Northern States Power Companies
(NSP-MN & NSP-WI)
Transmission Customer Meeting
October 14, 2014
Rate Discussion: Attachment O, GG & MM
1
Legal Disclosure
This document contains certain statements that describe the NSP Companies
management’s beliefs concerning future business conditions and prospects,
growth opportunities and the outlook for the electric transmission industry
based upon information currently available. Such statements are “forwardlooking” statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Wherever possible, NSP Companies has identified these
forward-looking statements by words such as “anticipates”, “believes”, “intends”,
“estimates”, “expects”, “projects” and similar phrases. These forward-looking
statements are based upon assumptions management believes are reasonable.
Such forward-looking statements are subject to risks and uncertainties which
could cause actual results, performance and achievements to differ materially
from those expressed in, or implied by, these statements.
2
Meeting Purpose / Objective
The purpose of today’s meeting:
Present the projected Attachment O, GG and MM revenue requirements for
the rates that will be effective January 1 through December 31, 2015. These
revenue requirements were calculated using the NSP Companies Tariff
templates using projected net revenue requirement and projected load.
Review the 2015 Attachment O, GG and MM formula rate calculation cost
components relative to the 2014 calculations currently in effect.
The dates and schedules, and even the projects themselves, represent our
best estimates for projects to be initiated and completed. Please be aware
that many factors could alter those schedules, including regulatory approvals,
construction resources, availability of materials, weather, and other unforeseen
events.
3
Attachment O, GG & MM Formula Rate for 2015
• Originally filed with MISO and posted on OASIS on August 29, 2014
• Update information was posted on OASIS on September 29, 2014
• MISO is still performing their review of the Company’s
Attachment O and GG with 2013 Actual Costs
Attachment O, GG and MM with 2015 Costs
The information currently on OASIS is incorporated in this presentation.
4
Attachment O Budgeted Rate Effective 1/1/2015
Based upon total Revenue Requirements Submitted to MISO
Annual Cost ($/kW/Yr)
$ 48.268
Network & P-to-P Rate ($/kW/Mo)
$ 4.022
Peak Rate
Off-Peak
Rate
Point-To-Point Rate ($/kW/Wk)
$
0.928
$ 0.928
Point-To-Point Rate ($/kW/Day)
$
0.186
$ 0.132
Point-To-Point Rate ($/MWh)
$ 11.603
$ 5.510
This is not the NSP Zone Rate. MISO calculates Zonal Rate.
5
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
6
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
7
Annual Revenue Requirement Determination
Function of:
Rate Base
x
Weighted Cost of Capital
8
Change in Rate Base
Total Rate Base – 2014
$2,114.3M
Net plant in service increase
$ 685.1M
Decrease in CWIP
$ (213.6M)
Increase in accumulated deferred taxes
$ (120.2M)
Increase in other working capital
$
Net increase in rate base
Total Rate Base – 2015
4.0M
$355.3M
$2,469.6M
9
Change in Cost of Capital
Weighted Cost of Capital
2015
2014
D/E Ratio
Cost
D/E Ratio
Cost
LTD
47%
2.34%
47%
2.33%
Equity
53%
6.62%
53%
6.58%
8.96%
8.91%
10
Reconciliation of Change in Return for 2015
Change in Rate Base
$355.3M x 8.96%
$ 31.8M
PY Rate base x decrease in WCC $2,114.3M x 0.05%
$ 1.0M
Net change in return
$ 32.8M
The increase in the return is driven by the increase in rate base for 2015.
Actual calculation performed on whole values
11
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
12
Change in Operating Costs Detail
Operating costs in 2013 Rate
$283.3M
Increase in income taxes
$16.7M
Increase in depreciation
$ 8.1M
Increase in taxes other than income
$ 8.0M
Decrease in O&M costs (Transmission and A&G)
$ (0.1M)
Net Increase in Operating Costs
$ 32.7M
Operating costs in 2014 Rate
$316.0M
13
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
14
Change in Net Revenue Credits
Revenue Credits Estimated in 2014 Rate
$(27.0M)
Lower Projected Firm Transmission/Contracts
$ 8.5M
Lower Projected PTP Revenues
$ 0.5M
Revenue Credits Estimated in 2015 Rate
$(18.0M)
Difference which increased 2015 Revenue Req
$ 9.0M
15
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
16
True-Up Calculation
2015
Prior Year Annual True-up
ATRR Component
Divisor Component
Interest on True-up
Total
2014
2013 Actual
2012 Actual
$(14.8M)
$ (7.7M)
$ (1.5M)
$(24.0M)
$ (12.3M)
$ 3.2M
$ (0.6M)
$ (9.7M)
Change
$(14.3M)
17
Comparison of 2015 Revenue Requirement to
2014 Revenue Requirement
Attachment O Net Revenue Requirement 2014
$322.3M
Cost Drivers in 2015:
Increase in Return Requirement
$ 32.8M
Increase in Operating Costs
$ 32.7M
Decrease in Revenue Credits
$
Increase in Annual True-up
$ (14.3M)
Increase in Attachment GG & MM Rev Req
$ (27.1M)
Attachment O Net Revenue Requirement 2015
9.0M
$355.4M
18
MTEP Projects Included in Attachment GG Calculation
The following RECB project costs were included in the Attachment GG:
In service
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cannon Falls (MTEP 1456)
Yankee (Colville) Station (MTEP 1366)
Ulik Wind (MTEP 2765)
St. Cloud – Sauk River (MTEP 1953)
Nobles Gen Station (MTEP 1457)
Upgrades for G349 (MTEP 1458)
Upgrades for G809 (MTEP 2109)
Upgrades for G417 (MTEP 2119)
Pleasant Valley-Byron (MTEP 2178)
10. Glenco-West Waconia (MTEP 1285)
11. Pleasant Valley – Byron (MTEP 2178)
12. MN Valley Kerkhoven (MTEP 3312)
13. Kohlman Lake Goose Lake (MTEP 3317)
14. Coudry Osprey (MTEP 3375)
15. Wilmarth Sub (MTEP 3104)
16. CAPX202-Bemidji-Grand Rapids 230Kv line (MTEP 279)
17. CAPX2020-Fargo- St. Cloud 345Kv line (MTEP 286)
18. CAPX2020-Rochester-Lacrosse 345Kv line (MTEP 1024)
CWIP
1.
2.
CAPX2020-Fargo, ND – St Cloud/Monticello, MN 345 kV project (MTEP 286)
CAPX2020-SE Twin Cities – Rochester, MN – La Crosse, WI 345 kV project (MTEP 1024)
Total project costs included in Attachment GG : $499.4M
19
MTEP Projects Included in Attachment MM Calculation
The following RECB project costs were included in the Attachment MM:
In service
1.
CAPX2020-Brookings (MTEP 1203)
CWIP
1.
CAPX2020-Brookings (MTEP 1203)
Total project costs included in Attachment MM : $441.8M
20
Components of Attachment GG & MM
Attachment GG
Attachment MM
Operating expenses (1)
$ 9.5M
$ 3.0M
Depreciation expense
$ 7.5M
$ 7.7M
Taxes other
$ 6.0M
$ 5.3M
Income taxes
$ 17.9M
$ 15.9M
Return
$ 35.4M
$31.5M
Rev Req for 2015 (Attachment O Deduct)
$ 76.3M
$63.4M
Rev Req for 2014
$ 60.4M
$52.2M
Increase 2015 over 2014
$ 15.9M
$ 11.2M
$27.1M
Attachment GG & MM revenue requirements are deducted from Attachment O
revenue requirements
(1) Includes Common & General depreciation calculation
21
Total Revenue Requirements Attachment GG & MM
Attachment GG
Attachment MM
2015 Annual Revenue Requirements
$ 76.3M
$ 63.4M
True-Up Adjustment
$ (6.6M)
$ (1.3M)
Total 2015 MISO Billings
$ 69.7M
$ 62.1M
22
Questions?
Thank you all for attending today’s meeting
Contacts:
Carolyn M Wetterlin
Sr. RTO Manager
612-330-6599
Thomas E Kramer
Principal Rate Analyst
612-330-5866
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