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Meeting Purpose
Otter Tail Power Company Profile
Attachment O Calculation
Capital Projects
Question/Answer
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To provide an informational forum regarding Otter Tail’s
2013 Attachment O for True-up.
The 2013 Actual Year Attachment O is calculated using
the FERC Form 1 Attachment O template under the
MISO Tariff utilizing actual data as reported in the 2013
FERC Form 1 for Otter Tail Power.
Any True-up for 2013 will be included in the 2015 FLTY
Attachment O Calculation for rates effective January 1,
2015 for the joint pricing zone comprised of Otter Tail,
Great River Energy, and Missouri River Energy Services.
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Actual Year Rate Requirements
Rate Base
Operating Expenses
Revenue Requirement and Rate
Network Rate Summary
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By June 1 of each year, Otter Tail will post on OASIS all information
regarding any Attachment O True-up Adjustments for the prior year.
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By September 1, 2014, and September 1 all years thereafter, Otter Tail
will hold a customer meeting to explain its Actual Year True-up Calculation.
 Ex., 2013 Forward Looking Attachment O will be trued-up by June 1, 2014
with a corresponding Customer Meeting being held by September 1,
2014.
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Beginning Sept. 1, 2010 and Sept. 1 all years thereafter, Otter Tail will
post on OASIS its projected Net Revenue Requirement ,including the TrueUp Adjustment and load for the following year, and associated work
papers.
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Beginning in 2010 and each year thereafter, Otter Tail will hold a customer
meeting by October 31, to explain its formula rate input projections and
cost detail.
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Beginning in 2014 and each year thereafter, the MISO Transmission
Owners will hold a Regional Cost Sharing stakeholder meeting by
November 1.
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Rate Base Item
2013
Actual
2013
Projected
$ Change
Gross Plant in
Service
$275,626,777
$287,571,748
$(11,944,971)
Accumulated
Depreciation
$102,362,268
$102,744,252
$(381,984)
Net Plant in
Service
$173,264,509
$184,827,496
$(11,562,987)
Adjustments to
Rate Base
$(42,727,177)
$(44,023,296)
CWIP for CON
Projects
$47,702,021
$53,482,317
Land Held for
Future Use
$9,037
$9,038
$(1)
$5,359,241
$5,830,055
$(470,814)
$183,607,631
$200,125,610
$(16,517,979)
Working Capital
Rate Base
$1,296,119
%
Change
Explanation
(4.2%)
The decrease in Plant in Service from Projected
to Actual was due to a combination of the Bemidji
CAPX project going into service at less than
expected capitalized cost as well as the delayed
in-service of various line segments on the
Bookings and Fargo CAPX projects
Net result of Annual Depreciation Expense
(0.4%) combined with projected retirements.
(6.3%) = Gross Plant - A/D
(2.9%)
$(5,780,296) (10.8%)
ADIT - Book vs Tax Depreciation Timing
Differences originating due to accelerated tax
depreciation methods such as Bonus
depreciation and MACRS tables created when
large Transmission (i.e., Fargo Phase II and
Fargo Phase III) projects go into service.
Reduced spend on Fargo CAPX project in late
2012 due to delays associated with material
deliveries that carried forward through 2013. All
is expected to be timing in nature.
0.0%
Decrease in CWC due to drop in Transmission-
(8.1%) related O&M which is discussed on the next tab.
= Net Plant + Adj + CWIP + Land + Working
(8.3%) Capital
Note: The above numbers are Transmission only
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Expense
Item
2013
Actual
2013
Projected
$ Change
O&M
$12,766,870
$15,223,429
$(2,456,559)
Depreciation
Expense
$5,785,772
$5,923,798
$(138,026)
Taxes Other
than Income
% Change
(16.1%)
Explanation
Total Company 2013 Actual O&M for
Transmission expense decreased by ~$540K or
only about 3% compared to the reported amounts
used in the Forward Looking Test Year (FLTY).
However, the amounts related to MISO 26/26A
and Schedule 10 charges actually went up
~$1.75M which increased the amount removed
from O&M’s on Attachment O.
Decrease in depreciation expense coincides with
(2.3%) the reduction in expected Plant in Service
reported on the previous slide.
$2,173,165
$2,373,190
$(200,025)
Income
Taxes
$7,144,939
$7,933,216
$(788,277)
Operating
Expense
$27,870,746
$31,453,633
$(3,582,887)
(8.4%)
Property Tax Assessments came in lower than
expected and a lower GP allocator are driving the
decrease in transmission-related property tax
allocations calculated on Attachment O.
(9.9%)
Decrease in Rate Base = Decrease in Return =
Decrease in Income Tax Expense; Also, 2013 had
a lower ETR than at the time the FLTY calculation
was completed as the ND State Tax rate has
been lowered from 5.15% to 4.53%.
(11.4%) = O&M + A&G + Depreciation + Taxes
Note: The above numbers are Transmission only
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2013
Actual
2013
Projected
$ Change
% Change
Explanation
Long Term Debt
46.48%
46.17%
0.31% Tracking close to forecast.
Common Stock
53.52%
53.83%
(0.31%) Tracking close to forecast.
Total
100.00%
100.00%
Weighted Cost of Debt
5.49%
5.73%
Cost of Common Stock
12.38%
12.38%
= Debt + Equity
Refinanced slightly more outstanding debt at a lower rate than
(0.24%)
originally expected .
0.00% Unchanged
Rate of Return
9.18%
9.31%
(0.13%) = (LTD*Cost)+(Preferred Stock*Cost)+(Common Stock*Cost)
Rate Base
$183,607,631
$200,125,610
$(16,517,979)
(8.25%) From "Rate Base" Calculation
Allowed Return
$16,850.312
$18,629,007
$(1,778,695)
(9.55%) = Rate of Return * Rate Base
Operating Expenses
$27,870,746
$31,453,633
$(3,582,887)
(11.39%) From "Operating Expense" Calculation
Attachment GG
Adjustments
$10,937,462
$13,142,264
$(2,204,802)
As with the discussion associated with the change in CWIP on
Attachment O, GG projects have spent less to date than expected
(16.78%)
due to delays in material deliveries which also leads to less than
expected revenue requirements.
Attachment MM
Adjustments
$2,377,316
$3,007,552
$(630,236)
As with the discussion associated with the change in CWIP on
(20.96%) Attachment O, MM projects have spent less to date than expected
which leads to lower than expected revenue requirements.
Gross Revenue
Requirement
$31,406,280
$33,932,824
$(2,526,544)
(7.45%) = Return + Expenses - Adjustments
Revenue Credits
$4,566,650
$7,328,404
$(2,771,754)
2013 Actual Year Other MISO Schedule revenue as well as ITA
-37.82% contractual payments were less than projected.
2012 True-up (Including
Interest)
$(4,159,423)
$(4,159,423)
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Net Revenue
Requirement
$22,690,207
$22,444,998
$245,210
0.00% N/A
1.09% = Gross Revenue Requirement - Revenue Credits + True-up
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Attachment O
True-up
Calculation
2013
Actual
2013
Projected
$245,210
ATRR True-up
Divisor
$ Change
$704,697
$670,317
$(34,380)
Projected Cost
($/kW/Yr)
$33.484
Divisor True-up
$(1,151,185)
Total Principal
True-up
$(905,975)
Interest on True-up
$(59,508)
Total Principal and
Interest True-up
$(965,483)
% Change
Explanation
From “Net Revenue Requirement” line on
previous slide.
(5.13%) From FERC Form 1
From 2013 FLTY Attachment O Template
= Divisor x Projected Cost ($/kW/Yr)
= ATRR + Divisor True-up Amounts
= Avg Monthly FERC Interest Rate on
Refunds x Principal True-up
To be Applied to 2015 FLTY Attachment O
Calculation
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$3.00
$2.79
$2.68
$2.50
$0.11 or 3.9% Decrease
$2.00
$1.50
$1.00
$0.50
$0.35
$0.27
$0.08
$0.00
($0.14)
($0.50)
($0.03)
($0.27)
($0.24)
($0.04)
($0.10)
($1.00)
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Total Rev.
Req. =
$36,004,985
Net Attch. O
ATRR =
$22,690,207
Attch. GG
Rev. Req. =
$10,937,462
Attch. MM
Rev. Req. =
$2,377.316
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Forecasted
2013 Capital
Addition
Actual
2013
Capital
Addition
$ Change
%
Variance
Circuit Breaker
Replacements
$300,000
$342,593
$42,593
14.2%
Project scope changed to
include 5 breaker
replacements rather than 4
Rejected Pole Replacements
$400,000
$415,960
$15,960
4.0%
Tracking close to forecast
Jamestown – Edgeley –
Oakes Line Rebuild
$500,000
$202,273
($297,727)
(59.5%)
Reliability concerns addressed
by a lower cost plan
Parshall Area 115 kV Source
$600,000
$5,348
($594,652)
(99.1%)
Project delayed due to
negotiations with third party
Summit 115/41.6 kV
Transformer Replacement
$1,000,000
$619,717
($380,283)
(37.8%)
Material costs were lower than
expected
Transmission Line Capacity
Upgrades
$5,000,000
$2,452,216
($2,547,784)
(51.0%)
Engineering has delayed the
initiation of expected
construction activities
Oakes Area Transmission
Improvements
$5,637,004
$455,650
($5,181,354)
(91.9%)
Project delayed due to budget
constraints
Project
Reason for Variance
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Project
Forecasted
2013 Capital
Addition
Actual 2013
Capital
Addition
$ Change
%
Variance
Reason for Variance
Underlying improvements
delayed until 2014 and 2015
Attachment GG
Buffalo – Casselton 115 kV
Line
$7,506,464
$3,326,581
($4,179,883)
(55.7%)
Fargo – St. Cloud 345 kV
Line
$20,683,120
$27,077,796
$6,394,676
30.9%
Material deliveries
accelerated during 2013
(9.4%)
Weather impacted expected
project schedule.
Attachment MM
Brookings – Hampton Line
Big Stone South –
Brookings Line
Big Stone South –
Ellendale Line
$11,587,249
$1,562,040
$3,865,059
$10,493,282
$581,900
$2,420,133
($1,093,967)
($980,140)
($1,444,924)
(62.7%)
Project development
activities did not occur as
quickly as forecasted
(37.4%)
Project development
activities did not occur as
quickly as forecasted
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If you have any additional questions after the meeting,
please submit via e-mail to:
Kyle Sem, CPA
Manager – Business Planning
ksem@otpco.com
All questions and answers will be distributed by e-mail to
all attendees. Additionally, the questions and answers
will be posted on Otter Tail’s OASIS website
(http://www.oasis.oati.com/OTP/index.html) within two
weeks from the date of inquiry.
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