2016 ATTACHMENT O
CUSTOMER MEETING
OCTOBER 30, 2015
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Meeting Purpose
Otter Tail Power Company Profile
Attachment O Calculation
Capital Projects
Budget Risks
Pending Updates to the Formula Template
Question/Answer
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LEGAL DISCLOSURE
All numeric data provided in this presentation is preliminary and
subject to change.
All information will be finalized by 12/31/15.
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To provide an informational forum regarding Otter Tail’s forecasted
Attachment O for 2016.
The forecasted Attachment O for 2016 is calculated using the FERC
Form 1 Attachment O template under the MISO Tariff with a projected
net revenue requirement and projected load.
Rates become effective on January 1, 2016 for the joint pricing zone
comprised of Otter Tail, Great River Energy, and Missouri River
Energy Services, Benson Municipal Utilities, Detroit Lakes Public
Utilities, and Alexandria Light & Power.
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SERVICE AREA
LANGDON WIND ENERGY CENTER
Rugby
• 70,000 Square miles
Devils Lake
Crookston
Garrison
COYOTE
STATION
• 130,200 Customers
SOLWAY
COMBUSTION
TURBINE
Bemidji
LUVERNE WIND FARM
ASHTABULA WIND ENERGY CENTER
ASHTABULA III
Jamestown
NORTH DAKOTA
Fergus Falls
Wahpeton
Oakes
HOOT LAKE PLANT
Morris
BIG STONE PLANT
Milbank
LEGEND
• 785 Employees
• 200 North Dakota
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90 South Dakota
• About 800 MW owned
generation
• About 245 MW wind
generation
• About 5,400 miles of
transmission lines
Headquarters
Customer service center
• Avg. population about 400
• 495 Minnesota
JAMESTOWN
COMBUSTION
TURBINE
SOUTH DAKOTA
• 422 Communities
LAKE PRESTON
COMBUSTION TURBINE
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Forward 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 each year, Otter Tail will post on OASIS its projected
Net Revenue Requirement including the True-Up Adjustment and load
for the following year, and associated work papers.
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Otter Tail will hold a customer meeting by October 31 each year to
explain its formula rate input projections and cost detail.
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RATE BASE
2016
Projected
Rate Base Item
2015
Projected
$ Change
% Change
Explanation
Gross Plant in Service
$
429,186,735 $
386,778,026 $
42,408,709
11.0%
The increase is primarily due to NERC work, Brookings
being finished and other system improvements.
Accumulated Depreciation
$
118,546,386 $
112,631,484 $
5,914,902
5.3%
The increase is primarily due to Fargo Phase III and the
remainder of Brookings in service all of 2016.
Net Plant in Service
$
310,640,349 $
274,146,542 $
36,493,807
13.3%
= Gross Plant - A/D
Adjustments to Rate Base
$
(62,249,278) $
(62,362,196) $
112,918
(0.2%)
CWIP for CON Projects
$
69,953,095 $
40,886,235 $
29,066,860
71.1%
Land Held for Future Use
$
9,038 $
9,038 $
-
0.0%
Working Capital
$
6,995,332 $
5,894,170 $
1,101,162
18.7%
Higher CWC related to higher O&Ms.
Rate Base
$
325,348,536 $
258,573,789 $
66,774,747
25.8%
= Net Plant + Adj + CWIP + Land + Working Capital
Upcoming construction of Brookings to Big Stone and Big
Stone to Ellendale; both are classified as MVP projects.
Note: The above numbers are Transmission only
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Expense
Item
2016
Projected
2015
Projected
$ Change
% Change
Explanation
O&M
$
16,746,015
$
14,024,094 $
2,721,921
19.4%
The increase is mainly due to higher Schedule 26 and
26A expenses.
Depreciation
Expense
$
7,875,761
$
7,140,892 $
734,869
10.3%
More plant is in service with the energization of Fargo
III and remainder of Brookings.
Taxes Other than
$
Income
3,358,563
$
3,133,563 $
225,000
7.2%
An increase in Total Company Property Tax Expense
as a result of higher assessed values.
Income Taxes
$
11,938,039
$
9,822,603
$
2,115,436
21.5%
Higher rate base results in a higher return and
subsequently more income tax expense.
Operating
Expense
$
39,918,378
$
34,121,152 $
5,797,226
17.0%
= O&M + A&G + Depreciation + Taxes
Note: The above numbers are Transmission only
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2016
Projected
2015
Projected
Long Term Debt
46.68%
48.35%
(1.67%)
Common Stock
53.32%
51.65%
1.67%
Total
100.00%
100.00%
Weighted Cost of Debt
5.56%
5.54%
0.02%
Close to last year.
Cost of Common Stock
12.38%
12.38%
0.00%
Unchanged
Rate of Return
9.19%
9.07%
0.12%
= (LTD*Cost)+(Preferred Stock*Cost)+(Common Stock*Cost)
Rate Base
$
325,348,536
Allowed Return
$
Operating Expenses
$ Change
% Change
Explanation
Haven’t had a need to increase our LT Debt from year over year.
= Debt + Equity
$ 258,573,789
$
66,774,747
25.82%
From "Rate Base" Calculation
29,914,500
$
23,465,923
$
6,448,577
27.48%
= Rate of Return * Rate Base
$
39,918,378
$
34,121,152
$
5,797,226
16.99%
From "Operating Expense" Calculation
Attachment GG Adjustments
$
18,550,354
$
18,208,328
$
342,026
1.88%
Close to last year.
Attachment MM Adjustments
$
13,285,520
$
6,603,848
$
6,681,672
101.18%
Upcoming construction of CAPX Brookings and Big Stone to
Ellendale; both are classified as MVP projects.
Gross Revenue Requirement
$
37,997,004
$
32,774,899
$
5,222,105
15.93%
= Return + Expenses - Adjustments
Revenue Credits
$
6,509,939
$
6,283,694
$
226,245
3.60%
Close to last year.
2014/2013 True-up
(Including Interest)
$
(3,117,851)
$
(1,181,325)
$
(1,936,526)
163.93%
Net Revenue Requirement
$
28,369,215
$
25,309,881
$
3,059,334
12.09%
= Gross Revenue Requirement - Revenue Credits + True-up
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$/kw-month
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
($0.50)
($1.00)
$3.24
$2.99
$0.25 or 8.4% increase
$1.03
$0.08
($0.10)
$0.32
$0.12
($0.04)
($0.23)
($0.10)
($0.04)
($0.79)
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TOTAL TRANSMISSION REVENUE REQUIREMENT
BREAKDOWN
Total Rev.
Req. =
$60,205,088
Net Attch. O
ATRR =
$28,369,214
Attch. GG
Rev. Req. =
$18,550,354
Attch. MM
Rev. Req. =
$13,285,520
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2016 TRANSMISSION PROJECTS
2016 Forecasted
Spend
(with AFUDC)
Voltage
In Service
Date
Repair/Replace Existing
Transmission Structures
≥ 115 kV
12/31/2016
$
252,000
Replace existing 230 kV and 115 kV
transmission structures due to water damage.
Proactive-Worst Performing
41.6 kV Lines
41.6 kV
12/30/2016
$
321,000
Enhancements and/or rebuild of worst
performing 41.6 kV lines.
Relocate Colgate 41.6 kV Line
41.6 kV
12/31/2016
$
302,000
Relocate existing 41.6 kV line near Colgate, ND
due to rising water in existing ROW.
$
Relocate existing 41.6 kV line between Martin –
201,000 Anamoose in ND due to rising water in existing
ROW.
Project
Martin – Anamoose 41.6 kV Line
Reroute
41.6 kV
12/20/2016
Description of Project
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Project
Rebuild Harvey – Rugby 115 kV
Line
Voltage
In Service
Date
115 kV
12/31/2021
Description of Project
Rebuild existing line by replacing structures due to
$
268,000 age and condition using new framing with shield
wire.
Upgrade Max – Ryder 41.6 kV Line
41.6 kV
Substation Security (CIP Ver. 5)
≥ 115 kV
Clearbrook Area 115 kV Line
2016 Forecasted
Spend
(with AFUDC)
115 kV
12/31/2018
$
399,000
Reconductor and rebuild existing transmission line
due to age and condition.
12/31/2017
$
255,000
Install necessary security equipment at applicable
substations to comply with NERC standards.
10/31/2018
$
Construct a new, approximately 16-18 mile 115 kV
transmission line in the Clearbrook area of north
2,500,000
central MN with new 230/115 kV substation near
Bagley.
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Project
NERC Facility Ratings Alert
Voltage
≥ 115 kV
2016 Forecasted
Spend
(with AFUDC)
In Service
Date
Description of Project
Line upgrades to numerous transmission
4,100,000 facilities across the OTP service territory that
violate NESC clearance requirements.
12/31/2016
$
7/31/2017
$
692,000
Rolette 230/69/41.6 kV
Substation
230 kV
Install a new 230/69/41.6 kV substation near
Rolette, ND.
Voltaire 115/41.6 kV Substation
115 kV
12/31/2016
$
3,600,000
Install a new 115/41.6 kV substation near
Minot, ND.
Rugby 41.6 kV Switching Station
41.6 kV
6/30/2017
$
2,200,000
Install a new 41.6 kV switching station near
Rugby, ND.
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Project
Voltage
2016 Forecasted
Spend
(with AFUDC)
In Service
Date
Description of Project
Attachment GG
J262/J263 Courtenay Wind Farm
Interconnection Project
Buffalo 345/115 kV Transformer
(Buffalo – Casselton Line)
J290 Border Winds Generator
Interconnection Project
345 kV
345 kV
230 kV
10/31/2016
4/30/2017
12/31/2015
$
Expand Jamestown 345/115 kV Substation and
replace two existing 345/115/41.6 kV transformers to
4,700,000
accommodate Generator Interconnection Project
J262/J263.
$
Underlying System improvements for 115 kV line
3,500,000 from Casselton – Buffalo. Add more transformer
capacity at Buffalo, ND.
$
Expand Rugby 230/115 kV Substation and add a
204,000 second 230/115 kV transformer to accommodate
Generator Interconnection Project J290.
Attachment MM
Big Stone South – Brookings Line
345 kV
9/30/2017
$
53,400,000
Build new 345 kV line from Big Stone South –
Brookings with Big Stone South Substation in SD.
Big Stone South – Ellendale Line
345 kV
9/30/2019
$
37,400,000
Build new 345 kV line from Big Stone South –
Ellendale in SD and ND.
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Demand/
Weather
Revenue
Outages
Regulatory
Filings
Timing of
Capital Projects
Financing
Tight Budgets
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PENDING UPDATES TO FORMULA TEMPLATE
• Otter Tail anticipates making a change to its Attachment O rate template
concerning the treatment of accumulated deferred income taxes (“ADIT”) based
on recent IRA Private Letter Rulings.
• The revisions modify the method used to calculate average ADIT balances.
• Otter Tail is working with other MISO Transmission Owners to file an updated
formula template with FERC and will request this update become effective
January 1, 2016.
• Otter Tail is still working through the calculations and does not have a final
impact at this time.
• Otter Tail will post the updated 2016 revenue requirements for Attachment O,
GG and MM on OASIS once the calculation is completed and the template
change request filing has been filed with FERC.
• The information in this presentation is based on the currently effective rate
template.
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If you have any additional questions after the meeting,
please submit via e-mail to:
Stacie Hebert
shebert@otpco.com
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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