A POSITIVE, CREDIBLE AND INDEPENDENT VOICE FOR MINNESOTA UTILITY INVESTORS

The second year of the legislative biennium began Tuesday, March 8th. It isn’t a budget year but due to the anticipated $1.87 Billion dollar state surplus, there will likely be a Supplemental Budget Bill to make some “tweaks” to the State Budget. Under state law, $665 million will automatically be directed into state budget reserves – leaving $1.2 Billion surplus for fiscal year 2016-2017. Also expected this year is an Omnibus Tax bill, some funding for transportation investments as well as a large capital improvement bill known as the “Bonding Bill” for state and local infrastructure projects.

Also having an impact in the discussions at the State Capitol is that all 201 Senators and Representatives are up for re-election in November.

All of the legislation that was introduced in 2015 that did not make it to the Governor’s desk is still “fair game” for debate in 2016 in addition to any new legislation that is introduced this year. Over 300 bills were “pre-filed” by House members in February before the Session started.

The legislature must adjourn by Monday, May 23rd so it will be a short but fast-paced session. Remember these legislators work for you – their constituent. Do not be shy about making your perspectives known on issues impacting you and your energy investments.

Responsible GenerationOne of the most significant issues to MUI members this session will be legislation that will allow Minnesota’s electric investor-owned utilities (MN Power, Xcel and Otter Tail Power) to transition some of their current coal generation assets to cleaner forms of energy.

For example: • As part of Xcel Energy’s regular Resource

Planning, they have proposed closing two of their coal-fired units at the Sherco Plant. They propose to replace those assets with a natural gas plant, wind and solar projects.

• Otter Tail Power is planning to close its coal-powered Hoot Lake Plant at Fergus Falls Minnesota in May of 2021. The PUC has directed the company to replace it with approximately 200 MWs of natural gas generating capacity and up to 300 MWs of new wind.

• Minnesota Power is considering making changes at their Taconite Harbor coal plant by developing a biomass energy center.

• In 2013, the Minnesota Legislature passed a 2020, 1.5% solar electricity mandate for all of the investor-owned utilities (IOUs) in the state. The IOUs are looking at how to meet that solar mandate.

The legislation would amend existing law to ensure that utilities will be allowed to build and own the natural gas and renewable generation that will be built. They also want to be able to recover the cost of new plants on a timely basis.

When the companies remove a capital asset (i.e. a coal plant) from their portfolio they want the ability to add an asset (i.e. a solar farm; natural gas plant) back to their portfolio.

By facilitating timely cost recovery for these necessary infrastructure investments, the legislation would minimize electric rate escalation associated with this transition to lower carbon-emitting sources, while still keeping the state’s public utilities financially viable.

2016 Minnesota Legislative Session

In yourInterestIn this issuePreview Meeting Schedule 2

EPA Carbon Rule 3

Company Updates 5–6

Day at the Capitol Information 7

Summer Tour Schedule 7

Email request 7

Membership Form 8

MARCH 2016

2016 Legislative Session cont. on page 2

VOL. 26 NO. 1

MARK YOUR CALENDAR

Day at the Capitol

April 6, 2016Check out the NEW Senate Legislative

Office Building!

In your INTERESTMARCH 20162

Other Energy Legislation Anticipated in '16Minnesota’s Renewable Energy Standard (RES)Even though Minnesota already has one of the highest Renewable Energy Standards (RES) in the United States (25% by 2025 for all electric companies except Xcel Energy has a 30% by 2020 mandate), legislation to increase it to 40% by 2030 was discussed and passed the Senate Energy Committee in 2015 which means it is still “alive” for debate in 2016.

A 2015 study of increasing the RES by the Department of Commerce indicated that to ensure reliability there will have to be significant investments in Minnesota’s transmission system (transmission line upgrades, transformer additions/replacements, and changes to substation terminal equipment)

with a total estimated cost of $373M. These costs would be paid for in higher electric bills for Minnesota’s electric customers.

Alternative Fuel Vehicles and Infrastructure DevelopmentThere are several bills moving through the legislative process this year that provide incentives to consumers to purchase electric and natural gas vehicles and encourage the development of infrastructure to support these vehicles.

This legislation includes rebates to encourage consumers to consider purchasing new electric and/or compressed natural gas vehicles; rebates to incentivize the conversion of light-duty, medium-duty and heavy-duty motor vehicles to compressed natural gas; as well as provide financial incentives for the construction and installation of commercial natural gas fueling stations as well as home fueling stations. G

2016 Legislative Session cont. from page 1

Mark Your Calendar

These meetings are being held to learn about energy issues being debated at the Capitol; answer questions about MUI’s April 6, 2016 Day at the Capitol and learn about Minnesota’s legislative process.

If you are unable to participate in MUI Day at the Capitol, you are still encouraged to attend one of these complimentary meetings. Call the MUI office at 1-888-850-5171 to register for a meeting . G

Day at the Capitol Preview Meetings

DATE TIME LOCATION

Monday, March 21 11:30 a.m. Owatonna

Monday, March 21 5:30 p.m. Rochester

Tuesday, March 22 11:30 a.m. Bloomington

Tuesday, March 22 5:30 p.m. NorthWest Metro

Wednesday, March 23 11:30 a.m. St. Cloud

Wednesday, March 23 5:30 p.m. Baxter

Thursday, March 24 11:30 a.m. Alexandria

DATE TIME LOCATION

Thursday, March 24 5:30 p.m. Fergus Falls

Tuesday, March 29 11:30 a.m. Duluth

Tuesday, March 29 5:30 p.m. St. Paul

Wednesday, March 30 11:30 a.m. Woodbury

Wednesday, March 30 5:30 p.m. NorthEast Metro

Thursday, March 31 12:00 p.m. Albert Lea

Thursday, March 31 5:30 p.m Mankato

This is where we share photos and updates on all of our events! Search for Minnesota Utility Investors and “Like” us.

Thank you to new MUI Associate Member: Messerli & Kramer

VOL. 26 NO. 1 3

News Brief

U.S. Supreme Court Puts EPA Carbon Rule “On Hold” During LitigationA divided Supreme Court on Tuesday temporarily blocked the Obama administration’s initiative to limit carbon emissions from power plants, dealing an early and potentially significant blow to a rule that is the cornerstone of President Barack Obama’s efforts to slow climate change.

The court, in a brief written order, granted emergency requests by officials of mostly Republican-led states and business groups to delay the regulation while they challenge its legality.

Although the Supreme Court’s order is temporary and isn’t a ruling on the merits, it indicates the court’s conservative majority harbors misgivings about the Obama administration plan. It signals the rules could run into trouble in the courts, which could hamper the administration’s ability to follow through on U.S. commitments in the Paris climate deal.

The court’s action, which divided the justices along ideological lines, came as a surprise to many observers because the court has strict criteria for granting stays. And the Environmental Protection Agency rules, issued last summer, have yet to be evaluated by lower court judges.

The EPA rule is aimed at compelling utilities to shift away from coal-fired power plants, which have been the bedrock of U.S. electricity generation for decades, toward such renewable sources as wind and solar, and to a lesser extent toward natural gas and nuclear power.

Lawyers challenging the EPA rule called the court’s move highly unusual. “It is the first time that the Supreme Court has actually stayed a regulation,” said Jeff Holmstead, a former EPA air official under President George W. Bush and a lawyer at Bracewell & Giuliani who represents clients suing the agency over the rule.

White House spokesman Josh Earnest said the administration disagreed with the Supreme Court’s move. “We remain confident that we will prevail on the merits,” Mr. Earnest said. “At the same time, the administration will continue to take aggressive steps to make forward progress to reduce carbon emissions.”

More than 30 lawsuits have been filed against the EPA rule in challenges raising issues under the Clean Air Act that have been little explored by the courts.

More than two dozen states challenging the rule argued the regulation should be halted in the interim or else they would

need to immediately begin enacting laws, revising regulations and devoting large sums of money and manpower to comply with the mandate.

Industry groups said that, without a stay, scores of power plants would be forced to shut down in the short term, harming power producers and their customers. The regulation would require a 32% cut in power-plant carbon emissions by 2030, based on emissions levels of 2005.

The EPA said that a stay of its regulation was unnecessary, because it was legal and being implemented slowly. The states don’t have to comply until 2022.

Oral arguments at the appeals level are scheduled for June, with the possibility of a ruling later in the year, on time to be heard in the Supreme Court’s 2016-2017 term.

To what extent the stay will have an immediate impact is unclear. While the compliance deadline isn’t until 2022, the EPA set an initial deadline of this September for states to submit a plan to eventually comply with the rule, or otherwise explain why they want an extension of one to two years. The EPA has required all final plans be submitted no later than 2018.

The ultimate outcome of the case likely won’t be decided until the next president is in office. Should the rule survive in the courts and a Republican be elected president, a GOP administration would face hurdles in abandoning the regulations. G

SOURCE: Wall Street Journal; Feb. 9, 2016 By Brent Kendall and Amy Harder

NOTE: Minnesota’s state agencies, working with stakeholders, have been working to develop the State Implementation Plan (SIP) to meet the Clean Power Plan’s initial September deadline. Governor Dayton has indicated that the State will continue moving forward in developing the SIP. A status report by MN Pollution Control Agency is expected to be presented to the State Legislature in March.

In your INTERESTMARCH 20164

Supporting Members ALSO receive the following benefits:

• FREE entry to Local Member Meetings for your household• Opportunities to bring a guest to events free of charge• Opportunities to take FREE Energy Site Tours organized by MUI• Quarterly printed newsletter (expanded Supporting Member version)• Weekly Monday e-newsletter• Automatic entry into any of our Supporting Member drawings

To become a Supporting Member, simply complete the application on the back page and return with payment

*Chart compiled courtesy of Edward Jones.

VOL. 26 NO. 1 5

Company Updates

Minnesota Power receives approval for Camp Ripley 10 MW solar array Minnesota Power's plans to install a solar energy array at Camp Ripley received the go-ahead from the Minnesota Public Utilities Commission.

Commissioners unanimously approved the 10-megawatt installation, which will be built at the Minnesota National Guard's base in central Minnesota on the southwestern edge of Minnesota Power's service territory. The $30 million project will help Minnesota Power, a utility division of ALLETE Inc., achieve about one-third of its requirement under the state's Solar Energy Standard.

Construction of the solar array is expected to begin in May and continue through the summer. It's anticipated the project will be generating solar power by November. Minnesota Power's first utility-scale solar array will utilize about 80 acres of underutilized property at the National Guard's 53,000-acre regional training facility near Little Falls. The Project will be made up of 120,000 thin-film photovoltaic panels manufactured by First Solar, a PV provider based in Ohio. Minnesota Power has contracted with M+W Group, a global engineering and construction company, to build the array; Hunt Electric is a primary subcontractor with other subcontractors to follow. SOURCE: BRAINERD DISPATCH, Jan. 29, 2016.

Big Stone Plant’s new air-quality control system is completeRecently the three companies that own Big Stone Plant—Otter Tail Power Company, Montana-Dakota Utilities Co., and NorthWestern Energy—announced that the plant’s new air-quality control system (AQCS) is commercially operational, meaning the project is complete and the system is reducing emissions in compliance with new federal and state regulations.

Balancing environmental stewardship with cost-effective serviceThe three-year $384 million project helps plant owners balance their commitments to environmental stewardship with cost-effective service for their customers by enabling them to responsibly generate base-load electricity from coal at Big Stone Plant. The new system reduces nitrogen oxides and sulfur dioxide emissions by approximately 90 percent and mercury emissions by approximately 80 percent.

For all three companies, making environmental upgrades at this plant was less expensive than building a new plant. “Our analysis showed alternatives, such as building a new

generation resource, to be more than 30 percent more expensive,” said Otter Tail Power Company President Tim Rogelstad. Otter Tail Power Company operates the plant on behalf of itself and the two other owners.

Completed on schedule, under budget, and with attention to safety“Despite challenges along the way, the project was completed on schedule. Because of lower-than-expected procurement and engineering costs, the project cost about $384 million—a 21 percent reduction from the original budget of approximately $490 million. And with workers putting in more than 2.5 million labor hours, our safety record is stellar,” said Rogelstad.

CenterPoint Energy Mulls Strategic Alternatives of Enable InvestmentCenterPoint Energy Inc. said it was considering selling or spinning-off its investment in publicly traded Enable Midstream Partners ENBL 3.10 % and that it was exploring converting its own utility business to a REIT business model.

CenterPoint owns a 50% general-partner interest and a 55.4% limited-partner interest in Enable. The move to evaluate strategic alternatives comes after CenterPoint said Friday it was investing $363 million in Enable’s preferred securities. The company said it was looking into doing a tax-free spinoff. CenterPoint and OGE Energy Corp. jointly control Enable.

“We are pleased with our investment in Enable,” CenterPoint Chief Executive Scott M. Prochazka said. “We believe that now is the right time to explore options for unlocking the value of our strategic investment.” SOURCE: The Wall Street Journal, February 1, 2016, Austen Hufford

Knife River Corp. awarded its largest contract Knife River Corp., a subsidiary of MDU Resources Group Inc. has been awarded a $63.4 million contract to reconstruct a portion of Interstate 29 in Sioux City, Iowa. This is the largest contract Knife River has been awarded.

Knife River will reconstruct the northbound lanes of I-29 from exit 147A to north of exit 149, alongside downtown Sioux City. The two-year project will begin this spring, with completion planned for fall 2017. In addition to working as the general contractor, Knife River will supply the concrete,

Company Updates cont. on page 6

*Chart compiled courtesy of Edward Jones.

In your INTERESTMARCH 20166

Company Updates

asphalt and aggregate base for the 2.5-mile project. Much of the road base — about 100,000 tons of material — will be made from recycled concrete.

“Securing this project adds to an already substantial backlog of work Knife River has compiled for 2016 — nearly $500 million,” said David L. Goodin, president and CEO of MDU Resources. “The momentum the company enjoyed in 2015 is carrying into this year, signifying steady growth in the construction materials industry. Landing projects of this size is a testament not only to Knife River’s capacity to handle large volumes of work, but also to its reputation as a company that will work safely and produce quality results.”

WEC Energy Group announces leadership changes effective May 1The board of directors of WEC Energy Group recently announced that effective May 1, 2016, Gale Klappa, age 65, will retire as chief executive officer and become non-executive chairman. As part of the company's leadership succession plan, Allen Leverett, age 49, will succeed Klappa as chief executive.

"We delivered a decade of strong growth as we've modernized the energy infrastructure of the region—investing more than $10.5 billion since 2003 in our electricity and natural gas networks, Klappa said. "And with our acquisition of Integrys

last year, we've emerged as the leading electric and natural gas utility in the Midwest – known for exceptional reliability, customer satisfaction and financial discipline."

Upon Klappa's retirement, Leverett will become the company's 14th chief executive. Leverett also has been appointed to the board of directors. He has been serving as president of the company since 2013.

Xcel Energy storm restoration efforts lauded as nation's best Successfully, safely and quickly restoring power to more than a quarter-million customers after a storm led to Xcel Energy being recognized for the efforts by the Edison Electric Institute with the organization’s Emergency Recovery Award.

On July 18, 2015 a severe thunderstorm that brought damaging winds, lightning and torrential rain hit the company’s Minnesota service area. The company mobilized 750 employees and contractors who were able to restore service to all customers in less than two days.

Preparation pays offXcel Energy’s Upper Midwest service territory spans more than 108,000 square miles and serves 3.4 million customers, presenting logistical challenges for storm response. In 2015, more than 90 percent of customers were restored within 12 hours of service disruptions, and 96 percent within 24 hours.G

Company Updates cont. from page 5

Xcel Energy operates in eight states (Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin) and provides energy-related products and services to approximately 3.5 million electricity customers and 2 million natural gas customers through four operating companies.

Minnesota Power. Mining companies alone account for more than 47 percent of Minnesota Power's revenue. Add paper mills, and heavy industry accounts for nearly 60 percent of the utility's customer load, far different from most utilities.

WEC Energy/MN Energy Resources Corp. provides services to nearly 4.4 million customers in Wisconsin, Illinois, Michigan and Minnesota with 70,000 miles of electric distribution lines, 44,000 miles of natural gas distribution and transmission lines, and 8,800 megawatts of reliable power plant capacity.

Otter Tail Corporation increased the company's quarterly common stock dividend to $0.3125 per share in January. This represents the 309th consecutive quarter dividends have been paid on common stock.

CenterPoint Energy's Home Service Plus has served generations of Minnesotans for nearly a century and is the state's largest provider of major appliance maintenance and repair services, as well as replacement heating and cooling equipment.

MDU Resources Great Plains Natural Gas Co. is a division of MDU Resources Group, Inc. with its general office in Fergus Falls, Minn., and a district office in Marshall, Minn. They began operations in 1966. The company operates as both a local distribution company and a transporter of natural gas to industrial, commercial and residential customers in 18 Minnesota communities and one North Dakota community. G

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VOL. 26 NO. 1 7

Mark your calendar

MUI Annual MeetingMonday, October 10, 2016

Earle Brown Heritage CenterBrooklyn Center, MN

Sign up for weekly email updates!Every week MUI sends an update on Energy Company initiatives; trending energy industry issues; MUI activities and meetings; legislation of interest; and utility company stock quotes. Please send us your email to start getting these “must see” Monday emails.

MUI is also utilizing a new grassroots tool called “Voter Voice”. It will help MUI and our members communicate with legislators in a timely manner on issues of importance to utility shareholders.

To request to be put on our list, email us at

mui@mnutilityinvestors.org

Information about the tours will be sent to MUI Supporting Members in April. Reservations will be taken on May 6th at 9:00 a.m. (central time).

MUI Summer Tours(available to Supporting members only)

DATE TOUR

Thursday, June 16 Alliant Energy Bent Tree Wind Farm (bus from Brooklyn Center, MN)

Monday, June 20 Otter Tail/MDU Resources Big Stone Coal Plant (bus from Willmar, MN)

Tuesday, June 21 Xcel Energy Wilmarth Refuse-Derived Plant (near Mankato, MN)

Wednesday, June 22 Xcel Energy Slayton Solar Tour (bus from Mankato, MN)

Monday, June 27 Xcel Energy Prairie Island Nuclear Plant Tour (near Red Wing, MN) (afternoon only)

Tuesday, June 28 MN Power Thomson Hydro Plant Tour (shuttle from near Cloquet, MN)

Wednesday, June 29 MN Power Boswell Coal Plant (near Cohasset, MN)

Thursday, July 28 Xcel Energy Monticello Nuclear Plant

To Be Scheduled Xcel Energy Allen S. King Coal Plant (near Oak Park Heights, MN)

Wednesday, April 6, 2016 • 10:15 a.m. – 2:00 p.m.

We will start our day at the Holiday Inn, St. Paul EastAGENDA

10:15 a.m. Registration

10:45 a.m. Program and speaker

11:30 a.m. Lunch

12:00 p.m. Bused to State Office Building or Senate Legislative Office Building

2:00 p.m. Head home or back to hotel (drivers)

Local Member meetings to discuss the issues and legislative process are scheduled for March.

You can make a difference!

• Free lunch at the event!• Free Motor Coach ride to the event!• Free flashing MUI button!

Due to construction, there will be no visits to the State Capitol this year. BUT this is the first opportunity to see the NEW Senate Legislative Office Building that opened in January 2016.

In Your Interest is a publication of Minnesota Utility Investors, and is published four times each year in March, June, September and December.

Phone: 651-227-7902 Toll Free: 1-888-850-5171

Email: mui@mnutilityinvestors.org www.mnutilityinvestors.org

President: Annette P. Henkel Office Manager: Lana Leonard Membership & Marketing Manager: Heidi Hickey

The Cass Gilbert Building 413 Wacouta Street, Suite 230 St. Paul, MN 55101

How to Join Simply complete this form and return with payment. Or call MUI at 1-888-850-5171 or 651-227-7902

NAME

SPOUSE’S NAME (IF APPLICABLE)

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TO JOIN simply complete this form and return with payment. Or call MUI at 888-850-5171 or 651-227-7902

Special Summer Tour Supporting Membership Offer!

Our Supporting Members are Informed, Involved, and Engaged Investors.

Win a chance for a tour of your choice! Become a Supporting Member of MUI before Monday, May 2, 2016 and be entered in a drawing to WIN TWO SPOTS at an exclusive Summer TOUR OF YOUR CHOICE!

Discover the benefits of Supporting Membership• Free Admission to MUI Local

Member Meetings (includes a meal and a program)

• Opportunities to go on exclusive Summer Energy Tours.

• MUI “Keeping Current” updates

• Automatic entry into all Supporting Member Only prize drawings

• MUI’s Guide to Minnesota’s Investor-Owned Natural Gas & Electric Utility Companies

Membership QualificationI have investments in the one or more of these Minnesota Investor-Owned Energy Utilities: (Check all that apply)

ALLETE

CenterPoint Energy

MDU Resources Group

Otter Tail Corp.

WEC Energy Group

Xcel Energy

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