Northern States Power Companies (NSP-MN & NSP-WI)

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Northern States Power Companies(NSP-MN & NSP-WI)

Transmission Customer Meeting

October 14, 2014

Rate Discussion: Attachment O, GG & MM

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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 industrybased upon information currently available. Such statements are “forward-looking” 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.

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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 ourbest estimates for projects to be initiated and completed. Please be awarethat many factors could alter those schedules, including regulatory approvals,construction resources, availability of materials, weather, and other unforeseen events.

Meeting Purpose / Objective

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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.

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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 RateOff-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.

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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 $ 9.0M

Increase in Annual True-up $ (14.3M)

Increase in Attachment GG & MM Rev Req $ (27.1M)

Attachment O Net Revenue Requirement 2015 $355.4M

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Annual Revenue Requirement Determination

Function of:

Rate Base x

Weighted Cost of Capital

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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 $ 4.0M

Net increase in rate base $355.3M

Total Rate Base – 2015 $2,469.6M

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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%

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Reconciliation of Change in Return for 2015

The increase in the return is driven by the increase in rate base for 2015.

Change in Rate Base $355.3Mx 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

Actual calculation performed on whole values

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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

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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

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True-Up Calculation

2015 2014 ChangePrior Year Annual True-up

ATRR Component $(14.8M) $ (12.3M)Divisor Component $ (7.7M) $ 3.2MInterest on True-up $ (1.5M) $ (0.6M) Total $(24.0M) $ (9.7M) $(14.3M)

2013 Actual 2012 Actual

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MTEP Projects Included in Attachment GG Calculation

The following RECB project costs were included in the Attachment GG:

In service1. Cannon Falls (MTEP 1456)2. Yankee (Colville) Station (MTEP 1366)3. Ulik Wind (MTEP 2765)4. St. Cloud – Sauk River (MTEP 1953)5. Nobles Gen Station (MTEP 1457)6. Upgrades for G349 (MTEP 1458)7. Upgrades for G809 (MTEP 2109)8. Upgrades for G417 (MTEP 2119)9. 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)

CWIP1. CAPX2020-Fargo, ND – St Cloud/Monticello, MN 345 kV project (MTEP 286)

2. CAPX2020-SE Twin Cities – Rochester, MN – La Crosse, WI 345 kV project (MTEP 1024)

Total project costs included in Attachment GG : $499.4M

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MTEP Projects Included in Attachment MM Calculation

The following RECB project costs were included in the Attachment MM:

In service1. CAPX2020-Brookings (MTEP 1203)

CWIP2. CAPX2020-Brookings (MTEP 1203)

Total project costs included in Attachment MM : $441.8M

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Components of Attachment GG & 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 Orevenue requirements

(1) Includes Common & General depreciation calculation

Attachment GG Attachment MM

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Total Revenue Requirements Attachment GG & MM

2015 Annual Revenue Requirements $ 76.3M $ 63.4M

True-Up Adjustment $ (6.6M) $ (1.3M)

Total 2015 MISO Billings $ 69.7M $ 62.1M

Attachment GG Attachment MM

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Questions?

Contacts:

Carolyn M Wetterlin Sr. RTO Manager

612-330-6599

Thomas E KramerPrincipal Rate Analyst

612-330-5866

Thank you all for attending today’s meeting

Northern States Power Companies (NSP-MN & NSP-WI)

Documents

Transcript of Northern States Power Companies (NSP-MN & NSP-WI)