Otter Tail Power Company 2013 Attachment O – True-up Customer Meeting August 15 , 2014
description
Transcript of Otter Tail Power Company 2013 Attachment O – True-up Customer Meeting August 15 , 2014
OTTER TAIL POWER COMPANY
2013 Attachment O – True-upCustomer Meeting
August 15, 2014
2
Agenda
Meeting Purpose
Otter Tail Power Company Profile
Attachment O Calculation
Capital Projects
Question/Answer
3
Meeting Purpose• 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.
4
Otter Tail Power Company
Mission: To produce and deliver electricity as reliably, economically, and environmentally responsibly as possible to the balanced benefit of customers, shareholders, and employees and
to improve the quality of life in the areas in which we do business.
– Incorporated in 1907, Otter Tail Power Company is a subsidiary of Otter Tail Corporation, trading under the NASDAQ symbol OTTR.
– Size: 70,000 square miles
– Communities served: 422
– Customers served: 130,200
– Transmission: ~ 5,400 miles
– Generation: ~ 798 MW of owned generation
5
2013 Actual Year Attachment O
Actual Year Rate Requirements
Rate Base
Operating Expenses
Revenue Requirement and Rate
Network Rate Summary
6
Rate Requirements 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.
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.
Beginning Sept. 1, 2010 and Sept. 1 all years thereafter, 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.
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.
Beginning in 2014 and each year thereafter, the MISO Transmission Owners will hold a Regional Cost Sharing stakeholder meeting by November 1.
Rate Base
Note: The above numbers are Transmission only
Rate Base Item 2013 Actual
2013 Projected $ Change %
Change Explanation
Gross Plant in Service
$275,626,777 $287,571,748 $(11,944,971) (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
Accumulated Depreciation
$102,362,268 $102,744,252 $(381,984) (0.4%) Net result of Annual Depreciation Expense combined with projected retirements.
Net Plant in Service
$173,264,509 $184,827,496 $(11,562,987) (6.3%) = Gross Plant - A/D
Adjustments to Rate Base $(42,727,177) $(44,023,296) $1,296,119 (2.9%)
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.
CWIP for CON Projects
$47,702,021 $53,482,317 $(5,780,296) (10.8%)
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.
Land Held for Future Use
$9,037 $9,038 $(1) 0.0%
Working Capital $5,359,241 $5,830,055 $(470,814) (8.1%) Decrease in CWC due to drop in Transmission-related O&M which is discussed on the next tab.
Rate Base$183,607,631 $200,125,610 $(16,517,979) (8.3%) = Net Plant + Adj + CWIP + Land + Working
Capital
7
8
Operating Expenses
Note: The above numbers are Transmission only
Expense Item
2013 Actual
2013 Projected $ Change % Change Explanation
O&M $12,766,870 $15,223,429 $(2,456,559) (16.1%)
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.
Depreciation Expense
$5,785,772 $5,923,798 $(138,026) (2.3%)Decrease in depreciation expense coincides with the reduction in expected Plant in Service reported on the previous slide.
Taxes Other than Income $2,173,165 $2,373,190 $(200,025) (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.
Income Taxes $7,144,939 $7,933,216 $(788,277) (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%.
Operating Expense $27,870,746 $31,453,633 $(3,582,887) (11.4%) = O&M + A&G + Depreciation + Taxes
Revenue Requirement and Rate
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% = Debt + Equity
Weighted Cost of Debt 5.49% 5.73% (0.24%)Refinanced slightly more outstanding debt at a lower rate than originally expected .
Cost of Common Stock 12.38% 12.38% 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) (16.78%)
As with the discussion associated with the change in CWIP on Attachment O, GG projects have spent less to date than expected 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) (20.96%)As with the discussion associated with the change in CWIP on 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) -37.82%2013 Actual Year Other MISO Schedule revenue as well as ITA contractual payments were less than projected.
2012 True-up (Including Interest)
$(4,159,423) $(4,159,423) - 0.00% N/A
Net Revenue Requirement
$22,690,207 $22,444,998 $245,210 1.09% = Gross Revenue Requirement - Revenue Credits + True-up
9
2013 Attachment O True-up
CalculationAttachment O
True-up Calculation
2013 Actual
2013 Projected $ Change % Change Explanation
ATRR True-up $245,210 From “Net Revenue Requirement” line on previous slide.
Divisor $704,697 $670,317 $(34,380) (5.13%) From FERC Form 1
Projected Cost ($/kW/Yr) $33.484 From 2013 FLTY Attachment O Template
Divisor True-up $(1,151,185) = Divisor x Projected Cost ($/kW/Yr)
Total Principal True-up $(905,975) = ATRR + Divisor True-up Amounts
Interest on True-up $(59,508) = Avg Monthly FERC Interest Rate on Refunds x Principal True-up
Total Principal and Interest True-up $(965,483) To be Applied to 2015 FLTY Attachment O
Calculation
10
11
RATE SUMMARY
$0.11 or 3.9% Decrease
2013
Pro
ject
ed A
TRR
Div
isor
Cha
nge
Rat
e B
ase
Ope
ratin
g E
xpen
se
Dep
reci
atio
n &
Pro
perty
Tax
es
Cha
nge
in C
apita
l Stru
ctur
e/R
OR
Atta
chm
ent G
G A
djus
tmen
t
Atta
chm
ent M
M A
djus
tmen
tR
even
ue C
redi
tsM
isce
llane
ous
2013
Act
ual A
TRR
($1.00)
($0.50)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00 $2.79
($0.14)($0.27) ($0.24)
($0.03) ($0.04)
$0.27 $0.08
$0.35
($0.10)
$2.68
12
Total Transmission Revenue Requirement Breakdown
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
2013 Transmission Projects
13
14
Attachment O Capital Projects: Transmission Line Projects >
$200K
Project Forecasted 2013 Capital
Addition
Actual 2013
Capital Addition
$ Change % Variance Reason for 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
15
Attachments GG and MM Capital Projects:
Transmission Line Projects > $200K
Project Forecasted 2013 Capital
Addition
Actual 2013 Capital
Addition$ Change %
Variance Reason for Variance
Attachment GG
Buffalo – Casselton 115 kV Line $7,506,464 $3,326,581 ($4,179,883) (55.7%) Underlying improvements
delayed until 2014 and 2015
Fargo – St. Cloud 345 kV Line $20,683,120 $27,077,796 $6,394,676 30.9% Material deliveries
accelerated during 2013
Attachment MM
Brookings – Hampton Line $11,587,249 $10,493,282 ($1,093,967) (9.4%) Weather impacted expected project schedule.
Big Stone South – Brookings Line $1,562,040 $581,900 ($980,140) (62.7%)
Project development activities did not occur as quickly as forecasted
Big Stone South – Ellendale Line $3,865,059 $2,420,133 ($1,444,924) (37.4%)
Project development activities did not occur as quickly as forecasted
16
Questions?
If you have any additional questions after the meeting, please submit via e-mail to:
Kyle Sem, CPA
Manager – Business Planning
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.