Great River Energy

2015 Attachment O

Annual Projected Rate Meeting

October 31, 2014

Agenda

• Introduction• Disclosure• Meeting purpose• Great River Energy corporate profile• Attachment O calculation• Capital projects • Budget risks• Information exchange procedures• Question/answer

Disclosure

All figures in this document are preliminary and subject to change. Per the revised Formula

Rate Protocols, figures will be finalized after the Information Exchange, Challenge Procedures,

and MISO’s review are complete1.

1 Awaiting FERC’s final decision on Docket ER13-2379 on FERC’s investigation into MISO Formula Rate Protocols

Meeting purpose

FERC requires GRE to hold an annual projected rate meeting by October 31 each year to (i) permit GRE to explain and

clarify it’s projected net revenue requirement and (ii) provide interested parties an opportunity to seek information and clarifications from GRE about the projected net revenue

requirement

Great River Energy’s projected net revenue requirement and associated network rate commencing January 1, 2015 is

calculated using GRE’s Attachment O formula rate template within the MISO tariff

Corporate profile

• 28 member cooperatives – 650,000 member-consumers

• 4th largest Generation & Transmission cooperative in the nation– $3.7 billion assets– $2.8 billion debt– $980 million revenue

• 880 employees (MN and ND)• 3,619 MW generation

– 701 MW renewables• 4,660 miles transmission• 102 transmission substations

Attachment O

• Forward rate requirements• GRE revenue requirement distribution• Rate base• Operating expenses• Rate of return• Revenue requirement• Network rate summary

Forward rate requirements

• By June 1 of each year GRE will post on OASIS all information in regards to our Attachment O, Attachment MM, and Schedule 1 True-Up Adjustment for the prior year including the associated workpapers and supplemental notes

• By August 1 of each year GRE will post on OASIS all information in regards to our Attachment GG True-up Adjustment for the prior year

• By September 1 of each year GRE will post on OASIS our projected Attachment O, Attachment GG, Attachment MM, and Schedule 1 including the True-Up Adjustments, associated work papers, and supplemental notes

• By October 31 of each year, GRE will hold an Annual Projected Rate Meeting to permit GRE to explain and clarify our projected net revenue requirement

GRE revenue requirement distribution

GRE NET ATRR

GRE PRICING

ZONE

ITCM PRICING

ZONE

MP PRICING

ZONE

NSP PRICING

ZONE

OTP PRICING

ZONE

Per Schedules 7,8, & 9 of the MISO Tariff, each Transmission Owner's total revenue requirement is allocated proportionately to each Zone in which the Transmission Owner owns transmission facilities based on the gross plant

value of its facilities located in that Zone relative to the gross plant value of its facilities in all Zones, as reflected in Attachment O

* Per Docket ER10-187, the gross plant value to use is transmission gross plant less the gross plant value of transmission facilities associated with Attachment GG and MM.

Rate base

Rate Base Item2014 Projected

Amount2015 Projected

Amount $ Change % Change Explanation

           

Gross Plant In Service  $   960,431,604   $   1,077,306,524   $   116,874,920  12.17%Remainder of Brookings and Fargo CapX projects going into service

           

Accumulated Depreciation  $   322,572,983   $      310,138,514   $   (12,434,469) -3.85%

           

Net Plant In Service  $   637,858,622   $      767,168,010   $   129,309,388  20.27%Remainder of Brookings and Fargo CapX projects going into service

           

100% CWIP Recovery for Incentive Rate Transmission Projects  $   101,165,538   $        40,815,524   $   (60,350,014) -59.65%Remainder of Brookings and Fargo CapX projects going into service

           

Adjustments To Rate Base  $    (13,256,507)  $       (18,023,811)  $      (4,767,304) 35.96%AFUDC offset increasing due to remainder of CapX projects going into service

           

Land Held For Future Use 0 0 0 0 

           

Working Capital  $     29,996,231   $        28,950,392   $      (1,045,839) -3.49% 

           

Rate Base  $   755,763,883   $      818,910,115   $     63,146,231  8.36%= Net Plant + CWIP + Adjustments + LHFFU + Working Capital

Operating expenses

Expense Item2014 Projected

Amount2015 Projected

Amount $ Change % Change Explanation

           

O&M  $       38,190,787   $          46,592,008   $     8,401,221  22.00%

Increasing O&M costs associated with: regulatory compliance activities (NERC), CapX capital additions, vegetation management expense

           

A&G  $       10,973,064   $          11,301,656   $        328,592  2.99% 

           

Depreciation Expense  $       25,901,568   $          26,070,575   $        169,008  0.65%Increasing due to remainder of CapX projects going into service

           

Taxes Other Than Income Taxes  $         2,226,382   $             2,240,317   $           13,935  0.63% 

           

Income Taxes  $                          -   $                             -   $                     -  0.00%GRE doesn't pay income taxes

           

Operating Expenses  $       77,291,800   $          86,204,556   $     8,912,756  11.53%= O&M + A&G + Depreciation + Taxes

Rate of return

2014 Projected

Amount2015 Projected

Amount Change % Change Explanation

           

Long Term Debt 86.60% 83.82% -2.78% -3.21% 

           

Proprietary Capital 13.40% 16.18% 2.78% 20.75%GRE is working on a corporate strategy to raise our equity to 20% by 2020

           

Total  100% 100%    = Debt + Equity

           

Weighted Cost of Long Term Debt 4.52% 4.70% 0.18% 3.99% 

           

Weighted Cost of Proprietary Capital 1.66% 2.00% 0.34% 20.75% 

           

Rate of Return 6.18% 6.70% 0.52% 8.49%= (LT Debt * Cost) + (Equity * Cost)

Revenue requirement

2014 Projected

Amount2015 Projected

Amount $ Change % Change Explanation

Rate Base  $         755,763,883   $    818,910,115   $  63,146,231  8.36%From "Rate Base" Calculation           

Return  $           46,689,363   $      54,885,110   $    8,195,747  17.55%= Rate of Return * Rate Base           

Operating Expenses  $           77,291,800   $      86,204,556   $    8,912,756  11.53%From "Operating Expense" Calculation           

Attachment GG Adjustment  $          (22,556,884)  $     (31,752,332)  $   (9,195,448) 40.77%Attachment GG Revenue Requirement           

Attachment MM Adjustment  $            (9,983,045)  $     (14,079,982)  $   (4,096,937) 41.04%Attachment MM Revenue Requirement           

Gross Revenue Requirement  $           91,441,234   $      95,257,351   $    3,816,117  4.17%= Return + Operating Expenses - Adjustments           

Revenue Credits  $            (4,005,472)  $       (3,304,621)  $       700,851  -17.50%            

Revenue Requirement w/o True-Up  $           87,435,762   $      91,952,730   $    4,516,968  5.17%            

Attachment O True-Up  $             2,807,652   $        2,851,351   $          43,699  1.56%2013 True-Up included in 2015 rate may change pending MISO's review. 

         

Net Revenue Requirement  $           90,243,415   $      94,804,082   $    4,560,667  5.05%= Gross Rev Req - Rev Credits + True-Up

Network rate summary$/

kW/M

o

$(0.75)

$(0.25)

$0.25

$0.75

$1.25

$1.75

$2.25

$2.75

$3.25

$3.75

$4.25

2014 Projected Rate$3.71

Return $0.27

Op Exp $0.25

GG$(0.34)

MM $(0.15)

Rev Cr $0.03

True-Up $(0.01)

2015 Projected Rate $3.76

$0.05 Rate Increase

2015 GRE revenue requirement distribution

GRE NET ATRR $94,804,082

100%

GRE PRICING ZONE

$52,005,900

54.9%

ITCM PRICING ZONE $2,920,963

3.1%

MP PRICING ZONE $9,228,091

9.7%

NSP PRICING ZONE

$25,301,984

26.7%

OTP PRICING ZONE $5,347,144

5.6%

Total Attachment O, GG and MM Revenue Requirement = $139,928,601*

Attachment GG $31,300,043

Attachment MM

$13,824,476

Attachment O

*Inclusive of 2013 True-Up Amounts

2015 Capital additions

Attachment O $31.5M

GRE PRICING

ZONE

$17.7M

MP PRICING

ZONE

$0.8M

NSP PRICING

ZONE

$10.4M

OTP PRICING

ZONE

$2.3M

Attachment GG $117.4M

Attachment MM $49.5M = $198.4M+ +

• Attachment O facilities do not include “excluded facilities” per page 4 of Attachment O

ITCM PRICING

ZONE

$0.3M

2015 Capital additionsAttachment “O” projects > $100K

GRE Project ID

Project Name kV Type ISDControl Area

Forecasted Capital Addition

200229 Ortman to Big Fork 69 kV 20 mi Transmission Line 69KV TRANS.LINE 7/8/2015 GRE $7,808,783201128 Ramsey-Grand Forks (80 mi.) 230 kV Rebuild - Str. 227-307 (2) 230KV TRANS.LINE 3/19/2015 GRE $4,002,29675591 Ortman 230/69 kV Substation 69KV TRANS.SUBST 7/16/2015 GRE $3,643,809200209 Wirt 69 kV 3-way motor operated switch 69KV TRANS.LINE 10/8/2015 GRE $344,935202975 Dickinson (S062) - 345 kV Breaker Fail/Bus Differential Replacement 345KV TRANS.SUBST 5/27/2015 GRE $286,149203210 Dickinson - Install 345kV Line CCVT's 345KV TRANS.SUBST 5/11/2015 GRE $220,688202104 Cromwell Distribution Switch (SS2912) 69KV TRANS.LINE 3/2/2015 GRE $176,79682821 Highland 3-Way Manual Load Break 1200A Tap Switch 69KV TRANS.LINE 5/27/2015 GRE $164,999200208 Jessie Lake 69 kV 1-way manual switch 69KV TRANS.LINE 10/8/2015 GRE $127,047

203031 Heron Lake Relay Replacement 69KV TRANS.SUBST 10/6/2015 ITCM $148,896

201719 New Market to Veseli 115kV Double Circuit (6 mi) 115/69kV TRANS.LINE 12/11/2015 NSP $6,096,04750401 Ravenna Distribution Substation (DEA) 115KV TRANS.DISTSUB 3/16/2015 NSP $794,744202118 CDX Line - Tree Easement Reclamation 345kV TRANS.LINE 11/25/2015 NSP $669,909203081 Benton County - Replace Bus Diff, Add Sec Diff 345KV TRANS.SUBST 10/16/2015 NSP $637,038202418 Elrosa Switch Upgrade 69 kV 1200A, MOD's, FLB 69KV TRANS.LINE 4/13/2015 NSP $327,756203034 Dickinson 115kV RTU Replacement 115/69kV TRANS.SUBST 12/8/2015 NSP $298,115202450 Benton County RTU's 345KV TRANS.SUBST 1/22/2015 NSP $258,719202005 New Market 3-Way Manual Quick Whip 115kV Sw. 115/69kV TRANS.LINE 8/21/2015 NSP $199,998203082 Hader 69 kV 3-Way Switch Replacement 69KV TRANS.LINE 10/8/2015 NSP $198,154202419 Grove Switch Upgrade 69 kV 1200A, FLB 69KV TRANS.LINE 10/19/2015 NSP $176,292203122 Miesville DA-MIT Tap Realignment 69KV TRANS.LINE 11/11/2015 NSP $122,450

202378 Miltona - 115/41.6kV Spare Transformer 115/41.6kV TRANS.SUBST 4/28/2015 OTP $1,102,422203007 Cormorant Jct SS2813 115 kV Switch Replacement 115KV TRANS.LINE 10/8/2015 OTP $297,449203212 Gorton Dist Sub - 3-Way Tap Switch 41.6KV TRANS.LINE 7/9/2015 OTP $230,000203033 Kerkhoven RTU Replacement 115/41.6kV TRANS.SUBST 10/27/2015 OTP $197,929203032 Marsh Lake RTU Replacement 115/41.6kV TRANS.SUBST 10/27/2015 OTP $197,929202444 Roseville Switch - Replace RTU and Transient Study 41.6KV TRANS.SUBST 4/17/2015 OTP $148,975

2015 Capital additions Attachment “GG” projects

MISO Project ID

Project NameEstimated

ISDForecasted Capital

Addition286 CapX 2020 Monticello to Fargo 345kV Line 05/31/15 $103,350,7142634 Gowan Dist.-Cromwell 115kV Line (21mi double circuit) 4/10/2015 $13,060,6042634 Savanna-Gowan Dist. 115kV Line (9mi single circuit) 3/23/2015 $3,253,9312634 Cromwell Breaker Addition 6/11/2015 $679,805

2015 Capital additions Attachment “MM” projects

MISO Project ID

Project NameEstimated

ISDForecasted Capital

Addition

1203 CapX 2020 - Brookings -SE Twin Cities 345KV 03/31/15 $49,465,037

Budget risks

Revenue

Demand/weather

Regulatory filings

Financing

Outages

Timing of capital projects

Tight budgets

Information exchange procedures

• Interested parties can submit information requests until December 1, 2014

• GRE will make a good faith effort to respond within 15 business days of receipt of such requests

• Any information request must be submitted in writing to tbutkowski@GREnergy.com

• GRE will post on the MISO website and OASIS all information requests from interested parties and GRE’s responses

Questions?

Additional questions may be submitted in writing to

Todd Butkowskitbutkowski@GREnergy.com or

Seth Nelsonsnelson@GREnergy.com