december 14, 2011
DESCRIPTION
Missouri River Energy Services 2012 Attachment O Customer Meeting. December 14, 2011. Terry Wolf, Manager of Transmission Services. Agenda. Meeting Purpose MRES Profile Attachment O Calculation Capital Projects Budget Risks Question/Answer . Meeting Purpose. - PowerPoint PPT PresentationTRANSCRIPT
December 14, 2011
Missouri River Energy Services 2012 Attachment OCustomer Meeting
Terry Wolf, Manager of Transmission Services
AgendaMeeting Purpose MRES Profile Attachment O Calculation Capital Projects Budget Risks Question/Answer
Meeting PurposeTo provide an informational forum regarding
the MRES forecasted Attachment O for 2012. The forecasted Attachment O for 2012 is
calculated using the Midwest ISO’s EIA Form 412 Attachment O-MRES template with a projected net revenue requirement and projected load.
Rates become effective on January 1, 2012 for joint pricing zone comprised of Otter Tail Power Company, Great River Energy, and MRES.
Attachment GG, and Attachment MM are planned to be effective January 1, 2012.
Missouri River Energy Services
Odin Wind Project
WorthingtonWind Project
Marshall Wind Project
LaramieRiver Station
Exira Station
WatertownPower Plant
Missouri River
Missouri R
iver
Missouri River
Yellowstone River
Big Horn RiverCanyon Ferry Dam
Fort Peck Dam
Yellowtail Dam
Garrison Dam
Oahe Dam
Big Bend Dam
Fort Randall Dam
Gavin’s PointDam
Rugby Wind
Project
Point Beach Nuclear Plant
Red Rock Hydroelectric
Plant
MBPP
Irv Simmons
CapX Fargo
CapX Brookings
ITA
MRES Member
MRES Generation Resource
Planned MRES Generation Resource
Federal Hydroelectric Dam Transmission Projects (MBPP, Irv Simmons, ITA, CapX (Fargo, Brookings)
- 61 Members served - Transmission: ~239 miles- Generation: ~740
MW- Renewable: ~84 MW
MRES FERC ActivitiesTransmission facilities are owned by Western
Minnesota Municipal Power Agency (WMMPA)
FERC Declaratory Order (EL08-22, 12/08) combines financial statements for ATRR
Attach O effect 6/1/11Incentive filing (EL11-45, 6/11)
CapX; Fargo P2 & P3, and Brookings CWIP, Abandon Plant, Hypothetical cap structure
205 filing (ER12-351, 11/11)
Forward Looking Attachment OForward Rate Requirements Rate Base Operating Expenses Revenue Requirement and Rate Network Rate Summary
Forward Rate RequirementBy June 1 of each year, MRES will post on OASIS all
information regarding any Attachment O True-up Adjustments for the prior year.2012 Forward Looking Attachment O will be trued-up by
June 2013.Beginning 2012 and each year thereafter, MRES will
post on OASIS its projected Net Revenue Requirement including the True-Up Adjustment and load for the following year, and associated work papers in October.
Beginning in 2011 and each year thereafter, MRES will hold a customer meeting to explain its formula rate input projections and cost detail.
Total Rate BaseRate Base Item
2012 Projected (Monthly Average)
Projected12/31/11 $ Change %
Change Explanation
Gross Plant in Service $ 73,564,991 $ 71,839,919 $1,725,072 2.4%
The increase is due mainly to the capitalization (approximately $10M) of CAPX Fargo Phase I in December 2011.
Accumulated Depreciation $ 35,220,891 $ 34,678,374 $ 542,517 1.6% Annual Depreciation Expense combined
with projected additions and retirements.
Net Plant in Service $38,344,101 $ 37,161,545 $ 1,182,556 3.2%
CWIP $ 24,768,664 $ 7,748,114 $17,020,550 219.7%The increase is due to CapX Fargo Phases 2 and 3 ($11.5M) and CapX Brookings ($5.5M).
Working Capital $1,320,795 $ 1,269,018 $ 51,777 4.1%
Total Rate Base $ 64,433,560 $ 46,178,677 $ 18,254,883 39.5% Net Plant + CWIP + Working Capital
Note: The above numbers are transmission only and general and intangible plant allocated to transmission.
Rate Base Earning Hypothetical Capital Structure Return
Rate Base Item 2012
Projected (Monthly Average)
Projected12/31/11 $ Change %
Change Explanation
Gross Plant in Service $ - $ - $ - - %
Accumulated Depreciation $ - $ - $ - - %
Net Plant in Service $ - $ - $ - - %
CWIP Projects included in Rate
Base $ 24,768,664 $ 7,748,114 $ 17,020,550 219.7% Projected costs for CWIP projects
requested to be included in rate base.
Working Capital $ - $ - $ - - %
Rate Base- Hypothetical
Capital Structure $ 24,768,664 $ 7,748,114 $ 17,020,550 219.7% Net Plant + CWIP + Working Capital
Note: The above numbers are transmission only and general and intangible plant allocated to transmission.
Operating ExpensesExpense Item 2012 Projected 2011 Projected $ Change %
Change Explanation
O&M $ 5,221,403 $ 4,807,181 $ 414,222 8.6%
Depreciation Expense $1,082,864 $ 840,295 $ 242,569 28.9% Increase in Depreciation Expense due to
projected plant additions.
Taxes Other than Income $290,268 $ 253,161 $ 37,107 14.7%
Increased is due to a projected increase in total company property tax expense and a projected increase in the transmission GP allocation percentage from 2011 to 2012.
Operating Expense $6,594,534 $ 5,900,637 $ 693,897 11.8% O&M + Depreciation + Taxes
Note: The above numbers are transmission only andA&G expenses, general plant depreciation and taxes allocated to transmission.
Return on Rate Base (Actual Capital Structure)2012
Projected 2011
Projected $ Change % Change Explanation
Long Term Debt 72% 74% ( 2%)Decrease due to no additional debt expected in 2012, scheduled principal payments and projected higher equity.
Proprietary Capital 28% 26% 2%Increase due to projected net surplus for 2012 combined with lower long-term debt.
Total 100.00% 100.00%
Cost of Debt 5.91% 5.91% 0.00% Cost of debt is expected to remain constant from 2011 to 2012.
MISO Equity Return 12.38% 12.38% 0.00% Equity return approved for MISO Transmission Owners.
Rate of Return 7.73% 7.59% -0.47%(LTD*Cost of Debt) + (Proprietary Capital * MISO Equity Return)
Total Rate Base $ 64,433,560 $ 46,178,677 $ 18,254,883 39.5% From Rate Base Calculation
Allowed Return -Actual Capital
Structure $ 4,978,834 $ 2,916,880 $ 2,061,954 70.7%
Increase largely due to additional transmission investment. See Rate Base slide for additional detail.
Return on Rate Base (Hypothetical Capital Structure)
2012 Projected 2011 Projected Comments
Long Term Debt 55% N/A Capital Structure requested in docket EL 11-45-000. Proprietary Capital 45% N/A
Total 100.00% N/A
Weighted Cost of Debt 5.91% N/A See previous slide.
MISO Equity Return 12.38% N/ARate of Return- Hypothetical Capital
Structure 8.823% N/A 55% * Cost of Debt plus 45% * 12.38%
Rate of Return- Actual Capital Structure 7.727% N/A From previous slide.
Difference between Hypothetical and Actual Capital Structure 1.096% N/A
Rate Base- Hypothetical Capital Structure $ 24,768,664 N/A
Additional Return –Hypothetical Capital Structure $ 271,558 N/A
Hypothetical and actual capital structure difference * Hypothetical Capital Structure Rate Base
A forward looking test year will be effective January 1, 2012 for MRES. Therefore, a hypothetical capital structure calculation for prior years in not applicable.
Revenue Requirements2012
Projected 2011 Projected $ Change % Change Explanation
Return -Actual Capital Structure $ 4,978,834 $ 2,916,880 $
2,061,954 70.7%
Additional Return–Hypothetical Capital
Structure $ 271,558 - $ 271,558
Operating Expense $ 6,594,534 $ 5,900,637 $ 693,897 11.8%Total Revenue Requirement
$ 11,844,926 $ 8,817,517 $
3,027,409 34.3%
Attachment GG Adjustments
($ 4,067,684) - ($
4,067,684)Projected credit for the CapX Fargo Project.
Attachment MM Adjustments ($ 819,435) - ($
819,435)Projected credit for the CapX Brookings Project.
Attachment O Revenue Requirement Before
credits$ 6,957,807 $ 8,817,517 ($
1,859,710) (21.1%)
Revenue Credits $ 135,156 $ 135,156 -Revenue credits assumed to remain unchanged from 2011 to 2012.
Net Attachment O Revenue
Requirement $ 6,822,651 $ 8,682,361 ($
1,859,710) (21.1%)Revenue Requirement before credits less Revenue Credits
Project Voltage Estimated In-Service
Date
Forecasted 2012 Capital
Addition Project Description
Brookings – Twins Cities 345 kV Line 345 kV $ 10,976,012
Fargo – St. Cloud 345 kV Line 345 kV $ 23,065,087Build new 345 kV line from St. Cloud (Quarry) to Alexandria to Fargo (Bison) (MN/ND) (190 miles), includes Alexandria substation.
Capital Projects: Transmission Line Projects > $100K
$(0.60)
$(0.40)
$(0.20)
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$0.62
$0.03
$0.82
$(0.50)
$(0.10) $(0.02)
$0.84
Rate Summary
Revenue Demand/Weather
Timing of Capital Projects
Financing
Regulatory Findings
Tight Budgets
Budget Risks
QuestionsIf you have any additional questions after the meeting, please submit via e-mail to Terry Wolf: [email protected]
All questions and answers will be distributed by e-mail to all attendees. Additionally, the questions and answers will be posted on the MRES OASIS website (http://oasis.midwestiso.org/OASIS/MRET) within two weeks from the date of inquiry.