November 16, 2012

Missouri River Energy Services 2013 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 2013. The forecasted Attachment O for 2013 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, 2013 for joint pricing zone comprised of Otter Tail Power Company, Great River Energy, and MRES.

Attachment GG, MM effective January 1, 2013.

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: ~744

MW- Renewable: ~86

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 ATRRAttachment O effective 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)FERC Approved ER12-351, and EL 11-45 on

January 20, 2012

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 true-up

info will be posted June 2013.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.

MRES will hold a customer meeting to explain its formula rate input projections and cost detail.

Total Rate BaseRate Base Item

2013 Projected (Monthly Average)

2012Projected (Monthly Average)

$ Change

% Change Explanation

Gross Plant in Service $ 71,513,182 $ $67,918,031 $ 3,595,151 5.3%

The increase is due mainly to the projected capitalization of CapX Fargo Phase 2 in December 2013.

Accumulated Depreciation $ 36,603,167 $ $35,634,208 $ 968,959 2.7% Annual Depreciation Expense combined

with projected additions and retirements.

Net Plant in Service $34,910,016 $ $32,283,823 $ 2,626,193 8.1%

CWIP $ 47,377,921 $ $21,383,316 $ 25,994,605 121.6%The increase is due to CapX Fargo Phases 2 and 3 ($15.3M) and CapX Brookings ($10.7M).

Working Capital, M&S and

Prepayments $ 1,350,564 $ 1,385,904 $ (35,340) (2.5%)

Total Rate Base $ 83,638,500 $ 55,053,043 $ 28,585,457 51.9% 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 2013

Projected (Monthly Average)

2012 Projected (Monthly Average)

$ Change

% Change Explanation

Gross Plant in Service $ 2,077,329 $ - $ 2,077,329 100%

The increase is due to the projected capitalization of CapX Fargo Phase 2 in December 2013.

Accumulated Depreciation $ - $ - $ - - %

Net Plant in Service $ 2,077,329 $ - $ 2,077,329 100%

CWIP Projects included in Rate

Base $ 47,377,921 $ 21,383,316 $25,994,605 121.6%

The increase is due to CapX Fargo Phases 2 and 3 ($15.3M) and CapX Brookings ($10.7M).

Working Capital $ - $ - $ - - %

Rate Base- Hypothetical

Capital Structure $ 49,455,250 $ 21,383,316 $ 28,071,934 131.3% Net Plant + CWIP + Working Capital

Note: The above numbers are transmission only and general and intangible plant allocated to transmission.

Operating Expenses

Expense Item

2013 Projected

2012 Projected

$ Change

% Change Explanation

O&M $ 5,133,693 $ 5,124,596 $ 9,097 0.2%

Depreciation Expense $1,026,565 $ 975,327 $ 51,238 5.3% Increase in Depreciation Expense due to

projected plant additions.

Taxes Other than Income $304,013 $ 291,819 $ 12,194 4.2%

Operating Expense $6,464,271 $ 6,391,742 $ 72,529 1.1% 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)2013

Projected 2012

Projected $

Change %

Change Explanation

Long Term Debt 73% 73% $- - %

Proprietary Capital 27% 27% $- - %

Total 100.00% 100.00% $- - %

Cost of Debt 5.48% 5.63% N/A (0.15%)Difference is due to benefit of refinancing in late 2012 and projected cost of debt issuance in late 2013.

MISO Equity Return 12.38% 12.38% N/A 0.00% Equity return approved for MISO Transmission Owners.

Rate of Return 7.35% 7.45% N/A (0.10%) (LTD*Cost of Debt) + (Proprietary Capital * MISO Equity Return)

Total Rate Base $ 83,638,500 $ 55,053,043 $28,585,457 51.9% From Rate Base Calculation

Allowed Return –Actual Capital Structure $ 6,144,901 $ 4,100,525 $2,044,376 49.9%

Increase largely due to additional transmission investment. See Rate Base slide for additional detail.

Return on Rate Base (Hypothetical Capital Structure)2013

Projected 2012

Projected Comments

Long Term Debt 55% 55% Capital Structure approved in docket EL 11-45-000. Proprietary Capital 45% 45%

Total 100.00% 100.00%

Weighted Cost of Debt 5.48% 5.63% See previous slide.

MISO Equity Return 12.38% 12.38%Rate of Return –

Hypothetical Capital Structure 8.58% 8.67% 55% * Cost of Debt plus 45% * 12.38%

Rate of Return - Actual Capital Structure 7.35% 7.45% See previous slide.

Difference between Hypothetical and Actual Capital Structure 1.238% 1.22%

Rate Base - Hypothetical Capital Structure $ 49,455,250 $ 21,383,316

Additional Return – Hypothetical Capital Structure $ 612,157 $ 260,632

Hypothetical and actual capital structure difference * Hypothetical Capital Structure Rate Base

Revenue Requirements2013

Projected 2012

Projected $

Change %

Change Explanation

Return - Actual Capital Structure $ 6,144,901 $ 4,100,525 $ 2,044,376 49.9%

Additional Return –Hypothetical Capital Structure $ 612,157 $ 260,632 $ 351,525 134.9%

Operating Expense $ 6,464,271 $ 6,391,742 $ 72,529 1.1%

Total Revenue Requirement $ 13,221,329 $ 10,752,899 $2,468,431 23.0%

Attachment GG Adjustments ($ 5,374,066) ($ 2,946,393) $(2,427,673) 82.4% Projected credit for the CapX Fargo Project.

Attachment MM Adjustments ($ 1,614,449) ($ 851,343) ($ 763,106) 89.6% Projected credit for the CapX Brookings Project.

Attachment O Revenue Requirement Before credits $ 6,232,814 $ 6,955,163 ($ 722,349) (10.4%)

Revenue Credits $ 135,153 $ 135,153 $ - - %Revenue credits assumed to remain unchanged from 2012 to 2013.

Net Attachment O Revenue Requirement $ 6,097,661 $ 6,820,010 ($ 722,349) (10.4%) Revenue Requirement before

credits less Revenue Credits

14

MRES Total ATRRAttachment O, GG, MM

$13,086,176

Attachment O $6,097,661

47%Non-MISO

IS PRICING

ZONE$3,267,

143 54% of Att O

MISOOTP

PRICING ZONE

$2,830,518 46% of Att O

MISO Attachment GG CapX Fargo$5,374,066

41%

MISO Attachment MM

CapX Brookings$ 1,614,449

12%

2013 MRES Annual Transmission Revenue Requirement Distribution

$(0.80)

$(0.60)

$(0.40)

$(0.20)

$-

$0.20

$0.40

$0.60

$0.80

$1.00 $0.75

$0.07

$0.79

$(0.65)

$(0.20)

$(0.02)

$0.74

Attachment O Rate Summary

Project Voltage Estimated In-Service

Date

Forecasted 2013 Capital

Additions by yr end

Project Description

Brookings – Twins Cities 345 kV Line 345 kV

2015 for entire

project$ 12,227,081

MTEP Project ID 1203 – Attachment MMBuild new 345kV line from SD to SE Twin Cities (250 miles)

Fargo – St. Cloud 345 kV Line 345 kV 2015 for

entire project

$ 19,788,401

MTEP Project ID 286 – Attachment GGBuild 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

in MISO > $500K

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: twolf@mrenergy.com

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.