November 16, 2012 Terry Wolf, Manager of Transmission Services

Agenda Meeting Purpose MRES Profile Attachment O Calculation Capital Projects Budget Risks Question/Answer

Meeting Purpose To provide an informational forum regarding the MRES forecasted Attachment O for 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 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 Activities Transmission facilities are owned by Western Minnesota Municipal Power Agency (WMMPA) FERC Declaratory Order (EL08-22, 12/08) combines financial statements for ATRR Attachment O effective 6/1/11 Incentive 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 on January 20, 2012

Forward Looking Attachment O Forward Rate Requirements Rate Base Operating Expenses Revenue Requirement and Rate Network Rate Summary

Forward Rate Requirement By June 1 of each year, MRES will post on OASIS all information regarding any Attachment O True-up Adjustments for the prior year Forward Looking Attachment O will be true-up info will be posted June 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 Base Rate Base Item 2013 Projected (Monthly Average) 2012 Projected (Monthly Average) $ Change % Change Explanation Gross Plant in Service $ 71,513,182$ $67,918,031$ 3,595,1515.3% The increase is due mainly to the projected capitalization of CapX Fargo Phase 2 in December Accumulated Depreciation $ 36,603,167$ $35,634,208$ 968,9592.7% Annual Depreciation Expense combined with projected additions and retirements. Net Plant in Service $34,910,016$ $32,283,823$ 2,626,1938.1% CWIP $ 47,377,921$ $21,383,316$ 25,994, % 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, %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$ -$ 2,077,329100% The increase is due to the projected capitalization of CapX Fargo Phase 2 in December Accumulated Depreciation $ - - %- % Net Plant in Service $ 2,077,329$ -$ 2,077,329100% CWIP Projects included in Rate Base $ 47,377,921$ 21,383,316 $25,994, % 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, %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$ 9,0970.2% Depreciation Expense $1,026,565$ 975,327$ 51,2385.3% Increase in Depreciation Expense due to projected plant additions. Taxes Other than Income $304,013$ 291,819$ 12,1944.2% Operating Expense $6,464,271$ 6,391,742$ 72,5291.1%O&M + Depreciation + Taxes Note: The above numbers are transmission only and A&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 Debt73% $-- % Proprietary Capital27% $-- % Total100.00% $- - % Cost of Debt5.48%5.63% N/A (0.15%) Difference is due to benefit of refinancing in late 2012 and projected cost of debt issuance in late MISO Equity Return12.38% N/A 0.00% Equity return approved for MISO Transmission Owners. Rate of Return7.35%7.45% N/A (0.10%) (LTD*Cost of Debt) + (Proprietary Capital * MISO Equity Return) Total Rate Base$ 83,638,500$ 55,053,043 $28,585, %From Rate Base Calculation Allowed Return – Actual Capital Structure $ 6,144,901$ 4,100,525 $2,044, % 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 Debt55% Capital Structure approved in docket EL Proprietary Capital45% Total100.00% Weighted Cost of Debt5.48%5.63%See previous slide. MISO Equity Return12.38% Rate of Return – Hypothetical Capital Structure 8.58%8.67% 55% * Cost of Debt plus 45% * 12.38% Rate of Return - Actual Capital Structure7.35%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 Requirements 2013 Projected 2012 Projected $ Change % Change Explanation Return - Actual Capital Structure $ 6,144,901$ 4,100,525$ 2,044, % Additional Return – Hypothetical Capital Structure $ 612,157$ 260,632$ 351, % Operating Expense$ 6,464,271$ 6,391,742$ 72,5291.1% Total Revenue Requirement$ 13,221,329$ 10,752,899 $2,468, % Attachment GG Adjustments($ 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 $ -- % Revenue credits assumed to remain unchanged from 2012 to 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 ATRR Attachment O, GG, MM $13,086,176 Attachment O $6,097,661 47% Non-MISO IS PRICING ZONE $3,267,143 54% of Att O MISO OTP 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

Attachment O Rate Summary

ProjectVoltage 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 MM Build 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 GG Build 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

Questions If you have any additional questions after the meeting, please submit via to Terry Wolf: All questions and answers will be distributed by to all attendees. Additionally, the questions and answers will be posted on the MRES OASIS website ( within two weeks from the date of inquiry.