2019 Attachment O customer meeting October 26, 2018

Agenda Meeting Purpose Otter Tail Power Company Profile Attachment O Calculation Capital Projects Budget Risks Question/Answer 1

Legal Disclosure All numeric data provided in this presentation is preliminary and subject to change. 2

Meeting purpose To provide an information forum regarding Otter Tail’s forecasted Attachment O for 2019. The forecasted Attachment O for 2019 is calculated using the FERC Form 1 Attachment O template under the MISO Tariff with a projected net revenue requirement and projected load. Rates will become effective on January 1, 2019 for the joint pricing zone. 3

Otter tail power company profile 4

About 800 MW owned generation About 245 MW wind generation 70,000 Square Miles 131,551 Customers 422 Communities Avg. population about 400 796 Employees 472 Minnesota 205 North Dakota 119 South Dakota About 800 MW owned generation About 245 MW wind generation About 5,940 miles of transmission lines 5

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Attachment o Calculation 9

Forward looking attachment o Forward Looking Rate Requirements Rate Base Operating Expenses Revenue Requirement and Rate Network Rate Summary 10

Regional Cost Shared Projects by November 1 of each year. Rate requirements Actual 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 of each year, Otter Tail will hold a customer meeting to explain its Actual Year True-up Calculation. Ex. 2019 Forward Looking Attachment O will be trued-up by June 1, 2020 with a corresponding Customer Meeting to be held by September 1, 2020. Forward Looking By September 1 of each year, Otter Tail will post on OASIS its projected Net Revenue Requirement, including the True-Up Adjustment and load for the upcoming year, and associated work papers. A customer meeting will be held by October 31 of each year to explain its forward looking formula rate input projections and cost detail. The MISO Transmission Owners will hold a Joint Informational Meeting on Regional Cost Shared Projects by November 1 of each year. 11

Rate base Rate Base Item 2019 Projected 2018 Projected $ Change Explanation Gross Plant in Service $627,664,454 $524,502,966 $103,161,488 19.7% The increase is primarily due to the Big Stone South - Ellendale Project forecasted to be placed into service in 2019. Accumulated Depreciation 139,923,689 132,031,347 7,892,342 6.0% The increase is primarily due to the Big Stone South - Ellendale Project forecasted to be placed into service in 2019. Net Plant in Service $ 487,740,765 $ 392,471,619 $ 95,269,146 24.3% = Gross Plant - A/D Adjustments to Rate Base (97,677,807) (86,355,173) (11,322,634) 13.1% ADIT - Book vs Tax Depreciation Timing Differences originating due to accelerated tax depreciation methods being used for large Transmission projects going into service. CWIP for CON Projects 24,932,385 101,015,521 (76,083,136) -75.3% The change in CWIP is due to the Big Stone South - Ellendale Project forecasted to be placed into service in 2019. Land Held for Future Use 9,038 - 0.0%   Working Capital 7,823,546 7,903,373 (79,827) -1.0% Tracking close to prior year forecast. Rate Base $ 422,827,926 $ 415,044,378 $ 7,783,549 1.9% = Net Plant + Adj + CWIP + Land + Working Capital Note: The above numbers are Transmission only. 12

Operating Expenses Expense Item 2019 Projected 2018 Projected $ Change Explanation O&M $ 16,207,192 $ 18,122,985 $ (1,915,793) -10.6% The decrease in O&M expenses is from the 2018 Projection including a larger amount forecasted for employee pension expenses. Depreciation Expense 11,552,490 9,755,866 1,796,624 18.4% Increase in depreciation expense coincides with the increase in Plant in Service reported on the previous slide. Taxes Other than Income 4,622,061 4,039,569 582,492 14.4% Increase in property taxes due to Big Stone South - Ellendale Project forecasted to be placed into service. Income Taxes 8,258,921 8,000,615 258,306 3.2% Increase in Rate Base = Increase in Return = Increase in Income Tax Expense. Operating Expense $ 40,640,664 $ 39,919,035 $ 721,629 1.8% = O&M + A&G + Depreciation + Taxes Note: The above numbers are Transmission only. 13

Revenue requirement and rate   2019 Projected 2018 Projected $ Change % Change Explanation Long Term Debt 45.11% 46.28% -1.17% Tracking close to prior year forecast Common Stock 54.89% 53.72% 1.17% Total 100.00% = Debt + Equity @10.82% Weighted Cost of Debt 5.25% 5.39% -0.14% Cost of Common Stock - 9/28/16 10.82% 0.00% Unchanged Rate of Return @ 10.82% 8.31% = (LTD*Cost)+(Preferred Stock*Cost)+(Common Stock*Cost) Rate Base 422,827,926 415,044,378 7,783,548 1.88% From "Rate Base" Calculation Allowed Return 35,124,486 34,480,304 644,182 1.87% = Rate of Return * Rate Base Operating Expenses 40,640,664 39,919,035 721,629 1.81% From "Operating Expense" Calculation Attachment GG Adjustments 15,186,090 15,829,436 (643,346) -4.06% Decrease is the result of small decreases in the expense and return factors. Attachment MM Adjustments 25,083,622 23,383,155 1,700,467 7.27% The factors increased primarily related to the Big Stone South - Ellendale Project going into service in 2019. Gross Revenue Requirement 35,495,438 35,186,749 308,690 0.88% = Return + Expenses - Adjustments Revenue Credits 2,962,826 3,812,985 (850,159) -22.30% The decrease is primarily due to less 3rd Party Revenues forecasted in 2019 than 2018. Prior-Year True-up (Including Interest) (2,304,806) (3,955,157) 1,650,351 41.73% The increase in the prior year true-up is from incorporating network load in our projections. Net Revenue Requirement 30,227,807 27,418,607 2,809,199 10.25% = Gross Revenue Requirement - Revenue Credits + True-up 14

Rate summary 15

Total transmission revenue requirement breakdown Total Rev. Req. = $70,497,519 Net Attch. O ATRR = $30,227,807 Attch. GG Rev. Req. = $15,186,090 Attch. MM Rev. Req. = $25,083,622 16

2019 transmission projects 17

Attachment o capital projects: transmission line projects > $500k Voltage In-Service Date 2019 Forecasted Spend Description of Project Doyon/Bartlett-Rebuild 41.6 kV Line 41.6 kV 12/20/2019 $500,000 Reconductor and rebuild existing transmission line due to age and condition. Devils Lake/Sweetwater 41.6 kV Pole Replace 11/30/2019 $400,000 Rebuild existing transmission line due to inaccessibility, age and condition. Morris/Cyrus-Rebuild 41.6 kV Line 5/31/2020 $350,000 Rebuild existing 7 miles of transmisison line due to age and condition. Turtle Lake/Mercer-Rebuild 41.6 kV Line 11/30/2021 $150,000 Rebuild existing 18 miles of transmission line due to age and condition. Max-Ryder 41.6 kV Line Upgrades $160,000 Lake Preston/Oldham-Replace 41.6 kV Line 5/31/2022 $250,000 Rebuild existing 10 miles of transmission line due to age and condition. Donaldson 115 kV Sub-Install 115 kV Breaker and Capacitor Banks 115 kV 11/30/2020 $1,000,000 Install a new 115 kV breaker and capacitor banks for increased load serving capability. Wahpeton/Wheaton-Rebuild 115 kV Line 12/15/2023 Lake Norden Area 115 kV Transmission Project 12/31/2020 12,895,438 Construct substation additions and build 49 miles of new 115 kV transmission line. Winger-Thief River Falls 230 kV Line 230 kV 12/15/2024 $1,281,000 Construct a new 230 kV transmission line from Winger to Thief River Falls. Attachment MM Big Stone South – Ellendale Line 345 kV 6/30/2019 $6,688,964 Build new 345 kV line from Big Stone South - Ellendale in SD and ND. 18

Timing of Capital Projects Budget Risks Revenue Demand/ Weather Regulatory Filings Financing Outages Timing of Capital Projects 20

Questions? If you have any additional questions after the meeting, please submit via e-mail to: Stuart Tommerdahl Manager – Regulatory Administration stommerdahl@otpco.com 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. 21