August 21, 2015 Terry Wolf, Manager of Transmission Services

Agenda Meeting Purpose MRES Profile MRES True-up for 2014 MRES member historical rate information Does not include historical info for MMU Question/Answer

Meeting Purpose MRES background Regulatory Changes / Timelines MRES specific rate information MRES true-up info on Attachment O/GG/M from True-up from 2014 along with forecast for 2016 will be incorporated into rates to be effective on January 1, MRES member rate information ALP Utilities (ALP), Benson Municipal Utilities (BMU), Detroit Lakes Public Utilities (DLPU), Hutchinson Utilities Commission (HUC), and Worthington Public Utilities (WPU).

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: ~362 miles -Generation: ~744 MW -Renewable: ~86 MW

MRES FERC Background 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

Regulatory / FERC Issues Complaint against MISO TOs regarding ROE and certain TOs regarding capital structure ( ER14-12) Unknown timing and impacts Resolved in 2015?? Complaint against MISO TOs regarding Protocols (Docket EL12-35)

Regulatory / FERC Issues, Procedures and Timing cont. By June 1st Post actual calculations and true-ups based on prior year’s Rate Information By September 1st Meet with Interested Parties to discuss the actual prior year’s Rate information December 1st Deadline for information requests By January 10th Must respond to information requests January 31st Deadline for informal challenges March 15th Annual Informational filing March 31st Deadline for formal challenges

True-up of Attachment O / GG / MM Forward Rate Requirements Rate Base Operating Expenses Revenue Requirement and Rate Network Rate Summary

2014 True-Up Adjustment Overview Actual ProjectedDifference Net Revenue Requirement$4,410,970 $4,618,873($207,903)(a) Divisor True-Up Divisor688,216672,09416,122 Projected Rate ($/kW/Yr)$6.872 True-Up (Divisor Difference x Projected Rate)($110,796)(b) Interest (a + b * interest rate)($1,740)(c) Total 2014 True-Up Adjustment (Under Recovery)($320,439)(a+b+c)

Total Rate Base Rate Base Item 2014 Actual (Monthly Average) 2014 Projected (Monthly Average) $ Change % Change Explanation Gross Plant in Service $86,881,475$107,061,023($20,179,548)-18.8% Both Brookings and Fargo project in-service dates were delayed. Accumulated Depreciation $37,013,250$37,444,201($430,951)-1.2% Net Plant in Service $49,868,225$69,616,822($19,748,597)-28.4% CWIP $65,630,535$45,433,754$20,196, % With the delayed in-service dates, additional plant remained in CWIP. Working Capital, M&S and Prepayments $1,213,081$1,545,076($331,995)-21.5% Total Rate Base $116,711,841$116,595,652$116,1890.1% 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 2014 Actual (Monthly Average) 2014 Projected (Monthly Average) $ Change % Change Explanation Gross Plant in Service $16,876,577$35,271,170($18,394,593)-52.2% With the delayed in-service dates, additional plant remained in CWIP. Accumulated Depreciation $374,648 $493,553($118,905)-24.1% Net Plant in Service $16,501,929$34,777,617($18,275,688)-52.6% With the delayed in-service dates, additional plant remained in CWIP. CWIP Projects included in Rate Base $65,630,535$45,433,754($20,196,781)-44.5% Working Capital $ - Rate Base- Hypothetical Capital Structure $82,132,464$80,211,371$1,921,0932.4% Net Plant + CWIP + Working Capital Note: The above numbers are transmission only and general and intangible plant allocated to transmission.

Operating Expenses Expense Item 2014 Actual 2014 Projected $ Change % Change Explanation O&M $ 4,949,677$ 5,592,612($642,936)-11.5% Depreciation Expense $ 2,256,216$ 1,895,223$360, % Increase in Depreciation Expense is due to plant additions. Taxes Other than Income $ 356,997$ 496,027($139,031)-28.0% Increase in other taxes is due to property taxes on additional transmission plant in service. Operating Expense $ 7,562,890$ 7,983,863($420,974)-5.3% 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) 2014 Actual 2014 Projected $ Change % Change Explanation Long Term Debt73%75% N/A-2.67% Proprietary Capital27%25% N/A8.00% Higher equity percent is due to issuing less debt than projected and higher than projected margins. Total100.00% N/A Cost of Debt5.50%5.43% N/A 1.29% MISO Equity Return12.38% N/A 0.0% Equity return approved for MISO Transmission Owners. Rate of Return7.35%7.18% N/A 2.37% (LTD*Cost of Debt) + (Proprietary Capital * MISO Equity Return) Total Rate Base $116,711,841$116,595,652$116,1890.1% From Rate Base Calculation Allowed Return – Actual Capital Structure $8,576,631$8,373,575$203,0552.4% Increase largely due to higher rate of return.

Return on Rate Base (Hypothetical Capital Structure) 2014 Actual 2014 Projected $ Change % Change Comments Long Term Debt55% NA Capital Structure approved in docket EL Proprietary Capital45% NA Total100.00% NA Weighted Cost of Debt 5.50%5.43%NA1.29% See previous slide. MISO Equity Return 12.38% NA Rate of Return – Hypothetical Capital Structure 8.60%8.56%NA-2.67% 55% * Cost of Debt plus 45% * 12.38% Rate of Return - Actual Capital Structure 7.35%7.18%NA2.37%See previous slide. Difference between Hypothetical and Actual Capital Structure 1.25%1.38%NA-9.42% Rate Base - Hypothetical Capital Structure $82,132,464$80,211,371$1,921,0932.4% Additional Return – Hypothetical Capital Structure $1,024,778$1,102,658($77,880)-7.06% Hypothetical and actual capital structure difference * Hypothetical Capital Structure Rate Base

Revenue Requirements 2014 Actual 2014 Projected $ Change % ChangeExplanation Return - Actual Capital Structure $8,576,631$8,373,575$203,0552.4% Increase largely due to higher rate of return. Additional Return – Hypothetical Capital Structure $1,024,778$1,102,658($77,880)-7.06% Operating Expense $7,562,890$7,983,863($420,974)-5.3% O&M + Depreciation + Taxes Total Revenue Requirement $17,164,298$17,460,096($295,798)-1.69% Attachment GG Adjustments ($8,033,546)($8,086,829)$53, % Credit for the CapX Fargo Project slightly higher than projected. Attachment MM Adjustments ($3,409,843)($3,129,634)($280,209)-8.95% Credit for the CapX Brookings Project slightly higher than projected. Attachment O Revenue Requirement Before credits $5,720,909$6,243,633($522,724)-8.37% Revenue Credits ($269,753)$135,153($404,906) % Adjustment from a prior year estimate caused the variance. Net Attachment O Revenue Requirement $5,990,662$6,108,480 $117, % Revenue Requirement less Revenue Credits, does not include 2012 true-up

16 MRES Total ATRR Attachment O, GG, MM $17,164,298 Attachment O $5,720,909 33% $4,410,970 (After True-up) Non-MISO (SPP) IS(UMZ) PRICING ZONE $2,334,197 53% of Att O MISO OTP PRICING ZONE $2,076,773 47% of Att O MISO Attachment GG CapX Fargo $8,033,546 47% MISO Attachment MM CapX Brookings $ 3,409,843 20% 2014 MRES Annual Transmission Revenue Requirement Distribution

MRES member Attachment O Information All standard MISO templates MRES is MISO TO on behalf of 6 MRES members MRES is contact for any initial questions OTP JPZ ALP – 2014 financials (first year) BMU – 2013 financials, 1 yr lag DLPU– 2013 financials, 1 yr lag ITC-M JPZ - WPU– 2013 financials, 1 yr lag GRE JPZ – HUC financials

Total Rate Base Rate Base ItemALPBMUDLPUHUCWPU Gross Plant in Service $ 2,547,572 $ 676,121 $ 1,542,961 $ 8,872,537 $ 3,150,487 Accumulated Depreciation $ 931,248 $ 101,418 $ 472,271 $ 4,148,959 $ 383,393 Net Plant in Service $ 1,616,324 $ 574,703 $ 1,070,690 $ 4,723,577 $ 2,767,094 Working Capital, M&S and Prepayments $ 9,205 $ 3,903 $ 488 $ 76,698 $ 3,668 Total Rate Base $ 1,625,530 $ 578,605 $ 1,071,178 $ 4,800,275 $ 2,770,762

Return on Rate Base ALPBMUDLPUHUCWPU Long Term Debt13%54%12%2% Proprietary Capital87%46%88%98% Total100.00% Cost of Debt4.62%2.77%1.38%4.83%3.56% MISO Equity Return12.38% Rate of Return11.39%7.23%11.01%12..25%12.18% Total Rate Base $ 1,625,530 $ 578,605 $ 1,071,178 $ 4,800,275 $ 2,770,762 Return $ 185,072 $ 41,833 $ 117,958 $ 588,104 $ 337,431

Operating Expenses Expense Item ALPBMUDLPUHUCWPU O&M $ 27,170 $ 18,025 $ 3,902 $ 376,352 $ 3,673 Depreciation Expense $ 78,229 $ 20,284 $ 49,894 $ 231,202 $ 99,659 Taxes Other than Income $ 68,710 $ 4,840 $ 31,539 $ 126,582 $ 67,725 Operating Expense $ 174,109 $ 43,148 $ 85,335 $ 734,136 $ 171,057 Note: The above numbers are transmission only and A&G expenses, general plant depreciation and taxes allocated to transmission.

Revenue Requirements ALPBMUDLPUHUCWPU Return $ 185,072 $ 41,833 $ 117,958 $ 588,104 $ 337,431 Operating Expense $ 174,109 $ 43,148 $ 85,335 $ 734,136 $ 171,057 Total Revenue Requirement $ 359,181 $ 84,981 $ 203,293 $ 1,322,240 $ 508,488 Revenue Credits $ 52,623 $ 4,057 $ 10,919 $ 22,582 $ 1,995 Net Attachment O Revenue Requirement $ 306,558 $ 80,981$ 192,374 $ 1,299,658 $ 505,493

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