1. 2015 Attachment O True-up Customer Meeting
July 29, 2016

2. AGENDA Meeting Purpose Otter Tail Power Company Profile
Attachment O Calculation
2015 Transmission Projects
Question/Answer

3. MEETING PURPOSE
To provide an informational forum regarding Otter Tail’s Attachment O for True-up.
The 2015 Actual Year Attachment O is calculated via the FERC Form 1 Attachment O template under the MISO Tariff utilizing actual data as reported in Otter Tail’s 2015 FERC Form 1
Any True-up for 2015 will be included in the 2017 FLTY Attachment O Calculation for rates effective January 1, 2017 for the joint pricing zone comprised of the following transmission owners: Otter Tail, Great River Energy, Missouri River Energy Services, Benson Municipal Utilities, Detroit Lakes Public Utilities and Alexandria Light & Power.

4. Otter Tail Power Company Profile

5. Service area NORTH DAKOTA SOUTH DAKOTA 70,000 Square miles
131,149 Customers
421 Communities
Avg. population about 458
770 Employees
445 Minnesota
210 North Dakota
115 South Dakota
About 800 MW owned generation
About 245 MW wind generation
About 5,300 miles of transmission lines
Service area
LANGDON WIND ENERGY CENTER
Rugby
Devils Lake
Crookston
Garrison
SOLWAY COMBUSTION TURBINE
Bemidji
COYOTE STATION
LUVERNE WIND FARM
ASHTABULA WIND ENERGY CENTER
Jamestown
ASHTABULA III
JAMESTOWN COMBUSTION TURBINE
NORTH DAKOTA
Fergus Falls
Wahpeton
HOOT LAKE PLANT
Oakes
SOUTH DAKOTA
Morris
BIG STONE PLANT
Milbank
LEGEND
Headquarters
Customer service center
LAKE PRESTON COMBUSTION TURBINE

6. Our mission
To produce and deliver electricity as reliably, economically, and environmentally responsibly as possible to the balanced benefit of customers, shareholders, and employees and to improve the quality of life in the areas in which we do business.

7. Our Vision
Growth and success—for our company and the rural communities we serve. We collaborate and prosper through responsible, resourceful action. We balance community, economic, and environmental commitments. Always.

8. Our VALUES INTEGRITY We conduct business responsibly and honestly.
SAFETY We provide safe workplaces and require safe work practices.
CUSTOMER FOCUS We provide reliable electricity and timely, courteous customer service.
COMMUNITY We care about the people and places we serve and improve the quality of life in the areas in which we do business.
RESOURCEFULNESS We draw on the ingenuity and expertise of various resources to create strategic, balanced, practical plans.

9. Attachment O Calculation

10. 2015 ACTUAL YEAR ATTACHMENT O
Actual Year Rate Requirements
Rate Base
Operating Expenses
Revenue Requirement and Rate
Network Rate Summary

11. 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., 2016 Forward Looking Attachment O will be trued-up by June 1, 2017 with a corresponding Customer Meeting to be held by September 1, 2017.
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 Regional Cost Sharing stakeholder meeting
by November 1 of each year.

12. RATE BASE Note: The above numbers are Transmission only Rate Base Item
2015
Actual
Projected
$ Change
% Change
Explanation
Gross Plant in Service
$381,519,700
$386,778,026
$(5,258,326)
(1.4%)
The decrease in Plant in Service from Projected to Actual was due to timing of in-service dates and lower capitalized project costs than expected.
Accumulated Depreciation
$111,888,154
$112,631,484
$(743,330)
(0.7%)
Net result of Annual Depreciation Expense combined with projected retirements.
Net Plant in Service
$269,631,545
$274,146,542
$(4,514,997)
(1.6%)
= Gross Plant - A/D
Adjustments to Rate Base
$(67,323,696)
$(62,362,196)
($4,961,500)
8.0%
ADIT - Book vs Tax Depreciation Timing Differences originating due to accelerated tax depreciation methods for Transmission projects going into service.
CWIP for CON Projects
$34,072,148
$40,886,235
$(6,814,087)
(16.7%)
Decrease was mainly due to the Fargo Phase III CAPX 2020 project going into service earlier than anticipated and lower spend versus forecast on other projects.
Land Held for Future Use
$9,037
$9,038
$(1)
0.0%
Working Capital
$6,722,903
$5,894,170
$828,733
14.1%
Increase in CWC due to slight increases in inventory and direct Transmission and A&G-related O&Ms.
Rate Base
$243,111,938
$258,573,789
$(15,461,851)
(6.0%)
= Net Plant + Adj + CWIP + Land + Working Capital
Note: The above numbers are Transmission only

13. Taxes Other than Income
OPERATING EXPENSES
Expense
Item
2015
Actual
Projected
$ Change
% Change
Explanation
O&M
$14,723,450
$14,024,094
$699,356
5.0%
Most of the increase is in transmission related regulatory expenses along with slight increases in A&G related expenses.
Depreciation Expense
$7,050,278
$7,140,892
$(90,614)
(1.3%)
Decrease in depreciation expense coincides with the reduction of Plant in Service reported on the previous slide.
Taxes Other than Income
$3,238,017
$3,133,563
$104,454
3.3%
Property Tax increases.
Income Taxes
$9,220,579
$9,822,603
$(602,024)
(6.1%)
Higher ETR in the 2015 actual vs the FLTY filing increased the tax calculation slightly. This is somewhat offset by a Decrease in Rate Base = Decrease in Return = Decrease in Income Tax Expense.
Operating Expense
$34,232,325
$34,121,153
$111,172
0.3%
= O&M + A&G + Depreciation + Taxes
Note: The above numbers are Transmission only

14. REVENUE REQUIREMENT AND RATE
2015
Actual
Projected
$ Change
% Change
Explanation
Long Term Debt
48.07%
48.35%
(0.28%)
Tracking close to forecast.
Common Stock
51.93%
51.65%
0.28%
Total
100.00%
= Debt + Equity
Weighted Cost of Debt
5.38%
5.54%
(0.17%)
Cost of Common Stock
12.38%
0.00%
Unchanged
Rate of Return
9.01%
9.08%
(0.06%)
= (LTD*Cost)+(Preferred Stock*Cost)+(Common Stock*Cost)
Rate Base
$243,111,937
$258,573,789
$(15,461,852)
(5.98%)
From "Rate Base" Calculation
Allowed Return
$21,914,041
$23,465,923
$(1,551,882)
(6.61%)
= Rate of Return * Rate Base
Operating Expenses
$34,232,324
$34,121,152
$111,172
0.33%
From "Operating Expense" Calculation
(Less) Attachment GG Adjustments
$17,916,401
$18,208,328
$(291,927)
(1.60%)
The reduction in revenue requirements is mainly due to less spend on Fargo CAPX than originally projected and a lower rate of return as calculated above.
(Less) Attachment MM Adjustments
$6,429,239
$6,603,848
($174,609)
(2.64%)
The reduction in revenue requirements is mainly due to less capital spend on the BSAT projects as well as a lower Rate of Return as calculated above.
Gross Revenue Requirement
$31,800,726
$32,774,901
$(974,174)
(2.97%)
= Return + Expenses - Adjustments
Revenue Credits
$5,629,352
$6,283,694
$(654,342)
(10.41%)
The reduction is mainly due to less MISO Schedule 26 and 26A credits than forecasted.
Prior Year True-up (Including Interest)
$(1,181,325) -
N/A
Net Revenue Requirement
$24,990,048
$25,309,881
(319,832)
(1.26%)
= Gross Revenue Requirement - Revenue Credits + True-up

15. 2015 Attachment O True-up Calculation
Actual
Projected
$ Change
% Change
Explanation
ATRR True-up
$(319,832) 
From “Net Revenue Requirement” line on previous slide.
Divisor (kW)
730,451
704,967
(25,484)
(3.61%)
Projected Cost ($/kW/Yr)
$35.90
From 2015 FLTY Attachment O Template
Divisor True-up
$(914,933)
= Divisor x Projected Cost ($/kW/Yr)
Total Principal
True-up
$(1,234,766)
= ATRR + Divisor True-up Amounts
Interest on True-up
$(81,728)
= Avg. Monthly FERC Interest Rate on Refunds x Principal True-up
Total Principal and Interest True-up
$(1,316,494)
To be Applied to 2017 FLTY Attachment O Calculation

16. RATE SUMMARY Z

17. TOTAL TRANSMISSION REVENUE REQUIREMENT BREAKDOWN
Total Rev. Req. = $49,335,688
Net Attch. O ATRR = $24,990,048
Attch. GG Rev. Req. = $17,916,401
Attch. MM Rev. Req. = $6,429,239

18. 2015 transmission Projects

19. ATTACHMENT O CAPITAL PROJECTS: TRANSMISSION LINE PROJECTS > $200K

20. ATTACHMENTS GG AND MM CAPITAL PROJECTS: TRANSMISSION LINE PROJECTS > $200K

21. Manager – Regulatory Administration
QUESTIONS?
If you have any additional questions after the meeting, please submit via to:
Stuart Tommerdahl
Manager – Regulatory Administration
All questions and answers will be distributed by to all attendees. Additionally, the questions and answers will be posted on Otter Tail’s OASIS website ( within two weeks from the date of inquiry.