NSP Transmission Customer Meeting: 2021 Revenue Requirements Discussion
This presentation discusses the projected revenue requirements for Northern States Power Companies (NSP-MN & NSP-WI) for 2021, including details on Attachment O, GG, and MM formulas. It outlines the process used to calculate revenue requirements, compares cost components with 2020 rates, and provides insight into various factors influencing project schedules. The document also contains legal disclosures regarding forward-looking statements and business outlook for the electric transmission industry.
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Northern States Power Companies (NSP-MN & NSP-WI) MISO Attachment O NSP Transmission Customer Meeting October 23, 2020 Discussion: Attachment O 2021 Projected Revenue Requirements 1
Legal Disclosure This document contains certain statements that describe the NSP Companies management s beliefs concerning future business conditions and prospects, growth opportunities and the outlook for the electric transmission industry based upon information currently available. Such statements are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, NSP Companies has identified these forward-looking statements by words such as anticipates , believes , intends , estimates , expects , projects and similar phrases. These forward-looking statements are based upon assumptions management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements. 2
Meeting Purpose / Objective The purposes of today s meeting are to: Present the projected Attachment O, GG and MM revenue requirements for the rates that will be effective January 1 through December 31, 2021. These revenue requirements were calculated using the NSP Companies Tariff templates using projected revenue requirement inputs and projected load. Review the 2021 Attachment O, GG and MM formula rate calculation cost components relative to the 2020 rates currently in effect and explore drivers of variances. The dates and schedules, and even the projects themselves, represent our best estimates for projects to be initiated and completed. Please be aware that many factors could alter those schedules, including regulatory approvals, construction resources, availability of materials, weather, and other unforeseen events. 3
Attachment O, GG & MM Formula Rate for 2021 Originally filed with MISO and posted on OASIS on September 1, 2020 Update was filed with MISO and posted on OASIS on October 1, 2020 MISO review of the Company s: Attachment O, GG and MM with 2019 Actuals In Process Attachment O, GG and MM Projected 2021 In Process The information currently on OASIS is incorporated in this presentation. 4
Attachment O-NSP Budgeted Rate Effective 1/1/2021 Based upon total Revenue Requirements submitted to MISO Annual Cost ($/kW/Yr) Network & P-to-P Rate ($/kW/Mo) $ 46.093 $ 3.841 Off-Peak Rate $ 0.886 $ 0.126 $ 5.262 Peak Rate $ 0.886 $ 0.177 $ 11.080 Point-To-Point Rate ($/kW/Wk) Point-To-Point Rate ($/kW/Day) Point-To-Point Rate ($/MWh) This is not the NSP Zone Rate. MISO calculates Zonal Rate. 5
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 6
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 7
Change in Operating Costs Detail Operating costs in 2020 Rate $ 292.4M Increase in depreciation $ 5.0M Decrease in O&M costs (Transmission and A&G) $ (0.4M) Increase in income taxes $ 2.9M Decrease in taxes other than income $(0.3M) Net increase in Operating Costs $7.1M Operating costs in 2021 Rate $299.5M 8
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 9
Annual Return Requirement Determination Function of: Rate Base x Weighted Cost of Capital 10
Change in Rate Base Total Rate Base 2020 $3,009.1M Net plant in service increase Lower accumulated deferred taxes (ADIT is a deduction from Rate Base) $ 118.6M $ 35.6M Lower other working capital Net increase in rate base $ (0.6M) $153.6M Total Rate Base 2021 $3,162.7M 11
Change in Cost of Capital Weighted Cost of Capital LTD Equity Cost of Capital D/E Ratio 2021B 2020B Cost * Cost of Capital D/E Ratio Cost * 4.13% 47.62% 1.96% 4.49% 47.23% 2.12% 10.52% 52.38% 5.51% 10.52% 52.77% 5.55% 7.47% 7.67% 2021 & 2020 ROE = 10.52% (10.02% per Opinion 569-A + 50 Basis Point RTO Adder) 12
Reconciliation of Change in Return for 2021 Change in Rate Base $ 153.6M x 7.47% $ 11.5M * PY Rate base x decrease in WCC $3,009.1M x (0.20%) $ (6.0M) * Net change in return $ 5.5M The increase in the return is driven by the increase in rate base for 2021. * Actual calculation performed on whole values 13
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 14
True-Up Calculation 2021 2020 2019 Actual 2018 Actual Change Prior Year Annual True-up ATRR Component $(22.7M) $ (18.3M) Divisor Component Interest on True-up Total $ 8.5M $(1.4M) $ (2.7M) $ (15.6M) $ (28.8M) $(7.8M) $13.2M A decrease in the True-Up refund increases the Attachment O Revenue Requirements 15
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 16
Change in Net Revenue Credits Revenue Credits Estimated in 2020 Rate $ (9.5M) Lower Projected PTP Service $ 1.1M Revenue from Self-Funding $ (2.0M) Revenue Credits Estimated in 2021 Rate $ (10.4M) An increase in Revenue Credits decreases the Attachment O Revenue Requirements 17
Comparison of 2021 Revenue Requirement to 2020 Revenue Requirement Attachment O Net Revenue Requirement 2020 Cost Drivers in 2021: Increase in Operating Costs Increase in Return Requirement $342.0M $ 7.1M $ 5.5M Decrease in Annual True-up $ 13.2M Increase in Revenue Credits Decrease in Attachment GG & MM Rev Req $ (0.9M) $ 1.7M Attachment O Net Revenue Requirement 2021 $368.6M 18
Components of Attachment GG & MM Attachment GG Attachment MM Rev Req for 2020 $ 67.8M $ 75.2M Operating expenses (1) $ (0.4M) $ 0.4M Depreciation expense Taxes other Income taxes Return Rev Req for 2021 (Attachment O Deduct) $ 1.1M $0.9M $(0.3M) $ (0.3M) $(0.2M) $0.0M $ (1.8M) $(1.1M) $ 66.1M $ 75.2M Delta 2021 versus 2020 $(1.7M) $ 0.0M $(1.7M) Attachment GG & MM revenue requirements are deducted from Attachment O Revenue Requirements 19 (1) Includes Common & General depreciation calculation
MTEP Projects Included in Attachment GG Calculation The following RECB project costs were included in the Attachment GG: In service 1. Cannon Falls (MTEP 1456) 2. Yankee (Colville) Station (MTEP 1366) 3. Ulik Wind (MTEP 2765) 4. St. Cloud Sauk River (MTEP 1953) 5. Nobles Gen Station (MTEP 1457) 6. Upgrades for G349 (MTEP 1458) 7. Upgrades for G809 (MTEP 2109) 8. Upgrades for G417 (MTEP 2119) 9. Pleasant Valley-Byron (MTEP 2178) 10. Glenco-West Waconia (MTEP 1285) 11. MN Valley Kerkhoven (MTEP 3312) 12. Kohlman Lake Goose Lake (MTEP 3317) 13. Coudry Osprey (MTEP 3375) 14. Wilmarth Sub (MTEP 3104) 15. CAPX202-Bemidji-Grand Rapids 230Kv line (MTEP 279) 16. CAPX2020-Fargo- St. Cloud 345Kv line (MTEP 286) 17. CAPX2020-Rochester-Lacrosse 345Kv line (MTEP 1024) 18. GIP 826 Crandal (MTEP 9523) 19. Hawks Nest (MTEP 11645) 20. Huntley-Wilmarth (MTEP 11883) CWIP No CWIP included at this time; however the Company can request FERC authorization to allow CWIP recovery in the formula rate on a project by project basis. Total project costs included in Attachment GG : $584.5M 20
MTEP Projects Included in Attachment MM Calculation The following RECB project costs were included in the Attachment MM: In service 1. CAPX2020-Brookings (MTEP 1203) 2. Big Stone Brookings (MTEP 2221) 3. Lacrosse Madison (MTEP 3127) CWIP No CWIP included at this time; however the Company can request FERC authorization to allow CWIP recovery in the formula rate on a project by project basis Total project costs included in Attachment MM : $692.1M 21
Total Revenue Requirements Attachment GG & MM Attachment GG Attachment MM 2021 Annual Revenue Requirements $ 66.1M $ 75.2M True-Up Adjustment Total 2021 MISO Billings $ (3.8M) $ 3.9M $62.3M $ 79.1M 22
Questions? Thank you all for attending today s meeting Contacts: Carolyn M Wetterlin Sr. RTO Manager 612-330-6599 Ryan E Strean Principal Rate Analyst 612-215-4527 23
