NSP Transmission Customer Meeting Recap
"Learn about Northern States Power Companies' Transmission Customer Meeting discussing the 2020 Actual Costs, True-Up calculation, and revenue requirements. Explore comparisons with prior years' data."
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Presentation Transcript
Northern States Power Companies (NSPM & NSPW) MISO Attachment O-NSP Transmission Customer Meeting August 25, 2021 Discussion: Attachment O Actual Costs 2020 1
Meeting Purpose / Objective The purposes of today s meeting are to: Comply with the Attachment O-NSP Formula Rate Protocol requiring a Customer Meeting to discuss the Actual 2020 Attachment O Cost Information Present the 2020 True-Up calculation that will be included in the development of the projected rates that will be effective January 1 through December 31, 2022, and Recap the 2020 Actual Attachment O cost information relative to the 2020 budget information upon which the 2020 Attachment O-NSP estimated rates were calculated. 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. 2
Attachment O-NSP Actual 2020 Revenue Requirement Originally submitted to MISO and posted to OASIS on June 1, 2021 Revision posted on July 26, 2021 MISO is still performing their review on this submission The 2020 True-Up, plus interest, will be included in the development of the 2022 Attachment O-NSP Annual Transmission Revenue Requirement (ATRR) and corresponding rates The information currently on OASIS is incorporated in this presentation. 3
Attachment O-NSP 2020 True-Up Recap Based upon total blended NSPM and NSPW Revenue Requirements Actual 2020 Budget 2020 Difference Net Revenue Requirement $328.4M $342.0M $(13.6M) A Projected Year Divisor True-Up Divisor 7.906M 8.283M (0.377M) Annual Cost ($/KW/Yr) $41.534 $41.283 (0.250) Divisor True-Up (Divisor Difference x Budget Rate) Total True-Up (Revenue Requirement & Divisor True-Up) $ (15.6M) B $ 2.0M (A B) * Actual calculations above performed on whole numbers 4
Comparison of 2020 True-Up to Prior Years Test Year (A) (B) Rev Req Divisor Total (A-B) 2020 True Up $(13.6M) $ (15.6M) $ 2.0M 2019 True-Up $(23.8M) $ (8.6M) $(15.2M) 2018 True-Up $(18.7M) $ 7.8M $(26.5M) 2017 True-Up $ (4.7M) $ (5.0M) $ 0.3M 2016 True-Up 2015 True-Up 2014 True-Up $(16.1M) $ (0.7M) $(15.4M) $(34.5M) $(15.2M) $(19.3M) $(18.9M) $(10.0M) $(8.9M) 2013 True-Up $(16.8M) $ 7.7M $(24.5M) 5
Comparison of 2020 Budget Revenue Requirement to 2020 Actual Revenue Requirement Budgeted Net 2020 Revenue Requirement Cost Deviations for 2020: Lower Operating Costs Lower Return Requirement $342.0M $ (11.5M) $ (10.0M) Lower Attachment GG & MM Credits Lower Revenue Credits $ 6.7M $ 1.2M Actual Net 2020 Revenue Requirement $ 328.4M * Actual calculations performed on whole numbers 6
Comparison of 2020 Budget Revenue Requirement to 2020 Actual Revenue Requirement Budgeted Net 2020 Revenue Requirement Cost Deviations for 2020: Lower Operating Costs Lower Return Requirement $342.0M $ (11.5M) $ (10.0M) Lower Attachment GG & MM Credits Lower Revenue Credits $ 6.7M $ 1.2M Actual Net 2020 Revenue Requirement $ 328.4M * Actual calculations performed on whole numbers 7
Change in Operating Costs Detail Budgeted operating costs in 2020 rate $292.4M Lower O&M costs (transmission and A&G) $ (7.3M) Lower income taxes $ (2.7M) Lower incurred taxes other than income $ (0.1M) Lower depreciation expense $ (1.4M) Net decrease in operating costs $(11.5M) Actual operating costs for 2020 $280.9M * Actual calculations performed on whole numbers 8
Comparison of 2020 Budget Revenue Requirement to 2020 Actual Revenue Requirement Budgeted Net 2020 Revenue Requirement Cost Deviations for 2020: Lower Operating Costs Lower Return Requirement $342.0M $ (11.5M) $ (10.0M) Lower Attachment GG & MM Credits Lower Revenue Credits $ 6.7M $ 1.2M Actual Net 2020 Revenue Requirement $ 328.4M * Actual calculations performed on whole numbers 9
Annual Revenue Requirement Determination Function of: Rate Base x Weighted Cost of Capital 10
Change in Rate Base Total Budgeted Rate Base 2020 $3,009.1M Higher average net plant in service No change in average CWIP Higher accumulated deferred taxes (deducted from rate base) Higher other working capital Net decrease in rate base $ 25.5M $ 0.0M $ (102.4M) $0.8M $ (76.1M) Total Actual Rate Base 2020 $ 2,933.0M * Actual calculations performed on whole numbers 11
Change in Cost of Capital Weighted Cost of Capital LTD Equity* 10.52% 53.11% Cost of Capital D/E Ratio 2020A 2020B Cost * Cost of Capital D/E Ratio Cost * 4.15%46.89% 1.95% 4.49% 47.23% 2.12% 5.59% 10.52% 52.77% 5.55% 7.53% 7.67% * Actual calculations performed on whole numbers; ROE base 10.02% + 50BP adder 12
Reconciliation of Change in Return for 2020 Change in rate base $(76.1M) x 7.53% $(5.7M) Bud. rate base x change in WCC* $3,009.1M x (0.14)% $(4.2M) Net change in return requirement $ (10.0M) Overall lower return was a function of both a lower rate base and the decrease in weighted cost of capital * Actual calculations performed on whole numbers 13
Comparison of 2020 Budget Revenue Requirement to 2020 Actual Revenue Requirement Budgeted Net 2020 Revenue Requirement Cost Deviations for 2020: Lower Operating Costs Lower Return Requirement $342.0M $ (11.5M) $ (10.0M) Lower Attachment GG & MM Credits Lower Revenue Credits $ 6.7M $ 1.2M Actual Net 2020 Revenue Requirement $ 328.4M * Actual calculations performed on whole numbers 14
Components of Attachment GG & MM Attachment GG Attachment MM Rev Req Budget for 2020 $ 67.8M $ 75.2M Operating expenses (1) $ (1.0M) $ (0.3M) Depreciation expense Taxes other Income taxes* Return Rev Req Actual 2020 $ (0.5M) $ 0.9M $ (0.1M) $ (0.0M) $ (0.6M) $ (0.5M) $ (2.7M) $ (1.9M) $ 62.8M $ 73.5M Variance in 2020 Actuals $ (4.9M) $(1.8M) $(6.7M) Attachment GG & MM revenue requirements are deducted from Attachment O, so lower credits to GG & MM increase the Attachment O revenue requirements * Actual calculations performed on whole numbers (1) Includes Common & General depreciation calculation 15
Comparison of 2020 Budget Revenue Requirement to 2020 Actual Revenue Requirement Budgeted Net 2020 Revenue Requirement Cost Deviations for 2020: Lower Operating Costs Lower Return Requirement $342.0M $ (11.5M) $ (10.0M) Lower Attachment GG & MM Credits Lower Revenue Credits $ 6.7M $ 1.2M Actual Net 2020 Revenue Requirement $ 328.4M * Actual calculations performed on whole numbers 16
Change in Net Revenue Credits (Other revenue received that offsets total revenue requirement) Estimated revenue credits in 2020 rate Actual revenue credits in 2020 $ (9.5M) $ (8.3M) Lower actual credits increase 2020 Revenue Req $1.2M Actual revenue credits were lower than budget, which was mostly due to lower point to point revenues in 2020 driven by the COVID-19 pandemic. 17
Questions? Contacts: Carolyn M Wetterlin Senior RTO Manager 612-330-6599 Or Ryan E Strean Principal Rate Analyst 612-215-4527 18
