1. 2019 Attachment O customer meeting
October 26, 2018

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

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

4. 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

5. Otter tail power company profile4

6. 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

7. . 6

8. 7

9. 8

10. Attachment o Calculation9

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

12. 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 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

13. 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
$ ,740,765
$ ,471,619
$ ,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
$ ,827,926
$ ,044,378
$ ,783,549
1.9%
= Net Plant + Adj + CWIP + Land + Working Capital
Note: The above numbers are Transmission only. 12

14. Operating Expenses Expense Item 2019 Projected 2018 Projected $ Change
Explanation
O&M
$ ,207,192
$ ,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
$ ,640,664
$ ,919,035
$ ,629
1.8%
= O&M + A&G + Depreciation + Taxes
Note: The above numbers are Transmission only. 13

15. 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 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

16. Rate summary 15

17. 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

18. 2019 transmission projects17

19. 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

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

21. 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. 21