1. 1 Northern States Power Companies (NSP-MN & NSP-WI) Transmission Customer Meeting October 27, 2015 Rate Discussion: Attachment O, GG & MM

2. 2 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.

3. 3 The purpose of today’s meeting: Present the projected Attachment O, GG and MM revenue requirements for the rates that will be effective January 1 through December 31, 2016. These revenue requirements were calculated using the NSP Companies Tariff templates using projected net revenue requirement and projected load. Review the 2016 Attachment O, GG and MM formula rate calculation cost components relative to the 2015 calculations currently in effect. Discuss the pending update to the formula template to address the issue of prorating Accumulated Deferred Income Taxes to comply with IRS regulation Section 1.167(l)-1(h)(6) 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. Meeting Purpose / Objective

4. 4 Attachment O, GG & MM Formula Rate for 2016 Originally filed with MISO and posted on OASIS on August 31, 2015 Update information was posted on OASIS on October 16, 2015 MISO review of the Company’s: Attachment O, GG, and MM with 2014 Actual Costs - Completed Attachment O, GG and MM with 2016 Costs – In Process The information currently on OASIS is incorporated in this presentation.

5. 5 Attachment O Budgeted Rate Effective 1/1/2016 Based upon total Revenue Requirements Submitted to MISO Annual Cost ($/kW/Yr) $ 55.373 Network & P-to-P Rate ($/kW/Mo) $ 4.614 Peak Rate Off-Peak Rate Point-To-Point Rate ($/kW/Wk) $ 1.065 Point-To-Point Rate ($/kW/Day) $ 0.213 $ 0.152 Point-To-Point Rate ($/MWh) $ 13.311 $ 6.321 This is not the NSP Zone Rate. MISO calculates Zonal Rate.

6. 6 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

7. 7 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

8. 8 Change in Operating Costs Detail Operating costs in 2015 Rate $316.0M Increase in depreciation$ 11.0M Increase in income taxes$ 5.5M Increase in taxes other than income$ 4.1M Increase in O&M costs (Transmission and A&G)$ 1.5M Net Increase in Operating Costs $ 22.1M Operating costs in 2016 Rate$338.1M

9. 9 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

10. 10 True-Up Calculation 2016 2015 Change Prior Year Annual True-up ATRR Component$(13.4M) $ (14.8M) Divisor Component$ 9.9M $ (7.7M) Interest on True-up$ (0.2M) $ (1.5M) Total $ (3.7M) $ (24.0M)$ 20.3M 2014 Actual 2013 Actual

11. 11 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

12. 12 Annual Revenue Requirement Determination Function of: Rate Base x Weighted Cost of Capital

13. 13 Change in Rate Base Total Rate Base – 2015 $2,469.6M Net plant in service increase $ 364.6M Decrease in CWIP$ (122.2M) Increase in accumulated deferred taxes $ (99.0M) Decrease in other working capital$ (2.3M) Net increase in rate base $141.1M Total Rate Base – 2016 $2,610.7M

14. 14 Change in Cost of Capital Weighted Cost of Capital 20162015 D/E Ratio Cost D/E Ratio Cost LTD 47%2.27% 47% 2.34% Equity53%6.56% 53% 6.62% 8.83% 8.96%

15. 15 Reconciliation of Change in Return for 2016 The increase in the return is driven by the increase in rate base for 2016. Change in Rate Base $141.1Mx 8.83%$12.5M PY Rate base x decrease in WCC$2,469.6M x (0.13%)$ (3.2M) Net change in return $ 9.3M Actual calculation performed on whole values

16. 16 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

17. 17 Change in Net Revenue Credits Revenue Credits Estimated in 2015 Rate $(18.0M) Lower Projected Firm Transmission GFA $ 6.2M Lower Projected PTP/Contracts $ 1.9M Revenue Credits Estimated in 2016 Rate $ (9.9M) Difference which increased 2016 Revenue Req $ 8.1M

18. 18 Comparison of 2016 Revenue Requirement to 2015 Revenue Requirement Attachment O Net Revenue Requirement 2015$359.2M Cost Drivers in 2016: Increase in Operating Costs$ 22.1M Decrease in Annual True-up$ 20.3M Increase in Return Requirement$ 9.3M Decrease in Revenue Credits$ 8.1M Increase in Attachment GG & MM Rev Req$ (17.4M) Attachment O Net Revenue Requirement 2016$401.6M

19. 19 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) CWIP None at this time the Company has authority to include in the formula rate. Total project costs included in Attachment GG : $592.6M

20. 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) CWIP None at this time the Company has authority to include in the formula rate Total project costs included in Attachment MM : $444.3M

21. 21 Components of Attachment GG & MM Operating expenses (1) $ 10.9M$ 3.5M Depreciation expense$ 11.7M$ 8.5M Taxes other$ 7.2M$ 5.4M Income taxes$ 20.5M$ 15.3M Return $ 40.2M$ 30.2M Rev Req for 2016 (Attachment O Deduct) $ 90.5M $ 62.9M Rev Req for 2015$ 76.2M $ 59.8M Increase 2016 over 2015$ 14.3M $ 3.1M $17.4M Attachment GG & MM revenue requirements are deducted from Attachment O revenue requirements (1) Includes Common & General depreciation calculation Attachment GG Attachment MM

22. 22 Total Revenue Requirements Attachment GG & MM 2016 Annual Revenue Requirements $ 90.5M$ 62.9M True-Up Adjustment $ (3.6M)$ 4.0M Total 2016 MISO Billings $ 86.9M$ 66.9M Attachment GG Attachment MM

23. 23 Pending Updates to Formula Template Calculation of Accumulated Deferred Income Taxes in accordance with IRS Regulation Section 1.167(l)-1(h)(6). IRS requires future looking rate calculations to use a pro-rate calculation to develop the ADIT rate base balance. The Company is still working through the calculations and does not have a final impact at this time. The Company is working with other MISO TO’s to updated the formula template and will request this update become effective January 1, 2016. The Company will post the updated 2016 revenue requirements for Attachment O, GG and MM on OASIS once the calculation is completed and the template change request filing has been filed with FERC.

24. 24 Questions? Contacts: Carolyn M Wetterlin Sr. RTO Manager 612-330-6599 Thomas E Kramer Principal Rate Analyst 612-330-5866 Thank you all for attending today’s meeting