May 18, Black Hills Power, Inc. Docket Nos. ER and EL Compliance Filing Revising Attachment H Formula Rate Protocols

Transcription

1 Texas New York Washington, DC Connecticut Seattle Dubai London Blake R. Urban Attorney Office Fax Bracewell & Giuliani LLP 2000 K Street NW Suite 500 Washington, DC May 18, 2015 The Honorable Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, NE Washington, DC Re: Black Hills Power, Inc. Docket Nos. ER and EL Compliance Filing Revising Attachment H Formula Rate Protocols Dear Secretary Bose: Pursuant to the Federal Energy Regulatory Commission s ( Commission ) March 19, 2015 order in this proceeding, 1 Black Hills Power, Inc. ( Black Hills Power ) hereby submits revisions to its formula rate protocols on file with the Commission under Attachment H to the Joint Open Access Transmission Tariff of Black Hills Power, Basin Electric Power Cooperative, and Powder River Energy Corporation ( Joint Tariff ) in compliance with the March 19 Order s directives. Consistent with the effective date adopted by the Commission for Black Hill Power s September 12, 2014 filing in this proceeding, 2 Black Hills Power requests that the Commission accept the proposed revisions to the Joint Tariff effective as of January 1, Upon acceptance by the Commission, only Black Hills Power will implement the revised formula rate protocols because the formula rate protocols do not apply to the other transmission service providers under the Joint Tariff. To comply with Order No. 714, 3 Black Hills Power submits for filing the revised formula rate protocols under Attachment H to the Joint Tariff in RTF with attached metadata to appear in the etariff Public Viewer as the Tariff Record. In addition, Black Hills Power is submitting clean and marked up copies of the revised formula rate protocols in PDF for publication in elibrary. 1 Black Hills Power, Inc., 150 FERC 61,198 (2015) ( March 19 Order ). 2 Black Hills Power, Inc., Compliance Filing Revising Attachment H Formula Rate Protocols, Docket No. ER (filed Sept. 12, 2014) ( September 2014 Filing ); March 19 Order at P 1 (conditionally accepting compliance filing, effective January 1, 2015, as requested, subject to further compliance). 3 Electronic Tariff Filings, Order No. 714, FERC Stats. & Regs. 31,276 (2008).

2 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 2 I. BACKGROUND On July 17, 2014, the Commission initiated an investigation pursuant to Section 206 of the Federal Power Act ( FPA ) on Black Hills Power s formula rate protocols under Attachment H to the Joint Tariff. 4 The Commission found that Black Hills Power s formula rate protocols under Attachment H to the Joint Tariff appear to be unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful, and directed Black Hills Power, as the Joint Tariff administrator, to file revisions to the Black Hills Power formula rate protocols or to show cause why Black Hills Power should not be required to do so. 5 Specifically, the Commission found that Black Hills Power s formula rate protocols may be deficient in three areas: (1) scope of participation (i.e., who can participate in the information exchange); (2) the transparency of the information exchange (i.e., what is exchanged); and (3) the ability to challenge Black Hills Power s implementation of its formula rate as a result of the information exchange (i.e., how parties may resolve their potential dispute). 6 Black Hills Power submitted revised formula rate protocols under Attachment H to the Joint Tariff to comply with the July 17 Order s directives in the September 2014 Filing. The Commission conditionally accepted the revised formula rate protocols that Black Hill Power submitted in the September 2014 Filing, effective January 1, 2015, subject to the submission of an additional compliance filing. 7 II. COMPLIANCE FILING In the March 19 Order, the Commission found that the proposed definition of interested parties in the revised formula rate protocols provided sufficient scope of participation in Black Hills Power s annual formula rate update and, therefore, accepted this revision with no further modification. 8 While the Commission found that Black Hills Power s proposed formula rate protocols related to transparency and challenge procedures generally complied with the requirements of the July 17 Order, the Commission ordered additional revisions on these two areas of the formula rate protocols. Specifically, the Commission directed Black Hills Power to: (1) include a requirement... that [Black Hills Power] endeavor[s] to coordinate with other transmission owners using formula rates to establish revenue requirements for recovery of the costs of transmission projects that utilize the same regional cost sharing mechanism and hold joint 4 Black Hills Power, Inc., 148 FERC 61,035 (2014) ( July 17 Order ). 5 Id. P Id. P March 19 Order at P 1. 8 Id. P 10.

3 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 3 meetings to enable all interested parties to understand how those transmission owners are implementing their formula rates for recovering the costs of such projects ; 9 (2) include language to provide remote access to [Black Hills Power s] annual update meetings ; 10 (3) include a provision that allows interested parties to obtain upon request information on procurement methods and cost control methodologies used by Black Hills [Power] in order to facilitate interested parties analysis of whether Black Hills [Power s] costs were prudently incurred ; 11 (4) revise its proposed protocols to remove [Section IV.3] to ensure that the Commission and interested entities are not precluded from exercising their statutory rights [under Section 206 of the FPA], or to clarify the provision so that it is consistent with the Commission s findings in the MISO Investigation Order and the MISO Compliance Order ; 12 and (5) revise its formula rate protocols to propose a date for any interested party to submit a formal challenge with the Commission that allows reasonable time for interested parties to review the informational filing. 13 As further discussed below, Black Hills Power respectfully requests that the Commission conclude that the additional revisions to its formula rate protocols proposed in this compliance filing fully comply with the March 19 Order s directives, and are consistent with the Commission s guidance provided in the MISO Investigation Order and the MISO Compliance Order. A. Joint Informational Meeting In the September 2014 Filing, Black Hills Power proposed to annually hold two open meetings with interested parties one for the Annual True-Up and the other for the projected net revenue requirement for the purposes of allowing: (1) Black Hills Power an opportunity to explain and clarify its Annual True-Up and projected net revenue requirement posted on its website and Open Access Same-Time Information System ( OASIS ); and (2) interested parties an opportunity to seek additional information and clarifications from Black Hills Power about its Annual True-Up and projected net revenue requirement posted on its website and OASIS. Black Hills Power included a provision in its proposed formula rate protocols that requires Black Hills Power to provide notice, via an exploder list, of 9 Id. P Id. P Id. P Id. P 42 (referencing Midwest Indep. Transmission Sys. Operator, Inc., 143 FERC 61,149 (2013) ( MISO Investigation Order ), reh g denied, 146 FERC 61,209 (2014); Midcontinent Indep. Transmission Sys. Operator, Inc., 146 FERC 61,212 (2014) ( MISO Compliance Order )). 13 Id. P 43.

4 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 4 such annual open meetings to interested parties no less than seven days prior to the meeting dates. 14 Black Hills Power, however, did not include a requirement that a joint information meeting be held with other transmission owners utilizing a regional cost sharing mechanism for the recovery of transmission project costs in formula rates, included under Attachment H to the Joint Tariff, because Black Hills Power does not have any existing or proposed transmission projects that utilize a regional cost sharing mechanism. Rather, in the event that Black Hills Power does participate in any transmission projects where costs are regionally allocated among transmission owners, Black Hills Power committed to the Commission that it would amend its formula rate protocols in a future FPA Section 205 filing to include a requirement to hold a joint informational meeting with other transmission owners to allow interested parties the opportunity to understand how those transmission owners are implementing their formula rates for cost recovery of such projects. 15 In the March 19 Order, the Commission accepted the requirement that Black Hills Power hold each year an Annual True-Up Meeting and an Annual Projected Rate Meeting 16 but did not accept Black Hills Power s commitment to make a future FPA Section 205 filing should Black Hills Power participate in transmission projects that involve regional cost sharing mechanisms. Due to Black Hills Power s membership in the WestConnect regional planning group, the Commission found that Black Hills Power may at some point develop regional transmission projects whose costs may be recovered through its formula rates. 17 Therefore, the Commission directed Black Hills Power to include a requirement that it endeavor[s] to coordinate with other transmission owners using formula rates to establish revenue requirements for recovery of the costs of transmission projects that utilize the same regional cost sharing mechanism and hold joint meetings to enable all interested parties to understand how those transmission owners are implementing their formula rates for recovering the costs of such projects. 18 In this compliance filing, Black Hills Power proposes a new Section II.8 to its formula rate protocols that fully complies with the Commission s directive on coordinating and holding such joint meetings. In the event that Black Hills Power utilizes a regional cost sharing mechanism with other transmission owners for the recovery of transmission project costs under Black Hills Power s formula rate contained in Attachment H of the Joint Tariff, Section II.8 of the formula rate protocols requires Black Hills Power to endeavor to coordinate with other 14 September 2014 Filing, Attachment A at II Id., Transmittal Letter at See Joint Tariff, Attachment H II March 19 Order at P Id.

5 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 5 transmission owners utilizing the same regional cost sharing mechanism to hold an annual joint informational meeting among those transmission owners and Interested Parties to enable all Interested Parties the opportunity to understand how those transmission owners are implementing their formula rates for recovering the costs of such projects. 19 Further, consistent with the requirement for Annual True-Up Meetings and Annual Projected Rate Meetings, set forth in Sections II.6 and II.7 of the formula rate protocols, Section II.8 requires Black Hills Power to post notice of the joint informational meeting on its website and OASIS of the time, date, and location of the joint informational meeting, and such notice will be circulated to interested parties via an exploder list. 20 B. Remote Access In addition to requiring a joint informational meeting, the Commission directed Black Hills Power to include language in its formula rate protocols to provide interested parties remote access to the annual formula rate update meetings. 21 The Commission found that it is reasonable to allow remote access to these meeting in order to ease burdens and to ensure all interested parties have the opportunity to participate in the meetings. 22 In compliance with the March 19 Order, Black Hills Power has included an express requirement in its formula rate protocols to provide remote access to its Annual True-Up Meetings, Annual Projected Rate Meetings, and joint informational meetings to allow all interested parties the opportunity to remotely participate in such meetings. 23 C. Procurement Methods and Cost Control Methodologies In the September 2014 Filing, Black Hills Power proposed in Sections III.1 and III.2 of its formula rate protocols to allow interested parties to obtain information regarding Black Hills Power s annual formula rate update for both the Annual True-Up and projected net revenue requirement by serving Black Hills Power reasonable information and document requests. 24 Black Hills Power proposed the same seven categorical limitations on the types of information and documents that can be requested under the information exchange procedures as required by the Commission in the MISO Compliance Order. 25 However, in 19 See Attachment A II Id. 21 March 19 Order at P Id. 23 Attachment A II See September 2014 Filing, Transmittal Letter at MISO Compliance Order at P 67 (finding the six inquiry categories limiting information and document requests proposed by the Midcontinent Independent System Operator, Inc. ( MISO ) transmission

6 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 6 the March 19 Order, the Commission found that Black Hills Power s proposed protocols did not include a provision that allows interested parties to obtain upon request information on procurement and cost control methodologies used by Black Hills [Power] in order to facilitate interested parties analysis of whether Black Hills [Power s] costs were prudently incurred. 26 In compliance with the Commission s directive in the March 19 Order, Black Hills Power has modified Sections III.1.E and III.2.E of its formula rate protocols to expressly provide that interested parties may request information and documents from Black Hills Power on procurement methods and cost control methodologies utilized by Black Hills Power. 27 D. FPA Section 206 Rights In the September 2014 Filing, Black Hills Power proposed straightforward and welldefined challenge procedures to afford interested parties the opportunity to raise informal and formal challenges in which Black Hills Power would bear the burden, consistent with Section 205 of the FPA, of demonstrating it has correctly applied the terms and requirements of the filed formula rate and protocols. 28 Accordingly, these proposed procedures enable interested parties the ability to challenge Black Hills Power s implementation of its formula rate without needing to file a complaint with the Commission pursuant to Section 206 of the FPA wherein the complainant would bear the burden of demonstrating that the current rate, charge or practice in question is not just and reasonable. 29 Thus, with the exception of prudence challenges, Black Hills Power would bear the burden of demonstrating that it had correctly implemented its formula rate under the just and reasonable standard of FPA Section 205 if an interested party invoked the formal challenge procedures set forth under the proposed formula rate protocols. owners to be reasonable, and directing an additional seventh category be added); see also Midcontinent Indep. Sys. Operator, Inc., 150 FERC 61,025, at P 20 (2015) ( MISO 2015 Compliance Order ) (accepting the additional seventh category as compliant with Commission directives). 26 March 19 Order at P Attachment A III.1.E, III.2.E. 28 September 2014 Filing, Attachment A IV; accord Midwest Indep. Transmission Sys. Operator, Inc., 143 FERC 61,149, at P 18 (2013) ( MISO Investigation Order ). However, the Commission has held that complaining parties will still bear the burden of proof in challenging both the reasonableness of the filed formula rate itself and the prudence of particular expenses that are input to the formula rate. MISO Investigation Order at P 18. In accordance with this precedent, Black Hills Power s proposed formula rate protocols clarified that nothing in the protocols is intended to alter the burdens applied by FERC with respect to prudence challenges. September 2014 Filing, Attachment A IV See MISO Investigation Order at PP 115,

7 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 7 Similar to the proposed formula rate protocols information exchange procedures that established specific deadlines for meetings, submission of information and document requests, and responses to any such information and document requests, 30 Black Hill Power proposed specific deadlines for the submission of formal and informal challenges. Specifically, in accord with the MISO Compliance Order, Black Hills Power proposed in Sections IV.1-2 of its formula rate protocols that interested parties must notify Black Hills Power in writing of any specific informal challenge to the Annual True-Up and projected net revenue requirement by September 15 and January 15 each year, respectively. 31 Further, in Section IV.8 of the proposed formula rate protocols, Black Hills Power proposed that interested parties must file a formal challenge with the Commission in the same docket as Black Hills Power s informational filing by March 15 of each year. 32 Consistent with the Commission s policy to encourage interested parties to actively engage throughout the [annual formula rate update] process, 33 Black Hills Power proposed two provisions that impact the ability of interested parties to invoke the formal challenge procedures of the formula rate protocols under which Black Hills Power would bear the burden of demonstrating the implementation of its formula rate for the given rate year was just and reasonable. First, pursuant to Section IV.8 of the proposed protocols, the failure of an interested party to submit an informal challenge within the specified timelines of the formula rate protocols shall preclude such interested party from pursing a formal challenge for the applicable Annual True-Up and projected net revenue requirement that is the subject of Black Hills Power s informational filing. 34 Thus, as a prerequisite to filing a formal challenge with the Commission under the formula rate protocols, interested parties must have previously submitted a written informal challenge to Black Hills Power in accordance with the applicable deadline provided in the formula rate protocols. Second, Section IV.3 of the formula rate protocols provided that [f]ailure to pursue an issue through an Informal Challenge or to lodge a Formal Challenge within the timelines provided in theses protocols regarding any issue as to a given Annual True-Up or projected net revenue requirement shall bar pursuit of such issue with respect to that Annual True-Up or projected net revenue requirement, but shall not bar pursuit of such issue or the lodging of a Formal Challenge as to such issue as it relates to a subsequent Annual True-Up or projected net revenue 30 See September 2014 Filing, Attachment A III. 31 Id. IV.1-2. If a deadline for submitting informal or formal challenges falls on a weekend or holiday recognized by the Commission, the deadline will be extended to the next business day. Id. 32 Id. IV.8. As discussed below and in accordance with the March 19 Order, Black Hills Power proposes to extend this deadline in this compliance filing to April 1 of each year. Attachment A IV MISO Compliance Order at P September 2014 Filing, Attachment A IV.8 (stating [a] party may not pursue a Formal Challenge if that party did not submit an Informal Challenge during the applicable True-Up Review Period or Projected Rate Review Period. ).

8 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 8 requirement. 35 This provision provided further clarification that the failure to submit an informal or formal challenge within the specified timelines established by the formula rate protocols would extinguish the right to contest any issues relating to Black Hills Power s Annual True-Up or projected net revenue requirement in a given rate year under the formula rate protocols challenge procedures. 36 Notwithstanding the provisions in Sections IV.3 and IV.8, Section IV.10 of the proposed formula rate protocols preserved interested parties rights under Section 206 of the FPA. 37 Consequently, an interested party may invoke its rights under Section 206 of the FPA and file a complaint with the Commission seeking a change in the current rate, charge or practice in question even after the expiration of the deadlines set forth in the challenge procedures of the proposed formula rate protocols. The difference, however, between a challenge under the formula rate protocols and an FPA Section 206 complaint would be the burden of proof. In an FPA Section 206 complaint, the complainant would have the burden of demonstrating that the rate, terms, or conditions of service are unjust and unreasonable; whereas, the burden of proof in a formal challenge under the formal rate protocols would lie with Black Hills Power to demonstrate that it has correctly applied the terms and requirements of the filed formula rate and protocols under the just and reasonable standard set forth in Section 205 of the FPA. In the MISO 2015 Compliance Order, the Commission rejected a protest requesting that the Commission require the MISO transmission owners delete similar language that Black Hills Power s proposed in Section IV.3 of its formula rate protocols. The Commission found that the purpose of this provision in the MISO transmission owners formula rate protocols was to clarify that the challenge procedures are available to interested parties only for a given rate year. 38 Further, the Commission rejected another protest requesting that the 35 Id., Attachment A IV.3. Section IV.3 of Black Hills Power s proposed formula rate protocols was nearly identical to the language contained in Section IV.A of the MISO transmission owners formula rate protocols that the Commission accepted in the MISO Compliance Order. 36 Black Hills Power adopted the provisions contained in Sections IV.3 and IV.8 of its proposed formula rate protocols from the MISO transmission owners formula rate protocols that the Commission accepted in the MISO Compliance Order. See, e.g., MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff ( MISO Tariff ), Attachment O 13 (Annual True-Up, Information Exchange, and Challenge Procedures), IV.A, IV.I; see also MISO, Compliance Filing Revising Attachment O Formula Rate Protocols, Exhibit I IV.A., IV.J (filed Sept. 13, 2013). 37 September 2014 Filing, Attachment A IV.10 (stating in relevant part that nothing herein shall be deemed to limit in any way... the right of any other party to request... changes [to the formula rate or any of its inputs] pursuant to Section 206 of the Federal Power Act and the regulations thereunder. ). 38 MISO 2015 Compliance Order at P 50; see also MISO Tariff, Attachment O 13, IV.A (stating [f]ailure to pursue an issue through an Informal Challenge or to lodge a Formal Challenge regarding an issue as to a given Annual Update shall bar pursuit of such issue with respect to that Annual Update, but shall not bar pursuit of such issue or the lodging of a Formal Challenge as to such issue as it relates to a subsequent Annual Update. ); cf. September 2014 Filing, Attachment A IV.3 (stating [f]ailure to pursue an issue through an Informal Challenge or to lodge a Formal Challenge within the timelines provided in theses protocols regarding

9 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 9 MISO transmission owners include a sentence in this same provision to clarify that the protocols do not restrict an interested party s ability to file a complaint pursuant to Section 206 of the FPA. The Commission found that Section IV.I of the MISO transmission owners formula rate protocols sufficiently preserves this right. 39 Despite the Commission s recent acceptance of a very similar provision with the MISO transmission owners formula rate protocols over protesting parties in the MISO 2015 Compliance Order proceeding, 40 the March 19 Order found that Section IV.3 of the proposed protocols would preclude interested parties from exercising their rights under Section 206 of the FPA. 41 The Commission directed Black Hills Power to remove this provision or to clarify the provision so that it is consistent with the Commission s findings in the MISO Investigation Order and the MISO Compliance Order. 42 In compliance with the March 19 Order, Black Hills Power proposes to modify Section IV.3 of its formula rate protocols to clarify that the bar to challenging Black Hills Power s formula rate implementation for a given rate year contained in this section only applies to challenges by interested parties invoking the challenge procedures set forth in the formula rate protocols. As explained above, with the exception of a prudence challenge, a challenge under the formula rate protocols challenge procedures would place the burden on Black Hills Power to demonstrate that it had correctly implemented its formula rate under the just and reasonable standard of review. If an interested party sought to challenge Black Hills Power s formula rate implementation for a given rate year and did not conform with the requirement to pursue an informal challenge or did not comply with the requirement to lodge a formal challenge within the timelines provided in the formula rate protocols, that interested any issue as to a given Annual True-Up or projected net revenue requirement shall bar pursuit of such issue with respect to that Annual True-Up or projected net revenue requirement, but shall not bar pursuit of such issue or the lodging of a Formal Challenge as to such issue as it relates to a subsequent Annual True-Up or projected net revenue requirement. ). 39 MISO 2015 Compliance Order at P 50; see also MISO Tariff, Attachment O 13, IV.I (stating [e]xcept as specifically provided herein, nothing herein shall be deemed to limit in any way the right of the Transmission Owner to file unilaterally, pursuant to Federal Power Act section 205 and the regulations thereunder, to change the formula rate or any of its inputs (including, but not limited to, rate of return and transmission incentive rate treatment), or to replace the formula rate with a stated rate, or the right of any other party to request such changes pursuant to section 206 of the Federal Power Act and the regulations thereunder. ); cf. September 2014 Filing, Attachment A IV.10 (stating [e]xcept as specifically provided herein, nothing herein shall be deemed to limit in any way the right of Black Hills Power to file unilaterally, pursuant to Federal Power Act Section 205 and the regulations thereunder, to change the formula rate or any of its inputs (including, but not limited to, rate of return and transmission incentive rate treatment), or to replace the formula rate with a stated rate, or the right of any other party to request such changes pursuant to Section 206 of the Federal Power Act and the regulations thereunder. ). 40 See MISO 2015 Compliance Order at P March 19 Order at P Id. (citing MISO Compliance Order at P 110).

10 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 10 party would need to file a complaint with the Commission pursuant to Section 206 of the FPA wherein the interested party would bear the burden of demonstrating that the current rate, charge or practice in question is not just and reasonable. Although the Commission did not require the MISO transmission owners to add language to clarify the bar on challenges under the MISO transmission owners challenge procedures does not restrict an interested party s ability to file an FPA Section 206 complaint as this right was expressly preserved in another provision of the protocols, which Black Hills Power also included in its formula rate protocols, Black Hills Power proposes certain modifications to Section IV.3 of its formula rate protocols to clarify that Section IV.3 does not preclude interested parties from exercising their FPA Section 206 rights. Specifically, Black Hills Power proposes to add language that clarifies the bar on pursing challenges to Black Hills Power s formula rate update for a given rate year only applies to challenges invoking the challenging procedures under the formula rate protocols. 43 Furthermore, Black Hills Power proposes to add a sentence at the end of Section IV.3 of its formula rate protocols that states: [t]his Section IV.3 in no way shall affect a party s rights under Section 206 of the Federal Power Act as set forth in Section IV.10 of these protocols. 44 As explained above, Section IV.10 of Black Hills Power s formula rate protocols expressly preserves a party s right to seek changes to Black Hills Power s formula rate or any of its inputs for a given rate year pursuant to Section 206 of the FPA. 45 Accordingly, Black Hills Power s proposed revisions fully comply with the Commission s directive to revise the formula rate protocols to ensure that the Commission and interested entities are not precluded from exercising their statutory rights. 46 E. Formal Challenge Deadline Black Hills Power s September 2014 Filing set forth specific information and challenge procedures to govern Black Hills Power s annual formula rate update. Included in these procedures were a number of deadlines that Black Hills Power and interested parties needed to meet. One of those deadlines was the annual date by which interested parties must submit a formal challenge with the Commission. Specifically, Black Hills Power proposed that this deadline be set as March 15 of each year, which is two weeks after the date by which Black Hills Power must submit its annual informational filing. 47 In the March 19 Order, the Commission found that the March 15 deadline to submit formal challenges may not allow 43 See Attachment A IV.3 (adding under the challenge procedures set forth in these protocols ). 44 Attachment A IV Id. IV See March 19 Order at P September 2014 Filing, Transmittal Letter at 10. Pursuant to Section V.1 of the formula rate protocols, Black Hills Power must submit an information filing with the Commission of its projected net revenue requirement and Annual True-Up by March 1 of year. Attachment A V.1.

11 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 11 adequate time for interested parties to review Black Hills Power s informational filing, and directed Black Hills Power to propose a date for any interested party to submit a formal challenge with the Commission that allows reasonable time for interested parties to review the informational filing. 48 In MISO 2015 Compliance Order, the Commission directed the MISO transmission owners to extend the deadline for submitting of formal challenges with the Commission from approximately 2 weeks to one month after the MISO transmission owners deadline to submit their informational filing. 49 Accordingly, the Commission determined that one month following the deadline that the MISO transmission owners must submit their informational filings to be a reasonable amount of time to allow interested parties to review the informational filings and, if so desired, submit a formal challenge. In accordance with the Commission s precedent in the MISO 2015 Compliance Order, Black Hills Power proposes to extend the deadline for submitting formal challenges with the Commission to one full month after the date that Black Hills Power must submit its annual informational filing with the Commission. Because Black Hills Power s deadline for submitting its annual informational filing is March 1 of year, which the Commission accepted in the March 19 Order, Black Hills Power has revised Section IV.8 of the formula rate protocols in this compliance filing to establish the deadline for submitting formal challenges shall be April 1 of each year. 50 III. CONTENTS OF THE FILING In addition to this transmittal letter, this filing consist of: Revised Attachment H to the Joint Tariff in RTF with attached metadata to appear in the etariff Public Viewer as the Tariff Record; A clean copy of revised Attachment H to the Joint Tariff in PDF for publication in elibrary (Attachment A); and A marked up copy of revised Attachment H to the Joint Tariff in PDF for publication in elibrary (Attachment B). 48 March 19 Order at P MISO 2015 Compliance Order at P See Attachment A IV.8.

12 The Honorable Kimberly D. Bose, Secretary May 18, 2015 Page 12 IV. EFFECTIVE DATE Consistent with the effective date adopted in the March 19 Order, Black Hills Power respectfully requests that the Commission accept the proposed revisions to the Joint Tariff in this compliance filing, effective January 1, V. SERVICE Black Hills Power has served a copy of this filing, including attachments, to Black Hills Power s customers under the Joint Tariff, Basin Electric Power Cooperative, Powder River Energy Corporation, the South Dakota Public Utilities Commission, and the Wyoming Public Service Commission. In addition, this filing has been posted electronically on Black Hills Power s website at VI. CONCLUSION For the foregoing reasons, Black Hills Power respectfully requests that the Commission accept these revised formula rate protocols under Attachment H to the Joint Tariff as fully compliant with the March 19 Order without modification or condition, effective January 1, Respectfully submitted, /s/ Blake R. Urban Blake R. Urban Catherine P. McCarthy Counsel to Black Hills Corporation 51 See March 19 Order at P 1.

13 CERTIFICATE OF SERVICE Pursuant to Rule 2010 of the Commission s Rules of Practice and Procedure, 18 C.F.R (2014), I hereby certify that I have this day served a copy of the foregoing on all persons designated on the official service list compiled by the Secretary in this proceeding. Dated at Washington, D.C. this 18th day of May, /s/ Blake R. Urban Blake R. Urban

14 Attachment A Revised Attachment H to the Joint Open Access Transmission Tariff of Black Hills Power, Basin Electric Power Cooperative, and Powder River Energy Corporation Clean Version

15 ATTACHMENT H MONTHLY NETWORK TRANSMISSION REVENUE REQUIREMENT FOR TRANSMISSION SERVICE ON THE AC TRANSMISSION SYSTEM 1. The Annual Transmission Cost for Transmission Service on the AC Transmission System is: a. Black Hills Component: Annual Transmission Revenue Requirement as determined pursuant to the formula set forth in this Attachment H b. Basin Electric Component: $16,482,130 c. PRECorp Component: $1,297,602 d. Annual Transmission Cost: $ (a + b + c) The amounts in (a) (b) and (c) shall be effective until amended by the Transmission Provider or until modified by the Commission. Each of Black Hills, Basin Electric and PRECorp ( Party ) may unilaterally modify its component of the Annual Transmission Cost pursuant to a filing with the FERC; provided that it must notify the other two Parties in writing not less than thirty (30) days prior to making such filing. 2. The Monthly Network Transmission Revenue Requirement shall be computed each month as follows: x = (y 12) - z x = Monthly Network Transmission Revenue Requirement y = Annual Transmission Cost (item 1(d)) z = Revenues from all Point-to-Point Transmission Service on the AC Transmission System in the month. Black Hills Power, Inc. Annual Transmission Revenue Requirement Formula

16 Estimate Service Year 2009 Cost of Service Utilizing FERC Form 1 Data Black Hills Power, Inc. (1) (2) (3) (4) (5) Form No. 1 Allocator Transmission Line Page, Line, Col. Company Total (page 4) (Col 3 times Col 4) No. RATE BASE: GROSS PLANT IN SERVICE 1 Production g 329,718,108 NA 2 Transmission g 70,930,677 TP ,479,764 3 New Construction CUS Assets See Workpaper 2 (line 9) 17,247,000 TP ,760,607 4 New Construction CUS Assets See Workpaper 3 (line 19 col D) 2,974,250 TP ,200,570 5 Distribution g 239,729,489 NA 6 General & Intangible See Workpaper 4 (line 5 col 1) 31,450,235 W/S ,206,407 7 Allocated Plant See Workpaper 5 (line 5) 5,054,792 W/S ,621 8 Communication System g 6,874,999 T&D ,468,503 9 Common CE TOTAL GROSS PLANT (sum lines 1-9) 703,979,550 GP= % 71,470, ACCUMULATED DEPRECIATION 13 Production c 159,696,980 NA 14 Transmission c 23,826,360 TPA ,009, Additional Transmission Depr See Workpaper 2 (line 48) 2,090,423 TPA ,843, Distribution c 79,001,766 NA 17 General & Intangible See Workpaper 4 (line 24 col 1) 15,050,577 W/S ,055, Allocated Plant See Workpaper 5 (line 11) 2,073,154 W/S , Communication System See Workpaper 4 (line 22 col 2) 2,136,253 T&D , Common CE TOTAL ACCUM. DEPRECIATION (sum lines 13-20) 283,875,513 24,510, NET PLANT IN SERVICE 24 Production (line 1 - line 13) 170,021,128 Auto 25 Transmission (line 2 - line 14) 47,104,317 Auto 31,470, New Construction CUS Assets (line 3 - line 15) 15,156,577 Auto 10,917, New Construction CUS Assets (line 4) 2,974,250 Auto 2,200, Distribution (line 5 - line 16) 160,727,723 Auto 29 General & Intangible (line 6 - line 17) 16,399,658 Auto 1,150, Allocated Plant (line 7 - line 18) 2,981,638 Auto 209, Communication System (line 8 - line 19) 4,738,746 Auto 1,012, Common (line 9 - line 20) 0 Auto 0 33 TOTAL NET PLANT (sum lines 24-32) 420,104,037 NP= % 46,960, ADJUSTMENTS TO RATE BASE (Note A) 36 Account No. 281 (enter negative) k (4,343) NA zero - 37 Account No. 282 (enter negative) k (68,245,483) NP (7,628,663) 38 Account No. 283 (enter negative) k (8,788,261) NP (982,375) 39 Account No c 7,258,863 NP , Account No. 255 (enter negative) h (307,159) NP (34,335) 41 FAS 109 Adjustment (232.1.f f f)* ,475 NP , TOTAL ADJUSTMENTS (sum lines 36-41) (7,743,809) LAND HELD FOR FUTURE USE 214.x.d (Note B) 0 DA WORKING CAPITAL (Notes C & H) 47 CWC (1/8 * line 63) 2,437,258 Auto 232, Materials & Supplies c 4,668,225 T&D , Materials & Supplies c 94,372 TP , Prepayments (Account 165) c 6,173,396 GP , TOTAL WORKING CAPITAL (sum lines 47-50) 1,925, TRANSMISSION RATE BASE (sum lines 33, 42, 44, & 51) 41,142,476

17 Service Year 2009 Cost of Service Utilizing FERC Form 1 Data Black Hills Power, Inc. (1) (2) (3) (4) (5) Line Form No. 1 Allocator Transmission No. Page, Line, Col. Company Total (page 4) (Col 3 times Col 4) O&M 54 Transmission b 9,746,087 TP ,210, Less: Account 565 and b & 96.b 9,091,266 TP ,726, A&G b 19,414,837 W/S ,362, Less FERC Annual Fees (Note D) b 201,513 W/S , Plus: Fixed PBOP expense (Note I) 227,200 W/S , Less: Actual PBOP expense (Company Records) 224,882 W/S , Less: EPRI & Reg. Comm. Exp. & Non-safety Ad. (Note E) 449,068 W/S , Plus Trans Related Reg. Comm. Exp. (Note E) (Workpaper 1 line 11) 76,667 TP , Common CE TOTAL O&M (sum lines 54, 56, 58, 61, 62 less lines 55, 57, 59, 60) 19,498,062 1,857, DEPRECIATION EXPENSE (Note I) 66 Transmission b 1,650,459 TP ,221, New Construction CUS Assets See Workpaper 2 (line 13) 400,130 TP , New Construction CUS Assets See Workpaper 3 (line 23) 69,003 TP , General & intangible b & d&e 2,389,067 W/S , Common b 0 CE TOTAL DEPRECIATION (Sum lines 66-70) 4,508,659 1,735, TAXES OTHER THAN INCOME TAXES (Note F) 74 LABOR RELATED 75 Payroll 263.3i, 263.4i, i 1,667,209 W/S , Highway and vehicle 263.i 0 W/S PLANT RELATED 78 Property i 4,341,000 GP , Gross Receipts 263.i 0 NA zero 0 80 Other 263.i 0 GP TOTAL OTHER TAXES (sum lines 75-80) 6,008, , INCOME TAXES (Note G) 85 T=1 - {[(1 - SIT) * (1 - FIT)] / (1 - SIT * FIT * p)} = 35.00% 86 CIT=(T/1-T) * (1-(WCLTD/R)) = 34.99% 87 where WCLTD=(line 156) and R= (line 159) 88 and FIT, SIT & p are as given in footnote G Total Income Taxes (line 86 * line 93) 1,363, RETURN 93 [ Rate Base (line 53) * R (line 159)] Auto 3,897, ESTIMATED REVENUE REQUIREMENT (sum lines 63, 71, 81, 90, 93) 30,014,930 9,412,267

18 Cost of Service Utilizing FERC Form 1 Data Service Year 2009 Black Hills Power, Inc. SUPPORTING CALCULATIONS AND NOTES Line No. TRANSMISSION PLANT INCLUDED IN JOINT TARIFF RATES Form 1 Reference 96 Total transmission plant Column (3) sum lines ,151, Less transmission plant excluded from Common Use Facilities Company Records 25,310, Less transmission plant included in Ancillary Services 0 99 Transmission plant included in Common Use Facilities (line 96 less lines 97 and 98) 65,840, Plus Common Use AC Facilities (line 110) 6,150, Total Gross Plant for the CUS System (line 99 plus line 100) 71,991, Total CUS Plant (line 96 plus line 110) 97,302, Percentage of transmission plant included in Common Use Facilities (line 101 divided by line 102) TP= DISTRIBUTION PLANT INCLUDED IN JOINT TARIFF RATES Form 1 Reference 107 Total distribution plant Column (3) line 5 239,729, Less distribution plant excluded from Common Use Facilities Company Records 233,578, Less distribution plant included in Ancillary Services Common Use AC Facilities (line 107 less lines 108 & 109) 6,150, Percentage of distribution plant included in Common Use Facilities (line 107 divided by line 110) DP= ACCUMULATED DEPRECIATION Form 1 Reference 115 Total Transmission Accumulated Depreciation Column (3), sum lines ,916, Less transmission plant excluded from Common Use Facilities Company Records 3,428, Total Transmission Accumulated Depreciation included in Common Use Facilities (line line 116) 22,488, Plus Common Use AC Facilities Accumulated Depreciation (line 127) 3,077, Total Accumulated Depreciation for the CUS System (line 117 plus line 118) 25,566, Total CUS Accumulated Depreciation (line 115 plus line 118) 28,994, Percentage of transmission plant accumulated depreciation included in Common Use Facilities (line 119 divided by line 120) TPA= Form 1 Reference 125 Total Distribution Accumulated Depreciation c 79,001, Less distribution accumulated depreciation excluded from Common Use Facilities (Company Records) 75,924, Common Use AC Facilities (line 125 less line 126) 3,077, Percentage of distribution plant accumulated depreciation included in Common Use Facilities (line 127 divided by line 125) DPA= WAGES & SALARY ALLOCATOR (W&S) 132 Form 1 Reference $ TP Allocation 133 Transmission b 1,171, , Total Wages Expense b 14,244, W&S Allocator 135 Less: A&G Wages b -1,888, ($ / Allocation) 136 Adjusted Total (sum lines ) 12,356, ,872 WS= TRANSMISSION & DISTRIBUTION ALLOCATOR (T&D) $ % TP T&D 139 Transmission Net Plant lines 25, 26 & 27 65,235, % 74% 21.36% 140 Distribution Net Plant line ,727, % 141 Total (sum lines ) 225,962, % T&D = 21.36% RETURN (R) Form 1 Reference $ 144 Long Term Interest 117, sum of 62.c through 66.c 11,817, Preferred Dividends c (positive number) Development of Common Stock: Form 1 Reference 149 Proprietary Capital c 232,419, Less: Preferred Stock c Less: Undistributed Earnings c (enter negative) Less: Accum Other Comp Inc c (enter negative) 1,277, Adjusted Common Stock (sum lines ) 233,696, Form 1 Reference $ % Cost Weighted 156 Long Term Debt c 153,217, % 7.71% 3.32% 157 Preferred Stock c % 0.00% 0.00% 158 Adjusted Common Stock (see above line 153) 233,696, % (Note I) 10.80% (Note I) 6.16% 159 Total (sum lines ) 386,914,273 R = 9.47%

19 Service Year 2009 Cost of Service Utilizing FERC Form 1 Data Black Hills Power, Inc. Note Letter A The balances in Accounts 281, 282, 283 and 190, as adjusted by any amounts in contra accounts identified as regulatory assets or liabilities related to FASB 109. Balance of Account 255 is reduced by prior flow through and excluded if the utility chose to utilize amortization of tax credits against taxable income. Account 281 is not allocated. B Identified in Form 1 as being only transmission related. C Cash Working Capital assigned to transmission is one-eighth of O&M allocated to transmission at line 47, column 5. D The FERC's annual charges for the year assessed the Transmission Owner for service since annual charges assessed directly under this tariff. E Line 1 - EPRI Annual Membership Dues listed in Form 1 at b, all Regulatory Commission Expenses itemized at h, and non-safety related advertising included in Account F Includes only FICA, unemployment, highway, property, gross receipts, and other assessments charged in the current year. Taxes related to income are excluded. Gross receipts taxes are not included in transmission revenue requirement in rates, since they are recovered elsewhere. G The currently effective income tax rate, where FIT is the Federal income tax rate; SIT is the State income tax rate, and p = "the percentage of federal income tax deductible for state income taxes". If the utility is taxed in more than one state it must attach a work paper showing the name of each state and how the blended or composite SIT was developed. Furthermore, a utility that elected to utilize amortization of tax credits against taxable income, rather than book tax credits to Account No. 255 and reduce rate base, must reduce its income tax expense by the amount of the Amortized Investment Tax Credit (Form 1, f) multiplied by (1/1-T) (page 7, line 26). Inputs Required: FIT = 35.00% SIT= 0.00% (State Income Tax Rate or Composite SIT) p = 0.00% (percent of federal income tax deductible for state purposes H See Note H for the True-Up calculation. I Depreciation rates, PBOP, ROE, and Capital Structure are fixed amounts that can be changed only through a Section 205 filing.

20 True Up Service Year 2009 Cost of Service Utilizing FERC Form 1 Data Black Hills Power, Inc. (1) (2) (3) (4) (5) Form No. 1 Allocator Transmission Line Page, Line, Col. Company Total (page 4) (Col 3 times Col 4) No. RATE BASE: GROSS PLANT IN SERVICE (Note H) 1 Production g NA 2 Transmission g TP Distribution g NA 4 General & Intangible See Workpaper 4 W/S Allocated Plant See Workpaper 5 W/S Communication System See Workpaper 4 T&D Common CE TOTAL GROSS PLANT (sum lines 1-7) 0 GP= 0.000% ACCUMULATED DEPRECIATION (Note H) 11 Production c NA 12 Transmission c TPA Distribution c NA 14 General & Intangible c W/S Allocated Plant See Workpaper 5 W/S Communication System See Workpaper 4 T&D Common CE TOTAL ACCUM. DEPRECIATION (sum lines 11-17) NET PLANT IN SERVICE (Note H) 21 Production (line 1 - line 11) 0 Auto 22 Transmission (line 2 - line 12) 0 Auto 0 23 Distribution (line 3 - line 13) 0 Auto 24 General & Intangible (line 4 - line 14) 0 Auto 0 25 Allocated Plant (line 5 - line 15) 0 Auto 0 26 Communication System (line 6 - line 16) 0 Auto 0 27 Common (line 7 - line 17) 0 Auto 0 28 TOTAL NET PLANT (sum lines 21-27) 0 NP= 0.000% ADJUSTMENTS TO RATE BASE (Notes A & H) 31 Account No. 281 (enter negative) k NA zero - 32 Account No. 282 (enter negative) k NP Account No. 283 (enter negative) k NP Account No c NP Account No. 255 (enter negative) h NP FAS 109 Adjustment (232.1.f f f)*.35 NP TOTAL ADJUSTMENTS (sum lines 31-36) LAND HELD FOR FUTURE USE 214.x.d (Notes B & H) 0 DA WORKING CAPITAL (Notes C & H) 42 CWC (1/8 * line 58) 0 Auto 0 43 Materials & Supplies c T&D Materials & Supplies c TP Prepayments (Account 165) d GP TOTAL WORKING CAPITAL (sum lines 42-45) TRANSMISSION RATE BASE (sum lines 28, 37, 39, & 46) 0

21 Service Year 2009 Cost of Service Utilizing FERC Form 1 Data Black Hills Power, Inc. (1) (2) (3) (4) (5) Line Form No. 1 Allocator Transmission No. Page, Line, Col. Company Total (page 4) (Col 3 times Col 4) O&M 49 Transmission b TP Less: Account 565 and b & 96.b TP A&G b W/S Less FERC Annual Fees (Note D) b W/S Plus: Fixed PBOP expense (Note I) W/S Less: Actual PBOP expense (Company Records) W/S Less: EPRI & Reg. Comm. Exp. & Non-safety Ad. (Note E) W/S Plus Transmission Related Reg. Comm. Exp. (Note E) TP Common CE TOTAL O&M (sum lines 49, 51, 53, 56, 57 less lines 50, 52, 54, 55) DEPRECIATION EXPENSE (Note I) 61 Transmission b TP General & intangible b & d&e W/S Common b CE TOTAL DEPRECIATION (Sum lines 61-63) TAXES OTHER THAN INCOME TAXES (Note F) 67 LABOR RELATED 68 Payroll 263.3i, 263.4i, i W/S Highway and vehicle 263.i W/S PLANT RELATED 71 Property i GP Gross Receipts 263.i NA zero 0 73 Other 263.i GP TOTAL OTHER TAXES (sum lines 68-73) INCOME TAXES (Note G) 78 T=1 - {[(1 - SIT) * (1 - FIT)] / (1 - SIT * FIT * p)} = 35.00% 79 CIT=(T/1-T) * (1-(WCLTD/R)) = 53.85% 80 where WCLTD=(line 154) and R= (line 157) 81 and FIT, SIT & p are as given in footnote G Total Income Taxes (line 79 * line 86) RETURN Auto 0 86 [ Rate Base (line 48) * R (line 157)] REVENUE REQUIREMENT (sum lines 58, 64, 74, 83, 85) ESTIMATED REVENUE REQUIREMENT (pg. 3 line 95) TRUE-UP AMOUNT TO BE (REFUNDED)/PAID (line 88 - line 90) 0