Rate Case Summary Q FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

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1 Rate Case Summary Q FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

2 About EEI The Edison Electric Institute (EEI) is the association that represents all U.S. investor-owned electric companies. Our members provide electricity for 220 million Americans, operate in all 50 states and the District of Columbia, and directly employ more than 500,000 workers. With $100 billion in annual capital expenditures, the electric power industry is responsible for millions of additional jobs. Reliable, affordable, and sustainable electricity powers the economy and enhances the lives of all Americans. EEI has 70 international electric companies as Affiliate Members, and 270 industry suppliers and related organizations as Associate Members. Organized in 1933, EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums. About EEI s Quarterly Financial Updates EEI s quarterly financial updates present industry trend analyses and financial data covering 53 U.S. shareholder-owned electric utility companies. These 53 companies include 47 electric utility holding companies whose stocks are traded on major U.S. stock exchanges and six electric utilities who are subsidiaries of nonutility or foreign companies. Financial updates are published for the following topics: Dividends Stock Performance Credit Ratings Construction Rate Case Summary SEC Financial Statements (Holding Companies) FERC Financial Statements (Regulated Utilities) Fuel EEI Finance Department material can be found online at: We Welcome Your Feedback EEI is interested in ensuring that our financial publications and industry data sets best address the needs of member companies and the financial community. We welcome your comments, suggestions and inquiries. Contact: Mark Agnew Director, Financial Analysis (202) , magnew@eei.org Bill Pfister Manager, Financial Analysis (202) , bpfister@eei.org Michael Buckley Financial Analyst (202) , mbuckley@eei.org Future EEI Finance Meetings 50th EEI Financial Conference November 8-11, 2015 Westin Diplomat Hollywood, Florida For more information about EEI Finance Meetings, please contact Debra Henry, (202) , dhenry@eei.org For EEI Member Companies The EEI Finance and Accounting Division is developing current year and historical data sets that cover a wide range of industry financial and operating metrics. We look forward to serving as a resource for member companies who wish to produce customized industry financial data and trend analyses for use in: Investor relations studies and presentations Internal company presentations Performance benchmarking Peer group analyses Annual and quarterly reports to shareholders Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C

3 The 53 U.S. Shareholder-Owned Electric Utilities The companies listed below all serve a regulated distribution territory. Other utilities, such as transmission provider ITC Holdings, are not shown below because they do not serve a regulated distribution territory. However, their financial information is included in relevant EEI data sets, such as transmission-related construction spending. ALLETE, Inc. (ALE) Alliant Energy Corporation (LNT) Ameren Corporation (AEE) American Electric Power Company, Inc. (AEP) Avista Corporation (AVA) Berkshire Hathaway Energy Black Hills Corporation (BKH) CenterPoint Energy, Inc. (CNP) Cleco Corporation (CNL) CMS Energy Corporation (CMS) Consolidated Edison, Inc. (ED) Dominion Resources, Inc. (D) DPL, Inc. DTE Energy Company (DTE) Duke Energy Corporation (DUK) Edison International (EIX) El Paso Electric Company (EE) Empire District Electric Company (EDE) Energy Future Holdings Corp. (formerly TXU Corp.) Entergy Corporation (ETR) Eversource Energy (ES) Exelon Corporation (EXC) FirstEnergy Corp. (FE) Great Plains Energy Incorporated (GXP) Hawaiian Electric Industries, Inc. (HE) Iberdrola USA IDACORP, Inc. (IDA) IPALCO Enterprises, Inc. MDU Resources Group, Inc. (MDU) MGE Energy, Inc. (MGEE) NextEra Energy, Inc. (NEE) NiSource Inc. (NI) NorthWestern Corporation (NWE) OGE Energy Corp. (OGE) Otter Tail Corporation (OTTR) Pepco Holdings, Inc. (POM) PG&E Corporation (PCG) Pinnacle West Capital Corporation (PNW) PNM Resources, Inc. (PNM) Portland General Electric Company (POR) PPL Corporation (PPL) Public Service Enterprise Group Inc. (PEG) Puget Energy, Inc. SCANA Corporation (SCG) Sempra Energy (SRE) Southern Company (SO) TECO Energy, Inc. (TE) UIL Holdings Corporation (UIL) Unitil Corporation (UTL) Vectren Corporation (VVC) WEC Energy Group, Inc. (WEC) Westar Energy, Inc. (WR) Xcel Energy, Inc. (XEL)

4 Companies Listed by Category (as of 9/30/2015) Please refer to the Quarterly Financial Updates webpage for previous years lists. iven the diversity of utility holding company corporate G strategies, no single company categorization approach will be useful for all EEI members and utility industry analysts. Never-theless, we believe the following classification provides an informative framework for tracking financial trends and the capital markets response to business strategies as companies depart from the traditional regulated utility model. Regulated Mostly Regulated Diversified 80%+ of total assets are regulated 50% to 80% of total assets are regulated Less than 50% of total assets are regulated Categorization of the 47 publicly traded utility holding companies is based on year-end business segmentation data presented in 10Ks, supplemented by discussions with company IR departments. Categorization of the six non-publicly traded companies (shown in italics) is based on estimates derived from FERC Form 1 data and information provided by parent company IR departments. The EEI Finance and Accounting Division continues to evaluate our approach to company categorization and business segmentation. In addition, we can produce customized categorization and peer group analyses in response to member company requests. We welcome comments, suggestions and feedback from EEI member companies and the financial community. Regulated (37 of 53) ALLETE, Inc. Alliant Energy Corporation Ameren Corporation American Electric Power Company, Inc. Avista Corporation Black Hills Corporation Cleco Corporation CMS Energy Corporation Consolidated Edison, Inc. DPL, Inc. DTE Energy Company Duke Energy Corporation Edison International El Paso Electric Company Empire District Electric Company Entergy Corporation Eversource Energy Great Plains Energy Incorporated Iberdrola USA IDACORP, Inc. IPALCO Enterprises, Inc. NorthWestern Energy OGE Energy Corp. Otter Tail Corporation Pepco Holdings, Inc. PG&E Corporation Pinnacle West Capital Corporation PNM Resources, Inc. Portland General Electric Company Puget Energy, Inc. Southern Company TECO Energy, Inc. UIL Holdings Corporation Unitil Corporation Westar Energy, Inc. Wisconsin Energy Corporation Xcel Energy, Inc. Mostly Regulated (13 of 53) Berkshire Hathaway Energy CenterPoint Energy, Inc. Dominion Resources, Inc. Exelon Corporation FirstEnergy Corp. MGE Energy, Inc. NextEra Energy, Inc. NiSource Inc. PPL Corporation Public Service Enterprise Group, Inc. SCANA Corporation Sempra Energy Vectren Corporation Diversified (3 of 53) Energy Future Holdings Hawaiian Electric Industries, Inc. MDU Resources Group, Inc. Note: Based on assets at 12/31/2014

5 Q Rate Case Summary HIGHLIGHTS Investor-owned electric utilities filed six new rate cases in Q3, one of the lowest quarterly totals of the past ten years. The average allowed ROE was 9.4%, a record low in our over-three-decades of data. Two commissions noted the significant decline in capital market costs when rejecting higher requested ROEs. As is typically the case, the predominant driver of filed cases in Q3 was capital expenditures for new and upgraded generation, distribution and transmission facilities. Utility attempts to implement clauses, riders and other rate mechanisms was a secondary, but also prominent, cause of Q3 s filings; these are also a typical cause for rate case filings. I. Number I. U.S. of Electric Rate Cases Output Filed (GWh) (Quarterly) II. Average Awarded ROE (Quarterly) % 14.0 COMMENTARY Investor-owned electric utilities filed six new rate cases in Q3, one of the lowest quarterly totals of the past ten years. The average allowed ROE was 9.4%, a record low in our overthree-decades of data. The average requested ROE, at 10.35%, is also low by historical standards. Both metrics have tracked the nearly continuous downward trend in interest rates since the early 1980s. Average regulatory lag, at 10 months, was about average for our dataset (except for the period of industry restructuring near the turn of the century, when lag was longer and more volatile). Filed Cases in Q3 The predominant driver of filed cases in Q3 was capital expenditures for new and upgraded generation, distribution and transmission facilities. This is usually the main driver of rate cases. Utility attempts to implement clauses, riders and other rate mechanisms was a secondary, but also prominent, cause of Q3 s filings; these are also a typical cause for rate case filings. 1

6 2 RATE CASE SUMMARY III. Average Requested ROE (Quarterly) IV. Average Regulatory Lag (Quarterly) % 14.0 Months % V. 10-Year Treasury Yield (1/1980 9/2015) Source: U.S. Federal Reserve Capital Investment Public Service Oklahoma filed for a rate increase in large part to recover for generation plant investments made to comply with U.S. Environmental Protection Agency requirements. Virginia Electric & Power filed in part to recover costs of constructing a gas-fired, combined-cycle generation plant and associated transmission line and switching station. Virginia formerly allowed ROE premiums for such construction, however, the state passed a law in 2013 that discontinued premiums for all construction projects except nuclear and off-shore wind plants. Pacific Gas and Electric filed in California to recover for investments in smart grid technologies that integrate and manage electric vehicles, smart appliances, rooftop solar and battery storage. Public Service New Mexico Public Service New Mexico (PNM) filed in part to implement a four-year revenue decoupling mechanism pilot for residential and small power class customers. This filing follows a previous filing the commission rejected as not meeting minimum filing requirements. The rejection was a result of differences between the company and the commission on interpretation of a new law that would allow the company to set rates based on a future test year. The commission similarly rejected a filing by Southwestern Public Service Company. PNM has appealed the commission s decision to the New Mexico Supreme Court. Decided Cases in Q3 Customer Charges The Missouri commission authorized Kansas City Power & Light (KCP&L) to increase its customer charge from $9 to $ The company had requested an increase to $25, although interveners in the case argued the charge should remain at $9. The commission based its decision on the results of a Staff-filed cost of service study. In the company s Kansas jurisdiction in Q3, the commission authorized a settlement allowing KCP&L to increase its customer charge from $10.71 to $14. The company had asked for an increase to $19. The Kansas commission also authorized a settlement for Westar, allowing the company to increase its customer charge from $12 to $ The company had requested $15. Mississippi Power The decision in Mississippi Power s case in Q3 reverses an earlier decision and requires the company to refund amounts already collected as a result of that decision. The earlier decision granted the company funds for construction work-inprogress on the Kemper coal gasification combined-cycle plant. The earlier decision was appealed to the Mississippi Supreme Court, which remanded the case back to the commission. The refund amount has been estimated at $350 million. Kansas City Power & Light Missouri Two settlements in Q3 resolved several of the issues in KCP&L s case. However, the commission made a determination on other issues related to the company s fuel adjustment clause (FAC). The commission authorized the company to implement a FAC that allocates costs 95%/5% to customers/shareholders. The company had asked for 100% recovery. The commission said, Allowing [KCP&L] to have 100% recovery of its costs in an FAC would act as a disin-

7 RATE CASE SUMMARY 3 VI. Rate Case Data: From Tables I-V Number of Average Average Average Average Quarter Rate Cases Filed Awarded ROE Requested ROE 10-Year Treasury Yield Regulatory Lag Q NA NA Q NA NA Q NA NA Q NA NA Q NA NA Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q NA Q Q NA Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

8 4 RATE CASE SUMMARY VI. Rate Case Data: From Tables I-V (cont.) Number of Average Average Average Average Quarter Rate Cases Filed Awarded ROE Requested ROE 10-Year Treasury Yield Regulatory Lag Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q NA = Not available

9 RATE CASE SUMMARY 5 centive for [the company] to control those costs. The commission also excluded from the FAC transmission costs related to the power the company produces and sells into the Southwest Power Pool market and subsequently repurchases for its native load. As a result, the company will bear the risk that these actual expenses will be higher than those included in rates. The company had asked for a 10.3% ROE. The commission awarded a 9.5% ROE, saying state public utility commissions in the country are reducing authorized [ROEs] to follow the significant decline in capital market costs. A comparison of industry-authorized [ROEs] indicates that they have been steadily declining over the last several years. In calendar year 2014, the industry authorized [ROE] for fully litigated cases was 9.63%. In the first quarter of 2015, the industry authorized [ROE] for fully litigated cases was 9.57%.... A reasonable finding for [an ROE] in this case is conservatively at 9.5% or less. The company requested rehearing in the case, saying the commission s rejection of prospective recovery of Southwest- Power-Pool-related costs ignores evidence of the company s inability to earn its allowed return, violates the Filed Rate Doctrine, and is contrary to the principles of federal preemption. The company notes that the Power Pool s invoices are based on a federally approved tariff. Further, the company claims the 9.5% authorized ROE deprives [the company] of adequate and reasonable compensation for the property it devotes to serving the public without due process and is confiscatory in impact and effect in violation of the... United States Constitution. Kansas City Power & Light Kansas Settlements largely resolved KCP&L s case in Kansas. The commission approved the settlements with some modifications. The company had requested a 10.3% ROE, but the commission found no support for an ROE above 10% and that the company-requested ROE runs counter to the trends in Kansas and nationwide toward lower ROEs in recognition of historically low costs of capital. The commission adopted a 9.3% ROE, finding it strikes the proper balance of allowing KCP&L to access capital markets while acknowledging the economic impact on ratepayers. The dissenting commissioner thought an 8.55% ROE would have been more appropriate, saying KCPL Kansas has some of the highest rates in the region. KCPL has treated electric-heat consumers callously. Miscellaneous In KCP&L s case in Missouri, the commission rejected company-requested tracking mechanisms for property taxes, vegetation management, and critical infrastructure protection and cybersecurity expenses. The commission said the company did not prove these expenses were extraordinary and did not explain how it arrived at its expense estimates, nor how the commission has the legal authority to grant such relief. In Westar Energy s case in Kansas, a settlement allows the company to establish a separate tariff for generating residential customers going forward. The rates specified in the tariff for these customers are the same as the rates for other residential customers, but these generating residential customers are not grandfathered from future changes in rates.