In the Matter of the Petition of Dooley's Natural Gas, LLC for Exemption for Small Gas Utility Franchise, Docket No.

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1 Brian M. Meloy DIRECT November 28, 2016 Via Electronic Filing Mr. Daniel Wolf Executive Secretary Minnesota Public Utilities Commission 121 Seventh Place East, Suite 350 St. Paul, MN Re: In the Matter of the Petition of Dooley's Natural Gas, LLC for Exemption for Small Gas Utility Franchise, Docket No. G6915/M Informational Filing of Dooley s Natural Gas, LLC Dear Mr. Wolf: Pursuant to Minn. Stat. 216B.16, Subd. 12(b) and (c), Dooley s Natural Gas, LLC ( DNG II ) respectfully submits this Informational Filing informing the Commission that its Rate Book has been updated to reflect a change in rates approved by the City of Clara City, Minnesota effective March 1, Included with this Informational Filing is (1) the final recommendation regarding DNG s 2016 Rate Case by the City of Clara City s Natural Gas Committee, which was adopted on August 10, 2016 (Attachment A); and (2) an updated Rate Book reflecting the decisions made in the 2016 Rate Case (Attachment B). Thank you for your attention to this filing. questions or concerns. Please do not hesitate to call with any Dated: November 28, 2016 Randy Dooley, President Dooley s Natural Gas, LLC P.O. Box 100 Murdock, MN Respectfully submitted, /s/ Brian M. Meloy Brian M. Meloy STINSON LEONARD STREET LLP 150 South 5 th Street, Suite 2300 Minneapolis, Minnesota Telephone: brian.meloy@stinson.com 1 As the Commission is aware, DNG operates under a single-system rate structure based on system-wide costs, with the City of Clara City playing the lead role in the review and approval of DNG s rates and terms and conditions of service. S T I N S O N. C O M S O U T H F I F T H S T R E E T, S U I T E M I N N E A P O L I S, M N M A I N F A X

2 ATTACHMENT A

3 I. Overview City of Clara City Dooley Natural Gas 2016 Rate Case Natural Gas Rate Committee Recommendations July 12, 2016 Dooley Natural Gas LLC (DNG) filed a Petition for Authority to Increase Natural Gas Rates on January 25, DNG requested a $442,766 (11.36%) increase in rates. The City of Clara City, consistent with state law, allowed DNG to temporary (interim) collect higher rates for bills rendered on and after March 1, The interim rate increase of 11.36% is a line item on DNG billings and is subject to refund with interest pending the final determination of DNG s rate increase request. Natural Gas Rate Committee (Committee) has reviewed DNG s January 25, 2016 Petition for Authority to Increase Natural Gas Rates filing. The Committee has also reviewed DNG s 2013, 2014 and 2015 audited financial statements and operating results. The Committee has also discussed the filing with DNG. The Committee makes recommendations on DNG s revenue needs (revenue requirement), rate design, Base Cost of Gas, implementation of new delivery rates and elements of the interim rate refunding plan. II. Revenue Requirement DNG began operating in the 4 th quarter of and 2014 were transition years as new customers were added and operations stabilized. The most current audited historic year, 2015, was the starting point to examine DNG revenue requirements for future rates. However, 2015 was an abnormal year for DNG gas sales. DNG 2015 rate revenues needed to be normalized for weather, agricultural drying and agricultural heating for normal poultry production. DNG s actual 2015 results show an overall rate of return of 5.56%. This return was below the 7.04% authorized in DNG most recent rate proceeding. Exhibit 1 provides the Actual 2015 results. Exhibit 1 also provides 2015 Weather Normalized, DNG s Proposed 2016 and KBC s 2016 Recommendation results. 1

4 Exhibit 1 Dooleys Natural Gas, LLC Recommended Changes to DNG's Proposed Increase 2016 Test Year 7/12/2016 Actual 2015 Normalized Sales Adjustment 2015 with Normalized 2016 Sales DNG Proposed 2016 Recommended Changes Recommendation Notes Rate Base Original System Cost and WorkingCapital $ 11,932,370 $ - $ 11,932,370 $ 11,879,937 $ 11,879,937 per DNG Property Tax Adj. for Working Capital $ - $ - $ - $ - $ - Additions to date $ - $ - $ - $ - $ - Other Assets $ 480,156 $ - $ 480,156 $ 361,798 $ 361,798 per DNG Cumulative Amortization $ (147,883) $ - $ (147,883) $ (123,023) $ (123,023) per DNG Cumulative Depreciation $ (1,552,027) $ - $ (1,552,027) $ (1,552,027) $ (1,552,027) per DNG Cumulative Book/Tax Adjustment $ (2,084,565) $ - $ (2,084,565) $ (2,084,565) $ 92,000 $ (1,992,565) Reduced balance to reflect an additional year Net System (Average Rate Base) $ 8,628,051 $ - $ 8,628,051 $ 8,482,120 $ 8,574,120 Operating Income Gas Commodity Revenue (Base + PGA) $ 3,190,676 $ 924,804 $ 4,115,480 $ 3,746,123 $ 154,482 $ 3,900,605 Normalized Sales PGA Revenue Adjusted for Timing $ - $ - $ - $ - Projected Cost of Gas $ 1,602,097 $ 716,253 $ 2,318,350 $ 2,089,500 $ 104,475 $ 2,193,975 Increased to match sales Projected Margin on Gas $ 1,588,579 $ 1,797,130 $ 1,656,623 $ 1,706,630 Customer Charges (per table) $ 151,380 $ 1,152 $ 152,532 $ 151,380 $ 1,152 $ 152,532 Increased Customer Count Total Projected Margin $ 1,739,959 $ 1,949,662 $ 1,808,003 $ 1,859,162 Administrative and OperatingCosts $ 613,560 $ - $ 613,560 $ 745,000 $ (77,480) $ 667,520 See work papers Property Tax $ 148,967 $ - $ 148,967 $ 320,000 $ (7,032) $ 312,968 Property Tax per DNG follow up detail Depreciation and Amortization $ 520,622 $ - $ 520,622 $ 525,466 $ 525,466 per DNG Interest on Long Term Debt $ 323,552 $ - $ 323,552 $ 313,054 $ 321,530 Interest synchronized to rate base Total Projected Operating Expenses $ 1,606,701 $ - $ 1,606,701 $ 1,903,520 $ 1,827,484 Net Income Before Income Tax $ 133,258 $ 342,961 $ (95,517) $ 31,679 Normalized Income Tax $ 53,303 $ 137,184 $ (38,207) $ 12,671 Provision for Deferred Income Tax $ (76,268) $ (76,268) $ (76,268) $ (76,268) per DNG Net Income after income tax $ 156,223 $ 282,045 $ 18,958 $ 95,275 Add: Interest Expense $ 323,552 $ 323,552 $ 313,054 $ 321,530 Regulated Earnings $ 479,775 $ 605,597 $ 332,012 $ 416,805 Summary of Revenue Requirements Avearge Rate Base $ 8,628,051 $ 8,628,051 $ 8,482,120 $ 8,574,120 Operating Income $ 479,775 $ 605,597 $ 332,012 $ 416,805 Overall Return (Oper. Inc./Rate Base) 5.56% 7.02% 3.91% 4.86% Required Return 6.92% 6.92% 7.04% -0.12% 6.92% Revised Capital Structure same Component Cost Oper. Inc. Req. (Rate Base x Req. Return) $ 597,061 $ 597,061 $ 597,141 $ 593,329 Income Deficiency (Oper. Inc. Req.-Oper. Inc.) $ 117,286 $ (8,535) $ 265,129 $ 176,525 Gross Revenue Conversion Factor (1/(1-.40))= Revenue Deficiency $ 195,868 $ (14,254.18) $ 442,766 $ 294,796 Revenues under Original Interim Rates $ 3,342,056 $ 4,268,012 $ 3,897,503 $ 4,053,137 Percent Increase In Interim Rates 5.86% -0.33% 11.36% 7.27% DNG 2016 proposed revenue requirements were reviewed. The Committee is recommending the following eight changes: 1. Normalize Sales. Gas distribution utility costs are primarily fixed. Fixed cost do not change with volume like variable costs. The return on the investment, depreciation, maintenance and customer billing are fixed/same whether gas is sold or not. Thus, gas sales volume is the primary driver in determining the rate charged to customers. DNG current rates were determined based on expected sales in a normal year. 2

5 Gas utilities financial results are significantly impacted by heating degree days. A mild winter with less heating degree days than average will result in less gas sales and lower revenue. A cold winter with more heating degree days than average will result in greater gas sales and higher revenue was a warmer than normal year for DNG. DNG 2015 sales was also impacted by lower agricultural drying sales (lowest in DNG s 3 years of operations) and the avian bird flu that reduced agricultural heating sales. Poultry flocks were killed by the flu or euthanized to prevent the spread of the disease. The use of normalized sales increased DNG s current rate gas commodity revenues by $154,482 and customer charge revenue by $1,152. The increase revenue was partially offset by a $104,475 increase in the cost of gas necessary to supply the increased sales volume. DNG net margin increase by $51,159. Ag. Drying sales were set at 750,000 therms per year. If Ag. Drying sales exceed 750,000 in a calendar year, DNG is required to refund 80% of the Delivery Charge revenue to Rate Payers based on therms. 2. Update the Accumulative Deferred Income Tax Adjustment (ADIT). The ADIT balance, a deduction to rate base, declines over the 30-year book life DNG plant investments made in The ADIT balance recognizes the difference between accelerated tax depreciation and straight line book depreciation. The reduction in the balance is approximately $92,000/year. The Committee is recommending a reduction in the balance of $92,000 which will increase the DNG filed rate base. 3. Property Tax. DNG filing reflects $320,000 in property tax. The actual assessment per DNG came in at $312,968. The Committee is recommending a reduction in filed property tax expense of $7, Other Administrative and Operating Expenses (does not include Amortization, Depreciation or Property tax expenses) Other Administrative and Operating Expenses were $613,560. DNG is requesting $745,000. The Committee is recommending $667,520. The Committee s recommendation was developed as follows: 2015 Audited Actual $613,560 Less ½ of Contributions/Donations -1,225 x ($613,560-$1,225) 9,185 Rate Case Expense 15,000 Dooley Petroleum Allocation 31,000 Total Other Adm. & Operating Expense $ DNG 2015 contributions/donations expense was $2,450. The Minnesota Public Utilities Commission (MPUC) generally only allows the recovery of 50% of donation expenses. 3

6 The 50% allowance recognizes that shareholder should also share in the cost of donations. The Committee is recommending a $1,225 reduction in donation expenses. The MPUC allows utilities to recover their incremental rate case expenses that are beyond their internal costs. These rate case expenses are general amortized over a period of time between rate cases. The Committee is recommending to add $15,000 in expenses by assuming a $45,000 rate case expense amortized over 3 years. Allocation of Dooley Petroleum costs to DNG. DNG is requesting $43,000 in Dooley Petroleum cost be allocated to DNG. This includes a portion of the CEO, CFO, CPA and miscellaneous office expenses. The Committee has reviewed information provided by DNG and is recommending an increase in expense of $31, Capital Structure and Rate of Return. DNG filed rate of return was the same as their last Clara City approved level. DNG 2015 capital structure has change. The Committee is recommending that DNG Rate of Return be set at their 2015 capital structure with the same component cost approved in their most recent rate case. This recommendation results in their requested Rate of Return of 7.04% being reduced to 6.92%. The Committee is recommending that DNG s requested revenue deficiency of $441,877 be reduced to $294,796. This reduction will result in a 7.27% overall increase rather than the 11.36% proposed by DNG. If Ag. Drying sales exceed 750,000 in a calendar year, DNG is required to refund 80% of the Delivery Charge revenue to Rate Payers based on therms. III. Rate Design DNG s current rate design has been maintained since 2012 except for a reduction in the delivery cost/therm. This reduction was the same per therm for all rate classes. DNG has proposed an increase in delivery charges to be more of a percentage rather than the same for each rate class. DNG did not file a cost of service study to support their proposed rate design. The Committee is recommending that any increase in rate be an equal increase per therm for all rate classes. The increase will get rate design closer to the original approved rate design. The increase in the delivery charges for all rate classes should be $0.0668/therm ($294,796/4,410,000 therms). Due to rounding the overall increase in DNG revenue will be 4

7 $294,588. The rate design assumes 750,000 therms of Ag. Drying sales. If Ag. Drying sales exceed 750,000 therms in the calendar year, all will receive a refund. IV. New Base Cost of Gas The Base Cost of Gas is normally reset at the time of the rate case to zero out the Purchase Gas Adjustment (PGA). The goal is to minimize the PGA impact on the bill. The current Base Cost of Gas is $0.3448/therm and the PGA for present rate revenues in this rate proceeding is $0.1527/therm. The new Base Cost of Gas would normally be set at $ ($ $0.1527). The new Base Cost of Gas will result in a $ PGA, thus no change in revenues. Based on updated information provided by DNG and per their request, the new Cost of Gas will be set at $ per therm. The new Cost of Gas will be implemented with the new rates. V. Implementing New Delivery Rates and Interim Rate Refund DNG should implement the new rates as soon as possible after the final rates are approved by Clara City. Once the new rates are implemented, DNG is required to file a refunding plan within 60 days of the Commission Order for the difference between the interim rate level and the final approved rate increase. DNG will be required to refund 36.00% ((11.36%-7.27%)/11.36%))of the interim rates collected plus interest. The current Wall Street Journal prime interest rate is 3.5 %. The refunding plan will need to be approved by Clara City prior to the refund. DNG must file a refund compliance filing when the refund is completed. The refunding plan should include the following elements: Interim rate revenue by month by rate class Billing date to collection date timing Interest calculation spread sheet Refunding method (bill credit vs check) Timing of the refund Treatment of residual refund balance (the portion of the refund not refunded due to the inability to locate customers) The netting of this interim rate refund against any PGA true-up shortfall for the period ending June 2016 should also be addressed. DNG will have likely under recovered its July 2015 through June 2016 purchase gas cost because of the warmer than normal weather during this period. 5

8 VI. Summary Dooley Natural Gas LLC (DNG) filed a Petition for Authority to Increase Natural Gas Rates on January 25, DNG requested a $442,766 (11.36%) increase in rates. The City of Clara City, consistent with state law, allowed DNG to temporary (interim) collect higher rates for bills rendered on and after March 1, The interim rate increase of 11.36% is a line item on DNG billings and is subject to refund with interest pending the final determination of DNG s rate increase request. The Committee has reviewed DNG s January 25, 2016 Petition for Authority to Increase Natural Gas Rates filing. The Committee is recommending that DNG s requested revenue deficiency of $441,877 be reduced to $294,796. This reduction will result in a 7.27% overall increase rather than the 11.36% proposed by DNG. The Committee is recommending that DNG s delivery rates be increased $0.0668/therm and the new Base Cost of Gas be set at $0.4400/therm. If Ag. Drying sales exceed 750,000 in a calendar year, DNG is required to refund 80% of the Delivery Charge revenue to Rate Payers based on therms. The Committee is further recommending that 36.00% of the interim rate revenue collected by DNG be refunded to customers with interest. VII. Work Papers 6

9 DNG Sales Projections 2016 Rate Case Kelly Bay Consulting LLC Billing Units Number of Customers Sales (Therms) Rate Class DNG Filing Recommended DNG Filing Recommended Residential Cat-1 1,106 1, , ,000 Commercial Cat , ,000 Industrial C at , ,000 Ag. Heating Cat ,650,000 2,195,000 Ag. Drying Cat ,000, ,000 Total 1,327 1,337 4,200,000 4,410,000 Recommended Sales Residential Used 2014 and 2015 average weather normalized sales/cust of 701 therms x 1,112 customers equals 779,512 therms rounded to 780,000 therms. Commercial Used 2014 and 2015 average weather normalized sales/cust of 2,792 therms x 170 customers equals 474,640 therms rounded to 475,000 therms. Industrial Used 2015 weather normalized sales of 209,712 therms rounded to 210,000 therms. Three larger than average customers were added in 2014, thus the 2014 average use per customer was not used. Ag Heating Used 2014 weather normalized sales of 2.195,028 therms rounded to 2,195,000 therms sales were not used because of the one time impact of the avian flu outbreak. Ag Drying Set at 750,000 therms with 80% of delivery charge revenue in excess of 750,000 therms/year refunded to customers. Weather normalization was based on Willmar, MN Airport's actual degree days compared to year average. 7/12/2016 7

10 8 DNG Sales History Kelly Bay Consulting LLC RESIDENTIAL January February March April May June July August September October November December Total 2013 Sales 114, ,714 94,703 90,721 35,471 8,194 2,699 2,086 2,344 10,024 57, , ,072 Customers ,019 1,036 Sales/Cust Sales 152, , ,652 86,164 45,405 3,767 3,292 2,968 6,124 30, ,973 99, ,194 Customers 1,031 1,021 1,050 1,052 1,058 1,047 1,033 1,051 1,049 1,073 1,058 1,086 Sales/Cust Sales 147, ,340 99,443 43,517 16, ,831 3,768 4,342 22,778 67, , ,514 Customers 1,079 1,094 1,093 1,095 1,094 1,091 1,096 1,097 1,095 1,091 1,115 1,076 Sales/Cust Sales 153, ,910 84,160 Customers 1,101 1,093 1,112 Sales/Cust Weather Normalized January February March April May June July August September October November December Total 2013 Sales 114, ,714 94,703 90,721 35,471 8,194 2,699 2,086 2,344 10,024 57, , ,072 Norm. Factor Norm. Sales 110, ,596 71,703 77,456 34,204 7,896 2,591 1,980 3,225 8,870 54,738 97, ,019 Customers ,019 1,036 Norm. Sales/Cust Sales 152, , ,652 86,164 45,405 3,767 3,292 2,968 6,124 30, ,973 99, ,194 Norm. Factor Norm. Sales 137, , ,181 75,976 40,063 4,159 1,613 5,935 5,467 30,429 93, , ,853 Customers 1,031 1,021 1,050 1,052 1,058 1,047 1,033 1,051 1,049 1,073 1,058 1,086 Norm. Sales/Cust Sales 147, ,340 99,443 43,517 16, ,831 3,768 4,342 22,778 67, , ,514 Norm. Factor Norm. Sales 164, , ,261 51,212 16, ,822 2,671 7,715 26,770 85, , ,648 Customers 1,079 1,094 1,093 1,095 1,094 1,091 1,096 1,097 1,095 1,091 1,115 1,076 Norm. Sales/Cust Sales 153, ,910 84,160 Norm. Factor Norm. Sales 165, , ,213 Customers 1,101 1,093 1,112 Norm. Sales/Cust

11 9 DNG Sales History Kelly Bay Consulting LLC COMMERCIAL January February March April May June July August September October November December Total 2013 Sales 49,743 15,186 30,268 48,548 10,495 16,187 4,313 3,528 3,855 7,191 28,651 63, ,434 Customers Sales/Cust Sales 88,297 84,353 78,281 56,723 26,189 10,091 9,263 8,465 8,041 19,155 78,479 60, ,137 Customers Sales/Cust , Sales 93,530 74,840 42,316 20,345 9,354 5,962 4,624 5,903 3,826 13,678 32,807 61, ,381 Customers Sales/Cust , Sales 81,607 62,687 84,160 Customers Sales/Cust Weather Normalized January February March April May June July August September October November December Total 2013 Sales 49,743 15,186 30,268 48,548 10,495 16,187 4,313 3,528 3,855 7,191 28,651 63, ,434 Norm. Factor Norm. Sales 48,086 14,600 22,917 41,450 10,120 15,599 4,140 3,349 5,305 6,363 27,067 53, ,267 Customers ,036 Norm. Sales/Cust Sales 88,297 84,353 78,281 56,723 26,189 10,091 9,263 8,465 8,041 19,155 78,479 60, ,137 Norm. Factor Norm. Sales 79,527 73,037 68,407 50,016 23,108 11,142 4,537 16,930 7,178 18,938 60,907 64, ,350 Customers Norm. Sales/Cust , Sales 93,530 74,840 42,316 20,345 9,354 5,962 4,624 5,903 3,826 13,678 32,807 61, ,381 Norm. Factor Norm. Sales 104,679 70,379 46,920 23,942 9,286 8,102 3,264 4,185 6,797 16,075 41,552 70, ,231 Customers Norm. Sales/Cust , Sales 81,607 62,687 84,160 Norm. Factor Norm. Sales 87,944 77, ,213 Customers Norm. Sales/Cust

12 DNG Sales History Kelly Bay Consulting LLC 10 Industrial January February March April May June July August September October November December Total 2013 Sales 2,741 39,943 12,084 14,536 8,079 11,267 (1,865) 11,601 8,549 (17,634) 15,169 12, ,005 Customers Sales/Cust. 1, (207) (2,204) 1,379 1, Sales 23,539 21,426 15,322 17,618 6,219 1,611 1,209 2,366 1,171 4,473 18,038 17, ,242 Customers Sales/Cust. 2,140 2,143 1,532 2, ,577 2,464 15, Sales 23,320 41,581 25,315 10,545 5,856 4,669 3,329 4,880 6,026 7,449 17,892 38, ,249 Customers Sales/Cust. 3,331 4,158 2,532 1, ,789 3,839 19, Sales 38,477 31,546 19,892 Customers Sales/Cust. 3,848 3,155 1,989 Weather Normalized January February March April May June July August September October November December Total 2013 Sales 2,741 39,943 12,084 14,536 8,079 11,267 (1,865) 11,601 8,549 (17,634) 15,169 12, ,005 Norm. Factor Norm. Sales 2,650 38,401 9,149 12,411 7,791 10,858 (1,790) 11,011 11,763 (15,605) 14,330 10, ,489 Customers Norm. Sales/Cust. 1, (199) (1,951) 1, Sales 23,539 21,426 15,322 17,618 6,219 1,611 1,209 2,366 1,171 4,473 18,038 17, ,242 Norm. Factor ####### Norm. Sales 21,201 18,552 13,390 15,535 5,487 1, ,732 1,045 4,422 14,000 18, ,068 Customers Norm. Sales/Cust. 3,029 1,855 1,339 1, ,000 2,619 15, Sales 23,320 41,581 25,315 10,545 5,856 4,669 3,329 4,880 6,026 7,449 17,892 38, ,249 Norm. Factor Norm. Sales 26,101 39,102 28,069 12,409 5,813 6,345 2,350 3,459 10,706 8,755 22,661 43, ,712 Customers Norm. Sales/Cust. 3,729 3,910 2,807 1, , ,266 4,394 22, Sales 38,477 31,546 19,892 Norm. Factor Norm. Sales 41,465 38,784 26,523 Customers Norm. Sales/Cust. 4,146 3,878 2,652

13 DNG Sales History Kelly Bay Consulting LLC Ag Heating January February March April May June July August September October November December Total 2013 Sales (7,033) 79,707 81, ,332 67, ,374 16,694 21,406 19, , , ,891 1,354,921 Customers Sales/Cust. 7,544 3,537 15, ,112 7,405 9, Sales 367, , , , ,811 41,494 31,114 46,450 61, , , ,613 2,393,263 Customers Sales/Cust. 9,935 8,887 7,387 5,564 6,152 1,660 1,245 1,858 2,452 8,931 12,269 9,171 75, Sales 305, , , ,777 49,336 12,635 16,761 24,434 92,978 80, , ,236 1,784,049 Customers Sales/Cust. 12,232 11,960 8,276 5,191 1, ,576 3,218 9,429 13,760 71, Sales 340, , ,707 Customers Sales/Cust. 13,084 10,077 9,188 Weather Normalized January February March April May June July August September October November December Total 2013 Sales (7,033) 79,707 81, ,332 67, ,374 16,694 21,406 19, , , ,891 1,354,921 Norm. Factor Norm. Sales (6,799) 76,631 61, ,376 64, ,289 16,027 20,318 26,552 94, , ,957 1,232,575 Customers Norm. Sales/Cust. 6,441 3,411 15, ,207 3,639 6,996 8, Sales 367, , , , ,811 41,494 31,114 46,450 61, , , ,613 2,393,263 Norm. Factor Norm. Sales 331, , , , ,716 45,816 15,240 92,899 54, , , ,174 2,195,028 Customers Norm. Sales/Cust. 13,243 7,695 6,455 4,906 5,429 1, ,716 2,189 8,830 9,522 9,747 74, Sales 305, , , ,777 49,336 12,635 16,761 24,434 92,978 80, , ,236 1,784,049 Norm. Factor Norm. Sales 342, , , ,722 48,973 17,171 11,831 17, ,193 94, , ,011 2,037,203 Customers Norm. Sales/Cust. 13,690 11,247 9,177 6,109 1, ,354 3,783 11,943 15,750 81, Sales 340, , ,707 Norm. Factor Norm. Sales 366, , ,275 Customers Norm. Sales/Cust. 14,100 12,390 12,251

14 12 DNG Sales History Kelly Bay Consulting LLC Dryer 2013 January February March April May June July August September October November December Total Sales (2,074) 1,749 1,801 2, ,850 1,086, ,566 1,288,881 Customers Sales/Cust ,303 67,933 8, Sales 59,165 11,723 50,574 41,089 15,294 41,397 28, , ,753 48,355 1,164,026 Customers Sales/Cust. 3, ,612 2,935 1,020 3,450 2, ,201 17,728 2,418 61, Sales 30,344 18,023 22, ,397 17,100 5, , ,810 20,373 41, ,014 Customers Sales/Cust. 1, , ,240 22,241 1,019 2,052 31, Sales 33, ,254 49,960 Customers Sales/Cust. 1, Average Sales = 1,030,307

15 DNG 2016 Rate Case Weather Normalization Data Kelly Bay Consulting LLC Average Degree Willmar MN Airport 5 Year Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Normalized Factor 5 Year Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 8131 Normalization factor determined by taking the average monthly degree days/actual montly degree days. Ex. January 2013, 1596/1651=

16 Dooley's Natural Gas Current and Recommended Rates 2016 Rate Case Current Rates Monthly Customer Charge Delivery Charge Base Cost of Gas PGA Residential Cat-1 $ 8.00 $ $ $ Commercial Cat-2 $ $ $ $ Industrial Cat-3 $ $ $ $ Rate Ag. Heating Cat-4 $ $ $ $ Rate Ag. Drying Cat-4 $ $ $ $ Recommended Rates Monthly Customer Charge Delivery Charge Base Cost of Gas PGA Residential Cat-1 $ 8.00 $ $ $ Commercial Cat-2 $ $ $ $ Industrial Cat-3 $ $ $ $ Rate Ag. Heating Cat-4 $ $ $ $ Rate Ag. Drying Cat-4 $ $ $ $ Note: 80% of Calendar Year Ag. Drying Delivery Charge revenues in excess of 750,000 therms sold will be refunded to ratepayers. Note: The Base Cost of Gas will be set at $0.4400/therm with the implementation of the new rates. 14

17 Dooley's Natural Gas Current and Recommended Rate Revenues 2016 Rate Case Revenues at Rate Class Revenues at Current Rates Recommended Rates Residential Cat-1 $ 874, $ 926, Commercial Cat-2 $ 492, $ 523, Industrial Cat-3 $ 190, $ 204, Rate Ag. Heating Cat-4 $ 1,842, $ 1,988, Rate Ag. Drying Cat-4 $ 653, $ 703, $ 4,053, $ 4,347, Note: Does not include the impact of Ag. Drying revenues in excess of 750,000 therms. 15

18 Dooley's Natural Gas Schedule of Revenues and Billing Units 2016 Rate Case Recommended Billing Units Rate Class Number of Customers Sales (Therms) Residential Cat-1 1, ,000 Commercial Cat ,000 Industrial Cat ,000 Rate Ag. Heating Cat ,195,000 Rate Ag. Drying Cat ,000 Total 1,337 4,410,000 Current Rate Monthly Customer Charge Delivery Charge Base Cost of Gas PGA Total Residential Cat-1 $ 8.00 $ $ $ Commercial Cat-2 $ $ $ $ Industrial Cat-3 $ $ $ $ Rate Ag. Heating Cat-4 $ $ $ $ Rate Ag. Drying Cat-4 $ $ $ $ Residential Cat-1 $ 106, $ 380, $ 268, $ 119, $ 874, Commercial Cat-2 $ 24, $ 231, $ 163, $ 72, $ 492, Industrial Cat-3 $ 2, $ 83, $ 72, $ 32, $ 190, Rate Ag. Heating Cat-4 $ 10, $ 739, $ 756, $ 335, $ 1,842, Rate Ag. Drying Cat-4 $ 8, $ 271, $ 258, $ 114, $ 653, Total $ 152, $ 1,706, $ 1,520, $ 673, $ 4,053, Revenues Recommended Monthly Customer Charge Delivery Charge Base Cost of Gas PGA Total Residential Cat-1 $ 8.00 $ $ $ Commercial Cat-2 $ $ $ $ Industrial Cat-3 $ $ $ $ Rate Ag. Heating Cat-4 $ $ $ $ Rate Ag. Drying Cat-4 $ $ $ $ Residential Cat-1 $ 106, $ 432, $ 343, $ 44, $ 926, Commercial Cat-2 $ 24, $ 263, $ 209, $ 27, $ 523, Industrial Cat-3 $ 2, $ 98, $ 92, $ 12, $ 204, Rate Ag. Heating Cat-4 $ 10, $ 886, $ 965, $ 126, $ 1,988, Rate Ag. Drying Cat-4 $ 8, $ 321, $ 330, $ 43, $ 703, Total $ 152, $ 2,001, $ 1,940, $ 253, $ 4,347, Note: 80% of Calendar Year Ag. Drying Delivery Charge revenues in excess of 750,000 therms sold will be refunded to ratepayers. 16

19 DNG Operating Expenses 2016 Rate Case Kelly Bay Consulting LLC Operating Expenses Requested O&M Labor $ 143,302 Sale & Adm. Labor $ 92,040 Dooley Petroleum Adm $ 43,000 Contract Services $ 57,000 Customer Service $ 7,500 Contract Labor $ 200,355 $ 248,084 $ 248,307 $ - Payroll Taxes $ 17,225 $ 19,564 $ 21,598 $ 28,530 Employee Benefits $ 17,077 $ 25,861 $ 21,858 $ 26,000 Advertising Expense $ 2,356 $ 5,649 $ 4,587 $ 12,000 Bank Service Charges $ 14,956 $ 48,964 $ 42,796 $ 45,000 Bad Debt $ - $ - $ 3,194 $ - Consulting $ 8,754 $ 41,826 $ 13,495 $ 22,000 Contributions $ 700 $ 2,075 $ 2,450 $ 3,600 Dues and Subscriptions $ 9,625 $ 11,095 $ 11,445 $ 12,000 Employee Training $ 387 $ 74 $ 102 $ 9,600 Fuel Expense $ 19,779 $ 22,991 $ 15,487 $ 24,000 Insurance Expense $ 14,309 $ 28,839 $ 17,823 $ 28,500 Lease Expense $ 9,690 $ 9,540 $ 3,975 $ - Legal and Profession Fees $ 35,228 $ 33,916 $ 17,998 $ 44,500 Meal and Incidental Expenses $ 2,543 $ 4,057 $ 6,122 $ 6,000 Miscellaneous Expense $ 15,780 $ 8,761 $ 8,229 $ 3,650 Office Supplies $ 13,789 $ 10,118 $ 11,701 $ 15,000 Unidentified $ - $ - $ - $ 12,188 Rent Expense $ 8,766 $ 9,950 $ 11,776 $ 19,440 Repairs and Maintenance $ 11,149 $ 10,631 $ 11,270 $ 20,500 Small Tools and Equipment $ 5,142 $ 4,162 $ 3,429 $ 4,500 Subcontract Labor $ 187,440 $ 131,546 $ 73,954 $ - Supplies $ 60,054 $ 194,249 $ 35,074 $ 38,500 Taxes $ 2,125 $ 4,207 $ 5,931 $ 6,000 Telephone $ 1,965 $ 2,280 $ 2,136 $ - Travel $ 350 $ 1,308 $ 3,368 $ 4,000 Uniforms $ 997 $ 1,846 $ 401 $ 650 Utilities $ - $ 16,169 $ 15,054 $ 16,000 Guarantee Payments to Members $ 60,000 $ - $ - $ - Total Other Operating Exp $ 720,541 $ 897,762 $ 613,560 $ 745,000 Amortization $ 49,099 $ 59,129 $ 28,684 $ - Depreciation $ 466,145 $ 479,685 $ 491,938 $ 525,466 Real Estate Taxes $ - $ 164,001 $ 148,967 $ 320,000 Total Operating Expenses $ 1,235,785 $ 1,600,577 $ 1,283,149 $ 1,590,466 Note: Actual operating expenses per 2013, 2014 and 2015 per Audited Financial Statements 17

20 DNG Capital Structure and Cost of Capital 2016 Rate Case Capital Structure 12/31/15 $ % Long Term Debt (Including Current Portion) $ 8,898, % Common Equity $ 2,384, % Total $ 11,282, % 2016 Allowed Return Type Percent Cost Wt. Cost LTD 78.9% 4.75% 3.75% Common Equity 21.1% 15.00% 3.17% Total 100.0% 6.92% JCE

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83 STATE OF MINNESOTA BEFORE THE MINNESOTA PUBLIC UTILITIES COMMISSION In the Matter of the Petition of Dooley s Natural Gas LLC for Exemption for Small Gas Utility Franchise ) ) ) ) ) ) MPUC Docket No. G6915/M CERTIFICATE OF SERVICE The undersigned hereby certifies that true and correct copies of the Informational Filing of Dooley s Natural Gas, LLC were served on this day by e-filing/e-serving to the following: NAME ADDRESS SERVICE Julia Anderson julia.anderson@ag.state.mn.us Office of the Attorney General DOC 1800 BRM Tower 445 Minnesota Street St. Paul, MN Randy Dooley Dooley s Natural Gas LLC PO Box 100 Murdock, MN Sharon Ferguson sharon.ferguson@state.mn.us Department of Commerce 85 7 th Place East, Ste. 500 St. Paul, MN John Lindell john.lindell@ag.state.mn.us Office of the Attorney General 1400 BRM Tower 445 Minnesota Street St. Paul, MN Brian Meloy brian.meloy@stinson.com Stinson, Leonard, Street LLP 150 S. 5 th Street, Suite 2300 Minneapolis, MN Steve Sarvi rushford@acegroup.cc Rushford Electric Dept. PO Box 430 Rushford, MN James M. Strommen jstrommen@kenned-graven.com Kennedy & Graven, Chartered 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN Daniel P. Wolf dan.wolf@state.mn.us Public Utilities Commission th Place East, Ste. 350 St. Paul, MN Electronic Paper Electronic Electronic Electronic Electronic Electronic Electronic

84 NAME ADDRESS SERVICE Winthrop C. Block Gaylan Bulthuis Carl Cronin Darvin Gast Richard Groothuis com City of Clara City 215 First Street NW, PO Box 560 Clara City, MN City of Roseland th Avenue SW Blomkest, MN Xcel Energy 414 Nicollet Mall - FL 7 Minneapolis, MN City of Whitefield Township/City of Svea th Avenue SE Willmar, MN City of Maynard PO Box 247 Maynard, MN Nicolle Kupser nkupser@greatermngas.com Greater Minnesota Gas, Inc. 202 South Main Street P.O. Box 68 Le Sueur, MN Amber Lee Adam Pyles Dawn Stahl Ardel Tensen Harvey Van Eps ASLee@minnesotaenergyresour ces.com adam.pyles@centerpointenergy. com Minnesota Energy Resources Corp th St W Rosemount, MN CenterPoint Energy 800 LaSalle Avenue PO Box Minneapolis, MN City of Blomkest PO Box Renstrom Street North Blomkest, MN City of Raymond 208 Cofield Street Raymond, MN City of Prinsburg PO Box 7 Prinsburg, MN Robyn Woeste robynwoeste@alliantenergy.com Interstate Power and Light Company 200 First St SE Cedar Rapids, IA Paper Paper Electronic Paper Paper Electronic Electronic Electronic Paper Paper Paper Electronic Dated this 28th day of November, 2016 /s/ Susan A. Hartinger Susan A. Hartinger