Investment in ATC

9 Months Ended

Sep. 30, 2015

INVESTMENT IN ATC

Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that owns and maintains electric transmission assets in parts of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equity method of accounting. As of September 30, 2015, our equity investment in ATC was $126.0 million ($121.1 million at December 31, 2014). In the first nine months of 2015, we invested $1.2 million in ATC, and on October 29, 2015, we invested an additional $0.4 million. We do not expect to make any additional investments in 2015.



ALLETE’s Investment in ATC
Millions
Equity Investment Balance as of December 31, 2014		$121.1
Cash Investments	1.2
Equity in ATC Earnings	14.1
Distributed ATC Earnings	(10.4		)
Equity Investment Balance as of September 30, 2015		$126.0

NOTE 8. INVESTMENT IN ATC (Continued)

ATC’s summarized financial data for the quarter and nine months ended September 30, 2015 and 2014, is as follows:



	Quarter Ended				Nine Months Ended
ATC Summarized Financial Data	September 30,				September 30,
Income Statement Data	2015		2014		2015		2014
Millions
Revenue		$164.5		$163.6		$482.0		$487.0
Operating Expense	78.0		76.6		238.3		229.6
Other Expense	23.1		21.4		71.7		65.1
Net Income		$63.4		$65.6		$172.0		$192.3
ALLETE’s Equity in Net Income		$5.5		$5.3		$14.1		$15.6

Our equity earnings in ATC for the nine months ended September 30, 2015, were $14.1 million and reflected a $2.0 million reduction related to complaints filed with the FERC by several customer groups located within the MISO service area; of which $1.1 million was attributable to ATC’s change in estimate of a refund liability relating to prior years. The groups requested, among other things, a reduction in the base return on equity used by MISO transmission owners, including ATC, to 9.15 percent. ATC's current authorized return on equity is 12.2 percent. On February 12, 2015, an additional complaint was filed with the FERC seeking an order to further reduce the base return on equity to 8.67 percent. We own approximately 8 percent of ATC and estimate that for every 50 basis point reduction in ATC’s allowed return on equity our equity earnings in ATC would be impacted annually by approximately $0.5 million on an after-tax basis ($0.9 million pre-tax).