Investment in ATC

12 Months Ended

Dec. 31, 2015

Equity Method Investments and Joint Ventures [Abstract]

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 December 31, 2015, our equity investment in ATC was $124.5 million ($121.1 million at December 31, 2014). On January 29, 2016, we invested an additional $1.2 million in ATC. In total, we expect to invest approximately $6.2 million throughout 2016.



ALLETE’s Investment in ATC
Year Ended December 31	2015			2014
Millions
Equity Investment Beginning Balance		$121.1			$114.6
Cash Investments	1.6			3.9
Equity in ATC Earnings	16.3			19.6
Distributed ATC Earnings	(14.5		)	(17.0		)
Equity Investment Ending Balance		$124.5			$121.1



ATC Summarized Financial Data
Balance Sheet Data
As of December 31	2015		2014
Millions
Current Assets		$80.5		$66.4
Non-Current Assets	3,957.6		3,728.7
Total Assets		$4,038.1		$3,795.1
Current Liabilities		$330.3		$313.1
Long-Term Debt	1,800.0		1,701.0
Other Non-Current Liabilities	245.0		163.8
Members’ Equity	1,662.8		1,617.2
Total Liabilities and Members’ Equity		$4,038.1		$3,795.1



Income Statement Data
Year Ended December 31	2015		2014		2013
Millions
Revenue		$615.8		$635.0		$626.3
Operating Expense	319.3		307.4		295.1
Other Expense	96.1		88.9		83.6
Net Income		$200.4		$238.7		$247.6
ALLETE’s Equity in Net Income		$16.3		$19.6		$20.3

Our equity earnings in ATC for the year ended December 31, 2015, were $16.3 million and reflected a $5.2 million reduction related to complaints filed with the FERC by several customer groups located within the MISO service area; of which $2.4 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. On December 29, 2015, a federal administrative law judge ruled that the MISO transmission users have been charged an unreasonable base return on equity and proposed a reduction to 10.32 percent, subject to approval or adjustment by the FERC. A final decision from the FERC on the administrative law judge’s recommendation is currently expected in 2016. 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).