Investment in ATC

12 Months Ended

Dec. 31, 2016

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, 2016, our equity investment in ATC was $135.6 million ($124.5 million at December 31, 2015). On January 27, 2017, we invested an additional $3.1 million in ATC. In total, we expect to invest approximately $10.9 million throughout 2017.



ALLETE’s Investment in ATC
Year Ended December 31	2016			2015
Millions
Equity Investment Beginning Balance		$124.5			$121.1
Cash Investments	5.4			1.6
Equity in ATC Earnings	18.5			16.3
Distributed ATC Earnings	(12.8		)	(14.5		)
Equity Investment Ending Balance		$135.6			$124.5



ATC Summarized Financial Data
Balance Sheet Data
As of December 31	2016		2015
Millions
Current Assets		$75.8		$80.5
Non-Current Assets	4,312.9		3,957.6
Total Assets		$4,388.7		$4,038.1
Current Liabilities		$495.1		$330.3
Long-Term Debt	1,865.3		1,800.0
Other Non-Current Liabilities	271.5		245.0
Members’ Equity	1,756.8		1,662.8
Total Liabilities and Members’ Equity		$4,388.7		$4,038.1



Income Statement Data
Year Ended December 31	2016		2015		2014
Millions
Revenue		$650.8		$615.8		$635.0
Operating Expense	322.5		319.3		307.4
Other Expense	95.5		96.1		88.9
Net Income		$232.8		$200.4		$238.7
ALLETE’s Equity in Net Income		$18.5		$16.3		$19.6

On September 28, 2016, the FERC issued an order reducing ATC’s authorized return on equity to 10.32 percent, or 10.82 percent including an incentive adder for participation in a regional transmission organization. Prior to this order, ATC had been allowed a return on equity of 12.2 percent which had been impacted by reductions for estimated refunds related to complaints filed with the FERC by several customers located within the MISO service area.

On June 30, 2016, a federal administrative law judge ruled on an additional complaint proposing a further reduction in the base return on equity to 9.70 percent, or 10.20 percent including an incentive adder for participation in a regional transmission organization, subject to approval or adjustment by the FERC. A final decision from the FERC on the administrative law judge’s recommendation is expected in 2017. (See Note 4. Regulatory Matters.) 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 after-tax.