October 19, Upper Peninsula Power Company 2017 Energy Waste Reduction Reconciliation Case No. U-20032

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1 Founded in 1852 by Sidney Davy Miller SHERRI A. WELLMAN TEL (517) FAX (517) Miller, Canfield, Paddock and Stone, P.L.C. One Michigan Avenue, Suite 900 Lansing, Michigan TEL (517) FAX (517) MICHIGAN: Ann Arbor Detroit Grand Rapids Kalamazoo Lansing Troy FLORIDA: Tampa ILLINOIS: Chicago NEW YORK: New York OHIO: Cincinnati CANADA: Toronto Windsor CHINA: Shanghai MEXICO: Monterrey POLAND: Gdynia Warsaw Wrocław October 19, 2018 Ms. Kavita Kale Executive Secretary Michigan Public Service Commission 7109 West Saginaw Hwy., 3 rd Floor Lansing, MI Re: Upper Peninsula Power Company 2017 Energy Waste Reduction Reconciliation Case No. U Dear Ms. Kale: Enclosed for electronic filing is the Settlement Agreement as signed by all the parties. Also enclosed is a Proof of Service. Should you have any questions, please kindly advise. Very truly yours, Miller, Canfield, Paddock and Stone, P.L.C. SAW/ark Enclosures cc w/enc: Hon. Martin D. Snider Michael J. Orris Gradon Haehnel Andrew McNeally By: Sherri A. Wellman \

2 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) UPPER PENINSULA POWER COMPANY ) Case No. U for authority to reconcile its 2017 energy waste reduction costs and revenues and to revise surcharges. ) ) SETTLEMENT AGREEMENT As provided in 78 of the Administrative Procedures Act of 1969 ( APA ), as amended, MCL , and Rule 431 of the Michigan Administrative Hearing System s Administrative Hearing Rules, 2015 AC, R , Upper Peninsula Power Company ( UPPCO ) and the Michigan Public Service Commission Staff ( Staff ) hereby agree as follows: 1. On March 21, 2018, UPPCO filed with the Michigan Public Service Commission ( Commission ) its Application, along with the testimony and exhibits of its witness Andrew McNeally to reconcile its Energy Waste Reduction ( EWR ) plan revenues and costs for the 12- month period ended December 31, On May 16, 2018, the Commission s Executive Secretary issued a Notice of Hearing directing UPPCO to mail a copy of the Notice of Hearing to all cities, incorporated villages, townships, and counties in its service area and to intervenors in Case Nos. U and U The Commission further directed UPPCO to publish the Notice of Hearing in daily newspapers of general circulation throughout its service area. UPPCO filed with the Commission the requisite affidavit of mailing and proofs of publication on May 31, On June 13, 2018, Administrative Law Judge Martin Snider presided over a prehearing conference in this matter. Staff entered its Appearance. There were no intervenors.

3 4. Subsequently, the parties engaged in audit procedures and settlement discussions and, as a result, have reached agreement on all of the issues in this case. The parties to this settlement agreement agree as follows: a. UPPCO made a payment of $2,213,207 to the Independent EWR Program Administrator in b. The proposed reconciliation of 2017 EWR revenues and payments should be approved by the Commission, and the resulting cumulative underrecovery of $362,353, including the prior period roll-in ($250,036) and interest ($2,421) through December 31, 2017, shall be reflected as the beginning balance for the 2018 EWR costs and reconciliation. c. The proposed revised EWR surcharges incorporated into the tariff sheet attached hereto as Attachment 1, should be approved for service rendered on and after November 1, d. The 2018 EWR 1 st Year Savings Goal shall be 7,492 MWh. e. Pursuant to MCL (3), the 2017 EWR credits that may be carried forward are 2,497 MWh, and any application of these carry forward credits is subject to approval in the 2018 reconciliation. f. The 2017 carry-forward dollar amount of $1,204,482.77, received by UPPCO subsequent to leaving the Independent EWR Program Administrator s program, will be applied to EWR plans costs and incorporated in the ensuing 2018 EWR reconciliation. 5. All of the signatories are of the opinion that this settlement agreement is reasonable, in the public interest and will aid the expeditious conclusion of this case. 2

4 6. This settlement agreement is intended to be a final disposition of this proceeding, and the parties join in respectfully requesting that the Commission grant prompt approval. The parties agree not to appeal, challenge, or contest the Commission s order accepting and approving this settlement agreement without modification. If the Commission does not accept the settlement agreement without modification, the agreement shall be withdrawn and shall not constitute any part of the record in this proceeding or be used for any other purpose whatsoever. 7. This settlement agreement has been made for the sole and express purpose of settling this case, and all discussions relating hereto are and shall be privileged and shall not be used in any manner, or be admissible for any other purpose in connection with this proceeding or any other proceeding hereof. This settlement agreement does not constitute precedent in any other case or proceeding. Without limiting the generality of the foregoing, this settlement agreement shall not constitute res judicata or collateral estoppel as to any issue. Neither the parties to the settlement nor the Commission shall use this settlement agreement or the order approving it, as precedent in any case or proceeding; provided however, reference may be made to enforce or implement the provisions thereof in subsequent proceedings. 8. The parties agree to waive Section 81 of the APA of 1969, as amended, MCL , as it applies to this proceeding if the Commission approves this settlement agreement without modification. 3

5 Dated: October 18, 2018 By: UPPER PENINSULA POWER COMPANY Ujgttk!C/! Ygnnocp Fkikvcnn{!ukipgf!d{<!Ujgttk!C/!Ygnnocp FP<!EP!?!Ujgttk!C/!Ygnnocp!gockn!?! ygnnocpuboknngtecphkgnf/eqo!e!?!wu Fcvg<!3129/21/29!21<5;<21!.15(11( Its Attorney Sherri A. Wellman (P38989) MILLER, CANFIELD, PADDOCK and STONE, P.L.C. One Michigan Avenue, Suite 900 Lansing, Michigan (517) Dated: October 18, 2018 By: MICHIGAN PUBLIC SERVICE COMMISSION STAFF Okejcgn!L/!Qttku Fkikvcnn{!ukipgf!d{!Okejcgn!L/! Qttku! Fcvg<!3129/21/2;!19<3;<41!.15(11( Its Attorney Michael J. Orris (P51232) Assistant Attorney General Public Service Division 7109 W. Saginaw Hwy. 3 rd Floor Lansing, MI (517) \

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7 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of UPPER PENINSULA POWER COMPANY ) ) Case No. U for authority to reconcile its 2017 energy waste ) reduction costs and revenues and to revise surcharges. ) ) STATE OF MICHIGAN ) )ss COUNTY OF INGHAM ) PROOF OF SERVICE Allison R. Kellogg, being first duly sworn, deposes and says that on October 19, 2018, she served the Settlement Agreement via electronic mail to Honorable Martin D. Snider at sniderm@michigan.gov and Michael J. Orris at orrism@michigan.gov. Subscribed and sworn before me on this 19 th day of October, Allison R. Kellogg Jennifer Joy Yocum, Notary Public State of Michigan, County of Ingham My Commission Expires: December 17, 2018 Acting in Ingham County \