S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * *

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1 S T A T E O F M I C H I G A N BEFOE THE MICHIGAN PUBLIC SEVICE COMMISSION * * * * * In the matter of the application of ) UPPE PENINSULA POWE COMPANY ) for authority to reconcile its 2014 energy optimization ) Case No. U costs and revenues and to revise surcharges. ) ) At the July 9, 2015 meeting of the Michigan Public Service Commission in Lansing, Michigan. PESENT: Hon. John D. Quackenbush, Chairman Hon. Greg. White, Commissioner Hon. Sally A. Talberg, Commissioner ODE APPOVING SETTLEMENT AGEEMENT On March 24, 2015, Upper Peninsula Power Company (UPPCo) filed its application, with supporting testimony and exhibits, for authority to reconcile its energy optimization (EO) plan revenues and costs associated with the plan approved in Case No. U for the 12-month period ended December 31, UPPCo also requested authority to revise its EO surcharges. A prehearing conference was held on June 3, 2015, before Administrative Law Judge Mark E. Cummins. UPPCo and the Commission Staff participated in the proceedings. Subsequently, the parties submitted a settlement agreement resolving all issues in the case. According to the terms of the settlement agreement, attached as Exhibit A, the parties agree that: (1) the 2014 payment of $2,106,595 to the independent energy optimization program administrator satisfies the requirements of MCL (1); (2) the proposed reconciliation of 2014 EO revenues and costs should be approved, and the resulting underrecovery of $143,465,

2 including interest through December 31, 2014, and the roll-in of the prior period (2013) underrecovery, should be approved and reflected as the beginning balance for the 2015 EO reconciliation; and (3) the proposed revised EO surcharges set forth in Attachment 1 to the settlement agreement should be approved for service rendered on and after August 1, The Commission finds that the settlement agreement is reasonable and in the public interest, and should be approved. THEEFOE, IT IS ODEED that: A. The settlement agreement, attached as Exhibit A, is approved. B. The 2014 payment of $2,106,595 by Upper Peninsula Power Company to the independent energy optimization program administrator satisfies the requirements of MCL (1). C. The proposed reconciliation of 2014 energy optimization revenues and costs is approved, and the resulting net underrecovery of $143,465 through December 31, 2014, inclusive of interest through December 31, 2014, and the 2013 prior period underrecovery, is approved and shall be reflected as the beginning balance for the 2015 energy optimization reconciliation. D. The proposed revised energy optimization surcharges set forth in Attachment 1 to the settlement agreement are approved for service rendered on and after August 1, E. Within 30 days of this order, Upper Peninsula Power Company shall file with the Commission tariff sheets substantially similar to Attachment 1 to the settlement agreement. The Commission reserves jurisdiction and may issue further orders as necessary. Page 2 U-17835

3 Any person desiring to appeal this order must do so in the appropriate court within 30 days after issuance and notice of this order, pursuant to MCL To comply with the Michigan ules of Court s requirement to notify the Commission of an appeal, appellants shall send required notices to both the Commission s Executive Secretary and to the Commission s Legal Counsel. Electronic notifications should be sent to the Executive Secretary at mpscedockets@michigan.gov and to the Michigan Department of the Attorney General - Public Service Division at pungp1@michigan.gov. In lieu of electronic submissions, paper copies of such notifications may be sent to the Executive Secretary and the Attorney General - Public Service Division at 7109 W. Saginaw Hwy., Lansing, MI MICHIGAN PUBLIC SEVICE COMMISSION John D. Quackenbush, Chairman Greg. White, Commissioner By its action of July 9, Sally A. Talberg, Commissioner Mary Jo Kunkle, Executive Secretary Page 3 U-17835

4 EXHIBIT A S T A T E O F M I C H I G A N BEFOE THE MICHIGAN PUBLIC SEVICE COMMISSION * * * * In the matter of the application of ) UPPE PENINSULA POWE COMPANY ) Case No. U for authority to reconcile its 2014 energy optimization costs and revenues and to revise surcharges. ) ) SETTLEMENT AGEEMENT As provided in 78 of the Administrative Procedures Act of 1969 ( APA ), as amended, MCL , and ule 431 of the Michigan Administrative Hearing System s Administrative Hearing ules, 2015 AC, , Upper Peninsula Power Company ( UPPCO ) and the Michigan Public Service Commission Staff ( Staff ) hereby agree as follows: 1. On March 24, 2015, UPPCO filed with the Michigan Public Service Commission ( Commission ) its Application, along with the testimony and exhibits of its witness James M. Beyer to, among other things, reconcile its Energy Optimization ( EO ) plan revenues and costs for the 12-month period ended December 31, On May 6, 2015, 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 June 1, On June 3, 2015, Administrative Law Judge Mark E. Cummins presided over a prehearing conference in this matter. Staff entered its Appearance. There were no intervenors. 4. Subsequent to the prehearing conference, the parties have engaged in audit procedures and settlement discussions and, as a result, have reached agreement on all of the

5 issues in this case. As shown on the attachment to this settlement agreement, the parties to this settlement agreement agree as follows: a. The 2014 payment of $2,106,595 to the Independent Energy Optimization Program Administrator satisfies the requirements of MCL (1). b. The proposed reconciliation of 2014 EO revenues and payments should be approved by the Commission; and the resulting net underrecovery of $143,465, including prior period roll-ins and interest through December 31, 2014, shall be reflected as the beginning balances for the 2015 EO costs and reconciliation. c. The proposed revised EO surcharges incorporated into the tariff sheet attached hereto as Attachment 1, should be approved for service rendered on and after August 1, 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. 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 2

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7 MPSC Vol No 8-ELECTIC UPPE PENINSULA POWE COMPANY Attachment 1 8th ev. Sheet No. D eplaces 7th ev. Sheet No. D D2. Energy Optimization (EO) EO Energy Optimization Surcharge This surcharge permits, pursuant to Section 91(4) of 2008 Pa 295, the adjustment of distribution rates, via the application of an Energy Optimization Surcharge, to allow recovery of the energy optimization alternative compliance payment made by the Company in compliance with Section 91(1) of 2008 Pa 295. All customer bills subject to the provisions of this tariff, including any bills rendered under special contract, shall be adjusted by the Energy Optimization Surcharge per kwh or Customer as follows: Tariff Energy Charges A-1 $ /kwh A-2 $ /kwh AH-1 $ /kwh Tariff Per Month/Meter Per Day/Meter C-1 $4.14 $ C-2 $4.14 $ H-1 $4.14 $ P-1 $41.65 $ N Cp-U $ $ WP-3 $ $ CP- $ $ TMP $ $ TMP-D $ $ Special Contract $ $ SL-3 $0.39 $ SL-5 $0.39 $ SL-6 $0.39 $ Z-3 $0.39 $ Z-4 $0.39 $ Issued: XX-XX-XX Effective for Service By Dennis M. Derricks On and After: Assistant VP - egulatory Affairs Issued Under Auth. of Green Bay, Wisconsin Mich Public Serv Comm Dated: XX-XX-XX In Case No: U-17835

8 P O O F O F S E V I C E STATE OF MICHIGAN ) Case No. U County of Ingham ) Joanna Klein being duly sworn, deposes and says that on July 9, 2015 A.D. she served a copy of the attached Commission order by first class mail, postage prepaid, or by interdepartmental mail, to the persons as shown on the attached service list. Subscribed and sworn to before me This 9 th day of July 2015 Joanna Klein Steven J. Cook Notary Public, Ingham County, Michigan As acting in Eaton County My Commission Expires: April 30, 2018

9 Service List U Mark E. Cummins DLAA/MAHS - MPSC Hearings 7109 W. Saginaw Hwy. I. D. M A I L Lansing MI Lauren D. Donofrio Michigan Attorney General-PSD 7109 W. Saginaw Hwy. Lansing MI Upper Peninsula Power Company Barbara A. Siehr, CEO 1002 Harbor Hills Drive Marquette MI Sherri A. Wellman Miller Canfield Paddock & Stone One Michigan Avenue, Suite 900 Lansing MI 48933