Minnesota Power customers will see higher power bills starting next month.

The Minnesota Public Utilities Commission on Thursday approved an interim rate increase for all Minnesota Power customers beginning Jan. 1, 2020. The 5.8% increase will cause the average residential customer’s electric bill to increase by $4.50 per month.

Those temporary rates will remain in place until the PUC decides on whether to grant Minnesota Power its full rate increase, a process that could take 12-18 months. If the PUC approves a full rate that is less than the interim rate hike of 5.8%, Minnesota Power will refund customers the difference with interest.

In its initial filing last month, Minnesota Power asked to increase its residential rates by 15% and business rates by 10% after an expected drop in revenue from expiring power sales contracts, increasing expenses and an ongoing transition to more renewable sources of power. The rate increase would boost the company's annual operating revenue by $65.9 million to $688 million.

If the full rate increase is approved, the average residential customer now paying $78 per month would pay an additional $11.66 per month, while the average small business would pay an additional $30.05 per month, the company has said.

The 5.8% interim rate increase approved Thursday is less than the 7.7% interim rate increase requested by Minnesota Power last month because the PUC opted not to include revenues from an expiring power sales contract in determining the interim rate increase. The PUC will revisit that as it considers the company’s final rate case.

“The commission disagreed with the amount of our request, and then they adjusted it,” Minnesota Power spokesperson Amy Rutledge said Thursday.

But the company maintains its request was fair.

“We felt that our interim rate case was fair and reasonable,” Rutledge said.

A series of public meetings on Minnesota Power’s proposed full rate increase will be held in 2020, and an administrative law judge will deliver a non-binding recommendation to the PUC by Sept. 1.