Minnesota Power asks regulators for 17.5% rate hike
A smaller temporary rate hike could take effect as soon as Jan. 1. The company said it's necessary to fund its move to more clean energy.
Minnesota Power has asked regulators to increase its electricity rates by nearly 18%.
In public filings made Monday morning, the Duluth-based utilities company asked the Minnesota Public Utilities Commission to allow it to raise its rates by 17.58%. Because the process takes 10-13 months to finalize the rate increase, it has proposed a lower interim rate increase of 14.23% that could take effect Jan. 1, 2022 while regulators consider the full increase. If regulators settle on a lower amount than the interim rate, the company will return the difference to customers.
The average residential customer should expect to see a $15.08 increase in their bill per month if rates increase by 17.58% or by $11.78 per month if rates increase by 14.23%, the company said.
The plans would generate $108.3 million and $87.3 million, respectively, for Minnesota Power.
Company officials have long said they intended to ask for a rate hike this month. When announcing their intention to do so earlier this year, company officials told investors that the COVID-19 pandemic had made it difficult to earn its authorized 9.25% rate of return.
In Monday's filings, the company noted that while its operational and maintenance expenses have remained the same since 2010, it needs to invest more in new power generation and transmission to reach 70% renewables by 2030 and be coal-free by 2035. It also wants to be 80% carbon-free by 2035 and 100% carbon-free by 2050. It surpassed 50% renewables in late 2020, the company said earlier this year .
The increase in rates also needs to make up for the loss of revenue from energy-intensive industrial customers, namely the closure of the Verso paper mill in Duluth last year and the idling of a machine at the UPM Blandin paper mill in Grand Rapids in 2017. The company said "load loss due to energy efficiencies also reduced revenue."
"Our current rates do not reflect Minnesota Power’s investments and state-leading efforts toward system decarbonization and ensuring the reliability and integrity of our system in that time," David Moeller, Minnesota Power's senior attorney, wrote in the filing. "Additionally, we have experienced a significant loss of customer load, due primarily to partial or complete closures of large industrial customers’ facilities. This high concentration of load within only a handful of large industrial customers creates a distinctively high risk to the company and significant variations in our energy sales."
Kelsey Johnson, president of the Iron Mining Association of Minnesota, said that because industry makes up most of Minnesota Power's customer base — mostly the iron mines and their pellet plants — the rate increase "threatens the competitiveness of our mines and operations in Northeast Minnesota."
“Minnesota Power’s proposed increase comes on the back of over 15 years of rate increases, amounting to an astounding 118% increase since 2005,” Johnson said in an emailed statement to the News Tribune. "This rate increase is in direct violation of state law, which requires that industrial customers have competitive rates. We ask the Public Utilities Commission to enforce that law and reject the rate increase request in its final rate decision."
The Citizens Utility Board of Minnesota is reviewing Minnesota's filing and will also likely intervene to advocate for lower rates in the company's push for more renewable energy sources.
"We're seeing inflation pretty much everywhere so you have folks that are already financially really stressed," Annie Levenson-Falk, the group's executive director, told the News Tribune in an interview. "And the reality is that 18% increase is going to be unaffordable for a lot of people."
Frank Frederickson, vice president of customer experience, said there were programs to help customers needing assistance or having trouble paying their bills and encouraged people to reach out to the company for help.
"We are always working on outreach and ways to support our low-income customers who might, as a percentage of income, carry a higher energy burden than the rest of our residential customers," Frederickson said.
The company's last rate increase, announced in 2019, sought to increase residential rates by 15% and business rates by 10%. The company's temporary 5.8% increase across all customers went into effect Jan. 1, 2020, but the company lowered it to 4.1% as the pandemic picked up and refunded the $12 million difference.
Before that, the company sought a rate hike in 2016, which was then approved in early 2018. But the rate increase allowed by the PUC was smaller than the company requested — just 3.5% for both residential and business customers and a 1%-2% raise for industrial customers instead of the company's request of an increase of 6.1% for industrial customers and 15% for residential customers. Minnesota Power cut $40 million out of its budget throughout 2018, including layoffs.
Two additional completed rate cases were filed by Minnesota Power in the 20 years before that 2016 case, the company said.
This story was updated at 4:45 p.m. Nov. 1 with additional quotes from Kelsey Johnson, Frank Frederickson and Annie Levenson-Falk. It was originally posted at 10:50 p.m. Nov. 1.