Regulators approve Minnesota Power rate increase, approximately half of what company requested
The company plans to ask for another rate increase later this year.
DULUTH — Regulators on Monday approved increasing Minnesota Power's rates by 9.5% instead of the full 17.58% increase requested by the Duluth-based utility in late 2021.
But bills won't jump by 9.5% when customer bills begin reflecting the new rates this summer.
That's because in January 2022, residential rates were temporarily increased by 7.11%, where they remain today. So residential customers will only see rates increase by the difference of interim and final rates — Just shy of 2.5%.
The 9.5% rate applies to residential customers and Minnesota Power's industrial and commercial customers. And because the final rate for industrial and commercial customers is lower than their interim rate of just over 14%, those customers can expect a refund of the difference with interest.
The company intends to file another rate case later this year to fund its transition to more renewable energy sources, the company said in a news release.
In a news release Tuesday, the Minnesota Public Utilities Commission said the company will generate $58 million with the rate increase, instead of more than $108.3 million under its full request. The PUC also authorized Minnesota Power to earn a 9.65% return on equity.
Commissioner Joseph Sullivan said in the release that the PUC's decision makes sure the company has what it needs while keeping prices in check.
"A key role of the Commission is to ensure the reasonableness of utility rates. ... This decision protects consumers’ wallets while providing reliable electrical service,” Sullivan said.
He said the PUC's decision is "making sure the company has the resources and tools they need."
The PUC's decision doesn't do that, Bethany Owen, chair, president and CEO of Allete, said in a news release Tuesday. Allete is the parent company of Minnesota Power.
“I’m proud of our Minnesota Power team and all our company has done to lead our state’s clean-energy transformation while providing safe and reliable power and keeping residential customers’ monthly bills below the national average,” Owen said. “Yesterday’s decision, however, does not give us the resources and tools we need to do all of this. As utilities are asked to do more and even faster, we expect rate review requests to become more frequent going forward.
"We plan to file another rate request later this year that will reflect the revenue requirements that Minnesota Power needs in order to advance its state-leading EnergyForward strategy," Owen said.
That plan includes adding a significant amount of renewable energy and going coal-free by 2035 and carbon-free by 2050. Currently, half the energy provided by the company comes from renewable sources.
But the transition will be expensive, and the company said it will need to raise rates to pay for new power generation and transmission.
The company did not say how much of an increase it will seek in its next rate case.
But it said residential rates have not kept up with general inflation. Over the past decade residential rates "have decreased by 0.2% annually on an inflation-adjusted basis," the company said.
"In the past 25 years, Minnesota Power has completed only three full rate reviews, and its residential customers’ monthly bills are below the national average while they receive the highest percentage of renewable energy in the state," the company said.
The rate case resolved Monday was first filed in October 2019, but the company withdrew it during the COVID-19 pandemic. It refiled it November 2021.
This story originally listed the incorrect amount of Minnesota Power's full request. It was updated at 9:23 a.m. Jan. 25. Minnesota Power sought $108.3 million under its full request. The News Tribune regrets the error.