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Minnesota Power Files for $55M Rate Increase

November 3, 2016 By Cheryl Kaften

Minnesota Power – which serves about 145,000 residential and commercial electricity customers statewide – announced on November 2 that it had filed a request with the Minnesota Public Utilities Commission (MPUC) for a rate increase of $55 million to recover hundreds of millions of dollars invested in infrastructure, efficiency upgrades, and business expenses.

It’s really recovering the investment we’d made in our system,” Minnesota Power EVP Dave McMillan told the Duluth News Tribune.

Specifically, the utility is asking the MPUC to approve an immediate 8 percent increase for homeowners on January 1 and then another 10 percent increase after the state regulators’ lengthy rate case process, according to the local news outlet.

If approved, a typical residential customer’s monthly bill would increase by $6 when interim rates take effect at the beginning of next year. A small business customer’s monthly bill would increase by $22.00.

Then, if the MPUC agrees with Minnesota Power’s assessment of cost allocation on its system, residential customers will see an additional 10 percent increase in early 2018.

The combined interim and final rates will result in an average monthly increase of $15 for residential customers and $28 for small business customers.

That decision on when and at what level to implement final rates will occur after the MPUC accepts input from the public, state agencies, and other community stakeholders.

Different customer classes already pay different rates, but a cost-of-service study, required to be filed with the company’s rate review request, concluded that residential customer rates would need to increase by approximately 35 percent to cover the actual cost of producing and delivering their energy. Business customers are paying the remainder of those additional costs within their current rates.

“When customers pay energy bills that don’t reflect the true cost of the service, those price signals affect everything from the investments businesses make in their employees and the region to the willingness of homeowners to invest in conservation,” McMillan said. “Every Minnesota Power customer will experience increased rates under our proposal. However, we are asking the MPUC to start aligning rates more closely with the true cost of providing service.”

The majority of the rate request ($37 million) is related to additional EnergyForward capital investments which include measures to harden the grid against extreme weather events and enable the safe integration of renewable resources, and the continuation of efficiency and environmental improvements at the company’s existing power plants, the utility stated.

Other components of the rate request address lower sales revenue and pension investment costs. MP also is proposing to provide annual savings to customers by extending to 2050 the capital cost recovery on the Boswell Energy Center. Minnesota Power’s last general rate review was seven years ago.

Corresponding with the rate review request, Minnesota Power also filed its annual Renewable Resources Rider plan. If approved by the MPUC, the proposal will result in a 2017 reduction to residential and most business customers’ bills, the utility said, which would offset about half of the interim rate increase.

“Our energy is an outstanding value when you consider the security, comfort and quality of life it provides,” McMillan said. “We know that there is no good time for a rate increase, though the investments we’ve made are meeting customer expectations for the safety, reliability and flexibility of our energy grid while adding cleaner energy sources, all under our EnergyForward plan.”

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