Retail Energy Buyer

Subscribe to the free weekly newsletter written just for retail energy buyers

Rates to Seesaw in Favor of Industrial Customers in Northern Minnesota

January 22, 2016 By Cheryl Kaften

In February, the Minnesota Public Utilities Commission (MPUC) is due to rule on a request, filed by Minnesota Power (Docket No. E015/M-15-984) last November 17, “to ensure competitive electric rates for energy-intensive trade-exposed [EITE] customers.”

Approval of the request would offer economic relief to large, industrial customers in the region – including companies in the steel, mining, and forestry sectors – that are dealing with major market downturns. Some companies would see as much as a 5 percent decrease in their rates.

Conversely, MPUC would shift costs to residential customers, who would pay 14.5 percent more on their monthly electricity bills; and commercial ratepayers, who would find themselves remitting from 1 percent to 4 percent extra.

Such changes only are possible under the provisions of a bill passed by the Minnesota Legislature in 2015, Statute 216B.1696, which states that: “It is the energy policy of the state of Minnesota to ensure competitive electric rates for energy-intensive trade-exposed customers. To achieve this objective, an investor-owned electric utility that [from 50,000 to 2000,000 retail electricity customers may impose] various EITE rate options … that include, but are not limited to, fixed-rates, market-based rates, and rates to encourage utilization of new clean energy technology.”

Duluth-based Minnesota Power fits this definition. It serves about 143,000 residential and commercial customers, as well as “some of the national’s largest industrial customers,” in a 26,000-square-mile service territory in the northeastern part of the state.

In its petition to the MPUC, Minnesota Power sought two separate, but related requests under the EITE Statute:

  • First, the utility asked for approval of an EITE Customers Rider that will provide certain customers, eligible under the EITE Statute, an energy charge credit based upon their site peak electric usage and total energy consumption.
  • Second, the utility requested approval of an EITE Current Cost Recovery Rider that will “allow the utility to recover any costs…associated with providing service to a customer under an EITE rate schedule.”

Arguing on behalf of the rate changes, Minnesota Power Executive Vice President Dave McMillan stated, “For these large industrial companies that employ thousands of people in our region, energy is one of their largest costs of doing business. “Global competition is intense and we need to do all we can to keep their energy costs as competitive as possible. Sustaining a healthy regional economy, which benefits everyone who lives here, is an important part of Minnesota Power’s mission.

Industrial customers’ rates have been set higher than the actual cost to serve them for many years—two decades or more,” McMillan continued. “They have been absorbing these costs not related to their electric service. Operating in a highly competitive commodity-driven global marketplace, these companies can’t simply absorb costs or pass them on to their own customers.”

The Minnesota Chamber of Commerce,which advocates on behalf of the state’s businesses and their employees, also has championed the rate revision. Bill Blazar, a senior vice president of Public Affairs and Business Development for the Chamber wrote in the Minneapolis Star Tribune “Counterpoint” column,  “Minnesota Power’s proposal, according to its spokesperson, “corrects a long-standing unfairness to large power users whose electric rates exceeded their cost of service, subsidizing residential customers’ rates.” It’s ironic, but the breaks provided for residential ratepayers could cost these same customers their jobs.”

On behalf of the state’s industries, Blazar urged the state’s “lieutenant governor and other policymakers to work harder to restore the competitiveness of Minnesota’s commercial/industrial electric rates.

Without the good jobs provided by our state’s steel, paper, wood products and other energy-intensive businesses, electricity at any price is too expensive for residential customers,” Blazar said.

However, while industrial customers are happy, many others are opposed to the plan. Environmentalists argue that, before rates are changed, the large customers should institute ambitious energy efficiency programs.

The decision will come soon, according to Minnesota Power, which urged the commission to respond to its request within 90 days of its filing.

Leave a reply


*