Consumer groups cool to utility rate hike to help Iron Range mines, pulp mills

Consumer advocates are fighting a plan to reduce electric rates for struggling northern Minnesota iron ore mines and pulp mills at the expense of residential ratepayers whose bills would jump 14.5 percent.

The rate-relief plan proposed last month by Minnesota Power promises a 5 percent electric rate break to mines and mills. But rates for the Duluth-based utility's residential customers, including many of the 2,000 recently laid-off miners, would go up $11.45 per month on average.

It has provoked one of the biggest pushbacks by consumer advocates over a Minnesota electric rate issue. Four consumer groups and two state agencies that represent ratepayers objected to the plan in regulatory filings this week, questioning its fairness. Most urged the plan's rejection by the Minnesota Public Utilities Commission, which sets rates for investor-owned electric monopolies.

"People see it as a very clear injustice or imbalance that residential customers, especially in an economically depressed part of the state, are being asked to shoulder this burden," Buddy Robinson, director of the Duluth-based Minnesota Citizens Federation Northeast, said in an interview.

Other consumer groups that want the PUC to reject the rate plan are AARP Minnesota, which represents seniors, and the Energy Cents Coalition and the Legal Services Advocacy Project, both of which work on behalf of low-income Minnesotans. Two environmental groups sided with consumer advocates in regulatory filings, urging energy efficiency and other ways to lower costs.

Separately, the state Commerce Department, which by law represents all ratepayers in utility matters, asked the PUC to deny the rate change unless Minnesota Power proves it offers a "net benefit" to the utility or the state, and meets other conditions. The state Attorney General's Office, which represents residential and small business ratepayers, said key questions, including the plan's impact on ratepayers, need to be answered before the commission acts.

Minnesota Power, a unit of Allete Inc. that serves 143,000 customers, proposed the rates after the Legislature passed a law this year allowing "energy-intensive, trade-exposed" mines and mills to qualify for lower electric rates. The forest and mining industries reiterated their support for the policy in regulatory filings with the PUC.

In an interview, Margaret Hodnik, Minnesota Power vice president for regulatory and legislative affairs, said the plan corrects a long-standing unfairness to large power users whose electric rates exceeded their cost of service, subsidizing residential customers' rates. Competitive electric rates are critical to the region's major industries, she added.

"They are the lifeblood of our regional economy," Hodnik said. "If those industries go down, the jobs that could be lost … and the economic woe that could occur as a result of that is very significant."

More than half of Minnesota's 11 major iron mines have shut down because of a worldwide glut of low-priced steel. On Tuesday, miners and political and business leaders, including Allete's CEO, met with a top White House official in Virginia, Minn., urging action against foreign steelmakers' unfair trade practices.

Consumer advocates acknowledged that the mines and mills face hardships, but urged the commission to look for another approach.

"The issue is why does it have to be, 'You win, and I lose?' " Ron Elwood, supervising attorney for the Legal Services Advocacy Project in St. Paul, said in an interview. "Why can't we figure out a way to minimize the impact? If it was a smaller impact, there wouldn't be a peep."

David Shaffer • 612-673-7090

Twitter: @ShafferStrib