Minnesota Power granted 9.5% rate hike — well short of its request

State utility regulators have granted Minnesota Power a rate hike of $58 million, or 9.5%, well short of what the utility requested but more than what ratepayer advocates sought.

"It's probably a result that no party will be happy with," said Annie Levenson-Falk, head of the Citizens Utility Board of Minnesota, an advocacy group for residential ratepayers.

Duluth-based Minnesota Power had asked the state Public Utilities Commission (PUC) for a rate increase of $108 million, or 17.6%. The commission said it voted unanimously for the 9.5% increase Tuesday, though Minnesota Power says the increase is 9%.

"This decision protects consumers' wallets while providing reliable electric service," PUC Commissioner Joseph Sullivan said in a press statement.

The 9.5% rate increase is across customer classes — residential, commercial and industrial. The PUC in late 2021 raised Minnesota Power's residential rates by 7.1% on an interim basis pending the outcome of the full rate case.

Minnesota Power supplies electricity to about 145,000 customers in northeastern and north-central Minnesota.

Bethany Owen, CEO of Minnesota Power's parent company Allete, said in a statement that the PUC's decision "does not give us the resources and tools we need. ... As utilities are asked to do more and even faster, we expect rate review requests to become more frequent going forward."

Minnesota Power said it has had only three full rate reviews in 25 years. Owen said the utility plans to request another rate hike later this year to help meet its renewable energy goals.

State law says utility rates should be at least 5% below the national average. Minnesota Power met that goal for residential prices in 2021, the last year for which data is available, according to a recent PUC analysis.

But over the past two years, U.S. consumers have been burdened by rising overall energy bills, including mushrooming tabs for natural gas and motor fuel.

With electricity prices already unaffordable for some consumers, "any increase is tough," Levenson-Falk said. The Citizens Utility Board recommended that Minnesota Power's residential rate increase be limited to 7.1%.

The state Department of Commerce, which represents ratepayers before the PUC, had proposed that Minnesota Power receive a $47.7 million, or 7.8%, overall rate increase, including a 7% increase for consumers.

In September, an administrative law judge recommended that the utility be granted a rate increase of $75.6 million, or 11.4%, based on a return on equity (ROE) of 9.8%. The PUC opted for a lower overall rate increase and a lower ROE of 9.65%.

Allowed ROE for a regulated utility is a ceiling on profitability.

Administrative law judges are appointed to contested cases before the PUC. Their recommendations are nonbinding.