Minnesota Power proposes 17.5% rate hike

DULUTH – Minnesota Power on Monday proposed to state regulators an electricity rate increase of 17.58%, or $108 million.

The Duluth-based utility's typical residential customers would see an increase of about $15 a month, and small business customers an increase of $55 a month. The company requested an interim rate increase of 14.2% for all customers, which would take effect in January and would remain until the Minnesota Public Utilities Commission (PUC), which must approve any increase, makes a decision.

The utility told the PUC in a letter that a rate increase that reflects its current revenue and costs was crucial in supporting a "financially healthy utility."

The request is tied to the company's clean energy transition, said Frank Frederickson, vice president of customer experience for Minnesota Power.

"We're proud of the progress we've made," he said, "and we've done that while maintaining the reliability and integrity of the system."

But current rates don't reflect those investments, the company says.

The request comes a week after Xcel Energy, the state's largest electricity provider, asked for a 21.2% rate hike over three years for its residential customers.

The utility is halfway to its goal of offering 100% carbon-free energy by 2050, and in 2020 it became the first Minnesota utility to deliver more than 50% of its energy supply from renewable sources. It's investing in a more resilient grid as extreme weather events become more common and is offering customers more control over their energy decisions and ways to reduce their bills, especially during the pandemic, it says.

But the rate hike will hit many Minnesota Power customers "really hard," said Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, an advocacy group for residential ratepayers.

While Minnesota Power makes an effort to protect and help struggling customers, "one in eight of [their] residential customers are already behind on their electricity bills," she said.

The proposed $180-a-year increase "is a really big number," Levenson-Falk said, especially considering increased heating and housing costs.

In its letter to regulators, the utility said it experienced a "significant loss of customer load, due primarily to partial or complete closures of large industrial customers' facilities."

That created high risk to the company and considerable variations in energy sales, Minnesota Power attorney David Moeller wrote. He said managing the risk is necessary for financial sustainability.

Levenson-Falk suggested that perhaps the large industrial customers should bear a bigger portion of the cost of what Minnesota Power says in its testimony to the PUC is its "increased risk profile." The risk they create for the utility is a driving factor behind the rate increase request, she said.

The utility, which has 145,000 customers across northeast and central Minnesota but sells most of its power to mining operations and paper producers, has had three full rate reviews in 25 years. Its last review ended with a 3.5% increase that went into effect in December 2018 — less than the 9.1% increase the company asked for. Minnesota Power has lost sales because of the permanent closure of a paper machine in Grand Rapids and the closure of the Verso paper mill in Duluth.

It can take more than a year for a rate increase to be approved, but the final adjustment is typically lower than requested.

Parent company Allete Inc. reported $79 million in profits on $674 million in revenue during the first half of 2021. Results for the third quarter will be released Thursday. Allete's stock closed at $63.19 Monday, up 2.5%.

Jana Hollingsworth • 218-508-2450