REGIONAL- Minnesota Power’s quest for a proposed 18 percent overall electricity rate hike will be subjected to public scrutiny next week as customers will have the chance to voice their opinions about the issue next week in virtual meetings on Tuesday and Wednesday, and at in-person hearings in Hermantown on Wednesday.
Initially proposed last November, Minnesota Power (MP) is requesting a 17.58 percent overall increase that would generate an additional $108.3 million that the company says it needs to respond to changing consumer demand, the continuing need to provide for a stable power grid, and its ongoing conversion to a carbon-free energy supply by 2050.
“The energy industry of the 2020s looks far different than it did five years ago as our customers’ expectations for clean energy and high-value service are increasing,” said Bethany Owen, ALLETE Chair, President and CEO in a press release last November that announced the proposed increase.
Consumer concerns
A number of consumer advocates say the company’s request is out of line. MP’s rate increase proposal comes as the nation is grappling with the highest rate of inflation it’s seen in 40 years, hitting 8.6 percent in May and driven mostly by increasing energy and food costs.
“It’s no secret that people have been struggling dealing with the ongoing fallout of the COVID-19 pandemic, and then more recently with inflation and costs going up in general,” said Brian Edstrom, senior regulatory advocate for the Citizens Utility Board (CUB) of Minnesota, a statewide advocacy group. “So, this rate increase comes at a at a tough time. And an 18 percent rate increase is big. That would mean approximately $180 per year for the average household. That might not seem like a lot to some, but for those who are already living paycheck to paycheck and struggling with inflation and making ends meet, that really does make a difference.”
Greater Minnesota Director of Minnesota Interfaith Power and Light Bret Pence was blunt in his group’s response to the proposed increase.
“This was an unreasonable rate increase even before inflation was a major issue in our lives,” Pence said in a July 8 press release. “Minnesota Power is requesting the rate increase primarily because electricity demand from its large industrial customers dropped. Minnesota Power is already directly passing along the higher costs of fossil fuel generation to its residential ratepayers on their monthly electric bills. Now they want to be compensated for millions in imprudent spending and receive a higher profit margin, called a return on equity, from ratepayers. That is both unreasonable and unjust.”
The increase, if approved by the state’s Public Utilities Commission (PUC), would impact residential and commercial electric customers in Tower and Soudan and a small portion of Lake Vermilion, along with many other parts of the region served by the investor-owned utility.
MP Vice President of Customer Experience Frank Frederickson highlighted some of the recent upgrades the utility has made to improve the service they provide to its customers. “We’ve been modernizing our infrastructure in the region with smart electric meters and smarter systems throughout our energy delivery systems,” Frederickson said. “We’ve modernized our customer service programs and engagement platforms so that customers can do everything online, everything from paying their bill to reporting an outage, and they can look at an outage map right from their phone, in the case of a storm. And, along with that we’ve continued to expand clean energy.”
The rate increase also seeks to make up for the loss of revenue from large-use commercial consumers, most recently including the closure of the Verso paper mill in Duluth in 2020.
Minnesota Power has already implemented a 7.1 percent interim rate increase, which went into effect in January. State law allows for partial interim rate increases while the full increase is being considered by the PUC. The company had sought a higher interim rate, but it agreed to lower the interim rate under an agreement with consumer advocacy groups.
Energy CENTS, a statewide advocacy group focused specifically on low- and restricted-income consumers, and CUB began negotiations with MP shortly after they announced the rate increase proposal, as they and others felt the requested 18 percent hike didn’t meet the criteria in state law that rates for regulated utility charges must be “just and reasonable.” The programs were instrumental in securing the agreement with MP to set the interim rate for residential customers at 7.1 percent rather than the company’s original proposal of 14.2 percent.
The interim increase boosted the average residential bill by an average of $5.89 per month, according to the PUC. Small businesses and other classes of service saw their interim rates go up 14.2 percent in January. If the interim rates turn out to be higher than what the MPUC finally approves, MP customers would receive refunds for the amounts they overpaid.
MP’s last full review of rates was initiated in 2016 with a similar request of between 18 and 19 percent, but the MPUC only approved a $13 million rate hike, about 40 percent of what the company had been seeking. Residential customers saw a 3.5 percent increase at that time. MP was back again in late 2019 asking for a rate increase, but voluntarily pulled most of that request off the table due to the impact of the COVID pandemic that began in March 2020.
“We worked with stakeholders to settle that request on a single issue, ultimately delaying other issues and inflationary pressures the company is experiencing to provide that electric service until this rate case, which we filed in November.”
MP offficials say they’re taking steps to reduce the impact of the increase on low-income customers. According to Frederickson, MP is increasing its financial commitment to the CARE program for income-eligible residential customers by almost $430,000 annually, bringing the total annual budgeted for the discounted rate program to over $2 million.
“One of the discounts is a flat discount that we’re going to increase from $15 to $20 a month, and this additional amount should extend the discount to more customers as well.”
Energy CENTS Executive Director Pam Marshall described another concession that will help those whose average usage per month is 1,000 kilowatt hours or less.
“They will prospectively offer a 40-percent discount on the first 600 kilowatt hours,” Marshall said. “That’s going to go a long way to mitigate the impact of any approved rate increase.”
Marshall believes the agreement with MP will bring up to twice as many people into the fold for assistance, particularly because customers are able to self-declare their income eligibility based on their participation in other programs such as SNAP food assistance, Social Security Disability, or free and reduced school lunches.
“We expect as many as 25,000-27,000 low-income customers to receive some benefit either in the form of the low-usage discount or the additional help from the CARE program,” she said. “The vast majority of their low-income customers are going to be pretty well insulated from any approved increase.”
Consumer input
The proposed rate increase affects all MP customers, from residential and small business users to large commercial customers, and many have already registered their comments and concerns in writing on the PUC website. But Edstrom strongly encourages people to take advantage of next week’s public hearings to add their voices to the information the PUC will consider when making its final decision.
“People might say, ‘Well, what does my single voice matter?’ but it really does, particularly if there are concrete examples that people can share of how a rate increase personally affects them and their family. Those are really powerful stories,” he said.
Two virtual public comment sessions will be held on Tuesday, July 19, at 2 p.m. and 6 p.m. On Wednesday, , July 20, in-person meetings will be held at 2 p.m. and 6 p.m. at the AAD Shrine Meeting and Event Center in Hermantown and are also accessible virtually. Full details including links and login information for the virtual hearings can be found on MP’s website at https://bit.ly/MNPowerRateHike.
Written comments may also be filed with the MPUC by emailing consumer.puc@state.mn.gov or mailing them to MN Public Utilities Commission, 121 7th Place East, Suite 326, St. Paul MN 55101.
On Thursday, July 14, at 6 p.m. Minnesota Interfaith Power and Light, the Citizens Utility Board, and the Sierra Club North Star Chapter were scheduled to hold a virtual townhall meeting where presenters were to discuss how utility rates are set, what Minnesota Power is proposing, and how to provide written or in-person comments. Those who read this article prior to the meeting can find more information and a registration link at www.mnipl.org/event/minnesota-power-rate-case-townhall.