Serving Northern St. Louis County, Minnesota

PUC approves Minnesota Power rate cut for big plants

But utility oversight agency rejects plan to pay for it with hefty hike in residential rates

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REGIONAL— The Minnesota Public Utilities Commission has approved a proposal by Minnesota Power to lower electric rates for 11 taconite plants and wood products mills in northeastern Minnesota that are uniquely exposed to global competition. But the MPUC delayed action on the stickier question of which of Minnesota Power’s other ratepayers will make up the difference. The plan, as approved, is revenue-neutral for Minnesota Power, which means other customers will have to make up the revenue shortfall caused by the rate reduction for industrial users.

The 2015 state Legislature enacted a law authorizing Minnesota Power to propose discounted rate plans for a limited number of its large industrial customers that meet state criteria as energy-intensive and trade-exposed businesses. For many such producers, energy costs comprise about 25 percent of their production cost, so legislators are hopeful that the rate reduction can help the mines and mills remain competitive in the global market and retain jobs in northeastern Minnesota.

“This Minnesota Power rate plan is one part of the equation that adds up to a more secure economic future for northern Minnesota,” said Al Hodnik, president, chairman and CEO of ALLETE, Minnesota Power’s parent company.

As part of its decision, the MPUC requested Minnesota Power to submit new cost recovery options that will be allocated to other customers. Minnesota Power initially proposed a 10-percent rate increase for residential power users, and a 1-3 percent hike for small businesses, but the MPUC did not approve that rate plan. The new industrial rate will take effect when Minnesota Power presents a new plan that the MPUC can approve. The MPUC has put the updated rate plan on an expedited track.

Under the statute, certain customers are exempt from the potential rate increase, including:

‰Low-income customers qualified to receive assistance through area heating assistance agencies.

‰Energy-intensive, trade-exposed industrial customers that are not eligible for the lower rate.

An earlier proposal by Minnesota Power called for modest rate increases on most residential and commercial customers to make up for the lower revenue from its major industrial users. But the proposal faced considerable political opposition, which convinced the MPUC to deny the proposal.

Minnesota Power provides electrical service to Tower-Soudan and nearby portions of Lake Vermilion. Most other electric users in northern St. Louis County are served by municipal utilities or rural electric cooperatives and will be unaffected by any change in Minnesota Power rates.

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