Minnesota Power

No one likes to see higher prices for anything, particularly something as basic to our everyday lives as electricity. And that’s one reason that most states in the U.S., including Minnesota, have agencies in place that are tasked with the job of determining whether rate increases by privately-owned utilities are justified.
Because of the nature of power distribution, the opportunity for competition is limited. While we may have multiple choices for internet or cell phone providers, or where to shop for household goods or refuel our vehicles, most of us have only one provider of electricity.
What our electricity market lacks in competition, is made up for through regulation, either by the Minnesota Public Utilities Commission (MPUC), or by members in the case of electric cooperatives.
Companies file rate increase requests regularly. The MPUC typically allows the company to charge a portion of their proposed increase on an interim basis while the MPUC allows the company to make their case for a permanent rate increase.
That’s what happened late last week when the MPUC voted last Thursday, Dec. 7, to allow Duluth-based Minnesota Power to charge an interim 8.6 percent rate hike, starting in January, while it reviews the company’s request for a 12-percent final increase. The interim increase is expected to add about eight bucks to a residential customer’s monthly bill.
If Minnesota Power’s rate increase was just a bid for bigger profits, it wouldn’t pass muster. As part of life as a regulated monopoly, the company is allowed an annual return on investment of just under ten percent. But Minnesota Power’s recent request for higher rates comes at a time that the company is making major changes in the sources of the power that it provides to customers as it works to comply with state laws intended to reduce Minnesota’s reliance on polluting sources of energy, particularly coal. Coal-burning power plants have long contributed significantly to a wide range of air pollutants, including mercury, which has been added to our lakes through deposition in rain and snow. Most critically, CO2 emissions from coal plants have been a major contributor to climate change.
State law has set mandatory targets for the phase-out of coal and other fossil fuels in the production of electricity and Minnesota Power has been a leader among the state’s utilities in making this energy transition, having already shuttered seven of its nine coal-burning plants, in favor of wind and solar as well as energy conservation. As we reported last April, the company has exceeded the state’s energy conservation goal for the 13th year in a row by offering assistance to its customers who wish to keep their electric bills in check through conservation measures. Just last year, the company’s efforts saved 76.4 million kilowatt-hours, or enough to power nearly 8,500 homes for a year. Saving energy, of course, means less revenue for a power company, so getting a bit more for the power that the company does sell to customers would seem reasonable.
At the same time, the company’s investments in renewable energy as well as the cost of decommissioning coal-fired power plants, can’t be ignored. These are investments that both improve the region’s air quality and fight climate change and are clearly in the public interest. Minnesota Power acknowledges it will take advantage of federal grants now available under the Inflation Reduction Act, which will provide financial incentives that will help fund a portion of these investments. But grants won’t cover all the costs, and it’s not unreasonable to expect customers to pay a bit more to gain significant long-term benefits.
We recognize that even a small rate increase can be onerous for those on fixed incomes, which is why the MPUC should insist that Minnesota Power continue to do all it can to ensure that its programs to assist low-income customers remain well funded.
At the same time, the MPUC should be asking why it is that Minnesota Power has seen a greater increase in rates in recent years than have other utilities in the state. The cost of renewable forms of energy have fallen so dramatically in recent years that the shift to renewables has allowed some power suppliers, like Great River Energy, to actually reduce their rates.
Renewable sources of power aren’t only cleaner, they don’t require the purchase of trainloads of coal or vast quantities of natural gas and those savings should eventually be passed along to customers.
If these rate adjustments are designed to finance the company’s transition to cheaper, renewable sources of power over the next 15 years, then customers have a right to eventually expect lower, or at least stable, rates in the future. Minnesota Power deserves credit, and compensation, for its currently aggressive efforts to reduce its emissions. It shouldn’t, however, get a blank check.