DULUTH — Duluth-based Minnesota Power has asked state regulators to increase its electric rates.
The utilities company has requested the Minnesota Public Utilities Commission allow it to increase its residential rates by 15% and business rates by 10% after an expected drop in revenue from expiring power sales, increasing expenses and an ongoing transition to more renewable sources of power. The rate increase would boost the company's annual operating revenue by $65.9 million to $688 million.
If approved, the average residential customer now paying $78 per month would pay an additional $11.66 per month, while the average small business would pay an additional $30.05 per month, the company said in a news release Friday morning.
Company officials said the full rate hike would still be below state averages.
The entire approval process could take 12-18 months, Minnesota Power spokesperson Amy Rutledge said.
In the meantime, the company has asked the PUC to approve an interim rate increase of 7.7% for all customers on Jan. 1. That would mean an increase of $5.95 per month for residential customers.
The interim hikes will likely be considered by the PUC in a meeting next month.
Company officials first announced the possibility of a rate hike during a February conference call with investors.
In an interview after that call, Pat Mullen, senior vice president of external affairs at Allete, Minnesota Power's parent company, said that even though the iron ore industry is running at near capacity, other industries were using less electricity. Industrial customers account for almost half of Minnesota Power's revenue.
"We have seen some downturn in the paper industry," Mullen said in February. "We've got less revenue coming from Blandin Paper since they shut down one of their paper machine lines."
Mullen said several contracts selling power to other utility companies were also set to expire.
On Friday, Frank Frederickson, Minnesota Power vice president of customer experience, said the company also faces increased health care and wage costs.
But the company also needs to invest in renewable energy as it transitions away from coal-fired plants, Frederickson said.
"We're also transforming in terms of where our investments are going. As we retire and remission those coal facilities, we also have reinvestment into transmission and wire and also customer-focused investments in terms of advanced metering and smart grid in infrastructure," Frederickson said.
Minnesota Power has been reducing its reliance on fossil fuels, namely coal power, since 2005 when just 5% of its power came from renewables. Since then, it has retired seven of its nine coal units and invested more in wind and solar. Minnesota Power expects 50% of its power will be generated by renewable resources in 2021, up from 30% today.
Minnesota Power last sought a rate hike with the Minnesota Public Utilities Commission in 2016, which was then approved in early 2018. But the rate increase allowed by the PUC was smaller than the company requested. So, Minnesota Power cut $40 million out of its budget throughout 2018, and made layoffs.