Frequently Asked Questions (FAQs)
Electric power is getting more expensive.
Here's why, and here's what you can expect.
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What, exactly, is a rate case?
Simply put, it’s a proceeding before state regulators addressing utility rates. The Minnesota Public Utilities Commission (MPUC) must approve any rate cases proposed by utility companies.
When is this going to happen?
If approved, you’ll see an MPUC-authorized increase on an interim basis beginning in the third quarter of 2008. This increase will remain in effect until the Commission’s final rate ruling in late spring of 2009.
How does the interim adjustment work?
Minnesota Power can begin collecting the amount proposed in the rate case as soon as the paperwork is filed—that’s the “interim adjustment,” set to begin August 1, 2008. This will remain in effect until the Commission’s final ruling in late spring of 2009. If the Commission sets a lower number, your bill will be adjusted to offset the difference collected to that point.
How is the rate case different from the line-item increases?
Line–item increases have been authorized by the Legislature and granted by the MPUC as a way for a utility to recover specific project related costs without going through a rate case proceeding. Some of the line items currently on the bill, such as the Arrowhead Regional Emission Abatement (AREA) adjustment will become part of the new base rate. Others, like the resource (fuel) adjustment and Boswell Unit 3 environmental upgrade will remain itemized.
Why don’t all the line items go away as part of the new rates?
We are proposing that the new base rates cover the costs of only those projects that will be complete before the third quarter. In addition to the special line items described above, the MPUC allows utilities to use the resource (fuel) adjustment to collect revenue to cover fuel cost increases we may experience in the future and the cost of power that we purchase on the open market during periods when our generating units are shut down for maintenance.
Will rates continue to rise in the future?
The increase covers investments in the Arrowhead Regional Emission Abatement work at Taconite Harbor and Laskin Energy Centers and the Taconite Ridge wind energy development, as well as increases in general operating costs, such as employee health care expenses. Future renewable energy and reliability improvement projects may result in new line items adjustments, or, eventually, another new rate case. We expect that, due to state and federal mandates, necessary upgrades and increased production costs, rates will continue to rise for the next several years.
So what will be the actual amount of the increase?
We don’t know yet. However, for the average consumer, it will add up to a few dollars each month. For businesses, of course, it will add up to more. Put in context, though, electricity is still your best power value. Increases in fuel oil and natural gas have averaged 20 to 30 percent or more. And Minnesota Power will still generate some of the lowest-cost electricity in the country—currently the tenth lowest retail base rate in the nation among investor-owned utilities, and, even after the increase, will remain very competitive when compared to other regional providers.
Why can’t Minnesota Power just absorb the cost?
We’ve been doing just that for 14 years, but have gone as far as we can. Now, because of increasing operating costs such as fuel and employee health care, the significant investment required to meet environmental mandates and the ongoing work of maintaining our systems, we need to adjust our rates.
Why do you need to increase rates when the company announced positive earnings last year?
Minnesota Power is just one part of a larger corporation, ALLETE, and represents only a part of the earnings picture. Our latest quarterly results reflect the ongoing challenge we face to manage rising costs.
As part of its examination of the rates we’ve proposed, the MPUC will calculate whether the rate of return that would result from those rates is reasonable. In other words, the MPUC not only decides how much Minnesota Power can charge, it also decides how much the company may keep from utility operations to be reinvested in the company or distributed to shareholders.
With a portion of our projected rate increase, we plan to make $1.5 billion of capital investments over the next five years in order to meet regional power demand, comply with the renewable energy mandates and new environmental standards, and maintain our systems.
I’m on a fixed income, and even a few dollars a month is going to make a difference. What can I do?
Minnesota Power offers programs that can help. To offset some of the future rate increase for low-income customers, we’re proposing special discounted rates for the Commission’s consideration. Please contact us at 800-228-4966, and we can work out a plan that may better fit your budget.
As a customer, what do I get in return for these higher rates?
Reliable electric service and cleaner air and water. Like you, we value the health of our natural environment and want to do our part to make the air and water cleaner for all of us today and for generations to come. As energy consumers, you expect reliability—in your homes and businesses. Minnesota Power is making investments today that will maintain our existing infrastructure and position the region for new economic growth.
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