2016 Rate Review
Invested in a safe, reliable and clean energy future
It has been seven years since we last asked state regulators for a rate review. Since then, we have invested extensively in our EnergyForward plan to transform the way we produce and deliver your power. We’ve made investments to strengthen the safety and reliability of the energy grid, added renewable energy resources, significantly reduced emissions at our remaining traditional power plants and added new tools for you to manage your energy use. Unlike most other businesses, we need regulatory approval to increase rates, so we’re asking the independent Minnesota Public Utilities Commission to review our request for an additional $39 million per year. Nearly 70 percent of that amount is related to EnergyForward capital improvements.
We know there’s no right time for a rate increase. But we think we’re on the right track in building a safe, reliable and cleaner energy future — and this rate review will support those efforts. You may email us at AskUs@mnpower.com if you have questions related to our rate review. Read on for more detailed information.
Safe and Reliable
Our transmission and distribution network safely and reliably delivers electric energy from where it’s generated to where it’s used by customers. Since 2009, we’ve invested more than $400 million to support continued reliability of our energy grid by replacing aging infrastructure, enhancing security, and preparing for outages caused by extreme weather events.
Maintaining a network of more than 8,400 miles of power lines and 164 substations is a big job. Much of the infrastructure was in place during the 1960s and 1970s so we’ve been making upgrades that require new poles, relays, transformers, circuit breakers and land rights. At the same time, we’ve added more lines to meet customer needs and modernized the system in ways that will allow better monitoring and quicker response to outages.
Here are two more ways we’re investing in transmission and distribution:
- Upgrades to comply with standards developed by the North American Electric Reliability Corporation and the Federal Energy Regulatory Commission to maintain the security and reliability of the bulk electric system. We continually study our system to identify necessary maintenance and upgrades to ensure the reliability of our system and to comply with regulations.
- Upgrades to support the integration of more renewable energy resources such as wind and solar on the energy grid.
We began as a renewable energy company 110 years ago by harnessing the power of the St. Louis River, and we’re committed to adding renewable energy through our EnergyForward strategy. That we met the state of Minnesota’s standard of 25 percent renewables a decade before the 2025 deadline is proof of that commitment. A cleaner environment benefits us all, which is why we’ve done our best over the past seven years to reduce our dependence on fossil fuels and lower carbon dioxide emissions. Here are some highlights:
- We built the Bison Wind Energy Center, North Dakota’s largest wind farm that produces enough electricity to power nearly 170,000 homes each year.
- We’re Minnesota’s largest producer of hydropower, and we continually maintain and upgrade our system of 11 hydro stations to improve their efficiency and ability to withstand extreme weather events. The upgrades are part of the reason the 109-year-old, carbon-free Thomson Hydro Station is on track to set a generation record this year.
- Our first solar power plant at Camp Ripley near Little Falls, Minnesota, began operating in November 2016 as we move toward meeting Minnesota’s Solar Energy Standard.
We're rapidly transforming the way we generate electricity through our EnergyForward strategy. We’ve reduced our use of coal from 95 percent of generation in 2005 to 53 percent today. And the traditional power plants we continue to operate are more reliable, more efficient and cleaner — we’ve reduced overall emissions of mercury, sulfur dioxide and particulates by 85 percent since 2005. We’ve also retired or idled three small coal units and converted another two to natural gas, reducing our overall carbon emissions.
Our largest environmental upgrade over the past seven years was at Boswell Energy Center Units 3 and 4, where we also installed a high-efficiency steam turbine at Boswell Unit 4 that produces 60 more megawatts of electricity with no additional emissions. The work there can keep Boswell producing low-cost energy for decades to come, and we’re asking the Minnesota Public Utilities Commission to extend its useful life to 2050. In addition, we plan to retire the older Boswell Units 1 and 2 in 2018.
Elsewhere, we converted both units at Laskin Energy Center from coal to cleaner natural gas generation, and retired Taconite Harbor Energy Center Unit 3 and idled Units 1 and 2 as part of our planned transition away from coal to reduce reliance on fossil fuels.
Customer Information Technology
We're investing in new technologies, such as Advanced Metering Infrastructure, to deliver the benefits of the smart grid to customers.
AMI is a two-way communication between energy companies and customers that is built on an integrated system of smart meters, communications networks and data management. It allows us to better respond to outages and gives customers more convenient ways to manage their energy use and costs.
We deployed more than 8,000 smart meters between 2010 and 2014 through our AMI pilot project. The benefits of AMI are many: real-time outage and restoration messages, the opportunity to enroll in time-based rate offerings such as Time-of Day service, notification of service issues, and improved load control. AMI lays the groundwork for more smart grid improvements.
In addition, we have expanded online tools for both residential and commercial customers to give them greater access to information about how they use energy and how they can use it more effectively. Beyond our successful core conservation programs, we also offer expanded solar rebate programs, a solar energy analysis and will soon launch a community solar garden pilot program, the first of its kind in northeastern Minnesota.
How will the rate change affect monthly bills?
The Minnesota Public Utility Commission (MPUC) approved interim rates on Dec. 15, 2016. The 5.6 percent increase was lower than the 8 percent originally sought because large industrial customers foresee using more electricity in 2017 than earlier expected, reducing the need for a general rate increase. The MPUC also approved a reduction in the Renewable Resources Rider, or a line item on bills to help pay for new sources of renewable energy. The change in the Renewable Resources Rider will significantly offset the 5.6 percent interim increase in rates for most residential customers, who will pay much less than the $4 per month the interim rates will add to the average residential bill. Small-business customers also will pay less than the $15 per month increase in interim rates because of the rider reduction.
The MPUC will conduct an extensive independent review of Minnesota Power’s rate request before setting final rates in late 2017 or early 2018. Minnesota Power may change the rate request in February 2017 given the expected increase in electricity use by large industrial customers. The proposed rate increases will affect individual customers differently, depending on electric use and customer type. The table below (click to enlarge) shows current monthly bills, the effect of the interim rates and Renewable Resources Rider reduction, and the proposed final monthly increase.
*If the $39 million increase we requested is approved by the MPUC in early 2018, the average residential bill will increase from $81 a month to $92.
2016 Rate Review Filing
Complete filing will be available once received by the MPUC.
Volume I - General Filing
Statement Regarding Trade Secret Information
Summary of Filing
Notice of Change in Rates
Proposed Notices to Counties and Municipalities
List of Counties and Cities Service List
Certificate of Service
Volume II - Interim Rate Petition
Notice of Petition for Interim Rates
Schedule A (IR) – Summary of Jurisdictional Revenue Deficiency, Rate Base and Operating Income
Schedule B (IR) – Jurisdictional Cost of Service Studies
Schedule C (IR) – Retail Class Cost Allocation, Test Year
Schedule D (IR) – Rate of Return/Cost of Capital
Schedule E (IR) – Comparison of Revenue
Schedule F (IR) – Annual Report
Schedule G (IR) – Miscellaneous
Schedule H (IR) – Tax
Schedule I (IR) – Employee Expenses
Interim Rate Tariff Sheets
Agreement and Undertaking Certification
Proposed Notices to Customers
Request to Modify Interim Rate Proposal
Volume III - Direct Testimony in Support of Change in Rates
David J. McMillan
Rate Case Overview
Patrick L. Cutshall
Capital Structure, Cost of Capital, and Retirement Plan Accounting
Robert B. Hevert
Return on Common Equity
Herbert G. Minke, III
Steven W. Morris
Joshua J. Skelton
Christopher E. Fleege
Transmission and Distribution
Nicole R. Johnson
Julie I. Pierce
Sales Forecast and Asset-Based Wholesale Energy Transactions
Michael A. Perala
Large Power Customer Demand and Forecasting
Leann S. Oehlerking-Boes
Fuel Clause Adjustment
Jamie L. Jago
Stewart J. Shimmin
Jurisdictional Cost and Class Cost of Service Study
Tina S. Koecher
Marcia A. Podratz
Revenue Requirements, Rate Design, and Annual Rate Review Mechanism
Volume IV - Information Requirements
Schedule A – Summary of Jurisdictional Revenue Deficiency, Rate Base and Operating Income
Schedule B – Jurisdictional Cost of Service Studies
Schedule C – Retail Class Cost Allocation, Test Year 2017
Schedule D – Rate of Return/Cost of Service
Schedule E – Comparison of Revenue
Schedule F – Annual Report
Schedule G – Miscellaneous
Schedule H – Tax
Schedule I – Employee Expenses
Tariff Pages for Change in Rates