Minnesota Power seeks rate increase that would add about $24 to average monthly residential bill

DULUTH — Minnesota Power asked state regulators Monday to approve a rate increase that would raise the average residential customer’s monthly electric bill by about $24, citing higher operating costs, infrastructure investments and declining electricity sales to taconite mines.

The utility requested a $134 million increase in annual revenue, net of existing rate riders, or 17.8%. The Minnesota Public Utilities Commission will review the proposal in a process expected to take a year or longer, with opportunities for public testimony and written comments.

Customers could see higher bills before that review is completed. Minnesota Power requested an interim increase beginning in January 2027 that would add about $15 to the average residential monthly bill. The company said previously announced bill credits would offset about 70% of the interim increase in 2027.

The commission will determine the interim increase and final rates. If final rates are lower than interim rates, customers will receive refunds of the difference with interest, according to the company.

Minnesota Power, which serves about 150,000 customers in northeastern Minnesota, last requested a rate increase in 2023. The utility said its latest filing reflects higher costs for maintaining power plants, transmission lines and distribution equipment, along with workforce expenses, renewable energy investments and inflation affecting materials, equipment and insurance.

“The electric system is undergoing an unprecedented transformation to achieve reliability and clean energy goals, requiring new investments at a time when our customer energy needs are changing and we are facing the same inflation and other cost pressures as other businesses,” said Jennifer Cady, Minnesota Power’s vice president of public policy and external affairs.

Reduced demand from the mining industry is also contributing to the request. Minnesota Power said the idling of Minorca Mine and partial idling of Hibbing Taconite have reduced electricity sales without reducing the cost of operating and maintaining the system shared by its customers.

Large industrial customers account for roughly two-thirds of the utility’s electricity sales, according to the company. That concentration leaves its revenue sensitive to production changes in industries such as mining and paper manufacturing.

Minnesota Power is proposing a sales adjustment mechanism that could pass benefits to customers if mines resume operations or new industrial customers begin taking service, without requiring another full rate case. The commission will consider that proposal during its review.

The utility said the requested increase is unrelated to the proposed Google data center in Hermantown. The commission is still reviewing the proposed electric service agreement for that project, and Minnesota Power said Google has agreed to cover the costs necessary to serve the facility, including infrastructure upgrades.

The company said the data center’s anticipated timing places it outside the scope of the current rate request. It contends that adding a large customer with around-the-clock electricity demand would help spread system costs and reduce its exposure to fluctuations in other industrial customers’ energy use.

“One of the reasons we support new business investment in the longer term is that new large, 24/7 customers benefit our residential and small business customers by diversifying our customer base, sharing in the costs to maintain and operate the overall electric system and reducing the impact when other large businesses have to slow their production and energy use,” said Josh Skelton, Minnesota Power’s chief operating officer.

Minnesota Power also said costs associated with the acquisition of its parent company, ALLETE, are excluded from the request and are being paid by shareholders. The company said the acquisition agreement included a 12-month prohibition on filing a rate increase and $200 million in customer rate benefits over several years.

As part of the filing, Minnesota Power is seeking an authorized return on equity of 9.78%, up from the current 9.65%. Return on equity is the return regulators allow a utility the opportunity to earn for its equity investors.

The commission’s review will include testimony from the utility, customers, the Minnesota Department of Commerce, the attorney general’s office and other participants. Public hearing information will appear in customer bills, and the commission will announce opportunities to submit comments.

Minnesota Power said customers concerned about paying their bills can seek financial assistance, conservation programs and other options through the utility. Information about the filing is available at mnpower.com/RateRequest.