Minnesota Power will likely ask state regulators to increase electric rates later this year, the Duluth-based utilities company announced Thursday morning.
During a conference call announcing parent company Allete, Inc.'s fourth quarter results, Bob Adams, Allete's senior vice president and chief financial officer, said Minnesota Power will need to make up for an expected drop in revenue from expiring power sales and increasing expenses.
"Given the significant revenue deficiencies, we do anticipate the need to file a rate case in late 2019," Adams said.
Just how much a customer's monthly electric bill could go up is not yet known.
"These things still need to be vetted," Pat Mullen, senior vice president of external affairs at Allete, told the News Tribune on Thursday, adding that it's still early in the process.
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Allete spokesperson Amy Rutledge said customers and stakeholders would be updated throughout the process.
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, including layoffs.
But the company still faces challenges.
Industrial customers account for almost half of Minnesota Power's revenue. While iron ore mines operated near full capacity in 2018, other industries in northeastern Minnesota are using less electricity.
"We have seen some downturn in the paper industry," Mullen said. "We've got less revenue coming from Blandin Papers since they shut down one of their paper machine lines."
Buddy Robinson, a staff director of the Minnesota Citizens Federation Northeast, which routinely fights rate hikes, said that's unfair for residential customers.
"For us, who are basically captive customers to have to shoulder extra expense because of the volatility in risk of the big industrial customers is what we especially think is not really fair and doesn't make sense," Robinson said.
As Adams cited in the earnings call, Mullen said contracts selling power to other utilities companies are set to expire.
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"Those are hard to replace in today's market, and that has natural cost increases with it," Mullen said.
Minnesota Power also forecasts higher expenses as it transitions to more renewable energy.
"We just don't think that level is sustainable when it comes to meeting our customers and our policymakers expectations when it comes to providing not only safe and reliable power, but also energy that is cleaner and more customer focused."
Thursday's conference call with analysts came after Allete released its final 2018 financial results, showing earnings of $3.38 per share on net income of $174.1 million and an operating revenue of $1.5 billion. In 2017 Allete saw earchings of $3.38 per share on a net income of $172.2 million and an operating revenue of $1.4 billion.
