Attorney General opposes Minnesota Power’s proposed $81 million rate hike

Minnesota Attorney General Lori Swanson has asked the Minnesota Public Utilities Commission (PUC) to deny Minnesota Power’s request to raise its customers’ electricity rates by another $81 million a year. Minnesota Power filed its current rate hike request with the PUC on Nov. 2, 2009, just one day after the PUC allowed the power company to raise electricity rates by $20.4 million. The attorney general also encouraged affected consumers to attend one of the upcoming public hearings in April.

“Minnesota Power waited just one day after its last $20.4 million annual rate hike to ask its regulator for permission to raise electricity rates by yet another $81 million per year. Times are tough for ordinary people in this economy, and the Public Utilities Commission should hold the power company accountable by closely scrutinizing its latest rate hike request. The company shouldn’t be allowed to raise people’s rates based on guesswork, fuzzy math, or questionable expenditures,” said Swanson.

The filing with the PUC by the Attorney General’s Office raises numerous concerns with Minnesota Power’s rate increase request and concludes that Minnesota Power has not adequately proved that another rate hike – coming closely on the heels of the last rate hike – is necessary. Under Minnesota law, a public utility has the burden of proving to the PUC that a rate hike request is necessary.

I. Uses Projections

As it did in its last rate request, Minnesota Power bases its current rate increase request on projected costs and revenues. The Attorney General’s Office objects to the utility raising rates by such a significant amount based on projections. The Attorney General’s Office notes that Minnesota Power’s actual revenues in 2007 were $49 million higher than its previous projections.

II. Lobbying Expenses

To the extent that the PUC considers the utility’s actual expenses in reviewing the rate hike request, the Attorney General’s office asked the PUC to eliminate from any rate hike expenses that are not reasonable or necessary for the provision of utility services. Minnesota Power asked to raise rates by over $200,000 per year to pay for its lobbyists. The Attorney General asks the PUC not to allow Minnesota Power to force its customers to pay for the company’s lobbyists.

“As this rate hike shows, the financial interests of power companies often collide with the interests of everyday customers,” said Swanson. “People should not have their rates go up so that a utility can hire corporate lobbyists, who may work to defeat laws and policies that regular customers support.”

The Attorney General’s Office noted that last year, the PUC disallowed the request of another utility to include the expenses associated with its corporate lobbyists in its rate case.

III. Executive Bonuses.

Minnesota Power is seeking to recover an additional $800,000 in executive bonuses through the rate case, including recovery of $557,222 in bonuses for its top 10 compensated employees, through its annual incentive plan. Minnesota Power considers the criteria used to determine whether it pays an executive a bonus to be a trade secret.

The Attorney General’s Office objects to the inclusion of the $800,000 in bonuses in the rate case, saying, “It is inappropriate to expect ratepayers to fund bonuses at a time when so many ratepayers have lost their jobs and homes and are struggling to get by.” The office notes that, if the company deems the bonuses to be important, they may be funded by shareholders of its corporate parent, ALLETE.

IV. Increased Residential Customer Charge

In November, 2009, Minnesota Power increased its monthly residential customer charge from $5 to $8. Minnesota Power now asks the PUC to let it further increase the residential customer charge for most residential customers to $9.75 per month. The Attorney General objects to this request, which, if granted, would mean that Minnesota Power would have the highest customer charge of any investor-owned electric utility in Minnesota.

V. Changes to the Lifeline Rate

Minnesota Power asks the PUC for permission to change its Lifeline Rate structure and limit its benefits to fewer customers. Under its proposal, lower income customers must successfully apply for the Lifeline Rate with a Minnesota Power designated energy assistance or service agency in its service area.

While Minnesota Power estimates that 36,000 of its customers would qualify, it acknowledges that many of these customers will not successfully apply for the Lifeline Residential Rider Rate. These low income customers would then be hit with Minnesota Power’s higher rate structure. The Attorney General’s Office asks the PUC to deny the changes to the current Lifeline Rate.

VI. Corporate Aircraft Ownership

In its last rate case, Minnesota Power asked the PUC for permission to charge ratepayers over $1 million to fund a corporate aircraft owned by ALLETE. In its current rate increase request, Minnesota Power excluded approximately 60 percent of its total budgeted expenses for the corporate aircraft but is seeking to charge ratepayers for $622,052 of $1,528,000 in aircraft expenses. The Attorney General’s Office asks the PUC not to allow Minnesota Power to raise customer rates by including any costs associated with ALLETE’s corporate aircraft in its rates.

VII. Travel and Entertainment Expenses

The Attorney General Office’s preliminary review found that Minnesota Power used ratepayer money on certain expenses, such as hotel fees, restaurant tabs, golf expenses, and celebrations, that may not be necessary for the provision of utility services. The office asks the PUC to consider whether such expenses are necessary for the provision of utility services.

VIII. Public Hearings

Administrative Law Judge Kathleen Sheehy has scheduled public hearings to allow customers an opportunity to present their views regarding Minnesota Power’s rate hike request. Customers may comment on Minnesota Power’s proposed rate increase, the adequacy and quality of Minnesota Power’s service, or other related matters. A local hearing will be held Thursday, April 22, at 7 p.m.. The meeting will be held at the Morrison County Government Center, Little Falls.

The attorney general also encourages Minnesota Power’s ratepayers to send written comments to: Administrative Law Judge Kathleen Sheehy, Office of Administrative Hearings, P.O. Box 64620, St. Paul, MN 55164-0620.

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