Politics of power: PUC OKs industrial rate cut

Nikola Tesla, with his equipment Credit: Wellcome Library, London. Wellcome Images images@wellcome.ac.uk http://wellcomeimages.org Nikola Tesla, with his equipment for producing high-frequency alternating currents. Inscribed: 'To my illustrious friend Sir William Crookes of whom I always think and whose kind letters I never answer! Nikola Tesla June 17, 1901' Photograph 1901 Published: - Copyrighted work available under Creative Commons Attribution only licence CC BY 4.0 http://creativecommons.org/licenses/by/4.0/

Nikola Tesla, with his equipment (1901). (Credit: Wellcome Library, London. Wellcome Images, CC)

This week, in a 3-2 split decision, the Minnesota Public Utilities approved a five percent rate cut for large industrial power customers, a deal targeted to help taconite mines in Northern Minnesota.

Last February, the PUC rejected Minnesota Power’s proposed rate deal, saying the utility had not adequately proven it needed to raise rates on residents while lowering them for industry.

Now the PUC is stuck halfway. It OK’ed the rate cut for industrial customers, while putting off the request to raise rates for residential and small business consumers. Minnesota Power now must make its case that the 10 percent rate increase is necessary. The rate cut for taconite plants won’t take effect until it does.

When the deal was first proposed last winter Minnesota taconite plants were reeling: three of six were idled. Prospects for the steel industry seemed dim.

Now, all but Keewatin Taconite have returned to service. Steel tariffs seem to be working to at least temporary stem foreign dumping. The mines that would benefit are already producing taconite and paying their electrical bills.

Nevertheless, mines — with the backing of Minnesota Power — argue that the quantity of power they purchase essentially amounts to a subsidy of smaller power consumers. Given their importance in the local economy, the mines say they need rate relief, with the rest to be picked up by traditional ratepayers.

The PUC clearly isn’t entirely on board with that idea. Politically, it’s a tough argument to say that the mines need the 5 percent rate cut more than regular people can stand the 10 percent rate hike.

But the mines and Minnesota Power are putting on a full court press, imploring local elected officials and community organizations to back the deal. And many of them are. Local chambers of commerce are passing resolutions left and right, while most state lawmakers are preparing to back Minnesota Power and the mines.

At least one, Rep. Tom Anzelc (DFL-Balsam Township), is planning to oppose the deal on the grounds that it isn’t fair to ask Minnesotans to pay out of pocket to help an industry already back on its feet.* Most local leaders, however, argue that the interests of the region’s largest power-consuming industry are more important.

* Disclosure: Rep. Anzelc is a personal friend and fellow Balsam resident. I have helped him with his campaigns since his first run in 2006.


  1. What would be interesting to know is what industry is paying Minnesota Power above cost of power provision versus what consumers are paying Minnesota power above cost of power provision.

    • You mean average cost to supply a large industrial consumer one MWH of power vs. the average cost to supply a residential house or small business with one MWH of power? I’d be interested in seeing this too. I’m guessing there are infrastructure and maintenance savings for supplying to a large consumer.

      • Yes, that’s what I had in mind. Which party, if either, is subsidizing the other?

        • I’d be willing to wager that the large power consumers have been subsidizing everyone else for many decades. My only concern with giving the big users a rate break is; if you give the largest users a break, not sure how you put the lid back on the can of worms and keep everyone else from comparing how much they should be paying to everyone else.

        • Yes, this would be interesting data to look at. On the one hand, there is much more infrastructure to maintain per kWh for a large group of small users than for one big user. On the other hand, large industrial users may also put more stress on the system during peak usage periods, which can sometimes incur expensive power purchases outside the system.

          That said, one also has to look at ability to pay. With most mines up again, the mines can presumably absorb the costs. But can low income retires absorb a sustained 10% increase on their power bill? My guess is that some can not. If the end result is elders getting their power shut off (or the general taxpayer paying for it through winter energy assistance), one has to ask whether that is consistent with a just society?

          • How is it a “just society” to have a commercial entity pay for everyone else’s power bill? Hey, if an elderly person can’t afford to pay their power bill, I’m fine with everyone’s taxes going to help that person out, but it isn’t right to only put that burden on a couple mines (or other commercial entities) just because they are large. As we’ve seen over the past couple years, these mines don’t have all that much margin for staying operational the way it is. On the other hand, there are often some tax loopholes that the large companies seem to fit into to avoid paying taxes. That needs to get fixed, but is a completely different issue.

          • I know Minnesota Power has provisions for people who can demonstrate they have limited means. However the idea that people should be charged, in general, on their ability to pay is basically a way to pick someone’s pocket. If you feel compassion you should always reach for your own wallet, not someone else’s wallet.

          • Gray Camp – You raise a great point about tax loopholes, and the fact that generally speaking, large corporations – and particularly, wealthy stock holders because of the lower capital gains tax – don’t pay their fair share of taxes due to tax loopholes. However, I’m not sure to what extent it applies in this particular case. If it does, and if we address the rate issue without addressing the tax fairness issue, then the end result is that average Joes get screwed.

            In any case, we are missing an awful lot of data. We don’t actually know what Minnesota Power’s delivery costs are for different classes of customer, so we really can’t say whether rate adjustment is “fair” or not until we see the numbers. Does anyone know if the PUC makes any of this data public?

          • I concur on the missing data.

          • Yup. On the need for more data, we agree.

            It’s interesting that you feel that setting prices based on someone’s ability is wrong. In the free market, a customer’s ability to pay is an important consideration in setting prices along with the cost of production. If the price is too high, people won’t buy, or will go elsewhere. So I’d say ability to pay is crucial information.

            But, of course, electric utilities are monopolies by nature, so they don’t have to deal with competition, which would tend to hold rates down. Which is why we have a PUC, to ensure that utilities don’t gouge us because we are captive users. And which is why it’s entirely appropriate that the PUC consider customer’s ability to pay along with many other factors in setting rates.

          • Maybe you can talk Rolls Royce into basing my price on my ability to pay. 🙂

  2. It should be noted that this idea of transferring burden from big industrial customers to residential customers originated with the Minnesota Legislature, not with the Public Utilities Commission. It was part of a big package of anti-consumer energy legislation.

    Also note that the original Minnesota Power filing was for a 5% decrease in the “energy-intensive and trade-exposed” rates and about a 14.5% increase in residential rates. This was rejected by the PUC. The next filing seems to involved a 10% residential increase and the same EITE decreases.

    It seems pretty clear that the PUC is not comfortable with this. Concerned people should be pointing their fingers at their legislators!

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