Reporter's Notebook: Covering the clean energy transition in northern Minnesota

NINA MOINI: Most of us don't put a whole lot of thought into the electricity that powers our daily lives. We just flip the switch and expect the lights to go on. Well, there's a proposed sale of one of Minnesota's largest electric utilities that's getting a lot of attention now. It's getting people to think more closely about who owns electric companies and who's going to pay for the solar and wind and other infrastructure that we need to transition to a green energy future.

Dan Kraker has a story out this week on the proposed sale of Minnesota Power. And he joins me now from Duluth to talk more about it as a part of our regional team check-in. Hi there, Dan.

DAN KRAKER: Hey, Nina.

NINA MOINI: Happy to be checking in with you. Could you start by telling us a little bit just about the basics of the proposal here?

DAN KRAKER: Yeah, of course. So Minnesota Power, they're the utility based here in Duluth. And it serves about 150,000 customers in Duluth and around the region. But its biggest customers are the taconite mines on the iron range and some other big industrial plants in the region, like paper mills.

And so last year, the utility's parent company, ALLETE, they announced that they had agreed to be purchased by these two private investment firms for $6.2 billion. A subsidiary of BlackRock would be the majority owner. BlackRock, a lot of listeners have probably heard of. They're a private equity firm.

They're actually the largest asset manager in the world with over $12 trillion in investments, which is bigger than most countries. So they would be majority owner under this proposed deal. And then a Canadian pension fund manager would buy a minority stake in the deal if it goes through.

NINA MOINI: And why does Minnesota Power want to sell?

DAN KRAKER: They say the big reason they want to sell is to help finance this transition to carbon-free electricity that the state is on the path towards.

So a lot of our listeners might know that Minnesota has this law requiring utilities to produce all of their electricity from carbon-free sources by 2040. And utilities are on the track to doing that. But to do it, they're going to have to build a lot more wind turbines, solar farms, transmission lines, all this expensive infrastructure that's going to be needed for this energy transition.

And so ALLETE Minnesota Power, they say that in order to do that, they need to tap into these private equity firms, these deep-pocketed investors who have the kind of private financing, the equity that they need to build all this stuff.

The reason they say they need this private investment is because Minnesota Power is unique. They're the eighth smallest investor-owned utility in the country. And then they also have this really unique customer base that I mentioned. So like 70% of their power is sold to these really big customers, mainly the taconite mines. And that means that they're really reliant on these companies, which are pretty cyclical.

Like right now, a couple of the mines are actually idled. One mine is temporarily closed, another one is partially idled. So they're not buying any electricity now. So Minnesota Power says that makes us a riskier investment to go out on the public markets and get the money they need to build this stuff. So they say that it's a safer bet for them, for this huge investment in clean energy that they need to have these private, deep-pocketed investment firms own them.

NINA MOINI: But the proposal, I understand, has gotten a lot of opposition. So who is against this deal and why?

DAN KRAKER: So the utilities largest customers actually, those mines we talked about actually, are opposed to it. The Minnesota Attorney General's office has come out against it. And then there's a bunch of environmental groups and consumer advocacy groups also opposed to it.

And the main reason, Nina, is because of electric rates. So they're really concerned that electric rates will go up if this deal goes through. And the main concern really is about private equity in general and that model that BlackRock and these firms work under.

They say that they're going to be paying a premium to acquire the company and that they're going to have to raise rates to help pay that off, that they're really going to be motivated by short-term profits and not the longer-term interests of Minnesota Power consumers in the region.

So that's the big concern. There's also other concerns. One of them is transparency. So private firms aren't required to make the same kind of financial disclosures that publicly traded companies like Minnesota Power currently have to do. So consumer advocates and environmental watchdog groups, they're worried that they might have less insight into the decisions that the company makes if this deal goes forward.

NINA MOINI: And how do the supporters respond to that?

DAN KRAKER: It's interesting. So there are clean energy groups that often work with some of the opponents to this deal who actually have come out in strong support of it. They say it's really because we're at this critical moment. We have to act quickly to curb the worst effects of climate change. And to do that, we really need to speed up this energy transition.

And they say that the risk of not getting the kind of capital that they need to build this clean energy infrastructure is greater than any risks that would happen if public equity firms own the company. And then unions whose members would build these projects also come out in support of it.

And the big thing that they come back to is they say, look, this utility, no matter who owns it, is going to be still regulated by the state. So they say that any proposed rate increases, any purchases or investments into infrastructure, all that stuff is still going to have to get approved by the Public Utilities Commission. So that's what they fall back on. They say that's what makes this a good bet.

NINA MOINI: It's interesting this is a story about a pretty small utility in Northern Minnesota. But it seems to be getting a lot of national attention, Dan. Why is that?

DAN KRAKER: I think a lot of it, Nina, is because this moment we're in the electric utility industry. There's just unprecedented demand right now for electricity. And a lot of that's really being driven by artificial intelligence, which just requires enormous amounts of computer power, which in turn requires enormous amounts of electricity.

And so it's actually generating a lot of interest from private equity because they see all this electricity demand, they want to get into that game. So that's why we have the BlackRocks of the world, and elsewhere in the country, who are looking at buying up utilities. Because they see the surge in demand.

NINA MOINI: Sure. And so when will this decision be made?

DAN KRAKER: Yeah, the Public Utilities Commission, they're going to be holding a hearing on this later this month. And then in their next hearing after that, which is scheduled for October 3, they're going to be making a decision. So that's less than a month away.

NINA MOINI: And this story is part of the Getting to Green series. It's a great series that you've worked on with fellow--

DAN KRAKER: Thank you.

NINA MOINI: --MPR Newsday reporter Kirsti Marohn, of course. It's been a couple of years that you all have been working on this. Remind us about the series, what it is and why you launched it. Because there's so much knowledge for our listeners to gain here.

DAN KRAKER: We launched this a couple of years ago, really, when there was a lot of momentum and money pouring into this clean energy transition. So this was about the time I mentioned this law that Minnesota passed, requiring all of our electricity to be produced by carbon-free sources by 2040.

There was also all this money coming out of the federal government because the Biden administration had passed the infrastructure bill, and then what's known as the IRA, the Inflation Reduction Act. Those bills just poured a ton of money into this clean energy transition.

NINA MOINI: And there have been really significant changes since you've started reporting this series. How close are, do you think, in terms of getting to green?

DAN KRAKER: We have made a lot of progress, especially in the electricity sector, which we've been talking about. Minnesota now produces over half of our electricity from clean sources. And it's really been a remarkable transition. Minnesota Power up here in Duluth that we've been talking about, only 20 years ago, almost all of their electricity was produced by coal.

Now it's over half renewable. And they're going to be totally carbon free by 2040, which is a remarkably fast transition. So the electric transition has been fast. But there's a lot of work to do still in other sectors, for instance, in transportation, in shifting to electric vehicles, in agriculture, in heavy industry that relies on a lot of energy.

Those are the areas that are really a lot more challenging to decarbonize. That's where I think a lot of the federal money was really important in doing the research and investments into those harder-to-reach sectors that are going to be tougher to wean from fossil fuels.

And that's where I think the-- the big change that's happened, obviously, in the last couple of years is there was a big presidential election. And President Trump, I think it's fair to say, is not a fan of renewable energy. He's referred to it as the big green scam. So he's cut a lot of the funding that had been approved under the Biden administration to pay for a lot of this stuff. So that's the big hurdle.

But I will say, Nina, that the prices have really come down. Wind and solar are now the cheapest way to produce electricity. That trend is not going to stop. But it's going to be perhaps more expensive, perhaps slower, to make some of these changes than supporters would have liked a couple of years ago.

NINA MOINI: All this reporting that you all are doing is so important. And I think it really gets to the heart of, how do we continue to make sure that we can have all the beautiful things that Minnesota has in terms of the environment? I wondered, with the fall color outlook just dropping from the DNR, where's your favorite place in Northern Minnesota to see the leaves turn? Where does Dan Kraker peep leaves?

DAN KRAKER: So you want me to-- you want me to reveal my secrets--

NINA MOINI: I do.

DAN KRAKER: --huh, Nina?

NINA MOINI: Yeah, you're a good person to ask.

DAN KRAKER: Well, I mean, I do like to go up the North Shore like lots of folks do. But here in Duluth, one of my favorite spots might be a little lesser known. It's called Ely's Peak. It's a great hike on the Southwest side of Duluth.

It's a hike up the steep ridge overlooking Lake Superior and the St. Louis River estuary. And it's just gorgeous. It's a beautiful rocky hike with amazing views, especially in the fall when the colors are turning.

And as a bonus, Nina, there's a really cool old abandoned railroad tunnel through this basalt cliff that you can actually hike through. And it's pitch black in the middle. It's a pretty cool experience, so you can do that when you're done checking out the colors.

NINA MOINI: All right, you heard it here, folks. That's our Dan Kraker checking in with us from Duluth. Thanks so much, Dan.

DAN KRAKER: You bet, Nina. Happy to do it.