Minnesota Power customers upset over rate hike proposal
Denis Sauve is alone in his small bicycle shop, one in a row of century-old buildings in a west Duluth neighborhood.
There are dozens of gleaming new Raleigh and Cannondale bicycles on the floor, and a long row of wheels near the pressed tin ceiling.
There aren't any customers this afternoon, but the lights are on and the electric meter is spinning. Sauve's electric bill is typically around $200 a month.
"We as small businesses, and we as homeowners and renters, are going to be absorbing about a 40 percent increase," Sauve said. "And that's scary."
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In time, Sauve can increase his income by raising prices. But that's not an option for some of his neighbors.
"This is a depressed area," Sauve said. "We have an inordinate ... number of retired people here. People on fixed incomes, people who are barely above the poverty line, and they've being hit with a lot of increases. And I consider this one questionable at best."
Minnesota's Attorney General Lori Swanson agrees. Swanson says the rate increase would hit some of the lowest use customers the hardest, who would see their rates jump as much as 43 percent.
Meanwhile, the highest use customers, like taconite mining companies and paper producers, will see the smallest percentage hike, around 3.5 percent.
"The consumer has to pay his fair share, as does the small business user, and heretofore they've all been subsidized by the big user."
Very low income customers could still qualify for special low rates.
If approved, the rates would pump $45 million a year into Minnesota Power's coffers -- something the company says is needed to cover a litany of increasing expenses, including investments in generation plants, pollution equipment and power made with renewable-fuels.
It's the first time the company has asked the Public Utilities Commission for a rate increase since 1994.
The request calls for a higher percentage rate increase for residential and other small customers, and a lower rate increase for the very largest customers.
The company says there's been a long-running disparity between the rates it charges small and big customers.
"Larger industrial customers -- the 12 largest customers on our system -- have historically subsidized the remaining classes, and especially the residential class," said Chris Anderson, associated general counsel for Minnesota Power.
Anderson said if the company were to end that subsidy altogether, residential customers would see a rate hike that's almost double the 24 percent in the current proposal.
"We knew that if we proposed a 42 percent increase to our residential customers, that wouldn't be approved by the commission," Anderson said.
Anderson points out that the big users aren't happy either. They think their rates are still going up too much.
Anderson says a taconite plant, which can pay $1 million per week for electrical power, could pay an additional $151,000 a month. But the average residential customer can expect to pay only about $16 more a month for service.
There's good reason to give the industrial users a break, according to Rob West, who directs the Duluth-based economic development organization APEX.
"At some point in time those companies still have to make a profit, and they still have to hire people, and they have to expand," West said. "If we put all that burden on the big user, then that's not fair. The consumer has to pay his fair share, as does the small business user, and heretofore they've all been subsidized by the big user."
West says the increase still keeps Minnesota Power's rates well below other regional providers like Xcel Energy.
"So we're still getting a pretty darned good bargain," said West.
But that's little comfort to Sharon and Eugene Soderberg, who live in a small but comfortable home in Duluth on nothing but Social Security. The timing for an increase in their electric bill couldn't be worse, Sharon says, with high costs for gas, food and taxes.
"It's just overwhelming," Soderberg said, sitting at her small kitchen table. "I feel like I'm in a whirlpool, just going round and round, down the drain."
An administrative law judge is accepting comment on the rate proposal through Friday, Oct. 17, 2008. The Public Utilities Commission is expected to rule on the request next April.
