New law offers utility rate cuts for big business

This photo taken Aug. 26, 2014, shows the Minntac taconite mine plant in Mountain Iron, Minn. Gov. Mark Dayton signed a broad jobs and energy budget bill that gives a rate break to mining companies, papers mills and steel mills.
Glen Stubbe | Star Tribune via AP 2014

Residential customers in northern Minnesota will have to pay more in electricity rates because of a change the Legislature made last week to help big business.

Gov. Mark Dayton signed a broad jobs and energy budget bill that gives a rate break to mining companies, papers mills and steel mills.

The new law allows major industrial customers in northern Minnesota to apply for a break in their electricity rates. It aims to help lower energy costs for companies competing in a global marketplace, among them the taconite mines on the Iron Range.

Larry Sutherland, general manager for Minnesota ore operations at U.S. Steel, said his company saw a dramatic increase in electricity rates between 2014 and 2015. Earlier this month, Sutherland told the state Executive Council, which includes the governor, lieutenant governor, attorney general, state auditor and secretary of state, that mining companies can't afford the higher costs as global steel prices plummet.

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"My electrical increase across Minnesota ore went up $13.2 million," Sutherland said. "That's approximately 60 cents a produced ton of taconite. That's a huge increase year on year just on energy."

State Sen. David Tomassoni, DFL-Chisholm, said about 1,000 people working in the taconite mines on the Iron Range have been laid off in the past year. He said lowering the cost of electricity will help companies compete.

"You know, maybe this is something that will actually help save the industry and the jobs we have," Tomassoni said.

But to pay for the break for industrial companies, residents and smaller businesses will be forced to pay more. State Sen. John Marty, DFL-Roseville, said he didn't object to helping out steel and paper companies but worries that the way the law is written, other companies could also take advantage of it. He said that means higher rates for everyone else.

"When you're talking about utility rates, if you're bringing down one customer's rates, you're bringing it up for someone else," Marty said. "In this case, we're bringing down electric rates for the biggest customers and we're bringing it up for residents, for homeowners, for renters [and] small businesses. They're going to be paying more, perhaps significantly more."

Cris Oehler, vice president of public relations for Otter Tail Power Company said she doesn't know yet how rates will change under the new law.

Amy Rutledge, manager of corporate communications for Minnesota Power, said the change is about fairness.

"For years, our industrial customers have been subsidizing our residential customers," Rutledge said. "This new law brings things back into balance."

The two companies have 205,000 customers between them.

It's not clear yet how many companies would seek a rate reduction under the new law. Those that do would have to apply to their power company, which would then have to ask for approval from the Public Utilities Commission.

Even though the threat of a rate hike is real for residents, some say rates could go even higher if U.S. Steel and other companies go out of business.

That should be a bigger concern for customers, said state Rep. Pat Garofalo, R-Farmington.

"If these businesses close, you're going to see a significant increase in electric rates for customers in northeastern Minnesota," Garofalo said. "By keeping these businesses active and involved, everyone wins."

But it's not clear whether changing the rates for companies competing in a global marketplace will make a major difference. State leaders have taken other steps to reduce costs for U.S. Steel since January.

The Minnesota Pollution Control Agency changed how it protects wild rice waters. The Executive Council gave the company a temporary break on iron ore royalty fees that could amount to $4 million. There's no word from the company that any of these steps will stop layoffs on the Iron Range.

After voting to give the company the break on royalty fees, Dayton said he was frustrated U.S. Steel is seeking help but hasn't said whether the changes will help get people working in the mines again.

"I just have a feeling that we're buffeted by these much larger and much more significant international trade balances and imbalances," Dayton said. "But we're put in a position where we don't really feel like have a choice because we want to do everything we can to bring these workers back on their jobs."