Otter Tail Power requests rate increase
Otter Tail Power Company has asked the Minnesota Public Utilities Commission (PUC) for permission to increase rates by approximately $10.6 million, or about 8 percent.
To help cover the cost of service while the PUC considers this request, the company has asked to increase rates on an interim basis by approximately $5 million, or about 3.8 percent. If approved, the interim increase will begin on June 1, 2010, and remain in effect until the PUC makes a final determination on the company's overall request, which is expected to occur in 2011.
The company implemented the PUC-approved 2.9 percent increase associated with its 2007 rate case in 2009. "Prior to that, we had not increased our base rates in more than 20 years," said Chuck MacFarlane, Otter Tail Power Company president and CEO. "In spite of that increase and ongoing efforts to manage costs, operate efficiently, and encourage energy-efficient behavior on the part of our customers, the cost of providing service still is more than we're able to recover through our rates."
If the PUC approves the overall request as filed, the average base rate increase for customers in the residential class will be $7.28 a month. Similarly, subject to PUC approval, the average base rate increase for customers in the commercial class will be $9.42 a month. The base rate increase will be more for some customers and less for others depending on the rates on which they're served and the amount of electricity they use. These examples don't include fluctuations in the cost-of-energy adjustment.
A major contributing factor behind the company's request is lower wholesale energy revenues, according to the company. Wholesale revenues result when Otter Tail Power Company sells electricity to other utilities during certain times of the year when the company is generating more electricity than its customers need. Those wholesale revenues are 80 percent lower than they were two years ago.
"Our wholesale sales are one of the reasons we were able to avoid a rate increase for the 20 years between our previous two filings," said MacFarlane. "Those sales helped us offset the amount we needed to charge our customers. Unfortunately the margins associated with those sales aren't as significant as they've been in the past and we need to replace them in base rates."
While the company withdrew from the Big Stone II project in September 2009, MacFarlane also cites the costs associated with developing and permitting the project as a contributing factor behind the company's request. "As a utility, our electric rates are based on the costs associated with providing service to our customers," said MacFarlane. "That means that the costs we incur to pursue or implement sensible and necessary infrastructure to meet our customers' needs must be included in rates."
The company has asked to spread the recovery of the Big Stone II development costs over a five-year period. "This means a little more than a dollar a month on the average residential customer's bill," MacFarlane said.
Customers will receive printed information with their June electric service statements showing the approved interim rate increase, the requested overall rate increase, and example monthly bill impacts for various customer classes. If final rates are lower than interim rates, the company will refund customers the difference with interest. If final rates are higher than interim rates, the higher rates will become effective as of the date of the PUC order approving those rates.
The PUC will hold public meetings related to the request and will post the meeting schedule on its web site once the schedule is determined. Otter Tail Power Company also will post the meeting schedule on its web site.
Otter Tail Power Company has a number of resources available to help customers manage electricity costs. Visit www.otpco.com, www.ConservingElectricity.com, or call Customer Service at 800-257-4044 to access those resources. Information about the rate increase request is available at www.otpco.com by clicking on Electric rates and Cost changes