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Energy company's rate hike faces opposition from Minnesota officials

Another proposed rate hike by Minnesota Energy Resources Corp., a company serving many Northland communities, also is in the works, but it's facing opposition from the Minnesota Department of Commerce.

MERC upped its rates from 86.3 cents per 100 cubic feet in January to 92 cents in February and 99.2 cents in March, for a net 15 percent increase during the first three months of this year.

MERC serves only one area in Duluth, the Zenith Terrace Mobile Home Park, with just shy of 500 customers. But it delivers gas to many other cities in the region, including Aitkin, Aurora, Barnum, Biwabik, Buhl, Cloquet, Cohasset, Coleraine, Crosby, Deer River, Deerwood, Eveleth, Hermantown, Hinckley, Hoyt Lakes, International Falls, Keewatin, Marble, Midway, Moose Lake, Mountain Iron, Pine City, Scanlon, Silver Bay and Wrenshall.

But the Minnesota Commerce Department is calling for regulators to reject all but 20 percent of the company's proposed $14.2 million rate increase. The state agency has asked an administrative law judge to instead permit MERC to increase its rates by just $2.8 million.

"The Commerce Department carefully examines requests for rate increases, and here the vast majority of MERC's proposed rate increase was clearly unjustified," Commerce Commissioner Mike Rothman said in a published statement.

"At all times, especially when energy costs are hitting families and businesses during the coldest winter in three decades, it is important that we work to ensure rates are reasonable and justified," he said.

Kerry Spees, a spokesman for Integrys Energy Group, MERC's parent company, said: "This is the amount that we pay for natural gas. It's a pass-through cost. We don't make a dime on it."

However, the commerce department contends the rate increase includes overstated capital costs, compensation and operation expenses.

Michelle Carlson, regional property manager for Zenith Terrace, said she hasn't heard much from tenants regarding the increased natural gas rates yet. But she said: "It's very difficult for people when they have to absorb uncontrollable expenses like this. I hope they think about that when they look at these increases and that they do everything they can to keep the rates as low as possible."

Public comment on MERC's rate request will be accepted for the next few weeks. Administrative Law Judge Eric Lipman will then present his recommendations to the Minnesota Public Utilities Commission, which is expected to issue a ruling in October.