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Tax reform could affect Minnesota Power rates

Federal tax reform benefits big corporations. Allete, the parent company of Minnesota Power, is among Duluth's biggest corporations.

So will those tax reform benefits be passed on to Minnesota Power customers?

It looks like it.

"The new lower tax rate will be built into our rates, and the savings will be passed through to our customers based on methodology determined by the (Minnesota Public Utilities Commission)," Minnesota Power spokeswoman Amy Rutledge wrote in an email Wednesday.

In the wake of the Republican tax bill passing both the House and Senate this week, the PUC will be digging into how tax reform affects the state's utilities "once the specific relevant provisions of the new tax law are analyzed," PUC Executive Secretary Dan Wolf wrote in a statement to the News Tribune. "As a result of this analysis, the commission may undertake specific proceedings to address these tax law changes in order to ensure that utilities recover only the costs of providing service."

Once President Donald Trump signs the tax bill into law, then, rates paid to Minnesota Power and other publicly traded utilities such as Xcel Energy could start falling alongside the corporate tax rate. It wouldn't happen overnight — if it happens at all.

"It's important to note that taxes are but one (relatively modest) item that goes into what makes up our rates," Rutledge said.

It's unclear what will become of Minnesota Power's current rate increase request — which an investor presentation released this month now says is $49 million — that the PUC is set to decide on this spring. And the tax cut will not mean rates will remain static.

"Our rate reviews are tied to investments we make in our system to continue to provide reliable and safe energy for our customers," Rutledge said. "So while the new tax bill will help hold down customers' costs, it won't obviate the need for the Minnesota Public Utilities Commission to evaluate future investments we make in our energy supply and delivery system."

State law requires the rate-setting commission to give "due consideration to the public need for adequate, efficient and reasonable service and to the need of the public utility for revenue sufficient to enable it to meet the cost of furnishing the service ... and to earn a fair and reasonable return upon the investment in such property."

In its investor presentation released before tax reform was finalized this month, Allete wrote: "We expect that our nonregulated businesses would benefit from lower corporate tax rates," and that "items could have offsetting impacts to both customer rates and earnings."

The company's nonregulated businesses include Allete Clean Energy. Rutledge said that company "views the bill favorably as it supports the company's overall growth strategy in the renewable energy space."

Brooks Johnson

Brooks is an investigative reporter and business columnist at the Duluth News Tribune.

(218) 723-5329
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