Minnesota Power will ask regulators in November to increase its electricity rates.
In a call with investors Wednesday morning announcing 2020 financial results, officials of Duluth-based Allete, Minnesota Power's parent company, said the company would file a rate case with the Minnesota Public Utilities Commission in November, with interim rates taking effect at the start of 2022.
The utility has seen revenues decline during the COVID-19, namely from outages from its large industrial customers.
Bob Adams, Allete's chief financial officer, said the COVID-19 pandemic had made it difficult for Minnesota Power to earn its authorized 9.25% rate of return and the 2021 earnings outlook is "well below authorized levels."
"As a result, we will be working closely with our state regulators on a fair and reasonable outcome in our next rate filing, which will enable the company to achieve earnings outcomes more in line with authorized return levels," Adams said.
Company officials did not say how much they plan to increase rates.
The company's last rate increase, announced in 2019, sought to increase residential rates by 15% and business rates by 10%. The company's temporary 5.8% increase across all customers went into effect Jan. 1, 2020, but the company lowered it to 4.1% as the pandemic picked up and refunded the $12 million difference.
The soonest Minnesota Power said it would seek another rate case would be March 1, 2021, but on Wednesday said it's eyeing November 2021 because customers are still dealing with the pandemic.
Minnesota Power has asked the PUC to allow it to track pandemic-related losses from two of its industrial customers — U.S. Steel's Keetac iron-ore mine and pellet plant in Keewatin and Verso's paper mill in Duluth — for possible recovery of lost revenues in its rate case.
While Keetac resumed production in December after a six-month idle, Verso, which closed in July and is for sale, remains closed.
The Minnesota Attorney General's Residential Utilities Division last month urged the PUC to deny Minnesota Power's petition to track those losses, in part because "cyclicality in large-customer load is not unusual but, in fact, is a business risk that Minnesota Power routinely encounters."
The office also wrote Minnesota Power's petition should be denied because it would "undermine" the 2019 rate case resolution, only focuses on two industrial customers and "attempts to insulate the Company’s investors from sales-variation risk that they are compensated for by the opportunity to share in the Company’s profits"
Asked by an investor if the rate case will seek to recover all of the COVID-19 related lost revenues, Steve Morris, Allete's chief accounting officer, said he expects much of the revenues to "rebound" by 2022.
"I don't expect to have all of that into our next rate case — Verso aside. We expect (Verso) to remain idle," Morris said.
Allete reports lower 2020 profit, but reups its growth target
Allete on Wednesday reported a 2020 profit of $174.2 million or $3.35 per share, down from a 2019 profit of $185.6 million and $3.59 per share.
During the call, Allete President and CEO Bethany Owen also said the company was returning its annual earnings per share growth rate to 5-7%. During its third-quarter results call in November, the company had lowered it to 4%.
"As we move on from 2020, Allete is well positioned for the future," Owen said. She noted Allete Clean Energy expected to continue its substantial growth as it expands beyond wind energy projects.
Shares of Allete closed at $64.98 Wednesday, down 37 cents for the day. Over the last year, Allete has traded as high as $82.22 last February and as low as $48.22 in May.