Minnesota Power seeks hike

Minnesota Power is planning to ask state and federal regulatory agencies for retail and wholesale rate increases, company officials said today.

Increases in the cost of electricity provided to customers are needed to recover general costs and offset increases in labor and benefit costs, Don Shippar, Allete chairman, president and chief executive officer said in a conference call.

Allete is the parent company of Minnesota Power, a Duluth-based utility.

The last time Minnesota Power requested a rate increase was in 1994.

A retail rate case increase would likely be filed in 2008 or 2009 with Minnesota Public Utilities Commission, Allete spokesman Eric Olson said.

A rate case requesting an increase in wholesale rates would be in late 2007 or early 2008 and filed with the Federal Energy Regulatory Commission, Olson said.

It would probably take about a year for each rate case to be reviewed, decided and potentially implemented.

Allete reported third quarter net income of $16.5 million, or 58 cents per share. Operating revenue for the quarter was $200.8 million.

In 2006, third quarter 2006 net income was $21.8 million, or 78 cents per share. Operating revenue for that quarter was $199.1 million.

An Allete investment in American Transmission Co., a Pewaukee, Wis.-based firm that owns transmission lines in parts of Minnesota, Wisconsin, Michigan and Illinois, recorded a third quarter net income of $1.9 million compared to $600,000 in the third quarter of 2006.

Earnings from Allete's energy business segments in the third quarter were about the same as 2006.

Allete's real estate holdings in Florida took an anticipated nosedive during the third quarter of 2007.

Real estate income for the quarter was $600,000 compared to $5.1 million in the third quarter of 2006.

For the year, real estate income is projected to be $16 million to $18 million, below the company's annual record of $23 million.

"We said in the second quarter that earnings from real estate would be lower due to difficult market conditions in Florida,'' Shippar said. "The Florida real estate market has deteriorated through 2007. We would expect it to continue the rest of the year, but this business will continue to be a profitable business for us. We do not see when it would not be profitable. We believe that the palm coast will continue to see demand for residential and commercial development over the long term.''

The idling of U.S. Steel's Line 3 pelletizing line at Minntac Mine in Mountain Iron affected Allete's total industrial kilowatt hours sold during the quarter.

The line, which shut down in February, was re-started in September.

However, iron ore production and electrical demand at northeastern Minnesota taconite plants is expected to be strong, Shippar said.

"The plants are still running at capacity,'' said Shippar. "We don't have any indication of that changing in the future.''

Through the first three quarters of the 2007, Allete earned $2.31 per share compared to $1.95 during the same period in 2006.

Allete remains on track to meet its earning expectations for the year of $3 to $3.05 per share, Shippar said.

Allete provides energy services in the upper Midwest, and has real estate holdings in Florida.