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CUB is fighting MERC’s requested 9.91 percent rate increase

Published February 27, 2023

On November 1, 2022, Minnesota Energy Resources Corporation (“MERC”) filed an application with the Minnesota Public Utilities Commission (the “PUC”) requesting an increase in natural gas rates of $40,322,302 (a 9.91 percent increase). How much MERC will ultimately be allowed to raise rates will be determined by the PUC following an ongoing legal proceeding. This blog post provides an overview of CUB’s involvement in that proceeding (the “rate case”).

On February 2nd, CUB filed a “petition to intervene” in MERC’s rate case. In the petition, we noted our concerns about the impact a significant rate increase could have on MERC’s residential customers. Minnesotans are already feeling the effects of increasing electricity and natural gas prices; surcharges MERC is using to collect the extraordinary costs it incurred in February 2021; and rising costs for housing, food, and other basic necessities. We also highlighted our concerns with specific aspects of MERC’s rate increase proposal. Most notably, MERC has requested to increase its authorized return on equity (“ROE”) from 9.7 percent to 10.30 percent—a request that, if approved, would permit the company to earn more profit for its shareholders at the expense of its customers. Last week, the judge overseeing this rate case granted CUB’s request to become a party. 

CUB has engaged a financial expert, Dr. Steve Kihm, to analyze and testify on the company’s ROE request. Dr. Kihm will draw from his 43 years of relevant experience to determine whether he believes a 10.30 ROE is reasonable under the circumstances and, if not, what a more appropriate ROE would be. Dr. Kihm recently offered excellent testimony on behalf of CUB in Xcel’s (ongoing) electric rate case. We look forward to again introducing his analysis and testimony in the MERC proceeding.

What happens next?

On March 16th, CUB and other intervening parties will file initial testimony responding to MERC’s rate increase request. Parties will then file additional testimony responding to other witnesses on April 11th and May 1st. In mid-to-late April, the judge will hold public hearings where anyone can share their perspectives and thoughts on MERC’s proposed rate increase. (See below for more information on how you might get involved.) Then, in May and June, parties will have the opportunity to question each other’s witnesses in an evidentiary hearing, then file legal briefs laying out their arguments. Ultimately, the judge will issue a report in late August laying out her findings and recommendations to the PUC. The PUC will have the final say in deciding whether—and by how much—MERC is permitted to raise its rates. We expect the PUC to reach its decision next fall.

In the meantime, the PUC permitted MERC to raise rates on an interim (temporary) basis. This means MERC customers already experienced a 9.08  rate increase (not quite as high as MERC had requested) beginning in January of this year. If the final approved rate increase ends up being lower than the approved interim rate increase, then MERC will need to refund any over-collected amounts to its customers.

Get involved

If you are a MERC customer and are concerned about this proposed rate hike, let the PUC know. Public comments will be helpful to bolster the case being made by CUB and other parties. 

You can write a comment online or send an email to consumer.puc@state.mn.us, and reference Docket No. 22-504. (Please note that everything in your comment will become part of the public record.)

You can also participate in one of several public hearings that will be held in April. We will share more specific information about the timing and location of those hearings and instructions on how to participate when it becomes available. Keep an eye on our blog and social media pages for updates!

Author: Brian Edstrom

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