PUC approves MERC's natural gas rate case settlement

On October 26, the Public Utilities Commission (PUC) accepted a settlement agreement that limited rate increases for customers of Minnesota Energy Resources Corporation (MERC). Under the settlement, the company lowered its request to raise rates from approximately $32.7 million to $21.2 million, a more than $11.5 million reduction. As a result, the residential rate increase was limited to about 5.3 percent, as opposed to the nearly eight percent originally asked for. CUB supported the settlement along with MERC, the Department of Commerce, the Office of the Attorney General, LIUNA, Local 49, and a coalition of clean energy organizations (Fresh Energy and Minnesota Center for Environmental Advocacy).

One of the key issues resolved through the settlement was the level at which MERC’s return on equity (ROE) should be set at. ROE plays a major role in determining how much profit the company can earn: the higher the ROE, the higher the profit (and the more customers must pay). CUB offered testimony that MERC’s return on equity should be set in the range of 8.5 to 9.0 percent, while MERC argued for an ROE as high as 10.3 percent. Although the difference between these positions seems minimal, each fraction of a percentage point impacts customer costs. Ultimately, the parties agreed an ROE of 9.65 percent would be reasonable. This is both below MERC’s currently authorized return of 9.7 and substantially lower than the 10.3 percent ROE the company asked for.

Overall, the settlement results in a rate increase that is much lower than MERC originally requested. Because the final rates approved through the settlement are less than what MERC has been charging customers on a temporary basis, customers will see refunds applied to their energy bills in the coming months.