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Rate increase approved for Otter Tail Power

The Minnesota Public Utilities Commission (MPUC) has granted Otter Tail Power Company a revenue increase of $4.99 million, or about 3.75 percent.

This excluded the effect of recovery for wind energy resources and for more Conservation Improvement Program (CIP) costs that will move from the Resource Adjustment into the base rate portion of customers' electric service statements.

The company had requested a revenue increase of $10.6 million, or 8 percent, to address wholesale energy margin declines, Big Stone II cost recovery, and rising operating costs.

"Because some items are moving from base rates to other line items on the bill and vice versa, we have some calculations to run and aren't able to immediately provide specific monthly dollar amount increases to the various customer classes. But we know some customers will see less than the overall increase of 3.75 percent and some will see more, based on their electric service rates and the amount of electricity they use," said Chuck MacFarlane, Otter Tail Power Company's president and CEO.

Customers have been paying a 3.8 percent increase during interim rates, which took effect June 1, 2010, so the overall net impact with final rates will be minimal, MacFarlane added.

Since 2008 the company has been recovering costs associated with its wind farms through a renewable resource rider, which is included in the Resource Adjustment line item on customers' electric service statements.

Riders are designed to allow recovery of specific costs until a utility files a new base rate request. Accordingly, the MPUC moved most of Otter Tail Power Company's wind costs into base rates. The MPUC also moved more CIP costs from the Resource Adjustment into base rates.

On the other hand, the MPUC moved wholesale energy margins from base rates to the Resource Adjustment. In the past, margins resulting from Otter Tail Power Company's sale of electricity to other utilities, when the company was able to generate more electricity than its customers needed, were passed to customers through a fixed credit in base rates.

When the new rates go into effect, 100 percent of Minnesota customers' share of these margins will be passed directly to them through the Resource Adjustment on a monthly basis.