On Nov. 4, the Minnesota Public Utilities Commission (MPUC) approved changes to Otter Tail Power Company’s rates to reflect major shifts in the company’s generation fleet. The approval also marks changes to operating costs and revenues that occurred since the company’s last Minnesota rate review, filed in 2016. The MPUC set Otter Tail Power’s return on equity at 9.48%, which is an increase from the 9.41% return approved in 2017.
The rate changes allow Otter Tail Power to recover the final costs associated with Otter Tail Hoot Lake Power Plant, which retired in 2021, and costs associated with two generation resources that came on line in the last year: Astoria Station, a 250-megawatt natural gas generator near Astoria, South Dakota, and Merricourt Wind Energy Center, a 150-megawatt wind project near Merricourt, North Dakota.
“Our employees continue our tradition of operational excellence and execute well on transformational projects,” said Otter Tail Power President Tim Rogelstad. “The commission’s rate approval allows us to recover the costs of significant investments, which is great news for our investors. And that this is occurring without a material change to our rates is great news for our customers.”
While the MPUC’s decision results in substantially unchanged rates, the approval recognizes many cost reductions the company achieved during the rate review, including lower depreciation expense due to lengthening the useful lives of wind-generation resources, decreased pension costs associated with higher pension fund assets, and an increase in expected wind-farm tax credits. According to Rogelstad, while it will take time to calculate the dollar impact of the MPUC’s decisions on numerous and complex issues, the change to customer rates will be minimal.
“Otter Tail Power’s residential customers will continue to have some of the lowest rates in the country,” said Rogelstad. “When our customers can benefit from expense reductions, it’s a win-win that aligns with the financial health of our company. We appreciate the commission’s input on our request and decision to allow us to recover on our prudent investments to provide our customers with electric service that’s safe, reliable and increasingly clean.”
In its initial filing, Otter Tail Power increased rates for Minnesota customers on an interim, or temporary, basis beginning Jan. 1, 2021. The result of the MPUC’s final decision is lower than the revenue Otter Tail Power collected during interim rates, so the company will refund customers the difference with interest.