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Minnesota Commerce Department recommends 70 percent cut in Otter Tail Power’s proposed rate increase

8/18/2016 10:07:06 AM

Public hearings scheduled for Bemidji, Crookston, Fergus Falls and Morris

SAINT PAUL – The Minnesota Department of Commerce is recommending a 70 percent reduction in the $19.3 million rate increase proposed by Otter Tail Power for electric service in 2016.

Four public hearings on the utility’s rate proposal will be held on August 24-25 in Bemidji, Crookston, Fergus Falls and Morris.

Otter Tail Power, a subsidiary of Otter Tail Corporation, is an investor-owned utility that provides electric service to over 61,000 customers in northwestern Minnesota.

Earlier this year, the utility filed a request with the Minnesota Public Utilities Commission to increase its rates by about 9.8 percent for 2016. According to the utility’s proposal, residential customers would see a monthly bill increase of about $9.50, while general service business customers would see a monthly bill increase of about $22. The actual increase for a particular customer would vary, depending on specific rates and the amount of electricity used.

According to the Commerce Department’s analysis, Otter Tail Power’s proposed rate increase can be reduced by over 70 percent, or $14 million, while still fully allowing the utility to provide safe, reliable service and obtain a reasonable rate of return on equity.  

The Commerce Department analysis found that the utility’s proposal overstated costs, including an excessive rate of return on equity (capital costs), excessive costs assigned to the utility’s retail customers and inappropriate accounting assumptions. The utility’s proposal also understated revenues.

While the proposed rate increase is under review, the Public Utilities Commission granted the utility an interim rate increase of $16.82 million, or about 9.56 percent, beginning on April 16, 2016. If the final rates approved by the Commission are lower, the utility will refund customers the difference with interest.

After written testimony, public hearings and evidentiary hearings are completed, Administrative Law Judge Eric L. Lipman will present his recommendations to the Public Utilities Commission. The Commission is expected to decide this matter in early 2017.

Four public hearings on Otter Tail Power’s rate proposal will be held on August 24 and 25 at the following locations:

Bemidji
Wednesday, August 24, 1:00 p.m.
City Hall
317 4th Street NW
Bemidji 

Crookston
Wednesday, August 24, 6:00 p.m.
Cobblestone Inn
2304 Sahlstrom Dr.
Crookston

Fergus Falls
Thursday, August 25, 1:00 p.m.
City Council Chambers
112 West Washington
Fergus Falls

Morris
Thursday, August 25, 6:00 p.m.
City Council Chambers
603 Oregon Avenue
Morris

For details on the rate case and to view all of the documents filed in this proceeding, go to the Minnesota eDockets website. Select 15 as the year and type 1033 as the number.

Media Contact:
Ross Corson
Director of Communications
Minnesota Department of Commerce
P: 651-539-1463 | C: 651-368-5050 | ross.corson@state.mn.us

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