St. Paul, Minnesota - The Minnesota Public Utilities Commission (“Commission”) took action yesterday on the petition by Otter Tail Power Company (“Otter Tail Power”) for a general increase in its electric rates.

Otter Tail Power provides retail electric service to approximately 61,000 customers in 149 communities in Minnesota, and also operates in North Dakota and South Dakota.

The Commission’s decisions are anticipated to reduce the overall amount of the allowed increase from the amount recommended by the Administrative Law Judge (ALJ) assigned to the case.  As Commission staff processes the impact of the decisions made today, the Commission will be better able to calculate the total dollar amount approved.

Otter Tail Power filed its petition in this rate case on February 16, 2016, initially asking for an increase in electric rates of $19.3 million, or 9.8%.  The ALJ conducted public hearings, evidentiary hearings, and issued his report with recommendations to the Commission on January 5, 2017.  The ALJ’s recommendations would have resulted in an approximate $12.95 million increase, or 6.6%.

• A major factor affecting the final approved increase is the authorized return on equity. The Commission approved an authorized return of 9.41%. Though not a guaranteed return for the company, setting a return on equity is needed in order to establish final rates. Whether the company actually earns that return depends on numerous operational and financial factors. The ALJ had recommended a return on equity of 9.54%. Otter Tail Power proposed a return on equity of 10.05%.

• The Commission approved increases in the monthly service charge for residential and small general service customers. Residential customers are currently charged $8.50 per month and small general service customers are charged $15.50 per month. Otter Tail Power proposed increases in these two monthly service charges to $13.30 and $21.50 per month, respectively. In its decision, the Commission approved the increases recommended by the Department that will result in service charges of $9.75 and $18.50 per month.

• With respect to alternative rate designs that encourage or support energy conservation, the Commission directed Otter Tail Power to commit to conducting research, working with stakeholders, and proposing alternative rate designs. The Commission also required Otter Tail Power to submit a report by April 1, 2018 that analyzes potential customer impacts of Fresh Energy's revenue decoupling mechanism and potential strategies for implementing revenue decoupling. [The purpose of a decoupling program is to remove the incentive for a utility to sell more electricity, and thereby its customers to use more, while still providing a mechanism for the utility to recover its allowed revenue requirement.]