Electric rates are the buzz in 2022

Electric bills in 2022 may be a bit more shocking to some consumers.

Skyrocketing inflation is pushing up costs for power poles, electrical line, transformers and other materials.

“We’re seeing a 30% increase in costs,” said Mark Bakk, general manager of Lake Country Power, the largest geographical rural electric cooperative in Minnesota. “The most pressing factors are the costs and the supply chain materials.”

At some utilities, costs associated with a move to more renewable energy is contributing to higher electricity costs.

“It’s driven most of our investments over the past 15 years,” said Frank Fredrickson, Minnesota Power vice president of customer experience. “Over that time period, our rates have increased 2-3% (annually), which is fairly close to the rate of inflation, not the hyperinflation we’re seeing now.”

Lake Country Power and Minnesota Power have both rolled out rate increases for 2022.

Lake Country Power’s 43,000 members in eight Northern Minnesota counties will see a 1.67 cent per kilowatt hour general service rate increase effective March 1. The rate increase amounts to a $10 to $16 increase for the cooperative members who use between 600 and 1,000 kilowatt hours per month, according to the cooperative.

Increased materials costs are driving much of the rate increase, according to Lake Country Power officials. The cost of a substation transformer has increased $350,000 to about $500,000, said Derek Howe, chief operating officer. The price of overhead wire has shot up 51%. PVC conduit is up 500%, he said.

And with the nation’s supply chain in disarray, electric providers are having a hard time getting what they need. That means a need to order materials a year or two ahead of time. “Lead times are 100 weeks or more,” said Howe. “I know that at Crow Wing Cooperative, they’re planning orders for 2024 already.” 

Within the last year, energy prices across the nation have gone through the roof. Gas, diesel fuel, natural gas and propane prices are already putting dents in customers pocketbooks across the nation.

Bakk said there’s no indication when electricity prices might stabilize.

“We’re hoping things come back to normal and level off,” said Bakk. “We’re certainly understanding that people are feeling it from all angles, but we have to continue to operate reliably.”

At Minnesota Power, a 7% interim rate effect for residential customers and 14% increase for all other customers went into effect Jan. 1. Minnesota Power reduced its interim residential rate request for residential customers from 14% as other inflationary costs hit consumers. “Part of the reason we did that was we realized our residential customers were struggling,” said Fredrickson.

A Minnesota Power rate filing with the Minnesota Public Utilities Commission (MPUC) requesting an approximate 18% across-the-board increase likely will be decided in early 2023 by the MPUC, according to Minnesota Power.

Minnesota Power is currently providing 50% renewable to its residential, business and industrial customers.

The company’s EnergyForward plan has a goal of carbon-free electrical production by 2050.

Changes in revenue, expenses related to EnergyForward, evolving customer energy demand, business operations and regulatory requirements since the company’s last rate review in 2016 all factor into the recent rate request, according to Minnesota Power. 

“Investing in clean energy and the grid and modernization of the grid is what is going into the rate increase,” said Fredrickson. “For Minnesota Power, we’ve been continuing to invest in a more sustainable system under our EnergyForward plan.”

As the Biden administration makes a push for more renewable energy and electric vehicles, and moves away from coal-powered electricity production, the nation is going through a major change in the way energy is generated, said Amy Rutledge, Minnesota Power manager, corporate communications. 

“Our energy industry in general is undergoing a huge transformation, and we do have an ambitious one,” said Rutledge. “We want to get to 100% (carbon-free) by 2050, but we want to do it affordably. The industry is undergoing significant change and it requires investment.” 

Across rural areas of Minnesota, electric cooperatives are generally trying to stave off increasing rates, said Darrick Moe, Minnesota Rural Electric Association president and CEO. Electricity providers to Minnesota cooperatives are for the most part keeping wholesale rates flat for 2022, he said. 

“Generally, across the state, cooperatives are trying to hold the line,” Moe said. “They’ve been able to hold the line on smaller rates than the investor-owned utilities are proposing. We’re in much better shape than Xcel (Energy) or Minnesota Power.” 

Energy prices as a whole have increased 33% across the nation, according to the U.S. Bureau of Labor Statistics, said Moe.

“I think we’re definitely seeing energy costs going up in general, and that it’s having an impact on the electric industry as well,” said Moe. “The price of (natural) gas has gone up in the last year and natural gas is a major source of energy to make electricity.”

At Superior Water Light & Power, rates are remaining the same in 2022, according to Joscelyn Skandel, manager, regulatory compliance, policy and rates. However, the utility will file a rate case with the Public Service Commission of Wisconsin, she said. The amount of the Superior Water Light & Power rate filing has not yet been determined. Typically, utilities in Wisconsin file rate cases every two years, but a 2020 Superior Water Light & Power rate filing was deferred until 2022 due to the pandemic. Once a rate case is filed, it usually takes about eight months for a determination. Any rate increase would take effect Jan. 1, 2023, she said.

“Normal reasons utilities file rate cases are investments in their systems to ensure safe and reliable energy and water services and SWL&P is no different,” said Skandel via email. “We continuously make improvements to our electric, gas and water systems.”

Superior Water Light & Power, with 15,000 electric, 13,000 gas and 10,000 water customers, purchases its electricity from Minnesota Power.

On the North Shore, Cooperative Light & Power hasn’t raised rates in 10 years and doesn’t anticipate a rate increase in 2022 to its 6,800 members unless costs worsen, said Hal Halpern, general manager. “But that could change if we have a major storm or larger increases in materials and fuel costs than what we’re seeing,” Halpern said. “Our materials costs have gone up about 30%, but we had a good stock in advance of this before COVID struck.”

Halpern said he’s aware of other cooperatives raising rates, but each cooperative is structured differently with differing services. Cooperative Light & Power distributes electricity in rural areas from north of Duluth to Finland. “I know a lot of the others are increasing rates, and I know there are a lot of material costs and delays,” said Halpern. “But we have a good inventory.”