On November 2, 2009, just one day after the Minnesota Public Utilities Commission’s (the “Commission’s”) final order in Minnesota Power’s 2008 rate case, Minnesota Power filed its largest petition ever to increase electric rates. As part of its petition, and consistent with Minnesota law, Minnesota Power sought to impose interim rates – the rates Minnesota utilities are permitted to collect while a petition to increase rates is pending. The size of any interim rate increase is generally dictated by Minnesota law. A number of parties opposed Minnesota Power’s interim rate increase, claiming exigent circumstances justified deviation from the statutory formula.
The Commission agreed. It determined that the confluence of the following three circumstances justified a finding of exigent circumstances: (i) the size of Minnesota Power’s request, (ii) the state of the economy, and (iii) the fact that the 2009 rate case was filed on the heels of the 2008 rate case. As a result, the Commission set interim rates at approximately 60% of Minnesota Power’s overall request – $25 million less than Minnesota Power’s interim rate request. Minnesota Power appealed the Commission’s decision to the Minnesota Supreme Court, which affirmed the Commission’s decision in an opinion issued on September 18.
In large part, the Minnesota Supreme Court deferred to the Commission’s interpretation of Minnesota’s interim rate statute, finding of exigent circumstances, and revised calculation for setting interim rates. Of particular note is the part of the court’s opinion distinguishing Bluefield Water Works & Improvement Co. v. Public Service Commission of West Virginia, 262 U.S. 679 (1923). Minnesota Power cited Bluefield for the proposition that the constitutional due process requirement that rates be sufficient to recover cost of service must inform the Commission’s decision in finding exigent circumstances. The court disagreed. It found that Bluefield and other similar State decisions “do not address the issue of the recovery of cost of service by interim rates set temporarily as part of a larger administrative process designed to determine final rate levels.” The court affirmed the Commission’s decision.