DULUTH -- Minnesota Power customers will see bills go up beginning Jan. 1.

The Minnesota Public Utilities Commission on Thursday morning, Dec. 2, unanimously approved raising rates for the company's residential customers by 7.11% and its industrial and commercial customers by 14.23%. The rates will be in place while regulators consider the company's full 17.58% rate hike request.

Under the interim rates approved Thursday, the typical residential customer would see monthly bills increase by about $5.89, according to the company.

In November, the Duluth-based utility company and two consumer advocacy groups agreed to cut the temporary rate increase for residential customers by half — from 14.23% to 7.11% — to help lessen the blow to customers affected by the COVID-19 pandemic.

During deliberations Thursday, Commissioner Valerie Means said she supported such a move because of the size of the increase and its timing during pandemic, especially when the moratorium on service disconnection has ended and many residential customers are still behind on electric bills..

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"While there's no specific data in this record, the commission can take judicial notice, if you will, that the pandemic has had negative impacts on the economy, and that residential customers have been affected and can make a finding that this unusual situation — unique in Minnesota's history and unique in the commission's regulatory history — demands unusual action," Means said.

In a Thursday afternoon news release, Minnesota Power the approval was "the first step of a longer process to evaluate Minnesota Power’s most recent request to change its rates."

“We appreciate the MPUC’s approval of interim rates and the efforts of stakeholders to reach a compromise on a reduced interim rate for our residential customers,” Minnesota Power Chief Operating Officer Josh Skelton said in the release.

In the joint letter filed last month by Minnesota Power, Energy Cents Coalition and Citizens Utility Board of Minnesota, the company said it would support the 50% cut in the residential interim rate hike if regulators allowed them to "establish a tracker for future recovery of the difference between proposed and approved interim residential rates."

The Large Power Intervenors — a coalition of Northeastern Minnesota paper companies, taconite plants and other industries that are Minnesota Power's largest customers — said in comments filed in November that they were "concerned that tracker recovery may be sought from all ratepayers rather than just the residential customers," and wanted to make sure that any difference was recovered from residential customers instead of other customer classes.

The commission did approve a tracker, but stopped short of approving future recovery. Commissioner John Tuma introduced language adopted into the order that said the residential interim rates were subject to adjustment as the full rate case plays out.

"Interim rates for residents are going to be 50% lower — that's locked in," Tuma said Thursday. "But there could be some adjustments that occur around that fact in refund or whatever other mechanism they can legally say that they can do."

The rates approved Thursday will take effect Jan. 1 and remain in place as regulators consider the company's full request of a 17.58% rate increase. It can take 12-18 months for a final rate to be approved.

If that full increase is approved, the typical residential customer would see bills increase by about $15.08 per month and a small business could see an increase of $55 per month, the company said.

If regulators settle on a lower amount than the interim rate, the company will return the difference to customers.

The full increase would generate $108.3 million for the company, which said it plans to use the funds for investments in greener energy production and improved transmission. The company also needs to offset the loss of industrial customers like Verso's Duluth paper mill, the idling of a machine at the UPM Blandin paper mill in Grand Rapids in 2017 and "load loss due to energy efficiencies also reduced revenue," the company said in documents filed in November.