Energy-Intensive Trade-Exposed (EITE) Competitive Rates
Understanding Energy-Intensive Trade-Exposed Rates
Taconite mines and paper mills are some of this region’s largest employers, and also require large amounts of electricity to produce their products. At times, energy is as much as 25 percent of the cost of production at these facilities, making energy prices a very important factor in whether their Minnesota-produced paper and mining products are competitive on the world market.
In June 2015, the Minnesota Legislature passed a law allowing Minnesota Power to propose new electric rates for these energy-intensive companies that operate in highly competitive markets. These rates, called EITE (Energy-Intensive, Trade-Exposed) rates, are intended to promote a healthy and stable regional economy. It should be noted these customers continually look for and implement energy conservation measures to run highly efficient operations.
On Sept. 15, 2016, the Minnesota Public Utilities Commission approved Minnesota Power’s plan to reduce the rate paid by these industrial companies by 5 percent. To make up the revenue lost to the EITE reduction, rates for residential, business and other classes of customers will increase. The amount of the increase for these customers will be set by the Minnesota Public Utilities Commission in early 2017. The rate reduction for industrial customers will not go into effect until rate increases for other customers have been approved. Minnesota Power’s reasons for supporting the new law are:
- Mining and paper companies in other parts of the world have become bigger players in the global marketplace for these products, threatening the success of important Northeastern Minnesota businesses. Lower energy prices are one of the reasons that foreign companies are successfully competing against companies operating in our region.
- As this region’s mining and paper industries remain competitive, it helps protect thousands of jobs – both within these industries and the other regional businesses that provide goods and services to large industrial companies and their employees. The mining and paper industries also sustain a strong property tax base, reducing homeowner taxes and supporting schools and government services.
- No one can predict the future success of any business. However, if our paper and mining companies are no longer competitive, residents in this region face a future that places the stability of jobs, taxes and electric rates at risk.
The proposed EITE rate is not the only step being taken to help these major employers stay competitive in the global market. As these companies continue to improve the efficiency of their operations – including their electric use – and lower costs in other areas, more competitive electric rates will further improve their ability to compete favorably with other companies in the paper and mining markets.
Minnesota Power strives to provide safe and reliable electricity to this region at a reasonable price. We also are committed to retaining and growing jobs in Northeastern Minnesota. We believe that an EITE rate helps meet these goals, and will benefit our other utility customers by encouraging a healthier regional economy for all.
Please email Minnesota Power at AskUs@Mnpower.com with any other questions that you have about EITE rates.
Answers to Questions about EITE Rates
The law declares that it is the state’s energy policy to ensure competitive rates for energy-intensive, trade-exposed businesses. This law also gives Minnesota Power permission to provide rate options to those customers, subject to the approval of state regulators.
The current plan includes 11 mining and paper companies that are eligible for this rate.
The Minnesota Public Utilities Commission will make the final decision, after input from state agencies, industrial customers, consumer groups and other interested stakeholders. By law, their decision must come within 90 days.
Large industrial customers that qualify for EITE rates will see an approximate 5 percent decrease in rates. To make up for the revenue lost to the EITE reduction, rates for residential, business and other classes of customers will increase. Minnesota Power’s original EITE filing included the rate changes in the table below. These rate changes have not been approved. The amount of the increase for these customers will be set by the Minnesota Public Utilities Commission in early 2017. The rate reduction for industrial customers will not go into effect until rate increases for other customers have been approved.
Estimated Customer Impact
|Average Rate Class Impact||Adjustment|
|Typical Average Monthly Bill ($/month)||$79.44|
|Average Increase ($/month)||$7.94|
|Typical Average Monthly Bill ($/month)||$284.33|
|Average Increase ($/month)||$4.62|
|Large Light & Power|
|Typical Average Monthly Bill ($/month)||$17,769.87|
|Average Increase ($/month)||$351.13|
|Typical Average Monthly Bill ($/month)||$622.50|
|Average Increase ($/month)||$10.98|
Because of our unique customer base, large industrial customers – who make up less than one percent of Minnesota Power customers – consume significantly more than half of our daily volume of electricity. They use large quantities of energy to operate things like 6,000 horsepower motors in taconite plants or large pulp grinding mills. As rates are reduced for those large industrial customers, other customers must pay more to offset the lost revenue and continue to support investments in the electric system.
Changes to the plan to address Public Utilities Commission concerns include lessening impact on residential customers, capping the number of customers eligible for the EITE rate, basing the rate increase on energy usage for all business customers and expanding outreach efforts to qualify additional low-income customers.
Minnesota Power’s low-income customers who are enrolled in heating assistance are exempt. And energy-intensive trade-exposed industrial customers that are not eligible for the EITE rate.
The proposal is revenue neutral, meaning that rates for most customers can increase only as much as is needed to offset the reduction in the rates for large industrial customers. Minnesota Power will not profit from the EITE rate change.
Conservation measures can help customers reduce energy use and potentially pay lower rates, which will help reduce the size of monthly energy bills. Interested customers should go to mnpower.com/EnergyConservation.
Minnesota Power regularly works with business customers to help manage energy use and reduce electric bills. Interested customers should go to mnpower.com/EnergyConservation/ForYourBusiness.
Even with an EITE rate increase, the typical residential electric bill for Minnesota Power customers would be less than neighboring electric utilities Xcel Energy and Lake Country Power. In addition, in a comparison with 175 investor-owned utilities across the United States, Minnesota Power customers would continue to have power costs that fall well within average rates for residential users.