Interim change in electric rateseffective

The process for reviewing Minnesota Power’s request As part of the MPUC review, the Minnesota Office of Energy Security (OES) reviews our request and examines our books and records.

The Office of the Attorney General-Residential Utilities Division (OAG-RUD) may also review this proposal, as well as other parties such as customer or public interest groups.

How to participate Public hearings will be scheduled and overseen by an Administrative Law Judge. Customers and the public are encouraged to attend the hearings and will have opportunities to comment on our rate request. Notice of the hearing dates and locations will be published in local newspapers in our service area, in a flyer enclosed with our electric service statements, and on www.mnpower.com.

Anyone who wishes to formally intervene in this case should contact: Office of Administrative Hearings PO Box 64620 St. Paul, MN 55164-0620 Phone: 651-361-7900 TTY: 651-361-7878 Email: Kathleen.sheehy@state.mn.us You do not need to contact the Administrative Law Judge if you simply want to attend the public hearings, provide oral comments at the public hearings, or submit comment letters.

You also may provide comments to the Minnesota Public Utilities Commission at:

121 Seventh Place East, Suite 350 St. Paul, MN 55101-2147

Phone: 651-296-0406

800-657-3782 TTY: Citizens with hearing or speech disabilities may call through Minnesota Relay at 800-627-3529 or 711 Email: consumer.puc@state.mn.us Written comments are most effective when the following three items are included: 1. The issue(s) in Minnesota Power’s proposal you are addressing.

2. Your specific recommendation.

3. The reason for your recommendation.

Please be sure to reference MPUC Docket No. E-015/GR09-1151 in all correspondence or requests.

Important: Comments will be made available to the public on the Commission’s Web site, except in limited circumstances consistent with the Minnesota Government Data Practices Act. The Commission does not edit or delete personal identifying information from submissions.

For more information You may visit Minnesota Power’s General Office Building between 8 a.m. and 5 p.m. Monday through Friday to examine our current and proposed rate schedules, and our request for new rates. Our offices are at: 30 West Superior Street Duluth, MN Phone: 218-722-2625 Please visit Minnesota Power’s Straight Energy Answers Web site at: www.straightenergyanswers.com for more information.

Or you may contact the Department of Commerce at:

85 Seventh Place East, Suite 500 St. Paul, MN 55101

Phone: TTY:

Web:

651-296-9314 Citizens with hearing or speech disabilities may call through Minnesota Relay at 800-627-3529 or 711 https://www.edockets.state.mn.us/ EFiling/search.jsp

Search by docket number: Select 09 in the year field, enter 1151 in the number field, click on search, and the list of documents will appear on the next page.

J-52471 ITR

Interim change in electric rates effective January 1, 2010

Minnesota Power’s rate increase request

The interim increase also applies to two line items that will appear on all customer bills:

Minnesota Power has asked the Minnesota Public Utilities Commission (MPUC) for permission to increase its electric rates by approximately $81 million, or about 18.9% overall.

Depending on customer rate class and customer usage, the actual percent will vary.

1. Fuel/Purchased Energy—This is the amount of the average budgeted fuel and purchased energy costs for 2010. The Resource Adjustment line item on your bill will reflect any costs over or under the budgeted amount.

We have proposed changes to monthly service charges and energy rates for most customers, and demand rates for larger commercial and industrial customers. We have also proposed a new discounted rate called the lifeline rider for income eligible residential customers.

Why Minnesota Power is asking for an increase at this time The production and delivery of electric energy is undergoing major changes. As a utility, we are investing in our system so we can continue to provide reliable, efficient and cleaner energy to our customers. This investment has been underway for several years and is causing a series of rate increases right now.

This rate increase will help to pay for new environmental pollution controls to reduce emissions at our largest facility, Boswell Energy Center in Cohasset, maintenance and upgrades to our overall system to ensure continued reliability, and investment and maintenance costs associated with acquiring an existing powerline that will ultimately deliver wind energy from North Dakota to our customers in Minnesota.

What Minnesota Power is doing to manage costs We’re all taking necessary actions in the face of a tough economy. For us, that has meant taking a hard look at our staffing levels this year, reducing our workforce, and instituting pay freezes to cut costs. The investments we have made and continue to make in our system are necessary to ensure reliable service our customers expect and to meet Minnesota’s aggressive environmental and renewable goals.

How interim rates will affect your bill While the MPUC considers our request, state law allows us to collect higher rates on an interim basis. The overall interim rate increase is about $48.5 million, or an average of 11.34% over current rates. This rate increase appears on your bill as “Interim Rate Adjustment” for service used on and after January 1, 2010. The interim increase applies to all major components of your bill. For Residential and small General Service customers, those charges include the monthly minimum charge and energy charges. For all other customers, the increase applies to the customer charge, energy charges, and the demand charge.

2. Bos 3/2009 Transmission—Includes transmission project costs and investments made in environmental upgrades to Boswell Unit 3 that will be rolled into base rates.

The MPUC has twelve months to evaluate our request and will make its decision regarding final rates by November 2010. If final rates are lower than interim rates, Minnesota law states the utility will refund the difference to customers with interest. If final rates are higher than interim rates, Minnesota law states that the Commission will determine how the utility will recover the difference in revenues between the date of the Commission’s final order and the date the new rates are put into effect.

The tables on this page show the effect of the interim and proposed rate change on monthly bills for an average customer in each customer class. Monthly increases include all line items on bills except sales taxes and municipal franchise fees, and may vary by individual customer based on usage characteristics.

Proposed change in monthly electricity costs Average monthly kWh usage

Customer classification

755 755 326 1,667 1,143 2,623 5,609 19,719 203,850 43,269,676 404

Residential Residential Lifeline Seasonal Residential Residential Controlled Access Dual Fuel – Residential General Service Dual Fuel – Commercial & Industrial Municipal Pumping Large Light and Power Large Power Street and Area Lighting

Residential Service Minimum Monthly Service Charge—$/Month Residential Residential – Lifeline Residential – Seasonal Residential – Controlled access service Residential – Dual fuel interruptible

Interim monthly increase

$65 $65 $38 $95 $72 $226 $309 $1,450 $13,109 $2,013,034 $53

Proposed final monthly increase $13 $8 $8 $18 $12 $44 $58 $285 $2,328 $358,411 $7

$7 $7 $4 $11 $8 $25 $35 $163 $1,467 $217,035 $6

Commercial and Industrial Service Current $8.00 $8.00 $8.80 $8.00 $8.00

Proposed $9.75 $8.00 $11.00 $9.75 $9.75

Energy Rates—$/kWh Residential 1st 50 kWh or less next 300 kWh all additional kWh Residential – Lifeline 1st 50 kWh or less next 300 kWh all additional kWh Seasonal Controlled access service Dual fuel interruptible

Previous monthly costs

Minimum Monthly Service Charge—$/Month

Current

Proposed

General Service (with or without demand meter)

$10.50

$13.30

C & I (Dual Fuel Service & Controlled Access Service)

$10.50

$13.30

Municipal Pumping (with or without demand meter)

$10.50

$13.30

$.07084

$.08895

$.05020 $4.87

$.06295 $6.10

$.04300 $.04025

$.05500 $.05200

$.07854

$.09500

$.04284 $5.81

$.05799 $6.28

Demand and Energy Rates $0.00 $.04773 $.08004

$0.00 $.06966 $.09650

$0.00 $.04773 $.08004 $.07574 $.03943 $.04300

$0.00 $.05700 $.09650 $.09500 $.05100 $.05500

General Service without demand meter ($/kWh) with demand meter energy charge ($/kWh) demand charge ($/kW) C & I Dual Fuel Service ($/kWh) low voltage high voltage Municipal Pumping without demand meter ($/kWh) with demand meter energy charge ($/kWh) demand charge ($/kW)