September 29, 2008

PRESS RELEASE

MP RAISING RATES ANOTHER 10+% TO THE MUNICIPAL UTILITES

At a meeting held Wednesday, September 24, 2008 in Grand Rapids, Minnesota Power (MP) announced another rate increase to the now eighteen Municipal Utilities they serve in Northeastern Minnesota.  This estimated 10+% rate increase will take effect January 1, 2009 and is on top of the almost 12% rate increase approved by the Federal Regulatory Energy Commission (FERC) on March 1, 2008.  Unlike residential ratepayers served directly by MP, the Federal Government (FERC) and not the State Public Utility Commission (MPUC) regulate wholesale rates to the Municipal Utilities.

At this meeting MP explained they were not going to apologize for the increases.   MP pointed out the reason for the increase is the rising cost of energy (coal, diesel, natural gas, etc.) and the increased cost of capital for compliance with regulated environmental requirements and renewable mandates passed by the State of Minnesota.  MP said rate increases using the new formula rate structure approved by FERC on March 1, 2008 will likely be adjusted annually.  The norm will be ever increasing rates.  In fact, they said the day of $0.06 to $0.07 power rates are gone and we are fast approaching $0.10 power, which will be the new norm.

This additional rate increase was not unexpected.  What was expected was going through 2009 with fuel adjustments, but not a rate increase.  The municipals anticipated another FERC filed formula rate adjustment (rate increase) sometime in 2010.

So what does this mean for the ratepayers in the City of Virginia?  The demand rate will increase from pre-March 1, 2008 rate of $8.89 and the post-March 1, 2008 rate of $10.24 to the new rate of  $11.90 on January 1, 2009.  You should also know that the Virginia Public Utility, along with other Municipals, are working with MP to determine if there are ways to reducing the impact on the announced increases.  There will be a meeting in October to determine available alternatives.

If you have questions, please address them to Terry Leoni, General Manager of the Virginia Public Utility.