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Regulatory Matters | 6 Months Ended
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Jun. 30, 2023
Regulated Operations [Abstract] |
Regulatory Matters [Text Block] | REGULATORY MATTERS Regulatory matters are summarized in Note 4. Regulatory Matters to the Consolidated Financial Statements in our 2022 Form 10-K, with additional disclosure provided in the following paragraphs. Electric Rates. Entities within our Regulated Operations segment file for periodic rate revisions with the MPUC, PSCW or FERC. As authorized by the MPUC, Minnesota Power also recognizes revenue under cost recovery riders for transmission, renewable, and environmental investments and expenditures. Revenue from cost recovery riders was $31.5 million for the six months ended June 30, 2023 ($11.9 million for the six months ended June 30, 2022). 2022 Minnesota General Rate Case. On November 1, 2021, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase of approximately 18 percent for retail customers. The rate filing sought a return on equity of 10.25 percent and a 53.81 percent equity ratio. On an annualized basis, the requested final rate increase would have generated approximately $108 million in additional revenue. In an order dated February 28, 2023, the MPUC made determinations regarding Minnesota Power’s general rate case including allowing a return on common equity of 9.65 percent and a 52.50 percent equity ratio. Upon commencement of final rates, we expect additional revenue from base rates of approximately $60 million and an additional $10 million in revenue recognized under cost recovery riders on an annualized basis. On March 20, 2023, Minnesota Power filed a petition for reconsideration with the MPUC requesting reconsideration and clarification of certain decisions in the MPUC’s order. Minnesota Power’s petition included requesting reconsideration of the ratemaking treatment of Taconite Harbor and Minnesota Power’s prepaid pension asset as well as clarification on interim rate treatment for sales to certain customers that did not operate during 2022. The MPUC denied the requests for reconsideration in an order dated May 15, 2023, and provided clarification in support of the interim rate refund treatment for sales to certain customers that did not operate during 2022. Final rates are expected to commence in the third quarter of 2023; interim rates will be collected through this period with reserves recorded as necessary. Minnesota Power has recorded a reserve for an interim rate refund of $31.8 million pre-tax as of June 30, 2023 ($18.4 million as of December 31, 2022), which is subject to MPUC approval of Minnesota Power’s compliance filing and interim rate refund calculation that was submitted to the MPUC on June 14, 2023. On June 14, 2023, Minnesota Power filed notice with the Minnesota Court of Appeals (Court) to appeal specific aspects of the MPUC’s rate case orders. Minnesota Power is appealing the ratemaking treatment of Taconite Harbor and Minnesota Power’s prepaid pension asset. We are unable to predict the outcome of this proceeding. Renewable Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on a current basis for the costs of certain renewable investments and expenditures, including a return on the capital invested. Current customer billing rates for the renewable cost recovery rider were approved by the MPUC in an order dated January 24, 2023. On March 29, 2023, Minnesota Power submitted its latest renewable factor filing. If the filing is approved, Minnesota Power would be authorized to include updated billing rates on customer bills. Fuel Adjustment Clause. Minnesota Power incurred higher fuel and purchased power costs in 2022 than those factored in its fuel adjustment forecast filed in May 2021 for 2022, which resulted in the recognition of an approximately $13 million regulatory asset in 2022. Minnesota Power requested recovery of the regulatory asset over 12 months as part of its annual true-up filing submitted to the MPUC on March 1, 2023, which was approved by the MPUC in an order dated July 31, 2023. We expect to begin recovery of the regulatory asset in the third quarter of 2023. Minnesota Power has incurred lower fuel and purchased power costs in 2023 than those factored in its fuel adjustment forecast filed in May 2022 for 2023, which resulted in the recognition of an $17.8 million regulatory liability as of June 30, 2023. Energy Conservation and Optimization (ECO) Plan. On April 3, 2023, Minnesota Power submitted its 2022 ECO, formally known as the conservation improvement program, annual filing detailing Minnesota Power’s ECO plan results and proposed financial incentive, which was approved by the MPUC at a hearing on July 20, 2023. As a result, Minnesota Power recognized revenue of $2.2 million for the approved financial inventive in the third quarter of 2023. A financial incentive of $1.9 million was recognized in the second quarter of 2022 upon approval by the MPUC of Minnesota Power’s 2021 ECO annual filing. The financial incentives are recognized in the period in which the MPUC approves the filing. NOTE 2. REGULATORY MATTERS (Continued) On June 30, 2023, Minnesota Power submitted its triennial filing for 2024 through 2026 to the MPUC and Minnesota Department of Commerce, which outlines Minnesota Power’s ECO spending and energy-saving goals for those years. Minnesota Power’s investment goals are $12.5 million for 2024, $12.7 million for 2025 and $12.8 million for 2026, subject to MPUC and Minnesota Department of Commerce approval. Regulatory Assets and Liabilities. Our regulated utility operations are subject to accounting standards for the effects of certain types of regulation. Regulatory assets represent incurred costs that have been deferred as they are probable for recovery in customer rates. Regulatory liabilities represent obligations to make refunds to customers and amounts collected in rates for which the related costs have not yet been incurred. The Company assesses quarterly whether regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. The recovery, refund or credit to rates for these regulatory assets and liabilities will occur over the periods either specified by the applicable regulatory authority or over the corresponding period related to the asset or liability.
Regulatory Assets and Liabilities | June 30, 2023 |  | December 31, 2022 |  |
Millions |  |  |  |  |
Current Regulatory Assets (a) |  |  |  |  |
Fuel Adjustment Clause | $15.7 |  |  | $25.6 |  |  |
Total Current Regulatory Assets | $15.7 |  |  | $25.6 |  |  |
Non-Current Regulatory Assets |  |  |  |  |
Defined Benefit Pension and Other Postretirement Plans | $223.6 |  |  | $225.9 |  |  |
Income Taxes | 93.3 |  |  | 97.6 |  |  |
Cost Recovery Riders | 42.4 |  |  | 41.2 |  |  |
Asset Retirement Obligations | 36.6 |  |  | 35.6 |  |  |
Taconite Harbor (b) | 27.1 |  |  | — |  |  |
Fuel Adjustment Clause | 5.4 |  |  | 14.5 |  |  |
Manufactured Gas Plant | 14.3 |  |  | 15.1 |  |  |
PPACA Income Tax Deferral | 4.0 |  |  | 4.1 |  |  |
Other | 7.8 |  |  | 7.0 |  |  |
Total Non-Current Regulatory Assets | $454.5 |  |  | $441.0 |  |  |
Current Regulatory Liabilities (c) |  |  |  |  |
Provision for Interim Rate Refund (d) | $31.8 |  |  | $18.4 |  |  |
Transmission Formula Rates Refund | 2.5 |  |  | 4.9 |  |  |
Other | 2.1 |  |  | 0.1 |  |  |
Total Current Regulatory Liabilities | $36.4 |  |  | $23.4 |  |  |
Non-Current Regulatory Liabilities |  |  |  |  |
Income Taxes | $320.7 |  |  | $332.5 |  |  |
Wholesale and Retail Contra AFUDC | 79.3 |  |  | 80.7 |  |  |
Plant Removal Obligations | 63.7 |  |  | 60.0 |  |  |
Fuel Adjustment Clause | 17.8 |  |  | — |  |  |
North Dakota Investment Tax Credits | 16.6 |  |  | 16.9 |  |  |
Defined Benefit Pension and Other Postretirement Benefit Plans | 13.8 |  |  | 17.6 |  |  |
Non-Jurisdictional Land Sales | 12.7 |  |  | 7.5 |  |  |
Boswell Units 1 and 2 Net Plant and Equipment | 6.7 |  |  | 6.7 |  |  |
Other | 6.7 |  |  | 4.2 |  |  |
Total Non-Current Regulatory Liabilities | $538.0 |  |  | $526.1 |  |  |
(a)Current regulatory assets are presented within Prepayments and Other on the Consolidated Balance Sheet. (b)In the first quarter of 2023, Minnesota Power retired Taconite Harbor Units 1 and 2. The remaining net book value was reclassified from property, plant and equipment to a regulatory asset on the Consolidated Balance Sheet when the units were retired. Minnesota Power expects to receive recovery of the remaining net book value from customers. (c)Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet. (d)See 2022 Minnesota General Rate Case.

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