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Regulatory Matters | 3 Months Ended
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Mar. 31, 2024
Regulated Operations [Abstract] |
Regulatory Matters | REGULATORY MATTERS Regulatory matters are summarized in Note 4. Regulatory Matters to the Consolidated Financial Statements in our 2023 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 $8.3 million for the three months ended March 31, 2024 ($16.4 million for the three months ended March 31, 2023). NOTE 2. REGULATORY MATTERS (Continued) 2024 Minnesota General Rate Case. On November 1, 2023, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase of approximately 12.00 percent for retail customers, net of rider revenue incorporated into base rates. The rate filing seeks a return on equity of 10.30 percent and a 53.00 percent equity ratio. On an annualized basis, the requested final rate increase would generate approximately $89 million in additional revenue. In separate orders dated December 19, 2023, the MPUC accepted the filing as complete and approved an annual interim rate increase of approximately $64 million, net of rider revenue, beginning January 1, 2024, subject to refund. On May 3, 2024, Minnesota Power entered into a settlement agreement with the Minnesota Department of Commerce, Minnesota Office of the Attorney General, Residential Utilities Division, and Large Power Intervenors to settle the retail rate increase request. The settlement agreement is subject to approval by the MPUC. As part of the settlement agreement, the parties have agreed on all issues, including an overall rate increase of $33.97 million, net of rider revenue and amounts transferring to the fuel adjustment clause, a return on equity of 9.78 percent, all non-financial items and cost allocation. As a result of the settlement, Minnesota Power recorded a reserve for an interim rate refund of $5.5 million pre-tax as of March 31, 2024, which is subject to MPUC approval of the settlement agreement and Minnesota Power’s refund calculation. 2022 Minnesota General Rate Case. Minnesota Power is appealing with the Minnesota Court of Appeals (Court) specific aspects of the MPUC’s February 2023 and May 2023 rate case orders for the ratemaking treatment of Taconite Harbor and Minnesota Power’s prepaid pension asset. Oral arguments on the appeal are expected to be heard by the Court in the second quarter of 2024 with a decision expected in the third quarter of 2024. We are unable to predict the outcome of this proceeding. 2024 Wisconsin General Rate Case. On March 29, 2024, SWL&P filed a rate increase request for its electric, gas and water utilities with the PSCW. The filing seeks an overall return on equity of 10.00 percent and a 55.00 percent equity ratio. On an annualized basis, the requested change would increase rates by approximately 5.90 percent for retail customers and generate an estimated $7.3 million of additional revenue. The change to SWL&P customers’ rates will be determined by the PSCW later this year. Any rate adjustments are anticipated to become effective in January 2025. Transmission Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on a current basis for certain transmission investments and expenditures, including a return on the capital invested. Current customer billing rates are based on an MPUC order dated December 19, 2023, which provisionally approved Minnesota Power’s latest transmission factor filing submitted on October 24, 2023. Updated billing rates were included on customer bills starting in the first quarter of 2024, and the MPUC approved Minnesota Power’s transmission factor filing with no changes in an order dated March 5, 2024. 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 October 3, 2023. On March 27, 2024, 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 beginning October 1, 2024. Solar Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on a current basis for solar costs related to investments and expenditures for meeting the state of Minnesota’s solar energy standard. Current customer billing rates were approved by the MPUC in an order dated December 26, 2023. Updated billing rates were included on customer bills starting in the first quarter of 2024. Fuel Adjustment Clause. Minnesota Power 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 approximately $13 million regulatory liability as of March 31, 2024, and December 31, 2023. Minnesota Power requested to refund the regulatory liability beginning in the third quarter of 2024 as part of its annual true-up filing submitted to the MPUC on March 1, 2024. NOTE 2. REGULATORY MATTERS (Continued) Energy Conservation and Optimization (ECO) Plan. On April 1, 2024, Minnesota Power submitted its 2023 ECO annual filing (formerly the Conservation Improvement Plan) detailing Minnesota Power’s ECO plan results and requesting a financial incentive of $2.2 million, which will be recognized upon approval by the MPUC. In 2023, a financial incentive of $2.2 million was recognized in the third quarter upon approval by the MPUC of the 2022 ECO annual filing. The financial incentives are recognized in the period in which the MPUC approves the filing. 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 | March 31, 2024 |  | December 31, 2023 |  |
Millions |  |  |  |  |
Current Regulatory Assets (a) |  |  |  |  |
Fuel Adjustment Clause | $8.1 |  |  | $8.7 |  |  |
Other | 0.6 |  |  | 0.6 |  |  |
Total Current Regulatory Assets | $8.7 |  |  | $9.3 |  |  |
Non-Current Regulatory Assets |  |  |  |  |
Defined Benefit Pension and Other Postretirement Plans | $217.3 |  |  | $218.6 |  |  |
Income Taxes | 85.1 |  |  | 88.1 |  |  |
Asset Retirement Obligations | 38.3 |  |  | 37.7 |  |  |
Cost Recovery Riders | 27.6 |  |  | 33.8 |  |  |
Taconite Harbor | 18.3 |  |  | 20.9 |  |  |
Manufactured Gas Plant | 13.1 |  |  | 13.2 |  |  |
PPACA Income Tax Deferral | 3.9 |  |  | 3.9 |  |  |
Fuel Adjustment Clause | 2.1 |  |  | 5.0 |  |  |
Other | 3.3 |  |  | 4.2 |  |  |
Total Non-Current Regulatory Assets | $409.0 |  |  | $425.4 |  |  |
Current Regulatory Liabilities (b) |  |  |  |  |
Fuel Adjustment Clause | $9.0 |  |  | — |  |  |
Provision for Interim Rate Refund | 5.5 |  |  | — |  |  |
Transmission Formula Rates Refund | 1.0 |  |  | $1.5 |  |  |
Other | 1.6 |  |  | 2.4 |  |  |
Total Current Regulatory Liabilities | $17.1 |  |  | $3.9 |  |  |
Non-Current Regulatory Liabilities |  |  |  |  |
Income Taxes | $302.3 |  |  | $310.0 |  |  |
Wholesale and Retail Contra AFUDC | 77.3 |  |  | 78.0 |  |  |
Plant Removal Obligations | 69.3 |  |  | 67.0 |  |  |
Defined Benefit Pension and Other Postretirement Benefit Plans | 45.5 |  |  | 48.6 |  |  |
Non-Jurisdictional Land Sales | 35.1 |  |  | 30.2 |  |  |
Investment Tax Credits | 13.5 |  |  | 13.6 |  |  |
Fuel Adjustment Clause | 8.2 |  |  | 15.5 |  |  |
Boswell Units 1 and 2 Net Plant and Equipment | 6.7 |  |  | 6.7 |  |  |
Other | 6.1 |  |  | 4.4 |  |  |
Total Non-Current Regulatory Liabilities | $564.0 |  |  | $574.0 |  |  |
(a)Current regulatory assets are presented within Prepayments and Other on the Consolidated Balance Sheet. (b)Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet.

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