HF4236

Purpose

This bill changes how interim (temporary) rate increases for public utilities are set while a rate case is moving through the Minnesota Public Utilities Commission. It creates a specific process for interim rates, aims to protect customers from overcharges, and outlines refunds or revenue recovery if interim rates are too high or too low.

Key concepts and terms

• interim rate schedule
• interim rate increase
• public utility
• Public Utilities Commission (the “commission”)
• initial filing date
• final determination
• test year cost of capital
• rate base
• expenses
• rate of return on common equity
• rate design
• general rate case
• rehearing and appeal (and exceptions)
• four-month delay
• four-month suspension
• exigent circumstances
• refunds and interest
• extension for settlement discussions
• recovery of revenue differences
• attorneys’ fees and court costs
• extension of time for refunds

Main provisions

• Timing and grant of interim rates: The commission must issue an interim rate schedule within 60 days after the utility’s initial filing, and it will be ordered ex parte (without a public hearing). This interim schedule cannot be reheard or appealed until the final determination is made.
• Basis for interim rates: Unless there are exigent circumstances, the interim rates are calculated using the proposed test year cost of capital, rate base, and expenses, and must include a rate of return on common equity equal to what the commission authorized in the utility’s most recent rate proceeding. There can be no change in the existing rate design. For a utility without a prior commission determination, the interim rates may be based on the commission’s most recent determination for a similar utility. Interim rate increases are capped at 5% relative to the existing rates.
• Reconciliation at final determination: If the final determination shows interim rates are higher than the final approved rates, the utility must refund the excess (with interest) within 120 days. If the interim rates are lower than the final rates, the commission must specify how the utility will recover the revenue difference from the date of the final determination to when the new rates take effect. If there is a settlement extension, the utility may recover the revenue difference for the length of that extension.
• Enforcement and timing of refunds: If refunds are not paid, the commission may sue to recover refunds, plus interest, and may also recover attorney fees and costs related to administering refunds. Action to recover refunds must be brought within two years after (the end of) the refund period set by the commission.
• Conditions on when interim rates can be ordered: In a general rate case, the commission cannot order interim rates to take effect until at least four months after it issues a final determination on any previously filed rate change, unless:
  • delaying four months would unreasonably burden the utility, its customers, or shareholders, and earlier interim rates are necessary; or
  • the utility files a second general rate case at least 12 months after a previous general rate case for which the suspension period was extended.
• Relationship to existing processes: These interim rate procedures operate alongside existing suspension, rehearing, appeal, and final-determination processes but provide a distinct, expedited path for interim rates during rate proceedings.

Process and implications

• Expedited interim rates: The process prioritizes a fast, ex parte interim rate schedule to keep utilities funded during proceedings, with limited ability to challenge until a final order is issued.
• Protections for customers: If interim rates are later found too high, refunds (plus interest) must be paid promptly; if too low, a method is set to recover the difference.
• Financial accountability: The bill emphasizes clear tracking of cost components (test year cost of capital, rate base, expenses, and equity return) and restricts changes to rate design during the interim period.
• Legal and time limits: Refund-related actions have specific time limits, and the commission can seek costs and attorneys’ fees if refunds are not paid on time.

Significance and potential impact

• Faster availability of interim utilities funding during rate cases could reduce delays in projects or operations, but introduces a cap and a refund mechanism to protect customers.
• The 5% cap and reliance on most recent rate proceedings for determining interim rates provide a predictable framework, though they may limit how interim rates respond to changing conditions.
• The balance between quick interim pricing and protections against overcharging or under-recovering revenue is reinforced by strict final-determination reconciliation requirements and enforcement provisions.

Relevant Terms interim rate schedule; interim rate increase; public utilities commission; initial filing date; final determination; test year cost of capital; rate base; expenses; rate of return on common equity; currently effective order; most recent rate proceeding; existing rate design; ex parte; public hearing; four months after final determination; general rate case; suspension; exponents of refunds; interest; refunds; extension for settlement discussions; recovery of difference in revenues; the date of final determination; second general rate case; rehearing; appeal; exigent circumstances; unreasonable burden; attorneys’ fees; court costs.