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Minnesota Energy Resource Coorporation (MERC) rate increases

Fri, Feb 28th, 2014
Posted in All Features

A request was made by a Fillmore County Journal reader to look into the “customer charge” and “per unit charge” increases requested by MERC last fall.

MERC has many local natural gas customers in Rochester and surrounding cities. MERC, a subsidiary of Integrys Energy Group, filed a request with the Minnesota Public Utilities Commission (PUC) to increase its natural gas rates by 5.52 percent overall or an increase of $14,187,597 in gross revenues on September 30, 2013. MERC has requested three rate increases since 2008, the last rate increase was three years ago.

My understanding is that the requested increase is not an increase in the base natural gas charge, but an increase in the retail natural gas rates which includes the wholesale cost of natural gas. For example, the rate increase for an average residential customer is expected to go from $8.50 to $11 per month, which taken by itself is greater than a 5.2 percent increase, but not when the whole bill is taken into account including the wholesale cost of natural gas.

The Minnesota PUC is tasked with regulating public utilities. A piece of their regulatory duties includes investigation into requested rate changes by large natural gas companies like MERC, which is the third largest distributor of natural gas in Minnesota.

In a press release the company called the requested increase modest and said it was to raise revenue to cover added costs due to “general inflation, property taxes, improvements to customer service programs, efforts to expand the customer base...and operations/maintenance projects to ensure reliability and safety for customers.” The company suggests they are experiencing increased costs due “to increased costs related to customer service functions and conservation programs.”

MERC expects that even with the rate increase residential customers will be paying less for natural gas than they did six years ago because the wholesale price of natural gas is considerably lower now than it was then.

MERC raises revenue to pay for the distribution of natural gas including infrastructure through the monthly customer charge, the per unit distribution charge, and the demand charge, if applicable. The wholesale price of natural gas is passed on to the customer directly “without adding a penny to the price.” The company’s revenue stream comes from these service charges to deliver natural gas and not from a mark up of the wholesale price of natural gas.

If the permanent rate changes are approved by the PUC, monthly bills will vary depending on the wholesale price of natural gas.

Late in November the PUC ordered MERC to include a customer notice in all bills about the interim rate increase. These rates, which went into effect on January 1, will be in effect until October, 2014, when the PUC hands down its decision on the requested authority for the permanent rate increase. “The overall interim rate increase is $10,526,156 or an average of 4.09 percent over current rates including the cost of gas.”

If the permanent rates are set lower than the interim rate, customers will be refunded the difference with interest. If they are set higher than the interim rate, customers will not be responsible for the difference.

The interim or temporary increase according to MERC is needed to produce sufficient revenue to cover costs and to prevent a “revenue deficiency.”

Customers will see differing effects on their monthly bills depending on “natural gas use and customer type.”

During this 10 month period of review and evaluation by the PUC, the Minnesota Department of Commerce investigates MERC’s books and records. The public comment period runs from December 19, 2013 through March 27, 2014. The local office for MERC is at 3460 Technology Drive NW, Rochester, Minn.

Comments can be e-mailed to or they can be mailed to Burl Haar, Executive Secretary, MN PUC, 121 7th Place East, Suite 350, St. Paul, MN 55101-2147. Include the docket number with your comments, PUC Docket Number G-011/GR-13-617.

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