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Otter Tail rate request trimmed

ST. PAUL - Regulators gave Otter Tail Power Co. its first rate increase in two decades, but trimmed the utility's request in half.

The Minnesota Public Utilities Commission approved the increase Thursday, allowing the Fergus Falls-based utility to estimate it will collect an additional $3.8 million annually from its Minnesota customers.

Otter Tail Power officials said that should mean an average rate increase of 2.9 percent for the 60,700 customers in western and northern Minnesota.

Otter Tail Power initially sought $14.5 million in new revenue but that was brought down to $8.26 million during rate case proceedings. Otter Tail Power said its request would have resulted in an average rate hike of 6.7 percent.

The four-member commission decided more than three dozen utility revenue and expense factors that will determine Otter Tail Power's actual revenue increase. That amount and the rate increase ratepayers will see is not yet known, said Janet Gonzalez, the commission's energy unit manager.

An interim average rate hike of 5.4 percent was set shortly after the request was filed last year. Since the new average rate hike will be less than that, customers will be refunded the difference. That refund will appear on their first bill after the new rate takes effect, possibly by October.

Otter Tail Power President Chuck MacFarlane said the company appreciated that commissioners recognized the need for a rate increase and that there was agreement on most of 38 individual decisions in the case.

"In addition, they established a well-reasoned path forward on the allocation of transmission investment, and we will work with other state commissions on that," MacFarlane said.

The company said a rate increase was necessary as it plans a new era of infrastructure upgrades and renewable energy projects, but the commission gave Otter Tail Power less than half what it requested. It is not yet clear how that will affect the company's infrastructure plans, said Cris Kling, Otter Tail Power's public relations director.

Otter Tail Power has 129,300 total utility customers in Minnesota, North Dakota and South Dakota. Nearly 80 percent of its Minnesota customers are residential ratepayers.