Minnesota Power on Wednesday asked state regulators for a rate increase of 12%, a request that comes after the utility in January was granted a 9.5% increase that was much smaller than it wanted.

The Duluth-based utility said that money would help pay for recruiting and retaining its workforce amid a transition from fossil fuels while still keeping its bills low compared to the rest of the region. One ratepayer advocate organization cast doubt on the need for another increase.

"Big picture, any time a utility requests a rate increase it's about balancing the ability of the company to make a healthy return with the ability of ratepayers to afford their bills," said Annie Levenson-Falk, executive director of the ratepayer advocate organization Citizens Utility Board of Minnesota.

Levenson-Falk said the Duluth-based utility appealed that decision of the Minnesota Public Utilities Commission (PUC), which isn't settled yet. Meanwhile, she said, 13% of residential Minnesota Power customers are past due on bills going into winter.

Jennifer Cady, vice president of regulatory and legislative affairs for Minnesota Power, said the company has the lowest total bills for residential customers in the state and electric rates for residential customers below the national average. At the same time, the utility has shifted its power mix from 95% coal in 2005 to nearly 60% renewable energy now as it works to meet a new state law requiring a carbon-free electric grid by 2040.

Minnesota Power asked for an increase of $89.1 million. The 12% increase would be the same for residential, commercial and industrial customers. If approved, the company said it would cost the average residential customer roughly $11 per month, or $133 every year. In January, the PUC granted a 9.5% rate hike worth $58 million. That was less than the $108 million the utility asked for.

Cady said what the PUC approved earlier this year was based on a budget from 2021 and didn't cover employee costs driven up by rising inflation that started in 2022. Part of why Minnesota Power is asking for a boost in rates is to recruit and retain a workforce to help it complete a transition from fossil fuels, Cady said, along with spending on infrastructure for that work.

That money could help with a variety of workers, like those developing wind and solar projects to linemen and engineers.

"It includes investments in cybersecurity professionals, for example, as there's more sophisticated threats to the grid and as we transition to a more interconnected system," Cady said.

Since rate cases take time to sort out, the utility asked for an interim rate increase that would go into effect in January. That temporary increase would be $63.8 million, a hike of 8.6%. The PUC usually grants those temporary rate hikes, but if the final decision on a rate increase is lower than the interim increase, customers are refunded the difference.

Minnesota Power has 150,000 residential and commercial customers across northeastern Minnesota. It also serves energy-hungry iron mines, pipelines and the paper industry, all of which make up nearly 70% of the utility's retail sales.

Minnesota's parent company, Allete, on Thursday reported third quarter net income of $85.9 million, or $1.49 a share, up from $33.7 million, or 59 cents a share, in the same period last year. Of that, regulated utilities made $34 million, down from $38.3 million last year.