The Iron Mining Association Applauds Minnesota Power EITE Rate Filing

Posted June 30, 2016

The Iron Mining Association Applauds Minnesota Power EITE Rate Filing

The iron mining industry applauds Minnesota Power’s energy intensive and trade-exposed (EITE) electric rate filing with the Minnesota Public Utilities Commission. The rate credit is critical for the industry, which continues to face significant global pressure to produce iron ore pellets at lower cost.  If approved, this rate credit will make the domestic taconite sector more competitive by implementing balanced, equitable electric power rates.   One of the highest cost inputs in producing taconite pellets is energy and for the past decade, the mining industry’s electric rates have continued to increase.  This rate credit, however, will ensure that the mines’ electric bill closer reflects the costs that they place on the grid.

“Minnesota Power’s refiling of the competitive rate shows their commitment to protect mining jobs in Northeastern Minnesota,” said Kelsey Johnson, President of the Iron Mining Association.  “Our region’s mining operations are continually working to lower costs in every area of their operations. Adjusting energy rates is an important way in which the State of Minnesota can support the Iron Range at a time when thousands of employees remain on layoff as a result of challenging global market conditions.”

Last year, steel imports captured 29% of the market in the United States, while the domestic steel sector operated at below 70% capacity, causing an unemployment crisis on the Iron Range and leading to the lay-off of over 2,000 miners.  Foreign countries, primarily China, are using government subsidies to overproduce steel and sell that steel in the world market below the cost of production.  As a result, thousands of people have been laid off on the Iron Range and Duluth metro area.

“This adjusted power rate is a critical tool for the iron ore industry to preserve our long-term competitiveness in the face of pressure from foreign companies that violate our trade laws and dump steel on our shores,” said Lourenco Goncalves, Chairman, President and CEO of Cliffs Natural Resources.  “Cliffs has recently announced a historic $65 million investment in Project Mustang at United Taconite and fairly-set, economic power rates will be a critical component of Cliffs’ future success.  Maintaining a lean, efficient cost structure is necessary to remain competitive in the face of new market realities.”

“For the past two years the Minnesota iron mining industry has struggled with intense global competition and a severe onslaught of unfairly traded and subsidized foreign steels. Mining companies have had to make difficult decisions to significantly cut costs to remain competitive.  One area of that cost structure that continues to rise, despite enhanced efficiencies, is the cost of electricity.  The EITE legislation passed by the Minnesota legislature last year is designed to ensure mining operations and other large employers on the Iron Range can compete in the intense global market.  This is a critical issue for the future of Northeast Minnesota job creation and our ability to attract new industry and investment,” said Larry Sutherland, Chairman of the Iron Mining Association and General Manager of U.S. Steel Minnesota Ore Operations.

To address these concerns, Minnesota Power is seeking   approval of a competitive rate proposal for EITE customers, like the iron mining industry, utilizing legislation passed by the Minnesota State Legislature.  The 2015 law specifically notes that it is the energy policy of the State to ensure competitive electric rates for EITE customers.  The 2015 law requires the Public Utilities Commission to review and approve electric rates that are more competitive  for companies that are both energy-intensive and exposed to trade threats from abroad – including the mining, forestry and paper industries – upon a demonstration that the competitive rate results in a net economic benefit to the utility and/or the state.  We firmly believe Minnesota Power’s new filing, as well as evidence submitted by EITE customers, meet this test.

Minnesota’s iron mines have directly employed 4,200 people and result in another 13,000 jobs at companies that sell products and services to the industry.  Additionally, a third of the Iron Mining Association’s members have businesses in the Duluth-Superior area.