This story was originally published by MPR News.
Minnesota regulators have unanimously approved the controversial $6.2 billion sale of Allete — parent company of the Duluth-based public utility Minnesota Power — to a pair of private investment firms.
Under the deal, Global Infrastructure Partners, a subsidiary of the massive private equity firm BlackRock, which is the largest asset manager in the world, will own 60 percent of the utility. The Canada Pension Plan Investment Board is purchasing a minority stake.
The five members of the Minnesota Public Utilities Commission concluded that the utility’s sale was in the public interest, despite concerns by environmental and consumer groups, the state Attorney General’s Office, and an independent judge who scrutinized the proposal. They all fear that the acquisition will lead to higher rates for Minnesota Power’s customers and the critics question whether the utility will really invest in clean energy infrastructure as promised.
Several commissioners admitted they were initially highly skeptical of the proposal, and only came around to supporting it after Minnesota Power and its purchasers agreed to several new conditions that the PUC says are “unprecedented.”
For example, the approved deal requires the utility to give customers $50 million in rate credits and create a $10 million fund for energy efficiency improvements for low and moderate-income households. It also freezes rates for one year.
It also requires Minnesota Power to create a $50 million fund for new clean energy technologies, and spend up to $3.5 million to forgive customers’ unpaid bills.
All totaled, the PUC said the deal includes more than $200 million in savings, protections and benefits.
“These benefits and credits would not happen, but if we approve the acquisition,” said PUC chair Katie Sieben. “I really commend the work of all the parties, the partners, my colleagues, for helping us get to a place that I think we can all be very proud of.”
Since the proposed acquisition was first announced more than a year and a half ago, Minnesota Power has argued the deal is needed to help finance massive requirements in infrastructure needed over the next several years, to replace aging power plants and transmission lines, and to enable the transition to a carbon-free energy system as required by state law.
But opponents have argued that there’s no guarantee the new owners will make those investments over the long-term. Fundamentally, they say the private equity model stresses short-term profits over the long-term interests of the state and Minnesota Power customers.
Commissioners said they were confident those risks could be mitigated, because the utility will continue to be regulated by the state.
“The risks can be managed through our regulatory process”, said Commissioner Hwikwon Ham. “We can deal with it in our rate case if they misbehave,” he added, referring to the process by which utilities must get rate increases approved by the PUC.
The deal also imposes caps on the utility’s profitability, but only through the end of 2030.
“I’m concerned about what happens in the future, 10, 15, years from now,” acknowledged Commissioner Joe Sullivan, who said he opposed the deal until the past few days, when new concessions made by the utility and its buyers convinced him it was in the public interest.
“I do think that the benefits in the near term and the medium term clearly outweigh the status quo and clearly show that the parties are taking very seriously the commitment to the state,” Sullivan said.
But several consumer and environmental groups that have opposed the acquisition remain unconvinced. The Citizens Utility Board said it believes the risks still outweigh the benefits, despite the additional commitments made by Minnesota Power and its buyers.
“The very temporary protections, programs, and funding tacked onto this deal cannot offset the billions of dollars of profit the new owners intend to reap from northern Minnesota households and businesses,” said Hudson Kingston, legal director of the conservation group CURE.
But other clean energy groups backed the deal, believing it maintained Minnesota Power’s ability to meet the state’s greenhouse gas reduction goals.
“We determined that the sale of Minnesota Power would significantly mitigate risk to the transition to clean energy in Minnesota,” said Allen Gleckner, Chief Policy Officer of Fresh Energy.
The agreement received the support of labor unions, which commissioner John Tuma said was key for his support. The utility has committed to keeping its headquarters and its workforce in Duluth, and to honor union contracts and maintain wage levels.
The Minnesota PUC’s blessing is the final approval needed for the acquisition, which had already been approved by federal regulators. Minnesota Power says the transaction is expected to close in late 2025.
“Today’s decision caps a comprehensive public process and positions Allete well to meet the significant infrastructure demands of the clean-energy transition without compromising the high-quality service and commitments to reliability and affordability that define our company,” said CEO Bethany Owen.
