A Michigan power company gets the OK to raise customer rates starting in 2025.

On Sept. 26, the Michigan Public Service Commission (MPSC) approved Upper Peninsula Power Company’s (UPPCO) settlement agreement to increase retail electricity generation and distribution rates.

UPPCO customers will see a $9 million total rate hike beginning in Jan. 2025.

According to the MPSC, a typical residential customer using 500 kWh a month will see an increase of $7.52, or 5.7 percent, on their monthly bill, effective Jan. 1, 2025.

UPPCO released a Frequently Asked Questions (FAQ) to explain to customers the reasoning for bringing this request before the Public Service Commission.

“The increase is required to address an under-recovery of revenue that is necessary to operate the electric utility,” UPPCO stated.

The company stated it needed the increase based on four factors: current investments being made in existing infrastructure; construction of new upgrades and infrastructure required to support load growth and economic development throughout the region; increased costs of equipment, materials, and labor; and increased operating expenses such as fuel for company vehicles, tree trimming, vegetation management, and more.

The rates are set through legal proceedings before the commission. In these proceedings, other parties, such as government offices or environmental organizations, may intervene should they disagree with parts of the settlement request.

In this case, Administrative Law Judge Lesley C. Fairrow granted the intervention of the Michigan Department of Attorney General, Citizens Utility Board of Michigan (CUB), Calumet Electronics Corporation, Billerud Americas Corporation and the Association of Business Advocating Tariff Equity (ABATE).

In March, UPCCO submitted an application asking for an annual collection increase of $16.9 million. It was ultimately granted an increase of $9 million, a roughly 47 percent reduction from the initial request.

According to court documents, the intervening parties and UPPCO held extensive settlement negotiations, leading to an agreement between all existing parties.

“It is the opinion of the signing parties that his settlement agreement is reasonable, prudent, and in the public interest, will aid in the expeditious conclusion of this proceeding, and will minimize the expense which would otherwise have to be devoted by the commission and the parties,” the court document stated.

Part of the agreement includes UPPCO adopting the State Reliability Mechanism (SRM). This mechanism requires all electric providers to annually demonstrate to the MPSC that they have owned or contractual rights to sufficient capacity resources to serve their retail electric load in Michigan in the planning period four years in the future.

UPPCO will also donate $200,000 to organizations benefitting low-income customers within its service territory. The company will confer with MPSC staff and the Attorney General’s office to identify appropriate organizations to receive the donation and the parameters of the donation.