RPU Scales Back Planned Electric Rate Increase for 2026

Rochester, MN (KROC-AM News) - The electric rate increase proposed by Rochester Public Utilities has been downsized.

The RPU Board meets later today to approve the municipal utility’s electric and water budgets for next year. The original plan called for a 6% electric rate increase in each of the next two years as RPU prepares for the expiration of its long-standing wholesale power contract with the Rochester-based Southern Minnesota Municipal Power Agency (SMMPA).

Lower Wholesale Costs Help Reduce Next Year’s Rate Hike

According to the RPU Board agenda, a reduction in SMMPA’s wholesale rate for next year will allow Rochester Public Utilities to lower its proposed 2026 rate increase to 4%. The plan still calls for a 6% increase in 2027.

RPU General Manager Tim McCollough explained that the rate increases are needed to address inflationary pressures facing electric utilities nationwide. Some of those pressures are linked to the ongoing transition from fossil fuel-generated electricity to renewable energy sources.

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Rochester Utility Targets 100% Renewable Power by 2030

The RPU Board recently voted to continue a policy calling for the city to achieve a goal of 100% net renewable energy by 2030. Part of that plan includes contracting for 245 megawatts of wind power generation to prepare for the end of the SMMPA contract and the phase-out of coal-generated electricity from the Sherco Power Plant in central Minnesota by the end of the decade.

READ MORE: RPU Plans ‘Middle-Ground’ Path to Renewable Energy Goal

(Photo by Scott Olson/Getty Images)

McCollough said RPU is facing higher costs due to the expiration of federal tax credits for renewable energy projects, rising prices for gas-fueled power turbines and raw materials, the impact of tariffs, and increased demand driven by the development of large data centers.

Water Rates Set to Rise 9% in 2026 and 2027

The RPU Board is also expected to vote today on its water utility budget for next year. It calls for 9% rate increases in both 2026 and 2027. The water budget includes funding for RPU’s advanced metering project, which involves replacing all current water and electric meters over the next several years at an estimated cost of more than $17 million.

RPU estimates the combined water and electric rate increases will raise the average residential utility bill by about $5.86 per month. Both rate changes still require approval from the Rochester City Council.