An investor-owned power company in southern Minnesota won regulatory approval Thursday to sell its assets to 12 cooperative utilities in a $122 million deal that will mean higher electricity prices for 43,000 customers.

The deal, affecting electric customers in Albert Lea and other small cities long served by Interstate Power & Light (IPL), represents the closing of a historical loop. Early in the 20th century, many investor-owned utilities wired up towns and houses on the roads between towns, but not farms, which were too widely spaced.

"Our co-ops, 80 years ago, were formed primarily because we couldn't get electric service extended into the rural areas," said Brian Krambeer, CEO of Tri-County Electric Cooperative in Rushford and head of the co-op buyers group. "Today we're actually having an opportunity to buy out the investor-owned utility that weaved through southern Minnesota."

Although the co-ops say the deal offers long-term benefits to IPL customers who will become member-owners, it carries a price. Most of the co-ops have higher electric rates than IPL, which hasn't sought an increase since 2010.

The Minnesota Public Utilities Commission approved the transaction 4-0, but will monitor a rate-moderation plan that bars any increase in former IPL customers' basic distribution rates for three years, and limits increases to 5 percent per year for two more years. After that, the co-ops will set their own rates, as they are permitted to do under state law.

Despite the rate mitigation, customers of IPL still face electric bill increases of 5 percent to 7 percent after the deal closes. That's because IPL will purchase power at higher rates for 10 years from IPL's parent company Alliant Energy. Most coops don't generate electricity, and their purchased power and transmission costs are a separate item on electric bills.

The Minnesota Chamber of Commerce and state attorney general's office objected to IPL getting a profit on the sale, which was priced at nearly $17 million over the book value of the utility assets. IPL also will make higher returns on selling wholesale power to the co-ops.

Regulators also expressed concern about future rate hikes for former IPL customers. Commissioner Nancy Lange, who ultimately voted for the deal, worried about the IPL ratepayers: "This isn't some frozen-in-time rate situation. These rates are going to go up 15 to 20 percent."

The co-ops' attorney, Hap LeVander, said co-op customers elect the boards that set rates, and will have a say in future rates. Some co-ops already have rural and city rates to reflect the different costs of serving concentrated and dispersed customers.

"This was a golden opportunity to acquire a customer base that they wouldn't be able to grow indigenously in their areas," LeVander said of the co-ops' motives.

Each co-op will absorb some IPL members, in numbers ranging from 800 to 15,000 per coop. Freeborn-Mower Cooperative Services will see more than a threefold increase in customers by adding 15,000 Albert Lea customers to its 6,100 existing customers.

Jim Krueger, Freeborn-Mower's CEO, said the co-op will hire 20 IPL employees, the largest share of any co-op. More than 20 other IPL employees are expected to be hired by other acquiring co-ops.