Brown: Minnesota Power takeover opens Wild West fight over energy future

Opinion editor’s note: Strib Voices publishes a mix of commentary online and in print each day. To contribute, click here.

•••

Like water in the Wild West, access to electricity will shape the remainder of the 21st century. In this, we might see last week’s acquisition of Minnesota Power for what it is: the polite commencement of a range war.

On Friday, the Minnesota Public Utilities Commission approved the proposed merger between Allete, the parent company of Minnesota Power, and two private equity firms. The majority firm is owned by BlackRock, the largest private equity company in the world.

An administrative law judge had warned the PUC not to do so, that the risk of rate increases and profit-taking outweighed the benefits. But the commission forged ahead, persuaded by pleas from Minnesota Power that it needed the cash infusion to comply with state clean-energy laws. The decision was also aided by an agreement by the buyers to limit rate increases for a time.

So, Minnesota Power gets the investment it says it needs. What happens next?

Despite the company’s assertion that this is just a normal day in a world filled with mergers and acquisitions, this unusual deal changes everything.

However, it’s wise to be wary. Once public companies fold past the event horizon into the black hole of private ownership, they do not come back. The new Allete might face the public in the shape of our friendly local power company, but it will henceforth be puppeteered by investors who need bigger numbers next quarter.

The long game might not include immediate rate increases but rather the availability of electricity for other profitable investments, namely data centers. That outcome could not only raise rates but push the grid to its limits.

Amid the PUC deliberations, the Minnesota Star Tribune last month reported that a mysterious development in the heart of Minnesota Power’s northern service area was, in fact, a data center. It’s one of more than a dozen such projects across the state, the leading edge of an onslaught of artificial intelligence, data and renewable energy development.

The scale of venture capital investment in AI dwarfs all other current technology. Last week, Sam Altman’s OpenAI announced a new slate of data centers that will consume as much electricity as New York and San Diego in the summertime. If the world’s most powerful companies intend to do what their spending suggests, they will wrest untold terawatts of electricity from our shared grid.

Here’s why that matters to regular folks, complete with a real-life example.

Even as Minnesota Power’s new owners won over skeptical commissioners and interest groups, they could not persuade mining companies like U.S. Steel and Cleveland-Cliffs to drop strong opposition to the merger. Why? Because those companies know their competitive advantage will end when the data centers come.

The mines worry about electricity rates as much as they do environmental regulations. They haven’t been shy about threatening plant closures over the state’s wild rice sulfate standard, but in the 1980s they actually closed facilities over power rates. In a tightening economy, these tensions will rise.

And residential and small commercial ratepayers? They were in second place. Now they will be relegated to third.

Minnesota Power, and the public utilities commissioners themselves, affirm that any rate increases will have to be approved by the PUC. Like an old town marshal with a rusty gun, they vow to run off the outlaws at the first sign of trouble.

But the electric horsemen of our economic and political future ride sturdy in the saddle and never shoot second. They write their own laws.