Release from PUC: NorthWestern Energy is granted its first base electric rate increase in South Dakota in three decades

NorthWestern Energy is granted its first base electric rate increase in South Dakota
in three decades

PIERRE, S.D. – The South Dakota Public Utilities Commission today voted to allow NorthWestern Energy to raise its electric rates by 15.5 percent, the first such increase since 1981. A typical residential customer using an average of 750 kilowatt-hours of energy each month will see an average monthly increase of about $16.41.

At its regular meeting in Pierre on Oct. 29, 2015, PUC Commissioners Chris Nelson, Kristie Fiegen and Gary Hanson accepted a revised settlement agreement that was filed by NorthWestern Energy, PUC staff, and businesses that had intervened in the case: Toshiba America Business Solutions, Trail King Industries, Redfield Energy and Wal-Mart Stores. The agreement fully described the negotiations from the starting point of $26.5 million in additional annual revenues requested by the company to the final figure of $20.9 million in additional annual revenues agreed to by all the parties. The rates will be effective upon the in-service date of the Big Stone Generating Station Air Quality Control System, expected to be Jan. 1, 2016.

The company filed its request for a 20.2 percent rate increase with the PUC in December 2014. On July 1, 2015, as allowed by state law, NorthWestern Energy implemented interim rates based on their initial request. Because the final rate increase is lower than the interim rate increase, the commission approved a plan for NorthWestern Energy to refund the difference to customers, plus 7 percent annual interest, no later than April 2016.

In its application, NorthWestern Energy cited a number of reasons for requiring increased revenue including the addition of the peaker plant in Aberdeen, South Dakota, federally-required environmental controls at three coal-fired generating plants, integration with the Southwest Power Pool Regional Transmission Organization, and distribution and transmission upgrades, including a transmission project near Yankton, South Dakota.

In the months following its application, NorthWestern Energy purchased Beethoven Wind, an 80-megawatt wind facility near Tripp, South Dakota. The cost of the purchase was included in the rate case. Prior to the wind farm purchase, NorthWestern Energy’s electric customers were obligated, as a result of federal regulations, to pay for the purchase of energy produced by Beethoven Wind via the Delivered Cost of Fuel on their electric bill, which is adjusted quarterly. Parties in the case agreed that incorporating the wind farm purchase into base rates would save customers approximately $44 million over the next 20 years as compared to continuing to purchase the energy produced by it pursuant to the contracts.

PUC Chairman Nelson focused on the reasons for the rate increase in his comments at the meeting. “It’s truly extraordinary to consider the capital investment NorthWestern has made in the last 34 years and the fact that the increase was kept as low as 15 percent,” he said. “It’s important to understand that much of this increase is the result of the company complying with federal mandates,” Nelson stated.

Fiegen, vice chairperson of the PUC, commented: “I have come to expect and am always impressed by the professionalism and high degree of character that is exhibited by the parties to dockets as complex as this rate increase. I am pleased that throughout the process NorthWestern, PUC staff and the intervenors kept reliability and limited customer impact as top priorities.”

Commissioner Hanson noted consumer involvement in the process. “The commission held a public hearing about the rate increase in May in Yankton at the formal request of NorthWestern Energy customers,” he said. “Additionally, a number of consumers submitted written comments to us. We fully understand how important it is to South Dakotans that the cost of energy be affordable while maintaining reliability. I believe that has been achieved with our decision today,” he concluded.

Today’s action by the commission imposes a moratorium prohibiting NorthWestern Energy from filing a request for an increase of base rates that would go into effect prior to July 1, 2018.

While the recent docket is the first comprehensive rate case filed by the company with the PUC since 1981, NorthWestern Energy has implemented limited rate adjustments since then with commission approval.

NorthWestern Energy serves approximately 62,100 electric customers in its South Dakota territory.

The complete NorthWestern Energy electric rate increase docket is available on the PUC website at www.PUC.SD.gov, Commission Actions, Commission Dockets, Electric Dockets, 2014 Electric Dockets. The docket is EL14-106 – In the Matter of the Application of NorthWestern Corporation dba NorthWestern Energy for Authority to Increase Its Electric Rates.

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