BY: JOSHUA HAIAR, SD Searchlight
A company that provides electricity to nearly 100,000 South Dakota customers will raise its rates by about 18 percent next month as an initial deadline passes for a state regulatory agency to act on the increase.
Xcel Energy will increase its electricity rates by 17.9 percent, starting Jan. 1. That’s a jump of $19.60 per month on an average residential customer’s bill. The proposed changes affect 97,500 customers.
Dennis Aanenson owns A&B Business in Sioux Falls and gets electricity from Xcel. He testified against the rate hike last week during a state Public Utilities Commission hearing, where he accused Xcel of poor customer service and criticized the company for paying its CEO more than $20 million annually in recent years.
“That’s over $10,000 an hour,” Aanenson said during his testimony. “He makes more in a half day than your lowest-paid employee. Do you think that’s justifiable?”
Xcel stands to gain about $44 million in annual revenue from the higher rates.
The PUC had six months to investigate and make a decision about the rate request before the company implemented it, but the three-member commission will not declare its decision in that timeframe.
That window closes at the end of December. Commission Chairman Chris Nelson said the PUC rarely completes its investigations in six months.
“Once that rate increase was filed with us, our staff immediately began working through the evaluation process,” Nelson said. “That is a very lengthy and complex process.”
The commission will subsequently have another six months to make a retroactive decision, but meanwhile, the requested rates will go into effect as an interim rate hike.
The rate increase will affect commercial and industrial customers as well as residential.
PUC’s process
When an investor-owned electric utility wants to modify its rates, it must seek permission from the Public Utilities Commission. The utility begins the process by filing an application with the commission that states the proposed rate of increase and the rationale.
Xcel applied for the rate increase on June 30. The commission then moved to suspend the rate increase for six months – providing time to investigate and make a decision before the rate increase could go into effect.
PUC employees, including an attorney and several analysts, began evaluating the rate request. The current PUC staff consists of six analysts and two staff attorneys.
The evaluation includes gathering additional information on factors such as company operating expenses, employee benefits, executive compensation, corporate advertising, and the cost of generation and transmission facilities.
In addition to reviewing the data and evidence submitted by the company and anyone who intervenes in the case, PUC staff request and analyze opinions from outside experts, and ask questions of the parties.
Finally, the staff presents recommendations to the state’s three elected public utilities commissioners.
If the commission completes its review by this coming June – as Commissioner Nelson says it will – the commission will take action on the rate increase. If the commission decides the increase was too high, it could order a lesser increase and customers could be eligible for refunds, plus interest. The interest rate is set by the commission.
Xcel’s justification
Xcel cited numerous reasons for the rate hike in commission filings, including investments and upgrades into the electrical grid; ensuring safe nuclear generation at its reactors – none of which are in South Dakota – and funding to decommission one of those reactors entirely; plus wind generation investments and keeping up with inflationary cost pressures.
Steve Kolbeck, a soon-to-be state senator and former South Dakota public utilities commissioner, is a principal manager for Xcel Energy and represents the company in front of the PUC.
Kolbeck said in an interview with South Dakota Searchlight that the rate hike will pay to strengthen the grid and improve the reliability of service.
“At the same time, we’re adding more wind energy as we build toward our vision of providing 100% carbon-free electricity to customers by 2050,” Kolbeck said.
This rate hike is Xcel Energy’s first rate application in South Dakota in eight years, according to Kolbeck.
The company is also requesting a rate hike in other states.
Xcel Energy was requesting a $122 million rate increase in Minnesota – raising its 1.3 million customers’ bills there by about 6%. The request was opposed by ratepayer advocates — including two state agencies — who said Minnesotans are already reeling from energy price inflation. In response, the company dropped its request. Activists there remain concerned that Xcel will continue its pursuit of a rate increase.
The company has also signaled plans to raise electric rates in Colorado.
Other providers
No other electric utility is currently requesting a rate hike in South Dakota. Commissioner Nelson said no other rate applications have been filed in the last three years.
Searchlight spoke with NorthWestern Energy and Black Hills Energy – each of which said it does not have plans to increase rates in the next year.
Black Hills Energy made the most recent South Dakota rate hike of comparable size in 2010. The company had requested a 19.4% rate increase.
The PUC investigation into that request went past the initial six-month window, and the rate increase took effect in the interim. But upon completion of the commission’s investigation, which took the entire 12 months the law allows, the commission approved only a 12.7% increase, resulting in customer refunds.
There are six investor-owned utility companies that provide electric service in South Dakota: Black Hills Energy, MidAmerican Energy, Montana-Dakota Utilities, NorthWestern Energy, Otter Tail Power and Xcel Energy.
The PUC does not regulate the rates charged by electric cooperatives or municipal electric organizations. Each co-op is governed by a board of directors, elected by its membership. Municipal electrics are managed by the local government entity.
This article was published in partnership with South Dakota Searchlight, a division of the non-profit States News Network.
