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PUC leading opposition to federal proposal increasing electric power rates

South Dakota's Public Utilities Commissioners are taking a lead role in expressing opposition to the Bush administration's new proposal to sell electric power from the Power Marketing Administrations based on market rates rather than on the cost of production.

The 2006 federal budget proposal, which would increase PMA rates by 20 percent each year until reaching market prices, would have a major impact on thousands of South Dakotans' electricity rates. PUC Commissioner Dusty Johnson is leading a working group of public utility commissions and industry representatives from electrical organizations throughout the country that are unified in opposing this proposal.

The PUC and electric association representatives estimate that this change in the Western Area Power Administration's rates – the PMA serving the state - would cost South Dakota ratepayers more than $140 million in the first five years of implementation, and more than $55 million each following year.

"Such an increase in electricity costs would impose an economic hardship on the people of this state, thousands of whom are least able to afford such a dramatic rise in their utility bills," said PUC Commissioner and National PMA Working Group Chairman Dusty Johnson.

"Some have made the argument that PMA electricity rates are artificially low and are subsidized by the nation's taxpayers. That claim is totally inaccurate," PUC Chairman Gary Hanson stated. "PMA rates are set to recover the full costs of electricity service, including repayment of the Treasury debt at market rates."

"This huge rate increase not only will hurt residential customers but also could have a chilling effect on rural economic development," said PUC Vice Chairman Bob Sahr. "We're working with other commissioners and members of Congress to stop this proposal."

The Commissioners are urging the administration to reconsider the proposal. They stress that cost-based power from the Western Area Power Administration is essential to the health of South Dakota's economy, and raising WAPA rates by as much as 20 percent a year will have a damaging economic effect on South Dakotans.