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FOR IMMEDIATE RELEASE: Wednesday, Nov. 26, 2014                              

CONTACT: Leah Mohr, deputy executive director, South Dakota Public Utilities Commission, (605) 773-3201 or (605) 280-4327             

Otter Tail Power Co. responds to environmental regulations; PUC approves associated rate increase

Pierre, S.D. – The South Dakota Public Utilities Commission this week agreed to allow Otter Tail Power Co. to recover from customers the company's cost of complying with environmental regulations at two of its coal-fired power plants near Milbank, South Dakota, and Fergus Falls, Minnesota.

The upgrades were required by federal mandates. Installation of equipment and technologies at the Hoot Lake Plant in Minnesota was completed in 2014. The retrofit project at the Big Stone Plant in South Dakota is expected to be completed in the fall of 2015. Both plants supply electricity to Otter Tail Power Co.'s 11,600 customers in northeastern South Dakota as well as to customers in Minnesota and North Dakota.

Otter Tail Power Company's South Dakota customers will be impacted, on average, by a 7.1 percent rate increase, which is referred to as an environmental cost recovery tariff, effective Dec. 1, 2014. The company expects the total rate increase to be slightly less than 12 percent when the retrofit construction is complete at the Big Stone Plant next year.

Commissioners Gary Hanson, Chris Nelson and Kristie Fiegen voted to approve the tariff at the PUC's regular meeting on Nov. 25 in Pierre.

Hanson, chairman of the PUC, acknowledged the challenging atmosphere Otter Tail Power Co. must operate in as an owner of coal-fired power plants. "This is a difficult time for electric providers and consumers as well," Hanson said. "With new federal environmental regulations being frequently imposed-that take a huge investment of time and money to meet-planning is difficult. Otter Tail has done well to keep this increase as low as it is," he concluded.

Commission Vice Chairman Nelson commended Otter Tail Power Co. for trimming $107 million from the initial cost of the Big Stone Plant project. "It appears you've gone to great efforts to drive that cost down and that is a big deal," Nelson told company officials at the meeting. "Overall, the company compiled a very thorough and complete application to illustrate the capital expenditure they have been forced to make," he said.

A consultant for the PUC staff provided analyses that determined the company's decision to install environmental retrofits at both power plants was the least cost option compared to other alternatives.

"The evaluations of the environmental projects were really interesting reports," said PUC Commissioner Fiegen. "The company's efforts to reduce costs, effectively and efficiently manage the construction process, and maximize their investment are evident. The changes Otter Tail has made and will make will strengthen reliability for their customers. Unfortunately, future federal regulation puts that reliability at risk," she said. 

View the complete docket on the PUC's website. Go to Click on "Commission Actions," "Commission Dockets," "Electric Dockets," "2014 Electric Dockets." The docket is titled "EL14-082 - In the Matter of the Petition of Otter Tail Power Company to Establish an Environmental Quality Cost Recovery Tariff."