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South Dakota's electric rates expected to increase 48 percent with proposed carbon cap and trade legislation

PIERRE, S.D. – Federal carbon cap and trade legislation is expected to increase South Dakotans' electric bills by an average of 48 percent, according to a report released by the South Dakota Public Utilities Commission.

The report, requested by PUC Commissioners Dusty Johnson, Steve Kolbeck and Gary Hanson, used information from national experts and area utilities to calculate the impact on ratepayers. The report also laid out a number of "carbon regulation principles" the commissioners said should be part of any federal cap and trade program. The principles included calls for low-cost or free carbon credits to be initially allocated to utilities, the widespread use of carbon offsets, and structuring the program to allow sufficient time for the development of new technologies necessary to comply with aggressive carbon reduction goals.

"Carbon regulation done poorly would seriously harm South Dakota businesses and families," PUC Chairman Dusty Johnson said. "Families are having a hard enough time paying their bills without adding on another 40 or 50 percent. If a cap and trade program is going to pass Congress, we want to make sure it's structured to minimize the negative impact to our state."

The PUC report includes information filed by the state's investor-owned utilities and wholesale power providers and estimates that applying the "carbon regulation principles" would significantly ease the economic harm to consumers.

"We're not arguing against reducing CO₂ emissions. Instead, we're asking how we best do that without causing unnecessary harm to any one region or state," PUC Vice Chairman Steve Kolbeck stated. "We need fair and balanced regulation of carbon emissions, and not regulations that cause greater harm to one region of the country over another."

The primary source for electrical generation in the U.S. is coal, at 48.5 percent. Coal, which emits more carbon dioxide than natural gas or renewable generation, provides 74 percent of the electricity generated in the West North Central Census Region which includes South Dakota, North Dakota, Nebraska, Iowa, Minnesota, Kansas and Missouri. South Dakota's generation is led by hydro at 47.6 percent, followed closely by coal at 46.5 percent. However, much of the hydro power generated is sent to other states by the Western Area Power Administration as part of the federal government's agreement in developing the Missouri River dams.

"Our region relies more heavily on coal than any other part of the U.S., so carbon reduction legislation would have a disproportionately high impact on us," PUC Commissioner Gary Hanson said. "We are moving forward with developing green power in this state, and we hope the policy out of Washington will be structured to allow us as a state time to continue that progress before imposing significant carbon costs."

The report notes in recent years the utilities serving South Dakota have made progress integrating wind power into their portfolios, and are soon expected to meet the state's goal of having 10 percent of the electricity sold in the state come from renewable sources. Additionally, utilities have implemented new energy efficiency programs and have worked to maintain or expand low-carbon generation resources like nuclear and natural gas power plants.