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FOR IMMEDIATE RELEASE: June 24, 2009                   
CONTACT: Leah Mohr, communications manager, South Dakota Public Utilities Commission, (605) 773-3201

Public Utilities Commission approves Otter Tail rate increase

PIERRE, S.D. – The South Dakota Public Utilities Commission approved an 11.7 percent rate increase for Otter Tail Power Co. this week. The company serves about 11,700 customers in northeastern South Dakota. Its last rate increase affecting South Dakota customers occurred in 1987.

Otter Tail Power Co. requested permission to raise its rates by 15.3 percent, generating approximately $3.9 million in additional annual revenue. PUC staff and company representatives spent several months negotiating the rate case, arriving at a settlement that allowed an 11.7 percent increase to retail electricity customers, amounting in an approximate $3 million in additional company revenue annually. The commission approved the settlement agreement at its regular meeting on June 23, 2009. The settlement contains a number of conditions as a result of the negotiations.

"Two numbers stand out in this proceeding: 21 years and $1 million. First, it has been 21 years since Otter Tail last asked for an increase in rates, which shows how hard they worked to keep costs down," said PUC Chairman Dusty Johnson. "Second, over the last six months PUC staff has managed to reduce the requested increase by $1 million, which shows how hard they worked to keep costs down," he concluded.

"Much of the negotiations focused on the company's rate classifications," PUC Vice Chairman Steve Kolbeck said. "All rate classes now have a seasonal component. This gives consumers the option to make smart usage decisions which will directly affect their bottom line. They can follow and adjust their energy use by season and see the results of those actions in their electric bills." 

"Otter Tail customers will receive a major benefit in sharing the proceeds of wholesale energy sales made by the company," said PUC Commissioner Gary Hanson. "This settlement provides that ratepayers will receive 85 percent of asset-based wholesale margins and 25 percent of non-asset wholesale margins. This case was a challenge given major changes the company has experienced as well as changes in the economy during the two decades since Otter Tail last filed for rate approval," he said.

One factor driving Otter Tail Power Company's rate case was a significant increase in the amount of wind power in its system. Costs associated with those capital investments made up 60 percent of the approved increase. Ratepayers will benefit on an ongoing basis because of wind powers low fuel and operating costs, however.

Otter Tail Power Co. pledged to make personal contact with industrial customers that will experience the largest rate impact, more than $500 a year, as the company rolls out its new rates on July 1. That group totals 20 customers.  

No individuals or organizations filed to intervene in this case. Since filing with the commission, Otter Tail Power Co. reported 15 individuals submitted comments to the company about the rate case. One consumer submitted comments to the PUC about the rate case.

The PUC was represented by five staff utility analysts, one staff attorney and three consultants who handled the rate case analysis and negotiations before bringing the issue to commissioners for approval.

To review the PUC's docket in this case, visit the Web site, Select "Commission Actions" at the top of the page, then "Commission Dockets," "Electric Dockets," "2008 Electric Dockets" and "EL08-030."

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