FOR IMMEDIATE RELEASE: Wednesday, Sept. 18, 2013        
CONTACT: Leah Mohr, deputy executive director, South Dakota Public Utilities Commission, (605) 773-3201 or (605) 280-4327

South Dakota PUC approves agreements for Black Hills Power rate increase

PIERRE, S.D. – The South Dakota Public Utilities Commission approved a rate increase for Black Hills Power that trimmed nearly $5 million in annual revenues from the company's original request. A typical residential customer will experience a 5.7 percent increase in their electric rates beginning on Oct. 1, 2013, as a result.

Black Hills Power filed a request with the PUC in December 2012 asking to increase rates for electric service by 9.94 percent that would generate an additional $13.7 million in annual revenue. A settlement agreement between the company and PUC staff was approved by the three PUC commissioners at a meeting in Pierre, S.D., on Sept. 17, 2013. The approval will allow the company to gain $8.8 million in annual revenue, or an increase of 6.39 percent.

"We were able to reduce Black Hills Power's rate increase request by more than 34 percent because of the comprehensive analysis by the PUC and cooperation on settlement issues from the company," said PUC Chairman Gary Hanson. "This is a fair rate. It is a just and reasonable settlement that allows BHP the revenue it needs to continue to provide safe and reliable electricity while protecting consumers from rate shock and keeps rates affordable," Hanson continued.

Electric reliability and ratepayer fairness were themes echoed by the three commissioners as they discussed the request, questioning representatives of Black Hills Power and PUC staff at this week's meeting. In the months leading up to the decision by the commission, PUC staff thoroughly analyzed Black Hills Power's rate increase application, made numerous requests for additional information and held several negotiation and settlement discussions with the company.

"State law guides what must be allowed by the PUC in a rate increase request," stated PUC Vice Chairman Chris Nelson. "PUC staff worked diligently to pare this request down to the minimums required by law while ensuring that Black Hills Power can continue providing reliable service to its customers," he said.

Among the reasons the company cited for requesting an increase in annual revenue was the cost of closing down three coal-fired power plants and vegetation management to remove trees infested by pine beetles from utility line rights-of-way.

"This decision is all about reliable service, and reliable service costs money," said Commissioner Kristie Fiegen. "Costs have been reduced where appropriate and a balance between fair rates and reliability has been achieved in a manner that is prudent for the ratepayers," she said.

Commissioners also approved settlement agreements between Black Hills Power and two sets of intervenors in the case: Wal-Mart and Sam's West, Inc., collectively known as Walmart; and GCC Dacotah, Inc., Rushmore Forest Products, Inc., Spearfish Forest Products, Inc., Pete Lien & Sons, Inc., and Rapid City Regional Hospital, collectively known as the Black Hills Industrial Intervenors. Both intervening groups negotiated separate agreements with Black Hills Power. Revenue shortfalls occurring as a result of the agreements between the company and the intervenors will not be passed on to other customers, but borne by the company's shareholders.

In accordance with state law, Black Hills Power implemented interim rates in mid-June 2013 based on the company's original rate increase request. Because the approved rate increase is less than the interim rate increase, the company will refund the difference, including interest, to its customers.

In related action, the commission allowed Black Hills Power to phase in a rate increase associated with the company's share of construction financing costs of the Cheyenne Prairie Generating Station, a natural gas fired facility being built near Cheyenne, Wyo. The company expects the plant to be in service in October of 2014. Due to current circumstances, including low short-term debt interest rates, the company estimates the phase-in process will result in a savings to rate payers of approximately $3.8 million.

Approval of the phase-in plan will allow Black Hills Power to increase rates on a quarterly basis, with the total phase-in increase during the phase-in term estimated at 3 to 4 percent. In accordance with state law, the commission authorized the company to introduce the increase to its customers effective April 1, 2013, on an interim basis until final approval by the commission. The phase-in rate process will continue until the plant is completed. It is expected that Black Hills Power will file a general rate increase request with the commission by April of 2014, seeking to recover the plant investment and related costs with rates effective beginning in October 2014.

The commission approved a separate settlement agreement for the phase-in rate increase request between Black Hills Power and the Black Hills Industrial Intervenors group.

Black Hills Power is the first investor-owned utility to bring a phase-in case before the commission since the legislature allowed such filings in 2012.

Both Black Hills Power rate dockets can be accessed from the PUC's website at www.puc.sd.gov. Select Commission Actions, Commission Dockets, Electric Dockets, 2012 Electric Dockets. The rate increase request is docket EL12-061; the phase-in rate docket is EL12-062.

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