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South Dakota Public Utilities Commission Meeting
May 2, 2012, at 10:00 a.m. CDT
Room 413, Capitol Building
Pierre, South Dakota


Chairman Chris Nelson called the meeting to Order. Present were: Commissioners: Kristie Fiegen and Gary Hanson; Commission Counsel: John Smith; Staff Attorneys: Ryan Soye and Kara Semmler; Staff Analysts: Chris Daugaard, Brian Rounds, Patrick Steffensen and Ross Pedersen; and Staff: Demaris Axthelm.

Also present were: Mike Uda, Uda Law Firm, P.C., representing Oak Tree Energy LLC; and Bill Makens and Michael Makens, Oak Tree Energy LLC.

Joining the meeting by telephone were: Heather Grahame, Al Brogan, and Tim Olson, NorthWestern Corporation dba NorthWestern Energy; Yvette Lafrentz, Doney Law Firm, representing Oak Tree Energy LLC; Richard Lauckhart, Oak Tree Energy LLC; and Bleau LaFave, NorthWestern Energy.


1.     EL11-006     In the Matter of the Complaint by Oak Tree Energy LLC against NorthWestern Energy for refusing to enter into a Purchase Power Agreement (Staff Analysts: Chris Daugaard, Brian Rounds, Staff Attorneys: Kara Semmler, Ryan Soye)

A lengthy discussion took place regarding Docket EL11-006. The transcript can be found on the PUC website under Commission Actions: Commission Minutes: 2012 - An audio of the discussion can be found on the PUC Web site under Commission Actions; Commission Meeting Archives; 2012; May 2, 2012, Hearing for Docket EL11-006, recording located at:

     Commissioner Hanson moved that the Commission find and conclude, in general agreement with Staff's conclusions in its Post-Hearing Brief:

  1. That, given NorthWestern's status as a vertically integrated utility with predominant reliance on its own internal generation at this time, the hybrid method is the proper method to calculate avoided costs for NorthWestern's South Dakota system.

  2. That NorthWestern did not, however, incorporate projected carbon cost inputs into its use of this method and also may have utilized unjustifiably low natural gas inputs and electric market inputs, and as a result, the Commission cannot reliably determine the proper avoided cost with the data and analyses currently in the record.

  3. That the carbon emission cost values of $5/ton starting in 2015 and shifting to $10/ton starting in 2020 and rising to $15/ton in 2025 as estimated by Lands Energy are reasonable carbon emissions cost estimates in the present environment and are the appropriate carbon emissions cost values to be included in the parties' respective hybrid method analyses of avoided cost.

  4. That NorthWestern is obligated to purchase Oak Tree's output because a legally enforceable obligation was created by Oak Tree on February 25, 2011.

  5. That Oak Tree is entitled to capacity credit for the facility's output commencing in 2012 with the capacity contribution to be determined and adjusted in accordance with the method NorthWestern is using for the Titan I project, and such capacity credit shall be incorporated into the hybrid method beginning in 2012.

  6. That the proper avoided cost contract term is 20 years.
     Commissioner Hanson further moved that on or before, June 6, 2012, the parties shall file with the Commission such additional analyses employing the hybrid method and such additional pre-filed testimony as they deem necessary to enable the Commission to determine the following:

  1. The proper application of the hybrid method;

  2. The proper natural gas input(s) to use in the hybrid method based on current market conditions and projections;

  3. The proper electric market rates that the parties may deem warranted to reflect current market conditions and projections taking into consideration the carbon emission costs previously stated and any adjustments to gas prices;

  4. The proper capacity contribution and resulting capacity credits to be included in the avoided cost and added into the hybrid method under the Titan I method;

  5. NorthWestern's avoided cost levelized over a 20 year period.

     The parties may file rebuttal testimony on or before June 13, 2012.

     Commissioner Hanson further moved that the Commission shall schedule this matter for further hearing on June 19, 2012, with the hearing to begin following adjournment of the Commission's regular meeting scheduled for such date.

        Commissioner Hanson further moved that the Commission direct Staff to open a rule-making docket for the purpose of considering, on statewide basis, the proper standards that should govern avoided cost determinations in the future in this state, including but not limited to, the requirements for creation of a legally enforceable obligation, the acceptable methodology or methodologies for determination of avoided cost and the appropriateness of particular methods in specified circumstances, appropriate contract term, and the standards for determination of when capacity credits shall be allowed and the appropriate method(s) for computing the magnitude and duration of such credits. Motion carried 3-0.

     There being no further business, at the hour of 10:56 a.m. the South Dakota Public Utilities Commission meeting adjourned.


/S/Joy Irving
Joy Irving
Administrative Assistant
PUC Email
May 2, 2012