SD PUC: Black Hills Energy South Dakota Rate Refund Approved

• The South Dakota Public Utilities Commission approved a settlement requiring Black Hills Energy to issue a $7.67 million refund to customers by October 2018.
• Black Hills Energy customers will also see a net decrease of approximately $9 million in base rates annually, effective January 2019.
• These actions ensure that benefits from the federal Tax Cuts and Jobs Act are passed on to consumers, with an average residential customer receiving about a $50 credit.
• The settlement, documented under SD PUC docket EL18-029, is part of a broader regulatory effort to address federal tax changes across all investor-owned utilities in South Dakota.
• This follows a similar $10.868 million refund to Xcel Energy customers in August 2018, setting a precedent for South Dakota utility rate regulation.

The consistent approach taken by the SD PUC in these cases underscores a clear regulatory stance: benefits from federal tax reforms are expected to translate into tangible savings for consumers.

The South Dakota Public Utilities Commission (SD PUC) recently approved a settlement agreement, paving the way for Black Hills Energy customers to receive a significant refund and subsequent rate reductions. This action, taken during the commission's regular meeting in Pierre on September 4, 2018, ensures that benefits from the federal Tax Cuts and Jobs Act are passed directly to consumers.

Under the terms of the agreement, Black Hills Energy customers will collectively receive a $7.67 million refund, which is scheduled to be disbursed no later than October 2018. An average residential customer can expect to see an approximate $50 credit applied to their account. Customers in other classifications, such as industrial and commercial, will also receive credits, though the precise amounts will vary. Eligibility for this refund is limited to individuals and entities who were active Black Hills Energy customers as of July 31, 2018.

Beyond the immediate refund, customers will also experience a net decrease in their base rates, amounting to approximately $9 million annually, effective January 2019. This adjustment involves a reduction in variable charges, balanced by a slight increase in monthly fixed charges, ultimately resulting in lower overall costs for consumers. This comprehensive approach reflects a commitment to long-term rate stability for those served by Black Hills Energy in South Dakota.

The SD PUC's decision to accept the Black Hills Energy settlement agreement underscores its role in regulating utility rates and ensuring consumer protection within South Dakota. The agreement was a collaborative effort, presented jointly by Black Hills Energy and the PUC staff, specifically designed to address the financial implications of the federal Tax Cuts and Jobs Act on utility operations and, consequently, on customer bills.

This specific case is formally documented under SD PUC docket EL18-029, titled 'In the Matter of the Application of Black Hills Power Inc., dba Black Hills Energy for Approval of Its Tax Cuts and Jobs Act Proposal.' The commission's proceedings related to the federal tax overhaul and its impact on South Dakota utility rate regulation have been ongoing, with a broader investigation into the effects of the Tax Cuts and Jobs Act on all state utilities tracked under docket GE17-003. This overarching docket includes comments filed by all investor-owned electric and natural gas utilities operating in the state, highlighting the widespread implications of the federal tax changes.

Commissioner Kristie Fiegen, chairperson of the SD PUC, emphasized that the commission had fulfilled a promise made in December to ensure that the benefits of the federal tax cut would be passed along to South Dakota consumers. Commissioner Chris Nelson further commented on the comprehensive nature of the Black Hills Energy settlement agreement, noting that the combination of the fall refund, the subsequent reduction of base rates, and clear communication to customers would yield a positive effect. While not present at the September 4 meeting, Commissioner Gary Hanson had previously voiced his support for efforts by regulated utilities to pass tax savings to consumers and commended Chairperson Fiegen's leadership in overseeing these critical proceedings.

The approval of the Black Hills Energy South Dakota rate refund and reduction represents a significant development in the ongoing efforts by the South Dakota Public Utilities Commission to ensure that the financial advantages stemming from the Tax Cuts and Jobs Act utility rates are equitably distributed to customers. This action is the latest in a series of steps taken by the SD PUC to evaluate the impact of federal tax changes on the rates paid by customers of the state’s investor-owned electric and natural gas utilities.

Earlier in 2018, the commission set a precedent by accepting a similar settlement agreement from Xcel Energy and PUC staff. That agreement resulted in a substantial refund of $10,868,000 to Xcel Energy customers in August. The consistent approach taken by the SD PUC in these cases underscores a clear regulatory stance: benefits from federal tax reforms are expected to translate into tangible savings for consumers.

Discussions regarding tax reform and utility rates are actively continuing between PUC staff and several other major utilities operating in South Dakota, including NorthWestern Energy, Otter Tail Power Co., Montana-Dakota Utilities Co., and MidAmerican Energy Co. The outcomes of these ongoing negotiations will further shape the landscape of South Dakota utility rate regulation, reinforcing the commission's commitment to providing stability for ratepayers and making a real impact on families and businesses across the state.

This action by the South Dakota PUC sets a precedent for how the benefits of the Tax Cuts and Jobs Act are to be passed on to consumers by regulated utilities in the state. Lawyers representing other South Dakota utilities or large commercial/industrial energy users should review this settlement for implications on future rate cases and potential refunds.

Source: Original reporting via South Dakota Public Utilities Commission