South Dakota PUC Montana-Dakota Rate Refund: $1.9M Approved for Customers

• The South Dakota Public Utilities Commission approved a refund and rate reduction for Montana-Dakota Utilities Co. customers on October 16, 2018.
• This decision was prompted by the federal Tax Cuts and Jobs Act, ensuring tax savings are passed to consumers.
• Natural gas customers will receive a total of $1,326,915, and electric customers $591,424, credited to accounts by mid-February.
• The PUC also approved a permanent reduction in base rates, estimated at $250,000 for electric and $300,000 for natural gas customers in South Dakota.
• The commission required Montana-Dakota Utilities to include a higher interest rate on the refund amounts, a move championed by Commissioner Chris Nelson.

This specific decision for Montana-Dakota Utilities is part of a broader, statewide initiative by the South Dakota Public Utilities Commission to address the financial implications of the federal Tax Cuts and Jobs Act on regulated utilities.

The South Dakota Public Utilities Commission (PUC) recently mandated a significant financial benefit for customers of Montana-Dakota Utilities Co., approving both a substantial refund and a reduction in future rates. This decision, reached on October 16, 2018, in Pierre, stems directly from the federal tax cuts enacted late last year, specifically the Tax Cuts and Jobs Act. The ruling ensures that the financial advantages realized by the utility due to these tax changes are passed on to its consumers.

In total, Montana-Dakota's natural gas customers are slated to receive refunds amounting to $1,326,915, while electric customers will see $591,424 returned. These amounts will be credited directly to customer accounts by mid-February of the following year. Individual residential customers can anticipate an estimated refund of $14.05 for natural gas services and approximately $41.84 for electric services, reflecting their share of the overall tax savings.

Beyond the one-time refund, the PUC also approved a permanent reduction in Montana-Dakota's base rates. This Montana-Dakota Utilities rate reduction is a critical component of the commission's effort to ensure ongoing benefits for consumers. The final figures for this reduction are still being finalized, but initial estimates suggest a notable impact on customer bills moving forward.

The precise amount of the base rate reduction was determined through a collaborative process involving PUC staff and representatives from Montana-Dakota Utilities. This involved a detailed review of 2017 test year data, which had initially been used to calculate the 2018 refund amount. Further adjustments were made to incorporate plant additions that were placed into service by October 31, 2018. While the final rate reduction is scheduled to be determined and submitted to the commission by December 1, 2018, current projections indicate an approximate $250,000 reduction for South Dakota electric customers and around $300,000 for the company's South Dakota natural gas customers.

The approval of this South Dakota PUC Montana-Dakota rate refund and reduction followed the presentation of a settlement stipulation by PUC staff and the utility at the commission's regular meeting. During deliberations, PUC Vice Chairperson Kristie Fiegen emphasized consumer protection as her primary concern, advocating for the inclusion of interest on the refund amount paid to customers. This stance underscored the commission's commitment to ensuring fairness for consumers.

Commissioner Chris Nelson subsequently moved to amend the initial proposal, successfully advocating for a higher interest rate to be applied to the refund. This amendment further enhanced the financial benefits for customers, demonstrating the commission's proactive role in maximizing consumer advantage from the Tax Cuts and Jobs Act utility impact. Chairman Chris Nelson highlighted that this requirement for an appropriate interest rate on the natural gas electric customer refund aligns with ongoing efforts to return money to utility consumers.

This specific decision for Montana-Dakota Utilities is part of a broader, statewide initiative by the South Dakota Public Utilities Commission to address the financial implications of the federal Tax Cuts and Jobs Act on regulated utilities. The PUC staff first requested an investigation into these effects in December 2017, leading to the opening of docket SD PUC GE17-003. The commission subsequently voted to proceed with this investigation, mandating that any rate adjustments resulting from the tax cuts be effective as of January 1, 2018. This proactive approach highlights the commission's dedication to robust South Dakota utility regulation.

The PUC has already approved similar refunds for customers of several other major utilities operating in the state, including Xcel Energy, Black Hills Energy, and NorthWestern Energy. This establishes a clear precedent for how the commission intends to handle the federal tax law changes across the utility sector. Discussions regarding potential refunds and rate adjustments are also actively ongoing with Otter Tail Power Co. and MidAmerican Energy Co., indicating a consistent regulatory stance.

PUC Commissioner Gary Hanson characterized the ongoing benefits from these tax-driven adjustments as a "gift that keeps on giving," noting that customers will continue to financially benefit each year utilities pay less in taxes due to the lower rate. Vice Chairperson Fiegen echoed this sentiment, stating that the outcome is fair to the company while effectively passing the benefits of the tax cut to consumers. This comprehensive approach ensures that the Tax Cuts and Jobs Act utility impact translates into tangible savings for residents and businesses across South Dakota.

This decision provides a precedent for how the South Dakota Public Utilities Commission is implementing federal tax law changes for utility rate adjustments and customer refunds, including the requirement for interest on refunds. Lawyers advising other regulated utilities or large energy consumers in South Dakota should monitor ongoing discussions with other companies for similar outcomes.

Source: Original reporting via South Dakota Public Utilities Commission