South Dakota rate case
2010 rate increase request
To bring rates closer to the actual cost of providing reliable electric service, we've asked the South Dakota Public Utilities Commission (PUC) for permission to increase rates by approximately $2.8 million, or a little less than 10 percent. If the PUC approves the request as filed:
- The average base rate increase for customers in the residential class will be $9.68 a month.
- The average base rate increase for customers in the commercial class will be $15.13 a month.
The base rate increase will be more for some customers and less for others depending on the rates on which customers are served and the amount of electricity they use. These examples don't include fluctuations in the cost-of-energy adjustment.
Contributing factors
Infrastructure investments
- A major factor behind the request is significant infrastructure investments such as our ownership of 49.5 megawatts of electric generation at the Luverne Wind Farm.
- Our South Dakota customers have received the benefit of this low-cost generation resource since 2009. And while base rates may increase as a result of this project, the Energy Adjustment line on customers' bills has the potential to be lower. That's because the wind-generated electricity that we receive from owned renewable resources reduces our need to purchase higher-priced electricity from the wholesale energy market. That reduces the amount of purchased-energy and fuel costs in the Energy Adjustment on customers' bills.
Big Stone II cost recovery
- Regulatory authorities once deemed Big Stone II a necessary and prudent least-cost project. As a utility, our electric rates are based on the costs associated with providing service to our customers. That means that the costs we incur to pursue or implement sensible and necessary infrastructure to meet our customers' needs must be included in rates.
- As part of this rate increase request we have asked to spread the recovery of the Big Stone II plant and transmission development costs over a five-year period.
Operating cost recovery
- Otter Tail Power Company looks for cost savings in every area of our business. We have efficient generation, transmission, and distribution maintenance protocols and prudent purchasing practices to keep operating costs as low as possible.
- Still, nonfuel operating and maintenance costs continue to increase. And, while we can make cuts and delay projects for a period of time without risk to our reliability standards and customer satisfaction, that's not a sustainable solution for the long term. We must continue to maintain and upgrade our system to continue providing reliable service. That requires financial strength.
Sensible financial planning
- To continue to meet our customers' needs, we'll need access to low-cost financing for infrastructure additions. Of course, lower financing costs help us save our customers money. So it's important that our company is financially strong and can obtain financing for future projects on the most favorable terms possible.
- While this requested rate increase doesn't include the cost of future infrastructure investments, this rate increase will help ensure the financial stability that lenders will be looking for.
Public Utilities Commission approval required
Otter Tail Power Company is a regulated utility, which means the Minnesota Public Utilities Commission, the South Dakota Public Utilities Commission, and the North Dakota Public Service Commission approve the amount we charge customers for producing and delivering their electricity.
The PUC will hold public input sessions related to the filing and will post the hearing schedule on its web site once the schedule is determined. We also will post the meeting schedule on our web site.
Energy-savings information
Otter Tail Power Company has a South Dakota Energy Efficiency Plan and a number of other resources available to help customers manage electricity costs.
