State regulators approve one electric rate increase, begin consideration of another

South Dakota regulators approved an electric rate increase for Otter Tail Power on Tuesday in Pierre while starting a review of Black Hills Energy’s rate increase request.

Otter Tail Power had proposed hiking its average residential customer’s bill by $14.39 per month. The company has about 11,500 customers in northeastern South Dakota.

The Public Utilities Commission approved a settlement reducing the increase to $8.97 per month. An annual revenue increase for Otter Tail that would have been $5.7 million was thus reduced to $3.3 million.

Otter Tail said it needs the higher rates to cover inflated day-to-day operating costs and necessary infrastructure investments.

Commissioners also approved Otter Tail’s reimbursement plan. Customers will receive credits on their May bills to refund the difference between the higher interim rates that began Dec. 1 and the rates approved in the settlement. The settlement includes a rate moratorium through Dec. 1, 2029, which means Otter Tail cannot seek another rate increase before then.

Black Hills Energy says its requested rate increase of about $25 per month for the average residential customer is justified by infrastructure investments, inflation and the lack of a rate increase since 2014.

The proposal would generate $50.6 million in additional annual revenue for the company, which serves roughly 75,000 customers in its western South Dakota electric service territory.

Black Hills Energy filed an application with the commission on Feb. 19. On Tuesday, commissioners voted to pause the proposed rate increase for up to six months while they review it, and to require Black Hills Energy to pay up to $500,000 to cover the cost of examining the proposal.

Separately, Xcel Energy is seeking an increase that would raise the average bill for its residential customers by about $21 per month and bring in $43.6 million in additional annual revenue. The company has about 107,000 customers in South Dakota, mostly in the Sioux Falls area. That rate case is pending.

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