Regulators to begin review of NorthWestern Energy’s proposed 16% rate increase

A company that provides electricity to 64,680 South Dakota customers wants to raise its rates by about 16%.

South Dakota’s Public Utilities Commission voted Tuesday to give itself six months to study the rate proposal.

It would be a jump of $19.14 per month on an average residential customer’s bill, although the increase would affect commercial and industrial customers, too. The company stands to gain about $31 million in annual revenue from the higher rates.

Commissioner Gary Hanson said completing the analysis in six months will be difficult. 

“We just do not have enough time,” Hanson said Tuesday during a meeting in Pierre. He said regulators usually do not complete rate-increase reviews in the initial six-month window.  

Regulators reduce Xcel’s 18% electric rate hike to 6%

If the six-month period passes without a decision, NorthWestern Energy could increase its rates at least temporarily while the PUC continues its review. That’s called an “interim” rate increase.

The commission and staff could then continue their review for up to another six months. At that time, the commission could vote on the increase. If the increase is pared back, customers could get refunds for the extra amounts they paid during the interim period.

The PUC staff consists of six analysts and two staff attorneys. When they evaluate an investor-owned utility’s rate proposal, they gather information on company operating expenses, employee benefits, executive compensation, corporate advertising, the cost of generation and transmission facilities, and other factors. The PUC staff also requests and analyzes opinions from outside experts, and asks questions of the parties in the case.

During a recent Xcel Energy rate case, the PUC staff sent the company 343 questions. The review went longer than six months, so the company was allowed to conduct an 18% interim rate hike. The commission later pared the increase back to 6%. Customers received refunds for the extra money they paid while the 18% increase was in effect.

Commissioner Chris Nelson recently told South Dakota Searchlight he plans to propose “something” next winter during the state’s annual legislative session to address the legal framework that allows for interim rate hikes.

“I have to start to ask myself, does that interim rate law need to be tweaked? I think that’s something we should have a discussion on,” Nelson said at a recent hearing for Xcel Energy.

In the NorthWestern rate case, the company said it has faced increasing costs, including the addition of a 58-megawatt natural gas plant in Huron, which is part of $267 million in electricity investments since NorthWestern’s last rate review in December 2014. The company is also considering construction of a more than $1 billion nuclear plant in the state.

EDITOR’S NOTE: This story has been updated to reflect a correction. The original version of the story mischaracterized the action taken by the PUC and the timeline of the rate case.