In the Matter of the Application of Black Hills Power, Inc. for authority to increase its electric rates.
CONSIDERED ON BRIEFS ON AUGUST 29, 2016
FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES
COUNTY, SOUTH DAKOTA, THE HONORABLE MARK W. BARNETT Judge.
A. MORENO of Moreno, Lee & Bachand, PC Pierre, South
Dakota ANDREW P MORATZKA of Stoel Rives, LLP Minneapolis,
Minnesota and CHAD T. MARRIOTT of Stoel Rives, LLP Portland,
Oregon, Attorneys for appellants GCC Dacotah, Inc., Pete Lien
& Sons, Inc., Rushmore Forest Products, Inc., Spearfish
Forest Products, Inc., Rapid City Regional Hospital, Inc.
& Wharf Resources, Inc., together the Black Hills
MAGNUSON NICOLE O. TUPMAN Lindquist & Vennum LLP Sioux
Falls, South Dakota and TODD BRINK AMY KOENIG of Black Hills
Power Corporation Rapid City, South Dakota, Attorneys for
appellee Black Hills Power.
E. CREMER Special Assistant Attorney General South Dakota
Public Utilities Commission Pierre, South Dakota, Attorneys
for appellee South Dakota Public Utilities Commission.
In March 2014, Black Hills Power, Inc., (BHP) filed an
application for authority to increase electric rates with the
South Dakota Public Utility Commission. In June 2014, Black
Hills Industrial Intervenors (BHII) filed a motion to intervene, and the
Commission granted the motion. The parties then agreed to a
settlement stipulation regarding the increase in December
2014, but BHP sought to amend the stipulation in February
2015. BHII resisted the amendment, but the Commission granted
the amended settlement stipulation and approved the rate
increase. BHII appeals.
Black Hills Power is a public utility in South Dakota,
providing electric service to approximately 65, 500 customers
in the western portion of the state. As a South Dakota public
utility, BHP must provide service to all customers in a given
area in return for a state-granted monopoly.
All utilities must petition the Commission before raising
their rates. BHP applied for a rate increase in March 2014.
As required by SDCL chapter 43-34A, BHP submitted a cost
analysis with its petition. The cost analysis included the
"test year" required by ARSD 20:10:13:43. The test
year is used by the Commission in its analysis of whether the
utility's costs merit a rate increase. The utility must
apply for the rate increase within six months of the end of
the test year. BHP's test year ran from September 30,
2012, to September 30, 2013. If granted, the rate increase
for a typical customer would be approximately $10.91 per
In June 2014, BHII filed a motion to intervene in BHP's
rate-increase application, which the Commission granted. The
Commission, BHP, and BHII exchanged discovery and began
negotiations to settle and stipulate to the rate increase.
BHP filed a joint motion for approval of the settlement
stipulation in December 2014, and the Commission held a
hearing on the matter in January 2015. One of the issues the
parties debated at the hearing was BHP's pension
expenses. In its cost analysis, BHP averaged its pension
expenses over the five-year period from 2010 to 2014, while
BHII argued that the actual costs from 2014 should be used.
BHII would later argue that a five-year period from 2011 to
2015 would be most appropriate.
Before the Commission voted on the matter, BHP filed an
amended settlement stipulation. This amendment removed a
previous cost allocation of $286, 000 to one of BHP's
affiliates and replaced that amount with $413, 000 for
expenses related to a power plant. The Commission considered
the amended stipulation and voted to approve the settlement.
BHII appealed the approval of the amended settlement
stipulation to the circuit court, which affirmed the
Commission's decision. BHII now appeals to this Court,
arguing three issues:
1. Whether the Commission misinterpreted ARSD 20:10:13:44 by
allowing BHP to make adjustments to its cost calculation