Otter Tail Power Company has submitted a request to the South Dakota Public Service Commission seeking a rate increase of a little less than 10 percent.
In a news release the company said the increase is needed to bring rates closer to the actual cost of providing reliable electric service to its customers. The company said if approved the request would increase rates by approximately $2.8 million, or a little less than 10 percent.
"In spite of ongoing efforts to manage costs, operate efficiently, and encourage energy-efficient behavior on the part of our customers, the cost of providing service still is more than we're able to recover through our rates," said Chuck MacFarlane, Otter Tail Power Company president and CEO.
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. Similarly, subject to PUC approval, 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.
A major factor behind the request is significant infrastructure investments such as the company's 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," said MacFarlane. "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 Otter Tail Power Company receives 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. Wind can't be our only resource due to its variability, but it currently is one of the lowest-cost resources available."
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MacFarlane also cites the costs associated with developing and permitting the Big Stone II project as a factor contributing to the company's request. "Regulatory authorities once deemed Big Stone II a necessary and prudent least-cost project," said MacFarlane. "As a regulated 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 the company has asked to spread recovery of the Big Stone II development costs over a five-year period. Otter Tail Power Company withdrew from Big Stone II in 2009 due to the broad economic downturn, financing risks, the withdrawal of other project participants, and the fact that the Environmental Protection Agency's indication in 2009 that it intended to regulate CO2 under the existing Clean Air Act made it unclear if the project still was a least-cost option.
The PUC will hold public input sessions related to the filing and will post the session schedule on its web site once the schedule is determined. Otter Tail Power Company also will post the schedule on its web site.
Otter Tail Power Company has a South Dakota Energy Efficiency Plan and a number of other resources available to help customers manage electricity costs.
Information about the rate increase request is available at www.otpco.com by clicking on Electric rates and Cost changes.
Otter Tail Power Company, a subsidiary of Otter Tail Corporation (NASDAQ Global Select Market: OTTR), is headquartered in Fergus Falls, Minnesota.
It provides electricity and energy services to more than a quarter million people in Minnesota, North Dakota, and South Dakota.
