The South Dakota Public Utilities Commission significantly reduced rate increases for both South Dakota electric and natural gas customers served by Montana-Dakota Utilities Co. at their regular meeting in Pierre today, Aug. 13, 2024. The commission’s actions came after a year-long analysis of two MDU requests: to increase base rates for electric service to customers in its South Dakota territory by approximately $2.98 million annually or approximately 17.3%, and to raise natural gas rates by approximately $7.42 million annually or 11.2%.
The approved rate for MDU’s South Dakota electric customers will allow a more modest overall revenue increase of $1.29 million annually. As a result, a typical residential electric customer using 900 kWh per month will see an average bill increase of $8.26 per month, less than half the estimated $20.00 per month from the company’s original request.
In the natural gas docket, parties agreed to increase annual revenues recovered by approximately $5.37 million annually, resulting in an average increase of approximately $4.45 per month for a typical natural gas customer using 66.3 dekatherms annually, or 5.53 dk per month. The amount approved by the PUC is just over half the $8.70 per month increase requested in MDU’s application.
“It’s important for the public to understand what the PUC is and what commissioners can do. We are quasi-judicial, so we have to abide by the law and ensure that rates are reasonable and just and that the company also gets a fair rate of return,” said PUC Chairperson Kristie Fiegen. “When analyzing these two dockets, I see a company that hasn’t had a rate increase in eight years and today we are looking at rate increase for both electric and natural gas of 7 or 8% over a period when the total inflation alone was well over 30%. We often hear customers ask us not to increase their rates, but we have abide by the law, and that’s what we’ve done today,” Fiegen continued.
Both resolutions were reached through negotiations between MDU and PUC staff and were filed with the commission as settlement stipulations on July 26, 2024. Both comprehensive agreements cover numerous areas and issues. As a part of both settlements, the company agreed to a moratorium on additional base rate increases that will prevent MDU from requesting an increase in base rates that would be effective prior to March 1, 2027. Other issues detailed in the settlements include increases to customer charges, an interim refund plan and a lower overall rate of return for the company.
PUC Vice Chairman Gary Hanson highlighted the importance of finding a balance between the interests of South Dakota customers and the company when analyzing rate cases. “Protecting the citizens from unnecessary utility expenses while allowing utilities to obtain the funds necessary to provide safe, reliable, and affordable electricity is a top priority of mine. I am especially appreciative of PUC staff for their incredible deep dive and thorough investigation,” said Hanson.
MDU’s natural gas filing cited investments made since the last rate increase and increases in operations and maintenance expenses as primary drivers behind the need for a natural gas rate increase. MDU cited the same two drivers in the need for an electric rate increase, with additional factors like depreciation and property taxes also contributing. The company’s last electric and natural gas rate increases in South Dakota were approved by the PUC in June 2016.
“MDU investment in new pipes to improve natural gas pipeline safety, increased interest costs, and general inflation are driving these increases,” noted PUC Commissioner Chris Nelson. “The PUC staff has worked hard to keep these rate increases far below the rate of general inflation to minimize the burden on utility consumers,” he said.
MDU submitted applications for both rate increases to the PUC on Aug. 15, 2023. New rates will go into effect Sept. 1, 2024. The company implemented interim rates for electric and natural gas customers on March 1, 2024. Because the rates approved by the commission are lower than the interim rates, the company must refund the difference, plus 7% interest, to customers as bill credits no later than Nov. 29, 2024.
MDU serves approximately 64,600 natural gas customers and 8,500 electric customers in South Dakota.