Regulators approve $16 monthly Black Hills Energy rate hike as extra $20 surcharge looms

South Dakota utility regulators unanimously approved a rate increase Wednesday that will add about $16 to the typical Black Hills Energy residential customer’s monthly electric bill, while an additional request from the company to add a $20 surcharge is pending.

The South Dakota Public Utilities Commission approved a settlement allowing the company to collect an additional $27.4 million annually from its roughly 75,000 customers in western South Dakota. That’s less than the $50.6 million the company sought, which would have been a $25 monthly increase for the average residential customer. 

The higher monthly increase took effect on an interim basis in August. The new rate will take effect in December, and customers will receive refunds for the overages they’ve paid the last several months.

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The commission’s staff negotiated the settlement with the company and a group representing large electric customers, including Monument Health; Pete Lien & Sons, which makes concrete and other construction materials; Wharf Resources, which operates a gold mine near Lead, and others. The settlement includes lesser increases for some types of commercial and industrial customers.

During a public meeting Wednesday in Pierre, Commissioner Kristie Fiegen described receiving numerous messages from Black Hills Energy customers who “are struggling with inflation and healthcare costs, and these are the people that necessarily didn’t have a lawyer at the table, but had the PUC staff at the table.” Fiegen said the staff did its due diligence in representing the residential customers.

In response to a commission question, staff attorney Amanda Reiss said the commission cannot reject a rate increase solely because customers are struggling. She said the commission is legally obligated to allow utilities to recover reasonable costs and earn a return on their investments, and she described the settlement as defensible.

The company has said the rate increase is necessary to cover infrastructure improvements, inflation and rising operating costs. The company’s rates had not increased since 2014.

The settlement prevents another rate increase from taking effect before August 2030. However, other charges on customers’ bills can still change.

The increase is separate from another pending Black Hills Energy request for a surcharge to recover costs associated with the $320 million Lange II natural gas power plant under construction in Rapid City.

That surcharge, which would add an estimated $19.70 per month to a typical residential bill, is scheduled to take effect on an interim basis in December. If the commission later rejects or reduces the surcharge, customers would receive refunds.