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Black Hills Power Seeks Electric Rate Increase

April 2, 2014, 6:03 PM by Kevin Woster

Black Hills Power Seeks Electric Rate Increase

The prominent smokestack of the Ben French generating plant doesn’t smoke these days at the Black Hills Power headquarters in northwest Rapid City.
Times are changing for power companies that once saw coal as the way to light the future. Federal environmental regulations made old plants costly to renovate and new ones, especially if they use cleaner alternatives to coal, sensible to build.

Now idled, Ben French will soon be torn down, along with retired coal plants in Osage and Gillette, Wyoming. Crews are building a new generating plant in Cheyenne, Wyoming, that will replace all three with cleaner electricity.

“The Cheyenne Prairie generation plant is actually natural-gas fired; it's a natural-gas-fired power plant," Vance Crocker, vice president of operations for Black Hills Power, said. "It's very clean burning. As a matter of fact, it's going to be one of the cleanest-burning plants in the nation."

But that cleaner energy comes at a cost, and it’s one Blacks Hills Power wants to share with its customers. The company has approached the South Dakota Public Utilities Commission for a rate increase that would cost a typical customer about $127 a year.

Black Hills Power is investing $95 million as its share of the $225 million cost of the new Cheyenne plant, which is located there because the city is a natural-gas hub. The rate sought by the company aims to recapture its costs, if state regulators agree.

That process of review and hearings could take six months to a year, Crocker says. Meanwhile, he argues that Black Hills Power works to provide a reliable source of energy as reasonably priced as possible while still meeting federal environmental mandates.

“Black Hills Power certainly works hard to control costs,” Crocker said. “You know, we think controlling costs and providing safe, reliable energy is very important. We think we still provide a great deal of value from an electric perspective.”

It remains to be seen what the Public Utilities Commission will think and decide. Black Hills Power last sought a rate increase in 2012 and it took effect in 2013.  The 6.6 percent increase on an average customer approved by the PUC was less than the company sought but enough to make some question another rate hike proposal so soon.

Crocker said the requested hikes will inevitably come. But based on consumer reactions in the past, smaller, more regular hikes are preferable to less-frequent-but-larger rate increases, he said.

The higher rates represent changes that will benefit electrical consumers over time, Crocker says.

“The trend here and the trend across the United States is essentially closing down a lot of the coal-fire plants and building natural-gas power plants,” Crocker said.  “So you’re seeing a shift away from coal and you’re seeing a shift to natural gas from a power-generation perspective.”

With federal regulations aimed at cracking down on mercury levels and other pollutants, power companies don’t have an alternative, he says. And while newer coal plants are better equipped for the tougher regulations, older plants are naturally on the hit list.

“We need to meet the regulations. And the Cheyenne Prairie generating plant is actually the most economic, cost-effective replacement for our customers,” Crocker said.

Which doesn’t mean it won’t sting power consumers.

“We understand that these increases in costs are very challenging for the customer,” Crocker said.

Customers can look for ways to save money on their electrical bill at the Black Hills Power website.

Crocker argues that electricity is still a good buy.

“If you look at a typical house, you know, we can power electricity to a typical home for an entire day for less than the cost of a gallon of gas or a gallon of milk," Crocker said.

And because of costly federal mandates, it's likely to be cleaner than ever before.

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