In re Black Hills Power, Inc.
| Citation | 2016 S.D. 92 |
| Decision Date | 14 December 2016 |
| Docket Number | #27751 |
| Parties | In the Matter of the Application of Black Hills Power, Inc. for authority to increase its electric rates. |
| Court | Supreme Court of South Dakota |
#27751-a-LSW
APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES COUNTY, SOUTH DAKOTA
THE HONORABLE MARK W. BARNETT Judge
MARK 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 Industrial
Intervenors
LEE A. 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.
[¶1.] 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)1 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.
[¶2.] 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.
[¶3.] 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 month.
[¶4.] 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.
[¶5.] 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.
[¶6.] 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:
[¶7.] 1. Whether the Commission misinterpreted ARSD 20:10:13:44 by allowing BHP to make adjustments to its cost calculation after its initial application.
[¶8.] This issue involves the interpretation of the language of an administrative rule. "Administrative regulations are subject to the same rules of construction as are statutes." Citibank, N.A. v. S.D. Dep't of Revenue, 2015 S.D. 67, ¶ 12, 868 N.W.2d 381, 387 (quoting Westmed Rehab, Inc. v. Dep't of Soc. Servs., 2004 S.D. 104, ¶ 8, 687 N.W.2d 516, 518). We review the agency's interpretation de novo. See Nelson v. S.D. State Bd. of Dentistry, 464 N.W.2d 621, 624 (S.D. 1991).2
[¶9.] "When regulatory language is clear, certain and unambiguous, [the Court's] function is confined to declaring its meaning as clearly expressed." Citibank, 2015 S.D. 67, ¶ 12, 868 N.W.2d at 387 (quoting Westmed Rehab, 2004 S.D. 104, ¶ 8, 687 N.W.2d at 518). "[I]t is fundamental 'that the words of a [rule] must be read in their context and with a view to their place in the overall [regulatory] scheme.'" In re Certification of a Question of Law from U.S. Dist. Court, Dist. of S.D., S. Div., 2014 S.D. 57, ¶ 8, 851 N.W.2d 924, 927 (quoting In re Expungement of Oliver, 2012 S.D. 9, ¶ 9, 810 N.W.2d 350, 352).
[¶10.] The parties argue about the meaning of ARSD 20:10:13:44, which reads in full:
The statement of the cost of service shall contain an analysis of system costs as reflected on the filing utility's books for a test period consisting of 12 months of actual experience ending no earlier than 6 months before the date of filing of the data required by §§ 20:10:13:40 and 20:10:13:43 unless good cause for extension is shown. The analysis shall include the return, taxes, depreciation, and operating expenses and an allocation of such costs to the services rendered. The information submitted with the statement shall show the data itemized in this section for the test period, as reflected on the books of the filing public utility. Proposed adjustments to book costs shall be shown separately and shall be fully supported, including schedules showing their derivation, where appropriate. However, no adjustments shall be permitted unless they are based on changes in facilities, operations, or costs which are known with reasonable certainty and measurable with reasonable accuracy at the time of the filing and which will become effective within 24 months of the last month of the test period used for this section and unless expected changes in revenue are also shown for the same period.
The phrase "at the time of filing" in the last sentence of the rule is the point of disagreement between the parties. BHII argues that the "filing" in the phrase refers to the filing of the initial petition. Under this interpretation, "adjustments"would refer to adjustments in the test-year data and would not be permitted after the filing of the initial application. BHP and the Commission assert that the word "filing" refers to the filing of the adjustment itself, thus permitting adjustments to the cost analysis after the initial application.
[¶11.] The plain meaning of the rule indicates that the Commission's interpretation is correct. The latter half of the rule reads:
[¶12.] 2. Whether the Commission erred by allowing BHP to exclude the year 2015 from its five-year normalization of pension expenses.
[¶13.] In its cost analysis, BHP included a normalization of its pension expenses from 2010 to 2014. Had it included the five-year period from 2011 to 2015, the normalization would have been higher. BHII argues that if the Commission allowed BHP to make adjustments to its cost analysis with new data that would require the new rate to be higher, BHP should be mandated to include other adjustments that would decrease the rate. Nothing in the language of ARSD 20:10:13:44 indicates that adjustments are mandatory rather than permissive. The clause concerning adjustments begins: "Proposed adjustments to book costs shall be shown separately and shall be fully supported, including schedules showing their derivation, where...
To continue reading
Request your trial