Electricity Markets

Public power wins latest round in S. D. territory battle with cooperatives

A bill in South Dakota that would have made it more difficult for public power utilities to provide electrical service to annexed areas has been tabled.

The bill, HB 1262, would have required public power utilities to give notice one year in advance of accepting a property owner’s request to be included in the municipal electric utility’s service territory. It also would have given electric cooperatives two chances to challenge an annexation of electrical service in court.

The bill was touted as a compromise, but the final product “favored the cooperatives heavily, restricting property owners’ rights and slowing down economic development,” Russell Olson, CEO of Heartland Consumers Power District said.

Over the past two years, Heartland has been working closely with Missouri River Energy Services and the South Dakota Municipal Electric Association to counter efforts by rural electric cooperatives in South Dakota to limit the ability of municipal electric utilities to provide electric service in areas annexed by municipalities.

Public power, cooperative and investor owned utilities all have defined service territories under South Dakota law, but a 1975 law stipulated that new, large electric customers are not required to take service from the utility assigned to that territory. Under the law, public power utilities have been able to provide electrical service to businesses that are built in areas annexed by municipalities.

“Public power utilities are not forcefully pushing into cooperatives’ territory,” said Tom Heller, President & CEO of Missouri River Energy Services. In 9 out of 10 cases, the new business would not be there if not for the economic development efforts of the municipalities, he said.

If a city annexes territory at the request of the property owner, and the municipal electric utility choses to serve the area, the municipal electric must compensate the incumbent utility. However, electric cooperatives in the state saw the law as unfair and in recent years mounted a legislative campaign to amend the law. A first effort, in 2019, resulted in the drafting of legislation that would have prevented public power utilities from serving in areas annexed by the city, but the bill never made it out of committee.

The bill was redrafted to create a legislative summer study committee that was supposed to be a framework for a compromise. “We made every effort to compromise,” but “all propositions were one-sided and would have delayed economic development,” Olson said.

The parties were not able to reach a compromise before the start of the 2020 legislative session, and a fresh bill was drafted that called for a one-year notice prior to annexation and redress in court.

That bill passed the state’s House of Representatives in February. It had a first reading in the Senate and was referred to the Commerce and Energy Committee, but ended up being tabled there.

The cooperatives have consistently brought legislation to change the 1975 deal that all utilities agreed to, Heller said, but noted that “we are hopeful they have heard the legislature loud and clear after unsuccessful attempts in both 2019 and 2020.”