Black Hills Power hopes to come to a resolution on its 26.6 percent rate increase request before the case is heard by the state Public Utilities Commission.

The utility is working to negotiate a settlement with the other parties to the case: the utilities commission staff, and the local businesses and residents who are legal parties to the case.

Rate cases work like court cases, and the parties involved are free to negotiate a settlement.

"Our preference would be to settle the case and have permanent rates by April 1," said Kyle White, vice president of regulatory and governmental affairs for Black Hills Corp., the parent company of Black Hills Power.

White said Thursday that the company planned to put interim rates into effect April 1 if permanent rates haven't been established by then, under a provision of state utilities regulation law.

A commission hearing on the matter, originally set for this week, has been postponed at the request of the other parties to the case, who want more time to study what is a particularly complex rate case.

A settlement would save time and money for all of the parties involved, avoiding what is likely to be a three-week hearing in Pierre attended by expensive attorneys and consultants.

Any settlement would still have to be approved by the utilities commission, which has the authority to override it.

"The commission's really got to take a look at that and make sure that it's good for the public interest," commission chairman Dusty Johnson said. "We're not going to delegate that authority."

Johnson said in his six years on the commission, no rate case has made it to the hearing stage before a settlement was reached.

But this case may be different.

For one thing, it's particularly complex.

The utility filed a lengthy document, called an Integrated Resource Plan, explaining its reasoning for building the Wygen III coal-fired power plant in Gillette, Wyo. The plant is a major addition to the utility's rate base and a big reason for the 26.6 percent rate increase request the utility filed for in September.

"Our recent rate cases have not had that in-depth of a look at resource generation decisions," Johnson said.

The plant will be ready for commercial operation beginning April 1.

White said it seems unlikely a settlement would happen in time to have permanent rates in place by that date. If the permanent rates are less than the interim rates, the utility would have to refund the difference to customers.

A second reason a settlement may be unlikely is there are several parties that would have to agree. In addition to Black Hills Power and the Public Utilities Commission staff, there are two other groups with legal standing in the case.

The first is a group of Hills-area businesses including Rushmore Forest Products, the GCC Dacotah cement plant, the Sanford Underground Laboratory at Homestake and Rapid City Regional Hospital. They are concerned about the effects of the increase on their cost of doing business.

The second is a group of residents in coalition with the South Dakota Peace and Justice Center. They are concerned about the cost to consumers, especially the poor, and have argued that coal-fired power is not the best option in the long run.

With possibly competing interests, a settlement may be a "tall order," Johnson said.

"For a settlement, you need to have all of the parties in the case satisfied with the resolution, and that's difficult to do," he said.

But in addition to the cost savings, the benefit of a settlement to the parties involved is the ability to craft a decision they all can live with.

"If you force the PUC to make a decision, then there are going to be winners and losers," Johnson said, "and if the PUC is deciding, the parties don't get to pick."

White agreed.

"It's always good to resolve your issues with the parties, because then more people's needs are satisfied, potentially, than if you take it to a hearing and have a disputed resolution," he said.

The attorney for the Peace and Justice Center coalition, Sam Khoroosi of Sioux Falls, would only say "the parties have been talking."

The attorney for the industrial business group did not return a call from the Journal.

Settlements are common because the issues at stake in a rate case are based in factual analysis of a utility's decisions, not questions of morality or energy policy, Johnson said.

"These are questions of facts and fairness," he said.

If there were a settlement, the commission could consider whether to approve it at one of its regular meetings, with the involved parties there to make a case about the benefits of the settlement. But if the commission rejected a settlement, it would order a full hearing, Johnson said.

Contact Barbara Soderlin at 394-8417 or barbara.soderlin@rapidcityjournal.com.