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NETTIE H. MYERS
President/CEO
2010 Legislative Session
Highlights of Bills Passed Impacting Utilities
HB 1060. Revises certain provisions regarding the refunds for new or expanded agricultural facilities and the refunds for new or expanded business facilities and to declare an emergency. The bill was originally brought by the Department of Revenue on behalf of the Governor. When introduced, it allowed 50 percent sales tax and contractors excise tax relief for construction projects between $25 and $250 million. Current law provides tax relief beginning at $10 million with an increasing percentage of tax relief depending upon the size of the project. The bill would ostensibly “save” the State $3.5 million. A large coalition of businesses, economic development organizations and utilities were involved because power plants, wind farms and transmission lines would all be potential recipients of the incentives, but also because the tax breaks affect local economic development efforts. HB 1060 in its final form sunsets the incentive program after 2012. HB 1060 was one of several bills affecting this issue. As they were defeated and SB 195 became the primary vehicle for change to the large tax breaks, HB 1060 was amended to provide additional tax incentives to wind and wind related industry, including transmission lines. The body was intent upon limiting (or “capping”) the total tax relief available to large projects and did so for most projects, but 1060 in its final form exempted wind from the caps and provides specific relief for transmission lines (despite legislative disagreement over relief for linear projects).
SB 172. Revises the definition for environmental upgrades used to provide a property tax exemption for coal-fired power plants.
This issue arose after the deadline for bill introduction when the SD Department of Revenue determined that the Big Stone Power Plant would not be eligible for property tax relief for environmental upgrades despite existing law to the contrary. The Department believed the upgrades being made to Big Stone did not comply with the strict definition in current law (best available control technologies). The bill was amended in its entirety (hoghouse) to ensure that future environmental upgrades are not limited to a certain technology; rather environmental upgrades are eligible for property tax relief if they are compelled by federal law, a significant improvement from the current language.
SB 195. Revises certain provisions related to tax refunds. SB 195 was introduced by the Republican leadership as an alternative to the Governor’s introduction of HB 1060. It was the primary vehicle for negotiations on the subject of refunds for large projects. SB 195 was controversial because of its subject matter, but it became even more of a hot button because of its significant financial impact for the budget. According to legislative math, reducing the incentives compared to what would have been paid under current law provided a “savings” to the 2011 budget. In the end, action was taken that would limit the refunds to 55% of the taxes paid for large projects (45% between $10 million and $40 million) and would end the refunds after construction costs reached $500 million. Perhaps most importantly, the bill would end the program on December 31, 2012, which means that business will have to return to redefine the incentive program. The bill has a significant financial impact on upcoming natural gas plants and could have a significant impact on any pipelines constructed.
SB 60. Revises certain provisions regarding the siting of energy facilities by the Public Utilities Commission.
The Public Utilities Commission’s siting authority is limited to new facilities and facility expansions, but the expansions are not clearly defined. Additionally, the PUC provides approval to crude oil pipelines and those hearings have been fairly controversial. SB 60 was brought to clarify the Commission’s authority over pipelines and to provide greater definition to when modifications required approval. Our concern was for transmission lines and power plants, or “energy conversion facilities” as they are defined in the bill.
We supported the concept of approval for significant modifications, but were concerned that minor upgrades would require commission approval where they not been required prior to the act. Approval of modifications as originally proposed by the PUC would require the creation of a local review committee and could/would take several months adding time and expense to facility upgrades.
The Commission was sensitive to our concerns and after several conversations with staff and commissioners seeking language that would balance our respective desires; they allowed us to amend their bill to require approval when modifications to energy facilities exceed a net 100 megawatts.
SB 57. Revises the time frames for issuing a decision in certain electric service area disputes and adequacy of service complaints
SB 57 was brought by the PUC. It extends the time that a PUC has to adjudicate territory disputes (from 45 days to 60 days). The bill was amended in committee to remove the opportunity for an affected party to request an extension of the timeline.
SB 58. Revises certain real property taxes for small renewable energy facilities.
Brought by PUC Commissioner Dusty Johnson. The bill exempts the first fifty thousand dollars of real property tax or 70 percent of the real property taxes, (whichever is greater) for renewable energy projects with less than 5 megawatts of nameplate capacity. In spite of opposition, the legislature approved the measure because they wish to be supportive of small wind projects.
SB 61. Requires an electric utility to file rates for purchases of electricity produced by small renewable power facilities.
Reads in its entirety, “Each electric utility shall file with the commission the electric utility's minimum rates for purchases of electricity generated from renewable resources, as defined by § 49-34A-94, and produced by a small renewable power facility that has a capacity of one hundred kilowatts or less. Except for a public utility's standard avoided cost rates set pursuant to the Public Utility Regulatory Policies Act of 1978, as amended to January 1, 2010, a rate filed under this section is not subject to commission approval.”
The utilities met as a group with PUC staff to discuss the effect of the bill. Their desire is to become a clearinghouse for avoided cost rates from all electric entities (including coops and cities). The utilities periodically provide such rates at this time so the bill has little effect on them. Staff assured the utilities that their past filing practices were adequate and thus they supported the bill.
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