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South Dakota Court Settles Boundary Dispute

Fortnightly Magazine - July 15 1997

South Dakota Supreme Court has ruled that state regulators erred in authorizing an electric utility to serve an established industrial customer of an electric cooperative.

The commission had found that the Northwestern Public Service Co. could replace Northern Electric Cooperative as the electric supplier for Hub City Inc. Hub had purchased an industrial property containing manufacturing facilities served by the utility and a plant addition served by the co-op.

Previously, the commission had allowed the co-op to serve the addition, although it was inside the utility's service territory under the "new customer, new location, large load" provision of the state's Territorial Integrity Act. Later, however, the commission found Hub could cut its energy costs by allowing the utility to serve the entire facility. The commission ruled a "significant change in circumstances" justified such a switch. It said the service agreement between the co-op and the original industrial customer granted the property owner a contractual right to terminate the co-op as its supplier.

According to the court, the commission's original ruling that split suppliers at the facility established the addition as part of the assigned service territory of the co-op. Simultaneously, the co-op acquired the exclusive right to provide retail service at that location. State law provided large, new-load customers with the right to choose suppliers under certain circumstances, but it did not create a second option to switch again, the court said.

In addition, the court found that the legislature created a system of exclusive service territories to eliminate duplication and wasteful spending in all segments of the electric industry. It said the law provided no special provisions for switching suppliers based on "changed circumstances," whether a customer changes its preference or experiences a load reduction, or whether another utility offers a lower rate or a service agreement expires. Re Petition of Northwestern Pub. Service Co., 560 N.W.2d 925, April 2, 1997 (S.D.)

Phillip S. Cross is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.

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