The Value of Small-Scale Energy

by Bill Powers

HB 1232: Purpose: provide for a determination of the value of small power production facilities by the PUC ONLY for investor-owned utilities.

DRA is backing this proposal. I like the idea of not having the legislature pursue a particular netmetering rate. What I didn’t realize until now is that the PUC ONLY regulates investor-owned facilities. It has nothing to do with either cooperatives or municipal electric facilities. This is unfortunate since only about 49% of sales are from investor-owned utilities.

As I tried to indicate in an earlier post, electricity providers need guidance with respect to local electricity generation. We can at least hope that the PUC will provide a model for such considerations.

This bill was referred to the House Commerce and Energy committee on 2/4. As of Tuesday 2/10, it has not been placed on the Commerce committee’s schedule.

From Dakota Rural Action:
House Bill 1232: Establishing a methodology to determine the value of small-scale electricity

Dakota Rural Action is supporting legislation being sponsored by Rep. Paula Hawks and Sen. Brock Greenfield requiring the Public Utilities Commission to develop a methodology to determine the value of small scale electric generation facilities. This methodology will be used by investor-owned utilities only to set purchase rates for excess electricity generated by energy producers in their service territories.

HB 1232 lays out specific considerations for the methodology, but leaves the door open for the PUC to also consider other costs and values. The legislation is based on Minnesota and North Carolina’s similar laws, and follows best practices set forth in most other states currently grappling with the value of small-scale distributed generation.

The benefits of HB 1232 extend far beyond the customers of investor-owned utilities. Municipal electrics are seeing more and more customers installing small-scale generating systems, and everyone is grappling with how much the generated power is worth. The methodology established by the PUC under this legislation will provide a framework municipal electrics and REAs can follow when determining how much small-scale electric generators are worth in their territory. HB 1232 does not require any municipality or REA to adopt the methodology.

Studies done across the country from California to New York show conclusively that these systems are a valuable and inevitable part of our energy mix. It is important, now that South Dakota is seeing growth in the adoption of such systems, to establish fair purchase prices for the power generated to ensure not only that the grid is supported, but that energy producers are compensated at a rate reflective of the value of their energy.

Key issues addressed by HB 1232:

  • More South Dakotans are choosing to invest in their own electricity generation, but they are finding there is no guideline to determine how much their excess electricity is worth.
  • So far, the investor-owned utilities have determined the rate at which they purchase electricity from individual generators. The utilities have taken a very narrow view of what that electricity is worth, and the current system of valuation does not follow best practices accepted around the country.
  • Small-scale electricity generation is a valuable part of South Dakota’s energy mix, and our policies need to reflect the growing desire for, and value of, these systems.
  • An open, transparent process for determining the value of small-scale electricity generation that takes into account all factors, not just fuel cost, as well as the value of the grid, is the best way to establish how much individual energy producers should be paid for what they are providing as a service to their fellow citizens.

For more information, contact:

Sabrina King, Dakota Rural Action Lobbyist



  1. Thad Wasson says:

    You will be in competition from Excel energy , MDU, Black Hills Corp and WAPA to find clients to sell excess power to. Not included is the cost of transformers, switches and other materials needed to get your product from your home to others in the grid.

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