HB 1140: Another Perspective

by Bill Powers

There has been much discussion of HB 1140. The general opinion is that its  intention is to limit the ability to appeal county commissioner decisions, especially with regard to zoning and permitting of agricultural operations, like CAFOs. I have pointed out to both supporters and opponents of the legislation, that, while it does provide commissions with alternatives they apparently do not presently possess, it doesn’t entail that more CAFOs will be permitted. In fact, the legislation could work to do just the opposite. Over the short run, it will likely result in more CAFO permits. That may, indeed, be the intention of the bill’s author. However, if the constitution of commissioners would change, it could just as easily put a halt to all CAFOs in SD. In fact, the legislation may make it easier to do that than previously.

In engaging in these and similar discussions, I have come to the following conclusions. It seems that the trend in CAFO permitting is for it to become similar to that required for a building permit. Obtaining a building permit does not require a public hearing. In the vast majority of cases the criteria for obtaining the permit and the subsequent rules associated with the construction are sufficiently clear that it is generally an administrative matter. There is no room for public comment, except where a variance is requested. It is not inconceivable that a similar situation might prevail for CAFO permits. It also seems to me that it is not inconceivable that there could be CAFO permitting and inspection process that would not require public comment.

Given that this is the current trend, I think it is well worth preparing for it. This entails focusing our attention on the permitting and inspection process. Already DRA is working to try to strengthen the DENR CAFO permitting process. Even with that DENR permit, local counties have leeway in the permitting process. I presume that they cannot make the permit criteria weaker than DENR would stipulate. They could, however, make them more stringent. Once the permit and inspection process is in place, for the most part the process is out of the hands of commissioners and the public. There must remain still opportunities for public oversight, but they will, for the most part, be rare.

If this trend is continues, opportunities for influencing CAFO requirements and permitting process will become increasingly limited. Influence through the hearing and appeals process will become increasingly difficult and rare. There remain, however, other avenues of influence. Three immediately come to mind: education, commissioner elections, and the permitting and inspection process. These strategies are different from the guerrilla tactics employed in appeals and those like that in Turner County. Their intention is to
infiltrate and reform from within. The presumption of many is that CAFOs make good business sense. Communities like them because they bring in taxes. These presumptions are questionable and need to be addressed. Changing the  tax structure or subsidies for grains alters the fiscal environment. A different vision for rural SD is possible. It is not that such efforts are not already in place, but rather it may require a refocusing and
redistribution of resources.

Will hemp soon be legal in South Dakota?

Note: Dakota Rural Action member Danny Dyck and Senator Troy Heinert, who is helping sponsor this legislation, will be on the Dakota Rural Voices radio show Thursday, January 21, at 1pmCT on KSDJ 90.7 in Brookings. You can listen in here: http://www.ksdjradio.com or stream KSDJ live on your phone, tablet, or smart TV via the free TuneIn App

by Bill Powers

HB 1054 would legalize the cultivation of industrial hemp in South Dakota. Hemp cultivation dates from at least 10,000 years ago in Southeast Asia. It has been a common cultivar throughout the world, including Europe, Russia, and North America. George Washington grew hemp and encouraged its cultivation as a cash crop. Industrial hemp is already produced in Canada and Europe, France being the largest producer worldwide. About 100,000 acres are presently cultivated in Canada. During WWII the US government encouraged the cultivation of hemp to replace Manilla hemp as a necessary component of the war effort, resulting in the short film “Hemp for Victory.”

Industrial hemp contains less than 0.3% of tetrahydrocannabinol (THC), making it useless as a recreational drug. Marijuana has a THC content of 3% – 20%, indicating that one would have to smoke from 10 to 20 hemp cigarettes to get high. The economic benefits from the cultivation of industrial hemp are significant. Recent results in Alberta indicate that the average net profit for hemp cultivation is about $516/acre, while that for corn and beans hovers around $300/acre. Both the straw and seed have significant commercial value, with additional commercial applications still under investigation.  The 2014 Farm Bill paved the way for legalized cultivation of industrial hemp for research in those states where hemp cultivation is legal.

HB 1054 requires any producer of industrial hemp to obtain a permit from the state and that only certified seed be used to guarantee its THC content. The fields producing hemp shall be subject to testing by the South Dakota Department of Agriculture (SDDA), and the purchaser of any harvested hemp will be reported to the SDDA. The cost of testing will be paid for by the applicant at a cost of $5/acre. These stipulations appear to reflect those in place in Canada.

Some are concerned that industrial hemp production could conceal marijuana production. There are at least two reasons why this is unlikely. First, if someone were to try to conceal marijuana production, it would seem that the last place you would want to do it is in a field that is being monitored for THC levels by state officials. It would make far more sense to try to conceal such cultivation in a field of rye, buckwheat, or any other tall grain. There is already ample evidence that marijuana is being grown in corn fields throughout the mid-west. Secondly, if you did want to grow marijuana in a field of industrial hemp, pollination by the industrial hemp would result in an inferior marijuana with a lower THC content.

Finally, even should the state legalize industrial hemp cultivation, significant hurdles are still in place. The Drug Enforcement Administration (DEA) requires that anyone cultivating industrial hemp receive a permit from the DEA, and this remains the case even in states like North Dakota and Montana where hemp production is legal. Despite the recent provisions of the 2014 Farm Bill, the DEA continues resist granting permission to any research institution to grow industrial hemp. On April 28, 2015, Purdue became the first research institution to receive such a grant. Despite this resistance, the first step under the 2014 Farm Bill is state legalization of hemp production. The economic benefits of hemp production are significant. Its influence upon local economies could be promising as new local industry would be established for subsequent processing of both the seed and straw. Moreover, hemp cultivation can serve as a valuable component in a crop rotation program.

Weekend Special: The Hidden Costs of CAFOs

by Bill Powers

An unfortunately old report (http://www.ucsusa.org/sites/default/files/legacy/assets/documents/food_and_agriculture/cafos-uncovered.pdf, 2008) by the Union of Concerned Scientists (UCS) asks why is it that CAFO numbers are increasing dramatically. They argue studies by the USDA indicate that CAFOs are no more efficient than medium sized operations. Instead they suggest that the benefit CAFOs accrue are due to farm policy, among these including processing contracts. Most CAFOs rely almost exclusively upon purchased feed. Alternative livestock operations will rely much more upon their own pasture and crop production. As such, the significant Federal subsidy for grain production indirectly favors CAFO operations.

UCS (2008) estimates are that there is a $3.86 billion/year grain subsidy to the livestock industry by crop subsidies. Other indirect costs that they consider are reductions in property values ($26 billion), and manure remediation costs $4.1 billion totals as of 2008. These external costs are paid for by the US taxpayer.

Optimum efficiency (cost/unit of production) is reached well below CAFO (2008 measures) size. They argue that studies have shown that economies of scale is not a signifcant factor favoring larger livestock operations. Fro example, one study showed that the optimal size for hogs was about 120 sows, producing about 2400 hogs/year. CAFOs do benefit from the more efficient use of fodder for weight gain since it is not expended in moving around pastures or adjusting to changes in climate. These gains, however, have to be offset by considerable increases in other costs. After all, the much higher cost of creating and maintaining CAFO environmentally controlled buildings, in addition to the added cost associated with animal health and manure management have to be offset somehow. The UCS argues that this is primarily offset by low grain costs. They note:

Low-cost inputs spread the high fixed costs of confinement infrastructure
(such as the buildings that contain the animals) over many units of production. CAFOs can compensate for low profit margins per animal by producing large numbers of animals. By contrast, small and diversified producers often have relatively lower fixed costs and higher variable costs, and may attempt to lower their costs by reducing production when prices are low. In this way, CAFOs may expand at the expense of smaller operations.

In effect, then, it is the US taxpayer who is indirectly subsidizing CAFOs. The UCS argue that there are alternative livestock operations that may be more efficient than either CAFOs or medium sized farms. Because of the significant external costs to CAFOs, it would seem that seeking such alternatives are well worth pursuing by publicly funded institutions.

The UCS consider, too, the affect of anti-competitive processing practices, a violation of the Packers and Stockyard Act (PSA). Processing facilities require governmental inspections. It may be that this requirement favors larger processing facilities. With the concentration of processing in the hands of a few, and contract relationships between larger producers and processing facilities favored, access of medium sized livestock operations to consumers is hampered, even when their production costs are competitive. This situation favors both the concentration of processing facilities and livestock operations.

What needs to be asked is why processing operations favor contract relationships with larger livestock operations. We could imagine that there might be vertical integration gains if the processing facilities owned their own livestock operations. While this is the case for some, it is not generally true. One possible problem is that while the cost/unit of production is the same (or even better) for smaller operations, they may require a higher marginal profit to remain in business than a CAFO. A small farmer might be able to competitively produce a profit of $10,000, but could not remain in business long because of external costs, viz., himself and family. A larger operation, employing more people, can simply lay off a whole person. I’m not being overly clear here, but it does seem that large facilities may be able to survive at a lower margin of profit than a smaller unit.

In any case, it appears that for the most part it is only the largest producers than sell their produce under contract.

Since feed costs represent something like 50% of the cost for CAFOs, they are sensitive to feed costs. To determine the subsidy to CAFOs through crop support programs, one would have to be able to determine what the cost of grains would have been without such supports. Starmer and Wise (http://www.ase.tufts.edu/gdae/Pubs/wp/07-04LivingHighOnHog.pdf, 2007) examine the cost of production of beans and corn and the market price of both. Because of Federal supports make up the difference to keep farmers solvent, the Federal subsidy enables CAFOs to purchase grain at a cost below the cost of production, an advantage that a livestock producer who grows his own grain and pastures his livestock cannot take advantage of. Starmer and Wise estimate that between 1998 and 2005 this translated into about a 15% savings in costs for hog CAFOs. Smaller sized livestock operations that produced their own grains after 1990 can also take advantage of these subsidies even if they do not sell the grain. However, studies have shown that the subsidies do not fully compensate farmers for the difference between production costs and market prices. As a result, there is a “subsidy gap,” one that benefits the CAFO and disadvantages the smaller livestock producer.

There are a number of issues that are worth investigating with regard to commodity prices and CAFOs. It would be interesting to find out what has happened to this “subsidy gap” since 2007. Farmers who rely upon these supports might simply argue for higher supports. By reducing this gap, it would help the smaller livestock producer. The recent bump in corn prices due to increased ethanol production dramatically increased corn prices. It would be worthwhile to consider at what commodity price the operation of CAFO style production would be less profitable than a livestock operation that grows its own feed.

Well enough said and researched for now.

No Common Core: House Bill 1223

by Bill Powers

HB 1223 will end the state’s involvement with Common Core. The Bill states:

“The South Dakota Board of Education shall end the state’s involvement with the Common Core State Standards Initiative no later than June 30, 2017. Further, it is the policy of the State of South Dakota that no multistate educational standards related to, similar to, or associated with the Common Core State Standards Initiative may be adopted in this state.”

House Education committee dedicated all of their 2/18 meeting to discussing HB 1223. Opponents and proponents each had 40 minutes. There were many speakers for and against the bill. As I see it there were two important concerns about the Common Core. First, there is a concern about the flexibility of the standards and second that at least some of the standards are not developmentally inappropriate. Standards that are too strict may make it difficult to adjust what is taught and how it is taught to fit particular student needs. If the standards cannot be met by some students, standards that are too strict may disallow any appropriate accommodations. There was some evidence given regarding the standards themselves. Especially
in the early years, some argued that some of the standards may be developmentally inappropriate, forcing students to develop abstract thinking before they are ready. Others argued that teaching to the standards can be an inefficient use of teacher time, and a waste of resources.

A representative of the SD Department of Education argued that the Common Core was not as inflexible as opponents indicate. Spelling and arithmetic tables are not disallowed. Moreover, even though Common Core is copyrighted, the state can modify the standards. Already reviews are scheduled for English and mathematics in 2017 and 2018, respectively. Because the Common Core is copyrighted, there is some controversy as to whether a state is free to modify the standards. It seems, however, that since some states are modifying the Common Core standards this is not a legal problem.

HB 1223 was tabled by the Education committee by a close vote of 8 to 7.

My concern with Common Core is somewhat different from that expressed. I am concerned that there are a significant number of students graduating from high school not job ready. It seems to me that the Common Core is intended to make students college ready. However, not all students go to college. Indeed, there are good reasons for all students not to go to college. There are many skilled jobs that do not require college training. Many students are not only not benefited from a college-ready program, but they are often lost to education entirely as a result of inappropriate programs, leaving high school benefited little from the experience. For this reason it behooves us to consider a far more flexible educational system, not merely after high school, but well before high school graduation.

Is South Dakota violating PURPA?

by Bill Powers

The Public Utilities Regulatory Policies Act(PURPA) was enacted it 1978. Its purpose is to encourage alternative energy development by providing qualified facility (QF) status to eligible cogeneration and small renewables with rights to sell to utilities.

It requires that utilities have a mandatory obligation to purchase power from qualified facilities (QFs)at “avoided cost based rates” with just and reasonable, non-discrimination standards.

“Avoided Cost” is legally defined to be “the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.” (http://www.gpo.gov/fdsys/pkg/CFR-2010-title18-vol1/pdf/CFR-2010-title18-vol1-sec292-101.pdf)

The Federal Energy Regulatory Commission (FERC) mandated by authority from the Energy Policy Act (EPAct) of 2005, which revised the Public Utility Regulatory Policies Act of 1978 (PURPA), requires that nonregulated electric utilities are required to purchase supplementary power from a qualified facility (QF)or to sell backup power to a QF, at an avoided cost rate.

By law, “supplementary power means electric energy or capacity supplied by an electric utility, regularly used by a qualifying facility in addition to that which the facility generates itself;” and “back-up power means electric energy or capacity supplied by an electric utility to replace energy ordinarily generated by a facility’s own generation equipment during an unscheduled outage of the facility.”

There are quite a few Avoided Cost Methodologies. The most common are:

  • Differential Revenue Requirement (DRR): Calculates the difference in cost for a utility with and without the QF contribution to generating capacity.
  • IRP Based Avoided Cost Methodology: Relies on state integrated resource planning to predict future needs and costs that will be avoided by QF generation; based on IRP, may then apply proxy, DRR or other methodologies.
  • Market Based Pricing (MBP): QFs with access to competitive markets receive energy and capacity payments at market rates. MBP appears to be the most common, but yields a price generally not sufficient to incentivize qualified facility development. DRR is not transparent and complicated.

The EPAct states in Subtitle E – Amendments to PURPA:

SEC. 1251. NET METERING AND ADDITIONAL STANDARDS.
(a) ADOPTION OF STANDARDS.-Section 111(d) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is
amended by adding at the end the following: “(11) NET METERING.-Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term ‘net metering service’ means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.

(b) COMPLIANCE.- (1) TIME LIMITATIONS.-Section 112(b) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is amended by adding at the end the following: “(3)(A) Not later than 2 years after the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority) and each nonregulated electric utility shall commence the consideration referred to in section 111, or set a hearing date
for such consideration, with respect to each standard established by paragraphs (11) through (13) of section 111(d).”
“(B) Not later than 3 years after the date of the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority), and each nonregulated electric utility, shall complete the consideration, and shall make the determination, referred to in section 111 with respect to each standard established by paragraphs (11) through (13) of section 111(d).”

PURPA provides to the Federal government through the FERC enforcement responsibilities and powers to insure state compliance with the requirements of PURPA. States are required to devise rules and policies to implement PURPA within parameters of PURPA and FERC Regulations.

South Dakota appears to be in violation of the EPAct Subtitle E, section 1251(b).

I have spoken to the South Dakota Municipal Electric Association. They are unaware of any municipal electric supplier that has any net-metering policy. They are, however, ready and willing to work with SDMEA members to develop such a policy.

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
sabrina@dakotarural.org
(605)939-0527

South Dakota and Teacher Pay

by Bill Powers

There has been increased interest in the media regarding teacher salaries. The 1/24 edition of the Brookings Register had an editorial calling for increases in teacher pay, and perhaps a shift from local school control. On 1/29, Todd Vik, SF School Distrist Business Manager, offered a seminar on school funding, calling for an increase in state support for education. Now that the discussion is finally heating up, I thought I would provide a little bit of background.

You can find a thorough report of the nation’s schools at http://www.nea.org/home/rankings-and-estimates-2013-2014.html comparing state educational systems, and a more complete pdf file at http://www.nea.org/assets/docs/NEA-Rankings-and-Estimates-2013-2014.pdf.

I have spent the good part of day combing through this data. It is not easy to compare states because no two states are the same. One thing is clear, however; SD doesn’t spend more money on education in part because it doesn’t have the funds. It doesn’t have the funds most importantly because it is amongst the lowest tax states in the country. North Dakota is one of highest, with Minnesota not far behind. It might seem sensible to simply call for higher taxes in SD, but the situation is a little more complex than that. Of neighboring states MN, ND, and NE, SD has a much lower median income than all three. As a result, SD has a larger fraction low income earners and a lower fraction high income earners than the other three states, especially MN. How important is this difference is unclear, but since much of our taxes comes from the wealthier, having fewer of them influences tax receipts. However, even with lower income than the other three states, its income per capita is still higher than the national average. It would seem then that the state could afford to pay higher taxes. The situation might be more flexible if SD had a state income tax. It is the only state of the four that does not. Without an income tax the state collects much of its revenue from local property taxes and sales tax. While sales tax tends to be regressive, it is worth noting that North Dakotans pay higher sales taxes than SD.

An increase in teacher salaries can come from two sources. Money can be taken from other expenditures or revenues increased. We need to bear in mind the distinctive features of SD when comparing its expenditures to other states. Being a rural state, it spends almost twice as much on roads per capita as MN. Nonetheless, ND spends more per capita than SD. Still South Dakotans spend considerably less per capita on schools than any of the other three states, NE being the highest. The differences can in part be explained by the differing schools systems. ND has a large number of schools, likely resulting in higher costs for education. NB has one of the lowest student-teacher ratios in the country, also likely accounting for the higher expense of their school system. MN realizes considerable savings by having much higher student-teacher ratios and average school size twice as large as those in SD. SD might save educational dollars by closing some smaller rural schools, thereby releasing more funds for teacher salaries, a suggestion that many for good reasons oppose. It might also increase the use of distance education technologies, thereby not only providing educational opportunities that might otherwise not have been available but also reducing the number of teachers employed. These savings might then be passed along in increased teacher salaries.

Despite these many possible ways to find savings that could be allocated to increased teacher salaries, it seems that the most obvious difference between the three neighboring states is the tax revenue. This is particularly striking when one compares corporate income tax rates. MN has one of the highest in the nation, ND one of the lowest, but only SD, NV, and WY have none. There are tax-based reasons for businesses and individuals to want to live in SD. However, it does seem that SD could still retain many of these advantages while still increasing some of its state taxes, some of which could be used to provide higher salaries for teachers in SD, where the average salary is the lowest in the country. Having said this, it also ought to be clear that someone must be the lowest, and bearing this in mind entails that non-comparative means ought to be sought to evaluate, not only teacher salaries, but also South Dakota’s educational system in general.

Assessing South Dakota students

by Bill Powers

At the 1/26 meeting of the House Education Committee, Dr. Melody Schopp, Secretary of Education, gave a presentation on student assessment.

The principal points to come away with were:
1) SD is presently associated with 19 other states in developing a K-12 assessment program. The 2014 Smarter Balance Assessment program was a field test of this assessment. SD, Idaho, and Montana fully participated.
2) The advantage of this assessment is that it is developed by educators from the various states in the consortium. As a result, the content tested can be fully consistent with the material taught in those states. In addition, by participating with other states SD is still able to make comparisons with other states.
3) The Nations Report Card (nationsreportcard.gov), also known as NAEP, is not developed under local participation.
4) The Smarter Balance Assessment is more detailed than the SD STEP assessment. It includes non-multiple choice questions, and writing assignments. The assessment is taken using computers. While there may be some problems associated with this testing strategy, there are some advantages. The print size on the screen can be modified, headphones can be
provided for students if necessary. The intention is not to test computer skills. So they are still assessing the affect of taking the test in this manner.
5) The Smarter Balance Assessment will have results similar to the NAEP, both of which have stricter definitions of proficiency and advanced than the STEP assessment.
6) Tests are still planned to be given to 4, 8, and 11-th grade students.

Net Metering in South Dakota – A Primer, Part 2

This is part two in a three-part series; part one can be read here, and part three will be up tomorrow.

by Bill Powers

Most utility companies make purchases of electricity from other utilities on the order of a few percent of their annual sales. These purchases don’t influence their fix costs. One could imagine such purchases taking the place of increased generation capacity. When they purchase electricity on this market, that is not their only cost in supplying it to their customers. For example, they still have transmission costs to account for. Midwest Independent System Operation (MISO) operates a large grid of transmission lines using “smart grid” technology, which enables it to not only query the status of the lines, but also to allocate sales of electricity to sub grids. The price is referred to as the Locational Marginal Price (LMP) and is usually expressed in dollars per MWH. To convert this to dollars per kwh divide by one thousand. As of 1/19/2015, prices are quite low, about 2.5 cents per kwh. But these prices can be quite volatile depending upon the time of the year and location. They can easily be twice that price.

Some have suggested tying the prices paid to net meter producers to the current LMP price. While this suggestion makes sense, it is not overly clear in what way that would be done. The purchase of net metering electricity, unlike that of electricity purchased from MISO, must be done whether the utility needs it or not. Where local producers decrease the purchases from MISO, there is a clear one-to-one exchange. When this is not the case, perhaps the utility can sell excess production through MISO. If this makes sense, then we can still imagine that the rate paid to the local producer would be the current LMP price. One difference between purchases from MISO and locally generated electricity are the much reduced transmission losses. Even so, these prices will not excite most local electricity generators, nor will they likely serve as a significant incentive to local production.

South Dakota legislation, passed in 2008, established a voluntary objective of providing 10% of electricity sold in state to be provided by renewable resources. Utility compliance with this policy can be found at https://puc.sd.gov/energy/reo/reo.aspx. Many local utilities have already met this requirement through hydro and wind generation, as has MISO. (Note: of the investor-owned utilities, only Otter Tail and Xcel have met the requirement. Black Hills Power, MidAmerican, Montana-Dakota, and Northwestern have all not reached 10%, though Northwestern is very close). Minnesota requires its utility companies to provide 25% of its electric energy through renewable sources by 2025. If the South Dakota objective were taken seriously or its renewable fraction increased, prices paid to producers per kwh might be used as an incentive to encourage local renewable electric generation, thereby serving as a means of achieving the stated goal. In order to assess the value of such a suggestion we need some idea of what would serve as a sufficient incentive.

Teacher pay – and the need for additional solutions

by Bill Powers

I intend to be following energy and educational issues during the 2015 legislative session. The big issue for education this year is supposed to be teacher salaries. One suggestion is to charge a 1% sales tax during the summer months. As far as I can tell, no bill reflecting this change has actually been put forward. There are bills, SB 53 and SB 54, that propose a 2% increase in funding for education and special education. DRA will be sponsoring a net metering bill. Again, as far as I can tell, no specific bill has been put forward yet.

Regarding teacher salaries in SD, the arguments for the increase are difficult to document. The arguments center around the difficulties some districts have in filling positions. But these difficulties are region wide. Education World reports that the problem is nationwide, the problem is exacerbated in rural areas. Nationwide, large numbers of teachers leave the profession after only a few years. Additionally, there are significant shortages in certain content areas, like math, science, and special education. The National Council on Teacher Quality (NCTQ) reports the problem is more complex that simply looking at starting salaries or average salaries. They consider the importance of the rate of salary change over the course of a teaching career, and the importance of the cost of living. South Dakota starting salaries are amongst the lowest in the nation. It’s average teacher salary is the lowest in the nation, almost $8000 below North Dakota’s. The cost of living in South Dakota is similar to that in neighboring states. So the cost of living is not a facile means of accounting for the lower salaries. Still, NCTQ reports that a more detailed cost of living analysis of teaching salaries over the course of their careers places Fargo, Saint Paul, Omaha, and Minneapolis far superior to Sioux Falls. What is interesting, however, is that the very same analysis places Sioux Falls as superior to Denver, San Diego, and Los Angeles.

It is not easy to make a facile analysis of the data. It is clear South Dakota salaries could stand to be higher, especially relative to some of its neighboring states. But it is not salaries alone that explain the shortage of teachers, especially of science, math, and special ed. It is clear that there are special problems nationwide luring teachers to rural areas and
into certain fields. There are many complex factors responsible for the teacher shortage. Consequently, we ought to be looking at more comprehensive solutions to that shortage. While it can’t hurt raising teacher salaries, it
is clear that it will not solve the problem facing South Dakota schools.

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