Otter Tail Power settlement includes customer refund

The state Public Service Commission may approve the settlement at any time, although Commissioner Tony Clark said action could be delayed because of questions about a proposed $450,000 economic development fund that Otter Tail ratepayers would finance.

"Aside from that, it looks like a pretty solid settlement," Clark said. Otter Tail spokeswoman Cris Kling said the agreement was satisfactory to the utility.

Otter Tail, which is based in Fergus Falls, Minn., has about 59,000 electric customers in North Dakota. It serves the cities of Devils Lake, Jamestown, Wahpeton and a number of smaller communities.

Otter Tail applied last November for a 5.1 percent electric rate boost, the first increase it has sought since 1983. In January, the utility implemented a 4.1 percent rate increase while it awaited the Public Service Commission's decision.

The proposed settlement gives Otter Tail a 3 percent average rate increase, which it estimates will be worth an extra $3.6 million annually. Residential customers will see a 4 percent increase, while commercial customers' increases will be kept below 2 percent.

North Dakota law allows electric utilities to impose interim rate increases while their cases are pending and requires them to repay customers with interest if the temporary rates turn out to be too high. If the settlement is accepted, those refunds could total almost $865,000, including interest, Kling said.

Clark said the settlement was virtually complete, except for the final terms of the economic development fund.

"If they can somehow leverage other economic development resources, and perhaps save some businesses in their communities... there could be some benefit to other ratepayers," he said. "The problem with that is, at some point, you've got to have an accounting for that, and you've got to be able to explain... how this money is being used, and exactly how it ties back to saving other ratepayers' dollars."

Otter Tail already may collect more than $300,000 annually from ratepayers to use to help create jobs in North Dakota, and it initially suggested raising the sum to $500,000, Public Service Commission filings show.

The proposed settlement suggests a $450,000 fund. Otter Tail is likely to ask the commission to accept the compromise instead of reopening talks or ordering a formal hearing, Kling said.