The South Dakota Public Utilities Commission has approved electrical rate increases for Black Hills Power. The investor-owned utility wanted a 9% increase, in part to support a return on equity for its investors nearly three percentage points greater than the average utility ROE. The PUC reined that rate increase back to 4.35%.
Bob Mercer breaks down who shoulders the hike:
The largest class of customers is residential with 42,144 meters. Their rate would increase 5.43 percent and they will pay more than $2.3 million of the additional revenue.
Small general-service customers are the second-largest class with 10,797 meters. Their rate would increase 3.49 percent and they will pay more than $1.6 million of additional revenue.
The two categories of general-service large customers would see rate increases of 5.19 and 4.91 percent. They will pay nearly $1.3 million of additional revenue.
Various sub-classes will pay approximately $1.7 million more [Bob Mercer, “Black Hills Power Gets OK to Increase Electricity Rates,” Black Hills Pioneer, 2015.03.03].
The PUC allowed Black Hills Power to temporarily implement the 9% rate hike last October; now BHP must refund customers the difference with 7% interest.
Recognize that the Public Utilities Commission is checking the impulses of the free market and setting prices on the basis of something greater than supply and demand.
Why do we South Dakotans practice such socialism? Well, we recognize that certain goods and services, like power, water, and communications (see also the FCC and net neutrality), are so vital to the general welfare that we cannot let the free market alone determine their availability. We set rules to ensure that everybody can access these basic goods and services, not just the highest bidders…
…which gets me thinking about health care. The federal government imposes price controls on health care provided to Medicare patients. The Centers for Medicare and Medicaid Services calculates what it considers a reasonable fee for certain medical services and says, “That’s the price we pay for Grandma and Grandpa.” If hospitals want more money to pay out dividends for investors or to build giant sports areans, they have to squeeze that money out of younger private customers.
So what if we declared health care, or at least some basic subset of health care services, a public utility? What if we decided that it is so important that people be able to get emergency care, yearly physicals, prenatal care and delivery, prescription drugs, and other health services (chemotherapy? Applied Behavioral Analysis for autism?) that we cannot allow hospitals complete autonomy in setting prices for those services?
A friend of the blog suggested earlier this winter that it might be interesting to propose an initiative to impose price caps on health care in South Dakota: quite simply, require that hospitals and clinics charge all customers the rates set by Medicare. Any takers?