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PUC Cuts Black Hills Power Rate Hike in Half; How About Price Caps for Health Care?

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?


  1. leslie 2015-03-04

    negotiation: ask twice what you will settle for so the “settlers” won’t get restless?

  2. tara volesky 2015-03-05

    hospitals could cut costs by cutting millions of dollars of advertising they spend every year. It use to be against the law and unethical to advertise.

  3. jerry 2015-03-05

    Good points Cory, healthcare costs should be regulated and the best way would be Medicare for all. Of course, all of this is in jeopardy right now with not only the folks under 65 being affected but it will also provide much pain to the seniors and the disabled by eliminating the prescription drug benefits they have been receiving for the last couple of years thanks to the Obamacare. The average yearly saving at present is over $700.00 bucks per insured. That is a big number for grandma and gramps, I wonder why the old dudes and dudettes are not up in arms about the gouge they will receive if the Court kills the ACA. Amazing that no one speaks of that.

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