South Dakota Municipal Electric Utilities look forward to Summer Study

 A group of South Dakota legislators was recently named to a committee to study and evaluate the legal right of a municipality to serve electricity in areas annexed into the municipality.

The interim committee comes as the result of a bill introduced by the state’s rural electric cooperatives during the 2019 legislative session that would have repealed this legal right. Cities with municipal electric systems have traditionally had the ability to annex service territory as their city boundaries expand.

According to Russell Halgerson, electric department manager at Brookings Municipal Utilities and president of the South Dakota Municipal Electric Association, annexations have been voluntary and at the request of the landowner or developer in order to be fully integrated with the city and take advantage of all city services.

“Municipal utilities are actively planning and investing resources in economic development, which leads to growth just outside city limits,” Halgerson added. “When a city grows outside their original boundaries, the local municipal utility should be able to provide all city services to the growing area, including electricity.”

Part of the committee’s focus will be to study the impact on economic development in the state. South Dakota’s 35 municipal electric systems hope the committee looks at past annexations to understand why most developers and businesses prefer to receive services from the local municipal utility.

If a territory freeze were implemented, any new business locating within the city’s growing boundaries would be forced to take power from the cooperative. However, the city would be responsible for extending roads, providing sewer, water, wastewater and other essential services to that business.

“Without electric revenue to supplement these services, all other rates for municipal services would increase, including property taxes,” said Halgerson.

When a municipal electric utility serves in an area that was formerly served by a cooperative, they are required to reimburse the cooperative for any infrastructure costs, plus a percentage of revenue over a period of several years. Municipals provide reimbursement even if the territory was previously bare ground.

“Municipal systems have had the ability to annex for over 100 years, yet have done so on a limited basis. Statewide, municipal electrics still serve a third of the electric load that cooperatives serve,” said Halgerson.

The municipal electric utilities look forward to participating in the study taking place this summer.