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Utility Power (Rates)

This guide provides important information about electric utility rates in the Black Hills area and how they relate to solar power installations. However, it's important to note that rates and policies can change over time, so it's always best to consult with your utility provider for the most up-to-date information. Additionally, we recommend utilizing your utility's online user/member login to access your energy usage, as well as any additional tools and information about their services.

According to federal public utility regulation (PURPA), homeowners (or Independent Power Producers) must be compensated for the power they supply to the grid. To facilitate this, the utility will install a bi-directional meter to register power flow in both directions, which creates an additional line on the bill as a credit for energy that flows back to the grid during the same billing period.

When starting a solar installation project, we will ask about your current utility rate plan and usage in order to provide you with the best advice and recommendations. We will also provide you with copies of the interconnection paperwork to complete, and notify the utility when the installation is underway and completed. Additionally, your utility provider will require proof of homeowner's insurance in order to approve the interconnection.

To better understand how rates work (especially demand rates), you can also check out our post about the difference between power and energy.

General Rate Options

While each utility offers a unique set of rates, residential options generally belong to one of the following categories:

  • Regular or Total Electric - this rate simply charges per unit of energy (kWh) you consume without additional usage charges. This is purely a 'volumetric rate'.

  • Demand charge / Peak demand - this rate discounts the energy (kWh) rate in exchange for an additional charge based on the peak power (kW) demand registered for the billing period. As opposed to volumetric, this is a 'capacity rate', and is designed to encourage reduction of peak power during specific periods of the day.

  • Time-of-use (TOU) - this rate is similar to the demand rate, and though not currently available in our area, it is expected to be an option in the future. With TOU, the kWh rate adjusts for different times, such as a high rate during the daytime and a low rate during the nighttime.

  • Submetered (Discounted) Electric Heat - this is an option that can be applied with either a regular rate or a demand rate, and may or may not be compatible with solar.

  • Vehicle charging - this is a special rate similar to the heat rate that discounts the energy used to charge a vehicle at night (off-peak time), and may not be compatible with solar.

Special discounted rates may not be offered by the utility when the home is using solar power because the discount is only offered as a reduction on the energy that is purchased from the utility company, and not on the electricity that is produced on site. This especially pertains to submetered heat discounts that are offered by some electric cooperatives.

When it comes to reducing power bills with a solar power system, some rate systems are more favorable than others. In general, the higher the energy charge (kWh rate), the relatively greater the savings of offsetting expensive electricity with your own solar power. The preferred utility service rate for reducing bills with solar power is usually a standard or all-electric rate. Peak demand charges cannot be reduced by solar energy directly, however, you can lower demand charges by incorporating a battery system.

Black Hills Energy (South Dakota)

Link to rates:

  • Residential rates include Regular Residential, Total Electric, and Demand Service.

  • BHE billing includes a Cost Adjustment Summary - this charge is based on the number of kWh consumed. Adding the energy charge and the cost adjustment charge together and then dividing by the kWh billed equals the actual rate being charged per kWh.

  • Note: BHE's Colorado and Wyoming rates and policies may not apply in South Dakota.

Black Hills Electric Cooperative

Link to rates:

  • Residential rates options include On-Peak Demand or General Service w/ Electric Heat.

  • The Peak Demand rate reduces the kWh rate while adding the additional demand rate.

  • Homes with electric heat (meeting a minimum usage requirement) can qualify for the electric heat discount. Homes that do not use electric heat are assigned the demand rate instead. The electric heat discount is not offered in conjunction with solar power. If you add solar power, the heat meter will be removed and the service assigned to the demand rate.

West River Electric Association

Link to rates (must log in):

  • There is one residential rate with the option of submetered heat.

  • Submetered heat may or may not be compatible with solar power.

  • WREA does not currently offer a demand rate.

  • Electric vehicle charging rates may be offered, and may or may not be compatible with solar.

Butte Electric Cooperative

Link to rates:

  • Residential rates include (Regular) Residential, All-Electric, and Demand.

  • Submetered heat is offered at a discount and is compatible with solar for accounts started prior to 2016 (grandfathered).

  • Electric vehicle charging rates may be offered, and may or may not be compatible with solar.

About Net Metering

Net metering, net billing, and avoided cost are all related concepts but have different meanings.

Net metering is a billing arrangement that allows customers who generate some or all of their own electricity from renewable sources such as solar panels to send any excess electricity they generate back to the grid and receive credits on their utility bill. This allows customers to offset their consumption of electricity from the utility company by sending their excess generation back to the grid.

Net metering is legislated in many states, including Wyoming, but not in South Dakota. Net Billing better describes the system as it applies in South Dakota.

Net billing is similar to net metering but the compensation for the excess energy generated is based on the utility's avoided cost rate, rather than the retail rate. Avoided cost rate is the cost that the utility company would have incurred to generate or purchase the same amount of electricity from other sources. This rate is typically lower than the retail rate that customers are charged for electricity consumed from the grid.

The avoided cost rate varies by the supplier and location. As of 2022, avoided cost rates are about 10% to 20% the amount of the retail rate when you purchase electricity.

The lack of net metering policy and low avoided cost rates in South Dakota may seem to make investing in solar power less favorable. However, it's important to note that properly sizing the solar power system will ensure that the investment is optimized and not oversized. When done correctly, solar power can still be a good investment, with many people seeing a full return on their investment well within the system's lifespan. Additionally, future changes in electricity rates can affect the payback time, so if the cost of power increases, the savings from the solar system will also increase accordingly.

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