Local Utilities

This topic will cover some essential information regarding rates and policies of electric utility providers in the Black Hills region. Details and policies will change over time, so please consult your utility for the most up-to-date information.

This topic is technical and you may benefit from reading our post on the difference between power and energy in order to better understand rate structures (especially demand rates).

Net metering. One of the most questioned solar topics is net metering policy, which refers to the relationship the utility provider has with the independent power producer and compensation for extra power produced "behind the meter" on the customer's property that flows back to (or "back-feeds") the grid. This only relates to back-fed power, and not solar power that is consumed directly by the home. With most metering systems, the utility does not know how much (solar) power is being generated, as they can only meter the extra power that feeds back to the grid.

When a grid-interactive (or grid-tie) power source like solar is installed on a home, power will now flow two ways: to and from the utility, depending on whether the home is a net consumer or net producer at any point of the day. So unless a battery is installed for storage, any excess solar power will flow to the grid. The homeowner/independent power producer (IPP) must be compensated according to federal public utility regulation (PURPA). Because of this, the utility will install a bi-directional meter (or activate the existing meter), so it can register power flow both ways. The meter has two registers for to and from the home (back-fed power does not reverse the meter).

Net metering compensation policies can be determined by the state legislature as they are in most states, setting the rate a utility must pay the energy producer. In South Dakota, no legislative rules exist for this purpose. The South Dakota Public Utilities Commission regulates investor-owned utilities (i.e. Black Hills Energy) but does not regulate electric cooperatives. Either way, the form of IPP compensation in South Dakota defaults to what's called the "avoided cost" rate, which is the rate the utility determines as the cost of energy delivered to the location where (solar) power is being produced. The avoided cost rate is about 15%-20% of the regular retail rate (as of 2022), but may change periodically. This is in contrast to net metering with a 1-to-1 (or near) retail rate of compensation known in some states, and therefore, avoided cost rates do not offer a sufficient revenue stream for small generators. In this situation, solar power is mainly suitable for offsetting the high cost of electricity you would otherwise have to purchase, while overproduction of solar power (back-fed to the grid) offers a lesser benefit.

The lack of net metering policy and the low avoided cost rates in South Dakota can be discouraging in some cases, however, while this limits the scope of opportunities it does not prevent solar from being a good investment when applied correctly. In many cases, solar is not just an investment but also applies to the homeowner's lifestyle whether for energy security, self-sufficiency, or environmental consciousness. But when solar is applied solely for payback and a net profit, the rates offered by the utility are the basis for any return on investment calculation. In most cases, it is reasonable to at expect a payback well within the system's lifetime, if not twice over when the situation is most favorable. Payback times will also be affected by future rate changes, so if power becomes more expensive the savings will correspond positively.

Utility Rates. While each utility offers a unique set of rates, each falls into one of the following general categories:

  • Regular or Total Electric - this rate simply charges per unit of energy (kWh) you consume.

  • Demand charge - this rate discounts the energy (kWh) rate in exchange for an additional charge based on the peak power demand (kW) registered for the billing period.

  • 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.

  • Time-of-use - this rate is similar to the demand rate, and is not yet in effect, but is expected to be an option in the future.

  • 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.

Electric Power Providers

Though you won't be able to choose your electric power provider, each has its own rate options. Sometimes you can choose an option, but most options have special requirements. Some options are more favorable with solar than others, and some options are not compatible with solar. In general, the preferred rate for solar is a regular rate without demand charges, however, demand charges can be reduced by battery systems.

All utilities have special requirements for interconnection to the grid. You will need to approve and sign the utility's interconnection application, and an interconnection agreement, and provide proof of homeowners insurance.

Black Hills Energy (SD)

Link to rates:

  • Residential rate options 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 totals together and then dividing by the kWh billed equals the rate being charged per kWh.

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

Black Hills Electric Cooperative

Link to rates:

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

  • Options allow either a demand charge with a reduced kWh rate or a regular kWh rate with a discounted electric heat rate.

  • Only homes with electric heat (and minimum usage) can qualify for the electric heat discount. Homes that do not use electric heat are assigned the on-peak demand rate instead.

  • The electric heat meter is not compatible when a secondary power system like solar is installed on the property. A heat meter may be removed and the rate reassigned when solar is interconnected. Inefficient homes with high electric heat use may benefit more from the heat meter discount than solar or else will have high demand charges due to electric heat.

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 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.

When we start a project with you we will ask about your utility provider and rate, and advise accordingly on the appropriate system design to meet your interests. We will also provide copies of the interconnection paperwork for you to complete, and notify the utility on your behalf when an installation is underway.

We recommend utilizing your utilities online user/member login to get access to your energy usage and additional useful tools and information.