South Dakota PUC halts three companies from conducting business due to delinquent taxes
Commission gives 30 days to pay in full
PIERRE, S.D. — The South Dakota Public Utilities Commission on Tuesday prohibited three companies from doing further business in South Dakota due to overdue gross receipts tax bills.
The action took place at the first meeting of the South Dakota Public Utilities Commission of 2022 at the Capitol building in Pierre.
At issue was the tax status of three telecommunication companies. DataBytes, Inc., TC Telephone LLC - doing business as Horizon Cellular - and Wing Tel, Inc. have all failed to pay their gross receipts taxes despite attempts by the PUC to contact them and obtain payment.
“(The PUC) staff recommends that DataBytes, Inc., Horizon Cell and Wing Tel not be able to do business in the state until all fees and penalties are paid,” said Cindy Kemnitz, finance manager for the South Dakota Public Utilities Commission, in a sworn testimony at the show cause hearing portion of the meeting.
According to Kemnitz, the companies have failed to pay their gross receipts taxes from 2020 and failed to pay penalties incurred for late payment of those taxes. The three companies were notified of the tax rate, the amount due and gross receipts tax payment deadline of July 15, 2021. The companies were notified about that deadline in April of 2021, and past due notices were sent out in August and September of 2021.
Despite efforts to claim payment, the PUC has been unable to secure the dollars owed.
“None of them have paid,” Kemnitz said.
No counsel appeared for any of the three companies at Tuesday's meeting.
According to South Dakota statute, the gross receipts tax fund is financed by assessing a tax rate of .0015 or $250, whichever is greater, on the annual intrastate gross receipts received by a utility from the company’s customers within the state of South Dakota. It requires that all telecommunications companies submit on April 1 an annual report of the amount of such gross receipts received during the preceding calendar year and pay the tax. None of the companies filed that revenue report for 2020.
The commission voted 3-0 to assess a penalty for failure to pay the gross receipts tax, effectively prohibiting them from doing further business in the state. If the companies do not pay that tax and all associated fees and penalties within 30 days of the order, the staff will turn the matter over to the South Dakota Obligation Recovery Center .
As of Jan. 4, each company owes the state $375, with $250 going toward the gross receipts tax assessment and $125 in penalties imposed by the PUC. The $250 was assessed, per state law, because none of the three companies had filed a revenue report for 2020.
Chris Nelson, chair of the South Dakota Public Utilities Commission, asked if Kemnitz knew if any of the three entities were actually conducting business in the state at present. Kemnitz said that was not entirely clear.
Nelson said that despite the best efforts of the PUC to contact and work with the companies, it appeared that action should be taken.
“I think it’s pretty clear cut. These three companies have abandoned their responsibilities, and hence this action is necessary,” Nelson said.
MidAmerican Energy extension
In other business at Tuesday's meeting, the commission approved a motion to grant a request from MidAmerican Energy to modify its purchased gas adjustment rate mitigation plan to extend the recovery period through April 22.
The move is expected to help reduce the cost impact on MidAmerican Energy customers as the company deals with the fallout of the cold weather event in February of 2021 , which increased the demand for and price of natural gas for utilities throughout the central United States.
The PUC staff filed a petition in February for a temporary waiver of fuel clause adjustment and purchased gas adjustment tariff provisions to mitigate rate impacts. The PUC staff requested the commission issue an order authorizing staff to work with state electric and natural gas investor-owned utilities to make the necessary modifications to the fuel clause adjustment and possibly the purchased gas adjustment tariffs to mitigate the rate impact associated with natural gas costs from the February cold weather event.
The PUC issued an order granting temporary waivers of tariff provisions on less than 30 days notice to mitigate rate impacts for Montana Dakota Utilities Company, NorthWestern Energy and MidAmerican Energy Company customers. On Dec. 9, MidAmerican filed a letter requesting to modify its purchased gas cost adjustment rate mitigation plan to extend the recovery period through April of 2022.
MidAmerican Energy said it was unable to collect expected costs due to the increasing market price of natural gas coupled with less volumes due to warmer weather. The proposed modification would allow MidAmerican Energy to recover the remaining gas costs without causing additional undue burden on its customers.
The company had come before the commission with the request in December, but the commission asked for more information at that time.
Nelson said the additional information provided Tuesday, along with some clarifications on just how much the company had yet to collect, made him support the motion.
“When I asked two weeks ago how many dollars from this polar vortex we have to collect, the answer was about $20 million. And that answer, frankly, shocked me. I couldn’t fathom how we had that many dollars left to collect,” Nelson said. “But MidAmerican indicated in their cover letter that that was, in fact, a misstatement, and that the amount was perhaps closer to the $10 million range.”
Representatives for MidAmerican Energy said during the Tuesday meeting that they had adjusted that number even further, bringing it down to $3 million.
Nelson said that was an important distinction of the latest information before the PUC.
“That’s incredibly important for the public to understand. It’s not $20 million, it’s $3 million, which are two very, very different figures,” Nelson said.
The extension is expected to help lessen the impact of the company dealing with the unexpected energy price spikes associated with the polar vortex and decrease the need for them to pass the costs on to their customers.
Kristie Fiegen, vice-chair of the commission, said the decision, coupled with stabilizing natural gas prices, should ease the impact on consumer’s utility bills.
“I think the public has to know the rates the Public Utilities Commission regulates for our natural gas consumers in South Dakota have not changed. It has remained the same and it is stable. What changes, of course, is the commodity price of natural gas, and we’re thankful that price fluctuation came down this past fall,” Fiegen said.
Nelson agreed, noting customers across South Dakota had adjusted to lower natural gas prices.
“We’re hearing from gas customers, not just at MidAmerican but customers across the state, that they have really gotten used to very low gas costs over the last 10 years and are feeling kind of hammered this winter because of the increase in gas prices,” Nelson said.
Nelson said he supported the motion in light of the additional information provided Tuesday.
“I’m going to support the motion. Two weeks ago I could not because we were sorely lacking in data and accurate information, but today we have that information and I feel comfortable that it is accurate and certainly is much less than what we were led to believe two weeks ago,” Nelson said.
The commission approved the motion 3-0.
The next meeting of the South Dakota Public Utilities Commission is set for Tuesday, Jan. 18.