Debate heats up over Colmans power system

If Colman residents werent aware of the battle brewing over who will run their citys electric system, they should be now.
Ads, press releases, and editorials have appeared in local papers in recent months outlining both the citys and Heartland Energys perspectives on the issue.
Most residents also likely received a letter and flier in the mail late last month from Jim Thompson, president of T&R Service Company, a longtime, family-owned company.
Thompsons business stands to pay substantially more in electric rates if the wrong move gets made. Because he isnt a city resident, hes making his voice heard through other means. His letter, which argues why the city should stay with Heartland and why the proposed transfer doesnt make sense, came after an August 19 meeting and a press release from Mayor Mike Preheim stating that city officials are taking steps to form an electrical utility partnership with Sioux Valley Energy.
Unapproved minutes from that August 19 meeting, available on the citys webpage, include:
Over the past year, the Colman City Council has discussed at length the city-owned electrical infrastructure and the upgrades that are necessary to the aging system. The councils primary concern is how to maintain affordable electric rates for residents while addressing the cost of needed improvements and the impact of inflation.
The urgency of the matter became clear in February after the city was presented an Electric System Study and Capital Improvements Plan from DGR Engineering that estimated costs of $2.5 to $3 million. The city then reached out to Sioux Valley Energy to discuss a possible partnership.
Jennifer Nelson explained to the council that she, Mayor Preheim, Finance Officer Maria Groos, and Maintenance Supervisor Grant Groos met with representatives from Sioux Valley Energy to discuss what a potential partnership would look like.
Pursuant to South Dakota Codified Law, municipalities are authorized to transfer or convey ownership of their electrical utilities to nonprofit rural electric cooperativessuch as Sioux Valley Energyprovided that the cooperative operates on a not-for-profit basis. The city is therefore permitted to gift its electrical system to Sioux Valley Energy under these statutory provisions.
Details and formal action are expected to be taken up in upcoming regular or special council meetings.
In a press release after the meeting, Mayor Mike Preheim stated,
If approved, this partnership with Sioux Valley Energy will benefit the residents of Colman. Sioux Valley Energy already provides maintenance on our electrical system so the transfer would be seamless. We would also see improved service through their online energy management system and various programs as well as access to 24/7 local dispatch services and emergency restoration.
Tim McCarthy, General Manager and CEO for Sioux Valley Energy also weighed in.
As a not-for-profit cooperative, Sioux Valley Energy can re-invest in and more efficiently upgrade the Colman electrical system over a period of time. This is a win-win for everyone,
Russ Olson, CEO of Heartland Energy, is pushing back, however. He said none of the recommended electrical upgrades are critical and that if they were, Sioux Valley crews already contracted by the city to maintain the system would have taken care of them long ago.
He added that the citys electric system is actually in better shape than most, with nearly 80% of its lines buried underground and updated, which is likely appealing to SVE. The industry standard calls for 50% of lines underground by 2040.
All of the infrastructure and underground is already in place, Olson said. Theyre way ahead, and they owe no money right now.
Olson also noted that Heartland is the only utility in the region that hasnt raised electric rates since 2017. He attributes that to Heartlands public power model versus the co-op structure used by Sioux Valley.
Sioux Valley gets their power from East River and Basin. Basin and East River have raised rates five years in a row and theyve both said theyre going to raise again in 2026. Our utility, if you take a 1200kw monthly bill on an average house in Colman and compare it to the same bill in usage for Sioux Valley, its about $50 difference to the good of the Heartland customer. So its $500 a year better to be with us. For T&R Electric, its like some $50,000 difference. And thats not with the pending rate increase. Sioux Valley hasnt said what their rate increase will be for next year, theyve just said there will be one, and itll be significant.
Olson added that giving away the citys only enterprise that makes money doesnt make sense.
The swimming pool doesnt make money, the golf course doesnt make money, the sewer and water doesnt make money, the liquor store is even subsidized by the electric fund even though its been leased out, said Olson. If they give that away, they wont be able to fund projects going forward because theyre giving away their biggest asset. How do you bond without assets? Theyve got a bad business model that theyve invested a lot of money into, and theyre paying for it. And we dont do that. Thats why were stable. I would predict 2029 Heartland at the absolute earliest we would have a rate increase, and we may not need one then.
Heartland Energy has provided services to the City of Colman since 1991 and has a contract through 2055.
Preheim, who was contacted for this story, offered no comment other than to encourage residents to attend the October 15 meeting at 6 p.m. to learn more.