I am dealing with this problem myself, but it occurs in some tab delimited data that I am using to build placemarks in KML using simplekml. The primary cause of the problem is that the so-called tab delimited text contains some high order characters. They are being copied into the placemark's description field as they are parsed. When I save the KML file, this error occurs.
There is a discussion of this problem from two years ago in the simplekml issues forum here: http://code.google.com/p/simplekml/issues/detail?id=10
Interestingly, the solution described there as accepted for release (response #6), is not in the current version of simplekml available via pip. Further, when I applied the patch locally it made no difference. Same unicode decode error occurs in base.py.
I can solve my specific occurrence by adding code to filter the tab delimited text prior to using it in simplekml assignments and methods. To summarize, simplekml requires ascii compatible text characters in its strings.