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FREQUENTLY ASKED QUESTIONS:

1. What is the proposed climate change legislation?
2. How would the climate change proposal impose additional costs on utilities and other businesses?
3. How would the money raised from a CO₂ “tax” be used?
4. How would this CO₂ “tax”, or climate change proposal, impact my electricity and natural gas bill?
5. Why would my electric and/or natural gas bill increase if Congress and the Administration were to pass a CO₂ tax?
6. Why would my natural gas bill increase if Congress were to pass the climate change legislation?
7. What is Black Hills’ stance on climate change legislation?
8. What does Black Hills recommend as alternatives to the proposed climate change legislation?
9. What is Black Hills’ doing today to help maintain affordable electricity and natural gas?
10. How is Black Hills helping to conserve energy and protect the environment?
11. What can I do to prevent Washington from imposing an unfair CO₂ tax?

What is the proposed climate change legislation?
The proposed climate change legislation is often referred to as a CO₂ tax, cap-and-trade or Waxman-Markey. The legislation is an attempt by the Obama Administration and U.S. Congress to control emissions such as carbon dioxide (CO₂) through a Cap-and-Trade program. The House version of the bill, H.R. 2454, the American Clean Energy and Security Act, passed the U.S. House on June 26, 2009, and other versions are under consideration by the U.S. Senate. Back To Top

How would the climate change proposal impose additional costs on utilities and other businesses?
A cost would be imposed per ton of CO₂ produced – most likely in the form of a federal CO₂ tax through a cap-and-trade program. Under cap-and-trade, total emissions of CO₂ in the United States would be limited (capped) at a certain level. In order to emit a ton of CO₂, utilities would be required to acquire emissions credits (“trade”). Some policymakers in Washington favor auctioning all of the emissions credits immediately, forcing utilities to purchase all of their credits immediately. Other proposals provide some credits to utilities up-front, but not enough to cover current emissions. Utilities would then be forced to pay for these credits, creating additional costs to generate electricity and produce natural gas. This would result in large cost increases for natural gas and electricity customers whose electricity is provided from coal-fired power plants. Back To Top

How would the money raised from a CO₂ “tax” be used?
There are various suggestions about how to use the revenues collected from the “tax”. Some have suggested using the funds for the federal government to spend on programs unrelated to energy. Some of the revenues would be turned into profits for entities trading (selling) unneeded credits on a commodity market. We believe if this tax were to pass, the proceeds should be used for energy research and defraying energy cost increases for customers. Back To Top

How would this CO₂ “tax”, or climate change proposal, impact my electricity and natural gas bill?
As passed by the U.S. House of Representatives on June 26, with its current Cap-and-Trade provisions, the climate change legislation would result in significantly higher energy bills for customers – especially those in the Midwest.

President Obama’s Administration and the U.S. Congress are considering proposals that would impose a new cost on various uses of energy, including coal for electricity generation. These efforts are aimed at addressing climate change, but would come at significant cost to customers and the economy. If this proposal takes effect, Black Hills customers could see their electricity and natural gas bills increase significantly. Back To Top

Why would my electric and/or natural gas bill increase if Congress and the Administration were to pass a CO₂ tax?
The majority of states throughout the Midwest depend on coal as a resource to produce affordable, reliable electricity. Coal, like most energy sources, creates emissions, including CO₂. In an attempt to promote a clean environment and promote renewable and alternative sources of energy which are less reliable, some policymakers in Washington believe that coal and natural gas should be more costly to use as an energy source.

The climate change proposal would impose a CO₂ “tax” on the use of energy sources like coal. A CO₂ “tax” would increase the cost for utilities to provide electricity. As a regulated utility, we pass actual costs, such as federally required CO₂ taxes, through to our customers —resulting in higher monthly electric bills.

There are significant negative impacts with this tax that do not protect customers that consume electricity and natural gas. Back To Top

Why would my natural gas bill increase if Congress were to pass the climate change legislation?
The majority of states throughout the Midwest enjoy the benefits of using natural gas for home heating and industrial applications. A CO₂ tax would likely result in substantial fuel-switching from coal to natural gas-fired electric generation. More demand for natural gas will significantly increase consumer costs for both natural gas and electricity.

Under the current provisions of the climate change legislation, a CO₂ tax on natural gas would go into effect in 2016. This federal CO₂ tax would result in a bill increase for residential, commercial and industrial natural gas customers.

In addition, imposing a CO₂ tax on coal will require electricity providers to look to other sources of energy generation to produce safe, reliable electricity at a reasonable price. Second to coal, the most viable and reliable energy choice to produce electricity is natural gas. Natural gas is also clean, domestic and abundant. But switching to natural gas-fired electric generation will increase the demand for natural gas. And as history has demonstrated in basic supply and demand principles, when demand for a commodity (such as natural gas) increases, the cost of that commodity will increase as well. Therefore, natural gas-fired electricity will increase customers’ natural gas bills, in addition to their electric bills. Back To Top

What is Black Hills’ stance on climate change legislation?
If Congress passes climate change legislation in its current form, it will increase our customers’ utility bills significantly. In fact, the legislation would increase energy costs for customers in the Midwest for the benefit of the East and West Coasts, and could transfer jobs from the United States to countries that don’t limit their greenhouse gases.

Negative economic impacts for compliance with the proposed climate change legislation would be significant, especially for states in the Midwest where Black Hills Corp., serves 759,000 utility customers in seven states – Colorado, Iowa, Kansas, Nebraska, Montana, South Dakota and Wyoming. Black Hills Corp. is concerned that CO₂ compliance costs would be more than our customers can bear, and we are concerned about potential job loss in our region. We support a diverse energy portfolio that includes coal, the primary fuel for our company and for the nation. Electricity customers in the Midwest depend on electricity generated from coal, which has been targeted to be taxed at a higher level than generation fuel sources used on the East and West Coasts.

Many states in the Midwest have affordable natural gas and electric service. Like you, customers across the region depend on coal to fuel most electricity needs, and depend on natural gas for home heating and industrial uses. Black Hills Corp. continues to further diversify its energy mix to include more renewable energy sources such as wind and solar power; however, electricity generation from coal is imperative to continue to provide customers with reliable, affordable electricity.

Black Hills Corp. believes that U.S. greenhouse gas reduction efforts must be part of a global initiative. Greenhouse gas reduction efforts also must be economy-wide and industry-wide. The CO₂ reductions proposed in the current climate change legislation are too aggressive to be practical or attainable with the current available technology. The implementation timeframe needs to be realistic and should not get ahead of technology; otherwise, there is no benefit – only tremendous cost for customers.

At the same time, Congress has alternatives to climate change legislation that address concerns while posing lower risks to customers and the economy. Back To Top

What does Black Hills recommend as alternatives to the current climate change legislation?
Congress has alternatives for addressing climate change concerns that pose lower risks to customers and the economy. The following protections could help reduce the negative impacts of a climate change program:

• Allocate free allowances to Electric Distribution Companies based upon emissions in order to provide as much cost relief as possible to customers, especially in regions reliant on coal as an electricity generation fuel.
  
• Create an allocation pool that matches the actual emissions from the year that is chosen to start the program.
  
• Include all power plants under construction and those placed in service after 2005. Coal plants built after 2005 that contain the latest technology are the “cleanest in the nation” for NOx, SO₂ and mercury emissions, and should be granted allowances for CO₂. Additionally, if commercial technology becomes available, newer plants could be the best positioned to convert to capture CO₂ emissions.
  
• Avoid market speculation that would lead to escalating costs through a maximum and minimum cost range for emissions credits.
  
• Provide funding and enough time for CO₂ capture and sequestration technology to become commercially viable.
  

The National Association of Regulatory Commissioners (NARUC), Edison Electric Institute and others in Washington favor initially granting emissions credits free of charge to existing emitters of CO₂ and then gradually increasing the portion of the credits that are auctioned. Black Hills’ agrees that this would lessen the immediate impact of a large cost increase, and would also allow time for the development of technologies to reduce the need to buy CO₂ emissions credits. Back To Top

What is Black Hills’ doing today to help maintain affordable electricity and natural gas?
For more than 125 years, Black Hills Corp. has pursued an energy mix that provides the best value and service to our customers.

Black Hills’ energy portfolio includes natural gas, coal, wind, solar, biomass and hydro. As noted, our diverse portfolio includes coal, an abundant, natural resource in the United States, which is a viable, long term energy solution for customers, our company and the nation. About two-thirds of the electricity we supply to homes, businesses and communities comes from our coal mine and energy generation complex near Gillette, Wyo. As we work to secure energy independence, the nation’s 250 year supply of coal will be an important part of the energy mix.

In order to meet our customers’ demands, Black Hills’ has employed advanced technologies to improve efficiency, conserve resources and reduce emissions. Black Hills continues to pursue the next generation of clean coal technology for future needs. However, those advances take time and money to develop and fully implement. Imposing the costly burden of a large CO₂ tax could set back the development of important clean coal and other projects.

Black Hills provides many options to help its natural gas and electric residential customers manage their utility bills. To learn more about the options available in your area, please visit www.blackhillsenergy.com or www.blackhillspower.com. Back To Top

How is Black Hills helping to conserve energy and protect the environment?
Just like you, we love where we live and work. We understand that we need to conserve our natural resources for the next generation to enjoy as well.

Utility companies face the ongoing challenge of balancing customers’ need for affordable, reliable electricity with the need to protect the environment. However, Black Hills has voluntarily and proactively implemented renewable energy into its portfolio in states without a mandate and fully complies with applicable laws and mandates. Additionally, Black Hills partners with others to implement new technology that reduces the impact our assets have on the environment, and we promote of energy efficiency through educational efforts and rebate programs to encourage customers and communities to use energy wisely. Back To Top

What can I do to prevent Washington from imposing an unfair CO₂ tax?
The outcome of this tax depends upon our leaders in Washington and how they respond to the concerns of people like us.

Your voice counts. When you write or call your U.S. Senators or members of Congress, they listen. We are thankful that many of the members of Congress representing Black Hills customers have resisted passing legislation that would implement a climate change program with no cost protection for customers. You can make a difference in whether or how Washington passes a new tax that would increase electric and natural gas bills. When you thank your U.S. House members who have opposed climate change legislation in its current form and urge senators who represent Black Hills customers to take a similar stance, they can use your views to influence others in Congress. Their continued support and the support of others in both houses of Congress will help ensure that any legislation to further regulate emissions from energy usage protects electricity and natural gas customers from undue cost increases. Let your voice be heard by letting your U.S. Senators know you oppose the proposed climate change legislation. Back To Top

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