Fayeyetteville, Arkansas — Oct. 9, 2018 — Black Hills Corp. (NYSE: BKH) today announced that its Arkansas gas utility, Black Hills Energy, received approval for a general rate increase from the Arkansas Public Service Commission to recover investments in safety, reliability and system integrity for natural gas service for more than 169,000 customers in Arkansas.
Since 2016, Black Hills Energy has invested more than $160 million to replace, upgrade and maintain more than 5,500 miles of natural gas pipelines in Arkansas-critical infrastructure required to meet system growth needs and ensure the safe and reliable delivery of natural gas to customers’ homes and businesses. These investments have improved safety and reliability by replacing aging infrastructure while meeting the compliance requirements of state and federal regulations.
The new rates will generate an estimated $12 million per year of new revenue. The commission’s approval also allows the company to include $10.6 million of revenue that is currently being collected through certain rider mechanisms in the new base rates. The new revenue increase is based on a return on equity of 9.61 percent and a capital structure of 49 percent equity and 51 percent debt.
Black Hills Energy originally requested $30 million in new annual revenues to recover its investment in utility infrastructure and increased operating expenses, driven primarily by the strong growth in northwest Arkansas. The request also included revenue for additional planned staff increases to assist in serving a rapidly growing customer base. Primarily as a result of the reduction in the corporate federal income tax rate due to passage of the Tax Cuts and Jobs Act, the company reduced the request to $18.6 million, based on a return on equity of 10.2 percent and a capital structure of 50 percent equity and 50 percent debt.
“This approval supports our commitment to deliver safe and reliable natural gas service to customers,”
“This approval supports our commitment to deliver safe and reliable natural gas service to customers,” said Linn Evans, president and chief operating officer of Black Hills Corp. “We provided infrastructure and support services to meet the increasing customer demands in our thriving Arkansas communities. This settlement allows us to continue promoting robust economic growth in the area and deliver strong long-term value for customers and shareholders.”
The new rates for customers will take effect Oct. 15, 2018, and will include benefits related to federal income tax reform. The passage of the Tax Cuts and Jobs Act lowered the company’s federal income tax rate from 35 percent to 21. These tax savings will be embedded in the new rates going forward and customers will benefit by approximately $1.5 million in 2018 and $6.2 million annually thereafter.