RAPID CITY, S.D., Sept. 18, 2013 - Black Hills Corp. (BKH) subsidiary Black Hills Power today announced that the South Dakota Public Utilities Commission has approved a settlement between the company, Commission Staff, and intervening parties that will increase electric rates by 6.4 percent, or a revenue increase of $8.8 million per year, on Oct. 1, 2013.
Black Hills Power filed a request in December 2012 to increase rates by 9.94 percent, and was allowed to implement that adjustment on an interim basis beginning June 16 of this year. Since the PUC approved increase is less than the interim increase, actual billed rates to customers will be reduced effective October 1, 2013. The company will recalculate charges for service between June 16 and Sept. 30 at the approved rate, and refund the difference, with interest, by crediting customer bills beginning in November.
"Our customers depend on safe and reliable electric service," said Vance Crocker, vice president of operations for Black Hills Power. "Since our last rate filing in 2009, we have invested more than $50 million to extend service to new customers, replace and upgrade our distribution and transmission systems, install advanced metering systems, and ensure environmental compliance."
The approved settlement also includes a mechanism for recovering financing costs for Black Hills Power`s share of the new Cheyenne Prairie Generating Station, a 132-megawatt, natural-gas-fired power plant located in Cheyenne, Wyo., expected to go online in the fourth quarter of 2014.
"Our customers shared their preference for smaller, incremental rate adjustments rather than infrequent and larger increases," Crocker said. "Customers will save money because the more gradual, quarterly rate adjustments will enable the company to recover financing costs during construction, reducing the total capital cost of the plant."
The utility received interim approval from the PUC in April to begin recovering the finance costs for the plant by increasing rates approximately one percent per quarter until the plant is completed in late 2014. The quarterly adjustments for Black Hills Power customers began in April 2013. Black Hills Power will seek, through a separate future rate filing, a return on the actual capital investment and recovery of plant operating costs.
The new power plant will be jointly owned by Black Hills Power and its affiliate, Cheyenne Light, Fuel and Power. Black Hills Power`s 55-megawatt share of the Cheyenne plant will replace the company`s Osage plant in Wyo., the Ben French plant in Rapid City, and the Neil Simpson I plant near Gillette, Wyo.
All of these coal-fired plants will be retired in 2014 to comply with new Environmental Protection Agency emissions regulations. It is more cost-effective to replace the company`s three oldest power plants rather than retrofit them to comply with the new regulations. Joint ownership and operation of the Cheyenne Prairie Generating Station will reduce capital cost and expenses, thereby keeping customer bills lower.
Rate requests are extensively reviewed by the South Dakota PUC and its staff, a process that considers public comments and includes testimony from utility representatives and intervenors in the case. Under terms of the settlement, return on equity and capital structure details will remain confidential. Additional information and the latest news on Black Hills Power`s new rates are available at www.reliablebhp.com. The site also offers ways to save energy to better control utility bills.
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Caution Regarding Forward Looking Statements
This news release includes "forward-looking statements" as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this news release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward looking statements. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including the factors discussed above, our ability to obtain adequate cost recovery for the actual capital and operating costs of the plant through future regulatory proceedings and the timing in which new rates would go into effect, the risk factors described in Item 1A of Part I of our 2012 Annual Report on Form 10-K filed with the SEC, and other reports that we file with the SEC from time to time.
New factors that could cause actual results to differ materially from those described in forward looking statements emerge from time-to-time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.
Black Hills Power, Inc.
Black Hills Power is the legacy utility business of Black Hills Corp. and has been delivering energy for more than 130 years. The electric utility serves 68,000 customers in 34 communities in western South Dakota, northeastern Wyoming, and southeastern Montana.
Black Hills Corporation
Black Hills Corp. (BKH), a growth oriented, vertically integrated energy company with a tradition of exemplary service and a vision to be the energy partner of choice, is based in Rapid City, S.D. The company serves 769,000 natural gas and electric utility customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. The company`s non-regulated businesses generate wholesale electricity and produce natural gas, oil and coal. Black Hills` 1,925 employees partner to produce results that are improving life with energy. More information is available at www.blackhillscorp.com.
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