Black Hills Corp. Natural Gas Utility Receives Approval for New Rates in Arkansas

Rhea-AI Summary

Black Hills Corp. (NYSE: BKH) announced that its Arkansas natural gas utility, Black Hills Energy Arkansas, Inc., received approval from the Arkansas Public Service Commission for new rates effective October 2024. The approved settlement agreement will:

• Generate approximately $25.4 million in new annual revenues
• Migrate $3.7 million in annual rider revenue to base rates
• Result in a total annual base rate revenue increase of $29.1 million

The new rates are designed to recover about $130 million of pipeline system investments made since 2021. The approval allows a 9.85% return on equity and a capital structure of 46% equity and 54% debt. Black Hills Corp. serves 1.34 million natural gas and electric utility customers across eight states.

Positive

• Approval of new rates to recover $130 million in pipeline system investments
• Generation of $25.4 million in new annual revenues
• Total annual base rate revenue increase of $29.1 million
• Approved 9.85% return on equity

Negative

• Increased rates for customers in Arkansas

Insights

Utility Regulatory Expert

The approval of new rates for Black Hills Energy Arkansas is a significant development for Black Hills Corp. The $130 million in pipeline system investments since 2021 demonstrates the company's commitment to infrastructure modernization and expansion. The $25.4 million in new annual revenues, combined with the $3.7 million migration from rider revenue to base rates, results in a total annual base rate revenue increase of $29.1 million.

The approved 9.85% return on equity and 46% equity / 54% debt capital structure are within industry norms, providing a balanced approach to financing operations. This rate case outcome supports the utility's ability to continue investing in its infrastructure while maintaining financial stability.

For investors, this regulatory approval provides revenue predictability and supports the company's growth strategy in Arkansas. The successful settlement also indicates a constructive regulatory environment, which is important for utility companies' long-term financial health and ability to attract capital for future investments.

Financial Analyst

This rate case approval is a positive development for Black Hills Corp., enhancing its financial outlook. The $29.1 million total annual base rate revenue increase will directly boost the company's top line, improving cash flow and earnings potential. This represents approximately a 0.7% increase to the company's trailing twelve-month revenues of about $4.2 billion.

The approval allows Black Hills to earn a return on its significant $130 million infrastructure investment, which is important for regulated utilities. The 9.85% allowed return on equity is competitive in the current market environment and should support the company's dividend policy and future growth initiatives.

Investors should note that this regulatory success in Arkansas may serve as a positive precedent for future rate cases in other states where Black Hills operates. The company's ability to reach a unanimous settlement also speaks to its strong regulatory management skills, which is a key factor in utility valuation.

RAPID CITY, S.D., Oct. 02, 2024 (GLOBE NEWSWIRE) -- Black Hills Corp. (NYSE: BKH) today announced that its Arkansas natural gas utility, Black Hills Energy Arkansas, Inc., doing business as Black Hills Energy, received approval from the Arkansas Public Service Commission of a unanimous settlement agreement for new rates effective with October billing cycles. The new rates are designed to recover approximately $130 million of pipeline system investments since the utility’s last general rate filing in 2021.

“We are pleased to receive approval of a settlement that supports our long-term commitment to our Arkansas customers and communities to deliver safe and reliable natural gas service,” said Linn Evans, president and CEO of Black Hills Corp. “The critical infrastructure investments made on behalf of our customers are essential to meeting the growing demand for energy while also supporting continued resilience of our Arkansas natural gas system.”

The approved settlement agreement will generate approximately $25.4 million of new annual revenues and migrates approximately $3.7 million in annual rider revenue to base rates for a total annual base rate revenue increase of $29.1 million. The approval allows a 9.85% return on equity and a capital structure of 46% equity and 54% debt.

Black Hills Corp.
Black Hills Corp. (NYSE: BKH) is a customer-focused, growth-oriented utility company with a tradition of improving life with energy and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves 1.34 million natural gas and electric utility customers in eight states: Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. More information is available at www.blackhillscorp.com.

Investor Relations
Sal Diaz
investorrelations@blackhillscorp.com

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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, including anticipated revenues from the new rate increase. 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, the risk factors described in Item 1A of Part I of our 2023 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.

FAQ

What rate increase did Black Hills Energy Arkansas (BKH) receive approval for in October 2024?

Black Hills Energy Arkansas received approval for a total annual base rate revenue increase of $29.1 million, which includes $25.4 million in new annual revenues and $3.7 million migrated from annual rider revenue to base rates.

How much pipeline system investment is Black Hills Corp. (BKH) recovering through the new rates in Arkansas?

The new rates are designed to recover approximately $130 million of pipeline system investments made by Black Hills Corp. since its last general rate filing in 2021.

What return on equity was approved for Black Hills Energy Arkansas (BKH) in the October 2024 rate settlement?

The Arkansas Public Service Commission approved a 9.85% return on equity for Black Hills Energy Arkansas in the October 2024 rate settlement.

What is the approved capital structure for Black Hills Energy Arkansas (BKH) in the October 2024 rate decision?

The approved capital structure for Black Hills Energy Arkansas is 46% equity and 54% debt, as per the October 2024 rate decision.