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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

 

Commission File Number 001-31303

 

BLACK HILLS CORPORATION

 

Incorporated in South Dakota IRS Identification Number 46-0458824

 

7001 Mount Rushmore Road

Rapid City, South Dakota 57702

Registrant’s telephone number (605) 721-1700

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock of $1.00 par value

BKH

New York Stock Exchange

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

The aggregate market value of the voting common equity held by non-affiliates of the registrant on the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2023, was $4,016,297,084

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class

Outstanding at January 31, 2024

 

Common stock, $1.00 par value

68,196,551

shares

 

 

Documents Incorporated by Reference

Portions of the registrant’s Definitive Proxy Statement being prepared for the solicitation of proxies in connection with the 2024 Annual Meeting of Stockholders to be held on April 23, 2024, are incorporated by reference in Part III of this Form 10-K.

 


 

TABLE OF CONTENTS

 

 

 

Page

GLOSSARY OF TERMS AND ABBREVIATIONS

4

WEBSITE ACCESS TO REPORTS

11

FORWARD-LOOKING INFORMATION

11

Part I

 

 

ITEM 1.

BUSINESS

12

 

History and Organization

12

 

Electric Utilities

12

 

Gas Utilities

15

 

Utility Regulation Characteristics

17

 

Environmental Matters

21

 

Human Capital Resources

22

ITEM 1A.

RISK FACTORS

24

ITEM 1B.

UNRESOLVED STAFF COMMENTS

30

ITEM 1C.

CYBERSECURITY

30

ITEM 2.

PROPERTIES

 

31

ITEM 3.

LEGAL PROCEEDINGS

31

ITEM 4.

MINE SAFETY DISCLOSURES

31

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

32

Part II

 

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

33

ITEM 6.

RESERVED

34

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

34

 

Executive Summary

34

 

Key Elements of our Business Strategy

35

 

Recent Developments

38

 

Results of Operations - Consolidated Summary and Overview

40

 

Non-GAAP Financial Measure

40

 

Electric Utilities

41

 

Gas Utilities

43

 

Corporate and Other

46

 

Consolidated Interest Expense, Impairment of Investment, Other Income (Expense) and Income Tax Benefit (Expense)

46

 

Liquidity and Capital Resources

47

 

Cash Flow Activities

47

 

Capital Resources

49

 

Credit Ratings

50

 

Capital Requirements

51

 

Critical Accounting Estimates

52

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

54

 

 

2


 

 

 

 

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

56

 

Management’s Report on Internal Controls Over Financial Reporting

56

 

Reports of Independent Registered Public Accounting Firm

57

 

Consolidated Statements of Income

60

 

Consolidated Statements of Comprehensive Income

61

 

Consolidated Balance Sheets

62

 

Consolidated Statements of Cash Flows

64

 

Consolidated Statements of Equity

65

 

Notes to Consolidated Financial Statements

66

 

Note 1. Business Description and Significant Accounting Policies

66

 

Note 2. Regulatory Matters

74

 

Note 3. Commitments, Contingencies and Guarantees

76

 

Note 4. Revenue

79

 

Note 5. Property, Plant and Equipment

80

 

Note 6. Jointly Owned Facilities

81

 

Note 7. Asset Retirement Obligations

81

 

Note 8. Financing

82

 

Note 9. Risk Management and Derivatives

85

 

Note 10. Fair Value Measurements

88

 

Note 11. Other Comprehensive Income

89

 

Note 12. Variable Interest Entity

90

 

Note 13. Employee Benefit Plans

90

 

Note 14. Share-based Compensation Plans

95

 

Note 15. Income Taxes

98

 

Note 16. Business Segment Information

100

 

Note 17. Subsequent Events

101

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

102

ITEM 9A.

CONTROLS AND PROCEDURES

102

ITEM 9B.

OTHER INFORMATION

102

ITEM 9C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

102

Part III

 

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

102

ITEM 11.

EXECUTIVE COMPENSATION

102

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

103

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

103

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

103

Part IV

 

 

 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

104

ITEM 16.

FORM 10-K SUMMARY

107

SIGNATURES

108

 

 

3


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

The following terms and abbreviations appear in the text of this report and have the definitions described below:

 

AC

Alternating Current

AFUDC

Allowance for Funds Used During Construction

AOCI

Accumulated Other Comprehensive Income (Loss)

APSC

Arkansas Public Service Commission

Arkansas Gas

Black Hills Energy Arkansas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Arkansas (doing business as Black Hills Energy).

ARO

Asset Retirement Obligation

ASC

Accounting Standards Codification

ASU

Accounting Standards Update as issued by the FASB

ATM

At-the-market equity offering program

Availability

The availability factor of a power plant is the percentage of the time that it is available to provide energy.

BHC

Black Hills Corporation; the Company

BHSC

Black Hills Service Company, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy)

Black Hills Colorado IPP

Black Hills Colorado IPP, LLC, a 50.1% owned subsidiary of Black Hills Electric Generation

Black Hills Electric Generation

Black Hills Electric Generation, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing wholesale electric capacity and energy primarily to our affiliate utilities.

Black Hills Energy

The name used to conduct the business of our Utilities

Black Hills Energy Renewable Resources (BHERR)

Black Hills Energy Renewable Resources, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings

Black Hills Energy Services

Black Hills Energy Services Company, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas commodity supply for the Choice Gas Programs (doing business as Black Hills Energy).

Black Hills Non-regulated Holdings

Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation

Black Hills Power

Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy). Also known as South Dakota Electric.

Black Hills Utility Holdings

Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy)

Black Hills Wyoming

Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation

Blockchain Interruptible Service (BCIS) Tariff

A WPSC-approved tariff applicable to prospective new Wyoming Electric blockchain customers. The tariff allows customers to negotiate rates and terms and conditions for interruptible electric utility service of 10 MW or greater that would be interconnected with Wyoming Electric’s system. Agreements under the BCIS tariff must be filed with the WPSC prior to the first customer billing, be at least 2 years in duration and include specific pricing for all electricity purchased (with pricing terms subject to renegotiation every three years). BCIS customers shall not participate in the PCA to the extent of service received under the tariff.

Btu

British thermal unit

Busch Ranch I

The 29 MW wind farm near Pueblo, Colorado, jointly owned by Colorado Electric and Black Hills Electric Generation. Colorado Electric and Black Hills Electric Generation each have a 50% ownership interest in the wind farm. Black Hills Electric Generation provides its share of energy from the wind farm to Colorado Electric through a PPA, which expires in October 2037.

Busch Ranch II

The 59.4 MW wind farm near Pueblo, Colorado owned by Black Hills Electric Generation to provide wind energy to Colorado Electric through a PPA expiring in November 2044.

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CACJA Adjustment

Clean Air Clean Jobs Act Adjustment is an adjustment mechanism that allows Colorado Electric to collect from customers the capital costs related to Pueblo Airport Generation CT #6.

CFTC

United States Commodity Futures Trading Commission

Cheyenne Light

Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service in the Cheyenne, Wyoming area (doing business as Black Hills Energy). Also known as Wyoming Electric.

Cheyenne Prairie

Cheyenne Prairie Generating Station located in Cheyenne, Wyoming serves the utility customers of South Dakota Electric and Wyoming Electric. The facility includes one simple-cycle, 40 MW combustion turbine that is wholly-owned by Wyoming Electric and one combined-cycle, 100 MW unit that is jointly-owned by Wyoming Electric (42 MW) and South Dakota Electric (58 MW).

Choice Gas Program

Regulator-approved programs in Wyoming and Nebraska that allow certain utility customers to select their natural gas commodity supplier, providing the unbundling of the commodity service from the distribution delivery service.

City of Gillette

Gillette, Wyoming

Clean Energy Plan

2030 Ready Plan that establishes a roadmap and preferred resource portfolio for Colorado Electric to cost-effectively achieve the State of Colorado’s requirement calling upon electric utilities to reduce GHG emissions by a minimum of 80% from 2005 levels by 2030. Based on initial modeling, the preferred resource portfolio proposes the addition of approximately 400 MW of clean energy resources (100 MW of wind, 200-250 MW of solar and 50 MW of battery storage) to Colorado Electric's system. The final mix of resources will be determined by the results of a competitive solicitation that was issued in July 2023. Colorado legislation allows electric utilities to own up to 50% of the renewable generation assets added to comply with the Clean Energy Plan.

CO2

Carbon dioxide

Chief Operating Decision Maker (CODM)

Chief Executive Officer

Colorado Electric

Black Hills Colorado Electric, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Parent Holdings, providing electric service to customers in Colorado (doing business as Black Hills Energy).

Colorado Gas

Black Hills Colorado Gas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Colorado (doing business as Black Hills Energy).

Common Use System

The Common Use System is a jointly operated transmission system we participate in with Basin Electric Power Cooperative and Powder River Energy Corporation. The Common Use System provides transmission service over these utilities' combined 230-kilovolt (kV) and limited 69-kV transmission facilities within areas of southwestern South Dakota and northeastern Wyoming.

Consolidated Indebtedness to Capitalization Ratio

Any Indebtedness outstanding at such time, divided by capital at such time. Capital being consolidated net-worth (excluding non-controlling interest) plus consolidated indebtedness (including letters of credit and certain guarantees issued) as defined within the current Revolving Credit Facility.

Cooling Degree Day

A cooling degree day is equivalent to each degree that the average of the high and low temperature for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.

Corriedale

The 52.5 MW wind farm near Cheyenne, Wyoming, jointly owned by South Dakota Electric (32.5 MW) and Wyoming Electric (20 MW), serving as the dedicated wind energy supply to the Renewable Ready program, which is a voluntary renewable energy subscription program for large commercial, industrial and governmental customers in South Dakota and Wyoming.

CP Program

Commercial Paper Program

CPCN

Certificate of Public Convenience and Necessity

CPUC

Colorado Public Utilities Commission

CSAPR

The United States Environmental Protection Agency's Cross-State Air Pollution Rule

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CT

Combustion Turbine

Cushion Gas

The portion of natural gas necessary to force saleable gas from a storage field into the transmission system and for system balancing, representing a permanent investment necessary to use storage facilities and maintain reliability.

Cybersecurity incident

An unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through a registrant’s information systems that jeopardizes the confidentiality, integrity, or availability of a registrant’s information systems or any information residing therein.

Cybersecurity threat

Any potential unauthorized occurrence on or conducted through a registrant’s information systems that may result in adverse effects on the confidentiality, integrity or availability of a registrant’s information systems or any information residing therein.

DC

Direct Current

Dividend Payout Ratio

Annual dividends paid on common stock divided by net income from continuing operations available for common stock

DRSPP

Dividend Reinvestment and Stock Purchase Plan

DSM

Demand Side Management

Dth

Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu).

EBITDA

Earnings before interest, taxes, depreciation and amortization, a non-GAAP measure.

ECA

Energy Cost Adjustment is an adjustment that allows us to pass the prudently-incurred cost of fuel and purchased energy through to customers.

Economy Energy

Purchased energy that costs less than that produced with the utilities’ owned generation.

EECR

Energy Efficiency Cost Recovery is an adjustment mechanism that allows us to recover from customers the costs associated with providing energy efficiency programs.

EIA

Environmental Improvement Adjustment is an annual adjustment mechanism that allows us to recover from customers eligible investments in, and expense related to, new environmental measures.

EGU

Electric generating unit

Energy Assistance Benefit Charge

Energy Assistance Benefit Charge is a Colorado statutory-created surcharge to provide additional funding for bill assistance and weatherization for income-qualified customers. We collect these funds and remit them to a Colorado non-profit organization that assists low-income residents with utility bills, repairs, and energy efficiency upgrades.

Energy Transition

The global energy sector’s shift from fossil-based systems of energy production and consumption, including oil, natural gas and coal to renewable energy sources like wind and solar, as well as battery storage solutions.

EPA

United States Environmental Protection Agency

ESG

Environmental, Social and Governance

EV

Electric Vehicle

EWG

Exempt Wholesale Generator

FASB

Financial Accounting Standards Board

FERC

United States Department of Energy's Federal Energy Regulatory Commission

Fitch

Fitch Ratings Inc.

GAAP

Accounting principles generally accepted in the United States of America

Gas Price Risk Management Rider

Gas Price Risk Management Rider is a mechanism that is similar to GCA but designed to also provide a price floor and price ceiling.

GCA

Gas Cost Adjustment is an adjustment that allows us to pass the prudently-incurred cost of gas and certain services through to customers.

GHG

Greenhouse gases

Gillette Energy Complex

The Gillette Energy Complex located in Gillette, Wyoming includes 793 MW of coal-fired generating facilities (Neil Simpson II, Wygen I, Wygen II, Wygen III, Wyodak Plant) which are supplied by WRDC and a 40 MW gas-fired generation facility (Neil Simpson CT). We operate and own majority interests in five of the six facilities and own 20% of Wyodak Plant.

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Global Settlement

Settlement with a utility’s commission where the revenue requirement is agreed upon, but the specific adjustments used by each party to arrive at the amount are not specified in public rate orders.

GWh

Gigawatt Hours

Heating Degree Day

A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.

HomeServe

We offer HomeServe products to our natural gas residential customers interested in purchasing additional home repair service plans.

Information systems

Electronic information resources, owned or used by the registrant, including physical or virtual infrastructure controlled by such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of the registrant’s information to maintain or support the registrant’s operations.

Integrated Generation

Non-regulated power generation and mining businesses (Black Hills Electric Generation and WRDC) that are vertically integrated within our Electric Utilities segment.

Iowa Gas

Black Hills Iowa Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Iowa (doing business as Black Hills Energy).

IPP

Independent Power Producer

IRA

Inflation Reduction Act of 2022

IRC

Internal Revenue Code

IRP

Integrated Resource Plan

IRS

United States Internal Revenue Service

ITC

Investment Tax Credit

Kansas Gas

Black Hills Kansas Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Kansas (doing business as Black Hills Energy).

kV

Kilovolt

LIBOR

London Interbank Offered Rate

Mcf

Thousand cubic feet

Mcfd

Thousand cubic feet per day

MDU

Montana-Dakota Utilities Co., a subsidiary of MDU Resources Group, Inc.

MEAN

Municipal Energy Agency of Nebraska

MMBtu

Million British thermal units

Moody’s

Moody’s Investors Service, Inc.

MSHA

United States Department of Labor’s Mine Safety and Health Administration

MW

Megawatts

MWh

Megawatt-hours

N/A

Not Applicable

NAAQS

National Ambient Air Quality Standards

NAV

Net Asset Value

Nebraska Gas

Black Hills Nebraska Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Nebraska (doing business as Black Hills Energy).

Neil Simpson II

A mine-mouth, coal-fired power plant owned and operated by South Dakota Electric with a total capacity of 90 MW located at our Gillette Energy Complex.

NERC

North American Electric Reliability Corporation

NOX

Nitrogen oxide

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NOL

Net Operating Loss

Northern Iowa Windpower

Northern Iowa Windpower, LLC, a 87.1 MW wind farm located near Joice, Iowa, previously owned by Black Hills Electric Generation. In March 2023, Black Hills Electric Generation completed the sale of Northern Iowa Windpower assets to a third-party.

OCI

Other Comprehensive Income

OPEB

Other Post-Employment Benefits

OSHA

United States Department of Labor’s Occupational Safety & Health Administration

OSM

United States Department of the Interior’s Office of Surface Mining

PacifiCorp

PacifiCorp, a wholly owned subsidiary of MidAmerican Energy Holdings Company, itself an affiliate of Berkshire Hathaway.

PCA

Power Cost Adjustment is an annual adjustment mechanism that allows us to pass a portion of prudently-incurred delivered power costs, including fuel, purchased capacity and energy, and transmission costs, through to customers.

PCCA

Power Capacity Cost Adjustment is an annual adjustment that allows us to pass the prudently-incurred purchased capacity costs, incremental to costs included in base rates, through to customers.

Peak View

The 60.8 MW wind farm owned by Colorado Electric.

PHMSA

United States Department of Transportation's Pipeline and Hazardous Materials Safety Administration

PPA

Power Purchase Agreement

PSA

Power Sales Agreement

PTC

Production Tax Credit

Pueblo Airport Generation

Pueblo Airport Generating Station located in Pueblo, Colorado includes 440 MW of combined cycle gas-fired power generation plants jointly owned by Colorado Electric (240 MW) and Black Hills Colorado IPP (200 MW). Black Hills Colorado IPP owns and operates this facility. The plants commenced operation on January 1, 2012.

PUHCA 2005

Public Utility Holding Company Act of 2005

Ready

The Company’s branding platform which emphasizes that we will 1) prioritize our customers; 2) act as a thoughtful, responsible leader; 3) listen first and lead with a focus on relationships; and 4) be creative in our approach to solutions.

Ready Wyoming

A 260-mile, multi-phase transmission expansion project in Wyoming. This transmission project is expected to serve the growing needs of customers by enhancing resiliency of Wyoming Electric’s overall electric system and expanding access to power markets and renewable resources. The project is expected to help Wyoming Electric maintain top-quartile reliability and enable economic development in the Cheyenne, Wyoming region.

RESA

Renewable Energy Standard Adjustment is an incremental retail rate limited to 2% for Colorado Electric customers that provides funding for renewable energy projects and programs to comply with Colorado’s Renewable Energy Standard.

Revolving Credit Facility

Our $750 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which was amended on May 9, 2023 and will terminate on July 19, 2026. This facility includes an accordion feature that allows us to increase total commitments up to $1.0 billion with the consent of the administrative agent, the issuing agents and each bank increasing or providing a new commitment.

RMNG

Rocky Mountain Natural Gas LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas transmission and wholesale services in western Colorado (doing business as Black Hills Energy).

RNG

Renewable natural gas

RTO

Regional Transmission Organization

SDPUC

South Dakota Public Utilities Commission

SEC

United States Securities and Exchange Commission

Service Guard Comfort Plan

Appliance protection plan that provides home appliance repair services through on-going monthly service agreements to residential utility customers.

SO2

Sulfur dioxide

SOFR

Secured Overnight Financing Rate

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S&P

S&P Global Ratings, a division of S&P Global Inc.

South Dakota Electric

Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in Montana, South Dakota and Wyoming (doing business as Black Hills Energy).

SPP

Southwest Power Pool, a regional transmission organization (RTO) that oversees the bulk electric grid and wholesale power market in the central United States.

SSIR

System Safety and Integrity Rider is a mechanism that allows us to recover the costs associated with certain pipeline safety and integrity investments, including the replacement of higher risk pipe, the improvement of the data management system, and the mitigation of other safety issues identified on our natural gas system.

System Peak Demand

Represents the highest point of retail customer usage for a single hour.

TCA

Transmission Cost Adjustment is an annual adjustment mechanism that allows us to recover from customers eligible transmission investments prior to the next rate review.

TCAM

Transmission Cost Adjustment Mechanism is a WPSC-approved tariff based on a formulaic approach that determines the recovery of Wyoming Electric's transmission costs.

TCJA

Tax Cuts and Jobs Act enacted on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21%. As such, we remeasured our deferred income taxes at the 21% federal tax rate as of December 31, 2017.

Tech Services

Non-regulated product lines delivered by our Utilities that 1) provide electrical system construction services to large industrial customers of our electric utilities, and 2) serve gas transportation customers throughout its service territory by constructing and maintaining customer-owned gas infrastructure facilities, typically through one-time contracts.

TEPR

Transportation Electrification Program Rider is a CPUC-approved mechanism associated with Colorado Electric's EV program.

TFA

Transmission Facility Adjustment is an annual adjustment mechanism that allows us to recover charges for qualifying new and modified transmission facilities from customers.

Transmission Tie

South Dakota Electric owns 35% of a AC-DC-AC transmission tie that interconnects the Western and Eastern transmission grids, which are independently-operated transmission grids serving the western and eastern United States, respectively. Basin Electric Power Cooperative owns the remaining ownership percentage. This transmission tie allows us to buy and sell energy in the Eastern grid without having to isolate and physically reconnect load or generation between the two transmission grids, thus enhancing the reliability of our system. It accommodates scheduling transactions in both directions simultaneously, provides additional opportunities to sell excess generation or to make economic purchases to serve our native load and contract obligations, and enables us to take advantage of power price differentials between the two grids. The total transfer capacity of the tie is 400 MW, including 200 MW from West to East and 200 MW from East to West.

TSA

United States Department of Homeland Security's Transportation Security Administration

Utilities

Black Hills’ Electric and Gas Utilities

VEBA

Voluntary Employee Benefit Association

VIE

Variable Interest Entity

WEIS

Western Energy Imbalance Service

Wind Capacity Factor

Measures the amount of electricity a wind turbine produces in a given time period relative to its maximum potential

Winter Storm Uri

February 2021 winter weather event that caused extreme cold temperatures in the central United States and led to unprecedented fluctuations in customer demand and market pricing for natural gas and energy.

Working Capacity

Total gas storage capacity minus cushion gas

WPSC

Wyoming Public Service Commission

WRDC

Wyodak Resources Development Corp., a coal mine which is a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing coal supply primarily to five on-site, mine-mouth generating facilities at our Gillette Energy Complex (doing business as Black Hills Energy).

Wygen I

A mine-mouth, coal-fired generating facility with a total capacity of 90 MW located at our Gillette Energy Complex. Black Hills Wyoming owns 76.5% of the facility and Municipal Energy Agency of Nebraska (MEAN) owns the remaining 23.5%.

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Wygen II

A mine-mouth, coal-fired power plant owned by Wyoming Electric with a total capacity of 95 MW located at our Gillette Energy Complex.

Wygen III

A mine-mouth, coal-fired power plant operated by South Dakota Electric with a total capacity of 116 MW located at our Gillette Energy Complex. South Dakota Electric owns 52% of the power plant, MDU owns 25% and the City of Gillette owns the remaining 23%.

Wyodak Plant

The 402.3 MW mine-mouth, coal-fired generating facility located at our Gillette Energy Complex, jointly owned by PacifiCorp (80%) and South Dakota Electric (20%). WRDC supplies all of the fuel for the facility.

Wyoming Electric

Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in the Cheyenne, Wyoming area (doing business as Black Hills Energy).

Wyoming Gas

Black Hills Wyoming Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Wyoming (doing business as Black Hills Energy).

Wyoming Integrity Rider

The Wyoming Integrity Rider (WIR) is a WPSC-approved tariff that allows Wyoming Gas to recover costs from customers associated with ongoing infrastructure replacement, gas meter and yard line replacement projects driven by federal regulation.

 

 

 

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WEBSITE ACCESS TO REPORTS

 

The reports we file with the SEC are available free of charge at our website www.blackhillscorp.com as soon as reasonably practicable after they are filed. In addition, the charters of our Audit, Governance and Compensation Committees are located on our website along with our Code of Business Conduct, Code of Ethics for our Chief Executive Officer and Senior Finance Officers, Corporate Governance Guidelines of the Board of Directors and Policy for Director Independence. The information contained on our website is not part of this document.

 

FORWARD-LOOKING INFORMATION

 

This Form 10-K contains forward-looking statements as defined by the SEC. Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those statements that are identified by the words “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts” and similar expressions and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Item 7 - Management’s Discussion & Analysis of Financial Condition and Results of Operations.

 

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including, without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Nonetheless, the Company’s expectations, beliefs or projections may not be achieved or accomplished.

 

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, such as adverse macroeconomic conditions, global pandemics or severe weather events, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements in this Annual Report on Form 10-K, including statements contained within Item 1A - Risk Factors.

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PART I

 

ITEM 1. BUSINESS

 

History and Organization

Black Hills Corporation, a South Dakota corporation (together with its subsidiaries, referred to herein as the “Company,” “we,” “us” or “our”), is a customer-focused, growth-oriented utility company headquartered in Rapid City, South Dakota (incorporated in South Dakota in 1941).

 

We operate our business in the United States, reporting our operating results through our Electric Utilities and Gas Utilities segments. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other.

 

Our Electric Utilities segment generates, transmits and distributes electricity to approximately 222,000 electric utility customers in Colorado, Montana, South Dakota and Wyoming. Our Electric Utilities own 1,394 MW of generation and 9,106 miles of electric transmission and distribution lines.

 

Our Gas Utilities segment serves approximately 1,116,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming. Our Gas Utilities own and operate 4,663 miles of intrastate gas transmission pipelines and 42,514 miles of gas distribution mains and service lines, seven natural gas storage sites, more than 50,000 horsepower of compression and 516 miles of gathering lines.

 

Electric Utilities

 

We conduct electric utility operations through our Colorado, South Dakota and Wyoming subsidiaries. Our Electric Utilities generate, transmit and distribute electricity to our retail customers. Our electric generating facilities and power purchase agreements provide for the supply of electricity principally to our retail customers. We also sell excess power to other utilities and marketing companies, including our affiliates. Additionally, we provide non-regulated services to our retail customers under the Service Guard Comfort Plan and Tech Services.

 

We also own and operate non-regulated power generation and mining assets that are vertically integrated into and primarily support our Electric Utilities. All of these operations are located at our electric generating complexes and are physically integrated into our Electric Utilities’ operations.

 

As of December 31,

 

Retail Customers

2023

 

2022

 

2021

 

Residential

 

190,776

 

 

188,921

 

 

186,852

 

Commercial

 

30,491

 

 

30,404

 

 

30,326

 

Industrial

 

84

 

 

82

 

 

81

 

Other

 

989

 

 

1,024

 

 

1,010

 

Total Electric Retail Customers at End of Year

 

222,340

 

 

220,431

 

 

218,269

 

 

As of December 31,

 

Retail Customers

2023

 

2022

 

2021

 

Colorado Electric

 

100,907

 

 

100,573

 

 

99,709

 

South Dakota Electric

 

76,479

 

 

75,169

 

 

74,509

 

Wyoming Electric

 

44,954

 

 

44,689

 

 

44,051

 

Total Electric Retail Customers at End of Year

 

222,340

 

 

220,431

 

 

218,269

 

 

Capacity and Demand. System Peak Demand for the Electric Utilities’ retail customers for each of the last three years are listed below:

 

System Peak Demand (in MW)

 

2023 (a)

2022

 

2021

 

Summer

Winter

Summer

 

Winter

 

Summer

 

Winter

 

Colorado Electric

411

297

 

410

 

 

334

 

 

407

 

 

279

 

South Dakota Electric

378

289

 

403

 

 

355

 

 

397

 

 

299

 

Wyoming Electric

312

301

 

294

 

 

281

 

 

274

 

 

246

 

____________________

(a)
In 2023, Wyoming Electric set new summer and winter peak loads. See recent peak discussion in the Recent Developments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 in this Annual Report on Form 10-K for additional information.

 

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As of December 31, 2023, our Electric Utilities’ ownership interests in electric generating plants were as follows:

 

Unit

Fuel
Type

Location

Ownership
Interest %
(d)

Owned
Nameplate
Capacity (MW)

 

In Service
Date

Colorado Electric:

 

 

 

 

 

 

Busch Ranch I (a)

Wind

Pueblo, Colorado

50%

 

14.5

 

2012

Peak View (b) (c)

Wind

Pueblo, Colorado

100%

 

60.8

 

2016

Pueblo Airport Generation #1-2

Natural Gas

Pueblo, Colorado

100%

 

200.0

 

2011

Pueblo Airport Generation CT #6

Natural Gas

Pueblo, Colorado

100%

 

40.0

 

2016

AIP Diesel

Diesel Oil

Pueblo, Colorado

100%

 

10.0

 

2001

Diesel #1 and #3-5

Diesel Oil

Pueblo, Colorado

100%

 

8.0

 

1964

Diesel #1-5

Diesel Oil

Rocky Ford, Colorado

100%

 

10.0

 

1964

South Dakota Electric:

 

 

 

 

 

 

Cheyenne Prairie

Natural Gas

Cheyenne, Wyoming

58%

 

58.0

 

2014

Corriedale (c)

Wind

Cheyenne, Wyoming

62%

 

32.5

 

2020

Wygen III

Coal

Gillette, Wyoming

52%

 

60.3

 

2010

Neil Simpson II

Coal

Gillette, Wyoming

100%

 

90.0

 

1995

Wyodak Plant

Coal

Gillette, Wyoming

20%

 

80.5

 

1978

Neil Simpson CT

Natural Gas

Gillette, Wyoming

100%

 

40.0

 

2000

Lange CT

Natural Gas

Rapid City, South Dakota

100%

 

40.0

 

2002

Ben French Diesel #1-5

Diesel Oil

Rapid City, South Dakota

100%

 

10.0

 

1965

Ben French CTs #1-4

Natural Gas/Diesel Oil

Rapid City, South Dakota

100%

 

100.0

 

1977-1979

Wyoming Electric:

 

 

 

 

 

 

Cheyenne Prairie

Natural Gas

Cheyenne, Wyoming

42%

 

42.0

 

2014

Cheyenne Prairie CT

Natural Gas

Cheyenne, Wyoming

100%

 

40.0

 

2014

Corriedale (c)

Wind

Cheyenne, Wyoming

38%

 

20.0

 

2020

Wygen II

Coal

Gillette, Wyoming

100%

 

95.0

 

2008

Integrated Generation:

 

 

 

 

 

 

Wygen I

Coal

Gillette, Wyoming

76.5%

 

68.9

 

2003

Pueblo Airport Generation #4-5

Natural Gas

Pueblo, Colorado

50.1% (e)

 

200.0

 

2012

Busch Ranch I (a)

Wind

Pueblo, Colorado

50%

 

14.5

 

2012

Busch Ranch II (c)

Wind

Pueblo, Colorado

100%

 

59.4

 

2019

Total MW Capacity

 

 

 

 

1,394.4

 

 

____________________

(a)
In 2013, Busch Ranch I was awarded a one-time cash grant in lieu of ITCs under the Section 1603 program created under the American Recovery and Reinvestment Act.
(b)
The PTCs for Peak View flow back to customers through a rider mechanism as a reduction to Colorado Electric’s margins.
(c)
This facility qualifies for PTCs at $28/MWh under IRC 45 during the 10-year period beginning on the date the facility was originally placed in service.
(d)
Jointly owned facilities are discussed in Note 6 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
(e)
In 2016, Black Hills Electric Generation sold a 49.9% non-controlling interest in Black Hills Colorado IPP to a third party. See Note 12 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

 

Our Electric Utilities’ power supply by resource as a percent of the total power supply for our energy needs for the years ended December 31 was as follows:

 

Power Supply

2023

 

2022

 

2021

 

Coal

 

35.0

%

 

35.1

%

 

34.2

%

Natural Gas

 

26.4

%

 

18.8

%

 

24.4

%

Wind (a)

 

8.9

%

 

11.4

%

 

11.3

%

Total Generated (b)

 

70.3

%

 

65.3

%

 

69.9

%

Coal, Natural Gas, Diesel Oil and Other Market Purchases

 

24.1

%

 

29.6

%

 

25.1

%

Wind and Solar Purchases

 

5.6

%

 

5.1

%

 

5.0

%

Total Purchased

 

29.7

%

 

34.7

%

 

30.1

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

____________________

(a)
Wind generation decreased due to the sale of Northern Iowa Windpower assets in March 2023.
(b)
The diesel oil-fueled generating units are generally used as supplemental peaking units. Power generated from these units, as a percentage of total power supply, was 0.0% for each of the years presented.

 

 

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Our Electric Utilities’ weighted average cost of fuel utilized to generate electricity and the average price paid for purchased power (excluding contracted capacity) per MWh for the years ended December 31 were as follows:

 

Fuel and Purchased Power (dollars per MWh)

2023

 

2022

 

2021

 

Coal

$

13.40

 

$

12.76

 

$

11.55

 

Natural Gas

 

20.20

 

 

37.09

 

 

33.65

 

Total Generated Weighted Average Fuel Cost

 

14.27

 

 

17.57

 

 

17.40

 

Coal, Natural Gas, Diesel Oil and Other Market Purchases

 

55.61

 

 

66.35

 

 

64.85

 

Wind and Solar Purchases

 

34.99

 

 

33.78

 

 

34.69

 

Total Purchased Power Weighted Average Cost

 

51.68

 

 

61.56

 

 

59.84

 

Total Weighted Average Fuel and Purchased Power Cost

$

25.39

 

$

32.82

 

$

30.17

 

 

Purchased Power. We have executed various PPAs to support our Electric Utilities’ capacity and energy needs beyond our regulated power plants’ generation, which include long-term related party agreements with our non-regulated power generation businesses. See additional information in Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

 

Coal Mining. We own and operate a single coal mine through our WRDC subsidiary which is reported within our Electric Utilities segment. We surface mine, process and sell low-sulfur sub-bituminous coal at our mine located immediately adjacent to our Gillette Energy Complex in the Powder River Basin in northeastern Wyoming, where our five coal-fired power plants are located. We produced approximately 3.7 million tons of coal in 2023.

 

The mine provides low-sulfur coal directly to these five power plants via a conveyor belt system, minimizing transportation costs. The fuel can be delivered to our adjacent power plants at very cost competitive prices (i.e., $1.14 per MMBtu for year ended December 31, 2023) when compared to alternatives. Nearly all of the mine’s production is sold to our on-site generation facilities under long-term supply contracts.

 

As of December 31, 2023, we estimated our recoverable reserves to be approximately 179 million tons, based on a life-of-mine engineering study utilizing currently available drilling data and geological information prepared by internal engineering analyses. The recoverable reserve life is equal to approximately 48 years at the current production levels.

 

Transmission and Distribution. Through our Electric Utilities, we own electric transmission and distribution systems composed of high voltage lines (greater than 69 kV) and low voltage lines (69 kV or less). We also jointly operate an electric transmission system, referred to as the Common Use System, with Basin Electric Power Cooperative and Powder River Energy Corporation. Each participant in the Common Use System individually owns assets that are operated together for a single system. The Common Use System also provides transmission service to our Transmission Tie. South Dakota Electric owns 35% of the Transmission Tie. The Transmission Tie is further discussed in Note 6 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

 

At December 31, 2023, our Electric Utilities owned the electric transmission and distribution lines shown below:

 

Utility

State

Transmission (a)
(in Line Miles)

 

Distribution
(in Line Miles)

 

Colorado Electric

Colorado

 

599

 

 

3,213

 

South Dakota Electric (b)

South Dakota, Wyoming

 

1,232

 

 

2,616

 

Wyoming Electric

Wyoming

 

86

 

 

1,360

 

 

 

1,917

 

 

7,189

 

____________________

(a)
Electric transmission line miles include voltages of 69 kV and above.
(b)
South Dakota Electric transmission line miles include 43 miles within the Common Use System.

 

Material transmission services agreements are included in our disclosures in Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

 

Seasonal Variations of Business. Our Electric Utilities are seasonal businesses and weather patterns may impact their operating results. Demand for electricity is sensitive to seasonal cooling, heating and industrial load requirements, as well as market price. In particular, cooling demand is often greater in the summer and heating demand is often greater in the winter.

 

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Competition. We generally have limited competition for the retail generation and distribution of electricity in our service areas. Various legislative or regulatory restructuring and competitive initiatives have been discussed in several of the states in which our utilities operate. These initiatives would be aimed at increasing competition or providing for distributed generation. To date, these initiatives have not had a material impact on our utilities. In Colorado, our electric utility is subject to rules which may require competitive bidding for generation supply. Because of these rules, we face competition from other utilities and non-affiliated IPPs for the right to supply electric energy and capacity for Colorado Electric when resource plans require additional resources. Additionally, electrification initiatives in our service territories could increase demand for electricity and increase customer growth.

 

The independent power industry consists of many strong and capable competitors, some of which may have more extensive operations or greater financial resources than we possess. With respect to the merchant power sector, FERC has taken steps to increase access to the national transmission grid by utility and non-utility purchasers and sellers of electricity to foster competition within the wholesale electricity markets. Our non-regulated power generation businesses could face greater competition if utilities are permitted to robustly invest in power generation assets. Conversely, state regulations requiring utilities to competitively bid generation resources may provide opportunity for IPPs in some regions. To date, these initiatives have not had a material impact on our non-regulated power generation businesses.

 

Our mining business strategy is to sell nearly all of our production to on-site generation facilities under long-term supply contracts. Historically, any off-site sales have been to consumers within close proximity to WRDC. Coal competes with other energy sources, such as natural gas, nuclear, wind, solar and hydropower. Costs and other factors relating to these alternative fuels, such as safety, environmental and availability considerations affect the overall demand for coal as a fuel.

 

Operating Statistics. See a summary of key operating statistics in the Electric Utilities segment operating results within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.

 

Gas Utilities

 

We conduct natural gas utility operations through our Arkansas, Colorado, Iowa, Kansas, Nebraska and Wyoming subsidiaries. Our Gas Utilities transport and distribute natural gas through our distribution network to our retail customers. Additionally, we sell contractual pipeline capacity and gas commodities to other utilities and marketing companies, including our affiliates, on an as-available basis.

 

We also provide non-regulated services to our regulated customers. Black Hills Energy Services provides natural gas supply to approximately 53,000 retail distribution customers under the Choice Gas Program in Nebraska and Wyoming. Additionally, we provide services under the Service Guard Comfort Plan, Tech Services and HomeServe.

 

As of December 31,

 

Retail Customers

2023

 

2022

 

2021

 

Residential

 

871,930

 

 

864,038

 

 

853,908

 

Commercial

 

84,917

 

 

85,203

 

 

84,234

 

Industrial

 

2,179

 

 

2,189

 

 

2,158

 

Transportation

 

157,367

 

 

155,685

 

 

153,929

 

Total Natural Gas Retail Customers at End of Year

 

1,116,393

 

 

1,107,115

 

 

1,094,229

 

 

As of December 31,

 

Retail Customers

2023

 

2022

 

2021

 

Arkansas Gas

 

186,216

 

 

183,270

 

 

180,216

 

Colorado Gas

 

211,155

 

 

208,060

 

 

202,747

 

Iowa Gas

 

163,281

 

 

162,801

 

 

161,905

 

Kansas Gas

 

119,407

 

 

118,599

 

 

117,862

 

Nebraska Gas

 

302,167

 

 

301,007

 

 

298,832

 

Wyoming Gas

 

134,167

 

 

133,378

 

 

132,667

 

Total Natural Gas Retail Customers at End of Year

 

1,116,393

 

 

1,107,115

 

 

1,094,229

 

 

We procure natural gas for our distribution customers from a diverse mix of producers, processors and marketers and generally use hedging, physical fixed-price purchases and market-based price purchases to achieve dollar-cost averaging within our natural gas portfolio. The majority of our procured natural gas is transported in interstate pipelines under firm transportation service agreements.

 

In addition to company-owned regulated underground natural gas storage assets in Arkansas, Colorado and Wyoming, we also contract with third-party transportation providers for natural gas storage service to provide gas supply during the winter heating season and to meet peak day customer demand for natural gas.

 

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The following table summarizes certain information regarding our company-owned regulated underground gas storage facilities as of December 31, 2023:

 

 

Working Capacity
(Mcf)

 

Cushion Gas
(Mcf)

 

Total Capacity
(Mcf)

 

Maximum Daily
Withdrawal Capability
(Mcfd)

 

Arkansas Gas

 

8,442,700

 

 

13,149,040

 

 

21,591,740

 

 

196,000

 

Colorado Gas

 

2,360,895

 

 

6,165,315

 

 

8,526,210

 

 

30,000

 

Wyoming Gas

 

5,733,900

 

 

17,545,600

 

 

23,279,500

 

 

36,000

 

Total

 

16,537,495

 

 

36,859,955

 

 

53,397,450

 

 

262,000

 

 

The following table summarizes certain information regarding our system infrastructure as of December 31, 2023:

 

 

Intrastate Gas
Transmission Pipelines
(in line miles)

 

Gas Distribution
Mains
(in line miles)

 

Gas Distribution
Service Lines
(in line miles)

 

Arkansas Gas

 

875

 

 

5,197

 

 

1,380

 

Colorado Gas

 

694

 

 

7,188

 

 

1,861

 

Iowa Gas

 

173

 

 

2,890

 

 

2,765

 

Kansas Gas

 

339

 

 

3,026

 

 

1,400

 

Nebraska Gas

 

1,315

 

 

8,611

 

 

2,845

 

Wyoming Gas

 

1,267

 

 

3,625

 

 

1,726

 

Total

 

4,663

 

 

30,537

 

 

11,977

 

 

Seasonal Variations of Business. Our Gas Utilities are seasonal businesses and weather patterns may impact their operating results. Demand for natural gas is sensitive to seasonal heating and industrial load requirements, as well as market price. In particular, demand is often greater in the winter months for heating. Natural gas is used primarily for residential and commercial heating, and demand for this product can depend heavily upon weather throughout our service territories. As a result, a significant amount of natural gas revenue is normally recognized in the heating season consisting of the first and fourth quarters. Demand for natural gas can also be impacted by summer temperatures and precipitation, which can affect demand for irrigation.

 

Competition. We generally have limited competition for the retail distribution of natural gas in our service areas. Various restructuring and competitive initiatives have been discussed in several of the states in which our utilities operate. These initiatives are aimed at increasing competition. Additionally, electrification initiatives in our service territories could negatively impact demand for natural gas and decrease future growth. To date, these initiatives have not had a material impact on our utilities. Although we face competition from independent marketers for the sale of natural gas to our industrial and commercial customers, in instances where independent marketers displace us as the seller of natural gas, we still collect fees for transporting the gas through our distribution network.

 

Operating statistics. See a summary of key operating statistics in the Gas Utilities segment operating results within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.

 

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Utility Regulation Characteristics

 

Our Utilities are subject to regulation by a number of federal, state and other organizations, including, but not limited to, the following:

State public utility commissions, which have jurisdiction over services and facilities, rates and charges, accounting, valuation of property, depreciation rates and various other matters;
the FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce, proposals to build and operate interstate natural gas pipelines and storage facilities, and wholesale purchases and sales of electric energy, among other things;
the NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts;
the EPA, which has the responsibility to maintain and enforce national standards under a variety of environmental laws, in some cases delegating authority to state agencies. The EPA also works with industries and all levels of government, including federal and state governments, in a wide variety of voluntary pollution prevention programs and energy conservation efforts;
the TSA, which regulates certain activities related to the safety and security of natural gas pipelines. In May and July 2021 the TSA issued security directives that included several new cybersecurity requirements for critical pipeline owners and operators; and
the PHMSA, which is responsible for administering the federal regulatory program to help ensure the safe transportation of natural gas, petroleum and other hazardous materials by pipelines, including pipelines associated with natural gas storage, and develops regulations and other approaches to risk management to help ensure safety in design, construction, testing, operation, maintenance and emergency response of pipeline facilities.

 

Rates and Regulation

 

Our Utilities are subject to the jurisdiction of the public utility commissions in the states where they operate and the FERC for certain assets and transactions. These commissions oversee services and facilities, rates and charges, accounting, valuation of property, depreciation rates and various other matters. Rate decisions are influenced by many factors, including the cost of providing service, capital expenditures, the prudence of costs we incur, views concerning appropriate rates of return, general economic conditions and the political environment. Certain commissions also have jurisdiction over the issuance of debt or securities and the creation of liens on property located in their states to secure bonds or other securities.

 

The regulatory provisions for recovering the costs of service vary by jurisdiction. Our Utilities have cost recovery mechanisms that allow us to pass the prudently-incurred cost of natural gas, fuel and purchased power to customers. These mechanisms allow the utility operating in that state to collect or refund the difference between the cost of commodities and certain services embedded in our base rates and the actual cost of the commodities and certain services without filing a general rate review. In addition, some jurisdictions allow us to recover certain costs or earn a return on capital investments placed in service between base rate reviews through approved rider tariffs, such as energy efficiency plan costs and system safety and integrity investments. These tariffs allow the utility a return on the investment.

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Table of Contents

 

 

Electric Utilities

 

The following table provides regulatory information for each of our Electric Utilities:

 

 

 

 

Subsidiary

 

 

 

Jurisdiction

Authorized
Rate of
Return on
Equity

 

Authorized
Return on
Rate Base

Authorized
Capital
Structure
Debt/Equity

 

Authorized Rate Base (in millions)

 

 

Effective Date

 

 

Additional Regulatory
Mechanisms

Percentage of Power Marketing Profit Shared with Customers