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Blacks Hills' Iowa Gas Rate Approved

Rapid City, SD-based Black Hills Corp.'s Iowa natural gas utility, Black Hills Energy, on Wednesday received approval from state regulators to increase rates by $10.4 million, or 5.8%, effective July 31. The new rates impact all of its Iowa gas customers -- residential, commercial and industrial.

The Iowa utility, which Black Hills acquired from Aquila in 2007, has not had a rate hike for more than three years (see Daily GPI, Sept. 6, 2007). The increase approved by the Iowa Utilities Board (IUB) is designed to allow the utility to cover investments in the utility infrastructure and increased operating costs.

Since the last rate hike in March 2006, Black Hills and its predecessor, Aquila, invested $25 million in the Iowa gas delivery system, Black Hills said. Some of the money also was spent to expand the system to add new customers.

The request was filed June 2, 2008, and as is the practice in Iowa, interim rates went into effect June 15, 2008 while the general rate case was reviewed. Those interim rates remain in place until the permanent hike goes into effect at the end of July.

Black Hills Energy was assigned a 10.1% return on equity and capital structure that is 51.4% equity and 48.6% debt. Under the new rate design more than half of the utility costs are to be recovered in a fixed monthly service charge, which for residential customers will increase to $15.60 and for commercial/industrial businesses to $23.60.

The utility said the new rates will impact only a little more than a quarter (27%) of a typical Iowa gas customer bill. The remaining 73% of the monthly bill accounts for wholesale natural gas costs and a pass-through cost the utility must pay to its natural gas suppliers.

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