Rapid City, SD-based Black Hills Corp. announced Wednesday that its natural gas utility operating in Nebraska was granted an $8.7 million general rate increase by the state Public Service Commission (PSC). The new rates are effective Sept. 1 for Black Hills Energy.

The decision on the rate hike request, which was filed late last year, also authorized a return on equity of 10.1% for Black Hills Energy, along with structuring the utility's capital structure at 52% equity.

Under the Nebraska PSC process, Black Hills implemented a $12.1 million, or 6.5%, interim increase last March 1. So since the new rates set by the PSC will be lower than the interim hike now in effect, customers will receive refunds for the difference between the two rates. The utility will file a specified refund plan to the PSC before implementing the refund.

Under the new rates, following any refunds, the typical Black Hills retail residential customer is looking at a monthly increase of almost $4; typical commercial customers will see an increase of nearly $2/month. For large industrial customers, the increases will vary depending on the rate class and volumes and type of natural gas use.

The rate increase also included a PSC-authorized change in the fixed monthly customer charges. Residential monthly charges will be set at $13.50, and the commercial fixed monthly charge will become $18.50. The utility said the new rates affect only about 35% of a Nebraska gas customer's typical bill; the rest of the monthly bill accounts for the cost of gas and a pass-through cost that Black Hills pays its suppliers. Black Hills emphasized that it does not earn a profit on that part of its revenues.

Since its last Nebraska gas utility rate increase in 2007, Black Hills said it has invested nearly $30 million in the state to replace gas pipelines and generally upgrade its distribution infrastructure and implement new technology, said Dan Mechtenberg, vice president for Black Hills Nebraska utility operations. "The rate increase allows for recovery of operating costs and a return on infrastructure investments."

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.