Rapid City, SD-based Black Hills Corp.’s utility in Iowa announced Tuesday that it has filed with state regulators for a $4.7 million, or 2.9%, rate increase request for its natural gas operations in the state. Black Hills Energy told the Iowa Utilities Board it needs to recover the cost of more than $17 million in capital investments made since 2008.
Under Iowa’s rate process the natural gas utility will be permitted to place a 1.6% interim rate hike in effect on June 18, subject to refund, while the rate request is being reviewed. When the interim increase goes into effect, average residential and commercial customers will see a monthly increase of about $1.46, a Black Hills spokesperson said.
If final rates approved by the Iowa regulators are lower than the interim rate hike, customers will receive a refund with interest, the spokesperson said. Black Hills said it expects the final rate decision to be effective in April next year.
Only about 35% of the typical Black Hills Energy gas customer’s retail bill will be impacted by the rate increase. The remaining 65% of a typical monthly gas utility bill is tied to the wholesale cost of natural gas and those costs are passed through with the utility not earning any profits from the fuel costs.
The proposed rate increase as filed would result in slightly different impacts for residential (added $2.26) and commercial ($3.65) customers’ monthly bills.
“The actual change in a customer’s total bill will vary based on how much natural gas is used and the price of the gas,” the spokesperson said.
As part of the rate filing, for the future Black Hills is proposing that a “system integrity rider” be created to allow the utility to recover a portion of the costs of capital to replace aging pipe to ensure safety and reliability, including depreciation on the investments made, thereby avoiding the need for a full rate case proceeding to recover these infrastructure investments. The utility spokesperson said the rider would be like similar ones used in other states, helping reduce the delay in the utility recovering its money, but still subjecting the expenditures to the review of the state regulatory commission.
Black Hills is reinvesting in Iowa’s mostly rural communities, said the Black Hills utility’s Tracy Peterson, vice president for gas operations. “[We] offer many programs and services to help customers manage their natural gas bills and control energy use.”
Noting that the company does all it can to keep down its operating and maintenance costs, Peterson said it is nonetheless “important that we make system upgrades and implement new technology so our natural gas distribution systems continue to deliver the energy our communities depend on.”
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