Black Hills Energy Receives Approval From the Colorado PUC to Implement New Electric Service Rates

Black Hills Corp.

utility subsidiary Black Hills Energy – Colorado Electric today announced that the Colorado Public Utilities Commission issued an order approving a base rate increase resulting in a $10.49 million, or 4.91 percent, increase in annual utility revenues with remaining costs, which have yet to be incurred, being recouped through Black Hills Energy's normal Energy Cost Adjustment and Transmission Cost Adjustment filings. The Commission authorized a range of 9.8 percent to 10.2 percent for a reasonable return on equity and a capital structure of 49.1 percent equity with new rates effective for service on and after Jan. 1, 2012. "This rate decision ensures appropriate cost recovery for the new Pueblo Airport Generation Station and its associated transmission investments which are needed to provide our customers with long-term rate stability, a secure energy supply, a base from which to integrate a growing renewable resource portfolio, and a hedge against the impact of uncertain future carbon legislation. It is important to remember that the circumstances calling for the construction of these assets—a utility facing the loss of three-quarters of the energy needed to supply its customers with electricity over a very short period of time—were unprecedented in the history of Colorado utility regulation," said Christopher Burke, vice president of Colorado utility operations – Black Hills Energy. Black Hills Energy's original rate request, for a $40.2 million, or 18.84 percent, increase in electric utility revenues was filed on April 28, 2011. Over the course of the normal stakeholder participation process associated with rate proceedings, Black Hills Energy filed rebuttal testimony Oct. 14, 2011. The rebuttal testimony proposed an alternative cost recovery approach, enabling the utility to mitigate some of the immediate bill impact for its customers and phase in the recovery of other expenses through normal rate adjustment mechanisms as they are incurred in 2012. Specifically, Black Hills Energy's rebuttal testimony requested an increase of $18.3 million in base rates, with approximately $17.5 million of additional annualized costs to be recovered in 2012 through the company's rate adjustment mechanisms. With the Commission-approved base rate increase, the company expects to recover nearly three-quarters of the $40.2 million revenue increase originally requested.