PUC upholds most elements of Black Hills rate decision, sets capital structure, WACC and clarifies multiple implementation items
Loading...
Summary
After considering rehearing requests and clarifications in the Black Hills Electric rate case, the Commission reaffirmed its core rulings but adjusted technical details: common equity at about 47–49%, long‑term debt at 4.61%, and an updated WACC of 6.91% while resolving multiple amortization, expense and tracker issues.
The Commission on April 23 considered multiple rehearing and clarification requests in the Black Hills Electric rate case and largely reaffirmed its prior decision while making several specific clarifications.
Advisory staff and witnesses led a detailed review of capital structure, return on equity (ROE), cost of debt, amortization periods, and other ratemaking adjustments. The Commission reiterated that capital should be evaluated with reference to the holding company’s capital formation while adjusting for unregulated subsidiaries; Commissioners concluded a common equity ratio in the 47–49% range remains appropriate on this record.
On the cost of long‑term debt, Commissioners accepted staff’s proposal to report the rate to two decimal places and set the cost of debt at 4.61%. Adjusting for that change raised the allowed weighted average cost of capital (WACC) slightly to 6.91%.
The Commission resolved multiple rehearing topics as follows: it denied the Office of the Utility Consumer Advocate’s request to reject the overall rate increase on affordability grounds; it declined to reverse its determination rolling LM‑6000 cost recovery into base rates while preserving a process (GRSA) if the company prefers that option; it granted Black Hills’ request on one narrow matter (corrections to prior litigation expense calculations); it changed the amortization of authorized rate case expense recovery from three to four years; it denied inclusion of production meters in cost of service (upholding the disallowance); it denied recovery of long‑term incentive plan (LTIP) expenses but allowed severance expense of $89,899 to remain in the cost of service; it denied Black Hills’ requested trackers for insurance and greenhouse gas fees; and it affirmed use of inclining block rates (denying Black Hills’ request to switch to default flat rates).
Advisory staff and company witnesses also discussed pension and retiree medical balances. After review, the Commission authorized inclusion of the company’s prepaid pension and retiree medical actuarial net assets in rate base, finding the amounts reflected timing differences under IRS and GAAP rules and noting the inclusion did not change the revenue requirement as calculated in the prior decision.
The Commission corrected several typographical and numeric items in the decision (litigation expense line items and paragraph clarifications), confirmed exclusion of travel expenses from the revenue requirement study, and directed staff and Black Hills to develop a data‑retention tariff proposal for a future filing rather than imposing a 10‑year tariff requirement now.
Commission leadership said the changes collectively balanced the Commission’s responsibilities to ensure just and reasonable rates, to recognize company financing realities, and to account for customer affordability concerns in a service territory with above‑average economic distress. Commissioners agreed to issue a TBC (to be circulated) order consistent with these outcomes and to finalize details before the statutory deadline.
