Black Hills Energy proposes natural gas rate hike

06/18/2014 8:42 AM

08/06/2014 12:13 PM

A proposed natural gas rate increase by Black Hills Energy is shaping up as a fight over two issues: the amount of the basic service charge on customers’ bills and the amount of return the company gets for its stockholders.

Black Hills is requesting an overall increase in its rates of about 6.7 percent, $4.17 a month for the average customer, according to a public notice by the Kansas Corporation Commission, the state agency that will decide the rate case.

The case is scheduled to go to a public hearing July 10 where residents from across Kansas will have a chance to give their thoughts on how much and how they’ll be charged for gas service.

The hearing will take place live at the Robert J. Dole Center for politics at the University of Kansas with two-way videoconference links to allow for testimony from Wichita, Garden City and Goodland.

South Dakota-based Black Hills has 110,000 customers in Kansas, about one third of them in the Wichita area.

As in all gas rate cases, the commission’s decision will only affect the amount the company can collect to operate the gas system. The cost of the gas itself is passed straight through to customers and based on market rates.

The biggest shift from the customers’ viewpoint could come in the recurring basic service charge on gas bills.

Black Hills proposes to raise that charge from $16 a month to $21.70 a month for residential customers. The company is proposing a slight decrease in the component of its rates that is based on the amount of gas a customer uses.

Gabe Schlickau, a program manager with Black Hills, said a higher basic service charge and lower volumetric rate will have the benefit of flattening customers bills between the high-usage winter months and low-usage summer months.

Four years ago, when the company proposed a charge to fund energy-efficiency programs, one customer at the public hearing showed he was paying a $16 a month delivery charge for about $12 worth of gas.

Schlickau said that makes sense because the cost of providing that customer service “is the same whether he uses $12 of gas or $20.”

The Citizens Utility Ratepayer Board, the state agency that represents residential and small-business utility consumers, disagrees. CURB is arguing that high per-month basic charges and low volumetric rates discourage conservation, said David Springe, chief consumer counsel.

“Our annual usage has been falling for 25 years,” Springe said. “We did all those things they said we should do (in terms of conserving energy) so now the rates are going up.”

Under the scenario proposed by Black Hills, “They get their money just because you’re a customer and they don’t really care what you use,” Springe said.

Another major area of contention is the rate of return that Black Hills is seeking for its shareholders, 10.6 percent.

Springe said that in a similar case involving Atmos Energy, a gas company in the Kansas City area, CURB is fighting to set the company’s shareholder return at 8.5 percent and the KCC staff has recommended 9 percent. Atmos is proposing 10.53 percent.

Springe said he expects the Atmos case to establish some parameters of what the commission, with two recently appointed members, will do in the Black Hills case and in the future with other utilities.

Schlickau said the company thinks its request is justified. He said company analysts have identified 10.6 percent as an adequate rate to attract ongoing investment in the gas company.

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