Black Hills Stock

Black Hills Corporation, together with its subsidiaries, operates as a customer-focused, growth-oriented utility company.

Segments

The company operates its business in the United States, reporting its operating results through the company’s Electric Utilities and Gas Utilities segments.

The company’s Electric Utilities segment generates, transmits and distributes electricity to approximately 222,000 electric utility customers in Colorado, Montana, South Dakota and Wyoming. The company’s Electric Utilities own 1,394 MW of generation and 9,106 miles of electric transmission and distribution lines.

The company’s Gas Utilities segment serves approximately 1,116,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming. The company’s Gas Utilities own and operate 4,663 miles of intrastate gas transmission pipelines and 42,514 miles of gas distribution mains and service lines, seven natural gas storage sites, more than 50,000 horsepower of compression and 516 miles of gathering lines.

Electric Utilities

The company conducts electric utility operations through its Colorado, South Dakota and Wyoming subsidiaries. The company’s Electric Utilities generate, transmit and distribute electricity to the company’s retail customers. The company’s electric generating facilities and power purchase agreements provide for the supply of electricity principally to the company’s retail customers. The company also sells excess power to other utilities and marketing companies, including its affiliates. Additionally, the company provides non-regulated services to its retail customers under the Service Guard Comfort Plan and Tech Services.

The company also owns and operates non-regulated power generation and mining assets that are vertically integrated into and primarily support the company’s Electric Utilities. All of these operations are located at the company’s electric generating complexes and are physically integrated into its Electric Utilities’ operations.

Purchased Power: The company has executed various PPAs to support its Electric Utilities’ capacity and energy needs beyond the company’s regulated power plants’ generation, which include long-term related party agreements with the company’s non-regulated power generation businesses.

Coal Mining: The company owns and operates a single coal mine through its WRDC subsidiary, which is reported within the company’s Electric Utilities segment. The company surface mines, processes and sells low-sulfur sub-bituminous coal at its mine located immediately adjacent to the company’s Gillette Energy Complex in the Powder River Basin in northeastern Wyoming, where the company’s five coal-fired power plants are located. The company produced approximately 3.7 million tons of coal in 2023.

Nearly all of the mine’s production is sold to the company’s on-site generation facilities under long-term supply contracts.

Transmission and Distribution: Through the company’s Electric Utilities, the company owns electric transmission and distribution systems composed of high voltage lines (greater than 69 kV) and low voltage lines (69 kV or less). The company also jointly operates an electric transmission system, referred to as the Common Use System, with Basin Electric Power Cooperative and Powder River Energy Corporation. Each participant in the Common Use System individually owns assets that are operated together for a single system. The Common Use System also provides transmission service to the company’s Transmission Tie. South Dakota Electric owns 35% of the Transmission Tie.

Strategy

The company’s mining business strategy is to sell nearly all of its production to on-site generation facilities under long-term supply contracts.

Gas Utilities

The company conducts natural gas utility operations through its Arkansas, Colorado, Iowa, Kansas, Nebraska and Wyoming subsidiaries. The company’s Gas Utilities transport and distribute natural gas through the company’s distribution network to its retail customers. Additionally, the company sells contractual pipeline capacity and gas commodities to other utilities and marketing companies, including the company’s affiliates, on an as-available basis.

The company also provides non-regulated services to its regulated customers. Black Hills Energy Services provides natural gas supply to approximately 53,000 retail distribution customers under the Choice Gas Program in Nebraska and Wyoming. Additionally, the company provides services under the Service Guard Comfort Plan, Tech Services and HomeServe.

The company procures natural gas for its distribution customers from a diverse mix of producers, processors and marketers. The majority of the company’s procured natural gas is transported in interstate pipelines under firm transportation service agreements.

In addition to company-owned regulated underground natural gas storage assets in Arkansas, Colorado and Wyoming, the company contracts with third-party transportation providers for natural gas storage service to provide gas supply during the winter heating season and to meet peak day customer demand for natural gas.

Utility Regulation Characteristics

The company’s Utilities are subject to regulation by a number of federal, state and other organizations, including but not limited to, the following:

State public utility commissions, which have jurisdiction over services and facilities, rates and charges, accounting, valuation of property, depreciation rates and various other matters;

The FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce, proposals to build and operate interstate natural gas pipelines and storage facilities, and wholesale purchases and sales of electric energy, among other things;

The NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts;

The EPA, which has the responsibility to maintain and enforce national standards under a variety of environmental laws, in some cases delegating authority to state agencies. The EPA also works with industries and all levels of government, including federal and state governments, in a wide variety of voluntary pollution prevention programs and energy conservation efforts;

The TSA, which regulates certain activities related to the safety and security of natural gas pipelines. In May and July 2021, the TSA issued security directives that included several new cybersecurity requirements for critical pipeline owners and operators; and

The PHMSA, which is responsible for administering the federal regulatory program to help ensure the safe transportation of natural gas, petroleum and other hazardous materials by pipelines, including pipelines associated with natural gas storage, and develops regulations and other approaches to risk management to help ensure safety in design, construction, testing, operation, maintenance and emergency response of pipeline facilities.

Rates and Regulation

The company’s Utilities are subject to the jurisdiction of the public utility commissions in the states where they operate and the FERC for certain assets and transactions.

The company’s electric utility subsidiaries provide FERC-jurisdictional services subject to FERC’s oversight.

The company’s Electric Utilities entities are authorized by FERC to make wholesale sales of electric capacity and energy at market-based rates under tariffs on file with FERC. As a condition of their market-based rate authority, Electric Quarterly Reports are filed with FERC. The company’s Electric Utilities own and operate FERC-jurisdictional interstate transmission facilities and provide open access transmission service under tariffs on file with FERC. The company’s Electric Utilities are subject to routine audit by FERC with respect to their compliance with FERC’s regulations.

PUHCA 2005 provides FERC authority with respect to the books and records of a utility holding company. As a utility holding company whose assets consist primarily of investments in the company’s subsidiaries, including subsidiaries that are public utilities and also a centralized service company subsidiary, BHSC, the company is subject to FERC’s authority under PUHCA 2005.

Through its subsidiaries, Black Hills Corporation is affiliated with two EWGs, Wygen I and Pueblo Airport Generation (facilities #4-5).

Gas Pipeline and Storage Integrity and Safety

The company is subject to regulation by PHMSA, which requires the following for certain gas distribution and transmission pipelines and underground storage facilities: inspection and maintenance plans; integrity management programs, including the determination of pipeline integrity risks and periodic assessments on certain pipeline segments; an operator qualification program, which includes certain trainings; a public awareness program that provides certain information; and a control room management plan.

History

Black Hills Corporation was founded in 1941. The company was incorporated in South Dakota in 1941.