LAWRENCE, Kansas – Black Hills Energy on Tuesday received Kansas Corporation Commission approval of an agreement that allows the utility to increase rates for serving the company’s approximately 111,000 natural gas customers in Kansas beginning January 1, 2015. The approved agreement was endorsed by the utility, the KCC staff and the Citizens’ Utility Ratepayer Board.
The average increase for a typical residential customer will be about $2.62 per month; for a typical small-commercial customer, the average is about $6.46 per month.
The 4.8 percent residential rate increase is significantly lower than the rate of inflation since 2006, when the utility last requested a new rate structure. The typical Black Hills Energy residential customer will continue to receive an entire day of natural gas energy for less than the price of a loaf of bread.
“We are committed to providing safe, reliable service at a good value,” said Todd Jacobs, general manager for Black Hills Energy’s Kansas natural gas utility. “We maintain that value by controlling costs, making responsible investments and providing the energy solutions to help our customers manage their bill and get help when they need it.”
With new rates, the fixed customer charge moves to $17.25 a month from $16 a month, and the volumetric rate moves to $0.17 from $0.15 per therm. The total increase equals approximately 9 cents per day for residential customers and 21 cents per day for commercial customers. The increase for commercial, industrial and irrigation customers varies by rate class and is based on costs of service, usage patterns and other factors.
Black Hills Energy requested new rates in order to earn a return on the company’s $51 million investment in infrastructure replacements, improvements and line extensions, and to recover other infrastructure investments and increased operating costs since the utility’s previous rate case. Since 2006, for example, Black Hills has installed or replaced 13,000 service lines and 226 miles of pipeline in Kansas.
Black Hills Energy and all other public utilities are not guaranteed a set rate of return. While the agreement will increase the company’s base revenues by approximately $5.2 million a year, nearly $4.5 million of that increase already was factored into customer bills over the past six years through incremental annual increases in the Gas System Reliability Surcharge (GSRS) and the Ad Valorem Tax Surcharge (AVTS).
The GSRS allows investor-owned natural gas utilities in Kansas to recover qualifying costs and earn a return on investments made since the utility’s last rate case. Eligible costs include those for maintaining a safe, reliable natural gas system and costs for relocating lines due to road projects. The AVTS allows utilities to recover the incremental growth in property taxes paid since the last rate case. For Black Hills, that occurred June 30, 2006.
Jacobs encouraged Black Hills customers to visit www.blackhillsenergy.com for a list of Black Hills Energy’s free, convenient billing and payment options, energy efficiency tips for lower energy bills, and contact information for local energy assistance agencies.