Consumer advocate opposes 'investment tracker' on Black Hills natural gas bills

It would raise a typical residential customer’s bill by an average of 39 cents per month

Dave DeWitte
Published: August 9 2012 | 12:47 pm - Updated: 31 March 2014 | 10:51 pm in
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The state’s consumer advocate has given a cold reception to Black Hills Energy’s proposal to add a new item on customers’ monthly bills to accelerate recovery of capital spending.

The utility filed an application Aug. 1 to implement a new investment tracker on bills. It would raise a typical residential customer’s bill by an average of 39 cents per month, and a typical commercial customer’s bill by $1.16 per month.

Trackers of various kinds are used on utility bills. They include a transmission rider recently added to Alliant Energy bills, and riders on many electric bills to recover changes in the cost of fuel for power generation.

Black Hills would use the tracker to recover expenditures to keep its natural gas system in good shape and compliant with government regulations. Utilities are allowed to ask for such trackers under state regulations enacted last year permitting “system safety maintenance adjustments,” Black Hills Energy spokesman Curt Floerchinger said.

The track would initially recover $8.5 million Black Hills Energy spent on the system since May 2010, Floerchinger said. General service customers would chip in the most under the tracker, providing $835,554 more in annual revenue. Residential customers would pay $621,285 more, and commercial/industrial customers would pay $214,270 more.

A division of the Iowa Attorney General’s Office is charged with representing consumer interests in rate cases. In an objection filed Tuesday, the Office of Consumer Advocate said Black Hills Energy did not file a written notice to all customers of the rate increase as required by Iowa law. It said the board should reject the filing even at this early stage in the case under a previous Iowa Supreme Court ruling.

The consumer advocate also said it appears that Black Hills has already fully recovered both the investment it made on new infrastructure during 2010 and 2011, and received a return on that investment. The company’s operating revenues exceeded operating expenses by nearly $14 million during 2010, the consumer advocate said, indicating the company had fully recovered all the expenses it booked that year.

Floerchinger said Black Hills will respond to the consumer advocate filing within the next two weeks.

“We’re confident that specific to this filing we’ve complied with all the rules and regulations and requirements,” Floerchinger said.

Adding the tracker will help consumers, Floerchinger argued, by reducing the size of rate increases by having them occur on a more regular basis. They are allowed once a year, he said.

In addition, Floerchinger said the rate tracker process reduces the administrative costs of a rate increase hearing before the Iowa Utilities Board, which are ultimately paid by consumers.

The consumer advocate’s office also argued that Black Hills’ request to recover all the infrastructure costs from residential and general service customers only is inconsistent with previous studies of the cost of serving various customer classes.

Floerchinger said Black Hills plans to implement the tracker in October if it is approved, and doesn’t mind addressing the consumer advocate’s points.

Based in Rapid City, S.D., Black Hills Energy serves 759,000 customers in seven states, including Iowa. They include customers in Dubuque, Decorah, Delhi, Manchester and other Eastern Iowa cities.

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