CHEYENNE – Customers of Black Hills Energy may see some changes on their bills in coming months.
An application to reduce energy rates to account for the federal Tax Cuts and Jobs Act of 2017 (TCJA) is set for a June 18 hearing before the Wyoming Public Service Commission. The utility also has applied for a reorganization to consolidate its gas operations throughout the state, and proposals for new projects, including a $57 million wind farm, have been filed.
Tax Cuts and Jobs Act
Utilities nationwide have implemented price reductions as a result of the tax cuts, and Black Hills Energy customers await the final result as the proposal makes its way through the regulatory process.
“Black Hills Energy looks forward to providing our customers the benefits of the federal corporate tax rate reduction from 35 percent to 21 percent,” Laurie Farkas, Black Hills Energy community affairs manager, said in an email.
The company estimated that customers across the eight states it serves could save about $35 million to $40 million annually as a result of the lower tax rate. The June 18 hearing will address the reduction for Cheyenne Light Fuel and Power customers, amounting to about $5.5 million, according to documents filed with the Wyoming Public Service Commission. Reductions for other Black Hills Energy businesses in the region will be handled in separate regulatory cases.
What the reduction will look like on customer bills is unknown.
“Because it’s just one little component of what makes up the whole rate, the decrease is much smaller than what you might anticipate,” said John Burbridge, a Public Service Commission attorney. “I don’t think it’s more than a buck or two. It’s kind of disappointing when you see it, but it is something.”
Bryce Freeman, administrator of the Office of Consumer Advocate, said his office plans to file testimony in the case on Monday.
He estimated that the reduction could amount to $2 or $3 a month on the average bill. Customers also can expect a larger one-time credit – around $40 to $70 on the average bill – for the amount accrued since the tax changes went into effect. That money has been accounted for as deferred regulatory liabilities, which the Public Service Commission established after the TCJA passed.
“At the end of the day, we think we’ve done a good job to make the customers as whole as we can,” Burbridge said.
Once approved, the reductions related to the TCJA will appear as a rider on bills until rates are reset. Cheyenne Light’s last base rate change for both gas and electric services was in October 2014. Farkas said the next rate hearings are expected in June for all of the company’s gas utilities in Wyoming and no later than June 2021 for Cheyenne Electric.
Since 2014, rates have been fairly stable, with periodic adjustments to reflect such factors as changes in the cost of natural gas and wholesale power purchases, Freeman said. Those changes follow a formulaic process, and the Office of Consumer Advocate doesn’t typically intervene unless it sees something out of the ordinary that might unfairly affect ratepayers.
Reorganization of gas business
The application to reorganize the company’s gas businesses that is currently pending wouldn’t affect customers, but it could pave the way for future changes that have the potential to affect rates.
“There is no rate impact as a result of that filing, so there was no need for us to be involved, really,” Freeman said. “If anything, it will be more administratively simple to operate the companies under that reorganization. We didn’t oppose it, so we just didn’t intervene.”
Filed on March 6, the joint application calls for the creation of a public utility called Black Hills Wyoming Gas LLC into which the company will combine the gas businesses of Cheyenne Light, Black Hills Northwest Wyoming Gas Utility Company LLC (NWWY), a division of Cheyenne Light identified as NEWY that operates as Black Hills Energy, Black Hills Northwest Wyoming Gas Utility Company LLC (NWWY) and Black Hills Gas Distribution LLC (BHGD).
“The consolidation of the four natural gas systems into one should ultimately improve overall administrative efficiency by reducing the number of utility-specific filings that will have to be prepared and filed with the commission, such as annual reports and other generally applicable filings,” Farkas said in an email. “This will also allow for future simplification for our customers.
“For example, Cheyenne Light, NEWY, NWWY and BHGD have five separate base rate and six gas cost rates, all of which were established historically based on legacy utility and geographical considerations. We hope to simplify this by combining the gas utility’s rate structure.”
Farkas expects that customers will continue to receive one bill for gas and electric services.
The application also calls for BH Wyoming Gas to assume a portion of $202 million debt currently held by Cheyenne Light.
“This debt was issued to support all of the gas and electric assets to serve the customers of Cheyenne Light,” Farkas said.
While the Office of Consumer Advocate isn’t intervening in the current application, Freeman said he expects to see a filing in coming months to more fully integrate the multiple companies, which have come to Black Hills Energy through a series of acquisitions in 2015 and 2016.
“We’ll be interested in seeing how they plan on harmonizing the rate classes because not all of the companies have the exact same rate classes,” Freeman said. “It’s gonna be a lot of work, and it’s gonna require some study and some thinking to make sure that we’re fair to everybody.”
The four gas companies have widely varying rates, with the average bills throughout the state ranging from about $35 to $100. The statewide median bill is $62.48, the mean is $67.80 and Cheyenne’s average bill is $61.76.
On the horizon
Freeman also is keeping an eye on how the company’s proposed projects might affect rates, including a proposal filed in December for a $57 million, 40-megawatt wind farm west of Cheyenne known as the Corriedale Wind Energy Project.
The proposal would offer commercial customers local utility-scale renewable energy resources through a subscription program, and is planned to be in service by Sept. 30, 2020. But the project is risky, and Freeman is skeptical, saying it relies on “heroic assumptions.”
“To the extent that it’s not fully subscribed by these larger customers … then the cost of the rest of it would have to be picked up by everybody else,” Freeman said.
A hearing on that proposal is set for July 2.
Another project on the horizon is a proposed substation and transmission line project referred to as the “West Cheyenne Project,” which includes a 115 kV switching substation and two 115 kV double-circuit transmission lines. It will allow for interconnection with new power generation resources.
The application for that project was filed in February, and the estimated cost is $8.7 million to be financed internally. The company has seen seven requests for transmission interconnectedness since 2016 by generating facilities as interest in wind generation has increased, according to the application. Construction could begin in July and be completed by July 2020.
The Office of Consumer Advocate hasn’t intervened in that case.
“We just work these cases as they come in, and we try to make sure that it’s fair and customers are getting good quality service for the money they pay,” Freeman said.
