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Black Hills Arm's (BKH) Rate Review Plea to Recoup Investment

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Black Hills Corporation’s (BKH - Free Report) Colorado natural gas utility Black Hills Colorado Gas, Inc. filed a rate review application with the Colorado Public Utilities Commission on Sep 11. The unit operating as Black Hills Energy made a request to add $13.5 million to new annual revenues for the recovery of investments that the utility made in its natural-gas infrastructure. If approved by the commission, the utility anticipates to implement new rates in the second quarter of 2021.

In a separate filing, as required by the Colorado commission, the company proposed a five-year system safety and integrity rider to retrieve the investment cost of its natural gas system, which it incurred to provide safe and reliable energy to its customers.

Per the rate review, capital structure is expected to be 50% equity and 50% debt with the return on equity for investments that Colorado Gas made in its natural gas system being 9.95%.

Need for Investment

The 7,000 mile long natural gas transmission and distribution pipeline in Colorado acts as the critical infrastructure by meeting the needs of its 192,000 Colorado customers. Also, the unit has plans to invest more than $105 million during the July 2018-2020 end period in the replacement, upgrade and expansion of the natural gas system in the state.The investments made to replace aging infrastructure and meet the requirements of state and federal regulations helped the utility to provide safe and reliable electricity.

The company is focused on extending its natural gas and electric utility infrastructure and is also planning to invest at least $2.7 billion in the 2020-2024 time period to strengthen its operations for efficiently serving its customers. In addition, the company’s geographic and utility type diversity provide a wider array of opportunities to aid its performance.

Zacks Rank & Price Performance

Black Hills currently has a Zacks Rank #3 (Hold).

The company’s shares have lost 28.4% in the past year compared with the industry’s decline of 10%.

Stocks to Consider

A few better-ranked electric utilities are Energias de Portugal (EDPFY - Free Report) , MGE Energy Inc. (MGEE - Free Report) and Otter Tail Corporation (OTTR - Free Report) , all carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Energias de Portugal has a long-term (three-five years) earnings growth rate of 4.9%. The Zacks Consensus Estimate for 2020 earnings has been revised 1.4% upward in the past 60 days.

MGE Energy has a long-term earnings growth rate of 4.38%. The Zacks Consensus Estimate for 2020 earnings has moved 5.2% north in the past 60 days.

Otter Tail Corporation delivered an earnings surprise of 3.92%, on average, in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has been revised 4.7% upward in the past 60 days.

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