Black Hills Corp.‘s (BKH - Free Report) natural gas utility subsidiary filed a rate review request to consolidate the tariffs, rates as well as terms and conditions of its four natural gas utilities to the Wyoming Public Service Commission (WPSC).
The application also includes $16.1millionrevenues increase, with an objective to recover the amount invested in 2018 and for the planned investments for 2019. The expenditures will include the Natural Bridge pipeline project. Notably, the company received an approval for theNatural Bridge pipeline projectin Nov 2018 to construct 35-mile natural gas pipeline that isexpected to be online in late 2019.
Long-term Investments in Utility Sector
Utility operation is capital intensive business as huge amount of fund is required to set up new plants, lay transmission and distribution lines as well as to upgrade and maintain their existing infrastructure. So, the utilities generally chalk long-term capital investment plans to strengthen existing operations and provide improved services to customers.
Black Hills is undertaking continuous investments to provide uninterrupted utility services. The company is spending toward expansion and maintenance of existing assets. The company has already invested $132 million in the first three months of 2019 and plans to spend nearly $2.8 billion over 2019-2023 period.
Other utilities are also planning to invest on a long-term basis.NextEra Energy (NEE - Free Report) has well-chalked plans to invest nearly $39.5 billion in different projects over the 2019-2023 period.NiSource (NI - Free Report) plans to make capital investment of nearly $1.6-$1.7 billion in 2019 and $1.6-$2 billion annually over the 2020-2022 time period.Dominion Energy (D - Free Report) plans to invest $26 billion in the 2019-2023 time period to strengthen its existing infrastructure.
Rising Demand for Natural Gas
Black Hills’ Gas Utilities distribute and transport natural gas through pipeline network to approximately 1,054,000 customers. The company’s planned investment reflects 58.5% investment toward Gas Utilities.
Per U.S. Energy Information Administration’s (EIA) dry natural gas production will average 90.3 billion cubic feet per day (Bcf/d) in 2019, up 6.9 Bcf/d from 2018. EIA expects natural gas production will continue to grow in 2020 to an average of 92.2 Bcf/d. The company believes that the rate review, if approved, will improve safety, reliability and service quality. The application will also reduce the complexity and number of rate reviews as well as other regulatory filings.
Zacks Rank & Price Performance
Black Hills carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 12 months, shares of Black Hills have rallied 39.2% compared with the industry’s growth of 20.8%.
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