Black Hills Corp.
BKH
recently announced that its Arkansas natural gas utility, Black Hills Energy Arkansas, Inc., operating as Black Hills Energy, has filed a rate revision application with the Arkansas Public Service Commission requesting $21.6 million in new annual revenues. This rate review comes after four years of the last general rate filing. The new rates, if approved, will become effective fourth-quarter 2022.
Black Hills Energy has invested more than $220 million since 2017 to enhance safety, system integrity and reliability for more than 7,200 miles of natural gas pipeline infrastructure in Arkansas. This investment ensured the safe delivery of natural gas to its customers in Arkansas, even during the extremely cold conditions last February.
Investment Needed in Aging Pipelines
The existing U.S. natural gas distribution pipelines are aging. Leakage or breakage in these old cast iron and bare steel pipelines may disrupt services. At present, utilities provide services to more than 75 million residential and 5 million commercial gas customers in the United States. Per a report from Business Roundtable, replacing the old pipelines will cost around $270 billion.
To reduce interruption in services, the Department of Energy announced $33 million funding for 10 projects involved in natural gas pipeline retrofitting to rehabilitate existing old cast iron and bare steel pipes.
Rate Revision Ensures Better Services
Given the aforesaid scenario, it is essential for the investor-owned utilities to make systematic capital investments to upgrade and maintain natural gas infrastructure and recoup the investment through rate revision application.
Last month,
CenterPoint Energy
CNP
requested a $67 million natural gas rate hike to Minnesota Public Utilities Commission. If approved, the rate revision will increase natural gas customers’ bill by $4.05 a month.
Xcel Energy
XEL
, which has 480,000 gas customers in Minnesota, filed for a rate increase of $35.6 million. Approval from the commission would increase the typical Xcel Energy’s residential customers’ bill by $5.12 per month.
The approval from the commission will allow CenterPoint and Xcel Energy to continue with their natural gas pipeline upgrades and infrastructure improvements. Both these companies have significant capital expenditure plans to upgrade and maintain their infrastructure. CenterPoint will invest $18 billion for the 2021-2025 period and plans to invest $40 billion for 10 years. Xcel Energy has plans to invest $26 billion during the 2022-2026 time frame to strengthen its existing operation.
Price Performance
Year to date, BKH’s shares have gained 11.4% compared with its
industry
’s rally of 5.5%.
Image Source: Zacks Investment Research
Zacks Rank & A Key Pick
Black Hills currently has a Zacks Rank#3 (Hold). A better-ranked stock in the same industry is
Dominion Energy
D
, currently carrying a Zacks Rank#2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Dominion’s long-term earnings (three to five) growth is currently pegged at 6.76%. Dominion reported a positive surprise of 2.39%, on average, in the past four reported quarters. The Zacks Consensus Estimate for 2021 earnings has been raised by 0.5% in the past 60 days to $3.89 per share.
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