- Black Hills Corp. has asked regulators in five states to allow its utility subsidiaries to make ratepayer-financed investments in natural gas resources, including reserves and drilling operations,Argus reports.
- Investments in gas production are designed to give stable prices over the long term,which the company says would be lower than current market prices.
- Black Hills proposal mirrors plans put forth by a growing number of utilities looking to shore up gas supply by investing in pipelines or reserves, but the impact on customers remains unclear.
South Dakota-based utilityBlack Hills has joined a growing list of utilities such as Florida Power amp; Light,Duke Energy, Entergy and Dominion looking to maintain low gas prices by investing in reserves rather than turning to the spot market. The company has asked regulators inIowa, Kansas, Nebraska, South Dakota and Wyoming for authority to purchase reserves or drill wells, with customers paying for the investments.
Our goal is to provide cost-effective energy for our customers, while mitigating the volatility of natural gas prices, said Black Hillspresident and COO of utilitiesLinn Evans in a statement.The Cost of Service Gas Program will be a long-term mechanism to support lower and more stable natural gas prices for our customers by leveraging our natural gas exploration and production expertise.
Evans also said the program would provide Black Hillsinvestors with new earnings growth opportunities.If approved, the company will acquire gas reserves and/or drill wells to produce natural gas for the program, which it expects will cost less than acquiring gas on the open market.
As gas prices have remained low, utilities have looked to gas investments in order to maintain a long-term and inexpensive supply. But the jury is still out on how those investments will hold up, as the price ofnatural gas has shown little sign of increasing.
Florida Power amp; Light was among the first states to convince regulators to approve the investments, and last year got authorization to pursue gas fields in Oklahoma. But so far, that plan has been losing money for the utility. In the first half of the year, the utility told theFlorida Public Service Commission, it lost almost $6 million and anticipated savings across the next decade had been cut about inhalf.Recommended Reading
Argus: Black Hills seeks OK to invest in gas reserves