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BLACK HILLS CORP /SD/

BLACK HILLS CORP /SD/BKHEarnings & Financial Report

NYSE · energy industry

Black Hills Corporation is an American diversified energy company that is an electric and gas utility in South Dakota, Montana, Wyoming, Colorado, Arkansas, Kansas, Nebraska, and Iowa. The company sells power throughout the American West. The company is based in Rapid City, South Dakota. It derives its name from its home in the Black Hills of South Dakota.

What changed in BLACK HILLS CORP /SD/'s 10-K — 2022 vs 2023

Top changes in BLACK HILLS CORP /SD/'s 2023 10-K

269 paragraphs added · 285 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

53 edited+9 added−14 removed37 unchanged
FERC also places certain limitations on transactions between public utilities and their affiliates. Our public Electric Utility subsidiaries provide FERC-jurisdictional services subject to FERC’s oversight. Our Electric Utilities entities are authorized by FERC to make wholesale sales of electric capacity and energy at market-based rates under tariffs on file with FERC.
FERC also places certain limitations on transactions between public utilities and their affiliates. Our electric utility subsidiaries provide FERC-jurisdictional services subject to FERC’s oversight. Our Electric Utilities entities are authorized by FERC to make wholesale sales of electric capacity and energy at market-based rates under tariffs on file with FERC.
See a summary of key operating statistics in the Gas Utilities segment operating results within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K. 15 Table of Contents Utility Regulation Characteristics Our Utilities are subject to regulation by a number of federal, state and other organizations, including, but not limited to, the following: • State public utility commissions, which have jurisdiction over services and facilities, rates and charges, accounting, valuation of property, depreciation rates and various other matters; • the FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce, proposals to build and operate interstate natural gas pipelines and storage facilities, and wholesale purchases and sales of electric energy, among other things; • the NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts; • the EPA, which has the responsibility to maintain and enforce national standards under a variety of environmental laws, in some cases delegating authority to state agencies.
See a summary of key operating statistics in the Gas Utilities segment operating results within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K. 16 Table of Contents Utility Regulation Characteristics Our Utilities are subject to regulation by a number of federal, state and other organizations, including, but not limited to, the following: • State public utility commissions, which have jurisdiction over services and facilities, rates and charges, accounting, valuation of property, depreciation rates and various other matters; • the FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce, proposals to build and operate interstate natural gas pipelines and storage facilities, and wholesale purchases and sales of electric energy, among other things; • the NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts; • the EPA, which has the responsibility to maintain and enforce national standards under a variety of environmental laws, in some cases delegating authority to state agencies.
These initiatives are aimed at increasing competition. Additionally, electrification initiatives in our service territories could negatively impact demand for natural gas and decrease growth. To date, these initiatives have not had a material impact on our utilities.
These initiatives are aimed at increasing competition. Additionally, electrification initiatives in our service territories could negatively impact demand for natural gas and decrease future growth. To date, these initiatives have not had a material impact on our utilities.
We operate our business in the United States, reporting our operating results through our Electric Utilities and Gas Utilities segments. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other. Our Electric Utilities segment generates, transmits and distributes electricity to approximately 220,000 electric utility customers in Colorado, Montana, South Dakota and Wyoming.
We operate our business in the United States, reporting our operating results through our Electric Utilities and Gas Utilities segments. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other. Our Electric Utilities segment generates, transmits and distributes electricity to approximately 222,000 electric utility customers in Colorado, Montana, South Dakota and Wyoming.
(b) The PTCs for Peak View flow back to customers through a rider mechanism as a reduction to Colorado Electric’s margins. (c) This facility qualifies for PTCs at $26/MWh under IRC 45 during the 10-year period beginning on the date the facility was originally placed in service.
(b) The PTCs for Peak View flow back to customers through a rider mechanism as a reduction to Colorado Electric’s margins. (c) This facility qualifies for PTCs at $28/MWh under IRC 45 during the 10-year period beginning on the date the facility was originally placed in service.
Demand for electricity is sensitive to seasonal cooling, heating and industrial load requirements, as well as market price. In particular, cooling demand is often greater in the summer and heating demand is often greater in the winter. 13 Table of Contents Competition. We generally have limited competition for the retail generation and distribution of electricity in our service areas.
Demand for electricity is sensitive to seasonal cooling, heating and industrial load requirements, as well as market price. In particular, cooling demand is often greater in the summer and heating demand is often greater in the winter. 14 Table of Contents Competition. We generally have limited competition for the retail generation and distribution of electricity in our service areas.
The recoverable reserve life is equal to approximately 47 years at the current production levels. Transmission and Distribution. Through our Electric Utilities, we own electric transmission and distribution systems composed of high voltage lines (greater than 69 kV) and low voltage lines (69 kV or less).
The recoverable reserve life is equal to approximately 48 years at the current production levels. Transmission and Distribution. Through our Electric Utilities, we own electric transmission and distribution systems composed of high voltage lines (greater than 69 kV) and low voltage lines (69 kV or less).
Our Gas Utilities are seasonal businesses and weather patterns may impact their operating performance. Demand for natural gas is sensitive to seasonal heating and industrial load requirements, as well as market price. In particular, demand is often greater in the winter months for heating.
Our Gas Utilities are seasonal businesses and weather patterns may impact their operating results. Demand for natural gas is sensitive to seasonal heating and industrial load requirements, as well as market price. In particular, demand is often greater in the winter months for heating.
Collective Bargaining Agreements At December 31, 2022, certain employees of our Electric Utilities and Gas Utilities were covered by the collective bargaining agreements as shown in the table below. We have not experienced any labor stoppages in decades.
Collective Bargaining Agreements At December 31, 2023, certain employees of our Electric Utilities and Gas Utilities were covered by the collective bargaining agreements as shown in the table below. We have not experienced any labor stoppages in decades.
See recent peak discussion in the Recent Developments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 in this Annual Report on Form 10-K for additional information. 11 Table of Contents As of December 31, 2022, our Electric Utilities’ ownership interests in electric generating plants were as follows: Unit Fuel Type Location Ownership Interest % (d) Owned Nameplate Capacity (MW) In Service Date Colorado Electric: Busch Ranch I (a) Wind Pueblo, Colorado 50% 14.5 2012 Peak View (b) (c) Wind Pueblo, Colorado 100% 60.8 2016 Pueblo Airport Generation #1-2 Gas Pueblo, Colorado 100% 200.0 2011 Pueblo Airport Generation CT #6 Gas Pueblo, Colorado 100% 40.0 2016 AIP Diesel Oil Pueblo, Colorado 100% 10.0 2001 Diesel #1 and #3-5 Oil Pueblo, Colorado 100% 8.0 1964 Diesel #1-5 Oil Rocky Ford, Colorado 100% 10.0 1964 South Dakota Electric: Cheyenne Prairie Gas Cheyenne, Wyoming 58% 58.0 2014 Corriedale (c) Wind Cheyenne, Wyoming 62% 32.5 2020 Wygen III Coal Gillette, Wyoming 52% 60.3 2010 Neil Simpson II Coal Gillette, Wyoming 100% 90.0 1995 Wyodak Plant Coal Gillette, Wyoming 20% 80.5 1978 Neil Simpson CT Gas Gillette, Wyoming 100% 40.0 2000 Lange CT Gas Rapid City, South Dakota 100% 40.0 2002 Ben French Diesel #1-5 Oil Rapid City, South Dakota 100% 10.0 1965 Ben French CTs #1-4 Gas/Oil Rapid City, South Dakota 100% 100.0 1977-1979 Wyoming Electric: Cheyenne Prairie Gas Cheyenne, Wyoming 42% 42.0 2014 Cheyenne Prairie CT Gas Cheyenne, Wyoming 100% 40.0 2014 Corriedale (c) Wind Cheyenne, Wyoming 38% 20.0 2020 Wygen II Coal Gillette, Wyoming 100% 95.0 2008 Integrated Generation: Wygen I Coal Gillette, Wyoming 76.5% 68.9 2003 Pueblo Airport Generation #4-5 Gas Pueblo, Colorado 50.1% (e) 200.0 2012 Busch Ranch I (a) Wind Pueblo, Colorado 50% 14.5 2012 Busch Ranch II (c) Wind Pueblo, Colorado 100% 59.4 2019 Northern Iowa Windpower (c) Wind Joice, Iowa 100% 87.1 2019 Total MW Capacity 1,481.5 ____________________ (a) In 2013, Busch Ranch I was awarded a one-time cash grant in lieu of ITCs under the Section 1603 program created under the American Recovery and Reinvestment Act.
See recent peak discussion in the Recent Developments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 in this Annual Report on Form 10-K for additional information. 12 Table of Contents As of December 31, 2023, our Electric Utilities’ ownership interests in electric generating plants were as follows: Unit Fuel Type Location Ownership Interest % (d) Owned Nameplate Capacity (MW) In Service Date Colorado Electric: Busch Ranch I (a) Wind Pueblo, Colorado 50% 14.5 2012 Peak View (b) (c) Wind Pueblo, Colorado 100% 60.8 2016 Pueblo Airport Generation #1-2 Natural Gas Pueblo, Colorado 100% 200.0 2011 Pueblo Airport Generation CT #6 Natural Gas Pueblo, Colorado 100% 40.0 2016 AIP Diesel Diesel Oil Pueblo, Colorado 100% 10.0 2001 Diesel #1 and #3-5 Diesel Oil Pueblo, Colorado 100% 8.0 1964 Diesel #1-5 Diesel Oil Rocky Ford, Colorado 100% 10.0 1964 South Dakota Electric: Cheyenne Prairie Natural Gas Cheyenne, Wyoming 58% 58.0 2014 Corriedale (c) Wind Cheyenne, Wyoming 62% 32.5 2020 Wygen III Coal Gillette, Wyoming 52% 60.3 2010 Neil Simpson II Coal Gillette, Wyoming 100% 90.0 1995 Wyodak Plant Coal Gillette, Wyoming 20% 80.5 1978 Neil Simpson CT Natural Gas Gillette, Wyoming 100% 40.0 2000 Lange CT Natural Gas Rapid City, South Dakota 100% 40.0 2002 Ben French Diesel #1-5 Diesel Oil Rapid City, South Dakota 100% 10.0 1965 Ben French CTs #1-4 Natural Gas/Diesel Oil Rapid City, South Dakota 100% 100.0 1977-1979 Wyoming Electric: Cheyenne Prairie Natural Gas Cheyenne, Wyoming 42% 42.0 2014 Cheyenne Prairie CT Natural Gas Cheyenne, Wyoming 100% 40.0 2014 Corriedale (c) Wind Cheyenne, Wyoming 38% 20.0 2020 Wygen II Coal Gillette, Wyoming 100% 95.0 2008 Integrated Generation: Wygen I Coal Gillette, Wyoming 76.5% 68.9 2003 Pueblo Airport Generation #4-5 Natural Gas Pueblo, Colorado 50.1% (e) 200.0 2012 Busch Ranch I (a) Wind Pueblo, Colorado 50% 14.5 2012 Busch Ranch II (c) Wind Pueblo, Colorado 100% 59.4 2019 Total MW Capacity 1,394.4 ____________________ (a) In 2013, Busch Ranch I was awarded a one-time cash grant in lieu of ITCs under the Section 1603 program created under the American Recovery and Reinvestment Act.
We produced approximately 3.7 million tons of coal in 2022. The mine provides low-sulfur coal directly to these five power plants via a conveyor belt system, minimizing transportation costs. The fuel can be delivered to our adjacent power plants at very cost competitive prices (i.e., $1.09 per MMBtu for year ended December 31, 2022) when compared to alternatives.
We produced approximately 3.7 million tons of coal in 2023. The mine provides low-sulfur coal directly to these five power plants via a conveyor belt system, minimizing transportation costs. The fuel can be delivered to our adjacent power plants at very cost competitive prices (i.e., $1.14 per MMBtu for year ended December 31, 2023) when compared to alternatives.
Each of these three EWGs have been granted market-based rate authority. NERC The Energy Policy Act of 2005 included provisions to create an Electric Reliability Organization, which is required to promulgate mandatory reliability standards governing the operation of the bulk power system in the U.S.
Both of these EWGs have been granted market-based rate authority. NERC The Energy Policy Act of 2005 included provisions to create an Electric Reliability Organization, which is required to promulgate mandatory reliability standards governing the operation of the bulk power system in the U.S.
Nearly all of the mine’s production is sold to our on-site generation facilities under long-term supply contracts. As of December 31, 2022, we estimated our recoverable reserves to be approximately 174 million tons, based on a life-of-mine engineering study utilizing currently available drilling data and geological information prepared by internal engineering analyses.
Nearly all of the mine’s production is sold to our on-site generation facilities under long-term supply contracts. As of December 31, 2023, we estimated our recoverable reserves to be approximately 179 million tons, based on a life-of-mine engineering study utilizing currently available drilling data and geological information prepared by internal engineering analyses.
(b) South Dakota Electric transmission line miles include 43 miles within the Common Use System. Material transmission services agreements are disclosed in Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Seasonal Variations of Business. Our Electric Utilities are seasonal businesses and weather patterns may impact their operating performance.
(b) South Dakota Electric transmission line miles include 43 miles within the Common Use System. Material transmission services agreements are included in our disclosures in Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Seasonal Variations of Business. Our Electric Utilities are seasonal businesses and weather patterns may impact their operating results.
Though EWGs are public utilities within the definition set forth in the Federal Power Act and are subject to FERC regulation of rates and charges, they are exempt from other FERC requirements. Through its subsidiaries, Black Hills Corporation is affiliated with three EWGs, Wygen I, Pueblo Airport Generation (facilities #4-5) and Northern Iowa Windpower.
Though EWGs are public utilities within the definition set forth in the Federal Power Act and are subject to FERC regulation of rates and charges, they are exempt from other FERC requirements. Through its subsidiaries, Black Hills Corporation is affiliated with two EWGs, Wygen I and Pueblo Airport Generation (facilities #4-5).
Black Hills Energy Services provides natural gas supply to approximately 52,600 retail distribution customers under the Choice Gas Program in Nebraska and Wyoming. Additionally, we provide services under the Service Guard Comfort Plan, Tech Services and HomeServe.
Black Hills Energy Services provides natural gas supply to approximately 53,000 retail distribution customers under the Choice Gas Program in Nebraska and Wyoming. Additionally, we provide services under the Service Guard Comfort Plan, Tech Services and HomeServe.
Our Gas Utilities transport and distribute natural gas through our distribution network to approximately 1,107,000 customers. Additionally, we sell contractual pipeline capacity and gas commodities to other utilities and marketing companies, including our affiliates, on an as-available basis. We also provide non-regulated services to our regulated customers.
Our Gas Utilities transport and distribute natural gas through our distribution network to our retail customers. Additionally, we sell contractual pipeline capacity and gas commodities to other utilities and marketing companies, including our affiliates, on an as-available basis. We also provide non-regulated services to our regulated customers.
These tariffs allow the utility a return on the investment. 16 Table of Contents Electric Utilities The following table provides regulatory information for each of our Electric Utilities: Subsidiary Jurisdiction Authorized Rate of Return on Equity Authorized Return on Rate Base Authorized Capital Structure Debt/Equity Authorized Rate Base (in millions) Effective Date Additional Regulatory Mechanisms Percentage of Power Marketing Profit Shared with Customers Colorado Electric (a) CO 9.37% 7.43% 48%/52% $539.6 1/2017 ECA, TCA, PCCA, EECR/DSM, RESA 90% CO 9.37% 6.02% 67%/33% $57.9 1/2017 CACJA Adjustment Rider N/A South Dakota Electric WY 9.90% 8.13% 47%/53% $46.8 10/2014 ECA 65% SD Global Settlement 7.76% Global Settlement $543.9 10/2014 ECA, TFA, EIA 70% FERC 10.80% 8.76% 43%/57% $177.8 (b) 2/2009 FERC Transmission Tariff N/A Wyoming Electric (a) (c) WY 9.75% 7.48% 48%/52% $506.4 3/2023 PCA, EECR/DSM, Rate Base Recovery on Acquisition Adjustment, TCAM N/A ____________________ (a) For both Colorado Electric and Wyoming Electric, transmission investments are recovered through retail rates rather than FERC Transmission Tariffs.
These tariffs allow the utility a return on the investment. 17 Table of Contents Electric Utilities The following table provides regulatory information for each of our Electric Utilities: Subsidiary Jurisdiction Authorized Rate of Return on Equity Authorized Return on Rate Base Authorized Capital Structure Debt/Equity Authorized Rate Base (in millions) Effective Date Additional Regulatory Mechanisms Percentage of Power Marketing Profit Shared with Customers Colorado Electric CO 9.37% 7.43% 48%/52% $653.7 (a) 1/2017 ECA, TCA, PCCA, EECR/DSM, RESA, TEPR, Energy Assistance Benefit Charge 90% CO 9.37% 6.02% 67%/33% $57.9 1/2017 CACJA Adjustment Rider N/A FERC 9.80% 6.45% 53%/47% (a) 9/2022 FERC Transmission Tariff N/A South Dakota Electric WY 9.90% 8.13% 47%/53% $46.8 10/2014 ECA 65% SD Global Settlement 7.76% Global Settlement $543.9 10/2014 ECA, TFA, EIA 70% FERC 10.80% 8.76% 43%/57% $197.7 (b) 2/2009 FERC Transmission Tariff N/A Wyoming Electric (c) WY 9.75% 7.48% 48%/52% $551.2 (a) 3/2023 PCA, EECR/DSM, Rate Base Recovery on Acquisition Adjustment, TCAM N/A FERC 9.90% 8.77% 44%/56% (a) 1/2019 FERC Transmission Tariff N/A ____________________ (a) For both Wyoming Electric and Colorado Electric retail customers, transmission investments are recovered through retail rates rather than FERC Transmission Tariffs.
Our Gas Utilities own and operate 4,713 miles of intrastate gas transmission pipelines and 42,222 miles of gas distribution mains and service lines, seven natural gas storage sites, more than 50,000 horsepower of compression and over 515 miles of gathering lines. Electric Utilities We conduct electric utility operations through our Colorado, South Dakota and Wyoming subsidiaries.
Our Gas Utilities own and operate 4,663 miles of intrastate gas transmission pipelines and 42,514 miles of gas distribution mains and service lines, seven natural gas storage sites, more than 50,000 horsepower of compression and 516 miles of gathering lines. Electric Utilities We conduct electric utility operations through our Colorado, South Dakota and Wyoming subsidiaries.
Our Team As of December 31, 2022 As of December 31, 2021 Total employees 2,982 2,884 Women in executive leadership positions (a) 33% 30% Gender diversity (women as a % of total employees) 25% 26% Represented by a union 25% 25% Military veterans 11% 14% Ethnic diversity (non-white employees as a % of total) 14% 12% For the year ended December 31, 2022 For the year ended December 31, 2021 Number of external hires 487 214 External hires gender diversity (as a % of total external hires) 30% 25% External hires ethnic diversity (as a % of total external hires) 23% 20% Turnover rate (b) 13% 11% Retirement rate 3% 3% ____________________ (a) Executive leadership positions are defined as positions with Vice President, Senior Vice President or Chief in their title.
Our Team As of December 31, 2023 As of December 31, 2022 Total employees 2,874 2,982 Women in executive leadership positions (a) 29% 33% Gender diversity (women as a % of total employees) 24% 25% Represented by a union 25% 25% Military veterans 10% 11% Ethnic diversity (non-white employees as a % of total) 15% 14% For the year ended December 31, 2023 For the year ended December 31, 2022 Number of external hires 293 487 External hires gender diversity (as a % of total external hires) 27% 30% External hires ethnic diversity (as a % of total external hires) 24% 23% Turnover rate (b) 12% 13% Retirement rate 3% 3% ____________________ (a) Executive leadership positions are defined as positions with Vice President, Senior Vice President or Chief in their title.
Power generated from these units, as a percentage of total power supply, was 0.0% for each of the years presented. 12 Table of Contents Our Electric Utilities’ weighted average cost of fuel utilized to generate electricity and the average price paid for purchased power (excluding contracted capacity) per MWh for the years ended December 31 were as follows: Fuel and Purchased Power (dollars per MWh) 2022 2021 2020 Coal $ 12.76 $ 11.55 $ 11.38 Natural Gas and Diesel Oil 37.09 33.65 8.59 Total Generated Weighted Average Fuel Cost 17.57 17.40 9.09 Coal, Natural Gas, Oil and Other Market Purchases 66.35 64.85 40.80 Wind Purchases 33.78 34.69 42.06 Total Purchased Power Weighted Average Cost 61.56 59.84 41.03 Total Weighted Average Fuel and Purchased Power Cost $ 32.82 $ 30.17 $ 17.36 Purchased Power.
Power generated from these units, as a percentage of total power supply, was 0.0% for each of the years presented. 13 Table of Contents Our Electric Utilities’ weighted average cost of fuel utilized to generate electricity and the average price paid for purchased power (excluding contracted capacity) per MWh for the years ended December 31 were as follows: Fuel and Purchased Power (dollars per MWh) 2023 2022 2021 Coal $ 13.40 $ 12.76 $ 11.55 Natural Gas 20.20 37.09 33.65 Total Generated Weighted Average Fuel Cost 14.27 17.57 17.40 Coal, Natural Gas, Diesel Oil and Other Market Purchases 55.61 66.35 64.85 Wind and Solar Purchases 34.99 33.78 34.69 Total Purchased Power Weighted Average Cost 51.68 61.56 59.84 Total Weighted Average Fuel and Purchased Power Cost $ 25.39 $ 32.82 $ 30.17 Purchased Power.
System Peak Demand for the Electric Utilities’ retail customers for each of the last three years are listed below: System Peak Demand (in MW) 2022 (a) 2021 2020 Summer Winter Summer Winter Summer Winter Colorado Electric 410 334 407 279 401 297 South Dakota Electric 403 355 397 299 378 304 Wyoming Electric 294 281 274 246 271 246 ____________________ (a) In December 2022, each of our Electric Utilities set new winter peak loads.
System Peak Demand for the Electric Utilities’ retail customers for each of the last three years are listed below: System Peak Demand (in MW) 2023 (a) 2022 2021 Summer Winter Summer Winter Summer Winter Colorado Electric 411 297 410 334 407 279 South Dakota Electric 378 289 403 355 397 299 Wyoming Electric 312 301 294 281 274 246 ____________________ (a) In 2023, Wyoming Electric set new summer and winter peak loads.
Among these requirements is the implementation of specific mitigation measures to protect against ransomware attacks and other known threats to information and operational technology systems; development and implementation of a cybersecurity contingency and recovery plan; and performance of a cybersecurity architecture design review.
Among these requirements is the implementation of specific mitigation measures to protect against ransomware attacks and other known threats to information and operational technology systems; development and implementation of a cybersecurity contingency and recovery plan; and performance of a cybersecurity architecture design review. Compliance with these measures has not had a material impact on our operations.
Gas Pipeline and Storage Integrity and Safety We are subject to regulation by PHMSA, which requires the following for certain gas distribution and transmission pipelines and underground storage facilities: inspection and maintenance plans; integrity management programs, including the determination of pipeline integrity risks and periodic assessments on certain pipeline segments; an operator qualification program, which includes certain trainings; a public awareness program that provides certain information; and a control room management plan.
We continue to evaluate the potential effect of these directives on our operations and facilities and will continue to monitor for any clarifications or amendments to these directives. 20 Table of Contents Gas Pipeline and Storage Integrity and Safety We are subject to regulation by PHMSA, which requires the following for certain gas distribution and transmission pipelines and underground storage facilities: inspection and maintenance plans; integrity management programs, including the determination of pipeline integrity risks and periodic assessments on certain pipeline segments; an operator qualification program, which includes certain trainings; a public awareness program that provides certain information; and a control room management plan.
As of December 31, Retail Customers 2022 2021 2020 Residential 864,038 853,908 844,999 Commercial 85,203 84,234 83,135 Industrial 2,189 2,158 2,235 Transportation 155,685 153,929 152,568 Total Natural Gas Retail Customers at End of Year 1,107,115 1,094,229 1,082,937 As of December 31, Retail Customers 2022 2021 2020 Arkansas Gas 183,270 180,216 178,281 Colorado Gas 208,060 202,747 197,817 Iowa Gas 162,801 161,905 160,952 Kansas Gas 118,599 117,862 116,973 Nebraska Gas 301,007 298,832 296,778 Wyoming Gas 133,378 132,667 132,136 Total Natural Gas Retail Customers at End of Year 1,107,115 1,094,229 1,082,937 We procure natural gas for our distribution customers from a diverse mix of producers, processors and marketers and generally use hedging, physical fixed-price purchases and market-based price purchases to achieve dollar-cost averaging within our natural gas portfolio.
As of December 31, Retail Customers 2023 2022 2021 Residential 871,930 864,038 853,908 Commercial 84,917 85,203 84,234 Industrial 2,179 2,189 2,158 Transportation 157,367 155,685 153,929 Total Natural Gas Retail Customers at End of Year 1,116,393 1,107,115 1,094,229 As of December 31, Retail Customers 2023 2022 2021 Arkansas Gas 186,216 183,270 180,216 Colorado Gas 211,155 208,060 202,747 Iowa Gas 163,281 162,801 161,905 Kansas Gas 119,407 118,599 117,862 Nebraska Gas 302,167 301,007 298,832 Wyoming Gas 134,167 133,378 132,667 Total Natural Gas Retail Customers at End of Year 1,116,393 1,107,115 1,094,229 We procure natural gas for our distribution customers from a diverse mix of producers, processors and marketers and generally use hedging, physical fixed-price purchases and market-based price purchases to achieve dollar-cost averaging within our natural gas portfolio.
Additionally, coal competes with other energy sources, such as natural gas, wind, solar and hydropower. Costs and other factors relating to these alternative fuels, such as safety, environmental and availability considerations affect the overall demand for coal as a fuel. Operating Statistics .
Historically, any off-site sales have been to consumers within close proximity to WRDC. Coal competes with other energy sources, such as natural gas, nuclear, wind, solar and hydropower. Costs and other factors relating to these alternative fuels, such as safety, environmental and availability considerations affect the overall demand for coal as a fuel. Operating Statistics .
For additional information on environmental matters, see Item 1A and Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 20 Table of Contents Human Capital Resources Overview We are committed to supporting operational excellence by attracting, motivating, retaining and encouraging the development of a highly qualified and diverse employee team.
For additional information on environmental matters, see Item 1A and Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 21 Table of Contents Human Capital Resources Overview We are committed to retaining, attracting and cultivating a talented, engaged and thriving team.
Additionally, we own and operate non-regulated power generation and mining assets that are vertically integrated into and primarily support our Electric Utilities. Nearly all of these operations are located at our electric generating complexes and are physically integrated into our Electric Utilities’ operations.
Additionally, we provide non-regulated services to our retail customers under the Service Guard Comfort Plan and Tech Services. We also own and operate non-regulated power generation and mining assets that are vertically integrated into and primarily support our Electric Utilities. All of these operations are located at our electric generating complexes and are physically integrated into our Electric Utilities’ operations.
Our electric generating facilities and power purchase agreements provide for the supply of electricity principally to our retail customers. Additionally, we sell excess power to other utilities and marketing companies, including our affiliates. We also provide non-regulated services to our retail customers under the Service Guard Comfort Plan and Tech Services.
Our Electric Utilities generate, transmit and distribute electricity to our retail customers. Our electric generating facilities and power purchase agreements provide for the supply of electricity principally to our retail customers. We also sell excess power to other utilities and marketing companies, including our affiliates.
Total Employees Number of Employees As of December 31, 2022 Electric Utilities 442 Gas Utilities 1,226 Corporate and Other 1,314 Total 2,982 At December 31, 2022, approximately 19% of our total employees and 21% of our Electric and Gas Utilities employees were eligible for retirement (age 55 with at least 5 years of service).
Total Employees Number of Employees As of December 31, 2023 Electric Utilities 425 Gas Utilities 1,198 Corporate and Other 1,251 Total 2,874 At December 31, 2023, approximately 18% of our total employees and 20% of our Electric and Gas Utilities employees were eligible for retirement (age 55 with at least 5 years of service).
Our Electric Utilities’ power supply by resource as a percent of the total power supply for our energy needs for the years ended December 31 was as follows: Power Supply 2022 2021 2020 Coal 35.1 % 34.2 % 40.3 % Natural Gas and Diesel Oil (a) 18.8 % 24.4 % 25.0 % Wind 11.4 % 11.3 % 8.8 % Total Generated 65.3 % 69.9 % 74.1 % Coal, Natural Gas, Oil and Other Market Purchases 29.6 % 25.1 % 21.1 % Wind Purchases 5.1 % 5.0 % 4.8 % Total Purchased 34.7 % 30.1 % 25.9 % Total 100.0 % 100.0 % 100.0 % ____________________ (a) The diesel-fueled generating units are generally used as supplemental peaking units.
Our Electric Utilities’ power supply by resource as a percent of the total power supply for our energy needs for the years ended December 31 was as follows: Power Supply 2023 2022 2021 Coal 35.0 % 35.1 % 34.2 % Natural Gas 26.4 % 18.8 % 24.4 % Wind (a) 8.9 % 11.4 % 11.3 % Total Generated (b) 70.3 % 65.3 % 69.9 % Coal, Natural Gas, Diesel Oil and Other Market Purchases 24.1 % 29.6 % 25.1 % Wind and Solar Purchases 5.6 % 5.1 % 5.0 % Total Purchased 29.7 % 34.7 % 30.1 % Total 100.0 % 100.0 % 100.0 % ____________________ (a) Wind generation decreased due to the sale of Northern Iowa Windpower assets in March 2023.
As of December 31, Retail Customers 2022 2021 2020 Residential 188,921 186,852 184,872 Commercial 30,404 30,326 30,225 Industrial 82 81 83 Other 1,024 1,010 1,017 Total Electric Retail Customers at End of Year 220,431 218,269 216,197 As of December 31, Retail Customers 2022 2021 2020 Colorado Electric 100,573 99,709 98,735 South Dakota Electric 75,169 74,509 73,700 Wyoming Electric 44,689 44,051 43,762 Total Electric Retail Customers at End of Year 220,431 218,269 216,197 Capacity and Demand.
As of December 31, Retail Customers 2023 2022 2021 Residential 190,776 188,921 186,852 Commercial 30,491 30,404 30,326 Industrial 84 82 81 Other 989 1,024 1,010 Total Electric Retail Customers at End of Year 222,340 220,431 218,269 As of December 31, Retail Customers 2023 2022 2021 Colorado Electric 100,907 100,573 99,709 South Dakota Electric 76,479 75,169 74,509 Wyoming Electric 44,954 44,689 44,051 Total Electric Retail Customers at End of Year 222,340 220,431 218,269 Capacity and Demand.
At December 31, 2022, our Electric Utilities owned the electric transmission and distribution lines shown below: Utility State Transmission (a) (in Line Miles) Distribution (in Line Miles) Colorado Electric Colorado 598 3,198 South Dakota Electric (b) South Dakota, Wyoming 1,235 2,587 Wyoming Electric Wyoming 59 1,347 1,892 7,132 ____________________ (a) Electric transmission line miles include voltages of 69 kV and above.
At December 31, 2023, our Electric Utilities owned the electric transmission and distribution lines shown below: Utility State Transmission (a) (in Line Miles) Distribution (in Line Miles) Colorado Electric Colorado 599 3,213 South Dakota Electric (b) South Dakota, Wyoming 1,232 2,616 Wyoming Electric Wyoming 86 1,360 1,917 7,189 ____________________ (a) Electric transmission line miles include voltages of 69 kV and above.
For the year ended December 31, 2022 Total Case Incident Rate (incidents per 200,000 hours worked) 1.39 Preventable Motor Vehicle Incident Rate (vehicle accidents per 1 million miles driven) 1.33 % of injuries reported within 1 day 90.8 % 22 Table of Contents
For the year ended December 31, 2023 Total Case Incident Rate (incidents per 200,000 hours worked) 1.51 Preventable Motor Vehicle Incident Rate (vehicle accidents per 1 million miles driven) 1.65 Proactive Safety Activities per Employee 4 % of injuries reported within 1 day 93.3% 23 Table of Contents
The following table summarizes the mechanisms we have in place for each of our Electric Utilities: Cost Recovery Mechanisms Electric Utility Jurisdiction Environmental Cost EECR/DSM Transmission Expense Fuel Cost Transmission Capital Purchased Power RESA Colorado Electric ☑ ☑ ☑ ☑ ☑ ☑ South Dakota Electric (SD) (a) ☑ ☑ ☑ ☑ ☑ South Dakota Electric (WY) (b) ☑ ☑ ☑ ☑ South Dakota Electric (FERC) (c) ☑ Wyoming Electric (d) ☑ ☑ ☑ ☑ ☑ ____________________ (a) South Dakota Electric’s EIA and TFA tariffs were suspended for a six-year moratorium period effective July 1, 2017.
The following table summarizes the mechanisms we have in place for each of our Electric Utilities: Cost Recovery Mechanisms Electric Utility Jurisdiction Environmental Cost EECR/DSM Transmission Expense Fuel Cost Transmission Capital Purchased Power RESA Colorado Electric (a) ☑ ☑ ☑ ☑ ☑ ☑ Colorado Electric (FERC) (a) ☑ South Dakota Electric (SD) (b) ☑ ☑ ☑ South Dakota Electric (WY) (c) ☑ ☑ ☑ ☑ South Dakota Electric (FERC) ☑ Wyoming Electric (a) ☑ ☑ ☑ ☑ ☑ Wyoming Electric (FERC) (a) ☑ ____________________ (a) For both Wyoming Electric and Colorado Electric retail customers, transmission investments are recovered through retail rates rather than FERC Transmission Tariffs.
(d) Wyoming Electric has a WPSC-approved transmission tariff based on a formulaic approach that determines the recovery of Wyoming Electric's transmission costs. 17 Table of Contents Gas Utilities The following table provides regulatory information for each of our Gas Utilities: Subsidiary Jurisdiction Authorized Rate of Return on Equity Authorized Return on Rate Base Authorized Capital Structure Debt/Equity Authorized Rate Base (in millions) Effective Date Additional Regulatory Mechanisms Arkansas Gas (a) AR 9.60% 6.20% (b) 55%/45% $674.6 (c) 10/2022 GCA, Safety and Integrity Rider, EECR, Weather Normalization Adjustment, Billing Determinant Adjustment Colorado Gas (a) CO 9.20% 6.56% 50%/50% $303.20 1/2022 GCA, SSIR, EECR/DSM RMNG CO 9.90% 6.71% 53%/47% $118.70 6/2018 SSIR, Liquids/Off-system/Market Center Services Revenue Sharing Iowa Gas (a) IA 9.60% 6.75% 50%/50% $300.90 1/2022 GCA, EECR, System Safety and Maintenance Adjustment Rider, Gas Supply Optimization revenue sharing Kansas Gas (a) KS Global Settlement Global Settlement Global Settlement Global Settlement 1/2022 GCA, Weather Normalization Tariff, Gas System Reliability Surcharge, Ad Valorem Tax Surcharge, Cost of Bad Debt Collected through GCA, Pension Levelized Adjustment, Tax Adjustment Rider, Gas Supply Optimization revenue sharing Nebraska Gas (d) NE 9.50% 6.71% 50%/50% $504.20 3/2021 GCA, Cost of Bad Debt Collected through GCA, Infrastructure System Replacement Cost Recovery Surcharge, Choice Gas Program, SSIR, Bad Debt expense recovered through Choice Supplier Fee, Line Locate Surcharge, HEAT Program Wyoming Gas (d) WY 9.40% 6.98% 50%/50% $354.40 3/2020 GCA, EECR, Rate Base Recovery on Acquisition Adjustment, Wyoming Integrity Rider, Choice Gas Program ____________________ (a) For additional information regarding recent rate review updates, see Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
(c) South Dakota Electric has WPSC authorization to accumulate certain energy efficiency costs in a regulatory asset with determination of recovery to be made in the next rate review. 18 Table of Contents Gas Utilities The following table provides regulatory information for each of our Gas Utilities: Subsidiary Jurisdiction Authorized Rate of Return on Equity Authorized Return on Rate Base Authorized Capital Structure Debt/Equity Authorized Rate Base (in millions) Effective Date Additional Regulatory Mechanisms Arkansas Gas (a) AR 9.60% 6.20% (b) 55%/45% $674.6 (c) 10/2022 GCA, Safety and Integrity Rider, EECR, Weather Normalization Adjustment, Billing Determinant Adjustment Colorado Gas (a) CO 9.20% 6.56% 50%/50% $303.2 1/2022 GCA, SSIR, DSM, Gas Price Risk Management Rider, Energy Assistance Benefit Charge RMNG (a) CO 9.50%-9.70% 6.93% 48%-50%/ 50%-52% $209.3 7/2023 Liquids/Off-system/Market Center Services Revenue Sharing Iowa Gas IA 9.60% 6.75% 50%/50% $300.9 1/2022 GCA, EECR, System Safety and Maintenance Adjustment Rider, Gas Supply Optimization revenue sharing Kansas Gas KS Global Settlement Global Settlement Global Settlement Global Settlement 1/2022 GCA, Weather Normalization Tariff, Gas System Reliability Surcharge, Ad Valorem Tax Surcharge, Cost of Bad Debt Collected through GCA, Pension Levelized Adjustment, Tax Adjustment Rider, Gas Supply Optimization revenue sharing Nebraska Gas (d) NE 9.50% 6.71% 50%/50% $504.2 (e) 3/2021 GCA, Cost of Bad Debt Collected through GCA, Infrastructure System Replacement Cost Recovery Surcharge, Choice Gas Program, SSIR, Bad Debt expense recovered through Choice Supplier Fee, Line Locate Surcharge, HEAT Program Wyoming Gas (a)(d) WY 9.85% 7.33% 49%/51% $450.8 1/2024 GCA, EECR, Rate Base Recovery on Acquisition Adjustment, Wyoming Integrity Rider, Choice Gas Program ____________________ (a) Colorado Gas regulatory information presented above does not reflect the recent settlement agreement which is subject to CPUC approval.
We continuously evaluate our recruitment strategies to determine their effectiveness to attract and build a high-performing, diverse workforce. Our diversity recruiting strategies support our efforts to attract qualified individuals with targeted efforts to reach underrepresented talent pools. Our internship program and our partnerships and participation in outreach programs with local schools and colleges attract students to careers in energy.
Our recruiting strategies support our efforts to attract qualified individuals with targeted efforts to reach underrepresented talent. Our internship program and our partnerships and participation in outreach programs with local schools and colleges attract students to careers in the energy industry.
In July of 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for GHG reductions from coal-fired power plants. In a January 2021 decision, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. Four petitions for review of the D.C.
In July of 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for GHG reductions from coal-fired power plants.
In addition to company-owned natural gas storage assets in Arkansas, Colorado and Wyoming, we also contract with third-party transportation providers for natural gas storage service to provide gas supply during the winter heating season and to meet peak day customer demand for natural gas. 14 Table of Contents The following table summarizes certain information regarding our company-owned regulated underground gas storage facilities as of December 31, 2022: Working Capacity (Mcf) Cushion Gas (Mcf) Total Capacity (Mcf) Maximum Daily Withdrawal Capability (Mcfd) Arkansas Gas 9,273,700 13,433,040 22,706,740 196,000 Colorado Gas 2,361,495 6,164,715 8,526,210 30,000 Wyoming Gas 5,733,900 17,545,600 23,279,500 36,000 Total 17,369,095 37,143,355 54,512,450 262,000 The following table summarizes certain information regarding our system infrastructure as of December 31, 2022: Intrastate Gas Transmission Pipelines (in line miles) Gas Distribution Mains (in line miles) Gas Distribution Service Lines (in line miles) Arkansas Gas 877 5,070 1,330 Colorado Gas 699 7,088 2,372 Iowa Gas 173 2,879 2,503 Kansas Gas 331 3,004 1,388 Nebraska Gas 1,317 8,558 2,796 Wyoming Gas 1,316 3,563 1,671 Total 4,713 30,162 12,060 Seasonal Variations of Business.
In addition to company-owned regulated underground natural gas storage assets in Arkansas, Colorado and Wyoming, we also contract with third-party transportation providers for natural gas storage service to provide gas supply during the winter heating season and to meet peak day customer demand for natural gas. 15 Table of Contents The following table summarizes certain information regarding our company-owned regulated underground gas storage facilities as of December 31, 2023: Working Capacity (Mcf) Cushion Gas (Mcf) Total Capacity (Mcf) Maximum Daily Withdrawal Capability (Mcfd) Arkansas Gas 8,442,700 13,149,040 21,591,740 196,000 Colorado Gas 2,360,895 6,165,315 8,526,210 30,000 Wyoming Gas 5,733,900 17,545,600 23,279,500 36,000 Total 16,537,495 36,859,955 53,397,450 262,000 The following table summarizes certain information regarding our system infrastructure as of December 31, 2023: Intrastate Gas Transmission Pipelines (in line miles) Gas Distribution Mains (in line miles) Gas Distribution Service Lines (in line miles) Arkansas Gas 875 5,197 1,380 Colorado Gas 694 7,188 1,861 Iowa Gas 173 2,890 2,765 Kansas Gas 339 3,026 1,400 Nebraska Gas 1,315 8,611 2,845 Wyoming Gas 1,267 3,625 1,726 Total 4,663 30,537 11,977 Seasonal Variations of Business.
Entities that violate standards can be subject to fines and can also be assessed non-monetary penalties, depending upon the nature and severity of the violation. 19 Table of Contents Pipeline Security In May and July 2021, the TSA issued security directives in response to a ransomware attack on the Colonial Pipeline that occurred earlier in 2021 that included several new cybersecurity requirements for critical pipeline owners and operators.
Pipeline Security In May and July 2021, the TSA issued security directives in response to a ransomware attack on the Colonial Pipeline that occurred earlier in 2021 that included several new cybersecurity requirements for critical pipeline owners and operators.
Effective September 1, 2022, a formulaic approach determines the revenue component of Colorado Electric's open access transmission tariff. (b) Includes $160.7 million in 2022 rate base for the 2022 Projected Common Use System formula rate that is updated annually and $17.1 million in rate base for the Transmission Tie that is based on the approved stated rate from 2005.
(b) Includes $180.6 million in 2023 rate base for the 2023 Projected Common Use System formula rate that is updated annually and $17.1 million in rate base for the Transmission Tie that is based on the approved stated rate from 2005.
FERC certified NERC as the Electric Reliability Organization and also issued an initial order approving many reliability standards that went into effect in 2007.
FERC certified NERC as the Electric Reliability Organization and also issued an initial order approving many reliability standards that went into effect in 2007. Entities that violate standards can be subject to fines and can also be assessed non-monetary penalties, depending upon the nature and severity of the violation.
Meetings of three or more employees begin with a safety share, a practice which contributes to keeping safety top of mind. Since 2009, we have reduced workplace injuries by more than 75% and continue to see long-term, sustained improvements in our safety practices and performance.
Since 2009, we have reduced workplace injuries by more than 64% and continue to see long-term, sustained improvements in our safety practices and performance.
We also own and operate non-regulated power generation and mining assets that are vertically integrated into and primarily contracted to our Electric Utilities. Our Electric Utilities own 1,482 MW of generation and 9,024 miles of electric transmission and distribution lines. Our Gas Utilities segment serves approximately 1,107,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming.
Our Electric Utilities own 1,394 MW of generation and 9,106 miles of electric transmission and distribution lines. Our Gas Utilities segment serves approximately 1,116,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming.
Our retention efforts include competitive compensation programs, monitoring employee engagement, career development resources for all employees and internal training programs. Our compensation programs are designed to be strategically aligned, externally competitive, internally equitable, personally motivating, cost effective and legally compliant. We continuously monitor employee engagement through bi-annual engagement surveys and quarterly pulse surveys.
Our compensation programs are designed to be strategically aligned, externally competitive, internally equitable, personally motivating, cost effective and legally compliant. We monitor employee engagement through bi-annual engagement surveys and quarterly pulse surveys. Every leader is responsible for creating and implementing an action plan based on their team’s engagement survey results.
(d) The Choice Gas Program mechanisms are applicable to only a portion of Nebraska Gas and Wyoming Gas customers. 18 Table of Contents The following table summarizes the mechanisms we have in place for each of our Gas Utilities: Gas Utility Jurisdiction Cost Recovery Mechanisms EECR/DSM Integrity Additions Bad Debt Weather Normal Pension Recovery Gas Cost (b) Revenue Decoupling Arkansas Gas ☑ ☑ ☑ ☑ ☑ Colorado Gas ☑ ☑ ☑ RMNG (a) ☑ Iowa Gas ☑ ☑ ☑ Kansas Gas ☑ ☑ ☑ ☑ ☑ Nebraska Gas ☑ ☑ ☑ Wyoming Gas ☑ ☑ ☑ ____________________ (a) RMNG, which is an intrastate transmission pipeline that provides natural gas transmission and wholesale services in western Colorado, has an SSIR mechanism which allows recovery of investments through December 31, 2021.
(e) Excludes amounts to serve non-jurisdictional and agriculture customers. 19 Table of Contents The following table summarizes the mechanisms we have in place for each of our Gas Utilities: Gas Utility Jurisdiction Cost Recovery Mechanisms EECR/DSM Integrity Additions Bad Debt Weather Normal Pension Recovery Gas Cost (a) Revenue Decoupling Arkansas Gas ☑ ☑ ☑ ☑ ☑ Colorado Gas ☑ ☑ ☑ RMNG Iowa Gas ☑ ☑ ☑ Kansas Gas ☑ ☑ ☑ ☑ ☑ Nebraska Gas ☑ ☑ ☑ Wyoming Gas ☑ ☑ ☑ ____________________ (a) All of our Gas Utilities, except where the Choice Gas Program is the only option, have GCAs that allow us to pass the prudently-incurred cost of gas and certain services through to the customer between rate reviews.
Utility Number of Employees Union Affiliation Expiration Date of Collective Bargaining Agreement Colorado Electric 105 IBEW Local 667 April 15, 2023 South Dakota Electric 130 IBEW Local 1250 March 31, 2027 Wyoming Electric 35 IBEW Local 111 June 30, 2024 Total Electric Utilities 270 Iowa Gas 129 IBEW Local 204 January 31, 2026 Kansas Gas 18 Communications Workers of America, AFL-CIO Local 6407 December 31, 2024 Nebraska Gas 83 IBEW Local 244 March 13, 2025 Nebraska Gas 137 CWA Local 7476 October 30, 2023 Wyoming Gas 15 IBEW Local 111 June 30, 2024 Wyoming Gas 82 CWA Local 7476 October 30, 2023 Total Gas Utilities 464 Total 734 21 Table of Contents Attraction Attracting talent to join our team is critical to our ability to serve over 1.3 million customers safely and efficiently.
Utility Number of Employees Union Affiliation Expiration Date of Collective Bargaining Agreement Colorado Electric 108 IBEW Local 667 April 15, 2027 South Dakota Electric 122 IBEW Local 1250 March 31, 2027 Wyoming Electric 29 IBEW Local 111 June 30, 2024 Total Electric Utilities 259 Iowa Gas 129 IBEW Local 204 January 31, 2026 Kansas Gas 15 Communications Workers of America, AFL-CIO Local 6407 December 31, 2024 Nebraska Gas 92 IBEW Local 244 March 13, 2025 Nebraska Gas 134 CWA Local 7476 October 30, 2026 Wyoming Gas 16 IBEW Local 111 June 30, 2024 Wyoming Gas 80 CWA Local 7476 October 30, 2026 Total Gas Utilities 466 Total 725 22 Table of Contents Diversity, Equity & Inclusion We believe the benefits of diversity, equity and inclusion can be powerful, and we are committed to building a workforce whose diversity is representative of the communities we serve.
We believe that a diverse workforce will assist us in executing our strategic business plans, including our growth strategy. Workforce diversity trends, which include gender and diverse new hires, promotions and turnover, are monitored at regular intervals throughout the year. Development and Retention Retaining and developing team members is critical to our continued success.
Workforce diversity trends, which include new hires, promotions and turnover, are monitored at regular intervals throughout the year. Development and Retention Developing and retaining talent is critical to our continued success. Our development and retention efforts include internal and external skills training, career development programs, and competitive compensation.
We will continue to monitor any related guidelines and rulemakings issued by the EPA or state regulatory authorities. In February 2022, the EPA proposed the Good Neighbor Rule Provisions, which are part of the CSAPR framework and is intended to address ozone transport for the 2015 ozone NAAQS.
In February 2022, the EPA proposed the Good Neighbor Rule Provisions, which are part of the CSAPR framework and is intended to address ozone transport for the 2015 ozone NAAQS. The proposed rule included the state of Wyoming and imposed a NOx emissions trading program on fossil fueled electricity generating plants within the state.
(b) Arkansas Gas return on rate base is adjusted to remove certain liabilities from rate review capital structure for comparison with other subsidiaries. (c) Arkansas Gas rate base is adjusted to include certain liabilities for comparison with other subsidiaries.
For additional information regarding recent rate review updates, see Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. (b) Arkansas Gas return on rate base is adjusted to remove certain liabilities from rate review capital structure for comparison with other subsidiaries.
Our commitment to equitable and inclusive hiring practices, including pay equity, further supports our vision of attracting, developing and retaining a high-performing workforce driven by improving life with energy. Diversity & Inclusion We believe in the benefits of diversity, equity and inclusion.
Our commitment to equitable and inclusive hiring practices, including diverse candidate slates and interview panels and pay equity reviews, further supports our vision of retaining, attracting and cultivating an engaged and thriving team driven by improving life with energy. We continuously evaluate our recruitment strategies to determine their effectiveness to attract and build a talented, diverse workforce.
Every leader is responsible for creating and implementing an action plan based on their team’s engagement survey results. Our career development resources include management onboarding, leadership development programs, mentoring programs, individual development assessments and more. Internal training opportunities include corporate-wide and specialized training opportunities for different job functions.
Our career development programs include management onboarding, leadership development programs, mentoring programs, individual development assessments, stretch opportunities, talent sharing and more. Internal training opportunities include corporate-wide and specialized training opportunities for different job functions. Our Field Career Path Program (FCPP) promotes career growth for our frontline customer-facing employees through established standards of knowledge, skills, abilities and performance.
Our Field Career Path Program (FCPP) promotes career growth through established standards of knowledge, skills, abilities and performance. Employee Safety and Wellness Safety is one of our company values, a top priority in all we do and deeply embedded in our culture. We are committed to consistently outperforming utility industry averages in key safety metrics.
Employee Safety and Wellness Safety is one of our company values, a top priority in all we do and deeply embedded in our culture. Meetings of three or more employees begin with a safety share, a practice which contributes to keeping safety top of mind.
Removed
In July 2022, South Dakota Electric and Wyoming Electric set new all-time and summer peak loads.
Added
(b) The diesel oil-fueled generating units are generally used as supplemental peaking units.
Removed
Historically, any off-site sales have been to consumers within close proximity to the WRDC mine. Rail transport market opportunities for WRDC are limited due to the lower heating value (Btu) of the coal, combined with the fact that the WRDC mine is served by only one railroad, resulting in less competitive transportation rates.
Added
Transmission investments are recovered from wholesale transmission customers under the FERC Formula Transmission rate. The rate base associated with FERC assets is not displayed separate from that collected through the state recovery mechanisms, to avoid double counting. The rate base amounts for Colorado Electric and Wyoming Electric include rate base recovered through base rates and the authorized regulatory mechanisms.
Removed
(b) South Dakota Electric has WPSC authorization to accumulate certain Energy Efficiency costs in a regulatory asset with determination of recovery to be made in the next rate review. (c) South Dakota Electric has an approved FERC Transmission Tariff based on a formulaic approach that determines the revenue component of South Dakota Electric’s open access transmission tariff.
Added
Transmission investments are recovered from wholesale transmission customers under the FERC Formula Transmission rate. (b) South Dakota Electric’s EIA and TFA tariffs were suspended for a six-year moratorium period effective July 1, 2017.
Removed
The other cost recovery mechanisms are not applicable to RMNG. (b) All of our Gas Utilities, except where the Choice Gas Program is the only option, have GCAs that allow us to pass the prudently-incurred cost of gas and certain services through to the customer between rate reviews.
Added
(c) Arkansas Gas rate base is adjusted to include certain liabilities for comparison with other subsidiaries. (d) The Choice Gas Program mechanisms are applicable to only a portion of Nebraska Gas and Wyoming Gas customers.
Removed
We have implemented several of these directives and are evaluating the potential effect of several others on our operations and facilities, as well as the potential cost of implementation, and will continue to monitor for any clarifications or amendments to these directives.
Added
On May 23, 2023, the EPA proposed to repeal the Affordable Clean Energy rule and at the same time issued a replacement rule to establish emissions limits for GHG emissions from existing coal-fired and oil/gas-fired electric power generating boilers. The EPA also proposed GHG emission limits for existing stationary combustion turbines.
Removed
Circuit’s opinion were subsequently granted by the U.S. Supreme Court on October 29, 2021, consolidated under West Virginia v. EPA et al. On June 30, 2022, the U.S. Supreme Court released its opinion in favor of West Virginia and aligned parties.
Added
The proposed emissions limitations are based upon the application of carbon capture controls or the use of hydrogen fuel beginning in 2030. The EPA is expected to issue a final rule in the first half of 2024. We will continue to monitor any related guidelines and rulemakings issued by the EPA or state regulatory authorities.
Removed
The decision clarifies that there are limits on how the EPA may regulate GHGs absent further direction from the U.S. Congress. The court concluded that emission caps that would cause generation shifting from fossil-fuel-fired power plants to renewable energy facilities would require specific congressional authorization and that such authorization had not been given under the Clean Air Act.
Added
The EPA’s consideration of revised NOx emissions inventories and revised ozone modeling resulted in Wyoming’s exclusion from the final Good Neighbor Rule published on June 5, 2023.
Removed
The decision by the U.S. Supreme Court may affect the EPA’s development of any new regulations to address CO 2 emissions from coal- and natural gas-fired power plants; however, at this time, we cannot predict the impact of any such regulations or the decision by the U.S. Supreme Court on the results of operations, financial position, and liquidity.
Added
In a subsequent action published on August 14, 2023, the EPA approved Wyoming’s State Implementation Plan submission addressing interstate transport for the 2015 8-hour ozone NAAQS, and Wyoming sources will not be subject to the CSAPR.
Removed
The EPA has indicated that it intends to issue a proposed rule in early 2023 with a new set of emission guidelines for states to follow in submitting state plans to establish and implement standards of performance for GHG emissions from existing fossil fuel-fired electric generating units.
Added
By making our people and culture a strategic priority, our employees are engaged and empowered to contribute to the success of our business.
Removed
The rule focuses on reductions of NO x , which is a precursor to ozone formation, for states that do not have an approved State Implementation Plan (SIP). On January 31, 2023, the EPA finalized a notice which disapproved 19 SIPs, partially disapproved two other SIPs and deferred action until December 2023 on two SIPs, which included Wyoming.
Removed
The EPA action on January 31, 2023 was a necessary prerequisite for the EPA to finalize a proposed Good Neighbor Rule by the March 15, 2023 deadline. The EPA also released a new air quality modeling that indicated two states (including Wyoming), which were previously within scope of the Good Neighbor Rule, no longer exceeded the cross-state ozone emissions threshold.
Removed
It is likely that the EPA will rely on this new air quality modeling as part of the final Good Neighbor Rule. Based on the new air quality modeling, Wyoming will not be required to purchase additional NO x allowances during the 2023 ozone season.
Removed
Until the EPA takes action on Wyoming's SIP, which is anticipated in December 2023, we cannot determine our future CSAPR compliance costs or impacts on our operations, but they could be material. However, we anticipate that any costs incurred as a result of the proposed rule would be recoverable through our regulatory mechanisms.
Removed
Our employees’ drive and dedication to their work, and their commitment to the safety of our customers and their fellow employees, allows us to successfully grow and manage our business year over year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+6 added−10 removed71 unchanged
Such developments could affect the price of energy and delivery of energy, require further improvements to our distribution systems to address changing load demands and could make portions of our electric system power supply and transmission and/or distribution facilities obsolete prior to the end of their useful lives.
Such developments could affect the price and/or delivery of energy, require further improvements to our distribution systems to address changing load demands and could make portions of our electric system power supply and transmission and/or distribution facilities obsolete prior to the end of their useful lives.
Our supply chain, material costs, and capital investment program may be negatively impacted by: • Unanticipated price increases due to recent macroeconomic factors, such as inflation, including wage inflation, or rising demand for raw materials associated with the Energy Transition; and • Supply restrictions beyond our control or the control of our suppliers such as disruption of the freight system (e.g. railroad labor union strikes), increased environmental threats from weather-related disasters, rising demand for raw materials associated with the Energy Transition and/or geopolitical unrest (e.g.
Our supply chain, material costs, and capital investment program may be negatively impacted by: • Unanticipated price increases due to recent macroeconomic factors, such as inflation, including wage inflation, or rising demand for raw materials associated with the Energy Transition; and • Supply restrictions beyond our control or the control of our suppliers such as disruption of the freight system (e.g. labor union strikes), increased environmental threats from weather-related disasters, rising demand for raw materials associated with the Energy Transition and/or geopolitical unrest (e.g.
Our senior unsecured debt rating is Baa2 (Stable outlook) by Moody’s; BBB+ (Stable outlook) by S&P; and BBB+ (Stable outlook) by Fitch. Reduction of our investment grade credit ratings could impair our ability to refinance or repay our existing debt and complete new financings on reasonable terms.
Our senior unsecured debt rating is Baa2 (Stable outlook) by Moody’s; BBB+ (Stable outlook) by S&P; and BBB+ (Negative outlook) by Fitch. Reduction of our investment grade credit ratings could impair our ability to refinance or repay our existing debt and complete new financings on reasonable terms.
New or more stringent regulations or other energy efficiency requirements could require us to incur significant additional costs relating to, among other things, the installation of additional emission control equipment, the acceleration of capital expenditures, the purchase of additional emissions allowances or offsets, the acquisition or development of additional energy supply from renewable resources, the closure or capacity reductions of coal-fired power generation facilities or conversion to natural gas, and potential increased production from our combined cycle natural gas-fired generating units.
New or more stringent regulations or other energy efficiency requirements could require us to incur significant additional costs relating to, among other things, the installation of additional emission control equipment, the acceleration of capital expenditures, the purchase of additional emissions allowances or offsets, the acquisition or development of additional energy supply from renewable resources, the closure or capacity reductions of coal-fired power generation facilities or conversion to alternative fuels, and potential increased production from our combined cycle natural gas-fired generating units.
The successful execution of our capital investment program depends on, or could be affected by, a variety of factors that include, but are not limited to: availability of low cost capital to fund projects, weather conditions, effective management of projects, availability of qualified construction personnel including contractors, changes in commodity and other prices, impacts of supply chain disruptions on availability and cost of materials, governmental approvals and permitting, regulatory cost recovery and return on investment.
The successful execution of our capital investment program depends on, or could be affected by, a variety of factors that include, but are not limited to: access to capital to fund projects, weather conditions, effective management of projects, availability of qualified construction personnel including contractors, changes in commodity and other prices, impacts of supply chain disruptions on availability and cost of materials, governmental approvals and permitting, regulatory cost recovery and return on investment.
Our regulated Electric and Gas Utilities are subject to cost-of-service/rate-of-return regulation and earnings oversight from federal and eight state utility commissions. This regulatory treatment does not provide any assurance as to achievement of desired earnings levels. Our customer rates are regulated based on an analysis of our costs and investments, as reviewed and approved in regulatory proceedings.
Our regulated Utilities are subject to cost-of-service/rate-of-return regulation and earnings oversight from federal and eight state utility commissions. This regulatory treatment does not provide any assurance as to achievement of desired earnings levels. Our customer rates are regulated based on an analysis of our costs and investments, as reviewed and approved in regulatory proceedings.
Requirements to post collateral may cause significant liquidity issues by reducing our ability to use cash for investment or other corporate purposes or may require us to increase our level of debt. Further, a requirement for our counterparties to post collateral could result in additional costs being passed on to us, thereby decreasing our profitability.
Requirements to post collateral may cause significant liquidity issues by reducing our ability to use cash for investment or other corporate purposes or may require us to increase our level of debt. Further, a requirement for our counterparties to post collateral could result in additional costs being passed on to us, thereby decreasing our profitability. ITEM 1B.
Each of our Electric and Gas Utilities are permitted to recover certain costs (such as increased fuel and purchased power costs, including costs from certain severe weather events, or integrity capital investments) outside of a base rate review in order to stabilize customer rates and reduce regulatory lag.
Each of our Utilities are permitted to recover certain costs (such as increased fuel and purchased power costs, including costs from certain severe weather events, or integrity capital investments) outside of a base rate review in order to stabilize customer rates and reduce regulatory lag.
Each of these factors described above could materially affect demand for electricity and natural gas which would impact our financial operating results including earnings, cash flow and liquidity. 27 Table of Contents If macroeconomic or other conditions adversely affect operations or require us to make changes to our strategic business plan, we may be forced to record a non-cash goodwill impairment charge.
Each of these factors described above could materially affect demand for electricity and natural gas which would impact our financial operating results including earnings, cash flow and liquidity. If macroeconomic or other conditions adversely affect operations or require us to make changes to our strategic business plan, we may be forced to record a non-cash goodwill impairment charge.
Our utility businesses are seasonal businesses and weather conditions and patterns can have a material impact on our operating performance. Demand for electricity is typically greater in the summer and winter months associated with cooling and heating, respectively.
Our Utilities are seasonal businesses and weather conditions and patterns can have a material impact on our operating performance. Demand for electricity is typically greater in the summer and winter months associated with cooling and heating, respectively.
More stringent environmental laws or regulations could result in additional costs of operation for existing facilities or impede the development of new facilities. There is significant uncertainty regarding if and when new climate legislation, regulations or administrative policies will be adopted to reduce or limit GHG and the impact any such regulations would have on us.
More stringent environmental laws or regulations could result in additional costs of operation for existing facilities or impede the development of new facilities. 24 Table of Contents There is significant uncertainty regarding if and when new climate legislation, regulations or administrative policies will be adopted to reduce or limit GHG and the impact any such regulations would have on us.
The occurrence of any of these events may not be fully covered by our insurance; • Weather, natural conditions and disasters including impacts from climate change (discussed above); • Acts of sabotage, terrorism or other malicious attacks. Damage to our facilities due to deliberate acts could lead to outages or other adverse effects; • Equipment and processes.
The occurrence of any of these events may not be fully covered by our insurance; • Weather, natural conditions and disasters including impacts from climate change (discussed below); • Acts of sabotage, terrorism or other malicious physical attacks. Damage to our facilities due to deliberate acts could lead to outages or other adverse effects; • Equipment and processes.
Failure or inability to comply with evolving environmental regulations may result in the imposition of fines, penalties and injunctive measures affecting operating assets. 23 Table of Contents Our business segments may not be successful in recovering increased capital and operating costs incurred to comply with new environmental regulations through existing regulatory rate structures and contracts with customers.
Failure or inability to comply with evolving environmental regulations may result in the imposition of fines, penalties and injunctive measures affecting operating assets. Our business segments may not be successful in recovering increased capital and operating costs incurred to comply with new environmental regulations through existing regulatory rate structures and contracts with customers.
Increased capital and operating costs to comply with increasingly stringent laws and regulations, unexpected engineering, environmental and geological problems, and unanticipated cost overruns could negatively impact our results of operations; • Supply chain challenges (discussed above); • Workforce capabilities and labor relations (discussed above); and • Public opposition.
Increased capital and operating costs to comply with increasingly stringent laws and regulations, unexpected engineering, environmental and geological problems, and unanticipated cost overruns could negatively impact our results of operations; • Supply chain challenges (discussed above); • Workforce capabilities and labor relations (discussed above); and 26 Table of Contents • Public opposition.
Our utility businesses are impacted by economic cycles and the competitiveness of the commercial and industrial customers we serve. Any economic downturn, inflation, disruption of financial markets, or reduced incentives by state government for economic development could adversely affect the financial condition of our customers and demand for their products or services.
Our Utilities are impacted by economic cycles and the competitiveness of the commercial and industrial customers we serve. Any economic downturn, inflation, disruption of financial markets, or reduced incentives by state government for economic development could adversely affect the financial condition of our customers and demand for their products or services.
We had approximately $1.3 billion of goodwill on our consolidated balance sheets as of December 31, 2022. If we make changes in our strategic business plan and growth strategy, or if macroeconomic or other conditions adversely affect operations in any of our businesses, we may be forced to record a non-cash impairment charge.
We had approximately $1.3 billion of goodwill on our consolidated balance sheets as of December 31, 2023. If we make changes in our strategic business plan and growth strategy, or if macroeconomic or other conditions adversely affect operations in any of our businesses, we may be required to record a non-cash impairment charge.
The inability to obtain required governmental permits and approvals along with the cost of complying with or satisfying conditions imposed upon such approvals could negatively impact our ability to operate and our results of operations; 26 Table of Contents • Operational limitations.
The inability to obtain required governmental permits and approvals along with the cost of complying with or satisfying conditions imposed upon such approvals could negatively impact our ability to operate and our results of operations; • Operational limitations.
Such directives or other requirements may require expenditure of significant additional resources to respond to cyberattacks, to continue to modify or enhance protective measures, or to assess, investigate and remediate any critical infrastructure security vulnerabilities.
Such directives or other requirements may require expenditure of significant additional resources to respond to cybersecurity incidents, to continue to modify or enhance protective measures, or to assess, investigate and remediate any critical infrastructure security vulnerabilities.
Accordingly, our utility operations have historically generated lower revenues, income and cash flows when weather conditions are cooler than normal in the summer and warmer than normal in the winter.
Accordingly, our Utilities have historically generated lower revenues, income and cash flows when weather conditions are cooler than normal in the summer and warmer than normal in the winter.
The coverage we currently have in place may not apply to a particular loss, or it may not be sufficient to cover all liabilities to which we may be subject, including liability and losses associated with wildfires, natural gas and storage field explosions, cyber-security breaches, environmental hazards and natural disasters.
The coverage we currently have in place may not apply to a particular loss, or it may not be sufficient to cover all liabilities to which we may be subject, including liability and losses associated with wildfires, natural gas and storage field explosions, cyber-security breaches, environmental hazards and natural disasters. We have a holding company corporate structure with multiple subsidiaries.
Supply chain challenges could negatively impact our operations. We rely on various suppliers in our supply chain for the materials necessary to execute on our capital investment program that is key to our strategic business plans and to respond to a significant unplanned event such as a natural disaster.
We rely on various suppliers in our supply chain for the materials necessary to execute on our capital investment program that is key to our strategic business plans and to respond to a significant unplanned event such as a natural disaster.
As benefit costs continue to rise, however, there is no assurance that the utility commissions will allow recovery of these increased costs. The rising employee benefit costs, or inadequate recovery of such costs, may adversely affect our financial operating results including earnings, cash flow, or liquidity. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
As benefit costs continue to rise, however, there is no assurance that the utility commissions will allow recovery of these increased costs. The rising employee benefit costs, or inadequate recovery of such costs, may adversely affect our financial operating results including earnings, cash flow, and liquidity.
Our continued success depends, in significant part, on our ability to execute our strategic business plans, including our growth strategy.
Our continued success depends, in significant part, on our ability to execute our strategic business plans.
We have a holding company corporate structure with multiple subsidiaries. Corporate dividends and debt payments are dependent upon cash distributions to the holding company from the subsidiaries. As a holding company, our investments in our subsidiaries are our primary assets.
Corporate dividends and debt payments are dependent upon cash distributions to the holding company from the subsidiaries. As a holding company, our investments in our subsidiaries are our primary assets.
Cyberattacks, terrorism or other malicious acts targeting electronic control systems could result in a full or partial disruption of our electric and/or natural gas operations. Attacks targeting other key technology systems, including our third-party vendors’ information systems, could further add to a full or partial disruption of our operations. Recent geopolitical conflicts (e.g.
Cybersecurity incidents, terrorism or other malicious acts targeting electronic control systems could result in a full or partial disruption of our electric and/or natural gas operations. Attacks targeting other key technology systems, including our third-party vendors’ information systems, could further add to a full or partial disruption of our operations.
Severe weather events, such as snow and ice storms (e.g., Winter Storm Uri), fire, and strong winds could negatively impact our operations, including our ability to provide energy safely, reliably and profitably and our ability to complete construction, expansion or refurbishment of facilities as planned.
Severe weather events, such as snow and ice storms (e.g., Winter Storm Uri), fire, and strong winds could negatively impact our operations, including our ability to provide energy safely, reliably and profitably and our ability to complete construction, expansion or refurbishment of facilities as planned. Climate change may intensify these events or increase the frequency of their occurrence.
Transition risks of climate change include changes to the energy systems as a result of new technologies, changing customer demand and/or expectations and voluntary GHG reduction goals, as well as local, state or federal regulatory requirements (discussed above) intended to reduce GHG emissions.
Over time, we may need to make additional investments to protect our facilities from physical risks of climate change. Transition risks of climate change include changes to the energy systems as a result of new technologies, changing customer demand and/or expectations and voluntary GHG reduction goals, as well as local, state or federal regulatory requirements (discussed above).
See additional information in “ Critical Accounting Estimates ” under Item 7 , Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
See additional information in “ Critical Accounting Estimates ” under Item 7 , Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 28 Table of Contents FINANCIAL RISKS A sub-investment grade credit rating could impact our ability to access capital markets.
Russia's invasion of Ukraine) have increased the risk of cyberattack. Any disruption of these operations could result in a loss of service to customers and associated revenues, as well as significant expense to repair damages and remedy security breaches.
Any disruption of our electric and/or natural gas operations could result in a loss of service to customers and associated revenues, as well as significant expense to repair damages and remedy security breaches.
To the extent weather conditions are affected by climate change, fluctuations in customers’ energy usage could be magnified. Climate change may lead to increased intensity and frequency of storms, resulting in increased likelihood of fire, wind and extreme temperature events.
Climate change may lead to increased intensity and frequency of storms, resulting in increased likelihood of fire, wind and extreme temperature events.
This could come from increased use of behind the meter technology, such as residential solar and storage. Risk of investor pressure over climate risk and/or ESG standards, activist campaigns against coal producers, employee preferences to work for sustainable companies and consumers preference for renewable energy could impact our reputation and overall access to capital and/or adequate insurance policies.
Risk of investor pressure over climate risk and/or ESG standards, activist campaigns against coal producers, employee preferences to work for companies with certain sustainability goals and consumers preference for renewable energy could impact our reputation, ability to attract and retain an appropriately trained workforce, and overall access to capital and/or adequate insurance policies.
In addition, each subsidiary’s ability to pay dividends to us depends on any applicable contractual or regulatory restrictions that may include requirements to maintain minimum levels of cash, working capital, equity or debt service funds.
In addition, each subsidiary’s ability to pay dividends to us depends on any applicable contractual or regulatory restrictions that may include requirements to maintain minimum levels of cash, working capital, equity or debt service funds. 29 Table of Contents There is no assurance as to the amount, if any, of future dividends to the holding company because these subsidiaries depend on future earnings, capital requirements and financial conditions to fund such dividends.
Our operations are subject to various conditions that can result in fluctuations in customer usage, including customer growth and general economic conditions in our service territories, weather conditions, and responses to price increases and technological improvements.
Despite our implementation of security measures and safeguards, all of our technology systems may still be vulnerable to disability, failures or unauthorized access. 27 Table of Contents Our operations are subject to various conditions that can result in fluctuations in customer usage, including customer growth and general economic conditions in our service territories, weather conditions, and responses to price increases and technological improvements.
Our ability to avoid or minimize supply interruptions, work stoppages and labor disputes is also a risk with approximately 25% of our employees represented by unions. Failure to hire and retain qualified employees, including the ability to transfer significant internal historical knowledge and expertise to new employees, may adversely affect our ability to manage and operate our business.
Failure to hire and retain qualified employees, including the ability to transfer significant internal historical knowledge and expertise to new employees, may adversely affect our ability to manage and operate our business.
As part of our strategic plan, we will need to attract and retain personnel who are qualified to implement our strategy and may need to retrain or re-skill certain employees to support our long-term objectives. The nature of our business subjects us to climate-related risk, stemming from both physical risk and transition risk of climate change, over varying time horizons.
As part of our strategic business plans, we will need to attract and retain personnel who are qualified to implement our strategy and may need to retrain or re-skill certain employees to support our long-term objectives. 25 Table of Contents Supply chain challenges could negatively impact our operations.
Recent trends, such as higher turnover, a competitive and tight labor market and an aging workforce may lead to higher costs and increased risk of negative outcomes for safety, compliance, customer service, and operations. Our ability to transition and replace our retirement-eligible utility employees is a risk; at December 31, 2022, approximately 19% of our employees were eligible for retirement.
OPERATING RISKS Failure to attract and retain an appropriately qualified workforce could have a negative impact on our operations and long-term business strategy. Recent trends, such as a competitive and tight labor market and an aging workforce may lead to higher costs and increased risk of negative outcomes for safety, compliance, customer service, and operations.
Physical risks of climate change refer to risks to our facilities or operations that may result from changes in the physical climate, such as changes to temperature and weather patterns. Our utility businesses are seasonal businesses and weather conditions and patterns can have a material impact on our operating performance.
The nature of our business subjects us to climate-related risk, stemming from both physical risk and transition risk of climate change, over varying time horizons. Physical risks of climate change refer to risks to our facilities or operations that may result from changes in the physical climate, such as changes to temperature and weather patterns.
Russian invasion of Ukraine). An inability to successfully manage challenges in our supply chain network could materially affect our financial operating results including earnings, cash flow and liquidity. 25 Table of Contents Cyberattacks, terrorism, or other malicious acts targeting our key technology systems could disrupt our operations or lead to a loss or misuse of confidential and proprietary information.
Cybersecurity incidents, terrorism, or other malicious acts targeting our key technology systems could disrupt our operations or lead to a loss or misuse of confidential and proprietary information.
Possible additional measures would be evaluated in the context of then-prevailing market conditions, prudent financial management and any applicable regulatory requirements. 28 Table of Contents Our use of derivative financial instruments as hedges against commodity prices and financial market risks could result in material financial losses.
Possible additional measures would be evaluated in the context of then-prevailing market conditions, prudent financial management and any applicable regulatory requirements. Costs associated with our healthcare plans and other benefits could increase significantly. The costs of providing healthcare benefits to our employees and retirees have increased substantially in recent years.
See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for further information 29 Table of Contents Costs associated with our healthcare plans and other benefits could increase significantly. The costs of providing healthcare benefits to our employees and retirees have increased substantially in recent years.
See Note 13 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for further information Our use of derivative financial instruments as hedges against commodity prices and financial market risks could result in material financial losses.
We have instituted security measures and safeguards to protect our operational systems and information technology assets, including certain safeguards required by FERC. Despite our implementation of security measures and safeguards, all of our technology systems may still be vulnerable to disability, failures or unauthorized access.
As discussed in Item 1C in this Annual Report on Form 10-K, we have instituted security measures and safeguards to protect our operational systems and information technology assets against cybersecurity threats, including certain safeguards required by NERC.
Removed
Our plans and strategy include building sustainable operations and supporting the Energy Transition; consistently outperforming utility industry averages in key safety metrics; modernizing utility infrastructure; transforming the customer experience; growing our electric and natural gas customer load; and pursuing operational efficiencies.
Added
Our strategy is centered on four critical priorities: Growth— to grow strategically and achieve strong financial performance, Operational Excellence— delivering safe, reliable and cost-effective energy to meet our customers’ needs, Transformation —be a simple and connected company positioned for growth, and People & Culture —retain and attract a talented, engaged and thriving team.
Removed
Our business, financial condition, results of operations and prospects may be materially adversely affected due to adverse results of litigation. Material legal proceedings are summarized in Note 3 of Notes to Consolidated Financial Statement in this Annual Report on Form 10-K.
Added
Our ability to transition and replace our retirement-eligible utility employees is a risk; at December 31, 2023, approximately 18% of our employees were eligible for retirement. Our ability to avoid or minimize work stoppages and labor disputes is also a risk with approximately 25% of our employees represented by unions.
Removed
Unfavorable resolution of legal or administrative proceedings in which we are involved or other future legal or administrative proceedings could have an adverse effect on our financial operating results, including earnings, cash flow and liquidity. 24 Table of Contents OPERATING RISKS Failure to attract and retain an appropriately qualified workforce could have a negative impact on our operations and long-term business strategy.
Added
Russia-Ukraine and Middle East conflicts). An inability to successfully manage challenges in our supply chain network could materially affect our ability to execute our business plan and growth strategy and our financial operating results including earnings, cash flow and liquidity.
Removed
Our plans and strategy include building sustainable operations and supporting the Energy Transition; consistently outperforming utility industry averages in key safety metrics; modernizing utility infrastructure; transforming the customer experience; growing our electric and natural gas customer load; and pursuing operating efficiencies.
Added
Our utility businesses are seasonal businesses and weather conditions and patterns can have a material impact on our operating results. To the extent weather conditions are affected by climate change, fluctuations in commodity prices and customers’ energy usage could be magnified.
Removed
Unmitigated impacts of climate change may intensify these events or increase the frequency of their occurrence. Over time, we may need to make additional investments to protect our facilities from physical risks of climate change.
Added
This could come from increased use of behind the meter technology, such as residential solar and storage.
Removed
Widespread public health crises and epidemics or pandemics could negatively affect our business operations, results of operations, financial condition and cash flows. We are subject to the impacts of widespread public health crises, epidemics and pandemics, including, but not limited to, impacts on the global, national or local economies, capital and credit markets, our workforce, customers and suppliers.
Added
The utility industry has been the target of several cyberattacks on operational systems and has seen an increased volume and sophistication of cybersecurity incidents from international activist organizations, other nation state actors and individuals. To date, we have not experienced a cybersecurity incident that has had a material impact on our business or results of operations.
Removed
There is no assurance that our businesses will be able to operate without material adverse impacts depending on the nature of the public health crisis, epidemic or pandemic. The ultimate severity, duration and impact of public health crises, epidemics and pandemics cannot be predicted.
Removed
Additionally, there is no assurance that vaccines, or other treatments, are or will be widely available or effective, or that the public will be willing to participate, in an effort to contain the spread of disease.
Removed
Actions taken in response to such crises by federal, state and local government or regulatory agencies may adversely affect our financial operating results including earnings, cash flow and liquidity. FINANCIAL RISKS A sub-investment grade credit rating could impact our ability to access capital markets.
Removed
There is no assurance as to the amount, if any, of future dividends to the holding company because these subsidiaries depend on future earnings, capital requirements and financial conditions to fund such dividends.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

6 edited+5 added−3 removed1 unchanged
ITEM 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Sections 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95 of this Annual Report. 30 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Linden R.
ITEM 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Sections 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95 of this Annual Report. 31 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Linden R.
Evans, age 60, has been President and Chief Executive Officer since January 1, 2019, President and Chief Operating Officer from 2016 through 2018, and President and Chief Operating Officer - Utilities from 2004 through 2015. Mr.
Evans, age 61, has been President and Chief Executive Officer since January 1, 2019, President and Chief Operating Officer from 2016 through 2018, and President and Chief Operating Officer - Utilities from 2004 through 2015. Mr.
Evans served as the Vice President and General Manager of our former communication subsidiary in 2003 and 2004, and Associate Counsel from 2001 to 2003. Mr. Evans has 21 years of experience with the Company. Brian G. Iverson, age 60, has been Senior Vice President, General Counsel and Chief Compliance Officer since August 26, 2019.
Evans served as the Vice President and General Manager of our former communication subsidiary in 2003 and 2004, and Associate Counsel from 2001 to 2003. Mr. Evans has 22 years of experience with the Company. Brian G. Iverson, age 61, has been Senior Vice President, General Counsel and Chief Compliance Officer since August 26, 2019.
Prior to joining the company, he was an Information Technology consultant to Ontic Inc., a global provider of parts and services for legacy aerospace platforms, from January 2020 to July 2020, and Chief Information Officer for BBA Aviation, a global aviation support and aftermarket services provider, from February 2012 to January 2020. Richard W.
Prior to joining the company, he was an Information Technology consultant to Ontic Inc., a global provider of parts and services for legacy aerospace platforms, from January 2020 to July 2020, and Chief Information Officer for BBA Aviation, a global aviation support and aftermarket services provider, from February 2012 to January 2020. Kimberly F.
Mr. Iverson has 19 years of experience with the Company. Erik D. Keller , age 59, joined the Company as Senior Vice President and Chief Information Officer on July 27, 2020.
Jones has a total of 22 years of experience with the Company and has advanced through roles of increasing responsibility in finance, accounting, corporate services, regulatory and utility operations. Erik D. Keller , age 60, joined the Company as Senior Vice President and Chief Information Officer on July 27, 2020.
Landis, age 48, has been Senior Vice President - Chief Human Resources Officer since February 1, 2017. She served as Vice President of Human Resources from April 2016 through January 2017, Director of Corporate Human Resources and Talent Management from 2013 to April 2016, and Director of Organization Development from 2008 to 2013. Ms.
Nooney , age 52, has been Senior Vice President and Chief Financial Officer since April 1, 2023. She served as Vice President – Treasurer from 2015 to 2023, and also served as the Corporate Controller from 2018 to 2022. Ms.
Removed
Kinzley, age 57, has been Senior Vice President and Chief Financial Officer since 2015. He served as Vice President - Corporate Controller from 2013 to 2014, Vice President - Strategic Planning and Development from 2008 to 2013, and as Director of Corporate Development from 2000 to 2008. Mr. Kinzley has 23 years of experience with the Company.
Added
Mr. Iverson has 20 years of experience with the Company. Todd Jacobs, age 55, has been Senior Vice President Growth and Strategy since June 15, 2023. Mr.
Removed
As previously announced, Mr. Kinzley intends to retire in mid-2023 He will continue to serve in his current position until March 31, 2023, after which Kimberly F. Nooney, the Company’s Vice President, Treasurer, will succeed Mr. Kinzley and Mr. Kinzley will continue as Senior Vice President until his retirement to provide for a reasonable transition period. Jennifer C.
Added
Jacobs spent seven years in operations roles at the company, serving as the state leader for our Kansas and Arkansas utilities from 2014 to 2019 and then as the segment leader of our natural gas utilities from 2019 to 2021.
Removed
Landis has 21 years of experience with the Company. 31 Table of Contents PART II
Added
He led our strategic planning and growth efforts from 2021 to 2023 before moving into this newly expanded role in 2023, which includes growth, strategic planning, business development, regulatory, government affairs, sustainability, communications and community affairs. He served in legal and corporate services leadership roles with other investor-owned utilities before joining the company in 2014. Mr.
Added
Jacobs served on active duty for seven years as a U.S. Army officer. Marne M. Jones , age 50, has been Senior Vice President Utilities since June 15, 2023. She served as VP Electric Utilities from 2021 to 2023, Vice President Regulatory and Finance from 2018 to 2021 and Vice President Regulatory from 2016 to 2018. Ms.
Added
Nooney has a total of 27 years of experience with the Company across numerous roles within accounting, internal audit, corporate development, accounting systems, treasury and financial planning and analysis. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed3 unchanged
COMPARATIVE STOCK PERFORMANCE The following performance graph compares the cumulative total stockholder return from Black Hills Corporation common stock, as compared with the S&P 500 Index, S&P 500 Utilities index, and our Performance Peer Group for the past five years. The graph assumes an initial investment of $100 on December 31, 2017, and assumes all dividends were reinvested.
COMPARATIVE STOCK PERFORMANCE The following performance graph compares the cumulative total stockholder return from Black Hills Corporation common stock, as compared with the S&P 500 Index, S&P 500 Utilities index, and our Performance Peer Group for the past five years. The graph assumes an initial investment of $100 on December 31, 2018, and assumes all dividends were reinvested.
UNREGISTERED SECURITIES ISSUED There were no unregistered securities sold during 2022. 32 Table of Contents SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS See Item 12 in this Annual Report on Form 10-K for information regarding Securities Authorized for Issuance Under Equity Compensation Plans.
UNREGISTERED SECURITIES ISSUED There were no unregistered securities sold during 2023. 33 Table of Contents SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS See Item 12 in this Annual Report on Form 10-K for information regarding Securities Authorized for Issuance Under Equity Compensation Plans.
ISSUER PURCHASES OF EQUITY SECURITIES The following table contains monthly information about our acquisitions of equity securities for the three months ended December 31, 2022: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs October 1, 2022 - October 31, 2022 2 $ 67.73 — — November 1, 2022 - November 30, 2022 294 $ 64.75 — — December 1, 2022 - December 31, 2022 10,035 $ 68.87 — — Total 10,331 $ 68.75 — — ____________________ (a) Shares were acquired under the share withholding provisions of the Amended and Restated 2015 Omnibus Incentive Plan for payment of taxes associated with the vesting of various equity compensation plans.
ISSUER PURCHASES OF EQUITY SECURITIES The following table contains monthly information about our acquisitions of equity securities for the three months ended December 31, 2023: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 47 $ 48.44 — — November 1, 2023 - November 30, 2023 991 $ 51.52 — — December 1, 2023 - December 31, 2023 7,018 $ 54.62 — — Total 8,056 $ 54.20 — — ____________________ (a) Shares were acquired under the share withholding provisions of the Amended and Restated 2015 Omnibus Incentive Plan for payment of taxes associated with the vesting of various equity compensation plans.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the symbol BKH. As of January 31, 2023, we had 3,403 common shareholders of record and 70,195 beneficial owners, representing all 50 states, the District of Columbia and 6 foreign countries.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the symbol BKH.
Years ended December 31, 2017 2018 2019 2020 2021 2022 Black Hills Corporation $ 100.00 $ 107.97 $ 138.83 $ 112.34 $ 133.55 $ 137.65 S&P 500 100.00 95.62 125.72 148.85 191.58 156.88 S&P 500 Utilities 100.00 104.11 131.54 132.18 155.53 157.97 Performance Peer Group (a) 100.00 103.67 130.41 128.89 150.96 152.70 ____________________ (a) Performance Peer Group represents the Edison Electric Institute Index, which was used in our 2022 Proxy Statement filed with the SEC on March 17, 2022.
As of December 31, 2018 2019 2020 2021 2022 2023 Black Hills Corporation $ 100.00 $ 128.59 $ 104.05 $ 123.69 $ 127.49 $ 102.08 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Utilities 100.00 126.35 126.96 149.39 151.73 140.99 Performance Peer Group (a) 100.00 125.79 124.33 145.61 147.29 134.47 ____________________ (a) Performance Peer Group represents the Edison Electric Institute Index, which was used in our 2023 Proxy Statement filed with the SEC on March 15, 2023.
Added
As of January 31, 2024, we had 3,244 common shareholders of record and 63,074 beneficial owners, representing all 50 states, the District of Columbia, Puerto Rico and 5 foreign countries.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33 Executive Summary 33 Key Elements of our Business Strategy 34 Recent Developments 38 Results of Operations - Consolidated Summary and Overview 39 Non-GAAP Financial Measure 40 Electric Utilities 41 Gas Utilities 44 Corporate and Other 46 Consolidated Interest Expense, Impairment of Investment, Other Income (Expense) and Income Tax Benefit (Expense) 46 Liquidity and Capital Resources 47 Cash Flow Activities 47 Capital Resources 49 Credit Ratings 50 Capital Requirements 50 Critical Accounting Estimates 52 ITEM 7A.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34 Executive Summary 34 Key Elements of our Business Strategy 35 Recent Developments 38 Results of Operations - Consolidated Summary and Overview 40 Non-GAAP Financial Measure 40 Electric Utilities 41 Gas Utilities 43 Corporate and Other 46 Consolidated Interest Expense, Impairment of Investment, Other Income (Expense) and Income Tax Benefit (Expense) 46 Liquidity and Capital Resources 47 Cash Flow Activities 47 Capital Resources 49 Credit Ratings 50 Capital Requirements 51 Critical Accounting Estimates 52 ITEM 7A.
Business Description and Significant Accounting Policies 66 Note 2. Regulatory Matters 74 Note 3. Commitments, Contingencies and Guarantees 78 Note 4. Revenue 80 Note 5. Property, Plant and Equipment 82 Note 6. Jointly Owned Facilities 83 Note 7. Asset Retirement Obligations 83 Note 8. Financing 84 Note 9. Risk Management and Derivatives 88 Note 10.
Business Description and Significant Accounting Policies 66 Note 2. Regulatory Matters 74 Note 3. Commitments, Contingencies and Guarantees 76 Note 4. Revenue 79 Note 5. Property, Plant and Equipment 80 Note 6. Jointly Owned Facilities 81 Note 7. Asset Retirement Obligations 81 Note 8. Financing 82 Note 9. Risk Management and Derivatives 85 Note 10.
Fair Value Measurements 91 Note 11. Other Comprehensive Income 93 Note 12. Variable Interest Entity 94 Note 13. Employee Benefit Plans 94 Note 14. Share-based Compensation Plans 100 Note 15. Income Taxes 103 Note 16. Business Segment Information 106 Note 17. Subsequent Events 108
Fair Value Measurements 88 Note 11. Other Comprehensive Income 89 Note 12. Variable Interest Entity 90 Note 13. Employee Benefit Plans 90 Note 14. Share-based Compensation Plans 95 Note 15. Income Taxes 98 Note 16. Business Segment Information 100 Note 17. Subsequent Events 101

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+35 added−45 removed57 unchanged
We have established utility money pool agreements which address these requirements. These agreements are on file with the FERC and appropriate state regulators. Under the utility money pool agreements, our utilities may, at their option, borrow and extend short-term loans to our other utilities at market-based rates.
We have established utility money pool agreements which address these requirements. These agreements are on file with the FERC and appropriate state regulators. Under the utility money pool agreements, our utilities may, at their option, borrow and extend short-term loans to the utility money pool at market-based rates.
Long-term Debt For information on our long-term debt, see Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Covenant Requirements The Revolving Credit Facility and Wyoming Electric’s financing agreements contain covenant requirements. We were in compliance with these covenants as of December 31, 2022.
Long-term Debt For information on our long-term debt, see Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Covenant Requirements The Revolving Credit Facility and Wyoming Electric’s financing agreements contain covenant requirements. We were in compliance with these covenants as of December 31, 2023.
We consider ourself a domestic electric and natural gas utility company. We have provided energy and served customers for 139 years, since the 1883 gold rush days in Deadwood, South Dakota. Throughout our history, the common thread that unites the past to the present is our commitment to serve our customers and communities.
We consider ourself a domestic electric and natural gas utility company. We have provided energy and served customers for 140 years, since the 1883 gold rush days in Deadwood, South Dakota. Throughout our history, the common thread that unites the past to the present is our commitment to serve our customers and communities.
At December 31, 2022, we had sufficient liquidity to cover collateral that could be required to be posted under these contracts. The cash collateral we were required to post at December 31, 2022 was not material. See Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
At December 31, 2023, we had sufficient liquidity to cover collateral that could be required to be posted under these contracts. The cash collateral we were required to post at December 31, 2023 was not material. See Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
We plan to fund our capital plan and strategic objectives by using cash generated from operating activities and various financing alternatives, which could include our Revolving Credit Facility, our CP Program, the issuance of common stock under our ATM program or in an opportunistic block trade.
We plan to fund our capital plan and strategic objectives by using cash generated from operating activities and various financing alternatives, which could include our Revolving Credit Facility, our CP Program, debt offerings, the issuance of common stock under our ATM program or in an opportunistic block trade.
Our primary sources of cash are generated from our operating activities, five-year Revolving Credit Facility, CP Program, ATM and ability to access the public and private capital markets through debt and equity securities offerings when necessary.
Our primary sources of cash are generated from our operating activities, Revolving Credit Facility, CP Program, ATM and ability to access the public and private capital markets through debt and equity securities offerings when necessary.
Guarantees We provide various guarantees, which represent off-balance sheet commitments, supporting certain of our subsidiaries under specified agreements or transactions. For more information on these guarantees, see Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 51 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP.
Guarantees We provide various guarantees, which represent off-balance sheet commitments, supporting certain of our subsidiaries under specified agreements or transactions. For more information on these guarantees, see Note 3 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP.
The fuel can be delivered to our adjacent power plants at very cost competitive prices (i.e., $1.09 per MMBtu for year ended December 31, 2022) when compared to alternatives. Nearly all the mine’s production is sold to these on-site generation facilities under long-term supply contracts. Approximately one-half of our production is sold under cost-plus contracts with affiliates.
The fuel can be delivered to our adjacent power plants at very cost competitive prices (i.e., $1.14 per MMBtu for year ended December 31, 2023) when compared to alternatives. Nearly all the mine’s production is sold to these on-site generation facilities under long-term supply contracts. Approximately one-half of our production is sold under cost-plus contracts with affiliates.
Those capital expenditures also earn a rate of return authorized by the commissions in the jurisdictions in which we operate. 50 Table of Contents Our historical capital expenditures by reportable segment are shown in Note 16 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Those capital expenditures also earn a rate of return authorized by the commissions in the jurisdictions in which we operate. Our historical capital expenditures by reportable segment are shown in Note 16 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Electric and Gas Utility margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes from the measure. Electric Utility margin is calculated as operating revenue less cost of fuel and purchased power.
Electric and Gas Utility margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes from the measure. 40 Table of Contents Electric Utility margin is calculated as operating revenue less cost of fuel and purchased power.
The renewable energy from these PPAs will be used to serve our expanding partnerships with data centers. • We have supported enabling legislation in Wyoming for the growing blockchain businesses while implementing our own BCIS Tariff to serve these customers.
The renewable energy from these PPAs will be used to serve our expanding partnerships with data centers. • Developed BCIS Tariff to Facilitate Growth: We have supported enabling legislation in Wyoming for the growing blockchain businesses while implementing our own BCIS Tariff to serve these customers.
Most notably, the IRA includes provisions that extend and expand the production and investment tax credits for wind and solar; include energy storage, EVs, RNG, and carbon capture and sequestration; and allow for the transferability of clean energy tax credits on existing and qualifying new facilities.
Most notably, the IRA includes provisions that extend and expand the production and investment tax credits for wind and solar; includes energy storage, EVs, RNG, and carbon capture and sequestration; and allows for the transferability of clean energy tax credits on existing and qualifying new facilities.
For discussion and analysis for the year ended December 31, 2021 compared to 2020, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 15, 2022.
For discussion and analysis for the year ended December 31, 2022, compared to 2021, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 14, 2023.
Varying by reporting unit, weighted average cost of capital in the range of 6.9% to 7.0% and long-term growth rate projections of 1.75% were utilized in the goodwill impairment test performed as of October 1, 2022.
Varying by reporting unit, weighted average cost of capital in the range of 6.9% to 7.3% and long-term growth rate projections of 1.75% were utilized in the goodwill impairment test performed as of October 1, 2023.
Under the asset and liability method, deferred income taxes are recognized at currently enacted income tax rates, to reflect the tax effect of temporary differences between the financial and tax basis of assets and liabilities as well as operating loss and tax credit carryforwards.
The Company uses the asset and liability method in accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized at currently enacted income tax rates, to reflect the tax effect of temporary differences between the financial and tax basis of assets and liabilities as well as operating loss and tax credit carryforwards.
For the year ended December 31, Contracted generating facilities availability by fuel type (a) 2022 2021 2020 Coal (b) 91.5 % 86.7 % 94.3 % Natural gas and diesel oil 96.1 % 95.5 % 84.6 % Wind 93.7 % 95.8 % 95.1 % Total availability 94.4 % 93.2 % 89.2 % Wind Capacity Factor 34.7 % 34.0 % 31.8 % (a) Availability and Wind Capacity Factor are calculated using a weighted average based on capacity of our generating fleet.
For the year ended December 31, Contracted generating facilities availability by fuel type (a) 2023 2022 2021 Coal 93.7% 91.5% 86.7% Natural gas and diesel oil 92.1% 96.1% 95.5% Wind 92.5% 93.7% 95.8% Total availability 92.6% 94.4% 93.2% Wind Capacity Factor 37.4% 34.7% 34.0% (a) Availability and Wind Capacity Factor are calculated using a weighted average based on capacity of our generating fleet.
Electric Utility goals include Scope 1 emissions from electric utility generating units and Scope 3 emissions from purchased power for sales. Our Gas Utilities goal includes Scope 1 emissions from distribution system main and service lines.
Electric Utility goals include Scope 1 emissions from electric utility generating units and Scope 3 emissions from purchased power for sales. Our Gas Utilities goal initially included only Scope 1 emissions from distribution system main and service lines.
A small portion of the mine’s production is sold to off-site industrial customers and delivered by truck. Supporting the Energy Transition by proactively integrating alternative and renewable energy into our utility energy supply while mitigating customer rate impacts.
A small portion of the mine’s production is sold to off-site industrial customers and delivered by truck. Supporting the Energy Transition by proactively integrating alternative and renewable energy into our utility energy supply while mitigating customer rate impacts. A critical component of our strategy involves sustainable operations and supporting the Energy Transition.
On August 31, 2022, we announced a new "Net Zero by 2035" target for our Gas Utilities, which doubles the previous target of a 50% reduction by 2035 and expands the scope of the goal to all Scope 1 sources of methane emissions on our distribution system.
In August 2022, we announced a new "Net Zero by 2035" target for our Gas Utilities, which doubled the previous target of a 50% reduction by 2035 and expanded the scope of the goal to all Scope 1 sources of methane emissions on our distribution system.
The following table represents the credit ratings, outlook and risk profile of BHC at December 31, 2022: Rating Agency Senior Unsecured Rating Outlook S&P (a) BBB+ Stable Moody’s (b) Baa2 Stable Fitch (c) BBB+ Stable (a) On August 26, 2022, S&P reported BBB+ rating and maintained a Stable outlook.
The following table represents the credit ratings, outlook and risk profile of BHC at December 31, 2023: Rating Agency Senior Unsecured Rating Outlook S&P (a) BBB+ Stable Moody’s (b) Baa2 Stable Fitch (c) BBB+ Stable (a) On February 17, 2023, S&P reported BBB+ rating and maintained a Stable outlook.
We are proud of our track record of annual dividend increases for shareholders. 2022 represented our 52nd consecutive year of increasing dividends. In January 2023, our Board of Directors declared a quarterly dividend of $0.625 per share, equivalent to an annual dividend of $2.50 per share.
We are proud of our track record of annual dividend increases for shareholders. 2023 represented our 53rd consecutive year of increasing dividends. In January 2024, our Board of Directors declared a quarterly dividend of $0.65 per share, equivalent to an annual dividend of $2.60 per share.
Each entity records income taxes as if it were a separate taxpayer for both federal and state income tax purposes and consolidating adjustments are allocated to the subsidiaries based on separate company computations of taxable income or loss. The Company uses the asset and liability method in accounting for income taxes.
Income Taxes The Company and its subsidiaries file consolidated federal income tax returns. Each entity records income taxes as if it were a separate taxpayer for both federal and state income tax purposes and consolidating adjustments are allocated to the subsidiaries based on separate company computations of taxable income or loss.
As of December 31, 2022 and 2021, we had total regulatory assets of $653 million and $797 million, respectively, and total regulatory liabilities of $519 million and $503 million, respectively. See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further information.
As of December 31, 2023 and 2022, we had total regulatory assets of $480.1 million and $653.0 million, respectively, and total regulatory liabilities of $566.6 million and $518.6 million, respectively. See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further information.
In addition, we are committed to a more sustainable future by better managing our impacts to the planet, whether that is water usage, recycling, biodiversity, or other important measures, and remaining focused on our human capital through diversity and inclusion.
In addition, we are committed to a more sustainable future by better managing our impacts to the planet, whether that is water usage, recycling, biodiversity, or other important measures.
Gas Utilities • See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for recent rate review activity for Arkansas Gas and RMNG. • See Key Elements of our Business Strategy section above for discussion of recent developments related to our Gas Utilities' voluntary RNG and carbon offset programs.
Gas Utilities • See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for recent rate review activity for Arkansas Gas, Colorado Gas, RMNG and Wyoming Gas. • See Key Elements of our Business Strategy section above for discussion of recent developments related to BHERR's purchase of a RNG production facility in Iowa.
A significant portion of our capital expenditures are for safety, reliability and integrity of our system and is included in utility rate base and eligible for recovery from our utility customers with regulatory approval.
See above in Key Elements of our Business Strategy for forecasted capital expenditure requirements. A significant portion of our capital expenditures are for safety, reliability and integrity of our system and is included in utility rate base and eligible for recovery from our utility customers with regulatory approval.
See Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.
See additional information in Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 49 Table of Contents Equity For information regarding equity, see Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
(b) On December 20, 2022, Moody's reported our Baa2 rating and maintained a Stable outlook. (c) On October 6, 2022, Fitch reported BBB+ rating and maintained a Stable outlook. Certain fees and interest rates under our Revolving Credit Facility are based on our credit ratings at all three rating agencies.
(b) On December 21, 2023, Moody's reported our Baa2 rating and maintained a Stable outlook. (c) On January 26, 2024, Fitch reported BBB+ rating and revised to a Negative outlook. Certain fees and interest rates under our Revolving Credit Facility are based on our credit ratings at all three rating agencies.
We have demonstrated our ability to cost-effectively access the debt and equity markets, while maintaining our investment-grade issuer credit rating. 37 Table of Contents Recent Developments Macroeconomic Trends We are monitoring adverse macroeconomic trends including potential recession, inflationary pressures on the prices of commodities, materials, outside services and employee costs; supply chain constraints; rising interest rates and a competitive and tight labor market.
We have demonstrated our ability to cost-effectively access the debt and equity markets, while maintaining our investment-grade issuer credit rating. Recent Developments Macroeconomic Trends We continue to monitor challenging macroeconomic trends including supply chain disruptions, rising interest rates, potential recession and inflationary pressures on the prices of materials, outside services and employee costs.
Segment information does not include intercompany eliminations and all amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.
All amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.
A few recent examples of our initiatives to grow our business through creative solutions include: • In 2022, Wyoming Electric entered into two new PPAs with third parties to purchase up to 106 MW of wind energy and up to 150 MW of solar energy, upon construction of new renewable generation facilities (to be owned by third parties) which are expected to be completed by the end of 2023.
A few recent examples of our initiatives to grow our business as an energy solutions provider include: • Contracted Renewable Energy to Grow Data Center Partnerships: In 2022, Wyoming Electric entered into two new PPAs with third parties to purchase up to 106 MW of wind energy and up to 150 MW of solar energy, upon construction of new renewable generation facilities (owned by third parties).
We are committed to cleaner energy and a low carbon future, integrating the Energy Transition and more renewable energy into our overall strategy and decision making.
How we operate our company for the social good has never been more important. We are committed to cleaner energy and a low carbon future, integrating the Energy Transition and more renewable energy into our overall strategy and decision making.
Net Zero will be achieved through pipeline material and main replacements, advanced leak detection, third-party damage reduction, expanding the use of RNG and hydrogen, and utilizing carbon credit offsets.
Net Zero will be achieved through pipeline material and main replacements, advanced leak detection, third-party damage reduction, expanding the use of RNG and hydrogen, and utilizing carbon credit offsets. Since 2005, we have reduced GHG emissions intensity from our Electric Utilities by one-third.
Access to funds is dependent upon factors such as general economic and capital market conditions, regulatory authorizations and policies, the Company’s credit ratings, cash flows from routine operations and the credit ratings of counterparties.
In order to operate and grow our business, we need to consistently maintain the ability to raise capital on favorable terms. Access to funds is dependent upon factors such as general economic and capital market conditions, regulatory authorizations and policies, the Company’s credit ratings, cash flows from routine operations and the credit ratings of counterparties.
Goodwill We perform a goodwill impairment test on an annual basis or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. Our annual goodwill impairment testing date is as of October 1, which aligns with our financial planning process.
Goodwill We perform a goodwill impairment test on an annual basis or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired.
We see the IRA as generally supportive of our Energy Transition strategy and as having the potential to drive increased value for our customers and shareholders. We are still evaluating the impacts of the IRA provisions on our future capital projects. Explore opportunities as an energy solutions provider.
We see the IRA as generally supportive of our Energy Transition strategy with the potential to drive increased value for our customers and shareholders. We are still evaluating the impacts of the IRA provisions on our future capital projects. Deliver a competitive total return to investors and maintain an investment grade credit rating.
Another strategic initiative is to grow our business through creative energy solutions with new customers and partnerships. We see value creation by recruiting new customers and expanding existing partnerships with data centers and blockchain opportunities; exploring energy markets such as RTOs; and expanding our transmission capabilities.
We see value creation by recruiting new customers and expanding existing partnerships with data centers and blockchain opportunities; exploring energy markets such as RTOs; and expanding our transmission capabilities, establishing a RNG program and expanding our RNG portfolio.
Under the programmatic approach, obsolete, at-risk and vintage materials are replaced in a proactive and systematic time frame. We have removed all cast- and wrought-iron from our natural gas transmission and distribution systems and continue to replace aging infrastructure through programs that prioritize safety and reliability for our customers.
We have removed all cast- and wrought-iron from our natural gas transmission and distribution systems and continue to replace aging infrastructure through programs that prioritize safety and reliability for our customers.
To support our 2023 capital investment program, we have contracted materials for the majority of our largest forecasted projects. We continue to forecast multi-year key material requirements with suppliers to enhance predictable material availability, challenge vendor price increases to ensure best value and cost transparency and invest in our distribution network to ensure the safety and continuity of our system.
We continue to forecast multi-year key material requirements with suppliers to enhance predictable material availability, challenge vendor price increases to ensure best value and cost transparency and invest in our distribution network to ensure the safety and reliability of our system. We have also evaluated each of our forecasted projects and will prioritize them depending on future constraints.
This keeps our customers at the forefront of our decision-making, which is central to our values. 35 Table of Contents More of our customers, particularly our larger customers, are demanding cleaner sources of energy to meet their sustainability goals.
This keeps our customers at the forefront of our decision-making, which is central to our values. More of our customers, particularly our larger customers, are demanding cleaner sources of energy to meet their sustainability goals. In addition, there is more interest from consumers, regulators and legislators to increase the use of renewable and other alternative energy sources.
Our utilities own and operate large electric and natural gas infrastructure systems with a geographic footprint that spans nearly 1,600 miles. Our Electric Utilities own and operate 1,482 MW of generation capacity and 9,024 miles of transmission and distribution lines and our Gas Utilities own and operate approximately 47,000 miles of natural gas transmission and distribution pipelines.
Our Electric Utilities own and operate 1,394 MW of generation capacity and 9,106 miles of transmission and distribution lines and our Gas Utilities own and operate approximately 47,000 miles of natural gas transmission and distribution pipelines.
The IRP’s preferred options for South Dakota Electric in the near-term planning period through 2026 are the addition of 100 MW of renewable generation, the conversion of Neil Simpson II to natural gas in 2025 and consideration of up to 10 MW of battery storage. • On January 13, 2023, Colorado Electric submitted a unanimous settlement for its Clean Energy Plan filed May 25, 2022, with the CPUC.
The IRP’s preferred options for South Dakota Electric in the near-term planning period through 2026 are the addition of 100 MW of renewable generation, the conversion of Neil Simpson II to dual fuel (natural gas and coal) in 2025 and consideration of up to 20 MW of battery storage.
In June 2022, Wyoming Electric completed its first agreement, a five-year agreement to deliver up to 45 MW with an option to expand service up to 75 MW to a new customer in Cheyenne, Wyoming, under this Tariff. Energy will be sourced through the electric energy market and delivered through our Electric Utilities’ infrastructure.
In June 2022, Wyoming Electric completed its first agreement, with a new customer in Cheyenne, Wyoming, under this Tariff. This five-year agreement provides delivery of up to 45 MW with an option to expand service up to 75 MW, which was exercised by the customer in 2023.
Federal law places limits on the ability of public utilities within a holding company structure to declare dividends. Specifically, under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account. The utility subsidiaries’ dividends may be limited directly or indirectly by state regulatory commissions or bond indenture covenants.
Additionally, there are certain statutory limitations that could affect future cash dividends paid. Federal law places limits on the ability of public utilities within a holding company structure to declare dividends. Specifically, under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account.
Our Gas Utilities are authorized to use system safety, integrity and replacement cost recovery mechanisms that provide for customer rate adjustments, between rate reviews, which allow timely recovery of costs incurred in repairing and replacing the gas delivery systems with a return on the investment.
Our Gas Utilities are authorized to use system safety, integrity and replacement cost recovery mechanisms that provide for customer rate adjustments, between rate reviews, which allow timely recovery of costs incurred in repairing and replacing the gas delivery systems with a return on the investment. 35 Table of Contents As of December 31, 2023, we estimate our five-year capital investment to be approximately $4.3 billion, with most of that investment targeted toward upgrading existing utility infrastructure supporting customer and community growth needs, and complying with safety requirements.
Due to their location in the resource rich areas of Colorado and Wyoming, natural gas supply to fuel our gas-fired generation can be sourced at competitive prices. Our coal-fired power plants, all located at the Gillette energy complex in northeastern Wyoming, are supplied by our adjacent coal mine.
Our Colorado and Wyoming gas-fired generating facilities are located close to major natural gas energy hubs that provide trading liquidity and transparent pricing. Due to their location in the resource rich areas of Colorado and Wyoming, natural gas supply to fuel our gas-fired generation can be sourced at competitive prices.
Accounting standards for testing goodwill for impairment require the application of either a qualitative or quantitative assessment to analyze whether or not goodwill has been impaired. Goodwill is tested for impairment at the reporting unit level. Under either the qualitative or quantitative assessment, the estimated fair value of a reporting unit is compared with its carrying amount, including goodwill.
Our annual goodwill impairment testing date is as of October 1, which aligns with our financial planning process. 52 Table of Contents Accounting standards for testing goodwill for impairment require the application of either a qualitative or quantitative assessment to analyze whether or not goodwill has been impaired. Goodwill is tested for impairment at the reporting unit level.
In addition, we operate our plants with high levels of Availability as compared to industry benchmarks. 34 Table of Contents Rate Base Generation: We continue to believe that customers are best served when the power generation facilities are owned and rate-based by our Electric Utilities.
Rate-Based Generation: We continue to believe that customers are best served when the power generation facilities are owned and rate-based by our Electric Utilities.
Arkansas Gas is partially excluded based on the weather normalization mechanism in effect from November through April. 45 Table of Contents Corporate and Other Corporate and Other operating results for the years ended December 31 were as follows (in thousands): (in thousands) 2022 2021 2022 vs 2021 Variance 2020 2021 vs 2020 Variance Operating income (loss) $ (3,174 ) $ (4,404 ) $ 1,230 $ 1,440 $ (5,844 ) 2022 Compared to 2021 The variance in Operating income (loss) was primarily due to an allocation of a 2020 employee cost true-up in the first quarter of 2021, which was offset in our business segments.
Arkansas Gas is partially excluded based on the weather normalization mechanism in effect from November through April. 45 Table of Contents Corporate and Other Corporate and Other operating results, including inter-segment eliminations, for the years ended December 31 were as follows: (in millions) 2023 2022 2023 vs 2022 Variance 2021 2022 vs 2021 Variance Operating (loss) $ (4.9 ) $ (3.3 ) $ (1.6 ) $ (4.5 ) $ 1.2 2023 Compared to 2022 Operating (loss) was comparable to the prior year.
This business model remains a core strength and strategy today as we invest in and operate efficient power generation resources to supply cost-effective electricity to our customers. These generation assets can be rate-based or non-regulated assets within our Electric Utilities segment. However, we believe that generation assets that are rate-based provide long-term benefits to customers.
These generation assets can be rate-based or non-regulated assets within our Electric Utilities segment. However, we believe that generation assets that are rate-based provide the most effective long-term benefits to customers. Our power production strategy focuses on low-cost construction and efficient operation of our generating facilities.
Our power production strategy focuses on low-cost construction and efficient operation of our generating facilities. Our low power production costs result from a variety of factors including low fuel costs (operations located near energy hubs), efficiency in converting fuel into energy and low per unit operating and maintenance costs.
Our low power production costs result from a variety of factors including low fuel costs (operations located near energy hubs), efficiency in converting fuel into energy and low per unit operating and maintenance costs. In addition, we operate our plants with high levels of Availability as compared to industry benchmarks.
Mandates for the use of renewable energy or the reduction of GHG emissions will likely drive the need for significant investment in our Electric Utilities and Gas Utilities segments. These mandates will also likely increase prices for electricity and/or natural gas for our utility customers.
Federal legislation for renewable energy standards and GHG emission reductions has been considered and may be implemented in the future. Mandates for the use of renewable energy or the reduction of GHG emissions will likely drive the need for significant investment in our Electric Utilities and Gas Utilities segments.
The IRP outlines a range of options for the two electric utilities over a 20-year planning horizon to meet long-term forecasted energy needs while strengthening reliability and resiliency of the grid. The analysis focused on the least-cost resource needs to best meet customers’ future peak energy needs while maintaining system flexibility and achieving the Company’s generation emissions reduction goals.
The analysis focused on the least-cost resource needs to best meet customers’ future peak energy needs while maintaining system flexibility and achieving the Company’s generation emissions reduction goals.
If the carrying amount exceeds fair value, then an impairment loss would be recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit. 52 Table of Contents Application of the goodwill impairment test requires judgment, including the identification of reporting units and determining the fair value of the reporting unit.
Under either the qualitative or quantitative assessment, the estimated fair value of a reporting unit is compared with its carrying amount, including goodwill. If the carrying amount exceeds fair value, then an impairment loss would be recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit.
We operate and own majority interests in four of the five power plants and own 20% of the fifth power plant. Our coal mine provides approximately 3.7 million tons of low-sulfur coal directly to these power plants via a conveyor belt system, minimizing transportation costs.
Our coal-fired power plants, all located at the Gillette Energy Complex in northeastern Wyoming, are supplied by our adjacent WRDC coal mine. WRDC provides approximately 3.7 million tons of low-sulfur coal directly to these power plants via a conveyor belt system, minimizing transportation costs.
Other income (expense), net Other income (expense), net was comparable to the prior year primarily due to lower costs for our non-qualified benefit plans which were driven by market performance mostly offset by a prior year recognition of death benefits from Company-owned life insurance and higher non-service pension costs primarily driven by a higher discount rate.
Other (expense), net increased primarily due to higher benefit plan non-service costs driven by higher discount rates and higher costs for our non-qualified deferred compensation plan which were driven by market performance. Income tax (expense) and the effective tax rate were comparable to the same period in the prior year.
All power plants within this business, except Northern Iowa Windpower, are contracted to our Electric Utilities under long-term contracts and are located at our utility-generating complexes, including Busch Ranch, Pueblo Airport Generation, and the Gillette, Wyoming energy complex, and are physically integrated into our Electric Utilities’ operations.
All power plants within this business are contracted to our Electric Utilities under long-term contracts, located at our utility-generating complexes and physically integrated into our Electric Utilities’ operations. 36 Table of Contents Generation Fuel Supply: Our generating facilities are strategically located close to energy hubs that help reduce fuel supply costs.
Collateral Requirements Our Utilities maintain wholesale commodity contracts for the purchases and sales of electricity and natural gas which have performance assurance provisions that allow the counterparty to require collateral postings under certain conditions, including when requested on a reasonable basis due to a deterioration in our financial condition or nonperformance.
The table below provides our dividends paid (in millions), dividend payout ratio and dividends paid per share for the three years ended December 31: 2023 2022 2021 Common Stock Dividends Paid $ 168.1 $ 156.7 $ 145.0 Dividend Payout Ratio 64 % 61 % 61 % Dividends Per Share $ 2.50 $ 2.41 $ 2.29 Our three-year compound annualized dividend growth rate was 4.8%. 51 Table of Contents Collateral Requirements Our Utilities maintain wholesale commodity contracts for the purchases and sales of electricity and natural gas which have performance assurance provisions that allow the counterparty to require collateral postings under certain conditions, including when requested on a reasonable basis due to a deterioration in our financial condition or nonperformance.
Common Stock Dividends Future cash dividends, if any, will be dependent on our results of operations, financial position, cash flows, reinvestment opportunities and other factors, and will be evaluated and approved by our Board of Directors. Additionally, there are certain statutory limitations that could affect future cash dividends paid.
See further information in Note 13 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Common Stock Dividends Future cash dividends, if any, will be dependent on our results of operations, financial position, cash flows, reinvestment opportunities and other factors, and will be evaluated and approved by our Board of Directors.
As a regulated utility, we are responsible for providing safe, reliable and cost-effective sources of energy to our customers. Accordingly, we employ a customer-focused strategy for complying with standards and regulations that balances our customers’ rate concerns with environmental considerations and administrative and legislative mandates.
Accordingly, we employ a customer-focused strategy for complying with standards and regulations that balances our customers’ rate concerns with environmental considerations and administrative and legislative mandates. We attempt to strike this balance by prudently and proactively incorporating renewable energy into our resource supply, while seeking to minimize the magnitude and frequency of rate increases for our utility customers.
We attempt to strike this balance by prudently and proactively incorporating renewable energy into our resource supply, while seeking to minimize the magnitude and frequency of rate increases for our utility customers. Inflation Reduction Act The IRA, signed into law by President Biden on August 16, 2022, features $370 billion in spending and tax incentives on clean energy provisions.
Inflation Reduction Act The IRA, signed into law by President Biden in August 2022, features $370 billion in spending and tax incentives on clean energy provisions.
To date, we have experienced moderate net impacts from these trends . However, if current macroeconomic conditions continue or deteriorate in 2023, adverse impacts to our businesses may be magnified. Higher commodity energy costs continue to have an effect on customer bills and deferred energy costs.
To date, we have experienced moderate net impacts from these trends . However, if current macroeconomic conditions deteriorate in 2024, adverse impacts to our businesses may be magnified. Inflation has increased our operating expenses, which included higher employee-related expenses in 2023 compared to the prior year.
CREDIT RATINGS Financing for operational needs and capital expenditure requirements, not satisfied by operating cash flows, depends upon the cost and availability of external funds through both short and long-term financing. In order to operate and grow our business, we need to consistently maintain the ability to raise capital on favorable terms.
We also plan to re-finance our $600 million, 1.0375%, senior unsecured notes due August 2024, at or before maturity date. CREDIT RATINGS Financing for operational needs and capital expenditure requirements, not satisfied by operating cash flows, depends upon the cost and availability of external funds through both short and long-term financing.
(b) These represent projects that are being evaluated by our segments for timing, cost and other factors. Efficiently plan, construct and operate power generation facilities to serve our Electric Utilities. We best serve customers and communities when generation is vertically integrated into our Electric Utilities.
Capital expenditures are presented net of contributions in aid of construction in the Consolidated Statements of Cash Flows. (b) Projects are being evaluated by our segments for timing, cost and other factors. Efficiently plan, construct and operate power generation facilities to serve our Electric Utilities.
See additional information in Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Equity Shelf Registration We have a shelf registration statement on file with the SEC under which we may issue, from time to time, senior debt securities, subordinated debt securities, common stock, preferred stock, warrants and other securities.
See Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further information. • On June 16, 2023, we filed a new shelf registration statement with the SEC and entered into a new Equity Distribution Sales Agreement.
Revenue (in thousands) Quantities Sold and Transported (Dth) For the year ended December 31, For the year ended December 31, 2022 2021 2020 2022 2021 2020 Arkansas Gas $ 311,239 $ 218,497 $ 184,849 32,282,324 31,478,303 28,572,621 Colorado Gas 320,890 208,019 186,085 34,343,485 32,247,042 32,077,083 Iowa Gas 283,938 171,673 137,982 40,883,742 38,022,801 36,824,548 Kansas Gas 191,392 121,603 101,118 38,630,944 34,475,799 33,732,897 Nebraska Gas 384,823 273,361 246,381 85,050,323 81,035,572 80,202,783 Wyoming Gas 176,807 131,712 118,255 36,672,188 32,743,460 35,280,388 Total Revenue and Quantities Sold $ 1,669,089 $ 1,124,865 $ 974,670 267,863,006 250,002,977 246,690,320 For the year ended December 31, 2022 2021 2020 Heating Degree Days Actual Variance From Normal Actual Variance From Normal Actual Variance From Normal Arkansas Gas (a) 3,844 2% 3,565 (12)% 3,442 (15)% Colorado Gas 6,325 4% 5,866 (11)% 6,068 (8)% Iowa Gas 7,037 7% 6,239 (8)% 6,504 (4)% Kansas Gas (a) 4,968 7% 4,508 (8)% 4,648 (5)% Nebraska Gas 6,220 4% 5,599 (9)% 5,853 (5)% Wyoming Gas 7,644 12% 7,074 (7)% 7,289 (4)% Combined (b) 6,536 5% 5,948 (8)% 6,038 (6)% (a) Arkansas and Kansas have weather normalization mechanisms that mitigate the weather impact on Gas Utility margins.
Revenue (in millions) Quantities Sold and Transported (Dth in millions) For the year ended December 31, For the year ended December 31, 2023 2022 2021 2023 2022 2021 Arkansas Gas $ 268.9 $ 311.3 $ 218.5 30.2 32.3 31.5 Colorado Gas 313.6 320.9 208.0 32.8 34.3 32.3 Iowa Gas 213.6 283.9 171.7 37.9 40.9 38.0 Kansas Gas 155.6 191.4 121.6 35.5 38.6 34.5 Nebraska Gas 366.1 384.8 273.4 82.2 85.1 81.0 Wyoming Gas 166.4 176.8 131.7 36.4 36.7 32.7 Total Revenue and Quantities Sold $ 1,484.2 $ 1,669.1 $ 1,124.9 255.0 267.9 250.0 44 Table of Contents For the year ended December 31, 2023 2022 2021 Heating Degree Days Actual Variance From Normal Actual Variance From Normal Actual Variance From Normal Arkansas Gas (a) 3,197 (17)% 3,844 2% 3,565 (12)% Colorado Gas 5,916 (4)% 6,325 4% 5,866 (11)% Iowa Gas 5,921 (12)% 7,037 7% 6,239 (8)% Kansas Gas (a) 4,387 (8)% 4,968 7% 4,508 (8)% Nebraska Gas 5,579 (8)% 6,220 4% 5,599 (9)% Wyoming Gas 7,385 8% 7,644 12% 7,074 (7)% Combined (b) 6,006 (4)% 6,536 5% 5,948 (8)% (a) Arkansas and Kansas have weather normalization mechanisms that mitigate the weather impact on Gas Utility margins.
Actual (a) Forecasted Capital Expenditures By Segment: 2022 2023 2024 2025 2026 2027 (in millions) Electric Utilities $ 243 $ 212 $ 348 $ 268 $ 184 $ 163 Gas Utilities 349 386 452 412 393 444 Corporate and Other 5 17 19 20 19 18 Incremental projects (b) - - - - 104 75 Total $ 598 $ 615 $ 819 $ 700 $ 700 $ 700 (a) Includes accruals for property, plant and equipment as disclosed as supplemental cash flow information in the Consolidated Statements of Cash Flows in the Consolidated Financial Statements in this Annual Report on Form 10-K.
Actual (a) Forecasted (b) Capital Expenditures By Segment: 2023 2024 2025 2026 2027 2028 (in millions) Electric Utilities $ 211 $ 409 $ 287 $ 466 $ 199 $ 264 Gas Utilities $ 372 $ 407 $ 387 $ 368 $ 372 $ 373 Corporate and Other $ 7 $ 24 $ 29 $ 29 $ 27 $ 29 Strategic growth projects $ - $ - $ 100 $ 400 $ 50 $ 50 Total $ 590 $ 840 $ 803 $ 1,263 $ 648 $ 717 (a) Includes accruals for property, plant and equipment as disclosed as supplemental cash flow information in the Consolidated Statements of Cash Flows in the Consolidated Financial Statements in this Annual Report on Form 10-K.
See Item 1A - Risk Factors and Note 1 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. Income Taxes The Company and its subsidiaries file consolidated federal income tax returns.
For the years ended December 31, 2023, 2022, and 2021, there were no impairment losses recorded. At December 31, 2023, the fair value exceeded the carrying value at all reporting units. See Item 1A - Risk Factors and Note 1 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.
Results of Operations Our discussion and analysis for the year ended December 31, 2022 compared to 2021 is included herein.
See Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further information. 39 Table of Contents Results of Operations Our discussion and analysis for the year ended December 31, 2023, compared to 2022 is included herein.
(b) 2021 included planned outages at Neil Simpson II, Wygen II, and Wygen III and unplanned outages at Wygen I, Neil Simpson II and Wyodak Plant. 43 Table of Contents Gas Utilities Operating results for the years ended December 31 for the Gas Utilities were as follows (in thousands): 2022 2021 2022 vs 2021 Variance 2020 2021 vs 2020 Variance Revenue: Natural gas - regulated $ 1,584,634 $ 1,051,610 $ 533,024 $ 900,637 $ 150,973 Other - non-regulated services 84,456 73,255 11,201 74,033 (778 ) Total revenue 1,669,089 1,124,865 544,224 974,670 150,195 Cost of natural gas sold: Natural gas - regulated 942,148 480,293 461,855 347,611 132,682 Other - non-regulated services 22,960 14,445 8,515 7,034 7,411 Total cost of natural gas sold 965,108 494,738 470,370 354,645 140,093 Gas Utility margin (non-GAAP) 703,982 630,127 73,855 620,025 10,102 Operations and maintenance 345,143 314,810 30,333 303,577 11,233 Depreciation and amortization 114,679 104,160 10,519 100,559 3,601 Total operating expenses 459,822 418,970 40,852 404,136 14,834 Operating income $ 244,160 $ 211,157 $ 33,003 $ 215,889 $ (4,732 ) 2022 Compared to 2021 Gas Utility margin increased over the prior year as a result of: (in millions) New rates and rider recovery $ 30.0 Weather 18.5 Carrying costs on Winter Storm Uri regulatory asset (a) 17.9 Prior year Black Hills Energy Services Winter Storm Uri costs (b) 8.2 Customer growth and increased usage per customer 3.7 Mark-to-market on non-utility natural gas commodity contracts (3.3 ) Other (1.1 ) $ 73.9 (a) In certain jurisdictions, we have commission approval to recover carrying costs on Winter Storm Uri regulatory assets which offset increased interest expense.
Gas Utilities Operating results for the years ended December 31 for the Gas Utilities were as follows (in millions): 2023 2022 2023 vs 2022 Variance 2021 2022 vs 2021 Variance Revenue: Natural gas - regulated $ 1,399.1 $ 1,584.6 $ (185.5 ) $ 1,051.6 $ 533.0 Other - non-regulated services 85.1 84.5 0.6 73.3 11.2 Total revenue 1,484.2 1,669.1 (184.9 ) 1,124.9 544.2 Cost of natural gas sold: Natural gas - regulated 760.2 942.1 (181.9 ) 480.3 461.8 Other - non-regulated services 23.0 23.0 — 14.4 8.6 Total cost of natural gas sold 783.2 965.1 (181.9 ) 494.7 470.4 Gas Utility margin (non-GAAP) 701.0 704.0 (3.0 ) 630.2 73.8 Operations and maintenance 328.7 317.3 11.4 290.2 27.1 Depreciation and amortization 113.9 114.7 (0.8 ) 104.2 10.5 Taxes - property and production 29.6 27.8 1.8 24.6 3.2 472.2 459.8 12.4 419.0 40.8 Operating income $ 228.8 $ 244.2 $ (15.4 ) $ 211.2 $ 33.0 43 Table of Contents 2023 Compared to 2022 Gas Utility margin decreased over the prior year as a result of: (in millions) New rates and rider recovery $ 19.8 Retail customer growth and demand 7.6 Weather (14.5 ) Prior year true-up of Winter Storm Uri carrying costs (a) (10.3 ) Mark-to-market on non-utility natural gas commodity contracts (3.5 ) Other (2.1 ) $ (3.0 ) (a) In certain jurisdictions, we have commission approval to recover carrying costs on Winter Storm Uri regulatory assets which offset increased interest expense.
CASH FLOW ACTIVITIES The following tables summarize our cash flows for the years ended December 31 (in thousands): Operating Activities: 2022 2021 2022 vs. 2021 2020 2021 vs. 2020 Cash earnings (net income plus non-cash adjustments) $ 566,392 $ 527,705 $ 38,687 $ 549,092 (21,387 ) Changes in certain operating assets and liabilities: Accounts receivable and other current assets (259,851 ) (78,877 ) $ (180,974 ) (8,088 ) (70,789 ) Accounts payable and accrued liabilities 89,405 10,660 78,745 24,659 (13,999 ) Regulatory assets and liabilities 203,869 (524,220 ) 728,089 (15,753 ) (508,467 ) 33,423 (592,437 ) 625,860 818 (593,255 ) Contributions to defined benefit pension plans — — — (12,700 ) 12,700 Other operating activities (15,014 ) 167 (15,181 ) 4,653 (4,486 ) Net cash provided by (used in) operating activities $ 584,801 $ (64,565 ) $ 649,366 $ 541,863 $ (606,428 ) 2022 Compared to 2021 Cash earnings (income from continuing operations plus non-cash adjustments) were $39 million higher than prior year primarily due to increased Electric and Gas Utility margins due to new rates and rider revenues and prior year impacts from Winter Storm Uri. 47 Table of Contents Net inflows from changes in certain operating assets and liabilities were $626 million higher than prior year, primarily attributable to: • Cash inflows increased by approximately $728 million primarily as a result of changes in our regulatory assets and liabilities primarily driven by prior year incremental fuel, purchased power and natural gas costs due to Winter Storm Uri and current year recovery of a portion of Winter Storm Uri incremental and carrying costs from customers; • Cash outflows increased by approximately $181 million primarily as a result of changes in accounts receivable and other current assets driven by increased revenue due to higher commodity prices and colder weather and increased purchases of natural gas in storage; • Cash inflows increased by approximately $79 million as a result of changes in accounts payable and other current liabilities driven by payment timing related to natural gas and power purchases and other working capital requirements; Cash outflows increased $15.2 million from other operating activities primarily due to higher cloud computing licensing costs, increased payments on settled commodity derivatives and higher preliminary survey charges.
CASH FLOW ACTIVITIES The following tables summarize our cash flows for the years ended December 31 (in millions): Operating Activities: 2023 2022 2023 vs 2022 2021 2022 vs 2021 Net income $ 276.0 $ 270.8 $ 5.2 $ 251.2 $ 19.6 Non-cash adjustments to Net income 313.5 295.7 17.8 276.6 19.1 Total earnings 589.5 566.5 23.0 527.8 38.7 Changes in certain operating assets and liabilities: Accounts receivable and other current assets 255.9 (259.9 ) 515.8 (78.9 ) (181.0 ) Accounts payable and accrued liabilities (109.9 ) 89.4 (199.3 ) 10.6 78.8 Regulatory assets and liabilities 236.8 203.9 32.9 (524.2 ) 728.1 Net inflow (outflow) from changes in certain operating assets and liabilities 382.8 33.4 349.4 (592.5 ) 625.9 Other operating activities (27.9 ) (15.1 ) (12.8 ) 0.1 (15.2 ) Net cash provided by (used in) operating activities $ 944.4 $ 584.8 $ 359.6 $ (64.6 ) $ 649.4 47 Table of Contents 2023 Compared to 2022 Net cash provided by operating activities was $359.6 million higher which was attributable to: • Total earnings (net income plus non-cash adjustments) were $23.0 million higher than prior year primarily as a result of increased Electric and Gas Utility margins due to new rates and increased rider revenues partially offset by higher operating expenses and higher interest expense. • Net inflows from changes in certain operating assets and liabilities were $349.4 million higher than prior year, primarily attributable to: o Cash inflows increased by approximately $515.8 million as a result of changes in accounts receivable and other current assets primarily due to higher collections on pass-through revenues and lower natural gas in storage inventories driven by fluctuations in commodity prices and timing of injections and withdrawals; o Cash outflows increased by approximately $199.3 million as a result of decreases in accounts payable and other current liabilities primarily driven by fluctuations in commodity prices, payment timing of natural gas and power purchases and changes in other working capital requirements; and o Cash inflows increased by approximately $32.9 million as a result of changes in our regulatory assets and liabilities primarily due to higher recoveries of deferred gas and fuel cost adjustments driven by fluctuations in commodity prices. • Cash outflows increased $12.8 million from other operating activities primarily due to higher costs from cloud computing arrangements.
Business Segment Highlights and Corporate Activity Electric Utilities • See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for recent rate review activity for Wyoming Electric. • See Key Elements of our Business Strategy section above for discussion of recent developments related to Ready Wyoming, Wyoming Electric's BCIS tariff, Colorado Electric's Clean Energy Plan filing, and the Electric Utilities joining the WEIS Market. • In December 2022, each of our Electric Utilities set new winter peak loads: • On December 22, 2022, Colorado Electric set a new winter peak load of 334 MW, surpassing the previous winter peak of 313 MW set in October 2018. • On December 21, 2022, South Dakota Electric set a new winter peak load of 355 MW, surpassing the previous winter peaks of 327 MW set on January 5, 2022 and 326 MW set in February 2021. • On December 21, 2022, Wyoming Electric set a new winter peak load of 281 MW, surpassing the previous peaks of 263 MW set on November 17, 2022, 262 MW set on February 23, 2022, 252 MW set on January 5, 2022 and 247 MW set in December 2019. • In December 2022, WRDC entered into a new agreement with PacifiCorp, effective January 1, 2023, to continue as the sole supplier of coal (fuel) to the Wyodak Plant through December 31, 2026 with a one-year extension option to December 31, 2027.
More detailed discussion of the future uncertainties can be found in Item 1A - Risk Factors . 38 Table of Contents Business Segment Highlights and Corporate Activity Electric Utilities • See Note 2 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for recent rate review activity for Wyoming Electric. • See Key Elements of our Business Strategy section above for discussion of recent developments related to Ready Wyoming, Colorado Electric's Clean Energy Plan, and South Dakota Electric and Wyoming Electric's IRP. • On January 11, 2024, Wyoming Electric set a new winter peak load of 314 MW, surpassing the previous winter peaks of 301 MW set on December 26, 2023, 299 MW set on October 31, 2023, and 281 MW set in December 2022. • On July 24, 2023, Wyoming Electric set a new all-time and summer peak load of 312 MW, surpassing the previous peak of 294 MW set on July 21, 2022.
The 260-mile, multi-phase transmission expansion project will provide customers long-term price stability and greater flexibility as power markets develop in the Western States. On October 11, 2022, the WPSC approved a CPCN submitted by Wyoming Electric to construct the transmission expansion project.
The 260-mile, multi-phase transmission expansion project will provide customers long-term price stability and greater flexibility as power markets develop in the Western States. Construction of the project commenced in late 2023 and is expected to take place in multiple phases or segments through 2025 and will interconnect South Dakota Electric’s and Wyoming Electric’s transmission systems.
We do not have any trigger events (i.e. an acceleration of repayment of outstanding indebtedness, an increase in interest costs, or the posting of additional cash collateral) tied to our stock price and have not executed any transactions that require us to issue equity based on our credit ratings.
The following table represents the credit ratings of South Dakota Electric at December 31, 2023: Rating Agency Senior Secured Rating S&P (a) A Fitch (b) A (a) On February 17, 2023, S&P reported A rating (b) On January 26, 2024, Fitch reported A rating We have not had any triggering events (i.e. an acceleration of repayment of outstanding indebtedness, an increase in interest costs, or the posting of additional cash collateral) tied to our stock price and have not executed any transactions that require us to issue equity based on our credit ratings. 50 Table of Contents CAPITAL REQUIREMENTS Capital Expenditures Capital expenditures are a substantial portion of our cash requirements each year and we continue to forecast a robust capital expenditure program during the next five years.
For additional information regarding equity, see Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 49 Table of Contents Future Financing Plans We will continue to assess debt and equity needs to support our capital investment plans and other strategic objectives.
Future Financing Plans We will continue to assess debt and equity needs to support our capital investment plans and other strategic objectives.
See additional information in Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. On January 25, 2023, our Board of Directors declared a quarterly dividend of $0.625 per share, equivalent to an annual dividend rate of $2.50 per share.
On January 26, 2024, our Board of Directors declared a quarterly dividend of $0.65 per share, equivalent to an annual dividend rate of $2.60 per share.
Consolidated Summary and Overview For the Years Ended December 31, 2022 2021 2020 (in thousands, except per share amounts) Operating income (loss): Electric Utilities $ 214,258 $ 202,676 $ 210,974 Gas Utilities 244,160 211,157 215,889 Corporate and Other (3,174 ) (4,404 ) 1,440 Operating Income 455,244 409,429 428,303 Interest expense, net (160,989 ) (152,404 ) (143,470 ) Impairment of investment — — (6,859 ) Other income (expense), net 1,708 1,404 (2,293 ) Income tax (expense) (25,205 ) (7,169 ) (32,918 ) Net income 270,758 251,260 242,763 Net income attributable to non-controlling interest (12,371 ) (14,516 ) (15,155 ) Net income available for common stock $ 258,387 $ 236,744 $ 227,608 Total earnings per share of common stock, Diluted $ 3.97 $ 3.74 $ 3.65 39 Table of Contents 2022 Compared to 2021 The variance to the prior year included the following: • Electric Utilities’ operating income increased $12 million primarily due to increased rider revenues, prior year impacts related to the Wygen I unplanned outage and Colorado Electric’s TCJA-related bill credits to customers, increased transmission services revenue and off-system excess energy sales partially offset by higher operating expenses and lower pricing on the new Wygen I PPA; • Gas Utilities’ operating income increased $33 million primarily due to new rates and rider recovery, favorable weather, carrying costs on our Winter Storm Uri regulatory asset, prior year Black Hills Energy Services Winter Storm Uri costs, customer growth partially offset by higher operating expenses; • Corporate and Other expenses decreased $1.2 million primarily due to an allocation of a 2020 employee cost true-up in the first quarter of 2021, which was offset in our business segments; • Interest expense increased $8.6 million due to higher interest rates on higher short-term debt balances; • Income tax expense increased $18 million driven by higher pre-tax income and a higher effective tax rate primarily due to prior year tax benefits from Colorado Electric and Nebraska Gas TCJA-related bill credits and decreased flow-through tax benefits driven by prior year repairs and gain deferral partially offset by tax benefits from various state tax rate changes; and • Net income attributable to non-controlling interest decreased $2.1 million due to lower net income from Black Hills Colorado IPP primarily driven by lower fired-engine hours and a planned outage.
Consolidated Summary and Overview For the Years Ended December 31, 2023 2022 2023 vs 2022 Variance 2021 2022 vs 2021 Variance (in millions, except per share amounts) Operating income (loss): Electric Utilities $ 248.8 $ 214.3 $ 34.5 $ 202.7 $ 11.6 Gas Utilities 228.8 244.2 (15.4 ) 211.2 33.0 Corporate and Other (a) (4.9 ) (3.3 ) (1.6 ) (4.5 ) 1.2 Operating Income 472.7 455.2 17.5 409.4 45.8 Interest expense, net (167.9 ) (161.0 ) (6.9 ) (152.4 ) (8.6 ) Other income (expense), net (3.2 ) 1.8 (5.0 ) 1.4 0.4 Income tax (expense) (25.6 ) (25.2 ) (0.4 ) (7.2 ) (18.0 ) Net income 276.0 270.8 5.2 251.3 19.5 Net income attributable to non-controlling interest (13.8 ) (12.4 ) (1.4 ) (14.5 ) 2.1 Net income available for common stock $ 262.2 $ 258.4 $ 3.8 $ 236.7 $ 21.7 Total earnings per share of common stock, Diluted $ 3.91 $ 3.97 $ (0.06 ) $ 3.74 $ 0.23 (a) Includes inter-segment eliminations. 2023 Compared to 2022 The variance to the prior year included the following: • Electric Utilities’ operating income increased $34.5 million primarily due to new rates and rider recovery, a one-time gain on the planned sale of Northern Iowa Windpower assets, a gain on a strategic sale of land in Wyoming to a customer to support continued load growth, and a one-time recovery from our business interruption insurance related to the 2021 Wygen I unplanned outage partially offset by unfavorable weather, higher depreciation expense and higher employee-related expenses; • Gas Utilities’ operating income decreased $15.4 million primarily due to unfavorable weather, a prior year one-time true-up of carrying costs accrued on Winter Storm Uri regulatory assets and higher operating expenses partially offset by new rates and rider recovery and retail customer growth and demand; • Interest expense increased $6.9 million due to higher interest rates partially offset by increased interest income on higher cash and cash equivalents balances; and • Other expense, net increased $5.0 million primarily due to higher benefit plan non-service costs driven by higher discount rates and higher costs for our non-qualified deferred compensation plan driven by market performance.
Depreciation and amortization increased primarily due to higher asset base driven by prior and current year capital expenditures. 41 Table of Contents Operating Statistics Revenue (in thousands) Quantities Sold (MWh) For the year ended December 31, 2022 2021 2020 2022 2021 2020 Residential $ 246,651 $ 244,589 $ 221,530 1,513,092 1,494,028 1,477,515 Commercial 277,981 275,998 239,166 2,087,800 2,075,690 1,974,043 Industrial 166,374 149,040 131,154 1,912,529 1,751,344 1,794,795 Municipal 20,497 19,092 16,860 159,248 162,903 158,222 Subtotal Retail Revenue - Electric 711,503 688,719 608,710 5,672,669 5,483,965 5,404,575 Contract Wholesale 25,869 16,128 17,847 654,016 574,137 492,637 Off-system/Power Marketing Wholesale 48,578 41,682 15,511 643,189 638,923 437,288 Other (a) 66,191 54,218 57,644 — — — Total Regulated 852,141 800,747 699,712 6,969,874 6,697,025 6,334,500 Non-Regulated (b) 48,021 41,511 39,145 293,026 269,558 258,399 Total Revenue and Quantities Sold 900,162 842,258 738,857 7,262,900 6,966,583 6,592,899 Other Uses, Losses or Generation, net (c) 450,010 475,280 406,422 Total Energy 7,712,910 7,441,863 6,999,321 (a) Primarily related to transmission revenues from the Common Use System.
Taxes - property and production were comparable to the same period in the prior year. 41 Table of Contents Operating Statistics Revenue (in millions) Quantities Sold (GWh) For the year ended December 31, 2023 2022 2021 2023 2022 2021 Residential $ 224.9 $ 246.7 $ 244.6 1,438.5 1,513.1 1,494.0 Commercial 259.8 277.9 276.0 2,074.4 2,087.8 2,075.7 Industrial 159.4 166.4 149.0 2,094.8 1,912.5 1,751.4 Municipal 17.5 20.5 19.1 150.9 159.3 162.9 Subtotal Retail Revenue - Electric 661.6 711.5 688.7 5,758.6 5,672.7 5,484.0 Contract Wholesale 22.0 25.9 16.1 579.1 654.0 574.1 Off-system/Power Marketing Wholesale 42.5 48.6 41.7 737.9 643.2 638.9 Other (a) 91.2 66.2 54.2 - - - Total Regulated 817.3 852.2 800.7 7,075.6 6,969.9 6,697.0 Non-Regulated (b) 47.7 48.0 41.5 120.6 293.0 269.6 Total Revenue and Quantities Sold $ 865.0 $ 900.2 $ 842.2 7,196.2 7,262.9 6,966.6 Other Uses, Losses or Generation, net (c) 463.5 450.0 475.3 Total Energy 7,659.7 7,712.9 7,441.9 (a) Primarily related to transmission revenues from the Common Use System.
We do not have required contributions and we do not expect to make contributions to our Pension Plan in 2023. See further information in Note 13 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
See Note 8 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for more information. (b) Net debt to capitalization ratio is net of Cash and cash equivalents for both Total debt and Total capitalization.
The decrease in the fair value cushion of the Gas Utilities reporting unit when compared to the prior year was primarily due to an increase in the weighted average cost of capital. The estimates and assumptions used in our impairment assessments are based on available market information and we believe they are reasonable.
The estimates and assumptions used in our impairment assessments are based on available market information and we believe they are reasonable. However, variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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At December 31, 2022 and 2021, a 10% change in market prices for our derivative instruments would not materially impact pre-tax income, the fair values of our derivative assets and liabilities, or OCI. See additional commodity risk and derivative information in Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
At December 31, 2023 and 2022, a 10% change in market prices for our derivative instruments would not materially impact pre-tax income, the fair values of our derivative assets and liabilities, or OCI. See additional commodity risk and derivative information in Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by review of their current credit information. We maintain a provision for estimated credit losses based upon historical experience, changes in current market conditions, expected losses and any specific customer collection issue that is identified.
We perform periodic credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by review of their current credit information. We maintain a provision for estimated credit losses based upon historical experience, changes in current market conditions, expected losses and any specific customer collection issue that is identified.
Interest Rate Risk Periodically, we have engaged in activities to manage risks associated with changes in interest rates. We have utilized pay-fixed interest rate swap agreements to reduce exposure to interest rate fluctuations associated with floating rate debt obligations and anticipated debt refinancings. At December 31, 2022, we had no interest rate swaps in place.
Interest Rate Risk Periodically, we have engaged in activities to manage risks associated with changes in interest rates. We have utilized pay-fixed interest rate swap agreements to reduce exposure to interest rate fluctuations associated with floating rate debt obligations and anticipated debt refinancings. At December 31, 2023, we had no interest rate swaps in place.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our activities in the regulated and non-regulated energy sectors expose us to a number of risks in the normal operations of our businesses. Depending on the activity, we are exposed to varying degrees of market risk and credit risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our activities in the regulated and non-regulated energy industries expose us to a number of risks in the normal operations of our businesses. Depending on the activity, we are exposed to varying degrees of market risk and credit risk.
A hypothetical 100 basis point increase in the benchmark rate on our variable rate debt would have increased annual pretax interest expense by approximately $4.1 million and $2.7 million for the years ended December 31, 2022 and 2021, respectively. See Note 8 for further information on cash amounts outstanding under short- and long-term variable rate borrowings.
A hypothetical 100 basis point increase in the benchmark rate on our variable rate debt would have increased annual pretax interest expense by approximately $0.9 million and $4.1 million for the years ended December 31, 2023 and 2022, respectively. See Note 8 for further information on cash amounts outstanding under short- and long-term variable rate borrowings.
Further details of past swap agreements are set forth in Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. At December 31, 2022, 88% of our debt is fixed rate debt, which limits our exposure to variable interest rate fluctuations.
Further details of past swap agreements are set forth in Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. At December 31, 2023, over 99% of our debt is fixed rate debt, which limits our exposure to variable interest rate fluctuations.
Declines in the value of the plan assets could diminish the funded status of the pension plans and potentially increase the requirements to make cash contributions to these plans. See additional information in Critical Accounting Estimates in Item 7 and Note 13 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Declines in the value of the plan assets could diminish the funded status of the pension plans and potentially increase the requirements to make cash contributions to these plans. See additional information in Note 13 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Changes in the fair value of these commodity derivatives are recognized in the Consolidated Statements of Income. A potential risk related to wholesale power sales is the price risk arising from the sale of power that exceeds our generating capacity. These potential short positions can arise from unplanned plant outages or from unanticipated load demands.
Changes in the fair value of these commodity derivatives are recognized in the Consolidated Statements of Income. There is a potential risk that our wholesale power sales could exceed our current generating capacity, which may arise from unplanned plant outages or from unanticipated load demands.
Our credit exposure at December 31, 2022 was concentrated primarily among retail utility customers, investment grade companies, cooperative utilities and federal agencies. See more information in Notes 1 and 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 55 Table of Contents
See more information in Notes 1 and 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 55 Table of Contents

Other BKH 10-K year-over-year comparisons