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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.

Commission File Number 001-31303

Black Hills Corporation

Incorporated in South Dakota IRS Identification Number 46-0458824

7001 Mount Rushmore Road
Rapid City, South Dakota 57702
Registrant’s telephone number (605) 721-1700

Former name, former address, and former fiscal year if changed since last report
NONE

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No ☒

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock of $1.00 par valueBKHNew York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
ClassOutstanding at April 29, 2022
Common stock, $1.00 par value64,833,223 shares



TABLE OF CONTENTS
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GLOSSARY OF TERMS AND ABBREVIATIONS

The following terms and abbreviations appear in the text of this report and have the definitions described below:
AFUDCAllowance for Funds Used During Construction
AOCIAccumulated Other Comprehensive Income (Loss)
APSCArkansas Public Service Commission
Arkansas GasBlack Hills Energy Arkansas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Arkansas (doing business as Black Hills Energy).
ASCAccounting Standards Codification
ASUAccounting Standards Update issued by the FASB
ATMAt-the-market equity offering program
AvailabilityThe availability factor of a power plant is the percentage of the time that it is available to provide energy.
BHCBlack Hills Corporation; the Company
Black Hills Colorado IPPBlack Hills Colorado IPP, LLC a 50.1% owned subsidiary of Black Hills Electric Generation
Black Hills Electric GenerationBlack Hills Electric Generation, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing wholesale electric capacity and energy primarily to our affiliate utilities.
Black Hills EnergyThe name used to conduct the business of our utility companies
Black Hills Energy ServicesBlack Hills Energy Services Company, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas commodity supply for the Choice Gas Programs (doing business as Black Hills Energy).
Black Hills Non-regulated HoldingsBlack Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation
Black Hills Utility HoldingsBlack Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy)
Black Hills WyomingBlack Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation
Cheyenne LightCheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service in the Cheyenne, Wyoming area (doing business as Black Hills Energy). Also known as Wyoming Electric.
Chief Operating Decision Maker (CODM)Chief Executive Officer
Choice Gas ProgramRegulator-approved programs in Wyoming and Nebraska that allow certain utility customers to select their natural gas commodity supplier, providing for the unbundling of the commodity service from the distribution delivery service.
Colorado ElectricBlack Hills Colorado Electric, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing electric service to customers in Colorado (doing business as Black Hills Energy).
Colorado GasBlack Hills Colorado Gas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Colorado (doing business as Black Hills Energy).
Common Use SystemThe Common Use System is a jointly operated transmission system we participate in with Basin Electric Power Cooperative and Powder River Energy Corporation. The Common Use System provides transmission service over these utilities' combined 230-kilovolt (kV) and limited 69-kV transmission facilities within areas of southwestern South Dakota and northeastern Wyoming.
Consolidated Indebtedness to Capitalization RatioAny indebtedness outstanding at such time, divided by capital at such time. Capital being consolidated net worth (excluding non-controlling interest) plus consolidated indebtedness (including letters of credit and certain guarantees issued) as defined within the current Revolving Credit Facility.
Cooling Degree Day (CDD)A cooling degree day is equivalent to each degree that the average of the high and low temperatures for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.
CPCNCertificate of Public Convenience and Necessity
CP ProgramCommercial Paper Program
CPUCColorado Public Utilities Commission
4


DthDekatherm. A unit of energy equal to 10 therms or approximately one million British thermal units (MMBtu)
FASBFinancial Accounting Standards Board
FitchFitch Ratings Inc.
GAAPAccounting principles generally accepted in the United States of America
Heating Degree Day (HDD)A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.
Integrated GenerationNon-regulated power generation and mining businesses that are vertically integrated within our Electric Utilities segment.
Iowa GasBlack Hills Iowa Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Iowa (doing business as Black Hills Energy).
IPPIndependent Power Producer
IRSUnited States Internal Revenue Service
Kansas GasBlack Hills Kansas Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Kansas (doing business as Black Hills Energy).
KCCKansas Corporation Commission
kVKilovolt
LIBORLondon Interbank Offered Rate
MEANMunicipal Energy Agency of Nebraska
MMBtuMillion British thermal units
Moody’sMoody’s Investors Service, Inc.
MWMegawatts
MWhMegawatt-hours
Nebraska GasBlack Hills Nebraska Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Nebraska (doing business as Black Hills Energy).
Neil Simpson IIA mine-mouth, coal-fired power plant owned and operated by South Dakota Electric with a total capacity of 90 MW located at our Gillette, Wyoming energy complex.
OCIOther Comprehensive Income
PPAPower Purchase Agreement
PRPAPlatte River Power Authority
Pueblo Airport GenerationThe 420 MW combined cycle gas-fired power generating plants jointly owned by Colorado Electric (220 MW) and Black Hills Colorado IPP (200 MW). Black Hills Colorado IPP operates this facility. The plants commenced operation on January 1, 2012.
Ready WyomingA 260-mile, multi-phase transmission expansion project in Wyoming. This transmission project will serve the growing needs of customers by enhancing resiliency of Wyoming Electric’s overall electric system and expanding access to power markets and renewable resources. The project will help Wyoming Electric maintain top-quartile reliability and enable economic development in the Cheyenne, Wyoming region.
Renewable ReadyVoluntary renewable energy subscription program for large commercial, industrial and governmental agency customers in South Dakota and Wyoming.
Revolving Credit FacilityOur $750 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which was amended and restated on July 19, 2021, and now terminates on July 19, 2026.
SECUnited States Securities and Exchange Commission
Service Guard Comfort PlanAppliance protection plan that provides home appliance repair services through on-going monthly service agreements to residential utility customers.
S&PS&P Global Ratings, a division of S&P Global Inc.
South Dakota ElectricBlack Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in Montana, South Dakota and Wyoming (doing business as Black Hills Energy).
5


SPPSouthwest Power Pool
TCJATax Cuts and Jobs Act
Tech ServicesNon-regulated product lines delivered by our Utilities that 1) provide electrical system construction services to large industrial customers of our electric utilities, and 2) serve gas transportation customers throughout its service territory by constructing and maintaining customer-owned gas infrastructure facilities, typically through one-time contracts.
UtilitiesBlack Hills’ Electric and Gas Utilities
Wind Capacity FactorMeasures the amount of electricity a wind turbine produces in a given time period relative to its maximum potential.
Winter Storm UriFebruary 2021 winter weather event that caused extreme cold temperatures in the central United States and led to unprecedented fluctuations in customer demand and market pricing for natural gas and energy.
WPSCWyoming Public Service Commission
Wygen IIA mine-mouth, coal-fired power plant owned by Wyoming Electric with a total capacity of 95 MW located at our Gillette, Wyoming energy complex.
Wyoming ElectricCheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in the Cheyenne, Wyoming area (doing business as Black Hills Energy).
Wyoming GasBlack Hills Wyoming Gas, LLC, an indirect and wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Wyoming (doing business as Black Hills Energy).

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the SEC. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts” and similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation, the risk factors described in Item 1A of Part I of our 2021 Annual Report on Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q and other reports that we file with the SEC from time to time, and the following:

Our ability to obtain adequate cost recovery for our utility operations through regulatory proceedings and favorable rulings on periodic applications to recover costs for capital additions, plant retirements and decommissioning, fuel, transmission, purchased power, and other operating costs and the timing in which new rates would go into effect;

Our ability to complete our capital program in a cost-effective and timely manner;

Our ability to execute on our strategy;

Our ability to successfully execute our financing plans;

Our ability to achieve our greenhouse gas emissions intensity reduction goals;

Board of Directors’ approval of any future quarterly dividends;

The impact of future governmental regulation;

Our ability to overcome the impacts of supply chain disruptions on availability and cost of materials;

The effects of inflation and volatile energy prices; and

Other factors discussed from time to time in our filings with the SEC.

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time-to-time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.
6


PART I.        FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS



BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)Three Months Ended March 31,
20222021
(in thousands, except per share amounts)
Revenue$823,570 $633,432 
Operating expenses:
Fuel, purchased power and cost of natural gas sold436,926 293,147 
Operations and maintenance136,132 129,679 
Depreciation, depletion and amortization60,463 57,269 
Taxes - property and production16,696 15,022 
Total operating expenses650,217 495,117 
Operating income173,353 138,315 
Other income (expense):
Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts)(38,821)(37,825)
Interest income276 225 
Other income, net704 266 
Total other income (expense)(37,841)(37,334)
Income before income taxes135,512 100,981 
Income tax expense(14,488)(494)
Net income 121,024 100,487 
Net income attributable to non-controlling interest(3,498)(4,171)
Net income available for common stock$117,526 $96,316 
Earnings per share of common stock:
Earnings per share, Basic$1.82 $1.54 
Earnings per share, Diluted$1.82 $1.54 
Weighted average common shares outstanding:
Basic64,565 62,633 
Diluted64,721 62,691 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
7


BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)Three Months Ended March 31,
20222021
(in thousands)
Net income$121,024 $100,487 
Other comprehensive income (loss), net of tax:
Reclassification adjustments of benefit plan liability - prior service cost (net of tax of $6 and $9, respectively)
(18)(16)
Reclassification adjustments of benefit plan liability - net loss (net of tax of $(45) and $(217), respectively)
143 381 
Derivative instruments designated as cash flow hedges:
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $(177) and $(190), respectively)
536 523 
Net unrealized gains (losses) on commodity derivatives (net of tax of $(340) and $(35), respectively)
1,047 107 
Reclassification of net realized (gains) losses on settled commodity derivatives (net of tax of $552 and $(8), respectively)
(1,702)23 
Other comprehensive income, net of tax6 1,018 
Comprehensive income121,030 101,505 
Less: comprehensive income attributable to non-controlling interest(3,498)(4,171)
Comprehensive income available for common stock$117,532 $97,334 

See Note 9 for additional disclosures.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
8


BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)As of
March 31, 2022December 31, 2021
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents$16,330 $8,921 
Restricted cash and equivalents5,017 4,889 
Accounts receivable, net383,790 321,652 
Materials, supplies and fuel108,232 150,979 
Derivative assets, current7,382 4,373 
Income tax receivable, net17,991 18,017 
Regulatory assets, current265,496 270,290 
Other current assets45,070 29,012 
Total current assets849,308 808,133 
Property, plant and equipment7,927,840 7,856,573 
Less: accumulated depreciation and depletion(1,454,425)(1,407,397)
Total property, plant and equipment, net6,473,415 6,449,176 
Other assets:
Goodwill1,299,454 1,299,454 
Intangible assets, net10,474 10,770 
Regulatory assets, non-current457,848 526,309 
Other assets, non-current40,155 38,054 
Total other assets, non-current1,807,931 1,874,587 
TOTAL ASSETS$9,130,654 $9,131,896 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
9


BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
(unaudited)As of
March 31, 2022December 31, 2021
(in thousands, except share amounts)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$173,102 $217,761 
Accrued liabilities227,209 244,759 
Derivative liabilities, current191 1,439 
Regulatory liabilities, current52,742 17,574 
Notes payable341,480 420,180 
Total current liabilities794,724 901,713 
Long-term debt, net of current maturities4,128,291 4,126,923 
Deferred credits and other liabilities:
Deferred income tax liabilities, net490,384 465,388 
Regulatory liabilities, non-current482,442 485,377 
Benefit plan liabilities123,111 123,925 
Other deferred credits and other liabilities140,680 141,447 
Total deferred credits and other liabilities1,236,617 1,216,137 
Commitments, contingencies and guarantees (Note 3)
Equity:
Stockholders’ equity —
Common stock $1 par value; 100,000,000 shares authorized; issued 64,849,227 and 64,793,095 shares, respectively
64,849 64,793 
Additional paid-in capital1,786,980 1,783,436 
Retained earnings1,041,451 962,458 
Treasury stock, at cost – 19,685 and 54,078 shares, respectively
(1,287)(3,509)
Accumulated other comprehensive income (loss)(20,078)(20,084)
Total stockholders’ equity2,871,915 2,787,094 
Non-controlling interest99,107 100,029 
Total equity2,971,022 2,887,123 
TOTAL LIABILITIES AND TOTAL EQUITY$9,130,654 $9,131,896 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
10


BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)Three Months Ended March 31,
20222021
Operating activities:(in thousands)
Net income $121,024 $100,487 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization60,463 57,269 
Deferred financing cost amortization2,475 2,214 
Stock compensation3,638 3,257 
Deferred income taxes14,462 153 
Employee benefit plans1,173 2,304 
Other adjustments, net5,337 6,151 
Changes in certain operating assets and liabilities:
Materials, supplies and fuel34,995 15,932 
Accounts receivable and other current assets(71,241)(11,599)
Accounts payable and other current liabilities(8,422)(23,602)
Regulatory assets98,528 (533,006)
Regulatory liabilities (5,291)
Other operating activities, net1,689 (355)
Net cash provided by (used in) operating activities264,121 (386,086)
Investing activities:
Property, plant and equipment additions(136,779)(146,302)
Other investing activities(1,065)78 
Net cash (used in) investing activities(137,844)(146,224)
Financing activities:
Dividends paid on common stock(38,533)(35,514)
Common stock issued3,791  
Term loan - borrowings 800,000 
Term loan - repayments (200,000)
Net borrowings (payments) of Revolving Credit Facility and CP Program(78,700)(18,170)
Long-term debt - repayments (1,436)
Distributions to non-controlling interest(4,420)(4,644)
Other financing activities(878)(740)
Net cash provided by (used in) financing activities(118,740)539,496 
Net change in cash, restricted cash and cash equivalents7,537 7,186 
Cash, restricted cash and cash equivalents at beginning of period13,810 10,739 
Cash, restricted cash and cash equivalents at end of period$21,347 $17,925 
Supplemental cash flow information:
Cash (paid) refunded during the period:
Interest, net of amounts capitalized$(23,605)$(21,232)
Income taxes 990 
Non-cash investing and financing activities:
Accrued property, plant and equipment purchases at March 3139,559 51,914 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
11


BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)Common StockTreasury Stock
(in thousands except share amounts)SharesValueSharesValueAdditional Paid in CapitalRetained EarningsAOCINon-controlling InterestTotal
December 31, 202164,793,095 $64,793 54,078 $(3,509)$1,783,436 $962,458 $(20,084)$100,029 $2,887,123 
Net income— — — — — 117,526 — 3,498 121,024 
Other comprehensive income, net of tax— — — — — — 6 — 6 
Dividends on common stock ($0.595 per share)
— — — — — (38,533)— — (38,533)
Share-based compensation425 — (34,393)2,222 (191)— — — 2,031 
Issuance of common stock55,707 56 — — 3,776 — — — 3,832 
Issuance costs— — — — (41)— — — (41)
Distributions to non-controlling interest— — — — — — — (4,420)(4,420)
March 31, 202264,849,227 $64,849 19,685 $(1,287)$1,786,980 $1,041,451 $(20,078)$99,107 $2,971,022 

(unaudited)Common StockTreasury Stock
(in thousands except share amounts)SharesValueSharesValueAdditional Paid in CapitalRetained EarningsAOCINon-controlling InterestTotal
December 31, 202062,827,179 $62,827 32,492 $(2,119)$1,657,285 $870,738 $(27,346)$101,262 $2,662,647 
Net income— — — — — 96,316 — 4,171 100,487 
Other comprehensive income, net of tax— — — — — — 1,018 — 1,018 
Dividends on common stock ($0.565 per share)
— — — — — (35,514)— — (35,514)
Share-based compensation82,794 83 7,448 (445)1,672 — — — 1,310 
Other— — — — — (2)— — (2)
Distributions to non-controlling interest— — — — — — — (4,644)(4,644)
March 31, 202162,909,973 $62,910 39,940 $(2,564)$1,658,957 $931,538 $(26,328)$100,789 $2,725,302 

12


BLACK HILLS CORPORATION

Notes to Condensed Consolidated Financial Statements
(unaudited)
(Reference is made to Notes to Consolidated Financial Statements
included in the Company’s 2021 Annual Report on Form 10-K)


(1)    Management’s Statement

The unaudited Condensed Consolidated Financial Statements included herein have been prepared by Black Hills Corporation (together with our subsidiaries the “Company”, “us”, “we” or “our”), pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, we believe that the footnotes adequately disclose the information presented. These Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes included in our 2021 Annual Report on Form 10-K.

Segment Reporting

Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products and services. All of our operations and assets are located within the United States. We conduct our operations through the Electric Utilities and Gas Utilities segments. In the fourth quarter of 2021, we integrated our power generation and mining businesses within the Electric Utilities segment. The alignment is consistent with the current way our CODM evaluates the performance of the business and makes decisions related to the allocation of resources. Comparative periods presented reflect this change.

For further information regarding our segment reporting, see Note 12.

Use of Estimates and Basis of Presentation

The information furnished in the accompanying Condensed Consolidated Financial Statements reflects certain estimates required and all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the March 31, 2022, December 31, 2021 and March 31, 2021 financial information. Certain lines of business in which we operate are highly seasonal, and our interim results of operations are not necessarily indicative of the results of operations to be expected for an entire year.

Recently Issued Accounting Standards

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ASU 2020-04

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which was subsequently amended by ASU 2021-01. The standard provides relief for companies preparing for discontinuation of interest rates, such as LIBOR, and allows optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are elective and are effective upon the ASU issuance through December 31, 2022. We are currently evaluating whether we will apply the optional guidance as we assess the impact of the discontinuance of LIBOR on our current arrangements but do not expect it to have a material impact on our financial position, results of operations and cash flows.

13


(2)    Regulatory Matters

We had the following regulatory assets and liabilities (in thousands):

As ofAs of
March 31, 2022December 31, 2021
Regulatory assets
Winter Storm Uri (a)
$438,675 $509,025 
Deferred energy and fuel cost adjustments (b)
67,068 59,973 
Deferred gas cost adjustments (b)
1,917 9,488 
Gas price derivatives (b)
220 2,584 
Deferred taxes on AFUDC (b)
7,420 7,457 
Employee benefit plans and related deferred taxes (c)
87,947 88,923 
Environmental (b)
1,375 1,385 
Loss on reacquired debt (b)
20,561 21,011 
Deferred taxes on flow through accounting (b)
69,387 63,243 
Decommissioning costs (b)
5,339 5,961 
Other regulatory assets (b)
23,435 27,549 
Total regulatory assets723,344 796,599 
   Less current regulatory assets(265,496)(270,290)
Regulatory assets, non-current$457,848 $526,309 
Regulatory liabilities
Deferred energy and gas costs (b)
$38,343 $6,113 
Employee benefit plan costs and related deferred taxes (c)
31,943 32,241 
Cost of removal (b)
181,690 179,976 
Excess deferred income taxes (c)
259,856 264,042 
Other regulatory liabilities (c)
23,352 20,579 
Total regulatory liabilities535,184 502,951 
   Less current regulatory liabilities(52,742)(17,574)
Regulatory liabilities, non-current$482,442 $485,377 
__________
(a)    Timing of Winter Storm Uri incremental cost recovery and associated carrying costs vary by jurisdiction and some jurisdictions are still subject to pending applications with the respective utility commission. See further information below.
(b)    Recovery of costs, but we are not allowed a rate of return.
(c)    In addition to recovery or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base.

Regulatory Activity

Except as discussed below, there have been no other significant changes to our Regulatory Matters from those previously disclosed in Note 2 of the Notes to the Consolidated Financial Statements in our 2021 Annual Report on Form 10-K.

Winter Storm Uri

In February 2021, a prolonged period of historic cold temperatures across the central United States, which covered all of our Utilities’ service territories, caused a substantial increase in heating and energy demand and contributed to unforeseeable and unprecedented market prices for natural gas and electricity. As a result of Winter Storm Uri, we incurred significant incremental fuel, purchased power and natural gas costs.

Our Utilities submitted Winter Storm Uri cost recovery applications in our state jurisdictions seeking to recover $546 million of these incremental costs through separate tracking mechanisms over a weighted-average recovery period of 3.5 years. These incremental cost estimates are subject to adjustments as final decisions are issued by the respective utility commissions. In these applications, we seek approval to recover carrying costs. For the three months ended March 31, 2022 and 2021, $2.3 million and $0, respectively, of carrying costs were accrued and recorded to a regulatory asset.

14


On January 27, 2022, Kansas Gas received approval from the KCC for their Winter Storm Uri cost recovery settlement with final rates implemented in February 2022. In March 2022, Colorado Electric and Colorado Gas received approval from the CPUC for their respective Winter Storm Uri cost recovery settlements with final rates implemented in April 2022.

To date, Colorado Electric, Colorado Gas, Iowa Gas, Kansas Gas, Nebraska Gas and South Dakota Electric received commission approval of their Winter Storm Uri cost recovery applications. Additionally, Arkansas Gas and Wyoming Gas received approval for interim cost recovery subject to a final decision on carrying costs and recovery periods at a later date. For the three months ended March 31, 2022, our Utilities collected $73 million of Winter Storm Uri incremental costs and carrying costs from customers. As of March 31, 2022, we estimate that our remaining Winter Storm Uri regulatory asset has a weighted-average recovery period of 3.1 years.

TCJA

As part of Kansas Gas’s 2021 rate review settlement agreement, Kansas Gas will deliver $3.0 million of TCJA and state tax reform benefits to customers, annually, for three years starting in 2022 (approximately $9.1 million of total benefits expected to be delivered). For the three months ended March 31, 2022, Kansas Gas delivered $0.8 million of TCJA-related bill credits to customers.

These bill credits, which resulted in a reduction of revenue, were offset by a reduction in income tax expense and resulted in a minimal impact to Net income for the three months ended March 31, 2022.

Arkansas Gas

On December 10, 2021, Arkansas Gas filed a rate review with the APSC seeking recovery of significant infrastructure investments in its 7,200-mile natural gas pipeline system. The rate review requests $22 million in new annual revenue with a capital structure of 50.9% equity and 49.1% debt and a return on equity of 10.2%. The request seeks to finalize rates in the fourth quarter of 2022.


(3)    Commitments, Contingencies and Guarantees

There have been no significant changes to commitments, contingencies and guarantees from those previously disclosed in Note 3 of our Notes to the Consolidated Financial Statements in our 2021 Annual Report on Form 10-K except for those described below.

Power Sales Agreement

On May 3, 2022, South Dakota Electric entered into an agreement with MDU to provide MDU capacity and energy up to a maximum of 50 MW in excess of Wygen III ownership. This agreement, which has similar terms and conditions as South Dakota Electric’s existing agreement with MDU expiring on December 31, 2023, is effective on January 1, 2024 and will expire on December 31, 2028.

GT Resources, LLC v. Black Hills Corporation, Case No. 2020CV30751 (U.S. District Court for the City and County of Denver, Colorado)

On April 13, 2022, a jury awarded $41 million for claims made by GT Resources, LLC (“GTR”) against BHC and two of its subsidiaries (Black Hills Exploration and Production, Inc. and Black Hills Gas Resources, Inc.), which ceased oil and natural gas operations in 2018 as part of BHC’s decision to exit the exploration and production business. The claims involved a dispute over a 2.3 million-acre concession award in Costa Rica which was acquired by a BHC subsidiary in 2003. GTR retained rights to receive a royalty interest on any hydrocarbon production from the concession upon the occurrence of contingent events. GTR contended that BHC and its subsidiaries failed to adequately pursue the opportunity and failed to transfer the concession to GTR. We believe we have meritorious defenses to the verdict and intend to appeal the verdict. At this time, we believe that the liability related to this matter, if any, is not reasonably estimable.

Power Purchase Agreement

On February 19, 2021, Colorado Electric entered into an agreement with TC Colorado Solar, LLC (TC Solar) to purchase up to 200 MW of renewable energy upon construction of a new solar facility, to be owned by TC Solar. This agreement relates to a new solar facility to be constructed and would expire 15 years after construction completion. On January 31, 2022, TC Solar provided notice of its intent to terminate the PPA. We disputed TC Solar's right to termination and, pursuant to the agreement, entered resolution negotiations to amend certain contract terms with TC Solar, which are ongoing.
15


Transmission Service Agreements

On January 1, 2022, Colorado Electric entered into a firm point-to-point transmission service agreement that provides Tri-State Generation and Transmission Association Inc. with a maximum of 58 MW of transmission capacity. This agreement expires December 31, 2024.

On January 1, 2022, South Dakota Electric entered into a firm point-to-point transmission service agreement that provides MEAN with a maximum of 20 MW of transmission capacity. This agreement expires December 31, 2023.


(4)    Revenue

The following tables depict the disaggregation of revenue, including intercompany revenue, from contracts with customers by customer type and timing of revenue recognition for each of the reportable segments for the three months ended March 31, 2022 and 2021. Sales tax and other similar taxes are excluded from revenues.
Three Months Ended March 31, 2022 Electric Utilities  Gas UtilitiesInter-company RevenuesTotal
Customer types:(in thousands)
Retail$172,806 $561,013 $ $733,819 
Transportation 49,523 (99)49,424 
Wholesale10,275   10,275 
Market - off-system sales7,154 238  7,392 
Transmission/Other15,433 9,575 (4,149)20,859 
Revenue from contracts with customers$205,668 $620,349 $(4,248)$821,769 
Other revenues870 1,043 (112)1,801 
Total revenues$206,538 $621,392 $(4,360)$823,570 
Timing of revenue recognition:
Services transferred at a point in time$7,113 $ $ $7,113 
Services transferred over time198,555 620,349 (4,248)814,656 
Revenue from contracts with customers$205,668 $620,349 $(4,248)$821,769 

Three Months Ended March 31, 2021 Electric Utilities  Gas UtilitiesInter-company RevenuesTotal
Customer Types:(in thousands)
Retail$204,280 $341,605 $ $545,885 
Transportation 47,951 (110)47,841 
Wholesale11,359   11,359 
Market - off-system sales4,772 73  4,845 
Transmission/Other14,186 10,390 (4,289)20,287 
Revenue from contracts with customers$234,597 $400,019 $(4,399)$630,217 
Other revenues807 2,500 (92)3,215 
Total Revenues$235,404 $402,519 $(4,491)$633,432 
Timing of Revenue Recognition:
Services transferred at a point in time$6,976 $ $ $6,976 
Services transferred over time227,621 400,019 (4,399)623,241 
Revenue from contracts with customers$234,597 $400,019 $(4,399)$630,217 



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(5)    Financing

Short-term Debt

We had the following Notes payable outstanding in the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:

March 31, 2022December 31, 2021
Balance Outstanding
Letters of Credit (a)
Balance Outstanding
Letters of Credit (a)
Revolving Credit Facility 16,855  27,209 
CP Program341,480  420,180  
Total Notes payable$341,480 $16,855 $420,180 $27,209 
__________
(a) Letters of credit are off-balance sheet commitments that reduce the borrowing capacity available on our corporate Revolving Credit Facility.

Revolving Credit Facility and CP Program

Our net short-term repayments related to our Revolving Credit Facility and CP Program during the three months ended March 31, 2022 were $79 million. The weighted average interest rate on short-term borrowings related to our Revolving Credit Facility and CP Program at March 31, 2022 was 0.79%.

Debt Covenants

Revolving Credit Facility

Under our Revolving Credit Facility, we are required to maintain a Consolidated Indebtedness to Capitalization Ratio not to exceed 0.65 to 1.00. Subject to applicable cure periods, a violation of any of these covenants would constitute an event of default that entitles the lenders to terminate their remaining commitments and accelerate all principal and interest outstanding.

We were in compliance with our covenants at March 31, 2022 as shown below:

As of March 31, 2022Covenant Requirement
Consolidated Indebtedness to Capitalization Ratio61.0%Less than65%

Wyoming Electric

Covenants within Wyoming Electric's financing agreements require Wyoming Electric to maintain a debt to capitalization ratio of no more than 0.60 to 1.00. As of March 31, 2021, we were in compliance with these financial covenants.

Equity

At-the-Market Equity Offering Program

During the three months ended March 31, 2022, we issued a total of 55,707 shares of common stock under the ATM for proceeds of $3.8 million. During the three months ended March 31, 2021, we did not issue any shares of common stock under the ATM.

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(6)    Earnings Per Share

A reconciliation of share amounts used to compute earnings per share in the accompanying Condensed Consolidated Statements of Income was as follows (in thousands, except per share amounts):

Three Months Ended March 31,
20222021
Net income available for common stock$117,526 $96,316 
Weighted average shares - basic64,565 62,633 
Dilutive effect of:
Equity compensation156 58 
Weighted average shares - diluted64,721 62,691 
Earnings per share of common stock:
Earnings per share, Basic$1.82 $1.54 
Earnings per share, Diluted$1.82 $1.54 

The following securities were excluded from the diluted earnings per share computation because of their anti-dilutive nature (in thousands):
Three Months Ended March 31,
20222021
Equity compensation 14 
Restricted stock 19 
Anti-dilutive shares 33 


(7)    Risk Management and Derivatives

Market and Credit Risk Disclosures

Our activities in the energy industry 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.

Market Risk

Market risk is the potential loss that may occur as a result of an adverse change in market price, rate or supply. We are exposed but not limited to, the following market risks:

Commodity price risk associated with our retail natural gas and wholesale electric power marketing activities and our fuel procurement for several of our gas-fired generation assets, which include market fluctuations due to unpredictable factors such as the COVID-19 pandemic, weather (Winter Storm Uri), market speculation, inflation, pipeline constraints, and other factors that may impact natural gas and electric supply and demand; and

Interest rate risk associated with future debt, including reduced access to liquidity during periods of extreme capital markets volatility, such as the 2008 financial crisis and the COVID-19 pandemic.

Credit Risk

Credit risk is the risk of financial loss resulting from non-performance of contractual obligations by a counterparty.

We attempt to mitigate our credit exposure by conducting business primarily with high credit quality entities, setting tenor and credit limits commensurate with counterparty financial strength, obtaining master netting agreements and mitigating credit exposure with less creditworthy counterparties through parental guarantees, cash collateral requirements, letters of credit and other security agreements.
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We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customers’ 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.

Derivatives and Hedging Activity

Our derivative and hedging activities included in the accompanying Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income are detailed below and in Note 8.

The operations of our Utilities, including natural gas sold by our Gas Utilities and natural gas used by our Electric Utilities’ generation plants or those plants under PPAs where our Electric Utilities must provide the generation fuel (tolling agreements), expose our utility customers to natural gas price volatility. Therefore, as allowed or required by state utility commissions, we have entered into commission approved hedging programs utilizing natural gas futures, options, over-the-counter swaps and basis swaps to reduce our customers’ underlying exposure to these fluctuations. These transactions are considered derivatives, and in accordance with accounting standards for derivatives and hedging, mark-to-market adjustments are recorded as Derivative assets or Derivative liabilities on the accompanying Condensed Consolidated Balance Sheets, net of balance sheet offsetting as permitted by GAAP.

For our regulated Utilities’ hedging plans, unrealized and realized gains and losses, as well as option premiums and commissions on these transactions, are recorded as Regulatory assets or Regulatory liabilities in the accompanying Condensed Consolidated Balance Sheets in accordance with the state regulatory commission guidelines. When the related costs are recovered through our rates, the hedging activity is recognized in the Condensed Consolidated Statements of Income.

We use wholesale power purchase and sale contracts to manage purchased power costs and load requirements associated with serving our electric customers. Periodically, certain wholesale energy contracts are considered derivative instruments due to not qualifying for the normal purchase and normal sales exception to derivative accounting. Changes in the fair value of these commodity derivatives are recognized in the Condensed Consolidated Statements of Income.

We buy, sell and deliver natural gas at competitive prices by managing commodity price risk. As a result of these activities, this area of our business is exposed to risks associated with changes in the market price of natural gas. We manage our exposure to such risks using over-the-counter and exchange traded options and swaps with counterparties in anticipation of forecasted purchases and sales during time frames ranging from April 2022 through December 2024. A portion of our over-the-counter swaps have been designated as cash flow hedges to mitigate the commodity price risk associated with deliveries under fixed price forward contracts to deliver gas to our Choice Gas Program customers. The gain or loss on these designated derivatives is reported in AOCI in the accompanying Condensed Consolidated Balance Sheets and reclassified into earnings in the same period that the underlying hedged item is recognized in earnings. Effectiveness of our hedging position is evaluated at least quarterly.

The contract or notional amounts and terms of the electric and natural gas derivative commodity instruments held at our Utilities are composed of both long and short positions. We had the following net long positions as of:

March 31, 2022December 31, 2021
Notional
Amounts (MMBtus)