Decade of the 70's
Changes of officers and directors in 1974 included the naming of Robert Asheim as Presi-dent with Neil Simpson continuing as Chairman of the Board and Chief Executive Officer. George Locke was named Senior Vice President and Tom Lane was elected as a new director. The designation of Director Emeritus was accorded Jarvis Davenport who provided 32 years of effective leadership through the formative years until the present time. William McNutt became Assistant Treasurer.
The completion date of the 330 megawatt plant was extended one year to the spring of 1978. Inflation and environmental requirements caused tremendous increases in the estimated cost of the plant. The Company adopted firm efforts to curtail expenses and increase productivity. Controllable expenses of all kinds were scrutinized, and more efficient methods of operation initiated. The mer-chandise operation was terminated because of higher priority requirements for capital and man-power allocations in the primary function of sup-plying electric service.
In 1974 consolidated per share earnings were under severe cost pressure. Earnings did not keep pace with the increase in operating revenues due to steadily increasing expenses in all taxes, deprecia-tion, labor, supplies, services and cost of money. While the cost of coal had increased a few cents per ton, the Company had experienced a number of freight rate increases in 1974. The rate increases resulted in increased transportation costs equal to about 34 cents per common share when annual-ized. Coal freight rates were a major factor in the decision to locate the new joint plant at mine mouth. The cost of transporting coal is one of the major factors leading to the decision to phase out operation of the Company's two plants in South Dakota when the new plant goes into commercial operation in 1977.
On November 1, 1974, approval by the stock-holders was given to the Amendment of Article Four of the Articles of Incorporation, which in-creased authorized capital stock. It also increased authorized indebtedness from $30 million to $60 million.
The year 1974 was characterized as one of the most challenging years in the history of the Com-pany. Expansion requirements in a highly infla-tionary period caused continuous review and modi-fication of cost estimates and financing require-ments. By the end of 1975, reassessment in light of these changing conditions reduced the Company's share of the 330 kW project to 10 percent with an option to increase the percentage participation to 20 percent under certain conditions.
The load growth and forecasts to 1978 and beyond indicated the need for capacity in addition to existing and planned generation. The Company expected to cover additional capacity requirements for the next several years with purchased power and peaking equipment.
Construction on the Wyodak #1 plant began in 1974 and commercial operation was scheduled for mid-1978. By the end of 1975 the estimated cost was $225 million. It will be the world's largest air-cooled electric generating plant.
The construction program for 1975 was budg-eted at $26.9 million. The Company was contem-plating that the Company's portion of the cost of the generating facility would be permanently fi-nanced through a leasing or similar arrangement. The Company also intended to finance the pollu-tion control abatement equipment to be added to existing generating plants by the issuance of tax-free bonds to be issued in 1975 or 1976. The abatement equipment was mandated by law in the public interest so tax-free bonds were acceptable.
The continuing upward trend of all costs, made it necessary to add additional revenues through a 15 percent increase in rates.
During 1975 a rate increase of 13.7 percent was approved by the Wyoming Public Service Commission. Revised rates were filed in South Dakota. Previously, South Dakota rates were in-creased by 15 percent. It was projected that the continuing upward trend of operating costs and the additional investment for environmental equip-ment would require further rate increases in early 1976.
The Company was operating in 1975 with 304 employees, 31 fewer employ-ees than a year ago, partially due to discon-tinuation of merchandise operations. A management by objectives pro-gram was im-plemented re-sulting in a greater degree of dedication and efficiency by employees.
The 230 kV transmission system, consisting of 318 miles of line, was under construction in 1975. It would extend from Wyodak to Spearfish to Rapid City and from Rapid City to Stegall, Nebraska. When completed, it would allow move-ment of larger blocks of power to the Company's load centers. The line would also tie the Company with the Bureau of Reclamation at Stegall and with Pacific Power & Light Company at Wyodak. The Wyodak-Spearfish section of the line was completed in 1975. Upgrading of the 161 kV line between Rapid City and a point near the Nebraska state line to 230 kV, and construction of a new line on to Stegall was underway. Substation facilities at Rapid City and Hot Springs were also under construction. The Lange property north of Rapid City was purchased for the site of the Rapid City substation.
District Managers of Black Hills Power and Light Company acquired the rights-of-way for the transmission line in their respective areas. Other utilities have right-of-way departments, however, the Company found that the local landowners were more willing to negotiate with the managers who are responsible for good public relations in the area. This was an enormous task for the managers because they were expected to continue to do their normal duties. Proof of their success was "no condemnations" encountered in the 138 miles and the completed acquisition was accom-plished on schedule. Donald Harris was the Company's engineer and did an outstanding job of location, profiling, and working very closely with the district managers in satisfying the landown-ers' needs and wishes.
In one of its final actions, the 1975 legislature approved a compromise version of Senate Bill 261, providing for comprehensive state-wide regu-lation of electrical utilities. The bill was agreed upon following extensive negotiations by the state's rural electric coops, investor-owned utili-ties (IOU's), and municipal electric systems. The bill provided for the regulation of rates of IOU's and cooperatives. Cooperatives were exempted from rate regulation in the next session of the leg-islature. The effective date of the bill was July 1, 1975. The PUC was also given final jurisdiction over certification of areas of service for all three electric utilities. The bill specifically provided for utilities in each area of the state to negotiate area agreements. The utilities had until July 1, 1976, to reach an agreement over areas of service.
On Tuesday, July 8, 1975, at 8:31 a.m. Mack West reported that the Neil Simpson Station was synchronized to the Pacific Power and Light Com-pany '5 161 kV line. The Pacific line was built from Buffalo, Wyoming, to the Wyodak plant over the winter of 1974-75. The Company built the temporary substation at Wyodak and Tn-County Electric Association purchased a 100,000 kVA transformer to make the 161-69 kV connec-tion. The step of moving the Neil Simpson Station to the west of the "East-West tie" was the first step of a long process that would be completed in 1976. By November, the 230 kV transmission line from Wyodak to Stegall, Nebraska, would be complete and then all of the Company's genera-tion would be connected to the west side of East-West ties. The Company had been on the east side of the tie before the recent change.
Wyodak Resources Development Corp., en-tered into a coal supply agreement with the South Dakota State Cement Plant on May 12, 1975. It called for supplying 1.2 million tons of coal for the plant between July 1, 1975, and May 15, 1979. The agreement provided for the coal to be deliv-ered at the mine at a base mine price of $6.50 per ton.
Still higher freight rates on coal led the list of increased expenses in 1975. A significant factor adversely affecting earnings of Wyodak was a 141 percent increase in severance taxes and a 67 percent increase in production taxes as a result of higher levies in Wyoming.
The sale of $2,768,000 of First Mortgage Bonds, Series Q, 11 percent was completed on July 29, 1975, effective July 15, 1975. The new series was issued to replace the maturing Series B and C Bonds, and was sold to The Equitable Life Assurance Society of the United States, the same investor holding the earlier series.
The year 1976 continued to be challenging, however, the challenges were met. Construction, financing, rate hearings, and environmental prob-lems kept the Company busy.
The Rapid City-Stegall, Nebraska, transmis-sion line was completed and in operation. Plan-ning for the installation of two 25 mW combus-tion turbines was started with installation in 1977. A third turbine was added in 1978 and a fourth in 1980. These units, together with the Company's portion of the Wyodak Plant, would allow the Company to serve the projected energy and ca-pacity requirements of the system at the most economical cost.