Decade of the 80's
During 1988 Western Production Company acquired 557,000 barrels of oil reserves and 253,000 MCF of natural gas reserves through acquisition and several drilling programs. Most of the oil reserves were the result of the acquisition of operating oil wells of TOCO, a small producer in Weston County, Wyoming. The objective is to increase reserves by at least 1.25 times annual production, a goal that was exceeded in 1988.
Two investigations of Black Hills Corpora-tion, one by the South Dakota Public Service Commission and the other by the Wyoming Pub-lic Service Commission, were concluded in 1988. The commissions investigated the rates, tariffs, services and regulations of the Company and its subsidiaries. Various adjustments were made, in-cluding a decrease in South Dakota rates due to the Tax Reform Act of 1986 and an increase in all rates due to the final phase of a 40-year, 75 mega-watt power purchase agreement with Pacific Power and Light Company. The final result was that rates were increased an average of 7 percent in 1988 over 1987 and will increase an average of 7 percent in 1989 over 1988.
Further, the commission provided a maxi-mum return on equity that Wyodak Resources can earn on sales of coal to Black Hills Power and Light Company. The cap is the rate on long- term "A" rated utility bonds plus 400 basis points.
A strategic planning decision was made to sell the trucking operation of the Company to Tri-mac Transportation, Inc. The sale included the sale of the stock of Universal Transport, Inc.; Les Calkins Trucking, Inc.; and Lodi Truck Sales. The sale was completed in 1988. The sale price included a profit of over $500,000.
Gary R. Fish was elected Controller of the Company replacing Jeffrey Wood who resigned.
The position of Senior Vice President Corpo-rate Development held by Richard Tupper was eliminated as a part of the strategic and organiza-tional process.
The Company purchased the Rushmore Mutual Life Insurance Building on September 30 for $1 million. The general offices of the Com-pany have been located in the building since Feb-ruary 1971.
The strategic plan incorporated the begin-ning of a study of feasibility of attracting inde-pendent power producers to construct a coal-fired plant near Gillette, Wyoming, adjacent to Wyodak Resources mine. The study is consistent with a utility industry trend that indicates a significant portion of new power generation will be con-structed by firms other than electric utilities. The plan offers the best potential for marketing the Company's existing coal resources as well as pro-viding an attractive investment potential if the plan proves successful.
System peak demand for 1988 was 261 megawatts established in the summer. In Febru-ary of 1989, the system peak demand reached 282 megawatts during an unusually cold period. Tra-ditionally, the summer and winter peaks are about equal, resulting in a 66 percent load factor. The Company's existing power supply of coal-fired generating capacity and long-term purchased power agreements are forecast to meet customer needs until the mid- 1990's.
A new streetlight conversion program was initiated in 1988 in cities throughout the Com-pany's service area. The conversion of 5,300 fix-tures from mercury vapor to High Pressure Sodium streetlighting increases the light level while lowering the electric consumption, thus the costs to cities. The new streetlights, considered to be a state-of-the-art lighting source, replace fixtures in-stalled in the 1950's and 60's. Though the conver-sion program reduces revenue, it offers opportuni-ties to reduce peak power demands and brings streetlighting up to modern standards. The present 175 watt and 400 watt Mercury Vapor fixtures will be replaced with 100 watt and 250 watt fixtures that provide approximately 35 percent more light while reducing operating costs more than 30 percent. The conversion will cost $513,000.
Two destructive forest fires occurred in July 1988. A wildfire that burned 16,788 acres of timber in the Custer State Park was believed to have started by lightning on July 4. Company crews made restoration of service within three days after the fire was contained. As the Custer State Park fire was brought under control, another tragic fire erupted in the Westberry Trails area of Rapid City. Arson was blamed for the forest fire that destroyed 14 homes and forced the evacuation of nearly 1,000 people from their homes. The fire was re-ported on July 26 and it burned over 3,500 acres of forest. It required 1,000 fire fighters to control the fire at a cost of $800,000. BHP employees did their usual outstanding job of restoring service and rebuilding the system quickly and safely.
The year 1988 was the year that all damages from Highway 51 were settled and the files closed. Back on October 31, 1951, Guy Bjorge, President of the Wyodak Coal Company owned by Homes-take Mining Company, signed an easement to allow the Gillette to Moorcroft road to pass through Wyodak. This road cut the mine in half. Then in April of 1974, I-90 was built bisecting the northern part of the mine. David Morrill worked to get federal legislation passed that allowed for an ex-change of coal to replace the lost coal under I-90. Wyodak was awarded 20.35 million tons of coal to the east of the line. It is known as the Highway Exchange Lands. The Company has not been allowed to relocate Highway 51 to allow for the mining of an addi-tional 6 million tons of coal.
At the close of 1989, the future for Black Hills Corporation looks bright. No longer a struggling little company trying to build an electrical system and generation capacity to meet the needs of scattered mining communities in the Black Hills, the Company today looks ahead from a position of strength.
As Alan Skrainka, an analyst at Edward D. Jones & Company in St. Louis, recently wrote to his company's brokers, "Black Hills Corporation is a diversified electric utility company based in Rapid City, South Dakota. The Company pro-vides service to a 99,300 square-mile area of South Dakota, Wyoming, and Montana. Wyodak Resources, an unregulated coal mining subsidi-ary, offers attractive long-term growth potential. The Company is also expanding into natural re-source related businesses. The current yield is well below average, but BKH offers strong fi-nances and excellent growth potential, primarily because of the success of diversification activi-ties. BKH is a fine choice for investors seeking superior long-term return."
Ben French, Neil Simpson, and all the other Company pioneers would nod their heads in approval if they could look at Black Hills Corpo-ration today.
Thanks to all the employees, both active and retired, who have been a part of the Company's rich history, insuring its bright future.