Colorado PUC E-Filings System

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO PROCEEDING NO. 18A- G IN THE MATTER OF THE VERIFIED JOINT APPLICATION OF BLACK HILLS GAS DISTRIBUTION, LLC, BLACK HILLS/COLORADO GAS UTILITY COMPANY, INC., AND BLACK HILLS COLORADO GAS, INC. FOR A COMMISSION DECISION APPROVING INTERNAL TRANSFERS CONSOLIDATING, THROUGH AN EXCHANGE OF STOCK AND MERGER, THE COLORADO ASSETS, LIABILITIES, AND OPERATIONS OF BLACK HILLS GAS DISTRIBUTION, LLC AND BLACK HILLS/COLORADO GAS UTILITY COMPANY, INC. INTO ONE PUBLIC UTILITY ENTITY NAMED BLACK HILLS COLORADO GAS, INC. VERIFIED JOINT APPLICATION Pursuant to Colo. Rev. Stat and Rules 4002 and 4104 of the Commission s Colorado PUC E-Filings System Rules Regulating Gas Utilities and Pipeline Operators, 4 Code of Colorado Regulations 723-4, Black Hills Gas Distribution, LLC ( BH Gas Distribution ), Black Hills/Colorado Gas Utility Company, Inc. ( BH Gas Utility ) and Black Hills Colorado Gas, Inc. ( BH Colorado Gas ) (together, the "Joint Applicants ), by their undersigned attorneys, respectfully request a decision from the Public Utilities Commission of the State of Colorado ( Commission ) approving certain internal transfers for the purpose of consolidating the Colorado assets, liabilities and operations of BH Gas Distribution and BH Gas Utility into one newly created public utility entity named BH Colorado Gas, which will continue the same natural gas utility operations thereafter, all as more specifically described herein and in the direct testimonies supporting this Joint Application (the Consolidation ). The purpose of the Consolidation is to simplify the currently complex corporate structure of Black Hills Corporation's ("BHC") Colorado gas utility subsidiaries, which in large part is due to acquisitions made in prior years.

2 Joint Applicants request Commission authorization to effectuate two specific transactions, as follows: 1 Authorization for BH Gas Distribution to transfer to BH Colorado Gas all of BH Gas Distribution s Colorado gas utility assets, liabilities, and operations, including all certificates of public convenience and necessity ( CPCN ) under which it currently provides gas service in Colorado; and Authorization for BH Gas Utility to merge into BH Colorado Gas such that all of BH Gas Utility s Colorado gas utility assets, liabilities, and operations, including all of BH Gas Utility s CPCNs under which it currently provides gas service in Colorado, will be held and operated by BH Colorado Gas as a single entity. Upon receipt of the two authorizations and consummation of the two transactions discussed above, BH Colorado Gas will assume ownership and control of the assets and operations of BH Gas Distribution and BH Gas Utility going forward, and will adopt as its own BH Gas Distribution s Colorado PUC No. 7 gas tariff and BH Gas Utility s Colorado PUC No. 3 gas tariff, as those tariffs exist and are in effect on the date of the transaction, and will file the notices of adoption required by Rules 1208 and 4104(d). While the Joint Applicants have not identified any other required Commission approvals, the Joint Applicants request that the Commission grant to them any other relief or waivers of Commission rules deemed necessary by the Commission to accomplish the Consolidation. For the reasons explained in more detail below, the Joint Applicants request that the Commission consider this Joint Application on an expedited basis as a non-contested proceeding pursuant to C.R.S (5) and Commission Rule The Joint Applicants desire to 1 As detailed later in this Joint Application, other transactions that do not require Commission approval must be completed in order to effectuate the Consolidation. 2

3 complete the Consolidation on or before December 31, The proposed Consolidation is a wholly internal reorganization and will not result in a change of control. Furthermore, approval of this Joint Application will not result in any change in the revenues, rates, terms, and conditions under BH Gas Distribution s or BH Gas Utility s tariffs. Any future changes in rates, terms, and conditions under those tariffs will be accomplished in future proceedings. The information required by Rules 4002 and 4104 follows. Before providing specific information required by the rules, however, an overview of the internal Consolidation is provided in order to assist the Commission in reviewing this Joint Application. I. JOINT APPLICATION OVERVIEW BHC is a diversified energy company headquartered in Rapid City, South Dakota. Through its electric and gas utility subsidiaries, BHC serves over 1.25 million electric and natural gas customers in over 800 communities in eight states - Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. BHC began providing electric and natural gas utility services to customers in Colorado in 2008 with the acquisition of the electric and gas utility assets previously owned by Aquila, Inc. The Commission approved that acquisition ( Aquila Acquisition ), subject to conditions, in Decision No. C , mailed February 29, 2008, in Proceeding No. 07A-108EG. As a result, Black Hills/Colorado Electric Utility Company, LP (now, Black Hills Colorado Electric, Inc.) commenced providing electric utility service in Colorado, and Black Hills/Colorado Gas Utility Company, LP (now, BH Gas Utility) commenced providing gas utility service in Colorado. In 2016, BHC expanded its gas utility operations in Colorado with its acquisition of SourceGas Distribution LLC and Rocky Mountain Natural Gas LLC ( RMNG ). SourceGas 3

4 Distribution LLC was a local distribution company providing retail gas sales and transportation services in Colorado, Nebraska, and Wyoming, and RMNG was an intrastate pipeline providing gas transportation and storage services in Colorado. The Commission approved that acquisition ( SourceGas Acquisition ) in Decision No. R , issued January 22, 2016, in Proceeding No. 15A-0667G. Immediately following the acquisition, on February 13, 2016, BHC changed the name of SourceGas Distribution LLC to Black Hills Gas Distribution, LLC. BH Gas Distribution continues to provide regulated retail gas sales and transportation services through separate divisions in Colorado, Nebraska, and Wyoming. 2 BH Gas Distribution, BH Gas Utility and BH Colorado Gas (the Joint Applicants) are each wholly-owned subsidiaries of Black Hills Utility Holdings, Inc. ( BHUH ) which, in turn, is a direct, wholly-owned subsidiary of BHC. As indicated above, BH Gas Utility has been under BHC s ownership and control since 2008, and BH Gas Distribution has been under BHC s ownership and control since Under the proposed transactions, both BH Gas Utility and BH Gas Distribution will transfer all of their Colorado gas utility assets, liabilities, and operations to BH Colorado Gas and, upon doing so, cease being Colorado public utilities. BH Colorado Gas, as a wholly-owned subsidiary of both BHUH and BHC, will thereafter be the public utility that owns and operates the combined local gas distribution businesses in Colorado. BH Colorado Gas will adopt and assume the Colorado PUC gas tariffs of BH Gas Utility and BH Gas Distribution. The Consolidation of BHC s Colorado gas distribution businesses is part of a larger jurisdictional simplification effort across BHC s different states to consolidate utility subsidiaries. The organizational chart appearing in Attachment A to this Joint Application shows 2 RMNG continues to provide gas transportation and storage services in Colorado. 4

5 the conceptual vision at the conclusion of the jurisdictional simplification project across all of BHC s jurisdictional gas and electric utilities. Mr. Stoffel discusses the broader jurisdictional simplification project in his direct testimony. Commission approval of utility transfers or mergers requires a finding that the transactions are not contrary to the public interest. As indicated above, no change of corporate control will result from the Consolidation. The proposed transactions will facilitate a wholly internal corporate reorganization within BHC and BHUH. The Commission has previously considered and determined that BHC s ownership and control of BH Gas Utility and BH Gas Distribution were in the public interest in approving the Aquila Acquisition and the SourceGas Acquisition. Upon Commission approval of this Joint Application and the consummation of the transactions detailed herein, BH Colorado Gas will merely step into the shoes of both BH Gas Utility and BH Gas Distribution with respect to the CPCNs, franchises and contractual obligations of BH Gas Utility and BH Gas Distribution, as well as the services provided to Colorado customers pursuant to the rates, terms and conditions of their tariffs. As far as current customers of BH Gas Utility and BH Gas Distribution are concerned, it will be business as usual. The Joint Applicants are filing the direct testimony of the following two witnesses on behalf of the Joint Applicants in support of this Joint Application: Fredric C. Stoffel, Director, Regulatory, BHUH; and Kenneth L. Crouch, Tax Manager, Regulatory and Planning, Black Hills Service Company ( BHSC ). The following are attached to and made a part of this Joint Application: Attachment A - Jurisdictional Simplification Organizational Chart Attachment B - Transactional Documents for Consolidation Steps 5

6 Attachment B.1: Contribution Agreement (BH Gas Distribution CO assets to BH Colorado Gas) Attachment B.2: Distribution Agreement (BH Colorado Gas stock distributed to Black Hills Gas, LLC) Attachment B.3: Distribution Agreement (BH Colorado Gas stock distributed to Black Hills Gas Holdings, LLC) Attachment B.4: Distribution Agreement (BH Colorado Gas stock distributed to Black Hills Gas Parent Holdings II, Inc.) Attachment B.5: Contribution Agreement (BH Gas Utility to Black Hills Gas Parent Holdings II, Inc.) Attachment B.6: Agreement and Plan of Merger (BH Gas Utility into BH Colorado Gas) Attachment C - Consolidation Organizational Charts Attachment C.1: Current BHUH Organizational Chart Attachment C.2: Organizational Charts Showing Transactional Steps Attachment D - Service Territory Map Attachment E - Rule 4002(b)(IX) Financials Attachment F - BH Colorado Gas Corporate Information Attachment F.1: Articles of Incorporation Attachment F.2: List of Officers and Directors Attachment F.3: List of Business Relationship Affiliates Attachment G - Pro Forma Accounting Entries Attachment H - Customer Notice 6

7 II. THE CONSOLIDATION TRANSACTIONS There are six different transactional steps in the Consolidation, including the two that require Commission approval (Step 1 and Step 6 in the table below). The transactional steps in the Consolidation, along with a reference to the associated transactional document found in Attachment B to this Joint Application, are as summarized below. Mr. Crouch provides additional detail and explanation as to each step of the proposed transactions under the Consolidation in his direct testimony. 7

8 STEP Step 1 CONSOLIDATION TRANSACTIONAL STEPS STEP DESCRIPTION BH Gas Distribution will contribute all of its Colorado gas utility assets and associated liabilities to BH Colorado Gas in exchange for stock in BH Colorado Gas. Before and after this Step 1, BH Colorado Gas will be a direct subsidiary of BH Gas Distribution. This is one of the two transactions for which the Joint Applicants seek Commission approval. TRANSACTIONAL DOCUMENT Contribution Agreement [Attachment B.1] Step 2 BH Gas Distribution will distribute the stock of BH Colorado Gas to Black Hills Gas, LLC. At the end of this Step 2, BH Colorado Gas will be a direct subsidiary of Black Hills Gas, LLC. Distribution Agreement (Attachment B.2) Step 3 Black Hills Gas, LLC will distribute the stock of BH Colorado Gas to Black Hills Gas Holdings, LLC. At the end of this Step 3, BH Colorado Gas will be a direct subsidiary of Black Hills Gas Holdings, LLC. Distribution Agreement (Attachment B.3) Step 4 Black Hills Gas Holdings, LLC will distribute the stock of BH Colorado Gas to Black Hills Gas Parent Holdings II, LLC. For the reasons explained by Mr. Crouch in his direct testimony, this step may need to change slightly. In any event, at the end of this Step 4, BH Colorado Gas will be a direct subsidiary of Black Hills Gas Parent Holdings II, LLC. Distribution Agreement (Attachment B.4) Step 5 BHUH will contribute the stock of BH Gas Utility to Black Hills Gas Parent Holdings II, LLC. At the end of this Step 5, BH Gas Utility and BH Colorado Gas will both be direct subsidiaries of Black Hills Gas Parent Holdings II, LLC, thereby facilitating the planned merger through a tax-free reorganization. Contribution Agreement (Attachment B.5) Step 6 BH Gas Utility will be merged into BH Colorado Gas, with BH Colorado Gas as the surviving corporation. At the end of this Step 6, BH Colorado Gas will hold all of the Colorado gas utility assets previously owned by BH Gas Distribution and BH Gas Utility and will be a direct subsidiary of Black Hills Gas Parent Holdings II, LLC. This is the second of the two transactions for which the Joint Applicants seek Commission approval. Agreement and Plan of Merger (Attachment B.6) 8

9 To assist in describing the proposed transactions, three organizational charts are included in Attachment C to this Joint Application. An organizational chart showing the relationships between and among BHUH, BH Gas Utility, BH Gas Distribution, BH Colorado Gas and their operating public utility affiliates as of the date of this Joint Application is shown in Attachment C.1. Attachment C.2 contains organizational charts that show the series of transactional steps listed in the table above, as well as the post-consolidation BHUH organizational chart which is shown on page three of Attachment C.2. III. INFORMATION REQUIRED BY RULE 4002(b) A. Names and Addresses of the Joint Applicants [Rule 4002(b)(I)]. The Joint Applicants are: Black Hills Gas Distribution, LLC; Black Hills/Colorado Gas Utility Company, Inc.; and Black Hills Colorado Gas, Inc. BH Gas Distribution s and BH Gas Utility s principal office for gas operations in Colorado is located at 7060 Alegre Street, Fountain, Colorado After the transactions proposed as part of the internal Consolidation are consummated and BH Colorado Gas takes over the gas utility operations of BH Gas Distribution and BH Gas Utility, its principal office for gas operations will also be located at 7060 Alegre Street, Fountain, Colorado B. Names Under Which Applicants Are, Or Will Be, Providing Service in Colorado [Rule 4002(b)(II)]. BH Gas Utility and BH Gas Distribution currently provide gas utility service to customers in Colorado under the trade name Black Hills Energy. After the transactions proposed as part of the internal Consolidation are consummated, BH Colorado Gas will commence providing gas utility service to customers in Colorado currently served by BH Gas 9

10 Utility and BH Gas Distribution. Black Hills Energy is the registered trade name on file with the Colorado Secretary of State s office for BH Gas Utility and BH Gas Distribution. BH Colorado Gas will also operate under the trade name Black Hills Energy. C. Contact Information of Joint Applicant s Representatives to Whom All Inquiries Concerning the Joint Application Should be Made [Rule 4002(b)(III)]. In addition to the undersigned counsel, the contact information of Joint Applicants representatives to whom all inquiries, notices, pleadings, and other communications and documents regarding this Joint Application should be directed are as follows: Fredric C. Stoffel Director, Regulatory Black Hills Corporation 1515 Wynkoop Street, Suite 500 Denver, CO Telephone: (303) Fred.Stoffel@blackhillscorp.com Eric Gillen Manager, Regulatory Black Hills Corporation 1515 Wynkoop, Suite 500 Denver, CO Telephone: (303) Eric.Gillen@blackhillscorp.com Elaine Hegler Paralegal Black Hills Corporation 1515 Wynkoop Street, Suite 500 Denver, CO Telephone: (303) Elaine.Hegler@blackhillscorp.com D. Statement and Agreement in Lieu of the Separate Statements Required by Rule 4002(b)(IV)-(VI) [Rule 4002(b)(VII)]. Joint Applicants have read, and agree to abide by, the provisions of subparagraphs (b)(iv) through (VI) of Rule

11 E. Description of Joint Applicants Existing Operations and General Service Areas in Colorado [Rule 4002(b)(VIII)]. BH Gas Utility and BH Gas Distribution are public utilities subject to the jurisdiction of the Commission, pursuant to C.R.S et. seq., including the rules and regulations of the Commission regulating gas utilities. After the transactions proposed as part of the internal Consolidation are consummated and BH Colorado Gas takes over the gas utility operations of BH Gas Distribution and BH Gas Utility, BH Gas Distribution and BH Gas Utility will cease public utility operations and BH Colorado Gas will be a public utility subject to the jurisdiction of the Commission, pursuant to C.R.S et. seq., including the rules and regulations of the Commission regulating gas utilities. BH Gas Utility provides retail gas sales and transportation service to approximately 84,800 gas customers within thirty-two communities in eight counties located in the east central area of Colorado. BH Gas Distribution provides retail gas sales and transportation service to approximately 101,000 residential, commercial, industrial and agricultural gas customers in two Base Rate Areas in Colorado. Information regarding the operations and service territories of BH Gas Utility and BH Gas Distribution is set forth in their respective tariffs on file with the Commission. A map depicting the general service areas of BH Gas Utility and BH Gas Distribution is provided as Attachment D. Colorado. BH Colorado Gas currently has no gas utility operations or general service area in 11

12 F. Copy of Joint Applicants' or Parent Company s and Consolidated Subsidiaries Most Recent Audited Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows [Rule 4002(b)(IX)]. Attachment E contains the (i) the audited consolidated Statements of Income, Balance Sheets (including retained earnings), and Statements of Cash Flow for BHC from its annual report (Form 10K) for the year ended December 31, 2017, and (ii) excerpts from the most recent FERC Form No. 2 filed in Colorado for BH Gas Utility and BH Gas Distribution. BH Colorado Gas was recently incorporated, has not commenced operations, and therefore has no applicable financial statements. G. The Town or City, and Any Alternative Town or City, in Which Joint Applicants Prefer Any Hearings Be Held [Rule 4002(b)(X)]. Joint Applicants believe this Joint Application can be decided as a non-contested proceeding without the need for an evidentiary hearing pursuant to C.R.S (5) and Commission Rule However, if the Commission does set this Joint Application for hearing, Joint Applicants prefer that any hearing be held at the Commission s offices in Denver, Colorado. H. Acknowledgment Required by Rule 4002(b)(XI). Joint Applicants have read, and agree to abide by, the provisions of subparagraphs (b)(xi)(a) through (C) of Rule I. Attestation Required by Rule 4002(b)(XII). Pursuant to the attached Verification, Fredric C. Stoffel, Director, Regulatory, for BHUH, as authorized agent for BH Gas Utility, BH Gas Distribution and BH Colorado Gas, attests under 12

13 penalty of perjury that the contents of the Joint Application are true, accurate, and correct to the best of his knowledge. J. Information Listed in Rule 1310(a)(I) Through (V) and Incorporated Herein by Reference to the Miscellaneous Docket Created Under Rule 1310 [Rule 4002(c)]. The corporate information required in Rule 1310(a)(I) through (V) for BH Gas Utility and BH Gas Distribution is on file with the Commission in Docket No. 06M-525EG and is hereby incorporated and made a part of this Joint Application by reference. BH Gas Utility and BH Gas Distribution state that the information on file in that docket is correct as of the date of this Joint Application. With respect to BH Colorado Gas, the corporate information required by Rule 1310(a)(I) through (IV) is contained in Attachment F to this Joint Application. Attachment F contains the following: (a) A copy of BH Colorado Gas s applicable organizational documents (e.g., Articles of Incorporation, Partnership Agreements, Articles of Organization) [Rule 1310(a)(I)]. A copy of BH Colorado s Articles of Incorporation filed with the Colorado Secretary of State is attached as Attachment F.1. (b) If not organized in Colorado, a current copy of the certificate issued by the Colorado Secretary of State authorizing BH Colorado Gas to transact business in Colorado [Rule 1310(a)(II)]. Not applicable. (c) The name, business address, and title of each officer, director, and partner of BH Colorado Gas [Rule 1310(a)(III)]. See Attachment F.2. (d) The names and addresses of affiliated companies that conduct business with BH Colorado Gas [Rule 1310(a)(IV)]. See Attachment F.3. 13

14 In addition, the name and address of BH Colorado Gas s Colorado agent for service of process [Section 1310(a)(V)] is as follows: Corporation Service Company 1900 W. Littleton Boulevard Littleton, CO IV. INFORMATION REQUIRED BY RULE 4104(b) A. Accounting Entries Pursuant to Rule 4104(b)(II). Rule 4104(b)(II) requires "a statement showing accounting entries, under the Uniform System of Accounts, including any plant acquisition adjustment, gain, or loss proposed on the books by each party before and after the transaction which is the subject of the application." For illustrative purposes, pro forma accounting entries relating to Steps 1 and 6 of the Consolidation are contained in Attachment G based upon year-end 2017 financial information. The actual journal entries will reflect the corresponding accounting information on the date of the transactions. Page G.1 of Attachment G illustrates the accounting entries that would be recorded by BH Gas Distribution to reflect the transfer of assets from BH Gas Distribution to BH Colorado Gas (Step 1). Page G.2 of Attachment G illustrates the accounting entries that would be recorded by BH Gas Utility to reflect the merger of BH Gas Utility into BH Colorado Gas (Step 6). Page G.3 of Attachment G illustrates the accounting entries that would be recorded by BH Colorado Gas to reflect the transfer of assets in Step 1 and the merger in Step 6. Neither of the proposed transfers of gas utility assets within the Consolidation will result in the recording of any plant acquisition adjustment (Account 114, Gas Plant Acquisition Adjustments) or gain or loss. The transfer of all of BH Gas Distribution s Colorado gas utility assets to BH Colorado Gas will be through a contribution by BH Gas Distribution of those assets for BH Colorado Gas stock. The transfer of all of BH Gas Utility s assets to BH Colorado Gas 14

15 will be through the merger of BH Gas Utility into BH Colorado Gas. BH Colorado Gas will acquire all of the assets of BH Gas Utility in exchange for BH Colorado Gas s stock, with no additional cash or other consideration. The gas plant assets, associated accumulated provision for depreciation, and accumulated deferred income taxes will be recorded on the books of BH Colorado Gas on the closing date in the same amounts as they were recorded on the books of BH Gas Distribution and BH Gas Utility on that same date. B. Copies of Agreements Required by Commission Rule 4104(b)(III). As stated above, the forms of agreements relating to the Consolidation that are required by Commission Rule 4104(b)(III) are contained in Attachment B to this Joint Application and are described in the table in Section II above. BH Colorado Gas will file with the Commission executed copies of the internal documents as part of a post-closing compliance filing in this application proceeding. C. Facts Showing that the Proposed Transactions Are Not Contrary to the Public Interest Pursuant to Rule 4104(b)(IV). The Consolidation will not result in any change to BHC s corporate control of the facilities, operations and services provided to Colorado customers. None of the rates, services, operations and business processes of either BH Gas Distribution or BH Gas Utility will be changed by the consolidation of these two utilities into a single entity. The consolidation of these two gas utility businesses into a single entity is a necessary step towards simplifying the regulatory administration of the Colorado gas utility operations and services under BHC. Rule 4104(b)(IV) requires a showing that the proposed transactions are not contrary to the public interest. In evaluating and concluding that this standard had been met as to the 15

16 transactions to transfer the electric and gas utility assets of Aquila, Inc. to BHC in Decision No. C , in the fully litigated Aquila Acquisition proceeding, the Commission clarified that it would apply the no net harm to customers test. The Commission concluded that this standard is consistent with the ratepayer side of the public interest equation articulated by the Colorado Supreme Court in Mountain States Telephone and Telegraph Co. v. Public Utilities Commission, 763 P.2d 1020, 1029 (Colo. 1988): As demonstrated within the context of past commission decisions, the term public interest involves a balancing of the interests of the shareholders in a reasonable rate of return and the rights of the ratepayers to receive adequate service at a price which reflects the cost of service. Decision No. C , pp , 74 and 75. Concluding that the joint applicants were satisfied that the proposed transactions were in the shareholders interests, as inferred by the approvals of their respective boards of directors, the Commission found that it was appropriate to focus our attention on the rights and interests of ratepayers and on the effect of the proposed asset transfer on them. Decision No. C , p. 21, 75. Here, as discussed more fully in Mr. Stoffel s direct testimony, the customers of BH Gas Utility and BH Gas Distribution will not be adversely affected by the proposed transactions as BH Colorado Gas will simply be stepping into the shoes of BH Gas Utility and BH Gas Distribution by adopting their existing tariffs. In fact, the consolidation of the two utilities into one will ultimately improve overall administrative efficiency by reducing the number of utility-specific filings that will have to be prepared and filed with the Commission, such as annual reports and other generally applicable filings. 16

17 D. Evaluation of the Benefits and Detriments to the Customers of Each Party and to All Other Persons Who Will be Affected by the Proposed Transactions, as Required by Rule 4104(b)(V). As explained above, all of the Colorado gas utility services and operations currently provided by BH Gas Utility and BH Gas Distribution will be performed substantially as they are being performed today, but consolidated within a single corporate entity with a new name. As the rates, terms and conditions of the gas utility services currently provided to Colorado customers will remain unchanged, there will be no detrimental effects to Colorado customers. In addition, as explained in this Joint Application and discussed more fully in Mr. Stoffel s direct testimony: There will be no change in the way in which these gas systems are operated after BH Colorado Gas becomes the operating entity. BH Colorado Gas will be assuming and adopting as its own BH Gas Distribution s Colorado PUC No. 7 gas tariff and BH Gas Utility s Colorado PUC No. 3 gas tariff as those tariffs exist and are in effect on the effective date of the transactions. No changes outside of the ordinary course of business in future proceedings or inconsistent with prudent, safe, and reliable operations and service are planned or expected concerning operations, administration, shared services, personnel, or positions as a result of the Consolidation. The methods used to allocate indirect costs to BH Colorado Gas based upon services provided by BHSC and BHUH will not change as a result of the Consolidation, and there will be no increase in existing corporate overhead cost allocations as a result of the Consolidation. The Joint Applicants will not seek to recover from customers any transaction costs relating to the Consolidation. 17

18 There will be no negative impact on customer service or rates of the other Colorado public utility companies that are wholly-owned subsidiaries of BHC that are not parties to this Joint Application. BH Colorado Gas will abide by all ring-fencing conditions and any applicable customer protection requirements as previously adopted by the Commission with respect to BH Gas Utility and BH Gas Distribution. There will be no gain or loss, goodwill, acquisition premium, or acquisition adjustment recorded on the regulatory books of the BH Colorado Gas as a result of the proposed transactions other than the acquisition premium that already exists on the regulatory books of BH Gas Utility as a remnant of the Aquila Acquisition. The transactions will result in the consolidation of BHC s Colorado gas distribution utility businesses into one entity, which is a necessary step towards simplification of the regulation of the combined business for the benefit of all stakeholders. There will be no change to BHC s corporate control over the gas systems operated by BH Gas Utility and BH Gas Distribution in Colorado. BH Colorado Gas is fit, willing, and able in terms of experience, management, resources, financial strength, and otherwise to operate and maintain the utility properties and to continue to perform the services authorized by the CPCNs issued to BH Gas Distribution and BH Gas Utility. E. Comparison of the Kinds and Costs of Service Rendered Before and After the Proposed Transactions, as Required by Rule 4104(b)(VI). As BH Colorado Gas will adopt and assume the effective Colorado PUC gas tariffs of BH Gas Utility and BH Gas Distribution as they exist on the date of closing of the transactions, there 18

19 will be no change in the kinds or costs of services to Colorado customers after the consummation of the transactions proposed herein, except as may be required in the future in the ordinary course of business or as may result from a comprehensive rate review proceeding filed after approval and consummation of the Consolidation. V. REQUEST THAT THIS JOINT APPLICATION BE GRANTED ON AN EXPEDITED BASIS WITHOUT A HEARING The Joint Applicants desire to complete the Consolidation on or about December 31, 2018, as it is preferable to have a January 1, 2019 effective date to simplify the necessary income tax, payroll and other internal administrative processes. The Joint Applicants request that the Commission consider this Joint Application as a non-contested proceeding in accordance with C.R.S (5) and Rule The Consolidation will have no adverse effects on any Colorado public utility operations, on the viability of any Colorado public utility, on Colorado customers, on the provision of natural gas utility service in Colorado, or on the jurisdictional authority of this Commission over any regulated utility operations in Colorado. For these same reasons, the Consolidation will have no adverse effects on the public interest or on the citizens of the State of Colorado. Based upon this Joint Application and the supporting direct testimony and attachments, review of this Joint Application by the Commission in a full evidentiary hearing, pursuant to C.R.S and (1), is neither necessary nor in the public interest for the reasons set forth above and in the interest of administrative efficiency. VI. CUSTOMER NOTICE Although not required by the Commission's rules, the Joint Applicants will cause to be published in The Denver Post a notice in the form reflected in Attachment H, and will also post 19

20 the notice, this Joint Application, and supporting direct testimony and attachments on its website at VII. CONCLUSION WHEREFORE, for all the foregoing reasons, Black Hills Gas Distribution LLC, Black Hills/Colorado Gas Utility Company, Inc. and Black Hills Colorado Gas, Inc., the Joint Applicants herein, respectfully request that the Commission issue a decision granting this Joint Application, and providing the following specific relief: Authorization for BH Gas Distribution to transfer to BH Colorado Gas all of BH Gas Distribution s Colorado gas utility assets, liabilities, and operations, including all CPCNs under which it currently provides natural gas service in Colorado; Authorization for BH Gas Utility to merge into BH Colorado Gas such that all of BH Gas Utility s Colorado gas utility assets, liabilities, and operations, including all of BH Gas Utility s CPCNs under which it currently provides natural gas service in Colorado, will be held and operated by BH Colorado Gas; Finding that the proposed transactions under the Consolidation, as detailed herein, are not contrary to the public interest; Granting such other relief or waivers of Commission rules to the extent deemed necessary to facilitate the consummation of the transactions proposed herein; Directing BH Colorado Gas to file, as a compliance filing, the following documents: Final signed agreements, the form of which are included in Attachment B, to be filed within ten (10) days after the closing of the transactions; and 20

21 Notices of Adoption of BH Gas Utility s Colorado PUC No. 3 Tariff and BH Gas Distribution s Colorado PUC No. 7 Tariff, to be filed within two (2) business days after the closing of the transactions. Respectfully submitted this 21 st day of August, By: / s/ James D. Albright James D. Albright, #18685 Wilkinson Barker Knauer, LLP 1755 Blake Street, Suite 470 Denver, CO Telephone: (303) Facsimile: (303) jalbright@wbklaw.com Attorney for Black Hills Gas Distribution, LLC, Black Hills/Colorado Gas Utility Company, Inc. and Black Hills Colorado Gas, Inc. 21