Direct Testimony of Linden R. Evans on Behalf

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Direct Testimony of Linden R. Evans on Behalf APSC FILED Time: 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE JOINT ) APPLICATION OF SOURCEGAS ) ARKANSAS INC., SOURCEGAS INC., ) SOURCEGAS LLC, SOURCEGAS ) DOCKET NO. 15-078-U HOLDINGS LLC, AND BLACK HILLS ) UTILITY HOLDINGS, INC. FOR ALL ) NECESSARY AUTHORIZATIONS AND ) APPROVALS FOR BLACK HILLS UTILITY ) HOLDINGS, INC. TO ACQUIRE ) SOURCEGAS HOLDINGS LLC ________________________________________ DIRECT TESTIMONY OF LINDEN R. EVANS ON BEHALF OF BLACK HILLS UTILITY HOLDINGS, INC. August 10, 2015 APSC FILED Time: 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Table of Contents I. Introduction and Background .................................................................................... 1 II. Statement of Qualifications ....................................................................................... 1 III. Purpose and Summary of Testimony ........................................................................ 2 IV. Black Hills Corporation and Its Operating Subsidiaries ........................................... 3 V. The Transaction ......................................................................................................... 9 VI. Black Hills’ Experience in Acquiring and Integrating New Utility Operations ........ 11 VII. Benefits of the Transaction ........................................................................................ 14 VIII. Required Approvals ................................................................................................... 14 IV. Conclusion ................................................................................................................. 15 Black Hills UtilityAPSC Holdings, FILED Time: Inc. 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Direct Testimony of Linden Evans Docket No. 15-078-U 1 I. INTRODUCTION AND BACKGROUND 2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 3 A. My name is Linden R. Evans. My business address is 625 9th Street, Rapid City, South 4 Dakota 57701. 5 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? 6 A. I am employed by Black Hills Corporation (“Black Hills”), as President and Chief 7 Operating Officer – Utilities. I am the executive responsible for managing and 8 implementing the strategic objectives for Black Hills’ utility businesses. My 9 responsibilities include ensuring the retail utility companies are managed efficiently and 10 in a manner to provide safe, reliable, and reasonably-priced natural gas and electric 11 service to customers, and long term value to our shareholders. This responsibility 12 includes maintaining open and quality relationships with our stakeholders – including 13 customers, regulators, the communities we serve, employees and shareholders. 14 Q. ON WHOSE BEHALF ARE YOU TESTIFYING? 15 A. I am testifying on behalf of one of the Joint Applicants, Black Hills Utility Holdings, Inc. 16 (“BHUH”). BHUH is a subsidiary of Black Hills. 17 II. STATEMENT OF QUALIFICATIONS 18 Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND BUSINESS BACKGROUND. 19 A. I graduated from the University of Missouri – Rolla in 1984 with a Bachelor of Science 20 degree in Mining Engineering, and received my Juris Doctorate degree from the 21 Northwestern School of Law of the Lewis & Clark College in Portland, Oregon in 1992. 22 From 1984 to 1988 I was employed as a mining engineer with St. Joe Minerals 23 Corporation. From 1988 to 1990 I was employed as a mining engineer with Homestake 1 Black Hills UtilityAPSC Holdings, FILED Time: Inc. 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Direct Testimony of Linden Evans Docket No. 15-078-U 1 Mining Company of California. I was in the private practice of law from 1993 to 2001, 2 primarily in South Dakota. From May 2001 to December 2003 I served as Associate 3 Counsel in the Office of the General Counsel for Black Hills. From December 2003 to 4 October 2004 I served as the Vice President and General Manager of Black Hills 5 FiberCom, a former communications subsidiary of Black Hills. I was appointed to my 6 current position as President and Chief Operating Officer – Utilities of Black Hills in 7 October of 2004. 8 Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS COMMISSION? 9 A. No, I have not previously testified before this Commission. 10 III. PURPOSE AND SUMMARY OF TESTIMONY 11 Q. PLEASE SUMMARIZE YOUR TESTIMONY. 12 A. My testimony supports the Joint Application seeking all necessary approvals from the 13 Commission for BHUH to acquire SourceGas Holdings LLC (“SourceGas Holdings”), 14 the indirect parent of SourceGas Arkansas Inc. (“SGA”), a regulated gas utility in 15 Arkansas, and direct parent of SourceGas LLC (the “Transaction”). I provide background 16 regarding Black Hills, and describe this Transaction, our reasons for acquiring SGA, and 17 the benefits that will follow by adding SGA’s operations and customers to Black Hills’ 18 existing utility operations. I begin by describing Black Hills’ background, corporate 19 structure, and experience in utility operations. (Section IV) I provide a high level 20 overview of the acquisition, explaining how SGA’s utility operations fit well with Black 21 Hills’ core strategy and complement Black Hills’ existing operations. (Section V) I 22 provide background on Black Hills’ experience in integrating newly acquired utility 23 operations based on its experience in past acquisitions. (Section VI) I summarize the 2 Black Hills UtilityAPSC Holdings, FILED Time: Inc. 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Direct Testimony of Linden Evans Docket No. 15-078-U 1 benefits that will follow from the Transaction. (Section VII) Finally, I summarize the 2 regulatory approvals that will be required in order to close this Transaction. (Section 3 VIII) 4 Q. WAS YOUR TESTIMONY PREPARED BY YOU OR UNDER YOUR 5 SUPERVISION? 6 A. Yes. 7 IV. BLACK HILLS CORPORATION AND ITS OPERATING SUBSIDIARIES 8 9 Q. PLEASE PROVIDE A BASIC OVERVIEW OF BLACK HILLS AND ITS 10 SUBSIDIARIES. 11 A. Black Hills is a diversified energy company based in Rapid City, South Dakota with 12 corporate offices in Denver, Colorado, and Papillion, Nebraska. Joint Application 13 Exhibit 4 to the Joint Application is the current organizational chart of Black 14 Hills. Black Hills was formed as a “holding company” under the Public Utility Holding 15 Company Act, and maintains that structure today. Black Hills has approximately 2,100 16 employees, with assets totaling approximately $4.3 billion. Black Hills, through its 17 subsidiaries, provides regulated natural gas and electric utility service to approximately 18 785,000 customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and 19 Wyoming. The Black Hills companies operate in two major business groups: 1) Utilities 20 – which deliver retail electric and natural gas service; and 2) Non-regulated Energy – 21 which is involved in various wholesale energy businesses. 22 23 3 Black Hills UtilityAPSC Holdings, FILED Time: Inc. 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Direct Testimony of Linden Evans Docket No. 15-078-U 1 Q. PLEASE PROVIDE AN OVERVIEW OF BLACK HILLS’ UTILITY 2 OPERATIONS. 3 A. Beginning with Black Hills Power, Inc. (“Black Hills Power”) and its predecessors, 4 Black Hills companies have been serving the Black Hills region since 1883. Black Hills 5 companies have a long and well-established history of providing safe and reliable utility 6 service. Black Hills conducts its regulated electric and gas utility businesses through 7 three subsidiaries: BHUH, Black Hills Power, Inc. (“Black Hills Power”) and Cheyenne 8 Light, Fuel and Power Company (“Cheyenne Light”). BHUH is the entity acquiring 9 SourceGas Holdings in the Transaction. Cheyenne Light, as well as a number of 10 operating utility entities under BHUH, provide both electric and gas utility service. 11 Black Hills Power provides electric utility service. Black Hills has proven expertise in 12 operating utilities, as well as its nonregulated assets, and is committed to providing safe, 13 reliable, and high quality utility service at just and reasonable rates. Attached as Direct 14 Exhibit LRE-1 is are the biographies of Black Hills’ Senior Management. 15 Q. PLEASE DESCRIBE BLACK HILLS POWER’S OPERATIONS. 16 A. Black Hills Power is subject to regulation as a public utility under the public utility laws 17 of the states of South Dakota, Wyoming, and Montana with respect to retail electric rates 18 and charges and the issuance of most of its securities. Black Hills Power is also subject 19 to regulation by the Federal Energy Regulatory Commission ("FERC") pursuant to the 20 Federal Power Act with respect to the classification of accounts, rates for wholesale sales 21 of electricity, the interstate transmission of electric power and energy, interconnection 22 agreements, and acquisitions and sales of certain utility properties. 4 Black Hills UtilityAPSC Holdings, FILED Time: Inc. 8/10/2015 1:31:31 PM: Recvd 8/10/2015 1:29:34 PM: Docket 15-078-U-Doc. 5 Direct Testimony of Linden Evans Docket No. 15-078-U 1 Black Hills Power also makes wholesale sales of electric capacity and energy to 2 municipal and investor-owned utility customers in Wyoming and Nebraska and to 3 other off-system wholesale customers throughout the western United States under rate 4 schedules and tariffs on file with the FERC. Black Hills Power owns and operates 5 approximately
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