MDU RESOURCES GROUP INC
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
MDU$18.63+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0000067716-24-000055
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000067716-24-000082
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 245 previous paragraphs and 333 current paragraphs.
119 unchanged; 87 reworded; 98 added; 38 removed; 1 previous and 29 current paragraphs rearranged.
Tables are not compared: 17 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (98)
Current report
•Earnings at the electric business were negatively impacted by lower volumes from a majority of customers, including a 13.3 percent reduction in residential sales, due to 37.0 percent cooler weather. Higher operation and maintenance expense, primarily contract services costs, also contributed to decreased net income. These decreases were partially offset by higher retail sales revenue due to rate relief in North Dakota and Montana.
Current report
•Earnings decreased at the natural gas distribution business, largely the result of higher operation and maintenance expense, primarily contract services and increased software-related expenses, and higher depreciation and amortization expense, primarily due to increased plant additions. Partially offsetting the seasonal loss was higher retail sales, due to rate relief in North Dakota, Idaho and South Dakota.
Current report
•The construction services business reported record second quarter earnings, however, the business experienced a decrease in income from continuing operations as a result of interest on debt facilities repaid in connection with the Knife River separation in 2023 classified as discontinued operations. Although revenue was lower due to the timing of projects, operating income as a percentage of revenue remained strong as a result of project efficiencies during the quarter. Higher other income related to joint ventures and lower interest expense, including the interest expense classified as discontinued operations for the second quarter of 2023, more than offset the decrease in operating income.
Current report
•Other earnings decreased primarily due to the absence of the 2023 $90.8 million, net of tax unrealized gain on the Company's retained interest in Knife River. Partially offsetting this decrease was lower operation and maintenance expense, largely a result of corporate overhead costs classified as continuing operations allocated to the construction materials business in 2023 which are not included in Other in 2024.
Current report
Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023 The Company's consolidated earnings decreased $7.7 million. The decrease in earnings is primarily due to the absence of the 2023 $90.8 million, net of tax unrealized gain on the Company's retained interest in Knife River, partially offset by the absence of the 2023 loss from discontinued operations and increased earnings at the pipeline business.
Current report
•The construction services business experienced increased earnings, however, the business experienced a decrease in income from continuing operations as a result of interest on debt facilities repaid in connection with the Knife River separation in 2023 classified as discontinued operations. Although revenue was lower due to the timing of projects, the earnings increase was primarily driven by lower interest expense, including the interest expense classified as discontinued operations for the second quarter of 2023, and increased income from joint ventures activities. Also contributing to the increased earnings was higher operating income, particularly on transmission and distribution projects due to project mix and efficiencies on certain projects, and higher operating income as a percentage of revenue.
Current report
•Other earnings decreased primarily due to the absence of the 2023 $90.8 million, net of tax unrealized gain on the Company's retained interest in Knife River. Partially offsetting this decrease was lower operation and maintenance expense, largely a result of corporate overhead costs classified as continuing operations allocated to the construction materials business in 2023 which are not included in Other in 2024. Other also experienced increased interest income which partially offset the decrease.
Current report
•Revenue increased $8.2 million.
Current report
▪Rate relief of $2.1 million, primarily in North Dakota and Montana.
Current report
◦Partially offset by lower retail sales volumes of $2.8 million from the majority of customers, including a 13.3 percent reduction in residential sales, driven primarily by 37.0 percent cooler weather than last year. There was a 3.9 percent overall decrease in volumes, which includes an increase in volumes from the data center as further discussed in the outlook section.
Current report
•Electric fuel and purchased power increased $9.3 million, largely the result of higher commodity prices, partially offset by lower retail sales volumes.
Current report
•Operation and maintenance increased $1.7 million.
Current report
▪Increased contract services of $900,000 primarily due to higher tree trimming expense and transmission expense.
Current report
▪Higher payroll-related costs of $400,000.
Current report
•Other income increased $1.1 million, primarily resulting from higher interest income of $1.0 million, including contributions in aid of construction and amounts related to higher deferred fuel and purchased power balances.
Current report
•Income tax benefit increased $1.6 million, largely due to higher production tax credits driven by higher wind production and lower income before income taxes.
Current report
Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023 Electric earnings increased $500,000 as a result of:
Current report
•Revenue increased $20.3 million.
Current report
▪Rate relief of $5.0 million primarily in North Dakota and Montana.
Current report
▪Higher miscellaneous revenue of $1.3 million, including higher transmission interconnect upgrades.
Current report
•Depreciation and amortization increased $1.1 million.
Current report
•Interest expense increased $1.3 million due to higher long-term interest expense due to higher commercial paper balances and rates.
Current report
•Income tax benefit increased $1.2 million, primarily due to higher production tax credits due to higher wind production and lower income before income taxes.
Current report
Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023 Natural gas distribution reported an increased seasonal loss of $1.8 million as a result of:
Current report
•Revenue decreased $17.5 million.
Current report
▪Lower basic service charges.
Current report
▪A 1.7 percent decrease in retail sales volumes to residential and commercial customer classes, offset in part by weather normalization and decoupling mechanisms of $600,000 in certain jurisdictions.
Current report
▪Higher emissions allowance sales revenue of $2.6 million, refunded in customer rates as a component of purchased natural gas sold, as discussed below.
Current report
▪Higher transportation revenue of $1.6 million primarily due to 8.7 percent higher volumes, largely higher industrial customers and electric generation customers.
Current report
•Operation and maintenance increased $2.4 million.
Current report
▪Higher contract services of $700,000, primarily due to legal and consulting fees, largely related to rate case filings.
Current report
▪Absence of the prior year gain on sale of the Company's customer service center.
Current report
•Other income increased $500,000 driven primarily by higher interest income on regulatory deferral balances.
Current report
•Income tax benefit increased $600,000, the result of a higher seasonal loss before income taxes.
Current report
•Revenue decreased $123.7 million.
Current report
◦Partially offset by:
Current report
▪Rate relief of $6.4 million in North Dakota, South Dakota and Idaho.
Current report
▪Higher emissions allowance sales revenue of $2.6 million, refunded in customer rates as a component of purchased natural gas sold, as discussed below.
Current report
•Purchased natural gas sold decreased $128.5 million, largely due to lower commodity costs of $103.2 million and lower volumes of natural gas purchased of $29.8 million. These decreases were partially offset by net environmental compliance costs and emissions allowance sales revenue of $4.5 million.
Current report
•Operation and maintenance increased $4.5 million.
Showing the first 40 of 98 passages. Open the source sections for the rest.
Removed paragraphs (38)
Previous report
Chief Executive Officer Transition On January 5, 2024, David L. Goodin, formerly president and chief executive officer of the Company, retired after a 40-year career with the Company. The board of directors unanimously selected Nicole A. Kivisto, formerly president and chief executive officer of the Company's electric and natural gas utility companies, to succeed Mr. Goodin as the Company's president and chief executive officer effective January 6, 2024. Ms. Kivisto became a member of the board of directors at the same time.
Previous report
Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023 The Company's consolidated earnings increased $62.6 million. The Company benefited from increased earnings from most businesses and was positively impacted by the absence of the 2023 loss from discontinued operations.
Previous report
•The construction services business earnings increased, primarily as a result of higher margins, largely in the utility market, due to efficiencies in labor and equipment utilization on certain projects. The business was negatively impacted by higher selling, general and administrative costs, including increased rent expense, higher payroll-related costs, increased professional services expenses, and decreased other income related to joint ventures. The decrease in income from continuing operations at the construction services business is a result of interest on debt facilities repaid in connection with the Knife River separation in 2023 classified as discontinued operations.
Previous report
•Other experienced lower income taxes from income tax adjustments related to the Company's annualized estimated tax rate. Other also benefited from increased interest income and lower operation and maintenance expense. Decreased operation and maintenance expense is largely a result of corporate overhead costs classified as continuing operations that were allocated to the construction materials business in 2023 which are not included in Other in 2024. These benefits were partially offset by higher interest expense related to debt issued in connection with funding the Company's strategic initiative costs.
Previous report
•Revenue increased $12.0 million.
Previous report
▪Rate relief of $2.7 million in North Dakota and Montana.
Previous report
▪Higher data center revenue of $700,000, including net transmission.
Previous report
•Operation and maintenance increased $700,000.
Previous report
•Depreciation and amortization increased $1.0 million.
Previous report
•Income tax benefit decreased $500,000, largely due to higher income before income taxes.
Previous report
•Revenue decreased $106.2 million.
Previous report
•Operation and maintenance increased $2.1 million.
Previous report
▪Higher contract services $1.2 million, largely subcontract payments and consulting fees.
Previous report
▪Higher software related expenses $800,000.
Previous report
◦Partially offset by lower costs for vehicles and equipment and lower uncollectible accounts expense.
Previous report
•Income tax expense increased $300,000, the result of higher income before income taxes.
Previous report
The Mercury and Air Toxics Rule tightens mercury emissions and particulate matter standards for coal-fired generation facilities that may require additional pollution controls on Montana-Dakota's jointly owned coal-fired units.
Previous report
The Legacy Coal Combustion Residuals Rule requires groundwater monitoring, evaluation, and potential remediation of certain older coal ash disposal sites and impoundments operated at current electric generating facilities.
Previous report
It is unknown at this time what emission limits, controls, or other action would be required for each Montana-Dakota owned and jointly owned fossil-fired electric generating facility. The Company is reviewing these rules and evaluating the impact on its generation facilities.
Previous report
•Revenues increased $10.5 million as a result of:
Previous report
▪Organic growth projects placed in service in November 2023 and March 2024 of $4.8 million.
Previous report
▪Increased North Bakken Expansion contracted volume commitments of $700,000.
Previous report
•Operation and maintenance increased $1.0 million.
Previous report
▪Higher payroll-related costs of $800,000.
Previous report
▪Higher other costs including non-regulated project costs and contract services.
Previous report
The Company began construction in April 2024 on the Line Section 28 expansion project, to serve a natural gas-fired power plant in northwestern North Dakota which will add 137 million cubic feet of natural gas transportation capacity per day. This project is supported by a long-term negotiated customer agreement and is expected to be in service in the third quarter of 2024.
Previous report
•Revenues decreased $128.6 million.
Previous report
▪Also contributing were higher transportation workloads from progress on projects in the traffic signalization market of $4.9 million.
Previous report
•Gross profit increased $6.7 million.
Previous report
◦Largely due to improved profit and profit percentages on both transmission and distribution and electrical and mechanical work from project efficiencies due to:
Previous report
▪Higher gross profit on transmission and distribution work of $5.8 million primarily from higher margin utility projects, largely transmission and underground work as a result of project mix along with higher margins in traffic signalization and street lighting markets.
Previous report
▪Also contributing were higher electrical and mechanical margins in the institutional market, particularly government and health care projects and renewables market from improved labor efficiencies and project closeouts.
Previous report
◦Electrical and mechanical projects in the industrial, service and commercial markets partially offset these increases due to project mix.
Previous report
•Selling, general and administrative expense increased $3.0 million.
Previous report
▪Increased office expense of $1.5 million primarily from bank fees and rent expense.
Previous report
▪Increased payroll-related costs of $1.4 million due to operational activity.
Previous report
•Income tax expense increased $900,000, primarily resulting from an increase in income before income taxes.
Previous report
Other experienced an income tax benefit from income tax adjustments related to the Company's annualized estimated tax rate. Other also benefited from increased interest income and lower operation and maintenance expense. Decreased operation and maintenance expense is largely a result of corporate overhead costs classified as continuing operations allocated to the construction materials business in 2023 which are not included in Other in 2024. These benefits were partially offset by higher interest expense related to debt issued in connection with funding the Company's strategic initiative costs.
Reworded paragraphs (87)
Previous wording
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business. Rising interest rates have resulted in and may continue to result in higher borrowing costs on new debt, resulting in impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers. The Company has continued to evaluate its businesses and has increased pricing for its products and services where possible. The ability to raise selling prices to cover higher costs due to inflation are subject to regulatory approval, customer demand, industry competition and the availability of materials, among other things.
Current wording
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business. Higher interest rates have resulted in and may continue to result in increased borrowing costs on new debt, resulting in impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers. The Company has continued to evaluate its businesses and has increased pricing for its products and services where possible. The ability to raise selling prices to cover higher costs due to inflation are subject to regulatory approval, customer demand, industry competition and the availability of materials, among other things.
Previous wording
Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023
Current wording
Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023 The Company's consolidated earnings decreased $70.3 million. The decrease in earnings is primarily due to the absence of the 2023 $90.8 million, net of tax unrealized gain on the Company's retained interest in Knife River, partially offset by the absence of the 2023 loss from discontinued operations and increased earnings at the pipeline business.
Previous wording
•The Company was also positively impacted by the absence of the 2023 loss from discontinued operations, which included the historical results of operations for Knife River, except for certain allocated corporate overhead costs classified as continuing operations, which do not meet the criteria for discontinued operations. Also included in discontinued operations in 2023 were strategic initiative costs associated with the Knife River separation.
Current wording
•The Company was positively impacted by the absence of the 2023 loss from discontinued operations, which included the historical results of operations for Knife River, except for certain allocated corporate overhead costs classified as continuing operations, which do not meet the criteria for discontinued operations. Also included in discontinued operations in 2023 were strategic initiative costs associated with the Knife River separation.
Previous wording
•Earnings at the electric business were positively impacted by higher retail sales revenue due to rate relief in North Dakota and Montana, and providing power to a data center near Ellendale, North Dakota. The increase was partially offset by lower residential volumes and higher operation and maintenance expense, primarily contract services costs.
Current wording
•Earnings at the electric business increased primarily due to rate relief in North Dakota and Montana and providing power to a data center near Ellendale, North Dakota. These increases were offset in part by decreased residential sales volumes due to 37.0 percent cooler weather in the second quarter of 2024 and higher operation and maintenance expense, primarily contract services.
Previous wording
•Earnings increased at the natural gas distribution business, which benefited from interim rate relief in North Dakota and South Dakota, higher interest income and increased transportation revenue, primarily to serve electric generation and industrial customers. These increases were offset in part by a 7 percent decrease in retail sales volumes to all customer classes due to warmer weather, which was partially offset by weather normalization and decoupling mechanisms. Also decreasing net income was higher depreciation expense, primarily due to increased asset additions, and higher operation and maintenance expense, primarily higher contract services costs and increased software-related expenses.
Current wording
•Earnings decreased slightly at the natural gas distribution business. The business experienced higher operation and maintenance expense, primarily contract services and software-related expenses, and increased depreciation and amortization expense, largely a result of increased plant additions. The business also experienced lower retail sales volumes to residential and commercial customers, partially offset by weather normalization and decoupling mechanisms. Partially offsetting these items was rate relief in North Dakota, South Dakota and Idaho, and increased transportation revenue, primarily to serve electric generation and industrial customers.
Previous wording
•The earnings increase at the pipeline business was driven by higher transportation volumes, primarily from organic growth projects placed in service in November 2023 and March 2024, and increased contracted volume commitments beginning February 2023 from the North Bakken Expansion project. New transportation and storage service rates effective August 1, 2023, and higher storage-related revenue further drove the increase. The increase was offset in part by higher operation and maintenance expense, primarily attributable to payroll-related costs. The business also incurred higher interest expense as a result of higher debt balances and higher interest rates.
Current wording
•Earnings increased at the pipeline business driven by higher transportation volumes, primarily from organic growth projects placed in service in November 2023 and March 2024. New transportation and storage service rates effective August 1, 2023, and higher storage-related revenue further drove the increase. The business also benefited from proceeds received from a customer settlement that was recorded in other income. These increases were offset in part by higher operation and maintenance expense, primarily attributable to payroll-related costs, and higher depreciation expense due to organic growth projects placed in service as previously discussed, which was partly offset by fully depreciated assets. The business also incurred higher interest expense as a result of increased debt balances to fund capital expenditures.
Previous wording
To date, many states have enacted and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. The current presidential administration has made climate change a focus, as further discussed in the Outlook section. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns and changing customer conservation patterns. Recently, MISO and NERC announced concerns with reliability of the electric grid due to capacity shortages, which has resulted from rapid expansion of renewables and rapid reduction of baseload resources such as coal, while load growth has increased faster than expected. MISO received FERC approval of a seasonal resource adequacy construct for its accreditation process, versus the previous annual summer peak capacity requirement process. These changes have not had a significant impact on the requirements for Montana-Dakota yet. The Company will continue to monitor the progress of these changes and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.
Current wording
To date, many states have enacted and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. The current presidential administration has made climate change a focus, as further discussed in the Outlook section. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns and changing customer conservation patterns. Recently, MISO and NERC announced concerns with the future reliability of the electric grid due to rapid expansion of renewables and retirement of baseload resources such as coal and the uncertainty of adequate energy production during certain periods of time, while load growth has increased faster than expected. MISO received FERC approval of a seasonal resource adequacy construct for its accreditation process, versus the previous annual summer peak capacity requirement process. Montana-Dakota filed its 2024 Integrated Resource Plan with the NDPSC on July 12, 2024. With MISO's filed changes in resources adequacy at FERC and the adoption of direct loss of load accreditation for generation resources around riskiest hours on the system versus peak load hours, Montana-Dakota is seeing the need to add additional capacity resources to its system in 2027 versus 2034 as identified in its last Integrated Resource Plan. The Company will continue to monitor the progress of these changes and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.
Previous wording
In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system. This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated through November 2023. To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and is unopposed by the MTPSC. On December 22, 2023, MISO filed a complaint letter with SPP regarding concerns related to the coordination of the constraint. Montana-Dakota filed a complaint letter with FERC related to this issue on January 23, 2024, which is pending before FERC. Effective April 1, 2024, as approved by the NDPSC, Montana-Dakota started recovery in North Dakota of these increased costs over a period of two years rather than one year, which will lessen the impact to customers and allow more time for Montana-Dakota's FERC complaint to mature and have greater certainty of the outcome.
Current wording
In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system. This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated through November 2023. To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and is unopposed by the MTPSC. On December 22, 2023, MISO filed a dispute letter with SPP regarding the coordination of the constraint in northwest North Dakota. Montana-Dakota filed a complaint with FERC related to this issue on January 23, 2024, which is pending before FERC. MISO also filed its own complaint with FERC against SPP on March 8, 2024 related to the congestion coordination in northwest North Dakota. Effective April 1, 2024, as approved by the NDPSC, Montana-Dakota started recovery in North Dakota of these increased costs over a period of two years rather than one year, which will lessen the impact to customers and allow more time for Montana-Dakota's FERC complaint to mature and have greater certainty of the outcome. In South Dakota and Montana, Montana-Dakota started recovery of these costs over a one-year period effective July 1, 2024.
Previous wording
Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023 Electric earnings increased $1.3 million as a result of:
Current wording
Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023 Electric earnings decreased $800,000 as a result of:
Previous wording
▪Higher fuel and purchased power costs of $8.2 million recovered in customer rates and offset in expense, as described below.
Current wording
▪Higher fuel and purchased power costs of $9.3 million recovered in customer rates and offset in expense, as described below.
Previous wording
•Other income was comparable to same period in the prior year.
Current wording
•Depreciation and amortization was comparable to the same period in the prior year.
Previous wording
•Taxes, other than income was comparable to same period in the prior year.
Current wording
•Taxes, other than income was comparable to the same period in the prior year.
Previous wording
•Interest expense increased $700,000, largely the result of higher long term interest expense due to higher commercial paper rates and balances.
Current wording
•Interest expense increased $500,000, largely the result of higher long term interest expense due to higher commercial paper balances.
Previous wording
◦Partially offset by lower retail sales volumes of $1.0 million, driven primarily by lower residential volumes. There was an 8.1 percent increase in volumes, which includes the data center as further discussed in the outlook section.
Current wording
◦Partially offset by lower retail sales volumes of $3.8 million, driven primarily by lower residential volumes due to 37.0 percent cooler weather in the second quarter of 2024. There was a 1.9 percent increase in volumes, which includes an increase in volumes from the data center as further discussed in the outlook section.
Previous wording
•Electric fuel and purchased power increased $8.2 million, largely the result of higher commodity prices and higher retail sales volumes.
Current wording
•Electric fuel and purchased power increased $17.5 million, largely the result of higher commodity prices and higher retail sales volumes.
Previous wording
▪Increased contract services primarily due to higher transmission expense of $900,000.
Current wording
•Operation and maintenance increased $2.5 million, largely the result of increased contract services, primarily due to higher transmission expense and tree trimming expense.
Previous wording
▪Increased property, plant and equipment balances of $500,000, as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
Current wording
▪Increased property, plant and equipment balances of $800,000, as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
Previous wording
•Taxes, other than income increased $400,000, largely as a result of higher payroll tax.
Current wording
•Taxes, other than income increased $500,000, largely as a result of higher payroll tax.
Previous wording
•Other income increased $800,000, primarily resulting from higher interest income of $500,000, largely related to higher deferred fuel and purchased power balances, and higher AFUDC equity due to higher CWIP balances.
Current wording
•Other income increased $1.9 million, primarily resulting from higher interest income of $1.5 million, including contributions in aid of construction and amounts related to higher deferred fuel and purchased power balances, and higher AFUDC equity due to higher CWIP balances.
Previous wording
▪Lower purchased natural gas sold of $108.5 million recovered in customer rates that was offset in expense, as described below.
Current wording
▪Lower purchased natural gas sold of $23.1 million recovered in customer rates that was offset in expense, as described below.
Previous wording
▪Interim rate relief of $3.0 million in North Dakota and South Dakota.
Current wording
▪Rate relief of $4.1 million in North Dakota, Idaho and South Dakota.
Previous wording
•Purchased natural gas sold decreased $108.5 million, largely due to lower commodity costs $80.7 million and lower volumes of natural gas purchased of $27.8 million.
Current wording
•Purchased natural gas sold decreased $20.2 million, largely due to lower commodity costs of $22.5 million and lower volumes of natural gas purchased of $2.1 million. These decreases were partially offset by net environmental compliance costs and emissions allowance sales revenue of $4.5 million.
Previous wording
▪Higher software related expenses of $400,000.
Current wording
▪Higher software-related expenses of $700,000.
Previous wording
◦Partially offset by decreased costs for vehicles and equipment and decreased payroll-related costs.
Current wording
▪Higher costs for vehicles and equipment.
Previous wording
•Depreciation and amortization increased $2.3 million, primarily resulting from growth and replacement projects placed in service.
Current wording
•Depreciation and amortization increased $2.0 million, primarily resulting from growth and replacement projects placed in service.
Previous wording
•Interest expense increased $1.6 million, primarily from higher long-term debt balances from debt issued in 2023 and higher commercial paper and revolving credit agreement balances, partially offset by lower short-term debt due to short term debt repayments.
Current wording
•Interest expense increased $1.7 million, primarily from higher long-term debt balances from debt issued in 2023 and higher commercial paper and revolving credit agreement balances, partially offset by lower short-term debt due to short term debt repayments.
Previous wording
Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023 Natural gas distribution earnings increased $1.2 million as a result of:
Current wording
Six Months Ended June 30, 2024, Compared To Six Months Ended June 30, 2023 Natural gas distribution earnings decreased $800,000 as a result of:
Previous wording
▪A 7.0 percent decrease in retail sales volumes to all customer classes due to warmer weather, offset in part by weather normalization and decoupling mechanisms of $3.8 million in certain jurisdictions.
Current wording
▪A 5.7 percent decrease in retail sales volumes to residential and commercial customer classes, offset in part by weather normalization and decoupling mechanisms of $4.3 million in certain jurisdictions.
Previous wording
▪Decreased revenue-based taxes recovered in rates of $2.1 million that were offset in expense, as described below.
Current wording
▪Decreased revenue-based taxes recovered in rates of $2.6 million that were offset in expense, as described below.
Previous wording
▪Higher transportation revenue of $1.1 million due to 14.8 percent higher volumes, largely higher electric generation and industrial customers.
Current wording
▪Higher transportation revenue of $2.7 million primarily due to 12.2 percent higher volumes, largely higher electric generation and industrial customers.
Previous wording
▪Higher conservation revenues of $1.8 million that were offset in expense, as described below.
Current wording
▪Higher conservation revenues of $2.4 million that were offset in expense, as described below.
Previous wording
▪Higher Oregon natural gas cost sharing $1.8 million.
Current wording
▪Decrease in Oregon natural gas cost sharing of $1.7 million.
Previous wording
▪Higher conservation incentives and program costs $1.8 million which are recovered in rates, as discussed above.
Current wording
▪Higher conservation-related costs of $2.4 million which are recovered in rates, as discussed above.
Previous wording
•Taxes, other than income decreased $1.9 million, primarily from lower revenue based taxes of $2.1 million, which are recovered in rates.
Current wording
•Taxes, other than income decreased $2.5 million, primarily from lower revenue based taxes of $2.6 million, which are recovered in rates.
Previous wording
•Other income increased $3.3 million driven primarily by higher interest income of $3.2 million, largely due to higher interest income associated with renewable natural gas projects of $2.2 million and higher interest on regulatory deferral balances.
Current wording
•Other income increased $3.7 million, driven primarily by higher interest income of $3.9 million, largely due to higher interest income associated with renewable natural gas projects of $2.2 million and higher interest on regulatory deferral balances.
Previous wording
In May 2022 the Company began construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota. The 2023 in service date was delayed due to unforeseen operational setbacks. While performing start-up testing an incident occurred resulting in damage to the generator field and turbine components. Repairs are complete and start-up testing is underway, with an expected in service date in the second quarter of 2024, assuming no further unexpected delays.
Current wording
In May 2022 the Company began construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota. It was originally expected to be in service in 2023, but was delayed and became in service and fully operational in July 2024.
Previous wording
The Company is one of four owners of Coyote Station and cannot make a unilateral decision on the plant's future; therefore, the Company could be negatively impacted by decisions of the other owners. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and its employees as well as each company's customers and communities served. Existing and proposed emissions reduction plans from the EPA could require the owners of Coyote Station to incur significant new costs. The EPA's recently finalized GHG and mercury emissions standards would require additional pollution controls to operate beyond 2031 and 2027, respectively, with a potential extension to add pollution controls that may be granted. If the owners decide to incur such costs, the costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows. In addition, the NDDEQ submitted its state regional haze round two implementation plan to the EPA in August 2022 proposing no additional pollution controls for Coyote. The EPA deemed the State's submission complete in August 2022 with a decision expected in late 2024.
Current wording
Existing and proposed emissions reduction plans from the EPA could require the owners of Coyote Station to incur significant new costs. The EPA's recently finalized GHG and mercury emissions standards would require additional pollution controls to operate beyond 2031 and 2027, respectively, with a potential extension to add pollution controls that may be granted. If the owners decide to incur such costs, the costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows. The NDDEQ submitted its second implementation period regional haze state implementation plan to the EPA in August 2022 proposing no additional pollution controls for Coyote. On July 10, 2024, the EPA proposed partial disapproval of the NDDEQ's state implementation plan, including disapproval of the NDDEQ's determination that no controls are required for Coyote Station. Comments on the proposed rulemaking are due within 30 days of the rule's publication date, by August 9, 2024. The Company is one of four owners of Coyote Station and cannot make a unilateral decision on the plant's future; therefore, the Company could be negatively impacted by decisions of the other owners. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and its employees as well as each company's customers and communities served.
Previous wording
On March 4, 2023, the Company began to provide power for Applied Digital Corporation's data center near Ellendale, North Dakota under an interim electric service agreement approved by the NDPSC, and on June 6, 2023, the NDPSC unanimously approved the Company's electric service agreement request. At full capacity, the data center requires 180 megawatts of electricity, which is the equivalent of about 28 percent of the Company's generation portfolio. The Applied Digital Corporation's load is purchased from the MISO market and does not impact other customers' power supply. On October 2, 2023, the Company filed with the NDPSC an electric service agreement request to serve an additional data center in its service territory.
Current wording
On March 4, 2023, the Company began to provide power to Applied Digital, a data center near Ellendale, North Dakota, under an interim electric service agreement approved by the NDPSC, and on June 6, 2023, the NDPSC unanimously approved the Company's electric service agreement request. At full capacity, the data center requires 180 megawatts of electricity, which is the equivalent of about 28 percent of the Company's generation portfolio. Applied Digital's load is purchased from the MISO market and does not impact other customers' power supply. On October 2, 2023, the Company filed with the NDPSC an electric service agreement request to serve an additional 225 megawatt data center load with Applied Digital in its service territory. The request was approved on May 23, 2024. A portion of the additional data center load is expected to be online in late 2024.
Previous wording
•On April 25, 2024, the EPA released the pre-publication versions of four final rules, three of which will impose stricter standards on GHG emissions from existing coal-fired and new natural gas-fired generation units, require a further reduction of mercury emissions from coal-fired generation units, and impose additional regulations around the storage and management of coal ash.
Current wording
•In May 2024, the EPA published four final rules, three of which will impose stricter standards on GHG emissions from existing coal-fired and new natural gas-fired generation units, require a further reduction of mercury emissions from coal-fired generation units, and impose additional regulations around the storage and management of coal ash.
Previous wording
The Electric Generation and Greenhouse Gas Rule establishes standards for new natural gas-fired electric generating units and existing coal units. New natural gas-fired units that operate more frequently must install carbon capture controls. Existing coal-fired units are given three compliance options: maintain current emissions rate and retire before 2032; co-fire with natural gas at 40 percent by 2030 and retire before 2039; or install carbon capture controls by 2032 in order to operate past 2039. States
Current wording
The Electric Generation and Greenhouse Gas Rule was published on May 9, 2024, establishing GHG emissions standards for new natural gas-fired electric generating units and existing coal units. New natural gas-fired units that operate more frequently must install carbon capture controls. Existing coal-fired units are given three compliance options: maintain current emissions rate and retire before 2032; co-fire with natural gas at 40 percent by 2030 and retire before 2039; or install carbon capture controls by 2032 in order to operate past 2039. Due to carbon capture and sequestration not being adequately demonstrated, and the limited time allowed to modify coal units to be capable of co-firing natural gas, the rule, as it is written today, may result in the retirement of Montana-Dakota's jointly owned coal-fired electric generating units before 2032. The joint owners continue to evaluate compliance options. States must evaluate individual units and develop, adopt, and submit a plan to the EPA which would include emission standards for each individual unit. State plans are required to be submitted to the EPA no later than 24 months after the final rule effective date. Many organizations have filed petitions with the District of Columbia Circuit Court challenging the rule. On July 1, 2024, Montana-Dakota also filed a petition for review in the District of Columbia Circuit Court. The EPA has not currently proposed GHG emission standards for existing natural gas-fired units and intends to explore setting emission standards in the future for these units.
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Current report — wording carried from elsewhere
•The earnings increase at the pipeline business was driven by higher transportation volumes, primarily from organic growth projects placed in service in November 2023 and March 2024. New transportation and storage service rates effective August 1, 2023, and higher storage-related revenue further drove the increase. The business also benefited from proceeds received from a customer settlement that was recorded in other income. These increases were offset in part by higher operation and maintenance expense, primarily attributable to payroll-related costs. The business also incurred higher depreciation expense due to organic growth projects placed in service as previously discussed, which was partly offset by fully depreciated assets.
Current report — wording carried from elsewhere
•The Company was positively impacted by the absence of the 2023 loss from discontinued operations, which included the historical results of operations for Knife River, except for certain allocated corporate overhead costs classified as continuing operations, which do not meet the criteria for discontinued operations. Also included in discontinued operations in 2023 were strategic initiative costs associated with the Knife River separation.
Current report — wording carried from elsewhere
▪Higher fuel and purchased power costs of $17.5 million recovered in customer rates and offset in expense, as described below.
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▪Decreased revenue-based taxes recovered in rates of $600,000 that were offset in expense, as described below.
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•Taxes, other than income decreased $500,000, primarily from lower revenue based taxes of $600,000, which are recovered in rates.
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▪Lower purchased natural gas sold of $130.7 million recovered in customer rates that was offset in expense, as described below.
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▪Higher software-related expenses of $1.5 million.
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•Depreciation and amortization increased $4.3 million, primarily resulting from growth and replacement projects placed in service.
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•Interest expense increased $3.3 million, primarily from higher long-term debt balances from debt issued in 2023 and higher commercial paper and revolving credit agreement balances, partially offset by lower short-term debt due to short term debt repayments.
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•In July 2024, the Line Section 28 Expansion project was placed in service and increased system capacity by 137 MMcf of natural gas per day.
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•Operation and maintenance increased $1.2 million.
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▪Higher payroll-related costs of $1.0 million.
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▪Partially offset by lower legal costs, due to absence of rate case related expense and lower non-regulated project costs.
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◦Increased transportation volumes, largely due to:
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◦New transportation and storage rates effective August 1, 2023, of $5.9 million.
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▪Higher payroll-related costs of $1.8 million.
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•Depreciation and amortization increased $700,000 driven largely by higher property, plant and equipment balances of $1.5 million, related to organic growth projects placed in service, as previously discussed, partially offset by fully depreciated assets.
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•Interest expense increased $1.6 million primarily from higher debt balances to fund capital expenditures.
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•Income tax expense increased $5.1 million, largely due to higher income before taxes.
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▪Lower commercial workloads, primarily in the hospitality sector of $315.5 million from completion of large projects offset by a $167.2 million increase in data center work primarily from higher workloads and the progress on large ongoing projects.
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▪Lower industrial workloads in the general industrial, high-tech and government sectors of $50.1 million, $38.4 million, and $12.1 million, respectively, primarily from the completion or near-completion of large projects, partially offset by higher manufacturing workloads of $17.1 million from the progress on ongoing projects.
Current report — wording carried from elsewhere
▪Lower service workloads of $33.5 million from the repair and maintenance for electrical and mechanical projects.
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▪Partially offsetting these decreases were higher workloads in the institutional market. Institutional workloads were driven by an increase of $39.6 million, $15.8 million and $8.3 million in the government, healthcare and education sectors, respectively, due to progress on projects.
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◦Transmission and distribution revenues increased by $50.3 million, due to increases in both the utility and transportation markets.
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▪The utility market had higher workloads in transmission, substation and telecommunication projects of $27.1 million, $14.4 million, and $12.9 million, respectively. These increases were offset by lower workloads in storm projects of $13.2 million from the timing of work available in the markets served.
Current report — wording carried from elsewhere
▪Increased expenses associated with professional services of $2.7 million.
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▪Partially offsetting these increases was lower allowance for uncollectible accounts of $2.8 million.
Current report — wording carried from elsewhere
•Other income increased $1.1 million, primarily related to the Company's joint ventures activity.
Current report — wording carried from elsewhere
•Interest expense increased $4.1 million due to interest on debt facilities repaid in connection with the Knife River separation in 2023 being included in discontinued operations.
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Previous report — wording carried elsewhere
must evaluate individual units and develop, adopt, and submit a plan to the EPA which would include emission standards for each individual unit. State plans are required to be submitted to the EPA no later than 24 months after the final rule effective date. The EPA has not currently proposed GHG emission standards for existing natural gas-fired units and intends to explore setting emission standards in the future for these units.