MDU RESOURCES GROUP INC
For the period ended Mar 31, 2025. Filed May 8, 2025.
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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.
Mar 31, 2025 · Filed May 8, 2025
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 2024-09-30; filed 2024-11-07.
0000067716-24-000107
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0000067716-25-000042
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 313 previous paragraphs and 196 current paragraphs.
73 unchanged; 67 reworded; 52 added; 162 removed; 11 previous and 4 current paragraphs rearranged.
Tables are not compared: 16 previous and 14 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 (52)
Current report
The Company generates, transmits and distributes electricity and provides natural gas distribution, transportation and storage services. Through a strategy focusing on its "CORE," the Company strives to deliver superior value and achieve industry-leading performance as a pure-play regulated energy delivery company, while pursuing organic growth opportunities. The Company's "CORE" strategy prioritizes customers and communities, operational excellence, returns focused initiatives and an employee driven culture.
Current report
Cautionary Note Regarding Forward-Looking Statements
Current report
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Other than statements of historical facts, all statements which address activities, events, or developments that the Company anticipates will or may occur in the future are based on underlying assumptions (many of which are based, in turn, upon further assumptions), including, but not limited to, statements identified by the words "anticipates," "estimates," "expects," "intends," "plans," and "predicts" in each case related to such things as growth estimates, stockholder value creation, the Company's "CORE" strategy, capital expenditures, financial guidance, trends, objectives, goals, strategies and other such matters, are forward-looking statements. These forward-looking statements are based on many assumptions and factors, which are detailed in the Company's filings with the SEC.
Current report
While made in good faith, these forward-looking statements are based largely on the Company's expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond the Company's control. For additional discussion regarding risks and uncertainties that may affect forward-looking statements, see Part II, Item 1A. Risk Factors in this quarterly report, Part I, Item 1A. Risk Factors in the 2024 Annual Report and subsequent filings with the SEC. Any changes in such assumptions or factors could produce significantly different results. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as required by applicable law, the Company undertakes no obligation to update the forward-looking statements, whether as a result of new information, future events, or otherwise.
Current report
•The electric business earnings decrease was largely the result of higher operation and maintenance expense, primarily due to higher contract services related to electric generation station outage-related costs, increased software expenses and higher payroll-related costs, and lower investment returns on nonqualified benefit plans. The decrease in net income was partially offset by increased retail sales revenue due to higher volumes to residential customers, primarily due to colder weather, and higher volumes to a data center near Ellendale, North Dakota.
Current report
•The natural gas distribution earnings improvement was largely the result of higher retail sales revenue due to rate relief in Washington, Montana and South Dakota, as well as increased volumes due to colder weather. These increases were partially offset by higher operation and maintenance expense, lower interest income and lower investment returns on nonqualified benefit plans.
Current report
•As previously discussed, the Company was adversely impacted by the absence of income from discontinued operations in 2025.
Current report
The Company's CODM, the chief executive officer of MDU Resources Group, Inc., regularly reviews discrete financial information of each reportable segment and uses net income to assess performance of each reportable segment. The CODM uses this information to assess performance and make decisions about resources to be allocated to each reportable segment, including capital and personnel. The information provided to the CODM is prepared at the reportable segment level in quarterly financial packages and on a more summarized basis monthly. Budget and forecast information is also provided to the CODM at the reportable segment level.
Current report
•Revenue increased $4.7 million.
Current report
◦Largely due to:
Current report
◦Partially offset by lower renewable tracker revenues associated with higher production tax credits offset in income tax benefit, as described below.
Current report
•Electric fuel and purchased power increased $4.0 million, largely the result of higher retail sales volumes, partially offset by lower commodity prices.
Current report
•Operation and maintenance increased $5.1 million.
Current report
◦Largely the result of:
Current report
▪Higher contract services related to electric generation station outage-related costs of $1.3 million.
Current report
▪Increased software and insurance expenses.
Current report
▪Higher payroll-related costs of $1.0 million.
Current report
•Other income decreased $1.0 million, primarily resulting from lower returns on the Company's nonqualified benefit plan investments of $900,000.
Current report
•Interest expense increased $400,000, largely the result of lower AFUDC.
Current report
•Revenue increased $79.8 million.
Current report
◦Largely due to:
Current report
▪Higher purchased natural gas sold of $61.7 million, including net environmental compliance costs, as described below.
Current report
▪Higher transportation revenues of $900,000.
Current report
•Purchased natural gas sold increased $61.7 million, largely due to net environmental compliance costs of $37.4 million, higher volumes of natural gas purchased of $20.8 million and higher commodity costs of $3.5 million.
Current report
◦Due in large part to:
Current report
▪Higher costs associated with MAOP projects.
Current report
▪Higher payroll-related costs of $400,000.
Current report
•Taxes, other than income increased $3.0 million, primarily from higher revenue-based taxes, as described above.
Current report
•Other income decreased $4.9 million.
Current report
▪The absence of $2.2 million of interest income associated with prior year renewable natural gas projects.
Current report
▪Lower returns of $1.3 million on the Company's nonqualified benefit plans.
Current report
•Interest expense decreased $900,000, primarily from lower long-term interest expense, largely due to lower long-term debt balances.
Current report
•Income tax expense increased $1.6 million, primarily the result of higher income before income taxes.
Current report
On February 13, 2025, Montana-Dakota entered into a definitive purchase and sale agreement with Badger Wind, LLC, a subsidiary of Orsted Onshore North America, LLC. Pursuant to the terms of the agreement, Montana-Dakota will purchase a 49 percent undivided ownership interest in a wind project being constructed and located in North Dakota that is anticipated to have a net generating capacity of approximately 250 MW for a purchase price of $294.0 million, which would represent 122.5 MW of wind generation to be owned by Montana-Dakota. The purchase agreement is contingent on regulatory approval from the NDPSC. This transaction would reduce Montana-Dakota's purchase requirements under the existing power purchase agreement with Badger Wind, LLC, dated November 4, 2024.
Current report
The Electric Generation and Greenhouse Gas Rule establishes GHG emissions standards for new natural gas-fired electric generating units and existing coal units. It is anticipated this rule could affect Montana-Dakota's jointly owned coal-fired units. The joint owners continue to evaluate compliance options. This rule is currently being challenged before the DC Circuit Court. Montana-Dakota is participating in this challenge. Though the case has been fully briefed and oral argument has taken place, the EPA has requested the court hold the case in abeyance in order to allow new leadership to review the underlying rule, which was granted by the court in February 2025.
Current report
•In Oregon, the Climate Protection Program Rule was approved in December 2021, which required natural gas companies to significantly reduce GHG emissions from customer use of natural gas starting in 2022. This rule was ultimately invalidated due to a procedural issue by the Oregon Court of Appeals, with final judgment issued in February 28, 2024.
Current report
Cascade began incurring expenses in 2022 to comply with the prior Climate Protection Program Rule. The OPUC has authorized Cascade, through a deferred accounting order, to collect $4.2 million in actual 2022 and 2023 costs related to the prior Climate Protection Program Rule. The average residential customer will experience a monthly bill increase of $1.75 or 2.4 percent. Cascade also expects the compliance costs for the new Climate Protection Program Rule to be recovered through customer rates. In August 2024, the Company filed a request for reauthorization of the use of deferred accounting for costs related to the decarbonization programs in Oregon. Due to the timing of regulatory recovery, future compliance obligation purchases could impact the Company's operating cash flow.
Current report
The Company expects compliance costs for these regulations will be recovered through customer rates. It is projected customer bills could increase substantially as a result of the legislation. The WUTC has approved Cascade’s request for a deferred accounting order, which allowed Cascade to collect $20.6 million in compliance costs within a ten month recovery period from June 1, 2024 through March 31, 2025. Due to the timing of regulatory recovery, the purchase of allowances could impact the Company's operating cash flow.
Current report
•In December 2024, the Wahpeton Expansion Project was placed in service and increased system capacity by approximately 20 MMcf of natural gas per day.
Current report
•Revenues increased $5.4 million as a result of:
Showing the first 40 of 52 passages. Open the source sections for the rest.
Removed paragraphs (162)
Previous report
The Company provides essential infrastructure and services. The Company and its employees work hard to keep the economy of America moving with the products and services provided, which include powering, heating and connecting homes, factories, offices and stores; and constructing and maintaining electrical and communication wiring and infrastructure. The Company is authorized to conduct business in nearly every state in the United States. The Company's organic investments are strong drivers of high-quality earnings and continue to be an important part of the Company's growth. Management believes the Company is well positioned in the industries and markets in which it operates.
Previous report
On May 31, 2023, the Company completed the separation of Knife River, its construction materials and contracting business, from the Company, resulting in Knife River becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of approximately 90 percent of the issued and outstanding shares of Knife River to the Company's stockholders. Stockholders of the Company received one share of Knife River common stock for every four shares of the Company's common stock held on May 22, 2023, the record date for the distribution. The Company retained approximately 10 percent or 5.7 million shares of Knife River common stock immediately following the separation, which were disposed of in a tax-free exchange in November 2023.
Previous report
Forward-Looking Statements
Previous report
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, trends, objectives, goals, strategies, performance or future events, including the dividend payout ratio target or becoming a pure-play regulated energy delivery company, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Business Segment Financial and Operating Data.
Previous report
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may not be achieved or accomplished and changes in such assumptions and factors could cause actual future results to differ materially.
Previous report
Any forward-looking statement contained in this document speaks only as of the date on which the statement is made and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements reported in Part II, Item 1A. Risk Factors in this quarterly report, Part I, Item 1A. Risk Factors in the 2023 Annual Report and subsequent filings with the SEC.
Previous report
•The electric business earnings increase was largely the result of higher retail sales revenue due to rate relief in South Dakota and Montana, and higher volumes to residential and commercial customer classes, largely due to warmer weather.
Previous report
•The natural gas distribution business reported a slightly lower seasonal loss compared to the same period in 2023. The earnings improvement was largely the result of higher retail sales revenue due to rate relief in North Dakota and South Dakota, and higher investment returns on nonqualified benefit plans. The increases were largely offset by the absence of recovery of short-term debt interest expense in Idaho related to increased gas costs in 2023.
Previous report
•The construction services business reported increased earnings, primarily due to higher revenues from both electrical and mechanical and transmission and distribution projects. Operating income as a percentage of revenue remained relatively consistent as a result of project efficiencies during the quarter. Higher other income related to joint venture activities and lower interest expense contributed to the increase in earnings.
Previous report
•Other earnings decreased primarily due to the absence of the 2023 $22.8 million, net of tax, unrealized gain on the Company's retained interest in Knife River and higher operation and maintenance expense related to higher insurance claims experience at the captive insurer. Partially offsetting the decrease was lower interest expense due to decreased borrowings.
Previous report
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023 The Company's consolidated earnings decreased $18.1 million. The decrease in earnings is primarily due to the absence of the 2023 $113.6 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 report
•The electric business earnings increase was largely the result of higher retail sales revenue due to rate relief in North Dakota, Montana, and South Dakota. Partially offsetting the increase was higher operation and maintenance expense, primarily contract services, and decreased residential sales volumes due to 37.0 percent cooler weather in the second quarter of 2024.
Previous report
•Earnings decreased slightly at the natural gas distribution business. The business experienced higher depreciation and amortization expense, primarily a result of increased plant additions, and higher operation and maintenance expense, primarily contract services and software-related expenses. The business also experienced lower retail sales volumes to residential and commercial customers, offset in part 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 industrial customers.
Previous report
•Earnings increased at the pipeline business, driven by higher transportation volumes, primarily from organic growth projects placed in service in November 2023, March 2024 and July 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 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.
Previous report
•Although electrical and mechanical revenue was lower due to timing of projects, the construction services business experienced increased earnings, driven by higher operating income, particularly on transmission and distribution projects, partially offset by increased selling, general and administrative expense. Operating income as a percentage of revenue was higher as a result of project efficiencies. The business also experienced lower interest expense, including the interest expense classified as discontinued operations for the second quarter of 2023, and increased income from joint venture activities.
Previous report
•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 report
In December 2022 and January 2023, natural gas prices significantly increased across the Pacific Northwest from multiple price-pressuring events including wide-spread below-normal temperatures and higher natural gas consumption; reduced natural gas flows due to pipeline constraints, including maintenance in West Texas; and historically low regional natural gas storage levels. Natural gas prices stabilized by March 2023. The higher natural gas prices in December 2022 and January 2023 impacted both Intermountain and Cascade, both of which borrowed short-term debt of $125.0 million and $150.0 million, respectively, in January 2023 to finance the increased natural gas costs. To assist in the recovery of higher natural gas costs, Intermountain filed an out-of-cycle purchased gas adjustment with the Idaho Public Utilities Commission that was effective February 1, 2023, and collected interest costs associated with short-term borrowing. Effective November 1, 2023, as approved by the WUTC, Cascade started recovery in Washington of these increased gas costs over a period of two years rather than the normal one year period. In January 2024, Cascade and Intermountain made the final repayment on short-term debt of $50.0 million and $45.0 million, respectively.
Previous report
•Revenue increased $400,000.
Previous report
▪Rate relief of $1.8 million in South Dakota and Montana.
Previous report
▪Higher net transmission revenue.
Previous report
•Electric fuel and purchased power decreased $3.8 million, largely the result of lower commodity prices, partially offset by higher retail sales volumes.
Previous report
•Operation and maintenance increased $600,000, largely the result of higher vehicle and equipment costs and higher contract services, primarily due to higher transmission expense offset in revenue.
Previous report
•Depreciation and amortization increased $900,000.
Previous report
▪Higher depreciation rates, which are recovered in operating revenues.
Previous report
•Other income increased $100,000, primarily resulting from higher returns on the Company's nonqualified benefit plan investments of $800,000, offset in part by lower interest income related to contributions in aid of construction.
Previous report
•Interest expense increased $600,000, largely the result of higher long term interest expense due to incremental debt issuances.
Previous report
•Income tax expense decreased $500,000, largely due to higher production tax credits driven by higher wind production, partially offset by higher income taxes related to higher income before income taxes.
Previous report
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023 Electric earnings increased $3.8 million as a result of:
Previous report
•Revenue increased $20.7 million.
Previous report
▪Higher miscellaneous revenue of $1.8 million, including higher transmission interconnect upgrades.
Previous report
◦Partially offset by lower retail sales volumes of $2.5 million, driven primarily by lower residential volumes due to 37.0 percent cooler weather in the second quarter of 2024. There was a 2.3 percent increase in volumes, which includes an increase in volumes from the data center as further discussed in the Outlook section.
Previous report
•Electric fuel and purchased power increased $13.8 million, largely the result of higher commodity prices and higher retail sales volumes.
Previous report
•Operation and maintenance increased $3.0 million, largely the result of increased contract services, primarily due to higher transmission expense and tree trimming expense.
Previous report
•Depreciation and amortization increased $1.9 million.
Previous report
▪Higher depreciation rates, which are recovered in operating revenues.
Previous report
•Other income increased $2.1 million, primarily resulting from higher interest income of $1.4 million, including amounts related to higher deferred fuel and purchased power balances, higher returns on the Company's nonqualified benefit plan investments, and higher AFUDC equity due to higher CWIP balances.
Previous report
•Interest expense increased $1.9 million, largely the result of higher long-term interest expense due to incremental debt issuances.
Previous report
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023 Natural gas distribution reported a decreased seasonal loss of $200,000 as a result of:
Previous report
•Revenue decreased $1.4 million.
Previous report
▪Absence of 2023 approved rate recovery of short-term debt interest expense of $3.2 million in Idaho related to increased gas costs in 2023.
Showing the first 40 of 162 passages. Open the source sections for the rest.
Reworded paragraphs (67)
Previous wording
On October 31, 2024, the Company completed the separation of Everus, its construction services business, resulting in Everus becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The distribution is expected to be tax-free to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. More information on the separation and distribution can be found within Everus' Form 10, which is not incorporated by reference herein.
Current wording
Strategic Initiatives On October 31, 2024, the Company completed the separation of Everus, its former construction services business, resulting in Everus becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The separation of Everus was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares.
Previous wording
Strategic Initiatives The Company incurred costs in connection with the strategic initiatives in 2023 and 2024, as noted in the Business Segment Financial and Operating Data section and expects to continue to incur these costs until the initiatives and subsequent work are completed.
Current wording
The Company incurred costs in connection with the strategic initiatives in 2024 and 2025, as noted in the Business Segment Financial and Operating Data section. The majority of the separation costs have already been incurred due to the separation of Everus in October 2024, as previously discussed.
Previous wording
Based on the Company becoming a pure-play regulated energy delivery business, the Company's board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated energy delivery earnings. The Company has an 86-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend as the Company transitions to being a pure-play regulated energy delivery company.
Current wording
Based on the Company becoming a pure-play regulated energy delivery business, the Company's board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated energy delivery earnings. The Company has an 87-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend.
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. The Company has observed supply chain improvements in lead times for certain commodities. Additionally, the Company is closely monitoring potential supply chain disruptions due to hurricanes Helene and Milton. Storm-related orders may receive priority, which could impact the Company's supply chain operations. Although the Company has started to see some reduction to interest rates, they remain elevated and have resulted in and may continue to result in increased borrowing costs on new debt, 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, changes in tariffs, 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. The Company has observed supply chain improvements in lead times for certain commodities. Although the Company has started to see some reduction to interest rates, they remain elevated and have resulted in and may continue to result in increased borrowing costs on new debt, impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers.
Previous wording
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023 The Company's consolidated earnings decreased $10.3 million. The decrease in earnings is primarily due to the absence of the 2023 $22.8 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 construction services, electric and pipeline businesses.
Current wording
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024 The Company's consolidated earnings decreased $18.9 million. The decrease in earnings is primarily due to the absence of income from discontinued operations in 2025, partially offset by increased earnings at the natural gas distribution and pipeline businesses.
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, March 2024 and July 2024. Higher storage-related revenue and new transportation and storage service rates effective August 1, 2023, further drove the increase. The increase was offset in part by higher operation and maintenance expense primarily attributable to payroll-related costs and higher materials and contract services. The business also incurred higher depreciation expense due to organic growth projects placed in service as previously discussed.
Current wording
•The earnings increase at the pipeline business was driven by growth projects placed in service throughout 2024 and customer demand for short-term firm capacity contracts. 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 depreciation expense due to growth projects placed in service, as previously discussed, and lower investment returns on nonqualified benefit plans.
Previous wording
Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as discussed in Note 15. Both segments strive to be top performing utility companies measured by integrity, employee safety and satisfaction, customer service and stockholder return. The segments provide safe, reliable, competitively priced and environmentally responsible energy service to customers while focusing on growth and expansion opportunities within and beyond its existing territories. The Company is focused on cultivating organic growth while managing operating costs and monitoring opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation, transmission and distribution, and natural gas systems, and through selected acquisitions of companies and properties with similar operating and growth objectives at prices that will provide stable cash flows and an opportunity to earn a competitive return on investment. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return; weather; climate change laws, regulations and initiatives; competitive factors in the energy industry; population growth; and economic conditions in the segments' service areas.
Current wording
Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as discussed in Note 14. Both segments strive to be top performing utility companies with a commitment to customers and communities, operational excellence, returns focused initiatives and an employee driven culture. The segments provide safe, reliable, competitively priced and environmentally responsible energy service to customers while focusing on growth and expansion opportunities within and beyond its existing territories. The Company is focused on cultivating organic growth while managing operating costs and monitoring opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation, transmission and distribution, and natural gas systems, and through selected acquisitions of companies and properties with similar operating and growth objectives at prices that will provide stable cash flows and an opportunity to earn a competitive return on investment. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return; weather; climate change laws, regulations and initiatives; competitive factors in the energy industry; population growth; and economic conditions in the segments' service areas.
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, data center growth 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.
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. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends as a means to address economy-wide carbon emission concerns, data center growth and changing customer conservation patterns. Recently, MISO and NERC announced concerns with the 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. Montana-Dakota filed its 2024 IRP with the NDPSC in July 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 2028 versus 2034 as identified in its previous IRP. The Company signed a power purchase agreement and ownership purchase agreement with Badger Wind, LLC for 150 MW of output capacity from the 250 MW Badger Wind Project which will reduce the Company's capacity and energy purchase requirements as identified in the 2024 IRP. Montana-Dakota will continue to monitor the progress of these changes, including the impacts associated with the implementation of MISO's direct loss of load accreditation in 2028, 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 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. MISO also filed its own complaint with FERC against SPP on March 8, 2024 related to the congestion coordination in northwest North Dakota. On September 10, 2024, FERC issued an order denying both Montana-Dakota and MISO's complaints regarding this issue. On October 10, 2024, Montana-Dakota and MISO filed with FERC for rehearing on FERC's decision to deny these complaints. 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.
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 January 2024. Montana-Dakota and MISO each filed a complaint with FERC against SPP related to this issue, which were denied in September 2024. In October 2024, Montana-Dakota and MISO filed with FERC for rehearing on FERC's decision to deny these complaints. Both rehearing requests were denied by operation of law in November 2024. FERC ultimately reaffirmed their prior position and denied the Montana-Dakota and MISO rehearing requests through commission action in March 2025. In January 2025, Montana-Dakota and MISO each filed a petition for review of the FERC decision with the United States Court of Appeals for the Eighth Circuit. 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 was unopposed by the MTPSC. 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. In December 2024, Montana-Dakota filed a request with the NDPSC for authorization to defer external legal expenses related to this congestion litigation and record those deferred expenses into a regulatory asset.
Previous wording
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays and inflationary pressures to continue.
Current wording
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays and inflationary pressures to continue. The Company also continues to monitor the impact tariffs will have on its costs. Tariff increases on raw materials could negatively affect the Company's construction projects and maintenance work. For additional discussion regarding risks and uncertainties, see Part II, Item 1A. Risk Factors in this quarterly report and Part I, Item 1A. Risk Factors in the 2024 Annual Report.
Previous wording
The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. On October 6, 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project.
Current wording
The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. On October 6, 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project. Montana-Dakota and Otter Tail Power Company received approval of a Certificate of Public Convenience and Necessity from the NDPSC on November 20, 2024 on this project.
Previous wording
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023 Electric earnings increased $3.4 million as a result of:
Current wording
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024 Electric earnings decreased $2.9 million as a result of:
Previous wording
▪Higher fuel and purchased power costs of $13.8 million recovered in customer rates and offset in expense, as described below.
Current wording
▪Higher fuel and purchased power costs of $4.0 million recovered in customer rates and offset in expense, as described below.
Previous wording
▪Higher retail sales volumes of $1.3 million, driven primarily by higher residential and commercial volumes, largely due to 21.1 percent warmer weather than last year.
Current wording
▪Higher retail sales volumes of $1.8 million, driven primarily by higher residential volumes, largely due to colder weather than last year, and higher commercial volumes from the data center as further discussed in the Outlook section.
Previous 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.
Current wording
•Depreciation and amortization increased $600,000, largely due to increased property, plant, and equipment balances as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
Previous wording
•Taxes, other than income decreased $700,000, largely as a result of lower property tax, primarily in Montana.
Current wording
•Taxes, other than income decreased $300,000, largely as a result of lower property tax and lower payroll tax.
Previous wording
•Income tax benefit increased $1.5 million, primarily due to higher production tax credits due to higher wind production, partially offset by higher income taxes related to higher income before income taxes.
Current wording
•Income tax benefit increased $3.2 million, largely due to higher production tax credits of $2.0 million driven by higher wind production, and lower income before income taxes.
Previous wording
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023 Natural gas distribution earnings decreased $400,000 as a result of:
Current wording
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024 Natural gas distribution earnings increased $4.6 million as a result of:
Previous wording
▪Rate relief of $6.8 million in North Dakota, Montana, and South Dakota.
Current wording
▪Rate relief of $6.8 million in Washington, Montana and South Dakota.
Previous wording
▪Decreased revenue-based taxes recovered in rates of $2.2 million that were offset in expense, as described below.
Current wording
▪Higher revenue-based taxes recovered in rates of $3.7 million offset in expense, as described below.
Previous wording
▪Higher payroll-related costs of $3.3 million.
Current wording
▪Higher retail sales volumes of $3.3 million, which includes higher volumes to commercial and residential customer classes, largely due to colder weather, offset in part by weather normalization and decoupling mechanisms in certain jurisdictions.
Previous wording
▪Higher conservation revenues of $2.7 million that were offset in expense, as described below.
Current wording
▪Higher conservation revenues of $1.7 million that were offset in expense, as described below.
Previous wording
•Operating income increased $4.3 million, primarily from increased gross profit, partially offset by increased selling, general and administrative expense discussed above. Operating income as a percentage of revenue increased as a result of project efficiencies.
Current wording
•Operation and maintenance increased $4.3 million.
Previous wording
▪Higher conservation-related costs of $2.7 million which are recovered in rates, as discussed above.
Current wording
▪Higher conservation related costs which are recovered in rates, as discussed above.
Previous wording
•Depreciation and amortization increased $1.1 million, primarily resulting from growth and replacement projects placed in service, partially offset by lower depreciation rates implemented from a South Dakota rate case.
Current wording
•Depreciation and amortization increased $600,000, of which $1.6 million resulted from increased property, plant, and equipment balances related to growth and replacement projects placed in service, partially offset by lower regulatory amortizations and lower depreciation rates implemented from rates cases in North Dakota, Montana and South Dakota of $400,000.
Previous wording
•Other income increased $5.0 million, driven primarily by higher interest income of $4.7 million, largely due to higher interest on regulatory deferral balances, and higher interest income associated with renewable natural gas projects, as well as higher returns on the Company's nonqualified benefit plans.
Current wording
▪Lower interest on regulatory deferral balances.
Previous wording
Outlook In 2023, the Company experienced rate base growth of 8.5 percent and expects these segments will grow rate base by approximately 7 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In 2023, these segments experienced retail customer growth of approximately 1.3 percent and the Company expects customer growth to continue to average 1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new and replacement electric and natural gas systems.
Current wording
Outlook In 2024, the utility business experienced rate base growth of 6.8 percent and expects these segments will grow rate base by approximately 7 percent to 8 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In 2024, these segments experienced retail customer growth of approximately 1.4 percent and the Company expects customer growth to continue to average 1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new and replacement electric and natural gas systems.
Previous 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. On August 9, 2024, Coyote Station co-owners submitted comments on the rulemaking to the EPA. 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.
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 GHG and mercury emissions standards finalized in May 2024 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 December 2024, the EPA issued a final decision on the NDDEQ's Regional Haze state implementation plan, maintaining the proposed disapproval of the state's conclusion that no additional controls are warranted during this implementation period. The EPA did not issue a federal implementation plan in place of the state plan and would have two years from state plan disapproval to either propose a federal plan or approve a new state plan. Coyote Station co-owners filed a petition for review with the Eighth Circuit Court of Appeals in January 2025, challenging EPA's NDDEQ state plan disapproval, and filed a petition for reconsideration with the EPA in February 2025. In March 2025, the EPA announced the agency is restructuring the regulations for implementing the Regional Haze Program. In March 2025, the Eight Circuit Court of Appeals granted a request by the EPA to hold the petition of review proceeding in abeyance for a period of 120 days so that the EPA could review the previous administration's findings and actions. 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 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. On September 5, 2024, the Company filed an amendment to the electric service agreement previously approved by the NDPSC, increasing the service provided from 225 megawatts to 350 megawatts. A portion of the additional data center load is expected to be online in 2025.
Current wording
In March 2023, the Company began to provide power for Applied Digital's data center near Ellendale, North Dakota. At full capacity, the data center requires 180 MW 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. An electric service agreement to serve an additional 350 MW data center load with Applied Digital in the Company's service territory was approved by the NDPSC. A portion of the additional data center load is expected to be online in 2025.
Previous wording
On August 5, 2024, the Company filed a request with the SDPUC seeking approval on an electric service agreement to provide up to 50 megawatts of electricity to a data center near Leola, South Dakota. Construction on the data center is expected to begin in the spring of 2025.
Current wording
On August 5, 2024, the Company filed a request with the SDPUC seeking approval on an electric service agreement to provide up to 50 MW of electricity to a data center near Leola, South Dakota. Construction of the data center and approval of the electric service agreement is pending development of new local siting requirements for data center loads by McPherson County in South Dakota, which is expected mid-2025.
Previous wording
The Infrastructure Investment and Jobs Act, commonly known as the Bipartisan Infrastructure Law, was enacted in the fourth quarter of 2021 and is providing long-term opportunities by designating funds for investments such as upgrades to electric and grid infrastructure, transportation systems, and electric vehicle infrastructure. In addition, the IRA provides $369 billion in new funding for clean energy programs. These programs include new tax incentives for solar, battery storage and hydrogen development along with funding to expand the production of electric vehicles and the build out of infrastructure to support electric vehicles. The Company is pursuing various opportunities under the Grid Resilience and Innovative Partnerships Program, which is part of the Infrastructure Investment and Jobs Act, and is also pursuing a biogas property at the Knott Landfill site in Bend, Oregon which may qualify for an investment tax credit as part of the IRA. The Company will continue to monitor additional opportunities from these legislative items.
Current wording
The Infrastructure Investment and Jobs Act, commonly known as the Bipartisan Infrastructure Law, was enacted in the fourth quarter of 2021 and is providing long-term opportunities by designating funds for investments such as upgrades to electric and grid infrastructure, transportation systems, and electric vehicle infrastructure. In addition, the IRA provides $369 billion in new funding for clean energy programs. These programs include new tax incentives for solar, battery storage and hydrogen development along with funding to expand the production of electric vehicles and the build out of infrastructure to support electric vehicles. The Company is pursuing various opportunities under the Grid Resilience and Innovative Partnerships Program, which is part of the Infrastructure Investment and Jobs Act, and is also pursuing a biogas property at the Knott Landfill site in Bend, Oregon which may qualify for an investment tax credit and clean fuel production credits as part of the IRA. The Company will continue to monitor additional opportunities from these legislative items.
Previous 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.
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. In March 2025, the EPA announced reconsideration of the Electric Generation and Greenhouse Gas Rule, Mercury and Air Toxics Standards Rule, and Effluent Limitations Guidelines Rule.
Previous wording
The Mercury and Air Toxics Standards Rule was published on May 7, 2024, tightening mercury emissions and non-mercury metals emissions standards for coal-fired generation facilities. The stricter mercury emissions limit for lignite-fired units will require Coyote Station to increase existing emission controls. In addition, Big Stone Station and Coyote Station must install particulate matter continuous emissions monitoring systems to monitor compliance with the revised non-mercury metals emission standard. Compliance with the revised emission standards and monitoring requirements must be demonstrated by May 7, 2027. On August 6, 2024, the DC Circuit Court denied a stay of the rule. Several petitioners filed for a stay of the rule at the Supreme Court of the United States. On October 4, 2024, the Supreme Court denied these stay application filings.
Current wording
The Mercury and Air Toxics Standards Rule tightens mercury emissions and non-mercury metals emissions standards for coal-fired generation facilities. The stricter mercury emissions limit for lignite-fired units will require Coyote Station to increase existing emission controls. In addition, Big Stone Station and Coyote Station must install particulate matter continuous emissions monitoring systems to monitor compliance with the revised non-mercury metals emission standard. In March 2025, the Coyote Station and Big Stone Station co-owners submitted requests to the EPA for a two-year Presidential exemption from compliance. In April 2025, a Presidential executive order was released granting certain facilities a two-year compliance extension, including Coyote Station and Big Stone Station. Compliance with the revised emission standards and monitoring requirements must now be demonstrated by July 8, 2029. This rule is likewise being challenged in the DC Circuit Court.
Previous wording
The Legacy Coal Combustion Residuals Rule was published on May 8, 2024, and requires utilities to evaluate older coal ash disposal units at certain inactive and active electric generating facilities. Montana-Dakota must complete facility evaluations by February 8, 2027, to determine if legacy ash is present and assess the extent of ash on site. If legacy ash is present, Montana-Dakota must monitor and evaluate for potential impacts and may need to conduct additional closure and remediation. The cost of additional remediation or closure activities may be material. Several petitioners have filed challenges to the rule at the DC Circuit Court, including stay petitions. On November 1, 2024, the DC Circuit Court ordered that the motion for stay be denied.
Current wording
The Legacy Coal Combustion Residuals Rule requires utilities to evaluate older coal ash disposal units at certain inactive and active electric generating facilities. Montana-Dakota must complete facility evaluations by February 8, 2027, to determine if legacy ash is present and assess the extent of ash on site. If legacy ash is present, Montana-Dakota must monitor and evaluate for potential impacts and may need to conduct additional closure and remediation. The cost of additional remediation or closure activities may be material. This rule also faces challenge in the DC Circuit Court.
Previous wording
The fourth rule, the Effluent Limitations Guidelines Rule, was published in the Federal Register on May 9, 2024 and is not expected to have impacts on any owned or co-owned Montana-Dakota facilities.
Current wording
The fourth rule, the Effluent Limitations Guidelines Rule is not expected to have impacts on any owned or co-owned Montana-Dakota facilities.
Previous wording
•In Oregon, the Climate Protection Program Rule was approved in December 2021, which requires natural gas companies to reduce GHG emissions 50 percent below the baseline by 2035 and 90 percent below the baseline by 2050. Each year, compliance instruments will be distributed to the Company by the ODEQ at no cost and will decline annually in step with the reduction from baseline. The Company intends to meet its obligations through surrendering no cost emissions allowances and will fill remaining compliance obligations by investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and purchasing low carbon fuels such as renewable natural gas. The Company expects the compliance costs for these regulations to be recovered through customer rates. Due to timing of regulatory recovery, future compliance obligation purchases could impact the Company's operating cash flow. For more information about this rule and associated compliance costs, see Items 1 and 2 - Business Properties in the 2023 Annual Report.
Current wording
In July 2024, the ODEQ released the proposed new Climate Protection Program Rule, which was adopted by the Oregon Environmental Quality Commission in November 2024. Like the prior rule, natural gas companies are required to significantly reduce GHG emissions 50 percent below the baseline by 2035 and 90 percent below the baseline by 2050. Each year, ODEQ will distribute compliance instruments to the Company at no cost and will decline annually in step with the reduction from baseline. The first compliance period is three years, from 2025 to 2027, with compliance demonstrations required by December 9 of the year following the end of a compliance period. Compliance periods are two years in length thereafter. The Company intends to meet its obligations through surrendering no cost emissions allowances and will fill remaining compliance obligations by investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and low carbon fuel projects such as RNG and purchasing associated environmental attributes. Cascade is evaluating customer bill impacts from the new rule.
Previous wording
•In Washington, the Climate Commitment Act signed into law in May 2021 requires natural gas distribution companies to reduce overall GHG emissions 45 percent below 1990 levels by 2030, 70 percent below 1990 levels by 2040 and 95 percent below 1990 levels by 2050. As directed by the Climate Commitment Act, in September 2022 the Washington DOE published its final rule on the Climate Commitment Act, which was effective on October 30, 2022, and emissions compliance began on January 1, 2023. The Company must demonstrate that it has met GHG emissions reduction goals through a combination of on-site emissions reductions and the use of approved allowances and offsets. Emissions compliance may be achieved through increased energy efficiency and conservation measures, purchased allowances and offsets, and purchases of low carbon fuels. Emissions allowances are allocated by the Washington DOE to the Company at no cost and additional allowances are required to be purchased. The Company expects compliance costs for these regulations will be recovered through customer rates. Due to the timing of regulatory recovery, the purchase of allowances could impact the Company's operating cash flow. For more information about this rule and associated compliance costs, see Items 1 and 2 - Business Properties in the 2023 Annual Report.
Current wording
•In Washington, the Climate Commitment Act requires natural gas distribution companies to reduce overall GHG emissions 45 percent below 1990 levels by 2030, 70 percent below 1990 levels by 2040 and 95 percent below 1990 levels by 2050. The Company must demonstrate that it has met GHG emissions reduction goals through a combination of on-site emissions reductions and the use of approved allowances and offsets. Some emissions allowances are allocated by the Washington DOE to the Company at no cost and a portion of these are required to be sold at auction to generate revenue for the benefit of customers.
Previous wording
•On April 22, 2022, the Washington State Building Code Council approved revisions to the state's commercial energy code that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings. On November 4, 2022, the Washington State Building Code Council adopted new residential codes requiring gas or electric heat pumps for most new space and water heating installations.
Current wording
•The Washington SBCC in November and December 2023, adopted residential and commercial building code amendments that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings. These amendments came after previous, similar state building code amendments were stayed by the SBCC after legal challenge by Cascade, along with two other local natural gas distribution companies in Washington and a coalition of homeowners, builders, and suppliers. Cascade did not believe such revisions addressed the issues which existed in the initial amendments. In May 2024, the Company filed a joint complaint seeking declaratory and injunctive relief under federal law against the Washington SBCC's adoption of the Washington State Energy Code.
Previous wording
The Company, along with two other local natural gas distribution companies in Washington, filed a lawsuit on May 22, 2023, challenging these amendments which the Company believes will stifle innovation, increase the cost of housing and energy for our customers, and do not consider the limitations of electric heat pumps in colder climates. On June 1, 2023, the plaintiffs filed a motion for a preliminary injunction to preliminarily enjoin the challenged building code amendments. Oral arguments on the preliminary injunction were held on July 18, 2023. The court denied the preliminary injunction, finding no immediate harm and confirming the building code amendments were not yet in effect due to the stay of 120 days issued by the Washington State Building Code Council. On September 15, 2023, the Washington State Building Code Council voted to delay the implementation of the State Building and Energy Codes. On March 15, 2024, the State Building and Energy Codes became effective. On May 15, 2024, the Company filed a joint complaint seeking declaratory and injunctive relief under federal law against the Washington State Building Code Council's adoption of the Washington State Energy Code. Initiative Measure No. 2066 has been forwarded to the voters and was included on the November 2024 ballot in Washington. If passed, Initiative Measure 2066 would prohibit the Washington State Energy Code from "in any way prohibit, penalize, or discourage the use of gas for any form of heating, or for uses related to any appliance or equipment, in any building."
Current wording
Initiative Measure No. 2066, which was approved by voters, prohibits the Washington State Energy Code from "in any way prohibit, penalize, or discourage the use of gas for any form of heating, or for uses related to any appliance or equipment, in any building." In an oral decision issued in March 2025, the King County Superior Court ruled Initiative Measure No. 2066 unconstitutional. The Building Industry Association of Washington plans to appeal the King County Superior Court decision.
Previous wording
•On March 6, 2024, the SEC issued Final Rule 33-11275 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule requires registrants to provide standardized disclosures in Form 10-K related to climate-related risks, Scope 1 and 2 GHG emissions, as well as to include in a footnote to the consolidated financial statements the financial impact of severe weather events and other natural conditions. The rule requires implementation in phases between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. The Company is evaluating the rule.
Current wording
•In March 2024, the SEC issued Final Rule 33-11275 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. In March 2025, the SEC withdrew its defense of the rules.
Showing the first 40 of 67 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
On October 31, 2024, the Company completed the separation of Everus, its former construction services business, into a new independent publicly-traded company. As a result of the separation, the historical results of operations for Everus are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which did not meet the criteria for discontinued operations and are reflected in Other. Also included in discontinued operations are certain strategic initiative costs associated with the separation of Everus.
Current report — wording carried from elsewhere
•Other experienced lower operation and maintenance expense, primarily a result of corporate overhead costs classified as continuing operations allocated to Everus in 2024, which are not included in Other in 2025.
Current report — wording carried from elsewhere
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024.
Current report — wording carried from elsewhere
The increase in cash flows provided by operating activities in 2025 from 2024 was largely driven by the collection of purchased gas cost balances, including net environmental compliance costs, at the natural gas distribution business. Partially offsetting these items was lower cash provided by discontinued operations due to separation of Everus in October 2024.
Rearranged previous paragraphs (11)
Previous report — wording carried elsewhere
◦Partially offset by lower fuel and purchased power costs of $3.8 million recovered in customer rates and offset in expense, as described below.
Previous report — wording carried elsewhere
▪Increased property, plant and equipment balances of $1.6 million, as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
Previous report — wording carried elsewhere
•In November 2023, the Line Section 15 Expansion project was placed in service and increased system capacity by 25 MMcf of natural gas per day.
Previous report — wording carried elsewhere
•Taxes, other than income were comparable to the same period in the prior year.
Previous report — wording carried elsewhere
◦Higher storage-related revenues of $5.2 million
Previous report — wording carried elsewhere
▪Higher other costs including materials and contract services.
Previous report — wording carried elsewhere
•Interest expense increased $1.9 million primarily from higher debt balances to fund capital expenditures.
Previous report — wording carried elsewhere
Outlook On October 31, 2024, the Company completed the separation of Everus, its construction services business, resulting in Everus becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The distribution is expected to be tax-free to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. More information on the separation and distribution can be found within Everus' Form 10, which is not incorporated by reference herein.
Previous report — wording carried elsewhere
(b)Certain provisions allow for increased borrowings, up to a maximum of $225.0 million.
Previous report — wording carried elsewhere
(c)Outstanding letter(s) of credit reduce the amount available under the credit agreement.
Previous report — wording carried elsewhere
(d)Certain provisions allow for increased borrowings, up to a maximum of $250.0 million.