Black Hills proposes limited solar program in the near term

Black Hills/Colorado Electric Utility Co. LP, d/b/a Black Hills Energy, applied Nov. 20 at the Colorado Public Utilities Commission for continuation of the company’s on-site solar programs using the unsubscribed capacity from its 2011 Qualifying Retail Utility Compliance Plan (2011 RES Plan) and its 2012 Qualifying Retail Utility Compliance Plan (2012 RES Plan).

Christopher Burke, employed by Black Hills/Colorado Electric Utility as Vice President-Colorado Utility Operations, noted in Nov. 19 testimony that the primary issue in a negotiated settlement of the company’s 2011 RES Plan was the company’s temporary suspension of its solar program in October 2010. Black Hills, like Public Service Co. of Colorado, experienced a sharp and unexpected increase in solar applications during the second half of 2009 and in 2010.

This caused greater customer payments for rebates and SO-RECS than the program revenues being collected through the Renewable Energy Standards Adjustment (RESA). The cost of installed solar systems had declined significantly making it more cost-effective for customers to install solar energy projects. Additionally, the $2,000 maximum personal tax credit for solar-electric systems was removed for systems placed in service after December 31, 2008, but thereafter customers could thereafter receive a full 30% personal tax credit.

“This combination of factors caused a significant increase in solar applications, resulting in a negative balance in Black Hills’ RESA fund,” Burke noted. “Although Black Hills took several steps to try to keep revenues ahead of costs, these steps were ultimately insufficient. As a consequence, it became necessary for the Company to temporarily suspend accepting or processing any new solar applications or entering into any other new solar contracts.”

The 2011 RES Plan proceeding was resolved by a comprehensive settlement agreement entered into by the trial staff of the Colorado Public Utilities Commission, the Colorado Solar Energy Industries Association, the Governor’s Energy Office and the Colorado Renewable Energy Society.

In the past, Black Hills met the RES requirements with: solar resources and small customer-cited wind; the purchase of solar RECs; small amounts of biomass and biodiesel; and the RECs associated with a load ratio share of Public Service Co. of Colorado’s non-solar renewables (wind RECs) which were credited to Black Hills in conjunction with the wholesale purchase power agreement between PSCo and Black Hills which expired at the end of 2011. The vast majority of Black Hills’ RES requirements were met with the wind RECs which were acquired for a nominal administrative cost. This allowed Black Hills to devote all of its RESA funds to the acquisition of solar resources.

Busch Ranch wind project a factor in current renewables picture

Also, Black Hills will acquire RECs from the Busch Ranch wind project which came on-line in October 2012, Burke noted. Black Hills is able to acquire these RECs for a net benefit and, therefore, will not need to spend any RESA funds to pay for the Busch Ranch energy and associated RECs. The Busch Ranch wind project provides a net benefit because the avoided costs of the project (natural gas fuel, economy energy purchases, and O&M costs) exceed the cost of Busch Ranch (including Black Hills’ 50% ownership share, the purchase power agreement for the energy, RECs from the other 50% owner, and wind integration costs).  The primary reason why the Busch Ranch wind RECs can be acquired for a net benefit is that both Black Hills’ ownership and the power purchase agreement costs include tax incentives that are currently scheduled to expire at the end of 2012.

Based upon resource modeling, additional wind resources cannot be added for a net benefit and, therefore, would require the use of RESA funds in order to be acquired, Burke reported. Furthermore, acquiring RECs based on the 2013 through 2016 solar framework is not the most cost-effective use of RESA funds. These RECs would cost between $84.72 per REC for the 2013 framework to $74.05 per REC for the 2016 framework and would require a total expenditure of $14,829,279. Therefore, wind energy is the most cost-effective approach for meeting the Black Hills’ eligible energy needs.

The company collects a 2% surcharge from its customers to provide the RESA funds. This is the maximum amount the company can collect because of the 2% retail rate impact limitation under the RES Rules. All of the company’s RESA revenues in 2013 through 2017 will be needed to pay for the existing REC obligations, program costs, interest on the negative RESA balance, and to pay down the RESA balance debt. No RESA Revenues will be available to acquire additional eligible energy resources until late 2017, Burke wrote.

Although no additional retail renewable distributed generation can be added for a net benefit and there is already a negative balance in the RESA, the company proposes a 2013-2014 solar program utilizing the unsubscribed capacity left over from the 2011 and 2012 solar programs. The company previously proposed to spend a specified amount to fund the 2011 and 2012 solar programs and the commission approved those proposals. The company is still willing to fund the unsubscribed capacity from the 2011 and 2012 solar programs to provide a 2013 and 2014 solar program. This proposal will slow the retirement of the negative RESA deficit, but not by a significant amount, Burke wrote. This proposal will allow a solar program to continue in the company’s service territory and will also allow for the addition of a community solar gardens program starting in 2014.

Charles Gray employed by Black Hills/Colorado Electric Utility as a Senior Regulatory Analyst, testified that the company is proposing a limited solar program for 2013 consisting of 120 kW of the unsubscribed capacity left from the 2011 solar program. The company’s experience with the 2011 and 2012 solar programs indicates that certain programs have very low customer interest, he noted.

For the 2013 solar program, the company proposes to allocate 120 kW of the unsubscribed capacity from the 2011 solar program. The company is proposing that any unsubscribed funding from the 2013 solar program be carried forward into 2014 in addition to the community solar gardens program. Therefore, unlike the 2011 and 2012 solar programs, if there is any unsubscribed capacity from the 2013 solar program as of the first day of the fourth quarter of 2013, the company is not proposing to reallocate the capacity to other categories. The company is proposing a community solar gardens program for 2014 of 120 kW of unsubscribed capacity from the 2011 solar program.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.