Black Hills gets down to talks with wind ‘Bidder B’

Black Hills/Colorado Electric Utility Co. LP filed an Aug. 2 report with the Colorado Public Utilities Commission outlining the results of an April 23 request for proposals (RFP) for 30 MW of wind capacity.

The identities of the bidders were withheld from the report. The RFP was issued and evaluated on an expedited schedule in order to allow the company the opportunity to seek cost- effective wind generating resources for its customers prior to the expiration of the Federal Production Tax (PTC) and investment tax credits later this year. In order to qualify for the PTCs, construction must begin before Jan. 1, 2014.

Because of the time limits associated with PTC qualification and the potential customer benefits conferred by the PTC, the company issued this RFP outside of its 2013 Electric Resource Plan proceeding. All RFP information was posted to a Black Hills RFP website hosted by Independent Auditor (IA) Accion Group.

The primary responsibilities of the IA are to, among other things, observe the bid solicitation and evaluation process and to report back to the commission on the integrity and fairness of that process. Accion Group will also serve as the Independent Evaluator for Phase II of the 2013 Electric Resource Plan proceeding. The IA will file a report with the commission regarding the evaluation of the wind bids on or before Aug. 9.

On June 14, the company received bids from only two companies, Bidder A and Bidder B. Bidder A submitted two bids offering 31.5 MW of new wind facilities in the form of 25 year power purchase agreements (PPAs). One of these bids offered an alternative build-transfer option for 31.5 MW which would give Black Hills the choice of eventually taking ownership of the facility. Both of Bidder A’s bids also offered alternatives for acquisition of significantly more than 30 MW. In sum, Bidder A submitted five alternatives as part of its bid. However, none of Bidder A’s bids complied with the firm transmission requirement. Bidder A proposed to build the new wind generation in Colorado.

Bidder B submitted one bid offering 29.25 MW, and one alternative bid offering significantly more than 30 MW of new wind facilities. Bidder B also proposed to build the new wind generation in Colorado.

Black Hills said it was surprised that it received a small number of bids in response to the RFP. While 31 entities signed-up as potential bidders, only two entities actually submitted bids. After bidding closed, Accion conducted a survey among registered potential bidders to determine whether there were any impediments to submitting a bid. The survey resulted in a number of potential bidders showing concern regarding the $10,000 bid fee. On July 2, the bidding process was reopened to address this concern, and the bid fee was reduced to $2,500 and the parties who had bid were given a partial refund of their bid fees. Those entities that already submitted bid(s) were allowed to refresh their bids in hopes of receiving more compliant bids to compete with the one bid that did conform to the RFP requirements and commission rules.

The bidding process was reopened through July 17 and the company received four  additional bids.

Black Hills has now identified a primary bidder, Bidder B, for delivering 30 MW or less via firm transmission to the Black Hills’ system at the Rattlesnake Butte substation. From its evaluation of the PTC Wind Bids, the company concludes that the addition of the selected bid, totaling about 30 MW to the Black Hills system, would provide customer savings in the amount of $1.46m over the PPA term. These savings were calculated with all transmission and wind integration related costs included as part of each bids overall costs to customers. Based on the results of its overall assessment of the bids received, Black Hills said it will commence negotiations with Bidder B.

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.