The Colorado Public Utilities Commission has approved a request from Public Service Co. of Colorado, which is a subsidiary of Xcel Energy (NYSE: XEL), for addition of 450 MW of wind to its system.
This capacity, from unnamed bidders, came out of the utility’s 2013 All Source Solicitation. The wind bids are premised on qualifying for the temporarily extended federal Production Tax Credit (PTC) program, which requires project construction to begin by the end of this year.
Public Service filed its initial PTC Wind Bid Evaluation Report on May 30, which provided a short list of bids. At that time, the company requested commission approval to commence contract negotiations with three PTC wind bids totaling about 550 MW, subject to final commission approval after the company evaluated these wind resources with other generation proposals as part of Phase II of this ongoing Electric Resource Plan (ERP) proceeding.
On June 21, the commission directed Public Service to commence contract negotiations with the most cost-effective PTC wind bid for 199 MW. The commission also allowed Public Service to move forward with developer(s) of appropriate back-up bid(s). It also indicated that any other PTC wind bids Public Service chose to pursue would be evaluated in accordance with the Phase I Decision and as presented in the 120-Day Report in Phase II.
In its 120-Day Report, Public Service proposed to enter into a power purchase agreement (PPA) with the most cost-effective bid as initially approved, and also with the second most cost-effective bid. Various commenters offered opinions on the Public Service plans. Natural gas producers recommended approval of only one of the bids, arguing that the other suffers from land use permitting challenges and that future gas prices will be both lower and more stable for the foreseeable future.
In combination with the other utility resources Public Service proposes to acquire under its preferred portfolio, the company will have excess capacity of about 92 MW during the Resource Acquisition Period ending Oct. 31, 2018, the commission noted in its Oct. 8 decision. These values indicate that capacity provided by the proposed 450 MW of PTC wind resources is not essential. However, the wind resources will reduce the company’s future capacity needs throughout the PPA terms. Public Service also projects that it does not require any additional wind energy to meet the Renewable Energy Standard.
“Therefore, our evaluation of Public Service’s request is primarily based on the projected net economic benefits of acquiring the PTC wind resources,” the commission wrote. “Specifically, the proposed wind bids are expected to result in $231 million of cost savings from the displacement of fuel and variable operating costs of other generation on Public Service’s system under the base bid evaluation assumptions we approved in Phase I of this ERP proceeding.”
Said the Oct. 8 order: “The request of Public Service Company of Colorado (Public Service or Company) for approval to acquire 450 MW of new wind generation resources in its Preferred Portfolio as set forth in its 2013 All Source Solicitation 120-Day Report (120-Day Report), filed on September 9, 2013, is granted, consistent with the discussion above.”
The commission said it will address all other resources to be included in Public Service’s final cost-effective resource plan by a separate decision under the procedures established in previous decisions issued in this proceeding.
Any executed contracts under the two approved wind bids must be consistent with the prices considered in the 120-Day Report, which are contingent on the projects qualifying for the federal tax credit. If these projects do not qualify for the PTC or if the price otherwise varies from representations made in the 120-Day Report, the resulting price revisions are not approved by the PUC decision.