Black Hills approved in Colorado for 40-MW addition to gas plant

The Colorado Public Utilities Commission on Jan. 6 approved a series of interlocking decisions related to the resource plan of Black Hills/Colorado Electric Utility Co. LP, including new gas-fired capacity to replace coal capacity being shut due to a state clean-air law.

Blacks Hill in April 2013 filed three applications which were the subjects of this proceeding: seeking a decision approving its 2013 Electric Resource Plan (ERP) and approving its 2013-2014 Renewable Energy Standard Compliance Plan (2013-2014 RES Compliance Plan); a request for a Certificate of Public Convenience and Necessity (CPCN) for the construction of a 40-MW LM6000 natural gas-fired unit at its Pueblo Airport Generation Station (PAGS); and a request for a CPCN approving the retirement (but not the decommissioning) of the gas-fired Pueblo 5 and 6 units on Dec. 31, 2013.

Black Hills settled issues in November 2013 with some parties to the case, with that settlement the basis of much of the commission’s Jan. 6 decision.

The new 40-MW of capacity at PAGS would replace the 42 MW of the Clark coal plant that will be retired under the state’s Clean Air-Clean Jobs Act (CACJA).

The commission on Jan. 6 approved the proposed Resource Acquisition Period of 2013 to 2019 and the proposed determination of resource needs during this period. The growth rates underlying the company’s calculation of net peak demands reflect low levels of annual growth, which is supported by the record. “We also find that the proposed 15 percent reserve margin is reasonable for addressing the risks associated with the development of new generation, the losses of generation or transmission capacity, and other risks, consistent with the ERP Rules,” the commission added. “We further find that the Company has appropriately addressed demand reductions from DSM measures and interruptible resources presently under contract.”

Commission approves planned request for proposals

Among the things the commission approved was an all-source solicitation for bids for resources to meet the resource need during a Resource Acquisition Period of 2013-2019. “We find good cause to approve the proposed all-source solicitation for Phase II of this ERP,” said the Jan. 6 decision. “Competitive bidding shall be used to acquire resources during the Resource Acquisition Period of 2013-2019 consistent with the Commission’s ERP Rules and this Decision. Given that Black Hills is projected to have insufficient eligible energy resources to meet the Renewable Energy Standard (RES) beginning in 2015, we also approve consideration of bids for up to 60 MW of such resources in 2017 or 2018. We further approve the revised model RFPs and the Seasonal Firm Market Purchases contract filed by the Company on November 8, 2013.”

The commission approved a Resource Planning Period extending from 2013 to 2037 for the purpose of bid evaluation in Phase II. It also directed Black Hills to submit, as a compliance filing, the modeling inputs and assumptions as well as the final bid evaluation criteria to be used in Phase II no later than six weeks prior to the deadline for bids.

At hearing, Black Hills said it intends to acquire additional on-site solar during the Resource Acquisition Period and that the company will bring forward its plan for such acquisitions when it files its 2015-2017 RES Compliance Plan, the commission wrote. “We direct Black Hills to address additional on-site solar acquisitions in its 2015-2017 RES Compliance Plan. In addition, due to the possibility that the Commission may not enter a final decision on that compliance plan before the end of 2014, the Company is directed to include a proposal for the continuation of its on-site solar program into early 2015 until such time that a final decision is issued and can be implemented by the Company.”

Black Hills wins aproval for 40-MW expansion at PAGS

The commission granted Black Hills a CPCN for the development and ownership of the proposed 40-MW LM6000 gas-fired generation unit at PAGS and a presumption of prudence for up to 5% of the company’s revenue requirement at the time the company requests cost recovery.

“In compliance with prior Commission decisions, Black Hills has demonstrated that a similarly-sized generation facility can be accomplished prudently and for reasonable rate impacts, with an increase of less than 5 percent in revenue requirement,” said the commission about the PAGS addition. “Based on the record in this proceeding, we agree with the Settling Parties that Black Hills can construct the facility at a reasonable cost as a brownfield expansion project at PAGS. The cost is also comparable with the costs and revenue requirement associated with a 42 MW portion of an LMS100 that Black Hills initially proposed in its emission reduction plan. We conclude that the construction, ownership, and operation of the LM6000 are consistent with Black Hills’ Commission-approved emission reduction plan.”

The commission noted that opposing parties are correct in that Black Hills plans to use the LM6000 as a peaking unit with a predicted annual capacity factor of 0.1 to 0.4% in the first five years. Further, Black Hills previously proposed to replace Clark Station with a peaking unit and the commission has approved that component of the emission reduction plan. Consistent with its finding that Black Hills has a resource need of approximately 82 MW in 2017 and given other mandates, the commission said it finds it reasonable for the company to meet a portion of that need with the proposed LM 6000.

The parties opposing the settlement suggested that Black Hills may have retired the Clark coal units even in the absence of CACJA. “However, this is irrelevant as a matter of law,” the commission wrote. “In enacting CACJA, the General Assembly chose to allow older coal plants to be included in emission reduction plans. In addition, the General Assembly was aware that Black Hills was a utility that owned and operated a single coal-fired unit, yet it did not preclude the Company from retiring that unit as part of its plan.”

Black Hills’ application for a CPCN approving the retirement of Pueblo Units 5 and 6 (27 MW total capacity) was unopposed. Based on the age of the units and the expectation of no rate impacts from their decommissioning costs, the commission found good cause to approve the retirement of those units.

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.