Colorado PUC again rejects Black Hills investment in 60-MW wind project

The Colorado Public Utilities Commission (PUC) on April 16 upheld its decision on Black Hills Energy’s electric resource plan, reaffirming that the company’s proposal to acquire additional renewable energy resources was not cost effective and would be an additional burden to ratepayers.

The PUC said in an April 16 statement that it unanimously denied requests for reconsideration of its February decision in which it determined that none of the three alternatives proposed in the company’s resource portfolio was cost effective. The PUC ruled in February that the Black Hills’ proposal to acquire a 60-MW wind farm could cost as much as $246 million with resulting increases to ratepayers. That’s on top of expected increases in 2015, 2016 and 2017 for a third gas-fired generation unit at the Pueblo Airport Generating Station, which the PUC said it reluctantly approved because it had no choice under the Colorado legislature’s Clean Air-Clean Jobs Act.

The company’s proposal also would exceed 2016 Renewable Energy Standard Adjustment (RESA) collections set at the 2% retail rate cap, requiring the company to advance funds for the project that would add further costs to ratepayers. The commission said it strongly refuted arguments that the proposed wind project would provide cost savings to ratepayers over both the short term and the long term. The PUC said Black Hills’ estimates were based on unrealistic natural gas price forecasts over the 25 years of the proposed wind facility.

“The record clearly shows that the original proposal by Black Hills is predicated on unrealistic assumptions, and will result in a net negative impact to their ratepayers,” PUC Chairman Joshua Epel said during deliberations on April 16.

The PUC reiterated that it encourages the development of cost-effective renewable energy. “This Commission consistently has and will approve cost-effective renewable energy projects that are predicated on accurate gas forecasts and are designed as a hedge against gas volatility,” Epel said.

In its March 19 application for rehearing, Black Hills cited a number of reasons for the commission to reverse itself, including the upcoming expiration of the federal Production Tax Credit (PTC) that goes to wind projects like this one. “The expiration of the $23/MWh PTC could mean that Black Hills’ customers will never be able to obtain wind at prices this low again. The Commission should not risk that the PTC will be extended. The rejection of this contract and use of [renewable energy credits] for a few years would mean that Black Hills will be back in the market for long-term renewables in the 2017-2018 period. There is no assurance that the PTC will still be available.”

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.