Filed on Sept. 24 with the Colorado Public Utilities Commission was a settlement that would allow Black Hills/Colorado Electric Utility Co. LP to go forward with a 60-MW wind project.
The settlement is between Black Hills, the commission’s Trial Staff, the Colorado Office of Consumer Counsel, the Colorado Energy Office, Western Resource Advocates, Invenergy Wind Development Colorado LLC, the Board of Water Works of Pueblo, Colorado, the Fountain Valley Authority and the Rocky Mountain Environmental Labor Coalition.
This proposed deal resolves all disputes that have arisen between the parties related to the company’s application for a Certificate of Public Convenience and Necessity to purchase and own a 60-MW wind project being developed by Invenergy.
In May 2014, Black Hills issued an All-Source solicitation that sought bids for 42 MW of seasonal firm electricity supply and up to 60 MW of eligible energy resources. In November 2014, Black Hills filed its 120-Day Report for the All-Source solicitation. In the 120-Day Report, Black Hills presented three alternative proposals for the acquisition of new utility generation resources, one of which was the acquisition of a 60-MW wind project on a parcel of land leased by the bidder in Huerfano and Las Animas counties (called the “Peak View Wind Project”).
On Feb. 27, the commission found that none of the resource proposals presented by Black Hills in its 120-Day Report was a cost-effective resource plan and ordered that Black Hills would not have a presumption of prudence if it elected to acquire any of the resources in the portfolios presented in the 120-Day Report. The commission denied applications for rehearing, but did allow Black Hills to renegotiate bids for eligible energy resources.
Black Hills asked the three top-rated bidders from the competitive solicitation, including Invenergy, to refresh their bids in terms of price and timing. Black Hills reevaluated the bids using a natural gas price forecast based on prevailing NYMEX natural gas prices and a revised integration cost adder. Invenergy’s updated bid was the most competitive. The bid contemplates a build-transfer structure with Black Hills acquiring the Peak View Wind Project immediately prior to commercial operation and owning it as a utility-owned asset.
Black Hills filed an application for a Certificate of Public Convenience and Necessity on June 23, which is one of four proceedings that this project is a part of.
Commission staff expressed concerns with the project and the company’s modeling of the project’s costs, as well as certain economic risks. Other parties had other issues.
The key elements of the Settlement Agreement filed on Sept. 24 are:
- The Settling Parties agree that the Peak View Wind Project is in the public interest, is consistent with Colorado law, and satisfies the standard established by the commission;
- The parties agree that, with the exception of transmission costs, Black Hills will recover the costs of the Peak View Wind Project through a combination of the Energy Cost Adjustment (ECA) and the Renewable Energy Standard Adjustment (RESA). Depending on timing, the capital costs of transmission associated with the Peak View Wind Project will be recovered through the Transmission Cost Adjustment (TCA) or base rates.
- The parties further agree that, for the first ten years of its commercial operation (through 2026), Black Hills will not put the Peak View Wind Project into base rates, but will recover the costs of the project during this period through the ECA and RESA.
- The parties agree that the avoided costs of the Peak View Wind Project will be “locked down” for ten calendar years (through 2026) using the NYMEX-based natural gas forecast submitted in this proceeding and used by the company to calculate the avoided costs.
- The parties agree that Black Hills will perform a stand-alone pro-forma revenue requirements analysis for each of the first ten calendar years of commercial operation of the Peak View Wind Project, beginning in 2017.
- The parties agree that the company should use a performance assessment tool for calendar years 2018 through 2026.
- Beginning in the eleventh calendar year of the operation of the Peak View Wind Project (2027), avoided costs will be unlocked and the Peak View PPA-related ceiling and associated performance assessment tool, will no longer apply. Therefore, during the Peak View Wind Project’s tenth calendar year of operation (2026), Black Hills will file an application setting forth its proposal for maintaining (i.e., through the ECA and RESA) or for changing the method of recovery of the costs of the Peak View Wind Project (e.g., the company may propose including the cost of the Peak View Wind Project through base rates).