Black Hills utility seeks new substation, line to serve data centers in Wyoming

Black Hills Corp. (NYSE:BKH) utility Cheyenne Light, Fuel and Power (Cheyenne Light) intends to begin construction this summer on a new substation and related transmission facilities in Wyoming to meet the needs of new data centers being added by Microsoft, the utility said in an application with the Wyoming Public Service Commission (PSC).

The planned King Ranch substation and associated 115-kV transmission lines are expected to cost $14.8m, but Microsoft has agreed to pay for the facilities under a “unique contract structure,” that would have Microsoft pay a fixed monthly fee for 15 years, Cheyenne Light said in the application.

During the term of the contract, Microsoft would pay the net book value to Cheyenne Light on a monthly basis, even if Microsoft leaves the utility’s system before the end of the contract, according to the application. The contract provisions protect Cheyenne Light and its customers from the risk of a stranded asset if Microsoft discontinues service to the data centers before the planned substation is fully paid for under the schedule set forth in the contract, the utility said.

“The contract provides that Microsoft is billed monthly on a fixed rate regardless of the amount of energy used by Microsoft, therefore providing additional security for Cheyenne Light and its customers,” the utility said.

Cheyenne Light added facilities previously approved by the PSC to meet the needs of existing Microsoft data centers, but Microsoft is expanding its data center operations in the Cheyenne area and additional facilities are needed to meet that demand, according to the Feb. 18 application. A substation connected to three data centers has a designed capacity limit of about 100 MW, which is expected to be reached with data center expansion plans. Three additional data centers are expected to be added, with construction beginning in late 2016, for a projected peak load in 2018, for service from the King Ranch substation and related facilities, Cheyenne Light said.

The proposed facilities to be added include the King Ranch substation that would be located on 5.3 acres of property purchased from Microsoft, with the substation to be built as a 115-kV breaker and one-half configuration to allow for the connection of three 115-kV transmission lines, five distribution load tap changing transformers and associated distribution breakers.

The utility plans to modify the existing North Range substation to allow the addition of a 115-kV line to feed the King Ranch substation, with about 2,000 feet of 115-kV transmission line to connect the two substations. Cheyenne Light also would build a short, double-circuit 115-kV transmission line from the existing South Cheyenne substation to the King Ranch substation.

“Cheyenne Light’s ability to provide safe and highly reliable electric service to Microsoft’s data center is a critical component toward the immediate and long-term success of this highly valued Microsoft economic development project,” the utility said.

All of the facilities would be in Laramie County in Cheyenne Light’s service territory, with the King Ranch substation planned to be south of the current Microsoft development. Following an environmental assessment, the utility said there are no known scenic, historical, archeological or recreational sites near the location of the proposed facilities.

The land required for the project is subject to Cheyenne Light purchasing it from Microsoft, but that is conditioned upon PSC approval of the certificate of public convenience and necessity (CPCN) required for the project. The rights of way for the transmission facilities would be obtained from Microsoft “and the company does not see any problems in obtaining these access rights,” Cheyenne Light told the PSC.

Cheyenne Light anticipates construction to last approximately 18 to 24 months.

The utility said it will need various commercial site plans and permits from Laramie County, and it plans to obtain them upon approval of the CPCN.