The Colorado utility operations of Rapid City, SD-based Black Hills Corp. has hit a state regulatory roadblock to replace old coal- and natural gas-fired generation plants with a single 88 MW gas-fired plant near Pueblo, CO.

The Colorado Public Utilities Commission (PUC) and an administrative law judge (ALJ) concluded that Colorado Electric did not adequately substantiate the need for replacing anything other than its 42 MW W.N. Clark coal-fired plant. The Black Hills' utility had sought to also replace two 60-to-70-year-old gas-fired plants at the Pueblo Airport Generating Station.

"We understand the business case Black Hills presented for use of the 'expansion slot' in the air permit at [the site], however due to the absence of critical information regarding possible alternatives to new construction, including the use of existing generation capacity in Colorado, we are not convinced that the company's objectives...will necessarily result in the best outcome for both Black Hills and its customers," the PUC stated in rejecting the settlement.

The Colorado gas producers' association had argued that Black Hills "met the burden of proof," and it urged the PUC to set aside an ALJ's recommendation for denial, and approve the settlement. The regulators, however, disregarded the request and a joint request by the utility and producers for an oral argument on the matter.

Black Hills had reached a settlement agreement with customers last year that included the power plant retirement and replacement plans. The PUC also rejected the settlement, and the company said it will now readdress the issue in a resource plan that it intends to file with state regulators by July 31.

"We can't make any decisions now on those old plants until we file the resource plan and we get some direction from the commission," said a Black Hills corporate spokesperson.

Christopher Burke, vice president for Black Hills Energy's Colorado utility operations, said the company will continue its discussions with the PUC as part of its filing of the latest electric resource plan later this year. "We remain committed to finding the best replacement for our W.N. Clark plant when it is retired the end of next year to ensure reliability and meet the terms of Colorado's Clean Air-Clean Jobs Act" (see Daily GPI, Nov. 22, 2010).

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