Michael Harrington Manager, Regulatory Michael.Harrington@blackhillscorp.com 1515 Wynkoop, Suite 500 Denver, CO 80202 P: 303.566.3539 F: 303.568.3252 Public Utilities Commission of the State of Colorado 1560 Broadway Suite 250 Denver, Colorado 80202 Colorado PUC E-Filings System The accompanying tariff sheets issued by Black Hills Colorado Electric, LLC, d/b/a Black Hills Energy ( Black Hills or the Company ) are sent to you for filing in compliance with the requirements of the Public Utilities Law and the applicable rules of the Public Utilities Commission of the State of Colorado ( Commission ), including Rule 1210, 4 Colorado Code of Regulations 723-1. The following tariff sheets are attached: Colorado P.U.C. Sheet Number 61 62 63 64 Second Revised Sheet No. 65 COLORADO P.U.C. NO. 10 Title of Sheet ADJUSTMENT Cancels Colorado P.U.C. Sheet Number Original Sheet No. 61 Original Sheet No. 62 Original Sheet No. 63 Original Sheet No. 64 65 On November 30, 2018, in Proceeding No. 18AL-0840E, the Company filed Amended Advice Letter No. 766 proposing several changes to the Company s Energy Cost Adjustment ( ECA ) Tariff Sheet Nos. 61 65 in the Rates section of its Colo. P.U.C. No. 10-Electric Tariff book. By Decision No. C18-1173 ( Order ) adopted on December 19, 2018, the Commission rejected the amended advice letter and applicable tariff sheets. Per the Order, the filing was rejected in
Page 2 order to allow the Company the opportunity to file a new advice letter and tariff sheets that address more thoroughly and better justify: (a) the Company s proposal to change the forecasted amounts used in the quarterly ECA rate calculation from quarterly forecasts to annual forecasts; and (b) any specific hedging costs the Company proposes to recover through the ECA. The principal purpose of this filing is to 1) continue to support the changes to the ECA that the Company proposed in its November 30, 2018 Amended Advice Letter No. 766, 2) provide more information to better justify the requested changes, and 3) provide specific information regarding hedging costs that are included in the ECA. The ECA rate is updated quarterly (February, May, August, and November) and is applicable to all retail customers. The ECA is strictly a pass-through charge. The ECA recovers costs incurred by the Company for natural gas used in the production of electricity, for costs associated with renewable energy production, and/or for wholesale power purchased on the open market by the Company to meet customers energy needs. These costs incurred by the Company are strictly pass-through costs. The proposed ECA rate is $0.03772 per kwh which, if approved, is to be prorated to bills for all kilowatt-hour usage beginning February 14, 2019. This is the same rate the Company proposed in Amended Advice Letter No. 766, Proceeding No. 18AL-0840E. The proposed ECA rate is a $0.00336 increase from the current ECA rate of $0.03436 per kwh. Appendix A provides the applicable tariff sheets. Appendix B provides a redlined version of the applicable tariff sheets and Appendix C provides calculation support for the proposed ECA rate. Appendix D provides calculation support for the ECA rate had the Company not changed its approach ( old method ). The primary reasons for the increase in the ECA rate are reflected below: 1. Estimated Generation and Purchases Estimated Generation and Purchases for the period January 1, 2019 December 31, 2019 are approximately $5.87M or 9.97% higher as compared to the same period forecasted in 2018. 2. Estimated Sales (kwh) Estimates Sales for the period January 1, 2019 December 31, 2019 are approximately 21.4M kwh or 1.09% lower as compared to the same period forecasted in 2018. Together, increased costs with lower forecasted sales, increase the ECA rate quarter-overquarter. If permitted to go into effect on February 14, 2019, the tariff revision will increase annual revenues by approximately $6,562,731. These costs incurred by the Company are strictly passthrough costs. Based on this proposed increase, the average residential customer monthly bill, under Rate Schedule RS-1 with an average usage of 600 kwh per month, will increase $2.11, from $98.54 to $100.64, or 2.14%. The average small commercial customer monthly bill, under Rate Schedule
Rate ($/kwh) Public Utilities Commission Page 3 SGS-N with an average usage of 2,300 kwh per month, will increase $8.07, from $319.36 to $327.43, or 2.53%. Additional Information as Requested by Decision No. C18-1173 ECA Variability: Historically, the ECA rate has fluctuated significantly quarter-over-quarter. The Company is proposing several changes to the ECA calculation to help stabilize and minimize the variability of the rate. For comparison purposes, the Company calculated the ECA rate using the old method. The old method produces a rate of $0.4552 which would have been a 32% increase in the rate or a 7.1% increase in the average residential monthly bill. Recall that the new method produces a rate of $0.03436 per kwh, representing a 9.79% increase in the rate or a 2.14% increase in the average residential monthly bill. Refer to the graph below for an illustration of the variability in the ECA rate quarter-over-quarter: $0.04991 $0.04791 $0.04591 $0.04391 $0.04191 $0.03991 $0.03791 $0.03591 $0.03391 $0.03191 $0.02991 ECA Rate Quarter-over-Quarter Effective Date The Company is proposing two primary changes to the ECA calculation to minimize the variability of the ECA rate. First, the Company is proposing to change the methodology from a quarterly forecast to an annual forecast. Changing the methodology from a quarterly forecast to an annual forecast will smooth out the variation in the rate due to seasonality. Important here, the Company will still file updates to the ECA quarterly, but the forecast period will reflect a rolling twelve month period instead of a three month period. For example, the forecasted period for this advice letter filing is January 1, 2019 through December 31, 2019. The Company s Q2 2019 ECA filing which is effective April 1, 2019, would reflect the forecasted period of April 1, 2019 through May 31, 2020. The Q3 2019 ECA filing which is effective July 1, 2019, would reflect the forecasted period of July 1, 2019 through June 30, 2020. As shown in Appendix C pages 2, 3, 5, and 6, the Company has changed the forecast period to reflect an annual forecast.
Page 4 Second, the Company is proposing to change the true-up process to align with the proposed change to the annual forecast methodology. The Company is also adding transparency in the true-up calculation to better align with the Company s General Ledger accounting system. The changes to the true-up calculation are shown on Appendix C page 5. The proposed changes to the ECA calculation should help stabilize and minimize the variability of the ECA rate. The Company is proposing several textual changes to the ECA Tariff sheets to incorporate the changes identified above. Company Hedging Costs: The Company has not engaged in additional hedging activities since 2015. On July 1, 2011, the Company filed its initial Gas Mitigation Plan ( GMP ) in Proceeding 11A- 580E. On October 25, 2011, the Commission approved the Company s initial 5 year GMP by Decision No. C11-1132. The initial GMP expired on June 30, 2015. On April 1, 2015, the Company filed an application seeking a one-year extension to its GMP among other changes. The application was approved on May 12, 2015 by Decision No. C15-0447, which extended the Company s GMP through June 30, 2016. On January 29, 2016, the Company filed a Petition for Variance in Proceeding No. 16V-0056E. The Petition sought to hold the filing requirements of GMP in abeyance until the outcome Company s Cost of Service Gas application was determined. The Commission granted the Company s request in Decision C16-0232. On May 17, 2016, the Commission dismissed the Company s cost of service gas application. On March 22, 2017, in Proceeding No. 15A-0199E, the Company filed a Notice of Gas Mitigation Plan Status. The Company informed the Commission that Black Hills will continue to operate under the terms of the approved 2015-2016 GMP. However, the Company informed the Commission that it would not undertake any addition hedging activities until further notice and approval by the Commission. The Company has not entered into new hedges since 2015 and hedges are in place through 2020. On March 29, 2017, the Commission requested that Staff review Black Hills hedging program and results. Staff issued their report in Proceeding No. 15A-0199E on May 31, 2017. Staff found Black Hill s implemented its hedging program consistent with the Commission approved strategy and budget. Staff found no evidence to suggest that Black Hills profited from the Company s hedging losses. Staff made several recommendations before future hedging is authorized. The Company has not entered into any new hedges since 2015 and has hedges in place through 2020. The Company anticipates that a new GMP application will be filed in 2019. The new GMP
Page 5 will address the future gas portfolio structure for electric generation and any proposed additional hedging levels and associated hedging tools and transactions for the period beginning in 2020. The forecasted monthly hedging costs for 2019 are $311,000 per month. These forecasts are trued-up to actual costs. Customer Notice: This filing will be noticed pursuant to the requirements of the Colorado Public Utilities Law. Concurrently with this filing, Black Hills is filing a Motion for Approval of Alternative Form of Notice ( Motion ) with an Attachment 1, Customer Notice. The Motion requests Commission approval for three methods of providing the Customer Notice to affected customers. First, the Company will post the Customer Notice as well as this advice letter and accompanying attachments on the Company s website. Second, a bill message will notify affected customers of the website posting, and provide both the URL link and a toll-free phone number for assistance. The bill message will run for one full cycle. Third, newspaper legal notices providing the Customer Notice will be published in three newspapers of general circulation covering the Company s service territory: The Pueblo Chieftain, the Cañon City Daily Record, and the Rocky Ford Daily Gazette. Black Hills requests that the tariff sheets accompanying this advice letter become effective on February 14, 2019. Please send copies of all notices, pleadings, correspondence, and other documents regarding this filing to the undersigned. Sincerely, Black Hills Colorado Electric, LLC /s/ Michael Harrington Michael Harrington Manager, Regulatory