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New Black Hills Electric Utility And IPP Generation Facilities In Colorado Ready To Serve Customers On Jan. 1, 2012

PUEBLO, Colo., Dec. 21, 2011 /PRNewswire/ -- Black Hills Corp. (NYSE: BKH) today announced that its new generation facilities will be ready to begin commercial operations on Jan. 1, 2012. Black Hills Energy – Colorado Electric owns the $227 million, 180-megawatt facility, and Black Hills Colorado IPP owns the $260 million, 200-MW facility. The electricity from both facilities will replace a purchase power agreement with Xcel Energy that expires on Dec. 31, 2011.

"This milestone ushers in a 21st century utility model that is one of the most advanced in the country," said David R. Emery, chairman, president and CEO of Black Hills Corp. "During the previous 16 months, we have substantially rebuilt the electric infrastructure in our Black Hills Energy – Colorado Electric service territory — from generation resources to transmission — in order to provide our utility customers long-term stability in rates, a secure supply of energy, the ability to effectively integrate renewable resources and protection from uncertain future carbon legislation."  

The two power plants are co-located at a site near the Pueblo Memorial Airport. Black Hills Energy – Colorado Electric owns two 90-MW, natural-gas-fired units, and Black Hills Colorado IPP owns two combined cycle units, each consisting of two 40-MW natural-gas-fired turbines and one 20-MW steam turbine. To date, all of the units have been successfully synchronized to the grid, tested at full output and effectively dispatched for test energy. Final remaining activities include completion of performance and emission testing and ensuring compliance with all air emission requirements.

"The successful completion of this project is a direct result of the effective partnerships forged between our power generation team and our numerous contractors," Emery said. "Additionally, the more-than 600 construction jobs during the peak of construction provided a substantial boost to the local economy. This plant was ruled as the least-cost option by the PUC in the unprecedented situation in which a Colorado utility, Black Hills Energy – Colorado Electric, was forced to replace 75 percent of its resource capacity at one time. To successfully complete these facilities under the time constraints of this project, on time and under budget is a significant achievement and a testament to the caliber of our project team."

On March 31, 2009, the Colorado Public Utilities Commission issued an order pertaining to the Aug. 5, 2008 electric resource plan for Black Hills Energy – Colorado Electric, providing the utility the opportunity to construct and operate new generation to serve a portion of the customer requirements when the utility's current power purchase agreement, which provides 75 percent of the utility's capacity needs, expires on Dec. 31, 2011.

On March 25, 2009, Black Hills Energy – Colorado Electric issued a 2009 non-intermittent resource solicitation requesting bids to determine how the remaining customer requirements will be supplied, and in June, Black Hills Colorado IPP submitted a response to the utility's request for proposals. The Black Hills Colorado IPP proposal was identified as the least-cost proposal in the resource solicitation processes established by the Colorado Public Utilities Commission and conducted with the oversight of an independent evaluator. Under a 20-year agreement, Black Hills Energy will purchase 200 MW of natural-gas-fired generation from Black Hills Colorado IPP.

Black Hills/Colorado Electric Utility Company, LP d/b/a Black Hills EnergyBlack Hills Energy serves 93,300 electric customers in 21 southeastern Colorado communities and was ranked No. 6 in Total Solar Watts per Customers in Solar Electric Power Association's 2009 Utility Solar Rankings report. Black Hills Energy is a subsidiary of Black Hills Corp. (NYSE: BKH).

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