1. Regulatory Priorities of the Colorado Public Utilities Commission Black Hills Corporation Analysts’ Meeting Remarks of Ron Binz, Chairman Colorado Public Utilities Commission October 1, 2009

2. 1 Outline of this presentation Brief introduction to the Colorado PUC Our energy regulatory priorities –Stress energy efficiency –Stress renewable energy development –Employ progressive resource planning –Support advanced generation development oCCS oCAES –Accelerate state and regional transmission development

3. 2 Caveat I am one of three equal commissioners My positions are my own I am confused by many things and have not made up my mind on much at all I don’t even agree with some of the things I say Good advice: don’t believe everything you think

4. 3 PUC Structure: Commissioners Three Commissioners Appointed by the Governor Confirmed by majority vote of State Senate Serve four-year teams – may be reappointed No more than two Commissioners from one political party Judicial functions and legislative functions

5. 4 The Commissioners Matt Baker Ron Binz Jim Tarpey

6. 5 What Do We Regulate? Investor-owned electric utilities Investor-owned natural gas utilities Intrastate natural gas pipelines ----------------------------------------------- Some telecommunications carriers & services Passenger transportation Railroad crossings Investor-owned water utilities Pipeline safety Relay Service for the hearing impaired 60% 15% 1% 10% 4% 10%

7. 6 Types of Colorado Electric Utilities

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9. 8 Our State Energy Priorities Boost Energy Efficiency –Customer: education –Utility: engagement –Regulatory: incentive regulation; rate structure changes Stress renewable resources –State Renewable Portfolio Standard –Healthy renewables industry –A commitment to addressing climate change –Progressive resource planning at Commission oPSCo ERP decision oInquiry into Tri-State resource planning oversight Advanced technologies development –Research and demonstration for carbon sequestration –Concentrating solar field at PSCo’s Cameo coal-fired plant –CAES and other storage strategies –Smart grid test bed in Boulder, Colorado Transmission development –SB 100 –Western Renewable Energy Zones participation

10. 9 The Challenges We Face Energy Supply Energy Efficiency Consumer Prices Climate Change

11. 10 Colorado’s Balanced Approach Coal producing state (#8 of 50 states) Natural gas producing state (#7 of 50 states) Substantial wind and solar resources Moderate electric rates Governor with a focus on the “New Energy Economy”

12. 11 Electric Generation Fuels in Colorado 1990-2008

13. 12 How Colorado Generates Electricity (2007)

14. 13 Colorado Approach to Electric Resource Planning “Least Cost Planning” Fuel Neutrality Utility models new portfolio Utility selects bid resources “Resource Planning” Clean Energy Preference Independent Evaluator Optional Post-bid Review Old Rule New Rule New DSM emphasis -- Resource Planning -- Little energy efficiency

15. 14 PUC’s ERP Decision for XcelEnergy Major Decision Items Affirmed commitment to competitive bidding for resources Approved closure of two coal plants Approved large solar projects (200 - 600 MW) Continued growth of wind Assumed future CO 2 price in modeling ($20/ton + 7% growth)

16. 15 PUC’s ERP Decision for Black Hills Major Decision Items Affirmed commitment to competitive bidding for resources Permitted Black Hills to own and construct half of new resources Modified competitive bidding process to eliminate “Phase II” Assumed future CO 2 price in modeling ($20/ton + 7% growth) Appointed Independent Evaluator Result of bidding:200 MW contract to BH IPP for CTs and CCs

17. 16 The Challenges We Face Energy Supply Energy Efficiency Consumer Prices Climate Change

18. 17 Boosting Energy Efficiency Utility: Engagement Customer: Education Regulation: Make rate structure changes New Development: “Smart grid”

19. 18 Utility Engagement Energy Efficiency goals in legislation Recent Commission rules establishing: –Bonus mechanism –Expedited cost recovery Tie-in EE to utility resource planning Overall: utility should make efficiency a business

20. 19 Customer Education Two 75-watt Compact Fluorescent Lights will reduce CO 2 emissions by One Metric Ton over their lifetime

21. 20 Energy Efficiency in Housing

22. 21 Colorado’s Energy Efficiency Ranking

23. 22 The Challenges We Face Energy Supply Energy Efficiency Consumer Prices Climate Change

24. 23 U.S. Residential Electric Rates

25. 24 Price Levels and Volatility 4.9 to 1.0

26. 25 The Challenges We Face Energy Supply Energy Efficiency Consumer Prices Climate Change

27. 26 Reduce Colorado’s carbon emissions by 20% below 2005 levels by 2020 Reduce Colorado’s carbon emissions by 80% below 2005 levels by 2050

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31. 30 EPRI Prism Analysis (2008)

32. 31 American Solar Energy Society

33. 32 What about China, India?

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35. 34 NREL Wind Resource Map

36. 35 Concentrating solar w/storage Other baseload (coal w CCS; nuclear) $ Concentrating Solar in Colorado

37. 36 San Luis Valley

38. 37 Solar Thermal Electric Density Use: 100 MW(ac)/mile 2 Colorado Peak Integrated Demand: 11GW Result: 110 mile 2 required land area

39. 38 San Luis Valley

40. 39 But what if 11 GW of solar were spread around the state in 100 MW installations? It might look like this...

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42. 41 Integrated Gasification Combined Cycle Coal Plant

43. 42 Compressed Air Energy Storage (CAES)

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45. 44 High Plains Express ARIZONA NEW MEXICO COLORADO WYOMING Energy Zones Wyoming Generation Dave Johnston LRS Albuquerque Tucson Phoenix Tot 3 Expansion Project SunZia EPTP Midway Limon Comanche Lamar Holcomb Pawnee/ Story Socorro Gladstone NNMI HIGH PLAINS EXPRESS

46. 45 Thanks for the invitation. I look forward to your questions.