BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 16A-0396E

IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF

COLORADO FOR APPROVAL OF ITS 2016 ELECTRIC RESOURCE PLAN

COALITION OF RATEPAYERS STATEMENT OF POSITION IN OPPOSITION TO

THE JOINT MOTION TO APPROVE STIPULATION

The Coalition of Ratepayers (the Ratepayers) submits this statement of position in

opposition to the Joint Motion to Approve the Stipulation (the Stipulation) filed on August 29,

2017 (Joint Motion).

Colorado PUC E-Filings System

ARGUMENT

The Ratepayers urge the Colorado Public Utilities Commission (Commission) to reject

the Joint Motion and the Colorado Energy Plan Portfolio (CEP) proposed in the Stipulation. The

CEP will harm ratepayers and the Colorado economy. If the early retirement of 660 MW of coal

generation from Comanche 1 and 2 was a cost-effective plan for ratepayers, Public Service

Company of Colorado (PSCo or the Company) would have made the proposal in its original

2016 Electric Resource Plan (ERP) application. The facts have not changed since the

Commission issued its Phase I decision nearly six months ago. No evidence supports the need for

early retirement of the coal units. The appropriate forum to address considerations regarding early

retirement of generation units and related stranded cost recovery is either through legislative action

or a rulemaking not ad hoc in this proceeding after a Phase I decision has already been adopted.

19041478v.3
 A. The CEP Will Harm Ratepayers With Increased Costs

The Ratepayers are small businesses that are captive ratepayers of Public Service. They are

not large enough to negotiate electricity contracts directly with the utility. Increases in their

electricity rates impact their cost of doing business and ability to employ Coloradans. The

Ratepayers oppose the Stipulation because it will harm its members with unjustified increased

costs. The Stipulation is premised on unsubstantiated claims that PSCo can retire 660 MW of

generation capacity from Comanche 1 and 2 during a period of low load growth, receive full cost

recovery for accelerated depreciation expense and all related stranded costs, build new generation

to replace the 660 MW of generation capacity, and construct the necessary transmission lines and

facilities to support the new generation without substantially increasing rates for Colorado

consumers. The claim that a 1% reduction in collections in the Renewable Energy Standard

Adjustment (RESA) will keep ratepayers whole and insulate them from unnecessary capital

investment of this magnitude is more than a lofty assertion it strains credibility. PSCo is a

regulated utility that is incented to make capital investment to increase the return on its rate base.

If early retirement of Comanche 1 and 2 was a cost effective and prudent portfolio decision, PSCo

would have made the proposal in its original ERP filing.

B. The CEP Contravenes the Phase I Decision and Phase I Evidence

The Phase I decision adopted on March 23, 2017, as modified by the Decision Addressing

Applications for Rehearing, Reargument, or Reconsideration (RRR) adopted on June 7, 2017

(Phase I Decision), should not be revisited. The CEP is an entirely new portfolio plan that was

not considered in Phase I of the Companys 2016 ERP. It is improper to consider the CEP at this

late stage.1 The Commission got it right when it held: the record in this case does not provide

1
See Colorado Office of Consumer Counsel v. Mountain States Tel. & Tel. Co., 816 P.2d 278, 282 (Colo. 1991)
(Appropriate factors for judicial analysis of decisions of the Commission (1) whether the decision is based on the
2

19041478v.3
adequate detail to establish how the coal retirements could be modeled in this ERP, particularly

given the level of cost inputs required for early retirement and the questions about the ability of

Strategist to be used for this purpose.2 This holding came after significant discovery and a hearing

on PSCos ERP plan, as well as the PSCos sworn testimony and public filings that unequivocally

stated there was no evidence to support the quantification of accelerated depreciation and other

stranded costs associated with early retirement of its coal units.3

As a matter of procedure, it is too late for a new portfolio to be considered in this

proceeding. The 20-day period provided for in C.R.S. 40-6-114, within which to file applications

for rehearing, reargument or reconsideration has run. As a matter of policy, it is also improper.

Prior Commission decisions related to retirement of the PSCos coal resources have come after

significantly more process and consideration of issues raised by early plant retirements.4

Moreover, if a state policy of portfolio diversification in favor of natural gas resources and

renewable energy coupled with full stranded cost recovery for utilities and guaranteed utility builds

was in the public interest, PSCo could have sought and received General Assembly approval for

such a plan.

C. Assumptions Related to Costs and Benefits of Plant Retirements Should Be

Developed in a Rulemaking, not Ad Hoc in PSCos 2016 ERP

evidence introduced at the evidentiary stage of the administrative proceedings; (2) whether the Commission's
decision is supported by findings of fact; (3) whether the Commission's decision-making process was conducted
pursuant to applicable legislative standards; and (4) whether the Commission acted within the authority conferred
upon it.).
2
Initial Decision at 53.
3
See Statement of Position of Public Service Company of Colorado at 83 (Public Service SOP). See Hr. Tr. II, at
72:22 73:7 (Feb. 2, 2017) (There is not [quantification of stranded costs] in this docket, particularly because we're
following the rules as they stand today. So one of the things I would say, Commissioner Koncilja, in our
conversation yesterday, you know on aligning the rulemakings; that's something that the rules would change -- have
to change in order for the company to be, you know, obligated to present that information. Quite frankly, I'm not
sure it's been -- we've never been ordered to do that. I'm not sure we have had a robust discussion around whether or
not that should be something we do. At the same time, you know, I do understand that in order to look at some of
those different aspects, we may require legislation to go that direction.)
4
See, e.g., Decision No. C08-0929, 93-110.
3

19041478v.3
 The Commission also got it right when it determined: [a] rulemaking proceeding to

examine potential changes to the Commissions RES Rules and the ERP Rules will be useful to

all stakeholders.5 Policy and legal issues related to the Commissions Renewable Energy Standard

(RES) Rules,6 the ERP Rules, and the appropriate measures and assumptions to quantify the

costs of early unit retirements should be addressed either by the General Assembly or in a

rulemaking, not ad hoc in an administrative proceeding. Until the parties reached a Stipulation

agreeing to full cost recovery for accelerated depreciation of the PSCos coal units, other stranded

costs, and concessions related to the right to build a significant portion of the replacement

generation, the PSCo made the legal argument that the Commissions ERP Rules do not

contemplate quantification of the costs of early retirement because the rules are expressly designed

to address incremental generation additions, not early retirements.7 The PSCo also made the

legal argument that forced retirement of its coal units would amount to a regulatory taking for

which it would be entitled to just compensation,8 which should set off alarm bells with the

Commission because the accelerated depreciation and stranded costs associated with the early

retirements have yet to be quantified, and the stipulating parties proposal to push consideration of

these issues to a future proceeding would require the Commission to consider approval of the CEP

without any real consideration of its economic impact on ratepayers.

PSCo may abandon its arguments in the face of enticing new opportunities to grow its rate

base and a Stipulation that will guarantee it full cost recovery. However, Ratepayers believe the

Commission should not rush to judgment on the CEP. The best way to move forward is to reject

5
Initial Decision at 53.
6
Rules 3650 3668, 4 C.C.R, 723-3.
7
See Public Service SOP at 70: (As discussed at the outset of this SoP, the ERP Rules make clear that the ERP
identifies incremental resource needs and then fills the incremental resource needs through the acquisition process.)
(Feb. 24, 2017).
8
Public Service SOP at 76.
4

19041478v.3
the Stipulation, proceed with this ERP within the parameters of the existing ERP Rules and the

Phase I Decision, and develop a methodology for calculating stranded costs associated with early

plant retirements in a rulemaking.

D. If the Commission Does Not Reject the Stipulation Outright, the CEPs Cost
Impacts Should be Thoroughly Vetted in This Proceeding

This proceeding has the potential to have a profound impact on the economy of Colorado.

Ratepayers remain skeptical that the CEP will yield quantifiable and tangible cost benefits to

Colorado ratepayers or be rate neutral for ratepayers. Colorado law requires that, [i]f the

commission considers the environmental effects when comparing the costs and benefits of

potential utility resources, it shall also make findings and give due consideration to the effect that

acquiring such resources will have on the states economy and employment .9 A significant

issue to be addressed is the CEPs impact on rates and the local economy. To that end, evidence

related to the costs of the plan should not be developed piecemeal in multiple proceedings so as to

engage in a shell game of costs and benefits. The evidence should be developed and considered in

this proceeding before the Commission considers adoption of the Stipulation.

Similarly, if the Commission reopens the Phase I record to consider the CEP, Ratepayers

respectfully request that the Commission give intervenors due process to thoroughly vet the

assumptions underlying the CEP i.e., sufficient time to review the PSCos supplemental direct,

conduct discovery on the supplemental direct, and develop testimony related to the CEP.

Ratepayers also recommend that a least-cost portfolio based on reasonable assumptions be

presented so as to provide a baseline for comparison to the CEP and that appropriate conditions

are placed on new generation builds.

9
C.R.S. 40-3-111.
5

19041478v.3
 E. If the Commission Does Not Reject the CEP Outright, the CEPs Cost
Impacts Must be Vetted and Conditions on the Settlement Should Be
Examined

Ratepayers agree with Commissioner Konciljas observations at the September 13, 2017

Weekly Meeting that there are many unanswered questions regarding the costs and benefits of the

CEP. The Coalition of Ratepayers will develop its position on the costs of the plan and its

recommendations as the proceeding continues and it has the opportunity to conduct discovery on

the CEP.

At the outset, Ratepayers identify the following areas for comparing the costs of Comanche

Unit 1 and 2 vis--vis new generation resources:

Transmission costs for new resources

Transmission costs are typically a significant cost for any new generation unit. The

transmission costs associated with the CEP are unknown. Rule 3608(d) states: In order to

equitably compare possible resource alternatives, the utility shall consider the transmission costs

required by, or imposed on the system by, and the transmission benefits provided by a particular

resource as part of the bid evaluation process. There is nothing in the record to meet this criteria.

Regarding transmission delivery costs and transmission interconnection costs, PSCos

modeling assumptions update states: Updated costs applied in Phase II Solicitation will be based

on proposed generator location.10 Similarly, the Stipulating Parties have not quantified the costs

of developing a new switching station on the southern transmission system in Energy Resource

Zone 5 (ERZ-5) remote from the Comanche Substation. Approval would be sought in a separate

proceeding to obtain a Certificate of Public Convenience and Necessity (CPCN) for the

10
Attachment A, Proceeding No. 16A-0396E, page 7 of 16.
6

19041478v.3
switching station. This proceeding would be separate from the application seeking approval of the

accelerated depreciation and RESA reduction.11

PSCo asserts that the Stipulation would free up approximately 660 MW of transmission

capacity. It carefully did not assert that this would create cost savings for customers.

Depreciation costs of early retirement

The record for this proceeding does not include detailed cost schedules that quantify the

incremental cost to ratepayers of accelerated depreciation of Comanche Unit 1 and 2, along with

any other related costs to be sought in a future regulatory asset. PSCo should make these

schedules available for Ratepayers and others review and for the Commissions consideration.

In addition, cost schedules should separately identify any offsets of the RESA and the assumptions

underlying those offsets, including load assumptions.

Scope of stranded costs associated with the units

The Stipulation states that PSCo will seek approval to create a regulatory asset to collect

incremental depreciation and related costs from the early retirement of Comanche 1 and

Comanche 2 as part of any filing to reduce the RESA.12 The scope of the related costs associated

with early retirement of the units is vague and undefined. For example, does it include costs

associated with early termination of coal or labor contracts? Does it include decommissioning

costs? Does it include the capital costs that PSCo invested in emissions and environmental controls

that have been installed for the plants?13

11
Supporting Testimony and Attachments of David Eves at 5.
12
Stipulation, Attachment A at 8.
13
See Decision No. C05-0049, Order Approving Settlement at 8 (adopted Dec. 17, 2004) (describing capital
investments in emissions controls for the Comanche units).
7

19041478v.3
 Before proceeding with approval of the CEP, PSCo bears the burden of clearly and

unequivocally defining the scope and amount of its stranded costs, including items such as

operations and maintenance expense, labor costs, and any other related costs.

Decommissioning costs for Comanche 1 and Comanche 2

The costs and timing of decommissioning Comanche 1 and Comanche 2 should be

examined.

Impact on the local economy

Consideration of rate impacts is critical to the Commissions obligation to examine local

economy impacts. To that end, Ratepayers urge the Commission to require PSCo to present

evidence on the impact of its plan on jobs and the local economy in Pueblo. The Commission

should also consider whether construction jobs for replacement generation are comparable to

existing long term jobs to be lost by the plant workers at Comanche 1 and 2.

In addition, Ratepayers urge the Commission to require PSCo to present evidence on its

least cost portfolio plan in comparison to the CEP. The Stipulation purports to protect ratepayers

by creating a scenario under which PSCo would have to present what it calls its materially less

expensive portfolio (MLEP) in the 120-Day Report.14 However, the terms for presenting the

so-called MLEP contain bells and whistles that could potentially permit PSCo from presenting its

least cost plan (i.e., portfolio ownership requirements and a $50 million benchmark on a present

value basis of estimated savings).15

14
Stipulation, Attachment A at 7.
15
Id. (However, if another portfolio: (1) provides between forty (40) percent and sixty (60) percent utility
ownership of eligible energy resources, (2) provides between sixty (60) and seventy-five (75) percent utility
ownership of dispatchable and semi-dispatchable resources, and (3) is materially less expensive (more than $50
million on a present value basis estimated savings) than the Colorado Energy Plan Portfolio presented to the
Commission, then the Stipulating Parties agree that the Company will also present the materially less expensive
portfolio (MLEP) in the 120-Day Report.)
8

19041478v.3
 The agreed ownership percentages for PSCo

The Stipulating Parties have agreed to ownership percentages as part of the Stipulation.

Under the CEP, PSCo would own a target of 50% of the nameplate capacity of all eligible energy

resources. PSCo would also own a target of 75% of the nameplate capacity of all dispatchable and

semi-dispatchable resources acquired to fill the resource need.16 As part of the Stipulation, PSCo

would also agree not to propose any utility self-builds in this ERP other than gas-fired resources.

It is clear why PSCo demanded that a portion of the replacement capacity be built by the

utility. It is less clear why this agreement is beneficial for ratepayers. Ratepayers urge the

Commission to examine whether such agreements are beneficial to ratepayers or, rather, act as a

restraint on obtaining the most cost competitive generation resources for Colorado consumers.

PSCo bears the burden of demonstrating why guaranteed ownership percentages are in the public

interest.

Risks of cost overruns and cost caps

While the costs of Comanche 1 and 2 are relatively certain, costs of new utility plant are

not. The CEP will leave ratepayers holding the bag. The Stipulating Parties assert:

Hard capital costs for any utility-owned generation resources

approved in this proceeding are unnecessary given that, pursuant to
Paragraph 117 of the Phase I Decision, all bids for utility-owned
generation resources must be evaluated based on a point cost and the
Company must establish the existence of extraordinary
circumstances to recover amounts above the point cost for capital.17

This decision was made based on an ERP that did not contemplate early retirement of 660 MW of

generation capacity. Because of utility and independent power producer incentives to support a

16
Stipulation, Attachment A at 8.
17
Stipulation, Attachment A at 14.
9

19041478v.3
plan that promotes new generation investment, Ratepayers encourage the Commission to consider

whether cost caps for any new utility plant are now justified.

Compliance With the Commissions ERP Rules

The Commissions rules are prescriptive with respect to the information that should be

presented as part of an ERP. Rule 3604, for example, contains the required contents of a resource

plan. The existence of a partial settlement does not abdicate the utility from presenting a plan that

meets the Commissions requirements. Rule 3617(c) governs the Commissions charge in

evaluating the 2016 ERP. It states:

If the record contains sufficient evidence, the Commission shall

specifically approve or modify: the utilitys assessment of need for
additional resources in the resource acquisition period; the utilitys
plans for acquiring additional resources through an all-source
competitive acquisition process; components of the utilitys
proposed RFP, such as the model contracts and the proposed
evaluation criteria; and, the alternate scenarios for assessing the
costs and benefits from the potential acquisition of increasing
amounts of renewable energy resources, demand-side resources, or
Section 123 resources.18

It is not clear that the Commissions rules contemplate retiring units before the end of the units

useful life. Notwithstanding, it is also unclear whether the CEP meets the required detail necessary

for Commission approval of the CEP. PSCo bears the burden of demonstrating that the CEP is

consistent with Colorado law and regulation.

CONCLUSION

Ratepayers respectfully request that the Commission deny the Joint Motion to adopt the

Stipulation. A stranded cost analysis associated with the early retirement of coal-fired generation

resources owned by PSCo is outside and contrary to the ERP Rules as they stand today.

18
4 C.C.R. 723-3-3617(c).
10

19041478v.3
Consideration of the CEP would also contravene the Initial Decision issued in this proceeding. A

rulemaking to develop the scope of analysis and assumptions that should be used when evaluating

the costs and benefits of early plant retirements is the appropriate administrative forum to address

cost and benefit issues related to early plant retirements.

If the Joint Motion is not denied, Ratepayers request that the Commission protect Colorado

ratepayers by providing sufficient due process to the Coalition of Ratepayers and consumers so as

to allow the Commission to review the plan and develop any conditions necessary to protect the

interests of Colorado ratepayers. As set forth in the Coalition of Ratepayers Motion to Intervene,

there is no need to hold a hearing on the Stipulation by the end of the year. After PSCo files

supplemental direct testimony, intervenors should be given at minimum of three months to conduct

discovery on the CEP and prepare testimony.

Respectfully submitted this 20th day of September, 2017.

/s/Shayne Madsen

________________________________
Shayne Madsen, #8750
Meredith Kapushion, #36772

Madsen & Associates, P.C.

7441 Old Mill Trail
Boulder, CO 80301
Shayne.madsen1@gmail.com
MKapushion@COLawyer.net
(ph) 303-588-1693

ATTORNEYS FOR COALITION OF RATEPAYERS

11

19041478v.3
 Certificate of Service

I hereby certify that a true and correct copy of the foregoing instrument has been served in
accordance with the governing procedural orders to all parties of record in this proceeding via the
Public Utilities Commission E-Filing system this 20th day of September, 2017.

_/s/ Sally Kline________________________

Sally Kline

12

19041478v.3