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Intermountain Rural Electric Association ("IREA"), by and through its undersigned

counsel, and pursuant to Decision No. C17-0823-I, submits the following Statement of Position.


The Colorado Public Utilities Commission (the "Commission") should deny the Joint

Motion to approve the August 29, 2017 Stipulation (the "Stipulation") because Public Service

Company of Colorado (the "Company") has failed to properly model the cost impacts of the

early retirement of 660 MW of coal-fired generation resources. These modeling errors

artificially inflate the purported savings of the Colorado Energy Plan Portfolio ("CEPP") as

against the baseline portfolio.

Specifically, the Company has failed to account for the cost impacts stemming from its

inability to realize Production Tax Credits for wind generation and the corresponding need to

establish a deferred tax asset. Additionally, the CEPP excludes the sunk costs of retiring

Comanche Units 1 and 2 based on the incorrect assumption that the Company will continue to

collect the maximum 2% Renewable Energy Standard Adjustment ("RESA"). In reality, the

competitive cost of renewables means the Company can meet the Renewable Energy Standard

("RES") by charging less than the 2% RESA cap, and therefore shifting 1% of the RESA to the

General Rate Schedule Adjustment is not "a wash" for customers as the Company contends.

Finally, the Company's modeling suffers from other deficiencies that artificially favor the CEPP,

such as the hardcoding of expensive gas generation replacement resources into the baseline

portfolio, rather than permitting the modeling software to optimize the selection of such


If these modeling errors are accounted for, the CEPP does not keep customers neutral or

result in savings, and therefore the Stipulation must be rejected. Moreover, the Company was

required to properly account for the modeling costs and assumptions in putting forward the

Stipulation so that the Commission can accurately assess which portfolio to adopt in Phase II.

Having failed to do so, the Company should not be permitted to fix these deficiencies after the

fact when the parties will not have the time or procedural means to vet the necessary corrections.

If the Commission does permit some version of the CEPP to move forward in Phase II,

the Commission should ensure that the Company's modeling deficiencies are remedied and that

the Company puts forward an accurate least-cost portfolio, regardless of Company ownership

requirements, against which to judge the CEPP. Interested parties should have the time and

procedural ability, i.e., written discovery, to assess any new assumptions and models put forward

by the Company.

In short, while IREA generally supports the laudable goal of adding renewable resources

to the Company's generation portfolio, IREA does not support doing so on uneconomic terms

simply because self-interested parties signed the Stipulation.


IREA is a cooperative electric association that purchases wholesale power from the

Company through a power purchase agreement and delivers such power to IREA's members.1

Joint Cooperative Witness T. M. Myers Corrected Answer Testimony ("Myers Answer Testimony") (Ex. 108),

IREA serves more than 153,000 member-meters in Adams, Arapahoe, Chaffee, Clear Creek,

Douglas, El Paso, Elbert, Fremont, Jefferson, Park, and Teller Counties.2 Its service base

includes residential, commercial, industrial, and agricultural members in rural and urban

communities.3 IREA also has a joint ownership stake with the Company in the Comanche Unit 3

power generation station in Pueblo, Colorado.4 IREA has a significant interest in the proceeding

because, as testified to by the Company, there are a "host of issues" concerning how IREA will

be impacted by the proposed CEPP both as a wholesale ratepayer and as a stakeholder in

Comanche Unit 3.5


In allowing consideration of the Stipulation as a proceeding within this proceeding, the

Commission was clear in its expectations of the Company. The Commission stated that, to

"warrant[] the exceptional treatment of permitting inclusion of an additional Phase II portfolio

after the Phase I Decision", the Company must provide a "full Net Present Value (NPV) analysis

demonstrating how the CEP Portfolio could provide savings compared with a baseline portfolio

as ordered in the Phase I decision, where Comanche 1 and 2 are not retired."6 Further, the

Company was required "to provide calculations using its best estimates of all costs involved so

Id. at 5:7-9.
Id. at 5:4-5.
Id. at 5:1-2. As part of this proceeding, the Company has represented that it will be working closely with IREA
and Holy Cross Rural Electric Association (another stakeholder in Comanche 3) to resolve issues stemming from
costs increases to Comanche 3 due to the proposed early retirements of Comanche Units 1 and 2 and that changes to
cost allocations between the units may be reflected in the 120-day Report. Company Witness S. H. Mills
Supplemental Direct Testimony (Ex. 83), 40:7-12; see also Tr. Vol. V at 217:14-16 (2/7/18) (Company witness
testifying that "we have to work with [IREA and Holy Cross] to see if this plan can be made beneficial and
acceptable"). To date, the cost-shift issues have not been resolved, and therefore IREA reserves the right to address
these issues later in this docket, in the AD/RR Proceeding, or in any other forum, as necessary.
Tr. Vol. V at 216:15-217:16 (2/7/18).
Interim Decision No. C17-0796-I, ¶ 41 (emphasis added).

[the Commission] can fully understand the drivers and analysis of bids that may result in a

successful CEP Portfolio."7

The Commission identified several specific considerations that the Company was to

address in the Stipulation proceedings, including "a thorough discussion and analysis of how

wind and solar tax credits will apply to both IPP bids and utility ownership proposals," and the

costs involved from the "accelerated depreciation of Comanche 1 and 2" as part of the NPV


The Commission required "review and consideration of the proposed modeling

procedures, costs, assumptions, and calculation methodologies" as part of the Stipulation

proceedings and "prior to the Company's filing of the Phase II 120-day report."9 The

Commission was clear on this point "so that parties can investigate and potentially challenge this

information and the Commission can make a determination on these issues" prior to the

Company filing its 120-day report.10 The Company has failed to satisfy these obligations in

advancing the Stipulation.

I. The Company Has Failed to Model the Cost Impacts of the Deferred Tax Asset
for Unrealized PTCs.

As set forth in the Answer Testimony of Joint Cooperative Witness Terry M. Myers, the

Company's modeling of the CEPP does not account for the costs arising from its inability to

realize Production Tax Credits ("PTCs") for wind generation and from the corresponding need to

establish a deferred tax asset ("DTA") to capture those PTCs. The issue is that the Company is

assuming cost savings from the PTCs when there is no tax liability against which the PTCs can

Id. (emphasis added).
Id. at ¶¶ 40, 42.
Id. at ¶ 39.
Id. at ¶ 40.

currently be applied.11 In other instances where the Company has been unable to realize PTCs, it

has proposed creating a DTA to capture accruing PTCs that cannot be realized and to collect the

carrying cost of the DTA through its customer rates.12

The PTCs that the Company will accrue from the CEPP derive from its 50% ownership

targets for renewables that are built into the Stipulation.13 Understanding the impact of the DTA

is critical because, absent the Company's proposed ownership stake, Independent Power

Producers ("IPPs") could realize PTCs currently, or sooner than the Company, and could pass

along these savings through reduced contract prices.14 Absent its proposed ownership stake, the

Company would also not need to charge customers the carrying costs of the DTA.

The carrying costs of the DTA are amplified here by the significant number of PTCs the

Company will be banking from other renewable projects in which it has an ownership stake, such

as the Rush Creek wind project, and by the reduction in the corporate tax rate that will decrease

the tax liability against which the Company's PTCs can be applied.15 These costs can be

approximated through modeling and are significant. For example, Mr. Myers projected the

cumulative DTA costs of the Company owning 200 MW of wind generation at $110,881,977.16

The failure to account for these costs greatly inflates the projected savings of the CEPP.17

Despite the magnitude of these cost impacts, the Company admits it did not include any

DTA costs in its modeling of the CEPP.18 At the same time, the Company agrees with Mr.

Myers Answer Testimony (Ex. 108), 4:17-20.
Id. at 7:22-8:8; see also Company witness D. L. Eves Rebuttal Testimony ("Eves Rebuttal") (Ex. 79), 50:10-18.
Stipulation at 8 (Ex. 76).
Id. at 10:16-11:2.
Tr. Vol. VII at 17:1-6 (2/9/18); Myers Answer Testimony (Ex. 108), 11:18-25. In fact, a Company witness
testified that, because of bonus depreciation issues, the Rush Creek PTCs cannot be realized and will be captured in
a deferred tax asset. See Tr. Vol. V at 132:19-25 (2/7/18).
Id. at 10:9-13.
Tr. Vol. VII at 17:11-20 (2/9/18).
Myers Answer Testimony (Ex. 108), 11:3-17.

Myers' accounting of the projected cost impacts modeled in his answer testimony.19 This fact

was also reflected in the Company's lack of any cross-examination of Mr. Myers regarding his

findings concerning the magnitude of the DTA costs. Yet, the Company refused to update its

modeling to address the DTA impacts in the Stipulation proceeding, declaring that it did "not see

the value in revising illustrative portfolios at this time."20

Instead, the Company is steadfast that the DTA impacts should be modeled and addressed

as part of the Company's 120-day report in this proceeding. In modeling the tax issues in this

manner, the Company believes that it is better to select the preferred portfolios and then assess

the tax impacts on the back end, rather than modeling the tax impacts on the front end to ensure

the Company has selected the proper portfolios in the first place.21 However, backing into these

issues after the Stipulation proceedings are closed directly contradicts the Commission's

requirement that the Company's models, costs, and assumptions be set prior to filing the 120-day

report.22 While the Company contends that it needs bids to determine the actual impact of the

DTA, the Company could have projected potential tax impacts using assumptions just as Mr.

Myers did.23 Making assumptions is an inherent part of the modeling process, and therefore the

Company cannot justify its modeling omission by claiming that actual numbers were


Furthermore, modeling the DTA impact after the parties have had a chance to vet the

modeling and assumptions is inappropriate, particularly given the complexity of this issue. For

example, a Company witness testified that assessing the cost of the DTA will involve modeling

Eves Rebuttal (Ex. 79), 50:4-7 (admitting that "Mr. Meyers is right to point out that the DTA could impact the
CEPP"); see also Tr. Vol. V at 135:20-25 (2/7/18) (Company witness testifying that he "agreed with everything" Mr.
Myers said with respect to the accounting of the DTA).
Eves Rebuttal (Ex. 79), 49:11-12.
Tr. Vol. V at 75:11-24 (2/7/18).
Interim Decision No. C17-0796-I, ¶¶ 39-41 (emphasis added).
Tr. Vol. VI at 160:22-163:20 (2/8/18).

as to when the Company will be out of a net operating loss position such that it can apply

PTCs.24 This issue is complicated by the fact that the parent company, Xcel Energy Services,

Inc. ("Xcel"), files a consolidated return on behalf of its subsidiaries, including the Company.25

Consequently, PTCs can only be applied when Xcel is out of a net operating loss position. At

the Hearing, the Company could not explain how the PTCs will be treated if, for example, Xcel

remains in a net operating loss position while the Company has taxable income against which the

PTCs could otherwise be applied.26 In fact, no Company witness in this Stipulation proceeding

can explain the proper tax treatment of the PTCs.27

In short, the Commission should reject the stipulation because the Company has failed to

account for a critical cost category in assessing the net present value of the CEPP as required in

Interim Decision No. C17-0796-I. Even if the Company were to accurately model the DTA

costs, it would not be able to justify the ownership targets mandated by the Stipulation because

of the significant corresponding impact on the value of the CEPP.

II. The Company Incorrectly Excludes the Sunk Costs of Early Retirement from Its
CEPP Model.

As set forth in the testimony of Charles S. Griffey, the Company artificially inflates the

cost savings of the CEPP by excluding from the CEPP the accelerated depreciation costs

resulting from early retirement of Comanche Units 1 and 2.28 The Company does not dispute

that it omitted the accelerated depreciation costs from the CEPP model.29 Rather, the Company

contends that the exclusion of this significant cost was proper based on the parameters of the

parties' Stipulation, which requires that the accelerated depreciation be paid for by reducing the

Tr. Vol. V at 77:19-78:14 (2/7/18).
Myers Answer Testimony (Ex. 108), 5:5-19.
Tr. Vol. V at 135:5-21 (2/7/18).
Id. at 160:7-161:3.
Coalition of Ratepayers witness Charles S. Griffey Answer Testimony ("Griffey Answer Testimony") (Ex. 95E),
Eves Rebuttal (Ex. 79), 39:9-11.

RESA from 2% to 1% and increasing the GRSA by a corresponding 1%.30 The Company

reasons that the collective impact of the accelerated depreciation, the RESA, and the proposed

GRSA are "a wash" for customers and consequently accelerated depreciation does not need to be

accounted for as a cost of the CEPP.31

This logic rests on the incorrect assumption that the Company will continue to collect the

maximum 2% RESA when the reduction in the cost of renewables means that a 2% charge will

not be necessary to meet the RES. C.R.S. § 40-2-124(1)(c). This point was crystallized by the

testimony of the Company's witnesses at the hearing. In response to questions posed by

Commissioner Moser, a Company witness testified that the Company has currently met the 30%

RES and that the Company will be "over collected" on the RESA around 2022.32 Consequently,

"at one point [the Company] envisioned implementing the RESA reduction sooner" because it

can "reduce the RESA and still fund the programs at an expected level in the renewable energy

plans to be approved in the future."33 When asked whether the Company had given thought to

reducing the RESA to help with customers' bills, the Company's witness answered: "Yes, we

have given thought to that."34

However, to avoid potentially losing a portion of the maximum 2% RESA, the Company

instead proposes to shift that portion of the RESA to pay for the early retirement of two coal-

fired power plants so that the Company can add more renewables in which it will own a

significant stake. The Company is, in essence, asking the Commission to lock in the RESA

maximum regardless of the Company's actual costs needed to meet the RES. While IREA

Id. at 35:6-11.
Tr. Vol. VI at 64:5-17 (2/8/18).
Tr. Vol. V at 201:21-202:6 (2/7/18).
Id. at 202:15-20.

generally agrees with the Company acquiring more renewables, the Company should do so based

on assumptions that accurately reflect the opportunity costs to ratepayers.

The Company's sole basis for excluding accelerated depreciation in the CEPP modeling

is that the Stipulation calls for it. However, as Mr. Griffey testified, stipulating not to consider

the accelerated depreciation as a cost of a plan to retire generation resources early is like

stipulating that "two plus two is three."35 When pushed by Commissioner Koncijla as to why the

failure to account for accelerated depreciation provides a "truer picture of the power plant

economics" of early retirement, the Company's power plant economist, Jon T. Landrum, could

not provide an explanation based on economics.36 Rather, his only explanation was: "because

the stipulation that we have proposed with the joint parties has this structure."37 When further

pushed by Commissioner Koncijla, Mr. Landrum conceded that there could be different ways of

looking at the economics but that "[t]hose are not what the Company is proposing."38 This

circular reasoning cannot serve as the basis for retiring 660 MW of generation several years

ahead of schedule.

As set forth in the modeling in Mr. Griffey's answer testimony, once the cost of

accelerated depreciation of early retirement is accounted for, the net present value analysis

swings significantly towards the baseline portfolio.39 The Company does not dispute Mr.

Griffey's calculations but only his decision to account for accelerated depreciation.40 Because

Mr. Griffey is correct to account for accelerated depreciation, the Commission should reject the


Tr. Vol. VI at 125:7-18 (2/8/18).
Tr. Vol. VII at 52:5-9 (2/9/18).
Id. at 52:10-12.
Id. at 52:20-53:17.
Griffey Answer Testimony (Ex. 95E), 27:4-16.
Company witness J.T. Landrum Rebuttal Testimony (Ex. 82), 13:6-15:13 (arguing merely that the Stipulation
justifies the treatment of accelerated depreciation).

III. The Company's Modeling Suffers from Other Deficiencies That Inflate the Cost
of the Baseline Portfolio.

The Company cannot dispute that, even with its modeling errors discussed above, the

CEPP does not project cumulative savings against the baseline portfolio until 2038, after both

Comanche Units 1 and 2 have been retired.41 In fact, when Comanche Unit 2 is retired in 2035,

the cumulative savings of the CEPP versus the baseline portfolio is negative $56 million.42

IREA agrees with Staff witnesses and Mr. Griffey that these distant savings projections are a

result of the different post-retirement modeling assumptions the Company built into the CEPP

versus the baseline portfolio.

The primary example of this is the Company's decision to hardcode a combined cycle gas

turbine ("CCGT"), including $100 million in associated transmission costs, as replacement

generation for Comanche Units 1 and 2 only in the baseline portfolio.43 Table CSG-1 in Mr.

Griffey's surrebuttal testimony concisely demonstrates how the Company's disparate assumptions

regarding replacement generation create the projected back-loaded savings of the CEPP.44

The Company should not be permitted to justify the early retirement of two generation

resources that are admittedly more economical during their scheduled lives based on an apples-

to-oranges comparison of replacement resources. As explained by Staff witness Sharon Podein,

in order to accurately compare the two portfolios, the Company's modeling must permit

optimization of replacement resources in the baseline portfolio.45 Ms. Podein clearly articulated

why the hardcoding of the CCGT, a significant capital cost, biases the CEPP over the baseline

Tr. Vol. VI at 113:2-114:14 (2/8/18).
Id. at 114:6-8.
See Griffey Surrebuttal Testimony (Ex. 97), 6:19-23, 8:3-13.
Id. at 11.
Tr. Vol. VII at 161:11-162:3 (2/9/18).

portfolio.46 In her opinion, if the Company allowed the model to optimize replacement

resources, the model would not select a CCGT, thereby eliminating significant costs the

Company tags on the baseline portfolio, including $100 million in transmission costs.47

In short, because the Company's assumptions and modeling artificially inflate the costs of

the baseline portfolio, the Commission should reject the Stipulation as not in the best interests of


IV. If the Company Is Permitted to Move Forward with the CEPP, Adequate
Protections Should Be Put in Place.

Between the significant cost categories omitted from the CEPP and artificially added to

the baseline portfolio, there is no way the Company can demonstrate that the CEPP "will keep

customers neutral or result in savings" as required by the Stipulation.48 Consequently, the

Commission should reject the Stipulation without further proceedings.

If the Commission nevertheless determines that the Company should be permitted to

conditionally move forward with the CEPP, the Commission should order the Company to take

measures necessary to accurately assess the CEPP. These measures should include, at a


 Requiring the Company to sufficiently revise its model to account for the cost impacts of

the DTA in the CEPP.

 Requiring the Company to put forward a least cost portfolio, regardless of Company

ownership targets, against which to judge the CEPP.

 Requiring the Company to include the cost of accelerated depreciation from early

retirement in modeling the CEPP.

Id. at 164:7-16, 166:21-167:12.
Id. at 170:3-19.
Stipulation (Ex. 76), at 2.

 Requiring the Company to permit the modeling software to optimize replacement

resources for Comanche Units 1 and 2 in the baseline portfolio.

 Revising the procedural schedule in this proceeding and in the associated AD/RR

Proceeding to allow for sufficient time and procedures, including written discovery, for

the parties to vet the Company's revamped assumptions and modeling.

While the Company and Stipulating parties may argue that the Stipulation will fall apart

if these safeguards are put in place, that should not deter the Commission because self-interested

parties should not be able to Stipulate to a bad deal for ratepayers.


WHEREFORE, based on the foregoing arguments and authorities, Intermountain Rural

Electric Association respectfully requests that the Commission deny the motion to approve the

Stipulation; or, in the alternative, if the Commission permits the Company to move forward with

the Stipulation, the Commission should put in place adequate safeguards to ensure an accurate

assessment of the CEPP.

Respectively submitted this 21st day of February, 2018.


By: /s/ K.C. Groves

K.C. Groves, #20832
Benjamin J. Larson, #42540
717 17th Street, Suite 2800
Denver, CO 80202
Telephone: 303-623-2700
Fax: 303-623-2062

Jeffrey S. Hurd, #40039

200 N. 6th Street, Suite 103
Grand Junction, CO 81501
Telephone: 970-822-1300
Fax: 970-243-4358




I hereby certify that on this 21st day of February, 2018, the foregoing
POSITION IN OPPOSITION TO STIPULATION was served on those parties shown on the
Commission's Certificate of Service accompanying such filing as indicated below through the
e-filing system or by other means in accordance with applicable law.

Email Name Email Address List Entity

Thorvald A. Nelson CEC

Michelle Brandt King CEC
Emanuel Cocian CEC
Adele Lee CEC
Connie Scribner CEC
Debra S. Kalish City of Boulder
Matt Lehrman City of Boulder
Heather Bailey City of Boulder
Jonathan Koehn City of Boulder
Mary Bisset City of Boulder
David Gehr City of Boulder
Timothy P. Cox City of Lakewood
Nanette Neelan City of Lakewood
Jonathan Wachtel City of Lakewood
Daniel Kogovsek City of Pueblo
Richard Fanyo Climax
Rose Tinnell Climax
Claybourne Clark Colorado Energy Office
Lindsey Stegall Colorado Energy Office
Barbara Boyd Colorado Energy Office
Jessica Lowrey Colorado Energy Office
Vincent P. Calvano CoSEIA
Rebecca Cantwell CoSEIA
David M. Nocera CPUC
Michael Santisi CPUC
Bill Dalton CPUC

Gene Camp CPUC
Sharon Podein CPUC
Rebecca Lim CPUC
Paul Caldara CPUC
Erin O’Neill CPUC
Melvena Rhetta-Fair CPUC
Mark Detsky Energy Outreach
Gabriella Stockmayer Energy Outreach
Rebecca Boyle Energy Outreach
Julie Wolfe Energy Outreach
Jennifer Gremmert Energy Outreach
Andrew Bennett Energy Outreach
Leslie Glustrom Pro Se
Randolph W. Starr Holy Cross
Bryan J. Hannegan Holy Cross
Diana Golis Holy Cross
Christopher Hildred Holy Cross
Robert O'Neill Holy Cross
Thomas F. Dixon OCC
Brent Coleman OCC
Cory Skluzak OCC
Cindy Schonhaut OCC
Chris Neil OCC
Ingrid Hassell OCC
Tim Villarosa OCC
Chere Mitchell OCC
Dana Showalter OCC
Hector Arreola OCC
Scott Brockett PSCo

Christopher Irby PSCo
William Dudley PSCo
Sage Tauber PSCo
Matthew S. Larson PSCo
Jack Ihle PSCo
Gregory E. Sopkin PSCo
Caitlin M. Shields PSCo
Schuna Wright PSCo
Shayne Madsen Ratepayers
Meredith Kapushion Ratepayers
Meghann Griffiths Ratepayers
Travis Ritchie Sierra Club
Michael Hiatt Vote Solar
Rick Gilliam Vote Solar
Eleanor Greer Vote Solar
Erin Overturf Western Resources
Gwen Farnsworth gwen.farnsworth@westernresources.o Western Resources
rg Advocates
Penny Anderson Western Resources
Robert K. Harris Western Resources

By: /s/ K.C. Groves

K.C. Groves, #20832