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BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 16A-0396E

IN THE MATTER OF THE APPLICATION OF THE PUBLIC SERVICE COMPANY OF


COLORADO FOR APPROVAL OF ITS 2016 ELECTRIC RESOURCE PLAN

THE COALITION OF RATEPAYERS’ STATEMENT OF POSITION

______________________________________________________________________________

February 21, 2018


TABLE OF CONTENTS

I.  Executive Summary ..............................................................................................................1 


II.  The Request for Relief and Scope of the Stipulation .............................................................4 
III.  The Joint Motion and Stipulation Should be Denied as a Matter of Law ...............................6 
A.  Approval of the Stipulation Calls for a Predetermination that Future Rate
Treatment is Reasonable, and this is Beyond the Scope of the ERP. .........................6 
B.  Consideration of the CEP Portfolio is Beyond the Commission’s Express
Authority. ..................................................................................................................7 
C.  Consideration of the CEP Portfolio Violates the ERP Rules. ..................................10 
1.  The Rules Do Not Allow the CEP to Be Presented in a “Phase 1.5.”..........10 
2.  The ERP Rules Do Not Provide for Economic Early Plant Retirements.....12 
D.  The RESA Cannot be Used to Pay Off the Sunk Costs of Coal Plants. ...................13 
IV.  Corrections to Biases and Errors in PSCo’s Modeling .........................................................15 
A.  Comanche Sunk Costs Should Be Included in the CEP Portfolio Cost
Calculation. .............................................................................................................16 
1.  Customers Pay The Sunk Costs of Comanche Units 1 and 2 Whether
the Plants Retire Early or Operate Until the End of Their Useful Lives. .....17 
2.  Diverting Funds from the RESA Does Not Make the Sunk Costs of the
Coal Units Magically Disappear. ..................................................................17 
B.  Staff’s Proposal to Allow the Strategist Runs to Economically Select Gas, Wind,
and Solar Resources as Generic Resources in the Post-RAP Period Should Be
Adopted. .................................................................................................................19 
1.  PSCo’s Limitation to Thermal Units Does Not Reflect Today’s Market
Conditions. .................................................................................................19 
2.  Failing to Include Renewables in the Resource Tail Overstates the
Avoided Energy Cost Savings of the CEP Portfolio. ...................................20 
3.  Changing the Generic Filler Complies with Decision No. C17-0796-I.........20 
C.  PSCo’s Decision to Hard Code a CC in the Baseline Portfolio With $100 Million
of Transmission Costs That Do Not Exist in the CEP Portfolio Should be
Rejected. .................................................................................................................21 
1.  The Company Has No Idea What Generation Resource Will Replace
Comanche Units 1 and 2 at the End of Their Planned Service Lives. ..........22 
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2.  PSCo’s Hardcoded CC Drives Illusory Net PVRR Benefit for the CEP,
But Even Its Modeling Shows That Operating the Coal Plants To The
End of Their Service Lives Saves Ratepayers Money. ..................................23 
D.  The Annuity Method Is Not Appropriate for Analyzing the CEP. ..........................25 
1.  The Annuity Method is Inconsistent With PSCo’s Testimony and an
Unreasonable Attempt to Rectify Evaporating “Illustrative” CEP
Portfolio Cost Savings. ................................................................................25 
2.  The Phase I Order Does Not Prescribe the Annuity Method for
Analyzing the CEP. .....................................................................................26 
V.  Corrections to the Stipulation..............................................................................................28 
A.  The Ownership Percentages Are Not In the Public Interest. ...................................28 
B.  The Commission Should Adopt Hard Caps to Protect Ratepayers. .........................28 
VI.  Phase II Procedures ............................................................................................................29 
VII.  Conclusion ..........................................................................................................................29 

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TABLE OF AUTHORITIES

Page(s)

Constitutional Provisions

COLO. CONST. art. XXV ................................................................................................................................... 7

Cases

CF&I Steel, L.P. v. Pub. Utils. Comm’n,


949 P.2d 577 (Colo. 1997) ......................................................................................................................... 7

City of Boulder v. Pub. Utils. Comm’n,


996 P.2d 1270 (Colo. 2000) ....................................................................................................................... 7

City of Montrose v. Pub. Utils. Comm’n,


629 P.2d 619 (Colo. 1981) ......................................................................................................................... 7

City of Montrose v. Pub. Utils. Comm’n,


732 P.2d 1181 (Colo. 1987) ....................................................................................................................... 7

Denver Local 2-477 v. Metro Wastewater Reclamation Dist.,


7 P.3d 1042 (Colo. App. 1999) .................................................................................................................. 7

Hawes v. Colo. Div. of Ins.,


65 P.3d 1008 (2003) .................................................................................................................................... 7

Home Builders Ass’n of Metro. Denver v. Pub. Util. Comm’n,


720 P.2d 552 (1986) .................................................................................................................................. 12

Peoples Natural Gas Div. v. Pub. Utils. Comm’n,


626 P.2d 159 (Colo. 1981) ......................................................................................................................... 7

Statutes

C.R.S. § 40-1-124(f)(I)–(III) ........................................................................................................................... 13

C.R.S. § 40-1-124(g)(I)(a) ................................................................................................................................ 13

C.R.S. § 40-2-123(1)(b) ...................................................................................................................................... 8

C.R.S. § 40-6-101(1) .................................................................................................................................. 11, 12


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C.R.S. § 40-6-101(4) ......................................................................................................................................... 11

Colorado Public Utilities Commission Rules

Rule 3617, 4 C.C.R. § 723-3:3617 .................................................................................................................... 6

Rules 3603–04, 4 C.C.R. §§ 723-3:3603–04 ................................................................................................. 10

Rule 3603, 4 C.C.R. § 723-3:3603(a) ............................................................................................................. 11

Rule 3607(a), 4 C.C.R. § 723-3:3607(a) ......................................................................................................... 11

Rules 3600–19, 4 C.C.R. §§ 723-3:3600–19 ................................................................................................. 12

Rule 3661(c), 4 C.C.R. § 723-3-:3661(c) ....................................................................................................... 14

Rule 3661(h)(IV), 4 C.C.R. § 723-3:3661(h)(IV) ......................................................................................... 14

Rule 1102, 4 C.C.R. 723-1100:1102............................................................................................................... 45

Commission Decisions

Decision No. C08-0929 ........................................................................................................................... 11, 12

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STATEMENT OF POSITION

I. EXECUTIVE SUMMARY

Before the Commission is a Stipulation that, if approved, will set in motion a plan for

ratepayers to pay for approximately $2.5 billion in energy resources for the state’s electric grid,

retirement of 660 MW of coal units more than a decade early, compensation to Public Service

Company of Colorado (“PSCo” or “the Company”) for the sunk costs in the coal units, and ownership

targets for PSCo for the replacement generation. This Stipulation, called the Colorado Energy Plan

(“CEP”), comes at a time when PSCo’s load growth is generally flat and the utility’s demonstrated

need for generation investment is questionable.1 The CEP comes after PSCo’s failed attempts to get

a similar proposal passed by the legislature. The CEP also comes with a dubious promise that PSCo

will present the CEP Portfolio in Phase II of this Electric Resource Plan (“ERP”) only if it does not

increase costs for PSCo’s captive ratepayers.

The Coalition of Ratepayers (“Coalition”) appreciates the Commission’s decision to give new

parties the opportunity to review PSCo’s evidence related to the costs and benefits of the CEP.

Unfortunately, the evidence in this case has demonstrated the wisdom of the old adage, “if it sounds too

good to be true, it probably is.” The decision to retire two large coal units more than a decade before their

planned retirement dates is obviously a win for PSCo, which will earn a return on increased generation

investment in its system while having ratepayers pay for the sunk costs of Comanche Units 1 and 2.

The CEP is a win for independent power producers who will have a potential opportunity to build

new renewable and thermal resources on PSCo’s system in a period of low load growth. The CEP is

also a win for environmental groups that desire to shut down coal units at any cost, even though the

units are equipped with “state-of-the art” environmental control technology and comply with all state

1
See Decision No. C17-0316 at ¶ 30, 45 (finding the Company projects no net generation need in 2022, net generation
need of 389 MW in 2023, and concluding that PSCo should develop a zero-need case for 2023).

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and federal environmental standards.2 What the evidence has not demonstrated is how the CEP is a

win for PSCo’s ratepayers who will pay the bills for the gratuitous investment and, more specifically,

how they will be guaranteed protection from cost increases that will indeed result from the CEP.

While PSCo promises the CEP will not be presented if it will increase costs, the evidence in

this case demonstrates that promise is illusory. PSCo’s actual measure of ratepayer cost savings is

much less straightforward than “no increased costs.” PSCo’s measure of cost savings is not based on

specific cost savings guarantees for ratepayers (e.g., long-term rate freezes or hard cost caps on plant

builds), but rather it is based on a convoluted cost comparison model that will examine a 38-year

present value revenue requirement (“PVRR”) calculation of the PVRR of the CEP Portfolio early-

retirement case, relative to the PVRR of the Baseline Portfolio business-as-usual case.3 This is no

promise of cost savings at all. The perils of this “standard of review” for cost savings is belied by the

fact that the Commission Staff and PSCo cannot agree on how to calculate the PVRR. It is also belied

by PSCo’s admitted $88 million of PVRR modeling errors before the hearing began and last-minute

revisions to modeling assumptions to offset the errors and drum up “illustrative” cost savings.4 Only

by (1) excluding the sunk costs of the coal units from the CEP Portfolio PVRR and including them

in the Baseline Portfolio; (2) hardcoding the backend of the Baseline Portfolio PVRR model with a

high-cost combined cycle gas turbine (“CC”) that does not exist in the CEP Portfolio; and (3) a host

of other unreasonable assumptions can PSCo make the PVRR of the CEP Portfolio positive.

Regardless, even PSCo’s own cost runs using the annuity method for modeling the resource tail show

that it is cheaper for ratepayers for PSCo to operate the coal units to the end of their service lives.5

2
Vol. VI, Hr. Tr. at 190 (hearing cross-examination of Garrison Kaufman).
3
“Baseline Portfolio” will be used to refer to the 450 MW base need case approved in Decision No. C17-0316, which
assumes Comanche 1 and 2 operate until the end of the planned service lives of 2033 and 2035, respectively. CEP
Portfolio refers to the Stipulation’s early-retirement case.
4
Hr. Ex. 82, Rebuttal Testimony of Jon Landrum at 26 and Hr. Ex. 124.
5
Hr. Ex. 99E, Surrebuttal of Charles Griffey at Attachment 98E and 11-12.

2
The Joint Motion filed on August 29, 2017 and the Stipulation should be rejected. The CEP

does not work, and it will not save ratepayers money. Under certain circumstances it may be possible

to make a case for early plant retirements. Indeed, the Commission has previously done so when

certain coal units were at or near the end of their service lives and facing impending environmental

regulations that necessitated significant increased capital investment, but the CEP is not one of those

cases. Neither the law nor the facts support approval of the Joint Motion or the Stipulation. If the

Commission is to fundamentally alter its ERP process to consider economic early plant retirements,

it should do so in a measured way through a rulemaking rather than in haste to capture evaporating

production tax credits (“PTC”) and investment tax credits (“ITC”) that will result in $2.5 billion of

investment that costs ratepayers in the long run. Specifically, the Commission should focus its

attention on the pending rulemaking in Proceeding 17M-0694E.6

As explained below, the Stipulating Parties have presented the Commission with a Stipulation

that contains so many bells and whistles related to “interrelated” rate and CPCN proceedings and tacit

pre-approval for these proceedings that the Commission is without the legal authority to approve the

Stipulation in this ERP. PSCo has not presented the facts and evidence in this ERP case to meet the

required burden of proof to demonstrate the Stipulation is in the public interest. If the Commission

decides, notwithstanding, to proceed with consideration of the CEP in Phase II, the Coalition urges

the Commission to make substantive changes in the modeling assumptions so that any purported

costs savings from the CEP are not entirely illusory. Absent rejection of the CEP, the Coalition

recommends the following changes to the modeling and Stipulation in order to protect ratepayers:

6
Proceeding No. 17M-0694E, In the Matter of the Commission’s Review of its Rules Governing Electric Resource Planning,
Implementing Colorado’s Renewable Energy Standard, and Enabling New Technology Integration.

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Corrections to Modeling Errors

 Comanche Sunk Costs - Include Comanche sunk costs in the CEP Portfolio PVRR.
 Optimization of Generic Filler Resources - Adopt Staff’s proposal to optimize the tails for the
portfolios using renewables (i.e., wind and solar) and gas resources.
 Hardcoded CC in the Baseline Portfolio – Reject PSCo’s decision to hardcode a CC in the
Baseline Portfolio with $100 million of transmission costs missing in the CEP Portfolio.
 Annuity Method - Reject the Annuity Method for the analysis of the CEP.
Corrections to the Stipulation

 Ownership Percentages - Reject the utility ownership percentages. Alternatively, require PSCo
to present a “least cost” CEP Portfolio that does not contain the ownership percentages.
 Hard Caps - Approve hard cost caps limiting the cost of new utility-owned resources to the
competitive bid price.
Phase II Procedure

 Given the significant and material errors in PSCo’s modeling to date, the Coalition requests
that the parties be given the opportunity to conduct discovery in Phase II.

II. THE REQUEST FOR RELIEF AND SCOPE OF THE STIPULATION

Before the legal and factual infirmities of the Joint Motion and Stipulation are addressed, it is

important to address the request for relief before the Commission and the scope of the Stipulation.

The Joint Motion asks that the Commission “find that the Stipulation is in the public interest and

approve the Stipulation without modification.”7 This request comes in an ERP proceeding filed

pursuant to Commission Rules 3600–3619. The agreements in the Stipulation are not limited to

matters related to this ERP. At a high level, the CEP and Stipulation request the Commission approve

in this ERP case various actions, some of which involve rate proceedings. The Stipulation proposes:8

First, as part of this ERP, PSCo will voluntarily retire Comanche 1 no later than the end of

2022 (325 MW) and Comanche 2 no later than the end of 2025 (335 MW).

7
Joint Motion at 9.
8
Stipulation at 8.

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Second, as part of this ERP, the Company requests approvals of ownership targets for the

replacement resources. PSCo will target ownership of 50 percent of the nameplate capacity of all

eligible resources. PSCo will target ownership of 75 percent of the nameplate capacity of all

dispatchable and semi-dispatchable resources.

Third, as part of a separate rate proceeding, the Company will obtain cost recovery for the

sunk costs of the coal units through accelerated depreciation expense. In that rate case, filed in

Proceeding No. 17A-0797E,9 the Company asks for a number of rate adjustments. It asks to defer

$211 million of Comanche 1 and 2 common costs.10 It asks to reduce its Renewable Energy Standard

Adjustment (“RESA”) collections by half (i.e., from 2% on customer bills to 1%). It then diverts that

1% RESA offset into a 1% rate charge under a concomitant General Rate Schedule Adjustment

(“GRSA”), which will charge customers for the coal unit sunk costs.

Fourth, in a separate CPCN Application, the Company will seek authority to construct a

new switching station on the southern transmission system in Energy Resource Zone 5.

The Joint Motion specifically states: “The Colorado Energy Plan Portfolio and related actions

are not severable and work in concert with one another.”11 In short, the Joint Motion asks the

Commission to find that the Stipulation as a whole is in the public interest, even though the facts and

evidence related to the intertwined rate cases and CPCN applications are not at issue in this case, and

the Commission has not adjudicated the facts and evidence related to those matters.

9
Proceeding No. 17A-0797E, In the Matter of the Application of Public Service Company of Colorado to Modify the Depreciation
Schedule for the Early Retirement of Comanche 1 and Comanche 2 Generating Units, Establish a Regulatory Asset to Collect Incremental
Depreciation, Reduce the Renewable Energy Standard Adjustment Collection to One Percent, and Implement a General Rate Schedule
Adjustment, Contingent on the Approval of the Colorado Energy Plan Portfolio in Proceeding No. 16A-0396E.
10
Hr. Ex. 95E, Answer Testimony of Charles Griffey at 25.
11
Stipulation at 9.

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III. THE JOINT MOTION AND STIPULATION SHOULD BE DENIED AS A
MATTER OF LAW

The Joint Motion and the Stipulation cannot be approved as a matter of law. The request for

relief cannot be granted for many reasons. First, as alluded to above, the Joint Motion cannot

withstand judicial scrutiny because its request to find the Stipulation as a whole “in the public interest”

puts the cart before the horse. The Commission cannot legally make a determination about rate

treatment without facts and evidence to support its determination; those facts and evidence are beyond

the scope of this ERP proceeding. Second, the CEP, as presented in the Stipulation, cannot be

approved because doing so violates the Commission’s rules and is beyond the Commission’s authority.

Finally, the agreement to use the dollars that would otherwise have been collected through the RESA

and convert them into a vehicle to pay off the sunk costs of coal units violates Colorado law.

A. Approval of the Stipulation Calls for a Predetermination that Future Rate Treatment
is Reasonable, and this is Beyond the Scope of the ERP.

In order to move forward with the CEP, PSCo has taken the extraordinary position that the

Commission must approve in this ERP proceeding a Stipulation that is contingent upon future rate

treatment for the stranded costs of the coal units. The Commission cannot legally grant the Stipulation

provisions related to rate treatment in this ERP proceeding. The cost-recovery proposals implicate a

change in rates.12 The Commission cannot legally preordain cost-recovery mechanisms and rate

changes in an ERP proceeding when the evidence related to the rate changes is at issue is in an entirely

separate proceeding.13 Commission Rule 3617(b) provides that the Commission’s decision regarding

the review and approval of resource plans must be “[b]ased on the evidence in the record.” A critical

component of the Stipulation and the new ERP proposal is being litigated elsewhere, so the facts that

the Commission must rely upon to determine whether the cost recovery proposals result in just and

12Vol. V, Hr. Tr. at 174.


134 C.C.R. § 723-3:3617(a)–(c) (the company’s ERP must be reviewed on the merits, based upon evidence in the record,
and the record must contain sufficient evidence).

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reasonable rates are absent from this case. It would be error to approve the “interrelated” rate

treatment requested in the Stipulation under these facts.

Similarly, the Commission cannot approve the rate changes proposed by the Stipulation

because PSCo made no effort to meet the necessary burden of proof for a rate change in this case.

The “PUC has the duty to examine proposed rates, and to determine whether the…charges…are

unjust, unreasonable, discriminatory, or preferential, or in any way violate any provision of law, and if

so, to set just and reasonable rates.”14 The Commission cannot presuppose the validity of the proposed

rate changes where there is no evidence before it to make that determination.

B. Consideration of the CEP Portfolio is Beyond the Commission’s Express Authority.

The CEP should also be rejected because its economic early plant retirement proposal is

beyond the Commission’s express authority. The power to “regulate the facilities, service and rates

and charges” of public utilities is expressly delegated to the Commission.15 The powers delegated to

the Commission on matters affecting the regulation of public utilities are legislative in nature.16 Title

40 of the Colorado Revised Statutes sets forth certain powers delegated to the Commission.17 If the

legislature has addressed the precise question at issue, courts look directly to the statute and afford no

deference to the agency’s interpretation.18 No implied power exists where an agency exceeds its

jurisdiction by acting contrary to the Colorado Constitution, contrary to express statutory provisions,

when such authority would be in derogation to statutory purpose, or when it does something entirely

unrelated to its statutory purpose.19

14 CF&I Steel, L.P. v. Pub. Utils. Comm'n, 949 P.2d 577, 579 (Colo. 1997) (citing C.R.S. § 40-3-111(1)).
15 COLO. CONST. art. XXV.
16 CF&I Steel, L.P. v. Pub. Utils. Comm'n, 949 P.2d 577 (Colo. 1997).
17
Denver Local 2-477 v. Metro Wastewater Reclamation Dist., 7 P.3d 1042, 1046 (Colo. App. 1999) (duties and powers of
agencies are determined and limited by the statutes that created them).
18
City of Boulder v. Pub. Utils. Comm'n, 996 P.2d 1270, 1277 (Colo. 2000).
19
Hawes v. Colo. Div. of Ins., 65 P.3d 1008 (Colo. 2003) (internal citations omitted); see also City of Montrose v. Pub. Utils.
Comm'n, 629 P.2d 619 (Colo. 1981) (the commission has considerable discretion in its choice of the means to accomplish
its functions, but it does not have limitless legislative prerogative, as the general assembly may restrict the legislative
authority delegated to it); Peoples Natural Gas Div. v. Pub. Utils. Comm'n, 626 P.2d 159 (Colo. 1981) (same); City of Montrose
v. Pub. Utils. Comm’n, 732 P.2d 1181 (Colo. 1987) (same).

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In this instance, there is no express legislative authority to consider wholesale replacement of

otherwise viable energy resources in an ERP.20 Generally, an ERP proceeding is designed to identify

future resource needs and incremental resource additions to address those additional needs. In Phase

I, PSCo’s position was that the ERP process should not be used for more than the fulfilling of an

incremental resource need and to go beyond that would require additional legislative authority:

It is not the purpose of this Phase I proceeding to fundamentally alter the ERP process
and diverge from the appropriate and established focus of an ERP, which is filing the
incremental resource need with a resource portfolio that is in the public interest. Such
fundamental changes to the resource acquisition process are a question for the General
Assembly.21

PSCo now eschews that interpretation after entering into the Stipulation.

In rare instances, the ERP process has expanded to include consideration of coal plant

retirement where the legislature called upon the PUC to do so. For instance, the 2007 ERP included

the possible early closure of coal plants as one means of meeting the recently enacted legislative

requirements moving Colorado’s energy policy away from a “least-cost” approach and adding new

requirements for additional Renewable Energy Resources.22 In that case, the Commission relied upon

C.R.S. § 40-2-123(1)(b) for its authority to consider the early retirements.23 The criteria cited in C.R.S.

§ 40-2-123(1)(b), i.e., the likelihood of new environmental regulation and the risk of higher future

costs associated with the emission of greenhouse gases, are not the considerations driving the CEP.

The environmental controls at Comanche 1 and 2 are “state of the art,”24 the Phase I decision rejected

20
Vol. V, Hr. Tr. at 110-111 (Eves acknowledging there is no legislation requiring early plant retirement).
21
Hr. Ex. 2, Corrected and Revised Rebuttal Testimony of Alice K. Jackson, January 30, 2017, at 3. While the stipulating
parties have relied in part upon Governor Hickenlooper’s Executive Order as a reason to support the stipulation, the
Executive Order is not dispositive and does not direct the conclusions of the Commission. See Decision No. C08-1153,
Docket No. 07A-447E issued November 7, 2008, ¶113 (acknowledging that Governor Ritter’s similar order did not
carry the force of law).
22
Decision No. C08-1153, Docket No. 07A-447E issued November 7, 2008, ¶¶ 2-5.
23
See Decision No. C08-1153, Docket No. 07A-447E issued November 7, 2008, ¶113. See C.R.S. § 40-2-123(1)(b) (“The
commission may give consideration to the likelihood of new environmental regulation and the risk of higher future costs
associated with the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire
resources.)
24
Vol. VI, Hr. Tr. at 190:04-17 (Kauffman).

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a carbon cost adder,25 and no environmental regulations are foreseen that would trigger the statute.26

The primary driver of the CEP is rather an economic one.27

This ERP is also easily distinguished from the 2011 ERP, wherein the enactment of the

Colorado Clean Air Clean Jobs Act required the consideration of early retirement of coal plants in

order to satisfy the legislature’s enactments.28 This legislative directive drove the early retirements; no

such directive exists here.29 As PSCo explained in Phase I:

If we are going to fundamentally restructure the way that we do resource planning in


Colorado, which is the effect of Mr. Monsen’s proposal, then that is a question for the
General Assembly and not for Mr. Monsen, CIEA, or the Company. The Clean Air-
Clean Jobs Act, House Bill 10-1365 . . . is an example of such legislation.30

To the extent that prior ERPs have addressed early coal plant retirements, they have done so in the

context of a legislative directive that provided an express framework to evaluate those retirements. As

no such directive exists here, and there are no guidelines to properly evaluate the CEP, it should not

be considered under the Commission’s rules.

Had the General Assembly intended for the Commission to engage in modeling exercises

related to early plant retirements, particularly for the economic reasons cited in the CEP, it would have

prescribed the Commission’s authority to do so by statute. Not only has the legislature withheld such

an express grant of authority, the legislature’s recent rejection of a similar proposal indicates that such

a directive is neither supported nor desired.31 Public comments from Assistant Majority Leader Ray

Scott describe the CEP as an end-run attempt around the General Assembly:

25
Decision No. C17-0316, Docket No. 16A-0396E, March 23, 2017,¶71.
26
Id.
27
Stipulation, p. 7 (“The Colorado Energy Plan Portfolio will seek to increase deployment of eligible energy resources and
lower carbon dioxide emissions “without increasing costs to consumers,” consistent with the goals and directives of
Executive Order D 2017-015, and as further described in Sections III(B) and V(A)”). See also Vol. V, Hr. Tr. 110-111
(Eves: “The Company is doing this based on what we believe the benefits of the overall plan could be to voluntarily
retire the two Comanche units early and replace it with a Colorado Energy Plan Portfolio. . . . it’s a cost benefit that
we’re primarily able to achieve, and therefore willing to voluntarily bring forward the potential retirements.”).
28
See Decision C13-0094, Docket Nos. 11A-869E, 12A-782E, & 12A-785E, issued Jan. 24, 2013.
29
Vol. V, Hr. Tr., 110- 111 (Eves).
30
Hr. Ex. 2, Corrected and Revised Rebuttal Testimony of Alice K. Jackson at 39.
31
Hr. Ex. 77, Supporting Testimony and Attachments of David L. Eves at 22–23 (alluding to discussions during the
2017 session of the General Assembly).

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Xcel tried to get it passed at the state capitol and couldn’t. Then the Governor rescues
them with his executive order. Two days later Xcel is meeting with the Office of
Consumer Counsel. They meet seven times and then sign on to an agreement to move
forward. Residential and small business ratepayers had no such courtesy. They didn’t
get a chance to review anything.

This plan didn’t pass at the state capitol because the Senate rejected it. So, I’m really
troubled that a regulated utility can go to the Governor for cover and regulatory
approval when it doesn’t get what it wants from the state legislature. This is a bad
precedent to set.32

Colorado Senate Majority whip, John Cooke, also offered similar public comments:

. . . this plan circumvents the state legislature. To quote my colleague, Jerry


Sonnenberg, “Xcel is pulling a bit of a fast one by going to the PUC for something it
couldn’t get passed in the State Legislature.” This proposal didn’t fly at the State House
because Republicans don’t believe it’s in the interest of Colorado energy consumers to
shut down our most affordable and dependable power plants while subsidizing
expansion of unreliable, not ready for prime-time alternatives. Basically, they are
seeking regulatory approval for something they couldn’t get consensus on at the state
capital, and that’s even with the army of lobbyists that they have.33

PSCo should not be allowed to put forward a proposal that is outside of the procedural rules, beyond

the express authority granted to the Commission, and beyond the proper scope of the ERP, simply

to further its otherwise unsuccessful legislative agenda.

C. Consideration of the CEP Portfolio Violates the ERP Rules.

The Stipulation also violates the ERP process and scope expressly articulated in ERP Rules.

1. The Rules Do Not Allow the CEP to Be Presented in a “Phase 1.5.”

Filing an entirely new ERP Plan after the Commission’s Phase I decision violates the

Commission’s rules. Rule 3603(a) provides for the filing of an ERP every four years and expressly

allows for a utility to submit an interim plan, pursuant to Rule 3604.34 The Rules do not allow for the

32
Public Comments from Colo. State Senator Ray Scott, Denver Public Hearing in Docket No. 16A-0396E (Feb. 1,
2018.)
33
Public Comment from Colo. State Senator John Cooke, Denver Public Hearing in Docket 16A-0396E (Feb. 1, 2018.)
34
4 C.C.R. §§ 723-3:3603–04.

10
insertion of a new portfolio mid-stream, in between the Phase I and Phase II of an existing ERP

proceeding, or otherwise. If a utility wishes to file an interim plan, the ERP process begins anew.35

The Commission Rules contemplate a procedure for an interim ERP if circumstances require

it.36 PSCo has not followed that procedure, but has rather chosen to disrupt the current proceeding

and muddy the waters of the current ERP with its late introduction of the CEP. As PSCo has a viable

procedural alternative, and the rules do not allow for the introduction of a new portfolio at this stage

in the proceeding, the Joint Motion should be denied.37 Neither the Commission nor PSCo is at liberty

to ignore the Commission’s own rules.38

The disruption of the current ERP process goes beyond a simple violation of protocol; there

are a number of reasons why this should not be permitted. First, Rule 3607 requires PSCo to provide

the PUC with an examination and evaluation of existing resources “at the time the plan is filed.”39 The

rule does not contemplate that the evaluation of existing resources will be a moving target. Rather,

PSCo is required to provide an accurate and meaningful assessment of the existing resources at the

outset, so that the PUC and the parties may move forward with the same working assumptions and

have an adequate opportunity to review, comment upon, and challenge the information presented.40

Second, the existing ERP process provides for a sensible approach by splitting the proceedings

between Phase I and Phase II, and the introduction of the CEP after the conclusion of Phase I distorts

35
Moreover, the filing of an interim plan is not a matter of right, but of discretion. If a “utility chooses to file an interim
plan more frequently than the required four-year cycle, its application must state the reasons and changed circumstances
that justify the interim filing.” 4 C.C.R. § 723-3:3603(a).
36
Id.
37
See C.R.S. § 40-6-101(4) (“All hearings and investigations before the commission, any individual commissioner, or any
administrative law judge shall be governed by this title and by rules of practice and procedure adopted by the
commission….”).
38
C.R.S. § 40-6-101(1) (“…where there is a specific statutory provision in this title applying to the commission, such
specific statutory provision shall control as to the commission.”).
39
4 C.C.R. §723-3:3607(a).
40
See, e.g., Decision No. C08-0929, Docket No. 07A-447E, ¶67 (“We are very concerned that Public Service failed to
timely file these [reserve margin and wind integration] studies. This failure will prevent parties and the Commission from
adequately reviewing and commenting on the studies prior to their use in Phase II. The Phase II proceeding is an
expedited process and will not allow time for a traditional adjudication process (e.g., direct, answer and rebuttal
testimony, and hearings). The ERP Rules are designed for such issues to be fully addressed in Phase I, where a full
adjudicatory process provides adequate opportunity to address these issues.”).

11
this process.41 Phase I identifies the resource need and the possible portfolios projected to address

those needs. By eliminating 660 MW of existing resource capacity after this process has been

completed, the introduction of the CEP forces the parties to revisit any Phase I Order that relied upon

it. Had the CEP been properly introduced as part of the original Phase I ERP, the Phase I decision

would have been altered substantially. To allow this post hoc introduction of a new portfolio without

fully revisiting the Phase I decision introduces error and creates due process violations.42

2. The ERP Rules Do Not Provide for Economic Early Plant Retirements.

Rule 3607 is designed to identify supplemental resources, not to evaluate replacement of

otherwise viable existing energy resources. This was the very position taken by PSCo in Phase I.43 As

correctly noted by PSCo, the current ERP rules do not contemplate calculating the costs and benefits

of early resource retirements.44 This is not a minor oversight. The rules are otherwise specific with

regards to what is expected in an ERP. Rule 3604 sets forth the required contents of an ERP and

includes providing demand and energy forecasts, evaluation of existing resources, assessment of

reserve margins and contingencies, evaluation of transmission resources, and assessment of the need

for additional resources, among other filings. The ERP must also include a cost and benefit analysis

of the integration of intermittent renewable energy resources. Plant retirement is not discussed in any

context in the rules governing ERPs. The Phase I decision issued by the Commission specifically

noted the need for just such a rulemaking.45 The Commission should follow its ordinary procedures

to develop rules as needed and not engage in ad-hoc rulemaking in this adjudication proceeding.46

41
See Decision No. C09-1257, Docket No. 07A-447E ¶16 (“In Phase I, the rules generally require the utility to file a plan
outlining how it proposes to fulfill its generation needs. In Phase II of the proceeding, the utility and IE evaluate third-
party bids and utility self-build proposals for specific generation resources and the Commission selects a preferred
portfolio of resources, pursuant to parameters established in Phase I.”).
42
See Decision No. C08-0929, Docket No. 07A-447E, ¶67; see also Decision No. C10-1328; Docket No. 10M-245E ¶49
(acknowledging that statutory due process requires the Commission to “conduct its proceedings in such a manner as will
best conduce the proper dispatch of business and the ends of justice”). C.R.S. § 40-6-101(1)).
43
Hr. Ex. 2, Corrected and Revised Rebuttal Testimony of Alice K. Jackson 39; see Vol. V, Hr. Tr. at 109–110 (Eves).
44
See generally, 4 C.C.R §§ 723-3:3600–19.
45
Decision No. C17-0316, Docket No. 16A-0369E, March 23, 2017, ¶54.
46
Home Builders Ass’n of Metro. Denver v. Pub. Util. Comm'n, 720 P.2d 552 (Colo. 1986) (where PUC decision had the effect
of modifying a rule, it constituted general rule-making in violation of section 24-4-103, 10 C.R.S. (1982 & 1985 Supp.),

12
D. The RESA Cannot be Used to Pay Off the Sunk Costs of Coal Plants.

The Stipulation should also be rejected because the Stipulating Parties cannot make an end

run around the fact that the RESA cannot be used to pay off the coal plants.47 The RESA was enacted

to implement the state’s Renewable Energy Standard (“RES”). 48 Neither Colorado’s voters nor the

General Assembly authorized the retirement of existing energy resources in the RES or the

amendments thereto. There is a significant difference between the Legislature’s authorization of a fee

to fund development and investment in additional resources and its authorization of a fee to subsidize

a utility’s voluntary retirement of its existing resources. The RES was implemented to incentivize

qualifying retail utilities to add renewables to their portfolios, not to eliminate existing portfolio

resources at the expense of ratepayers. The plain purpose of the RES is reflected in the statutes

pertaining to retail rate impacts, which states “. . . Policies for the recovery of costs incurred . . . must

provide incentives to qualifying retail utilities to invest in eligible energy resources . . . ”49 The

RESA is to be used exclusively to offset the incremental additional cost of a new renewable resource.50

Rule 3661 also reflects the statutory requirement that the RESA be used to fund new eligible

energy resources. Rule 3661 provides:

The net retail rate impact shall include the prudently incurred direct and indirect costs
of all actions by a QRU to meet the RES, including, but not limited to, program
administration, rebates and performance-based incentives, payments under renewable
energy supply contracts, payments under renewable energy credit contracts, payments
made for RECs purchased through brokers or exchanges, computer modeling and
analysis time, QRU investment in and return on investment for eligible energy

of the State Administrative Procedure Act and section 40-6-101(1), 17 C.R.S. (1984), of the Public Utilities Law, which
requires the PUC to comply with the provisions of the State Administrative Procedure Act).
47
See Vol. V, Hr. Tr. at 118 (Eves testimony that “. . . the modeling relies on the recognition that the RESA reduction
offsets the increased depreciation expense during the next seven to ten years.”).
48
Colo. Sess. Laws S.B. 143, Ch. 63 (2005). C.R.S. § 40-1-124(g)(I)(a) (“the [C]ommission shall establish a maximum
retail rate impact for this section for compliance with the electric resource standards of two percent of the total electric
bill annually for each customer. The retail rate impact shall be determined net of new alternative sources of electricity
supply from noneligible energy resources that are reasonably available at the time of the determination.”). See also Colo.
Sess. Laws H.B. 1281, Ch. 60, p. 257 (2007). See generally Decision No. See generally Decision No. C07-0622, Docket No.
07R-166E, July 12, 2007 (discussing legislative history and implementation of the RES).
49
C.R.S. § 40-1-124(f)(I)–(III) (emphasis added).
50
See, e.g., Decision No. C15-0317; Docket Nos. 14A-0534E and 14A-0535E, March 18, 2015, ¶17 (investments
resulting in avoided costs are paid for under the ECA, while only the incremental difference in generating electricity
from a renewable source as compared to a conventional source is paid for out of the RESA fund).

13
resources, and expenditures made to purchase unsubscribed energy and RECs from
CSGs.51

The voluntary retirement of Comanche 1 and 2 is separate from PSCo’s actions to meet the RES.

Thus, under Rule 3661, the use of the RESA to offset the Comanche sunk costs is impermissible.

The Rules are also clear that the 2% cap is firm and that if an “RES plan exceeds this maximum

retail rate impact over the RES planning period, the investor owned QRU shall modify the RES plan

to limit the acquisition of eligible energy resources so as not to exceed the maximum retail rate impact

for the RES planning period.”52 If it is impermissible to expand the RESA cap to use such funds for

the purpose of acquiring additional resources beyond the RES, it follows that RESA funds cannot be

used for things not authorized by the RES either. While the parties to the Stipulation may want to use

the RESA funds as an offset to the sunk costs of the early retirements by converting 1% of the RESA

to a GRSA, this is simply an end run around the statutory constraints and is not permitted by the

statutes or the rules. Conversion of the 1% RESA to a 1% GRSA to recover the sunk costs of coal

units does not fall within the list of eligible costs under the retail rate cap provided by the rules.

Apart from the statutes and rules of the RES, it is perverse to use ratepayer dollars as an offset

to determine whether or not ratepayers will save money and not to count them in the CEP cost

analysis. PSCo claims it modelled the converted 1% RESA into a GRSA to show savings in the CEP

Portfolio model as compared to the Baseline model. Using ratepayer dollars to pay down the cost of

the CEP does not translate to cost savings for ratepayers. While it may give the illusion the CEP is

less costly by masking a rate increase from accelerated depreciation of the coal units, that is only

because the ratepayers have already paid the difference. To use an analogy, it is like taking a dollar

from your wallet and then offering you a $10 item for “sale” at $9. That is no bargain. The use of the

RESA here is just such a “fool’s bargain.” The RESA is a ratepayer funded subsidy that is specifically

51
4 C.C.R. § 723-3:3661(c).
52
4 C.C.R. § 723-3:3661(h)(IV).

14
used to pay only the incremental difference in generating electricity from a renewable source as

compared to a conventional source.53 In other words, the RESA offsets the marginal cost of adding a

renewable energy source in place of a different resource. To use this same amount to discount the

cost of a different resource—in this case, Comanche 1 and 2—gives the illusion that the CEP is a

better deal than it actually is.

IV. CORRECTIONS TO BIASES AND ERRORS IN PSCO’S MODELING

If the Commission permits PSCo to present the CEP Portfolio in Phase II, it is critically

important to PSCo’s captive ratepayers that the modeling assumptions used to develop the net present

value revenue requirement (“PVRR”) of the Baseline and CEP Portfolios are reasonable and do not

intentionally bias an end result. The parties generally agree on this seemingly non-controversial

principle.54 Otherwise, any modeled costs or benefits of the CEP Portfolio will be entirely illusory.

This risk is especially real in light of PSCo’s unequivocal testimony that the proposed Stipulation does

not guarantee cost savings for customers.55 PSCo promises its ratepayers that the CEP Portfolio will

result in “no additional costs to the company’s electricity customers,”56 but notably the Company does

not promise that rates will not increase as a result of the CEP Portfolio. Rather, the Company will

measure “no additional costs” by using Strategist modeling in Phase II to compare the Baseline

Portfolio PVRR and CEP Portfolio PVRR over a 38-year planning period (“Planning Period”).57

A problem with PSCo’s PVRR cost comparison approach is the use of a lengthy Planning

Period to create a cost comparison of two vastly different portfolios means the modeling assumptions

regarding the types of generation resources that will be on the system decades from now and the

53
Decision No. C15-0317; Docket Nos. 14A-0534E and 14A-0535E, March 18, 2015, ¶17.
54
Vol. V, Hr. Tr. at 97-98 (hearing testimony of PSCo witness David Eves). Vol. VII, Hr. Tr. at 156 (hearing testimony
of Staff witness Sharon Podein).
55
Vol. V, Tr. at 72-74 (David Eves hearing testimony acknowledging that the Stipulation contains no procedure to
guarantee that modeled and projected cost savings accrue to ratepayers).
56
Hr. Ex. 126.
57
Hr. Ex. 77, Supporting Testimony of David Eves at 16.

15
fixed costs of those resources bear significantly on the relative PVRR of the competing portfolios at

issue in the Resource Acquisition Period (2016–2024). If the assumptions are unreasonable or

inconsistent, they bias the modeling results. That has indeed occurred here, and PSCo’s modeling

biases can only be fixed by creating an apples-to-apples comparison of the tails of the Baseline

Portfolio and the CEP Portfolio that (1) includes the sunk costs of Comanche Units 1 and 2 in both

portfolios; (2) permits the Strategist to optimize the most economic resource type for generic filler

(i.e., renewable, combined cycle (“CC”) or single-cycle combustion turbine (“CT”)) in the post-RAP

period; (3) does not hard code resource types; and (3) does not burden the combined cycle CC

resources with transmission network upgrade costs that are non-existent for CTs. The annuity method

should also be rejected for consideration of the CEP Portfolio.

A. Comanche Sunk Costs Should Be Included in the CEP Portfolio Cost Calculation.

PSCo’s proposed cost modeling understates the PVRR of the CEP Portfolio by excluding the

sunk costs of Comanche Units 1 and 2 and overstates the PVRR of the Baseline Portfolio with their

inclusion. These sunk costs are $211 million on a nominal basis and $173 million on a NPV basis.58

The Commission should reject PSCo’s proposal to exclude the sunk costs of Comanche Units 1 and

2 from the CEP Portfolio PVRR and include the sunk costs in the Baseline Portfolio PVRR. Book

value costs that will not be avoided in either case should either not be included in the portfolio cost

comparison in either case, or they should be added to the costs of both portfolios.59

PSCo’s decision not to include the sunk costs in its CEP Portfolio PVRR modeling because

the parties to the Stipulation have chosen to pay off the accelerated depreciation costs with another

pot of ratepayer dollars—i.e., the RESA—does not justify this shell game. Misinforming the public

about the costs of the CEP Portfolio is not in the public interest, even if the parties to the Stipulation

58
Hr. Ex. 95E, Answer Testimony of Charles Griffey at 24.
59
Id. at 14.

16
agreed to certain rate adjustments to temporarily mask higher rates caused by accelerating the

depreciation expense of the coal units. If the Commission permits the CEP Portfolio to be presented

in Phase II, PSCo should be ordered to include the Comanche Unit 1 and 2 accelerated depreciation

costs in its Strategist modeling of the CEP Portfolio PVRR.

1. Customers Pay The Sunk Costs of Comanche Units 1 and 2 Whether the Plants
Retire Early or Operate Until the End of Their Useful Lives.

PSCo’s ratepayers will pay the costs of the coal units whether or not the plants operate until

their planned retirement dates or retire early.60 Mr. Eves confirmed the Company’s plans to recover

the Comanche Units 1 and 2 sunk costs at the hearing, as well as the Company’s intention to earn a

return on its investment in the plants at its weighted average cost of capital of 6.78 percent.61

Q: Mr. Eves, is it correct that whether or not the CEP Portfolio is allowed to proceed,
the Company intends to recover a return on and of its investment in Comanche Units
1 and 2?

A: Yes, just through a different vehicle.62

The problem is that the Company ignores the different vehicle in its CEP Portfolio PVRR.

2. Diverting Funds from the RESA Does Not Make the Sunk Costs of the Coal Units
Magically Disappear.

Ignoring the sunk costs by using a different source of ratepayer funds that are not at issue in

this case does not make the costs go away or justify the Company’s modeling. The “different vehicle”

referenced by Mr. Eves will be a 1% charge on customer bills in the form of a GRSA, which PSCo

has not modeled in the CEP Portfolio PVRR and does not intend to do so.63 In response to Mr.

Griffey’s testimony regarding this obvious omission in the modeling of the CEP Portfolio costs,

PSCo’s rebuttal testimony does not admit error, but rather asserts that ignoring the sunk costs of

60
Vol. V, Hr. Tr. at 116.
61
Id.
62
Vol. V, Hr. Tr. at 115.
63
Hr. Ex. 95E, Answer Testimony of Charles Griffey at 25.

17
Comanche Unit 1 and 2 is consistent with the terms of the Stipulation and the Coalition should reserve

opposition to this ratemaking treatment for Proceeding No. 17A-0796E,64 a case that will be decided

after the Commission makes its determination on the Joint Motion.

This is Orwellian logic. First, Mr. Eves acknowledges that “. . . the modeling relies on the

recognition that the RESA reduction offsets the increased depreciation expense during the next seven

to ten years.”65 Second, ignoring the sunk costs in the cost comparison of the CEP Portfolio is a logical

fallacy if the point is to determine if the CEP will cost ratepayers money. The RESA funds are currently

used for renewable programs that benefit the Baseline Portfolio revenue requirement. Even if

undersubscribed, the funds are a ratepayer asset and the Company could file an application to lower

customer bills by decreasing the RESA.66 Thus, while the parties may have agreed to certain rate

adjustments to pay off the accelerated depreciation expense from early plant retirements, that

agreement does not justify exclusion of the Comanche sunk costs from the CEP Portfolio PVRR and

Baseline Portfolio cost comparison, if the same costs are included in the Baseline Portfolio. Such

treatment obscures the fact that, in the Baseline Portfolio, there is approximately $200 million available

to (1) either return to customers, (2) pay down the costs of the portfolio, or (3) buy additional

renewables or distributed generation products that will provide additional value to the Baseline

Portfolio.67 By failing to include the value of this approximately $200 million in the Baseline Portfolio,

PSCo’s Strategist analysis treats the RESA money as if it provided nothing of value. There are a

number of ways to correct PSCo’s modeling errors so there will be an apples-to-apples comparison

of the sunk costs in both portfolios. Including the accelerated depreciation costs of the coal units in

both the Baseline Portfolio and the CEP Portfolio is one way to correct the error.

64
Hr. Ex. 79, Rebuttal Testimony of David Eves at 39 (“We modeled the CEP consistent with the Stipulation.”)
65
Vol. V, Hr. Tr. at 48.
66
Vol. V, Tr. At 120.
67
Hr. Ex. 95E at 24.

18
B. Staff’s Proposal to Allow the Strategist Runs to Economically Select Gas, Wind, and
Solar Resources as Generic Resources in the Post-RAP Period Should Be Adopted.

The Coalition supports Staff’s recommendation that the Strategist portfolios runs should be

optimized to allow the model to economically select gas, wind or solar resources as generic resources

in the Post-RAP period.68

1. PSCo’s Limitation to Thermal Units Does Not Reflect Today’s Market Conditions.

PSCo recommends that generic resources in the post-RAP period be “backfilled” with the

Company’s lowest-cost combustion turbine proposal.69 This means the Strategist model will not be

allowed to make an economic decision regarding which resource type (i.e., wind, solar, CC or CT) is

the most economical “backfill” for resource acquisition period capacity that does not extend to the

end of the planning period. Rather, the model will assume CTs, unless the Company hardcodes a

different result (i.e., a CC as PSCo did for the Baseline Portfolio).

PSCo’s generic backfill proposal is unreasonable based on (1) PSCo’s testimony that the

median cost of current wind bids is $18/MWh for wind and $29.50/MWh for solar70 and (2) Staff’s

testimony reporting a $33/MWh levelized cost of wind energy and $46/MWh levelized cost of solar

energy in the post-RAP for unsubsidized wind.71 It should be no surprise to anyone paying attention

to power markets that renewables are competing with natural gas resources and are expected to do so

even once the PTCs and ITCs phase out. If the facts support cost competitive renewable resources,

it would be arbitrary and capricious to ignore the evidence before the Commission on the basis that

the Company previously utilized thermal resources to backfill generic filler capacity.

68
Hr. Ex. 123, Supplemental Answer Testimony of Sharon Podein at 4.
69
Volume 2 of ERP at Page 2–225.
70
Hr. Ex. 81, Rebuttal Testimony of James Hill at 36.
71
Hr. Ex. 122, Answer Testimony of William Dalton at 6.

19
2. Failing to Include Renewables in the Resource Tail Overstates the Avoided Energy
Cost Savings of the CEP Portfolio.

Failure to include cost competitive resources for generic filler would also bias the PVRR

comparisons. If the Strategist model chooses only thermal resources to fill PSCo’s resource need in

the resource tail period (i.e., 2025–2054), the avoided energy cost on the system will likely be higher

relative to a model that allows renewable resources in the resource tail period.72 This is because thermal

resources have energy costs, and renewable resources do not have any fuel costs. As Mr. Griffey

testified, “… by artificially driving up energy costs for the resource tail, PSCo drives up the overall

avoided energy costs for the entire Planning Period. As a result, the CEP will look like it saves more

in energy costs than is reasonable considering that, in reality, renewable power can be considered for

future resource needs after the RAP.”73

3. Changing the Generic Filler Complies with Decision No. C17-0796-I.

PSCo cross-examined Ms. Podein on the Commission’s prior decisions to use CTs to backfill

the resource tail. Presumably, PSCo will argue Staff’s recommendation is an attack on the Phase I

Order or that the Commission should rely on past precedent. The Commission should review such

argument with skepticism. First, the Phase I Order was not issued with the CEP Portfolio in mind.

As the time the order was issued, the Commission did not have evidence of the Company’s

competitive solicitation median bid pricing or market reports on unsubsidized wind and solar pricing.

Nor was the Commission comparing two wildly different resource portfolios such that the resource

tail issues could entirely drive the portfolio chosen in the RAP.

Second, Decision No. C17-0796-I expressly states that the Commission will consider changes

to modeling assumptions that are “required for the consideration of the CEP Portfolio.”74

72
Hr. Ex. 96, Cross-Answer Testimony of Charles Griffey at 6.
73
Id.
74
Decision No. C17-0796-I at n.14.

20
Circumstances since the Phase I decision have changed dramatically and should be considered in light

of applicability to the CEP Portfolio. Ms. Podein testified: “The introduction of the CEP has brought

up additional things for consideration by the Commission.”75 She also testified:

I believe that the CEP has introduced a new paradigm going forward in resource
acquisition. I think that for the first time what we are seeing is renewable resources are
getting generally deployed on cost effectiveness.

And in the past, the tails haven’t reflected renewable resources, whether they haven’t
been optimized or whether they just didn’t meet the cost burden of getting into the
tail is kind of irrelevant. They just weren’t able to compete in the post-draft years.

Today, they are, and it’s important to consider them, otherwise the model will be
starved, and it will overestimate the costs or the benefits -- underestimate the costs,
overestimate the savings of the renewable resources in the CEP.76

Ms. Podein’s recommendation is consistent with the Company’s reports of robust renewable bids. It

is unreasonable for PSCo to build a model that assumes that wind and solar resource cannot

economically bid in the post-RAP period considering the facts indicate otherwise. The Commission

should adopt Staff’s recommendation.

C. PSCo’s Decision to Hard Code a CC in the Baseline Portfolio With $100 Million of
Transmission Costs That Do Not Exist in the CEP Portfolio Should be Rejected.

PSCo similarly biased the Baseline Portfolio by hardcoding a utility-owned CC unit as the

generic filler to replace Comanche Units 1 and 2 in the year 2034.77 This CC unit does not exist in the

CEP Portfolio model run. PSCo’s arbitrary decision creates fixed cost biases in the model because it

adds almost $100 million in transmission costs for a CC plant that does not exist in the CEP Portfolio.

The CEP Portfolio contains more than 3,000 MW of CTs, but PSCo has not assumed any such costs

for these resources.78 This lack of parity in the treatment of transmission network upgrade costs

between CTs and CCs significantly and seemingly intentionally biases against the Baseline Portfolio

75
Vol. VII, Hr. Tr. at 188.
76
Vol. VII, Hr. Tr. at 159-160.
77
Hr. Ex. 95E Answer Testimony of Charles Griffey at 30.
78
Vol. VII, Hr. Tr. at 159-160 (Mr. Landrum confirming no grid upgrade costs were allocated to CTs).

21
by adding $100 million of speculative transmission costs to the Baseline PVRR, which is wholly

unjustifiable considering that the utility has no idea whether it will replace Comanche Units 1 and 2 in

2034 with a CC or multiple CTs. This single assumption has a material impact on the cost benefit

calculation and, in the lower renewable cost case, represents 47% of the PVRR difference.79 To correct

this error, the CC network upgrade costs should be removed from the modeling.

1. The Company Has No Idea What Generation Resource Will Replace Comanche
Units 1 and 2 at the End of Their Planned Service Lives.

PSCo offered no real explanation for its decision to hard code a CC in the Baseline Portfolio

that does not exist in the CEP Portfolio. Mr. Landrum justified the CC as follows:

In these models, the only difference in the optimized generic plans generated by the
model was the addition of a single CC unit in 2034 to replace Comanche 1 and 2. The
difference between the two runs is clear – only one single unit changed, and during a
year that can reasonably be matched to the retirement of Comanche 1 and 2. As such
it is logical that the 2034 unit in the generic expansion plan can be considered “business
as usual” Comanche replacement.80

At first, it may seem “logical” to replace two large coal units with a large CC at the same site

if there will be transmission capacity at the site. CCs are often placed in brownfield sites near existing

transmission and gas infrastructure.81 However, Mr. Landrum also testified that the Company has no

idea where it will put replacement resources for Comanche 1 and 2 when the units reach their normal

retirement dates or whether the Company will actually replace the units with CCs.82 He further testified

that locating the CC at the existing Comanche site with sufficient transmission capacity may not be

feasible because of a lack of existing gas supply at the site.83 This begs the question why the Company

chose to hardcode a CC to replace Comanche 1 and 2 in the Baseline Portfolio if there isn’t sufficient

gas supply at the existing site. There is no reasonable answer to this question other than to drive up

79
Hr. Ex. 95E, Answer Testimony of Charles Griffey at 37.
80
Hr. Ex. 95E, Answer Testimony of C. Griffey at Attachment CSG-4.
81
Id. at 35.
82
Vol. VII, Hr. Tr. at 35-36.
83
Hr. Ex. 82, Rebuttal Testimony of Jon Landrum at 18.

22
the costs of the Baseline Portfolio. 84 This is demonstrated by evidence that, in the CEP Portfolio, over

3,000 MW CTs are added by the year 2034 (i.e., the year the CC is added to the Baseline case).85 PSCo

assigns no network upgrade costs to these CTs and over $100 million in transmission network upgrade

costs to the 658 MW CC in the Baseline Portfolio.86 Indeed, Company witness Thomas Green agreed

that transmission systems are based on power flows and that, all things being equal, the system upgrade

costs for 3,000 MW of CTs are the same as the system upgrade costs for 3,000 MW of CCs.87

Staff witness Sharon Podein agreed that the Company’s proposal biases the results. She

testified:

So to model a CC, and burden that portfolio with such a large investment simply by
hardwiring it in there, and not allowing it to choose and optimize, and given a choice
of wind, we have a problem with.

And we’ve talked to the Company about it, and because of the time constraints in this
docket, we didn’t have enough time to resolve it, but it continues to be a question and
it continues to be an issue for staff.88

The transmission costs of the CC should be removed from the model.

2. PSCo’s Hardcoded CC Drives Illusory Net PVRR Benefit for the CEP, But Even
Its Modeling Shows That Operating the Coal Plants To The End of Their Service
Lives Saves Ratepayers Money.

The CC helps drive the illusory net benefit of the CEP Portfolio relative to the Baseline

Portfolio. The CC unit creates considerable fixed costs in the resource tail that impact the PVRR of

the Baseline Portfolio. PSCo assumed a transmission interconnection cost of $25/kw-year for a

generic CC. PSCo then escalates this amount with inflation, such that in 2034 the transmission

network costs are almost $28/kw-year.89 The net present value of that cash flow beginning in 2034

84
Hr. Ex. 95E, Answer Testimony of Charles Griffey at 35.
85
Id at 36.
86
Id.
87
Vol. VII, Tr. at 87-88.
88
Vol. VII, Hr. Tr. at 165.
89
Hr. Ex. 95E at 37.

23
through the end of the analysis period is $82 million—a clear example of tail costs wagging the

portfolio PVRR in the RAP.

The impact of this CC is even more apparent after PSCo changed its modeling to reflect the

annuity method. Attachment S-CSG-1 to Hearing Exhibit 99E shows PSCo’s annuity modeling

calculations. These annuity runs show that Portfolio 2 (the Baseline case) saves ratepayers money

compared to the CEP Portfolio through the year 2033. In the year 2034, Comanche Unit 1 is retired

and replaced with the 658 MW CC whose costs are inflated as previously described. It is only in 2034

that the CEP Portfolio results in annual cost savings relative to Portfolio 2.90 The purported savings

accelerate when Comanche Unit 2 is retired. On a present value basis under PSCo’s method, the CEP

Portfolio does not breakeven until the year 2038, fully twenty years from now, and after Comanche

Units 1 and 2 have retired.91 Continued operation of the coal units until the end of their useful

lives therefore saves ratepayers money relative to the CEP.92

Only the addition of a CC laden with inflated costs in 2034 in Portfolio 2 allows the CEP to

begin accruing relative value in the backend of the Planning Period. Moreover, PSCo did not include

the sunk costs of Comanche Units 1 and 2 in these annuity runs. While PSCo’s calculations indicate

the CEP Portfolio finally breaks even in 2038, if sunk cost recovery is treated properly, the breakeven

would not occur until 2048.93 In short, operating Comanche 1 and 2 is cheaper than the CEP for the

expected life of the units in any instance. Rule 3601 states that it is “the policy of the State of Colorado

that a primary goal of electricity resource planning is to minimize the net present value of revenue

requirements.” Retiring Comanche 1 and 2 before the end of their service lives violates this policy.

90
Hr. Ex. 99E, Surrebuttal Testimony of Charles Griffey at 5.
91
Id. at 11.
92
Id.
93
Id.

24
D. The Annuity Method Is Not Appropriate for Analyzing the CEP.

The Coalition requests that the Commission reject the use of the Annuity Method for the CEP

Portfolio and Baseline Portfolio Strategist runs and use the Replacement Method.

1. The Annuity Method is Inconsistent With PSCo’s Testimony and an Unreasonable


Attempt to Rectify Evaporating “Illustrative” CEP Portfolio Cost Savings.

To show that the CEP can work and save customers money, PSCo witness James Hill

presented what the Company called “illustrative modeling” of the CEP Portfolio costs relative to the

Baseline Portfolio.94 This illustrative modeling was presented in Table JFH-1 of Mr. Hill’s

Supplemental Answer Testimony and originally purported to show the CEP Portfolio may save

ratepayers $176 million on cumulate PVRR basis relative to the Baseline Portfolio using base pricing

of $20/MWh wind and $30 MWh solar and $39 million using base pricing + 20% pricing for wind

and solar.95 Because of Mr. Griffey’s scrutiny of the Company’s calculations in Table JFH-1, the

illustrative cost savings in Table JFH-1 began to evaporate. By the time the hearing began, PSCo had

presented three versions of the illustrative modeling making two corrections for “mistakes” adding a

significant amount of zero-cost “filler capacity” in the CEP Portfolio.96 PSCo presented the final

version of the illustrative modeling on the eve of the hearing.97 On February 5, 2018, revised Table

JFH-1 showed $89 million of cumulative CEP Portfolio PVRR benefit under the base pricing and $47

million and PVRR cost to ratepayers using the base + 20% for wind and solar.

Notably, these CEP Portfolio PVRR values do not include transmission interconnection and

system network upgrade costs for bids from the competitive solicitation, except for a potential Badger

Hills substation or switching station.98 Nor do they include the sunk costs of the coal plants. Similarly,

94
Hr. Ex. 80, Supplemental Direct of James Hill at 14 (Table JFH-1).
95
Portfolio 3 and Portfolio 5 are the CEP Portfolio cases, with Portfolio 3 assuming $20/MWh wind and $30/MWh
solar pricing and Portfolio 5 assuming a 20% escalation.
96
Hr. Ex. 83, Rebuttal Testimony of James Hill at 35. See also Hr. Ex. 124.
97
Hr. Ex. 124.
98
Hr. Ex. 80, Supplemental Direct of James Hill at 15, 31.

25
the PVRR calculations are laden with the hard-coded CC in the Baseline Portfolio and PSCo’s

assumption to use only thermal resources for generic filler. In short, what the February 4, 2018 Revised

Table JFH-1 showed is that the Company had not met its burden to show the CEP Portfolio can work

and save ratepayers money on a PVRR basis.

Faced with vanishing CEP Portfolio benefits, the Company sua sponte revised its modeling

methodology in its rebuttal case. Despite Mr. Hill’s testimony in Phase I that the annuity method was

unreasonable to use when comparing different resource types,99 the Company claimed it erred in by

using the Replacement Method to model illustrative savings rather than the Annuity Method.100 The

Company then renamed Table JFH-1 “The Replacement Method.”101 Using an Annuity Method, the

Company’s Rebuttal case numbers swung in favor of the CEP to show a purported $285 million of

savings under the Portfolio 2 base wind and solar pricing and $134 million of savings for the base +

20% case.102 The annuity method “swing” is somewhere around $196 million for the Portfolio 2 base

pricing and $181 million for the base + 20% case.103

2. The Phase I Order Does Not Prescribe the Annuity Method for Analyzing the CEP.

PSCo now claims Decision No. C17-0316 requires it to use the annuity method, but that is

not the case. First, the Phase I decision was issued when the CEP did not exist. The context of the

Phase I Order was to evaluate a purchased power contract with a shorter life than a utility-owned

generating unit when both are an alternative to serving a new need for a resource. This is different

than evaluating resources comparing early retirements.104 The CEP changes the facts that were at issue

in Phase I. Using the annuity method now means the CEP Portfolio is compared not only to the

operation of the retiring PPAs, but mainly to a speculative CC resource that does not enter service

99
See Phase I Hr. Tr. II at 262 (Feb. 2, 2017) (“The replacement method, that’s the Company’s preferred approach.”)
100
Hr. Ex. 83, Rebuttal Testimony of James Hill at 35.
101
Id.
102
Id. at 38.
103
Based on the difference between the changing Table JFH-1s.
104
Hr. Ex. 99E, Surrebuttal of Charles Griffey at 9.

26
until 2034.105 Most of the evaluation of the CEP Portfolio is actually a comparison of the CEP

resources against this hard-coded CC (years 2034–2054).106 Indeed, this creates a false comparison and

overstates the CEP Portfolio benefits because it assumes PSCo cannot replace Comanche Units 1 and

2 with economic resources at the end of their service lives. PSCo’s introduction of this modeling also

contradicts its prior position that bids should be compared to the same technology.107

More specifically, the annuity method should not be used for the CEP analysis because it will

compare utility-build escalated generic resource (i.e., the hard-coded CC) in the Baseline Portfolio to

unescalated power purchases in the CEP Portfolio. This drives the economic comparison of the two

portfolios, instead of examining the relative value of retiring the units today and replacing the units

with power purchases.108 Uninflated renewal purchase power agreements (“PPAs”) will be compared

to a CC that was assumed to have its cost escalated 40% for general inflation.109 Not only are the PPAs

not assumed to go up with general inflation (which is 71% by 2045 using 2% inflation), they are

implicitly assumed to have access to the same level of tax credits as are provided today. This means a

solar PPA renewal in 2045 would avoid a 71% cost increase and obtain a 30% investment tax credit.110

Considering the state of the law on PTCs and ITCs and Staff’s testimony regarding the increased

levelized cost of energy for unsubsidized wind and solar, these are not reasonable assumptions.

Under these conditions, it is little wonder than PSCo’s annuity method shows a $285 million

“savings” for the CEP Portfolio. These savings are manufactured by the assumptions and method

used. As Mr. Griffey stated, along with PSCo’s ignoring the sunk cost recovery of the coal units in the

CEP Portfolio, it is inconceivable that any units, not just the Comanche units, would survive annuity

105
Id.
106
Id.
107
See Phase I, Hr. Ex. 58, Response to Discovery Request CIEA 801. See also PSCo Statement of Position at 43 (Feb.
24, 2017).
108
Hr. Ex. 99E, Surrebuttal of Charles Griffey at 9.
109
Id. at 12.
110
Id.

27
retirement analysis.111 This demonstrates the absurdity of this method for examining the CEP’s relative

costs and benefits. It should not be used. Rather, the replacement method should be used. If the

Commission denies this change despite the significantly changed circumstances of the CEP, the

Coalition urges the Commission to order PSCo to present base optimization runs using both methods,

as reflected in Staff’s bookend approach.

V. CORRECTIONS TO THE STIPULATION

A. The Ownership Percentages Are Not In the Public Interest.

The Commission should reject the utility ownership percentages. If certain resources are more

cost effective, they should be chosen regardless of ownership. Utility plant ownership creates ratepayer

risk related to stranded costs.112 If the Commission does not reject the percentages outright, the

Coalition agrees with the direction of Commissioner Koncilja’s hearing comments related to requiring

the presentation of a “least-cost” CEP Portfolio without the ownership constraints.

B. The Commission Should Adopt Hard Caps to Protect Ratepayers.

When the Commission issued the Phase I Order it was not faced with a resource portfolio

that would potentially result in gratuitous need of 660 MW and an incremental $2.5 billion of

investment. The facts have changed. The Commission should approve hard cost caps that limit the

cost of any utility-owned resources as a result of the CEP Portfolio to the competitive bid price.

PSCo’s affiliates have agreed to such cost hard cost caps in other jurisdictions.113 The Commission

should mandate similar protections for its ratepayers.

111
Id.
112
Vol. V, Tr. at 123–124.
113
See, e.g. Hr. Ex. 127, Unanimous Stipulation at 8.

28
VI. PHASE II PROCEDURES

PSCo’s modeling has contained numerous mistakes and errors. The Coalition requests the

opportunity to conduct expedited discovery on the 120-day report and the modeling runs prior to the

deadline for submitting comments.

VII. CONCLUSION

PSCo has not met its burden to demonstrate that the Joint Motion and Stipulation are in the

public interest and the relief requested therein cannot be granted as a matter of law. If the Commission

does not reject the Joint Motion, the Coalition requests that the Commission modify the Stipulation

and modeling procedures as set forth above.

WHEREFORE, The Coalition of Ratepayers respectfully submits its Statement of Position.

Dated: February 21, 2018.

Respectfully submitted,

/s/ Shayne Madsen _______________________


Shayne Madsen, #8750
Meredith Kapushion, #36772
Madsen & Associates, P.C.
7441 Old Mill Trail
Boulder, CO 80301
smadsen@COlawyer.net
mkapushion@COLawyer.net
(ph) 303-588-1693

Meghan Griffiths
TX State Bar No. 24045983
Jackson Walker LLP
100 Congress Ave., Suite 1100
mgriffiths@jw.com
(ph) 512-236-2363

ATTORNEYS FOR COALITION OF


RATEPAYERS

29
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 the 21st day of February, 2018.

_/s/Shayne Madsen_______________________
Shayne Madsen

30
SERVICE LIST

*Bill Dudley bill.dudley@xcelenergy.com PSCo


*Christopher Irby christopher.m.irby@xcelenergy.com PSCo
*Greg Sopkin gsopkin@wbklaw.com PSCo
*Matthew Larson mlarson@wbklaw.com PSCo
*Caitlin Shields cshields@wbklaw.com PSCo
*Alice Jackson alice.k.jackson@xcelenergy.com; PSCo
*Robin Kittel robin.kittel@xcelenergy.com; PSCo
Yrene Nunez yrene.nunez@xcelenergy.com PSCo
Glenda Richey glenda.richey@xcelenergy.com; PSCo

*Debra Kalish kalishd@bouldercolorado.gov Boulder


*Matt Lehrman lehrmanm@bouldercolorado.gov Boulder
*Heather Bailey baileyh@bouldercolorado.gov Boulder
*Jonathan Koehn koehnj@bouldercolorado.gov Boulder
*Mary Bisset bissetm@bouldercolorado.gov Boulder

#Chris Colclasure chris.colclasure@state.co.us CDPHE Air Division (Amicus)


#Barbara Boyd barbara.boyd@coag.gov CDPHE Air Division (Amicus)

*#Michelle Brandt King mbking@hollandhart.com CEC


*#Emanuel Cocian etcocian@hollandhart.com CEC
*Connie Scribner CMScribner@hollandhart.com CEC
*Kayla Hall KLHall@hollandhart.com CEC
*Adele Lee ACLee@hollandhart.com CEC

#Clay Clarke clay.clarke@coag.gov CEO


#Chris Worley chris.worley@state.co.us CEO
#Lindsey Wedewer lindsey.wedewer@state.co.us CEO
#Barbara Boyd barbara.boyd@coag.gov CEO

Gene Camp gene.camp@state.co.us CPUC (Trial Staff)


Sharon Podein sharon.podein@state.co.us CPUC (Trial Staff)
Paul Caldara Paul.Caldara@state.co.us CPUC (Trial Staff)
Rebecca Lim Rebecca.Lim@state.co.us CPUC (Trial Staff)
Erin O’Neill Erin.ONeill@state.co.us CPUC (Trial Staff)
Ron Davis ron.davis@state.co.us CPUC (Advisory Staff)
Bob Bergman Bob.Bergman@state.co.us CPUC (Advisory Staff)
Keith Hay keith.hay@state.co.us CPUC (Advisory Staff)
James Lester James.Lester@state.co.us CPUC (Advisory Staff)

43
Paul Gomez Paul.Gomez@coag.gov CPUC (Commission Counsel)
Erin McLauthlin Erin.McLauthlin@coag.gov CPUC (Commission Counsel
*#Dave Nocera dave.nocera@coag.gov CPUC Staff
*#Michael Santisi Michael.Santisi@coag.gov CPUC Staff
Melvena Rhetta-Fair melvena.rhetta-fair@state.co.us CPUC

*#Mark Detsky mdestky@dietzedavis.com CIEA


*#Gabriella Stockmayer gstockmayer@dietzedavis.com CIEA
*#Bill Monsen wam@mrwassoc.com CIEA
*#Warren Wendling w.l.wendling@q.com CIEA
*#Julie Wolfe Julie@dietzedavis.com CIEA

*#Richard Fanyo rfanyo@polsinelli.com Climax


Rose Tinnell rtinnell@polsinelli.com Climax

*Vince Calvano vincecalvano@gmail.com COSEIA


*Rebecca Cantwell rcantwell@coseia.org COSEIA

Ellen Kelman ekelman@laborlawdenver.com IBEW Local 111

*#Lisa Tormoen Hickey lisahickey@newlawgroup.com Interwest Energy Alliance

Judith Matlock Judith.matlock@dgslaw.com Invenergy


Matt Hartford Matt.hartford@dgslaw.com Invenergy
Greg Leuchtmann gleuchtmann@invenergyllc.com Invenergy

*Randolph W. Starr Randy@starrwestbrook.com Joint Cooperative Movants


*Delvan D. Worley dworley@holycross.com Joint Cooperative Movants
*Diana Golis dgolis@holycross.com Joint Cooperative Movants
Michael Westbrook Mike@starrwestbrook.com Joint Cooperative Movants
Diane Johnson djohnson@yvea.com Joint Cooperative Movants
*Amy Watson awatson@irea.coop Joint Cooperative Movants
*Patrick Mooney pmooney@irea.coop Joint Cooperative Movants
*Gregg Kampf gkampf@hfak.com Joint Cooperative Movants
*Thomas Walch twalch@gvp.org Joint Cooperative Movants

*#Thomas Dixon thomas.dixon@coag.gov OCC


*#Brent Coleman brent.coleman@coag.gov OCC
*#Chris Neil chris.neil@state.co.us OCC
*#Cory Skluzak Cory.Skluzak@state.co.us OCC
*#Tim Villarosa tim.villarosa@state.co.us OCC
*#Ingrid Hassell ingrid.hassell@coag.gov OCC
*#Chere Mitchell chere.mitchell@state.co.us. OCC

Leslie Glustrom lglustrom@gmail.com Intervenor

44
*#Susan Eckert susaneckert.sellc@comcast.net RMELC/CBCTC
*#Joseph Santarella jmsantarella.sellc@comcast.net RMELC/CBCTC

David Rhodes rhodesd@southwestgen.com Southwest Gen


John Putnam jputnam@kaplankirsch.com Southwest Gen

*Kevin Fox kfox@kfwlaw.com sPower


*Scott Dunbar sdunbar@kfwlaw.com sPower

*Michael Hiatt mhiatt@earthjustice.org Vote Solar


*Rick Gilliam rick@votesolar.org Vote Solar
*Eleanor Greer egreer@earthjustice.org Vote Solar

*#Erin Overturf erin.overturf@westernresources.org WRA


*#Gwen Farnsworth gwen.farnsworth@westernresources.org WRA
*Robert Harris rob.harris@westernresources.org WRA
Penny Anderson penny.anderson@westernresources.org WRA
Robin Quarrier lawclerk@westernresources.org WRA

*Denotes persons eligible to receive confidential proprietary information pursuant to the


Commission’s Rules on Confidentiality, 4 CCR 723-1100-1102.

#Denotes persons eligible to receive confidential proprietary information pursuant to the


Commission’s Rules on Confidentiality, 4 CCR 723-1100-1102.

45