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PROCEEDING NO.

17A-0797E

RE: IN THE MATTER OF THE § BEFORE THE PUBLIC


APPLICATION OF PUBLIC SERVICE §
COMPANY OF COLORADO TO § UTILITIES COMMISSION OF THE
MODIFY THE DEPRECIATION §
SCHEDULES FOR THE EARLY § STATE OF COLORADO
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 §
Colorado PUC E-Filings System

THE APPROVAL OF THE COLORADO §


ENERGY PLAN PORTFOLIO IN §
PROCEEDING NO. 16A-0396E. §

SURREBUTTAL TESTIMONY OF CHARLES S. GRIFFEY

ON BEHALF OF

The Coalition of Ratepayers

July 9, 2018

PUBLIC VERSION - REDACTED

NOTICE OF CONFIDENTIALITY:
A PORTION OF THIS DOCUMENT HAS BEEN FILED UNDER SEAL, PURSUANT
TO 4 CCR 723-1101, PROCEDURES RELATING TO CONFIDENTIAL INFORMATION
FILED WITH THE COMMISSION IN A PROCEEDING

Highly Confidential Testimony: Pages 5, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 30, 31, 36
Highly Confidential Attachment: Exhibit CSG SR 2
PROCEEDING NO. 17A-0797E

RE: IN THE MATTER OF THE § BEFORE THE PUBLIC


APPLICATION OF PUBLIC SERVICE §
COMPANY OF COLORADO TO § UTILITIES COMMISSION OF THE
MODIFY THE DEPRECIATION §
SCHEDULES FOR THE EARLY § STATE OF COLORADO
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. §

EXECUTIVE SUMMARY

Mr. Griffey’s Surrebuttal testimony addresses Public Service Company of Colorado’s

(PSCo) rebuttal testimony regarding:

 Cost impacts of the Tax Cut and Jobs Act (TCJA) and the recently dismissed rate
case;

 PSCo’s claim that $23.1 million in savings should be added to the Preferred CEP
portfolio compared to the Preferred ERP portfolio;

 Changes PSCo made to the resource tail and natural gas prices that create fictional
“savings” for the Preferred CEP portfolio; and

 Whether PSCO’s newly proposed Colorado Energy Plan Adjustment (CEPA) rider
is in the public interest.

Mr. Griffey demonstrates that PSCo incorrectly calculated the savings associated with the

TCJA by selectively applying a twenty-one percent (21%) tax rate to the revenue requirement for

Surrebuttal Testimony of Charles S. Griffey


Page 1
a selective subset of resources and applying a thirty-five percent (35%) rate to the revenue

requirement for the plant replacing Comanche 1 and 2 in the Preferred ERP portfolio. PSCo’s

claimed $23.1 million of savings are eliminated and there are savings for the Preferred ERP

portfolio when the same tax rate is properly applied to the revenue requirement of all the relevant

resources in the Preferred ERP and CEP portfolios. In addition, Mr. Griffey observes that the

mismatch in the tax rate used for the different resources biases PSCo’s cost calculations in favor

of the CEP.

Mr. Griffey’s discovery on the TCJA impacts also revealed that PSCo changed the resource

tail and natural gas prices in the Preferred CEP portfolio in a manner that unfairly advantages the

CEP portfolio relative to the ERP portfolio by introducing a new, low cost unit type in the CEP

portfolio that has access to lower gas prices. As a result, the savings claimed for the Preferred CEP

do not accurately represent the costs of the CEP to ratepayers. Because of these cost errors, the

transmission issue identified in his Cross-Answer testimony, and the wind degradation issue

identified by Staff in Docket No. 16A-0396E, the early retirement of Comanche 1 and 2 will cost

ratepayers $284 million more on a net present value (NPV) basis than continued operation of

Comanche 1 and 2 through the end of the planning period.

Mr. Griffey also continues to recommend the Commission give little weight to the

economic modeling results after Comanche 1 and 2 have retired because the cost modeling is

essentially a comparison of (1) the assumed combined cycle gas turbine (CCGT) built in 2034 in

the Preferred ERP portfolio to (2) the assumed new resource type and gas prices that PSCo

introduces in the resource tail in the Preferred CEP portfolio. The net present value or revenue

requirements upon the retirement of Comanche 2 in 2036 shows that the Preferred CEP portfolio

costs ratepayers $577 million on a nominal basis and $299 million on a net present value basis.
Surrebuttal Testimony of Charles S. Griffey
Page 2
Any benefits or costs after that time are too speculative to rely upon, and no one is accountable for

their delivery. The relief requested in this application is therefore not in the public interest because

it is not cost-effective to retire Comanche 1 and 2 early.

Mr. Griffey also shows the CEPA proposal, in lieu of the prior General Rate Service

Adjustment (GRSA), is not in the public interest for other reasons. The CEPA, like the GRSA,

gives the utility an opportunity to over-earn. Nor PSCo did rebut Mr. Griffey’s earlier critique of

the GRSA (which applies equally to the CEPA) that the utility has not demonstrated that a GRSA

will save ratepayers money relative to simply taking accelerated depreciation. As Mr. Griffey

explains, PSCo’s economic analysis is opaque and does not demonstrate what PSCo purports.

PSCo claims in the 120 Day Report that taking accelerated depreciation as it occurs has a NPV

cost to ratepayers of $110 million on a total company basis. However, in this case, the NPV cost

to retail ratepayers of the CEPA proposal is $121.4 million, and, including wholesale, the NPV

cost is $133 million. Thus, the net impact of the CEPA is to increase costs to ratepayers by $23

million on a NPV basis. The costs of the CEPA are obviously real, but PSCo’s calculation of those

costs remains a moving target. PSCo has not demonstrated that its new CEPA proposal provides

customer savings. PSCo’s proposal is not in the public interest and should be rejected.

Finally, in response to PSCo’s proposal to revert the Renewable Energy Standard

Adjustment (RESA) to 2% in 2028, Mr. Griffey reiterates his recommendation that the RESA

should be reduced in 2021. Based on PSCo’s projected RESA over-collections, it is self-evident

that ratepayers should not be charged the full 2% beginning in 2021. The fact that that the RESA

would not be 2% in the business-as-usual case makes it harder for PSCo to justify not counting the

GRSA/CEPA as a cost of the CEP. If, in 2028, there is a need for a 2% RESA, then the

Commission can reinstate it at that time.


Surrebuttal Testimony of Charles S. Griffey
Page 3
RE: IN THE MATTER OF THE § BEFORE THE PUBLIC
APPLICATION OF PUBLIC SERVICE §
COMPANY OF COLORADO TO MODIFY § UTILITIES COMMISSION OF THE
THE DEPRECIATION SCHEDULES FOR §
THE EARLY RETIREMENT OF § STATE OF COLORADO
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. §

TABLE OF CONTENTS

EXECUTIVE SUMMARY .............................................................................................................2

I.  INTRODUCTION AND SUMMARY ................................................................................7 

II.  FLAWS IN PSCO MODELING .........................................................................................9 

A.  ERRORS IN THE TCJA AND DISMISSED RATE CASE IMPACTS.................9 

B.  NEW LOW COST GENERIC REPLACEMENT COMBUSTION TURBINES


HAVE BEEN ADDED TO THE CEP PORTFOLIO............................................17 

III.  THE CEPA IS NOT IN THE PUBLIC INTEREST..........................................................32 

IV.  CONCLUSION ..................................................................................................................35 

Surrebuttal Testimony of Charles S. Griffey


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LIST OF EXHIBITS

CSG-SR-1 Errors in PSCo Calculation of Impact of Dismissed Rate Case

CSG-SR-2 Summary of Annual Economics of Early Retirement of Comanche 1 and 2

LIST OF FIGURES

CSG-SR-1 Impact of TCJA, Dismissed Rate Case, and CEPA Start Date Using Correct
Approach

CSG-SR-2 Comparison of “REPL 5 190 MW” Unit in CEP to the CT in the ERP

CSG-SR-3 Capacity Difference Between Preferred ERP and CEP Portfolios

CSG-SR-4 Comparison of “REPL 5 190 MW” Unit in CEP to the Generic CCGT in ERP

CSG-SR-5 Comparison of Natural Gas Prices

CSG-SR-6 Summary of Economics of Early Retirement of Comanche 1 and 2

CSG-SR-7 Summary of Annual Economics of Early Retirement of Comanche 1 and 2

Affidavit

Surrebuttal Testimony of Charles S. Griffey


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GLOSSARY OF ACRONYMS AND DEFINED TERMS

Acronym/Defined Term Meaning

BAU Business As Usual case where Comanche 1


and 2 continue operating
CCGT Combined Cycle Gas Turbine
CEP Colorado Energy Plan with Comanche 1 and 2
retired early
CEPA Colorado Energy Plan Adjustment
CT Combustion Turbine
GRSA General Rate Schedule Adjustment
ITC Investment Tax Credit
NPV Net Present Value
PPA Power Purchase Agreement
Preferred CEP Preferred Colorado Energy Plan portfolio
Preferred ERP Preferred Energy Resource Plan portfolio
PSCo Public Service Company of Colorado
PTC Production Tax Credit
PVRR Present Value Revenue Requirements
RESA Renewable Energy Standard Adjustment
TCJA Tax Cut and Jobs Act

Surrebuttal Testimony of Charles S. Griffey


Page 6
PROCEEDING NO. 17A-0797E

RE: IN THE MATTER OF THE § BEFORE THE PUBLIC


APPLICATION OF PUBLIC SERVICE §
COMPANY OF COLORADO TO MODIFY § UTILITIES COMMISSION OF THE
THE DEPRECIATION SCHEDULES FOR §
THE EARLY RETIREMENT OF § STATE OF COLORADO
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. §

1 SURREBUTTAL TESTIMONY OF CHARLES S. GRIFFEY

2 I. INTRODUCTION AND SUMMARY

3 Q. PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS ADDRESS.

4 A. My name is Charles S. Griffey, and I am a consultant providing services to the energy

5 sector. My address is 2918 Todville Road, Seabrook, Texas 77586.

6 Q. ARE YOU THE SAME CHARLES S. GRIFFEY WHO PREVIOUSLY TESTIFIED

7 ON BEHALF OF THE COALITION OF RATEPAYERS IN THIS PROCEEDING

8 AND PROCEEDING NO. 16A-0396E?

9 A. Yes.

Surrebuttal Testimony of Charles S. Griffey


Page 7
1 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?

2 A. I address PSCo’s rebuttal testimony on the impacts of the Tax Cut and Jobs Act (TCJA)

3 and recently dismissed rate case on the revenue requirements of continuing to operate

4 Comanche 1 and 2 and early retirement of the units. I address PSCo’s false claim in its

5 rebuttal testimony that the Preferred CEP portfolio is a further $23.1 million more cost-

6 effective because of the effect of these impacts. Discovery on this issue revealed significant

7 problems in PSCo’s economic modeling of the Preferred CEP portfolio, and I update my

8 previous testimony based on that discovery. I also address the problems with PSCo’s newly

9 proposed plan to implement a Colorado Energy Plan Adjustment rider (CEPA) in lieu of

10 its previously proposed General Rate Schedule Adjustment (GRSA) and its continued

11 request to earn a return on the unamortized amount of its proposed regulatory asset for the

12 CEP. I respond to PSCo’s claims on these issues and show that its rebuttal testimony does

13 not change any of the facts nor any of the recommendations I presented in my Answer

14 testimony or in my Cross-Answer testimony.

15 Q. HOW IS YOUR TESTIMONY ORGANIZED?

16 A. Since the underlying issue for this case is the question of whether early retirement of

17 Comanche 1 and 2 is cost-effective, I begin with a discussion of the flaws in PSCo’s

18 economic modeling in Section II. In Section III, I address the problems associated with

19 PSCo’s proposed ratemaking treatment of the CEPA and PSCo’s failure to address the

20 transparency issues related to its overall treatment of the CEPA.

Surrebuttal Testimony of Charles S. Griffey


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1 II. FLAWS IN PSCO’S MODELING

2 A. ERRORS IN THE TCJA AND DISMISSED RATE CASE IMPACTS

3 Q. COMMISSION DECISION NO. C18-0141-I ORDERED PSCO TO EXPLAIN THE

4 IMPACT OF THE TAX CUTS AND JOB ACT ON THE COSTS OF THE CEP.

5 HOW HAS PSCO DEALT WITH THE TCJA IN THE 120 DAY REPORT?

6 A. In the 120 Day Report, PSCo claims that the impacts of the TCJA were included for the

7 refreshed bids and Comanche 1 and 2. PSCO states:

8 While the overall net effect of the TCJA is a decrease to our revenue requirements,
9 the TCJA does increase the revenue requirements of certain individual tax
10 advantaged investments such as wind and solar. The Company therefore
11 developed the final ongoing costs associated with BOT projects in accordance
12 with the new TCJA provisions. Moreover, bidders were afforded the opportunity
13 to revise their pricing to account for TCJA via the bid affirmation and refresh
14 process described in Section 6. To make the Company’s projections of the costs
15 of continued operation and early retirement of Comanche 1 and Comanche 2
16 comparable to the refreshed bids, the Company also adjusted the ongoing revenue
17 requirements for Comanche 1 and Comanche 2 as discussed in Section 5.1

18 and

19 Subsequent to that filing, the Tax Cuts and Jobs Act (“TCJA”) was passed into
20 law, which required the previously provided revenue requirement projections for
21 Comanche 1 and Comanche 2 to be updated in order to reflect the collective
22 impacts of TCJA. These updated revenue requirements have been included in the
23 portfolio modeling for this 120-Day Report.2

24 Thus, in the 120 Day Report results, PSCo included the effect of the TCJA on the bids,

25 build-own-transfer (BOT) projects, and Comanche 1 and 2 in its cost calculations.3 In the

26 120 Day Report, PSCo separately makes an estimate of the impact of the recently dismissed

1
120 Day Report at 54.
2
120 Day Report at 69.
3
PSCo confirmed this in its response to request for information CR2(1-10).
Surrebuttal Testimony of Charles S. Griffey
Page 9
1 rate case on the cost evaluation, and reports a change of $26 million in favor of the

2 Preferred CEP portfolio.4

3 Q. WHAT CLAIM DOES PSCO MAKE IN THIS CASE WITH RESPECT TO THE

4 TCJA AND THE DISMISSED RATE CASE?

5 A. PSCo states in this case it updated the revenue requirements of Comanche 1 and 2 (and

6 common costs) for the TCJA, as well as for the impact of the rate case that was recently

7 dismissed and beginning the CEPA in 2021.5 PSCo claims that these impacts would result

8 in an additional $23.1 million savings for the Preferred CEP portfolio relative to the

9 Preferred ERP portfolio because the impacts (including the TCJA) were not included in

10 the modeling for the 120 Day Report for anything but the refreshed bids.6 Ms. Perkett

11 states:

12 Overall, the new present value of the revenue requirements is


13 approximately $23.1 million less than the amount presented in
14 Supplemental Direct Testimony, Attachment MAM-1. In this
15 proceeding, the revenue requirements are shown only for Comanche
16 1 and Comanche 2 and only for the plant assets. Thus, it does not
17 show the revenue requirements for Comanche 3 and the revenue
18 requirements do not include any of the other costs such as operating
19 and maintenance expense, property taxes, and RESA collections, as
20 well as a shorter period represented for the net present value. While
21 I am not a Strategist modeling expert, my understanding is that when
22 these additional costs are included along with the present value of
23 revenue requirement calculated in this proceeding, it results in the
24 amount of approximately $26 million referenced as the savings as
25 between the Preferred CEPP and Preferred ERP in the 120-Day
26 Report filed in Proceeding No. 16A-0396E.7

4
120 Day Report at 70.
5
Perkett Rebuttal at 13.
6
Perkett Rebuttal at 13, Trowbridge Rebuttal at 36.
7
Perkett at 22-23.
Surrebuttal Testimony of Charles S. Griffey
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1 Ms. Perkett is claiming that the $23.1 million in this case, when combined with the changes

2 to the NPV of the revenue requirement of Comanche 3, operations and maintenance

3 expense, and RESA collections, leads to the $26 million amount cited in the 120 Day

4 Report. In contrast, the 120 Day Report claims that the impact of the dismissed rate case

5 by itself results in an additional $26 million savings for the Preferred ERP portfolio

6 compared to the Preferred ERP portfolio.8

7 Q. IS PSCO’S ESTIMATE IN THIS CASE OR IN THE 120 DAY REPORT

8 ACCURATE?

9 A. No, neither calculation is accurate.

10 Q. ON A CONCEPTUAL LEVEL, PLEASE EXPLAIN WHY PSCO’S TCJA COST

11 IMPACT ESTIMATES ARE WRONG.

12 A. PSCo’s approach is terribly flawed because it assesses the impacts of the TCJA on only a

13 subset of the units that are included in the modeling of the CEP and the ERP. As PSCo

14 notes, the TCJA will ultimately result in lower revenue requirements.9 When it compared

15 the Preferred CEP portfolio to the Preferred ERP portfolio, PSCo should have taken the

16 impact of the TCJA into account throughout the evaluation period and on all of the units

17 that have an impact on the results. Instead, in both the 120 Day Report and in this case,

18 PSCo takes the impact of the TCJA into account on only the bids and Comanche 1 and 2:

19 While the overall net effect of the TCJA is a decrease to our revenue
20 requirements, the TCJA does increase the revenue requirements of
21 certain individual tax advantaged investments such as wind and
22 solar. The Company therefore developed the final ongoing costs

8
120 Day Report at 70. PSCo response to CR2 (1-10).
9
“The TCJA results in a significant net decrease to our cost of service and annual revenue requirements for both the
Company’s electric and gas departments.” 120 Day Report at 54.
Surrebuttal Testimony of Charles S. Griffey
Page 11
1 associated with BOT projects in accordance with the new TCJA
2 provisions. Moreover, bidders were afforded the opportunity to
3 revise their pricing to account for TCJA via the bid affirmation and
4 refresh process described in Section 6. To make the Company’s
5 projections of the costs of continued operation and early retirement
6 of Comanche 1 and Comanche 2 comparable to the refreshed bids,
7 the Company also adjusted the ongoing revenue requirements for
8 Comanche 1 and Comanche 2 as discussed in Section 5.10

9 However, PSCo’s approach does not make the projections of cost in the Preferred ERP

10 portfolio “comparable to the refreshed bids.” For example, the revenue requirements of the

11 combined cycle gas turbine (CCGT) that replaces Comanche 1 and 2 in the Preferred ERP

12 portfolio, upon which the portfolio comparison is based beginning in the year 2034, is not

13 reduced for the impacts of the TCJA. Instead the CCGT unit is modeled as if the old 35%

14 federal tax rate was in effect. That means, beginning in 2034, the Preferred ERP Portfolio

15 is burdened with a 35% tax rate while the resources in the Preferred CEP portfolio get the

16 benefit of the 21% tax rate enacted in the TCJA. This is yet another reason why the

17 Preferred CEP portfolio only begins showing consistent benefit after the CCGT is

18 introduced in 2034 (other reasons are laid out in my Cross-Answer testimony, my

19 testimony in Docket No. 16A-0396E, and later in this testimony). I address the impact of

20 this failure later in my testimony.

21 Q. PUTTING ASIDE FOR NOW THE HIGH LEVEL FLAW, IS PSCO’S $23.1

22 MILLION ESTIMATE OF THE IMPACT OF THE TCJA AND DISMISSED RATE

23 CASE ASSOCIATED SOLELY WITH COMANCHE 1 AND 2 CALCULATED

24 CORRECTLY?

10
Id.
Surrebuttal Testimony of Charles S. Griffey
Page 12
1 A. No. One problem is that PSCo arrived at the impact only by comparing its new early

2 retirement revenue requirement to the previous early retirement revenue requirement.11

3 This is the wrong benchmark. If you want to understand the impact of the TCJA on the

4 cost benefits of early retirement, you have to measure the TCJA impacts on both the early

5 retirement scenario and the business-as-usual (BAU) scenario. PSCo only made the

6 calculation for the impact on the early retirement scenario.

7 Finally, there are mechanical errors in PSCo’s calculation. The claimed $23.1 million net

8 present value impact is not presented on the same basis as in the 120 Day Report. The 120

9 Day Report presents NPV for a base year of 2016.12 In Revised MAM-1 the NPV of the

10 new revenue requirement is based on the year 2021, and it is compared to a NPV of the old

11 early retirement revenue requirement that has a base year of 2022. PSCO takes the

12 difference between these two NPVs with different base years and gets $23.1 million, which

13 is a number with no economic meaning given the different base years. PSCo then compares

14 that $23.1 million figure to the amounts in the 120 Day Report, which is based on 2016 for

15 NPV calculations. To do a correct comparison, the base year should be 2016 across the

16 board. Using a 2016 base year, the impact of the TCJA, the dismissed rate case, and the

17 start of the CEPA in 2021 on the revenue requirement of retiring Comanche 1 and 2 early

18 is $13.7 million before comparison to the BAU case.

19 Q. WHAT IS THE IMPACT OF THE TCJA AND DISMISSED RATE CASE IF PSCO

20 HAD SET UP THE COMPARISON CORRECTLY?

11
See Revised Attachment MAM-1 at tab “RR Comparison”, columns F and G.
12
120 Day Report at 13, 67, Appendix B.
Surrebuttal Testimony of Charles S. Griffey
Page 13
1 A. If you properly do an apples-to-apples comparison, the impacts of these changes would

2 show a benefit to the Preferred ERP portfolio compared to the Preferred CEP portfolio.

3 Please refer to the figure below:

4 FIGURE CSG-SR-1
5 Impact of TCJA, Dismissed Rate Case, and CEPA Start Date Using Correct Approach13
6 $Millions

Annual  Annual  Annual  Annual 


Revenue  Revenue  Revenue  Revenue 
Requirement Requirement Requirement Requirement
(Early  (Early  (Continued  (Continued  Relative 
Retirement) Retirement) Operations) Operations) Impact
Revised  Revised 
Attachment Attachment  Attachment Attachment  (Savings)/Cost 
MAM‐1 MAM‐1 MAM‐1 MAM‐1 to CEP
2016
2017                     ‐                      ‐                      ‐                      ‐
2018                     ‐                      ‐                      ‐                      ‐
2019                     ‐                      ‐                      ‐                      ‐
2020                     ‐                      ‐                      ‐                      ‐
2021                   27.4                      ‐                      ‐                      ‐
2022                   24.2                    34.7                    32.7                    36.2
2023                   10.4                    22.6                    36.3                    39.3
2024                      8.9                    21.6                    35.5                    38.5
2025                      6.8                    19.3                    34.9                    37.9
2026                    (1.8)                       3.2                    34.3                    37.3
2027                    (1.8)                       1.2                    33.7                    36.7
2028                    (1.5)                     (0.6)                    33.1                    36.1
2029                    (1.5)                     (1.4)                    32.5                    35.5
2030                    (1.5)                     (1.4)                    31.9                    34.9
2031                    (1.5)                     (1.4)                    31.2                    34.3
2032                    (1.5)                     (1.4)                    30.3                    33.4
2033                    (1.5)                     (1.4)                    28.3                    30.9
2034                    (1.5)                     (1.4)                    14.5                    16.2
2035                    (1.0)                     (1.4)                    13.4                    14.1
2036                    (1.0)                     (1.4)                       1.7                       1.4
                     ‐                      ‐                      ‐                      ‐
2016 NPV                    45.5                    59.2                  201.3                  219.7
Correctly calculated difference                   (13.7)                      ‐                   (18.4)                       4.6
                     ‐                      ‐                      ‐                      ‐                      ‐
2021 NPV                    59.1                      ‐                      ‐                      ‐                      ‐
2022 NPV                      ‐                    82.2                      ‐                      ‐                      ‐
PSCo's 
calculated 
7 difference                      ‐                   (23.1)                      ‐                      ‐                      ‐

13
Data taken from the “RR Comparison” tab from each of Revised Attachment MAM-1 and the original Attachment
MAM-1.
Surrebuttal Testimony of Charles S. Griffey
Page 14
1 Using the correct baseline, the 2016 NPV of the impact of the TCJA is a $13.7 million

2 reduction in the early retirement scenario and a $18.4 million reduction in the BAU

3 scenario. The net change is $4.6 million in favor of the BAU (Preferred ERP) case, not an

4 additional savings $23.1 million savings for the Preferred CEP portfolio as PSCO claims.14

5 Q. YOU HAVE SHOWN THAT THE PURPORTED ADDITIONAL SAVINGS OF

6 $23.1 MILLION PRESENTED IN THIS CASE IS INCORRECT. PLEASE

7 ADDRESS THE PURPORTED $26 MILLION CALCULATION IN THE 120 DAY

8 REPORT TO WHICH MS. PERKETT AND MR. TROWBRIDGE MAKE A

9 COMPARISON.

10 A. The purported $26 million in additional savings claimed in the 120 Day Report is also done

11 incorrectly, although for different reasons. Unlike in the AD/RR case, PSCo does correctly

12 compare the change in the early retirement cases to the change in the BAU cases for the

13 impact of the dismissed rate case; the problem is that PSCo incorrectly calculates the

14 changes.

15 Please refer to Exhibit CSG-SR-1. The $26 million NPV is driven by a relative increase

16 in the revenue requirement for Comanche 3 in the ERP compared to the CEP of $4.2

17 million, while the remainder, $21.6 million, is due to changes in the revenue requirement

18 of Comanche 1 and 2. PSCo’s main error is in failing to ensure that it fully depreciated

19 Comanche 1 and 2 in the CEP 2019 rate case scenario. Looking at the ERP base case and

20 2019 rate case scenarios, one can see that the nominal amount of depreciation is the same

21 over the period—$462 million—and the increase in the NPV of revenue requirements for

22 Comanche 1 and 2 is only $1.7 million. But in the CEP comparison, the NPV of the revenue

14
If the data were available to make the calculation from 2018-2022, the advantage for the BAU would increase.
Surrebuttal Testimony of Charles S. Griffey
Page 15
1 requirement for Comanche 1 and 2 drops by nearly $20 million. This is because PSCo

2 does not fully depreciate Comanche 1 and 2 in the CEP 2019 rate case scenario. In the

3 CEP base case the nominal depreciation is $164.7 million, but in the 2019 rate case it falls

4 to $150.1 million. In other words, $14.6 million of depreciation vanished and is never

5 recovered (the recovery of the regulatory asset via the rider did not change between the

6 two cases), and the return on and taxes associated with that depreciation vanish as well.

7 Thus, the “savings” calculated from the delay in the rate case is driven by PSCO failing to

8 capture that an additional $14.6 million needs to be recovered, with return.15

10 With respect to the Comanche 3 revenue requirement, it is inexplicable why changing the

11 timing of recovery of sunk costs for Comanche 3 (whose sunk cost recovery is unaffected

12 by early retirement of Comanche 1 and 2) would see such relative changes between the

13 cases. The delay in the change in depreciation rate for Comanche 3 by 18 months should

14 not have affected the relative size of the revenue requirements of Comanche 3 in the ERP

15 case compared to the CEP case.16

16 Q. BASED ON YOUR ANALYSIS OF THE $23.1 MILLION IN THIS CASE AND THE

17 $26 MILLION SAVINGS CLAIMS IN THE 120 DAY REPORT, IS THERE ANY

18 ADJUSTMENT THAT SHOULD BE MADE TO THE REVENUE

15
PSCo notes in this AD/RR case that the regulatory asset increased by $11.7 million as a result of the dismissed rate
case. Perkett Rebuttal at 14. While the numbers do not match, at least PSCo attempted to reflect that impact in its
calculations in this case, while it failed to include the need for greater CEPA recovery in the 120 Day Report
calculation.
16
In the base assumptions the NPV of the revenue requirement of Comanche 3 was $861.1 in the ERP case and $863.9
in the CEP case, i.e., as would be expected the revenue requirement is higher in the CEP case due to the stand-alone
operation of Comanche 3. But in the 2019 rate case alternative, the ERP case NPV revenue requirement goes to $869
million while the CEP case NPV revenue requirement only goes to $867.6 million, i.e. stand-alone operation is now
less costly.
Surrebuttal Testimony of Charles S. Griffey
Page 16
1 REQUIREMENTS USED IN THE 120 DAY REPORT PORTFOLIO

2 COMPARISONS?

3 A. Not for the factors claimed by PSCO. However, there are adjustments that do need to be

4 made, beginning with inclusion of the impact of the TCJA on the CCGT installed in 2034

5 in the ERP cases and continuing with addressing other changes to the resource tail and

6 natural gas prices that PSCo selectively made.

7 Q. CAN YOU ESTIMATE THE IMPACT OF PSCO’S FAILURE TO INCLUDE THE

8 EFFECT OF THE TCJA ON THE CCGT IN THE PREFERRED ERP

9 PORTFOLIO?

10 A. Yes, it has a net present value impact of $37 million.17 In other words, the revenue

11 requirement of the Preferred ERP portfolio should be reduced by $37 million to reflect the

12 impact of the TCJA on the CCGT that replaces Comanche 1 and 2 in the ERP Portfolio.

13 Only by including the impact of the TCJA on the year 2034 CCGT can the economics of

14 the ERP and CEP portfolios be accurately compared.

15 B. NEW LOW COST GENERIC REPLACEMENT COMBUSTION


16 TURBINES HAVE BEEN ADDED TO THE CEP PORTFOLIO

17 Q. DID YOU DISCOVER OTHER PROBLEMS WITH PSCO’S MODELING OF THE

18 PREFERRED CEP PORTFOLIO?

19 A. Yes. PSCo introduced a new unit type of combustion turbine it labels “REPL 5 190 MW”

20 in its cost calculations in the Strategist Output files reflecting the Preferred ERP and

21 Preferred CEP portfolios provided in discovery in this proceeding. Presumably, this new

17
Calculated as a 9% reduction in the revenue requirements associated with recovery of capital costs. To get the NPV
of capital costs, one must first subtract fixed operations and maintenance expense from the annual fixed charges shown
in the spreadsheet entitled “SO_-Pref_ERP, multiply by 9% for the TCJA impact, and take the NPV.
Surrebuttal Testimony of Charles S. Griffey
Page 17
1 generic unit is to represent the application of the “replacement” method to the expiring

2 contracts and resources in the portfolios being evaluated. Recall that the Commission

3 described the replacement method as follows:

4 Public Service’s “replacement method” represents a market where


5 demand exceeds supply, and expiring contracts are bid at or near the cost
6 of new construction, either for new utility resources or for existing
7 projects.18

8 Thus, one would expect the replacement unit to be the cost of new construction for the

9 technology—in this case a combustion turbine. Yet the “REPL 5 190 MW” units replace

10 certain of the generic CTs in the resource tail as early as 2026, and only cost 60% of the

11 cost of generic CTs. The new “REPL 5 190 MW” units also have a lower heat rate and

12 lower emissions rates than the generic CTs they replace. Finally, PSCo assumes that the

13 new “REPL 5 190 MW” units will have lower natural gas costs than the 2034 CCGT in the

14 Preferred ERP by $0.60 - $0.80/MMBtu. PSCo puts six of these “REPL 5 190 MW” units

15 into the Preferred CEP portfolio at various times,19 and it only puts three in the Preferred

16 ERP Portfolio.20

17 Q. PLEASE COMPARE THE UNIT ATTRIBUTES OF THE 2026 CT FROM THE

18 ERP PORTFOLIO TO THE “REPL 5 190” MW UNIT IN 2026 FROM THE

19 PREFERRED CEP PORTFOLIO.

20 A. Please see the figure below for a comparison between the “REPL 5 190 MW” unit put into

21 the Preferred CEP portfolio and the generic CT used in the Preferred ERP Portfolio to meet

18
Decision No. C17-0316 in Docket No. 16A-0396E at paragraph 120.
19
One in 2026, two in 2041, one in 2043, and two in 2048.
20
One in 2041, one in 2046, and one in 2048.
Surrebuttal Testimony of Charles S. Griffey
Page 18
1 the same need. Both units were placed in service for a partial year in 2026, and the

2 comparison is for a full year of operation in 2027.

3 FIGURE CSG-SR-2
4 COMPARISON OF REPL 5 UNIT IN CEP TO CT IN ERP
5 YEAR 2027
Attribute REPL 5 190 MW Generic 192 MW CT Ratio
Unit
Fixed Cost ($/kw- 4.47 7.4321 1.66
mo)
Heat Rate 10.18 10.26 1.01
(MMBtu/MWh)
CO2 Emissions 0.58 0.65 1.12
(tons/MWh)
NOx Emissions 0.00016 0.00019 1.19
(tons/MWh)
6
7 PSCo assumes that the “REPL 5 190 MW” unit in the CEP portfolio will cost 40% less

8 than the generic CT that is put in the same year in the ERP portfolio. It further assumes

9 the CEP portfolio unit will have a better heat rate, and miraculously, will emit relatively

10 less CO2 and NOx for each MMBtu of fuel burned.22

11 Q. PLEASE SHOW HOW THE INSTALLED CAPACITY DIFFERS BETWEEN THE

12 PREFERRED ERP AND PREFERRED CEP PORTFOLIOS BY TECHNOLOGY.

13 A. Please see Figure CSG-SR-3 below for the capacity difference between the portfolios by

14 year:

21
This is public information and can be found at Page 2-198 of Volume 2 of PSCo’s 2016 Electric Resource Plan.
22
The tons/MwH emissions rates are constant through time and do not vary with start-up fuel consumption. Thus,
they should be proportional to the heat rates. Since they are not, it is only an assumption with no basis that leads to
the difference. This is a good encapsulation of PSCo’s approach to demonstrating the cost-effectiveness of the CEP
Portfolio – simply assume it.
Surrebuttal Testimony of Charles S. Griffey
Page 19
1 FIGURE CSG-SR-3
2 CAPACITY DIFFERENCE BETWEEN PREFERRED ERP AND CEP PORTFOLIOS
3 (MW)

4 Q. WHAT IS THE IMPORTANCE OF THIS COMPARISON?

5 A. The figure highlights two important new points for the Commission to consider. First, in

6 the Preferred CEP portfolio PSCo replaces a generic CT with a new “REPL 5 190 MW”

7 unit in 2026. There are no expiring contracts from the solicitation in 2026. This

Surrebuttal Testimony of Charles S. Griffey


Page 20
1 substitution is completely unrelated to any bids that are being accepted, and I cannot think

2 of any reason that the CEP portfolio should get a cheaper unit substituted for a generic CT

3 while the ERP portfolio is denied that substitution. This is simply PSCo putting a thumb

4 on the scale.

5 Second, after the retirement of Comanche 1 and 2, the economic difference between

6 the Preferred ERP and Preferred CEP portfolios is driven largely by a comparison of the

7 generic CCGT in the preferred ERP portfolio to the new “REPL 5 190 MW” units and

8 hybrid solar/battery capacity. Since the new “REPL 5 190 MW” units are assumed to have

9 very low capital cost and are assumed to have advantaged natural gas prices, the economics

10 during this period are very suspect and should be rejected.

11 Further, PSCO replaces all of the solicitation resources in the portfolios with the

12 new lower cost unit type when those resource’s contracts expire, regardless of technology

13 type. This results in a bias in favor of any portfolio with more resources taken in the

14 solicitation, such as the Preferred CEP portfolio.23 There is not even a remnant of the

15 current solicitation left in the comparison of the Preferred ERP and Preferred CEP after

16 2047. Instead, the economics after 2047 are solely a comparison of the assumed high cost

17 CCGT to the assumed low cost “REPL 5 190 MW” units. Finally, the economics are also

18 driven by assumptions that the batteries will perform precisely as modeled and will not

19 degrade. Given the lack of experience with battery installations in the United States,24

20 PSCo’s assumptions as to long-term battery performance are very speculative.

23
This flaw is very similar to the flaw in the “Annuity Method” I described in my Surrebuttal Testimony in Docket
No. 16A-0396E; the Commission has already determined that the results of the “Annuity Method” should be given
very little weight.
24
The United States has only approximately 700 MW of installed battery capacity, most built in the last three years.
PSCo is proposing to commit ratepayers to 275 MW of battery capacity through the CEP.
https://www.eia.gov/todayinenergy/detail.php?id=34432.
Surrebuttal Testimony of Charles S. Griffey
Page 21
1 Q. WHAT IS THE NET PRESENT VALUE IMPACT OF PSCO SUBSTITUTING A

2 “REPL 5 190 MW” UNIT FOR A GENERIC CT IN 2026?

3 A. The substitution of the “REPL 5 190 MW” unit for the generic CT in 2026 lowers the

4 revenue requirements of the Preferred CEP portfolio by $55 million based on comparing

5 the fixed costs only. Since the “REPL 5 190 MW” unit has a slightly lower heat rate than

6 the generic CT there would also be an impact on fuel costs, but I do not have the capability

7 to perform a re-dispatch of the entire portfolio in Strategist to determine the amount.

8 Q. WHAT IS THE NET PRESENT VALUE IMPACT OF THE ADDITIONAL “REPL

9 5 190 MW” UNITS THAT ARE PUT INTO THE PREFERRED CEP BEGINNING

10 IN 2041?

11 A. The incremental “REPL 5 190 MW” units shown in Figure CSG-SR-3 lower the revenue

12 requirements of the Preferred CEP Portfolio by an additional $37 million relative to if the

13 generic CTs had been used.25

14 Q. SINCE MUCH OF THE POST-COMANCHE RETIREMENT COMPARISON IS

15 BETWEEN THE GENERIC CCGT IN THE PREFERRED ERP AND THE “REPL

16 5 190 MW” UNITS IN THE PREFERRED CEP, HOW DO THE ATTRIBUTES OF

17 THOSE UNITS COMPARE?

18 A. Please refer to the figure below:

25
As for the 2026 unit, this is only calculated for the fixed costs.
Surrebuttal Testimony of Charles S. Griffey
Page 22
1 FIGURE CSG-SR-4
2 Comparison of “REPL 5 190 MW” Unit in CEP to the Generic CCGT In ERP
3 YEAR 204926
Attribute “REPL 5 190” MW Generic CCGT
Unit
Fixed Cost ($/kw-mo) 6.91 18.09
Heat Rate 10.02 6.93
(MMBtu/MWh)
Gas Price ($/MMBtu) 7.00 7.58
Variable O&M 1.35 6.18
($/MWh)
Variable Cost 71.5 58.7
($/MWh)
Capacity Factor 69% 77%
Total Cost ($/MWh) 85.2 90.9
4

5 By assuming a low fixed cost and gas price relative to the CCGT and by not adjusting the

6 variable O&M of the “REPL 5 190 MW unit” to reflect the higher than expected capacity

7 factor, PSCo enables the “REPL 5 190 MW” combustion turbine to actually have a lower

8 total cost per MWh than the generic CCGT in 2049. If gas turbines are actually as

9 inexpensive as PSCo assumes for the “REPL 5 190 MW” units beginning in 2026, i.e.,

10 40% lower than the generic CT cost assumed in Phase 1, then the generic CCGT in 2034

11 would also have a lower price, as it is simply a configuration of two gas turbines and one

12 steam turbine. PSCo games the system by assuming cheap generic gas turbine availability

13 in the Preferred CEP Portfolio, but not in the Preferred ERP Portfolio for the replacement

14 to Comanche 1 and 2.

15 Q. CAN YOU THINK OF ANY REASON THAT THE NEW UNIT TYPE SHOULD

16 HAVE ADVANTAGED ACCESS TO NATURAL GAS PRICES THAN THE

17 CCGT?

26
Data from “Unit Details” tab in each of CR1-04.A1_SO-_Pref ERP and CR1-04.A2_SO-_Pref CEPP spreadsheets
provided in response to RFI CR1-04. REPL unit is for the unit put in service in 2048.
Surrebuttal Testimony of Charles S. Griffey
Page 23
1 A. No. The natural gas price PSCo used for the year 2034 CCGT in the Preferred ERP

2 Portfolio is unchanged from the natural gas price it used in Docket No. 16A-0396E. But

3 the natural gas price PSCo uses for the “REPL 5 190 MW” unit type and the generic CTs

4 did change between Docket No. 16A-0396E and the runs made for the 120 Day Report.

5 See the figure below for a comparison:

6 FIGURE CSG-SR-5

7 Comparison of Natural Gas Prices ($/MMBtu)

8
9 The natural gas price forecast dropped from Docket No. 16A-0396E to the 120 Day Report

10 for CTs and the new unit type used in the Preferred CEP portfolio, but it was unchanged

11 for the 2034 CCGT used in the Preferred ERP portfolio. I cannot imagine a reasonable

Surrebuttal Testimony of Charles S. Griffey


Page 24
1 basis for change in assumptions. Whether deliberate or bad quality control, the impact is

2 to bias the result in favor of the Preferred CEP portfolio.

4 Q. CAN YOU QUANTIFY THE IMPACT IF THE SAME NATURAL GAS PRICE

5 WERE USED FOR THE GENERIC CCGT AS FOR THE “REPL 5 190 MW”

6 UNITS?

7 A. I can make an order of magnitude estimate based on not changing dispatch. Because the

8 CCGT operates at a relatively high capacity factor throughout, lower gas prices should

9 have less impact on dispatch as the unit can only improve its dispatch so much. If the same

10 gas price was used for the CCGT as for the “REPL 5 190 MW” units, the economics of the

11 Preferred ERP portfolio would improve by a NPV of $68 million.

12 Q. PLEASE ADDRESS THE ISSUE OF UNCERTAINTY IN BATTERY

13 OPERATION.

14 A. The Preferred CEP portfolio essentially replaces one of the Comanche units largely with

15 batteries. There is very little operating history for utility-scale batteries in the United

16 States; indeed, the amount of capacity from batteries PSCo proposes to buy is nearly 40%

17 of all the battery capacity installed in the United States through 2017.27 PSCo appears to

18 recognize the limited experience with batteries. For instance, it recommends including 50

19 MW of batteries in the Preferred ERP so that it can gain experience with the technology,

20 and it notes that deferring 125 MW of batteries in the “Alternate CEPP” “would provide

21 greater economic benefits and allow a staged introduction of new battery storage

27
275 MW CEP batteries compared to 700 MW of battery capacity installed per EIA.
Surrebuttal Testimony of Charles S. Griffey
Page 25
1 technology.”28 With respect to the Preferred ERP Portfolio, PSCo states that it will include

2 “50 MW of battery storage technology, which will enable the Company to advance

3 understanding of this technology.”

4 If PSCo does not have adequate understanding of battery technology, one questions why it

5 recommends committing ratepayers to buying so much of the resource now. The results

6 from Strategist rely upon very explicit modeling as to how the batteries will operate, yet

7 PSCo never addresses whether the costs included in the bids will allow battery operation

8 (both physical and financial through dispatch decisions) not to degrade relative to the

9 assumptions put into Strategist.29

10 Q. CAN YOU ANALOGIZE BATTERY DEGRADATION TO THE WIND

11 DEGRADATION MODELING REQUESTED BY STAFF?

12 A. Staff recognizes that the actual performance of wind resources does not necessarily

13 comport with the design assumptions. The sensitivity that PSCo performed for wind

14 degradation showed a $39 million reduction in savings of the Preferred CEP relative to the

15 Preferred ERP portfolio. Battery degradation relative to planning assumptions has two

16 components – actual physical degradation and suboptimal performance of actual

17 injection/withdrawal decisions. Again, there is only a very limited battery operation

18 history in the United States for utility operation, so it is premature to speculate on physical

19 degradation, how it matches current warranties, or how the battery will perform after the

20 warranty period. The injection/withdrawal decision process in reality is also very complex

28
120 Day Report at 12.
29
The fixed costs for the hybrid solar/battery accepted bids actually decrease on a nominal basis throughout the
modeled life. See “System Cost” tab at lines 1005-1006.
Surrebuttal Testimony of Charles S. Griffey
Page 26
1 and will very likely be suboptimal relative to a deterministic modeling approach.30 While

2 I do not believe it is reasonable to estimate the size of that given the time constraints and

3 resources available to me in this case, I can say that to rely so heavily on the modeled

4 economics of batteries twenty years from now is very speculative and not reasonable.

5 Q. CAN YOU SUMMARIZE THE ISSUES YOU HAVE FOUND WITH THE PSCO’S

6 EVALUATION OF THE ECONOMICS OF RETIRING COMANCHE 1 AND 2

7 EARLY?

8 A. Yes. Please refer to the figure below for a summary on a net present value basis:

9 FIGURE CSG-SR-6
10 Summary of Economics of Early Retirement of Comanche 1 and 2
11 NPV 2016 $ Millions
12
Item
1. PSCo Claimed CEP 213
Portfolio Savings31
2. Failure to Include (171)
Accelerated Depreciation
and RESA Impacts32
3. TCJA Impacts in ERP33 (37)
4. “REPL 5 190 MW” 2026 (55)
unit capital cost34
5. “REPL 5 190 MW” (37)
2041+ units capital cost35
6. Equalize “REPL 5 190 (68)
MW” and CCGT gas price36
30
PSCo provides a six page discussion on how they model storage in Appendix K to the 120 Day Report.
31
Comparison of the NPV revenue requirements of the Preferred CEP Portfolio to the Preferred ERP Portfolio
presented by PSCO in the 120 Day Report.
32
This amount includes counting accelerated depreciation and the additional RESA impacts described previously in
my Cross-Answer testimony in Figure CSG-CA-2).
33
This is the NPV of applying the TCJA to the CCGT that is assumed to replace Comanche 1 & 2 in 2034 in the
Preferred ERP portfolio.
34
This is the impact of removing the 40% discount to fixed cost that PSCo gives the CT that is placed in service in
2026.
35
This is the NPV of removing the 40% discount that PSCo gives to 5 particular CTs beginning in 2041 in the CEP
portfolios compared to 3 CTs in the ERP portfolios.
36
This is the NPV if the 2034 CCGT in the ERP portfolio was allowed access to the same price of natural gas as was
given to the “REPL 5 190 MW” CTs in the CEP portfolio.
Surrebuttal Testimony of Charles S. Griffey
Page 27
7. Excess transmission cost (90)
in ERP37
8. Wind Degradation38 (39)
Subtotal Deducts (497)
Actual savings of CEP with (284)
Comanche 1 and 2 early
retirement compared to
ERP through 2054
1

2 As the chart demonstrates, PSCo’s claimed savings for the CEP are based on ignoring

3 various costs in a biased manner, and simply assuming different fixed costs and natural gas

4 costs for resource tail units in the CEP portfolio that do not occur in the ERP portfolio. If

5 one simply includes the revenue requirement reduction of the TCJA on the 2034 CCGT in

6 the Preferred ERP portfolio (line 3) the NPV difference is approximately zero. Taking

7 away the unfair fixed cost advantage (lines 4 and 5) PSCo arbitrarily placed into the

8 Preferred CEP portfolio with the “REPL 5 190 MW” units makes the Preferred ERP

9 portfolio cheaper than the Preferred CEP portfolio by NPV $87 million. Using the same

10 gas price for the CCGT as for the “REPL 5 190 MW” units makes the Preferred ERP $155

11 million cheaper on a cumulative basis. In short, PSCo made $160 million in changes

12 associated with the new unit type that bias the result in favor of the Preferred CEP portfolio.

13 When added to their failure to account for the impact of the TCJA on the CCGT in the

14 Preferred ERP portfolio and the need to appropriately account for CEPA and RESA

15 impacts, the continued operation of Comanche 1 and 2 actually saves ratepayers by NPV

37
As discussed in my Cross-Answer testimony in this docket, PSCo assumed nearly $100 million in transmission
interconnection cost for the CCGT in the ERP portfolio, and this cost was not incurred at all for any gas units in the
CEP portfolio. Nor is the cost at all comparable to the low interconnection cost assumed for any of the evaluated bids.
The amount also includes the excess transmission delivery costs assigned to the ERP portfolio I discussed in my Cross-
Answer testimony. Finally, I have subtracted the impact of the TCJA on the original $100 million estimate of excess
transmission cost.
38
This is the amount PSCo calculates from the sensitivity it ran for wind degradation in the 120 Day Report.
Surrebuttal Testimony of Charles S. Griffey
Page 28
1 $155 million. I believe that the Commission should also take the excess transmission that

2 PSCo places on the ERP portfolio and wind degradation into account.

3 There are a number of uncertainties that are not quantified, as I have discussed in

4 my various testimonies in this case. While the chart above shows costs through 2054,

5 consistent with PSCo’s presentation, the portfolio comparison after the retirement of

6 Comanche 1 and 2 is generally driven by comparing cost assumptions about generic units

7 that are unlikely to ever be built. With respect to comparing the Preferred ERP and

8 Preferred CEP portfolios, I recommend concentrating on the costs comparison through the

9 currently planned retirement dates of Comanche 1 and 2 and putting very little weight on

10 the costs thereafter.

11 Q. PLEASE PROVIDE AN UPDATE ANNUAL COMPARISON OF THE

12 PREFERRED ERP AND PREFERRED CEP PORTFOLIOS.

13 A. Please refer to Exhibit CSG-SR-2 and the figure below:

Surrebuttal Testimony of Charles S. Griffey


Page 29
1 FIGURE CSG-SR-7
2 Summary of Annual Economics of Early Retirement of Comanche 1 and 2
3 $ Millions
4

6 Column (2) is the annual difference I showed in Figure CSG-CA-2 in my Cross Answer

7 testimony, and it includes the impact of the accelerated depreciation recovery and

8 differential impacts on RESA provided by PSCo in the 120 Day Report. Columns (3)

9 through (8) are the annual impacts of the items I have discussed in my testimony. Column

10 (9) is the summation of columns (2) through (8) and is the annual revenue requirement

11 difference between the Preferred ERP portfolio and the Preferred CEP portfolio when
Surrebuttal Testimony of Charles S. Griffey
Page 30
1 properly accounting for all impacts. Column (10) is the running total of the annual impacts,

2 and Column (12) shows the cumulative NPV of the impacts. The figure shows that

3 ratepayers are better off on a nominal basis by $577 million in 2036 if Comanche 1

4 and 2 are not retired. On a NPV basis, ratepayers are better off by $299 million in

5 2036 if Comanche 1 and 2 are not retired. There is no breakeven on a nominal or NPV

6 basis. Qualitative factors, such as the CEP portfolio’s heavy reliance on batteries, also

7 favor the Preferred ERP portfolio.

8 Q. PLEASE SUMMARIZE YOUR FINDINGS ON THE ECONOMICS OF THE

9 EARLY RETIREMENT OF COMANCHE 1 AND 2.

10 A. PSCo’s methodology for evaluating the economics of early retirement is fatally flawed. It

11 ignores the ratepayer cost of recovering the accelerated depreciation of Comanche 1 and 2.

12 It ignores the differential impact on the RESA balance between the CEP and ERP

13 portfolios. It only gives the full benefit of the TCJA reduction in revenue requirements to

14 the Preferred CEP portfolio. Finally, PSCo preferentially introduced new low cost

15 Combustion Turbine (CTs) into the CEP portfolio in lieu of the previously approved

16 resource tail units. This is not just putting a thumb on the scale, it amounts to sitting on

17 the scale to ensure that PSCo can purport to show that the CEP is cost effective. PSCo

18 makes further assumption about gas prices available to the new CT units compared to the

19 CCGT in the ERP portfolio, transmission needs, and the lack of degradation in renewables

20 or batteries that further biases the evaluation in favor of the Preferred CEP portfolio.

21 PSCo noted in Phase 1 of Proceeding No. 16A-0396E that Strategist was not well suited

22 for evaluating early retirement decisions.39 PSCo has proved that point with the way it has

39
“Public Service also argues that the extent of Strategists’ capabilities to conduct the analyses proposed by CIEA is
Surrebuttal Testimony of Charles S. Griffey
Page 31
1 used Strategist in this process. It attempts to focus only on NPV, which allows it to

2 manufacture present value benefit by comparing the ERP portfolio based on a high cost

3 generic CCGT in 2034 to its new low cost replacement units in the Preferred CEP portfolio.

4 None of these units are likely to ever be built, and the Commission should give little to no

5 weight to the purported benefits that accrue after Comanche 1 and 2 are retired. It should

6 instead focus on whether the incremental resources PSCo proposes to buy in the CEP are

7 lower cost than Comanche 1 and 2. Clearly they are not.

8 III. THE CEPA IS NOT IN THE PUBLIC INTEREST

9 Q. WHAT IS PSCO’S NEW CEPA PROPOSAL?

10 A. In lieu of its previous GRSA approach, PSCo now proposes to: (1) accelerate the

11 depreciation of Comanche 1 and 2; (2) defer that accelerated depreciation to a regulatory

12 asset, but not put the regulatory asset in rate base nor amortize it until each unit is retired;

13 (3) earn a return at its weighted average cost (WACC) of capital on the regulatory asset

14 after it is placed in rate base and on the BAU level of plant in service prior to each unit

15 retirement;40 (4) lower the RESA by 1% and collect a CEPA instead of a GRSA for that

16 amount until the regulatory asset is completely amortized; and (5) revert the RESA to 2%

17 upon the full amortization of the regulatory asset.

18 Q. WHAT WAS YOUR CRITIQUE OF PSCO’S ORIGINAL PROPOSAL?

19 A. I showed that PSCo’s original proposal was not in the public interest for numerous reasons.

20 First, it is uneconomic to retire Comanche 1 and 2 early. Second, PSCo’s proposed method

unknown and potentially ‘fairly crude.’” Commission Decision No. C17-0316 in Docket No. 16A-0396E at paragraph
52.
40
PSCo modifies it original proposal to state that if there is a rate case prior to unit retirement, it will subtract the
accrued credit from the CEPA from the BAU plant in service balance.
Surrebuttal Testimony of Charles S. Griffey
Page 32
1 to account for the diverted RESA funds would give PSCo a windfall because it did not

2 provide ratepayers the time value of money for the collected funds. Third, PSCo did not

3 show that deferring the proposed accelerated depreciation saved money for ratepayers.

4 Fourth, it is premature to determine the rate of return, if any, that should be granted for the

5 proposed regulatory asset. Finally, PSCo’s forecasted over-collections demonstrate the

6 RESA should be lowered to 1% in 2021 regardless of whether the CEP is approved.

7 Q. HOW DID PSCO ADDRESS YOUR CRITIQUE?

8 A. PSCo claims that it did not mean to enable itself to make a windfall. Mr. Trowbridge

9 states:

10 I agree the isolated presentation…may have made it appear as


11 though some additional savings would not go to the benefit of
12 customers. This is not the case...As referenced above, the company
13 will use any CEPA rider collections realized prior to the retirement
14 of the two Comanche units to reduce the unrecovered net plant
15 balance of the Comanche units. After the retirement of the units, the
16 CEPA rider collections will be used to reduce the balance of the
17 regulatory asset attributable to the early retirement of the two
18 Comanche units and provide a return on that balance.41

19 PSCo did not meaningfully address any of the other points that I made.

20 Q. DOES PSCO’S CLARIFICATION THAT IT INTENDS TO GIVE RATEPAYERS

21 THE TIME VALUE OF MONEY ON CEPA COLLECTIONS ASSUAGE YOUR

22 CONCERN OVER A POTENTIAL WINDFALL?

23 A. No. As always, the devil is in the details. What PSCo is actually proposing is that, if it

24 comes in for a rate case after it starts collecting the CEPA and before unit retirement, it

25 will include the accumulated CEPA recoveries as a deduct to rate base. This will still allow

41
Rebuttal testimony of Mr. Trowbridge at 58.
Surrebuttal Testimony of Charles S. Griffey
Page 33
1 PSCo to benefit from regulatory lag.42 While PSCo claims this is typical rate regulation, it

2 is atypical for a utility to simply receive an additional $30 million in cash flow each year

3 without incurring any new costs. PSCo will start collecting approximately $30 million in

4 additional revenue from the CEPA for its own account each year beginning in 2021, and

5 this will help keep PSCo from coming in for a rate case. Further, if PPA payments for new

6 capacity flow through the fuel charge, this will also help avoid a rate case. Thus, the

7 likelihood of a windfall from keeping the time value of money for itself is still there. PSCo

8 has to pay customers at its WACC for the RESA each year, and it should not be allowed to

9 divert that to itself with the CEPA.

10 Q. DID PSCO PRESENT ANY INFORMATION IN THIS CASE TO SHOW

11 WHETHER DEFERRING THE ACCELERATED DEPRECIATION AND

12 RECOVERING IT VIA A CEPA ACTUALLY PROVIDES SAVINGS TO

13 RATEPAYERS COMPARED TO SIMPLY RECOVERING THE ACCELERATED

14 DEPRECIATION AS IT OCCURS?

15 A. No. PSCo contends that its calculations address what it believes the Commission

16 requested,43 but PSCo did not make a comparison to answer this simple question.

17 However, one can take a PSCo calculation in the 120 Day Report of the impact of

18 recovering accelerated depreciation as it occurs and compare it to the revenue requirement

19 arising from recovering the deferred depreciation through the CEPA. In the 120 Day

20 Report, PSCo calculated the NPV of revenue requirements for recovering the accelerated

21 depreciation as it occurs at $110 million for the total company.44 In this case, the 2016

42
PSCO response to CR1-7.
43
Trowbridge at 56-58.
44
Appendix E to the 120 Day Report.
Surrebuttal Testimony of Charles S. Griffey
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1 NPV of the CEPA recovery is $121.4 million on a retail basis and $133 million on a total

2 company basis.45

3 Q. DOES DEFERRING ACCELERATED DEPRECIATION AND RECOVERING IT

4 VIA THE CEPA PROVIDE SAVINGS TO RATEPAYERS?

5 A. No, it costs customers NPV $23 million according to PSCo’s own figures. Further,

6 customers are also harmed because the complexity of PSCo’s proposal allows it the

7 opportunity to keep the time value of money on CEPA payments by customers.

8 Q. DO YOU HAVE ANY OTHER RESPONSE TO PSCO’S REBUTTAL

9 TESTIMONY?

10 A. PSCo presented no reason to maintain the RESA at its current 2% level beginning in 2021.

11 If the CEPA is adopted, there is certainly no reason today to commit to returning the RESA

12 to 2% in 2028. The proposal to do so by PSCo and certain parties represents another

13 agreement between special interests to ensure access to ratepayer funds. If the CEPA is

14 adopted, which I do not recommend, the Commission should let the passage of time inform

15 it as to the correct level of the RESA necessary in 2028 and beyond.

16 IV. CONCLUSION

17 Q. DO YOU HAVE ANY CONCLUDING REMARKS?

18 A. Early retirement of Comanche 1 and 2 is not economic. These units are the lowest variable

19 cost thermal units in PSCo’s electric system, and PSCo forecasts relatively low amounts

45
2016 NPV calculation of early retirement revenue requirement for of the CEPA from tab “4.1RA Rollforward” of
Revised Attachment MAM-1. Retail amounts are shown in cells J49 through J56. The retail NPV is grossed up for
the 8.64% wholesale jurisdictional amount to get a total company amount.
Surrebuttal Testimony of Charles S. Griffey
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1 of capital expenditures to keep them operating through their original retirement dates.

2 PSCo contorts itself to purport to show that early retirement is economic by:

3 1. Failing to include the cost to ratepayers of the accelerated depreciation of

4 Comanche 1 and 2 and its proposal to defer that depreciation;

5 2. Failing to account for the impacts to the RESA balance of the CEP portfolio;

6 3. Using a methodology that relies on a comparison of hypothetical future units and

7 hard-coding an expensive unit in the ERP cases to drive the net present value

8 calculation;

9 4. Failing to properly account for the impacts of the TCJA in the Preferred ERP

10 portfolio;

11 5. Biasing the calculation by assuming low cost gas turbines are available only if

12 Comanche 1 and 2 are retired early;

13 6. Using different gas prices between the CCGT and the new CT unit type in the CEP

14 portfolios;

15 7. Using biased assumptions as to transmission interconnection costs; and

16 8. Ignoring likely degradation to wind and battery resources.

17 When apples-to-apples calculation is made to address these flaws and biases, the early

18 retirement of Comanche Units 1 and 2 will cost ratepayers $577 million on a nominal basis

19 and $299 million on a present value basis through 2036. The NPV through 2054 is a cost

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1 of $284 million, but costs/benefits after 2036 are very speculative and are driven solely by

2 modeling assumptions about resources that are unlikely to ever actually be built.

3 Furthermore, if, as PSCo suggests, solar prices are expected to continue to decrease, then

4 there is no reason to make a decision to retire Comanche 1 and 2 at this time. These two

5 units are clearly more economic to operate than the alternatives in the near-term, and the

6 economic decision would be to defer retirement, operate the two units, and wait for solar

7 costs to continue their decline. In such a situation, the RESA could be lowered, thus giving

8 ratepayers a rate decrease. Ratepayers would also get the benefit of the lower costs

9 associated with operating Comanche 1 and 2 and the production tax credit (PTC) benefits

10 and low operating cost associated with the nearly 800 MW (nominal) of new wind in the

11 ERP portfolio. They would not be saddled with the higher reserve margins, certain high

12 capital costs, and uncertain future benefits for which no one is accountable associated with

13 the Preferred CEP portfolio.

14 Q. HAS PSCO’S 120 DAY REPORT OR THE REBUTTAL TESTIMONY ALTERED

15 YOUR POSITION REGARDING WHETHER THE CEP AND THE ASSOCIATED

16 COST RECOVERY MECHANISMS PRESENTED IN THIS PROCEEDING ARE

17 IN THE PUBLIC INTEREST?

18 A. No, the Preferred CEP places excessive risk on ratepayers and largely insulates PSCo’s

19 shareholders from risk. PSCo’s CEPA proposal does not change that. Given the real costs

20 to ratepayers and the lack of tangible benefits, it is not in the public interest.

21 Q. DOES THAT CONCLUDE YOUR TESTIMONY?

22 A. Yes.

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