You are on page 1of 14

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 16A-0396E


_____________________________________________________________________________
IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF
COLORADO FOR ITS 2016 ELECTRIC RESOURCE PLAN
_____________________________________________________________________________

INTERMOUNTAIN RURAL ELECTRIC ASSOCIATION'S


COMMENTS ON PUBLIC SERVICE COMPANY OF COLORADO'S
120-DAY REPORT
____________________________________________________________________________

Intermountain Rural Electric Association ("IREA") submits the following Comments on

Public Service Company of Colorado's Phase II 120-Day Report pursuant to 4 CCR 723-3-3613(f)

and Decision No. C18-0191.


Colorado PUC E-Filings System

I. SUMMARY

The Colorado Public Utilities Commission ("Commission") should adopt the preferred

energy resource plan ("Preferred ERP") presented by Public Service Company of Colorado (the

"Company") in the 120-Day Report. The Preferred ERP is the most cost-effective portfolio

because the projected savings under the Company's preferred Colorado Energy Plan Portfolio

("Preferred CEPP") are illusory. In particular, when it became clear that accelerated depreciation

costs would need to be included in the Preferred CEPP, the Company introduced flaws and biases

into the 120-Day Report that undermine the report's fundamental reliability.

Even assuming the Company's numbers are correct, the purported ratepayer savings do not

occur until well into the future and not until after the as-scheduled retirement of Comanche Units

1 and 2. As the Commission reasoned in Decision No. C18-0191, the timing of alleged cost

savings is important because far-off projections are inherently uncertain.1 The risk of relying on

1
See Decision No. C18-0191, ¶ 79.

2873275.4
such projections is compounded by the fact that the Company would be better positioned to take

advantage of declining renewable generation pricing if it retired Comanche Units 1 and 2 as

scheduled. Because the illusory cost savings do not warrant ratepayers taking on the risks

presented by the Preferred CEPP, the Commission should approve the Preferred ERP.

II. BACKGROUND

A. IREA's Interest in This Proceeding.

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

Company through a power purchase agreement and delivers that power to IREA's members.2

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

Douglas, El Paso, Elbert, Fremont, Jefferson, Park, and Teller Counties.3 Its service base includes

residential, commercial, industrial, and agricultural members in rural and urban communities.4

IREA also has a joint ownership stake with the Company in the Comanche Unit 3 power generation

station in Pueblo, Colorado. IREA has a significant interest in the proceeding because, as testified

to by the Company, there are a "host of issues" concerning how IREA will be impacted by the

portfolio emerging from Phase II—both as a wholesale ratepayer and as a stakeholder in

Comanche Unit 3.5

B. The Commission's Directives in Decision No. C18-0191.

In Decision No. C18-0191, the Commission directed the Company to address several issues

and to present alternative portfolios in the 120-Day Report. As it relates to these Comments, the

pertinent Commission directives include:

2
Joint Cooperative Witness T. M. Myers Corrected Answer Testimony ("Myers Answer Testimony") (Ex. 108), 3:19-
4:1.
3
Id. at 5:7-9.
4
Id. at 5:4-5.
5
Tr. Vol. V at 216:15-217:16 (2/7/18).

2
2873275.4
1. Separately modeling the CEPP costs to include and exclude accelerated

depreciation costs for the early retirement of Comanche Units 1 and 2;6

2. Presenting annual cost impacts to see when alleged savings occur;7

3. Addressing tax issues, including modeling cost impacts of the deferred tax assets

from utility-owned wind generation;8 and

4. Including a wind degradation sensitivity analysis.9

C. The Company's 120-Day Report.

The Company filed its 120-Day Report on June 6, 2018. While modeling 11 different

portfolios, the 120-Day Report focuses on three: (1) the Preferred CEPP; (2) the Alternative CEPP;

and (3) the Preferred ERP.10 The Company contends that the Preferred CEPP (early retirement of

Comanche Units 1 and 2) saves $213 million on a net present value ("NPV") basis over the

Preferred ERP (no early retirement).11 But this $213 million figure does not account for the

accelerated depreciation costs of early retirement.12 Notwithstanding the Company's prior

admission that it could not keep customer cost-neutral while accounting for accelerated

depreciation, the 120-Day Report alleges that the Preferred CEPP, even purportedly accounting

for accelerated depreciation, still provides $103 million of NPV savings versus the Preferred

ERP.13

6
Decision No. C18-0191, ¶¶ 60-61.
7
Id. at ¶ 79.
8
Id. at ¶ 93.
9
Id. at ¶ 102.
10
The Alternative CEPP was not addressed in Phase 1 or Phase 1.5, but the Company contends that it "was developed
on the full suite of information" developed from those proceedings. While the Alternative CEPP purports to show
additional savings over the Preferred CEPP by deferring the acquisition of replacement capacity for Comanche Unit
2 in an early retirement scenario, IREA believes it is inappropriate to consider the Alternative CEPP because it was
not subject to the same modeling scrutiny as the other portfolios. Consequently, IREA will focus its comments on the
Preferred CEPP.
11
120-Day Report, p. 32.
12
120-Day Report, p. 53.
13
Id. at p. 72.

3
2873275.4
D. Proceeding No. 17A-0797E.

In Proceeding No. 17A-0797E (the "AD/RR Proceeding"), the Commission is addressing

whether and how the Company's accelerated depreciation costs from retiring Comanche Units 1

and 2 early will be accounted for and then be paid back by using 1% of the Renewable Energy

Standard Adjustment ("RESA").14 Because the Company's agreement to move forward with the

CEPP is contingent on approval of using the RESA funds to retire Comanche Units 1 and 2 early,

and because the accelerated depreciation costs are a critical component of the early retirement

scenario in the CEPP, the AD/RR Proceeding is inextricably entwined with this ERP proceeding.

Accordingly, the evidence and testimony presented in the AD/RR Proceeding are critical to

understanding whether approving the Preferred CEPP is in the best interest of ratepayers.15

III. COMMENTS

A. Accelerated Depreciation Costs Must Be Accounted for in Assessing the Preferred


CEPP; the Company's Modeling of These Costs Does Not Account for All Costs.

1. The Assessment of the Preferred CEPP Must Include Accelerated Depreciation Costs.

Prior to filing the 120-Day Report, the Company admitted that without the RESA reduction

to offset the cost of accelerated depreciation from early coal retirement, it did "not believe the

CEPP can keep customers neutral or save money on a present value basis."16 Since the Company

made this admission, it has become evident that the decreasing cost of renewables means that the

14
Supplemental Direct Testimony of Marci A. McKoane, Proceeding No. 17A-0797E ("McKoane Suppl. Direct"),
44:6-9.
15
Western Resource Advocates has moved to strike certain portions of testimony filed by the Coalition of Ratepayers'
expert in the AD/RR Proceeding, Charles S. Griffey, contending that the AD/RR Proceeding should be confined to
cramped parameters set by the Company. The motion is currently pending. IREA believes the Company should not
be able to compartmentalize the evidence based on the Company's own strategic decision to address accelerated
depreciation in a separate proceeding. Additionally, the Company and other stipulating parties opened the door to
these issues by making claims in the AD/RR Proceeding that savings from the Preferred CEPP are actually greater
than reflected in the 120-Day Report. See, e.g., Rebuttal Testimony of Lisa H. Perkett, 22:18-23:8. IREA will thus
address testimony from the AD/RR Proceeding in these Comments.
16
McKoane Suppl. Direct, 44:6-9.

4
2873275.4
Company will be significantly over-collected on the RESA if it stays at the 2% maximum cap

allowed under C.R.S. § 40-2-124(1)(c).17 PUC Staff has also recognized that "[t]he purpose, need

and objective behind the RESA rider has been met such that reducing the RESA to 1 percent in

2022 has become feasible."18

Consequently, the Company would need to reduce the RESA to no more than 1% even if

Comanche Units 1 and 2 were not retired early. Accordingly, the Company cannot exclude the

cost of accelerated depreciation from the Preferred CEPP by simply re-labeling 1% of the RESA

as a "different" bill rider, because paying 2% in bill riders rather than 1% is not cost neutral for

customers. Indeed, the evidence presented in the AD/RR Proceeding concerning the Company's

future RESA balances suggests the stipulation triggering the Preferred CEPP's creation may have

been intended to avoid having any portion of the RESA returned to customers. The Commission

should include the cost of accelerated depreciation when assessing the Preferred CEPP.

When accelerated depreciation is included as a cost of the Preferred CEPP, the Company's

own numbers show that the alleged savings to ratepayers are dramatically reduced by $110

million.19 In contrast, operation of Comanche Units 1 and 2 is economic through their currently

scheduled retirement. Indeed, continued operation of Comanche Units 1 and 2 under the Preferred

ERP will result in $192 million of NPV savings through 2033 (the scheduled retirement year for

17
See, e.g., Id. at 42:17-20 ("The RESA is expected to have a positive balance of $441 million by 2026 if it is collected
at the current rate of 2% of retail sales. If reduced to 1% in 2022, as the AD/RR Application specifies, the surplus
balance will still be $261 million in 2026.") (emphasis added); see also Supplemental Direct Testimony of Alexander
G. Trowbridge, Proceeding No. 17A-0797E ("Trowbridge Suppl. Direct"), 27:11-29:6 (same) (further testifying that
there are "$0 forecasted RESA costs starting in 2023") (emphasis added).
18
Answer Testimony of William J. Dalton, Proceeding No. 17A-0797E ("Dalton Answer Testimony") ("Staff believes
that current low cost market for all renewable energy resources and the Company's RES compliance position provide
sufficient reason to support reducing the RESA rider in 2022 to 1 percent and that it should not negatively impact
renewable energy acquisitions.")
19
120-Day Report, p. 72 (showing that accelerated depreciation impacts reduce the NPV cost savings by $110 million).

5
2873275.4
Comanche Unit 1) and $160 million of NPV savings through 2035 (the scheduled retirement year

for Comanche Unit 2).20

2. The Company Has Not Accounted for All the Impacts of the RESA Reduction.

The Company's modeling of the accelerated depreciation costs conveys an inaccurate

conclusion. As set forth in the testimony of Mr. Griffey in the AD/RR Proceeding, the Company

improperly justifies the Preferred CEPP by underestimating the RESA cost impacts. IREA agrees

with the testimony of Mr. Griffey in the AD/RR Proceeding that the actual NPV impact of the

Company's treatment of the RESA issues in the 120-Day Report does not account for the value of

the hundreds of millions of additional RESA balances under the Preferred ERP versus the

Preferred CEPP.21 The fact that the Company is now undervaluing the RESA impacts is consistent

with its prior testimony that the CEPP would not keep customers cost-neutral absent the proposed

RESA reduction.

When accounting for all the impacts of the RESA reduction, the Preferred CEPP does not

break even on a NPV basis until 2046, well after the currently scheduled retirement of Comanche

Units 1 and 2 and after the contracts from the current solicitation would have expired.22 Based

solely on the accelerated depreciation impacts, the Commission should reject the Preferred CEPP:

alleged benefits that are razor-thin and that are dependent on speculative modeling assumptions

projected out more than 25 years cannot justify retiring 660MW of economic coal generation a

decade ahead of schedule. Alternatively, if the Preferred CEPP is approved despite the accelerated

depreciation costs, the Commission should nevertheless deny the Company's request to use 1% of

20
Cross-Answer Testimony of Charles S. Griffey, Proceeding No. 17A-0797E ("Griffey Cross-Answer Testimony"),
p. 18, Figure CSG-CA-1.
21
Griffey Cross-Answer, 12:6-16 (asserting that the then-projected $279 million difference between the RESA
balances projected by the Company are not accounted for in the Company's treatment of accelerated depreciation).
22
Griffey Cross-Answer Testimony, 12:17-13:1.

6
2873275.4
the RESA to pay back the Company for electing to retire Comanche Units 1 and 2 early. The

CEPP should stand on its own merits and does not need a customer-funded subsidy simply because

self-interested parties desire it.

B. Under Either the Company's or Mr. Griffey's Numbers, the Alleged Savings from the
Preferred CEPP Would Not Occur Until Far Into the Future.

Because savings that are projected to occur far into the future are inherently uncertain, the

Commission determined in Decision No. C18-0191 that "it is important to understand . . . the

timing of any increased or decreased costs that customers may experience."23 Taking the

Company's 120-Day Report projections at face value, the continued operation of Comanche Units

1 and 2 saves customers hundreds of millions of dollars through their currently scheduled

retirement dates.24 When properly taking into account the RESA impacts, the continued operation

of Comanche Units 1 and 2 saves nearly a quarter billion dollars through their current retirement

dates.25 IREA agrees with the Coalition of Ratepayers that any projected NPV savings that are not

modeled to occur until decades out and not until after the retirement of Comanche Units 1 and 2

are highly speculative.26 As discussed below, this is particularly true in light of the Company's

modeling adjustments that appear to unfairly favor the Preferred CEPP on inputs and assumptions

wholly unrelated to the early retirement of Comanche Units 1 and 2.

Additionally, the continued business-as-usual operation of Comanche Units 1 and 2 would

permit the Company to delay the procurement of additional solar generation that the Company

admits is declining in pricing. The Company recognizes the benefit of delaying the acquisition of

23
See Decision No. C18-0191, ¶ 79.
24
Griffey Cross-Answer Testimony, 10:22-11:6, 19:4-9, Figure CSG-CA-1 (showing $232 million and $160 million
of present value savings through 2033 and 2035, respectively, from the continued operation of Comanche Units 1 and
2).
25
Id. at 20:6-21:11, Figure CSG-CA-2.
26
Id. at 22:2-11;

7
2873275.4
additional solar generation by trying to put forward the Alternative CEPP. The Company concedes

that, "[b]y aligning new low-cost solar resources . . . with the Comanche 2 [early] retirement date

in the next ERP [sic] we anticipate that we could achieve approximately $20 million in additional

savings."27 Because the Company projects that solar prices will continue to drop, these savings

would presumably be even greater if the Company extends the delay in acquiring additional solar

while Comanche Units 1 and 2 operate at a cost-savings through their current 2033 and 2035

retirement dates.28

In sum, it is not in ratepayers' best interest to be burdened with the risk of retiring economic

coal generation a decade early based on speculative assumptions of cost-savings that will only

occur well after the units' scheduled retirement.

C. Based on Other Errors and Inaccuracies in the 120-Day Report, the Projected Savings
of the Preferred CEPP Evaporate Entirely and Should be Disregarded.

Mr. Griffey has raised several unanswered questions concerning instances in which it

appears the Company has either intentionally or unintentionally favored the Preferred CEPP in

order to project illusory savings versus the Preferred ERP. Some examples include:

1. Selectively applying the Tax Cuts and Jobs Act's 21% tax rate to only certain generation

resources in a manner that artificially boosts the NPV savings of the Preferred CEPP

by $37 million;29

27
120-Day Report, p. 30.
28
See also Griffey Cross-Answer Testimony, 22:10-23, 29:14-18.
29
Griffey Surrebuttal Testimony, 11:10-12:20, 17:7-14. Other tax issues, including deferred tax asset issues, are
addressed in the comments filed by the other Joint Cooperative Movants. Those comments correctly point out that
the Company will likely not be able to realize its production tax credits, and, as set forth in the unrebutted testimony
of Terry Myers, the Company has underestimated the cost of carrying the corresponding deferred tax assets. The
Company's failure to sufficiently account for the cost impacts from the deferred tax assets provides another reason for
the Commission to adopt the Preferred ERP.

8
2873275.4
2. Substituting cheaper generic replacement gas generation in the Preferred CEPP but not

in the Preferred ERP, favoring the Preferred CEPP by $92 million in NPV savings;30

and

3. Using cheaper natural gas prices for certain replacement gas generation in the Preferred

CEPP than in the Preferred ERP, favoring the Preferred CEPP by $68 million in NPV

savings.31

To the extent these discrepancies cannot be explained, they undermine the reliability of the

Company's projections and the alleged cost savings of the Preferred CEPP. Combining these

impacts with accelerated depreciation costs and the impact shown in the Commission-ordered

wind degradation study, the NPV savings swing by $407 million towards the Preferred ERP.32

This wipes out the Company's purported $213 million NPV savings and means the Preferred ERP

is better than the Preferred CEPP by $204 million on an NPV basis.33 Accordingly, the

Commission should approve the Preferred ERP.

IV. CONCLUSION

IREA commends the laudable goal of adding renewable generation to the Company's

portfolio; indeed, the Preferred ERP adds 1,111 MW of wind and solar and 50 MW of battery

storage.34 However, the stipulating parties' fixation on retiring 650 MW of economic coal

generation a decade ahead of schedule and at any cost has been a deeply flawed proposal from the

outset. If not for the advocacy of certain parties and the analysis of their respective experts,

Colorado ratepayers would have certainly been on the hook for hundreds of millions of dollars in

30
Id. at 23:20:4-21:3, 22:1-13.
31
Id. at 23:15-25:11.
32
Decision No. C18-0191, ¶ 102.
33
Id. at 27:5-8, Figure CSG-SR-6. Mr. Griffey also adds $90 million in savings for the Preferred ERP based on excess
transmission costs added by the Company. IREA does not take a position on this issue. Regardless, the Preferred
ERP is significantly less expensive on an NPV basis without the transmission costs included.
34
120-Day Report, p. 15, Table 1.

9
2873275.4
hidden deferred tax asset costs and unnecessarily re-purposed RESA funds. Accounting for these

dollars demonstrates that the Company's efforts to portray the Preferred CEPP as cost-effective

lack merit.

The CEPP requires ratepayers to pay a premium for renewable generation levels that

significantly exceed already-satisfied Renewable Energy Standard levels and is based on a deeply

flawed model that inaccurately projects cost savings decades from now. The record before the

Commission does not support the early retirement of Comanche Units 1 and 2, and therefore the

Commission should approve the Preferred ERP.

Respectively submitted this 23rd day of July, 2018.

IRELAND STAPLETON PRYOR & PASCOE, PC

By: /s/ K.C. Groves


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

Jeffrey S. Hurd, #40039


P.O. Box 2605
Grand Junction, CO 81502
Telephone: 970-822-1300
Fax: 970-243-4358
jhurd@irelandstapleton.com

ATTORNEYS FOR INTERMOUNTAIN


RURAL ELECTRIC ASSOCIATION

10
2873275.4
CERTIFICATE OF SERVICE

I hereby certify that on this 23rd day of July, 2018, the foregoing INTERMOUNTAIN
RURAL ELECTRIC ASSOCIATION'S COMMENTS ON 120-DAY REPORT was served
on those parties shown on the Commission's Certificate of Service accompanying such filing as
indicated below through the e-filing system or by other means in accordance with applicable
law.

Email Name Email Address List Entity

Robyn Wille Robyn.wille@coag.gov CDPHE


Gary Kaufman Gary.kaufman@coag.gov CDPHE
Thorvald A. Nelson tnelson@hollandhart.com CEC
Michelle Brandt King mbking@hollandhart.com CEC
Emanuel Cocian etcocian@hollandhart.com CEC
Connie Scribner cmscribner@hollandhart.com CEC
Debra S. Kalish kalishd@bouldercolorado.gov City of Boulder
Matt Lehrman ehrmanm@bouldercolorado.gov City of Boulder
Heather Bailey baileyh@bouldercolorado.gov City of Boulder
Jonathan Koehn koehnj@bouldercolorado.gov City of Boulder
Mary Bisset bissetm@bouldercolorado.gov City of Boulder
David Gehr gehrd@bouldercolorado.gov City of Boulder
Timothy P. Cox timcox@lakewood.org City of Lakewood
Nanette Neelan nannee@lakewood.org City of Lakewood
Jonathan Wachtel jonwac@lakewood.org City of Lakewood
Daniel Kogovsek dkogovsel@pueblo.us City of Pueblo
Richard Fanyo rfanyo@polsinelli.com Climax
Rose Tinnell rtinnell@polsinelli.com Climax
Claybourne Clark clay.clarke@coag.gov Colorado Energy Office
Lindsey Stegall lindsey.stegall@state.co.us Colorado Energy Office
Barbara Boyd barbara.boyd@coag.gov Colorado Energy Office
Jessica Lowrey jessica.lowrey@coag.gov Colorado Energy Office
Jean Watson-Weidner Jean.weidner@coag.gov Colorado Energy Office
Vincent P. Calvano vincecalvano@gmail.com CoSEIA
Rebecca Cantwell rcantwell@coseia.org CoSEIA
David M. Nocera dave.nocera@coag.gov CPUC
Michael Santisi Michael.santisi@coag.gov CPUC

11
2873275.4
Bill Dalton bill.dalton@state.co.us CPUC
Gene Camp gene.camp@state.co.us CPUC
Sharon Podein sharon.podein@state.co.us CPUC
Rebecca Lim rebecca.lim@state.co.us CPUC
Paul Caldara paul.caldara@state.co.us CPUC
Erin O'Neill erin.oneill@state.co.us CPUC
Melvena Rhetta-Fair melvena.rhetta-fair@coag.gov CPUC
Mark Detsky mdetsky@dietzedavis.com Energy Outreach
Colorado
Gabriella Stockmayer gstockmayer@dietzedavis.com Energy Outreach
Colorado
Rebecca Boyle rboyle@dietzedavis.com Energy Outreach
Colorado
Julie Wolfe julie@dietzedavis.com Energy Outreach
Colorado
Jennifer Gremmert jgremmert@energyoutreach.org Energy Outreach
Colorado
Andrew Bennett abennett@energyoutreach.org Energy Outreach
Colorado
Leslie Glustrom lglustrom@gmail.com Pro Se
Randolph W. Starr randy@starrwestbrook.com Holy Cross
Bryan J. Hannegan bhannegan@holycross.com Holy Cross
Diana Golis dgolis@holycross.com Holy Cross
Christopher Hildred childred@holycross.com Holy Cross
Robert O'Neill roneil@mccarter.com Holy Cross
Thomas F. Dixon thomas.dixon@coag.gov OCC
Brent Coleman brent.coleman@coag.gov OCC
Cory Skluzak cory.sckluzak@state.co.us OCC
Cindy Schonhaut cindy.schonhaut@state.co.us OCC
Chris Neil chris.neil@state.co.us OCC
Ingrid Hassell ingrid.hassell@coag.gov OCC
Tim Villarosa tim.villarosa@state.co.us OCC
Chere Mitchell chere.mitchell@state.co.us OCC
Dana Showalter dana.showalter@coag.gov OCC
Hector Arreola hector.arreola@state.co.us OCC

12
2873275.4
Scott Brockett scott.b.brockett@xcelenergy.com PSCo
Christopher Irby christopher.m.irby@xcelenergy.com PSCo
William Dudley bill.dudley@xcelenergy.com PSCo
Sage Tauber sage.tauber@xcelenergy.com PSCo
Matthew S. Larson mlarson@wbklaw.com PSCo
Jack Ihle jihle@xcelenergy.com PSCo
Gregory E. Sopkin gsopkin@wbklaw.com PSCo
Caitlin M. Shields cshields@wbklaw.com PSCo
Schuna Wright schuna.wright@xcelenergy.com PSCo
Robin Kittel Robin.kittel@xcelenergy.com PSCO
Yrene Nunez Yrene.nunez@xcelenergy.com PSCO
SShayne Madsen smadsen@colawyer.net Ratepayers
Meredith Kapushion mkapushion@colawyer.net Ratepayers
Meghann Griffiths mgriffiths@jw.com Ratepayers
Travis Ritchie travis.ritchie@sierraclub.org Sierra Club
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 Western Resources
Advocates
Gwen Farnsworth gwen.farnsworth@westernresources.o Western Resources
rg Advocates
Penny Anderson penny.anderson@westernresources.org Western Resources
Advocates
Robert K. Harris rob.harris@westernresources.org Western Resources
Advocates

By: /s/ K.C. Groves


K.C. Groves, #20832

13
2873275.4
14
2873275.4