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Public Service Company of Colorado's Phase II 120-Day Report pursuant to 4 CCR 723-3-3613(f)
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.
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such projections is compounded by the fact that the Company would be better positioned to take
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
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
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
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).
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1. Separately modeling the CEPP costs to include and exclude accelerated
depreciation costs for the early retirement of Comanche Units 1 and 2;6
3. Addressing tax issues, including modeling cost impacts of the deferred tax assets
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
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.
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D. Proceeding No. 17A-0797E.
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
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
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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
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
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Comanche Unit 1) and $160 million of NPV savings through 2035 (the scheduled retirement year
2. The Company Has Not Accounted for All the Impacts of the RESA Reduction.
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.
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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
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
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
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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
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
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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
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
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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
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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.
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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
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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
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