INDUSTRY DEFENSE FUND APPLICATION FOR FUNDS

Transcription

1 INDUSTRY DEFENSE FUND APPLICATION FOR FUNDS TO: FROM: RE: BOMA IDF Oversight Committee Jeannie Bernard, CAE Denver Metro BOMA Xcel Energy s (PSCo) Proposal to build a new steam plant and to raise steam rates to customers which includes a plan to spread steam costs to natural gas customers. These proposals would greatly increase BOMA member steam rates as well as affect natural gas rates. AMOUNT of REQUEST: $30,000 DATE: June 3, 2013 I. PURPOSE: IDF financial assistance is respectfully requested for expenses to challenge Xcel Energy s (PSCo) plan to raise steam rates to pay for increasing steam costs, to spread the costs of steam to natural gas customers and to build new steam facilities near downtown Denver. These proposals have been filed as cases before the Colorado Public Utilities Commission (PUC). Our request includes expenses for legal representation as required by the Colorado PUC to include a combination of: case development and analysis, research, correspondence, teleconferences with other parties and respective counsel, discovery, pleadings, retention of expert witness(es), collaboration of written and oral testimony with expert witnesses, cross-examination, preparation for and participation in the evidentiary hearings, post-hearing briefs, and participation in any settlement negotiations that may occur. Attached please see the following exhibits: Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E 12A-1264ST_Verified Application of PSCo 12A-1264ST_Verified Amended Application 12A-1264ST_Unopposed Motion of PSCo for Establishment of New Procedural Schedule 12A-1264ST_C I_ Order Requesting Legal Briefs and Addressing Prehearing Procedures 12A-1264ST_Amendment to Verified Amended Application 1

2 APPLICATION FOR FUNDS Page Two II. MEMBER IMPACT: Office buildings will shoulder the biggest share of these steam rate hikes. Many of Denver Metro BOMA member buildings are commercial customers of PSCo and use steam and/or natural gas. The majority of downtown office buildings use steam. These cases will, therefore, directly impact the owners of the affected buildings. To illustrate the scope and urgency of these issues, below is a list of just a few of the Denver buildings that use steam: Colorado State Bank Building 432,000 sf 1515 Arapahoe 537,000 sf Independence Plaza 570,000 sf th Street 656,000 sf th Street 667,000 sf 1670 Broadway 700,000 sf Republic Plaza 1,236,000 sf 1801 California 1,280,000 sf III. BOMA MEMBERS INTERESTS IMPACTED: As previously stated, office buildings will shoulder the biggest share of these steam case outcomes. BOMA principal members are gravely concerned about the impact the proposed 26% to 35% rate increases will have on building operating expenses, as well as the possible effect of increases in natural gas rates, should the regulatory plan be approved. There are currently 150,000 PSCO commercial customers, many of whom are Denver Metro BOMA members. Xcel also serves other cities/states in the BOMA International Midwest Northern Region (Minneapolis, St. Paul, Milwaukee, Wisconsin) that could be impacted by these proposals. Other cities/states around the country also using steam heat include (but are not limited to) New York, New Jersey, Baltimore, Pittsburgh, Detroit, San Francisco, Seattle, Washington D.C., Illinois. Summary of the Cases: Regulatory Plan In recognition of how sharply steam rates will likely rise both in the near term and beyond, PSCo is also seeking PUC approval of a Regulatory Plan which, if granted, would spread some of PSCo s steam related capacity costs among PSCo s gas customers beginning in According to PSCo, this approach is intended to help prevent a potential migration of steam customers away from the district steam system. Of course, this Regulatory Plan also stands to affect PSCo s existing gas customers who may be faced with some degree of cost responsibility for PSCo s steam investments. 2

3 APPLICATION FOR FUNDS Page Three Certificate of Public Convenience and Necessity ( CPCN ) to construct a new steam facility If approved, PSCo s proposed Application for a Certificate of Public Convenience and Necessity ( CPCN ) to construct a new steam facility consisting of two package boilers and supporting equipment also stands to impact rates beginning in Because the current price tag associated with the new steam facilities ranges from $29 - $35 Million, we presently anticipate that beginning in 2016, PSCo may need to seek a rate increase to capture the revenue requirements associated with PSCo s new steam investment that may dwarf the rate increases slated for combined. Multi-Year Rate Case PSCo s proposed Multi-Year Rate Case seeks approval for a series of stepped rate increases for 2013, 2014 and 2015 which, if approved, would increase steam rates as follows: Year Revenue Requirement Deficiency General Rate Schedule Adjustment ( GRSA ) Increase Monthly Rate Increase for the Average Customer* 2013 $1,635, % 9.67% 2014 $878, % 4.7% (which captures the increases for 2013 and 2014) 2015 $2,330, % 11.85% (which captures the increases for 2013, 2014 and 2015) 3-Year TOTAL Approximately $4.7 Million in Revenue Requirements Approximately 55.78% GRSA increase, cumulatively Approximately 28.43%, cumulatively IV. PRECEDENT VALUE: Has this issue been litigated, legislated, or the subject of regulation in another local or state jurisdiction, or at the federal level? X NO To the best of our knowledge, these issues haven t been litigated. YES. If Yes, where and what was the result?: 3

4 APPLICATION FOR FUNDS Page Four V. MATCHING FUNDS: $30,000 Amount of Matching Funds Denver Metro BOMA Source of Matching Funds (Please use additional sheets if necessary) VI. ACCOUNTABILITY: A. Please provide the following information on the individual who will serve as lead on this project and will verify all relevant payment requests. Name: Jeannie Bernard, CAE, Executive Vice President Denver Metro BOMA 1600 Broadway, Suite 650 Denver, Colorado (303) ; (303) Fax B. How will project costs be tracked, and how will the required updates, financial statements, and related documentation outlined in the Disbursement of Funds process (Section VII of the IDF Rules) be provided to the IDF Oversight Committee? Denver Metro BOMA will provide a financial report that will detail all expenses incurred related to the intervention case as well as an accounting of allocated expenses and/or income. VII. DURATION OF FUNDING: The first hearing on the CPCN case is scheduled for June 19, The rate case hearing is currently scheduled for September, The PUC is anticipated to issue a final decision on the CPCN case sometime in August, before the rate case gets underway. The rate case will most likely not be decoded until late in VIII. OUTLOOK: A. Please indicate the likelihood of success of the planned action and your reasons for making such an assessment. POOR FAIR GOOD X EXCELLENT The above assessment is based on conversations with our Holland & Hart legal team and Denver BOMA s previous experiences with PUC case interventions. B. Please indicate the likelihood of success of planned action without IDF funding and your reasons for making such an assessment. 4

5 APPLICATION FOR FUNDS Page Five Likelihood of success without funding is unknown, since we would have to limit our legal representation expenditures and may not have enough to hire expert witnesses. POOR FAIR X GOOD EXCELLENT IX. SELF HELP: A. Please list actions already undertaken toward achievement of the stated project goal: Denver Metro BOMA Executive Vice President, Jeannie Bernard, has been participating in meetings and conference calls with the Holland & Hart attorneys. Denver BOMA also held a meeting with buildings managers and has solicited funds from member buildings that use steam. The total estimated cost of the three cases is approximately $150,000. We have commitments from some member buildings for a total of $70,000 (this is uncollected). Denver BOMA is also contributing $30,000 out of its Legal Defense Fund. B. Do you have a Government Relations Committee or similar entity to assist and/or provide oversight in pursuing this issue? Denver BOMA s Government Affairs Committee is the oversight committee for the intervention in these cases. X. WORK PRODUCT: A. Will this application result in a work product that may be used by other BOMA members, local associations, or state coalitions? YES X NO Please list expected products: On all of these cases, Denver Metro BOMA will file testimony and answers to the PUC that will explain our position and concerns. In addition, the Colorado PUC will deliver an advice letter including a Final Statement and Finding of Fact that will include specific discussions and conclusions. If these decisions are favorable to the commercial real estate industry, they may set a precedent for use in other states. 5

6 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO * * * * * IN THE MATTER OF THE APPLICATION OF ) PUBLIC SERVICE COMPANY OF COLORADO ) FOR A CERTIFICATE OF PUBLIC) CONVENIENCE AND NECESSITY TO) CONSTRUCT TWO PACKAGE BOILERS FOR ) DOCKET NO. 12A-XXXST ITS STEAM UTILITY AND FOR APPROVAL OF ) A REGULATORY PLAN AFFECTING RATES ) FOR NATURAL GAS AND STEAM SERVICES ) EFFECTIVE AFTER THE BOILERS HAVE ) BEEN PLACED IN SERVICE ) Colorado PUC E-Filings System VERIFIED APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO Pursuant to , C.R.S.. Public Service Company of Colorado ("Public Service" or "Company"), by and through its undersigned attorneys, hereby respectfully requests a Certificate of Public Convenience and Necessity ("CPCN") authorizing the Company's construction and operation of the new Sun Valley Steam Center, which will include two package boilers with steam production capacity of 300 thousand pounds per hour ("Mlbs/hr"), to replace the steam capacity being provided by Zuni Electric Generating Station ("Zuni Station") in support of our steam utility. Related to the proposed construction of the steam boilers and as a condition of going forward with construction, the Company also seeks approval of a proposed regutatory"'" to stabilize steam rates in the long-term once the new package boilers are pfaced in service. In support of this Application, Public Service is offering the testimony of the

7 following witnesses: Karen T. Hyde, Vice President, Rates and Regulatory Affairs - Colorado, will present the Regulatory Plan that the Company is proposing to stabilize steam rates in the long-term by combining the cost of service for the steam and gas utilities for ratesetting purposes starting in 2016 and explain why the Commission should approve both the CPCN and the Regulatory Plan proposals as in the public interest. Ms. Hyde shows how the CPCN and Regulatory Plan function together to enable the Company to modernize its steam system and stabilize steam service rate so that there is not a significant migration of customers from the steam utility system to the natural gas utility system. Ms. Hyde explains how the Regulatory Plan results in just and reasonable rates for the Company's gas and steam customers starting in Ms. Jan Wagner, Director, Zuni Station and Thermal Energy, testifies regarding the history of the steam business and the nature of the Company's customer base. Ms. Wagner also describes the need for the Sun Valley Steam Center and explains why construction of these facilities is in the public interest. Ms. Wagner describes the alternatives to constructing the Sun Valley Steam Center considered by the Company. She also explains why it is necessary to approve a regulatory plan to stabilize steam rates over the long term in order to maintain the viability of the steam business. Mr. Tim M. Farmer will describe the new package boiler equipment and provides the Company's construction cost estimate and other elements traditionally provided in a CPCN application, including a diagram of the steam system, a project construction schedule including the projected in-service date of S~pfember 30, 2015, an aerial map 2

8 showing the area in which the facility will be located, and the tradeoffs between one boiler versus two as a prudent reliability and cost conservation measure. Mr. Justin D. Briggs, Technical Consultant, testifies regarding the Company's study of the conversion costs that customers who elect to leave the steam system in favor of natural gas service to meet their heating needs would face, the percentage of these customers that have the ability to convert to natural gas in the face of a rise in steam service rates, and the sensitivity of the results to the assumptions and variables in the model. In addition, Mr. Briggs presents the various scenarios that were run to understand the factors that have the greatest influence on customers migrating from steam service to natural gas service. Ms. Deborah A. Blair, Director, Revenue Analysis, presents the Company's fiveyear revenue requirement forecasts for both the steam and gas businesses and shows the impact of the proposed new package boilers on the stand-alone steam utility's revenue requirement in 2016 and our expected trajectory of gas system revenue requirements beyond our current rate case. Ms. Blair's analysis forms the basis for Mr. Brockett's cost allocation analysis. Mr. Scott B. Brockett, Director Regulatory Administration and Compliance, will provide information in support of the Regulatory Plan that we are proposing. Mr. Brockett details the cost allocation principles the Company is requesting the Commission approve to facilitate stabilization of our steam rates once the package boilers are put into service and shows the impacts of the proposed changes on both gas and steam customers. Mr. Brockett will demonstrate that by pooling the distribution capacity costs from both the steam and gas utility and allocating the aggregate of these 3

9 costs based on design-day requirements of the Company's steam and gas customers, the Company is able to stabilize steam rates at a level that should allow it to preserve its steam customer base and minimize load erosion while having only a very small impact 011 the rates paid by the Company's natural gas customers. Mr. Brockett will also show that the result of the rate stabilization plant is that rates charged to both steam and natural gas customers will be just and reasonable. I. BACKGROUND 1. Public Service and its predecessors has provided steam utility services in the Downtown Denver area since As of September 2012, the Company had 133 metered steam customers representing a variety of customer types, including commercial office buildings, residential buildings, hotels, retail establishments, restaurants, city, state and federal governmental buildings, including the State of Colorado's Capitol Complex, the City and County of Denver (including the Colorado Convention Center, Denver Art Museum, Webb Municipal Office Building and the new Denver Justice Center), and the campus of the Auraria Higher Education Center. As explained by Ms. Jan Wagner in detail in her Direct Testimony filed in support of this Application, the Company is currently facing a challenge with respect to its steam utility business. In order to continue to reliably meet its customers' demand for steam service, Public Service must make significant capital investments in new steam production capacity to replace the steam production capacity provided by Zuni Station, which has reached the end of its useful life and is expected to be retired. However, given the small customer base currently served by the steam utility, the impact on steam rates associated with such a large investment is expected to result in loss of 4

10 some steam customers for whom installing self-generation equipment and switching to natural gas service to meet their heating needs would be more cost-effective once the full cost of the new boilers is included in the steam utility rate base. The loss of any steam customers as a result of rate increases stemming from installation of new boiler facilities will, in turn, exacerbate the risk of further reductions in our steam customer base. 2. The Company is concerned that, without some means of mitigating the rate impact associated with the investment in the package boilers, it could ultimately see steam rates for remaining customers rise to a point where it would make the option of self-generation and switching to natural gas cost-effective even for customers who would have to make substantial investment in alternate on-site boilers, leaving remaining customers without any alternative but to pay extremely high rates for steam service. Since 30 percent of the Company's steam customer base is made up of public facilities; including State, City and County, theaters, college campus and other public buildings in downtown Denver; a significant portion of this rate increase will be borne by citizens who are both Public Service steam utility customers and taxpayers. The waste of resources attendant with this end result is not in the public interest and in the Company's view is best addressed by a solution that combines installation of the most cost-effective steam production facilities and approval of a regulatory plan for stabilizing the rates for steam customers once the new production facilities go into service so that the customer base remains stable and able to support that investment. 3. Against this background, the Company has worked to identify the most cost-effective alternative to replacing the steam capacity it is currently obtaining from 5

11 the Zuni Station and to develop a reasonable plan that will allow it to stabilize steam rates at a sustainable level following installation of the proposed package boilers, thereby preserving the viability of the steam utility business for the benefit of existing and future customers. The Company's willingness to install the package boilers, which the Direct Testimony filed in support of this Application shows to be the best option for the steam business, is conditioned upon the approval of the rate stabilization plan. The Company has joined its requests for a CPCN and the regulatory plan in one application so that the Commission can consider whether the entire plan - modernization of the Denver steam system and stabilization of steam rates - is in the public interest and results in just and reasonable rates for its natural gas and steam customers in Colorado. DESCRIPTION OF THE SUN VALLEY STEAM CENTER 4. Public Service proposes to construct the Sun Valley Steam Center, a steam production facility consisting of two package boilers and supporting equipment, including: water treatment, boiler feedwater system, control system, electrical equipment, and a building to house the equipment. The building will also house the operating, maintenance, and management personnel to operate and maintain the plant and manage the facility. This Sun Valley Steam Center will be located on a portion of the Zuni Station property and is intended to replace Zuni Station's steam generation send-out capacity to the Public Service Steam distribution system, following retirement of the electric Zuni Station expected to occur at the end of

12 5. The need for the new steam production capacity arises as a result of the planned retirement of Zuni Station at the end of its useful life. The proposed project entails the installation of highly efficient modern boilers (two half-size units for redundancy purposes) with state-of-the-art operating and environmental controls and a minimal staffing requirement. The output will completely replace the current steam send out available from Zuni Station, resulting in essentially a "Iike-for-like" replacement of system steam capacity. 6. Public Service estimates the cost of the Sun Valley Steam Center to be $29 million, which is accurate within the range of plus or minus 20 percent. INFORMATION REQUIRED BY RULE Facts Relied Upon to Show that the Public Convenience and Necessity Require Granting this Application. The above discussion sets forth the facts that demonstrate that the public convenience and necessity require granting this application. 8. Estimated Project Costs. The capital cost of the project is expected to be $29 million, plus or minus 20 percent. The plus or minus 20 percent figure is consistent with the typical level of accuracy in Company plant cost forecasts at the time it filed an application for a CPCN. 9. Schedule for Construction. The expected in-service date for the Sun Valley Steam Center is September 30, To meet this in-service date, the Company has established the following milestones. The Commission has not promulgated rules governing an Application for CPCN filings seeking authority to construct new steam facilities pursuant to , C.R.S. Accordingly, the Company used Rule 4 CCR pertaining to the construction 7

13 Award of the Engineering; Procurement of Materials and Equipment and; Construction Agreements ("EPC") - November 15, 2013 Award of the Boiler Contract - August 15, 2013 Commence Construction - JUly 30,2014 In-Service Date - September 30, 2015 Mr. Farmer includes a detailed construction project plan as Exhibit No. TMF-8 to his Direct Testimony and Exhibits. 10. Maps. An aerial photo of the site for the Sun Valley Steam Center as well as a map and diagram of the project is attached as Exhibit No. TMF-1 and TMF-2 to the Direct Testimony of Mr. Timothy Farmer. 11. Alternatives Studied. The Company considered a number of alternatives for addressing the need for steam production capacity in 2016, including 1) extending current steam operations at the Zuni station past the end-of-life; 2) replacing Zuni Station steam capacity with modern package boilers at another existing steam generating location; 3) replacing Zuni with a combined heat and power unit through the electric resource plan; or 4) replacing Zuni steam capacity with modern package boilers at a new facility (Sun Valley Steam Center). As detailed by Mr. Farmer, the Company also considered the alternative of installing one large boiler with sufficient capacity to replace Zuni Station, or the installation of two half-size package boilers. of electric generation facilities as a guideline for the content of the CPCN portion of this Application. 8

14 As Ms. Wagner and Mr. Farmer show in their testimony, the Sun Valley Steam Center proposed in this Application represents the most cost-effective solution for the replacement of the steam capacity currently being provided by Zuni Station. 12. Prudent Avoidance Measures. This information is not required for this application. 13. Information required by Paragraph C of the Rule. This information is not required for this application. THE STEAM RATE STABILIZATION PLAN 14. As discussed by Ms. Wagner's in her Direct Testimony and Exhibits filed with this Application, the Company's steam rates are expected to rise from our estimated 2015 level of $22.61 to $26.69 per Mlb in 2016 as a full year of the Sun Valley Steam Center will be reflected in rates in Based on the Company's best information and analyses, at this price level, the customers who can most costeffectively pursue alternative heating options are likely to leave the steam system. The consequence of this happening would ultimately be an increase in the cost burden of the remaining customers, which in turn will change the economics of remaining steam customers, potentially resulting in further load erosion. For a few customers who do not have the same options to leave the steam system as others, due to high conversion costs, infrastructure limitations and other considerations, the resulting steam service rates would be exceptionally high and burdensome. 15. Over the decades in which the Company's steam and gas utilities have coexisted and been available to customers located in the Downtown Denver area, customers have chosen to subscribe to either steam or gas service and have 9

15 configured their own behind-the-meter systems to accommodate whichever utility service they have selected to meet their heating needs. As described by Mr. Briggs in his Direct Testimony supporting the Application, the Company estimates that the conversion costs that the Company's steam customers would have to incur would be significant if the Company were to discontinue providing steam utility service in favor of gas service and would likely be between $130 and $180 million. The Company currently has investment in steam system infrastructure totaling over $21 million and proposes to add about $29 million with the installation of the Sun Valley Steam Center. 16. In recognition of the alternatives to our district steam service available to some of our customers for heating services, as well as the significant disruption and waste that would occur were the Company to construct the Sun Valley Steam Center, and then start to see a departure of existing steam customers who have the lowest costs to convert to alternative services to meet their thermal needs, the Company is proposing a plan to combine the gas and steam revenue requirements and then directly assign some costs and allocating others for purposes of setting rates beginning in January 1, Specifically, as described by Mr. Brockett in his Direct Testimony supporting the Application, under the proposed Regulatory Plan, beginning with rates that would take effect in 2016, the Company proposes to first identify the 2016 gas and steam revenue requirements on a stand-alone basis. We would then directly assign the customer-related costs attributable to each department and the production costs attributable to the steam department. The remaining costs would be combined and allocated to the two departments based on the peak loads of their respective customers. 10

16 17. The result is that customer-related and production-related costs would continue to be recovered, as they currently are, from the customers directly responsible for those costs. However, capacity-related costs and overhead costs would be treated as the costs of one system and allocated to the respective departments based on the peak capacity required to serve their firm customers. This same approach would be employed in years subsequent to 2016 using updated costs. Mr. Brockett shows a range of potential cost allocation alternatives and the Company requests approval of the cost allocation alternative that stabilizes steam customers' rates at a level that is sufficiently low to prevent significant migration of steam customers away from the district steam system, but still keeps the impact on gas customers very low. 18. The proposed regulatory plan to stabilize steam rates would serve the public interest in a number of ways. First, approval of the proposed steam rate stabilization plan will enable the Company to go forward with construction of the Sun Valley Steam Center project, which it has demonstrated is the least cost approach to meeting the heating needs of its existing steam customers over the long run. The Regulatory Plan the Company has proposed in this proceeding avoids the significant dislocation and waste that would occur if steam rates increased to a level where customers with the most cost effective means of converting to alternative sources for their thermal energy needs were to take that path. The Company's proposed Regulatory Plan also ensures that the Company can continue to provide steam service at reasonably sustainable rate levels to the benefit of all the citizens of the City and County of Denver and the State of Colorado. The proposed plan thus reflects an appropriate regulatory balance in that it provides numerous important and valuable 11

17 benefits for the Company's existing steam customers and to the citizens of the City of Denver and the State generally while imposing only very modest cost increases on the Company's natural gas customers. It is thus not unlike the sorts of trade-offs that are made every day in establishing average utilities rates to serve utility customers. 19. Public Service intends to file a combined general rate case for both its steam and gas utilities such that rates would be effective on January 1, At this point, we expect such a filing would be made on or about May 1, Public Service requests in this docket an order from the Commission approving the Company's proposal to combine the steam and gas revenue requirements for purposes of the Phase I portion of the proceeding and authorizing the allocation of the aggregate of distribution capacity costs among gas and steam customers as proposed by Mr. Brockett in his Direct Testimony filed in support of this Application. NOTICE 20. A separate notice of the Company's proposed CPCN and Regulatory Plan, including the proposed changes to the method of allocating gas and steam distribution capacity costs as presented by Mr. Brockett, will be provided to all of the Company's natural gas and steam customers by direct mail. A copy of the notice is attached to this Application. Public Service anticipates that it will take until January 2, 2013 for all customers to receive notice of this application. Accordingly, Public Service requests that the thirty-day intervention period to respond to this Application not expire until at least January 20,2013. ZUNI RETIREMENT 12

18 21. With the filing of the CPCN and this Regulatory Plan, the Company is announcing its intention to retire Zuni Station upon attaining reliable operation of the Sun Valley Steam Center and to demolish the components of Zuni Station, which will no longer be needed for service for its electric customers. The Company will separately file for approval of the retirement and decommissioning of Zuni Station and the remediation, removal, and restoration of the site consistent with the process approved by the Commission in Docket No. 09AL-299E. INFORMATION REQUIRED BY RULE 3002(b) AND (e) 22. Name and Address of Applicant (Rule 3002(b)(I)): Public Service Company of Colorado 1800 Larimer Street, Suite 1100 Denver, CO Name under which Applicant provides service in (Rule 3002(b)(II»): The Company conducts its operations in Colorado under the trade name of Xcel Energy. 24. Representatives to whom inquiries concerning the Application should be made (Rule 3002(b)(11I)): Please send copies of all inquiries, 'notices, pleadings, correspondence, and other documents regarding this filing to: Scott B. Brockett Director Regulatory Administration Xcel Energy Services Inc Larimer Street, Suite 1400 Denver, CO Phone: (303) Ann E. Hopfenbeck, #15460 Ducker, Montgomery, Lewis & Bess, P.C. c/o Xcel Energy Services Inc Larimer Street, Suite

19 Denver, CO Phone: (303) Fax: (303) and James D. Albright, # Wilkinson Barker Knauer LLP 1755 Blake Street, Suite 4700 Denver, Colorado Telephone: (303) Fax: (303) jalbright@wbklaw.com 25. Agreement to comply with Rule 3002(b)(lV)-(VI) (Rule 3002(b)(VII): Public Service has read and agrees to abide by the provisions of subparagraphs (b)(iv) through (VI) of Commission Rule 3002(b). 26. Description of existing operations and general Colorado service area (Rule 3002(b)NIII): Public Service provides electric and gas public utility service in numerous areas throughout the State of Colorado. The Company also provides stream utility service within the downtown area of Denver. A full listing of Public Service's existing operations and service area is set forth in Public Service's tariffs on file with the Commission. 27. Financial information (Rule 3002(b)(IX»: A copy of Public Service's most recent audited balance sheet, income statement, and statement of retained earnings was last filed on March 23, 2011 in Docket No. 06M-525EG. 28. Location of hearing (Rule 3002(b)(X»: If the Commission sets this application for hearing, Public Service requests that the hearing be held at the Commission's offices in Denver, Colorado. 14

20 29. Acknowledgement required by Rule 3002(XI)(D): Public Service acknowledges that the Company has read and agrees to abide by the provisions of Rule 3002(b)(XI) (A) through (C). 30. Statement under oath (Rule 3002(b)(XII»: Karen T. Hyde states under penalty of perjury that the contents of the Application are true, accurate, and correct to the best of her knowledge. Her affidavit is attached to this application. 31. Information required by Rule 3002(c): Pursuant to Rule 3002(c) of the Commission's Electric Rules, Public Service hereby incorporates by reference the following information, which is on file with the Commission in Docket No. 06M-525EG: a. A copy of Public Service's Amended Articles of Incorporation, which was last filed on October 3, 2006; b. The name business address and title of each of Public Service's officers and directors, which was last filed on September 23, 2011; c. The names and addresses of affiliated companies that conduct business with Public Service, which was last filed on March 23,2011. d. The name and address of Public Service's agent for service of process, which was last filed on October 3,2006. e. A copy of Public Service's most recent audited balance sheet, income statement, statement of retained earnings, and statements of cash flows was last filed on April 20,2012 in Docket No. 06M-525EG. 15

21 CONCLUSION WHEREFORE, Public Service requests that the Commission grant a Certificate of Public Convenience and Necessity for the Company to construct, own and operate the Sun Valley Steam Center project and approve the proposed Regulatory Plan for the stabilization of steam rates once the Sun Valley Steam Center is placed in service. Dated this iz" day of December, Respectfully submitted, By: /S/Ann E. Hopfenbeck Ann E. Hopfenbeck, #15460 Ducker, Montgomery, Lewis & Bess, P.C. c/o Xcel Energy Services Inc Larimer Street, Suite 1100 Denver, CO Phone: (303) Fax: (303) ann.e.hopfenbeck@xcelenergy.com James D. Albright, # Wilkinson Barker Knauer LLP 1755 Blake Street, Suite 4700 Denver, Colorado Telephone: (303) Fax: (303) jalbright@wbklaw.com ATTORNEYS FOR PUBLIC SERVICE COMPANY OF COLORADO 9

22 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO * * * * * IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT TWO PACKAGE BOILERS FOR ITS STEAM UTILITY AND FOR APPROVAL OF A REGULATORY PLAN AFFECTING RATES FOR NATURAL GAS AND STEAM SERVICES EFFECTIVE AFTER THE BOILERS HAVE BEEN PLACED IN SERVICE. DOCKET NO. 12A- XXXST VERIFICATION STATE OF COLORADO ) CITY AND COUNTY OF DENVER ) I, Karen T. Hyde, being duly sworn, do hereby depose and state that I am Regional Vice-President, Rate and Regulatory Affairs, Xcel Energy Services Inc., agent for Public Service Company of Colorado, Applicant in the foregoing Application; that I am an authorized agent for Public Service Company of Colorado for the purposes of verifying the above Application; that I have read the foregoing Application; and that the facts set forth therein are true and correct to the best f my knowledge, information, and belief. ar:. Hyde egional Vice-Presiden, Rates and Regulatory Affairs 1800 Larimer Street, Suite 1400 Denver, Colorado Subscribed and sworn to before me this 1z" day of December My Commission expires: Notary Public

23 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO * * * * * IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT TWO PACKAGE BOILERS FOR ITS STEAM UTILITY AND FOR APPROVAL OF A REGULATORY PLAN AFFECTING RATES FOR NATURAL GAS AND STEAM SERVICES EFFECTIVE AFTER THE BOILERS HAVE BEEN PLACED IN SERVICE ) ) ) ) ) ) ) ) ) ) DOCKET NO. 12A-1264ST Colorado PUC E-Filings System AMENDED VERIFIED APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO Pursuant to , C.R.S.. Public Service Company of Colorado ( Public Service or Company ), by and through its undersigned attorneys, hereby respectfully requests a Certificate of Public Convenience and Necessity ( CPCN ) authorizing the Company s construction and operation of the new Sun Valley Steam Center, which will include two package boilers with steam production capacity of 300 thousand pounds per hour ( Mlbs/hr ), to replace the steam capacity being provided by Zuni Electric Generating Station ( Zuni Station ) in support of our steam utility. 1 Related to the 1 This Amended Application replaces and supersedes Public Service s original Application filed in this docket on December 12, 2012 (but not the Direct Testimony and Exhibits attached thereto). As additional support, Public Service is filing with this Amended Application the Supplemental Direct Testimony and Exhibits of Ms. Karen T. Hyde and Ms. Janice Wagner. Other than minor reference changes and miscellaneous corrections, the only other change to the original Application reflected herein is the Company s general request for waivers, if any, the Commission may deem necessary to grant the relief requested. 1

24 proposed construction of the steam boilers and as a condition of going forward with construction, the Company also seeks approval of a proposed regulatory plan to stabilize steam rates in the long term once the new package boilers are placed in service. While the Company does not believe any waivers of Commission rules are necessary, out of an abundance of caution the Company also seeks any waivers of Commission rules that the Commission deems necessary to grant the relief requested by the Application. In support of this Application, Public Service is offering the testimony of the following witnesses: Karen T. Hyde, Vice President, Rates and Regulatory Affairs - Colorado, presents the Regulatory Plan that the Company is proposing to stabilize steam rates in the long-term by combining the cost of service for the steam and gas utilities for ratesetting purposes starting in 2016 and explains why the Commission should approve both the CPCN and the Regulatory Plan proposals as in the public interest. Ms. Hyde shows how the CPCN and Regulatory Plan function together to enable the Company to modernize its steam system and stabilize the steam service rate so that there is not a significant migration of customers from the steam utility system to the natural gas utility system. Ms. Hyde explains how the Regulatory Plan results in just and reasonable rates for the Company s gas and steam customers starting in Ms. Jan Wagner, Director, Zuni Station and Thermal Energy, testifies regarding the history of the steam business and the nature of the Company s customer base. Ms. Wagner also describes the need for the Sun Valley Steam Center and explains why construction of these facilities is in the public interest. Ms. Wagner describes the 2

25 alternatives to constructing the Sun Valley Steam Center considered by the Company. She also explains why it is necessary to approve a regulatory plan to stabilize steam rates over the long term in order to maintain the viability of the steam business. Mr. Tim M. Farmer describes the new package boiler equipment and provides the Company s construction cost estimate and other elements traditionally provided in a CPCN application, including a diagram of the steam system, a project construction schedule including the projected in service date of September 30, 2015, an aerial map showing the area in which the facility will be located, and the tradeoffs between one boiler versus two as a prudent reliability and cost conservation measure. Mr. Justin D. Briggs, Technical Consultant, testifies regarding the Company s study of the conversion costs that customers who elect to leave the steam system in favor of natural gas service to meet their heating needs would face, the percentage of these customers that have the ability to convert to natural gas in the face of a rise in steam service rates, and the sensitivity of the results to the assumptions and variables in the model. In addition, Mr. Briggs presents the various scenarios that were run to understand the factors that have the greatest influence on customers migrating from steam service to natural gas service. Ms. Deborah A. Blair, Director, Revenue Analysis, presents the Company s fiveyear revenue requirement forecasts for both the steam and gas businesses and shows the impact of the proposed new package boilers on the stand-alone steam utility s revenue requirement in 2016 and the expected trajectory of gas system revenue requirements beyond the Company s current rate case. Ms. Blair s analysis forms the basis for Mr. Brockett s cost allocation analysis. 3

26 Mr. Scott B. Brockett, Director Regulatory Administration and Compliance, provides information in support of the Regulatory Plan that we are proposing. Mr. Brockett details the cost allocation principles the Company is requesting the Commission approve to facilitate stabilization of our steam rates once the package boilers are put into service and shows the impacts of the proposed changes on both gas and steam customers. Mr. Brockett will demonstrate that by pooling the distribution capacity costs and overhead costs from both the steam and gas utility and allocating the aggregate of these costs based on the peak load requirements of the Company s steam and gas customers, the Company is able to stabilize steam rates at a level that should allow it to preserve its steam customer base and minimize load erosion while having only a very small impact on the rates paid by the Company s natural gas customers. Mr. Brockett will also show that the result of the rate stabilization plan is that rates charged to both steam and natural gas customers will be just and reasonable. BACKGROUND 1. Public Service and its predecessors have provided steam utility services in the Downtown Denver area since As of September 2012, the Company had 133 metered steam customers representing a variety of customer types, including commercial office buildings, residential buildings, hotels, retail establishments, restaurants, city, state and federal governmental buildings, including the State of Colorado s Capitol Complex, the City and County of Denver (including the Colorado Convention Center, Denver Art Museum, Webb Municipal Office Building and the new Denver Justice Center), and the campus of the Auraria Higher Education Center. As explained by Ms. Jan Wagner in detail in her Direct Testimony filed in support of this 4

27 Application, the Company is currently facing a challenge with respect to its steam utility business. In order to continue to reliably meet its customers demand for steam service, Public Service must make significant capital investments in new steam production capacity to replace the steam production capacity provided by Zuni Station, which has reached the end of its useful life and is expected to be retired. However, given the small customer base currently served by the steam utility, the impact on steam rates associated with such a large investment is expected to result in loss of some steam customers for whom installing self-generation equipment and switching to natural gas service to meet their heating needs would be more cost-effective once the full cost of the new boilers is included in the steam utility rate base. The loss of any steam customers as a result of rate increases stemming from installation of new boiler facilities, in turn, will exacerbate the risk of further reductions in our steam customer base. 2. The Company is concerned that, without some means of mitigating the rate impact associated with the investment in the package boilers, it could ultimately see steam rates for remaining customers rise to a point where it would make the option of self-generation and switching to natural gas cost-effective even for customers who would have to make substantial investment in alternate on-site boilers, leaving remaining customers without any alternative but to pay extremely high rates for steam service. Since 30 percent of the Company s steam customer base is made up of public facilities -- including State, City and County, theaters, college campus and other public buildings in downtown Denver -- a significant portion of this rate increase will be borne by citizens who are both Public Service steam utility customers and taxpayers. The 5

28 waste of resources attendant with this end result is not in the public interest and in the Company s view is best addressed by a solution that combines installation of the most cost-effective steam production facilities and approval of a regulatory plan for stabilizing the rates for steam customers once the new production facilities go into service so that the customer base remains stable and able to support that investment. 3. Against this background, the Company has worked to identify the most cost-effective alternative to replacing the steam capacity it is currently obtaining from the Zuni Station and to develop a reasonable plan that will allow it to stabilize steam rates at a sustainable level following installation of the proposed package boilers, thereby preserving the viability of the steam utility business for the benefit of existing and future customers. The Company s willingness to install the package boilers, which the Direct Testimony and Supplemental Direct Testimony filed in support of this Amended Application show to be the best option for the steam business, is conditioned upon the approval of the rate stabilization plan. The Company has joined its requests for a CPCN and the regulatory plan in one application so that the Commission can consider whether the entire plan modernization of the Denver steam system and stabilization of steam rates is in the public interest and results in just and reasonable rates for its natural gas and steam customers in Colorado. DESCRIPTION OF THE SUN VALLEY STEAM CENTER 4. Public Service proposes to construct the Sun Valley Steam Center, a steam production facility consisting of two package boilers and supporting equipment, including: water treatment, boiler feedwater system, control system, electrical equipment, and a building to house the equipment. The building will also house the 6

29 operating, maintenance, and management personnel to operate and maintain the plant and manage the facility. This Sun Valley Steam Center will be located on a portion of the Zuni Station property and is intended to replace Zuni Station s steam generation send-out capacity to the Public Service Steam distribution system following retirement of the electric Zuni Station expected to occur at the end of The need for the new steam production capacity arises as a result of the planned retirement of Zuni Station at the end of its useful life. The proposed project entails the installation of highly efficient modern boilers (two half-size units for redundancy purposes) with state-of-the-art operating and environmental controls and a minimal staffing requirement. The output will completely replace the current steam send out available from Zuni Station, resulting in essentially a like-for-like replacement of system steam capacity. 6. Public Service estimates the cost of the Sun Valley Steam Center to be $29 million without Allowance for Funds Used During Construction ( AFUDC ), which is accurate within the range of plus or minus 20 percent. INFORMATION REQUIRED BY RULE Facts Relied Upon to Show that the Public Convenience and Necessity Require Granting this Application. The above discussion sets forth the facts that demonstrate that the public convenience and necessity require granting this application. 8. Estimated Project Costs. The capital cost of the project is expected to be $29 million, plus or minus 20 percent. The plus or minus 20 percent figure is consistent 2 The Commission has not promulgated rules governing an Application for CPCN filings seeking authority to construct new steam facilities pursuant to , C.R.S. Accordingly, the Company used Rule 4 CCR pertaining to the construction 7

30 with the typical level of accuracy in Company plant cost forecasts at the time it files an application for a CPCN. This estimate does not include an Allowance for Funds Used During Construction, an allowance that would need to be added when the costs of the boilers are included in steam utility rates. 9. Schedule for Construction. The expected in-service date for the Sun Valley Steam Center is September 30, To meet this in-service date, the Company has established the following milestones. Award of the Boiler Contract August 15, 2013 Award of the Engineering; Procurement of Materials and Equipment and Construction Agreements ( EPC ) - November 15, 2013 Commence Construction July 30, 2014 In-Service Date September 30, 2015 Mr. Farmer includes a detailed construction project plan as Exhibit No. TMF-8 to his Direct Testimony and Exhibits. 10. Maps. An aerial photo of the site for the Sun Valley Steam Center as well as a map and diagram of the project is attached as Exhibit No. TMF-1 and TMF-2 to the Direct Testimony of Mr. Timothy Farmer. 11. Alternatives Studied. The Company considered a number of alternatives for addressing the need for steam production capacity in 2016, including: 1) extending current steam operations at the Zuni station past the end-of-life; 2) replacing Zuni Station steam capacity with modern package boilers at another existing steam generating of electric generation facilities as a guideline for the content of the CPCN portion of this Application. 8

31 location; 3) replacing Zuni with a combined heat and power unit through the electric resource plan; or 4) replacing Zuni steam capacity with modern package boilers at a new facility (Sun Valley Steam Center). As detailed by Mr. Farmer, the Company also considered the alternative of installing one large boiler with sufficient capacity to replace Zuni Station, or the installation of two half-size package boilers. As Ms. Wagner and Mr. Farmer show in their testimony, the Sun Valley Steam Center proposed in this Amended Application represents the most cost-effective solution for the replacement of the steam capacity currently being provided by Zuni Station. 12. Prudent Avoidance Measures. This information is not required for this application. 13. Information required by Paragraph C of the Rule. This information is not required for this application. THE STEAM RATE STABILIZATION PLAN 14. As discussed by Ms. Wagner in her Direct Testimony and Exhibits filed with this Application, the Company s steam rates are expected to rise from an estimated 2015 level of $22.61 to $26.69 per Mlb in 2016 as a full year of the Sun Valley Steam Center will be reflected in rates in Based on the Company s best information and analyses, at this price level, the customers who can most cost-effectively pursue alternative heating options are likely to leave the steam system. The consequence of this happening would ultimately be an increase in the cost burden of the remaining customers, which in turn will change the economics of remaining steam customers, potentially resulting in further load erosion. For a few customers who do not have the 9

32 same options to leave the steam system as others, due to high conversion costs, infrastructure limitations and other considerations, the resulting steam service rates would be exceptionally high and burdensome. 15. Over the decades in which the Company s steam and gas utilities have coexisted and been available to customers located in the Downtown Denver area, customers have chosen to subscribe to either steam or gas service and have configured their own behind-the-meter systems to accommodate whichever utility service they have selected to meet their heating needs. As described by Mr. Briggs in his Direct Testimony supporting the Application, the Company estimates that the conversion costs that the Company s steam customers would have to incur would be significant if the Company were to discontinue providing steam utility service in favor of gas service and would likely be between $130 and $180 million. The Company currently has investment in steam system infrastructure totaling over $21 million and proposes to add about $29 million with the installation of the Sun Valley Steam Center. 16. In recognition of the alternatives to our district steam service available to some of our customers for heating services, as well as the significant disruption and waste that would occur were the Company to construct the Sun Valley Steam Center, and then start to see a departure of existing steam customers who have the lowest costs to convert to alternative services to meet their thermal needs, the Company is proposing a plan to combine the gas and steam revenue requirements and then directly assign some costs and allocate others for purposes of setting rates beginning in January 1, Specifically, as described by Mr. Brockett in his Direct Testimony supporting the Application, under the proposed Regulatory Plan, beginning with rates 10

33 that would take effect in 2016, the Company proposes to first identify the 2016 gas and steam revenue requirements on a stand-alone basis. The Company would then directly assign the customer-related costs attributable to each department and the production costs attributable to the steam department. The remaining costs would be combined and allocated to the two departments based on the peak loads of their respective customers. 17. The result is that customer-related and production-related costs would continue to be recovered, as they currently are, from the customers directly responsible for those costs. However, capacity-related costs and overhead costs would be treated as the costs of one system and allocated to the respective departments based on the peak capacity required to serve their firm customers. This same approach would be employed in years subsequent to 2016 using updated costs. Mr. Brockett shows a range of potential cost allocation alternatives and the Company requests approval of the cost allocation alternative that stabilizes steam customers rates at a level that is sufficiently low to prevent significant migration of steam customers away from the district steam system, but that still keeps the impact on gas customers very low. 18. The proposed regulatory plan to stabilize steam rates would serve the public interest in a number of ways. First, approval of the proposed steam rate stabilization plan will enable the Company to go forward with construction of the Sun Valley Steam Center project, which the Company has demonstrated is the least cost approach to meeting the heating needs of its existing steam customers over the long run. The Regulatory Plan the Company has proposed in this proceeding avoids the significant dislocation and waste that would occur if steam rates increased to a level 11

34 where customers with the most cost effective means of converting to alternative sources for their thermal energy needs were to take that path. The Company s proposed Regulatory Plan also ensures that the Company can continue to provide steam service at reasonably sustainable rate levels for the benefit of all the citizens of the City and County of Denver and the State of Colorado. The proposed plan thus reflects an appropriate regulatory balance in that it provides numerous important and valuable benefits for the Company s existing steam customers and to the citizens of the City of Denver and the State generally while imposing only very modest cost increases on the Company s natural gas customers. It is thus not unlike the sorts of trade-offs that are made every day in establishing average utilities rates to serve utility customers. 19. Public Service intends to file a combined general rate case for both its steam and gas utilities such that rates would be effective on January 1, At this point, we expect such a filing would be made on or about May 1, Public Service requests in this docket an order from the Commission approving the Company s proposal to combine the steam and gas revenue requirements for purposes of the Phase I portion of the proceeding and authorizing the allocation of the aggregate of distribution capacity costs and overhead costs among gas and steam customers as proposed by Mr. Brockett in his Direct Testimony filed in support of this Application. WAIVERS 20. The Company does not believe that it is necessary for the Commission to waive any of its rules in order to grant the relief requested in the Application. However, to the extent the Commission deems it necessary to do so, the Company also seeks approval of any required waivers of Commission rules. 12

35 NOTICE 21. A separate notice of the Company s proposed CPCN and Regulatory Plan, including the proposed changes to the method of allocating gas and steam distribution capacity costs as presented by Mr. Brockett, will be provided to all of the Company s natural gas and steam customers by direct mail. A copy of the notice was attached to the original Application filed on December 12, Public Service anticipates that it will take until January 2, 2013 for all customers to receive notice of this application. Accordingly, Public Service requests that the thirty-day intervention period to respond to this Application not expire until at least January 20, ZUNI RETIREMENT 22. With the filing of the CPCN and this Regulatory Plan, the Company is announcing its intention to retire Zuni Station upon attaining reliable operation of the Sun Valley Steam Center and to demolish the components of Zuni Station, which will no longer be needed for service for its electric customers. The Company will separately file for approval of the retirement and decommissioning of Zuni Station and the remediation, removal, and restoration of the site consistent with the process approved by the Commission in Docket No. 09AL-299E. INFORMATION REQUIRED BY RULE 3002(b) AND (c) 23. Name and Address of Applicant (Rule 3002(b)(I)): Public Service Company of Colorado 1800 Larimer Street, Suite 1100 Denver, CO

36 24. Name under which Applicant provides service in (Rule 3002(b)(II)): The Company conducts its operations in Colorado under the trade name of Xcel Energy. 25. Representatives to whom inquiries concerning the Application should be made (Rule 3002(b)(III)): Please send copies of all inquiries, notices, pleadings, correspondence, and other documents regarding this filing to: Scott B. Brockett Director Regulatory Administration Xcel Energy Services Inc Larimer Street, Suite 1400 Denver, CO Phone: (303) Ann E. Hopfenbeck, #15460 Ducker, Montgomery, Lewis & Bess, P.C. c/o Xcel Energy Services Inc Larimer Street, Suite 1100 Denver, CO Phone: (303) Fax: (303) and James D. Albright, # Wilkinson Barker Knauer LLP 1755 Blake Street, Suite 4700 Denver, Colorado Telephone: (303) Fax: (303) jalbright@wbklaw.com 26. Agreement to comply with Rule 3002(b)(IV)-(VI) (Rule 3002(b)(VII)): Public Service has read and agrees to abide by the provisions of subparagraphs (b)(iv) through (VI) of Commission Rule 3002(b). 14

37 27. Description of existing operations and general Colorado service area (Rule 3002(b)(VIII)): Public Service provides electric and gas public utility service in numerous areas throughout the State of Colorado. The Company also provides stream utility service within the downtown area of Denver. A full listing of Public Service s existing operations and service area is set forth in Public Service s tariffs on file with the Commission. 28. Financial information (Rule 3002(b)(IX)): A copy of Public Service s most recent audited balance sheet, income statement, and statement of retained earnings was last filed on March 23, 2011 in Docket No. 06M-525EG. 29. Location of hearing (Rule 3002(b)(X)): If the Commission sets this application for hearing, Public Service requests that the hearing be held at the Commission s offices in Denver, Colorado. 30. Acknowledgement required by Rule 3002(XI)(D): Public Service acknowledges that the Company has read and agrees to abide by the provisions of Rule 3002(b)(XI) (A) through (C). 31. Statement under oath (Rule 3002(b)(XII)): Paula M. Connelly states under penalty of perjury that the contents of the Amended Application are true, accurate, and correct to the best of her knowledge. Her affidavit is attached to this amended application. 32. Information required by Rule 3002(c): Pursuant to Rule 3002(c) of the Commission s Electric Rules, Public Service hereby incorporates by reference the following information, which is on file with the Commission in Docket No. 06M-525EG: 15

38 a. A copy of Public Service s Amended Articles of Incorporation, which was last filed on October 3, 2006; b. The name business address and title of each of Public Service s officers and directors, which was last filed on September 23, 2011; c. The names and addresses of affiliated companies that conduct business with Public Service, which was last filed on March 23, d. The name and address of Public Service s agent for service of process, which was last filed on October 3, e. A copy of Public Service s most recent audited balance sheet, income statement, statement of retained earnings, and statements of cash flows was last filed on April 20, 2012 in Docket No. 06M-525EG. CONCLUSION WHEREFORE, Public Service requests that the Commission 1) grant a Certificate of Public Convenience and Necessity for the Company to construct, own and operate the Sun Valley Steam Center project; 2) approve the proposed Regulatory Plan for the stabilization of steam rates once the Sun Valley Steam Center is placed in service; and 3), if necessary, grant any required waivers of Commission rules. 16

39 Dated this 31 st day of December, Respectfully submitted, By: /S/ Ann E. Hopfenbeck Ann E. Hopfenbeck, #15460 Ducker, Montgomery, Lewis & Bess, P.C. c/o Xcel Energy Services Inc Larimer Street, Suite 1100 Denver, CO Phone: (303) Fax: (303) and James D. Albright, # Wilkinson Barker Knauer LLP 1755 Blake Street, Suite 470 Denver, Colorado Telephone: (303) Fax: (303) jalbright@wbklaw.com ATTORNEYS FOR PUBLIC SERVICE COMPANY OF COLORADO 17

40 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO * * * * * IN THE MATTER OF THE APPLICATION OF PUBLIC ) SERVICE COMPANY OF COLORADO FOR A ) CERTIFICATE OF PUBLIC CONVENIENCE AND ) NECESSITY TO CONSTRUCT TWO PACKAGE ) BOILERS FOR ITS STEAM UTILITY AND FOR ) APPROVAL OF A REGULATORY PLAN AFFECTING ) RATES FOR NATURAL GAS AND STEAM SERVICES ) EFFECTIVE AFTER THE BOILERS HAVE BEEN ) PLACED IN SERVICE. ) DOCKET NO. 12A-1264ST VERIFICATION STATE OF COLORADO ) CITY AND COUNTY OF DENVER) SS: /, Paula IVI. Connelly, being duly sworn, do hereby depose and state that I am Managing Attorney, Xcel Energy Services Inc., agent for Public Service Company of Colorado, Applicant in the foregoing Amended Verified Application of Public Service Company of Colorado; that I am an authorized agent for Public Service Company of Colorado for the purposes of verifying the above Amended Verified Application; that I have read the foregoing Amended Verified Application; and that the facts set forth therein are true and correct to the best of my know/edge, information, and belief. Q?~/J1.~- Paula M. Connelly ~ Managing Attorney 1800 Larimer Street, Suite 1100 Denver, Colorado Subscribed and sworn to before me this 31 st day of December My Commission Expires Dec. r7, 2Of4 My Commission expires: Dt.J {(frtjc.c \1) 1(j ly i~~~rjct-

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48 Decision No. C I BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO DOCKET NO. 12A-1264ST IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT TWO PACKAGE BOILERS FOR ITS STEAM UTILITY AND FOR APPROVAL OF A REGULATORY PLAN AFFECTING RATES FOR NATURAL GAS AND STEAM SERVICES EFFECTIVE AFTER THE BOILERS HAVE BEEN PLACED IN SERVICE. INTERIM ORDER REQUESTING LEGAL BRIEFS AND ADDRESSING PREHEARING PROCEDURES Colorado PUC E-Filings System I. BY THE COMMISSION A. Statement Mailed Date: May 16, 2013 Adopted Date: May 15, This matter comes before the Commission upon review of the Answer Testimony and Exhibits of Gene L. Camp, filed by Staff of the Colorado Public Utilities Commission (Staff) on May 3, In that testimony, among other things, Mr. Camp argues that, under (1)(a)(I), C.R.S., Public Service Company of Colorado (Public Service or Company) is not operating as a public utility in its provisioning of steam services. In addition, Mr. Camp argues that, even if Public Service is a public utility when offering steam services, changed circumstances (for example, allegedly low costs of conversion from steam to natural gas 1 Staff filed its testimony pursuant to Decision No. C I, mailed March 1, In that decision, the Commission adopted a procedural schedule to govern this docket. We are also aware that, on May 13, 2013, Staff filed a motion for leave to file supplemental testimony to Mr. Camp s answer testimony. By this Order, we are not addressing the merits of that motion.

49 Decision No. C I Before the Public Utilities Commission of the State of Colorado DOCKET NO. 12A-1264ST and the proposed retirement of Zuni facilities) warrant a reconsideration of prior Commission decisions to regulate that service. 2. We find that the above mentioned arguments are legal in nature and, as such, are more appropriate for a legal brief signed by counsel rather than testimony of a non-attorney witness. 2 We also find that the legal and jurisdictional issues of whether a steam business is a public utility and the extent of appropriate Commission regulation are threshold issues to the others we are considering in this docket. 3. We therefore request all parties in this proceeding, including Staff and Public Service, submit legal briefs regarding the issues raised on pages 1 through 13 of Mr. Camp s answer testimony. In particular, we request that the parties address whether Public Service is a public utility within the meaning of (1)(a)(I), C.R.S., other statutes found within Title 40, as well as Colorado Constitution Article XXV, in its offering of steam services. 4. More specifically, we are interested in exploring the significance of other statutes contained in Title 40 that mention steam on the issue of whether providing steam makes the Company a public utility. We are also interested in exploring whether Public Service s steam offering makes it a public utility under (1)(a)(I), C.R.S., because steam falls within the meaning of gas or because steam is a service provided by a gas corporation or an electrical corporation, specifically, Public Service. 3 Further, we request the parties to address the person declared by law to be affected with a public interest language contained in 2 See, e.g., Hartman v. Community Responsibility Ctr., 87 P.3d 202, 205 (Colo. App. 2003) (an expert may not express an opinion regarding the applicable law or legal standards). 3 For example, on page 7 of his answer testimony, Mr. Jeffrey Ackermann on behalf of the Colorado Energy Office suggests viewing steam and natural gas as energy as a service rather than as specific commodities. He also views steam service as value-added natural gas service. Even though Mr. Ackermann raises this issue in the context of his support for the proposed rate stabilization plan, the same argument could also pertain to whether steam is a public utility. 2

50 Decision No. C I Before the Public Utilities Commission of the State of Colorado DOCKET NO. 12A-1264ST (1)(a)(I), C.R.S. In particular, we request that the parties brief whether the Commission, exercising any of its functions, has the legal authority to declare a person or an entity to be affected with a public interest or whether such a declaration may be made only by the General Assembly. 5. If a party concludes in its legal brief that steam renders Public Service a public utility in regards to that service, we request that party comment on the extent of appropriate Commission regulation. On the other hand, if a party comes to the conclusion that steam is not a public utility service, we invite that party to comment on the public policy implications of that conclusion to the ratepayers, Public Service, and other stakeholders and what, if any, steps would be lawful for the Commission to take concerning steam services. 6. Whether or not an entity is a public utility when it provides a particular service may also be a mixed issue of law and fact. To the extent that a party believes that to be the case, we request that the party explain its position and address the facts that, in its view, are relevant to the issues identified above and their public interest implications in the next round of testimony. 4 For example, facts may address the interrelationship of steam services with gas or electrical services, whether steam services have characteristics or attributes of a public utility service such that they are affected with a public interest, estimated costs of conversion from steam to natural gas, the long term future of Public Service s steam business, prior Commission actions regarding that business, and others. 7. The legal briefs will be limited to 20 pages and will be due on or before May 31, Further, to address the threshold legal issues identified above in advance of the evidentiary hearing scheduled to commence on June 17, 2013, we schedule a 4 Pursuant to Decision No. C I, cross-answer and rebuttal testimonies are due on May 24,

51 Decision No. C I Before the Public Utilities Commission of the State of Colorado DOCKET NO. 12A-1264ST prehearing conference in this matter for 9:00 a.m. on June 10, We may elect to hear oral argument on these issues during this prehearing conference, and we will advise the parties accordingly after the briefs are filed. 8. We also direct Public Service to coordinate the filing of a matrix indicating the order of cross-examination of witnesses and the estimated amount of time of cross-examination by each party for each witness for the hearing commencing on June 17, Further, Public Service shall include a list of exhibits that have been pre-filed through the rebuttal round of testimony. This shall be filed with the Commission no later than June 12, Finally, we ask that parties arrive before the hearing on June 17, 2013 at 8:30 a.m. in order to have their exhibits marked and recorded. II. ORDER A. It Is Ordered That: 1. The briefs on whether Public Service Company of Colorado (Public Service) is operating as a public utility in its provisioning of steam services and other threshold legal issues identified above will be due on or before May 31, The prehearing conference in this matter is scheduled as follows: DATE: June 10, 2013 TIME: PLACE: 9:00 a.m. Commission Hearing Room 1560 Broadway, Suite 250 Denver, Colorado 3. We direct Public Service to file a matrix indicating the order of cross-examination of witnesses, as well as a list of exhibits that have been pre-filed through the rebuttal round of testimony, on or before June 12,

52 Decision No. C I Before the Public Utilities Commission of the State of Colorado DOCKET NO. 12A-1264ST 4. This Order is effective on its Mailed Date. B. ADOPTED IN COMMISSIONER S WEEKLY MEETING, May 15, (S E A L) THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO JOSHUA B. EPEL ATTEST: A TRUE COPY Doug Dean, Director JAMES K. TARPEY PAMELA J. PATTON Commissioners 5