RR4-132 of 571. Attachment TSM-RR-B Page87of SPS Rate Case

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1 RR4-132 of 571 Attachment TSM-RR-B Page87of SPS Rate Case

2 Attachment TSM-RR-B Page 88 of SPS Rate Case

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5 Attachment TSM-RR-B Page 91 of SPS Rate Case

6 Attachment TSM-RR-B Page92 of SPS Rate Case,,,,,,, n coo -99 " K N

7 Attachment TSM-RR-B Page 93 of SPS Rate Case I, - c m 0

8 Attachment TSM-RR-B Page 94 of SPS Rate Case

9 Attachment TSM-RR-B Page 95 of SPS Rate Case

10 Attachment TSM-FIR-B Page 96 of SPS Rate Case

11 Attachment TSM-RR-B Page 97 of SPS Rate Case -01 xz

12 Exclusions from XES Expenses by Affiliate Class and FERC Account For Twelve Months Ended December 31,2007 Teresa Madden Attachment TSM-RR-C Page 1 of 1 SPS 2008 Rate Case (A) (B) (C) (D) (E) FERC Explanations for Exclusions Affiliate Class Account FERC Account Description Exclusions (Total Company) CE Audit Services Other Deductions Below the Line CE Audit Services Total CF Chief Financial Officer Other Deductions CF Chief Financial Officer Total Below the Line CF Controller CF Controller CF Controller CF Controller CF Controller Taxes Other Inc. & Ded Other Exp fi-om Non-Utility Intrst & Dividnd Income Other Deductions Other Interest Exp CF Controller Total Below the Line Below the Line Below the Line Below the Line Below the Line (1,143.69) CF Environmental Policy CF Environmental Policy Donations Expenditures for Civic, CF Environmental Policy Total Below the Line Below the Line CF Investor Relations Other Deductions CF Investor Relations Total Below the Line CF Portf. Strategy & Bus. Dev Other Deductions Below the Line CF Portf. Strategy & Bus. Dev. Total CF Risk Management Other Deductions CF Risk Management Total Below the Line CF Treasurer CF Treasurer CF Treasurer CF Treasurer Intrst & Dividnd Income Donations Other Deductions Interest & Dividend CF Treasurer Total Below the Line Below the Line Below the Line Below the Line (31,599.36) , Chairman's Environmental Fund Donations Below the Line Chairman's Environmental Fund Total 70, , Chief Executive Officer Chief Executive Officer Expenditures for Civic, Other Deductions Chief Executive Officer Total Below the Line Below the Line 73, Amounts may not add or tie to other schedules due to rounding. Total - Witness Teresa Madden RR4-143 of

13 Pro Forma Adjustments toxes Expenses by Affiliate Class and FERC Account For Twelve Months Ended December 31,2007 Teresa Madden Attachment TSM-RR-D Page 1 of SPS Rate Case (B) FERC (C) FERC Account (E) (F) Pro Formas Affiliate Class Account Description Explanations for Pro Formas Sponsor (Total Company) CF Chief Financial officer 920 MGSalaries Labor Escalator Tim WiUemsedMarvin MeDaniel CF Chief Financial officer 920 A&G Salaries lncenlive Adjustment CF Chief Financial officer 926 MG Pen & Ben Pension & Benefit Tim Willemsen/Marvin McDaniel Tim WillemsenlMarvm McDaniel CF Chief Financial Officer Total (56052) , CF Controller CF Controller CF controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller CF Controller Stm Gen Fuel Stm Gen Fuel Mix Steam Pwr Exp Misc Steam Pwr Exp 0th Oper Mise Gen Exp OthOperMiscGenExp mer Power 0th Exp mer Power 0th Exp Trans Oper Super & Ehg Trans Oper Super & Eng Trans Oper Mise Exp Trans Oper Misc Exp A&G Salaries A&G Salaries A&G Pen & Ben A&G General Advertising Labor Escalator Incentive Adjustment Labor Escalator lncentive Adjustment Labor Escalator Incentive Adjustment Labor Escalator Incentive Adjustment Labor Escalator Incentive Adjustment Labor Escalator Incentive Adjustment Labor Escalator Incentive Adjustment Pension & Benefit Advaising Tim WillansenlMarvin McDaniel Tim WillemsenlMarvin McDaniel Tim WilkmenMwin MeDaniel Tim Willemsen/Marvin McDaniel Tim WillemsenMarvin McDaniel Tim Wil-. McDaniel Tim Willemsedvfawin McDaniel Tim WillemsenlMarvin McDaniel Tim WillemsedMarvin McDaniel Tim WillemsenlMarvin McDaniel Tim WillemsenMarvin McDaoiel Tim WillemsenMarvin McDaniel Tim WillemsenlMarvin McDaniel Tim WillemsenlMarvin McDaniel Tim WillednsenlMarvin McDaniel Tim Willansen CF Controller Total ) (264.71) 8, (I,694.07) (74.03) (133.86) (25.45) (11431) 109,77331 (20,695.01) 14, (94.39) 113, CF Environmental Policy CF Environmental Policy CF Environmental Policy CF Environmental Policy A&G Salaries A&G Salaries A&G Pen & Ben A&G General Advertising Labor Escalator Incentive Adjustment Pension & Benefit Advertising Tim Willemsen/Marvin McDaniel Tim Wiuemsen/Marvin McDaniel Tim WillemsenlMawin McDaniel Tim Wilkmsen CF Environmental Policy Total 1, (339.89) (5,625.21) (3,995.41) CF Investor Relations CF Investor Relations CF Investor Relations CF Investor Relations ACG Salaries A&G Salaries A&G Pen & Ben MG General Advertising Labor Escalator Incentive Adjustment Pension & Benefit Advertising Tim Willemsen/Mmin McDaniel Tim WiIlemsedMarvin McDaniel Tim WilkmsedMarvin McDaniel Tim Willemsen CF Investor Relations Total 2,02 I.68 (385.07) (2,377.44) (509.32) CF Portf. Strategy & Bus. Dev. CF Portf. Strategy & Bus. Dev. CF Portf. Strategy & Bus. Dev. CF Portf. Smtegy & Bus. Dev ABG Salaries A&G Salaries A&G Pen & Ben ABG General Advertising Labor Escalator lncentive Adjustment Pension & Benefit Advertising Tim WillemsenMarvin McDm.el Tim WillemsenlMarv in McDaniel Tim WillemsenlMarv in McDaniel Tim Willemsen CF Portf. Strategy & Bus. Dev. Total 6,59529 ( ) (136.25) 6, CF Risk Management CF Risk Management CF Risk Management CF Risk Management CF Risk Management CF Risk Management CF Risk Management CF Risk Management ther Power 0th Exp Other Power 0th Exp Custcuner Asst Expense Customer Asst Expense A&G Salaries A&G Salaries A&G Pen & Ben A&G General Advertising Labor Escalator lncentive Adjustment Labor Escalator Incentive Adjustment Labor Escalator lncentive Adjustment Pension & Benefit Advertising Tim WillemsenMarvin McDaniel Tim WillemsenMarvin McDaniel Tim WillesuwdMarvin McDaniel Tim Willemsen/Marvin McDaniel Tim WillansedMarvin McDaniel Tim Wiuemsen/Marvin McDaniel Tim WillemsedMarvin McDaniel Tim WiUemsen CF Risk Management Total 2,77236 (529.58) (82.80) 21,16029 (3,958.51) 2, ( ) 22, CF Treasurer CF Treasurer CF Treasurer CF Treasurer CF Treasurer CFTreasnrer CF Treasurer Tax 0th than Inc Tx-Ut AM Salaries MG Salaries MG Salaries A&G Injuires & Damages A&G Pen & Ben ABG Pen & Ben Busmcss Area Pro-Forms Adj Business Area Pro-Forma Adj Labor Escalator Incentive Adjustment Business Area Pro-Forma Adj Busmess A m Pro-Forma Adj Pension & Benefit Teresa Madden Teresa Madden Tim WillemsenlMarVin McDaniel Tim WillemsenlMarvin McDaniel Teresa Madden Teresa Madden Tim WilkmsenlMarvin McDaniel CF Treasurer Total (2,838.10) (36,682.34) 13, (2,455.66) (47.40) (5,724.37) 1, (33,11725) CE Audit Services CE Audit Services CE Audit Services CE Audit Services ABG Sakries A&G Salaries A&G Pen & Ben A&G General Advertising Labor Escalator lncentive Adjustment Pension & Benefit Advertising Tim WillemenMarvin McDaniel Tim WillemsenlMarvm McDaniel Tim Willemsen/Marvio MeDaniel Tim Willemsen CE Audit Services Total 11, (2,105.92) 1,32951 (1420) 10,32894 ChiefExecutive officer Chief Executive officer Chief Executive officer A&G Salaries A&G Salaries A&G Pen 81 Ben Labor Escalator Incentive Adjustment Pension & Benefit Tim Wiuemren/Marvin McDaniel Tim WillemseWMarvin McDaniel Tim WillemsenlMa~m McDaniel Chief Executive Officer Total 6, (1,163.09) ,64523 Total - Witness Teresa Madden 122, Amounts may not add or tie to other schedules due to rounding. RR4-144 of

14 DOCKET NO. APPLICATION OF SOUTHWESTERN Q PUBLIC SERVICE COMPANY FOR Q PUBLIC UTILITY COMMISSION AUTHORITY TO CHANGE RATES, Q TO RECONCILE FUEL AND Q PURCHASED POWER COSTS FOR Q 2006 AND 2007, AND TO PROVIDE A Q OF TEXAS CREDIT FOR FUEL COST SAVINGS Q DIRECT TESTIMONY of CATHY J. HART on behalfof SOUTHWESTERN PUBLIC SERVICE COMPANY (Revenue Requirement) (Filename: HartRRDirect. doc) Table of Contents Glossary of Acronyms and Defined Terms... 4 List of Attachments... 5 I. WITNESS IDENTIFICATION AND QUALIFICATIONS ASSIGNMENT SUMMARY OF AFFILIATE EXPENSES FOR THE SPONSORED AFFILIATE CLASSES... 9 IV. AFFILIATE EXPENSES FOR THE CORPORATE SECRETARY CLASS Summary of Services ofthe Corporate Secretary Class The Corporate Secretary Class Provides Necessary Services B. C. The Corporate Secretary Class Provides Necessary Services at a Reasonable Cost Objective Evidence (Benchmarking) Budget Planning Cost Trends Staffing Trends Cost Control and Process Improvement Initiatives D. The Costs for the Corporate Secretary Class are Priced in a Fair Manner V. AFFILIATE EXPENSES FOR THE SHAREHOLDER RELATIONS CLASS Hart Direct - Revenue Requirement Page 1 G:\WORD\2008\ \HartRRDirect.doc RR4-145 of

15 A. B. C. D. Summary of Services of the Shareholder Relations Class The Shareholder Relations Class Provides Necessary Services The Shareholder Relations Class Provides Necessary Services at a Reasonable Cost Budget Planning Cost Trends Staffing Trends Cost Control and Process Improvement Initiatives The Costs for the Shareholder Relations Class are Priced in a Fair Magner VI. AFFILIATE EXPENSES FOR THE CORPORATE COMMUNICATIONS CLASS A. Summary of Services of the Corporate Communications Class B. The Corporate Communications Class Provides Necessary Services C. The Corporate Communications Class Provides Necessary Services at a Reasonable Cost Budget Planning Cost Trends Staffing Trends Cost Control and Process Improvement Initiatives The Costs for the Corporate Communications Class are Priced in a Fair Manner VI1. AFFILIATE EXPENSES FOR THE AVIATION AND TRAVEL SERVICES CLASS A. Summary of Services of the Aviation and Travel Services Class VI11. D. B. C. D. The Aviation and Travel Services Class Provides Necessary Services The Aviation and Travel Services Class Provides Necessary Services at a Reasonable Cost Objective Evidence (Benchmarking) Budget Planning Cost Trends Staffing Trends Cost Control and Process Improvement Initiatives The Costs for the Aviation and Travel Services Class are Priced in a Fair Manner AFFILIATE EXPENSES FOR THE PROPERTY SERVICES CLASS A. Summary of Services ofthe Property Services Class B. The Property Services Class Provides Necessary Services C The Property Services Class Provides Necessary Services at a Reasonable Cost Objective Evidence (Benchmarking) Budget Planning Cost Trends Hart Direct. Revenue Requirement G:\WORD\2008\ \HartRRDirect.doc RR of 571 Page

16 4. Staffing Trends Cost Control and Process Improvement Initiatives D. The Costs for the Property Services Class are Priced in a Fair Manner IX. CAPITAL ADDITIONS X. CONCLUSION AFFIDAVIT Hart Direct. Revenue Requirement G:\WORD~008\ U- artrrdirect.doc RR Of 571 Page

17 ~~~ Glossary of Acronyms and Defmed Terms AcronyrdDefined Term FERC Foundation NBAA NYSE O&M Operating Company PSCO SEC SPS Test Year Total Company or total company UPS Xcel Energy XES Meaning Federal Energy Regulatory Commission Xcel Energy Foundation National Business Aviation Association New York Stock Exchange Operation and Maintenance One of the Operating Companies Public Service Company of Colorado, a Colorado corporation Securities Exchange Commission Southwestern Public Service Company, a New Mexico corporation January 1, 2007 to December 3 1,2007 Total SPS (before any jurisdictional allocation) Uninterrupted Power Supply Xcel Energy, Inc. Xcel Energy Services, Inc. Hart Direct - Revenue Requirement Page 4 G:\WORD\2008\ \Ha1fRRDirect.doc 1716 RR4-148 of 571

18 List of Attachments Attachment Attachment CJH-RR-1 Attachment CJH-RR-2 Attachment CJH-RR-3 Attachment CJH-RR-4 Attachment CJH-RR-5 Attachment C JH-RR-A Attachment CJH-RR-B Attachment CJH-RR-C Attachment CJH-RR-D Description Organization Chart of Corporate Services Business Area (Non-native format) Your Rights as an Xcel Energy Customer (Non-native format) News Release - Xcel Energy asks customers to curb electricity use (Non-native format) Airline Schedule Comparison (Non-native format) Property Services Capital Additions (Filename: CJH-RR-5.xls) Summary of XES Expenses to SPS by Affiliate Class and Billing Method (Filename: CJH-RR-xls) XES Expenses to all Affiliates by Affiliate Class, Activity, Billing Method, and FERC Account (Filename: CJH-RR-B.xls) Exclusions from XES Expenses to SPS by Affiliate Class and FERC Account (Filename: CJH-RR-C.xls) Pro Forma Adjustments to XES Expenses by Affiliate Class and FERC Account (Filename: CJH-RR-D.xls) Hart Direct - Revenue Requirement G:\WORD\2008\ WartRRDirect.doc RR4-149 of 571 Page

19 Q. Q. Q. Q. Q- DIRECT TESTIMONY OF CATHY J. HART I. WITNESS IDENTIFICATION AND QUALIFICATIONS Please state your name and business address. My name is Cathy J. Hart. My business address is 414 Nicollet Mall, 5 h Floor, Minneapolis, Minnesota On whose behalf are you testifying in this proceeding? I am filing testimony on behalf of Southwestern Public Service Company ( SPS ), a wholly owned subsidiary of Xcel Energy, Inc. ( Xcel Energy ). Xcel Energy is a registered holding company that owns several electric and natural gas utility companies. By whom are you employed and in what position? I am employed by Xcel Energy Services, Inc. ( XES ), the service company subsidiary of Xcel Energy, as Vice President, Corporate Services and Corporate Secretary. Please briefly outline your responsibilities as Vice President, Corporate Services and Corporate Secretary. I am responsible for Property Services, Corporate Communications, Shareholder Relations, Corporate Secretary, and Aviation and Travel Services. Please describe your educational background. In 1971, I earned a Bachelor of Science degree in Journalism fiom Ohio University in Athens, Ohio. 1 Xcel Energy is the parent company of four utility operating companies: Northern States Power Company, a Minnesota corporation; Northern States Power Company, a Wisconsin corporation; Public Service Company of Colorado, a Colorado corporation ( PSCo ); and SPS, a New Mexico corporation (individually, Operating Company ; collectively, Operating Companies ). Hart Direct - Revenue Requirement RR4-150 of 571 G:\WORD\2008\ WartRRDirect.doc Page

20 1 Q* Q Q Please describe your professional experience. My career began as a Reporter and then City Editor of the Lancaster Eagle- Gazette in Lancaster, Ohio, fiom 1971 to Following that, I worked as a Public Affairs Consultant with American Electric Power, Inc., Fuel Supply Department, fiom 1979 to 1984; Public Affairs and Communications Consultant with Old Ben Coal Company, from 1984 to 1987; Manager, Public Relations with Desbrow & Associations fiom 1987 to 1988; Client Services Coordinator and senior staff writer at PSCo fiom 1989 to 1990; Assistant to the Chairman, Chief Executive Officer and President of PSCo fiom 1990 to 1993; Manager of Corporate Communications with PSCo from 1993 to 1996; Corporate Secretary with New Century Energies, Inc. fiom 1998 until August 2000 when it merged with Northern States Power Company to form Xcel Energy; Corporate Secretary for Xcel Energy and its subsidiaries from 2000 to the present. Since November 2005, I have been Vice President, Corporate Services and Corporate Secretary for XES. Have you attended or taken any special courses or seminars relating to public utilities? Yes. I completed the Public Utilities Executive Course at the University of Idaho in Have you previously filed testimony at any regulatory commission? Yes. I presented testimony in Public Utility Commission of Texas Docket No , SPS s most recent Texas retail base rate case. Hart Direct - Revenue Requirement Page 7 G:\WORD\2008\ UHartRRDirect.doc RR4-151 of

21 1 2 Q* ASSIGNMENT What is your assignment in this proceeding? I sponsor the Test Year costs for the following five classes of affiliate services: Corporate Secretary; Shareholder Relations; Corporate Communications; Aviation and Travel Services; and Property Services. In my testimony, I will: describe the functions associated with each of these services; explain why these functions are reasonable and necessary for SPS; explain why the charges to SPS for these services are reasonable and necessary; explain how these services do not duplicate any functions provided to SPS internally or by any other source; and explain that the XES charges to SPS for these services are no higher than the XES charges to SPS s affiliates for the same or similar services. In addition, I sponsor the Property Services capital additions, including the associated capitalized affiliate costs therein. Hart Direct - Revenue Requirement Page 8 G:\WORD\2008\ \HartRRDirect.doc RR4-152 of

22 ~~~ ~ Q* Q Q SUMMARY OF AFFILIATE EXPENSES FOR THE SPONSORED AFFILIATE CLASSES Please explain the term affiliate class. A portion of SPS s costs during the Test Year are for services provided by other Xcel Energy affiliates, specifically XES or other Operating Companies. These charges have been grouped in various cost centers, based upon the business area or function that provided the service or, in a few instances, the clearing accounts that capture certain costs. These groupings, or cost centers, are referred to as affiliate classes. SPS witness Mary E. Holland provides a detailed explanation of how the affiliate classes were developed and are organized for this case. Which affiliate classes do you sponsor? I sponsor the Corporate Secretary, Shareholder Relations, Corporate Communications, Aviation and Travel Services, and Property Services classes of affiliate services. Where do these affiliate classes fit into the overall affiliate structure? Attachment MEH-RR-5 to Ms. Holland s direct testimony provides a list and a pictorial display of all affiliate classes, dollar amounts for those classes, and sponsoring witness for each class. As seen on that Attachment, these five affiliate 19 classes are part of the Corporate Services business area. Attachment SJH-RR to my testimony is an organization chart for the Corporate Services orgi nization. Hart Direct - Revenue Requirement G:\WORDY2008\ \HartRRDirect.doc RR4-153 of Page

23 1 Q. 2 What is the dollar amount of the Test Year XES charges that SPS requests, on a total company basis, for the five affiliate classes addressed in your 3 testimony? 4 5 The following table summarizes the dollar amount of the Test Year XES charges for the five sponsored classes and also provides the following information about 6 each class: Total XES Class Expenses Requested Amount of XES Class Expenses Billed to SPS (total company) % Direct Billed % Allocated Dollar amount of total Test Year expenses that XES charged to all Xcel Energy companies for the services provided by this affiliate class. This is the amount fiom Column D in Attachment CJH-RR-A, which I will discuss in the next question. Requested dollar amount of XES expenses to SPS (total company) for this affiliate class after exclusions and pro forma adjustments. This is the amount fiom Column J in Attachment CJH-RR- The percentage of SPS s requested XES expenses (total company) for this class that were billed 100% to SPS. The percentage of SPS s requested XES expenses (total company) for this class that were allocated to SPS. 7 G:\WORD\2008\ WartRRDirect.doc Hart Direct - Revenue Requirement RR4-154 of 571 Page

24 1 2 3 Class Corporate Secretary Shareholder Relations Corporate Communications Aviation and Travel Services Property Services Table CJH-1 Total XES Class Expenses $4,017,18 1 $1,846,974 $15,890,501 $3,744,684 $42,150,888 Requested Amount of XES Class Expenses Billed to SPS (total company) Requested Amount $521,444 $238,43 8 $660,071 $524,942 $6,279,424 % Direct Billed 0.5% 0% 27.0% 100% 100% % Allocated 99.5% 100% 73.0% 0% 0% 4 Q Please describe the attachments that support the information provided on Table CJH-1. There are four Attachments to my testimony that present information about the requested SPS affiliate expenses for the five sponsored affiliate classes. Attachment CJH-RR-A: Provides a summary of the affiliate expenses for each class. The summary starts with the total of the XES expenses to all Xcel Energy affiliates for the services provided by each affiliate class and ends with the requested dollar amount of XES expenses to SPS (total company) for each affiliate class after exclusions and pro forma adjustments. The columns on this Attachment provide the following information. Column A - Business Area Column B - Affiliate Class Provides the business area associated with the affiliate class. Lists the affiliate class. Hart Direct - Revenue Requirement G:\WORD\2008\ VIartRRDirect.doc RR4-155 Of 571 Page I1 1723

25 Column c - Column D - Column E - Column F - Column G - Column H - Column I - Billing Method (Work Order) Total XES Billings for Class to all Legal Entities (FERC Acct ) XES Billings for Class to All Legal Entities Except for SPS (FERC Acct ) XES Billings for Class to SPS (Total Company) (FERC Acct ) Exclusions Per Book Pro Formas Shows the billing method code that XES uses to charge the expenses to 1 he affiliates. In her direct testimony, Ms. Holland explains the billing methods and defines the codes. Shows the total XES billings to all affiliates (Xcel Energy legal entities), including SPS, for Federal Energy Regulatory Commission ( FERC ) Accounts 400 through 935 for the affiliate class. Shows XES billings to all affiliates, other than to SPS, for FERC Accounts 400 through 935 for the affiliate class. Shows XES billings to SPS (total company) for the affiliate class. The dollar amounts in Columns E and F equal the dollar amount in Column D. Shows the total dollars to be excluded from Column F. Exclusions reflect expenses not requested, such as expenses not allowed or other below-the-line items. Shows XES billings to SPS (total company), for the affiliate class, after the exclusions shown in Column G. The dollar amount in Column H is Column F plus or minus Column G. Shows the total dollar amount of pro forma adjustments to the dollar amount in Column H. Pro forma adjustments reflect revisions for known and measurable changes to Test Year expenses. * Hart Direct - Revenue Requirement Page 12 RR4-156 of G:\WORDL?008\ \HartRRDirect.doc

26 Column J - Requested Amount (Total Company) Shows the requested amount (total company) for the affiliate class. The dollar amount in Column J is Column H plus or minus Column I. In her direct testimony, Ms. Holland describes in detail the calculations that take the dollars of Total XES Billings in Column D to the Requested Amount in Column J. Attachment CJH-RR-B: Provides the detail of the XES expenses for the sponsored affiliate classes that are summarized on Attachment CJH-RR- The detail shows the XES expenses for the classes listed by individual work order, activity, and billing method. Specifically, the columns on this Attachment provide the following information. Column A - Legal Entity Receiving XES Expenses Column B - Affiliate Class Column C - Activity Column D - Billing Method (Work Order) Column E - Billing Method Description COlUmn F - FERC Account Shows the legal entity (Xcel Energy or one of its subsidiaries) that received the XES expense. Lists the affiliate class. The short title for the activity. The billing method code. In her direct testimony, Ms. Holland explains the billing methods and defines the codes. The short title for the billing method. In her direct testimony, Ms. Holland explains the billing methods in detail. Shows the FERC Account in which the expense was recorded. Hart Direct - Revenue Requirement Page 13 RR4-157 of G:\WORD\2008\ \HartRRDirect.doc

27 Column G - Total XES Billings for Class to all Legal Entities (FERC Acct ) Column H - XES Billings for Class to All Legal Entities Except for SPS (FERC Acct ) Column I - XES Billings for Class to SPS (Total Company) (FERC Acct ) Column J - Exclusions Column K - Per Book Shows the total XES billings to all affiliates (Le., Xcel Energy legal entities) by work order and FERC Account for the affiliate class. The total dollar amount for the affiliate class in Column G ties to the total dollar amount for the affiliate class in Column D of Attachment CJH-RR- Shows XES billings to all affiliates, other than to SPS, by work order and FERC Account for the affiliate class. The total dollar amount for this affiliate class in Column H ties to the total dollar amount for the affiliate class in Column E of Attachment CJH-RR- Shows XES billings to SPS (total company) by work order and FERC Account for the affiliate class. The dollar amounts in Columns H and I equal the dollar amount in Column G. The total dollar amount for this affiliate class in Column I ties to the total dollar amount for the affiliate class in Column F of Attachment CJH-RR- Shows the total dollars excluded from Column I. The total dollar amount for the affiliate class in Column J ties to the total dollar amount for the affiliate class in Column G of Attachment CJH-RR- Shows XES billings to SPS (total company), by work order and FERC Account for the affiliate class, after the exclusions shown in Column J. The dollar amount in Column K is Column I plus or minus Column J. The total dollar amount for the affiliate class in Column K ties to the total dollar amount for the affiliate class in Column H of Attachment CJH-RR- Hart Direct - Revenue Requirement Page 14 G:\WORDQ008\ WartRRDirect.doc RR4-158 of

28 1 Column L - Pro Formas Column M - Requested Amount (Total Company) Shows the dollar amount of pro forma adjustments to the dollar amount in Column K. The total dollar amount for the affiliate class in Column L ties to the total dollar amount for the affiliate class in Column I of Attachment CJH-RR- Shows the requested amount (total company) by work order and FERC Account for the affiliate class. The dollar amount in Column M is Column K plus or minus Column L. The total dollar amount for the affiliate class in Column M ties to the total dollar amount for the affiliate class in Column J of Attachment CJH-RR- 2 Attachment CJH-RR-C: Both Attachments CJH-RR-A and CJH-RR-B 3 show any applicable exclusions to the XES expenses billed to SPS for the 4 sponsored affiliate classes (Attachment CJH-RR-A, Column G; Attachment CJH- 5 RR-B, Column J). Attachment CJH-RR-C provides detail about those exclusions 6 listed on Attachments CJH-RR-A and CJH-RR-B. The columns on this 7 Attachment CJH-RR-C provide the following information. Column A - Affiliate Class Column B - FERC Account Lists the affiliate class. The FERC Account for the expense that has been excluded. Column C - FERC Account Short title of the FERC Account in Description Column B. Column D - Explanations for Exclusions Column E - Exclusions (Total Company) Brief rationale for the exclusion. Dollar amount of the exclusion. Hart Direct - Revenue Requirement Page 15 RR4-159 of

29 ~~ ~~ ~ ~~ In her direct testimony, Ms. Holland describes the calculations underlying the exclusions. Attachment CJH-RR-D: Both Attachments CJH-RR-A and CJH-RR-B show pro forma adjustments to SPS s per book expenses for the sponsored affiliate classes (Attachment CJH-RR-A, Column I; Attachment CJH-RR-B, Column L). Attachment CJH-RR-D provides information about those pro forma adjustments shown on Attachments CJH-RR-A and CJH-RR-B. The columns on this Attachment CJH-RR-D provide the following information. Column A - Affiliate Class Column B - FERC Account Column C - FERC Account Description Column D - Explanations for Pro Formas Column E - Sponsor Lists the affiliate class. The FERC Account affected by the pro forma adjustment. Short title of the FERC Account in Column B. Brief rationale for the pro forma adjustment. The witness or witnesses who sponsor the pro forma adjustment. 9 Q* Column F - Pro Formas (Total Company) Dollar amount of the pro forma adjustment. Does XES bill ail of its expenses for the sponsored affiliate classes to SPS? No. XES bills most of its expenses for the sponsored affiliate classes to affiliates other than SPS. SPS receives only a relatively small percentage of total XES billings for these classes, as shown on Attachment CJH-RR-A (Columns D, E, and F) and Attachments CJH-RR-B (Columns G, H, and I). G:\WORD\2008\ \HartRRDirect.doc Hart Direct - Revenue Requirement Page 16 RR4-160 of

30 1 Q* Q* Q Are there any exclusions to the XES billings to SPS for the sponsored affiliate classes? Yes. As mentioned earlier, exclusions reflect expenses not requested, such as expenses not allowed or other below-the-line items. Exclusions are shown on Attachment CJH-RR-A, Column G, and on Attachment CJH-RR-B, Column J. The details for the exclusions are provided in Attachment CJH-RR-C. As I also mentioned earlier, Ms. Holland describes how the exclusions were calculated. Are there any pro forma adjustments to SPS s per book expenses for the sponsored affiliate classes? Yes. As I mentioned earlier, pro forma adjustments are revisions to Test Year expenses for known and measurable changes. Pro forma adjustments are shown on Attachment CJH-RR-A, Column I, and on Attachment CJH-RR-B, Column L. The details for these pro forma adjustments, including the witness who sponsors each pro forma adjustment, are provided in Attachment CJH-RR-D. Attachment CJH-RR-D shows that you are the sponsor for a pro forma adjustment to the per book expenses of the Corporate Communications affiliate class. Please explain the adjustment. I sponsor pro forma adjustments to the per book expenses of the Corporate Communications affiliate class related to the Xcel Energy Foundation ( Foundation ). The costs of the Foundation are excluded fiom the cost of service. The adjustments that I sponsor remove the labor costs associated with administering the Foundation. The adjustments total $125,019. In addition, I sponsor pro forma adjustments totaling $81 for costs that were previously Hart Direct - Revenue Requirement Page 17 RR4-161 of

31 1 2 rnisclassified as a result of the assignment of an incorrect accounting code. They are now being removed fi-om SPS s cost of service. G:\WORD\2008\ ~artRRDirect.doc Hart Direct - Revenue Requirement RR4-162 of 571 Page

32 IV. Q. B. Q* Q. AFFILIATE EXPENSES FOR THE CORPORATE SECRETARY CLASS Summary of Services of the Corporate Secretary Class What services does the Corporate Secretary class provide? XES S Corporate Secretary department provides services that are necessary in order for SPS and Xcel Energy to function as corporations. The Corporate Secretary department serves as a liaison between management and the SPS and Xcel Energy Boards of Directors, maintains official corporate records, and oversees compliance programs. The Corporate Secretary Class Provides Necessary Services Are the services provided by the Corporate Secretary class necessary for SPS s operations? Yes. In order to operate legally, every corporation requires the kinds of services that are provided by the Corporate Secretary department. They are necessitated by the obligation to comply with state and federal laws governing corporations and publicly traded companies, and to conduct business in accordance with ethical standards. When SPS was a stand-alone company, it performed these functions for itself. They are now provided for SPS by the Corporate Secretary department. What are some of the specific services that the Corporate Secretary class provides to SPS? Specific services provided to SPS by the Corporate Secretary department include: Coordination and management of SPS Operating Company Board Meetings and Xcel Energy Board Meetings. Hart Direct - Revenue Requirement Page 19 RR4-163 of; G:\WORD\2008\ WartRRDirect.doc

33 Q. Q* Preparation of annual filings with the Texas Secretary of State. This service is essential in order for the corporation to comply with state laws and remain in good standing to continue operations. Preparation of Securities and Exchange Commission ( SEC ) reports. These reports are required by the SEC for all public companies. Maintenance of official records, such as minute books for SPS and Xcel Energy. Thls is a legal requirement for a corporation. Compliance with listing requirements for various exchanges, such as the New York Stock Exchange ( NYSF ). This is necessary in order for the stock of Xcel Energy to continue to be publicly traded. Oversight of the Corporate Compliance and Business Conduct Programs. This service is essential to promoting a culture of ethical conduct and ensuring compliance with all legal and regulatory requirements. Are any of the services provided by the Corporate Secretary class duplicated elsewhere in XES or in any other Xcel Energy subsidiary such as SPS itself? No. The Corporate Secretary department is the only department that provides these services. No other Xcel Energy subsidiary performs these services for the Operating Companies. SPS does not perform these services for itself. Do SPS ratepayers benefit from the services provided by the Corporate Secretary class of services? Yes. The services provided by the Corporate Secretary department allow SPS to continue functioning as a corporate entity and Xcel Energy to remain a publicly traded company. This facilitates utility operations, and provides financing and G:\WORD\2008\ WartRRDirect.doc Hart Direct - Revenue Requirement Page 20 RR4-164 of

34 1 2 3 c. 4 5 Q- additional investment in facilities required to serve SPS ratepayers. Providing the services through XES is efficient and cost effective for SPS. The Corporate Secretary Class Provides Necessary Services at a Reasonable Cost Are the costs of the Corporate Secretary class of services reasonable? 6 Yes. Overall costs are reduced as a result of economies of scale and the 7 efficiencies of providing the services centrally through XES. There is no Q duplication of activities and costs. Instead, the costs of the services are shared among multiple affiliates. In addition, the department controls costs through its budgeting process, rigorous review of expenditures, and competitive bid process. 1. Objective Evidence (Benchmarking) Is there any objective evidence that supports your opinion that the costs of the Corporate Secretary class are reasonable? Yes. The fees paid to directors of SPS and Xcel Energy are reviewed annually and benchmarked by an external executive compensation consulting firm. SPS s share of these directors fees comprises more than half of the requested XES charges to SPS for Corporate Secretary services. The fees are comparable to those of the companies against whom SPS and Xcel Energy compete for directors. Hart Direct -Revenue Requirement Page 21 G:\WORD\2008X)800068WartRRDirect.doc RR4-165 of

35 ~ Q* 2. Budget Planning Does the Corporate Secretary department have a budgeting process to control costs? 4 Yes. The Corporate Secretary Department, as part of the annual business 5 6 planning process, reviews historical performance of services provided, identifies services required for the.hture, forecasts future usage, analyzes costs associated 7 8 with providing services and proposes a budget. budgeting process in more detail. Ms. Holland discusses the Q* During the fiscal year, does the Corporate Secretary department monitor its actual expenditures versus its budget? Yes. A financial services representative attends the monthly Corporate Services Leadership Team meeting to review summary budget information for all Corporate Services departments. Actual expenditures and deviations fiom budget are discussed. Corrective actions are discussed, as required. We try to control costs withm the budget through a prioritization process of delaying or canceling 16 other planned activities. In addition, I personally review detailed monthly Q. expenses for the Corporate Secretary department to ensure expenses are accurate, properly recorded, and within budget. Are Corporate Secretary department employees held accountable for deviations from the budget? Yes. Controlling costs directly impacts employee compensation. Compensation is affected by performance in three areas: individual, business area and overall Xcel Energy. Budget performance is part of all three components. Hart Direct - Revenue Requirement Page 22 G:\WORD\2008\ \HartRRDirect.doc RR4-166 of

36 1 2 Q Cost Trends Please state the dollar amounts of the actual charges (per book) from XES to SPS for the Corporate Secretary class of services since The following table shows, for the two fiscal years (calendar years) immediately prior to the Test Year and for the Test.Year, the actual per book affiliate charges (column H on Attachment CJH-RR-A) from XES to SPS for services provided by the Corporate Secretary class: Table CJH-2 Class i Test Year Corporate Secretary $391,422 $457,726 $5 18, Q Q What are the reasons for this trend? The change is primarily due to an increase in director s fees, which was driven by the increased time commitment associated with being a director of a public company. Xcel Energy is compelled to compete with the fees paid by other similar companies in order to obtain and retain the best director candidates. 4. Staffing Trends Please provide the staffing levels for the Corporate Secretary department since The following table shows, for the two fiscal years (calendar years) immediately prior to the Test Year and for the Test Year, the staffing levels for the Corporate Secretary department. Hart Direct - Revenue Requirement Page 23 RR4-167 of

37 Department Table CJH (# of staff) 2006 Test Year (# of staff) (# of staff) Corporate Secretary Q. Q9 What are the reasons for this change in staffing? The two employees in the Shareholder Relations department were transferred to the Corporate Secretary department in 2006 for administrative purposes, although they continue to provide services for Shareholder Relations. Non-labor costs for Shareholder Relations remained in the Shareholder Relations class of service. 5. Cost Control and Process Improvement Initiatives Separate from the budget planning process, does the Corporate Secretary department take any steps to control its costs or to improve its services? Yes. The Corporate Secretary class controls costs by using a competitive bid process and working through the XES Supply Chain organization to select the right vendors. This helps to ensure that services are obtained at the lowest available cost. After the contract is executed, the contract and the vendor are reviewed and monitored on an ongoing basis. For example, at the time of the merger, competitive bidding was utilized in selecting a registered agent. Public companies are required to have a registered agent on record for service of process as well as to assist in the filing of Secretary of State business qualifications. Because of the number of entities that are represented, XES benefits from a volume discount for - ~ Hart Direct - Revenue Requirement Page 24 G:\WORD\2008\ WartRRDirect.doc. RR4-1680f

38 these services. Recently, as technology changes increased the need for and types of services that the registered agent provides, XES re-negotiated the bid price to include entity management and records services at no additional cost, resulting in an annual cost savings of several thousands of 5 dollars. D. Q. The Costs for the Corporate Secretary Class are Priced in a Fair Manner For those costs that XES charges (either directly or through use of an Q. Q. allocation) to SPS for the Corporate Secretary class of services, does SPS pay any more for the same or similar service than does any other Xcel Energy affiliate? No. Why do you answer no? The per unit price that XES charges to SPS for any particular service is no higher than the price that XES charges to any other Xcel Energy affiliate. The costs charged for particular services are the actual costs that XES incurred in providing those services to SPS. A single, specific billing method, rationally related to the cost dnvers associated with the service being provided, is used with each work order. In her direct testimony, Ms. Holland discusses the selection of billing methods and XES S method of charging for services in more detail. How are the costs of the Corporate Secretary class billed to SPS? My Attachment CJH-RR-B shows all of the costs in ths class broken out by activity and shows the billing method associated with each activity. Hart Direct - Revenue Requirement Page 25 G:\WORD\2008\ \HartRRDirect.doc RR4-169 of

39 1 Q* Q* Q What billing methods are used for the Corporate Secretary class of services? A small percentage (0.5% = $2,491) of the XES charges to SPS for this class were billed directly to SPS. The remaining 99.5% of XES charges to SPS ($518,953) for Corporate Secretary services were allocated using a general allocator that is the average of the total asset ratio, revenue ratio, and the employee ratio. Why is direct billing appropriate for the costs captured in the work orders that use that billing method? For the work orders charged using direct billing, the costs normally reflect work that was performed specifically for SPS only. The work orders charged using the direct billing method are appropriate because the allocation of costs is in accordance with the distribution of benefits of the services received. For the work orders that assign costs based upon this billing method, the per unit amounts charged by XES to SPS as a result of the application of this billing method are no higher than the unit amounts billed by XES to other affiliates for the same or similar services and represent the actual costs of the services. Why is it appropriate to allocate costs based on the average of the total asset ratio, revenue ratio, and the employee ratio? For the work orders billed using this allocator, the cost drivers are the services that the Corporate Secretary department provides that benefit multiple Xcel Energy affiliates. For example, labor costs associated with compliance and listing requirements for various exchanges, such as annual mandatory filings with the NYSE, are allocated using ths allocator. An affiliate s relative number of employees and relative size of assets and revenues is a good measure of the Hart Direct - Revenue Requirement Page 26 G:\WORDL!008\ \HartRRDirect.doc RR4-170 of

40 ~ io 11 relative work load the subsidiary places on the Corporate Secretary department and the benefits the subsidiary receives from the Corporate Secretary department. In addition, some of the costs are allocated to the parent company, Xcel Energy. Thus, allocating the Corporate Secretary costs based upon the average of the total asset ratio, revenue ratio, and the employee ratio is appropriate because it is a valid match of cost causation and benefits received. Ms. Holland discusses this billing method in more detail in her testimony. For the work orders that assign costs based upon this billing method, the per unit amounts charged by XES to SPS as a result of the application of this billing method are no higher than the unit amounts billed by XES to other affiliates for the same or similar services and represent the actual costs of the service. Hart Direct - Revenue Requirement Page 27 G:\WORD\2008\ \HartRRDirect.doc RR4-171 of

41 1 V. AFFILIATE EXPENSES FOR THE SHAREHOLDER RELATIONS 2 CLASS 3 Summary of Services of the Shareholder Relations Class 4 Q. What services does the Shareholder Relations class provide? XES S Shareholder Relations department provides services that are necessary in order for Xcel Energy to function as a publicly traded company. It serves as a liaison between the corporation, transfer agent, and the approximately 92,000 registered common stock and preferred shareholders. 9 B. The Shareholder Relations Class Provides Necessary Services 10 Q Are the services provided by the Shareholder Relations class necessary for SPS s operations? Yes. In order to operate legally and manage its relationship with shareholders, every public corporation requires the kinds of services that are provided by the Shareholder Relations department. These functions are necessitated by the obligation to comply with state and federal laws, and to conduct business in accordance with ethical standards. When SPS was a stand-alone company, it had to cany out these functions for itself. Because SPS is now a part of Xcel Energy, the functions are provided by the Shareholder Relations department of XES for the corporation as a whole. Hart Direct - Revenue Requirement Page 28 G:\WORDY2008\ \HartRRDirect.doc RR4-172 of

42 1 2 Q. What are some of the specific services that the Shareholder Relations class provides to SPS? Shareholder Relations provides the following services to SPS: Directs and monitors all shareholder transaction processing at The Bank of New York, the transfer agent. This service is necessary to ensure compliance with NYSE and SEC requirements and facilitates continued shareholder investment; Issues all new stock for various Xcel Energy stock plans. This is necessary to support incentive programs approved by the Board of Directors and Xcel Energy s shareholders; Ensures all stock-related items are in compliance with SEC and NYSE regulations. Noncompliance with SEC and NYSE regulations would have an adverse effect on the ability to obtain financing for improvements at SPS and would deter additional investment by new and existing shareholders; Distributes annual meeting proxy materials, coordinates activities related to shareholder meetings, and manages the voting process and tabulation. Federal securities law, SEC regulations, and state business laws require this activity Q. Are any of the services provided by the Shareholder Relations class duplicated elsewhere in XES or in any other Xcel Energy subsidiary such as SPS itself? No. The Shareholder Relations department is the only department that provides these services. No other Xcel Energy subsidiary performs these services for the Operating Companies. SPS does not perform these services for itself. Hart Direct - Revenue Requirement Page 29 RR4-173 of

43 ~~ 1 Q* Do SPS ratepayers benefit from the services provided by the Shareholder Relations class of services? Yes. The services of Shareholder Relations are necessary for.xcel Energy to remain a publicly traded company, attract shareholder investments and obtain financing, which in turn benefits SPS ratepayers. For example, Xcel Energy provides financial support for the capital investments required to support SPS s transmission and distribution system, and this financial support is made possible by Xcel Energy s investors. 9 c Q. The Shareholder Relations Class Provides Necessary Services at a Reasonable Cost Are the costs of the Shareholder Relations class of services reasonable? 12. Yes. Overall costs are reduced as a result of economies of scale and the 13 efficiencies of providing the services centrally through XES. There is no 14 duplication of activities and costs. Instead, the costs of the services are shared 15 among the affiliates. In addition, the department controls costs through its Q budgeting process, rigorous review of expenditures, and competitive bid process. Is cost benchmarking available for the services that the Shareholder Relations department provides? No. Cost benchmarking is not readily available for the services that the Shareholder Relations department provides. G:\WORD\2008\ \HartRRDirect.doc Hart Direct -Revenue Requirement Page 30 RR4-174 of

44 1 2 3 Q. 1. Budget Planning Does the Shareholder Relations department have a budgeting process to control costs? 4 Yes. The Shareholder Relations department, as part of the annual business Q. Q. planning process, reviews historical performance of services provided, identifies services required for the future, forecasts usage, analyzes costs associated with providing services and proposes a budget. Ms. Holland explains this process in more detail. During the fiscal year, does the Shareholder Relations department monitor its actual expenditures versus its budget? Yes. A financial services representative attends the monthly Corporate Services Leadership Team meeting to review summary budget infomation for all Corporate Services departments. Actual expenditures and deviations fi-om budget are discussed. Corrective actions are discussed, as required. We try to control costs within the budget through a prioritization process of delaying or canceling other planned activities. The manager of Shareholder Relations performs this same budget review process in detail on a monthly basis. Are Shareholder Relations department employees held accountable for deviations from the budget? Yes. Controlling costs directly impacts employee compensation. Compensation is affected by performance in three areas: individual, business area and overall Xcel Energy. Budget performance is part of all three components. Hart Direct - Revenue Requirement Page 31 RR4-175 of