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30:18good morning is the court reporter ready
30:22good morning I am ready thank you uh
30:26welcome back it's uh September 5th 9:00
30:30a.m. this is uh the Public Service
30:33Company at Colorado uh G rase and we're
30:38uh back on the record um I have a couple
30:42of preliminary matters but let's see if
30:44the parties have any uh preliminary
30:47matters before we uh jump uh back to Mr
30:51burman's redirect Miss Brahma any
30:53preliminary
30:55matters uh good morning Chair by
30:57Commissioners um we do have a
30:58preliminary matter and I have asked
31:00staff uh to also join me um I think
31:03we're we're to report we're able to
31:05maybe bring a little more clarity uh on
31:07on an area that's where staff and the
31:09company may be closer to agreement than
31:11maybe we understood coming into the
31:13hearing and we thought it may be helpful
31:15to the Commissioners to kind of identify
31:17that as a preliminary matter and then
31:19confirm it briefly through testimony um
31:22for staff and the company so um I can
31:25get into that now if there are other you
31:28know more straightforward logistical
31:29matters you prefer to handle first that
31:31that would also be fine no anything that
31:34re uh reduces uh cross examination is
31:38welcome
31:40so uh so the the um after the discussion
31:43with Mr Burman yesterday with respect to
31:46um staff witness Rivera lugo's proposals
31:48related to the calculation of
31:50depreciation rates and net Salvage going
31:52forward so this is leaving aside The
31:55Proposal with respect to the $15 million
31:57amortization of a regulatory asset that
32:00is still you know as it has been
32:02discussed um we have I think reached a a
32:06better understanding that staff is
32:07proposing that the issue of how to
32:09calculate net Salvage um or any other
32:12changes to depreciation rates um are
32:14best addressed in a depreciation study
32:17which with uh and the company agrees
32:19with that and so um staff and the
32:23company uh have also been able to talk a
32:26little bit about having some further
32:28conversation outside of the hearing
32:30about how the company can address
32:32staff's issues in the depreciation study
32:35and present some kind of an analysis
32:37that meets their needs within you know
32:39the available data and the other
32:41qualifications Mr Burman provided and so
32:44our proposal is to um put that in the
32:48record that that between with Mr Burman
32:50I'll just ask him a couple quick
32:51questions to confirm that we'll do the
32:53same with Miss O'Neal assuming that all
32:55goes as we expect uh the company will
32:58also wave Cross of Mr Rivera
33:00Lugo
33:03perfect uh anything you'd add Miss mclin
33:07nope that was a great summary of
33:09everything and and I agree with what
33:11Miss Brahma said all right um Miss
33:14Brahma any other preliminary matters yes
33:18uh uh yes your honor we do have um one
33:21quick issue with respect to the order of
33:23witnesses for today um and in particular
33:28we have had a witness and and I'm not
33:30going to go into details for reasons
33:31you'll understand but um we've had a
33:33witness who's dealing with a family end
33:36of life issue and so we need to
33:38rearrange our Witnesses a little bit um
33:40in order to accommodate that uh and also
33:43we had some other uh date certains that
33:46were previously identified so we
33:48anticipate finishing this morning with
33:50Mr Burman and then the next witness
33:54would be Mr Gardner as we discussed
33:57yesterday yesterday um from there would
34:00be Mr
34:02mhler um which also is you know in the
34:04order of the list as we identified
34:09it Mr Davidson you're unmuted if you can
34:17mute don't rise
34:20right there we
34:23go uh so we in short we'll be skipping
34:26Miss Gillan for right now Mr Gardner and
34:29then Mr mhler depending on oh and then
34:32miss sheller uh and then after that
34:34would be Mr Johnson or Miss bulkley
34:36depending on how far we get during um
34:40the day today all right so we're just
34:42gonna take Miss uh Gill Gill land later
34:45uh that's the main issue and miss miss
34:48sheller will be a little earlier and
34:49then Mr Johnson and Miss Bley May refers
34:51order depending on on their planes and
34:56things like that
34:59yeah no problem that all uh that all
35:03works um anything else I think that's
35:07all from the company's perspective thank
35:09you uh Miss singer Nelson preliminary
35:12matters H good morning uh there's only
35:16one issue that uh UCA discovered that
35:20one of our Witnesses um
35:24exhibits the exhibit to Corey glusac
35:28answer testimony was incomplete and it
35:31uh Mr chairman it's up to you as to when
35:34we actually um switch out that exhibit I
35:38can do it with the witness that we
35:40intend to um address the exhibit with or
35:43I can do it now you now if you could
35:46please uh please do it uh with the
35:49witness later and just let the parties
35:52know what you're doing so it's post
35:55great thank you that's all
35:58uh Mr
36:01Davidson thank you Mr chairman good
36:03morning and Commissioners I just wanted
36:05to see what the plan is for mayor
36:09Graham's testimony I know it was part of
36:12exhibit 1,000 I don't think there's any
36:15cross but I think commissioner Gilman
36:18wanted to think overnight about any
36:20potential um cross she might have for
36:23the non-public Service Company Witnesses
36:25and that included um mayor Graham and
36:27just want to check and see if there's no
36:29cross if she could be
36:31excused uh yeah so um uh commissioner
36:35Gman I think there were four Witnesses
36:38uh M Ramos uh um uh M Marcela mayor
36:45Graham and the UCA witness cook and doll
36:49um do you have questions for those
36:52Witnesses thank you for giving me extra
36:54time uh I do not all right so we can
36:58excl uh excuse uh uh Miss
37:03Ramos U Miss
37:06Marcel uh mayor Graham and
37:11uh I don't know Mr or Miss uh cook
37:14cooking do so does that give you what
37:16you need uh Mr Davidson yes thank you Mr
37:20chairman uh and just I don't know if
37:22commissioner plant waiting on them cuz I
37:24kind of jumped the gun
37:26yesterday ready
37:28I apologize commissioner fine
37:30commissioner Gilman no yeah it's fine I
37:33didn't have any question all right so
37:35those uh four Witnesses uh can be
37:39excused thank you Mr
37:43Davidson uh any other preliminary
37:46Matters from the
37:49party uh so I had uh uh two issues uh uh
37:53one on the First on scheduling uh it
37:56sounds like uh given uh commissioner and
37:59other schedules we're going to break a
38:01little early today at
38:034:30 and even earlier uh tomorrow at
38:083:30 and uh on Monday I may need uh no
38:13I'm sorry on Tuesday I may need
38:14commissioner Gilman uh to run the
38:17hearing for um an hour or two uh in the
38:21afternoon um so that's uh uh one issue
38:26uh Miss Brahma
38:28um I had a second issue uh for you guys
38:31I had a line of questions for um Mr
38:34Gardner trying to compare 2023 and
38:392022 Capital spending with what happened
38:42in the prior Gaz Ray case and I'm all
38:46twisted up about Capital additions
38:49versus Capital spending and pretty much
38:53not able to get uh an Apples to Apples
38:56comparison
38:57um and I was just wondering if the
38:59company would be willing to just uh uh
39:02provide information on Capital spending
39:05um from 2017 to
39:092023 um let us know where you're finding
39:13that spending um and then to the extent
39:16you can by category uh I get it may not
39:20be completely consistent across time and
39:22if you can include um uh shared
39:26corporate services and
39:28Investments That get allocated to the
39:29gas
39:30business uh that would be helpful so um
39:35uh I guess I can ask commissioner plan
39:38and commissioner G if they'd support it
39:40but uh do you do you have any objection
39:42to providing that
39:44information there's another
39:48vote would would you be willing to um
39:51provide that information instead of me
39:52trying to bumble around through the
39:54record and the prior rate case to try
39:56and pull that together
39:58I I think that would be fine uh chair
40:00blank the one question I want to make
40:02sure I clarify though is we're talking
40:04about money spent each year not amounts
40:06placed in service each year is that what
40:09you're looking for yeah I think so I
40:11think that's like a um a more s i I mean
40:14I didn't understand the difference
40:16between capital additions and capital
40:17spending until yesterday uh and as I
40:21think Mr Burman pointed out the uh the
40:24uh additions are lumpy depending on the
40:26timing of the r case and the spending is
40:29a much better um indication of how
40:32you're running the business so to the
40:34extent that's true yes okay that that is
40:37helpful and the other reason I ask is
40:39because of course spend can include
40:41spend on taking things out of service as
40:43well as placing things into service
40:44because it costs money to retire items
40:46as well as to place them in service so
40:49that that is also part of what shows up
40:51in yeah i' I'd welcome to see that too
40:54okay um commissioner plan uh it's of
40:57like you were okay with that would you
40:59add anything to that or nope that sounds
41:02good uh commissioner Gman yeah probably
41:05the only thing I would add um that does
41:08sound like helpful information to me and
41:10and I like we have a couple questions
41:12for Mr Garner with response to that you
41:15know we've asked in supplemental direct
41:17for that comparison of SSI expenditures
41:20which look to increase um fairly
41:22dramatically and and his testimony
41:25indicated that a lot of what was going
41:27on was essentially a recategorization or
41:29a different categorization so to the
41:33extent when you're doing that exercise
41:36you can try to normalize the categories
41:39or indicate what is moving from one to
41:42another that also just makes it very
41:46difficult to track the expenses from
41:49year to year I I am happy to see what is
41:53possible to do in that regard I'm not
41:55sure if it's something that can be done
41:58in the space of a hearing um because
42:02it's it's not an easy thing to to
42:05necessarily categorize it's not an
42:07automated just spit out a spreadsheet um
42:10but I um but I but I'm I'm speaking not
42:14knowing exactly what's possible I just
42:16want to add that caution but we're happy
42:18just to point out that's part of the
42:20struggle commercially reasonable
42:23efforts commercially reasonable efforts
42:26uh given timing Miss Brahma and uh uh if
42:30you could just whenever you get it if
42:32you could um put it into the record and
42:35uh we can see if we need a witness to
42:37maybe one of your uh ending witnesses
42:40can sponsor it uh you know but uh I
42:43leave that to you but I think that would
42:44be really helpful and it would save time
42:47uh on on my questioning which I I just
42:51couldn't get my act together to get
42:53underneath it so we will do what we can
42:56thank you very much commissioner Gano
42:59when um when like decommissioning shows
43:01up in there that will what be its own
43:04category I guess in terms of well when
43:07we're talking about spend again I'm I'm
43:10gonna get out over my skis very fast
43:12here because I'm I'm not the one working
43:13with the data I it's just that spend is
43:16spend and maybe Mr Burman can speak to
43:18this a little bit better than I can um
43:20I'm happy to ask him a question or have
43:22him just speak informally at the moment
43:24um but it I'm not sure that it's going
43:26to be broken out exactly that way so
43:28maybe I'll defer phone a friend here and
43:30ask Mr B in I figured I'd pop one to see
43:32if it was appropriate for me to help a
43:34little bit here um I I say let us let us
43:38see what we can pull together certainly
43:40we can pull something together I know
43:41for a fact we can easily pull together
43:44Capital spend it's the category
43:46breakouts that might get a little more
43:48challenging because those have changed
43:49over time with the Gip rules we
43:51certainly can show you you know chair
43:53blank to your question like total gas
43:56cap spend each year how much of that was
43:59it and the allocated costs um the
44:04categories is where I'm concerned it
44:05might take a little more time especially
44:07for uh commissioner Gilman's comment
44:10that they've changed and trying to to
44:12Back cast them or forward cast the old
44:14categories is where you get into
44:17difficulty so certainly we can provide
44:19something on with respect to the
44:22retirements those typically just get get
44:26lumped into the category so if something
44:29in a particular category is retiring it
44:31just Nets out of the total um so I don't
44:35know that they're going to be discreetly
44:38identified in a way you can track
44:40them all right well we we recognize this
44:44is AD Heering uh and uh uh just
44:49appreciate uh whatever you can do so
44:52thank
44:54you uh I think you're back so uh Miss
44:58Brahma uh you want to finish up your
45:00redirective Mr Burman yes we'll do that
45:04uh Mr Burman thank you uh for for both
45:07helping me out and being here to
45:08continue talking with us
45:10today um I'd like to start with the
45:13preliminary matter um that we addressed
45:15first thing this morning um did you hear
45:18the discussion uh I had and Miss mclin
45:20had with the Commissioners regarding uh
45:23the management of questions around the
45:25future calculation of depreciation rates
45:27and costs of
45:28removal yes and um are you able to
45:32confirm that the company and staff um
45:35have have reached an understanding that
45:37that both believe that the calculation
45:40of ongoing depreciation rates and
45:41accounting for Salvage and net sh
45:43Salvage are best addressed in the
45:45upcoming depreciation study yes we have
45:49and uh is will the company then work
45:52with staff to figure out how to provide
45:54analysis that both meets staff needs
45:57within the um data availability and and
46:00uh you know the realm of what's possible
46:03yeah we will certainly um meet with
46:05staff and and seek to incorporate as
46:08much of staff's uh requested analysis as
46:12possible into the forthcoming
46:14depreciation study and then I would just
46:16say not knowing exactly all of the the
46:21things that staff would like the company
46:22to look at and the timing of that if if
46:25staff and the company agree that there
46:26there's a need for additional time we
46:28would petition the commission for a
46:30variance from the six months um at that
46:34time and and ask for additional time to
46:36provide that information but we haven't
46:38made that determination yet so we're
46:40going to keep moving towards the
46:41six-month deadline and have those
46:43discussions with staff to ensure that we
46:45get everything in there that they're
46:46looking for and if you were to need
46:50additional time is that something that
46:51you'd be asking the commission to decide
46:53in this particular rate case no it's my
46:56understanding that that that six months
46:58was ordered in the last rate case so we
46:59would seek a variance to the decision in
47:01the last rate case and make a filing
47:03with the commission to seek
47:06that uh does that I I'm just going to
47:09ask you to confirm does that cover the
47:10extent of of your understanding of the
47:12agreement with staff Mr Gman yeah and
47:15just that the the company and staff are
47:18aligned that we're not seeking the
47:19commission to make any changes either to
47:22the revenue requirement related to net
47:25Salvage and depreciation rate issu or to
47:27the company's accounting for those
47:29coming out of this proceeding until we
47:32get into the depreciation
47:34proceeding thank you Mr Burman um there
47:38was one other kind of follow-up item
47:39from yesterday that I think may be
47:41helpful is uh question from the
47:43Commissioners about um whether franchise
47:46agreements for the company speak
47:48to whether the company must remove
47:51infrastructure versus retiring it in
47:53place uh at the time of decommissioning
47:55an asset were you able to uh look into
47:58that at all yes and Mr Gardner also can
48:02speak to this a little more because um
48:05his team does the actual work in
48:08compliance with the franchise agreements
48:10but it's my understanding that as a
48:11general matter franchise agreements
48:13don't uh have a requirement around
48:16whether the assets are actually removed
48:19or left in place uh when they're
48:21retired and to the extent the company
48:24has historically removed only a very
48:26small port of total infrastructure and
48:28that by removed I mean physically
48:30removed do you know if that history
48:32would be reflected in a decommissioning
48:34or depreciation
48:37study the there's assumptions made based
48:41on how the company has historically
48:43treated that so the fact that the
48:45company has historically physically
48:48removed very little would be reflected
48:50in those assumptions and and how the
48:53depreciation study treats the the rates
48:55for that okay and just one other item to
48:58Circle back on in the same vein there
49:00was a brief discussion about um
49:03inflation assumptions embedded in in
49:05calculations of cost of removal do you
49:08know if current in uh decommissioning
49:10costs or cost of removal include future
49:14inflation as a general matter it's my
49:17understanding that the inflation that's
49:20included doesn't take into account all
49:22of the future inflation through the
49:25retirement of an asset so if his place
49:28in service today 60 years worth to
49:30retire in 60 years um but Mr Muller
49:34could certainly speak to the details
49:35around that better than I can thank you
49:38so Switching gears um let's go back to
49:41staff and uca's questions yesterday
49:43about year end versus 13-month average
49:45rate base just like to run through a few
49:47items very quickly um do you recall uh
49:51Council asking you whether the
49:53commission ordered a 13-month average
49:54rate base in the 2015 and 2017 rate
49:58cases I do and is there a place in the
50:01record where the company has cataloged
50:03the history of yearend versus 13-month
50:05average rate base going back some 50
50:08years yeah Mr fratus is testimony um has
50:12discuss that particularly I think as
50:14rebuttal testimony and uh I I can pull
50:17it up if needed but rather than doing
50:19that to your knowledge outside of
50:21settled cases and those 2015 and 2017
50:24orders is there any other case where the
50:27commission has ordered a 13-month
50:30average rate base in a litigated
50:33proceeding no I I think Mr Fred's
50:35analysis goes back a few decades and
50:37shows um numerous year end rate based
50:41decisions was there anything different
50:43about the 2015 and 2017 cases compared
50:46to others where year end average rate
50:48base was ordered yeah I think one of the
50:51the primary drivers in the rate based
50:53decision in those cases related to the
50:56existence of the psia um and certainly
50:59the I believe it was even the 17 case
51:02where the alj cited the psia as a one of
51:05the factors for not approving a future
51:07test year that the company requested so
51:09the the fact that the psia allowed for
51:12current recovery of a large portion of
51:15the company's assets during those years
51:18somewhat offset the regulatory lag that
51:21uh was experienced from the average rate
51:23base so certainly that was a factor okay
51:26there was also some questions about how
51:28quickly the company is back uh with a
51:30rate case following the 2022 gas rate
51:33case um which was based on a 2021 test
51:37year with year end rate base can you
51:39remind us what was the company's
51:40proposal in that rate
51:42case in that rate case the company
51:45proposed uh I believe a 2022 test year
51:49and then Capital steps for 2023 and
51:532024 and and to the qu questions about
51:55how forward looking test years might
51:57help avoid rape cases can you maybe
51:59address that using that last case as an
52:01example sure and the example of that
52:04case um had the commission uh approved
52:07the capital steps the company wouldn't
52:08be seeking recovery for anything uh
52:12before 2025 given that those we were
52:15agreeing in that case that those steps
52:18would be representative enough to set
52:20rates uh for the 2023 and 2024 periods
52:24so it essentially likely would have kept
52:26the company out of a rate case
52:28longer okay um Miss mlin also asked you
52:31some questions in relation to the 13mon
52:34average rate base issue about how on and
52:36M and revenue are based on multiple
52:38points in time um as in comparison to
52:41rate base do you recall that discussion
52:43I do does the difference between onm and
52:47revenues versus rate base have anything
52:49to do with the difference between a
52:50balance sheet and income
52:52statement yes omm and revenues are you
52:56would typically find on the income
52:58statement uh and rate Bas is really
53:01reflective of the balance sheet which is
53:03more of a point in time look uh you
53:06would always look at a balance sheet as
53:08of a certain date and you would look at
53:09an income statement for a 12- month
53:12period typically a calendar year and so
53:15just to be clear rate Bas is on the
53:17balance sheet and omm and revenues are
53:19on an income statement is that fair
53:21that's correct yes and and can you just
53:25address why does this matter to the
53:26company so much in light of those
53:28questions about uh the revenue versus
53:30any other reasons why this might matter
53:32to the company yeah I think and
53:34particularly with chair blank's question
53:37this morning around spend versus
53:39additions is is relevant to this
53:41discussion of of rate based convention
53:43and I just want to be clear in the
53:46record that how the math works here so
53:48from a a rate based convention
53:50standpoint and we'll use this case as
53:53the example we're talking about the
53:55company has is proposed a 2023 calendar
53:58test year made up entirely of actual
54:01data so in that test year you you're
54:04going to have your calendar year Revenue
54:06your calendar year expenses but from a
54:08rate base convention the two rate bases
54:12conventions that issue here for the
54:13commission to make a decision is year
54:15end and the way year end would work is
54:17you would take the entire balance sheet
54:21or asset value at December 31st of 2023
54:24so I'll use an example of an asset
54:27that's placed in service in December and
54:29if it's a asset that is valued at $13
54:32million if you place that asset and
54:34service for $13 million in December and
54:37you use a yearend rate base the company
54:40will earn on the 13 million the entire
54:43amount that was spent to develop that
54:46asset for use by customers if you use an
54:48average rate base the company will earn
54:51on 13th of that asset or $1 million and
54:55that's where atory lag is really coming
54:57in and that's why the decision between
55:0013-month average and year end is really
55:03a decision about regulatory lag and how
55:06much lag to impose on the company um and
55:09the last piece I would point out is we
55:11talked yesterday about how there is
55:12still lag in the company's proposed year
55:15end rate base and that's because the
55:18company will not earn a return on any
55:20assets placed in service after December
55:2331st of 2023 until we have another ray
55:26case and rates become effective from
55:27that rate case so all of that will stay
55:30on a lag until the next case and in this
55:33case what we're really looking at is
55:34where we value that rate base and if we
55:37impose an additional six months of
55:39lag okay thank you turning to staff's
55:42questions about uh the revenue deferral
55:44mechanism the company has proposed in
55:46this Cas in this case excuse me first
55:48you you discussed how a whack return on
55:51the Deferred portion of Revenue would
55:53make the company whole financially in a
55:55sense that would make up for the time
55:56value of money is that a fair
55:58characterization of your discussion it
56:00is would the company experience any
56:03impacts as a result of the cash flow not
56:06coming in to the in the door if you will
56:09uh during the deferral period yeah we
56:11would so certainly if the rates were
56:13effective uh in November we would begin
56:16to collect the the dollars and have that
56:19cash flow and if we defer that we will
56:22not be collecting those until further
56:24out so we would defer beginning
56:26collecting those until February and then
56:28collect them over 12 months which again
56:32uh the reason why the company can do
56:34things like this is because we do have a
56:37strong financial position and and that's
56:39part of the discussion here when we talk
56:41about why it's important to continue to
56:43ensure that the company remains in that
56:45position it allows us to to bring
56:47forward these types of proposals for
56:49customers to defer revenue or to for
56:52instance spread out storm Yuri costs
56:54over 24 and 36 months that the company
56:57has already puted the cash out the door
56:59for and why does it matter that the
57:01company doesn't have the cash if it's
57:03earning a a whack return cash flow is
57:06certainly a metric that the both the
57:08rating agencies look at and just
57:10operating the company and having the the
57:12cash in in the door to be able to to
57:15spend on the things the company is
57:17purchasing whether it be capital or
57:19onm now um Miss um mlin also asked you
57:25about uh the settlement in the company's
57:282020 gas rate case where the company uh
57:31agreed to foro a return on the Deferred
57:33revenues into a um and to average uh
57:36rate base do you recall that I do could
57:39we pull up hearing exhibit 412
57:52please and to page 25
58:03so taking a look just very briefly um Mr
58:06Burman at at paragraphs one and two on
58:09page 25 here um can you just summarize
58:14your understanding of of what this is
58:15saying with respect to the
58:17settlement sure just simply saying that
58:20that the positions taken in the
58:22settlement are not precedential and
58:24there's give and take in every
58:25settlement and so you know the fact that
58:28the company would agree to do something
58:29within a settlement was probably part of
58:32the give for something else the company
58:34was looking for in the settlement um so
58:37not surprising to see something in a
58:39settlement not be consistent with a
58:42position that a party would take outside
58:44of a settlement thank you we can take
58:46down this um
58:48exhibit um Mr bman I'd like to talk
58:51briefly about um the differentiated Roe
58:54proposal that staff has made to apply a
58:56lower as low as 3% Roe to certain types
59:00of company assets do you recall that
59:02conversation with staff yes now
59:05regarding your questions from staff and
59:07UCA regarding the policy behind the
59:08differentiated Roe proposal and in
59:10generally and in general investment in
59:13gas assets and your view is it
59:15inconsistent with State policy to
59:17continue to make investments in the gas
59:20system no I don't think it is in fact I
59:23think it was
59:25a I was surprised to kind of hear that
59:28assertion uh yesterday in that when we
59:31looked at the commission's own mission
59:33statement it spoke to ensuring the
59:36utilities providing safe and reliable
59:37service and there's necessarily a cost
59:39to do that and so investment for the
59:42customers that we serve today is going
59:44to be necessary in order to continue to
59:46provide that service and I don't think
59:48that's inconsistent with continuing to
59:51advance State decarbonization goals okay
59:55now do you recall that staff asked you
59:58or um about your actual earned Roe of
1:00:037.81% in
1:00:042023 and noted that staff's proposed roe
1:00:08with respect to certain uh company
1:00:11assets was 7.71% do you remember that
1:00:14comparison I do if you were awarded an
1:00:17Roe of
1:00:187.71% On All or a portion of the
1:00:21company's inservice assets in this
1:00:23proceeding would you likely earn
1:00:277.71% no especially not given the
1:00:31discussion we've just had about the
1:00:33historic test year and the rate based
1:00:35convention and especially not if a
1:00:3713-month average was approved for use in
1:00:40that test year what we've seen is that
1:00:43in that construct the company's
1:00:45typically earning about a 100 basis
1:00:47points below whatever Roe is authorized
1:00:50on day one when those rates are
1:00:52affected okay and so it in talk in terms
1:00:57of
1:00:57comparison the earned Roe of 7.81%
1:01:02should be more properly compared to what
1:01:05uh from that time frame I mean so that
1:01:08earned Roe is probably comparable to
1:01:11Something in the range of a 92 or 93
1:01:14authorized Roe and that's exactly the
1:01:16discussion or exactly the point I was
1:01:18just making is that because of the
1:01:20regulatory lag the company's earning
1:01:22significantly less than the authorized
1:01:25okay
1:01:26now you also discussed with staff um the
1:01:29potential calculation of a Consolidated
1:01:32Roe versus um calculating an Roe on
1:01:35certain assets and a different Roe on
1:01:37other assets do you recall that
1:01:38discussion I do regardless of the method
1:01:42of calculation of the Roe separately for
1:01:45certain assets or on an aggregated basis
1:01:47what Roe would the commission
1:01:49effectively be authorizing as the
1:01:51company experienced
1:01:52it the regardless of that calculation
1:01:56and when you look at the total rate base
1:01:58it's it's going to result in a lower
1:02:00return on the rate base and I think
1:02:02that's partially why staff did the
1:02:05calculation the way they did in their
1:02:06revenue requirement and ultimately
1:02:08applied a lower Roe to all of R base
1:02:12okay um could we please pull up hearing
1:02:15exhibit uh 100 attachment um uh
1:02:20spb2 I'm sorry uh 101 apologies not 100
1:02:45okay Mr Burman do you recall um that you
1:02:49uh had a conversation with
1:02:52um um UCA Council regarding this
1:02:56particular attachment and the multiple
1:02:58line items on it I do can you just
1:03:01identify first of all why are there
1:03:03multiple lines of costs on this document
1:03:05instead of just a single number these
1:03:08represent the different costs that a
1:03:10customer would see on their bill so
1:03:11they're base rate costs there's a
1:03:13separate bill line for the dmca and then
1:03:16there's a separate bill line for the GCA
1:03:18for the fuel
1:03:20costs and do these represent uh real
1:03:24costs the company is experiencing
1:03:26yes they
1:03:28do when we're talking about
1:03:31um I'll strike that we'll move on from
1:03:33here um could we please turn to hearing
1:03:37exhibit 100 now attachment
1:03:53one just give me a second for that one e
1:04:41okay uh do you recall discussing this
1:04:43attachment with uh Council for UCA
1:04:46yesterday I do and you had some
1:04:49discussion if we could scroll down just
1:04:50a little bit so we can see a little bit
1:04:52more of the table
1:04:56um this
1:04:5731% uh was discussed correct could you
1:05:00could you please just explain what is
1:05:02the
1:05:0331% uh represent the 31% represents the
1:05:08amount that we have to set a rate a grsa
1:05:12at in order to collect the deficiency
1:05:15that the companies brought forward or
1:05:17that $169 million in this rate case it's
1:05:21not representative of a bill impact or a
1:05:24revenue impact
1:05:26we looked at those separately on the
1:05:28other documents where believe the last
1:05:30document the the revenue impact was
1:05:33about 11% the residential Bill impact
1:05:36here in this case is about 9.5 this 31
1:05:39is higher just by virtue of the math
1:05:42that's necessary to to set that rate to
1:05:44collect the
1:05:46dollars and speaking of either the 31%
1:05:49or the overall Bill impact do those
1:05:52numbers represent entirely new Revenue
1:05:55to the company or has some of that been
1:05:58discussed in Prior proceedings deferrals
1:06:02Etc oh certainly some of those items
1:06:05that are built into the the testure and
1:06:07the deficiency are are amortizations of
1:06:09Prior deferrals and other things that
1:06:11have been discussed in other proceedings
1:06:14okay um um Miss fed I I apologize I'm
1:06:17going to ask you we're going to come
1:06:18back to this in a moment but I'm going
1:06:20to ask you to First bring up hearing
1:06:21exhibit
1:06:22137 from the company's box folder
1:06:35while that's happening perhaps Mr Burman
1:06:37I can just ask you do you also recall a
1:06:39conversation with um uh UCA Council
1:06:42regarding the backup for the company's
1:06:44rate Trend report in in that hearing
1:06:45exhibit 100 I do and she asked whether
1:06:49the company provided information on a
1:06:51perm basis you recall that I do uh can
1:06:56you tell me uh you recognize what on the
1:06:58screen here has been marked as hearing
1:07:00exhibit
1:07:01137 yeah I believe that this is the rate
1:07:04Trend report that exists publicly on the
1:07:07company's website when you say on the
1:07:10company's website do you mean on the EXL
1:07:11energy.com website where any member of
1:07:14the public could access it should they
1:07:16want to yes and and this provides the
1:07:19backup for the company's rate Trend
1:07:21report it does and this is updated every
1:07:24time there is a new rate Trend report
1:07:27filed in compliance with the rules uh
1:07:30set forth on those reports okay company
1:07:33would move admission of hearing exhibit
1:07:36137 any
1:07:39objection no
1:07:42objection thanks so
1:07:45moved so if we could um please go back
1:07:48to hearing exhibit uh 100 attachment
1:07:51one and uh scroll to the next page
1:07:54please
1:07:57I think we have to keep going to the
1:07:58first uh graph which may have been on
1:08:00page
1:08:03three okay there we are thank you um Mr
1:08:07Burman I'd like to ask you a few
1:08:09questions uh about this particular um uh
1:08:13graph to put some maybe more uh proper
1:08:16context around it uh first of all the
1:08:19largest chunk of color if you will on
1:08:22this graph is the light blue that
1:08:24represents the gas cost adjustment is is
1:08:27that right that's right okay and and to
1:08:29what extent is the gas cost adjustment
1:08:31at issue in this base rate case it's not
1:08:35the this this base rate case is about
1:08:37the base rate costs um and not fuel
1:08:40costs okay and along those same lines um
1:08:44the brown color that says extraordinary
1:08:46gas cost recovery writer uh what is that
1:08:50that is the spreading out of gas costs
1:08:54that we're experienced during storm Yuri
1:08:56that um B approved B
1:08:59collection uh I believe over 32 months
1:09:02for gas purposes and and those roll off
1:09:07uh in February of
1:09:082025 and will those costs roll off in
1:09:11February of 25 regardless of the revenue
1:09:13deferral mechanism the company proposed
1:09:16yes they will okay and um how do the
1:09:20gray and yellow colors here on this
1:09:22chart relate to each other if you will
1:09:25yeah we talked a little bit about this
1:09:27yesterday the the gray is base rate
1:09:31usage charges so that's the per THM
1:09:34charges we talked about and the yellow
1:09:37are grsa which is what the mechanism we
1:09:41use in between phase two rate cases
1:09:43where we actually change the therm rates
1:09:45so you as we talked about yesterday you
1:09:48kind of have to look at those two in
1:09:50tandem to understand all of the portion
1:09:54that's coming from BAS
1:09:55because just because of the virtue of
1:09:58the mechanics of how that grsa works in
1:10:00between phase two cases okay and then
1:10:03maybe one other piece of context here
1:10:05the the yellow cost associated with the
1:10:08grsa from roughly February of 21 through
1:10:12uh late 2022 can you explain why those
1:10:15are lumpy and why there's a rather
1:10:17significant increase on the back end of
1:10:19those
1:10:21costs yeah those that was where the the
1:10:25company did use the rate deferral search
1:10:28charge mechanism in the past and so
1:10:31because of that which was also collected
1:10:34through a grsa like mechanism so because
1:10:37we deferred the revenue for certain
1:10:39periods of time and we only collected
1:10:41that rate to ferral sear charge in the
1:10:43shoulder months um that's why there's
1:10:46those spikes and there certain months
1:10:49where it it's basically
1:10:51zero and did that deferral benefit the
1:10:54company
1:10:57no it did not as we looked at in the
1:11:00settlement agreement that the company
1:11:02didn't earn a return on that deferral
1:11:03and it did have the cash flow impacts we
1:11:06talked about earlier okay and and why
1:11:08did the company um propose a deferral at
1:11:11all in that case and and then in this
1:11:13case that case was really um that
1:11:17deferral was driven coming out of covid
1:11:19and just the the environment that our
1:11:21customers were experiencing at that time
1:11:23and so as part of that settlement um the
1:11:26company had brought that proposal
1:11:27forward and ultimately uh settled to
1:11:30implement it with no return okay and and
1:11:33one other piece here um so we we've
1:11:37talked a little bit about the yellow
1:11:39gray and blue kind of all relating as
1:11:41the blue is the service and facility
1:11:43charge all sort of relating to base
1:11:44rates right just is it
1:11:47fundamental yes okay and then one other
1:11:50piece that was um not talked about at
1:11:52all um in this discussion yesterday was
1:11:55the green can you please explain what
1:11:57that is yeah that's the psia which was
1:12:01in place for a number of years you can
1:12:03see basically from the beginning of this
1:12:05chart up until about 2022 when it was
1:12:08rolled into base rat so really you would
1:12:12you would to get an apples and apples
1:12:14comparison to the far right side of this
1:12:16chart you would want to layer that green
1:12:18on top of the prior
1:12:21periods and how does that then affect
1:12:24what the company is asking for in terms
1:12:26of Base rates in this case versus prior
1:12:29cases where the psia was one proceeding
1:12:31and base rates were another
1:12:33proceeding yeah all of the Investments
1:12:35that were recovered under the psia in
1:12:37the past are now shifted into base rates
1:12:39so those continued safety Investments
1:12:42that were recovered through the ryer are
1:12:45now just part of the request here in
1:12:47base rates and and what might uh what
1:12:50what is the um what might be the
1:12:53perceived impact of doing that of ing
1:12:55those psia costs into base
1:12:57rates well for one as we talked about
1:13:00before the the rider offered a more
1:13:02current recovery of those costs and so
1:13:04that is now uh no longer in existence
1:13:07and those costs are in to be treated for
1:13:10Recovery purposes the same way as all
1:13:12other base rate costs uh which with the
1:13:15hty will incur regulatory lag um
1:13:20[Music]
1:13:21and I guess only other thing would
1:13:23really be simplifying to not have
1:13:25multiple mechanisms under which you're
1:13:28recovering those costs which are now in
1:13:30base rates okay and just to wrap this up
1:13:32and and and kind of put some more
1:13:35complete context on all of it can you
1:13:37please summarize how to look at this
1:13:38sort of rate Trend report from a base
1:13:41rate perspective for purposes of this
1:13:44proceeding yeah I I so like as I said
1:13:47before I think you've got to look at the
1:13:49the blue the gray the yellow and the
1:13:52green historically has all being
1:13:55equivalent to the items that are
1:13:57currently in just the gray and blue at
1:14:02the edge at the right edge of this chart
1:14:04um those things which had been recovered
1:14:07in other mechanisms are now all
1:14:10recovered in base
1:14:11rates and then lastly do you expect for
1:14:14the light blue which is um not part of
1:14:17this case gas commodity costs are those
1:14:21are those costs uh continuing any
1:14:23particular Trend at this time those
1:14:25costs have been declining I mean those
1:14:27are clearly looking at this chart that's
1:14:29the most volatile piece of rates and it
1:14:31is a large it's the largest piece of our
1:14:33customers bills um and you know if you
1:14:37shave off kind of that Peak there in
1:14:402022 when we all know we experienced
1:14:42high gas prices this looks a lot more
1:14:46normalized um and as a result of that
1:14:49Peak the company has engaged with the
1:14:51commission and done a number of things
1:14:53to try to decrease the volatility those
1:14:55costs in the future with our gas price
1:14:57risk mitigation plans our continued um
1:15:00gas price volatility plans uh and
1:15:04currently engaging in a GCA uh pin R
1:15:09making thank you Mr Burman that's all I
1:15:16have uh thank you would you like to call
1:15:20your next
1:15:21witness uh uh yes chair blank um Samar
1:15:25PCO is going to take over for me but
1:15:27we'll be calling Mr Gardner we just need
1:15:29a moment to transition please
1:15:32y Mr Gardner can you hold up your right
1:15:39hand uh and can you come off M mute yeah
1:15:42there you go uh do you swear to tell the
1:15:44truth the whole truth and nothing but
1:15:45the truth I do you can put your hand
1:15:48down uh is anybody uh in the room with
1:15:51you or communicating with uh you in any
1:15:54way they are not if that changes you'll
1:15:57let us know
1:15:59absolutely uh back to you Miss Samar PCO
1:16:03good morning can you hear me okay chair
1:16:05we can we can uh for the record my name
1:16:08is Tanis Mard PCO I'm Council for public
1:16:10service good morning Mr Gardner good
1:16:13morning um as we were transitioning I
1:16:16didn't catch whether you stated and
1:16:18spelled your name for the
1:16:20record I have not but I can do that now
1:16:22okay if you could please r a y g a r d n
1:16:29r ray Garder Thank You by whom are you
1:16:33employed and in what capacity uh Public
1:16:35Service Company in Colorado I am the
1:16:38area vice president of uh gas
1:16:40engineering and for purposes of this
1:16:43matter did you prepare hearing exhibit
1:16:45105 rev one as your direct testimony yes
1:16:49I
1:16:51did and did you also prepare hearing
1:16:54exhibit 120 as your supplemental direct
1:16:57testimony yes I did and finally hearing
1:17:01exhibit 128 as your rottal testimony yes
1:17:04I did as Mr Gardner's testimony has been
1:17:07admitted into evidence he's now
1:17:09available for cross
1:17:11examination uh I think uh the Pu is up I
1:17:17got 20 minutes Miss
1:17:19mclin thank you chair good morning Mr
1:17:21Gardner my name is Katie mlin and I
1:17:23represent trial staff in this matter I
1:17:26have a few questions for you today and
1:17:28it's going to touch on two overarching
1:17:30topics so first I want to talk to you
1:17:33about the Questar supply project and I
1:17:37want to pull up a figure to just help
1:17:39this discussion get off we please pull
1:17:42up the direct testimony of company
1:17:44witness Gardener that's hearing exhibit
1:17:47105 and we're going to look at page 71
1:17:49please
1:17:57now thank you looking at this map Mr
1:18:01Garder the Questar Pipeline and the
1:18:04rifle processing plant are located in
1:18:07direct Geographic proximity to one
1:18:09another
1:18:11right roughly speaking yes yeah okay we
1:18:16can go ahead and take this exhibit down
1:18:17thank you so
1:18:19much now the company and Rocky Mountain
1:18:22Natural Gas jointly own and operate the
1:18:25rifle processing plant correct that is
1:18:29correct and they share Capital additions
1:18:32equally amongst
1:18:34themselves no that's not
1:18:42correct they don't share Capital
1:18:45additions amongst
1:18:46themselves we do but it's not an a
1:18:49perfectly even split the capital
1:18:52additions are split based on
1:18:55each company's usage of the
1:18:57asset okay but there is a split between
1:19:00the two correct there is a split but
1:19:02it's not a perfectly even 50/50 split
1:19:07okay now have the allocations of costs
1:19:10between Rocky Mountain Natural Gas and
1:19:12the company always been
1:19:15accurate they I'm not sure I understand
1:19:18your can you state that again I'm not
1:19:20sure I understand the question yeah
1:19:22absolutely has psco been able to
1:19:27accurately determine the split between
1:19:30Rocky Mountain Natural Gas and the
1:19:33company in every
1:19:36circumstance I think when you say every
1:19:38that's a that's a bold statement but um
1:19:41to to my understanding
1:19:45yes but in this proceeding wasn't there
1:19:49an error in the company accurately
1:19:52reflecting the capital addition split
1:19:54between the compan in Rocky Mountain
1:19:55Natural
1:19:56Gas there was in my testimony yes okay
1:20:02so is it possible that there's some
1:20:05errors between the allocation of costs
1:20:07between Rocky Mountain Natural Gas and
1:20:08the
1:20:09company well I think you're inferring
1:20:12that an error in the way that we
1:20:14allocated costs in my testimony would
1:20:16translate to an error in how we allocate
1:20:18costs directly with Rocky which I'm not
1:20:20sure is it's not really an Apples to
1:20:23Apples comparison
1:20:24um and I don't think that's completely
1:20:27fair but I think in any business
1:20:28relationship there's I mean there's
1:20:31always a aspect of human error that can
1:20:33exist just in how we go about our daily
1:20:35lives so I mean there's always a
1:20:38potential for that but it's a you know
1:20:39commercial relationship so we meet on a
1:20:43regular basis to to make sure that we're
1:20:45sorting those things out and do you
1:20:48think that the complexity of this
1:20:49Arrangement has the possibility to
1:20:51increase errors between the two
1:20:53companies
1:20:56I don't think I would say increase I
1:20:58mean I think this relationship has been
1:21:01in existence for 30 plus years and so I
1:21:05don't think there's really anything
1:21:08that's that changes that um and
1:21:12specifically not the Questar supply
1:21:14project okay now focusing a little bit
1:21:17more on the Questar pipeline project
1:21:20this pipeline has the ability to
1:21:22transport pipeline quality gap
1:21:26right
1:21:29um not contractually but yes it it does
1:21:34it has the ability to do that correct
1:21:37okay and meaning pipeline ready gas is
1:21:40of a quality that does not need to be
1:21:42refined before it's transported right
1:21:45that is correct yes whereas in contrast
1:21:48all gas that is sent to the rifle plant
1:21:52needs to be processed before it's out of
1:21:55quality that can flow into a pipeline is
1:21:57that correct um not exactly because the
1:22:02idea when you build a processing plant
1:22:04from an actual execution standpoint is
1:22:06that you want to build in the capacity
1:22:09to go around the plant in the case that
1:22:12you receive pipeline quality gas and
1:22:14that's as much a safety feature as it is
1:22:16anything else because if you run
1:22:18pipeline quality gas through a
1:22:20processing plant you're running the
1:22:22processing plant out of design base
1:22:24basis meaning you would see like
1:22:27excessive temperatures on a heat
1:22:28exchanger that type of thing so um the
1:22:31idea that you're building a supply point
1:22:34with that ability is more um is not
1:22:37unique to Questar and it exists on the
1:22:40other Supply Point into the gas plant as
1:22:43well sure and I understand that you have
1:22:45to do that from an engineering
1:22:47perspective but the rifle processing
1:22:50plant has to process gas correct the
1:22:54purpose of the processing plant is to
1:22:56process gas
1:22:58yes and like you just touched on
1:23:01Pipeline ready
1:23:03gas will flow through the Questar
1:23:06project it bypasses the rifle processing
1:23:09plant in its entirety right jack this
1:23:12States his
1:23:15testimony can you reframe um as mclin
1:23:19sure I'll just ask the question Point
1:23:21Blank does pipeline ready gas FL through
1:23:24the Questar project bypass the rifle
1:23:28processing
1:23:29plan so again I think you're you're misc
1:23:32characterizing here because the Questar
1:23:35supply project is not required to
1:23:37provide pipeline quality gas thus why it
1:23:40has to be connected to the processing
1:23:42plant so any Supply point there is
1:23:45variable of the quality of gas that's
1:23:48received and so in this
1:23:50case if assuming that we get wet gas
1:23:54through the Questar Supply it would have
1:23:56to go through the processing plant if
1:23:58you receive pipeline quality gas then
1:24:01you would want it to bypass the plant so
1:24:04that you don't um overheat heat
1:24:07exchangers and you know uh operate out a
1:24:11design basis of your
1:24:12plant so yes pipeline quality gas would
1:24:17bypass the rifle
1:24:19plan in the scenario that we were in the
1:24:22scenario if we were to receive pip
1:24:24quality gas through the Questar Supply
1:24:28if yes we would want it to bypass the
1:24:31processing plant in the same way that if
1:24:34we receed pipeline quality gas from
1:24:36Williams that we would want it to bypass
1:24:38the plant as well
1:24:40okay is it fair to say that there is
1:24:44generally an additional cost associated
1:24:47with processing gas compared to
1:24:49receiving pipeline ready
1:24:52gas yes it does cost money to run a
1:24:56plant so in general gas that goes
1:24:59through the processing step would likely
1:25:01be more expensive than gas that is
1:25:03pipeline ready correct no not
1:25:06necessarily because it depends on what
1:25:08your price of gas is so it it I don't
1:25:13think you can make that
1:25:14characterization would you agree that
1:25:16there are times though when pipeline
1:25:18ready gas would be less expensive than
1:25:21gas that needs to be processed through a
1:25:22processing plant
1:25:25maybe maybe not it just depends on the
1:25:27price of the Upstream
1:25:29gas okay and the company sells gas from
1:25:35the Questar pipeline to its rate payers
1:25:38right yes okay and the company has an
1:25:42obligation to try and acquire the least
1:25:45cost resources for its rate
1:25:48payers generally speaking yes
1:25:55and the rifle plant is a baseload source
1:25:58of gas during the heating season
1:26:01correct the gas that comes through the
1:26:04the rifle gas plant is a Basel load
1:26:06source during the heating
1:26:09season did the company study whether it
1:26:12would remain a Basel load resource after
1:26:14the Questar pipeline project is
1:26:17finished yes and I think I clearly
1:26:19stated that in my rebuttal testimony
1:26:21that the um the implementation of the um
1:26:27Questar supply project doesn't change
1:26:30how the company would utilize the gas
1:26:33plant for Basel load Supply
1:26:38okay has the company determined if there
1:26:40has been circumstances where the rifle
1:26:42plant would no longer be used as a
1:26:44Baseel
1:26:48load our so f a couple things I would
1:26:51say so first um my responsibilities
1:26:54operating the system so planning the
1:26:55system and doing future planning is held
1:26:58by our um integrated system planning
1:27:00team that's led by witness Mars but I
1:27:02think when we look at the by my
1:27:05understanding when we look into the
1:27:07future and as I stated in my rebuttal
1:27:09testimony we see the processing plant as
1:27:12still being part of the supply portfolio
1:27:14from that rifle system um for the
1:27:16foreseeable future and the Questar
1:27:19project certainly doesn't change that
1:27:25now in your rebuttal testimony you state
1:27:27that the Questar facility does not
1:27:31impact the capacity of the rifle
1:27:35plant correct the capacity of the plant
1:27:38is what it is yes and capacity and
1:27:42throughput are different concepts right
1:27:45that is that is true yes could it be
1:27:48that the Questar facility does not
1:27:50impact the capacity of the rifle plant
1:27:53but it does affect the annual
1:27:56throughput it could yes okay and has the
1:28:00company studied whether that is a
1:28:03possibility I think we've looked at it
1:28:05from the perspective of yes it could
1:28:07impact the total throughput just um
1:28:11depending on the situation yeah has the
1:28:14company presented that result to the
1:28:19commission no okay and is it possible
1:28:23that an impact on throughput would also
1:28:26impact the overall profit of the
1:28:30plant so if you have more throughput
1:28:36then um arguably you would say you have
1:28:39more liquid Dropout in which case you I
1:28:44mean potentially you could impact the
1:28:47profitability did the company study this
1:28:50potential
1:28:51impact I don't think we specifically
1:28:54looked at the profitability of the plant
1:28:57because I think from our
1:28:58perspective again the Questar supply
1:29:01project doesn't change the fact that
1:29:02we'll continue to use the plant
1:29:13okay now wouldn't it be fair to say that
1:29:17replacement of
1:29:19equipment at the rifle plant would have
1:29:22to happen regardless of how much gas is
1:29:25flowing through
1:29:28it can you restate that again just to
1:29:30make sure I understand what you're
1:29:31saying yeah absolutely so regardless of
1:29:34how much gas is being flown through the
1:29:36rifle plant the company in Rocky
1:29:39Mountain Natural Gas would still have to
1:29:41engage in equipment replacement to
1:29:44ensure reliability of the plant
1:29:46overall yes I would say that's true
1:29:50okay um and now we briefly touched on
1:29:53this but Rocky Mountain
1:29:54natural gas and the company have a joint
1:29:56venture agreement for the rifle
1:29:59processing plant right yes that is
1:30:02true did the joint venture agreement
1:30:05change between the companies after the
1:30:06Questar pipeline was
1:30:08built no it did
1:30:12not and
1:30:14has the company's gas procurement
1:30:17strategies changed after the Questar
1:30:20pipeline has been built
1:30:24not materially no I think um it's
1:30:28important to remember that for the rifle
1:30:31processing plant each company's required
1:30:34to Source our own Supply as well as pay
1:30:39a proportional share based on our usage
1:30:41of the plant and then subsequently
1:30:45receive liquids revenues based on how
1:30:47much we're flowing through the
1:30:48plant understood do you know if or how
1:30:53the Questar pipe blind would change
1:30:54Rocky Mountain Natural gas's utilization
1:30:56of the rifle
1:30:57plant I think that would be a a question
1:31:01for for Rocky and not something I could
1:31:03speak on their
1:31:04behalf do you know if this could
1:31:07possibly cause any Financial harm to
1:31:09Rocky Mountain Natural
1:31:10Gas again I I you know the Questar
1:31:14Supply is a fully uh wholly owned by
1:31:18psco and for the use for the benefit of
1:31:21our customers and so I don't um um again
1:31:25I can't speak on Rocky's behalf of
1:31:28impacts of them because from our
1:31:30perspective we don't see any impact to
1:31:33the plant and how um really any impact
1:31:36to
1:31:37them do you know how Rocky Mountain
1:31:40Natural Gas recovers costs associated
1:31:43with the rifle plant from its
1:31:45Rays I I am a Fasco employee and I I
1:31:49can't speak on behalf of Rocky on how
1:31:51they how they Supply their gas or how
1:31:53they their
1:31:55customers would the company be better
1:31:57equipped to answer these questions if
1:31:59given more time and
1:32:02Analysis no I I don't think so because
1:32:05you're asking me questions specific to
1:32:07Rocky Mountain Natural Gas of which I'm
1:32:10not privy to the way that they conduct
1:32:12their business nor do I think I should
1:32:17be do you think that if Rocky Mountain
1:32:19Natural Gas and the company met to
1:32:21discuss these issues you'd have a better
1:32:23understanding
1:32:24not of the way that they charge their
1:32:27customers none of those things I don't
1:32:29think that's I mean again I come back to
1:32:32I'm a Pasco employee and so my
1:32:34responsibility is uh supplying gas to
1:32:38Pasco customers so you don't think that
1:32:41more information would help understand
1:32:43the situation
1:32:44better I it depends on what you're
1:32:47referring to of situation I guess I'm
1:32:49not really understanding the the root of
1:32:51your question there because I'm just
1:32:53saying I mean I
1:32:55even if we meet on the rifle gas plant
1:32:59processing plant which we do as joint
1:33:01venture Partners anyway I don't think
1:33:04that that stands to provide me any
1:33:08benefit of how they build their
1:33:11customers and how they go about their
1:33:13business um separate from the joint
1:33:16venture so
1:33:25okay now Mr
1:33:26[Music]
1:33:32Gardner do you think that a joint study
1:33:35of operations would be
1:33:38beneficial
1:33:40operation uh
1:33:42operation of the rifle plant of the
1:33:45rifle gas processing plant specifically
1:33:47is that what you're referring to
1:33:50correct um I as from a high I understand
1:33:54that the commission has ordered Rocky to
1:33:57to do that and to the extent that it um
1:34:01impacts us we're happy to participate
1:34:04but um I can't really speak to it beyond
1:34:07that okay thank you for your answers on
1:34:11those now I have a couple questions for
1:34:14you on the Clarkson
1:34:18project this project is occurring in
1:34:21four phases right
1:34:26yes there's there's four different
1:34:27phases to the to the Clarks and work
1:34:31yes and the initial scope of work for
1:34:34all four
1:34:35phases happened roughly around the same
1:34:39time
1:34:41um very very high level preliminary
1:34:43scoping of understanding I guess first
1:34:46maybe it's helpful to understand that
1:34:48when we identify these we identify a
1:34:51scope of work that needs to be completed
1:34:53and then we're separating that into
1:34:56reasonably executed pieces and I think
1:34:58that's what you see reflected so if
1:35:01you're indicating that we identified the
1:35:04the total broad scope at the roughly at
1:35:06the same time then then yes I think
1:35:09that's fair and the first two phases
1:35:11have already been completed right yes
1:35:14that is
1:35:15correct and phase one of the Clarkson
1:35:18project cost approximately $4.1
1:35:21million right subject to check that that
1:35:25is my understanding sure absolutely uh
1:35:28we can pull up your direct testimony if
1:35:29you would like to
1:35:30check I I'm I'm fine with it but I think
1:35:35I'm just saying that that's based on my
1:35:36memory so okay and phase two of the
1:35:39Clarkson project costs approximately
1:35:42$5.8
1:35:43million that sounds roughly correct
1:35:47yes and phase three is scheduled to be
1:35:51in service in 2025 next year
1:35:55correct phase three is currently scoped
1:35:59to begin next year which which I would
1:36:02expect would hit in service of next year
1:36:04yes
1:36:06okay excuse
1:36:08me and phase four is scheduled to begin
1:36:12and be in service in 2026
1:36:15right that is the current plan pending
1:36:18obviously successful completion of the
1:36:20prior phase yes
1:36:23does the company know the projected cost
1:36:26of the phase three for the Clarkson
1:36:28project I don't have that committed to
1:36:31memory I I know that we are going
1:36:33through estimating processes now related
1:36:35to that but I don't have that committed
1:36:38to my memory now so you don't have a
1:36:41final estimate yet I do not personally
1:36:45no okay so it's fair to say that you
1:36:47have not presented an estimate to the
1:36:49commission either that is correct and
1:36:53does the company know the projected
1:36:54costs of the phase four for the Clarkson
1:36:57project I don't have a final estimate on
1:36:59it I I know that again similarly we've
1:37:03been working through preliminary
1:37:04estimates but I don't have a final
1:37:05estimate for that one either and it's
1:37:08also fair to say that the company has
1:37:09not presented that estimate to the
1:37:12commission I believe that's
1:37:14correct so what is the anticipated total
1:37:18cost of the Clarkson project with all
1:37:20four
1:37:21phases I I don't don't know the the
1:37:24total um of all four phases combined
1:37:29together so the compan is about halfway
1:37:31through you know it's completed phase
1:37:33one and two it's got two more to go it's
1:37:36roughly spent about 10 million but it
1:37:39has not provided the commission with an
1:37:41estimate of the entire cost of the
1:37:43project
1:37:45right I don't I don't believe that we've
1:37:48provided the commission a total cost of
1:37:51the total of the full scope of
1:37:55okay now I want to run through a little
1:37:58timing with you
1:38:00briefly the company filed its initial
1:38:03gas infrastructure plan or the Gip in
1:38:052023 and I recognized this was not a
1:38:08litigated
1:38:10proceeding yes okay and do you know when
1:38:14the commission finalized its Gip
1:38:18rules I don't remember the exact date
1:38:20but it would have been prior to the
1:38:22start or it would have been the Clarks
1:38:25and work would have started prior to
1:38:27that okay
1:38:30but phase three and phase four are
1:38:33occurring after the Gip rules that is
1:38:35correct
1:38:36yes and the company's second Gip was
1:38:40filed in June of this year does that
1:38:41sound about
1:38:43right second Gip our initial Gip was
1:38:46filed this year I believe I maybe
1:38:49crossed up on some of
1:38:51that just just to clarify the record
1:38:53only one G was filed that was in
1:38:562023 okay appreciate that thank
1:39:00you now isn't one of the intentions of a
1:39:03Gip to investigate gas system
1:39:07Alternatives that would be that would be
1:39:10one aspect but I think it's really to
1:39:12provide the commission with some
1:39:14forward-looking view of planned
1:39:16investment great has the company filed
1:39:19the cpcn for the Clarkson project we
1:39:22have not no
1:39:28and did the company evaluate any
1:39:31alternatives to the Clarkson
1:39:35project so I'd have to I mean I'd have
1:39:38to go back to to my direct testimony to
1:39:41for my exact memory of everything
1:39:42evaluated we I believe we did because I
1:39:45believe we looked at Alternatives such
1:39:47as dting which we deemed infeasible as
1:39:50well as different routing studies
1:39:53um that would be potential
1:39:56Alternatives did the company present
1:39:58those alternatives to the
1:40:01commission um I believe those are four
1:40:04if you're talking about
1:40:06the if you're talking about the two
1:40:08phases that have already been completed
1:40:10those are presented in this
1:40:14case but did the company present
1:40:17alternatives to the Clarkson project to
1:40:19the Commission in uh object on and uh
1:40:23it's a little ambiguous are you
1:40:24referring to this case or in general to
1:40:27the giip just did at in any point did
1:40:31the company present any alternatives to
1:40:34the commission for the Clarkson project
1:40:37so as I stated for the first two phases
1:40:41in my direct testimony we did discuss
1:40:44alternatives to the project in this
1:40:48case so phase one and phase two have
1:40:52already started and
1:40:54completed and you're presenting the
1:40:56alternatives to the commission for
1:40:58something that's already
1:41:00happened that by definition is part of
1:41:03what a historical year uh rate case does
1:41:07yes so to confirm you did not present
1:41:10these alternatives to the commission
1:41:12before you started working on the
1:41:14Clarkson
1:41:15project yes that is correct
1:41:39now the company has also filed a
1:41:42declaratory order about the Clarkson
1:41:45projects
1:41:47right we have filed a declaratory order
1:41:50related to the final two phases of the
1:41:54Clarkson
1:41:57project and why did the commission or I
1:42:00apologize why did the company wait to
1:42:02file that declaratory order I'm going to
1:42:05object on the grounds that it may call
1:42:07for a legal conclusion and is pending in
1:42:09a different proceeding from this case
1:42:11this case is about a historical test
1:42:13year that case is about future
1:42:16investment Miss mlin I'll withdraw the
1:42:19question thank you um
1:42:26do you believe that the company could
1:42:28learn and have feedback on
1:42:32Alternatives if there was a planning
1:42:34process for the Clarkson
1:42:36project so I think
1:42:40the specific to the Clarkson
1:42:43project the Clarkson project is a Safety
1:42:46project so when we talk about
1:42:49Alternatives alternatives are required
1:42:52to in order to be effective an
1:42:54alternative would need to equivalently
1:42:56remediate the safety risk at hand so in
1:43:00this case um I think the Gip provides A
1:43:05forward-looking View to provide that uh
1:43:09in the future but in in this case um and
1:43:12where this work was uh initially
1:43:16presented in the psia I would say no it
1:43:20would not because it has um I may have
1:43:23misdated myself earlier but if this was
1:43:25included in the psia as I recall in the
1:43:30deferral final question for you Mr
1:43:33Gardner in the company's view does
1:43:35breaking a project up into phases
1:43:37eliminate the need for a
1:43:41cpcn I think that's more of a a legal
1:43:44determination but I think functionally
1:43:47the way that we address these scope
1:43:49these large scopes of work is that we
1:43:51identify the risk at hand and then we
1:43:53have to break it into reasonable pieces
1:43:57that we can actually go execute so I
1:43:59don't see it as avoiding a cpcn as much
1:44:02as I see it as just breaking a scope of
1:44:06work into something that can be like
1:44:09logistically
1:44:11executed but the Clarkson project was
1:44:14One Singular overarching project
1:44:17correct I don't know that you could
1:44:19necessarily I think the way I've
1:44:21referred to it as it's a scope of work
1:44:23and that's what we identified it as in
1:44:26the the psia deferral I
1:44:33believe and I think that's exactly what
1:44:36the the declaratory order is seeking to
1:44:38accomplish it's a that's a legal
1:44:51question all right Mr G I'm just looking
1:44:53through my notes
1:44:58briefly I think those are all the
1:45:00questions that I have for you today I
1:45:02really appreciate you taking the time to
1:45:03answer
1:45:04these thank you thank you Miss uh mlin
1:45:09um I'm gonna assume commission councel
1:45:11doesn't have any questions uh
1:45:14commissioner
1:45:15plant no questions for me thanks uh
1:45:19commissioner
1:45:21Gman hi good morning Mr Garner good
1:45:25morning um okay I just have a couple
1:45:29questions I have more than a couple but
1:45:32anyway I'll get
1:45:33some
1:45:35um let me look through here some some of
1:45:38my questions overlapped a bit with
1:45:40things Miss maakan asked
1:45:42you
1:45:43[Music]
1:45:48um um a question on the qar um Supply in
1:45:54project um staff asserts in their
1:45:57testimony that the project increases gas
1:45:59flows from rifle to Avon um during Peak
1:46:03day operations which could stand to
1:46:05benefit uh some parties other than
1:46:08public service like Rocky Mountain
1:46:09Natural Gas and other shippers um is
1:46:12that an appropriate assessment um of
1:46:16some of the impact of that uh project or
1:46:19do you see it
1:46:20differently I I would say I see that
1:46:23differently um yes I think it's true
1:46:27that on a peak demand day I think it
1:46:31does increase the flow in the rifle to
1:46:33Avon Pipeline and that that's exactly
1:46:35the the basis for the project is
1:46:38increasing Supply to PCO customers um
1:46:42specifically feeding across that Western
1:46:45portion of our mountain system over
1:46:47towards the veil Valley um but I I would
1:46:50not agree with the assertion that it
1:46:52benefit it's one one party more than the
1:46:57other okay but perhaps um I'm not sure
1:47:01they asserted that it benefited one
1:47:02party more than another but that there
1:47:04were benefits to those other parties in
1:47:08the increased flow of gas in the design
1:47:10day situation that I guess in what I
1:47:13would U read through that meaning that
1:47:16increase in capacity is not limited to
1:47:20only being used by public Service
1:47:23Company for their retail customers is
1:47:25that is that accurate so as it sits
1:47:29today that Supply point is really only
1:47:33available to Pasco customers so in that
1:47:38Supply um and I think one thing and I
1:47:41tried to clarify that with Miss mlin
1:47:43which is that this Supply is a supply
1:47:47into the rifle gas plant not into the
1:47:49pipeline directly and so the gas that
1:47:53comes through there transports through
1:47:55existing company pipelines that were
1:47:58already present as an inlet into the gas
1:48:01plant and so it just supplies what I
1:48:04would call a new Supply into the gas
1:48:07plant so it's it is separate from the
1:48:09gas plant I'm not sure if that helps
1:48:11clarify your question at all
1:48:13but but at the end of the day at the end
1:48:15of that pipeline who all can use the
1:48:18increase supply of gas so as as of today
1:48:21psco customers
1:48:23only correct okay um do you know that
1:48:28estimated remaining service life of the
1:48:30rifle
1:48:31plant I I don't I don't know that yeah I
1:48:36think when we look at our capacity or
1:48:38like when our in our future capacity
1:48:40models and um you know I mentioned this
1:48:43with Miss mlin as well that we see the
1:48:45gas plan as a longterm asset um because
1:48:48frankly there there is a continued need
1:48:51for Supply they're coming from rifle and
1:48:53I think staff's own engineer actually
1:48:55even agreed with that that there's
1:48:57there's a need for more Supply coming
1:48:59from rifle so that to me speaks volumes
1:49:03to the the need for the gas plant going
1:49:06into the
1:49:07Future Okay um let's see
1:49:12um in um in your direct testimony um it
1:49:19probably helped to look at it um hearing
1:49:22about 10
1:49:235 um there's a table ARG
1:49:27[Music]
1:49:29D1 um maybe you could help help me
1:49:34Source it for our Legal Assistant I
1:49:36didn't put down a page um so table ARG
1:49:40D1 in your direct testimony shows uh
1:49:44Capital additions in the for that
1:49:47occurred in the first essentially nine
1:49:49months of 2023 the test year and
1:49:52forecasted for the last three months of
1:49:55the year are you roughly familiar I am
1:49:58yeah um it struck me that the um the
1:50:02values for the last three months are
1:50:06quite large per month compare
1:50:09comparatively to those for the initial
1:50:12nine months um is there any is this
1:50:15because we're looking at additions not
1:50:18expenditures like help me walk through
1:50:20why we're seeing such a lops sited am
1:50:23um allocated to the last three months of
1:50:25the year yeah absolutely and I would say
1:50:29that ties a lot with the conversation
1:50:30that Mr Burman had with chair blank too
1:50:33is and it relates very specifically to
1:50:36those Capital additions so when we talk
1:50:38about executing work um we execute I
1:50:43mean the reality is in Colorado your
1:50:45construction season runs from say March
1:50:48through October early November depending
1:50:51on the year right so as a result we're
1:50:53really trying to press to get work done
1:50:56and then getting work done and in
1:50:58service at the end of the year so when
1:50:59we're talking about Capital additions it
1:51:01ends up being fairly lumpy because the
1:51:04additions come in when the when the like
1:51:07the full the total amount comes into
1:51:09service when it when the asset goes in
1:51:12service so I'm certainly not the don't
1:51:16have the chps that like a witness Burman
1:51:19would have in talking through the split
1:51:20of how Capital additions versus
1:51:22expenditures work but the the additions
1:51:25the reason that that is very lumpy and
1:51:27shows up at the end of the year is
1:51:28because that's when projects go and
1:51:30service okay so if we look at
1:51:33expenditures may not see that sort of
1:51:35breakdown where it's so lopsided towards
1:51:37the end of the year in particular that
1:51:40is what I would expect you'd see a
1:51:41little more uh it's going to be
1:51:44obviously a little bit more a little bit
1:51:46lumpy because you're going to see um
1:51:49higher costs generally when you're doing
1:51:51the mechanical work of you know actually
1:51:54digging ditches and stuff but it would
1:51:57probably be smoothed out a little bit
1:51:59versus what you're seeing with with
1:52:01additions okay thanks um we don't need
1:52:04this exhibit anymore thank you so much
1:52:07um so thanks for addressing our
1:52:10supplemental direct question regarding
1:52:13um you know at least what looks like in
1:52:15the direct testimony as a pretty marked
1:52:18increase in SSI spending um you
1:52:21explained in your response resp if I can
1:52:23paraphrase essentially the
1:52:24categorization is not exactly the same
1:52:27so uh perhaps some projects that used to
1:52:29appear in a different category have now
1:52:32moved into the SSI
1:52:34category um and you you kind of describe
1:52:36it as being somewhat steady is that a
1:52:39fair
1:52:41representation yeah I think that's fair
1:52:43it's the it's really a function of
1:52:45recategorizing we made you know through
1:52:47the Gip we made new buckets right and so
1:52:50um the company did the best we could to
1:52:53to group The EV the Investments and
1:52:55provide consistency between rate case
1:52:59and rate cases moving forward with the
1:53:01Gip so that in the future you can get a
1:53:03little bit more apples to apples
1:53:06comparisons yes that that is my mission
1:53:09here and you probably heard me talking
1:53:12before um you know obviously it's
1:53:14different here and I understand the
1:53:16company adapting to kind of the gift
1:53:18categories and um to the extent that we
1:53:22look at those rules again I'd be very
1:53:24interested in understanding
1:53:26categorization from your perspective in
1:53:28terms of what provides us with the clear
1:53:30snapshot and the best Apples to Apples
1:53:33um I mean I hope you can appreciate it
1:53:36it's fairly difficult from our
1:53:38standpoint looking at numbers that
1:53:41appear to vary not understanding always
1:53:43what's behind that and if you I mean
1:53:45stands in St contrast to some of what we
1:53:48saw in the gas infrastructure plan where
1:53:50we saw you know projection for Z of
1:53:54scoped projects in SSI out only a few
1:53:57years and
1:53:58so part of my main mission here is
1:54:01trying to figure how can we normalize
1:54:02this information how can we actually get
1:54:05information that is consistent from
1:54:06proceeding to proceeding and be able to
1:54:09compare it especially across the gift
1:54:12and rate cases from rate case to rate
1:54:15case so um just an open invitation do
1:54:17you have any ideas for me on how we can
1:54:20do this because it it's very difficult
1:54:23to analyze the information as it
1:54:26stands
1:54:28I I guess I would say um consistency and
1:54:33and letting the process play out a
1:54:35little bit and then making changes is I
1:54:37mean if you're asking for my opinion
1:54:39which I'm understanding you are which is
1:54:42really letting us live in the in the
1:54:45bounds that we have right now for a
1:54:46couple years and then being able to so
1:54:49that we can kind of work the process
1:54:50that's been set in front of us and that
1:54:52we can we can start I think that will
1:54:55help us to see some stabilization and be
1:54:59able to to do those apples to apples
1:55:01comparisons and I think um you know
1:55:04we've we've done the best that we can to
1:55:06to Really follow those buckets and then
1:55:08provide consistency going forward so
1:55:11okay I don't know that that helps
1:55:13answers your question but offer to the
1:55:15extent that you understand something is
1:55:17not the same as how it's been presented
1:55:19in the past maybe you can skip us a step
1:55:21and um help explain that up front so
1:55:24that it it just will make it easier
1:55:27perhaps as we go forward um So within
1:55:31that supplemental direct um I do have a
1:55:34page number for this one which is
1:55:35hearing exhibit 120 um page 11 you
1:55:39provide a figure that shows your
1:55:42expectations for SSI investment moving
1:55:45forward um in which it
1:55:48looks relatively flat or declining from
1:55:522024 I understand and I will I will be
1:55:55up front the rest of this page explains
1:55:57that you don't think we should base a
1:55:59lot on this this is just a rough
1:56:01projection
1:56:03right um so um are these based off of
1:56:08any sort of discrete projects that you
1:56:11understand to be needed how do you come
1:56:13up with these numbers understand I'm
1:56:15contrasting with the gas infrastructure
1:56:17plan where we saw zero dollars because
1:56:20we don't know exact projects so where
1:56:21does this information come from yeah so
1:56:25the the company does a five-year
1:56:27budgeting process and so
1:56:31um I guess let me start by saying of
1:56:35when we you know when you're looking at
1:56:37contrasting this with the Gip um that we
1:56:40filed in 23 one of the things that I
1:56:43would emphasize is that the Gip being
1:56:45the very first similar to you're asking
1:56:48me about the different buckets the
1:56:49company was very much adapting to the
1:56:51Gip and kind of learning you know I feel
1:56:55like we're learning a little bit on the
1:56:56Fly of learning how you know how to fit
1:57:00everything within the Gip the Gip rule
1:57:02so these uh are reflective of that
1:57:06five-year budgeting process and some of
1:57:08that is discret projects but some of
1:57:11that and I think we talked about this
1:57:13some in the GI where we have programs of
1:57:15work so in this case we talk about like
1:57:18our Dent programmatic replacement for
1:57:20example um where we know roughly the
1:57:24amount of spend that we're going to
1:57:27see um in that category but we may not
1:57:30have the discreete projects completely
1:57:33nailed down and so as we move through
1:57:36the cycle
1:57:38um this may be reflective of a program
1:57:41of work and then when the actual
1:57:43discrete projects are identified then
1:57:45the money is basically then shifted from
1:57:48the program into this discrete project
1:57:53so that's kind of why you see a little
1:57:54bit of that difference between the Gip
1:57:57versus this because in the Gip we were
1:58:00looking very specifically at discrete
1:58:04projects okay and now as they look at
1:58:07this from 2024 to 2028 they're they're
1:58:10tiny but those are the lighter color
1:58:13bars I'll say um it looks like a modest
1:58:18decline in expected SSI expenditures I'm
1:58:22just curious from a very broad level is
1:58:25that the expected
1:58:26Direction uh and kind of what assumption
1:58:30underlies uh an expectation for a
1:58:33decline in
1:58:35SSI funding so from my perspective
1:58:40um not necessarily some of that is a
1:58:43function of visibility so if you think
1:58:48about as we look forward we're we're
1:58:53constantly re-evaluating our risk models
1:58:55looking at the different threats risks
1:58:56on our system and then identifying the
1:58:58projects that come out of that and so to
1:59:01some degree those out years are
1:59:03influenced by the fact that we may not
1:59:05have visibility to some of those things
1:59:07at that point so do I see a decline in
1:59:10safety spend maybe maybe not because it
1:59:13it depends on what we see in the
1:59:15performance of our system but it's also
1:59:17very influenced by the FEMA regulations
1:59:20that come about so um if we look back at
1:59:24say like 2016 2017 that predated the
1:59:29fima mega rule which provided a lot more
1:59:33um work that the company had to do from
1:59:35a safety perspective and so as a result
1:59:39it then subsequently obviously drives
1:59:41that spend up so if you look at this and
1:59:44you say Okay safety spend is declining
1:59:48that would also assume that you're not
1:59:49getting any additional federal
1:59:51regulations that you you know you may
1:59:53not have a picture of today because
1:59:55really even though you you commonly get
1:59:57like proposed rule makings that kind of
1:59:59stuff you generally don't know the scope
2:00:01of the ru making and how it's actually
2:00:04going to impact the company until the
2:00:05till the ru making is actually
2:00:08published okay yeah and kind of actually
2:00:11what I've noticed across proceedings is
2:00:13probably the opposite phenomenon than
2:00:15you're talking about whereas these
2:00:17projections are noticeably lower than
2:00:21what we have seen in other proceedings
2:00:23and move in a different direction than
2:00:25what we've seen in other proceedings
2:00:27like the clean heat plan where there
2:00:29were some projections on future SSI
2:00:31spending that
2:00:34were roughly $100 million more than this
2:00:37a year and and moved up consistently and
2:00:40so this is the most recent you know kind
2:00:43of projection data I understand they're
2:00:45all rough but it looked fairly different
2:00:48and I was just wondering if the broad
2:00:50assumptions had changed given that this
2:00:52appears to project lower expenditures
2:00:55than we've seen across other proceedings
2:00:57in the
2:00:59past I I don't recall specifically what
2:01:02was in the clean heat um plan as far as
2:01:05the SSI expenditure so I I can't really
2:01:08speak to that Delta but um I think the
2:01:11idea of um looking at safety
2:01:15expenditures and and thinking in terms
2:01:17of they're again I would just restate
2:01:20they're very heavily influenced by by
2:01:22Federal Regulation and the work that we
2:01:25we have to do according to that so I
2:01:27think we've even mentioned at times I
2:01:29know that from a federal level they're
2:01:31looking at additional rule making as it
2:01:33results to Gas Distribution and we like
2:01:35we don't know the scope of that work at
2:01:37all yet um we have we really don't know
2:01:40exactly what direction that that rule
2:01:42making is going to uh go but when it
2:01:45comes to Federal Regulations from fza
2:01:48related to the safety of our assets I
2:01:50don't think I've seen any that that
2:01:52caused a decrease in spend
2:01:55so I would expect we'd see some increase
2:01:57from that okay um now I I presume you
2:02:02heard um some of yesterday's testimony
2:02:04the chair had a discussion with Mr
2:02:06verman kind of broadly about um concerns
2:02:10about continued increasing investment in
2:02:13the system especially in the face of
2:02:15potential declining throughput um
2:02:18beinging a fairly difficult economic
2:02:20picture um
2:02:22so I I guess I'll just start by saying
2:02:25um I I discussed with Mr Burman
2:02:27yesterday kind of an expectation that
2:02:29new business uh might decrease in part
2:02:32due to policy in part potentially due to
2:02:34Market um changes and I know the
2:02:37companies in the past Express that
2:02:39capacity expansion might decrease in the
2:02:40future are those like General sentiments
2:02:42that you agree with yeah I would say I
2:02:45generally agree with what Mr verman said
2:02:48I mean I think um you know the
2:02:50commission is you know we've made some
2:02:52changes into things like line extension
2:02:55policies and I'm definitely not the
2:02:56expert to about those and exactly what
2:02:59the impacts will be um I think like
2:03:02witness P could could speak to that
2:03:04better than I could but um I do expect
2:03:06there will be some impacts related to
2:03:08that specifically around that new
2:03:10business
2:03:11category okay um and I think notably the
2:03:15SSI category feels a lot thornier going
2:03:18forward um in terms of understanding how
2:03:21we can continue to deliver a safe
2:03:23reliable system to the customers that
2:03:25continue to rely upon it and the
2:03:27communities in which it
2:03:30traverses um in the face of the
2:03:32potential of of declining sales and some
2:03:36difficulty in sustaining reasonable
2:03:37rates um for those customers and
2:03:41so understanding that the parem here is
2:03:43we have to maintain a safe system but we
2:03:46have some more continually seen SSI
2:03:49expenses over the course of decades
2:03:51continue to rise rather than kind of
2:03:54move through a glut of really high-risk
2:03:57projects and and Decline and so this is
2:04:01the trajectory that I'm familiar with
2:04:03and it feels particularly concerning
2:04:06given the economic pressures we're
2:04:08looking at and
2:04:10so it feels like something has to give
2:04:13here you know are there different ways
2:04:15in which the company might analyze these
2:04:18risks with the assumption that there is
2:04:21not an unlimited pot of money there are
2:04:24unlimited rate increases that perhaps an
2:04:27increasingly small number of customers
2:04:29will
2:04:30sustain um you know H how do we Square
2:04:34this going forward particularly in the
2:04:36area of safety which builds the most
2:04:38difficult I mean I guess a couple things
2:04:42I would say so one um I I would I would
2:04:46not suggest that we we compromise safety
2:04:49obviously um going forward I don't think
2:04:52that's uh the right direction for us to
2:04:55go but I think um the company already
2:04:57does do a lot of work related to looking
2:05:00at Alternatives when we do look at
2:05:02safety projects so I think we've talked
2:05:05previously um I think it's in Gib
2:05:07discussions about like the maop
2:05:09reconfirmation for example where we look
2:05:12at things like a drate we look at uh
2:05:14things like an engineering critical
2:05:16assessment we look at different
2:05:18approaches Beyond just pipe replacement
2:05:21um and I think that's that's a direction
2:05:25um that you know to the extent that
2:05:28those Alternatives actually mitigate the
2:05:31safety risk that's things that we we
2:05:34want to continue to do to manage the
2:05:37costs but at the end of the day from
2:05:40from my seat we we we still absolutely
2:05:44have to maintain the safety and
2:05:46reliability of the
2:05:47system for those customers that are that
2:05:50are using it so
2:05:53okay um as part of your supplemental
2:05:56direct you also compareed the actual
2:05:58versus estimated um project costs for
2:06:01Capital expenditures for 11 discret new
2:06:03business projects do you recall that yes
2:06:06I do um so the variances from the
2:06:09estimated
2:06:10costs ranged um but I did want to make
2:06:15one observation for 10 of the 11
2:06:17projects there there is actual data one
2:06:20of them there is not I think it's not
2:06:22complete um they're off by different
2:06:25amounts but they're all more expensive
2:06:28than the estimate all
2:06:3010
2:06:33so how do we look at that going forward
2:06:37is this something that the company
2:06:39continually tracks and tries to improve
2:06:43estimation on and if so why are we
2:06:45constantly ending up in the same
2:06:48direction we do track it and it is
2:06:50something we we do continue to try and
2:06:53improve our estimation process
2:06:55specifically around some of those
2:06:57discrete projects um I think the you
2:07:02know if you're going through some of
2:07:03those projects we saw some very unique
2:07:06challenges in some of those um you know
2:07:08there's one of them that we saw
2:07:10challenges related to um asphalt so that
2:07:14you know it's extremely hard to predict
2:07:16but we had the municipality required a
2:07:19very specific polymer type in their
2:07:22asphalt which then caused us to be
2:07:25delayed and and getting it done because
2:07:28the the asphalt plant only batches that
2:07:30certain type on you know on certain
2:07:33times of the year and only in single
2:07:35batches so it becomes very very
2:07:37difficult to go execute um and the
2:07:40nature of the work that we do where
2:07:43we're working right in the middle of a
2:07:44lot of these urban populations is makes
2:07:48it very very difficult to estimate so I
2:07:50I will it will UPF front in saying that
2:07:52I think that that's just a challenging
2:07:54environment we do look at that and
2:07:56continue to try and improve um but some
2:08:00of these things are just very very
2:08:02difficult to to foresee
2:08:05coming right um I want to go through a
2:08:08couple of the new business projects that
2:08:11you detailed in your attachments let me
2:08:13get the exact
2:08:17attachments
2:08:19um okay let's see
2:08:23um sorry let me get to my that
2:08:29here um you had you had talked um before
2:08:33we get to new business um you had talked
2:08:35a bit about my my offer Max operating
2:08:39pressure maximum allowable operating
2:08:41pressure there has to be n um so a as
2:08:45that there are options in terms of
2:08:48derating or potentially decreasing the
2:08:51capacity of gas flowing through the pipe
2:08:54rather than just replacement um within
2:08:57this rate case you've shown three that I
2:09:00found uh projects that essentially look
2:09:03like May projects in which the pipes
2:09:06were replaced the 20-in southeast Metro
2:09:1012in Fossil Creek and 8 in Mesa to chalk
2:09:14Bluffs Karma projects um as I understand
2:09:18kind of the basis for the projects those
2:09:20look to be largely based upon a lack of
2:09:23documentation to support the maximum
2:09:25operating pressure is that
2:09:28accurate yeah it's fundamentally the
2:09:31when the mega rule was published in 2018
2:09:35it changed the goalpost for what was
2:09:37required for documentation and so when
2:09:40you look back things that that didn't
2:09:44used to be required um are now required
2:09:47so it it really shifted like I said it
2:09:49it's a shifting of the go poost but yeah
2:09:53that's
2:09:54the okay um looking now at some new
2:09:58business projects which are uh primarily
2:10:02covered in your attachment
2:10:05arg5 um and the the public version is
2:10:08fine if we want to look at that um so
2:10:10it's hearing exibit 105
2:10:13arg5 um so as I look at this I go to
2:10:16page
2:10:17two um shows the um Canyon's development
2:10:22project and on the right um we just want
2:10:25to look at the right so if you want to
2:10:27blow it up just a little around project
2:10:29cost this shows um thanks now just scoot
2:10:33right there you go um so this shows
2:10:35project cost which are the additions
2:10:37from 22 to 23 just north of 5 million
2:10:40there's an Excel contribution of 2.8 and
2:10:43then third party contributions of
2:10:462.3 I think if I added those numbers
2:10:49they end up at 5.1 million right
2:10:53I I think so yes more or less okay
2:10:56curious um from your perspective um if
2:11:00this project this new business project
2:11:02were done today under current policies
2:11:06um would the third party contribution
2:11:08look substantially different than what
2:11:10we're seeing
2:11:12here uh I'll be honest I I would really
2:11:15have to defer that to to witness pet
2:11:18because I'm I'm definitely not the the
2:11:20policy
2:11:21expert as it relates to the the new line
2:11:25extension policy um so I think he could
2:11:28he could speak to what this would look
2:11:31like in future future year much better
2:11:35than I could I okay over my skis on that
2:11:39one more question for you if we go to
2:11:40pach 4 I've got another project here um
2:11:45the co Creek Canyon's Pine project
2:11:49Pine's project so same kind of um
2:11:52display but there's kind of some
2:11:54different caveat here in Project cost in
2:11:57that the Excel contribution is net of
2:11:59the third- party contribution and
2:12:01therefore the project cost being
2:12:03displayed as an addition in years 2223
2:12:06is net of the third party contribution
2:12:11I'm wondering why this display looks so
2:12:13different than the other project and um
2:12:16presumably it looks to me like the third
2:12:18party contribution has been included in
2:12:21the value on page two of what's being
2:12:23described as the project cost addition
2:12:26um any insights for
2:12:29me I don't recall the difference in why
2:12:33why this one looks like specifically
2:12:36looks different from the Canyon's one I
2:12:38can say on the whole when we look at
2:12:41third party contributions coming in it's
2:12:44it can be a little bit tricky in from
2:12:47the accounting side as far as allocation
2:12:50to the specific project and so that's
2:12:54um but I I I honestly don't remember um
2:12:59specific to the can like comparing the
2:13:02Canyons to this one and why the two are
2:13:04presented differently okay but as a
2:13:07general matter if there is a thirdparty
2:13:09contribution whatever that third party
2:13:11contribution is should or would be
2:13:13netted from the total cost for what the
2:13:16actual project cost going into the
2:13:18additional rate base would be it's yes
2:13:21as far as what actually hits rate base
2:13:23yes absolutely but whether it's
2:13:26allocated to the specific project or not
2:13:29is going to be more dependent on the
2:13:31project and I would say um probably
2:13:34witness freedus um might be able to
2:13:37speak to that better than I could
2:13:39too okay um all right a few capacity
2:13:44expansion projects which are uh larg in
2:13:47your attachment
2:13:49arg7 um I just want to talk through some
2:13:52of the semantics on there to make sure
2:13:54I'm understanding the information that's
2:13:57provided um so uh let me see ramp art
2:14:02range reinforcement can can we go to the
2:14:05third project I'm so sorry I don't know
2:14:07what page it's probably like five or
2:14:11six may keep scrolling down there we go
2:14:15back up a
2:14:16little thank you um so as we look at
2:14:20something like this
2:14:21I want to understand when you say in the
2:14:23explanation of need which is kind of
2:14:25just scroll down and
2:14:26left um in the explanation of need it
2:14:29says approximately 3,900 equivalent
2:14:32customers in the project area were at
2:14:34risk of experiencing outages it's the
2:14:37very last sense in the explanation of
2:14:39need um is that an immediate or a
2:14:42projected
2:14:44condition so that's um it's generally um
2:14:50defined by by um a heating season for
2:14:53which we will see it so in these uh
2:14:57projects and I'm just trying to look at
2:14:59it up above um because I think in the
2:15:02first sentence it talks to that because
2:15:04it refers to by the 2022
2:15:072023 heating
2:15:10season and so that's what it's referring
2:15:12to okay so the
2:15:1439 specific to what your modeling
2:15:18projects for the 23 2223 heting
2:15:22season that is correct that that's what
2:15:24it was projecting to okay and when you
2:15:27size a new project like and did it go I
2:15:30mean I guess presumably in the year
2:15:32before was it zero were at
2:15:34risk so in this specific case we've got
2:15:39we had additional development that came
2:15:41onto the system and so that's the loads
2:15:44do change and so um I I guess I should
2:15:48start this by saying I'm definitely not
2:15:50the the planning uh planning witness for
2:15:54this so that would fall under our
2:15:55integrated system planning team to
2:15:57really speak through a lot of the detail
2:15:59behind how they review the models and
2:16:01update the models and all of that view
2:16:03of it but from a high level I would say
2:16:06we every year we we review the prior
2:16:10year loads and look at really balancing
2:16:13that to what we actually
2:16:16experienced um and then based on that
2:16:19identify areas in our system that
2:16:22require reinforcement and so in this
2:16:25case um this one as I recall is very
2:16:29much related to the I believe this is
2:16:32the Sterling Ranch development that
2:16:34there's there's a lot of homes down
2:16:35there and uh so in this case uh it based
2:16:43on the model for the 2122 heating season
2:16:48that no we did not expect to see outages
2:16:51there and that's again a function of how
2:16:54many homes are constructed um what's the
2:16:57actual loads and also just comparing to
2:17:00what was the performance of the the
2:17:02system in the prior
2:17:04winter okay um and when you build out a
2:17:08capacity Expansion Project like this
2:17:09like here it went from 6 in to 8 inch
2:17:12steel retired the 6 inch in place so now
2:17:16you're relying entirely upon the 8 inch
2:17:18um to what extent does that build in
2:17:21future growth
2:17:26projections I'm not sure in terms of
2:17:28sizing the replacement what are your
2:17:31assumptions about future
2:17:34growth I it depends on the area but I
2:17:38know and again I'm I'm definitely
2:17:40outside of my my baileywick and you know
2:17:43and outside of planning the system but I
2:17:46think our our planning team actually
2:17:48does look at projected growth rates as
2:17:52well as any customer developments and
2:17:54stuff that they know um and that all
2:17:56plays into that model so that they can
2:17:59project the growth so I don't there's
2:18:01not a a one specific number that's used
2:18:05across the state that I know of um but
2:18:07it's it's more looked at geographically
2:18:10of what is the growth in um you know
2:18:14Littleton Colorado or what is it in you
2:18:16know Breen Ridge or somewhere else on
2:18:18the system and then um modeling that
2:18:21portion of the system applying growth
2:18:23rates as well as known
2:18:26um known customer
2:18:28requests okay so it is it fair to say
2:18:32there's not standardization as to kind
2:18:34of the timeline and assumptions that
2:18:36would be used in something like
2:18:40that I'm not sure and you know
2:18:44understanding I'm I'm I can talk from a
2:18:46high level but I'm definitely out of my
2:18:48my realm here but I don't I don't know
2:18:51that I would say it's fair to say
2:18:52there's no standardization because I
2:18:53think there there there is but it's it's
2:18:56geographically based so you have a
2:18:58design day temperature that's based on a
2:19:01specific area so in this case you're
2:19:02looking at a design day temperature of
2:19:04minus 25 if you looking in like Breen
2:19:08Ridge Keystone like Summit County area
2:19:10you're going to be looking at like minus
2:19:1139 so there is standardization but it's
2:19:15standardized like to a specific area
2:19:18based on the conditions that we're
2:19:19expecting to exist in not just the
2:19:22weather conditions but also the actual
2:19:24growth
2:19:25rates okay is there any W coming up that
2:19:28you think can speak better to the
2:19:31Assumption I think witness Mars was
2:19:33really the best one to speak to this um
2:19:37I'm not aware of of a of a upcoming
2:19:41witness that would be able to speak to
2:19:43that in more detail okay
2:19:47um um and let me see that
2:19:52yeah okay in um attachment
2:19:57arg9 on page 42 you outline our project
2:20:02uh categorizes an SSI project that is
2:20:05essentially replacement of any kind of
2:20:08missing or damaged transmission pipeline
2:20:11markers and installation of liar capses
2:20:13that sound familiar yes it does actually
2:20:16remembered this one from the previous
2:20:18recase
2:20:21um so I went back and looked I'm a
2:20:23little confused about the um about the
2:20:26cost um from what I was initially
2:20:29finding it looked like the company's
2:20:31expectation was they would spend 2.2
2:20:33million through December
2:20:352022 this looks like a cost of four
2:20:38million is this additive to what we've
2:20:41seen in previous rate cases the
2:20:43extension like I'm just a little lost in
2:20:46the values and that I understood it to
2:20:47be a less costly project previously
2:20:51so I think I think what we're referring
2:20:53to is in the prior rate case that would
2:20:56have been reflective of additions in the
2:20:58prior rate case and that this would be
2:21:01additions for 22 and
2:21:0523
2:21:07so I don't
2:21:10recall um without without looking at the
2:21:13prior prior rate case I I can't remember
2:21:15exactly the facts and figures of how we
2:21:19presented it there um I do remember
2:21:22discussing it but I I don't remember the
2:21:24details of exactly how we projected it
2:21:26but this is reflective of actual costs
2:21:29of additions in 22 and
2:21:3323 okay yeah and what I found it looks
2:21:36like got a projection or or I guess an
2:21:40actual 1.8 million from July 2020
2:21:43through June
2:21:442021 and then 2.2 million through
2:21:48December 2022
2:21:50so it's
2:21:51not it's not clear if this is additive
2:21:54now there's been work in 2023 that
2:21:56originally wasn't projected or I'm just
2:21:59a little lost in the values here but so
2:22:03it sounds like we have a basically the
2:22:05year splitting so you have 2021 you have
2:22:092022 and you have 2023 and this value
2:22:12here is showing the sum of additions in
2:22:1522 and
2:22:1823 okay so it's not directly I mean this
2:22:22would be additive so if you're looking
2:22:25at total scope of transmission pipeline
2:22:27markers this would be additive to the
2:22:28number that you saw in 2021 but this
2:22:31number would overlap what you saw for
2:22:3422 okay okay thank you for that I was
2:22:37trying to like Square it all myself and
2:22:40getting a little loss
2:22:45um okay just a few more questions for
2:22:50you that are um actually about a
2:22:53different attachment attachment to
2:22:55hearing exhib at
2:22:58114 um which is a different Witnesses
2:23:00testimony but it's attachment
2:23:03mpm3 in which um that witness actually
2:23:06lists the appropriate witness for each
2:23:09project and you're listed next to them
2:23:11so even though it's not your attachment
2:23:13I guarantee your name appears many
2:23:17times um so yeah it's a big
2:23:22one thanks for
2:23:24that oh it's okay I have line numbers
2:23:29because it's an executable spreadsheet
2:23:31so that might be a little difficult on
2:23:33the PDF um version here but perhaps Mr
2:23:38you have the executable of this document
2:23:40you may be able to follow me pretty
2:23:42efficiently with
2:23:44that um just broadly when we're looking
2:23:47at this given the the the discussions
2:23:50that have transpired already about
2:23:53Capital additions versus Capital
2:23:55expenditures what am I looking at on
2:23:57this
2:24:03sheet so I don't know if there's a
2:24:05heading on another page that would show
2:24:08that and is this from is this from Mr
2:24:10mohler's testimony I believe this is
2:24:13attachment for Mr Muller but then he
2:24:15lists specific Witnesses next to that
2:24:18can represent each project so I was
2:24:20going to ask you about projects where
2:24:22your name appears but there is not a
2:24:26bigger heading here so I'm not sure
2:24:30given the confusion if we're talking
2:24:31about additions or
2:24:33expenses if if I could wait in
2:24:35commissioner Gilman in looking at
2:24:37witness Mueller's uh direct testimony
2:24:40hearing exhibit 114 on page three where
2:24:43he lists the attachments he says
2:24:45attachment mpm3 is gas and common plant
2:24:48additions if that helps
2:24:51addition okay it does help thank you
2:24:54we'll we'll take that as what it is and
2:24:56Mr Muller can correct us if we got it
2:24:59wrong when we get to him um okay and
2:25:03looking at these um like I said it's
2:25:06going to be really hard to follow on the
2:25:08screen because I was looking at the
2:25:09executable and got the actual line
2:25:12numbers uh this has hundreds of pages or
2:25:17hundreds of of lines of data um if you
2:25:22have the
2:25:23executable lines 451 and 452 represent
2:25:28gas meters and
2:25:30Regulators expenditures uh to the tune
2:25:33of just less than 75
2:25:37million um so if I'm understanding uh
2:25:41the company's filing and current policy
2:25:44appropriately is it fair to assume that
2:25:46this is the exact sort of expenditure
2:25:49that will know longer be included in
2:25:51rate base moving forward for new
2:25:54customers so um just for sake of
2:25:59discussion and just tying another
2:26:00reference I believe it's ARG D6 if my
2:26:04memory holds correctly is my new is the
2:26:06new table B uh new business table in my
2:26:09direct testimony that actually has this
2:26:11line item in it um and it is meters and
2:26:14rs so this is a it's a great one to
2:26:18discuss in that
2:26:20um the meters and regs line item is all
2:26:24meters and regs so new actual new
2:26:27business meters and rs is a fraction of
2:26:30that line item but when we you know we
2:26:32talked previously about the different
2:26:34categories of work the company did our
2:26:37best to put meters and regs in the most
2:26:39applicable spot which we felt was new
2:26:41business but understanding that that
2:26:44meters and reg's line item would include
2:26:47new business it's also going to include
2:26:49a replacement of a meter for really
2:26:51almost any other reason so whether it's
2:26:53a damaged meter a meter that um is not
2:26:56functioning properly um you know I
2:26:59mentioned damage like I think of like
2:27:01car hitting meter those types of things
2:27:03like that's all going to fall into this
2:27:05same meter category um and so and the
2:27:10reason for that is the company purchases
2:27:12meters in in large batches and so
2:27:15there's not a split of these that's
2:27:18readily apparent that says okay exactly
2:27:22like when we order the meters we don't
2:27:25like tag them and say okay this one is
2:27:27specifically a new business meter this
2:27:29one is for this other purpose and so we
2:27:32that's why in our financials they're
2:27:34they're all grouped together and we we
2:27:37put them under new business because we
2:27:38really didn't see another category that
2:27:40was more fitting for
2:27:42these okay that that's very helpful
2:27:45description I mean as I'm looking at and
2:27:48you don't have to keep switching back
2:27:50and forth but as I look at
2:27:53mpm3 there's you're right uh gas meters
2:27:57and Regulators categorized under new
2:27:59business roughly you know the the new
2:28:03meters in 22 and
2:28:0623 total like 68 million and the new
2:28:10reg's over 3 million um but then there
2:28:15are separate line items under SSI for
2:28:17failed meter lots for um at risk
2:28:21meter um Replacements I think that's
2:28:25what the acronym stands for um so aren't
2:28:29those somewhat separated out on
2:28:33mpm3 um so failed meter Lots was has
2:28:38always been broken out separately and I
2:28:41think that's very much related to how
2:28:43that scope of work was implemented so if
2:28:46you think about it from a and this is
2:28:48purely thinking about like engineering
2:28:50Logistics
2:28:51perspective failed meter Lots was was
2:28:54much more predictable in the sense of
2:28:56you you know that you're going to have
2:28:58you know you go into a year knowing
2:29:00there's this many lots that you're
2:29:02replacing and so as a result you can
2:29:04allocate those meters to the failed
2:29:06meter lot program and uh separate that
2:29:10expense
2:29:11versus
2:29:12um in like new new business as well as
2:29:17like damaged meters they all are
2:29:20purchased as a large lot together so
2:29:22there is some
2:29:24separation um but this the number that
2:29:27we are seen in in my table there that
2:29:3174.8 does not include the failed meter
2:29:35Lots piece because that piece is
2:29:38separate okay and what's in the failed
2:29:41meter Lots broadly like what causes the
2:29:42meter to get categorized there so that
2:29:45is the we we do a meter sampling program
2:29:48where we go out and actually are you
2:29:50know pulling meters and testing for
2:29:52accuracy so in failed meter lots that
2:29:54that just means that the accuracy of the
2:29:56meter has is outside of the spec range
2:29:59and so as a result we're we're replacing
2:30:01it there's a lot more complexity than
2:30:03that but from a very very high
2:30:06level that that's fundamentally what's
2:30:08going on more or less through a sampling
2:30:10protocol you're not sure you're charging
2:30:11people for the right amount of
2:30:13gas that's the idea it it's the process
2:30:16that was put in place to make sure that
2:30:17we do charge people the right amount
2:30:19yeah
2:30:20um I'm just curious um that's
2:30:22categorized on mpm3 as a safety uh
2:30:25Integrity program I was just curious
2:30:28what leads to that categorization for
2:30:30something that's more about accuracy of
2:30:32billing my understanding I I the best
2:30:36answer I can give is I think we we
2:30:38grouped it I mean we'd have to pull up
2:30:41the the the specific um descriptions I
2:30:44think it's actually like page 12 of my
2:30:47direct but um you know some of this per
2:30:50our discussion earlier is us trying to
2:30:53put stuff in the the most applicable bu
2:30:55you know bucket so we didn't really feel
2:30:57like it falls in new business it doesn't
2:30:59really fall in capacity so you know
2:31:02moving things into buckets as as best we
2:31:06can
2:31:07understood um thank you for getting the
2:31:10executable this I I only have a couple
2:31:12more questions but this will make get
2:31:14much less torture so I will use the
2:31:16executable if you can keep it up um I'm
2:31:19line uh
2:31:21639 there's a line item um gas new
2:31:25Main's blanket which is about 30 million
2:31:28plus a year can you just tell me what
2:31:30that
2:31:32is yeah so and I I believe that that's
2:31:36going to tie back to
2:31:43that9 yeah so row
2:31:45639 so that should tie back to that same
2:31:50ARG D6 where we have um
2:31:54meters uh new Mains new services that
2:31:57are all in that new business category so
2:32:00new Mains new Services both of those C
2:32:03both of those categories which would be
2:32:06um see if I pass the it test row
2:32:09639 and row
2:32:12640 um those those two rows would tied
2:32:17to that table those are specifically
2:32:19providing service to new I the way I
2:32:23think of it is like structures that did
2:32:25not previously have gas
2:32:28service okay and blanket just means it's
2:32:31an aggregation it's a collection correct
2:32:35yeah sure there was some new term I
2:32:38needed to learn here um okay and then um
2:32:43the
2:32:44[Music]
2:32:46um uh let's see okay I think that answer
2:32:50my question for a few of these
2:32:55um let me just see um line 643 a
2:33:00question there's gas service renewal
2:33:05blanket
2:33:07um and there are uh and this is yeah 40
2:33:13to 52 million a year this is literal
2:33:17replacement of gas services for specific
2:33:21customers yeah so what this refers to
2:33:24this this is typically used um a good
2:33:26example of the operationally if we have
2:33:29a leak on a service that may be in the
2:33:31middle of somebody's yard rather than
2:33:34trying to dig up somebody's yard and
2:33:36repair a service that we would go in and
2:33:38and replace the service so this is if
2:33:41it's in the safety and integrity
2:33:43category the gas service renewal blanket
2:33:46is operationally we go out and and are
2:33:49replacing somebody's service and it's
2:33:51generally caused by a leak a damage
2:33:54something like that that's that's
2:33:55driving us to go out there and do that
2:33:58okay and we don't have it in in this
2:34:01proceeding I know I've seen it elsewhere
2:34:04sort of for um like coil discussions
2:34:08maybe average cost
2:34:1156,000 is the company roughly replacing
2:34:14like 10,000 service lines a
2:34:18year I I
2:34:20I don't I'm I'm not sure on numbers on
2:34:23units so I I don't think I can answer
2:34:25very directly but I can say I mean again
2:34:27this blanket is specifically out there
2:34:30replacing services so there's this is
2:34:33going to
2:34:34be any service that you know there's
2:34:38generally a problem with that service
2:34:40and then the crew gets out there and
2:34:41says okay rather than trying to repair
2:34:44we're going to just replace because it
2:34:46makes more sense so but I I don't have
2:34:50unit numbers to be able to say how many
2:34:53that is okay
2:34:57um okay I think those are my questions
2:35:00for you Mr Garner you passed the it test
2:35:03thank you for reading that uh exhibit
2:35:06with me appreciate
2:35:09it uh thank you uh commissioner Gan um
2:35:13Mr Gardner I just want to follow up with
2:35:15you uh mainly about one
2:35:18project yeah could we take a break
2:35:21please uh sure let's come back at uh
2:35:4811:15
2:36:18e
2:36:48e
2:37:18e
2:37:48e
2:38:18e
2:38:48e
2:39:18e
2:39:48e
2:40:18e
2:40:48e
2:41:18e
2:41:48e
2:42:18e
2:42:48e
2:43:18e
2:43:48e
2:44:18e e
2:45:07uh Miss Boule you
2:45:10ready ready thank
2:45:14you uh hey Mr Garder um I want to uh
2:45:18follow follow up on one of the uh
2:45:20projects that you talked about with uh
2:45:23commissioner Gilman the uh Cole Creek
2:45:26Canyon Pines project as I understand it
2:45:30and this is on page 52 of your direct
2:45:33testimony uh this project is a large new
2:45:36residential development that began late
2:45:38in
2:45:392022 and is currently ongoing with 90
2:45:42Lots expected to be developed at full
2:45:46buildout is uh is that correct
2:45:50yes that that is
2:45:52correct and this project required a main
2:45:56reinforcement of approximately 3,000 ft
2:46:00uh with 6 in steel I think you also
2:46:03installed over 23,000 fet of new
2:46:06polyethylene main along with a new regul
2:46:10regulator station that was connected uh
2:46:13to the existing main to reduce pressure
2:46:16is that
2:46:17fair yes I believe so
2:46:19so and on page 56 of your direct
2:46:22testimony it sounds like the company
2:46:25incurred uh approximately $4.3 million
2:46:29in capital additions which is net of the
2:46:32approximately 1 million of customer
2:46:35contribution for the pipeline portions
2:46:37mentioned above in addition it sounds
2:46:40like the regul regulator station Capital
2:46:42additions were approximately 1.2 million
2:46:45is that right yes that is correct
2:46:49all right you you you can uh take this
2:46:52down thanks um how did you arrive at
2:46:55that $1 million customer contribution
2:46:57was that negotiated between the company
2:46:59and the customer or is there a tariff
2:47:02that governs or is this amount at the uh
2:47:05company's
2:47:06discretion so I I witness p is probably
2:47:11a better person to talk to this as far
2:47:13as exactly what the line extension
2:47:15policy follows through but I believe
2:47:18that would based on on line on the um
2:47:22based on a tariff
2:47:24requirement and if the company wanted
2:47:27could they have uh was there anything in
2:47:30the Tariff that would have Pro
2:47:31prohibited you from charging $1.1
2:47:33million to the customer or two
2:47:37million I again I think this is it's
2:47:40probably much better to to give to to
2:47:42winess pet because I I believe that um
2:47:47it's I don't know I I I'm a little out
2:47:49of my my bailey wick on the exact how
2:47:52the exact customer quoting process goes
2:47:55but I believe I think the short answer
2:47:57to your question is is yes I believe the
2:48:00Tariff does spell out a requirement
2:48:03related to how much we are able to
2:48:06charge the customer um as we go through
2:48:09the estimating process but um I think
2:48:12whitness p is proba can speak to this
2:48:14better than I can so under the status
2:48:17quo you don't think well I'll I'll ask
2:48:19him but you don't think we could charge
2:48:21aund 100% of that of this cost to the
2:48:24developer so I guess looking back again
2:48:28this this is this is a historical test
2:48:31year so this would not have followed the
2:48:34the new extension policy so this would
2:48:38all be under the old one um and I I
2:48:42don't
2:48:43believe based on that tariff I don't
2:48:46believe we could have charged them the
2:48:48whole project and specifically we we
2:48:51couldn't have charged them for the
2:48:53regulator
2:48:54station all right but how about the four
2:48:584.3 million additional uh for the
2:49:01pipeline
2:49:03additions I I I don't believe our tariff
2:49:05would have allowed that under the the
2:49:08prior policy but again witness pet could
2:49:11speak to that better all right I'll uh
2:49:14ask him more but I I would like to
2:49:16follow through with you um on how this
2:49:20uh particular project
2:49:22presents um in Mr maty's supplemental
2:49:25direct testimony hearing exhibit 123 at
2:49:29page 11 lines 12 to 17 he says that this
2:49:34project results in a net incremental
2:49:36cost over and above uh the revenues of
2:49:397.4 million to the greater natural gas
2:49:43system over the course of 40 years and
2:49:46we could pull that up but do you have
2:49:47any reason to out uh that um statement
2:49:52in his
2:49:54testimony I don't but it probably would
2:49:56benefit me to pull it up yeah if we
2:49:58could hearing exhibit 123 at page
2:50:0811 you see
2:50:10that yeah
2:50:19all right you can take that uh down so
2:50:22just putting aside The Net Present Value
2:50:24issues which may be significant if I
2:50:26divide 7.4 million the 7.4 million cross
2:50:30subsidy by the 90 houses in this
2:50:33neighborhood where this development just
2:50:36is it fair to say that the company's uh
2:50:39other customers are being asked to
2:50:41provide a greater than $80,000 per home
2:50:44subsidy to this developer is that math
2:50:47right just dividing $7.4 Million by
2:50:5390 assuming that all of this solely
2:50:57feeds those 90 customers then then yes I
2:51:01would say that's correct
2:51:03yeah and before you decide to move
2:51:06forward with this does the company
2:51:08conduct anal any analysis of whether the
2:51:11net revenues from the additional gas
2:51:13sales to 90 customers would be enough to
2:51:16offset the cost
2:51:19I think we have a we have an obligation
2:51:22to serve and so if they specifically
2:51:25request the service that's what we have
2:51:27to provide and I think we do look at
2:51:30Alternatives obviously and present those
2:51:32Alternatives but I think um when the
2:51:36customer specifically requests gas
2:51:38service that's really what we have to
2:51:41do um and I think there's I mean this
2:51:45commission has made changes going
2:51:46forward to the EXT ion policy that that
2:51:50would likely impact something like this
2:51:53um going forward but as it sit looking
2:51:57back this would be under the old policy
2:52:00and so I think the answer to your
2:52:02question is no we we we wouldn't
2:52:05have um do you think the obligation to
2:52:07serve requires you to um serve at below
2:52:11your costs of
2:52:13service um or to subsidize $880,000 a
2:52:17home well I mean I'll just say I think
2:52:21we're outside of my we're definitely far
2:52:23outside of my realm here as far as um
2:52:27policy and I think that's you know
2:52:29better referred to some to somebody like
2:52:31you know witness Burman or or witness
2:52:35pet but I think you know from My Lens
2:52:39I'm required to to provide service safe
2:52:42and reliable service to our
2:52:44customers so on this project the company
2:52:47places in rate basee earns a a return on
2:52:50the 4.3 million plus the 1.2 million for
2:52:54the regul regulator station over 40
2:52:57years so seems like the company is got a
2:53:00pretty good deal here um any dispute of
2:53:04that characterization of uh uh um how a
2:53:10company uh sees
2:53:12this I can't really speak to the to the
2:53:15financial side of that I mean that's
2:53:17really some for Mr Mohler or Mr P or Mr
2:53:22Burman to speak to I can't really speak
2:53:24to
2:53:26that uh do you know the average sales
2:53:28price for homes in the co Creek uh
2:53:30Canyon pintes
2:53:32project I do
2:53:34not uh let me represent to you that I
2:53:37went online and looked at the prices uh
2:53:40if I represented to you that the sales
2:53:42price for a completed home was in the 5
2:53:44to7 million range would you have any
2:53:46reason uh to doubt that that I I I I
2:53:51don't have any data to either confirm or
2:53:53or refute that so I'd have to go off
2:53:56your go off go off your word
2:53:59there appreciate that um how should this
2:54:03commission think about the role of the
2:54:04company as a Fiscal Agent or the status
2:54:07quo as a Fiscal Agent for all customers
2:54:10or sort of the existing business when we
2:54:13see these kind of you know $80,000 per
2:54:17home subsidies for multi-million doll
2:54:20homes uh that is funded across all
2:54:23customers while the you know company is
2:54:25building its rate based by over five
2:54:27million any thoughts on how we should
2:54:30think about this system well I think I
2:54:33mean the first thing I would say is I
2:54:35mean this commission's already made
2:54:37changes to line extension policies that
2:54:41that influence that and this happens to
2:54:43be a historical test year so it's not
2:54:45influenced you know these projects
2:54:48don't reflect that so I think that's one
2:54:51thing to keep in mind is that if you
2:54:53were to do the project all over again I
2:54:55I would presume that there would be an
2:54:57impact to that based on the new
2:55:00policy fair enough um assum we required
2:55:04as part of an order well let me just ask
2:55:06you uh one more uh question which again
2:55:09may be outside your expertise uh but uh
2:55:13in the Gaz roeming uh proceeding number
2:55:1621 r- 0449 G rule 4210 C was added to
2:55:21the line extension rule stating line
2:55:24extension policies procedures and
2:55:26condition shall be based on the
2:55:28principle that the connecting customers
2:55:30pays its share of the estimated full
2:55:33incremental cost of growth including any
2:55:36costs associated with increases in Peak
2:55:38design day demand so it sounds like you
2:55:43would agree that this project didn't
2:55:45comply with the spirit of that role but
2:55:48you know presumably going forward the
2:55:50company will do better is is that fair
2:55:54well I think this project really
2:55:56predated those rules I mean I think
2:55:58that's the thing to keep in mind and um
2:56:01like I said witness pet can speak to
2:56:03this much better than I can but um you
2:56:06know the the projects that are reflected
2:56:08here are not reflective of the change in
2:56:11the line extension
2:56:13policy I guess the last question for you
2:56:15assume we required as part of our order
2:56:18in this case some form of commission
2:56:20approval before the company spent uh
2:56:23accumulative total including All Phases
2:56:27of more than say a million dollars on
2:56:29any new individual new business or
2:56:31capacity Expansion Project as a
2:56:34mechanism for implementing World 4210 C
2:56:37uh further assumed that this process
2:56:39would require an analysis of why the new
2:56:41customers aren't paying for 100% of the
2:56:44upgrades they cause uh or 100% of the
2:56:47incremental uh cost of the upgrades they
2:56:50cause
2:56:52um uh any any thoughts about that so you
2:56:55know I get the cpcn by rule is set at 12
2:56:59million and it sounds like even that uh
2:57:03may be leaky in terms of how we think
2:57:05about phases uh but what do you any
2:57:09advice or thoughts on a a more limited
2:57:12process to implement Ro 4210 C that
2:57:16would allow us to look at these uh at
2:57:20these projects and maybe uh accelerate
2:57:24uh the implementation of the new re
2:57:27regime I think sorry I interrupted you
2:57:30no no I done um I guess a couple things
2:57:34that come to mind for me so one is some
2:57:37of the conversation that I just had with
2:57:39commissioner Gilman related to the
2:57:41individual buckets of work right so if
2:57:44you apply something that's tied to a
2:57:46specific bucket of work it's really
2:57:47important to understand what is it you
2:57:49know make sure that we're you're
2:57:51focusing it on the specific thing that
2:57:54you're looking to pay attention to
2:57:55versus there's some you know there is
2:57:58some ambiguity and discretion in how
2:58:01work is bucketed and and the company did
2:58:03the best we could to to make it fit in
2:58:05those individual buckets but I I'm
2:58:08cautious of an un unintended
2:58:11consequence um related to that bucketing
2:58:15so I guess that's and I'm thinking very
2:58:17specifically around meters but that
2:58:19that's something to to I think we would
2:58:21want to
2:58:22be to be very cognizant of and then I
2:58:25think the other thing I would mention is
2:58:27just the reminder I mean we do have the
2:58:29Gip Gip process that is you know I would
2:58:32say you know the company is still
2:58:36learning as we go through but I mean
2:58:38that's a process that is is a planning
2:58:41process that's already in place so
2:58:45that's I guess the only things I would
2:58:46mention
2:58:48I I mean I guess I'll just follow up
2:58:50with the really the same question
2:58:52commissioner Gilman asked is which is
2:58:54how do we get
2:58:57visibility um into future Capital cost
2:59:01spending um when you know what we're
2:59:04seeing isn't consistent across these uh
2:59:07these cases and I
2:59:11mean I I I don't have a clear view I
2:59:15don't even have a clear view yet of what
2:59:16happened historically let alone where
2:59:19this business is is
2:59:21going um and I I think what we're doing
2:59:24now seems as this example suggests maybe
2:59:27really
2:59:29problematic um how do how do we get a
2:59:31handle on this and and if you disagree
2:59:35with that characterization let me know I
2:59:38guess I would say I don't completely
2:59:39agree with the characterization in the
2:59:41sense that when you look at it we
2:59:44established through Gip we establish new
2:59:47buckets of work
2:59:48and so the company is doing our best to
2:59:51align with those and so then going
2:59:54forward the idea is that if you you
2:59:56maintain consistency in the buckets of
2:59:58work then you'll be able to get much
3:00:02more uh a much better View and
3:00:05specifically Apples to Apples
3:00:07comparisons as as you as you walk
3:00:09through and I think you know we we did
3:00:10our best in in my supplemental direct to
3:00:13to illustrate that with the you know
3:00:17Safety project specifically in showing
3:00:20how the changing of
3:00:22buckets you know it can be very it can
3:00:25be very misleading and I and I I get
3:00:28that and so that's why I guess what my
3:00:30you know you ask for my opinion you'll
3:00:32you'll get it which is that I think
3:00:35keeping consistency in the buckets and
3:00:37not trying to change things before they
3:00:40actually get fully implemented and lived
3:00:42in for a little bit is the best way to
3:00:44be able to get better visibility into
3:00:48what's
3:00:49happening uh last question any concerns
3:00:52that this commission uh asked you um you
3:00:56know as part of the filing and the next
3:00:58rate case to provide um Capital
3:01:01forecasts uh um going
3:01:06forward I mean I I don't think so but I
3:01:10mean I also think that's that's really
3:01:12in My View From My Lens that's also the
3:01:15function of uh of the get proceedings
3:01:18right to provide that forward-looking
3:01:21view
3:01:23so yeah just um seems like it's not
3:01:27always uh consistent um that's all I
3:01:30have uh Miss Sam peo uh
3:01:36redirect thank you
3:01:38chair um Mr Gardner I'd like to start
3:01:42where we left off with chair blank um
3:01:45can you just please level set us can you
3:01:47hear me okay yes I can thank you um
3:01:51could you please level set us uh
3:01:53regarding your role in this case and uh
3:01:56the scope of your
3:01:58responsibilities yeah absolutely the
3:02:00scope of my responsibilities is the
3:02:03execution of projects um so my team does
3:02:07not handle the planning of work that's
3:02:09handled to our integrated system
3:02:11planning team uh led by Mr Marts um but
3:02:16my my responsibility is the the
3:02:18day-to-day execution of the work and and
3:02:20ensuring that we have safe reliable
3:02:22service on a day-to-day
3:02:24basis um thank you would would the
3:02:26hypothetical presented by chair blank be
3:02:28something that would be better addressed
3:02:31by company witness
3:02:33pay yes I believe it
3:02:36would
3:02:37um you mentioned uh in your conversation
3:02:42with chair blank that the gas
3:02:44infrastructure plan may be the
3:02:46appropriate forum to gain more
3:02:49transparency into some of the issues
3:02:51that were discussed today um is the
3:02:55company working on providing additional
3:02:57transparency into the ongoing cast
3:02:59ongoing gas Capital investments in the
3:03:02next giip to be filed in 2026 if you
3:03:05know yeah yes we
3:03:10are and does that include all categories
3:03:12of capital
3:03:14investment so that would include
3:03:16anything that's within the action period
3:03:18as well as anything over the the Gip
3:03:20reporting threshold but but yes that
3:03:23would include all
3:03:25categories are you familiar uh with a a
3:03:30pending rate case related rule
3:03:35making um I don't believe
3:03:38so so you wouldn't be aware of anything
3:03:42that is in that Ru making ass associated
3:03:45with requirements for future filings in
3:03:48cases is that a fair statement that is a
3:03:51fair
3:04:00statement I would like to turn next to
3:04:04the Questar project you received several
3:04:06questions regarding that project
3:04:09today um I'd like to first ask you from
3:04:12your perspective how critical was the
3:04:14need for the Questar project
3:04:18uh AB absolutely critical we were um we
3:04:22had a capacity shortfall for our Western
3:04:25mountain system that that um had we seen
3:04:28designed a temperatures could have
3:04:31resulted in in customer outages
3:04:33specifically in the veale
3:04:35valley and realistically were there
3:04:38cost-effective Alternatives that could
3:04:40have been pursued instead of the
3:04:42project no there there were
3:04:45not how
3:04:48I just want to turn for a moment to the
3:04:50relationship between the company and
3:04:51Rocky Mountain Natural Gas um how
3:04:55long has uh Rocky Mount natural gas I'll
3:04:59refer to them as Rocky and the company
3:05:01been in a in this joint
3:05:03relationship for for multiple decades in
3:05:07excess of 30
3:05:08years and how would you characterize
3:05:12that relationship generally uh generally
3:05:15I think it's been a very good
3:05:16relationship I mean we've we've
3:05:18successfully operated the plant as well
3:05:20as um the rifle to Avon pipeline over
3:05:24that time
3:05:25period and just to clarify is the
3:05:29company willing to participate in the
3:05:31study that Rocky is already required to
3:05:34do yes
3:05:41absolutely uh Council for staff asked
3:05:43you a few questions regarding air and
3:05:48allocating cost do you recall that
3:05:50conversation yes I do when Council for
3:05:54staff was referring to an error in
3:05:56allocating cost between the company and
3:05:59Rocky is it your understanding that she
3:06:02was referring to an error in the cost
3:06:04reflected in the revenue requirement in
3:06:06this case or an error in Billing
3:06:09Rocky solely
3:06:12in my understanding is there was an
3:06:14error in solely the revenue requirement
3:06:16in this case
3:06:18and is that the issue that you corrected
3:06:21in your rebuttal test human yes that
3:06:25is and did the company make an
3:06:27adjustment in its Revenue requirement in
3:06:30rebuttal to reflect the proper
3:06:32costs yes we did by the company sorry
3:06:36yes we
3:06:37did and to be to be clear were there you
3:06:42weren't referencing errors in Billing to
3:06:44Rocky no no I'm not aware of any errors
3:06:47building to
3:06:58Rocky um you were also asked about
3:07:03pipeline quality gas already bypassing
3:07:06the plant do you recall that discussion
3:07:08yes I
3:07:10do and I I believe in the course of that
3:07:13conversation you you referenced the
3:07:15Questar Supply as well as the Williams
3:07:18Supply do you remember that yes yes I do
3:07:21recall there's another source of Supply
3:07:24uh in the in the rifle plant area is
3:07:28that right yes there there's uh the cig
3:07:32lean Supply
3:07:34yes uh how does that Supply travel
3:07:39through the area that supply that Supply
3:07:42bypasses the the rifle gas plan and
3:07:45flows directly into directly to the
3:07:48rifle to Avon
3:07:50pipeline to meet uh customer Pesco
3:07:55customer demands on the system will the
3:07:57company be relying on all three sources
3:08:00of Supply at the point yes yes we
3:08:08will I would like to turn briefly to
3:08:15Clarkson do you recall when the CL
3:08:17Clarkson project
3:08:20started yes I believe it was included in
3:08:23our 2022 psia deferral and I believe
3:08:27construction started in 2022 if I recall
3:08:32correctly and in your discussion with um
3:08:35Council for staff you mentioned that
3:08:37Alternatives were
3:08:40considered do you recall that discussion
3:08:42I believe so yes yeah I do recall the
3:08:44discussion yeah okay if we could please
3:08:47pull up your direct testimony hearing
3:08:49exhibit 105 and I'd like to go to page
3:09:00142 and maybe just give you a chance to
3:09:03refresh your recollection if we could
3:09:05have you look at the question and the
3:09:06answer starting on line three
3:09:21okay I've read
3:09:22it does this refresh your recollection
3:09:25as to the Alternatives considered for
3:09:27the Clarkson project yes it does thank
3:09:29you and could you please just elaborate
3:09:32on those for the record yeah so for
3:09:35Clarkson we evaluated a
3:09:37reroute um we evaluated um a d rate and
3:09:43we evaluated electrification
3:09:48do you know uh Mr Gardner whether
3:09:51alternatives to safety investment are
3:09:53currently required under the gas
3:09:54infrastructure planning
3:09:56rules no I believe they are
3:10:00not could you please uh elaborate on the
3:10:04safety concerns presented by the
3:10:06Clarkson
3:10:07project yeah absolutely the Clarkson
3:10:10project remediates uh a safety concern
3:10:13associated with um
3:10:16vintage uh steel main as well as
3:10:19compression coupling so on a 20-inch
3:10:21pipeline you have um of this vintage we
3:10:24have these compression couplings that
3:10:27are unable to be protected by a cathodic
3:10:29protection system so they can corrode
3:10:31and if they fail the end result is a
3:10:3420inch gas line blowing blowing gas at
3:10:37the
3:10:38Joint could we please pull up uh hearing
3:10:41exhibit 128 which is Mr Gard Gardner's
3:10:44rebuttal testimony and could we please
3:10:46go to page seven
3:10:50looking at figure
3:10:52arg1 on the screen are these photos of
3:10:56the Clarkson project and the safety
3:10:58concern that you just discussed yes they
3:11:01are this is a photo of a compression
3:11:03coupling on the from the Clarkson
3:11:08project now the Clarkson project was
3:11:13that commenced under the pipeline system
3:11:15Integrity adjustment it was included in
3:11:18the in the deferral um the psia deferral
3:11:23yes and our portions are are the first
3:11:28two phases of that project currently in
3:11:30service and and providing gas service to
3:11:33customers today yes they
3:11:36are do you recall your discussion with
3:11:38Council for staff regarding the petition
3:11:41re recently filed by the company
3:11:44relating to the Clarkson project
3:11:48yes I
3:11:49do if we could please pull up hearing
3:11:52exhibit 139 in the company's
3:12:09box does this look familiar to you Mr
3:12:13Gardner uh yes it does
3:12:20I think if we could please scroll to the
3:12:22last
3:12:29page and if we could scroll yeah too did
3:12:32you verify this petition Mr Garden yes I
3:12:37did the company would ask that the
3:12:40commission take administrative notice of
3:12:42hearing
3:12:43exhibit
3:12:45139 any objection
3:12:47no
3:12:48objection so moved
3:12:51so could we please go to page one sorry
3:12:55to make you go back and
3:12:58forth and uh if we could scroll to the
3:13:01bottom of the first paragraph there you
3:13:03go um Mr
3:13:07Garder the purpose of this petition is
3:13:11set forth in this first paragraph here
3:13:13could you
3:13:15please take a look at
3:13:17uh and and read starting on the line
3:13:19that says weather to the end of that
3:13:24sentence whether under Colorado law and
3:13:26applicable commission rules a
3:13:27certificate of public convenience and
3:13:30necessity is required for future work
3:13:32required to be undertaken by public
3:13:34service in order to complete the
3:13:36Clarkson Street main renewal project and
3:13:39by Future work what is being referred to
3:13:42the final two phases of this project and
3:13:46are those two phases of of the project
3:13:48at issue in this case no they are
3:13:53not thank you we can take that
3:14:00down um you were asked a few questions
3:14:03by commissioner Gilman Rel and and I
3:14:06believe cheer blank related to the C
3:14:07creete Canyon findes project do you
3:14:10recall
3:14:11that I believe you indicated that
3:14:14company witness Rus might be the
3:14:17appropriate person to speak to about uh
3:14:20what we refer to kayak contributions in
3:14:23a of construction is he the appropriate
3:14:25witness to refer
3:14:27to probably not it's probably witness
3:14:31mhler thank you for that
3:14:39clarification if I could have just one
3:14:41moment
3:14:47I don't have any further questions thank
3:14:48you Mr Gardner uh you may be excused Mr
3:14:51Gardner thank you much sir thank
3:14:56you what's uh Mr mher are you out
3:15:02there and we're gonna
3:15:07whoops switch
3:15:13Council yes thank you the switch is
3:15:15always a little bit of a chenge but here
3:15:17we
3:15:18are uh Mr mhler are you out
3:15:31there you want to uh check in with Mr
3:15:34mher or do you want to jump to uh Miss
3:15:36sheller he'll be here in just a moment
3:15:38he had just stepped away for one moment
3:15:42okay oh there he is
3:15:50Mr mher morning good afternoon Cher
3:15:54blank H I guess close sorry good morning
3:15:58still yeah uh can you hold up your right
3:16:01hand
3:16:02please do you swear to tell the truth
3:16:04the whole truth and nothing but the
3:16:06truth I do you can put your hand down uh
3:16:11is anyone with you now or communicating
3:16:13with you in any way no no one I'm in the
3:16:16room alone and nobody is communicating
3:16:18with me if that changes will you let us
3:16:20know
3:16:22absolutely uh back to you Miss Brahma
3:16:25good morning Mr mhler um would you
3:16:27please um spell your name please for the
3:16:31record sure uh Mark
3:16:34Mohler m o l l
3:16:38r and could what is your uh job title
3:16:41please uh I am the director of capital
3:16:44asset accounting at Exile energy
3:16:48and uh did you cause to be submitted
3:16:50into the record in this proceeding
3:16:52hearing ex hearing exhibits 114 121 and
3:16:56133 as your direct supplemental direct
3:16:58and rebuttal testimony yes that's
3:17:01correct do you have any additional
3:17:03corrections to your testimony as you sit
3:17:04here today I do not all right thank you
3:17:08Mr mher is available for cross-
3:17:10examination Miss kmon uh I have 30
3:17:15minutes
3:17:17thank
3:17:18you uh good morning Mr Muller I don't
3:17:21think we've met my name is Kate krampton
3:17:23I'm an attorney representing the utility
3:17:25consumer advocate in
3:17:27Colorado good
3:17:29morning Mr Muller you provided rebuttal
3:17:32testimony in this proceeding that
3:17:35responded to UCA and staff's
3:17:38recommendations regarding the potential
3:17:41disallowance for plant held for future
3:17:44use is that correct that's correct okay
3:17:48and in your rebuttal testimony you
3:17:50discussed the treatment of uh plant held
3:17:53for future use or
3:17:55Phu from a capital accounting
3:17:58perspective is that right that's
3:18:01correct and I think you noted in in Your
3:18:04settlement test or I'm sorry your
3:18:06rebuttal testimony that um another um
3:18:09Public Service employee micheller
3:18:12discusses the company's perspective
3:18:15regarding how and when the private LTE
3:18:18project uh May benefit rate payers in
3:18:20the future is that right that's
3:18:23correct have you had an opportunity to
3:18:25review Miss sheller's rebuttal testimony
3:18:27regarding the
3:18:29phf prior to testifying here today I
3:18:33have reviewed some of it yes okay and do
3:18:35you have a general familiarity with the
3:18:38company's overall proposal for the
3:18:41private
3:18:42LTE plan which is the pfu and this
3:18:47proceeding yes I have a general
3:18:49familiarity with it okay and generally
3:18:52speaking the private LTE project is a
3:18:56project that will span across excel's
3:19:00Total Service uh areas is that
3:19:04right uh I believe it is most service
3:19:07areas I don't believe it is a it is all
3:19:10inclusive it is all I believe it's all
3:19:13jurisdictions but it may not be every
3:19:15County okay and all jurisdictions so not
3:19:18just Colorado and public service but all
3:19:21of excel's
3:19:24jurisdictions
3:19:29uh smaller smaller jurisdictions I uh I
3:19:33guess I'll qualify that we have smaller
3:19:35jurisdictions in North Dakota South
3:19:37Dakota Michigan I uh Miss sheller could
3:19:41better speak to its applicability or its
3:19:46presence Ed in all
3:19:48jurisdictions absolutely large
3:19:51jurisdictions uh okay prom Colorado PCO
3:19:55and northern states
3:19:57power okay thank you and so the the
3:20:024.9 million dollar of
3:20:06pfu um that's an issue in this
3:20:10proceeding that is the
3:20:12cost for well let me back up
3:20:17um generally speaking this private LTE
3:20:20plan or proposal involves several phases
3:20:25before completion is that
3:20:27right I believe it does yes okay and an
3:20:31issue here in this proceeding is the um
3:20:36work that has been done in the in the
3:20:38year 2023 is that
3:20:41right yes that would be the test year
3:20:44okay and specifically that work is the
3:20:48acquisition of Rights for the to the
3:20:51wireless
3:20:54Spectrum correct okay and so the $4.9
3:20:59million $4.9 million that are issue in
3:21:03issue in this proceeding is
3:21:06for Public Service of Colorado
3:21:09gas portion of that acquisition of the
3:21:14rights to the wireless uh Spectrum is
3:21:16that correct that's correct okay do you
3:21:20know the total cost for the acquisition
3:21:24of rights to the wireless p uh Spectrum
3:21:27over all of excel's
3:21:29territory I do not okay
3:21:33and you said a moment ago that this
3:21:36overall project will be conducted in
3:21:39phases do you know the total cost of all
3:21:43of the phases of this private LTE
3:21:47uh plan over all Excel service
3:21:50territories I do
3:21:57not as you said a moment ago your
3:22:00rebuttal testimony is primarily
3:22:03focused
3:22:07on uh your Ral testimony is primarily
3:22:12focused on the treatment of phf you from
3:22:14a capital accounting perspective as is
3:22:16that right that's
3:22:23correct if I could just back up for a
3:22:25second I I've I've mentioned this
3:22:27private LTE what does LTE stand for Mr
3:22:32Muller
3:22:39uh I
3:22:41guess I believe I know it I just can't
3:22:43recall it right now so it's the
3:22:45equivalent of LTE that you would have on
3:22:48your cell phone it's a uh it's a
3:22:51communication protocol used to to
3:22:55translate over
3:22:58uh cellular
3:23:01networks okay um and so here with this
3:23:05private LTE the company is asking to
3:23:08create its own
3:23:12private communication network is that
3:23:15correct that's that's correct okay and
3:23:19ultimately the company is asking its
3:23:22utility customers to pay for its private
3:23:27communication network is that
3:23:29correct that's
3:23:40correct and you mentioned that your
3:23:44perspective is a capital account
3:23:46accounting perspective on this
3:23:49pfu project is that right that's correct
3:23:53okay
3:23:55and your Capital accounting when you
3:23:58describe your Capital accounting
3:24:00perspective in your rebuttal testimony
3:24:03you reference the FK uniform system of
3:24:06accounts is that correct that's correct
3:24:09okay and so it's that uniform system of
3:24:12accounts that you rely on for your
3:24:16capital accounting
3:24:17perspective as well as internal policies
3:24:20so it would have to meet the definition
3:24:23of capital which would also be within
3:24:26the FK uh chart of accounts guidance FK
3:24:29would prescribe how we classify
3:24:31individual assets based on uh for
3:24:35example where it is in the construction
3:24:37process if it's construction work in
3:24:39process it would be classified as such
3:24:41if it is in service or whether it is
3:24:44plant held for future use
3:24:47okay and
3:24:50that these category categorizations from
3:24:53the uniform system of uh accounts
3:24:57dictates um I think what you said is
3:25:00dictates how assets are to be reflected
3:25:03in the company's financial statements is
3:25:06that right that's
3:25:08correct
3:25:10and
3:25:12financial statements have these
3:25:14requirements um particular for how this
3:25:18information concerning Capital assets is
3:25:21presented to investors is that right um
3:25:25I would say investors rely primarily on
3:25:28the company's SEC
3:25:31reporting uh the SEC reporting Al aligns
3:25:36with Burke reporting uh pretty closely
3:25:40but there are classifications within FK
3:25:43that would not show up on our external
3:25:45invest financial statements
3:25:49okay um and relying on the uniform
3:25:52system of accounts you assert that this
3:25:55portion of the private LTE project that
3:26:00is categorized as phf view is not judged
3:26:04by the standard of used and useful is
3:26:06that
3:26:07right that's correct so I'll explain uh
3:26:11when the company is looking at its
3:26:13various assets
3:26:16typically what when we are acquiring
3:26:19them and constructing them they are
3:26:21typically either in construction work in
3:26:23process which would be Burke account
3:26:26107 uh as they if it is built and
3:26:30constructed it would move from that
3:26:31account into un unitized plant which
3:26:35would be FK
3:26:36106 and which is considered in service
3:26:40uh used and useful and as we break that
3:26:44out into into individual assets sets it
3:26:46would move into for count 101 so both of
3:26:50those
3:26:51classifications would be where uh it
3:26:55when it's in C whip it's collecting
3:26:57afudc when it moves into service it
3:27:00would be considered part of rate base
3:27:03and then uh we would also begin
3:27:06depreciating it the third classification
3:27:09is if we were to construct an asset that
3:27:13was not immediately moving into service
3:27:15did not meet our definition of used and
3:27:17useful we would move it into plant held
3:27:20for future use so we would do a formal
3:27:23determination
3:27:25to
3:27:26establish uh that it was not currently
3:27:28being used that it is um it has been
3:27:33completed that there is a plan a formal
3:27:36plan to use it going forward and we can
3:27:40uh determine that there is a a path to
3:27:42move to
3:27:44that okay thank you I think some of what
3:27:47you just said is is what was um
3:27:50explained in your rebuttal testimony as
3:27:52well is that right that's correct
3:27:55okay Mr Moher you would agree that
3:27:58there's a difference between Financial
3:28:01Accounting of an asset and rate making
3:28:05treatment of an
3:28:07asset uh I would say there can be
3:28:10differences there are F to Gap
3:28:13differences in how we report certain
3:28:16things uh but for the most part they
3:28:21align like I said there can be more
3:28:23detail in the first chart of accounts
3:28:25and what we disclose
3:28:27publicly uh but I would say that they
3:28:29generally generally
3:28:31align okay and just to clarify how the
3:28:35US OA or uniform system of
3:28:39accounts treats a particular asset may
3:28:42or may not be the same as a regulator's
3:28:44treatment of the same transac ction for
3:28:47rate making purposes is that right um I
3:28:50would say Regulators always have the
3:28:52ability to question
3:28:56recoverability uh I have not seen where
3:28:59a regulator would challenge FKS
3:29:03classification so in this case I have
3:29:08not seen where a regulator would say
3:29:10don't put this in 105 even though FK
3:29:13defines that it should go there but a
3:29:15regulator does have the ability to say
3:29:18to challenge
3:29:20prudency uh to decide on
3:29:24recoverability okay part of that is is
3:29:27gets back to the wording within my
3:29:29testimony on uh me being the capital
3:29:33asset accounting witness I reviewing it
3:29:37in terms of my interpretation of the the
3:29:40Burke uniform system of accounts which
3:29:42is fairly prescriptive when it when it
3:29:44comes to this type of an asset
3:29:46uh I am not ruling on the commission's
3:29:51or The Regulators ability to challenge
3:29:54the recoverability of
3:29:56that okay thank you I I appreciate that
3:30:01explanation the and the U
3:30:03usoa itself does not prescribe what
3:30:07accounts should be included or not
3:30:10included in rate base
3:30:13correct uh it does not that is
3:30:16determined by individual rate Making
3:30:26jurisdictions Mr I want to talk to you
3:30:30hold on I'm gonna go ahead and ask a
3:30:32question here I was gonna okay Mr mher
3:30:36you reference in your
3:30:38testimony another Authority on
3:30:42accounting with respect to Public
3:30:44Utilities is that
3:30:46correct I'm sorry in your rebuttal
3:30:49testimony uh can
3:30:53you I guess I'll say I may have can you
3:30:55tell me which what I refer to
3:30:57specifically sure if it would be helpful
3:30:58if we could pull up here in
3:31:00exhibit
3:31:04133 and if we could go to page one or
3:31:08I'm sorry 18
3:31:12please actually if we could go to page
3:31:14three please
3:31:20okay Mr Muller do you do you recognize
3:31:22this as your rebuttal testimony I do I
3:31:26do okay and you see that you included
3:31:29with your rebal testimony and attachment
3:31:32mpm which was a portion
3:31:36of the publication accounting for Public
3:31:39Utilities is that
3:31:44right yeah yes yeah okay and then if we
3:31:48could go to page
3:31:5218 and just scroll
3:31:59down thank
3:32:01you and Mr mher you you again referenced
3:32:05that accounting for Public Utilities uh
3:32:09Treatise is that
3:32:10right uh I'm not sure I would refer to
3:32:13it as A Treatise but I reference it
3:32:15because I am was rebutting Mr lugo's
3:32:18testimony and Mr Lugo referenced it in
3:32:21in his
3:32:22testimony okay and tretis
3:32:27is included in your testimony there is
3:32:29that
3:32:32right uh yes that is how Mr Lugo
3:32:36referred to it okay and you attached a
3:32:39portion of that publication accounting
3:32:42for Public
3:32:43Utilities that's correct okay and you
3:32:46are familiar with that publication
3:32:48accounting for Public Utilities is that
3:32:50right uh that is not correct I am
3:32:54familiar with the page and the reference
3:32:57referred to by Mr Lugo I am not familiar
3:33:00with the entirety of the
3:33:02book okay and so your role is director
3:33:05of capital asset accounting that's
3:33:10correct that's correct
3:33:11okay um for a public utility yes that's
3:33:16correct
3:33:17okay um you have had a chance it sounds
3:33:21like to review portions of accounting
3:33:24for Public Utilities in relation to your
3:33:28preparation of rebuttal testimony in
3:33:32this proceeding is that correct yes I I
3:33:35have reviewed the section referred to by
3:33:37Mr Lugo okay uh Miss fedo if we could
3:33:42pull from UCA box.com
3:33:46hearing exhibit
3:34:10532 and Mr Muller just give you a a
3:34:13moment to review
3:34:17what's in this document let me know when
3:34:20you've kind of had a chance to
3:34:21familiarize yourself with
3:34:43it okay okay and Mr Muller does this
3:34:47appear I know that you attached in your
3:34:50rebuttal testimony chapter six or
3:34:52section
3:34:53six of accounting for Public Utilities
3:34:57does this appear to be section four of
3:35:00that same um overall
3:35:03publication um based on the reference at
3:35:07the top of the page I would say yes I
3:35:09don't know that based on firsthand
3:35:11experience but I am relying on the
3:35:14heading that says accounting for public
3:35:15utilities and section four okay and you
3:35:19see a date there of
3:35:212022 I do it appears to be a recent
3:35:25version of this publication
3:35:29yeah and in particular
3:35:32here accounting for Public
3:35:35Utilities discusses or has a chapter
3:35:38discussing items included in rate base
3:35:41is that what you
3:35:43see as the major heading
3:35:46uh but I would also say this is so when
3:35:51you talk about authoritative Guidance
3:35:53the authoritative guidance for
3:35:55accounting is um for the authoritative
3:36:00guidance for inclusion and rate base is
3:36:02our regulate
3:36:04regulated our rate making authorities
3:36:07this commission right here so uh the
3:36:10fact that it says items included in rate
3:36:13base uh I would qualify that to say that
3:36:16our jurisdictions establish inclusion
3:36:18and rate base uh
3:36:21not the author of this publication okay
3:36:25so I think what you're saying is the
3:36:26commission ultimately decides what's
3:36:29included in rate
3:36:30base not the uniform system of accounts
3:36:36right correct the uniform system of
3:36:39accounts designates accounting
3:36:43classification okay and a commission
3:36:46could decide to uh utilize an authority
3:36:50to make a decision about what items to
3:36:52include in rate base objection uh
3:36:56and calls for speculation with respect
3:36:57to what
3:36:58Authority Miss Miss kempton's referring
3:37:01to uh you want to rephrase Miss grampton
3:37:05if I may respond he has provided
3:37:09testimony about commissions deciding
3:37:12what's in rate base so I I don't think
3:37:15it's speculative he has already opined
3:37:17on
3:37:19that question could a commission rely on
3:37:23an authority to make that
3:37:25decision my objection was to the fact
3:37:27that an authority is could cover any
3:37:30number of
3:37:31potential documents sources materials
3:37:34and so to ask Mr Mohler to talk about
3:37:37that is is just too broad of a question
3:37:40um with respect to that particular part
3:37:43of the question can you
3:37:45your question um miss crimon Mr mhler
3:37:49could a commission rely on accounting
3:37:52for Public Utilities to determine what
3:37:56to include in rate base and I'll object
3:37:58here that this calls for a legal
3:38:00conclusion about the commission's
3:38:01authority and the proper standard for
3:38:04its
3:38:05decisions Miss krampton
3:38:08I haven't asked Mr mher to draw a legal
3:38:11conclusion I asked him if a commission
3:38:14could rely on this Authority it's a
3:38:17hypothetical situation that doesn't
3:38:19require a legal
3:38:21opinion uh the objections over world if
3:38:24you can answer Mr Muller that'd be
3:38:27great uh I believe the the
3:38:32commission the commission can rely
3:38:34on on various sources if
3:38:43the I guess there is is the commission
3:38:46can rely on sources that it views as
3:38:49valuable in uh arriving at the
3:38:53appropriate regulatory
3:38:55conclusion okay and I appreciate that my
3:38:58my question was could they rely on
3:39:01accounting for Public Utilities as a
3:39:04resource same
3:39:10objection uh I guess they could Mr
3:39:14Muller why don't you hold on for a
3:39:15second let the chair please yeah over
3:39:18world if you could
3:39:20answer
3:39:22uh my take is that commissions rely on
3:39:25various sources in
3:39:28establishing uh they could rely on F
3:39:31they can rely on other jurisdictions I
3:39:34suppose it is possible that a commission
3:39:37could rely on this book okay and if we
3:39:41could scroll to page 14 of of this
3:39:46document
3:39:47please before we proceed I need to raise
3:39:50an objection as to the authentic ability
3:39:52to authenticate this document Mr Mohler
3:39:55was pretty specific in both his written
3:39:57and live testimony that he reviewed one
3:40:00section of this book specifically
3:40:02because Mr Rivera Lugo raised it on a
3:40:04different topic and he is not able to
3:40:07authenticate this section other than
3:40:09what it says on the page um and what it
3:40:11reports to be so we we are lacking a
3:40:13foundation and authentication of the
3:40:15document is and it is also outside the
3:40:17scope of uh Mr Muller's testimony Miss
3:40:22kmon um I to respond to the last portion
3:40:27of the objection first I I disagree that
3:40:29it's beyond the scope of his rebuttal
3:40:33testimony Mr Muller in his rebuttal
3:40:36testimony uh proposes that the uniform
3:40:39system of accounts has
3:40:43a discuss of plant held for future use
3:40:48that
3:40:49precludes plant held for future use from
3:40:52a use and used and useful analysis and
3:40:56therefore it is appropriate to include
3:40:59this plant held for future use project
3:41:01in rate base in this
3:41:04proceeding the uniform system of
3:41:09accounts well I'm introducing
3:41:12information to rebut that rebuttal
3:41:15testimony so it's certainly within the
3:41:19scope of his rebuttal testimony to be
3:41:23able to reut that on
3:41:28cross-examination it's in the scope uh
3:41:30what about uh authenticating uh this
3:41:33document proper foundation for this
3:41:36document with this
3:41:38witness well I haven't moved it into
3:41:41admission at this
3:41:43time um however
3:41:47I believe that regardless of whether or
3:41:50not he can authenticate it that this is
3:41:53relevant evidence under Colorado Rules
3:41:56of Evidence 608 to rebut the proposition
3:42:01set forth in his testimony that this is
3:42:03properly included in rate base I think
3:42:06under the commission rules rules
3:42:101501 this information is also useful to
3:42:13the commission because this evidence
3:42:15possesses reliable and probative value
3:42:19on this
3:42:21issue go ahead m r respond this is first
3:42:25of all the relevance of the document is
3:42:27is a different issue than the pro than
3:42:29the the ability to authenticate it and
3:42:32the foundation it's hard to State
3:42:34relevance without having a foundation
3:42:36and an authentification and to the
3:42:38extent as I heard Miss kampton say right
3:42:40now that the intention is to have Mr
3:42:43mhler read into the record or talk about
3:42:47something in this document without
3:42:48authenticating it without his background
3:42:50in it that's not an appropriate use of
3:42:52this document for this witness and so I
3:42:55I don't know that the response to my
3:42:57objection really gets at all at the
3:42:59problems with foundation and
3:43:00authentication that still
3:43:05exist Miss uh Kamp well I think uh Miss
3:43:10Harper uh I are you out there I'd
3:43:14probably let this go on uh I struggle to
3:43:18admit it in to uh evidence but um strugg
3:43:25but also struggling to see the harm of
3:43:27letting this continue do you do you have
3:43:28any guidance Miss Harper or Miss uh uh
3:43:34Miss
3:43:35RI I agree with your
3:43:38assessment chair as to allowing the
3:43:41question to continue um if it comes to
3:43:44to moving for admission then that does
3:43:46become another issue perhaps parties
3:43:49could stipulate and and come back you
3:43:52know tomorrow with a version that they
3:43:55would agree to but in terms of the
3:43:57questions I think it I agree with you it
3:43:59can proceed subject to all of the
3:44:02concerns that are being
3:44:04raised so uh I would overw the uh
3:44:08objections uh I'd allow the questioning
3:44:11to proceed but um I would say I don't
3:44:14think there's a proper
3:44:15Foundation uh uh with this witness to
3:44:18admit it into evidence so and we're
3:44:22getting late Miss Granton so thank you I
3:44:27appreciate that I I believe I have some
3:44:29time left of the time reserved I don't
3:44:31know if the commission wants to take a
3:44:33break now or uh allow me finish thank
3:44:37you I don't have a lot more for this
3:44:42witness
3:44:43uh Mr Moher
3:44:47um you have familiarized yourself with
3:44:51Section six of accounting for Public
3:44:53Utilities with respect to your response
3:44:57to staff's answer testimony is that
3:44:59right that's correct okay and so you're
3:45:02you're certainly aware of this
3:45:05publication um from preparing that
3:45:07portion of your rebuttal testimony as
3:45:10well as providing that exhibit correct
3:45:13correct okay
3:45:17and we talked a moment ago about what
3:45:20appeared to be a different portion of
3:45:24that document regarding what's included
3:45:26in in Ray base um from accounting for
3:45:29Public Utilities is that right objection
3:45:31Foundation apologies but I need to make
3:45:34sure I preserve my
3:45:37objection um Miss
3:45:40krton he has already answered that in
3:45:43the affirmative so I don't think he
3:45:45lacks the foundation since he's been
3:45:47able to answer that question again
3:45:49there's a difference between reading
3:45:50what it says on the screen and being
3:45:51able to authenticate the document as
3:45:53legitimately what it reports to be or or
3:45:56a legitimate
3:45:58Source can you restate the question
3:46:01again miss
3:46:02crimon uh Mr Müller are you aware that
3:46:07accounting for Public
3:46:09Utilities um contains a section
3:46:12regarding uh items uh for items to
3:46:16consider for rate base objection
3:46:19Foundation asked and answered
3:46:24over can you answer the question Mr mher
3:46:27uh can you repeat the question Miss
3:46:29kampton sure are you Mr merer are you
3:46:32aware of accounting for Public Utilities
3:46:36containing a section or a chapter
3:46:39devoted to what items may be contained
3:46:42in rate base
3:46:45I struggle with the term aware you have
3:46:49shown me a heading on a screen but I
3:46:52have not reviewed that
3:46:54book okay um as the Director of capital
3:46:59asset accounting you have not reviewed
3:47:00this book I have not there are many
3:47:05there are
3:47:07many volumes out there that are guidance
3:47:11basically like teaching manuals that
3:47:15include some references to FK and some
3:47:18opinions of the author that are out
3:47:20there and interpretations on how the
3:47:24uniform system of account should work
3:47:26and how utility should
3:47:28operate this is not the only one of
3:47:30those there are many out there some are
3:47:32published by
3:47:34nuk uh Addison electric Institute and
3:47:37the American Gas Association the
3:47:40Michigan
3:47:42uh University of Michigan Michigan State
3:47:44does as well
3:47:47uh there are many of these documents out
3:47:50there and they all take their own
3:47:52position on it I recognize that this is
3:47:55one of those but I uh I am not in a
3:48:00position to read every single one of
3:48:01them cover to cover okay and are you
3:48:05aware whether the accounting for Public
3:48:09Utilities um publication states that
3:48:12there's considerable disagreement over
3:48:14the proper treatment of pfu for rate
3:48:17making
3:48:20purposes I will say I am not aware of
3:48:23that I did see words on a page in front
3:48:26of me that spelled it out in one
3:48:27individual section but I do not know the
3:48:30entire context of the book and therefore
3:48:33I cannot put that statement say
3:48:36definitively
3:48:39that's how I would Define awareness and
3:48:43what saying I am aware of
3:48:45constitutes in terms of my level of
3:48:48understanding okay um and are you aware
3:48:53of accounting for Public
3:48:55Utilities um statement that the quote
3:48:58the most common argument offered by
3:49:00commissions for rejecting rate based
3:49:02treatment for phf is that only plant
3:49:06presently used and useful in providing
3:49:08service should be allowed in rate base I
3:49:10will object to this question as first of
3:49:13all not even showing us a do doent that
3:49:15she was referring to but also we're
3:49:16going now into the substance of a
3:49:18document that has not been authenticated
3:49:20in any way I I mean you can respond Miss
3:49:23krampton but given what the witness said
3:49:27about this document uh I think we're at
3:49:31the end of this rope um we could pull up
3:49:35hearing exhibit 503 if that's useful Mr
3:49:38Muller what is what is hearing exhibit
3:49:43503 uh the public uh accounting for
3:49:46Public Utilities portion that I had
3:49:48displayed on the screen that that would
3:49:50not resolve my objection which is to the
3:49:52document itself and and Mr mohler's
3:49:55ability to speak to it we would again be
3:49:56misusing that document that has not been
3:49:58authenticated or foundation with any
3:50:01foundation yeah I guess the piece I'm
3:50:03now struggling with is the witnesses
3:50:05said he's not aware of this document he
3:50:08doesn't have the context to understand
3:50:10these statements and I think there are
3:50:13foundational problems with this so miss
3:50:16Harper uh can you help me here but I
3:50:19think we may be uh as given what the
3:50:22witness is now saying I think we may be
3:50:24as far as we can go with this I agree
3:50:28given where the witness has uh taking
3:50:31his responses
3:50:33too so I think that objection is uh
3:50:36sustained miss krampton Mr Müller are
3:50:39you aware of any accounting
3:50:43Publications that address
3:50:45the propriety of including
3:50:48pfu for rate Mak
3:50:52purposes I am not okay uh chairman I
3:50:57would move to
3:50:59admit hearing exhibit 503 I understand
3:51:03the discussion that has occurred and
3:51:05anticipate objection from public service
3:51:08however I do believe that this is
3:51:11relevant evidence under the Colorado
3:51:13Rules of Evidence to rebut the testimony
3:51:16of Mr Mueller's rebuttal testimony to
3:51:19suggest that
3:51:20pfu is properly included in rate base
3:51:24this is relevant information for the
3:51:27commission for that consideration and to
3:51:31reut that
3:51:32testimony
3:51:34um I will also refer to the commission
3:51:38rules rules
3:51:401501 indicating that the Rules of
3:51:44Evidence are relaxed or not um strictly
3:51:47adhered to in these commission
3:51:49proceedings and that this is relevant
3:51:51information that's useful to the
3:51:53commission's consideration one of
3:51:56whether or not Mr Muller's testimony
3:51:58regarding pfu is reliable and two to the
3:52:02commission's consideration of whether
3:52:05it's appropriate to include pH Fu in uh
3:52:10rate base in this proceeding so I I
3:52:13understand the objection and I
3:52:15understand the discussion uh but I would
3:52:17move to admit this document hearing
3:52:20exhibit 503 under those grounds Miss
3:52:23Brahma I will restate my prior
3:52:25objections regarding lack of
3:52:26authentication and foundation and I
3:52:28would like to also add as an objection
3:52:30in light of um the discussion Miss krton
3:52:33just offered the purpose of
3:52:35cross-examination is not for a party to
3:52:37offer new evidence in an effort to add
3:52:39rebuttal to answer testimony it is to
3:52:42cross-examine the witness on issues
3:52:43discussed in their answer testimony so
3:52:46to the extent Miss krampton is sort of
3:52:48trying to put in rebuttal testimony to
3:52:50answer testimony in the form of a new
3:52:52exhibit that's not authenticated that is
3:52:54also improper under the rules um
3:52:56governing this proceeding and and
3:52:58commission's procedures generally um if
3:53:00I may respond to that last point I I
3:53:03respectfully disagree um a party on
3:53:07cross-examination can introduce evidence
3:53:10to rebut the testimony Mr Mohler
3:53:13provided rebuttal testimony
3:53:15UCA is not precluded from introducing
3:53:18evidence or asking questions to call
3:53:20into question that rebuttal testimony or
3:53:22to rebut it if that were true then there
3:53:25would
3:53:27be diminish due process with respect to
3:53:30how a party May address rebuttal
3:53:32testimony um let me jump in um Miss
3:53:36Harper uh I think this it's relevant in
3:53:39the scope I also think it's not
3:53:41inappropriate on Cross but I just don't
3:53:43see a proper for uh foundation and
3:53:47authentication with this witness so I'd
3:53:50probably say no but can you uh help me
3:53:58here I I agree that the objection um as
3:54:02to authentication should be sustained um
3:54:06the parties could come together and and
3:54:08stipulate and come back and try to get
3:54:11it documented once Public Services had a
3:54:13chance to
3:54:15understand what is being presented here
3:54:17um I think that would be the cleanest
3:54:20the document could be admitted subject
3:54:23to the you know objection that it's at
3:54:27this point merely a document that was
3:54:30used for questioning but uh was
3:54:33certainly not authenticated I think
3:54:35those are the options going
3:54:37forward or or just uh deny the motion to
3:54:41admit it and let the line of of
3:54:43questioning
3:54:45stand yeah that's where I'm at um so I'm
3:54:48going to um decline to uh admit this uh
3:54:52at the current time um just really on
3:54:56authentication uh Foundation
3:54:58grounds and um uh any anything else uh
3:55:03Miss krampton
3:55:05yes um Mr Mohler did you have an
3:55:08opportunity to hear the conversation
3:55:10from the commission and commission
3:55:12Council
3:55:16which conversation would that be uh the
3:55:18conversation that just occurred yes okay
3:55:22um and if the commission were to take a
3:55:25recess would you be willing to review
3:55:28this uh portion of accounting for public
3:55:30utilities and familiarize yourself with
3:55:33it I I object to this proposal first of
3:55:36all it's not Mr mohler's call whether or
3:55:38not this is something that's
3:55:40legitimately for him to review or not
3:55:43and also um I don't even if we could
3:55:46look at it and have a do a document we
3:55:49would need to have the opportunity for
3:55:50Mr mhler to speak to it more generally I
3:55:54this is beyond the scope of of uh of
3:55:58what I think we're we're talking about
3:56:00in terms of coming together it's it's
3:56:02not for it's for Council to make that
3:56:05determination um Miss
3:56:11Harper I I agree with uh Council this is
3:56:15something that Council can talk about
3:56:17offline and and come back with a
3:56:20proposal if there is
3:56:23one uh so I guess the request is denied
3:56:26Miss krampton
3:56:28uh I don't have any further questions
3:56:30for this witness thank you thanks
3:56:35um uh I guess we should take a break uh
3:56:39for lunch and come back for uh 115 say
3:56:42uh before we do uh commissioner plan do
3:56:45you have an estimate on how many how
3:56:46long you have for this witness I I don't
3:56:49have any questions for this witness uh
3:56:52commissioner
3:56:54Gan very bad at astim meting this um 15
3:56:59minutes all right I probably have 10 all
3:57:03right let's come back at
3:57:04115
3:57:13thanks
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4:45:43let's just give uh commissioner Gman a
4:46:02second oh there you are com you're up
4:46:07sorry that's something last minute
4:46:09little out of breath okay
4:46:12excellent uh good afternoon Mr Muller
4:46:15good afternoon commissioner
4:46:17Gilman all right uh let me
4:46:21see back okay
4:46:25um so first I want to start with um the
4:46:29commission had requested the company to
4:46:31provide some additional information on
4:46:34decommissioning of assets um including a
4:46:37breakdown and any trending between
4:46:40projects re in place versus physically
4:46:42removed as part of the supplemental
4:46:44direct uh request do you recall that I
4:46:48do okay and you um sorry still had
4:46:52breath um and over the past uh five
4:46:57years the company was only able to
4:46:59identify four projects in which the
4:47:02projects were actually fully removed
4:47:04does that sound correct that does yes
4:47:08okay I want to see um m Frederic I think
4:47:11it's Miss Frederico but I've lost track
4:47:14it's Miss Frederico Miss
4:47:17kungle yeah sorry um if you could pull
4:47:20up um the document that I had provided
4:47:23to you um I would appreciate that so
4:47:26what we're looking at here is a
4:47:28transcript from the evidentiary hearing
4:47:31um from the
4:47:332022 natural gas rate case which was
4:47:36preceding 22
4:47:39al-46 G
4:47:42um and this was from um August 25th 2022
4:47:47it looks like and I'd like to head to
4:47:50page 13 of the
4:47:52PDF um the numbers don't exactly match
4:47:55so we'll just go with the PDF
4:47:57numbering um and I'd like you to look at
4:48:02line seven through
4:48:06um uh 15 for me and if you could just
4:48:10read that and I will represent to you
4:48:12this was an exchange between me uh as
4:48:15the questioner and Miss wal for the
4:48:17company as the responder
4:48:21here yep I can see
4:48:25that okay so if you can take a look um I
4:48:29had asked her in setting the nut Salvage
4:48:33rates um what the company's assumption
4:48:36was in terms of if everything has to be
4:48:39fully removed as their assumption she
4:48:43responded that is correct
4:48:46yes and I then asked okay so you don't
4:48:49assume anything ever could be retired in
4:48:51place if that was somehow able to be
4:48:53safely done and she responded for
4:48:56purposes of the attenuation study no
4:48:59complete
4:49:01removal so I just wanted to contrast
4:49:04that with your responses in supplemental
4:49:06direct representing that the company
4:49:10almost entirely with the exception of
4:49:12only four projects in the past five
4:49:14years actually retires the Assets in
4:49:17place are you able to help me understand
4:49:20that in the context of what I was led to
4:49:22believe two years ago by Miss wal um
4:49:27I I guess the the facts haven't changed
4:49:31since then we we have uh primarily done
4:49:35retirement in place uh based on
4:49:38discussions with operations like 97 98%
4:49:41of the time uh definitely High 90s uh
4:49:45the the only thing I I can think of is
4:49:47that we commonly within the company just
4:49:50refer to cost of
4:49:51removal as a generic term our systems
4:49:55refer to it as cost of
4:49:56removal and um that Miss wal just
4:50:00misunderstood the actual actions we take
4:50:04in
4:50:05retiring uh our underground gas
4:50:09pipelines yeah I guess what I'm
4:50:11struggling with is I I feel like other
4:50:13people at the company probably heard
4:50:15this testimony and here we are two years
4:50:18later the understanding of the
4:50:20commission was only corrected by us
4:50:23directing the company to specifically
4:50:25ask answer supplemental direct questions
4:50:28to this point so I'm curious why the
4:50:32record was never
4:50:34corrected um I've literally thought this
4:50:36was the situation for two years until
4:50:38you all responded to our question
4:50:41um I guess I don't have a good answer to
4:50:43that question it it it should have we
4:50:46probably should have come back and
4:50:47corrected that
4:50:49and uh made it clear that historically
4:50:52our predominant practice
4:50:56for it I'll qualify that as four
4:50:58underground pipelines is to retire them
4:51:01in place there is above ground equipment
4:51:04where that's not the
4:51:05standard uh station equipment uh above
4:51:09ground Pipelines
4:51:11but you're correct that it should have
4:51:14been
4:51:15corrected uh to recognize that for
4:51:17underground pipeline are predominant
4:51:19practices not even predominant vast
4:51:21majority is actually retired in
4:51:25place okay um and then um the commission
4:51:30also asked a few questions I'm I'm done
4:51:33with this um document things um chairman
4:51:37I don't know the procedure do you want
4:51:40that as an exhibit I I don't know what
4:51:42to do I
4:51:44think if you want it I think if you I
4:51:48think if you choose to reference it uh
4:51:50in the deliberation uh it'll be fine and
4:51:53I think the parties can uh site to the
4:51:57transcript uh in in relying on that
4:52:00exchange as evidence so I
4:52:03don't I I don't know Miss Harper do we
4:52:05want to take administrative notice of
4:52:07that transcript
4:52:17um well if if someone is going to site
4:52:21to it then it would need to be in the
4:52:23record of this case all right um Miss
4:52:26Brahma any uh uh objection if we uh move
4:52:31uh that uh piece of Miss Walt's uh
4:52:35response from the transcript into two
4:52:37evidence in this case uh no chair I I
4:52:40think my only question and this is just
4:52:42to make sure we understand is are we are
4:52:44we putting in Miss W's testimony that
4:52:46page just so we know what we're but we
4:52:48know just we know yeah I think it' be
4:52:51the the cover page and maybe a page or
4:52:55two before to make sure the context was
4:52:58there no
4:52:59objection yeah we can look at the pages
4:53:01the reason the PDF and the numbering
4:53:03doesn't line up is there was some sort
4:53:05of confidential session that occurred
4:53:07before that so the PDF has fewer pages
4:53:10but are within this publicly available
4:53:13transcript but we don't need any other
4:53:15confidential
4:53:16section all right so moved uh
4:53:20commissioner Gan excellent and I think
4:53:22um I think Miss fredman's helped me get
4:53:25it numbered and and um we have we have a
4:53:27number for it and things like that um
4:53:31okay the commission also asked a few
4:53:33questions in the supplemental direct
4:53:36about the potential for negative rate
4:53:38base especially as it relates to these
4:53:41um significant negative Salvage values
4:53:43do you also recall that I do I do um and
4:53:48let me see um in your response to that
4:53:51in supplemental direct um you had
4:53:54essentially stated regarding the
4:53:56possibility of um the entirety of net
4:54:00base uh of sorry rate base going
4:54:03negative as opposed to say a specific
4:54:06project um with regard to that
4:54:08possibility you had said
4:54:11This is highly unlikely because it
4:54:13assumes that an entire asset class is
4:54:16being retired at once rather than
4:54:19decommissioned over
4:54:21time uh when the system is gradually
4:54:24being shut down does that sound accurate
4:54:27that does sound accurate yes okay so I
4:54:30just want to impr on this a little so I
4:54:32can understand kind of how this works
4:54:34individually and then an aggregate yeah
4:54:36so it's easier for me to think of an
4:54:39individual project and then obviously
4:54:41the ray Bas is a collection of bunch of
4:54:44individual projects um so right now if
4:54:48we look at say like a pretty
4:54:49run-of-the-mill distribution system
4:54:51pipeline which I'm kind of the most
4:54:53familiar I think with the figures on um
4:54:56the depreciable life as I understand it
4:54:59is right around 57 years if that sounds
4:55:02appropriate to you yeah that sounds
4:55:04about right I was going to say 60 but
4:55:07yeah 57 sounds right okay I think we
4:55:09have that from from the last rate case
4:55:12um uh and and oddly it was the number I
4:55:15had in my head so I was pretty happy
4:55:16that checked out um and uh the net
4:55:21salvage value set in that last rate case
4:55:24was around
4:55:2672% of the value if that sounds appro
4:55:29for that type of asset yes y um so as I
4:55:35understand it um this all then gets
4:55:39depreciated together so we're
4:55:41essentially depreciating
4:55:45172% of the value of the project the
4:55:49capital value of the project does that
4:55:51sound appropriate that sounds
4:55:53appropriate okay
4:55:55so somewhere right before year 33 you
4:56:00just do the straight line math we have
4:56:03paid off 100% of the capital cost of the
4:56:06project through the
4:56:08depreciation and so my understanding is
4:56:10at that point and then for essentially
4:56:13the last 24 years of that asset's
4:56:17depreciable life the rate based
4:56:19contribution for that asset in
4:56:21particular is negative because we have
4:56:24more than paid off the actual Capital
4:56:27cost of it is that all still check
4:56:30out I mean let me know if I just mixed
4:56:33up the semantics but like the general no
4:56:36I think it is we we depreciate both
4:56:38simultaneously so there's a a life
4:56:40component to our depreciation and
4:56:42there's a cost of removal but I believe
4:56:44you're correct that when you add both of
4:56:46those depreciations together that you
4:56:49will end up with an amount that would
4:56:51exceed
4:56:52the uh the original gross or the the net
4:56:56plant you would end up with negative net
4:56:58plant at a uh at an individual record
4:57:03level okay so if investment on the
4:57:08system were too slow
4:57:11and that you at some point in decades
4:57:15from now when whenever it is you have
4:57:18more projects that are kind of in those
4:57:21later years of
4:57:23thical recovery than you have new
4:57:27projects coming in to fill up that Gap
4:57:33isn't it possible that you the whole
4:57:36kind of the entirety shifts either
4:57:40considerably lower than it would have
4:57:43been or in a more extreme sense into the
4:57:46negative so what I'm trying to contrast
4:57:48that to is kind of your view that is
4:57:51entirely unlikely because it would be
4:57:52like retiring the whole system at once I
4:57:56think there's also a situation you could
4:57:57go negative where you have just slowed
4:58:00investment in that you're not keeping
4:58:03Pace in new investment to keep positive
4:58:06rate base filling that negative rate
4:58:08base yes yes I would agree that that's
4:58:11that would be a potential scenario but I
4:58:14guess the way I was thinking about it is
4:58:17that you would also if you are tapering
4:58:19down a system that you would also be
4:58:21increasing the amount of retirements
4:58:23that you make along the way and actually
4:58:26decommissionings decommissioning parts
4:58:28of the system that would then erode the
4:58:33uh cost of removal that was sitting in
4:58:34rate base so that it in today's world I
4:58:39believe the numbers about 400 million uh
4:58:42that's been recovered for cost of
4:58:44removal
4:58:46that even though we are recognizing
4:58:49addition creating additional reserves
4:58:51through depreciation that at the same
4:58:53time we would be decommissioning parts
4:58:55of our system and working it down which
4:58:58would offset that and that in a call it
4:59:03a zero end of life 2050 model that you
4:59:06would decommission gradually as you shut
4:59:09down the system now that assumes
4:59:12that you know we would look at a
4:59:16pipeline or let's say a subdivision or a
4:59:19city that might have 70y old
4:59:22infrastructure and we could either make
4:59:24the decision that we're going to replace
4:59:26all that
4:59:27infrastructure or that we are going to
4:59:30just
4:59:31say in a hypothetical scenario that well
4:59:35we'll just we're just not going to
4:59:36provide gas to that City or subdivision
4:59:38anymore and then we would decommission
4:59:41that branch and the decommissioning
4:59:43process would eat up reserves as we go
4:59:46so the model I was thinking through that
4:59:48as as we were to move into the future
4:59:50that we would continue to decommission
4:59:52assets that would not be accompanied by
4:59:54additional new assets going in behind
4:59:57them and then the decommissioning would
4:59:59eat up the uh the reserve that we have
5:00:02out there and so it would gradually
5:00:04decline now I'll acknowledge that that
5:00:07depends on that's contingent on the
5:00:10model that I just laid out to you on how
5:00:11the system would kind of shut down or uh
5:00:16break down over time
5:00:19but there there is there's absolutely a
5:00:22model where we're still adding
5:00:25infrastructure but the infrastructure is
5:00:26not at the level and we're simultane at
5:00:30at the same level that we're increasing
5:00:32depreciation reserves and we are also
5:00:35not taking assets out of service and I
5:00:38think that's a little bit of the
5:00:39complexity that we deal with as we're
5:00:41we're looking forward to
5:00:432050 and what does the decommissioning
5:00:46model look like uh I will say when I
5:00:49envisioned this and laid this out and
5:00:50talked through it with our operations
5:00:52people we kind of looked at it in terms
5:00:54of that individual branches and
5:00:56subsystems would be decommissioned along
5:00:59the way as we approached an end of life
5:01:01for it so that was the model that I was
5:01:03working with okay so if I if I can
5:01:07re-explain because I'm not uh a
5:01:09financial
5:01:10person um if you if if yes investment
5:01:14slows so we start to get this kind of
5:01:17lopsided nature with more of these
5:01:20negative um you know kind of skewing
5:01:22toward end of life but if you are
5:01:26actually decommissioning those at a
5:01:28reasonable rate you're kind of buying
5:01:31down the negative part at the same time
5:01:35so it's not like having undue influence
5:01:38sort of on the total yeah yeah that's
5:01:41that's kind of the model that we that we
5:01:44envisioned okay okay um I have some more
5:01:47questions about like that font and how
5:01:49it works but I think they were elsewhere
5:01:52in my list so let me unfortunately I'm
5:01:56going to change of subjects and then
5:01:57I'll come back because I I don't want to
5:01:59mix it around in my list here and miss
5:02:01something um you talk in your testimony
5:02:05about the units of production method
5:02:08that you all are considering
5:02:10um employing for the um depreciation
5:02:15study um rather than just straight up
5:02:18years of service as as the best
5:02:21indication for
5:02:23depreciation um so similar question to
5:02:27what I asked Mr verman yesterday do you
5:02:29have any insights for me it seems as
5:02:31though this relies very much upon kind
5:02:33of uh evolving and improved methodology
5:02:36for future throughput modeling and
5:02:39forecast in um so I was curious you know
5:02:42how much progress will there really be
5:02:45with regard to that improved forecasting
5:02:48by six months from whenever six months
5:02:51from the end of the clean heat um you
5:02:54know so how how much will things really
5:02:57have adapted in terms of the company's
5:02:59own internal forecasting and therefore
5:03:01your ability to apply that in like a
5:03:04depreciation sense yeah I I believe we
5:03:07have already given our depreciation
5:03:11external
5:03:12depreciation uh Consultants that are
5:03:14doing the study uh I believe it was one
5:03:17of the forecast models that was provided
5:03:20as part of the clean heat plan as like a
5:03:23projected
5:03:24throughput and then they will model that
5:03:27projected throughput in the absence of
5:03:29other any other inputs on that that they
5:03:33would model that uh as a way to derive a
5:03:36units of production model
5:03:40uh with with the intent really being
5:03:42that if we know demand is dropping off
5:03:44over time and we typically do straight
5:03:46line
5:03:47depreciation if demand is 20% of what it
5:03:50is today but depreciation is the same
5:03:53your cost per decm is going to be five
5:03:55times the amount so the intent is really
5:03:58to translate this into a cost per decm
5:04:01or therm so that the depreciation is
5:04:04recognized over every unit of gas uh
5:04:09transported through the pipe as opposed
5:04:12to treating it as a the same amount
5:04:14every
5:04:15year okay okay and I talked to Mr Burman
5:04:20also a little bit about the relationship
5:04:22of this to net Salvage um and I I don't
5:04:27want to like step way out because I
5:04:30understand there's some new agreement as
5:04:32far as how that will be and I don't know
5:04:33how much you know about that agreement
5:04:37but does that seem like a reasonable
5:04:40way to also look at net Salvage within
5:04:43the depreciation study to be accounting
5:04:46for um kind of the these different
5:04:50assumptions in potential useful
5:04:53life yeah I I think it seems reasonable
5:04:57you know I think our goal is to um
5:05:01recover costs in a manner that's not
5:05:04that recovers it from the customers that
5:05:07use it in in an equitable manner
5:05:11um so I will acknowledge though that uh
5:05:15similar to you with the discussion we
5:05:17just had if we're front end loading the
5:05:19cost of removal which is what a units of
5:05:22production would do it would also
5:05:24increase that and likely if we're not
5:05:27decommissioning assets along the way
5:05:29would push us closer to a low you know a
5:05:32lower or potentially negative rate
5:05:35base understand I just wanted to
5:05:37acknowledge that since we just had the
5:05:39discussion on it yeah that's helpful um
5:05:43you indicate that the current
5:05:44depreciation reserve and the breakout of
5:05:47the cost of removal within that Reserve
5:05:50is in effect a separate Reserve fund
5:05:53which is some of what I think staff was
5:05:56arguing for um because you had stated
5:06:00it's contributions by customers that
5:06:02occur before the costs are incurred by
5:06:04the company that's right so I want to
5:06:09understand a little better um is it
5:06:11really the same as a funding Reserve you
5:06:14know where does that money sit you
5:06:16reference 400 million which is I think a
5:06:18value from Mr Johnson's
5:06:21testimony um where is that money right
5:06:25now uh I would say it's basically in the
5:06:28company's uh operating funds so it's
5:06:32it's
5:06:33funding could be funding current uh new
5:06:36gas construction it could be electric
5:06:38because as as a company we fund at a uh
5:06:42debt typically at the operating company
5:06:44level uh Equity at EXL energy it really
5:06:47just becomes part of the fungible pool
5:06:50of uh operating cash it's cash flow it
5:06:54is yeah uh which Paul Johnson uh who's
5:06:58coming up later can can talk in a lot
5:07:01more detail on how the company treats
5:07:04that uh I believe we also like
5:07:08uh does that answer your question or did
5:07:10you want me to talk in no I think for
5:07:13now um
5:07:15so is that actually the same as a
5:07:18funding Reserve like I always imagine I
5:07:20could have my my Concepts mixed up that
5:07:23a funding Reserve you would take in the
5:07:25money and actually set it aside and
5:07:29actually have the money when it came
5:07:31time to pay for those expenses what I'm
5:07:35hearing is this is cash that's being
5:07:37taken in it's being used for what
5:07:39whatever the company's expenses are yeah
5:07:43and so although you took in the
5:07:46cash I'm not sure it's available at year
5:07:5157 I think it's it's a fair question um
5:07:55so there are two models there are we can
5:07:57do it as our operating cash flows um you
5:08:01know even the entirety of the
5:08:04removal is a fraction of the company's
5:08:09capital
5:08:10Capital fund current capital funding in
5:08:11a single year so you know I guess I
5:08:15would say that would be in terms of is
5:08:18this a material portion something that
5:08:20the company could be able to continue to
5:08:22fund like the total decommissioning cost
5:08:25uh that'd be a good question for Mr
5:08:27Johnson in terms of how
5:08:30significant is this the numbers we are
5:08:33talking about were in the three billion
5:08:35range you know that that are in the
5:08:36company's numbers for this case three .7
5:08:40billion I believe in total um when you
5:08:43spread that over multiple years when you
5:08:45look at the company's overall funding
5:08:46it's going to be a small portion of it
5:08:49but Paul would be the one who could talk
5:08:51to you about how significant that is in
5:08:52the bigger
5:08:54picture um the other model you refer to
5:08:56is what I would refer to is the trust
5:08:58model so setting up a separate trust
5:09:01where the money would go into it
5:09:03separate from the company's available
5:09:05funds uh that fund is then isolated the
5:09:09company is not available to use it for
5:09:11normal ongoing
5:09:13operations um it would earn a return
5:09:16that would stay within the
5:09:19trust uh also a viable option it those
5:09:23do exist they typically exist more for
5:09:25nuclear
5:09:27plants uh in terms of where there's a
5:09:29dedicated
5:09:30trust
5:09:32uh I think the position is more that it
5:09:36creates restrictions on the cash does
5:09:39not allow it to flow to the best best
5:09:42use within the company uh you're
5:09:45Reliant you know it's it's effectively
5:09:48going to increase rate base because the
5:09:50company no longer is funding it and
5:09:52we're no longer giving customers a
5:09:55credit for the value of it so the 400
5:09:58million is an offset to rate Base today
5:10:01so whatever our weighted average cost of
5:10:04capital this is a offset to that that so
5:10:07you can argue the customers return on
5:10:09that on an ongoing basis is the weighted
5:10:12average cost of capital is what they get
5:10:14for it okay and I'm happy to ask Mr
5:10:17Johnson if if you don't know but to your
5:10:19understanding this the 400 million
5:10:22that's as of year end
5:10:2520203 approximately 400
5:10:29million what 400 million is the net
5:10:33between what has been collected for the
5:10:35purpose of decommissioning versus what
5:10:37has been actually expended for the
5:10:40purpose of decommissioning to
5:10:43date yes that's the that's the that's
5:10:46the amount that's in reserve so that
5:10:48would be amount collected less amount
5:10:52spent to date okay um and I I mean 400
5:10:57million sounds like a lot of money to me
5:10:59but but understood with relationship to
5:11:02the rate Bas it is not a massive
5:11:04proportion right now but it consider
5:11:08with me the possibilities we've been
5:11:11talking about of decreased
5:11:14throughput potentially slowing
5:11:17expenditures on the system to avoid
5:11:21dramatic read increases given a decrease
5:11:24in
5:11:25throughput
5:11:26um does it raise your concerns as kind
5:11:30of a Fiscal Agent of the company that
5:11:34that paints a picture whereby it might
5:11:36be more difficult to just come up with
5:11:38the cash cash in 30 years 40 years 50
5:11:42years that you already collected from
5:11:44customers for the stated
5:11:46purpose um you I'm not involved with
5:11:50issuing equity and issuing debt uh so
5:11:54but you know as a company
5:11:57with
5:11:59uh I don't know what our exact net rate
5:12:01base is you know but 50
5:12:04billion uh you know could we fund
5:12:07it well I shouldn't speculate I'm in an
5:12:10accounting role Paul Johnson is in a
5:12:12financing the business role and I I
5:12:15shouldn't speculate on on what would be
5:12:18significant to the company or not
5:12:19significant to the company okay does it
5:12:22seem like it could get more
5:12:26challenging I think it would just be
5:12:28something we would consider in our
5:12:30overall Capital
5:12:32plan okay um um I'm curious
5:12:37um does the company regularly compare I
5:12:41know you do these studies um you know at
5:12:45every every other rate case it seems
5:12:48right now um on the cost of this but
5:12:50does the company regularly compare the
5:12:52cost of decommissioning to the revenue
5:12:56collected or um through depreciation
5:13:00based on the net Salvage um like on an
5:13:03asset level or any sort of
5:13:07granularity um so like a ratio of the
5:13:10amount collected relative to relative to
5:13:13the
5:13:14reserve no uh the comparing the actual
5:13:18cost of decommission asset to what would
5:13:22have been collected for that asset in
5:13:24terms of net salvage value for the asset
5:13:26um so so when we do the decommissioning
5:13:29study we are actually doing the de the
5:13:33study decommissioning study uh for pipes
5:13:38is based on
5:13:39our historical costs to actually retire
5:13:42that same type of pipe so what uh
5:13:45Alliant or whoever does the work will do
5:13:48is they'll come in and they will look
5:13:50historically how many how much did we
5:13:53spend on retiring pipe how much did we
5:13:55spend how many feet of pipe did we
5:13:58retire and then they use that to come up
5:14:01with an average cost per footer per mile
5:14:03to decommission pipe which would be
5:14:05based on the actual actual cost to do
5:14:08the decommissioning
5:14:09and then they apply that
5:14:12to
5:14:14forward based on the N number of feet of
5:14:17pipe that we have deployed right now at
5:14:19each size range to say what would we
5:14:22expect
5:14:25um it to cost us to do the
5:14:28decommissioning for that pipe so it's a
5:14:30model that's entirely based on what
5:14:33we've historically spent on it which in
5:14:36some ways can give you comfort that uals
5:14:39are driving the forecast but at the same
5:14:42time when we start talking about end of
5:14:44life scenarios where we don't know
5:14:47exactly how we're going to decommission
5:14:48the pipe that H history may not be as
5:14:52good an indicator of the future as it
5:14:54historically has been when you assume
5:14:56that you've got a system that's going to
5:14:57exist into perpetuity it's a much better
5:15:00model for doing
5:15:02that okay and I'm trying to just
5:15:06understand I mean this is kind of all
5:15:07taken in this giant aggregate right
5:15:10whereas like it's assessed for a project
5:15:13but then it's just one giant pot of
5:15:16money sort of the money's not really
5:15:19there it's the giant accounting
5:15:21situation that's going on yeah um so you
5:15:24know I keep thinking of discre projects
5:15:27which I understand you all kind
5:15:29generally don't think of it that way but
5:15:31if um so if you've been assuming lower
5:15:35than is actually the cost of removal
5:15:39uh presumably that cash like that cash
5:15:42is just coming out of this fund but to
5:15:45the ex you might be short changing other
5:15:48future decommissioning projects
5:15:51right um when you say coming out of this
5:15:53fund do you mean like a actual separate
5:15:57isolated trust or do you mean like Poli
5:16:00no I mean as you operate it which is
5:16:02just an accounting mechanism as I
5:16:04understand it um could we be short
5:16:07changing other projects
5:16:10um I I think our investment interplays
5:16:15with planned expenditures so I think
5:16:17there's always like at a macro level
5:16:20deciding um how we fund our business how
5:16:24much we need to
5:16:25fund uh I guess in my head I'm thinking
5:16:28of the 20 billion model that we had on
5:16:31that was on the screen
5:16:33yesterday uh that chair blank uh put up
5:16:37there's a lot of things that come into
5:16:39play and the company looks at how to
5:16:40fund them and and how that interplays
5:16:44with our overall investment
5:16:46strategy and uh given that that's Mr
5:16:49Johnson's
5:16:50presentation uh not to kick too much to
5:16:52Mr Johnson
5:16:54but
5:16:56um I guess I couldn't tell you that it's
5:17:00preventing us from doing other
5:17:01investment that we should be doing I
5:17:03think it just all is viewed in the
5:17:05context of the company needs a certain
5:17:08amount of money to fund the
5:17:10business and then we look at how we uh
5:17:15how we fund that like the fact that we
5:17:18don't have a separate trust is allowing
5:17:20us to allow money to flow back and forth
5:17:23whether it be for decommissioning
5:17:26to uh allow us to build new
5:17:31infrastructure okay um and coming back
5:17:34both Circle to to kind of my original
5:17:37questions about the proportion of
5:17:39projects that are retired in place
5:17:41versus physically removed um weighing
5:17:46very very much in favor of being retired
5:17:49in place um are you certain that that is
5:17:55the the Assumption and the strategy that
5:17:57was used in calculating the net salvage
5:18:01value um I can tell you that the
5:18:04assumption that was used is based on
5:18:07actual history
5:18:09so it would be based on the actual
5:18:12historical mix so we don't make an
5:18:14independent assumption and say it's
5:18:16going to be 90% retire 97% retire in
5:18:20place and 3% removal we say historically
5:18:24it has been this much cost per
5:18:27foot and that cost per foot is based on
5:18:29a mix of hypothetically 97% retire in
5:18:33place 3% physically remove so it it's
5:18:39I can say that the methodology used to
5:18:42determine the cost of removal mirrors
5:18:45what we have historically done and do
5:18:48you know like over what sort of time
5:18:50period we only asked you five years but
5:18:56um I guess I don't know the answer to
5:18:59that I I'm assuming that I believe when
5:19:02the actuaries look at these they're
5:19:03looking back uh it isn't that small a
5:19:07window they're looking back
5:19:1010 years and then I believe they're
5:19:12adjusting for you know different
5:19:15Consumer Price levels over those years
5:19:17to normalize
5:19:1910-year-old costs per foot of pipe
5:19:21removed with the current year that
5:19:24they're they're doing the study
5:19:26in okay um I only have a couple more
5:19:29questions chairman okay um how me
5:19:33understand the expense associated with
5:19:35just purging and capping a line
5:19:39um 20 like what types of things occur in
5:19:42that just
5:19:44$224 linear
5:19:46foot it strikes me as a lot The Purge
5:19:49and Capal
5:19:52line uh it would be so the 2224 isn't
5:19:57the cost to cap and Purge a line that's
5:20:00the weighted average cost of
5:20:03the let's say 97% Purge in Capal line
5:20:07and 3% and fully removal
5:20:10line the although the fully removal line
5:20:15is a small percent when we actually have
5:20:17to do it the cost is
5:20:20high just being honest that's not at all
5:20:23the impression I have from your
5:20:24testimony I have written down that the
5:20:27cost to purge and cap or retire in place
5:20:30whatever okay was
5:20:33$224 a linear foot and the cost for full
5:20:36removal was2
5:20:39817 a linear foot these are separate
5:20:43calculations so to my understanding that
5:20:45$224 is actually entirely specific to
5:20:49retirement okay okay uh confusion is on
5:20:52my part then yeah so so when I discussed
5:20:56with the operations what does this
5:20:58involve and they would say it involves
5:21:01putting a bypass in so that they can if
5:21:04it's a active gas line they
5:21:07will uh trench
5:21:10bypass uh cut Purge cap uh if it's a
5:21:15steel line they are putting a steel cap
5:21:18on and Welding if it's a plastic pipe
5:21:20they are uh basically gluing a cap
5:21:23on uh I had I had them talk me through
5:21:28it just so I had an understanding of it
5:21:30but in terms of the $22 per linear foot
5:21:35uh whether that's reasonable or or uh I
5:21:40guess I don't have a uh as the
5:21:42accountant in the equation I don't know
5:21:44whether that's reasonable or
5:21:47unreasonable okay um just one other
5:21:50question um I had uh talk with Mr Garner
5:21:54earlier this morning in you know at
5:21:57least the 10 new construction projects
5:22:00that we have data for compared um in
5:22:03every one of the 10 instances the
5:22:05project ended up costing more than the
5:22:08project estimate variety of reasons uh
5:22:11project delays inspectors it rain too
5:22:14much in the trench there were a whole
5:22:16bunch of questions um it doesn't strike
5:22:18me as any of that would increase the
5:22:23final decommissioning cost of that
5:22:25project yet to my understanding since
5:22:27it's assessed as a percentage anytime
5:22:30the actual costs exceed the
5:22:32estimate your net Salvage you know your
5:22:36decommissioning costs now have gone up
5:22:39uh one to one commiserate with that and
5:22:42it just it strikes me as a little
5:22:45difficult that these sort of very
5:22:49particular construction delays or
5:22:51problems are now also translating to
5:22:55increases in decommissioning costs even
5:22:57though there's no evidence that that led
5:22:59to an increase in decommissioning cost
5:23:01can you help me understand
5:23:04that um I guess my response would be
5:23:08that the percentage method that we use
5:23:11the you know when we we calculate
5:23:13depreciation isn't a perfect method um
5:23:17but it's a good method for rate making
5:23:21although can potentially have that type
5:23:23of flaws in it because as we put new
5:23:27pipe in the ground it's very easy for us
5:23:30to just apply that new depreciation rate
5:23:33to each new asset going in and make sure
5:23:38that what we're putting it in at and
5:23:40depreciating depreciating it at aligns
5:23:43with what was approved by the Commission
5:23:45in the last case
5:23:48so let's use the the 60% you used before
5:23:52if we overran that could lead to
5:23:55additional um cost of removal being
5:23:58calculated
5:24:00but on the flip side is that a small
5:24:04piece of
5:24:05it um and do we have a built-in trup
5:24:10mechanism you know maybe in the
5:24:13past uh we also had projects at overran
5:24:17and because those historic projects
5:24:19overran the the potential for overruns
5:24:23is kind of already built into the the
5:24:26math of the
5:24:28formula um you know projects tend to
5:24:31overrun more than they
5:24:34underrun uh so 100% of the time
5:24:39yeah um okay those are my only questions
5:24:42so I guess my point was really that I I
5:24:45don't disagree that that could lead to
5:24:47slightly more depreciation being taken
5:24:50but I feel like the percentage method
5:24:53for applying a depreciation rate to
5:24:56utility assets is the
5:25:00um it's an established model and I I
5:25:03believe it works fairly well even given
5:25:06the fact that you can have some indiv
5:25:08idual projects
5:25:10overrun thank
5:25:12you thank you commissioner Gman I'm
5:25:14gonna try and walk away at the same
5:25:17subject and see see where we land um can
5:25:21we pull up uh Mr Johnson's supplemental
5:25:23direct testimony I think it's hearing
5:25:25exhibit 119 at page 13 uh line 17 and I
5:25:31think Mr mhler what he said is that the
5:25:35company is acre $70 million
5:25:39per year in negative net salvage value
5:25:43uh and taking it out of the business in
5:25:45the form of free cash flow is is that
5:25:48right that seems like a very large uh
5:25:51number and I guess I can go to Mr
5:25:55Johnson and clear it up but just curious
5:25:58of your
5:25:59view um and you can you pull that uh
5:26:03pull that
5:26:04exibit yes you said 119 and then the
5:26:07page number again
5:26:1013 yeah I didn't understand the
5:26:12reference to taking that out of the
5:26:13business is free cash
5:26:17flow um I'll wait until I see the
5:26:20exhibit
5:26:25though page
5:26:2913 uh line 17
5:26:42all
5:26:44right uh so you see the 70 million and
5:26:47the four 400 million there I do I do so
5:26:51where where does uh so that 70
5:26:55million um oh geez I forget where he
5:26:58said it but I think Mr Johnson said it
5:27:01uh and I think you said it in your
5:27:03answers to commissioner Gilman it's
5:27:04basically just free cash flow um in any
5:27:09given year that you can use to pay
5:27:10dividends pay off debt invest in the
5:27:13business but it it's cash and I I I
5:27:17guess where um Mr Johnson references
5:27:20this is in the credit metrics and and
5:27:22the free um uh the cash flow uh
5:27:26obligations on the credit metrics he
5:27:28says this is available as free cash flow
5:27:31as the rating agencies Define it but it
5:27:35it's that right it's just the $70
5:27:36million a year is just cash that you're
5:27:40using to fund your business uh so so
5:27:43maybe like to take a step back to
5:27:46depreciation any type of
5:27:49depreciation is it's a
5:27:52non-cash component of income you know
5:27:56it's what we refer to as return of
5:27:57investment as opposed to return on um
5:28:01difference being when we when we build
5:28:04the pipeline the cash goes out the door
5:28:06on day one and you know we kind of get
5:28:08the return of in future years this is a
5:28:11little bit opposite we're collecting it
5:28:12as we go with the removal cost being at
5:28:15the end of it um so you I agree that
5:28:19it's free cash flow but it is also
5:28:23countering the investment that the
5:28:25company is making uh in the business I I
5:28:29I see but but it's $70 million more than
5:28:33what you needed to earn a return on the
5:28:36actual in in investment
5:28:39right that that's paid off 100%
5:28:42elsewhere and this in uh uh in 2024 and
5:28:472025 is $70 million in additional cash
5:28:51not income that is available to the
5:28:54company to spend as it wants is is that
5:28:56intuition more or less correct correct
5:29:00and in return customers would get a
5:29:02weighted average cost of
5:29:04capital return on that because it's
5:29:06reducing rate base right so uh so
5:29:09there's a gap entry in in the form of
5:29:12negative rate base that over time
5:29:15occurs yeah I would call it a rate base
5:29:18offset but okay looking only at this one
5:29:21it would be a negative rate base
5:29:22component all right and the 400 million
5:29:25that you talked about with commissioner
5:29:26Gman and that Mr Johnson references here
5:29:30is the amount that's acred
5:29:34historically correct all right you can
5:29:36you can take this down
5:29:41um and so there's no Reserve or trust as
5:29:46you referred this is just it's taken out
5:29:49it's allocated as the company sees fit
5:29:53and then at a future cash flow and
5:29:57revenue there it would be paid off there
5:30:01would be uh an offset at the time you
5:30:04need to fund this at least the Gap rate
5:30:08base however you want to uh describe it
5:30:10in an accounting asset in the future uh
5:30:13from which you'd fund this right um an
5:30:18accounting offset I I would say it's an
5:30:19accounting offset today not only in
5:30:22future but but the only thing carried
5:30:24forward is the negative rate base
5:30:26there's no cash carried forward correct
5:30:29correct
5:30:30okay and in your supplemental direct
5:30:33testimony and we don't have to pull this
5:30:35up uh unless it's useful at page 15 912
5:30:39uh you talk about how it is highly
5:30:41unlikely that the cumulative value of
5:30:43all decommissioning removal Reserve
5:30:46exceeds the book value of all plant and
5:30:48service resulting in negative rate base
5:30:50for the entire gas business but right
5:30:53now according to Mr Lugo and I think in
5:30:56response to commissioner Gilman you said
5:30:59there's negative net salvage value of
5:31:013.7 billion and total net Book value of
5:31:06depreciable plant and service is is 4.4
5:31:09billion so given those rough order of
5:31:12magnitudes I don't see why it's so
5:31:17unlikely um it I guess I would call it
5:31:21the the you're using the netbook value
5:31:24for the plant but then the gross value
5:31:28of the decommissioning so I guess I
5:31:30would I would argue the more appropriate
5:31:32ratio would be the gross value of plant
5:31:34and gross of
5:31:35the but but Point Tak
5:31:38um
5:31:39okay and then I would just reiterate
5:31:43what commissioner Gman said I mean based
5:31:46on the conversation with Mr Burman
5:31:48yesterday and the sales forecast used by
5:31:50Mr matley in a supplemental direct it's
5:31:53some it seems like the company is
5:31:55agreeing that sales are going to be
5:31:58significantly declining uh over the
5:32:00coming years so if we have these large
5:32:04decommissioning renew renew removal
5:32:07expenditure and sales are going to
5:32:09decline maybe
5:32:11precipitously seems like there's a
5:32:12decent risk we're not going to have the
5:32:15cash and revenue to fund the
5:32:18decommissioning
5:32:20um I mean who knows but it seems like
5:32:23it's a material
5:32:28risk I'll just say I think that's that's
5:32:31the perfect Paul Johnson question is in
5:32:34terms of how material is a 3.7 7
5:32:38billion decommissioning to the company's
5:32:42ongoing cash
5:32:44flows 4 billion dollar repas yeah at
5:32:49line six at page six line 28 of your
5:32:52supplemental direct you say that a
5:32:54reserve fund would be highly unusual and
5:32:56complex for natural gas assets um but I
5:33:00I don't follow why it would be complex
5:33:02instead of allocating the dollars out of
5:33:05the company as free cash flow to use as
5:33:07it fit why couldn't we order the exact
5:33:11same dollars go into a reserve fund um
5:33:15if can you help me understand why it
5:33:17would be high highly complex uh I think
5:33:21the the the complexity really comes from
5:33:23predicting the return um so the company
5:33:26does it for its nuclear decommissioning
5:33:28trust uh there's couple layers of
5:33:31overhead on it in terms of the fund
5:33:34management a and I would say the
5:33:36complexity comes from pretty predicting
5:33:38the
5:33:39return investment mix cash flows out of
5:33:43the
5:33:44trust um it isn't impossible
5:33:48it's
5:33:50uh you know it it is done it's more just
5:33:54to recognize that you have to layer on
5:33:57the projections in terms of future
5:33:59return and will the return be in the
5:34:01right spot at the intersection of when
5:34:04you want to take that cash
5:34:06out um
5:34:08not insurmountable complex it's more
5:34:11just is there more value in allowing the
5:34:14cash to flow through the entity and flow
5:34:17into places where cash is needed if it's
5:34:20in a separate trust you're trying to
5:34:23land a plane in the future on the
5:34:26funding amount which
5:34:30is you can refine it as you go but
5:34:33you're continuously monitoring the
5:34:35return on the assets whether in a good
5:34:38year where asset returns are high uh a
5:34:41down year where they might be low and
5:34:43then then saying how is that going
5:34:45to going to end up in terms of the total
5:34:49available in the trust relative to what
5:34:51I
5:34:51need uh to fund all of my cost of
5:34:54removal at those points in the future
5:34:57and is it a single point in the future
5:34:59is it multiple points in the future uh
5:35:03there's just a lot of variables and um
5:35:08hopefully as we get closer to that point
5:35:10the number of variables goes away or
5:35:13shrinks a little bit or we have more
5:35:15predictability in terms of what does
5:35:17decommissioning look like over what time
5:35:20Horizon is it partial is it um are there
5:35:25different methods you know I'm assuming
5:35:27that in this model we are not going to
5:35:30decommission ex with exactly the same
5:35:33mix that we use today but I can't tell
5:35:35you for sure what it is it might go you
5:35:38know there's not only an assumption
5:35:41around um whether we have to remove pipe
5:35:45whether we cap it but there's also the
5:35:47discussion of capping a pipe is pretty
5:35:50much a cost whether it's a 10- foot pipe
5:35:53or 100 foot pipe it costs almost the
5:35:56same to cap cut cap
5:35:59Purge that section of pipe so variables
5:36:04around predictability on are we retiring
5:36:06larger sections of pipe in the future is
5:36:09it the same as what we do today does the
5:36:11Mix Change I think those are all the
5:36:13variables that we're trying to work
5:36:15through as we do this depreciation and
5:36:17decommissioning study and which of those
5:36:20variables have the most significant
5:36:23impact on
5:36:25cost because we're talking about a
5:36:27system of I believe it's 25,000 miles of
5:36:31pip so I get I mean I get that the trust
5:36:36fund Reserve fund whatever you want call
5:36:37it could be too big could be too small
5:36:40but that uncertainty and risk which you
5:36:43can address in real time during the
5:36:45course of 20 or 30 years seems way less
5:36:49risky to me than you know getting a
5:36:53multibillion doll liability with no cash
5:36:57and no Revenue to fund it so when I look
5:37:01at the RIS they seem very asymmetric uh
5:37:05any any comments on that evolving view
5:37:09the world I think I would just say that
5:37:12we are a multi-state multi company
5:37:15utility that has both Gas and Electric
5:37:18operations
5:37:20it I would say that as
5:37:23a it's it's not a nothing concern for us
5:37:27but if we were a standalone gas utility
5:37:31that didn't have cash flow generated
5:37:33from other operations it's a different
5:37:35uh it's a different level of
5:37:38risk are you telling me Northern State's
5:37:41power all electric business is going to
5:37:43bail out the Colorado natural gas
5:37:49business all all I'm saying is that even
5:37:52at the psco level we have an electric
5:37:54business and we have a gas business and
5:37:57we issue Equity at the total Excel level
5:38:00and we issue that you know both at Excel
5:38:03level and at the operating company level
5:38:06so I get you were going to
5:38:07work on a depreciation study with staff
5:38:11to try and resolve this and I understand
5:38:14that there's concerns with reducing uh
5:38:17cash free cash flow in terms of the
5:38:20credit metric but if this commission uh
5:38:23wanted a phase in a trust fund in an
5:38:25incremental way in an order coming out
5:38:28of this case um would you have any
5:38:31additional advice or um concerns uh uh
5:38:36for us my advice would be talk to Mr
5:38:39Johnson about
5:38:40it all
5:38:42right that's all I got thank you Mr mler
5:38:46uh redirect Miss uh Miss Brahma uh just
5:38:49fairly briefly uh thank you Mr mhler I
5:38:52think it's um important that we're clear
5:38:55here on kind of relative scale of what
5:38:58we're talking about with respect to
5:38:59decommissioning costs and and you
5:39:01referenced earlier the need to compare
5:39:03net plant to net I I believe it was net
5:39:05plant to net decommissioning as opposed
5:39:07to gross to net could you maybe just
5:39:09speak to that and make sure we have a
5:39:12good sense of the relative scale of what
5:39:14we're talking about here in terms of
5:39:16future de decommissioning costs on a net
5:39:18toet or gross to gross
5:39:21basis
5:39:23um well
5:39:26it gross plant you know we look at the
5:39:28value of our plant like what was the
5:39:31original cost of it and then we subtract
5:39:33depreciation off of it uh you have the
5:39:36gross amount which is about 8 billion we
5:39:38have the net amount which uh I'm not
5:39:41going to remember the exact number it
5:39:42was four four something I
5:39:44believe uh that was referred to in this
5:39:46case and
5:39:50the I look at it as when I put a pipe in
5:39:54the ground that's the Val that kind of
5:39:56the dollars that we put in on day one
5:39:59and that shrinks over time the
5:40:02decommissioning or the removal cost is
5:40:04going to increase over time so it's a
5:40:06little bit of just understanding like
5:40:09what's the right ratio uh the the
5:40:13estimated future DEC commissioning cost
5:40:15of
5:40:163.7 I just view it as more appropriate
5:40:19to the original cost of what we invested
5:40:21in it as opposed to the amount that we
5:40:23originally invested in it less what
5:40:25we've already depreciated it down okay
5:40:29um it wasn't to minimize the reference
5:40:31to that it was just I think of it more
5:40:34as total cost to buy an install the
5:40:37equipment total cost to remove it okay
5:40:41and with respect to this the specific
5:40:44costs of removal whether it's and by I
5:40:47should be very careful here um in terms
5:40:49of cost of physical removal versus
5:40:51retire in place um would would would you
5:40:56be more comfortable deferring to Mr
5:40:58Gardner or Miss gilland as to why those
5:41:00costs are what they are and how they're
5:41:03determined I would yes thank you um and
5:41:09and as we're talking about the upcoming
5:41:11depreciation study um do you anticipate
5:41:15this will be the company's
5:41:17only uh depreciation or or
5:41:19decommissioning studies um in the years
5:41:22ahead as we're looking at the future of
5:41:24the gas system yeah I don't um as I talk
5:41:27to the way we do it currently is based
5:41:29on our
5:41:31historic historic cost to remove and the
5:41:34assumption that those are the that those
5:41:36continue forward that
5:41:38how work is performed the mix of work uh
5:41:42my expectation that as we we're going to
5:41:45go through the six month and at some
5:41:46point there's going to be a need to do
5:41:48probably some type of a separate
5:41:50engineering study if there are
5:41:53alternative methods uh because we are
5:41:56the current model is that we rely on the
5:41:58past methods for how we decommission and
5:42:01that the future looks like the past uh I
5:42:04just want to be cautious in that if we
5:42:07have to conduct an entire some type of a
5:42:10complex decommissioning study with an
5:42:12engineering firm that is something that
5:42:14we can't accomplish within likely within
5:42:17a six-month
5:42:19period those will evolve over time right
5:42:22I guess my question is if we're talking
5:42:24about the future of the gas system over
5:42:26decades here there will
5:42:27be I I guess I want to assume but in in
5:42:30your view will there be opportunities to
5:42:31take incremental steps to address these
5:42:33concerns as more information becomes
5:42:36available you know several years um over
5:42:39the life of the assets yeah absolutely
5:42:42and this is a new path for us as a
5:42:44company like going down a path that
5:42:47doesn't assume the future looks like the
5:42:50past um there was a you know fair amount
5:42:53of discussion of course about a uh trust
5:42:56versus a a
5:42:57reserve um and maybe just to get our
5:43:00terms clear when we say reserve do we
5:43:02mean a
5:43:05liability it well trust is separate
5:43:09isolated I have used the term reserved
5:43:13uh more appropriately would be
5:43:15probably Reserve is a little bit of a
5:43:17generic term that could Encompass either
5:43:19a
5:43:20trust
5:43:22uh you could say there's a balance sheet
5:43:24Reserve which is a regulatory liability
5:43:27on our books for the other one I think
5:43:29it depends on your definition of the
5:43:31term uh Reserve well and that's why I
5:43:35asked Mr mull I want to make sure that
5:43:36our record is as as clear as it can be
5:43:39so maybe if you could just confirm from
5:43:42a a you know a accounting but I'm
5:43:46talking about for purposes of customers
5:43:47and determining you know how this is
5:43:49accounted for in this context not just a
5:43:52gap accounting but generate making are
5:43:54you able to address what is the what how
5:43:57does the company currently characterize
5:44:00uh what it's hold what it has in in uh
5:44:03available for future decommissioning
5:44:05costs uh we care eriz it as the reserve
5:44:09depreciation Reserve how we characterize
5:44:12it as a company and is it separately
5:44:14accounted for in the company's books and
5:44:16Records it is separately accounted for
5:44:18on our books and Records okay and how
5:44:20does it affect what we characteriz as
5:44:24rate base at this
5:44:26time it it reduces or offsets rate base
5:44:30because it is a it would be a credit
5:44:33balance funds that have come in that
5:44:35reduce the rate base of the company okay
5:44:38and and why does the company maintain it
5:44:41as an offset to rate base if it's really
5:44:44I'm want to make sure we understand the
5:44:47relationship between free cash flow but
5:44:49still having a a liability on the
5:44:51company's books that's offsetting rate
5:44:53base and and why we do if you could
5:44:55explain why we do that if it's just free
5:44:58cash
5:44:59flow uh why we keep the separate Reserve
5:45:02yes uh it's really to make sure that we
5:45:04are attributing it back to the customers
5:45:08that it's attribute to that contribute
5:45:10it in this case that Reserve is specific
5:45:14to
5:45:15individual uh sub account accounts
5:45:18within our gas system so we have a
5:45:20separate reserve for pipes than we do
5:45:22for uh station equipment and the reserve
5:45:26is different even by size of pipe and
5:45:28transmission versus
5:45:29distribution what that does is ensures
5:45:32that when we're uh when you're looking
5:45:35at different classes of customers
5:45:37and who contributed the the dollars that
5:45:40it kind of flows back and gets
5:45:43attributable in future rate cases
5:45:46relative to the assets that it's
5:45:48attributable which align with customer
5:45:50classes okay and and I think you
5:45:53addressed um with with the Commissioners
5:45:55why a trust would be um you know complex
5:45:59but I'm wondering if you could also
5:46:01address why it may be more expensive for
5:46:03customers than the way the the company
5:46:05is currently doing it and I'm not
5:46:06talking so much about cost of capital
5:46:08we'll let Mr Johnson speak to that I'm
5:46:10just talking about the management of a
5:46:11trust and and returns um specific to the
5:46:16yeah it's
5:46:18it's in what I've seen there is a uh
5:46:22there's a trustee there's a
5:46:24fiduciary uh that would actually hold
5:46:26the trust and the dollars and is
5:46:27responsible for any distributions in and
5:46:29out of it there is also a uh fund
5:46:33manager think of it more like your uh
5:46:36investment own personal investment
5:46:38advisor that's determining the right mix
5:46:41of funds and then they are basing that
5:46:44mix of funds how much in debt Equity
5:46:47cash uh that also has to be integrated
5:46:51with uh a more detailed forecast to
5:46:53Future cash flows so there's the there's
5:46:56the layer in terms of assessing future
5:46:59cash flows layering that onto the
5:47:02investment strategy and then the trustee
5:47:05that is actually uh the bank uh that
5:47:08holds the
5:47:11Securities and would that trust then
5:47:13offset rate base the way the current um
5:47:16Reserve or regulatory liability does uh
5:47:19it doesn't because the trust is no
5:47:21longer the company's money it's the
5:47:24trust money so it isn't
5:47:29that customers get the advantage that
5:47:32they will get the returns that are
5:47:35earned by the investor Ms in the trust
5:47:38but they would not then get the rate
5:47:40base offset attributable to it so there
5:47:43there are offsets it just creates more
5:47:47it's it's funded and looked at
5:47:49differently because you're relying on in
5:47:52today's world we give customers the
5:47:54return real time they have $400 million
5:47:57on it we are giving them $400 million
5:47:59times our weighted average cost of
5:48:02capital as opposed to that it would be
5:48:05putting money in a trust and relying on
5:48:08the actual return of it and then
5:48:10changing or managing contributions to
5:48:12align with where you want to end up uh
5:48:15at a date in the future and and is there
5:48:18any guarantee that those market returns
5:48:20would be at or above the company's
5:48:22weighted average cost of capital
5:48:24currently applied to the
5:48:26reserve
5:48:28uh no no
5:48:30guarantees like with any investment but
5:48:33okay
5:48:35um I think uh the only other thing I
5:48:38want to ask you just going back to 's
5:48:40questions super quickly um is why do you
5:48:42rely on the FK uniform system of account
5:48:45uh for purposes of categorizing in that
5:48:48case plan held for future
5:48:50use uh it's it's kind of the established
5:48:55Baseline for for you know whether it be
5:48:57for the state of Colorado whether it's
5:49:00for our wholesale customers with
5:49:01jurisdictions it ensures that we are
5:49:04kind of all playing by the same set of
5:49:06rules and how we classify our costs so
5:49:10what constitutes plant and service what
5:49:12constitutes plant heeld for future use
5:49:14what is considered cweb F gives us the
5:49:17accounts they gives us the
5:49:19definitions uh we layer in our policies
5:49:24into that as well
5:49:27but it's it's more to make sure that we
5:49:30all understand the the language and the
5:49:33interpretation and definition and then
5:49:36lastly is it your understanding that the
5:49:37Colorado's Public Utilities Commission
5:49:40uh typically follows the UN for uniform
5:49:42system of
5:49:43account uh object to that question um I
5:49:47think it's outside the scope of my
5:49:49cross-examination I also think it's
5:49:52vague in the way that it's phrased what
5:49:54the Colorado commission generally does
5:49:56there's no type of proceeding uh no
5:50:00proceeding
5:50:01referenced uh can you rephrase uh Miss
5:50:05Brahma sure Mr mher uh is there a place
5:50:09in this record where we can look at to
5:50:10see whether or not this commission has
5:50:12historically followed the FK uniform
5:50:14system of account with respect to plant
5:50:17held for future
5:50:20use uh I can say specific the plant held
5:50:23for future
5:50:25use the commission has followed and we
5:50:28have followed uh FK in how we present it
5:50:32is there a witness who talks about that
5:50:34with respect to the determination of
5:50:36rate
5:50:37base yes art frus can talk about that uh
5:50:42and also how our Revenue requirement it
5:50:45that that we file in this case aligns
5:50:46with the first chart of accounts as well
5:50:48thank you that's all I
5:50:50have uh thank you Mr Moher you're
5:50:53excused uh who's next uh Miss sheller
5:51:08good
5:51:09afternoon uh for the record Valerie
5:51:11Herring appearing on behalf of Public
5:51:12Service welcome M sheller I can't see
5:51:15your
5:51:17camera uh but uh if you could hold up
5:51:20your right hand uh even though I can't
5:51:23say it uh do you uh swear to tell the
5:51:26truth the whole truth and nothing but
5:51:28the
5:51:29truth I
5:51:30do and you can put your hand down uh is
5:51:34anyone in the room with you or communic
5:51:36ating with you in any way they are not
5:51:40if that changes you let us know I will
5:51:43uh back to you Miss
5:51:45[Music]
5:51:46Herring oh there we go there you
5:51:52are good afternoon meller can you please
5:51:54State and spell your name for the record
5:51:56I can my name is Megan sheller m g n s c
5:52:01h l l r and by whom are you employed and
5:52:05in what position
5:52:07I'm employed by Excel Energy Services
5:52:09and my position is senior director of
5:52:11product
5:52:12management did you prepare direct a
5:52:14testimony and attachments in this
5:52:16proceeding that have been marked as
5:52:17hearing exhibit 111 I have and did you
5:52:21also prepare rebuttal testimony in this
5:52:23proceeding that's been marked as hearing
5:52:24exhibit 132 I did do you have any
5:52:28corrections to your testimony or your
5:52:30attachments not at this time um as Miss
5:52:33sheller's testimony and attachments have
5:52:35been previously Ed into the evidence um
5:52:38meller is available for cross
5:52:40examination uh Mr bunker I have 40
5:52:46minutes yes thank you good afternoon
5:52:49Miss sheller good afternoon my name is
5:52:52Greg bunker and I represent the utility
5:52:54consumer advocate in this case like to
5:52:57talk to you a bit about your rebuttal
5:53:00testimony and if we could pull up here
5:53:02in exhibit 132 your rebuttal testimony
5:53:07and turn to page five lines 1 through
5:53:148 and here in lines 1 through eight you
5:53:17indicate you are responding to UCA and
5:53:20staff testimony regarding the company's
5:53:22Capital
5:53:23Investments associated with the private
5:53:26long-term
5:53:28Evolution or the private LTE project and
5:53:33public services proposed Information
5:53:35Technology def ferral Pro uh proposal or
5:53:38the it to furl is that right that's
5:53:41correct okay uh if we could pull up now
5:53:47hearing exhibit
5:53:49500 and this is UCA witness Mr sco's
5:53:54testimony and if we could go to page 102
5:54:09page 102 at the bottom of the page lines
5:54:1113 to
5:54:1317 and and here Mr scok uh States in
5:54:18July of 2023 Excel Energy announced it
5:54:21would be using Nokia's private LTE
5:54:24network communications
5:54:26Technologies for its eight State
5:54:28territory including
5:54:30Colorado to modernize its electric
5:54:34grid and in the first line there he uh
5:54:38answers this question that this it is
5:54:41his assumption that this private LTE
5:54:44project is the same network that XL
5:54:47Energy is deploying Enterprise
5:54:50wide and my question to you is whether
5:54:53his assumption is
5:54:57accurate we are deploying the private El
5:55:00Network Enterprise wide okay thank
5:55:04you and is it correct that that the
5:55:06private LTE network is a redundant
5:55:10Communications Network that's not
5:55:12designed to replace the existing
5:55:15wireless network for psco
5:55:20gas the redundancy of the private
5:55:23Network comes into play as we have
5:55:25access to the third-party network still
5:55:28but we'll only be using it when needed
5:55:30and that's when the redundancy will come
5:55:32into
5:55:33play okay so it the this new network
5:55:37does not replace the old
5:55:40Network it is a A system that will keep
5:55:44the existing Network as a redundant
5:55:47backup system is that is that roughly uh
5:55:50characterized right let me just restate
5:55:54um for my understanding so the private
5:55:56network is a network that we are are
5:55:58building obviously from a private aspect
5:55:59we will have access maintain access to
5:56:02the third-party Network and we'll be
5:56:04using when needed
5:56:09okay if we could turn to page 106 of Mr
5:56:12sco's testimony at lines 18 to
5:56:1721 here he contends that Pesco is asking
5:56:21rate payers to pay for both the private
5:56:24LTE
5:56:26project plus the existing wireless
5:56:29system from third party vendors which
5:56:31will which will be kept as a redundant
5:56:34backup system and to pay for them now
5:56:38and before the L private LTE project is
5:56:41used and useful do you see that I do see
5:56:46that and public service currently uses
5:56:49two thirdparty Public Communication
5:56:52providers correct
5:56:55correct and referring to your rebuttal
5:56:59testimony now hearing exhibit
5:57:02132 at page 15 lines 1 to
5:57:117 here you indicate the company would
5:57:14still have the ability to access the
5:57:17third-party networks as needed in order
5:57:20to ensure connectivity for the company's
5:57:23operations such as during
5:57:26outages without incurring the cost of
5:57:29the full-time access to the thirdparty
5:57:32networks is that right that's correct
5:57:36and is it correct that the company has
5:57:38not executed contracts which spells out
5:57:42with this spells out this third-party
5:57:46Arrangement and its understanding with
5:57:49this understanding with its third-party
5:57:54vendors so what is known is that the
5:57:57company will be paying for as needed
5:58:00basis and that will be something that
5:58:02will be
5:58:04documented okay my question is it has
5:58:07not yet executed contracts regarding
5:58:11this part-time Arrangement or is youut
5:58:14it as needed basis with these uh
5:58:17thirdparty vendors is that
5:58:23right I cannot fully answer that
5:58:26question all right let's uh go to our
5:58:29box.com account if you will please
5:58:32hearing exhibit 525
5:58:57and this is public
5:59:00services Discovery response to UCA 30-10
5:59:06and you're the sponsor of
5:59:09this this dis uh this response correct
5:59:13[Music]
5:59:15correct I'd move to
5:59:17admit hearing exhibit
5:59:21525 any OB any objection no
5:59:25objection still
5:59:27admitted and is it correct in the
5:59:29response
5:59:31U subp part A it says such contracts
5:59:34have not been EX executed at the time of
5:59:37this response that is what
5:59:41stated and what is pesco's estimate of
5:59:45the future costs to use its third-party
5:59:48vendor networks on a part-time
5:59:53basis I do not have future costs of that
5:59:56third party
6:00:00basis
6:00:02okay uh Mr chairman I have couple of
6:00:06questions that concern a confidential
6:00:11document and is now a good time it fits
6:00:15in with the
6:00:16discussion but we would need to go into
6:00:19a confidential
6:00:22session how long u how long's the do can
6:00:25you do this at the end of your acoss
6:00:27when we take a break or uh uh do you
6:00:30need it to do it
6:00:32now I could uh
6:00:37I could do it at the end if if that uh
6:00:40works best for you for all parties and
6:00:44uh just for all the parties uh if you
6:00:47could give us like 24 hours notice uh
6:00:50before you um uh bring up confidential
6:00:54exhibits so we can uh uh clear the clear
6:00:58the room and uh in
6:01:00a managed way that'd be greatly
6:01:03appreciated so Mr bunker if you could
6:01:05complete complete your non-confidential
6:01:07cross and then we'll uh probably take a
6:01:11how how long is your confidential
6:01:13cross oh I would say
6:01:17perhaps five 10 minutes at the very most
6:01:21uh and that's assuming that you or the
6:01:25other Commissioners may have uh a couple
6:01:27of questions or some redirect while
6:01:30we're in the confidential session so I
6:01:32would I would think say 10 to 15 minutes
6:01:36assuming all of those folks involved in
6:01:39in the discussion my my questions
6:01:42probably say five minutes all right
6:01:46let's uh if we could do the rest of your
6:01:48cross now and then around three or
6:01:51whenever you finish your cross we'll
6:01:52take a 20 or 30 minute break and then
6:01:56we'll uh uh use 10 or 15 minutes of that
6:02:00uh to um to do the confidential session
6:02:04so okay keep going if you would yes
6:02:07thank
6:02:09you if we could now refer to uh hearing
6:02:13exhibit
6:02:14500 and that is Mr sco's answer
6:02:18testimony at page 107 lines 1 to six and
6:02:23here Mr scoach discusses the used and
6:02:26useful principle
6:02:30right
6:02:31correct and if we could turn to uh scok
6:02:37answer testimony attachment
6:02:5749 you can scroll to the bottom of of
6:03:01the uh document where it shows the
6:03:04sponsors
6:03:06uh you are one of the sponsors to Public
6:03:09Services response to
6:03:12cpuc Discovery request 2-5 correct
6:03:17yes okay and if we could uh kind of go
6:03:22to the middle of the break between page
6:03:24one and two and and subar paragraph
6:03:29C thank
6:03:30you and in sub paragraph C Pesco respond
6:03:35Ed in Discovery that the private LTE
6:03:39project and the
6:03:42pfu in question is plant that is used
6:03:46and useful but the larger project for
6:03:50which it is intended is not yet in
6:03:52service is that right that's what it
6:04:02states all who is speaking I'm having a
6:04:05hard time hearing you yeah Miss I can't
6:04:07hear you
6:04:11either me try
6:04:21something is this better much okay sorry
6:04:25I apologize for that um stating an
6:04:28objection here that this is outside the
6:04:30scope of this witness's testimony this
6:04:33discovery response is sponsored by
6:04:34multiple company Witnesses this
6:04:36particular part of the discovery
6:04:38response I believe is being sponsored by
6:04:39company witness
6:04:42frus Mr bunker are you willing to uh ask
6:04:47your questions on this uh uh exhibit to
6:04:51Mr fedus well I believe I believe this
6:04:54witness does go into testimony uh
6:04:58regarding used and usefulness of of the
6:05:02of the system and she is one of the SP
6:05:05sponsors to this to this particular
6:05:08Discovery
6:05:09response and while I may have additional
6:05:12questions for Mr fedus or fedus I guess
6:05:15it's pronounced fedus after uh this
6:05:18discussion but I think it is relevant
6:05:22and reasonable to ask this
6:05:24witness uh this this uh
6:05:27question objection Overworld uh and
6:05:30we'll see uh what the witness says
6:05:36do you need the question reread Miss
6:05:39sheller yeah yes that would be
6:05:42appreciated yeah so in the response to
6:05:45sub paragraph C Pasco responded in
6:05:49Discovery that the private LTE project
6:05:51in the pfu in question is plant that is
6:05:56used and useful but the larger project
6:05:59for which it is intended is not yet in
6:06:03service and I believe you answered
6:06:05correct
6:06:06what is
6:06:09stated and in the response to
6:06:12subparagraph
6:06:15e Public Service responded that the
6:06:18private LTE project is rights to Access
6:06:22Wireless Spectrum so it is currently
6:06:26operational and that the wireless
6:06:28Spectrum ass a access sorry is needed
6:06:33ahead of the stages being placed in
6:06:35service service which is why it is
6:06:38placed in
6:06:41pfu is that
6:06:44right as I
6:06:46stated so as the various stages are
6:06:50completed and placed into
6:06:54service is it your understanding the phf
6:06:57balance will be transferred to plant and
6:07:01service I am not the right witness to
6:07:04answer that question on how it will be
6:07:06um placed I can speak to the project
6:07:08timeline um and where we are within it
6:07:11but Mr fedus is much better to speak to
6:07:14that okay I can ask him about that but
6:07:18uh you say you can talk about the
6:07:20project timeline is that right
6:07:24correct okay so let me ask you uh
6:07:27referring to your rebuttal testimony on
6:07:29page 19 lines 4 through
6:07:33six here you in indicate uh to date the
6:07:37company has deployed two cellular towers
6:07:39in its service Tera service territory
6:07:42sorry one located on Lookout Mountain
6:07:45and the other located at the company's
6:07:47material Distribution Center is that
6:07:50right correct and if we turn to page
6:08:0321 I'm sorry uh it I'm looking for your
6:08:07table
6:08:09MNR or MN s-r
6:08:13D1 in your rebuttal testimony and I
6:08:16thought it was on page 21 but page 19 I
6:08:20think on the bottom yeah it's on 19
6:08:23thank you for your help
6:08:25there and and here uh these two sites
6:08:30were completed in
6:08:34202 three is that right
6:08:39correct more specifically these two
6:08:41sites were deployed on the very last day
6:08:44of
6:08:452023 on December 31 2023
6:08:49correct that's when they were ins
6:08:54serviced and under the company's yearend
6:08:57rate base method the full amount of $4.9
6:09:01million will be included in the
6:09:04company's Revenue request IR is that
6:09:07right I would defer to Mr fedus to
6:09:10confirm
6:09:12that well let's look at uh your
6:09:17testimony uh direct testimony
6:09:21table mds.com
6:09:36I believe it's page
6:10:0141 okay this is this is is your direct
6:10:05test
6:10:06testimony and it is uh
6:10:10table
6:10:12mn-
6:10:15d-5 and if I look at the various project
6:10:18names and I look down at the third line
6:10:21from the top private
6:10:24LTE shows
6:10:26$4.9 million right that's
6:10:30correct and these are enhancing
6:10:33capability capital additions right
6:10:37that's
6:10:38correct so is it accurate that under the
6:10:42company's yearin rate based method the
6:10:44full amount of $4.9 million will be
6:10:47included in the company's Revenue
6:10:50requirement as stated
6:10:54yes okay and by
6:10:58deployed
6:11:00what is it accurate that this would mean
6:11:04the company is completed all the tests
6:11:06in a testing
6:11:08procedure which then enables the company
6:11:11to eventually
6:11:12proceed with its device deployment
6:11:16scheduled later in
6:11:212024 there are testing that happens as
6:11:25devices and counties are going into
6:11:28place so that is something that is a
6:11:30rolling process within the
6:11:33deployment okay
6:11:36and referring to your rebuttal testimony
6:11:39at uh page
6:11:48eight 15 to
6:11:5119 here you assert that Mr sco's answer
6:11:57testimony did not argue that the private
6:11:59LTE project costs were
6:12:02imprudent and that he did not question
6:12:05the implementation or scope of the
6:12:07project is that right that's what
6:12:10stated and if we could turn to Mr sco's
6:12:14testimony at page
6:12:24105 you'll see a long uh question there
6:12:29uh that Mr scok poses to himself
6:12:32starting on page three and it's starts
6:12:35do you believe it's prudent and just and
6:12:37reasonable for pesco's rate payers to be
6:12:39burdened with the additions to rate base
6:12:42in the form of the private LTE
6:12:46network and the annual expenses to the
6:12:48third-party telecommunication companies
6:12:51for a
6:12:52backup and redundant Communications
6:12:55Network would you agree the first word
6:12:57on line nine is
6:13:00no I agree
6:13:07we could go back to your rebuttal
6:13:09testimony at page
6:13:1914 and starting on
6:13:27um line 13 here Mr scok
6:13:31identifies issues or other concerns
6:13:34regarding the project right
6:13:49correct we can go back to line uh page
6:13:5910 of your
6:14:01testimony lines 13 to 17
6:14:06and here you
6:14:08discuss one of the primary benefits of
6:14:11having a private LTE network is the
6:14:14security of information related to
6:14:17pesco's Natural Gas distribution system
6:14:20do you see that
6:14:23yes is it correct that in your testimony
6:14:26in this proceeding you did not address
6:14:28specific instances where the security of
6:14:31the system or security of information
6:14:34relat Rel ated to pesco's Natural Gas
6:14:36system was an
6:14:41issue I would assume that's
6:14:44true all right and uh here again
6:14:50on on uh lines 13 to 17 here on page
6:14:57three you
6:15:00uh you discuss this security of
6:15:03information as we just
6:15:07discussed does pesco's present
6:15:10third-party Public Communication vendors
6:15:13have an obligation to psco to maintain
6:15:16the security of the information
6:15:18transmitted on their
6:15:21Network they have a level of obligation
6:15:24yes I assume
6:15:25so and is it your understanding pesco's
6:15:29present thirdparty Public Communication
6:15:31vendors encrypt data passing through
6:15:35their their
6:15:37networks that is my
6:15:39understanding and is it your
6:15:41understanding that pasco's present
6:15:43third-party Public Communication vendors
6:15:46use both use wireless
6:15:53technology
6:15:55yes and these thirdparty vendors and the
6:15:59private LT LTE system will use the same
6:16:03Wireless techn techology which is
6:16:06presently LTE and moving to a 5G network
6:16:10is that
6:16:13right
6:16:15yes and are these third-party
6:16:18communication Network providers
6:16:21redundant of each
6:16:25other I cannot answer
6:16:28that I'm sorry you cannot are they
6:16:32redundant of each other yes
6:16:37no I can answer
6:16:39that I'm sorry maybe it's my hearing but
6:16:42you cut out I just didn't quite yeah I'm
6:16:45not understanding when if you can repeat
6:16:47the question oh okay uh in other words
6:16:52the communication Network providers
6:16:55currently used are they redundant of
6:16:59each other in other words they they each
6:17:02have the obligation to maintain the
6:17:05security of the
6:17:06information and they are able to they
6:17:10are able to uh overlay on top of each
6:17:15other to where the information is
6:17:18maintained as
6:17:21secure yes they provide similar services
6:17:24that are redundant in nature okay
6:17:35and referring to your rebuttal testimony
6:17:37on page
6:17:3817 and here you talk about the future on
6:17:43lines 5 through eight you talk about the
6:17:47the uh future expansion of devices that
6:17:52are integral to our natural gas
6:17:54operations do you see that
6:17:58yes and by devices you are referring to
6:18:02your rebuttal testimony
6:18:07where and we can we can flip back to
6:18:10this why don't we uh page 10 lines 13-
6:18:1417 and this is your
6:18:17table
6:18:20mnr-1
6:18:24and it is not on page 10 I'm sorry 19 19
6:18:30thank you and the column that states gas
6:18:34of devices per
6:18:38site the third column
6:18:41over do do you see
6:18:44that so when you refer to devices you're
6:18:47referring to these gas devices per site
6:18:50in this table is that
6:18:52right I'm talking about the growth of
6:18:55the devices this is both the known
6:18:57devices as well as what is projected
6:19:00into the future okay
6:19:05if we look at uh just above the table on
6:19:09line
6:19:1010 you indicate before the end of 2024
6:19:14the plan the company plans to install
6:19:16approximately
6:19:18236 devices are these the devices that
6:19:22you're referring to correct okay and
6:19:26these will be connected to the two
6:19:29towers that ultimately support the gas
6:19:32business is that right yes
6:19:35would it be accurate to say that these
6:19:39devices are not intended to be used
6:19:42directly by gas customers as their
6:19:45individual communication
6:19:48Services I'd say the the broader Network
6:19:52supports both electric and gas and gas
6:19:54customers will benefit it as well well
6:19:57well what I what I really meant by that
6:20:00is that say you or I as an individual
6:20:04gas C customer we can't use this for our
6:20:07individual communication Services
6:20:09correct correct
6:20:15okay now if we could go to to page five
6:20:19of your rebuttal
6:20:24testimony and once again at lines uh
6:20:27five
6:20:29through five or 11 through 16
6:20:33rather you
6:20:35talk about the it deferral
6:20:38issues and you indicate the company's
6:20:42request to track and defer recovery of
6:20:45depreciation expense and interest
6:20:48associated with incremental aging
6:20:51technology and cyber security cyber
6:20:54security Capital additions placed in the
6:20:56service between January 1
6:21:012024 and in pin you have the end of the
6:21:03test year approved by the
6:21:06commission and the implementation of the
6:21:09final rates in the company's net next
6:21:12natural gas rate case see that
6:21:16yes and so we all have an understanding
6:21:20of the length of time between January 1
6:21:252024 and the implementation of final
6:21:29rates in the company's next natural gas
6:21:32rate case when does psco plan to file
6:21:36its next gas rate
6:21:39case Mr fedas or or another witness you
6:21:42best answer
6:21:46that okay well based on your knowledge
6:21:50are we looking at one year two years
6:21:52five years objection asked and
6:21:56answered uh this is a different question
6:22:00Council um I believe it's the same
6:22:02question you asked her previously
6:22:03whether or not she was aware of when the
6:22:05company would be filing its next rate
6:22:06case and she said that was not within
6:22:08her um knowledge I think you objected
6:22:12before he even finished his question so
6:22:15uh go ahead can you re askk your
6:22:18question Mr bunker
6:22:21sure so we have an understanding of the
6:22:24length of time between January 1
6:22:272024 and the implementation of the final
6:22:31rates in the company's next natural gas
6:22:34rate
6:22:35case when does psco plan to file its
6:22:38next gas rate
6:22:40case I mean that was a question she
6:22:44didn't know but go ahead you can answer
6:22:46again I'm gonna respond with the same Mr
6:22:48fedos or another witness is better to
6:22:50answer
6:22:51that thank
6:22:59you if we could turn to page 26 of your
6:23:03rebuttal test
6:23:10Tony and it winds 13 to
6:23:1515 and your testimony that we know that
6:23:18our investments will ultimately be
6:23:20reviewed in a later proceeding for
6:23:22reasonableness and Prudence do you see
6:23:25that
6:23:27yes over the last 10 years are you aware
6:23:30of any instance when pesco's it
6:23:34investment ments were challenged for
6:23:35reasonableness and
6:23:40prudency well I believe that we're
6:23:42reviewing that on for example private
6:23:44LTE as we speak um and that's part of
6:23:47the process that we go through in the
6:23:49right case
6:23:51review so you're saying that you
6:23:53consider this to be a prudency review of
6:23:56the
6:23:57it uh deferral
6:24:01program objection mischaracterizes or
6:24:04test
6:24:06testimony I'm not sure it did De
6:24:09honor can you uh repeat the
6:24:13question over the last 10 years are you
6:24:17aware of any instances where any of
6:24:19pesco's it Investments were challenged
6:24:22for reasonableness and
6:24:24prudency and she answered this is a rate
6:24:28case and looking at or this is a case
6:24:31looking at the reasonableness and
6:24:33prudency and so then my follow-up
6:24:35question was so are you saying that this
6:24:39rate case is a prudency review of
6:24:43pesco's IT
6:24:46Investments I'm sorry the word he used
6:24:48was it deferral well that that's a good
6:24:52question you can answer that question
6:24:54Miss sheller I have no objection to that
6:24:56question as stated I had an objection to
6:24:58him stating it was for to the it
6:25:00deferral I believe it's Our obligation
6:25:03to defend
6:25:05and look at the reasonableness of our
6:25:07investments as part of this
6:25:11process okay and so over the last 10
6:25:14years are you aware of any instance
6:25:16where any of pesco's it Investments were
6:25:20disallowed by the
6:25:22commission I do not have knowledge of
6:25:24that
6:25:26okay is it correct that Pesco withdrew
6:25:30its it deferral request in the
6:25:33settlement
6:25:34in pesco's last electric rate case which
6:25:39was 20
6:25:41a0
6:25:46530e I believe that to be
6:25:52true and with that uh Mr chairman I am
6:25:57finished with my cross examination but
6:26:00for
6:26:02the uh confidential question
6:26:05all right
6:26:08um uh uh Miss conle how long do you need
6:26:11to set up uh the confidential
6:26:15session I'll just need someone from the
6:26:17company to verify the parties on Zoom
6:26:19first and then it'll just take me a
6:26:22minute or so I just have to verify that
6:26:24the live stream is paused all right so
6:26:27for the public session let's reconvene
6:26:29at
6:26:313:30 um and what do you need uh us to do
6:26:35do we need to log off and log on or is
6:26:37there a separate Zoom
6:26:39link no they can just stay here and um
6:26:42as long as everyone on the screen now is
6:26:45allowed to be on then we can just go
6:26:47right into it I just need a minute to
6:26:49turn off live stream all right if uh
6:26:52people who are not um supposed to be on
6:26:55could drop off uh that'd be
6:27:03great
6:27:33e
6:28:03e
6:28:33e
6:29:03e
6:29:33e
6:30:02e
6:30:32e
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6:36:32e
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6:37:32e
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6:38:32e
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6:40:32e
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6:41:32e
6:42:02e
6:42:32e
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6:43:32e
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6:46:01e
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6:47:01e
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6:50:01e
6:50:31e
6:51:01e
6:51:31e
6:52:01e
6:52:31e e
6:53:17missioner plant any questions for Miss
6:53:21sheller uh just just one quick question
6:53:24um you were talking about the um the LTE
6:53:28system that would be used for both the
6:53:29electric and the gas system and I'm
6:53:31assuming this is
6:53:33for the the derms VPP
6:53:37Communications uh to assist with the
6:53:39development of that program is that
6:53:41correct yeah this is our Network that
6:53:44helps our supports our field devices
6:53:46both electric and gas okay so I was
6:53:49wondering is that one of the um
6:53:52components that would be included in the
6:53:55rider that was approved in the
6:53:58legislation that passed last year
6:54:03the private LTE portion of it yeah the
6:54:07costs associated with the communications
6:54:09protocols that are established through
6:54:11the LTE system I am not aware of what
6:54:13was included in that writer if this
6:54:15portion of that was in it okay and so
6:54:18this would be a this would be what the
6:54:20company attributes the gas component of
6:54:23that uh system would be in this rate
6:54:28case and the other components would be
6:54:31but you're not sure if that would be
6:54:32uh worked into the rider or not yeah so
6:54:35the the network is being deployed across
6:54:37our service territory what's being
6:54:39allocated in this right case is the gas
6:54:42portion of psco um is being attributed
6:54:45to in this race case I am not aware of
6:54:48what I would assume that that if we're
6:54:52asking for it here we it's not part of
6:54:54that writer but I I would defer okay
6:54:57thank you that's all
6:54:58I commissioner Gman
6:55:04hi good afternoon meller good
6:55:07afternoon um just a couple
6:55:11questions um so as I understand it now
6:55:15like this SK devic is related to the LTE
6:55:18issue um the skated devices that you
6:55:21have right now are connected to these
6:55:23third party
6:55:25networks but they will remain connected
6:55:27to the third party networks essentially
6:55:29as a
6:55:31backup uh even once you deploy your LTE
6:55:35network
6:55:37yes um so just curious from a security
6:55:42standpoint I I understand kind of the
6:55:44information security Associated or
6:55:46flowing to or from these devices as
6:55:49being part of the company's motivation
6:55:52but I'm curious does that actually
6:55:54substantially change if the devices stay
6:55:56connected to a third party Network yeah
6:56:01so today we are heavily reliant on that
6:56:04third party to manage the security uh we
6:56:07will maintain access and use it they use
6:56:10their Network as necessary but the data
6:56:12transfer and the monitoring will be
6:56:14something that's in a private nature in
6:56:16the new network so we will be able to
6:56:18have that closed an additional
6:56:20monitoring available that we don't have
6:56:22today due to the public nature of
6:56:25it okay so um so it's the actual
6:56:30transmission of data so so if you just
6:56:33have it as a backup is all of the
6:56:37information to or from or contained in
6:56:39the device totally inaccessible to the
6:56:43third- party Network unless you push
6:56:46that information
6:56:47out correct so we will have access to it
6:56:51but we will not be sharing that to my
6:56:54knowledge this is where probably get a
6:56:55little bit more to P but we'll have
6:56:57access we'll access to their Network and
6:56:59we'll share that data as necessary but
6:57:02we won't be using it um unless it's
6:57:05needed okay um can you tell me what's
6:57:09the total cost of the LTE
6:57:14project so the total cost um and I I
6:57:18don't have the exact cost in front of me
6:57:20um I know the question earlier was
6:57:22specifically asking around the Spectrum
6:57:25um itself in which we're looking to
6:57:26recover as part of this rate case the
6:57:29total cost of the spectrum for the life
6:57:31is 80 million
6:57:32that we are associating across the
6:57:35across the
6:57:37jurisdictions okay so when we see that I
6:57:40think it's uh okay so um how you
6:57:46indicated in your rebuttal testimony
6:57:48that the Colorado gas utility will only
6:57:50bear a portion of the cost that's
6:57:53allocated to it pursuant to the
6:57:55company's established cost allocation
6:57:58procedures can you be more specific
6:58:01about what that
6:58:02allocation percentage is and what cost
6:58:06allocation procedure upon which it's
6:58:08based so I am probably not the best one
6:58:11to answer our allocation model I would
6:58:13defer to Mr fedas for that um what the
6:58:17company is using what has been guided or
6:58:19excuse me what we are using for the
6:58:21project is what's been Guided by the
6:58:22allocation model which has been
6:58:24predetermined by the company but I would
6:58:25defer to Mr pretas for that okay yeah
6:58:29I'm happy to ask him more specific
6:58:31questions um I just want to maybe follow
6:58:33up with one or two to make sure the
6:58:35parts of this you know that I'm not kind
6:58:37of skiing over um so that it sounds like
6:58:41some sort of more general cost
6:58:43allocation framework correct to your
6:58:46understanding yes um as I understand the
6:58:50systems relative to each other it seems
6:58:53to me that the Electric System would
6:58:56have far more
6:58:59interoperable intelligent information
6:59:02sharing devices than the gas system is
6:59:06that a fair
6:59:09assumption I think the exception is
6:59:11there I think when we think through the
6:59:13not only the current devices but
6:59:15potential devices for additional
6:59:17monitoring additional um security I
6:59:20think that it benefits both electric and
6:59:22gas uh I do think there's obviously
6:59:24increasing expansion on the electric
6:59:26side as a fair
6:59:28statement and which is why the gas
6:59:30portion is much smaller than the
6:59:32electric which is being
6:59:34allocated yeah I'm not really talking
6:59:36about expansion of the system but more
6:59:38or less the the number of actual devices
6:59:42on each system that will interact with
6:59:46the LTE strikes me would be far more
6:59:49devices on the Electric System do you
6:59:51think that's a fair assumption I do not
6:59:54have the device count split out of
6:59:56electric and gas um so I can't make that
7:00:00assumption it's at least my
7:00:02understanding that the SK system on the
7:00:04gas side is somewhat Limited in terms of
7:00:08actual monitoring points um is that
7:00:13fair I think that would be I can't make
7:00:16that
7:00:18assumption okay those are my only
7:00:21questions I do not have anything for M
7:00:24sheller so um Miss Herring redirect yes
7:00:28thank you chair blank just a couple um
7:00:32Miss sheller UCA Council asked you a
7:00:35series of questions about the redundancy
7:00:37of the private LTE network with the
7:00:40existing third-party Network do you
7:00:42recall those questions I
7:00:44do um once the private LTE network is
7:00:47fully deployed when will the company be
7:00:49using the third-party
7:00:51Network the company will only be using
7:00:53the third party Network um as needed um
7:00:57in those
7:00:59outages so in other words will the Third
7:01:01thir party Network be a fully redundant
7:01:03Network to the private LTE network the
7:01:05company is
7:01:07deploying yeah the company will only use
7:01:10it when our network is not
7:01:16available and does the fact that the
7:01:18company hasn't executed contracts with
7:01:19the third party networks at this time
7:01:22change your understanding it does not
7:01:25based off all of the discussions up
7:01:26until this point um we're proceeding as
7:01:30planned UCA Council also asked you a
7:01:33series of questions about the obligation
7:01:35of the thirdparty LTE network to
7:01:37maintain the security of the company's
7:01:39data and other data on the system do you
7:01:41recall those questions I do and do you
7:01:44recall whether the company answered
7:01:46discovery that was very similar to the
7:01:47questions that the UCA Council asked you
7:01:50I do um and if I can pull up from uh box
7:01:54uh hearing exhibit
7:02:00141 I only see exhibits up to 140 in
7:02:05your Bo oh
7:02:11Sho just one second
7:02:26please the company believes they are in
7:02:29the Box perhaps refresh I think they
7:02:31were just recently put
7:02:34in just Char refes just give me a second
7:02:37okay thank you
7:03:25and I'm actually looking for hearing
7:03:28except oh there we go thank
7:03:30you sorry about
7:03:33that thank you for your patience um Miss
7:03:36sheller is the Discovery response that
7:03:39you were referring to Discovery request
7:03:40UCA
7:03:4430-3 that's
7:03:49correct and looking at the the question
7:03:52here that's asked on subpart
7:03:54a asked whether or not thirdparty
7:03:56communication networks have an
7:03:58obligation to maintain the security of
7:04:00information transmitted
7:04:02on their Network do you recall what you
7:04:04responded to that
7:04:07question yes similar to what stated
7:04:10here and I noticed that there's a highly
7:04:13confidential attachment to this so um
7:04:16can you just speak to the answer that's
7:04:19in subp part
7:04:21A yes I think as we think through not
7:04:24only as previously discussed is the
7:04:27access to the data but also the
7:04:29increasing security and monitoring
7:04:31that's NE necessary um for
7:04:35devices and I'd move admission of this
7:04:38exhibit without the confidential
7:04:41attachment any
7:04:45objections all right Mr bunker no
7:04:49objection still
7:04:53moved one last question micheller um did
7:04:56the company evaluate the cost of
7:04:58continuing to use the third party
7:05:00Network into the future as opposed to
7:05:03deploying a private LTE
7:05:05network yes uh future cost was
7:05:08definitely part of the evaluation of not
7:05:12only maintaining our existing third
7:05:14party as well as I'm looking at our
7:05:16private access and the reality of the
7:05:19evaluation is with the future growth of
7:05:22the devices and the plan expansion of
7:05:24the business needs it's just not
7:05:26financially viable to be Reliant solely
7:05:28on our third party
7:05:30vendors thank you you nothing further
7:05:32for this
7:05:33witness uh thank you uh thank you
7:05:38Michelle are you may be
7:05:40excused uh I think the next W witness is
7:05:44uh Mr
7:05:49Johnson Mr Johnson can you hold up your
7:05:52right hand you swear to tell the truth
7:05:55the whole truth and nothing but the
7:05:56truth I do you can put your hand down is
7:05:59anybody with you or communicating with
7:06:01you in any way no that changes you'll
7:06:04let us know yes uh back to you Miss
7:06:08Brahma thank you uh good afternoon Mr
7:06:11Johnson would you please uh spell your
7:06:13name for the record p a u l j o hns o n
7:06:19and what is your title Please vice
7:06:22president Treasurer and investor
7:06:24relations thank you uh did you cause to
7:06:27be submitted into uh this case your
7:06:30direct testimony as hearing exhibit 103
7:06:33your supplemental direct testimony is
7:06:35hearing exhibit 119 and your rebuttal
7:06:37testimony as hearing exhibit
7:06:40126 yes that testimony has already been
7:06:43admitted so Mr Johnson is available for
7:06:47cross-examination uh
7:06:50UCA I have oh no pu 30
7:06:55minutes thanks chairman um good
7:06:58afternoon Mr Johnson my name is Justin
7:07:01Cox and I'm a Assistant Attorney General
7:07:03representing trial staff in this
7:07:04proceeding it's nice to meet you I don't
7:07:07think we've met
7:07:08before um let's kind of ease into it uh
7:07:12start with a little background just a
7:07:14level set um for its electric operations
7:07:19public service is currently authorized
7:07:20to earn a whack of
7:07:236.95% correct that sounds correct yes
7:07:28and an equity ratio of 55.6 %
7:07:33correct and Roe of
7:07:3699.3%
7:07:38correct then on the gas side company's
7:07:41currently authorized to earn a whack of
7:07:456.7%
7:07:47correct and an equity ratio ranging from
7:07:5152% to 55%
7:07:55correct and again another range for Roe
7:07:59of 99.2%
7:08:029.5%
7:08:04correct and then in this case uh the
7:08:07company is requesting a whack of
7:08:107.52% is that correct
7:08:12correct and an equity ratio 55%
7:08:16correct and an
7:08:19Roe which is changed since your direct
7:08:22uh testimony but as of your rebuttal
7:08:25testimony
7:08:2610.1% that
7:08:29correct um and according to your
7:08:31rebuttal testimony the company is making
7:08:33these proposals to maintain current
7:08:35credit ratings to allow the company to
7:08:38raise Capital at a reasonable cost is
7:08:40that accurate
7:08:44yes and looking at the credit rating
7:08:48credit
7:08:48ratings um has Public Service
7:08:51experienced any credit rating downgrades
7:08:53because of its last gas rate case
7:08:58no and have there been any any credit
7:09:02rating downgrades because of its last
7:09:04electric rate
7:09:06case no the but the credit ratings are
7:09:08on negative all look at SPS or S&P
7:09:12excuse me S&P um but again that Outlook
7:09:18was not because of either the last gas
7:09:21rate case or the last uh electric rase
7:09:27correct it was related to F Wildfire
7:09:30risk including litigation
7:09:34correct
7:09:36um and the company hasn't had any
7:09:40problem attracting Capital reasonable at
7:09:42a reasonable cost since those
7:09:45cases correct the the credit spreads
7:09:48have widened compared to uh some of our
7:09:51other companies um in the recent two
7:09:55years but we continue to be able to
7:09:56access Capital
7:09:59markets and this despite the Regulatory
7:10:02and business risk that you cited in your
7:10:04testimony uh would you agree that
7:10:07Colorado is is generally still viewed by
7:10:09the rating agencies as a mostly credit
7:10:12supportive regulatory
7:10:14environment I would say that's correct I
7:10:16would say they view it as less
7:10:17supportive than it used to
7:10:20be and it's fair to say that uh the
7:10:25credit rating agencies at least in uh
7:10:28some of the exhibits you provided and um
7:10:32they their
7:10:34issuance they they're most worried right
7:10:36now about the Wildfire risk and
7:10:39Associated litigation risk
7:10:45correct in looking at your
7:10:49testimony um and we if we could bring
7:10:51that up Miss klets um this is a rebuttal
7:10:55testimony hearing exhibit
7:10:59126 page
7:11:0213 and Mr Johnson I'll just remind you
7:11:04to please keep your voice
7:11:13up yeah we can focus on that
7:11:17table um Mr Johnson as part of your
7:11:20rebuttal you ran seven credit metric
7:11:23scenarios to determine each scenario's
7:11:24impact on the credit levels of Public
7:11:27Service um including the cost of the
7:11:30proposals from staff and or the impact
7:11:34of the proposals from staff and UCA
7:11:36correct
7:11:39correct and based on your
7:11:43analyses
7:11:44um would you agree that a higher equity
7:11:48ratio um will result in Better Credit
7:11:51met
7:11:52metrics
7:11:55yes now for each of these calculations
7:11:58you've applied the equity ratio that's
7:12:00either
7:12:01uh approved or proposed for the gas
7:12:07operations um side of of the company
7:12:10across the entire B balance sheet
7:12:13including electric operations is that
7:12:15correct that is
7:12:17correct and you don't you do not factor
7:12:20in the higher equity ratio that's been
7:12:21approved for the electric
7:12:24operations no we've we have moved our
7:12:27credit rating that we're managing the
7:12:29company to to 55%
7:12:37it's it's are you suggesting it's
7:12:38currently a
7:12:3955%
7:12:43yes
7:12:47um and
7:12:50so just to be clear it was approved for
7:12:54the electric operations at 55.6 n% again
7:12:58is that right yeah it's correct and then
7:13:01the max max range for gas was
7:13:0455%
7:13:06correct
7:13:09and and I think this is new but your
7:13:14your testimony today is that the company
7:13:16as of
7:13:17today the equity ratio is at flat 55%
7:13:21approximately
7:13:23correct
7:13:26approximately is it is it above 55% or
7:13:29not well it's going be very close that I
7:13:31mean every keep in mind we try to manage
7:13:33to a 55 but there's always going to be a
7:13:35little bit of a Nuance but we're trying
7:13:37to manage to the
7:13:3855% because keep in mind it's a
7:13:40Consolidated entity and we have to pick
7:13:42one cap structure with which to manage
7:13:45to and the commission has given us
7:13:48direction that they think that 55 to 52
7:13:51to 55% is the way we should go and so
7:13:53that's why we've moved the credit or the
7:13:56capital structure down to 55% consistent
7:13:59what we've asked for in this case
7:14:03and do you recall testifying in the last
7:14:05gas rate case um that if there was a
7:14:09difference between the equity ratio
7:14:11approved for electric and the elect the
7:14:13ratio approved for gas that you would
7:14:15use a weighted
7:14:17average
7:14:20yes but your testimony now is that
7:14:24that's not the case changing our
7:14:26approach in that we're trying to view is
7:14:29where the intention of the commission is
7:14:31going and trying to make sure that we
7:14:33manage to that
7:14:37level
7:14:42um me skip down
7:14:48um we can talk specifically about the
7:14:54credit metric analyses for UCA well
7:14:57particularly staff um but uh you
7:15:01mentioned UCA here and if if we
7:15:03can uh Miss conle if you can move down
7:15:06to line 5 through
7:15:128 I'll just read it there real quick um
7:15:16both and we're talking about UCA and sta
7:15:20recommendations both result in cash from
7:15:23operations pre-working Capital to debt
7:15:25at approximately
7:15:2718.5% in 2024 and 19% in
7:15:322025
7:15:34um however you've actually rounded Down
7:15:39staff's results is that correct uh you
7:15:42have bring back the table for me to see
7:15:45oh yeah if we could move back up to the
7:15:47table thanks it's in uh scenario 7even
7:15:49there last
7:15:52column well it's 8 18.5% and
7:15:5719% appears to be consistent the cash
7:15:59from operations Pre-K working capital
7:16:01debt okay yes okay sorry I was I think
7:16:04what I think I think that this is
7:16:06supposed to be ffo the debt but that
7:16:08probably where the difference
7:16:11is okay um
7:16:15so uca's cash from operations
7:16:18pre-working Capital debt was 18.5 and
7:16:20and 19 staff staff was 18.7 and 19.2 is
7:16:26that correct
7:16:29yes um
7:16:31and in running the scenario for staff's
7:16:34proposal um you use the composite
7:16:39recommended Roe of
7:16:428.89% correct rather than uh staff's or
7:16:47Dr deuse uh recommended 9% is that
7:16:51correct well this is the composite are
7:16:54we when you take into consideration the
7:16:57lower Ro we on the capacity additions
7:17:00for the gas op
7:17:03ations and is
7:17:06that a composite based on your
7:17:08understanding that staff recommends
7:17:10applying an
7:17:128.89% deposit across the
7:17:15board I'm not quite sure what the I
7:17:19think that the 8.89% represents the
7:17:21average of the composition of the two
7:17:25different
7:17:27recommendations okay um but in this
7:17:34case and so let me just clarify do you
7:17:37understand Miss O'Neal's recommendation
7:17:38to be to apply separate Roes to separate
7:17:42Investments particularly she she
7:17:44recommends a separate uh Roe for um New
7:17:51Growth Investments is that correct
7:17:58correct and even assuming
7:18:01the
7:18:028.89 um%
7:18:05Roe the ffo to debt ratio for staff's
7:18:09proposal does not go near
7:18:12177% uh which is the threshold for the
7:18:14downgrade from S&P is that correct
7:18:17correct but it's that the Moody's
7:18:19downgrade threshold of
7:18:2119% yeah and and with regard to the
7:18:23Moody's downgrade uh and the 19% relates
7:18:27to the CFO pre-working Capital to debt
7:18:29ratio um it's really only slightly below
7:18:34the
7:18:3519% uh for
7:18:392024 correct that fair yes but I would
7:18:422024 2024 is almost over
7:18:46right I would say that it's never admir
7:18:49it's never in a good position to be that
7:18:51close to the downgrade threshold it does
7:18:53not allow any flexibility for any kind
7:18:55of event that might
7:18:58occur such as the wildfire
7:19:01risk well such as a let's say that we
7:19:05had a run up in natural gas prices and
7:19:07we had to defer recovery because of the
7:19:09smoothing mechanism that was U put in
7:19:12place because of the legislation that
7:19:14would likely Drive the ffo to debt or
7:19:17CFO to debt below the downgrade
7:19:22threshold and that ratio uh did go down
7:19:27to approximately
7:19:2917.3% in 2021 is that correct
7:19:34correct and the company did not see a
7:19:37rating downgrade as a
7:19:39results that's correct the rating
7:19:41agencies are not going to necessarily
7:19:43look at one year and and make a decision
7:19:45they will look at if they think this is
7:19:48a a trend that's going to continue so in
7:19:51the case of the Yuri situation they did
7:19:54not downgrade I that is
7:19:57correct so even assuming the 8.8 9%
7:20:02Roe uh unlikely based on your opinion
7:20:07just now that they're not going to look
7:20:09necessarily or you know downgrade just
7:20:12based on that one year below the
7:20:14threshold is that correct I would say
7:20:17that in my opinion that's a that is a
7:20:18potential scenario obviously I can't
7:20:20speak for the
7:20:23rating uh and you did not conduct a
7:20:27scenario using the recommended equity
7:20:31ratio at
7:20:339%
7:20:36no um but if you had done that um is it
7:20:42fair to say that with that higher Roe
7:20:44you would expect the credit metric
7:20:46results have improved yes
7:20:50slightly slightly potentially
7:20:53potentially to 19% or more potenti in
7:20:572024
7:21:02let me see if I have any other questions
7:21:05I think we got done early here
7:21:08um thank you Mr Johnson I have no
7:21:10further questions Mr
7:21:13chairman uh thank you Mr PX uh um
7:21:18UCA uh I have uh 60 minutes so we may
7:21:22not uh finish uh but let's see how far
7:21:25we can
7:21:28get thank you Mr chairman and good
7:21:31afternoon Mr Johnson good
7:21:37afternoon I'm going to discuss some of
7:21:39the
7:21:40same items maybe in a little more detail
7:21:44and specifically as to the
7:21:46UCA so if you would just give me a
7:21:50moment to go off camera I hear a trash
7:21:53truck outside that's probably making it
7:21:56difficult to hear so I'm going to go off
7:21:58camera for just a moment
7:22:05see you know Mr bunker I could hear
7:22:16you sorry about that so much for the uh
7:22:19so much for the fresh air I've closed
7:22:22the
7:22:23window sorry about that so if we could
7:22:26start with your hearing
7:22:29exhibit number uh 126 your rebuttal
7:22:33testimony at page
7:22:4237 and we see a table at the top of the
7:22:45page
7:22:4737 and this is uh table p
7:22:52aj-
7:22:55r-5 and this is public services
7:22:57requested whack uh per it's rebuttal
7:23:01case is that right
7:23:04correct and here you support a capital
7:23:06structure of 55% Equity
7:23:1143.8% long-term debt
7:23:141.82% short-term debt a row an Roe of
7:23:2010.10% with a resulting whack of
7:23:247.52% correct
7:23:28correct and at page p uh six of your
7:23:32rebuttal
7:23:33testimony here you state that you
7:23:36continue to support the same capital
7:23:39structure percentages for Equity
7:23:42long-term debt and short-term debt
7:23:44ratios as was stated in your direct
7:23:47testimony correct
7:23:50correct however your rebuttal testimony
7:23:53now supports a lower Roe of 10.10% as
7:23:58compared to your direct testimony record
7:24:00recommendation of
7:24:0210.25% is that correct
7:24:05correct and your rebuttal testimony now
7:24:08supports a higher whack of
7:24:147.52% as compared to your direct
7:24:16testimony whack recommendation of
7:24:207.50% right
7:24:24correct so the wack requests
7:24:28increased from 7.5
7:24:305% in your direct
7:24:33testimony to
7:24:357.52% in your rebuttal
7:24:39testimony but the capital structure did
7:24:41not change from your direct testimony to
7:24:44your rebuttal
7:24:46testimony and the roe has decreased from
7:24:5110.25% in in your direct testimony to
7:24:5410.10% in your rebuttal testimony did I
7:24:57summarize that correctly correct
7:25:03and at page six of your rebuttal
7:25:06testimony on wines s and 8 here you
7:25:11indicate you've updated my recommended
7:25:13cost of long-term debt for known and
7:25:17measurable adjustments related to new
7:25:19debt
7:25:20issuances completed since the filing of
7:25:23my direct testimony is that right
7:25:26correct so is it accurate then Mr
7:25:29Johnson you did not include any
7:25:31information about the 2024 new debt
7:25:35issuance in your direct
7:25:37testimony we had not issued it at that
7:25:39point in time
7:25:40correct so it's a new issue you brought
7:25:43up in rebuttal testimony correct
7:25:47objection mischaracterizes Mr Johnson's
7:25:51testimony I think I was summarizing his
7:25:54testimony as he stated
7:25:58it uh I think the witness answer
7:26:00answered the question so just keep going
7:26:01Mr Mr move on thank you let's go to page
7:26:0629 of your rebuttal
7:26:09testimony and it lines one through
7:26:1518 here you indicate you've updated the
7:26:18cost of the cost of long-term
7:26:22debt from
7:26:254.05% to
7:26:284.27% due to cost associated with the
7:26:31issuance of $1.2 billion in long-term
7:26:35debt that was priced in April of 2024 is
7:26:40that correct that is
7:26:44correct and this new debt issuance that
7:26:47you introduced in your rebuttal
7:26:49testimony that increased the cost of
7:26:51debt and thus increased the company's
7:26:54requested Revenue requirement is that
7:26:56right that is
7:26:58correct how much did theany comp's
7:27:00requested Revenue requirement increase
7:27:03as a result of adding this new debt this
7:27:06new 2024 debt issuance in pesco's
7:27:10rebuttal case we didn't increase the
7:27:13revenue requirements because we lowered
7:27:14the Roe well I was going to get to that
7:27:18but how much did it increase had you not
7:27:22lowered the
7:27:23Roe I don't know off the top of my
7:27:26head
7:27:28okay and referring to your rebuttal
7:27:31testimony
7:27:33at page six line 7 through
7:27:378 here you indicate the company has
7:27:40lowered its proposed Roe to 10.10% to
7:27:43moderate the overall rebuttal
7:27:45requirement is that correct
7:27:49correct and regarding this testimony
7:27:52that public service required its
7:27:54proposed Roe to
7:27:5610.10% to moderate the overall Revenue
7:28:00Vue requirement rebuttal Revenue
7:28:02requirement that
7:28:04is did Pesco have to lower the rebuttal
7:28:07Roe request from
7:28:1010.25% for the
7:28:12Roe in addition to the increased cost of
7:28:16the long-term debt for the $1.2 billion
7:28:19Bond issuance to
7:28:224.27% or otherwise that would have
7:28:25resulted in a revenue requirement
7:28:27request than is higher than what public
7:28:29service noticed in this CA this rate
7:28:31case objection that calls for a legal
7:28:34conclusion about noticing requirements
7:28:35for the
7:28:37case you know I think it your honor if I
7:28:41could respond it goes directly to the
7:28:43testimony that the company lowered its
7:28:46Roe to moderate the over overall Revenue
7:28:50requirement and the testimony that the
7:28:53bond issuance came up in the rebuttal
7:28:55testimony not the direct case but in
7:28:58rebuttal and I think we're entitled to
7:29:01investigate and ask questions regarding
7:29:05would this have caused a noticing issue
7:29:08if the combination of a lower Roe along
7:29:13with this higher C long cost to
7:29:16long-term debt would have caused a
7:29:19notice issue yeah overw world if you can
7:29:22restate your uh question for the witness
7:29:25that'd be great thank you regarding this
7:29:29testimony that that Pesco lowered its
7:29:32proposed Roe to 10.10% to moderate the
7:29:36overall rebuttal Revenue requirement did
7:29:39Pesco have to lower the rebuttal Roe
7:29:43request because a
7:29:4610.25% Roe in addition to the increased
7:29:50cost long-term debt for the $1.2 billion
7:29:54Bond issuance to
7:29:574.27% would have resulted in a revenue
7:30:00requirement request that that is higher
7:30:04than what psco noticed for this rate
7:30:07case I can't speak to what we noticed
7:30:10because I'm not quite sure on the rules
7:30:11on that I would say all things being
7:30:14considered equal if there was no other
7:30:16changes if we had kept the Roe at 1025
7:30:20and increased the cost of debt the
7:30:22revenue requirements would have gone up
7:30:24from what we had previously respon
7:30:26requested
7:30:30okay thank you and if we could turn to
7:30:31Mr burman's rebuttal testimony it's
7:30:36hearing exhibit
7:30:38124 at line
7:30:4218 through page nine at at line
7:30:5112 here Mr Burman up I'll wait till the
7:30:55document gets pulled up sorry about that
7:30:57again it is page eight starting at line
7:31:0019
7:31:02through page nine at line
7:31:1412 so as you read this here Mr Burman
7:31:17discusses the fact that the updated cost
7:31:20of long-term debt to reflect the April
7:31:232024 Bond
7:31:25issuance along with updating the 2023
7:31:29test year for actuals for the calendar
7:31:32year
7:31:332023 would have resulted in the
7:31:36company's rebuttal Revenue requirement
7:31:39being somewhat higher than the as filed
7:31:41case is that is that what you get out of
7:31:44that
7:31:45testimony that appears to be what it
7:31:51says okay so then just to summarize the
7:31:56company would have had to Ren notice
7:31:58this rate case if Public Service had
7:32:01continued to support a
7:32:0210.25% roe while also increasing the
7:32:07cost of longterm debt from
7:32:094.05% to
7:32:134.27% and updating the test year for
7:32:16actuals for the calendar year 2023 and
7:32:19it's rebuttal case is that right I'm
7:32:21going to object on multiple grounds that
7:32:23this both mischaracterizes Mr Johnson's
7:32:26testimony it is without he has already
7:32:28indicated he does not have Foundation to
7:32:30answer that question and it calls for a
7:32:31legal conclusion about noticing
7:32:35requirements I'll withdraw the test the
7:32:38question I think the testimony speaks
7:32:40for itself thank you let's move on to a
7:32:43different
7:32:44topic uh the financial Market is
7:32:48expecting the Federal Reserve to cut
7:32:50interest rates during its September 17
7:32:54and 18 2024 meeting is that correct I
7:32:59think that is a fair
7:33:01assessment and if the Federal Reserve
7:33:03Cuts interest rates during its September
7:33:0617 and 18 meeting as the market
7:33:09expects then pesco's cost of short-term
7:33:13debt will in will decrease is that
7:33:16right I would say that the market uh
7:33:19interest rates already reflect the
7:33:21expectation of what the FED is going to
7:33:22do so there probably will not be a
7:33:24material change in the interest
7:33:27rates okay you say a material change but
7:33:30is it likely there would be some U
7:33:34reduction in the cost of short-term debt
7:33:37not
7:33:38necessarily
7:33:44okay let's assume hypothetically that
7:33:47the commission authorizes pesco's
7:33:50historical cost of short-term debt at a
7:33:54rate that is higher than what the market
7:33:56interest rates
7:33:58are would customer rates then be set
7:34:02higher than what they need to be for PCO
7:34:04to recover its
7:34:06costs for that individual item
7:34:17yes is it Equitable for rate payers to
7:34:21pay for the added and new higher costs
7:34:23associated with the long-term debt
7:34:26issuance and by that I mean the $ 1.2
7:34:29billion dollar debt
7:34:31issuance but to not receive the benefits
7:34:34that result from the new and lower cost
7:34:37associated with short-term debt if
7:34:41short-term debt is reduced after the FED
7:34:48meeting well I mean I think we'd have to
7:34:50look at what the short-term debt level
7:34:51is and what the short short-term debt
7:34:53cost is I mean obviously there's lots of
7:34:57costs that change without within a array
7:34:59cas
7:35:00clearly PCO is not earning anywhere near
7:35:02its authorized um return so I don't know
7:35:06that that is it sounds like single issue
7:35:08rate Mak in that
7:35:15regard
7:35:19okay in this rate case you're proposing
7:35:21rates for short-term debt that are
7:35:24higher than the rates for your long-term
7:35:26debt is that correct the short-term debt
7:35:31um cost that we have in this case
7:35:32reflect the historic test year for
7:35:372023 okay and if we look at page 37 of
7:35:40your
7:35:42testimony and your table p aj-
7:35:46r-5 on page 37 I'm sorry which testimony
7:35:51uh rebuttal testimony uh hearing exhibit
7:35:54126
7:36:06so when we're talking about the proposed
7:36:09rates for short-term
7:36:12debt being higher than long-term
7:36:15debt this would be short-term debt at
7:36:204.81% is the cost of debt and the cost a
7:36:23long-term debt at 4.27% is that right I
7:36:27think that the short-term debt was 5 81%
7:36:30not 4.81% oh I'm sorry you're you're
7:36:33correct I uh I misspoke 5.81% for
7:36:36short-term debt just to clarify right
7:36:39yes that is the that's the that was a
7:36:42cost in 23 and frankly it's fairly
7:36:44consistent been at that level for
7:36:4724 and historically and typically
7:36:50long-term debt has a higher cost than
7:36:52short-term debt is that right
7:36:55correct and is this what is known as has
7:36:59a inverted yield curve where short-term
7:37:03costs are higher than long-term debt
7:37:06costs
7:37:10correct and assuming that the Federal
7:37:14Reserve lowers short-term interest rates
7:37:17during the September 17 and 18
7:37:20meeting do you believe the short-term
7:37:22interest rates will go
7:37:25down or does that get back to our
7:37:28discussion a few minutes ago where you
7:37:29said it would be marginal I would say
7:37:32that the the interest rates that are
7:37:34currently in the marketplace already
7:37:36reflect the expectation that the FED is
7:37:39going to reduce
7:37:40rates red reduce the federal funds
7:37:46rate okay uh just help me with this for
7:37:50a second I'm scrolling to the top of
7:37:54your testimony uh rebuttal testimony
7:37:57it's dated August 15 20
7:38:0024 so you're saying as you wrote this
7:38:03testimony roughly three weeks ago it was
7:38:08already it was already factored in in
7:38:12terms of long-term and shortterm cost of
7:38:18debt I would say that interest rates
7:38:21every day the interest rates are
7:38:22changing in they based on Market
7:38:24expectations so um where they were three
7:38:27weeks ago is different than where they
7:38:29they are now and they will continue to
7:38:32change I would say short-term debt
7:38:35funding continues to be elevated and
7:38:38continues to be above 5% I don't know
7:38:41the exact rate for commercial paper at
7:38:43this point in time but throughout this
7:38:45year it's been
7:38:505556 when you say 5556 do you mean
7:38:555.5%
7:38:565.6% correct so that would be anywhere
7:39:02from 21 to 31 basis points less than
7:39:06what we're looking at here in your table
7:39:09on page
7:39:1137
7:39:14yes okay
7:39:17so if these shortterm debt
7:39:20costs are not if you will they're
7:39:25outdated let's let's put it this way if
7:39:27they're o outdated and
7:39:32overstated that would increase the
7:39:35costs that rate payers pay for this cost
7:39:38of debt is that accurate
7:39:47yes all right let's let's go to a
7:39:50different topic now and let's go to page
7:39:5212 of your rebuttal testimony that's uh
7:39:56same attach or hearing exhibit here 126
7:40:00page
7:40:0212 and here you begin to uh you're
7:40:07talking about your your credit metric
7:40:12scenarios and you you stayed in your at
7:40:15lines 10 through
7:40:1715 that in your direct and supplemental
7:40:20direct testimony you
7:40:23addressed credit metric scenarios one
7:40:26through
7:40:27five and now when your your rebuttal
7:40:31testimony you've added scenarios six and
7:40:34seven to reflect UCA and staff
7:40:38recommendations and you've also adjusted
7:40:41scenario
7:40:422 to reflect a 10.10% roe rather than
7:40:47the
7:40:4810.25% Roe in your direct case is that
7:40:51right that is correct and if we flip to
7:40:54the top of the next page uh
7:40:5713 here's your
7:41:00P aj-
7:41:03R-1 and this reflects the seven credit
7:41:06metric scenarios we just talked about
7:41:08right
7:41:10yes and looking at scenarios one two and
7:41:17five and specifically the
7:41:2055% equity ratio that's used in
7:41:24scenarios 1 two and
7:41:27five is that roughly the actual equity
7:41:32ratio for all of public service and by
7:41:35that I mean gas electric and steam
7:41:38correct
7:42:09it's just me but I can't hear anything
7:42:11uh um um sorry I just paused for a
7:42:13minute I was looking at my
7:42:15notes and uh I'm sorry I had not asked a
7:42:19question oh that's fine
7:42:31if you give me just a moment
7:42:33here uh if we could go to USU uca's uh
7:42:38box
7:42:40account and in particular uh UCA hearing
7:42:44exhibit number 9
7:43:03yes thank you and this is uh pesco's
7:43:08response and supplemental response to
7:43:11UCA Discovery request
7:43:1528-8 can can you make that bigger
7:43:19please thank you and
7:43:23includes uh the response here on page
7:43:27one and then the attachment UCA UCA
7:43:3228-8 A1 do you see
7:43:36that if you could scroll down you should
7:43:39see you should see some additional Pages
7:43:41here there we go okay let's let's go
7:43:44back to the first
7:43:47page and uh you are the sponsor of this
7:43:51discovery response correct that is
7:43:54correct I'd move to admit hearing
7:43:57exhibit 509
7:43:59any objection Miss
7:44:02Brahma well we have a lot of objections
7:44:04in the actual Discovery response but in
7:44:06terms of admission subject to those no
7:44:08objection to the admission so
7:44:12admitted okay in uh UCA
7:44:1728-8 and this is with regard to your
7:44:22rebuttal table uh p
7:44:27aj-1 uh um as you see in the top of the
7:44:32uh Discovery request at the top of the
7:44:34page
7:44:35here we asked SC down so I could read
7:44:39the request again uh scroll up you mean
7:44:42yes yes exactly okay at the very top
7:44:45there in the in the first paragraph here
7:44:49the UCA asked for another set of metric
7:44:53credit metric scenarios showing any
7:44:56proposed changes that only imp
7:44:59psco gas and do not impact psco electric
7:45:03is that right yes okay and in the second
7:45:07sentence there we UCA stated if it makes
7:45:12the modeling simpler Mr Johnson can
7:45:14assume that psco electric is 75% of the
7:45:18company and psco gas is 25% of the
7:45:21company is that right
7:45:24yes so now let's go to the supplemental
7:45:28response
7:45:29and the near the bottom of the page
7:45:33there and in the last two lines here you
7:45:38say attachment UCA
7:45:4228-8 A1 which simply isolates 25% of the
7:45:48credit metric resulting from the
7:45:50scenarios in Mr Johnson's testimony is
7:45:52that right
7:45:56yes thank you and
7:45:59as you uh as you indicate the
7:46:04attachment
7:46:0628-8
7:46:08A1 that takes your
7:46:11scenario uh from from the
7:46:15tables and it it isolates 25% for public
7:46:19service right
7:46:22correct and your credit metric models
7:46:26and uh
7:46:29moved to admit this already let's let's
7:46:30go back to your
7:46:33um let's go back for a second to your
7:46:37rebuttal
7:46:42testimony and on page
7:46:4513 here are your your seven credit
7:46:49scenarios
7:46:51right correct and so the credit models
7:46:56in this uh rebuttal table P aj-
7:47:02R-1 assumes any changes made to the
7:47:05capital structure would be for both
7:47:08Public Service Electric and Public
7:47:09Service Gas right that is
7:47:12correct and scenario
7:47:16one the no rate case filing
7:47:20scenario that's Public Services current
7:47:24credit metric scenario and assumes no
7:47:26rate case has been filed right
7:47:31correct and is it correct that in public
7:47:33services last gas rate case in
7:47:3720122 psco was authorized an equity
7:47:41ratio range of 52 to
7:47:4755% and public service chosen equity
7:47:50ratio of
7:47:5153.78 per to set rates and for reporting
7:47:57purposes that is that's not my
7:47:59understanding we bandaged the capital
7:48:01structure to 55 or better since that
7:48:04rate
7:48:07case okay all
7:48:11right let's look now at scenario five
7:48:16and here the company this is the company
7:48:18request with prior equity ratio SL Roe
7:48:24scenario and this assumes the continued
7:48:27use of the current
7:48:2955% equity
7:48:31ratio and the current
7:48:3499.2% Roe but now includes increased
7:48:38debt percentages
7:48:41right okay
7:48:45yes and is it correct that in scenario
7:48:50two the company's updated proposal
7:48:53approved 10.10% Roe scenario
7:48:59this scenario two would reflect Public
7:49:02Services rebuttal case
7:49:07advocacy correct okay so I know I'm
7:49:12jumping around but let's go to scenario
7:49:14six and this is the uca's
7:49:18proposal and it reflects using a
7:49:2199.2% roe which is the same as the
7:49:24company's current Roe as shown in
7:49:28scenario 1 and five but with a
7:49:3351.4% equity
7:49:35ratio and debt percentages that are
7:49:38lower than pesco's current debt
7:49:40percentages in scenario one is that
7:49:43right I believe
7:49:47so and with regard to scenarios six and
7:49:51seven and the uca's and staff's
7:49:54respective credit metric
7:49:57proposals you indic
7:49:59on page 13 here just below this table at
7:50:02lines four and five that the primary
7:50:06recommendations from Mr Fernandez and Dr
7:50:09deepo have similar levels of credit
7:50:13impact to public service is that right
7:50:16that's
7:50:17correct and with regard to the similar
7:50:20levels of credit impact a public service
7:50:24statement at page 13 lines 5 and seven
7:50:28you comment
7:50:29both result in cash from operations
7:50:32pre-working capital capital to
7:50:35debt at approximately
7:50:3818.5% in
7:50:402024 and
7:50:4219.0% in 2025 right
7:50:47correct and this is based on the
7:50:49percentages presented in the bottom two
7:50:52lines of table P aj-
7:50:56R-1 under SC arios six and seven right
7:51:02correct and at page 13 on line seven
7:51:07and8 you comment this would result in
7:51:09public service being below the downhall
7:51:12threshold in
7:51:142024 and at the downgrade threshold in
7:51:172025
7:51:19correct correct per
7:51:22moodies per moodies yes we'll get
7:51:26there and it lines eight in 10 you say
7:51:30this would leave the company with at
7:51:32best minimal levels of financial cushion
7:51:36to withstand adverse unforeseen events
7:51:40right that's
7:51:42correct and would you agree that your
7:51:45statement regarding minimal levels of
7:51:48financial
7:51:49cushion indicates Pesco would have some
7:51:53level of financial
7:51:55cushion even if the cash from operation
7:51:59pre-working Capital to debt
7:52:01percentage is at approximately
7:52:0518.5% for
7:52:082024 and 19% in
7:52:122025 so it' be under the threshold for
7:52:1524 and at the threshold for
7:52:2225 okay and so if this is below the the
7:52:27threshold if the
7:52:2918% 18.5% in
7:52:342025 is is what this shows and then
7:52:37increases to 19% in
7:52:422025 and the commission's order in this
7:52:45case will be issued in the fourth
7:52:46quarter of
7:52:492024 is it correct that
7:52:53CFO to debt ratio below 19% would be for
7:52:57just one quarter Q4 of
7:53:002024 and would not be a percentage of
7:53:04below 19% on a sustained
7:53:07basis it would be for 24 it' be below
7:53:11the threshold for 25 it would be at the
7:53:14threshold for 26 it would likely be
7:53:17below the threshold again unless there's
7:53:18a rate case filing the 25 number
7:53:21reflects the fact that you have
7:53:22additional Revenue being implemented for
7:53:25the case and very minimal Revenue levels
7:53:27in 2014 for that's why you see the
7:53:29increase in the ffo to debt or CFO to
7:53:32Deb yeah so you you site quot uh Moody's
7:53:36rather you quote uh Moody's on lines 10
7:53:39through
7:53:4116 and
7:53:43and you indicate the ratings could be
7:53:49downgraded if the utility generates
7:53:51metrics that are weaker than currently
7:53:54anticipated specifically it's CFO pre
7:53:59WC to debt ratio stays below 19% on a
7:54:04sustained basis is that correct correct
7:54:08that is a direct report that's
7:54:10essentially a quote from Moody's yes
7:54:13we'll get there in a
7:54:15minute how would you define sustained
7:54:18bases and by that I mean at least four
7:54:21quarters or
7:54:23more probably for a year or two a year
7:54:27or two so for to eight
7:54:29quarters well they don't again it's it's
7:54:31looked at more on an annual basis or a
7:54:33running 12 month
7:54:35basis so at least at least one year 12
7:54:38uh four or four quarters 12 months right
7:54:42well again Woodies will look at that and
7:54:43they'll make their own determination I
7:54:45can't really speak for them I'm taking
7:54:47the words that they put in the report
7:54:49you can interpret sustained as how You'
7:54:51see okay so if they're looking at this
7:54:55issue of of the a sustained basis and
7:54:59you're indicating it would be four
7:55:05quarters a
7:55:07year is it correct that the CFO
7:55:12prwc to debt
7:55:15ratio below 19% for just Q4
7:55:202024 would not be a percentage below 19%
7:55:25on a sustained basis again that'd be
7:55:28open to Moody's interpretation it's
7:55:30probably not a downgrade threshold it
7:55:32probably does not result in a downgrade
7:55:35threshold a downgrade I should say Okay
7:55:40so let's let's take a look at
7:55:45your your
7:55:48attachment uh which is the
7:55:50Moody the Moody's attachment P
7:55:55aj20 that would be attached to your
7:55:57rebuttal
7:56:10testimony and I am U pulling up my copy
7:56:15so give me a moment as uh as we're all
7:56:20trying to get there
7:56:33okay let me ask you a question as the as
7:56:38uh m kungle is trying to Define this
7:56:42attachment which is attachment
7:56:45PH2 and let me uh as we're talking about
7:56:49this your your quote stated in your
7:56:54abuttal
7:56:55testimony this quote is not the ENT
7:56:58higher Moody statement regarding factors
7:57:01that could lead to a credit rating
7:57:03downgrade for public service is that
7:57:06right H this many factor is
7:57:09correct all right
7:57:13so and and with that regard we're we're
7:57:17referring to your quote on lines 12 and
7:57:2116 of your rebuttal
7:57:25testimony so let's take a look at this
7:57:27PA j20 and on the first page it
7:57:31indicates this uh Moody's credit opinion
7:57:34up in the top corner there it's dated
7:57:37April 5th 2024 is that
7:57:41right
7:57:43yes and so let's go Mr bunker we
7:57:46probably only have about five more
7:57:48minutes uh today I don't know how much
7:57:50you have left I think you're 35 minutes
7:57:52into your hour um but uh we're going to
7:57:56wrap up uh a little before
7:57:594:40 um so um just giving you a headt up
7:58:03okay I appreciate that I I do not know
7:58:06if I'm going to be able to finish but um
7:58:10we'll uh we'll go for the next five
7:58:12minutes and see what we uh see what we
7:58:15can accomplish all right yep all right
7:58:18thank you so when we turn to page
7:58:25three at the top of the page the second
7:58:28uh item there in in the blueprint is
7:58:32factors that could lead to a downgrade
7:58:34you see that
7:58:36yep and would you agree that in addition
7:58:40to your concerns about the CFO
7:58:47pre WC to debt ratio that you talk about
7:58:52in your rebuttal test rebuttal testimony
7:58:55on page
7:58:5613 The Moody credit opinion cites at
7:58:59least four other factors that could lead
7:59:01to a credit rating downgrade for public
7:59:04service would you agree with
7:59:06that uh
7:59:09correct okay so these other four these
7:59:11other four factors and as you read
7:59:14through the couple of sentences
7:59:17here these other factors that could lead
7:59:20to a downgrade are a deterioration in
7:59:23the credit supportiveness of the
7:59:24Colorado regulatory environment correct
7:59:29correct the sentence that is after the
7:59:3319% and it starts with a word negative
7:59:37it's about the middle of the third
7:59:40line negative momentum on ratings is
7:59:43also possible if the utilities exposure
7:59:45to file Wildfire risk is not adequately
7:59:49addressed with a new Wildfire mitigation
7:59:52plan correct another one is a downgrade
7:59:56or a negative outlook could materialize
7:59:59if there is a negl a finding of
8:00:01negligence against the
8:00:03utility and this is with regard to the
8:00:05Marshall Wildfire right correct and then
8:00:10the uh next uh potential downgrade
8:00:14factor is uh expect the liabilities
8:00:18associated with a marshall Wildfire to
8:00:21substantially exceed the $500 million of
8:00:25currently available insurance right
8:00:28that is correct okay so let's go back to
8:00:32your
8:00:37uh let's go back to your rebuttal
8:00:42testimony and it lines 13 through
8:00:4517 you acknowledge that you cannot speak
8:00:49definitively on what actions the credit
8:00:52rating agencies would take is that right
8:00:55or will take correct
8:00:58I'm sorry I interrupted you that's
8:01:01correct okay and would you agree it
8:01:05would be speculative for you to speak
8:01:07definitively on what actions the ratings
8:01:10will take if the capital structures
8:01:13proposed by UCA and staff were
8:01:16approved I can't speak for the rating
8:01:18agencies I I'll tell you that when when
8:01:21SPS uh when the New Mexico Commission in
8:01:24August excuse me of August of 2018
8:01:27lowered the equity ratio if I could if I
8:01:31could interrupt you my question was
8:01:33would you agree it would be speculation
8:01:35on your
8:01:36part to speak
8:01:38definitively on what actions the rating
8:01:41agencies will take if the capital
8:01:42structure proposed by UCA or staff are
8:01:47approved I can't speak for them that is
8:01:50fair okay thank you uh Mr bunker I think
8:01:55we uh better uh take a break and will
8:01:58resume uh tomorrow morning uh at uh 9: I
8:02:03know in the confidential uh session I
8:02:05was trying to move it to 8:30 but let's
8:02:08uh stick to uh to 9:00 am tomorrow
8:02:11morning uh Miss Brahma uh final thoughts
8:02:15before we uh break for the day yeah just
8:02:18to to um alert the commission and the
8:02:20parties at this time um we're going to
8:02:22need to push Miss bulley into next
8:02:24Tuesday since we don't have a hearing
8:02:26day on Monday and uh and she has become
8:02:29unavailable um tomorrow so we'll
8:02:32continue with the rest of our Witnesses
8:02:34but um just wanted to make that known at
8:02:36this
8:02:37time
8:02:39okay anything else before we
8:02:42adjourn nothing from the company thank
8:02:44you I'm just curious for Miss Brahma
8:02:46when do you see Miss gilland going in
8:02:49the order uh tomorrow I think after Mr
8:02:52Johnson is the likely next step okay
8:02:55just we appreciate the patience we've
8:02:57had several schedules we needed to
8:02:58accommodate some
8:03:00unexpected no worries uh and uh it's
8:03:04we're all struggling with our
8:03:06schedules um all right with that and
8:03:09apologies to uh Mr bunker uh we'll uh
8:03:13adjourn for the day and you still got 20
8:03:15minutes left uh on your allocated time
8:03:18Mr bunker thank you I appreciate that
8:03:20and thanks for the update on the uh
8:03:22minute count I appreciate that trying
8:03:26all right not tomorrow everybody thanks
8:03:30thank you

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