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YouTube transcript (Sh5sGm-kuNY) — Transcript

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28:31good morning is the court reporter ready
28:36I'm
28:37ready thank
28:39you uh any preliminary uh matters before
28:44we jump into it uh commissioner
28:47Gilman I do just have one that I wanted
28:50to bring up um in preparing for the
28:53testimony of Mr matley I hope I'm saying
28:56his name right um
28:58I was reviewing the uh attachments to
29:01this testimony and heing exhibit 123
29:05attachment
29:08r-4 um was filed as confidential uh we
29:12have not been able to locate a
29:14non-confidential version to understand
29:17if any of the materials um are not
29:19considered confidential so I think it
29:22would be very helpful in preparation to
29:24understand from the company what
29:26specific aspects of this exhibit um are
29:31actually considered confidential um
29:34which would very much help in
29:35preparation to be able to question the
29:38witness um and I'm not sure if we need
29:40that right now if you all can respond so
29:43we can understand um the confidentiality
29:46claim for that document Miss Brahma um
29:51Miss Gilman commissioner Gilman excuse
29:52me I um the company has been working um
29:56with uh um commission staff to file a
29:59non uh a a non-confidential version of
30:03that it there's primarily gas uh
30:05commodity cost do data in the model but
30:08it does permeate the model and so um I
30:12I'm not sure that we can prepare a
30:13public version that only has certain
30:16items as confidential or
30:18non-confidential because it per the the
30:20data permeates the the model itself so
30:24um I'm not sure that that's exactly what
30:27you were hoping to hear here um and I
30:28can talk to Mr matle see if there's
30:30anything else to be done but I um I I
30:34don't know that we have um the ability
30:36to do a model that's partially
30:40confidential and partially
30:42public okay so is the case that the only
30:45confidential kind of input here or
30:48aspect understanding perhaps someone
30:51very skilled could back calculate if
30:54that's blacked out but the only really
30:57confidential aspect going into it is the
31:01gas commodity
31:02forecast I believe that that's the case
31:04I if you don't mind I would like to
31:06verify that when we have a a break in in
31:08the action today um with Mr matley and
31:11just make sure that there's nothing else
31:13that I'm forgetting or missing as we're
31:15talking this
31:16morning can I just ask you is the sales
31:18forecast confidential I've been dancing
31:20around that but
31:23uh uh we we'll have to double check
31:26check that as well um obviously we have
31:28sales forecast data in the case that is
31:30not confidential in Mr goodne enough's
31:32testimony but the longer term data I'd
31:34have to check with Mr
31:36madley okay um you know and as we go for
31:39I I think this is an issue we've kind of
31:41seen in the past and just to the extent
31:44it it makes it difficult certainly to to
31:46question the witness um and I think for
31:48transparency purposes you know part of
31:50the reason to get a rate forecast as I
31:53think it's helpful to have as part of
31:55the record uh for transparency in the
31:57proceedings so limiting the extent to
31:59which it can be discussed in the public
32:02form of the hearing is somewhat
32:04difficult and I wonder if it really is
32:06gas commodity forecast couldn't this
32:08commission just give you a number and an
32:10escalation factor to be used
32:12to say this is what the commission put
32:15in here I mean I don't think publicly
32:18available forecasts vary all that
32:20incredibly much that we might not be
32:22able to get some actual outcomes with
32:25something that is set that does not
32:26disclose with the company
32:28beliefs yeah I I think that understand
32:30the concern it's certainly the company
32:32does not is not trying to make anything
32:34confidential that we don't need to we we
32:37prefer to keep things public to the
32:39extent that that's a possibility so if
32:41it's if it is um acceptable I'd like to
32:44take this back to Mr matley and the team
32:47and and have a a conversation on the
32:48break and then bring back what we think
32:50we can do that actually relates to one
32:52of the preliminaries that we have this
32:54morning as well which is we have a few
32:57Witnesses who need to um have travel or
33:01other issues today and so we were
33:03actually thinking it may be helpful to
33:05um talk about that briefly and push Mr
33:08matley a little bit which may also give
33:09us a little time to get um some of these
33:13things sorted out before Mr matley takes
33:15the stand so that the commission will
33:16have as much public data as we can
33:18potentially you know possibly provide um
33:21in order to have that discussion with Mr
33:24matley that'd be great so do you want to
33:27give us the travel schedule now or uh
33:30yes I think that would be helpful so um
33:33not on the record I hope that's okay
33:36yeah that's fine okay um so we have Mr
33:39Johnson of course will be finishing um
33:42we were prepared to go ahead with Miss
33:44Gillan next um and I we understood that
33:47the commission is looking to talk with
33:48her sooner rather than later if it would
33:50be acceptable um if we could do Mr
33:54desich before Miss gilland and then miss
33:56gillilland he does have a lot of time
33:58reserved uh for cross and we think we'd
34:01still get to miss Gillan today uh if
34:04that's if there's a desire to get to
34:06miss Gillan first we'll make that work
34:08as well we may have to push Mr desich to
34:10next Tuesday no I think that's fine um
34:13and then we would move to um Nicole
34:16Doyle and Mr aan and then we'll I guess
34:20we'll see where we are at that point
34:21that might take us if we get to the end
34:22of the day I think Mr matle would then
34:24follow Mr aan um but have to see how the
34:28day unfolds can we uh if uh we do end up
34:32maybe we just plan on uh Mr matley uh
34:36first thing on
34:38Tuesday uh so if we needed a
34:40confidential
34:41session uh we could just do that first
34:44thing in the morning that sounds that
34:46would work for the company so let let's
34:48just lock him in first thing on Tuesday
34:51okay if we get through the others then
34:53today we would have on
34:55Tuesday um Mr matley uh miss bulkley Mr
35:00P and Mr
35:01katus
35:06okay um I believe we're we just wanted
35:08to confirm as well I think the intention
35:10was um of the commission was to end at
35:123:30 today um just planning purposes
35:16yeah that's that's the plan and maybe
35:17we'll keep uh lunch to 30 minutes okay
35:20thank you for that update um we do have
35:24two other preliminaries um one I think
35:26we may want in the record it pertains to
35:30um the discussion commissioner Gilman
35:32had with Mr mhler yesterday and just
35:34make sure we have we think we maybe
35:35found a correction that would be
35:36clarifying in Mr Muller's testimony
35:39which I can talk through and then we can
35:40determine if we need to have any further
35:43activity beyond that and
35:46Miss could you officially go yeah we're
35:50back on the record now
35:53okay uh would you like me to start with
35:55I I think we have two other
35:56preliminaries uh or two preliminaries
35:58this morning uh
36:00commissioner okay um the first one is um
36:04we had talked there's a conversation
36:06yesterday between commissioner Gilman
36:08and Mr Mohler um with respect to his
36:11supplemental direct
36:13testimony uh it was page 10 with respect
36:17to the results of the analysis of the
36:19cost per linear foot of retiring a line
36:21in place versus full removal um it might
36:26would it be okay if we pulled up that
36:27test for just a moment yes
36:30just explain what we
36:33saw Sor can you say the number one more
36:35time for me absolutely hearing exhibit
36:39121 at page
36:4110 and that's can you tell me the
36:44witness sorry when there's so many
36:46numbers it's easier to find the witness
36:48uh Mark mohler's supplemental direct
36:50testimony thank you give me just a
36:52second
37:09did you say page five uh page 10
37:1710 uh if we could scroll down to the
37:20question that starts on line 15 thank
37:24you um so there was a little bit of I
37:26think confusion and in U unintentionally
37:30of course on our part but sometimes we
37:32we discover things in the course of
37:33having these
37:34conversations um uh Mr mohler's
37:38discussion here with respect to the
37:422224 per linear foot um was intended to
37:46say that that is almost exclusively
37:49retiring a line in place because they
37:51could only manually find four um
37:54examples uh or I it was four or five
37:57examples
37:58where removal um had happened um so the
38:02this and we have this available in box
38:05but um probably the better thing to say
38:09on line six would 16 would have been to
38:11say the average cost over the last five
38:14years primarily to fully retire a line
38:16in place was approximately 22 to $24 per
38:19linear foot because this is a total
38:22average number as Mr Müller started to
38:24say yesterday it's just that there are
38:26so few physical removal examples and
38:29they have to be manually found that um
38:33it it is you know I can't remember what
38:35he said but 99 or 90 some percent um uh
38:39retiring aign in place so we wanted to
38:43make sure we were clarifying that point
38:45I know it was a matter of interest Mr
38:47Muller is available to come back
38:49otherwise if that's clear we can offer
38:52um a REV one to the supplemental direct
38:55testimony with that one additional word
38:57and and hopefully that helps clarify the
38:59discussion from
39:01yesterday okay thank
39:06you did you have other uh matters I I
39:09just wanted to confirm that that's how
39:11the commission would like us to proceed
39:13yeah yeah unless you think different
39:15commissioner government I think I just
39:17have them uh um uh refile or Revis we'll
39:21see if there's any objections and we'll
39:23put it in the record does that work for
39:25you that's fine with me thank you
39:29so that's just the 121 revision one
39:31correct correct thank
39:34you we do have that I think available in
39:37box.com right now would you uh shair
39:40blank would you like us to bring that up
39:41at this time or just um yeah let me does
39:46any of the parties have any objection to
39:48making uh that one change in in the
39:52document
40:00hearing none uh so
40:03moved and we apologize for any confusion
40:06but obviously wanted to correct it when
40:07we saw it so appreciate that
40:10opportunity um the the last preliminary
40:13item we had was just briefly to update
40:15um we are working on the commission's
40:17request for capex data uh over a span of
40:21time and we anticipate having more U
40:23available and and having something to to
40:25be able to provide the commission a
40:27Tuesday uh hopefully first thing that'd
40:30be great and if you have it uh
40:33Monday um uh and can circulate it to the
40:37to the parties in the commission that'd
40:39be awesome so we have a chance to look
40:41at
40:42it uh we can do that um and um would
40:46would you want us to uh file that or or
40:50circulate it inform formally
40:52or I guess uh Miss Harper any advice
40:56Miss rosani
41:05is is something that parties or the
41:07Commissioners would be wanting to rely
41:09upon yes then um it should be added H to
41:14the record so moved for admission all
41:16right so we'll do it first thing on
41:19Tuesday all
41:22right uh any other preliminary matters
41:24Miss Brahma uh no I think we've covered
41:27them thank you all right I think Mr uh
41:30bunker you're uh up with uh Mr
41:34Johnson I think you got 20 minutes
41:38left excellent thank you Mr chairman and
41:41good morning Mr
41:45Johnson can you hear me
41:47yep all right thank you
41:51um let's go back to our discussion uh
41:55yesterday afternoon and that is you have
41:59already stated that psco electric is
42:02currently authorized a
42:0555 69 equity ratio
42:09correct with electric yes yes and
42:13whatever the commission authorizes for
42:16psco gas in this proceeding will not
42:19impact the equity ratio authorization
42:22for psco electric
42:24correct it won't change what his L was
42:27authorized by the Commission in the past
42:30correct okay thank you now if we could
42:34uh pull up and display hearing exhibit
42:39509 you will recall that this is the uh
42:45response and supplemental response to
42:47UCA Discovery request
42:5028- and
42:52attachment UCA
42:5528-8 do8 a one that's a four-page
43:00document and if we could look at the
43:02first uh paragraph there uh just as a
43:06refresher you'll recall that this
43:10question Discovery uh request ask
43:13for a another set of your credit metric
43:19scenarios which are contained on page 13
43:23of your rebuttal testimony your table p
43:27j-
43:29R-1 and the UCA was asking for another
43:33set of credit metric
43:35scenarios that propose any changes that
43:38only impact piesco gas and do not impact
43:43psco
43:44electric and then you'll note in the
43:46second
43:47sentence the the offer if you will that
43:52you could assume psco electric is 75% of
43:56the compan
43:58and psco gas is 25% of the company do
44:01you see all
44:02that yes okay and then at the bottom of
44:06the page in the supplemental response
44:08starting the last line and a half you
44:13indicate attachment UCA 28-
44:18A.1 which simply isolates 25% of the
44:22credit metric impact resulting from the
44:24scenarios in witness Johnson's t
44:27testimony see
44:28that yes okay so if we could go to
44:33the um essentially what I'd like you to
44:37do is walk us the Commission in
44:40particular through pages 2 three and
44:42four which is the attachment to hearing
44:46exhibit
44:47509 and discuss this
44:5025% credit metric
44:53impact with regard to these scenarios on
44:56page 13 of your rebuttal
44:58testimony so if we could go to uh you
45:03understand that right yes okay so if we
45:06could go to if we could go to the uh
45:10second
45:12page can you explain to us what we are
45:18seeing in this particular page before uh
45:22Mr Johnson responds to Mr bonker's
45:24Question I'd like to just note for the
45:25record that the company stated several
45:27legal objections to the uca's um
45:30proposal here as well as some discussion
45:33in the response about why it's not a
45:35legitimate calculation that the company
45:36just did the math at uca's request so if
45:39we could just have that objection in the
45:40record I'm not opposed to Mr Johnson
45:42explaining what the paper shows um with
45:46that so noted so
45:50noted Mr bunker keep going so Mr Johnson
45:54would you uh please explain
45:57to us what we are looking at here on
46:01page two of the four
46:04pages yeah this just shows the cap
46:07structure for the four operating
46:10companies and the Consolidated
46:14entity okay so when you say Consolidated
46:18entity that is with reference to all of
46:23psco so that's gas electric and and
46:26steam I Pres presume right I was
46:29referring to yeah well correct on PCO
46:31and also correct on the Consolidated 10K
46:34the 40.2% equity ratio reflects the
46:38Consolidated XL Energy
46:40company so it's XL Energy it's not
46:43Public Service of Colorado well Fiasco
46:46is the
46:4755.5% equity
46:49ratio I I I see that yes and that is the
46:53Consolidated Pasco entity since there's
46:56only one balance sheet essentially for
46:58PCO there's not a separate gas separate
47:01steam separate distribute or separate uh
47:05electric okay so just just so I'm I'm
47:08clear uh the Consolidated 10K is for XL
47:12Energy correct and the column that says
47:16piasco that is Public Service of
47:19Colorado and that's the Consolidated gas
47:23electric and steam right correct okay
47:28anything else that we should glean from
47:29this page no objection that's a vague
47:35request World he's already answered and
47:37and just to be clear the units on this
47:40is millions of
47:43dollars uh that is correct all right
47:46thanks so yeah capitalization 43.8
47:51billion there's no way to look at it
47:54okay and the uh column
47:57um borrowings and then underneath that
48:01there's a single
48:03line looks like
48:05a78 and elimination to remove the
48:08short-term borrowings between op Coes
48:12what what is
48:14that that's just a an accounting entry
48:17that you make when you do the
48:20consolidation okay and that applies to
48:23the entire
48:24Excel Energy rather than any one of the
48:28uh entities psco SPS Etc right yes
48:32that'd be for some other
48:35subsidiary
48:37okay if we could move to page three uh
48:41there there's a ton of information here
48:46and uh can you explain what we are
48:50seeing here as it relates to the
48:52Discovery
48:55request uh
48:57this is just showing the Excel Energy
49:01Consolidated balance sheet and then what
49:03it shows that's on the left side of the
49:07page um it is then showing the
49:11various dead issuances at Excel Energy
49:15and at NSP
49:17Minnesota it is showing the
49:21capitalization schedule for Excel and
49:24then the uh individual operating
49:28companies uh below that is showing the
49:32credit facilities for the individual
49:35operating companies and Excel so this is
49:37essentially information taken out of the
49:4210K okay and uh there are several
49:46references in the in the
49:50two
49:52middle uh or in the middle
49:55column there's a a uh there's
50:01a debt to Capital debt to Total Capital
50:05ratio and it shows Pesco there at
50:1044.3% in 2023 44% at 2022 is that
50:18right uh
50:20yes and then uh below that um there's
50:24some shaded material uh kind of middle
50:27of that second column if you will that
50:31shows uh committed credit facilities
50:35right and it shows the credit facility
50:38for
50:39piesco 700 and I assume that is million
50:43or is it billion 700 million million
50:47okay you see the millions of dollars
50:49there in the title ah yes I do now that
50:52I after I asked a question thank
50:54you uh and there is a uh withdrawal
50:59amount of 349 million and an available
51:02amount of
51:04351 million is that right yeah so what
51:07that means is there was $349 million of
51:09commercial paper that is outstanding at
51:12December 31st
51:132023 was not drawn on the credit faity
51:16was commercial pay okay and looking at
51:19the first note just underneath that uh
51:24that uh listing uh some shad some not it
51:28says these credit facilities mature in
51:30September 2027 so this is a credit
51:33facility that's available through
51:35September 2027 is that an accurate
51:39understanding
51:43yes okay and then
51:46um on the far uh right we have Excel
51:51Energy and these are long-term debt
51:54obligations uh the top is Exel energy
51:57and the next is NSP Minnesota right
52:01correct and uh while Public Service
52:05would be part of that uh Excel Energy uh
52:12column perhaps at the segment of the
52:15table on top it would not be part of the
52:18NSP Minnesota table of below that right
52:22Public Service Company is not part of
52:23the debt of standing at the Excel Energy
52:25level that is strictly debt issued at
52:27the holding company level
52:30okay okay so now if we go
52:34to page
52:41four help uh help me with what we're
52:45what we're seeing here we see we see
52:48four uh columns if you will and
52:54uh there these are the four uh
52:58subsidiary operating companies right
53:01that is
53:02correct okay and so in this middle uh or
53:07the third over from the uh left this is
53:11Public Service of Colorado right that is
53:15correct it's extremely hard for me to
53:17read because it's so small so I don't
53:19know if you can make that bigger we're
53:21on this column right here correct yes
53:24yes thank you
53:30let me know if you want me to do it
53:31bigger but that's probably all I can do
53:33to get the full table if but if you want
53:36me to zoom in a certain think I can get
53:38it my eyes are not what they used to be
53:40well I think most of my questions Miss
53:42freder Rico are going to uh uh concern
53:45this this third column which is public
53:48service so if you want to focus on that
53:52third column and enlarge it even more so
53:56people can can see it a little easier
53:58that would be that would be
54:00terrific yeah so this is the this is
54:03only size where I can show the entire
54:04column if you want like the top bottom
54:06middle I can make it bigger but to show
54:09the entire thing this is the only way
54:10this is the only size I can get okay I
54:13understand that thank you now um so Mr
54:17Johnson what what are we seeing here in
54:21terms of it's a Consolidated balance
54:23sheet but uh expl explain that with
54:27regard
54:28to um how it is related to your table on
54:32page 13 of your rebuttal
54:35testimony so this is the Consolidated
54:39balance sheet for Public Service Company
54:41of Colorado as of December 31st
54:462023 from the 10K that we filed for our
54:49Pesco so it shows all of the assets
54:52liabilities so you can see um there's
54:56what is it$ 24.6 billion dollar worth of
54:59assets similar level of of debt or
55:03excuse me of equity um and liabilities
55:06and so you see the long-term debt totals
55:09you see the amount of equity you see the
55:13current portion of short-term debt and
55:15then also the current maturities of any
55:19um long-term debt that has due within a
55:21year so that's basically where you would
55:23pick up the capital structure or the
55:26operating
55:28company and and again where where would
55:31that particular the reference you just
55:33made which part of this uh table are we
55:37looking at for that all right so the
55:40capital structure so you if you look
55:42under current liabilities you see
55:43current portion of long-term
55:45debt um which looks like there is zero
55:50there um and then you see borrowings
55:52under money pool arrangement of $51
55:55million
55:56and then you see short-term debt of $320
56:00million so that's the short-term debt so
56:02basically about
56:04$371 million if my math is good then if
56:09you go down to
56:11capitalization you'll see
56:147.45 billion doll worth of long-term
56:18debt and you will see uh
56:229742 billion of equity so the
56:26combination of those items are what
56:28makes up the capital structure for
56:31Public Service Company of Colorado okay
56:34so if you do the math on that what
56:36you'll find is that the debt or the
56:39equity ratio would be approximately
56:4150.5
56:4355.5% or
56:47thereabouts okay and that is
56:52um okay so how does this relate back to
56:58your uh rebuttal testimony table on page
57:0213 and if you could uh Miss Frederico if
57:05you could keep this document handy but
57:08go to hearing exhibit
57:16126 yeah page
57:2013 and and here is your credit metric
57:23scenario table so
57:27if you can help us with uh the interplay
57:30if you will between this uh Discovery
57:34response and attachment and this
57:38table so the table that shows the
57:42balance sheet shows that you know that's
57:45where you come up with the the equity
57:48ratio so as we talked about there at the
57:50end of 23 the equity ratio for Public
57:54Service Company of Colorado was
57:56approximately
57:5855.5% in this proceedings we have
58:00suggested lowering the equity ratio down
58:03to
58:0555% uh this table reflects that equity
58:09ratio of
58:1255.0% and then the scenarios are the
58:15scenarios that the commission has
58:17requested in the past and other
58:18scenarios that um reflect the UCA and
58:22the staff's proposal
58:26okay okay so you will recall that
58:30yesterday we talked about
58:33Moody and the and the downgrade
58:37Threshold at 19% which we see discussed
58:41at the bottom of this uh testimony page
58:44starting at
58:45line uh primarily at line
58:4810 um and and it regards the the cash
58:55from oper operations pre-working Capital
58:58to debt or the CFO
59:00pre
59:02WC debt uh for
59:062024 and
59:082025 right yeah you you could probably
59:10just refer to it as CFO to debt just
59:12make it easier for
59:13yourself okay CFO to debt thank you sir
59:17appreciate that so when we're looking at
59:20the CFO to debt ratios here on the
59:25bottom two uh lines of the table here on
59:31the top of page
59:3313 uh how do these how do these
59:38percentages change with regard to the
59:4225% uh scenario that we just walk
59:45through in the attachment for Public
59:47Service
59:51Gas Mr John sorry about that I just want
59:54to make sure we register our objection
59:56with respect to that Discovery request
59:58and its relation to this U scenarios
1:00:00which are different
1:00:02things I think it's been registered Miss
1:00:05Brahma so thank you keep going Mr bunker
1:00:09to try to to try to answer the question
1:00:12so the equity ratio that is listed at
1:00:15the top line of all the scenarios is
1:00:18based on the Consolidated Mt for psco
1:00:21which is electric natural gas Ste
1:00:26there's one company there's one capital
1:00:28structure there's one balance sheet the
1:00:31data request asked us to say what would
1:00:35happen if we only adjusted the capital
1:00:38structure for the natural gas
1:00:41sector obviously that is you know
1:00:45something we can't do there's not a
1:00:46separate capital structure for the um
1:00:51gas division so that's why we objected
1:00:53to it we then did what what is if we
1:00:57assume some kind of
1:00:5975%
1:01:00hypothetical equity and 25% for natural
1:01:05gas what would that mean and so we
1:01:08although we didn't agree with the
1:01:09analysis we don't think it um it that
1:01:12doesn't think it's realistic a realistic
1:01:15scenario we tried to do the math to
1:01:18honor the request of the
1:01:21discovery okay uh looking at the table
1:01:27scenario six is uca's proposal right
1:01:32correct and in the UCA proposal the
1:01:35equity ratio that's proposed is
1:01:3851.4% Right
1:01:42correct so stepping back to the stepping
1:01:47back to the uh discussion we've been
1:01:49having here regarding the
1:01:53attachment and the in the discussion
1:01:57that you've uh had or the statement
1:02:00you've made that
1:02:01the equity ratio for Public Service
1:02:05Electric is 55.6 n% right that was the
1:02:10level of authorization in the last
1:02:12electric rate case okay and if that is
1:02:16weighted at
1:02:2075% and the uca's gas ratio of 51.
1:02:274% is weighted at
1:02:3325% my math suggests and this would
1:02:37obviously be subject to check for you
1:02:39but this would average
1:02:4354.62 per. would you generally agree
1:02:47with that I have not done the math so I
1:02:50can't make that
1:02:52statement does it uh does does it sound
1:02:56reasonable subject to
1:02:59check I'll I'll say that without
1:03:01checking and I'll assume that you have
1:03:03relatively solid math skills and I have
1:03:05no reason to believe that you did not do
1:03:07that
1:03:08accurately okay thank you for that I
1:03:10appreciate it it's a vot of
1:03:13confidence excellent I I I like that
1:03:16thank
1:03:24you okay so if if the if the
1:03:31uh commission
1:03:35adopts well let's let's let's look at
1:03:39again the CFO to
1:03:41debt uh CFO Deb to debt uh percentages
1:03:46here and for the uca's proposal in 2024
1:03:51you have
1:03:5318.5% and for 20 25 you have
1:03:5719.0%
1:04:00correct in your table yes okay so if the
1:04:07hypothetical or the scenario we just
1:04:09walked through results in a
1:04:1454.62
1:04:16per equity ratio that would bring the
1:04:21CFO debt for 2024
1:04:25it would likely bring that up above 19%
1:04:29wouldn't
1:04:30it yeah if the Consolidated equity ratio
1:04:33was
1:04:3554.5% I would agree with that yes okay
1:04:38and and the uh 2025 CFO to debt uh that
1:04:44would it's currently at
1:04:4819% under a
1:04:5051.4% equity ratio so it would clearly
1:04:54jump above n or
1:04:56rise above
1:04:5719.0% right that is correct
1:05:04okay I think it's also little important
1:05:06if that were to be the case the gas
1:05:09customers would be getting the benefit
1:05:10from a higher equity ratio that is not
1:05:12reflected in the cost of service for
1:05:14those customers so essentially the
1:05:17electric customers would be subsidizing
1:05:19the gas customers in that regard
1:05:26okay and and in
1:05:30your supplemental direct testimony
1:05:34conclusion at uh let's see that is
1:05:38hearing
1:05:46exhibit
1:05:53119 in your conclusion on P page
1:05:5719 at lines uh 3 to8 you
1:06:01suggest Public Service would avoid a
1:06:03credit rating downgrade if the base rate
1:06:06Revenue requirement was established
1:06:08consistent with the return on equity and
1:06:11capital structure approved in
1:06:1522-00 46g
1:06:18correct yes
1:06:25that would be
1:06:27your uh if we could jump back to your
1:06:29hearing exhibit
1:06:32126 and the table that would be your
1:06:37scenario
1:06:39five uh in the in the table is that
1:06:42right
1:06:44correct
1:06:48okay okay uh let's let's um move to a
1:06:53another another topic which is you
1:06:57brought up uh the
1:07:00levers model in your direct
1:07:07testimony and you discuss this lever
1:07:10models and included as attachment P aj1
1:07:15to your direct testimony is that
1:07:17right uh yes the lever model was
1:07:20included in the testimony as
1:07:23requested okay
1:07:26and and this is the same levers model
1:07:28that was discussed quite
1:07:30extensively in public services fully
1:07:33litigated 2022 gas rate case right it's
1:07:36very similar we may have made
1:07:38enhancements to it but yes it's the same
1:07:40basic
1:07:43model
1:07:45okay and looking at your supplemental
1:07:49direct testimony at page uh 12 it's
1:07:53heing exhibit 119 at page 12
1:07:58here you go into a little bit of an
1:08:01explanation
1:08:03regarding the fact that the levers model
1:08:07and this is on lines 1 through
1:08:0914 on page 12 The Leverage model enables
1:08:13the commission and the parties to assess
1:08:15credit metric impacts of various Roe and
1:08:19Equity ratios is that correct
1:08:22correct and at page six uh or at lines 6
1:08:27through 7 there on page 12 you
1:08:29specifically State the mathematical
1:08:32model requires inputting a
1:08:35particular Roe and equity
1:08:38ratio as it cannot produce a range of
1:08:42result or produce a result based on
1:08:44ranges is that right it's mathematically
1:08:47impossible to put a range in you could
1:08:49put individual numbers within the range
1:08:52and do the calculation but you can't put
1:08:54a range in there and have the model spew
1:08:57out different numbers based on every
1:09:00Point within that
1:09:03range
1:09:05so my recollection from the 2022 case is
1:09:09that when you input a particular
1:09:11Roe an equity ratio into the lever's
1:09:15model it produces a result that
1:09:18calculates the debt percentage and the
1:09:21whack percentage based upon the Roe and
1:09:25would e ratio inputs is is that a simple
1:09:28way of thinking of this model could you
1:09:30repeat the question please
1:09:34sure is it correct that inputting a
1:09:37particular Roe and equity ratio into the
1:09:41levers
1:09:42model produces a result that calculates
1:09:47the debt percentage and the whack
1:09:50percentage based on those Roe and equity
1:09:54ratio inputs
1:09:56correct and then it calculates the the
1:09:58credit metrics based on
1:10:00that
1:10:03okay and referring to your rebuttal
1:10:07testimony now hearing exhibit uh
1:10:11126 at page
1:10:1510 here you you generally discuss the
1:10:19capital structures and the various Roe
1:10:21and Equity ratios produced by UCA and
1:10:25staff
1:10:27correct correct and with those various
1:10:30Roe and Equity inputs the levers model
1:10:33can generate the capital structure
1:10:35showing the debt percentage and the
1:10:38whack percentage based on those UCA or
1:10:42staff Roe and equity ratio inputs is
1:10:44that right I mean the lovers model is a
1:10:47simplistic model that we provided to the
1:10:50commission and to the interveners to
1:10:53essentially um get a ballpark range of
1:10:57credit metrics based on different
1:10:58scenarios for the actual scenarios we
1:11:01ran more detailed models which we
1:11:02provided in the
1:11:04attachment to uh calculate the impacts
1:11:08of various scenarios and various
1:11:11recommendations so there are nuances
1:11:13between the the
1:11:17two
1:11:22okay I think that completes my uh cross
1:11:26exam would you give me just a moment to
1:11:28look at my
1:11:29notes
1:11:44yes yes that completes my cross of Mr
1:11:48Johnson thank you sir appreciate it
1:11:50thank you Mr
1:11:52bunker uh thank you Mr bunker uh
1:11:55commission counsel any uh
1:12:01questions no questions commissioner
1:12:05plant thank you Mr chairman good morning
1:12:07Mr Johnson good morning um so uh I I'm
1:12:12still trying to understand sort of the
1:12:14the way that the Credit Agencies
1:12:17evaluate um you know the companies
1:12:20particularly as they're Blended here
1:12:22with with the electric and the gas and
1:12:24so uh
1:12:25um I'm trying to specifically try
1:12:28understand sort of the impacts of the
1:12:30capital structure on the credit
1:12:31evaluations for the combined companies
1:12:34before I get into my questions I did the
1:12:36I did have some follow-up questions that
1:12:39uh were raised from Mr bunkers uh cross
1:12:42so I just wanted to ask a few things I
1:12:45was still confused about um so you
1:12:47mentioned when talking to Mr bunker that
1:12:50uh gas customers would be benefiting
1:12:52from the credit impacts of the electric
1:12:55system um in his scenario but isn't that
1:12:58going to happen anyway because the
1:13:00credit rating process is a Consolidated
1:13:02evaluation it doesn't happen
1:13:03individually for the gas and the
1:13:05electric companies so one is going to
1:13:08naturally benefit the other well not
1:13:12really because again if you have a
1:13:15similar capital structure for both the
1:13:17gas and the electric the the credit
1:13:20rating ratings reflect the Consolidated
1:13:22entity the cost of service represents
1:13:26the Consolidated Equity
1:13:28structure okay so you're sort of
1:13:32advocating um the same or
1:13:35similar um uh Capital structures for
1:13:39both so that there's not one that would
1:13:43have an influence over the other is that
1:13:47well the the commission has the always
1:13:49has the ability to determine a different
1:13:51capital structure for each for the
1:13:53electric or the gas
1:13:55we then as a company would have to S
1:13:57determine how would we handle that so
1:13:59there's
1:14:00basically in my mind two different ways
1:14:02we could do that the first would be okay
1:14:05we'll take we'll come up with an
1:14:07allocated capital structure based on the
1:14:09different
1:14:11authorizations that's that's one way the
1:14:14second way would be to make a
1:14:15determination to for example if the gas
1:14:18se you took the the
1:14:21authorized equity ratio from 55 to 4% we
1:14:26could determine well is this where the
1:14:28electric is going to go in the next
1:14:30proceeding has the commission given us a
1:14:32site saying this is where they think the
1:14:34capital structure should be and
1:14:35therefore we could say okay at that
1:14:37point in time maybe it makes sense for
1:14:38us to manage to the lower cap structure
1:14:40so we would have to determine what how
1:14:42we would handle a different
1:14:44authorization level for each
1:14:47entity okay I understand um and you also
1:14:51said that the 25%
1:14:55um that Mr bunker and UCA proposed isn't
1:14:59accurate is there an accurate number or
1:15:01that you know or that you could
1:15:03estimate I was merely saying that that
1:15:06is not I didn't say it was necessarily
1:15:07inaccurate if I did I I meant it's not
1:15:10realistic because that's not the way we
1:15:12manage the
1:15:13company okay so I'm I'm not sure what
1:15:16the exact allocation between electric
1:15:18and gas based on whatever measure you
1:15:20want to use if you want to use rate base
1:15:21Etc it's probably somewhere between 20
1:15:23and 25%
1:15:25okay so but you're saying that because
1:15:30they're because they would have the same
1:15:33capital structure under what your
1:15:35assumption is here that they would have
1:15:36the same capital
1:15:38structure if it's 25% if it's 20% if
1:15:41it's 30% it doesn't matter really
1:15:43because they have the same capital
1:15:45structure if they have the same capital
1:15:47structure it doesn't matter correct if
1:15:49we're doing an allocated capital
1:15:51structure based on two different
1:15:53entities yes so then he's saying what
1:15:56with the Blended cap I gotta okay
1:16:01um and one of the other things I think
1:16:03yesterday Mr bunker referenced the
1:16:05changing nature of debt and reaction to
1:16:07various Market forces including
1:16:09quarterly action by the fed and in those
1:16:12cases between rate cases if something
1:16:16happens that changes those rates what
1:16:19happens the the the the does the whack
1:16:22change the Roe the capital structure is
1:16:25there a TR up process does it impact the
1:16:28next Revenue requirement and the next
1:16:30rate C what happens what happens to sort
1:16:33of if the actual debt that you that you
1:16:36that you issue has a different rate
1:16:39because so let's assume that the rates
1:16:40are set um and it's based on some cost
1:16:45of capital some cost of debt Etc and
1:16:49then let's for simp politics let's
1:16:51assume that the cost of short-term debt
1:16:53is 5%
1:16:55if the excuse me and let's assume that
1:16:59this is based on historic test year and
1:17:00nothing changes in the next year
1:17:03everything cost Revenue all at the same
1:17:07level but let's say that short-term debt
1:17:10goes down to to 4% the company would
1:17:15then
1:17:16earn above that
1:17:18level if the cost of debt went up to 6%
1:17:22then the C the company would earn less
1:17:24because its rates don't reflect that so
1:17:28once the rates are set um and this is
1:17:31it's not this is not only for short-term
1:17:34debt and long-term debt obviously costs
1:17:36and revenues change and the company then
1:17:38has to try to manage based on the
1:17:41different levels and revenue so
1:17:44basically it would it would float within
1:17:45the
1:17:46Roe yes it would it would the earned Roe
1:17:50would reflect the change in assumptions
1:17:53from what was authorized in the raid
1:17:56proceeding okay great and one of the
1:18:00things in in your testimony um uh was
1:18:05response I think to Mr
1:18:07Fernandez he he had said that the
1:18:09natural gizm natural gas business is too
1:18:11small to have a significant impact on
1:18:13the company's credit
1:18:15rating um and and and you disagreed with
1:18:19that but then a couple of days ago um
1:18:22the chair brought up the investor
1:18:24presentation from Excel and we saw that
1:18:27about 19 out of about $1 19 billion
1:18:29dollar of proposed additional Capital
1:18:31something like two and A5 billion was
1:18:33attributable to the gas business is that
1:18:37something that Credit Agencies would
1:18:39look at or would that level of
1:18:42investment on the electric side be of
1:18:44more interest to Credit
1:18:45Agencies that in their consideration of
1:18:50evaluating the company they're going to
1:18:52evaluate the Fiasco based on the toal
1:18:54company so they're not going to
1:18:56necessarily look at they're going to
1:18:57look at the individual decisions that
1:18:58are made in regulatory proceedings more
1:19:00from a standpoint of what kind of
1:19:02Revenue does that provide but they're
1:19:05also going to look at it from what kind
1:19:06of insights do they get in how the The
1:19:09Regulators are viewing the company they
1:19:12aren't looking so much at what is the
1:19:15gas capital investment versus the
1:19:17electric capital investment they're
1:19:19going to look at the total investment
1:19:20and and say okay how is this going to be
1:19:22funded what is the impact on credit
1:19:24metrics Etc but they're not looking so
1:19:26much as the breakdown between the two
1:19:28entities so the size of the investment
1:19:32you know if if if um Excel is saying in
1:19:35their investor presentation we
1:19:37anticipate investing $19 billion do in
1:19:40the next four years the size of that
1:19:44investment really doesn't impact the
1:19:46credit evaluation if they said we're
1:19:49looking at investing $5 billion in the
1:19:51next four years the the evaluation from
1:19:54the credit agency wouldn't be different
1:19:57for one of
1:19:58those they're going to look at the total
1:20:00investment they're definitely going to
1:20:01look at the total investment and what
1:20:03they're going to do is they're going to
1:20:04look
1:20:05at what is that investment how is it
1:20:08going to be financed how is it going to
1:20:10be funded what are going to be the
1:20:12projected they have a model they'll look
1:20:14at and say this is what we project the
1:20:16various credit metrics to be based on
1:20:18the level investment and the assumed
1:20:21financing plan that we provide them and
1:20:24so
1:20:25if the capital investment went from 10
1:20:27billion to 19 billion or 10 billion to
1:20:2920 billion or whatever and we said we're
1:20:31going to fund that all with debt well
1:20:33they would look that very differently
1:20:34than if we said we're going to fund it
1:20:36with a portion of equity and a portion
1:20:37of Deb okay so they're looking more at
1:20:40the structure of of the of the of maybe
1:20:44another way to get at if the total
1:20:46capital investment for psco is 19
1:20:49billion and it was 9 billion electric
1:20:51and 9 billion natural gas they wouldn't
1:20:54look at that necessarily
1:20:57as be all that focus on the split
1:21:00between the two as long as they assume
1:21:02that the revenue require the revenue
1:21:04recovery the cost recovery is going to
1:21:06be consistent okay thank you um and you
1:21:10mentioned in your direct testimony uh
1:21:13that the provisions of Senate Bill 291
1:21:15that shared gas volatility risk with
1:21:18consumers was viewed as negative by the
1:21:20Credit
1:21:21Agencies doesn't the the states inserted
1:21:25policies to move away from gra gas
1:21:27reduce those risks overall particularly
1:21:30because of the positive positive impact
1:21:32on the electric side of the business or
1:21:35do the Credit Agencies you know doubt
1:21:37the ability of the state to decarbonize
1:21:39or what how do they look at that Dynamic
1:21:43I was merely quoting the S&P report and
1:21:45the S&P report said they viewed the the
1:21:49bill that was passed is uh credit
1:21:51potentially credit negative because it
1:21:54allows for potential disallowance of
1:21:56costs and deferral of costs which would
1:21:59affect the credit
1:22:01metrics so they're not apping on the
1:22:04policy of the state to decarbonize the
1:22:07gas sector but is there I mean I can see
1:22:12I can see that component on the gas side
1:22:16I'm just wondering if there is a if the
1:22:18credit agency
1:22:20see uh uh an associated
1:22:25uh benefit on the electric side or do
1:22:27they just not do they not look at that
1:22:30well they'd have to someone would have
1:22:31to be able to point out to them how
1:22:33they'd have to see that there is a
1:22:34benefit on the electric side so in other
1:22:37words even if there's a benefit on the
1:22:39electric side if you if there's a a
1:22:41natural gas pin and and there's a $25
1:22:44million disallowance because Natural Gas
1:22:48Prices
1:22:49rose they would look at that and say
1:22:51okay well there's $25 million that is
1:22:52not being collected from the cup from
1:22:55okay from uh customers it's it's no sim
1:22:58it's no different than any kind of
1:22:59disallowance that occurs and extend if
1:23:03it's a small disallowance and it's
1:23:04probably not going to have a material
1:23:06impact okay so they're not really
1:23:09looking at sort of the the the long-term
1:23:13policy implications on the gas system or
1:23:16the Electric System they're looking more
1:23:18at what's being allowed and what's not
1:23:20being allowed they're they're looking at
1:23:22exactly they're looking at what's going
1:23:23to drive credit
1:23:25metrics okay what's going Drive cash
1:23:28flow okay so one of the things that
1:23:31we've done in the past is we pick a
1:23:33whack and we have a range for the
1:23:36capital structure that the that the
1:23:37company can sort of move within and I
1:23:40thought that that that was a sort of a
1:23:42good balance to protect the consumer and
1:23:45allow the company you know that sort of
1:23:48flexibility to best manage their credit
1:23:50rating within the capital structure but
1:23:52in this proceeding the companies asked
1:23:54in specifically not for a range and I'm
1:23:57just help if you could help me
1:23:59understand why that is because I thought
1:24:01that helped the company benef you know
1:24:03manage their credit rating there I mean
1:24:06as far as whether there's a range or at
1:24:08the end of the day um if if the
1:24:11commission provides a range we'll have
1:24:12to make a decision on where to operate
1:24:15what what essentially we need to manage
1:24:16to a capital structure and so if you
1:24:19provide us a range we'll look at that
1:24:20range and determine what is the
1:24:22appropriate level we we should manage to
1:24:26so in the last
1:24:27proceeding we decided to stay at the
1:24:29high end of the capital structure range
1:24:31and the reason we did that is we think
1:24:34that that provides the most protection
1:24:36for Pesco from a credit supportiveness
1:24:39standpoint so in other words if you give
1:24:41us a a revenue requirement and and we
1:24:44are at
1:24:4655% the credit metrics are going to be
1:24:49stronger than if we took that same
1:24:50Revenue requirements and levered up the
1:24:53company and move down to 52% if we do
1:24:57that the CFO or ffo to debt is going to
1:25:01go down because of that and so we took
1:25:04the most conservative approach on
1:25:07capital structure based on that range so
1:25:09if you give us a range if you if the
1:25:10commission decides that a range is
1:25:12appropriate way to manage it we will
1:25:13then have to look at that and see what
1:25:15is the appropriate place within that
1:25:17range to essentially manage the capital
1:25:20structure and then the Roe essentially
1:25:22becomes a Fallout from where the ratio
1:25:25is yeah I I get that I just what I was
1:25:29wondering is why in this proceeding the
1:25:33company is asking specifically not for
1:25:35the commission to not give you a range I
1:25:38don't know that I mean I don't I don't
1:25:40have a strong view on it one way or the
1:25:41other at the end of the day I just need
1:25:43a an equity ratio that I can manage to
1:25:46and so if you if the commission decides
1:25:48that they think that a range is more
1:25:50flexible I don't have a concern with
1:25:52that okay thank you
1:25:54and um last question uh you mentioned
1:25:58that the Credit Agencies when you when
1:25:59you have a a disallowance of of of some
1:26:02kind of cost that's a negative thing do
1:26:05they look
1:26:06at sort of um the structure of the
1:26:10business I would imagine you know that
1:26:13there's a negative and maybe this is
1:26:16wrong but they that they see because of
1:26:18the state's carbon goals and this is a
1:26:20gas company that there's a negative uh
1:26:23impact but if the company were to expand
1:26:26their business to include Capital
1:26:28Investments that were not directly
1:26:29associated with gas but for for example
1:26:32a clean heat sort of component of of the
1:26:36company um that was investing
1:26:40in uh you know heat pump systems or
1:26:43District heating or whatever it might be
1:26:45some sort of clean heat you know
1:26:46Investment
1:26:48Portfolio that would be then
1:26:51allowable um expenses as opposed to
1:26:54disallowing you know other expenses
1:26:57would that be seen by Credit Agencies as
1:26:59reducing risk to the company and and in
1:27:01know in a clean heat sort of Paradigm of
1:27:04policy Paradigm that we're in uh yeah
1:27:06they could look at that and say you know
1:27:08that they see that this is a a strong
1:27:11policy to reduce risk and that if you
1:27:14look at another way to look at is
1:27:15because we're a combined company if if
1:27:17there's a declining side of Revenue and
1:27:21costs on the gas side that's offset by
1:27:24the electric side because of investment
1:27:26and returns again because they're
1:27:29looking at the Consolidated entity
1:27:30they'd say well this is fine they don't
1:27:31see an issue obviously if you had a
1:27:34standalone gas company that had a
1:27:37declining business and that reflect uh
1:27:40projected credit metrics that are going
1:27:42to decline that's a different story so
1:27:44what they try to do is interpret the
1:27:47actions of the company the actions of
1:27:49the commission the actions of the state
1:27:52to determine what that does to the
1:27:54company strategy what the risks are for
1:27:57the company and what the cash flows and
1:27:59credit metrics are a result of from that
1:28:02that
1:28:03action great thank you very much Mr
1:28:05Johnson I don't have any other questions
1:28:07can can you explain what that thing that
1:28:09looks like a guitar but has only four
1:28:10strings is it's a it's a bitar okay
1:28:14thank you very
1:28:16much iing you have a Flying V instead
1:28:19but that's that's cool
1:28:21too I appreciate your efforts Mr John to
1:28:24clarify the record on that
1:28:28point H commissioner Gman good morning
1:28:32Mr Johnson morning commissioner
1:28:34Gilman um I had a couple questions for
1:28:37you um related to something in your
1:28:40rebuttal
1:28:41testimony um we we could or couldn't
1:28:43look at it it's a fairly General concept
1:28:46I think you'll follow without looking um
1:28:49in table PJ R1 in your rebuttal
1:28:53testimony you showed um the company's uh
1:28:57Financial metrics for 2024 and 2025
1:29:00under a range of different scenarios you
1:29:01recall that
1:29:03yes okay um so in looking at this table
1:29:07it looks as though the company's 2024
1:29:09Financial metrics are subject to a
1:29:12fairly sizable swing due to the uh
1:29:15outcomes of this rate case would you
1:29:16agree with that uh
1:29:19yes um and just to confirm the credit
1:29:22analyses you conducted did um actually
1:29:25assumes the adjustments made in this
1:29:27rate case apply to the entirety of the
1:29:30public service entity
1:29:32right yes so what again it does is it
1:29:36assumes that the capital structure is
1:29:37going to be at the Consolidated entity
1:29:40the revenue is going to Bas be based on
1:29:42whatever change in Revenue there is from
1:29:45this gas rate
1:29:46case Okay words if the RO is set at a
1:29:51certain level that's going to inherently
1:29:52mean there's going to be a certain
1:29:54Revenue requirement for this gas that
1:29:56gas entity that'll be the amount of
1:29:59Revenue that'll be reflected the it
1:30:01doesn't look at the change in revenue
1:30:03for the electric the electric revenue is
1:30:05essentially a static based on the model
1:30:08okay um so given that this rate case
1:30:12likely won't in conclude until November
1:30:162024 um or
1:30:18so what's the basis for projecting such
1:30:21significant impacts to the 2020 for
1:30:25financials it it'd be really
1:30:27reflecting the change in the level of
1:30:31capital structure and the level of debt
1:30:33that would be existing in that
1:30:36entity and that's this impactful for
1:30:39only a portion of the entity for only
1:30:41one 12th of the Year well again we did
1:30:43that earlier in the year so you're
1:30:45looking at it at that point in
1:30:48time sorry walk me through that again so
1:30:52that was based on when that was filed at
1:30:55that point in time in in 24 so if the if
1:30:58you change the the capital structure at
1:31:01some point in time what's the level of
1:31:02debt what's the level of interest
1:31:04expense that's going to occur I don't
1:31:06remember I don't know the exact
1:31:08assumption for what the impact would be
1:31:10on 24 as far as when we would make the
1:31:13change in the capital structure it's
1:31:15probably more important to look at the
1:31:1625 metrics versus the
1:31:1924 okay so yeah this was filed August 15
1:31:24okay 2024 so then the
1:31:272024 projected impacts were based on as
1:31:31if the changes would occur the day you
1:31:33did the calculation even though this
1:31:34rate I don't I don't know the exact I
1:31:36didn't do the calculation myself I'd
1:31:37have to talk to our staff to find out
1:31:39what they assume for when the capital
1:31:41structure was adjusted but that's my
1:31:43assumption is why there's a impact but
1:31:46again I would be more focused on 25
1:31:48which is more of a go forward credit
1:31:51metric okay and just to be also the
1:31:54company's main request here is of these
1:31:56credit or these um sorry rate
1:31:59changes um would go into a a deferral
1:32:04but then the actual um changes would
1:32:07occur to customers in February 2025 is
1:32:10that accurate correct with a sear charge
1:32:12back for the previous months okay
1:32:16[Music]
1:32:18um okay um just one more question um
1:32:22curious you you probably know that the
1:32:24history better than I do I'm curious
1:32:27going back the past 10 or 15 years has
1:32:31there ever been an example where Public
1:32:33Service Company of Colorado has been
1:32:35downgraded based specifically on Roe
1:32:37determination in a recase for the gas
1:32:40utility uh well I mean I know that in
1:32:44the you know 2008 time period the credit
1:32:50ratings for psco were lower than they
1:32:52are now I don't I don't know why the
1:32:56what what caused the rating agencies to
1:32:58make that adjustment it is again it's
1:33:00not necessarily the r it's going to be
1:33:02the impact on the credit metrics that
1:33:04you know that flow
1:33:06through that that being said the
1:33:08commission does look at decisions
1:33:10related to Roe and uh capital structure
1:33:13and and sites those is in their in their
1:33:16reports as part of how they view the
1:33:18business risk for the
1:33:20entity okay so related to that has there
1:33:22been an example the last 10 or 15 years
1:33:25when the company has been downgraded
1:33:27based on the determination of Roe and uh
1:33:30credit and uh equity ratio for the gas
1:33:33utility
1:33:34specifically for for
1:33:36psco for psco yeah but like based on
1:33:40changes to the Roe and uh equity ratio
1:33:43for the gas utility specifically as it
1:33:45feeds into Pasco not that I'm
1:33:47wor those are my only questions thank
1:33:51you uh thank you commissioner Gman hey
1:33:54Mr
1:33:55Johnson um can we pull up table
1:33:58pj- R-1 from the Mr Johnson's rebuttal
1:34:02testimony at page 13 I just want to
1:34:05follow up on a uh a conversation you've
1:34:08been having with uh uh my colleagues so
1:34:13if you just look at scenario one which
1:34:16is uh
1:34:17basically um what the credit metrics are
1:34:21with no rate case it looks like you're
1:34:25more or less fine even with zero rate
1:34:29increase is that a fair way of reading
1:34:32this yes from a strictly from a revenue
1:34:36credit metric standpoint that if we
1:34:38didn't file a rid case we would not be
1:34:40downgraded all right and um so I guess I
1:34:45I assume we would not be downgraded
1:34:47right and I get it would send a message
1:34:49to financial communities changing
1:34:51regulatory environment but at least on
1:34:52the cash flow credit metrics yes um
1:34:56you'd be fine and I guess that's at
1:34:58least some evidence that the way we set
1:35:00common Equity ratios and Roe in the last
1:35:03case um certainly didn't harm at least
1:35:06this aspect of the company's credit
1:35:09metrics is is that fair
1:35:12yes and uh just again back to
1:35:15commissioner plant's uh question you
1:35:18know as I understand it the companies
1:35:20proposing Roes in the 10 other parties
1:35:24are in the
1:35:26eights um it seems a little tough given
1:35:30that range to pick something down to
1:35:33like a hundredth of a basis point uh you
1:35:37know or down to a single basis point uh
1:35:41um I I've always thought that the range
1:35:44better reflects what's in this record do
1:35:47do you have any thoughts or or or
1:35:50guidance uh on that and you know to the
1:35:54extent a court or somebody else is
1:35:55looking at it that range accurately
1:35:59reflects the uncertainty in the
1:36:02regulatory process in the range of what
1:36:04we're getting presented and any comments
1:36:07on that perspective no I think that
1:36:09again as I mentioned earlier I think
1:36:11that if you elect to pick a range of
1:36:13Roes and Equity ratios based on some
1:36:16weighted average cost of capital I don't
1:36:18see a a problem with that okay
1:36:22appreciate that
1:36:24as I as I said before I mean obviously
1:36:25we're gonna have to pick a point to to
1:36:28manage to from a capital structure
1:36:30standpoint no I I appreciate that and
1:36:33then you're picking the 99.2% Roe we're
1:36:36not somehow imposing it uh we're not
1:36:39picking it's a it's a basically it falls
1:36:41off from whatever equity ratio we take
1:36:43correct right um um this may be a little
1:36:47bit beyond uh um your testimony but um
1:36:51it came up with your discussion with
1:36:53commissioner plan and Mr Burman referred
1:36:56it to you um I had a discussion with Mr
1:36:58Burman about public service company's
1:37:005-year Capital budgets and more
1:37:03specifically a March 2023 Excel Energy
1:37:06investor presentation shared your
1:37:08fiveyear Capital budgets at 11.2 billion
1:37:12about 14 months later by April
1:37:152024 the proposed 5-year capital budget
1:37:18was now at 19.2 billion a 70% increase
1:37:23that will maybe double or triple rate
1:37:25base from when I joined uh this
1:37:28commission um and you know given that
1:37:31Colorado retail electric sales have
1:37:33grown at uh a compound annual growth
1:37:36rate of 3% uh since
1:37:392010 can you provide us with any comfort
1:37:43that this Capital spending plan is not
1:37:45going to produce large rate CES on a
1:37:48large rate increases on the electric
1:37:50side in the coming
1:37:51years well I I mean I don't do the
1:37:54revenue requirement calculation or the
1:37:56customer bill impact um obviously the
1:37:58capital expenditure forecast that we
1:38:00include in our investor deck you know we
1:38:02have a base Capital forecast and
1:38:04generally it includes projects that uh
1:38:07you know large projects are you know
1:38:09have been that have been approved by the
1:38:10commission so the change for the in
1:38:14Colorado really reflects the clean
1:38:16energy plan that was approved last fall
1:38:19um and and that's why the you know you
1:38:21see the uh adding more Renewables
1:38:24replacing coal generation Etc that's
1:38:27reflecting of the capital and the
1:38:28transmission are probably the biggest
1:38:30drivers in that change in that
1:38:33plan all right and same question on the
1:38:36natural gas side given the likelihood of
1:38:39uh declining natural uh gas retail uh
1:38:42sales should this commission be managing
1:38:45down natural gas spending uh to avoid
1:38:48rapidly Rising rates on the gas side and
1:38:51are there any things we should be
1:38:53thinking about in the financial
1:38:54Community if we do go in that direction
1:38:57well I mean I think that you know we
1:38:59obviously you want to do is you want to
1:39:00make sure that we're operating the
1:39:01system safe and reliably uh we obviously
1:39:04want to make sure that that we're not
1:39:06making decisions that are going to put
1:39:08our customers or the public at at harm
1:39:10and we want to make sure we maintain
1:39:11that system uh obviously any Capital
1:39:14Investments that we think that there's a
1:39:16potential stranded Asset Risk should be
1:39:19scrutinized both by the company and by
1:39:21the
1:39:22commission all right
1:39:24uh just uh moving on the negative uh net
1:39:27salvage value in your supplemental
1:39:29direct testimony at page 13 line 17 you
1:39:33say that the company is Acro $70 million
1:39:36per year in negative net salvage value
1:39:39and that 400 million has been in cruded
1:39:42so far is is that
1:39:45fair that is correct and and I should
1:39:47point out that is that art frus is and
1:39:50his team are the ones that have come up
1:39:52with those numbers again I'm an expert
1:39:54on what we collect from our customers
1:39:56all right and uh these areals count as
1:40:00free cash flow the company can use as it
1:40:02sees fit including to support the credit
1:40:05metrics uh increase dividends whatever
1:40:09it's it's your it's your cash to spend
1:40:11as you see fit is that fair well I I
1:40:14would say it's part of our operating
1:40:16cash flow and it can used to it can be
1:40:18used to fund capital investment pay for
1:40:21operating expenses replace
1:40:23pipes Etc uh that is correct so we have
1:40:27an obligation based on that $400 million
1:40:29we have an obligation to at some point
1:40:32in time make sure that we can fund the
1:40:35decommission that would occur at that
1:40:37whatever that number
1:40:38is uh your testimony goes on to talk
1:40:41about the potential damaging impact of
1:40:44the company's credit M metrics if you
1:40:46are required to put uh that 70 million
1:40:49per year into a cash-based trust fund or
1:40:52have to provide cash support for the uh
1:40:55400 million that has been AC cruit so
1:40:57far is is that fair I wouldn't say that
1:41:00I would call it damaging and maybe if
1:41:02you could advance to that schedule we
1:41:04can just talk through that that'd be
1:41:06great uh do you uh recall the page
1:41:08number or just have uh it's it's towards
1:41:12the just a couple more pages I
1:41:16believe just let me know uh to stop when
1:41:19you see what you want I I'll let you
1:41:20know keep going
1:41:25all right here we go this is well no
1:41:26keep going keep
1:41:31going all right so this is the
1:41:34table so what we tried this is going to
1:41:37get a little bit uh Nuance but the way
1:41:40it works is let's say we collect 70
1:41:43million from our customers that'll be
1:41:45reflected in our cash from operations
1:41:48okay if we put $70 million into a trust
1:41:52fund
1:41:53that would show up in the investing form
1:41:57of the cash flow statement all right so
1:42:00our CFO theoretically doesn't
1:42:04change if the so if the rating agencies
1:42:07recognize that and make an adjustment to
1:42:10it they would what they would do is
1:42:11they' back that $70 million up so we
1:42:14basically have two different ways of
1:42:16looking at it assuming the rating
1:42:18agencies make an adjustment or assuming
1:42:20that they don't all right
1:42:22so scenario one assumes that what
1:42:25happens is we issue $400 Million worth
1:42:28of debt put that into a trust uh a
1:42:32decommissioning trust and then we a we
1:42:36collect that $70 million from our
1:42:39customers annually and we put that into
1:42:42the trust every
1:42:43year so if the if in scenario one with
1:42:47that assumes is that the commission not
1:42:50commission the Raiden agencies adjust
1:42:52our cash from operations to reflect that
1:42:55$70 million being removed from cash from
1:42:58operations and it also reflects that
1:43:00higher debt level so that would say that
1:43:02the credit metrics would decline by 95
1:43:05based
1:43:07points scenario two is that we issue the
1:43:11debt of $400 million and we put that
1:43:15into a uh decommissioning trust and and
1:43:19the change there is that and and there's
1:43:21no change uh
1:43:24to the commission or the ra agencies do
1:43:27not adjust cash from
1:43:29operations so that would adjust the
1:43:32credit metrics down by 20 basis points
1:43:34largely to reflected that there's really
1:43:35no change in cash from operations but
1:43:37there's more debt
1:43:40outstanding scenario three is
1:43:43essentially that uh the $70 million that
1:43:48we collect from our
1:43:50customers goes into the trust fund every
1:43:53year and the rating agencies notice that
1:43:56and they adjust the cash from operations
1:43:58and that that would um adjust the credit
1:44:02metrics by 8 basis point and scenario
1:44:05four is that we we establish that trust
1:44:10we take this the 70 million annually we
1:44:12put it in the trust but the the ra
1:44:16agencies don't adjust cash from
1:44:17operations they just reflect the fact
1:44:19that there is more debt on the balance
1:44:21sheet because instead of having that $70
1:44:24million available for you know
1:44:27operations we now have to fund that with
1:44:31data that kind of explains the the
1:44:33various
1:44:35ramifications no I appreciate that that
1:44:38was uh very helpful um and do you have a
1:44:42view of How likely uh the agencies are
1:44:47to are likely the agent uh the credit
1:44:49rated agencies are to adjust I mean it
1:44:53seems like uh what was free cash flow
1:44:57may now be
1:44:58restricted um but is it like 5050 that
1:45:02they go from Scenario one to two and
1:45:05scenario 3 to four is it 2080 or who
1:45:08knows I really couldn't Venture guess
1:45:10you know it's uh I hate to bet on the
1:45:12credit rating
1:45:14agencies fair enough um are you
1:45:17generally familiar with the staff
1:45:18proposal to accelerate depreciation by
1:45:2115 million uh per year which I
1:45:23understand that the company uh does not
1:45:26oppose I have just a basic knowledge of
1:45:29it yes all right what would you think if
1:45:32we uh in an order in this case made it
1:45:36clear that we weren't requiring you to
1:45:39post credit support for the 400 million
1:45:42that would stay as it was but required
1:45:44the company to incre incrementally
1:45:47manage down that 70 million in annual
1:45:50net salvage value uh Salvage free cash
1:45:54flow to zero over say five years and at
1:45:58the same time offset that loss-free cash
1:46:02flow uh uh to maintain credit ratios by
1:46:06accelerating uh depreciation on roughly
1:46:09a one for one uh basis would that um
1:46:14essentially address this issue so the
1:46:16idea is instead of taking 70 million out
1:46:20say yeah uh you take 55 million and
1:46:24you'd accelerate depreciation you know
1:46:27more broadly by 15 million so no matter
1:46:29what we do with anything else in this
1:46:31rate case I think that would keep you
1:46:35more or less even on a cash flow base on
1:46:37a free you know free cash flow basis
1:46:41while potentially diffusing what could
1:46:45be described as sort of a time bomb of
1:46:48this negative net salvage value and also
1:46:51accelerating depreciation so there was
1:46:53less hanging out there so if the worry
1:46:56is you know 30 years from now there's
1:46:58going to be you know greatly reduced gas
1:47:01sales this removes the multi-billion it
1:47:05basically funds the multi-billion or
1:47:08some portion of this in a trust fund it
1:47:11accelerates
1:47:13depreciation and helps us both ways
1:47:15without hurting your credit metrics so
1:47:18any any reaction to that uh proposal
1:47:23I don't I don't have any I think that
1:47:24that I I think again I think what you're
1:47:27saying is is is is fair and that would
1:47:30definitely address any credit metric
1:47:31issues and uh if it addresses a concern
1:47:34that the commission has that there's
1:47:36potential liability that would be
1:47:38difficult to fund in the future that's a
1:47:39way to handle it I mean obviously
1:47:42uh a decommission a decommissioning
1:47:45trust or some costs associated with it
1:47:47but that you know that and there's some
1:47:49complexities but that's something we we
1:47:50can certainly manage through so it's a
1:47:52policy decision that the commission can
1:47:54make and and you know doesn't have a the
1:47:57way you're talking about I'm I'm I'm
1:47:59supportive about it and would you have
1:48:01any advice uh about how to best
1:48:04Implement something like this approach
1:48:06in this case if we chose to do so I
1:48:09assume it'd be language in the order you
1:48:11know explicitly trying to manage uh to
1:48:14the concerns of the credit rating
1:48:17agencies yeah I mean I don't have any
1:48:19specific advice for it I think I think
1:48:20what you've talked about and proposed
1:48:23addresses any concerns that would occur
1:48:26I guess the
1:48:28the uh one last thought um is there a
1:48:32long-term letter of credit mechanism
1:48:34where the regulated system could pay a
1:48:35fraction of the 400 million per year uh
1:48:39and have a third party guarantee funding
1:48:41for the removal you know I know in um
1:48:46you know resource planning world uh
1:48:49developers have to post credit support
1:48:51for the term of the off take contracts
1:48:54and the let it of credit costs were
1:48:56maybe you know 0.5% or 1% is there
1:49:01something like a similar approach to
1:49:03assure that there's funding uh for the
1:49:06400 uh million or whatever that balance
1:49:09is uh at the end of the term you know
1:49:12again the scenario is uh you know we get
1:49:15out 30 years and there's no revenue and
1:49:17cash to uh you know remove this and I I
1:49:21know we do it on I've seen seen counties
1:49:23do it on on decommissioning uh wind and
1:49:25solar facilities right they require a
1:49:28bond to be posted and that you know you
1:49:32pay a little bit every year but at the
1:49:33end of the year at the end of The
1:49:35Project Life the money's there to to to
1:49:38do this so any thoughts or advice on
1:49:42something like that I don't have any
1:49:44experience with like a long-term letter
1:49:46of credit and that kind of arrangement I
1:49:48mean I guess the other thing I would
1:49:49assume is that we are going to be
1:49:52decommission in a portion of the system
1:49:54over the next 25 years I would expect
1:49:56that we would utilize that $400
1:49:59million that we've got ACR as a
1:50:01liability to do that so at you know 25
1:50:0630 years from now hopefully that has
1:50:07been utilized from any lines that be
1:50:11decommissioned I guess the other
1:50:13alternative you could consider is
1:50:15issuing you know having psco issue debt
1:50:17and take that $400 million and put it
1:50:20into a uh a trust
1:50:23but that has real consequences sure
1:50:26there yeah exactly because obviously
1:50:27then there's going to be an increase in
1:50:29rate base and the customers are going to
1:50:31pay the full whack with that you know
1:50:33they're currently getting the benefit of
1:50:35so there is a cost yes yeah I mean I was
1:50:38thinking if if you could do a letter of
1:50:40credit it might be a couple million
1:50:41dollars a year for you know 30 years but
1:50:45but then it's back stopped at at no
1:50:47immediate cost yeah I guess we'd have to
1:50:50find an institution that would be
1:50:51willing to ISS that letter of credit
1:50:53based on the credit supportiveness of of
1:50:58Pasco right I'm sure I'm sure that
1:51:00there's many of banks that that would
1:51:02love to do that and you know would love
1:51:04to you know charge us for
1:51:07that I bet especially if the electric
1:51:10business was standing behind it and it
1:51:12wasn't only the business Bankers always
1:51:14like to be helpful yeah
1:51:18um uh I think that's uh all I all I have
1:51:22uh appreciate it Mr Johnson uh uh Miss
1:51:26Brahma should we take a a brief break
1:51:28and let you come back with uh redirect
1:51:31or you ready uh that's fine we can take
1:51:33a quick break now if it's a good time
1:51:35yeah why don't we uh break till 10:30
1:51:37and then we'll uh come back with uh Miss
1:51:39brahma's redirect
1:51:51thanks
1:52:21e
1:52:51e
1:53:21e
1:53:51e
1:54:21e
1:54:51e
1:55:21e
1:55:51e
1:56:21e
1:56:51e
1:57:21e
1:57:51e
1:58:21e e
1:58:43[Music]
1:58:58Miss
1:59:02Brahma all right uh thank you uh
1:59:05Commissioners Mr Johnson I'd like to um
1:59:09go back to some discussion you had
1:59:10throughout cross and discussion um so
1:59:13far today regarding um the credit
1:59:17metrics presented in your rebuttal
1:59:18testimony um and and potential changes
1:59:22those credit metrics um first can you
1:59:25explain whether the point of your
1:59:26rebuttal testimony is to focus on the
1:59:30exact point at which the company's
1:59:32credit rating make uh credit ratings
1:59:34might be
1:59:34downgraded no I mean I think what again
1:59:37I think that we want to be very careful
1:59:39we never want to be we never want to
1:59:41have a company at the threshold of a
1:59:43downgrade you always want to have some
1:59:46cushion for things that happen
1:59:48particular if you look at things like
1:59:50wildfire risk that we've seen in the P
1:59:52that is now a much more prevent thing so
1:59:55I I've always said and I think in
1:59:56previous um proceedings I've said that a
1:59:58two to 300 basis point cushion is
2:00:00probably the right place to be but you
2:00:02never want to be at that threshold is is
2:00:05there a single correct number for what
2:00:08the credit metric should be is 18.5
2:00:11versus 18.6 or 19 no I mean again
2:00:15the when when you look at like the mood
2:00:17you know we talk a lot about Moody
2:00:19because Moody has separate methodology
2:00:21for each entity of the Excel family and
2:00:24each one has a standalone credit rating
2:00:26and based on their their profile uh you
2:00:30know the rating agencies will detail
2:00:32their methodology but it is still a
2:00:34subjective rating and they look a a lot
2:00:36different things and it's not like hey
2:00:38you're at 18.99% therefore we're going
2:00:40to downgrade you you know and and so it
2:00:43is it is our us making sure that we
2:00:46position the company to weather a storm
2:00:49and to preserve the credit rating so we
2:00:51can access the capital markets at
2:00:52attractive rates okay thank you and at
2:00:56the same time do you have enough
2:00:57information to speak about the likely
2:01:00investor reaction to a material
2:01:02reduction in the company's uh cap
2:01:04structure equity
2:01:06ratio well you know I Tuesday I was or
2:01:08excuse me I guess Wednesday I was in New
2:01:10York City at the Barkley conference and
2:01:12you know the we had I think 11 or 12
2:01:15meetings and every meeting the gas case
2:01:18came up and you know the the commission
2:01:20or the the investors are continually
2:01:22focused on Roe and cap structure you
2:01:25know we had a a decision a year and a
2:01:28half ago in Minnesota where you know
2:01:30investors thought that the commission
2:01:33was going to increase the Roe um and
2:01:36they didn't increase the level we did
2:01:38and we lost 400 basis points of our
2:01:41Equity value in two days um clearly our
2:01:45fixed income investers look at the
2:01:47credit metrics they they make an
2:01:49independent decision based on their
2:01:51assessment versus the raing agencies and
2:01:54you know they look they took look all at
2:01:56all those things determine what they
2:01:58think the appropriate credit spread
2:01:59should be for uh each one of the family
2:02:03members uh Council I believe it was for
2:02:06UCA asked you some questions about
2:02:08whether there was an immediate downgrade
2:02:10after of Public Service after the 2022
2:02:13rate case and I think you were trying to
2:02:15give some examples of where things uh
2:02:17can go wrong after a adverse outcome if
2:02:21you will and I think in particular you
2:02:23started to refer to SPS uh could you
2:02:25please explain what happened to SPS when
2:02:28the New Mexico commission reduced SPS is
2:02:30equity ratio to
2:02:3151% yeah so I mean the equity ratio had
2:02:34been approximately 54% the New Mexico
2:02:38commission uh we this was after um the
2:02:44the tax reform proposal had gone through
2:02:47which affected some of the credit
2:02:48metrics we had suggested that perhaps
2:02:51Equity r go up higher to offset the
2:02:54impact the commission disagreed with us
2:02:58and they reduce the equity ratio and
2:03:00Moody's uh downgraded them relatively
2:03:04quickly and cited that as the reason for
2:03:06their downgrade what is the current
2:03:08equity ratio for
2:03:10SPS uh it is still
2:03:1454.5% and that's what's been authorized
2:03:17in previous uh rate cases so they they
2:03:21moved the equity ratio back up however
2:03:23the Moody has not changed their uh
2:03:26credit rating for SPS and so the lesson
2:03:29to be member is it's much easier to get
2:03:32downgraded than upgraded and that I
2:03:34would say that's based on my 20 plus
2:03:36years of of dealing with the raen
2:03:38agencies was there also a time frame
2:03:40when public service companies um uh
2:03:44credit rating was down to Triple B minus
2:03:46at S&P yes as we talked about with uh
2:03:49commissioner Gilman in the
2:03:52I'll call it that
2:03:5520058 time period I believe that that's
2:03:58when the credit rating was triple V
2:04:00minus and I I again as I was there and
2:04:03and it's never a good spot to be when
2:04:06you're on the verge of when you've got
2:04:08no cushion to go below investment grade
2:04:11and it took us a lot of time to get the
2:04:13credit ratings propped back
2:04:15up was that situation part of the reason
2:04:19that the public service started um with
2:04:22the commission's support to get its
2:04:25equity ratio at that time back up closer
2:04:26to
2:04:2760% yes so it at one point we had the
2:04:31equity ratio was at 60% to improve the
2:04:34credit metrics and also to reflect the
2:04:36fact that there was a fair amount of
2:04:38imputed debt from PPA contracts uh on
2:04:42the the balance sheet well off balance
2:04:43sheet but reflected in the the Raiden
2:04:46agency
2:04:47adjustments okay uh thank you Mr Johnson
2:04:50could we please
2:04:52um turn to um we need uh Mr Johnson's
2:04:57rebuttal testimony hearing exhibit
2:04:59126 at page
2:05:0513 a lot of focus on this schedule it's
2:05:09exactly what I was going to
2:05:10say so one thing I I think is important
2:05:13to make very clear with respect to
2:05:16scenarios six and seven in
2:05:19particular do those uh scenarios or or
2:05:23to what extent do those scenarios
2:05:25reflect any of the adjustments staff and
2:05:27UCA proposed in this proceeding other
2:05:30than the different equity ratio and Roe
2:05:33that the company proposed it it it
2:05:36doesn't reflect any kind of additional
2:05:38adjustments or disallowances or lack of
2:05:40recovery so if if those were implemented
2:05:43then the credit metrics would decline
2:05:46further so for example uh do these
2:05:49credit metrics reflect a 13-month
2:05:51average average rate base no do they
2:05:54reflect placing any money in uh a trust
2:05:57for decommissioning as opposed to having
2:05:59that that available for the company's
2:06:01cash flow no did they include any
2:06:04capital or on andm disallowances or lack
2:06:07of a return on assets no okay I just
2:06:11think that's very important because we
2:06:12talked a lot about um the focus As I
2:06:15understood it was on these U
2:06:18metrics without that is that was that
2:06:22what your understanding was as well Mr
2:06:24Johnson yes
2:06:28so I'm trying to skip ahead a little bit
2:06:31here because I'd like to not have to
2:06:32jump around too much with respect to um
2:06:35pulling up and down documents so I'm
2:06:37going to
2:06:39um switch gears a little bit um one of
2:06:44the questions I think that you were
2:06:46asked was um if for
2:06:502024 um
2:06:52when you when you provide both 2024 and
2:06:542025 metrics here first of all maybe
2:06:58just to provide a little context the
2:07:00company's proposed cap structure in this
2:07:01case is is that based on uh year end
2:07:04data as of the end of
2:07:072023 uh no the equity ratio at the what
2:07:12was the company's equity ratio at the
2:07:13end of
2:07:152023 approximately 55.5 55.6% something
2:07:19like that okay and so so if um the
2:07:23company for 25 and then 24 was assuming
2:07:27only two months of data for revenues but
2:07:31the cap structure taking effect for your
2:07:33end or different would that have a
2:07:35material impact for 2024 in this
2:07:38assessment no okay
2:07:43um you were also asked uh some questions
2:07:46here
2:07:47about the company um needing to
2:07:52um wh why if the company was uh had no
2:07:56rate case filing the credit metrics um
2:07:59wouldn't change do you recall that
2:08:02discussion well I think we had a
2:08:04discussion on what the the credit
2:08:06metrics assuming no raid case I I think
2:08:09that's a that's a better
2:08:10characterization thank you following
2:08:12from that are there reasons why Public
2:08:15Service needed to file a rate case apart
2:08:18from the credit metrics yes I mean
2:08:20obviously there's that are being
2:08:22incurred that were not re that are
2:08:24currently not being recovered you know
2:08:26clearly our um earned uh Roe is
2:08:31significantly below was authorized uh
2:08:34yes these are legitimate prly incurred
2:08:36costs that should be recovered and
2:08:38reflected in our rates
2:08:41and do you have H A sense of what the
2:08:44likely uh rating agency reaction would
2:08:46be if uh the outcome in this case didn't
2:08:50um reflect uh materially reflect
2:08:53substantially reflect uh the the
2:08:56Investments that the company has made
2:08:58since its last rate
2:08:59case well you know I think I talked a
2:09:01little bit about this and obviously um
2:09:04all three agencies and and also fixed
2:09:06income and Equity investors look at
2:09:09Material regulatory decisions
2:09:11particularly in a com in a company like
2:09:13PCO which is very important to the
2:09:16overall uh company uh and they look at
2:09:18that and they make an assessment on the
2:09:21the supportiveness of the of the
2:09:23regulatory environment and how that
2:09:25should impact the uh the credit profile
2:09:28the business risk the Financial Risk Etc
2:09:30and so a materially adverse impact would
2:09:33would be reflective in by investors and
2:09:35probably result in increased cost of
2:09:37capital and is and is that a concern to
2:09:40customers as well to the
2:09:42company well I think it should be
2:09:44because obviously it would increase the
2:09:46cost of of financing for the investment
2:09:49that we have for psco and psco obviously
2:09:51has a lot of investment that's going to
2:09:53be funding over the next you know five
2:09:56years do you is it your understanding or
2:09:58do you have an understanding whether
2:10:00customers also um whether there's a
2:10:03benefit to customers to having a
2:10:05financially healthy
2:10:08utility clearly there is I mean if you
2:10:11look at credit spreads the you know when
2:10:14investors feel that is a well-run
2:10:17utility that is recovering its cost and
2:10:19has a supportive commission you'll see a
2:10:20tighter credit spread which means a
2:10:23lower cost of debt and and more
2:10:25attractive Equity that allows us to fund
2:10:28continue to fund capital investment and
2:10:30Infuse Equity into the operating
2:10:32companies okay uh do you recall Council
2:10:35for UCA asking you some questions about
2:10:38the extent to which um a lower uh
2:10:41capital structure for the gas utility
2:10:43would have an impact on public service
2:10:45as a whole given the higher authorized
2:10:47equity ratio for the electric
2:10:49utility yes now uca's proposal for a
2:10:5451.4% equity ratio for the gas utility
2:10:57here um is that unique for the UCA to
2:11:00propose that kind of uh equity ratio in
2:11:03in this gas case no and matter of fact
2:11:06they've made the similar recommendation
2:11:09for the electric the only difference is
2:11:12that they use the rationale in the gas
2:11:14recommendations saying it's only a small
2:11:16portion of the business therefore you
2:11:18shouldn't be concerned but they make
2:11:19basically the same recommendations
2:11:21electric they're just being a little
2:11:22disingenuous about it okay I'd like to
2:11:25turn to um the discussion you had with
2:11:29ucca Council about the cost of long-term
2:11:32debt so I think we can take down this um
2:11:34document now thank
2:11:38you uh with respect to the company's
2:11:42April 2024 update to the cost of its
2:11:44long-term debt has the company routinely
2:11:47provided updates to its long-term debt
2:11:49in cases uh in rate cases to reflect
2:11:52issuances that occur over sometimes the
2:11:54nearly year-long process between the
2:11:56filing of the case and the outcome of
2:11:58the case yes and and historically what
2:12:01you've seen over the last five to 10
2:12:03years is that as interest rates have
2:12:05come down the cost the over the average
2:12:09cost of debt has declined and so we've
2:12:12updated that newer cost of capital or
2:12:16new a cost of debt and that has
2:12:18reflected a customer benefit but we've
2:12:20made sure that we've Incorporated that
2:12:21into the rate proceeding so that it's an
2:12:25accurate assessment of the cost for the
2:12:27customers so I referenced earlier uh the
2:12:30April um update was that uh update also
2:12:34communicated to staff and UCA around
2:12:36that
2:12:37time yes did staff or UCA speak to one
2:12:43way or the other um whether or not that
2:12:46cost of debt should be accepted or
2:12:47rejected in this
2:12:49proceeding in review the discovery
2:12:51request I don't re recall anything
2:12:53having to do with that uh and how about
2:12:56in reviewing answer testimony no I
2:12:59didn't see any assessment of that and to
2:13:01your knowledge has there been a prior
2:13:03case where that that similar type of
2:13:05update has been uh
2:13:07rejected
2:13:09no
2:13:11um now if we I I do apologize I'm going
2:13:15to ask if we could pull up hearing
2:13:16exhibit 126 again same one we just had
2:13:19um but at page 29
2:13:269 so on line eight of your rebuttal
2:13:30testimony Mr Johnson you characterize
2:13:33this update to the cost of long-term
2:13:35debt as a known and measurable
2:13:36adjustment do you see that yes how is
2:13:40this unnown adjustment if you could
2:13:42explain what you mean factually by known
2:13:44and measurable well I mean we've issued
2:13:47the debt it's the actual cost of the
2:13:49debt so it is
2:13:51it is an actual number that is
2:13:55reflective of the debt that we issued at
2:13:57that time and when you issue um a new uh
2:14:01Bond uh in this case a 10-year bond does
2:14:05that also mean that that cost change
2:14:07will affect the company over the life of
2:14:09that Bond absent
2:14:11refinancing
2:14:13yes and Mr uh bunker I believe asked you
2:14:16some questions about short-term debt and
2:14:20um do you call that discussion yes so
2:14:24why is short-term debt currently at a
2:14:25higher rate than long-term debt
2:14:27generally speaking in the market
2:14:30place it reflects the concern well you
2:14:33as we talked a little bit there's an
2:14:35inverted curve that inversion is
2:14:37starting to to go away over time but it
2:14:39just reflects concerns that there could
2:14:41be a potential recession and and as a
2:14:43result of that what you see is a higher
2:14:45short-term debt cost versus a higher
2:14:47long-term debt cost and that's been the
2:14:49way has been it's been that that way for
2:14:52I would suppose close to a year and a
2:14:54half or two
2:14:56years and is there a difference between
2:14:59what the company is proposing with
2:15:01respect to a its specific change in the
2:15:04cost of long-term debt and whether
2:15:07short-term debt changes in the
2:15:10marketplace are similarly known and
2:15:13measurable so the change in short-term
2:15:16debt I mean obviously it can change
2:15:18every day that is would be a for forast
2:15:21it's not known in measurable um what we
2:15:24tried to do is provide a you know I know
2:15:26that the forward test years and forward
2:15:30forast and things like that are not
2:15:31necessarily looked at positively here so
2:15:34we tried to we used the historic test
2:15:36year and so the short-term debt that's
2:15:37reflected in the cost of service is the
2:15:40actual cost of debt that we had for 23
2:15:43no different than the cost of O M or
2:15:45anything
2:15:47else
2:15:49um did uh um what what did UCA propose
2:15:53with respect to short-term debt in this
2:15:54proceeding uh
2:15:561% do you consider that to be a better
2:16:00measure or more representative of the
2:16:02company's cost of short-term debt it's
2:16:07there's no we have no ability to borrow
2:16:08at 1% in the current Marketplace we've
2:16:11not had that ability La in 24 uh we
2:16:15don't have it in ex we didn't have it in
2:16:1723 we don't have it in 24 I'd be highly
2:16:21skeptical that we will see it in 25 and
2:16:2426 it's possibility but it's certainly
2:16:27not anywhere available in the market
2:16:29place if we if it was available we
2:16:30certainly would take advantage of it
2:16:33okay thank you um I'd like to uh talk a
2:16:38little bit about UCA exhibit 509 if we
2:16:41could pull that up please
2:17:01okay so as we discussed um or I
2:17:05discussed with uh the chair and I think
2:17:07as you discussed from a a factual
2:17:08perspective the company had several
2:17:10concerns about uh the hypothetical
2:17:14assumed in this request just again to
2:17:16talk about it a little bit could you
2:17:18please um explain from your perspective
2:17:20why this isn't a legitimate hypothetical
2:17:23factually
2:17:24speaking well I think there's a couple
2:17:27things number one and there are several
2:17:29data requests Associated this where
2:17:31there are some different scenarios uh
2:17:33they asked us to run different scenarios
2:17:34assuming a different capital structure
2:17:37and keeping the um so changing the
2:17:40capital structure but not changing net
2:17:43income and obviously if you change the
2:17:45capital structure and incur incremental
2:17:47debt there's going to be interest
2:17:50expense
2:17:51but they asked us not to reflect that so
2:17:54there were several Discovery requests
2:17:56that were said do this kind of math and
2:17:58give us the results I'm not quite sure
2:17:59why they just didn't do the math
2:18:01themselves and say Here's what we've
2:18:02seen um so we did the math as requested
2:18:06it's we don't agree with any of the
2:18:08assessments or the outcome of it uh
2:18:11again you could theoretically come up
2:18:13with a allocated cap structure and
2:18:15that's certainly an alternative but we
2:18:17didn't essenti they asked us to do a
2:18:20highlevel just adjust the impact based
2:18:22on this and it's not you know I don't
2:18:26think it was a fully
2:18:28substantiated analysis that we would
2:18:30support okay if we could please scroll
2:18:33down to the last page I believe it is of
2:18:36this response oh I'm sorry of of the
2:18:38narrative response would be page two of
2:18:40the sorry about
2:18:44that oh it is still page one okay
2:18:48so was there an originally a response to
2:18:51this do you know Mr Johnson uh well I
2:18:53mean believe we objected to it if that's
2:18:55what you mean yes that is what I mean
2:18:58thank you uh and did and and uh you
2:19:02mentioned that UCA potentially had the
2:19:04ability to do this themselves why do you
2:19:06say
2:19:08that it's just doing back of the
2:19:10envelope analysis so I mean
2:19:15it's they should certainly could should
2:19:17have been able to do it themselves and
2:19:19you also mentioned that um UCA asked
2:19:23several hypotheticals was this just uh
2:19:27one example of those yes and did you
2:19:32nonetheless after the objecting and UCA
2:19:34coming back and asking for a
2:19:36supplemental response what did your team
2:19:38do we
2:19:41responded okay thank you very much
2:19:45um and I guess I should ask too to what
2:19:48extent did your uh Team have to commit
2:19:51time and resources in order to do this
2:19:54math on behalf of
2:19:56UCA uh I mean we obviously we have
2:19:58several people that spend a fair amount
2:20:00of time responding to data requests and
2:20:03uh it's just another part of their their
2:20:05job and requires time and effort okay uh
2:20:09I think we can I'd like to just uh go to
2:20:13um I believe it was uh I apologize I was
2:20:16trying to take notes as we went along
2:20:17here but uh could we scroll down to page
2:20:20uh two
2:20:22no I guess it'll be
2:20:25three there we are uh just focusing your
2:20:28attention very quickly um in the middle
2:20:31column here uh Mr Johnson where it's
2:20:33talking about the debt to Total
2:20:34capitalization ratio just one quick
2:20:37point of
2:20:38clarification where it talks about
2:20:40public service or psco in 2023 and 2022
2:20:45at debt to Total capitalization ratios
2:20:47of 44.8 versus 44.0
2:20:51how is a debt to Total capitalization
2:20:53ratio different than the equity ratio
2:20:55that we've been talking about in the 54
2:20:5755% range well you would just take I
2:21:00mean if if if the equity ratio is 55%
2:21:04then the debt ratio is going to be 45%
2:21:07thank you I just wanted to clarify that
2:21:09we were not suggesting this was the
2:21:11equity ratio in this time frame no it's
2:21:13not y okay um the math all works yes
2:21:17thank
2:21:18you um
2:21:21we can take this response or this
2:21:24discovery response down
2:21:28now so I'd like to talk a little bit
2:21:31about um the question about a range of
2:21:36of uh Roe and capital structures within
2:21:39awak just again very briefly um are
2:21:42there reasons why the company would need
2:21:45at least certain components of the whack
2:21:48to be identified as as a specific data
2:21:50Point rather than there other aspects of
2:21:53the rate making process and art fedus
2:21:56could provide more detail on what he
2:21:57would need but you know clearly we need
2:21:59to have a a cost of debt identified and
2:22:02then for things like afudc we would need
2:22:04to have we have to have an roeu that we
2:22:06could use to calculate afudc uh going
2:22:10forward but art is probably the better
2:22:12person uh to ask regarding that I was
2:22:15merely commenting on from a management
2:22:18of the capital structure we can we can
2:22:19certainly handle it range okay thank you
2:22:22and do you have any concerns about um
2:22:26whether it matters to the company if the
2:22:28Roe and cap structure ranges are are
2:22:30capable of being met on either end
2:22:32within aack established by the
2:22:34commission well mathematically yes it
2:22:36should be a range that actually works so
2:22:38if you have a
2:22:4055% equity ratio then the Roe that is at
2:22:44the bottom of the Roe range should be U
2:22:48you should be able to do that
2:22:48mathematically that they fit with the
2:22:50range thank you um and I think uh last
2:22:56topic here um the discussion you had um
2:23:01with our chair regarding
2:23:04um how you might manage the 70 million
2:23:07versus in in a trust over time or or how
2:23:10you might dedicate that can you just
2:23:12address briefly um how that would affect
2:23:15the revenue requirement if you're able
2:23:17to over five years
2:23:20well there' have to be some way to
2:23:22adjust the revenue requirements to
2:23:23actually have that cash flow uh come in
2:23:26so in other words if you're going to
2:23:28stagger in higher depreciation rate over
2:23:31time then there would be need to be some
2:23:33adjustment to the revenue over time to
2:23:35reflect that otherwise the credit
2:23:37metrics would not be would not be have
2:23:40that the benefit of that depreciation so
2:23:43by a mechanism do you mean something
2:23:46like a A grsa or just some other way to
2:23:48actually make the change to the company
2:23:51it could be some step measure or some
2:23:53kind of regulatory mechanism whether
2:23:56it's a raid case or some kind of uh you
2:23:58know step increase to reflect the higher
2:24:00depreciation so if you increase
2:24:01depreciation from1 15 million to $30
2:24:04million you'd want to reflect that in uh
2:24:08the revenue that cust company's actually
2:24:09collecting and and obviously from an
2:24:11earning standpoint it'd be neutral but
2:24:12it would affect the cash flows okay uh
2:24:16and I assume you you don't take a
2:24:18position on how or if that would affect
2:24:20theany cost of removal or or
2:24:22availability of funds from a the
2:24:24commissioning standpoint in your
2:24:25testimony that's out of my uh my
2:24:28knowledge spere okay if I could just
2:24:30have one moment I'm just going to check
2:24:31my notes but I believe I'm
2:24:36done I think so thank you very much Mr
2:24:39Johnson I appreciate it thank you I
2:24:42think we're calling uh Mr thank you Mr
2:24:45Johnson you're
2:24:47excused uh I think we're calling Mr
2:24:49desik
2:24:51next is that
2:24:55right uh desolich thank you desich uh Mr
2:24:59desich uh can you hold up your right
2:25:01hand yes do you swear to tell the truth
2:25:04the whole truth and nothing but the
2:25:05truth I do you can put your hand down is
2:25:09anybody uh in the room with you or
2:25:11communicating with you in any way no if
2:25:14that changes you'll let us know I will
2:25:17uh back to you Miss
2:25:18Herring just wanted check and make sure
2:25:21that the volume is okay on my it's okay
2:25:24thanks great um Mr D can you please
2:25:27State and spell your name for the record
2:25:30Michael desich m i c h a l d s l i
2:25:38c and by whom are you unemployed and in
2:25:41what position EXL Energy Services Inc
2:25:45and I'm a senior compensation
2:25:47consultant and did you prepare Direct
2:25:50testimony and attachments in this
2:25:51proceeding that have been pre-marked as
2:25:54hearing exhibit 108 that is correct and
2:25:57did you also prepare rebuttal testimony
2:25:59in this proceeding that has been marked
2:26:01as hearing exhibit
2:26:03129 that is also correct do you have any
2:26:06corrections to either of those
2:26:08testimonies or attachments I do not at
2:26:10this time uh Mr desich is available for
2:26:15cross-examination um UCA I have 45
2:26:19minutes Mr
2:26:21bunker yes thank you CH Mr chairman and
2:26:24good morning Mr dich morning Mr bunker
2:26:27we have not met but my name is Greg
2:26:29bunker and I represent the UCA in this
2:26:33proceeding and to the extent you see me
2:26:36glance to my my right uh I'm looking at
2:26:41another screen so I am paying attention
2:26:44to what you're saying but I'm just
2:26:45looking at some notes on a uh different
2:26:48computer screen sure thing all right
2:26:51let's uh let's start with your rebuttal
2:26:53testimony hearing exhibit
2:26:57129 and at page five on lines 2 through
2:27:0216 when we get
2:27:05there on lines 2 through 16 there on
2:27:07page five here you indicate the purpose
2:27:10of your rebuttal testimony is to respond
2:27:14to UCA and staff answer
2:27:17testimony challenging four categories
2:27:20of compensation and benefit expenses
2:27:24which you list in bullet points on lines
2:27:2611 through 16 is that right that is
2:27:30correct and if we turn to page nine of
2:27:33your rebuttal
2:27:35testimony here you provide your
2:27:37recommendations as to these various uh
2:27:40points is that correct that is correct
2:27:44okay and if we could refer to the first
2:27:47uh item bullet point item there on page
2:27:51nine lines 2 to
2:27:534 uh this is your recommendation that
2:27:56the commission should allow recovery of
2:27:59annual incentive program or
2:28:02AIP at the Target level is that right
2:28:05that is
2:28:06correct and on lines 5 through eight you
2:28:09indicate that psco is Seeking a 2024 AIP
2:28:15Target
2:28:16level is that
2:28:18right that is that's correct and 100%
2:28:23performance level is that AIP Target
2:28:26level you're referring to is that right
2:28:29correct okay now if we could go to Mr
2:28:32Fernandez's answer testimony which is
2:28:35hearing exhibit
2:28:37[Music]
2:28:38501 page
2:28:40117 please
2:28:54again that was here in exhibit 501 page
2:28:59117 yeah sorry it just takes a while to
2:29:02scroll that far down on the spreadsheet
2:29:04so I understand not a problem thank you
2:29:10and if we could enlarge that maybe just
2:29:12a
2:29:13touch oh that's great thank
2:29:16you on uh lines 1 through three Mr
2:29:20Fernandez um indicates that Pesco is
2:29:23seeking AIP Target level
2:29:26expense expenses of 5.3 million assuming
2:29:30the 100% Target incentive amount at the
2:29:34individual level is that
2:29:36right that is
2:29:38correct and you've indicated uh in your
2:29:43testimony we don't necessarily have to
2:29:45go back because I think you'll be able
2:29:46to answer this both staff and the UCA
2:29:50recommend a
2:29:5115% cap on AIP expenses for employee is
2:29:55that correct that is correct
2:29:59okay and uh on Mr Fernandez's testimony
2:30:04here on page 117 lines 4 through
2:30:0820 Mr Fernandez cites numerous recent
2:30:12Colorado Gas and Electric
2:30:14cases and a case for Black Hills in
2:30:18Colorado and and an electric and gas
2:30:21rate cases in another XL
2:30:24jurisdiction
2:30:26Ms nspm Minnesota electric and nspm
2:30:31Minnesota gas which all limited recovery
2:30:35of AIP expenses to 15% do you agree with
2:30:40that um in those particular situations
2:30:45that is
2:30:45correct okay now turning to page 10 of
2:30:49your rebuttal testimony which is uh
2:30:52exhibit
2:30:54129 excuse me on 10 through
2:30:5914 you acknowledge the commission has
2:31:03previously imposed a 15% c cap on
2:31:08AIP compensation in Prior rate cases is
2:31:11that right yes and that started an
2:31:13approximately
2:31:152017 okay and uh you uh indicate on why
2:31:21in
2:31:2317 there uh there's no substantive
2:31:26support in this case for continuation of
2:31:28the cap is that
2:31:30right that is correct there hasn't been
2:31:32any market-based information that's been
2:31:34provided to identify the fact that a 15%
2:31:38cap across all employees that are
2:31:39eligible for annual incentive that that
2:31:42cap should be applied to each and every
2:31:46person and every job okay
2:31:50and and turning to page 11 uh of your
2:31:54testimony
2:31:56uh
2:31:58you indicate the
2:32:012023 Willis Towers Watson compensation
2:32:06study supports pesco's argument that the
2:32:112024 AIP Target level expense should be
2:32:14approved is that
2:32:16right the Willis Watson study um makes a
2:32:20comparison between what the company
2:32:22supplied to Willis Towers Watson in its
2:32:26in the 2023 excuse me probably the 2022
2:32:29data and this particular study was
2:32:31published in
2:32:3323 um and it compared the compensation
2:32:36levels of base pay annual incentive and
2:32:39long-term incentive to a particular
2:32:42group of utility companies Across the
2:32:44Nation and found that we were at or
2:32:46slightly below um the levels of the
2:32:50utility organizations across across the
2:32:55country okay thank you
2:33:01and is it correct that EXL energy
2:33:05retained and paid Willis Towers Watson
2:33:08to create the
2:33:102023 Willis Towers Watson compensation
2:33:13study that
2:33:15supports your argument about the 2024
2:33:19AIP Target
2:33:20level Willis Towers Watson was asked to
2:33:24provide this study to us and for that
2:33:26service we did compensate them for that
2:33:32product okay thank
2:33:34you if we could look at uh your direct
2:33:38testimony hearing exhibit of
2:33:44108 and in particular uh your attachment
2:33:49in D D1
2:34:32sorry I heard you it's
2:34:34a my screen froze give me just a second
2:34:37I know you're looking for 108
2:34:39mpd1 yes not a problem thank
2:34:48you e
2:35:33can you see
2:35:36it yes if you could uh if you could
2:35:39scroll down just a little I'm sorry I uh
2:35:42I didn't realize it was up on the screen
2:35:44and this is a this is the public version
2:35:47which is fine uh
2:35:51um when I review this this attachment
2:35:57mpd1 I found no references to Pesco
2:36:01gas psco or even Colorado in this Willis
2:36:05Towers uh Watson compensation study and
2:36:11only references to Exel energy would you
2:36:13agree with that I would agree with that
2:36:16because the company uh sponsors its
2:36:19compens program across all entities the
2:36:22company including psco Gas and
2:36:28Electric okay uh thank you so on on page
2:36:33uh let's let's skip for a moment to um
2:36:36Mr Fernandez's answer testimony it's
2:36:39exhibit 501 on page
2:36:46118 on lines one through nine Mr
2:36:48Fernandez States the uca's
2:36:52recommendation that the commission
2:36:55continue to or continue its fair and
2:36:58consistent treatment of incentive
2:37:00compensation by capping pesco's
2:37:03AIP incentive compensation of 15% per
2:37:07employee in this proceeding do you see
2:37:08that I
2:37:12do and the estimated
2:37:16amount of the AI IP compensation is
2:37:21listed there on line
2:37:24six the uh AIP incentive compensation
2:37:28and its Revenue requirement above the
2:37:31per 15% employee level is
2:37:48636,000 uca's Revenue requirement model
2:37:52attachment
2:37:53raf2 there on line six and seven
2:37:57right I'll take your word for it that
2:37:59it's in there yeah okay thank you
2:38:03uh if we could now move back to
2:38:08your back to your rebuttal
2:38:12testimony ex Z at
2:38:14129 and I'd like to talk uh about
2:38:17environmental long-term incentives or
2:38:20the
2:38:21LTI and the timebase long-term incentive
2:38:26compensation uh LTI uh I'd like to talk
2:38:29about that collectively if we could and
2:38:32if we could turn to page nine of your
2:38:36rebuttal testimony you'll see those two
2:38:39items uh starting at line five through
2:38:42line
2:38:4319 so uh your your first your or your
2:38:48second bullet point here you can tend
2:38:50the commission should allow recovery of
2:38:53environmental LTI at the Target level
2:38:55right that's
2:38:58correct and if we could go to page
2:39:0326 of your uh rebuttal
2:39:07testimony here you
2:39:10indicate that in responding to UCA and
2:39:14staff
2:39:15recommendations that the commission
2:39:17should disallow
2:39:19the entire exp or the the UCA and staff
2:39:24recommend that there should be a
2:39:26disallowance of the entire expense
2:39:28associated with the target amount of
2:39:31Public Services environmental LTI
2:39:33compensation is that right that's
2:39:38correct and going back to page nine for
2:39:40a moment your third bullet
2:39:43point this is the bullet point where you
2:39:46contend the commission should allow
2:39:48recovery
2:39:50time-based
2:39:51LTI at the Target level correct that is
2:39:56correct and skipping forward to page 31
2:40:00of your
2:40:01testimony here you're responding to UCA
2:40:06and staff recommendations on lnes 13
2:40:10through
2:40:1118 and their recommendation that there
2:40:14should be a disallowance of the entire
2:40:19expense associated with timebase LTI
2:40:21compensation is that right uh can you
2:40:24scroll up just a
2:40:28moment oh sorry scroll down into that
2:40:31section I believe that's correct yeah
2:40:34I'm referring to The Heading B at the
2:40:37bottom on line 13 and that question and
2:40:39answer through line 18 yes yes all
2:40:45right and if we could go to Mr
2:40:48Fernandez's
2:40:49uh answer testimony exhibit
2:40:53501 on page
2:40:55118 and at lines 15 to
2:40:5921 would you agree Mr Fernandez States
2:41:03several objections to the recovery of
2:41:05environmental
2:41:07LTI and time-based
2:41:10incentives that is
2:41:12correct and the several objections at
2:41:15lines 15 to 21 include that the
2:41:19environmental LTI and timebase incentive
2:41:22programs are poorly designed and
2:41:25duplicative
2:41:27correct that is what Mr Fernandez stated
2:41:30yes and multiple commission orders and
2:41:33settlement agreements in PCO rate cases
2:41:36have denied recovery of LTI expense from
2:41:39rate
2:41:41payers and that all LTI costs are more
2:41:45appropriately assigned to shareholders
2:41:47do you see those two items I do see that
2:41:52yeah if we turn to page uh 120 of Mr
2:41:57Fernandez's
2:42:00testimony on line one Mr Fernandez
2:42:04opines that rate payers receive no no
2:42:07benefits from environmental LTI
2:42:10compensation is that right I do see
2:42:14that and on page 119 lines 1 through
2:42:20five do you agree that in the 202 or the
2:42:262022 case which is 22
2:42:310046
2:42:32G which was pesco's last gas rate case
2:42:37in
2:42:382022 that was a fully litigated case and
2:42:41the commission denied recovery of both
2:42:44time-based and environmental
2:42:46LTI that is correct
2:42:52and on line 6 through 14 do you agree
2:42:55that in pesco's last three phase one
2:42:58electric gray cases in
2:43:022022
2:43:042021 and
2:43:072019 and whether they were fully
2:43:10litigated or due to a
2:43:13settlement Pesco was denied or excluded
2:43:16in the case of the settlement
2:43:19from recovering LTI and compensation
2:43:23expenses yes that is
2:43:28correct and at uh page
2:43:31120 starting on line 15 and continuing
2:43:36on to page uh
2:43:38121 at
2:43:40line
2:43:43two and footnote
2:43:46123 uh here Mr Fernandez your direct
2:43:50testimony table
2:43:52MPD
2:43:55dd-1 for pesco's estimated amount of
2:43:59environmental LTI
2:44:01compensation included in the
2:44:052023 Revenue
2:44:07requirement and he notes that there
2:44:10should be an
2:44:12adjustment to exclude this environmental
2:44:15LTI compensation in the amount of
2:44:19$558,500
2:44:49starting on line 20 through
2:44:5226 and here you Advocate the commission
2:44:55should decline to adopt uca's
2:44:58recommendation to
2:45:00disallow $1.6
2:45:03million of executive compensation based
2:45:06on application of the Drucker
2:45:08compensation principle is that
2:45:10correct that's correct this particular
2:45:13principal has never been
2:45:16employed um at any level that I'm aware
2:45:18of across any particular industry and I
2:45:22don't see why it should be applicable in
2:45:24this case okay let's go into that for a
2:45:27moment
2:45:29um excuse
2:45:31me on uh lines 22 and 24 here you state
2:45:36the drer compensation principle provides
2:45:38that there should be a 20 to1 ratio
2:45:41between compensation of a CEO and an
2:45:44average worker is that
2:45:46right uh based on the information that
2:45:49provided that's correct
2:45:51okay and is it correct that one of your
2:45:54objections to applying to the drer
2:45:57compensation uh principle that you
2:46:00mentioned on uh lines 24 and 25 that is
2:46:04that this compensation principle has not
2:46:07been adopted by any Fortune 500 company
2:46:10and would not result in Market
2:46:12competitive compensation for employees
2:46:14is that
2:46:15right that's correct and not only
2:46:17Fortune 500 compan comp I couldn't find
2:46:19it applicable to any company anywhere
2:46:22when I tried searching on it okay uh
2:46:26when looking at let's let's just focus
2:46:28on the Fortune 500 companies when
2:46:31looking at Fortune 500
2:46:33companies how many are regulated you
2:46:37utilities that enjoy a monopoly
2:46:40status uh I didn't count them
2:46:42specifically but my guess is probably
2:46:44somewhere in the neighborhood
2:46:47of 25 to 40 as a guess but I'm not
2:46:52certain
2:46:54okay and uh you indicate that you're not
2:46:58aware of the drer compensation principle
2:47:00ever being applied to executive
2:47:02compensation recovery for any regulated
2:47:06Colorado utility is that right
2:47:10um I don't see it being applied to any
2:47:13company in any
2:47:15industry including the utility industry
2:47:18including Colorado okay let's let's look
2:47:21for a second at your rebuttal testimony
2:47:24on page
2:47:3237 and specifically Alliance 12 to
2:47:3716 uh you indicate you're not aware
2:47:42of the Dr or compensation principle ever
2:47:45being all applied to Executive comp Rec
2:47:48recovery for any of the regulated colit
2:47:50utilities is that right that's correct
2:47:54okay and would it also be accurate that
2:47:57you're unaware of any prohibition with
2:48:01respect to the commission's application
2:48:03of the drer compensation principle to
2:48:06the executive compensation recovery
2:48:08issue for any regulated Colorado
2:48:12utility objection to the extent it calls
2:48:14for a legal
2:48:16conclusion Mr bunker you want to respond
2:48:20yeah I believe that this this witness is
2:48:22able to respond to this he he indicates
2:48:25it's never been applied but the converse
2:48:28of that is is he aware of any
2:48:32prohibition on applying it yeah I'll
2:48:35allow it
2:48:41overall can you restate the question
2:48:43please sure would it also be accurate
2:48:46that you're unaware of any prohibition
2:48:49with respect to the commission's
2:48:50application of the drer compensation
2:48:53principle to the executive compensation
2:48:56recovery issue for any regulated
2:48:58Colorado
2:49:03utility I'm not aware of any prohibition
2:49:06that the commission may have um with
2:49:09regards to that particular theory that
2:49:11Mr duer had 50 years
2:49:15ago all right uh let's go to Mr
2:49:17Fernandez's is uh hearing uh exhibit 501
2:49:22is answer testimony at page
2:49:26126 and at lines one through
2:49:29five here uh this testimony regards EXL
2:49:35other XL jurisdictions limiting recovery
2:49:39of EX excessive executive
2:49:43compensation and would you agree in the
2:49:45most recent NSP Minnesota electorate
2:49:48case
2:49:50the P the Minnesota pu capped customer
2:49:53expenses for excel's 10 highest paid
2:49:56Executives at
2:49:58$150,000 per year in alignment with what
2:50:02the Minnesota's Governor
2:50:06earns uh this particular ruling is
2:50:09actually under appeal at the moment and
2:50:11I don't have a final outcome for
2:50:13that do you agree though that in the
2:50:17decision itself from from the
2:50:19commission Minnesota commission that
2:50:22they did cap compensation at
2:50:24$150,000 per year for
2:50:28executives that is what they indicated
2:50:30in the order correct okay thank
2:50:35you now going back to your rebuttal
2:50:39testimony at page 43 and this is uh
2:50:43hearing exhib
2:50:45129 at page 43 on on lnes 8 through
2:50:5111 here you discuss this um Minnesota
2:50:55electric rate case and you say the
2:51:00MP's decision to limit executive
2:51:03compensation to the governor of
2:51:05Minnesota's salary of
2:51:08$150,000 was not based on a review of
2:51:11applicable salary market conditions was
2:51:14not a recommendation from any
2:51:16intervening party nor based on any
2:51:19record of evidence is that right that's
2:51:23correct and with uh similar to the
2:51:27Minnesota commission would you agree
2:51:30that with regard to rate case related
2:51:33executive compensation
2:51:36limitations this Colorado commission has
2:51:38a discretion and ratemaking authority to
2:51:41limit the recovery of executive
2:51:44compensation objection to the extent it
2:51:46calls for a legal conclusion
2:51:50would you like to rephrase Mr
2:51:53bunker would you agree that the
2:51:56commission has discretion with regard
2:52:00to issues and adjustments in this rate
2:52:06case I believe the commission's
2:52:08responsibility is to look at just
2:52:09unreasonable expenses that the company
2:52:11incurs in the operation of its business
2:52:13to
2:52:14supply uh safe and reliable energy
2:52:17Utility Services to its
2:52:22customers okay uh thank
2:52:25you is it your understanding that Mr
2:52:29Fernandez and the
2:52:31UCA are not recommending that psco and
2:52:36Excel should change its executive
2:52:39compensation but rather the UCA is only
2:52:43making recommendations on who should pay
2:52:46for excessive exec
2:52:51compensation I'm not really sure that
2:52:53UCA or any intervening party has really
2:52:56identified what is considered to be
2:52:58excessive because they have not supplied
2:53:00any uh Market information that
2:53:03identifies where our company versus the
2:53:06market
2:53:09differ well didn't Mr Fernandez
2:53:12recommend uh a dcker principle
2:53:20requirement or let's call it a provision
2:53:24that would disallow compensation above
2:53:27the 20 to1
2:53:29ratio again that's not really something
2:53:32that's ever been employed across any
2:53:35organization across the country and I
2:53:38don't see why it would um be introduced
2:53:41at this time and I believe it's only
2:53:43introduced to create some sort of
2:53:45adjustment to limit the company's
2:53:47recovery
2:53:49of regular expenses that are required to
2:53:52attract and retain employees and
2:53:54motivate them in the service of our
2:53:57customers okay let's turn to Mr
2:53:59Fernandez's answer testimony on page
2:54:03125 and we have his Table raf1
2:54:0719 and this identifies the
2:54:12six top executive salaries at
2:54:16Excel for uh 2023 would you
2:54:20agree I
2:54:22agree and in the discussion uh just
2:54:26below the table he
2:54:28indicates that the
2:54:3220% by taking the 20 to one
2:54:37ratio the compensation is
2:54:4127.4
2:54:42million over that 20 to1 ratio for the
2:54:46top six EXE is that right uh in his
2:54:51particular example it is but I I think
2:54:52there are a number of things that need
2:54:54to be considered here while this is the
2:54:57information that he pulled from our
2:54:59proxy this is not what the company has
2:55:01requested for rate
2:55:04recovery so any adjustment that would
2:55:06need to be made should be based on what
2:55:09the company is actually requesting in
2:55:11this
2:55:12case or if you'd like to use the full
2:55:15amounts that are listed on this page we
2:55:17could maybe work through that type of an
2:55:19adjustment to determine what they feel
2:55:22is accurate okay so
2:55:27um looking at lines six through eight
2:55:31just below this this
2:55:33table uh Mr Fernandez indicates using an
2:55:38allocation factor of
2:55:405.8% provided by psco as an approximate
2:55:44allocator for Excel to psco G gas the
2:55:49PSO psco gas excess compensation amount
2:55:53would be $1.6 million for the top six
2:55:57Executives did I read that right yes but
2:56:01again his calculation is based on
2:56:03information that has not been requested
2:56:05by the
2:56:06company you mean provided by the
2:56:09company uh the company has not submitted
2:56:12all compensation
2:56:13elements for its Executives in this uh
2:56:17proceeding
2:56:20and this
2:56:21particular um table that he identifies
2:56:25includes all actual compensation
2:56:28received in 2023 but not the company's
2:56:31request which is
2:56:41lower okay with that I think I'll leave
2:56:43it there and that ends my
2:56:46cross-examination Mr delich thank you
2:56:49thank you Mr BR thank you Mr bunker
2:56:52commissioner plan any questions for M Mr
2:56:55desich I have no questions M
2:57:01Gman hi good morning Mr desich good
2:57:05morning
2:57:06commissioner um just want to talk to you
2:57:09briefly about to um areas vacant
2:57:13positions as well as executive
2:57:15compensation to follow on some the
2:57:17discussions
2:57:19um so first with regard to vacant
2:57:21positions
2:57:23um uh so as staff pointed out um Excel
2:57:28laid off quite a few employees and also
2:57:31um offered voluntary retirement offers
2:57:33to um several hundred uh last year and I
2:57:38know you point out in your testimony
2:57:39that very few of those were actually at
2:57:42uh Public Service Gas just one I think
2:57:45at Public Service Company gas and just a
2:57:48handful at uh excel in the gas
2:57:51operations um but if I'm to kind of try
2:57:54and take the point to understand how
2:57:57this works after rate case if public
2:58:00service companies gas operations slim
2:58:03down or cut employees say um that
2:58:08doesn't change the revenue requirement
2:58:10going forward right the company will
2:58:11will be awarded whatever it was based on
2:58:15um whatever was submitted in this case
2:58:18um I believe Mr fedus can talk to the
2:58:20specific Revenue requirement however
2:58:23changes in headcount aren't all a one
2:58:25for one change um if we if we had one
2:58:28employee that left the company they may
2:58:30have been at a certain level in the
2:58:31organization and a certain job at a
2:58:33certain pay and we could have hired
2:58:36since then several other people um in
2:58:40various jobs at even higher or lower
2:58:43levels of pay so headcount isn't
2:58:45necessarily um the best barometer to
2:58:48determine what the expenses should be
2:58:50it's a starting point to indicate that
2:58:52you know there's a there's a person in a
2:58:54job that person receives paying benefits
2:58:57however not all paying benefits are the
2:58:59same for every person in every
2:59:01job okay um so with the vacant positions
2:59:07can you just talk me through kind of the
2:59:09detail so these are positions the
2:59:12company already has posted or plans to
2:59:15post um within what time frame
2:59:19uh positions are posted on a daily basis
2:59:22um and are filled on a daily to weekly
2:59:24basis it's hard to really say at any
2:59:26given point in time um I do know that
2:59:30the expenses for our gas side of the
2:59:33business here in psco it was identified
2:59:35in my um rebuttal testimony those
2:59:38expenses had gone up um in the first six
2:59:42months of 2024 higher than both the
2:59:45six-month periods in the first half of
2:59:472023 three and the latter half of
2:59:512023 so head counts again don't
2:59:55necessarily mean that um there should be
3:00:00some type of an adjustment out for a
3:00:02specific headcount um because as I
3:00:05mentioned other employees are being
3:00:08hired throughout the year um on a
3:00:10regular basis and their paying benefits
3:00:13could be slightly
3:00:15different okay so understanding this
3:00:17happens
3:00:18kind of on a rolling basis what's the
3:00:20basis for the Assumption in the um
3:00:24vacant value um that should be included
3:00:27in rate base per your argument again I I
3:00:30believe Mr fedus can speak to that a
3:00:31little bit more um but the way my
3:00:36understanding he approached it was
3:00:38whatever expenses were there actual
3:00:40expenses were
3:00:42included um if a position was vacant for
3:00:45a period of time those those expenses
3:00:49obviously aren't there because there
3:00:50isn't an employee to attach them to so
3:00:52therefore they would not be included but
3:00:54then as new employees come on throughout
3:00:57a period of time those expenses would be
3:01:00included up to the point where uh the
3:01:02filing took
3:01:05place okay sorry I'm a little confused
3:01:07is the company proposing to include in
3:01:11the revenue requirement a value for
3:01:14positions that are currently vacant as
3:01:16of um you know uh positions that were
3:01:21filled as part of the historic test year
3:01:24again I don't believe it's based on a a
3:01:26vacant position it's based on the
3:01:28expense that was accured during that
3:01:31period of time or
3:01:34incurred and and again Mr Fus has
3:01:37greater detail into adjustments and
3:01:39what's included in the revenue
3:01:41requirement okay accounting
3:01:44detail okay um
3:01:48I just want to understand something that
3:01:49was presented in one of your attachments
3:01:52um
3:01:54attachment
3:01:58mpd1 um I think you're sorry let me get
3:02:02that hearing exhibit
3:02:05number probably hearing ex up at
3:02:09129
3:02:12mpd1 shows kind of a comparison of um
3:02:19uh it a CEO compensation based on 2024
3:02:24Excel Energy proxy statement and you
3:02:27kind of contrast total compensation here
3:02:30with something from public service from
3:02:32uh calculation UCA can you describe to
3:02:35me your calculation showing total
3:02:38compensation what this is intending to
3:02:41show sure um in the table that Mr bunker
3:02:45pulled up from Mr Fernandez's testimony
3:02:48he included all compensation for the CEO
3:02:51and I limited it to that um single
3:02:54person um just to make things easier and
3:02:58and you can see in that total
3:02:59compensation line um $21 million was
3:03:02total actual
3:03:04compensation however the company in its
3:03:07request would limit that based on um the
3:03:11fact that we do remove the uh relative
3:03:15TSR compensation which is uh relative
3:03:20total shareholder return portion of the
3:03:22LTI payment as well as any
3:03:27um uh payment that was above Target for
3:03:30both annual incentive and either the
3:03:34environmental and long-term or excuse me
3:03:36the time based
3:03:39LTI okay so in what's presented in the
3:03:43furthest right column here does that
3:03:45represent um what the company is
3:03:49requesting as treatment in this
3:03:51proceeding or what the past treatment
3:03:53has been determined to be for these um
3:03:58incentives um this is what the company
3:04:00would be requesting and again this is a
3:04:01very simple example to just compare um
3:04:05what UCA was looking at in creating some
3:04:09level of an adjustment to what is
3:04:12something closer to what the company
3:04:14would be requesting
3:04:18okay um
3:04:21okay uh let me see
3:04:24um are you aware just generally that the
3:04:27commission's received significant
3:04:29comments regarding the level of
3:04:32compensation uh for executives at Excel
3:04:36and Public Service Company um I'm not
3:04:39aware of those
3:04:41comments okay um those are my only
3:04:43questions thank
3:04:45you thank you commissioner Gman um I
3:04:48have uh no questions for M Mr dich um
3:04:52Miss Herring any redirect yes just
3:04:56briefly uh Mr dlet do you remember uh
3:04:59UCA Council asking you questions about
3:05:01the Willis Towers Watson study performed
3:05:03by the company yes I do are the costs of
3:05:07the Willis Towers Watson study um being
3:05:11included for Recovery in this case uh no
3:05:13they are not the the company had that um
3:05:16study prepared for
3:05:18other jurisdictions and those costs are
3:05:21not included in our um request for rate
3:05:23recovery in this
3:05:26case Mr deset do you recall um UCA
3:05:30Council asking you about um previous
3:05:32commission decisions limiting the
3:05:34recovery of API and LTI I do AIP yes
3:05:40sorry um given those prior decisions why
3:05:42is the company requesting recovery of
3:05:45Target levels of AIP
3:05:48and uh environmental and time based LTI
3:05:50in this case sure uh the company uses a
3:05:53market-based approach and it looks at
3:05:55all compensation and what's comparable
3:05:58out in the marketplace from for design
3:06:00of its compensation programs so each
3:06:03position that it benchmarks to the
3:06:06marketplace uh we look at base pay
3:06:09annual incentive for those that are
3:06:10eligible as well as LTI long-term
3:06:13incentive for those that are eligible
3:06:14for that form of compensation and and
3:06:18the company's programs are then based on
3:06:21goals that are established for the
3:06:22incentives um what the company feels it
3:06:26needs to work on internally or to help
3:06:29serve customers better um our AIP
3:06:32program has a limited number of goals
3:06:34that um are identified on our corporate
3:06:37scorecard and each year those um
3:06:40scorecard results are published and the
3:06:43AIP payment if if one is Justified would
3:06:47be paid to the employees based on that
3:06:49outcome as far as our long-term
3:06:51incentive program goes there are um
3:06:54three different components that impact
3:06:56our business unit vice president level
3:06:58employees and above those would be the
3:07:01relative TSR component of LTI which the
3:07:04company is not requesting for Recovery
3:07:07the environmental portion of LTI which
3:07:09is our carbon reduction goal for the
3:07:12company and again um this is something
3:07:15that the company feels strongly about
3:07:17and it and as the goal or as the type of
3:07:20compensation indicates long-term
3:07:23incentive um covers an extended period
3:07:25of time and in this case um getting to
3:07:28that carbon reduction goal to reach our
3:07:31carbon free um goals by 2050 is an
3:07:35extensively long period of time um and
3:07:40the reason the company has placed that
3:07:42into the LTI program it's so the
3:07:45leadership of the organization has some
3:07:47level of consistent skin in the game as
3:07:50they would say that their pay is being
3:07:53put on the line to continuously make
3:07:56progress towards that long-term goal
3:07:59because if they didn't um we wouldn't be
3:08:03able to reach that goal I I think you
3:08:05know goals that aren't written don't
3:08:07always get the same level of focus
3:08:09however that doesn't mean that other
3:08:11goals aren't behind the scenes that are
3:08:13are getting focus but when you put the
3:08:15employees compensation at risk in in
3:08:17this case um it does create a greater
3:08:20level of focus and marching towards that
3:08:23again long-term goal and then our our
3:08:26time-based LTI is something that creates
3:08:28longevity of our leadership and those
3:08:31that are eligible um by creating a
3:08:33retention tool for deferred
3:08:37compensation and Mr D talking about the
3:08:40total compensation amounts that the
3:08:41company's requesting recovery for in
3:08:44this case how does the company go about
3:08:46determining what the total compensation
3:08:48should be for its employees sure again
3:08:51it looks at um third party independent
3:08:54Benchmark studies um we provide data to
3:08:58these um companies as do companies
3:09:01across the United States uh the wellis
3:09:03tow Watson study itself reviewed utility
3:09:06companies and in particular looked at
3:09:08ones that were in a comparable Revenue
3:09:10space with um XL Energy and made a
3:09:14comparison and in both comparisons both
3:09:16on the utility
3:09:17that are at the same Revenue level and
3:09:20the national level um XL Energy is very
3:09:24comparable at at each level but slightly
3:09:26Below in at that Revenue um cut for base
3:09:30pay annual incentive and long-term
3:09:32incentive so making that comparison to
3:09:35the market we are just slightly below
3:09:37which would indicate that we we are not
3:09:39paying excessive levels of compensation
3:09:42across our
3:09:45company and Mr D's turning to the drer
3:09:48principle you testified in response to
3:09:50uca's question that uh you've never seen
3:09:53this principle applied in any company is
3:09:55that correct that's correct uh what is
3:09:58the best practice for determining
3:10:00executive
3:10:02compensation um market-based levels of
3:10:04compensation looking at comparable um
3:10:07comparable jobs comparable Industries
3:10:09comparable size of the organization um
3:10:12revenues those types of things are all
3:10:15included and one last question
3:10:17commissioner Gilman had a question for
3:10:19you about uh vacant positions do you
3:10:21recall that I do um and to your
3:10:24knowledge is the revenue requirement uh
3:10:26that the company has in this case is
3:10:28that based on a particular headcount it
3:10:31is not it was based on actual
3:10:34expenses I have nothing further for this
3:10:37witness uh thank you you may be excused
3:10:40uh Mr
3:10:41desich thank you commissioner Mr uh
3:10:44chairman if I could yeah uh I note that
3:10:47I had 15 minutes left on my estimate for
3:10:51Mr desich and he and I think it was Mr
3:10:54Johnson have referred uh several issues
3:10:58to Mr fedus in response to either my
3:11:01questions or commission questions and I
3:11:05would like to take that 15 minutes and
3:11:08uh move it to Mr fedus if I
3:11:12could all right thank you
3:11:17thank you Mr desich thank you chair
3:11:20bline um let's go
3:11:25to bis
3:11:29gilland can you hold up your right hand
3:11:32do you swear to tell the truth the whole
3:11:34truth and nothing but the truth I do you
3:11:37can put your hand down um is anyone in
3:11:40the room with you or communicating with
3:11:41you in any way no they are not that
3:11:44changes you'll let us know we'll do
3:11:48uh back to you Miss
3:11:51samardo thank you chair good a uh well
3:11:55let's see it's still good morning Miss
3:11:57giland um could you please spell your
3:12:00name for the record sure Lauren gilland
3:12:03l a u r n g i l l i l a n d Thank You by
3:12:10whom are you employed and in what
3:12:12capacity um I'm employed by EXL Energy
3:12:14Services and my title is Vice President
3:12:17and gas operations and
3:12:20Engineering uh for purposes of this case
3:12:22did you prepare hearing exhibit 104 as
3:12:25your direct testimony and hearing
3:12:27exhibit 127 rev one as your rotal
3:12:31testimony yes I did do you have any
3:12:34further corrections to your rottal
3:12:36testimony yes I do could we P please
3:12:39pull up hearing exhibit 127 rev 2 from
3:12:43the company's
3:12:45box and one we do that could we please
3:12:48go to page
3:12:4929 line 12 and
3:12:5913 Miss gilan can you please explain the
3:13:02corrections being
3:13:04made yes uh as you can see the total
3:13:07number amount of 4.5 million should have
3:13:10reflected 5.4 million um and as you can
3:13:13see instead of discussed below it should
3:13:15actually be above
3:13:17thank you with those Corrections the
3:13:20company moves for admission of hearing
3:13:21exhibit 127 rev 2 any
3:13:26objections hearing none so
3:13:29moved Miss giland is now available for
3:13:35cross-examination staff has 20
3:13:38minutes yeah thank you chair um before I
3:13:41get started I just wanted to let you and
3:13:44the parties know that we are going to
3:13:45wave our Cross of company
3:13:47amen
3:13:49amen okay thank you
3:13:56yep get my notes up um good morning miss
3:13:59gillin my name is Katy mlin and I
3:14:01represent staff in this proceeding I
3:14:04have just one main topic to discuss with
3:14:07you today hopefully we'll finish up um
3:14:09in less than 20 minutes but I want to
3:14:12talk to you about the company's gas
3:14:14quality service plan or qsp
3:14:18metrics in general the qsp measures the
3:14:21company's gas service to customers with
3:14:24various
3:14:27metrics I would agree yes okay and one
3:14:30of those metrics is the repair time for
3:14:33a grade two leak correct
3:14:36correct
3:14:38and would you agree that a grade two
3:14:40leak is generally considered a leak that
3:14:43is nonhazardous at the time of detection
3:14:46but could be become hazardous in the
3:14:48future yes I would agree with that and
3:14:51in your rebuttal testimony the company
3:14:54proposes to reduce the average repair
3:14:57time for a grade two leak from 52 days
3:15:01to 40 days correct that's
3:15:03correct and you recall that staff
3:15:06recommended that the company set the
3:15:08average grade 2 leak repair goal at 28
3:15:12days yes I do recall that
3:15:15correct and in 202 three isn't it true
3:15:18that the company averaged a grade 2 leak
3:15:21repair time of 25.9 days yes that is
3:15:27correct Now isn't the company directly
3:15:30accountable to the pipeline and
3:15:32hazardous materials safety
3:15:34administration also known as FSA yes we
3:15:37are so the company has to comply with
3:15:39all applicable fimsa laws and
3:15:42regulations yes that are put into Ru
3:15:44making yes okay and if updated its
3:15:47regulations would the company have to
3:15:49comply with those new rules yes we would
3:15:58okay I just have some brief questions
3:16:00for you um is a gas rate case the only
3:16:05proceeding in which the company's gas
3:16:07qsp could be
3:16:10modified um I believe so yes it couldn't
3:16:14be done in a standalone proceeding I
3:16:16would object to the extent you're asking
3:16:18her about regulatory process which is
3:16:20beyond her area of expertise perhaps you
3:16:22could rephrase the
3:16:24question um you can rephrase but uh I
3:16:28think uh the witness if she doesn't know
3:16:31can say
3:16:33so so if you just rephrase that' be
3:16:36great
3:16:37absolutely are you aware of a qsp ever
3:16:41being brought in a standalone proceeding
3:16:43no I not aware of that okay so if the
3:16:47company has brought a standalone
3:16:49proceeding in the electric qsp would you
3:16:51have any reason to dispute that I would
3:16:54not have any reason to dispute it no and
3:16:57you don't know of anything that would
3:16:58prevent the gas qsp from being in a
3:17:01standalone proceeding right the only
3:17:04recollection I have is during the gas
3:17:05rate case proceedings that we've done
3:17:07qsps for gas okay but you don't know of
3:17:11anything that would prevent the company
3:17:13from bringing a gas qsp and a standalone
3:17:16proceeding not that I'm aware of no
3:17:21okay so I recognize that the electric
3:17:24and the gas systems are very different
3:17:26obviously but do you believe that there
3:17:28are some lessons that parties could
3:17:30learn from comparing the electric qsp to
3:17:34the gas
3:17:36qsp um as I'm not familiar with the
3:17:39electric qsp I don't um I wouldn't agree
3:17:42of knowing the similarities between the
3:17:43two comparisons um but always up for
3:17:46discuss s of our radio Okay absolutely
3:17:57um the electric qsp used granular data
3:18:02on sensus block groups in its metrics do
3:18:05you have any reason to dispute that no I
3:18:08do
3:18:09not and are you aware that the
3:18:12commission has a statutory obligation to
3:18:15consider disproportionate impacted
3:18:17communities in its decision making yes I
3:18:20do okay and that's in all of the
3:18:25commission's
3:18:27work I would assume so yes
3:18:31okay now the impact of service quality
3:18:35to di communities can't really be
3:18:38assessed unless granular data is used to
3:18:42understand the community impacts would
3:18:44you agree with that if the data is
3:18:46available to provide yes okay and
3:18:51couldn't the gas qsp be improved by
3:18:53using such granular data for certain
3:18:57metrics I would say it's always open for
3:18:59discussion of looking at that but all of
3:19:01our leak rating especially the grade two
3:19:03it doesn't have any recollection or
3:19:06determination of the areas of it impact
3:19:09it has to be dealt with the exact same
3:19:10way depending on the severity of the
3:19:12leak sure but beyond the grade two leaks
3:19:15the qsp addresses other metrics right
3:19:18correct y okay so the census block on
3:19:21granular data could be impactful for
3:19:23those other metrics as well potentially
3:19:26however those other two metrics within
3:19:28the USP also um have certain rules that
3:19:31have to be followed regardless of you
3:19:33know impacted communities as well sure
3:19:36now did the company propose a metric
3:19:39around service inequality by census
3:19:41block group in its gas qsp here no
3:19:47has the company considered this
3:19:48possibility not at this time
3:19:51no do you think that if the commission
3:19:54heard the gas qsp in its own proceeding
3:19:58more time and attention could be
3:20:00provided to it compared to including it
3:20:02in a rate
3:20:03case again there's always open for
3:20:06discussion of evaluating the additional
3:20:08you know data that could be available
3:20:11dependent on what that would look like
3:20:13for further
3:20:14evaluation do you think that putting it
3:20:17in its own proceeding would give it more
3:20:19time and attention I would say there
3:20:22definitely would have to be more
3:20:23discussion involved of what data is
3:20:24currently available or what would be
3:20:26proposed um outside of this proceeding
3:20:28yes okay and do you think that such a
3:20:31standalone proceeding would help the
3:20:33commission to more robustly consider the
3:20:36quality of service for Di communities to
3:20:39address some historical
3:20:41inequities I would say potentially
3:20:44however the current qsp metrics that we
3:20:46have
3:20:47really don't have a comparison with
3:20:48those types of communities as we have an
3:20:50obligation to meet those metrics based
3:20:52off of the current criteria for our
3:20:55state and federal
3:20:56regulations but it's possible that it
3:20:58could include additional
3:21:00information it could I don't I depending
3:21:03on what it actually is needed and how it
3:21:05actually reflects the impact okay great
3:21:08miss glan that's all that I have for you
3:21:09today I really appreciate you answering
3:21:11my questions okay thank you thank you
3:21:13Miss uh mlin uh uh let's see UCA I have
3:21:20uh 50 minutes for you uh Miss singer
3:21:24Nelson and maybe we'll take a break at
3:21:2712:15 if there's a logical
3:21:30break okay it might be easier to take
3:21:33the break now um if that works okay um
3:21:37Mr chairman yeah let's do that so it's
3:21:40uh 11:53 let's come back at uh 12:30 um
3:21:45since we've got uh um an early ending
3:21:48today so
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3:58:57Miss singer Nelson you're up all right
3:59:01thank you chairman blank miss gilland my
3:59:04name is Michelle Singer Nelson and I'm
3:59:07an attorney for the utility consumer
3:59:10advocate office um here in Colorado good
3:59:14afternoon good
3:59:15afternoon uh your testimony addresses
3:59:19operations and maintenance expenses for
3:59:22liquefied natural gas U otherwise
3:59:25referred to as
3:59:26LNG and compressed natural gas otherwise
3:59:30referred to as CNG is that correct that
3:59:34is correct yes um are you aware of this
3:59:38commission's affordability initiative
3:59:41work plan where the commission States
3:59:44that affordability is a critical part of
3:59:47the commission's oversight as it
3:59:49regulates Colorado Gas and Electric
3:59:53utilities I'm not specifically familiar
3:59:55with that verbage but um assume that's
3:59:58part of their plan yes
4:00:00okay
4:00:02um just for your information oh first of
4:00:05all can you just tell us I I know
4:00:08there's different statements throughout
4:00:10your testimony that addresses the exact
4:00:13am amount that um public service is
4:00:17requesting for LNG and CNG uh
4:00:22procurement costs in rate base could you
4:00:25identify what the current number is for
4:00:28that yeah what you actually mind pulling
4:00:30up I believe it's in my rebuttal
4:00:31testimony of the exact number so I can
4:00:33confirm that
4:00:35okay your uh rebuttal testimony is um
4:00:39hearing exhibit 127
4:00:45and are you referring to your
4:00:49table um I'm assuming so or whatever
4:00:52amount you're wanting to me for me to
4:00:53confirm would be
4:00:54great okay I think you're it's uh at
4:01:00let's
4:01:05see at page
4:01:1024 there you go
4:01:16yep those those are the accurate numbers
4:01:18that were in my rebuttal testimony yes
4:01:21okay so the um for LNG costs
4:01:27your commodity requests are
4:01:311193
4:01:349,38 is that still included in this
4:01:38proceeding it's not included in the cost
4:01:40of service no okay where is that
4:01:44um amount been moved
4:01:46to um it's it's not part of this
4:01:50proceeding is it true that that that was
4:01:54moved to the GCA proceeding I believe so
4:01:57yes and Mr pet could add more additional
4:01:59context and he was is was part of that
4:02:02hearing okay so then is that true for
4:02:07the uh commodity costs relating to um
4:02:12your GNC
4:02:15expens the
4:02:17CNG yeah CNG correct all cost of service
4:02:21is not included in here as indicated on
4:02:23the right hand side okay so in response
4:02:27to my question as to what the current
4:02:30amount is that the company is seeking to
4:02:33recover for procurement costs or
4:02:36thirdparty vendor support cost as
4:02:38they're referred to in these tables is
4:02:42um
4:02:47the addition of
4:02:505,226 183 and 357
4:02:55758 is that right for the third party
4:02:58vendor
4:03:00correct
4:03:02okay is the the company looking for the
4:03:06um amounts that are set out for uh
4:03:11materials in red in these two tables
4:03:15that is correct
4:03:18yes okay
4:03:20so in order for all of us to determine
4:03:24exactly the amount that the company is
4:03:27looking to recover in base rates for LNG
4:03:31and
4:03:31CNG um we'd have to add the numbers in
4:03:37um the last two rows of each of these
4:03:42tables is that right
4:03:44yes and I would believe that was part of
4:03:46the correction um that we discussed
4:03:48earlier within my rebuttal testimony of
4:03:51the 5.4 million okay so it is a
4:03:545.4 million amount correct okay good
4:03:58thank you
4:04:04sure I'm going to start off by
4:04:07talking about the you can take this down
4:04:10thank you um the historical use by
4:04:14Public Service of
4:04:18LNG Public Service first started using
4:04:21LNG and Breen Ridge in the
4:04:242223 winter heating season is that right
4:04:28that's
4:04:29correct and it you then used LG again
4:04:34for the 2023 2024 winter heating
4:04:39season that is
4:04:41correct it just says in it's side Public
4:04:44Services uh winter heating season runs
4:04:47from November 1st of one year through
4:04:51March
4:04:5231st of the next year is that correct
4:04:56roughly those are the appropriate
4:04:58timelines depending if we have some type
4:05:00of severe weather event yes
4:05:04okay so any particular use of LG for a
4:05:08winter heating season would be in two
4:05:10separate calendar years correct
4:05:14uh potentially
4:05:16yes would you agree that LG costs
4:05:19included in the calendar year 2023
4:05:22historic test year in this proceeding
4:05:25actually are from two winter H Heating
4:05:28Seasons from January to March of
4:05:312023 and then um November to December of
4:05:372023 I'm sorry could you repeat the
4:05:39question one more time sure would you
4:05:41agree that the l& costs included in in
4:05:44the historical historic test year in
4:05:46this proceeding the 2023 historic test
4:05:49year that it includes heating costs from
4:05:52two separate heating Seasons so it would
4:05:56be November
4:05:58of uh November through December of
4:06:022023 and then
4:06:06January through March of
4:06:092023 yes I'd say that's accurate because
4:06:11it does go between two calendar years
4:06:13for the heating seeds and cycle
4:06:17okay isn't it true that LNG is much more
4:06:20expensive than CNG to to
4:06:23deploy on average CNG um could
4:06:26potentially be higher cost yes no my
4:06:30question was whether LNG was typically
4:06:34more costly oh I apologize yes l& is uh
4:06:38typically it could be more costly than
4:06:39cngg depending on how the usage is
4:06:42completed
4:06:45going back to um your rebuttal testimony
4:06:48hearing exhibit 127 at at 24 in the
4:06:52table we were just looking
4:06:56at the costs in table lgr3 relating to
4:07:03LNG were only used for one location is
4:07:08that correct that is correct yes yet the
4:07:12cost for CNG G in table L
4:07:18lgr4 were was for um eight different
4:07:22locations is that
4:07:24right no not necessarily those are
4:07:26potential locations that can be used for
4:07:29CNG um I don't believe all eight
4:07:31locations use CNG during this historical
4:07:34test
4:07:36year can we pull up
4:07:39your uh let's
4:07:42see your uh direct testimony hearing
4:07:45exhibit 104 at page
4:07:5046 we'll go to footnote
4:08:0026 does it say there um
4:08:04that six million of the total relates to
4:08:07the use of CNG at various facilities in
4:08:10Keystone Aurora lions me Longmont
4:08:15Boulder Grand Lake and Pagosa Springs in
4:08:18the 2022 2023 Andor 2023 2024 heating
4:08:24Seasons yes it say 600,000 not 6
4:08:28million well 0 six million is what I I
4:08:33read oh apologize I thought you said six
4:08:35million yeah so um so the point is that
4:08:40we can go back to the last exhibit in
4:08:43the
4:08:46tables it's hearing exhibit 127 at 24
4:08:50right thank you you are quick on that um
4:08:53so the point is the $5
4:08:55million for LG was only used for one
4:08:59location and the
4:09:02$357,000 was used for all the locations
4:09:06for deployment at all the locations that
4:09:08we just listed in the footnote of your
4:09:11direct testimony is that right
4:09:14that's
4:09:15correct referring to page 192 and 193 of
4:09:21hearing exhibit 500 can we go
4:09:28there this is Corey
4:09:32scac answer testimony in this proceeding
4:09:49192 oh great so at the bottom Mr scac
4:09:55specifically talks about the commodity
4:09:59costs um for
4:10:01LNG um and that they're much higher than
4:10:05natural gas used by public service and
4:10:08its pipes is that
4:10:10right that's correct do you disagree
4:10:15with the figures that he put um in lines
4:10:1922 of page 192 and then lines 1 through
4:10:23five of 193 where he says that commodity
4:10:28component of LG for the 2023 2024 season
4:10:33was
4:10:35$21.29 per
4:10:39mmbtu and pesco's GCA cost for the
4:10:42fourth quarter of 2023 was
4:10:47$365 per decm or mm BTU for both
4:10:51commodity and Upstream
4:10:56costs do you have any Reon out his
4:10:59numbers no okay um so he concludes that
4:11:03just the LG commodity cost is 5
4:11:08183% larger than the Allin GCA cost for
4:11:12both commodities and Upstream
4:11:17costs is that right that's what it
4:11:20states here
4:11:27yes are you aware of a decision earlier
4:11:31this year you can pull this down thank
4:11:34you uh a decision earlier this year
4:11:37relating to Public Services GCA
4:11:40adjustment and uh the company's attempt
4:11:42to recover LG procurement costs through
4:11:45the
4:11:47GCA I'm Vaguely Familiar with it
4:11:49yes and are you do you recall judge
4:11:52Farley's decision there that the
4:11:55Upstream costs and total costs of LNG
4:11:57are substantially higher than the same
4:12:00cost for delivery of non CNG LNG natural
4:12:05gas I I would have to take your word for
4:12:07that again on the GCA determination I
4:12:09would recommend talking specifics with
4:12:11Mr P okay well we can pull up the
4:12:14exhibit if that would refresh your
4:12:16recollection we can pull up the
4:12:19decision okay that's fine it's hearing
4:12:22exhibit CWS hearing exhibit 500 and it
4:12:26would be CWS
4:12:4190 he it's page or paragraph 38 which I
4:13:04think there you go um halfway through
4:13:08this
4:13:11paragraph the uh judge Farley States
4:13:15this is an important question given the
4:13:17Upstream costs and total costs of LG are
4:13:20substantially higher than the same cost
4:13:22for the delivery of non CNG LNG natural
4:13:25gas and the commission has emphasized
4:13:27the need to carefully consider the
4:13:29impact of its decisions on the
4:13:32affordability of utility service does
4:13:35that refresh a
4:13:36recollection it does yes I I I read that
4:13:39there correct
4:13:43by the way did public service request a
4:13:45cpcn to deploy LNG in Breen
4:13:50Ridge I I'm not
4:13:52sure
4:13:55okay and going back to hearing exhibit
4:13:58127 at
4:14:0024 the thank
4:14:05you uh the LG commodity costs represent
4:14:09approximately
4:14:112.2% of the total LG expenses in the
4:14:152023 calendar year is that
4:14:18right that seems accurate
4:14:23yes and uh so the LNG third party vendor
4:14:27costs
4:14:30um oh you know what I wanted to uh refer
4:14:35to um one of your ex one of your
4:14:38Discovery responses because it looks
4:14:40like the third-party vendor support
4:14:43costs that are in this table are higher
4:14:47than what um you stated in response to
4:14:52Discovery is it true that um over time
4:14:56you guys um changed your third-party
4:15:00vendor support cost for LG between your
4:15:03direct and rebuttal
4:15:06testimony could you perhaps share a
4:15:09discovery response with a witness sure
4:15:11it's here um out of uca's box it's
4:15:14hearing exhibit
4:15:26516 will you identify this for the
4:15:29record Miss
4:15:31gilland y I see it's uh proceeding
4:15:34number 24 Al 0049 G Discovery request
4:15:38UCA
4:15:402710 okay and
4:15:44uh it talks about this table that we
4:15:46were just referring to and the
4:15:51119,00 138 for LNG and approximately 52
4:15:575.2 million for third party vendor
4:15:59support cost do you see that I do yes
4:16:03and of subpart a asks how much the
4:16:05thirdparty vendor cost support
4:16:07changed um from your direct case
4:16:14yes I see the
4:16:155.2 and then I is that what you're
4:16:18referring to I'm not sure what right so
4:16:21that um subp part A your
4:16:25response it looks like you reflect there
4:16:28that the um difference between what you
4:16:32provided in your uh direct case and that
4:16:36what was provided in your rebuttal T um
4:16:39case is 574 th000
4:16:43right it's showing the difference
4:16:44between the two amounts from October
4:16:4722nd to September 23rd versus the 2023
4:16:51actuals of the
4:16:54difference all right and uh you're the
4:16:57one that sponsored the response to this
4:17:00request is that right we can scroll down
4:17:01to the bottom
4:17:06yes chair I'd like to move for admission
4:17:09of hearing
4:17:11exhibit five
4:17:1416 any objections no objection so
4:17:21moved thank you you can take this
4:17:26down so at Pages 20 uh 8 lines 9 through
4:17:3011 of your testimony you state that two
4:17:33acres are needed to deploy CNG versus
4:17:37what space is needed for LG deployment
4:17:40is that right that's correct yes yes and
4:17:44you use the space needs for CNG to
4:17:46support the company's decision to deploy
4:17:49the more expensive LNG to Breen Ridge is
4:17:53that
4:17:55correct there's a specific need of why
4:17:58LG is needed in Breen brige versus CNG
4:18:01and part of what you state in your
4:18:04testimony is is space constraints for
4:18:06CNG that is part of the reason why
4:18:11yes um Public Service did not even
4:18:14evaluate the Avail availability for land
4:18:18for the deployment of CNG in Breen Ridge
4:18:21is that
4:18:24right I I would say there was very
4:18:26limited options available for the site
4:18:29access where LG was the sufficient
4:18:31decision of what we needed to deploy to
4:18:33meet capacity needs for Breen
4:18:37Ridge can we pull up um from uca's box
4:18:41hearing exhibit
4:18:52520 Miss gillin can you identify this
4:18:54for the record please yes UCA
4:18:582717 can we scroll
4:19:04down are you the sponsor of this um
4:19:08Discovery response yes I am commissioner
4:19:11blank um I move to I move for the
4:19:15admission of hearing exhibit
4:19:19520 any objections no objection I
4:19:24moved all right so in this question um
4:19:30subp part C UCA asked did psco have two
4:19:34acres available in Breen Ridge and your
4:19:37response at the very end of the response
4:19:40here it says as LG was the appropriate
4:19:43solution for the constrainted issue
4:19:46Public Service did not evaluate the
4:19:48Avail availability of land for CNG and
4:19:51Breen Ridge and did not otherwise have
4:19:54it available for CNG deployment did I
4:19:57read that correctly yes you did so in
4:20:00other words uh Public Service did not
4:20:03even evaluate the uh the space needed
4:20:07for
4:20:08CNG in bar bridge as I mentioned there
4:20:11was very limited
4:20:13um availability for various acres of
4:20:15land and LM was the option that we chose
4:20:17to move forward
4:20:20with for the
4:20:23past couple of winter seasons um Public
4:20:26Service only injected LNG gas into its
4:20:30gas system in Breen Ridge once is that
4:20:32right that is correct what this was a
4:20:36little confusing because um in response
4:20:39to a discovery uh
4:20:41request uh it's hearing exhibit 514 UCA
4:20:4527-
4:20:586B H can we scroll down Miss gilland I
4:21:02think you're the sponsor of this
4:21:04response I believe so yes correct okay
4:21:07thank you um commissioner blank I'd like
4:21:10to move for admission of hearing
4:21:13exhibit
4:21:15514 any objections no objection so move
4:21:21can thank you can we move to subpart B
4:21:23real
4:21:24quickly it says um the purpose of oops
4:21:29sorry do you want the question b or the
4:21:31answer B I guess we can go to the
4:21:34question
4:21:36first so the question asked that um psco
4:21:40to admit that it it is not used as G and
4:21:43Breen Ridge for the prior to Winter
4:21:45heating season specifically for Peak
4:21:47shaving Solutions during um periods of
4:21:51high peak hour gas demand and so let's
4:21:54go to your first response I think you
4:21:56have a supplemental supplemental
4:21:58response will go
4:22:00first um so it
4:22:06says uh let's move down a little further
4:22:09it looks like you didn't respond in the
4:22:11supplemental so the you say in subpart B
4:22:14your initial response in August was the
4:22:17purpose of and need for LNG is discussed
4:22:20in your testimony while it's correct
4:22:22that system pressures were maintained
4:22:24without the need to actually inject LNG
4:22:27LG was still required to be available to
4:22:30ensure reliable service did I read that
4:22:33correctly you did yes so at that time in
4:22:36August you state that LG was not
4:22:39injected into the system but then just
4:22:43last night um UCA received responses to
4:22:48um additional Discovery and I think
4:22:51we've got um a hearing exhibit
4:22:54534 in our
4:22:58box and it would be um
4:23:01UCA sorry there's doesn't look like
4:23:03there's a 534 I've got up to
4:23:05531 um I can double check the web
4:23:08version to make sure that it's not a
4:23:09syncing issue but I don't see a 534
4:23:13okay it was just added this morning so
4:23:17um give me a second I'll I'll check the
4:23:20web too
4:23:22but well and maybe we can do it this way
4:23:25Miss gilland did you did a public
4:23:28service later amend its representation
4:23:32that uh it never injected LNG into the
4:23:35Breen Ridge gas system um in its most
4:23:38recent responses to Discovery and say
4:23:40that in fact it did inject LNG at once
4:23:45in the gas system in Breen
4:23:48Ridge I would object on the grounds that
4:23:51this is a vague question and and if
4:23:53there's a discovery response which it
4:23:54looks like it's on the screen I would
4:23:56ask that the witness be allowed to refer
4:23:58to
4:23:59that uh the objections over rolled but
4:24:02um Miss gilan you're welcome to look at
4:24:04the discovery response before I
4:24:07answering okay thank you uh can you
4:24:10please identify the document on the
4:24:11screen
4:24:13yes Discovery request UCA
4:24:1533-9 and were you the sponsor of this
4:24:19response yes I believe so okay let's
4:24:23let's look at
4:24:25D um so of course uh public service has
4:24:30objections to responses but this
4:24:33yesterday we got the response that said
4:24:38um let's
4:24:40see halfway through the response says
4:24:42with that clarification it is correct
4:24:45that the LG commodity while not required
4:24:48to be injected to support system
4:24:50pressures was injected at the end of the
4:24:53winter heating system into the company's
4:24:55system and used by
4:24:58customers is that accurate that is
4:25:01accurate yes was it only used
4:25:04once
4:25:06yes thank
4:25:11you what what did Public Service use if
4:25:14anything to meet system constraints in
4:25:16Breen Ridge for heating s um heating
4:25:21periods prior to 2223 when you first
4:25:24injected
4:25:26LG prior to having our LG system
4:25:30installed uh we had determined that
4:25:32there were potential capacity
4:25:34constraints on the system and so we
4:25:36actually chose to install the LG as a
4:25:39non pipeline alternative um the
4:25:42alternative would have to be an
4:25:44evaluation of actually building a larger
4:25:46pipeline um up in that area for larger
4:25:48capacity needs so that is when we
4:25:51actually took a change of route of
4:25:53looking at an MPA which is the LG option
4:25:56to ensure that we have capacity to be
4:25:58able to support our customers in the
4:26:00Breen Ridge area for those cold winter
4:26:02days but you didn't use LNG prior to
4:26:05that time period correct that is
4:26:11correct and today Public Services only
4:26:14deployed LG and Breen Ridge correct as
4:26:17of right now yes that is
4:26:19correct uh does public service plan to
4:26:22continue to deploy Breen Ridge or LNG to
4:26:26Breen Ridge yes we are continuing to
4:26:29look at Breen rid and deploying allergy
4:26:31in that area yes and um at page 25 lines
4:26:3611 through 17 of your rebuttal testim
4:26:39testimony excuse me I'm having a hard
4:26:41time this afternoon my mouth is dry or
4:26:47something um so you you testify that um
4:26:51the company's going to present an
4:26:53expansion of LG in a larger NPA
4:26:56portfolio is that right that is correct
4:26:59yes in what towns or locations will LNG
4:27:03likely be needed in upcoming winter
4:27:07seasons um like I've mentioned in my
4:27:09testimony um witness marks um is
4:27:12actually working with his team on the
4:27:14long-term planning of where the
4:27:15appropriate LNG um will need to be
4:27:18deployed across our
4:27:21footprint and does public service intend
4:27:24to file a cpcn with the commission
4:27:27regarding that
4:27:29deployment I would say that would be
4:27:31handled under Mr Mars's um Team to be
4:27:33able to look at that evaluation and the
4:27:35needs to file that
4:27:36cpcn so you don't know at this point I
4:27:40do not know
4:27:43is
4:27:45um is future LG deployment plan to
4:27:48address an existing capacity constraint
4:27:51in the Eastern Mountain
4:27:53system um I would say we're evaluating
4:27:56all systems um and again Mr Mars's team
4:28:00is is doing that evaluation for further
4:28:02NPA across our system for capacity
4:28:04constraints okay just out of curiosity
4:28:07what towns are in the Eastern Mountain
4:28:10system in our Eastern mountain system um
4:28:13it would be anything east of our um
4:28:15specific I I don't know the specific
4:28:17cities off the top of my head honestly
4:28:19right now okay that's
4:28:22fine all right um so it looks like the
4:28:26company has also gone ahead in addition
4:28:29to the thirdparty vendor costs and we
4:28:31can take down that exhibit that's up
4:28:33right now thank
4:28:35you um for the third-party vendor costs
4:28:38that are part of this case um the
4:28:43the um company has gone ahead and
4:28:46purchased its own LNG equipment is that
4:28:50right that is correct this year in
4:28:542024 can we pull up heing exhibit 519
4:28:58from uca's box it's another response to
4:29:09Discovery will you please identify this
4:29:11for the record
4:29:12yes uh Discovery request UCA
4:29:162721 21 yes and are you the sponsor of
4:29:20the response I am yes uh Mr chair I'd
4:29:25like to move for admission of hearing
4:29:29exhibit
4:29:31519 any
4:29:33objections no objection so moved so the
4:29:38this question goes to um Public Services
4:29:42purchases of modular LNG equipment that
4:29:45you described in your rebuttal testimony
4:29:47can we scroll
4:29:51down pass the
4:29:54objection all right here we are um so in
4:29:57response to our request for how much
4:30:00money was spent on that it looks like
4:30:02the company spent $3.6 million for its
4:30:06own LNG equipment is that right that is
4:30:09correct and then you also State the
4:30:11company will have expenditures to among
4:30:14other things operationalize the
4:30:16equipment on the system correct that is
4:30:20correct and the company does the company
4:30:23intend to seek reimbursement of these
4:30:27costs in uh a rate base or base rate
4:30:31case a rate case proceeding um Beyond
4:30:36today's rate case proceeding that is
4:30:39correct as these are purchases made in
4:30:412024 and we're on the 2023 historical
4:30:44test year so yes it'll be
4:30:46future this LNG acquisition plan and
4:30:49purchase was was not included in the
4:30:52gift proceeding was
4:30:54it I don't believe so um but I'm not
4:30:58100%
4:30:59sure can we pull up hearing oh it's I
4:31:03guess it's on the same uh Discovery
4:31:06response looking
4:31:10at um subp part
4:31:13C do you see acquisition of the modular
4:31:16LG equipment was not planned at the time
4:31:18the Gip was filed in 2023 correct yep so
4:31:23it wasn't no filed in that
4:31:29proceeding and is it true that this
4:31:32equipment will be deployed in Breen
4:31:35Ridge that is correct the same place
4:31:38where um public service is requesting
4:31:41reimbursement in this proceeding for
4:31:44$5.2 million in LG
4:31:47costs yes the same same
4:31:51system well the company owned LG
4:31:54equipment
4:32:00um well I guess the my next question was
4:32:05really relating to the fact that um the
4:32:09company is requesting reimbursement for
4:32:12the third party cost for the same
4:32:14location where it's now spent money to
4:32:19um deploy its
4:32:21own uh equipment there is that
4:32:25right that's correct it was um third
4:32:29party rental we purchased our own in 24
4:32:33that will be our own
4:32:36equipment okay we can take this down and
4:32:38I'll move on to my next topic
4:32:42Mr chair I only have a couple more
4:32:45topics okay let's talk about um use of
4:32:49LG on a design day versus use of LNG as
4:32:54a peer
4:32:56plant uh in your rebuttal testimony at
4:32:59page 30 lines 7-9 you mentioned that the
4:33:03company deployed LNG to provide service
4:33:06and ensure that outages would be
4:33:09experienced that outages would not be
4:33:12experienced during design day conditions
4:33:14is that right that is
4:33:17correct and a design Day by definition
4:33:20is based on the probability of a one in
4:33:2230e design day occurrence correct that
4:33:26is
4:33:27correct and a 1 in30 design day um is a
4:33:31temperature that's expected to be colder
4:33:34than every other day except one in 30
4:33:37years
4:33:38correct that is
4:33:40correct and your rebuttal testimony you
4:33:43also mentioned that the use of LNG in
4:33:45Breen Ridge um can be done as a peak
4:33:49shaving facility is that
4:33:52right yes that was in my yes will you
4:33:56explain how a facility shaves Peak
4:33:59demand um within my testimony I think it
4:34:02was more of a reference to indicate that
4:34:04it would be similar in comparison to a
4:34:06peak shaving plant of using it on such
4:34:09days as capacities needed on those cold
4:34:12weather temperature
4:34:16days isn't it true that the sole reason
4:34:18that the company decided to First deploy
4:34:22LG was to meet a one in 30e low
4:34:25temperature design
4:34:27day the design day is the absolute
4:34:30holdest day to be able to deploy that
4:34:32when we look at deploying the LG
4:34:35facility in the Breen Ridge area it can
4:34:38start as starting to look at17 which is
4:34:40not the design to be able to make sure
4:34:43that the equipment is ready for capacity
4:34:45needs if it does get to a colder
4:34:47temperature can we pull up heing exhibit
4:34:50500 attachment CWS
4:35:0289 and can we go to
4:35:05page
4:35:08nine 89 only has two pages
4:35:12oh okay that's where I was gonna
4:35:16um I was going to ask that we pull up
4:35:20the the Box copy of this document I um
4:35:24Mr chairman I referenced this the other
4:35:26day we realized when we were preparing
4:35:29for the hearing that um exhibit 89 to Mr
4:35:34slac's testimony inadvertently only
4:35:37included two pages but um his the
4:35:41exhibit was supposed to include the
4:35:43entire
4:35:44um entire uh piece of Mr trowbridge's
4:35:50testimony um and so I circulated that
4:35:53yesterday to all the parties and asked
4:35:55whether anybody would object to us
4:35:58actually
4:35:59replacing um the hearing exhibit CWS 89
4:36:04with the full copy of the testimony and
4:36:07um I didn't hear anything this morning
4:36:09as to whether anybody would object to
4:36:11that so we put it in our box and um
4:36:15there it is actually uh referred to as
4:36:19um CWS 89 revised
4:36:24one do you have any uh objections to uh
4:36:29Miss singer Nelson using this uh uh to
4:36:34cross-examine miss gilland um Miss Samar
4:36:38P that's a broader question um I I I
4:36:42don't have an objection to this document
4:36:44coming in given the uploading issues as
4:36:46it was an attachment to Mr Sak's
4:36:49testimony however I do have an issue
4:36:52with uh using this document which is
4:36:54from a different company witness and the
4:36:56formerly in the regulatory group to
4:36:59cross-examine uh Miss giland uh to the
4:37:02extent it's going to be used for
4:37:03impeachment or anything else it's not
4:37:05her testimony and she's provided very
4:37:07robust testimony in this case on LNG and
4:37:10the needs for LG
4:37:12not area but um that would be my
4:37:16response well I guess uh Miss singer
4:37:19Nelson uh you have a clean right to get
4:37:22this in the evidence but uh and we'll
4:37:25take it there and we'll take it from
4:37:27there so uh how would you like to
4:37:30proceed um the only reason I was going
4:37:33to walk through this and by the way this
4:37:35is um Public Services Company
4:37:38Representatives testimony in a
4:37:40proceeding where it attempted to uh
4:37:44recover these same LG costs from the GCA
4:37:50so um it is it is something that I think
4:37:54is permissible to use um
4:37:58in before we get there just let's move
4:38:00it into evidence okay uh so uh so I'll
4:38:05say it's uh admitted in the evidence and
4:38:08is it your intent to use this to
4:38:10cross-examine and this witness yes just
4:38:14briefly uh I guess I'm struggling to see
4:38:18the concern uh that you have given it
4:38:21that it's a a a former
4:38:26uh uh given that ex it's a company
4:38:29witness in a in a different case it's uh
4:38:33I think this uh seems legitimate to me
4:38:35I'm not sure I understand the the
4:38:39objection well perhaps we can you know
4:38:42let Miss singer Nelson ask her questions
4:38:44I don't know to what extent U Miss
4:38:46giland is familiar with this testimony
4:38:49she didn't testify in that case she was
4:38:50not a witness in that case uh she's an
4:38:54operations witness in this case
4:38:55testifying on lmg so uh what a
4:38:59regulatory uh witness said in a prior
4:39:03case may may not be appropriate so we we
4:39:05can proceed with the questions chair and
4:39:08if I have objections I'll Lodge them at
4:39:10that time
4:39:12uh please go ahead Miss singer Nelson
4:39:15thank you Mr chairman and uh Miss Gillan
4:39:18this is really um to address your
4:39:21testimony that talks about using now LNG
4:39:25as um as a like a peaking plant versus
4:39:30the use of elgy um to address design day
4:39:35conditions can we go to page nine at
4:39:39lines 18 through 22
4:39:44and by the way this is the testimony of
4:39:47Mr
4:39:49Trowbridge do you see the
4:39:54question let's see 18 through
4:39:5722 um what is a designed day condition
4:40:01and he responds consistent with you what
4:40:03you just said that a design day refers
4:40:06to a 1 in 30e low temperature for a
4:40:08given weather Zone
4:40:11and then at a little above there from
4:40:15Line 6 through
4:40:2317 he asks himself how does the company
4:40:26determine the need for LNG or
4:40:29CNG and he
4:40:33responds on an annual basis beginning
4:40:36after the conclusion of the heating
4:40:38season the company's hydraulic models
4:40:40are calibrated
4:40:41with system operating data from the past
4:40:44heating season to confirm whether the
4:40:46gas system is continuing to meet our
4:40:48system specific design day
4:40:51conditions so there it appears that Mr
4:40:54trobridge was explaining that LNG and
4:40:58CNG were
4:41:00specifically used for to satisfy design
4:41:03day conditions is that right that's what
4:41:06I'm reading here I guess he doesn't talk
4:41:08about Peak shaving there does he he does
4:41:11not
4:41:14know and and then going to page 12 lines
4:41:184 through
4:41:227 rlng and CG seasonal deployments only
4:41:27any responds yes there's seasonal
4:41:29deployments that are used only during
4:41:31the heating season when the company
4:41:33faces the risk of not meeting design day
4:41:36requirements again he doesn't talk about
4:41:39Peak shaving there either
4:41:44that's correct I don't see that on here
4:41:46circling back to rebuttal testimony we
4:41:49can take this down thank
4:41:52you you liken the LNG deployment in
4:41:55Breen Ridge as not a similar to a
4:41:58peaking power plant that operates when
4:42:00called upon to do so does that sound
4:42:03correct yes can we pull up heing exhibit
4:42:07515
4:42:18will you identify this document
4:42:21for yes Discovery pleas
4:42:2627-7 and are you the sponsor of this
4:42:30response I am
4:42:33yes Mr chairman I'd like to move for
4:42:35admission of hearing exhibit
4:42:39515 any objection
4:42:41would you mind scrolling to the bottom
4:42:43just so I can confirm the
4:42:47sponsor thank you no objection here so
4:42:52moved okay and I'd like specifically go
4:42:55to go to the question for
4:42:58277a and then the response so the
4:43:01question is is Miss gilland referencing
4:43:04a peaking power plant just for an
4:43:06electric utility if so please explain a
4:43:09peaking power plant for gas utility and
4:43:12the
4:43:16[Music]
4:43:18response is
4:43:22yes uh you're generally referencing a
4:43:25peaking power plant for an electric
4:43:27utility and you're not referring to um
4:43:32Public Services electric utility and
4:43:35it's clear from rebuttal testimony that
4:43:38that it's only being used as an analogy
4:43:42is that right
4:43:51yes um peing Power Plant for an electric
4:43:54utility is available to provide
4:43:56electricity when there's high demand
4:43:59correct that is
4:44:01correct for example on a 100 degree day
4:44:05Public Service May employ a peaking
4:44:07power plant to meet its air conditioning
4:44:09demand
4:44:12I would say that's accurate yes wouldn't
4:44:14it be more cost effective for public
4:44:16service to use traditional natural gas
4:44:19and non-pipeline Alternatives and even
4:44:22CNG for Peak shaving than to deploy
4:44:25extremely expensive LG to shave the
4:44:29peak when you look at the difference
4:44:31between LG and CG if you're needing it
4:44:33to actually provide capacity at Peak
4:44:36Demand on a cold day even to the
4:44:38extremes of design day you would need to
4:44:40be able to deploy LNG um due to actually
4:44:44needing that higher volume of Supply
4:44:47being able to demand provide the demand
4:44:49load to the customers so they do not
4:44:51have Interruption of
4:44:53service so you're saying at times the
4:44:56company believes CN LNG is is more cost
4:45:00effective than
4:45:02CG I would say LNG is the appropriate
4:45:05use of commodity to be able to supply
4:45:07our customers on demand days to ensure
4:45:09that they do not ction of service but at
4:45:12a higher
4:45:14cost it potentially could be at a higher
4:45:16cost
4:45:17yes now the my last topic is relates to
4:45:21safety issues um and I'll just briefly
4:45:26address your response to uca's testimony
4:45:30on the need to provide information to
4:45:32the commission on the safety of LG in
4:45:35every case where cost recovery for LG is
4:45:38sought um at page 31 1 lines 18 through
4:45:4322 of your rebuttal testimony you state
4:45:46that the company provided information
4:45:48regarding its planned use of LNG in a
4:45:52proceeding number 23 A- 0325
4:45:56G and and um that happens to be the same
4:46:00proceeding that Mr trowbridge's
4:46:03testimony was filed in that we just
4:46:06referenced um
4:46:11and you state at the very bottom that
4:46:15the company provided testimony on the
4:46:17characteristics value cost and planned
4:46:20use of CNG and LNG in proceeding 23 Al
4:46:24325g when re requesting recovery for the
4:46:28cost of third party up CNG and LNG
4:46:31Services through the GCA this testimony
4:46:35was filed over a year ago in a case that
4:46:37UCA was party to Now isn't that the
4:46:40proceeding where judge Farley denied LG
4:46:44procurement cost recovery and found that
4:46:47public service failed to address the
4:46:50relative safety of LNG and CNG versus
4:46:53the conventional method of alleviating
4:46:56pipeline constraints and delivering
4:46:59natural gas to
4:47:00customers I object to the form of the
4:47:03question and that it's characterizing
4:47:05the com uh the decision by judge Farley
4:47:08but uh if you could put the language
4:47:10from the decision in front of her she
4:47:12may be better able to answer okay um can
4:47:15we pull appearing exhibit
4:47:20500 um see I'm sorry it would be the
4:47:23attachment
4:47:3190 looking at page
4:47:3916 yeah and would be paragraph
4:47:4739 so miss gilland can you see uh judge
4:47:51Farley's um
4:47:55statements yeah sorry I was just reading
4:47:57okay good yeah so starting in line it
4:48:00really starts at line two where he says
4:48:03while Public Service often repeats in
4:48:05its testimony and sop that it must
4:48:08provide safe and reliable service to its
4:48:10rate payers it never addresses the
4:48:13relative safety of storing and using CNG
4:48:16or LNG to address pipeline constraints
4:48:19versus the conventional method of
4:48:21alleviating pipeline constraints and
4:48:24delivering natural gas to rate payers
4:48:27this deficiency in the record is notable
4:48:30given that the commission specifically
4:48:32requested such evidence and decision
4:48:35number um c23 d59
4:48:41so so there in the um judge Farley noted
4:48:46that it it was it's important to the
4:48:49commission and uh judge Farley that the
4:48:52company always provides sufficient
4:48:54information in the record so the
4:48:56commission can evaluate the deployment
4:48:59of LG
4:49:02correct I would say that looks accurate
4:49:04based off of this this statement yes and
4:49:07also to evaluate the prudency of the
4:49:09cost of el
4:49:12G
4:49:17correct uh I would say yes sorry I was
4:49:20just rereading that one more time
4:49:23sure um thank you Mr chairman I have no
4:49:26further questions thank you Miss gilland
4:49:28thank you thank you Miss singer Nelson
4:49:31in 50 minutes exactly so nicely
4:49:35done uh uh commissioner PL questions for
4:49:39Miss Gillian
4:49:48I'll uh for the record that's a no uh
4:49:51commissioner plan is having trouble
4:49:53unmuting and shaking his head now
4:49:55commissioner Coman hi good afternoon
4:49:58Miss Gillan hi good
4:50:00afternoon few questions for you um first
4:50:04regarding the quality service plan or
4:50:08qsp um so
4:50:11if I'm getting it right it sounds like
4:50:13um the current plan is for no changes to
4:50:16the qsp now as proposed by the company
4:50:20but potentially some stakeholder process
4:50:23to look at that qsp prior to 2026 filing
4:50:26is that
4:50:28accurate Yes except we are proposing
4:50:30that decreased number in the grade two
4:50:32leaks but the other ones would stay the
4:50:34same for the
4:50:372026 okay so sorry decreased timeline
4:50:40for for grade two yes okay
4:50:44um and um so I'm just curious kind of
4:50:47given the scope of the qsp and changing
4:50:52policy considerations within the state
4:50:55um do you see other areas as being
4:50:59important to explore As you move forward
4:51:02with those stakeholders discussions for
4:51:04possible inclusion in the qsp moving
4:51:07forward yeah I would definitely say the
4:51:10GR weak um qsp will be one to
4:51:14re-evaluate look at especially now that
4:51:15we'll be moving into the advanced Leak
4:51:18Detection technology and how we'll be
4:51:20quantifying looking at our leaks overall
4:51:22in that period of time it is going to
4:51:23change the methodology as we move
4:51:25forward um why we are proposing that
4:51:28number and not um anything less at this
4:51:30time so I think when we look at with the
4:51:32new Advanced leak um detection it
4:51:35definitely will be something to evaluate
4:51:37further once we get um that furthermore
4:51:40find um as we move into those um new
4:51:43types of processes here okay um has the
4:51:47company already purchased Advanced Leak
4:51:49Detection equipment or that's something
4:51:51planned no it's something planned we
4:51:53have not purchased it yet okay outside
4:51:56of just um revisions to kind of perhaps
4:52:00some leak detection and timelines do you
4:52:02fore any other um areas of performance
4:52:05or policy that you could Envision being
4:52:08included within the qsp
4:52:10um not at this time I feel like those
4:52:12three metrics are very um sufficient
4:52:15metrics for us as if we look from a gas
4:52:17operation standpoint of making sure that
4:52:19we're committing to our safety needs
4:52:21looking at our gas emergency response um
4:52:23looking at the damage ratios um across
4:52:26the across the board and then also to
4:52:28the um the leakage ratio I think will be
4:52:30the biggest Factor as we move move
4:52:32forward but at this time we haven't
4:52:34considered anything further than those
4:52:36three okay um and another the company
4:52:40proposes um as I said keeping the qsp um
4:52:44certainly the dollar levels the same and
4:52:47I was just curious given the significant
4:52:49inflation over the past few years with
4:52:51this being I believe a
4:52:532022 vintage um document and moving it
4:52:58all the way forward to 2026 without any
4:53:00adjustments wouldn't that result in
4:53:02significantly lower uh real dollars um
4:53:06that are uh
4:53:08essentially a part of the the penalty
4:53:11structure uh as we move forward in the
4:53:14years I would say yes I mean if we keep
4:53:17the same dollar amount as we've had
4:53:19today would stay flat compared to any
4:53:22additional increases in penalties based
4:53:25off of the current metrics
4:53:27okay um okay so you discussed the
4:53:31characteristics of CNG and LNG in your
4:53:35testimony heard a lot about it already
4:53:39um I'm curious for the Summit County
4:53:43application um you've discussed and just
4:53:46to be clear not like a piece of paper
4:53:48application but the use I guess is how
4:53:51I'm using it um you've talked about the
4:53:55purchase of the equipment um so for the
4:53:58prior two winter seasons this has been a
4:54:00contract right 22 23 and
4:54:052324 um what will be the structure in
4:54:08this upcoming winter season we are are
4:54:10just now about to start the 2425 will
4:54:15that be a contract or will you be using
4:54:17the purchased equipment no for the 2425
4:54:20heating season we'll be using the
4:54:22purchase equipment so that's what we've
4:54:24been moving towards is getting away from
4:54:25the third party type of vendor usage
4:54:28that we've had over the past two heating
4:54:30seasons and why we purchase the new um
4:54:32the new equipment that we can actually
4:54:34maintain and and have that in place for
4:54:37a long period of time okay and when do
4:54:39you actually expect delivery of
4:54:42that um I believe actually I I don't
4:54:45know off the top of my head of when
4:54:46that's going to be
4:54:48delivered okay um do you have any
4:54:51obligation to continue or any kind of
4:54:54sunk costs associated with the contract
4:54:57when you stop Contracting for the
4:55:00service no we definitely took that into
4:55:03our planning phases of evaluating that
4:55:05third party cost and and planned within
4:55:08Mr marz's um group of looking at that
4:55:11when would we purchase that equipment
4:55:12and actually have that deployed so we
4:55:15definitely took that into consideration
4:55:16of when we would be cancelling our third
4:55:18party contract to when we would actually
4:55:20be purchasing the equipment and using
4:55:23our internal Workforce for that
4:55:26asset okay um and with regard to
4:55:29sighting of that equipment is that on a
4:55:32is it I guess currently with the
4:55:34contract situation is it currently on a
4:55:38public service owned or controlled
4:55:41site no I believe it was rented um for
4:55:44the last two heating seasons and we're
4:55:47currently acquiring the final land for
4:55:50moving forward for this winter season
4:55:51moving
4:55:53forward so it's the same site you're
4:55:56just trying to own the site instead of
4:55:58rent the site no it would it will be a
4:56:01different site it's not the same site as
4:56:02it's been for the past two
4:56:04years okay so public service is looking
4:56:08at acquiring land to site the equipment
4:56:11you have bought to provide this yes
4:56:14correct um are there additional kind of
4:56:19interconnection costs I don't know if
4:56:21that's the right word um but to be able
4:56:24to now inject in a different location
4:56:27than you had been injecting in the past
4:56:30um there there'll always be additional
4:56:32cost for the interconnection of that but
4:56:34depending you still have to have certain
4:56:37asset locations and being close to
4:56:38certain regulation points with on the
4:56:41system to be able to to meet that de
4:56:43demand potential need on the system so
4:56:45it wouldn't really have additional cost
4:56:48impacts due to the site location moving
4:56:50very minimally on the on the
4:56:52system okay and are there were there
4:56:56costs for the integration I I suppose
4:56:59there are since you said there are
4:57:00always interconnection costs costs for
4:57:03the interconnection that is being
4:57:06abandoned
4:57:08essentially um I would say minimal I
4:57:10don't have the specific amount of what
4:57:12that dollar amount would be from the
4:57:13decommissioning standpoint of the
4:57:15current site to moving it to the new
4:57:17site but there would be decommissioning
4:57:19cost associated with decommissioning the
4:57:21current location which was
4:57:22decommissioned at the end of the heating
4:57:24season prior we always decommission at
4:57:26the end of the heating season so that's
4:57:28already been taken care of and now we'd
4:57:30be standing up the new commissioning of
4:57:32our new site as
4:57:33well but you're going to use the
4:57:36contract site again this winter so it's
4:57:39not been decommissioned yet right no the
4:57:42the current site of where we had been
4:57:44using lamp prior has is not going to be
4:57:46used this winter season there will be a
4:57:48new site location that will be utilized
4:57:51for this winter season with the
4:57:52purchased
4:57:55equipment sorry okay you're not using
4:57:59the purchased equipment this coming
4:58:00winter right no we are the purchased
4:58:03equipment will be used this winter
4:58:05season the equipment was for last for
4:58:09the 23 24 heating season we'll be using
4:58:11the purchased equipment for the 2425
4:58:14heating season okay perhaps I
4:58:16misunderstood you before I thought we
4:58:18had one more winter of contract no no no
4:58:22more no more winter of Contra okay so
4:58:24you're on a new site have already just
4:58:26decommission on the old site um and you
4:58:31do not yet own the new site is that all
4:58:34accurate the land yes correct the land
4:58:37yes okay um okay
4:58:40um and just to be clear you're looking
4:58:42at purchasing that land rather than
4:58:45renting or leasing that land for my
4:58:47understanding we're exploring all
4:58:49options I we don't have a final
4:58:51confirmation of what the land will be
4:58:53purchased or rented on yet okay um thank
4:58:57you sorry I got confused um so you
4:59:01referred um earlier in your testimony to
4:59:03the turn NPA or non-pipeline alternative
4:59:06when referring to the LG project and I
4:59:09just wanted to be clear this is not an
4:59:10NPA that has actually been through a Gip
4:59:14or been presented in a Gip to the
4:59:16commission is that correct that's
4:59:18correct it it's more of looking at that
4:59:20non-pipeline alternative instead of
4:59:22actually building a new pipeline where
4:59:24if you're looking at the capacity needs
4:59:26for the system there's really that those
4:59:29are your two options of being able to
4:59:30have LG to be able to supply that on the
4:59:33design and the demand date or looking at
4:59:36building that larger capacity pipeline
4:59:38so we of course chose the option of
4:59:40looking at another alternative of the
4:59:42LNG to help with Supply on the capacity
4:59:46okay um you know in your testimony that
4:59:50a separate filing will be presented to
4:59:52the Commission in
4:59:542024 regarding a larger NPA portfolio
4:59:58and overall proposal um when is that
5:00:01expected to be
5:00:03filed I don't have that exact date so
5:00:05that will be um witness Mr Mars his team
5:00:08is actually working on that full PA
5:00:10portfolio and that filing requirement as
5:00:14well do you know if Ellen if and for how
5:00:18long LG is projected to be part of what
5:00:22the company will put forth as a larger
5:00:24NPA portfolio for the
5:00:27area I do not have the specifics but I
5:00:30know LNG is definitely a part of the NPA
5:00:32portfolio for other locations as we move
5:00:35forward as as part of
5:00:37that okay um
5:00:41so it I I did have a a question about
5:00:44how frequently and to what extent the LG
5:00:47cited in Breen Ridge had been used but
5:00:49you did cover that somewhat with Miss
5:00:51singer Nelson um so I'm a little lost on
5:00:57it though because I understood the
5:00:58purpose of of the sighting to be to
5:01:01handle design day situation um where
5:01:04pressure on the system might reduce
5:01:06because of too much use not enough um
5:01:10availability but it sounds like that's
5:01:12not the circumstance for which it was
5:01:14used the one time it was used so can you
5:01:15help me understand what it was used for
5:01:18sure so on the time that it was used
5:01:20when we have LG in in the tanks and
5:01:23ready to be injected into the system for
5:01:26Supply um when we do the decommissioning
5:01:29we have to empty those tanks to be able
5:01:31to transport them and move them off site
5:01:33and so we injected the LNG for commodity
5:01:36use into the system at that time
5:01:39understood and that's um just one second
5:01:45so you um stopped using the contract
5:01:49equipment you're going to use your own
5:01:51equipment now or was there some transfer
5:01:53that I'm missing that wasn't one of
5:01:54those two things yeah so this for the
5:01:5823 24 heating season when you
5:02:01decommission those tanks to be able to
5:02:03move them offsite we have to inject the
5:02:06remaining LG within those tankers to be
5:02:08able to move them in a safe condition
5:02:10off site um of that location so that was
5:02:13taken care of and the LG was injected
5:02:15into the system at that time when that's
5:02:18separate of this heating season coming
5:02:20up with the purchased equipment okay so
5:02:24essentially between 20 22 23 and 23 24
5:02:29whatever wasn't used was able to remain
5:02:32in there basically but then because you
5:02:35cease using the
5:02:36contractor they had to get their
5:02:38equipment away away and in order to move
5:02:41their equipment away it had to
5:02:43essentially be purged and it was purged
5:02:45into the system correct but both heating
5:02:48Seasons we decommission the units and
5:02:50remove them from the sites both times so
5:02:53they don't they did not stay up there
5:02:55for the full year we actually
5:02:57recommission and decommission as those
5:02:59tankers have to be moved off during the
5:03:01heating
5:03:02season okay so um what about when it's
5:03:07your equipment are you going going to
5:03:10have to decommission it or maybe not
5:03:13have to are you going to decommission it
5:03:15every
5:03:17spring at this time I do not know the
5:03:19specific answer on the current equipment
5:03:21we'll be purchasing and how that will be
5:03:23used for the decommissioning or keeping
5:03:25that on site intact during the season so
5:03:28I unfortunately I do not have a specific
5:03:30answer for you at to say okay
5:03:36um uh does the company have data on the
5:03:41measured shortfall um as they see kind
5:03:45of system Asis um system as is
5:03:49conditions from SK data and whatnot from
5:03:51the prior heating season to understand
5:03:54if the shortfall and not area is growing
5:03:56or
5:03:58shrinking yes so our ISP organization
5:04:01which falls under Mr Marts and others is
5:04:04able to do predictive modeling of the
5:04:06forecasting of our design days and what
5:04:08that capacity needs are um need to be
5:04:11met um so that can definitely um be
5:04:14modeled to see where those capacity
5:04:15constraints are on the system is that
5:04:18being done does the company understand
5:04:20if the shortfall in the area of concern
5:04:23is growing or shrinking yes so I I would
5:04:26say those capacity checks are being
5:04:28evaluated to ensure that we are still in
5:04:31need of additional capacity support the
5:04:34design day as well as load on the system
5:04:36for our customers do you know if the
5:04:39shortfall is growing or shrinking I do
5:04:42not
5:04:43know um let's
5:04:47see um so this was just identified prior
5:04:51to the 23
5:04:532223 winter season right
5:04:57correct and what's projected right now
5:05:00is essentially the same need for CNG in
5:05:03the same quantity as was identified
5:05:06several years ago when it was first
5:05:08identified
5:05:09I I would say yes the LG need is still
5:05:13there from a capacity need but witness
5:05:15Mr Mars would be able to provide more
5:05:17specifics on exactly the the modeling
5:05:20and behaviors of capacity constraints
5:05:22we've seen over
5:05:23time okay
5:05:25[Music]
5:05:30um
5:05:31[Music]
5:05:32um Public Service Company of Colorado
5:05:35had for for at least two Winters um that
5:05:39I'm aware of run a gas demand response
5:05:42pilot program in Summit County which
5:05:45Summit County is the location of Breen
5:05:48Rich um if you're not familiar um to
5:05:51your knowledge has that pilot um been
5:05:54used at all to try to minimize the
5:05:56shortfalls in this area of
5:06:00concern I I am not sure on
5:06:02that um are you aware of any results
5:06:06reports or other information that the
5:06:08company has or has made available
5:06:11regarding the company's gas demand
5:06:13response pilot in this
5:06:15area again I I'm not as familiar with
5:06:18that I would I would think another
5:06:19witness would be able to to support the
5:06:22the current needs on
5:06:23that
5:06:25okay um let's see um so you note in your
5:06:31rebuttal testimony that the decision
5:06:33essentially to go with LG in this area
5:06:35was made with cost Consciousness at its
5:06:38core I'm just curious what was the
5:06:41company's rough estimate of the
5:06:43infrastructure costs associated with
5:06:45increas in the capacity in the area
5:06:47instead through traditional
5:06:48infrastructure
5:06:50means as far as the cost of l&g versus
5:06:53the traditional of installing a pipeline
5:06:55that's correct okay um so if we were
5:06:57actually going to be installing a
5:06:58pipeline in this area it would have cost
5:07:00upwards of a 100 million plus um to be
5:07:03able to do that if not more um and so we
5:07:05chose the option of l&g um to support
5:07:07those capacity needs instead
5:07:10are you aware over how many years of
5:07:12growth or what growth assumptions were
5:07:14made with regard to the sizing of that
5:07:18replacement of traditional
5:07:19infrastructure I am
5:07:21not okay I did some some quick research
5:07:25only to find out that Breen Ridge is
5:07:27apparently at 93% of its residential
5:07:30buildout so apparently in what I'm
5:07:33seeing not a lot of room left for
5:07:35additional residential
5:07:37development don't expect that you have
5:07:40looked that up but just uh perhaps to
5:07:43interject on future growth potential for
5:07:45the
5:07:46area
5:07:47[Music]
5:07:49um has the company begun um either when
5:07:53the need was identified or in any time
5:07:55in interim has the company begun any
5:07:58specific efforts to slow or reverse
5:08:01capacity growth rates in the particular
5:08:03area of
5:08:05concern um not to my knowledge not at
5:08:07this time no
5:08:09um how large are you able to kind of
5:08:12describe geographically where all the
5:08:15area of concern is in terms of use um
5:08:19that leads to the capacity
5:08:21shortfall um I can't get P specifics
5:08:24unfortunately um that would fall under
5:08:25our integrated system Planning Group
5:08:27that provides the the long-term capacity
5:08:30and the evaluation of capacity
5:08:31constraints um for various needs on the
5:08:35system has the company pursued or prop
5:08:39proposed a moratorium in the area to
5:08:42slow or stop growth um to address the
5:08:45shortfall not to my knowledge no is that
5:08:49something the company's done in the past
5:08:50in other areas where they've run into
5:08:52capacity
5:08:53issues um I think it's been a point of
5:08:55discussion I I'm not aware of any
5:08:58specific mandates that we've done in the
5:09:00past those my only questions thank you
5:09:03thank you thank you commissioner Gman um
5:09:07just a couple quick follow-ups it sounds
5:09:10like uh the company purchased some uh LG
5:09:13equipment in
5:09:152024 if you had this equipment list
5:09:17heating system do you have a rough sense
5:09:19of how much the total LNG spending would
5:09:23have been
5:09:25reduced I do not have those figures um
5:09:28off the top of my head chair blank um
5:09:31that would again be something for for Mr
5:09:33Mars to have provided with the
5:09:36evaluation of that purchase but the
5:09:38rough idea is when you have the
5:09:40pressurizing and deep pressurizing
5:09:42commitment it's just sort of normal
5:09:44commodity Gaz that's the commodity input
5:09:47is that is that sort of like the rough
5:09:49intuition yes I would say that's correct
5:09:52all right and just from your answer to
5:09:55commissioner Gman it sounds like the LNG
5:09:57equipment stays in Sumit County all
5:10:00winter um is that right it's not like uh
5:10:03if you have a crisis somewhere else you
5:10:05can move it within a couple days uh
5:10:08somewhere else it's not like wacka once
5:10:10it's in Summit County it's there for the
5:10:13entire winter is is is is that the right
5:10:17intuition yes that's my understanding is
5:10:19that it it cannot be moved to to various
5:10:22sites um to support other needs okay um
5:10:27just a couple questions on cost
5:10:29allocation right or wrong I picture sort
5:10:31of large multi-million dollar second
5:10:33homes gone up in Summit County are
5:10:36leading to this gas system capacity
5:10:39shortfall at the same time as I
5:10:42understand it we're being asked to
5:10:43socialize this $5 million maybe not a
5:10:46year cost or maybe the hundred million
5:10:48Capital cost of the long-term solution
5:10:51across all customers including IQ
5:10:54customers to the best of your knowledge
5:10:56has the company conducted any analysis
5:10:58to see if the revenues from the added
5:11:00gas sales in uh Su County offset these
5:11:04costs U I am not aware of any of those
5:11:07at this time no given that uh none of
5:11:11these costs are on the new customers and
5:11:13they're socialized across anyone uh
5:11:15everyone from a customer perspective is
5:11:19it fair to say that there is less
5:11:21incentive for these customers to go all
5:11:23electric or engage in demand
5:11:26response um I would say that this is
5:11:28providing the customer choice of still
5:11:30wanting to stay on the gas system and
5:11:31that we're needing to make sure that we
5:11:33can provide them an additional capacity
5:11:35and Supply on the system um while we're
5:11:38still here to serve them and making sure
5:11:39that they do not have Interruption of
5:11:41service at this time yeah but for those
5:11:44customers those new customers that say
5:11:47it is $100 million to serve those new
5:11:49customers I mean it's great that they
5:11:51want natural gas but they're not paying
5:11:54the the full cost that they're imposing
5:11:56on the system is is that fair that's
5:11:59fair all right and any if the if the
5:12:03Commission in this case wanted to uh you
5:12:06know with whatever we do with these
5:12:08expens is if we wanted to issue an order
5:12:11you know requiring you to you know look
5:12:14at the revenues versus the cost as part
5:12:16of any future
5:12:18process um and look at creative ways of
5:12:23you know more fairly internalizing those
5:12:26costs in the future so the incentives
5:12:28for demand response all electric you
5:12:31know are based on the true underlying
5:12:34economics any concerns advice or
5:12:36guidance uh you might give us if we
5:12:39choose to do that I would say we
5:12:41definitely could look at the additional
5:12:43portfolio that we plan to file at a
5:12:45later time of the NPA and what that
5:12:47analysis could look at as we move
5:12:49forward into the future for the system
5:12:52all right uh that's all I had uh any
5:12:57redir uh yes cheer blank give me just
5:12:59one
5:13:02moment um Miss giland I'd like to start
5:13:05with the qsp do you recall the question
5:13:09just kind of going back to the beginning
5:13:11it's been a little while now but do you
5:13:12recall the questions that were asked of
5:13:14you by staff about the company's gas
5:13:17qsp yes I
5:13:20do and currently Miss giland are all of
5:13:24the companies gas qsp metric safety
5:13:26focused yes they
5:13:28are uh staff asked some questions
5:13:30regarding the grade two leak repair
5:13:32metric do you recall those questions yes
5:13:35I do why did the company propose a
5:13:37reduction of this metric from 52 days to
5:13:4040 days instead of the 28 days
5:13:42recommended by sta y so we took a the
5:13:46threeyear average of looking at the
5:13:48overall reduction and and as I mentioned
5:13:50previously we're really looking at where
5:13:52we're going and heading with the
5:13:53advanced leak uh detection technology
5:13:56and what that's actually going to do for
5:13:58the ratio um and bringing down leakage
5:14:00overall on our
5:14:02system thank you um miss giland you were
5:14:05not involved at all with the electric
5:14:08qsp is that right that is correct and is
5:14:12it fair to say that you're not at all
5:14:13familiar with its
5:14:15metrics no I am not is the company
5:14:18nevertheless supportive of working with
5:14:21stakeholders to discuss future changes
5:14:23to the gas
5:14:24qsp yes we are is there another company
5:14:28witness who's more familiar with the
5:14:30regulatory process and how that would be
5:14:32accomplished Mr pet would be able a
5:14:34witness pet would be able to provide
5:14:36more clarity on that
5:14:40thank you I'd like to switch to another
5:14:43topic I would like
5:14:45to talk about LNG and CG
5:14:50briefly can you please elaborate on why
5:14:52the availability of both LNG and CNG as
5:14:56supplemental Supply going forward is so
5:14:59important to the
5:15:00company sure um I'll start with alen um
5:15:04as I've mentioned previously when we're
5:15:05looking at um capacity constraints
5:15:08across the system and depending on the
5:15:10supply needs on those cold temperature
5:15:12days LG is more of the appropriate need
5:15:14depending on the full capacity of the
5:15:17customers that we have to provide that
5:15:19demand and Supply to CG as well is
5:15:22another great supplemental Supply
5:15:23alternative uh to be able to serve and
5:15:25deliver to our customers on cold days as
5:15:28well as for other times where we
5:15:30potentially might need CG um where we
5:15:32have to take instead of having a
5:15:34customer customer be out on an outage
5:15:36we're able to deploy CNG um to keep them
5:15:39online without any type of interruption
5:15:41of
5:15:44service now thank you for that you were
5:15:47asked a series of questions uh by
5:15:49Council for
5:15:51UCA regarding uh the
5:15:54various commodity
5:15:57costs do you recall that I
5:16:00do if we could please pull up uh hearing
5:16:03exhibit 127 rev two
5:16:17and if we could go to page
5:16:2424 I just want to clarify looking at
5:16:27tables
5:16:29lgr3 and lgr4 particularly the commodity
5:16:33costs do you see those lines I do yes
5:16:36and I believe you testified earlier
5:16:38about those commodity costs have been
5:16:40removed from the cost of service in this
5:16:42rate case did I call that correctly
5:16:46correct um and you I believe were also
5:16:49asked if those commodity costs are being
5:16:51recovered to the gas cost adjustment do
5:16:53you recall that question yes is that a
5:16:57question better directed to another
5:16:58company
5:16:59witness uh again I would I would
5:17:01reference uh witness pet to be able to
5:17:04provide more clarity on those
5:17:07details okay can pull that
5:17:12down actually keep it handy if you don't
5:17:14mind um do do you recall Council for UCA
5:17:18referring you to Mr Sak's answer
5:17:20testimony where he discusses the cost of
5:17:22LG as compared to gas commodity in the
5:17:25gas cost
5:17:26adjustment yes I do and I I believe you
5:17:30agreed that LG was more
5:17:32expensive
5:17:34yes and you also had a conversation with
5:17:39commissioner Gilman about the cost of
5:17:41the traditional gas infrastructure do
5:17:44you recall it yes I do did those cost
5:17:47comparisons contribute significantly to
5:17:50the company's decision to use LG as
5:17:53supplemental support instead of the gas
5:17:56infrastructure that is correct and is LG
5:18:00also being used for other purposes in
5:18:03the
5:18:03[Music]
5:18:04interum l&g is not no not the specific
5:18:07site up in Breen bridge is currently
5:18:09being used for
5:18:11lmg the company is also making a
5:18:13mountain system filing this year I
5:18:15believe you referenced that in your
5:18:16testimony and commissioner Gilman asked
5:18:18you several questions about that correct
5:18:21yes that is correct um is the use of
5:18:25supplemental
5:18:27LNG given the company additional time to
5:18:30implement non-pipeline Alternatives
5:18:32should those be approved by the
5:18:33Commission in a future filing yes that
5:18:36that that is correct
5:18:40I would like to turn to hearing exhibit
5:18:47519 which I believe is the company's
5:18:49response to Discovery request UCA
5:18:5727-21 and if we could move to the
5:18:59question for subpart
5:19:02D that question reads will the cost
5:19:05associated with with this modular LNG
5:19:07equipment replace the costs that Pesco
5:19:09has paid to third party vendors or will
5:19:12it be in addition to those costs do you
5:19:14see that question I do could we please
5:19:17go down to the
5:19:21response would you mind reading that
5:19:23response into the record Miss Gill sure
5:19:26uh the LG onm cost reference and Mrs
5:19:29gillan's rebuttal testimony that the
5:19:30company has paid two third party vendors
5:19:33was incurred during the 2023 test year
5:19:35whereas the LG purchase equipment is
5:19:37occurring in the 2024 and therefore will
5:19:39not replace previously incurred cost uh
5:19:42please also see the skill and rebuttal
5:19:45testimony at 30 on
5:19:4714-2 thank
5:19:50you um we can take that
5:19:54down Council for
5:19:56UCA also
5:19:59um in discussing the cost for
5:20:03LG at least the way I heard it seemed to
5:20:06infer that that alternative
5:20:09was cheaper than CG or compressed
5:20:11natural gas do you recall that
5:20:13conversation I do yes if the company had
5:20:18chosen which it did not for the reason
5:20:20stated in your testimony to deploy
5:20:23CNG instead of LNG would that cost have
5:20:26been higher or lower than the cost of
5:20:29LG it it would have been higher um and
5:20:33also two other variables were taken into
5:20:36consideration and outside of cost as
5:20:38well but it would have been
5:20:51higher give me one second shair blank to
5:20:54check my
5:20:59notes uh no further questions for this
5:21:02witness thank you Miss
5:21:03gilland uh thank you Miss gilland and
5:21:07your excused
5:21:09appreciate uh I have the next uh company
5:21:14witness as
5:21:16Doyle is that correct that's correct and
5:21:19we're going to be switching Council for
5:21:22that um before we do however chair blank
5:21:24I would I would like to say at the end
5:21:26of the day today we'd like to Circle
5:21:28back around with the with you and the
5:21:30Commissioners regarding your request uh
5:21:33related to witness
5:21:34Manley's uh hearing exhibit which is the
5:21:3815year rate model uh just to kind of
5:21:41have a plan before we recess for the
5:21:43weekend I had that on high on my agenda
5:21:46so we'll stop at 320 or 3:25 and make
5:21:49sure we uh have that
5:21:52conversation uh Miss Doyle can you raise
5:21:54your right hand and chairman before we
5:21:57go on the record I I just or before we
5:21:59get going with Miss Dole I wanted to
5:22:01indicate that UCA will wave its Cross of
5:22:04Miss
5:22:05Doyle oh
5:22:09uh Miss Doyle
5:22:11[Laughter]
5:22:14smiling uh thank you Miss kmon uh Miss
5:22:17Doyle can you raise your right
5:22:19hand uh do you swear to tell the truth
5:22:21the whole truth and nothing but the
5:22:23truth I do um you can put your hand down
5:22:27if it's anybody with you in the room or
5:22:29communicating with you in any way nope
5:22:32and if that changes you'll let us know
5:22:35yep we'll do and let me uh talk to my
5:22:38colleague and see if you could be
5:22:40excused because I don't have any
5:22:42questions for you um commissioner plant
5:22:44do you have any questions for Miss Doyle
5:22:46I do not uh commissioner Gman do you
5:22:49have any
5:22:50questions I think Miss
5:22:53Doyle great job that was short right
5:22:58yeah right thank you thank you Miss
5:23:02Doyle
5:23:04uh all right uh I have as the next uh
5:23:09witness uh Mr amen or
5:23:12amen that's correct CH blank we'll see
5:23:15if he's on and available I know Miss
5:23:17Doyle went faster than we expected fair
5:23:30enough can we take a quick break so we
5:23:32can check in on him he's actually in
5:23:34another
5:23:36location uh yeah so why don't we take
5:23:38take a 5 minute break till uh two and
5:23:41then if he's not available let's get
5:23:43going with uh uh Mr pette or uh uh Mr
5:23:48frus okay okay thank you
5:24:07thanks
5:24:37e
5:25:07e
5:25:37e e
5:26:18Mr amen are you on and
5:26:28available yes I'm I'm
5:26:33on can you hear me yes I can hear you
5:26:36okay we're we're going to get started
5:26:38with you in about 2
5:27:07minutes
5:27:37e e
5:28:36uh Mr amen amen amen amen amen Mr amen
5:28:43uh can you uh uh hold up your right hand
5:28:46and turn on your camera if you
5:28:48can yeah I'm not sure why the camera is
5:28:51not
5:28:53on all right um can you do you swear to
5:28:57tell the truth the whole truth and
5:28:58nothing but the truth yes I
5:29:00do uh is anybody uh in the room with you
5:29:03or communicating with you in any way no
5:29:07if that Chang you'll let us know
5:29:11yes uh there you are here I am you're
5:29:15welcome uh miss
5:29:19hering good afternoon Mr amen can you
5:29:22please State and spell your name for the
5:29:23record please my name is Ronald aan r o
5:29:28n a l d a m
5:29:32n and by whom are you employed and in
5:29:34what
5:29:35position I'm one of two managing being
5:29:38partners of Atrium economics
5:29:42Inc and did you prepare direct testimony
5:29:45and attachments in this proceeding
5:29:46that's been marked as hearing exhibit
5:29:48115 yes I did and you previously
5:29:51provided corrections to that direct
5:29:53testimony is that correct yes and do you
5:29:57have any additional corrections to your
5:29:59direct testimony
5:30:02no are you
5:30:04sure
5:30:06um we can pull up hearing exhibit 115
5:30:09rev to that's might refesh the answer is
5:30:13yes because I thought they were
5:30:15all in if you will yeah they're not
5:30:20these there's two additional Corrections
5:30:22that I think we need to yeah okay go
5:30:27through um and if we can turn to page
5:30:34nine I think it's a little bit
5:30:40Y and is this one of the corrections to
5:30:43your yes this this corrects uh a a bad
5:30:47reference um to a
5:30:50decision and if we can turn to page 15
5:30:58please and is this an additional
5:31:00correction you had to your direct
5:31:01testimony here on lines 5 through seven
5:31:04uh actually I thought that was an
5:31:05earlier one but um
5:31:08yes this is a
5:31:10correction and then turning to page 16
5:31:13at line
5:31:1713 right this corrects a
5:31:22number with that the company moves for
5:31:25admission of hearing exhibit 115 rev
5:31:282 uh any
5:31:31objections hearing none so
5:31:35moved did you also prepare rebuttal test
5:31:37testimony that's been marked as hearing
5:31:39exhibit 134
5:31:41yes any corrections to your rebuttal
5:31:44testimony
5:31:46no uh the witness is available for cross
5:31:49examination thank you um I have 45
5:31:54minutes for
5:32:00UCA Mr
5:32:02bunker yes thank you Mr chairman good
5:32:05afternoon Mr amiman good afternoon Mr
5:32:08bunker uh my name as you just mentioned
5:32:11is Greg bunker and I am an attorney for
5:32:15the UCA in this proceeding nice to meet
5:32:17you nice to meet
5:32:19you if we could start with your direct
5:32:22testimony and by by the way if you see
5:32:25me look off from the camera it is
5:32:29because I have another screen I'm
5:32:30looking at for and if I turn away it's
5:32:34not because I'm not paying attention or
5:32:37listening it's because I'm looking at my
5:32:39notes very
5:32:41well now if we turn to hearing exhibit
5:32:44115 this is your direct testimony at
5:32:47page
5:32:48four here you indicate you're a managing
5:32:51partner with Atrium economics and that
5:32:54Atrium is a management and Consulting
5:32:58and financial advisory firm focused on
5:33:01the on the North American Energy
5:33:04industry is that correct yes
5:33:08and your statement of qualifications is
5:33:12attachment rja
5:33:16A-1 and if we could pull that up for a
5:33:20moment
5:33:33please and looking at the header I I
5:33:36noticed that it is 15
5:33:39pages uh so you is it accurate to say
5:33:43over your long career in utility
5:33:45management and Consulting for gas
5:33:47electric and water
5:33:50utilities that you have been retained in
5:33:53most instances by the
5:33:56utility that's
5:33:58correct okay and uh just as a
5:34:01housekeeping note I note that the
5:34:05labeling at the top attachment
5:34:08R
5:34:10aj-1 is uh not correct it should be rja
5:34:13A-1 is that correct that's right yeah
5:34:17all right thank you um if we could go to
5:34:21Mr P's direct testimony hearing exhibit
5:34:27116 and in particular his attachment JJ
5:34:31p-1
5:34:43you see on line8 an indication that uh
5:34:48$100,000 is the estimated cost for
5:34:51Atrium economics to BR to provide
5:34:54services for the decoupling proposal in
5:34:56this proceeding is that correct
5:35:00yes okay now moving back to hearing
5:35:04exhibit uh 115 your direct testimony
5:35:09on page five at lines five and six you
5:35:13indicate your direct testimony is to
5:35:16present and support the company's
5:35:18proposed Revenue stability mechanism the
5:35:21RSM is that right
5:35:25yes and on win 6 through eight you state
5:35:29the RSM that you are proposing on behalf
5:35:32of
5:35:33Pesco is a total revenue decoupling
5:35:36mechanism intended to separate the
5:35:39company's revenue from the volume of gas
5:35:42itself is that right
5:35:45yes and this proposed decoupling
5:35:48mechanism only applies to pesco's gas
5:35:53department residential and small
5:35:56commercial rate classes is that right
5:35:59yes and so to be clear the purpose of
5:36:03the proposed decoupling mechanism does
5:36:06not apply to pesco's other rate classes
5:36:10such as large commercial interruptible
5:36:13gas or Transportation customers is that
5:36:16right that's correct and could I pause
5:36:19for a moment yes I was planning to turn
5:36:22another light on that would not have me
5:36:25in the
5:36:26shadow okay
5:36:39there we go that adjusted you're ready
5:36:42yeah okay thank
5:36:45you now if we can move to your rebuttal
5:36:48testimony which is uh hearing exhibit
5:36:56134 and at page five starting on line
5:37:0217 uh here you testify the RSM was was
5:37:08specifically crafted to further enable
5:37:11Colorado's ambitious decarbonization
5:37:14goals is that
5:37:21right what what line did you say I said
5:37:25line 17 to
5:37:2820 on page
5:37:33five
5:37:35yes I see that
5:37:37okay very good and if we could go to
5:37:41uca's box
5:37:43account and bring up hearing exhibit
5:37:51540 this is pesco's response to UCA
5:37:57Discovery request number
5:38:0029-1 do you see that yes I do and if we
5:38:04could move to the uh page
5:38:09two you'll see that you are listed as
5:38:13one of the sponsors of this discovery
5:38:16response is that right yes i' move to
5:38:20admit UCA hearing exhibit 540 please any
5:38:25objections no objections so moved so
5:38:31admitted now with regard
5:38:34to the response on the bottom of page
5:38:37page
5:38:39one as to subp paragraphs A and B in
5:38:45both both of these responses you
5:38:47indicate the reference testimony relates
5:38:50to Colorado's decarbonization goals not
5:38:54specific commissionary uh commission
5:38:57rules I'm sorry there actually is a
5:38:59difference in sub paragraph B you state
5:39:03the reference testimony relates to
5:39:05Colorado's decarbon decarbonization
5:39:08goals not specific Colorado statutory
5:39:12sections is that
5:39:13right yes commission rules yes so this
5:39:19request
5:39:20concerns uh page five line 17 through
5:39:2620 could I could I see the um the actual
5:39:31question yes absolutely let's go to the
5:39:34top of the page there on page one
5:39:38and you'll see that this uh request
5:39:41concerns your rebuttal testimony at F
5:39:43page 5 17
5:39:45to2 and your testimony that the RSM
5:39:49stability mechanism the
5:39:52RSM was specifically crafted to further
5:39:55enable Colorado's ambitious
5:39:57decarbonization goals do you see that in
5:39:59the first three lines yes okay and so
5:40:04then your response is you know what are
5:40:07the specific to the questions in a what
5:40:10are the specific Colorado commission
5:40:12rules and in B what are the specific
5:40:15Colorado statutory sections pertaining
5:40:18to decarbonization that was specifically
5:40:23crafted and you indicate in subparagraph
5:40:28a is this correct that the reference
5:40:31testimony relates to the Colorado to
5:40:35Colorado's decarbonization goal
5:40:38but not to specific commission rules yes
5:40:42and then in B you state the reference
5:40:45testimony relates to Colorado's
5:40:48decarbonization goals but not to
5:40:51specific Colorado statutory sections is
5:40:53that right
5:40:55right
5:40:58okay and if the
5:41:02commission does not
5:41:07approve pesco's proposed a coupling
5:41:10proposal in this gas rate
5:41:12case this does not mean that the company
5:41:15will be unable to meet Colorado's
5:41:17decarbonization goals is that
5:41:20correct uh no it it does not um imply
5:41:25that um will just make it more
5:41:30difficult they'll be a financial strain
5:41:33on the company uh without being able to
5:41:37to completely recover its um commission
5:41:40approved Revenue requirement for the
5:41:43classes that are being included in the
5:41:47um Revenue stability
5:41:49mechanism right and if we turn to page
5:41:53two uh the top of the page your response
5:41:56to subparagraph C uh basically just
5:41:59summarizes what you just said is that
5:42:02correct yes I guess it does
5:42:14and is it your understanding that if the
5:42:16commission does
5:42:21not let me start over is it your
5:42:24understanding that if the commission
5:42:25does not approve pesco's proposed a
5:42:28coupling proposal in this gas rate case
5:42:31this does not mean that the company will
5:42:34somehow be forced to slow down its
5:42:36benefit IAL electrification efforts or
5:42:40other opportunities to achieve carbon
5:42:48reductions well I have no information
5:42:51that um would indicate that they would
5:42:54do
5:42:55so okay thank you if we could go back to
5:42:59your uh direct
5:43:04testimony this is Ser exhibit 115 and on
5:43:09page
5:43:1514 and at lines 10 through
5:43:1818 here you uh provide a highlevel
5:43:23description of the proposed
5:43:25RSM that generally describes the
5:43:28mechanics of the proposed RSM is that
5:43:31correct
5:43:34yes and if we focus on lines 11 through
5:43:3813 that first sentence of this high
5:43:40level
5:43:42description the predetermined Revenue
5:43:45amount for the
5:43:46RG and CSG rate
5:43:49classes is not related to actual energy
5:43:53consumption by customers or by the
5:43:56impact of weather on sales or revenues
5:43:59or affected by a decline in gas
5:44:02customers if customers decide to go all
5:44:05electric is that correct
5:44:08right it's based on the commission
5:44:11authorized Revenue requirement for those
5:44:13two
5:44:16classes
5:44:17okay uh on lnes 14 through 15 and this
5:44:22is your second sentence of your
5:44:24highlevel description of the proposed
5:44:27RSM uh here basing the predetermined
5:44:30Revenue amount on the total nonas
5:44:34revenue requirement for the RG and CS G
5:44:37Customer classes as determined in this
5:44:40rate class would fully decouple pesco's
5:44:44sales revenue for the residential and
5:44:47small commercial rate classes from the
5:44:49amount of gas sold to those rate classes
5:44:52is that right that's
5:44:55correct and if we look at uh line 16
5:44:59through 18 this is your third sentence
5:45:02of the high level
5:45:03description of the proposed RSM
5:45:07the periodic quarterly trup adjustments
5:45:10to rates is a trup to predetermined
5:45:13revenue for the predetermined Revenue
5:45:16amount for the RG and CSG rate classes
5:45:21so the focus of the true up is whether
5:45:24the determined Revenue amount was
5:45:27achieved an actual energy consumption
5:45:31the impact of WEA on sales or revenues
5:45:34or a decline in glass in gas customers
5:45:38would not be factors in this true op
5:45:41analysis is that
5:45:44right um I might ask you to repeat that
5:45:48sure I'd be happy
5:45:51to okay referring to the third sentence
5:45:54which is and by the way um Mr bunker
5:45:57you're kind of coming in and
5:45:59out in terms of what I can hear oh okay
5:46:03I will try to uh do
5:46:05better sorry about that just let me know
5:46:07if you can't hear
5:46:08me the periodic quarterly true up of
5:46:12adjustments to rates is a true up to the
5:46:17predetermined Revenue amount for the
5:46:20RG and the CSG rate
5:46:23classes so the focus of the true up is
5:46:27whether the predetermined Revenue amount
5:46:30is cheve is
5:46:33achieved and not whether actual energy
5:46:37consumption the impact of weather on
5:46:40sales or
5:46:42revenues or a decline in GL in gas
5:46:47customers would be factors in this trop
5:46:50analysis is that right I'm gonna object
5:46:53as a compound question I think it might
5:46:55be helpful to break up the question into
5:46:57a couple questions so we can make sure
5:46:59that um we're getting a accurate
5:47:01response here okay I can do
5:47:04that so again we're focused seen on the
5:47:07quarterly periodic true up right yes and
5:47:12that true up is to determine whether the
5:47:14revenue amount was achieved so actual
5:47:18energy
5:47:19consumption is not a factor in the trup
5:47:22is that right well it is to the extent
5:47:25that that actual energy consumption
5:47:28produces the revenue the actual
5:47:32Revenue but the revenue was already set
5:47:35by the Commission in this case is that
5:47:37right the target was
5:47:39set but um it's being
5:47:44reconciled with the actual
5:47:47Revenue that the company received during
5:47:50the quarter that's being evaluated from
5:47:52the customers and that revenue is
5:47:54determined by their usage and the rates
5:47:57that are
5:48:00charged
5:48:02okay if the true up focus of the true up
5:48:06is whether the predetermined Revenue
5:48:08amount was
5:48:11achieved the impact of weather on sales
5:48:14or revenues would not be a factor in the
5:48:18trup analysis is that right well again
5:48:21it's a factor because the weather will
5:48:25have a determination on the actual
5:48:27consumption of the customers during that
5:48:30quarter and that will produce a level of
5:48:33Revenue that will be compared against
5:48:36the Revenue
5:48:39Target so with regard to a declining gas
5:48:42customers you would you would say the
5:48:44same thing that there is
5:48:47a a stated Revenue amount Revenue
5:48:51requirement stated in this in this gas
5:48:55rate case and the true up would be with
5:49:00regard
5:49:02to was that Revenue amount achieved
5:49:07yes so let's let's let's just do a a
5:49:12simple hypothetical so let's say the
5:49:16predetermined Revenue amount for the RG
5:49:20and CGS rate classes let's just say
5:49:26let's use the number $10
5:49:29million got that in mind yes
5:49:33okay
5:49:35so we have $1 million and then the true
5:49:38up
5:49:39occurs and the
5:49:42revenue is
5:49:459.9
5:49:48million have that in mind yes so what
5:49:51would be the function of the true up
5:49:54analysis well it would
5:49:57um make that calculation and there'd be
5:50:01$100,000 of um Revenue that wasn't uh
5:50:07obtained and then that would
5:50:09be um used to
5:50:13create a
5:50:16recovery uh of that Revenue over a
5:50:19subsequent 12-month
5:50:22period so there'd be a unit amount um
5:50:27based on expected volumes over that next
5:50:3112-month
5:50:33period And so that difference that
5:50:35$100,000 would be um turned into a unit
5:50:42rate that would be part of a recovery
5:50:45over the next 12- month period and
5:50:48that's one of the the protections built
5:50:51into the
5:50:52mechanism because the the quarterly
5:50:56adjustments um by that very nature are
5:50:59smaller than if you were to do it on an
5:51:02annual basis and because the recovery is
5:51:05spread out over the next 12 months it
5:51:08also um gives rise to a lower uh rate
5:51:13impact and we modeled that and I have um
5:51:18examples of that in my in my testimony
5:51:20okay let me ask you this question
5:51:23because I I guess I see this
5:51:27hypothetical
5:51:28opposite of what you've just said and
5:51:31that
5:51:32is if
5:51:34the if the RS m is set in this in this
5:51:40case and it is set at $10
5:51:45million and the actual amount at the
5:51:48trup is $9.9
5:51:52million is it inaccurate or is it wrong
5:51:57that that means customers were
5:51:59overcharged
5:52:04$100,000 well uh
5:52:07um the first of
5:52:11all the revenue requirement
5:52:15um is essentially spread over the 12
5:52:19month period well as well so by
5:52:24quarter it's it would be established
5:52:27based on um expected billing
5:52:31determinance um and uh therefore the
5:52:35expected amount of that overall Revenue
5:52:37requirement to be captured in that
5:52:41quarter and um it doesn't mean that
5:52:45anyone was
5:52:46overcharged it's just that U the
5:52:50revenue didn't live up to that
5:52:54particular Target revenue for that
5:52:58quarter I understand that but wouldn't
5:53:01for that quarter customers be
5:53:04overcharged no they would not no because
5:53:07they're being
5:53:08compared they're being compared to um
5:53:12what the authorized Revenue requirement
5:53:15is for that
5:53:16class so if they uh had
5:53:22um actually brought in $1,100,000 they'd
5:53:26get a refund in related to that
5:53:30quarter and those
5:53:33those um incremental
5:53:37recovery or or refund amounts are then
5:53:42spread out over the next 12- month
5:53:43period and and it Cascades to the next
5:53:46quarter and the next quarter so that the
5:53:49authorized Revenue
5:53:51requirement is collected over over a
5:53:54one-year period in that
5:54:00fashion it could have been for example
5:54:04that that first quarter was warmer than
5:54:07normal and
5:54:09therefore uh the the actual usage by
5:54:12customers in that quarter was less than
5:54:14the target Revenue
5:54:19requirement okay let's let's move on to
5:54:22a slightly different topic and if we
5:54:25could bring up uh from the UCA box
5:54:29account hearing exhibit 541
5:54:43and this is Fiasco's response to UCA
5:54:48Discovery request
5:54:5029-2 and I direct your attention to the
5:54:53bottom of the
5:54:55page and you are the sponsor of this
5:54:59discovery response
5:55:01correct um yes that's
5:55:05correct um what part of my testimony is
5:55:08this
5:55:09reference it is a rebuttal testimony
5:55:12you'll see at the very top of the uh the
5:55:15page the request concerns your rebuttal
5:55:19testimony at uh six page six line two
5:55:24and table rj-
5:55:29R-1
5:55:30okay
5:55:32okay and you are the sponsor of this uh
5:55:36response correct yes I'd move to admit
5:55:40UCA hearing exhibit
5:55:43541 any
5:55:45objections no
5:55:47objections so
5:55:50moved if we could look at the top of the
5:55:52page there in subparagraph
5:55:56B of the
5:55:59request states is it Mr Aman's position
5:56:03that the RSM proposed in this 2020 for
5:56:06gas rate
5:56:08case is not fold a
5:56:11coupling and in the response at the
5:56:14bottom of the page in B you say no the
5:56:18proposed RSM is full
5:56:20decoupling as it is a full total margin
5:56:24Revenue decoupling mechanism is that
5:56:26right
5:56:29yes and if we could go back to your
5:56:32rebuttal testimony which is hearing
5:56:35exhibit one
5:56:4434 and at page
5:56:48seven starting on uh line 19 through
5:56:53page eight at line
5:56:55four here you
5:56:58discuss pesco's decoupling proposal in
5:57:01its 2022 gas rate case which is 22
5:57:07al-46 G is that
5:57:10correct
5:57:13yes and continuing down on page
5:57:18eight at
5:57:20lines 15 to
5:57:2318 here you say the company's present
5:57:27proposal was carefully and specially
5:57:29crafted to be responsive to the
5:57:31commission's
5:57:32findings in that proceeding
5:57:36including its Express concerns with the
5:57:39previous Revenue per customer model is
5:57:42that right yes and by that proceeding on
5:57:46line 17 you're referring to pesco's
5:57:50decoupling proposal in its 2022 rate
5:57:54case gas rate case correct
5:57:58correct okay and at the top of the
5:58:02page on uh lines one through four on
5:58:06page
5:58:07eight here you quote a finding from the
5:58:10commission
5:58:11decision which you footnote uh at the
5:58:14bottom of the page is decision c22
5:58:20d642 in the 2022 gas rate case about the
5:58:25unintended consequences of
5:58:29hb21 D 1238 is that
5:58:34correct yes
5:58:37and is it your understanding that the
5:58:41decoupling section of of this house bill
5:58:45again which is 21-1
5:58:491238 that was codified in the Colorado
5:58:52statutes as section 40-
5:58:583.2-a
5:59:015B if you say
5:59:04so okay
5:59:06thank
5:59:10you well I think you'll see on the
5:59:13bottom of page six you have a citation
5:59:15to that exact statut statutory
5:59:19section so with that in mind um I will I
5:59:24I didn't recognize the
5:59:26uh um all the numbers that you
5:59:30were quoting there but I that's fine
5:59:33fully understand and every state
5:59:37numbers are statutes differently and
5:59:39refers to them differently so I
5:59:41perfectly
5:59:44understand is it your understanding that
5:59:46pesco's decoupling request for 2000 for
5:59:50the 2022 phase1 gas rate
5:59:53case was based on this statutory section
5:59:5840- 3.2
6:00:00d103 subp paragraph 5B
6:00:11well um I believe it
6:00:15was formulated to be to
6:00:19reflect
6:00:20um the uh the intended policy statements
6:00:26from the uh
6:00:28legislation as
6:00:30codified and it was
6:00:34um therefore
6:00:37uh
6:00:38structured as a revenue per
6:00:41customer um decoupling
6:00:44mechanism okay if we could go to uca's
6:00:48box
6:00:50account and this would be exhibit
6:00:52hearing exhibit
6:01:03542 and you'll see that
6:01:06this is
6:01:08pesco's response and supplemental
6:01:11response to
6:01:13UCA Discovery request
6:01:1729-5 and Mr aan I would direct your
6:01:20attention to page
6:01:24two and at the bottom there of that um
6:01:28well top fourth of the
6:01:30page you are one of the sponsors of the
6:01:33initial response to
6:01:36uh UCA
6:01:3729-5 is that
6:01:43correct uh this is 29-5 I can't see it
6:01:47it it says at the top of the page there
6:01:49this 29-5
6:01:52continued page two
6:01:56yes okay see
6:01:58that and your sponsors correct
6:02:02yes I'd move to admit hearing exhibit 5
6:02:0642 any
6:02:08objections and this appears to be the
6:02:11supplemental response is that correct Mr
6:02:13bunker it is both the response is here
6:02:17on the second page and the supplemental
6:02:20response is at the bottom of page
6:02:24one so with that I have no objections I
6:02:27don't want to make sure it's the
6:02:28supplemental response yes yes it is
6:02:32complete it is there
6:02:36and I'm sorry you're you're honored did
6:02:38you say admitted yes thank
6:02:43you so if we can look at uh the response
6:02:48on page two sub paragraph
6:02:51a here the the response to sub paragraph
6:02:55a States the reference statute was taken
6:02:58into consideration for the company's
6:03:00decoupling
6:03:01proposal in the 2022 Phase 1 gas rate
6:03:05case right that's my
6:03:07understanding okay and the statute as
6:03:10you can see is referenced again as the
6:03:14section we've been talking about
6:03:1740-32
6:03:19d103 sub paragraph
6:03:225 see that at at the uh in the request
6:03:25on the top of page one so the statute
6:03:28you're referring to that was taken into
6:03:32consideration is this decoupling uh
6:03:36statute we've been talking about right
6:03:39yes I understand it yes
6:03:46okay and is it
6:03:49correct that public services decoupling
6:03:52request in this
6:03:542024 Phase 1 gas rate case is not based
6:03:59on the statute section
6:04:0240-32
6:04:04d103 sub paragraph
6:04:075B Roman I or Roman
6:04:11one well in one respect uh I would agree
6:04:15and that is um it was not crafted as a
6:04:19revenue per customer decoupling
6:04:21mechanism but a total revenue
6:04:24requirement mechanism based on the
6:04:29authorized Revenue requirement for the
6:04:32two classes that were um
6:04:36um covered by the decoupling
6:04:40mechanism
6:04:41um and and here in in uh my
6:04:47opinion is where
6:04:49sometimes
6:04:51legislators
6:04:53um
6:04:55um are too
6:04:58prescriptive um in terms of um the
6:05:03details and so what what you have here
6:05:07is is um a situation where um as as time
6:05:12was
6:05:13passing and based on the um
6:05:17decarbonization
6:05:18goals uh the clean heat
6:05:22plan um it was apparent
6:05:26that uh to us um in consultation with
6:05:32the company that a revenue per customer
6:05:36approach would not deal
6:05:39properly with the throughput
6:05:42incentive and that is to
6:05:47um um in a way encourage C uh the
6:05:53company to
6:05:54continue uh to pursue new customers and
6:05:58new um uh new burner tips to increase
6:06:02load
6:06:06okay thank you for that uh response
6:06:09appreciate that and and and
6:06:23so so let let me ask you uh this way
6:06:28then you would agree the com the
6:06:30company's decoupling proposal is not
6:06:34directly predic ated on section
6:06:3740-32 d103
6:06:405bi is that right as I said uh earlier
6:06:45um in at least this aspect of that
6:06:49section that prescribed a revenue per
6:06:52customer approach
6:06:55yes okay thank you let's go back to uh
6:07:00hearing exhibit
6:07:03134 and on page
6:07:068 at lnes
6:07:1015 through
6:07:1218 you you discuss how the company's
6:07:16present proposal was carefully
6:07:19crafted carefully and specifically
6:07:22crafted to be responsive to the
6:07:24commission's findings in the 2022 rate
6:07:28case uh so you were involved in the
6:07:31crafting of this uh RSM for this case is
6:07:35that right
6:07:45yes and is it correct that by basing
6:07:49pesco's proposed
6:07:51RSM which is a full decoupling mechanism
6:07:55on total
6:07:57revenues the RO the result is it would
6:07:59fully decouple its sales revenues for
6:08:02residential and
6:08:03Commercial rate
6:08:06classes for the amount of gas sold to
6:08:09those rate classes in any quarter to
6:08:12maintain Revenue
6:08:14stability yes it it um its very name
6:08:19suggests it's
6:08:21decoupling um company's revenues from
6:08:26consumption okay if we could turn to Mr
6:08:30sco's answer testimony hearing exhibit
6:08:33500
6:08:38and if we could go to page 2116 when you
6:08:41find uh Mr Schoo testimony
6:08:55please page 216 lines 11 through
6:09:0117 uh in this testimony Mr scac opines
6:09:05that pesco's decoupling proposal does
6:09:09not adjust for the impact that weather
6:09:11has on sales and revenues do you see
6:09:23that what lines are you pointing to I am
6:09:26pointing to lines
6:09:2911 through 17 and specifically the
6:09:33question and answer on 16
6:09:36line 16 and
6:09:3917 where Mr scac oine pesco's decoupling
6:09:44proposal does not adjust for the impact
6:09:47that weather has on sales and
6:09:53revenue you see that yeah I see it okay
6:09:57uh since the proposed RSM is based on a
6:10:01predetermined Revenue amount for the RG
6:10:05G and CSG rate
6:10:08classes factors that benefit customers
6:10:11in the residential and small commercial
6:10:13rate class like the impact of weather on
6:10:16sales or
6:10:17revenues or the actual energy
6:10:20consumption by the
6:10:22customers that does not change the
6:10:25predetermined Revenue amount is that
6:10:27correct well the the predetermined
6:10:30Revenue
6:10:31amount is based on
6:10:35um billing determinants under normal
6:10:40weather and so the U the authorized
6:10:44Revenue requirement for those two
6:10:45classes is therefore based on normal
6:10:50weather and
6:10:52therefore
6:10:55um this I disagree with this this uh
6:10:59statement and
6:11:00answer uh because if
6:11:05whether is warmer or colder than normal
6:11:09it will be reflected in their
6:11:11actual um consumption and therefore the
6:11:15revenue that will be
6:11:17received that will be compared to the
6:11:21authorized Revenue requirement for the
6:11:23class under normal
6:11:28weather okay is it your testimony Mr
6:11:32Aman then that even with a requested
6:11:36increase in the revenue requirement of
6:11:39roughly $170 million in this
6:11:43proceeding and with Pesco gas's current
6:11:47writers and
6:11:48adjustments such as pesco's $1 per month
6:11:52residential service and Facilities or
6:11:55SNF
6:11:56charge and other charges such as
6:12:00interstate Pipeline and natural gas
6:12:03charges and the extraordinary gas cost
6:12:07recovery
6:12:09writer even with all those charges psco
6:12:13gas would not be able to recover its
6:12:15fixed cost required to provide safe and
6:12:18reliable service through its volumetric
6:12:22rates if the RSM proposal is not
6:12:26approved object is a compound question
6:12:29that was a very long question we could
6:12:30break it up be helpful to get a accurate
6:12:33response here
6:12:35you could break it up Mr bunker that' be
6:12:38great
6:12:39sure is it your testimony
6:12:45that first let's let's assume that the
6:12:48revenue requirement of roughly $170
6:12:52million in this proceeding is
6:12:55approved got that in
6:12:57mind yes and that Pesco gas currently
6:13:03has various writers and adjustments
6:13:06including a $11 a month residential SNF
6:13:10charge for uh its residential customers
6:13:13it also has one I don't have it in the
6:13:16top of my head in terms of small
6:13:18commercial classes but that there are
6:13:20SNF charges got that in mind right and
6:13:24those are part of the the base rates
6:13:27those aren't
6:13:29writers that that would be attached to
6:13:32the base rates uh but there's other
6:13:34charges like Pipeline and natural gas
6:13:37charges correct yes those are flow
6:13:40through items yeah and if you recall
6:13:44there was a uh winter freeze in 2021
6:13:49February of
6:13:512021 and as a result uh there is what is
6:13:55called the extraordinary gas cost
6:13:58recovery Rider charge and that allows
6:14:03Public Service Gas
6:14:05as well as electric and other utilities
6:14:08also to recover a charge for these
6:14:12extraordinary gas cost during that Fay
6:14:14winter storm so you have that in mind
6:14:17and and do I understand that that is it
6:14:20is to spread over some months uh the
6:14:25exorbitant costs of natural gas that
6:14:29were um incurred During a severe weather
6:14:34event like like storm Yuri exactly yes
6:14:38that is correct so those two are gas
6:14:41costs that would be a flow through to
6:14:44the
6:14:46customer understandable but that's still
6:14:49on a customer bill
6:14:51agree it may be yes but it doesn't uh
6:14:54recover the U company's cost of
6:14:58distribution
6:14:59service okay so let me ask you uh the
6:15:03this question then is it your position
6:15:07that psco gas would be
6:15:10unable to recover its fixed cost
6:15:13required to provide safe and reliable
6:15:16service through its volumetric
6:15:20rates if the RSM proposal is not
6:15:27approved well it would certainly make it
6:15:30more
6:15:31difficult um and it would not
6:15:36um Mr account for Mr aan if I could
6:15:40interrupt I think my question was a yes
6:15:42or
6:15:44no so um I'm sorry I need to interrupt
6:15:49for a moment somebody's trying to call
6:15:50me and I need to cancel it
6:15:54okay so you think it's a yes or no
6:15:57question yes I believe the way I posed
6:16:00the question that would be yes or no so
6:16:02if you could answer yes or no I disagree
6:16:09okay so you're saying if the RSM
6:16:13proposal is not approved Public Service
6:16:16would not be able to recover its fixed
6:16:18cost is that
6:16:20right mischaracterizes his testimony he
6:16:23was disagreeing with the fact that he
6:16:25believed the question was a yes or no
6:16:27question if you go reframe the question
6:16:29Mr bunker
6:16:32sure Mr aan if PCO gas
6:16:37if let me let me start
6:16:40over psco gas would be unable to recover
6:16:45its fixed costs required to provide safe
6:16:47and reliable service through its
6:16:49volumetric
6:16:51rates if the RSM proposal is not
6:16:55approved is that your position
6:17:08the um the situation
6:17:11where
6:17:14um the company may not be able to
6:17:18recover its fixed costs can be driven by
6:17:22extreme normal weather so that the
6:17:25revenue received does not help them to
6:17:29cover their their revenue
6:17:31requirement it would it would provide
6:17:34them with a an
6:17:35incentive to
6:17:37increase um customers and
6:17:40increase um
6:17:43consumption um to try and make up that
6:17:48difference um and is
6:17:51contrary uh to the
6:17:53goals um of the the clean heat plan and
6:17:57the reduction in um carbon so um it it
6:18:03essentially
6:18:05pits the
6:18:06company um against these policies in
6:18:10order to try and um collect enough
6:18:13Revenue to
6:18:14cover um its authorized Revenue
6:18:18requirement not withstanding the fact
6:18:21that they still have to deal with
6:18:24escalating costs and and manage those
6:18:26costs in order to um recover
6:18:33them okay thanks thank you Mr aan I have
6:18:36no further
6:18:38cross-examination uh thank you Mr
6:18:41bunker uh commissioner plan any
6:18:44questions no I do not commissioner Gman
6:18:48any questions no
6:18:50question uh I don't have any either um
6:18:54any redirect Miss
6:18:56Herring very briefly chair
6:18:59blank uh Mr Aman can you uh just you
6:19:03recall you discussion with UCA Council
6:19:05about um
6:19:08decarbonization yes how will the RM RSM
6:19:13further Colorado's decarbonization
6:19:18[Music]
6:19:20goals well it will
6:19:23provide the company with um the ability
6:19:27to recover its
6:19:30authorized
6:19:32um Revenue requirement to classes
6:19:35included in the
6:19:37RSM um and therefore eliminate any
6:19:42disincentive to
6:19:46um um
6:19:48work to its fullest to um implement the
6:19:53very uh important decarbonization
6:19:56goals and
6:19:59um and in the process
6:20:03um it also
6:20:05aligns um the the interests of both
6:20:10customers and the
6:20:11company um when it comes to um the um
6:20:17the risks that uh both
6:20:21share um due to changes in weather that
6:20:25impact um customer bills and the
6:20:29company's ability to recover its
6:20:31costs so um I I think it's the right
6:20:36mechanism at the right
6:20:38time um
6:20:41to um
6:20:42provide removal of of certain
6:20:45disincentives and allowing the company
6:20:48to
6:20:49rigorously um work towards achieving
6:20:52those clean heat
6:20:54goals um while not being subject to any
6:20:59degradation in its Financial Health
6:21:04you Mr Aman um do you recall the
6:21:07conversation with UCA Council about the
6:21:09difference between a total decoupling
6:21:11mechanism and as opposed to a revenue
6:21:13per customer
6:21:16model um yes
6:21:18I
6:21:20um I I remember that conversation yes my
6:21:24question for you is why did the company
6:21:26propose a total revenue to coupling
6:21:29mechanism in this
6:21:32proceeding well it's Reven first of all
6:21:36its Revenue per customer approach was um
6:21:41disallowed um
6:21:43and and when I hesitated there at first
6:21:47they were both um full decoupling
6:21:51mechanisms um but um one being uh
6:21:57Revenue per customer and one being the
6:21:59total revenue
6:22:02requirement and I think I think again
6:22:05the the total revenue requirement
6:22:07approach um is the um solution for the
6:22:15times have nothing further for this
6:22:18witness uh thank you Mr Amman you may be
6:22:21a excuse sir thank
6:22:24you uh I'd like to get started with uh
6:22:29uh I think Mr pette is the next uh
6:22:33witness and see if we can at least get
6:22:35through uh trial staff and we'll uh have
6:22:39a hard stop at
6:22:413:25 so uh is there you
6:22:45are Mr pette can you hold up your right
6:22:49AR right
6:22:50hand do you swear to tell the truth the
6:22:52whole truth and nothing but the truth
6:22:55yes I do put your hand down uh is anyone
6:22:59in the room with you or communicating
6:23:00with you in any way no they are not
6:23:04that's is you'll let us know yes I will
6:23:08back to you
6:23:10misso thank you chair my computer
6:23:12crashed so I need just a second for word
6:23:16to open up but I am here so I just need
6:23:18one
6:23:27second computers never cooperate when
6:23:29you need them
6:23:31to okay um Mr P could you please uh
6:23:36State and spell your name for the
6:23:38record yes my name is Jason j o n p PE
6:23:46qu by whom are you employed and in what
6:23:50capacity I am employed by Public Service
6:23:53Company of Colorado as the Director of
6:23:55regulatory
6:23:57Administration and for purposes of this
6:23:59matter did you prepare hearing exhibit
6:24:02116c rev one as your direct testimony
6:24:06yes and hearing exhibit 122 as your
6:24:09supplemental direct testimony yes I
6:24:13don't believe you had any corrections
6:24:14today to either your direct or
6:24:16supplemental direct testimony is that
6:24:18right that's correct turning to your
6:24:21autal testimony hearing exhibit 135 as
6:24:25well as your attachment jjp 14 to that
6:24:29hearing exhibit do you have corrections
6:24:32to those two documents
6:24:34yes I believe I do could we please start
6:24:37by pulling up hearing exhibit 135
6:24:40attachment jjp 14 rev one from the
6:24:43company's
6:24:47box uh yes I'm it's doing that syncing
6:24:50thing again so I just have to pull it
6:24:51from the web version give me just a
6:24:53second no problem if it's not there let
6:24:56me know we'll try to get it there as
6:24:57soon as possible
6:25:13uh it's an executable right executable
6:25:16attachment jjp 14 that's correct okay
6:25:20give me just a second to get that open
6:25:45thank you uh Mr pqu could you please uh
6:25:49walk us through the correction that was
6:25:50made and why it was
6:25:53needed yes I believe the correction is
6:25:56um in row or sorry cell
6:26:01F uh 21 it looks like that that number
6:26:04highlighted in red to the top right I
6:26:07believe there was a formula error before
6:26:11um something in the range of 32,000 but
6:26:13but it's corrected to say about 7,000
6:26:16now and that is the difference between
6:26:18columns d and e I'm showing the
6:26:22remainder um in costs for one of the
6:26:25consultants in this
6:26:27case and did we add a revisions tab to
6:26:31this uh exhibit so that the chain could
6:26:34be more clearly seen yes I believe at
6:26:37the end we have
6:26:40one if you could please click on the
6:26:42revisions tab Miss
6:26:47fredero and does this reflect in red uh
6:26:50with the correction description the
6:26:52changes that were made yes it does and
6:26:55these changes did not flow through to
6:26:57your rebuttal testimony did they no I do
6:27:01not believe this changed any numbers in
6:27:03my by written testimon perfect um if we
6:27:07could also now then pull up um hearing
6:27:11exhibit 135 his rebuttal testimony I
6:27:14guess it would be rep one
6:27:39and if we could please go to page
6:27:4640 if we could scroll down there you go
6:27:48to line
6:27:5214 uh I believe you have the same change
6:27:56also on page 42 could you please explain
6:28:00this
6:28:02change yes these couple changes refer to
6:28:05the the gain on sale um from the golden
6:28:08service center land we had corrected
6:28:11this in my direct testimony changing it
6:28:13from 4.7 million to 4.8 million and
6:28:17unfortunately had missed that same
6:28:19correction um to a few references to
6:28:21that number in my rebuttal testimony so
6:28:23simply flowing that through here thank
6:28:26you uh with that the company moves for
6:28:29admission of hearing exhibit 135 rev one
6:28:32and hearing exhibit 135
6:28:34attachment jjp 14 grab
6:28:38one uh any uh
6:28:41objections no
6:28:43objection so
6:28:45moved Mr P is now available for cross-
6:28:49examination uh
6:28:51Mr uh Morman uh 30 minutes sir and I may
6:28:57have to cut you off uh at problem see
6:29:01see if we can get it done in uh 25
6:29:03minutes here
6:29:04good afternoon Mr PK uh my name is Josh
6:29:07Horman and I represent trial staff in
6:29:09this proceeding uh it's nice to meet you
6:29:12nice to meet you as well have a few
6:29:14subject areas that I wanted to discuss
6:29:16with you and the first one is the golden
6:29:19service
6:29:20center um in your rebuttal testimony uh
6:29:23you testified that the golden service
6:29:25center is on land owned by the company's
6:29:28electric business correct that's correct
6:29:31and that fact was discovered after you
6:29:33filed direct
6:29:35testimony the fact that it was solely
6:29:37owned by the electric company was
6:29:40something that we un covered in the
6:29:41process of preparing for botal
6:29:43Testimony okay um but would you agree
6:29:45with me that it would be more
6:29:48appropriate to address uh the sale of
6:29:51the golden service center um and the
6:29:54company's next electric rate
6:29:58case your question was would it be more
6:30:01appropriate yeah would it be more
6:30:03appropriate to address the sale of that
6:30:06uh land in the next electric rate case
6:30:09versus this
6:30:11proceeding that's correct that's the
6:30:12company's recommendation here both for
6:30:14the the sale of the land as well as for
6:30:17the the buildings okay thank you for
6:30:20that clarification and really um what
6:30:22I'm asking is uh the golden service
6:30:25center land is not an issue in this
6:30:26proceeding correct correct thank you um
6:30:30and now I'd like to turn to uh the rifle
6:30:33plant hugar project um Mr P have you
6:30:36been listening to the hearing this
6:30:38week yes I have and do you recall Mr
6:30:43Gardner's testimony on the rifle plank
6:30:46houar project yes I do recall that did
6:30:49you hear Mr Gardner's conversation with
6:30:51the
6:30:52commission
6:30:54yes and do you recall where Mr Gardner
6:30:57mentioned that he was unaware of any
6:30:59concerns with Rocky Mountain Natural Gas
6:31:02regarding this project
6:31:05yes and I believe uh he designated you
6:31:10um as uh in the role of implementing the
6:31:14project is that correct for the
6:31:18company I don't believe that specific um
6:31:22reference to me in that conversation but
6:31:24sure let me rephrase you do have a role
6:31:27in this project
6:31:28correct U from the to the extent that it
6:31:30influences our regulatory proceedings
6:31:32both in this case and potentially others
6:31:36yes okay and do you know if Rocky
6:31:38Mountain Natural Gas has voiced any
6:31:40concerns to the company and how the qar
6:31:42project will impact the rifle processing
6:31:46plant uh I'm not directly
6:31:49aware do you know if Rocky Mountain
6:31:52Natural Gas has had the opportunity to
6:31:54voice any
6:31:56concerns I believe there is I would
6:31:58object as this being outside the scope
6:32:00of Mr P's testimony his testimony on the
6:32:02Questar project is limited to the
6:32:04regulatory processes as he indicated and
6:32:07whether a cpcn was
6:32:09required uh overrall if the witness
6:32:11doesn't know the witness uh can say keep
6:32:14going Mr Horman and we'll see what uh Mr
6:32:18pette
6:32:20says would you like me to re ask the
6:32:22question please thank you I just asked
6:32:25if if uh does excuse me has Rocky
6:32:28Mountain Natural Gas had the opportunity
6:32:30to voice any
6:32:31concerns I believe there was some
6:32:33convers ation with this project in a
6:32:35recent Rocky Mountain Natural Gas um
6:32:38raid filing or or other filing um to
6:32:41which the company was was not a party
6:32:43I'm not aware of any other proceedings
6:32:45at the
6:32:46moment and would you agree that a joint
6:32:49study would be an opportunity to
6:32:51understand um and address any
6:32:53issues if Rocky Mountain National grass
6:32:56had
6:33:00any again referring to that prior
6:33:02proceeding I I believe there was
6:33:03discussion of this fact um the company
6:33:06continues to talk to its partner on this
6:33:08project or or sorry related to the some
6:33:11of our assets down in the rifle region
6:33:13which includes Rocky Mountain Natural
6:33:14Gas we talk to them regularly as a as a
6:33:17result of that um but I'm not aware of
6:33:20of specific requirements or or or lack
6:33:23of requirements about specific
6:33:26studies uh well in your opinion do you
6:33:28think a joint study would be helpful I
6:33:30would renew my objection this is a
6:33:32regulatory Witness we testified about
6:33:35regulatory processes and not the
6:33:36relationship between the two
6:33:38companies so noted but uh overall uh
6:33:43again Mr pette if he's outside his
6:33:45expertise we'll say
6:33:47so Mr Horman keep
6:33:51going um do you think a joint study
6:33:53would be
6:33:55helpful again without more specifics of
6:33:58of what would be included in such a
6:33:59study I can
6:34:01opine okay thank you I'll I'll move on
6:34:03to my next subject matter uh area which
6:34:06is gas storage inventory costs or
6:34:10gsic um are you familiar with the firk
6:34:12uniform of
6:34:14accounting at a high level yes and is
6:34:17that something that could be possibly
6:34:19better um ask to Mr fedus yes
6:34:25okay and please uh just defer me to
6:34:29witness fedus if if you can't answer
6:34:31this but does the company apply the FK
6:34:33definition of current asset to
6:34:37gsic I'm sorry that's probably a better
6:34:39question for Mr frus okay I'll move on
6:34:42to my next question then um would you
6:34:46agree that regulatory assets that
6:34:49receive a return at whack are typically
6:34:51those that are expected to be recovered
6:34:53over a longer period let's say over a
6:34:56year through customer
6:35:01rates could you rephrase the question
6:35:03fore or or restate it
6:35:05rather yes uh would you agree that
6:35:08regulatory assets that receive a whack
6:35:11return are typically those expected to
6:35:13be recovered over a longer period over a
6:35:17year I would answer slightly differently
6:35:20that the company receives a whack return
6:35:22on its Assets in in rate base um
6:35:26generally and so some of those are
6:35:27short- lived assets some of those are
6:35:28longer lived assets It's a combination
6:35:30it reflects the the company's way
6:35:33weighted average cost of capital by
6:35:36definition okay would you agree that
6:35:38it's generally Good Financial policy to
6:35:40finance short-term or temporary assets
6:35:43with short-term sources of
6:35:46financing I would
6:35:50disagree um I'd like to turn my turn
6:35:52your attention to your direct testimony
6:35:54uh hearing exhibit
6:35:56116 at page 49 uh Miss Frederico if we
6:36:00could bring that up
6:36:02please where's it Miss conle I'm
6:36:05sorry no you were right Miss federo
6:36:08thank you Miss what page did you say 49
6:36:10uh 49 uh lines uh 16 through 19
6:36:15please okay Mr P uh can you read the
6:36:18sentence starting with providing a
6:36:20return on gas storage
6:36:24inventories yes it says providing a
6:36:26return on gas storage inventories that
6:36:28is below the actual cost of financing
6:36:30those assets however short-term in
6:36:32nature they may be
6:36:34ultimately provides a financial
6:36:35disincentive to developing and relying
6:36:37on those assets
6:36:39fully thank you in regarding the use of
6:36:42financial disincentive here uh will the
6:36:45company reduce the overall amount of
6:36:47physical stored gas if the return
6:36:49remains at at the short-term debt rate
6:36:52compared to the whack rate that's not
6:36:54what the company's saying here it's
6:36:56simply noting that there's a a penalty
6:36:59uh with this type of a treatment
6:37:01afforded to to gas storage assets that
6:37:04it's not commensurate with the actual
6:37:06cost the company inures to finance those
6:37:08assets so the company wouldn't purchase
6:37:11less gas if the gsic earns a short-term
6:37:15debt rate correct I can't say at this
6:37:18time whether we purchase more or less
6:37:20I'm just noting that there's a penalty
6:37:22and you know as we conduct our business
6:37:23we'd have to take that penalty into
6:37:25account whether or not that would
6:37:26actually change the purchasing behavior
6:37:29um I I can't comment on this
6:37:32time okay tto Rico we can take this
6:37:34exhibit down thank
6:37:37you uh Mr P isn't it true that a whack
6:37:41return is generally higher than a
6:37:42short-term debt
6:37:45return I'm sorry I was distracted the
6:37:47lights came off in here no problem did
6:37:49the same to me uh isn't it true that a
6:37:52whack return is generally higher than a
6:37:54short-term debt
6:37:56return Yes and the gsic gets recovered
6:38:01to the gas cost adjustment correct
6:38:04yes currently although my testimony
6:38:06talks about how in the past it used to
6:38:08be an element of of Base
6:38:11rates okay and the GCA is a component of
6:38:15a customer's monthly bill correct yes so
6:38:19wouldn't a whack return create higher
6:38:21bills to customers as compared to
6:38:23short-term debt
6:38:27return if we think about it all else
6:38:30equal a short-term debt return compared
6:38:32to our wack return on any given asset
6:38:35will produce um a higher cost when a
6:38:39when a whack return is applied I would
6:38:43agree okay Miss ferto Rico can we
6:38:45actually bring up uh hearing exhibit 116
6:38:47again and go back to page 49
6:38:53please okay now if you could scroll up
6:38:56to lines five through 11
6:39:03oh I apologize this is actually
6:39:06uh I I meant to say he in exhibit 135 I
6:39:09apologize you're a btle
6:39:22testimony same page 49 and
6:39:27135
6:39:29um I could just have one moment
6:39:43u m fed could we take this exhibit down
6:39:45please actually I'm gonna ask Mr PK a
6:39:48question before referring to his
6:39:49testimony uh do you remember Mr PK
6:39:52talking about uh various reasons uh for
6:39:58um uh in disagreement with the staff's
6:40:01recommendation to continue GS
6:40:05IC disagreement with which
6:40:08recommendation specifically I'm
6:40:10specifically referring to uh your
6:40:13recommendation uh related to policy in
6:40:16which you state um in light of the
6:40:19companies the commissions Colorado
6:40:22lawmakers and customers more acute
6:40:24interest in service reliability and rate
6:40:26stability in light of extraordinary
6:40:28storms and gas prices uh witness in
6:40:31recent years do you remember recall that
6:40:34testimony yes okay are you generally
6:40:36familiar with winter storm Yuri yes in
6:40:41your opinion would winter storm Yuri
6:40:42qualify as an extraordinary
6:40:45storm yes and that storm occurred in
6:40:49February 2021 correct
6:40:52correct in the company's G last gas rate
6:40:55case proceeding number
6:40:5822- 0046
6:41:0146g uh was litigated in 22
6:41:05correct
6:41:07correct is it your understanding that
6:41:09the commission approved short-term debt
6:41:11return for gsic during the company's
6:41:13last G gas rate case that's
6:41:17correct so would you agree with me that
6:41:19part of the company's requests to alter
6:41:21the recovery of gsic is policy
6:41:27based yes it I in my testimony I'm
6:41:30making policy Arguments for why a
6:41:33short-term debt return um is not as
6:41:36appropriate as a whack
6:41:38return are you aware of any federal
6:41:40state or commission policies that would
6:41:42necessitate revisiting the company or
6:41:45the commission's uh decision in the last
6:41:47rate case on
6:41:49gsic I would object to on the grounds it
6:41:52calls for a legal
6:41:54conclusion if I may respond or
6:41:59chair can you just rephrase please yes
6:42:04uh Mr P are you aware of any federal
6:42:06state or commission policies that would
6:42:08necessitate revisiting
6:42:16gsic um not that would necessitate doing
6:42:19so right thank
6:42:23you I'm not going to turn your attention
6:42:25to um decoupling and the company has
6:42:29proposed a full decouple decoupling
6:42:31mechanism based on revenues in this
6:42:34proceeding
6:42:35correct yes and that is the company's
6:42:38proposed Revenue stability
6:42:40mechanism
6:42:42yes and if we could pull up uh Mr PK's
6:42:45rebuttal testimony uh hearing exib at
6:42:49135 page 32
6:42:58please okay if we could
6:43:04do you recall let's see here do you mind
6:43:07scrolling down a little bit Miss
6:43:08Federico thank you I'm looking at lines
6:43:1010 through
6:43:1313 Mr PK do you recall stating in your
6:43:15Bal testimony that the
6:43:18RSM is an important tool to consider as
6:43:20the company faces a potential Financial
6:43:22disincentive associated with decreased
6:43:25sales volumes from policies such as
6:43:27conservation and beneficial
6:43:29electrification yes that's what it
6:43:32says so is it the company's position
6:43:34that the company currently lacks
6:43:36sufficient Financial incentive to
6:43:37implement programs from remoting
6:43:39conservation and
6:43:42be I would answer differently than that
6:43:45the RSM as as Mr aan was was discussing
6:43:50um previously really tries to align the
6:43:53company's Financial interests and those
6:43:55of the the public policy interests of
6:43:56the state and that doesn't mean we're
6:43:58not going to do everything we can to
6:44:00implement DSM programs to implement new
6:44:02clean
6:44:04programs that were just recently
6:44:05approved but it's helpful when we're all
6:44:09GR in the same direction that there's no
6:44:11potential conflicts once we think about
6:44:13all the company's employees all the
6:44:15programs at hand all the interactions we
6:44:17have with customers potential customers
6:44:20and stakeholders that that we all
6:44:22pushing and aligned in the same
6:44:25direction Mr P I appreciate your answer
6:44:28but I don't think I heard a yes or
6:44:32no would you mind restating the original
6:44:34question sure is it the company's
6:44:37position that the company lacks
6:44:39sufficient Financial incentive to
6:44:41implement programs promoting
6:44:43conservation and beneficial
6:44:45electrification I'm saying it's not a
6:44:47simple yes or no
6:44:50answer if it was no if it's no why is
6:44:54the RSM
6:44:57necessary objection he did he said it's
6:44:59not a simple yes or no answer sure I'll
6:45:02move on
6:45:04and just for clarification though the
6:45:06company does consistently earn a bonus
6:45:08for its performance under the DSM
6:45:11plan yes that's correct we've been
6:45:14achieving above our Target for several
6:45:16years now I
6:45:18believe the company generally has been
6:45:20able to meet or exceed its company or
6:45:22commission approved DSM targets is that
6:45:25right yes yes as I just did and one
6:45:28component of the company's DSM incentive
6:45:31structure is the acknowledgement of loss
6:45:34revenues or
6:45:35DSM
6:45:37ALR that is one component
6:45:40yes so in other words the DSM
6:45:44ALR already compensates the company for
6:45:46every therm lost as a result of
6:45:48conservation and
6:45:53electrification it compensates the
6:45:56company um at a certain level for therms
6:46:02saved or concerned or
6:46:05conserved through DSM program
6:46:08specifically so doesn't the DSM ALR
6:46:11already remove any Financial
6:46:14disincentive associated with DSM
6:46:17conservation or be I would disagree with
6:46:21that Mr P have you reviewed staff
6:46:24witness Hagan's testimony in this
6:46:27proceeding yes I reviewed his answer
6:46:30testimony and are you generally aware
6:46:33that staff's primary recommendation is
6:46:35that the commission should uh reject the
6:46:38company's proposal to implement
6:46:40decoupling in this
6:46:42proceeding yes and he also has an
6:46:44alternative proposal um I would change
6:46:47some of the specifics of it if it were
6:46:48in
6:46:49flon you uh nearly answered my next
6:46:52question uh so is it your understanding
6:46:54that staff recommends in the alternative
6:46:57approving partial decoupling
6:47:01yes um and you're autal you
6:47:04testify uh in your ble you testify that
6:47:07staff's Al alternative recommendation
6:47:09for partial decoupling is not the right
6:47:12approach is that correct that is
6:47:16correct and I'm sorry Mr Frederico you
6:47:18can take this exhibit down thank
6:47:21you under uh the company's proposed RSM
6:47:25the company would calculate and apply
6:47:28RSM on a quarterly basis
6:47:30correct yes it would be on under three
6:47:33Monon increments that wouldn't exactly
6:47:36align with calendar
6:47:38quarters and while the company proposes
6:47:41an annual true up as part of RSM there
6:47:45would be no cap on increased adjustments
6:47:47to the RSM
6:47:49correct I disagree with that it the
6:47:52mechanism itself is naturally capped by
6:47:55the fact that we'd be
6:47:57recouping the um fixed cost approved in
6:48:02the prior for the most recent gas Ray
6:48:05case and no more no less from those Ray
6:48:07classes in
6:48:09question okay do you recall stating that
6:48:12RSM would have been impactful for
6:48:15customers in 2022 2023 because of colder
6:48:19than normal temperatures and higher than
6:48:21normal gas commodity prices that's
6:48:25correct okay and if that situation were
6:48:28to occur again would your position be
6:48:31that RSM would be impactful because it
6:48:33would provide a refund to those rate
6:48:36pairs yes it would have if it had been
6:48:39in place during that heating
6:48:41season but isn't it true in that
6:48:43situation the over recovered amount
6:48:46doesn't provide a refund until the next
6:48:49quarter it provides a refund in the next
6:48:52quarter that's um that takes 12 months
6:48:57um to fully be returned or surcharged to
6:49:00customers so would it be fair to say
6:49:02that the refund doesn't provide
6:49:04short-term relief in that situation if
6:49:07it's spread over 12
6:49:08months well I would say given that it
6:49:11starts within three
6:49:13months that's pretty timely it's much
6:49:16more timely than an annual mechanism
6:49:18which we think is one of the benefits of
6:49:20of this
6:49:21proposal all right thank you um and now
6:49:24like to turn your attention to uh your
6:49:27rebuttal testimony heent exhibit
6:49:30135 uh page 37
6:49:33line
6:49:4211 Mr PK do you see where you state that
6:49:45staff is inconsistent on its approach to
6:49:48decoupling yes are you f uh you already
6:49:52testified that you're familiar with the
6:49:54company's last gas rate case
6:49:58correct uh yes I was not involved in
6:50:00that case but I'm familiar with it okay
6:50:02okay well are you aware that staff
6:50:04advocated that any approved decoupling
6:50:07mechanism should be a partial decoupling
6:50:12mechanism in the last gas rate case
6:50:15yes okay but as an example of staff's
6:50:19supposed inconsistency here you cite an
6:50:21electric decoupling pilot from 2016 in
6:50:24which staff recommended full decoupling
6:50:27correct correct and you're familiar with
6:50:30the electric decoupling pilot because
6:50:32you were witness for staff correct
6:50:35correct so you recall that the company
6:50:38in that proceeding I'm talking about the
6:50:41electric pilot advocated for partial
6:50:43decoupling
6:50:50correct yes the company's proposal in
6:50:53that proceeding
6:50:54was for partial
6:50:58decoupling So based on the company's
6:51:00position of partial decoupling for the
6:51:02electric pilot and the company's
6:51:04proposal here for full decoupling isn't
6:51:07the company's approach to decoupling
6:51:09inconsistent we've tried to take into
6:51:12account the feedback heard from other
6:51:14parties as well as the commission as
6:51:16these decoupling conversations have
6:51:18evolved in recent years and and we've
6:51:20taken that that feedback into account
6:51:22into this this latest proposal here in
6:51:24this Ray
6:51:26case but would it be more consistent for
6:51:28the company to roll out a decoupling gas
6:51:31pilot like it did with the electric
6:51:33pilot proceeding instead of the
6:51:37RSM no that would not take recent
6:51:39feedback into
6:51:43account I could just have one
6:51:46moment
6:51:51yep Mr PK thank you for your time I have
6:51:54no further questions uh thank you Mr
6:51:57hormon
6:51:59um Miss uh Brahma what are we doing with
6:52:04Mr matley can we start off uh
6:52:08Tuesday actually I'm going to answer
6:52:10your question shair that's all right all
6:52:12right sorry um first with a bit of good
6:52:16news a company has decided to wave its
6:52:17Cross of witness La Mer so we wanted to
6:52:20make sure we pass that along before the
6:52:22weekend uh commissioner uh plant any
6:52:25questions for Mr L no I do not uh
6:52:29commissioner
6:52:30Gman hit me a little B surprise I don't
6:52:33know 100% I think it's probably fine all
6:52:37right we'll uh take that up first thing
6:52:39on
6:52:41Tuesday okay um let me move on then to
6:52:45uh Mr mle's uh testimony a couple of
6:52:48issues that we wanted to discuss with uh
6:52:51with the Commissioners um first with
6:52:53respect to your request regarding his
6:52:55hearing exhibit 123 attachment
6:52:59ra4 and the request that we make it uh
6:53:03public rather than
6:53:04confidential um the company has
6:53:07determined that it will remove the a
6:53:09subject to the commission's approval we
6:53:11can remove the confidential gas forecast
6:53:13and we propose to replace that forecast
6:53:16with actual gas costs to date and
6:53:19escalate those actual gas costs with a
6:53:21user defined escalation rate which will
6:53:24be defaulted to 2% to align with the
6:53:27generic escalation rate included in the
6:53:29model if that is acceptable to the
6:53:32commiss we can prepare that public
6:53:34version and we would uh propose to file
6:53:38it in E filings on Monday so that the
6:53:40commission and parties can see it uh
6:53:43before hearing uh on Tuesday and we can
6:53:46email it to the parties as well and then
6:53:48we can formally deal with admission at
6:53:51the hearing on on Tuesday that'd be
6:53:54great thank you um there will that will
6:53:57also require did you have comments on
6:54:00that I just want to confirm that'll be
6:54:02an executable version but you'll provide
6:54:04my
6:54:06okay um and there will be some flowr
6:54:09changes to Mr Manley's testimony as a
6:54:12result of the of the changing numbers so
6:54:14there may be some some changes to make
6:54:17there um there's one other matter that
6:54:20we discovered yesterday in uh with
6:54:23respect to Mr Manley's supplemental
6:54:25direct
6:54:25testimony um while he was preparing
6:54:29again I said it was yesterday uh his
6:54:31attachments ra 1 ra2 and
6:54:35ra3 which are all the revenue and
6:54:38revenue requirement analyses associated
6:54:40with those select new business projects
6:54:42that we've been discussing during the
6:54:43hearing including Canyons C Creek Canyon
6:54:46and uh uh Rampart Range um had an error
6:54:49in the calculation of depreciation
6:54:51expense uh those attachments were
6:54:53calculating only the life portion of
6:54:56depreciation expense and not the cost of
6:54:58removal portion of depreciation expense
6:55:01so we also plan on correcting those
6:55:03attachments as as well uh we propose to
6:55:07undertake the same process and file
6:55:09those provide them to the parties and
6:55:11then we can deal with those also on
6:55:14Tuesday but we um it's a little more
6:55:16than just a simple mathematical
6:55:18correction we noticed a subsid error so
6:55:20if that's acceptable to the commission
6:55:23we're not asking for any action on the
6:55:24exhibits right now but thought uh it
6:55:27might be a bit more accurate uh to
6:55:29include that input if you could file
6:55:31that on first thing on Monday I do have
6:55:34questions for him on those exhibits and
6:55:37uh if it's I and I I would like to see
6:55:41them before Tuesday if possible yeah
6:55:44that's our plan to file all the things
6:55:46that I mentioned on Monday understanding
6:55:49we'd also have to have them in our box
6:55:51and then formally move for admission and
6:55:53deal with them properly at hearing right
6:55:56uh um that'd be great it would not be
6:55:59part of the record on Monday but at
6:56:00least it would let people uh look at it
6:56:03and prepare assuming that's okay with
6:56:05commission counsel as well and the
6:56:08parties
6:56:10yes I saw you come on so I thought I
6:56:12better ask you got you you came to the
6:56:16same
6:56:17resolution thank
6:56:21you anything else no I think that's all
6:56:24anything else
6:56:26nope uh Miss krampton I saw you had your
6:56:29uh video on did you have uh a final
6:56:32matter before we
6:56:35adour I had just um been ready for
6:56:39cross- examination so just to clarify
6:56:42are we picking up with Mr matle on
6:56:44Monday because of scheduling or I'm
6:56:46sorry on Tuesday or uh will it be Mr I
6:56:51think we should finish with Mr mck pette
6:56:54and then go to Mr matley and then go to
6:56:56Mr uh frus would that work for you for
6:56:59the company we would actually like to
6:57:02fit Miss Bley in there somewhere on
6:57:05Tuesday so I would suggest that Mr arus
6:57:08go last and I don't think it matters to
6:57:10us us whether Mr matley or Miss bulkley
6:57:13go after Mr K it's at the preference of
6:57:16the Comm so let's can we do p pette
6:57:21matley bulley fedus that works that
6:57:25works for us and uh we're a little
6:57:28behind would you guys be uh open to
6:57:31starting
6:57:32uh uh at maybe uh 8:30 or should we just
6:57:37stick to 9 is it's too inadequate notice
6:57:41you for the company you read our mind we
6:57:43were feeling like we're a little bit
6:57:44behind as well uh and we'd be happy to
6:57:47start at
6:57:488:30 uh commissioner Gman commissioner
6:57:51plant um not a problem for me to start
6:57:54at 8:30 and I know we'll wrap up very
6:57:56quick so I did just want to say um Mr
6:57:58Mar penko I appreciate you all looking
6:58:01into that issue today with regard to the
6:58:04confidentiality and I think coming to a
6:58:06reasonable resolution to use some
6:58:07generic values there to um really
6:58:10enhance the transparency here so I
6:58:12appreciate it yeah thank you yeah I'd
6:58:14I'd Echo that so there's a commission
6:58:16vote expressing our
6:58:18appreciation uh commissioner plant it's
6:58:22unanimous
6:58:23um uh I yeah I have another meeting but
6:58:27I can try and uh move that and start at
6:58:298:30 on we we can start at 9: if it's uh
6:58:32I don't want to hold things up we'll
6:58:33we'll all right 8:30 so uh 8:30 and if
6:58:38for some reason uh we have a problem
6:58:41with il Legal Assistance or with councel
6:58:44uh we'll circulate uh a
6:58:46notice um any other final monels uh
6:58:50before we adjourn for the
6:58:52weekend no we appreciate the kind words
6:58:55and uh we look forward to seeing
6:58:56everyone on Tuesday and we will make
6:58:57those filings as soon as possible on
6:58:59Monday uh greatly appreciate at uh 8:30
6:59:04on uh Tuesday thanks everybody have a
6:59:08good weekend thank
6:59:31you for

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