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YouTube transcript (ZMhTGV5wuz4) — Transcript

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32:23good morning we're back in uh 4
32:29al-49 G the Public Service Company in
32:32Colorado G Ray case uh any uh
32:37preliminary matters Miss Samar
32:40PCO uh chair good good morning
32:43Commissioners uh we wanted to confirm
32:44the order of witnesses that you recited
32:46late
32:47Friday if
32:49you yeah my understanding is that it's
32:54uh Mr
32:56pette um m Mr matley M
33:00bulkley uh and then Mr fedus is that
33:03consistent with your understanding it is
33:06we just wanted to reconfirm uh what
33:08order we had Miss bulley and so thank
33:12you uh I think we've uh in receipt of
33:16the exhibits uh we requested the other
33:18day so thank you uh for that greatly
33:23appreciated um commissioner Gan
33:26commissioner plant any preliminary
33:29matters before we jump back to Mr
33:32pette nothing commissioner
33:36plant uh I'm gonna need to uh take a bit
33:40of a break after lunch so uh
33:42commissioner Gman thanks uh for your
33:44willingness uh to lead us forward for uh
33:47a couple hours this afternoon uh greatly
33:51appreciated uh Miss Samar PCO any uh
33:54other preliminary matters or should we
33:56jump back to uh Mr pette uh not from the
34:00company we thought we would address Mr
34:02matti's exhibits when we call him
34:06uh uh with that uh Mr
34:11pette I just remind you you're still uh
34:15under
34:17roof um Miss krampton I have uh I think
34:2275 minutes so you're you're up
34:27thank you uh good morning Mr P how are
34:31you I'm well how are you good thank you
34:35um and Mr P and just for the record I'm
34:39Kate krampton I'm an attorney with um
34:42the Attorney General's office
34:43representing UCA you and I have met
34:46before correct
34:48correct and Mr P uh your position at ex
34:53uh I'm sorry public service and and your
34:57um position as you testify here today is
34:59director of regulatory Administration is
35:01that correct yes and how long have you
35:04served in that
35:06role for about a year and a
35:09half and I think you mentioned this um
35:12last Friday during your
35:14examination with staff but did you have
35:17an opportunity to hear the testimony of
35:19your colleagues last week yes I
35:23did and um specifically did you hear
35:26your colleague Mr B
35:28testify
35:31yes and did you have an opportunity to
35:33hear Mr Burman acknowledge that from a
35:36Colorado state government perspective
35:39affordability is a critical public
35:41interest
35:43issue yes there was a a long discussion
35:46on affordability okay and would you
35:48agree with your colleague Mr Burman that
35:50affordability is a critical issue for
35:52the
35:54state yes and I would say that extends
35:56Beyond Colorado I think that's important
35:58for all customers of utility services no
36:01matter where they live okay and and not
36:04just a state concern right that's a
36:06concern of this
36:08commission
36:14yes and you talked about affordability I
36:17think in in all of the testimonies you
36:19submitted in this proceeding is that
36:21right correct indirect supplemental in
36:25direct and supplemental direct and in
36:27robol
36:29and it's the company's position that the
36:31concept of
36:32affordability involves a more complex
36:37consideration than um just whether
36:39there's a cost increase to customers is
36:41that
36:44right yes I believe one of my
36:46testimonies makes that exact point okay
36:50and if it's helpful if we could pull up
36:52here and exhibit uh 116 Mr P's direct
36:57testimony
36:58believe this is at
36:59page
37:12seven I'm sorry I think that citation is
37:15not correct but um Mr P what you what
37:19you talked about in your direct
37:20testimony we can take that down thank
37:22you um is that there are additional
37:25considerations regarding a affordability
37:28from the company's perspective um in
37:31particular the fact that the utility has
37:33an obligation to provide safe and
37:36reliable service correct that's one of
37:38the factors
37:40yes um and I think and I'm
37:43sorry if we could pull up here in
37:46exhibit 116 and go to page 21
37:54please then if we could just scroll down
37:56to lines 12 through
38:0316 and here Mr pqu you list some of
38:06those additional considerations sort of
38:08adding to that complexity surrounding
38:11the discussion of affordability is that
38:13right yes okay and you knowe um as we
38:17discussed the obligation of the utility
38:19to serve right
38:24correct um you also note that part of
38:27this complexity is that some customers
38:30within a single rate class are are not
38:32in the same Financial
38:35circumstances yes that's correct okay
38:38and then another Factor you list on line
38:4016 is that public service in the
38:42company's opinion provides excellent
38:45value via the services its renders is
38:48that right
38:50yes uh you do not list in this
38:52discussion of complexity
38:55considerations regarding affordab ility
38:58uh the more than doubling of shareholder
39:00dividends over the last 10 years
39:04correct that was not mentioned in this
39:06list no and likewise in this list um you
39:09do not
39:11discuss um as part of this complexity
39:15considerations of any shift in state
39:18policy with respect to a business's us
39:20usual approach to the company's natural
39:23gas system correct
39:30uh I don't think that's correct I think
39:32between my testimony and Mr burman's
39:34testimony we we talk about how at the
39:37the beginning of this transition on on
39:38the gas utility of reducing the carbon
39:42footprint um and and that that brings in
39:44affordability Dimensions as well okay
39:48and understanding that that um shift in
39:52state policy regarding the natural gas
39:54system it's just not a factor you list
39:56here in this portion of your testimony
39:59correct yes it's not listed here but it
40:01is an important Dimension here okay
40:04thank you if the commission approves
40:07Public Services proposals from its
40:09rebuttal
40:10testimony you would agree that that
40:12would result in an increase in base rate
40:14Revenue correct I'm sorry I missed the
40:17first part of your question could you
40:18restate that if the commission approves
40:21Public Services proposals from its
40:24rebuttal testimony that will result in
40:27in an increase in base rate Revenue in
40:29this case is that right yes that's
40:33correct and if the commission approves
40:36Public Services proposal from its
40:38rebuttal it will also in result in an
40:41increase in public services gas cost
40:44adjustment revenues if all other
40:46components that make up the GCA are held
40:48constant is that
40:52right I'm sorry I lost you there m
40:55Crampton that what the compan proposing
40:58in this proceeding does not relate to
41:00the gas cost adjustment okay if base
41:04rates are increased and holding all
41:06other V variables constant Public
41:09Services gas rates for its rate payers
41:12becomes less affordable on an objective
41:14basis is that right yes all else equal
41:18if gas commodity costs increase and over
41:21time that would flow into the the
41:22company's gas cost adjustment or GCA
41:26which would increase uh the final rates
41:29that that customers face yes okay and
41:33from a customer's perspective if a cost
41:35increase means that the customer cannot
41:37afford their bill then to them the
41:40utility service is unaffordable
41:46correct yes in that scenario for that
41:49particular customer yes if someone
41:51cannot afford their bill it's it's not
41:55affordable and would you agree
41:58um that a customer is a good source of
42:01information to determine whether their
42:04utility rate is
42:07Affordable I think that's the the
42:09challenge that's been tasked to the
42:12company in the energy and security
42:14working group is working with
42:15stakeholders to talk about these exact
42:17questions that affordability can be very
42:20subjective that there's not just one way
42:22to look at it there's a whole bunch of
42:24different metrics whole bunch of
42:25different lenses to to view that
42:28question and we're we're trying to
42:30answer that in a parallel process here
42:33okay and I'm glad you mentioned that
42:35we'll come back to the affordability or
42:37the energy insecurity uh working group
42:39in a few
42:41minutes Mr P customers are are not only
42:45negatively impacted by increase in base
42:47rate revenues but also by periodic
42:50increases in all of the other um expense
42:54categories or any riders that may be
42:56added to their bill is that
42:58right yes it's not just base rates that
43:01affect a customer's Bill okay and did
43:05you hear um Mr burman's testimony last
43:08week that approximately 72% of Public
43:13Services gas customers are also Public
43:16Service Electric
43:20customers uh I don't recall that exact
43:22statistic but that sounds generally
43:25correct okay and so for approximately
43:2972% of of Public Services gas
43:32customers they not only experien rate
43:36increases when their gas rates go up but
43:38they also have experienced rate
43:40increases when their electric rates go
43:42up as well is that
43:44right for our dual customers that is
43:49correct and the concern about
43:52affordability um we mentioned that you
43:55talked about it in your testimonies
43:58uh this concern was also raised in
44:00several of the intervenor testimonies in
44:03this case is that right which concerns
44:06specifically concerns about
44:08affordability yes this topic was raised
44:11in in several pieces of teston okay and
44:14if we could I'm going to refer to a few
44:16of them so I think it would be helpful
44:17if we could go to hearing exhibit
44:20135 at page 22
44:25please and if we could just scroll down
44:27to about line
44:33eight and Mr P this is this is your
44:37rebuttal testimony where you discuss the
44:41intervenor testimonies that address
44:44affordability concerns is is that right
44:47yes it's a very high level summary of
44:49some of the points okay made by
44:52interveners okay and um one of the
44:56interveners that you know if we could
44:58actually just keep scrolling down a
45:00little
45:02bit um down at L27 Mr P you dedicate a
45:08bullet point um to peblo mayor uh
45:12Heather Graham who filed answer
45:15testimony
45:18um about affordability for peblo
45:22customers is that right
45:27yes I believe that was the focus of that
45:30testimony okay and in her test and you
45:33reviewed all these testimonies before um
45:37providing this highle summary
45:40right
45:42yes and mayor Graham testified that not
45:45only does peblo face a potential near
45:4910% gas increase from public service in
45:51this case but that their electricity
45:54provider Black Hills Electric is also
45:57proposing to increase their electri
45:59electricity rates by
46:0218% you recall that I don't recall that
46:05line
46:06specifically if we could pull up heuring
46:10exhibit
46:12900
46:14um and it'll be bottom of page three top
46:18of page four
46:38and Mr P do you do you recognize this as
46:41the testimony of of Mayor Heather Graham
46:43that you reviewed prior to drafting your
46:46rebuttal testimony yes okay and mayor
46:50Graham notes the concern about the The
46:53Proposal here for a 10% increase for gas
46:57as well as the proposal from Black Hills
47:00to increase electric rates by 18%
47:04correct yes that's what the testimony
47:08States
47:11um
47:13and in her testimony mayor Graham
47:16discusses affordability programs and
47:20rate
47:21mitigations uh rate mitigation efforts
47:24available but indicated that they do not
47:26Rel leave the financial pressures caused
47:29by the increased energy cost do you
47:31recall that if you could direct me to
47:34that line that would be helpful sure if
47:35we could scroll down to page
47:40five still in 900 right yep thank
47:48you okay and Mr pqu looking at the uh
47:52page five those lines four and five
47:57here mayor Graham talks about rate
47:59affordability programs or rate
48:01mitigation
48:03efforts
48:06um and indicating that these these costs
48:08to customers are are still too much um
48:11for the city and its residents is that
48:13right that's what the testimony
48:17states did
48:19you in addition to these testimonies um
48:23that you
48:24mention uh in your rebuttal test having
48:27reviewed did you review the public
48:29comments filed in this
48:32case uh yeah I believe I reviewed many
48:35of them okay um and you said many
48:40there's there's hundreds of public
48:41comments filed in this proceeding is
48:43that right that's
48:45correct um and from your review what you
48:48saw is that customers are struggling to
48:50afford the continuous increases in
48:53energy costs is that right that's one of
48:56the points made in public comment there
48:58have been other points made as well okay
49:02um if we could pull up hearing exhibit
49:06502
49:20please and Mr P um hearing exhibit 502
49:24that's the answer testimony of use CA
49:27witness Carrie uh cooking doll is that
49:29correct yes okay and you you reviewed
49:32this and I think discussed it in your
49:34rebuttal testimony is that right yeah
49:37one of the summary bullets
49:39discusses okay just um and Mr cook
49:43andelle summarized over the over 700
49:47public comments uh filed in this
49:50proceeding in his testimony is that
49:53right
49:55yes um and in his testimony if we could
49:58go to page
50:00six bottom of page six top of page seven
50:10please um and Mr P in Mr candell's
50:15testimony he observed that a commonly
50:18expressed view in the comments is that
50:21utility rates have increased too fast
50:24over the last few years and are
50:26unaffordable is that
50:29right it's it seems like lines 20 and 21
50:32say that although it's a little cut off
50:34but yes it appears to say that okay
50:36thank you
50:39um
50:40and if we could pull up hearing exhibit
50:44502 attachment kk2 please
50:57and if possible to maybe zoom in just a
51:00little
51:02bit oh perfect thank you and Mr P the
51:08affordability concerns that Mr candell
51:11summarized are not only expressed by
51:13those customers that would be considered
51:16lowincome households but also those that
51:19do not qualify for low income assistance
51:22as well is that right it's hard to tell
51:25from just the the comments right people
51:28are not entering their income
51:29information there's no way to verify
51:31that information these are just general
51:33comments from the public so I would
51:35presume that it would be a mixture of
51:36income qualified and and non-income
51:39qualified customers okay and if it's
51:41helpful if we could go to page three of
51:43this attachment
52:01um and if we could just scroll down to
52:04um the road from um commenter Alicia
52:08Nicks it's at the bottom of the screen
52:10right
52:14now okay and um Mr
52:18P this comment and this was one of the
52:21comments um included with Mr candell's
52:24testimony that you
52:27reviewed if we can go through this um
52:30and just kind of looking at the the
52:31bottom part of Miss nix's
52:35comments Miss Nix noted in her comment
52:38to this commission that she does not
52:40qualify for any assistance because they
52:42make too much
52:45money for any kind of assistance and so
52:48they walk around in sweatshirts socks
52:51slippers Etc in the winter and are
52:54uncomfortable in the summer during sleep
52:57hours as they turn off their air
52:58conditioner do you see
53:01that yes okay and she would be an
53:04example of someone who um doesn't
53:08doesn't meet any eligibility from her
53:10statement doesn't meet any eligibility
53:12for assistance um but is still
53:14struggling to afford these rates
53:17correct that's the statement made
53:21okay um and if we could scroll down to
53:23page 11 as well
53:30and then um Mr P just focusing your
53:35attention on this third
53:38comment
53:40um from Miss I think it's deir from
53:44Arvada do you see
53:47that yes the third line down yeah yes
53:52and Miss
53:54dahir notes and I'm again kind of
53:57looking at this bottom part of the of
53:59the
54:00comment is that she and her
54:03husband aren't on a fixed income like
54:06many
54:07retirees but they still struggle to pay
54:09their utility bills is that right that's
54:14the statement
54:16made and the statement made in statement
54:19that you
54:20reviewed um as part of your work
54:23reviewing this public comments in this
54:25case correct
54:32yes um thank you we can take uh here in
54:36exhibit 52 kk2 down
54:39please and these examples we went
54:42through these are just two examples of
54:44the hundreds of comments that were filed
54:46with the commission that are
54:48contesting Public Services request for
54:51another multi-million dollar rate
54:53increase correct
54:56yes it's one of the themes in those
54:58comments that there are also other
54:59themes on the importance of gas service
55:02um the importance of optionality for
55:05customers um things like that
55:08okay
55:10um and if we could go back to hearing
55:13exhibit uh 135 at page
55:2022 and just looking at these bullet
55:22points Mr P all of these interveners
55:26city of peblo
55:28UCA trial staff they all believe it was
55:32appropriate for the commission to
55:33address affordability concerns in this
55:37rate case proceeding
55:44correct I don't think I agree with that
55:47um each of these testimonies talks about
55:50affordability in a different
55:53sense staff talks about it in context of
55:56the RDS proposal right we were just
55:58going through um the UCA Witnesses
56:01testimony which is summarizing public
56:03comments everyone saying affordability
56:05is an important subject I think everyone
56:07is differing on on what that
56:09means okay um and and I'm glad you said
56:12that so the these are all testimonies
56:14filed by interveners In This proceeding
56:17correct yes and some of these
56:20testimonies would it be fair to say
56:22maybe raise just concerns about
56:25affordability generally whereas other
56:28portions of testimonies address specific
56:32aspects of the company's proposal that
56:34implicate affordability
56:37concerns yes
56:41okay um but they all raised that in
56:43connection with the commission's
56:45decisions in these in this proceeding
56:47correct as have as excuse me as has the
56:51coment okay if we could go to page 23 of
56:56this exhibit
57:00please and in fact with respect to that
57:06statement and by contrast to these other
57:09interveners the company believes it's
57:11not appropriate for the commission to
57:13use the rate making process to
57:15explicitly reduce or disallow costs in
57:18light of affordability concerns
57:21correct yes that's my testimony okay um
57:26instead the company believes the best
57:28approach to affordab to address
57:30affordability is through programmatic
57:32offerings that offer direct payment
57:35assistance to customers is that
57:38right yes direct assistance to customers
57:41can either mean um support on monthly
57:44bills or specifically targeting on on
57:47other programmatic offerings that the
57:48company has be it weatherization
57:50programs offered by other agencies
57:53Energy Efficiency programs we now have
57:55clean Heat programs being layered on top
57:57of this there's a whole lot of offerings
57:59that can help
58:01customers um on their monthly bills you
58:04know including
58:07um um budget billing and other
58:09programmatic offerings okay and um you
58:14kind of got into this but these direct
58:16assistance these could be the payment
58:19bill assistance from from um nonprofit
58:22and government a agencies correct as
58:25well as from the company that's correct
58:27okay um and I think you mentioned
58:30increased EP and GAP funding is that
58:33right yes that is one of the major
58:36routes through which the company
58:37provides direct bill assistance to to
58:40customers okay then I think you also
58:42mentioned targeted or rear repayment
58:44programs
58:47yes you indicated that in your testimony
58:51um just I think at the bottom of this
58:53page around line 13
59:01and I'm sorry this would be page
59:0821 that the company welcomes while the
59:12company doesn't feel that uh Revenue
59:15requirement determinations are the
59:18appropriate Forum to consider
59:22affordability the commission or that the
59:24company welcomes discussion about
59:26affordability in both ongoing and future
59:29proceedings is that
59:31right yes that's correct That explicit
59:34disallowances based on affordability
59:37concerns is what the company is is not
59:40recommending here but of course we
59:42recommend continued discussion on
59:43affordability in this and other
59:45proceedings including through the energy
59:47and security working group and other
59:48future changes um to the company support
59:51programs that we might have in mind okay
59:54and if we could just scroll down to the
59:55footnotes here the proceedings that you
59:57mentioned in particular one of them is
1:00:00uh proceeding 22 m-
1:00:030171 all which concerns the imple
1:00:07implementation of Senate Bill
1:00:0921272 uh which is an equity proceeding
1:00:12is that right yes now to date that
1:00:16proceeding 22m 0171 all that does not
1:00:21yet involve any commission decisions
1:00:24regarding cost recovery
1:00:26with respect to affordability for
1:00:28customers
1:00:30correct not yet no it's been a
1:00:32miscellaneous proceeding and I believe
1:00:35there was a recently a decision um to
1:00:37open up our R making in light of all of
1:00:39this work okay and and that's kind of
1:00:42alluded to in that footnote 30 staff's
1:00:45Capstone report um and their
1:00:47recommendation to open rul making uh you
1:00:51would agree with me that as of today
1:00:53that rule making has not commenced
1:00:56correct not yet and that Ru making is
1:00:59not currently providing any rate relief
1:01:03uh for public service customers
1:01:08correct no not
1:01:13currently um these things that we've
1:01:16discussed um this Equity
1:01:19proceeding uh rule makings Direct
1:01:22Customer Assistance targeted aage
1:01:25programs
1:01:26these things are all part of what you
1:01:28call quote the
1:01:30ecosystem to support and address
1:01:34household energy costs is that
1:01:37right that sounds right if you could
1:01:39refer me to a specific piece of my
1:01:41testimony where I state that that would
1:01:43be helpful sure if we could go to
1:01:45hearing
1:01:46exhibit 122
1:01:57and I'm sorry this is
1:01:58your um here in exhibit 122 is your
1:02:01supplemental direct testimony is that
1:02:03right Mr P yes if I could just have a
1:02:07moment
1:02:37just reviewing my
1:02:41notes um if we could page
1:02:4621 lines uh 10 through 12
1:02:57Mr pqu this is where you you you sort of
1:02:59characterize all of all of
1:03:01these um things that we've discussed as
1:03:04as part of an ecosystem of support for
1:03:07energy household costs is that right yes
1:03:10that's
1:03:13correct part of the ecosystem that
1:03:15you've mentioned and I want to discuss
1:03:17with you is the energy insecurity
1:03:19working group is that right correct okay
1:03:23and the energy insecurity work group
1:03:26convened in response to uh the
1:03:30stipulation stemming from the company's
1:03:32last electric gase uh last electric rate
1:03:36case 22
1:03:38al-53 is that
1:03:40right yes that was the Genesis of the
1:03:44working group but I believe there were
1:03:46additional there was additional
1:03:47discussion and I believe an additional
1:03:49directive or two stemming from the
1:03:52company's most recent Phase 2 Electric
1:03:54rate case as well
1:03:56okay um and the phase one wrapped
1:04:02portion of the rate case wrapped
1:04:03approximately a little over a year ago
1:04:05is that
1:04:06right basically exactly a year ago yeah
1:04:09okay and then phase two I think was was
1:04:12litigated in December of 2023 and WRA
1:04:15shortly after that is that
1:04:18right
1:04:21yes
1:04:22and part of the work of this working
1:04:25group was um targeted to three if we
1:04:29could go to page 22 I'm
1:04:31sorry uh part of the work of this
1:04:35working group was targeted to three
1:04:37specific directives is that
1:04:41right that sounds right that I know that
1:04:43there were a few different directives um
1:04:46that that we working
1:04:47towards so might be more than three but
1:04:50but yeah there were a few we could
1:04:52scroll down to line 28 please
1:05:03um
1:05:06and I'm sorry page
1:05:1428 okay and and here Mr P you discuss in
1:05:18your um supplemental direct the working
1:05:20group having three D objectives first to
1:05:24develop a cons consensus estimate for
1:05:27the number of energy insecure
1:05:30customers second to conduct an outreach
1:05:33program to interview disconnected
1:05:34customers to better understand their
1:05:36circumstances and third to identify
1:05:39options and solutions to help further
1:05:42addressed energy uh insecurity is that
1:05:45right yes thanks for directing me to
1:05:47that to those lines yes that's all
1:05:50correct okay and the energy insecurity
1:05:53group was able to submit their first
1:05:55report regarding their work on May 7th
1:05:59of this year and filed into proceeding
1:06:0322-
1:06:05053e is that
1:06:07right
1:06:09yes and if we could pull up from UCA
1:06:13boox
1:06:14dcom what's been marked as hearing
1:06:17exhibit 521
1:06:33and just yes thank you um and if we
1:06:36could just scroll down to show the whole
1:06:39page um Mr pqu do you recognize this as
1:06:43uh do you recognize hearing exhibit 521
1:06:46as the report filed um on May 7th of
1:06:51this year from the energy in security
1:06:53working group yes I do
1:06:57and if we could just um go to and you
1:07:00recognize this from your work with that
1:07:02group is that right yes I've been
1:07:04actively involved in that group okay
1:07:06great um if
1:07:08we chairman I I would move to admit here
1:07:11in exibit 521 um in in the alternative
1:07:14I'd asked the court to take
1:07:15administrative notice of this document
1:07:18it was filed
1:07:20into um that other
1:07:22proceeding any objections no objection
1:07:26so uh so
1:07:29noticed if we could go to page seven of
1:07:32that
1:07:39report and um just kind of scroll to
1:07:42show most of the text on the page
1:07:46um and and Mr P this isn't um
1:07:50necessarily a specific reference but
1:07:53that first directive to develop a cons
1:07:55census estimate of the number of energy
1:07:57insecure
1:07:59customers um for that directive the
1:08:02working group was not limited to
1:08:04considering households that were
1:08:06potentially eligible for energy
1:08:08assistance
1:08:09correct yes it sound like you're
1:08:11referring to a specific line um on this
1:08:15page could you direct me there sure um
1:08:17just looking at that first paragraph the
1:08:20sentences starts
1:08:22importantly um there the report from the
1:08:25group that you're involved with said the
1:08:27work is not limited to considering
1:08:29households that are potentially eligible
1:08:32for gas and electric affordability
1:08:35programs yes that that is correct that
1:08:37is just one lens to apply but we've
1:08:39applied several lenses as this reports
1:08:41some Rises okay um and so the working
1:08:45group which the company is involved with
1:08:47um here acknowledges that there are
1:08:49customers who may not qualify for energy
1:08:51assistance but they are nevertheless
1:08:54potentially energy Bur or energy
1:08:58insecure yes potentially depending on
1:09:00which uh threshold um for energy burden
1:09:05you apply to an analysis and and what
1:09:07year of data you're looking at and
1:09:10currently these customers who um are not
1:09:13eligible for for assistance programs um
1:09:19they are responsible
1:09:23for essentially subsidizing these
1:09:25programs
1:09:27correct through rates all customers
1:09:30contribute um to the funding for eping
1:09:33Gap if that's your question although
1:09:35only some customers are actually
1:09:37eligible for that these funds are
1:09:39collected through our service and
1:09:41facility charges to all customer
1:09:44classes and with the working groups um
1:09:49with the work of the working group The
1:09:52working group was able to provide a
1:09:55definition or reach a consensus that
1:09:57energy insecurity means a customer
1:10:00household that spends either six or 7%
1:10:04more or more of their gross household
1:10:07income on electricity and natural gas
1:10:10combined is that
1:10:14right those are the I believe the six
1:10:16and 7% thresholds refer to the tables
1:10:18that we have likely on the next page or
1:10:20the subsequent page so so again there's
1:10:23a few different lenses one could apply
1:10:25um to to how we look at that that
1:10:28question of how many energy insecure
1:10:29customers are there it's hard to exactly
1:10:32pin down an an exact definition that
1:10:34applies to to everything again there are
1:10:37several different lenses what one could
1:10:39apply and we're still working through
1:10:40this with a working group on you know
1:10:42what is the exact lens we want to we
1:10:44want to use to inform you know either
1:10:47future programmatic offerings or future
1:10:49Outreach efforts are all the
1:10:51above okay and so just picking a lens
1:10:54may be the first
1:10:55step um to reaching a consensus before
1:10:59being able to move
1:11:01forward yes this is the this was the
1:11:03first part of
1:11:05our um work together as a working group
1:11:09um and so we we wanted to get a range of
1:11:12estimates on on what that total
1:11:14population of energy and secure
1:11:15customers could be to then um use as we
1:11:19talk about more specific options
1:11:22thereafter okay and if we could just go
1:11:24down to page eight and I
1:11:27think it'll be the
1:11:31last um full paragraph and I think I
1:11:35think this is what you're talking about
1:11:37when you talk about we we got to even
1:11:39first just decide on a lens before we
1:11:42can reach any definition or any
1:11:45consensus um but part of that was
1:11:47working with definitions of insecurity
1:11:51energy insecurity that um
1:11:56Define that threshold as households
1:11:58spending six or s% more of their gr
1:12:01household income on household
1:12:02electricity and natural gas combined is
1:12:05that right yes that's correct the 6% and
1:12:087%
1:12:09thresholds have been the levels that
1:12:11we've been homing in on okay um and are
1:12:15you aware of whether the that threshold
1:12:17of
1:12:186% is in fact an already nationally
1:12:22understood threshold standard for energy
1:12:25and
1:12:30security I believe States uh I think
1:12:34every state is different on this
1:12:36question how exactly they structure
1:12:38their energy assistance programs I think
1:12:416% and 7% and numbers in that range are
1:12:44common okay um and are you aware of
1:12:48Excel
1:12:49Energy action and proposed pilot in
1:12:52Minnesota to explore providing bill
1:12:55credits starting at a threshold of 4%
1:12:59energy
1:13:00burden yes that's one of the options
1:13:03that we're discussing in real time with
1:13:05the working group um our our sister
1:13:08company up in Minnesota actually has a a
1:13:10pilot pending before the the
1:13:13Commission in Minnesota and again that
1:13:16that's one of the options we're
1:13:17considering we're also considering other
1:13:18more granular options but but we're
1:13:20still putting that all together
1:13:22okay um and
1:13:27and putting those those pieces together
1:13:30I think is is still in place I want to
1:13:33talk about the second commitment of the
1:13:35working group which was the Outreach to
1:13:37customers who've recently experienced
1:13:40disconnections I mean for this uh the
1:13:43working group has developed a what's
1:13:46contemplated is that Excel or I'm sorry
1:13:48public service will be making phone
1:13:50calls to disconnected customers
1:13:53correct yes recently conducted a survey
1:13:57which this report summarizes we we had
1:13:59just um begun executing it I believe and
1:14:03we filed this report um conducting a
1:14:06survey to recently disconnected
1:14:08customers to learn about that
1:14:10experience okay um well and and in fact
1:14:14um what the working group first did was
1:14:16to develop a script for
1:14:18these
1:14:20uh for these conversations
1:14:23correct yes we work on that script
1:14:26collaboratively with with all the
1:14:27stakeholders involved okay and the
1:14:29target was to reach 40 total
1:14:32customers um as part of this Outreach is
1:14:36that right yes and more specifically we
1:14:38were trying to reach customers um that
1:14:41were disconnected just for a short
1:14:42period as well as those disconnected for
1:14:44a longer period so we tried to make sure
1:14:47we had some customers in each bucket
1:14:48there and at the time that this report
1:14:51was filed in May these conversations had
1:14:54not yet occurred occurred I believe the
1:14:56com or I believe the report indicates
1:14:58that they were intending to conduct
1:15:00these conversations in June is that
1:15:01right that is correct yeah the the
1:15:04survey lasted I believe most of June and
1:15:07and wrapped up in July and we've begun
1:15:10um reporting out on those those details
1:15:13in the working group okay um in the
1:15:15working group you'd agree that to date
1:15:18the company has not filed any report or
1:15:20document detailing um the work of these
1:15:23phone calls or any analysis from this
1:15:26Outreach into that
1:15:2922-
1:15:31053e proceeding
1:15:33correct no we have not yet filed a
1:15:37second update uh into that proceeding
1:15:40we're still working through it with
1:15:41stakeholders okay and Mr P currently the
1:15:45energy insecurity the efforts of the
1:15:48energy insecurity working
1:15:50group is not currently providing any
1:15:54rate relief to the company's customers
1:15:57correct it it's discussing possible
1:16:00paths
1:16:02forward to enhance that support and and
1:16:04better understand the customer
1:16:07experience um Mr P I want to turn to
1:16:10another part of your rebuttal
1:16:12testimony um you were posed questions
1:16:16regarding developing an affordability
1:16:19metric um by this commission is that
1:16:22right
1:16:25yes okay and if we could just pull up
1:16:27hearing exhibit 122 Mr P's rebuttal
1:16:32testimony um and sorry 122 is
1:16:35supplemental direct supplement you're
1:16:37right supplemental direct thank you at
1:16:39page 22
1:16:47please okay and Mr P this is just the
1:16:50portion of your supplemental direct
1:16:52where you discuss the development of
1:16:55affordability metric is that right
1:16:58yes um this is not the first time that
1:17:01this commission has directed questions
1:17:04concerning customer affordability and
1:17:07affordability metrics
1:17:10correct no I believe there have been
1:17:12additional supplemental requests in the
1:17:15past okay and specifically the the
1:17:18company was asked to provide the same
1:17:19affordability metric in the company's
1:17:21last electric rate case that 22 al- 530e
1:17:26proceeding
1:17:27correct yes that's correct it was
1:17:29testimony from company witness Steve
1:17:32Wisher okay um and so in response to
1:17:35this um question posed by the commission
1:17:38the company here was able to calculate
1:17:41an affordability ratio uh for gas
1:17:45utility service based on a number of
1:17:47statistical inputs is that right yes and
1:17:51specifically to do so the the company
1:17:53used uh
1:17:55um information from the US Bureau of
1:17:57Labor and statistics consumer
1:18:00expenditures for Denver Metro
1:18:03Area uh years 2021 through 2022
1:18:07correct yes okay um and this us Bureau
1:18:12of Labor Statistics well let me just
1:18:15back up um to our conversation
1:18:19earlier you you have
1:18:22the statistic for for the Denver metro
1:18:25area but as we know from mayor Heather
1:18:29Graham's testimony uh there's a number
1:18:32of um Public Service Gas customers who
1:18:35do not reside in metro Denver is that
1:18:40right that's correct okay um and that
1:18:43their income information might look
1:18:45different than what we know from the US
1:18:48Bureau of Labor Statistics information
1:18:51that you provided correct yes there are
1:18:53several ways one could calculate this
1:18:56okay um and for the Denver metro area
1:19:00this included a threat uh an average
1:19:03income of
1:19:05$115,000 $ 115 and
1:19:08$112,000 is that
1:19:10correct yes I forget if that was median
1:19:13income or average household income but
1:19:16but yes it was specific to the Denver
1:19:19metro area Okay and then another
1:19:22statistical input for this affordability
1:19:25ratio was the annual natural gas bills
1:19:28for a residential customer
1:19:31correct correct and we appli that both
1:19:33on median usage and average usage okay
1:19:37if we could pull if we could go to page
1:19:3925
1:19:41of um Mr P of hearing exhibit 122
1:19:50please and just scroll down to the table
1:19:53jpps
1:19:57and Mr P this
1:19:58table um that line stating annual income
1:20:02that's the annual income from that
1:20:03Bureau of Labor Statistics for Denver
1:20:06Metro Area is that right correct okay
1:20:09and then it for usage you provide a mean
1:20:13usage and a median usage and it's
1:20:17translation to a customer's current
1:20:19annual bill is that right yes okay and
1:20:22then also how that annual Bill may
1:20:24change with the company's proposal in
1:20:26this
1:20:28proceeding correct okay and looking at
1:20:32that um current annual bill mean usage
1:20:34of
1:20:36$769 you'd agree that if you divide that
1:20:38by 12 that comes out to approximately
1:20:41$64 a month for
1:20:45customers that sounds right okay um and
1:20:48in fact that 60 if we could just scroll
1:20:50down to the next page
1:20:57um I'm sorry I think it's Table jpp
1:21:076 that $64 monthly bill that's reflected
1:21:13in um your table jpp sd6 is that right
1:21:19correct and I'm sorry jjp um
1:21:27and going back if we could pull up at
1:21:30page 25 table jpp jjp sd5
1:21:38please and so Mr P this table reflects
1:21:43the company's
1:21:45calculation of the affordability uh
1:21:47ratio requested by the commission
1:21:50reflecting essentially a customer's cost
1:21:53of gas
1:21:55in a percentage of their discretionary
1:21:57spending is that right yes
1:22:03okay you would agree with me however
1:22:05that a the company's gas customers
1:22:07generally speaking do not use the same
1:22:09amount of natural gas for heating during
1:22:12each month of the year correct correct
1:22:16there will be fluctuations throughout
1:22:17the year
1:22:19okay reasonable to assume less gas
1:22:23heating in the summer and more gas
1:22:24seaing in the winter
1:22:27yes and so while the percentages in the
1:22:30affordability ratio prepared by the
1:22:32company reflect that overall percentage
1:22:35of of 2.3 or potentially 2.5 or
1:22:392.4 on an annual basis you would agree
1:22:43that this metric might look different
1:22:45when considering on a comparative
1:22:47monthly
1:22:49basis for customers that are not um
1:22:53participating in a um balance billing
1:22:58program yes that's correct for for those
1:23:01that are it'll be smoothed out and it'll
1:23:02be the same percentage every
1:23:05month okay and so for those not in the
1:23:08balance billing um that affordability
1:23:11metric for winter
1:23:13months um might look different than
1:23:15those percentages reflected on that
1:23:19chart
1:23:22correct when to talk a little bit about
1:23:25the US Bureau of Labor Statistics
1:23:27information that you used for your
1:23:29analysis if we could pull up from um
1:23:32ucas box.com hearing exhibit 531
1:23:46please and just scrolling
1:23:51down kind of through the document Mr pqu
1:23:54just asked ask you if you recognize this
1:23:58document as
1:24:00essentially the
1:24:02information contained at the link
1:24:06provided in your rebuttal testimony
1:24:09regarding the US Bureau of Labor
1:24:13Statistics um information is that right
1:24:16did you mean the supplemental direct
1:24:17testimony yes thank you supplemental
1:24:21direct yes this seems to be the the
1:24:24Source data from the BLS and if we could
1:24:27just scroll up a little bit to the first
1:24:33table um right I'm sorry right there on
1:24:36that second
1:24:39page this one or down here down yep
1:24:42second
1:24:43page okay and Mr P just to kind of
1:24:46Orient you a little bit this is where we
1:24:48see that average income of $1
1:24:51115,116 is that right that's correct
1:24:55okay I mean and like you said you you
1:24:58recognize this as as the information
1:24:59that you linked to in your rebuttal
1:25:02testimony yes I have a table in my
1:25:05supplemental direct testimony that that
1:25:07summarizes many of these
1:25:08rows okay um but you'd agree there's
1:25:12some information here that's not in your
1:25:14table that is in your
1:25:17testimony I believe so yes okay um
1:25:21chairman I would move to admit hearing
1:25:24EX exhibit
1:25:28531 any objection no
1:25:32objection so
1:25:34admited and just zooming in on this
1:25:36table on page two um one of the things
1:25:39that we can
1:25:41observe is that this
1:25:45$115,000 and $115,000 annual income
1:25:50contemplates a household of
1:25:52approximately 2.5 people is that
1:25:59right yes on the people line of the
1:26:03table it says for the Denver area it's
1:26:062.5 okay and um what it also indicates
1:26:11is um contemplating an average household
1:26:15with approximately six of those people
1:26:18being children is that
1:26:20right yes children under 18 okay
1:26:24um assuming all other inputs remain the
1:26:28same for your calculations in jjp D
1:26:32sd5 you would agree that if a customer
1:26:35household made less than that Bureau of
1:26:38Labor statistic household income of
1:26:40$115,200
1:26:55correct and and the reverse is also true
1:26:57if someone made more than this average
1:26:59level than that resulting affordability
1:27:02metric would be
1:27:04lower this is an average by
1:27:07definition okay Mr P if I were to
1:27:10represent to you that a quick Google
1:27:12search indicated that the average K
1:27:15through 12 public school teacher salary
1:27:17in Colorado for the year
1:27:202023 was
1:27:21$61,000 a year would you have any reason
1:27:24to dispute that
1:27:26number I wouldn't have any reason to
1:27:28dispute that number but it's important
1:27:30to to point out that what we're talking
1:27:32about here is average income and
1:27:35expenditures by households and what you
1:27:37decided was a income for an individual
1:27:40and I believe most households in the
1:27:42Denver area will be dual inome
1:27:44households well can you can you imagine
1:27:47a scenario where uh someone is in a
1:27:51single income household yes that's
1:27:53certainly occurs okay I want you then to
1:27:57imagine a hypothetical scenario of a
1:27:59teacher in Colorado making the average
1:28:01salary of $61,000 a year in a single
1:28:05person or single income
1:28:08household would you agree that in this
1:28:11hypothetical well would you agree that
1:28:14$61,000 is just a little over half of
1:28:17that average
1:28:20$115,000 household salary
1:28:24yes okay and in this hypothetical
1:28:27scenario and assuming all other inputs
1:28:30from this um Bureau of label statistics
1:28:33remain the
1:28:35same you would agree that the percentage
1:28:38of income for this hypothetical
1:28:41teacher would require them to spend more
1:28:43for natural gas or that their
1:28:46affordability ratio would be higher than
1:28:48the averages presented in your chart jjp
1:28:52sd5
1:28:54so there are a number of assumptions you
1:28:56you're making there so just to be clear
1:28:59for the record you're assuming that
1:29:01income was lower for a particular
1:29:03household that all these other
1:29:05categories of expenditures remain fixed
1:29:08which in reality may or may not occur
1:29:10right there's there's very much a case
1:29:11to be made that a single income
1:29:13household might not have any children
1:29:16might have much lower food
1:29:18Transportation Education Health care
1:29:20costs so on and so
1:29:22forth okay okay and and my question in
1:29:25the hypothetical was assuming that all
1:29:27these other inputs remain the same you
1:29:29would agree that the percentage of
1:29:31income for Teacher making $61,000 a year
1:29:35that their affordability ratio would be
1:29:37higher than the averages provided in
1:29:39your
1:29:40chart yes all else equal if you're only
1:29:43changing one element of of this analysis
1:29:47then yes that resulting percentage will
1:29:50increase okay and for someone like like
1:29:54this hypothetical teacher making $61,000
1:29:56a year that affordability ratio instead
1:30:00of being
1:30:012.3% or
1:30:042.4% could approach something more like
1:30:07four or 5% of their
1:30:11income
1:30:13um if all other variables remain the
1:30:16same correct correct and once we're
1:30:19getting up to the four five 6% levels
1:30:22you know that's very much the percent of
1:30:23income lels that our affordability
1:30:25programs can can kick in for be it our
1:30:29electric affordability program our gas
1:30:31affordability program and so forth right
1:30:34and that kind of goes back to that
1:30:35energy
1:30:37affordability threshold and and maybe
1:30:39National threshold of about 6% is that
1:30:44right it it it depends our our energy
1:30:47our even Gap programs just use the
1:30:50acronyms for a
1:30:52moment have have varying thresholds for
1:30:55for qualification depending on what
1:30:57services the customer receives from the
1:30:59company whether it's electric only gas
1:31:01only or both and what's their primary
1:31:03heating fuel so so there's a whole bunch
1:31:05of different relevant thresholds that
1:31:07might apply to a particular customer I
1:31:09believe the lowest one that would make
1:31:12them qualify for a program is 2% so the
1:31:15fact that in this hypothetical scenario
1:31:18a um single income household in the 60
1:31:21to $70,000 range could very well qualify
1:31:25for one of those one or both of those
1:31:28programs okay and I think you kind of I
1:31:31think you're kind of connecting this
1:31:33right at at that
1:31:35income um this is where the the
1:31:38ecosystem sort of that we've described
1:31:40earlier might become operative is that
1:31:42right correct okay Mr P from from a
1:31:46policy perspective should a teacher in
1:31:49Colorado need to rely on an ecosystem of
1:31:54nonprofit and government assistance
1:31:55programs in order to afford their energy
1:32:00bills that is a much broader policy
1:32:03question than than the utility company
1:32:05itself can answer we we only have
1:32:08purview over uh the energy and gas costs
1:32:14um for the service that we provide and
1:32:16then the resulting affordability
1:32:17programs that we offer to customers that
1:32:19can qualify to make sure that we're
1:32:21providing some base level of support for
1:32:23customers that truly need it I think
1:32:26your question is morphing into you know
1:32:27what else can public policy do to to
1:32:29support households that that might be
1:32:32burdened or vulnerable um based on some
1:32:35view or definition and I think that that
1:32:37expands beyond the realm of the
1:32:39utility okay well and I I appreciate
1:32:44that um I I would agree that it's a
1:32:47broader question um
1:32:49and uh Mr P would you agree that it's
1:32:52not just a broader policy question but
1:32:54it also implicates what the commission
1:32:57can decide to do in specific proceedings
1:33:01to address these affordability
1:33:04concerns is that fair to
1:33:06say could you restate the question sure
1:33:10um what we've been discussing it's not
1:33:12just a broader policy uh consideration
1:33:16but
1:33:18um implicates whether there's also
1:33:22specific things that this commission can
1:33:24do in a proceeding regarding customer
1:33:28affordability
1:33:30correct yes I'm I'm not a lawyer but
1:33:33it's my understanding that the
1:33:34commission has has broad latitude to to
1:33:36consider a lot of items that that affect
1:33:39the regulation of gas and electric and
1:33:41steam utilities you know our
1:33:43affordability programs being one of them
1:33:46and one of the decision points that the
1:33:49commission can make in this proceeding
1:33:52is with respect to the company proposal
1:33:54for the revenue deferral search charge
1:33:56is that
1:33:57right yes that's one of the company's
1:33:59proposals
1:34:00here and the proposal here from the
1:34:04company is to defer
1:34:07implementation um of new base rates for
1:34:10a period beginning November 5th
1:34:132024 and ending February 14 2025 is that
1:34:18right yes so roughly three Monon period
1:34:21okay and this what this proposal entails
1:34:24is the creation of a regulatory interest
1:34:27that a regulatory asset that earns
1:34:29interest at whack for that three-month
1:34:31period um through February 14 2025 is
1:34:36that
1:34:37right yes um we've propos to apply an
1:34:41interest rate at wack because that's our
1:34:43cost of of
1:34:46financing and and so um the cost of
1:34:50whack or the interest would create the
1:34:54sech charge
1:34:56um that would be contained within a new
1:34:59Rider called the RDS SAR charge is that
1:35:04right yes interest would be added to
1:35:06that deferred balance I believe the
1:35:09interest amount is in the order of
1:35:10magnitude of of $3 million 3.3 sound
1:35:14right that sounds right and under the
1:35:17company's proposal the sech charge
1:35:18Begins the day after the storm Yuri
1:35:22search charge falls off is that right
1:35:25correct we made this proposal to help
1:35:27smooth customer rights um particularly
1:35:30on on the tail end of a of a heating
1:35:32season in
1:35:34mid-February okay and I think you
1:35:36characterized that in your
1:35:38um in your testimony is is rate
1:35:41stability at a modest cost correct under
1:35:45this proposal the customer can get rate
1:35:47stability for the modest cost of $3.3
1:35:50million is that right
1:35:56if you could direct me to my test not if
1:35:58I'm making a specific statement on on
1:36:00that but but yes I would say it's not
1:36:02just the cost of 3.3 million that's
1:36:05important here it's it's the whole
1:36:07proposal in itself the fact that we
1:36:09defer new base rate increases until you
1:36:13know approaching the tail end of the
1:36:14heating season when another charge is
1:36:17about to drop off from customer bills
1:36:19really helps to moderate those rates
1:36:21that customers face and this proposal
1:36:24customers go directly from one sear
1:36:26charge to a new search charge in
1:36:29addition to base rates is that
1:36:31right correct the extraordinary gas cost
1:36:35recovery mechanism would fall off just
1:36:37as the RDS or charge would be
1:36:40implemented and this
1:36:43RDS um $3.3 million for the deferred
1:36:47revenue sear charge that would generate
1:36:50additional revenue for the company and
1:36:52its shareholders correct
1:36:57it would constitute additional revenue
1:36:59for the company dollars wise but it
1:37:01simply compensates the company for the
1:37:03cost of financing because we will have
1:37:05foregone the collection of revenues an
1:37:08increase in revenue steming from this
1:37:09proceeding you know assuming of course
1:37:12an increase is approved by the
1:37:14commission and so it's yes it produces
1:37:17an increase in revenues but it simply is
1:37:19is a cost of financing okay and I I
1:37:22understand the company's perspective
1:37:24perspective um on that issue for support
1:37:28of this proposition in fact the company
1:37:30noted that this proposal is very similar
1:37:32to a proposal accepted by the Commission
1:37:35in the 2020 combined Fiasco gas rate
1:37:38case is that right yes there was a
1:37:41similar but different RDS proposal uh in
1:37:44that proceeding I believe it was
1:37:46proposed by the company in rebuttal um
1:37:49once the pandemic began and you say
1:37:51similar but different one of the things
1:37:53that was different is in that 2020 case
1:37:57the commission approved a revenue
1:37:59revenue deferral without an interest or
1:38:02whack earning is that right yes that was
1:38:06what the commission approved and the
1:38:07company did not propose to apply
1:38:10interest to the RDS mechanism in that
1:38:12proceeding so the so the commission was
1:38:15agreeing with the company's proposal it
1:38:18was a different time and place and
1:38:20situation in which that proposal was
1:38:22made so You' agree based on that past
1:38:24case it would be possible to have a
1:38:27revenue
1:38:28deferral um without an interest or whack
1:38:30earning
1:38:33correct there is a recent example of one
1:38:35occurring without interest but that's
1:38:37not the company's proposal here okay but
1:38:39it would be possible to do the deferral
1:38:42without the interest or whack earning
1:38:44mean on that prior case mechanically yes
1:38:47it's possible okay and if the commission
1:38:49were to do that in this proceeding that
1:38:51would effectively reduce the overall
1:38:54rate Base by 3.3 million is that
1:38:59right no I disagree with that this is
1:39:01these are not amounts um affecting the
1:39:04company's rate
1:39:06base okay that would be $3.3 million
1:39:09less recovered from the company's rate
1:39:11payers
1:39:12correct uh over the period of
1:39:17um 15 to 16 months correct okay and you
1:39:21would agree that this is a decision that
1:39:25the commission could make to provide
1:39:26that $3.3 million of rate relief to
1:39:30Public Service customers right now and
1:39:32through this
1:39:36proceeding the commission has broad
1:39:39latitude to to approve or reject
1:39:42proposals before
1:39:43it I I won't contest I I won't um reject
1:39:47that notion I think what's important to
1:39:50note here is that the company incurs
1:39:52Finance ing costs to forego 3 and a half
1:39:55months of foregone revenue and the 3.3
1:39:59million is simply a recognition of those
1:40:02costs that will be recovered from
1:40:04customers over the subsequent 12 months
1:40:07beginning in mid-February
1:40:092025 and so the entire period we're
1:40:11talking about here is is actually quite
1:40:13long 15 or 16 months for the RDS
1:40:16proposal in in its
1:40:18entirety okay thank you Mr P I want to
1:40:22talk about the
1:40:23gas um the gsic I think this was
1:40:27something that you spoke with Mr Horman
1:40:29about
1:40:30on
1:40:33Friday um and in this com in this
1:40:35proceeding the company Advocates that
1:40:37the commission re-evaluate its prior to
1:40:40decision from the 2022 gas rate case and
1:40:44in this proceeding allow gas storage
1:40:46inventory costs or gsic to um as we were
1:40:51discussing with the revenue deferral
1:40:52search charge to earn a return at whack
1:40:55is that
1:40:56right yes that's correct there was a
1:40:58brief discussion on that on
1:41:00Friday and in their answer testimonies
1:41:03both staff and
1:41:05UCA uh responded to this request of the
1:41:08company and and opposed this request of
1:41:11the company is that right
1:41:14yes um and what staff and UC recommended
1:41:18instead of a whack return is that the
1:41:22company recover cover at the cost of
1:41:24short-term debt instead is that right
1:41:28yes and UCA specifically recommended
1:41:32that the commission authorize cost
1:41:33recovery of
1:41:35gsic to occur at the cost of short-term
1:41:38debt and that the commission should
1:41:39clarify that short-term debt is not a
1:41:42return and should not have an income tax
1:41:45gross-up applied to it is that right I'm
1:41:48sorry can you restate which party is
1:41:50stating that UCA UCA recommended
1:41:54recovery at the cost of short-term debt
1:41:56and clarification that short-term debt
1:41:59is not a return and should not have an
1:42:01income tax gross up is that right yes
1:42:04that sounds like their
1:42:05recommendation okay and the difference
1:42:08between applying the whack return
1:42:10advocated by the company and cost
1:42:12recovery at short-term debt as advocated
1:42:14by UC and staff is a difference of
1:42:17approximately
1:42:19$383,000 is that
1:42:20right yes that's what I stated my direct
1:42:23testimony based on short-term interest
1:42:26rates and the company's existing whack
1:42:29at the
1:42:31time and if the commission did decide to
1:42:34reverse course as advocated by the
1:42:36company from its last decision or last
1:42:39rate case decision that would be an
1:42:41additional
1:42:43$383,000 recovered from the company's
1:42:45rate payers is that
1:42:47right
1:42:49yes is it your understanding that the
1:42:52treatment recommended here by UCA and
1:42:55staff for cost recovery short-term debt
1:42:58is consistent with the alj's decision in
1:43:00Atmos energies 2022 gas rate
1:43:04case I'm not familiar with with that M's
1:43:07great case at the moment I believe I've
1:43:09reviewed it in the past but I'm I can't
1:43:11recall the
1:43:13specifics um if we could pull up hearing
1:43:16exhibit 500 which is answer testimony of
1:43:19Mr
1:43:20scac um at page 226
1:43:34please and if we could go to lines 12
1:43:38through
1:43:4718 and Mr um P you recognize Mr Mr Sak's
1:43:54answer testimony from your review
1:43:57previously yes okay and here Mr scac
1:44:01discusses um the alj's treatment
1:44:06of uh gas storage for Atmos and and
1:44:10specifically the alj's
1:44:12finding for uh cost of short-term debt
1:44:16recovery is that right that's what it
1:44:18states here okay when you had a chance
1:44:21to file rebuttal test
1:44:24correct yes and you didn't dispute this
1:44:26portion of Mr Sak's testimony in your
1:44:29rebuttal testimony correct I did
1:44:35not
1:44:36um and in reaching that decision the alj
1:44:40found that the value of stored gas is I
1:44:43think this came up a little bit on
1:44:44Friday that stored gas is temporary and
1:44:48volatile is that right I would object on
1:44:51the grounds that the decision speaks for
1:44:53for itself it may be helpful for the
1:44:54witness to see the
1:44:57decision um Miss
1:45:00[Music]
1:45:01kampton uh this is an admitted exhibit
1:45:04I'm just asking him to observe from it I
1:45:08don't disagree that the decision
1:45:10reference speaks for itself but I I
1:45:12think he can testify from this exhibit
1:45:14as well um is it pette or pqu just the
1:45:19so I get it right it's pqu it's a tough
1:45:23one p okay I I apologize I'm a bit T de
1:45:27so
1:45:29p
1:45:31uh yeah ask your question again miss
1:45:36crimon I'm not try to remember my
1:45:39question um ask whatever question you'd
1:45:42like uh I just say you got about five or
1:45:4610 minutes left so okay thank you um Mr
1:45:49P here Mr skac disc is the alj
1:45:55finding regarding that decision for
1:45:57Recovery at short-term debt noting that
1:45:59the gas or that the value of stored gas
1:46:02is temporary and volatile is that
1:46:04right that's Mr Sak's testimony here I
1:46:07can't recall if the commission's
1:46:09decision uses that exact phrasing okay
1:46:13and Mr scoach cites to that decision in
1:46:15the footnotes of his testimony correct
1:46:18it does okay and again you didn't
1:46:21dispute this um character ation of Mr
1:46:23scac in your rebuttal
1:46:25testimony I rebutted the the concept
1:46:28even if I didn't refer to this these
1:46:30specific lines okay um and is it true
1:46:34that in Black
1:46:36Hills Black Hills Colorado gas recently
1:46:40completed 2023 gas rate case that Black
1:46:43Hills Colorado gas agreed to transition
1:46:47to a cost recovery
1:46:49component uh for stored gas that shall
1:46:51be equal to Black Hills cost of
1:46:54short-term debt does that sound
1:46:58right if you could direct me to lines
1:47:01referencing that that would be
1:47:03helpful sure if we could go I think it's
1:47:05down to page
1:47:10227 um in
1:47:13lines 8 through 14
1:47:23okay and you had a chance to review this
1:47:25from Mr Sak's testimony previously
1:47:27correct yes and and his discussion of
1:47:31the treatment of Black Hills for gas
1:47:35storage inventory correct yes okay and
1:47:38you didn't dispute this characterization
1:47:41of Black Hills treatment in your
1:47:43rebuttal testimony
1:47:46correct I did not reference the Black
1:47:48Hills case or or example no okay would
1:47:52you agree that if uca's recommendations
1:47:55for Recovery at shortterm at the cost of
1:47:57short-term debt are adopted by the
1:48:00Commission in this proceeding that that
1:48:02would render Public Services gsic cost
1:48:05recovery components to be consistent
1:48:08with both Atmos and black
1:48:11hills I don't know all the specifics of
1:48:13Atmos and black Black Hills um proposals
1:48:17or or the decisions so I I can't agree
1:48:20or or deny that statement
1:48:23okay would you agree that it would be
1:48:25consistent with the commission's
1:48:26decision in the in public services 20
1:48:31last gas rate case uh
1:48:3422-00
1:48:3649g yes and that's what the company is
1:48:39respectfully bringing up for for review
1:48:41again here we disagree with the
1:48:44rationale that this is a a temporary
1:48:47asset that's financed or should be
1:48:49financed with a specific short-term
1:48:51financing tool we Finance all of our um
1:48:55costs and expenses with a combination of
1:48:57external capital and internally
1:48:59generated funds and you know this is a
1:49:02this is not just a short-term asset
1:49:05there's actually costs that go year to
1:49:07year that are significant that my a
1:49:10portion of my
1:49:11confidential um testimony discusses and
1:49:14so we do not think a short-term debt is
1:49:17a short-term debt return is the
1:49:18appropriate interest rate I I think I
1:49:20understand Mr P um if we could pull up
1:49:24from box.com here in exhibit
1:49:31545
1:49:32[Music]
1:49:39and Mr pqu I'm showing you a discovery
1:49:43request UCA
1:49:4634-1 and if we could just scroll
1:49:49down um to the response
1:49:53portion you are the sponsor of this
1:49:56response for public service is that
1:49:58right correct okay I would move to admit
1:50:02here in exhibit
1:50:04545 any objection no
1:50:07objection so ad Mr P after the gas rate
1:50:11decision the company did not change its
1:50:14gas storage program or practices or
1:50:16Services
1:50:18correct we did not change our our
1:50:20approach to to using and relying on on
1:50:24gas storage I can't comment on whether
1:50:26we actually used it more or less but we
1:50:30continue to rely it on it in the same
1:50:33manner in the same manner which provides
1:50:36a a huge reliability benefit to our
1:50:39system and our customers and if the
1:50:41commission were to or to issue an order
1:50:43in this proceeding consistent with the
1:50:452022 gas rate decision and in that order
1:50:49concluded that the cost recover for gsic
1:50:52is not authorized a whack return this
1:50:54will not necessarily result in the
1:50:56company reducing its gas storage correct
1:50:59it will not necessarily reduce our use
1:51:02of gas and storage okay and Mr that's in
1:51:04fact what you discuss in in this um
1:51:07Discovery response correct yes I say not
1:51:10necessarily doesn't mean we will doesn't
1:51:12mean we
1:51:13won't if the commission were to adopt
1:51:16uca's
1:51:17recommendations uh regarding gas storage
1:51:21um inventory that would
1:51:23$383,000 less recovered from the
1:51:26company's rate paays in this proceeding
1:51:29correct correct and the company views
1:51:31that as a penalty for the use of gas
1:51:38storage Mr cap did you
1:51:42hear the testimony of your colleague
1:51:45miss gilliand last week regarding
1:51:48LNG yes
1:51:52and do you agree with Miss Gillian's
1:51:54testimony that the LG commodity was
1:51:57injected into the company's system not
1:51:59to support system pressures but because
1:52:02it was the end of the winter heating
1:52:06season yeah she stated that that that we
1:52:09needed it for um reliability and
1:52:13capacity reasons um but didn't actually
1:52:15have to rely on it um on those coldest
1:52:20days and did you hear Miss Gillian's
1:52:22test testimony that the company will be
1:52:24transitioning from using thirdparty
1:52:26vendors for LG to company-owned
1:52:32equipment yes for this upcoming heating
1:52:35season that is the
1:52:36plan okay and I think you discussed this
1:52:39in your rebuttal
1:52:40testimony um that public service has
1:52:44purchased modular LNG equipment at
1:52:47roughly a similar cost to what Public
1:52:49Service would have to spend annually to
1:52:51rent that equip from a third party is
1:52:53that right
1:52:56yes if we could pull
1:53:03up hearing exhibit my apologies
1:53:09um 536 please from uca's box
1:53:25and if we could just scroll down to the
1:53:32sponsor and Mr P you are one of the
1:53:35sponsors of uh the responses to UCA
1:53:4033-11
1:53:42correct uh yes I'm one of the sponsors
1:53:45on this question if you could scroll
1:53:46back up to the top so I could see which
1:53:49number this
1:53:51is yes UCA 3311 okay and it's
1:53:54referencing I think it starts off by
1:53:56referencing your rebuttal testimony
1:53:57correct correct uh I would move to admit
1:54:00hearing exhibit 536
1:54:03please uh any
1:54:06objection no
1:54:08objection so
1:54:10admited and in this discovery response
1:54:15um just scroll into the response please
1:54:26what the company describes in its
1:54:29response is
1:54:33that
1:54:34the revenue requirement associated with
1:54:37the purchase of Public Services own LG
1:54:41equipment will be a fraction of the
1:54:44annual onm expense which Public Service
1:54:46currently is requesting in this rate
1:54:48case correct
1:54:54yes the last line of subpart
1:54:57a states that okay and so from the
1:55:00company's perspective on a
1:55:02forward-looking basis the annual expense
1:55:04to deploy LG to Breen Ridge will be a
1:55:07fraction of what it present of what is
1:55:10presently part of Public Services
1:55:12Revenue requirement is that
1:55:16right when only looking at this one
1:55:18specific issue that's correct I would
1:55:20note that Miss gillan's rebuttal test
1:55:22testimony talks about all the other ways
1:55:25our gas operations on andm are are
1:55:28increasing in fact and so we still
1:55:29believe that the um Revenue requirement
1:55:32in our test year is representative of
1:55:34cost will be facing moving forward okay
1:55:38um and with respect to this proceeding
1:55:40the company is asking rate payers to pay
1:55:43approximately 5.4 million for LG
1:55:46cost when l& as we heard from Miss gilan
1:55:49was never needed to be injected into the
1:55:51gas system
1:55:53in Breen Ridge for either a design day
1:55:57or as a peak shaving facility is that
1:56:01right this is one component of our gas
1:56:04operations
1:56:05onm that we continue to see as
1:56:11reasonable okay and with respect to this
1:56:13proceeding the company is asking right
1:56:15payers to pay $5.4 million for the LNG
1:56:18costs correct
1:56:22jection asked and
1:56:24answer I respectfully disagree that it
1:56:26was answered
1:56:28um you can answer
1:56:32Mr so the let's be clear on a couple
1:56:36Concepts right the amount included in
1:56:39the test year will affect our our rates
1:56:42moving forward this will not collect
1:56:45costs that we've already incurred
1:56:47related to LNG and so given that we
1:56:50spent the 5.4
1:56:52on l&g sited here on non-commodity
1:56:58costs that does not affect what what
1:57:01we're not going to recover the amounts
1:57:02already spent what we're talking about
1:57:04is moving forward is are the costs in
1:57:06the test year representative cost moving
1:57:08forward and the company emphatically
1:57:09says yes okay and if those costs for LG
1:57:13moving forward were disallowed in this
1:57:16proceeding that would be $5.4
1:57:19million uh less recovered from the
1:57:22company's customers correct that would
1:57:25be the result okay um chairman I have a
1:57:29little bit more but I um suspect that
1:57:32I'm over so I just wanted to alert the
1:57:37commission um how much more do you
1:57:42have five minutes 10
1:57:45minutes yeah if you can wrap up in
1:57:48fiveish minutes that would be greatly
1:57:50appreciated I think you UCA has over 600
1:57:54minutes in this case so if we can keep
1:57:57the schedule that'd be greatly
1:57:59appreciated thank you
1:58:02um Mr P in your rebuttal testimony if we
1:58:07could pull up heing exhibit 135 at page
1:58:19nine and looking at lines
1:58:23uh five and
1:58:25six Mr P you describe what you uh you
1:58:29characterize the testimony of Staff as
1:58:32having uh a quote bias for historical
1:58:35test years do you recall that portion of
1:58:37your
1:58:38testimony
1:58:39yes do you know when the last time that
1:58:42the company advocated for a historical
1:58:45test
1:58:47year the rates that we've proposed in
1:58:50this proceeding are sorry the costs that
1:58:53we brought forward in this proceeding
1:58:54are based on a historical time
1:58:57period and that's specifically the cost
1:59:00proposed and discussed in the company's
1:59:03rebuttal case is that right
1:59:06correct um prior to the company using a
1:59:10historical test year in rebuttal in this
1:59:13case do you know the last time that
1:59:16public service advocated for a
1:59:17historical test year
1:59:24I believe the results of the company's
1:59:26last gas rate case as well as the last
1:59:29electric rate case are all based on
1:59:31historical time periods so it's it's
1:59:35become um more of a common feature in
1:59:39recent years on both the electric and
1:59:40gas
1:59:42proceedings and Mr P would you agree
1:59:45that the test year that the commission
1:59:47decides to use in this proceeding will
1:59:51affect the overall Revenue
1:59:54requirement I would object on this being
1:59:56outside the scope of Mr pay's
2:00:03testimony Miss grampton
2:00:07I I've referenced his testimony where he
2:00:11discusses historical test
2:00:14years I don't scope yeah you can answer
2:00:19the question and and really if you could
2:00:21finish in five minutes U miss krampton
2:00:23that would be appreciated I will thank
2:00:26you uh Mr
2:00:29Pai I'm sorry miss kampton you might
2:00:31need to repeat the question for me my
2:00:33question was do you agree that the test
2:00:35year the commission decides to use in
2:00:37this proceeding will affect the overall
2:00:39Revenue
2:00:42requirement yes the test year is an
2:00:44important input into the revenue
2:00:47requirement
2:00:48calculation and the overall Revenue
2:00:51requirement
2:00:52calculation uh will affect what amount
2:00:55of money is ultimately recovered from
2:00:57the company's rate paays
2:01:02correct yeah well while these questions
2:01:04are um best for company withness freedus
2:01:10you know a test year affects the revenue
2:01:12requirement which then can affect the
2:01:14the revenue deficiency that issue in a
2:01:17phase one red
2:01:19case thank you I I don't have any
2:01:21further questions
2:01:23uh thank you uh Miss krampton uh Comm
2:01:27commissioner plant questions for Mr
2:01:34P uh for some reason you're muted um uh
2:01:39uh assuming that was no questions but
2:01:41I'll knock great Li reading oh one
2:01:44question why don't we jump to uh
2:01:46commissioner Gman while you're working
2:01:49on your uh audio oh there you
2:01:52okay sorry about that yeah I I
2:01:56appreciate it uh good morning Mr P um
2:02:00morning I just had a couple of of uh
2:02:03quick questions I mean is it is it in
2:02:05general is it fair to say customers
2:02:07bills increase in the winter and
2:02:09decrease in the
2:02:10summer um so November through February
2:02:13are generally going to be times of the
2:02:16highest bills for most customers is that
2:02:19fair to
2:02:20say correct for for gas customers who
2:02:23primarily rely on gas for heating which
2:02:26again is I think describing the majority
2:02:28of our gas customers that's correct and
2:02:31in your direct testimony you mentioned
2:02:34that the deferral mechanism is taken to
2:02:37promote rate stability deferring the
2:02:39impact of the rate change from November
2:02:421st to February 15th and that's really
2:02:47tied to the the winter storm Yuri
2:02:50adjustment
2:02:52I think in general we could say that the
2:02:54bills are higher during that period
2:02:56anyway um and that pretty much every
2:02:59year um so to sort of walk back why
2:03:05we're in this situation a little bit the
2:03:08company submitted their advice letter in
2:03:11January there was an end of February
2:03:14tariff which I think is 30 days out
2:03:16maybe from the advice letter and that
2:03:19starts the 250-day clock for implement
2:03:21ation and that put you at the required
2:03:24rate change in early November I think
2:03:27November maybe 2D or 3rd something like
2:03:30that um and then because the the letter
2:03:37was submitted in January and you didn't
2:03:39have actual costs through the end of
2:03:422023 there's another filing that was
2:03:44submitted in March to update the
2:03:48estimates of costs with the actuals
2:03:51because you it took there's a little bit
2:03:53of time before you actually know what
2:03:55the actual costs are um and then there's
2:03:59a deferral
2:04:01mechanism um to move the rate increase
2:04:04that happens in November forward to
2:04:08February
2:04:0915th to avoid that impact of the
2:04:14increases in November um is that
2:04:19pretty that's accurate so it seems to me
2:04:23what's confusing to me is that you you
2:04:26could have avoided that whole process
2:04:28just by submitting the advice letter in
2:04:30May right I mean if you submitted advice
2:04:33letter in May the Tariff would go you
2:04:36know would be in June 250 days out would
2:04:39be
2:04:40February you'd have the actuals already
2:04:43when you submit a nice letter I mean
2:04:45what wouldn't it just be easier to do it
2:04:48that way I mean why why does it and this
2:04:51is I I think the way it
2:04:53happens every gas case the the advice
2:04:56letter is submitted in January the rate
2:04:59impact happens in
2:05:01November couldn't we alleviate some of
2:05:04that impact to
2:05:07customers right when their bills are
2:05:09increasing for the summer heat or for
2:05:11the winter heating season by submitting
2:05:13the advice letter in May instead of in
2:05:16submitting it in
2:05:19January yeah good question think I
2:05:22understand that the question there
2:05:23commissioner
2:05:24plant I think another way to look at it
2:05:26is you know the company delays as long
2:05:29as possible the following of Ray cases
2:05:32however it can and so you know if you've
2:05:35seen this case and the last case both
2:05:37proposed in that kind of early um
2:05:40calendar year time frame it's simply a
2:05:43result of that process that you know
2:05:45most of the billing determinant occur
2:05:47during that heating season to your now
2:05:49right that's when customer bills um you
2:05:52know tend to reflect that increased
2:05:53usage in light of the weather so so by
2:05:56delaying as long as we can it kind of
2:05:58pushes up against that
2:06:00early um early year time frame just
2:06:02recognizing the N9 to 10 month process
2:06:04that the commission
2:06:06has uh it's important for the company's
2:06:09finances and again this might be
2:06:11directed at at another company witness
2:06:13either Mr frus or Mr Burman um for the
2:06:16reasons we brought forward this case um
2:06:19for for financial reasons it's important
2:06:22that the
2:06:23company receive those revenues in order
2:06:27to have a a strong financial position
2:06:29and so simply delaying the case until
2:06:32May I think you said in your example um
2:06:35kind of pushes out the the collection of
2:06:37any new revenues even further right and
2:06:40so an important part of the RDS is we're
2:06:41deferring the implementation of new
2:06:43rates but those rates are actually
2:06:45effective they're effective come early
2:06:47November we're just ACR those foregone
2:06:50revenues into a regulatory asset which
2:06:54would then be recovered from Rays
2:06:57beginning in mid-February over the
2:06:59subsequent 12 months so simply delaying
2:07:01the ray case has a very large Financial
2:07:04implication to the compy company I think
2:07:06to the tune of 70 to 75 million that
2:07:09would have been recovered as a result of
2:07:12the rate increase over this upcoming
2:07:14heating season I hope that makes sense
2:07:16but I'm happy to clarify anything there
2:07:19so so the reason that it happens in
2:07:21January is basically because you're it's
2:07:24a volumetric charge correct and you're
2:07:26going to receive most of the
2:07:28volumetric revenue beginning in
2:07:31November correct so that's kind of
2:07:36the seems like that's what's creating
2:07:38the problem here that we have
2:07:41where the company there you have like
2:07:44two situations the company gets most of
2:07:47its revenue from the volume which
2:07:50increases dramatically in November and
2:07:53the customers have the
2:07:56greatest costs because the volume
2:07:59increases dramatically in November so
2:08:02it's a question of I mean if I
2:08:04understand what you're saying there's
2:08:05sort of a regulatory lag issue that
2:08:07you're trying to address by by
2:08:10submitting the the um the advice letter
2:08:14early in the
2:08:15year and it's a question of really who
2:08:19pays for the regulatory lag it's either
2:08:22going to be the company or it's going to
2:08:23be the customer and in this case the the
2:08:26customer pays because you're because
2:08:29it's happening uh on their uh you know
2:08:33to their volumetric charge in November
2:08:36although you're deferring it now out
2:08:39until uh until uh February but you but
2:08:44we could avoid this with a later advice
2:08:46letter it's just that you're saying that
2:08:48cost of regulatory lag would then fall
2:08:49on the company similar
2:08:52to similar to the questions of you know
2:08:55forward test year end of year historic
2:08:58test year 13-month average all these
2:09:01debates that we have in every case uh
2:09:04having to do with regulatory law okay
2:09:06thank you um and I have one more
2:09:10question uh because I was curious and
2:09:13and I'm sure that the chair is gonna
2:09:15follow up on this uh line of questioning
2:09:18that that he had but in his in his
2:09:20questioning about the Co Creek project
2:09:23it was determined that the it's going to
2:09:25cost about 7.5 million uh dollars to the
2:09:28overall system over 40 years but Mr
2:09:31Gardner said during that questioning
2:09:33that the opportun that the company
2:09:36evaluated uh various different
2:09:37Alternatives and I was just curious do
2:09:39those Alternatives include the electric
2:09:42side of the business or or are you
2:09:44considering Alternatives specifically to
2:09:47the gas side of the business I'm I'm
2:09:48always a little confused it because it's
2:09:51a electric company and a gas company but
2:09:52we're talking about the gas company
2:09:55whether or not we're talking about the
2:09:57Alternatives that are uh considered both
2:10:00on the electric and the gas
2:10:02side yeah great question commissioner I
2:10:06think I can talk at a high level right
2:10:08since I think the the planning of the
2:10:10system and our
2:10:12analysis um alternative analysis
2:10:14processes you know Mr Gardner and Mr
2:10:17Marts can can talk about um at greater
2:10:20length than I can but I think the
2:10:22important thing is is moving forward
2:10:23it's going to be both right it's going
2:10:25to be gas Alternatives what's the
2:10:27cheapest way to get service to these
2:10:28customers requesting Service as well as
2:10:31electrification Alternatives right
2:10:32through our Gip planning rules giips are
2:10:35now going to try to answer that exact
2:10:37question that we've got hey we've got
2:10:39requests in certain parts of the system
2:10:41we're going to need to build it up in
2:10:42order to serve that
2:10:43request can we Electrify can we what are
2:10:47the lowest cost options for for gas
2:10:49assets that that that's all in the
2:10:50purview there I think what's important
2:10:53to note with these projects is you know
2:10:55these these kicked off um or rather
2:10:57these were in
2:10:58serviced um in the 22 and 2023 time
2:11:03frame I don't recall the exact the exact
2:11:07construction start dates on on these but
2:11:09but we're talking about a regime that
2:11:11was not in place fully when these
2:11:14projects were were contemplated
2:11:17and so so what you're saying is that for
2:11:22these projects it was really considered
2:11:24within the gas company but for future
2:11:27projects because of the G process and
2:11:29all that it's G to kind of you'll be
2:11:32considering electric Alternatives as
2:11:34well as gas Alternatives is that that
2:11:36that's that's my understanding although
2:11:39I'm I will be the first to admit I'm not
2:11:41a gas
2:11:42planner with our new get Paradigm the
2:11:45new clean heat incentives you know
2:11:47layered in we've got a whole bunch of
2:11:48new tools now to to think about this
2:11:50moving forward and I think that's going
2:11:51to be impactful okay great thank you and
2:11:56you may or may not know this but I'll
2:11:58you're here so I'll ask you um is has
2:12:02the company been looking at uh
2:12:06presenting Capital Improvements that
2:12:07would be associated with clean heat for
2:12:09example you know either heat pump
2:12:11systems or District heat systems things
2:12:13like that that would lead to reduced
2:12:15emmissions but still allow the company
2:12:17to maintain a capital investment that
2:12:20that uh you
2:12:21becomes a part of their B basically part
2:12:23of the business model so as opposed to
2:12:27you know on the electric side you've got
2:12:29you know incentives for customers or or
2:12:32developers to put in heat pump systems
2:12:35but I'm wondering if on the gas side is
2:12:37you're looking at sort of a move away
2:12:40from uh new natural gas customers if
2:12:43you're looking at you know shifting
2:12:46Capital Investments towards more clean
2:12:48heat Solutions
2:12:51that that's a great question
2:12:52commissioner I I just don't think I'm
2:12:54the right person to answer that Mr Marts
2:12:57is our planning person who can talk
2:12:58about all these Dynamics moving forward
2:13:01I appreciate that all right thank you
2:13:02that's all the questions I
2:13:04have Gman morning Mr P
2:13:09morning um couple questions starting out
2:13:12on LG and the specific application in
2:13:16bricken Ridge um when was the need to
2:13:19alleviate capacity con straints in the
2:13:21barken rdge area first identified by the
2:13:25company oh good question I I know it's
2:13:28been years I do not know the exact date
2:13:31I'm sure
2:13:33um Miss gillin would probably have a
2:13:35more speci perise answer to that um but
2:13:39I know it's been quite a while okay so
2:13:42quite a while before the deployment of
2:13:44the
2:13:44LNG I think recognizing a future
2:13:48capacity constraint is something we've
2:13:49known about from years you know we did
2:13:51deploy an LG solution until the 2022
2:13:562023 heating season so I think that's
2:13:58really when we saw more acute challenges
2:14:00in the short term but I think we've seen
2:14:01a long-term challenge for for a few
2:14:04years now and we've been studying it for
2:14:06a few
2:14:07years um and
2:14:11um did the company begin pursuing any
2:14:14demand reductions through other means in
2:14:17the interm years since the need was
2:14:19initially identified
2:14:29I'm I'm trying to think of of what we've
2:14:32been doing on on the DSM front and what
2:14:35programs we have
2:14:36available um to address that I'm just
2:14:38I'm just not the expert on our our DSM
2:14:40offering so I can't comment too much on
2:14:42on what we have been able to offer
2:14:45through that Suite of programs okay but
2:14:48are you familiar with any specific or
2:14:50targeted program to reduce demand in
2:14:52that project area I believe that the
2:14:55targeted demand areas is a is a recent
2:14:57addition um to our DSM plans it might
2:15:00actually be a pending component of
2:15:02something before the commission at the
2:15:03moment but I'm I'm not very familiar
2:15:05with it beyond that okay um
2:15:07geographically can you help me
2:15:09understand all the area of the
2:15:11constraint and how extensive it
2:15:14is I'm sorry I'm not the engineering
2:15:16expert here I can't give you too much of
2:15:18a um Geographic basis there
2:15:22okay um now I noticed in your testimony
2:15:25and your abuttal you referenced the
2:15:27company's gas demand response pilot are
2:15:30you uh familiar with the
2:15:32pilot at a high level are you familiar
2:15:36that it was um at least as far as I knew
2:15:38being conducted in Summit
2:15:41County uh that I'll take your word for
2:15:44it okay um are there any results to the
2:15:49gas demand response pilot that are
2:15:51compiled or
2:15:53available great question commissioner
2:15:55I'm sorry I'm just not
2:15:57aware do you know um who within the
2:16:00company is where um I found it
2:16:02referenced in your testimony and very
2:16:05barely anywhere else so that's why I'm
2:16:07asking
2:16:08you we don't have any DSM Witnesses
2:16:12specifically in this case just just
2:16:13given the content usually of what a
2:16:15array case entails um but in terms of
2:16:20the company's Witnesses Mr Mar Marts
2:16:22might be closest to that okay um you
2:16:26indicated the company's preparing a
2:16:28Mountain Energy System filing to address
2:16:32um issues around this shortfall and
2:16:35potentially other issues um when will
2:16:37that be
2:16:39filed we're targeting um an October
2:16:43filing on that commissioner um probably
2:16:46late October might slip a week or two
2:16:49but but certainly this fall right in
2:16:50October November time frame um you know
2:16:53as soon as this proceeding wraps up that
2:16:55is our top focus on the regulatory side
2:16:58okay thank you um want to talk a little
2:17:02bit to clarify my understanding of the
2:17:05golden service center issue it could um
2:17:11so if if I've got it right um while
2:17:14preparing it rebuttal case the company
2:17:16determined that the electric entity or
2:17:20Department
2:17:21was the sole
2:17:22owner um of the land is that accurate
2:17:26that's correct who owns the
2:17:30building the the buildings um had
2:17:33allocations were were co-owned both
2:17:36between the electric side of the
2:17:38business and the gas side and there were
2:17:39two buildings that issue right one was
2:17:41the golden service center one was the
2:17:42Table Mountain service center and those
2:17:44have been Consolidated into to one new
2:17:46location now okay okay um so the
2:17:51buildings were co-owned but the land was
2:17:54solely owned by the electric Department
2:17:57correct okay and then talk me through
2:18:00there was a is it accurate there was a
2:18:02gain on the land but not on the
2:18:04buildings that's correct there was a
2:18:06gain on the land I believe in my
2:18:08testimony was cited as $4.8 million and
2:18:12there was a loss on the
2:18:15buildings okay L on the building oh I'm
2:18:18sorry no no go ahead I believe the loss
2:18:21on the buildings was in the magnitude of
2:18:22$2 million of which you know a fraction
2:18:26of that was allocated to the to the gas
2:18:29business okay um and now throughout I
2:18:33think part of the issue it seems staff
2:18:36and UCA take with the situation is is it
2:18:39accurate that taxes and expenses were
2:18:41being split for the whole property
2:18:44including the gas
2:18:48utility for the buildings yes that's
2:18:51correct do you pay tax on the land
2:18:54separate from tax on the
2:18:56building um yes I believe there's
2:18:59there's taxes on property that are that
2:19:01is separate um but Mr frus might might
2:19:04know more on that okay I can ask
2:19:08um so I'm just curious um this just came
2:19:12up in rebuttal kind of the
2:19:14classification of the ownership here so
2:19:17it brings me out a question in my mind
2:19:19in terms of what checks and balance B es
2:19:21the company has in place um you know
2:19:23this seems to me to have been caught
2:19:26because it was disputed by the other
2:19:28parties and then caught by the company
2:19:29in rebuttal can you explain to me a bit
2:19:31about the checks and balances that would
2:19:33prevent um issues like this from
2:19:35occurring and going
2:19:39unnoticed yes happy to I think this was
2:19:42just a consequence of moving a little
2:19:43bit too quickly as we're preparing the
2:19:46the direct case um I I take
2:19:48responsibility for that it's my
2:19:50testimony
2:19:51in in all um transparency I was out for
2:19:54a month on fraternity leave I think that
2:19:55contributed to a little bit here on this
2:19:58specific issue um but you know moving
2:20:01forward you know I think it's incumbent
2:20:03on on everyone to be reviewing these
2:20:04details and and to be fair right we we
2:20:07provided all the spreadsheets with the
2:20:09underlying analysis through Discovery um
2:20:12showing who owned who owned what what
2:20:14what were all the costs entailed you
2:20:16know those those
2:20:18responses um the information those
2:20:20responses showed that it was um the land
2:20:24was all allocated or owned by the
2:20:26electric company and that that's not
2:20:27something intervenor noticed anyway I'm
2:20:30not saying it's their responsibility I'm
2:20:31just saying there's a lot of details
2:20:33here and it was one that that wasn't um
2:20:35uncovered in the process of the
2:20:37preparing direct testimony we did catch
2:20:39it on rebuttal
2:20:41obviously okay um couple questions about
2:20:44gas
2:20:46storage um just kind of roughly can you
2:20:49help me understand understand how the
2:20:51company determines when to utilize their
2:20:54gas storage when to charge or discharge
2:20:56the
2:20:58asset I know that first and foremost we
2:21:00use it as a reliability tool um ensur
2:21:04ensuring safe and reliable service to
2:21:06customers you know particularly during
2:21:08cold weather events um and system
2:21:11balancing needs but but if we need to
2:21:13get more granular than that I'll confess
2:21:15that I'm not the uh engineering expert
2:21:17on that okay um just trying to relate
2:21:22that back um as you're aware there's uh
2:21:25Arguments for other parties for return
2:21:27of short-term debt for the gas in
2:21:30storage um and to my understanding you
2:21:34um dispute that and indicating it
2:21:36creates a disincentive for the company
2:21:39to fully develop and rely on those
2:21:40assets I'm curious if it serves
2:21:43primarily a reliability function is it
2:21:45your assertion that the company will
2:21:47intentionally use it differently if
2:21:49there's a different return
2:21:51on the um gas Commodities stored
2:21:54inside right so this goes a bit to my
2:21:57conversation with uca's
2:21:59attorney I think what we're we're saying
2:22:01is we think our gas storage assets are
2:22:04an incredible asset for our customers it
2:22:07provides a reliability when we need it
2:22:10most uh to think about applying an
2:22:14interest rate on the cost needed to to
2:22:17operate and use that asset to its
2:22:18fullest we think about that interest
2:22:20rate being less than our actual costs it
2:22:23creates a financial penal penalty to
2:22:26relying on that asset for all that we
2:22:28can I'm not saying that's necessarily
2:22:30going to make us use it less it may or
2:22:32may not but it creates a financial
2:22:35penalty that I just don't think has a
2:22:36basis in in that
2:22:39asset so I know you can't track every
2:22:42single molecule right but I'm I'm
2:22:45curious on average how long gas remains
2:22:48in storage it it was generally my
2:22:50understanding that um all or pretty much
2:22:55all gas is expelled uh at the end of the
2:22:59winter season from the storage is that
2:23:02accurate or is that not accurate it
2:23:05that's not um the full picture I I want
2:23:07to avoid um giving a a confidential
2:23:11figure here um during our public session
2:23:13but I I believe my direct
2:23:17testimony um on a confidential page or
2:23:19two presents a table that shows those
2:23:22balances both in decms as well as in
2:23:25dollars what the average is per month of
2:23:27a given year as well as what the lowest
2:23:29amount was in a given month in a given
2:23:31year as well as what the highest amount
2:23:33was in a given month in a given year
2:23:35over the past three years and you can
2:23:37show that it it never gets close to zero
2:23:40it's always a sizable amount of
2:23:41molecules and it's always a sizable
2:23:43amount um dollarwise when you add up all
2:23:46those molecules and apply the a given
2:23:49gas cost to those so okay so that's my
2:23:52my point here is that it's a long-term
2:23:54asset that we're financing with
2:23:56long-term capital that the company
2:23:57relies on um and so anything less than
2:24:00that weighted average cost of capital is
2:24:02a financial
2:24:04penalty you see those figures are in
2:24:06your Rob or direct I believe they're in
2:24:08my direct testimony I no worries
2:24:12no I believe they are in Mr
2:24:17freda's um hearing exhibit 13 six he has
2:24:21a table APF R3 that shows the annual gas
2:24:25storage inventory
2:24:28balance it's in dollars but maybe
2:24:30that'll help I'll take a look no worries
2:24:33I don't need you to delve into the
2:24:34confidential here if we can just
2:24:36refirming that's great um so I'm curious
2:24:38with regard to the the use of um gas
2:24:42storage does the GCA reform um that was
2:24:46recently undergone here which puts a
2:24:48performance incentive um on those gas
2:24:52commodity costs have any influence on
2:24:54your use of gas
2:24:59storage uh that that's a great question
2:25:02I think that's something we we don't
2:25:03know the answer to yet right because the
2:25:06the GCA fuel cost incentive um rle
2:25:10making is still ongoing and so we don't
2:25:12know what that that end result will be
2:25:14but but our comments have really focused
2:25:16on that on saying you know depending on
2:25:19the definitions here depending on the
2:25:20Baseline depending on the risk sharing
2:25:22amounts between the company and
2:25:24customers it could make us think about
2:25:26storage different differently moving
2:25:28forward you know we we don't think
2:25:30that's wise and we we've submitted
2:25:31comments to that effect but but we don't
2:25:34quite know yet okay thanks um couple
2:25:38questions about new business and line
2:25:40extension allowances I think primarily
2:25:42that your colleagues sent to you yes um
2:25:47so
2:25:48um let me see
2:25:53uh so I wanted to go through a few of
2:25:56the new construction projects that the
2:25:58company provided um primarily as part of
2:26:01Mr Gardner's testimony to understand
2:26:04from a policy perspective how those
2:26:07situations might look differently if
2:26:09done today or in the future under the
2:26:11new paradigm sorry of lineing extension
2:26:15policy so um if we can take a look at
2:26:18hearing exhibit 10 5 which is Mr
2:26:22Gardner's direct testimony and it's
2:26:25attachment
2:26:26arg5 so that's kind of a detailed list
2:26:30of the um some of the new business
2:26:33projects I'll I'll give you a second
2:26:35because I know maybe not at the
2:26:37fingertips since it's a different
2:26:41witness thank you so much all right
2:26:43let's go to page two and we're just
2:26:46going to look at project cost if you
2:26:48wanted to um zoom in top right um so the
2:26:52project cost for the Canyon's
2:26:53development which was displayed here by
2:26:55Mr Gardner um showed a total project of
2:27:00just over 5.1 million with excel's
2:27:03contribution or essentially the rate
2:27:05based contribution among all rirs of 2.8
2:27:09million do you see that yes um we could
2:27:14zoom in in the top right if if it's
2:27:16possible if not possible no worries um
2:27:19so I just wanted to understand for this
2:27:21situation how would you see these prices
2:27:24playing out under the new paradigm of um
2:27:29uh since sen it Bill 23
2:27:33291 yeah great question so so from that
2:27:37discussion you
2:27:39had um last week with with Mr Garner
2:27:42I've gone back to these I think there
2:27:44were three projects in question right
2:27:45the the Canyons development the CLE
2:27:47Creek Canyon one and also the Rampart
2:27:49Range I think we singled out as kind of
2:27:51three distinct projects included for
2:27:53additional analysis um that company
2:27:56witness matley also talks about and so I
2:28:00so if I I believe the question is as you
2:28:02just phrased right what would these
2:28:04costs have been if they had applied for
2:28:06service in 2025 once all the line gas
2:28:09line extension changes we've been
2:28:11talking about in in a few proceedings
2:28:13now since last fall are kind of fully
2:28:16implemented and and manifesting
2:28:18themselves um
2:28:20into our actual you know how we'd handle
2:28:22a new project coming at us and so for
2:28:25this project in particular you know it's
2:28:27a a 5.3 million project in total I
2:28:30believe the costs would increase by
2:28:33roughly um
2:28:36200,000 for the customer and the the
2:28:39Excel contribution would would
2:28:41decrease um in light of that that that
2:28:45is entirely a function of the off-site
2:28:4828% credit being eliminated that was
2:28:51eliminated last fall and a fing the
2:28:54company made in compliance with the last
2:28:56gas Ray case
2:28:58decision um so that 28% credit would
2:29:00have gone away I don't believe there
2:29:02were any on-site um costs as part of
2:29:06this this
2:29:09project okay so you say it's about a
2:29:13$200,000 swing that would probably go
2:29:16from in the current example being a sell
2:29:19contribution to being the third party
2:29:22contribution and that is specifically
2:29:25attributed to the elimination of the 28%
2:29:27offsite credit correct so so not a big
2:29:31chunk of these dollars but but still
2:29:32movement in a downward direction for the
2:29:35Excel contribution line okay so for the
2:29:38roughly remaining 2.6 million that would
2:29:43still be an Excel
2:29:45contribution what portions is that
2:29:48covering
2:29:50so so I think a an important piece to to
2:29:54highlight I think for all of these these
2:29:56projects that that were highlighted last
2:29:58week is that there's a new regulator
2:30:01station that's needed you can see that
2:30:03over there on Project type um we're
2:30:05talking about a high pressure pipe as
2:30:07well as a new gas regulator station
2:30:11those regulator stations are are
2:30:13expensive I think as we see here in
2:30:15these costs and they can serve you know
2:30:18up to thousands of customer customers in
2:30:20many situations you know we don't we
2:30:23kind of think of those similar to
2:30:25Electric substations you know they're
2:30:28different assets different companies
2:30:30different systems but kind of serve
2:30:32similar functions and and this to the
2:30:34extent that they can serve whole lots of
2:30:36customers and and we just we don't
2:30:39charge customers for those reg stations
2:30:42in the same way that we tend to not
2:30:44charge customers for substations of
2:30:47course there's extreme examples right
2:30:48where you could say you know a
2:30:50particular customer has such a demand
2:30:52that it it warrants completely
2:30:54allocating those costs to that customer
2:30:57um but but that's not how our current
2:30:59line extension policies
2:31:02work okay and in your understanding of
2:31:05how this is work in the new paradigm um
2:31:081,500 homes 250 Town Homes 325
2:31:12apartments and 2.1 million square ft of
2:31:15commercial would not be enough to
2:31:17trigger an assignment of those
2:31:19regulators Station cost to a specific
2:31:23customer is yes that that's my
2:31:27understanding is there a threshold in
2:31:29which a regulator station would be
2:31:31assigned to a specific customer from a
2:31:34cost responsibility
2:31:42standpoint good question I um there
2:31:45might be in practice I'm I'm I'm just
2:31:48not aware of what that might be
2:31:51okay um let's go down two pages same
2:31:55exercise but it's the C Creek Canyon
2:31:58Pines um if we can zoom in the top right
2:32:02that works but um essentially a um and
2:32:07this one I'm I'm not so sure I think
2:32:09it's 4.3 million is net of the third
2:32:12party contribution which was just below
2:32:15a million dollar for the third party
2:32:17contribution um how would these um costs
2:32:22if you're aware differ under the newer
2:32:24policy Paradigm if done today or in the
2:32:28future yeah I'm I'm sorry commissioner I
2:32:30think I was confusing myself on on these
2:32:32numbers I think in the prior example the
2:32:34cost would have changed by about 900,000
2:32:37so so more than I was saying this
2:32:40project would be at $200,000 change I'm
2:32:42sorry I confused them in my mind um so
2:32:45the the Canyons project the customer
2:32:48contribution would have gone up by 9
2:32:4900,000 so quite a large change for this
2:32:53project it would have been a smaller
2:32:54change of about
2:32:57200,000 um okay is the explanation still
2:33:01the same that the remaining Excel
2:33:03contribution in each case is pretty much
2:33:07specifically attributed to regulator
2:33:09stations or are there other things
2:33:11involved in the Excel contribution
2:33:13portion that would remain under the new
2:33:16paradigm right under the new paradigm I
2:33:19think we're still talking about a lot of
2:33:21those kind Upstream costs right it's the
2:33:23regulator station as well as some of
2:33:25that new piping required you know pieces
2:33:28that we don't um traditionally allocate
2:33:31to to specific customers and so you know
2:33:34again what you are seeing change here is
2:33:36the elimination of the
2:33:3828% offsite infrastructure credit and
2:33:41that's going to increase the the costs
2:33:44um to that customer in in this case by
2:33:47about $200,000
2:33:50okay um is it the the company's position
2:33:54that you've eliminated all incentives to
2:33:56join the gas system um through the
2:34:00changes that have already taken place
2:34:03and um the elimination of the
2:34:0528% offsite credit um is that the
2:34:09totality of what the company sees as
2:34:12incentives to join the
2:34:14system we think we're abiding by that
2:34:18that directive Commission commer that's
2:34:20a director both from sb23 291 to
2:34:23eliminate new incentives there also
2:34:25there's also a commission role um
2:34:27regarding incremental costs we think
2:34:30we're abiding by those those directives
2:34:33you know having said that I will admit
2:34:34that there's complexity here right I
2:34:36don't think there's a a universal
2:34:38definition for for what incentives means
2:34:41I don't believe that was defined Beyond
2:34:44um customer allowance for construction
2:34:46allowances rather in the statute nor is
2:34:48there a very clear definition for what
2:34:50incremental costs mean in the rle and
2:34:53and that's not a critique at all it's
2:34:54just saying like hey there's there's
2:34:56complexity here I think we we need to
2:34:58keep talking about this because it's
2:35:00clearly an important issue to the
2:35:02commission it's important issue for us
2:35:03and obviously to our customers and and
2:35:05Builders and developers and so I think
2:35:08there'll be venues to continue
2:35:09discussing that you know we we cited I
2:35:12believe in Mr burman's rebuttal
2:35:14testimony saying we're happy to keep um
2:35:16studying this and bring forward
2:35:17additional analysis in our next guest
2:35:19phase two proceeding um which will be
2:35:22forthcoming in the next year I think by
2:35:24the end of 2025 is what we said as well
2:35:28as in the the upcoming M doet that the
2:35:30commission needs to to open um following
2:35:34the clean heat decision on gas cost
2:35:36causation okay um and just just a little
2:35:40more probing on it today though um so
2:35:44for the C creete Canyon Pines which we
2:35:46have up uh this is the one Excel contrib
2:35:49ution 4.3 million and you had indicated
2:35:53under the new paradigm you would expect
2:35:55perhaps that would drop
2:35:56$200,000 is that accurate I believe
2:35:59that's correct no in this case I
2:36:02understand that the project entails um
2:36:05reinforcement of an upstream pipe in
2:36:07order to deal with the capacity
2:36:09increases as well as a new regulator
2:36:12station is that fair yes that's what we
2:36:15say in the project typ line yes okay so
2:36:18if we're we're at .1 million when we
2:36:21deduct your your 200,000 if we're in the
2:36:24hypothetical new paradigm um does that
2:36:27include the Upstream pipe reinforcement
2:36:30and the regulator station in this
2:36:32example it does yes that 4.3 million for
2:36:35the Excel
2:36:36contribution is is all those costs all
2:36:39those Upstream costs are part of
2:36:41that okay and is the um 3000 foot main
2:36:45reinforcement upstream or Downstream of
2:36:48the regulator station
2:36:53that is a good question I'm not sure I
2:36:55think it could be either um so some with
2:36:57more knowledge of this specific project
2:36:59would be able to answer that um okay
2:37:03yeah sorry um I'll point out you Dre a
2:37:05coary to the Electric System whereby the
2:37:07regulator station is sort of the
2:37:09substation now if a new Electric
2:37:12customer were to require a new feeder
2:37:14from a substation Downstream of the
2:37:16substation is that the customer's
2:37:18responsibility cost
2:37:20wise I think on the electric side
2:37:23customers can bear some responsibility
2:37:25for those feeders but again I think
2:37:27that's
2:37:30a that's dependent on the specifics of
2:37:32the
2:37:33project okay but I think whether or not
2:37:37this main reinforcement is upstream or
2:37:39Downstream of the regulator station it's
2:37:42your perspective moving forward under
2:37:44the new paradigm that that main
2:37:46reinforcement would be um Public
2:37:48Services kind contribution for the
2:37:52project I think main reinforcements are
2:37:56a lot of times some of the costs that
2:37:57the 28% credit um would would go against
2:38:01and so um I think there's a lot of cases
2:38:04in which those cost
2:38:07responsibilities will be on the
2:38:11customer um you know things Upstream of
2:38:14the regulator regulator station probably
2:38:17not
2:38:19okay um just a couple final questions
2:38:24for you on prohibited expenses in
2:38:27relation to Senate Bill
2:38:3023291 sure um so you have a good amount
2:38:34of focus related to uca's discussion on
2:38:38lobbying associated with trade
2:38:40organizations um but I wanted to look a
2:38:44little broader when we look at that
2:38:47issue um
2:38:50uh let me see so looking at um at the
2:38:54legislation I don't think we need to
2:38:56bring it up I think you're probably
2:38:58familiar enough with the general
2:39:00concepts there um there's a bullet e
2:39:04under the prohibited expenses in which
2:39:07case a utility shall not recover from
2:39:09its customers whether part of Base rates
2:39:12the rider or other charges its expenses
2:39:15for lobbying or other activities meant
2:39:17to influence local state or federal
2:39:21legislation ordinances Etc um so just
2:39:24curious related to this aspect so not
2:39:27related to a Trade
2:39:28Organization but have any internal
2:39:32Public Service Company of Colorado or
2:39:34Excel employees engaged over the past
2:39:36few years in working on potential
2:39:39legislation U within
2:39:41Colorado yes and and we summarize that
2:39:44in our report this
2:39:46spring um in in light of this new
2:39:49statute right as part of our annual
2:39:51report we now have a a separate or
2:39:54parallel report on prohibitive expenses
2:39:56in that we detail company um internal
2:40:00company employees who are registered as
2:40:02lobbyists and we include those costs or
2:40:05those portion of those employees times
2:40:06that are directed at lobbying and you
2:40:08know we've always not recovered those
2:40:11costs okay so those would be specific
2:40:15employees who are registered
2:40:17lobbyists correct okay is there time of
2:40:21other internal employees either policy
2:40:23employees or Executives that goes to
2:40:26counseling those Lobby employees
2:40:28lobbying employees about what actions or
2:40:31positions they should be
2:40:34taking I'll confess I'm not sure how how
2:40:37other individuals track their time I
2:40:39believe our um prohibitive expenses
2:40:41report just laid out those um several
2:40:45individuals who engage in these
2:40:47activities on a regular basis
2:40:50okay um so it doesn't sound like other
2:40:54employees track anytime that relates to
2:40:57kind of interaction with those
2:40:58individuals that could relate to
2:41:00lobbying the on the company's behalf I'm
2:41:03not sure if there are are um if there is
2:41:06that that tracking I I'll confess I'm
2:41:08not the expert there but our our
2:41:11privative expenses report did not
2:41:13include that information it was just the
2:41:16um the folks who engage on this as a
2:41:17regular part of their job
2:41:20okay and can you direct me just as to
2:41:22where that filing is more
2:41:25precisely yes it was
2:41:29um it was part of our um annual report
2:41:33to the commission um I don't have the
2:41:36proceeding number but it will be an
2:41:38mocet I'm happy to to find that
2:41:40proceeding and we can make sure we get
2:41:42that to you okay perfect um so I wanted
2:41:47to just go back to the organizational as
2:41:49aspect of the lobbying Prohibition in
2:41:52Senate bill
2:41:5429291 and a separate line item when I
2:41:57just
2:41:58discussed one I think you're quite
2:42:00familiar with another prohibited expense
2:42:03is organizational or membership dues or
2:42:06other contributions to any organization
2:42:08Association institution Corporation or
2:42:11other entity that engages in lobbying or
2:42:14similar activities it goes on a little
2:42:16bit but I think we got the gist y um now
2:42:20your argument within your rebuttal
2:42:22appears to be that only the portion of
2:42:24your association dues that can be
2:42:27attributed to lobbying um kind of on a
2:42:31percentage basis should be disallowed is
2:42:33that accurate that is correct that's how
2:42:35we've interpreted that line um and and
2:42:38I'll I'll admit I've read that line many
2:42:40times I think there's a uh it's unclear
2:42:44exactly what it's meant but but that is
2:42:46how we've interpreted
2:42:47it okay I was going to ask I know you're
2:42:50not a lawyer but you've got a lot of
2:42:53relationship to Senate bill
2:42:5529291 in your testimony so I was just
2:42:58wondering if there was a specific
2:43:00statutory reference or language uh
2:43:03buttressing the company's argument that
2:43:05only a portion of those dues that relate
2:43:08to the act of lobbying should be
2:43:10excluded right well I think if you look
2:43:13at the plain language of that that
2:43:15little um section that you referenced
2:43:18you know I don't have the language in
2:43:19front of me but but I you know just
2:43:21paraphrasing it for a moment it says you
2:43:24know excluding lobbying and related
2:43:27expenses um from the organizations that
2:43:29are conducting that work and so the
2:43:31company read that to mean exclude the
2:43:33lobbying expenses and that's not
2:43:35necessarily excluding everything else
2:43:37that that organization provides to the
2:43:39company and to its customers and we see
2:43:41a lot of value from those other services
2:43:44whether we're talking about eii or I
2:43:46know that the AG do is came under um a
2:43:49lot of discussion from other intervenors
2:43:51in this proceeding but we we think that
2:43:53there's a lot of value there on Research
2:43:55provided understanding industry Trends
2:43:57things that make us as a company better
2:43:59at what we do we think there's real
2:44:01value there and so the invoices that we
2:44:03receive from these organizations split
2:44:05out those costs so we can very clearly
2:44:08identify the lobbying portions and then
2:44:11not recover those moving
2:44:14forward okay those are my only questions
2:44:16thanks thanks
2:44:20Miss uh Boule can you hang on for
2:44:22another 10 minutes or do you need a
2:44:25break I'm good for another
2:44:2710 um Miss Samar PCO did you have H
2:44:31something before I start just want to
2:44:34make sure the witness is okay going
2:44:36another 10 minutes fair enough I've been
2:44:39managing to do you need a bathroom B Mr
2:44:42P are you good H chair if you're good
2:44:45I'm good all right we'll see
2:44:50uh I guess um just see if I can get a
2:44:53little more detail um for new business
2:44:55uh customers how do you determine the
2:44:58exact amount of the customer uh
2:45:00contribution it looks like some
2:45:02customers pay half and others a quarter
2:45:05of the total Capital costs is this
2:45:07setting of the customer contribution
2:45:10fixed by tariff or does a negotiation be
2:45:13between the customer and the
2:45:15company uh where you have a decent
2:45:17amount of discretion can you just
2:45:19give me some sense to how that
2:45:21allocation Works sure it's not a
2:45:25negotiation right the for Comm let's
2:45:27start with large commercial projects
2:45:29right because those are going to be um
2:45:32more expensive and there's going and
2:45:33there's going to be estimates on those
2:45:35projects in every instance and So based
2:45:38on those estimates for what it's going
2:45:40to cost to provide service to that
2:45:42customer we assess okay what portion of
2:45:44this would you know in the previous
2:45:46Paradigm right where there's an offside
2:45:48credit there's a um distribution main
2:45:52customer allowance and then there's also
2:45:54a service lateral customer allowance you
2:45:56know which which parts of the project
2:45:58fall into which category at which point
2:46:00you know that 28% credit the casa apply
2:46:04which then reduce the customers
2:46:05responsibility it's it's very formulated
2:46:08you know moving forward right we don't
2:46:09have the off-site credit we don't have
2:46:11the on-site customer allowance nor do we
2:46:14have the the service leral customer
2:46:16allowance and so by definition there
2:46:17will be more more cost responsibility on
2:46:20the customer moving forward and and
2:46:22again it's it's not a negotiation these
2:46:24are estimated costs for large commercial
2:46:27projects and they're allocated as such
2:46:30you know for residential projects we try
2:46:31to streamline a little bit more and we
2:46:33have you know standardized cost to make
2:46:35it more um simple and
2:46:39transparent given uh Mr Gardner's
2:46:42testimony it seems like uh for the Coal
2:46:45Creek Canyon Pines project there was a
2:46:47very large per
2:46:49home subsidy you know something like 70
2:46:52or
2:46:5380,000 per home as part as part of
2:46:57setting customer cost contributions for
2:46:59new
2:47:00developments uh do you conduct an
2:47:02analysis of whether the additional
2:47:04revenues exceeds the cost you know
2:47:07particularly uh for setting the customer
2:47:11contribution good question I I don't
2:47:13believe we assess that on a project by
2:47:16project basis because the purpose of our
2:47:19previous line extension policies were to
2:47:22average these things out across
2:47:24thousands of customers and thousands of
2:47:26new requests every year right so in the
2:47:29past right a construction allowance
2:47:30equates what new customers are paying um
2:47:34in average embedded rates along with
2:47:36what existing customers are paying so
2:47:38now without that support right um I know
2:47:43I've mentioned it several times now
2:47:44right but without the the 28% offside
2:47:46credit without the casa new customers by
2:47:49definition will be paying more um than
2:47:52existing customers and so now there's a
2:47:54subsidy from new to
2:47:57existing well in this case the uh new
2:48:00line policy doesn't get you anywhere
2:48:03near uh break Break Even um that's
2:48:07correct on I'm speaking on average chair
2:48:10bu so do you have any uh concerns if and
2:48:16where would we get this fixed it sounds
2:48:18like we'd have to modify uh the Tariff
2:48:21in the The Phase 2 decision in a phase
2:48:24two Gaz rate case if we want try and
2:48:28address
2:48:29this so you're saying to fix what what
2:48:32piece exactly to avoid having existing
2:48:37customers subsidize new customers and
2:48:40may out in the wash but I I have not
2:48:43seen anything to suggest it does and you
2:48:47know in the last case we required
2:48:49supplemental direct and it was very
2:48:51unconvincing about whether it came out
2:48:54in the wash or not and I think that was
2:48:56reflected in our final order so is there
2:49:01that if we wanted to limit the cross
2:49:04subsidies from existing customers to new
2:49:07customers we' do that in a phase two gas
2:49:10Ray
2:49:11case yeah I think we can do that anytime
2:49:14we want to adjust our our gas line
2:49:16extension policies it can be in a um in
2:49:20a phase one or in a phase two and so yes
2:49:23the upcoming phase two will is is
2:49:25certainly a good venue for this and I
2:49:27would just note that if you know we're
2:49:29we're talking on average here right I
2:49:30think this particular
2:49:32project is is an example on the extreme
2:49:36side right where there is a large
2:49:38subsidy from existing customers to
2:49:40support this new development I'm simply
2:49:42talking on average right across the
2:49:44system across all these new um service
2:49:47requests you know in the past Paradigm
2:49:49you would see those tend to average out
2:49:51and I'm what I'm arguing is that in this
2:49:53new paradigm without these additional
2:49:56incentives um there almost certainly is
2:49:59a is a new subsidy now from new
2:50:01customers to existing customers although
2:50:03this project is not a good example of
2:50:05that I have yet to see any evidence
2:50:09supporting the factual accuracy of that
2:50:12statement despite asking for it uh and I
2:50:16think that was the finding in the last
2:50:17gazer case
2:50:20um any concerns if we requireed this
2:50:23type of uh analysis for new customers
2:50:27like this development uh where we just
2:50:30required the the uh uh customer
2:50:35contribution to either equal to the
2:50:36formula or to equal to make sure there's
2:50:40no cross subsidy between the the
2:50:43customer and existing customers any
2:50:46concerns if we tried to do that in this
2:50:49g r
2:50:52case it's a good question I think that
2:50:55there
2:50:56are
2:50:59um I think there's a lot
2:51:02of complicated elements and and Nuance
2:51:05to that to our line extension policies
2:51:08right by definition as we've been
2:51:09talking about here I I think we'd need
2:51:12more investigation into it and so if
2:51:14that if bringing forward additional
2:51:17analysis in the phase two helps that
2:51:20process I think that's great but I think
2:51:22we need more discussion there um before
2:51:26help me understand why this uh kle Creek
2:51:29Kenyon Pines project should be allowed
2:51:32to keep going forward like this where
2:51:35we're providing
2:51:37$80,000 home subsidies to homes that
2:51:39cost in excess of $5
2:51:42million uh especially given the guidance
2:51:45from the legislature which it sounds
2:51:46like Main marginally
2:51:49reorient that subsidy why shouldn't we
2:51:52just in this case um especially and you
2:51:55know the why shouldn't we just stop this
2:52:00now I mean there was an example of this
2:52:02in the prior Cas Ray case I don't know
2:52:05how isolated it
2:52:07is yeah I understand that without a a
2:52:10full picture of all projects it's it's
2:52:11hard to prove the point absolutely chair
2:52:14I understand that I think the important
2:52:17point is is to recognize that there's
2:52:18also an obligation to serve and so we're
2:52:21trying to wrestle with these with these
2:52:23Concepts right of putting more cost
2:52:24responsibility onto the customers
2:52:26exploring more Alternatives both on the
2:52:28gas side as well as the electrification
2:52:30side with our new clean heat tools and
2:52:33gas planning rle roles at our disposal
2:52:37you know I think it's a different
2:52:38Paradigm moving forward but there's
2:52:39still an underlying obligation to serve
2:52:41you know despite all of that you know
2:52:43working with the customer exploring all
2:52:45these Alternatives planning as far in
2:52:47advance as we can
2:52:49they still want gas and they don't want
2:52:51to Electrify and they still want to
2:52:52build where they want to build you know
2:52:54we've got a responsibility to to serve
2:52:57that you know the cost allocation from
2:52:59there I think as I've been saying is is
2:53:01certainly worthy of of further further
2:53:04exploration well if you're subsidizing
2:53:06the home $80,000 a house then it's an
2:53:09easy decision that they want gas I guess
2:53:12do you view the OB do do you view that
2:53:14there's an obligation to serve uh at
2:53:17below your cost of serving
2:53:23them I'm I'm sorry chair I'm not sure I
2:53:25understand the question you believe the
2:53:27obligation to serve requires you to uh
2:53:31serve the Cur Canyon project below
2:53:35significantly below your actual cost of
2:53:37serving them that do you think that's
2:53:40you know the obligation to serve has to
2:53:43be interpreted in that
2:53:45way I'm not a lawyer I'll be the first
2:53:49but you're the one who just claimed the
2:53:51obligation to serve so seems like a fair
2:53:55question totally agree yeah I I think I
2:53:59think when we think on averages right
2:54:01that that's what gets us comfortable
2:54:02with that although I understand for this
2:54:05particular project that those economics
2:54:08the economics of the project do not pan
2:54:10out as Witnesses Matt Lee um what one of
2:54:14his supplemental direct testimony
2:54:16exhibits proves right even our number so
2:54:19yeah the revenues from this project are
2:54:20not going to offset the cost to connect
2:54:22that customer to the system we don't
2:54:24deny that we're I'm simply saying on
2:54:27average that that's not the case and so
2:54:30the obligation to serve is is a kind of
2:54:32crucial element there of what else as
2:54:35the company what else are we supposed to
2:54:38do yes we're offering electrification
2:54:39incentives and Alternatives so we think
2:54:41this looks different moving forward but
2:54:44if at the end of the day even if the
2:54:45customer rejects all of that
2:54:49we we have to provide them the the
2:54:50service being
2:54:51requested one last question in this line
2:54:54is there evid any evidence on this
2:54:56record that would support your uh
2:54:59assertion that on average the new
2:55:02customer the cost of serving new
2:55:04customers including Peak design day
2:55:07demand uh increases uh that the revenues
2:55:12from all that offset the cost any
2:55:14evidence on this record that you can
2:55:16point me to that that uh supports that
2:55:19assertion I'm making that assertion on a
2:55:22theoretical basis that there's not a
2:55:25analytical um piece of evidence in this
2:55:27testimony that proves that okay um uh
2:55:32just one last line of question it's on
2:55:34page 18 line 17 of your supplemental
2:55:36direct uh testimony hearing exhibit
2:55:39122 you say that just under 10,000
2:55:43electric uh customers were disc
2:55:45disconnected in 2023
2:55:49uh is that consistent with your memory
2:55:52and I guess we're gonna yeah there it is
2:55:53line
2:55:5617 you see that yes I do and as you
2:56:01point out in your supplemental direct
2:56:03testimony this commission mentioned
2:56:055,000 customers were disconnected in
2:56:082023 and I guess I was and am confused
2:56:13if most customers are combined electric
2:56:15and gas customers with a joint Bill how
2:56:17do you know what whether the failure to
2:56:19pay is on the electric side or the gas
2:56:28side we'd be able to tell that from our
2:56:32our total aares data um assessing by a
2:56:36customer you know do they have balances
2:56:38on both for for dual dual service
2:56:40customers do they have balances on both
2:56:42their gas service and their electric
2:56:44service this line of my testimon was
2:56:46simply saying you know how we affect
2:56:48uate that disconnection it's often
2:56:49through the electric
2:56:51side okay and for a combined customer
2:56:54who fails to pay do you shut off both
2:56:56gas and electric or just gas or just
2:56:59electric or depend in what season
2:57:03we right good good question I think what
2:57:06what the company's communicating here is
2:57:08that if it's a dual service
2:57:10customer um that is up for disconnection
2:57:14that is
2:57:15effectuated largely through the through
2:57:17the electric C
2:57:18right because you won't be able to power
2:57:20a furnace or boiler without
2:57:23electricity I can't say that's always
2:57:25the case I believe that's the
2:57:26predominant
2:57:28practice okay you know I don't think we'
2:57:31fully gone through the disconnect data
2:57:33yet and it's s sounds like we may need
2:57:36to get the electric data to understand
2:57:38what happened in
2:57:402023 but does the company ever go
2:57:42through the data and look for patterns
2:57:44by ZIP code race education or other um
2:57:48potentially relevant uh
2:57:54elements good question I'm sure our
2:57:56customer care Department analyzes those
2:57:59Trends um specifically to to know kind
2:58:02of where to target our Outreach and and
2:58:05bill assistance programs too um but but
2:58:08I can't speak specifically on on what
2:58:10they do and if we wanted to better
2:58:13understand the patterns by ZIP code race
2:58:15education uh any advice about how to do
2:58:18that in the order in this
2:58:22case I think we'd be relying on those
2:58:26demographic or socioeconomic factors on
2:58:28publicly available information you know
2:58:30we're H we're happy to help the
2:58:31commission compile that based on census
2:58:34data or any other information but I just
2:58:36want to make clear that the company
2:58:37doesn't hold that information on each
2:58:39customer ourselves we we'd have to um
2:58:42look to public sources for that all
2:58:45right uh I think that's uh all I have uh
2:58:49um let's convene again at
2:58:531110 uh I guess m missar PCO if you
2:58:57could uh give us an update about where
2:59:00we stand on the um capital investment
2:59:03side I think you guys uh committed to
2:59:06get us that data um and I did not see it
2:59:10in the E filing so if you can let us
2:59:11know where we uh stand on that uh that'd
2:59:14be greatly appreciated we'll do that
2:59:17after the break
2:59:20okay I just need to consider of course
2:59:23of course uh maybe before launch and I
2:59:26guess uh commissioner Gilman and
2:59:28commissioner plant would you guys be
2:59:30okay if I started off uh questioning
2:59:32with uh Mr matley so I can get my
2:59:34questions and I may have to uh disappear
2:59:38for a little while after lunch would
2:59:39that be okay with you guys yeah of
2:59:42course not a problem for me and I just
2:59:44wanted to give an early heads up about a
2:59:46break we'll have to take the afternoon
2:59:48for my schedule if I'm running the
2:59:51hearing um from uh 4:10 or just before
2:59:5510: to about
2:59:574:30 so we'll try and work that in uh
3:00:01just wanted to give everyone that heads
3:00:03up but I know I'll need a break at that
3:00:06time you're in charge you set the breaks
3:00:09so uh thanks all Let's uh uh reconvene
3:00:14at uh 11:10 with uh redirect and we'll
3:00:18jump to Mr mat thank
3:00:46you
3:01:16e
3:01:46e
3:02:16e
3:02:46e
3:03:16e
3:03:46e
3:04:16e
3:04:46e
3:05:16e
3:05:46e
3:06:16e
3:06:46e
3:07:16e
3:07:46e
3:08:16e
3:08:46e
3:09:16e
3:09:46e e
3:10:28uh
3:10:30missart Cheo back to you for rate uh
3:10:34redirect or an update on the uh the one
3:10:38piece of
3:10:39information uh I can provide a brief
3:10:41update on the capital expenditure
3:10:43request that the commission had we are
3:10:46we are working on that had intended to
3:10:48provide it after the lunch break um and
3:10:51address it at that point if that's all
3:10:53right with you
3:10:55chair that Grant thank
3:10:59you redirect over to you thank
3:11:06you still morning so good morning Mr P
3:11:09good
3:11:11morning uh you were asked a number of
3:11:13questions regarding affordability
3:11:18can you please elaborate on why it is
3:11:19not appropriate to character
3:11:21characterize affordability solely in
3:11:23relation to the company's rate request
3:11:25in this
3:11:27case yes as I was saying a little bit in
3:11:30my discussion
3:11:31earlier there's a lot of different
3:11:33lenses to apply on the affordability
3:11:35conversation you know my testimony talks
3:11:38about how we compare to other utilities
3:11:40both on rates and monthly bills and I
3:11:43believe Miss gillan's testimony talks
3:11:45about onm comparisons across utilities
3:11:48there's also the energy burden factor of
3:11:50all this that the energy and security
3:11:52working group has been spending a lot of
3:11:53time thinking about um the impacts of
3:11:56every customer are going to be different
3:11:59and and I think that the most optimal
3:12:01way to address that is through
3:12:03programmatic offerings and Outreach to
3:12:05get the support to customers that that
3:12:07are the most vulnerable and and
3:12:09otherwise be thinking about it on you
3:12:11know do we have the right planning tools
3:12:13and and cost review processes in place
3:12:16to make sure we're we're choosing the
3:12:18most appropriate option for
3:12:20customers uh at every
3:12:23juncture do you recall the questions
3:12:26from Council for UCA regarding the
3:12:29$61,000 a year teacher
3:12:31hypothetical yes you expressed that you
3:12:34disagreed with that hypothetical would
3:12:36you like to elaborate on that at
3:12:40all yeah I believe as I indicated in
3:12:43that discussion that there are a whole
3:12:45bunch of scenarios we could consider for
3:12:47particular households right um one two
3:12:50three earner households lots of children
3:12:52or no children um the the exact um zip
3:12:57code that that they reside in and other
3:12:59challenges that might they might face in
3:13:01that area you know whether or not we're
3:13:03mapping energy burden
3:13:05specifically um or other ways that that
3:13:08customers could be
3:13:10vulnerable it doesn't lend itself to
3:13:12just one analysis I think we have to
3:13:15apply a few different lenses to it and
3:13:16again again that's work that we're that
3:13:18we're leading through the energy and
3:13:20security working group and and we hope
3:13:21to bring forward you know new updates to
3:13:24the commission um in that front this
3:13:27year uh speaking of the energy energy
3:13:31insecurity working group can you please
3:13:33elaborate on what work remains to be
3:13:35done and how you expect the results from
3:13:37that collaborative effort will be
3:13:38brought forward to the Commission in the
3:13:42future yes so now that we've we've
3:13:44settled in on a few different ways to
3:13:46think about that total population of
3:13:48energy burdened customers and again that
3:13:50really depends on how you define that
3:13:53we've we've gone through some estimation
3:13:55approaches that use publicly available
3:13:57information from the Census combined
3:14:00with our energy use information on both
3:14:03electric and gas customers we've also
3:14:05gone some gone down some more granular
3:14:07paths whereby we're trying to estimate
3:14:09at a household level what their specific
3:14:11energy burden in in energy burden is
3:14:15using information that the um company
3:14:18subscribes to and so you know now that
3:14:20we're we've got a good handle on that
3:14:22what we've been talking about in recent
3:14:24months with stakeholders is okay now
3:14:26what now what do we do what additional
3:14:29programma programmatic offerings could
3:14:31help reduce that burden for for
3:14:34customers and how do we allocate scarce
3:14:36resources really at the end of the day
3:14:39um so so we're not through that process
3:14:41yet we're still trying to to map some of
3:14:43these elements to figure out um which
3:14:46additional households are our energy
3:14:47burden but not falling into our programs
3:14:50and and so we hope to come forward with
3:14:52with some proposals um or at least
3:14:54updates to the Commission in the near
3:14:56future but we still need to have these
3:14:57these discussions with with stakeholders
3:15:00and and I confess that there's only so
3:15:02much of us internally at the company
3:15:04that that can be focusing on all the
3:15:06priorities at the same time so this this
3:15:08will be something I'm turning back to uh
3:15:10at the conclusion of this
3:15:13proceeding and is UCA a participant in
3:15:16that working group
3:15:18object on relevance
3:15:23grounds Cheo I would I would respond
3:15:26that the actual report that was filed
3:15:28was pulled up uh and admitted into
3:15:30evidence in the record I think it's a
3:15:32fair
3:15:33question uh objection over
3:15:37world uh Mr P if you could answer uh the
3:15:41question sure we've included um lots of
3:15:46stakeholders B basically anyone and
3:15:47anyone who's who's interested UCA has
3:15:50been on our distribution list for that I
3:15:52actually can't recall if they
3:15:54participated in any of our virtual
3:15:56meetings um to date I I don't recall so
3:16:00but but yes they are
3:16:02included thank you turning back to
3:16:06um your testimony that the rate making
3:16:09process should not explicitly reduce or
3:16:11disallow costs in light of affordability
3:16:14do you recall the commission's mission
3:16:16statement and the factors that it
3:16:19considers yes I do recall could we
3:16:22please pull up here in exhibit 152 out
3:16:24of the company's
3:16:26box which is a document entitled the
3:16:29Colorado Public Utilities Commission
3:16:31back
3:16:41sheet are you familiar with this
3:16:43document Mr P yes I've seen this before
3:16:50can you please take a look at the second
3:16:53paragraph and read the second sentence
3:16:56into the
3:16:57record is this the the pu's mission uh
3:17:01while the
3:17:05pu's second
3:17:08paragraph Yes I sorry about that while
3:17:12the PC's Authority has changed over the
3:17:13years based on legislative and policy
3:17:15decisions the Pu is primarily
3:17:18responsible for working in the public
3:17:20interest by ensuring utility customers
3:17:23have access to Safe reliable and
3:17:24reasonably priced Services while
3:17:26ensuring utility service provider
3:17:28providers have an opportunity to earn a
3:17:31reasonable return on
3:17:33investment and in this mission statement
3:17:36the The
3:17:38commission's Authority is multi fasted
3:17:41would you agree with that yes
3:17:47and is um there anything in particular
3:17:51in this statement that you just read
3:17:52that you would like to point
3:17:54out yes it's the balancing of all of
3:17:57these factors right that that's the hard
3:17:59job of the commission and having worked
3:18:02for the the Colorado Public Utilities
3:18:03Commission in the past I can attest to
3:18:06to how challenging that is and I I just
3:18:08want to highlight that the you know
3:18:10balancing safe reliable and reasonbly
3:18:12priced Services needs to be both from
3:18:14the utility perspective as well as the
3:18:15customer perspective
3:18:17uh and finding that that right approach
3:18:19through it all is is hugely important
3:18:22for for everyone involved and and would
3:18:24just highlight the the reasonably priced
3:18:25Services line in particular and we
3:18:27compare ourselves to our our peers all
3:18:29the time and we think we stack up really
3:18:31well especially when considering all the
3:18:34forward leaning actions we have on on
3:18:36decarbonization both on the electric
3:18:37side and the gas
3:18:39side uh the company would seek admission
3:18:41of hearing exhibit
3:18:43152 um miss kmon any uh
3:18:47objection no thank you uh so
3:18:54admitted during the course of uh cross
3:18:58examination Council for UCA walked
3:19:01through several public comments filed in
3:19:03this case do you recall those questions
3:19:06yes I do would it be fair to say that
3:19:09the company has nearly 1.5 million
3:19:11customers and the public comments here
3:19:13represent a very small number of our
3:19:15customers EXP expressing
3:19:18concerns yes we have about 1.5 million
3:19:21gas customers both commercial and
3:19:24residential and I believe we've received
3:19:26a few hundred um comments into this
3:19:29proceeding which would just be a
3:19:31fraction I believe you briefly spoke as
3:19:34to other comments aside from those
3:19:36related to affordability that were
3:19:38contained in the filed public comments
3:19:40could you please summarize those based
3:19:42on your
3:19:44recollection yes that there there was
3:19:46one particular that was that was of note
3:19:49and that was a you know the voice of our
3:19:53um our development Community right the
3:19:56the folks that are building new housing
3:19:58building new commercial developments um
3:20:02to accommodate the growth that we're
3:20:03seeing in this region that that really
3:20:04benefits everyone and just noting the
3:20:07the importance of optionality the
3:20:09importance of gas service to customers
3:20:11that's reliable and reasonably priced um
3:20:14was one item in particular that was that
3:20:16was notable to me and just underscores
3:20:18that there's a whole lot of
3:20:20opinions on on any topic when you go out
3:20:23to the public and just recognizing that
3:20:25that distribution of opinions is is
3:20:28important were there also public
3:20:31comments indicating a a desire to have a
3:20:35choice to choose gas
3:20:38service yes I I believe is as part of
3:20:41that um from the the Builder and
3:20:45developer community that that choice is
3:20:47a a key aspect to what they they often
3:20:55highlight now questions from Council for
3:21:00UCA seem to infer that the company's
3:21:03rate request here harms customers do you
3:21:05agree with that object um I think that
3:21:09form of the question is argumentative
3:21:16I can rephrase my
3:21:18question
3:21:20uh what
3:21:23um what is your perspective
3:21:27on the company's requests in this case
3:21:32and the benefits received by our
3:21:37customers the company H has to make sure
3:21:41it's in a strong financial position to
3:21:43to continue to provide safe and reliable
3:21:47services to customers and it's it's very
3:21:50easy in a ray case proceeding to to only
3:21:53F focus on on half of that right only
3:21:55focus on the costs of providing that
3:21:57service but we also have to remember
3:21:59what we're providing at the end of the
3:22:01day and the value that that that good
3:22:03and service provides to customers and
3:22:06and we're we're transporting a
3:22:08combustible natural gas every day to
3:22:11customers homes and places where they
3:22:13they live and work and to do that
3:22:15reliably and safely requires the
3:22:19dedication of thousands of people and
3:22:21serious investment to make sure that
3:22:24that that all those structures are in
3:22:25place moving
3:22:27forward and you know that that value
3:22:31piece again there's there's lots of lens
3:22:33to to apply here um comparing ourselves
3:22:36to other utilities is is often the route
3:22:39that that we take there and making sure
3:22:41that we're stacking up well in terms of
3:22:43how our our services are priced is a key
3:22:46goal of
3:22:47ours in in that regard could we please
3:22:50pull up hearing exhibit 116 and turn to
3:22:53page
3:23:0610 is this what you were referring to in
3:23:09the testimony you just provided your
3:23:11figure JJ p- d-1 which contains a
3:23:14residential average rate comparison Gas
3:23:17Utilities th that's correct and this is
3:23:19a comparison of the 50 largest gas
3:23:23providers in the country and you can see
3:23:25that as we stand here today we're well
3:23:28below average and with our proposal you
3:23:31know it's kind of counterintuitive that
3:23:33we drop even further off to the left but
3:23:35that that's simply a fact of gas prices
3:23:38have come down a lot since 2022 which is
3:23:40the base year for this
3:23:42data um and so all all costs are part of
3:23:46this figure not just base rates it's
3:23:48it's base rates and commodity
3:23:50costs so either way you look at it you
3:23:53know we're we're well below
3:23:55average could we also scroll down to
3:23:57figure jjp
3:24:01D2 can you please elaborate on the
3:24:03importance of this data which I believe
3:24:05is showing the residential average
3:24:06monthly bill comparison of Gas
3:24:09Utilities right so you know customers
3:24:12pay bills at the end of the day um that
3:24:15that's determined by rates and so when
3:24:16you look at it from a total bill
3:24:18comparison we're we're still below
3:24:19average again this is a comparison of of
3:24:22us to the other 50 largest providers in
3:24:25the country and and we we still stack up
3:24:31well and could we also scroll down to
3:24:34figure jjp
3:24:36D3 which I believe is on page
3:24:4112 and I believe in this figure you show
3:24:43the company's non-fuel rates have larg
3:24:46state in line with the US gross domestic
3:24:48product growth and are on the same
3:24:50trajectory with inflation can you please
3:24:53elaborate on the importance of this data
3:24:56exactly we we want to make sure we're
3:24:58keeping Pace with with other changes in
3:25:00the broader economy and if we look at
3:25:02just the past four years right 2020
3:25:05through
3:25:062023 a four-year
3:25:09period the changes proposed here um or
3:25:13or rather the proposes the changes
3:25:15proposed um um through September of last
3:25:17year keep Pace with both wage increases
3:25:20and price increases and I I know price
3:25:22increases affect everyone and that's a
3:25:24real big focus of folks these days and
3:25:26rightfully so it's a big focus of the
3:25:28company um these cost increases affect
3:25:30everyone and and my graphic here is is
3:25:33showing that we're keeping Pace we're
3:25:36doing everything we can to keep downward
3:25:38pressure on rates but there's still a
3:25:40cost of providing service and and that's
3:25:42what's under consideration in this
3:25:44proed thank you can take that
3:25:47down um following up again on questions
3:25:50asked of you regarding affordability in
3:25:52your direct testimony you indicated that
3:25:54on the fuel cost side the company has
3:25:57implemented a number of strategies to
3:25:59stabilize the cost of the gas commodity
3:26:02which is a large portion of the
3:26:03customer's overall bills can you
3:26:05elaborate on how those strategies have
3:26:07actually benefited customers since your
3:26:09direct testimony has been
3:26:12filed I'm going to object uh that's
3:26:15beyond the scope of my cross-examination
3:26:19and
3:26:20essentially um allowing the company
3:26:22another opportunity to enter new
3:26:24evidence into the record that the other
3:26:28parties won't be able to challenge or
3:26:30respond
3:26:31to just SM check now uh on
3:26:35cross-examination Council for UCA asked
3:26:37a had a lengthy series of questions
3:26:40relating to affordability and also asked
3:26:42about the gas commodity price so I think
3:26:45this question is within the scope can
3:26:48you repeat the question sure can you
3:26:51elaborate on how the strategies
3:26:54implemented by the company to stabilize
3:26:57the costs of the gas commodity have
3:26:59actually benefited customers since your
3:27:01direct testimony has been fired yeah
3:27:04objection overall I think that's uh uh
3:27:07within the scope of uh cross Mr
3:27:11P sure so we've recently implemented a
3:27:16gas price risk management plan to to
3:27:19seek to stabilize gas commodity costs um
3:27:23that flow through to
3:27:24customers this keeps gas commodity cost
3:27:27within a certain range it's roughly
3:27:28between $3 and half dollar a DEC up to
3:27:31about $8 a decm and we the goal is to
3:27:34build up a reserve fund during times of
3:27:36of low prices which we've been in these
3:27:38past couple quarters which is great um
3:27:41to be able to draw down from during high
3:27:43priced events like we saw um either in
3:27:47but both in the 2022 to 2023 heating
3:27:49season as well as in response to to what
3:27:52might be large storms or weather events
3:27:54moving forward that there's this buffer
3:27:56that that customers will have so that's
3:27:59that's just one element another element
3:28:00is our guest and electric hedging
3:28:03programs we've recently built in the
3:28:06addition of um fixed price contracts as
3:28:09additional tool and toolkit there to
3:28:11help lock in low
3:28:13prices um for durations of a year or
3:28:16more when that looks like a good deal
3:28:18for customers and so you know we're also
3:28:21looking at our purchasing strategies
3:28:23every day to see how we can be doing
3:28:25better for customers um what additional
3:28:28um tools we can have on on that front
3:28:30and so we're we're trying to leave no
3:28:31Rock On Turned and how we stabilize cost
3:28:34for customers and get the best deal
3:28:36possible on gas commodity
3:28:39costs thank you I'd like to turn now to
3:28:41the gas storage inventory charge which
3:28:44I'll also refer to as the G6
3:28:47uh it may seem like a lifetime ago but
3:28:49last Friday um you received some
3:28:52questions from Council for staff
3:28:54regarding winterstorm Yuri in the
3:28:56context of the company's request to earn
3:28:59a whack return on the gck and your
3:29:02supporting policy arguments do you
3:29:04recall that yes can we please pull up
3:29:07hearing exhibit 116 and go to page 49
3:29:20and maybe scroll just so we can see the
3:29:22question starting on line
3:29:26five thank you at at this portion of
3:29:29your testimony you were making
3:29:30policy-based arguments as to why the
3:29:32commission should re-evaluate the G
3:29:35return
3:29:37issue
3:29:42correct do you believe that the
3:29:45company's policy base arguments are
3:29:46flawed because winter storm Yuri
3:29:49occurred prior to the commission's
3:29:50decision in the last gas rate
3:29:55case I'm I'm sorry I missed the first
3:29:57part of that could you repe okay yep yep
3:29:59do you
3:30:01um
3:30:03agree with
3:30:05staff's questions that your policy-based
3:30:07arguments are flawed because winner
3:30:10storm muuri occurred prior to the
3:30:12commission's decision in the last gas
3:30:14rate case where the short-term debt
3:30:16return was approved on the G6 instead of
3:30:18the
3:30:20what right I think the answer there is I
3:30:22do not agree with with staff's
3:30:25assertions um for for that exact reason
3:30:27right we were talking about winter Stern
3:30:29and muray being an extraordinary event
3:30:31as something that the that the company's
3:30:33gas storage reserves were a huge asset
3:30:36for and we're talking about an event
3:30:38that was that happened before um a
3:30:41change in in the company's um interest
3:30:44applied to to gas storage inventories
3:30:47and so it's just just important to point
3:30:50out that difference right the fact that
3:30:52the company had this asset and was able
3:30:53to rely on it fully um does not
3:30:57necessarily mean that's always going to
3:30:58be the case and you know we don't have
3:31:00plans to to change but I just wanted to
3:31:01note that a change in policy on the
3:31:04GC um brings in a a penalty into this um
3:31:09decision for the
3:31:12company um with with respect to uca's
3:31:15question questions or staff for or
3:31:17Council for uca's questions regarding GC
3:31:20and how the company may use storage and
3:31:22you may have already gotten to this so
3:31:24if you have I apologize but I believe
3:31:26you indicated during cross-examination
3:31:28that there was something you wanted to
3:31:30highlight but you could not finish your
3:31:31answer is there something you would like
3:31:33to add on this topic for the
3:31:35commission's
3:31:38benefit I that's a great question I I
3:31:41can't recall at the moment I think I got
3:31:42in all the points but um thank you
3:31:48move on give me one
3:32:06second oh yes I I do remember now I'm
3:32:09sorry I gave you enough time while I was
3:32:11looking at my notes there you
3:32:13go yeah sorry brain's moving a little
3:32:16slow here um after a few hours but the
3:32:19the point that I didn't get to to state
3:32:21in that discussion is that money is fun
3:32:24fungible right I believe I talked about
3:32:26how that the company finances all of its
3:32:29um all of its needs through a
3:32:32combination of internal and external
3:32:34financing and that we
3:32:36don't look at financing a specific
3:32:38financing tool to finance a specific
3:32:40asset or cost that it's all merged
3:32:42together and that all merging together
3:32:44is what I mean by money is fungible
3:32:46right we're not issuing short-term debt
3:32:49just for specific short-term assets you
3:32:51know I've made the case that I don't
3:32:52think our gas storage inventory is a
3:32:54short-term asset at all and Mr frus is
3:32:57exhibit and my direct testimony you know
3:32:59ATT test to that of course but but even
3:33:02if you did um come to the conclusion
3:33:04that it was a short-term asset then it's
3:33:06also not appropriate to apply a
3:33:07short-term interest rate to it because
3:33:10again all money is fungible we're
3:33:11financing the company's needs from a
3:33:13combination of equity debt long-term
3:33:16debt and short-term debt and internally
3:33:17generated funds and to just assign one
3:33:20interest rate to it kind of ignores that
3:33:22that broader
3:33:23picture thank you um during the course
3:33:28of um questions from commissioner
3:33:31Billman I interjected hopefully that was
3:33:34okay and provided a reference to Mr
3:33:36fetus's testimony regarding gas storage
3:33:39inventory but with respect to your own
3:33:42testimony were you referring to
3:33:44confidential table JJ
3:33:46pd2 in your direct testimony hearing
3:33:49exhibit 116 yes it was the only
3:33:51confidential table in my direct
3:33:54testimony I believe thank
3:33:57you turning to the um Revenue deferral S
3:34:08charge you were asked a series of
3:34:10questions from Council for
3:34:13UCA uh regarding that topic do you
3:34:15recall that
3:34:17yes was the revenue dis sporal sech
3:34:21charge resulting from the 2020 gas rate
3:34:23case a result of a settlement
3:34:27agreement yes that case was
3:34:29settled and were there particular
3:34:32circumstances in that case and in that
3:34:34settlement that caused the company to
3:34:37agree that there would be no whack
3:34:40return on those deferred
3:34:44revenues certainly there's specific um
3:34:47circumstances in every proceeding in in
3:34:50any given year that would lead um the
3:34:53the company to agree to certain terms in
3:34:56one setting and and not in
3:34:58another and that was during the covid
3:35:01pandemic is that right that was that
3:35:03that was extraordinary times both for
3:35:05the company as well as for all of our
3:35:06customers and this
3:35:08commission and so I would just point out
3:35:11that extraordinary situation we all
3:35:12found ourselves
3:35:14in do the view its RDS proposal in this
3:35:18case as a benefit to
3:35:20customers
3:35:22absolutely and if the RDS were not
3:35:25granted would the company earn a whack
3:35:28return on those same re revenues if its
3:35:31rate simply go into effect in no
3:35:33November
3:35:342024 correct yes if if rates were to go
3:35:37into effect without an RDS you know
3:35:40we've projected that's roughly $75
3:35:42million of additional revenues over the
3:35:44heating season
3:35:46um and so that that would um that would
3:35:49effectuate itself you know of course if
3:35:50the company's proposal were were
3:35:52approved by the commission um the RDS
3:35:55simply shifts that and spreads it out
3:35:57over a longer time
3:35:59period if the commission granted the RDS
3:36:02but did not Grant the company a whack
3:36:04return do you view that as would you
3:36:06view that as being a penalty to the
3:36:08company from your
3:36:10perspective yes that would be a penalty
3:36:12it would be um
3:36:17relying on the company's resources to
3:36:20finance that deferral um when it was for
3:36:24customers
3:36:33benefit uh turning now to new business
3:36:37and line extension policy related
3:36:42issues has the company adopted all of
3:36:44the line extension policy changes that
3:36:46have been required to be made at this
3:36:48point in time yes absolutely
3:36:52my supplemental direct testimony has a
3:36:55table summarizing all those changes
3:36:57we've made um basically there's kind of
3:36:59two big tranches of that both last fall
3:37:02we made several
3:37:03changes eliminating the offsite credit
3:37:06requiring half of meter and regulator
3:37:08cost to be paid by the customer and
3:37:10those were all stemming from the
3:37:12company's last gas Ray case and there
3:37:14was another big set of changes stemming
3:37:17from a year-end filing last year um in
3:37:19light of the additional directives from
3:37:21Senate bill 23291 that was to eliminate
3:37:25um all incentives or customer allowances
3:37:28as part of our line extension tariff and
3:37:31we we filed that and we were we were
3:37:33able to settle that with parties and the
3:37:34commission subsequently approved that
3:37:36settlement and so effective June one of
3:37:39this year um there has not been a
3:37:42customer allowance offered of course
3:37:43there's a few grandfathering Provisions
3:37:46in there for for projects that had
3:37:48previously res received permits or
3:37:50approvals from their local permitting
3:37:52jurisdiction prior to that date um but
3:37:56starting um at the beginning of 2025
3:37:58none of those grandfathering Provisions
3:38:00will be relevant anymore um moving
3:38:02forward in 2025 and Beyond there's no
3:38:06offsite credit there's no
3:38:07construction um
3:38:09allowances or any other incentives as as
3:38:14defined given um the company's 2023 test
3:38:18you in this case is it fair to say that
3:38:22the vast majority of the new business
3:38:24projects in this case then were
3:38:26undertaken
3:38:27under previous commission approved line
3:38:30extension
3:38:31policies that's correct I I can't
3:38:34comment on on when construction began on
3:38:36a lot of these projects but you know for
3:38:38sure they were ins serviced between 2022
3:38:41and 2023 which is the um period uh in
3:38:45which which capital additions are being
3:38:47reviewed in this case and so it was a
3:38:49different Paradigm in place at the
3:38:53time uh in discussing uh new business
3:38:57projects with chair blank you indicated
3:38:59that there's no specific evidence that
3:39:01you can point to in a record that proves
3:39:04the company's assertion that on average
3:39:07uh new business projects pay their own
3:39:09way do you recall that I do to your
3:39:13knowledge conversely is there evidence
3:39:15in the record Deb on average customer of
3:39:17new business projects do not pay their
3:39:19own way there is no such
3:39:22evidence on
3:39:25average what what was the overall result
3:39:28of the two new business projects
3:39:30analyzed by witness matley as part of
3:39:32his supplemental direct
3:39:34testimony so when we look at those two
3:39:37projects together again this is the
3:39:39culry canyons and the canyon Pines
3:39:42projects I think his analysis shows
3:39:46that when you combine those two together
3:39:48it it results um in more in revenues
3:39:52offsetting the cost of those projects so
3:39:55even just between those two projects on
3:39:57net we're seeing existing customers
3:40:02benefit can you please elaborate on
3:40:04whether you think there is evidence in
3:40:06this case to change the company's line
3:40:08extension
3:40:10policies no not not within the confines
3:40:13of this proceeding
3:40:16are there other voices that should be
3:40:17heard on this
3:40:19issue yes I think if we want to keep
3:40:21exploring this topic um but we're going
3:40:25to need to make sure we have all the
3:40:26right voices in the room that's um the
3:40:29traditional regulatory interveners as
3:40:31well as folks that are kind of engaged
3:40:33on the front lines on what customers
3:40:34want and in a lot of ways that's our
3:40:37Builder and developer Community we're
3:40:39figuring out what types of structures
3:40:41and and homes and buildings to build in
3:40:44response to what C customers are
3:40:46demanding um you we also want a lot of
3:40:48commercial customers um our our
3:40:51commercial sorry our customer Advocates
3:40:53of course are environmentalists I think
3:40:55we'd want everyone in the room I'm
3:40:57talking about that and we only have a
3:40:59fraction of those folks here in this
3:41:01proceeding so in that regard you
3:41:03mentioned that there are other venues
3:41:05where this line extension topic can be
3:41:07fully explored do you recall that yes
3:41:12and I think you mentioned um a
3:41:14proceeding that the commission is
3:41:16required to
3:41:17open within 60 days now under Senate
3:41:20Bill 23 291 do you remember that yes
3:41:23this is the natural gas cost causation
3:41:26study I believe is the title of that
3:41:27section of the bill and do you think
3:41:30that particular proceeding would provide
3:41:32a venue for a full discussion of this
3:41:35topic yes absolutely as that um section
3:41:38of Statute reference it's it's to
3:41:41investigate you know the costs that new
3:41:43residential developments in particular
3:41:45are are bringing on to the system and
3:41:47how that affects existing customers and
3:41:48particularly income qualified customers
3:41:51so I think there's a lot of topics to
3:41:52explore
3:41:53there and um Mr Burman in his rebuttal
3:41:56testimony made another suggestion as to
3:41:59an alternative venue where new business
3:42:01related projects uh and topics and line
3:42:04extension could be explored what what
3:42:05was that yes that was in the the
3:42:08company's next phase two proceeding
3:42:10which the company is committing to make
3:42:13um before the end of 2
3:42:16about is there also a pending
3:42:18miscellaneous docket where line extend
3:42:21gas line extension related questions are
3:42:23being
3:42:29asked yes that that might be um part of
3:42:33the the ongoing GP M
3:42:36doet um to to explore a couple issues
3:42:39doing from that you know lwn extension
3:42:41topics in general are also part of the
3:42:43beneficial electrification
3:42:45and docket so I think there's a lot of
3:42:47Vues to to be discussing this now and
3:42:50moving forward you got it at the at the
3:42:53end of the day um the uh and then uh
3:42:57also the company is required to file a
3:42:59litigated gas infrastructure plan uh
3:43:02next year would that provide another
3:43:04venue for discussion of this topic
3:43:12absolutely if I could have just a second
3:43:14chair blank to check my
3:43:27noes no further questions thank you Mr P
3:43:31thank you thank you Mr P you may be
3:43:34excused uh Mr matley are you out
3:43:42there hey Mr matley can you hold up your
3:43:44right hand
3:43:46you swear to tell the truth the whole
3:43:47truth and nothing but the truth I do you
3:43:50can put your hand down uh is anyone in
3:43:53the room with you or communicating with
3:43:54you in any way no there's no one here in
3:43:57the room nor communicating with me if
3:44:00that changes you'll let us know
3:44:03certainly uh back to you
3:44:05missar checho or thank
3:44:09you um Mr matley good morning good
3:44:12morning could you please spell your name
3:44:14for the rec
3:44:16yes it's r y a n m a t l
3:44:21y by whom are you employed and at what
3:44:24capacity I'm employed by Public Service
3:44:26Company of Colorado as a manager of
3:44:29regulatory
3:44:31Administration as discussed at hearing
3:44:33on Friday you have revisions to your
3:44:35supplemental direct testimony hearing
3:44:37exhibit
3:44:38123 and all attachments is that
3:44:41right um that is correct I've got
3:44:44revision to my testimony and revisions
3:44:47to attachment one two three and a new
3:44:51attachment five that's correct thanks
3:44:53thanks for correcting me we did not uh
3:44:55have any corrections to your hearing
3:44:56because it would
3:44:59R4 um are the revised versions that you
3:45:02just mentioned the same ones that were
3:45:03filed in E filings on Monday and
3:45:05provided to the parties yes they are
3:45:09chair blank we have put the revised
3:45:11testimony and referen attachments in box
3:45:14uh before I proceed I'd like to clarify
3:45:17excuse me whether we can simply move for
3:45:19admission of those exhibits or if you
3:45:21would like Mr matley to walk through the
3:45:23changes that have been made from the
3:45:24original
3:45:26versions uh I would love to just uh move
3:45:29him in evidence without having them walk
3:45:32through everything if uh there's no
3:45:34objection from the parties Miss singer
3:45:36Nelson you okay with that I'm fine with
3:45:39that Mr
3:45:41chairman so moved thank you and singer
3:45:45Nelson is it all right if I ask my
3:45:47questions ahead of you
3:45:49absolutely thank you do we need
3:45:52clarification on which exhibits to pull
3:45:54out of the box no I think I've got them
3:45:57it's 123 just the testimony and then 123
3:46:00executables ra 1 two three and five
3:46:03right that's correct thank you and
3:46:05they're all public correct that's
3:46:07correct
3:46:09thanks Mr matley is now available for
3:46:12commissioner questions thank you
3:46:15thank
3:46:16you uh can we pull up hearing exhibit
3:46:19two3 attachment Ram five the ex
3:46:23executable version and turn to the
3:46:25capital uh
3:46:29worksheet and uh I guess uh is it fair
3:46:34to say Mr matley you show uh the
3:46:37capacity expansion and new business
3:46:39lines uh going to zero over the coming
3:46:42years yes that's correct we made a
3:46:45modeling assumption to take those uh
3:46:49Capital Investments down to zero over a
3:46:52three-year period starting I believe in
3:46:552028 and what's the basis for those
3:46:58lines going to zero I think Mr P just
3:47:02testified that the new line extension
3:47:04policies maybe knock 5% off the cost can
3:47:10you help me understand why this is
3:47:13assumed to go to zero for the long long
3:47:15term rate impact
3:47:16analysis I can or I can attempt to we um
3:47:21made that assumption putting together
3:47:24this model back in May of this year
3:47:27before some of those line extension
3:47:29policy updates were finalized uh and
3:47:33this assumption at the time was
3:47:35consistent with the Assumption made in
3:47:37the same version or a different version
3:47:39of this model in the clean heat
3:47:41proceeding and so we aligned the output
3:47:46and the assumptions in this model with
3:47:48that assumption um from clean heat and I
3:47:51think um you know as you've heard from
3:47:54Mr P and um a bit from Mr Burman earlier
3:47:59um you know that that assumption um you
3:48:04know under current policies may not play
3:48:06out exactly as modeled here but that was
3:48:09the Assumption made for the purposes of
3:48:11the
3:48:12modeling uh any objection if we gave you
3:48:15a six-year multi-year rate plan based on
3:48:18these uh Capital
3:48:22numbers it's not a serious question I
3:48:25know You' wanted a multi-year rap
3:48:30plan
3:48:32uh um all right so in reality this is
3:48:35not you would no longer stand behind
3:48:38this assumption and if the commission
3:48:39was trying to uh figure out long-term
3:48:41rate impacts this would not be accurate
3:48:44is that fair I would say that uh all of
3:48:48these assumptions going forward in this
3:48:50model are subject to change as we move
3:48:52forward in time and so um yes I think
3:48:55this is one of those assumptions that
3:48:56would change amongst others all right uh
3:49:00if we can pull this down uh starting on
3:49:03page 12 to 13 of your supplemental
3:49:05direct testimony you described the
3:49:07ramport uh range project at page 13 line
3:49:1117 uh to 22 and if you could actually
3:49:15pull a heing exhibit 123 attachment Ram
3:49:203 uh uh the ex executable spreadsheet
3:49:25that'd be great I think Mr matley is
3:49:27going to be able to answer this in your
3:49:29supplementary direct testimony at page
3:49:3113 line 17 to 22 you state that this
3:49:35project contributes net equal revenues
3:49:38of 16.1 million to the greater natural
3:49:41gas system over the course of 30 years
3:49:44do you recollect
3:49:46that um I don't recollect the specific
3:49:49number but that phrasing sounds familiar
3:49:52all right well um we can pull it up if
3:49:56uh if you'd like but let let's go to the
3:49:58spreadsheet can you go to the Rev R Cal
3:50:0130 years
3:50:05page um and can you zero out that uh in
3:50:09cell B3 can you zero out the minus 58
3:50:15all right and then can you go back uh
3:50:18down to cell
3:50:24c52 do you see that 16.1 with this with
3:50:30this spreadsheet with the net Savage
3:50:33value be zero out uh be how that 16.1
3:50:37was justified yes it's that 16.1 million
3:50:41figure you see in cell c52
3:50:45okay and um if we did uh a Net Present
3:50:51Value calculation that'd be d52 right
3:50:55that's correct that would be the 1.9
3:50:57million shown right so just looking at
3:50:59present value reduces the positive
3:51:02benefit for the system from 16 million
3:51:05down to under 2 million is that fair
3:51:08that's fair on this specific project
3:51:11okay can we go back up to cell B3 and
3:51:14put that uhga 58 back in
3:51:20there and then can we go back down to
3:51:23line
3:51:2941
3:51:31um uh do you see uh uh do you see that
3:51:36uh book depreciation on the revenue
3:51:38requirement it goes up to
3:51:41760,000 yes I see that now if you can
3:51:44you get sorry can you go back up to B3
3:51:46and put it to zero again and go back
3:51:49down and look at that
3:51:52line and now it goes back to 480 do you
3:51:55see that yes I see that so net salvage
3:51:59value
3:52:00increases
3:52:02depreciation and uh fre Cash Flow by
3:52:06280,000 a year the difference between
3:52:09those two numbers is that fair that's
3:52:12fair on this project yes yeah so in each
3:52:15year of the 30 years uh the company gets
3:52:18an additional 280,000 and free cash flow
3:52:22as discussed by Mr Johnson and is
3:52:24defined by the credit R rating agencies
3:52:28any reason to dispute that uh no okay
3:52:33and then after 30 years you'd be
3:52:35required to fund uh something like 8.4
3:52:38million in nominal dollars out of then
3:52:42current cash flows and that's just the
3:52:44200 180,000 by 30 years so there's you
3:52:48know there's increased cash flow for 30
3:52:50years and then there's a
3:52:53gap uh benefit to rars and an actual
3:52:57cash requirement to remove that would
3:53:00would you say that any
3:53:02differently no I I would think you've
3:53:05captured the the concept we are
3:53:06collecting the removal cost over the
3:53:09life of the asset through depreciation
3:53:11expense which is credited to customers
3:53:14through rate base and then those costs
3:53:16are incurred by the company after the
3:53:18retirement of the asset all right if you
3:53:21can go back to B3 and set it back to
3:53:23zero for one more
3:53:24second oh uh put it to minus
3:53:3258 and then if you can go down uh to
3:53:35that uh c52 or d52 again so do you see
3:53:40in d52 with present value and negative
3:53:43net Salvage value uh it's more like $1.1
3:53:47million in net benefit to
3:53:50customers yeah I do see that all right
3:53:54and now can you go pull up puring
3:53:57exhibit 123 attachment Ram
3:54:00to and this is just the Coal Creek
3:54:03Canyon Pines one we've been talking
3:54:06about and I think if you look at the
3:54:08same number with uh negative net salvage
3:54:12value and npv uh it's minus 4 million
3:54:16we'll pull it up in a second uh but do
3:54:19you have any reason to to doubt that um
3:54:22no that sounds
3:54:25accurate and uh so over these uh two
3:54:29projects where C Creek Canyon Pines was
3:54:33minus 4 million and the other one was uh
3:54:36plus 1 million um
3:54:40uh uh for you know uh benefit to
3:54:43customers is it fair to say that these
3:54:45combined two projects are adverse to
3:54:48existing
3:54:49customers uh
3:54:52uh independent of Mr P's testimony
3:54:56saying they weren't well can maybe one
3:54:59clarification is the minus 4 million the
3:55:02nominal or the present value figure
3:55:04present value can can you go to rev Rec
3:55:06CS
3:55:0930 and sell d52
3:55:17uh might be up go up up up up sorry it's
3:55:21a difference there it is minus minus
3:55:23four million H down
3:55:27down yeah there it is D d51 on this
3:55:32one yeah I you can sum those two values
3:55:36to get to a negative number I would
3:55:38point out that you know this is a new
3:55:41business project rm3 Rampart Range is a
3:55:44Capac project so they slightly different
3:55:47um you know categorization and you know
3:55:50likewise if you add in the third R1
3:55:52project you also get back to a positive
3:55:56net benefit for other
3:55:58customers yeah I understand fair enough
3:56:02any uh guidance or advice for us if we
3:56:05uh wanted to uh uh eliminate these uh
3:56:10cross subsidies to uh new customers as
3:56:13soon as possible
3:56:16I would suggest it it is important to
3:56:19look at it at the aggregate level
3:56:21understanding that there's variations
3:56:23project by project and that um certain
3:56:25projects can end up with a net cost
3:56:28wellas others um would have a net
3:56:32benefit um to other customers and
3:56:36important to also just consider all the
3:56:38issues and um be aware of potentially
3:56:42unintended consequences of of of those
3:56:45changes so I think what Mr P stated in
3:56:48terms of the importance of having the
3:56:50right voices and the right um evidence
3:56:53um to help underpin those changes is is
3:56:57pretty
3:56:59critical and is there evid is there any
3:57:02EV I think it's been pretty pretty
3:57:03clearly established that there's no
3:57:05evidence on this record one way or other
3:57:07about the average impact with any reason
3:57:09to doubt that we we have evidence on
3:57:12these three projects but there
3:57:14their other
3:57:16projects uh that's all I had uh thanks
3:57:19so much for uh accommodating me and I
3:57:22think uh commissioner go I'm gonna turn
3:57:24this back to you to start running now
3:57:27and you can declare the the lunch break
3:57:30uh uh uh as you see
3:57:34fit well everyone would like to be the
3:57:36hero that gives everyone lunch thank
3:57:38[Laughter]
3:57:41you um all right so think um being that
3:57:45we're right about at noon I think it
3:57:47probably makes sense to break for lunch
3:57:50now um perhaps return 12:45 if that
3:57:54works for people so keep it incredibly
3:57:57short but somewhat abbreviated to make
3:57:59sure we can keep things moving so my
3:58:02suggestion would be we start back at
3:58:0312:45 and we'll start with Miss singer
3:58:06Nelson's questioning of Mr Mutley uh
3:58:10does that work for
3:58:11everybody that works excellent and I'll
3:58:15um I'll check in as we go in the
3:58:17afternoon my guess is you know somewhere
3:58:19around the 3:00 time frame we'll try and
3:58:21take just an abbreviated break to give
3:58:23the court reporter a quick rest and then
3:58:27um I do have that break I need from 410
3:58:30to 4:30 so we'll work our best around
3:58:33those issues um and with that I will see
3:58:36you all at 12:45 to resume and just a
3:58:39reminder to mute yourself turn off your
3:58:41cameras while we're on break thank you
3:58:45thank
3:59:13you
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4:45:32all right welcome back let me check and
4:45:34make sure we have our court reporter
4:45:36back I'm ready thanks Harriet
4:45:41um and we have Mr matley
4:45:47back excellent am I saying your name
4:45:50right matle or matey you are you have it
4:45:52exactly right thank you commission
4:45:54Gilman perfect um all right so next up
4:45:59we have uca's questioning of Mr matley
4:46:02for 30 minutes Miss singer Nelson thank
4:46:06you commissioner Gilman uh Mr Matt Lee
4:46:09my name is Michelle Singer Nelson and I
4:46:12represent the Colorado Office of the
4:46:15utility consumer advocate in this
4:46:17proceeding good afternoon good afternoon
4:46:19it's nice to meet you nice to meet you
4:46:22um I'm just going to start off with a
4:46:25little bit of level setting um so you
4:46:28filed supplemental direct testimony in
4:46:31this proceeding that's marked as hearing
4:46:34exhibit
4:46:35123 is that right that's correct and you
4:46:39recently revised it so the exhibit that
4:46:43we refer to in this case is uh revision
4:46:46number two that's
4:46:49correct and in your supplemental direct
4:46:51you provided responses to the a couple
4:46:55of the questions that the commission's
4:46:57the commission asked in its order
4:47:00requesting supplemental direct testimony
4:47:03correct yes that's correct and the first
4:47:06area that you addressed was the
4:47:10commission's requests for incremental
4:47:12revenues associated with three specific
4:47:16projects that are included in the
4:47:18investments in this case yes that's
4:47:21correct the Canyons Cole Creek Canyon
4:47:23Pines new business projects and the
4:47:26Rampart Range capacity project correct
4:47:30um and then the second topic you
4:47:31addressed was the commission's request
4:47:34for a 15-year forecasted rate
4:47:37projections
4:47:39model yes that's correct and I'm I'm
4:47:41just going to ask you a couple
4:47:45questions about each of those areas um
4:47:49this part the first part that we're
4:47:51going to go over I think is uh some more
4:47:54level setting and we've already heard a
4:47:56lot of the testimony from Mr P on the
4:47:59three discret projects that you talk
4:48:02about in your testimony but I'm going to
4:48:04address them specifically to your
4:48:07testimony not necessarily Mr pay's yeah
4:48:10have that in
4:48:12mind yes that sounds
4:48:14reasonable and as you said the Canyon's
4:48:17development and the K Creek Canyon
4:48:20projects are two new business projects
4:48:23correct that's correct and Rampart Range
4:48:27is a capacity Expansion
4:48:30Project yes that's
4:48:32correct and in your exhibits to your
4:48:35testimony you sponsor separate analyses
4:48:39for each of these three projects
4:48:41attachments ra 1 2 and three correct
4:48:45that's
4:48:47correct your analysis of the incremental
4:48:49costs and revenues for the Canyons
4:48:52project and the Rampart Range project
4:48:55show that they each pay their own way is
4:48:58that
4:48:59right can you sorry did you say for the
4:49:02canyons and the Rampart Range project
4:49:05yes yes that's correct they each showed
4:49:08over their lifetime more Revenue Vue
4:49:11than the associated Revenue requirement
4:49:13with the company's investments in those
4:49:16projects thank you and your analysis as
4:49:21uh chairman blank noted a few times uh
4:49:24this morning and U your analysis of the
4:49:28kle Creek Canyon project shows that the
4:49:31in incremental cost of that project
4:49:33exceed the incremental revenues correct
4:49:36yes the forecasted revenues uh from that
4:49:39project are forecasted to be less than
4:49:42the revenue requirement of the company
4:49:44funded portion of the investment okay
4:49:47and I'm I'm a little
4:49:49confused about the state of the record
4:49:51right now because I noticed in your
4:49:55revised um exhibit your forecast your
4:50:01uh testimony itself well let's
4:50:05see oh
4:50:07yeah you Chang the numbers between
4:50:11your um last section of testimony or
4:50:15last version of testimony and then this
4:50:18uh Revis too um can we go to
4:50:23page 11 of hearing exhibit 123 rev 2
4:50:37please can we move down to lines 12 12
4:50:41through uh
4:50:4717 so um Mr matley in lines 12 through
4:50:5217 you're talking about the kle Creek
4:50:55Canyon Pines project
4:50:57correct yes that's correct and you
4:51:00talked about originally that the net
4:51:03incremental cost was $7.4
4:51:06Million to the greater natural gas
4:51:10system over the course of 40 years is
4:51:12that right yes that's the number from
4:51:15the original version of my supplemental
4:51:17direct testimony filed back in May and
4:51:20and now that number is 5.3 million to
4:51:23the greater natural gas system yes and
4:51:26the change as a result of the inclusion
4:51:28of the negative net salvage value into
4:51:31the analysis as um described in the
4:51:35revised version of attachment
4:51:38ra2 thank you for that and then likewise
4:51:41in lines 18 through 21 you also
4:51:47revised the uh net incremental cost
4:51:52under a 30-year depreciable life from
4:51:557.1 to 66.3 million to the greater
4:51:59natural gas system correct that's
4:52:02correct I made the change to include
4:52:04negative net Salvage in all three in the
4:52:07analysis of all three of these projects
4:52:09in both the 40-year View and the 30-year
4:52:12View and that's the change that has
4:52:15resulted in the revision of these
4:52:18numbers in my testimony so your
4:52:20testimony shows that the K Creek Canyon
4:52:24project results in millions of dollars
4:52:27of cost increases to customers that
4:52:29don't live in the CLE Creek Canyon
4:52:31project area is is that
4:52:34right my testimony states that when you
4:52:37isolate the view simply to Cole Creek
4:52:39Canyon Pines yes over its 40 or 30-year
4:52:42lifetime depending on the analysis there
4:52:44are more costs incurred by other
4:52:47customers than the forecasted Revenue um
4:52:52the provided by the by that project
4:52:55thank you you can take this exhibit down
4:52:57thank
4:52:58you now I'm going to talk next about the
4:53:02differences between an incremental cost
4:53:04analysis and a full cost analysis do you
4:53:07have that in
4:53:08mind I do
4:53:11and your attachments Rams one two and
4:53:14three are analyses of the incremental
4:53:17costs and the incremental revenues for
4:53:20each of the three projects
4:53:23correct I guess I
4:53:25would not knowing maybe how you're
4:53:28defining that term I would simply state
4:53:31that the analysis is based on the costs
4:53:35associated with those projects and the
4:53:37revenues expected to be or forecasted to
4:53:39be provided by those
4:53:45projects do you know the difference
4:53:47between a full cost analysis and
4:53:49incremental cost
4:53:52analysis I guess I'm not sure what you
4:53:54mean by full cost
4:53:57analysis um would you agree that it's a
4:54:01a reasonable definition of a full cost
4:54:04analysis as a pricing strategy where all
4:54:08re relevant variable costs and a full
4:54:11share of fixed costs direct directly
4:54:16attributable to the product are used in
4:54:19setting the price and the
4:54:22cost I guess I interpret that to mean
4:54:25similar to the exercise were undertaking
4:54:28uh or maybe better said exercise that
4:54:30would be undertaken in a phase two rate
4:54:32case of taking total system costs and
4:54:35allocating each customer's share of
4:54:37those costs um that is my interpretation
4:54:42I guess of the what you stated with a
4:54:45full cost analysis okay so total system
4:54:48costs as opposed to just the isolated
4:54:51costs associated with a specific
4:54:55project um
4:54:59yes so would you agree with me that um a
4:55:04full share of fixed cost is included in
4:55:07a full cost analysis and a full uh share
4:55:12of fixed costs was not used in your
4:55:15incremental analysis that's used um in
4:55:18your testimony in your case in this
4:55:22case the analysis I provided in my
4:55:26testimony was uh in accordance with the
4:55:29commission's request in supplemental
4:55:31direct to identify the incremental costs
4:55:34and incremental Revenue associated with
4:55:36these projects um so to that effect
4:55:41they don't the the analysis doesn't
4:55:43consider one way or another I guess the
4:55:45impact on fixed costs either from the
4:55:49projects to the system or from the
4:55:51system to the
4:55:52projects that's right and I do
4:55:55understand the commission asked for an
4:55:56incre incremental cost analysis but um
4:56:00if the company were to do a full cost
4:56:03analysis it would include the fixed
4:56:06costs that are associated with the
4:56:10system system
4:56:12correct I guess can you help me
4:56:14understand what you mean by the fixed
4:56:15cost well I I guess we're talking about
4:56:20um things
4:56:22like um operation and maintenance
4:56:26expenses and um administrative and
4:56:29general
4:56:32expenses in terms of the allocated share
4:56:36of those costs to these incremental
4:56:38projects
4:56:40um okay that's helpful can you maybe
4:56:42restate the question then sure um would
4:56:45you agree with me that the um your study
4:56:49did not include the operations and
4:56:52maintenance expenses and the
4:56:55administrative and general expenses
4:56:57associated with these
4:56:59projects my study did not allocate any
4:57:03of those any of our existing onm costs
4:57:05or existing administrative expenses to
4:57:08these projects and if you had then the
4:57:12costs for each of these projects would
4:57:15be higher would you agree with
4:57:17that the I would agree if we were to
4:57:22take an allocated share of those costs
4:57:23and apply it or um sort of burden in a
4:57:27sense the these projects with those
4:57:29costs then it would uh show more cost
4:57:34associated with these projects and
4:57:36therefore less benefit
4:57:38although that does not mean or that's
4:57:41not to say that these projects are the
4:57:44cause of incremental onm or might result
4:57:48in incremental administrative costs that
4:57:50would be a different
4:57:55question are with new customers are
4:57:58there expenses for such things as
4:58:01customer billing and customer
4:58:04service they there are which those
4:58:06customers tend to pay through their
4:58:08service and Facilities fee
4:58:11which is in a phase duray case where
4:58:14those costs get
4:58:16allocated and you didn't include those
4:58:19types of costs or those specific costs
4:58:21in in your incremental cost
4:58:25study I did not
4:58:29include the
4:58:31[Music]
4:58:35um Mo step back I did
4:58:38not um take a share of our existing um
4:58:43customer costs and necessarily allocate
4:58:47it to these customers uh but those
4:58:50customers to the extent they created
4:58:53incremental costs associated with
4:58:55billing and administrative costs um that
4:58:59those customers would pay those
4:59:00incremental costs through their service
4:59:02and Facilities fee so I don't see that
4:59:04as having an
4:59:08impact our um
4:59:11when you put new pipes in the ground to
4:59:13serve customers there's additional
4:59:16annual maintenance costs associated with
4:59:19those pipes
4:59:23correct I would say all other things
4:59:27being equal there may be incremental onm
4:59:31likely incremental onm Associated
4:59:33although I'm not an expert in you know
4:59:37I'm not an engineer on our systems I
4:59:40can't speak to exactly what that might
4:59:42be and you didn't include those onm
4:59:45costs in your incremental cost study for
4:59:48these three projects did you I did
4:59:57not would you agree with me that
5:00:00operations and maintenance expenses are
5:00:02a very significant part of uh Public
5:00:07Services uh Revenue requirement in this
5:00:09case
5:00:14um I guess I would characterize them
5:00:17certainly as a component of our Revenue
5:00:19requirement in this case I don't have
5:00:21the exact figures in front of me in
5:00:24terms of the uh exact proportion of our
5:00:27Revenue
5:00:29requirement uh would you agree with me
5:00:31subject to check that uh Mr feda
5:00:35attachment APF 17 shows that operation
5:00:40and maintenance maintenance
5:00:43expenses are roughly
5:00:45$261 million in this case subject to
5:00:50check I would believe
5:00:52that and those types of costs were not
5:00:55included in your incremental cost
5:00:58study no they were
5:01:04not I just have a couple clarifying
5:01:07questions relating to inputs that you
5:01:09use used in your um ra1 ra2 and
5:01:14ra3 analyses and I'm just going to use
5:01:17your
5:01:18ra1 analysis I think it's the um let me
5:01:24see which one that
5:01:29is believe that's the Canyons yeah the
5:01:32Canyons project that's right um
5:01:35for um an example for these questions
5:01:40and they're really just clarifying
5:01:42questions um can we pull up attachment
5:01:45ra1 rev one and go to page two of 16
5:01:53please uh so sorry the it's an
5:01:57executable the one they just admitted
5:01:59earlier that's fine yeah that works
5:02:01great thank you well yeah you said page
5:02:0316 so I don't I'm not quite sure what
5:02:05you mean oh there's multiple tabs so
5:02:09you're gonna have
5:02:11okay can we pull it up it's probably all
5:02:13I have is the pdf version I couldn't get
5:02:16the ex executable version to open so I'm
5:02:19just looking at um at the very first
5:02:24page the tab well if you can pull up the
5:02:28exhibit I can direct you to the tab I
5:02:30think it's just the revenue requirement
5:02:33tab it was the same
5:02:35one yes so let's go to the revenue
5:02:38requirement Cal 40
5:02:42years PAB see if that turns up yep that
5:02:46works um so Mr matley I am just looking
5:02:51at that top left corner lines one
5:02:54through through six do you see that I do
5:02:58see that um and there's a property tax
5:03:01rate of
5:03:021.3% in this spreadsheet can you tell me
5:03:05why you use
5:03:071.3% yeah that um was dered D based on
5:03:11historical property taxes that we've
5:03:13paid as compared to the netbook value of
5:03:17um plant and so I derive that factor
5:03:20from actual property tax expense and use
5:03:23that to apply to the netbook value in
5:03:26each and every year in the revenue
5:03:27requirement
5:03:28calculation okay and was that for the
5:03:332023 year historical year that you
5:03:36looked at I think it would have been
5:03:38from 2022 I don't remember specifically
5:03:40off the top my head but given this was
5:03:42prepared in May I don't know that the
5:03:442023 numbers would have been readily
5:03:46available at that time okay so you think
5:03:49you you got 1.3% from the
5:03:5320202 um historical figures your
5:03:56property tax
5:03:57figures correct uh yes okay thank you um
5:04:03and then still on this very page let's
5:04:06go down to the
5:04:07bottom it'll be under the income tax
5:04:10section so you see that from lines 27
5:04:14through line 20
5:04:1635 I see that and the uh line that says
5:04:21composite tax rate all across that row
5:04:26you use a
5:04:282448 per tax rate where did that come
5:04:31from um you can actually see it up in
5:04:34cell
5:04:35L1 and that's the composite of the
5:04:38federal income tax rate at 21% the state
5:04:40income tax rate at
5:04:424.4% and it accounts for the fact that
5:04:44we get to deduct state income taxes uh
5:04:48off of the federal income
5:04:50tax so that's how that composite rate is
5:04:53compiled that's helpful thank you um and
5:04:57you show the federal income tax rate of
5:05:0021% is there a possibility that this 21%
5:05:04rate could increase to to a higher rate
5:05:09um on under the next Presidential
5:05:11Administration if you know uh I well I
5:05:15don't know I would say there's certainly
5:05:17a possibility it could increase and
5:05:18there's a possibility it could decrease
5:05:20as well and if it increased then the
5:05:24total revenue requirement for each of
5:05:26these three projects would increase do
5:05:28you agree if it increased the income tax
5:05:32component of the revenue requirement
5:05:33would increase and all other things
5:05:35being equal the revenue requirement
5:05:38would increase thank you
5:05:42all right uh we can take this exhibit
5:05:44down thank you and move on to the second
5:05:48topic of your testimony uh which is the
5:05:5115-year forecasted rate projections
5:05:55model
5:05:56um please pull up ex uh UCA exhibit
5:06:00number
5:06:07546 and I'll represent to you this is
5:06:10the commission's decision in this case
5:06:12asking for supplemental testimony can we
5:06:15go to page seven paragraph
5:06:2216 scroll up a little bit thank you um
5:06:26in in this paragraph uh the commission
5:06:29notes that uh the company indicates that
5:06:32investments from 2022 through 2023 were
5:06:36some1 billion do you see that
5:06:41I do see that and therefore the
5:06:43commission asked in order to understand
5:06:47how the company's ongoing Investments
5:06:50pancake into customer rates over time
5:06:54that uh the company provide a 15-year
5:06:58rate projections through
5:07:002038 of overall average rates and
5:07:03residential rates under the company's
5:07:05forecast assumptions in this proceeding
5:07:10and is that what your uh 15-year
5:07:13forecast model responds to um it is we
5:07:18put together the 15-year model to be
5:07:21responsive to this
5:07:24request thank you um before we get into
5:07:27any details of the forecast model itself
5:07:30I'm going to ask a couple of preliminary
5:07:32questions you're aware that for several
5:07:35years now the commission's been
5:07:37expressing concern over continu capital
5:07:40investment and gas infrastructure I
5:07:42think there is a discussion with Mr P
5:07:45about that
5:07:47concern uh I've not been part of those
5:07:50conversations in in previous cases or
5:07:52previous years but I understand the
5:07:55concern expressed to Mr
5:07:58pet you you understand that that's a
5:08:00commission
5:08:05concern the understanding that you know
5:08:08the I don't want to speak on on behalf
5:08:10of the commission um but I have heard
5:08:13that concern okay and that the
5:08:15commission has also been concerned about
5:08:18the impact that gas infrastructure
5:08:21investments will have over time on the
5:08:24rates that will be borne by those left
5:08:26on the gas system as beneficial
5:08:29electrification
5:08:33advances um I've not been part of those
5:08:37conversations or those proceedings I can
5:08:39certainly understand from the words on
5:08:41the page here the concern about the
5:08:44impact of Investments on customer rates
5:08:47here in this
5:08:49case can we pull up um hearing exhibit
5:08:53547 from UCA
5:09:02box and I'll represent to you that this
5:09:05is the commission's decision on
5:09:08exceptions
5:09:10in uh proceeding number 21
5:09:14a472 G which is known as the West Metro
5:09:19decision can we turn to page eight
5:09:22paragraph 18
5:09:27please I think I have that right page
5:09:32eight
5:09:33right
5:09:37um so this proceeding just for a little
5:09:40bit of background Mr matley uh the
5:09:43commission
5:09:44approved um the company's request for an
5:09:48investment of 21 million or $27 million
5:09:51in uh the company's gas infrastructure
5:09:54in Denver um and the decision came out
5:09:58in
5:10:002022 there at paragraph
5:10:0418 the commission States continuing
5:10:07business as usual investments in the G
5:10:09gas system without additional throughput
5:10:12to financially support them creates a
5:10:15major economic friction moving forward
5:10:18and could eventually impact the
5:10:19company's ability to continue to deliver
5:10:22service at rates that are just and
5:10:25reasonable do you see that I'd like to
5:10:29object to this line of questioning um
5:10:31it's not been establish establish that
5:10:33Mr matley is familiar with this decision
5:10:35in fact I believe I could be wrong but I
5:10:37believe the decision predates it
5:10:39Cur role in regulatory uh for psco in
5:10:43addition this is beyond the scope of his
5:10:45testimony he simply provided
5:10:47supplemental direct testimony in this
5:10:50case uh responding to some very specific
5:10:53commission
5:10:57requests commissioner oh this goes
5:11:00directly to um the concern that the
5:11:03commission expressed when it asked for
5:11:07the 15-year forecast um the concern that
5:11:11the rates that come out of this
5:11:14proceeding are going to or how they're
5:11:16going to be
5:11:17impacting um consumers going forward and
5:11:22the model itself talks about uh the the
5:11:26change in Investments that will be
5:11:29needed going forward and the increase of
5:11:33costs that will result to Consumers um
5:11:38because of the Investments that are made
5:11:42in the gas infrastructure by the company
5:11:44so this your order back in two years ago
5:11:482022 prior to the Investments that are
5:11:52at issue in this case talked about uh
5:11:55the your concern relating to investments
5:11:59in the gas infrastructure and how they
5:12:01were going to be impacting consumer
5:12:05rates I'll overrule the objection um I
5:12:08think it's fine questioning given that
5:12:10he's the witness that responds to
5:12:12questions about future rates um and to
5:12:15the extent he's not familiar uh I think
5:12:17he can indicate such in his
5:12:21responses go ahead and re ask your
5:12:23question Mr
5:12:25Sing sure um
5:12:29so Mr manler um in this 2022 decision of
5:12:35the commission um relating to gas
5:12:39infrastructure Investments the
5:12:41commission expressed its concern that
5:12:44continuing business as usual investments
5:12:47in the gas system without additional
5:12:49throughput to financially support them
5:12:52will create a major economic friction
5:12:54moving forward and could eventually
5:12:57impact the company's ability to continue
5:12:59to deliver service at rates that are
5:13:01just and reasonable do you see that
5:13:04commission concern I do see those words
5:13:07written
5:13:10and that was a couple years ago and
5:13:12prior to the
5:13:142023 historic test year and many of the
5:13:17Investments made in this case
5:13:20correct uh this case covers Investments
5:13:23made in and put into service in 2022 and
5:13:272023 so I I can't see exactly when this
5:13:30decision was issued um but it looks like
5:13:34from the c22 I see on the page it was
5:13:37issued at some point in 2022 would be in
5:13:39the midst of the investments in this
5:13:42case we can go to the last predating
5:13:46this decision oh I'm sorry Mr matley I
5:13:49interrupted you I didn't mean to can we
5:13:51go to the first page of this exhibit
5:13:55please and do you see the mail dates and
5:13:59the adopted dates I do so with the mail
5:14:02date of December 6
5:14:042022 then I would say you know about
5:14:08half nearly half in terms of time span
5:14:10wise if the Investments put in service
5:14:13in this case were prior to this
5:14:17decision and the October 26 and nove
5:14:20November 26 um or 16th 2020 two dates
5:14:24were the adopted dates of this decision
5:14:28I do see
5:14:30that uh can I move for administrative
5:14:33notice of U hearing exhibit
5:14:44547 uh any uh objection M
5:14:47marchenko no your honor since this is in
5:14:50the uh uh commission's Records no
5:14:53objection okay so notice thank you um so
5:14:58Mr matley your analysis Bears our
5:15:01commission's concerns out doesn't
5:15:05it well I I don't know if I would agree
5:15:09with that um I would say that my
5:15:12analysis um certainly shows a forecasted
5:15:16rate increase under the assumptions of
5:15:18this case one of which one of those key
5:15:20assumptions is the change in throughput
5:15:23that's informed by the clean heat plan
5:15:27um at least as we understood it at the
5:15:28time of putting the the model together
5:15:31back in May of this year I'll also note
5:15:34the model um underlying the or in along
5:15:38with that rate change the model's
5:15:40forecasting average bills to rise less
5:15:43than the rate of inflation if you just
5:15:45look at the base rate Revenue
5:15:47requirement associated with gas service
5:15:49going forward so the because the rate
5:15:53impact is primarily driven by um by
5:15:57throughput changes then uh as rates go
5:16:01up as forecast in the model average
5:16:03usage also decreases and so average
5:16:07bills show sort of moderate forecasted
5:16:10increase in the rate
5:16:13model now it it's interesting um you
5:16:17talked to chair uh blank before he left
5:16:22about uh the capital
5:16:25investment um that and the fact that the
5:16:29company for purposes of this model um
5:16:32went ahead
5:16:34and put uh new business and Capac
5:16:39expansion projects at zero uh from 20
5:16:432030 going forward do you recall that I
5:16:46do recall that
5:16:48discussion and then
5:16:51um you talked about how that might not
5:16:57be true going forward that in fact the
5:17:00company may have uh additional new
5:17:03business and additional capacity
5:17:06expansion projects after 2030 do you
5:17:09recall that um I recall the discussing
5:17:13that particularly in the context of um
5:17:16the ultimate implementation of the line
5:17:19extension policies uh that they're you
5:17:23know knowing what we know now categories
5:17:26like new business may not go to zero
5:17:29under current
5:17:31policies so if new business and capacity
5:17:35expansion projects don't go to zero at
5:17:382030 as you as you used in your uh
5:17:42forecast model here um then the
5:17:47increases would be even higher for
5:17:49consumers wouldn't you agree so all
5:17:52other things being equal yes if capacity
5:17:55and new business projects do not go to
5:17:57zero the rate increase would or the rate
5:18:00forecast would rise from what's
5:18:02currently stated of course that being
5:18:04said not you know other things will
5:18:07change going forward in the model
5:18:09one of which we saw with the difference
5:18:11in the investor presentations that
5:18:14commissioner blank submitted as hearing
5:18:16exhibits between October 23 which is the
5:18:19time period of the forecast underpinning
5:18:22this case and the September 2024
5:18:24investor presentations gas Capital
5:18:26forecast decreased and so there will
5:18:29continue to be movement in both
5:18:31directions I think in our Capital
5:18:34forecast but my point was that if there
5:18:38is an increase in in capital investment
5:18:43after 2030 compared to what you used in
5:18:46the model then the um impact on
5:18:50consumers would be greater than as you
5:18:53showed in the model correct all other
5:18:56things being equal the rate forecast
5:18:57would increase from what
5:19:00showns thank you can we pull up um
5:19:03hearing exhibit two3 executable
5:19:06attachment ra5
5:19:12and I'm going to start out with um page
5:19:16one so it should be the output and the
5:19:19input
5:19:28page sorry there are the multiple Excel
5:19:31sheets open my computer doesn't like it
5:19:33give me a second okay no problem
5:19:44can we make this a little
5:19:49bigger great thank you um Mr matley can
5:19:54you identify what's in front of
5:19:56us so I can this is my attachment five
5:20:01um just filed yesterday on the public
5:20:03version of the 15year r model and it
5:20:06shows on the left hand side of the page
5:20:10um some of the key inputs to the model
5:20:11particularly the user adjustable inputs
5:20:14to the model as requested in the
5:20:16supplemental direct decision and it
5:20:19shows the outputs of the model on the
5:20:21right 2third of the page in graphical
5:20:24form and in table form in terms of sales
5:20:27total revenue requirements and average
5:20:30total rates and average residential
5:20:33rates thank you um can we just make it a
5:20:37little bigger I don't know if it's Miss
5:20:40kungle or Miss Federico but thank you so
5:20:42much that's perfect um I'm going to be
5:20:45focusing on the outputs that are on the
5:20:49right
5:20:51side of the page um and the first box as
5:20:55you said addresses total sales total
5:20:59annual sales and you show that there's a
5:21:04growth rate or a total change of 40.4
5:21:08percent from 2024 to 2038 is that right
5:21:13that's
5:21:15correct so sales go from roughly 145
5:21:19million decms to roughly 87 million
5:21:24decms correct that's
5:21:28correct and then in the
5:21:31next let's
5:21:34see oh you know what I think we have to
5:21:37go to
5:21:39the gas sales forecast for my next
5:21:42question I'm hoping it's in that
5:21:47tab yes uh and if we could make this a
5:21:50little bigger
5:21:54um Mr matley um if I guess we have to
5:21:58see the very first column in this
5:22:01spreadsheet in order to uh address my
5:22:06questions um can we move that over so we
5:22:10can see the First Column it's probably
5:22:12column
5:22:16A on the left side oh thank you okay so
5:22:19here's where you've got your sales
5:22:22figures um and this is where we see in
5:22:252021 the roughly 145 million for on on
5:22:31row
5:22:32five and then if we look at 2038 it's
5:22:36going to have the figure that you put in
5:22:39your table for total sales forecasted
5:22:42which I think was roughly what 89
5:22:47million is that right that sounds
5:22:49roughly correct this this tab is the
5:22:51source for that output okay great and
5:22:54here's where you've got the residential
5:22:56sales forecast and on row 10 um so in
5:23:012021 it looks like uh the
5:23:05forecast um or these are probably act
5:23:08ual numbers aren't they if it was 2021
5:23:102022 and
5:23:122023 yes those would be actuals with 24
5:23:16and forward being a forecast thank you
5:23:19so the actuals for
5:23:222021 uh were roughly $103
5:23:26million um and then you show in
5:23:302038 if we can scroll over to the last
5:23:34columns in the
5:23:37spreadsheet and it's this row 10 um
5:23:40we've got 2038 you've got quite a
5:23:44reduction it's now for residential sales
5:23:47it's going to be a total of is that 56
5:23:51or 58 56 million dollar is that right 56
5:23:57um million decms yes decms I'm sorry um
5:24:02so that is quite a quite a change in
5:24:05sales from 2021 to 2038 wouldn't you
5:24:08agree it's a significant decline I would
5:24:12agree can we go back to the very first
5:24:15tab I think the um inputs thank you the
5:24:20guas system inputs and outputs um here
5:24:25we
5:24:26show the total revenue
5:24:32requirements
5:24:34go up from uh one
5:24:391.5 billion to $1.7 billion from 2024 to
5:24:462038 is that right that's
5:24:49correct and that's a
5:24:5210.6% increase correct in total over a
5:24:5615year period which equates to 7% per
5:25:00year on
5:25:02average so going down to the average
5:25:06residential rate box
5:25:10the average residential rates I'm
5:25:12looking at the very last
5:25:16row change they increase by
5:25:2190.3% did I read that correctly you read
5:25:25that
5:25:25correctly so melson I just want to check
5:25:28in with you on your timing see how much
5:25:30you have left I have one more line after
5:25:33this and it'll go real quickly okay
5:25:36couple minutes thank you okay yeah I
5:25:38guess I am getting to my half an hour I
5:25:40appreciate that um so and this is where
5:25:44my confusion was from before it looks
5:25:47like in your revised
5:25:50ra5 you have the total um per decm rate
5:25:56of
5:25:57$10.5 in 2024 and then in 2038 you have
5:26:02a per decm rate uh for consumers of
5:26:06$19.31 do you see that I do see that but
5:26:10in your revised testimony and hearing
5:26:13exhibit
5:26:15123 you have a table at page 19 and we
5:26:19don't have to to go there unless Mr
5:26:21matley needs to see it but you you have
5:26:24your table ra
5:26:26sd3 where you you um have different
5:26:30numbers for average residential rates in
5:26:342024 and 2038 can you explain why you
5:26:37didn't Rev
5:26:40this and I can appreciate the the
5:26:42confusion so the my testimony remains uh
5:26:48as filed in terms of the 15-year rate
5:26:50model section and that is discussing the
5:26:52confidential version of the attachment
5:26:55ra4 C which you know is different and is
5:27:00still on the record in this case and my
5:27:02attachment ra5 has changed in the G in
5:27:06the GCA line item so we pulled out the
5:27:08gas price forecast that was the
5:27:10confidential piece of information we've
5:27:12replaced it with actuals to date with a
5:27:15user defined escalation rate or user
5:27:17adjustable escalation rate going forward
5:27:20so it's just the GCA component of the
5:27:22model that has changed but that has
5:27:24flowthrough effects on the total
5:27:27numbers thank you Mr matley that really
5:27:29clears it up I appreciate that um so we
5:27:33are talking about uh the the rates then
5:27:37the average res itial rates that are
5:27:39here in your model um it shows the
5:27:45$105 per decm for 2024 and that
5:27:48increased to
5:27:501931 cents per decm in in um 208 correct
5:27:57that's correct and looking at the um
5:28:02column in that box on the left that only
5:28:06in includes base rate rates the GCA the
5:28:11dmca and the clean heat surcharges
5:28:15correct that's correct
5:28:19um the clean heat surcharge will um be
5:28:23part of the dsmc going forward is that
5:28:26right yeah that's correct that's where
5:28:28where I was going we we put this
5:28:29together while clean heat was still
5:28:31being deliberated so we made our best
5:28:34estimate as to budgets and allocations
5:28:37to the gas uh utility that we could and
5:28:41it was before ultimately the decision to
5:28:43include that as part of the dmca so does
5:28:46this include the safety and facility
5:28:48charge or the energy assistance charge
5:28:51that are also included on customer bills
5:28:54um that would come through in the base
5:28:56rates line item okay in and the energy
5:29:00assistance charge does as well yes thank
5:29:04you
5:29:05um this rate forecast doesn't include
5:29:08any charges for electricity service
5:29:11though does it it does not it is solely
5:29:14focused on gas yeah just guess um so to
5:29:18demonstrate the real customer impact of
5:29:21that increase I'm going to use my uh
5:29:24January 2024 usage as an example for
5:29:28some hypothetical calculations are you
5:29:31are you good with
5:29:35that yes okay my my uh gas usage for the
5:29:40household in January of 2024 was at 227
5:29:45thms of natural
5:29:48gas um would you agree with me that a
5:29:50decm equals 10 therms I would agree with
5:29:54that and and our bills speak in in terms
5:29:58of therms so I'm going to be talking in
5:30:01terms of thms for these calculations
5:30:04okay okay so a trans changing the 2024
5:30:10rate to a per THM rate it would be
5:30:14$1 and two cents between one and two
5:30:18cents is that right that's right and so
5:30:21if I were to multiply that
5:30:24$2 times my
5:30:28227
5:30:30therms it would equal
5:30:33$231
5:30:3554 do you accept my math subject to
5:30:39check I will accept that subject to
5:30:41check okay and at the 2038 rate shown
5:30:46here of um
5:30:50$1.93 per therm my bill would increase
5:30:54by
5:30:56$26 to
5:30:59$438 for my gas services does that sound
5:31:03right uh I will accept your math
5:31:08so going
5:31:10from
5:31:12$231 to
5:31:14$438 is an increase of more than $200
5:31:18for one month just for my gas service
5:31:21isn't that
5:31:22right uh and that
5:31:24hypothetical it it is and it speaks I
5:31:28think to one of the limitations of this
5:31:31modeling exercise which is this is a
5:31:33point in time estimate going forward
5:31:35based on current assumptions it's do not
5:31:38include any potential feedback effects
5:31:41that might happen going forward it
5:31:42doesn't include future policy changes
5:31:44future regulatory decisions so you know
5:31:47should rates remain on this course over
5:31:50the next 15 years without any sort of
5:31:54course correction or intervention then
5:31:56that is what might happen to your
5:31:58particular bill in that hypothetical
5:32:01however I expect there's you know many
5:32:03more policy decisions and Regulatory
5:32:06decisions to come in the interm that
5:32:08could change that
5:32:10course and could
5:32:15restrict yeah this is my last my last
5:32:18question so um so would you agree that
5:32:25um
5:32:27discouraging uh additional Capital gas
5:32:30Investments would be one way to keep
5:32:33that rate from being as high as you show
5:32:36in this uh forecast
5:32:38C I think there are a number of ways to
5:32:42mitigate future rate impacts I would be
5:32:45um cautious about discouraging capital
5:32:49investment particularly given that the
5:32:50majority of our capital investment is
5:32:53focused on maintaining safe and reliable
5:32:55gas system and that's certainly not the
5:32:57type of investment I want to
5:32:59discourage I'm done thank you Mr matley
5:33:02thank you commissioner Gilman no worries
5:33:06thank you Mr Nelson all right I don't
5:33:09believe commission Council has any
5:33:12questions so I'll turn to you
5:33:13commissioner PL I have no questions no
5:33:17questions all
5:33:18right my turn
5:33:21then uh good afternoon Mr matley how's
5:33:25it going doing okay thank you
5:33:27commissioner Gilman good okay
5:33:32um couple questions for you first of all
5:33:35on the discreet uh new business projects
5:33:38that you provided an analysis of in your
5:33:40supplemental direct
5:33:42testimony um the first question is just
5:33:46regarding an assumption and where it
5:33:48comes from if you can help me with that
5:33:51um so in page eight of your supplemental
5:33:53direct testimony you reference an
5:33:56average growth rate of annual revenues
5:34:00over the life of the project at
5:34:031.4% uh annually and kind of refer that
5:34:06that came from the 15-year rate model
5:34:10yeah um which was
5:34:12rm4 now we have an rm5 that we can pull
5:34:15up on the screen if we want um I was
5:34:18just curious where in particular in that
5:34:22model I should be referencing to find
5:34:25that
5:34:261.4% annual increase uh did some
5:34:30calculations on a few uh Revenue
5:34:32requirement lines and none of them
5:34:34turned out to be that so I was hoping
5:34:35you can help me find it yeah and in fact
5:34:38I think we just saw it on the screen so
5:34:39I'm happy to point it out if we want to
5:34:41bring it back up or I can describe it as
5:34:43well it's in that Revenue requirement
5:34:47box on the output side uh next to the
5:34:50base rate line item so that's the uh
5:34:54compound annual growth rate from 2024 to
5:34:572038 of the base rate Revenue
5:34:59requirement component of total customer
5:35:03or the total revenue requirement I
5:35:05should say
5:35:07I see him got it okay okay so that's
5:35:11merely an average of all of the
5:35:14different growth rates from 2024 to
5:35:182028 it's a it's the average annual
5:35:22growth rate of the base rate Revenue
5:35:24requirement over that time period got it
5:35:27okay thank you and I CH that number
5:35:29specifically because rates are
5:35:31forecasted to go up greater than that
5:35:33but throughputs also forecasted to
5:35:34decline so that would be a proxy of A
5:35:38Sort for the average bill
5:35:40inent okay got it thank you very much I
5:35:42was trying to find that exact one
5:35:46um let's see um when you looked at the
5:35:50projects uh for for each of the projects
5:35:53that you analyzed when you looked at
5:35:54their annual revenue
5:35:57requirement um did you include any
5:36:00incremental onm associated with the
5:36:03project I did
5:36:05not um is is it reasonable that there
5:36:08may be some incremental onm associated
5:36:11with new
5:36:13infrastructure it's reasonable that all
5:36:15other things may equal you know
5:36:17expansion on the system might incur some
5:36:20incremental
5:36:21on okay um and also looking at your
5:36:25general assumptions for the what's
5:36:28included in the revenue requirements for
5:36:31those new business projects did you
5:36:33include any
5:36:35um incremental needs for Upstream
5:36:39capacity in other words Upstream
5:36:41capacity needs where you may be getting
5:36:43closer to triggering the projects but
5:36:45have not gone over the line in terms of
5:36:48actually triggering those projects for
5:36:51their Upstream to occur is there any
5:36:53kind of incremental allocation of
5:36:56perhaps the cost of getting closer to
5:36:58needing other capacity projects Upstream
5:37:00like that um it's not an an input that I
5:37:05have readily available from the end
5:37:08that um you know the the starting point
5:37:11of the analysis was the um Capital
5:37:15additions laid out in Mr Gardner's
5:37:17testimony for each of these projects so
5:37:19it was the cost that um the company
5:37:22incurred to put these projects in
5:37:25service okay so is just the cost
5:37:28incurred as part of this discret effort
5:37:32but if these additions of customers were
5:37:35getting us closer to triggering capacity
5:37:38constraints further Upstream that's not
5:37:41necessarily accounted for that's not
5:37:43imputed to the project itself and we
5:37:45don't have a sort of at least in my
5:37:48knowledge a clear way to identify those
5:37:50costs or calculate those okay that's
5:37:53helpful thanks um now looking at the
5:37:57project revenues in terms of how you
5:37:59determine project revenue for those um
5:38:02discret new business projects we had you
5:38:04look at um it's my understanding that
5:38:07you used similar building stock and
5:38:10vintages to determine um usage
5:38:13assumptions is that accurate that is
5:38:16accurate
5:38:18um are these and and you can separate
5:38:21them out for me or whatever are these
5:38:24projects we have the Cole Creek Canyon
5:38:26Pines and then the the Canyons Castle
5:38:29Pines they're all Seas so it's it's a
5:38:33little confusing between the projects
5:38:35but um are these projects actually under
5:38:39construction right now like the actual
5:38:43homes um so I'm more familiar I would
5:38:47say with the state of the Canyons
5:38:48project but that is actually under
5:38:51construction um with homes going in that
5:38:54said they're it's in a state of buildup
5:38:58right and so one of the challenges in
5:39:00estimating the revenue is that we don't
5:39:02have yet the revenues from the specific
5:39:05uh new business projects themselves
5:39:08and so the next best thing in my opinion
5:39:12is pulling similar vintage um in terms
5:39:16of year of construction you know as
5:39:18recent as possible within the last four
5:39:19years similar vintage um size square
5:39:23footage so for Canyons we used 1800 to
5:39:272,000 square foot um new construction in
5:39:31the surrounding area uh and then we
5:39:34filter that through our Billing System
5:39:36to identify
5:39:37um those which we had 12 months worth of
5:39:39gas usage data and that became our
5:39:42sample and became what we used to
5:39:45calculate the average throughput or the
5:39:47average annual gas consumption of those
5:39:50kind of comparable uh new builds and
5:39:53that is what underpins the revenue
5:39:56assumptions okay and did the company
5:39:59kind of verify any um information from
5:40:03actual applications for the project to
5:40:05ensure that it looked like they were
5:40:06requesting the same type of servicing
5:40:08capacity as any of the proxy
5:40:12projects um we didn't go and compare the
5:40:16sort of new new service request I guess
5:40:19from the current to um the the proxy
5:40:24projects um the challenge with the new
5:40:26service request is it's typically
5:40:28capacity based and we need a throughput
5:40:31number to do annual
5:40:33revenues okay and so I I was just look I
5:40:38identified from the city of Castle Pines
5:40:41website that they're on the 2021 um
5:40:45International building code and I was
5:40:48curious if you had any idea if the code
5:40:51for the um uh similar building stock
5:40:56that you use was permitted under the
5:40:59same building code as the homes that are
5:41:01currently being built there are being
5:41:03permitted under I'm not specifically
5:41:06aware although one of the reasons we we
5:41:09limited the scope of the proxy homes to
5:41:15that region you know that same County uh
5:41:18and the similar vintage in order to try
5:41:21and normalize for those type of um
5:41:25effects okay but to the extent that a
5:41:27new building code was adopted in mid
5:41:3120203 that could provide a difference
5:41:33between what building code version this
5:41:36new project project may be on versus
5:41:38others that you have a full year of data
5:41:40for by that point correct it it could
5:41:43and I would point out I do think our
5:41:45usage consumptions remain fairly
5:41:47conservative in this Viewpoint um
5:41:50Canyons for
5:41:51example uh the the numbers you see in
5:41:53the attachments 43 decms per year in
5:41:57usage and so that's 430 therms our
5:42:00average um residential customer usage is
5:42:03more in the ballpark of 700 to 750 f for
5:42:08year okay and that's a result of
5:42:10essentially you filtering that
5:42:11geographic area for the same uh the most
5:42:14recent I guess new conru and also the
5:42:17fact that most of canyons are sort of
5:42:19duplex or town home style and so we
5:42:22filtered for that as well because that
5:42:23obviously has its Associated energy
5:42:26usage profile okay that's awful um and
5:42:29then the revenues that you attribute to
5:42:32each project um as you had said below uh
5:42:35before these are a different um varying
5:42:37stages of buildout so the revenue
5:42:40projections assume full build out right
5:42:44they do and the the kind of analysis is
5:42:47a little bit independent of time that
5:42:49way and that it looks at you know
5:42:51investment starting year one and revenue
5:42:53starting in year
5:42:54one okay so you kind of for the purpose
5:42:57of the culation assume full buildout
5:42:59started full build out was in place day
5:43:02one everyone's using how much they'll
5:43:05eventually use and every unit is built
5:43:07yes um as the modeling convention absent
5:43:11other
5:43:12information okay and then
5:43:15um the the revenues also would assume
5:43:20kind of a 100% tency right like um with
5:43:24the commercial uh areas you assuming
5:43:27100% of that is filled all of the time
5:43:30you're around it really it depends on
5:43:34how I guess um used the proxy sample is
5:43:37because this is based on actual
5:43:39throughput so it would maintain the
5:43:41characteristics of the sample of homes
5:43:43that we use to generate um the revenue
5:43:46assumptions to the extent any of those
5:43:48were vacant for a period of time during
5:43:50the 12 months we looked at then that
5:43:51would be carried forward into the
5:43:53analysis and for commercial did you also
5:43:56use a proxy group or make some other
5:43:58determinations for the commercial
5:44:00occupancy for commercial our starting
5:44:02point was eia Data translated to our um
5:44:05climate we did use the proxy step to
5:44:08determine uh an average square
5:44:11footage um per small commercial per
5:44:14commercial customer and that is what led
5:44:16us to determine the 196 new commercial
5:44:19customers because the available
5:44:21information we were starting with was
5:44:22there's 2.1 million square feet of
5:44:24commercial space in
5:44:27Canyons okay and then those um usage
5:44:31assumptions essentially per unit or per
5:44:33square foot if it's commercial were held
5:44:36constant for the entire 30 or 40 Years
5:44:39of the study of that right that's
5:44:41correct we did not assume usage changes
5:44:44either upwards or downwards over time
5:44:46okay so no no assumed potential for uh
5:44:51Energy Efficiency or beneficial
5:44:53electrification modifications within the
5:44:5530 or 40 year time frame no the model
5:44:58didn't we didn't take a view of that
5:44:59through the model okay um let me see
5:45:03what else they got for you um moving on
5:45:07the Rampart Range
5:45:09project um which you pointed out I think
5:45:12was is different it's an upstream
5:45:14capacity uh issue um and to my
5:45:19understanding that the data on that
5:45:20project shows there's approximately 3900
5:45:24customers at risk absence the capacity
5:45:27expansion is that fair that's fair that
5:45:30was the starting point for the
5:45:31analysis okay and those are existing
5:45:34customers that are being served right
5:45:36now by the system is that
5:45:38correct that's my interpretation of that
5:45:42statement that 3900 customers are at
5:45:44risk
5:45:45yes okay um and in this case did the
5:45:49company use actual usage from 3900
5:45:55customers in that area or you still used
5:45:57a proxy group even though you have
5:45:58actual customers we still used a proxy
5:46:01group because our understanding of the
5:46:03situation is um there is growth and
5:46:07development in that area and so we used
5:46:09a proxy group from the growth and
5:46:12development of in that area um and that
5:46:16again is you know the kind of 1800 to
5:46:192,000 square foot home a little bit of
5:46:22conservative view based on some of the
5:46:24large developments near the project area
5:46:27um and so that's the the basis for the
5:46:31usage assumption and the revenue
5:46:33assumptions so was the requirement as
5:46:36you understand for the project to serve
5:46:383900 existing homes or future growth
5:46:43it's difficult in a sense to to pull
5:46:46that apart I think with capacity
5:46:48projects because there is certainly a
5:46:52risk of 3,900 customers uh being unable
5:46:56to be
5:46:57served however there's also upstream or
5:46:59sort of different uh causes of that and
5:47:04so the you know the the system is not
5:47:09static you know in my understanding that
5:47:11it's hydraulically connected and interl
5:47:14and so um we used the kind of proxy
5:47:20group analysis approach to develop the
5:47:24revenue associated with grand Parts
5:47:26based upon the new development in the
5:47:28area in effect helping to put those 3900
5:47:32customers at risk although I'm certainly
5:47:34not a gas planner and so I suspect
5:47:36there's you know much more to it and
5:47:38much more complexity in my understanding
5:47:40of the
5:47:41situation okay so if um as I understand
5:47:45in the current situation we have 3,900
5:47:47customers at risk absent any more
5:47:51growth um and then the potential that
5:47:54new customers are also coming online in
5:47:56that area is that
5:47:58fair I guess I would say I understand
5:48:02that we have 3900 customers at risk
5:48:04certainly without any potential future
5:48:06growth but how they got there I think is
5:48:08dependent on past
5:48:11growth okay and then your Revenue
5:48:14assumption for the support of this
5:48:17project was based on 3900 customers yes
5:48:22okay I'm not entirely clear if they're
5:48:24existing customers or not the revenue
5:48:28assumption is based on the usage from
5:48:31new customers assuming that's how we
5:48:33that's how we determine the throughput
5:48:35assumption um you know whether or not
5:48:37you want to think of the 3900 customers
5:48:40as new or existing I guess it's most
5:48:42fair to think of them as existing
5:48:44customers we just had to get their usage
5:48:47data somehow and we used the proxy group
5:48:51approach there existing customers is it
5:48:53really incremental
5:49:05Revenue a fair question I think it's not
5:49:09supposed to be a trick question no it's
5:49:11it's a fair question I mean they are
5:49:14existing customers
5:49:16that I mean to the extent that they are
5:49:21at risk right they are uh it is a
5:49:24required investment you know that we
5:49:26need to make to maintain their service
5:49:29so you know I certainly would never want
5:49:31to Endeavor a situation where those 3900
5:49:33customers do not have service and so um
5:49:36um you know
5:49:40the we did we did attempt to calculate
5:49:44the revenue associated with this
5:49:46capacity project right in comparison to
5:49:48the revenue requirement um but it's a
5:49:51fair question on whether or not to look
5:49:53at it as incremental it's less clearcut
5:49:56in my view with capacity projects than
5:49:58with new
5:49:59business um are you familiar knowing you
5:50:02might not work on this side of the
5:50:04business but are you familiar when the
5:50:06capacci constraint in the ramp art range
5:50:10area was originally identified I'm I'm
5:50:13not familiar with that okay I think part
5:50:16of what I struggle with in looking at
5:50:17these capacity expansion projects to
5:50:20understand are they incremental Revenue
5:50:21are they not it's like when did we
5:50:24identify the need and how did we add
5:50:273900 customers that we apparently don't
5:50:30have the capacity
5:50:33for that's that's what I struggle to
5:50:35figure out as part of yeah I fortunately
5:50:37don't have a great uh answer for you on
5:50:39that question it might be something Mr
5:50:42Mars might be more helpful with okay um
5:50:46if the company adds throughput um does
5:50:50it make sense to you that that could or
5:50:53would increase the company's cost of
5:50:55compliance with clean heat statutes
5:50:58still a clean heat statute there's only
5:51:02one
5:51:04if the as my understanding clean heat
5:51:07requirement is a percentage reduction in
5:51:11uh greenhouse gas yeah
5:51:17um to the extent that throughput was
5:51:20added I could see mathematically how
5:51:23that might make the same percentage
5:51:24reduction more more challenging to be
5:51:28met and is there any assumption for any
5:51:31kind of increased compliance cost for uh
5:51:35clean Heat
5:51:37in the um in the new business business
5:51:41um no there's no incremental assumption
5:51:44on the compliance costs okay um got a
5:51:49couple questions for you on the 15year
5:51:52rate model that you submitted um and
5:51:55first of all thank you for your efforts
5:51:57to uh give us a non-confidential version
5:52:00uh I think for transparency purposes
5:52:02that's very helpful as well as for our
5:52:05discussion today so thank you for your
5:52:07efforts and short time in putting that
5:52:09together I appreciate the idea on how to
5:52:12get around our guest Price Forecast
5:52:15confidentiality excellent well
5:52:17appreciate it um okay so
5:52:23um maybe first of all um you show within
5:52:27the r forecast uh transport sales but do
5:52:31not um you know mo most of your work is
5:52:35around your retail customer
5:52:37um now for the purpose of Transport
5:52:39sales those are essentially kept
5:52:41constant throughout the model from what
5:52:43I saw is that accurate that's accurate
5:52:46we didn't take a view on the forecasted
5:52:48changes in tra transport sales in the
5:52:51model now as we see and I think I don't
5:52:55think there's a summary on the expected
5:52:57rate changes for transport customers
5:53:01either to that end so
5:53:04um is the scenario that being laid out
5:53:07in the 15-year rate projections one that
5:53:10would also lead to increased rates for
5:53:12transport
5:53:16customers I think that the rates for
5:53:20transport customers as laid out um would
5:53:23increase at a much more moderate pace
5:53:27and I think one way to think about that
5:53:29you see a difference in the residential
5:53:31rate increase as compared to the total
5:53:33average rate increase I think it's the
5:53:35through put of Transport customers being
5:53:38kept constant that's a has a bit of a
5:53:40moderating impact on the total average
5:53:42rate increase as compared to the
5:53:44residential rate
5:53:46increase okay but do you think if the
5:53:49transport customers do face rate
5:53:52increases moving forward that that could
5:53:53have some influence on the sales to
5:53:56transport
5:53:57customers I think that there's um it's
5:54:01almost certain that the uh actual
5:54:04transport customer throughput will look
5:54:05very different than what's put in the
5:54:07forecast and so they uh could respond to
5:54:11price increases by you know reducing
5:54:14their consumption whether that's through
5:54:15efficiency or fuel switching or um you
5:54:18know any other me and there could also
5:54:21be continued economic development that
5:54:25you know continues to increase
5:54:26throughput from transport customers
5:54:28going forward um we just chose not to
5:54:32take a position on the forecast for
5:54:34those customers in the model okay
5:54:37understood
5:54:41um were the outcomes to your and I know
5:54:44you're not the the sales forecast
5:54:47witness here but to your understanding
5:54:49were the outcomes of the clean heat
5:54:51proceeding
5:54:52Incorporated um throughout your rate
5:54:55model including in sales and anywhere
5:54:57else they were so what I can um tell you
5:55:00is the forecast that we used the sales
5:55:03forecast that we used in the model was
5:55:06in informed by the amended preferred
5:55:08portfolio as we put forward in the clean
5:55:10heat proceeding um the sales you know
5:55:13the the ultimate decision on the final
5:55:15clean heat uh proceeding came after you
5:55:20know the sales forecast was generated
5:55:21for this model but it is informed by our
5:55:24what we put forward as the amended
5:55:26preferred
5:55:27portfolio Okay so perhaps directionally
5:55:30accurate but based on a prior version
5:55:33within that proceeding is that fair yeah
5:55:36not final answer but I think it
5:55:38incorporates clean heat impacts
5:55:41certainly okay
5:55:44um me see
5:55:47um so it looks like um you might have
5:55:50gone over this number with M singer
5:55:52Nelson but um a drop in expected sales
5:55:56from 2024 through 2038 of about 40% does
5:56:00that sound right that sounds right okay
5:56:05um and as I look through the the um
5:56:09calculation we can we can pull it up if
5:56:11it's helpful for you um it's
5:56:14R5 a new one on the gas sales tab which
5:56:18I think is the second tab um so as we
5:56:22look at the gas sales forecast
5:56:26um it looks like we do have
5:56:29year-over-year
5:56:30reductions thank you there's percents
5:56:32that run across the top that kind of
5:56:34give us the year-over-year changes is um
5:56:38and those um start off as relatively
5:56:43slow reductions increase in Pace um but
5:56:47then kind of moderate back down a little
5:56:51in their pace and I want to understand
5:56:54um in terms of like
5:56:56customer demand for the product do you
5:57:00expect those to
5:57:02slow given some of the rate projections
5:57:05in those out years we're seeing a
5:57:08slowing of of the decrease in sales and
5:57:13is that a reasonable assumption um given
5:57:15that the pricing is expected to increase
5:57:19significantly I guess are you asking
5:57:21that based on the price forecast in the
5:57:24model do we expect those reduction
5:57:28customers Accelerate from what's
5:57:30presented here
5:57:32yeah I guess that's a difficult
5:57:35hypothetic to answer from the standpoint
5:57:38that all of their things being equal I
5:57:42would say the there would be some sort
5:57:45of at least price elasticity response
5:57:47from customers on increasing rates um
5:57:52that said I think and I mentioned this
5:57:54with Miss singer Nelson certainly this
5:57:57model is not a prediction of the future
5:57:59and of the next 1450 years absent other
5:58:03um policy interventions or commission
5:58:04decisions um including topics like rate
5:58:08design uh to kind of address impacts of
5:58:13um clean clean heat uh driven throughput
5:58:17changes as we move forward in
5:58:19time okay um and can we go to the
5:58:23capital tab it's the very next tab there
5:58:27um
5:58:28so um on this tab this shows um best gas
5:58:33that expected upcoming capital
5:58:36expenditures by basically the broad gift
5:58:39categories is that a fair representation
5:58:42yeah that's fair in the same categories
5:58:43presented in Mr Gardner's direct
5:58:46testimony okay um they were also
5:58:49presented in a an exhibit and attachment
5:58:52within the clean heat proceeding so I
5:58:54did first of all want to thank you for
5:58:56keeping the presentation relatively
5:58:58similar um for comparison
5:59:00purposes um acknowledge that that that
5:59:03was helpful um as I look back I'm it was
5:59:08a confidential exhibit in a prior
5:59:11proceeding um I will uh point out to you
5:59:15that these numbers are directionally
5:59:18lower um in every year than what I saw
5:59:21there um by a significant margin for
5:59:24some of them and so I was curious if
5:59:28there are any specific circumstances
5:59:31upon which that is based is that the
5:59:34position of the company that they
5:59:36anticipate the future Capital
5:59:39expenditures to be lower than what was
5:59:42being projected um earlier in
5:59:472023 um unfortunately I don't know if
5:59:49I'm going to have a good answer for you
5:59:51on that one because I'm not familiar
5:59:53with the capital forecast that went into
5:59:55the clean heat model um I can tell you
5:59:58that this uh Capital forecast you're
6:00:00seeing here is from the October 2023
6:00:03time period which is uh the same
6:00:06forecast in our direct case um but I I
6:00:09don't know that I can comment on its
6:00:12directional change since clean heat nor
6:00:15if that's indicative of future
6:00:18plans okay
6:00:21um in your conversation with chair chair
6:00:25plan or chair sorry chair blank luy's
6:00:28gone so such a short time we've already
6:00:31um your conversation with the chairman
6:00:35um
6:00:36he had discussed a little bit uh some of
6:00:39the conversations around new business
6:00:41and there being at least from the
6:00:42company's perspective I think some
6:00:45expenses that may remain um despite
6:00:49policy changes to remove incentives for
6:00:52new new customers to join um so it's I I
6:00:56just wanted to kind of wrap it up with
6:00:58coming back to that
6:01:00discussion um I know we don't know
6:01:03exactly but you all expect that actually
6:01:06capacity expansion new business will
6:01:08continue with costs given the company's
6:01:11current interpretation of that or do you
6:01:14think this is the most accurate that we
6:01:17know um so I don't know that I wouldn't
6:01:20say this model is the most accurate that
6:01:22we know or maybe that we we could know I
6:01:24think um a few things I can kind of
6:01:28highlight as we've you know through the
6:01:30course of the proceeding one is which um
6:01:33I think Mr Burman mentioned that all of
6:01:35me
6:01:37expenses are accounted for in the new
6:01:38business category so I think that's an
6:01:40example of you know separate from any of
6:01:43the line extension changes that's um a
6:01:46category that includes meters for new
6:01:48customers as well as meters for existing
6:01:51customers so that's one element of new
6:01:53business that might not go to zero um
6:01:56and I think in Mr burman's rebuttal
6:01:58testimony He also mentioned um our
6:02:01desire to continue to study this issue
6:02:03and bring forward in the next phase two
6:02:06case uh a more detailed analysis of
6:02:09changes we expect to see in new business
6:02:12U and that maybe we're starting to see
6:02:13from these uh line extension policy
6:02:17changes okay um one other um question
6:02:22for you within the clean heat proceeding
6:02:25and the rate projections that were
6:02:26prepared within that proceeding the
6:02:28company put forth essentially a
6:02:30formulaic approach to omm to look at
6:02:35different assumptions could be tested
6:02:37about the extent to which onm is
6:02:39influenced by drops in in um I'm trying
6:02:43to recall if it was through putter
6:02:45capacity honestly at the moment um but
6:02:47anyway a formulaic approach which could
6:02:49moderate Down onm based on um different
6:02:53forecast that approach wasn't followed
6:02:55here and I was just curious um if you
6:02:58think this is a more accurate
6:03:00representation or if a formulaic
6:03:03approach might still be more accurate
6:03:06this might be a more conservative
6:03:07presentation than what you're describing
6:03:09in clean heat the the way I interpret
6:03:12that um formulaic approach is there is
6:03:15an element of as clean heat rolls out
6:03:19and you know if electrification of gas
6:03:21customers as it continues through clean
6:03:23heat to the extent that that uh
6:03:26electrification is geographically
6:03:27coordinated and leads to a smaller in
6:03:31size gas system that would have an
6:03:33impact on I think both capital expens
6:03:35ures and onm associated with maintaining
6:03:39the gas system um that is an probably
6:03:42likely an important assumption for clean
6:03:44heat and understanding the relative
6:03:46impact of those different
6:03:47scenarios um that's an assumption that
6:03:50if added to this rate model um might
6:03:54help moderate the rate increases some
6:03:56which is why I guess I say it's maybe a
6:03:58conservative Viewpoint in that from that
6:04:00regard okay thank you um and thanks
6:04:03again for getting us a public version of
6:04:06this um really appreciate it and I'll
6:04:09turn it back to you missar penko for
6:04:12redirect thank you
6:04:16commissioner Mr matley commissioner
6:04:18Gilman had several questions for you
6:04:21just recently regarding the Rampart
6:04:22Range project and the assumptions used
6:04:24do you recall that conversation I
6:04:27do would it be fair to
6:04:30state that the need for the project and
6:04:33Associated risk to customer is a topic
6:04:36better addressed by company witness
6:04:39Garder um yes I would agree with
6:04:43that the model itself uh relative to the
6:04:47Rampart Range project does not take into
6:04:50account the risk or cost to customers of
6:04:52not having gas in the winter is that
6:04:55your
6:04:56assumption um I can state that yes the
6:04:58model does not include any costs or
6:05:01risks associated with the loss of gas
6:05:04service would it be reasonable to assume
6:05:06that if customers require more gas there
6:05:09would be more capacity
6:05:11required all other things equal if
6:05:14customers would require more gas than
6:05:17the capacity we have to serve we would
6:05:19need more
6:05:20capacity um Mr Manley did you obtain
6:05:24your 3900 equivalent customer number
6:05:27from Mr Gardner's testimony I did well I
6:05:31can pull it up if necessary does it help
6:05:34to clarify things that Miss Mr Gardner
6:05:36stated at page 95 of his direct
6:05:39testimony hearing exhibit 105 at lines
6:05:4212- 14 that quote in short without
6:05:46capacity expansion approximately 3,900
6:05:50equivalent customers in the project area
6:05:53were at risk of experiencing outages
6:05:55including customers within the new
6:05:58developments that does help
6:06:01clarify we weren't talking solely about
6:06:03existing customers is that a fair
6:06:05assumption based on what I just read to
6:06:07you based on Mr Gardner statements yes
6:06:10it sounds like a mix of existing and new
6:06:13pesters um those are all my questions
6:06:16thank you thank
6:06:19you all right Mr matley thank you so
6:06:22much and you're free to go
6:06:24sir uh next up we have Miss Bley yes
6:06:28commissioner Gilman uh we're gonna
6:06:30switch Council now I'm gonna defer to my
6:06:33co counsel Miss Brahma and I believe she
6:06:35has a preliminary matter to address as
6:06:37well relative to the capital
6:06:38expenditures that chair blank mentioned
6:06:41uh before we put uh Miss Bley on the
6:06:43stand sure thank
6:06:50you hi Miss
6:06:55brma would help if I unmuted myself good
6:06:57afternoon Commissioners um very nice to
6:06:59see you uh we wanted to follow up as we
6:07:02had discussed this morning about the
6:07:04commission's request for gas capital
6:07:06expenditure data for the period from
6:07:072017 through
6:07:092023 uh we have um in a short period of
6:07:13time done our very best uh to put
6:07:15together um hearing exhibit 169 which is
6:07:18in our box.com folder um this data shows
6:07:22um uh cap capital expenditures so not
6:07:25additions but but spend uh
6:07:27year-over-year 2017 through 2023 and
6:07:30both nominal dollars and and in
6:07:32comparison to inflation just for the
6:07:34commission's information so um we can
6:07:37bring that up and just wanted to let you
6:07:38know that it is there we assume the
6:07:41Commissioners would want this submitted
6:07:43as an exhibit and on that basis would
6:07:44move for its
6:07:46admission excellent and are we admitting
6:07:48that
6:07:49executable it is there there it is a
6:07:52spreadsheet it it's um the math is
6:07:56fairly simple in terms of uh it's just
6:07:58you know data and then of course
6:08:00multipliers for the inflation
6:08:01information but it isn't an executable
6:08:04document excellent um any
6:08:08objections all right it will be admitted
6:08:11thank you for that thank
6:08:13you and I think that was all we're ready
6:08:15for Miss bulkley at this point all right
6:08:18great go ahead and call Miss bulley
6:08:21please give her a moment to join us on
6:08:30screen all right um good good afternoon
6:08:33Miss Bley would you please State oh I
6:08:35think need to be sworn in first so I'll
6:08:36defer to commissioner Gilman for that
6:08:39I'll do it uh good afternoon Miss fley
6:08:41can you please raise your right
6:08:43hand you swear to tell the truth the
6:08:45whole truth and nothing but the truth I
6:08:47do and is anyone um communicating with
6:08:50you in any way during your testimony no
6:08:53if that changes will you please stop and
6:08:55let me know of course okay go ahead Miss
6:08:59Brahma uh good afternoon Miss Buckley
6:09:01would you please State and spell uh your
6:09:03name for the record
6:09:05yes it's an bulkley it's a Ann B as and
6:09:09boy u l k l y and for who do you work
6:09:14and what is your title the Bridle group
6:09:17as a
6:09:18principal okay and uh did you uh cause
6:09:22to be prepared and submitted into this
6:09:24record hearing exhibits U 102 and
6:09:28125 as your direct and rebuttal
6:09:31testimony including
6:09:33attachments yes do you have have any
6:09:35additional corrections to your testimony
6:09:37at this time I don't all right with that
6:09:40miss bulley is available for
6:09:44cross-examination excellent uh thank you
6:09:46Miss Brahma first up I have the staff of
6:09:49the Colorado PC Mr
6:09:53Cox thanks commissioner Gilman 30
6:09:56minutes correct um good afternoon Miss
6:09:59Bley it's very nice to meet you my name
6:10:01is Justin Cox I'm an assistant attorney
6:10:05General representing trial
6:10:07staff um good afternoon just kind of
6:10:11want I kind of wanted to start with um
6:10:14some
6:10:15background um and you just said you were
6:10:18with the Brattle group um you were hired
6:10:20as a consultant by public service to
6:10:23provide expert testimony regarding cost
6:10:25of capital in this case is that correct
6:10:27yes that's
6:10:28correct and I'm new here uh but I think
6:10:32you've testified in public services last
6:10:35or rate cases is that
6:10:38correct
6:10:41um potentially for several cases I have
6:10:44testified in that's
6:10:46true and according to your resume you've
6:10:48provided expert testimony on cost of
6:10:50capital in nearly 100 regulatory
6:10:54proceedings that's
6:10:56correct and each of those were on behalf
6:10:59of utilities correct that's
6:11:03correct uh now turning to this case in
6:11:06particular and focusing on
6:11:09Roe after initially proposing Roe of
6:11:1410.25% in its direct testimony company
6:11:17is now proposing a
6:11:2010.10% Roe is that right that's
6:11:24correct however it's your position that
6:11:27a reasonable Roe range is
6:11:3010.25% to
6:11:3211.25% correct that's that's correct
6:11:35that's supported by the exhibits that I
6:11:38filed in both my direct and rebuttal
6:11:41testimony and actually in your direct
6:11:44testimony uh you stated that it would be
6:11:47appropriate to set the Roe above the
6:11:49midpoint of this range which would be
6:11:5410.75% is that
6:11:58right um I'd have
6:12:00to if you can point me to that spot in
6:12:02the testimony I do recall setting the
6:12:04range the specific point estimate you'd
6:12:07have to point me to but sure it's uh
6:12:10hearing exhibit
6:12:13102 page
6:12:1594 lines 7 through 12 yeah we can bring
6:12:19it up if you need to just double check
6:12:21that and
6:12:31confirm I believe that sets the range of
6:12:3410 and A4 to and a
6:12:41qu is that what you're referring
6:12:44to yes and and do you see where it talks
6:12:47about it would be appropriate to set the
6:12:51RO above the midpoint of that range yes
6:12:55I see that on line 12 that's correct
6:12:58thank you and you can take that down
6:13:01that exhibit down thank
6:13:03you um giving your positions is it your
6:13:06opinion that a
6:13:0810.10
6:13:10roe recommendation by the company is
6:13:15unreasonable no I mean the company's the
6:13:17company has made its uh adjustments to
6:13:20its Roe not necessarily based on Market
6:13:23factors but based on other elements in
6:13:25the case I believe
6:13:28um Mr Burman spoke to
6:13:31those those reasons in his testimony um
6:13:35obviously the roe has a range if you
6:13:37look at the schedule just following the
6:13:40page we were referring to in my
6:13:41testimony at page 95 there is a range of
6:13:44results presented uh given my um
6:13:48analytical results and the company's uh
6:13:5110.10% Falls within that range and also
6:13:54if you were to look
6:13:56at um hearing exhibit
6:14:00125 at
6:14:02exhibit or attachment excuse me
6:14:06ab13 pages one and two you would find
6:14:09that the company's uh 10.10 Falls within
6:14:11the range of of modeling results there
6:14:14as
6:14:16well so it's fair to say that the
6:14:18reasonableness Roe range uh for the
6:14:20company extends below
6:14:2310.25% the model results do um my my
6:14:27expectation was um something within the
6:14:30range I established um considering kind
6:14:33of the median results of the of the DCF
6:14:37analyses at the time of the filing of my
6:14:39testimony I felt like that was a
6:14:41reasonable um lowend Range so that there
6:14:45certainly are other um Model results
6:14:49within my analyses that that demonstrate
6:14:53uh 10.1 would also be
6:14:57reasonable okay um and moving on to
6:15:01market conditions you talk quite a bit
6:15:02about markting market conditions in your
6:15:05testimony um specifically in your
6:15:08rebuttal testimony uh you criticize
6:15:10staff's re we recommendation for being
6:15:13the exact same as staff's recommendation
6:15:17in the company's last gas rate uh
6:15:20proceeding despite changes in the market
6:15:22conditions and including increases in
6:15:24interest in interest rates is that
6:15:28correct um yes that's correct I mean if
6:15:30you look at page 14 of hearing exhibit
6:15:3412 five you can see the changes in
6:15:37market conditions since the time of the
6:15:39company's last case um and and looking
6:15:42at that interest rates were lower then
6:15:45so yes I think a lower Roe directionally
6:15:48is
6:15:50incorrect um now your criticism about
6:15:54staff offering the same
6:15:56recommendation and in the last gas rate
6:16:00case you concluded the reasonable Roe
6:16:03range uh was 10 25% to
6:16:0811.25% is that
6:16:12accurate I if you wouldn't mind showing
6:16:15that to me I don't recall
6:16:17actually sure if we could bring up this
6:16:20is in uh staff's box hearing exhibit 425
6:16:39you'll see that this is your rebuttal
6:16:41testimony in uh the last gas rate case
6:16:44proceeding number 22 A- 0046
6:16:51G um you could go to page 30 lines 7even
6:16:56through nine
6:17:11and we're able to confirm that range of
6:17:1310.25 to
6:17:1511.25 um yes I can confirm that range um
6:17:20you the differences in the two
6:17:21testimonies of course are changes in the
6:17:23market and that I just I just asked if
6:17:26we if you could confirm that range yes I
6:17:29and as we discussed you re recommend the
6:17:30same range in this case is that
6:17:32correct I do again noting that the the
6:17:37at the time of my testimony in the last
6:17:39rate proceeding I identified in that
6:17:42testimony concerns with one of the model
6:17:44results um in particular the DCF given
6:17:47that the dividend yields for those that
6:17:50model were um artificially low um at
6:17:54that time I had indicated the
6:17:56expectation that they would rise over
6:17:58time which they did um and so the
6:18:00difference between these two cases of
6:18:02course is that the model conditions or
6:18:05the market conditions did respond the
6:18:06way I had expected and therefore the
6:18:10fact that the range is the same I think
6:18:11is not really the important factor but
6:18:14that I had had the expectation as noted
6:18:16in my direct testimony in that case and
6:18:18in my rebuttal testimony that we would
6:18:21expect those market conditions to change
6:18:23and had taken that into consideration in
6:18:25the development of my range but again
6:18:27you criticize staff's recommendation
6:18:29because it's the same yet your
6:18:31recommendation is the same as well from
6:18:34the last cast case again with the
6:18:36caveats that we just described that part
6:18:38of my testimony in the last case was
6:18:40that I had concerns about the effects of
6:18:43market conditions on the DCF model and
6:18:45that the DCF Model results had
6:18:46understated the cost of equity and I had
6:18:49taken that into consideration in my
6:18:50analysis and had recommended a
6:18:52range expecting that those Model results
6:18:55would change if you were to look at the
6:18:58model results Associated Miss Miss Bley
6:19:01I I asked simp yes or no question well
6:19:04it's actually not a have the same do you
6:19:06have the same recommendation or not the
6:19:09the numerical range would be the same
6:19:12but the basis for it obviously differs
6:19:14considerably as I
6:19:16just and per your direct testimony um is
6:19:21it fair to say that you believe that the
6:19:23uh expected
6:19:24underperformance of utility stocks
6:19:27compared to the market supports a higher
6:19:29cost of equity than previously
6:19:31approved at the time of my direct
6:19:33testimony which included
6:19:36data
6:19:40through the end of November yes that's
6:19:43true I believe at the time of my
6:19:45rebuttal testimony I would say no that
6:19:47that was not a consideration that the
6:19:48market had responded to that so in the
6:19:51end of November and the beginning of
6:19:52December of last year at the time that
6:19:55this case started um the market
6:19:59conditions were such that um interest
6:20:02rates had
6:20:04been volatile and had changed pretty
6:20:06dramatically and so had the yields on
6:20:08utility stocks they then reversed in
6:20:11January and continued um along a similar
6:20:14path that I discussed in my testimony in
6:20:16the last case and so from my direct
6:20:18testimony to my rebuttal testimony I
6:20:19would say that that is not the
6:20:21case that I had concerns about the
6:20:25models yeah you had concern concerns
6:20:28about the market conditions th those
6:20:30concerns you no longer have is that
6:20:32about the effects of the market
6:20:34conditions on on the model
6:20:36results okay I think I understand so
6:20:40over time as the market conditions
6:20:43evolved um and and as that's what I was
6:20:46trying to describe to you from my direct
6:20:48testimony in the last case uh that at
6:20:52that time and to be clear sorry to
6:20:54interrupt you but to be clear I'm just
6:20:55talking about your direct testimony in
6:20:57this case sure it's just sort of a
6:20:59Continuum right so from that time period
6:21:02through the direct testimony in this
6:21:04case
6:21:05um the market conditions did indicate
6:21:07some concerns about where the DCF
6:21:09results were uh using
6:21:12the assumptions in the DCF the dividend
6:21:15yield in particular uh at the filing of
6:21:18my rebuttal testimony I would say that
6:21:19that was not the
6:21:22case but would you agree that markting
6:21:24conditions have
6:21:26improved since then I think you need to
6:21:28Define what Improvement
6:21:31means well I think we just talked about
6:21:33underperformance of utility stocks
6:21:35compared to the market but that NE the
6:21:38utility sector stocks have performed
6:21:41better than
6:21:42anticipated to last
6:21:45fall U well I guess it depends on what
6:21:48time period you're referring to so the
6:21:50times at the time of my analyses utility
6:21:52stocks had continued to be
6:21:56um have a lower overall return relative
6:22:01to the S&P 500 so had underperformed the
6:22:04S&P 500 uh through the through June of
6:22:07this year which was my rebuttal
6:22:08testimony but they had responded to what
6:22:11I expected in interest rats so that's
6:22:13what I would say um is the difference
6:22:16between my direct testimony and my
6:22:18rebuttal testimony that I had an expect
6:22:21expectation that as interest rates
6:22:23changed um the investors would rotate
6:22:26out of the utility sector and in um and
6:22:30into treasuries I had that expectation
6:22:33in my testimony in the last case and in
6:22:35the beginning of this case and that
6:22:37actually occurred over the over the
6:22:39course of this
6:22:42case um but you're not familiar with how
6:22:44stocks are performing as of today
6:22:46compared
6:22:48to the the market I don't have today's
6:22:51information for you
6:22:54now um and considering the market
6:22:57conditions uh since the last gas rid
6:22:59case is your opinion that Ro the Roe
6:23:02authorized by the Commission in that
6:23:04case
6:23:05is not relevant in this
6:23:09case I think the Roe that gets
6:23:11established in each case should be
6:23:12established based on the data in the
6:23:14case so at that time the commission
6:23:17established a range of returns and as I
6:23:19noted in my rebuttal testimony I've
6:23:22identified on figure aebr R2 how that
6:23:27range compared to interest rates at that
6:23:29time and then where we are today with
6:23:31respect to interest rates so as as shown
6:23:34in that table since the filing of my
6:23:37direct testimony in that case the
6:23:3930-year treasury bond yield is up 264
6:23:43basis points and since the rebuttal
6:23:45testimony it's up 132 basis points
6:23:48authorized Roes are also higher and so
6:23:51those are factors I think that the
6:23:52commission should be considering in this
6:23:54case when they make their
6:23:56determination about the Roe today I
6:23:58don't necessarily believe that it is
6:24:01important for the commission to consider
6:24:03their last Roe as much as they should be
6:24:06considering where the market conditions
6:24:07are today and what the investor required
6:24:10return is
6:24:11today and I don't think I heard an
6:24:13answer to my question is it your opinion
6:24:16that the Roe authorized by the
6:24:17Commission in the last gas rate case is
6:24:19not relevant in this
6:24:21case I don't think it's irrelevant but I
6:24:24think it's important to take into
6:24:26consideration many other factors so I
6:24:28think I think it's important to note
6:24:30that at that time interest rates when
6:24:33that Roe was interest rates were quite a
6:24:35bit lower and So directionally speaking
6:24:37I would expect so that is taking into
6:24:39consideration where the commission's Roe
6:24:41was at that time but it's saying market
6:24:44conditions have changed you would expect
6:24:46the number to be higher
6:24:47today if we could pull up a hearing
6:24:50exhibit 426 please
6:25:07and Miss bulley are you familiar with
6:25:08this
6:25:11document yeah if someone can make it
6:25:13just a touch larger that would be great
6:25:15or I can just look in my list here
6:25:21417 yes this is a discovery request from
6:25:26UCA if you could scroll
6:25:31down yes I'm familiar with this
6:25:35if you could scroll down were you the
6:25:36were you the sponsor the response to
6:25:39this yes I
6:25:41request okay um and just for sake of
6:25:45paraphrasing they're asking you uh about
6:25:49the reasonableness of the
6:25:52commission's uh last Roe approval um and
6:25:57then if you could read you don't have to
6:26:00read it out loud you can read it to
6:26:01yourself um your second paragraph in
6:26:04your
6:26:07response yes I see that the question
6:26:10however is different the question you
6:26:12asked right is it is it your words that
6:26:15historical return authorized by the
6:26:16commission for the company's natural gas
6:26:18rate proceeding um is not relevant to
6:26:23this proceeding uh no it says in the
6:26:25determination of the Roe in this
6:26:27proceeding right not relevant to this
6:26:29proceeding in the determination of the
6:26:31Roe and as I said at the beginning of
6:26:34this line of discussion most all I asked
6:26:38all I asked were were those your words
6:26:40and that's that's all you need to answer
6:26:42yes the the full sentence is clearly my
6:26:45words thank you now we can take that
6:26:48down oh excuse me let's um I didn't move
6:26:51to admit it I'll go ahead and move to
6:26:53admit it
6:26:55commissioner um Miss Brahma no objection
6:26:58all right so
6:27:00admitted thank you um
6:27:04if we could talk a little bit about um
6:27:06regulatory risk um this is again some
6:27:09you talk about regulatory risk and
6:27:11business risk quite a bit um in your
6:27:14direct testimony you noted that uh you
6:27:17said that public service has a somewhat
6:27:19higher regulatory risk than your pro
6:27:21than the proxy group um which has been
6:27:23demonstrated through the inability of
6:27:25Public Service to earn its authorized
6:27:27Roe or its Gas distri Distribution
6:27:31business
6:27:35the under
6:27:36earning yes that's in um your direct
6:27:39testimony hearing exhibit
6:27:41102 page 78 lines 19 through
6:27:4623 um
6:27:49the under earning of authorized Roe is
6:27:53not something that's unique to public
6:27:55service is
6:28:01it I would
6:28:05there are circumstances where other
6:28:06utilities underere
6:28:09earn not sure and would you agree
6:28:12that so there are circumstances where
6:28:15other utilities do not earn their
6:28:16authorized Roe that is true well you
6:28:19would agree that the average annual uh
6:28:22earned Roe for Natural Gas Utilities
6:28:24Nationwide has generally been below the
6:28:28average annual authorized Roe for the
6:28:30last decade or
6:28:32so I don't have that data available to
6:28:35me do you have you're not familiar
6:28:39with annual earned Roe
6:28:42and authorized Roe across the country I
6:28:46don't have the average to make that
6:28:47comparison across the whole country do
6:28:50you have that information available yeah
6:28:53if we could pull up hearing exhibit 427
6:29:11I'll represent to you this is an article
6:29:13that's uh taken from S&P
6:29:17Global it's put together by regulatory
6:29:20research
6:29:21Associates and you are familiar with
6:29:23those entities is that correct yes I am
6:29:25could I'm sorry to ask but could someone
6:29:27just make it a little bit larger if
6:29:28you're going to actually read words out
6:29:29of it I cannot see that thank you
6:29:43then we'll go to to page
6:29:46two and and just before we get there you
6:29:48you've cited re a regulatory research
6:29:51Associates in
6:29:52your testimony is that correct yes they
6:29:56do produce a tremendous amount of
6:29:58reports however so I cannot claim that I
6:30:00have read each one sure but they're
6:30:02relied upon by inv and financial
6:30:05experts
6:30:07yes and you know you don't have any
6:30:09reason to question the Au authenticity
6:30:12of this
6:30:15document I don't question the
6:30:17authenticity of the document no there's
6:30:20no header on it but you've represented
6:30:21what it is
6:30:24so on page two um it looks like this is
6:30:30the electric if you go go down scroll
6:30:33down a little bit
6:30:35there's another graph that shows the gas
6:30:38utility operating company's averal
6:30:40annual earned versus authorized Roes
6:30:432009 through
6:30:452023 that pink line is is average annual
6:30:49Roe earned Roe or you excuse me the pink
6:30:54line is the average annual authorized
6:30:57Roe and the purple line is the average
6:31:00annual earned R we do you see that I do
6:31:04see that the pink sentence is that is
6:31:06also says the average is 96 is that true
6:31:10is that what you're is that what you're
6:31:11looking
6:31:12at no I'm looking at I asked about your
6:31:15the experience of Nationwide over the
6:31:18last decade or so
6:31:20um
6:31:22of
6:31:24average authorized Roe compared to
6:31:26earned
6:31:27Roe yes I see that and you see that's
6:31:30lower okay I do see that yes
6:31:34uh commissioner gum and I would move to
6:31:37admit this
6:31:38document hearing exib at 425 or 427
6:31:42excuse
6:31:43me m
6:31:45brma um this is not a document that um
6:31:51miss bulley you know could could
6:31:53authenticate in full it looks like there
6:31:55are three pages we've seen about a page
6:31:57and a half so I think um if we could um
6:32:02preserve our objection at this time and
6:32:04have a chance to take a look at the
6:32:06complete document then we can Circle
6:32:08back to whether we actually have an
6:32:09objection to its admission or
6:32:11not okay will you be uh able to do that
6:32:14later this afternoon I'd be happy to do
6:32:16that on our next break I don't think it
6:32:18will take more than a couple minutes I
6:32:19just don't want to hold up the
6:32:20proceedings now no worries and I was
6:32:22actually anticipating we'll probably do
6:32:23a short break um after Mr Cox's
6:32:26questioning um just given the timing of
6:32:29the other break we'll do something
6:32:30fairly short just to help prepare you so
6:32:33um okay okay if that works for you Mr
6:32:35Cox we will maybe come back to its
6:32:38admission once m m has a chance to take
6:32:40a look if we the document emailed to us
6:32:43or otherwise uploaded to the public box
6:32:45so that we can see the complete document
6:32:46that would be
6:32:50helpful sure yeah we can do we can email
6:32:53to you thank you excellent I'll check in
6:32:55with you after the next break if that
6:32:56wasn't enough time I'll check in with
6:32:58you after the break after that thank you
6:33:01okay go ahead Mr Cox sure
6:33:04um and we can take this down this
6:33:08exhibit thank you um Miss bulley would
6:33:12you agree that one of the drivers of the
6:33:14inability to earn the authorized Roe is
6:33:16regulatory
6:33:18lag can
6:33:20be yes H yet in this case uh the company
6:33:23is proposing mechanisms that create
6:33:25greater regulatory lag including the
6:33:27usage of a historical test year and
6:33:29deferral of increased rates is that
6:33:31correct
6:33:38I'm sorry can you ask that question
6:33:41again yes in this case uh the company is
6:33:45proposing mechanisms that would create
6:33:48greater regulatory lag including usage
6:33:51of a historical test year and deferral
6:33:54of increased
6:33:56rates do you agree with that
6:34:06I believe that's those not sure those
6:34:08character characterizations are exactly
6:34:11correct but they using you don't agree
6:34:14that you don't agree the historical test
6:34:16sheers result in regulatory
6:34:21lag no the deferral mechanisms that
6:34:23you're referring to I I would have to
6:34:25take a look at what you're referring to
6:34:27specifically yes I agree that historical
6:34:29testes create regulatory
6:34:31lag and when I say deferral I mean um
6:34:34rates increased rates going into effect
6:34:37later
6:34:39um later than they they
6:34:43could later than upon
6:34:48approval I'm sorry I'm not sure I
6:34:50understand your specific if you could
6:34:52point to the specific mechanism that the
6:34:54company is referring to that would be
6:34:55helpful the characterizations I'm having
6:34:57difficulty with are you familiar that
6:35:00the Comm the company is
6:35:03having uh requesting that rates
6:35:06increased rates go into effect later um
6:35:09following the end of uh the
6:35:16psia
6:35:18generally and would you say that creates
6:35:20regulatory
6:35:22lag there there can be lag I haven't
6:35:25looked at the modeling on that for the
6:35:26company so I I'm not not entirely sure
6:35:29how how this is modeled
6:35:31so okay we can move on probably be a
6:35:33better question for somebody who's
6:35:34actually done the modeling on it but
6:35:38sure
6:35:40um and since
6:35:43we're going short on on time a little
6:35:46bit
6:35:50um we'll move to to your proxy groups um
6:35:54so to estimate Roe you developed two
6:35:57groups one in which uh you've labeled
6:35:59the natural gas utility group and
6:36:01another you generally refer to as the
6:36:03combination utility group is that
6:36:05correct yes are these companies the
6:36:08companies in these groups are they
6:36:11parent companies or operating
6:36:14subsidiaries they are publicly traded
6:36:21companies they're publicly traded but
6:36:23are they oper are they
6:36:27operating companies uh similar to public
6:36:30service or more more similar to excel
6:36:34well they would be publicly traded
6:36:36entities like Excel they would have to
6:36:37be in order to use the data to model
6:36:40them and they have operating
6:36:43subsidiaries similar to Public
6:36:47Service yes that's
6:36:50correct um in screening for the proxy
6:36:53groups you did not screen for business
6:36:55and Regulatory risk is that
6:36:58correct that's very that's very
6:37:01challenging to try to screen uh the
6:37:03proxy group for the business risks so
6:37:06the way the traditional approach is done
6:37:09is to screen the proxy group based on um
6:37:12criteria much the same as what I have
6:37:13done and you know other Witnesses in
6:37:15this case looking at percentages of
6:37:18operating income related to the business
6:37:20operations uh related to the business
6:37:22operations that are consistent with the
6:37:25subject company and then to look at the
6:37:26business risks separately at the
6:37:28operating company level sure and Miss
6:37:31bulley I'm trying to get this through we
6:37:33only have 30 minutes and we've been
6:37:35going for a really long time in this
6:37:37case so I'm asking a lot of yes or no
6:37:39questions so if we could try to keep it
6:37:40to yes or no I I'd really appreciate it
6:37:43um and you did not screen for capital
6:37:46structure either did we did
6:37:48you no I evaluated capital structure but
6:37:51I did not screen for
6:37:53it um and then according to your direct
6:37:56testimony this is on page 41 lines 7
6:38:01through 17 through 18 you include the
6:38:03proxy group of combination utilities
6:38:06quote as a check on the reasonableness
6:38:08of the results of the primary proxy
6:38:11group yes that's
6:38:13correct would you agree that the
6:38:16inclusion of the same company from the
6:38:18natural gas group in the combination
6:38:21group uh will tend to make the natural
6:38:23gas group appear more
6:38:28reasonable
6:38:31no no they wouldn't have they wouldn't
6:38:33make make it have similar results if you
6:38:36had the same companies in two
6:38:40groups it would depend on specifically
6:38:43on the results of that one individual
6:38:44company I don't think you can say that
6:38:46this this is not a yes or no question by
6:38:47the way because it would certainly
6:38:49depend on um the results of that
6:38:51particular company however the the
6:38:53groups were
6:38:54screened um based on the operating
6:38:58characteristics of the parent companies
6:39:01not based on their Model results
6:39:04but you've included NYS Source in both
6:39:06your proxy group is that correct
6:39:09yes so your combination group that is a
6:39:12is supposed to be a check on the
6:39:14reasonableness of the results of the
6:39:15primary group which is the natural gas
6:39:17group it includes
6:39:20a a group that's in the primary
6:39:24group well the company itself has
6:39:27business operations that are both gas
6:39:30and and un combination utility
6:39:33group I'm not so I'm not sure I
6:39:35understand the
6:39:36question if you were to the question is
6:39:40you're you're using is it a check so
6:39:42you're comparing the results or
6:39:44comparison purposes but you're using the
6:39:46same a same an individual company in
6:39:49both groups which will T would you agree
6:39:52will tend to make the results of the
6:39:54combination group look more like the the
6:39:58results of the natural gas group and I
6:40:00would say no not necessarily I mean
6:40:02there are
6:40:06eight companies in the net in the
6:40:08combination utility proxy group and
6:40:11there are five companies in the natural
6:40:13gas utility proxy group the inclusion of
6:40:16one company does not necessarily
6:40:19make the groups more comp more the
6:40:22results more
6:40:26similar the let's move on to to
6:40:29particularly your capm and eapm
6:40:34uh capm is capital asset pricing model
6:40:36is that
6:40:37correct yes it is and eapm is is
6:40:42empirical Capital asset pricing
6:40:45model that's
6:40:47correct in your direct testimony you
6:40:49suggest that capm and eapm are are
6:40:52better Roe models for the use in this
6:40:54proceeding because they better reflect
6:40:57expected market conditions is that
6:40:59accurate in my direct testimony I yes I
6:41:02did say that based on where we were in
6:41:04interest rate environment yes that's
6:41:07correct um would your testimony be
6:41:11different
6:41:15now as I said in the beginning of our
6:41:17discussion over the course of my the
6:41:20preparation of my testimony from direct
6:41:21to rebuttal um and the longer dialogue
6:41:25that I've had with this commission I had
6:41:26had concerns with the DCF model and the
6:41:29dividend yields in the DCF model not
6:41:32reflecting the the market conditions
6:41:34correctly over time I believe that that
6:41:36circumstance had had resolved itself by
6:41:39the time I prepared my testimony for my
6:41:41rebuttal testimony so I would say that
6:41:43they
6:41:44were equal to consider in my rebuttal
6:41:47testimony but I had raised some concerns
6:41:50in Prior cases and in my direct
6:41:52testimony in this case okay that's fair
6:41:55thank you um and just focusing spe
6:41:59specifically on the betas um is it fair
6:42:02to say there are dozens of sources for
6:42:05beta
6:42:07estimates I don't know that there are
6:42:09dozens but there are several sources
6:42:13there are some that are more widely used
6:42:15but there are several
6:42:17sources and those betas often vary
6:42:20between sources beta estimates excuse me
6:42:23often vary between sources due to
6:42:25differences in historical period uh for
6:42:29the return data frequency of returns and
6:42:31market index relied upon
6:42:34those are some of the reasons that they
6:42:36vary others would be some are adjusted
6:42:38some are not adjusted there are a lot of
6:42:39reasons why you might have variation in
6:42:42betas I think in my rebuttal testimony I
6:42:45discussed some concerns
6:42:46about um the staff's calculation of
6:42:50their own betas uh rather than using the
6:42:53industry standard you know value line
6:42:55that had been used by staff and prior
6:42:57cases
6:43:00yes then in general you would agree that
6:43:02there is no one correct or definitive
6:43:05beta
6:43:07estimate there
6:43:10are beta estimates that might be
6:43:13more
6:43:16significant when you do the calculation
6:43:18so as I noted in my testimony there are
6:43:20concerns about using a beta that is
6:43:23calculated on a daily or a weekly basis
6:43:26because of the liquidity associated with
6:43:28the stock relative to the S&P 500 that
6:43:31you may not actually get an accurate
6:43:32result
6:43:33if you have a liquidity issue you
6:43:35actually have to have trading data in
6:43:37order to be able to run that calculation
6:43:39and so if a stock does not trade is not
6:43:42as liquid as the index that you are
6:43:45measuring against your beta will be
6:43:48inaccurate relative to a time period
6:43:52that would take into
6:43:55consideration uh similar
6:43:59liquidity and just to be clear we're not
6:44:01talking about staff's beta estimates or
6:44:04anything right now we're just talking
6:44:05about the general sources that U would
6:44:10be generally relied upon um so you would
6:44:14be you would agree that it's fair to
6:44:15look at multiple sources for beta
6:44:19estimates I think it's fair to look at
6:44:22multiple sources of beta estimates that
6:44:24are calculated with some rigor that do
6:44:27that do not fall subject to the concerns
6:44:30I just raised
6:44:33um typically we've used valon and
6:44:35Bloomberg betas because they would be
6:44:37what investors would use and of course
6:44:39what we're trying to do here is is
6:44:41understand what the investor required
6:44:43return is so we would use betas that you
6:44:45would expect investors to use I would
6:44:49expect most institutional investors to
6:44:50have multiple Bloomberg terminals
6:44:52therefore Bloomberg would be a very good
6:44:53choice value line is a publication that
6:44:57has been circulated for more than
6:45:00multiple decades and has relied on by
6:45:03the investment Community is available
6:45:05very publicly another very good source
6:45:06for Betas it is less likely that
6:45:10investor would calculate their own
6:45:14betas less likely but it does happen and
6:45:17other sources are relied upon as well
6:45:20correct I believe that those two sources
6:45:23are more often relied upon and I think
6:45:26it's much much less likely than anyone
6:45:29would be calculating their own you could
6:45:31expect that the
6:45:33broad array of investors that we're
6:45:36seeking to measure here would be
6:45:37calculating their own
6:45:39datas Mr Cox just a quick time check for
6:45:43you yeah
6:45:45um um if I could um have 10 or 15 more
6:45:49minutes I will note that on Mr Johnson I
6:45:51think I only used 20 of my 30 minutes um
6:45:56and certainly this is answers are being
6:45:58provided not always directly answering
6:46:01the question okay I got gr at um five
6:46:04more already so 10 more will be our hard
6:46:07step for you 250 thank
6:46:12you um and Miss Spookley looking at the
6:46:15value line in Bloomberg beta estimates
6:46:17um those are
6:46:19adjusted uh those value line and
6:46:22Bloomberg adjust their betas upwards
6:46:25based on the assumption that the betas
6:46:27tend toward one one over time is that
6:46:31correct that's correct perform the bloom
6:46:35adjustment um so this would suggest that
6:46:38uh utility stocks should be uh become
6:46:41more volatile and riskier over
6:46:46time uh no it's the tendency to revert
6:46:49towards one which is um discussed at
6:46:52Great length this is not a yes or no
6:46:54question either sir just to be clear so
6:46:57this is discussed at Great length in my
6:46:58rebuttal testimony and would you say
6:47:01that the uh
6:47:05stocks with they're Le consider the beta
6:47:07estimates they're less than one those
6:47:09are generally considered less uh less
6:47:13risky compared to the overall Market
6:47:16less
6:47:20volatile that is correct I'm not sure
6:47:22that that's necessarily relates to the
6:47:26adjustment that valine and Bloomberg
6:47:28make but that is true well adjust
6:47:30adjusting it up towards one would
6:47:32suggest that
6:47:34it would tend to become more volatile or
6:47:36risky over time is that correct no this
6:47:40again this is not a yes or no question
6:47:43it involves going back into the research
6:47:44that's been done on beta so we can do
6:47:46that if you'd like but it's not a yes or
6:47:48no
6:47:52question um and in the in your rebuttal
6:47:56test only you take issue with staff and
6:47:58uca's concern about your choice of beta
6:48:00estimates specifically you state that
6:48:03staff has relied upon these same data
6:48:05sources in previous
6:48:07proceedings is that
6:48:08correct yes as I mentioned earlier staff
6:48:11has historically relied on and as you
6:48:14mentioned earlier I've testified before
6:48:15this commission several times and in
6:48:18each of those cases staff has relied on
6:48:19value line
6:48:21betas have they are you aware if they've
6:48:24ever used those uh beta
6:48:27estimates um for the purpose of
6:48:29estimating betas under capm analysis in
6:48:32previous
6:48:34proceedings any ask that question
6:48:38again yes are you aware if they've used
6:48:40those beta estimates uh for purposes of
6:48:44a capm
6:48:48analysis yes the the value line betas
6:48:51have been used for capam analyses
6:48:56yes um we
6:49:00could I'm trying to see where we can go
6:49:03with this of time
6:49:07um in your analysis um would you agree
6:49:11that the company's capital structure has
6:49:12an effect on the beta
6:49:20estimate I would agree
6:49:23that you could lever and
6:49:26unlever beta based on the
6:49:31capitalization and the Bloomberg and
6:49:33value line are lever betas
6:49:37right that is
6:49:39true and lever means that they take into
6:49:42account capital
6:49:46structure that's correct and you did not
6:49:50unlever the betas to account for
6:49:52disparities in capital structure between
6:49:53the proxy companies and public service
6:49:55is that
6:49:56correct um I believe we addressed that
6:50:00in rebuttal let me just see if I can
6:50:02find that
6:50:22and if you aren't aware you can no I I
6:50:24do believe we did we addressed the
6:50:27Hamada Corrections in rebuttal I just
6:50:29need to locate that so that would be the
6:50:31Levering and unlevering of
6:50:36beta the other option is we could look
6:50:39for that and I could read it back
6:50:42in that's
6:50:46helpful it was just a simple yes or no
6:50:49answer again well I need to actually
6:50:51find it so it's not a yes or no because
6:50:53I I'm I'm checking so I would like to
6:50:57locate it but I know we're running short
6:50:58on time so I was offering a
6:51:01solution well I can move on and if you
6:51:03can find it later you
6:51:05can tell us
6:51:09um but so without the Levering
6:51:13unlevering and Rel Levering
6:51:17um and assuming that it didn't happen um
6:51:22in effect you are assuming that pesco's
6:51:24capital structure will be the same as
6:51:25the proxy groups companies Capital
6:51:27structures is is that fair to say
6:51:33um generally assuming that
6:51:38yes but according to your rebuttal
6:51:40testimony it's also inappropriate to
6:51:41compare the capital structure of those
6:51:44apparent companies to in a proxy group
6:51:47is that correct rather than U operating
6:51:53subsidiaries so again I think we've done
6:51:55that analysis in rebuttal as well where
6:51:57we've relied on the capital structure of
6:52:00the um
6:52:03if you look at exhibit
6:52:06um 125 attachment
6:52:09ae28 there we
6:52:12demonstrate um the capital structures of
6:52:15the proxy
6:52:17group um using a correct market value
6:52:20capital structure so my concern about
6:52:23the methodology that was used
6:52:25by um Mr Fernandez in particular in this
6:52:28case was that he did not use a market
6:52:31value capital structure and if you're
6:52:33going to look at the proxy group Capital
6:52:35structures you need to use the market
6:52:37value of the capital structure for the
6:52:38proxy group so my correction which is
6:52:42shown on ae28 would adjust for
6:52:49that do you want me to pull that exhibit
6:52:52up Mr
6:52:54Fox um no that's okay we can uh move on
6:52:59we're running out of
6:53:01time um
6:53:05then just quickly with regard to DCF
6:53:08models I think you
6:53:11um did the same thing in the last G gas
6:53:14rate case but in assessing the results
6:53:16from the DCF F models you stated in your
6:53:20direct testimony that you place more
6:53:22weight on the mean to mean High results
6:53:24is that correct
6:53:33I
6:53:33don't you'd have to show that to me in
6:53:35my direct testimony I mean basically if
6:53:38you look at the results of my models
6:53:41they are shown on it's it's
6:53:45um it's in hearing zibit
6:53:49102 page 48 lines 15 through 17
6:54:07that's correct on my in my direct
6:54:09testimony yes that's
6:54:12true and that's different in your
6:54:16rebuttal testimony is that a suggestion
6:54:19yes this goes back to the conversation
6:54:20that we have had a couple of times now
6:54:23with concerns about the DCF results um
6:54:26over
6:54:27time expecting that market conditions
6:54:29would adjust and that the DCF models
6:54:31needed to adjust to reflect market
6:54:33conditions so again when you're looking
6:54:36at the DCF models so even though even
6:54:38though the DCF model is in your rebuttal
6:54:40testimony showed lower
6:54:41results um you're stating that you took
6:54:45those into
6:54:48account yes I did take them into account
6:54:52but that didn't change your that didn't
6:54:53change your
6:54:58recommendation the DCF results in my
6:55:01rebuttal testimony certainly do still
6:55:04support the range that I've discussed
6:55:07not sure I understand your
6:55:09question but you're saying you you're
6:55:12suggesting that you no longer placed
6:55:14more weight on mean to mean High
6:55:17results well what I'm saying is that
6:55:21I've taken into consideration my Model
6:55:23results generally speaking the concerns
6:55:25related to the DCF model as I mentioned
6:55:30earlier the dividend yields in the DCF
6:55:33model adjusted over time and so as the
6:55:35dividend yields adjusted over time to
6:55:37reflect market conditions there was less
6:55:39concern associated with the DCF
6:55:43models if we could just bring up
6:55:47uh hearing is up at
6:55:50125 believe it's page
6:55:5824 you finding your way to your last
6:56:00question or two yeah this this is last
6:56:02question is was
6:56:08confirming so this these are the uh
6:56:10results of your updated analyses for
6:56:12your rebuttal testimony is that correct
6:56:14that's
6:56:15correct and under the uh constant growth
6:56:19DCFS multi-stage
6:56:22growth they have numerous F espcially
6:56:25the First Column has uh numerous results
6:56:28that are well under 10.25
6:56:33yes those Model results consideration
6:56:36the lowest growth rate for every company
6:56:38in the group whereas the averages take
6:56:41into consideration the average growth
6:56:42rate for all the proxy companies and if
6:56:45you're looking at the median results
6:56:47there they certainly Support over the
6:56:49course of time the 10 and a
6:56:54quarter um
6:56:57median median average is that what
6:56:59you're suggesting yes if you look at the
6:57:03for example if you look at the 180 day
6:57:05median result of the multi-stage model
6:57:07you've got
6:57:091036 the range is from
6:57:12101 to 1036 on those
6:57:16models so it's fair to say that you
6:57:18believe we should discount everything in
6:57:20that First
6:57:22Column those are the First Column is
6:57:25showing the absolute lowest growth rates
6:57:27of of
6:57:28any any
6:57:31analyst that has reported for every
6:57:33single company in the group that would
6:57:35be the lowest possible value so if
6:57:38you're looking at the constant growth
6:57:40DCF median results the lowest possible
6:57:45answer assuming every you the growth
6:57:48rate for all of the
6:57:51analysts uh the lowest possible growth
6:57:53rate reported for all of the analysts
6:57:55you would come up with numbers that are
6:57:56in the 97 Range if you looked at the
6:58:00multi-stage model they would be in the
6:58:0396 to 992 range for the lowest possible
6:58:07growth rates for every single
6:58:10company if you look across then you have
6:58:13the averages and then you have the
6:58:15highest growth rates that's how you
6:58:17would interpret that
6:58:19chart thank you U no more questions
6:58:23thank you Miss
6:58:25bulley turn over you M Gill I appreciate
6:58:28it um Miss wisen had a quick question
6:58:32for
6:58:33you um I was considering going on a
6:58:36short break to give you a rest until
6:58:38about 3:05 I want to see if that works
6:58:40for you works
6:58:42fine sorry that works fine okay great um
6:58:47and then also the way I'm seeing things
6:58:49play out I think we might just get
6:58:51through staff's questioning of Mr frus
6:58:55if we did so and try to allow that to be
6:58:57complete as possible we go until like
6:59:005:15 sure sure I'm good for as long as
6:59:03you guys want to go tonight then we
6:59:05doing the afternoon okay would anyone
6:59:08else have an issue with 515 give or take
6:59:12um to make all of staff's questioning
6:59:15for Mr frus work
6:59:17today uh commissioner Gilman Greg bunker
6:59:20um on The Matrix you'll see that I have
6:59:2360 Minutes reserved for Miss bulkley and
6:59:27uh so you mentioned getting through
6:59:30possibly freedus I'm off the record
6:59:32right now so you guys
6:59:34know that's
6:59:38okay sorry yes you have 0 minutes for
6:59:41Miss Bley I see that yeah okay thank you
6:59:44I I probably misunderstood what you said
6:59:47no that's fine acknowledging that that
6:59:49will happen and I think we might just
6:59:51get through staff's questioning a free
6:59:53disc today if things play out with not
6:59:56much more delay so just making sure 5:15
7:00:00more or less would work for people
7:00:02today commissioner Gilman I can repeat
7:00:05this when we're back on the record but
7:00:06to make this easier staff is going to
7:00:08wave their Cross of company witness
7:00:11freedus okay so hopefully that frees up
7:00:14a little time this
7:00:16afternoon okay maybe right when we come
7:00:18back to break you can div that in case
7:00:21Miss I'll do it back on the record but
7:00:22just wanted the part appreciate that in
7:00:25that case just a heads up to
7:00:27UCA um let's see how the timing works
7:00:31out I think it's quite possible I'd ask
7:00:33you to try to start Mr fedus today but
7:00:36you probably would not get all the way
7:00:37through given time allowances today um
7:00:41so perhaps just look for a a reasonable
7:00:44Breaking Point within your um Cross of
7:00:48Mr fedus if you could consider that as
7:00:50we move forward this afternoon yes thank
7:00:53you we will do that and Target 515 is uh
7:00:57sort of the break point okay great that
7:01:00that sounds wonderful all right let's
7:01:01break until 3:5 just give everyone a
7:01:04quick quick break and we'll come back
7:01:05with staff's questioning of Miss fley
7:01:08thanks so
7:01:30much
7:02:00e
7:02:30e
7:03:00e
7:03:30e
7:04:00e
7:04:30e e
7:05:18Miss wisen Bell are you back yes
7:05:22excellent thank you um Miss mcin if you
7:05:25are back I understand you have H perhaps
7:05:28a change to the Cross
7:05:30Matrix yes uh commissioner Gilman now
7:05:32that we're back on the record saf is
7:05:34going to wave its Cross of company
7:05:35witness
7:05:36freedus excellent got it thank you very
7:05:40much all right next up um we have Miss
7:05:43Bley still on the stand and
7:05:47UCA with 60 Minutes of um
7:05:51cross right ahead Mr bunker thank you
7:05:54commissioner Gilman good afternoon Miss
7:05:57bulkley good to see you
7:05:59again uh actually I do not see her on
7:06:05screen there we go sorry about that not
7:06:09a problem how are you this afternoon I'm
7:06:12well how are you I am good thank you uh
7:06:15let's start with your hearing exhibit
7:06:18102 and your attachment
7:06:25aeb-1 and as that document's being
7:06:27pulled
7:06:29up if we could go to page seven
7:06:37and this is this is your your CV or your
7:06:41summary of of cases you've worked on yes
7:06:46and on page seven we see that Colorado
7:06:50Public Utilities Commission is listed at
7:06:52the top and underneath that uh heading
7:06:56there are six other Colorado gas
7:07:00electric and steam case es between 2019
7:07:04and
7:07:072022 and prior to this 2024 case where
7:07:11you've been the Roe witness for public
7:07:13service is that right yes that's correct
7:07:17okay and my recollection is that you and
7:07:20I have discussed Roe issues in the five
7:07:23electric and gas rate cases between 2019
7:07:27and
7:07:282020 so if we could focus on those five
7:07:31cases I'd like
7:07:33to
7:07:34sure okay uh let's start with the 2019
7:07:38electric case which was 19
7:07:420268
7:07:44e and you were the Roe witness for psco
7:07:49in that proceeding correct that's
7:07:52correct and if we could refer to hearing
7:07:55exhibit
7:07:57500 that's Mr sco's answer testimony and
7:08:01his attachment
7:08:04CWS
7:08:17-86 and if we could turn to page 25 when
7:08:23that document's pulled up
7:08:33and in particular in paragraph
7:08:35[Music]
7:08:3671 the commission's order which is
7:08:40decision C20
7:08:44d96 it indicates your rebuttal
7:08:47recommendation of 10.2% for the Roe was
7:08:51a reduction from your direct case
7:08:53recommendation for a 10.35 Roe
7:08:57correct yes that's
7:08:59correct and is it your recollection that
7:09:02proceedi number 19
7:09:05al- 0268 e was a fully litigated
7:09:11case I don't recall this was an electric
7:09:14case yes but I don't necessarily recall
7:09:17if it was fully litigated I'm sorry if
7:09:19it looks like I've turned away from you
7:09:20I just trying to put it on a screen
7:09:22where I can see so I am doing the same
7:09:25thing Miss bulkley so I understand I'm
7:09:27paying attention as well but I may be
7:09:30looking away from the camera okay so if
7:09:34we if we can go back to the top of uh of
7:09:38this decision on on page one just to
7:09:42confirm with you that this was a fully
7:09:45litigated case and not a
7:09:50settlement if we look at the caption
7:09:53there it indicates that there's a motion
7:09:55for a partial settlement on Wildfire
7:09:59mitigation but other than that the case
7:10:01is litigated would you agree with that
7:10:04representation I do see that yes okay
7:10:08now if we could go to page 36 of this
7:10:11[Music]
7:10:12order and paragraph
7:10:22102 here we say the uh
7:10:26Commission State in the middle of
7:10:28paragraph 102 that
7:10:32pesco's authorized electric Department
7:10:34Roe following that 2019 case was a 99.3%
7:10:39roe correct yes I see
7:10:44that okay uh let's move on to the
7:10:472020 gas rate case which was 20 al-
7:10:540049 G
7:11:02and you were also the company6 sorry Mr
7:11:06bunker 49 isn't it is
7:11:0920-
7:11:14z49
7:11:17G so 20 Al
7:11:200049 G got
7:11:23that I got I got it confused with the
7:11:26six one that's different yep that's
7:11:28that's
7:11:30fine uh my question uh miss bulkley you
7:11:33were pesco's Roe witness in the
7:11:36company's 2020 phase one gas rate case
7:11:40as well
7:11:41right
7:11:43yes the docket number on that is that
7:11:46the docket number you just gave sorry
7:11:48yes
7:11:5020- 0049 G yes that's correct okay and
7:11:55is it your recollection that proceeding
7:11:58number 20-
7:12:0149g was a settled
7:12:06case don't recall okay let's let's
7:12:10quickly go back to the first
7:12:13page and the caption at the top of the
7:12:18page and you'll see this is a
7:12:20recommended
7:12:22decision of one of the Pu alj's
7:12:26approving an amended settlement
7:12:28agreement see that I do see that yes
7:12:33okay okay so if we could go
7:12:41to scok answer testimony attachment CWS
7:12:4731 I think we're already
7:12:50there and
7:12:52and no we were on 89 um you're still in
7:12:56500 CWS attachment 31 ah I think I
7:13:01skipped ahead and Miss bulkley may have
7:13:03skipped ahead as well but I um I'm sorry
7:13:07let me let me go back just one moment
7:13:10then uh let's pull up uh Mr SCU acts
7:13:17attachment CW
7:13:28s-31 and my apologies for that I uh
7:13:32jumped ahead of
7:13:33myself okay now looking at the the
7:13:37caption here so all can see this is a
7:13:40recommended decision of an alj approving
7:13:44an amended settlement agreement agree
7:13:46yes I see that okay and if we could go
7:13:52to paragraph
7:13:55seven which is on page four
7:14:02here the uh the decision indicates the
7:14:05Roe
7:14:07recommendation uh was a
7:14:1299.95% Roe is that right uh so that's
7:14:17that's the company's request at that
7:14:19point yes I don't recall if that
7:14:23was how how that evolved over time if I
7:14:26was to tell you that your recommendation
7:14:30was 10
7:14:32.1% and the company requested
7:14:3699.9% for the Roe with that refresher
7:14:40recollection
7:14:42um not really but I would believe that
7:14:46it might be different yes okay okay
7:14:49thank you for that I I believe I may
7:14:52have
7:14:53uh looked at that Roe recommendation in
7:14:56your in your testimony and uh I I don't
7:15:01happen to have that uh in front of me so
7:15:05if
7:15:06you'll uh a subject to check uh agree
7:15:10your recommendation was
7:15:1210.10% and Pesco requested at
7:15:169 uh 95% Roe in the case I'd uh I'd
7:15:21appreciate that
7:15:25okay okay if we could now turn to
7:15:29paragraphs 52 and 53 of this
7:15:33order and it is on
7:15:40uh top of page 20 and uh then there's a
7:15:45table in paragraph 53 you see
7:15:50that I see that and this uh this
7:15:55particular uh portion of the order
7:15:58indicates the commission approved a SLE
7:16:00settlement between the parties and the
7:16:03settled Roe was
7:16:069.20% is that
7:16:08right um yes as one term of the
7:16:10settlement the Roe was
7:16:1299.2% I'm assuming this is I have not
7:16:16had time as you know to to refresh on
7:16:18this entire decision but typically
7:16:20settlements are give takes so this is
7:16:23one portion of the settlements yes I
7:16:25would agree to that okay and in
7:16:28particular the last line
7:16:31of paragraph 52 says the
7:16:33subtle. 120% right that's
7:16:37correct okay now if we could move to the
7:16:412021 electric rate
7:16:44case and that case is
7:16:4721-0
7:16:55317e and you were Public Services phase
7:16:58one electric rate case Roe WI in that
7:17:01case
7:17:02right uh yes I believe that's
7:17:06true okay and if we could pull up uh
7:17:10this is from Mr Fernandez's answer
7:17:13testimony and it is attachment that is
7:17:17uh hearing exhibit
7:17:19501 and in particular attachment rf-31
7:17:36and if we could turn
7:17:38to page well let me first say th this is
7:17:42the uh decision in proceeding number uh
7:17:4621 Al
7:17:490317 and you will see that this is a
7:17:55decision approving a settlement in the
7:17:57caption agree I see that yes okay okay
7:18:01so if we move to paragraph nine which is
7:18:06on the top of page
7:18:16five this particular decision indicates
7:18:20that uh
7:18:23pesco's
7:18:252021 Phase 1 electric rate case
7:18:29recommendation is is an
7:18:31Roe of 10% is that
7:18:36right yes that's
7:18:39correct and if I was to uh indicate to
7:18:42you that your recommendation range was
7:18:4710.0% to
7:18:4910.5% with the Roe for the Roe would you
7:18:54tend to agree with that I I don't recall
7:18:57all the recommendations in every case so
7:19:00we
7:19:03um don't happen to have it handy to look
7:19:05at do
7:19:07you
7:19:08uh unfortunately I do not
7:19:14okay I don't recall it to be honest but
7:19:18we can go from there I guess yes fair
7:19:21enough I I should have been thinking
7:19:22ahead on that one sorry about that nope
7:19:25that's
7:19:26fine and if we could turn to uh
7:19:29paragraph
7:19:3333 of the decision which is on
7:19:38page 11 I
7:19:48believe here the uh decision indicates
7:19:51the settled Roe is
7:19:549 30% is that
7:19:58right yes I would offer the same sort of
7:20:03uh Fuller answer to say that it's one
7:20:07element of an overall settlement but yes
7:20:09it does state that that element is at 93
7:20:12there are obviously other terms that get
7:20:13us to this paragraph 33 right but yes
7:20:18yes yes and if we could now go to the
7:20:232022 electric rate
7:20:26case which
7:20:28is 22
7:20:32al-
7:20:350530
7:20:37e you were the witness in the company's
7:20:40phase 2022 Phase 1 electric rate
7:20:45case uh
7:20:4722-0 530e is that correct
7:20:52yes and in if we could pull up
7:20:56attachment uh this would be Mr sco's
7:21:00attachment
7:21:0543 again I I just want to make sure
7:21:07you're talking about 500 attachment CWS
7:21:1043 I'm sorry yes I am thank you
7:21:39and that particular
7:21:41case your um well let's let's turn to
7:21:47page
7:21:5064 which
7:21:52is part of the subtl
7:21:56agreement and there in p on paragraph in
7:22:00par paragraph 4 towards the bottom last
7:22:04couple lines of of the uh settlement
7:22:08agreement there in paragraph
7:22:114 it indicates the
7:22:16Roe of
7:22:1910.25% uh is that
7:22:21correct could I ask that maybe you
7:22:23scroll up just to touch in the paragraph
7:22:25I can't see the bottom of the paragraph
7:22:27I think you're asking for the last lines
7:22:29yes now I can see I am I'm sorry yep and
7:22:32I agree with you that that's what it
7:22:33says that's correct again this is a
7:22:35settlement so with similar to the other
7:22:38two settlements I would just note that
7:22:40there are other Provisions as part of
7:22:42the settlement but yes okay and if we
7:22:45could go to page 30 of and this is part
7:22:49of the decision itself oh okay Y in
7:22:53paragraph 89
7:23:01oh here the commission talks about the
7:23:05provisions of the settlement agreement
7:23:08and an authorized Roe at
7:23:109.3% is that right that's correct Mr
7:23:13bunker could I trouble you to go back to
7:23:14the last exhibit for a moment because I
7:23:16think I answered you incorrectly I'm
7:23:17sorry so I think that was my testimony
7:23:20maybe and maybe I got a little bit
7:23:22confused in what you were showing me the
7:23:2410 and a quarter that we were looking at
7:23:26in paragraph four was
7:23:28that that is part of the settlement
7:23:32agreement or are you talking are you
7:23:35talking the
7:23:38um it was just paragraph 4 we just
7:23:40looked at it and I maybe didn't
7:23:42recognize where we were maybe it's the
7:23:44beginning of this settlement I just
7:23:45wanted to make sure I think I answered
7:23:47you that this was part of a settlement
7:23:48agreement but I believe the sentence
7:23:49that we were referring to it might not
7:23:52have been correct that was actually the
7:23:53recommendation that we were looking at
7:23:55is that okay if we could look at correct
7:23:59that if to look at page
7:24:0461 and if we could scroll down just a
7:24:08touch there you'll see this is a nearly
7:24:13comprehensive settlement agreement and
7:24:16this is attached to the order that we
7:24:18were just talking
7:24:21about okay which is uh c23
7:24:27d592 and if we could now go to page
7:24:3364 and at the near the bottom of that
7:24:37paragraph the
7:24:39uh it says the revenue uh increase was
7:24:43based on an overall proposed whack of
7:24:477.45% including a roe of
7:24:5310.25% if the company's proposed testare
7:24:56was
7:24:57accepted I see that okay so the the uh
7:25:04if you would the The Proposal uh uh from
7:25:08you on behalf of the company was an Roe
7:25:11of
7:25:1310.25% but as we see in the uh order
7:25:17itself the settlement agreement in uh
7:25:21included an authorized Roe of
7:25:249.30% would you agree with that I would
7:25:27subject to the same the same uh comments
7:25:31I made earlier that settlements are uh
7:25:34it's a whole package right so um as part
7:25:37of the package of of uh negotiated items
7:25:41that was the Roe that's correct okay
7:25:44thank you and now let's look at the 2022
7:25:48gas rate case which is the company's
7:25:51last rate case uh uh gas rate case
7:25:54before this one and that is 22-00
7:26:0246g and if we could look at uh you were
7:26:06the witness in that case is that right
7:26:09yes and by witness I mean the Roe
7:26:12witness yes okay and if we could go to
7:26:16Mr sco uh this is hearing exhibit
7:26:20500 his answer testimony attachment CWS
7:26:25D12
7:26:42and you can see here on the caption uh
7:26:45on the first page this is a decision
7:26:48permanently suspending the Tariff sheets
7:26:50so you would agree with me would you not
7:26:53that this was a fully litigated case not
7:26:57a settled case that's correct
7:27:00okay if we could go to page uh
7:27:0637 and in paragraph 117
7:27:13117 uh here the decision
7:27:17indicates that public service requested
7:27:21an Roe of
7:27:2510.25% is that
7:27:28right and let me let me expand on that
7:27:31before you answer
7:27:33that public service requested a
7:27:3610.25%
7:27:38roe if the company's cty was
7:27:43approved and requested an Roe of
7:27:4910.75% if the commission approved an hty
7:27:52is that is that right that's correct I
7:27:55see that okay and your range of
7:27:58reasonableness was between 10 and 11%
7:28:02and 10.0%
7:28:0411.0% right yes
7:28:08okay uh if we could go now to uh
7:28:12paragraph uh let's make a page 40
7:28:15paragraphs
7:28:17123 to
7:28:21126 and fortunately that's all on one
7:28:24page and and what that shows is the
7:28:27position of the intervening parties
7:28:30starting in paragraph 123 through 126
7:28:34and you'll you'll see that the parties
7:28:39including the interveners including the
7:28:42uca's recommendation of a
7:28:4599.0%
7:28:47roe staff proposed an Roe range of 9.0
7:28:52to
7:28:5599.2% and that FEA the Federal Executive
7:29:00Administration I believe is what FEA uh
7:29:02the acronym uh spells out proposed a roe
7:29:06range of
7:29:089.0% to
7:29:0999.8% with a midpoint estimate of
7:29:1499.4% would you agree I see that yes and
7:29:17I think the other number that's shown
7:29:19here is the authorized returns of 9.42
7:29:23on
7:29:24average yes uh yes that would be correct
7:29:28yes okay okay so now turning to page
7:29:3341 and paragraph 127 of this order in
7:29:37the fully litigated 2022 gas rate case
7:29:42the commission held a reasonable
7:29:44authorized Roe for public service is
7:29:47within the range of
7:29:4999.2% to
7:29:5299.5% agree
7:29:55yes
7:29:57okay so
7:30:00in the five gas or electric cases
7:30:03between 2019 and 2022 when you were the
7:30:07Roe witness for public service would you
7:30:11agree your Roe recommendations were
7:30:14between
7:30:1610.0% and
7:30:2610.75% I'm trying to think back over the
7:30:29cases we just talked about but that
7:30:31seems appropriate yes that seems
7:30:33approximately true okay thank you
7:30:38and in these five gastro electric cases
7:30:42between 2019 and
7:30:452020 and whether the case was fully
7:30:48litigated or
7:30:50settled would you agree the commission
7:30:52approved an Roe for Pesco of
7:30:5799.2% one time
7:31:00an Roe of
7:31:0299.3% three
7:31:03times and an Roe range of
7:31:0899.2% to
7:31:1099.5% on one
7:31:12occasion I would agree with that I think
7:31:15the sentence on 128 is actually in
7:31:17paragraph 128 is actually important to
7:31:19think through though that the commission
7:31:22was focused on where interest rates were
7:31:24headed and that they were expected to
7:31:27continue to rise which we had seen over
7:31:30this time period so I think that
7:31:32information is actually also helpful if
7:31:34you think back over the time period that
7:31:36we just considered we were looking at a
7:31:39fairly low interest rate environment
7:31:41which is very different as I've said in
7:31:43my testimony from the circumstances we
7:31:46find today right um in the instance when
7:31:50the commission set an Roe range of 99.2%
7:31:54to
7:31:5599.5% in pesco's last gas rate case in
7:31:5920
7:32:0022 psco chose a
7:32:0599.2% roe so they could also choose a
7:32:0955% equity ratio and still stay within
7:32:13the authorized whack of
7:32:166.7% would you
7:32:18agree uh yes I believe in the testimony
7:32:21of Mr Johnson earlier maybe at the end
7:32:24of last week he indicated that that
7:32:28choice was in order to keep the credit
7:32:29metric solid and that the credit of
7:32:32course the equity ratio is the
7:32:37um has the greatest effect on credit
7:32:41metrics so that decision actually was to
7:32:43stabilize the credit metrics for the
7:32:45company yeah and and and since you
7:32:48mentioned Mr Johnson's supplemental
7:32:50direct testimony if we could pull up H
7:32:53uh hearing exhibit
7:32:56119 and this is Mr Johnson supplemental
7:32:59direct testimony and if we could go to
7:33:02page
7:33:20nine sorry it's just uh taking me a
7:33:22second to find him uh Mr Johnson's you
7:33:25said 119 yes it's exhibit 119
7:33:29Mr Johnson's supplemental direct
7:33:33testimony and when you get to the
7:33:36document pulled up if we could go to
7:33:38page nine
7:33:51please yeah and if we can start uh lines
7:33:554 through
7:33:5815 and and you'll see starting on line
7:34:0310 uh the the discussion by Mr Johnson
7:34:08while the
7:34:099.2% Roe is at the bottom of the
7:34:12commission's range the company could not
7:34:16select a higher Roe and also stay within
7:34:19the authorized whack of
7:34:226.7% without significantly reducing its
7:34:26capital
7:34:27structure increasing the Roe and
7:34:31decreasing the equity ratio within the
7:34:33capital structure to achieve the same
7:34:36whack would be a less coste efficient
7:34:40way of maintaining the company's credit
7:34:42metrics do you see that I do I'm Mr
7:34:46bunker I apologize but can we just
7:34:48scroll down this is in this case right
7:34:49you've shown me a lot of different cases
7:34:51so I just want to make sure that we're
7:34:52talking about this case yes this okay
7:34:55thank you sorry yeah not a problem this
7:34:57is uh Mr Johnson supplemental direct
7:35:00testimony in this case yes thank you
7:35:03you're
7:35:05welcome so so when we view the
7:35:08commission's decisions in these five
7:35:10rate cases as resulting in a
7:35:1399.2% or a
7:35:1799.3% Roe and then compare that to your
7:35:20Roe recommendations ranging from
7:35:2510.0% to 10.75%
7:35:30would you agree your Roe recommendations
7:35:33in the five cases we discussed have been
7:35:36between 80 to
7:35:38155 basis points higher than what the
7:35:42commission authorized for the Roe and
7:35:44these five Gas and Electric rate
7:35:47cases so again I would say that first
7:35:52it's important to recognize that most of
7:35:54the cases are settlements as we talked
7:35:56about as we were going through the each
7:35:58each case and so those are all tradeoffs
7:36:01that get made um in determining an
7:36:04overall settlement and getting all
7:36:06parties to agree to a settlement so yes
7:36:08the commission did approve those but I
7:36:10think settlements um you need to be uh
7:36:14aware of the trade-offs that are made in
7:36:17a
7:36:18settlement um but the others are are
7:36:21lower than my recommendation that is
7:36:24true um over the course of this time
7:36:27period I would say that
7:36:30there had been the expectation for
7:36:32interest rates to be increasing and that
7:36:34was also noted in the commission's
7:36:36decision in that last case uh where they
7:36:39had actually started to increase and so
7:36:42uh this was a very difficult time period
7:36:44in history as the Federal Reserve noted
7:36:47as chair Powell noted in his comments in
7:36:50August about how challenging this
7:36:52financial time period has been to
7:36:55navigate and so certainly the
7:36:57expectation was that the markets would
7:36:59respond and that the and circumstances
7:37:02in the economy would respond long before
7:37:04they actually did over that time period
7:37:07so as interest rates have increased
7:37:09however I think um we're we find
7:37:12ourselves in a different circumstance
7:37:14today okay thank you for that uh if we
7:37:17could refer to uh Mr
7:37:21P's answer test or uh direct testimony
7:37:25rather hearing exhibit
7:37:28116
7:37:34116 and if we could look at attachment J
7:37:39[Music]
7:37:52jp-1 and if we could look at line
7:37:55seven and would you please confirm the
7:37:58rate case expenses for Consulting by
7:38:01Brattle group for your Roe testimony in
7:38:04this gas rate case is
7:38:06$160,000 is that correct yes that's
7:38:09correct
7:38:11okay uh let's let's uh Focus now on the
7:38:17uh 20 this this case the
7:38:212024 uh gas rate
7:38:24case and I don't know that we need to
7:38:27look at Mr Johnson's uh rebuttal
7:38:31testimony uh for this but would you
7:38:33agree the current Roe for psco gas
7:38:37following the 2022 gas rate case is the
7:38:4199.2% we were just talking about in Mr
7:38:45Johnson's testimony that's correct okay
7:38:49now if uh we could go to your hearing
7:38:52exhibit 102 which is your direct
7:38:56testimony
7:39:00uh on page
7:39:1144 and at lines five uh through six here
7:39:15you indicate the method you used to
7:39:18estimate pesco's cost of equity or its
7:39:22Roe and they include the constant growth
7:39:26DCF model the multi-stage DCF F model
7:39:30the capim the
7:39:32eapm and a
7:39:36byp approach which is the bond yield
7:39:39plus risk premium approach is that right
7:39:42that's correct okay and is it your
7:39:46understanding that the commission has
7:39:48previously relied on the results of the
7:39:52multi-stage DCF analysis when it has set
7:39:56Public Services Roe and prior gas rate
7:40:00cases um I believe there is some
7:40:04precedent for the multi-stage model and
7:40:06more recent precedent where the
7:40:08commission has indicated that they have
7:40:11considered all of the results of the
7:40:13models okay so I think the history there
7:40:18has been some older cases where the
7:40:20commission specifically had relied on a
7:40:22multi-stage Model but the more recent um
7:40:26commission determinations have been to
7:40:27consider where there have been ated
7:40:29cases that is to consider um the results
7:40:34of all of the
7:40:35models okay we could go to Mr
7:40:38Fernandez's testimony that's he in
7:40:40exhibit 501 his answer
7:40:44testimony uh at page 59 starting at
7:40:50L3 and on to page 60 at line 11 and this
7:40:55includes footnotes 41 and
7:40:5843 on Pages 59 and 60 um I'm not going
7:41:02to be able to show the whole page so
7:41:04you're gonna you'll have to have me
7:41:05scroll when you're yes that that is fine
7:41:08that is fine if you could stop right
7:41:10there for the moment uh do you agree uh
7:41:15or do you rather
7:41:17disagree with the accuracy of Mr
7:41:20Fernandez's testimony that the
7:41:22commission has relied partially or
7:41:26fully on the multi-stage DCF model model
7:41:29for its Roe decisions in several Gas and
7:41:33Electric
7:41:34cases and you'll see that he sites
7:41:37proceeding number 12 a 1268
7:41:42G 15 Al
7:41:450135
7:41:47G and 17
7:41:50a-0
7:41:53363g in the text of the document uh
7:41:57there and then in the footnote it's 41
7:42:00through 43 at the bottom of uh page
7:42:0759 so the
7:42:102012 gas case the 2015 gas case and the
7:42:15two
7:42:182017 gas case is what I'm I'm asking you
7:42:21about and in your question is are these
7:42:24accurate representations of the
7:42:26commission order is that your question
7:42:28I'm asking if you agree the commission
7:42:31has partially or fully relied on the
7:42:35multi-stage DCF model in its Roe
7:42:38decisions in several cases over the last
7:42:42uh
7:42:43decade um I would agree that that is
7:42:46true the case that is always missing
7:42:49from Mr
7:42:50Fernandez's summary of cases however is
7:42:54the commission's decision in 19 Al um-
7:42:5902 68e where the commission said that
7:43:02they would want to consider all of the
7:43:05models um and so it's interesting that
7:43:09he skipped the last
7:43:11one in this analysis that all of the
7:43:14history uh is where he focuses but not
7:43:17the more recent case which might be more
7:43:19reflective of the challenging market
7:43:21conditions that I just discussed
7:43:23previously so I think that's an
7:43:25important link from my perspective that
7:43:28commission recog ized that we need to
7:43:30look at all models um because the market
7:43:33conditions at a time when the market
7:43:35conditions have been um difficult to
7:43:40to um understand
7:43:45directionally okay well let's let's uh
7:43:48let's take a look at your direct
7:43:53testimony and on Line's third uh page 46
7:43:57this is your exhibit B 102 your direct
7:44:01testimony page 46 let's look at line 13
7:44:05lines 13 to
7:44:0815 and just above that in uh on line 11
7:44:12you you indicate you're talking about
7:44:1622-04 6G which is the company's last G
7:44:21gas rate case before this case right yes
7:44:25and then on line 13 you say it's my
7:44:28understanding that the commission
7:44:29indicated in its deliberations that it
7:44:32would like the company to include in the
7:44:35future the multi-stage DCF model for
7:44:38consideration do you see that I do see
7:44:40that yes okay it's not exclusive waiting
7:44:44though that's just to included yes I I
7:44:46fully understand what you're saying
7:44:48there and is it correct that in the
7:44:512022 case
7:44:5522-00 46g
7:44:59which is the company's last natural gas
7:45:02rate case the methods you use to
7:45:05estimate pesco's
7:45:07Roe included the constant growth DCF
7:45:11model the capm the
7:45:15eapm and the bond yield plus risk
7:45:19premium
7:45:20methodology but you did not include a
7:45:23multi-stage DCF model in your analysis
7:45:27is that right I believe that's correct
7:45:28yeah yes okay but I have included it in
7:45:31this
7:45:34proceeding yes you have thank you and
7:45:38and in your direct testimony on page uh
7:45:4394 which is the document we're looking
7:45:48at on lines 7 through n here you state a
7:45:52reasonable range of Roe results for
7:45:54Pesco in this rate case is 10.25 % to
7:46:0111.25% is that right yes that's
7:46:05correct and if we now go to your
7:46:09rebuttal
7:46:11testimony which is here in exhibit 125
7:46:33uh page I'm sorry I thought I said page
7:46:4026 starting at lines 13- 16 here you
7:46:44indicate with regard to your Roe
7:46:47analysis that these results continue to
7:46:50support an
7:46:51Roe of in the range of
7:46:5510.25% to 11.25%
7:46:58although the company is currently
7:47:00requesting an Roe of
7:47:0410.10% in this proceeding due to
7:47:07regulatory considerations apart from the
7:47:10factors I've considered is that correct
7:47:13yes that is
7:47:15correct and so you continue to support
7:47:19the Roe range of 10.25 to 10 or
7:47:2611.25% uh that you that you uh
7:47:30recommended in your direct testimony
7:47:33right yes I think I covered that in the
7:47:35earlier cross-examination if you were to
7:47:37look at exhibit or attachment I'm sorry
7:47:41ae13 right um I walked through how that
7:47:45how those numbers support that range
7:47:47still Yes okay and on lines four through
7:47:50six here on the top of page uh 26 you
7:47:54indicate for your natural gas proxy
7:47:57group uh since the filing of my direct
7:48:00testimony the results of the constant
7:48:03growth DCF the multi-stage
7:48:06DCF and the bond yield plus risk
7:48:11premium analyses have
7:48:14decreased while the results of the capm
7:48:17and
7:48:18eapm have generally increased by
7:48:21approximately the same extent is that
7:48:24right
7:48:26yes and if we look at page
7:48:3124 of your uh of your rebuttal testimony
7:48:34there and this is figure a eb-
7:48:40R-3 uh that is where you uh State the
7:48:43results of your natural gas utility
7:48:46proxy group correct um yes and the
7:48:49exhibit that I referenced earlier which
7:48:51then provides the details for each of
7:48:54the proxy companies and the scenarios
7:48:56that follow but yes same same table
7:48:59okay okay
7:49:02and at uh
7:49:05page
7:49:0711 of your uh of your uh rebuttal
7:49:11testimony here if we could go to Wine
7:49:20n here this this is a
7:49:24summary of the staff and UCA cost of
7:49:28Equity Model results
7:49:31correct as filed yes yeah
7:49:36okay and would you agree that UCA
7:49:40witness Mr Fernandez
7:49:43recommends an
7:49:45Roe and in particular I'm looking at the
7:49:47overall recommendation there near the
7:49:50bottom of uh at the bottom of the table
7:49:52there or the figure and uh would you
7:49:56agree Mr Fernandez recommends an Roe of
7:50:019.40 if the commission rejects the
7:50:04company's proposed risk reduction
7:50:07items an Roe of
7:50:109.20% if the commission approves the
7:50:14company's proposed risk reduction
7:50:16items and then is noted with footnote
7:50:19three uh there and youca witnessed Mr
7:50:23scok further proposed reduction to the
7:50:27Roe to
7:50:299.0% for affordability or as you call it
7:50:34status quo capital investment is that
7:50:36right yes that's
7:50:40true and if we could
7:50:44uh if we could look here starting on
7:50:47line
7:50:4910 through uh on page 11 on to page 12
7:50:54line 10 here you discuss the uca's 20 b
7:50:58basis point reduction to Mr Fernandez's
7:51:029.40
7:51:04recommendation noting the reduction is
7:51:07based on a proposed reduction for
7:51:09factors such as
7:51:11affordability
7:51:13decoupling and PS Go's business's usual
7:51:16approach to capital investment or status
7:51:20quo capital investment as you refer to
7:51:24it in note three to the figure on H page
7:51:28page 11 which is figure ae- R-1
7:51:34correct that's correct yeah I think here
7:51:37I'm quoting Mr slac specifically yes
7:51:40okay U let's specifically talk about the
7:51:45multi-stage DCF method and
7:51:49Analysis and uh in that regard let's
7:51:53talk about specifically about the
7:51:55multi-stage DCF analysis that you and Mr
7:51:59Fernandez have have
7:52:02conducted and let's look at your hearing
7:52:06exhibit uh your rebuttal
7:52:09testimony uh 125 and attachment aeb 15
7:52:32what page of
7:52:37that I believe let's start with the uh
7:52:40with the very first page of
7:52:44aeb attachment aeb
7:52:4715
7:52:49okay and this is your updated
7:52:53multi-stage DCF analysis using your
7:52:56natural gas proxy utility group
7:52:59consisting of five natural gas companies
7:53:02is that right that's correct
7:53:05yes and the median cost of equity under
7:53:09column
7:53:1110 of this attachment
7:53:15a15 it shows a
7:53:199.60
7:53:20roe
7:53:2299.60% Roe for your updated multi-stage
7:53:26DCF analysis using your natural gas
7:53:29proxy group right um yes with a 30-day
7:53:33stock price so the various Pages
7:53:35following that show different uh stock
7:53:38price average and conventions yes for
7:53:41the first page that's true okay and if
7:53:44we could go to your rebuttal testimony
7:53:46at page
7:53:5435 and here on wine uh starting on wine
7:53:585 through 15 and in the two uh q&as on
7:54:03the uh bottom portion of this page
7:54:0635 here you discuss the primary
7:54:09difference between the multi-stage DCF
7:54:13analyses that you and Mr Fernandez have
7:54:17conducted is that right that's correct
7:54:20and it lines 7 through 9 you state the
7:54:23most significant difference in the
7:54:25results of the multi-stage DCF model
7:54:28that Mr Fernandez and I have developed
7:54:31is the inclusion of
7:54:33Chesapeake in Mr Fernandez's proxy group
7:54:37is that right that's
7:54:39correct and is it correct that
7:54:43Chesapeake uses private rather than
7:54:46public debt and therefore it does not
7:54:49have a credit rating from one of the
7:54:52three major credit rating
7:54:55agencies um that's one of the
7:54:57circumstances is associated with
7:54:59Chesapeake yes it's also okay and if we
7:55:03could if we could turn to Mr Fernandez's
7:55:06answer
7:55:08testimony uh which is hearing exhibit
7:55:15501 Mr bunker I just want to check in
7:55:17with you on time you think you'll be
7:55:19able to wrap up around
7:55:21405 I have
7:55:24roughly six questions to go so I think
7:55:28I'm going to even beat
7:55:30405 great thanks you're welcome you
7:55:34wanted 501 or 500 uh Mr Fernandez
7:55:39501 and if we could go to page 75
7:55:48please and at the bottom of the page
7:55:52there uh starting on line 16
7:56:03and then if you could uh yep you you're
7:56:06showing footnote 60 thank
7:56:09you
7:56:11uh this testimony contains uca's list of
7:56:15natural gas proxy companies is that
7:56:20right it does that's true okay and with
7:56:25respect to Chesapeake utilities
7:56:28flit note 60 States while the debt of
7:56:32Chesapeake utilities is not rated by SNP
7:56:35or Moody value line continues to assign
7:56:40Chesapeake utilities its second best
7:56:43safety rank of
7:56:45two and Chesapeake has a beta of
7:56:5080 which is the lowest beta in the proxy
7:56:54group do you see where uh it states at
7:56:58in footnote 60 yes I do see
7:57:01that do you disagree with the accuracy
7:57:05of the data in footnote
7:57:0860 no I believe it's the exact same data
7:57:11that was available for Chesapeake in the
7:57:13last case when Mr Fernandez did not
7:57:16include Chesapeake in the proxy group
7:57:18that's actually what I've discussed in
7:57:20my rebuttal testimony that those two
7:57:23conditions existed in the last case and
7:57:27Mr Fernandez elected not to include
7:57:29Chesapeake in his proxy group and at
7:57:31that time they had a the DCF results for
7:57:34that company were very high and so in
7:57:37this case with the same conditions
7:57:40present for his screening criteria he
7:57:43has included chesap Peak but in this
7:57:45case the DCF results are very
7:57:48low okay that's what I discussed in my
7:57:50testimony yes and if we could go back to
7:57:54your uh rebuttal testimony he in exhibit
7:57:57125
7:58:06I I I uh would like to skip back I'm
7:58:09sorry uh Miss uh frto Rico if we could
7:58:13go back to Mr Fernandez's testimony 501
7:58:16for just a moment and at page
7:58:2583 starting online 20 and onto the top
7:58:29of
7:58:3084 lines one and
7:58:33two
7:58:36uh here Mr Fernandez states that the
7:58:40estimated Roe results from his
7:58:43multi-stage
7:58:44calculations were
7:58:479.40% for the proxy group uca's proxy
7:58:51group is that
7:58:53right yes I see that okay now if we
7:58:58could go to your hearing exhibit 125
7:59:02please page 35 and here at lines 10
7:59:05through
7:59:0615 you indicate your rebuttal testimony
7:59:10attachment
7:59:12a25 updates the
7:59:14assumptions in Mr Fernandez's
7:59:17multi-stage DCF analysis to rely on data
7:59:21through June 30
7:59:242024 and when Chesapeake is excluded
7:59:27from the proxy group the resulting
7:59:29average cost of equity increases to
7:59:3299.63% is that right that's correct
7:59:36yep now if we refer back to your
7:59:40rebuttal attachment
7:59:54a25 can you tell me the number again is
7:59:57it
7:59:58125 yes it is uh rebuttal testimony
8:00:02hearing exhibit 125 I'm sorry for not
8:00:05saying that hearing exhibit
8:00:07125 and it's attachment
8:00:11aeb
8:00:1625 and this is Miss bulley's uh rebuttal
8:00:20testimony yep there it is okay thank
8:00:23you so referring to this rebuttal
8:00:27testimony ATT atment
8:00:29a25 when you consider all six companies
8:00:32in Mr Fernandez's gas proxy group
8:00:36including
8:00:38Chesapeake the average cost of equity
8:00:41using the multi-stage DCF method is
8:00:4499.63% is that
8:00:47correct I'm sorry this page I'm looking
8:00:50at says 9.36 which is his I'm sorry i'
8:00:53meant to say that
8:00:559.36% you're right that's that's his
8:00:58filed as filed yes and that seems to be
8:01:02rounded to 9.4 as his recommendation
8:01:06from his multi-stage analysis yeah right
8:01:09which I've shown on figure a
8:01:11ebr1 let me ask you the question this
8:01:14way uh and that is not necessarily
8:01:17disputing what you just said but is it
8:01:20correct that your updated robutt case
8:01:23assumptions to Mr Fernandez's
8:01:26multi-stage DCF anal is using data
8:01:30through June 30
8:01:332024 and with the inclusion of
8:01:36Chesapeake in the gas proxy group that
8:01:39that reduces Mr Fernandez's multi-stage
8:01:42DCF analysis results by four basis
8:01:46points from
8:01:489.4 to
8:01:5599.36% no it my understanding I believe
8:02:00that page one of this exhibit is Mr
8:02:05Fernandez's as
8:02:07filed Model
8:02:09results so which generates a
8:02:129.36
8:02:18roe okay uh let me just confirm this
8:02:22with you that that as we look at this
8:02:26the average
8:02:28under all proxy companies and this
8:02:31includes Chesapeake on this attachment
8:02:35a25
8:02:38correct yes and the average as I look at
8:02:42all proxy
8:02:44companies
8:02:46average and it's uh in a box that has a
8:02:50rectangle around it it is
8:02:5499.36% is that correct yeah that's
8:02:56correct so basically I've shown two
8:02:59decimal places and in Mr Fernandez's
8:03:01exhibit he shows one and when you
8:03:04collapse that to one decimal place it is
8:03:079.4 and that's so but the data shown on
8:03:11this page is all data presented in Mr
8:03:15Fernandez's attachment ra
8:03:17a-8 so this is just his analysis
8:03:22reproduced and then I've in I've
8:03:24included the section that excludes
8:03:27Chesapeake below but up until that point
8:03:31it is consistent with what he filed as
8:03:34attachment ra
8:03:36af-8 okay so but the distinction between
8:03:40the
8:03:4299.4% and the
8:03:469.36 or
8:03:4899.36% you're saying is the result of a
8:03:53of a moving of a decimal point it's just
8:03:56the presentation so if if I look at his
8:03:58electronic copy of his exhibits and I
8:04:01just get myself one more decimal place I
8:04:04will get an exactly the same answer so
8:04:07all of the data if I were to take for
8:04:09each of these
8:04:10companies um if the cost of equity
8:04:13column if I were to only show one
8:04:17decimal place the results would be ident
8:04:20identical to what Mr Fernandez filed
8:04:24it's really just copied out of his
8:04:26exhibit and placed into this schedule
8:04:28and then I showed two decimal places
8:04:31okay I I I follow what you're saying and
8:04:34and thank you for that just to put a
8:04:36fine point on it the updated uh
8:04:41rebuttal assumptions then for your uh
8:04:44proxy group analysis that doesn't change
8:04:48that did not change anything in this
8:04:50exhibit uh or this attachment a25 is
8:04:53that right not on page one so page one
8:04:56is just as file and then page two
8:04:59updates because Mr Fernandez used data
8:05:01through April so and I used data through
8:05:04June so in order to make his analysis
8:05:08and my analysis comparable I just used
8:05:10all of his assumptions through June to
8:05:12create page two of this exhibit and so
8:05:17and then I removed Chesapeake and then
8:05:19Mr Fernandez relies on his average when
8:05:22he so when you look at his schedule ra
8:05:26af8 he shows an average for all of his
8:05:29proxy companies of 9.4 so he's relying
8:05:32on the average and not the median which
8:05:33was
8:05:349.6 that number is what he brings
8:05:37forward as his recommendation for his
8:05:40multi-stage model is the average number
8:05:42so that's why I focused on the averages
8:05:45here okay that thank you for that
8:05:48explanation yes that's very helpful and
8:05:51that concludes my cross-examination and
8:05:54thank you sure your timely Mr bunker
8:05:57wonderful thank you um okay as promised
8:06:01I do need to take a break um when we
8:06:04return from break uh we will have
8:06:07commissioning Council uh questioning of
8:06:10Miss bulkley so I'm going to aim to be
8:06:13back it's quick as I can I think 425 is
8:06:16as quick as I could do that so um Miss
8:06:19Brahma Miss bulley Miss Harper Mr Plant
8:06:23if we could plan to be back at 425 I'll
8:06:25turn my camera on as soon as I walk in
8:06:27so if it's a minute or two after that
8:06:29but if you could be available at that
8:06:30time it'll get us started as quick as
8:06:32possible we'll do thank you perfect
8:06:35excellent all right I'll see yall as
8:06:37close to 425 as I can manage thank
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8:25:32wanted to check um and see if Miss Wise
8:25:34and B
8:25:38back I am excellent okay thank you um
8:25:44well thank you all for your punctuality
8:25:46l i me back at
8:25:484:25 um so we have Miss Bley on the
8:25:52stand and next up is commission counsel
8:25:55Miss Harper
8:25:57good afternoon Miss Spookley I'm Ruth
8:26:00Harper I represent the Commissioners and
8:26:02their advisors in this case and I just
8:26:05have a short series of questions for you
8:26:08today would you agree that since the
8:26:11time you rebuttal testimony was prepared
8:26:15that the 30-year treasury rate has has
8:26:20fallen um it has fallen it's been pretty
8:26:23volatile I would say as well though so
8:26:25similar to sort of December of last year
8:26:28where it was volatile in the expectation
8:26:31of the fed's actions where it goes from
8:26:33here I'm not
8:26:36sure um do you have an
8:26:39approximate value for how far treasury
8:26:42yields have fallen over that time
8:26:45period um I would say well I don't ever
8:26:48use a spot number because I don't think
8:26:50spot numbers are particularly helpful
8:26:51due to that volatility so it's probably
8:26:55down I'm going to yes 20 basis points on
8:26:57a 30-day average um again I would say
8:27:01you know I've looked at this time period
8:27:03right now in comparison to December of
8:27:062023 and which I think is relevant
8:27:08because it is again just prior to a
8:27:10period where we had an expectation for
8:27:12the FED to act um and so it's responding
8:27:15kind of similarly to what we saw in
8:27:17December and then um we saw this you
8:27:20know the run up in in interest rates
8:27:22following that when the FED didn't
8:27:24respond the way the market expected so
8:27:26I'm not really sure where we're headed
8:27:28but we're in about the same
8:27:31place
8:27:32and how is this level of decrease or or
8:27:36perhaps volatility accounted for in a
8:27:40proxy utility
8:27:42analysis well it would be accounted for
8:27:45in um potentially in two places
8:27:48certainly in the capm it would be
8:27:50accounted for in the risk-free rate um
8:27:55and in the dividend yields to the extent
8:27:58that it's actually the DCFS have
8:27:59responded sometimes the DCF doesn't
8:28:01respond right away uh so it could be
8:28:05reflected there as well but it can be a
8:28:07little slower
8:28:08sometimes and given what we have
8:28:12discussed in these these questions how
8:28:15should the Commission address falling or
8:28:18volatile uh interest rates in in setting
8:28:21Roe in this case yeah so this is a great
8:28:24question and this is something I've
8:28:25given a lot of consideration to given
8:28:27where we are um you know I think we we
8:28:31are at a point of uncertainty with
8:28:33respect to the Federal Reserve in terms
8:28:35of what they intend to how where they
8:28:38intend to go which is not unlike
8:28:39December of of 2023 that's sort of where
8:28:42I go back to um and at that time you
8:28:45know the Federal Reserve had looked at
8:28:48where um unemployment was if you sort of
8:28:51look at the fed's comments in December
8:28:53of last year versus chair pal comments
8:28:56in August of this year they're almost
8:28:59similar with respect to the data points
8:29:01that they're considering and where we
8:29:03are right so in inflation has come down
8:29:05some but they're focused on what where
8:29:08job growth is and how that's going to
8:29:10affect um the economy overall the August
8:29:13job numbers came in stronger than was
8:29:15expected so all of these things are
8:29:18playing into interest rates and right
8:29:20now I I don't know if we'll see another
8:29:23situation like we saw in December and
8:29:25January where the treasuries ran down in
8:29:28December and then they came back up
8:29:29again in January I I I just I think
8:29:32probably the best approach at this
8:29:35particular time would be to look at um
8:29:38you know a maybe slightly longer term
8:29:41average to sort of take into
8:29:42consideration that
8:29:46volatility no further
8:29:50questions thanks Miss Harper appreciate
8:29:53it uh commissioner plant
8:29:57I have no questions for Miss Buckley
8:29:59thank
8:30:00you excellent um Miss Buckley I just a
8:30:04few um so uh in your direct
8:30:09testimony um in figure a
8:30:12eb-
8:30:15d-7 which is on page 40 of your Direct
8:30:20hearing exhibit 102 um you show a proxy
8:30:23group that you used in your cap m& Anis
8:30:27correct um yeah I use this in all of the
8:30:30analyses actually so this is the natural
8:30:32gas group is that the group you're
8:30:33referring
8:30:34to yeah scroll down just a little
8:30:38yep there it
8:30:41is yeah um and um those companies listed
8:30:46are holding companies
8:30:49correct yes they are holding companies
8:30:51they're publicly traded companies that
8:30:54have multiple operations within those
8:30:57companies
8:30:59yes and so since we're talking here
8:31:01about Public Service Company of Colorado
8:31:04the operating company um rather than
8:31:07Excel it's holding company is it uh fair
8:31:10or appropriate to compare an operating
8:31:12company to holding
8:31:15companies yeah so it's the best data we
8:31:18have and um so we need Market data to be
8:31:22able to do this analysis to be able to
8:31:24run any of the cost of Equity models
8:31:27that we're running um so you need prices
8:31:30you need you know dividends you need
8:31:32growth rates for the DCF all of that
8:31:34needs to be based on publicly traded
8:31:36companies and we need the betas
8:31:38associated with them for the for the
8:31:40capm so it the analysis really can't be
8:31:42run on operating companies and so that's
8:31:45sort of we're in the situation of
8:31:47needing to use these parent companies
8:31:49which is why we then look to the
8:31:51operating companies afterwards for an
8:31:53assessment of the risk profile and
8:31:56capital structure because the ideal
8:31:57circumstance would be to be able to use
8:31:59the operating company data but we don't
8:32:02have data on those companies so I have
8:32:06done this long enough to know that there
8:32:07was a time when there were 95 companies
8:32:09in the electric utility proxy group as
8:32:11publicly traded entities but that's not
8:32:13where we are today we have a smaller
8:32:14group and when um they've all sort of
8:32:17Consolidated and and that they're all on
8:32:19the op Coast right they're all owned by
8:32:21other companies at this point so this is
8:32:23the best information we have available
8:32:28okay
8:32:30um and um Excel as public service
8:32:34companies holding company issues its own
8:32:36debt
8:32:38right I believe it does I think psco is
8:32:41a standalone though I think PCO issues
8:32:44its own Standalone debt so they're
8:32:48separate that would probably be a better
8:32:49question for Mr Johnson to be honest I
8:32:51just know that psco has a standalone
8:32:53credit
8:32:54rating okay
8:32:56but any debt issued at the um Excel
8:32:58level uh or leverage would have an
8:33:01impact on the return offered at the
8:33:03parent company level
8:33:06right at the parent company
8:33:11level holding company yes sorry to keep
8:33:16our that's fine yes the the
8:33:19capitalization does affect yeah the
8:33:21return calculation
8:33:23yes okay and does that influenced part
8:33:26of RC
8:33:28excels uh or the holding company excels
8:33:31um Roe higher than any of its operating
8:33:36company are we talking earned or
8:33:39authorized when you talk about the the
8:33:41operating companies Roes I just want to
8:33:43make sure I'm clear on the
8:33:45question I think earned would be the
8:33:47most
8:33:48appropriate yeah so the earned I think
8:33:51is a factor of you know several things
8:33:54you know that relates in part to um the
8:34:00timing of recovery of costs um certainly
8:34:02the earned returns are affected by were
8:34:04infected affected by inflation and the
8:34:06operating cost changes that occurred
8:34:08more more recently in the
8:34:10last uh four years through covid there's
8:34:13a lot of reasons why those earned
8:34:15returns are um different than the parent
8:34:19company
8:34:20returns um and that they why they differ
8:34:24across jurisdictions
8:34:27probably I'm not sure if that answered
8:34:29your
8:34:30question yeah just trying to figure out
8:34:32how we can compare you know it
8:34:35essentially a bunch of holding companies
8:34:38to an operating company here in Colorado
8:34:42in terms of understanding you know is it
8:34:44more appropriate to actually compare
8:34:47Excel the holding company to these other
8:34:50holding companies for the comparison
8:34:52purposes that you're
8:34:54undertaking yeah so we don't typically
8:34:56use Excel as the basis for comparison
8:34:59for the operating companies for a
8:35:01variety of reasons the risk profile of
8:35:03excel is very different than the risk
8:35:05profile of Pesco Excel is a holding
8:35:08company and so by the virtue of that
8:35:09fact it has um Diversified across many
8:35:13jurisdictions it has Diversified
8:35:15customer bases industry within those
8:35:18utility within those different operating
8:35:20companies and it's just a different
8:35:22structure than than the opco right so I
8:35:25don't think that that's the Excel return
8:35:27is necessarily Market return is
8:35:30necessarily comparable to the psco
8:35:34return does that right but that is the
8:35:37holding company and we're just seeing
8:35:39comparisons to other holding companies
8:35:40right right
8:35:43right so um so that's I think and all in
8:35:46this particular case too I think you
8:35:48know the operations are quite a bit
8:35:51different where Excel has a lot of you
8:35:53know generation and your the company
8:35:55that we're talking about here is the gas
8:35:57division right so I think there's a
8:35:58little bit of a difference in operations
8:36:01as
8:36:02well the screening
8:36:05criteria oh I'm
8:36:07sorry no worries um those are my only
8:36:10questions I will turn it back to you
8:36:13Miss Brahma for redirect uh thank you uh
8:36:17commissioner Gilman I thought it may be
8:36:19helpful before um we proceed just
8:36:22because I may have a couple questions
8:36:23for miss bulley about
8:36:26um staff's hearing exhibit uh 427 the
8:36:29S&P article that was a bit of a question
8:36:33at the
8:36:33conclusion of um Mr Cox's
8:36:36cross-examination of Miss
8:36:38Bley um and I I just wanted to know the
8:36:41company does not have an objection to
8:36:43entering that article I just appreciate
8:36:45the opportunity to review it before we
8:36:47we uh um uh took that position the one
8:36:50thing that we did notice is that the
8:36:52version that was originally inboxed had
8:36:54some highlighting in it we just just ask
8:36:56that staff um introduce a clean version
8:36:58I iume that maybe what Mr P is here to
8:37:00do
8:37:03so yeah thank you I just want to make
8:37:06clear that we did update uh the version
8:37:09in the in our box um so correct version
8:37:12of hearing exhibit 427 is in there
8:37:15without the uh inadvertent
8:37:18highlight okay with the stipulation of
8:37:21no highlighting and hearing exhibit uh
8:37:24427 uh are you okay with the submission
8:37:27Miss Brahma yes we Have No objection
8:37:29thank you okay great uh so admitted
8:37:34thank you for bringing that back
8:37:35up and I do have some redirect for Miss
8:37:38Bley so if it's okay I will move to
8:37:42that um Miss bulkley I I'd like to kind
8:37:45of start where you left off in your
8:37:47conversation with the commission just
8:37:49now just maybe because that came up a
8:37:51couple different times um I I think it
8:37:54may be helpful to just crystallize why
8:37:57we use a holding company proxy group to
8:38:01look at Roe considerations but don't
8:38:04recommend using that kind of comparison
8:38:07for determining an equity ratio for
8:38:09public service so if you could offer
8:38:10some clarification I think that would be
8:38:12helpful sure um so again the
8:38:16there's because we need to use Market
8:38:19data in order to estimate what the
8:38:21investor required return is we need to
8:38:23use the publicly available information
8:38:26for the holding companies or the
8:38:28publicly traded entities um but but the
8:38:33companies that are most like the subject
8:38:35in this case psco are really at the opco
8:38:39level and so that's why we typically
8:38:41we're sort
8:38:42of there is no other information to use
8:38:45to run the models so that's where we are
8:38:47on the models we need to use the public
8:38:49data but then when you're sort of when
8:38:50you're looking at how does the company's
8:38:52overall risk profile compare to other
8:38:55companies that make up that you know
8:38:58those Market data what we're really
8:39:01looking at is the operating company
8:39:02information to to establish the overall
8:39:06risk profile and so that's why in my
8:39:08exhibit I should have this for you my
8:39:11exhibit
8:39:12ae10 tries to go through some of the
8:39:15mechanisms that actually affect the the
8:39:20risk profile of the operating companies
8:39:23that are owned and operating by the
8:39:26holding companies to compare the overall
8:39:28risk of those companies to the subject
8:39:32entity in this case Pesco uh gas
8:39:34division and with respect to um looking
8:39:38at the proxy group are you looking at
8:39:41the parent company Excel Energy Inc by
8:39:43itself or are you looking at the
8:39:45Consolidated energy Exel energy or
8:39:48something
8:39:50different well for the proxy group we we
8:39:53would not be using Excel just because of
8:39:55the the sort of circularity associated
8:39:56with including excel in the group um you
8:39:59don't want to be using a company that
8:40:01has an influence on the parent comp a
8:40:04company that has that is this um the
8:40:07owner of the company you're setting the
8:40:09return for because the return for the in
8:40:11the case is actually going to affect
8:40:13potentially stock price which we've seen
8:40:16and uh growth potential for companies uh
8:40:19at the parent company level so we take
8:40:21that company out of the equation we
8:40:22wouldn't use Excel because of that
8:40:24circularity
8:40:26um but the maybe you want to ask your
8:40:29question again is my fault this B I
8:40:31didn't actually I should not have
8:40:32phrased my question that way what I
8:40:34really was trying to get at with respect
8:40:35to the company is there a difference
8:40:37between looking at XL Energy not
8:40:40necessarily as part of the proxy group
8:40:41but just in general looking at for
8:40:43example the capital structure if we were
8:40:46to do that as some parties recommend uh
8:40:48for Exel energy Inc as just a holding
8:40:50company versus looking at EXL energy as
8:40:53a Consolidated entity are those
8:40:54different
8:40:56considerations they are yeah so we we
8:40:58want to be at the operating company
8:41:00level which is the actual operating
8:41:02companies financing when we're
8:41:05considering the capital structures for
8:41:06the for the proxy group companies and
8:41:08that's the analysis that I've done in my
8:41:09direct testimony um the the holding
8:41:13company um the ability to finance the
8:41:17holding company as I mentioned earlier
8:41:18it's a very different risk profile and
8:41:20so therefore the capital structure
8:41:21should likely be different for a holding
8:41:23company that is more Diversified than uh
8:41:26than a single unit operating company um
8:41:30and so there you would expect that the
8:41:32capitalization would reflect that
8:41:33difference in Risk typically you know
8:41:36the higher risk you would have more
8:41:37equity in the in the equity layer um of
8:41:40the capitalization so that would be at
8:41:42the opco level you would expect to have
8:41:43more Equity okay um switching uh maybe
8:41:48just one other quick question that topic
8:41:49do you recall uh Mr Johnson in his
8:41:51rebuttal testimony maybe providing some
8:41:53more explanation around Excel Energy as
8:41:56a a parent does or doesn't uh factor
8:41:59into the consideration of Excel or of
8:42:01Public Services capital
8:42:04structure I do recall that
8:42:07yes um I I can certainly pull it up I
8:42:10think it's if we could look at hearing
8:42:12exhibit
8:42:14126 at page uh
8:42:1916 can you remind me who the witness is
8:42:22for 126 that helps me find it a little
8:42:24quicker absolutely uh Miss Paul Johnson
8:42:27for the company ah okay thank
8:42:30you and what page did you say uh page 20
8:42:33I'm sorry page
8:42:4316 if we could scroll down to line
8:42:47[Music]
8:42:4818 there we go thank you that's perfect
8:42:51um I thought maybe this would help um
8:42:54Miss bulley where Mr Johnson kind of
8:42:56talks a little bit about the difference
8:42:57between a a pass through capital
8:42:59structure and uh when we're looking at a
8:43:02parent versus a Consolidated entity that
8:43:04has right regulated non-regulated and
8:43:07other jurisdictions in it yeah so this
8:43:10is the parent company that's that is the
8:43:12traded entity that is at 70% that's
8:43:16correct um separate and apart from the
8:43:19Consolidated financials of the of the
8:43:21opose that's I think that's the point
8:43:24that um Mr Johnson was trying to make
8:43:26here and and is that another reason then
8:43:28why we don't look at Excel Energy Inc as
8:43:30part of the capital structure
8:43:32consideration yes that's correct you
8:43:35we're trying to get the capitalization
8:43:37of companies that are actually similar
8:43:39to psco in in their operations which
8:43:41again is why we are looking at the opco
8:43:44level for all the proxy group companies
8:43:47thank you okay we can take this down
8:43:49thanks so
8:43:50much um let's go back a little bit
8:43:53earlier in your cross-examination
8:43:55um M Bley
8:43:59um you were asked a question about
8:44:02hearing exhibit uh
8:44:05426 um which was uh the company's
8:44:07response to UCA
8:44:09417 that asked about uh the relevance of
8:44:13historical Roes in the calculation of
8:44:15Roes in this particular proceeding do
8:44:17you recall that I do yes could you
8:44:21please
8:44:21clarify why you say it's it may be
8:44:25relevant it may be something to consider
8:44:28but isn't directly relevant uh in the
8:44:31calculation sure so I mean I think the
8:44:33commission's decision actually that we
8:44:35looked at earlier in my discussion with
8:44:38Mr bunker was actually agreed with this
8:44:41position um where the commission
8:44:43recognized in the last case that
8:44:44interest rates were increasing and that
8:44:46they that historical information may not
8:44:48have been the most appropriate and they
8:44:50were setting their range based on the
8:44:52information that was readily available
8:44:53at that time Rec recognizing the
8:44:55increase in interest rates and the
8:44:56potential for them to continue to
8:44:58increase and that that is exactly what I
8:45:01was trying to get to he is that you
8:45:03there's there are we have to take into
8:45:05consideration the conditions that occur
8:45:07at the time we're doing this analysis
8:45:10and how they may differ and I think the
8:45:11commission was in full agreement with
8:45:13that in the last decision that they um
8:45:17you know the rationale that they offered
8:45:19in the last decision for the range that
8:45:20they produced recognizing that market
8:45:23conditions change and so that's what I
8:45:25was focused on there okay and to that
8:45:27point if we could pull up the hearing
8:45:29exhibit 427 uh which we were just
8:45:31talking about with uh commission staff
8:45:34councel the S&P Global
8:45:40article and if we could please uh turn
8:45:44to um first of all page uh two of three
8:45:51please
8:45:53and if we we say if we scroll down just
8:45:56a little uh a little bit further
8:45:59please yes there we go and the regulator
8:46:02approved authorized OES have do you see
8:46:05that Miss vley I do yes and the last
8:46:08paragraph of this um this or the last
8:46:12sentence of this paragraph excuse me
8:46:14speaks to average authorized Roes for
8:46:16gas utilities over uh recent time frames
8:46:19can you read that for us
8:46:21please uh are you in the paragraph that
8:46:24starts regulatory approved authorized
8:46:26Roes is that where you'd like to be last
8:46:28sentence thank you yeah the average
8:46:30authorized Roes for Gas Utilities was
8:46:329.64% in cases decided in 2023 up from
8:46:379.53% average observed in Bull year
8:46:412022 and I believe your rebuttal
8:46:43testimony if I remember incorrectly
8:46:45spoke to average Roes for uh year to
8:46:49date this year being something like
8:46:509.67 was that correct at the time of
8:46:53your bual I think they were higher than
8:46:55that I think it was actually 981 as of
8:47:00June um as of the end of June on average
8:47:03for the gas companies and that is
8:47:06on uh page
8:47:0933 at line 16 of hearing exhibit 125
8:47:15this is why we ask because you know
8:47:16better than I do so is it fair to say
8:47:19just fundamentally we've seen uh um well
8:47:23we can get there it's uh y 125 page I'm
8:47:26sorry it's 125 I gave you all the
8:47:28information backwards it's 125 page 33
8:47:31line
8:47:3616 okay so the average authorized Roe
8:47:40for Natural Gas Utilities in other
8:47:42regulatory jurisdictions for rate cases
8:47:44through June 30th 2024 is 9.81% is that
8:47:47right that's correct yes so how does
8:47:50that how if it all should that factor
8:47:53into the commission's consideration of
8:47:55Roes in this case in your view well I
8:47:57think it's important to recognize that
8:47:59market conditions have moved and we're
8:48:01what we're doing here is setting the
8:48:03return that you know we think is
8:48:05reasonable for investors of in in
8:48:08companies that are comparable to Pesco
8:48:11and obviously the market conditions are
8:48:13very different than um than at the time
8:48:16of the company's last case which is
8:48:20somewhere in the
8:48:2195 range um or potentially slightly
8:48:25lower than that at the time that we
8:48:27introduced the evidence in that case so
8:48:29obviously a considerable movement and we
8:48:31need to reflect that in the higher
8:48:34Roe um could we go back to hearing
8:48:36exhibit 427 for one more moment
8:48:39please so this is the table that staff
8:48:43Council referred to you about um Gas
8:48:46Utilities uh typically under earning
8:48:48their authorized Roes do you recall that
8:48:51I do recall this yes now as I always
8:48:54looking at this table I see that in
8:48:572023 I I think uh it looks like average
8:49:01annual Roes were in the neighborhood of
8:49:04um 8% average and authorized this shows
8:49:09closer to 10% am I reading that
8:49:12correctly I'm just trying to level set
8:49:14us here right so the the pink line is
8:49:19average annual authorized so that is
8:49:22somewhere closer to 10 I say N9 98 maybe
8:49:27there too um and then the average earned
8:49:31is something different than that yeah
8:49:34yeah do you do you have um a
8:49:37recollection of what public services uh
8:49:40are earned Roe was in
8:49:422023 I thought it was in the 5% range I
8:49:45don't know the exact number but I
8:49:47thought it was somewhere in the order of
8:49:485%
8:49:50return and did that reflected anywhere
8:49:52on this particular chart
8:49:55um well it's certainly well below the
8:49:58purple line that's shown for the average
8:50:00annual earned returns in 20123 that's
8:50:03more like
8:50:048% um so I guess gee no there isn't even
8:50:09a five on this chart so the axis starts
8:50:12at six so it's not even reflected here
8:50:15okay thank you we can take this down um
8:50:18Miss buley I you were also ask some
8:50:20questions from staff about um NYS Source
8:50:23being in both your G gas and combination
8:50:26company proxy group uh comparisons for
8:50:29Roe purposes can you explain why that is
8:50:32sure so when I screen a proxy group I
8:50:35look at all of the companies that are uh
8:50:38particularly in in a circumstance like
8:50:40this um where the company it's a gas
8:50:44company um we're looking at a broad the
8:50:46broadest proxy group we can get for that
8:50:48is generally speaking comparable to the
8:50:50company the gas group that is defined by
8:50:52value line is small so we cast a broader
8:50:55net um and we look at all of the
8:50:58available companies from the gas and
8:50:59electric proct group and apply our
8:51:01screening criteria ni Source fits those
8:51:03screening criteria for the gas companies
8:51:06and then when you PL apply the screening
8:51:07criteria for the combination companies
8:51:10it also meets the screening criteria for
8:51:12the combination companies because they
8:51:14do have both electric and gas
8:51:17operations do you know this is just a
8:51:19point of clarification because I'm not
8:51:20sure if it came through clearly as as we
8:51:23were talking uh ear
8:51:25do you know whether investors tend to
8:51:26calculate their own
8:51:29betas I would say that majority of
8:51:31investors are not calculating their own
8:51:33betas um and if that didn't come through
8:51:35you know the majority of the investment
8:51:37that's done is being done on an
8:51:39Institutional basis and I think I
8:51:40mentioned that you know they all have
8:51:41Bloomberg terminals they're all relying
8:51:43on Bloomberg data and making their
8:51:46decisions based on that so the use of
8:51:48Bloomberg datas um I find to be very
8:51:52relevant given that you know the
8:51:53exercise is looking at the investor
8:51:55required return and then again the value
8:51:58line betas um being another publication
8:52:01that might be in a the hands of an
8:52:03investor who um in addition to the
8:52:06Traders you know you can get it in the
8:52:08public library so your average investor
8:52:10could get value line and see the beta
8:52:12there neither group is actually going to
8:52:14sit in calculate their own
8:52:17betas you were also asked some questions
8:52:19about um whether you unlevered betas to
8:52:22calculate U with respect to value in
8:52:24Bloomberg to calculate in in relation to
8:52:27Public Service um I know you were
8:52:30looking for that and didn't have enough
8:52:31time to find it I don't know if you had
8:52:33time if not your testimony speaks for
8:52:35itself but were were able to find that
8:52:37yeah so I we did not look at the Hamada
8:52:39equation I will say that in almost you
8:52:43know I think it was noted earlier that
8:52:44I've testified in you know a 100
8:52:47proceedings across the country I would
8:52:48say that very few cases has anyone made
8:52:53any adjustments to the value ler
8:52:54Bloomberg betas to reflect the the
8:52:57change in
8:52:58capitalization so I don't feel like
8:53:01that's the sort of traditional approach
8:53:03to estimating the the cost of
8:53:06equity um I I'm going to try to do this
8:53:09as short as quickly as I can with to
8:53:12address some a series of questions asked
8:53:14you by UCA Council about past litigated
8:53:17um electric and gas rate cases and your
8:53:19recommendations versus the
8:53:21outcomes do you recall in those cases um
8:53:24Miss bulkley whether uca's recommended
8:53:27Roes let's focus on the on the litigated
8:53:29cases but in nether do you recall
8:53:32whether uca's um recommended Roes in
8:53:35those litigated cases was below or well
8:53:38below um what the commission ultimately
8:53:41authorized um yes I my recollection is
8:53:44that the that the uca's recommendations
8:53:47have been in the nine and sub n range
8:53:49over that time period okay so we have
8:53:53recommendations on both sides of what
8:53:54the commission has ultimately offered
8:53:56not even including staff or other
8:53:57parties at this point that's
8:54:00correct
8:54:02um do you also recall um how uca's
8:54:07proposed Equity ratios for public
8:54:09service have compared to what the
8:54:11commission has typically authorized over
8:54:13the this sort of 2019 to the present
8:54:16time frame to the extent you recall yeah
8:54:18they're traditionally quite a bit lower
8:54:20than what the commission has
8:54:22authorized and
8:54:26um do you know do you do you testify in
8:54:29in jurisdictions besides Colorado Miss
8:54:31Bley I do yes um do you testify in in um
8:54:37across the country in certain regions um
8:54:40where does your testimony find you just
8:54:42sort of generally speaking sure yeah
8:54:44I've testified um
8:54:47in I'm going to say 30 regulatory
8:54:50jurisdictions across the country
8:54:51including the firk
8:54:54do you know why uh Public Utilities find
8:54:57it necessary or beneficial to have an
8:54:59outside Roe
8:55:01consultant sure I mean I think one part
8:55:03of it is being able to produce an
8:55:05independent analysis um and being able
8:55:08to run all of the models and maintain
8:55:10all of the data and understand all the
8:55:12proxy companies and make sure that
8:55:13someone's up to speed on you certainly
8:55:15can't use companies that are part of a
8:55:17merger so there's a fair amount of data
8:55:19um cleaning that needs to be done in
8:55:21order to produce an analysis that's
8:55:23independent and relevant
8:55:24so um that's probably not something that
8:55:28people want to keep in house and have to
8:55:30manage the you know development of the
8:55:32model and the maintain maintenance of
8:55:33the information but I think another
8:55:35piece is being able to look at how
8:55:40um the
8:55:42information uh about how um decisions
8:55:46are made across the country and other
8:55:47relevant trends that we're seeing across
8:55:49the country and so being able to bring
8:55:50the perspective of having been in 20
8:55:53regular jurisdictions over the course of
8:55:55a year and what's on um you know the
8:55:59minds of other regulators and in other
8:56:01jurisdictions is also helpful to to
8:56:04making these decisions as well as being
8:56:06able to run all of the
8:56:07models to what extent do you think
8:56:09that's important um independent of
8:56:11whether the commission accepts your or
8:56:13any one party's particular Roe
8:56:15recommendation or or whether the company
8:56:18even asks for something less than your
8:56:20models might
8:56:21support I think it is very important I
8:56:24mean I think that you know I think it's
8:56:25important to see um all of the
8:56:29information with respect to uh the
8:56:31mechanisms that have been proposed in
8:56:33other places what you know what the risk
8:56:34profile looks like of each of the proxy
8:56:36companies what has happened in other
8:56:39jurisdictions when decisions have been
8:56:42made that are not viewed positively in
8:56:45um in the marketplace I think is also
8:56:47important information that we have
8:56:50shared in this case how other companies
8:56:52have had difficulty as a result of that
8:56:55I raised an issue in my rebuttal
8:56:57testimony that um where the Avon grid
8:57:00companies in Connecticut have had
8:57:02difficulty accessing financing that's
8:57:04information that this that I feel like I
8:57:06bring to these cases from my work in
8:57:08other jurisdictions that is important
8:57:10for commissions to be considering okay
8:57:13you were asking some questions too about
8:57:15the multi-stage DCF model and and your
8:57:18having provided that model in this
8:57:20particular case do you recall that yes I
8:57:23do uh um now you also talked with Mr
8:57:26bunker about providing several models
8:57:28including the multi-stage DCF the
8:57:30constant growth DCF capm Etc um do you
8:57:33recall whether the other Witnesses um
8:57:35Who provided Roe testimony in this case
8:57:38provided similar
8:57:40models um yes the there are well they've
8:57:44provided estimations based on some of
8:57:46those models yes in my rebuttal
8:57:50testimony I think I summarize
8:57:55on page 11 so hearing exhibit 125 page
8:57:5911 figure aebr R-1
8:58:02summarizes um the staff and Mr
8:58:05Fernandez's models so they're using both
8:58:08constant growth multi-stage capm um and
8:58:11then you
8:58:13know where I use a risk premium they do
8:58:16not but um but Mr Fernandez looks at
8:58:18authorized Roe as another Benchmark so
8:58:22similar models we have a range of of
8:58:25models and testimony and a variety of
8:58:27data points in this record is that fair
8:58:29that's correct okay um I'd like to talk
8:58:31to you a little bit about um uh the
8:58:34discussion with UCA Council regarding uh
8:58:36inclusion of Chesapeake and the proxy
8:58:38groups I think this makes a significant
8:58:39diff different difference in how we look
8:58:42at Roes in this case so if we could um
8:58:46look at hearing exhibit 501 which is Mr
8:58:50Fernandez's rebuttal test or answer
8:58:52testimony
8:59:16uh oh uh 51 apologies Mr Fernandez sorry
8:59:21that was my fault I was too eager to
8:59:23stop scrolling
8:59:34and we're looking at page 75
8:59:40please if we could scroll down to uh
8:59:43lines 11 and Below there we go thank you
8:59:48so um Miss Bley I'm showing you uh
8:59:52what's uh been marked as hearing exhibit
8:59:54501 Mr Fernandez for the uca's um answer
8:59:59testimony um and his in particular his
9:00:02criteria for uh his proxy group and I'd
9:00:06like to direct your attention in
9:00:07particular to the second of these
9:00:10criteria an investment grade credit
9:00:12rating or equivalent do you see that I
9:00:14do see that do you recall that that
9:00:17criteria is different than it might have
9:00:20been um in Mr Fernandez's testimony and
9:00:23past yes rate cases yeah I believe it
9:00:25was just an investment grade criteria in
9:00:27his last
9:00:29case so the or equivalent is new that's
9:00:32correct okay um and so I think we
9:00:35already confirmed did we not that uh
9:00:37Chesapeake does not have an investment
9:00:39grade credit rating yes that's correct
9:00:42and they're still of course in Mr
9:00:44Fernandez's proxy group here right yes
9:00:47yeah as I mentioned earlier that's um
9:00:49the criteria that um Mr Fernand has
9:00:54relied on in this footnote to suggest
9:00:57that Chesapeake should be included in
9:00:59the proxy group in this case um being
9:01:02that he had that that Chesapeake had a
9:01:04safety ranking of Two and a beta of 08
9:01:09is the same um would have been the same
9:01:12in the last case but Chesapeake was not
9:01:14included in the proxy group in the last
9:01:16case okay so we could scroll down just a
9:01:18little bit more so we can see the full
9:01:21footnote thank you um taking the first
9:01:25point here that value line continues to
9:01:27assign Chesapeake utilities at second
9:01:29best safety rank of of two um are you
9:01:33aware um Miss bulley of of any
9:01:35commission or financial institution that
9:01:37has accepted value line safety ranking
9:01:39in place of a credit rating I am not are
9:01:43you aware of any institution that will
9:01:46price debt based on a value line safety
9:01:48ranking rather than a credit rating no
9:01:50I'm not and a beta isn't is a how about
9:01:54a beta how does the lowest beta and the
9:01:56proxy group factor into this
9:01:58consideration I really don't know
9:02:00because the screening criteria above
9:02:02don't include a beta so I'm not really
9:02:04sure I understand why there's a why
9:02:06that's a relevant Criterion okay I'd
9:02:09like to also look at the last proxy
9:02:12group criteria that Mr Fernandez offered
9:02:16um on line 15 no significant non-utility
9:02:20non-regulated or International
9:02:22subsidiaries is that right yes is that a
9:02:26consistent criteria that you've seen Mr
9:02:27Fernandez use in the
9:02:30past um I believe he has used that
9:02:32Criterion in the past yes okay could we
9:02:36please pull up still hearing exhibit 501
9:02:39but attachment
9:02:49rf9 and if we could turn to page two
9:02:52please which is the chesap
9:02:55page and if we scroll down here to the
9:02:58middle of this
9:02:59page there's a box there the one that
9:03:02says business in the middle of the page
9:03:05can you see that Miss Bley um yeah I'm
9:03:09just GNA move you to a different screen
9:03:10it's a little small it is yes so sorry
9:03:13if I look like I'm not paying attention
9:03:15I just need a bigger screen again I'm
9:03:17doing the same thing trying to things my
9:03:21eyes can see thank you yes now I read it
9:03:24okay so I'm going to direct your
9:03:26attention here to this business box and
9:03:29particularly the the portion that says
9:03:32Chesapeake utilities Corporation
9:03:33consists of two main units do you see
9:03:35that I see that yes so um can you speak
9:03:39to and take your time if you need to go
9:03:42back and read it um what those two units
9:03:44are based on this
9:03:46data sure so the the data is you know
9:03:50regulated energy operations or regulated
9:03:53distribution natural gas operations and
9:03:56unregulated
9:03:57wholesale uh and Midstream
9:04:00Services okay so and and can we tell
9:04:03from this
9:04:04box whether or not um the unregulated
9:04:08energy operations in Chesapeake are a
9:04:11significant uh portion uh of of
9:04:15Chesapeake utilities Corporation yes it
9:04:18is a significant portion it's
9:04:2041.2% and how does that relate then to
9:04:23Mr Fernandez criteria that the proxy
9:04:26group should have should not have
9:04:28companies with significant non-utility
9:04:30non-regulated or International
9:04:32subsidiaries I would say that that would
9:04:35eliminate this company from the proxy
9:04:37group being that it's you
9:04:40know a significant number a significant
9:04:42percentage of its operations are
9:04:45unregulated okay could we please turn to
9:04:49um still attachment uh excuse me hearing
9:04:52exhibit 501 attachment
9:04:58raf5 and while we're doing that Miss
9:05:01Bley in your abuttal testimony and in
9:05:04really in discussion with u Mr bunker
9:05:06you discussed what would happen if you
9:05:08removed chesap Peak Bay or Chesapeake I
9:05:11should say utilities from um uh Mr
9:05:15Fernandez's proxy group all else equal
9:05:17is that right yes that's
9:05:20correct
9:05:22so we can do this I'm not sure what's
9:05:24going to be easiest here we can either
9:05:26look at Mr Fernandez's attachment which
9:05:28as I have pulled up or we can look at J
9:05:30rebuttle to see how removing Chesapeake
9:05:33affects his range um but first of all
9:05:38did you recalculate the multi-stage DCF
9:05:40outcome without
9:05:43Chesapeake yes I did and do you remember
9:05:46what the outcome was or um if you remove
9:05:50Chesapeake from that
9:05:52analysis yes so Mr Fernandez relied on
9:05:55the average results for his proxy group
9:05:57companies and so looking at
9:06:01um hearing exhibit 125 attachment
9:06:05a25 if you exclude Chesapeake from the
9:06:08multi-stage DCF analysis
9:06:11using um using his data so this would be
9:06:17on page one of that exhibit the average
9:06:19would be 9.68 or he uses one decimal
9:06:23place so
9:06:249.7% and um and then if you use an
9:06:29update for June 30th it would be 99.63%
9:06:32okay and let's just stick to his data
9:06:35for the moment just to avoid confusing
9:06:37things if that's okay so just using his
9:06:39data for the multi-stage DCF would bring
9:06:42uh his average from 9.4 to 9.7 is that
9:06:45that's correct okay and then if you um
9:06:49did the same thing for his constant
9:06:51growth
9:06:52DCF uh just remove Chesapeake holding
9:06:55all else equal how would that change the
9:06:56average estimated Roe in his analysis
9:07:00sure that is shown on exhibit
9:07:03or uh hearing exhibit 125 attachment aeb
9:07:0924 and using his
9:07:12analysis it would the average would be
9:07:179.81% as opposed to 99.54%
9:07:21so is my math right that changing
9:07:25nothing else if we made those
9:07:27changes the range here of the four
9:07:29methods if we could scroll just a little
9:07:31bit so we can see the summary as well of
9:07:33Mr there we go the the range of the four
9:07:36methods instead of 9.4 to 9.7 would be
9:07:409.7 to 9.8 is that
9:07:46right me just verify yes so the constant
9:07:49growth DCF would go from 9.5 there to
9:07:549.8 and then the multistage would go to
9:07:579.7 and so then your range of
9:08:01methodologies which he's used here would
9:08:04be 97 to 98 yes he says four methods So
9:08:08In fairness if we were going to include
9:08:10recent authorized we'd be
9:08:13somewhere it would be 96 to 98 if you
9:08:16include the recent authorized okay but
9:08:19we discussed earlier that recent
9:08:20authorized is actually higher than 96
9:08:22for 2024 is that yes that's correct so
9:08:25my my updated data as of June would be
9:08:289.81 so again you would still be 97 to
9:08:3198 okay thank you I think that's all I
9:08:34have in redirect appreciate the
9:08:37time thank you Miss brma um well given
9:08:40our our intended uh finish time I don't
9:08:43think it makes oh sorry Miss bulkley
9:08:46you're free to go thank you for your
9:08:48testimony appreciate it um given that it
9:08:52is 8 after 5 now I think it probably
9:08:54doesn't make much sense to get Mr fedus
9:08:57on as it would be a quite abbreviated
9:09:00start um to his testimony um Miss mland
9:09:04did you have something oh I just wanted
9:09:06to ask about timing tomorrow and it
9:09:07seems like you're getting there uh
9:09:09commissioner Gilman I'll get there yeah
9:09:12excent um so my plan is uh we're
9:09:16scheduled to start tomorrow at 1:00
9:09:18given the commission's um morning
9:09:20meeting commitments um So the plan would
9:09:24be to meet at 1:00 we would uh begin
9:09:28with Mr frus on the stand and uh I think
9:09:32with UCA questioning him as the first
9:09:36matter so uh that's what I see coming
9:09:38next but the chairman will be back in
9:09:40charge tomorrow short stint for me um
9:09:44Miss Brahma um May I just ask and maybe
9:09:46this is a question for staff counsel i'
9:09:48just like to verify where we're starting
9:09:50um with staff Witnesses after Mr frus
9:09:52just so we can prep accordingly as well
9:09:54we know yeah I think that's a question
9:09:56that we wanted to address as well um we
9:10:00are moving along a little bit slower
9:10:02than we anticipated so we have some
9:10:04conflicts tomorrow with some of our
9:10:06Witnesses um one thing that I wanted to
9:10:09clarify and it's possible that I
9:10:10misunderstood last week but I know that
9:10:13the company waved their cross on staff
9:10:16witness Lam Mer but I wasn't sure if the
9:10:19commissioner still had questions for
9:10:21Witness lamera
9:10:24yeah I think we're waiting on me and I
9:10:26do not so witness lir can be excused so
9:10:30far as I'm aware I was the only P out to
9:10:33making that
9:10:35decision uh right right commissioner
9:10:38plant you don't have
9:10:40anything nothing okay so Lam mer can be
9:10:44excused perfect um so then we have um de
9:10:49hagland Rivera Lugo and O'Neal first St
9:10:54remaining so so Missin let's talk
9:10:58availability and what you need to happen
9:10:59with those Witnesses tomorrow after Mr
9:11:04Fred's
9:11:05testimony I think with where we are at
9:11:07the order of witnesses looks like it is
9:11:09going to be just fine Mr hagland has a
9:11:13conflict from 2: to 3 tomorrow but I
9:11:15don't anticipate that we will get to him
9:11:17based on the cross times that are
9:11:18reserved on company witness freedus and
9:11:21Dr Dew so I think think we can leave it
9:11:24as is and start with staff witness Dr de
9:11:27and then continue on to Mr hagland I'm
9:11:29sure that he'll be done with his
9:11:31conflict um and will be able to join us
9:11:34at 3 o'clock and I think um if we get to
9:11:38staff witness Lugo and O'Neal that would
9:11:40be great but if not um I don't think
9:11:43that there's any conflicts for them on
9:11:44Thursday
9:11:46morning okay great yeah right now I'm
9:11:49kind of projecting ideally we get
9:11:50through from L go tomorrow although
9:11:52it'll be a nail biter
9:11:53but it sounds like for some reason we're
9:11:56faster
9:11:58than we think we are and we get to um Mr
9:12:01hagland during his conflict I suppose we
9:12:04could just put Mr Vera Lugo in his place
9:12:08uh orderwise with that work um I believe
9:12:11that we we touched on this with the
9:12:13company that it's possible if we have to
9:12:16do that that we would call Miss O'Neal
9:12:18first because it's our understanding
9:12:20that Miss O'Neal might answer some
9:12:22questions that the company has in which
9:12:24they they would be able to wave their
9:12:26cross on uh Mr Rivera Lugo if that
9:12:30happens that is exactly what I was going
9:12:32to say okay so if we end up in an issue
9:12:35with Mr hland we don't really foresee we
9:12:38would go to O'Neal as um the next after
9:12:41Dew um so just notify
9:12:45them
9:12:47availability um optimistic in case we
9:12:50start moving faster than we have been I
9:12:53like it um anything else to deal with uh
9:12:56today before we
9:13:00go okay um in that case we will
9:13:05reconvene tomorrow for the hearing at 1
9:13:08p.m and uh see you all there thank thank
9:13:22you e

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