C07-1101Decision No. C07-1101
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO
07R-419EDOCKET NO. 07R-419E
IN THE MATTER OF THE ELECTRIC RESOURCE PLANNING RULEMAKING TO PERMANENTLY AMEND THE COMMISSION’S RULES, AS IMPLEMENTED IN THE EMERGENCY RULEMAKING IN DECISION NO. C07-0829.
ORDER ADOPTING PERMANENT RULES
Mailed Date:    December 27, 2007
Adopted Date:  December 19, 2007
TABLE OF CONTENTS
I.	BY THE COMMISSION	2
A.	Statement	2
B.	Background	2
C.	Permanent Rulemaking Procedural History	6
D.	Discussion of Individual Comments	7
1.	Office of Consumer Counsel (OCC)	7
2.	Western Resource Advocates (WRA)	8
3.	Ms. Nancy LaPlaca	9
4.	Ms. Leslie Glustrom	9
5.	Colorado Independent Energy Association (CIEA)	11
6.	Trans-Elect and Wyoming Infrastructure Authority (WCI Parties)	11
7.	Ratepayers United of Colorado (RUC)	12
8.	Public Service Company of Colorado (Public Service)	13
II.	ORDER	13

I.	BY THE COMMISSION
A.	Statement
1.	This matter comes before the Commission for adoption of permanent rules entitled Electric Resource Planning (ERP) Rules, 4 Code of Colorado Regulations (CCR) 723-3-3600, et seq.
2.	Recent legislative changes enacted pursuant to HB 07-1037, HB 07-1281, SB 07-100 and HB 06-1281 significantly impacted the Commission’s Least Cost Planning Rules (LCP) that were in effect prior to September 28, 2007.  Generally, this new legislation requires the Commission to consider various benefits of new utility resources such as “new clean energy” and “energy efficient technologies,” in addition to considering the costs of those resources, contrary to the requirements of the LCP rules.  On September 28, 2007 in Decision No. C07-0829, we adopted Emergency Rules to accommodate these legislative changes.  Pursuant to § 40-2-108(2), C.R.S., the Emergency Rules expire after 210 days on April 22, 2008.
3.	Now, being fully advised in this matter, we adopt the permanent rules attached to this Decision as Attachment A.  For the reasons set forth in this Decision, the rules we adopt here are the same rules as issued in the Notice of Proposed Rulemaking (NOPR) in this docket and are identical to the Emergency Rules. 
B.	Background
4.	Though not required for emergency rule adoption, the Commission crafted the Emergency Rules with significant stakeholder input.  We opened Docket No. 07M-256E to solicit comments on preliminary draft rule changes developed by the Commission.  We solicited and received written comments, written reply comments, and oral comments at hearing.  We then issued revised draft rules and solicited additional written comments.  We developed the Emergency Rules based on this extensive stakeholder input.
5.	The Commission sought to balance the requirements of the new legislation with providing utilities the flexibility to put into place a resource plan that allows them to meet their future electric resource needs.  The new legislation described above requires the Commission to consider various benefits of new utility resources that emphasize clean energy and energy efficient technologies, in addition to the costs of these resources as prescribed in the previous LCP rules, as discussed below.  In striking that balance, the Commission has adopted, as a general matter, a regulatory scheme that allows utilities additional options for including renewable energy resources in their future resource plans.
6.	The legislative changes referenced above require substantial changes to the Commission’s LCP rules, as indicated in our Emergency Rules.  For example, HB 07-1037 establishes requirements for energy efficiency and demand-side management resources.  Consequently, the LCP rules must be amended to reflect the reduction in a utility’s resource needs as a direct result of those efficiencies and demand side management requirements.  Additionally, HB 07-1037 establishes a minimization of net present value of revenue requirements as a primary goal of resource acquisition.  Our LCP rules establish the primary standards as the minimization of net present value rate impacts.  Therefore, the LCP rules directly conflict with HB 07-1037.  This new legislation requires the Commission to give “due consideration to the impacts of Demand Side Management (DSM) programs on non-participants and low-income customers.” Such impacts on non-participants and low-income customers now require us to assess the rate impacts of DSM programs.  HB 07-1037 therefore requires us to shift from a least-cost standard to a broader, more subjective consideration of multiple criteria which will require substantially more Commission involvement in the resource selection process.  This criteria shift applies not only to DSM measures, but also to the evaluation of all other resources. 
7.	HB 07-1281 increases the renewable energy resources that jurisdictional electric utilities must acquire to meet levels that are greater than those mandated by the voter-approved Amendment 37.  Consequently, the least-cost standards mandated in the LCP rules are not consistent with the renewable mandates in this new legislation.  The increased renewable requirements mandated by HB 07-1281 necessitate greater integration between the Commission’s resource planning rules and the increased Renewable Energy Standard of HB07-1281.  More renewables will increase the complexity of the utility’s resource planning process, since a higher presence of renewables will influence the nature of the utility’s remaining resource needs and, in turn, the economics and operating characteristics of the remaining resources to be procured through competitive acquisition.  Further, as part of our statutory charge, we must carefully consider the rate impacts inherent in HB 07-1281 when considering the overall cost-effectiveness of all new utility resources.
8.	SB 07-100 provides for the designation of energy resource zones and for the construction or expansion of electric transmission facilities to transmit energy from those zones to load centers.  The bill is intended to improve the economic viability of certain rural renewable energy resources, and thus could potentially influence the cost-effectiveness of resources brought before the Commission for consideration in the development of a utility’s resource plan.
9.	HB 06-1281 added additional language to §40-2-123(1), C.R.S., which requires the Commission to give the fullest possible consideration to new clean and energy efficient technologies.  The additional language in §40-2-123(2) provides an example of how the Commission can give such consideration to resources that may be in the public interest when accounting for the benefits of advancing the development of a particular resource or when accounting for other benefits outside of a strict cost perspective.  Since we must give similar consideration to new clean energy or energy efficient resources, we must develop additional standards for such resources.
10.	HB 06-1281 also provides unique considerations for an Integrated Gasification Combined Cycle (IGCC) resource.  It requires the Commission to determine if a proposed IGCC resource is in the public interest before approving it.  We must determine whether the incremental cost and rate impact of the IGCC facility is reasonable, taking into account the breakthrough nature of the project.  Modeling the costs and benefits of an IGCC plant in comparison to other resources will indeed present significant challenges.  These include comparing the ratepayer risks of fixed bid versus utility rate-based plants and determining if and how balance-sheet impacts of bid resources should be considered against rate-based plants, as well as assessing the risks of new technologies.  We must also assess the benefits of advancing the development of emerging technologies, assess the benefits of carbon capture and the risks of long-term carbon storage, and generally weigh the concerns and benefits of a multi-billion dollar nascent technology.  Again, the additional statutory requirements in HB 06-1281 provide an example of how the Commission should treat other emerging technologies under §40-2-123(1), C.R.S.  The Emergency Rules provide a framework for the Commission to consider all new clean and energy efficient technologies, including emerging technologies as exemplified in §40-2-123(2), C.R.S.
11.	The most significant changes required by the new legislation to our previous LCP rules are related to legislatively mandated “Section 123 Resources,” the expedited Phase II proceeding, and the Independent Evaluator.  As a result, a number of other changes are required as well, as detailed in the attached proposed rules.  
C.	Permanent Rulemaking Procedural History
12.	Consistent with requirements for emergency rules, the Commission issued a Notice of Proposed Rulemaking (NOPR) for permanent rules in Decision No. C07-0912 on October 31, 2007 in the present Docket No. 07R-419E. The rules attached to the NOPR were identical to the Emergency Rules adopted in Docket No. 07R-368E.
13.	In Decision No. C07-0912, we requested that parties file written comments by November 28, 2007.  We also set a hearing for December 10, 2007 to continue any discussion and comments.  Written comments were filed by Colorado Independent Energy Association (CIEA), Leslie Glustrom, Nancy LaPlaca, Office of Consumer Counsel (OCC), Ratepayers United of Colorado (RUC), Western Resource Advocates (WRA), and joint comments by Trans-Elect Development Company and the Wyoming Infrastructure Authority, who jointly constitute the Wyoming-Colorado Intertie Project (WCI Parties).
14.	At the December 10, 2007 hearing, we allowed additional reply comments to be filed by December 14, 2007.  See Decision No. C07-1042.  Written reply comments were filed by Public Service Company of Colorado (Public Service).
15.	On December 17, 2007, a Motion Requesting Leave to Reply by Leslie Glustrom to Public Service's Responses of 12-14-07 was filed, along with comments.  Also on December 17, 2007, a Motion Requesting Leave To Reply And Reply By Nancy LaPlaca To Public Service Company Of Colorado's Responses Of Dec. 14, 2007 was filed.  Both of these motions requested that the Commission accept their additional written comments after the hearing and beyond the December 14, 2007 filing date for additional written comments.  Both motions also requested that the Commission entertain “replies to replies to comments.”  That is, both Ms. Glustrom and Ms. LaPlaca hoped to reply to statements contained in another stakeholder’s reply, which addresses initial comments.  We find that their initial comments speak for themselves, so the clarification intended is not necessary.  Further, it would not be fair to other stakeholders to allow this deviation from the ordered procedure.  We deny both motions.
D.	Discussion of Individual Comments
1.	Office of Consumer Counsel (OCC) 
16.	The OCC has proposed three rule changes. First the OCC suggests renaming the rules to Integrated Resource Planning (IRP) to indicate that the plan should integrate both supply side and demand side resources.  Second, the OCC suggests eliminating the independent evaluator, arguing that it represents an unnecessary cost and it is not clear whom the independent evaluator represents—Staff, OCC, or the Commission. Further, an independent evaluator is not subject to a prudence review, like the utility, which raises liability and responsibility questions.  Last, the OCC advocates that the rules should contemplate comparing costs of owning generating facilities versus purchasing power by comparing a utility-owned expansion plan to proposals for purchased power.  The OCC, however, notes that Public Service’s approach in its 2007 Colorado Resource Plan (CRP), filed under the ERP rules, relieves much of this concern.
17.	We find that renaming the ERP to IRP is unnecessary.  Such a change would be confusing because our resource planning rules were previously named IRP rules.  Further, the relationship between supply and demand side resources should be spelled out in the rules:  renaming the title is not an efficient way of emphasizing a particular aspect of the rules.
18.	With respect to eliminating the independent evaluator and requiring a comparison of owning versus power purchase agreements, we note that the Commission has previously addressed both these issues.  In addition, the rules are clear that the independent evaluator represents the Commission.  A consultant hired by an intervenor is not equivalent to an independent evaluator that reports to the Commission, and the independent evaluator is an integral part of expediting the Phase II proceeding.  For both these issues it makes more sense to complete one cycle of the new ERP rules before reopening the rules, so that we have more experience.  In summary, we decline to change the rules for all three of these concerns.
2.	Western Resource Advocates (WRA)
19.	The comments offered by WRA propose revised rule language to allow access by intervenors to confidential information developed during the planning process. In particular, WRA proposes that Section 3608(c), which addresses the filing of a contingency plan, and section 3610(h), which pertains to the report from the independent evaluator, include language making this information available to intervenors who have signed the non-disclosure agreement. WRA argues that Section 3606(c)(III) already includes this language, so that adding this specific language to the other two sections would improve rule consistency.  At the hearing, WRA stated a concern that the rule language as proposed by the commission without the WRA revision might prevent parties from obtaining confidential information through Commission’s confidentiality rule procedures. 
20.	Section 1100 of the Commission’s Rules of Practice and Procedure directly address the confidentiality issue raised by WRA.  Section 1100 thoroughly addresses a wide range of confidentiality issues, so we find that our rules would be best served by avoiding any confidentiality provisions elsewhere.  Information relating to sections 3608(c) and 3610(h) may contain highly confidential information, such as bid amounts or other details that could be very destructive to the bidding process if confidentiality is breached.  In contrast, Rule 3606(c)(III) only clarifies that individual customer information should not be disclosed to the public.  The distinction between confidential information and highly confidential information must be addressed on a case-by-case basis, as prescribed by the confidentiality rules in Section 1100.  Though Rule 3610(h) contains language stating that confidential reports will be provided to Staff and OCC, this language simply directs that these two parties will receive the information at a minimum, but does not preclude parties from pursuing confidential information through the Commission’s normal confidentiality procedures in Section 1100.  Therefore, we decline to adopt WRA’s proposed rule language.  
3.	Ms. Nancy LaPlaca 
21.	Ms. LaPlaca suggests that the rules include consideration for clean energy as suggested in the legislation passed in 2006 and 2007.  Further, she stresses that evaluation criteria should include health benefits of clean energy and provides a number of articles on the topic.
22.	Clean energy resources are important to the Commission and the rules as proposed address this issue through the Section 123 criteria.  We expect parties in the ERP proceedings to propose specific benefit considerations in Phase I, so that the Commission can properly consider all aspects of the available resource options.  We find that rule changes to address these issues are not warranted, until we gain experience in the current round of ERP filings
4.	Ms. Leslie Glustrom 
23.	Ms. Glustrom suggests that, in light of the fact the any coal gasification will not play a role for many years, the Commission should re-evaluate if this rule provision is really needed at all.  We find that Section 123 resources, as used in the rules, focus largely on clean energy and energy efficiency resources other than IGCC, and are a primary component of the rules.  Regardless of whether any IGCC generating plants are proposed pursuant to §40‑2‑123(2), the IGCC legislation is an example of how the Commission should give the fullest possible consideration to new clean energy and energy efficient technologies as required in §40‑2‑123(1), as discussed above.  The new rules are designed to give any Section 123 resource a full opportunity, not just IGCC resources.
24.	Ms. Glustrom states in several areas that we should slow down and take time to evaluate these rules carefully.  The Commission has entertained numerous rounds of comments in this matter.  As discussed above, we solicited three rounds of written comments and held a hearing in the initial docket, issued emergency rules that were subject to Rehearing, Reargument or Reconsideration, and solicited two rounds of written comment and held a hearing in this permanent rule docket.  We find that the solicitation of further comment in this matter would not be productive or efficient.
25.	Next, Ms. Glustrom argues that the Commission is not in compliance with §40‑3.2‑104, C.R.S. and recommends that the rules should place more emphasis on energy efficiency.  Ms. Glustrom argues that §40‑3.2‑104 requires energy efficiency to be the first, best choice and should be implemented fully before anything else is considered.  Though we agree that energy efficiency should be given every opportunity in resource planning, we disagree that §40‑3.2‑104 directs the Commission to disregard all other resources in favor of energy efficiency within our rules.  The new rules establish a system designed to fully consider and develop energy efficiency in a process where the Commission can consider the benefits of all options.  While we do not agree that §40‑3.2‑104 mandates that only energy efficiency be implemented before considering any other resource, we find that, because energy efficiency can be considered to be a Section 123 Resource in the new rules, these rules allow all energy efficiency proposals to be considered in the most favorable light.  We find that our rules are fully in compliance with §40‑3.2‑104, and we decline to adopt the recommended changes proposed by Ms. Glustrom.
26.	Next, Ms. Glustrom argues that the Commission is not in compliance with §40‑2‑123(1), arguing that the Commission is not giving the fullest possible consideration to cost-effective clean energy and energy-efficient technologies.  We disagree.  The Commission implemented the Emergency Rules, and issued notice for the permanent rules, so that the Commission can give fullest possible consideration to the Section 123 resources.  Commission consideration of these resources in Phase II is the cornerstone of our new rules, and this entire Phase II ERP process is dedicated to Section 123 resources.    We find that our rules are fully in compliance with §40‑2‑123(1). 
5.	Colorado Independent Energy Association (CIEA)
27.	CIEA takes exception with Public Service’s proposal to exclude Power Purchase Agreements from the All Source bid process in its recent CRP.  CIEA suggest that the rules be clarified and tightened before this flawed process proceeds further.
28.	We find that these issues are specific to the CRP filed by Public Service and thus should be addressed in that docket rather than as rule changes.  If changes are necessary, it would be prudent to complete Public Service’s current CRP docket before any rule changes are considered. 
6.	Trans-Elect and Wyoming Infrastructure Authority (WCI Parties)
29.	In review of the CRP filed by Public Service, WCI Parties identify six perceived "loopholes" which must be addressed in the ERP rules:
•	1.	Consideration of renewable resources should not be limited to Colorado resources;
•	2.	Consideration of only in-state wind resources compromises the ability to benefit from geographic diverse wind resources;
•	3.	Transmission is not adequately addressed as part of the CRP;
•	4.	There is no evaluation of the comparative economics of different power supply costs. Such as a comparison between gas-fired generation and wind;
•	5.	Public Service should not receive a 25% bonus for renewable energy generated in Colorado that is not needed to meet the Renewable Portfolio Standard; and
•	6.	Public Service’s plan to stage wind projects in its CRP artificially constrains the bidding process.
30.	Though the WCI Parties raise several interesting questions, we find that these issues arise from an analysis of Public Service’s CRP filing and should be addressed in that docket.  If changes are necessary, it would be prudent to complete Public Service’s current CRP docket before any rule changes are considered. 
7.	Ratepayers United of Colorado (RUC)
31.	RUC argues that different treatment of Section 123 resources is necessary, specifically citing rule 3604(j) and offering suggestions for how the resources should be evaluated.  Second, RUC requests that all regulated utilities provide a discussion about how ownership of generation, level of Section 123 resources, regulatory delay, DSM investments, and bonuses impact the financial position of the company.  Last, RUC argues that “electric energy storage” be defined and included as a 123 resource.  
32.	First, regarding the evaluation of Section 123 resources, we find that it is important to complete a full ERP cycle under the new rules before making changes.  Second, the additional information that RUC requests utilities to provide appears to be specific to the Public Service CRP filing and should be addressed in that docket.  Lastly, changes to the definition of Section 123 resources are not necessary.  The definition for Section 123 resources refers to §40-1-123(1), which simply states, “…new clean energy and energy-efficient technologies in consideration of generation acquisition...” We find that this statutory language is broad enough to encompass such storage technologies.  If the purpose of a storage resource is to acquire more new clean energy and energy-efficient technologies within the goals of §40-1-123(1), then the storage is an integral part of the consideration of generation acquisition under that statute.  Information about the integration of such technologies needs to be presented within the context of a specific ERP filing, rather than in the rule. Further, if rule changes are appropriate, it would be helpful to gain more experience before we make any such changes.  We therefore decline to change to the rules to address these issues at this time.
8.	Public Service Company of Colorado (Public Service)
Public Service filed only reply comments.  Though it generally agrees with certain rule changes proposed by others, Public Service asserts that it is too early to revise the rules at this point. Instead, the Commission should wait until it has worked through one resource planning cycle prior to changing rules.  We agree.
II.	ORDER
A.	The Commission Orders That:
1.	The Motion Requesting Leave to Reply by Leslie Glustrom to Public Service's Responses of 12-14-07, filed on December 17, 2007, is denied.
2.	The Motion Requesting Leave To Reply And Reply By Nancy LaPlaca To Public Service Company Of Colorado's Responses of Dec. 14, 2007, filed on December 17, 2007, is denied. 
3.	The Commission adopts permanent rules attached to this Order as Attachment A, consistent with the above discussion. 
4.	The rules shall be effective 20 days after publication in the Colorado Register by the Office of the Secretary of State.
5.	The opinion of the Attorney General of the State of Colorado shall be obtained regarding the constitutionality and legality of the rules. 
6.	A copy of the rules adopted by the Order shall be filed with the Office of the Secretary of State for publication in The Colorado Register. The rules shall be submitted to the appropriate committee of the Colorado General Assembly if the General Assembly is in session at the time this Order becomes effective, or to the committee on legal services, if the General Assembly is not in session, for an opinion as to whether the adopted rules conform with § 40-8.7, C.R.S. 
7.	The 20-day time-period provided by § 40-6-114(1), C.R.S. to file an application for rehearing, reargument or reconsideration shall begin on the first day after the effective date of this Order. 
8.	This Order is effective upon its Mailed Date.
B.	ADOPTED IN COMMISSIONERS’ WEEKLY MEETING 
December 19, 2007.

	THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO

________________________________

________________________________

________________________________
Commissioners

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