C07-0912Decision No. C07-0912
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.
NOTICE OF PROPOSED RULEMAKING
Mailed Date:    October 31, 2007
Adopted Date:  October 31, 2007
I.	BY THE COMMISSION
A.	Statement
1.	The Colorado Public Utilities Commission (Commission) gives notice of proposed rulemaking (NOPR) regarding permanent rules that modify the Commission’s Least Cost Planning Rules (LCP), 4 Code of Colorado Regulations (CCR) 723-3-3600, et seq.  These permanent rules are required as the result of several bills enacted by the Colorado Legislature in the 2006 and 2007 Legislative Sessions.  In a related matter, the Commission recently enacted emergency rules on this same topic in Docket No. 07R-368E, Decision No. C07-0829, dated September 28, 2007 (Emergency Rules).  This NOPR seeks to adopt permanent rules to serve as a replacement for those emergency rules.  Because the emergency rules, and the proposed rules attached to this NOPR change the fundamental structure of the Least Cost Planning Rules (LCP), required because of significant legislative changes, we refer to the revised rules as Electric Resource Planning (ERP) rules.  
2.	As indicated supra the emergency rules were enacted pursuant to Decision No. C07-0829 on September 28, 2007.  Prior to the enactment of the emergency rules, the previous Least Cost Planning rules required a utility to apply for approval of its resource plan that was technology neutral and emphasized the least cost resources to meet its future energy needs.  However, recent legislative changes enacted pursuant to HB 07-1037, HB 07-1281, SB 07-100 and HB 06-1281, significantly impacted the LCP rules.  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 the costs of those resources, contrary to the requirements of the LCP rules.
3.	The Commission crafted the emergency rules with some care.  The Commission sought to balance the requirements of the new legislation, with providing utilities the ability 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.  
4.	The purpose of this NOPR is for the Commission to entertain suggestions on the possible changes to the LCP process and the current treatment found at 4 CCR 723-3-3600 et seq.  In particular, the Commission seeks comment on the Rules attached to this NOPR.  The proposed rule changes shown in Attachment A to this decision are identical to the emergency rule changes implemented in C07-0829.  
5.	The legislative changes referenced above require substantial changes to the Commission’s LCP rules as indicated in our emergency rules established in Decision No. C07-0829.  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 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. 
6.	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 are to carefully consider the rate impact requirements inherent in HB 07-1281 when considering the overall cost-effectiveness of all new utility resources.
7.	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 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.
8.	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, while §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.  
9.	HB 06-1281 also provides unique “emerging technology” considerations for an 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.
10.	The most significant changes required to our previous LCP rules are related to the introduction of the new 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.  
11.	The Commission will conduct a hearing on the proposed amendments and related issues at the below-stated time and place.  Interested persons may submit written comments on the amendments, including data, views, or arguments, and present these orally at hearing unless the Commission deems oral presentations unnecessary.  The Commission encourages interested persons to submit written comments before the hearing scheduled in this matter.  In the event interested persons wish to file comments before the hearing, the Commission requests that such comments be filed no later than November 28, 2007.  The Commission prefers that interested persons submitting comments do so both in paper and, when possible, electronic format.  The Commission may post electronically submitted comments to its web site.  The Commission will consider all submissions.
II.	ORDER
A.	The Commission Orders That:
1.	This Notice of Proposed Rulemaking shall be filed with the Colorado Secretary of State for publication in the November 10, 2007, edition of The Colorado Register.
2.	A Hearing on the proposed rules and related matters shall be held as follows:
	DATE:	December 10, 2007 
	TIME:	1:30 p.m.
	PLACE:	Commission Hearing Room
	Suite 250
	1560 Broadway
	Denver, Colorado
3.	At the hearing referenced above, the Commission may set further hearing dates to continue the discussion and comment.
4.	Interested persons may file written comments in this matter before hearing.  The Commission prefers that such pre-filed comments be submitted in both paper and, when possible, electronic format no later than November 28, 2007.  The Commission will consider all submissions.
5.	This Order is effective upon its Mailed Date.
B.	ADOPTED IN COMMISSIONERS’ WEEKLY MEETING
October 31, 2007.

	THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO

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Commissioners
	
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