Xcel Energys. PUBLIC SERVICE COMPANY

Transcription

1 Xcel Energys. - PUBLIC SERVICE COMPANY IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR APPROVAL OF ITS ELECTRIC AND NATURAL GAS DEMAND-SIDE MANAGEMENT (DSM) PLAN FOR CALENDAR YEARS 2009 AND 2010 AND TO CHANGE ITS ELECTRIC AND GAS DSM COST ADJUSTMENT RATES EFFECTIVE JANUARY 1,2009, AND FOR RELATED WAIVERS AND AUTHORIZATIONS. DOCKET NO. 08A- EG DIRECT TESTIMONY OF ARTHUR R. WARREN

2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO ***** IN THE MATTER OF THE APPLICATION OF ) PUBLIC SERVICE COMPANY OF 1 COLORADO FOR APPROVAL OF ITS 1 ELECTRIC AND NATURAL GAS DEMAND- ) SIDE MANAGEMENT (DSM) PLAN FOR ) DOCKET NO. 08A- EG CALENDAR YEARS 2009 AND 2010 AND ) TO CHANGE ITS ELECTRIC AND GAS DSM ) COST ADJUSTMENT RATES EFFECTIVE ) JANUARY I, 2009, AND FOR RELATED WAIVERS AND AUTHORIZATIONS. 1 1 DIRECT TESTIMONY OF ARTHUR R. WARREN PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. My name is Arthur R. Warren. My business address is '~ Street, Suite 1000, Denver, CO BY WHOM ARE YOU EMPLOYED AND IN WHAT POSITION? I am employed by Xcel Energy Services, Inc., a wholly-owned subsidiary of Xcel Energy Inc., the parent company of Public Service Company of Colorado. My job title is Resource Planning and Acquisition Analyst. ON WHOSE BEHALF ARE YOU TESTIFYING IN THE PROCEEDING? I am testifying on behalf of Public Service Company of Colorado ("Public Service" or the "Company"). HAVE YOU INCLUDED A DESCRIPTION OF YOUR QUALIFICATIONS, DUTIES, AND RESPONSIBILITIES?

3 Yes. A description of my qualifications, duties, and responsibilities is included as Attachment A. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY? The purpose of my testimony is to explain and support the methodology the Company is proposing to use in developing the Electric Generation Avoided Costs used in the Total Resource Cost Test in the Biennial DSM Plan. WHAT ARE ELECTRIC GENERATION AVOIDED COSTS? Electric Generation Avoided Costs are an estimate of the costs that would be avoided as a result of the need to produce and distribute less electricity to our customers in conjunction with energy efficiency programs. Energy efficiency programs that reduce the electric energy requirements on the Public Service system have the potential to reduce the amount of generation capacity that may need to be constructed, the fuel that will be burned, the transmission and distribution capacity to be installed, and the emissions created during generation. The total of these "avoided or reduced" costs are used in the development of the Total Resource Cost Test for DSM programs as described by Company witness Mr. Jeremy Petersen. PLEASE DESCRIBE WHAT THE COMPANY PROPOSES TO INCLUDE IN THE ELECTRIC GENERATION AVOIDED COSTS The Electric Generation Avoided Costs include an estimate of the capital investment for new generation plant that may possibly be avoided, the

4 costs associated with the reduction in fuel that would have been consumed to produce the energy that is being reduced, the cost of emissions related to the reduction in fuel that is not being consumed, and the possible reduction of capital investment associated with the installation of future transmission and distribution facilities. WHAT ARE THE CAPITAL INVESTMENT COSTS FOR FUTURE GENERATION THAT MAY BE AVOIDED DUE TO THE PROPOSED DSM PROGRAMS? Due to the fact that many of the DSM programs that are being contemplated for the future result in both avoided capacity and significant quantities of avoided energy, the Company is proposing to base the avoided cost of future generation on a combined cycle facility. Consistent with the avoidable capital costs considered, the costs are based on the capital investment costs to purchase and build a Siemens 5000F 2x1 combined cycle generating plant and what has been presented in other recent dockets before the Commission. These costs equate to total an avoided capital investment cost of $ per kw-year. ARE THE COST ESTIMATES FOR THE SIEMENS 5000F COMBINED CYCLE FINAL? No, these costs are subject to change. However, these are the Company's most current estimates, and the cost and methodology used to develop these costs are consistent with the 2007 Colorado Resource Plan ("CRP") in Docket No. 07A-447E.

5 ARE THERE ANY ADDITIONAL CAPACITY-RELATED COSTS THAT SHOULD BE CONSIDERED AVOIDABLE? Yes. Since DSM programs effectively reduce the demand on the system, the planning reserves attributed to the avoided supply side resource should be considered. This is accounted for by increasing the avoided capital investment cost by the Company's 16% reserve margin.' Therefore, the avoidable capital investment cost of $ per kw-yr is multiplied by 1.16 for a total capital investment of $1 20 per kw-year. WHAT ARE MARGINAL ENERGY COSTS? Marginal energy costs are the operating costs of the last electric generating unit dispatched on the system to serve load in any particular hour (also referred to as the marginal unit cost). The Company utilized the PROSYM model to develop the marginal energy cost projections. The future expansion plan included in this model was the High Section 123 Plan described in the 2007 CRP. WHAT IS INCLUDED IN THE MODEL'S HOURLY MARGINAL ENERGY COSTS? The hourly marginal costs are the marginal unit's operating costs that include the variable operational costs of producing electricity, such as fuel and variable O&M. Since the marginal unit is already considered a system resource, the fixed costs are not included in the marginal cost I The Company, Commission Staff, and OCC are in the process of finalizing a reserve margin study that will be used to inform the Phase II evaluation of resources in the Company's 2007 CRP. The results of this study, although not finalized, indicate that a 16% reserve margin is appropriate for the PSCo system.

6 calculation and are viewed as sunk costs, whether the unit is dispatched or not. ARE THERE ANY OTHER COSTS THAT ARE AVOIDED BY REDUCING THE ELECTRIC LOAD REQUIREMENTS BY IMPLEMENTING ENERGY EFFICIENCY PROGRAMS? Yes. Reducing the amount of electric energy produced also reduces the amount of generating fuel burned. This reduced fuel burn also reduces the amount of C02 produced and the cost of C02 is reduced. The C02 cost assumed was $20 per ton beginning in 2010 and escalating at 7 percent annually thereafter. SO, emission costs are also included as described by Company witness Peterson. The differences between modeling analysis with and without the DSM programs were used to develop the avoidable emissions costs. WHAT AVOIDED ELECTRIC TRANSMISSION AND DISTRIBUTION COSTS ARE INCLUDED? Avoided electric transmission and distribution (T & D) refers to costs that might be avoided by not having to extend or upgrade the transmission and distribution system to meet the increased demand. Public Service used a combined value of $30.00 per kw-year for 2007 avoided transmission and distribution escalating at 1.99 percent annually, making the avoided T & D for 2008, $30.60 per kw-year. This estimate is consistent with the Comanche 3 Settlement Agreement in Docket Nos. 04A-214E, 04A-215E and 04A-216E.

7 1 Q. DOES THIS CONCLUDE YOUR TESTIMONY? 2 A. Yes, it does.

8 Attachment A Statement of Qualifications Arthur R. Warren I completed my undergraduate studies in I983 at University of Colorado receiving a Bachelor of Science in Mechanical Engineering. I have been employed by Public Service Company of Colorado, New Century Services, Inc., and now Xcel Energies Services Inc. since During my tenure I have held positions in system protection, regional system planning, gas system planning, risk services, and now a resource planning analyst in Resource Planning and Bidding for Xcel Energy Services Inc. In these positions I have conducted numerous analytical analyses related to fuel, demand, energy, and other regulated industry subjects. My current activities in the Resource Planning and Bidding involve technical and numerical analyses as needed and required, but not limited to, the evaluations of generation resource needs and supplies associated with Xcel Energy's operating companies.