UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION. Public Service Company of Colorado ) Docket No.

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Exhibit PSC- Page of Public Service Company of Colorado ) Docket No. ER PREPARED TESTIMONY OF TERRI K. EATON XCEL ENERGY SERVICES INC. ON BEHALF OF PUBLIC SERVICE COMPANY OF COLORADO

2 Exhibit PSC- Page of I INTRODUCTION AND EXPERIENCE 0 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. A. My name is Terri K Eaton. My office address is 00 Larimer Street, th Floor, Denver, Colorado, 00. Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? A. I am employed by Xcel Energy Services Inc. ( XES ). I am the Director, Federal Regulatory Administration. Q. ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING? A. I am testifying on behalf of Public Service Company of Colorado ( PSCo or the Company ), a wholly owned subsidiary of Xcel Energy Inc. ( Xcel Energy ). PSCo is an integrated electric and natural gas utility operating in Colorado, including in the Denver metropolitan area, and is one of four utility operating company subsidiaries of Xcel Energy. Q. PLEASE EXPLAIN YOUR DUTIES AND RESPONSIBILITIES. A. My department is responsible for regulatory filings, regulatory activity, and compliance monitoring activities involving the Federal Energy Regulatory Commission ( FERC or Commission ) for the four Xcel Energy utility operating companies, including PSCo. The FERC compliance monitoring responsibilities include PSCo compliance with North American Electric Reliability Corporation ( NERC ) and the Western Electricity Coordinating Council ( WECC ) mandatory electric reliability standards.

3 Exhibit PSC- Page of 0 Q. WHAT IS YOUR EDUCATION AND YOUR EXPERIENCE IN THE ELECTRIC UTILITY BUSINESS? A. In, I received my B.S. degree from the University of Texas. In, I received my J.D. from the University of Texas School of Law. From 000 to 00, I worked as a staff attorney for the Public Utility Commission of Texas ( PUCT ). In that role, I was responsible for representing PUCT staff in rate case, transmission line, stranded cost, and various other proceedings. In 00, I joined Green Mountain Energy Company as Manager of Governmental Affairs, representing the company s interests as a competitive retail electric provider before the PUCT, the Texas legislature, and the Electric Reliability Council of Texas ( ERCOT ). I joined XES in 00 as a Manager of Market Operations, representing the interests of PSCo s affiliate Southwestern Public Service Company ( SPS ) in the efforts by Southwest Power Pool, Inc. ( SPP ) to create its Energy Imbalance Service market. In 00, I transferred into XES s FERC regulatory group where I managed electric market policy issues. In 00, I assumed a newly created position focused on monitoring and oversight of mandatory reliability standards compliance efforts of the Xcel Energy Operating Companies. In 00, I assumed my current position. Q. HAVE YOU PREVIOUSLY SUBMITTED TESTIMONY BEFORE ANY REGULATORY COMMISSION? A. Yes, I have previously submitted pre-filed testimony before this Commission in Docket Nos. ER-, ER-, and ER-. Additionally, I have submitted affidavits to the Commission on various matters, including affidavits in support of tariff change filings in Docket Nos. ER--000, ER--000, and ER--000.

4 Exhibit PSC- Page of II PURPOSE AND SUMMARY Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? A. The purpose of my testimony is to provide a brief description of Xcel Energy, XES and PSCo, and to provide an overview of PSCo s request for approval of revisions to its Open Access Transmission Tariff ( Xcel Energy OATT ) to facilitate transactions under the Joint Dispatch Agreement ( JDA ). Concurrent with this filing, PSCo is filing for 0 approval of the JDA, an agreement that will provide for the economic dispatch of participating generation within the PSCo Balancing Authority Area ( BAA ), and the other FERC jurisdictional party to the JDA is filing revisions to its Open Access Transmission Tariff corresponding to PSCo s changes in this filing. Q. PLEASE SUMMARIZE THE PROPOSED TARIFF CHANGES. A. The proposed revisions to the Xcel Energy OATT include: A new section titled Joint Dispatch Transmission Service that provides non-firm transmission service at a zero rate applicable only to load serving entities that have participating generation that they can contribute to the joint dispatch pool in the PSCo BAA and are signatories to a Joint Dispatch Agreement; A new Schedule, Joint Dispatch Transmission Service; and, A Service Agreement for Joint Dispatch Transmission Service. Q. HAVE YOU INCLUDED ATTACHMENTS TO YOUR TESTIMONY SHOWING THE CHANGES TO THE OATT? A. Yes. The attached Exhibit No. PSC- is a redlined version of the proposed tariff changes, while Exhibit No. PSC- is a clean version of the tariff changes.

5 Exhibit PSC- Page of III CORPORATE OVERVIEW Q. PLEASE PROVIDE A BRIEF DESCRIPTION OF XCEL ENERGY. A. Xcel Energy is a holding company that primarily engages in the production, transmission and distribution of electricity and the distribution of natural gas through its four utility subsidiaries: PSCo, SPS and Northern States Power Company, a Minnesota corporation ( NSPM ) and Northern States Power Company, a Wisconsin corporation ( NSPW ) (NSPM and NSPW jointly the NSP Companies ). PSCo, NSPM and NSPW are each combination electric and natural gas utilities. SPS is an electric-only utility. 0 Collectively, Xcel Energy s utility operating company subsidiaries serve. million electric and. million natural gas customers in Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. In addition, SPS owns and operates transmission facilities in Kansas and Oklahoma. I note that the changes to the Xcel Energy OATT proposed in this filing do not affect the rates or terms of service on the NSP Companies or SPS transmission systems. Q. PLEASE DESCRIBE XES. A. XES is a service company that provides a variety of management and administrative services to Xcel Energy s four utility operating companies, including PSCo. Some of the services provided by XES include executive management, human resources, accounting, audit, legal, claims, regulatory and compliance, fuel and energy management, engineering and customer services. As a service company, XES files an annual Form 0 service company report with the Commission each year detailing the revenues from its charges to the individual utility operating companies. Q. PLEASE PROVIDE A BRIEF DESCRIPTION OF PSCO.

6 Exhibit PSC- Page of A. PSCo generates, transmits and distributes electric power and energy throughout portions of the State of Colorado. PSCo provides electric service to approximately. million wholesale and retail customers in Colorado. The Company s greatest concentration of retail customers is in the Denver metropolitan area. PSCo is located at the eastern edge of the Western Interconnection and is a member of the Western Electricity Coordinating Council ( WECC ). Since there is no regional transmission organization ( RTO ) serving Colorado, PSCo is the transmission provider for the PSCo transmission system. PSCo provides Network Integration Transmission Service ( NITS ) and Point-to-Point Transmission Services and derives rates for such services pursuant to Attachment O-PSCo of the Xcel Energy OATT, on file with the Commission pursuant to Order Nos. and 0. IV BACKGROUND 0 Q. WHAT IS THE PURPOSE OF THE INSTANT FILING? A. The instant filing reflects changes to the Xcel Energy OATT designed to facilitate joint dispatch of the resources of PSCo, Platte River Power Authority ( PRPA ) and Black Hills Colorado Electric Utility Company, LP ( BHCE ) (collectively referred to as the Parties ) under the JDA. More specifically, the proposed tariff changes provide that nonfirm transmission service used to deliver energy dispatched under the JDA across the PSCo transmission system will be provided at no additional cost, other than payment of losses, to parties to the JDA. The proposed revisions to PSCO s OATT are consistent with the JDA s terms and conditions that require each signatory to agree to provide the necessary transmission service for JDA energy, at no additional cost, across the transmission systems on which they take network service. To that end, BHCE, a

7 Exhibit PSC- Page of 0 jurisdictional public utility transmission provider, is also filing similar proposed changes to its OATT in order to provide the necessary transmission service for JDA transactions. PRPA is not a jurisdictional public utility and therefore is not making a similar filing; however, PRPA will implement the necessary changes to its transmission tariff. PSCo previously filed changes to the Xcel Energy OATT to facilitate the JDA on November, 0, in Docket No. ER However, that filing, as well as the related filing by PSCo of the JDA itself in Docket No. ER--000, was rejected by the Commission on June, 0. Public Serv. Co. of Colorado, FERC, (0) ( June Order ). The Commission rejected the filings for two reasons. First, the Commission found that PSCo did not show that its proposed payment structure for resources dispatched under the JDA would result in rates that are just and reasonable. The Commission s concerns on this issue were due to PSCo s lack of market-based rate authority in the PSCo BAA and the Commission s conclusion that PSCo could exercise market power through the pricing structure of the JDA, which the Commission found was not cost-based. June Order at P. Second, the Commission found that the JDA would require JDA parties to grant PSCo s merchant function access to non-public information that, under the Standards of Conduct, should be restricted to PSCo s transmission function. Id. at P 0. Q. DID THE JUNE ORDER CONCLUDE THAT ANY OF THE REVISIONS PROPOSED TO THE XCEL ENERGY OATT TO FACILITATE THE JDA MAY BE UNJUST AND UNREASONABLE?

8 Exhibit PSC- Page of A. No. The Commission s reasons for rejecting the filings were related only to the provisions of the JDA, not the proposed revisions to the Xcel Energy OATT. Although the Commission did not identify specific issues in the June Order related to transmission under the Xcel Energy OATT, certain transmission-related issues were raised in the pleadings of other parties during the proceedings and in a deficiency letter issued by Commission staff. Thus, while no required adjustments were identified by the Commission to the originally-proposed Xcel Energy OATT revisions, I provide additional explanation and support for the revisions to respond to the transmission-related issues. IV OVERVIEW OF THE JDA 0 Q. WHAT IS THE PURPOSE OF THE JDA? A. The parties to the JDA intend to capture efficiencies and cost savings through joint dispatch of their committed resources to serve the native load obligation of the parties to the JDA within the PSCo BAA. Q. HOW WILL THE JDA CAPTURE EFFICIENCIES? A. As discussed in more detail in the companion filing and the testimony of John Welch in that filing, the parties to the JDA have agreed to allow PSCo to dispatch the committed and participating resources of all the parties in real-time in a manner that maintains reliability while minimizing overall production costs and respecting transmission constraints and unit operating characteristics. Q. WHERE IS THE LOAD THAT WILL BE SERVED BY THE JDA LOCATED? A. Under the JDA, the load that can be served under the agreement is limited to that which is located within the PSCo BAA.

9 Exhibit PSC- Page of V POLICY Q. WHY SHOULD THE TARIFF REVISION BE APPROVED BY THE COMMISSION, AND IS THE JDA IN THE PUBLIC INTEREST? A. The JDA will enable optimal dispatch of the combined participating resources of all the participating parties, resulting in increased dispatch efficiency. The tariff revisions are in the public interest because, among other things, the dispatch efficiency facilitated by the JDA and tariff revisions will be reflected through reduced fuel costs for the customers of all participating parties, including PSCo s retail and wholesale customers. The JDA and tariff revisions provide an alternative mechanism to effectively manage the difference between scheduled and actual load, which is currently managed in the PSCo BAA through Energy Imbalance services under Schedule of the Xcel Energy OATT. PSCo, as the BAA, provides energy imbalance services without purchasing transmission service to do so. PSCo balances the system after taking into account the committed resources from each customer that were determined prior to the start of the hour. Under joint economic dispatch facilitated by the JDA and Joint Dispatch Transmission Service, participating generation resources will be dispatched in the most economic order to achieve this balance. VI OATT REVISIONS 0 Q. WHAT REVISIONS ARE BEING MADE TO PSCO S OATT? A. PSCo is revising its OATT in order to offer Joint Dispatch Transmission Service. Joint Dispatch Transmission Service is service that can only be used to receive and deliver energy dispatched under the JDA to the Parties wholesale and retail native load customers.

10 Exhibit PSC- Page of 0 Q. ARE THE TARIFF PROVISIONS PROVIDING FOR THE NEW SERVICE OPTION OPEN TO ADDITIONAL PARTIES? A. Yes, the tariff provisions are not limited to the initial Parties of the JDA. Any loadserving entity in the PSCo BAA who agrees to provide, or whose host transmission provider agrees to provide, joint dispatch transmission service at rates and terms comparable to those proposed in this filing, and has the ability to contribute generating resources located within the PSCo BAA to the JDA pool, is eligible to participate in the JDA. If the prospective JDA party is not a transmission service provider, its transmission service provider must agree to make its transmission system in the PSCo BAA available for JDA transactions on a non-firm, zero-price basis. Q. ARE THERE EXCEPTIONS TO THE REQUIREMENT THAT GENERATION BE LOCATED INSIDE THE BAA? A. Yes. Generation could be located outside the PSCo BAA but pseudo-tied into the PSCo BAA. A pseudo-tie essentially involves electrically sinking the output of a generator in one BAA into another sink BAA. Q. WERE ANY ISSUES RAISED IN DOCKET NO. ER--000 REGARDING THE AVAILABILITY OF THE NEW SERVICE OPTION TO OTHER CUSTOMERS? A. The Commission did not identify this as one of its concerns in the June Order. However, during the proceedings in Docket No. ER--000, Tri-State Generation & Transmission Association ( Tri-State ) argued that the new service option could be unduly discriminatory because it does not provide for a circumstance that would arise if an entity desires to participate in the JDA but cannot persuade its transmission provider to

11 provide free transmission service. Exhibit PSC- Page of This is not a valid concern. The only transmission 0 providers in the PSCo BAA are PSCo, PRPA, BHCE, and Tri-State. As noted earlier, the initial JDA parties are PSCo, PRPA, and BHCE, and they have agreed to make their transmission systems available for the service. Thus, the only entity that might create obstacles to its customers using the new transmission service option in conjunction with JDA participation is Tri-State itself. Q. ARE THE PROPOSED CHANGES CONSISTENT WITH, OR SUPERIOR TO, THE COMMISSION S PRO FORMA OATT? A. Yes. The new tariff provisions provide for a new type of service for Parties to the JDA that is essentially a license plate rate available to those entities that have committed to joint dispatch of their participating resources to serve load located in the PSCo BAA. These new provisions do not depart from the Commission s prior determination that PSCo s OATT conforms with, or is superior to, the pro forma OATT. In addition to being non-discriminatory, the new service will not have an adverse impact on other transmission users. Q. PLEASE EXPLAIN HOW THE JOINT DISPATCH TRANSMISSION SERVICE WILL NOT ADVERSELY IMPACT OTHER TRANSMISSION USERS. A. Joint Dispatch Transmission Service is only available if there is posted non-firm Available Transmission Capacity ( ATC ) after all other procurement and scheduling deadlines have passed. PSCo will limit transfers under Joint Dispatch Transmission Service to the amount of unused ATC that remains on the system after such procurement and scheduling deadlines have passed. Although schedule-driven ATC updates may Tri-State Protest at, Docket Nos. ER--000, et al., (Nov. 0, 0).

12 Exhibit PSC- Page of 0 occur every quarter-hour, PSCo will update ATC limits for Joint Dispatch Transmission Service every five minutes. By conducting these updates every five minutes, PSCo will ensure that any immediate intra-hour schedule changes, such as those prompted by outages, are captured and only the leftover ATC be made available for Joint Dispatch Transmission Service. In this way, energy transfers are limited by ATC availability on the system, and participating generation units will be adjusted to limit volumetric transfers between Parties based on unused ATC that remains after the close of transmission schedules. Thus, Joint Dispatch Transmission Service will only use ATC that would otherwise go unused and promotes more complete usage of the existing transmission system. Additionally, Joint Dispatch Transmission Service will have the lowest priority, and any party seeking transmission service will be in a queue position higher than Joint Dispatch Transmission Service. Each Party s transmission service provider will be required to post ATC that PSCo will collect and use to determine appropriate transfer capabilities. Based on historic data, PSCo estimates the transfer capabilities needed to execute the JDA should not exceed 00 MW between parties, with typical transfers expected to be less than MW. Q. WILL JOINT DISPATCH TRANSMISSION SERVICE HAVE AN IMPACT ON FIRM XCEL ENERGY OATT CUSTOMERS BY DISPLACING REVENUES GENERATED BY NON-FIRM TRANSMISSION SERVICE UNDER THE XCEL ENERGY OATT? A. PSCo does not expect the JDA to cause a significant change in typical non-firm transmission service revenues and, therefore, has no reason to anticipate that any change in future non-firm transmission service revenues and the credits they provide to firm

13 Exhibit PSC- Page of transmission service customers rates will result from implementation of the JDA. Even if all of the non-firm revenues PSCo receives from PRPA and BHCE were to disappear due to the JDA, the resulting loss of revenue credits for PSCo s firm transmission service customers would have a de minimis impact on their rates. Parties to the JDA are required to have available sufficient resources to serve load plus reserves for every hour under Section. of the JDA. In advance of the intra-hour dispatch under the JDA, parties will not know whether their resources will be dispatched up or down in real-time. Therefore, parties will continue to look for opportunities to lower their dispatch costs through economic purchases. Parties will also look for opportunities to lock in margins from economic sales. Transmission will have to be procured for both economic purchases and sales just as it is today. While PSCo expects all JDA parties to continue to engage in economic purchases and sales just as they do today, even if that were not the case and the JDA Parties no longer utilized the non-firm transmission service provided by each other, the total impact to the revenues generated by non-firm transmission service would be de minimis. Total dollars received by PSCo for non-firm point-to-point transmission service to facilitate energy transactions to the other JDA Parties for 0 and 0 are shown in Table and Table below. This table shows the non-firm point-to-point (Schedule ) revenues PSCo received from BHCE and PRPA for 0 and 0. Customer 0 Total 0 Total BHCE (,) (,) 0 PRPA - (,)

14 Exhibit PSC- Page of 0 Thus, the total revenues received by PSCo from PRPA and BHCE for non-firm service is $0,0 for the two year period, or about $,000 per year or 0.0% of PSCo s annual transmission revenue requirement, on average. Non-firm revenues are credited to the annual transmission revenue requirement. Wholesale customers represent.% of the total customers that would receive credits for non-firm revenues. Of the.% amount, third-party transmission-only customers represent 0.%. Thus, of the $,000 average impact, PSCo s transmission-only customers would only see a collective loss of less than $0,000 in revenue credits. (($,000.).0 = $,). The PSCo merchant function primarily utilizes network integration transmission service to serve native load, not non-firm transmission service for purchases from PRPA and BHCE, and thus there are no non-firm revenues displayed in the table associated with the PSCo merchant function. If, for the sake of argument, one makes the improbable assumption that the PSCo merchant function would cease to engage in any economic sales with third parties using non-firm transmission on any path (i.e., not only those paths associated with service to BHCE and PRPA) due to the JDA, then the loss of those revenues would still have only a minimal impact. Adding the $,0 associated with the wholesale merchant function to the $0,0 associated with non-firm transmission for PRPA and BHCE on the PSCo transmission system, as described in the deficiency letter response filed in Docket Nos. ER- et al., results in a sum of $, for 0 and 0, and a total average amount of $,0.0. Wholesale customers represent.% of the total customers that would receive credits for non-firm revenues. Of this.% amount, third-party transmission customers represent 0.%. Thus, of

15 Exhibit PSC- Page of VII the hypothetical $,0.0 average loss (if such were the case) in non-firm revenues, there would be $, less in total revenue credits to offset the revenue requirement of all of PSCo s transmission-only customers taking firm service. Compared to the expected amount of non-firm revenue credits expected for 0 from all transmission customers, which is $,,, the loss in non-firm revenues under this hypothetical worst-case scenario represents a reduction of less than % in the total anticipated credits. DESCRIPTION OF THE SERVICE 0 Q. WHAT TYPE OF TRANSMISSION SERVICES WILL BE PROVIDED UNDER THE NEW TARIFF PROVISIONS? A. Joint Dispatch Transmission Service is a non-firm, as-available transmission service provided at a zero rate that is made available for the sole purpose of facilitating energy transfers pursuant to the JDA. Q. WOULD A JDA BE FEASIBLE WITH TRANSMISSION CHARGES? A. No. Xcel Energy and BHCE explored a joint dispatch arrangement that incorporated additional transmission charges a few years ago, but shelved the idea primarily because the economic benefits would be severely diminished if both PSCo and BHCE secured point-to-point transmission service to facilitate dynamic transfers or if BHCE became a network customer under the Xcel Energy OATT. In this proposal too, transmission charges would likely eliminate the benefits that the Parties expect to achieve through the JDA. Q. PLEASE EXPLAIN WHY A TRANSMISSION CHARGE WOULD BE INCOMPATIBLE WITH JOINT DISPATCH TRANSMISSION SERVICE.

16 Exhibit PSC- Page of 0 A. The reason PSCo is proposing to have zero-price transmission service is to maximize the level of re-dispatch among the parties to reduce the delivered energy cost to the participants customers. Any charge for Joint Dispatch Transmission Service would add a hurdle rate and as a result reduce the level of generation re-dispatch. If transmission prices were added, the difference in dispatch costs would have to be higher for a transaction to take place. In the table below, an example of this is presented: Seller PRPA PSCo BHCE Buyer PRPA NA.0. PSCo. NA. BHCE..0 NA This table shows that if the parties respective on-peak hourly transmission rates were applied, differences in dispatch costs between $./MWh and $./MWh would have to be achieved prior to a transaction taking place. By comparison, on a unitized basis the per MWh savings associated with each JDA transaction would be roughly $(to be determined)/mwh assuming the minimum estimated overall savings of $(to be determined) would be achieved. A comparison of the unitized savings to the cost of non-firm transmission shows that assessing posted transmission charges against JDA transactions would erode a significant portion of JDA benefits. In some cases, the transmission cost would exceed the unitized savings. Q. HOW WILL THE BENEFITS OF THE JOINT DISPATCH TRANSMISSION SERVICE ALIGN WITH THE CURRENT RATEPAYERS WHO PAY FOR THE PSCO TRANSMISSION SYSTEM?

17 Exhibit PSC- Page of 0 A. The vast majority of PSCo s transmission customers almost 0% on a load basis are production customers as well. This group of customers will receive the reduced fuel cost benefits of joint dispatch through the applicable fuel cost adjustments. As explained above, PSCo does not expect the JDA to have any impact on rates paid by wholesale transmission customers. The smaller group of PSCo transmission-only customers will experience either zero or de minimis additional costs. Further, the transmission-only customers may obtain benefits from reduced imbalance charges. This is because PSCo s purchases of cheaper surplus energy under the JDA may reduce PSCo s system incremental cost, which is the basis for imbalance energy rates under Schedules and of the Xcel Energy OATT. Q. CAN JOINT DISPATCH TRANSMISSION SERVICE BE USED BY A PARTY FOR TRANSACTIONS OTHER THAN TO SERVE NATIVE LOAD WITH JDA ENERGY? A. No. Joint Dispatch Transmission Service will not be available for off-system sales of capacity or energy or for providing direct or indirect transmission service to a third party and is limited to the use described above. Joint Dispatch Transmission Service cannot be used as a substitute for point-to-point or network service. For off-system purchases and sales, Joint Dispatch Transmission Service Customers must ensure point-to-point transmission service has been obtained, as needed, to import purchases from outside the PSCo BAA, or to export off-system sales, in accordance with FERC regulations. Thus, each Joint Dispatch Transmission Service customer will continue to be required to For example, in the Southwest Power Pool s regional pooled dispatch (aka Energy Imbalance Service), scheduled delivery using transmission service actually increased after dispatch operations began. If this occurs for PSCo, the transmission system costs to the transmission-only customers would be reduced.

18 Exhibit PSC- Page of 0 maintain adequate firm network and point-to-point service for its wholesale and retail native load and its contractual commitments. VIII. TRANSMISSION CHARGES Q. WHAT IS THE CHARGE FOR JOINT DISPATCH TRANSMISSION SERVICE? A. PSCo proposes that Joint Dispatch Transmission Service be priced at $0 per MWh, meaning that Joint Dispatch Transmission Service Customers will not pay any additional transmission charges for receipt and delivery of energy dispatched under the JDA. Each Joint Dispatch Transmission Service Customer has an obligation independent of the JDA to maintain adequate firm network and firm point-to-point service on the transmission systems where they are located, in order to serve its wholesale and retail native load. With Joint Dispatch Transmission Service, no additional transmission service charge will be imposed for energy deliveries under the JDA. Q. WHY IS THE ZERO RATE FOR JOINT DISPATCH TRANSMISSION SERVICE REASONABLE? A. In essence, the $0 price for Joint Dispatch Transmission Service will operate as a zonal or license plate transmission service with respect to the energy imbalance deliveries under the JDA. The parties to the JDA must independently maintain network and point-to-point service under applicable transmission tariffs to serve their respective loads, so they are already bearing the fixed costs of the same transmission systems used to deliver energy under the JDA, i.e., in the zones where they are located. Therefore, the $0 rate does not affect the recovery of embedded costs in the transmission system or materially displace the payment burden onto other transmission customers because those costs will continue to be borne by parties to the JDA in the same manner and magnitude as today.

19 Exhibit PSC- Page of The $0 rate helps to mitigate rate pancaking issues so that the JDA parties are not paying additional transmission charges for delivery of imbalance energy under the JDA associated with the source transmission system. Each Party will continue to pay pointto-point charges for sales to third parties. The proposed $0 rate is consistent with the nature of this transmission service because the Joint Dispatch Transmission Service would be the lowest priority transmission service. Non-firm transmission service will have a higher priority than Joint Dispatch Transmission Service. Joint Dispatch Transmission Service will only utilize non-firm ATC within the operating hour that is otherwise unused capability that is not being used or paid for by transmission customers. The fact that the rate for Joint Dispatch Transmission Service will be $0, however, does not mean that the service is free. As discussed earlier, Each JDA participant must arrange to provide the necessary transmission service to effect the JDA transactions on the transmission systems where it is located. This results in an exchange of transmission service among the JDA parties, which the Commission has recognized includes an exchange of consideration among contracting parties. Such an arrangement is a legitimate form of compensation. Under the definition of electric service, the 0 Commission s own rules provide that charges for transmission service are without regard to the form of payment or compensation. Absent such a transmission arrangement, there may not be the capability to deliver joint dispatch energy to the prospective customer. In addition, there is a potential See, e.g., Central Iowa Power Cooperative, Inc. v. FERC, 0 F.d, (D. C. Cir. ) (explaining that including smaller systems in a power pool would not burden existing pool members as long as they provide compensation for the true value of transmission services, whether in kind or in money ). C.F.R..

20 Exhibit PSC- Page 0 of 0 for free ridership for prospective customers who may be served by PSCo, BHCE, or PRPA and also have service with another transmission service provider who has not made its transmission system available for joint dispatch transmission service. In that case, the prospective customer would have free use of the systems of PSCo, BHCE, and PRPA for joint dispatch transactions but not be supporting expansion of the JDA through contribution of their own transmission capability. Conversely, including an additional transmission fee for JDA service above the in-kind compensation already contributed by JDA participants is not necessary and would negatively affect the economics of the arrangement. Q. IS THERE PRECEDENT FOR THIS TYPE OF LICENSE PLATE SERVICE? A. Yes. In Docket No. ER--000, the Commission conditionally approved a proposal by California Independent System Operator ( CAISO ) to facilitate the Energy Imbalance Market ( EIM ) outside of the CAISO footprint. PacifiCorp is one of the first participants and filed revisions to its OATT in Docket No. ER- to allow it to participate in the EIM. In that case, FERC conditionally accepted PacifiCorp s OATT revisions, but specifically rejected PacifiCorp s proposal to require participating resources in the EIM in PacifiCorp s BAA to pay for additional transmission service charges beyond what they already pay as transmission customers on PaciCorp s OATT. In this respect, PacifiCorp s proposal was in conflict with CAISO s proposal to waive wheeling access charges for EIM exports from CAISO to PacifiCorp. As the Commission explained: PacifiCorp s proposal to charge for transmission service in association with participation in the EIM is in conflict with the proposal by CAISO to have reciprocal transmission rates for the EIM, which we accept in the concurrently issued order on CAISO s EIM proposal. CAISO proposes to assess transmission

21 Exhibit PSC- Page of 0 charges only in the BAA where the EIM energy sinks. In the CAISO BAA, load, which will include EIM Transfers originating in PacifiCorp, will continue to pay the CAISO transmission access charge; however, CAISO proposes to waive its wheeling access charge, normally charged on exports from CAISO, on EIM Transfers to PacifiCorp. If PacifiCorp requires EIM resources to purchase transmission service to participate in the EIM then that cost of transmission will be included in the energy bids of those resources. The proposal of the JDA parties is similar to CAISO s proposal in that there will be a $0 rate charged for transmission service of JDA energy from the source system and this service will be provided reciprocally among the JDA participants, who are all located in the PSCo BAA. JDA participants will still pay for the transmission system where their loads are located. However, requiring the participants to pay additional transmission costs for the transmission system where the energy is sourced would cause the overall price of their JDA energy to increase and defeat the efficiencies and, ultimately, the purpose of the JDA arrangement. Q. WILL THE PSCO TRANSMISSION FUNCTION INCUR COSTS IN PROVIDING JOINT DISPATCH TRANSMISSION SERVICE THAT ARE NOT RECOVERABLE THROUGH A $0 RATE? A. No. The extent of PSCo s transmission function activities associated with the JDA will be limited to processing and administering the associated Joint Dispatch Transmission Service Agreements. The number of these agreements is limited (with only three signatories to the JDA to date, only three agreements must be processed) and it is expected that all such service agreements will use the pro forma Joint Dispatch Transmission Service Agreement proposed by PSCo in this proceeding. Further, there is no settlement, billing, or payment required under the JDA agreement by the transmission PacifiCorp, FERC, at P (0).

22 Exhibit PSC- Page of 0 function. Therefore, the costs to execute and administer the Joint Dispatch Transmission Service Agreements are de minimis and do not need to be independently captured or accounted for. PSCo has identified no other costs that its Transmission function would incur to facilitate Joint Dispatch. The only other activity performed by PSCo s transmission function upon which the JDA is dependent is the regular updating and posting of Available Transfer Capability ( ATC ) on the PSCo OASIS. However, PSCo s Transmission business unit already updates and posts ATC in real time when a third party submits and confirms a Transmission Service Request and no additional activity is required. Because the ATC update is already a part of PSCo Transmission s normal activities, it will not experience any incremental increase in ATC management activity levels or costs in support of the JDA. Q. ARE THERE OTHER COSTS ASSOCIATED WITH THE JDA THAT WILL BE ALLOCATED TO TRANSMISSION CUSTOMERS? A. Some costs that are associated with IT and software could be allocated to the transmission function through an existing salaries and wages allocator factor, resulting in a pass-through of a portion of the costs to transmission customers through transmission rates. In the separate, contemporaneous filing by PSCo of the revised JDA, Ms. Deborah Blair identifies how PSCo proposes to identify the costs that might be allocated to transmission through the allocator and to apply an offsetting credit such that there is no impact to transmission customers as a result of the JDA. Q. HOW WILL LOSSES BE CHARGED UNDER THESE PROPOSED TARIFF PROVISIONS?

23 Exhibit PSC- Page of 0 A. As provided in the proposed tariff language, all Joint Dispatch Transmission Service Customers will be responsible for losses on each Party s system used for delivery of JDA energy. So, for example, if energy is delivered from PRPA to BHCE, which necessarily involves a delivery across PSCo s system, BHCE will be assessed losses by both PRPA and PSCo. Q. WILL JOINT DISPATCH CUSTOMERS BE RESPONSIBLE FOR ANCILLARY SERVICE CHARGES? A. Ancillary service charges will not apply to Joint Dispatch Transmission Service as a separate transmission service. However, Joint Dispatch Transmission Service Customers will continue to be responsible for ancillary service charges applicable to any service they may take under Part II, III, or IV of the Xcel Energy OATT, including Scheduling, System Control and Dispatch, Reactive Supply and Voltage Control, Reserve Sharing, Operating Reserve Spinning, and Operating Reserve -- Supplemental. Notably, however, participation in the JDA will effectively eliminate imposition of charges under Schedule of the Xcel Energy OATT for those customers taking other transmission service under the Xcel Energy OATT because, by definition, PSCo will be responsible for balancing the load and resources of all parties to the JDA. More detail about the services offered under the JDA and the charges associated with those services is found in the companion JDA filing Q. IN THE JUNE ORDER, THE COMMISSION SUGGESTED THAT THE PSCO TRANSMISSION FUNCTION COULD ADMINISTER THE JDA, IN ORDER TO ELIMINATE STANDARDS OF CONDUCT CONCERNS. IS THIS FEASIBLE FROM PSCO S PERSPECTIVE?

24 Exhibit PSC- Page of A. No. While transmission function personnel are adept at managing the transmission system, they do not have the personnel or skill sets to routinely dispatch resources on an economic basis. Implementing that skill set within the transmission organization would result in significant duplication of resources. Further, to the extent the Commission believes a Standards of Conduct issue exists, it would seem that having transmission function personnel administer the JDA would constitute a violation of the independent functioning requirement because the PSCo transmission function would be engaging in sales of energy among the JDA parties and arguably engaging in merchant activities. Q. HOW HAS PSCO ADDRESSED THE JUNE ORDER S STANDARDS OF CONDUCT CONCERNS IN THIS FILING? A. As explained in its request for rehearing submitted in Docket No. ER--000, et al., PSCo does not believe that information exchanged under the JDA is transmission function information that must be controlled by the PSCo transmission function or subject to the Standards of Conduct at all. Nevertheless, the JDA parties have attempted to address the Commission s concern in this filing. The testimony of John Welch in the accompanying JDA filing explains PSCo s proposed approach to mitigate the Commission s concerns. IX CONCLUSION 0 Q. DOES THIS CONCLUDE YOUR PREPARED PRE-FILED TESTIMONY? A. Yes.