Dispatches from the Front: The Colorado Clean Air-Clean Jobs Act

Platts 5th Annual Rockies Gas and Oil Conference

Ron BinzPublic Policy Consulting

April 14, 2011

Summarized History for Bill Number HB10-1365

03/15/2010 Introduced In House - Assigned to Transportation & Energy + Appropriations

03/16/2010 House Committee on Transportation & Energy Refer Amended to Appropriations

03/19/2010 House Committee on Appropriations Refer Amended to House Committee of the Whole

03/19/2010 House Second Reading Special Order - Passed with Amendments

03/22/2010 House Third Reading Passed03/23/2010 Introduced In Senate - Assigned to Agriculture and Natural Resources + Appropriations

03/25/2010 Senate Committee on Agriculture and Natural Resources Refer Amended to Appropriations

03/26/2010 Senate Committee on Appropriations Refer Unamended to Senate Committee of the Whole

03/29/2010 Senate Second Reading Special Order - Laid Over Daily

03/30/2010 Senate Second Reading Passed with Amendments

03/31/2010 House Considered Senate Amendments - Result was to Concur - Repass

03/31/2010 Senate Third Reading Passed

04/08/2010 Signed by the President of the Senate

04/08/2010 Signed by the Speaker of the House

04/09/2010 Sent to the Governor

04/19/2010 Governor Action - Signed

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Structure of HB10-1365• Utility must consult with state air regulator (CDPHE) on a plan

to meet current and reasonably foreseeable EPA clean air rules.

• Utility files plan with PUC to improve air quality, addressing at least half of coal generation up to 900 MW.

• Utility required to conduct various studies:– Plan impacts on NOx emissions (must reduce by 70%-80%)– Cost of controlling emissions at existing coal plants– Cost of replacing 900 MW coal generation with natural gas– Impacts on system reliability

• CDPHE will participate in PUC process.• Any PUC-approved plan must meet projected EPA rules.• Air Quality Control Commission will incorporate approved plan

into State Implementation Plan (SIP) for addressing regional haze.

• New law specifies some details of regulatory cost recovery

HB10-1365 PUC Timeline for Xcel

April 19 Bill signed into lawApril 21 PUC opened docketMay 27 Prehearing conference

Ruling on Interventions (34 parties)August 15 Xcel filed preferred and alternate

plansNovember Hearings (~90 witness testimonies)December

15PUC Order

January 2011

CDPHE adopts SIP

April 2011 Legislature considers SIP

Peabody CMA ACCCE AGNC AnadarkoGas

Intervenors WRA10/21/2010 Thursday PSCO

Hyde 30 15 0 20 20

Magno 30 10 0 5 0

Mills 0 0 0

Boland 0 0 010/22/2010 Friday Hill 0 40 20

Prager 15 10 0 5 0

Ford 45 10 0 20 10

Brockett 15 0 30 10

Landrum 0 10 0 010/25/2010 Monday Carter 30 0 10 10 0

Green 0 10 20

Johnson 0 10 20

Peabody CMA ACCCE AGNC AnadarkoGas

Intervenors WRA CIEA SWG Thermo** GEO Interwest Boulder Denver Glustrom CSU-TriStateCF&I

Climax FEA Walmart AESCBlanca

TrincheraBCC-Weld CEC CIG-WIG COGA CoSEIA

CREA-Western Fuels DPS No. 1 Holy Cross IREA Larson OCC Staff CDPHE PSCo Total total by day

10/21/2010 Thursday PSCO

Hyde 30 15 0 20 20 20 40 10 20 0 20 10 20 45 10 10 40 330

Magno 30 10 0 5 0 0 5 0 20 70

Mills 0 0 0 5 0 5

Boland 0 0 0 0 0 40510/22/2010 Friday Hill 0 40 20 15 20 5 0 10 110

Prager 15 10 0 5 0 0 10 40

Ford 45 10 0 20 10 15 30 0 30 160

Brockett 15 0 30 10 0 30 10 35 10 140

Landrum 0 10 0 0 10 0 20 47010/25/2010 Monday Carter 30 0 10 10 0 5 0 10 65

Green 0 10 20 10 30 0 10 10 90

Johnson 0 10 20 10 30 5 0 75

Mogensen 0 10 20 10 30 0 70

Wobbekind 10 0 10 0 0 5 0 25

Sheesley 0 10 10 0 0 20 10 50 37510/26/2010 Tuesday Roberts 0 0 10 0 15 0 25

CDPHE

Torangeau 45 15 0 10 20 25 15 0 30 25 185

Miller 0 0 0 0 5 5

WRA

Middleton 15 0 10 0 5 30

FEA

Blank 0 0 5 0 10 15

CPUC Staff

Camp 30 0 0 10 15 10 5 0 10 30 110

Podein 0 20 10 10 0 10 20 70

Dominguez 0 0 15 15 10 0 5 45

Kunzie 0 20 0 0 10 30

Markell 0 5 0 0 15 20 53510/28/2010 Thursday Cutler 0 0 10 10 10 0 10 40

Kwan 10 0 5 15

PEABODY 0

Montgomery 0 30 5 5 0 20 60

Wendling 0 30 10 5 0 20 65

Smith 0 10 40 15 15 0 40 120

Cichanowicz 0 5 0 0 10 15

Coddington 10 5 20 5 0 15 20 75 39010/29/2010 Friday CMA

Bezdek 0 20 15 10 0 5 15 65

Hewson 0 20 20 10 0 15 65

ACCCE

Ross 0 0 0 5 0 5 15 25

AGNC

Monger 0 5 5 5 0 5 0 20 17510/30/2010 Saturday WRA

Nielsen 0 10 15 15 0 25 20 85

Palermo 0 0 10 20 0 20 50

Schlissel 0 10 0 0 25 20 55

Deck 0 0 0 5 5

Dirmeier 0 5 0 10 20 35

Keohane 15 0 0 0 5 20

Schaeffer 0 0 0 5 5

Tellinguisen 0 0 0 10 5 15 27011/1/2010 Monday CSU/TRISTATE

McLennan 0 10 5 0 5 15 35

GAS INTERVENORS

Van Nostrand 30 0 0 15 15 0 15 75

Cavicchi 30 0 0 15 0 30 75

Arunchalam 0 0 0 0 15 15

Malmedal 15 0 0 10 0 30 55

Fishman 30 0 10 0 10 0 15 65

Gilliss 0 0 0 0 0

Norsworthy 15 0 0 10 0 10 35 35511/2/2010 Tuesday ANADARKO

Moore 30 0 5 0 10 10 55

CIEA

Muller 0 0 5 0 15 20

Malmedal 0 0 15 0 30 45

SWG

Kushner 0 5 0 0 30 35

Rhodes 0 5 0 0 20 25

THERMO

Whittles 0 0 0 0 10 10

GEO

Futch 0 20 0 0 15 35

INTERWEST

Cox 0 0 0 0 5 5

Hunt 0 0 0 0 10 10

BOULDER

Koehn 0 5 0 0 0 10 15

Milmoe 0 0 0 0 0 0 0 25511/3/2010 Wednesday 1/2 day DENVER

Williams 0 0 5 0 0 5

GLUSTROM 0 0 0 5 5

OCC

Levis 0 5 10 10 5 0 0 30

Senger 0 5 20 10 10 5 0 15 65

CF&I/CLIMAX

Baron 0 5 0 0 10 15

WALMART

Chriss 0 0 0 0 10 10

AESC 0 0 0

BLANCA-TRINCHERA 0 0 0BOARD OF CNTY COMMISSIONERS WELD 0 0 0

CEC 0 0 0

CIG-WIG 0 0

COGA 0 0

COSEIA 0 0

CREA-Western Fuels 0 0

DPS No. 1 0 0

HOLY CROSS 0 0

IREA 0 0

LARSON 0 0 130

Total minutes 420 70 0 30 95 480 315 25 235 275 0 40 0 0 120 0 50 0 20 0 40 0 180 0 0 0 0 0 0 0 20 40 140 45 720 3360 3360

Highlights of the Proceeding• Utility plan addressed 1801 MW• Utility filed analysis of ~20 plans (7 basic plans with

variations)• Interventions by large gas and coal interests• Two very large public hearings• Prefiled testimony of 61 expert witnesses; 30 more rebuttal• Utility rejected “controls-only” plan• Utility’s preferred plan was ruled not in compliance with new

statute; utility filed new plans and identified new preferred plan

• CDPHE rejected some plans as insufficient to meet EPA rules• Long-term natural gas contract approved• Motions filed to disqualify two commissioners• Hearings in evenings and on Saturdays

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NOx (2018) -85%CO2 (2020) -24%

PSCo Electric 10M-245EScenario AnalysisPSCo Electric 10M-245E

Scenario Analysis 8

2011 2012 2013 2014 2015 2016 2017Existing Coal Plant

Cherokee 1 RetireCherokee 2 Retire SCCherokee 3 RetireCherokee 4 SCRArapahoe 3 Retire SCArapahoe 4 GasValmont 5 RetireHayden 1 SCRHayden 2 SCR

Pawnee SCR/LSDReplacement

2 X 1 Cherokee On-Line1 X 1 Cherokee

Peaker CherokeeIPP Re-ups

Retirement and Controls Replacement CapacityIn-Period Post-Period

MW MW2 X 1 Cherokee 569 N/A1 X 1 Cherokee N/A N/A

Peaker Cherokee N/A N/ATotal 569

IPP Re-upsMW Year

SWG Arapahoe 0 N/ASWG Valmont 0 N/AThermo UNC 0 N/A

Total 0

Scenario 5B

SC = Synchronous Condensor SCR = Selective Catalytic Reduction Control Gas = Fuel Switch from Coal to Gas LSD = Lime Spray Dryer

FuelPlant MW Retired Controls SC Switch

Cherokee 1 107 107Cherokee 2 106 106 YesCherokee 3 152 152Cherokee 4 352 352Arapahoe 3 45 N/A YesArapahoe 4 111 111Valmont 5 186 186Hayden 1 139 139Hayden 2 98 98

Pawnee 505 505In-Period Total 1,801 551 1,094 111

Post-Period Total N/A N/A N/A

9PSCo Electric 10M-245EScenario Analysis

Estimated Near Term Base Rate Effects STRATEGIST Revenue Requirements

0.0%2.5%5.0%7.5%10.0%12.5%15.0%17.5%20.0%22.5%25.0%27.5%30.0%

2011 2012 2013 2014 2015 2016 2017

STRATEGIST Rates Analysis ($0/ton carbon)

0.0%2.5%5.0%7.5%10.0%12.5%15.0%17.5%20.0%22.5%25.0%27.5%30.0%

2011 2012 2013 2014 2015 2016 2017

Carbon Carbon Carbon$0/ton $20/ton Effect

2010-2020 $M 28,547 31,266 2,719

2010-2030 PVRR $M 46,314 52,684 6,370

2010-2033 PVRR $M 50,735 58,046 7,311

2010-2046 PVRR $M 66,687 76,543 9,857

Capital Investments

Cost InPlant Action $ million Service

Cherokee 1Cherokee 2 SC 4 2012Cherokee 3Cherokee 4 SCR 174.9 2016Arapahoe 3 SC 4.9 2014Arapahoe 4Valmont 5Hayden 1 SCR 67.1 2015Hayden 2 SCR 80.7 2016

Pawnee/LSD SCR 236.5 20142 X 1 Cherokee 481.4 20151 X 1 Cherokee N/A N/A N/A

Peaker Cherokee N/A N/A N/ATransmission Upgrades 9.9

Total 1,059.4

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Scenario 5B

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NOx (2018) -89%CO2 (2020) -29%

PSCo Electric 10M-245EScenario Analysis

Retirement and Controls Replacement Capacity

IPP Re-ups

Scenario 6.2J2011 2012 2013 2014 2015 2016 2017

Existing Coal PlantCherokee 1 RetireCherokee 2 Retire SCCherokee 3 RetireCherokee 4 RetireArapahoe 3 Retire SCArapahoe 4 GasValmont 5 RetireHayden 1 SCRHayden 2 SCR

Pawnee SCR/LSDReplacement

2 X 1 Cherokee On-Line1 X 1 Cherokee On-Line

Peaker CherokeeIPP Re-ups

SC = Synchronous Condensor SCR = Selective Catalytic Reduction Control Gas = Fuel Switch from Coal to Gas LSD = Lime Spray Dryer

MW YearSWG Arapahoe 0 N/ASWG Valmont 0 N/AThermo UNC 0 N/A

Total 0

In-Period Post-PeriodMW MW

2 X 1 Cherokee 569 N/A1 X 1 Cherokee 314 N/A

Peaker Cherokee N/A N/ATotal 883

FuelPlant MW Retired Controls SC Switch

Cherokee 1 107 107Cherokee 2 106 106 YesCherokee 3 152 152Cherokee 4 352 352Arapahoe 3 45 N/A YesArapahoe 4 111 111Valmont 5 186 186Hayden 1 139 139Hayden 2 98 98

Pawnee 505 505In-Period Total 1,801 903 742 111

Post-Period Total N/A N/A N/A

11PSCo Electric 10M-245EScenario Analysis

Retirement and Controls Replacement Capacity

IPP Re-ups

Benchmark 1.0

SC = Synchronous Condensor SCR = Selective Catalytic Reduction Control Gas = Fuel Switch from Coal to Gas LSD = Lime Spray Dryer

FuelPlant MW Retired Controls SC Switch

Cherokee 1 107 107Cherokee 2 106 106Cherokee 3 152 152Cherokee 4 352 352Arapahoe 3 45 N/AArapahoe 4 111 N/AValmont 5 186 186Hayden 1 139 139Hayden 2 98 98

Pawnee/LSD 505 505In-Period Total 1,801 0 1,280

Post-Period Total N/A N/A

In-Period Post-PeriodMW MW

2 X 1 Cherokee N/A N/A1 X 1 Cherokee N/A N/A

Peaker Cherokee N/A N/ATotal 0

MW YearSWG Arapahoe 0 N/ASWG Valmont 0 N/AThermo UNC 0 N/A

Total 0

2011 2012 2013 2014 2015 2016 2017Existing Coal Plant

Cherokee 1 SNCRCherokee 2 SNCRCherokee 3 SCRCherokee 4 SCRArapahoe 3Arapahoe 4Valmont 5 SCRHayden 1 SCRHayden 2 SCR

Pawnee SCR/LSDReplacement

2 X 1 Cherokee1 X 1 Cherokee

Peaker CherokeeIPP Re-ups

NOx (2018) -75%CO2 (2020) -16%

Decisions on PSCo Plants

Unit Size Action Date

Cherokee 1 107 MW Retirement 2011

Cherokee 2 106 MW Retirement 2011

Cherokee 3 152 MW Retirement 2015

Cherokee 4 352 MW Conversion 2017

Arapahoe 3 45 MW Retirement 2013

Arapahoe 4 111 MW Conversion 2014

Valmont 5 186 MW Retirement 2017

Hayden 1 139 MW Controls 2015

Hayden 2 98 MW Controls 2016

Pawnee 505 MW Controls 2014

Source: Xcel Energy – Summary Report for Investors 2009

Colorado Coal Mining

Source: http://wvrhrc.hsc.wvu.edu/images/coal_mining_atlas_1994-2005_colorado.jpg

Long Term Natural Gas Contracts

Gas Prices: Market Forecast vs. Anadarko Long Term Contract

Forecast

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$/MMBtu

Model Legislation

Available at:www.rbinz.com/LTContracts.pdf

Thanks for the invitation.

I look forward to your questions.

Ron Binz, PrincipalPublic Policy Consulting

www.rbinz.com720-425-3335

rbinz@rbinz.com