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IN THE MATTER OF THE PROPOSED                      )
RULES REGARDING NATURAL GAS                       )                 Docket No. 07R-371G
DEMAND-SIDE MANAGEMENT                            )

                                 Reply (#2) Comments of

                          Ronal W. Larson and Randy Kuehn

                                        on behalf of

                         Ratepayers United of Colorado (RUC)

                                    November 20, 2007

Introduction and Background. Ratepayers United of Colorado (RUC) is a public
interest non-profit organization dedicated to promoting both renewable energy and
energy efficiency / demand side management (EE/DSM) in Colorado. RUC is motivated
by health, jobs, environmental, future supply restrictions, and rate impact considerations.
We have supplied one previous set of comments dated 6 November, focusing on bonus
computations and two previous sets of comments in the preceding investigatory docket.
On November 15, we supplied a first set of reply comments (misdated Nov. 16),
restricting ourselves in that reply to the November 9 comments from Public Service of
Colorado (PSCo). This present reply covers the five other comments found at .
We note that the very important November 9 PSCo comments were still not at this site as
of 20 November. RUC can forward them to interested parties who contact us

1. Aquila (ref.
371G_Aquila11-09-07InitialComments.pdf) (10 pages)
        The first 4.5 pages seem to be implying that the draft rules of this Docket are in
some sort of constitutional conflict – especially as they relate to utilities providing a DSM
opportunity to all ratepayers. As we are non-lawyers, we shall stay out of this, but we
note that Aquila has nowhere referred to recently-passed SBO7 – 022, dealing with low-
income rate-payers. We like the special emphasis in the OCC response below - taking
the opposite legal position on this inclusion topic.
        The final half of the Aquila comments begins with a plea for multi-year plans.
We note that the language of HB07-1037 states on p5 (re 40-3.2-103(c)(I): “….ALL
APPROPRIATE.” (emphasis added). The key words clearly are “set” (and this can only
mean the Commission) and “annual”. We are surprised that Aquila (and PSCo and all
other utilities apparently) would want this important decision made in the absence of their
annual plans. But even if the gas utilities discount the importance of cost adjustment
mechanisms, it is difficult to believe that the required annual report cannot contain a short
description of what might reasonably change in a following year (NOT the year in which
the report is due). The “imposition” of a required plan is the wrong way to look at
planning. Since it is absolutely clear that an annual DSM report is mandated, it is only
necessary that this report contains enough also of a planning character to update the 2-, 4-
or even 10-year plans on which the utilities choose to stake their reputations. Multiple
year plans need not be inconsistent with annual updates.
        Aquila next states a concern about a lack of flexibility – which we don’t
understand, since the only example given is that of Rule 4750 (General), which deals
again with the “Constitutional” issue of the first 4.5 pages on providing ratepayers access
to DSM measures. As noted above, to us, this is a question of equity and therefore
should have nothing to do with flexibility. We urge Commission rejection of this utility
position until a more concrete example of rule inflexibility is presented. Refer to other
RUC replies in this document rejecting this non-equitable approach. Aquila also rejects
rule 4750 wording “adoption potential, market transformation capability and ability to
replicate in the service territory while; considering the overall rate impact of …”
referring to PUC direction on DSM planning. As elsewhere stated, we think this is
counter-productive advice.

2. Colorado Energy Efficiency Business Coalition (CEEBC) (a 3 page
Word document directly opening in Word)
         RUC finds this newest corporate entry to the DSM discussion to be exceedingly
valuable. We concur with all but one of their main points. We specifically endorse their
comments about Rules 4753 (criteria – resource assessment, stating early, and aggressive
goal), 4756 (non-energy benefits (NEBs) quantification, buildings, patterning after
NYSERDA) and 4757 (bonus computations). Our small objection is to suggesting it
appropriate for PSCo to expend 20% of their funds to quantify the NEBs. We believe
there are numerous studies in the DSM evaluation literature (especially that of
NYSERDA and several Colorado evaluation companies [ex. Skumatz, Summit Blue])
who can lead Commission staff to the appropriate quantification literature. If necessary,
there can be appreciable leniency in such quantification, if it becomes apparent that the
Bonus will be based on expenditures, rather than benefits. RUC has come to the same
conclusion as CEEBC on bonuses – as reported on 9 November in our own first

3. Energy Outreach Colorado (EOC)
    07Comments.pdf (2 pp)
    RUC agrees with EOC in all parts of their comments – which of course concentrate
on the appropriate level of DSM attention to low income ratepayers. We believe
intuitively that extra attention with this sector will be proven highly justified if there is
inclusion of realistic non-energy benefits for all rate payers (and that will be larger for
low-income customers). The imaginative exclusion of low-income ratepayers from the
G-DSMCA seems justified in light of the language in HB 1037 and SB 22. We guess
that this zero-cost-adjustment would be supported by a majority of Colorado voters and
ratepayers. Inclusion of low-income ratepayers in DSM programs will save money for
EOC and other organizations (Xcel included), which raise funds to pay utility bills for
these individuals. In a good economy, funds can be raised, but in bad times, utilities will
be forced to raise rates to cover unpaid bills.

4.Office of Consumer Counsel (OCC). A zip file. (4pp directed at about 8 small
modifications of the rules).

        RUC generally agrees with the proposed modifications. We especially like the
OCC emphasis on equity. The recommendation to ensure a possible third category of
customer is well worth considering, as it goes along well with the EOC comments
discussed above. However, in particular, the low-income recipient/payer of DSM
programs could be in a terrible situation if they are established as a separate class. We
therefor recommend new language following 4753(c) – so as to read (as first modified by
EOC with “shall”): “The utility shall propose one or more DSM programs that are targeted to
low-income customers. The DSM costs for this class shall be borne by the other rate payer
classes, in proportion to their usage of natural gas and the availability of DSM programs
therein, as established by the Commission.” The justification for this last RUC proposal
is several-fold. We understand that this is the roughly the case now, as the only existing
gas DSM program (E$P) is for low-income – and those costs are borne by all ratepayers
– definitely not by the low income customers alone. RUC views this as something like a
life-line or inverted-block rate as used in many jurisdictions – in part for equity reasons.
The justification for having a lower energy “tax” for low-income is much like that for the
graduated income tax - that has been the Colorado and US norm from the beginning –
one of equity. This goes a little further by exempting the low-income rate payer from
any DSM charge (much as many low-income taxpayers pay no income tax). Low-income
consumers are generally not going to be able to participate in the program at all - for
reasons of being renters or simply not having cash for something even with a one-year

        We could understand a modification of the DSM applications in which those who
absolutely benefited having some repayment out of those monthly bill savings that could
be directly attributed to the DSM program. For example, if monthly bills could be shown
to drop in half because of several thousand dollars of DSM investment, perhaps half of
the half could be put back into the system for others. Of course, efforts should be made
to ensure that real estate value accruing to a landlord from DSM program funds is
similarly tracked and recovered where possible. We guess that this sort of DSM program
would be much preferred by most ratepayers over the present system of paying bills for
housing units that are badly inefficient (while understanding that emergency lifeline bill
payment is sometimes the only option).

        The last OCC modification re rule 4760 (bonus) is headed in the right direction,
but we would make both columns much simpler (always 20% in the right column) - as
justified in our first comments. But we think the following final comment (with
emphasis added) can be misinterpreted. “…. the OCC recommends that the maximum
bonus be earned for the same level of outstanding achievement, under either the percent
of economic benefits measurement or the percent of expenditure measurement.” The
legislation is clear that the lesser of the two bonus computations is to be used. We think
this is the appropriate choice – as both bonuses are very generous, if not overly so. We
urge the OCC to rethink their position. We also note as we talk about bonuses with
various interested parties that there is considerable confusion over how the bonus is to be
computed. Therefore, we welcome examples from any party that thinks they know how
to calculate both (not just one based on benefits or expenses alone, and not by simply
assuming a benefit to cost ratio). We should like to see some examples dealing with both
program and customer costs, the total benefits, and attribute lifetimes.

5. Howard Geller for the Southwest Energy Efficiency Project (Ref.
07Comments.pdf (6 pp)
         The first 1.5 pages argue for less complexity and a longer period between plans.
We have addressed this in earlier remarks – stating that we are for simpler rules, but that
annual statements about plans seem to be valuable - because the goals and bonus
payments need to be provided every year by the Commission (as emphasized by SWEEP
on p 3).
         SWEEP argues on p2 for a utility ability to exceed budgets by up to 30%. We
concur – but would argue for a larger (possibly unlimited) upper limit, as long as the
utility felt it could justify prudency. The expenditure and benefit goal setting by the
Commission should almost force larger goal expenditures, as we read the proposed rules
(which we would make more lenient).
         On page 3, SWEEP recommends specific near-term goals (rising to 1% of utility
gross sales. RUC would rather focus on the Governor’s Climate Action Plan (released
after the Sweep comments) – and let the budgets be dictated by the degree to which it
seems possible to meet the proposed 20% reduction of greenhouse gases.
         There is a useful annual target here of 20,000 decatherms per million-dollar
expenditure. Inverting, one finds about $50 per decatherm (or MMBtu) per year.
Assuming a twenty-year average investment lifetime, this gives about $2.50 per MMBtu
– clearly a good bargain these days. Again, Dr. Geller is emphasizing that this is a
Commission determined target goal. As 1 MMBtu approximately equals 1000 cuft, and
combustion turns that amount of methane into about 120 pounds of CO2, this $2.50
investment per MMBtu equates to a CO2 cost of more than $40 per tonne. Thus, we
can’t promote CO2 reduction via DSM of natural gas use as a practical cost-effective
means of keeping CO2 from the atmosphere. Rather, this is primarily a means of saving
on monthly average bills. Nevertheless, this amount needs to be compared to the $20 per
tonne CO2 “ERP penalty cost”, that PSCo announced on 15 November would be used in
resource planning and that is presumably going to be used to compare DSM against new
gas plants in competitive electric all-source bid evaluations.
         On page 4, Dr. Geller provides comments on Rule sections 4754, 4755, and 4756,
in all of which RUC agrees. Under 4754, he points out the need for an additional rule
under which the utilities shall report on costs per tonne of each pollutant, per the enabling
        Rule 4755 (funding) begins on p 5, with a recommendation to remove a specific
sentence limiting incremental expenditures; RUC agrees. More specifically, we think
that the bonus structure will eventually be seen to be sufficiently remunerative that there
will be utility agreement to greatly increase DSM activities, and RUC favors that path.
         We cannot agree with all the remarks about Rule 4758 on bonus structures – as
we have said several times earlier about this bonus rule. We cannot concur that one or
the other bonus can take precedence over the other as is implied here. We look forward
to someone providing example computations that illuminate Dr. Geller’s last sentence
dealing with a natural limiting optimum. Rather, we perceive that there is a “magic” B/C
ratio of 2.25 for selecting the required 20% or 25% bonus amount. But the dollar bonus
amounts seem to (monotonically) increase even for B/C ratios less that 2.25 (net benefits
less than 1.25), as long as B/C stays above unity. That is, it is difficult to imagine a
“normal” case (B/C > 1, which is required) where benefits don’t increase when
expenditures increase. More exact examples are needed. .
        In sum, the SWEEP remarks are cogent and excellent, with the few exceptions
noted above.

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