William M.

Dudley

(l Xcel Energy

Assistant General Counsel

1800 Larimer Street, Suite 1100

Denver, CO 80202
Phone: 303.294.2842
Fax: 303.294-2852
Email: bill.dudley@xcelenergy.com

May 18, 2015

By Email
Ms. Heather Bailey
City of Boulder
Executive Director of Energy Strategy
& Electric Utility Development
1101 Arapahoe Ave. , 1st Floor
Boulder, CO 80302
Re: Public Service Company of Colorado Response to Request for Proposals
Dear Heather:
Thank you for forwarding me Boulder' s request for proposals (RFP) requesting bids to
provide a partial requirements wholesale electric power supply contract. Although it is
not clear from the RFP document itself, you indicate that this RFP is exclusive to Public
Service Company of Colorado (Public Service). I have attached Public Service' s
response. While we are not making a formal bid at this time, for reasons I will elaborate
upon below, we are indicating our willingness to negotiate a requirements wholesale
supply contract with Boulder, and are proposing a conceptual framework to go forward.
To provide some brief context to our response, we believe that there are three primary
goals Boulder is trying to achieve through its RFP: to obtain a transitional power supply
arrangement for at least a five-year term; to provide a framework to allow for the
introduction of new resources (presumably renewable resources) into Boulder's power
supply mix; and to mitigate stranded costs. We would observe that these objectives taken
together are not entirely consistent, so it will be important for us to have a better
understanding of what Boulder' s primary objective is for any ongoing power supply
arrangement. Furthermore, as a practical matter, we believe that it will not be possible to
have any meaningful discussions without understanding what our Federal Energy
Regulatory Commission (FERC)-approved stranded costs will be, since the effect of a
requirements arrangement will be to mitigate Boulder's obligation at least in part.
Reflecting these considerations, our conceptual framework includes, among other things,
the following components:
An expressed willingness to enter into a requirements arrangement with Boulder.

We presently expect that the rates for this agreement will be at the same cost-

Ms. Heather Bailey

City of Boulder

May 18,2015
Page 2

based formula rates that are used to price service to our other six wholesale
requirements customers.
We can provide for flexibility in this arrangement to allow for Boulder to acquire
other resources with the understanding that such resource acquisition will affect
Boulder's stranded cost responsibility, and that there will need to be a make
whole payment (or another agreed-to mechanism) to account for that effect.
We will file a case to recover stranded costs at the FERC in the near-term. As
required by the FERC, our application will specify the length of the obligation
period (or L), a component of the FERC' s stranded cost formula. Because
stranded cost mitigation is an important objective of the RFP, we believe that our
filing will provide a basis to have more informed negotiations of any requirements
contract. This filing should help facilitate discussions regarding the effect of a
requirements agreement on stranded cost mitigation.
I want to make one additional observation. In your email to me, you indicate that we
encouraged Boulder to "propose a request for a wholesale power arrangement between
PSCo and the City of Boulder." We were not, however, suggesting an RFP approach. We
believe that there will be a great deal of complexity in negotiating an arrangement with
Boulder given Boulder' s desire to acquire different resources coupled with a desire to
mitigate stranded costs. We believe the better approach is to have a negotiation with
Boulder after it has greater clarity regarding its objectives - in this regard, we believe our
stranded cost filing will be useful as we note above - and desired terms. Most helpful at
this time would be to have an idea of what resources Boulder wishes to acquire and
when.
Finally, while we question whether the City of Boulder' s January 1, 2018 date for
possession and initiation of the wholesale electric supply is realistic or achievable, our
willingness to supply transitional power together with the recommended approach
described herein should allow both Boulder and our company to address these issues well
in advance.
We are submitting our response on a non-confidential basis.
Please give me a call if you have any questions about our response.

Ms. Heather Bailey

City of Boulder

Enclosure
cc: Jonathan Koelm

May 18,2015
Page 3