UCA staff flag stranded-asset risk in PSCo depreciation and gas infrastructure filings

UCA staff briefed the board on two related items from Public Service Company of Colorado (PSCo): an asset depreciation filing and a gas infrastructure plan (GIP) that together could affect how the utility recovers costs from customers as Colorado pursues heating-sector decarbonization.

Ron Fernandez, an analyst with the UCA, said the PUC ordered PSCo to file updated depreciation rates and to set up a fund — a depreciation reserve — with approximately $15 million in increased rates to finance future retirements. Fernandez said the UCA intends to support a regulatory-liability approach to hold those funds rather than establishing a dedicated trust because the liability approach is “cheaper and a lot cleaner” for customers.

Joshua Puterman, an analyst who presented the depreciation analysis, said changing depreciation schedules alters the utility’s revenue requirement and therefore customer rates. “When you change the depreciation rate…you change the revenue requirement on what’s going to be charged to all of us,” Puterman said, and he urged PSCo to quantify the benefits the company expects from proposed accelerated schedules so the UCA and the PUC can weigh ratepayer impacts against any claimed public benefits.

Staff then presented PSCo’s second gas infrastructure plan filing, which lists 62 projects with a combined cost of about $572 million. Carrie (UCA analyst) summarized that roughly 51 of the 62 projects — representing about 71% of the plan’s spending — are labeled “system safety and integrity,” with notable items including reconfirmation of maximum allowable operating pressure (MAOP) work, distribution integrity management program (DIMP) activities and a project to bury an above-ground pipeline segment near Winter Park (the Louisville Rawlins Pass work, roughly $17.1 million).

The plan also proposes capacity-expansion work totaling about $127.5 million and includes projects to replace or rebuild compressors and interconnect work tied to the Spirit Canal interconnects assignment. PSCo seeks multiple outcomes: approval of the plan and related CPCNs for specific projects, permission for current cost recovery for both large and small non-pipeline alternatives (NPAs) identified in the plan, deferred accounting for plan-development costs, and waivers or variances as needed.

UCA analysts told the board they will scrutinize the need for capacity expansion given the state clean heat forecast expects declining gas loads. Carrie said that expansion assets placed into service now risk becoming stranded before the end of their useful lives, which could shift early-retirement costs onto ratepayers. “If the company continues to plan for expansion while the state forecast expects usage to decline, we need to test whether those expansion projects belong in the GIP or should be placed in rate base,” she said.

Board members discussed trade-offs. Some urged shorter depreciation lives and tools such as securitization to limit ratepayer exposure. Former PUC Chairman Ron Lehr and others noted prior competitive procurement and financing tools can mitigate some risks. Staff said they will pursue discovery to require PSCo to quantify the benefits asserted for accelerated depreciation, to test design-day assumptions behind capacity projects (including Spirit Canal interconnects and mountain LNG/CNG solutions), and to evaluate whether NPAs are appropriately placed in a regulatory recovery framework or should be treated differently.

UCA staff said the issues will proceed through adjudicated PUC processes where case-specific evidence about project pricing, depreciation calculations and NPAs can be tested. The board directed staff to continue developing testimony and analytics for the cases.