BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE APPLICATION OF ) PUBLIC SERVICE COMPANY OF COLORADO ) DOCKET NO. 11A- FOR APPROVAL OF REVISIONS TO ITS ) WINDSOURCE PROGRAM ) VERIFIED APPLICATION INTRODUCTION Public Service Company of Colorado hereby applies to the Commission for approval of changes to our existing Windsource program. In addition, Public Service respectfully requests approval of an additional new long term fixed-price Windsource offering. Both of these programs would use wind energy produced by the Limon II wind farm. The Wind Energy Purchase Agreement between Public Service Company of Colorado and Limon Wind II, LLC dated August 15, 2011 (the "Limon II PPA") is before the Commission for review and approval in Docket No. 11A-689E. In the application Public Service filed in Docket No. 11A-689E, Public Service advised the Commission that Public Service desires to use the Limon II wind energy as a foundation for new Windsource product offerings for our customers. We explained in that application that we would be filing a second separate application addressing these Windsource offerings. This Verified Application is that second application. In Docket No. 11A-689E, the Commission will determine whether it is in the public interest for Public Service to acquire wind energy under the Limon II PPA as a system resource. Windsource issues will not be addressed in Docket No. 11A-689E. 1 A 1 See Commission Decision No. C11-1008 (September 16,2011). 1

procedural schedule has been set in Docket No. 11A-689E for the Commission to render its decision no later than November 30, 2011 - a contractual deadline that must be met for Limon Wind II, LLC (a subsidiary of NextEra Energy Resources, LLC) to construct the Limon II wind farm and have it reach commercial operation no later than December 31, 2012 to qualify for federal production tax credits. The federal production tax credits are necessary for Limon Wind II, LLC to offer Public Service the very low wind energy prices that are contained in the Limon II PPA. By this second Verified Application, Public Service is requesting if the Limon II PPA is approved as a system resource, that the renewable energy credits that are generated by this wind farm form the foundation of a restructuring of Public Service's Windsource program. Review and approval of this second application addressing Public Service's Windsource program need not be completed on as expedited a schedule as Docket No. 11A-689E. This second application may be reviewed under the normal timeframes allowed for review ofapplications under the Commission rules. Accompanying this Verified Application are the pre-filed Direct Testimonies of the following Xcel Energy personnel testifying on behalf of Public Service: Steve Mudd, Product Portfolio Manager for the Xcel Energy Windsource Program; Kurtis J. Haeger, Managing Director, Wholesale Planning; and Nicholas Detmer, Manager of Commercial Operation. BACKGROUND ON THE PUBLIC SERVICE WINDSOURCE PROGRAM Public Service's Windsource program was originally established in 1997, prior to the establishment of any Colorado renewable energy mandates, so that Public Service could offer our customers, who volunteered to pay a premium, renewable energy from 2

new wind farms that would be constructed in Colorado. In Docket No. 96A-401 E, by Decision No. C97-203, the Commission approved a stipulation that set the terms of this voluntary renewable resource program. The stipulation provided for a program that would have premiums set on the basis of a "value price" (market-based price) that was initially established by stipulation at $2.50 per 100 kwh block. The Windsource subscriptions were to be filled from RECs generated by identified discrete wind farms. By initiating this program, Public Service hoped to determine the market demand for a premium-priced, voluntary product with environmental benefits. The Windsource program quickly grew to be one of the largest voluntary green power programs in the United States. Periodically between 1997 and 2008, Windsource issues arose in the context of Public Service rate cases. During this period, the Windsource premium was changed from a market-based premium to a cost-based premium, with some contributions to cover the cost of the Windsource assets coming from all customers through their electric rates, based upon the benefits provided to the Public Service system from the Windsource assets. The Windsource program proved so popular that by 2008 Public Service could not supply sufficient RECs from the discrete Windsource assets to meet the Windsource demand, even though by that time Public Service was awash with RECs from the other renewable resources that Public Service has acquired to meet and exceed the Renewable Energy Standard that was passed by ballot initiative in 2004. To address this Windsource demand, in Docket No. 08A-260E the Commission approved a restructuring of Windsource. The Commission approved the Final Stipulation and 3

Settlement Agreement dated January 8, 2009 among Public Service, the Commission Staff, the Colorado Office of Consumer Counsel, the Governor's Energy Office, Western Resource Advocates, and the City of Boulder (the "2009 Windsource Agreement"). The 2009 Windsource Agreement altered the Windsource program to allow Windsource subscriptions to be met with RECs from Public Service's overall renewable resource portfolio (instead of from only discrete wind farms dedicated to Windsource). The Windsource premium would be priced based upon the incremental cost of adding new renewable resources to the Public Service system (as opposed to recovering the costs of existing discrete Windsource wind facilities). The purpose of the Windsource restructuring was to allow the Windsource program to grow and to take advantage of the economies of scale and lower prices that could be obtained by contracting for larger scale renewable resources and for longer terms. In approving the 2009 Windsource Agreement, the Commission encouraged Public Service to find ways to grow our Windsource program. The Commission's Administrative Law Judge stated as follows, at Decision No. R09-0117 ( February 5, 2009) at page 21: The undersigned ALJ finds that the successful continuation of the Windsource program is just as important to the State of Colorado today as it was in 1997, if not more so. Windsource in 1997 provided a means to participate in renewable energy acquisition not easily available by other means. Windsource today provides an additional means for Public Service customers to voluntarily participate in renewable energy acquisition above and beyond the mandated 2 percent retail rate impact cap. While the Staff's concerns regarding the program and its continued viability and contribution to adding additional renewable resources are well taken, it is nonetheless important to maintain Windsource as a successful, voluntary renewable program. Mr. Stoffel offered in testimony that Windsource was one of the most successful programs of its kind offered by a utility in the country. To end the program at this point would send the wrong signal. 4

Certainly, encouraging Public Service to continually improve its renewable energy program is an important purpose to ensure the continued viability and growth of the program. The Final Stipulation provides the means to keep the program moving along that path... To accomplish growth in the Windsource program, Paragraph 5 of the 2009 Windsource Agreement provided as follows: Public Service commits to consider the development of additional new financially viable renewable energy products, including products that include emerging technologies and products that provide for stable rates. Paragraph 5 also required Public Service to involve environmental and communitybased organizations and interested government agencies in discussions to obtain ideas for product development throughout 2009. Those discussions emphasized customer interest in longer term product offerings that could provide a hedge against natural gas prices and potentially provide net bill savings if wind contracts proved to be cheaper than fossil-fueled energy. Recent meetings with stakeholders have reaffirmed a strong interest in such longer term contract offerings. THE CURRENT STATE OF AFFAIRS As discussed by Mr. Mudd, Public Service has recently seen a large reduction in residential customer participation in Windsource. While commercial subscriptions have increased, our commercial customers are more and more looking for price stability and fuel price hedges. The 2009 Windsource Agreement, while increasing the RECs available for the Windsource program, has features that are very complex for residential customers to understand and provides no long term pricing stability. Currently, the Windsource premium is recalculated annually under a complicated formula. 5

As discussed by Mr. Mudd, our commercial customers have options to buy RECs from many unregulated sellers of RECs. The current Windsource premium, calculated based upon the incremental cost of new renewable energy, puts Public Service at a competitive disadvantage in marketing our program to these customers. At the same time that Public Service is pricing 2 our Windsource RECs too high for the Colorado market, Public Service has a surplus of RECs beyond the RECs necessary to comply with the Colorado Renewable Energy Standard through 2028. This has occurred because Public Service has responded well over the years to state law mandates to acquire renewable energy to the maximum extent practicable within retail rate limits set by the General Assembly. Public Service is marketing some of these surplus RECs by selling them at wholesale to other utilities. We would like the opportunity to competitively price these surplus RECs and make them available to our own retail customers." In Docket No. 11 A-418E, the Commission is reviewing Public Service's 2012 Renewable Energy Standard Compliance Plan. That plan shows that Public Service projects that we will have a negative balance in the RESA Deferred Account through 2016. 4 As permitted by law and encouraged by earlier Commission decisions, Public Service has advanced funds to acquire renewable resources beyond the level that could have been acquired under current year RESA collections. We believe that the public interest would now be well served by selling surplus RECs at competitive prices to our 2 The pricing calculation follows the Commission-approved methodology. 3 RECs that are sold to other utilities or that are retired on behalf of Windsource subscribers are not available to Public Service to use for compliance with the Colorado Renewable Energy Standard. 4The RESA Deferred Account tracks the revenues received by Public Service from the two percent Renewable Energy Standard Adjustment ("RESA") on all retail customer bills against the incremental costs of renewable resources acquired. 6

customers who voluntarily subscribe to Windsource and then crediting these premiums to the RESA deferred account. By reshaping our Windsource programs to make them more attractive to customers, we can 1) respond to increased customer interest in "greening up" their electricity consumption at reasonable rates; and 2) reduce the negative RESA balance, freeing up more funds for either the acquisition of more renewable energy and/or eventually reducing the RESA surcharge to less than two percent. The Limon II PPA presents Public Service with a good opportunity to reshape these Windsource programs. The Limon II PPA has very low wind prices and provides us with approximately 877,000 MWH of wind energy annually. This 25 year contract, at known prices, allows Public Service the opportunity to offer a longer term Windsource product and to reduce the premium charged under the standard Windsource offering. We have designed the Windsource changes to accomplish the following goals: 1) Continue to meet the demand of many of our customers for renewable energy in excess of Renewable Energy Standards; 2) Offer renewable energy at competitive rates through the Windsource program; 3) Continue to ensure that non-participants in Windsource are not adversely impacted by the Windsource program and that they also share in the benefits provided by the Limon II PPA; 4) Minimize year-to-year Windsource participation price volatility; 5) Ensure renewable energy supplies are readily available to meet program demand; and 6) Provide the flexibility for further Increases in system renewable generation should the Commission find the resource additions to be in the public interest. 7

SUMMARY OF PROPOSED WINDSOURCE CHANGES The details of Public Service's proposed changes to our Windsource program are discussed in great detail in the pre-filed testimony. At a high level, here are the proposed changes. First, Public Service proposes to continue the Windsource Standard program. However, instead of pricing this program on the basis of the projected incremental cost of new renewable resources over the next five years as provided in the 2009 Windsource Agreement (the price is currently $2.1588 per 100 kwh block), we will reduce the price of this standard product by over 50%, to $1.00 per 100 kwh block (one cent per kwh). The Windsource Standard program will be available to all Public Service retail customers. Customers need not subscribe for any specific minimum period and will be able to cancel their Windsource subscriptions on 30 days notice. Public Service will reserve the right to change the rate prospectively, to reflect market conditions, upon the filing of a tariff rate change for Commission approval. Public Service also reserves the right to limit or cancel the program should we believe we have insufficient RECs to serve this program and to meet compliance with the Renewable Energy Standard. Subscriptions to this program will be served with Green-e Energy certified wind RECs from Public Service's REC inventory, including a share of the RECs generated by the Limon II wind farm. Second, Public Service proposes to offer a new program - Windsource Long Term Contract - that is available to commercial and industrial customers for a minimum term of five years, to the extent of their electric load in Public Service's service territory, and with a minimum purchase obligation of 120,000 kwh per year. Mr. Mudd describes 8

how subscriptions to this program will be obtained. The Windsource Long-Term Contract program will be a modified "contract for differences" program. The "difference" that forms the basis for these contacts will be the actual differences, over time, between the Limon II PPA wind contract price and the Public Service system net avoided cost. The system net avoided cost will take into account the costs the system incurs (and therefore does not "avoid") to integrate wind and if necessary, to curtail wind. The RECs provided subscribers to the Windsource Long-Term Contract program will be supplied by the production from the Limon II wind farm. Except for the modifications that we discuss below, to the extent that the Limon II PPA price is greater than net avoided cost, the Windsource subscriber pays the difference; to the extent that the Limon II PPA price is less than net avoided cost, the Windsource subscriber receives the difference. The variation in Public Service's avoided costs is primarily influenced by the variations in the price of natural gas used in Public Service's generation portfolio. This is why this modified contract for differences should serve as a hedge against natural gas price increases. The proposed Windsource Long-Term Contract program is a modified contract for differences, as more fully described in the pre-filed testimony. The modifications include: a fixed REC price of $12.00 per MWH paid each month, against which the contract for differences calculation is made; a required contribution to the RESA Deferred Account, that varies with natural gas prices, that allows non-windsource customers to share in the savings achieved by the Limon II PPA over system avoided costs; and a deduction to cover administrative expenses of the Windsource Long-Term Contract program. In addition, subscribers to this program will need to either post a 9

letter of credit to secure contract performance or build a security fund from the net "differences" before any benefits are returned to the subscriber. In our Direct Testimony, we explain fully the mechanics of this program, how the net avoided costs will be determined, and how this program will affect both the ECA and the RESA Deferred Accounts. PROPOSED WINDSOURCE CHANGES ARE IN THE PUBLIC INTEREST Pubic Service's proposed changes to our Windsource program are in the public interest. First, with respect to the Windsource standard program, it makes eminently more sense to competitively price Windsource to respond to customer demand for more green energy (accomplished through selling them the RECs and retiring the RECs on their behalf) than to either horde surplus RECs in our inventory or only sell them to other utilities. Our own customers who are willing to pay for these RECs should have the opportunity to buy them. All proceeds from the Windsource Standard program go into the RESA Deferred Account to make fund available for the acquisition of renewable resources (or reduction in the 2 A> RESA surcharge). Competitively pricing the Windsource program in this way is clearly in the public interest. Second, the Windsource Long-Term Contract programs allows Public Service the opportunity to offer our commercial and industrial customers a program that helps them support renewable energy in a way that stabilizes their REC prices and provides a hedge against fuel price volatility. The large volumes of additional wind energy at attractive prices that are made possible by the Limon II PPA provide a good opportunity for Public Service to launch what we believe will be an innovative and popular way to market green energy. We have designed the program to meet subscriber concerns and 10

to share the savings we expect to receive from the low cost Limon II PPA with all customers. We believe that this program is designed so that all customers are likely to be better off than had we not contracted for the Limon II wind. This program through its contributions to the RESA likewise provides us with the flexibility over time to either acquire more renewable resources, or alternatively, to reduce the RESA 2% surcharge. How these additional RESA funds are spent will be subject to Commission approval in future resource planning and RES compliance plan proceedings. Finally, as we stated earlier, the changes we propose to the Windsource program are premised on the Commission approving the Limon II PPA as a system resource in Docket No. 11A-689E. The obvious question, therefore, is why should a beneficial system resource be used to support a voluntary green pricing program? As we will show in Docket No. 11A-689E, the Limon II PPA will likely provide substantial system benefits in the form of energy savings; however, the extent of those savings are highly dependent upon what happens with natural gas prices - a future that no one can accurately predict. We presume that our customers who opt to subscribe to Windsource are more willing to assume the risk that wind will outperform natural gas than are non-subscribers. That is why we believe that it is in the public interest to shift some of that risk and, correspondingly, some of the benefit, to those folks in our customer base who are more willing to accept that risk and who are perhaps more "bullish" on wind resources. As described above, our proposed program design shares the savings that are achieved by the Limon II PPA (vis a vis system avoided cost) with non-windsource customers by the contribution that Windsource customers will make to the RESA. 11

Under the Public Service proposed modified contract for differences, Windsource customers do not receive the full benefits from Limon II PPA; nor do they assume the full risk of that contract. Public Service believes our proposed programs strike an appropriate balance between retaining potential benefits from the Limon II PPA for all our customers and rewarding Windsource customers who absorb some of the risks of the Limon II PPA. For all these reasons, Public Service Company of Colorado respectfully requests that the Commission approve our proposed changes to our Windsource program. ADDITIONAL INFORMATION REQUIRED BY COMMISSION RULE 3002 Name and Address of the Applicant: Public Service Company of Colorado 1225 17th Street, Suite 1000 Denver, CO 80202-5533 Name Under Which Applicant Provides Service in Colorado. All operations conducted by the Company in Colorado are conducted by Public Service Company of Colorado, under the trade name of Xcel Energy. Representatives to Whom Inquiries Concerning the Application Should be Made. Please send copies of all inquiries, notices, pleadings, correspondence, and other documents regarding this filing to: Robin Kittel Director, Regulatory Administration Xcel Energy Services Inc. 1225 17th Street, Suite 1000 Denver, CO 80202-5533 Tel: 303-294-2242 Fax: 303-294-2329 Email: robin.kittel@xcelenergy.com 12

and Paula M. Connelly Managing Attorney Xcel Energy Services Inc. 1800 Larimer Street, 11 th Floor Denver, Colorado 80202-5533 Telephone:(303) 294-2222 Fax: (303) 294-2988 Email: paula.connelly@xcelenergy.com Agreement to Comply with 4 CCR 723-3002(b)(IV)-(VI). Public Service has read and agrees to abide by the provisions of subparagraphs (b)(iv) through (VI) of Commission Rule 4 CCR 723-3-3002. Description of Existing Operations and General Colorado Service Area. Public Service provides electric and gas public utility service in numerous areas throughout the State of Colorado. The Company also provides steam utility service within the downtown area of Denver. A full listing of Public Service's existing operations and service area is set forth in Public Service's tariffs on file with the Commission. Location of Hearing. Public Service requests that if a hearing is held on this Verified Application that it be held at the Commission's offices in Denver, Colorado. Acknowledgment. Public Service acknowledges that the Company has read and agrees to abide by the provisions of Rule 3002 (b) (XI) (A) through (C). Statement Under Oath. Mr. Kurtis J. Haeger, Managing Director Wholesale Planning, states under penalty of perjury that the contents of the Application are true, accurate, and correct to the best of his knowledge. His affidavit is attached to this Application. 13

Information Required by Rule 3002(c). Pursuant to Rule 3002(c) of the Commission's Electric Rules, Public Service hereby incorporates by reference the following information, which is on file with the Commission in Docket No. 06M-525EG: a. A copy of Public Service's Amended Articles of Incorporation, which was last filed on October 3, 2006; b. The name, business address and title of each of Public Service's officers and directors, which was last filed on September 23, 2011; c. The names and addresses of affiliated companies that conduct business with Public Service, which was last filed on March 23, 2011; d. The name and address of Public Service's agent for service of process, which was last filed on October 3, 2006. e. A copy of Public Service's most recent audited balance sheet, income statement, and statement of retained earnings was last filed on March 23, 2011. Dated this 13th day of October, 2011 Resp~mittedl By: UIf/1 /VI Paula M. Connelly, #14451 Managing Attorney Xcel Energy Services Inc. 1800 Larimer Street, Suite 1100 Denver, Colorado 80202-5533 Telephone: (303) 294-2222 Fax: (303) 294-2988 Email: paula.connelly@xcelenergy.com Attorney for Public Service Company of Colorado ----~..-... 14

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO * * * * * IN THE MATTER OF THE APPLICATION OF ) PUBLIC SERVICE COMPANY OF COLORADO ) FOR APPROVAL OF REVISIONS TO ITS ) WINDSOURCE PROGRAM ) DOCKET NO. 11A STATE OF COLORADO ) CITY AND ) SS: COUNTY OF DENVER ) VERIFICATION I, Kurtis J. Haeger, being duly sworn, do hereby depose and state that I am Managing Director Wholesale Planning, Xcel Energy Services Inc., agent for Public Service Company of Colorado, Applicant in the foregoing Application; that I have read the foregoing Application; and that the facts set forth therein are true and correct to the best of my knowledge, information, and belief. ~r/~~-"'- Managing Director Wholesale Planning Subscribed and sworn to before me this 13 th day of October, 2011. My Commission expires: may (p, ),OD/,?