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UPDATE ON TACOMA POWER PLANT RELICENSING PROCESS: The Public Service Company ofColorado d/b/a Xcel Energy is in the process of relicensing its Tacoma Hydroelectric Project with FERC. The Tacoma Project is located on Cascade Creek and the Animas River just north of Durango. Xcel owns the water rights to divert the flows of Cascade Creek into a conduit that delivers those flows to the Little Cascade Creek watershed, and then into Electra Lake. From Electra Lake, the water is diverted into a penstock to the Tacoma Powerhouse in the Animas River canyon. The relicensing process, which started in July 2004, is scheduled for completion in February 2010. Based upon a request from Xcel to proceed as contemplated in the April 2004 MOU between the USFS and the State of Colorado, representatives of Xcel, the CDOW, the CWCB, the DNR, and the USFS and BLM have been meeting regularly to collaborate on developing an alternative approach to a bypass flow to meet the USFS requirements for mitigation of the impacts of the operation of the power plant. Representatives of the Southwestern Water Conservation District and the San Juan Citizens Alliance also participate in the meetings. Xcel filed its final license application on June 25, 2008. On August 28, 2008, FERC issued an amended procedural timeline for processing the application. In accordance with that timeline, FERC issued its notice of Ready for Environmental Analysis on September 4, 2008, and the USFS filed its Comments and Preliminary Terms and Conditions related to the relicensing on October 29, 2008. To preserve its position in the event that the ongoing negotiations are not successful, the USFS included a condition requiring PSCo to maintain year-round continuous minimum flows in the reach of Cascade Creek below the diversion dam. However, the USFS has informed the parties that it remains committed to successfully negotiating a mutually acceptable alternative to a bypass flow requirement. To that end, the parties have been meeting regularly to develop and refine such an alternative, and are close to reaching agreement. Under the alternative, PSCo would provide funds to enhance aquatic resources in the Dolores River below McPhee Dam. At the time of issuance of a new FERC license for the Tacoma Project, PSCo would provide a lump sum payment to a Dolores River Water/Habitat Fund of $225,000, with annual payments of $15,000 each year thereafter, beginning 12 months after the initial lump sum payment, adjusted for inflation. )The primary purpose of the funds will be to acquire, lease, or otherwise obtain control over water rights or interests in water in the Dolores River, such water or rights so acquired to be used for the enhancement of the aquatic resources of the Dolores River below McPhee Dam. The program and process for use of these funds will be at the discretion of PSCo, USFS, CDNR, and CDOW, acting jointly, with input from affected stakeholders. PSCo and the parties have submitted a request to FERC to delay the procedural deadlines to allow the parties time to draft and sign a Final Settlement Agreement for submittal to FERC. The delay would postpone the commencement of a hearing process that would be expensive and time-consuming for the parties. To support the request for extension, the parties negotiated and submitted to FERC an Agreement-In-Principle that documents the alternative to bypass flow agreed upon to date, and provides a framework for developing the Final Settlement Agreement. The parties are requesting a 90 day extension, which would enable staff to obtain CWCB approval of the Final Settlement Agreement at the January 2009 CWCB meeting. After finalization of the Final Settlement Agreement, the USFS and the CDOW will submit recommended license conditions to FERC that are consistent with the Final Settlement Agreement, and the parties will jointly recommend that FERC accept the Final Settlement Agreement and incorporate it into the license. (Linda Bassi) ~~~~ 23 ,w ~,