[bouldercouncilhotline] Hotline: Request for additional Municipalization business case model runs

[kohls at bouldercolorado.gov]

Sender: Wilson, Ken

I would like to request that several additional model runs be made for the municipilization business case.  The current run that we have is what I would charachterize as "near best case".  I think we owe it to the voters to see what a "near worst case" model run would look like and then what some runs in between reveal.  If we are to ask the voters to fund a municipilization effort, we need to show them the range of possible outcomes.  Here are the scenarios that I would like to see run:

Scenario 1 - Near Worst Case (all numbers in $$ millions)

Acquisition of Distribution Grid                           170 (see Warren Wendling estimate)

Smart Grid City                                                  40 (could actually be more if include partner investments)

Stranded Costs                                                300

Solar Rewards buy out                                       30  ($38.6 M less depreciation)

DSM Rebate buy out                                          10  (guess based on state expenditures)

"Going Concern" costs                                        32 per year for 10 years (25% of electricity costs)


Scenario 2 -   Near Worst Case without "Going Concern"

Same as above but drop the "Going Concern" charge of $32M

Scenario 3 - Compromize Scenario A

Same as Scenario 1, but cut Stranded Costs in half (150M), cut SmartGrid City in half (20M) and reduce "Going Concern" to $15M per year.

Scenario 4 - Compromize Scenario B

Same as Scenario 3, but drop "Going Concern"

I believe these four scenarios will give us a good idea of the range of possible outcomes, in the context of the current "Near Best Case" that has been developed by staff and the consultants.  While there would be a great deal of dispute on these values, especially Stranded Costs and the Colorado law associated with "Going Concern" I think we need to see how bad the outcome could be.  I hope that Xcel will give us some indication of what they think the acquisition costs would be, which would give us an idea of the true "worst case" scenario.  They already have given us their number for Stranded Cost at $330 million.

As was discussed last night, we would not know the actual numbers until a ruling is made by a condemnation judge in Colorado and by FERC (Federal Energy Regulatory Commission) for the Stranded Costs.  These would no doubt be heavily litigated cases by Xcel and the City and could take between 1 and 5 years according to our legal consultants.  The budget for this legal battle was estimated last night by our legal consultant to be up to $6 million for the city (and could go higher).

This is serious stuff and we need to look carefully at the risks and rewards before jumping into it with both feet.

Ken Wilson