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

[kohls at bouldercolorado.gov]

Sender: Appelbaum, Matt

So, at the grave risk of being yelled at for having a “discussion” on Hotline, I’d first like to second both Macon’s and Susan’s excellent comments.  And then focus, again, on process, not substance.   It will be impossible for council to vote on how the modeling with proceed, which cases/assumptions will be made, etc.  I suggested a couple of ideas during the public meeting last night, and I’ll leave it to staff to determine if any of those are helpful.  Certainly council can ask questions – for example, if there are any credible issues with the acquisition cost analysis they should be dealt with  – but they cannot all be answered, both due to time, and, importantly, as Macon points out, strategic implications.

Finally, and for the umpteenth time, we need to more generally deal with this “discussion on Hotline” issue.  It simply cannot be the case that the first person to send in a comment, no matter how unrepresentative or irrelevant or for a particular political purpose, gets the final word, with staff all too often then jumping to respond, or the media picking up on it as if it were the sense of the entire council.  And so it simply must be acceptable for others to respond, as Macon and Susan did so well in this case (and, for example, as I did re Lisa’s question of a few days ago).  We could, I suppose, “make believe” that we’re sending in a completely separate and independent Hotline that just so happens, by sheerest accident, to cover the same issues as the Hotline we’re **not** responding to, or we could get real and just respond, even if that implies a dreaded “discussion.”  However we handle this, on this most controversial issue or on others sure to come, it can’t be that the first person in gets the first, last, and only word on a topic.
--Matt
From: Osborne, Susan
Sent: Wednesday, June 15, 2011 12:06 PM
To: Wilson, Ken
Cc: HOTLINE
Subject: Re: Request for additional Municipalization business case model runs

Dear Ken and others,

If there is much cost associated with running these models, I think we should talk further.  From my perspective, imagining worst case scenarios - given the level of uncertainty about almost all of the values associated with acquiring the distribution system - is a fool's errand. I would also spend no time or money on running a "best case" scenario.

What we are presented with is a possible ballot option which would allow us to get the most important numbers settled before bonds are issued and any proceeds spent. I support Matt's idea that as a part of any ballot item that includes maximum bonding capacity there be assurance to the voters that costs to buy the distribution system would still allow substantial rate parity... Isn't that what's important?

I am appalled by the notion that Xcel is planting suggestions of all the ways it will delay a fair determination of value and energy service should Boulder citizens decide they want their own utility.  It simply confirms the worst about our utility provider and denies the simple reality of a freely chosen franchise.

S
Susan M. Osborne, Mayor
Boulder, Colorado
303-513-3533

Sent from my iPad

On Jun 15, 2011, at 10:07 AM, "Wilson, Ken" <WilsonK at bouldercolorado.gov<mailto:WilsonK at bouldercolorado.gov>> wrote:
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