[bouldercouncilhotline] Hotline: Energy Future questions -- Revised

[kohls at bouldercolorado.gov]

Sender: Appelbaum, Matt

[Oops...I left out a couple of items, so here's the complete version.]

I suspect all of these are being worked on, but I just want to make sure that a few key issues are thoroughly evaluated in time for our July meeting - and if possible, in time for this week's public session on the 28th:

-- There seemed to be some agreement on council that any needed up-front funds for municipalization (or, presumably, for the even more expensive Xcel proposal) might come from an increase in the current CAP tax.  But that tax was carefully set up to charge each customer class (residential vs. commercial, primarily) based on their expected "returns" from CAP programs.  That assumption clearly would not be appropriate any longer, so the relative contributions would need to be completely reevaluated.  Perhaps that makes the CAP tax a poor choice for this purpose, but it still, for me, seems better than an entirely new, earmarked tax of some sort.

-- Xcel's proposal essentially has Boulder purchasing a wind farm (RECs) and then hedging energy costs.  While we presumably couldn't exactly replicate their proposal (and thus might not be legally required to get competitive bids), could we effectively do so by acquiring similar RECs and then in various ways hedging energy costs?  What would that entail?  Would we really lose any benefits, or would we gain control and completely resolve issues like "avoided costs" and "curtailment" (among others) that come along with the Xcel deal?  Why wouldn't we just go out for a competitive bid regardless, unless there are some essential components of the Xcel deal  that we couldn't replicate?

-- More generally, we know that staff is looking at the potential benefits of setting up a "municipal energy authority" regardless of how everything else plays out (as is at least one of our neighboring cities).  I'd like to understand quite specifically what this would - and more importantly, what this wouldn't - allow Boulder to do, assuming that municipalization isn't pursued/approved.  For example, since we would still get our power from Xcel (with or without a franchise), how are rates set?  Are all of the limits on solar gardens still in effect?  Can we buy power from other providers and actually use it, or just get the RECs, or what?  Are we still (presumably) on the hook for all of Xcel's fossil fuel plants/projects?  These may not be the right questions, but I'd like to see (and I think the public would like to see) a very specific list of things we can do and things we can't do - particularly since some folks seem to believe that even without a muni there would be all sorts of energy tools at our disposal.

-- While it's hard to argue with "environmental justice," I'm concerned about its vague definition and the seemingly open-ended ability to lower rates for low-income folks.  I'd like to know how this is currently handled by Xcel/PUC, who pays for subsidies, what the limits are, etc.  For what it's worth, I'd prefer to get rid of this entire concept for now, and keep rates for everyone equal, with no subsidies.  If a muni wants to, in various ways, help out lower-income folks, I think a more direct approach would be far more preferable.  And for our models, although it would presumably have only a very small effect, I'd like to remove the lower rates for low-income folks.

-- No doubt much emphasis will be placed on the reasonable-worst-case-scenarios (for both a muni and for Xcel's proposal).  For the muni, I think we need to be extremely clear that the worst-case scenario is most likely spending the time and money to pursue it and then backing out because it just wouldn't be cost-effective due to final acquisition costs, interest rates, or whatever.  So, even if a reasonable-worst-case business model suggests that, for example, energy costs for customers would rise significantly, it's essential to note that we simply wouldn't pursue that route - assuming that at the time we got all the final, actual costs we still had an exit strategy (which is why I've repeatedly asked for a process timeline with off-ramps).  Note that for Xcel's proposal (however it turns out after our negotiations), the reasonable-worst-case is whatever we model now, since that proposal comes with a 20-year agreement that has no practical off-ramps.

-- Finally, and obviously, I trust we will get very, very specific comments on the issues raised re our consultants' initial analysis of acquisition (and some related) costs.  While we can't necessarily respond to and evaluate every concern, any credible issues should be resolved as much as possible.  If that results in an increase in estimated costs, so be it.

Thanks -- Matt