Boulder’s Energy Future Project and Municipalization Exploration Study

www.BoulderEnergyFuture.com1

Agenda

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I. The Municipalization Exploration Project and Why It’s Important

II. Where We Are Now

III. Where We Are Going1. Work Plan2. Schedule3. Key Engagement Points4. Council Decision Points

Municipalization Exploration Project

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Oobjective: To evaluate strategies for a city-owned electric utility that support community goals and guiding principles, determine whether those strategies can meet city charter test for municipalization, and to provide City Council with a preferred strategy and recommendation on whether to proceed with municipalization, or not.

To answer the questions:• Can we municipalize? – Meets Charter reqs• Should we municipalize? – Adds value

Why Boulder is on this path

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• Seeking new ways to achieve community greenhouse gas reduction and climate change mitigation goals

• To give the community access to:– Reliable power that is increasingly clean and

competitively priced– Local decision-making authority on where power

comes from and new investments in emerging technology

Energy Future Work Plan: Timeline

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Phase 1: Develop StrategiesPost Nov. 2011 Election to 1st Qtr 2013

Phase 2: Strategy Implementation1st Qtr 2013 to ? (1-5 years)

Phase 3: Operationalize StrategiesUpon Completion of Phase II

Formulating a Strategy

What do we mean by strategy?• How and where we get our energy resources• What business structure meets financial targets• What assets do we need to serve our community• What investments do we need to make in electric

infrastructure• How we achieve excellent reliability• Other components needed to support the

community goals

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Financial Strategy Development Inputs

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Where we are now: Work Plan

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Objectives:• Roadmap for creating utility of the future

• We don’t want to recreate what Xcel has built• Gain community support and/or understanding of

outcome (address as many concerns as possible)• Ensure integrity of the process• Documentation for third-party evaluation

Consultants, technical engineers, local academics, community stakeholders and other interested individuals all contributing to analysis

Charter Requirements & Metrics

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• Charter requirements are absolute conditions that must be met prior to creating a utility. • These are the “floor” or baseline requirements• Won’t be the only criteria that will be used to

make a decision on moving forward.• If Charter requirements are met, we will know

that we CAN, but we still won’t know if we SHOULD. • Analysis in Phase II will determine if enough

value will be added to the community by forming municipal electric utility.

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Charter Requirements & Metrics

Charter Requirement MetricRates do not exceed rates charged by Xcel at time of acquisition

Average cost per kWh of electricity by class as provided by Xcel compared to Xcel’s average cost per kWH at time of acquisition

Rates produce revenues sufficient to pay for new utility’s operating expenses and debt payments plus an amount equal to 25% of debt payments

Debt service coverage ratio measured by dividing net annual operating income by total annual debt service, using standard rating agency methodology

Reliability comparable to Xcel 1. Maintain comparable equipment facilities and services as Xcel at acquisition to achieve same SAIDI and SAIFI

2. Maintain adequate reserve margin of 15%3. Meet NERC compliance requirements

Plan to reduce greenhouse gas emissions and increase renewable energy

5-year plan demonstrating emissions reductions and increase in renewables proportionally beyond levels achieved by staying with Xcel at acquisition. 20-year plan demonstrating city’s carbon intensity from electricity will be less and renewables will be greater than Xcel’s.

Where we are now–Formed stakeholder working groups–Hired consultants to support financial, separation, reliability, and decision analysis work–Developed and refined cost and resource models–Collecting and vetting data and assumptions

GOAL – refine existing cost model to accept more complex inputs and provide more complete outputs to show financial viability of proposed strategies.

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Evaluation of Risk & Benefits/Impacts

Risk Assessment is part of entire work plan and is critical to understanding impact of various strategies• Strategies will be vetted for economic and

community benefits/impacts• Risks will be identified, as well as ways to mitigate• Opportunities will also be identified, and seized, if

possible• Modeling value and risk with assistance from a

top economic expert in this field12

Next Steps

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• Intense work plan analysis by staff and work groups over next three months

– Finalize 20-year models and integrate between financial, resource, and decision analysis

– Collect data and do projections of cost, load growth, etc.

• Review best practices and benchmark with comparable municipal utilities

• Develop risk matrix and prioritize strategies• Synthesize work group recommendations and

rank using cost, risk, value criteria

Next Steps

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Community review of strategy(ies):

The public’s chance to provide feedback • Follow progress on website – each working

group has a web page• Public outreach• December 11 Council roundtable and

workshop – present white paper and project update

• Public comment - Jan. 21 to Jan. 31• Review and comment electronically• Tentative plans for community meeting

Next Steps

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Strategy presentation to City Council in the first quarter of 2013• Council will advise on moving forward• Will be an “off-ramp” opportunity

Post March 2013• Develop plan for implementation of Strategy• Legal filings, if required

You May Have Heard…

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Inaccurate information circulating through the community:

• Process hasn’t been clear and transparent and we’re not releasing consultant information.• Almost all project documentation, aside from

some confidential legal work, is available at www.BouldersEnergyFuture.com, including information on paid and volunteer consultants, budget figures, and consultant reports.

You May Have Heard…

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• Industrial and commercial businesses will leave if we move forward, because rates will go up and reliability will be an issue.

•Ongoing contact with both sectors, and have included them in our work as much as possible.

•Per voter-approved Charter, city would have to meet or beat Xcel’s rates at start-up, and reliability would have to be at least as good as Xcel’s currently is. Will be held to same NERC standards.

• In some communities, munis and related rates are a huge draw for business

You May Have Heard…

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• Metrics created so city can avoid off-ramps, and March decision is last off-ramp opportunity.

• Metrics aren’t only decision criteria. They determine if city can meet the Charter requirements and answer “CAN we municipalize?”

• Community adopted goals will also be used in decision analysis process to answer “SHOULD we municipalize?”

• Need to consider value added

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You May Have Heard…

• City will have to annex county enclaves and subdivisions

• Not a foregone conclusion• City has communicated with neighbors about

the separation evaluation that is occurring now and pledged to keep open lines of dialogue

• Lawyers examining possibility that city could provide electric service to areas that are not within city limits with PUC oversight of rates, if any higher than in-city rates

Get Involved Today

Follow along at www.BoulderEnergyFuture.com• Sign up for E-News reports and monthly newsletter• Use online comment form for questions/feedback• Invite us to present at your meeting

Provide feedback on specific questions/areas at www.InspireBoulder.com• Strategies will be vetted here

Contact Heather Bailey with questions/comments• BaileyH@BoulderColorado.gov or 303-441-1923

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