Chris Hoffman: Muni off-ramp leads to a swamp of debtPublished on: Saturday, November 4, 2017
Opponents have tried to scare the community by talking about the high cost of public power, but why have they never mentioned the higher cost of staying with Xcel?
Taking an off-ramp on the municipalization process now just leads to a swamp of debt and rate increases, and deprives us of crucial leverage over Xcel in negotiating for more renewable energy.
For comparison, 2L will lead to a residential bill increase of about $2 a month for two years, then the Utility Occupation Tax (UOT) will revert to its existing level of about $1.20 a month for the average residence for three more years and then it’s done.
What opponents are holding back from you is that staying with Xcel will actually cost us more than creating a municipal utility. Below are a few of the costs of staying with Xcel that opponents of 2L are not telling you about.
Xcel’s base rate increases: Xcel recently filed at the Public Utilities Commission (PUC) for a rate hike of 9.6 percent over the next four years, adding about $7 per month to your bill.
Xcel’s fuel cost increases: On top of that, the PUC approved a $3-a-month increase in Xcel’s bills as part of the process that passes increased fossil fuel costs on to us automatically.
Even as Boulder undergoes an intense campaign about a possible $2-a-month increase in residential bills, the PUC approved a $3-a-month increase with less than five minutes of discussion.
This “Electric Commodity Adjustment” (“ECA” on your bill) is reviewed quarterly, and can go up and down; but we bear 100 percent of the risk for rising fossil fuel costs if we stay with Xcel and Xcel has little incentive to save money on fuel. Xcel’s current plan is to burn fossil fuels for decades and to burn coal until 2070.
Xcel’s own estimate is that, including adjustments and the rate increase, our bills will increase by about $10 a month (over 14 percent) by 2021.
Who pays for Xcel’s stranded costs? We do! When Xcel’s coal and natural gas plants are no longer viable, Xcel ratepayers can expect to be responsible for hundreds of millions of dollars for these “stranded assets.”
Xcel’s debt is very likely more than muni debt: Opponents of 2L have attempted to scare the Boulder community with the size of debt that could be required to start a municipal electric utility.
But they don’t mention that with Xcel we are already responsible for huge debts. Xcel has $4.2 billion in long-term debt and about $5.2 billion in common stockholder equity for a total of over $9 billion in debt and equity. Boulder’s 4 percent share of that is likely over $360 million, with a high percentage of that being for electricity.
On top of the $360 million, Xcel in Colorado has plans for over $6.4 billion in new capital expenditures. Boulder’s 4 percent share of these new expenditure would be and additional $240 million — with even more expenditures and associated debt likely in the future.
Xcel’s debt costs us more: In addition to Xcel’s path very likely leading to larger debt, we pay more for Xcel debt than we would for our own. Xcel’s cost of capital (known as the WACC or Weighted Average Cost of Capital) is currently 7.55 percent (combining percentage returns on debt and equity.) A Boulder municipal utility would likely have a cost of capital well under 6 percent and perhaps under 5 percent because it will bond with municipal bonds and won’t have equity.
Legal expenses that go on “forever”: No one likes paying attorneys, but taking an “off ramp” won’t make the legal expenses go away; it will actually make them go on “forever.” If we stay with Xcel the city of Boulder will have to keep on paying for expensive legal representation and expert witnesses at the PUC — unless we withdraw completely and let Xcel determine our future.
Also “forever” will be the opportunity cost of the profit that Xcel takes from Boulder every year. While there’s nothing wrong with profit per se, the approximately $20 million annually in after-tax profits that Xcel takes could be ploughed back into our community by a municipal utility.
Please don’t be hoodwinked by the arguments against ballot measure 2L. Don’t take the off-ramp into a swamp. The costs of staying with Xcel will almost certainly greatly exceed the costs of forming and operating our own electric utility.
Please join me in voting “Yes” on 2L, for the people of Boulder and not for Xcel’s shareholders and profits.
This Opinion appeared in the Daily Camera.