Don’t be hoodwinked Boulder!
Opponents have tried to scare the community by talking about the high cost of public power, but why have they never mentioned the cost of staying with Xcel?
That’s because taking an off-ramp now leads to a swamp of Xcel debt and rate increases. And they don’t want you to know about it.
First, let’s summarize what passing 2L will mean for average residential customers:
- 2L will lead to an increase of about $2 per month for two years, on your electricity bill. Total: $48.
- Then the increase will revert to its existing level of $1.20 for three more years. That money allows us to find out how much it would cost to make public power a reality in Boulder. It also gives us leverage to demand more renewable energy from Xcel.
Muni opponents claim it’s “too expensive.” What they don’t talk about is the cost of staying with Xcel. This will cost MORE than the creation of a municipal utility.
Below are a few examples of things the opponents of 2L don’t tell you—and, sadly, neither does the Daily Camera.
Xcel’s Debt Will Exceed Muni Debt
What is the MUNI debt? Opponents of 2L have been fear mongering with the size of debt that could be required to start a municipal electric utility. They estimate this to be $300 – $350 million, which is not inaccurate, although let’s pass 2L so we can get the conclusive numbers! That sort of debt could cost $15 million in annual interest. After 30 years, the debt would be paid and boulder would own the assets.
What is Xcel’s current debt and what is Boulder’s share of it?
Boulder’s share of current Xcel debt: $7.6 million in interest per year
Source: PSCo’s 2016 10-K filing with the federal Securities and Exchange Commission shows existing long-term debt of $4,210,936,000. At a conservative 4.55% (some debt is issued for more), Boulder’s 4% share is about $7.6 million per year.
What is Xcel’s new proposed debt (2017-2021) and what is Boulder’s share of it?
Boulder’s share of new Xcel debt: $11.5 million in interest per year
Source: Xcel has recently proposed capital expenditures of $6.4 billion between 2017-2021 in a recent PUC filing Bouder’s share – or 4% of that – is about $288,000,000, and the interest on that at a (low rate) estimate of 4.5% is $11.5 million per year. Please see slide 20 in Xcel’s recent presentation to West Coast Investors.)
Total Annual Boulder Interest on Xcel Debt: ~$19 million per year.
Boulder Interest on Muni debt? ~$15 million per year.
The debt that Boulder is already responsible for with Xcel is very likely to be much greater than the debt to start a municipal electric utility. Reviewing page 40 of Xcel-Colorado’s 2016 Annual Report [PSCo 2016 10-K] we can see that in addition to Xcel’s long term debt, the company has about $5.2 billion in common stockholder equity for a total of over $9 billion in debt and equity.
Xcel’s Capital is More Expensive than Public Power Capital
Not only will we almost certainly be responsible for more debt if we stay with Xcel, we will almost certainly pay more for that debt. Xcel’s cost of capital (known as the WACC or Weighted Average Cost of Capital) is currently 6.78% A Boulder municipal utility would likely have a cost of capital that is well under 6% because it will issue municipal bonds – a portion of which will be tax-free – and it won’t have equity. [see page from Docket 16A-0396E].
Who Pays Xcel’s Stranded Costs? We do!
When Xcel’s coal and natural gas plants are no longer economic, ratepayers can expect to pay off hundreds of millions of dollars on these “stranded” assets in yet another example of a corporation privatizing the profits and socializing the risks. Opponents of 2L and the Daily Camera don’t talk about this either.
Xcel Rate Increases:
9% over the next four years or $7 on your electric bill…or is it 14%?
In early October, Xcel filed for an increase in “base” rates at the Public Utilities Commission which would increase residential electric rates by 9.6% over the next four years, and up to 14% with riders. This would add about $7 to the average residential bill—and this increase can be expected to last “forever.” The opponents of 2L don’t tell you this, and sadly, neither has the Daily Camera.
$3 per month on your electric bill for fuel cost increases
Fuel Cost Increases:
On September 27, 2017, the PUC approved a $3/month increase in the Electric Commodity Adjustment (ECA) on Xcel’s bills. This rider on our bills passes the cost on to us automatically when the costs of coal and natural gas go up. [Link to Exhibit 10, Customer Impact Study in Docket 17L-0612E]
While Boulder goes through an intense campaign about a $2/month increase in residential bills, the PUC approved the $3/month fuel cost increase with less than 5 minutes of discussion. These are things the opponents of 2L—and the Daily Camera– don’t tell you.
The ECA is reviewed quarterly, and can go up and down, but ratepayers bear 100% of the risk for rising fossil fuel costs if they stay with Xcel. Xcel’s current plan is to burn fossil fuels—and have us pay the fuel costs—for decades. Xcel’s current plan is to operate the Comanche 3 coal plant until 2070.
Other Type of “Riders” on your Xcel Bill
There are many other line-item “riders” on your electric bill and Xcel’s own estimate is that our bills will increase by about $10/month or over 14% when the increases of these riders is combined with their requested rate increase. [Link to AKJ-4, Docket 17AL-0649E] Yet another thing that the opponents of 2L—and the Daily Camera—don’t tell you.
Other issues… that will affect cost of staying with Xcel
Legal Expenses Go On “Forever: While no one likes paying attorneys, taking an “off ramp” on municipalization won’t make the legal expenses go away; it will just make the legal expenses go on “forever,” as the City of Boulder is forced to pay the high costs of legal representation and expert witnesses in numerous PUC dockets.
You don’t have a voice at the PUC:
High levels of debt and and on-going rate increases, are approved in decisions that you have no control over. That’s because they are made at the largely inaccessible Colorado Public Utilities Commission (PUC). Got an expensive lawyer on tap?
Don’t be hoodwinked by the arguments against Ballot Measure 2L. What awaits unsuspecting Boulder residents on the other side of the “off ramp” from municipalization is a swamp of rate increases and debt that we have essentially no control over.
Join us in voting “Yes” on 2L!! 2L will keep our quest for renewable energy moving forward and keep our leverage on Xcel. $2 per month is a small price to pay to get the answers on public power in Boulder.