Boulder’s Energy Future Project and Municipalization Exploration Study

Update

www.BoulderEnergyFuture.com1

AGENDA

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

II. Where We Are NowIII. Where We Are Going

1. Work Plan2. Schedule3. Key Engagement Points4. Council Decision Points

Municipalization Exploration Project

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Objective: To evaluate strategies for a city-owned utility which supports energy future goals and guiding principles, determines whether those strategies can meet the city charter test for municipalization, and to provide city council with a strategy and recommendation on whether or not to proceed with municipalization.To answer the questions:• Can we municipalize? – Meets metrics• Should we municipalize? - Adds value

Why Boulder is on this path.

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• Expired franchise agreement with Xcel• Seeking new ways to achieve community

greenhouse gas reduction and climate change mitigation goals

• To give residents and businesses 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

Remember this little guy? Maybe you saw the inspirational motion graphic?

Energy Future Work Plan

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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 StrategyWhat 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 7

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• Gain community support for the ultimate

outcome• 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

Where we are now

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• Assembled state and federal legal teams• Hired Executive Director • Council approved work plan• Staffed Energy Future team • Retained financial, engineering, and

modeling consultants• Selected modeling tools and collecting data

for analysis• Formed project stakeholder work groups

Municipalization Exploration Study

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Tour of Regional Utility Substation

Where are we now: Draft Metrics

• Quantitative measurements related to rates, reliability and renewables

• Used to determine whether the Charter requirements have been met

• Worked with stakeholder work groups to develop metrics– Business Community– Academic Community– Activists

• Council to approve next Thursday, November 1512

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Charter Requirement & Proposed MetricsCharter Requirement Proposed MetricRates do not exceed Xcel’s at time of acquisition

Average cost per kWh

Revenue sufficiency Debt Service Coverage Ratio

Comparable equipment, facilities and services to achieve a SAIDI of 85 and SAIFI of .85; 15% reserve margin; and, NERC compliance

Reliability compared to Xcel

Reduce GHG emissions Short and long term plan to meet or exceed Xcel

Increased renewables Short and long term resource plan to meet or exceed Xcel

LegalLegal

– Hired FERC and Condemnation legal counsel– Evaluating various legal strategies, but to

maintain the city’s negotiation position, these have to be kept confidential

– Looking at options to mitigate litigation risks, including stranded costs

– Ongoing PUC involvement – Continue to be open to discussions with Xcel

Energy14

FinancialFinancial Evaluation

– Issued RFP and selecting financial advisor specializing in public power financing

– Acquired financial modeling tools and identified data requirements, moving forward with an Excel spreadsheet based format

– Formed stakeholder work group to vet model assumptions and assist in data collection

– Output = Revenue requirement and rate comparability

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Rate ComparisonColorado Association of Municipal Utilities (CAMU) survey results – Jan. 2012

Rate Comparison

Reliability• Identified experts• Formed stakeholder work group• Researching regulatory and legal

standards • Collecting data • Output = Reliability recommendations

for infrastructure and operations

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Reliability Comparison

Resource MixResource Mix

– Evaluated resource planning and optimization tools, selected one that already has 70% of what we need

– Forming stakeholder work group to help develop electric resource options and cost• Recruiting experts in energy efficiency, demand

side management, renewables, distributed generation, and transmission

– Output = Optimum resource plan with cost to integrate into financial model

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Asset AcquisitionAsset Acquisition and Reliability

– Formed team of staff and technical experts• Includes engineers, appraisers, GIS data analysts,

former utility (including Xcel) experts– Held kick-off meeting to vet plan and approach– Identified and collecting data for use in valuation, able

to leverage off existing records– Issued Engineering RFP and selected asset valuation ,

separation, and reliability engineers– Output = Separation plan to integrate with reliability

and resource plan21

Communications and Outreach• Website, newsletter and other

traditional communication pieces created and updated frequently– www.BoulderEnergyFuture.com

• Formed stakeholder work group• www.InspireBoulder.com for idea

collaboration on specific topics• Neighborhood outreach

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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– Modeling value and risk with assistance from

a top economic expert in this field

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Evaluation of Risk & Benefits/Impacts

Part of Risk Assessment is looking at what other municipal operations have done, both successfully and unsuccessfully.

–Longmont, Ft. Collins, Colorado Springs and many others have successful municipal electric utilities

– Also look at places that have experienced issues with their municipal electric utilities for lessons learned

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Where we are going

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Work Plan• Intense work plan analysis by staff

and work groups over next 4 to 5 months• Finalize 20 year models and

integrate between financial, resource, and decision analysis

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

Where we are going

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• Work Plan• 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

Where we are going

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Community review of strategy(ies):Your chance to provide feedback

• Follow progress on website – each working group has a web page

• Through representatives on working groups

• Public outreach to neighborhoods• Jan. 21 to 31 public input on

municpalization strategies• Review and comment electronically

Where we are going

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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

Where we are going

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Post March 2013• Independent third party evaluation of strategy• Develop plan for implementation of Strategy• Develop short- and long-term aspirational

goals• Legal filings, if required• Purchase power and resource development• Define energy services plan • Rate and incentive design • Evaluate governance structure

Get Involved TodayFollow along at www.BoulderEnergyFuture.com

• Sign up to receive E-News reports and the monthly “Energy Future Today” 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 hereContact Heather Bailey with questions/comments

• BaileyH@BoulderColorado.gov or 303-441-1923

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