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Financial Forecast Tool

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2016 Financial Analysis

Did you miss our information session on Nov. 10? Our presentation is available for download pdf.

In November 2016, the City of Boulder released additional financial information and analysis reaffirming that a local electric utility would be cost effective on day one and over a 20-year period and could quickly incorporate renewable resources

Other results of the analysis show:

  • Of the four scenarios published, three result in long-term cost savings, driven by relying on cheap renewable resources and accessing a less expensive power supply. 
  • The analysis estimates that a municipal electric utility would generate significant savings compared to remaining with Xcel Energy. 
  • A city-operated utility could meet each of the financial charter metrics approved by voters in 2011 and 2013.
  • The most expensive of these scenarios would occur if the city were to buy all its power from Xcel Energy for 20 years.

  • Long term savings could be used for rate stabilization, increasing the pace of undergrounding or system improvements, investing in local renewable energy projects and more. These dollars stay in the community and support meeting local goals. 

Financial Forecast Tool

According to the city’s analysis, a municipal electric utility would be cost effective— but you don’t have to take our word for it!  The Financial Forecast Tool the city used is available to the public. You can test your own assumptions on factors like the cost of power, acquisition cost, load growth, etc. and see how they impact the model cash flows.

Do you have feedback or input you'd like to provide? Let us know by emailing us at EnergyFuture@bouldercolorado.gov.

The drop-down menus below provide general information on the inputs and conclusions of the Financial Forecast Tool as well as in-depth support documents to use in conjunction with a download of the tool.

Overview

1. What is the Financial Forecast Tool and what does it do?

The Financial Forecast Tool is an in-house financial planning tool completed in November 2016.  It is used to evaluate cash flows and budgets associated with the operation of a local electric utility over time. The tool provides flexibility to change assumptions and run a variety of scenarios that enable decision-making about the utility’s financial health. 

This tool:

  • Generates budget forecasts and financial metrics and a proforma cash flow to provide to rating agencies for use in evaluating the electric utility's credit worthiness prior to bond issuance;
  • Formulaically represents relevant city financial policies;
  • Demonstrates sensitivity and impact on cash flows from varying scenarios at a case-by-case level—at minimum, changes to resource costs, capital costs, operations costs, sales and economic trends;
  • Tracks historic costs and generates forecasts;
  • Generates budgets to be placed into the city’s accounting/financial system; and
  • Evaluates key metrics related to debt service coverage, performance and liquidity.

This tool does not:

More info: Summary Document pdf

2. What were the inputs of the tool?

For the purposes of this analysis, the following range of assumptions were used as the following variables:

  • Acquisition Cost: The cost to acquire the electric system assets from Xcel Energy
  • Interest Rates
  • Debt Service Coverage Ratio: The measure of cash flow available to meet debt obligations
  • Annual Operations and Maintenance Costs
  • Load Growth Rates: How fast electric load grows in Boulder on an annual basis
  Acquisition Cost Interest Rates (Taxable/Tax Exempt) Debt Service Coverage Ratio Annual Operations and Maintenance Load Growth Rates
Low $150M 4.5/3.5 1.25 -20% 2.46%
Medium $150M 5.5/4.5 1.50 APPA Median

1.43%

High $214M 6.5/5.5 1.75 +20% 0.31%
Source City Charter/ Xcel Energy Financial Advisor Financial Advisor American Public Power Association (APPA) Xcel Energy (PSCo) Electric Resource Plan
  • Power Supply Scenarios: There are three power supply scenarios programmed into the FFT:
  1. Four years of purchase from Xcel Energy followed by a gradual step down from Xcel Energy and increasing amounts of wind energy
  2. Four years of purchase from Xcel Energy followed by a complete departure to 100 percent renewable electricity from other sources
  3. Purchase 100 percent of requirement from Xcel Energy for the 20-year forecast period

From these ranges of variables, staff used the medium case (highlighted above) as a fair and conservative proxy for what is most likely to occur.

The city used the medium case (highlighed) with variations on acquisition cost and power purchase costs to produce the four runs presented as results. The most likely case (Scenario 1) is highlighted below.

Scenario Acquisition Cost Power Supply Scenario
1 $150M

Four years of purchase from Xcel Energy followed by a gradual departure from Xcel Energy and increasing amounts of wind energy

2 $214M

Four years of purchase from Xcel Energy followed by a gradual departure from Xcel Energy and increasing amounts of wind energy

3 $150M

Four years of purchase from Xcel Energy followed by a complete departure to 100 percent renewable electricity from other sources

4 $214M

Purchase 100 percent of requirement from Xcel Energy for the 20-year forecast period

 

How did the city account for unanticipated additional costs?

Unanticipated damages can be divided into two categories: those that could awarded before bonds are issued and those that could be awarded after.

For damages that could be awarded before bonds to start-up the utility are issued, like "going concern, for instance, the city could add the additional costs into the Financial Forecast Tool and determine whether a utility could still be cost effective.

For damages awarded after the utility is running, like a natural disaster or stranded costs, the results of the analysis show that the utility would generate significant cost savings over 20 years. These savings could be used, in part, to absorb such costs should they arise.  

More info: Summary Document pdf

3. What were the conclusions of the tool?

The key conclusion of the Financial Forecast Tool is that a local electric utility would be cost effective on day one and over a 20-year period

Each scenario is based on a 20-year forecast. Financial feasibility is measured through the net present value (NPV) of savings or losses over five, 10 and 20 years. This is measured in two ways:

  1. The NPV of the difference in the revenues requirements, or earnings test, collected using Xcel Energy’s rate and the revenue requirement of the municipal utility. The revenue requirement of the municipal utility includes all expenses and the amount collected to meet the debt service coverage level set in the FFT.  Therefore, years that are negative are ones where additional revenue is likely needed to meet the target DSCR set in the FFT.
  2. The NPV of the actual cash flows over the forecast period. This analysis shows the amount of cash the utility has available to use each year after all expenses and debt payments are made. The cash flow includes the revenues collected for debt service coverage, because the utility can use money set aside as debt service coverage. Since the rates are fixed at a certain amount, this analysis shows the actual debt service coverage ratio year to year rather than the target DSCR set in the FFT.

Below is a high-level summary of the net present value over five, 10, and 20 years for each of the four scenarios listed in the tab above shown by both revenue requirement and cash flow.

Results - Revenue Requirement Scenario
Net Present Value (NPV) of Savings/(Losses)  1 2 3 4
NPV of Savings/(Losses) over 5 years    13.781M       (4.463M)       33.086M       (24.006M)   
NPV of Savings/(Losses) over 10 years 118.962M 77.611M 254.672M (72.163M)
NPV of Savings/(Losses) over 20 years 322.837M 246.01M 539.128M (101.719M)

 

Results - Cash Flow Scenario
Net Present Value (NPV) of Cash Flow 1 2 3 4
NPV of Cash Flow over 5 years    57.007M       50.465M       76.312M      30.922M  
NPV of Cash Flow over 10 years 203.258M 183.2M 333.968M 33.426M
NPV of Cash Flow over 20 years 469.196M 427.066M 685.487M 79.336M
   Debt Service Coverage Ratio at acceptable levels     Yes Yes Yes No

 

More info: Summary of Results pdf

The tool and user support documents

If you'd like to download the Financial Forecast Tool (Excel spreadsheet) and test your own assumptions, the city has created a set of support documents for you. Use the drop-down menu below to get started. Specific questions can be sent to EnergyFuture@bouldercolorado.gov. 


Other Municipalization Updates

On Sept. 28 , the city filed its Supplemental Application pdf to the Colorado Public Utilities Commission (PUC). For more information on the filing,  use the button below. The press release on the filing is available here.

Supplemental Application

Contact Us

Address Phone Email Executive Director

1101 Arapahoe Ave.

Boulder, CO 80302

303-441-3274

energyfuture@bouldercolorado.gov

Heather Bailey

baileyh@bouldercolorado.gov

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