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Third Party Evaluation Information

Third Party Evaluation Information

Third-Party Independent Evaluation

Background:

On November 1, 2011, Boulder voters adopted Article XIII of the Boulder Home Rule Charter. Section 178 of Article XIII provides for the conditions under which the City Council may authorize the creation of a light and power utility. One of these conditions is "verification by an independent third-party expert." Section 178(a) states:

The city council, at such time as it deems appropriate, subject to the conditions herein, is authorized to establish, by ordinance, a public utility under the authority in the state constitution and the city charter to create light plants, power plants, and any other public utilities or works or ways local in use and extent for the provision of electric power. The city council shall establish a light and power utility only if it can demonstrate, with verification by a third-party independent expert , that the utility can acquire the electrical distribution system in Boulder and charge rates that do not exceed those rates charged by Xcel Energy at the time of acquisition and that such rates will produce revenues sufficient to pay for operating expenses and debt payments, plus an amount equal to 25% of the debt payments, and with reliability comparable to Xcel Energy and a plan for reduced greenhouse gas emissions and other pollutants and increased renewable energy.

The importance of the analysis the city conducted cannot be overstated. City Council and voters included an additional charter requirement in 2011 that a third-party independent evaluator assess the work.

The city manager selected a third-party firm called PowerServices, Inc. to verify whether the materials prepared by staff and presented to council on Feb. 26 and April 16, 2013 demonstrated that the city could form an electric power and light utility while meeting the conditions set by voters.

What did this assessment show?

In a presentation to City Council on July 23, 2013, a representative of PowerServices, Inc. said that the materials prepared by staff adequately demonstrated that the charter conditions could be met.

During the presentation, City Council was told that the utility modeling conducted by city staff and the Energy Future team was among the most robust the PowerServices team has reviewed. The evaluator concluded that Boulder could operate a municipal utility that meets the charter conditions under current modeling assumptions. Further, Boulder’s assumptions match benchmarks to other utilities across the country.

Oct. 15, 2013 - PowerServices Report on Updated Modeling pdf

July 2013 - PowerServices Original Report on City Modeling pdf

How was this firm selected?

After advertising a Request for Proposals (RFP), interviewing applicants, and receiving comments from the public as specified, the city manager selected PowerServices, Inc. to serve as the independent reviewer.

PowerServices has been providing engineering and management services to the electric utility industry, including electrical municipalities, for more than 45 years and to nearly 300 clients in 40 states.

Why did they review?

The purpose of the third party review was to make sure the city modeling included all components necessary to accurately analyze the feasibility of municipalization and that the modeling was based on assumptions commonly accepted in the industry.

PowerServices reviewed the city’s materials, including the financial model, and asked numerous questions of the staff and consultants, all under the supervision of the designated project manager. No written or verbal communication was permitted between PowerServices and city staff or consultants without a designee of the city manager in attendance.

Was there anything the evaluator did not review?

PowerServices was not asked to prepare its own model to compare results with the city’s modeling. Instead, they analyzed all of the assumptions and inputs used by the city to verify whether or not they were complete, accurate, and consistent with industry standards. In addition, PowerServices was not asked to prepare its own appraisal of the value of Xcel’s system or stranded costs. Instead, it was asked to assume that the numbers provided by Xcel for acquisition and stranded costs were accurate. PowerServices did, however, compare the amounts the city used as assumptions for stranded and acquisition costs with its indices to make sure they were in a reasonable range.

Did the third-party evaluator raise any concerns?

PowerServices raised a concern that, given the uncertainty around a carbon tax/regulation, the city should show the model results without the carbon tax as well. Staff incorporated this variation in its presentation to council on July 23. The results showed a local utility could still fulfill the charter requirements without this kind of measure.

 

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