Revenue Stabilization Agreement
October 27th, 2006
I have this feeling about the proposed deal between Red Wing and Xcel. It’s been in the works for a year and a half now, and is due to be approved. It was on the last Council meeting agenda until I raised this little problem — the copy on-line was missing all the odd pages, and it’s hard to comment on something that you can’t read! So they did continue that…
In the meantime, now I’m starting to go over this and there are a few things that jump out.
1) The “valuation” of the property, a 1,060MW plant, is listed at $400,000, which is 1/4 of the cost of the 600MW Big Stone II plant. It seems at minimum, it should be twice that. Apparently valuations can be challenged, and ARE challenged because they’re regarded as arbitrary, there’s not a concrete formula used. Valuation is in the Tax Statements in the Exhibit, and can also be found using the PIN at the County site. Go to Property Information and then Property Tax Information (but I’m getting “ERROR”).
2) There’s this out for large capital expenditures. Extraordinary Investments, para. 7. Ummm… this is an aging plant, and is in the process of being refurbished, and it seems it will be, in large part, prior to relicensing. Steam Generator I has been replaced, and Steam Generator II is on the way (or done?), turbines are going to be replaced, and it seems that by not counting the increase in value, what they’re doing is restoring the major components and then those would not be included in the valuation. Sure, that’s good for Xcel, but what does it do for us? They’ll end up with a like-new plant with a $400,000 “value.” Because there is an exemption for these costs, those agreeing to this deal should have a replacement schedule with costs, so they know what they’re waiving. It seems to me that if this agreement was not in place, the valuation would rise, the gross valuation would rise with these expensive replacements, even if the rate itself goes down.
3) Isn’t there an inherent value in relicensing and in avoided costs when they can use this plant and not build another? Like avoiding costs of around $3 billion, using Big Stone as a guide?
4) Though the agreement is predicated on continued legislative efforts to restore the tax revenue, through any number of means, and the agreement allows for these continued efforts, assumes it, yesterday Sen. Steve Murphy was very clear that he had no intent on addressing this legislatively, “that would be going backwards.” If his constituents are counting on his help on this, on his supporting them and not his employer, Xcel, we have a problem here.
There are a few things to weigh. I would guess that what Xcel is doing is planning to make improvements and not have to account for the benefit they receive, only that they can deduct the cost. They are positioning the plant for relicensing, and I’d bet they are also positioning the plant as a “stranded cost” a la deregulation, where we pay for the privilege of imprudent PUC decisions to invest in infrastructure. And I can’t imagine they are doing this out of the goodness of it’s radioactive little heart, so they must gain, and not have their gain recognized in a way that cost them anything. So is this a set up we want?
Here’s the power point that explains the deal:
Here’s the deal itself, in several parts because it wouldn’t upload:
city-council-agenda-report-resolution-oct-23.pdf
(Agreement still too big, on to Filezilla, maybe posted soon)
Leave a Reply