Consultants: City hydro project estimates flawed
December 10, 2011
ASPEN – With the Aspen City Council set to hold two separate Monday discussions on the Castle Creek hydropower project, a Washington, D.C.-based environmental group has issued a report that slams the initiative as being financially unfeasible.
Matt Rice, Colorado director for American Rivers, said his organization wasn’t trying to “drop a bomb” in advance of the city’s meetings.
He said the report, released Thursday, was intended for council members, city officials and others involved in the debate over the merits of the project. Rice also expressed disdain for a press release the city issued Friday stating that the American Rivers-commissioned report contains “egregious errors.”
“We didn’t really want to get involved in this kind of garbage,” he said.
A work session at 1 p.m. Monday is designed to give council members answers to some long-pressing questions surrounding the project; the council’s regular meeting Monday evening will include a public hearing on a zoning request for the proposed facility, dubbed the Castle Creek Energy Center.
At the core of the organization’s report, researched and prepared by Tier One Capital Management LLC, is an estimate that the project will cost between $16 million and $18 million, with $7.3 million in interest payments over the life of bonds used to finance construction. The city of Aspen has disclosed a capital cost of $10.5 million, according to Tier One.
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The city’s financial analysis, Tier One claims, does not include debt service on the $5.5 million bond that local voters approved in 2007. “Debt service will add significantly to the cost of the project, and it is inappropriate not to consider debt service in assessing financial feasibility,” the report states.
“Tier One concludes that the project is not cost effective,” the report continues. “Given the very high price of this project and debt service extending for 28 years, future electrical rate increases are a likely result.”
The city’s Friday statement says that Tier One’s alternative analysis of the project’s costs includes “many factual errors and egregious mistakes.” The city listed what officials have determined to be “three of the most fundamental” errors:
– Tier One “incorrectly states that the city of Aspen didn’t consider debt service” in its analysis.
– Tier One’s conclusion that the project should be abandoned is deeply flawed “due to its failure to consider only the incremental costs needed to complete the project [as] opposed to considering investments already made with benefits for projects other than the hydro plant.”
– Tier One “assigned ridiculously low inflation rates” for the cost of coal — a power source on which the city is hoping to lessen its dependence through hydropower – using rates between .3 percent and .6 percent annually.
The report “should not be used to evaluate the merits of the project and its conclusion that the hydro plant will have a $16 million price tag is wrong,” said Mitzi Rapkin, city of Aspen community relations director, in a prepared statement.
Rice said his organization will offer a presentation on the Tier One report at City Hall at 11:30 a.m. Monday, prior to the council’s 1 p.m. work session.
“Our interest is in helping Aspen achieve its renewable energy goals in a smart, efficient, environmentally friendly cost-effective way,” he said. “Our consultant has talked with [city officials] several times asking specifically if the capital cost numbers that were given to us, and are publicly available, included debt service, and the answer every single time was no.”
The Tier One report also suggests that the city pursue cheaper sources of energy, such as purchasing additional renewable supplies from the Municipal Energy Agency of Nebraska (MEAN) at affordable rates.
“The city of Aspen did not compare and consider the economic feasibility of renewable project alternatives, such as constructing or participating in local solar or wind projects,” the report states. “The [city’s] conclusion that the only project alternative is to continue purchasing coal-fired power from MEAN distorts reality.”
The proposed Castle Creek hydroplant has been a source of controversy since the 2007 bond election. Opponents of the project say that voters weren’t fully aware of what they were approving when they supported the bond issue.
In mid-September, a group of local landowners touting themselves as an environmental organization, Saving Our Streams, filed suit in state water court to seek a ruling on whether the city of Aspen abandoned its right to use water from Castle and Maroon creeks for the proposed hydroelectric facility. In response, the City Attorney’s Office and a Denver consultant filed a document asking the court to toss the lawsuit, citing evidence of the city’s historic claim of water rights for Castle and Maroon creeks.