Power line critic hedges bet against Xcel

Billionaire Louis Bacon is spending a lot of money to combat Xcel Energy's plan to erect a fortress of new transmission lines in southern Colorado, where he owns a sportsmen's spread in paradise.

In a recent editorial in The Denver Post, he wrote how Xcel is brazenly raping the land, under false environmental pretenses, to secure double-digit rates of return on a speculative backroom boondoggle.

Now he proclaims Xcel's business model is so outrageously unfair that he wants a piece of the action.

The Denver Post this morning reported that Bacon's hedge fund, Moore Capital Management, owns Xcel stock valued at nearly $56 million and now stands to benefit from profits from the power lines. Indeed, Bacon says Xcel's revenue projections are attractive enough to make it his hedge fund's largest utility holding.

“I am expecting their guaranteed profit earnings machine will pay for my legal fees irrespective of the success of their [San Luis] Valley project,” Bacon wrote in an e-mail to Real Aspen this morning to explain Moore Capital's purchase of 2,335,000 shares of Xcel in the fourth quarter of 2010 . “They are in a no-lose position in most states — if this is what the regulatory structure is why not benefit from it.”

Xcel's spokesman Mark Stutz declined comment.

Despite his hedge fund's financial stake in Xcel, the owner of the 171,400-acre Trinchera Ranch, which Bacon bought from Steve Forbes for $175 million in 2007, isn't done fighting Xcel. Bacon's land sits alongside Blanca Peak, the state's third-highest mountain, and he wants to keep the region pristine.

Bacon, a strong skier who regularly visits Aspen, says he is using his investor know-how to expose Xcel's greed, which he claims is buoyed by the Colorado Public Utilities Commission's lax regulatory oversight.

“The ugly fact is that the more expensive a transmission project is — and, as a consequence, the higher utility rates become — the more profitable it is for Xcel,” he wrote in his editorial in last Sunday's Denver Post. “In its reports to shareholders, Xcel extols transmission lines as one of its top profit opportunities. Xcel, with the PUC's help, has the extraordinary privilege of dictating double-digit rates of return on their equity investment in transmission — costs the ratepayers bear. These extraordinary guaranteed profits to energy shareholders are added to customers' rates as soon as a shovel hits the ground. … Xcel's corporate presentation of its transmission business highlights its success in 'actively influencing policy' and boasts about its 'favorable transmission investment recovery' — 'favorable,' not 'fair' — to generate superior and safe returns for shareholders. It scores Colorado as its top state for the highest return with the lowest regulatory risk for the 'timely recovery' of investments in transmission lines — what it calls 'constructive regulation.' But it's only constructive for the shareholder.”

Xcel maintains new power lines are needed to re-enforce the reliability of the existing power grid in the San Luis Valley. The utility originally dressed the proposal in green, asserting the lines would transport solar energy from sun-drenched southern Colorado to the bustling Front Range. Xcel has since backed off its headier environmental claims and no longer has to use the new lines for cleaner forms of energy.

Bacon and other residents in the area are calling for more transparency in Colorado's utility regulatory decision-making and they have proposed alternative routes for the location of any new power lines.

Xcel's most vocal adversary, however, didn't become one of the world's richest men by not understanding how to manage risk. It is in his DNA to find victory even in defeat.

River Name / Location	Stream flow, ft3/s	Gage height ft
Gore Creek
At Upper Station, Near I-70 Twin Bridges	n/a	4 ft
Booth Creek	n/a	4 ft
Abv Red Sandstone Creek At Vail	190	6 ft
At Mouth Near Minturn	225	7 ft
Beaver Creek
At Avon	21	2 ft
Lake Creek
Near Edwards	79	1 ft
Cross Creek
Near Minturn	98	4 ft
Homestake Creek
At Gold Park	127	5 ft
Eagle River
East Fork Eagle River Near Climax	n/a	2 ft
At Red Cliff	30	3 ft
Near Minturn	234	4 ft
Wastewater Treatment Plant At Avon	671	5 ft
Below Gypsum	826	5 ft
Colorado River
Near Kremmling	402	4 ft
Near Dotsero	1,620	3 ft
Below Glenwood Springs	3,080	5 ft
Near Cameo	3,740	6 ft
Below Grand Valley Div Nr Palisade	2,160	5 ft
Near Colorado-utah State Line	4,120	4 ft
Near Cisco, Ut	4,100	3 ft
At Lees Ferry, Az	12,100	9 ft
Near Grand Canyon, Az	12,000	9 ft
Yuma Main Canal Ww At Yuma, Az	987	10 ft
Roaring Fork River
Abv Lost Man Cr Near Aspen	n/a	n/a ft
Ab Difficult C Nr Aspen	53	1 ft
Near Aspen	78	1 ft
Near Emma	476	6 ft
At Glenwood Springs	1,160	3 ft
Hunter Creek
Near Aspen	57	2 ft
At Aspen	49	4 ft
Frying Pan River
Near Ruedi	111	2 ft
Crystal River
Abv Avalanche Crk, Near Redstone	610	2 ft
Arkansas River
Ef Arkansas R At Us Highway 24, Nr Leadville	46	3 ft
Near Leadville	85	5 ft
Below Empire Gulch Near Malta	156	3 ft
Below Granite	453	4 ft
Near Nathrop	451	4 ft
At Parkdale	464	3 ft