If Colorado Springs Utilities goes through with a deal to lock in a discount gas price for 30 years, it could save ratepayers $53 million.

But some City Council members, who oversee the cityowned organization as the Utilities Board, are skeptical.

“I’m not real comfortable supporting an ordinance right now,” Mayor Lionel Rivera told staff last week.

“Credit conditions have changed dramatically since this started.”

Last year, Utilities staff proposed a plan in which bonds would be issued to fund payments for up to 20 percent of the city’s gas supply at a discount rate locked in for several decades.

The National Energy Policy Act of 2005 allows the issuance of tax-exempt debt to finance prepaid natural gas and electricity purchases for municipal providers.

Since then, more than $8 billion of gas prepayment revenue bonds have been issued nationwide.

Utilities began investigating prepayment bonds a year ago.

In August, officials told the council Merrill Lynch had been chosen from a field of six contenders to handle the deal.

The program calls for a separate entity, the Public Authority for Colorado Energy – set up by the city – to issue tax-exempt bonds and use the proceeds to pay a gas supplier up front for future deliveries of natural gas.

An underwriter guarantees the supplies, and the authority protects the city and Utilities in the case of default, Utilities officials said.

The city hopes to negotiate a price of 30 cents to 70 cents below normal per million BTUs.

Since Merrill Lynch was picked, it’s been among the financial institutions sent reeling because of the mortgage credit meltdown and showed a net loss of $8.6 billion recently, said Utilities general manager of financial services Bill Cherrier.

He said city officials recently met with Merrill Lynch’s vice chairman, who said the firm is “committed to the prepay market.”

Ed Easterlin, Utilities chief financial officer, said the city can’t lose. “If Merrill Lynch doesn’t deliver the gas, we don’t pay for the gas,” he said.

Rivera suggested waiting until the markets stabilize so the city can get the biggest discount possible.

“I’m looking for more savings for the customer,” he said. “Why would we go forward for 30 cents when the upper range is 70 cents?”

Easterlin said Utilities officials will try to work the best deal, but he added, “The point we want to avoid is being greedy. We want the most savings we can achieve, but we don’t want to hold out for something we can’t achieve.”

He said deals closed two years ago for 15 cents, so 30 cents is a bargain.

Utilities wants the City Council to approve the necessary documents at its formal meeting Tuesday so they’ll be “on the shelf” ready to go when a good price becomes available, Easterlin said.

The market is so “volatile,” he noted, the city might have a small window to act.

CONTACT THE WRITER: 636-0238 or pam.zubeck@gazettedev.gazette.com

Monte Nelsen of Nelsen Brothers Jewelers displayed a recast ring, left, made using a plaster mold, center, shaped from a wax mold. Photo by (BRYAN OLLER, THE GAZETTE)