By - Jim Vess

Boulder’s effort to create a municipal utility faces challenges at the ballot box and in the courts

Energize Weekly, October 25, 2017

It has been nearly seven years since the city of Boulder, nestled in the foothills of the Colorado Rocky Mountains, embarked on its quest to leave Xcel Energy and form a municipal electric utility—the next few weeks may decide the fate of the effort.

The city faces tests at the polls and before the Colorado Public Utilities Commission (PUC). A misstep in either venue could deal a death blow to the effort. Even if the city succeeds in both arenas, it is still facing a challenge from Xcel before the Colorado Supreme Court.

“It has been a difficult road, a costly road,” said Mayor Pro Tem Andrew Shoemaker. “It has taken longer than anyone expected.”

Since 2011, Boulder, a city of 104,000 and home to the main campus of the University of Colorado, has spent nearly $18 million in trying develop a municipal utility, and according to filings with the PUC, it will still take another five years.

Boulder set out to create a clean energy utility to meet its Climate Action Plan to reduce greenhouse gases. City officials concluded that the goal couldn’t be reached with Minneapolis-based, investor-owned Xcel as the community’s electricity supplier. At the time, more than half Xcel’s electricity came from coal-fired plants.

The city envisions taking over from Xcel in 2022, but first there are some big hurdles to navigate.

On Nov. 7, Boulder residents will vote on three munipalization ballot measures. The key one, Question 2L, would extend and increase the local tax that has financed the project, raising another $17 million over five years.

“This is going to be a close call,” said city councilman Matt Appelbaum. “A lot of people who support the idea and reducing emissions are frustrated and tired. It is still the right thing to do.”

Will Toor, a former Boulder mayor and an initial supporter of the effort, is now active on the “No on 2L” issue committee. “I supported it, thought it had potential, but we’ve learned a lot since then,” Toor said.

Without the special tax, it will be hard to finance the work to develop a municipal utility, Appelbaum said.

“If 2L doesn’t pass, we will be having a discussion with council on next steps,” said Heather Bailey, Boulder’s executive director of energy strategy and electric utility development.

The other ballot measures would allow the city council to continue executive session meetings on municipalization legal issues and require voter approval before the city incurred debt for a utility.

Even if voters approve all the measures, the city still have challenges before the PUC.

In September, the commission issued a decision that added some cost to the municipal plan and required Boulder and Xcel, Colorado’s largest electricity provider, to negotiate three agreements days:

  • An accord on permanent rights-of-way for Xcel to locate and access facilities inside the city needed to serve its customers
  • A revised list of assets the city wants that is “accurate and complete”
  • A settlement on how Boulder will pay Xcel for costs incurred during separation

The PUC gave the parties 90 days to conclude the agreements. The commission also rejected a Boulder proposal to share poles and substations with Xcel and another that Xcel handle all the work involved in separating the two systems and then bill the city. The commission said that each party had to do the work and bear the cost of its end of separation. This added $33 million to the city’s tab for separation bringing it to $110 million.

The city and Xcel will have to negotiate over the fate of the substations, which could include additional costs. If the two parties can’t reach an agreement, it is not clear what the PUC will do.

Still, the Boulder officials saw the commission decision as positive, outlining the steps to be followed. “We are pleased with the PUC ruling,” Bailey said. “They did give us a path forward.”

That path, however, has already added costs to the plan, and depending on how negotiations with Xcel go, could add more.

“We are open to having those discussions and figuring out the city of Boulder’s cost responsibilities,” said Nadia El Mallakh, Xcel assistant general counsel. “We are here to negotiate. The ball is in their court right now.”

Xcel has opposed municipalization. It backed opposition to the initial ballot measure that established funding for the municipal utility project in 2011. That measure passed by less than 1 percentage point. In 2013, Xcel supported a ballot measure, donating $300,000 to issue committees, aimed at limiting the municipalization process. It was defeated 2 to 1.

This time, Xcel is sitting out the election. Since the start of the Boulder process, Xcel has raised its renewable energy generation to 30 percent of its portfolio, has closed six coal-fired power plants and has a proposal before the PUC to close two more and move to 55 percent renewable energy by 2050.

When Boulder created a utility—at least on paper—in 2014, Xcel sued, arguing that the action was premature and required information on cost and reliability. In August, the state’s Supreme Court agreed to hear the case.

“We’ve always recognized that Boulder has a right to form its own utility,” El Mallakh said. “But it has an obligation to do it in a way that doesn’t harm others, doesn’t cut corners and doesn’t impact the statewide system.”

The biggest and most nagging issue has been getting a fix on how much it will cost to create a municipal utility. Early on, the city offered an estimate of $223 million. In 2013, voters passed a ballot measure capping the expenditure for Xcel assets at $214 million.

But there still is no clear dollar figure. After the PUC decision, the separation costs of untangling and realigning wires and circuits has grown to $110 million. The substations could add to that price tag.

Boulder estimates the cost of acquiring Xcel assets at $150 million or less. Xcel estimates assets at more than $200 million, and when the costs for loss of a going concern and other charges are added, the “all in cost” is around $550 million, El Mallakh said.

The resolution of these issues—if Boulder can get past the ballot measure, the PUC and the state Supreme Court—will come in condemnation court and at the Federal Energy Regulatory Commission, adding yet another layer.

Shoemaker, who is not running for another term on the city council and now opposes the municipalization, said that the costs and risks are piling up. “We tried the Boulder way, but the train is off the tracks,” he said.

A big part of the problem is that the system is stacked against a community trying to break away from a big corporation to create an independent utility, said Appelbaum, who also is not running for another term after 16 years on the council.

The city had to wrestle with Xcel to get needed data, which the utility said was proprietary, Appelbaum said. Court challenges by Xcel and the PUC dragged on. The process has taken so long that the composition of the PUC has changed twice, and each new commission has had a different approach. “The slow pace, the roadblocks, the way things are set up, the regulatory procedure, the statutory law are all stacked against doing this,” he said.

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