Boulder, Xcel haggling over assets; $20M spent on muni so far

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Photo by American Public Power Association on Unsplash

Boulder to date has spent $20 million toward its effort to take over Xcel Energy’s system in the city and create a municipal-owned, renewable-powered utility. That’s according to a year-end report released recently on expenditures for the municipalization process, known in shorthand as the muni.

Negotiations are still ongoing as to what, exactly, Boulder will be buying from Xcel — and how much it will cost. State regulators in September 2017 mandated a list of agreements for the two sides to work out before the separation could be approved, a decision that followed two failed application attempts from Boulder.

Xcel and Boulder were initially given 90 days to reach the agreements, but after four extensions and 17 months, the parties are still haggling.

It’s the list of assets that is holding things up. A list was filed to the Colorado Public Utilities Commission on Oct. 26, but a dispute has since arisen over what should be included.

“We’re trying to figure out what it is they don’t agree with and what needs to be fixed, if anything,” said Kathy Haddock, senior assistant city attorney. 

Haddock said that Boulder is “only asking” for a “portion” of Xcel’s property that is needed to distribute electricity, indicating that the list might include non-essential assets. An Xcel spokesperson also confirmed the dispute but did not elaborate on the details. 

There is not deadline for Boulder and Xcel to agree on assets. At the request of both parties, the PUC is taking a timeout: “On Feb. 8, the PUC granted a request by Boulder and Xcel indefinitely staying all pending matters in the proceeding,” PUC spokesperson Terry Bote said via email.

Despite the joint request for a stay, Haddock seemed to suggest that the city was somewhat perturbed by the lack of urgency on behalf of Xcel and the PUC.

We thought it was done in October,” she said. “That was late from what we were thinking,” given that agreements were supposed to have been reached by the start of 2018.

When asked about a timeline, Xcel spokesperson Michelle Aguayo said that a hard deadline was “a city thing more than it is an Xcel Energy thing.”

“The city has its objectives; our focus is on making sure (the separation) doesn’t negatively impact our remaining customers,” she said. “From our standpoint, we’re continuing the work as it needs to be done.”

The discussion over assets is separate from the one over the purchase price, Haddock and Xcel confirmed— the stickiest subject and, both sides have said previously, the one that will likely send the matter to court. Boulder’s council in December re-authorized the city to file the lawsuit, but Haddock said there is no timeline for that while negotiations continue.

“As long as we’re having good-faith negotiations with Xcel, we don’t need to file condemnation,” Haddock said. 

A successful negotiation or a court ruling is needed for Boulderites to know just how much they’ll have to pay for their own electric system. City officials have in recent months declined to provide estimates for what Xcel might demand, but voters have approved up to $214 million.

The city so far has spent $20.3 million to reach this point in negotiations, according to an information packet recently released by the city.

The report was short on details, simply breaking the spending down into two main categories: $10,692,038 for “operating” expenses and $5,298,896 for “personnel.” Boulder is on the hook for all Xcel’s costs related to separation, including paying employees and lawyers for negotiations.

Boulder’s staff contributions have totaled $4,023,932 since 2012. In 2018, 32 staff members dedicated at least a portion of their time to the muni effort.

Half the spending has occurred in the past three years; as the Daily Camera reported in March 2016, muni spending totaled $10.4 million at that time.

The bulk of all the money spent on muni has come from the utility occupation tax, which raised $17,880,311 between 2012 and 2018. The city manager’s contingency fund kicked in $613,876 along the way, and other unspecified one one-time funds of $1,545,480 were used as well.

Community support for the effort has dwindled over time, but remained strong enough in 2017 to pass an extension of the utility occupation tax, which passed by just over 1,000 votes.

Voters will have to weigh in once again on moving forward, once it’s known what the total cost will be to separate from Xcel and build and design the city’s own system. Staff hopes to have that information by early 2020, in time for a vote that November. Others, including some council members, have cast doubt on that timing, given that court proceedings for condemnation could stretch over years.

Leslie Glustrom, the city’s staunchest defender when it comes to municipalization, said even she will need to know the final numbers before committing herself fully to a Boulder utility: “I’m not an advocate for the muni,” she said, “I’m an advocate for muni exploration.”

What Glustrom and others have continued to believe is that Boulder can introduce more renewables more quickly into the grid than Xcel. Even with the company’s recently announced goal to eliminate carbon emissions by 2050, 73% of Xcel’s energy in Colorado still comes from fossil fuels.

“With great respect to the progress they’ve made, with deepest respect and gratitude for that, we can do better,” she said.

To that end, Glustrom shows up every two weeks at Boulder city council meetings, power point presentation in hand, to encourage and extol the virtues of the muni process so far. Joining her at nearly every meeting is Patrick Murphy, in many ways the face of the anti-muni camp, with his own presentation. (Most recently, it’s taken a Christmas-y direction: The Muni Naughty List.)

Murphy also thinks Boulder can do better; he just thinks the muni is the wrong way to go about it. The $20 million spent so far could have been put to better use by funding solar projects or other city-led efforts to reduce greenhouse gases.

“We could put (that) into incentives and make great progress in reducing our carbon footprint,” Murphy said. “We’re already way behind the curve.”

Roughly half of Boulder’s emissions are attributable to electricity, according to the city. Earlier this year, Boulder announced it had reduced emissions by 16 percent from 2005 levels by the end of 2017, three years earlier than expected. But more money will be needed to reach the target of 80 percent reductions by 2050, staff said in an early February information packet: between $4-5 million each year.

However, that figure is based on the expectation that Boulder will have its own operational utility by 2024.

Boulder in mid-February launched a survey to gauge community support for other climate initiatives; results were expected Friday. Council members will be meeting in pairs with chief sustainability officer Kendra Tupper over coming months, according to the information packet. (No more than two elected officials can be involved in discussions, or else the meeting must be open to the public.)

As is perhaps to be expected, Murphy and Glustrom both have different takes on the $20 million that has gone toward the muni so far. Murphy points to how the total breaks down in daily spending: $9,273 each day for the past six years (2012-2018). While that sounds like a lot, Glustrom said, it “equates to a latte or two a month for most families.”

— Shay Castle, boulderbeatnews@gmail.com, @shayshinecastle

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14 Comments Leave a comment

  1. Thanks Shay for doing the story.

    I look forward to a story that reports on the Boulder RFIP and the 89% renewable energy at about 2/3 the cost of Xcel. That is just the latest example of the likelihood that Boulder can do better.

    Also, it isn’t really accurate to say that the City could use the money from the UOT for Patrick’s ideas. One person can’t reverse a community-wide vote and claim the money can and should be used in the way he wants it to be used.

    We have the CAP Tax which is used for all the other climate and energy work and if Patrick wants money to do what he wants to do then he needs to go to the hard work of getting a measure on the ballot and getting it passed. That is how the system works and I object to having his ideas reported as though they could be done the way Patrick wants it done just because he shows up at Council every other week. That isn’t accurate reporting.

    Thanks

    Leslie 720-341-4154-cell

    Sent from my iPhone

    >

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  2. HEY Murphy, how about a retort?
    Thank you Shay for providing in-depth coverage on this topic. I think it’s very fair to ask these sorts of questions.
    – What have we gotten for our $20MM?
    – Where else could we have spent $20MM (i.e. what was the opportunity cost)?
    Of course, I’d prefer if we asked these sorts of questions before we made the decision.

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    • Hey, Osman. Thanks for the comment. Just FYI, I will be requiring people to use their first and last name when posting. I know who you are (Osman Parvez) so I’m letting this one stand.
      In response to your above questions (which are good ones) Boulder is limited in its ability to direct the money it has set aside for the muni. Voters approved it for that, so that’s where it had/has to go. But I get the philosophical question of what it *could* have been spent on if it hadn’t been approved specifically for the muni, and it’s a fair one to ask.
      Thanks for engaging!

      Like

  3. Shay, Leslie, Patrick –
    Can you shed some light on the RFIP analysis (which proponents claim shows a savings on energy costs) and how it integrates debt service and other costs into the equation. My concern is the x-factor sunk costs that everyone is tiptoeing around… will it be $214M or $500M or $750M? When Xcel asks for $1B in court, $500M doesn’t feel like an unlikely compromise by an arbitrator in a town where property is expensive. We all know from an Xcel bill that the actual energy component is one of many (4? 8?) line item charges that include a variety of taxes, surcharges, fees, and other charges unrelated to direct electric power cost. So – tell us the “people on the street” – when we look at the other 50% of the bill each month, will that part of the cost be equal, lower, or the same? The technical and legal jargon that has dominated this discussion for years now is not understood nor analyzed by 99% of the citizens, its akin to reading EULAs and no one has the time or patience. Will Boulderites see a lower total electric bill, as it is being implied, or not?
    Thanks

    Like

    • Hi, Nick. I will certainly look into that. I’m dipping my toe very slowly into muni reporting; there’s so much I don’t understand. I’ll add RFIP analysis to the list of things to explore.
      Just FYI, I require all people posting to use their (real) full first and last name. I know who you are (Nick Fiore) so I’m letting this one slide.
      Thank you for your thoughts!

      Like

    • HI Nick,
      FYI I got solar put on my roof for no money down and a 20 year lease that is less than my average monthly electric bill and will never go up. Because my electricity zeros out, I don’t pay all those taxes and fees, and only $0.69 for the Boulder carbon taxes. For example, My monthly lease of the solar panels on my roof is $36.80. In 2011 my average monthly electric bill was $46. I still have to pay a connect fee to Xcel of $5.41 So my electric bill each and every month is about $43. So I actually save 3 bucks a month and I am 100% renewables. The company I used back in 2011 (Solar City, now Tesla) got all the credits, rebates etc. Of course the rebates are less now, but if Boulder made a one time $2,000 incentive to put solar on your roof it would equal the financial conditions back in 2011. A $2000 incentive basically reduces the monthly payments by $2. The Muni is a vanity project in my opinion because if carbon reduction was a real goal, we could have been doing all of this for the last 8 years, and that time and money will never come back.
      Patrick Murphy

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  4. If you count the number of comments you will see that there are only seven but at the top to the list it says 8. Don’t you wonder what that missing comment is? If not, then I have to wonder about you.

    Let’s see if smaller segments works better.
    Leslie has missed the fact that the City Council can also put this to a vote and thus demonstrate that they truly want to democratized the Muni. They have already de-democratized the muni by preventing a vote on two Xcel proposals that would allow use to join with Xcel to meet our goals or conduct a negotiated buyout that Xcel was providing a low value and Boulder used a much higher value just to reject that option. That is what is known as a bad faith negotiation. The ballot issue could simply state that the currently collected carbon taxes could only be used for solar incentives, wind incentives and renewable energy certificates. If we had done that in 2011 we would be well on our way to 100% renewables for our electric supply, instead of 8 years of nothing.
    The actual cost of the Muni is not $20 million, but actually $30 million. The deceit that leaves out the $1.2 million in lost undergrounding per year that we lost starting in 2011 is clear evidence that truth is a victim of the Muni. Xcel retuned $1.2 million back to the city each year to be used to underground power poles. So 8 X $1.2 million = $9.6 million and we are already into the first quarter of 2019. That is money that we claim we will still need to spend if a Muni is created. You have heard the saying that a penny saved is a penny earned, well $10 million lost is $10 million SPENT. That $10 million still goes out as part of our rates each year but does not come directly back. The reason we got that money was because under a franchise it was much more efficient for Xcel to have right-of-way to powerline corridors, so Xcel provided that as compensation to the city for the improved efficiency. Now Xcel has to spend more time and money every time they want to access their facilities.

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  5. The giant elephant in the room is stranded cost. Boulder used a value of Zero in all their calculation over the 8+ years, and after years of complaining to them they finally agreed to include it in their financial spreadsheet on December, 2017. It was not until a year later that they actually included a cell in the spreadsheet that allowed the entry of a value. BUT they still left that value as zero! I estimate that the stranded costs will be upwards of $200 million. So what is stranded cost? Xcel is required by the PUC to include Boulder in all future planning. There is nothing about the Muni “exploration” that allows them, or us, off the hook for the costs of those efforts. For example, the $1 billion Rush Creek Wind Farm means that Boulders share of the expenses should be about 3.5% x 1 billion or about $35 million. Our share of the Coal plant shutdowns and emissions clean up add to that as well. It is basically like a mortgage payment and our share of the mortgage is about 3.5% since Boulder is about 3.5% of Xcel’s generation. The actual determination of what stranded costs will be is to be determined by the Federal Energy Regulatory Commission (FERC) and is simplified (sort of) by a formula of only 3 items. The formula goes like this (Total revenues minus the transmission elements and any transmission that can be resold) times the number of years Xcel could reasonably expect to serve Boulder. As Leslie and others love to proclaim, the total revenues from Boulder is about $120 million. The number of years that Xcel could reasonably expect to serve Boulder could at least be 50 years since that is how far out their planning goes. Let’s just be conservative and say 10 years. So just ignoring the minus element in the equation, that comes to $1.2 billion. If just 5 years is what the FERC decides then it would be $600 million. Remember that Boulder has always used ZERO for this in their financial calculation and advertised the “good” news while leaving this elephant out of the equation. Boulder can pay off the stranded costs by just continuing to buy electricity from Xcel until the debt is covered, which would be many years after the Muni begins. So for years past day-one we would just be and Xcel customer. So what about the “minus” part of the equation? Boulder claims that we/Xcel can easily sell off the excess electricity and quickly (or in Boulder’s financial spreadsheet, instantly) get the first value to zero. Here is a logic exercise for you. Boulder proclaims that their Request for Indicative Pricing (RFIP) shows that we could get cheap renewables easily. So who exactly is going to buy the slightly higher price for the Xcel electricity when they could just get the cheaper prices? The other reality is that most energy providers are already well supplied and may only have a little growth each year. So Boulder may be able to reduce the $120 million dollars of transmission a little every year, but not all of it instantly, and perhaps none of it at all. When the city had the presentation of their financial spreadsheet at a public meeting they proclaimed what a great state everything was in, but when I asked them to scroll down to the stranded cost cell (which had nothing in it) and asked them to put in $200 million, the spreadsheet had Boulder losing money past 2030. Where do you suppose that money will come from? RATES, that’s where. Stranded costs will never be zero and Boulder knows it but never admits it, or actually considers ANY high, medium, or low value for the stranded costs. This is blatant deceit.

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  6. The smaller elephant in the room is going-concern. Going concern has also been considered ZERO in all calculation by the City. What is going-concern? When a government entity (like Boulder) takes both assets and customers from any business, the business has to be fairly compensated for lost revenues. Xcel cannot just go out and find another Boulder out there to easily replace Boulder’s exit. Going-concern will be part of the condemnation proceedings and Xcel will righteously demand it. It is likely that it will be some multiple of the $120 million annual revenues. Probably ranging from 1 to 5 ($120 – $600 million). When I asked Mr. Carr (the city lawyer) why he continues to assume the value will be zero, he stated that it has never been done before in Colorado. He was wrong; it has been done before in Colorado as well as nationally. I can provide the example of it in Colorado.
    In summary, there are about $200+ millions that are nowhere to be found in the financial spreadsheet, and when I got them to put $200 million into the spreadsheet (documented by the City video of the meeting) the Muni was a complete failure.
    This is why I show up at City Council so much. They should see these facts and overcome the propaganda of the Muni. Stay tuned for the March 19th presentation. You can also get to the index of 60+ previous presentations here:
    OnLine Summary List
    http://tinyurl.com/BoulderMuni
    Thanks Shay for including the link in your article.
    Patrick Murphy

    Like

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