Boulder 101: The Muni

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Also known as: Municipalization, Local Power

What is it? 

Boulder’s attempt to create its own, city-owned electric utility by buying the existing system (power lines and poles, transformers, substations — all the parts it takes to run a utility) from Xcel Energy, the company that currently provides power to Boulder.

Where are we now? 

Since Xcel doesn’t want to sell its system, Boulder is attempting to condemn Xcel’s assets in court. The state has signed off; federal regulators have yet to approve a portion of the process. The city is working to produce a final, full estimate of how much it will cost to buy Xcel’s system, which it will present to voters.

Simultaneously, city and Xcel officials negotiated a settlement that would end Boulder’s attempts to condemn Xcel’s assets and form a city utility. Boulder would sign a franchise agreement with Xcel; the city hasn’t been “in franchise” with the company since January 2011.

Decision point

Should Boulder keep going in its attempts to acquire Xcel’s system or settle with Xcel and re-enter into a franchise agreement with the company?

How (and why) did we get here?

Boulder has long been unhappy with the level of renewables Xcel was providing to the city. The idea of a municipal (city-owned) utility was discussed as early as 2005. Voters in November 2010 decided to end the franchise agreement with Xcel. 

Not much changed, practically speaking, when Boulder went out of franchise (they did miss out on undergrounding; see more below). State law requires the company to keep providing electricity outside of a franchise agreement.

Voters have to approve re-entering into a franchise agreement. That’s what’s on the ballot this year: a new, 20-year franchise agreement with Xcel plus a settlement to preserve the work done on municipalization so far and allow Boulder to restart that process in the future.

As of mid-2020, more than $27 million had been spent on the muni. All the work has been to determine if Boulder can legally separate from Xcel and run its own utility — yes, most likely — and how much it will cost, which is still TBD. 

If voters don’t approve the settlement and franchise in November, final cost estimates on the muni could be available in 2022, though city staff think later is more likely. If it takes longer,  another funding source will be needed to keep the work going: the Utility Occupation Tax  expires in 2022.

Highlights over a 10-year history

2010: Voters OK replacing the 3% Xcel franchise fee (roughly $4 million/year, which goes into Boulder’s general fund) with a Utility Occupation Tax and to fund research into alternatives through 2015. At the end of 2010, Boulder’s franchise agreement with Xcel expires.

2011: Voters give Boulder the authority to form a utility and condemn Xcel’s assets, if certain conditions were met: That the city can acquire the system and match Xcel’s rates at the time of acquisition while maintaining reliable service, and that rates will cover costs + debt + 25%

Voters also increase UOT funding to pay for exploration of municipalization.

2012: Council OKs using general fund money for the muni

2013: Colorado’s Public Utilities Commission (the state regulatory body for utilities, hereafter referred to as PUC) rules that it will decide what Boulder can and can’t acquire from Xcel. The PUC also finds that Boulder will have to pay to replace/rebuild facilities/infrastructure Xcel needs to provide service to area customers not served by Boulder’s utility.

Voters put a cap on the amount of debt that can be issued to acquire Xcel’s system: $214 million. (That will be adjusted with inflation at the time of acquisition.)

2014: Per a 6-3 vote of council, Boulder forms a light and power utility (on paper, at least), sparking a lawsuit from Xcel that won’t be resolved until 2019. The city files for condemnation of Xcel’s assets in Boulder District Court

2015: Boulder District Court rules that Boulder will have to go through the PUC process before filing for condemnation (January) PUC rules that Boulder can’t condemn infrastructure serving customers outside city limits and that Xcel doesn’t have to share that infrastructure with Boulder. PUC dismisses part of Boulder’s application but allows for discovery process so Boulder can learn more about Xcel’s system to determine what it needs to acquire (November)

Voters extend UOT first passed in 2010 through 2022 

2016: Muni spending passes $10 million (March) Boulder resubmits application with PUC (September) and PUC rules it complete (November)

2017: Council declines 6-3 to put a settlement with Xcel — which would end the muni effort and re-establish a franchise agreement — on the ballot (April) Council unanimously decides that voters will get final say before Boulder buys Xcel’s system, once a full and final purchase price has been determined 

PUC rules that Boulder, Xcel have to meet certain conditions before approval is granted to proceed with condemnation (September) Voters extend UOT expansion passed in 2011 through 2022 (November)

2018: Boulder, Xcel file final list of agreements with the PUC (October), though it is later contested and won’t be approved for another year

2019: Muni spending passes $20 million (March) City offers $68.5 million to Xcel for its system (April) City makes $82 million offer and files for condemnation (June) PUC approves separation of assets outside of substations, closing out state process (October) Boulder makes $94 million offer to Xcel (November)

2020: Councilman Bob Yates, Mayor Sam Weaver inform public that Xcel and city are in negotiations for a muni off-ramp; council agrees to continue settlement talks (May) 6-2 vote of council (Aug. 20) and 7-2 final vote (Sept. 1) puts an Xcel franchise and settlement agreement on the ballot

Arguments for the muni / against the settlement

This is just a quick list; each argument is explained in more detail further down

Renewables: Boulder can get more renewable energy, more quickly than Xcel by buying from other suppliers and from local production

Cost: Boulder can provide electricity for the same or lower cost than Xcel, and the money will stay in the community rather than going to a corporate entity beholden to shareholders

Control: Boulder deserves a greater say in where/from whom it gets its energy and how the grid is planned and built. Residents would have more input on these things under a city-run utility.

Trust: Xcel cannot be trusted to stick to renewables and other concessions if they affect profitability, and has a history of passing along the costs of questionable decisions  and investments to ratepayers

Arguments against the muni / for the settlement

This is just a quick list; each argument is explored in greater detail further down

Renewables: Xcel has now set a goal of 80% emissions reduction by 2030, which gets Boulder very close to its own target, and carbon-free electricity by 2050

Cost: Buying Xcel’s system could cost hundreds of millions of dollars, which is too much debt for Boulder to carry and still provide electricity affordably

Control: A city-owned utility comes with considerable liability that would be ultimately born by the taxpayers. Some residents and groups doubt that Boulder can provide system reliability as well as Xcel. The settlement allows Boulder to have a greater say in decision-making

Trust: Boulder has continually under-estimated the cost, time and complexity involved in establishing a municipal utility.

Who is arguing against the muni / for a settlement with Xcel?

IBM, Governor Jared Polis, Colorado Energy Office, Colorado Department of Health and Environment (None of these organizations have formed formal elections issues groups but all have expressed support in various forms.)

The Committee for Boulder’s Great Green Deal is campaigning for approval of the franchise/settlement agreements and extension of the UOT. The group is led by former Boulder Mayor Leslie Durgin and former city council member Andy Schultheiss, who was also chair of Open Boulder for three years.A statement of contributions and expenditures has not yet been filed; this article will be updated with that information.

Who is arguing for the muni / against a settlement with Xcel? 

Empower our Future, a group of local pro-muni residents that includes former city council members and backed by a number of organizations, including Eco-Cycle, New Era Colorado, PLAN-Boulder County and the local Sierra Club chapter.

Some of Empower’s organizers also formed an official issue committee, No on 2C for Local Power. A statement of contributions and expenditures has not yet been filed; this article will be updated with that information.

A deep(er) dive into the arguments

Cost

What has been spent so far — $27.6 million, including staff time — is all to answer two questions: Can Boulder municipalize? And how much will it cost?

There’s much that is still unknown about the cost to buy Xcel’s physical system (power lines, poles, transformers, substations, etc.) and/or the eventual rates Boulderites will be paying, either under a city utility or Xcel franchise. What is known so far:

Municipal utility costs

There are three big costs to consider, because Boulder will need to issue debt financing to pay for them: Acquisition (What it will take to forcefully buy Xcel’s system) Separation/Construction (Once Boulder buys the system, there will be significant construction required to separate the existing distribution electric systems into two independently operating systems; this will include building three substations for the city and Xcel) and Startup (What the city will need to spend on IT systems, fleet equipment, billing systems, staff, offices, etc. to get an operational utility on Day 1, plus enough cash to keep it operational for three months)

Estimates for those:
Acquisition: $68.5 million – $214 million*
Separation: $180 million
Startup: $30 million
Total debt: $278.5 million – $424 million**

*This acquisition range was created using, at the low end, the amount a city-tapped appraiser valued Xcel’s system at and, on the high end, the voter-imposed cap on acquisition debt. But it is still subject to fluctuation. 

**This is the mid-range estimate. Costs are based on industry standards and are subject to change.

The Xcel settlement caps acquisition spending at $200 million, which includes the purchase of two substations and going concern: What Boulder could owe Xcel for future lost profits. (If the settlement isn’t approved, the substations would fall under Acquisition or Construction costs.)

Boulder contends it won’t owe going concern; Xcel has pegged those costs at up to $350 million. If the settlement agreement isn’t approved, going concern would be back on the table and the eventual acquisition cost will be determined via a court ruling in Boulder’s case to forcefully condemn Xcel’s assets. 

One unsettled question is stranded costs: What Boulder might owe Xcel for investments and plans the company made under the assumption that it would keep the city as a customer for a certain period of time. Stranded costs were not included in the settlement agreement, so those would have to be determined if Boulder were ever to restart municipalization or if voters turn down the settlement.

Xcel has estimated stranded costs between $255 million and $335 million in the past; Boulder has consistently declined to provide a range, citing the numerous factors involved in calculating it. There are several ways to reduce stranded cost obligations, including buying power from Xcel after a municipal utility is formed (see Renewables section for more details).

Rates – city utility 

Boulder’s charter requires that the city be able to provide electricity at rates comparable to Xcel’s at the time of acquisition, and that the utility’s revenue has to cover the cost of acquisition, debt used to buy Xcel’s system plus 25%. 

The charter requires that rates be less than or equal to Xcel’s on Day 1; thereafter, they must be “comparable” to neighboring utilities. What “comparable” means is not clearly defined, but the city’s financial forecasting uses city rates that are lower than Xcel’s projected rates — based on historic increases — for the length of the forecast.

If the city utility needs more money for capital projects, for example, rates could be raised to pay for it. There are plans in Year 4 and 9 of utility operation to take on $39.3 million more in debt for facility upgrades. However, capital spending by the utility and rate increases would be a community decision, according to staff. (See Control section for more detail)

Rates – Xcel

Xcel has raised rates five times since 2010. The city’s data shows that rates have increased between 2.8% and 3.1% over the past 8-10 years. 

Although rates have gone up, Xcel counters that residential and commercial bills have actually trended down over the past five years, as customers use less energy overall. The average residential bill declined some 6% between 2010 and 2019, from $71.30 to $66.84, according to the company. 

Critics of the franchise agreement note that, to reach its carbon-reduction goals, Xcel will have to invest heavily in renewables — costs that will be passed along to ratepayers. Colorado President Alice Jackson in August said any increases due to climate action will be capped at 1.5% per year.

The company intends to spend $7.7 billion on capital investments between 2020 and 2024. Of that, $785 million is related to electricity generation.

Xcel has to file its planned rates through 2030 with the PUC, but those won’t be public until after the November election.

Control

Democratization – Xcel is a publicly traded company, required to submit plans (power supply, proposed rates, etc.) to the PUC every four years. There is a process for public participation, though citizens’ ability to participate as individuals is limited. Boulder as a whole often intervenes on behalf of residents, as a single entity.

Boulderites will theoretically get more of a say in the operation of a municipal utility because there will be fewer layers between them and decision-makers. City council will be the final authority over a city utility, though they may appoint a utility board (similar to the Water Resources Advisory Board). Residents would be able to weigh in on rates, capital spending, grid planning, discounts for lower-income residents, etc. the way they do other city issues. 

At the end of the day, muni proponents say, Xcel is beholden to its shareholders, while a Boulder utility will have to answer to Boulderites. And once the city owns the physical system, it can purchase power from wherever it wants; with Xcel, there is no choice.

(Note: This may change in the future, as Colorado lawmakers are pursuing “community choice energy,” which would allow cities to buy power wholesale from renewable providers. Other states allow this; in Colorado, discussions are still preliminary but promising, supporters say. There is nothing in the settlement that precludes Boulder from taking advantage of community choice, according to a city spokesperson.)

Critics point out that local control doesn’t necessarily result in better governance or reflect the will of the people. In the most recent community survey, just 10% of respondents said they felt city council members consider their input before making decisions.

Several city departments are running major maintenance backlogs; there were $375 million in unfunded needs before the COVID-19 pandemic. The city does run large utilities already: water, wastewater and storm/flood management. But, as critics note, rates are being raised significantly (percentage-wise) to pay for a backlog of maintenance and flood control: The 2021 budget calls for an 8% increase in water rates, 5% for wastewater and 12% for stormwater/flood management, on top of 2020 hikes.

Grid planning – The physical grid that delivers electricity to homes places some limitations on how much renewable energy Boulder can source and generate itself. The system needs to be able to transmit a certain level of power; if local generation wasn’t planned for in building that system, then even if the capacity is there, it can’t safely be realized.

That’s one reason Boulder fought so hard to be able to participate in Xcel’s planning process. It will get a seat at the table under the settlement deal — but, again, with less control than if the city was running its own utility. Three groups will oversee grid planning and other projects: executives from Xcel and Boulder; operational staff from Xcel and Boulder; and an “advisory committee” of community members, business leaders and CU representatives.

Reliability – Xcel is better-than average when it comes to reliability, among other providers across the U.S.; even better when looking at large utilities only (more than 500,000 customers). Municipal utilities generally experience fewer and shorter outages than investor-owned utilities; Fort Collins, for instance, consistently averages outages shorter than 30 minutes each year.

Xcel outages averaged about 90 minutes a year over the last five years; 137 minutes on Major Event Days. (MED is a little hard to explain, but it’s an industry benchmark for serious outages.) The average Colorado customer experienced 0.9 outages per year during that time (excluding MED) and 1.1 outages annually with MED included.

Reliability of a system is often tied to how many of its power lines are buried underground. Xcel undergrounds lines for its customers using 1% of the revenue generated in that municipality; in Boulder, that’s around $1 million a year, enough to bury roughly one mile of lines each year when the city was an Xcel customer. 

There are roughly 165 miles of power lines in Boulder. Lines along major roads (28th, Broadway, Canyon, etc.) are buried. Since 2011, only lines in new development — Boulder Junction, for example — have been buried.

As part of the settlement, Xcel will provide $33 million worth of undergrounding over the 20-year life of the franchise agreement; half in the first five years. Boulder does not have an estimate of how much undergrounding it would perform as a municipal utility, but said that the city could choose to direct more funding to that task in order to speed up the process, if city council and/or residents so desire.

Other considerations: IBM’s largest data center in north Boulder. Due to the critical nature of the facility, the failed 2017 settlement allowed IBM to remain an Xcel customer in the event of municipalization. That provision is not included in the current settlement; the city intends to have IBM as a customer. 

The company, however, plans to petition the PUC to opt out of a city utility, if one is eventually established, and remain an Xcel customer.

IBM officials say this decision is not based on an analysis of Boulder’s ability to reliably run a utility. Rather, it is a desire to stick with what works, said Pete Lorenzen, IBM Colorado Senior State Executive. Under Xcel, there has been one outage in 10 years, and the cost for electricity is “incredibly competitive.”

“When you look at making a major change — and this would be a major change for us — you say, ‘What’s the value?’ The equation isn’t close for us.”

The University of Colorado secured a deal from Boulder to keep paying Xcel’s offered rates even under a city utility. The agreement worried some who felt that ordinary residents would end up footing CU’s electricity bill if Xcel’s rates are lower than the city’s. Others look at Boulder’s willingness to offer sweetheart deals to large institutions as an acknowledgment that cost and reliability of a municipal utility may not be competitive or attractive.

Renewables

Xcel today sources 30% of its energy from renewables. It plans to be at 55% by 2025, Jackson said in August.

The company’s goals for 80% carbon reduction by 2030 are not the same as Boulder’s goal of 100% renewable electricity by that year, but the bid to limit greenhouse gas emissions will necessitate a shift to renewables. Jackson says the mix should be 65-70% renewable by 2030. Formal plans for Xcel’s power supply, rates and more won’t be made public until next year.

Boulder can get 90% renewables the first day a municipal utility is operational, according to recently received bids from power providers. There are some caveats, most notably stranded costs, which could be owed if Boulder chooses to buy power from anyone other than Xcel. (See Cost section)

Depending on what stranded costs are owed — which would be determined via negotiation or a court case and a ruling from federal regulators — Boulder may keep buying power from Xcel to lower stranded costs, which would lower the share of renewables the city relies upon. 

The city has modeled three years of continued power purchase from Xcel, based on a worst-case stranded cost estimate, though the city declined to name a worst-case dollar amount. 

There are several ways for stranded costs to be reduced. Xcel has a legal obligation to try and sell the power it planned for Boulder to someone else. Boulder’s own power supply cost can also be taken into consideration, further reducing the stranded costs it owes. 

Whatever is left over after those two avenues are explored, Boulder would have to pay.

The city contends that the savings it will realize by purchasing wholesale renewables elsewhere — about $30 million a year, based on a 2018 request for indicative pricing — will help to pay off stranded costs. The contents of the RFIP and a recent competitive bidding process are not publicly available.

Trust

Pro-muni folks don’t trust Xcel for a number of reasons. The company has a history of raising rates (see Cost section) and has continued investment in fossil fuels. The Comanche coal-fired power plant was finished in 2010 — when municipalization efforts began in earnest — and is supposed to operate until 2070. 

An early retirement is being explored, but critics contend that customers will foot the bill for shutting down the $1 billion facility, just as costs were passed along in another ill-fated project: Smart Grid City.

The plan was to provide hyper-connectivity of homes and appliances to the grid, providing real-time usage data and therefore opportunities for more efficiency. In reality, Smart Grid went over budget — 3X more than estimates — and under-delivered. Boulder later fought Xcel’s attempts to recoup its spending via higher rates, successfully.

(Xcel responded that it learned lessons from Smart Grid that are still being applied today. Officials did not respond to concerns over the Comanche plant or other investments.)

To critics, Comanche and SmartGrid together paint a picture of a company insufficiently committed to carbon reduction making questionable decisions, secure in the knowledge that customers will pay for missteps. Although Xcel has a goal of 80% carbon reduction by 2030 and 100% carbon-free power by 2050, muni proponents worry it won’t stick to that if profitability is adversely affected.

Xcel will be legally bound to the plans it files with the PUC, due next year, though there is a process for exemptions. Colorado has its own targets for emissions reductions and renewable energy, codified into law last year. 

Boulder will also have the opportunity to end a franchise if climate goals aren’t met. (See: Xcel, Boulder settlement: What’s in it?

Opponents of the muni argue that Boulder has continually underestimated the time and cost required to municipalize. They point to the ever-extending timeline for an operational city-owned utility: 2016 was the original inception date, then 2017, and 2022, now 2025 — a start that is subject to a court ruling on condemnation of Xcel’s assets. 

Citizens’ final say over municipalization has been likewise postponed, from 2020 to 2021 and now, assuming the settlement isn’t approved and Boulder loans $2.1 million from its general fund, 2022, though staff in August said that timeline is only likely if “all the stars align.”

Boulder officials respond that municipalization is uncharted territory — most municipal utilities were formed decades ago — and that delays were the result of Xcel’s intentional actions to slow the process.

The city has presented too rosy a picture, critics have long contended, painting setbacks as victories or otherwise downplaying judgements against Boulder. A notable example of this was an initial contention that the 2017 PUC ruling wouldn’t result in extra spending, “clarified” days later that it would, in fact, add $23 million to costs. City Manager Jane Brautigam and then-muni leader Heather Bailey penned a 2014 Daily Camera op-ed extolling the virtues of municipalization; four years later, they were in the Camera‘s pages once again, pledging to present a more complete and neutral picture of municipalization’s viability.

Because of this perceived bias, muni opponents worry that the city is presenting an incomplete picture of costs. A lawsuit forced release of financial models on which Boulder’s analysis is based; for years, indirect staffing costs were left out of total expenditure reports, as were possible stranded costs. (Boulder contends these are incredibly complicated pieces of information to parse out, something other city projects have not been required to do.) 

Lastly, opponents of a municipal utility point to city handling of other large projects as evidence of its inability to manage large, complex systems. Progress as slow and spending rarely matches initial budget estimates. (See Control section)

Author’s note: There’s one more consideration: Xcel’s lack of responsiveness to the press. Multiple interviews were requested over many months, without success. Xcel was provided the full text of this story but failed to answer several questions and did not address all the points raised. Boulder, given the same opportunity, arranged multiple interviews, answered nearly every question and provided supporting documentation.

The press is often the only channel for the public to access large organizations. The failure to be available, the selectiveness in answering questions and addressing concerns, adds weight to critical voices arguing that the company is not accountable to its customers.

Voting history

2010: Issue 2B replaced the 3% yearly franchise fee (approximately $4 million per year) customers pay to Xcel with the Utility Occupation Tax, which would fund research into alternatives for five years. (Passed 68.4% to 36.6%. Turnout: 35,580)

2011: Issue 2B raised the UOT by $1.9 million per year, through 2017 (Passed 50.4% to 49.6%. Turnout: 26,494)

Issue 2C gave council council the authority to form a light and power utility and condemn Xcel’s assets (Passed 51.9% to 48.1%. Turnout: 26,541)

2013: Issue 2E limited the amount of debt that could be issued to buy Xcel’s system to $214M. (Passed 66.5% to 33.5%. Turnout: 29,319)

2015: Issue 2O extended the original UOT. (Passed 71.4% to 28.6%. Turnout: 26,824)

2017: Issue 2L extended the 2011 UOT increase. (Passed 51.7% to 48.3%. Turnout: 30,659)

Where does council stand?

Bob Yates: The only council member who has been openly critical of the muni. He has consistently voted against efforts and was involved in bringing Xcel and Boulder back to to the negotiating table this year. In 2017, he voted in the minority to put a settlement to voters; that motion failed. Voted to place the current settlement on the ballot.

Mayor Sam Weaver: Ardent supporter of the muni. Prior to election to city council, he served on resident groups who studied aspects of municipalization. He also works in renewable energy and owns Cool Energy, which develops and manufactures engines that convert waste heat into energy. Voted against putting a 2017 settlement to voters. Voted to put the current settlement on the ballot.

Mary Young: Has consistently voted for the muni. Voted against putting a 2017 settlement to voters. Voted to put the current settlement on the ballot.

Mirabai Nagle: Has voted for every muni measure thus far. Voted to put the current settlement on the ballot.

Aaron Brockett: Has consistently voted for the muni as the “only path” to 100% renewable energy — he voted against putting the 2017 settlement to voters — but has shown himself more willing to draw lines than other pro-muni council members.

For example, in 2016 he voted against forcibly annexing Boulder businesses to better position the muni over the objections of owners. (Yates joined in the dissent, while Weaver and Young supported the move.)

Voted to put the current settlement on the ballot.

Adam Swetlik: “Firmly” pro-muni; has said the effort is “worth every penny.” Voted against putting the current settlement on the ballot.

Junie Joseph: Is “definitely” pro-muni, mostly for the value of putting an essential utility into the hands of the people. Voted against putting the current settlement on the ballot.

Mark Wallach: Wrote an op-ed opposing the muni before he was elected to council, but during campaigning, switched to a position of support and made it a tenet of his platform. He attributed the change to learning how “fossil-fuel dependent” Colorado was. Voted to put the current settlement on the ballot.

Rachel Friend: Categorizes herself as a tentative supporter, saying she’d need to see the numbers before deciding. But has also made statements indicating she thinks taxpayer money would be better spent on other climate initiatives. Voted to put the current settlement on the ballot.

Read more:

Xcel, Boulder settlement: What’s in it? Boulder Beat
Pros, cons of settlement weighed Daily Camera
Cost of Transitioning to 100% renewable energy Institute for Energy Research

Author’s note: This article has been updated to correctly reflect who is supporting the settlement and who is opposed, as well as to correct the vote total for the UOT expansion in 2011.

Published: Thursday, Sept. 10, 2020 (Updated Friday, Sept. 11, 2020)

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

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Elections Municipalization

15 Comments Leave a comment

  1. Thanks for the write-up. Very well done and a lot of effort for sure. One thing I’d add is the city has no plan for efficiency measures or rooftop solar incentives. They can’t afford for people to use less power and still provide reasonable rates. And they certainly can’t subsidize solar installations or pay customers for feeding excess energy back to the grid. Xcel can on both fronts due to their very large customer base and robust DSM programs. To me this is another big con of the muni. We should spend our money on efficiency and let Xcel deal with that problem.

  2. Posting these comments on behalf of Patrick Murphy, who ran into some technical difficulties. These are Mr. Murphy’s comments, NOT Boulder Beat’s or my personal comments. – Shay

    From Patrick:

    You mention that Xcel is non-responsive, but fail to note that they have stated that they will not weigh in on this election. How are they supposed to not weigh in, and what about the fact that the City of Boulder won’t give you the estimates of stranded costs. How devious and irresponsible is that. They have failed to provide that estimate knowing full well that it would blow the budget out of the water, or extend the actual day that Boulder could bring in renewables to past 2030.

    You left out the Boulder Water utilities 2015 rate increase of 75%, 30%, and 5% for storm, waste, and drinking water respectively. With their current rate increases that has changed to 87%, 42%, and 12%. My water bill is now more than my electric bill and I have reduces my water use by over 50%.

    Only 105 votes changed from Yes to No would have ended the muni in 2011. Your statement that “Boulder has long been in pursuit of the muni” needs to be tempered with the fact that votes have demonstrated that we aren’t.

    City of Boulder Ballot Issue No. 2B
    [Increase and Extend the Utility Occupation Tax] Votes Percent
    FOR THE MEASURE 13,353 50.40%
    AGAINST THE MEASURE 13,141 49.60%
    Total Votes:26,494

    Your statement, “Boulder has long been unhappy with the level of renewables Xcel was providing to the city.” should be tempered with the fact that for the last 10 years half of Boulder has been fine with working with Xcel vs. the Muni boondoggle.

    Undergrounding. You leave out the $1.2 million per year that we have lost since ending the franchise in 2010. That total is now at least $10.8 million. The Undergrounding fund, aka the 1% fund is based on 1% of the total Boulder electricity revenues. That has averaged $120 million/year (but is more than that now), so the average per year undergrounding is $1.2 million. leaving that out of the true costs is not honest. Thus the true cost is $10.8 million plus $27.6 million = $38.4 million.

    The second point is what we are getting with the nee agreement. We will get $33 million in undergrounding over 20 years. What we would normally get over 20 years is $24 million. So that is a $9 million bonus or a 37.5% increase over what we would normally get over 20 years.

    For completeness, here is the undergrounding that was done with the undergrounding fund prior to 2011.

    Xcel Energy invested over the years about $19.5 million through the “one percent fund” to convert power lines to underground in Boulder. As a favor to the city, Xcel Energy allowed Boulder to carry forward about $350,000 of unspent funds from 2010 (when the franchised expired) into in 2011 (after the franchise expired) to convert power lines along East Pearl Parkway at Boulder Junction. Other “one percent” projects include:
    • All of 28th St from the Turnpike to Iris
    • 30th St. – Walnut to Pearl
    • Arapahoe from west of Folsom to east of Foothills Parkway
    • Majority of Pearl St, Canyon, Walnut, Broadway, Spruce, Iris, Valmont

  3. I’m impressed, Shay! Your article on local power vs. surrendering to Xcel was very well researched and balanced. Thanks for representing both sides of the issue.

  4. About the Opposed argument titled Control:
    I am not aware of this so called liability to be borne by taxpayers. The utility would be an enterprise with its own revenue bonds paid off through rates. The rates are capped at Xcel’s rates per the Charter. The bondholders would be the ones on the hook for any liability. Any explanation where this claim came from?
    System reliability for municipal utilities are generally better than for-profit monopoly utilities. Take a look at Longmont and Fort Collins.
    The settlement gives Boulder 4 meetings a year with Xcel. It does not in any way obligate Xcel to do Boulder’s bidding. The settlement does allow Boulder to *ask* for system improvements, to be paid for entirely by Boulder.

  5. Impressive work on a huge struggle – whew!

    It’s always helpful to first determine which question are we trying to answer:

    1) If your goal is local control, this is easy: vote to continue the legal battle.

    2) If your goal is to reduce greenhouse gas emissions as quickly and effectively as possible, vote to stop fighting and start saving energy.

    That’s really it: Do you want to keep paying lawyers to fight, or do you want to spend our time and money to actually accomplish our climate action goals? This is a divorce battle, when both parents say they “only want what’s best for the kids” – both sides (and the kids) lose while the lawyers win big.

    Observations:

    1) We gave 27 million dollars to lawyers and consultants, instead of directly to good projects that would be saving a ton of energy right now. After 10 years and 27 million dollars has not reduced our emissions by a single molecule.

    2) I hear that Exel has raised rates, so the City should take control. The City has raised all our other utility rates dramatically more. The PUC regulates what Exel can and can’t do, while our City Council are good people, but their job is to be a politician not an engineer – personally, I trust science and engineering more.

    3) In the unlikely event that condemnation can finally happen within the required budget cap, note that the 200+ million dollars would only buy us poles and wires. I don’t want to own poles and wires – I want someone else to deal with all that. The fundamental thinking behind municipalization is not progressive; it’s very outdated. I want to spend my money on actually reducing emissions, which we can do directly.

    4) It appears that every statement ever made by the proponents of municipalization has been incorrect. For 10 years, every number, date, estimate, or projection, has been wrong. Dang. All good, well-intentioned people, but … really? Fool me once, shame on you; fool me twice (10 times), shame on me … It is time for a new plan.

    • Way to give up on Boulder’s Climate goals! Clean energy is available on the open market, but Colorado laws enslave us to Xcel’s pollution with the exception of one escape route: municipalizing. If you think Xcel is quick and effective in reducing GHG emissions, you haven’t been paying attention. They do what is required under the law and beyond that only what increases profits.

  6. 1) If your goal is local control, this is easy: vote to continue the legal battle against an aging, outmoded monopolistic energy company that squelches our democratic process, continues to invest hundreds of millions of dollars in coal fired plants right here in our state (Pueblo’s unreliable Comanche 3), and offers us no way to equitably share electricity across our community.

    2) If your goal is to reduce greenhouse gas emissions as quickly and effectively as possible, just STAY OUT OF FRANCHISE WITH XCEL, continue to benefit from the short term improvements they are already making as required by CO state law, and KEEP OUR FUTURE ENERGY OPTIONS OPEN.

    3) If you care about the future implications on our children and our planet, STAY OUT OF FRANCHISE WITH XCEL. Recognize that much like in a divorce, Xcel’s obstructionist tactics to preserve the $20M/year in profits they divert from Boulder’s pockets to their shareholders and executives have cost us dearly in the short run, but should not divert us from how great it will be once we’re on our own, free to engage in a modern, 100% renewable, equitable, resilient, 21st century energy economy.

  7. Hi Shay,

    You cover an impressive amount of ground in your article here. Great Work.

    One thing I would correct about your analysis is that there are many alternatives to a franchise with Xcel besides municipalization that you did not mention. By staying out of franchise with Xcel, Boulder can keep its options open to a variety of electricity-procurement arrangements that will be viable in the short term as more competition is inevitably introduced to Colorado’s electricity system.

    – Duncan Gilchrist

  8. All you Boulder Beaters!

    First, we are so fortunate to have Shay Castle in our midst. We are so lucky to have an objective voice tempered by a aspiration to encourage civil discourse. This is actually getting a bit difficult to find in our world of polarized fake news and righteous indignation. You have produced what I would interpret as a very good start to community conversations. Your ability to glean the issues that matter from the swirling rhetoric is very helpful. You have identified four key issues: Renewables, Cost, Control, and Trust.

    Trust comes first!

    In this soliloquy, I would like to do a deep dive on the Trust issue. I think to paraphrase the Franchise view the Public Power initiative has over-promised and under-produced. It has spent twenty five million, and there is isn’t a working Local Utility to show for it. Since the Public Power initiative has shown it is ineffective, the reins should therefore be returned to the entrenched Investor Owned Utility (IOU) who represents the kind of power and resources the public can trust. I can state that the Public Power perspective is that the entrenched IOU has demonstrated they cannot be trusted and therefore need to be replaced. From the article I culled this:

    Opponents of the muni argue that Boulder has continually underestimated the time and cost required to municipalize. They point to the ever-extending timeline for an operational city-owned utility: 2016 was the original inception date, then 2017, and 2022, now 2025 — a start that is subject to a court ruling on condemnation of Xcel’s assets.

    Citizens’ final say over municipalization has been likewise postponed, from 2020 to 2021 and now, assuming the settlement isn’t approved and Boulder loans $2.1 million from its general fund, 2022, though staff in August said that timeline is only likely if “all the stars align.”

    Boulder officials respond that municipalization is uncharted territory — most municipal utilities were formed decades ago — and that delays were the result of Xcel’s intentional actions to slow the process.

    So lets do a little memory exercise. In 2008, Xcel announced that Boulder would become the first Smart Grid City in the country. Shay has provided us some of the facts:

    Here is a little timeline of what happened in that demonstration of the trust we can place in Xcel’s ability to deliver on its promises:

    In 2008, when the project began, Xcel estimated a budget of $100 million, with Xcel spending just over $15 million. The rest of the cost was to be shared by seven investment partners including GridPoint Inc. and Accenture.

    But, by 2009, the utility’s expenses shot up to $45.5 million.

    “True, there were cost increases, there’s no arguing that,” said Lamb. “We were doing something new, and as the first people doing it, it is hard to estimate the cost since we hadn’t done it before.”

    In 2011, the Colorado Public Utilities Commission (CPUC) allowed Xcel to recover $27.9 million of those costs from Colorado ratepayers. The CPUC withheld the remaining $16.6 million, telling Xcel it must show customer benefits from the project before it would allow recovery of the balance.

    Just weeks ago, on March 21, the CPUC ruled against Xcel, denying it the recovery of the remaining $16.6 million.

    From: The lessons of smart grid test in Boulder

    In Xcel’s SmartGridCity plan fails to connect with Boulder we find:

    The idea of a “smart grid” — a computerized system to control energy from power plant to the kitchen dishwasher — was sweeping the utility industry in 2007, and Xcel Energy planned to launch the world’s biggest project.

    The company’s SmartGridCity would manage power flows, allow more wind and solar on the grid, and enable consumers to control electricity consumption. Xcel chose Boulder for the ambitious plan.

    Five years later, few of the promises are fulfilled. Costs nearly tripled to $44.5 million, and Xcel wants its Colorado customers to foot the bill.

    The article pretty much reveals that we being led to place our trust in a company that overpromised, underdelivered, and then had the audacity to charge the public with rate increases for its cost over-runs, and were denied an additional 16 million they demanded from the Public Utility Commission.

    The article goes on to reveal:

    “We thought it was an excellent opportunity to work with Xcel on something that would revolutionize how we consume energy,” said Shaun McGrath, Boulder’s mayor at the time.

    SmartGridCity would deploy thousands of sensors in the distribution system and 35,000 smart meters that would enable as many as 10,000 homes to communicate with the utility, right down to thermostats and appliances, according to Xcel presentations.

    McGrath said he was told by Xcel officials that the company would not seek to have customers pay.

    Xcel said the company meant it would not seek immediate recovery or charge Boulder residents.

    At the time, Boulder had a task force and a consultant exploring whether to renew Xcel’s 20-year electricity franchise as the city’s power supplier or to replace it with a municipal utility.

    “The franchise was an issue,” said former Boulder City Manager Frank Bruno. “They didn’t want to make an investment in a city they didn’t have a relationship with.”

    In March 2008, Bruno recommended shelving work on a municipal utility and moving forward with SmartGridCity. The City Council agreed.

    And a bit of irony

    The city and community of Boulder put the brakes on Xcel’s SmartGridCity and began an evaluation to take over the pilot as a city-owned municipal utility. Kara Mertz, Boulder’s Environmental Action Project Manager, said that city staff previously offered to help Xcel correspond with the community, but that the utility just had too much on its plate. The smart grid project was operationally successful though, she said.

    I argue that the argument that untried initiatives, in uncharted territory apply to the Public take over of the utility as much as the smart grid initiative. There appears to be some shape shifting going on here and I believe we need to call a spade a spade. I argue that if you are looking for a partner in a future you can trust, Xcel may not actually be eligible.

    Let’s not be casting stones…they appear to be boomerangs…

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