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Boulder, Colo.’s relationship with Xcel under scrutiny by city council

In Boulder, there is little debate over the cause of climate change. Everyone knows wind and solar are good and coal is bad. You would think the carbon conscious residents and council members would hop all over Xcel’s recent proposal to deliver 70 percent wind power to the city by 2013 and 90 percent by 2020. Well, it’s not that simple. While carbon reduction is a goal, it’s not the only goal.

This saga started last year, when Boulder citizens voted to replace a franchise fee with an energy tax and retain $1.4 million in city revenue, giving an implicit stamp of approval on a council decision to let the city’s franchise agreement with Xcel lapse.

All members of Boulder’s city council and many local environmentalist activist groups pulled hard for the ballot measure. They said it would free the city to explore clean energy options – while even examining the feasibility of “municipalization” (meaning the city would condemn Xcel’s power supply and distribution system and use it to establish a municipal utility).

Fast forward to the present and Xcel, desperate to maintain Boulder customers, has rolled out a plan to build a 200 megawatt wind plant (which would increase the company’s renewables portfolio past the 30 percent mandated by Colorado law) in exchange for signing a renewed franchise agreement with the city where Xcel would be the sole energy provider.

Under the Xcel plan, Boulder customers would pay a “premium” to cover the difference between the capital costs of installing the wind plant and the savings incurred from wind power generation.

While council members have been intrigued by the plan, they have in no way abandoned municipalization as a viable option. Consultants commissioned by the city to explore the feasibility of municipalization recently presented their model to council. They postulated that rates paid by Boulder residents would in fact be slightly lower under the municipalized plan than Xcel’s plan.

However, the model makes some pretty large assumptions, claiming the system could be acquired for only $121 million even though Xcel would almost certainly dispute that price, wanting it to be higher.

To pay for acquisition and new operating costs, the city would likely issue taxable bonds at a predicted 8 percent interest rate over 30 years.

The consultants’ model also makes the assumption that Boulder will not be on the hook for purchasing Xcel’s $45 million (questionably) “smart grid” and also that they will not be held responsible for “stranded costs”, which are investments Xcel may have made in anticipation of future profit opportunities in Boulder.

Xcel currently claims $336 million for stranded costs.

In all likelihood, if Boulder does choose to municipalize, it is likely a protracted and costly court battle will ensue.

With all these trials and tribulations associated with the municipal option, it is in a way surprising that many Boulder council members and activists continue to lean toward creating a local Boulder power authority.

“Even if we do choose to continue working with Xcel, I am certain that I want some form of municipal power authority,” said Mayor Susan Osbourne. “We are talking about changing the model.”

When asked about the philosophy behind the potentially momentous challenge of municipalization, Mayor Osbourne pointed out a staff writing that illustrated her views on the situation facing the city.

“These forces – an industrialization model that pits expansion against environmental protection; a mounting climate crisis that is increasingly dire; and a dwindling supply of fossil fuels to meet growing energy needs – are the context for Boulder’s discussion of its energy future. They represent conditions and forecasts never faced before; and they require a thoughtful, strategic and powerful response.”

In addition to freeing the city from Xcel, many council members relish the idea of freedom from the PUC. They relish the idea that the city could utilize a more varied approach toward energy supply that most likely would invest much more heavily in solar gardens.

While Boulder’s solar industry has taken off in recent years, a recent decision by Xcel to abruptly rescind its solar rewards program has dramatically destabilized a burgeoning industry. In a Denver Post article, executive director of the Colorado Solar Energy Industries Association, Neal Lurie said the state’s solar industry lost 400 to 600 jobs after Xcel changed its program.

The hope is that a municipalized Boulder, if advertised as a dynamic and independent player in the emerging renewable sector, could become a hotbed of solar, geothermal and wind entrepreneurship and research.

“Municipalzation is really about independence,” said Council Member Lisa Morzel. “We would be able to freely chart our own path, without the constraints of Xcel or PUC oversight.”

With the economy continuing to flounder and the failure of the federal government to form adequate incentives to ensure a competitive American renewable industry, many in Boulder have become frustrated and are losing faith that change will happen anywhere else but in Boulder.

Hayden Tippit, a recent transplant to Boulder from Florida who is working full time in the food service industry to support himself after his family’s business collapsed and house went under foreclosure, argued in a living room conversation with the Colorado Independent that the city should declare energy independence as a matter of security in an increasingly unstable world environment.

“Look around the world from the Greek debt crisis to the American foreclosure crisis… There is strong evidence that the highly centralized global political economy is fundamentally flawed,” said Tippit. “We as Boulder can only rely on ourselves if we are to be prepared for tomorrow’s changes.”

The issue will likely be determined by the voters through two distinct ballot measures in the upcoming election. So the question is: will Boulder continue to depend on Xcel, or will it tap into its own well? Wait and see, because only time will tell.

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