Thu August 4, 2011

Boulder Moves Closer to Creating City-Owned Utility

The city of Boulder and Xcel Energy have been battling over the possible municipalization of the city’s utility.  KUNC’s Erin O’Toole talks with Boulder County Business Report publisher Chris Wood to discuss how the issue is dividing Boulder’s business community.

O’Toole: Chris, the Boulder city council appears to be moving forward on ballot measures that would authorize creation of a city-owned utility. What exactly will voters see on the ballot?

Wood:They’re likely to see two items, Erin. First, the city will ask voters to extend and increase a utility occupation tax that was approved by voters last year to replace money it was getting from Xcel Energy’s franchise agreement. That agreement was allowed to expire while the city explored creation of a municipal-owned utility. That tax would be extended to 2017, when the city would decide formally whether to create a utility or not.

Secondly, voters will be asked to amend the city charter to authorize the city council to create a local utility and to issue bonds for the acquisition of the distribution system from Xcel Energy.

What voters will not see is any potential new franchise agreement with Xcel. Negotiations between Xcel and the city broke down a couple of weeks ago.

O’Toole: Well, this seems to be a monumental decision that is being presented to voters. What is the background of this issue?

Wood:This issue goes back many years, Erin. Boulder has explored municipalization over the past decades but always has opted to stick with Xcel Energy. The purpose behind the push has nothing to do with cost. It’s really stemming from Boulder’s desire to obtain its energy from clean-energy sources. Xcel has worked with the city to help it in that regard, including creation of the Smart Grid City, and an 11th-hour offer to make Boulder the greenest city in the country.  But in the end, the two sides couldn’t come to terms.

O’Toole: Creation of a municipal-owned utility would seem to be something that would affect not only residents but also businesses. Where does the business community stand on this issue?

Wood:To put it simply, it stands divided. There really are three distinct groups. One group is the Boulder Clean Energy Business Coalition, which includes a number of clean-energy companies, such as Namaste Solar, Bella Energy and Boulder Electric Vehicles. That group hasn’t taken a formal position, but is viewing municipalization favorably.

Another group, the Boulder Smart Energy Coalition, is skeptical. While that group supports clean energy, it is concerned that municipalization could be costly and time-consuming.

The Boulder Chamber has not yet taken a formal position, as it waits for final ballot language. Some of the city’s largest employers likewise are waiting to see what lands on the ballot, but they are very concerned that electricity be both reliable and affordable.

O’Toole: Affordability would certainly be key. What are some estimates of what it would cost Boulder to launch its own utility?

Wood: As you can imagine, those estimates vary widely. In any scenario, we’re talking about a lot of money. The city says that it would take $121 million just to buy Xcel’s distribution assets, excluding stranded costs and the cost of compensating Xcel for lost business. Xcel puts stranded costs alone at $335 million and predicts many years of costly litigation.

Boulder also might be liable for taking the assets of a going business concern, which an Xcel consultant says could add $350 million to the cost. The consultant estimates that the city could spend up to $1.2 billion in this effort. The city, of course, disputes those figures.

In any event, the ballot measures will come up for a final reading August 16.

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