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Tuesday June 25th 2019

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The Mayor and Deputy Mayor Debate Municipalization


By and

Mayor Susan Osborne and Deputy Mayor Ken Wilson

Editor’s note: This debate between the Mayor and Deputy Mayor first appeared in a series of emails among University Hill neighbors, of which both are members, on their list serve. Emails, authored separately by the Mayor and Deputy Mayor, have been reformatted here to facilitate comparison. — Mary Young.

Introductory Remarks from the Mayor

In the past year we have gone as far as we can go in our studies of municipalization. The next step is to determine actual costs and economic feasibility.  There is a clear process to do this, although it will take time and money. Whether or not to go forward to determine feasibility is the question before our community this fall.

I strongly support taking this next step and will vote yes on 2B and 2C. No expert, no consultant can tell us today the actual cost to municipalize; the estimates of costs from the most experienced people in the country vary widely. Once the actual costs are known, unequivocal language in the ballot issue stops the sale of bonds if not economically feasible.

There is a world-wide movement going on as cities and countries innovate to reduce their carbon impact. We can look to Germany and Denmark, or to Austin and Marin County in the United States, for examples of approaches. Municipalization, I believe, is our surest way to be a leader in this movement. Below are my top ten reasons for a municipal utility.

Introductory Remarks from the Deputy Mayor

I would like to offer some counterpoint to Mayor Osborne’s well written points on municipalization. This is a debate (and vote) where good people have different opinions. We all have the same goals – more renewable energy and a smaller carbon footprint for Boulder and beyond. How we get there is the issue. As an electrical engineer with 35 years of experience in the utility industry, I am convinced that if we vote to form a municipal electric utility it will not bring about what people are dreaming.

Top Ten Reasons to Municipalize (or Not)

  1. Boulder has the legal authority under the Colorado Constitution and the city charter to municipalize utility services in the city.

Mayor: Every twenty years Boulder voters get to decide whether or not to sign a new long-term franchise agreement with Xcel Energy, a regulated monopoly. That time is now and, after an intensive year of work, city studies and analysis show that creation of a municipal utility may be financially feasible.  The current ballot measure will allow us to get firm numbers on the cost to acquire the local distribution system, as well as a determination of other costs. At any time during the process, Boulder could decide not to proceed with creating a local utility if creating a utility turned out to be too costly.

Twenty-nine Colorado towns and cities, including neighbors Longmont, Lyons, Loveland, Fort Collins and Estes Park, run successful municipal utilities. Boulder certainly could, too.

Deputy Mayor: It is true that many cities in Colorado have municipal power utilities. However, none of them have municipalized in at least 40 years. Ft. Collins formed its municipal power utility 75 years ago. None of the 29 Colorado municipal power utilities has a debt load associated with acquiring their distribution grid. They make capital investments in modernizing their grids, as we would need to do. But if you overlay on Ft. Collins or the other municipal power utilities the kind of debt load we will take on, their utility would be way under water. A friend of mine is a council member in Ft. Collins. He said at a party last week: “Why do you want to form a muni? They aren’t that great.” He is also a professor in the engineering department at CSU.

  1. Municipalization will allow decisions about Boulder’s fuel mix to be made here in Boulder based on the values of Boulder residents and businesses.

Mayor: Decisions are currently made by the Colorado Public Utilities Commission (PUC). This regulatory reality and the business reality of an investor-owned utility based in Minneapolis hamstring Boulder’s efforts to reduce our carbon footprint, localize our power supply and develop our own initiatives. A municipal utility, without the constraints of either the PUC or the driving need for investor profit, can operate as a service focused on providing direct benefit to its customers.

Deputy Mayor: It is quite true that if we were a muni we could make our own decisions on fuel mix. Xcel has a state mandated (and Xcel supported) 30% Renewable Energy Standard (RES). Ft. Collins is struggling to find a way to get to a 10% RES. It’s all about money. We would be a broke municipal power utility for the first ten years with a huge debt load for 30 years. We simply wouldn’t have the money to fund large renewable energy projects or to purchase more costly renewable energy.

  1. Municipalization supports innovation and our home-grown energy businesses.

Mayor:In the past decade, Boulder has attracted an array of clean tech businesses. A local utility would have the opportunity to tap into the wealth of knowledge and cutting edge products and services that are now being developed in our town. The enthusiastic support from many clean tech Boulder businesses for municipalization has been important to our effort.

Deputy Mayor: I have evaluated many cities with municipal power utilities. None of them have any more innovation in green energy than Boulder. Ft. Collins for example. They have some great companies in smart grid and renewables, but so do we. Show me an example where a city with a muni is way ahead of Boulder. Another related issue: It is true that Xcel recently reduced rebates for Solar Rewards that caused rooftop solar companies to cut staff. Would the city be able to sustain higher rebates than Xcel when it is a muni? I proposed that instead of fighting Xcel with additional tax money (Ballot Issue 2B) we use the money to increase rebates. Unfortunately that option is not on the table now.

  1. Municipalization will save money on some basic utility services.

Mayor: For example, Boulder is in the unenviable position of paying for the electricity costs for the city’s street lights, but can neither control the type of fixture used nor the maintenance of the lights. This profit center for the utility increases costs to the city. As another example, during the negotiations for the 1990 franchise Boulder pushed for the establishment of a fund to bury overhead power lines. Such a fund became part of our franchise and all other Xcel franchises in Colorado. While this was a step forward, Xcel retained the right to use its own contractors, creating another profit center at local government cost.

Deputy Mayor: The model that city consultants have created, which shows us paying less for electricity than we currently do is very optimistic and highly unlikely. It is grossly underestimating acquisition and separation costs and is optimistic on operations costs. Controlling our costs for street lighting would be good, but will have associated costs for a muni. Burying power lines is expensive. It is true that Xcel does it at high cost, but they were giving us $1 million per year for free when we were under franchise. A city muni would need to replace that money.

  1. Municipalization will lead to a cleaner and more renewable energy mix.

Mayor: One fact is certain – Xcel, regardless of the renewables it adds to its system, is inextricably tied to coal for its base power. Xcel’s recent billion dollar investment in a new coal-fired plant in Pueblo indicates that Xcel will be burning coal for decades into the future.  As a municipal power utility, Boulder, taking cost and reliability as considerations, would be able to choose its fuel mix. By tapping the wholesale electricity market, Boulder will benefit from highly competitive energy prices, while choosing fuel sources that reduce carbon emissions.

Deputy Mayor: There is absolutely no guarantee that municipalization will lead to more renewable energy for the city. Again, it’s all about money. The models that advocacy groups have created that show high levels of renewables are experimental and have never been used to provide power to even a modest sized city. Ft. Collins, Longmont and other Colorado municipal power utilities are even heavier into cheap coal than Xcel. It is unfortunate, but true that while new wind generation is cheaper than new coal generation, new wind is more expensive than existing coal generation buy quite a bit. I am skeptical that a new municipal utility, with no transmission and no generation of its own, could buy a cleaner mix at anywhere near the same price. If we had formed one 75 years ago, this would be a great discussion and we could see if we could do that. I don’t think we could even attempt it for a decade with a start up municipal power utility.

  1. Municipalization will eventually allow for the full development of local energy resources.

Mayor: As long as Boulder is an investor-owned utility customer, any local energy production is required to be sold to Xcel at wholesale rates that is then sold to others at retail rates by the company. Individuals and businesses can use energy produced on site, but any surplus energy is bought by the utility at wholesale rates. This sort of purchasing scheme makes sense for a profit-making business, but is a strong disincentive for local distributed energy production. A municipal utility, with a strong focus on local production, would be free to develop pricing incentives.

Deputy Mayor: I would love to see the city develop more local energy resources. We have good solar, indifferent wind and maybe other resources that could be considered. I work on smart grid projects because smart grids are the way we can integrate more local renewables in the future. Municipalization will not lead to more development of local resources in the short run. If we are paying off a huge debt to acquire Xcel’s grid, how can we invest in local renewables?

  1. Municipalization could lead to the optimization of the smart grid.

Mayor:It remains to be seen whether Boulder would purchase the smart grid system installed by Xcel, or look for a more current technology. In any case, a local utility would be focused on serving its customers and supporting demand side management programs with customer monitoring devices – currently a missed opportunity with the existing system.

Deputy Mayor: Xcel’s SmartGrid City is providing increased reliability to Boulder. The IBM smart city analysis said this in detail. If we municipalize, SmartGrid City will be broken because it depends on Xcel’s back office systems – which we would not and could not acquire. It would take us many years to re-create the current smart grid or build another one. They are expensive and not easy to implement.

  1. Municipalization plays to Boulder’s strength in innovation.

Mayor:While maintaining a AAA bond rating, Boulder has a history of bold and innovative actions. Whether it’s pioneering circulator shuttles, being the first in the state to use tax increment financing to redevelop an aging shopping center, building a clean, green, high- head hydroelectric system, imagining a new neighborhood on the site of a defunct drive-in theater, or figuring out how to build a remarkable and trend setting open space system, this community has had the creativity and will to shape its future. Each example has involved controversy, risk and a financial commitment. Each example has yielded positive community results.

Deputy Mayor: My fear is that if we vote to municipalize it will put a chill on innovative businesses in Boulder. There will be a period of 5 to 7 years where we are fighting Xcel in court over acquiring their assets. Uncertainty is bad for businesses. Will the rates go up? Will reliability go down? No one will know for 5 to 7 years.

  1. Municipalization is the only path to meeting our Kyoto carbon reduction goal.

Mayor: While Boulder businesses and citizens are making heroic efforts to reduce energy use, it has become clear that we will only reach our Kyoto carbon reduction goal by fundamentally changing our energy supply mix – in addition to reducing consumption through efficiency and conservation. The path toward a more localized and clean energy supply can only be achieved through municipalization.

Deputy Mayor: Municipalization is not the only path to meet our Kyoto goals. Kyoto goals are pretty much old hat anyway. We have higher goals at the state level now. I want to see us work with Denver, Aurora and other cities to move the whole state forward. Municipalizing will take us out of the state discussion on renewable energy.

  1. Municipalization is an investment in Boulder’s future, a legacy project.

Mayor: While there are unknowns about the costs to municipalize, there should be no doubt that if the effort proves feasible in the present, future generations will reap the benefit. There will come a point when the acquisition bonds are repaid and the city will be its own master in regard to our energy fuel mix and tailored programs to increase reliability, lower cost, promote renewables and support local green businesses.

Deputy Mayor: Investment in Boulder’s Future – a legacy project? As an engineer I feel obligated to tell people that I am convinced that going down the municipalization path is a train wreck. It would be a legacy of a very bad decision. If I thought otherwise, I would be an advocate rather than a skeptic.

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One Response to “The Mayor and Deputy Mayor Debate Municipalization”

  1. don barshay says:

    first of all, the format for the so-called ‘debate’ is one which favors the opponents of 2B & 2C, and was submitted to you precisely for that reason. not allowing an answer to the counter-point allows the latter the opportunity to answer without an answer to the so-called answer — thus, counter-point has the last word in EVERY instance. also, susan is not the optimal person to debate the issue, as her lack of a technical backround precludes her from technically dueling with, essentially, a technician (wilson)who holds a rather shallow view of reality. don

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