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Making Sense of Energy Measures on the Ballot: Vote No on 310 and Yes on 2E


By and

Note from the authors: Powerful interests are counting on voter confusion (and are even creating confusion) to thwart Boulder from determining its own clean energy future. Please read on, and help others get informed. There is a lot at stake in this election . . .

In a Nutshell

There are two competing measures on our November ballot that will determine the course of Boulder’s energy future:

  1. Xcel-sponsored ballot measure 310, which requires unworkable processes to address debt and out-of-city customers, making Boulder municipalization essentially impossible;

and

  1. City Council-sponsored ballot measure 2E, which sets limits on debt and includes out-of-city customers in utility decision-making, while moving forward in exploring the creation of a local Boulder electric utility.

This is a VERY IMPORTANT vote. Whichever measure passes will determine our future, and if both measures pass, then whichever gets the most votes wins. Please vote no on 310 and yes on 2E—for all of the reasons discussed below.

The Context

First off, a little background: in November 2011, Boulder voters passed two ballot measures (2B & 2C), which provided clear direction for the city to move forward in exploring and pursuing the establishment of a local electric utility (aka “municipalization”). Measure 2B established a local utility tax to pay for the effort, and 2C gave the green light to moving forward with municipalization provided that four specific charter metrics could be met:

  1. Rates meet or beat Xcel at time of acquisition;
  2. Reliability must remain comparable to (or better than) that of Xcel;
  3. The utility must have sufficient reserves to cover operating costs and debt, plus carry a reserve of 25% of the debt  (i.e., maintain a debt service coverage ratio of at least 1.25); and
  4. There must be a plan to increase the amount of renewable energy in our fuel mix and reduce greenhouse gas emissions.

So for the past two years, the city has been engaged in an unprecedented modeling effort—with input from technical working groups, outside consultants, and city staff—to determine whether a municipal utility could meet these four metrics under various price scenarios. The results, which were verified by an independent third party this summer, found that yes indeed these metrics could be met, including under a wide range of possible cost estimates for acquisition of the poles and wires, stranded costs to be determined by the Federal Energy Regulatory Commission, and other factors. Under many scenarios, a municipal utility could actually achieve ambitious clean energy goals at lower utility rates than Xcel’s. Armed with these results, the City Council voted to move forward in August with the next step in cost exploration: initiating condemnation proceedings with Xcel, which is the only way to determine the exact value of Xcel’s poles and wires.

Meanwhile, the city and Xcel have continued a dialogue, most recently thru the Xcel-City Working Group of diverse citizen and business representatives, to explore alternatives to municipalization as a way to meet our clean energy goals. City and Xcel staffs are working on a model to compare Xcel’s latest proposed energy programs with a municipal utility—the results of which are due out in early 2014.  The city is committed to continuing this dual path of exploration to determine the best option for achieving Boulder’s clean energy future.

So why is municipalization back on the ballot again?

The November Ballot

In short, Boulder’s energy future is back on the ballot because Xcel is mounting another effort to derail municipalization. This is understandable, as Xcel makes roughly $35 million/year in pre-tax profits from Boulder. Plus, municipalization by individual cities poses a direct threat to Xcel’s monopoly business model. While it is Xcel’s right to provoke another vote, it is unfortunate that the approach of 310 proponents seems to be to foster fear and confusion rather than an informed debate.

What is Xcel proposing?

Ballot Measure 310

Ballot measure 310 has four provisions that together focus on two key issues—debt limits and out-of-city customers—to make municipalization essentially impossible.  Measure 310 is deliberately misleading, as it directly undermines municipalization but without appearing to.

Specifically, 310 requires that voters must approve the exact amount of debt limit and cost of repayment before any utility debt is issued. It then further requires these debt votes to occur during municipal elections, which can only happen every other year on odd-numbered years.  Together these provisions hamstring both the acquisition and start-up of a municipal utility, as well as ongoing operations. The city cannot proceed with condemnation proceedings if it has to tell the judge that the city might pay the acquisition costs the court determines but won’t know until an election that can’t take place for another year or two. Put another way, the city must have the authority to issue the bonds necessary to pay for the system, as the voters granted in 2011, before it can proceed to court to determine the exact costs of the system. Measure 310 also makes it unworkable for a municipal utility to issue future debt in response to emergencies (e.g., floods) or to take advantage of emerging business opportunities. This requirement for a vote on any debt for the life of the utility is far more stringent than even the Taxpayer Bill of Rights (TABOR), which specifically exempts enterprises such as utilities.

Ballot measure 310 also states that the municipal utility’s service area cannot extend outside city limits unless registered electors in those areas are permitted to participate in debt limit votes. Yet the drafters of 310 know full well that existing law doesn’t give the city authority to hold an election for voters outside its city limits. As such, 310 makes it virtually impossible to engineer a workable separation plan for a Boulder utility because the most cost-effective and technically sound separation points are at the six substations that ring the city, but which also serve about 5,800 out-of-city customers along the city perimeter.

Finally, 310 also arbitrarily limits brokerage fees for managing any sale of utility bonds to one percent, without specifically defining what can be included in such fees. While brokerage fees are a made-up issue, it further adds to confusion and threat of lawsuits when the city goes to issue debt bonds.

In short, 310 thwarts the direction given by Boulder voters in 2011 to fully explore municipalization, by making municipalization an unworkable premise before we even know what it would cost.

The history of how 310 got on the ballot is also relevant for what it reveals about the intent of the measure, as well as the influence of corporate money in local elections. This summer, a group of five “concerned citizens” (including one who had moved to Boulder the week before) petitioned to put 310 on the ballot. Later, Xcel admitted that it tested and fine-tuned the ballot wording through several phone opinion polls. Workers were paid to collect signatures to put the measure on the ballot, engaging in practices that were challenged as misleading by New Era Colorado. While these concerns were found to have merit and resulted in signatures being disallowed, they did not ultimately prevent the measure from making it onto the ballot. More recently, Xcel donated $300,000 to the “Yes on 310” campaign, which is helping finance the many newspaper ads and TV spots Boulderites are now seeing.

So what is the city’s counter measure about?

Ballot Measure 2E

The City Council, in responding to people’s concerns about debt and county customers, instead crafted a solution-oriented, positive alternative to 310 that allows exploration of municipalization to continue.

Specifically, in measure 2E, council placed a cap of $214 million on debt for the two big unknown costs associated with municipalization—the cost of system acquisition and stranded costs—which would be decided by the courts. (All other costs associated with municipalizing can be reasonably estimated and have been accounted for in the modeling.) The $214 million for acquisition and stranded cost debt represents an amount that the modeling has shown the city could afford and still meet the charter metrics. If the courts determine these costs to require higher debt than this, the city would not municipalize or we would come back to the voters for additional guidance. (While $214 million for these two costs may sound like a large number, keep in mind that if the city municipalizes, it would in essence be buying a large revenue-generating business from Xcel that grosses some $118 million/year, which would pay back the bonds and be used to run the utility. Under municipalization, however, excess revenues wouldn’t be going to Xcel shareholders as profit but be reinvested in Boulder’s utility system—e.g., to underground wires to increase reliability, invest in distributed generation or other green energy projects, or to lower electricity rates.)

Ballot measure 2E also states that future debt will be addressed through normal channels as allowed by the city charter, just as our other city-operated utilities—for drinking water, storm water, and waste water—are operated. (It is worth noting that Boulder’s water utility has an AAA bond rating, which is the best there is.) Measure 2E also importantly clarifies that utility issues can be placed on the ballot and addressed by voters in any election, not just every two years.

Measure 2E further states that the city can acquire the necessary infrastructure to create a reliable and cost-effective utility system, including going beyond city limits if needed, but specifically addresses the concerns of out-of-city customers by:

  • Allowing out-of-city customers to serve on the utility board;
  • Prohibiting rate differentials between in- and out-of-city customers; and
  • Codifying the commitment of the city that, if it proceeds with municipalization, it will determine the service provider preference of each out-of-city neighborhood, either Xcel or the city, and if not the city, to try to find a mechanism—whether through the PUC or the state legislature—to accommodate those wishes.

Finally, 2E limits brokerage fees associated with acquiring debt to industry standards.

In short, 2E ensures that the issues of debt limits and out-of-city customers are effectively addressed (within the limits of existing law) while allowing the city to continue to explore our clean energy future options, including municipalization.

Summary

So, to recap:  310 stops Boulder’s exploration of municipalization in its tracks; 2E would allow us to continue exploration, as previously directed by the voters and in keeping with the four charter metrics adopted in 2011.

As has been written about extensively over the past few years, there are a lot of merits to pursuing municipalization: it is the quickest path to decarbonizing our electricity supply; allows us to quickly exceed 50% renewables; allows us to innovate, experiment, and harness the new technology being developed by the many clean energy start-ups in our town with all the economic vitality that brings; and allows us to democratize decisions about our energy choices and future.

But regardless of whether you support municipalization or not, Boulder needs to soundly defeat 310 or we will lose all of our negotiating influence over Xcel. If we can no longer explore municipalization, we also no longer have leverage to get a better partnership agreement out of Xcel because Xcel has the most incentive to offer us a good deal when we are walking out the door.

The Xcel-supported 310 campaign is running full-page ads and TV spots to promote a measure that would protect Xcel’s $35 million in profits from Boulder each year. Let them know that Boulder can’t be bought or bullied into voting against our best interests. Please vote no on 310 and yes on 2E—for a clean, democratic and economically vibrant Boulder energy future!

Please note that the Daily Camera and Boulder Weekly have also come to similar conclusions:

For more information, including the long list of groups and individuals opposing 310 and endorsing 2E, we recommend:

And for a copy of ballot language for all measures on the city ballot, see the city’s website: https://bouldercolorado.gov/elections/2013-ballot


For our email subscribers: this article was co-written by Suzanne Jones and Lisa Morzel

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