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That's what she said

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Boulder’s New Utility Expected to Electrify the Town in 2015


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At a PLAN-Boulder County forum on Friday, June 13, about the status of Boulder’s municipalization efforts, City Attorney Tom Carr estimated that the city will probably be able to start operating an electric utility by October or November of 2015.

Carr noted that the Boulder City Council passed an ordinance on August 13, 2013, to authorize condemnation of Xcel’s local electrical distribution facilities and that on May 6, 2014, it adopted another ordinance forming a municipal, electrical utility. Carr said that on June 10 the city had tendered a final offer of $128 million for those facilities, which, he observed, exceeded their book value.

Carr stated that Xcel had not given the city an appraisal of the value of these facilities, nor made a counter-offer. However, he said he anticipated that Xcel’s counter-offer, when it occurs, will fall in the range of $500 million. The city will probably initiate a condemnation suit against Xcel for these assets in July, Carr asserted; and he said he expected an order from the court for immediate possession of them about 15 months later. He said that the city will be prepared to run the electric utility on the day it acquires possession of Xcel’s local system.

When asked about the status of the City of Boulder-Xcel Task Force that was intended to find ways for the city and Xcel to collaborate in providing electricity to Boulder, Carr and forum audience member Sam Weaver, who had served on the task force and currently serves on the City Council, said that the task force had worked very hard for a year and originated a number of promising proposals. However, Xcel never responded to any of the ideas. The memorandum of understanding that had created the task force expired, and Xcel declined to extend it. Without the protection against litigation that had been contained in the memorandum of understanding, the members of the task force decided not to continue to participate.

Carr noted that tax revenues of about $1.9 million a year, approved by the Boulder electorate, will fund the effort to create a municipal utility until December, 2017. He also reported that the City Council has added about $300,000 more a year from the city’s general fund. However, he claimed that the city’s funds for this program were dwarfed by what Xcel has been spending to oppose it. He said that Xcel seems to have decided to try to thwart the city wherever it can. He noted that Xcel had been unwilling to even provide the city with the inventory of its rights-of-way within city boundaries. So the city had to hire workers to comb through the real property records of the County Clerk and Recorder to compile a 1,000 page book listing these rights-of-way.

Carr said that the legal activity concerning Xcel has imposed a considerable burden on his staff. He claimed that five of the nine lawyers in the civil section of the City Attorney’s Office had been spending most or all of their time on the contests with Xcel. He said that because of the time demands of the litigation, no major ordinances, including additional marijuana ordinances, will be prepared during the rest of this year.

Carr summarized the status of other litigation involving Xcel:

The “Boulder Docket”—Xcel has filed an application with the Colorado Public Utilities Commission (PUC) to limit the ability of Boulder residents to add on-site solar systems, and to participate in solar gardens and in Xcel’s demand management programs. Carr noted that later that day (June 13) the city would announce its response, including an offer to assume Xcel’s position in solar garden contracts.

The PUC’s order on Boulder’s right to condemn out-of-city facilities—Last summer the PUC issued an order asserting that it has the right to determine which out-of-city facilities the city can condemn and what it should pay for them. The city contested that order by initiating a court suit. Carr asserted that the city’s position is based on strong authority in Article XX of the Colorado Constitution. He said he anticipates a decision reversing the PUC’s order in August or September.

The Federal Energy Regulatory Commission (FERC)—Last summer the city sought a declaratory order from FERC that it could reduce its stranded costs obligation to Xcel by purchasing electricity from it. (“Stranded costs” are the costs, if any, that Xcel has expended to build generating capacity to serve its customers in Boulder and that it will not be compensated for through the condemnation process or through payments for new demand for electricity from customers outside of Boulder.)  FERC declined to issue such a declaratory order because it said it needed more facts. However, in its decision declining the declaratory order Carr said that FERC did re-affirm the pre-existing principle that a new utility may mitigate the stranded costs of the prior utility by buying electricity from the prior utility.

Carr expressed confidence that Xcel will have few, if any, stranded costs due to Boulder’s electrical utility because its demand is growing and it can use the generating capacity originally intended to serve Boulder customers to satisfy the additional demand. Carr also surmised that if FERC does award Xcel stranded costs against Boulder, the city will be able to manage them by buying some electricity from Xcel for a few years.

Xcel’s Boulder District Court suit—On June 5, Xcel filed a suit in Boulder District Court claiming that the City Council did not validly create a municipal utility when it passed its ordinance on May 6. Carr said that he expected a decision from the District Court in late July or early August validating the council’s action. Of course, an appeal is always possible.

The other panelist at the PLAN-Boulder forum, Heather Bailey, the city’s executive director of energy strategy and electric utility development, said that Boulder’s electric utility will be much more flexible and willing to foster innovation than Xcel has been. She observed that the electric utility industry has operated in basically the same way for the last 100 years, but that it is on the brink of major change and innovative services. We will be “a platform for innovation,” she declared.

Bailey also noted that many municipalities have exhibited a tendency to use their own utilities as “cash cows” by diverting their profits to fill gaps in the municipal budgets. However, she said that Boulder has prevented that form of exploitation by including a provision in the city charter that limits the amount paid by the utility to the city to four percent of revenues—the amount of the franchise fee that Xcel had been paying to Boulder. Bailey also said that the municipal utility intends to bury all electrical lines within 20 years after it starts operations.

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