I was invited by the editors of the Blue Line to write this piece after they saw some of the comments I had written for a utility industry newsletter that’s been following Boulder’s initiative to form its own utility. I must admit that I’m not familiar with all of the details and the history, but after spending nearly 40 years working in the electric business, I can offer a few insights.
The first thing to realize is that what we in the business call publicly-owned utilities are not a cure-all for the ills – real and perceived – of being served by a for-profit, or investor-owned, electric utility. Research by the Lawrence Berkeley Laboratory shows that on average, there’s not much difference between the rates charged by investor-owned utilities and publicly-owned utilities though of course there are exceptions at both ends of the spectrum. In some cases, local utility control leads to innovation and more responsive service as exemplified by the Sacramento Municipal Utility District, which serves Sacramento California, and Austin Energy, which serves Austin Texas. In other cases, local utility control becomes enmeshed in city politics and utility revenues become a cash cow for the city, as is the case in Los Angeles, which has the largest municipal utility in the country. Many of the country’s rural electric cooperatives are among the most risk-averse businesses you’ll find, while others have gotten themselves in financial trouble by taking on ancillary functions without understanding the businesses or the risks.
The second thing to realize is that a Boulder municipal utility will remain dependent on Xcel Energy for at least a decade and possibly longer. Boulder will need Xcel’s transmission system to carry power from wherever it is produced, whether by fossil-fired plants, renewable energy plants or a combination of the two. Since it sits squarely in the middle of Xcel’s Colorado electric grid, Boulder will need balancing services provided by Xcel’s fleet of power plants to ensure reliable service. In all likelihood, Boulder will have to source at least a portion of its bulk power supply from Xcel for a period of time until other arrangements can be made. Although this places Boulder in a less-than-ideal commercial position, the Federal Energy Regulatory Commission has issued a number of rules over the years that are intended to protect smaller utilities embedded in the service territories of larger ones.
A Boulder municipal utility will no longer be regulated by the Colorado Public Utilities Commission. Instead, either the city council or a separate board will be responsible for management oversight, prices and terms of service. On the positive side, a local regulator might be more willing to tolerate, or even require innovations that Xcel might be reluctant to go along with or the PUC might be reluctant to approve. For example, some elements of the Smart Grid City idea could be implemented differently and at much lower cost. On the other hand, local regulators could be more easily swayed by public opinion to take actions that negatively influence the municipal utility’s long-term viability.
Since the renewable energy content of electricity consumed by Boulder residents was a major issue in the decision to explore a municipal utility, it’s worth pointing out that electrons can’t be color-coded. Renewable energy purchased from wind and solar farms enters the grid much like streams that enter a lake, and electricity withdrawn from the grid by business and residences behaves like streams that empty a lake. There’s no way to direct the flow from one point to another without building expensive new transmission lines that neighbors don’t want anyway. In fact, it’s entirely possible at least some of Boulder’s renewable energy could be purchased in Texas or portions of the Midwest that can’t physically deliver it to Boulder. Consequently, Boulder residents need to get comfortable with the idea that the flow of physical energy out of a wind farm that has a contract with Boulder is separate and distinct from the flow of money to that wind farm. Of course, renewable energy could also be purchased from solar panels on the roofs of homes and businesses in Boulder and wind turbines that feed directly into the Boulder distribution system, which would keep some of the money spent on renewable energy purchases in the community.
Forming and operating a municipal utility is a complex, time-consuming and potentially risky undertaking. If it’s handled badly or if it’s done for the wrong reasons, consumers are going to see higher costs while failing to enjoy any benefits. If it’s done well, the citizens of Boulder have an opportunity to pursue distinct environmental and policy objectives that a large utility with service obligations across Colorado cannot. My advice to those of you reading this article is to educate yourselves and stay engaged with the process.
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