City: No annexation needed to form utility
Michael Davidson
BOULDER - The owners of 5,700 homes and businesses outside Boulder's city limits will not become Boulder residents if the city forms a municipal utility, but they would become the utility's customers if a service plan being considered by the city comes to fruition.

That is the takeaway message from letters the city sent Thursday to residents and property owners in unincorporated Boulder County who are near the city's borders. The unincorporated communities affected include Gunbarrel, residential neighorhoods north of the Baseline Reservoir and homes along Sunshine Canyon Drive west of downtown Boulder. (See a PDF map of the possible boundaries here.)

The letters, to be published online at boulderenergyfuture.com, are the result of studies conducted by city staff and its legal and engineering advisers. They were signed by Heather Bailey, the city's executive director of energy strategy and electric utility development.

In November 2011, voters narrowly gave Boulder City Council the authority to create a municipal utility if it could offer power as reliably and safely as current provider Xcel Energy Inc. Other conditions require rates to be cheaper, carbon emissions to be reduced and more energy to be obtained from renewable sources.

Since then, city staff and outside advisers, including planners, engineers and lawyers, have been studying to see if a utility is feasible.

The process has been highly controversial, and one source of dispute is over whether Boulder would annex parts of Gunbarrel. Xcel Energy also has made clear it does not want to sell its Boulder assets, which would mean Boulder would have to take them through eminent domain litigation.

The city's engineers and lawyers have determined Boulder would not have to annex land outside its current borders in order to create a "technically optimal" utility, the letters state.

"The Colorado constitution gives home rule cities the right to acquire property, including by condemnation, outside of its territorial limits to provide services to its residents," said Kathy Haddock, city of Boulder's assistant attorney. According to the city, courts have upheld this power, provided cities demonstrate that it is necessary for the public purpose of serving its citizens.

However, they do believe Boulder would require two electrical substations that are outside city limits to create the utility. Those substations serve both residents of Boulder and many people and businesses outside city limits.

"I will be recommending to the council that they not consider annexation as a part of the energy future project," Bailey wrote.

"For technical and efficiency reasons, however, I will be recommending that the city seek to acquire all six of the electrical substations currently serving the city. ... This means that a city-run utility, if created, would provide electrical service to all residences and businesses served by these substations, including those that are outside of city limits," she wrote.

Xcel Energy responded to the news late Thursday. Company spokeswoman Michelle Aguayo said Xcel Energy would not discuss publicly Boulder's possible taking of its substations and other assets.

Xcel's emailed statement did say "the letter raises many questions, which we need to consider."

"We believe that someone should be asking the County Commissioners and potentially thousands of customers outside the City of Boulder, who didn't have an opportunity to vote on Boulder's municipalization, how they feel about all of this."

Xcel Energy's statement also noted that Boulder is saying nonresidents would be protected by Colorado Public Utilities Commission oversight. Advocates for municipal control have said in the past that independence from the PUC would be a benefit. The body typically does not regulate municipally owned utilities.

The decisions about what was or was not needed were driven by technical considerations, city spokeswoman Sarah Huntley said. If the city utility did not include the substations, it would have to build very costly replacements.

The letters were written to address concerns of non-Boulder residents that their homes and businesses would be annexed into the city if Boulder formed a utility.

Two different versions of the letter have been sent, Huntley said. Late last year, the city informed owners of about 4,800 homes and businesses their property might be annexed. Residents, business owners and community leaders have received a one-page version of the letter that provided an update on the city's plans.

A more detailed letter was sent to the 900 or so property owners who were not contacted last year, Huntley said. They initially were viewed to be outside the borders of a potential utility, but studies have changed that opinion. Those two-page letters are intended to give recipients more background, she said.

The city is approaching some important milestones in its municipalization effort. On Feb. 26, the city's energy advisers and analysts will brief the Boulder City Council on its options heading forward. It could include a recommendation the city form a municipal utility, abandon the effort or choose something in between. The City Council's decision on what path to take could come at an April 16 meeting.

The recommendations will be released to the public on Feb. 21 in a posting on the city's website.

The letters repeat that the city has not decided to form a municipal utility and seeks input from residents, non-residents and business owners.

Bailey's recommendations should not be construed as signs the energy staff will recommend the creation of a utility, Huntley said in a statement.

"This is not in any way intended to presage the outcome of the Feb. 26 discussion or the April 16 council vote about whether to continue to explore the possibility of municipalization. That decision has not yet been made. In fact, the city is communicating in advance of such a discussion because we want all potential customers to have an opportunity to weigh in. What staff will be doing next week (with a memo that will be released on Feb. 21) is outlining the results of its analysis of a variety of options related to municipalization. Council will not be taking any action until it hears from the community," her email said.

Huntley acknowledged there are governance issues and questions of fairness created by a utility which would include people who could not vote in the 2011 election. Some Gunbarrel residents already have spoken against the utility at City Council meetings, saying it would be unfair to be annexed into the city because of an election they could not participate in.

Even though the city will not be expanding, officials expect there will be Gunbarrel and Niwot residents who still object to the utility on those grounds.

"It's likely to be an issue," Huntley said.

The city views the letters as the first step in a major outreach campaign intended to explain what it is considering. Residents of unincorporated Boulder County are being asked directly to contact city officials and elected leaders.

There's also the fact that customers don't pick their power providers under the current system.

"We are currently operating in a monopolistic system. No one has a choice who their utility is," Huntley said.