Boulder, Xcel dispute cost of split
Last Updated: 17:43 March 28, 2012
BOULDER — The clock is ticking for the city of Boulder, Xcel Energy Inc. and the business community as the city moves forward with studies and debates that could result in Boulder taking over the local power grid.
Consultants working with the city have found it is technically, legally and financially feasible for the city to create a municipal utility that would be safe, reliable and cost competitive.
Meanwhile, Xcel Energy has submitted a plan to build a wind farm that would help the company supply 90 percent of Boulder’s power from renewable energy sources by 2020. The proposal would require Boulder to approve a new 20-year franchise agreement.
Both options require a lot of work in little time as city staff works to have a ballot proposal ready by July 19 to meet the deadlines required to put the agreement before voters in this November’s election.
“It’s a very aggressive timeline,” Boulder communications coordinator Sarah Huntley said.
The city will continue to seek the input of the business community on the proposals, but the “Business Matters” meetings have finished and turnout was less than expected, Huntley said.
“We didn’t get the number of business owners that we hoped for, but we do think we had really meaningful conversations with the people who did come,” Huntley said.
“We’ve heard very loud and clear from the business community what their concerns are. There continues to be a lot of concern about rates,” she said.
How much a city-owned utility will have to charge for power, and how it funds the purchase of the grid and other fees required to separate from Xcel Energy, is a source of major dispute between the city and the utility.
City staffers believe the rate models developed by its consultants show that rates will remain the same or even go down, Huntley said.
According to a cost estimate created by Robertson-Bryan Inc., a consulting firm based in Elk Grove, California, with an office in Boulder, it would cost Boulder $222 million in startup costs, including $121.3 million to acquire the electricity distribution system.
Annually, it would cost $59.1 million per year to purchase power on an open market, $13 million to operate and manage the grid and $24.7 million per year in financing costs, including interest and debt payments, Robertson-Bryan found.
Xcel Energy believes those numbers are “very, very low,” said Craig Eicher, the company’s area manager for community and local government affairs. After the acquisition would be complete the city utility would still be buying most of its power from Xcel Energy, Eicher said.
Xcel Energy still is determining what its Boulder infrastructure is worth and is not interested in selling it, said Paula Connelly, the company’s attorney.
That would leave condemnation litigation as the city’s only option to take over the system, and Xcel Energy will fight those efforts in court, Connelly said.
“These kinds of cases can be very expensive to prosecute and defend and take a very long time,” Connelly said.
The city and Xcel Energy already are at odds over the stranded costs Boulder would owe Xcel Energy if it took over the grid.
Xcel Energy said the city would owe it nearly $335.7 million, while the city believes it might not have to pay the utility anything. The city has an estimate that is included in it its rate model, but it will not release it because of potential negotiations or litigation.
If the parties cannot reach an agreement the Federal Energy Regulatory Commission could decide the issue.
Huntley acknowledges keeping the city’s estimate of stranded costs confidential is at odds with Boulder’s usual commitment to transparency, but officials feel strongly that publicizing it would put Boulder at a major disadvantage in negotiations or litigation, she said.
Boulder still is evaluating a counter-proposal Xcel Energy presented to the City Council on June 7.
The proposal would build Boulder its own wind farm and could result in Boulder having up to 90 percent of its power come from renewable sources by 2020.
Boulder’s rates to purchase the energy would be locked in over the long term, and it could save money if the price of fossil fuels passes the costs of wind power.
Xcel Energy does not believe it can come up with another plan that will satisfy Boulder if the wind farm proposal is not accepted, Eicher said.
The cost of the proposal remains a major factor the city is considering, Huntley said.
“If natural gas prices stay the same, or go down, then Boulder will be paying way more than it should,” Huntley said.
The municipalization and wind power plans are different enough that an “apples-to-apples” comparison is difficult, though the city is working with consultants to provide the best possible price comparison by a public forum scheduled for 6 p.m., Tuesday, June 28, at the East Boulder Community Center, 5660 Sioux Drive.
A growing concern is the process is moving fast. City staff is trying to emphasize that a vote on municipalization is the start of a process and not the end of it. City Council could stop the process if the cost estimates proved too low.
“There are a lot of off ramps,” Huntley said.
The other major concern from the business community was whether a municipal system would be reliable, but that issue seems to have subsided, Huntley said. While advocates of municipalization have pushed for more local control over planning and to introduce more renewable energy, businesses have not been as interested in those topics, she said.