Xcel not willing to sell power grid
Last Updated: 17:36 March 28, 2012
BOULDER - Boulder is greatly underestimating how much it will cost to start its own electric utility and faces a lengthy legal fight if it tries to take over the Boulder power grid, representatives of Xcel Energy Inc. said last week as the company stepped up its effort to dissuade Boulder from creating a municipal utility.
Boulder City Council is considering a ballot measure that would ask voters to give it the authority to create a municipal utility.
That would require taking over the local grid from Xcel Energy, which has made clear it is not a willing seller.
The investor-owned utility spent the last week in July telling its side of the story.
Xcel Energy's future CEO weighed in during a conference call discussing the company's quarterly earnings.
Xcel Energy president and chief operating officer Benjamin Fowke, who will become chairman and CEO Aug. 24, said he thinks Boulder voters will reject municipalization, but if they don't the city can expect tough negotiations or a legal fight.
"We will make sure we get the price we are entitled to," Fowke said.
In Boulder, Xcel Energy has started an outreach campaign to spread its message that municipalization will be very expensive and very contentious.
Xcel Energy will meet with business and community groups as part of an issue education campaign, said Robert Osborn, the company's director of community relations.
Other details of a campaign, such as advertising, have yet to be decided, and Xcel Energy does not have an unlimited budget to oppose the ballot measure, Osborn said.
Xcel Energy also is trying to clarify where it disagrees with the city. The company is supportive of Boulder's desire to incorporate more clean energy into its mix of fuels, said Craig Eicher, area manager for the Boulder region. But the company has to consider state regulations and how Boulder-specific policies would affect the rates of Xcel customers outside the city.
If Boulder did try to municipalize, Xcel Energy would fight to recover the cost of its investments in Boulder. Company officials believe they owe that to other Xcel customers and investors, Eicher said.
On July 28, Xcel Energy cosponsored a meeting with Boulder Tomorrow, a self-described nonpartisan and nonprofit business and community advocacy group.
The speaker at the meeting was Robert Bellemare, an independent consultant hired by Xcel Energy to provide an outside appraisal of Xcel's assets in Boulder and to evaluate the municipalization proposal.
Bellemare is chief operating officer of UtiliPoint International Inc., an Albuquerque-based energy research and advisory firm. He has been a consultant or expert witness for utilities in Florida and Washington as they have attempted to stop municipalization efforts.
The city's estimates for what it will take to acquire the distribution system, form a utility and purchase power could be off by hundreds of millions, Bellemare said.
Voters will not have a clear understanding of how much municipalization will cost until well after the Nov. 1 election, Bellemare said.
Forming a utility is lengthy and complicated, and major costs will not be clear until after years of technical studies and litigation, Bellemare said.
Bellemare focused on costs, technical challenges and the likelihood the municipalization process could be ended if voters gave City Council the authority to pursue it. Whether a government should take over part of a power company and if municipalization would help Boulder achieve its energy goals were outside the scope of the presentation, he said.
Attempts to condemn and obtain a utilities' assets through the eminent domain process start a spiral of litigation that takes years to resolve and cost millions, Bellemare said after the meeting.
"No matter who wins or loses in the first round, somebody is going to be unhappy, and they're going to appeal," he said.
Cost estimates presented to the city so far have been reasonable but on the low side of what could be expected, Bellemare said. They also have excluded costs that could raise the bill by hundreds of millions, which the city has acknowledged.
Studies done by city staff and consultants have estimated it will cost $121.3 million to acquire Xcel Energy's distribution assets, excluding stranded costs or the costs of compensating Xcel Energy for losing business.
Xcel Energy's estimate for stranded costs is $335.7 million. The city has a lower estimate it has not released to the public, citing the possibility of litigation or negotiations with Xcel Energy. Staffers also believe there is a strong legal case Boulder would owe Xcel Energy nothing. If a deal cannot be worked out, the Federal Energy Regulatory Commission would decide the cost.
Boulder also might be liable for taking the assets of a going business concern, which could require it to compensate Xcel Energy for lost business, Bellemare said. That could add $350 million to the cost.