BOULDER - Xcel Energy Inc. and the city of Boulder are sparring over who has the legal right to serve about 5,700 utility customers in unincorporated parts of Gunbarrel, other unincorporated areas east of the city and in unincorporated Sunshine Canyon to the west.

Xcel Energy Inc. on Monday sent a letter to Boulder's city attorney Tom Carr that said Boulder does not have the legal right to provide utility service outside of its city limits, should the city decide to run its own electrical utility. Such utility service is governed by the state Public Utilities Commission, the letter said. The PUC has ruled that Denver-based Public Service Co. of Colorado, an Xcel subsidiary, has the right to serve those customers, the letter said.

Carr responded in a letter that "we respectfully disagree." The state constitution's language regarding home-rule cities gives Boulder the authority to serve customers outside the city, Carr wrote.

Specifically, a home-rule city, "shall have the power, within or without its territorial limits, to construct, condemn and purchase, purchase, acquire, lease, add to, maintain, conduct and operate water works, light plants, power plants, transportation systems, heating plants and any other public utilities or works or ways," Carr wrote in his letter.

The latest exchange of letters comes in advance of a scheduled Boulder City Council vote on Tuesday, April 16, on whether to move forward with plans to create a municipal electric utility.

In November 2011, voters gave the Boulder City Council the authority to create a municipal utility, with conditions. Those conditions require rates to be cheaper, carbon emissions to be reduced, more energy from renewable sources, and that Boulder be able to offer power as reliably as current provider Xcel Energy. Voters also approved a $1.9 million annual budget to study the plan for five years.

The research process has been controversial. Xcel Energy has made clear that the company does not want to sell its Boulder assets. Boulder could go through a condemnation process in the future to acquire Xcel's assets, Huntley said Tuesday. In such a process, a government has the legal right to exercise eminent domain to take private property for public use after compensating a property owner.

Heather Bailey, the city's executive director for energy strategy and electric utility development, in February recommended "for technical and efficiency reasons" that Boulder acquire all six of the electrical substations that serve its residents - including two in unincorporated Boulder County near the city's borders.