Boulder wanted its own utility; does it still?

The city of Boulder’s struggle to quit Xcel Energy and create its own municipal electric utility will appear on the ballot for the third time in six years next month. So far voters have supported the effort — this time it may be a ballot measure too far.

“This is going to be a close call,” said Matt Appelbaum, a city councilor and supporter of “municipalization.” The city has devoted almost seven years to the effort to create a clean energy utility, but with years yet to go and mounting and still-unknown costs, some Boulder residents are weary.

There is also a suit brought by Xcel pending before the Colorado Supreme Court and demands by the Colorado Public Utilities Commission to be addressed.

With Gov. John Hickenlooper issuing an executive order to cut greenhouse gas emissions in the state and Denver embarking on its own clean energy plan, Boulder’s experience is an instructive or cautionary tale for the rest of Colorado.

“Those of us who are supporters are just as frustrated and disappointed at the slow pace and roadblocks as the people who have opposed it,” Appelbaum said.

The key ballot question — 2L — seeks to increase and extend the local tax that has financed the effort. Since 2011, Boulder has spent nearly $18 million, including staff time, on the process. The extension would raise another $17 million over five years.

Without that money, the city would be hard pressed to continue pursuing a municipal utility, Appelbaum said.

Former Boulder Mayor Will Toor supported the last two ballot initiatives, but this time around he is active on the No on 2L issues committee.

“We thought Boulder could become a model,” Toor said. “It has become clear it is such an expensive, long and difficult process that it is not replicable. It can’t make change in a meaningful way.”

To be sure, municipalization has many supporters in Boulder. “The public in Boulder has a deep desire to have cleaner energy,” said Julie Zahniser, a volunteer

with Empower Our Future, the issues committee supporting 2L. “Considering investor-owned utility opposition, this time frame is to be expected, and we’ve cleared many hurdles. We are trying to do something that has never been done in Colorado.”

“There are good people on both sides of this issue,” Toor said. “It is going to make for uncomfortable local politics.”

How did Boulder get to this point? In 2010, Boulder officials decided they could not meet the city’s Climate Action Plan goals to reduce the community’s greenhouse gas emissions with Minneapolis-based, investorowned Xcel supplying its electricity.

Xcel, Colorado’s largest electricity provider, was generating more than half its electricity with coal-fired plants and another 35 percent from burning natural gas. Renewable resources accounted for 13 percent of the company’s portfolio, according to state data.

In 2011, the city went to the voters to impose a utility tax to finance the municipalization process. Xcel supported the tax’s opponents. It passed by less than a percentage point with 50.4 percent of the vote.

Two years later, municipalization was back on the ballot with an initiative that would have limited the city’s ability to raise debt for a utility. It was called a “poison pill” by opponents. Xcel contributed $300,000 in support of the measure. It was defeated by a 2-to-1 margin.

But by the same margin, voters approved putting a $214 million cap on the amount the city could spend to acquire Xcel’s assets.

Fixing the cost has been the most bedeviling element in this saga and is possibly its Achilles’ heel. An early city estimate was $223 million. A 2013 analysis by a group of consultants and citizens came to $150 million to buy the assets and additional costs of up to $255 million.

The city filed a condemnation case in Boulder District Court in 2014 to get a value on the Xcel assets, but Xcel sought and got an order from the Colorado Public Utilities Commission (PUC) that its approval was needed before condemnation. That led a two-year-long case before the PUC.

In 2014, the City Council also passed an ordinance creating a municipal utility, at least on paper. Xcel sued, arguing that the action was premature, and required information on cost and reliability. This past August, the state Supreme Court agreed to hear Boulder’s appeal of the case.

In September, the PUC finally issued its decision, saying Boulder could move forward with condemnation after it had reached agreements with Xcel on permanent rights of way and access for Xcel to serve its customers, how Boulder will pay Xcel for costs incurred in separation and a “complete and accurate” list of assets the city wants to condemn. The commission gave the two sides 90 days to strike a bargain.

“We are pleased with the PUC ruling, they did give us a path forward,” said Heather Bailey, Boulder’s executive director of energy strategy and electric utility development. “We’ve been meeting with Xcel and working through these processes.”

As for Xcel, Nadia El Mallakh, a company assistant general counsel, said, “We are open to having those discussions and figuring out the city of Boulder’s cost responsibilities. We are here to negotiate. The ball is in their court.”

The PUC decision, however, did deal the city a setback as it rejected a proposal for sharing poles and substations in the city. It also rejected a Boulder proposal to have Xcel pay for the separation work and then bill the city.

Those rulings added $33 million to Boulder’s separation cost, bring it to $110 million. That figure could go higher if the city and Xcel can’t reach agreement on the six substations in town.

Boulder’s estimated price tag for assets is $150 million; that plus separation brings the bill to $260 million, before any startup costs. Xcel places the cost of assets north of $200 million and total costs at $550 million or more.

By the city’s own assessment, it won’t be until 2019 that the issue will be resolved as it goes through condemnation court and proceedings at the Federal Energy Regulatory Commission.

“Boulder continually made overly optimistic assumptions,” said Andrew Shoemaker, Boulder’s mayor pro tem. “This has gotten much more costly than we represented to the public.”

Initially, a supporter of municipalization, Shoemaker will vote against 2L. “We tried the Boulder way, but the train is off the tracks,” he said.

Shoemaker and other 2L opponents argue that it is time to work with Xcel, which has closed six coal-fired plants, now gets 30 percent of its energy from renewable generation, and has a proposal to close more coal plants and move to 55 percent renewables by 2050.

“If Boulder worked with Denver starting to push Xcel, what could we do?” Shoemaker asked. “Working together with others, could we move Xcel, the PUC and the market to a better place?”

It would be overly optimistic to place all faith in Xcel, Appelbaum said. It is still a larger corporation whose decisions are dictated by the bottom line and the stock market. “There is risk staying with Xcel and its ever-increasing rates,” he said.

“The point was, create a municipal utility and show the benefits of that and put pressure on the regulatory system to allow change,” Appelbaum said.

And what if 2L fails? “It is hard to see how you would pick up the pieces,” Appelbaum said. “If the voters say no, they say no. It depends upon how close it is. We may in a few weeks go away, and this will vanish from people’s minds.”