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Energy News

As costs rack up in Boulder’s push to split with Xcel, voters to have the final say

Climate advocates in the Colorado city, eager to accelerate the push for clean energy, are divided over whether to cut a deal or continue a complex process to form their own utility.

A decade ago, Boulder, Colorado, set out to create its own municipal utility in hopes of accelerating its push to cut emissions. It has been a difficult path. Xcel Energy, the investor-owned utility serving the city, has fought the separation at every turn. Already, Boulder has spent $28.7 million in legal, engineering and other work. Voters had originally approved $30.6 million. 

Now, with still more years of legal battles and an estimated $5 million to $20 million in litigation just to get the final purchase price, city residents must decide whether to throw in the towel, at least for now, and accept a new franchise agreement.

The proposed 20-year agreement could conceivably move Boulder toward its goal of 100% clean energy by 2030 at a brisker pace than Xcel’s announced plans for its Colorado customers altogether. In theory, the partnership between the city and utility defined in the agreement will also quicken the pace of innovation at the interface between utilities and customers.

A municipalization push in Minneapolis ended in 2014 ended with a similar compromise, although for only a 10-year contract.

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Opponents of the proposed franchise agreement, including Boulder’s three former mayors during the last decade, describe the proposed partnership as toothless. They want Boulder to dig in just a little longer because of the substantial rewards available to a locally controlled utility as the world of electricity and energy change rapidly.

Sam Weaver, the current mayor, lies at the center of intersecting arguments. He was an ardent municipalization supporter as recently as January but changed his stance after helping negotiate the proposed franchise agreement. He concedes its imperfections. 

“There is no getting around the fact that their motivations will not completely align with ours,” he says.

But he does defend the agreement based on his appraisal of risk. If Boulder walks away from this agreement, he says, the city’s municipalization opponents will surely initiate an election next year. With a municipal budget already trimmed 10% because of COVID-induced revenue declines and worse possibly to come, he fears losing everything. This agreement, he says, gets Boulder most of what it wants.

Fundamentally at issue is whether the business model of vertically integrated monopoly utilities can meet 21st century needs. Xcel, seen as a carbon-focused old-school utility even a decade ago, has picked up its pace, turning heads across the country with its December 2018 declaration to achieve 80% emissions reduction by 2030 and 100% emissions free electricity by 2050.

But Boulder wanted more, to be a model in Colorado and beyond. Denver and several suburban cities will have their franchises expire in the next decade. Advocates for municipalization would like to show what could be gained by more daring enterprises. The motto of municipalization advocates is “decarbonize, democratize and decentralize.” Add to that localize: the city envisions 50% locally generated power.

“They’re a sumo wrestler trying to compete with a ballerina,” says Leslie Glustrom, describing the innovation she sees by Xcel compared to the agility that  she says is actually needed. A biochemist by training who shelved her career to work in climate change advocacy and birddog Xcel, Glustrom describes Xcel as “slow-walking in the right direction.” It’s not enough. “When you’re in a crisis, pace matters,” she says.

Municipalization advocates make it clear they don’t dislike Xcel or its leaders. It’s Xcel’s profit-driven,  investor-owned utility business model they find objectionable.

“I want to be clear that Xcel is not a bad company, but they do stand between us and our ambitions,” says Suzanne Jones, a former mayor. “This investor-owned utility (model) is outdated and is not the best way to address climate change.”

protest at power plantA climate protest at Xcel Energy’s Valmont Generating Station in 2011. Xcel stopped burning coal at the plant in 2017 but one natural gas unit continues to operate.

A green culture

A pall of smoke has been ominously hanging over Boulder, the result of wildfires that have raged in Colorado since August, the hottest and driest ever recorded in the state. The disagreement is not about the need to rapidly suppress greenhouse gas emissions, but rather the most effective way to do so.

Boulder exults in both nature and technology. Iconic sandstone formations called the Flatirons tilt dramatically as the Great Plains erupt into the Rocky Mountains. Well-used hiking trails festoon both foothills and prairies. Even for Colorado, it’s uncommonly pretty.

It’s also exceptionally wealthy, the average home value of $770,000 reflecting an economy flush since the 1980s with high-tech and aerospace companies but also businesses engaged in the design and manufacture of outdoor goods and in organic and natural foods. Boulder County has the highest ownership rate of electric vehicles in Colorado. Home to two national laboratories and a university, Boulder routinely vies with Cambridge, Ann Arbor and San Jose in leading the country in the number of degreed residents. 

Boulder’s values can be seen in its 1982 law protecting solar access of existing homes and apartments, barring shadows from new and taller buildings. It was the nation’s first such law. Another national first, in 2006, was the city’s carbon tax. It generates $1.8 million annually for climate change programs. 

Even then, conversations had begun about creating a municipal utility to better further the city’s renewable energy goals. Xcel had just won approval from state regulators to build Comanche 3, a coal-fired power plant, and had vigorously opposed Colorado’s successful voter-initiated renewable energy standard.

Xcel didn’t sit still, though. It set out to comply with the renewable standard then readily agreed to more and more as it figured out how to integrate wind and solar while still ensuring reliability. It has added 1,100 megawatts of wind capacity from farms on Colorado’s eastern plains in the last three years and plans to close two coal-burning units at the Comanche Generating Station near Pueblo during the next several years. More coal plant closures are likely to be announced next March when the utility files plans with state regulators.

The utility has also stumbled. In 2008, it chose Boulder as a laboratory for the application of new information technology at the intersection of the utility and customers. That experiment, proudly titled SmartGridCity, was saddled by high costs and fell far short of expectations. State regulators allowed Xcel to recoup $27.9 million of its costs from ratepayers but denied an additional $16.6 million. In Boulder, it is described as a debacle.

Nor have the stumbles ended. Xcel in recent years was engaged in two solar-plus-storage microgrid projects in Denver, one in conjunction with Panasonic and the other at the neighborhood formerly called Stapleton. Hearing results of the study reports in September, members of the Colorado Public Utilities Commission were distinctly unimpressed. 

“The world is changing, and we need a utility that changes quickly,” said Jeffrey Ackermann, the PUC chairman.

‘It’s gone on too long’

Boulder has had its own problems. The city council in 2010 did not renew the franchise agreement and won voter approval for a tax to fund investigation of municipalization. Voters approved continuation five times since. Some were landslides, others were squeakers.

The city’s municipalization dream has taken it through courtrooms and state and federal regulatory bodies. The tedious, costly process has frustrated supporters and taxed the patience of everybody. 

“We have wasted enough time and money on the municipalization effort, and it’s time to end the debacle,” wrote George Craft in an op-ed in the Boulder Daily Camera. He identified himself as “no Xcel lover” and that he has a solar roof, composts and drives a hybrid.

Matt Appelbaum, mayor from 2011 to 2015, expects Boulder voters to approve the franchise agreement. “I would be shocked if this did not pass,” he says. “I think people are just bored. It’s gone on too long. It has cost more than it should have,” he says.

“I suspect we made several mistakes, but the vast majority of them were simply because there were no precedents to follow,” adds Appelbaum. “None.”

That’s mostly correct. Lyons, a small town near Boulder, gained independence from Public Service, an Xcel subsidiary, in 1974. Another small town had gained independence in the early 1950s. The last time a municipality comparable to Boulder—currently population 108,000—separated from an investor-owned utility in Colorado was in the 1930s. That was Fort Collins, another university town that, with three other municipal utilities, created the Platte River Power Authority. That wholesale provider is confident it can achieve at least 90% renewables by 2030.

But Xcel’s profits are also at issue. Pointing to company presentations, municipalization advocates estimate that Boulder delivered Xcel $23 million in profits to the company in 2019. They’d like to keep those profits at home.

Boulder is currently condemning Xcel’s assets, a messy legal process that has the city and Xcel doing duplicate engineering studies, with expenses for both falling on the city’s taxpayers. Yet to be determined is exactly how much Boulder would have to pay for the distribution lines, substations and other equipment as well as stranded generating capacity. The city estimates this process will take five more years. Boulder’s total debt once the transfer is completed has been estimated at between $278.5 million and $424 million.

Municipalization supporters say it will be worth the wait and cost. Appelbaum compares it to buying a rental property. 

“The first few years are tight, but you do OK, but over time things look better and better. With the muni, though, it’s more than money. It’s control, and control is worth a lot, too.”

The franchise agreement negotiated by Weaver, the current mayor, and Bob Yates, the mayor pro tem, offers an element of local control that Weaver says is just enough. His former comrades in support of municipalization say it falls far short.

The proposal came together rapidly. Weaver and Yates were in a conversation with Alice Jackson, the chief executive of Xcel’s operations in Colorado, during April about distribution system planning. Xcel as recently as 2017 had delivered what it said was its final offer. But Jackson suggested new discussions. The upshot was the franchise agreement presented to the city council in August. The agreement barred Xcel from campaigning. Even meetings with editorial boards were not allowed.

Weaver says it has most of what Boulder wanted. It provides five off-ramps for the city before 2030, three of them if Xcel fails to achieve specified carbon reduction goals. Climate Registry, a third party, will evaluate the progress. If that happens, Xcel agrees to let the municipalization effort resume where it left off. The franchise agreement also does not preclude Boulder from continuing to lobby in Colorado for community choice energy—a deliberate threat to the business model of Xcel. The agreement also resumes the undergrounding of distribution lines halted when the last franchise lapsed; at a cost of $33 million over 20 years. 

Will the agreement move the needle fast enough?

Remarkable in Boulder’s debate is the level of expertise that protagonists bring to the debate. Weaver, a CalTech graduate, co-founded two companies, including Cool Energy, of which he is CEO. The company provides the technology for waste-heat recovery and biomass power. As an inventor, he has his name on 30 U.S. patents. Yates, the mayor pro tem, retired to Boulder after overseeing European operations for Level 3 Communications. 

Across the table from him is Steve Whitaker, a member of the advocacy group Empower Our Future. As a scientist, he worked at the National Center for Atmospheric Research, the National Oceanic and Atmospheric Administration,  and the predecessor of the National Renewable Energy Laboratory. Along the way he got interested in manufacturing. 

“I considered manufacturing the decathlon of business. You have to do so much so well and be so involved. To do that right is really a challenge,” he says. Continental Control Systems, the company he co-founded in 1995, specializes in electric power metering and monitoring equipment to allow greater energy efficiency.

Weaver, despite professed neutrality about the franchise agreement he negotiated, points proudly to the component that defined a new partnership between the city and the utility. It defines a meeting schedule between Xcel and Boulder at the highest level to chart the course forward. “It’s not just a bright, shiny object,” he says. “It’s a process, an ongoing process.”

The agreement defines Boulder’s vision for electrifying buildings and transportation, for example, and specifies that the partnership “will strive to identify projects that meet Boulder’s goals and could be scaled and replicated where appropriate in other Colorado communities” served by Xcel.

Whitaker is unimpressed with this and other elements. “I have never seen a supply agreement so light on enforcement.” He sees competition as vital in spurring innovation. “Monopolies will not innovate and create the solutions we are going to need over the next decade,” he says. 

Even as votes were being cast, Empower Our Future released a financial study that members say the city should have done itself before putting the franchise to a vote. The study used results of requests for proposals sent out in June, with results delivered to city officials only days before the franchise vote was approved by the city council. Companies offered to supply Boulder with 100% renewable energy by 2030 at prices 8% to 15% less than a similar RFP in 2018. Empower Our Future’s new study also incorporated lower interest rates available today. The study concluded with high confidence a rapid return on investment yielding the city over a hundred million dollars in the next 10 years. The worst-case scenario with defensible assumptions is breaking even.

Aside from the number-crunching, there’s an emotional component that is perhaps best understood by younger demographics. Duncan Gilchrist, 26, says he’s confident his age cohorts will reject the compromise agreement with Xcel. 

“I’m hungry, very hungry, for bold action on climate action,” he says, “action that is commensurate to the scale of the problem we are facing.”

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