By Steve Pomerance
Posted: 08/14/2011 01:00:00 AM MDT

Boulder’s November’s ballot item creating a municipal electric utility only allows the city council to acquire the electrical distribution system from Xcel if (1) at the time of acquisition, electric rates will not exceed Xcel’s, (2) electricity revenues will be sufficient to pay for operating expenses (including power purchases) plus 125 percent of debt payments, (3) reliability will be comparable to Xcel’s, and (4) there is a plan for reducing greenhouse gas emissions and increasing renewable energy.

In order to determine if these conditions can be met, the City must get a decision from the Federal Energy Regulatory Commission as to whether Xcel must be compensated for power plants and transmission lines that would lose value if Boulder leaves Xcel’s system, and a determination from the state courts as to the worth of Xcel’s transformers, poles, wires, etc. within the city (excluding transmission lines.)

FERC and the courts will only take action if the City has access to the funds reasonably expected to be needed; thus, bonding authority is included in the ballot. This bonding authority is limited de facto by the bond market, based on projected revenues, and the revenues are limited by the ballot restrictions as well as rate design rules (which are similar to those Xcel must follow.) Once FERC and the courts have made their determinations, the City can evaluate whether the ballot criteria can be met, and therefore whether it would be responsible to proceed.

The process outlined above dramatically reduces the City’s risk and uncertainty. The real risk is if we stick with Xcel. For starters, Xcel is regulated by the Public Utilities Commission, a group of three unelected officials, in a process that is almost impenetrable for any normal person. Decisions are sometimes bizarre — the PUC awarded Xcel about two-thirds of the money they spent on the failed SmartGridCity, even though the cost was three times what Xcel projected, and will grant Xcel the last one-third based on the vaguest of criteria. With a municipal utility, at least decisions are made by elected officials that you can talk to, or vote out of office.

Xcel is still massively committed to coal and therefore at risk with respect to future Federal carbon taxes/restrictions as well as inevitable coal cost increases. There has been a lot of hype about Xcel shutting down coal plants under the Clean Air Clean Jobs Act, but the truth is that Xcel has added over four times as many mega-watt years of new coal generation by building Comanche 3 (completed last year) as was deleted by the CACJA shutdowns. Xcel’s base-load coal also interferes with expansion of its renewable energy portfolio; wind energy is already being curtailed.

Although Colorado’s target of “30 percent renewables by 2020” sounds good, CO2 emissions are what count. Other states are considering standards based on percentage reduction, and if the Feds go that way, we would no doubt be forced to pay to fix more of Xcel’s problems.

Xcel’s rates are reported to have gone up 7 percent this year already, an annual cost to Boulder ratepayers that will far exceed all the money that the City will spend on its investigations outlined above. And I saw projections by Xcel that say they will make capital investments of over $4 billion in Colorado over the next 5 years; the pass-through to Boulder could approach $200 million.

Xcel has been very inconsistent with respect to solar. Rebates were cancelled, but then reinstated at minimal levels. People with PV panels were supposed to be able to “net meter” (run their meters backwards), but now under consideration is a new rate to be paid only by solar owners, which would make a mockery of existing agreements. Solar gardens rules have only now emerged, years after the concept was developed.

Boulder can hire utility management that is at least as good as Xcel’s. Check out, for example, encous.com, who manages a number of “munis.” Also, we shouldn’t forget that Xcel is a monopoly for-profit corporation. Investor-owned utilities focus on adding to their “rate base” (invested capital), on which they made outrageous almost-risk-free rates of return on equity (in 2010, Xcel’s was 10.23 percent per year) A municipal utility is nonprofit; under Boulder’s proposed rules, excess revenues will go to benefit the ratepayers.

My conclusion — there are significant risks if we stick with Xcel. And most of these can be mitigated if we take control of our energy future.

Steve Pomerance is a former Boulder City Council member. stevepomerance@yahoo.com

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