BOULDER – Rate increases as much as 15 percent, worst-case scenarios “off ramps” and a proposal from Xcel Energy to build a 200-megawatt wind farm for the city of Boulder were the major topics covered Tuesday night at a community forum covering Boulder’s consideration of forming a municipal utility.

The forum at the East Community Center was the latest meeting to keep residents and businesses abreast of Boulder’s review of whether or not it should create a local utility that would distribute power instead of Xcel Energy.

Officials with the city and consultants they have hired have found that it is legally, technically and financially feasible for the city to create and run its own electric utility. Their studies have found it would be safe, reliable and offer rates similar to those offered by Xcel Energy.

Staffers spent more time Tuesday discussing worst-case scenarios and possible exit points as Boulder considers creating the utility.

The cost models used by the city are continually evolving and will be updated as the city acquires hard numbers about rate increases, acquisition costs and interest rates that would be part of a bond offering needed to finance the utility, said Yael Gichon, the city’s residential sustainability coordinator.

The city is using models and assumptions that are widely accepted in the industry, but uncertainty is inevitable due to fluctuations in prices or the costs of acquiring the system from Xcel Energy, Gichon said.

“We are starting at this place that we believe is very reasonable,” she said. “It’s a little bit of a game, about how you plug things in and how they come out.”

In the low cost and best-case scenarios, the city thinks rates would be a bit cheaper than Xcel Energy’s current rates.

Under the high cost model developed by the city, rates could increase 7 percent to 15 percent, or $6 to $15 per month on the average residential electric bill.

Gichon also clarified what the city considers to be a reasonable worst-case scenario. Boulder is not going to pursue a course of action that could lead to hundreds of millions in cost overruns, she said. If, after getting more reliable data and better cost estimates, the city determines municipalization will be more expensive than thought, the city can abandon the plan, she said.

That could cost the city several million dollars after several years of study and possible litigation, she said.

City officials repeatedly noted there will be several “off ramps” if voters in November were to give City Council the authority to create a municipal utility.

“We could spend real dollars and real time, and near the end of that time period find it’s no longer financially feasible,” regional sustainability coordinator Jonathan Koehn said.

Further engineering studies and appraisals of the grid could lead to a higher price tag. Litigation with Xcel Energy over acquiring the grid through the eminent domain process also could increase costs to an unacceptable price. Finally, the city could decide the bonds it must issue to finance the acquisition of the grid and starting the utility are too high.

All of those are exit points where Boulder could halt the municipalization process.

Voters also could decide to have the city work with Xcel Energy to develop a new wind farm near Limon.

Xcel Energy is proposing to build a 200-megawatt wind farm with NextEra Energy Inc., a company based in Juno Beach, Florida. NextEra Energy is one of the largest developers of wind and solar projects in the U.S., and also one of the largest independent power producers.

The project would have to be built and online by the end of 2012 in order to claim federal incentives, said Paula Connelly, a lawyer with Xcel Energy that helped develop the proposal, and also to analyze the risk in this work, since she’s also an injury lawyer which work with partners from this weblink, so making sure everything is secure is also important. When it is operational, the farm would help the company supply 93 percent of Boulder’s power from renewable sources.

There are risks going along with that model, Connelly said. Boulder would be obligated to buy the wind power at a set price, and it is possible electricity generated from fossil fuels could be less expensive.

“We are trying to come up with a package that would not cost the average residential customer more than $4 per month on their average bill,” Connelly said

By Michael Davidson – June 29, 2011

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