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Boulder Likely to Adopt Its Own Green Utility—and Risks of Going Solo

Boulder could soon be on a long-fought path to break from utility Xcel Energy, control its own electricity and ramp up clean power. But obstacles await.

Jan 23, 2013
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Renewable energy advocates protest against Xcel Energy

The work came to a halt in 2007, however, when Xcel offered to bring the world's biggest smart grid project to Boulder if leaders dropped the study. Under its SmartGridCity initiative, the utility installed a fiber-optic cable network and 23,000 smart meters to make the grid more energy efficient and to allow more solar and wind power to come online.

But project costs soared, eventually tripling to $44.5 million—and some plans were dropped, leaving advocates feeling disenchanted. Xcel maintains the ongoing experiment has benefited the grid.

By 2009, the drive to municipalize was back on track. Burchell co-founded a new organization, the Boulder Climate Action Network, and gathered a few dozen local experts to research Boulder's options for minimizing its carbon footprint, including municipalization.

Out of that network grew the Renewables Yes committee, which led several ballot initiatives needed to break from Xcel—including two in 2011 that narrowly passed.

The first gave leaders permission to pursue municipalization, so long as the city could provide electricity at the same cost and with the same reliability as Xcel. The second raised an existing utility bill tax to a total of $10 million over five years to help cover consultant and legal fees expected from municipalization. Xcel spent nearly $961,000 to defeat the measures. Proponents spent about $107,000 to pass them.

Since their passage, the city has convened five working groups to explore the costs, risks and logistics of forming a utility. The City Council will collect their reports in late February and spend two months gathering public comment. In April, councilmembers will vote whether to greenlight municipalization.

If approved, which is likely, Boulder would begin the process of parting from Xcel.

Even proponents admit the effort would be fraught with economic, legal and technical difficulties.

To municipalize, Boulder would have to pay Xcel for its local grid infrastructure, including costs to physically separate the power system from the regional network. It might also have to reimburse Xcel for the investments the utility has already made in power plants and infrastructure to serve Boulder, along with the money it spent on SmartGridCity, energy efficiency and solar power programs.

The price tag will be huge. Not including expensive lawsuits, Boulder estimates it will cost the city about $290 million to start the municipal utility. Xcel puts the tab at more than four times that, or about $1.2 billion.

Under Colorado eminent domain law, Xcel must at least consider the city's offer to buy the system, but the utility has "no intentions or desire" to sell its infrastructure, said Davis, the Xcel regional vice president.

In short, that means years of legal battling in state condemnation court and before the Federal Energy Regulatory Commission.

What about clean energy?

Even if successful, it would take years before the city could add renewables due to the limited number of clean energy installations nearby and high costs of building new ones. Initially, the city plans to swap coal for existing natural gas capacity and then develop and buy more renewable power over time. Profits collected from running the utility could be invested in building solar power plants and in programs to promote efficiency and other clean economy initiatives.

Ken Wilson, a city councilmember and electrical engineer who opposes the municipalization plan, said it won't "really solve any climate problems."

"All that money will get us zero watts of renewable energy," he said. Wilson said a better plan is for Boulder to negotiate with Xcel at the state level to develop clean energy incentives and programs that benefit all Coloradans.

Davis of Xcel said municipalization is a "very risky proposition." He expressed concern that cutting off Boulder from the regional grid would harm reliability near city limits. He said ratepayers in other cities could end up paying more if Xcel takes a financial hit from the takeover, though Xcel would fight to avoid that. And he also warned there are no guarantees the city could ever deliver as much renewable energy as Xcel.

But many renewable energy advocates aren't convinced.

They see cities, and citizens, as natural leaders of America's clean energy transformation, especially of distributed generation—the type of small-scale, locally produced power like rooftop solar that makes up most of Germany's clean energy mix. Utilities in the United States are leery of adding too many intermittent sources like solar and wind, fearing they could compromise their ability to offer affordable rates and reliable service. To protect the grid, they often set limits on distributed generation.

Craig Lewis, founder of the Clean Coalition, a California-based advocate of clean energy policies, said green-inclined municipal utilities like Boulder would allow for more distributed renewable projects. They could also adopt programs like feed-in tariffs that fueled solar booms across Europe—also called CLEAN programs—which pay solar operators a fixed rate to feed clean electricity back to the grid.

"Municipalization is the nirvana," Lewis said. "We're big fans of Boulder and their municipalization process," he noted, adding that his group will do "whatever we can to make sure that it's a showcase for other towns."

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