In Electricity War, it's Boulder vs. Xcel Energy

It’s perhaps not all that surprising that Boulder, Colorado — a city attempting to adhere to the Kyoto Protocol and the first in the nation to self-impose a carbon tax – is now trying to forcefully municipalize its electrical utility in order to fight climate change and reduce carbon emissions.

After all, the city of 100,000 at the base of the Rocky Mountains is home to the University of Colorado and its electorate skews young, progressive and committed to causes. But what surprises Xcel Energy, the incumbent investor-owned utility, is that they’re the takeover target.

“It’s not like we’ve got a 100-percent coal mix. We’re a very progressive, environmental-leaning utility,” Xcel Regional Vice President Jerome Davis told GovExec State & Local. “Boulder’s been the first city that’s entered into this under a different sort of a theme — a theme of renewables or carbon reduction. That’s what’s so odd about this.”

Minneapolis-based Xcel provides electricity in parts of eight states, including Colorado, where in 2013, 56 percent of its power came from coal, 21.6 percent from natural gas and 20.4 percent from renewables such as wind (19.3) and solar (1.1). By state law, Xcel is on track to pump renewables up to 30 percent by 2020, and it’s the top wind-power-producing utility in the nation.

That’s clearly not good enough for Boulder voters, who have now backed the city’s municipalization efforts several times at the polls dating back to 2011 — despite substantial campaign spending by Xcel.

“We have one of the more carbon-intensive power supplies in the country,” said Heather Bailey, Boulder’s executive director of energy strategy and electric utility development, who adds that the city can fairly easily get to 40 percent renewables as soon as it’s able to acquire and develop its own energy resources. Long-term, Boulder hopes to be fossil-fuel-free by 2050.

“The carbon-intensity of the power supply, that’s what gets the young people out to vote, and they are a very strong voting bloc,” Bailey said. “The whole issue of emissions, of climate change in their future, they take that very seriously.”

Voters first narrowly approved launching the municipalization process in 2011, and then much more decisively chose to continue moving forward in 2013, but with a $214 million cap on condemnation costs for acquiring Xcel’s infrastructure (minus its coal-burning Valmont Generating Station).

Xcel sued Boulder last month after the city council voted unanimously in May to form its own utility — a step Xcel claims was premature because the city has yet to prove it can fulfill the charter requirements originally approved by voters.

“I’m not saying they cannot run a utility,” Davis said. “What you hear me saying is I do not believe they can deliver on the promises of the metrics that were set out, meaning more renewables than Xcel, more carbon reduction, having a lower rate, having the same or better reliability.”

Bailey says the city has done its homework, modeling numerous scenarios based on what other utilities around the nation are already providing, and fully vetting all of its models with a slew of experts, including unbiased members of the local business community.

“Putting on my democracy hat, what right does a corporation have to come in and say, ‘No, you can’t do what the will of the people voted to do?’” Bailey said. “If they’re so worried about customers leaving, then that would tell me customers are unhappy, so what do you do when you have unhappy customers? You don’t fight them; you figure out how to work with them.”

Davis says Xcel has made several offers to meet the demands of its Boulder customers and city officials, but they always seem to want more. Ultimately, he said the company is doing what it has to do to protect its other customers outside of Boulder, which comprises 4 percent of Xcel’s Colorado market share.

Boulder is spending upwards of $3 million a year to pursue municipalization, which first came to a head in 2010 when Xcel’s 20-year franchise agreement with the city expired. Davis says the entire effort will have cost the city $13 million by the end of this year, but that the company is not trying to wear down the city by tying it up in court.

“I don’t know why everyone says that’s part of our strategy,” he said. “From the very beginning we always said this thing is going to be very difficult. It’s going to take a long time, and there’s going to be a lot of litigation.”

Davis also said the company isn’t worried about the precedent of a large municipal utility forming for environmental reasons or that Boulder will open the floodgates for more municipalization in Colorado or elsewhere in its service territory.

But Santa Fe, New Mexico, is studying municipalization for many of the same reasons as Boulder, and Bailey says quite a few small to mid-sized communities around the country have been contacting Boulder officials about the concept.

Nationally, 17 new public power utilities have formed in the last decade — usually for reasons of reliability or rates — and 13 have sold to investor-owned companies, according to the American Public Power Association (APPA).

Based on the number of contacts from interested cities and towns around the nation, Ursula Schryver, APPA vice president for education and customer programs, said the trend right now is toward municipalization.

“Boulder has definitely brought [municipalization] into the limelight and made more communities aware of the fact that they could pursue this,” Schryver said. “All of these speak to the fact that public power is all about local control. It allows cities to undertake projects that are of interest to the community.”

David O. Williams, managing editor of the Rocky Mountain Post, is a writer based in Eagle, Colorado.

This post has been updated to clarify incorrect second references to Jerome Davis' last name.

(Image via Nelson Sirlin/Shutterstock.com)