Boulder files amended application with PUC for creation of electric utility

BOULDER – The city of Boulder on Wednesday afternoon filed an amended application with the Colorado Public Utilities Commission that includes more-robust technical details about how the city plans to separate its electrical system from that of Xcel Energy for the purpose of creating a municipal electric utility.

In addition to the materials made public — including the 46-page application, plus testimony and exhibit documents — city officials said the new submittal includes some 1,200 pages of exhibits related to the inner workings of Xcel’s Boulder system that are considered highly confidential for security reasons and can’t be released due to federal law.

Boulder’s move Wednesday reaffirms the city’s years-long quest to acquire the Xcel distribution equipment necessary to provide electricity services to city residents and businesses on its own. And it comes even as it appeared that an alternate route might be taken earlier this year when city and Xcel officials jointly announced that they were in negotiations on a settlement that would end Boulder’s utility-creation efforts.

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The city’s main objectives in creating a municipal utility all along have been to move the city over to renewable sources of energy faster than Xcel would be able to do, and also to provide more services that help reduce residents’ carbon footprints. Xcel officials have long contended that the city’s best option for achieving its renewable-energy goals is to work with the company rather than breaking away.

Boulder officials said Wednesday that they remain on the parallel paths of both exploring municipalization and negotiating with Xcel.

“We don’t believe this filing in any way precludes those continued discussions,” city of Boulder spokeswoman Sarah Huntley said.

Clarity about which path the city ultimately takes could come soon, however. The city’s lawyers are expected to meet with city council members in a closed-door executive session on Oct. 5 to brief them on litigation strategy as it relates to creating a utility, as well as possible settlements. Huntley said a decision to move toward a settlement would require council approval during a public meeting.

“Now is a key time in the settlement process, and we look forward to Boulder’s decision in October to see if we’re able to reach an agreement or if the city is going to continue with municipalization instead,” said Xcel spokeswoman Michelle Aguayo, who added that she couldn’t comment on the status of the settlement negotiations.

If municipalization is the chosen path, the city of Boulder plans to acquire Xcel’s distribution assets within the city limits in condemnation court through the power of eminent domain. But the PUC has jurisdiction over which assets the city is allowed to acquire and how they must be separated to ensure safety and reliability for both Xcel and Boulder customers, as well as fairness to Xcel because the company is an unwilling seller.

Boulder filed its application with the PUC in July of last year, outlining its separation plan. The PUC struck down a portion of that proposal, saying that the city could not acquire equipment that served only Xcel customers living outside city limits. The PUC at the time also noted that the city’s technical and engineering analysis was insufficient for the commissioners to make a ruling on the application, but they did leave open the opportunity for city officials to return with a revised application.

City officials say their new application completely separates Boulder’s proposed system from Xcel’s and no longer seeks to acquire any equipment that serves only Xcel customers outside city limits.

Xcel officials hadn’t had a chance to examine Boulder’s latest filing Wednesday. But Aguayo said Xcel’s objectives are the same as when the city submitted its initial application to the PUC.

“We’re focused on a plan that provides complete separation ensuring safe and reliable service for both Boulder customers and the rest of our statewide integrated system,” Aguayo said. “We hope that this revised plan will follow those requirements. We will review what Boulder submitted in light of what the PUC outlined (last year).”

When it requested more information from the city last fall, the PUC also directed Boulder and Xcel officials to engage in discovery so that the city could have a better understanding of Xcel’s equipment that it would acquire and thus be able to provide a more-informed application.

Boulder’s original application proposed nine interconnection points with Xcel’s system that city officials said allowed for the cleanest break. But to comply with the PUC’s earlier decision, the city’s new proposal separates Boulder’s system from Xcel’s in a more complex fashion, even separating out unincorporated pockets within the city’s borders. Doing so places the city’s projection for separation costs at $53 million as opposed to the roughly $5 million projected previously.

Heather Bailey, who is leading the development of a municipal electric utility for the city, said that the higher cost of separation for the new plan is due in part to the addition of increased capacity and resiliency to the system that the city had previously budgeted to occur over the course of 20 years.

“We’re frontloading … those projects now,” she said, in order to comply with the PUC’s requirements.

The $53 million figure for separation costs would not factor into the $214 million cap on acquisition costs to which the city is bound. In 2013, voters passed a measure limiting to $214 million the amount of debt that could be issued for the acquisition of Xcel assets, as well as any stranded costs incurred by Xcel such as investments already made by the company to provide future service to Boulder residents.

City officials reiterated Wednesday that they believe those acquisition and stranded costs — which would be determined in condemnation court — will come in below the $214 million cap. Part of the reason for that is that the new proposal includes acquiring fewer assets from Xcel than the city’s original plan due to the PUC requirements.

Boulder’s new application includes engineer testimony on how the city’s electrical system will function, information on how any possible newly annexed areas will be integrated over time, and financial projections. City officials said they’ve also created a video of engineer Steve Catanach walking the public through the separation plan, as well as a private version with more detail created for the PUC. In addition, the city plans to soon release a financial forecast tool that aims to give the public a detailed look at Boulder’s financial assumptions about acquiring and running a utility.

City officials said their earlier filing relied only on information about Xcel’s system that was publicly available. Much of the city’s modeling was based on comparing Boulder’s needs with other similar cities. But they said the new filing, thanks to information handed over by Xcel during the discovery process, is based on much more concrete knowledge about how energy flows through Xcel’s system.

“We got far more technical information from Xcel about how the system works and is designed,” Senior Assistant City Attorney Deb Kalish said. “The difference between the two filings is really pretty dramatic.”

If the PUC approves Boulder’s separation plan, the city would embark on the condemnation process to determine what price is paid for Xcel’s equipment.

The city would not be able to begin construction on separating its system from Xcel’s until it purchases the company’s equipment. Separation construction is expected to take two to three years. During that period, the city’s proposal to the PUC includes the city leasing back its equipment to Xcel for free. The city would provide the customer interface for billing and service, but would pay Xcel a fee to operate and maintain the system until the city has finished separation construction.

The city’s new application also outlines a process by which the city would be required to continue to buy wholesale power from Xcel for a period of five years, gradually stepping down the amount.

Boulder officials are hoping to have condemnation proceedings completed by the end of 2017 so that they can take ownership of Xcel’s equipment in January of 2018 and begin running the utility.

That timeline is crucial due to funding constraints. Boulder voters in 2011 approved a utility occupation tax that would collect $1.9 million per year through 2017 to fund exploration and formation of a municipal utility. The city has already spent more than $1.9 million per year on the efforts. The current total stands at just more than $9 million, with extra cash coming from the city’s general fund.

Huntley said city officials are “doing everything in our power to meet that timeframe” without having to go to voters for an extension of the utility occupation tax. But opening for business in January 2018 could indeed prove challenging.

Should the PUC accept Boulder’s new application for consideration, the commissioners will have 210 days to issue a decision, and city officials expect that extensions to that timeframe could push the process to 300 days. That would mean the city wouldn’t begin the condemnation process until next summer.

City officials acknowledged that condemnation proceedings could take 12 to 18 months, though they’re hoping for less. That’s because the PUC will already have determined what assets can be acquired by the city, so the only major piece remaining to be determined by the court would be the price.