Boulder files to avert Xcel obligation

BOULDER – Attorneys for the city of Boulder on Friday filed a petition with the Federal Energy Regulatory Commission related to the possible creation of a local electric utility. The petition seeks to confirm that the city would have no “stranded-cost” obligations for portions of wholesale power it may continue to acquire from Xcel Energy Inc.

The city is planning to decide later this year whether to attempt to acquire the electrical system serving Boulder from Xcel and create its own municipal electric utility.

There is, however, a question about how much, if any, Boulder would have to pay Xcel Energy in “stranded costs.” Under federal law, customers who leave their utility can be required, under certain circumstances, to pay the utility for investments in generation that were made on their behalf if the departing customer uses the utility’s transmission system to receive electricity from a new wholesale supplier.

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In this case, Xcel Energy has said the city would owe $255 million if Boulder leaves Xcel’s system in 2017. According to Xcel, this is necessary to cover Boulder’s share of the debt for coal plants and other generation assets the company brought online prior to Boulder indicating its intent to purchase energy from sources other than Xcel. Currently, Colorado law does not allow communities served by investor-owned utilities such as Xcel to purchase power from any other supplier.

In the filing, the city argues that any stranded cost obligation should be proportionately related to how much power it purchases from Xcel and for how long. If the regulators agree, Boulder would be in a clear position to manage any potential stranded-cost obligation. The city of South Daytona, Florida, received a similar ruling from the commission in 2012 during its municipalization process.

“We believe a ruling in support of the city on this very specific legal question would be a win-win-win,´ said city attorney Tom Carr in a press statement. “This would chart a way for a Boulder electric utility to address its stranded-cost exposure while at the same time protecting Xcel’s shareholders and protecting remaining customers of the company.”

Recent city analyses show that a local electric utility could use renewable sources of energy such as wind, solar and hydro for more than 50 percent of its supply and significantly decrease greenhouse gas emissions while maintaining similar or lower rates and reliability than those offered by Xcel Energy.

Xcel Energy is expected to begin investing in new generation assets in early December. Boulder City Council is scheduled to decide Aug. 6 whether to enter into good-faith negotiations – and, possibly, condemnation litigation – about the value of the equipment and facilities the city would need to acquire.