BOULDER – The possibilities for Boulder’s “energy future” are becoming a bit clearer.
City staff and Xcel Energy Inc. have outlined alternate visions in advance of a July 19 Boulder City Council meeting during which council members are expected to start writing the ballot proposals that would have voters decide whether to stick with the utility or to go it alone.
The measures could lead to Boulder creating a city-owned and -managed utility or agreeing to a 20-year franchise agreement with Xcel Energy that calls for the company to build a 200-megawatt wind farm dedicated to supplying Boulder with green energy.
Representatives of the city and Xcel Energy discussed rate increases, worst-case scenarios, “off ramps” and Xcel Energy’s proposed wind farm during a June 28 community forum attended by at least 100 people at the East Community Center.
The proposals are the result of the council’s decision last year not to renew a 20-year franchise agreement with Xcel Energy and to investigate if the city could create its own utility.
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 at the June 28 meeting spent much of their time discussing worst-case scenarios and possible exit points.
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” after voters in November 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.
Boulder also has yet to determine how public officials would oversee the utility.
The city has considered an oversight board analogous to a planning board, which would have experienced people make decisions on behalf of the city, but whose decisions could be reviewed and overridden by the City Council, City Attorney Tom Carr said.
The structure of the board will be a subject of the July 19 meeting.
Wind farm proposal
So too will Xcel Energy’s wind farm proposal, which the company discussed in detail June 28.
The 200-megawatt project would be built near Limon by NextEra Energy Inc., a company based in Juno Beach, Fla. NextEra Energy is one of the largest developers of wind and solar projects in the United States and 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 who helped develop the proposal. When it is operational, the farm would help the company supply 93 percent of Boulder’s power from renewable sources.
“This is a real project, (creating) additional renewable energy, that would be built right here in Colorado. You’d be able to drive down I-70 and see your wind farm,” Connelly said.
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 cheaper.
Boulder, Xcel Energy and NextEra Energy are trying to craft a deal that would allow Boulder some protection from fluctuating prices, she said.
“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.