Council lays out utility criteria

BOULDER — The Boulder City Council has set the criteria it will use to determine whether it should form a municipal electric utility, and city staffers and consultants are due to make a recommendation about how the city should proceed to the council in March.

Boulder City Council voted 7-1 on Nov. 15 to approve the metrics it will use to evaluate whether or not forming a municipal electric utility is feasible.

The city is studying whether it should take over the Boulder transmission grid from Xcel Energy. Boulder residents narrowly approved two ballot measures in 2011 giving City Council the authority to create a utility and allocate money to pay for technical and financial studies and potential litigation.

The ballot measures established general criteria the utility would have to meet before its creation and put them in the City Charter. The utility would have to have rates that don’t exceed Xcel’s, be as reliable as Xcel, produce revenues sufficient to cover operational costs and debt payments and reduce greenhouse gas emissions.

The measure approved recently by the council establishes the data the city will collect and sets performance and financial thresholds it must meet before a utility can be created, said Heather Bailey, executive director of energy strategy and electric-utility development for the city. Bailey is overseeing the team of staff and consultants working on the project.

The metrics “are here to help answer the fundamental question of if it’s feasible for the city to municipalize,” Bailey said during the City Council meeting.

They only set a baseline, Bailey said. Whether the city should create a utility is another matter, and City Council is free to factor in other considerations — such as the amount of renewable energy used — as long as the thresholds are met.

“They’re not intended to be the only criteria,” Bailey said.

In an interview following the meeting, Bailey explained what’s next. For city staff and consultants, it looks to be a lot of data collection and number crunching.

“We are now delving into the nitty gritty of doing the analysis,” Bailey said.

The city will be working with a financial adviser to help determine whether the utility could be economically viable and what it would need to show to establish its credibility with potential bondholders, Bailey said.

An engineering consultant will work with the city to study how a potential utility could be separated from Xcel Energy’s existing grid and what infrastructure the city would need, Bailey said.

Boulder has retained legal counsel for potential condemnation negotiations and litigation and for federal regulatory hearings.

The city also is working with four working groups made up of Boulder residents, Bailey said.

The city has much to learn but not much time. In March, City Council will make its next big decision, which is whether to continue the municipalization process or pursue an alternate strategy.

Possible strategies will be made public in late January, and City Council will have a study session in February to receive an update and go over its options, Bailey said in the interview. The energy strategy staff will incorporate the feedback from the public and council into the recommendation it makes to City Council, Bailey said. The decision of what course of action to follow is up to the council.

If it decides to continue toward creating a utility, the city and Xcel Energy likely would face off in a state condemnation court and before the Federal Energy Regulatory Commission as they fight over the value of Xcel’s system and what Boulder would have to pay for stranded costs.

Those costs might not be known for several years, and if they are too high, a future City Council would have the opportunity to take an “off ramp” and not create a utility.

“As we go through litigation, the outcomes of those lawsuits will also be off ramps,” Bailey told the council. “It’s also an opportunity to say, ‘You know what, this is where we need to stop.’ ”

Bailey later clarified how the condemnation process would work. If City Council approves, city attorneys and outside counsel would begin putting together its case, which includes putting a value on the assets it would take from Xcel Energy.

Xcel Energy has said it is not willing to sell its assets to the city. If Boulder tries to take them by claiming eminent domain, the sides are required by state law to engage in good faith negotiations, but if a settlement price cannot be reached the case will go to court.

It would take several months for the sides to put together their cases and negotiate, Bailey said.

The transparency of the process was a major issue of discussion at the council meeting. Councilman Ken Wilson introduced five amendments, including one that would have required the city to reveal more about its business plan and the inputs of its financial and performance models.

Revealing those details would severely hamper the city’s approach to litigation, city attorney Tom Carr said.

“You have to leave to staff some level of judgment about what we disclose and what we don’t,” Carr said. “You can’t send us into a courtroom with our hands tied behind our back, and that’s what scares me about this amendment.”

All Wilson’s amendments were defeated, and he was the only vote against the measure. Council member KC Becker was absent.

Ultimately, the City Council approved a revised measure that explained the metrics are the minimum requirements and will not be the only criteria considered by the council.

The metrics are markers and will not set a predetermined course, Councilwoman Lisa Morzel said.

“They frame the conversation, and where it’s going,” Morzel said.

The conversation should include skeptics and opponents of municipalization, of which there are a lot in Boulder’s business community, Councilman George Karakehian said.

“Many in the business community have real questions about the city’s ability to manage an electric utility,” Karakehian said. “I’m not saying we have to bend over backwards, but we have to make sure the business community is comfortable” with the business case.”

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