BOULDER – Public Service Co. of Colorado, an Xcel Energy Inc. (NYSE: XEL) company, is suing the city of Boulder and City Council, contending that Boulder illegally formed a light and power utility, according to a lawsuit filed Tuesday in Boulder District Court.

Public Service Co. of Colorado contends that the city of Boulder overstepped its authority when it established a municipal utility, according to the lawsuit. The company has requested an order striking down the ordinance the Boulder City Council passed last month creating the utility.

City Council members voted unanimously May 6 to create the utility, giving the city authority to issue bonds to finance the initiative if the city goes forward with operating its own utility. Boulder has sought to increase its share of electricity generated from renewable sources while decreasing carbon emissions that lead to climate change.

Xcel argues in its filing Tuesday that the city overstepped its authority based on limitations of an amendment to the city’s charter in 2011. The amendment gave City Council authority to create a utility only if it first satisfied requirements showing the utility’s financial viability and service reliability.

City Council does not know the scope of the proposed utility or what customers it will serve, and the city has failed to show that it can comply with the cost and reliability requirements of the charter, according to the filing.

“One of the many open issues is that the city has assumed that it can serve customers outside city limits and has not evaluated the impact this assumption has on financial and reliability requirements in the charter,” said Nadia El Mallakh, Xcel assistant general counsel.
Mallakh added that Xcel tried to find alternatives to litigation by working with the city.

“We proposed an agreement that would hold off any litigation, but the city informed us that it did not see a benefit in our proposal,” she said. “This has required us to pursue legal action now, in order to preserve our rights.”

The city in January filed a notice to acquire Xcel’s assets, a step required by law to start the process of acquiring property by using eminent domain.

Xcel does not want to sell its assets, contending that it can help Boulder reach its goals of a cleaner energy mix faster and more economically than the city can do on its own.

The city received Xcel’s complaint Tuesday after learning earlier this week that the utility planned to sue the city, said Patrick von Keyserling, spokesman for the city. The city had offered to negotiate in good faith to transfer Xcel’s assets to Boulder, but Xcel refused to consider the city’s proposal.

“The city welcomes the opportunity to address the spurious claims made by Xcel in this lawsuit,” he said. “City staff is confident that the court will give both sides a fair hearing.”