The City of Boulder, Colorado, is fighting for its dream of a municipal electric utility.

Xcel Energy, which now provides Boulder’s electricity, does not think city leaders are going about municipalization in a legal or practical way.

“Xcel is waiting for us to stumble and we intend to show them we know what we are doing,” Heather Bailey, executive director of energy strategy and electric utility development for the City of Boulder, told Utility Dive. “The things that need to be done are not rocket science but you need to know how to do them.”

Boulder's ambitious plan

Bailey and Boulder’s transition team are getting input from investor-owned utilities, other municipal utilities, local experts, and the American Public Power Association. They have formulated a high-level, eighteen-month transition plan with seven major functional areas. And they have a 600-step to-do list.

“To seamlessly integrate an electric utility,” explained the final report from PowerServices, Inc., Boulder’s municipalization consultant, the city must “manage multiple uncertainties and create a path forward” despite the fact that the Xcel-Boulder dispute remains a “complex process highly influenced by acquisition legal and regulatory proceedings.”

The key objectives, PowerServices reported, are safe and reliable system operations, cost effective and reliable wholesale power, minimal transitional costs and customer impacts, and getting more renewables into the generation mix.

These objectives will come through either of two scenarios. One foresees “coordination with Xcel Energy to provide wholesale power and services at acquisition (Day 1) until interconnection construction is completed (Day 2).” Power supply and operations would be stable over a gradual two-year transition period.

Another foresees Boulder taking over “all aspects of utility operations immediately upon acquisition (Day 1) and prior to completion of interconnection construction.” In that scenario, Boulder would be on its own.

“We are planning for the worst and hoping for the best,” Bailey said. “I suspect we will end up somewhere in the middle.” For now, her team is working to identify best practices and establish standards, procedures, and policies.

The dispute with Xcel Energy

The dispute over municipalization centers on Xcel-owned infrastructure within the Boulder city limits that the city believes should be turned over at a fair price through a district court condemnation proceeding.

An October 2013 decision by the Colorado Public Utilities Commission (CPUC) ruled condemnation should be settled in a regulatory proceeding.

“It is state law,” Xcel spokesperson Michelle Aguayo told Utility Dive. “The PUC made it very clear the Colorado Supreme Court has upheld that time and again.”  

It is not just what is best for Xcel Energy or Boulder, Aguayo said. “It is what is best for the grid and for all the customers of Colorado. They are looking at reliability, at safety, and at what state law has dictated.”

The process seems to be “testing the relative importance of competing values,” explained Pace University Law School regulatory authority and former Texas regulator Karl Rabago. “The interests of a democratically convened local government in the health and welfare of its citizens” are set against “the property-and-investment-backed profit expectation interests of a corporation operating as a monopoly.”

Sources who asked not to be named said Xcel’s dissatisfaction is with inadequate details provided by the city about the Xcel infrastructure it wants. The lawsuit prevented Aguayo from addressing that issue specifically but she told the Boulder Daily Camera Xcel has “too many unanswered questions.”

Xcel’s website echoes Aguayo, reporting that Boulder’s failure to settle forced it to take legal action.

“The city has provided a detailed inventory to Xcel,” responded Boulder Senior Assistant City Attorney Kathy Haddock, though it cannot be publicly disclosed.  “During negotiations, the city also provided Xcel a mapbook showing the locations of all Xcel facilities the city intended to acquire, and its negotiators had several meetings with Xcel."

But first, jurisdiction must be established. “The PUC has ‘primary jurisdiction’ so even if the courts resolve the ultimate issues, there is an argument that the matter must be heard at the PUC,” Rabago explained. “The exception is that when there are clear issues of law and no real issues of fact, the courts are an acceptable place to start.”

Boulder is ready for a five year battle that could go before the Federal Energy Regulatory Commission and Colorado’s Supreme Court, municipalization advocate Ken Regelson said.

Xcel knows the utility must be operational by the end of 2016 or the city must ask voters for a third approval of the plan, so it is “throwing up as much legal dirt as it can to hold onto the $30 million per year in profits it earns in Boulder,” Regelson explained. “But they’re kidding themselves. We first got a 54% voter approval. And when Xcel spent millions trying to reverse that, we got a 62% approval. We know how to talk to Boulder voters and they want this.”

The issue will also go back to Boulder voters if legal and regulatory proceedings set the value of Xcel's poles and wires higher than the initial ballot measure's $214 million limit.

Boulder's path forward

Heather Bailey is a veteran of regulatory complexities. She helped establish programs at the Public Utility Commission of Texas, was involved in creating a Lower Colorado River Authority transmission subsidiary, and consulted for NextEra Energy when it formed its transmission company. Her response to the dispute is to move ahead on plans for the municipal utility.

Bailey’s Solar Working Group wants to expand the city’s privately-owned 14 megawatts of installed solar capacity and add community-owned solar gardens. They want to build a resilient distributed power supply through Boulder’s 26 energy-based local businesses. “A lot of them never got to do business locally because Xcel wouldn’t talk to them,” Bailey said. “We have begun creating partnerships.”

Control of Xcel’s poles and wires is crucial, Bailey said. It is the only way Boulder can choose its own energy mix, structure its grid to incorporate micro-grids and energy storage, and make its own rules for where and how it can expand distributed solar and cogeneration. “We need that ownership,” she said.

If they have to go back to voters, municipalization advocates can argue Xcel is using legal delays to hold on to profits the city could use to pay down debt, reinvest in infrastructure, inject into the local economy, or drive innovation, Bailey said. “Today we have no control over how to use it.”