Opinion: Let Boulder municipalize


Xcel is spending massive sums of money chattering about the dangers of Boulder creating a green electric utility and firing criticisms at Boulder’s analyses. If all Xcel says were true, it would be in Xcel’s interest to stop its barrage of negativity and just let Boulder pursue its own future. Then, if the disaster that Xcel keeps predicting actually occurs, other cities would not even think about following Boulder toward a cleaner energy future. And Xcel’s nearly $700 million of pre-tax income from Colorado would be protected forever. Or at least until ratepayers revolt over skyrocketing rates from rapidly increasing coal costs, and carbon taxes make an albatross of Xcel’s new billion dollar Comanche 3 coal plant. (sourcewatch.org/index.php/Existing_U.S._Coal_Plants)
In spite of essentially flat electric sales, Xcel’s Colorado pre-tax/after-expense income more than doubled in six years — from $323 million in 2006 to $690 million in 2012 (per PSCo’s 10K filings.) So the $8.2 million that Xcel was just forced to return to ratepayers is nothing compared to this massive increase in profit. And Xcel still makes over a 10 percent return on equity.
Xcel’s claims and criticisms of Boulder’s analyses are, by-and-large, bogus. For example, in Xcel’s Issue Paper No. 1, Xcel claims to be on track to reduce carbon emissions more than 30 percent by 2020; but Xcel included carbon reductions from terminating wholesale contracts with other utilities, which just transfers the emissions to another utility’s account. Xcel raises questions about Boulder’s “capitalizing” the first 18 months of debt payments so they can be paid after the municipal utility is receiving revenues; but this is standard practice for new entities issuing debt. And even while paying interest on this debt, the modeling shows that a Boulder muni can beat Xcel’s rates in every year, while greatly reducing greenhouse gas emissions and other pollutants and also reducing water use. Xcel also uses unrealistic stranded cost numbers in trying to claim that Boulder will not be able to keep rates below Xcel’s; if Boulder goes off Xcel’s system in parallel with Xcel’s need for more generation, Boulder will likely avoid any stranded cost claims, the biggest cost numbers in Xcel’s analysis. And Xcel ratepayers will save the cost of new generation (see EmpowerOurFuture.org).

In Issue Paper No. 2, Xcel’s discussion of Boulder’s carbon tax analysis is also flawed. Xcel used inflated dollars for their carbon tax, and failed to discount their numbers to present value, both the opposite of what Boulder did. This made Xcel’s estimates of the effect of a carbon tax about double what it should have been. (BTW, Boulder is doing a no-carbon-tax analysis; results due later this summer.) This is not Xcel’s first distortion in doing discounting; even though coal costs are just passed through, Xcel has discounted them at its cost of capital (a high rate) rather than using the ratepayers’ return on safe investments (a low rate); this makes coal plants look much better than they should.
These mistakes are not anomalies. The Independent Evaluator who inspected Xcel/PSCo’s bidding process for their possible 500-plus megawatts of new wind said, “…the IE is unable to confirm that the PSCo processes function reliably. The RFP process employed was needlessly convoluted and was being created as the RFP was conducted, making review of the ongoing process difficult.” The IE also commented that if wind curtailments become a more substantial issue for Xcel in the future, the projected benefit of this wind could be dramatically reduced. Wind is a good deal, but Xcel may have to shut down this wind because its coal plants cannot ramp up and down fast enough.

This would not be a problem for Boulder, since its gas backup power would ramp much faster. And if Xcel sells this wind power to municipalities and rural electric associations so they can meet the new Renewable Energy Standard passed this year, there would be no net reduction in emissions. I note that wind power installed before 2015 still gets a 1.25X multiplier; this makes the new “20 percent renewable energy” requirement for rural electric associations and municipal utilities as misleading as the 30 percent requirement for investor-owned utilities. No wonder Colorado is still at the highest level of CO2 emissions per Kilowatt hour relative to the rest of the country (ucsusa.org).
The old guard at Xcel is fighting hard because they have stuck themselves with a costly, inflexible, polluting coal-intensive future and they know that if Boulder is allowed to succeed, others will certainly follow.
Time for a change!


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