Opinion: Staying the muni course


There has been a lot of misinformation lately about Boulder’s attempt to municipalize its electric service. Here’s my bare-bones analysis:
The wind deal: In 2011, Xcel made a last-minute offer to sell Boulder energy from a yet-to-be-built wind farm. Boulder would bear all the risks, but Xcel would set the numbers, so Boulder turned it down. Then Xcel had the farm built, and got a lower per Kwh price. So the CO2 savings occurred anyway.
Buying the local grid: We are already paying Xcel for the local poles and wires, but when we’ve finally paid them off, Xcel will still own them. If we municipalize but bypass this equipment, we will still have to pay Xcel for their abandoned assets. So why not get something for our money? And even for homeowners and businesses that want to self-generate, the grid allows access to backup power, large-scale solar and energy storage, and cheap wind power from eastern Colorado.
The courts: Unfortunately, our state legal system does not define a clear path for a home-rule city to break away from a for-profit utility that has held such a long-term monopoly. So, as expected, there will be a fair amount of maneuvering, and inevitably a number of false starts. Not that I’m thrilled about this, but as an attorney presciently said to me, the law is not engineering!
The infamous spreadsheet: The information released as a result of the Murphy lawsuit was from one of over 700 model runs. It illustrates part of the format, but by itself is not representative of the range of outcomes. Also, it illustrates costs, and rates will not reflect those numbers moment to moment; as with any other business, the utility will use capital reserves to smooth out the bumps and dips.
The FERC: The acquisition of the transmission circuit will require approval of the Federal Energy Regulatory Commission, but apparently that is mostly a matter of making the appropriate filings. Xcel will fight it tooth and nail, but there’s no good reason for the FERC to turn it down. As to “stranded assets” — Xcel power plants that might lose their markets — Boulder’s franchise agreement with Xcel expired years ago, and Boulder has offered to buy a portion of our power from Xcel for additional years; together these should resolve any obligation we might have. Besides, Xcel has had excess capacity, but they never complained because they profitably sold it on the market.
Gunbarrel: Whether the Gunbarrel residential area is served by the city or by Xcel is pretty much irrelevant to the muni’s bottom line. It is a tiny fraction of the total, and most of the cost is for power, which is just a pass-through. If Boulder ends up owning those lines but Xcel keeps those customers, then Xcel can pay Boulder a transmission tariff.
Secrecy: Boulder has published all of its modeling inputs as well as the analysis of the outputs. The intermediate data simply doesn’t exist. This is not the ’70s, where reams of printouts were generated to be examined by accountant types with eye shades. These days, the various parts of the models (load, resources, probabilistic forecasts, etc.) are integrated, with the only outputs being the analysis of the results. In contrast, Xcel’s secrecy is evident with their numerous inaccessible “highly confidential” filings at the PUC.
Worst-case analysis: This is where the real financial benefits of the muni show up. Xcel is facing a coal supply crisis, as some of the companies that supply it are losing money rapidly. How this will play out is anybody’s guess, but it will likely make a mockery of Xcel’s rate forecasts, which are subject to further uncertainty from future federal carbon regulations. Xcel’s billion-dollar investment in Comanche 3 and its $400 million investment in refurbishing coal plants under the mis-named Clean Air Clean Jobs Act were bets on the wrong horses, and the chickens will come home to roost.
The Minneapolis deal: This “deal” has no real content; it’s just an agreement to talk. It is about where Boulder was in 2010, but with the difference that Boulder can more easily pursue municipalization because Colorado laws are less restrictive.
The proposed “settlement” of Xcel’s 2014 rate case, really a back-room deal, would cost Boulder ratepayers more than $5 million per year above the PUC staff’s recommended rates. This alone dwarfs the cost of the muni project. And the prices of wind, solar and storage keep dropping. So let’s stay on the cheaper, cleaner path.


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