Boulder asks FERC to rule on stranded costs
Originally published May 24, 2013
The City of Boulder, Colo., asked the Federal Energy Regulatory Commission for a declaratory order on the city's stranded cost obligations to its current supplier, Xcel Energy, should the city create a municipal utility. The May 17 petition asks FERC to confirm that the city would have no stranded cost obligations for the portion of its wholesale power it may continue to acquire from Xcel Energy’s Public Service Co. of Colorado (PSCo) subsidiary. If the commission agrees, Boulder said it "would be in a clear position to manage any potential stranded cost obligation."
Boulder is seeking clarification that the commission’s ruling in City of South Daytona would apply, even if Boulder purchases less than 100 percent of its requirements from Xcel. In its South Daytona order, the commission ruled that South Daytona, Fla., should it form a municipal electric utility, would create no stranded costs to the extent that its existing supplier, Florida Power, continued to use its generation assets to serve South Daytona.
The South Daytona order "should apply, on a proportional basis, to a partial requirements purchase from the existing supplier as well as the full requirements purchase that was the fact situation in that case," Boulder said. "That is, to the extent that the retail-turned-wholesale customer purchases electricity from its former retail supplier, the assets necessary to generate that electricity are not stranded."
Xcel Energy has said the city would owe $255 million if it leaves Xcel’s system in 2017. According to Xcel, that would cover Boulder’s share of the debt for coal plants and other generation assets the company brought online prior to Boulder indicating its intent to purchase energy from sources other than Xcel. Currently, Colorado law does not allow communities served by investor-owned utilities like Xcel to purchase power from any other supplier.
"We believe a ruling in support of the city on this very specific legal question would be a win-win-win," said City Attorney Tom Carr. "This would chart a way for a Boulder electric utility to address its stranded cost exposure while at the same time protecting Xcel’s shareholders and protecting remaining customers of the company."
A decision to leave Xcel’s system could benefit customers throughout the region, if it is made before the company decides to invest in more generation capacity, Boulder said. "The cheapest energy is the energy you don’t have to generate," Carr said. "If Boulder customers are drawing less of their energy from Xcel, the existing supply can be reallocated to others in Colorado without ratepayers having to pay for new and expensive infrastructure. This helps everyone."
Boulder asks FERC to act on petition by July 18
Boulder asked FERC for an expedited decision on its petition—by July 18—so the city can coordinate its planning and decision making with the PSCo Electric Resource Plan proceeding currently pending before the Colorado Public Utilities Commission. The Boulder City Council is expected to vote Aug. 6 on whether to move forward with municipalization. The CPUC is slated to begin considering the acquisition phase of the PSCo resource planning process on Oct. 9.
Expedited resolution of the petition should enable the City Council to complete its evaluation of the feasibility of municipalization based on purchasing partial requirements power supply service from PSCo in preparation for the Aug. 6 council meeting, Boulder told FERC. An affirmative vote on municipalization by the City Council at its Aug. 6 meeting will enable the city to notify PSCo and the CPUC in advance of the CPUC’s review of PSCo’s resource acquisition plan.
Boulder said its goals are "substantially reducing the carbon emissions associated with the community’s electricity usage, and providing electricity as a service adaptable to the needs and values of the different users that make up the Boulder community. In pursuit of those goals, Boulder is exploring the creation of a municipal utility, without harming either the shareholders or the remaining customers of PSCo." One way for Boulder to achieve this result would be by purchasing from PSCo during a transition period an amount of electric capacity and associated energy that would otherwise be stranded, while purchasing its remaining requirements from generators using renewable resources, the city said.
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