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Boulder should not owe any stranded costs if it becomes a wholesale customer of Xcel Energy, APPA tells FERC


From the June 24, 2013 issue of Public Power Daily

Originally published June 24, 2013

By Jeannine Anderson
Editor
APPA has asked the Federal Energy Regulatory Commission to issue an order on or before July 18 confirming that the city of Boulder, Colo., if it carries out its plan to form a municipal electric utility, will have no stranded cost obligations to Xcel Energy for wholesale power the city buys from the investor-owned utility.

In its June 17 request to FERC, APPA asks to intervene in support of Boulder's May 17 petition to the commission asking it to issue a declaratory order stating 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. 

"All APPA utility members are load-serving entities, with the primary goal of providing customers in the communities they serve with reliable electric power and energy at the lowest reasonable cost, consistent with good environmental stewardship," APPA said in its request to FERC. "This orientation aligns the interests of APPA-member electric utilities with the long-term interests of the residents and businesses in their communities."

Boulder is seeking clarification that the commission’s 2011 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." (See Public Power Daily, May 24.)

APPA said it "strongly supports Boulder's petition for declaratory order and believes that the interpretation of the commission's precedent set forth in the petition is well reasoned and well supported."

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. 

In April, the Boulder City Council voted to move forward with its plan to create a municipal electric utility. The council is expected to vote again in early August on whether to proceed with the plan. 

Boulder wants a lower carbon footprint and more renewable energy. According to a detailed report issued by the city in late February, creating a city-owned utility would likely pay off, both in the near term and over 20 years. The analysis finds that, under at least some of the scenarios studied by city staff, "a local utility could operate effectively with cost savings and flexibility, creating significant advantages" compared to continuing the current arrangement with investor-owned Xcel Energy. The report goes farther, too, saying that Boulder could cut its greenhouse gas emissions by 50 percent and could procure half of its energy from renewable sources.

"The opportunity exists for Boulder to transition to a new sustainable, low-carbon emission society, and it is coming much faster than anyone had anticipated just a few years ago," the city said. "The growing differential between the rising costs of fossil fuels and the declining costs of renewable energy technologies is setting the stage for the emergence of a new economic paradigm for the next century." (See Public Power Daily, March 4.)

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Senior Vice President, Publishing 
Jeanne Wickline LaBella
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