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Boulder City Council authorizes purchase of local distribution system from Xcel Energy


From the August 26, 2013 issue of Public Power Daily

Originally published August 26, 2013

By Jeannine Anderson
Editor
The Boulder City Council on Aug. 20 took another step toward the possible creation of a city-owned electric utility, voting to move forward with efforts to buy the local distribution system from Xcel Energy. Members of the City Council also decided to give voters an opportunity to set an upper limit of $214 million on key costs, in addition to the limits previously set forth by the City Charter. Both measures passed on a vote of 6-3.

The vote will allow city staff to conduct a formal appraisal of the parts of Xcel’s system that serve Boulder and enter into negotiations with the investor-owned utility "in hopes of reaching an agreement about the value of the system," the city said. 

The vote also gives attorneys for the city authority to file a condemnation lawsuit in Boulder District Court, if the negotiations are unsuccessful. Such a condemnation action would not occur, however, before January 2014, the city said. 

In July, an independent evaluator said Boulder is likely to be able to offer rate parity with Xcel at the outset and also over a 20-year period. (See Public Power Weekly, July 29.)

The effort to create a municipal utility in Boulder is driven in large part by a desire for cleaner, more renewable sources of energy. Residents of the Colorado community approved two ballot measures in November 2011 that authorized the city to continue to explore the possibility of purchasing Xcel Energy’s distribution system and forming a city-owned utility. (See the Nov. 3, 2011 Public Power Daily.)

"We appreciate City Council providing the opportunity to take the next steps in evaluating how we can achieve our community goal of accessing clean, reliable and local energy in a cost-effective way," said Heather Bailey, the city's executive director of energy strategy and electric utility development. "The information we gather over the next several months will be critical to helping us understand all that is possible."

Attorneys have indicated that a court case, if necessary, is likely to take 12 to 18 months from the time legal action is filed.

A video featuring statements from council members about their positions prior to voting on whether to move forward with potential acquisition is available at http://vimeo.com/72287823.

Council also approved the language of a November 2013 ballot item related to the issuance of debt. The ballot item will give Boulder voters an option of setting a $214 million limit on the amount the city can take on in debt in order to buy Xcel’s assets, and for stranded costs.

"Stranded costs are costs that an existing utility, in this case, Xcel, may be able to recoup from customers who are leaving its system to cover investments it made in generation facilities, like coal plants, in order to serve them," the city said in a news release. "There are limitations in Xcel’s ability to claim these costs, and the city recently received clarification from the Federal Energy Regulatory Commission that it is possible to mitigate these types of costs, if they apply at all, by continuing to buy some power from Xcel for a limited time."

If approved by voters, the $214 million limit would be in addition to existing City Charter provisions that require the city to meet specific financial, service delivery and environmental requirements before issuing debt.

The City Council-backed measure is designed to conflict with a citizen-petitioned initiative that is also related to the municipalization effort, the city said. The petitioned measure "limits the city’s ability to carry out the direction it received from voters in 2011 by requiring additional voter approval by all utility customers before the issuance of any debt, regardless of whether the charter requirements can be met," Boulder said.

The petitioned initiative "also seeks to limit these types of elections to every two years and require that all customers, including those who are not city voters, be included in any city election related to utility debt," the city said. "The measure does not establish a legal procedure for allowing this type of an out-of-jurisdiction vote."

More information about the two ballot measures, including a Boulder Channel 8 video of the Aug. 20 City Council meeting, is available at BoulderEnergyFuture.com

The November ballot measures are in conflict with one another, so the following three outcomes are possible, the city said:

•   One measure passes and the other one fails;
•   Both measures pass; or
•   Both measures fail.

If the City Council-backed measure has the most votes, the petitioned initiative will not take effect.  If the petitioned initiative has the most votes, both measures will be in effect, but where they conflict, the measure with the most votes will prevail.

If both measures fail, the City Council would have authority to issue bonds to create a local electric utility if certain conditions can be met. However, the council "has said it would seek to understand the intentions of voters and determine how to proceed at that time," the city said.

The election will be Tuesday, Nov. 5.
 

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