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Xcel debate was just heating up when talks broke off 

Credit:  By Jefferson Dodge, Boulder Weekly, www.boulderweekly.com 14 July 2011 ~~

Before talks between Xcel and the city broke off Thursday, battle lines had been drawn for what would have been a momentous Boulder City Council meeting on July 19 regarding the company”s proposal for a 20-year franchise agreement heavy on wind energy.

On that date, the council was expected to decide whether to put one or more ballot questions regarding Boulder’s energy future on the Nov. 1 ballot. And some raised questions about whether one councilmember should be voting on that matter.

The debate has been occurring across a spectrum of viewpoints, on issues ranging from renewable energy to economics. Some say municipalization could be a financial boon to the city, directing utility revenues to our own economy instead of to a major corporation, its coal-plant payments, regulatory costs and overpaid officers. Others say municipalization is fraught with risk and unknown costs.

Many are opposed to getting into bed with Xcel for such a long period of time. Others want more hard figures from Xcel about price modeling. Both sides say they want more time to evaluate the alternatives. Municipalization backers say they don’t want to commit without testing the open market.

Groups questioning municipalization include the Boulder Smart Energy Coalition. It has a conservative, pro-Xcel bent, critics claim, pointing to its members’ ties to Xcel representatives and groups like the Boulder Economic Council, Boulder Tomorrow, the Boulder Chamber of Commerce and its Community Affairs Council.

“To me, this whole group is opposed to municipalization, and they’re all working to help Xcel get what they want,” says Ruth Blackmore, co-chair of PLAN Boulder County. “[Xcel Boulder Area Manager] Craig Eicher is on the board of directors of the Chamber of Commerce and [chair of ] the Economic Council.”

The coalition’s chair, David Miller, says it’s misleading to characterize the group that way.

“We’re just getting started,” he says.

“Our goal is to be a very big tent and include as many voices as we can.”

Miller told Boulder Weekly that coalition members have a keen interest in achieving the city’s renewable energy goals, but most agree that going down the municipalization path seems risky and costly, since Boulder could be on the hook not only for purchasing Xcel’s infrastructure but the company’s “stranded costs.” And, he says, that’s before the city tries to purchase any of its own renewable energy, which will be a challenge because the relatively small number of ratepayers will make it hard to get competitive rates, and the city may end up stuck buying “on the margins,” without the expertise to do so.

Miller and one of the coalition’s other members, Dan Cohen, are partners with Deputy Mayor Ken Wilson in the renewable energy consulting firm New Energy Development, LLC.

Miller says that while New Energy Development has never been hired by Xcel, he acknowledges that the firm’s current specialty is solar gardens, which could be negatively affected by Boulder refusing to do business with Xcel. Miller says the solar gardens legislation passed in 2010 requires Xcel to accept applications for the program from ratepayers in its own territory, but if Boulder were to municipalize, the city might no longer be eligible for the program.

Still, he says the firm does not do much business in the city of Boulder.

“We’ve kind of shied away from Boulder because Ken’s a councilmember,” Miller explains.

He denies, however, that his financial interest in his energy consulting firm is the reason he is chairing the coalition.

“That’s false,” Miller says. “That’s not what brought me to this debate.”

Blackmore says Wilson should recuse himself if he stands to gain financially from an Xcel franchise.

“I think he’s working for his own benefit if he votes for Xcel, if he benefits from an Xcel franchise with the city,” Blackmore says. “The public would like to know more about Ken’s relationships in this business and the partners and their relationship to Xcel.”

Wilson was on vacation and did not return calls before press time.

Boulder Weekly also sat down with a handful of top Xcel officials last week to ask some of the questions that the pro-municipalization crowd has been posing. (Eicher was not available for that meeting.)

Public Service Company of Colorado President and CEO David Eves told Boulder Weekly that “the cost of municipalization has been understated,” and that Boulder has a small window of opportunity to take advantage of a “buyer’s market” for low-cost wind energy. Xcel Managing Attorney Paula Connelly explains that a federal tax credit for wind ends at the conclusion of 2012, and Boulder would likely pay 30 percent to 40 percent more after that date.

When asked about the perception that the Xcel deal arrived late and didn’t leave time for the city to do enough research on the offer, Connelly says the deal only became apparent when wind bids were received in January, and it took time to configure a proposal within regulatory frameworks.

“It’s not like this deal’s been sitting on the table for years,” she says.

“It’s not that it was coming late to the scene,” adds Kurt Haeger, Xcel managing director of wholesale planning. “That’s how long it takes to get a deal like this done.”

According to Eves, the full specifics of the deal weren’t going to be made public until the council’s July 19 meeting, in part because Xcel didn’t want to tip its hand to any possible competitors.

Haeger says it wouldn’t be appropriate to discuss the details before a deal is struck, but that Xcel would be “transparent and open” if a ballot proposal were agreed upon.

“We can’t negotiate with the whole populace of Boulder,” Connelly says.

“But we’re trying,” adds Eves.

Connelly explains that Xcel is hoping to have two ballot questions: one asking voters to approve a traditional franchise agreement with Xcel, and one requesting the franchise agreeement with added infusion of wind energy. That proved to be the bone of contention that broke down talks between the two sides, because city officials had no interest in asking voters about the traditional franchise agreement.

When asked about the perception that Boulder would have taken on all the risk of future energy cost fluctuations, while Xcel would have taken on none, Connelly replies, “We don’t think Boulder would be taking on any more risk than they would for municipalization.”

In response to a question about the need for a 20-year agreement, Connelly explains that the wind developer, NextEra, needs that commitment to pay off the capital costs associated with building the new wind farm, and those payments would be higher if compressed over a shorter period of time.

Some Xcel critics have said they are suspicious of Xcel’s models for determining the city’s costs, describing them as a black box that only Xcel would control and have access to. And the calculations get complicated. “Curtailment” costs would be charged by wind generator NextEra to protect its investment at times when the turbines will need to be slowed, when energy needs are already being met by Xcel’s fossil-fuel plants, which can’t be turned down as easily as wind farms. “Integration” charges were to be assessed to cover Xcel’s operating costs related to bringing the wind energy into the grid. And Boulder would also have paid the difference between the cost of wind energy and the money saved by shutting down the most expensive fossil-fuel generation on Xcel’s system at that time (likely natural gas), an amount referred to as the “avoided cost.”

Initially, that would have cost the city more money, since wind currently costs more, but Xcel officials claim that, as fossil fuel prices rise, Boulder would eventually have gotten money back, as the cost of fossil fuels rises. (Xcel estimates that the contract would initially have cost Boulder about $9 million more per year, or a 7 percent to 8 percent increase for Boulder ratepayers.)

On some matters, such as Xcel’s efforts to meet individually with city councilmembers, or how much Xcel would lose annually if Boulder went elsewhere for its electricity, Xcel officials seem unclear. They insisted however, that details would have been made public once a ballot proposal was finalized – whether people want them or not.

“You can explain how sausage is made, but you only want to see it once,” Xcel spokesperson Michelle Aguayo says when asked about the cost models. “People want to trust it, but if you actually put it on the table, their eyes would glaze over, and they’d say, ‘Next.’”

Source:  By Jefferson Dodge, Boulder Weekly, www.boulderweekly.com 14 July 2011

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial educational effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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