August 23, 2011
Colorado

Cost, renewables debated at utility forum

By Michael Davidson, Boulder County Business Report, www.bcbr.com 23 August 2011

BOULDER – The potential cost of creating a municipal electric utility and whether Boulder could take an “off ramp” if it proved too high were among the topics discussed by municipalization advocates and opponents Monday.

The forum, hosted by PLAN Boulder County, was the first time speakers for the two sides have met the public since City Council on Aug. 16 passed two measures that could lead to the creation of a city-owned utility.

Ballot Issue 2B asks voters to extend and raise the utility occupation tax by $1.9 million to pay for further engineering studies and legal work necessary to create a utility. Ballot Issue 2C asks voters to give Boulder the authority to create a utility and issue bonds.

Boulder would be taking over the electric grid from Xcel Energy Inc., its current owner and operator. The company opposes the measures.

Opponents of the municipalization focused on the potential costs, saying that consultants hired by Boulder were underestimating how expensive starting and running a utility will be.

Boulder’s consultants have estimated it would cost about $222 million in start the utility, including $121.3 million to acquire the electricity distribution system.

Boulder’s estimates for what it would owe Xcel Energy for investments the company has made in local infrastructure and to compensate it for giving up potential profits could raise the price tag by about $650 million, said Bob Bellemare, chief operating officer of UtiliPoint International Inc., an energy consulting firm. Bellemare also is a consultant hired by Xcel Energy.

After paying those costs to acquire and start the utility, Boulder would then have to purchase electricity on the sometimes volatile wholesale market. Buying power will be about 65 percent of the utility’s annual budget, Bellemare said.

“Your biggest cost item, you really don’t know until the end,” Bellemare said.

They believe the city has a strong legal case that it would not owe Xcel Energy anything for its investments or for potential lost business. Boulder’s AAA bond rating also suggests the city could borrow money at a better interest rate than its cost models assume, said Sam Weaver, president of Cool Energy Inc. and a member of a pro-municipalization group of Boulder residents that have been developing cost projections.

“It seems to me there’s more headroom than either the city or the opponents assume,” Weaver said.

Major issues like whether the city owes Xcel Energy for stranded costs probably will be resolved relatively early in the process, allowing Boulder to back out of municipalization if it is too expensive.

The language of the ballot measure also clearly stipulates the utility cannot be created unless it can charge rates lower than those charged by Xcel Energy at the time of the utility’s creation, said Ken Regelson, a municipalization supporter. Regelson owns FiveStarConsultants.com, a sustainable energy consulting firm.

The two sides also differed over the effect adding more renewable energy to the power mix would have on rates.

Additional renewables, such as solar and wind, would provide a hedge against increasing natural gas prices, Weaver said.

The cost of adding more renewable energy sources to the system will lead to a price increase because the generation sources such as solar arrays and wind farms have yet to be built, said David Miller, chair of the Boulder Smart Energy Coalition.