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Boulder report finds city could dramatically reduce greenhouse gases, keep rates flat, by forming a city-owned utility

From the March 4, 2013 issue of Public Power Daily

Originally published March 4, 2013

By Jeannine Anderson

The city of Boulder, Colo., which wants a lower carbon footprint and more renewable energy, is seriously considering forming a municipal electric utility to get those things. According to a Feb. 26 report, the effort 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, 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. Boulder is poised to drive this process to tackle climate change, secure energy independence, and grow a sustainable 21st century economy all at the same time."

"This is a really exciting night," said Heather Bailey, executive director of energy strategy and electric utility development, at a three-hour work session and public hearing held by the Boulder City Council on Feb. 26. She cautioned, though, that the February report does not decide the question of whether the city should form a municipal electric utility. That question is for the future, she said. The study does say "yes," however, to the preliminary question of whether Boulder could create a city-owned utility and meet the goals it has set for itself if it decides to go down that path, she said.

"We believe the findings demonstrate that a municipal utility could be good for consumers, good for Boulder businesses and good for our planet," Bailey said. "We look forward to an informed conversation over the next couple of months about how best to proceed."

The City Council is scheduled to vote April 16 on whether to continue to pursue municipalization. City leaders have said they also are open to a partnership with Xcel Energy to reach their clean energy goals.

The 38-page report, Boulder's Energy Future Municipalization Exploration, which runs to 287 pages including all attachments, is posted on the city's website, under "Boulder's Energy Future."

The city has taken a slow, methodical approach to its quest for a greener energy supply. In November 2011, residents of Boulder approved two ballot measures on the city's energy future. One of those ballot questions authorized the city to explore the possibility of purchasing Xcel Energy's distribution system and forming a municipal utility, providing that customer rates would be no higher than the rates Xcel Energy is charging at the time of acquisition. The other ballot provided the funding necessary to determine the actual costs of buying Xcel’s system and starting a local utility. (See the Nov. 3, 2011 Public Power Daily.)

The November 2011 ballot measures set limiting requirements in the city charter that must be met before City Council could proceed. These included provisions related to rates, revenue sufficiency and reliability, as well as plans to reduce greenhouse gas emissions and increase renewable sources of energy.

A summer 2011 telephone survey found that Boulder voters supported creation of a city-owned electric utility by a wide margin and that residents overwhelmingly wanted a reduction in carbon emissions. Seventy-one percent of survey respondents said they supported municipalization and said they thought the city would be better than Xcel Energy at offering renewable sources of energy and at reducing carbon emissions.

In its latest study, city staff looked at six different scenarios:
1. A baseline option that keeps Xcel as the city's supplier, using current rates;
2. A phased-in approach to municipal power, using a five-year purchased power agreement with Xcel, then allowing the city to enter agreements with other suppliers;
3. A low-cost option that would have 25 percent of the mix be coal-fired power in 2017;
4. A second low-cost generation option that excludes coal;
5. A low-greenhouse-gas option based on power supply purchases; and
6. A low-greenhouse-gas option that would include investment in local energy-efficiency efforts.

One of the surprising findings is that in four of the six scenarios, the city is projected to exceed the greenhouse gas reduction goals set by the Kyoto treaty, said Jonathan Koehn, regional sustainability coordinator.  A fifth scenario met and exceeded the Kyoto goals in year five, he told the Feb. 26 City Council work session. The only scenario that failed to meet the Kyoto greenhouse gas emission goals was the "status quo" option that assumes that the city keeps Xcel Energy as its supplier (with no change in that company's power supply plans).

Even under the low-cost option, "we got a surprising amount of greenhouse gas reduction," said Koehn. "It is astounding to see how much we could reduce emissions."

The city said that under some of the options analyzed, a municipal electric utility would meet the charter metrics and have a high likelihood of being able to:

• Offer all three major customer classes (residential, commercial and industrial) lower rates than what they would pay Xcel, not just on day one, as required by the city charter, but on average over 20 years;
• Maintain or exceed current levels of system reliability and emergency response;
• Reduce greenhouse gas emissions by more than 50 percent from current levels and exceed the Kyoto Protocol target in year one;
• Obtain 54 percent or more of its electricity from renewable resources; and
• Create "a model public electric utility with leading-edge innovations in reliability, energy efficiency, renewable energy, related economic development and customer service."

The report also examines the impact that a variety of stranded cost and acquisition cost rulings could have on rates and revenue requirements over 20 years.

"Boulderites always have walked their own path," the city says on its website. "Paddled their own kayak. Marched to the their own music. And they're known for doing it skillfully. Why should it be any different with our electricity supply?"

While the city said it is committed to exploring ways to achieve what it calls "the electric utility of the future," it has also said there might be ways to do so short of creating its own utility – in the form of a new partnership with Xcel Energy.

"What we are looking to do is move beyond a 19th century approach to providing energy and create a forward-looking, innovative and consumer-friendly utility model that reduces our reliance on fossil fuels," Bailey said. "Xcel Energy has served us for decades, and in many ways, done an admirable job. It is possible they could help us meet our objectives. We would welcome their involvement in a meaningful, timely and transparent discussion."

Even if the City Council votes on April 16 to move forward with the pursuit of municipalization, there will be many steps still to come, "and off-ramps will remain available," the city said in its Feb. 26 report.


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