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Boulder rejects Xcel

The plot thickens.

Voters in Boulder, Colo., on Tuesday approved by a very thin margin a ballot proposition that would allow the city to pursue a municipal utility. The vote effectively rejected Xcel Energy, its current provider. (Last year, Boulder allowed Xcel's 20-year franchise to lapse without renewing it, while voters approved an "occupation tax" to replace lost income from the former, annual franchise fee.) Tuesday's measure passed with 51.8 percent of the vote, a margin of 933 votes out of about 83,000 cast. 

Boulder voters also narrowly approved a measure that raises the city's existing utility occupation tax by $1.9 million per year, which creates a fund the city can use to pay legal fees and consultant costs as it explores municipalization. That measure passed with 50.3 percent of the votes, a margin of 141 votes.

Xcel spent about $950,000 on efforts to defeat the two measures, while proponents spent less than 10 percent of that amount.

Of course, that's just peanuts in the battle anticipated to continue between the two parties. The city's consultants have estimated that creating a municipal utility will cost Boulder about $290 million, while Xcel's consultants project a cost of $1.2 billion. That puts the two sides a mere billion dollars apart. The various costs involved will be determined going forward, however, which in the long run will establish whether Boulder was starry-eyed on costs and to what degree Xcel might have been involved in fear-mongering.

Boulder seeks to reduce its carbon emissions in line with the Kyoto Protocol, which would mean reducing greenhouse gas (GHG) emissions to 7 percent below 1990 levels, according to The Boulder Daily Camera. Deriving its electricity from 60 percent renewable energy, twice Xcel's ambitious renewable portfolio standard, has been mentioned as a means to achieve those GHG reductions.

Currently, it does not appear that any city has achieved anything near that level of renewable penetration. Boulder's projected smart grid would have to be brilliant indeed to achieve its goals. And, as one our astute readers has pointed out, Boulder would still need Xcel for balancing the grid, electricity that presumably would come from various sources, including fossil fuels.

Xcel, on the other hand, stands to lose about $100 million revenue annually from Boulder's defection, if and when the city can proceed with its own utility. That depends on a stew of factors including many that will require contentious legal wrangling with Xcel, such as the value of Xcel's distribution system in the city and the utility's stranded assets.

The narrowness of the vote this week means that while proponents of municipalization, which includes a narrow majority on Boulder's city council, have won at the ballot box, they cannot claim a solid mandate to move ahead. Critics of municipalization and even proponents wanted some sort of "off ramp" in the process, which will include developing real costs to myriad elements of the plan.

Whether an effective outcome is possible with the city divided nearly in half is an open question. And that divided electorate provides a fertile audience for arguments that Xcel may make and that local critics are sure to echo.

However, it is also entirely possible that the slew of potential pitfalls Boulder faces turn out to be paper tigers and that, in coming years, the city could very well develop a cutting edge grid that incorporates the latest digital, "smart" technologies to achieve its objectives in a cost-effective manner. Anything is possible in this case, which is one reason I find it so fascinating.

This story will unfold in slow motion over the coming years, a compelling mix of politics, economics and technology that will parallel the development of grid modernization in myriad other settings, some of which have already produced nearly as much drama. Each juncture in the process will produce enough sparks that I predict this long-running saga will become a bellwether not just for cities considering a similar step, but for the power industry as well.

How far will Boulder go to achieve its ambitious goals and what will the political fights and financial costs look like on that road? What possible developments in grid modernization will make Boulder's efforts more or less feasible? What risks will Xcel take, if it decides to continue fighting with Boulder at every juncture? As one of the nation's leading investor-owned utilities, Xcel's stance in coming disputes could burnish or tarnish its brand, attract or repel investors. And what impact, if any, will all this have on national discussions of grid modernization?

We're about to find out, although, admittedly on a protracted time scale.

Clearly, the technical and financial uncertainties of forming a municipal utility just neatly cleaved this city's electorate into nearly identical halves.

As proponent Leslie Glustrom told The Boulder Daily Camera Tuesday night, "It's essential that all of the parts of the community stay involved at a high level. Our goal is bringing our community together, not split it apart."

But as one critic of municipalization, David Miller, whose group, the Boulder Smart Energy Coalition, was predominantly funded by Xcel, put it: "It looks to me like the voters are not endorsing municipalization. It was presented as a passport to clean energy and I don't think there's any sort of resounding endorsement of that."

For more on this story, and related stories, see a couple articles we've run:

"Boulder Seeks Divorce from Xcel"

"ComEd Wins Smart Grid Okay"

Phil Carson
Intelligent Utility Daily



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