Boulder, Colo., pushes to split with Xcel Energy

Boulder, Colo., moved closer to turning off the switch on Xcel Energy Inc. as the city's electricity supplier.

The City Council, in its latest step toward forming a municipal utility, voted 8 to 1 late Tuesday to authorize detailed financial, legal and other work necessary for a critical decision on a permanent break with Xcel in August.

One of Boulder's hopes is that a municipal utility can supply the city's 45,000 customers with electricity mostly from cleaner sources like wind farms. Xcel, the nation's No. 1 wind power utility, generates 14 percent of its power from renewable sources in Colorado.

The city is home to the University of Colorado Boulder, which was recognized in 2009 by the Sierra Club as the greenest school in the nation. The National Wind Technology Center, part of a U.S. Energy Department laboratory, is 5 miles south of Boulder.

"We are going to have a lot of information to make an informed decision," said Sarah Huntley, a spokeswoman for the city of Boulder.

Xcel is fighting back. It has questioned the city's financial projections and threatened a legal fight over the city's proposed service area, which includes customers outside of Boulder. Xcel and Boulder also disagree on the price of assets such as power poles and substations that the city must acquire from the utility, possibly by condemnation.

"What they are working on is not a solution," Jerome Davis, Xcel's regional vice president, said in an interview Wednesday.

Davis said he questions Boulder's claim that it can inexpensively get more than 50 percent of its power from wind. "We are experts in this stuff," he said. "We have been doing it for a while. For the levels that they're looking at, this is … unheard of."

If Boulder goes its own way, it would represent a loss of 4 percent of Xcel's business in Colorado, he said. No other cities in that state are considering municipalization, he added.

The effort is being closely watched in Minneapolis, where Xcel has its headquarters and where its franchise agreement to supply electricity in the city is up for renewal at the end of 2014. The expiration of Xcel's franchise in Boulder opened the door in that city to the municipalization drive. A majority of Boulder voters endorsed the idea in a November 2011 ballot question.

Boulder has spent $3.3 million studying a break from Xcel. The next four months are a critical period. An independent consultant will check a city analysis, released in February, that said customers would pay less for power under a municipal utility.

Boulder officials also plan to test the waters for selling bonds. Its lawyers will prepare for a likely condemnation battle to acquire Xcel's Boulder assets and for a separate regulatory fight as Xcel seeks reimbursement for past investments in generation facilities intended to supply Boulder. Those costs could be in the hundreds of millions of dollars.

Even as they pushed toward a split, Boulder city officials agreed this week to discuss alternatives with Xcel, including abandoning the idea of municipal ownership and forging a partnership in which the utility would deliver more renewable energy and meet other goals under a renewed franchise.

Last Friday, the Minneapolis City Council authorized spending $250,000 to explore ways to boost renewables and reduce greenhouse gases as the city renegotiates its franchise agreement with Xcel and CenterPoint Energy, the natural gas utility.

One option is to push for a municipal utility, though Minnesota law makes it hard for cities to acquire power companies, which have a right to be reimbursed for lost revenue.

"There are some pretty major state law changes that would have to happen," said Minneapolis City Council member Elizabeth Glidden. "We are trying to understand our options. Xcel understands that we do want multiple options and we do have a high interest in cleaner energy."

David Shaffer • 612-673-7090 • Twitter: @ShafferStrib