Boulder sees upside if the Colorado city breaks from Xcel Energy

By DAVID SHAFFER  dshaffer@startribune.com

The city of Boulder, Colo., says it makes financial sense to end Xcel Energy Inc.'s electric monopoly there and create a municipally owned power company.

A city economic analysis, released late Thursday, concluded that the city's 45,000 electric customers could pay less "on day one" of municipal ownership compared with the rates charged by Minneapolis-based Xcel.

Researchers who examined various financial scenarios found "a very high likelihood" that municipalization would result in lower electric rates even if the city relied increasingly on renewable energy and reduced greenhouse gas emissions.

"The amazing thing is the impact you can have on decreasing greenhouse gases and increasing renewable energy," said Heather Bailey, a former utility executive whom the city hired last year as executive director of energy strategy and electric utility development. She headed a team of city officials and outside experts that prepared the report.

In November 2011, Boulder voters narrowly passed a measure to replace Xcel when the utility's franchise agreement expires. The measure authorized a switch only if a city power company could offer rates and service as good as Xcel's.

Xcel sought a new, 20-year franchise with the city and has opposed the switch to municipal ownership. David Eves, CEO of Xcel's operations in Colorado, said Friday that the utility needs to see more details about the city's financial model.

If Boulder were to make the switch to a publicly owned power company, it would be the largest U.S. city to do so in at least a decade, according to the American Public Power Association. Boulder has a population of 100,0000.

The city's study, which assumes the takeover would occur in 2017, is one of several steps in a process that could end in the city government acquiring Xcel's Boulder electrical distribution system, including poles and wires. The study assumed a takeover cost of $150 million to $405 million. In April, the Boulder City Council is scheduled to vote on whether to keep pushing toward municipalization.

Xcel, which uses the most wind power of any U.S. utility, says it's in a position to advance renewable energy goals for Boulder without a municipal takeover. Eves said Xcel has proposed a partnership with the city to advance renewable energy and greenhouse gas reductions.

"We are interested in working with them to see what kind of additional flexibility we can offer to meet their needs," he said.

Eves criticized Boulder for proposing to include in its municipal system several thousand customers living outside the city. "They are not represented by city officials, and they don't vote in city elections," he said.

Most of the nation's 2,008 municipal power companies were formed early in the 20th century. They serve more than 20 million customers, 14.5 percent, of U.S. power users.