Boulder Municipalization

On the November election ballot were two items which, if passed, allow the city to pursue a takeover of our electric distribution system. We don't want to sell our assets. We know our company is Boulder's best partner to help it reach its energy goals and that municipalization is a costly and risky path. And at the end of that path, the city will unlikely have any more renewable energy than if it had continued its relationship with Xcel Energy. This page provides facts to help our Boulder customers make an informed decision about municipalization.

Update
In February 2012, David Eves, president and CEO of Public Service Co. of Colorado, an Xcel Energy company, sent this letter to Boulder customers to provide an update since the passage of municipalization ballot issues 2B and 2C.

• Q:
  What is municipalization?
  A:
  Municipalization is the process the City of Boulder is pursuing to condemn and take over Xcel Energy’s electric infrastructure within city borders, including the utility’s substations, poles, wires and other equipment. The process is estimated to cost hundreds of millions of dollars. The actual total cost will be settled through two legal paths in state condemnation court and before the Federal Energy Regulatory Commission. The process could take five years or more.
• Q:
  What was the Boulder City Council's decision?
  A:
  The Boulder City Council decided to place two measures on the November ballot that could ultimately lead to the condemnation and take over of Public Service Company of Colorado’s (PSCo) electric distribution system in Boulder (PSCo is Xcel Energy’s operating company in Colorado). Measure 2B approves an increase in the utility occupation tax to fund the condemnation and purchase of the electric system. Item 2C gives the city permission to form a municipal utility. The Nov. 1 election is expected to be the only opportunity for citizens to vote on the issue.
• Q:
  What are the costs involved in a takeover?
  A:
  The city is budgeting $286 million and years of effort to complete the acquisition; however, the actual cost could well be hundreds of millions more because Boulder assumed it would not have to compensate Xcel Energy for a number of costs, including going concern, stranded costs, or reimbursing the utility for its solar, demand-side management (DSM), and SmartGridCity™ investments. These items represent hundreds of millions of dollars in potential liabilities. Boulder has also only budgeted $15 million to separate the power system at the city limits. A full engineering design is required to determine a final system separation cost, but costs in the neighborhood of $100 million are certainly possible given the irregular shape of Boulder’s city limits and other factors.
• Q:
  What other cost factors have to be considered?
  A:
  Boulder’s feasibility study does not include any costs to achieve lower emissions, rather it is based on a least-cost design that provides only rate and emission parity with Xcel Energy. Xcel Energy’s consultant analyzed the city’s study and concluded the city council’s takeover plan is based on optimistic assumptions and does not provide adequate budgets to replace tens of millions of dollars in lost tax benefits and Xcel Energy’s large-scale solar and DSM programs investment. When the study is adjusted for these items, the city could see millions and even tens of millions in financial losses.
• Q:
  Could the city's takeover result in higher rates?
  A:
  The economics of rates are very sensitive to acquisition costs, wholesale (generation) costs and operating expenses. According to the city’s own model, just a $72 to $112 million increase in acquisition costs OR a ten-percent increase in total wholesale and operating expenses would push results financially negative. City staff has publicly represented that financial losses in the 7-15 percent range are possible if higher cost are incurred compared to plan, which would be over $10 million per year in higher rates paid by Boulder customers.
• Q:
  Have utility condemnation cases been successful elsewhere?
  A:
  In recent times, nearly all contested condemnation attempts to take over a private electric utility system have failed. It was during the early decades of the last century that most municipal utility systems that exist today were formed. Virtually all recent efforts to create a municipal electric system through a hostile takeover have failed due to high legal costs, inaccurate estimates of the real costs to acquire and operate the system, and lack of public support from the community for taking over the utility business.

We invite you to read a full or summary analysis of Boulder's feasibility study on municipalization to learn more about the costs and risk of this option. 

We also are providing other useful links to help you become an informed voter.