The Electric Utility of the Future: Terms and Questions
Frequently Asked Questions (FAQs):
In 2011, voters approved ballot initiatives to authorize creation of a city-run electric utility if certain requirements were met and to provide funding for further exploration of this possibility. Colorado state law allows cities to create and run their own electric utilities. Colorado already has more than 25 city-run electric utilities, including in Colorado Springs, Longmont, Fort Collins, Loveland, Estes Park, Aspen, Lyons, Frederick, Fort Morgan and Burlington. In 2012, the City Council amended Boulder’s charter to authorize the creation of a city-run electric utility as long as its electricity was cleaner and greener than it received from its current provider, Xcel Energy, and that its rates and reliability were comparable or better than that received from Xcel.
Yes. The city has received multiple engineering studies confirming the technical feasibility of transitioning to a city-run electric utility.
Current modeling is based on an expectation that the city would be able to “flip the switch” by 2017. There are a number of deciding factors to be made between now and then that could change the current status. It is expected that the switch to a city-run utility would follow substantial litigation with Xcel Energy.
Boulder already runs a water delivery system. Over 2,000 cities across the U.S. already run their electric systems, including more than 25 in the state of Colorado. There are numerous well-recognized firms that the city could hire for a wide range of potential responsibilities, from replacing poles and wire in the field to managing the process of acquiring renewable generation.
No. The city plans to buy physical assets like electric lines, poles and transformers from Xcel Energy, most likely through a condemnation process. The basic equipment that supplied electricity to your home or business would not change.
It isn’t cheap, but it’s not particularly expensive either. In approving Ballot Issue 2B in November 2011, Boulder voters authorized the city to raise up to $1.9 million per year to fund investigation of a city-run utility. The funds would come through an increase in the existing utility occupation tax. Acquisition and start-up costs would be raised through bonds with the debt repaid through electricity rates (the same way that Xcel recovers the money it needs to pay its investment debts). The amount of revenue collected by a municipal utility would be significant – and that money would be used to cover all ongoing costs.
Not at all. Today, more than 46 million Americans receive their electricity from one of 2,000 community-owned electric utilities. More information on public power can be found at the American Public Power Association.
Not necessarily. It’s impossible to predict the future, and electric rates could rise regardless of who provides Boulder customers with electricity. However, Boulder’s charter was amended to permit the creation of a city utility only if its rates and reliability were as good or better than Xcel Energy’s. The rates provision only applies to the time of acquisition; however, a recent analysis conducted by the city shows the impact different options would have on rates for 20 years.
No. The city’s engineers have recommended a plan that would utilize the same distribution system currently used by Xcel Energy. In addition, the finance modeling has included significant resources for factors related to reliability, emergency response and customer service. Some power outages or momentary surges or sags are the result of factors beyond any utility’s ability to control, such as severe weather or vehicles running into utility equipment. But proper maintenance of equipment and trimming of trees can prevent a lot of potential outages. As a community-owned utility, Boulder’s electric utility would have a strong local reason to maintain its electric system. Some Colorado city-run utilities, including Fort Collins, have better reliability than Xcel Energy. And a city-run electric utility would plan to sign mutual aid agreements with other electric utilities to provide reciprocal aid when severe weather or natural disasters hit.
Under a municipal utility, programs similar to the solar rewards will be put in place. These programs will be determined by in part by customer choice to ensure you receive the best possible benefits. There are currently a number of options to address existing solar rewards contracts and these were factored into our models. We will ensure Boulder customers are not harmed in any way in terms of addressing these contracts.
A Boulder-run electric utility would respond to community values by providing electricity that was cleaner and greener than that provided by Xcel Energy, and it would do so while keeping rates and reliability as good as or better than Xcel. A Boulder-run electric utility would sharply increase use of renewable energy while reducing or eliminating the use of coal. A Boulder-run electric utility would also share its customer’s desire to lower electric usage, and potentially electric bills, with aggressive deployment of energy efficiency measures. Members of the community would have greater opportunity to give their views to a community-owned utility: They wouldn’t have to go to Denver and participate in proceedings held by the Colorado Public Utilities Commission (PUC). A community-owned electric utility would have fewer restrictions in making decisions that benefitted the community. Perhaps most importantly, as a community-owned utility, funds would be reinvested in our community rather than going to Wall Street to pay stockholders dividends.
Xcel Energy does not agree with Boulder. Xcel has repeatedly refused to turn over records about the electric system in Boulder and has said any effort to municipalize will require litigation. Spurred in part by a city report on alternatives that was issued in December, Xcel Energy has recently expressed an interest in discussing some possible forms of partnership that could achieve the Electric Utility of the Future vision without the city creating its own. The city and the utility are currently working on appointing a task force to explore these possibilities.
Energy markets are extremely dynamic. The City of Boulder will respond as changes unfold. Increasing the deployment of energy efficiency measures, as the city plans to do, will help insulate customers from potential electric rate spikes. Also, as the City of Boulder does not plan to own any electric generation in the immediate future, it would be insulated from potentially expensive federal and state environmental rules that seek to lower emissions from fossil fuel power plants.
Court action is likely, if an alternate partnership agreement or acquisition settlement cannot be reached. Boulder would prefer to save its residents and businesses the cost of litigation. But a court decision may be the only way Boulder can acquire Xcel’s records on the city’s electric system and gain control over the physical assets that deliver electricity to residents and businesses in the city.
Until now, it has been premature to discuss potential governance of a city-run electric utility. However, if at its April 16, 2013, meeting, City Council directs city staff to move forward, the staff plans to begin analyzing potential utility governance structures. Community-owned utilities exist for the benefit of their local communities, and they have a long tradition of seeking the views of their customer-owners. City councils, not the state public utility commission (PUC), typically serve as the regulators for city-run utilities.
No. The city charter limits the amount of funds that can be transferred from the utility to the city’s General Fund to 4% of net revenue (revenue less expenses), much less than other city-run utilities, who transfer up to 9% or even 12% from their utility to their general fund. The city charter requires “fair and equitable” electric rates and limits cross-subsidization of one type of customer by another. Moreover, as a community-owned utility, whatever body has responsibility for oversight and governance can be expected to pay very close attention to the budgets and activities of a city-run utility. Why? Because they live in the community and would be directly affected by the decisions that are made. Because the community would own the utility, and it would be operated and governed locally, there is every reason to believe it would be operated more efficiently.
The American Public Power Association recently published Straight Answers to False Charges Against Public Power, an important resource that provides fact-based answers on the benefits of public power, electric reliability, customer service, lower rates, operational efficiencies and other important issues relating to city-run utilities. We recommend consulting this free resource if you have further questions about creating or operating a city-run electric utility.
Last Updated on Friday, 12 April 2013 13:50