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Xcel Energy : Boulder says municipalization ruling adds $23M in city costs

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09/24/2017 | 05:23am CEST

Sept. 23--Following the issuance of a written order from regulators who presided over Boulder's application to separate from Xcel Energy to form a municipal electric utility, the city issued a statement that the order did not appear to "significantly" alter the cost of municipalization.

In an interview Friday, Kathy Haddock, a senior assistant city attorney, clarified that Boulder expects the order to add $23 million in costs.

"It definitely is a significant cost, but we also are looking at significance in relationship to how the funding works," Haddock said, explaining the city's post-order statement, "and it's not something that increases the cost of providing services, because it will be paid for by bonds that are issued over time."

That $23 million in new, city-projected costs result from the fact that the state Public Utilities Commission, which issued the written order, ruled that it cannot compel Xcel to enter into an agreement that allows the city to jointly use Xcel power poles -- something Boulder proposed in its application.

"We know it's going to add costs ... if we can't have joint use of poles and need to do it a different way," said Bob Eichem, the city's chief financial adviser. That "different way" would likely see Boulder installing lines underground, in lieu of Xcel voluntarily agreeing to joint use of their above-ground poles.

During a nine-day trial that preceded the commission's order, Xcel argued repeatedly against joint use of poles. An Xcel engineer said joint use in this case would harm the company's ability to provide reliable service to its non-Boulder customers.

'Good faith discussions'

Xcel and Boulder have engaged in on-and-off negotiations in recent years, including one 18-month run that ended this spring when City Council members voted against pursuing a settlement with Xcel, in favor of pressing on with litigation.

This time around, the talks will, at a minimum, involve three separate Xcel-Boulder agreements that the commission requested within 90 days as a condition of approval for some of the assets the city sought to acquire when the trial began.

City officials say they expect those agreements to be reached in that 90-day span -- the countdown for which began after the written order was issued last week.

In a statement, Xcel said of the three required agreements: "Our focus at this time is to meet with Boulder to discuss the requirements that Boulder must satisfy as outlined in the order. The Commission will receive an update after 90 days."

The commission has said that it does not have jurisdiction to compel Xcel to enter into agreements that allow Boulder to use the company's poles, but the commission also believes it can't command any agreements regarding the future location of city facilities within the six Xcel substations Boulder wants to access as part of its potential municipal utility.

New substations can cost about $15 million apiece, or more, to build, engineering experts say. But Boulder is not focusing on that option for now, Haddock said, and is instead intent on making use of Xcel's substations, even in the absence of commission support for that.

And the city may have a path to that end: In order for Xcel to operate the transmission system Boulder wants to connect to, it is required by federal law to have open access, so that any utility can connect to the grid under "just and reasonable" terms. Xcel is not allowed to discriminate when this access is requested.

In the next "30 to 120 days," Haddock said, the city will file an application with Xcel to receive transmission service.

And if the company is to deny any or all of that application -- which could present a major setback in the city's overall utility plan -- Boulder attorneys say that denial would have to be made on the basis of engineering, as opposed to any prejudice on Xcel's part.

The company statement addressed this expected application in its statement.

"The Commission's written decision is clear in regard to poles and substations," the statement read. It was "clear that any substation co-location would have to be acceptable to Xcel Energy given the various complexities surrounding any such relationships, including factors such as safety, governmental limitations on liability, and the like.

"We are starting discussions with the City and will honor our commitment to have good faith discussions with Boulder on these issues. While working with the City, our objectives remain unchanged -- continue to ensure that if Boulder opts to pursue municipalization, system safety and reliability will not be impacted and Boulder's plans will not shift costs to others."

'Go/no go decision'

The city's latest calculations, following the commission order, suggest that the overall cost of municipalization will be somewhere in the range of $275 million to $375 million, including money spent over the past seven years of the project.

Of that total, the next $16.5 million would have to come from voters, who are being asked by the City Council to approve a tax extension in that amount this November.

Assuming that tax passes, the three agreements are reached and Boulder is able to resolve outstanding infrastructure issues related to poles and substations, the city can seek out a an estimate from condemnation court for the complete cost to acquire Xcel's local assets.

Voters in 2013 capped the total amount of debt issuable for that acquisition at $214 million -- but even that voter mandate could be flexible.

"The city can't spend more than $214 million to acquire assets, unless the voters say otherwise," Haddock said.

Under the council's latest plan, the voters will have a say, anyway, before Boulder actually moves ahead with the costly exercise of acquiring Xcel's assets. A ballot measure this fall would, if passed, require a vote before Boulder makes a decision on what it's calling the "go/no-go" decision -- that is, whether to proceed with municipalization once the costs are clarified through condemnation and detailed engineering research.

The city expects "go/no-go" to happen by 2020, and the requested $16.5 million would fund the municipalization effort until then.

But if Boulder learns in condemnation court that it'll need to spend more than the $214 million cap voters approved, the council could pair a "go/no-go" ballot measure with another item requesting the cap be raised.

Said Haddock: "That's presumably how it would work."

Alex Burness: 303-473-1389, [email protected] or twitter.com/alex_burness


(c)2017 the Daily Camera (Boulder, Colo.)

Visit the Daily Camera (Boulder, Colo.) at www.dailycamera.com

Distributed by Tribune Content Agency, LLC.

© Tribune Content Agency, source Regional News

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