Boulder’s fight to ‘decarbonize’ shows a ‘perfect community’ can find it exhausting

Source: Stephanie Paige Ogburn, E&E reporter • Posted: Monday, March 10, 2014

BOULDER, Colo. — There are probably more energy and climate experts here than in any community of its size (population 97,385) in the United States. So when the city was preparing to renew its 20-year contract with Xcel Energy, a large, investor-owned utility that provides its power, Boulder decided to do something different.Boulder was used to pioneering. In 2006, it became the first city in the nation to implement a carbon tax. Now, it wanted to make itself into a laboratory to display the uses of cleaner energy.But Minneapolis-based Xcel, which serves 3.3 million electric customers across half a dozen states, was not quite ready to do that. It did offer the city more renewable power, including an option for development of a new wind farm, said Michelle Aguayo, a spokeswoman for the company.

But Boulder had a climate plan with emissions targets it was failing to meet, along with a vision of itself as the renewably powered city of the future. If Xcel would not offer them this option, Boulderites decided, they would form their own utility and do it themselves.

“Boulder is a really highly educated town with early adopters and people who understand experiments,” said Leslie Glustrom, a clean energy analyst and co-founder of the Boulder group Clean Energy Action.

That is probably an understatement. Many federal and academic experts who advise the nation on clean energy issues live around here. They work at the National Institute of Standards and Technology, the National Center for Atmospheric Research or the University of Colorado — all in Boulder — or at the Department of Energy’s National Renewable Energy Laboratory in nearby Golden, Colo.

“We have a perfect community willing to serve as a laboratory for decarbonization,” Glustrom said.

“[Boulder] can have this within months, literally: 50 percent renewable energy, a mix of mostly wind and some solar, and 50 percent natural gas — moving towards 60, 70, 80 percent renewables as cost and technology allow,” predicted Ken Regelson, a clean energy consultant and founder of the group

After years of effort, Boulder is still in the middle of a fight to wrest control of its utility from Xcel. The city’s ongoing struggle offers a window into the complications facing cities wishing to seriously bump up their supply of renewable energy.

‘Municipalization’ is hard

One of the reasons Boulder opted to take control of its utility is that, unlike cities in a number of other states, it is not able to buy power on the open market. In a handful of states, municipalities have an option to buy power from whomever they wish.

If they want, they can buy renewables. In Ohio, which has a community choice law on the books, Cincinnati now gets 100 percent of its power from alternative sources.

But Colorado does not have such a law. And when Boulder examined how it might enact one through the Colorado Legislature, an expert told the city it was not likely to pass. So it was left with the option of negotiating with Xcel or going head to head with the utility in a full-fledged takeover, which is referred to as “municipalization.”

Glustrom said she realized municipalization was not an easy task, nor was it her first choice: “too much money, too many lawyers,” she said. But since Xcel did not respond positively to Boulder’s ideas for becoming a model of how to do renewable power, a utility takeover became the city’s “last resort,” she explained.

Boulder has allotted $214 million to acquire Xcel’s power distribution and infrastructure. In 2011, voters also approved a five-year tax that gives it $1.9 million annually to spend on the effort.

Industry experts could only name two other places — Winter Park, Fla., and Jefferson County, Wash. — that have taken over their utilities in recent years. Those municipalization efforts took place because residents were seeing large rate increases or had experienced poor reliability, and they were on a much smaller scale than Boulder’s.

Portland, Ore., also attempted to take over its utility in the early 2000s but did not succeed, and a push to get municipalization on the ballot in Minneapolis, which is Xcel’s corporate base, failed last year.

Years of discussions

Meanwhile, the legal back-and-forth among Boulder, Xcel and the Colorado Public Utility Commission, which also has a role to play in the process, is likely to continue for years, with arguments over the fair market value of the utility’s infrastructure, should the city choose to take it over, being a significant sticking point.

At the same time, the city is also in negotiations with Xcel to see whether the utility will come up with an alternative that helps it meet its climate goals, said Sarah Huntley, a spokeswoman for the city.

“We have given them until April. While we do that, we continue to go full speed ahead [toward taking over the utility], but if they come forward with something that is really interesting to the community and would allow us to meet our goals, we can certainly stop proceeding along the municipalization path,” Huntley said.

Xcel’s Aguayo said the utility is readying a proposal to meet the city’s April deadline.

“We are emphasizing that we want to develop renewable programs that are available to all Xcel Energy retail customers, not just our customers in Boulder,” Aguayo said.

While Boulder may still see Xcel’s renewable options as paltry, others are more sympathetic to utilities, which are in the midst of a rapidly changing energy landscape.

Kenneth Skinner, vice president at Integral Analytics Inc., a consultancy that works with utilities across the nation, points out that although customers may want more renewables, utilities have sunk costs in existing infrastructure and power plants and are constrained by regulations on how they can recoup their investment costs.

“Because their profits are regulated, they are extremely sensitive to the possibility of having costs disallowed [by public utility commissions],” Skinner said.

A utility that has tried

Nationally — and contrary to its depiction in Boulder — Xcel is seen as a progressive utility that has integrated a significant amount of wind and solar power into its mix, said Ralph Cavanagh, co-director of the Natural Resources Defense Council’s energy program.

It is perhaps for this reason that the utility can seem frustrated with Boulder at times.

“You look at where we are in terms of renewable energy, and we are one of the top utilities in the country, and Boulder says that’s not enough and it’s not quick enough,” Aguayo said.

Cavanagh sees Boulder’s effort as an outlier — but a useful pressure point.

“It’s always healthy for utility management to be reminded that if their energy efficiency and renewable energy constituencies get sufficiently frustrated that they have other options,” he said.

Meanwhile, utilities nationwide are taking note of the push for alternative power, Cavanagh said.

In February, NRDC and the Edison Electric Institute, a group that represents the nation’s utilities, released a joint statement recommending a change in how utilities are regulated, pushing for more incentives for efficiency and renewables — a significant shift for the utilities community.

If cities try to negotiate with utilities to get more renewables and come up short, Cavanagh recommends exercising political pressure at state public utility commissions, which control much of the incentive structure for utilities in each state.

“There is the option of going to the utilities regulators and encouraging them to do more [to encourage efficiency and renewables],” Cavanagh said.

Nearby city may be the model

On a Saturday in late February, Clean Energy Action’s Glustrom and a number of residents and leaders from nearby towns gathered in Lafayette, Colo., a municipality a few miles east of Boulder.

They were there for a daylong meeting sponsored by the Colorado Renewable Energy Society. Called “Think Globally, Power Locally,” the event included speeches by Glustrom and the mayor of Boulder, and brainstorming sessions on how to organize communities to obtain more renewable energy.

Glustrom, who advocates for citizen engagement as the important first step in the transition to renewables, acknowledges that Boulder’s effort, while important, may not need to be replicated.

“The utilities are beginning to realize that they have to change or their companies will not survive the inevitable transition to the post fossil fuel world,” she wrote in an email.

Last November, Lafayette residents voted to renew their 20-year franchise with Xcel.

Yet despite the fact that it is retaining ties to Xcel, the town is still interested in an alternative energy future — and may soon expect its utility to provide it. It won’t be the only one.