The ongoing saga between the City of Boulder, Colorado, and local utility Xcel Energy seems to have reached the final chapter, with the city having placed its $94mn bid for specific Xcel assets – apparently its final offer. In California, a former chief regulator is calling for the state to go a step further and takeover the entirety of Pacific Gas & Electric (PG&E), and should this start a trend, the crossover between smart grid and smart city applications could become considerably easier.
Municipal utilities, owned by the cities or regions they serve, are better placed to consider the overlap between their smart grid deployments and the emerging smart cities, mostly due to the diminished profit motivation and that they are beholden to the taxpayer. Smart cities have always struggled on the funding and motivation front, especially when trying to convince businesses why they should get involved in areas that might have unclear or poor returns on investments. With a municipal utility, this is not such an obstruction.
Many of the smart city use cases have clear social benefits, but are difficult to pitch to a private enterprise. For instance, better air quality in the city has proven health benefits, but improving the quality of the air doesn’t earn a taxi fleet more money, nor increase sales in the main shopping plaza. Both those business stakeholders would be contributing to the problem, but the only recourse a city has to fund air quality improvement would be through levying taxes, or enacting laws that directly affected the businesses – both of which would be unpopular.
But if a city owns its energy supplier, it can begin to pursue all manner of applications that could benefit the city. A clear example would be the integration of battery storage and rooftop solar in as many of the city buildings as possible, using voucher schemes and the utility’s installation fleet to move at a pace that might not be palatable for a profit-motivated utility.
This would both help reduce the amount of non-renewable energy the utility would have to purchase from wholesalers or generate in its own plants, as well as create a very large fleet of assets that can be used in Demand Response (DR) projects. Leveraging the municipal utility to aggressively push these installations would be a huge benefit for a sufficiently motivated city, and being able to tie these smart buildings in with the smart city platform and utility energy projects would be a glimpse of the future.
Electric vehicle charging infrastructure is another obvious example, and one of the main challenges for convincing drivers to make the switch from internal combustion engines to EVs is the valid concern over the ability to charge these new vehicles. With the utility being able to dispatch engineers to install chargers at customer homes, and fill the urban centers with EV charging stations, a city could much more aggressively pursue a target of removing ICE-powered vehicles from its streets, to improve air quality.
To this end, a city-owned utility would be one of the most effective tools to use in the pursuit of a properly connected city – one that combines the homes, buildings, vehicles, and systems that serve its inhabitants. As no city is the same, there are millions of possible combinations to make, and many cities will have good relationships with their utilities. But if you want a single touchpoint that could bring everyone to the table, it’s hard to think of a better candidate than the company that provides the energy that keeps the modern world ticking.
Returning to Boulder, the city says that the value of the assets it wants to buy from Xcel has been appraised at around $62.3mn – meaning the $94mn offer is around a 33% premium. This is for some 100,000 ‘items,’ including the underground and overground distribution infrastructure, electric poles, primary circuits, and feeders. However, the city is not interested in the substations, and would leave those with Xcel.
Notably, Xcel has confirmed that it is evaluating this offer, as it has been silent in response to the previous offers. In June, $82mn was the figure, which was a 20% premium over the $68.5mn that was offered in April. Back in September, Xcel won a reprieve from the city’s attempts at a takeover, after the district court dismissed the city’s condemnation filing that would have allowed for an Eminent Domain claim.
The Colorado Public Utility Commission (PUC) has already approved the transfer of these items, should Xcel agree, and our previous coverage has more detail of the intricacies of the case. Despite the usual sins of utilities, it appears that the major driver in this conflict has been that the city wants to implement much more ambitious renewable energy targets than Xcel feels comfortable with. But the city seems to be moving too fast, and the courts don’t appear to be fans. If Xcel accepts, it would be free of the burdensome legal process, and pocket a decent margin on those assets too.
As for PG&E, the former head of the California PUC, Loretta Lynch, told the Los Angeles Times that she was fed up with a system that failed to hold giant investor-owned utilities accountable for massive wildfires and sprawling blackouts. “I think the only way to effectively protect all California families and businesses is to create a statewide power company that is state owned.”
This is a more extreme position than the current public officials are calling for, but this would be because PG&E’s failings have actually killed people in California. With the liability lawsuits currently bludgeoning the utility in the courts, public opinion would probably side with such a takeover, should the state opt for it. San Francisco has already offered PG&E some $2.5bn, in a very similar deal to the Xcel-Boulder one, but if California itself took over the bankrupt utility, its cities would not have to.
Lynch continued, telling the paper that her five-year tenure at the PUC and additional academic studies have persuaded her that “public power is generally cheaper, safer, cleaner — with some exceptions — and more reliable.” Lynch added that California has the legal power and leverage to take over PG&E, but that “the only thing that’s lacking now is the political will to do it.”