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10 September 2019

Xcel gets municipalization reprieve in Boulder, only a matter of time?

Have you ever been so bad at your job, or upset your biggest customer so greatly, that it decides it’s going to acquire you just to see you gone? That’s broadly what’s going down in Boulder, Colorado, where the city has just had its advances rebuffed, as it writes the latest chapter in its meandering attempt to form a municipal utility at Xcel Energy’s expense.

The Boulder district court has dismissed the city’s condemnation filing, which would have allowed the city to use Eminent Domain to take ownership of Xcel assets to use as the basis for a municipal utility. The city council has been knocked back before, and this decision is a pretty close mirror of a 2014 one, but this game has been in motion since 2011 and shows no real sign of stopping. Another vote on the issue will take place in 2020, while the city tries to persuade the court that it does have jurisdiction, via the Colorado Public Utilities Commission (PUC).

So what has Xcel done? Despite the usual sins of utilities, it appears that the major driver 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.

Xcel notes that the city “has again filed condemnation proceedings before the PUC has finally determined and approved how facilities should be assigned, divided, or jointly used to ensure the effectiveness, reliability, and safety of the separated systems and what assets Boulder may seek to acquire. Thus, whether analyzed through the lens of issue preclusion or on the underlying merits, this Court lacks subject matter jurisdiction and must dismiss this condemnation lawsuit.”

As for the city’s position, Boulder Director of Climate Initiatives Steve Catanach said “It was the city’s position that this stage of the PUC process and condemnation could run concurrently, and the city is committed to completing the PUC process. While the city believes that there is still a path forward, the city is now evaluating the impact of today’s ruling on the project schedule, particularly the planned community go/no-go decision in 2020.”

From the outside, it’s unclear if the matter could ever be resolved. The nearly-nine-year quest to buy the Xcel assets now has such a high sunk-cost that it will factor into any decision. Xcel says it has been trying to work with the city to achieve the 100% carbon-neutral by 2050 ambition, but there has been such continued tension between the two that the issue can’t exactly be swept under the rug.

The PUC could be the deciding factor, as this state commission could provide Boulder with the mandate needed to take ownership of the assets. On the other hand, the PUC might side with Xcel, and tell the city that it has no business running its own utility – but the city thinks it can achieve compliance with the PUC requirements regardless.

IBM is also involved here, as it is supplied by a substation at the heart of the case, and Big Blue’s lobbying power could factor into the equation. A meeting between the three parties back in August was described as ‘testy.’

Perhaps the biggest barrier to the city is the requirement that if it holds a city vote for the decision, it will have to include the dollar-amount price that it will pay for the assets on the ballot paper. That figure, whatever it is, will provide huge political ammunition for the parties involved, with mud-flinging inevitable and most voters having no way to properly understand the factors in play.

This price would be decided by the court, and the city is already making noises about this possibly being the last hurrah. It said that “the risk of abrogation (abolition of a law or right) is real. If the court dismisses or stays this eminent domain proceeding, it likely would effectively end the city’s attempt to create a municipal public utility.” Back in June, it was $82mn – or at least, that was the price offered in the final round of negotiations. This was a 20% increase over what was offered in April,

“We continue to work with all our communities, including Boulder, to provide a clean, reliable and affordable energy future,” Xcel spokesperson Michelle Aguayo said. “Today’s decisions provide a step forward and further clarity in our effort to resolve this issue. We have a vision to achieve 100 percent carbon-free electricity by 2050, which aligns with Boulder’s clean energy priorities, and we look forward to working with them, as we do all Colorado communities, to achieve their energy goals.”

After the first draft of this article was written, San Francisco has just announced that it is offering PG&E $2.5bn for the grid assets that serve the city, as part of the utility’s bankruptcy proceedings. It follows PG&E’s grid being accused of starting fatal wildfires, with bankruptcy declared due to the mounting payouts it would owe. PG&E has not said it is interested in selling, but one wonders if a refusal would trigger San Francisco to pursue a similar approach to Boulder.