boulder light & power: exploring the creation of a municipal utility
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Boulder Light & Power: Exploring the Creation of a Municipal Utility Macon Cowles - Lawyer, Boulder City Council Member Debra Kalish- Senior Assistant City Attorney David Gehr- Deputy City Attorney Jonathan Koehn- Regional Sustainability Coordinator. - PowerPoint PPT PresentationTRANSCRIPT
Boulder Light & Power: Boulder Light & Power: Exploring the Creation of a Municipal Exploring the Creation of a Municipal
UtilityUtility
Macon Cowles - Lawyer, Boulder City Council Member
Debra Kalish- Senior Assistant City Attorney
David Gehr- Deputy City Attorney
Jonathan Koehn- Regional Sustainability Coordinator
City of Boulder Presentation to the CBA Environmental Law City of Boulder Presentation to the CBA Environmental Law Section Section
January 24, 2012January 24, 2012
Agenda
1. Macon Cowles - Introduction
2. David Gehr – Franchises and Ballots
3. Debra Kalish - Colorado Regulatory Context
4. Jonathan Koehn- Why Municipalize?
5. David Gehr- The Federal Regulatory Context
6. Macon Cowles - Lessons Learned / Wrap-up
Part 1- Local Utility-Big Picture
Background on Boulder’s
Investigation into Municipalization
Part 2- Franchises and Utilities
Part 2- Franchises and Utilities
Specific Ballot Language
Ballot Issue No. 2B
INCREASE AND EXTEND THE UTILITY OCCUPATION TAX
Key points:
Increases Utility Occupation Tax $1.9 M annually For the purpose of funding planning to create a municipal electric utility
and acquire the existing distribution system Extends tax for two years Expires Dec. 31, 2017, or when the city chooses not to create a utility,
or when a municipal utility starts
Specific Ballot Language
Ballot Issue No. 2CLIGHT AND POWER UTILITY
Key points:
Authorizes the creation of a municipal electric utility ONLY IF:
City Council determines that it can acquire the electrical distribution system in Boulder and charge rates that do not exceed those rates charged by Xcel Energy at the time of acquisition, and
Such rates will produce revenues sufficient to pay for operating expenses and debt payments, plus an amount equal to twenty-five percent (25%) of the debt payments, and
Utility can demonstrate comparable reliability to Xcel Energy and include a plan for reduced greenhouse gas emissions and other pollutants and increased renewable energy
Part 3- The State Regulatory Context
The Colorado Public Utilities Commission
(PUC)
Gen’l William Jackson Palmer William B. StrongSeptember 17, 1836-March 13, 1909 May 16, 1837-August 3, 1914
History of the PUC
Bartholomiew Masterson (William Barclay "Bat" Masterson)
1853-1921
History of the PUC
The PUC “serves the public interest by effectively regulating utilities and facilities so that the people of Colorado receive safe, reliable, and reasonably-priced services consistent with the economic, environmental and social values of our state.”
PUC Mission Statement
EnergyTelecommunicationsTransportationEconomicsRail/Transit Safety and WaterGas Pipeline SafetyResearch and Emerging Issues
PUC Organization
Colorado Constitution, art. XXV, Public utilities
In addition to the powers now vested in the General Assembly of the State of Colorado, all power to regulate the facilities, service and rates and charges therefor, including facilities and service and rates and charges therefor within home rule cities and home rule towns, of every corporation, individual, or association of individuals, wheresoever situate or operating within the State of Colorado, whether within or without a home rule city or home rule town, as a public utility, as presently or as may hereafter be defined as a public utility by the laws of the State of Colorado, is hereby vested in such agency of the State of Colorado as the General Assembly shall by law designate.
Until such time as the General Assembly may otherwise designate, said authority shall be vested in the Public Utilities Commission of the State of Colorado; provided however, nothing herein shall affect the power of municipalities to exercise reasonable police and licensing powers, nor their power to grant franchises; and provided, further, that nothing herein shall be construed to apply to municipally owned utilities.
Constitutional, Statutory & Regulatory Authority
C.R.S. § 40-3-101 et seq.
4 Colorado Code of Regulations 723-1
Constitutional, Statutory & Regulatory Authority
The current state regulatory system is based upon the state’s regulation of a monopoly
Treating all similarly situated customers similarly
40-3-101: No “unjust discrimination or the granting of a preference.”
Effect of Regulatory Scheme
Effect of Regulatory Scheme
Effect on City’s Negotiations with Xcel Energy– No “Boulder Rate” for different mixes of power– Nothing that couldn’t be offered to another
community
Effect on City’s Ability to Meet its Goals– Everything needs PUC approval, not just local
approval– Limited by state statute and PUC regulations
Part 4- Why Municipalization?
What must a jurisdiction learn in order to
assess the feasibility of creating
a municipal utility and explore the
opportunities?
Local Energy Goals Ensure a stable, safe and reliable energy
supply
Ensure competitive rates, balancing short-term and long-term interests
Significantly reduce carbon emissions and pollutants
Provide customers with a greater say about their energy supply
Promote local economic vitality
What Are We Trying to Achieve? Respond in a responsible and pro-active manner to a
changing energy economy
Reduce our exposure to fluctuating energy prices and long-term fuel availability issues
Reduce our greenhouse gas emissions
Maximize the local benefit of our energy investments
Create more choice and more competition, and position Boulder as a center for energy innovation
The Choices Stay with Xcel under “status quo” (no franchise)
Continue to focus on demand-side management Pursue options as they become available Negotiate a new 20-year franchise?
Create a municipal utility that owns and operates the distribution system Fee for service, nonprofit enterprise; there are 29 other
munis in Colorado; 2,000 nationally Pursue new partnerships and strategies to achieve
short-term and long-term goals and objectives
2121
Municipalization
Process of a city acquiring ownership and assuming responsibility for operation of the electric utility system
Locally-Run Electric Utility
Fee for service vs. profit based entity
29 in Colorado, 2000 nationally (14% of consumers)
Local Utility-Big Picture
Potential benefits of a local utility Local management
Emphasis on long-term community goals
Lower electricity rates with equal or greater reliability
Not for profit
Opportunities for innovation and partnership
Access to tax-exempt finance for capital projects
Local jobs creation
Ability to tap wholesale electricity market
Local Utility – Big Picture
2323
Setting a Course for the Future
Energy Baseline Analysis
Localization Report
Smart Grid Evaluation
Local Utility FeasibilityAnalysis
Cost Model (initial and additional runs)
All reports and City Council materials are available atwww.boulderenergyfuture.com
City-Funded Analyses
Energy Baseline Analysis
Understanding Boulder’s past, present and future related to energy
Localization Report
Feasibility Modeling Fully Reliable Grid (99.99% plus)
Grid Design Must Be Robust and Scalable and Implementable
Minimize CO2 and Pollution Emissions
Maximize Grid Ability to Accept Increasing Renewables/Storage
Minimize Resulting Electricity Rates
Be Conservative! Most Generation Pricing Data from Xcel Filings
Assume Current Load, Energy Prices, Generation Prices
Require FERC Levels for Reliability
Identify Modeling Plan for Future Improvements to Reduce Rates
Cost Modeling
$120M Startup Costs (Estimates $120M -$600M)
7% Bond Interest Rates
Equipment Costs from Xcel (mostly) and Literature
25-Year Program for Costs of Generation
15% or Higher Annual Operating Reserve (FERC)
7% Hourly Operating Reserve (WECC)
Cost Modeling
Are We Ready to Move Forward?
Yes. We know that a municipal utility is technically, legally and financially feasible
November’s vote will allow Boulder to determine the costs that can only be known through further proceedings
There are suitable off-ramps to protect the city’s and customers’ interests
The potential benefits outweigh the risk of investing time and resources and deciding not to move forward
What Is An Off-Ramp?
Financial impact of “variables”
- Acquisition
- Stranded Cost
- Bond Rating
- Interest Rate
Identification of alternative paths
??
44
Hire/retain key experts
Conduct next step analyses and initiate negotiations/ condemnation
Distribution system appraisal
Separation/severance planning
Develop Energy Action Plan
Next Steps
Part 5- The Federal Regulatory Context
The regulatory framework established by the Federal Energy Regulatory
Commission (FERC)
Part 4- The Federal Regulatory Context
Shively, Bob andJohn Farrare, Understanding Today’s Electricity Business, Enerdynamics (2010), p. 55.
Part 5- The Federal Regulatory Context
STRANDED COST FORMULA
Stranded (Revenue __ Competitive) Length ofCost = (Stream Market Value) x AnticipatedObligation (Estimate Estimate) Service
Macon Cowles - Lawyer, Boulder City Council Member(303) 381-3406
Debra Kalish - Senior Assistant City Attorney(303) 441-3020
David Gehr - Deputy City Attorney(303) 441-3020
Jonathan Koehn- Regional Sustainability Coordinator(303) 441-1915
Contacts