Is the nation’s 'greenest' utility green enough? Boulder says no.

Boulder, Colo., wants to municipalize arguably the nation's "greenest" utility, Xcel Energy, saying that it is not nearly clean enough – too much of its power still comes from fossil fuels.

Now their three-year-old battle is going to the courts.

It's an ironic turn of events. Xcel has led the nation in wind-energy development for nearly a decade and has ranked among the Top 10 utilities in solar-power installation is concerned. The Minneapolis-based utility has cut its carbon emissions in Colorado by 20 percent since 2005 and expects to hit the 35 percent level by 2020.

Boulder and Xcel should be working together. But last week, Xcel sued the city, saying it has overstepped its authority and had moved to assume its assets without proving that it could do a better job. City leaders have called the suit “spurious.” 

“While it is true that Xcel Energy is a leading provider of wind energy, the utility continues to have huge investments in coal plants – investments that are expected to last for years,” writes Sarah Huntley, spokeswoman for the city of Boulder, in an e-mail. “A city utility would be in a position to increase renewables without being beholden to shareholders and to out-dated ways of doing business.”

Boulder has done detailed modeling to illustrate how it could support a much greater level of renewables – something that would boost the current levels of 20 percent to between 40 percent and 60 percent in a decade or less, writes Leslie Glustrom, with Empower Our Future in Boulder, in an e-mail exchange. [Editor's note: This sentence was updated to reflect a higher current level of renewable power.] Xcel Colorado’s fuel mix consists of 77 percent fossil fuels.

Xcel counters that a hostile takeover will not only backfire but will also be prohibitively expensive. Boulder’s voters, in fact, have approved a buyout not to exceed $214 million, although Xcel and other analysts say that its citywide transmission system is worth at least $500 million. Beyond that, the utility says the city is underestimating its bills by about $10 million to $15 million a year. Generation and distribution are large capital expenditures while the engineering, fuel, and maintenance all add up.

“Few communities can afford to go through such a [hostile takeover] process, and fossil fuels are still needed in the fuel mix,” says Bob Bellemare, chief operating officer at Mykobel, a consulting firm working with Xcel on this issue. “For example, Boulder is planning on about 21 percent coal and 30 percent natural gas generation should it form a utility, which will do little if anything to lower emissions in Colorado. A better model would be one where a utility and community develop solutions together to reach their community goals.”

A key legal sticking point are two Xcel transformers and some high-voltage wiring that the city wants to acquire but which lie outside city limits. Boulder says the assets are necessary to provide reliable electric power to the city of 100,000.  Xcel argues that it’s illegal for Boulder to take over assets outside its purview – and that without those assets, it won’t be able to meet the financial targets in its plan. “We understand state law [to mean] that the city can take things within their own boundaries,” says Xcel spokeswoman Michelle Aguayo. “So, we ask, 'If you can go past your boundaries, where does it stop?' "

The Colorado Public Utility Commission is deciding the matter. It is also an issue Xcel has raised in its lawsuit.

Only a handful of cities have wrested control of their utilities and nearly always because of service complaints: Winter Park, Fla., and Hermiston, Ore., did so in the last decade while Page, Ariz., and Massena, N.Y., were able to reach settlements in the 1980s. Frustrated over service quality, Winter Park had a right-to-buy clause in its franchise agreement with Progress Energy, now part of Duke Energy. It lost $11 million over four years but it is now turning the corner. Page and Massena, by contrast, had access to cheap hydropower that made the deals cost-efficient.

Boulder says that its cause has a greater purpose.

“Xcel is trying to put up roadblocks but we have shown we are in this for the long haul,” says Steve Fenberg, executive director of New Era Colorado, in an interview. “Most likely this will go to court and the cost assessment will be in line with what the city has anticipated. The city can then move forward with creating a utility to meet its climate goals – and be an example for other states.”

Xcel won’t come out of this unscathed. Boulder will either require it to accelerate its adoption of clean energy or it will wrest control of Xcel’s assets and do the job itself.