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In 1969, long before climate change was a major political issue, a 20-year franchise agreement between Boulder and the Colorado-based electric utility known as the Public Service Company was set to expire.Public Service was discussing placement of a new excise...

Boulder's long road to its elusive right to a municipal electric utility

In 1969, long before climate change was a major political issue, a 20-year franchise agreement between Boulder and the Colorado-based electric utility known as the Public Service Company was set to expire.Public Service was discussing placement of a new excise...

Boulder's long road to its elusive right to a municipal electric utility

In 1969, long before climate change was a major political issue, a 20-year franchise agreement between Boulder and the Colorado-based electric utility known as the Public Service Company was set to expire.

Public Service was discussing placement of a new excise tax on the ballot, revenue from which would pay for the installation of utility lines underground. The city feared that in the event the tax didn't generate as much money as the company expected, Boulder would be on the hook for remaining costs of undergrounding.

"Why should the city have to bear this burden?" then-City Manager Ted Tedesco said at the time.

"What bothers me," said then-Councilman Ray Joyce, "is they won't pay for the undergrounding, and they'll benefit just as much or more than the average electric user who will have to bear the burden of the cost."

Many in the city were already discontent with Public Service, and believed that the company's local earnings were too high. A consultant for the city found that the company was netting 7 percent profits statewide, but taking 8.2 percent profits out of Boulder.

Later in the 1969, the city received what was then a highly anticipated report on the feasibility of municipal ownership of the electric utility. It was done by R.W. Beck & Associates — the same firm that would work with Boulder again 40 years later, during exploration ahead of the current municipalization bid.

The original report said net revenues of a municipal distribution system would be adequate to pay off debt incurred in relatively short order, and that the city could use surplus revenues to slash customer rates.

It was heavily challenged by many who felt there were too many unknown costs that the city would incur in the process of separating from Public Service, and believed that Beck's report was somewhere between optimistic and delusional. The same disagreement remains at the center of Boulder's municipalization debate today.

Emboldened by those 1969 findings, though, and frustrated by the issue of undergrounding and perceived gouging of local customers, the city considered pursuing a municipal electric utility — something to which it had been legally entitled since an 1893 state statute placed the authority to regulate, operate and set rates for electric systems locally.

For the next three years, the city delayed votes on a new franchise over and over again, before finally settling on a new franchise agreement that was put to a vote in 1973. The city had taken a long look at municipalization, but ultimately felt it had neither the time nor the absolute confidence to pursue a public power utility.

Meanwhile, by 1974, 29 cities in Colorado had already succeeded in municipalizing.

At the time of the 1893 statute, feasible electric distribution was still only about a decade old, and the economics of the industry were still very much in question. The state had few electric utility systems then, and governments in rural areas of Colorado used their statutory authority to introduce electricity in their communities.

"In a lot of these communities, municipalization evolved with the beginning of electricity itself," said Daniel Hodges, executive director of the Colorado Association of Municipal Utilities. "Some towns just said, 'Hey, we're already doing water and sewer. Why not light?'"

By 1910, CAMU reported, Aspen, Fort Morgan, Gunnison and four other towns were offering municipal electric service. Longmont and two others would follow suit by 1920.

Another bumpy franchise renewal

When it came time to talk franchise renewal in 1990, Boulder again looked into municipalization, and again agreed to a franchise agreement after several years of negotiation.

But during those talks, rates remained a topic of interest, as Boulderites observed customers of municipal utilities in peer cities such as Fort Collins and Longmont were paying at least 25 percent less on average.

Undergrounding was of even greater concern then, as many citizens organizers had grown deeply opposed to the construction of overhead power lines in the city. Many Boulder officials entered negotiations with Public Service thinking this grassroots opposition would give the city the upper hand in franchise talks.

The franchise agreement was renewed in 1993, though, and five years later, Public Service merged with Northern States Power, of Minneapolis, and Southwestern Public Service, of Amarillo, Texas, to form Xcel Energy.

Today, those behind the municipalization effort in Boulder harbor many of the same concerns that their counterparts in 1970 and 1990 did. Undergrounding and Xcel profits continue as talking points in the checkered relationship between city and company, which haven't agreed to a franchise renewal since the 1990 deal expired.

But a lot else changed between then and now to stoke interest in municipalization.

In 2002, Boulder formed its first working group on renewable energy and energy efficiency, then committed to reducing greenhouse gas emissions as part of the Kyoto Protocol — an international agreement to fight global warming, with reductions targets the city would ultimately fall short of.

The city commissioned R.W. Beck to conduct another municipalization feasibility study in 2005, and a year later approved the country's first carbon tax.

Municipalization supporters in Boulder were, by 2008, motivated not only by the decades-old disagreements that highlighted the 1970 and 1990 discussions, but by a new urgency to decarbonize the city's electric supply.

But establishing a local electric utility was much easier to do in the years immediately following the mainstreaming of electric distribution. It's no mistake that no place in Colorado has municipalized since 1974, or that the few towns and cities that have recently tried elsewhere in the country have described the separation as being very difficult.

"As any industry matures and establishes itself, the norms and the structures sort of settle into place," Hodges said. "And it gets harder to change as time goes on. Especially if the incumbent is profitable. You just can't overlook that."

A different approach?

Depending on the starting date from which one calculates, Boulder's current municipalization effort is anywhere from about 5 to 13 years old. But one could also argue that the bid — or at least the sentiment — never died after 1969.

If there's one detail that's remained the same throughout the years in the debate over whether to form a local utility it's that Boulder does have a right to do so. The question has always been how. And at what cost?

The city may be primed to finally get an answer — if only, perhaps, to the question of how.

Barring a rescheduling, the city will head to trial in July before the state Public Utilities Commission. It's not clear that Boulder's plans for acquiring Xcel's local system will be approved there, because the city hasn't had much success on that front in recent memory.

Reasonable minds in Boulder and beyond disagree on why it is that the city's latest and most legitimate stab at municipalization has made up such little ground in court to date. But one possible explanation is that while the state constitution gives cities the right to municipalize, there's nothing in state statute that actually lays out how to achieve that end goal.

The Public Utilities Commission, seemingly as a result of that, has struggled at times to agree on where its authority over the case begins and ends. Boulder's constitutional right has proved elusive, to say the least.

"I think in all three of those situations over the years in Boulder, the very specific complaint is different each time, but at the end of the day the theme is the same: communities actually don't have a choice," said State Sen. Steve Fenberg, of Boulder.

"They're told that they have a choice, but we're seeing now that the option of municipalization really isn't easy. Every community's needs are different and the complaints and requests are going to be a little bit different, but at the end of the day they all want to control their own destiny. And they don't know how."

At a lengthy public hearing on municipalization Monday — after which the City Council rejected settlement offers from Xcel and decided to press on in court — Fenberg introduced that Boulder might have more success winning the rights it seeks by amending the state constitution, or somehow clarifying in the legislative process of how it is a city that votes four times in favor of municipalization, and taxes itself to the tune of $2 million a year to achieve that goal, can actually win.

Councilman Matt Appelbaum said he thinks Boulder should consider looking in that direction should things go poorly this time around at the PUC, or if voters decide not to extend the municipalization tax after it expires later this year.

"If people see the constitutionally guaranteed option doesn't exist in reality," he said, "the path you're on then is working at the Legislature or perhaps working on a statewide ballot issue."

Whether or not the constitutional right is false in practice will be tested in the coming months, Appelbaum added.

"If Boulder can't do it," he said, "we'll know that nobody can do it."

Alex Burness: 303-473-1389, burnessa@dailycamera.com or twitter.com/alex_burness

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