Boulder Shouldn’t Municipalize Its Energy Utility System

I’ve sat in the background and expressed my opinion privately on the energy utility municipalization issue in Boulder. It’s been one where the debate and exploration so far has been much more emotional, at least in my opinion, that rational.

Beth Hartman recently reached out to me with an extremely clear point of view that parallels mine. It was stimulated by a recently announced spending increase of 18% for the 2015 budget, borrowing $4 million from the general fund for the municipal utility effort. I’ve long felt that the city of Boulder could take a much more innovative approach to this problem, but everyone I’ve suggested this to who is an advocate of municipalization had said “but we can’t spend the money on that.” Now that the city has demonstrated that they’ll take money from the general fund to spend on municipalization, I encourage everyone in Boulder to rethink the path we are taking.

Following is the OpEd and Beth and I had published in the Boulder Daily Camera today. I’m certain it will generate plenty of emotional response, which I put in the “whatever” category. I’m much more interested in the rational, thoughtful responses that discuss what we could be doing around our energy future that’s actually progressive as well as innovative.

The original article is at Boulder’s budget: Our best bet?, but the Daily Camera took all the links out, so if you want the backstory, they are in the post that follows.


Boulder’s Budget: Our Best Bet? By Brad Feld and Beth Hartman

Boulder recently announced a spending increase of 18% for the 2015 budget, borrowing $4 million from the general fund for the municipal utility effort – in addition to the money that the city has already spent. With the utility business model currently under pressure around the world from disruptive forces that many in the industry refer to as a “death spiral,” the city’s assertion that this money will soon be repaid should be carefully examined by every citizen and business leader in town.

Citizens and businesses would be wise to scrutinize this investment not just because of the millions that are being spent now, but more importantly because of the serious impact that potentially higher electricity prices could have on this community in the coming years. While Boulder is currently building a strong reputation as an entrepreneurial ecosystem to rival Silicon Valley and is consistently voted among the top cities to live in the country, there is almost nothing more fundamental to quality of life and competitive business than affordable energy.

A municipal utility may be able to provide electricity that is cheaper or about as affordable as our current utility offers – or the city may waste millions of dollars trying, just as communities in Florida, California, and New Mexico have done recently. Although the city is hoping that rates will be lower and Boulder will actually earn money, the fact that Barclays recently downgraded the entire utility sector indicates that this is not currently a business model with strong growth opportunity for new entrants. In addition to uncertainty about costs, there are several big legal questions pending that must be answered before we know if the plan will even work, over which the city has little to no control.

Why are we taking this considerable risk? Instead of buying a bunch of old poles and wires, we could be spending the money on more innovative initiatives that would have a real impact on saving energy and reducing carbon emissions, such as solar panels, an electric vehicle car sharing program, or installing Nest thermostats the way Airbnb is doing.

There are many innovative energy companies right here in Boulder, offering an opportunity to support solutions that can be rapidly replicated in other cities around the world. Instead of spending so much on a 20th century business model, the city could focus more on coordinating efforts between local energy entrepreneurs, the university, research labs, and consulting companies, providing thought leadership on new energy solutions. This would also offer amazing economic benefits to our own community, through helping to create more jobs at Boulder-based organizations. The city could start offering this support now, without waiting to see what happens with the uncertainty of forming a utility.

Another important question is what else our community could be doing with the millions of dollars we are spending on this effort, whether it’s schools, roads, affordable housing, open space maintenance, or any other initiative that our city needs. If you are a citizen who is concerned about the city’s new budget, please reach out to city council and ask them what else we could be doing with so much money. We could also ask for more details on how exactly they plan to deliver an energy service that is at least as good as what we’re getting now.

If you understand the difference between renewable energy and efficiency, distributed generation and demand response, and net metering and decoupling, please reach out to city council and have a conversation with them about their plans to start a utility during this time of disruption for an incredibly complex and challenging industry. Finally, if you are a business owner and you rely on affordable energy for your company to run every day, please reach out to city council and ask them how they are going to support your needs.

Getting into the utility business now is in many ways akin to starting a land line telephone company right when the internet and cell phones were really starting to get popular. Our community needs to question the wisdom of our city investing in this industry right now, with so many real risks.

 

  • Rick

    Hey Brad. Do any of these book titles catch your eye:
    1. In the business segment: Get Your Head Out of Your Cloud
    2. In the web segment: Personafied
    3: In the sci-fi segment: Time Folded

    BTW… You said a while back you were not gonna’ talk politics anymore.

    • Time Folded might catch my eye. Who is it by?

      I’ve been very quiet in general on politics but I decided it was time to say something about this.

      • Rick

        It’s by me!

        • Neat – happy to read it whenever.

          • Rick

            Maybe. It’s not available for purchase. I’ve only had articles published not a book.

  • Reuben Munger

    Brad,

    Thanks for adding a voice to this important community conversation. Your request for rational dialogue vs an emotional one is important. At the same time, the use of an OpEd opens the door to challenging some of your assertions as you have blended a series of issues.

    To start, I have not taken a side on the specifics of what the best path is for the city. Rather, I am deeply involved in evolving utility business model discussions across the country and happen to call Boulder home.

    The community conversation is really one about risk and who bears that risk as well as what the goals are of the community. Raising the specter of higher rates in the face of an industry death spiral is relevant but exists in both the context of an XCEL owned system or in a municipal utility. In fact, it is the very new
    technologies you cite that are most responsible for accelerating this shift in
    how the grid operates and who pays for what. AND it is in part the lack of
    willingness of XCEL to create pathways to accelerate that transformation that
    have prompted the city to explore municipalization.

    It was a hard truth for some of our own entrepreneurs to learn that doing BETTER than OPower at reducing demand was not something that the utility customer wanted. The utility, in many markets including CO, is incented to do just enough to check the box with their regulator. That our community wants to have a better
    framework than that is right minded. The cost of achieving it may not be (and I
    think this is your point).

    Investor owned utilities exist in the context of a highly regulated environment. Boulder’s preference to not be regulated by the PUC (the same one you were so frustrated by in the early days of Uber) is not unreasonable. Cities with municipal utilities often have innate advantages around lower costs and increased local control. These attributes both exist in Fort Collins and Colorado Springs.

    There is a simple advantage in cost of capital between being an IOU with a double digit regulated ROE and a city owned asset funded by sub 3% municipal funding. Sadly the transition from IOU to municipal control is where the risks emerge. How much will the system cost? How well will it be managed? Will politics get in the way of good decisions?

    The unknowns in the discussion are substantial. The lack of leadership in Denver since the resignation of PUC Chair and sadly not FERC Chair Ron Binz has made this a local discussion. In NY state, Hawaii, Fort Collins and beyond Boulder expert
    are helping advance the evolution of utilities. The wires are the telecom
    equivalent of a fiber backbone for an energy future. The difference is there is
    no wireless and even though disconnecting may become economic within 5 years,
    that undermines the collective value of the grid. In the meantime, for Boulder,
    the system is regulated by the PUC in a way that does not serve customers
    optimally and has not begun to tackle the changes coming.

    I agree there are a number of mechanisms that could advance the energy future without buying the system. Minneapolis may have just succeeded in a better compromise solution than Boulder was able to realize. It is immensely unfortunate that we are where we are. The current path is too expensive for the city. The alternate path does not realize the community’s energy goals.

    XCEL has used Boulder to show Minneapolis and Denver that they should compromise. Boulder hasn’t found a way to succeed without pushing down this path. When two sides are playing two different games, finding a successful solution is incredibly hard.

    I am troubled by your decision to engage on this with an OpEd in the Daily Camera as your piece uses a set of scare tactics that do not even acknowledge the strengths of our community or the risks inherent in the changes ahead. The specter of higher electricity prices have been used by the status quo to hold back change time and again. It is in fact at the heart of the “death spiral” you reference. But
    if you truly believe that the Boulder community you have worked so hard to
    build will make different choices based on 2-3 cents/kWh and not based on the
    performance of its workforce, you are selling our entrepreneurs short and I
    know of all people you aren’t doing that.

    I wish we had a simple pathway to the electricity system of the future as we have the entrepreneurs and experts in town to do it well. I agree with you that the path to do so and the risks are less clear than a sharp business analysis would desire. My honest answer is I am not sure where to go. Our goal is to bring knowledge to the
    current debate and we have, in the past, privately put forth an attempted
    solution not dissimilar to our offer to lease the utility from Colorado Springs
    in an attempt to insulate the City from the risks of the evolving utility
    sector.

    I am posting fast vs editing as the discussion is more important than getting everything just right in tone and words. I think your letter helps broaden the discussion in the community. Maybe we can all find a good answer. I may try to write a post with my own lens more clearly in the coming days.

    Thanks,

    Reuben

    • Rick

      Like I said to Andrew Hyde you guys should go self-sufficient with your homes. It makes the country more secure. There is then no way to bring down the grid as there is no grid in that situation.

    • markgelband

      Reuben – Xcel or muni is an either or fallacy, and one the city has ridden with its “evil corporation” nonsense. Also, when comparing Ft. Collins or Colorado Springs to what we are doing, it is important cite some relevant facts. Both of those munis have existed for decades and decades. They both own significant generation. Neither currently has a better mix of renewables than Xcel – especially when you take out Ft. Collins historically owned – federally paid for – hydro. In its muni charter, Colorado Springs guarantees rates lower than those along the front range.

      The collective value of the grid is changing – from both an energy perspective and a security perspective. Micro grid technologies, storage, geothermal, etc. are all pushing to a highly decentralized model. The status quo is not acceptable, but neither is the status quo run by a local government with no experience.

    • bethhartman

      Thanks for your detailed comment, Reuben! You raise many important points especially about the regulatory framework in which IOUs operate, which can certainly impede innovation as discussed above – but also exists in an effort to protect the interests of all customers, hence the current legal dispute between the PUC and Boulder. Without PUC regulation in Boulder, what recourse will we have if rates do increase substantially or the city decides to eliminate net metering and charge a high fixed fee for rooftop solar panel owners to access the grid (just a hypothetical example – don’t necessarily think net metering is the right solution overall anyway)? Rather than thinking of Boulder as a special case that has forced our existing utility to offer a great deal to other cities in the service territory, maybe we should consider the possibility that our existing utility understands that there are fundamental changes happening in the industry right now, making the company willing to negotiate with large groups of customers to give them the energy choices they demand. From recent news about Minneapolis, it certainly looks like our current utility is not the one that is having trouble taking a seat at the table.

  • We should have the public vote on it?

    Oh, we did. How about another vote on it?

    Oh, we did.

    So now it is wrong (or still wrong) but odd in that the “we were voted down twice and are still pissed” group is taking the high ground on “the city will spend too much” so it is wrong.

    $316,771,328 — Total proposed budget. And we are saying the municipalization is a mistake because they want to borrow $4M from the general fund? Am I supposed to be outraged that the city wants to spend ~1% of their yearly budget for a massive new program (that will bring in revenue)?

    I’m not saying it is right or wrong (I think it is massively ambitious project!) but it seems like we are just trying to fear-monger. Not trying to pick a fight here, just see this as extremely odd.

    They now have every household as a customer, for life, for their pretty consistent energy needs (and don’t say that Nest will somehow make my refrigerator use less energy). Is that really a death spiral?
    Wouldn’t the profits from this go back / support the general fund?

    • Rick

      I don’t know anything about Boulder politics but I think you should all switch to self-sufficient homes. You should generate all your own electricity. Brad probably know something about that as he spends time in AK where many people are off the grid year round.

    • So based on this I assume you were willing to accept all those votes against gay marriage that happened around the country?

    • markgelband

      Andrew – that $4M may be slightly more than 1% of the general fund, but the $250M that we will be buying outdated lines and poles for, and the additional $65M that we will have already spent or that we are bonding at interest only to help cover capital expenses and have start up cash are almost 100 percent of the general fund. Those bonds will be guaranteed by general fund dollars. They do not have every household as a customer for life. Households like mine that already net produce more electricity to the grid than we use make a smaller customer base. The smaller base will keep paying higher and higher rates to help pay off debt for outdated lines and poles. The disruptive forces in the retail electric market are why Barclays has downgraded all this debt. Advances in storage, demand management technology, geothermal, PV, etc. are making it easier to cut the cord. In less than the time it will take to municipalize our local utility, my household will be completely off the grid. Is the city going to mandate that I am a customer for life?

    • bethhartman

      Hi Andrew, thanks for joining the discussion! As always, I’m happy to chat about the death spiral and how much energy your refrigerator uses – what kind do you have? And yes, Nest and other smart home/smart grid technologies could alert your fridge to lower energy use during peak demand or while the laundry is running, for example. From Nest’s recent acquisition of Dropcam, Revolv and others, we can see that Google has ambitions far beyond the thermostat – and this is just one big player focused on stealing revenue from the energy industry, along with others I mentioned at Ignite like Comcast and home security companies. Combined with Elon Musk’s fancy combo of solar, storage and electric cars, utilities are definitely at risk of losing a big chunk of their “for life” customers. Dealing with this type of disruption is something that concerns even the most experienced utility executives. Does city council have the experience, time and ability to address such big challenges?

    • bethhartman

      Also, sorry that I forgot to address the voting question in my earlier reply! Yes, we’ve had two votes: one to explore the idea and see if it makes any sense, and the second one to limit the amount of money we spend. I voted for both of those things and obviously would hardly consider that to be a ringing endorsement of actually forming a municipal utility at this point! I hope we have the opportunity for one final vote, once all the legal questions are answered and the real costs are clear, so that citizens can actually decide whether we should go ahead, stay with what we’ve got, or negotiate for a third option such as the clean energy deal that was just announced in Minneapolis.

      • RealityEngineer

        re: “hope we have the opportunity for one final vote”

        I’m guessing you may not know much about Boulder politics if you think there is the slightest chance that will ever happen (if they can stop it). It appears they are trying to up their spending as much as possible to increase the level of “sunk costs” in the project, since even though it isn’t rational, after they have spent a lot of money, many voters are likely to say “we’ve come this far, we need to just go for it rather than having wasted all that money”. They also are rushing the condemnation lawsuits I presume to help prevent anyone from thinking there is still a chance to get a new ballot issue next year to stop this.

        The whole reason for the city’s ballot issue this last time was to pre-empt a ballot issue that would have forced a vote on the final costs (which they duped the public into thinking would “kill the muni”.. rather than in reality it only would have done so if the public wouldn’t approve the final costs).

        They claimed all along that worst case they needed the muni study to continue as a bargaining chip to get a better deal with Xcel, so even those who didn’t want a muni should vote for it. Then they turned around and as expected try to pretend those votes were to definitely do a muni, without ever having a vote on whether people prefer to give up the bargaining chip. There is no sign they think another vote is needed, and I suspect they will do everything possible to avoid it.

        • bethhartman

          I know it is a slim hope, but I suppose I’m an optimist! As a Boulder native, perhaps the politics should have completely cured me of that by now, but so far it’s not working. I know people are primarily emotional creatures so it can sometimes take awhile for a rational argument to get through – this is why I’m so interested in the power of effective communication. I think you’re right that the issue of sunk costs and loss aversion is a powerful psychological motivator, but we may also be able to convey the same message with something like “why would you let the city continue to waste your money forever, just the way they’ve been doing for the last few years” if somehow there is, in fact, a final vote.

      • Politics Debunked

        re: the vote issue, one problem of course is that studies show in general much of the public tends to be poorly informed about political matters (as well as economics) so unfortunately greenwashed propaganda can outweigh reasoned objections. The Camera had an unscientific poll on their website last summer about the muni, and out of a few thousand votes two thirds were against it. I suspect that the emotionally driven muni activists were likely to have done a “get out the vote” push for the poll, but still lost heavily. I suspect that those who read a newspaper website are more likely those better informed about the issues than the average voter so I suspect those who are well informed are opposed to the muni. Unfortunately it isn’t clear even if there were another vote whether the public would be better informed about the issue than they are now to make a different decision.

        • bethhartman

          I must have missed that poll on the Camera website somehow! Do you happen to have a link? That’s definitely interesting that two thirds were against the idea of a municipal utility last summer, despite a likely push to get out the vote from the activists on the other side.

  • Doug

    The money would be better spent on finishing work on Perl street. Feels like it has been torn up for 20 years.
    The city could easily work with Xcel to get smart meters installed and have smart infrastructure. That seemed to be the driving need when last I looked at their plans (a few years ago when I was at Tendril.)
    Do you think they should do something like the Longmont fiber project? I know you did a fiber start-up house in KC. I am hoping to get fiber to my house come Nov 3. Wish me luck and tell my wife it is a good idea.

  • Comment via email from a reader.

    Kudos to you and Beth Hartman for your opinion piece today! Several of us have expressed similar views over the last month, including the letter yesterday, “Don’t give city more money to waste” and my letter of 09/14/14 below, “What’s the limit on municipalization?”

    When voters approved the ballot issue, I don’t think they intended the city to pursue municipalization at any cost. Minneapolis has seemingly reached a practical, sensible deal with Xcel. Boulder, on the other hand, has budgeted for two years of legal fighting in a risk-fraught process spread over a much smaller tax base and has borrowed $4M more in the meantime. Outside of Boulder, Xcel is viewed as a hero in green energy generation. As I said in my last letter to the editor, “I am not willing to give the city a blank check to endlessly spend my money.”

    ————————————–

    What’s the limit on municipalization?

    I was pleased to learn that Councilman George Karakehian went on record against borrowing $4M from Boulder’s general fund to aid in the city’s continuing municipalization effort.

    I personally would like to know the limit that Council is willing to spend on studying municipalization and fighting Xcel Energy, the Public Utilities Commission and other entities before taking the off ramp. It seems, in fact, there is no limit now.

    I do not want to see the city pursue municipalization at any cost. Half the residents do not want municipalization. Those that do must know that the business model of a centralized, monopolistic utility — whether it’s city-run or corporate-run — is an old fashioned approach that is contrary to modern views of distributed power generation.

    Prudent business strategy should dictate that a fixed limit will not be exceeded in pre-municipalization spending. I am not willing to give the city a blank check to endlessly spend my money.

  • Kwindla Hultman Kramer

    Brad, great to read you wading back into politics to highlight questions we all need to be asking about energy policy, everywhere in the US. I completely agree with you that affordable energy is critical to both quality of life and economic growth. How we generate that affordable energy, today, is also of vital concern for the quality of life we leave behind for future generations. In the US, we still get about 40% of our electricity from coal —a slow-motion environmental catastrophe.

    I got a crash course in how misaligned incentives are in the utility industry when we worked with GE Energy at Oblong. In our heavily regulated system, today, all our big utility companies (whether publicly owned or investor owned) generate profits as a narrowly banded return on investment in status quo infrastructure. That system has some real positive effects. We have affordable, reliable electricity everywhere in our country. But, as you point out, this way of thinking is a dead end.

    David Roberts wrote a really good piece last week on how our current utility industry policies are in direct opposition to our social and environmental goals, and how/why technological disruption is coming, and coming fairly soon. http://grist.org/climate-energy/rooftop-solar-is-just-the-beginning-utilities-must-innovate-or-go-extinct/

    • bethhartman

      You’re right, the current utility business model does not provide the proper incentives for achieving our social and environmental goals. I sincerely hope that the regulatory process will adjust quickly enough to allow the business model to adapt. As the Rocky Mountain Institute has explained, maintaining a reliable grid with innovation at the edge is certainly the best outcome (compared with a crumbling network that increasingly fails to meet the needs of lower income groups while others go off the grid). Check out the September 2014 RMI blog about an Airbnb or Uber for the electric grid if you haven’t seen it already: http://blog.rmi.org/blog_2014_09_02_an_airbnb_or_uber_for_the_electricity_grid

      • Kwindla Hultman Kramer

        Beth, thanks for the link to the Rocky Mountain Institute post. I hadn’t seen it — very interesting.

        • bethhartman

          Glad you enjoyed! I think RMI has done some especially insightful and detailed blogs recently.

  • markgelband

    Brad – thank you very much for today’s op-ed. not sure what promises you’ve made about local politics in the past, but it is more important than ever for community leaders to get involved. i know many business people in our community who are afraid to speak up against municipalization. i disagree with the comments regarding scare tactics. your piece provides some balance in the steady stream of marketing propaganda we get from the city and the status quo pablum we get from the muni rah-rah crowd – including the DC.

    Andrew Hyde’s “we voted”… “twice” is a canard as is Mr. Munger’s either/or fallacy of Xcel (status quo) as bogeyman. It is neither intellectually dishonest to have been pro exploring municipalization nor to be against the status quo and against the city’s approach. I will get back to both of their takes below in more depth in adding to your reasons why we should definitively not municipalize our electric utility.

    Brad’s two strongest reasons thought are not some scare tactic about relative rates; rather, the impending collapse of the retail electric market and the risk reward proposition based on the city’s own original metrics and purported models. When we originally voted on the muni, the city said it would use three basic metrics in determining if this would be a good approach: renewables, rates and reliability. Those metrics have changed or been grossly distorted throughout the process; however, they are the best starting point for an honest discussion.

    I recently met with Boulder Energy Czar, Heather Bailey, to discuss these issues and the horrible lack of transparency and wildly inaccurate claims by the city – such as “we currently get one of the most carbon intensive energy supplies in the nation.” Let’s start with renewables because it is clear that our community wants to green our energy supply, decrease our reliance on fossil fuels and reduce carbon emissions. These are all wonderful goals. Is a city muni the best way to get there?

    Renewables
    To be very clear: we will not get 1kWh of local or renewable energy when we go over $250,000,000 in debt to buy a bunch of outdated lines, poles and substations for the rights to buy energy on the open market and resell it at a profit to the people of Boulder. I asked Ms. Bailey directly about this and she conceded this as fact. She also said that the community was more interested in “local control” than in a localized, distributed energy supply. The city’s strategy will not reduce carbon on the grid one bit, and in the general scale of the broader grid, even if we we’re to achieve 50% renewables for our percent of energy use, our reduction will not compare to the incremental dents Xcel is already making.

    Our city models rely on a near endless supply of cheap, tracked natural gas. There is serious debate in the scientific community about whether the methane off-gassing in the production of natural gas causes more greenhouse emissions than the burning of coal. This is not settled science. Based on the 19th century grid system we will be buying though, the only way to add significant amounts of solar and wind to this system is to burn natural gas as a base load. Close to 70% of all natural gas in the US is fracked. Anyone with serious questions about fracking must be skeptical of the city’s models.

    Not 1kWh of local or renewable generation, not 1kWh of any generation, a model built on fracked natural gas, and in order to just buy the lines and poles and offset stranded costs, our plan is to buy Xcel’s energy supply for at least five years after litigation. How does this get us closer to our renewables, carbon reduction goals…

    more coming. sorry. my son needs to do some homework.

  • markgelband

    Rates
    The only way the city could make its models produce rates that meet our charter language – language which only hypothetically guarantees rates comparable to Xcel’s on day 1 – was to not only fudge numbers by buying Xcel’s energy for years, but also to get additional interest only debt to help pay off the debt of buying an antiquated grid. This is tantamount to leveraging to get into an unaffordable home. We will be house poor if we buy the infrastructure under the city’s models.

    Worse yet, Ms. Bailey owned the notion that the city has no intention of keeping rates comparable with Xcel’s. They intend to create a strict demand management energy budget similar to what we have used for our water utility. Looking at our water utility is very telling as well. As part of the 18% increase in our city budget, we are raising our water rates for the 15th time in 16 years – 75%, 25% and 5% for wastewater, storm water and water rates respectively. My family’s 2000 gallons a month has gone from less than $18 per month to what will be over $60 a month with the latest increase. This says nothing of what the city projects will be up to $1000 a month increases for some restaurants and small businesses.

    Who pays for this? These types of increases are the most regressive taxes in our community, consistently hurting those least able to afford them. It is laughable to hear the same people yammer on about affordable housing. And remember this is for a virtually free resource to the city – senior water rights.

    While we all know the economics of purchasing power – i.e. the power of bulk purchasing, the city of boulder will have a much smaller purchasing base and pay higher rates for us on the wholesale market. Remember, we will own nearly no generation. What has happened with the water utility is that the city implored the community to conserve. Our community has conserved – we buy less water; therefore, our rates have gone up because we are conserving more. This will be proportionally more significant when we are paying debt guaranteed by the general fund.

    Mr. Feld points out that Barclays has downgraded all debt in the retail electric market because of the disruptive technologies on the horizon. Real green revolutionaries like myself are already making the move to sever our lives from the grid, and we’re doing it for far less than investment than it will cost per person of Boulder to buy lines and poles. What happens when more and more of the city’s small customer base gets less and less of its energy from the city? The relatively less affluent people left in our community, the businesses struggling or with large power demands will start paying more. Either that or more and more money will come from the general fund to pay off the outdated grid.

    The $13+ million we’ve already spent on 11 law firms, another dozen energy firms, and a bloated staff working on the muni that already costs us over $3M per year could have been paving the way to a much greener energy future. The fact is we do not need the lines and poles to make innovative strides.

    Reliability

    Xcel has been a reliable carrier. They showed as much during the past few years of flood and fires. Perfect? No. But what experience do we have with the city? Our water utility again points to what we can expect. Not a month goes by without another water main breaking. This is only what we hear about in the paper. Fact is our water utility infrastructure has been neglected for so long that the endless string of water rate increases have gone to pay for woefully deferred maintenance. Those of us who have lived in Boulder for the past two decades plus have seen how horribly the city maintains its core infrastructure – roads, parks, etc.

    What is clear is that looking at the city’s own metrics the muni fails on all counts.

    • bethhartman

      Thank you very much for your detailed comment – I agree with your points. Rates comparable to current electric bills after “day one” are unlikely given not only our community’s unique situation but also the state of the industry as a whole, and it will also be difficult to improve upon reliability. I would also add that our current energy provider seems quite willing to work with municipal partners on achieving carbon reduction goals, as they just did in Minneapolis – I believe you get into this topic further in your comment below but here is a link for more information on that deal: http://www.ci.minneapolis.mn.us/news/WCMS1P-132599

      • RealityEngineer

        The “offramp” regarding rates was a scam since they only need to *estimate* they could charge comparable rates day one (not day 2), but aside from estimates not necessarily matching reality, they never have to do it, they can decide “nah, we prefer this more expensive approach”. In addition as Mark noted all they do is estimate they borrow money to subsidize day 1 rates, so no matter how much the project costs they could always have merely estimated they borrow enough to have low rates day 1 (or even free if they wanted to claim that), then jack up the rates later.

        Part of the problem is that they hold onto a myth there is a huge pot of profit that won’t be there if the city does this, so they can do it cost effectively. (and their claimed Xcel profit figures were off, almost half of it was Boulder’s share of Xcels’ energy trading business). Yet all the for profit companies (including Xcel) they buy power from will take profit, as will the private company they say they may hire to handle operations. The only part of this that won’t have a profit would be the parts the city directly engages in, for which it also wont’ have economies of scale and will need to engage in a learning curve. In the unlikely event there were any lower costs from the city doing this, they are counterbalanced by huge bond repayment costs for decades. The idea they can do this more cost effectively than the existing provider while adding on a huge debt repayment load strains credulity.

        • bethhartman

          I agree, especially with your concluding sentence that “the idea that they can do this more cost effectively than the existing provider while adding on a huge debt repayment load strains credulity.” This is especially difficult to imagine given the fact that even well established investor owned utilities are under pressure to maintain their existing revenues due to disruptive forces, the Barclays downgrade, etc. There is certainly not a huge pot of profit waiting at the end of this rainbow! The language about maintaining existing rates “on day one” should have been a red flag to all citizens that this was not a great investment, but unfortunately such details are easily overlooked.

  • steve stewart

    Brad & Beth — thanks for your leadership on this. I could not agree more. I like the land line telephone co. metaphor at the end of your piece— perfect analog to really understand the naivete of this city effort. I will be stealing that analog for my next neighborhood brew pub argument (-;

    • bethhartman

      Thank you Steve – glad you enjoyed the land line telephone analogy! I think it is an apt comparison and as the link in the article shows, one that had been made before by Greentech Media and others.

  • williamhertling

    I’m not familiar with Boulder’s situation, but I was a little surprised to see you oppose it. Circa 2003, when I was in the green MBA program at Pinchot, we studied some case studies on municipalization of energy, and it seemed fairly positive then. Local control seemed like it favored more sustainable decisions and local generation, and over the long run was more advantageous to the community.

    The electricity industry is in flux, but it seems unlikely that most individuals will be able to afford to be disconnected from the grid (e.g. self-sufficient electricity production) within the next twenty years.

    So with local control, doesn’t it seem like you can influence things more over the next 1 to 20 years?

    • bethhartman

      Thank you for your comments William! Local control can be positive especially for municipal utilities that were formed several decades ago when the industry was more stable – I am not sure which case studies you looked at in grad school but it can be hard to say if lessons learned from an organization formed several decades ago would apply in the same way today, especially given the many new disruptive forces. You are right that not everyone will go off the grid, but overall declining sales from those that do combined with increased efficiency, new entrants in smart home technology, and more mean that utilities will have to maintain an aging grid with falling revenues. This is a big challenge for even those who have been doing it for over 100 years and will be likely even more challenging for new entrants!

  • From an email I received today from a Boulder citizen.

    I agree with you the the Electrical Utility direction of the City is likely a waste.

    How city funds are being spent or should be spent is of great concern. Funds should be spent on items that need rehabilitation and not on chasing after functions that are working quite well at this time, such as Xcel.

    Many of the things that need desperate fixing are not known to the general public and in some cases, not even to Council.

    For example, many people are unaware that:

    The main 42″ diameter sanitary sewer line which is 7 miles long running to the wastewater treatment plant has recently been inspected for the first time in 50 years. The inspection result indicated that it could collapse and send 12 million gallons of sewage every day into Boulder Creek. Council is casually thinking it’s okay to fix this sometime between 2015 and 2020. It really is an emergency.

    Much of the neighborhood flooding happened because some creeks are so full of trees (really full) that the creeks could not convey a reasonable amount of water. The city has a strong attitude that they want trees in the stream bed, in the water.

    When the creeks overflowed, the water ran into the sanitary sewers, thereby, backing up the sanitary sewers all the way from the treatment plant into homes.

    These are just a few items that you might find interesting because they relate to your comments that there are better ways to spend the enormous amount of money that is going toward Electrical Municipalization.

    It would seem that a sewer system that is unreliable is far more important to be working on now, rather than trying to enhance a perfectly working Xcel system.

    If you are interested, there are many more critical projects that need significant attention.

    An unofficial estimate of the cost to repair most of the major infrastructure problems in Boulder is $500 million.

  • bethhartman

    Thank you to everyone for such thoughtful and respectful discussion on this complex and important topic! I look forward to responding to as many of you as I can directly as soon as possible. Many points being raised about disruptive forces in the industry, system acquisition costs, and more show that our community is indeed full of informed, critical thinkers. Again, thanks to everyone for your comments and I look forward to continuing the conversation!

    • markgelband

      Thank you so much Beth for putting yourself out there.

  • David DuPont

    Props to both of you, Brad and Beth. Boulder has far more important issues to address than energy municipalization. If the city were really to focus on what would make a difference in the lives of its residents, the topic would not even be on the table.

  • If it is anything like anything Denver and surrounds do (think the RTD boondoggle) it will be a patronage dump and expensive and it will cost the citizens much more than anticipated. Without cost controls government does not do much well although we certainly need it for some things.

  • RealityEngineer

    I noticed this post a few days late, but the major thing that is being ignored in the discussion is that around the world the trend is to break power generation monopolies so you can buy power from any company you want, including usually 100%renewable options. 17 other states have already broken their monopolies, as have many other countries, Europe takes it for granted there is no need for power generation to be a monopoly. The muni activists point to Germany as an example of renewable energy use, but neglect to tell anyone that progressive green activists there credit breaking the monopoly as a crucial factor in the rise of distributed green power production. Former US Energy Secretary Pena had an oped in the Denver Post pushing the idea of energy competition as part of his role as co-chair of a national organization pushing for that (they seem to be focused on larger states first, but it’ll happen here). The problem is that in Texas for example when they broke their power generation monopoly, they allowed munis to keep theirs, which almost all did, despite hundreds of choices people would otherwise have access to. The number of munis peaked almost a century ago, it is an obsolete approach, a conservatively nostalgic retreat to a romanticized view of the past.

    The city is proposing to spend $hundreds of millions for poles&lines that generate no electricity, it is a greenwashed scam. Check the various articles&opeds about it on the Daily Camera for myriad comments from local residents debunking the nonsense the muni advocates have been pushing (unfortunately many fear backlash from those who disagree if their views were expressed publicly. They fear impact on their work&social life if they write opeds using their own name so there are fewer published pieces addressing the issue). Even if the city were going to spend money on green energy (which it shouldn’t since once the monopoly were broken private investors would) it could have directly invested in generation as a lesser evil than a muni (it laready has a tiny bit of hydro since a muni isn’t needed to generate power).

    • bethhartman

      Certainly true that the major trend around the world is to break the power generation monopoly – see the piece from RMI that I referenced in a comment below about an Airbnb or Uber for the electric grid: http://blog.rmi.org/blog_2014_09_02_an_airbnb_or_uber_for_the_electricity_grid Perhaps deregulation of this sector was attempted too soon before (with Enron etc) but now the industry is ready?

      • RealityEngineer

        This group is one source of info about energy competition, which Pena used to co-chair (I don’t know if he still does):
        http://www.competecoalition.com/

        re: Enron, and the California mess it was associated with. California wasn’t a serious attempt at deregulation, it was merely a change in regulation, as these articles note:

        http://www.cato.org/pub_display.php?pub_id=4398


        “California’s Troubles Not Caused by Deregulation

        But the California power crisis is not an example of what happens when
        businessmen are running important industries. It’s a story of what
        happens when politicians try to manage competition and impose their
        vision of a market…

        If “deregulation” means less – not more – political control over an
        industry, then the California electricity industry has not been
        “deregulated.”””

        http://www.cato.org/pub_display.php?pub_id=4277


        “And everyone is wrong to listen to Californians whine about electricity
        deregulation. There never was any deregulation. The California Public
        Utilities Commission merely changed its regulations, which apparently
        weren’t stupid enough to meet Golden State standards.” ”

        http://www.cato.org/pubs/regulation/regv30n2/v30n2-inreview.pdf
        “In their co-written chapter “Can Electric Restructuring Survive?” Kleit and
        his Penn State colleague Timothy Considine compare the disastrously political
        “restructuring” of the electricity industry in California in the late 1990s with
        the far more successful experience in
        Pennsylvania.

      • RealityEngineer

        Also FYI here is the oped Pena had in the Denver Post on the topic a couple of years ago, co-authored by the CEO of a Boulder startup, Adrian Tuck of Tendril, I don’t know if he may be better informed on these issues since he seems to be in an energy related business (I’m not in that field, just a concerned resident who researches things):

        http://www.denverpost.com/Opinion/ci_20860350/Guest-Commentary:-Update-Colorados-electricity-market

        “Update Colorado’s electricity market”

  • RealityEngineer

    It is unfortunate that the internet startup world has ignored the muni-internet proposal that is on the ballot this time, perhaps thinking it is more innocuous than the power muni, or perhaps even misguidedly thinking it is about “fast internet” (rather than likely slowing progress). It is about political control just as the power muni is about political power rather than green power. It is just as misguided even if some fall prey to wishful thinking that it’ll be different. I’d suggest reading the comments posted on the story about 2C regarding giving the city broadband authority:

    http://www.dailycamera.com/news/boulder/ci_26750152/boulder-issue-2c-gives-city-broadband-authority

    • bethhartman

      Thanks for connecting these two issues, as I do think there are important parallels! Given my recent discussions with folks at Zayo and my past work at Silicon Flatirons I’m not sure they are exactly the same – with electricity, the disruption is primarily happening because people can go off the grid or increasingly choose where they purchase electrons through the grid, vs. data which was more disrupted by wireless technology but does not allow going “off the grid” because the internet is by definition a network. However, I do agree that having the city in charge of the internet would likely not work out well for the community, and competition between private providers would certainly benefit all customers.

  • bethhartman

    Hi everyone, just wanted to make sure you all saw the response that the city published today: http://www.dailycamera.com/guest-opinions/ci_26946341/brautigam-bailey-municipalization-more-opportunity-than-risk

  • trchat72

    This says nothing of what the city projects will be up to $1000 a month increases for some restaurants and sohbet odaları
    small businesses. (I’m not in that field, just a concerned resident who researches things):