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Municipalization Update: Where Are We At?

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This page provides detailed information on the status of municipalization after the September 2017 Colorado Public Utilities Commission (PUC) decision. For general information on the city's municipalization effort, please visit the general FAQ page.

PUC hearing and key outcomes

What was the PUC hearing in August all about? And what did the commissioners say?

In this proceeding, the city sought the commission's approval to transfer assets from Xcel Energy. The commission’s ruling is most easily understood by separately considering assets inside substations from assets outside of substations.

Assets outside substations

Utility wires, pole and transformers The assets outside of substations include the “poles and wires.” These are the above-ground power poles generally located in street rights-of-way, but sometimes on other property. The wires are either the wires located on the power poles or, in some areas of town, the wires located underground. There are other assets located outside of substations, as well. The decision issued by the PUC on Sept.14, 2017 approved the transfer of these assets once the city has filed three documents with the PUC, which it must do by Dec. 13, 2017. 

Although the PUC approved the transfer of these assets, there are some assets that Xcel will continue to own within the city limits to serve customers that will remain with Xcel. Some of these customers are in areas called "enclaves."

Enclaves fall within city limits and are surrounded by the city but are not subject to city jurisdiction. An enclave could be a subdivision, a shopping area, or even a single house. The PUC ruled in an earlier decision that the city cannot serve customers outside of the city, including those in enclaves. These customers must continue to be served by Xcel. The city developed a separation plan that will allow Xcel to continue to serve these customers. This means that Xcel will need to retain poles and wires inside the city limits that are necessary to serve these customers, as well as other customers located outside the city.

Documents ordered by the commission

The first document the city must file with the PUC by Dec. 13 is an agreement with Xcel that will provide Xcel with property rights necessary to serve its customers after the city has begun to operate its electric utility.

The second document is a revised list of assets outside substations that includes any real property the city will seek to acquire, as well as a revised list of poles. The PUC did not order Xcel to allow the city to place its wires on Xcel poles, that is, to jointly use those poles, but it indicated it would permit limited joint use of these poles if Xcel agrees. As a result, the city will be removing those poles from the list of assets it is seeking to acquire. Boulder will also remove poles identified as being transmission poles or poles owned by CenturyLink.  The fact that only a very limited number of poles will be jointly used means that the city will be undergrounding power lines rather than placing them on existing poles. This decision impacts roughly 10 percent of the poles in the city. This increases the upfront cost of municipalization by increasing the costs to separate the system.

The third document is an agreement (or agreements) with Xcel regarding how the city will pay Xcel for the work it will do to construct new facilities or reconfigure existing facilities it will continue to own. This includes the cost for Xcel's engineers to work with the city to develop a plan for how the two systems will be separated and detailed design drawings and specifications for the separation. The agreement should also explain who will be responsible for repair and replacement of existing facilities until the Boulder electric utility begins operations and how equipment failure or damage will be handled.

Once these three documents are submitted, other parties may request a hearing on these filings within 30 days. If a hearing is requested, the matter will be heard by an administrative law judge, who will make a recommendation to the commission. If no party requests a hearing, the commission will issue a decision granting final approval of the transfer of the facilities located outside of substations. The city may then proceed with acquiring the facilities located outside of substations, including the poles and wires.

Assets inside substations

Substation Substations are places where local distribution system links to the regional transmission system. The assets located inside substations include the transformers necessary to "step-down" the higher transmission level power received from plants that generate power (here it is 115 kilovolts or 230 kilovolts) to lower levels that can then be transmitted safely to homes and businesses. (Other transformers outside of substations, step down power even further to the 120/240V levels used in most homes and businesses.)  In addition to transformers, substations contain additional equipment, like switches, meters and grounding equipment. 

To separate the city's electric utility from the Xcel electric utility, the six substations that currently provide service to customers in the city will each need some degree of modification. In its decision, the PUC determined that the details of how substations will be configured should be decided through the network integration transmission service (NITS) process. This process is usually used when a utility wants to connect to the transmission grid. That process is within the jurisdiction of the Federal Energy Regulatory Commission, a federal agency that controls electric transmission service in the United States. The city will submit a NITS application to Xcel, which is the transmission provider in this area. The city hopes to provide a NITS application to Xcel's transmission team in the next three months.

Construction

Utility contractors underground electric lines The PUC regulates investor-owned utilities in Colorado, including Xcel. However, it does not regulate municipal utilities that only serve customers within their boundaries. To ensure that the PUC would remain in charge of the electric grid in Boulder until separation, the city proposed that Xcel perform all the construction necessary to separate the system. The PUC rejected this approach and decided instead that Xcel should construct any new facilities that it will own when the city electric utility begins operations (what is referred to as the Cut-Over Date) and the city should construct any new facilities it will own at the Cut-Over Date.

Reimbursement for construction costs

As part of the effort to ensure the PUC would stay involved in the separation, the city proposed that Xcel construct and own all new facilities and pay for that construction up front.  The city would then reimburse Xcel at the Cut-Over Date.  The PUC disagreed and ordered the city to pay its own costs and to reimburse Xcel monthly for the costs it incurs for both engineering and construction.

Phasing

The city had proposed to return to the commission in three future phases:

  1. To seek approval of the detailed design drawings and specifications;
  2. To seek approval of the transfer of billing and other Xcel-owned information and to share information regarding the city's plans for operations; and
  3. To seek final approval of the asset transfer after the condemnation case is over, the separation is complete, and the city has paid Xcel for both the acquisition of the assets and for its work to separate the systems.

The commission did not approve this phasing approach.

IBM

IBM had requested that the commission not allow the new city electric utility to serve it. Barring that, it proposed that the city reapply to serve IBM after the city had five years of experience operating an electric utility. The commission denied IBM's request as premature, finding that there was not sufficient evidence to find that the city was unwilling or unable to serve the company, but did note that IBM could return to the commission later with evidence that it believes demonstrates that Boulder is unable to provide adequate service to IBM.

Service until the cut-over date

The city requested, and the PUC agreed, that Xcel should continue to own and operate the system until the Boulder electric utility begins operating. 

Good faith cooperation

Finally, the commission directed Xcel to work in good faith with Boulder to assist the city in satisfying the three conditions placed on the transfer of assets outside substations and to work with the city to resolve issues in the NITS process regarding the six substations.

 

Cost implications of the order

What impact does the PUC order have on the city's cost analysis?

The city is analyzing the impact of the PUC order.

There are several areas of cost that contribute to the total.

  1. Substation Costs: Costs to develop alternative substation designs and possibly build new substations. Based on the ruling, these costs will be higher.
  2. Distribution Separation: Costs to physically separate Xcel’s system from Boulder’s system so that Boulder will serve only Boulder customers and Xcel will serve only its remaining customers. Based on the ruling, these costs will be higher.
  3. Acquisition Costs: Costs to acquire the parts of Xcel’s system necessary to own and operate a city electric utility. These costs are expected to be lower than originally forecasted because Boulder would seek to acquire fewer assets; however, the city plans to continue to take a conservative approach for modeling purposes by using the $150 million estimate Xcel provided previously. The charter prohibits the city from moving forward if the cost of acquisition exceeds $214 million. Prior to acquiring the assets, the city will obtain an appraisal prepared by an independent expert. The ultimate acquisition cost will be determined either through an agreement with Xcel or through a judicial condemnation proceeding.
  4. Legal Process Costs: Costs to litigate at the PUC, negotiate with Xcel and move through the NITS process. The city cannot predict how long particular steps will take; however, the commission’s decision not to require additional phases of review could shorten the timeline. In addition, at the hearing, Xcel committed to expedite the NITS application process to 60 to 90 days. The timeline and complexity of legal processes has monetary implications. In its Sept. 5 memo, the city estimated that legal costs over the next three years, including the NITS application and the condemnation case, will total $5 million.

What is the estimated cost of separation now?

The city is estimating that the cost of separation, based on the direction in the order, could reach $110 million.

Has the city plugged its best estimates into its financial modeling resources to determine how this information impacts the bottom line?

The city has run its model to test the increase from $77 million in separation costs to $110 million; however, staff has not made any adjustments to account for cost savings that could be realized because of assets the city would not acquire as a result of the changes in the separation plan. The latest version of the modeling is available at https://bouldercolorado.gov/energy-future/financial-forecasting-tool .

Does the requirement that the city pay construction costs up front increase the costs to the city?

The commission’s decision about financing separation costs does not in and of itself make this project more expensive. Under the most recent PUC proposal by the city, Xcel would have “fronted” the costs and the city would have paid them back in their entirety. The city suggested this approach based on feedback that the PUC might wish to maintain jurisdiction over the process until the city’s utility began operation; however, the PUC determined that the city should be permitted to pay costs as they’re incurred. This is consistent with an earlier proposal the city made to the PUC and is preferable to the city because it could reduce financing costs. 

Other items of note ​

NITS process

NITS stands for the Network Integration Transmission Service and is used by utilities and power generators. As a transmission provider, Xcel must have an Open Access Transmission Tariff (OATT), approved by FERC (the Federal Energy Regulatory Commission), so that any utility, including the city, can apply for connection to Xcel’s transmission system. The transmission provider is required to follow the same OATT for all applicants and cannot discriminate. Violations are handled by FERC. Xcel’s OATT is available online . It describes the procedures for a NITS application, the requirements of the applying utility, and has standard agreements for operation of the substation(s) where connections occur. FERC’s decision about the NITS application must include the configuration for the transmission side of the substation. It often has the configuration for the distribution side too, but that is not always required.

Sharing poles

The city's application to the PUC included a proposal for the city and Xcel to share existing power poles for the purposes of attaching both city and Xcel electric lines. However, Xcel objected to this proposal, and the PUC decided it did not have the jurisdiction to require Xcel to share poles. Therefore, the city has modified the separation plan to underground all new electric lines required to separate the electric systems. This increases the separation construction cost, and these costs are included in the $110 million cost estimate.

Status of discussions with Xcel

The city and Xcel have begun these discussions. Both sides are mindful of the 90-day deadline set by the commission and are approaching this part of the process in good faith. The city would characterize the first couple of conversations as useful and productive. It would be inappropriate for either side to discuss ongoing negotiations in any more detail.

Where would Boulder's power supply come from?

If completed, Boulder’s municipal electric utility would have several power supply options.

  1. Purchase power from Xcel Energy on the wholesale market. The city has considered this option for a short period of time after the municipal utility begins operation to help smooth the transition from Xcel. Purchasing power from Xcel would not get us to 100 percent renewable electricity by 2030, so the city is considering “stepping off” Xcel power gradually and purchasing renewable power on the market from other providers.
  2. Purchase renewable power on the wholesale market. One of the potential benefits of municipalization is gaining access to the wholesale power market. As its own utility, Boulder could choose where its power comes from. There are dozens of renewable (wind and solar) providers that Boulder could purchase power from, moving the community closer to its 100 percent renewable electricity goal.
  3. Support more local distributed generation. Boulder is also committed to achieving 100 MW of local renewable generation by 2030. To do this, we’d need to quadruple the total amount of rooftop solar we have on our roofs today. Boulder’s utility would add increasing amounts of local solar to its energy mix. Coupled with possible battery storage, local solar could play an important role in the municipal utility’s power mix.

Ultimately, the municipal electric utility would likely use all three of these strategies. They will be evaluated on cost, reliability and how quickly we can get to 100 percent renewable electricity by 2030.

What is the new timeline for municipalization?

Taking into account the September 2017 PUC ruling, the city’s electric utility could be operational by 2022 or 2023. Let’s break that down:

Year 2018 2019 2020 2021 2022 2023
Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Substation Details (NITS Process)

                                               

Detailed Engineering with Xcel Energy

                                               

Construction Bid Process

                                               

Asset Acquisition/ Condemnation

                                               

Go/ No-go Decision

                                               

Separation Construction

                                               

Transition Period

                                               

Cut-over/ start-up

                                               

 


Contact Us

Address Phone Email Executive Director

1101 Arapahoe Ave.

Boulder, CO 80302

303-441-3274

[email protected]

Heather Bailey

[email protected]

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