On New Year's Day, the city of Boulder, Colo., started down a road toward energy independence by decoupling with their electrical utility, Xcel Energy. After three years of negotiations for more green power failed, Boulder let its 20-year franchise agreement with Xcel expire at the end of 2010.
When voters in the environmentally-minded city approved Proposition 2B last election by almost 70 percent, instating a tax to replace Xcel's $4.1 million annual kickback to the city, Boulder's financial freedom from the utility was secured.
Boulder now stands at an energy crossroads, one that other Western communities are facing as they demand affordable, locally controlled clean energy from profit-driven, coal hungry utilities.
"I think it sends a very important message that the Boulder community is not going to continue with the status quo," said Jonathan Koehn, regional sustainability coordinator for Boulder.
The city must now decide whether to hash out a new agreement with Xcel that provides more local control over their energy mix, or get into the electricity business themselves -- a potentially risky move.
To take full control of its power supply, Boulder must become its own electrical municipality, essentially taking out the middleman (Xcel) between electricity generation (coal plants, wind farms, solar arrays) and the light switch. But municipalization is no easy task. It involves acquiring the poles and wires for electricity distribution from Xcel and figuring out how to run an electric utility. Drawn-out legal issues are likely as the city takes a sizable customer base out from under Xcel. Despite these complications, Boulder has much to gain by taking the energy reins.
“It's a very cash-positive and lucrative business for a city to municipalize once you are there,” said Koehn. “Because you are not building in a profit margin, so all of the money stays local.”
Boulder residents paid $90 million in energy bills to Xcel Energy last year. By keeping that cash local, the city could invest in local solar and wind generation (HCN 7/2/09, "Let's Get Small") while keeping rates affordable. Boulder's attempts at reducing energy consumption on the demand side have had mixed results despite enacting the nation's first carbon tax (The Range 2/22/10, "Rolling Boulder up the mountain"). Now they are attacking greenhouse emissions from the energy supply side of the equation.
Communities in California and around the country have opted for a middle path to taking their power back. That path is a policy called community choice aggregation (CCA), which allows communities to purchase energy from where they choose while letting the utility manage the power lines. Marin County, Calif., most recently reclaimed control of their energy sources from Pacific Gas and Electric (PG&E) and now supplies 25 percent renewable energy without increasing electricity rates. Sonoma County, Calif., is undertaking an ambitious plan to localize 67 percent of their electricity generation in the next five years. Similar localization efforts have succeeded in Cape Cod, Mass., and Toledo, Ohio, and CCA laws recently passed in Texas, Illinois and Virginia.
Unfortunately for Boulder, this middle path is not currently allowed under Colorado state law, nor any other Western state except California, says Paul Fenn, an energy consultant who developed the CCA policy in the 1990s. This inability to choose the CCA option could set the city up for a potential showdown with Xcel should it decide to become its own utility.
"Municipalization is gloves off," said Fenn at a presentation in Boulder in November. "(It) will harm Xcel" by taking away that $90 million in yearly energy bills. "CCA is a little bit softer," he explained. "It doesn't quite take [the utility] out at the knees the way municipalization does. "
Boulder would prefer to work with Xcel, said Koehn, but only if their clean energy needs are met. The city is continuing talks with Xcel and gathering data to help determine what to put on the ballot this November, when voters could decide Boulder's energy future.
Paul Fenn noted the significance of the city's position.
"This would make Boulder a U.S. leader and on the list of world leaders if they go ahead with localization," he said.
"To have a town that has, arguably, critical mass and public support for real movement on green power and localization - That almost never happens," Fenn explained.
Nathan Rice is an HCN Intern
Boulder wind turbine photo courtesy Mike Linenberger, NREL