The muni’s time has passed

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Sometimes conflicts go on for so long that people forget how they started.

Take the fight over whether Boulder should ditch Xcel energy as its electricity provider and form a municipal electric utility (aka the muni).

The roots of the conflict go back to 2002. That was the year the City Council passed a resolution calling on Boulder to reduce its carbon dioxide emissions to a level 7 percent below its 1990 emissions by 2012. This was the same target set for the world by the Kyoto climate treaty, which was adopted in late 1997.

The Council’s action grew out of a decision by Bill Clinton not to send the Kyoto treaty to the Senate for ratification. He had concluded the treaty would be dead on arrival on Capitol Hill, because it contained a clause exempting China and India from complying with it. He was right. The Senate subsequently passed a resolution opposing the treaty anyway. The vote was 95-0; in 2001 the Bush Administration took a similar position.

This prompted American environmentalists to lobby city and county governments to pledge to reduce their local CO2 emissions to the Kyoto treaty’s target (7 percent below 1990 emissions by 2012). Eventually more than 900 did.

Four years later it dawned on the Boulder City Council that it would take more than resolutions to reduce the City’s greenhouse gas emissions.

By 2006 it was clear Boulder’s CO2 emissions were going up, not down. Boulder would have to reduce its annual CO2 output by about 25 percent to get Kyoto compliant.

So in 2006 the Council asked voters to approve a small excise tax on electricity — which initially added about $10 a year on the typical residential utility bill and $75 a year to the average business utility bill — to fund getting Boulder Kyoto compliant. The tax, which was to expire after five years, was expected to raise around $8 million. It passed.

Most of the money was spent on things like energy audits, weatherization, public workshops, information distribution, energy efficient light bulb giveaways and additional city employees to nag everyone to do the right thing.

It didn’t work. By 2011 it was clear Boulder still wouldn’t meet its Kyoto target. Neither would the other 900-plus local governments that had drunk the Kyoto Kool-Aid. (The two exceptions were San Francisco and Seattle, which historically got most of their electricity from hydroelectric power, and in San Francisco’s case from geothermal).

So the City Council decided to double down on fighting global warming by asking the voters to double the tax and extend it for five more years.

More important, it also asked them to approve using some or all of the revenues to “explore” forming a municipal utility that would displace Xcel and supply the city with non-fossil-fuel-generated electric power.

And since the Kyoto treaty was about to become irrelevant, the Council adopted a new climate action goal — getting 100 percent of Boulder’s electricity from non-fossil-fuel sources.

The proposal narrowly passed.

Xcel was not amused. Litigation ensued.

And most of the tax revenue for “exploration” was spent on lawyers and legal defense.

According to Boulder City Councilman Bob Yates, $11.8 million from the 2011 tax has been used “to pay lawyers, consultants and newly-hired City staff dedicated to the muni litigation” — and it still wasn’t enough to pay the City’s muni-related legal bills. The City has spent $13.9 million on them, the extra $2.1 million coming out of the City’s general fund.

Also according to Yates, the City staff estimates that over the next three years Boulder will need another $16.5 million to continue muni-related lawsuits.

The tax approved in 2011 expires at the end of the year. So the City is asking the voters to extend it again starting in 2018 — and to triple it. (The proposal will appear on Boulder ballots as Issue 2L.)

In other words what started out as a relatively meaningless exercise in virtue signaling over the Kyoto treaty is morphing into a $30 million legal money pit, with no guarantee that that City will prevail.

And if it does prevail, then the real expenses will begin. These will include more than $300 million the City will have to pay Xcel for its distribution system in Boulder and for past capital investments it made in order to serve Boulder. These would likely cost the municipal utility’s customers $15 to $20 million a year in principal and interest payments “for decades,” according to Yates.

And then there would be the costs of buying, installing and maintaining dozens of wind turbines and hundreds of acres of solar cells. Or alternatively, buying renewable energy from for-profit private sector suppliers – including Xcel.

The reasons for Boulder having a municipal utility have been overtaken by events. The original argument for it was that Boulder couldn’t meet its self-imposed Kyoto “obligations” if it kept getting electricity from Xcel. But the Kyoto treaty has expired, and Xcel is replacing coal with natural gas (which produces half the CO2) and is adding several times more renewable generating capacity to its system every year than is necessary to supply all of Boulder’s electricity needs.

The muni is an idea whose time has passed.

If Boulder has its heart set on spending hundreds of millions of dollars on “doing something” about global warming, spend it on something that can make a significant difference locally — spend it on adapting to a changing climate, which is already baked in no matter what Boulder tries to do about it.

And if it wants to “do something” about its greenhouse gas emissions, it might start by capping its growth.

This opinion column does not necessarily reflect the views of Boulder Weekly.

  • westernwoman

    Bob Yates and Paul Danish both conveniently ignore the amount we ALREADY pay for Xcel’s interest on debt. Let’s see, Yates claims that the debt on public power will be $15-$20 million for ‘decades.'” Three decades to be precise. Then we will own the system, and we will have paid off OUR debt. With Xcel on the other hand, we will pay their debts in perpetuity because they are constantly borrowing, and have a guaranteed rate of return on their investments.

    If you compare the interest Boulder would pay on bonds for a Boulder muni, with interest Boulder already pays for PSCo, plus the interest Boulder would pay on PSCo’s proposed $6.4 billion capital investment – Boulder would pay much more by staying with PSCo. About $4.6 million more every year.

    Looking at PSCo’s 10-K filing with the federal SEC for the year ending in December, 2016, PSCo shows existing long-term debt of $4,210,936,000. Assuming this debt bears an annual yield of 4.5% (some debt is issued for more, some for less) PSCo pays annual interest of $189,492,000.

    Boulder’s share (4%) of this is about $7,580,000 per year.

    Then there is Xcel’s proposed capital investment of $6,400,000,000. If this is bonded at 4.5%, the yearly interest would be $288,000,000. Boulder’s share of this is $11,520,000.

    The sum of Boulder’s interest payments on PSCo existing debt and proposed debt would total $19,100,000 every year – at MINIMUM.

    In contrast, the interest Boulder would pay for the muni is: bonded debt of $322,000,000 (City’s estimate) at 4.5% yield, is $14,490,000 annually.

    The difference is $4,610,000. This completely ignores the 9% rate of return on Xcel’s equity investments and the ~$30 million that Xcel takes out of Boulder every year.

    All of this explains why publicly owned electric utilities – across the country – have lower rates. BTW, they also have better reliability (because they invest the community’s money in burying their wires) and better customer satisfaction.

  • westernwoman

    I should add one thing. I think that Bob Yates is incredibly dishonest and unethical to mislead the community in this way. What he’s doing is called “lying by omission.” The reality is that Xcel Energy will end up costing us far more than a municipal electric utility. I would say also I’ve heard the *real* reason Yates is opposed to public power is that he wants to get his hands on a private broadband network. Bob is an ex Level 3 lawyer. If public power becomes a reality on Boulder it’s far more likely that could lead to public broadband, like Longmont, which now offers one of the best deals in the entire US. Or maybe he’s just philosophically opposed to public ownership of anything? Last point, Yates does not share the goal most people in Boulder share for a radical transition to renewable energy. Before his election, he was the only City Council candidate who did not support the goal of 100% renewable energy for Boulder.

  • Elijah Bleue

    As usual, Danish is full of s**t.