Boulder says splitting from Xcel will save millions
The city of Boulder says its plan to form a municipal utility to replace Xcel Energy would be cost effective over two decades, lead to $13 million in savings, and include more renewable energy than Xcel can provide.
According to a financial analysis of the plan released early last week, a public utility would “result in long-term cost savings, driven by low-cost renewable resources and less expensive power supply, over 20 years” in three of four scenarios the city examined. The city has been negotiating to create its own utility for over five years, arguing Xcel offers more expensive rates and less renewable energy than the city itself could provide.
The city says it developed a Financial Forecast Tool to determine whether a local electric utility would be cost effective. The tool used two methods to measure fiscal strength: savings compared to Xcel Energy and cash flow. By each measure, a city-run utility would prove more fiscally sound than using Xcel. The base case of the analysis, which represented the scenario most likely to occur and compared it to Xcel’s projected rates, would result in $13 million in savings over five years and over $100 million over 10 years. This would result in a positive cash flow in each year of the 20-year forecast, approximately $57 million after five years, and $200 million after 10 years.
The analysis also showed a city-owned utility obtaining a generation mix of 80 percent renewable energy by 2030.
“These are impressive revenues, and they would stay in our community,” said Heather Bailey, executive director of Energy Strategy and Electric Utility Development. “This money could fund any number of programs, from significant improvements to reliability, or lower rates compared to Xcel, to the kind of innovative and equitable projects we know our community will expect.”
Although most of the scenarios showed a net financial gain and greater deployment of renewables by a city-run utility as compared to Xcel, there were scenarios which showed the city’s cost becoming prohibitively high. The most expensive of these scenarios would be if the city decided to purchase power from Xcel for all 20 years. The city has proposed a plan of purchasing power from Xcel for an undetermined length of time, although the City Council has maintained it will only pursue municipalization under a financially feasible scenario.
The tool was developed by a combination of city staff and consultants including Michael Hubbard, a utility financial analyst; Warren Wendling, a former engineer with the state Public Utilities Commission; and PFM, an independent financial and investment advisor to government entities and non-profits.
The city says it will be making its tool available to the public, and it held a public information session about the tool and its findings late last week.
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