It’s often been said that “time is money,” and it turns out to be more than an aphorism.
I’m going to try and tell you a story about discounting, which is one of the ways that we convert between time and money. The story has broad implications for the energy investments we choose. It’s not entirely straightforward, and if it’s going to make sense there are some background pieces you’re going to need. The background is important because the ending depends not only on understanding what is being done, but why. This story happens to be about Xcel Energy and Colorado, but the same thing happens in other places, with other companies, and in other contexts too.
To greens my argument may seem circumspect. I’m not going to challenge the doctrine of Everlasting Economic Growth. I’m not going to look at the large externalized costs of burning fossil fuels. I’m not going to argue against the monopoly electrical utility model. Those are important discussions to have — they’re just not the one I’m having here. What I’m trying to do is show that a minor change in the way we calculate the cost of future energy can drastically alter what kind of power we decide to invest in for the next century, even if we only look at the decision in selfish financial terms.
To the finance geeks among you, much of the background will be familiar, but the situation may seem strange unless you’re familiar with how regulated monopolies work. I haven’t been able to find anyone familiar with energy finance who thinks what we’re currently doing makes sense, but if you’ve got a thoughtful rebuttal, I’m genuinely interested to hear it.
Conservative thinktanks step up attacks against Obama’s clean energy strategy, as revealed by ALEC bills and other PR documents. This morning at the World Renewable Energy Forum, in response to a (long winded) question about how we might re-frame the energy discussion in light of the unfortunate hay which was made from Solyndra’s failure, US Energy Secretary Stephen Chu re-iterated that clean energy should not be a political issue — that it’s just common sense. That may be true, but it doesn’t mean it will remain apolitical. As Pericles once said… “Just because you do not take an interest in politics, does not mean that politics will not take an interest in you.” Clean energy is political, as is climate change. Yes, it’s stupid, but that’s the way it is. We have to deal with it. Though, I have to admit, if prices keep dropping like they have been, it will be fun to watch the right-wing culture warriors backpedal, as massive renewable deployments become profitable without subsidies of any kind in the next decade.
Andy Revkin talks to Nate Lewis about the scale of the challenge we face in addressing climate change. Lewis (whom I took Chem 1 from at Caltech) was one of the first people to communicate the scale of the problem effectively to me, in his Powering the Planet talk. He’s of the opinion that there are big technical gaps to be filled if we’re going to address the issue seriously — we need to learn how to do things we’ve never done before, in a technical sense. But one of his underlying assumptions is that we will 1. have continuing economic growth globally, and 2. that this will necessarily mean an increase in energy use (even as we continue to decrease our energy intensity). I think this need not be the case. High quality lives are available at vastly lower energy usages than we see in the US, or even Japan and Western Europe. They’re different, sure, but that doesn’t mean they’re inferior. Compact, walkable/bikeable/livable cities. Drastically reduced flying and driving, zero energy buildings, petroleum free agriculture, heirloom designed durable goods instead of cheap plastic disposable crap. These things are huge, and make the remaining energy generation challenge much more manageable. Yes, we still need to figure out long term storage and reliable renewable portfolio management, but it’s not the same herculean task that Lewis puts forward: of running our society as we do today, but on some other energy source. Which simply will not work.
Yale Environment 360 has an interview with the CEO of NRG Energy, a fossil fuel based, nationwide independent power producer (IPP) that sells their 22GW of generation into the wholesale market. He’s bullish on solar PV, much less so on wind. No mention of solar thermal. He believes storage will be vehicle batteries. Net metering policies and pricing will be key to broad adoption. Given the lack of forecast energy demand increase, he sees different sources of energy (esp. coal, gas, solar, wind) having to compete for market share for the first time. It’s important to note that as an IPP his position and incentives are much different from those of regulated utilities like Xcel, who certainly do not want to “keep [their] rates to [their] consumers down and get these electrons onto its grid at a very cheap price”. And I think regulated utilities still make up a large majority of electrical generation in the US.
Almost immediately after we empowered Boulder to form a utility, a spate of articles appeared in the national press talking about the relative costs of coal and renewables, and the trends in those costs. There was Krugman’s Here Comes Solar Energy Op-Ed in the NY Times, making the case that solar PV is already cheaper than coal-fired power once you remove all the subsidies we provide to both of them, and calling for the Feds to fix regulation to make that clear. Boulder’s own RMI had a bit of commentary on Krugman’s opinion: it’d be nice if Federal regulations were saner, but even without that fix, it makes sense to build this stuff now, and will only make more sense as time goes on and the balance of system costs (which currently make up 50% or more of the cost of a PV installation) are reduced through best practices, standardization and mass production.
In the same vein, Xcel Energy’s recently filed 2011 Electric Resource Plan foresees essentially no new generation facilities being built until close to the end of the decade. Some of this is attributable to the soft economy, but many people are saying it’s just as much a consequence of energy efficiency, demand side management, and increasing distributed (behind-the-meter) generation coming on line. Unfortunately, Xcel added a gigawatt of coal generation to its grid last year, and this lack of demand for more energy means the company is now walking away from the transmission lines that would have enabled large-scale solar-thermal with storage in the San Luis Valley. This means that the only way to shift Xcel’s power mix in the near future will be to accelerate the retirement of existing coal-fired generation, making room for more efficiency, wind, and solar.
The optimistic narrative that falls out of the articles above — that our energy systems are undergoing a transformation — seems plausible, and I hope that it’s true. Certainly it’s the one that the Boulder Light and Power effort is going to be built around. It’s comforting to see that we’re not alone on the world stage, and less daunting to imagine our job as facilitating an ongoing transformation, rather than starting one from scratch.
Xcel appears to be backing away from new transmission lines to the San Luis Valley. This infrastructure is required to implement the several hundred megawatts of solar-thermal generation that they proposed in their 2007 resource plan. Solar thermal is the only renewable power (other than pumped hydro, which has limited availability) for which energy storage is potentially feasible right now (e.g. using huge tanks of molten salt). It’s interesting to contrast the utility’s statements on the San Luis Valley project with what they’re saying about the Pawnee retrofit, and what they said about the Comanche 3 plant.
Former Xcel CEO Dick Kelly would be fine with no more coal. Unfortunately, the regulatory environment that his former employer works within in Colorado, and the company’s need to protect a couple of billion dollars worth of undepreciated coal assets makes it very hard for them to move away from it.
Last Thursday (Sept. 8th) the Boulder Green Building Guild (BGBG) and Boulder Tomorrow hosted a debate of the 2B/2C ballot measures. The event was completely booked in advance through the BGBG’s website and the REI community room was packed and buzzing with members of the city’s considerable sustainable building and design community.
Personality-wise, it was mostly a re-match of the folks involved in the PLAN Boulder event from a couple of weeks ago with Bob Bellemare (Utilipoint) and David Miller (Boulder Smart Energy Coalition) speaking against the measures, and Ken Regelson (Renewables YES!) speaking in favor. However, instead of Sam Weaver sitting next to Regelson, we had former Colorado state legislator Tom Plant, co-chair of the Boulder Clean Energy Business Coalition, and former head of the Governor’s Energy Office. Also present was Jonathan Koehn, the City of Boulder’s Regional Sustainability Coordinator. He was on hand to speak to matters of fact alone, as the City is required to recuse itself from advocating one way or the other on the ballot measures.
All in all, the “against” side seemed somewhat more polished, but essentially unchanged, and still very focused on fear, uncertainty and doubt. I thought the “for” side focused less on the technical and quantitative aspects of the initiatives, and more on the benefits of moving our electrical generation much closer to home, both in an economic sense (keeping our energy dollars in our community, involving local businesses in the development an innovation) and in a regulatory sense (removing ourselves from the statewide public utility commission process, and making the relevant governing bodies much more accessible). The “for” side also repeatedly pointed out that the purpose of the ballot initiatives in large part is to empower the city to remove much of the uncertainty surrounding the formation of a municipal utility.
What follows is my attempt to summarize the content of the debate. Anything not in “quotes” is my attempt to paraphrase the speakers, based on my notes. In the interest of full disclosure, while I am in favor of passing 2B and 2C, I am working as a volunteer only, and receiving no compensation.
The Backgrounder: Jonathan Koehn
Koehn introduced the debate with a little background, explaining that the expiration of our 20 year franchise agreement is why we’re talking about this today, but that the issue is more broadly relevant now because of the City’s aggressive commitment to its Climate Action Plan and rapid changes taking place in the energy industry. He pointed out that whatever decision we make, it will be momentous, with consequences spanning decades and directing several billion dollars worth of investment in energy technologies and fuels. He likened the scale of the decision to that of our open space purchases, geographic growth constraints, and the last 30 years of city investments in bike, pedestrian and mass transit infrastructure. He noted that the City has done a lot of outreach and communication with citizens to try and figure out what our real energy priorities are, and beyond the obvious functional ones of reliability and reasonable costs, the ones that stood out were:
Hedging against the possibility of an uncertain energy future, with potentially volatile fossil fuel prices and supply issues.
Positioning Boulder as a center for innovation in the fields of renewable energy and energy efficiency (or as NY Times editorialist Thomas Friedman likes to say, ET).
Meeting our moral and ethical obligations to future generations with regards to our consumption of finite material resources, and the curation of our habitable atmosphere.
He made it clear that there are two basic structural options going forward, either we stay with Xcel, or we form a municipal utility. Within each of those options of course there’s a lot of potential variability. For example, with Xcel, there’s no reason we need to sign another franchise agreement. Xcel simply passes the franchise fee directly through to us as ratepayers, so it amounts to nothing more than indirect taxation via corporation. This is politically expedient in many communities, but Boulder has demonstrated that we are often willing and able to voluntarily tax ourselves to pay for the services and infrastructure we want from our local government, so it makes less sense here. If we stick with Xcel, we’ll still have the ability to do energy efficiency and other demand side management programs, as well as anything else that takes place “behind the meter”.
Koehn also pointed out that within the municipal non-profit utility option, there are also many different ways to go about meeting our local goals, and made it very clear that while there haven’t been a huge number of municipal utilities formed recently, it’s by no means an unusual way to get your power in the US. In Colorado alone, there are 29 other municipal electrical utilities, including Fort Collins, Loveland, Longmont, and that bastion of socialist fervor… Colorado Springs. Nationwide, there are about 2,000 munis, serving about 14% of the US customer base.
As to why we ought to make the decision now, and not just sit on it another year, Koehn noted that multiple analyses by disinterested outside parties have already determined that the formation and operation of a municipal utility in Boulder is technically, legally, and at least potentially financially feasible. The remaining unknowns, including the rates we’d have to pay on any bonds issued, the cost of any stranded Xcel assets, and the cost of separating our infrastructure from that of the investor owned utility can only be determined with a vote. Then he outlined what the ballot initiatives actually say:
2B extends and increases the Utility Occupation Tax:
to pay for technical and legal operations connected with the City’s exploration of forming a Boulder Light and Power utility.
Tax lasts until the earlier of Dec 31st, 2017, or until the city decides one way or the other on creating a utility.
Would raise ~$1.9M/yr (which is equivalent to about $0.90 on each monthly electric bill)
2C Gives the City the authority to create Boulder Light and Power:
if we are able to acquire Xcel’s distribution infrastructure
and initial rates will be lower than or equal to Xcel’s
and the utility’s operations and debt service (with a 25% margin of safety) will be covered by projected revenues.
and we are assured the same or better reliability, and can come up with a concrete plan to integrate more renewables, with less GHG emissions.
Also gives the City the authority to issue bonds to pay for starting up the utility, and the creation of a citizen board which would oversee its operations.
After Koehn’s setup, each side got to make 15 minutes worth of introductory statements.
Against: David Miller and Bob Bellemare
First up was David Miller. He said the sole purpose of the $12 million raised by the Utility Occupation Tax is to “fund the fight against Xcel”, and that 2C does not actually require any municipal utility created by the city to reduce GHG emissions or increase its renewables fraction. (This is true, but the initiative does require a concrete “plan” to those ends. There are no binding emissions/renewables targets partly because without doing the technical legwork which 2B would fund, we can’t know what the rate vs. emissions vs. renewables tradespace will look like.) Miller claimed that the muni option is too slow and risky, and that “there are better quicker options” to get the clean energy that we want. He didn’t elaborate on what those options might be.
He again pointed out that the cost of the whole utility start up is as of yet unknown, and will only be determined through lengthy negotiations and potentially litigation. Nobody is disputing this; in fact one of the main purposes of the ballot initiatives is to give the City the ability to figure the costs out concretely. He again made the point that after this vote, we won’t have direct say in whether the City decides to form a utility — City Council will have the authority to do so (within the bounds set out by the ballot language). However, in a community as politically engaged at the local level as Boulder, it’s hard for me to imagine Coucil going ahead if it was clear that the move didn’t have popular support. It seems like it would be politically… difficult, and as Bob Bellemare intimated in the first debate, we can always vote the bastards out if we don’t like what they’re doing.
The Xcel side seemed to be appealing repeatedly to our supposed distrust of government and bureaucracy. Miller mentioned that our municipal utility would no longer be under the purview of the Colorado Public Utilities Commission, which is supposed to represent the interests of the public in the regulation of the utility monopolies. This is true of course. Instead, it would be governed (that is, regulated — not operated) by a locally appointed utility board, and the City Council. To me, this sounds like a much much more accessible level of governmental control. I’ve been to Council meetings. I’ve talked to the mayor and council members and City staff about issues that concern me. At the state level, that becomes a much more challenging proposition. Regardless of whether you think creating a Boulder Light and Power utility makes financial or technical sense given our goals, it would clearly localize our decision making processes, and in this era of distant, dysfunctional, corporate influenced governance, that seems to me a good thing.
On the financial side, Miller also noted that Xcel’s rates are below the Colorado median, and that Boulder takes far more than its fair share of Xcel’s efficiency and renewables programs. For every $1 we put in as ratepayers, our community has gotten back $4-5. That’s definitely some kind of deal, but it strikes me as a kind of cheating. Obviously it’s not a solution that can scale up to work at the state level, and it’s only made possible by other communities failing to embrace efficiency and renewables. Miller also said that while all of Colorado’s municipal utilities are very reliable, they’re also by and large very dependent on coal, and that Boulder’s potential focus on a high renewables fraction might somehow make us less reliable. If it’s a foreseeable failure of reliability, this scenario is expressly forbidden in the ballot language. Even if it wasn’t, in the broader view of things, if we really do care as a species about stabilizing the Earth’s climate without reverting to a pre-industrial society, then somebody somewhere is going to have to figure out how to make renewable power also reliable power, and it’s not as if we’re going to cut ourselves off from the rest of the grid in five years and suddenly jump to 100% wind and solar in a leap of blind faith… silly YouTube videos notwithstanding.
Finally, Miller talked about GHG emissions and climate change directly. He noted that the City is set to fail in its bid to meet our (voluntarily imposed) Kyoto GHG goals by 2012. He said we need to focus on heating, efficiency, and transportation systems too. All true, but unfortunately, every one of the major emissions sectors — transportation, heating, electrical generation, agriculture, etc — must be tackled aggressively if we are to make the 80-90% reductions in GHG emissions required to stabilize the atmosphere. They are all necessary, and each one alone is insufficient, so we need to work on all of them now. He suggested that Boulder as an entity is too small to make any difference in the larger scheme of things, and that we’d have more impact by continuing to influence Xcel more broadly in the context of Colorado. How exactly this influence was to be exerted was left unsaid.
I thought this was a strange juxtaposition — first, that we are going to fail to meet our 2012 climate goals, and second, that we should just keep doing what we’ve been doing, and hope that it turns out better in the future than it has so far.
Bob Bellemare took a different tack in his half of the introductory statements. First, he did his best to convince us of his credentials. He’s a professional business appraiser. He’s spent 25 years in the utility industry. He’s managed a 14 gigawatt generation fleet. Been involved in almost every similar potential municipalization case in the nation over the last decade. I haven’t checked, but I presume these are true statements. However, just because someone possesses a particular expertise doesn’t mean that they are wielding it on your behalf. The appointment of many Goldman Sachs alumni to positions within the US financial regulatory bodies is a great example of this. Certainly Hank Paulson (former Goldman CEO) understands the market as well as anyone, but that doesn’t mean you can expect him to do a good job of overseeing it in the public’s best interest as secretary of the Treasury.
So it is here. I have no doubt that Bellemare understands what’s going on in this debate, but his interests are Xcel’s and not ours, and so his experience and expertise should, if anything, make us wary of what he has to say. After extolling his own virtues, Bellemare went on to display lots of frightening financial numbers very quickly, without making much effort to explain what they meant. The main takeaway point was that it could end up costing as much a $1.2 billion to get a municipal utility off the ground in Boulder. Of course, we don’t get to see where Xcel’s numbers come from. To use them, we must simply have faith that the company is, as its slogan states, Responsible by Nature™. This is in stark contrast to the analysis by the City’s consultants and the citizen’s modeling effort put together by Renewables Yes, which both offer no end of gory detail about their assumptions, inputs and processes.
More than anything listening to Miller and Bellemare, I got the impression that they were doing a very good job of staying on message, with the same Fear, Uncertainty and Doubt approach that they’d taken in the PLAN Boulder debate (Miller has the role of Uncertainty, and Bellemare is in charge of both Fear and Doubt). It was somewhat more polished, but none of the substance had changed.
In Favor: Tom Plant and Ken Regelson
The pro-municipalization side brought a fresh face to the table with Tom Plant, in lieu of Sam Weaver. The addition of his political experience definitely changed the character of the team, providing a nice counterpoint to Regelson’s more technical approach. I suspect this combination will appeal to a broader audience than the purely quantitative duo.
Plant listed the main goals of the Boulder Light and Power initiative as localization, decarbonization, democratization, and decentralization, and framed the issue as being about finding the best way to address those goals, either with our own utility, or in partnership with Xcel. We’ve been working within the framework provided by Xcel for years, but in Plant’s opinion have not been able to find an acceptable way forward. He was adamant that passing 2B and 2C does not commit us to forming a utility, and emphasized that passing these measures do not take any options off the table. Rather, he sees them as simply giving the City the ability to even seriously consider the municipal utility option. He sees localizing our power systems as a way to keep more of our energy dollars within the community, and anticipates a lot of participation from local renewable energy companies in the creation of a system that works, positioning them well to help other communities in similar endeavors.
He sketched three scenarios for our energy going forward. We might decide to simply buy our power from 3rd parties through wholesale contracts, and focus our efforts locally on demand side management, energy efficiency, and distributed generation, or we could go ahead and do a lot of our own generation, or we might end up being able to negotiate an acceptable deal with Xcel, and he pointed out that passing 2B and 2C would actually put us in a much stronger negotiating position with the utility, if that’s what we decided to do. He lamented the fact that Thomas Edison would still recognize and understand the structure of our grid today, despite all of the technological change that’s taken place in the last century, and questioned whether we really want that to be the case for our grandchildren, which is the future he sees resulting from continuing to rely on centralized fossil fuel based generation.
Regelson began by describing Xcel’s plan as “Coal to 2069”, referring to the anticipated retirement date of Comanche 3, their most recently completed, billion dollar, 750MW power plant. In contrast, he summarized the results of the Renewables Yes citizen’s modeling effort as: 40% renewables and a 2/3 reduction in carbon emissions, while maintaining rate parity with Xcel, and he was keen to point out that all the data and modeling behind those numbers are publicly available, unlike Xcel’s estimates.
He explained wind curtailment costs — because wind is variable, and coal plants can’t be turned on and off quickly, sometimes Xcel ends up dumping wind power, when it would exceed the grid’s demand. In 2007 these costs were only about $120k, but as more wind has been integrated into the grid, they’ve exploded, nearing $4M in 2010. The problem will only get worse as more renewables are added — baseload coal and variable renewable power just can’t play well together. Just switching from coal to gas cuts our GHG emissions roughly in half, but more importantly, it allows us to integrate more renewables into the mix, as gas plants can be turned on and off quickly, allowing the grid to absorb whatever wind and solar there is available, and using the fossil fuels only as backup “firming” power.
Like Plant, Regelson emphasized the fact that we simply cannot get accurate estimates of a municipal utility’s startup costs without passing measures like 2B/2C, and enabling serious negotiation from the City’s side. He asserted that even if the startup costs were as much as $810M, we could still do a 50% reduction in carbon emissions while maintaining rate parity, and that a 68% reduction would be similarly possible, so long as startup costs were below $560M.
Questions and Answers
Written questions were then posed to the panelists by the moderator. Each side had 3 minutes to respond, and could split that time as they saw fit between the two members.
Q: What is your organization’s position on climate change and the Climate Action Plan?
David Miller admitted that climate change is a very serious problem, and the coal is a huge contributor, but emphasized the need to look at other carbon sources as well. He also touted Xcel’s wind farm proposal (despite the large curtailment costs that would have resulted from it). He urged us to continue working with “the greater community” in Colorado, as he believes that any actions taken by Boulder independently will prove insignificant in the grand scheme of things.
Bob Bellemare remained strategically silent, letting Miller have all 3 minutes.
Tom Plant described stabilizing the climate as one of the greatest challenges of our time, and disagreed that Boulder’s local actions are immaterial. Demonstrating that these changes are both possible, and economically feasible will set an important example and precedent, and embolden others to do the same. He agreed that we’re not going to come anywhere close to meeting our 2012 Kyoto goals, and attributed a lot of that failure to our inability to separate ourselves from coal fired power.
Ken Regelson said that carbon is a huge deal, and that he’s dedicated his life to mitigating climate change, both professionally and as a volunteer advocate. He noted that while we’ve done better as a community with renewables and efficiency measures than most other cities served by investor owned utilities, we’re not doing as well as Sacramento, CA or Austin, TX with their municipal utilities. He called into question the practicality of Xcel’s wind deal, because of the large curtailment costs that would result.
Q: What about stranded asset, separation, and “going concern” costs?
Ken Regelson: Big range in cost estimates here from $0 (city) to $huge (Xcel). Only rural electrical co-ops are explicitly given value as “going concerns” in the law. Xcel will have to sue to set such a precedent for an investor owned utility. Seems like it will be a difficult case to make. According to consultants hired by the City, separation of our infrastructure from Xcel’s will be a piece of cake, due to the near continuous greenbelt we’ve surrounded ourselves with. Their informed cost estimate was $7.5M total. The city doubled that to $15 in their financial modeling, which is still a far cry from the $100M number Xcel is throwing around.
Bob Bellemare: Spent most of his 3 minute response talking about his credentials as a business appraiser, power engineer, and expert witness and asserting his status as an authority on the subject in a very serious voice, before describing Boulder’s city boundaries as “swiss cheese”, and asserting that it would be very expensive to separate.
Tom Plant: You’ve heard two sides with wildly differing numbers. The only way to actually get a final estimate is to pass 2B/2C and put together a detailed separation proposal.
Q: If we separate, where will our power come from?
David Miller: We have no idea.
Bob Bellemare: You won’t know until 6 months before your utility begins operations. The ballot language doesn’t say anything about this. Wholesale power could be 65% of your operating costs. You might lose what wind power you’ve got now.
Tom Plant: as a wholesale power utility, we will have the power to go to the market and shop around, to competitively bid our supply contracts. Xcel customers will be locked in to carbon because of the way it generates its profits, and the large investments it has made, and is redoubling, in coal. What if we actually end up pricing carbon effectively?
Ken Regelson: initially we will probably bid power production out to many independent suppliers. There are lots of companies interested in this kind of contract. Tiny Marin got 12 qualified responses to their request for proposals, and we have a much higher profile than they did. Southwest generation has 1GW of natural gas in Denver (we only need at most 285MW) and they’ve got a contract with Xcel that expires in 2012, which Xcel has decided not to renew. They’re already interested, and are members of the Boulder Clean Energy Business Coalition (which Tom is representing).
Jon Koehn: point of information. The City looked at many different plausible scenarios with different renewable energy portfolios. We currently have a request for information (PDF) out on the street asking for proposals, due back on Sept. 16th. We’ve already gotten 9 responses. Don’t know yet if they are real credible offers, but keep an eye out on the city website for more information as it comes in.
Q: What is the biggest misconception the public has about your organization’s position?
Tom Plant: Well… we’re only now taking a position, so people can’t be confused yet! We’re in favor of 2B/2C because we want to take an innovating position in the market. The real decision is not being made in November. We are not committing one way or the other now, we’re just talking about whether to give the City the power it needs to fully explore all the options, despite what Xcel says about this being some kind of point of no return.
Ken Regelson: Polling has shown there’s a lot of support for the municipal option. There’s a misconception that what we’re talking about doing here is somehow strange or unique. It’s not; there are lots of other municipal utilities out there.
David Miller: I don’t think there are any misconceptions about us out there. The notion that we’re not committing ourselves is incorrect. We won’t be able to stop once we’ve started. We’re already spending money, and it’ll be nearly $2M/yr going forward. We don’t have the time to figure this out and work through the process, which could take many years. There’s a misconception that a municipal utility is some kind of proxy for clean, green energy, which just isn’t true. At some point, we have to make a resource choice and finally pay for it. 2C doesn’t say anything about our future resource mix.
Bob Bellemare: Condemnation is a difficult process. It’s very divisive for the community, and creates bad blood with the utility. You’re committing with this ballot measure, and you have no guarantees as to what you’ll get in your energy mix going forward. The city plans not to do any debt service on its bonds for the first 1.5 years of operations, so of course you’ll have lower rates then.
Q: Is the City of Boulder qualified to run a utility?
Bob Bellemare: Clearly today you don’t have the staff, nobody with those skills on hand, but you’ll still be making these decisions, about assets with 20-50 year lifetimes. Of course cities can run utilities, but there will be growing pains, and the first few years will be a mess. Where will you get the linemen? It costs a lot of money to build competency.
David Miller: City doesn’t have it, obviously. We’re going to have to learn and/or build it.
Tom Plant: We already run several utilities (water, sewer, roads, etc.) We’re surrounded by cities that run their own utilities (Ft. Collins, Colorado Springs, Longmont, etc.). A municipal utility can engage with the local community in a much broader way, and we have lots of really high quality local resources
Ken Regelson: From a technical standpoint, for the first 5 years it will certainly make sense to outsource this expertise, to bid it out competitively, and learn from the experiences of the experts we hire. Investor owned utilities have much higher overhead. Consultants, highly paid executives, lawyers, etc. In fact I recognize quite a few Xcel staff in the room right now on company time! The city is extremely fiscally conservative. We have a AAA bond rating, which we’re not going to jeopardize. Financially we can do this, and we can buy the technical expertise while we build our own core competency.
Q (from Tom Plant to Xcel) if 2B/2C doesn’t pass, we’re left with Xcel (with or without a franchise). Why would it be in the City’s best interest to limit our options today by not considering Municipalizing?
David Miller: It’s in the City’s interest to take advantage of the existing Xcel programs. It doesn’t benefit us to be reclusive on this issue. We can’t choose a daunting, expensive, time consuming process and expect others to follow in our footsteps. Let’s just keep doing what we’ve been doing.
Bob Bellemare: if you vote no, you don’t lose the option to do this again in the future. You have such a good relationship with Xcel today, why sour it? If you municipalize, you’ll no longer be part of the discussion at the Public Utilities Commission. Currently you get 5x as much money in solar and 4x as much money in energy efficiency as you put in to those programs as a community. How can you hope to do better than that?
Ken Regelson, rebutting Bellemare: Jefferson County, WA voted to condemn, and within 4 months they had a settlement with their utility. It was an easy process. A lot of this talk about “souring” a relationship is just posturing. Corporations (and nations) have no friends or enemies, just interests.
Q (from David Miller to Plant/Regelson) We’ve had significant benefits with the current arrangement with Xcel. What’s really the benefit of this separation, and all the overhead it brings?
Tom Plant: We’ve collaborated with Xcel for 12 years, and I’m proud of the work we’ve done in Colorado. I don’t hate Xcel, I congratulate them for making changes to their fuel mix (from 90% to 60% coal). Their actions have benefited communities that left to their own devices would have done nothing whatsoever to mitigate climate change. However, Boulder is not one of those communities. Allowing Boulder to separate will let us similarly pull Colorado forward, both materially and by example. Today Xcel is holding us back.
Ken Regelson: Xcel has come a long way for an investor owned utility, however, we want to see much, much more, and you simply cannot get there while relying on baseload coal. Shifting to renewables will bend our rate curves down. Renewables get cheaper with time, unlike fossil fuels. At the state/CPUC level you can’t get your voice heard as a community of 100,000. It’s much easier to participate directly at the city level. I’ve worked with the PUC as an expert witness, I know what the process down there is like.
Tom Plant: The other side says we shouldn’t do this because it’s hard. They say Xcel is good enough, that we’re better off working through the PUC and the Colorado legislature. Having served in the legislature for eight years, and worked with the PUC as the head of the Governor’s Energy Office, I can tell you firsthand that the process down there is arduous. However, we do have good communication with our city government. Our local democracy works! Our local Green Building, SmartRegs, and Carbon Tax regulations have all been developed in close cooperation with the BGBG. We have lots of great local expertise in these areas, and creating a local utility will allow us to leverage that expertise in the field of renewable generation, and set an example for the rest of the nation, and the world. I’m doing this as a volunteer because I want to see us take advantage of this great opportunity.
Ken Regelson:WE CAN DO IT. 40% renewables, 67% reduction in CO2, and rate parity. We want to be able to tell our children and grandchildren that we did what needed to be done in 2011!
David Miller: Let’s work on this NOW! Let’s keep doing what we’ve been doing! We don’t have to wait for it to come to us. Wish as we might for clean energy, 2B/2C doesn’t guarantee it.
Bob Bellemare: Is this really the best way to meet your goals? What else could you do with that $12M over 6 years instead? Is this the best possible use of $300M in Boulder? Will you really make up what you lose in economies of scale with Xcel? Will you have enough money to replace our solar rebates and other programs?
First each side got to make a 10 minute introductory statement or presentation, followed by a series of pre-submitted questions, posed by the moderator. Finally, written questions from the audience were vetted by someone from Plan Boulder and passed on.
We can achieve rate parity with Xcel while reducing CO2 emissions by 67%, using natural gas and a 40% renewables mix, if we assume startup costs of $250M to $400M.
Coal and renewables simply can’t play well together on the same grid. The renewables get curtailed because coal fired power takes a long time to turn on and off.
Xcel’s business model, based on large existing investments in coal, can at most accommodate a 15% reduction in CO2 emissions.
David Miller was supportive of meeting our Climate Action Plan goals, but seemed unsure whether going after the emissions due to power generation was the best strategy, suggesting we might instead focus on demand side management, energy efficiency, and the use of RECs. As with the flyer circulated by his organization, most of the points he made focused on cultivating uncertainty. He was apparently choosing to ignore, or unwilling to accept the conclusions of the City’s consultants and the citizen modeling effort. Two points he made which I thought did warrant real concern:
About 75% of Boulder’s energy consumption is commercial/industrial, and that constituency isn’t directly represented in the voting public.
It is important that we not let the municipal utility’s revenues get entangled with the City’s general funding, as it sets up all kinds of poor incentives for the organization, and leads to an opaque city revenue scheme.
All in all Miller seemed earnest, but less informed than he ought to have been. Maybe that’s not his fault — based on the Plan Boulder flyer, it looks like Craig Eicher, Xcel’s community affairs manager for Boulder, was supposed to be sitting in his seat.
Bob Bellemare on the other hand seemed like a more practiced, more active disinformer, mostly trying to seed doubt in the minds of listeners. Among his recurring points:
Hardly anybody ever succeeds in this process. Maybe one city every decade nationwide.
Once you vote in November to begin, it will be very difficult to actually stop the process, regardless of what “off ramps” you’ve supposedly put in place. The only way it ever seems to happen is by voting in a new city council.
Your cost estimates are wildly wrong. It will be much more expensive, and take much longer than you think. You will probably lose money.
There’s no reason to think that your local monopoly (the municipal utility) will be any less monopolistic than Xcel.
The point about stopping the process often requiring the voting in of a new council seemed like a thinly veiled political threat.
Often the debate became one side asserting some number, and the other simply claiming it was wrong. Stranded costs, separation costs, fuel costs, interest rates, etc. At some point Bellemare claimed that Xcel was going to be shutting down half its coal plants, which got shocked and appalled looks from both Ken and Sam. Half? Really? Their counter claim was that generation was dropping from 2400MW to 2000MW of coal (a 1/6 reduction, not 1/2). When quantitative issues become he-said, she-said, all you can do is get someone to go look at the calculations or data. In this sense, I think the proponents of municipalization have a big advantage. Their models are all public. They’re willing to have you examine their assumptions and check their work. Xcel on the other hand has been very cagy with their data, and are unwilling to give detailed background on where their estimates are coming from (it took months just to get the city’s power consumption profile… and only happened after we’d gotten similar data from Ft. Collins). All you get the end result and a “Trust Us…” which unsurprisingly makes municipalization look like a lousy deal.
Some of the audience questions were actually quite good. Somebody requested that each debater disclose how much they were being paid (if anything) to participate, and by whom. Weaver and Regelson (and the Plan Boulder moderator) are volunteering their time without pay. Miller received a few hundred dollars from the Boulder Smart Energy Coalition. Bellemare is a paid consultant working for Xcel and “[his] financial arrangements are not a matter of public information.”
At some point near the end of the debate, it became clear that the proponents of municipalization were winning pretty unambiguously in terms of both information and eloquence, and they became a bit more aggressive. Miller claimed that obviously our rates would have to go up in a less carbon intensive scenario, as renewables are simply more expensive — just look at all the renewables assessments on our bills. Weaver took almost violent objection to this point, noting that wind is already the same price as coal, we just can’t take advantage of it with the coal fired grid we’ve got today because of the baseload/curtailment issue. He further noted that while solar is more expensive today, it’s dropped 40-50% in cost over the last 5 years to around $5.15 per installed watt, and if/when it gets to $2.75, it will be cheaper than grid power. At which point, he envisions an explosion of distributed generation, “behind the meter” i.e. outside of Xcel’s control, which he believes will prove disruptive to Xcel’s business model. It came off as being somewhere between a warning and a threat.
The final question, which came directly from the moderator, was on the larger consequences of the decisions being made, both for other communities watching the process, and for the future Boulder 10, 20 or even 50 years on. The proponents of municipalization clearly felt that we are attempting to set an example for others, of creating a scalable, replicable, financially and climatically responsible power system. One which a few decades hence they also expect Boulder ratepayers to be thankful for, due to much lower exposure to high and volatile fossil fuel prices.
Miller held out hope that we would find a “third way” to achieve our goals, also setting an example for other communities, though he didn’t lay out in any detail what such a third way would look like, and how it could work from within the confines of the Xcel energy system.
Bellemare felt that regardless of the outcome of the election it would have little effect more broadly. Every franchise agreement is different, state regulations are different, what you learn in one place doesn’t really transfer well to others. (Nobody’s watching. What you’re doing doesn’t really matter.) Should the ballot measure succeed, he expected 5 years of wrangling to get the utility set up, and another 5 years before we really figured out how to run it. Twenty or fifty years on? Well, who knows… If the ballot measure fails, he expects Xcel and Boulder to keep on working together as they have for years, continuing to build one of the nation’s best energy efficiency programs.
This inspired a pretty loud response from Ken… who noted that yes, we do have one of the best efficiency and renewables programs in the nation for an investor owned utility, but several municipal utilities do far better, Austin, TX and Sacramento, CA were mentioned as examples.
Based on their overall performance, it seemed pretty clear to me that the proponents of municipalization can win if they’re given a fair forum. It’s less clear to me how they will fare in the decidedly unfair landscape of full page newspaper ads, push polling, semi-anonymous glossy mailers, radio sound bites and yard signs. In those fora, money talks much louder than good information, and Xcel has a lot more money at their disposal than we do. We need to change that.