The Boulder City Council on Tuesday night authorized the city manager to enter into a drafted agreement whereby the University of Colorado would take power for 20 years from a potential, yet-to-be-created municipal electric utility.
If the city succeeds in its bid to separate from Xcel Energy, the deal now supported by the council will ensure CU is the local utility’s largest customer.
The council voted 7-2 favor of the agreement, with members Jan Burton and Bob Yates in opposition.
Under the agreement, the university will have the choice, every three years, to opt between the lowest rates being offered by the city and Xcel at that time. Heather Bailey, director of the city’s Energy Future office, said she is not aware of any other arrangement elsewhere that allows a customer not only to pay a vendor’s best price, but to choose the best price of the vendor’s chief competitor.
Yates and Burton voted against the deal out of discomfort with that arrangement, which they felt would leave the city with too much financial risk.
“All the risk is on us and none of the risk is on them,” Yates said. “They’re getting the benefit of the better of two (rates). … I think the deal is too good, and there is a risk to our taxpayers.”
In a presentation to the council, Bailey argued that the risk is not as high as it might seem. She said that of nine municipally-owned utilities in Colorado, the highest reported annual price differential among those whose rates were higher than Xcel’s was just 6 percent.
Were Boulder’s rates to run 6 percent higher than Xcel’s, city projections say, the city would take a $600,000 financial hit in a year, were CU to opt for Xcel prices. A 10 percent differential, Bailey said, would amount to a $1 million setback, which she argued is not prohibitive given the expected $140 million annual operating budget of a city utility.
“We feel like, for one, our rates will be lower, and if they’re not, we would address it in a number of ways,” Bailey said. “I don’t think we put ourselves at a risk that is unreasonable.”
She later added that the deal represented “the best solution, compared to potentially losing a customer of that magnitude.”
CU, under the drafted agreement, would not only be a customer but a potential provider, too, as the university has power generation facilities of its own, which the city believes could offer a “primary or back-up energy source for the larger community.”
The university would also lend research capabilities to the local utility, Vice Chancellor for Infrastructure and Safety David Kang said.
“We are committed to continuing to work with the city to further our shared vision for a better energy future,” Kand said. “I think this agreement is one step in the right direction.”
CU, however, says it will not officially support Boulder’s bid with the state Public Utilities Commission to form the utility. It says it won’t fight that bid, though, which means the deal leaves the city with one fewer potential opponent in the short and long term.
“It’s a very calculated risk that makes a lot of sense,” Mayor Suzanne Jones said of the deal.
But council members supported drafting specific criteria for future arrangements with other larger customers before agreeing to any other deals that might also present some financial risk to the city and its prospective ratepayers.
Alex Burness: 303-473-1389, burnessa@dailycamera.com or twitter.com/alex_burness
Our editors found this article on this site using Google and regenerated it for our readers.
