Vote FOR a renewable energy future by voting AGAINST the Boulder muni

I’m really frustrated with the way many from the the pro-muni block in Boulder have misappropriated the idea that being for municipalizing our local utility infrastructure (condemning the Xcel’s local grid and forming a city-owned and operated electric utility) is the only way to move Boulder towards the goal of 100% renewable energy. They’re trying to co-opt the idea that a vote against muni is a vote for fossil fuels and a vote for it is a vote for renewables. I couldn’t disagree with this line of thinking more. In fact I think the opposite is true – a vote to continue the Boulder muni effort is the wrong way to go about pursuing the goal of lessening our dependence on non-renewable energy sources.

This weekend I wrote a long note to a local friend who came out in support of municipalization. I thought it was worth sharing to a broader audience – especially the answer to his question of why so many from the Boulder tech and business community are against continuing the muni effort (see for example here and here).

The main reason the tech community is against municipalization is that people in the tech community are futurists. We think about where the world is going and have true faith in the ability of new technologies to solve problems. In that context the idea of investing in 100 year old technology and infrastructure makes absolutely no sense. The future of power isn’t centralized power production and an aging, inefficient and outdated electrical grid. But that’s exactly what we’d be buying (and, because of the economics of the buy-out, be locking ourselves into for the next 50-100 years). It’s the equivalent of investing in steamships just before the railroads came about in the mid-1800’s or investing in a land line telecom company in the late 90’s. Both at the time were embedded utilities that one could easily have misunderstood as the future not the past. That’s exactly what we’re proposing doing with the utility grid in Boulder – at any price it’s a bad investment. On top of that, owning outdated infrastructure isn’t the best way to accomplish climate independence. With the money we’ve already wasted pursuing muni we could have already moved almost 10% of Boulder to renewable sources. For a measure that barely passed (the original muni funding “won” by 212 votes of over 26,000 cast) we’re spending like we have an overwhelming mandate. The highest paid person on city payroll is the head of the muni movement. And the PUC has just said that Boulder will be responsible for Xcel’s costs which may double (or more) the cost of this next phase if we choose to pursue it.
From my perspective the likely outcome of extending the muni tax will be continued wasted spending that won’t move us any closer to an energy independent future (and will actually take us further away as we waste time and resources). The business model for the muni makes absolutely no sense (which is why the city fought to keep secret). The economics simply don’t add up – even at a price for the Xcel assets that’s wildly unrealistic. Without massive increases in utility rates Boulder can’t afford to run it’s own municipal system (the original model assume 40% increases’ in the first 2 years of Boulder owning its utility – and that’s assuming a debt load substantially lower than anything close to the reality of what is possible). Personally, I think the economics will prove prohibitive. But if we do move forward I think it’s pretty clear that we’ll bankrupt Boulder. I mean that seriously. I think if muni moves forward we will be consumed with the debt that we incur and ironically will be in the position of fighting progressive (and environmentally friendly) change in the power markets as we fight to keep a rate base to support the 100 year old energy model we will have saddled ourselves with. We’d be much better off spending this money (and for that matter the money we’ve already wasted on muni) on actual energy efficiency. As an aside here, if we keep going with muni we’re going to have to rob the general fund to pay for it. Much of the costs of the next phase of pursuing the muni will happen in the next year or two but the funding through the tax won’t cover it (it’s evenly distributed; and it’s very unclear given the PUCs recent decision on fees whether the tax will even come close to paying for the next phase of this folly) – so we’ll be again sacrificing current priorities to continue to pursue this.
It’s unfortunate that the muni issue has been misconstrued as either being for renewables or against it. It’s really a question of whether Boulder wants to bankrupt itself by making a massive investment in outdated infrastructure or whether it wants to blaze a new path towards renewable energy. To me the choice is obvious.
  • Jim Linfield

    Bravo! Very well said, Seth. This debate has been painful to watch, as we continue to get misinformation from the City and the muni proponents. Providing consistently reliable, cost effective electric service is a serious business. For many of the proponents it has, sadly, become a vanity exercise, and one that puts us all at risk.

    • Appreciate the comment Jim. It truly has been painful to watch. They’re so dug in on their position they can’t seem to see anything else. I described it to a friend this way: “All I can think about is the image of us all staring down the train tracks trying hard to think of a way we can make our train faster, cary more people over longer distances, run on time more, more efficient… all the while missing the airplane about to fly over head. They’re so focused on what they know and what they see in front of them, they’re missing that the entire industry is about to change around them/”

      • Waylon Lewis

        Muni will allow innovation—greener (which is innovative), offgrid, multigrid, making money off of surpluses for each home—faster. Xcel is looking at coal plants into the 21st century.

  • Greg Schwarzer

    It’s just as painful to watch from just outside city limits.

    We had to listen to the City of Boulder bully us with talk of forced annexation so they could purchase Xcel assets in our neighborhood, and then how for the ‘privilege’ of being incorporated into the City WE would have to pay for upgrading our infrastructure (lighting, sidewalks, etc.) to meet city standards!

    All for something we didn’t ask for (we personally are on solar) and worse yet, we DON’T GET TO VOTE ON…because we aren’t in city limit…

    Hey, City of Boulder – we are doing just fine without you. Really. Get over yourself.

  • Waylon Lewis

    Going Muni will allow us to go greener–innovated, instead of depending on dinosaurs–faster. To address climate change full-on, instead of half-assed. To save money–tons of it. And, to your point, it’ll enable us to microgrid and offgrid, which Xcel prohibits. Also, I’d add that much of the tech community supports Municipalization–you don’t speak for it, you speak for a part of it, and that’s great.

    Yours in learning from one another–

    • I don’t expect to convince you that you’re thinking about this the wrong way. So let me say that I recognize that passion exists on the muni side of the debate – a lot of it. In my mind that passion blinds you to the massive limiatations of chaining ourselves to hundreds of millions of dollars of yesterday’s technology (thus the steamship and railroad analogies – we’re solving the wrong problem by municipalizing; the questions isn’t “how can we make the existing infrastructure greener” it should be “what does an energy future look like and how can Boulder take a leading role in shaping a greener future – first in Boulder and then elsewhere” – to my view we are investing in steamships (and we’re going to make those steamships great!) right before they become effectively obsolete). Are there limitations to sticking with Xcel? Absolutely. Do I think we can overcome them to a much greater extent than if we tied ourselves to old technology? Absolutely again. Many of the ideas you describe above (or at least some derivatives of them) are actually more workable under the current structure and would actually become economically impossible under muni.

      One of the things that’s perplexed me is how focused the pro-muni side is on municipalization as the only possible answer. At pretty much every turn the muni effort has suffered setbacks (they had to release their model and show how the economics don’t work at all; they’ve lost key points at the PUC; they’ve been told they’ll now need to pay some of Xcel’s costs; etc). Rather than reassess whether the economics still make sense or whether they’re actually still pursuing the stated goal of reducing our reliance on fossil fuels, they instead keep their heads down, their eyes closed and push on. Ironically one of the original goals of the muni proponents was to show other communities a path to a greener future through municipalization. We’ve completely failed at that. We’ve shown that the process is long, hard and very expensive – so much so that other cities that were thinking about this route have backed off.

      As for the tech community, I’ve spoken with hundreds of people about muni and only a small handful are for it. From my perspective it’s fair to say that most (vast majority/overwhelming majority?) are against it. And while I certainly don’t cover all the arguments against it that I’ve heard from others in the tech community, I think the main ones are addressed above.

      • bethhartman

        Thank you very much Seth for writing this piece and Waylon for engaging in respectful discussion on the topic, which is absolutely a passionate subject for many of us. We all care a great deal about clean energy and climate change, and it seems unfortunate that the municipal utility issue has divided friends and neighbors who are otherwise in complete agreement about the need for faster, bigger improvements to the entire energy system. I have even disagreed with my own father at times about the approach we should take – but always enjoyed respectful discussions over dinner! I sincerely hope that after the election is over we are able to move forward together on a plan to more quickly get to the exciting projects that we all want, with community solar, micro grids, EV charging stations, and more innovative energy solutions for our city and many others around the world.

  • Merrill Glustrom

    Seth, with all respect, you make a common mistake in your analysis. Your argument conflates transmission lines with distribution lines. The transmission lines take the electricity from coal and gas-fired plants to cities like Boulder. Once to the city, the electricity is distributed to individual homes and businesses via distribution lines. While the transmission lines system will be disrupted if large coal- and gas-fired plants close, replaced by large solar and wind farms, the need to get power to individual homes and businesses within the city will remain stable. Also, as homes generate more of their own power, distribution lines will allow that power to flow to other homes and businesses in the city. It’s a much more dynamic system than Xcel provides.

    Secondly, It’s an illusion that we can apply money saved from the Muni to renewables. That’s because we must pay Xcel to provide our power; after those payments, there’s no money left for renewables. We would need to raise taxes. And we can raise taxes with or without Xcel.

    Whatever we save by the muni can be used for renewables or conservation or burying power lines (what Winter Park, Florida, did with their savings when they created a muni ten years ago). There’s good reason to think we’ll save money. Xcel makes money not on sales but on power plants. Their profits are baked-in at the PUC.

    Our payments to Xcel are about 7% add-on to costs, and there’s no competition to lower the rate. Xcel makes about 20M after-tax profits a year from Boulder. The city’s equivalent payment would be about 5%, so there’s savings to put into renewables without raising taxes. And when our mortgage is paid off, we’ll have significantly more money for renewables, while our lease to Xcel goes on in perpetuity.

    If I have a shoe store and want to open a second shoe store, I need to borrow money to build. I then pay that back based on selling shoes. Xcel doesn’t work that way. Their profits are based on infrastructure, like their billion dollar coal plant in Pueblo, and the rate of return is baked in at the PUC. This is inherently anti-competitive and rewards Xcel for building more power plants, because they make more money, so they’ve built infrastructure at a far greater rate than needed to serve the communities including the hottest day of the year. This is good for their stock holders, but not the ratepayers.

    As an angel investor, I favor competition, and a monopoly is intrinsically non-competitive. Check out Marin County outside San Francisco. Breaking away from PG&E has enabled them to favor entrepreneurs in competitive bidding to supply their power, and they’ve lowered rates and increased renewables.

    • Thanks for this comment Merrill. As I’m writing this the results of the election are in and the pro-muni block will have more of our money to continue to spend on this (as you know from my post above I don’t think the extra time and money will result in any progress and will actually move us away from our renewable goals, but I respect that your opinion is different than that).

      There are a few things above that I’d like to address. For starters, I’m quite familiar with the infrastructure involved in operating an electric grid and can assure you I’m not confusing transmission and distribution. In my mind you’re confusing incremental progress with the future. You’re talking about making the horse buggy faster. I’m talking about building an airplane.

      You make a common argument around the finances of operating a muni, but unfortunately it doesn’t work like that. Yes, Xcel makes a profit (which as you point out is regulated by the PUC) from operating the power grid locally. But the idea that we can simply take over that profit and apply it to renewables isn’t correct. That’s like assuming that you can apply your neighbors principal payment from their mortgage to you when you buy their house. The cost of the asset (or house) and the cost of capital are what determine that. As you know from my post, I don’t think the economics are going to work for us at all – the cost of our taking over the plant will be much higher than even the most rosy assumptions (which keep moving up, I’d add) from the pro-muni side. And the cost of maintaining an aging and outdated infrastructure will eat into that further.

      I do agree with your more generalized comment that competition here would be beneficial (I am a capitalist, after all). But replacing the Xcel monopoly with the Boulder monopoly isn’t progress, isn’t a good way to spend taxpayer money and most importantly isn’t the best way for us to achieve our carbon goals.

  • Ted James

    Thoughtful and well-reasoned arguments. “We’d be much better off spending this money…on actual energy efficiency.” This is spot on — and I’d only add targeted spending on lobbying that could lead to better outcomes for Boulder in the longer-term. Don’t get saddled with legacy assets, too much debt, and operational challenges. If advancing climate change mitigation is the goal, there are other ways than municipalization to aggressively push for progressive change. All the best from California and thanks for posting.

  • Merrill Glustrom

    Some points to consider:

    1. Your argument conflates transmission lines with distribution lines. The transmission lines take the electricity from coal and gas-fired plants to cities like Boulder. Once to the city, the electricity is distributed to individual homes and businesses via distribution lines. While the transmission lines system will be disrupted if large coal- and gas-fired plants close, replaced by large solar and wind farms, the need to get power to individual homes and businesses within the city will remain stable.

    Moreover, the analysis does not take into account that we can do more with the lines if we own rather than lease, just as you can do more with a home you own rather than rent. Also, as homes and businesses generate more of their own power, distribution lines will allow that power to flow to other homes and businesses in the city. It’s a much more dynamic system than Xcel provides (see point below on Xcel infrastructure-based profit model. This is especially important as we convert more of our power to alternatives, based on competitive bidding from multiple energy providers and local sources (see Marin County).

    2. Your analysis also does not take into account that if the city contracts with Xcel to provide our power, Xcel will not let the city use its system for free; rather they charge ratepayers to “lease” the system. The real question is whether purchasing the system in an arrangement similar to a mortgage will cost more than leasing. The city’s conservative calculation has taken these costs into account, and there is an added safeguard: Our total costs for the Muni cannot be more than what Xcel would charge for a lease.

    So we will not have 300M to spend on alternative energy; it will all go to Xcel. There’s no free lunch here, and we can only spend above what we need to pay Xcel, and that means raising taxes, or not doing much about renewables. It’s laudable that Xcel hopes to have 55% renewables in ten years, but three points: 1) Xcel has told us that the Muni effort was important in moving their thinking; 2) they’re free to change this figure at any time; there is no contract; and 3) and most important we can do far better.

    Finally, are you aware of Xcel’s business model? If I own a shoe store and decide to buy a second store, I must take out a loan, which I can only pay back based on the shoes I sell. I had better be competitive in price, reliability, and marketing. Xcel makes their profits not on a competitive basis, but on the infrastructure, they build. That’s why they built a billion-dollar coal plant in Pueblo even though they’re generating far more power than need, above the reserve margin and calculating for the hottest day of the year. Their rate of return is determined by the Public Utilities Commission (governmental agency), and baked in, regardless of sales or the price of coal. That’s what’s going on now: the price of coal is up, (no one is building coal plants) which should eat into their profits, even creating a massive loss, as a profit making venture did something so short sided would incur (think investing in typewriter company 30 years ago) but not so with Xcel, their profits are assured and continue to be quite high (about 20M per year from Boulder alone) because they built the coal plant and several gas plants.

    As an angel investor, I have a strong philosophical abhorrence of this perverse profit model. It’s not in the rate payers interest.