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Thursday, October 17,2013

Election Guide 2013: Yes on Boulder Ballot Question 2E

By Boulder Weekly Staff

City of Boulder Ballot Question 2E
Electric Utility Amendments, $214 million acquisition debt limit and superseding other initiatives

Vote Yes

This is the ballot question that was added by the Boulder City Council as a response to the Xcel-backed ballot Question 310.

If Question 2E passes, it would amend Boulder’s Home Rule Charter by setting a $214 million limit on the bonds or other debt obligations that the city could issue for the purpose of acquiring Xcel’s electric system assets and paying the company’s stranded costs should the city move forward with its plans to create a city-owned electric utility. Question 2E would also allow the approximately 7,000 county residents living outside city limits, but who would get their electricity from a newly formed City of Boulder electric utility if the municipalization process is successful, the opportunity to serve on the city utility’s advisory board.

One of the primary reasons the city has put forward this question with its $214 million limit is to combat the very high figures being put forward by anti-municipalization proponents supported by Xcel, whose flyers and other advertising have been making claims that the city may have to spend more than $600 million to acquire the company’s fixed assets and pay it for its stranded costs.

The city has long claimed that these higher figures are greatly exaggerated and that it would not move forward with its municipilization plans if it had to spend that much on the initial acquisition.

Question 2E could be thought of as the City of Boulder’s way of guaranteeing voters that it won’t overspend to create its own utility.

Voters should also be aware that if both Questions 2E and 310 pass, then the question that receives the most votes will be the one that the city implements.

It’s really a shame that the city felt it even needed to put forward Question 2E in order to combat the Xcel-backed question 310. That’s because the real issue of municipilizing is not which future provider, Xcel or the city, can save us a few cents on our electric bill. The real issue of creating a city-owned utility is global warming. Another new study found that in just 47 years, the coldest day on Earth (taking all temperatures around the globe, both winter and summer, and averaging them together) will be hotter than the hottest day on Earth in 2000.

If you believe that a utility owned and operated by the people of Boulder will be more committed to finding sustainable sources of energy than a utility owned by Xcel, whose primary legal obligation is to return the maximum profit possible to its shareholders, then vote yes on 2E.

And besides, its very likely that residents will pay less for electricity through a city-owned utility than they do through Xcel because the city doesn’t have to generate excess revenue as profit. But the main reason to vote yes on 2E is for the health of the planet and our children and children’s children.

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It pretends to set a $214 million debt limit, but that is only for acquisition costs, which many poorly informed voters won't realize. It does not include other start up costs which aren't limited. It includes "stranded costs" that would be paid to Xcel, but *only* if they are paid in a lump sum, it explicitly allows them to be paid over time in rates. Current city plans already borrow money to subsidize the rates at first. So the city could for instance say make a deal to pay Xcel $400 million over time out of rates for a few years, then borrow $400 million more in start up costs it uses to subsidize those initial rates. Effectively the city has a blank check, while pretending to the uninformed that it set a debt limit, hoping apparently to mislead people that aren't paying close attention into thinking this is a real debt limit since they include a $ figure.

In fact the charter changes are somewhat unclear, but it appears the city could probably even make a deal to pay stranded costs not in a lump sum,but not out of rates either (they merely use that as one explicit thing they allow). It may be they could simply pay Xcel in 2 payments, $400 million the first year and $1 the second year.

The city's ballot issue tries a sleazy scam to pretend to do something for county residents, but in fact doesn't guarantee to provide them anything. The actual charter changes just suggest that they will *attempt* to provide some choice in the future for groups (not individuals) and only between Xcel and the muni of course. The "attempt" may amount to thinking about it for five minutes and saying "nah, we don't know how to do it, thats enough of an attempt, we give up". It also doesn't say which year.. or century.. this might occur in.

If anything there may be some pro-muni folks that support 310 instead since they support the idea of a real democratic decision. They may grasp that if they try to grab county residents without a vote that this may be tied up in court for a while. In almost every way the city has no more jurisdiction over those county residents outside its border than say the government of Mexico would have or a private citizen or corporation has. The limited exceptions re: eminent domain are likely not relevant, and are ripe to be challenged at the US Supreme Court level as being unconstitutional. If the city of Colorado Springs tried to pass a conservative law they wished to enforce within the city of Boulder they would be laughed at. It is no less absurd for the city of Boulder to try to control county residents merely because they live next to the city border.



re: "The real issue of creating a city-owned utility is global warming"

The problem is the muni is a greenwashed obsolete dead-end path, not the wave of the future.

Muni advocates tout the growth of renewable energy in Germany on their website. They neglect to mention that progressive green activists credit breaking the power generation monopoly as a crucial factor leading to the decentralized creation of new green energy facilities. They now have over 1000 power providers to choose from.

In 17 states and many countries around the world you can choose to buy power from any company you want, just as you can choose your own cell phone provider here. Residents can choose a company providing 100% renewable energy *today*, they aren't stuck with 1 choice the way Colorado currently is. Power monopolies are being broken to enlist competition to produce the same type of improvements in power generation as it has in computers, consumer electronics, and cell phone service.

The Camera has written about Texas munis adding more renewable power. They neglected to mention that Texas broke its power monopoly but allowed munis to keep their monopolies if they wished to, and almost all did. In most of the state people can get 100% renewable energy, but munis there are stuck playing catch up to satisfy public demand. Unfortunately when Colorado breaks the monopoly, a Boulder muni would likely keep its monopoly to pay off huge bond costs for a few decades. We will be left in the dust on a dead-end path while competition quickly arises to offer residents elsewhere in the state 100% green power.

Democratic former US Energy Secetary Frederico Pena (also formerly mayor of Denver) was co-chair of the COMPETE Coalition which is pushing for competition around the country, and wrote an oped advocating it in the Denver Post last year. The other co-chair at the time was former GOP US Senator Nickles since there is bipartisan support for the issue. Free market advocates value competition, and those skeptical of markets hate big corporations the most. In Michigan for instance where voters have been educated about the topic a recent poll shows 82% of consumers want the freedom to shop for electricity service. 70% of them are more likely to vote for candidates who support energy choice, with the majority of them saying it is a strong determining factor.

Competition advocates seem to be focusing on larger states now, but Colorado will eventually join the wave of the future. Legislators who are opposed can be rightfully added to a public blacklist of those who appear to be in the pocket of Xcel before the next election. The city of Boulder spends money to lobby the state. Its likely if it had spent the amount of money it used to study the muni to instead lobby to break the monopoly it would already be in the works. That would open up an energy market around fifty times larger than Boulder to inspire the creation of new renewable providers.

The muni isn't about renewable energy, that is greenwashing. If it were the city would propose spending hundreds of $millions on renewable energy generation facilities (it can do that without a muni, it already has a tiny bit of hydro), or subsidies for solar for buildings. Instead its proposing to waste it buying poles&lines since council likes the idea of "playing monopoly". A better approach is to allow private investors to risk their money to compete to provide new renewable energy generation facilities.

Let informed investors decide which technology may work best, as they do in the computer industry, instead of risking the government handing contracts to politically connected insiders. The free market approach of trying many things to see what works best did a better job evolving computer technology than the defunct Soviet model of a government monopoly controlling the direction of an industry in a 1 size fits all fashion.

The number of munis peaked almost a century ago, a muni isn't leading the way into the future. It is a conservatively nostalgic retreat to a romanticized view of the past. There is no reason to waste money and effort switching from a private monopoly to a government monopoly when the general consensus among scholars is that power production needn't be a monopoly to begin with.

There isn't currently an organized effort in Colorado to break the monopoly. Green activists however should take a long term perspective and consider putting their effort into following the leaders on the issue instead of wasting time derailing Boulder onto a dead end path. The more states that break monopolies, the more market there will be for companies to invent better renewable energy technology.



re: "because the city doesn’t have to generate excess revenue as profit."

That is silly, the city will be paying private companies for power and to operate this and they wil take profit, it won't magically disppear. It is important to set a real debt limit since Boulder's fantasies about costs are likely as flawed as the initial FastTracks estimates, their whole model strains credulity. If a private company were to take over from Xcel with the exact same operational costs, but $hundreds of millions in debt, most people could grasp that the rates would go up to cover the debt payments. Now pretend a city took over, and then merely let that same other company run it (with its same profit). It should be obvious that the costs haven't changed and that the rates would also have to go up to cover the debt costs.

In this case the city may not hand everything over to one company, but muni advocates say the city is likely to contract out operations (which won't be regulated so it may have a higher profit margin), and initially it will buy its power from Xcel (or then from other entities that take a profit). The only part of this where there will be less "profit" is what the city does itself, whatever tiny fraction of it, and it isn't clear there will be any savings since the city will lack economies of scale and have a learning curve doing something new and be less efficient at first. Munis pay fees in lieu of taxes (despite of course less "profit" since it farms out most tasks), and of course just as with a regular utility or company or even a city, some "profit" has to be saved for emergencies or future expansion.

So just like the case of a private company taking on Boulder, it seems the city will need to raise rates to cover the debt costs since it won't have enough "savings" elsewhere, potentially a minor amount from any taxes it doesn't replace with fees but unlikely enough to cover the debt payments. Activists haven't come up with a credible explanation for how they can take on a huge debt load and magically be comparable, or supposedly even cheaper.



The Boulder Weekly unfortnately seems to be very poorly informed on the issue, it seems like they merely bought into every piece of nonsense propaganda the 2E and anti-310 folks pushed.

There are more comments on the Daily Camera's voter guide as well, and many posters combat the various myths and misinformation about these ballot issues on any letters and articles on the topic. I'd suggest anyone thinking about voting against 310 or for 2E post a comment on one of the Camera pages when a letter to the editor or article on the topic arises and you will find people there to address whatever reason you have which may be based on myths. The anti-democratic anti-310 campaign is full of a  lot of mislading information and outright misinformation.



"Activists haven't come up with a credible explanation for how they can take on a huge debt load and magically be comparable, or supposedly even cheaper. "

Bull.  YOU totally ignore the cost of the $$ in assets to Excel, apparently with an intent to mislead.

Obvsiously, Excel's rates cover these assets now - if only to offset the opportunity cost of what they could make if those $$ were used/invested elsewhere.

So the question is whether their profit for those investments are higher than the debt cost to a city muni.  There is no magic, just simple economics.

For myself, I'm voting against 310 because I get the impression that Excel has used its deep pocketbook to obscure facts and mislead (probably including hiring people to write comments such as yours).

I'm not sure I like 2E either, though... I may vote against both.


re: "Bull. YOU totally ignore the cost of the $$ in assets to Excel, apparently with an intent to mislead." Your comment makes little sense.I didn't ignore the cost of those assets to Xcel, Boulder will be paying for them. It isn't clear what sort of twisted view of this the muni folks have managed to convey, it is very simple. Yes, there is magic, your comment seems to indicate a lack of understanding of of simple financial matters. Have someone who knows something about them explain my comment above, it is basic business 101. re: "(probably including hiring people to write comments such as yours)." i.e. you understand very little about the topic. I advocated above breaking the power generation monopoly statewide, which would cost Xcel *far* more than just losing Boulder. They'd have to be complete idiots to have paid me anything. Unfortunately most folks in the Boulder bubble refuse to bother learning about what is going on in the rest of the world, and have pushed a greenwashed obsolete dead end path merely because council likes the idea of being in control, and some folks locally hope to make lots of money off contracts from a muni. re: "get the impression that Excel has used its deep pocketbook to obscure facts and mislead" The obfuscation has been on the part of the muni advocates, as I noted the Empower website pushes Germany as an example.. and doesn't mention that they broke their power monopoly, just as the Camera has been lobbying for their buddies on council and avoided mentioning that Texas broke its monopolies when they write about the Texas munis getting more green power, neglecting to mention they are playing catchup to what people can get in the rest of the state.