Xcel petition to Federal Energy Regulatory Commission

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SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 NEW YORK AVENUE, N.W.

WASHINGTON, D.C. 20005-2111 TEL: (202) 371-7000

FAX: (202) 393-5760

www.skadden.com

August 26, 2014

Kimberly D. Bose

Secretary

Federal Energy Regulatory Commission

888 First Street, N.E.

Washington, DC 20426

RE: Public Service Company of Colorado, LLC, Docket No. EL14-___-000

Dear Secretary Bose:

Public Service Company of Colorado (“PSCo”) hereby submits for filing a Petition for

Declaratory Order (“Petition”). In accordance with sections 385.207(c) and 381.302(a) of the

Federal Energy Regulatory Commission’s Rules of Practice and Procedure, 18 C.F.R.

§§ 385.207(c) and 381.302(a), and the Annual Update of Filing Fees, 146 FERC ¶ 62,199

(2014), I am electronically submitting to the Treasurer of the United States $24,260 for the filing

fee associated with the Petition.

Also included is a form of notice suitable for publication in the Federal Register. If you

should have any questions regarding this filing, please do not hesitate to contact the undersigned.

PSCo will serve a copy of this Petition on the City of Boulder, Colorado and on the

Colorado Public Utilities Commission. A copy is also being served on the Director - Office of

Electric Market Regulation (West).

Respectfully submitted,

/s/ John S. Moot

Enclosures

1

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Public Service Company of Colorado

)

)

)

Docket No. EL14-___-000

PETITION FOR DECLARATORY ORDER OF PUBLIC SERVICE COMPANY OF COLORADO

Public Service Company of Colorado (“PSCo” or “Public Service”) hereby petitions for

an order declaring that: (i) the City of Boulder, Colorado’s (“Boulder”) attempt to acquire

PSCo’s transmission facilities and associated substations by condemnation requires prior

approval by the Commission under Federal Power Act (“FPA”) section 203, 16 U.S.C. § 824b;

(ii) the Commission, when exercising its section 203 jurisdiction, will apply its longstanding

criteria that consider, inter alia, the effect of the proposed transfer on rates, regulation, and other

relevant factors; and (iii) the Commission’s exercise of its section 203 jurisdiction does not

diminish the authority of the Colorado Public Utilities Commission (“CPUC”) over the transfer

of facilities that are the subject matter of the condemnation. This declaratory relief is necessary

because Boulder appears to be attempting to effectuate its condemnation without prior regulatory

review at either the state or federal level. PSCo respectfully requests action on this Petition

within 120 days in order to “terminate [the] controversy” and “remove [the] uncertainty”

associated with these important issues. 18 C.F.R. § 385.207(a)(2). Commission action within

this time frame will provide timely clarity to the Colorado courts and the affected public on these

issues.

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SUMMARY

Boulder has filed a Petition in Condemnation in state district court (“Condemnation

Petition” and “Condemnation Court”) to acquire PSCo’s electric system in the Boulder area,

including a 115 kV transmission loop and associated 115 kV and 230 kV transmission

substations (together, the “Transmission Loop”). The Transmission Loop provides transmission

service in interstate commerce under the Xcel Energy Operating Companies Open Access

Transmission Tariff (“Xcel Energy OATT”) and forms an integral part of PSCo’s transmission

system. Its value is far in excess of $10 million. Prior approval from the Commission under

section 203 is therefore required before PSCo can transfer these jurisdictional facilities to

Boulder.

This Petition is necessary because Boulder appears to be attempting to complete its

condemnation without any prior state or federal regulatory review. At the state level, the CPUC

has asserted jurisdiction over some of the facilities that are subject to the Condemnation Petition

and ordered Boulder to obtain CPUC approval of Boulder’s acquisition plans before

commencing its condemnation action (“CPUC Jurisdictional Order”). However, Boulder has

flouted that ruling by submitting its Condemnation Petition without first obtaining CPUC

approval. Boulder has also commenced a separate action in Colorado District Court appealing

the CPUC Jurisdictional Order and, relevant here, has argued that FERC’s post-condemnation

jurisdiction over transmission and reliability matters supplants any need for the CPUC to

consider those issues as they relate to retail customers. Boulder has not, however, acknowledged

to its citizens, the Condemnation Court, or the District Court hearing the appeal of the CPUC

Jurisdictional Order that condemnation and transfer of the Transmission Loop requires prior

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Commission approval under section 203. In fact, in a recent filing in state court Boulder has

contended that the Commission has no such jurisdiction.

This failure to acknowledge or respect this Commission’s jurisdiction is particularly

concerning given the nature of a Colorado condemnation action. Under Colorado law, the first

phase of the proceeding determines the property interests to be taken and, once compensation is

determined in the second phase, a final condemnation order effectuates the transfer of the

condemned property. Despite having initiated this process—and recently proclaiming that it

“starts the countdown” to a takeover of the property in 2016—Boulder has failed to acknowledge

the requirement to obtain section 203 approval from this Commission. It therefore appears that

Boulder is attempting to circumvent this Commission’s jurisdiction and obtain dispositive

Condemnation Court rulings on the property to be taken without reflecting binding federal

determinations under section 203 with respect to the same property.

It has therefore become necessary, to provide clarity to the public and the state courts

hearing condemnation matters, for the Commission to rule on three straightforward questions:

(i) whether section 203 applies to Boulder’s attempted condemnation of the Transmission Loop,

(ii) whether the Commission will apply its traditional criteria in exercising that section 203

jurisdiction, and (iii) whether the Commission’s exercise of its jurisdiction will diminish the

CPUC’s authority over the transfer of facilities that are the subject of the condemnation. The

answers sought by PSCo are, consistent with longstanding precedent, as follows.

First, the Commission has jurisdiction under section 203 because the facilities in question

provide transmission service in interstate commerce and have a value in excess of $10 million.

There should be no reasonable debate about this. Although Boulder appears to believe, given its

actions before the Colorado courts, that condemnation creates an exception to traditional

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regulatory review of public utility asset transfers, the Federal Power Act provides no such

exception.

Second, the Commission’s longstanding policy under the section 203 “public interest”

test is to consider, among other factors, the effect on rates and regulation. Here, too, there is no

exception for condemnation actions by a non-jurisdictional transmission provider. If anything,

the Commission’s traditional concerns are even greater in this situation because Boulder is

attempting to remove an integrated transmission facility from plenary federal regulation under

FPA sections 205 and 206. Although PSCo is not requesting a definitive determination at this

time as to how these traditional factors will apply, it is nonetheless important the Commission

declare that they will in fact apply, and we provide examples of why that clarification is

important on the facts here.

Third, the Commission’s exercise of section 203 jurisdiction will not diminish the

CPUC’s authority over the transfer of facilities that are the subject of the condemnation. The

Commission has long held that its section 203 jurisdiction is concurrent with, not preemptive of,

state commission review of the transfer of public utility assets that provide bundled service at

retail. Confirming that this longstanding rule applies here is important because Boulder has

sought to bypass the CPUC’s authority by relying, in part, on this Commission’s purported post-

acquisition jurisdiction over certain matters. By affirming that section 203 does not trump the

CPUC’s authority, the Commission can avoid any further mischaracterization of its jurisdiction

in state court.

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COMMUNICATIONS

Pleadings and other communications concerning this Petition should be directed to the

following individuals1 on behalf of PSCo:

William M. Dudley

Assistant General Counsel-Lead

XCEL ENERGY SERVICES INC.

1800 Larimer St., Suite 1100

Denver, CO 80202

Telephone: (303) 294-2842

[email protected]

John S. Moot (*)

Gerard A. Clark

Tim T. Mastrogiacomo

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

1440 New York Avenue, N.W.


Telephone: (202) 371-7000

[email protected]

[email protected]

[email protected]

BACKGROUND

I. PSCO AND THE TRANSMISSION LOOP IN THE BOULDER AREA

PSCo is headquartered in Denver, Colorado and is a wholly-owned subsidiary of Xcel

Energy Inc. (“Xcel Energy”), a public utility holding company. PSCo is a fully integrated utility

that, inter alia, generates, transmits, distributes, and sells electric energy to approximately 1.4

million retail and wholesale customers in the State of Colorado. PSCo is the largest electric

utility in Colorado, and its service territory includes several of the largest cities in the state—

including the City of Boulder. PSCo owns approximately 5,500 MW of generation capacity in

Colorado.

PSCo owns and operates an integrated transmission system consisting of approximately

4,500 miles of transmission lines at 44 kV and above and 55 transmission substations, all in the

State of Colorado. PSCo provides open access transmission service over these facilities under

the Xcel Energy OATT.

1 Persons marked with an asterisk (*) are designated for receipt of service pursuant to Rule 203(b)(3) of the

Commission’s Rules of Practice and Procedure (18 C.F.R. § 385.203(b)(3)).

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PSCo owns several 115 kV transmission facilities in and around the City of Boulder,

Colorado. These facilities are part of PSCo’s integrated transmission system and are subject to

open access transmission service under the Xcel Energy OATT. These 115 kV facilities include

looped transmission lines and six substations that run from PSCo’s Valmont substation, around

the City of Boulder to the Eldorado substation, and then back to the Valmont substation (the

“Transmission Loop”). The following is a map that shows the Transmission Loop:

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The Transmission Loop is part of PSCo’s integrated transmission system over which

service is offered under the Xcel Energy OATT. Boulder’s staff recognized this in

recommending that the City Council condemn the loop: “The 115kV transmission loop allows

for multiple points of delivery to the distribution system and provides redundancy both within

the loop (failure of one segment does not take a substation out of the system) and outside the

loop since it is connected to Xcel’s transmission system in two locations.” Memorandum from

City of Boulder to Boulder City Council, “Updated Proposed Service Area for Municipalization”

(July 23, 2013) (“July 23 Memorandum to City Council”) (attached hereto as Attachment B) at

15.

The Transmission Loop was constructed in several segments between 1910 and 1969 and

has thereafter been upgraded on a continuing basis. The facilities have a net book value

significantly in excess of the $10 million jurisdictional limit under section 203. See Affidavit of

Betty L. Mirzayi (“Mirzayi Affidavit”) (attached hereto as Attachment A) ¶ 10. However, the

condemnation of these facilities will (assuming, for these purposes, that it occurs) require

Boulder to compensate PSCo for the fair market value of these facilities (including real estate).

The fair market value of the Transmission Loop far exceeds its book value. Id.

II. BOULDER’S MUNICIPALIZATION EFFORTS

The residential, commercial and industrial customers within Boulder are currently retail

customers of PSCo. PSCo currently serves approximately 240 MW of load in the City of

Boulder, which represents approximately 4% of PSCo’s total retail load. PSCo and its

predecessors have served the full requirements of all retail customers in Boulder for over a

century.

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In November 2011, the Boulder City Council placed Ballot Measures 2B and 2C on the

city ballot. Measure 2B proposed to raise the city occupation tax by $1.9 million annually in

order to fund further planning for the creation of a municipal utility and the acquisition of

PSCo’s electric distribution system. Measure 2C proposed to authorize the formation of a

municipal electric utility and the issuance of revenue bonds to finance the acquisition of the

Public Service electric distribution system, but only if the City Council could demonstrate, with

verification by a third-party independent expert, satisfaction of certain metrics, including that the

municipal utility (a) would charge rates not to exceed the rates charged by PSCo at the time of

acquisition and (b) operate with reliability compared to PSCo. Both measures passed narrowly.

On February 26, 2013, Boulder City Council staff completed a report titled “Boulder’s

Energy Future Municipalization Exploration.” Boulder City Council, “Study Session: Boulder’s

Energy Future Municipalization Exploration” (Feb. 26, 2013) (“Boulder Municipalization

Report”), available at https://www-static.bouldercolorado.gov/docs/BEF_SS_Feb26_2013_

Final_Packet-1-201306201201.pdf. The study purported to find that municipalization was

feasible and proposed, inter alia, a separation plan under which the service territory for the self-

dubbed “Utility of the Future” would extend beyond the Boulder city boundaries and would

include customers outside the city limits. See Boulder Municipalization Report at Attach. E

(Service Territory Map). City staff had previously considered annexing the additional territory,

but ultimately it did not pursue annexation and instead determined to include non-city customers

within the service territory of the municipal utility by acquiring PSCo’s facilities that serve those

customers. The separation plan proposed that the municipal utility would acquire PSCo’s

distribution facilities, including facilities on the low-voltage side of transmission substations.

The plan did not contemplate acquiring the 115 kV Transmission Loop.

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On July 23, 2013, City staff completed a report updating the municipalization plan, and

on July 24, 2013 the City Council held a special meeting to address the municipalization plan to

guide the City Council at its August 2013 meeting. See City of Boulder Report to Boulder City

Council, “Study Session: Boulder’s Energy Future Municipalization Exploration Project” (July

23, 2013) (“July 23 Report”) (attached hereto as Attachment C). The July 23 Report reaffirmed

the City Council’s prior decision to extend the service territory of the municipal utility beyond

the city boundaries to include customers outside the city and modified the plan to include

additional areas outside the city boundaries. See July 23 Memorandum to City Council at

Attach. B-1 (map of proposed Service Area). As a result, the proposed service territory for the

municipal utility included approximately 7,000 PSCo customers who live outside the city

boundaries. Mirzayi Affidavit ¶ 11.

The July 23 Report also proposed (for the first time) that the utility would acquire the

Transmission Loop from PSCo, including the 115 kV transmission lines and all or portions of the

six attached 115 kV substations. The reasons for proposing to acquire the Transmission Loop

were summarized in the July 23, 2013 Memorandum to the City Council:

The engineers recommend including the 115kV transmission loop to provide

integrated transmission capacity alongside the traditional distribution network

which will allow Boulder’s local utility to better manage the flow of electricity

throughout the service area. The use of transmission facilities reduces electricity

line losses associated with moving electric power from the source of generation to

the point of delivery. The 115kV transmission loop allows for multiple points of

delivery to the distribution system and provides redundancy both within the loop

(failure of one segment does not take a substation out of the system) and outside

the loop since it is connected to Xcel’s transmission system in two locations.

Owning and operating the 115kV transmission loop will improve reliability for

Boulder’s customers by minimizing the outages associated with the distribution

system and decreasing the amount of time that it would take to restore power to

those that are affected by an outage. It also allows upgrades to specific

substations or additions to serve new load without the entire system having to be

upgraded or changed.

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In addition, it is critical for a local utility to own and control internal transmission

capacity to manage local generation, distributed generation, energy storage, and

management of demand response programs. The loop can be acquired without

negatively impacting the service provided by Xcel, and in fact acquisition of the

loop benefits to Xcel in several ways, including that the city will be able to focus

greater resources on maintaining and upgrading these facilities and reduces Xcel’s

exposure for this aged equipment or balancing resources within the city.

July 23 Memorandum to City Council at 15. Boulder also proposed to acquire additional

transmission facilities, including facilities on the high-side of three 230 kV substations

(Gunbarrel, Niwot, and Leggett). Id. at 13-14.

The July 23 Report claimed that the acquisition of the Transmission Loop would not

change the previous $150 million cost estimate for acquisition of the PSCo facilities, although it

would add $28 million in costs over twenty years to maintain and update the loop. July 23

Report at 21. The report did not explain how acquisition costs would remain the same after

purchasing substantial PSCo transmission and substation facilities. The report also did not

mention that FERC approval under FPA section 203 is required before the Transmission Loop

and other FERC-jurisdictional transmission facilities could be transferred from PSCo to the

municipal utility, nor did it acknowledge that the CPUC had authority to review and approve the

transfer.

On August 20, 2013, the City Council adopted an ordinance authorizing the City

Manager to acquire property interests and assets owned by PSCo within the area specified in the

July 23 Report. The ordinance included the authority to exercise the power of eminent domain

by filing a petition for condemnation on or after January 1, 2014. In November 2013, voters in

the city approved a cap of $214 million on the amount of debt that the City can take on to acquire

property from PSCo and cover payments for stranded costs. On January 6, 2014, Boulder sent

PSCo a Notice of Intent to Acquire, informing PSCo that Boulder intended to acquire

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unspecified partial interests in some of PSCo’s facilities and other property rights within the

acquisition area, by eminent domain if necessary. The Notice of Intent was followed by a

May 22 “offer” to purchase that property from PSCo for $120 million, in which Boulder

confirmed it intended to take PSCo’s Certificate of Public Convenience and Necessity (“CPCN”)

to serve the customers outside the city limits; a “final offer” of $128 million on June 10, 2014, in

which Boulder again indicated it intended to take the CPCN; and then a modified final offer on

July 3, 2014, in which Boulder reversed course and indicated that it no longer intended to acquire

the CPCN. Boulder has subsequently indicated that it retains the right to reverse course again

and seek to acquire the CPCN.

On August 19, 2014, Boulder staff released a report specifying some of the steps to be

taken to complete the municipalization effort. City of Boulder Memorandum to Boulder City

Council, “Energy Future Transition Work Plan” (Aug. 19, 2014) (“Aug. 19, 2014

Memorandum”) (attaching City of Boulder Report of Transition Planning for New Electric

Utility (Aug. 12, 2014)), available at https://www-static.bouldercolorado.gov/docs/2014.08.19_

Boulders_Energy_Future_Transition_Work_Plan_IP_Final-1-201408141037.pdf. Boulder staff

described the recent condemnation filing as “start[ing] the countdown to startup of a city-owned

electric utility.” Aug. 19, 2014 Memorandum at 2. Boulder staff also projected that Boulder will

“take[] ownership” of PSCo’s facilities in “third quarter 2016.” Id. The report vaguely

references undescribed “regulatory activities or filings,” but, once again, fails to disclose that

Commission approval under section 203 is required. Id. at Attach. A (City of Boulder Report of

Transition Planning for New Electric Utility) at 6.

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III. PSCO’S PETITION FOR DECLARATORY ORDER AT THE CPUC AND BOULDER’S

APPEAL

Once the Boulder City Council voted to proceed with its municipalization plans at its

April 16, 2013 meeting, PSCo filed a Petition for Declaratory Orders with the CPUC in May

2013 asking the CPUC to provide guidance on the extent of its certificate jurisdiction regarding

the PSCo customers outside the Boulder city limits who involuntarily would become customers

of the municipal utility under Boulder’s proposed plan. See In the Matter of the Verified Petition

of Pub. Serv. Co. of Colo. for Certain Declaratory Orders Concerning the Rights of Pub. Serv.

Co. of Colo. Under Its Serv. Territory Certificate Covering Boulder Cnty., Colo., Verified

Petition for Declaratory Orders, CPUC Docket No. 13D-0498E (May 9, 2013) (“PSCo CPUC

Petition”). Specifically, PSCo asked the CPUC to declare that (1) a municipal utility seeking to

serve customers outside the city boundaries is subject to the CPUC’s certificate jurisdiction; (2)

PSCo already has a certificate to serve all customers located in Boulder County; (3) PSCo’s

certificate is exclusive under Colorado law; (4) PSCo’s certificate cannot be taken away absent a

finding by the CPUC that PSCo is unwilling or unable to serve its customers; and (5) the need to

construct replacement facilities as a result of a condemnation action does not constitute an

inability to serve. See id.

Boulder opposed PSCo’s Petition. See In the Matter of the Verified Petition of Pub. Serv.

Co. of Colo. for Certain Declaratory Orders Concerning the Rights of Pub. Serv. Co. of Colo.

Under Its Serv. Territory Certificate Covering Boulder Cnty., Colo., City of Boulder’s Response

to Public Service Company of Colorado’s Verified Petition for Declaratory Orders, CPUC

Docket No. 13D-0498E (Aug. 15, 2013). Boulder agreed with the first three requested

declarations, but argued that request no. 4 should be denied because a CPUC certificate is a

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property interest and, as a home rule municipality, Boulder allegedly has the authority to

condemn that property interest. Boulder also argued that request no. 5 should be denied because

it would encourage PSCo to construct duplicative facilities and it would undermine the

Condemnation Court’s supposed authority to determine the terms and conditions for condemning

PSCo’s property interests.

On October 9, 2013, the CPUC issued an order granting PSCo’s Petition for Declaratory

Orders. See In the Matter of the Verified Petition of Pub. Serv. Co. of Colo. for Certain

Declaratory Orders Concerning the Rights of Pub. Serv. Co. of Colo. Under Its Serv. Territory

Certificate Covering Boulder Cnty., Colo., Decision Issuing Declaratory Rulings, CPUC Docket

No. 13D-0498E (Oct. 9, 2013) (“CPUC Jurisdiction Order”) (attached hereto as Attachment D).

The CPUC first ruled that a declaratory order was proper because the CPUC has the authority to

rule on its own jurisdiction and the matter was ripe because a declaratory ruling “will instruct the

parties on the legal standards governing their conduct and disputes” and “will have a practical

effect on an actual and existing controversy between Public Service and Boulder.” CPUC

Jurisdictional Order at PP 16, 18. The CPUC then ruled that it has exclusive jurisdiction over

PSCo’s certificate to serve customers outside the city limits and that, under state law, another

utility cannot serve those customers unless the CPUC determines that the certificated utility is

unwilling or unable to provide adequate service. Id. at PP 20-25. The CPUC ruled that this

authority and these standards are not affected by the pendency of a condemnation action. The

CPUC further ruled that:

If Boulder seeks to condemn facilities, wherever located, that Public Service

currently uses, at least in part, to serve customers located outside Boulder’s city

limits, this Commission must have the ability to investigate and determine how

the facilities should be assigned, divided or jointly used to protect the system’s

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effectiveness, reliability and safety, as well as other matters affecting the public

interest.

Id. at P 28. The CPUC also declared that CPUC proceedings addressing the transfer of PSCo’s

certificate to serve customers outside the city limits or other facilities used to serve those

customers “are to be completed before Boulder initiates a condemnation action for such

property.” Id. at P 30 (emphasis added).

On December 11, 2013, the CPUC denied Boulder’s Request for Rehearing, Reargument,

or Reconsideration of the CPUC Jurisdiction Order. See In the Matter of the Verified Petition of

Pub. Serv. Co. of Colo. for Certain Declaratory Orders Concerning the Rights of Pub. Serv. Co.

of Colo. Under Its Serv. Territory Certificate Covering Boulder Cnty., Colo., Decision Denying

City of Boulder’s Application for Rehearing, Reargument, or Reconsideration, CPUC Docket

No. 13D-0498E (Dec. 11, 2013) (“CPUC Rehearing Order”) (attached hereto as Attachment E).

The CPUC reaffirmed its conclusions in the CPUC Jurisdiction Order and reiterated its finding

that “Commission approval proceedings over regulated property is a condition precedent to a

condemnation action over the subject property.” Id. at P 20.

On January 15, 2014, Boulder filed an appeal of the CPUC’s orders in the District Court

for the County of Boulder. Boulder argued that the CPUC erred because Boulder had a legal

right to seek condemnation of a certificate without prior review by the CPUC and, once the

Condemnation Court ordered condemnation of the certificate, the CPUC no longer had the

authority to order construction of new facilities to serve the non-city customers. To support its

argument that the CPUC lacks jurisdiction to review its condemnation proposal, Boulder has

relied on this Commission’s jurisdiction over “reciprocal” transmission service provided by

Boulder to PSCo and this Commission’s jurisdiction over the reliability of the Bulk Electric

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System under section 215 of the FPA, 16 U.S.C. § 824o. See City of Boulder v. Colo. Pub. Utils.

Comm’n, No. 2014-CV-030047, City of Boulder’s Reply Brief at 30-31 (Colo. Dist. Ct. July 23,

2014) (“Boulder Reply Brief”). Boulder’s appeal is opposed by PSCo, the CPUC, and the

Colorado Office of Consumer Counsel.

In response to Boulder’s jurisdictional arguments before the District Court, PSCo has

informed the District Court that, in addition to CPUC jurisdiction, condemnation of the

Transmission Loop is subject to FERC jurisdiction under section 203. See City of Boulder v.

Colo. Pub. Utils. Comm’n, No. 2014-CV-030047, Sur-Reply Brief of Public Service Company of

Colorado at 6 n.18 (Colo. Dist. Ct. Aug. 8, 2014) (“prior approval for transfer of [the

Transmission Loop] will also be required to be obtained from FERC under Section 203 of the

Federal Power Act”). In reply, however, Boulder disagreed with PSCo’s position, stating

without acknowledging section 203 that “[t]he City’s research has . . . failed to disclose the

existence of any authority requiring that . . . the FERC make such decisions [regarding issues

relating to the transfer of the Transmission Loop] pre-condemnation.” See City of Boulder v.

Colo. Pub. Utils. Comm’n, No. 2014-CV-030047, City of Boulder’s Response to Sur-Reply

Briefs at 9 (Colo. Dist. Ct. Aug. 21, 2014) (“City of Boulder’s Response to Sur-Reply Briefs”)

(proposed response, pending grant of leave to file).

IV. CONDEMNATION PROCEEDING

On July 17, 2014, Boulder, in direct violation of the CPUC Jurisdictional Order, filed a

condemnation proceeding against PSCo in the District Court for Boulder County. City of

Boulder v. Pub. Serv. Co. of Colo., Petition in Condemnation, No. 2014-CIV-030047 (Colo.

Dist. Ct. July 17, 2014) (“Condemnation Petition”) (attached hereto as Attachment F). In its

Condemnation Petition, Boulder identified an “Acquisition Area” consistent with the separation

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plan in the July 23 Report, which included land and facilities in an area covering approximately

65 square miles, including approximately 39 square miles outside the Boulder city limits.

Consistent with its changed position, however, Boulder did not identify the PSCo Service CPCN

in the Petition or allege that it would seek to serve the 7,000 PSCo customers located outside the

city boundaries. The facilities to be condemned included the Transmission Loop (including the

FERC-jurisdictional transmission facilities on the high-side of three 230 kV substations). See

Condemnation Petition ¶¶ 13, 21, 33, Exh. A-2-TL. Boulder’s Petition recognized that the

Transmission Loop and other facilities it is seeking to condemn provide service to customers

outside of the city, although Boulder claimed only “a relatively small number of customers” are

affected. Id. ¶ 14. Boulder also stated that its condemnation actions include “the adoption of

transmission tariffs by the City that will provide reciprocal electric transmission service to Xcel”

and that “[t]he tariffs include transmission service over those lower voltage facilities that are part

of the Property to be acquired under th[e] Petition.” Id. ¶ 20. No specific transmission tariff

rates or terms were discussed in the Condemnation Petition.

Boulder’s condemnation filing makes no reference to FERC’s jurisdiction under section

203 of the FPA to review a public utility’s transfer of control over transmission facilities. The

filing also does not acknowledge that the CPUC has asserted jurisdiction over the transfer of

facilities associated with the condemnation.

On August 12, 2014, PSCo filed a Motion to Dismiss Boulder’s Petition in

Condemnation under Colorado Rule of Civil Procedure 12(b)(1) for lack of subject matter

jurisdiction. City of Boulder v. Pub. Serv. Co. of Colo., Public Service Co. of Colorado and Xcel

Energy Inc.’s Motion to Dismiss Under Colo. R. Civ. P. 12(b)(1) for Lack of Subject Matter

Jurisdiction, No. 14-CV-30890 (Colo. Dist. Ct. Aug. 12, 2014) (attached hereto as Attachment

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G). PSCo argued that the state Condemnation Court will not have jurisdiction to consider a

Petition in Condemnation filed by Boulder until and unless the CPUC considers the effect of

condemnation on customers outside of Boulder’s city limits and grants Boulder approval to

proceed. See id. at 3 (citing CPUC Rehearing Order at P 1 explaining that the CPUC has

“jurisdiction to approve the transfer of regulated property before a condemnation court acquires

subject matter jurisdiction over the property”).

SPECIFICATION OF RELIEF SOUGHT

PSCo requests that the Commission issue declaratory rulings stating that:

(1) Boulder cannot effectuate its condemnation of the Transmission Loop without prior

Commission approval under FPA section 203;

(2) In exercising its section 203 jurisdiction, this Commission will apply the longstanding

criteria that consider, inter alia, the proposed transfer’s effect on rates, effect on regulation, and

other relevant factors (including the effect on reliability); and

(3) The Commission’s exercise of jurisdiction under section 203 does not diminish the

authority of the CPUC to review the transfer of facilities that are the subject of the

condemnation.

ARGUMENT

I. DECLARATORY RELIEF SHOULD BE GRANTED

Rule 207(a)(2) of the Commission’s Rules of Practice and Procedure provides that a

party may file a petition for declaratory order “to terminate a controversy or remove

uncertainty.” 18 C.F.R. § 385.207(a)(2). The Commission has discretion whether to grant such

relief. See, e.g., Pioneer Wind Park I, LLC, 145 FERC ¶ 61,215 at P 35 (2013); Idaho Wind

Partners 1, LLC, 143 FERC ¶ 61,248 at P 8 (2013); see also 5 U.S.C. § 554(e) (issuance of a

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declaratory order is within an agency’s “sound discretion”). The Commission grants declaratory

relief when appropriate to provide “definitive guidance,” “clarity,” and “uniform interpretation”

of the Commission’s regulations and requirements. See, e.g., SFPP, L.P., 102 FERC ¶ 61,089 at

P 12 (2003); Nicole Gas Prod. Ltd., 103 FERC ¶ 61,328 at P 12 (2003); see also Midwest Indep.

Transmission Sys. Operator, 136 FERC ¶ 61,010 at P 65 & n.114 (2011) (granting a petition for

declaratory order to remove uncertainty on a FERC-jurisdictional issue that was important in

pending state proceedings). This relief includes removing uncertainty regarding the scope of

Commission authority under section 203 of the FPA, see, e.g., Cal. Pub. Employees’ Ret. Sys.,

138 FERC ¶ 61,073 at P 14 (2012); N.Y. Mercantile Exch., 74 FERC ¶ 61,311 at 61,987 (1996),

and thereby ensures that any parties considering a jurisdictional transaction do so in a manner

that complies with Commission regulations. See, e.g., Enova Corp., 79 FERC ¶ 61,107 (1997)

(denying petition for declaratory order seeking a determination that no section 203 approval was

needed for a corporate restructuring but providing analysis useful to the parties regarding “the

purposes of section 203 of the FPA, relevant legislative history and case law, and Commission

precedent”).

Declaratory relief is also appropriate where, as here, it can narrow issues to be decided in

a future FERC proceeding. See, e.g., Promoting Transmission Investment Through Pricing

Reform, Order No. 679, FERC Stats. & Regs. ¶ 31,222 at PP 76-78 (allowing utilities to obtain

Commission review of transmission investment rate incentives through petitions for declaratory

orders preceding any FPA section 205 rate filings, in order to provide utilities with increased

planning and financing flexibility), order on reh’g, Order No. 679-A, FERC Stats. & Regs.

¶ 31,236 (2006); Entergy Servs., Inc., 88 FERC ¶ 61,149 (1999) (granting petition for

declaratory order to provide guidance to utility regarding how the Commission would address

19

certain issues involving the utility’s proposed Independent System Operator (“ISO”) formation

in later section 203 and 205 filings and providing guidance on certain issues for the utility to

address in its future filings); see also Entergy Servs., Inc., 90 FERC ¶ 61,191 at 61,611-12

(2000) (holding that granting petition for declaratory order in advance of section 203 and 205

filings was “appropriate and useful” and explaining that the Commission was “not asked to (and

did not) approve a complete application here, but were only asked to provide preliminary

guidance”); SFPP, 102 FERC ¶ 61,089 at P 12; Express Pipeline P’ship, 75 FERC ¶ 61,303 at

61,967 (1996).

In this case, declaratory relief is necessary to provide clarity with respect to federal and

state jurisdiction over condemnation of the Transmission Loop. Boulder has never

acknowledged—whether to the Colorado courts or affected public—that condemning the

Transmission Loop would require prior approval under FPA section 203. Boulder has also

recently asserted, without explanation, that no such jurisdiction exists. Boulder’s position

therefore has the potential to mislead the Colorado courts and the public because condemnation

of the Transmission Loop, as proposed by Boulder, not only requires prior FERC approval but

also conflicts with certain Commission policies under section 203. Boulder’s stance on section

203 jurisdiction is particularly troubling because Boulder has argued that this Commission’s

post-acquisition jurisdiction supplants CPUC authority over the Transmission Loop. See

Boulder Reply Brief at 30-31.

A declaratory ruling is also necessary because Boulder has tailored its arguments in a

misleading manner that shifts depending on the forum. For example, when promoting the

benefits of acquiring the Transmission Loop before the City Council, Boulder’s Staff highlighted

the integrated nature of the loop, stating: “The 115kV transmission loop allows for multiple

20

points of delivery to the distribution system and provides redundancy both within the loop

(failure of one segment does not take a substation out of the system) and outside the loop since it

is connected to Xcel’s transmission system in two locations.” July 23 Memorandum to City

Council at 15. But when Boulder submitted its Condemnation Petition, it downplayed the

significance of the Transmission Loop as a mere “radial” configuration: “The electrical system

within the Acquisition Area as designed by Xcel is a typical radial feed with feeder tie

capabilities for backup operations and outage conditions.” Condemnation Petition ¶ 18

(emphasis added). Then, a few days later, Boulder argued in Colorado district court that

Commission jurisdiction under FPA section 215 obviated any need for the CPUC to consider

reliability issues (Boulder Reply Brief at 30-31)—despite having just described the Transmission

Loop as “radial” in another Colorado court, which suggests that Boulder will claim an exclusion

from mandatory reliability standards regulation under FPA section 215. See NERC, Glossary of

Terms Used in NERC Reliability Standards at 13 (July 7, 2014), available at http://www.

nerc.com/files/glossary_of_terms.pdf (excluding from the definition of Bulk Electric System

“[r]adial transmission facilities serving only load with one transmission source”); N. Am. Elec.

Reliability Corp., 146 FERC ¶ 61,199 at PP 9-12 (2014) (discussing exclusions from definition

of Bulk Electric System, including radial and local facilities).

A declaratory order is also critical to provide clarity with respect to the Commission’s

authority to review the rate impacts of condemning the Transmission Loop. Boulder has

informed the public that its acquisition of the Transmission Loop will not increase the acquisition

price one penny. The only rational (albeit unlawful) explanation for this representation is that

Boulder intends to shift the acquisition costs back onto PSCo and its customers through a non-

jurisdictional “reciprocity” transmission charge. (Even in this scenario, however, it is difficult to

21

understand how the initial acquisition price would not change.) Any such attempt to shift the

entire costs back to PSCo would conflict with Commission precedent. The market value of the

Transmission Loop—which forms the basis for any condemnation award—far exceeds the net

book value and therefore any such charge would reflect an acquisition premium that generally

cannot be recovered in rates. A declaratory ruling will therefore make clear to the public and the

Colorado courts that this and other important rate issues will be evaluated by the Commission

before the condemnation occurs. PSCo is not seeking a definitive ruling at this time on how

these rate issues will be decided,2 but rather only that they must be evaluated before the

condemnation can proceed.

A declaratory ruling is also necessary to provide clarity on the effect of the Commission’s

exercise of its section 203 jurisdiction on the CPUC’s authority over the facilities at issue in the

condemnation. Boulder has, as indicated, used this Commission’s jurisdiction in Colorado state

court as a purported shield against CPUC jurisdiction and it is therefore important that the

Commission clarify that its section 203 jurisdiction does not diminish CPUC authority over the

transfer of facilities that are the subject of the condemnation.

Finally, timely action on the Petition is appropriate because of the finality of the

condemnation rulings that Boulder has now sought. Under Colorado eminent domain statutes,

once a jury or condemnation commission determines the just compensation to be paid for taking

PSCo’s property, Boulder may then deposit the award into the court registry. The condemnation

court will then enter a Rule and Order, which immediately and automatically transfers the

property to Boulder in the same manner that a deed or other document would transfer title in an

2 A definitive ruling on the rate impacts and other factors, such as the effect on regulation and reliability, can

occur when Boulder submits a section 203 application or PSCo seeks a definitive ruling at a future time in a

future proceeding.

22

ordinary private transaction. See C.R.S. § 38-1-105(3) and (4); see also City of Broomfield v.

Walnut Creek Dev. Corp., 666 P.2d 1103, 1105 (Colo. App. 1982) (entry of rule and order

operates as the conveyance to the condemnor of the property being condemned).

But even before compensation is determined, the condemnation court will determine

Boulder’s right to condemn the facilities and other property rights it seeks from PSCo, including

the Transmission Loop subject to FERC transfer approvals. Colorado condemnation cases

follow a bifurcated process. In the first phase of the case, the court determines whether Boulder

has the legal authority to acquire the property and has met all other prerequisites to condemning

the property. Such issues are typically considered at an “immediate possession hearing” where

the condemnor seeks the right to possess and use the property during the pendency of the case.

See C.R.S. § 38-1-105(1) (“The court shall hear proofs and allegations of all parties interested

touching the regularity of the proceedings and shall rule upon all objections thereto.”); C.R.S.

§ 38-1-109 (“[T]he court shall hear and dispose of all objections that may be raised touching the

legal sufficiency of the petition or cross petition or the regularity of the proceedings in any other

respect.”). But even where immediate possession is not requested, the court must resolve all

legal challenges to the condemnation action early in the proceedings upon the property owner’s

motion or at an in limine hearing. See Union Pac. R. Co. v. Colo. Postal Tel. Cable Co., 69 P.

564, 565 (Colo. 1902) (“If, for any reason, the petitioner in condemnation proceedings is not

entitled to exercise the right of eminent domain, or take a particular tract, these questions should

be determined by the court in limine”); Kaschke v. Camfield, 102 P. 1061, 1063 (Colo. 1909)

(legal challenges to the taking must be made before a jury is empaneled and just compensation is

decided).

23

After this first phase is resolved, the parties then move forward with the second phase of

the case—valuation litigation to determine the just compensation owed for the property that the

condemnation court has ruled can be taken. Absent an extraordinary writ or other unusual

situation, there is no further opportunity during the pendency of the case for the parties to revisit

the condemnor’s authority to take the property. Upon determination of the just compensation to

be paid, the property is simply transferred pursuant to the Rule and Order described above.

Thus, it is important for the Commission to make it clear to the Condemnation Court that

Boulder must apply for and obtain transfer approvals under section 203 before the transmission

and substation facilities can be condemned.

II. BOULDER’S ATTEMPT TO CONDEMN THE TRANSMISSION LOOP REQUIRES

PRIOR APPROVAL UNDER FPA SECTION 203

Section 203(a)(1) of the FPA provides that “No public utility shall, without first having

secured an order of the Commission authorizing it to do so—(A) sell, lease or otherwise dispose

of the whole of its facilities subject to the jurisdiction of the Commission, or any part thereof of a

value in excess of $10,000,000.” 16 U.S.C. § 824b(a)(1). There is no question that section

203(a)(1)(A) applies to Boulder’s attempt to acquire the Transmission Loop.

First, section 203(a)(1)(A) applies to dispositions by a “public utility,” and PSCo is a

public utility because it “owns or operates facilities subject to the jurisdiction of the

Commission.” 16 U.S.C. § 824(e). That Boulder is not a public utility under the Federal Power

Act is irrelevant because section 203 jurisdiction is triggered by the fact that a public utility

(PSCo) would be “dispos[ing]” (albeit involuntarily) of its “facilities subject to the jurisdiction of

the Commission.” 16 U.S.C. § 824b(a)(1); see also Long Island Lighting Co., 82 FERC ¶ 61,129

at 61,462-66 (1998) (exercising section 203 jurisdiction over transfer of transmission facilities

24

from a public utility to a non-jurisdictional entity); Dogwood Energy, LLC, 138 FERC ¶ 62,185

(2012) (same). Second, the Transmission Loop consists of “facilities subject to the jurisdiction

of the Commission” because they are used to provide transmission service in interstate

commerce under the Xcel Energy OATT. 16 U.S.C. § 824(b)(1) (FERC “ha[s] jurisdiction over

all facilities for . . . transmission or sale of electric energy” “in interstate commerce”); New York

v. FERC, 535 U.S. 1 (2002). Third, section 203 jurisdiction is triggered because these

jurisdictional facilities have a fair market value far in excess of $10 million. See Mirzayi

Affidavit ¶ 10; 18 C.F.R. § 33.1(b)(3)(i).

The Commission should therefore declare that section 203 approval is required before

Boulder can effectuate its condemnation of the Transmission Loop.

III. THE TRADITIONAL SECTION 203 CRITERIA WILL APPLY IN DETERMINING

WHETHER CONDEMNATION OF THE TRANSMISSION LOOP IS CONSISTENT

WITH THE PUBLIC INTEREST

A. The Public Interest Test

Section 203(a)(4) of the FPA provides that the Commission shall approve the proposed

disposition if it finds that the proposed transaction “will be consistent with the public

interest. . . .” 16 U.S.C. § 824b(a)(4). In making this public interest determination, the

Commission considers the effect of the transaction on competition, rates and regulation. 18

C.F.R. § 2.26(b); see also Revised Filing Requirements Under Part 33 of the Comm’n’s

Regulations, Order No. 642, FERC Stats. & Regs. ¶ 31,111 at 31,914 (2000), order on reh’g,

Order No. 642-A, 94 FERC ¶ 61,289 (2001); Inquiry Concerning the Comm’n’s Merger Policy

Under the Fed. Power Act: Policy Statement, Order No. 592, FERC Stats. & Regs. ¶ 31,044

(1996), reconsideration denied, Order No. 592-A, 79 FERC ¶ 61,321 (1997). The Commission

“may also consider other factors.” 18 C.F.R. § 2.26(b). The Commission makes an independent

25

determination on these factors even if other governmental entities also have jurisdiction to

review the transaction. See Cincinnati Gas & Elec. Co., 64 FERC ¶ 61,237 at 62,710 (1993)

(explaining that FERC’s section 203 public interest determination and the state public utility

commission’s determinations are “independent” and that “whether the proposed merger, as

originally filed or as amended, should be approved under Indiana law is not relevant to our

determination of whether the proposed transaction is consistent with the public interest for

purposes of the FPA”); Cent. Vt. Pub. Serv. Corp., 22 F.P.C. 672, 674-75 (1959) (“[T]he

legislative history of the section [203] shows that it was the intention of Congress that our

jurisdiction under it was not to be controlled by the exercise of State jurisdiction. . . . We have no

difficulty in concluding that whether the proposed transaction is ‘[c]onsistent with the public

interest’ is a matter for us to decide irrespective of the conclusion reached by the State

Commission.”); cf. El Paso Elec. Co. v. FERC, 201 F.3d 667 (5th Cir. 2000) (reversing the

Commission’s decision to defer to the condemnation court on the effect of the city’s acquisition

of a transmission loop on reliability in the context of an FPA section 202 order).

The public interest test under section 203 is a “no harm” test, such that “an applicant need

not show that a positive benefit to the public interest will result from a proposed merger or

disposition of facilities in order to support a public interest finding,” but instead “[o]nly a

showing of compatibility with the public interest is required.” Entergy Servs., Inc., 65 FERC

¶ 61,332 at 62,465 (1993) (quoting Entergy Servs., Inc., 62 FERC ¶ 61,073 at 61,370

(1993)); see also ITC Holdings Corp., 143 FERC ¶ 61,256 at P 49 (2013) (“[T]he Commission’s

analysis does not require an affirmative showing of competitive benefits from a proposed

transaction. . . .”); Old Dominion Elec. Coop., 119 FERC ¶ 61,253 at P 27 (2007) (explaining

that a transaction may be acceptable if “the status quo will continue”); Order No.

26

592, FERC Stats. & Regs. ¶ 31,044 at 30,114 (“[T]he transaction taken as a whole must be

consistent with the public interest. Thus, even if certain aspects of a proposed merger are

detrimental, the merger can still be consistent with the public interest if there are countervailing

benefits that derive from the merger.”) (footnote omitted), reconsideration denied, Order No.

592-A, 79 FERC ¶ 61,321; see also, e.g., ITC Holdings Corp., 143 FERC ¶ 61,256 at P 118

(“Our focus here, in this order, is on the effect that the Proposed Transaction itself will have on

rates, whether that effect is adverse, and whether any adverse effect will be offset or mitigated by

benefits that are likely to result from the Proposed Transaction.”). Consequently, if the

jurisdictional transaction, as here, creates harm to the public under factors relevant to the

Commission’s review, that harm must be remedied before section 203 approval is granted.

B. Effect on Rates

In evaluating the effect of a jurisdictional transaction on rates, the Commission requires

the applicant to “demonstrate how wholesale ratepayers will be protected” following the

proposed transaction and has explained that “applicants . . . have the burden of proving that their

proposed ratepayer protections are adequate.” Order No. 642, FERC Stats. & Regs. ¶ 31,111 at

31,914. This demonstration must include specific “ratepayer protection mechanisms”:

Rather than requiring estimates of somewhat amorphous net merger benefits and

addressing whether the applicant has adequately substantiated those benefits, we

will focus on ratepayer protection. Merger applicants should propose ratepayer

protection mechanisms to assure that customers are protected if the expected

benefits do not materialize. The applicant bears the burden of proof to

demonstrate that the customer will be protected. This puts the risk that the

benefits will not materialize where it belongs—on the applicants.

Order No. 592, FERC Stats. & Regs. ¶ 31,044 at 30,123. These ratepayer protection

mechanisms include the following:

27

General hold harmless provision—a commitment from the applicant that it will

protect wholesale customers from any adverse rate effects resulting from the

merger for a significant period of time following the merger. Such a provision

must be enforceable and administratively manageable.

Moratorium on increases in base rates (rate freeze)—applicants commit to

freezing their rates for wholesale customers under certain tariffs for a significant

period of time.

Rate reduction—applicants make a commitment to file a rate decrease for their

wholesale customers to cover a significant period of time.

Id. at 30,124 (footnote omitted).3

Ratepayer protection will be a central issue in the section 203 proceeding associated with

Boulder’s attempted condemnation of the Transmission Loop. The fair market value of the

Transmission Loop is substantially in excess of the existing book value, and Boulder has

signaled that it may attempt to insulate its citizens from these rate effects and, instead, charge

PSCo for the cost of the loop. Although Boulder has been somewhat cryptic about its means to

accomplish this goal, there is no other apparent explanation for its twin contentions that (i)

condemning the Transmission Loop will not add one penny to the condemnation costs, and (ii)

Boulder will impose on PSCo a “reciprocity” transmission charge for its use of the loop.

This gambit is not permitted by Commission precedent. Acquisition premiums (i.e., the

amount by which the acquisition price exceeds net book value) are not generally allowed in rates.

See, e.g., Mo. Pub. Serv. Comm’n v. FERC, 601 F.3d 581, 586 (D.C. Cir. 2010); Silver Merger

Sub, Inc., 145 FERC ¶ 61,261 at P 68 (2013) (explaining in a section 203 order that “the

Commission historically has not permitted rate recovery of acquisition premiums”); Order No.

3 The Commission will also consider an “open season” for wholesale power customers that allows them to

purchase power from other suppliers. Id. This form of ratepayer protection does not apply here because PSCo

would have no choice but to use the Transmission Loop to serve its retail customers outside the Boulder city

limits unless it constructs duplicative transmission facilities.

28

679, FERC Stats. & Regs. ¶ 31,222 at P 258; Minn. Power & Light Co., 43 FERC ¶ 61,104

(1988). The only exception is if an applicant can prove “specific dollar benefits” that are

“tangible, non-speculative, and quantifiable in monetary terms” and, under this exception, “[t]he

burden of proof for a utility seeking to demonstrate specific dollar benefits is heavy and may be

practically impossible to meet.” Arkla Energy Res., 61 FERC ¶ 61,004 at 61,038 (1992).

Concrete benefits are particularly hard to show where, as here, the transmission assets are

“already being used for open access service.” Startrans IO, LLC, 122 FERC ¶ 61,306 at P 40

(2008).

The Commission has therefore routinely conditioned approval of a transaction under

section 203 on a commitment not to recover any acquisition premium in rates. See, e.g., ITC

Holdings, 143 FERC ¶ 61,256 at P 132; Delmarva Power & Light Co., 71 FERC ¶ 61,160

(1995). This policy applies without regard to whether the acquiring entity is a public utility

subject to section 205 jurisdiction over rates. See Long Island Lighting Co., 82 FERC ¶ 61,129

at 61,464 (approving transfer of jurisdictional utilities to a non-public utility where there was “no

evidence that LILCo intends to write up the acquisition price of its transmission” and accepting

“LIPA’s representation that it is acquiring LILCO’s stock for slightly less than book value”).

Boulder thus could not, in PSCo’s opinion, acquire the Transmission Loop without committing

not to recover any costs above current net book value in rates charged to PSCo or other

wholesale customers. See Startrans, 122 FERC ¶ 61,306 at P 40; see also Central Vermont, 22

F.P.C. 672 at 676 (denying transfer of a transmission line because purchaser’s costs would

increase after the transfer even though the “evidence shows that as far as functioning electrically

is concerned the line could be operated just as well if it were owned by [seller] as if it were

owned by [purchaser].”).

29

The Commission also, as indicated, requires ratepayer protection mechanisms for all

wholesale rate changes associated with the transaction. Consequently, any change in the book

value of the Transmission Loop or any other element of the cost of service (e.g., cost of capital,

administrative and general charges, operation and maintenance expense, or transaction-related

consultant and attorney fees) would be subject to the Commission’s ratepayer protection policies.

Boulder would therefore have to demonstrate that PSCo, as a wholesale customer, would not

incur more costs in using the Transmission Loop than it does today.

C. Effect on Regulation

Boulder will also be required to demonstrate that federal or state regulation will not be

impaired by its acquisition of the Transmission Loop. Long Island Lighting Co., 82 FERC

¶ 61,129 at 61,465; see also Order No. 592, FERC Stats. & Regs. ¶ 31,044 at 30,124. The

primary concern in this regard is that the condemnation would remove the Transmission Loop

from FERC jurisdiction under sections 205 and 206 of the FPA and, hence, from the plenary

authority to ensure that the rates, terms and conditions for transmission service in interstate

commerce comply with sections 205 and 206. In Long Island Lighting Co., the Commission

expressed this very concern over the transfer of transmission facilities from a public utility to a

non-jurisdictional entity, holding that “[w]e do not believe it is in the public interest to approve

this disposition unless we are assured that the transferred facilities will continue to be available

on a comparable basis to all wholesale market participants.” 82 FERC ¶ 61,129 at 61,460. The

Commission therefore approved the transfer only after (i) the non-jurisdictional entity committed

to file a reciprocity OATT with the Commission and (ii) represented that it would join the New

York ISO once it is formed. 82 FERC ¶ 61,129 at 61,464-65.

30

In this case, by contrast, there is no independent grid operator in the area that could

assure that nondiscriminatory access is provided over the Transmission Loop, nor has Boulder

offered to file a reciprocity OATT with the Commission (but rather only a vague suggestion that

a reciprocity arrangement could be developed). Moreover, whatever the form of “reciprocity”

service is contemplated by Boulder, it would result in an impairment of this Commission’s

jurisdiction because it constitutes only an indirect regulation of Boulder as a customer of PSCo,

not direct regulation of Boulder as a transmission provider. See Promoting Wholesale

Competition Through Open Access Non-Discriminatory Transmission Servs. by Pub. Utils.,

Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,760-61 (1996) (“We are not requiring non-

public utilities to provide transmission access. Instead, we are conditioning the use of open

access services on an agreement to offer open access services in return.”) (subsequent history

omitted).

This distinction has important consequences, particularly with respect to the

Commission’s limited jurisdiction over the rates charged by Boulder and the inadequate

enforceability of the reciprocity arrangement. The Commission’s focus on approving any

reciprocity arrangement is whether the non-rate terms and conditions “conform or are superior

to” the FERC pro forma OATT. Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,761. Thus,

even the “safe harbor” procedure applicable to a full OATT does not subject a non-jurisdictional

utility to plenary rate review under section 205 or 206. Id. (explaining that “comparability”

standard would apply, not section 205 standards); see, e.g., Orlando Utils. Comm’n, 136 FERC

¶ 61,240 at P 3 (2011) (same); Sierra Sw. Coop. Servs., Inc., 95 FERC ¶ 61,310 at 62,059 (2001)

(same). Indeed, although Boulder has suggested that the Commission may review the

31

reasonableness of its rates, it has argued that its rates “are not directly subject to FERC review.”

See City of Boulder’s Response to Sur-Reply Briefs at 10.

The enforceability of a reciprocity arrangement is also questionable at best. Even if

Boulder files a reciprocity tariff under the Commission’s safe harbor procedures, the

Commission’s only remedy to address a violation of a reciprocity tariff is to revoke the non-

jurisdictional utility’s safe harbor status and thereby give the opportunity for FERC-jurisdictional

utilities to decline to provide OATT service. See E. Ky. Power Coop., Inc., 144 FERC ¶ 61,063

at P 19 n.17 (2013) (“[I]f the reciprocity OATT remained on file, this Commission cannot

enforce its provisions. The Commission’s only recourse would be to permit a public utility

transmission provider to refuse to offer reciprocity transmission service.”); U.S. Dep’t of Energy,

140 FERC ¶ 61,043 at P 17 (2012) (“[B]ecause Bonneville is not subject to regulation as a public

utility under the FPA, even if we were to [find that Bonneville violated its tariff], the only relief

we could provide would be to conclude that Bonneville’s Tariff is not a safe harbor reciprocity

tariff.”); Transmission Planning and Cost Allocation by Transmission Owning and Operating

Pub. Utils., Order No. 1000, FERC Stats. & Regs. ¶ 31,323 (2011), Order No. 1000-A, 139

FERC ¶ 61,132 at P 774 (“[T]he Commission did not intend that it would enforce reciprocity

tariff provisions sua sponte, except insofar as the Commission permits a public utility

transmission provider to refuse to offer open access transmission service to that non-public

utility transmission provider, in accordance with Order No. 888.”), order on reh’g, Order No.

1000-B, 141 FERC ¶ 61,044 (2012). This is hardly a realistic remedy on the facts here because

Boulder will rely on the PSCo’s transmission system to serve its load reliably and, therefore,

service could not be discontinued without an extended interruption of firm load.

32

Finally, a reciprocity condition would apply only to PSCo and therefore would be of no

value to independent generators that may seek to interconnect to the Transmission Loop. As the

Commission held in Order No. 888, the reciprocity remedy can be enforced only by PSCo

because it is a condition of Boulder’s purchase of transmission service from PSCo, not by a

third-party generator. Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,760 (“We wish to

clarify that, in stating that a user must provide non-discriminatory access to the tariff provider,

we intend that reciprocal service be limited to the transmission provider”).

Consequently, there are important issues with respect to the effect on regulation that must

be considered before Boulder is allowed to condemn the Transmission Loop.

D. Effect on Reliability

“When a transaction potentially affects reliability, the Commission . . . can consider that

effect when making an evaluation under section 203.” Edison Mission Energy, 96 FERC

¶ 61,032 at 61,083 (2001). Even more generally, the Commission has a “policy of considering

the reliability implications of Commission decisions, as appropriate.” Policy Statement on

Matters Related to Bulk Power Sys. Reliability, 107 FERC ¶ 61,052 at P 37 (2004).

There will be at least two reliability issues that merit evaluation in the context of

Boulder’s effort to condemn the Transmission Loop. First, as indicated above, Boulder has

given conflicting characterizations of the Transmission Loop that raise questions as to whether

the mandatory reliability standards under section 215 will apply to ownership and operation of

those facilities. Boulder has told the district court hearing the appeal of the CPUC Jurisdictional

Order that FERC will regulate the Transmission Loop under section 215, but has told the

Condemnation Court that it is merely a set of “radial” facilities, thereby suggesting that Boulder

33

may well claim an exemption from regulation under section 215. See discussion supra pages 19-

20.

The second issue is the effect of the condemnation on PSCo’s ability to continue to serve

its remaining customers who must continue to use the Transmission Loop to receive retail

service from PSCo. Boulder’s operation of the Transmission Loop increases the risk of load loss

for PSCo customers in and around Boulder. The Loop is currently operated by PSCo in a way

that utilizes redundant facilities owned by PSCo, which minimizes the risk of load loss during

system maintenance. In contrast, Boulder has not proposed to build or acquire additional circuit

elements to create redundancy. This means that Boulder will likely perform maintenance by de-

energizing sections of the line and creating radial service points, which would increase the risk of

load loss.

Additionally, the Valmont-Eldorado segment of the Loop is an integral part of PSCo’s

interconnected transmission system used for bulk power transfers. While PSCo has a great deal

of experience reliably running bulk electric facilities, Boulder does not. PSCo’s concerns in this

regard are heightened by the fact that Boulder has sought to slice the property within the

transmission substations in a manner that raises significant operational and reliability issues. As

explained in the Affidavit of Ms. Mirzayi:

In discussions with our engineers, we have identified substantial concerns about

Boulder’s proposal to effectively “slice and dice” the substation equipment

between Boulder and PSCo and to impose associated access restrictions within

the substation property. NERC requires the designation of one responsible party

for substations with a clear demarcation point between entities at the substations.

Boulder has provided no information how that compliance obligation will be

satisfied. Moreover, the exclusive easements within shared substations that the

City of Boulder has included in its condemnation filing will make access for

maintenance, construction, and operation of the PSCo-owned remaining

equipment difficult if not impossible.

34

Mirzayi Affidavit ¶ 15.

These increased risks of service interruption and degradation in operations are

particularly hard to justify because Boulder’s acquisition of the Transmission Loop is entirely

unnecessary. PSCo is already obligated to provide service over the Transmission Loop to all

eligible customers under the Xcel Energy OATT. Boulder therefore does not need to acquire the

Transmission Loop to effectuate the condemnation.4

Finally, PSCo’s reliability concerns are heightened by the fact that Boulder is seeking to

acquire not only the transmission facilities used to serve non-Boulder customers but also the

distribution facilities. This configuration will leave PSCo with control only over the meters to

the individual retail customer homes and businesses. Not only does this further reduce PSCo’s

ability to maintain reliability, it is the very type of sham arrangement that Congress sought to

prohibit with section 212(h) of the FPA, 16 U.S.C. § 824k(h). Although section 212(h) would

not technically apply here, Congress’ intent that utilities not be forced to support sham

transactions is relevant because that is the very type of configuration Boulder is attempting to

force upon PSCo to serve its own load.

IV. THE COMMISSION SHOULD DECLARE THAT THE EXERCISE OF ITS SECTION 203

JURISDICTION DOES NOT DIMINISH THE CPUC’S AUTHORITY

It is well established that “Section 203 was . . . added with full awareness that this was

not a provision needed to close a constitutional gap, and that the states had jurisdiction to

accomplish this regulation” and therefore that the adoption of section 203 did not preempt states’

4 Moreover, the proposed “loop” that Boulder seeks to condemn has two points of separation and, therefore, is

incomplete. The segment from Valmont to Eldorado on the east side of the city does not connect to any other

Boulder facilities at any point, and the segment from Valmont to Eldorado around the west side of the city

connects to city-owned generation and load, but there is no alternative path (other than using the PSCo

transmission system) to connect generating resources to loads in the event of an outage. These gaps in Boulder’s

proposed configuration for the Transmission Loop further support the conclusion that Boulder’s acquisition of

the Transmission Loop is unnecessary.

35

ability to regulate the transfer of public utility facilities subject to their jurisdiction: “That the

states did and do have such constitutional jurisdiction is clear.” Duke Power Co. v. FPC, 401

F.2d 930, 935 n.41 (D.C. Cir. 1968) (emphasis added).

Consistent with this longstanding interpretation of the scope of section 203, the

Commission has repeatedly explained that its rulings under FPA section 203 do not prevent a

state regulatory commission from conducting its own, independent review of the proposed

transfer. See Commonwealth Edison Co., 91 FERC ¶ 61,036 at 61,138 (2000) (explaining that

the Commission’s review of a section 203 application would not cause the Pennsylvania Public

Utility Commission’s (“PPUC”) to “lose jurisdictional oversight,” that the PPUC had the

“authority to approve or disapprove the merger,” and that the PPUC could “condition any

approval of the merger as necessary to ameliorate [its] concerns”); Cincinnati Gas & Elec. Co.,

64 FERC ¶ 61,237 at 62,710 (1993) (“Our action here will have no effect on the Indiana

Commission’s ability or authority to make an independent determination of whether the

proposed merger is legal under Indiana law. In addition, our action obviously has no effect on

any other regulatory approval that is required.”).

The Commission therefore routinely cites state approvals as supplementary to its own

jurisdictional determinations under section 203, not as supplanted by FERC jurisdiction. See,

e.g., Appalachian Power Co., 143 FERC ¶ 61,074 at P 48 (2013) (noting that the Kentucky

Public Service Commission was conducting a concurrent review of the proposed transaction and

explaining that FERC’s determination would not constrain the Kentucky commission’s ability to

decide issues related to retail rates); PNM Res., Inc., 110 FERC ¶ 61,204 at P 46 (2005) (stating

that two states’ public utilities commissions would need to approve the proposed transaction

before it could close); Ameren Energy Generating Co., 108 FERC ¶ 61,081 at P 28 (2004)

36

(noting that the Missouri Public Service Commission had already approved the transaction the

Commission was considering and explaining that the Missouri commission “is responsible for”

protecting “Missouri retail customers” and that FERC “independently review[s]” the transaction

to ensure that it is consistent with the public interest); N. States Power Co., 90 FERC ¶ 61,020 at

61,137 (2000) (observing that seven states’ public utility commissions would need to

independently review and approve the proposed merger); Commonwealth Edison Co., 91 FERC

¶ 61,036 at 61,138 (2000) (explaining that the PPUC was conducting a contemporaneous

independent review of the proposed merger). The states may therefore, when conducting their

own proceedings, impose conditions that differ from those imposed by FERC. See Transactions

Subject to FPA Sec. 203, 113 FERC ¶ 61,006 at P 52 (2005) (discussing state commissions

which “impose specific conditions designed to protect customers against unfair competitive

practices, cross-subsidization, and affiliate abuse”).

This is why FERC only considers the issue of whether a proposed transaction will impair

effective state regulation when the relevant state commission does not have authority to act on

the transaction. 18 C.F.R. § 2.26(e). Similarly, the Commission will only consider the effect on

retail rates when the state commission does not possess independent authority to consider the

issue or where a state commission specifically asks FERC to perform such review. See id.

(requiring section 203 applicants to specify whether a state commission has authority to review

the transaction); Order No. 592, FERC Stats. & Regs. ¶ 31,044 at 30,112 (“[W]e intend to rely

on the state commissions to exercise their authority to protect state interests.”); Appalachian

Power Co., 143 FERC ¶ 61,074 at P 36 (“The Commission’s examination of a section 203

transaction’s rate impact does not concern the transaction’s retail rate impacts, unless a state

specifically asks the Commission to consider such rate impacts. The role of the relevant state

37

commission is, among other things, to consider such effects.”) (footnote omitted); NSTAR

Advanced Energy Sys., Inc., 131 FERC ¶ 61,098 at P 18 (2010) (“[R]etail rates are not typically

addressed by this Commission and are usually addressed by the relevant state commission.”).

The Commission should therefore declare that its exercise of jurisdiction under section

203 does not diminish the CPUC’s authority over the transfer of facilities that are the subject of

the proposed condemnation.

CONCLUSION

For the foregoing reasons, PSCo respectfully requests that the Commission issue an order

granting the Petition on the questions presented herein. PSCo respectfully requests action on this

Petition within 120 days.

William M. Dudley

Assistant General Counsel-Lead

XCEL ENERGY SERVICES INC.

1800 Larimer St., Suite 1100

Denver, CO 80202

Telephone: (303) 294-2842

[email protected]

Respectfully submitted,

/s/ John S. Moot

John S. Moot

Gerard A. Clark

Tim T. Mastrogiacomo




Telephone: (202) 371-7000

[email protected]

[email protected]

[email protected]

Counsel for Public Service Company of Colorado

August 26, 2014

CERTIFICATE OF SERVICE

I hereby certify that I have this day caused to be served copies of the foregoing document

upon the City of Boulder, Colorado and the Colorado Public Utilities Commission.

Dated at Washington, DC, this 26th day of August, 2014.

/s/ Amber Thornhill

Amber N. Thornhill




(202) 371-7000

1


BEFORE THE


Public Service Company of Colorado ) Docket No. EL14-___-000

NOTICE OF PETITION

( )

Take notice that on August 26, 2014, Public Service Company of Colorado (“PSCo”) hereby

submits this Petition, pursuant to 18 C.F.R. § 385.207(a)(2), for an order declaring: (i) the attempt

of the City of Boulder, Colorado to condemn PSCo’s transmission facilities and associated

substations requires prior approval by the Commission under Federal Power Act section 203, 16

U.S.C. § 824b; (ii) the Commission, when exercising its section 203 jurisdiction, will apply its

longstanding criteria that consider, inter alia, the effect of the proposed transfer on rates,

regulation and other relevant factors; and (iii) the Commission’s exercise of its section 203

jurisdiction does not diminish the authority of the Colorado Public Utilities Commission with

respect to the condemnation. PSCo requests Commission action within 120 days of the date of the

Petition.

PSCo certifies that copies of the Petition were served on the contacts for the City of Boulder,

Colorado and the Colorado Public Utilities Commission.

Any person desiring to intervene in or protest this filing must file in accordance with Rules

211 and 214 of the Commission’s Rules of Practice and Procedure (18 C.F.R. §§ 385.211 and

385.214). Protests will be considered by the Commission in determining the appropriate action to be

taken, but will not serve to make protestants parties to the proceeding. Any person wishing to

become a party must file a notice of intervention or motion to intervene, as appropriate.

The Commission encourages electronic submission of protests and interventions in lieu of

paper using the “eFiling” link at http://www.ferc.gov. Persons unable to file electronically should

submit an original and 5 copies of the protest or intervention to the Federal Energy Regulatory

Commission, 888 First Street, N.E., Washington, D.C. 20426.

This filing is accessible online at http://www.ferc.gov, using the “eLibrary” link and is

available for review in the Commission’s Public Reference Room in Washington, D.C. There is an

“eSubscription” link on the website that enables subscribers to receive email notification when a

document is added to a subscribed docket(s). For assistance with any FERC Online service, please

email [email protected], or call (866) 208-3676 (toll free). For TTY, call (202) 502-

8659.

Comment Date: 5:00 pm Eastern Time on [insert date].

Kimberly D. Bose

Secretary

ATTACHMENTS

Attachment A Affidavit of Betty L. Mirzayi (“Mirzayi Affidavit”)

Attachment B Memorandum from City of Boulder to Boulder City Council, “Updated Proposed Service Area for Municipalization” (July 23, 2013) (“July 23 Memorandum to City Council”)

Attachment C City of Boulder Report to Boulder City Council, “Study Session: Boulder’s Energy Future Municipalization Exploration Project” (July 23, 2013) (“July 23 Report”) (provided without attachments)

Attachment D In the Matter of the Verified Petition of Pub. Serv. Co. of Colo. for Certain

Declaratory Orders Concerning the Rights of Pub. Serv. Co. of Colo. Under

Its Serv. Territory Certificate Covering Boulder Cnty., Colo., Decision Issuing Declaratory Rulings, CPUC Docket No. 13D-0498E (Oct. 9, 2013) (“CPUC Jurisdiction Order”)

Attachment E In the Matter of the Verified Petition of Pub. Serv. Co. of Colo. for Certain

Declaratory Orders Concerning the Rights of Pub. Serv. Co. of Colo. Under

Its Serv. Territory Certificate Covering Boulder Cnty., Colo., Decision Denying City of Boulder’s Application for Rehearing, Reargument, or Reconsideration, CPUC Docket No. 13D-0498E (Dec. 11, 2013) (“CPUC Rehearing Order”)

Attachment F City of Boulder v. Pub. Serv. Co. of Colo., Petition in Condemnation, No. 2014-CIV-030047 (Colo. Dist. Ct. July 17, 2014) (“Condemnation Petition”) (Exhibits BT-1 through GB-3 omitted)

Attachment G City of Boulder v. Pub. Serv. Co. of Colo., Public Service Co. of Colorado and Xcel Energy Inc.’s Motion to Dismiss Under Colo. R. Civ. P. 12(b)(1) for Lack of Subject Matter Jurisdiction, No. 14-CV-30890 (Colo. Dist. Ct. Aug. 12, 2014)

ATTACHMENT A


BEFORE THE


Public Service Company of Colorado

)

)

)

Docket No. EL14-___-000

AFFIDAVIT OF BETTY L. MIRZAYI

1. My name is Betty L. Mirzayi. I am the Manager of Transmission Planning West

for Xcel Energy Services Inc., which is the service company for Xcel Energy Inc. My business

address is 1800 Larimer Street, Suite 600, Denver CO 80202.

2. I am responsible for overseeing the engineering group that plans Public Service

Company of Colorado’s (“PSCo” or “Public Service”) transmission system. I am also

responsible for the development of transmission budgets, regulatory compliance, and portions of

the operations and maintenance (“O&M”) of PSCo’s transmission system. PSCo is a wholly-

owned subsidiary of Xcel Energy Inc. (“Xcel Energy”).

3. I joined Xcel Energy in 1998. In January 2008, I began work in the Transmission

Business Area as a project manager. Prior to that time and through December 2007, I worked in

the Distribution Capacity Planning department. In this position, my responsibilities included

developing load forecasts and working as part of a larger team to develop capital budgets for

projects and to monitor implementation and adherence to these budgets. Before joining Xcel

Energy, I was employed by the Merrick Company from 1995 to 1998 in its Power Systems

department. Between 1985 and 1990, I was employed by PSCo in the Electric Distribution

Engineering, Planning, and Special Studies departments.

4. I graduated from the University of Colorado at Denver in 1980 with a Bachelor of

Arts degree in German. In 1984, I received a Bachelor of Science in Electrical Engineering from

the University of Colorado at Denver.

2

5. I have previously submitted testimony in proceedings before the Colorado Public

Utilities Commission (“CPUC”) and Minnesota Public Utilities Commission. See In the Matter

of Advice Letter No. 1672-Electric Filed by Pub. Serv. Co. of Colo. to Revise Its Colo. PUC No.

7-Electric Tariff to Implement a General Rate Schedule Adjustment and Other Rate Changes

Effective July 8, 2014, Direct Testimony and Attachments of Betty L. Mirzayi on Behalf of Pub.

Serv. Co. of Colo., CPUC Docket No. 14AL-0660E (June 17, 2004); In the Matter of the Route

Permit Application for a High Voltage Transmission Line Route Permit for the Hiawatha

Transmission Project, Direct Testimony of Betty Mirzayi on Behalf of N. States Power Co., a

Minnesota Corp., MPUC Docket No. ET2/TL-09-38 (Feb. 18, 2010).

6. The purpose of my affidavit is to provide factual support for PSCo’s Petition for

Declaratory Order (“Petition”) by describing the FERC-jurisdictional transmission facilities that

the City of Boulder (“Boulder”) seeks to condemn, by showing that the value exceeds the $10

million threshold needed for FERC jurisdiction, and by describing Boulder’s condemnation plans

as they relate to the FERC-jurisdictional transmission facilities.

7. As described in more detail below, PSCo owns several 115 kV and 230 kV

transmission facilities in and around Boulder that are subject to the jurisdiction of the FERC.

These facilities are part of PSCo’s integrated transmission system and are used to provide service

under the Xcel Energy Operating Companies Open Access Transmission Tariff (“Xcel Energy

OATT”). The 115 kV facilities include looped transmission lines and six substations that run

from PSCo’s Valmont substation, around the City of Boulder to the Eldorado substation, and

then back to the Valmont substation (the “115 kV Transmission Loop”).1 These facilities

1 As proposed to be acquired by Boulder, the 115 kV transmission lines will not actually constitute a “loop” because

there will be gaps at two substations – Valmont Substation and Eldorado Substation, each of which is discussed

below – where the power flows across the PSCo 115 kV bus between transmission interconnection bays.

(cont'd)

3

connect two generating plant facilities to the transmission grid. The substations served off this

loop serve both City of Boulder PSCo customers and PSCo customers outside the city limits of

Boulder. The 230 kV facilities include an integrated transmission line running north and south

along the east side of Boulder. This line contains several 230 kV substations that connect

distribution feeder lines that serve customers in Boulder and customers outside the Boulder city

limits. A map showing these 115 kV and 230 kV FERC-jurisdictional transmission facilities is

attached to this Affidavit at Diagram A.

8. The 115 kV Transmission Loop is made up of several segments that are

connected through the load-serving substations. The segments are as follows:

a. Line 9205 – Boulder Hydro Substation to Eldorado Substation, originally

constructed in 1910, but with ongoing upgrades, maintenance, and additions since that

time. This segment includes the transmission tap to the National Center for Atmospheric

Research or NCAR Substations. The total line segment length is 9.16 miles.

b. Line 9046 – Valmont Substation to Eldorado Substation, originally


time. The total line segment length is 12.35 miles.

c. Line 9065 – Valmont to Boulder Terminal Substation, originally



d. Line 9216 – Boulder Hydro Substation to Boulder Terminal Substation,

originally constructed in 1923, but with upgrades, maintenance, and additions since that


________________________

(cont'd from previous page)

4

The 115 kV Transmission Loop is operated in a normally closed configuration and is used,

among other things, to serve distribution load-serving substations that serve customers both

within and outside of the Boulder’s city limits. These 115 kV facilities also connect two

generating plant facilities to the transmission grid. The substations served off this loop serve

PSCo customers both within the City of Boulder and PSCo customers outside the city limits of

Boulder. These transmission and substation facilities are included in Xcel Energy’s OATT.

9. Based on our review of Boulder’s Petition in Condemnation and our

understanding of the substations, it appears that in addition to the 115 kV Transmission Loop

Boulder is also proposing to take the following assets:

a. At Boulder Terminal Substation, which is served off the 115 kV system,

Boulder proposes taking the entire substation including the highside deadend structures,

oil and gas circuit breakers, metering units, switches, two 50 MVA load serving

distribution transformers and their switchgear buildings, and other devices to include

everything within the substation yard. Originally constructed in 1931, this substation

provides the transition location for an underground transmission line segment that

connects to Sunshine sub, the termination for the Valmont line, and also provides load

service to distribution customers. This substation is included under the Xcel Energy

OATT.

b. At Sunshine Substation, which is served off the 115 kV system, Boulder

proposes taking the entire substation including the highside deadend structures, the 50

MVA load serving distribution transformer and switchgear building, and all other devices

to include everything within the substation yard. Originally constructed in 1983, this

5

substation provides load service to distribution customers. This substation is included

under the Xcel Energy OATT.

c. At NCAR Substation, which is served off the 115 kV system, Boulder

proposes taking the entire substation including the highside deadend structures, the two

50 MVA load serving distribution transformers and switchgear buildings, and all other

devices to include everything within the substation yard. Originally constructed in 1962,

this substation provides load service to distribution customers. This substation is

included under the Xcel Energy OATT.

d. At Boulder Canyon Hydro Substation, which is served off the 115 kV

system, Boulder proposes taking the entire substation with the exception of two 115 kV

ties to Bank 3. Originally constructed in 1931, this substation provides load service to

distribution customers and is the outlet for the Boulder Hydro generating plant. This

substation is included under the Xcel Energy OATT.

e. At Eldorado Substation, which is served off the 115 kV system, Boulder

appears to be proposing to take at least the highside deadend structures, an oil and a gas

circuit breaker, metering units, and bus work. Originally constructed in 1949, this

substation provides the termination point for the NCAR transmission tap and also

provides load service to distribution customers. This substation is included under the

Xcel Energy OATT.

f. At Valmont Substation, which is served off the 115 kV system, Boulder

appears to be proposing to take at least the highside structures that provide termination

access for the 115 kV transmission line to Eldorado and to Boulder Terminal, circuit

breakers, metering units, and capacitor coupled voltage transformer. Boulder also has

6

indicated that it is purporting to “take” through an easement two future 115 kV

interconnection bays that will connect to PSCo’s 115 kV bus. Both in its condemnation

filing document and in its recently published “Energy Future Transition Work Plan,”

which is available on their website,2 Boulder shows and describes five (5) bays in the

Valmont switchyard that it intends to acquire as part of its acquisition. Only three (3) of

these presently exist in the Valmont yard.3 Per our Open Access Transmission Tariff

(OATT), however, space cannot be reserved for their future interconnection. The City of

Boulder will need to follow the interconnection request process and apply when they

have a defined need for these additional transmission line interconnections. This

substation was originally constructed in 1924. The substation includes numerous

upgrades and equipment expansions and enhancements over time. This substation is the

outlet for the Valmont Plant and serves as the switchyard for both 115 kV and 230 kV

transmission lines. This substation is included under the Xcel Energy OATT.

g. At Leggett Substation, which is served off the 230 kV system, Boulder

appears to be proposing to take at least two switchgear buildings, two distribution

transformers, a deadend switch, circuit switchers, and metering units. This substation

was originally constructed in 1969. The substation includes numerous upgrades and

equipment expansions and enhancements over time. This substation provides load

2 Information Item: Energy Future Transition Work Plan, BOULDERCOLORADO.GOV, https://www-static.

bouldercolorado.gov/docs/2014.08.19_Boulders_Energy_Future_Transition_Work_Plan_IP_Final-1-

201408141037.pdf

3 Boulder’s proposal to acquire easements in bays that do not presently exist raises a question whether it is

attempting to obtain future transmission or interconnection service without following applicable tariff requirements

under the Xcel Energy OATT.

7


OATT.

h. At Niwot Substation, which is served off the 230 kV system, Boulder

appears to be proposing to take at least the switchgear building, the two load serving

distribution transformers, circuit switchers, and metering units. This substation was

originally constructed in 1960. The substation includes numerous upgrades and



OATT.

i. At Gunbarrel Substation, which is served off the 230 kV system, Boulder

appears to be proposing to take at least two switchgear buildings, the two load serving

distribution transformers, circuit switchers, switches, and metering units. This substation

was originally constructed in 1992. The substation includes numerous upgrades and



OATT.

10. The book value of the 115 kV Transmission Loop and the identified substations

and portions of substations that Boulder is proposing to take significantly exceeds $10 million

and, based on discussions with PSCo consultants regarding their preliminary analysis, the fair

market value of the 115 kV Transmission Loop and substations listed above far exceeds the

facilities’ book value.

11. Approximately 15,000 non-city (county or other municipality) customers are

served by the distribution substation facilities which Boulder seeks to condemn. These

8

customers are generally located in Boulder County (primarily in Niwot, Gunbarrel, and

Jamestown) and in the City of Louisville. A prior version of Boulder’s plan, which is not

expressly included in Boulder’s Petition in Condemnation, contemplated that over 7,200 of these

15,000 would be served by Boulder and approximately 7,500 would remain with PSCo.

Boulder’s most recent plan appears to suggest that it will take all of the facilities used to serve

these non-Boulder customers and then require PSCo to wheel over the taken facilities to serve all

15,000 customers. However, it is my understanding that Boulder has also nonetheless argued

that it reserves the right to revert to its original plan to take 7,200 of the 15,000 as Boulder

customers.

12. Boulder’s initial condemnation plan in February 2013 did not propose to condemn

and acquire the 115 kV Transmission Loop. However, Boulder announced in July 2013 that it

planned to acquire the 115 kV Transmission Loop and the 230 kV substations at Leggett, Niwot,

and Gunbarrel. A July 23, 2013 memorandum prepared for the Boulder City Council’s July 24,

2013 meeting stated that Boulder staff recommended acquisition of the 115 kV Transmission

Loop to “allow the city direct access to the hydro power from the Bolder Hydroelectric Plant and

allow the city to better manage the flow and distribution of electricity throughout much of the

grid serving Boulder.” Memorandum from City of Boulder to Boulder City Council, “Updated

Proposed Service Area for Municipalization” at 12, Agenda Item 3B (July 23, 2013)

(Attachment A to Petition). The July 23 Memorandum further explained:

The engineers recommend including the 115kV transmission loop to provide

integrated transmission capacity alongside the traditional distribution network

which will allow Boulder’s local utility to better manage the flow of electricity

throughout the service area. The use of transmission facilities reduces electricity

line losses associated with moving electric power from the source of generation to

the point of delivery. The 115kV transmission loop allows for multiple points of

delivery to the distribution system and provides redundancy both within the loop

(failure of one segment does not take a substation out of the system) and outside

9

the loop since it is connected to Xcel’s transmission system in two locations.

Owning and operating the 115kV transmission loop will improve reliability for

Boulder’s customers by minimizing the outages associated with the distribution

system and decreasing to amount of time that it would take to restore power to

those that are affected by an outage. It also allows upgrades to specific

substations or additions to serve new load without the entire system having to be

upgraded or changed.

In addition, it is critical for a local utility to own and control internal transmission

capacity to manage local generation, distributed generation, energy storage, and

management of demand response programs. The loop can be acquired without

negatively impacting the service provided by Xcel, and in fact acquisition of the

loop benefits to Xcel in several ways, including that the city will be able to focus

greater resources on maintaining and upgrading these facilities and reduces Xcel’s

exposure for this aged equipment or balancing resources within the city.

Id. at 15.

13. As I previously noted, the 115 kV Transmission Loop and the 230 kV

transmission line currently are FERC-jurisdictional transmission facilities subject to open access

transmission under the Xcel Energy OATT. Under FERC’s open access transmission policies,

PSCo is obligated to provide service over its transmission facilities in a non-discriminatory

manner that is comparable to the way PSCo provides service to itself. It is, therefore, not

necessary for Boulder to condemn and acquire these FERC-jurisdictional transmission facilities

in order to use them to serve its customers in the same manner that they are used today. Without

condemning these facilities, Boulder could access output from the Boulder Hydroelectric Plant

and obtain delivery of other power supplies across the 115 kV Transmission Loop under the Xcel

Energy OATT.

14. In addition to using the 115 kV Transmission Loop to serve its retail customers

both within and outside of Boulder, PSCo is providing transmission service over this facility for

Boulder to deliver power from its Boulder Hydro generating station to Tri-State Generation &

Transmission Association, Inc.

10

15. In discussions with our engineers, we have identified substantial concerns about

Boulder’s proposal to effectively “slice and dice” the substation equipment between Boulder and

PSCo and to impose associated access restrictions within the substation property. NERC

requires the designation of one responsible party for substations with a clear demarcation point

between entities at the substations. Boulder has provided no information how that compliance

obligation will be satisfied. Moreover, the exclusive easements within shared substations that

the City of Boulder has included in its condemnation filing will make access for maintenance,

construction, and operation of the PSCo-owned remaining equipment difficult if not impossible.

16. This concludes my Affidavit.

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Diagram A

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ATTACHMENT B

ATTACHMENT B To Agenda Memo of July 24, 2013

Authorizing Condemnation for New Electric Utility

To: Members of City Council From: Jane S. Brautigam, City Manager Paul J. Fetherston, Deputy City Manager Tom Carr, City Attorney Heather Bailey, Executive Director of Energy Strategy and Electric Utility

Development Kathy Haddock, Senior Assistant City Attorney

David Driskell, Executive Director of Community Planning and Sustainability Kara Mertz, Local Environmental Action Project Manager

Maureen Rait, Executive Director of Public Works Robert Harberg, Principal Engineer, Public Works - Utilities

Date: July 23, 2013 Subject: Updated Proposed Service Area for Municipalization EXECUTIVE SUMMARY The materials presented for the work session on February 26, 2013 regarding exploration of municipalization included a preliminary boundary of the service territory if the city were to municipalize. This memo updates those maps, depicting the area within which the city would acquire the electrical assets serving customers if the city proceeds to municipalization. The city has modeled that it would serve the customers within the boundaries of this service area, even outside the city limits; however, the final determination of whether or not the city would serve each of those customers has not been made. Ownership of the facilities may be different than the entity providing the end service to the customer.

The direction given to the city’s consulting engineer, Exponential Engineering Company, to define the recommended service area was:

1. Serve all properties within the municipal boundaries; 2. Serve city properties with electric needs, where feasible; and 3. Separate the systems at the technically optimum location to maintain reliability for the

new electric utility as well as the Xcel system. The boundaries of the February 26 map were not specific because at that time the engineers had not yet: 1) field-verified facilities and equipment on the ground at each of the potential interconnection points between the proposed Boulder system and the remaining Xcel system, or 2) investigated the portions of the system at the potential service area boundaries. Attachment B-1 shows the recommended boundary, mapped after the engineers completed their field verification of the equipment and completed other analyses. While the area within the

Attachment B

Agenda Item 3B Page 11

recommended boundary is larger than the area shown on February 26, the change in size is primarily due to including properties which the city owns or has a conservation easement over and drawing the boundaries along property lines. The change in service area does not add customers or load beyond the February 26th area but clarifies that certain customers would be included based on information determined during the field analysis. There are fewer than ten additional customers clarified to be in the service area in Attachment A than on the area shown February 26. Much of Boulder is served by a 115kV transmission loop that is depicted as the black line on Attachment B-2. Staff recommends that the acquisition for municipalization include this loop. Acquiring the transmission loop will allow the city direct access to the hydro power from the Boulder Hydroelectric Plant and allow the city to better manage the flow and distribution of electricity throughout much of the grid serving Boulder. The transmission loop recommended for acquisition does not include the 230kV transmission lines that run along the east side of the city through the Valmont Switchyard and the Leggett, Niwot and Gunbarrel substations. BACKGROUND Because Boulder is surrounded by Open Space and Mountain Parks, the electrical system developed and has been operated in a way that is technically and geographically isolated from surrounding areas. The open space has also created areas around the periphery of the city that will have little or no development of additional electric load in the future. Boulder’s development philosophy has concentrated development, and therefore the loads for electric service, in clearly identified areas. Distribution of electricity to the city is via six substations (Boulder Terminal, Leggett, Niwot, Gunbarrel, Sunshine, and NCAR) connected to either a 115kV transmission loop or 230kV transmission lines. While three of the substations have feeders serving areas outside the city limits (Leggett, Niwot and Boulder Terminal), all six substations primarily serve the city. Exponential Engineering Company, with peer review by Warren Wendling, P.E., and Schneider Electric, applied the city’s direction and developed the following criteria in defining the recommended service area:

• Serve all customers within the municipal boundaries; • Serve city properties with electric needs where feasible; • Define interconnection points at the municipal system boundaries and at the technically

optimum locations to maintain or enhance quality of service, redundancy and capacity; • Maintain the primary geographic areas that are presently served by the substations; • Serve contiguous geographic areas; • Utilize existing points of interconnection with other external substations as currently

operated by Xcel; • Maintain the ability to cross-feed between substations and to use substation capacity to

maintain reliable service to customers; • Establish logical service area boundaries utilizing existing parcel area boundaries; • Minimize operational and maintenance conflicts; • Eliminate the need for duplicate facilities.

Description of Attachment B-1 – Proposed service area map.

Attachment B


The area that was outlined in the preliminary service area map for February 26, 2013 is shown as the black scalloped line. The solid purple line that is outside the scalloped area encompasses additional property that is primarily city-owned and served by one of the six substations. That solid purple line is the proposed service area boundary for the municipal utility and follows existing property lines. The boundaries of the service areas of other utilities are shown in the shaded areas on the north, east and west sides of the map. The north coral-colored area shows a portion of the boundaries of the Poudre Valley Rural Electric Association (PVREA) Service Area, the orange shaded area to the west of the city is the United Power–Mountain Service Area, and the light orange area on the east side is the United Power-Plains Service Area. The gray area shows the city boundaries, and the dark and light green areas show city owned property interests. Each of the substations is labeled. Based on field research and additional technical analysis since February 26, the proposed service area boundary was modified. Generally the modifications are:

• To the south to follow parcel lines to include city owned open space properties with no distribution facilities.

• In the southeast corner, the city-owned properties not included in the service area are because the few improvements in that area are served from Xcel’s Eldorado distribution substation.

• On the northeast side of the map to include city-owned open space properties that have city facilities on the property including one city water tank and one of the city’s primary emergency communications facilities. Those properties are served from the Niwot Substation; field investigation clarified that the feeder running along Lookout Road to the east that feeds the city properties also serves two other customers and then ends.

Description of Attachment B-2 – Transmission loop diagram The purple boundary line depicts the recommended service boundary and the gray shading shows the city municipal boundaries. The 115kV loop serving the city that staff recommends be included in the city’s acquisition is depicted in black and connects through the Valmont Switchyard, to Boulder Terminal Substation, Sunshine Substation, Boulder Canyon Hydro Substation, NCAR Substation, Eldorado Substation, and back to Valmont Switchyard. The blue lines show the 115kV lines that the city would not acquire that run through the Eldorado Substation and the Valmont Switchyard; and that connects Boulder Canyon Hydroelectric Substation to Xcel Boulder Canyon Substation. The 230kV transmission lines, which the city would also not acquire, are shown in red running north and south on the east side of the city connected through the Gunbarrel, Niwot and Leggett Substations and Valmont Switchyard. The white boxes with an S at the Sunshine, Boulder Canyon Hydro, NCAR, and Boulder Terminal Substations show the four substations that Boulder would own (Boulder already owns a portion of the Boulder Canyon Hydro Substation). The yellow boxes depict where Boulder would acquire 115kV line terminals including two bays in the Eldorado Substation and five bays in the Valmont Switchyard; as well as access to operate and maintain those facilities. At those locations, the land would remain owned by Xcel, as would the balance of equipment that Boulder is not acquiring. The green boxes at Leggett, Niwot and Gunbarrel Substations depict the locations where the city would acquire Xcel’s 230/13.2kV transformers (including high side

Attachment B


protection and low-side switchgear), and an easement for operating and maintaining those facilities. At those locations, the land would remain owned by Xcel, as would the balance of equipment that Boulder is not acquiring. Description of Interconnections The city plan includes installing interconnection equipment generally consisting of meters, disconnect switches, protective devices and communications systems to interface with Xcel’s system. At the locations where the city would serve as a distribution service provider, FERC would regulate the city’s operation of the transformers and interconnection feeders to require the city to maintain quality of service to the feeders that Xcel will still own or operate. This regulation is, in part, to make sure that the reserve capacity Xcel currently has on those transformers is not reduced by the acquisition of the transformers by the city. At the locations where the city would take service at the high side of the 230kV transformers, Xcel would maintain the 230kV bus and connections to the 230kV transmission system. The city would own the switchgear and transformer. That interconnection is also regulated by FERC. The four interconnection points where the city would wheel power to Xcel over the distribution system at 13.2kV as a distribution service provider under FERC are:

1. US 36 going north from the service territory boundary 2. Along Mineral Road east of the Diagonal (119) feeding north to the town of Niwot 3. Linden Avenue west 4. Lee Hill Road west

The five points where the city would interconnect with Xcel for mutual aid and support as a Distribution Service Provider under FERC are:

1. 75th Street south of Valmont Road 2. Arapahoe Avenue east of 63rd Street 3. Baseline Road west of 75th Street 4. South Boulder Road east of South Cherryvale Road 5. South Broadway Road south of Gillaspie Drive

The six interconnection points where the City would interface to the Xcel transmission network and be classified as a Transmission Service Provider under FERC are as follows:

1. The 115kV bus at Valmont Switchyard – transmission interconnection 2. The 115kV bus at Eldorado Substation – transmission interconnection 3. The 115kV bus at Boulder Canyon Hydro Substation – transmission interconnection to

connect to Xcel’s Boulder Canyon Distribution Substation 4. The 230kV bus at Leggett Substation – transformer interconnection 5. The 230kV bus at Niwot Substation – transformer interconnection 6. The 230kV bus at Gunbarrel Substation – transformer interconnection

ANALYSIS In determining the technically optimal location to define the service territory, the engineers analyzed the existing facilities serving Boulder, including the substations, transmission circuits, the current location of interconnections to feeders originating outside of the service boundaries, feeders inside service area boundaries, and service lines. The separation concept and service boundary have been created to provide benefits to the city and to Xcel and to allow for orderly, reliable, operable, and maintainable interconnections with Xcel to maintain quality of service

Attachment B


matching or exceeding the present system on both sides of the separation. Acquisition of the 115kV transmission loop allows the city to focus greater resources on this portion of the system and reduces Xcel’s exposure for this aged equipment. The delineation of this area does not depict that electric lines will be severed at the boundary, but shows: 1) Where interconnections currently exist as Xcel operates the system, 2) Where interconnections may be relocated several yards to meet the boundary conditions, and/or 3) Where interconnections will be added to maintain service and reliability to the city utility and to Xcel customers outside of the city. The engineers recommend including the 115kV transmission loop to provide integrated transmission capacity alongside the traditional distribution network which will allow Boulder’s local utility to better manage the flow of electricity throughout the service area. The use of transmission facilities reduces electricity line losses associated with moving electric power from the source of generation to the point of delivery. The 115kV transmission loop allows for multiple points of delivery to the distribution system and provides redundancy both within the loop (failure of one segment does not take a substation out of the system) and outside the loop since it is connected to Xcel’s transmission system in two locations. Owning and operating the 115kV transmission loop will improve reliability for Boulder’s customers by minimizing the outages associated with the distribution system and decreasing the amount of time that it would take to restore power to those that are affected by an outage. It also allows upgrades to specific substations or additions to serve new load without the entire system having to be upgraded or changed. In addition, it is critical for a local utility to own and control internal transmission capacity to manage local generation, distributed generation, energy storage and management of demand response programs. The loop can be acquired without negatively impacting the service provided by Xcel, and in fact acquisition of the loop benefits to Xcel in several ways, including that the city will be able to focus greater resources on maintaining and upgrading these facilities and reduces Xcel’s exposure for this aged equipment or balancing resources within the city. The allocation of property and customers depicted on the new service area maps are as follows:

Recommended Service Territory

Inside City Municipal Boundaries

Outside City Municipal Boundaries

Land Area owned in fee or conservation easements by City of Boulder (not including street rights of way)

4,512 Acres 17,242 Acres (67 percent of out-of-city service area)

Land Area in BVCP Area II 0 3,190 Acres Land Area in BVCP Area III 0 22,273 Acres Percent of Residential Customers 90% <10% Percent of Commercial or Industrial Customers >99% <1%

Estimated Percent of Electric Load 97% 3%

Attachment B


ATTACHMENT B-1 - Map of proposed Service Area ATTACHMENT B-2 - Map of 115kV transmission loop to be acquired

Attachment B


Attachment B-1 - Map of proposed Service Area Exhibit A to Condemnation Ordinance


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ATTACHMENT C

Update on Boulder’s Energy Future

Municipalization Exploration Project

Boulder City Council STUDY SESSION

Tuesday, July 23 6 to 8 p.m.

Council Chambers Municipal Building

1777 Broadway

TABLE OF CONTENTS

I. PURPOSE ................................................................................................................................................. 1

II. QUESTIONS FOR COUNCIL ................................................................................................................ 2

III. EXECUTIVE SUMMARY ....................................................................................................................... 2

IV. QUANTITATIVE ANALYSIS: MODELING PROCESSES ................................................................ 12

V. QUALITATIVE ANALYSIS: COMPARING PATHS TO BOULDER’S ENERGY FUTURE .......... 34

VI. CITY/XCEL ENERGY TASK FORCE ................................................................................................. 38

VII. GOVERNANCE WORKING GROUP .................................................................................................. 40

VIII. ACQUISITION PROCESS .................................................................................................................... 41

IX. REGULATORY ISSUES ....................................................................................................................... 41

X. RATES USED FOR DEBT OR INTEREST RATES MODELED ........................................................ 42

XI. PUBLIC INPUT ..................................................................................................................................... 43

XII. NEXT STEPS ......................................................................................................................................... 45

XIII. ATTACHMENTS ................................................................................................................................... 46

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MEMORANDUM

TO: Members of City Council FROM: Jane S. Brautigam, City Manager

Tom Carr, City Attorney David Gehr, Deputy City Attorney Kathy Haddock, Senior Assistant City Attorney Debra Kalish, Senior Assistant City Attorney Heather Bailey, Executive Director of Energy Strategy and Electric Utility Development Jonathan Koehn, Regional Sustainability Coordinator Kelly Crandall, Energy Sustainability Specialist II

Yael Gichon, Energy Sustainability Coordinator Carl Castillo, Policy Advisor Bob Eichem, Chief Financial Officer Cheryl Pattelli, Director of Fiscal Services Maureen Rait, Executive Director of Public Works Robert Harberg, Principal Engineer, Public Works - Utilities David Driskell, Executive Director of Community Planning and Sustainability

Kara Mertz, Environmental Action Project Manager Sarah Huntley, Media Relations/Communications Manager Andrew Barth, Communications Specialist II Ruth McHeyser, Qualitative Analysis Coordinator

DATE: July 23, 2013 SUBJECT: Study Session: Boulder’s Energy Future Municipalization Exploration

Project I. PURPOSE This work session is intended to provide information that will guide City Council’s decision on Aug. 6 about whether to approve, on second reading, a condemnation ordinance authorizing city staff to initiate negotiations with Xcel Energy (Xcel) for the acquisition of assets necessary to form a local electric utility. Because consideration of a first-reading condemnation ordinance requires the convening of a special City Council meeting, scheduled for July 24, information related to that is covered in a separate memo. The purposes of this study session are to:

Update council and receive feedback on the ongoing modeling and analysis with respect to the status quo and municipalization options, as presented Feb. 26 and April 16, 2013.

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Present and receive council feedback on a qualitative analysis. This analysis transcends the quantitative evaluation, which was conducted to determine if the city could, based on charter requirements, form a local electric utility. Looking at the options qualitatively is intended to help answer the question about whether the city should proceed with such an action.

Receive feedback and any direction related to the third-party independent evaluation.

Describe the process and ideas generated by the City/Xcel Task Force and receive council feedback on ideas proposed by Xcel.

Receive feedback from council on the Governance Working Group’s recommendations with respect to establishing an electric utility advisory board, including membership, skills and the role the board should play if a local electric utility is created.

Provide updates on regulatory, legal and financial steps taken to date. Update council on public processes related to this issue. Define or refine next steps.

II. QUESTIONS FOR COUNCIL 1. Does council have sufficient information and confidence to move forward with

acquisition of Xcel’s electric system assets through negotiation and if that fails, through condemnation, and to make a decision about whether to pursue creation of a local electric utility?

2. Does council want staff to proceed with discussions about Xcel’s proposal related to potential new products and services and if so, what additional information would council need to decide if this is worth pursuing instead of creating a local utility?

III. EXECUTIVE SUMMARY This memo represents a diligent effort to understand and incorporate a variety of risks and benefits associated with creating a local electric utility. There is no doubt that both exist. The following are key takeaways from this phase of exploration:

The new round of modeling shows that all goals related to cleaner, reliable and local energy can be met, even if some underlying costs are increased, as can the charter metric of offering comparable or better rates on Day 1. There are differences in probability, however, related to long-term cost savings between these results and earlier analyses.

This outcome is not surprising. In this phase, the city’s model was intentionally stress tested by incorporating higher levels of risk in the form of costs. This was done to address concerns that the initial analysis was overly optimistic and help identify the point at which a local electric utility would be unable to perform as well or better than Xcel. As expected, adding costs to the municipalization options

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decreased the financial favorability of some of these, but the changes made fail to take into account opportunities to reduce a local utility’s exposure.

Many, if not all, of the risks can be mitigated as a utility is established and managed. Even the possible impact of stranded costs – one of the largest unknowns – could be eliminated by purchasing power from Xcel until previous investment obligations are met, although this could lead to a longer time to reach the community’s goals.

When examining the challenges and opportunities qualitatively, it is clear that a local electric utility would be better positioned than Xcel to adapt to rapidly changing industry and market conditions. A local utility would be able to respond with flexibility, timeliness and clarity about Boulder’s specific needs and goals.

Xcel, as a result of partnership discussions over the past few months, has proposed a series of products and services it believes could help Boulder – and other customers throughout its territory – achieve green energy goals. While the city recommends further consideration of this path and continued dialogue with Xcel, the proposal does not represent a partnership that would give Boulder more of a voice in investment decisions and would likely result in customers paying increased rates for the products and services the community chooses.

Staff recommends moving forward on Aug. 6 with the next steps in pursuing a local electric utility. This includes approving an ordinance to initiate negotiations with Xcel and if necessary, condemnation litigation to acquire the required assets. It will be important, however, that the city’s work in Phase 3 incorporate all that has been learned about the potential impacts of pushing risks – even to extremes – so they can be addressed proactively.

Remembering how we got here At the Feb. 26 City Council Study Session, staff presented preliminary modeling and acquisition analyses related to six specific Energy Future options and discussed the goal of creating “The Electric Utility of the Future.” This utility, whether owned by the city or formed through a new partnership with Xcel, would strive to be a leader in reducing the impact our community’s electric use has on climate change and provide local energy services that meet the unique needs and values of Boulder customers—including customers’ ability to maximize energy efficiency, develop customized energy solutions and pursue local and onsite renewable generation opportunities. On April 16, City Council voted to move forward with Phase 2 of the Municipalization Exploration project. Since then, staff has been working intensely to refine the options and incorporate new information to address community feedback and better inform council’s decision about whether to proceed with acquisition and associated litigation.

https://bouldercolorado.gov/pages/feb-26-2013-council-study-session

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This work session marks another significant milestone in the Municipalization Exploration project. As staff has continued to evaluate the options, through research, community outreach and learning from other utilities, the vision of a utility of the future and the city’s understanding of ways it could address risk are clearer than ever before. Updates made to the municipal utility models As stated previously, modeling results presented in February were based on the best information available at the time and illustrated how a city-owned utility would meet the charter test under varying conditions. Since then, updated cost assumptions have been incorporated into the models. In addition, the models have been stress-tested with additional risks to identify issues that could impact the city’s ability to meet those charter tests. More in-depth analysis examined the likelihood of each of these risks and explored the actions a utility would take to mitigate them. In general, the modeling results show that the metrics related to renewable energy, greenhouse gas emissions, debt service coverage and reliability can be met at levels comparable to those presented in February and April of this year. The charter requirement related to Day 1 rates can be met and costs can be kept comparable to Xcel’s for years into the future. Actual ongoing costs and the ability to keep these comparable will depend upon the amount and terms of city-issued debt to cover stranded and acquisition costs. The city would need to proceed cautiously and potentially adjust how a local utility would operate, at least in its initial years, based on the outcomes of legal and regulatory proceedings that will define this overall debt. Nonetheless, with rates that are comparable to Xcel’s over time, a local utility should be able to:

Make investments in proactive grid management and undergrounding to increase reliability;

More than double renewable energy; Include ongoing energy efficiency and local solar investments that meet or

exceed what Boulder currently receives; and Establish a strong foundation for incorporating emerging technology to meet both

our community’s environmental and economic vitality goals.

The following chart presents options at four levels of stranded and acquisition cost ($150 million, $214 million, $277.5 million, and $405 million) as compared to the Xcel Baseline. In all options, carbon intensity and emissions were half those of Xcel and renewable resources were double Xcel’s, increasing to more than 50 percent of the resource mix. Even with the additional risk and costs added to the assumptions, the low cost option at $150 million in stranded and acquisition costs have a high probability (nearly 80 percent) of savings over 20 years when compared to Xcel. Three options at $150 million in stranded and acquisition cost exceed a 50 percent likelihood of savings, and two options at $214 million in stranded and acquisition costs exceed a 50 percent likelihood of savings.

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While the probability of long-term savings is lower than shown in February, it is important to note that the actual cost per kWh differential between options at various levels of stranded and acquisition costs is in the tenths of a cent. What this suggests is that there are opportunities to improve savings over time by managing costs or modifying resource procurement strategies. The following tables summarize the updated modeling results and metrics.

$150 Million in Stranded and Acquisition Costs

Data Unit Xcel

Baseline Low Cost

Low Cost (50%

Wind) No Coal

Local Generation

Revenue Required for Operations Over 20 Years (NPV)

$millions $2,629 $2,489 $2,523 $2,693 $2,556

Revenue Required for Local Electric Utility Over 20 Years Compared to Xcel Energy (NPV)

$millions n/a $140 $106 -$64 $73

Cost Paid by Utility Customers, Averaged Across Rate Classes, in 2017 ("Day 1")

cents/kWh 11.24 9.05 9.45 10.17 9.64

Cost Paid by Utility Customers, Averaged Across Rate Classes, Over 20 Years

cents/kWh 15.25 14.43 14.63 15.62 14.82

Percent of Electricity Consumption Coming from Renewables in 2017

% 23.10% 43.60% 60.20% 55.40% 61.20%


% 22.60% 45.10% 61.00% 55.10% 62.10%


% 24.40% 56.30% 58.60% 55.30% 59.70%

Carbon Intensity of Electricity 2017 kg CO2e/MWh 719.13 354.25 250.77 201.43 244.19



Total Carbon Emissions in 2017 mtCO2e 1,136,443 559,814 396,285 318,322 385,890


Total Carbon Emissions in 2037 mtCO2e 846,919 382,408 362,822 357,933 351,869

Table 1

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Data Unit Xcel

Baseline Low Cost

Low Cost (50%

Wind) No Coal

Local Generation


$millions $2,629 $2,584 $2,618 $2,788 $2,651


$millions n/a $45 $11 -$159 -$22


cents/kWh 11.24 9.06 9.45 10.17 9.64


cents/kWh 15.25 14.98 15.18 16.17 15.37


% 23.10% 43.60% 60.20% 55.40% 61.20%


% 22.60% 45.10% 61.00% 55.10% 62.10%


% 24.40% 56.30% 58.60% 55.30% 59.70%







Table 2

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$277.5 Million in Stranded and Acquisition Costs

Data Unit Xcel

Baseline Low Cost

Low Cost (50%

Wind) No Coal

Local Generation


$millions $2,629 $2,680 $2,714 $2,884 $2,747


$millions n/a -$51 -$85 -$255 -$118

Cost Paid by Utility Customers, Averaged Across Rate Classes, 2017 ("Day 1")

cents/kWh 11.24 9.07 9.46 10.18 9.65


cents/kWh 15.25 15.54 15.74 16.72 15.93


% 23.10% 43.60% 60.20% 55.40% 61.20%


% 22.60% 45.10% 61.00% 55.10% 62.10%


% 24.40% 56.30% 58.60% 55.30% 59.70%







Table 3

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Data Unit Xcel

Baseline Low Cost

Low Cost (50%

Wind) No Coal

Local Generation


$millions $2,629 $2,875 $2,909 $3,078 $2,942


$millions n/a -$245 -$279 -$449 -$312


cents/kWh 11.24 9.09 9.48 10.19 9.67


cents/kWh 15.25 16.67 16.87 17.85 17.06


% 23.10% 43.60% 60.20% 55.40% 61.20%


% 22.60% 45.10% 61.00% 55.10% 62.10%


% 24.40% 56.30% 58.60% 55.30% 59.70%

Carbon Intensity of Electricity in 2017

kg CO2e/MWh 719.13 354.25 250.77 201.43 244.19


kg CO2e/MWh 685.26 365.55 260.47 203.83 252.71


kg CO2e/MWh 481.28 217.31 206.18 203.40 199.96




Table 4

Another consideration to make when evaluating these findings is that the Xcel Baseline, used for comparison purposes to test the city’s ability to meet its charter requirements, was not stress-tested for risks inherent in its resource mix or capital investment plan. It is impossible to do so at this time because there is insufficient data. The results of the comparison between the municipal utility model and the Xcel model should be viewed with this disparity in mind. In response to feedback from the community and Xcel, the modeling teams delved deeper into some possible worst-case assumptions for the local electric utility, such as no carbon tax or fee; all production tax credits going away such that renewable resources are less cost competitive; and the potential for significant increases in natural gas prices. In addition, the team adjusted Xcel’s Baseline to be even more conservative. Lastly, at the request of council, a more robust distributed generation resource was included in the mix to test its impact on costs and resources.

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The working groups provided significant feedback about concerns they had as well as those raised by Xcel. They are primarily operational issues such as reliability, staffing and outsourcing, emergency response, transmission access, resource portfolio diversity and others. Staff has analyzed the risks with respect to a municipal utility and how those risks might be mitigated. These are discussed in detail in Attachment A. The issue of multiple compounded risks generated significant debate within the working groups, with some saying that such a confluence is unlikely and that the results fail to take into account the emergence of new technology, which could have a profound impact on the potential success of a local electric utility that is flexible enough to incorporate it. By modeling all of these risks or potential factors at once, it’s possible to see how many simultaneous risks a local electric utility could bear without “breaking the model.” As was expected, some of the options appear less likely to meet the charter test when loaded with these multiple risk factors (even though others continue to perform well). It is important to consider, however, the low probability of all these risk factors occurring at the same time and not being addressed through various mitigation measures. The Utility of the Future The research conducted to date continues to demonstrate the potential for shifting to a new utility business model. In fact, this is a shift that is being discussed and pursued in communities and regions around the country and the world. Today’s electric utilities face unprecedented challenges. On top of traditional goals of safety, efficiency and reliability, utilities must now address global environmental issues such as climate change, national security issues surrounding dependence on foreign energy and a growing desire by customers to have greater control over energy use decisions. As has been discussed in previous study sessions, meeting these challenges requires transformation of the traditional electric utility business model. While delivering safe and reliable electricity will always form the bedrock of what the electric utility serving Boulder will do, the utility of the future must shift away from a command-and-control model of centralized generation and electricity sales and toward a model that is increasingly being referred to as “the energy Internet”—a complex and resilient system of distributed generation, customized solutions, empowered customers and energy-and-data flows. In essence, the utility of the future will treat electricity as a service rather than a commodity. Some of the key drivers behind this shift include:

The imperative to reduce greenhouse gas (GHG) emissions upwards of 80 percent by 2050;

Significant climate/clean energy policy momentum in a majority of US states, with likely near-term federal action that will further increase costs and complicate development of fossil-fuel based electricity generation;

Continued decline in production costs for renewable energy technologies; Rapid innovation in energy technology; Growing support and uptake of regulatory policies to allow utilities to utilize

large-scale energy efficiency as the lowest-cost energy resource;

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Implementation of technologies that offer utilities and their customers the information and tools to better manage electricity usage;

Growing interest and activity in the development of plug-in electric vehicles (PEVs); and

Increasing recognition of domestic natural gas as a resource that is less carbon intensive than other fossil fuels for large-scale electricity generation and complementary to renewable energy resources.

While each of these drivers will materially influence the entire electric power sector in the coming years, the city’s analysis indicate that a new local utility—developed from the beginning with the aim of embodying a different business model—would be better positioned for long-term success than a large traditional utility that must significantly alter its current business model, culture and operations while also constrained by previous investments. Specific examples that illustrate this potential are provided as part of the qualitative analysis in Section V. City-Xcel Partnership Discussions The city continues to receive questions about whether the community’s goals could be achieved under some new agreement with Xcel. To identify opportunities, the city and Xcel convened a group of community leaders to explore a potential partnership and achieve Boulder’s Energy goals. The membership had a diverse set of perspectives and priorities but worked together during frequent meetings from April until early July to develop some innovative possibilities. Xcel developed a set of recommendations or offerings, and presented the Task Force with a proposal that is discussed in Section VI. Staff intended to model the proposal submitted by Xcel as a comparison to the Xcel status quo and municipalization alternatives. Unfortunately, there was neither sufficient time nor detail in the proposal for the city or Xcel to perform an adequate economic comparison and modeling exercise. This analysis could be performed later should council direct staff to continue discussions with Xcel based on the company’s proposal. Governance The city staff committed to the business community and potential county customers that it would establish a governance working group to review the charter utility advisory board role, membership and skills. The working group was diverse representing all types of potential electric utility customers, including business and out-of-city residents. The key recommendations include a charter change to allow one representative to be from out-of-the-city but not necessarily part of the business community. The group also explored the role of the board in terms of recommendations related to rates and fees and defined the skill set that would be most helpful for this board. Section VII is a summary of the report.

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Regulatory Updates Lastly, this memo provides updates with respect to regulatory filings (which are still in process) and feedback about interest rates, which impact the cost of debt issues to finance municipalization. Condemnation and Timing As explained in previous memos, the city, Xcel and other Xcel ratepayers would benefit if the city could provide a clear indication about whether it intends to leave Xcel’s system. The company has said in filings before the Public Utilities Commission that it will seek to secure new generation of electricity at the end of this year, in order to meet increasing demand. If Boulder customers are no longer drawing from this supply, these additional resources would not be necessary. The community-funded exploration that has been conducted to date has yielded significant and extremely valuable information. The staff team believes the extensive modeling demonstrates the city’s ability to meet the charter test and provides adequate information about risks to allow the community – and a potential utility – to address them. It is important to note that while staff is asking for council to approve the condemnation ordinance on Aug. 6, the ordinance anticipates that the good-faith negotiation process required by Colorado law would not be completed before the end of the year. Accordingly, the condemnation ordinance does not authorize filing of a complaint until January 2014. This allows for additional time for continued discussions with Xcel and analysis, to the extent these would be fruitful.

Conclusion None of the new modeling and subsequent results changes the key conclusion that a local electric utility is possible under the charter metrics. They do, however, underscore the importance of having clear plans to manage stranded and acquisition cost rulings and other potential risks if and before they occur. Staff believes this is both reasonable and achievable. While researching specific examples of how utilities elsewhere are meeting key aspects of Boulder’s Energy Future goals it became apparent how much the electric industry is changing. The ideas often discussed by city staff and community leaders in Boulder are becoming reality in various communities, although no single utility has done all the things envisioned here. So the question that remains is what option – creating a local electric utility or remaining with Xcel, either in the status quo or under a proposal it developed out of the partnership working group process – could achieve Boulder’s energy goals the most quickly, effectively and affordably? Staff viewed these options against the goals and finer-level objectives identified by council. The results show that while many of the goals could be achieved by both a local utility or Xcel, there are key differences related to timing, Xcel’s motivation to make necessary changes, where decision-making authority would rest (PUC vs. local governance), and the impact of state and federal regulations.

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Based on 1) the ability of a local utility to meet the charter metrics; 2) the ways the city has identified to mitigate potential risks; and 3) the significant additional value the Boulder community could realize through a local electric utility, staff recommends council move forward with the next steps supporting municipalization. This includes consideration and approval of an ordinance authorizing the condemnation of Xcel’s assets at an appropriate point if negotiation to acquire is not successful. At the same time, however, staff urges council and the community to understand that the additional modeling highlights the importance of understanding and responding to potential risks, especially in the unlikely event that several of these risks were to come to fruition at the same time. Phase 3 will include further analysis about how a local utility would be set up so that it is solidly positioned to address any possible worst-case scenarios. In addition, because some of the final costs are not yet known and there remains a possibility that the city could impact change at a more regional level, staff supports continuing to work with Xcel to better understand its proposal. This should occur as a parallel path to municipalization, with the understanding that this dialogue would no longer be appropriate if condemnation proceedings become necessary. IV. QUANTITATIVE ANALYSIS: MODELING PROCESSES A. Summary of Modeling Results This latest round of modeling is intended to highlight the risks associated with possible formation of a local electric utility and to model those risks in such a way as to determine the overall impact on the city’s ability to meet its charter requirements. The modeling has always been viewed as iterative, with each round allowing the city to refine its understanding of these risks. The city was able in this phase of modeling to modify assumptions relating to the Xcel Baseline, though this continues to be limited due to a lack of current information about what Xcel factors in to its resource and cost models, as well as a lack of accurate information about how Xcel might respond to changing conditions in the future. Notwithstanding this limitation, the city’s model inputs and assumptions have been updated based on feedback from the working groups and on more current data provided by Xcel in its filings at the Colorado Public Utilities Commission (PUC).

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The following table summarizes the charter metrics results.

Metric Related to Charter Requirements

Performance Under Revised Modeling

Rates not to exceed Xcel’s at time of acquisition

Met under some options that prioritize lower costs.

Subject to the level of stranded and acquisition costs, this could be done with or without capitalized interest.

Comparable rates possible for the entire 20 years in some options (low cost, local generation at $150M and $214M).

Debt service coverage ratio of 1.25

Debt coverage of 1.25 is modeled as a requirement.

All other charter metrics could be met for some options even if the municipal utility received a credit rating lower than expected and/or carried a coverage ratio of 2.0.

Comparable reliability This has been built into the modeling through proactive operations and maintenance planning.

Aging distribution and transmission system components are replaced and updated.

Costs include undergrounding 40% of the overhead distribution lines during the initial 20 years and the entire system over 50 years.

Resource models include 15% extra resource purchases to ensure sufficient reserves.

Increased renewable energy compared to Xcel’s at five and 20 years

Using the resource plan that Xcel updated in April for its 2011 Electric Resource Plan, all of the local electric utility options nearly [or more than] double the renewable energy on Day 1 of the models.

Reduced greenhouse gas emissions compared to Xcel’s at five and 20 years

Using the resource plan that Xcel updated in April for its 2011 Electric Resource Plan, all of the local electric utility options cut total GHGs attributable to Boulder.

Similarly, the GHG intensity of the electricity Boulder would receive, is cut in half or lower on Day 1 of the models.

Table 5: Summary of Performance Against Specific Charter Requirements and Metrics

B. A Refresher: Why Model Risk? How is it Modeled? The feasibility modeling is illustrative and is designed to identify large risks that can impact a local electric utility. It is not designed to lock Boulder into a particular resource package and it does not reflect the city’s legal positions; instead, it shows potential costs, rather than rates customers would pay, and it offers examples about the types of services a local utility might offer. The modeling shows different decisions the local electric utility could make about resources and infrastructure investments depending on how the world might look in 2017 and over the subsequent 20 years. Therefore, while it provides guidance for identifying and mitigating risks, it does not commit to a particular path. These decisions would have to be made later, once actual conditions were known.

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HOW RISK IS MODELED The model includes wide ranges of costs for a small number of high-impact variables. The ranges were developed using publicly available information that is relevant to Colorado. Sometimes, multiple decisions factor into the prices that are modeled: for example, the median price for wind power in 2017 is based on feedback from the working groups that future state and federal subsidies will likely not be as large as the existing Production Tax Credit, but that the trend is toward decreasing costs as technology improves. Running the models many times under different price levels shows where changes in the future could have an impact on the ability of a local electric utility to meet the requirements of the City Charter. WHAT WE’VE LEARNED ABOUT FUTURE RISK FOR A LOCAL ELECTRIC UTILITY While the future is uncertain, there are several variables that could have a significant impact on whether a local electric utility could meet the charter requirements, and many other variables that would not have a significant impact. Stranded and acquisition costs are among the largest impacts, which is why the city is focusing on refining its valuation of Xcel’s infrastructure and requesting that the Federal Energy Regulatory Commission (FERC) answer a threshold legal question related to stranded costs. As answers come in for these remaining questions, the city expects to be able to shrink the large range of debt that was modeled to provide a more accurate view of future options. The prices for wind and natural gas also play an important role, as the resource portfolios modeled include significant amounts of both. Macroeconomic conditions and the utility’s credit rating impact interest rates on both taxable and non-taxable debt—this effect increases when higher levels of stranded and acquisition costs are modeled. The electric utility’s investments in operations and maintenance, which includes both maintaining the grid and providing customer service, further impact the overall cost-effectiveness of the enterprise. Finally, state and federal actions on environmental issues like carbon policy will have an impact. There are numerous other assumptions that come into play in the model—such as the level of funding for energy efficiency rebates or transmission costs—but none have as significant an impact as these other variables. MODELING XCEL’S RISKS The city’s consultants developed a comprehensive “Baseline” for Xcel’s future resource mix and costs, using publicly available information filed with the PUC and FERC. A few elements of this Baseline can be exposed to risk in similar ways to the local electric utility options. For example, Xcel’s interest rates on debt and return on equity; the prices it would pay for new wind contracts; the prices it pays for natural gas; and the cost it would pay were a carbon price to be implemented can all be varied similarly to how they are varied on the local electric utility options. However, Xcel may not be fully incorporating some key risks in its publicly available resource planning or rate filings. For example, a variable with a significant impact on customers’ bills—the price Xcel pays for coal, which makes up over 50 percent of its resource mix—is only projected into the future with one low price trajectory for long-term planning purposes. In contrast, the

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city has looked at the local utility’s major resources, wind and natural gas, with three price levels that have been developed to anticipate 80 percent of the possible prices the utility could see on the market. As part of its annual Securities and Exchange Commission (SEC) 10-K filing, Xcel does address (at least at a high level) some risks to which it believes it could be exposed. Interestingly, if Boulder were to establish a local utility based on providing electricity as a service rather than a commodity (as discussed in the executive summary of this memo), the risks Xcel cites as its largest could actually represent opportunities for a Boulder utility. The following box spells these out more specifically.

Risks Identified by Xcel in its 2012 SEC Filing “Xcel Energy’s industrial and large commercial customers have the ability to

own or operate facilities to generate their own electricity” (p.42) “[D]istributed solar generation may become an economic competitive threat to

our load growth in the future . . .” (p.49) “Unusually mild winters and summers could have an adverse effect on our

financial condition, results of operations, or cash flows” (p.42)

Finally, Xcel notifies its stakeholders that part of its mitigation plan for some risks is to pass costs onto its customers. For example, in 2012, Xcel noted that:

[I]t is not possible to determine when or to what extent additional facilities or modifications of existing or planned facilities will be required as a result of changes to environmental regulations, interpretations or enforcement policies or, what effect future laws or regulations may have upon Xcel Energy’s operations . . . Although the impact of these policies on Xcel Energy will depend on the specifics of state and federal policies, legislation, and regulation, we believe that, based on prior state commission practice, we would recover the cost of these initiatives through rates” (p.42).

“CHANGING COURSE” An area where the models have been subject to criticism is that no results have been shown that reflect Xcel “changing course” in the period of 2017 to 2037 based on different market or regulatory conditions. The most prominent example is related to any potential increase in the cost of carbon: and the idea that putting a price on carbon could lead Xcel to make different resource decisions. While the modeling could theoretically show this, Xcel has not provided sufficient information to the city about how it would react under scenarios like that. As a result, city modeling would be speculative at best. Moreover, Xcel has significant previous and long-term investments in coal-based load generation that could limit its ability to respond to changing conditions. The modeling results provide a variation without a carbon price to minimize the impact of this particular issue. This change was requested by members of the community and recognizes the political uncertainty surrounding this issue.

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C. Options Analysis: What It Tells Us The purpose of modeling options for the local electric utility is to help identify, evaluate and manage risks. Because resource costs are generally the highest single ongoing cost for utilities, the modeling sought to illustrate possible resource packages for which the local electric utility might contract. The financial and resource modeling analysis focuses on the “Low Cost” option, as this appears to strike the best balance of all of the community’s energy goals, and then describes the trade-offs associated with the variations on that option. Although a local electric utility would have to meet a series of metrics—including financial requirements related to rate parity that are in the City Charter—it has flexibility in what path it would take to get there. By varying the costliest operating parameters, the modeling tests the feasibility of prioritizing different resource mixes once stranded and acquisition costs become known. For example, if actual stranded and acquisition costs came in closer to the highest amount modeled, council could choose a least-cost resource mix (“Low Cost” option), and if they come in lower, council could look to eliminating coal (“No Coal” option). Figure 1 illustrates how this might work.

Figure 1: Example of Decision Tree Once Stranded and Acquisition Costs Are Known

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The following table briefly summarizes the options that were modeled for this phase of the analysis. Given that the “Lowest GHGs” options were not cost effective in the first phase of modeling, this phase focused exclusively on variations to the “Low Cost” option. Additionally, the “Phase Out” option—which was designed to reduce risk by purchasing power from Xcel for a five-year period, mitigating any stranded cost obligation—was not re-modeled at this time because the city has been awaiting a decision from the FERC on its declaratory order. In addition, the phase out option would likely be a variation of the low cost model with a portion of the power supply being purchased from Xcel in the early years to mitigate stranded cost. As a result, this analysis focuses on the “Low Cost” option and then describes the trade-offs associated with potential variations on that option.

Name of Option Description Feb/Apr Modeling

July/Aug Modeling

Xcel Baseline Forecasts Xcel’s revenue requirements over 20 years based on publicly available filings at the PUC and allocates a proportion of them to Boulder for comparison to the local electric utility options.

√ √

Low Cost A least-cost resource mix of renewable energy baseload (wind and hydroelectricity), natural gas for stability, and some purchases from the wholesale market, which includes coal. The July modeling requires the resource mix include at least 30% wind.

√ √

No Coal Variation on the “Low Cost” option (and subsequently the “Low Cost (50% Wind)” option that blocks the utility from acquiring energy resources on the market that may include coal.

√ √

Lowest GHGs Variation on the “No Coal” option which reduces GHGs to the maximum cost-effective extent.

√

Reduce Use Variation on “Lowest GHGs” option in which energy efficiency investment is more than doubled, reducing the need to purchase electricity.

√

Low Cost (50% Wind)

Variation on the “Low Cost” option in which wind is modeled to meet or exceed 50% of annual energy needs.

√

Local Generation Variation on the “Low Cost (50% Wind)” option in which $7 million annually is invested in local solar PV via a rebate, feed-in tariff, or other incentive.

√

Table 6: Description of Options Modeled in February as Modified for July

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D. Updates & Refinements to the Modeling The feasibility modeling related to the formation of a local electric utility is an iterative process. While the modeling that led up to the February and April council meetings represented the best available information at the time, more information has become available since then. Staff and consultants have refined the modeling to include, among other changes, Xcel’s revised assumptions for its 2011 Electric Resource Plan and an expert review of the Xcel Baseline model. The focus of the most current model updates examined additional possibilities that could significantly impact the local utility modeling results and its comparison to the Xcel Baseline. The goal of this iterative process is to progressively increase the accuracy of the modeling and to highlight any areas where the local utility models might be vulnerable. The results identified which risks posed the greatest challenges to forming a local electric utility and options for mitigating them. The changes that have been made to the models are summarized in Table 7 and described in more detail in Attachment B.

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Type of Revision

Model Impacted by the Revision

Impact of the Revision Xcel

Baseline Local Utility

Area 1: Xcel’s 2011 Electric Resource Plan Update

1. Adjusted natural gas prices based on updated “base” and standard deviation prices and transportation costs

√ √ Increase to “high” and decrease to “low” and “median” gas prices

2. Adjusted wind power purchase agreement prices, primarily based on assuming the “base” or median case should exclude subsidies (such as the PTC) but include a price reduction for technological advancement

√ √ Increased median or “base” wind prices, making wind less competitive in early years

3. Added carbon prices of $0 and $20 per metric ton for testing in addition to the three price trends

√ √ Although the carbon price was retained for the full analysis, these alternatives allowed for additional variations of the models to be tested

Area 2: Expert Review of Xcel Baseline

1. Adjusted how Xcel’s annual costs are allocated to Boulder for comparison based on Boulder’s contribution to Xcel’s revenues rather than to Xcel’s load

√ Reduces the costs that are attributable to Boulder for comparison

2. Disaggregated Xcel’s revenue requirement into its components to separately escalate expenses for generation, transmission, distribution, and general assets based on historic trends from FERC filings

√ Reduces slightly the overall trend in Xcel’s cost increases

3. Adjusted tax calculation for Xcel’s revenue requirements for taxes Xcel pays on equity returns

√ Increases magnitude of impact of macroeconomic changes

4. Distinguished existing contracts for wind power from potential future wind power, allowing the price of wind to vary only on the future wind power (as would be experienced by the local electric utility)

√ Reduces magnitude of impact of wind prices changes on Xcel

5. Adjusted Xcel’s DSM costs based their new budgets and incentive cap proposed for 2015-2020

√ Significantly reduces Xcel’s future DSM costs

Area 3: Engineering/Appraisal Work

1. Increased capital replacement 5-year bonds to include more undergrounding and maintain 115 kV transmission loop

√ Increases capital replacement plan by approximately $28 million over 20 years

Area 4: Additional Revisions

1. Revised options being modeled; specifically, a “Local Generation” option was modeled that increases the amount of solar PV incentives being offered

√ Illustrates other potential resource mixes for Boulder that could be prioritized depending on stranded and acquisition costs

2. Increased city DSM investments to $3 million annually, increased by inflation, to coincide with Xcel’s assertion about Boulder’s share of rebate amounts

√ Adds approximately $0.9 million per year, although load has not been decreased as would be expected from increased DSM

3. Increased level of solar PV incentives to $3.5 million per year under each option except the Local Generation option, which includes $7 million per year

√ Impact is less than the cost of the incentives due to avoided energy purchases from other resources

Table 7: Summary of Modeling Updates that Impact the Xcel Baseline and Municipalization Options

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Attachment B includes a complete description of the areas that were revised. The following outlines key takeaways from each of the areas where revised assumptions were used. Revisions, Area 1: Xcel’s 2011 Electric Resource Plan (ERP) Assumptions Update Updated assumptions for Xcel’s long-term resource modeling were provided to the PUC on April 16 (Attachment C). These updates led to changes to the natural gas prices, wind prices, and carbon prices that were modeled and impact both the Xcel Baseline and the municipalization options. While the changing gas prices provide some benefit to the local electric utility, as a larger proportion of its resource costs rely on natural gas, the change to the wind assumptions adds significant risk to the local electric utility options by increasing overall resource costs. Adding new carbon tax levels of $0 and $20 does not change the primary results based on the working groups’ belief that some state or federal climate action is likely, but it does enable a more “apples to apples” testing with the baseline case Xcel presented in its ERP. Revisions, Area 2: Xcel Baseline Expert Review (Fast Tracks Consulting Services, Inc.) Staff contracted for an extensive expert review of the Xcel Baseline portion of the model, which forecasts Xcel’s costs and energy mixes through 2037 and attributes a portion of those overall costs to Boulder. This review was conducted by Fast Tracks Consulting Services, Inc. Because Xcel has declined to provide information or data to the city, the analysis is based on publicly available documents filed at the PUC and FERC. This work is critical to ensure that the municipalization options are being compared accurately to what Xcel has reported. A description of the methodology for the Xcel Baseline forecast is available as Attachment D. The overall impact of changes to the Xcel Baseline is approximately a 6 to 8 percent decrease in Xcel’s revenue requirement, or about $200 million dollars in reduced cost to Xcel over 20 years. At this time, the expert reviewer has concluded that the Xcel Baseline model is as accurate as is possible without Xcel’s explicit cooperation in providing data, including its rate studies and detailed load information, both of which have been denied to date. Revisions, Area 3: Engineering/Appraisal Updates A detailed description of the equipment and property included in the proposed service area is contained in the July 24 City Council agenda memo on first reading and consideration of a motion to authorize the acquisition of property interests from Xcel. The engineers designing the separation and interconnection plan for the proposed local utility made some relatively minor modifications to the service territory since the information that was released in February. This was done after the engineers were able to

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field verify the equipment and investigate the portions of the system at the service area boundaries. This service area boundary adjustment added less than ten additional customers, since the vast majority of additional service territory is permanently protected from development through the city’s Open Space and Mountain Parks Charter. In addition to the service area boundary adjustment, the separation and interconnection plan now contains acquisition of the 115kV transmission loop that ties six of Boulder’s substations to each other. Incorporation of the 115 kV transmission loop and adjustment of the service area boundary does not change the $150 million acquisition cost estimate, but it does add approximately $28 million over 20 years in costs to maintain and update the transmission loop. This additional amount has been incorporated in this updated modeling. Revisions, Area 4: Energy Efficiency Rebates and Investments To address Xcel’s assertion that the city model did not provide the same level of energy efficiency incentives, staff performed an analysis of Xcel’s publically available information (see Section F Energy Efficiency Incentives for details). Expanding the funding for energy efficiency rebates increased the local utility’s operations budget by approximately $825,000 per year. It is important to note that staff has not conducted any analysis about how the expected reduction in load stemming from these investments would affect expenditures for energy resources. It is reasonable to expect that these resource costs would go down. Checking this assumption and calculating how much these reductions would save a local utility could be captured in future modeling. E. Results of Adjustments to Xcel Baseline Modeling The Xcel Baseline modeling forecasts Xcel’s costs and energy mixes through 2037 based on its own publicly available documents, attributing a portion of their overall costs to Boulder. As is shown in Figure 2, the model forecasts that Xcel’s revenue requirement will increase at an average rate of approximately 4.6 percent per year over the 20 years modeled (this excludes a carbon price). Historic trends, derived from FERC and EIA data, indicate a nearly 6 percent per year average increase in revenues collected in the years 2004 through 2011, so the model is considered to be conservative. This overall revenue trend is used to compare the Baseline against the municipalization options. The Xcel Baseline revenue requirement is varied in the probabilistic (risk based) model by changing the gas prices, prices of new wind Xcel acquires in future years, interest rates on debt and equity, and carbon prices, to the same degree that they are changed for the municipalization options. This is because these uncertainties are conditions that have an overall effect on both Xcel and a municipal utility. For example, if the local electric utility can no longer purchase federally incentivized wind power, it won’t be available for Xcel or other utilities either.

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Figure 2: Actual Revenue Collected and Projected Revenue Need for Xcel’s Colorado Service

Territory

Additionally, as shown in Figure 3, Xcel’s generic generation mix from now through 2037 shows a decrease in its fossil fuel proportion by only five percent. Xcel primarily transitions from a coal-based load to natural gas as their coal plants approach retirement. Although Xcel is acquiring wind, provided it is “least-cost,” its modeling does not demonstrate a strategic plan to utilize this resource in higher amounts from what is currently used and transition from a fossil fuel-based system.

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Figure 3: Xcel’s Projected Generation Mix from 2013-2037

Table 8 shows how this revenue requirement forecast translates into a monthly bill impact for three rate classes based on the average electricity consumption Xcel reports when it updates its Electric Commodity Adjustment (ECA) each quarter.

Rate Class Monthly Average

kWh

Reported Monthly Bill

(2013) 1

Projected Monthly Bill

(2017)

Projected Monthly Bill

(2022)

Residential (Schedule R) 632 $75.67 $91.87 $111.68

Small Commercial (Schedule C) 1,123 $145.14 $176.21 $214.21

Industrial (Schedule PG) 492,079 $39,051.64 $47,410.25 $57,634.73

Table 8: Current and Forecast Monthly Bills for Select Customer Classes Under Xcel Energy

Additional aspects of the Xcel Baseline, such as carbon emissions and costs per kWh over time, are explored in the next section as part of the comparison to the local electric utility options.

1 Exhibit 10, Notice of Revision of Electric Commodity Adjustment on Less Than Thirty-Days’

Notice (dated June 17, 2013), Docket No. 13L-0692E.

66% 55%

44% 40%

34%

20%

11% 22%

28% 35% 37%

52%

22% 21% 20% 20% 22% 21%

1% 2% 3% 3% 3% 3%

1% 5% 3% 3% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2017 2022 2027 2032 2037

Xcel's Generation Mix as Projected in its Electric Resource Plan

Coal Natural Gas Wind Solar Hydro Other

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F. Results from Modeling Municipalization Options The models continue to demonstrate that a local utility can meet the charter metrics on Day 1. Because the latest round of modeling was designed to test risks and model a reasonable worst-case scenario, it was expected that the confidence interval for meeting the charter metrics would decrease. This did, in fact, occur. A focus of the modeling has been to evaluate whether the local electric utility options were likely to lead to cost savings compared to staying with Xcel Energy over 20 years. The Low Cost option is likely to provide savings at lower levels of stranded and acquisition costs ($150 million and $214 million). However, changes to the Xcel Baseline and to the price of wind and natural gas contribute to an approximately 20 percent reduction in the confidence of that option (however, they still stand at 77 percent and 59 percent confidence, respectively). As a reminder, the model has been designed to produce results that address the requirements in the City Charter. These charter requirements were translated into a series of metrics which, as applicable, have been programmed into the model. The metrics are in comparison to the Xcel Baseline. The metrics, which will be discussed further below, include:

1. Rates equal to or less than Xcel’s at the time of acquisition; 2. Debt service coverage ratio of 1.25; 3. A plan to increase renewable energy and decrease emissions; and 4. Comparable reliability to that offered by Xcel.

RATES THAT DO NOT EXCEED XCEL’S AT THE TIME OF ACQUISITION Metric status: Achieved The charter requirement to provide rates equal to or less than Xcel’s at the time of acquisition—as measured in average cost to run the utility over kWh consumed—can be met even under higher levels of stranded and acquisition costs (see Table 9 below).

Cost per kWh of Local Utility Options Compared to Xcel Energy Baseline

Stranded & Acquisition

Period Measured Xcel

Baseline Low Cost

Low Cost (50%

Wind) No Coal

Local Generation

$150 million Day 1 (2017) $0.112 $0.090 $0.094 $0.102 $0.096

20-Year Average $0.152 $0.144 $0.146 $0.156 $0.148

$214 million Day 1 (2017) $0.112 $0.091 $0.095 $0.102 $0.096

20-Year Average $0.152 $0.150 $0.152 $0.162 $0.154

$277.5 million Day 1 (2017) $0.112 $0.091 $0.095 $0.102 $0.097

20-Year Average $0.152 $0.155 $0.157 $0.167 $0.159

$405 million Day 1 (2017) $0.112 $0.091 $0.095 $0.102 $0.097

20-Year Average $0.152 $0.167 $0.169 $0.179 $0.171

Table 9: Cost per kWh for Local Electric Utility Options Compared to Xcel Baseline (green cells indicate performance better than that forecast for Xcel)

http://www.colocode.com/boulder2/charter_articleXIII.htm

https://bouldercolorado.gov/energy-future/energy-future-work-plan-metrics

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However, the data shows a more complicated story. The city’s modeling since April has been focused on testing worse-case scenarios, thereby building in additional risks and costs. This creates a modeling structure in which the local electric utility bears all of the risks of a poor economy, a grid that could be in worse condition than Xcel has disclosed, lack of access to transmission, etc., while at the same time insulating the Xcel Baseline model from many of those circumstances. Moreover, as is noted above, Xcel’s cost trajectory as modeled is lower than its historic revenue collection. This was done to give it the benefit of the doubt where its future investments were uncertain.

Resource price risks that have been added—primarily, an increase in median wind prices based on the assumption that federal subsidies would not continue at current levels over the period modeled—brought the prices of wind, natural gas, and the wholesale market (representing a mix of generation similar to that of Xcel’s resource mix) closer together. The resulting increase in resource costs impacts the likelihood that overall costs could be kept comparable to those of Xcel’s over the 20-year period being modeled. Although there were options presented in February and April for which there was a greater than 80 percent likelihood of 20-year cost savings under varying levels of stranded and acquisition costs, the options modeled for this memo have decreased likelihoods of cost savings. At $150 million to $214 million in combined stranded and acquisition costs, the “Low Cost” options—which still include $3.5 million in solar rebates and 30 to 50 percent wind energy—are between 50 and 80 percent likely to produce cost savings. Although the Local Generation option has a higher likelihood of success than the No Coal option, it does not perform as well as the Low Cost variations. Based on this, should council move forward, it would be prudent to prioritize a mix that does not entirely exclude coal power (although it could be cut in half from current levels) unless stranded and acquisition costs come in at the lower levels of what was modeled.

There is a further nuance to this data based on bill impact. Depending on the level of stranded and acquisition costs, the local electric utility could make significant strides in increasing renewable resources and reducing emissions compared to staying with Xcel for just pennies on a customer’s monthly bill. For example, under the Local Generation option, a $7 million per year solar incentive program, proactive maintenance program, increased energy efficiency rebates and as much as 60 percent renewable energy could be incorporated for less than two-tenths of a penny per kWh. These costs—to essentially “gold plate” the system—go into the local utility options. This indicates that although the overall confidence in there being long-term cost savings has decreased in this recent round of modeling, there is a considerable amount of flexibility in the model such that cutting the local electric utility’s total budget by $8 million to10 million per year (in debt, fuel costs, staffing, etc.) could significantly improve its performance even in worst cases.

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Variations on the “Base” Models. Council and the public have requested a more in-depth analysis of the impact of changing certain assumptions in the models. The impact of removing a carbon price and removing capitalized interest are discussed below and depicted in subsequent Figure 4.

Carbon price: The recent modeling analyzed the impact of high, median, and low carbon prices when applied to the resource mixes of the Xcel Baseline and the local electric utility. Removing carbon prices could have a 10 to15 percent impact on the likelihood of cost savings over 20 years for the local electric utility options. The Low Cost option continues to exceed 50 percent likelihood of savings at $150 million in stranded and acquisition costs.

Capitalized interest: Capitalizing interest on debt for 18 months is a standard

utility practice. If interest capitalization is removed from the taxable debt—the stranded and acquisition costs—it actually makes the overall cost of the debt cheaper over 20 years and improves, by a few percentage points, the likelihood of 20-year cost savings compared to the Xcel Baseline. Looking at cost per kWh in 2017 (“Day 1”), it appears that at $214 million in combined stranded and acquisition costs, the Low Cost option with 50 percent wind could continue to have a cheaper starting price than the Xcel Baseline (11.11 cents per kWh for Low Cost-50 percent wind vs. 11.24 cents per kWh for the Xcel Baseline). However this would make it difficult to develop a cash reserve, which staff believes is the more prudent approach.

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Figure 4: Cost Savings Compared to Staying with Xcel Under Modeling Variations (Low Cost

Option, $150 million in Stranded and Acquisition Costs)

What is clear from this modeling is that there are several high impact costs that could impact the ability of the local electric utility to meet charter requirements and could force some balancing between renewable energy and costs. These high-impact costs include stranded costs, acquisition costs, wind prices, and natural gas prices, with carbon prices having a lesser impact.

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The table below illustrates the impact of some of the key financial risks on the day one metric and whether the municipal utility can still maintain comparable rates.

Ability For local utility to meet "Day 1" metric in relation to key risks Local Electric Utility Options @ $150M and $214M Stranded and Acquisition Levels

Key Additional Financial Risks Low Cost Low Cost (50% Wind) Local Generation

$150M $214M $150M $214M $150M $214M

Carbon tax is not implemented (remove carbon tax range of $1.18 to $46.47/metric tons)

Yes Yes Yes Yes Yes Yes

The wind Production Tax Credit (PTC) is not continued during the modeled period (Median wind price changes from $38/MWh to $50/MWh)


Interest is not capitalized and deferred for 18 months (defers $44.6M - $53.7M of debt payments in the first 18 months, depending on debt level)


Loss of out-of-city customers (approximately 3% of revenues)


Increasing DSM rebates and incentives to exceed Xcel's expenditures in Boulder (additional $0.9M/year for DSM rebates)


Table 10 DEBT SERVICE COVERAGE Metric status: Achieved Debt service coverage ratio (DSCR) is calculated by dividing the utility’s net operating income (revenues minus operating expenses) by its annual debt service. This measures a utility’s ability to cover the cost of its debt payments. Although the charter requires that the model be set at 1.25 coverage, the model has generally been programmed at 1.625, which is a level that the financial advisor acknowledged as consistent with the anticipated A- credit rating of the local electric utility. When modeling wide ranges of cost to show risks, a range of 1.25 to 2.00 is included. INCREASED RENEWABLES, DECREASED EMISSIONS Metric status: Achieved This metric is measured in several ways: 1) based on the carbon intensity of electricity; 2) based on the total carbon emissions; and 3) based on the percentage of renewable energy, including local distributed generation (solar PV), hydroelectric power, and large power purchase agreements for wind. Carbon is measured as carbon dioxide equivalent to account for the additional higher global warming potential (GWP) of methane. The charter requirement is to show short-term (5-year) and long-term (20-year) plans to increase renewable energy and reduce emissions, compared to the Xcel Baseline. Xcel’s

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anticipated resource commitments are based on a forecast that the company provided in its 2011 ERP. The following four figures are related to the increased renewables and decreased emissions metric. Figure 5 (below) shows the resource portfolio mix for the low cost (30 percent wind) option. The 30 percent wind is a minimum constraint on the model, as demonstrated in the figure. The cost of wind was optimal in many cases to provide more wind energy than 30 percent on the system. In 2017, the system has 42 percent renewable energy, as compared with 23 percent for Xcel. In 2022, while the amount of coal on the system increases (due to the wholesale market being less expensive than natural gas at this point in time), the renewable energy percentage increases to 47 percent as compared with 23 percent for Xcel. In year 20, Xcel projects 24 percent renewable energy as compared with 51 percent for the local utility in this option.

Figure 5: Breakdown of Renewable Energy vs. Fossil Fuel Power Generation for Low Cost

Option

3% 3% 3% 2% 2%

35% 39% 50% 52%

46%

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2017 2022 2027 2032 2037

Generation Mix by Resource Overall Portfolio

Low Cost (30% Wind) Option

Hydro Wind Solar Natural Gas Coal Other

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Figure 6 (below) shows the renewable resource mix by option compared with the Xcel Baseline. In the low cost 50 percent wind option and the local generation option, the percentage of renewable energy decreases slightly between 2032 and 2037. While the overall energy consumed increases each year, annual load growth, along with competing lower resource costs causes the slightly reduced percentage of renewables in year 2037. Figure 6 clearly demonstrates the ability of a local utility to far exceed Xcel’s renewable energy percentage in years five and 20.

Figure 6: Generation Mix by Option

0%

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Xcel Baseline Low Cost Low Cost (50% Wind)

No Coal Local Generation

Renewable Resource Mix by Option

2017 2022 2037

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Figure 7 below shows the carbon intensity by option compared with the Xcel Baseline. In certain options, the carbon intensity increases in year five above year one. This is due to the increased wholesale market purchases (which have coal embedded in the mix) in year five due to the price of the wholesale market relative to natural gas. Even with slight fluctuations in carbon intensity, the figure shows the ability of the local utility to have much lower carbon intensity of its fuel supply than Xcel.

Figure 7: Carbon Intensity per MWh of Electricity by Option

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The last figure in this series, Figure 8 (below), shows the total carbon emissions by option compared to the Xcel Baseline. The increase in total carbon emissions in all options between years 2017 and years 2022 (except the no coal option) is due to wholesale market purchase prices during that span. The no coal option has a slight increase in emissions over time due to the fluctuation between wind and natural gas prices over time since these are the two main fuel sources in this option. The key takeaway is that the total carbon emissions of a local utility are far below Xcel’s in all options. The local utility exceeds the carbon emissions metric in years five and 20.

Figure 8: Total GHG Emissions by Option (metric tons of carbon dioxide equivalent)

Energy Efficiency Incentives. In the task force on partnership options report, Xcel estimated that Boulder customers are “5.2 percent of total DSM dollars spent on rebates and incentives,” although the company did not provide any underlying data (such as whether this is electric-only rebates or if gas rebates are included). Looking at energy efficiency and “Savers’ Switch” rebates, Xcel provided $32.6 million in electric rebates in Colorado in 20112 and provided $44.7 million in electric rebates in 2012.3 This translates to between $1.7 million to $2.3 million in electric rebates to Boulder each year, with a comparable amount budgeted for 2013. The modeling has been adjusted so that the local electric utility options now include approximately $3 million in direct electric energy efficiency rebates and incentives that would be provided by a local electric utility each year.

2 Table 6a, http://www.xcelenergy.com/staticfiles/xe/Regulatory/Regulatory%20PDFs/CO-DSM-2011-

Annual-Status-Report.pdf. 3 Table 7b, http://www.xcelenergy.com/staticfiles/xe/Regulatory/Regulatory%20PDFs/CO-DSM-2012-Annual-Status-Report.pdf.

0

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me

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Total Carbon Emissions by Option

2017 2022 2037

http://www.xcelenergy.com/staticfiles/xe/Regulatory/Regulatory%20PDFs/CO-DSM-2011-Annual-Status-Report.pdf




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Solar Incentives. All options modeled include $3.5 million each year for solar incentives, with a mix of large and small customer ownership. The Local Generation option doubles that investment to $7 million annually. The incentive price assumes that there is no Investment Tax Credit (ITC) for solar. This program could be implemented in the form of a standard rebate offer, a feed-in tariff, a low-interest financing program, or some other innovative construct, and it is designed to be illustrative rather than reflective of the local utility’s exact plan for solar programs. Although Xcel has not clarified whether the 14 percent of the program it says Boulder comprises is based on participation or incentives, data from its RESA filings would indicate that changes to the Solar*Rewards program have it currently spending less than $4 million per year in Boulder going forward. This is in large part because Xcel has transitioned the Solar*Rewards programs to a performance-based incentive (PBI) that pays out over time rather than up-front, which had historically been the case during the period it said that Boulder received $7 million or more in rebates each year. COMPARABLE RELIABILITY Metric status: Achieved The local electric utility budget includes funding to proactively maintain and improve the local distribution grid by replacing 50 to 86 percent of the transmission equipment; replacing 83 percent of the aging substation equipment; and undergrounding 50 percent of the overhead distribution lines during the 20-year modeling period. Comparing this to historical trends, while under franchise with the city, by law, Xcel dedicated one percent of its revenues to system undergrounding, which resulted in less than one percent of the system being relocated underground each year. Since the expiration of the franchise, no funds have been set aside from Boulder's electric revenues for this purpose. In other measures, the electric utility would be required to maintain comparable reliability to Xcel at the time of acquisition, as measured by:

Maintaining comparable electric equipment, facilities and services as those of Xcel at the time of acquisition, which will be designed to achieve the same System Average Interruption Duration Index (SAIDI) of 85 and a System Average Interruption Frequency Index (SAIFI) of .85, which is slightly better than the Xcel four year average for the Boulder region. Based on the current condition of the grid, engineering consultants estimated costs associated with maintenance and the capital expenditures needed to meet or exceed this level of reliability. The vast majority of Boulder's distribution grid dates back to the 1970s. The modeling has estimated $1.5 million per year for capital replacement from cash margins and an average of $5.2 million per year to be funded from four tax-exempt bond issues. The city utility would be investing over $100 million over 20 years to pay for upgrades to the grid with a goal of improving local reliability and reducing maintenance needs.

Providing experienced and professional management of the local utility grid,

including ongoing investment in maintenance and system improvement, and a strong customer-service ethic in responding to emergencies, daily

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maintenance and long-term grid investment. This has been met by budgeting for an amount to cover the equivalent of 104 full-time employees, based on information gathered from regional municipal utilities, American Public Power Association benchmarking studies, and discussion with experts. The city recognizes that on Day 1 all staff needed to manage the local electric utility may not yet be hired; therefore, the models anticipate a transition period where the city would outsource certain operations while hiring experienced staff, establishing policies and procedures for operating the system, and developing training programs. This is a prudent approach that is based on preliminary conversations with potential service providers. The annual O&M budget also includes costs involved with meeting regulatory requirements and for entering into mutual aid agreements with other local utilities to provide emergency and other support. Financial modeling includes cash reserves that not only provide six months of working capital but also ensure adequate self insurance reserves to cover the cost of uninsured equipment in the event of an emergency.

Maintain an adequate reserve margin of 15 percent. Using the HOMER

resource modeling software, an additional 15 percent natural gas capacity has been purchased beyond what Boulder would need to meet its energy demand over the next 20 years. The financial model also includes annual dues for participating in organizations like the Rocky Mountain Reserve Group (RMRG), which pool their resources to ensure regional reliability.

Meet applicable compliance requirements established by the North American Electric Reliability Corporation (NERC). This has been met by budgeting for regulatory compliance in the form of adequate estimated annual Operation and Maintenance expenditures, capital replacement and refurbishment, and regulatory engineering and legal team costs.

V. QUALITATIVE ANALYSIS: COMPARING PATHS TO BOULDER’S ENERGY FUTURE

Purpose of the Analysis The next step toward potential municipalization is initiating the acquisition process, which, if good-faith negotiations with Xcel are not successful, will require litigation. Previously, staff presented modeling that concluded that municipalization is feasible, in that the charter requirements can be met. This conclusion is reaffirmed in the most recent round of modeling. However, prior to making a decision to move forward with litigation, council has indicated a desire to determine if municipalization is also desirable—in other words, whether it is the optimal path toward realizing the community’s Energy Future and associated carbon reduction goals. The purpose of the qualitative analysis is to analyze whether the potential benefits associated with municipalization outweigh the risks associated with changing from the status quo. This analysis has been conducted incrementally over several years but was formalized with a public process in April, May and June of this year.

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A touchstone to consider in determining added value is the desire to develop the “electric utility of the future,” which can be described as:

Flexible and customer service-oriented Adaptable to new information and new expectations without unsustainable

investments in nonrenewable resources or inefficient regulatory practices Providing high reliability to reduce its customers’ costs Providing increasingly clean power while offering customers enhanced

opportunities to manage their energy and save money Agile and competitive, while promoting local innovation and engaging local

industry and institutional leaders in partnerships that will further enhance its service

Offering a new business model that provides energy as a service, rather than relying on increasing electricity sales and building more generation plants

The “utility of the future” concept is reflected in both the Energy Future goals adopted by City Council and in the voter-approved City Charter guiding principles, which are the basis of the Qualitative Analysis. The analysis was intended to evaluate the benefits and concerns associated with three possible future paths: staying with Xcel as the community’s electric utility provider without any new partnership model or agreement; moving forward with a local electric utility; or, forming an innovative and goal-centered partnership with Xcel. Because the Xcel partnership discussions were not complete in time for inclusion in the Qualitative Analysis in Attachment E, a summary of the results of the partnership discussions, along with Xcel’s proposal, is provided separately in Section VI of this memo. Components of the Analysis Qualitative Analysis work to date is provided in Attachment E and has two parts:

1) Assessment of Benefits and Concerns: A comparison of the extent to which two distinct paths--the status quo with Xcel or creation of a local electric utility-- further the community’s Energy Future goals4, along with a comparison of the concerns associated with each of these paths; and,

2) Summary of “Utility of the Future” Practices: A compilation of Progressive Electric Utility Technologies and Practices that could advance the city’s energy future goals, and an evaluation about the extent to which they might be utilized under the paths discussed above. This analysis describes each technology or practice; which of the city’s goals it would address; where it has been implemented elsewhere; and, whether it is technically and legally possible under either the Status Quo with Xcel or a local electric utility.

4 As expressed in the City Charter guiding principles (see Art. XIII, Sec. 178 of the City Charter) and the Boulder’s Energy Future goals available at Goals.

http://www.colocode.com/boulder2/charter_articleXIII.htm

https://bouldercolorado.gov/energy-future/energy-future-goals-and-objectives

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Summary of Public Process and Input The working groups formed to help develop the modeling options and vet assumptions and specific data inputs have also provided significant feedback on the Qualitative Analysis work. Council will recall that these working groups offer significant industry expertise and represent the major areas of finance, reliability, resources, decision analysis, governance, as well as communications and outreach. Staff provided early drafts of the qualitative analysis to various working groups to seek input on the overall structure, as well as a more detailed analysis of benefits and risks in each goal area. A meeting with all of the working groups together was held on June 27, along with a meeting with a community executive advisory group on July 15, to further vet the analysis and discuss preliminary conclusions. The groups’ input helped shape the analysis in Attachment E and the key conclusions, described below. Key Conclusions Part One: Benefits and Concerns

Key Benefits under the Status Quo with Xcel

The large scale of Xcel’s assets, financial resources, industry knowledge and service area provides significant opportunities to manage multiple objectives based on economies of scale.

Xcel serves customers in eight states, and if it chooses to make positive changes in its fuel supply and program offerings, it would impact a larger number of customers and have a greater environmental impact than a local utility.

Xcel has an established organizational and management structure. Xcel is generally viewed as a reliable provider and has a record of

responding quickly and effectively in emergencies. Xcel has been recognized as a leader among regulated investor-owned

utilities in investing in wind energy. Key Benefits under a Local Electric Utility: Boulder Light & Power

Modeling indicates that a local electric utility could meet a significant portion of Boulder's energy needs with renewable energy sources and could dramatically reduce the Boulder community’s coal dependency while maintaining the same (or better) costs and reliability as Xcel.

A local electric utility can tailor its structure and business model to reflect local values and achieve community-specific goals. A Boulder utility would not have pre-existing investments in outdated enterprise software or fossil fuel base load generation, which would provide more flexibility to invest in innovative technologies and services.

Municipal utilities have lower costs of capital. A local utility would have access to less expensive financing, through tax-exempt bonds, than is available to Xcel, and would not need to provide a return on investment to shareholders, as is required of Xcel.

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As a not-for-profit entity, a municipal utility would have the ability to re-invest any excess revenues locally; this could include, for example, reducing rates, increasing programs and services or increasing reliability.

The city’s economic vitality programs and strategies promote innovation, competitiveness and entrepreneurship. A local utility would be closely aligned with these programs and could integrate technology and become a laboratory for new projects, programs and services.

Local customers have more direct access to decision-makers, which could help ensure that the utility’s priorities and operations are community-focused and responsive.

A local utility would have control over capital investment priorities, such as undergrounding electric lines, replacing aging equipment, micro-gridding, or investing in other innovative practices and technologies, as described in the Part Two Qualitative Analysis.

Key Concerns under the Status Quo: Xcel Current efforts to increase renewable energy in the supply are hampered

by Xcel's current and planned investments in coal. While Xcel emphasizes its leadership in wind energy, it still invests heavily in coal—so much so, that Boulder customers use one of the most carbon-intensive energy supplies in the nation. Real change would mean decommissioning more coal plants than the company has planned and an end to building new ones.

Xcel customers have little say or impact in long-term decisions that impact them.

Due to its service territory, Xcel must operate in the regulatory regimes of eight different states, which can make it slow-moving and inefficient.

As a for-profit corporation, Xcel must meet shareholders’ desire to maximize profit.

Key Concerns under a Local Electric Utility: Boulder Light & Power

The city has worked hard to accurately model the financial impacts associated with creating a local electric utility; however, an inability to test assumptions due to lack of data provided by Xcel means there could be variations in actual outcomes.

Some costs, specifically those related to legal proceedings, are not yet known. The modeling utilized several possible outcomes.

This would be the largest debt issue the city has ever made. It will require a significant undertaking to establish a new utility. The financing terms, which are currently unknown, would be set by bond rating agencies. However, the city has been advised that its assumptions related to bond rating and interest rates are reasonable.

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Members of the business community who do not live in the city are not eligible to vote or run for local office. Business customers are likely to account for 80 percent of the utility’s billing and revenue, and some are concerned that local politics may influence the local electric utility in a manner that is counter to their interests.

Part Two: Utility of the Future

There are many proven progressive technologies and practices not currently being utilized locally that would help Boulder meet its energy future goals. As shown in the Part Two matrix in Attachment E, a local electric utility would encounter fewer barriers and likely achieve greater efficacy in implementing a majority of the options than the community would by maintaining the status quo with Xcel. VI. CITY/XCEL ENERGY TASK FORCE When City Council advised Xcel of its decision not to renew the city’s franchise agreement in August 2010, it explained that non-renewal of the franchise did not mean that the city did not wish to partner with Xcel. In fact, council welcomed the opportunity to explore possible ways to engage with Xcel in a collaborative and community goals-driven partnership. In the course of exploring municipalization and examining how other utilities around the country are structured, city staff has learned more about what such a partnership might look like and how a partnership could be structured. While the typical franchise agreement has been rejected by council, Xcel will undoubtedly continue to have a role to play in Boulder, whether municipalization occurs or not. For example, should council decide to move forward with municipalization of the electric system, Xcel will still be the city’s natural gas provider. Further, a city electric utility could, and likely would, contract with Xcel through a power purchase agreement to provide some level of wholesale energy. In other words, as interconnected utilities, Xcel and the city would continue to work together as they would with other utilities who share interconnection points and services. A local electric utility would also still receive both transmission and balancing services from Xcel. Finally, operation and maintenance functions could be contracted out to Xcel if it wished to bid on providing those services. There are quite a few combinations of services for which a local electric utility could work with Xcel. Last December, city staff prepared a paper, titled, Exploring Opportunities for Reaching Boulder’s Energy Future Goals, that outlined possible ways that Xcel could choose to partner with Boulder to meet the community’s Energy Future goals. The options included many alternatives to municipalization. Most of these options would require PUC approval. Some would require changes to state law. All of them would require Xcel to work with the city to affect a change in the status quo of electric utility operations.

https://www-static.bouldercolorado.gov/docs/Dec_2012_Options_to_work_with_Xcel-1-201306061248.pdf

https://www-static.bouldercolorado.gov/docs/Dec_2012_Options_to_work_with_Xcel-1-201306061248.pdf

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Early this year, the City of Boulder and Xcel agreed to convene a Task Force of knowledgeable community members to consider possible partnership options for achieving the city’s energy goals, and develop new initiatives that Xcel might offer to the city and elsewhere on its utility system. City staff’s role in the Task Force was one of advisor. Staff offered its expertise in such diverse topics as resource mix, demand side management, finance, law and the city’s energy future goals as those issues came up for the Task Force. Staff engaged with the Task Force with the hope that the group would develop the best possible partnership proposal that would meet the city’s goals. The role of the Task Force was to advise Xcel in developing a proposal that could be modeled using the same process as the local utility options. The Task Force members, who represent diverse backgrounds and perspectives, have been highly engaged in the task force discussions. The Task Force met on a bi-weekly basis beginning April 9, and concluded its discussions on July 15. One of the major issues challenging the Task Force was finding ideas and solutions that met both the city’s and Xcel’s different emphases and goals. In the first meeting, city staff focused on partnership requirements as they were discussed in the December paper. In the city’s view, those partnership principals would then determine how the city would meet its renewable energy, carbon reduction, and localization goals with its partner Xcel. Xcel, on the other hand, wanted to focus, with the help of Boulder, on the development of new products and services that would provide more customer and community options to increase renewables and reduce carbon throughout all its service area. Xcel maintained that negotiating comprehensive individual partnership agreements with each municipality where it provides service is not an effective, efficient, or possibly legal way to proceed. Xcel stated it would like to develop products and services that would provide not only individual customer choice, but would provide opportunities for entire communities to opt in. Members of the Task Force developed a variety of partnership ideas, some which were primarily new forms of business relationships and others that included new products and services. As the various concepts were discussed by the group, it became clear that there are a number of restrictions that limit Xcel’s ability to meet the Energy Future goals. For example, Xcel is required by Colorado law to treat all its retail customers equally, that is, Xcel cannot do for one retail customer what it does not do for all similar customers. At one point, because of the Task Force’s emphasis on partnership structure, Xcel delivered a letter to the Task Force suggesting there was not enough common ground to continue. Members of the Task Force encouraged Xcel to present its products and services idea to the group even though Xcel was clear that it was not interested in considering a different partnership structure with the city.

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In response, Xcel opted to utilize the input it received from the Task Force and developed a proposal of its own. The Task Force Report, which includes Xcel’s proposal, along with a list of the Task Force members and meeting summaries is included as Attachment F. Next Steps The Task Force proposed performing quantitative modeling to determine the emission reductions and associated costs of the Xcel partnership proposal relative to the city’s municipalization study. Unfortunately, because Xcel’s proposal was not presented until mid-June, there was not enough time for Xcel or the city to perform a rigorous economic comparison. In an effort to provide some level of cost comparison for the Task Force, the company attempted to use similar assumptions included in the city’s study to identify the potential benefits of its proposal. While the attached Xcel proposal illustrates a high-level analysis of the potential emissions reductions, costs and overall impacts and benefits of a package of services and programs, it would take additional time for Xcel and Boulder to review and agree to all of the modeling assumptions necessary for a rigorous comparison of the cumulative savings from the proposed Xcel programs as compared to the municipalization options. If City Council chooses to consider Xcel’s proposal, actual forecast modeling should be performed. Ultimately, the Task Force recommended that the city continue its dialogue with Xcel in an effort to determine how far Xcel’s efforts might go toward meeting the city’s energy future goals. However, it took no position on whether the parties should continue with or avoid other actions outside of ongoing discussions. It encouraged Xcel and the city to continue this dialogue parallel to those actions. VII. GOVERNANCE WORKING GROUP In May of this year, a Governance Working Group was created to work with city staff to develop a recommendation for City Council on any necessary ordinance amendments or other suggestions about how the utility should be governed. The Working Group consisted of 15 members selected on the basis of their diverse backgrounds and perspectives. It met four times beginning on May 29 and ending on June 26. During this time the Working Group reviewed the system of governance already provided for by Boulder’s Charter and the types of decisions that the City Council and the utility advisory board could be expected to face. The Working Group developed recommendations on the following topics:

1. Advisory board role in rates and rate structure 2. Advisory board composition related to county residents 3. Advisory board composition related to customer classification, and 4. Advisory board composition related to skills

These recommendations, along with the names and bios of the Governance Working Group members and minutes of each of their meetings, are described in a report included as Attachment G.

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VIII. ACQUISITION PROCESS On April 16, council authorized staff to proceed with due diligence regarding acquisition in order to be able to make a recommendation about whether the city should seek to acquire the electrical system serving the city. The due diligence resulted in changes to the recommended service area and a recommendation to proceed to acquire the electric system. The update on the changes to the recommended service area and the issues related to acquisition are covered separately in the agenda memo for the special meeting of July 24, 2013.

IX. REGULATORY ISSUES Federal Energy Regulatory Commission (FERC) In May, the city asked the FERC for a declaratory order on the city’s possible stranded cost obligations to its current supplier, Xcel, should the city create a local electric utility. Specifically, the city asked FERC to confirm that Boulder would have no stranded cost obligations for the portion of its wholesale power it may continue to acquire from Xcel. It is clear from previous FERC rulings that the city can avoid stranded costs if it purchases 100 percent of its power from Xcel. In City of South Daytona, 61 FERC ¶ 61,183, FERC ruled that South Daytona, Fla., should it form a local electric utility, would create no stranded costs to the extent that its existing supplier, Florida Power, continued to use its generation assets to serve South Daytona. The city’s petition is requesting a declaration that the commission’s ruling in City of South Daytona would apply, even if Boulder purchases less than 100 percent of its requirements from Xcel. The city’s position is that the South Daytona order should apply, on a proportional basis, to a partial requirements purchase from the existing supplier as well as the full requirements purchase that was the fact situation in that case. The city stated in its filing that to the extent that the retail-turned-wholesale customer purchases electricity from its former retail supplier, the assets necessary to generate that electricity are not stranded. Xcel, the Colorado Public Utilities Commission (CPUC), the Edison Electric Institute (EEI), the Colorado Office of Consumer Counsel (OCC), and the American Public Power Association (APPA) filed motions to intervene in this docket. None of the parties objected to the basic principle that there should not be stranded costs associated with partial power purchase requirements contracts. Xcel, the CPUC, and EEI emphasized that there are a variety of factual issues that need to be addressed as part of such an arrangement. The OCC did not take a position on the matter. The APPA supported the city’s petition. The city filed its response to the interveners on June 28. The city requested expedited consideration of its petition and a decision by FERC by July 18, 2013, in order to allow

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its thinking to inform the council’s decision-making and to help the city effectively participate in Xcel’s current electric resource planning process. As of the completion of this memo, FERC has not yet responded. Public Utilities Commission (PUC) Xcel filed a petition for declaratory orders at the PUC on May 9, asking it to find that:

1) municipal utilities that seek to serve customers located outside the city’s boundaries must obtain a certificate of public convenience and necessity (CPCN) from the PUC;

2) Xcel has a CPCN to serve the Boulder County area in which the 5,800 meters are located;

3) under Colorado law there can only be one certificated utility per geographic area; 4) certificates cannot be taken away without due process of law, which requires a

hearing before the PUC and substantial evidence that the existing certificated utility is unwilling or unable to serve the area; and

5) The need to construct replacement facilities as a result of actions taken by a challenging utility does not constitute an inability to serve.

The city has always anticipated that a hearing before the PUC would be required to adjust service territory boundaries once acquisition was complete and the final ownership of the assets was settled. As there is no requirement that such a hearing be held before condemnation is complete, the city objected to the petition on the ground that it was premature. The Commission has decided, however, that it would like to hear legal argument regarding these issues. The parties to the proceeding will be Xcel, Boulder, the Office of Consumer Council (OCC) and PUC staff. Several rural electric cooperatives have been given permission to file an amicus curiae (friend of the court) brief. Answer testimony must be filed by Aug. 15. In its answer brief, the city will lay out the city’s legal arguments in response to Xcel’s petition. Parties will have an additional 15 days to reply to other parties that file testimony.

X. RATES USED FOR DEBT OR INTEREST RATES MODELED Previously, city staff has modeled the debt related to acquisition and creation of a local electric utility at an interest rate of 6.5 percent for taxable bonds and 5.5 percent for tax-exempt bonds,assuming a rating of A- for the new local utility. Based on more in-depth discussions with PFM, the financial advisor retained by the city, and work PFM has done in the industry and with rating agencies, the staff team continues to believe the rates and bond rating modeled are reasonable. The following factors were identified as issues to continue to consider in the future:

Higher target Debt Service Coverage Power supply and volatility of fuel costs and their impact on rates

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Condition of the system (better or worse than expected) and future capital requirements to upgrade the system

Integration and transition of the system from Xcel to a local electric utility As staff has modeled various scenarios using industry-based assumptions, most of these issues have been taken into account in the financial model. For example, based on the detailed analysis of the system, a capital improvement plan was developed to repair and replace equipment based on age and functionality. The integration and transition will be addressed more explicitly in the next phase of the project, should council choose to move forward. However, through outsourcing agreements and leveraging existing city resources such as accounting, billing, GIS and other systems, as well as having access to common facilities for fleet and inventory, the most significant risks can be mitigated. The ability to increase debt service coverage is a function of actual debt issued and revenues net of operating expenses. Modifications to any of these key variables could improve debt service. The modeling currently reflects a minimum of 1.25 times(x) with a target of 1.63x, which is adequate for maintaining an investment grade rating, all other things being equal. XI. PUBLIC INPUT

The decision about whether to create a local electric utility is a significant one that could result in change to electric service for residents and businesses in the city and limited parts of unincorporated Boulder County. While this move could offer substantial benefits, a decision to issue bonds for this purpose would represent one of the largest financial investments Boulder has ever made. Knowing this, the city has engaged in intensive communications and outreach efforts to ensure that the community is informed about the issues the goals, the options for achieving them and ways they can participate in the evaluation and decision making processes. One of the core tenets of a local utility would be to increase customer participation and engagement, and staff has worked to put this principle into practice in each part of this deliberative process. After City Council approved moving forward with the municipalization exploration study on April 16, the communication team created a new plan that focused on the work that would take place between April 17 and August 2013 and the best ways to provide new and updated information to the community in digestible formats. The plan also addresses ways people could stay actively engaged and participate in the process while staff worked to refine the materials needed for City Council and the community to make an informed decision about how to move forward. The communication plan is included as Attachment H. As part of this plan, the staff team continued to work closely with its working groups and the Executive Advisory Team. The working groups met collectively on June 27 to vet the revised assumptions and results of new modeling efforts, as well as provide feedback on the qualitative analysis materials. Members of the Executive Advisory Team (see

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Attachment I) met on July 15 and also offered input on these specific areas of work, primarily from a commercial or large user perspective. Both sessions resulted in valuable information, which the staff team has incorporated into the materials and findings presented in this memo. In terms of communicating with the broader public, much of the city’s efforts during this period were focused on explaining the analysis conducted as of April 16 and the additional work that was underway. Because it’s imperative that the Boulder community understand that it will be difficult to meet its climate goals without addressing where our energy comes from, staff also began reconnecting the municipalization study back to the city’s overall climate commitment. Boulder’s demand-side reduction programs and other services have done much to move the community in the right direction, but because of the carbon-intensity of the current electricity supply, they, by themselves, are not enough to significantly reduce greenhouse gas emissions. Recent Methods of Communication and Engagement In May, Xcel began hosting presentations with a paid consultant, Bob Bellamare, who talked about elements that he thought were either missing or incorrect in the city’s findings and modeling. Since Mr. Bellamare’s first presentation on May 22, the city team has been working to correct inaccuracies provided in the Xcel-sponsored presentations. To help do this, the city created a new website BoulderEnergyFacts.com and launched an advertising campaign to direct people to this source of information. Since the site’s launch on Friday, June 7, the page has been viewed more than 1,500 times and has become the second most visited webpage on the BoulderEnergyFuture.com website. This website will be updated as needed throughout the duration of the project. Through the associated advertising campaign that was launched both electronically and digitally in the Daily Camera, the city unveiled a new slogan that directly connects the current analysis with our community’s goals, “Clean Reliable Low-cost Local Energy.” A series of tag lines were also developed that could go with this, as appropriate, including “Talk about Powerful,” Be informed,” “Learn more about the city’s analysis,” “Help make it happen,” and a simple link to the Energy Future URL. The electronic ads were emailed to 50,000 addresses inside five Boulder-specific zip codes. In addition, they were run for five days on the Camera’s website and were hyperlinked directly to the BoulderEnergyFacts.com page. A print ad was featured in the Sunday, June 9, edition of the Daily Camera. To make this approach more complete and useful, the city also redesigned the BoulderEnergyFuture.com home page and navigation tools to make the site user-friendly and to direct people to information that can explain the purpose and details of the modeling and refute misinformation. A new “About” page was created to share clear information about the municipalization exploration study. All existing pages were also migrated to the new web content management system so they remain available to the public during the city’s transition to a new website system.

https://bouldercolorado.gov/energy-future/energy-future-frequently-asked-questions-faqs


https://bouldercolorado.gov/energy-future/energy-future-frequently-asked-questions-faqs


45

For a complete list of communications and outreach efforts since April 17, 2013, efforts, see Attachment J. If City Council directs staff to continue to move forward, a new communication plan for the next phase of work will be developed. XII. NEXT STEPS

A. July 24 City Council special meeting first reading ordinances including: 1) An ordinance authorizing the acquisition of property interests owned by

Xcel Energy, inc. D/B/A Public Service Company of Colorado by negotiation and purchase or through the power of eminent domain and setting forth related details.

2) An ordinance submitting to the qualified electors of the City of Boulder at the general municipal coordinated election to be held on Tuesday, November 5, 2013, the question of adding a new Section 188 of the City Charter relating to the limitations on debt superseding any other measures to add Section 188 setting forth the ballot title; and specifying the form of the ballot and other election procedures and setting forth related details.

B. Aug. 6 City Council meeting: Second reading and consideration of an ordinance to authorize the acquisition of the electrical system serving Boulder residents under certain and specific circumstances.

C. Future Actions: Develop next phase (Phase 3) of the workplan, depending on the direction

council takes with respect to municipalization. 1) If council directs staff to move forward with municipalization -

a. Explore establishing (in the short term) a Boulder Local Utility that consolidates existing and potential new city-sponsored services related to Demand Side Management and Distributed generation

b. Explore specific resource options (issue RFPs, look at transmission access alternatives, distributed generation integration analysis)

c. Issue a request for information from potential service providers for various outsourced services

d. Work with regional municipal utilities to identify partnership and mutual aid opportunities

e. Pursue legal and regulatory actions i. Complete appraisal reports

ii. Commence good faith negotiations with Xcel iii. If negotiations are futile, file action in eminent domain iv. When acquisition price known, issue bonds v. Refine transition plan

vi. Take regulatory actions necessary for operation of new utility

f. Work with city departments to develop shared service arrangements and identify resources (facilities, IT systems, staff) that could be leveraged to support a city operated electric utility

g. Develop short- and long-term staffing plans

46

h. Begin financing actions i. Develop transition plan

2) If council directs staff to move forward and continue to evaluate a partnership with Xcel

a. Perform all of the steps above and next steps recommended by the City/Xcel Task Force, until partnership talks result in firm commitments that support the energy future goals

3) If council directs staff to not move forward with municipalization a. Develop a plan to achieve as many of the energy future goals as

possible without owning the utility assets b. Explore establishing a Boulder Local Utility that provides services

related to Demand Side Management and Distributed generation c. Continue to work with Xcel to develop a relationship that could

support the Energy Future goals d. Explore regulatory and legislative options to achieving the energy

future goals

XIII. ATTACHMENTS A Risk Identification and Mitigation for a Local Electric Utility

B Updates and Refinements to the Models Since February/April 2013 C PSCo Modeling Assumptions Update – 2011 ERP D Xcel Baseline Analysis Methodology E Qualitative Analysis: Benefit/Risk Assessment and “Utility of the Future”

Practices F City/Xcel Energy Task Force Report G Governance Working Group Report and Membership List

H Communications Plan I Executive Advisory Team J Communication and Outreach Efforts Since April 17, 2013

ATTACHMENT D

Decision No. C13-1350

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 13D-0498E

IN THE MATTER OF THE VERIFIED PETITION OF PUBLIC SERVICE COMPANY OF

COLORADO FOR CERTAIN DECLARATORY ORDERS CONCERNING THE RIGHTS OF

PUBLIC SERVICE COMPANY OF COLORADO UNDER ITS SERVICE TERRITORY

CERTIFICATE COVERING BOULDER COUNTY, COLORADO.

DECISION ISSUING DECLARATORY RULINGS

Mailed Date: October 29, 2013

Adopted Date: October 9, 2013

TABLE OF CONTENTS

I. BY THE COMMISSION .........................................................................................................2

A. Statement ...........................................................................................................................2

B. Public Service’s Requests for Declaratory Orders ............................................................3

C. Positions of the Parties and Amici. ....................................................................................4

D. Discussion ..........................................................................................................................6

1. Commission Jurisdiction to Hear this Matter .............................................................6

2. Ripeness .....................................................................................................................7

a. The Commission’s Regulatory Authority Over a Municipal Utility Serving

Outside its Territorial Boundaries. ......................................................................9

b. Commission Proceedings Addressing Transfer of Public Service’s CPCN and

Other Property ...................................................................................................12

E. Conclusion .......................................................................................................................14

II. ORDER ...................................................................................................................................15

A. The Commission Orders That: ........................................................................................15

B. ADOPTED IN COMMISSIONERS’ WEEKLY MEETING October 9, 2013. .............16

Colo

rado

PUC

E-Fil

ings

Syst

em

Before the Public Utilities Commission of the State of Colorado

Decision No. C13-1350 PROCEEDING NO. 13D-0498E

2

I. BY THE COMMISSION

A. Statement

1. On May 9, 2013, Public Service Company of Colorado (Public Service) filed a

Verified Petition for Declaratory Orders (Petition) pursuant to Rules 1001 and 1304(i) of the

Commission's Rules of Practice and Procedure, 4 Code of Colorado Regulations 723-1, and

Colorado Rule of Civil Procedure 57. The Petition requests that the Commission enter

declaratory rulings relating to actions of the City of Boulder (Boulder) to municipalize and

provide electricity services to customers located in unincorporated Boulder County, Colorado.

2. On June 12, 2013, the Commission issued a decision accepting the Petition and

providing notice of the Petition to interested persons.1

3. The Commission granted Boulder’s motion to intervene and noted the

intervention by right of the Colorado Office of Consumer Counsel (OCC). The Commission

denied the motion to intervene filed by Black Hills/Colorado Electric Utility Company, L.P., and

Black Hills/Colorado Gas Utility Company, L.P. (collectively Black Hills); however, the

Commission permitted Black Hills to participate as amicus curiae. The Commission granted the

joint motion to participate as amicus curiae filed by the Colorado Rural Electric Association;

Delta-Montrose Electric Association, Inc.; Holy Cross Electric Association, Inc.; Poudre Valley

Rural Electric Association, Inc.; and United Power, Inc.2 Through this Decision, the Commission

1 Order Accepting Petition for Declaratory Order and Issuing Notice; Decision No. C13-0705, issued

June 12, 2013. 2 Interim Decision: (1) Addressing Interventions and Motion to Participate as Amici Curiae; (2) Granting

Motion for Leave to Reply; and (3) Establishing a Procedural Schedule, Decision No. C13-0875-I, issued July 16,

2013.



3

denies the motion to intervene filed by the Gunbarrel Energy Future Citizens’ Group,3 but

accepts its filing as public comment.

4. The Commission heard this case en banc.

5. Pursuant to Commission scheduling orders, the parties and amici filed briefs

addressing the issues raised by the Petition. In addition, this Decision grants Boulder’s request

for acceptance of its supplemental authority, filed September 6, 2013, and also grants Public

Service’s request for leave to reply to the supplemental authority, filed September 13, 2013.

B. Public Service’s Requests for Declaratory Orders

6. Public Service’s Petition describes Boulder’s actions and plans to form a

municipal electric utility, condemn Public Service’s facilities, and serve customers located not

only inside Boulder’s city limits, but also outside in unincorporated Boulder County. Public

Service asserts that Boulder expects to obtain these extraterritorial customers through

condemnation of Public Service’s certificate of public convenience and necessity (CPCN) and

facilities that serve unincorporated Boulder County.

7. Paragraph 25 of the Petition requests the Commission enter the following five

declaratory orders:

1) If a municipal utility seeks to serve customers located outside the city's

boundaries, it is subject to the certificate jurisdiction of the Commission;

2) The Commission has already granted to Public Service a certificate of

public convenience and necessity covering the territory in Boulder

3 Because The Gunbarrel Energy Future Citizens’ Group as an association must be represented by a

licensed attorney to participate formally as a party, and because its filing is not signed by and does not identify a

licensed attorney representing the group, the Commission denies its request to intervene as a party. See Rules

1201(a) and (b) of the Rules of Practice and Procedure, 4 Code of Colorado Regulations 723-1; Denver Bar

Association v. Public Utilities Commission, 391 P.2d 467 (1964).



4

County, outside the Boulder city boundaries, in which the

5,800 customers4 are located;

3) Under Colorado law, there can only be one certificated utility per

geographic area;

4) The certificate of an existing utility cannot be taken away without due

process of law which requires a hearing before this Commission and proof

by substantial evidence that the existing certificated public utility is

unwilling or unable to serve the certificated area; and

5) The need to construct replacement facilities as a result of actions taken by

a challenging utility does not constitute an inability to serve.5

Public Service further explains that it “is simply seeking a clarification that it will not lose its

right to serve out-of-city customers because Boulder creates a municipal utility and condemns

some facilities which currently serve customers both inside and outside the Boulder city limits.”6

8. Public Service is not requesting declaratory rulings addressing Boulder’s

authority to form a municipal utility and serve customers located within Boulder city limits, or its

ability to acquire through condemnation facilities located outside city limits but used to provide

service within the city.7 Public Service’s request for declaratory rulings refers only to its rights to

serve the customers located service outside Boulder’s territorial boundaries.8

C. Positions of the Parties and Amici.

9. Public Service argues that the Commission has the authority to regulate a

municipal utility operating extraterritorially and to resolve service disputes between a

municipality and an existing utility. Public Service also contends that the doctrine of regulated

monopoly, which permits only one certificated utility to serve in an area and requires a new

4 Subsequent filings indicate that the number of customers located in unincorporated Boulder County at

approximately 7,000. See Public Service Response, dated August 15, 2013, at 2. 5 Verified Petition, at ¶ 25. 6 Public Service Reply, at 8. 7 Public Service Response, dated August 15, 2013, at ¶¶ 11-15. 8 Verified Petition, at ¶ 26.



5

carrier to show that the existing carrier is unable or unwilling to provide adequate service,

governs Boulder’s plans to serve in unincorporated Boulder County. Public Service asserts that a

municipality’s decision to seek condemnation of an existing utility’s CPCN does not override the

Commission’s exclusive jurisdiction over certification of a municipal utility operating its

territorial boundaries. Public Service also argues that the Commission’s determination—of

whether the CPCN and other extraterritorial assets will be transferred to Boulder—should

precede a condemnation action.

10. The OCC and amici curiae support Public Service’s position. They argue that

becoming a municipal utility does not automatically allow Boulder to serve customers located

outside of its municipal boundaries, and that the doctrine of regulated monopoly requires a

showing that Public Service is unwilling or unable to serve the customers at issue, regardless of

whether Boulder’s provisioning of service would be more efficient or technically optimal.

11. Boulder states that as a home rule municipality, it has the authority under

Article XX of the Colorado Constitution to operate an electric utility and to condemn all

necessary facilities and property, whether located inside or outside of its city limits. Boulder

asserts that a CPCN to serve a particular area is a property interest subject to condemnation, and

the district court hearing a condemnation action has the authority to determine Boulder’s need

for the CPCN. Boulder argues that its plans to condemn Public Service’s CPCN as a property

interest distinguish this case from those cited by Public Service recognizing the Commission’s

authority to regulate municipal utilities extraterritorially and apply the doctrine of regulated

monopoly to a new carrier’s encroachment into an existing provider’s territory. Condemnation

of a CPCN would relieve Boulder from the burden of showing that Public Service is unable or

unwilling to serve in unincorporated Bolder County. Boulder admits that it must obtain a



6

certificate from the Commission to serve extraterritorial customers, but argues that the

condemnation action would precede the Commission’s proceedings for transfer of Public

Service’s certificate, and that the Commission must act consistently with the orders of the district

court condemning the CPCN.

12. Boulder also contends that the public interest standard should apply to the transfer

of Public Service’s certificate, and that its provision of service in unincorporated Boulder County

would be the most efficient, effective, and reliable option. Further, Boulder argues that Public

Service’s request may not be ripe, because Boulder has not decided finally whether to serve

unincorporated Boulder County.

D. Discussion

1. Commission Jurisdiction to Hear this Matter

13. Boulder contends that Articles II and XX of the Colorado constitution authorize

home rule cities to condemn property for the creation and operation of a municipal utility, and

that the district court has jurisdiction over condemnation matters. Thus, Boulder argues, the

district court sitting in condemnation, not the Commission, has the jurisdiction to determine

Boulder’s ability to obtain Public Service’s CPCN to serve unincorporated Boulder County.9

14. We disagree. The Commission has the authority to determine the facts upon which

its jurisdiction may depend and rule on the scope of its jurisdiction.10 The Commission’s

jurisdiction to decide matters has been analogized to that of judicial tribunals: “except in the case

of plain usurpation, a court has the jurisdiction to determine its own jurisdiction.”11

9 Boulder Response, dated August 15, 2013, Part I.C., at 7-9. 10 Keystone v. Flynn, 769 P.2d 484, 488 (Colo. 1989).

11 Id., quoting United States v. United Mine Workers, 330 U.S. 258, 292 n. 57 (1947) (in turn quoting

Carter v. United States, 135 F.2d 858, 861 (5th Cir. 1943)).



7

The Commission therefore has the authority to hear Public Service’s request for declaratory

rulings regarding Boulder’s attempts to serve unincorporated Boulder County. As shown below,

our rulings do not interpret Boulder’s constitutional or statutory rights to condemn property;

rather, we apply the Commission’s authority under Article XXV of the Colorado constitution and

the public utilities law as interpreted by the Colorado Supreme Court to rule upon Boulder’s

municipal utility service in unincorporated Boulder County.

2. Ripeness

15. Boulder argues that Public Service’s request for declaratory rulings is not ripe,

contending that no final decision has been made on whether its municipal utility will serve

customers in unincorporated Boulder County.12

16. “Ripeness requires that there be an actual case or controversy between the parties

that is sufficiently immediate and real so as to warrant adjudication.”13 “A court may find ‘a

conflict is ripe for judicial review even in the context of uncertain future facts so long as there is

no uncertainty regarding the facts relevant to the dispute and no pending actions that might

resolve the issue prior to the court’s determination.’”14 To be ripe, the court’s or an agency’s

decision must have a “practical effect upon an actual and existing controversy.”15

17. Undisputed facts show that a controversy is sufficiently immediate and that there

is no uncertainty regarding the facts relevant to the dispute. The Boulder City Council passed an

ordinance authorizing the city to acquire the property of Public Service through negotiation or

12 Boulder Reply, dated August 30, 2013, at 3.

13 Beauprez v. Avalos, 42 P.3d 642, 648 (Colo. 2002); See also Developmental Pathways v. Ritter, 178

P.3d 524, 534 (Colo. 2008). 14 Metal Management West, Inc. v. State, 251 P.3d 1164, 1175 (Colo. App. 2010) (quoting Stell v. Boulder

County Dep't of Social Servs., 92 P.3d 910, 915, n.6 (Colo. 2004)). 15 Board of Directors v. Nat'l Union Fire Ins. Co., 105 P.3d 653, 656 (Colo. 2005).



8

the power of eminent domain. The ordinance authorizes a condemnation action on or after

January 1, 2014.16 Boulder’s engineers have advised the city that it should provide service to

extraterritorial customers.17 Boulder sent letters dated February 15, 2013, to customers located in

unincorporated Boulder County stating that, if it creates a city utility, then it plans on providing

service to residential and business customers located outside the city.18 This letter states that

Boulder has no plans to annex the area outside of Boulder where it seeks to provide service.19

18. A Commission ruling will have a practical effect on an actual and existing

controversy between Public Service and Boulder. Public Service asserts that the Commission

has the authority to apply the breadth of public utilities law to Boulder’s attempt to obtain a

CPCN to serve customers outside its city boundaries; whereas, Boulder contends that the

Commission’s rulings upon a transfer of Public Service’s CPCN to Boulder must await and be

consistent with a court’s condemnation orders. We find that a Commission ruling will instruct

the parties on the legal standards governing their conduct and disputes regarding Boulder’s

actions to obtain Public Service’ CPCN for unincorporated Boulder County. A Commission

ruling also will guide the parties on whether a Commission proceeding should precede a

condemnation action and which property interests and facilities could be used to provide service

and thus may be part of a condemnation action. Therefore, Public Service’s Petition is ripe for

Commission determination.

19. Boulder admits that the first three statements listed in paragraph 25 of the Petition

for which Public Service seeks declaratory rulings—that a municipal utility serving outside its

16 See Response of Public Service, dated August 15, 2013, at 2-3.

17 Boulder Response, at 3-4.

18 Letter from City of Boulder to unincorporated Boulder County customers, dated February 15, 2013,

attached as Exhibit A to Public Service’s Verified Petition. 19 Id.



9

territorial boundaries is subject to the certificate jurisdiction of the Commission, that Public

Service had been granted a certificate to serve unincorporated Boulder County, and that there can

be only one certificated utility per geographic area—are correct.20 We therefore proceed with

addressing the issues underlying the fourth and fifth statements.

a. The Commission’s Regulatory Authority Over a Municipal

Utility Serving Outside its Territorial Boundaries.

20. Dating back to the 1920s and extending through interpretations of Commission

powers granted by Article XXV, the Colorado Supreme Court repeatedly and consistently has

acknowledged the Commission’s authority to regulate a municipal utility serving customers

located outside its territorial boundaries.21 This rule is premised upon the customers’ ability to

vote on municipal matters. If the services offered by a municipality to its citizens within its

territory are not satisfactory to a majority of the citizens, they can effect a change, either at a

regular election, or by the exercise of the right of recall. 22 In contrast,

When a municipally owned utility provides utility service outside the

municipality, those receiving the service do not have a similar recourse on

election day. They have no effective way of avoiding the possible whims and

excesses of the municipality in the absence of state regulation by the PUC.23

21. The court has elaborated on the Commission’s authority over service area disputes

between a municipal utility and a certificated public utility. “[T]he Utilities Act unmistakably

20 Boulder’s Response, filed August 15, 2013, at 4.

21 Town of Holyoke v. Smith, 226 P. 158 (Colo. 1924); City of Lamar v. Town of Wiley, 248 P. 1009

(Colo. 1926); Public Utilities Commission v. City of Loveland, 289 P. 1090 (Colo. 1930); City and County of Denver

v. Public Utilities Commission, 507 P.2d 871 (Colo. 1973); Board of County Commissioners v. Denver Board of

Water Commissioners, 718 P.2d 235 (Colo. 1886); Poudre Valley Rural Electric Association, Inc. v. City of

Loveland, 807 P.2d 547 (Colo. 1991). 22 Town of Holyoke v. Smith, 226 P. 158, 161 (Colo. 1924); City of Lamar v. Town of Wiley, 248 P. 1009,

1010 (Colo. 1926). 23 K.C. Electric Association, Inc. v. Public Utilities Commission, 550 P.2d at 871, 874 (Colo. 1976). See

also City and County of Denver v. Public Utilities Commission, 507 P.2d at 874; and City of Loveland v. Public

Utilities Commission, 580 P.2d 381, 385 (Colo. 1978) (“the PUC [is] the only protection for the non-resident

customers.”)



10

and clearly invests the Public Utilities Commission with the sole jurisdiction to hear and

determine, in the first instance, a controversy of this nature.”24 Further,

We believe it is essential that the PUC be allowed to regulate the public utility

services provided by municipalities outside their boundaries. Not only is the PUC

the only protection for the non-resident customers,…but the PUC must also be

allowed the power to resolve jurisdictional disputes between municipalities and

private utilities companies over who is to serve areas outside municipal

boundaries.25

22. The court also has defined a municipality’s status relative to other utilities when it

serves outside its boundaries: “Both upon authority and reason a municipally owned public

utility, as to service furnished consumers beyond its territorial jurisdiction, should be as already

stated, subject to the same regulation to which a privately owned public utility must conform in

similar circumstances."26

23. Boulder’s plans to condemn Public Service’ CPCN to serve unincorporated

Boulder County do not affect the Commission’s authority over the transfer of the CPCN or the

applicable standards. The statute upon which Boulder relies as granting a property interest to a

CPCN, § 40-5-105, C.R.S., conditions any sale or assignment of a CPCN upon Commission

approval and upon such terms and conditions as the Commission may prescribe.27 The court

rulings quoted above in this Decision—recognizing Commission authority to resolve disputes

between municipalities serving outside its boundaries and existing public utilities—also refute

24 Public Utilities Commission v. City of Loveland, 289 P. 1090, 1093 (Colo. 1930).

25 City of Loveland v. Public Utilities Commission, 580 P.2d 381, 385 (Colo. 1978).

26 City and County of Denver v. Public Utilities Commission, 507 P.2d at 874.

27 Section 40-5-105, C.R.S., says:

Certificate or assets may be sold, assigned, or leased. (1) The assets of any public utility,

including a certificate of public convenience and necessity or rights obtained under any such certificate

held, owned, or obtained by any public utility, may be sold, assigned, or leased as any other property, but

only upon authorization by the commission and upon such terms and conditions as the commission may

prescribe….”



11

Boulder’s argument that the potential of an action in condemnation over utility property

diminishes Commission authority.

24. Two Supreme Court cases specifically confirm Commission authority even when

a municipality is planning or has completed condemnation actions. In City and County of

Denver v. Public Utilities Commission,28 the Supreme Court upheld the Commission’s regulatory

authority over Denver’s tramway service outside its boundaries, even after a district court had

completed a condemnation action transferring ownership rights to Denver. In Colorado and

Southern Railway Co., Inc. v. District Court,29 the court ruled that the Commission may exercise

its statutory authority to determine where a railroad may cross the tracks of another, even though

the utility already had filed an action to condemn an easement for the crossing. These cases

demonstrate that, if the public utilities law has granted the Commission regulatory authority over

property or service used by a utility to serve outside its territory boundaries, the Commission

retains its regulatory authority even though the property or service is the subject of a

condemnation action.

25. The doctrine of regulated monopoly governs Boulder’s attempt to serve

unincorporated Boulder County where Public Service is certificated.30 “After a utility has been

assigned a specific territory, no other utility may provide service in that territory unless it is

established that the certificated utility is unable or unwilling to provide adequate service.”31

Evidence that the challenging utility may provide better service or may serve the customers more

28 City and County of Denver v. Public Utilities Commission, 507 P.2d 871 (Colo. 1973).

29 Colorado and Southern Railway Co., Inc. v. District Court, 493 P.2d 657 (Colo. 1972).

30 Public Service Company v. Public Utilities Commission, 765 P.2d 1015, 1021 (Colo. 1988).

31 Id.



12

easily cannot be the basis of a finding that the existing utility is unwilling or unable to serve its

certificated area.32

b. Commission Proceedings Addressing Transfer of Public

Service’s CPCN and Other Property

26. Boulder’s briefing argues that a condemnation action for Public Service’s

extraterritorial CPCN should precede any Commission proceedings under § 40-5-105, C.R.S.,

addressing Boulder’s request for the CPCN, and that any resulting Commission orders must be

consistent with a condemnation court’s order awarding ownership to Boulder.33 Public Service

disagrees, asserting that “it is essential that a determination be made, before the condemnation

action, regarding who has the right to serve the out-of-city customers. That information affects

the separation of the two utilities, reconnection costs, the compensation owed in any

condemnation proceeding, and pre-filing good faith negotiations.”34

27. Transfer of Public Service’s CPCN would be required for Boulder to serve

customers in unincorporated Boulder County, and the Commission possesses the statutory power

to determine under § 40-5-105, C.R.S., and under the doctrine of regulated monopoly, whether

Public Service’s CPCN is to be transferred to Boulder. Thus, Commission proceedings

addressing the transfer of Public Service’s CPCN are to precede any actions seeking to condemn

Public Service’s CPCN.

32 Id., at 1022; See also Public Service Company v. Public Utilities Commission, 485 P.2d 123, 127; Public

Utilities Commission v. Poudre Valley Rural Electric Association, 480 P.2d 106, 107 (Colo. 1970). 33 Boulder Response, dated August 15, 2013, at 12-14.

34 Public Service Reply, dated August 30, 2013, at ¶ 7.



13

28. Also under the Commission’s jurisdiction are other types of property, plant, and

equipment used to provide service in unincorporated Boulder County. The Commission

exercises its regulatory authority over Public Service’s transmission and distribution lines,

substations, and other facilities to protect the reliability, safety, and service quality of electricity

services provided to unincorporated Boulder County, and to safeguard the integrity of the system

statewide. If Boulder seeks to condemn facilities, wherever located, that Public Service currently

uses, at least in part, to serve customers located outside of Boulder’s city limits, this Commission

must have the ability to investigate and determine how the facilities should be assigned, divided,

or jointly used to protect the system’s effectiveness, reliability, and safety, as well as any other

matter affecting the public interest. Thus, a Commission proceeding addressing these facilities

should precede a condemnation action to allow the district court to rule on the public need and

value of facilities that the Commission determines may be the subject of transfer to Boulder.

29. Case law also supports Public Service’s position. In Colorado & Southern,35 a

railroad company known as C&W commenced a proceeding in district court to condemn an

easement over tracks owned by two other railroads. C&W selected the easement as suitable for

the crossing. The two other railroads filed a motion to dismiss the district court action, asserting

that C&W first had to secure an order from the Commission as required under the public utilities

law that would determine the point at which C&W may cross the tracks or facilities of other

railroads. The Supreme Court ruled that the district court did not have jurisdiction over the

property easement identified by C&W absent a predetermination by the Commission. Because




14

the Commission has the power to determine the point of crossing, “[i]t follows logically then that

the commission -- not the railroad -- determines what property the railroad requires.”36 37

E. Conclusion

30. For the reasons stated above, we rule on the fourth and fifth statements listed in

paragraph 25 of Public Service’s Petition by clarifying that the Commission has regulatory

authority over electricity services provisioned by a municipal utility formed by Boulder to

customers located in unincorporated Boulder County, and that the doctrine of regulated

monopoly as delineated by rulings of the Colorado Supreme Court governs any application filed

by Boulder seeking transfer of Public Service’s CPCN. The potential that Boulder may file a

condemnation action to obtain Public Service’s CPCN for unincorporated Boulder County does

not affect the Commission’s regulatory authority, the doctrine of regulated monopoly, or the

standards governing transfer of Public Service’s CPCN. Further, Commission proceedings

addressing the transfer of Public Service’s CPCN or other plant, equipment, and facilities used to

provide service to customers located in unincorporated Boulder County are to be completed

before Boulder initiates a condemnation action for such property.

36 Id., 493 P.2d at 659.

37 The case cited by Boulder, Miller v. Public Service Company of Colorado, 272 P.2d 283 (1954), for the

proposition that its condemnation action for Public Service’s CPCN should precede a Commission proceeding, is

inapposite and has been distinguished by the court in Colorado & Southern. The court in Miller ruled that a utility

was not required to obtain a CPCN from the Commission to construct a facility before the utility filed a

condemnation action to acquire the land upon which the facility was to be built. The court reasoned that the

construction permitted by the CPCN is an act that occurs after the utility obtains ownership of the land. Further, the

court in Miller found that: “[t]he so-called certificate is only a permit or license to use and enjoy land that has been

condemned; it is not a condition precedent to the right to condemn; and has no relationship whatever with the

matter of condemnation.” Miller, 272 P.2d at 285 (emphasis added). The court in Colorado and Southern ruled that

the Miller result—that a condemnation action may precede the Commission’s—did not apply to C&W’s

condemnation of the easement, because the location of crossing point was essential to determining the property to be

condemned and was subject to the Commission’s approval authority. Colorado and Southern, 493 P.2d at 659. The

issue presented in this proceeding mirrors that of Colorado & Southern, in which the property at issue in the

potential condemnation proceeding, Public Service’s extraterritorial CPCN, is the same property over which the

Commission has jurisdiction and approval authority.



15

II. ORDER

A. The Commission Orders That:

1. The request to intervene filed by the Gunbarrel Energy Future Citizens’ Group is

denied. The filing submitted by the Gunbarrel Energy Future Citizens’ Group on August 8,

2013, will be accepted as public comment.

2. The request of the City of Boulder to accept its Supplemental Authority, filed

September 6, 2013, is granted. The request of Public Service Company of Colorado (Public

Service) for leave to reply to the City of Boulder’s Supplemental Authority, filed September 13,

2013, is granted.

3. The Commission grants the request of Public Service to enter as declaratory

orders the first, second, and third statements listed in paragraph 25 of Public Service’s Verified

Petition for Declaratory Orders (Petition).

4. The Commission enters declaratory rulings addressing the fourth and fifth

statements listed in paragraph 25 of the Petition by clarifying that the Commission has regulatory

authority over electricity services provisioned by a municipal utility formed by the City of

Boulder to customers located in unincorporated Boulder County, and that the doctrine of

regulated monopoly as delineated by rulings of the Colorado Supreme Court governs any

application filed by the City of Boulder seeking transfer of Public Service’s certificate of public

convenience and necessity (CPCN). The potential that the City of Boulder may file a

condemnation action to obtain Public Service’s CPCN does not affect the Commission’s

regulatory authority, the doctrine of regulated monopoly, or the standards governing transfer of

Public Service’s CPCN. Further, Commission proceedings addressing the transfer of Public

Service’s CPCN or other plant, equipment, and facilities used to provide service to customers



16

located in unincorporated Boulder County are to be completed before the City of Boulder

initiates a condemnation action for such property.

5. The 20-day time period provided by § 40-6-114(1), C.R.S., to file an application

for rehearing, reargument, or reconsideration shall begin on the first day after the effective date

of this Decision.

6. This Decision is effective on its mailed date.

B. ADOPTED IN COMMISSIONERS’ WEEKLY MEETING

October 9, 2013.

(S E A L)

ATTEST: A TRUE COPY

Doug Dean,

Director

THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF COLORADO

JOSHUA B. EPEL

________________________________

JAMES K. TARPEY

________________________________

PAMELA J. PATTON

________________________________

Commissioners

ATTACHMENT E

Decision No. C13-1550

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 13D-0498E

IN THE MATTER OF THE VERIFIED PETITION OF PUBLIC SERVICE COMPANY OF

COLORADO FOR CERTAIN DECLARATORY ORDERS CONCERNING THE RIGHTS

OF PUBLIC SERVICE COMPANY OF COLORADO UNDER ITS SERVICE TERRITORY

CERTIFICATE COVERING BOULDER COUNTY, COLORADO.

DECISION DENYING CITY OF BOULDER’S

APPLICATION FOR REHEARING,

REARGUMENT, OR RECONSIDERATION

Mailed Date: December 18, 2013

Adopted Date: December 11, 2013

TABLE OF CONTENTS

I. STATEMENT ...........................................................................................................................1

A. Introduction .......................................................................................................................1

B. Procedural Background and Positions of the Parties .........................................................2

II. DISCUSSION ...........................................................................................................................4

A. Scope of Commission Jurisdiction ....................................................................................4

B. Commission Jurisdiction and Municipal Functions ..........................................................5

C. Sequencing of Commission and Condemnation Proceedings ...........................................9

III. ORDER ...................................................................................................................................14

A. The Commission Orders That: ........................................................................................14

B. ADOPTED IN COMMISSIONERS’ WEEKLY MEETING December 11, 2013. ........14

I. STATEMENT

A. Introduction

1. On November 18, 2013, the City of Boulder (Boulder) filed its Application for

Rehearing, Reargument, or Reconsideration (RRR) of Commission Decision issued on

Colo

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PUC

E-Fil

ings

Syst

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2

October 29, 2013 (Decision). Boulder’s RRR challenges the Decision’s rulings clarifying the

Commission’s jurisdiction to conduct approval proceedings of the proposed transfer from Public

Service Company of Colorado (Public Service) to Boulder of certifications, assets, and facilities

used to provide electricity services to customers located outside Boulder’s territorial limits in

unincorporated Boulder County. Boulder’s RRR also opposes the requirement to obtain

Commission approval before Boulder commences a condemnation action over regulated property

rights. Because Colorado Supreme Court precedent interpreting Article XXV of the state

constitution and the public utilities law validates Commission jurisdiction to approve the transfer

of regulated property before a condemnation court acquires subject matter jurisdiction over the

property, the Commission denies Boulder’s RRR.

B. Procedural Background and Positions of the Parties

2. We incorporate the Decision’s description of the procedural history of this case,

including Public Service’s petition for declaratory ruling, intervention by Boulder and the Office

of Consumer Counsel, grants of amicus status, and the positions of parties and amici.1

3. The Decision issued declaratory rulings clarifying the Commission’s jurisdiction

under the state constitution and the public utilities law to regulate Boulder’s certification as a

municipal utility to provide electricity services to customers located in unincorporated Boulder

County. The Decision also declares the Commission has the authority to conduct approval

proceedings over Boulder’s proposed acquisition of assets and facilities owned and used by

Public Service to provide service outside the city. Citing Colorado and Southern,2 the Decision

requires Boulder to obtain Commission approval before a condemnation action could commence.

1 Decision, issued October 29, 2013, at ¶¶ 1-12. 2 Colorado and Southern Railway Co., Inc. v. District Court, 493 P.2d 657 (Colo. 1972).



3

4. Boulder’s RRR challenges the following ruling from paragraph 28 of the

Decision:

If Boulder seeks to condemn facilities, wherever located, that Public Service

currently uses, at least in part, to serve customers located outside of Boulder’s city

limits, this Commission must have the ability to investigate and determine how

the facilities should be assigned, divided, or jointly used …. Thus, a Commission

proceeding addressing these facilities should precede a condemnation action to

allow the district court to rule on the public need and value of facilities that the

Commission determines may be the subject of transfer to Boulder.

(emphasis added by Boulder).

Boulder requests the deletion of paragraph 28 from the Decision. According to the RRR,

selection of facilities for condemnation is a “municipal function,” and the Decision impairs

Boulder’s ability as a home rule city to form a municipal utility and condemn plant and facilities

it deems necessary. Boulder also objects to the Decision’s application of the Colorado and

Southern case requiring Commission approval of any acquisition of regulated property rights

from Public Service before Boulder files a condemnation action.

5. Boulder’s RRR “recognizes the authority of the Commission over service

provided by a municipal electric utility to customers located outside the jurisdictional boundaries

of the municipality,”3 and indicates it “will file all applicable applications for transfer.”4 Boulder

argues, however, “Commission’s approval of an application for transfer is not the same as the

Commission’s deciding what property rights may be transferred and when the transfer may

occur.”5

6. By leave of the Commission, Public Service filed a response to Boulder’s RRR on

December 3, 2013. Public Service requests denial of Boulder’s RRR and provides argument and

3 Boulder RRR, at 3. 4 Id., at 5-6. 5 Id., at 6.



4

citations to the state constitution, the public utilities law, and Colorado case law in support of

Commission regulatory authority over extraterritorial electricity services.

II. DISCUSSION

A. Scope of Commission Jurisdiction

7. The Decision defines the Commission’s jurisdiction over Boulder’s municipal

utility to encompass certifications, assets, and facilities used to provide electricity to customers

located outside Boulder’s territorial boundaries. The Decision does not suggest or imply

Commission jurisdiction over services Boulder’s utility may provide within the city.

Paragraph 28 of the Decision, the object of Boulder’s RRR, also is limited to facilities and assets

used to provide extraterritorial services.

8. Despite these definitions of the scope of Commission authority, Boulder’s RRR

causes us to question whether it is addressing Commission jurisdiction over municipal services

provided inside, or outside, the city. Boulder’s RRR on occasion references extraterritorial

matters; however, the vast majority of the RRR discusses municipal powers in general terms, and

cases cited by the RRR address municipal functions to provide services within the municipality,

not outside.

9. The Commission reiterates its assertion of regulatory authority over the

certifications, assets, and facilities, wherever located, used by Public Service at least in part to

provide electricity service to customers outside Boulder city limits. The Commission does not

assert regulatory authority over Boulder’s efforts to form a utility or over facilities and plant,

wherever located, used only to provide service to customers within Boulder’s municipal territory.



5

B. Commission Jurisdiction and Municipal Functions

10. Boulder argues in its RRR that selection of certifications, facilities, and other

property rights for condemnation is a municipal function beyond the Commission’s jurisdiction.

Boulder’s primary citation for this proposition is the 1926 case of Public Service v. City of

Loveland,6 in which the city sought to condemn Public Service’s distribution system used to

provide service to Loveland’s residents.7 Public Service challenged Loveland’s ability to acquire

ownership through eminent domain proceedings and also protested the city’s unwillingness to

condemn a substation and real estate located within the town. The Court in Public Service v.

City of Loveland ruled that the town has the authority to condemn facilities, and the selection of

which facilities to condemn is a municipal function Public Service could not override. Boulder’s

RRR also relies upon City of Thornton v. Farmers Reservoir & Irrigation Co.,8 arguing a home

rule city has constitutionally-granted powers to condemn “within or without its territorial limits,”

to acquire utilities “and everything required therefore.”9

11. Neither Public Service v. City of Loveland nor City of Thornton addresses the

Commission’s jurisdiction over regulated services provided by a municipal utility to customers

located outside territorial boundaries. These cases do not diminish the multitude of Supreme

Court cases and their citations to article XXV of the Colorado constitution and the public utilities

law granting the Commission regulatory authority over services provided to customers located

6 Public Service Company v. City Of Loveland, 245 P. 493 (Colo. 1926). 7 The distribution system in Loveland also served “a few customers located adjacent to or in close

proximity with the city.” Public Service raised no objections before the Supreme Court to Loveland serving

customers located outside the city, and the Court did not address any issues defining either the municipality’s or the

Commission’s authority over facilities used to provide service outside city limits. 8 City of Thornton v. Farmers Reservoir & Irrigation Co., 575 P.2d 382 (1978). 9 Id., 575 P.2d at 388-899 (emphasis that of the Court).



6

outside city limits. Our Decision lists these cases and their holdings,10 examples of which

include the following:

• “When the city became a public utility under the statute, it had no superior right as to territory outside of its municipal boundaries over the rights of any other

public utility, private corporation or otherwise, authorized to furnish service.”11

• In the 1930 case in which the City of Loveland extended its facilities to serve customers outside the city’s boundaries, the Court stated: “the Utilities Act

unmistakably and clearly invests the Public Utilities Commission with the sole

jurisdiction to hear and determine, in the first instance, a controversy of this

nature.”12

• In the 1978 City of Loveland case, the court stated: “We believe it is essential that the PUC be allowed to regulate the public utility services provided by

municipalities outside their boundaries. Not only is the PUC the only protection

for the non-resident customers,…but the PUC must also be allowed the power to

resolve jurisdictional disputes between municipalities and private utilities

companies over who is to serve areas outside municipal boundaries.”13.

12. None of the other cases cited in Boulder’s RRR impair Commission authority to

regulate services provided by a municipal utility outside city boundaries.14

13. Boulder’s citations also do not reconcile the Court’s ruling in City and County of

Denver v. Public Utilities Commission,15 in which the Court upheld the Commission’s regulatory

authority over Denver’s provision of tramway services outside its boundaries, even after a

10 Decision, issued October 29, 2013, at ¶¶ 20-22.

11 Public Utilities Commission v. City of Loveland, 289 P. 1090, 1094 (Colo. 1930).

12 Id., 289 P. at 1093 (emphasis added).

13 City of Loveland v. Public Utilities Commission, 580 P.2d 381, 385 (Colo. 1978) (emphasis added).

14 In Colorado Cent. Power Co. v. City of Englewood, 89 F.2d 233 (10th Cir. 1937), cited in Boulder’s

RRR, a private utility challenged the city’s condemnation of facilities located outside the city and part of the system

supplying electricity inside and outside of the city. The federal appeals court held that the city may condemn

extraterritorial facilities to serve customers within the city. The utility also argued condemnation of such facilities

amounted to an effort to generate, distribute, and sell electricity outside the city without first having obtained a

certificate of convenience and necessity from the PUC. The court ruled: “Whether the city is required to obtain such

a certificate cannot be determined on the complaint of a private suitor. It may be inquired into only on the complaint

of the state or the commission.” Thus, the federal appeals court did not address Commission jurisdiction to regulate

any efforts by the City of Englewood to provide extraterritorial service. 15 City and County of Denver v. Public Utilities Commission, 507 P.2d 871 (Colo. 1973).



7

district court had completed a condemnation action transferring ownership rights of the system to

Denver.

14. Characterizing the selection of facilities for condemnation as a “municipal

function” does not undermine the scope of Commission jurisdiction over certifications and

facilities used to serve extraterritorial customers. In the 1978 City of Loveland v. PUC case,16 the

Court characterized the setting of rates by a city utility for its inhabitants as a “municipal

function”;17 however, when the city performed the same function for extraterritorial customers, it

was subject to the Commission’s jurisdiction.18 Also, in Colorado and Southern Railway Co.,

Inc. v. District Court,19 in which a railway company attempted to condemn property for a railroad

crossing, the Court referenced the Commission’s authority to approve the location of railway

crossings and stated “the commission – not the railroad -- determines what property the

railroad requires.”20

15. Boulder’s RRR reflects an intention to initiate condemnation proceedings over

Public Service’s certificate of public convenience and necessity (CPCN) before obtaining the

Commission’s formal approval: “Because a CPCN is a property right, whether a CPCN will be

included in a city’s petition in condemnation is likewise a matter within the purview of the city

to determine.”21 A major issue addressed in the briefing of parties and amici prior to issuance of

the Decision was Boulder’s ability to condemn Public Service’s CPCN for service in

unincorporated Boulder County. The Decision, citing the Commission’s authority to approve

16 City of Loveland v. Public Utilities Commission, 580 P.2d 381 (Colo. 1978).

17 Id., 580 P.2d at 384.

18 Id., 580 P.2d at 384-85.


20 Id., 493 P.2d at 659 (emphasis added).

21 Boulder RRR at 7.



8

and regulate CPCN transfers, held that Boulder must obtain Commission approval of any

proposed acquisition of Public Service’s CPCN to serve extraterritorial customers.22 Boulder’s

RRR does not cite any cases or other legal authorities placing this holding into question.

16. Boulder’s RRR at times acknowledges Commission authority over CPCNs and

services provided to extraterritorial customers; however, its RRR minimizes this authority by

suggesting it will satisfy this requirement by simply working and coordinating with the

Commission and Public Service to identify which facilities should be acquired and condemned.23

Boulder also attempts to reduce the extent of Commission approval authority:

“[T]he Commission’s approval of an application for transfer is not the same as the Commission’s

deciding what property rights may be transferred and when the transfer may occur.”24

17. Negotiation and coordination among Boulder, Public Service, and other interested

entities and agency staffs are encouraged to reduce the scope of disputed issues and conserve

administrative and judicial resources. Informal negotiations, however, do not supplant formal

Commission approvals required by statute. Further, an inability to determine which property

rights may be acquired conflicts with the Commission’s constitutional and statutory duties to

regulate the transfer of certification, assets, and facilities used to provide service to

extraterritorial customers.

18. Boulder contends that pre-approval proceedings before the Commission will deny

Boulder of its right to conduct discovery pursuant to the rules of civil procedure applicable to

22 Decision, issued October 29, 2013, at ¶¶ 23-24 (citing City and County of Denver v. Public Utilities

Commission, 507 P.2d 871 (Colo. 1973), and Colorado and Southern Railway Co., Inc. v. District Court, 493 P.2d

657 (Colo. 1972)). 23 Boulder RRR at 3, 10.

24 Id., at 6.



9

eminent domain actions.25 The Commission’s procedural rules provide Boulder with the same

mechanisms to conduct discovery through written interrogatories, requests for production of

documents, and depositions.26 Boulder also objects to delays resulting from Commission

approval proceedings.27 Commission rules allow parties to request expedited proceedings, which

accelerate discovery responses and hearing schedules.28 The Commission will process and

decide the matter as efficiently as the issues and the public interest allow.

19. Regulatory oversight of the assets, plant, and facilities used to provide electricity

outside Boulder’s territorial boundaries advances important public interests. Public Service

constructs, engineers, and operates its network as an integrated system, and its service

capabilities cross the political boundaries defining the City of Boulder and Boulder County.

Performance of the Commission’s duty to ensure the reliability of the system for unincorporated

Boulder County and other regions of the state requires an evaluation and determination of the

optimal division, joint use, and potential replacement of assets and facilities providing services

both inside and outside Boulder city limits.

C. Sequencing of Commission and Condemnation Proceedings

20. The Supreme Court’s Colorado and Southern case29 governs the sequencing of

Commission and condemnation proceedings of property subject to Commission regulation. In

Colorado and Southern, a railway company commenced a condemnation action for an easement

over railroad tracks. The public utilities law granted the Commission “the power to determine

25 Id., at 13.

26 4 Code of Colorado Regulations (CCR) 723-1-1405 of the Commission’s Rules of Practice and

Procedure. 27 Boulder RRR, at 9-10.

28 4 CCR 723-1-1302(c), 1405(i).




10

what property the condemning railroad can use as the ‘particular point of crossing.’”30 The Court

issued two holdings applicable to Boulder’s RRR: first, because the Commission has the

statutory power to determine the point of crossing, “[i]t follows logically then that the

commission -- not the railroad -- determines what property the railroad requires”;31 and second,

absent Commission approval, the district court sitting in condemnation did not have jurisdiction

over the subject matter of the case.32 Under Colorado and Southern, Commission approval

proceedings over regulated property is a condition precedent to a condemnation action over the

subject property.33

21. Boulder’s RRR attempts to distinguish Colorado and Southern. Boulder first

argues that the statute cited in Colorado and Southern authorized the Commission to approve the

property at issue, whereas, according to Boulder, “Here, there is no such statute. No statute

grants this Commission the power to determine, order, and prescribe which property a

municipality may seek to condemn in order to create a municipal utility.”34

22. Two public utilities law provisions prove otherwise and authorize Commission

approval of the transfer of property and facilities providing regulated services. As cited in the

Decision, § 40-5-105(1), C.R.S., requires Commission approval of the sale, assignment, or lease

of assets of a public utility, including any CPCN. This statute also permits the Commission to

30 Id., 493 P.2d at 659.

31 Id.

32 Id., 493 P.2d at 659-60.

33 Id., 493 P.2d at 658-60.

34 Boulder RRR, at 11.



11

prescribe the terms and conditions of approval.35 The transfer of ownership through

condemnation means to “purchase” or to “acquire,”36 which is a “sale,” and thus a transfer of

facilities used to provide electricity service outside territorial limits is within Commission

purview under § 40-5-105(1), C.R.S. Despite arguing no statute grants the ability of the

Commission to conduct approval proceedings, Boulder in other portions of its RRR concedes

regulatory approval authority over property it may wish to condemn.37

35 § 40-5-105, C.R.S., says:

Certificate or assets may be sold, assigned, or leased. (1) The assets of any public

utility, including any certificate of public convenience and necessity or rights obtained under any

such certificate held, own, or obtained by any public utility, may be sold, assigned, or leased as

any other property, but only upon authorization by the commission and upon such terms and

conditions as the commission may prescribe; except that this section does not apply to assets that

are sold, assigned or leased:

(a) In the normal course of business: or

(b) [Describing circumstances applying only to telecommunications service providers]

36 See Article XX, Section 1 (extended to home rule cities by Article XX, Section 1), which says:

[The City and County of Denver] … shall have the power, within or without its territorial

limits, to construct, condemn and purchase, purchase, acquire, lease, add to, maintain, conduct,

and operate water works, light plants, power plants, transportation systems, heating plants, and

any other public utilities or works or ways local in use and extent, in whole or in part, and

everything required therefore, for the use of said city and county and the inhabitants thereof, and

any such systems, plants, or works or ways, or any contracts in relation or connection with either,

that may exist and which said city and county may desire to purchase, in whole or in part, the

same or any part thereof may be purchased by said city and county which may enforce such

purchase by proceedings at law as in taking land for public use by right of eminent domain….

37 See, for example, Boulder RRR at 3 (“The transfer of a CPCN, which is a property right subject to

condemnation, cannot take place without the Commission’s approval….While Boulder recognizes the authority of

the Commission over service provided by a municipal electric utility to customers located outside the jurisdictional

boundaries of the municipality, Boulder respectfully submits that the Decision misapprehended certain points of

law, as discussed below, and requests that the Commission reconsider its Decision.”), and 5-6 (“Once Boulder

determines that it may form a retail electric utility in compliance with its Charter requirements and it, in fact, does

so, Boulder will file all applicable applications for transfer.”).



12

23. The emphasis in Boulder’s RRR upon facilities, and the potential for interference

with Public Service’s system, invokes a second provision of the public utilities law,

§ 40-5-101(1)(b), C.R.S. It says:

If a public utility, in constructing or extending its line, plant, or system, interferes,

or is about to interfere, with the operation of the line, plant, or system of any other

public utility already constructed, the commission, upon complaint of the public

utility claiming to be injuriously affected, after hearing, may prohibit the

construction or extension or prescribe just and reasonable terms and conditions

for the location of the lines, plants, or systems affected.

Boulder acts as a “public utility” under Commission regulation when it operates outside

territorial limits.38 Any extension of Boulder’s system interfering with Public Service’s

provisioning of service to extraterritorial customers is within this statute, and the Commission

may prohibit the extension or prescribe just and reasonable terms for the location of the lines,

plant, or systems affected.

24. Independent of these two statutory authorizations is the Commission’s

constitutional mandate over regulated property and services, as recognized by the Court:

Article XXV of the Colorado Constitution vests in such agency as the General

Assembly may designate all power to regulate the facilities, service, rates, and

charges of every public utility operating within Colorado. See Colo. Const. art.

XXV. Through the Public Utilities Law, 40-1-101 to 40-7-117, 11 C.R.S. (1998),

the General Assembly has assigned to PUC the authority "to do all things,

whether specifically designated in articles 1 to 7 of this title or in addition

thereto, which are necessary or convenient in the exercise of such power."

40-3-102, 11 C.R.S. (1998). Accordingly, PUC has power to accomplish

functions delegated to it by the Public Utilities Law and article XXV.39

25. Boulder’s attempt to minimize the precedential value of Colorado and

Southern—by arguing the public utilities law does not contain a specific statute authorizing the

38 Public Utilities Commission v. City of Loveland, 289 P.2d 1090, 1094 (Colo. 1930).

39 Public Service Company of Colorado, v. Trigen-Nations Energy Company, L.L.L.P., 982 P.2d 316, 322

(Colo. 1999).



13

Commission to select property for condemnation of a municipal utility—is of no consequence.

In Colorado and Southern, the approval statute at issue also did not reference or grant

Commission authority to select facilities for condemnation; rather, as here, the statute granted the

Commission general approval powers over the subject property.40 The approval statutes

governing the acquisition of Public Service’s assets by Boulder are comparable to the crossing

approval statute in Colorado and Southern.

26. Boulder’s second attempt to distinguish Colorado and Southern is to attach

significance to the demands of the condemning railway in that case to take immediate

possession, in contrast to Boulder’s commitment not to take possession of Public Service’s assets

until after the condemnation action (but by implication before obtaining Commission approval).

The language and reasoning of Colorado and Southern do not support Boulder’s contention.

The condemnation action was prohibited from proceeding not because of the demand for

immediate possession, but because the district court lacked subject matter jurisdiction over the

property absent Commission approval of the crossing pursuant to the public utilities law.41

40 As quoted by the Court in Colorado and Southern, the approval statute at issue stated:

The [public utilities] commission shall have power to determine, order, and prescribe,

in accordance with the plans and specifications to be approved by it, the just and reasonable

manner including the particular point of crossing at which the tracks or other facilities of any

railroad corporation may be constructed across the tracks or other facilities of any other railroad

corporation at grade, or above or below grade; and to determine, order, and prescribe the terms

and conditions of installation and operation, maintenance, and protection of all such crossings

which may now or hereafter be constructed to the end, intent, and purpose that accidents may be

prevented and the safety of the public promoted. 493 P.2d at 658-59. 41 Colorado and Southern, 493 P.2d at 658-60.



14

III. ORDER

A. The Commission Orders That:

1. The City of Boulder’s Application for Rehearing, Reargument, or

Reconsideration of Decision No. C13-1350, filed November 18, 2013, is denied.

2. This Decision is effective on its mailed date.

B. ADOPTED IN COMMISSIONERS’ WEEKLY MEETING

December 11, 2013.

(S E A L)

ATTEST: A TRUE COPY

Doug Dean,

Director

THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF COLORADO

JOSHUA B. EPEL

________________________________

JAMES K. TARPEY

________________________________

PAMELA J. PATTON

________________________________

Commissioners

ATTACHMENT F

DISTRICT COURT, BOULDER COUNTY, COLORADO 1777 6th Street Boulder, Colorado 80302 303-441-3750 Petitioner:

THE CITY OF BOULDER, a Home Rule City and a Colorado Municipal Corporation,

v.

Respondents:

PUBLIC SERVICE COMPANY OF COLORADO, a Colorado Corporation, XCEL ENERGY, INC., BOB HULLINGHORST, in his official capacity as Treasurer of Boulder County

Attorneys for Petitioner: Donald M. Ostrander, No. 12458 Richard F. Rodriguez, No. 25105 James Birch (Special Counsel), No. 15899 Duncan, Ostrander & Dingess, PC 3600 S. Yosemite Street, Suite 500 Denver, Colorado 80237 Phone Number: 303.779.0200 Fax Number: 303.779.3662 Email: [email protected]

[email protected] [email protected]

Thomas A. Carr, No. 42170, City Attorney Kathleen E. Haddock, No. 16011, Senior Assistant City Attorney Sandra M. Llanes, No. 33717, Senior Assistant City Attorney Boulder City Attorney’s Office P.O. Box 791 Boulder, CO 80306 Phone Number: 303.441.3020 Fax Number: 303.441.3859 Email: [email protected]

[email protected] [email protected]

COURT USE ONLY Case No. 2014-CV- Division:

PETITION IN CONDEMNATION

mailto:[email protected]






2

The City of Boulder, Petitioner (“City” or “Petitioner”), by and through its attorneys, alleges as follows:

ALLEGATIONS

1. The City is a home rule municipality of the State of Colorado organized and existing under a home rule charter pursuant to the Colorado Constitution, Article XX.

2. The City’s authority to maintain this proceeding is set forth in Article XX sections 1 and 6 of the Colorado Constitution, in Article 1, sections 2(b) and (d) and Article XIII section 180(a) of the Home Rule Charter of the City of Boulder, and in various state statutes.

3. The City has the power to construct, condemn, purchase, acquire, add to, maintain, conduct, and operate public utilities or works or ways, in whole or in part within or without its territorial limits and everything required therefore pursuant to the Colorado Constitution, Article XX, sections 1 and 6.

4. All property, property interests, facilities and equipment sought in this proceeding are subject to acquisition by the Petitioner. Colorado Constitution, Article XV, section 8 states: "The right of eminent domain shall never be abridged nor so construed as to prevent the general assembly from taking the property and franchises of incorporated companies and subjecting them to public use, the same as the property of individuals" Article XX states, in part, that home rule cities:

. . . shall have the power, within or without its territorial limits, to construct, condemn and purchase, purchase, acquire, lease, add to, maintain, conduct, and operate water works, light plants, power plants, transportation systems, heating plants, and any other public utilities or works or ways local in use and extent, in whole or in part, and everything required therefore, for the use of said city and county and the inhabitants thereof, and any such systems, plants, or works or ways, or any contracts in relation or connection with either, that may exist and which said city and county may desire to purchase, in whole or in part, the same or any part thereof may be purchased by said city and county which may enforce such purchase by proceedings at law as in taking land for public use by right of eminent domain, . . . (emphasis added).

5. The City has complied with the conditions precedent for the exercise of its condemnation powers in this case. The 20-year term of the electric utility Franchise Agreement between the City and Public Service Company of Colorado (“PSCo”) has expired (the “Franchise Agreement”). To the extent it applies, this proceeding is also authorized by C.R.S. §38-5-105.

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6. This proceeding is brought pursuant to the procedural provisions of C.R.S. § 38-1-101, et seq., as amended.

7. On November 1, 2011, voters in the City approved Ballot Question 2C, which authorizes the formation of a City-owned and operated municipal electric utility (the “City Utility”).

8. On August 20, 2013 Ordinance No. 7918 was adopted by the Boulder City Council, which authorizes the City to exercise its power of eminent domain in this case. Ordinance No. 7918 can be found at https://documents.bouldercolorado.gov/weblink8/0/doc/123436/Page1.aspx.

9. The City has determined there is a need and necessity and that it is in the public interest for the City to acquire the property described herein and in the exhibits attached hereto (“the Property”).

10. The Property is owned by Respondent Public Service Company of Colorado (“PSCo”) and its parent holding company, Xcel Energy, Inc, as their interests may appear (collectively, “Xcel” or the “Respondent”).

11. The City Council has determined that the Property includes electrical facilities and other property interests in the area owned by Xcel as shown on the maps attached hereto as Exhibit

A-1 and Exhibit A-2-TL, dated July 31, 2013 and marked Acquisition Area Distribution System and the Acquisition Area 115kV Transmission Loop (collectively “the Acquisition Area”).

12. The Acquisition Area was determined by analyzing the technically optimum places of separation of ownership of interconnected electric facilities in order to maintain reliability on both sides of the separation to serve properties within the City and provide electricity, avoid duplication of distribution and transmission equipment, minimize operational and maintenance conflicts, establish the boundaries along property boundaries and define the area in which the City will acquire property to implement Article XIII of the Charter.

13. The 115kV Transmission Loop is defined as that part of the Property comprised of transformers, substations, substation equipment, conductors operated at 115kV along with support structures, buswork and related equipment used or useful to manage the flow and distribution of electricity within the City and the local generation anticipated by the City Utility, to interconnect the City’s hydroelectric facility in Boulder Canyon to lower voltage facilities within the City, to balance electrical demand within the Acquisition Area and the supply of electricity to that demand, and to enable the City Utility to access and integrate power supply resources located outside of the Acquisition Area efficiently and in a cost effective manner.

14. The Property has been used primarily to provide electric service to the City and its inhabitants. The Property serves customers inside the City, as well as City-owned facilities located outside City limits, such as City water facilities and one of the City’s primary emergency communications facilities. The Property incidentally distributes electricity to a relatively small number of customers in enclaves (areas completely surrounded by the City) and areas just outside the City.

https://documents.bouldercolorado.gov/weblink8/0/doc/123436/Page1.aspx

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15. Approximately 97% of the electric load on the system that the City seeks to acquire is within City limits.

16. The Property is being acquired for a public purpose and in furtherance of a public use: establishing, erecting, maintaining and operating a municipal light and power utility for the use of the City and its inhabitants. The “Project” for which the Property is being acquired is defined as acquisition of all of the property interests, facilities, and physical, administrative, and legal changes to the electrical facilities and appurtenant facilities required to enable the City to own and operate its own electric utility, often described as the City’s municipalization project, together with the adoption of tariffs, programs, contracts and other activities customarily associated with the ownership and operation of an electric utility. The changes to the existing electrical system include change in ownership of facilities and associated property interests from Xcel to the City.

17. The Project does not include acquisition of ownership of generation facilities or capacity of generation facilities, and the Property does not include any facilities or property of Xcel’s that is used for generation of electricity or for provision of natural gas service. Through this action the Petitioner does not seek any natural gas facilities or equipment or interests in real property owned or claimed by Respondent used to support or provide natural gas service. The Petitioner disclaims any interest in natural gas facilities in the Acquisition Area. Petitioner’s disclaimer shall not be construed as permission by the Respondent, or any others, to interfere with Petitioner’s use of the property acquired in this action.

18. The electrical system located within the Acquisition Area is a “load pocket” relative to the entire Xcel system. The electrical system within the Acquisition Area as designed by Xcel is a typical radial feed with feeder tie capabilities for backup operations and outage conditions. As a load pocket, the Acquisition Area can be readily segregated from the Boulder Division of Xcel’s electrical system.

19. The City is surrounded by open space, including over 17,000 acres owned by the City or subject to City conservation easements, and over 22,000 acres in the Boulder Valley Comprehensive Plan Area III (where the City and Boulder County have determined to preserve existing rural land uses). As a result, the electrical system providing electricity within Boulder is technically and geographically isolated to a significant extent from surrounding areas. The Project includes maintaining connection with the Boulder Division of Xcel’s electrical system by placing additional inter-utility metering at appropriate points on the electrical lines that provide interconnection capability to the Acquisition Area with the intent of eliminating the need to construct redundant and unnecessary facilities.

20. The Project includes installation of meters, and associated disconnection switches, protective devices and communications systems to interface with Xcel’s electric system outside of the Acquisition Area, in order to maintain the status quo of the equipment over which the electricity is delivered and the retail electric service providers in areas outside the Acquisition Area and to permit the provision of customary inter-utility mutual aid and cooperation. The interconnection points between those facilities that will become the City Utility’s and those that

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will remain under the ownership of Xcel are intended to maintain the safety, reliability, and continued use of that portion of the system, as it is currently designed, necessary for Xcel to serve those customers outside of the City and the service territory outside of the Acquisition Area. The Project also includes the adoption of transmission tariffs by the City that will provide reciprocal electric transmission service to Xcel. The tariffs include transmission service over those lower voltage facilities that are part of the Property to be acquired under this Petition.

21. The Property includes such temporary construction easements as may be necessary to install the equipment within substations and at interconnection points.

22. Within the substations interconnected to the 230kV transmission system, the Property includes all electrical delivery facilities up to and including the high voltage side of the 230kV transformers and transfer protection and interrupting equipment.

23. The Project includes maintaining the capacity in the system for Xcel as currently exists to distribute power to Xcel facilities and customers.

24. Xcel owns natural gas facilities, electric power transmission facilities that are not part of the 115kV Transmission Loop, and other facilities unrelated to the Project, that are located on the same property as the Property to be acquired by the City. The Project will provide for continued co-location of those facilities. The Project includes the City’s acquisition of limited property interests, including easements for access or location of equipment to avoid interference with Xcel’s use of the same property for its uses unrelated to the Project.

25. The Property also includes agreements with third parties which are necessary to facilitate the operation of the electric system serving the City, and agreements for use by third parties of the facilities or property being acquired by the City, such as pole attachment agreements. The Property does not include any deposits Xcel may have received from customers or any agreements with customers within the Acquisition Area.

26. The types of facilities that are part of the Property include substations, 13.2kV (and lower) electrical lines, transformers, meters, customer service drops, 115kV electrical lines, towers, poles, braces, guys, anchors, crossarms, cables, conduits, conductor, switching stations, high tension apparatus, streetlights, control and protective equipment, customer meters, and other fixtures whose primary purpose is to augment, integrate or tie together, within the Acquisition Area, the electric service to customers within the City, and all of the real property interests necessary to support the facilities. Where any of these electric facilities are currently located on the same poles, within the same easements, within the same trenches, or within the same substation, as facilities of Xcel that are not part of the Property, the Project provides for continued co-location of the electric facilities to be acquired with other Xcel property used to provide electric service to Xcel customers or for natural gas service.

27. Certain information related to the facilities to be acquired may be critical infrastructure information subject to restrictions on disclosure established under the authority of state or federal law (e.g. C.R.S. § 24-33.5-1602, or 42 U.S.C. § 5195c(e)). The City has prepared

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an inventory of the facilities that are part of the Property, and once a suitable confidentiality procedure is established by the Court to prevent the inappropriate disclosure of critical infrastructure information, the City will submit that inventory to the court in accordance with that procedure. Pending the implementation of such a confidentiality procedure, the inventory that the City provided Xcel on June 23, 2014, as part of the good faith negotiations, is incorporated herein by reference, but may not be publicly disclosed.

28. The acquisition in this case is a total taking of the electric facilities in the Acquisition Area serving the load pocket as the system was designed by Xcel and therefore there is no “Residue” (or "Remainder"), as defined in CJI Civ. 36:4: “’Residue’ means that portion of any property that is not taken but that belongs to the respondent, and that has been used by, or is capable of being used by, the respondent, together with the property actually taken, as one economic unit.”

29. The Property, facilities and equipment are located in the City and in the County of Boulder Colorado, which is the county in which this action is brought.

SUBSTATIONS

30. The City is acquiring the following substations entirely:

A. Boulder Terminal as illustrated in Exhibits BT-1 and BT-2;

B. Sunshine as illustrated in Exhibit Sunshine-1 and Sunshine-2;

C. NCAR as illustrated in Exhibit NCAR-1 and NCAR-2 ;

31. The City is acquiring the remainder of the Boulder Hydro substation as illustrated in Exhibits BH-1 and BH-2, except for a non-exclusive easement for Xcel’s overhead transmission lines currently existing on the Boulder Hydro substation property.

32. The City is acquiring facilities within the following substations and easements to access such facilities (“-1” is an illustration of the division of ownership of high voltage equipment using standard industry symbols, “-2” is an aerial photo of the substation showing the approximate location of the facilities to be acquired and access areas necessary, and “-3” is the language of the easement being acquired by the City):

D. That portion of Eldorado as illustrated in Exhibits EL-1, EL-2, and pursuant to the terms and reservations as set forth in Exhibit EL-3;

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E. That portion of Valmont as illustrated in Exhibits VM-1, VM-2, and pursuant to the terms and reservations as set forth in Exhibit VM-3;

F. That portion of Leggett as illustrated in Exhibits LEG-1, LEG-2, and pursuant to the terms and reservations as set forth in Exhibit LEG-3;

G. That portion of Niwot as illustrated in Exhibits NW-1, NW-2, and pursuant to the terms and reservations as set forth in Exhibit NW-3; and

H. That portion of Gunbarrel as illustrated in Exhibits GB-1, GB-2, and pursuant to the terms and reservations as set forth in Exhibit GB-3.

115kV TRANSMISSION LOOP

33. The City is acquiring the property rights and equipment associated with the 115kV Transmission Loop as illustrated in Exhibit A-2-TL. The 115kV Transmission Loop consists of: Circuits 9065 and 9067 from Valmont Substation to Boulder Terminal Substation; Circuit 9216 (and 9216UG) from Boulder Terminal Substation to Sunshine Substation to Boulder Canyon Hydro Substation; Circuit 9205 from Boulder Canyon Hydro Substation to NCAR Substation to Eldorado Substation; Circuit 9046 from Eldorado Substation to Valmont Substation, including all transmission structures. The acquisition does not include the conductors, overhead ground wire, insulators and transmission line easements for the section of Circuit 9688 from Eldorado Substation to Ridge Substation between Eldorado Substation and Superior Junction, and for the section of Circuit 9054 from Valmont Substation to Ridge Substation between Valmont Substation and Superior Junction.

13.2 kV ELECTRIC FACILITIES, PROPERTY AND EQUIPMENT

34. The Property sought consists of all 13.2kV facilities and appurtenant facilities within the Acquisition Area and is further defined in § 1.5 and § 1.6 of the Franchise Agreement, as well as associated easements. Outside the City within the Acquisition Area, the Property extends to the load side of customer meters.

35. The City is not acquiring: the maintenance facility owned by Xcel west of the Valmont substation; the Valmont power plant, or any generation facilities or generation capacity, or any natural gas distribution facilities, or any property interests or equipment necessary for such facilities.

36. Petitioner is informed and believes that Public Service Company of Colorado, is an owner of the Property or may have an interest in the Property.

A. Xcel Energy, Inc. may also have an interest in some of the Property and equipment as the holding company for PSCo.

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B. Bob Hullinghorst, in his official capacity as Treasurer of Boulder County, is joined as a Respondent pursuant to C.R.S. § 39-3-134.

37. Insofar as it is known to the Petitioner upon exercising due diligence there are no other persons or entities who may claim any right, title, or interest in or to the Property.

38. Petitioner is informed and believes this action does not affect the property of any persons in a guardianship or conservatorship.

39. The Petitioner has negotiated in good faith with Xcel in an attempt to acquire the Property, but has not been able to reach a mutual agreement. The just compensation to be paid for the Property cannot be agreed upon and further negotiations would be futile.

REQUESTS FOR RELIEF

WHEREFORE, Petitioner requests this court enter Orders as follows:

1. That if ownership or interests in the Property are not correctly set forth herein, then the Respondents be required to set forth by Answer the extent of their respective interests and the names and addresses of any other interested persons or entities and the nature and extent of their interest.

2. That the just compensation to be paid for the acquisition of the Property be determined in the manner provided by law.

3. That the Petitioner have judgment condemning the Property and that a Rule and Order be entered conveying the Property to the Petitioner upon Petitioner’s payment of just compensation as determined by the Court.

4. That the Respondent be ordered to make and prosecute, in a timely and expeditious manner, in cooperation with the Petitioner, such regulatory filings before regulatory tribunals charged with supervising the public’s interest with respect to the involuntary transfer of utility assets as may be necessary and appropriate to effectuate the transfer of ownership of the Property from the Respondent to the Petitioner.

5. Any additional relief as may be deemed just and proper.

Respectfully submitted this 17th day of July, 2014.

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BOULDER CITY ATTORNEY’S OFFICE

By: /s/ Kathleen E. Haddock Thomas A. Carr, No. 42170, City Attorney

Kathleen E. Haddock, No.16011, Senior Asst. City Attorney Sandra M. Llanes, No. 33717, Senior Asst. City Attorney

DUNCAN, OSTRANDER & DINGESS, P.C.

Donald M. Ostrander, No. 12458 Richard F. Rodriguez, No. 25105 James Birch (Special Counsel), No. 15899

Special Counsel to the City of Boulder

ATTORNEYS FOR PETITIONER

Address of Petitioner: City of Boulder P.O. Box 791 Boulder, CO 80306

Exhibit A-1

Exhibit A-2-TL

ATTACHMENT G

Xcel petition to Federal Energy Regulatory Commission

Documents

Transcript of Xcel petition to Federal Energy Regulatory Commission