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Boulder's Utopian Utility Effect

Utopian Utility Effect (UUE): a romanticized perception that a group, such as a municipality, can provide reliable, reasonably priced, global warming-friendly electricity more efficiently than its current power provider.

Specifically for supporters of 2B and 2C, Boulder’s ballot measures to form its own utility, UUE seems to mean, “a local energy utility can reduce our carbon emissions by 60%, increase the percentage of renewables by 40%, all while keeping our rates at parity or lower than those charged by Xcel [Energy].” Question 2B raises and extends the current utility occupation tax to raise up to $12 million over the next 6 years to fund the legal, financial and technical process of forming a municipal utility. Question 2C authorizes Boulder to create a utility that increases reliance on renewable energy, reduces greenhouse gas emissions and issues revenue bonds to pay for it.

This policy blog cannot be accused of being a tool for Xcel, Colorado’s largest investor owned utility. (For proof see recent post on consumer dissatisfaction with Xcel) We love the David vs. Goliath paradigm with consumers throwing off the yoke of Xcel, forming a utility in their own image and paying for it themselves. In fact, I have had the same fantasy about my hometown, which is currently negotiating a new franchise agreement with Xcel. In this case though, it’s a bad idea. Boulder’s green dream will prove a nightmare that is more emotional than economical.

In an hour long interview with Amy Oliver of News Talk 1310 KFKA (part I, part IIUtiliPoint‘s Bob Bellemare, an engineer and seasoned energy industry analyst/consultant, provided several examples of how Boulder currently suffers from what he describes as the “utopian utility effect:”

  • Utopian budgeting: Boulder is likely underestimating the cost by hundreds of millions of dollars because it didn’t budget for Xcel and its ratepayers’ stranded costs, lost future revenue, and repayment of solar/renewable energy rebates.
  • Xcel’s offer: Boulder could have been up to 70 percent renewable energy powered by 2013 at a cost of roughly $4 per month per customer if they stayed with Xcel.
  • Renewable/natural gas panacea: Boulder’s combination of renewables and natural gas is not likely to reduce carbon emissions.
  • Opportunity costs: if Boulder invested the 2B $12 million of taxpayer funds into energy efficiency efforts instead, residents could enjoy a $48 million return on energy savings.

Xcel hired Bellemare to examine the Boulder municipalization issue, something he immediately discloses.  But Bellemare also points out that from a financial perspective, he stands to make more money if Boulder is successful in breaking away from Xcel because his contract likely will continue through the lengthy legal process, which could drag on for years.  A no vote, and he is done with this case.

Bellemare suggests that if Boulder is serious about being green and reducing its carbon footprint, it simply must reduce the amount of energy it consumes. A 2010 Wall Street Journal article revealed how hard that is even for eco-conscience Boulder:

In 2006, Boulder voters approved the nation’s first “carbon tax,” now $21 a year per household, to fund energy-conservation programs. The city took out print ads, bought radio time, sent email alerts and promoted the campaign in city newsletters.

But Boulder’s carbon emissions edged down less than 1% from 2006 through 2008, the most recent data available.

By the end of 2008, emissions here were 27% higher than 1990 levels. That’s a worse showing than the U.S. as a whole, where emissions rose 15% during that period, according to the Department of Energy.

Why is it so hard? Because even those who claim to be good environmental stewards love their gadgets and the electricity needed to power them:

“If a place like Boulder that regards itself as being in the environmental forefront has such a tough time, these types of efforts are not going to work as a core policy” for the nation, says Roger Pielke Jr., who studies the political response to climate change at the University of Colorado, Boulder.

One problem: People don’t want to give up gadgets. Recently, Prof. Pielke taught a seminar on energy demand. The university had installed motion-detector lights that shut off when the room is vacant to save energy. But when he asked his 17 students to lay all their iPods, cellphones and laptops on their desks, they had 42 electronic devices among them. Powering those up, he said, negated any conservation value from the fancy lights.

A problem for ratepayers is that with Boulder gone, the rest of Colorado’s Xcel customers have to pay for the state’s New Energy Economy, which has been heavily influenced by Boulder’s green dreams and applies primarily to investor owned utilities.

If Boulder wants to indulge its utopian utility fantasies, fine. But the rest of Xcel’s customers shouldn’t have to pay for it either directly through rate increases or indirectly through opportunity costs as Xcel must expend financial resources for this process rather than investment.

For more information on opponents of 2B and 2C, visit Boulder Smart Energy Coalition.

For more information on supporters of 2B and 2C, visit Renewables Yes.