Bob Yates: Utility deal would require more time, money than you think

Greetings to the people of Tucson from Boulder, Colorado. We in Boulder understand that folks in Tucson are considering an attempt to municipalize the electricity distribution network in your city. In Boulder, we worked on that for 10 years, from 2010 to 2020. After spending $30 million in litigation and not getting very far, we gave up. So, allow us to share our story and offer a few friendly words of advice.

We launched our municipalization effort in Boulder in 2010, when we voted to end our franchise with our regulated electricity provider, Xcel Energy. We believed that, by ending the franchise and taking over Xcel’s network, electricity in our town of 100,000 people would be greener and less expensive, with greater local control.

When we started the municipalization effort in 2010, our experts predicted that, even if Xcel resisted this change (which they did), we could get the necessary state and federal regulatory approvals, conduct an eminent domain condemnation of Xcel’s assets, and stand up our own municipal electric utility within seven years, by 2017. As things grew increasingly more complicated, the projected takeover date slipped to 2019, then 2021, then 2023, then 2025. That was going to be 15 years after we ended the franchise and launched the municipalization process. And we weren’t even sure of that.

Why did things take so long? In addition to resistance from Xcel, we ran into a lot of problems that we hadn’t anticipated when we started in 2010. Although the network had been engineered and built logically — without regard to city limits — we couldn’t legally condemn network elements, like substations, poles, and wires, that sat outside the city boundaries. It became complicated and expensive to separate the in-city network from the out-of-city portions, forcing uneconomical redundancies. And our revenue assumptions had to be reduced because we couldn’t force out-of-city customers to buy electricity from the proposed municipal utility, even though they were connected to the network we hoped to acquire. You can evaluate whether Tucson may face similar challenges.

The litigation and regulatory process were crazy. As a retired lawyer, I can tell you that the city of Boulder tried every legal maneuver that we could think of. But Xcel Energy and our state regulatory agency were not thrilled about what we were trying to do, and they fought us every step of the way. We had to file three separate actions before the Colorado Public Utilities Commission and three separate condemnation lawsuits in court. We repeatedly lost litigation and legal appeals. We never even got to a condemnation.

The process was expensive. Through two tax votes, one in 2011 and an extension in 2017, Boulder taxpayers gave the city staff a $30 million budget to spend on lawyers and engineers for the municipalization undertaking. By 2020, we were running out of money again, and we were going to have to go back to the voters to ask for more.

So, we finally threw in the towel. After ten years out of franchise and in court, our voters approved a settlement with Xcel Energy in November 2020 that ended the litigation, allowed the company to keep its network, and put us in a new 20-year franchise. In the settlement, Xcel did make some commitments to reduce its carbon use statewide and to help Boulder get to its 100 percent carbon reduction goal by 2030. We’ll never know if Xcel would have done those things without a ten-year battle. But we like to tell ourselves that’s what we got for our $30 million.

There is no doubt that Tucson will learn from Boulder’s mistakes and incorrect assumptions. Perhaps your legal and regulatory climate in Arizona is more friendly than ours in Colorado. Maybe your electricity utility will put up a less of a fight than ours did. But regardless of the differences between Tucson and Boulder, here’s some friendly advice from one city that tried municipalization to another that is considering it: It will probably take longer and cost more than you think.