Boulder Power, Inc.
Published in the Boulder Daily Camera, May 14, 2011
The City of Boulder is thinking about adding “municipal utility” to its résumé. Sometime in the coming months, City staff will present a plan to the Council to try to convince them (and voters) that the idea merits their support. Utilities are, indeed, sometimes run by governments and Boulder has noble reasons for wanting to do so. However, whenever government wants to take over something already supplied by the private sector, citizens should ask hard questions – think Russia in 1917 and Venezuela today. Governments are good at many things, but efficiency and customer orientation, just as examples, aren’t always amongst them. So, I thought I’d give voters some things to look for as you are asked to judge, essentially, a Business Plan for the City to take over the local power grid.
First, what does Boulder hope to achieve by running their own utility and will the Business Plan get them there? On the City of Boulder web site is this description of the Energy Future Program that clearly defines the goal:
“Energy localization seeks to provide clean, reliable and affordable power that maximizes local energy generation.”
Boulder already has reliable and affordable power through Excel, so the added value from the City of Boulder will be cleaner and more locally generated power. Got it. So, if you like that goal, the next question is how much cleaner and how much more locally generated will Boulder be able to make it? Excel is already required by Amendment 37 to provide 10% of their power from alternative energy by 2015. So, Boulder has to commit to doing better than this – say 20-30% total. And, Boulder needs to produce the alternative energy themselves, not just buy energy produced by other commercial providers on the open market, or they may end up not adding to the amount of alternative energy created in Colorado, just reshuffling the deck. If Boulder wants to ensure that it’s replacing fossil power, it needs to actually produce the alternative power that it promises to deliver. Bottom line, Boulder need to show us in the Business Plan how it will build and integrate the windmills, photovoltaic arrays, and battery banks to deliver the additional clean power it promises.
Second, does Boulder really have the capabilities to start up and manage a utility? From the City of Boulder web site, it’s clear that there is boundless enthusiasm amongst the City staff for this endeavor. Good, because, without that, it’s hopeless. However, running a utility requires a lot more than enthusiasm – it takes specific expertise and infrastructure. In addition to having or being able to quickly get top-level managers with electrical generation and distribution experience, Boulder needs people and infrastructure for things like 1) constructing power generation plants from alternative and traditional sources, 2) maintaining power plants, 3) buying power on the open market, 4) maintaining and updating the electrical grid, 5) customer service, and 6) utility accounting, finance, human resources and all the other supporting infrastructure that any enterprise needs to run smoothly. That’s a lot of expertise and, minus any part of it, the goals of “reliable and affordable power” will fall quickly to the wayside. Also, this assumes that the first phase of municipalization – buying the existing infrastructure from Excel – goes smoothly and the City doesn’t wake up someday to find they are missing a critical piece they thought they had or didn’t know they needed. Bottom line – the Business Plan must provide a convincing and detailed explanation of the expertise Boulder already has and how they’ll quickly get what they don’t.
Third, does the Business Plan adequately identify and address the risks? Central to any good business plan is an honest assessment of the risks and answers about how, when it starts to “hit the fan,” the problems will be solved. A proposal to supply all the electricity in Boulder by a government with no electrical power experience should anticipate Armageddon, not optimism painted through rose-colored glasses. Bad things will happen, and City Council and voters should feel sure that, when they do, the power will come back on quickly and the price will be reasonable.
These are tough questions, but the same ones that anyone should ask before investing in an enterprise. City Council and Boulder voters will be asked to make a substantial investment and, if the Business Plan can convince us that this investment is wise, we should support it. If not, any further work is a fool’s errand and Boulder should consider other ideas for making our community greener.
The City of Boulder is thinking about adding “municipal utility” to its résumé. Sometime in the coming months, City staff will present a plan to the Council to try to convince them (and voters) that the idea merits their support. Utilities are, indeed, sometimes run by governments and Boulder has noble reasons for wanting to do so. However, whenever government wants to take over something already supplied by the private sector, citizens should ask hard questions – think Russia in 1917 and Venezuela today. Governments are good at many things, but efficiency and customer orientation, just as examples, aren’t always amongst them. So, I thought I’d give voters some things to look for as you are asked to judge, essentially, a Business Plan for the City to take over the local power grid.
First, what does Boulder hope to achieve by running their own utility and will the Business Plan get them there? On the City of Boulder web site is this description of the Energy Future Program that clearly defines the goal:
“Energy localization seeks to provide clean, reliable and affordable power that maximizes local energy generation.”
Boulder already has reliable and affordable power through Excel, so the added value from the City of Boulder will be cleaner and more locally generated power. Got it. So, if you like that goal, the next question is how much cleaner and how much more locally generated will Boulder be able to make it? Excel is already required by Amendment 37 to provide 10% of their power from alternative energy by 2015. So, Boulder has to commit to doing better than this – say 20-30% total. And, Boulder needs to produce the alternative energy themselves, not just buy energy produced by other commercial providers on the open market, or they may end up not adding to the amount of alternative energy created in Colorado, just reshuffling the deck. If Boulder wants to ensure that it’s replacing fossil power, it needs to actually produce the alternative power that it promises to deliver. Bottom line, Boulder need to show us in the Business Plan how it will build and integrate the windmills, photovoltaic arrays, and battery banks to deliver the additional clean power it promises.
Second, does Boulder really have the capabilities to start up and manage a utility? From the City of Boulder web site, it’s clear that there is boundless enthusiasm amongst the City staff for this endeavor. Good, because, without that, it’s hopeless. However, running a utility requires a lot more than enthusiasm – it takes specific expertise and infrastructure. In addition to having or being able to quickly get top-level managers with electrical generation and distribution experience, Boulder needs people and infrastructure for things like 1) constructing power generation plants from alternative and traditional sources, 2) maintaining power plants, 3) buying power on the open market, 4) maintaining and updating the electrical grid, 5) customer service, and 6) utility accounting, finance, human resources and all the other supporting infrastructure that any enterprise needs to run smoothly. That’s a lot of expertise and, minus any part of it, the goals of “reliable and affordable power” will fall quickly to the wayside. Also, this assumes that the first phase of municipalization – buying the existing infrastructure from Excel – goes smoothly and the City doesn’t wake up someday to find they are missing a critical piece they thought they had or didn’t know they needed. Bottom line – the Business Plan must provide a convincing and detailed explanation of the expertise Boulder already has and how they’ll quickly get what they don’t.
Third, does the Business Plan adequately identify and address the risks? Central to any good business plan is an honest assessment of the risks and answers about how, when it starts to “hit the fan,” the problems will be solved. A proposal to supply all the electricity in Boulder by a government with no electrical power experience should anticipate Armageddon, not optimism painted through rose-colored glasses. Bad things will happen, and City Council and voters should feel sure that, when they do, the power will come back on quickly and the price will be reasonable.
These are tough questions, but the same ones that anyone should ask before investing in an enterprise. City Council and Boulder voters will be asked to make a substantial investment and, if the Business Plan can convince us that this investment is wise, we should support it. If not, any further work is a fool’s errand and Boulder should consider other ideas for making our community greener.