City could lose $14M in energy credits

By Ryan Morgan, Camera Staff Writer
March 16, 2006

Boulder is facing the loss of millions of dollars in expected revenue and a possible court fight over renewable-energy credits that city officials say a state commission is unfairly taking away.

The state Public Utilities Commission will issue a final set of rules in two weeks spelling out how Amendment 37, a renewable-energy initiative voters approved in 2004, will work.

Amendment 37 requires Xcel Energy and other utilities to generate an increasing percentage of their power from renewable sources in the next several years. It requires utilities to buy credits from customers who produce renewable energy — and independent producers, such as the city of Boulder — for $2.50 per watt to help meet those goals.

Boulder's officials thought the city would continue to get credit for the 7 million watts its eight hydroelectric power plants produce. Earlier this year, the Public Utilities Commission issued a preliminary set of rules that said otherwise — that Xcel Energy owns those credits.

"It was a great disappointment," City Attorney Ariel Calonne said.

The utilities commission must finalize its rules by March 31.

Calonne said the city might be forced to fight the issue in court if the rules don't change. At least $14 million is at stake, he said, though the exact amount is difficult to know.

"If you've got that kind of potential dollar impact, you don't have much choice but to pursue all of your remedies," he said.

Utilities commissioners reasoned by analogy from 19th-century law concerning mineral rights. A property owner who sells land to someone who later discovers it contains gold or silver underground can't try to claim those resources.

By the same logic, the commissioners said that because the purchasing contracts between Boulder and Xcel Energy didn't specifically mention renewable-energy credits, Xcel purchased the credits when it bought the hydroelectric plants' power.

Tom Henley, a spokesman for Xcel Energy, said that ruling makes sense.

"Since we're buying the total output of the power generation, we would own the renewable-energy credits," he said. "Normally when a product is sold, if the seller wishes to retain a portion of the product, they must expressly retain that portion of the asset."

But Boulder Mayor Mark Ruzzin said that analogy isn't fair.

People know there's always a possibility that their land could hold some mineral resources, and they can take that into account when drafting a contract to sell it. But that's not the case with renewable-energy credits, he said, because they didn't even exist when Xcel signed contracts to buy the city's power.

"It doesn't seem fair to say that just because you didn't forecast that these would come about, that you should be penalized for not being able to read into the future," he said.

The PUC's decision poses another difficulty for the city, too. Since the middle of last year, Boulder has been participating in the Chicago Climate Exchange. Participants in the voluntary exchange agree to cap their greenhouse gas emissions at a certain limit. The program gives cities a financial incentive to cut their emissions so they don't have to buy credits.

Cities that manage to get below the emissions cap — as Boulder plans to do, thanks partly to its renewable hydroelectric power production — can sell credits to cities that are above it.

It's not clear if Boulder will be able to sell credits that the PUC now says it doesn't own.

Contact Camera Staff Writer Ryan Morgan at (303) 473-1333 or morganr@dailycamera.com.

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