Judge rules Boulder must go to PUC before seeking Xcel's assets

Jan 15 - Daily Camera (Boulder, CO)

 

Boulder suffered a setback in its municipalization push Wednesday when a judge rejected the city's appeal of a Colorado Public Utilities Commission ruling that the city should first present its plans to that body before filing for condemnation of Xcel Energy's local assets.

In a ruling issued just before 5 p.m. , Boulder District Judge Judith LaBuda affirmed the PUC decision and said Boulder should seek approval before attempting to acquire assets outside city limits.

"The city's constitutional right to eminent domain over property outside of its territory does not extend to serving those outside the municipality," LaBuda wrote. "The city's constitutional right is not unfettered because the PUC has constitutional authority to regulate public utilities for those outside the municipality.

"This limitation provides a certain level of protection for those who have no vote, and therefore no voice, within a municipality."

Xcel Energy , which has long maintained that the city's condemnation filing was premature, lauded the ruling.

"We are pleased with this decision that affirms our position that there is a structured and necessary process the city must follow to protect the effectiveness, reliability and safety of the statewide electric system and all of our customers," Michelle Aguayo , an Xcel spokeswoman, said in an email.

Boulder officials said they still are reviewing the ruling. They have until Feb. 25 to file an appeal to the state Supreme Court .

"Litigation often involves ups and downs," City Attorney Tom Carr said in a news release. "This is largely uncharted legal territory, so we were prepared for the possibility of this decision. Nonetheless, the city respectfully believes the state Constitution is clear."

Carr said the city always planned to participate in some sort of PUC process to ensure a smooth transition and reliable service. However, he believes the decision about which assets to condemn should belong to the Boulder City Council .

Carr said the case involves "an important point of law" that is important for other cities that might want to follow in Boulder's path.

In 2013, the PUC ruled that because Boulder's plans include acquiring Xcel's electric infrastructure outside city limits and have potential impacts on regional reliability, the city should get PUC approval before filing for condemnation.

"If Boulder seeks to condemn facilities, wherever located, that (Xcel) 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," the commissioners wrote in that decision.

Boulder appealed that decision in May and then filed for condemnation in July without waiting for a ruling in the appeal.

The city's attorneys argued that Boulder's right as a home-rule city to condemn property through eminent domain, inside and outside city limits, was clear and unambiguous in the state Constitution. They said they could seek commission approval of Xcel's certificate of public convenience and necessity after the condemnation proceeding.

Boulder did not include the certificate, which gives Xcel the sole right to serve customers in a particular area, in its condemnation filing, but it reserved to right to add it to the case.

Boulder's condemnation filing included a high-voltage transmission line, substations and distribution infrastructure in the Gunbarrel area outside city limits.

The PUC, in its own defense, argued that its authority to regulate utilities also derives from the Constitution and that the commissioners have broad discretion in how to exercise that authority.

LaBuda found that the PUC has authority over the city's municipalization process once Boulder reaches outside city limits.

"The PUC's right to exercise jurisdiction over a municipality providing services to customers outside of the municipality is important to protect those who do not have voting rights within the municipality," she wrote. "The city characterizes the extraterritorial customers as 'incidental' and asserts they represent only 3 percent of the customer load. ... The court finds the number of customers outside the city limits is neither dispositive nor persuasive for the arguments presented by the city or the PUC; what matters is the fact that Boulder seeks to include non-resident customers in its service area.

"Service to non-resident customers thus invokes PUC jurisdiction and regulation."

LaBuda said that the PUC's order that Boulder first seek its approval does not abrogate the city's constitutional right to eminent domain, but only delays its exercise of that right. LaBuda further found that because the PUC would have to review Boulder's separation from Xcel at some point in the process, the delay would be necessary at some point in the process no matter what.

When Boulder excluded the certificate from its condemnation case, officials said they hoped that would limit the PUC's authority and appease angry county residents who had lobbied the PUC to protect them from a potential Boulder utility. However, because the city retains the right to pursue the certificate at some point, it remains at issue legally.

LaBuda said the separation and the appropriate entity to serve those customers could prove to be a technically complicated matter better decided by the PUC than the district court.

"It is necessary for the PUC to determine which entity will be providing service outside of the city and to then determine how to best allocate the property to accomplish service to the extraterritorial customers and the statewide power grid," she wrote. "In the event (Xcel) continues serving those outside of Boulder , the court finds that the property in question will not be easy to separate and may require technical expertise in determining the best method of separation in order to avoid negatively impacting the statewide energy grid. The PUC is best suited to exercise jurisdiction in this regard."

Wednesday's ruling is likely to delay Boulder's condemnation case, and it is the second recent decision to go against the city.

Last month, the Federal Energy Regulatory Commission found that Boulder needs its approval to take possession of the high-voltage transmission line, though the ruling left open the possibility that a FERC process could run concurrent with the local condemnation case.

Heather Bailey , Boulder's executive director of energy strategy and electric utility development, said the ruling does not change Boulder's commitment to fully exploring municipalization.

"There is nothing in this decision that contradicts the city's previous findings that creating a local electric utility is a feasible and desirable outcome for Boulder ," she said. "We will be assessing our timelines and work plan and responding in an appropriate and prudent way, just as we have throughout this process."

Aguayo said Xcel Energy still believes it -- and not a Boulder electric utility -- provides the better path toward reductions in greenhouse gas emissions.

"We remain steadfast in our goals of carbon reduction and the use of renewable energy, which align with Boulder's stated environmental goals," she said.

Erica Meltzer : 303-473-1355, meltzere@dailycamera.com , twitter.com/meltzere

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