Steve Pomerance

The negative ads have taken their toll, so it`s been difficult to generate much enthusiasm for this election. But there are some bright spots. Cary Kennedy, running for re-election as Colorado state treasurer, has done some seriously good things for this state. Normally, the state treasurer is not noticed, as the job involves managing the state`s accounts in a risk-averse way. But in an economic collapse when many smart investors lost their shirts, Kennedy managed to prevent significant losses and even made money. Kennedy is also willing to invest the time to investigate new approaches that could help Colorado maintain its budget. She made a fundraising call to me that ended up lasting almost three-quarters of an hour, as we discussed the state transportation funding shortfall and alternatives to help solve it. Most fundraising calls are cursory, as the candidate is trying to get a donation and move on. For her to spend that amount of time with someone she doesn`t know is quite r...

Of the 15 books I`ve read on the financial crisis, by far the most interesting is “The Origin of Financial Crises” by George Cooper. Cooper`s fundamental observation, backed up by numerous examples and detailed analyses, is that the natural behavior for asset and credit markets is characterized by “positive feedback” where, once started in a particular direction, the market accelerates, leading to a rapidly inflating bubble. Eventually, there is a crisis, and when the bubble bursts, an accelerating collapse. What is frightening is that many societal and political processes follow a similar escalating course, perhaps far more than are self-regulating like the markets for goods and services that we all learned about in Econ 101: Markets operate with “negative feedback” and thus reach stable equilibrium as if regulated by a thermostat, historically called the “invisible hand,” which allocates goods and services to maximize societal welfare, the mantra of laissez-faire economists and f...

In the last weeks, many of us received robo-calls from Xcel promoting their “Pricing Challenge,” a by-product of the SmartGridCity. This two-phase program is an attempt by Xcel to determine the effects of higher pricing during times of peak electricity use. It will cost $1.5 to $2 million, and be paid for by Xcel customers. It is being promoted through an expensive mailer, whose beautiful design is unfortunately missing important pieces of information. This is not the first time that Xcel has studied time-of-use (TOU) rates, and such rates have been used by other utilities for decades. Unfortunately, it is not clear exactly what new information Xcel expects to gather. I was curious whether people who have photo-voltaic systems could participate in this Challenge, so I asked my friend Ken Regelson, a sustainable energy consultant. Regelson had already called Xcel. “After about 20 phone menus and talking to two people, I did talk to an informed phone rep. According to her, customer...

Ballot Item 2B, the Five Year Utility Occupation Tax to Replace Lost Franchise Fee Revenue, has perhaps the longest ballot title since I`ve been involved in Boulder politics. But it is a crucial issue in November`s election. Let me explain a bit about 2B and how it came about. Ballot Item 2B would safeguard the city`s financial ability to deliver services by simply replacing the franchise fee we already pay on our Xcel bills when the current 20-year Xcel franchise expires at the end of December. So 2B is not a new tax, in spite of what the mandatory ballot language required by the Taxpayers Bill of Rights (TABOR) says. In fact, 2B is designed so that our energy bills will not increase — we will pay essentially the same amount as we would have otherwise paid, just under a different name. Even without a franchise, Xcel is required to continue delivering both electricity and natural gas to its Boulder customers. And if Xcel temporarily extends the franchise past December and continu...

We are closing in on the end game. Xcel`s grand experiment of SmartGridCity is dying of its own financial and technical weight without ever having fulfilled many of the myriad of claims that Xcel made when they proposed it. The story is both depressing and illuminating. Around six years ago, the City of Boulder started to look at the idea of taking over from Xcel the business of supplying electric power within the city limits. The process is called “municipalization,” and is well defined in state law. (For example, Fort Collins, Colorado Springs, and Longmont are all munis.) Then, a few years into this study, in March of 2008, Xcel announced that Boulder was going to be its grand experiment in implementing a “smart grid.” The project was called SmartGridCity, and was supposed to provide customers with real time data on their electric use, allow Xcel to manage demand in order to make more efficient use of its generating facilities, support better integration of intermittent renewabl...

As the Great Recession continues to impact local governments, we are seeing the effects of the various shortcuts that have been taken in the way we pay for services. When prices do not accurately reflect costs, serious budget problems can occur. Here are some examples. The City of Boulder is considering raising fees for recreation facilities and classes so as to more accurately reflect the real costs. Since these fees were previously subsidized, when sales taxes drop, shortfalls occur. Increasing fees seems a legitimate solution, but this economic necessity may not match the socially desirable outcome of having more people participate in these activities. The city is also looking at raising water rates. The rates, which are now pretty close to being cost-based, have actually induced conservation, which what was the intent. But the effect is that the utility is now running an operating deficit. Why? The reason is that most of the costs the utility incurs are fixed, like labor and ...

On Tuesday night, the City Council will make a very important decision — given the goal of having a cleaner energy future with more stable prices, should Boulder investigate whether creating a municipal electric utility would be better than committing to a 20-year franchise with Xcel? The council may decide that Boulder should fully evaluate running our own electric distribution system, like Fort Collins, Colorado Springs, Longmont, Loveland, Estes Park, Lyons and many other Colorado cities do. This could provide more renewable energy, give us more local control, minimize the effect of escalating fossil fuel prices, and help both Boulder and the state toward a greener future. If the council decides to keep this option open, we will likely see a Five Year Utility Excise Tax on the ballot in November. This tax will replace the Xcel “franchise fee” for long enough that the city can fully research the alternatives. So it`s clear, the Xcel “franchise fee” is not paid by Xcel. It is a ...

Boulder is considering an ordinance that would require landlords to bring their rental units up to a reasonable standard of energy efficiency. The draft ordinance went to the Planning Board on Thursday, and will likely be considered by the City Council in May. But will the complaints by some landlords derail this important step in our efforts to address climate change while making rental housing more affordable? The need to use regulation to improve energy efficiency was recognized many years ago. The reason is simple: When the tenants pay the utilities, landlords do not have a direct incentive to improve energy efficiency. And tenants have little incentive to make improvements since they will not be there long enough for the energy savings to pay them back. This “split incentives” paradox is the main obstacle to upgrading rental housing, and is why regulation is the only effective approach. From my perspective, the complaints about the proposed regulations are overblown. Any bui...

Xcel’s franchise in Boulder expires in August, and the negotiations about putting a new franchise agreement on the ballot have not yielded much of anything new. But there is an opportunity here, both for Xcel and for the citizens and businesses of Boulder, to do something really innovative. For Xcel, the opportunity is to have a “laboratory” to learn how to deal with its customers when delivering a high percentage of renewable energy (RE) and managing it through its Smart Grid. For Boulderites, the opportunity is to receive “green electrons” for the majority of their electricity needs, and avoid, to some extent, the coming price inflation for fossil fuels. Fundamentally, the franchise is an agreement between the city and Xcel. Xcel gets Boulder as a guaranteed customer base for 20 years (with an opt-out at 10), and the city gets a 3 percent “franchise fee.” However Xcel is required to serve the city with or without a franchise. And Xcel doesn’t actually pay the $3-plus million “f...

The state legislature and the Governor`s Energy Office have been very active this session in moving forward their agenda for Colorado`s clean energy future. Three bills will make significant changes in our renewable energy goals, in the way citizens invest in solar generated electricity, and in metro area air quality. House Bill 10-1001, which Governor Ritter recently signed, raises the standard for renewable energy to 30 percent of retail electricity sales for 2020 and thereafter. This applies to Xcel Energy (about 65 percent of the state`s electricity, I am told) and Black Hills Energy (the other investor owned utility, about 10 percent). The 25 cooperative electric associations and larger municipal utilities must meet a 10 percent requirement. The bill is quite innovative: It rewards utilities for investing in renewables ahead of schedule; it reduces rebates as the cost of renewables drops; and solar owners will continue to pay to support more renewables even if they zero out th...