Boulder took a “significant” step toward creating a municipal electric utility Monday when it formally notified Xcel Energy that it plans to acquire parts of the utility’s electric system.

The letter of intent sent to Xcel Energy CEO David Eves from City Manager Jane Brautigam is a legally required precursor to filing for condemnation, though it doesn’t mean that Boulder will go all the way to condemnation.

The letter outlines the assets that Boulder wants to acquire to create a city energy utility, informs Xcel that the city will pay for the company to do an appraisal of those assets — as required by law — and asks the company to appoint representatives to participate in negotiations.

“The sending of this notice is an important and concrete step toward understanding all of the costs associated with the possible creation of a local electric utility,” said Heather Bailey, Boulder’s executive director of energy strategy and electric utility development, in a prepared statement.

According to the four-page letter, Boulder will share its appraisal of Xcel’s assets with the company after it receives Xcel’s own appraisal. City officials said they can’t legally disclose their appraisal of private property at this point, but that it eventually would become public as part of the condemnation process.

Xcel officials issued a brief written statement in response to the city’s action.

“Xcel Energy has received Boulder’s notice of intent to acquire, which is under review,” the statement said. “We continue to believe that we can help Boulder achieve its goals better, faster and cheaper by working together instead of Boulder attempting to take over our business.”

Xcel spokeswoman Michelle Aguayo said officials have not made any decisions about how the company will respond, including whether the utility will participate in negotiations.

Agreement ‘would benefit everyone’

Boulder spokeswoman Sarah Huntley said the city is prepared to negotiate with Xcel for as long as those discussions seem productive, but it is ultimately up to Xcel whether it wants to participate.

“This notice starts what we hope will be productive and collaborative formal conversations with Xcel Energy about the equipment we would need if we choose to meet our community’s energy goals in this way. It would benefit everyone — the city, Xcel Energy and ratepayers across Xcel’s service territory — if both parties could reach an agreement on this issue,” Bailey said.

Xcel Energy and the city also are in discussions — though the city has put its own participation on hold — about possible alternatives to municipalization. Xcel is expected to present an analysis to the City Council in June of the costs and greenhouse gas emission reductions of new products and services it could implement systemwide.

City officials still are deciding whether to appeal a decision of the Colorado Public Utilities Commission that Boulder must seek the commission’s approval before filing for condemnation if it wants to acquire equipment outside city limits that is also used to serve non-city customers. The city has until Jan. 15 to file an appeal with the district court.

Huntley said city officials are simultaneously working with the PUC to determine what the next steps should be if the city doesn’t appeal and instead seeks PUC approval for its plans.

The commissioners have said they don’t want to stop municipalization, but they have an obligation to look out for the interests of non-city customers and protect regional reliability.

Huntley said the city is not circumventing the PUC process by sending the notice of intent.

Acquiring substations

In addition to the distribution system, Boulder intends to acquire the entirety, including the land, of four substations — Sunshine, Boulder Canyon Hydro, NCAR and Boulder Terminal– and portions of equipment and easements for access at three other substations — Leggett, Niwot and Gunbarrel, the latter two of which are in unincorporated Boulder County — while Xcel would keep the land and the rest of the equipment.

Xcel Energy officials have raised concerns about the feasibility of sharing equipment.

Boulder also wants to acquire a high-voltage transmission line that loops around the city and terminals for that line at the Eldorado substation and the Valmont switchyard.

Likewise, Boulder wants to acquire streetlights within the acquisition area that are owned by Xcel and all the SmartGrid City equipment, including meters, cable, conduit and communications facilities.

The city does not want to acquire any power-generation facilities, according to the letter.

“This represents all the equipment and assets the city believes it needs to operate the safest, most efficient utility it can for customers inside and outside the city,” Huntley said.

Contact Camera Staff Writer Erica Meltzer at 303-473-1355, meltzere@dailycamera.com or twitter.com/meltzere.