Xcel, Boulder reach deal to end municipalization, re-establish franchise

Xcel, Boulder reach deal to end municipalization, re-establish franchise

Tuesday, July 28, 2020

After mere months of negotiation — and a decade-plus the city’s steady march toward municipalization — Boulder and Xcel Energy have reached a deal that will re-establish a franchise agreement; that is, if voters approve it in November.

The settlement was announced Tuesday night. An agreement will include upgrading Boulder’s physical infrastructure, allowing for local distribution and more renewables, and promises $33 million in “under grounding” — burying overhead power lines, which increases reliability — that was put off while Boulder was out of franchise.

Most crucially, it provides numerous options for Boulder to opt out of a franchise agreement, and resume municipalization efforts, if Xcel doesn’t make good on its pledge to reduce carbon emissions 80% by 2030. The company has yet to file plans with state regulators, but once it does, Xcel will be bound by them. Any variances would have to be granted by the Public Utilities Commission, according to spokesperson Terry Bote.

Specific to carbon reduction, voters can end the franchise in 2023, 2025 and 2028 if adequate progress isn’t being made. Additionally, the franchise can be ended by a vote of the people “without any reason” in 2026, 2031 and 2036, according to a staff presentation. There are also opt-outs at five, 10 and 15 years; franchise agreements last for a period of 20 years.

Boulder was last an Xcel franchisee in 2010. Voters allowed that to lapse in 2011, that same year passing two measures authorizing the city to form a utility and condemn Xcel’s physical assets and funding those efforts through an expansion of the Utility Occupation Tax.

Voters will have to OK this settlement. If they don’t, the next chance to weigh in on Boulder’s energy future will be 2022. Because of the way the UOT is structured, the municipalization effort — which the city calls Local Power — will need to borrow $2.2 million from the general fund next year, to be repaid in 2022.

More than $27.5 million has been spent on the muni since 2012, all in pursuit of a final answer to the question: How much will it cost to buy Xcel’s lines, poles, transformers, substations, etc. and get a city-owned electric utility up and running? (Plus the cost to repair/replace Xcel infrastructure needed to keep serving customers outside city limits.)

Some major proceedings need to conclude before that question is answered, including a court case condemning Xcel’s system and a federal ruling on the future of a transmission loop. As part of the agreement, Boulder will dismiss a pending condemnation case and federal regulatory proceedings.

The city first filed for condemnation in 2014. The dismissal of that case sent the city to the PUC, a process that wrapped only last year. Delays have pushed back the launch of a municipal utility: It was supposed to be operational by 2016, then 2017, then 2022, according to a decade of Daily Camera coverage.

Now, staff maintains it can be operational by 2025, and powered by 100% renewable energy by 2030 — Boulder’s goal and part of its climate commitments. The city recently launched a competitive building process seeking power providers. Bids are due Aug. 14 and so should be available ahead of November’s election.

Boulder is bound by a few restraints, based on a 2011 vote of the people that embedded certain conditions in the city’s charter. A municipal utility would have to provide reliable service at rates equal to Xcel’s, bringing in enough revenue to cover the cost of acquisition plus debt plus 25%. Voters also set a hard cap on the debt that can be issued to pay for the purchase at $214 million, to be adjusted for inflation.

Critics doubt that Boulder can do so, noting delays and cost increases of this and other city projects. Proponents of municipalization reserve their skepticism for Xcel, questioning the company’s commitment to renewables and ratepayers.

Part of the agreement with Xcel actually sets a lower limit for acquisition, at $200 million. That would include going concern, monies owed to Xcel by Boulder based on the company’s plans to have the city as a customer and the investments made in light of that assumption. Boulder has consistently argued it will not owe going concern costs; Xcel estimated them at $350 million.

A public hearing on the deal will be held Aug. 18.

Author’s note: This article will be updated with comments from Tuesday’s discussion.

— Shay Castle, boulderbeatnews@gmail.com, @shayshinecastle

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