Xcel, Boulder settlement: What’s in it?

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Saturday, Aug. 1, 2020 (Updated Friday, Aug. 21)

The city in July announced a monumental settlement with Xcel Energy that, if approved by voters, will end 10 years of municipalization efforts (for now) and re-establish a franchise agreement between Boulder and the utility company.

A closer look at the details of the agreement is below. Read the full text for yourself.

A franchise agreement will be re-established, which means that Boulder gives Xcel “the right to use city streets, alleys, rights-of-way, public easements and other public property for the purpose of providing electric and natural gas utility service to the residents and businesses within the city.” 

Xcel will resume payment of a franchise fee to Boulder’s general fund (more on that below). Boulder hasn’t been in franchise since January 2011, but because electricity is essential, Xcel still has to provide power.

Boulder will stop pursuing a city-owned electric utility (municipalization), which includes dismissing pending court cases and regulatory proceedings. Two condemnation cases are ongoing. Boulder appealed the dismissal of its first 2019 filing. Once that judgement is handed down, the city will withdraw the other condemnation case and agree not to file anything else in court related to municipalization. Boulder will also cease proceedings with federal regulators.

Xcel agrees not to do any work on municipalization in the meantime, and Boulder won’t pay for any. If Xcel wants to upgrade Boulder’s system, any improvements over $5 million — except for reliability or safety, or those already approved by state regulators — will be subject to the city’s OK.

But the city will be able to try again for a utility in the future. Court cases, regulatory proceedings — all of that will resume if Boulder is unhappy in a partnership with Xcel. Several conditions of the agreement address future municipalization attempts, including:

  • A firm limit of $200 million on acquisition costs for Xcel’s physical assets in Boulder. Profits that Xcel will lose by not having Boulder as a customer, referred to as going concern, fall under that umbrella. The company had previously estimated those north of $300 million, while Boulder insisted, based on legal precedence, that it would not be responsible for going concern.
  • Retention of agreements on what, exactly, Boulder will buy in the event of a separation, arrived at during a lengthy process at the Public Utilities Commission. Assets can be added or subtracted from the list, but Xcel can object to the “taking” of any asset not approved by the PUC and is entitled to be compensated additionally.
  • An agreement on who pays for what as part of separation, which was also approved by the PUC. To date, Boulder has paid Xcel $3.6 million for its work, plus $300,000 for substation studies. In the event of future municipalization efforts, Xcel will cover the cost of updating studies and designs for changes at substations. Boulder will pay Xcel to update the  separation plan and distribution design.
  • Plans for how to deal with the city’s six substations, which the PUC agreement didn’t cover. Boulder plans to buy two substations (NCAR, $3.24 million; and Gunbarrel, $7.72 million) and build three new (Leggett, Sunshine, Wastewater Treatment Plant) plus an additional one for Xcel at the wastewater treatment plant site. The utility company will retain the sixth (Boulder Terminal) and operate it on behalf of Boulder via a deal that has to be approved by federal regulators. The cost of purchasing two substations is included in the $200 million cap. Purchase of the NCAR and Gunbarrel substations is also subject to federal approval; as part of the settlement, Boulder retains its right to argue that substations can be condemned, while Xcel retains the right to disagree.

State regulators will still have to issue final approval on eventual municipalization, after citizens vote, and will require a joint application from Xcel and Boulder for the separation of the two systems.

Before re-filing for condemnation, an appraisal of the system will be conducted. Boulder and Xcel have to agree on who produces the appraisal and the method used. If they can’t agree within 60 days, Boulder will pick.

A purchase price will be negotiated for no less than three months before Boulder can file for condemnation in court. Boulder will not be responsible for Xcel’s attorney’s fees — as it has been throughout the current municipalization process — unless the court-determined value of Xcel’s system is 150% or more than what Boulder offered.

Xcel agrees not to object to future condemnation action, though both Boulder and the utility company can appeal federal rulings on stranded cost awards.

Boulder will have a way out (many, actually) from under Xcel. Franchise agreements are for 20 years. State law allows cities to opt out twice: year 10 and year 15. Boulder will have many more chances, in certain years if Xcel doesn’t meet its carbon reduction goals and in others “without any reason.” A vote of the people or a six-member majority of council can end the franchise in 2023, 2025, 2026, 2028, 2031 and 2036.

Xcel’s carbon reduction progress will be measured based on this agreed-upon schedule:

Screen Shot 2020-08-15 at 3.25.44 PM

If Boulder wants to opt-out at the five, 10 or 15-year mark, it will have until Dec. 31 following the anniversary of franchise approval by the PUC to notify Xcel of its intent. For opt-outs based on emissions, the city will until mid-December of the following year — covering two November election cycles. It’s unknown what time of year that data may be released.

For good cause shown and with mutual agreement between the parties,” the agreement states, “these thresholds may be adjusted due to extraordinary circumstances.”

A 2/3 majority (six members) of council or a vote of the people (either by petition or referendum) can end the Xcel franchise, triggering a return to municipalization.

The city could still achieve 100% renewables by 2030,  the target set by its climate commitment. At least half of Boulder’s power will be produced within the city. Xcel will continue to transmit, deliver and buy power that Boulder generates, as it does today. (Fun fact: Did you know Boulder’s wastewater treatment facilities produce hydroelectric power?) 

Bridging the gap between Xcel’s 80% reductions and Boulder’s own goals may require local projects (See more below) and grid planning. Three bodies will oversee this work: executives from Xcel and Boulder; operational staff from those two parties; and an “advisory committee” of community members, business leaders and CU representatives.

Proposed projects are ones that can be completed within five years, are “designed and structured to have the broadest impact to the most residences and/or businesses possible,” address Boulder’s goals around equity, and couldn’t otherwise happen without teaming with Xcel. Both parties will seek outside funding and may contribute to costs themselves.

“The agreement does not require the city to expend any funds. It will allow the city and Xcel to look at the financial viability of projects, and to the extent the city decides, it will be able to decide if the project is worthy of city, company, or grant funding.”

The city may also recoup some of its investment in these projects, should Xcel choose to implement them elsewhere:

“To the extent Boulder financially funds 100% of a project or pilot program which are then offered by Xcel Energy, within the 10 years of project or pilot launch, to other Colorado Xcel Energy customers, Xcel shall reimburse Boulder as necessary,” the agreement reads. “Such reimbursements may be subject to PUC approval.”

A list of floated projects:

  • Microgrids
  • Chautauqua (underground lines, 100% renewable energy, microgrid — demonstration of net zero energy in a historic preservation environment)
  • Alpine Balsam (Demonstration of net zero energy in a 9-acre new mixed-use development)
  • Hydrogen energy storage project (deploy a hydrogen production and storage system

Xcel will pay $33 million to bury Boulder’s power lines, over the life of the franchise. The company dedicates 1% of revenue generated by a city to “underground” lines in that city. Buried lines make outages less frequent (since trees and debris aren’t falling on them during storms).

In Boulder’s rocky soil, it’s an expensive undertaking. The city missed out on $10 million worth of undergrounding while out of franchise. Xcel has pledged that about half its spending ($16.5 million) will occur in the next five years.

Priority areas are TBD, but staff said Boulder’s equity filter will be applied to the decision-making process.

Boulder will get access to Xcel data, including:

  • Map of the distribution system — what Boulder is buying — provided annually
  • System Power Flow model
  • Substation Loading (hourly) / Peak Annual Demand
  • Solar / renewable info (generation and storage)
  • O&M (routine reports on vegetation management and pole testing)
  • O&M – substations (cost on major system upgrades)
  • Planning documents for the upcoming two years
  • Undergrounding plan and priorities (projects in past year, schedule and cost; upcoming projects, schedule and cost)
  • Reliability heat maps
  • Resident participation in various programs (EV charging, solar gardens, on-site solar, etc.)
  • Carbon emissions by class from electricity use
  • Carbon emissions by class from gas use
  • Annual investment and earnings for Boulder

Xcel and Boulder will jointly lobby state lawmakers for change. A handful of topics have been proposed, the most crucial being a rule that says a property can only generate 120% of the electricity it consumes. That’s important because it limits the ability of those who can’t install solar (renters, for instance) of powering their homes with renewables.

Targets for joint lobbying efforts:

  • Elimination or substantial increase of the 120% limitation on onsite generation
  • Develop a new tariff to effectuate the rapid conversion of bus fleets to electric buses.
  • Removal of barriers to large amounts of local distributed generation
  • Facilitation of microgrids in specific projects 
  • Xcel will share data with the City in support of projects and programs

A franchise fee will replace the Utility Occupation Tax in the city’s general fund. Xcel pays every city 3% of the revenues it generates there, via a franchise fee. It’s charged on customer bills and sent to Boulder. That fee was replaced with the UOT via a 2010 vote of the people. Once a franchise is re-established, the franchise fee will replace $4.7 million of UOT revenue.

The portion of the UOT that funds municipalization will end. Voters in 2011 expanded the UOT to pay for exploration of a city utility. That was extended in 2017 and is now set to expire in 2022, or when Boulder is back under franchise. Boulder will have to ask voters to repurpose that money (just under $2.1 million) to pay for the aforementioned pilot projects; that measure will be on ballots alongside the settlement agreement this November and would redirect UOT funding and extend it through 2025. The tax is expected to bring in $2 million per year, which would be put toward reaching the 100% renewable target or to help lower-income residents pay utility bills.

The city will need to devote substantial resources to the effort to decarbonize the electric supply completely,” staff wrote in notes to council.

(Author’s note: This article has been updated to reflect the release of the full settlement.)

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

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Climate Municipalization

9 Comments Leave a comment

  1. “The company had previously estimated those north of $300 million, while Boulder insisted, based on legal precedence, that it would not be responsible for going concern.” NOTE: There is legal precedence in Colorado FOR awarding going concern. It happened when Denver bought out a water utility in the 1900’s.

    NOTE #2 – Stranded costs were also always treated as zero but would easily be in the $200 million plus category. When $200 million was fed into the stranded costs financial spreadsheet at a public meeting, the Muni was losing money past 2033.

    The Muni is a gigantic failure and we are lucky to have this agreement. A little humility and self-critical review goes a long way. That lost decade of carbon reduction can never be recovered, and those 30 million dollars can never be recovered. We need to never make this same mistake again.

  2. The $33 million undergrounding is NOT a gift to Boulder. Xcel does not PAY, Xcel SPENDS our money that we give them each month for our bills and then adds the the amount spent on undergrounding to the rate base, so we also pay Xcel a profit on that asset.ggoing forward.

    Unfortunately, Shay, this is mostly a regurgitation of Xcel’s talking points. WE have not seem the actual agreement, WE have just seen Tom Carr’s presentation of the Xcel talking points.
    Keep digging!

  3. That is totally FALSE. There is NO under grounding fund UNLESS there is a franchise. That money goes into a general operations and maintenance fund without a franchise. You got that all wrong Paul. Just like so many others.

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