Xcel, Boulder settlement: What’s in it?

pexels-photo-4221070Saturday, Aug. 1, 2020

The city this week 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:

(Author’s note: Although an agreement has been made in principle, the actual language of the settlement is still being developed. This article will be updated accordingly if the deal materially changes, or with further details when available.)

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 stopping ongoing 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 stop proceedings with federal regulators.

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.
  • Plans for how to deal with the city’s six substations, which the PUC agreement didn’t cover. Boulder plans to buy three substations and build three new. The cost of purchasing two substations is included in the $200 million cap. If the substations undergo changes that necessitate new studies and designs, Xcel will cover the cost of that work

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 majority of council can end the franchise in 2023, 2025, 2026, 2028, 2031 and 2036.

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

2005: 33.9 million tons emitted = Baseline
2019: 19.5 million tons emitted = 42% reduction (actual)
2022: 16.6 million tons emitted = 52% reduction (target)
2024: 13.6 million tons emitted = 61% reduction (target)
2027: 11.5 million tons emitted = 67% reduction (target)
2030: 6.9 million tons emitted = 80% reduction (requirement)

Measured by the Climate Registry and its Electric Power Sector Protocol, which aligns with the World Resources Institute and ISO 14000 series standards

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.

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.

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. Council will have to ask voters to repurpose that money to pay for the aforementioned pilot projects, which staff has recommended. That measure would be on ballots alongside the settlement agreement this November.

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

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

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8 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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