Guest opinion: Phil Wardwell: Straight talk about proposed franchise dealPublished on: Friday, August 14, 2020
August 11, 2020
Time for straight talk about the proposed deal for an Xcel Energy franchise for Boulder.
There are two agreements – the franchise agreement and a side agreement. The side agreement is to set forth the benefits for Boulder. As I wrote this on Aug. 5, the side agreement didn’t exist.
First, there must be a fair chance for the public to evaluate this side agreement and its enforceability. Does Xcel really have to do anything? Uncommitted City Council members can correctly refuse to go further, until the council and the public have had a full opportunity to review the side agreement.
Second, the main argument against continuing municipalization is that the pandemic has hit the city’s finances, the city can’t afford the $4 million to $5 million needed to go on. But think:
1.) Responses to the Boulder power supply and financing request for proposals are due Aug. 14. Boulder asked for proposals to finance the rest of the process. It is premature to say no money will be available, until the RFP responses are examined. Aug. 18 is too soon for that. 2.) The Court of Appeals appeal has been fully briefed and will go forward anyway. 3.) There is a Federal Energy Regulatory Commission (FERC) proceeding regarding connections to substations. This petition is filed, there is not much more to do but wait for the FERC decision. 4.) If the expensive piece is the condemnation action, the city could wait several months before restarting it. 5.) As for the economy, two different COVID-19 vaccines are currently on full trial in the U.S. Dr. Anthony Fauci has predicted vaccines will be available to the public in early 2021. With a return to public health, the Boulder economy and tax revenues will pick up.
Third, as the franchise agreement acknowledges, two Colorado laws require an 80 percent reduction in greenhouse gases by 2030. The franchise agreement adds intermediate year goals and opt-out provisions, fine, but what do they add regarding the 80 percent goal? Nothing. Once the momentum for municipalization has stopped, it will be hard to restart.
Fourth, other nice things that can come from a Boulder/Xcel “partnership” such as repeal of the so-called 120 percent rule, making Boulder a test bed for new tech, helping Boulder achieve its goal of 100 percent renewable energy by 2030, all depend on “best efforts” and are unenforceable. Besides, a paragraph tucked into the franchise agreement –14.4 – says the company is not required to incur costs it believes “the PUC will not allow the company to recover through the ratemaking process,” i.e., Xcel doesn’t have to do anything unless the Public Utilities Commission allows it to pass the costs on.
Fifth, coordination between Boulder and Xcel for street construction, etc., is good, but has been happening for 10 years without a franchise.
Sixth, the $200 million cap on distribution system acquisition costs, separation costs, etc., is useful, but is probably a realistic estimate of the maximum costs anyway. The case for any “going concern” costs is terribly weak. People worry about “stranded costs” – costs for generation capacity that would allegedly be left stranded if Boulder left the Xcel system. The potential for stranded costs is not addressed at all by the franchise agreement or apparently by the side agreement. Besides, FERC has already ruled Boulder would owe no stranded costs if it bought power wholesale from Xcel, and Boulder could self generate with solar within city limits.
Seventh, $33 million for undergrounding over 20 years is nice. But this is the juicy worm which conceals the steel hook. Boulder would be “on the hook” for a 20-year franchise. What does that franchise cost city residents and businesses? In 2011, an Xcel official stated in writing that Xcel gets a revenue stream each year from Boulder of “$42,435,000” – in one year, more than $9.4 million more than the $33 million.
Eighth, the settlement avoids the millions for separation costs, etc., described in “sixth” above. But at what cost to Boulder in the future? If Xcel gets $42,435,000 per year over a 20-year franchise period, that is about $850 million. So do you pay “rent” to Xcel for 20 years – and own nothing at the end – or pay a “mortgage” (bond debt) and own the system? Continuing with Xcel means continually paying to gain ownership of nothing.
Boiling it down: This deal says Boulder gives up municipalization, which would lead to cleaner and cheaper power for future generations, to get $33 million in undergrounding costs. This deal doesn’t seem worth it.
Phil Wardwell is a retired environmental/energy attorney, last employed at Los Alamos National Laboratory in Los Alamos, New Mexico.
Published in the August 11, 2020 Boulder Daily Camera