Pomerance: Bad process, worse outcome on Xcel ballot proposal

August 17, 2020

Over the last months, Boulder officials had a number of closed-door meetings with Xcel Energy. They appear to be following the rules for executive sessions (rejected by the voters in 2017) where nothing is revealed other than the basic topics. Given this lack of information, citizens attempting to provide input in the public comment sessions were unable to give detailed feedback.

These agreements, almost 100 pages of dense text, are now public, and predictably, have serious flaws. For example, a critical question is enforceability: What happens if Xcel doesn’t live up to the terms? The only recourse provided is for Boulder to “opt out” of the agreements. The first real opportunity is five years after the Public Utilities Commission approves the agreements. 2026 at the soonest and very far in the future.

Worse, the agreement’s “opt out” language is completely garbled: “The city will notify the company that it will end the franchise, if by vote of the City Council or of its intent to refer the question to the voters and the next scheduled regular or special election, within 30 days after the five-, 10-, or 15-year anniversary of the date the PUC approves this franchise.” But apparently our attorneys approved this language.

There is an earlier exit option in 2023 if Xcel doesn’t meet specified emissions reduction numbers. But the chances of that happening are very low, since Xcel already has a plan to meet these targets. And the 2030 state requirements will be reviewed on an annual basis by the PUC and Air Quality Control Commission, and changes enforced as necessary. Besides, if Boulder exits, the City Council loses the $4 million per year “franchise fee” (a tax imposed by Xcel on customers’ energy bills), so the council has a strong incentive to stay, irrespective.

The fundamental problem with this enforcement mechanism is that it assumes that Xcel really cares whether Boulder is under franchise or not. The biggest threat to Xcel’s monopoly has been Boulder’s pursuit of municipalization.

Xcel makes money by putting its capital into power generation facilities, transmission lines, etc. (collectively, the “rate base”) on which it earns an exorbitant rate of return on this almost risk-free investment. So for Xcel, more customers mean more demand, more investments, and more profits. But if Boulder municipalizes and buys cheaper and cleaner power elsewhere, other cities will surely follow, and Xcel’s profits will tank. It’s as simple as that.

Xcel is quite aware that, after citizens and city staffers have spent 10 years battling Xcel’s obstructionist legal maneuvers, if the City Council members abandon that effort now – especially after many of them promised to wait until the full cost data becomes available next year – that municipalization’s momentum will be lost. So, even if Boulder were to exit its franchise in 2026, Xcel would not be harmed because Boulder would just keep buying electricity from Xcel. This lack of consequence seems to have eluded some of our officials.

The franchise agreement also denies Boulder the right to use Xcel’s poles for broadband cable. So Boulder could not follow Longmont’s lead and have cheaper and faster public broadband service. But the agreement does allow Xcel to lease pole space to private for-profit cable companies. That’s not OK.

The provision that allows Boulder to recover the last 10 years of unpaid undergrounding money is inequitable. Undergrounding is paid for by all of Xcel’s customers; it doesn’t cost Xcel a dime. So Boulder’s “benefit” imposes higher rates on everyone on the system, whether franchised or not. Instead, Boulder should file a lawsuit to finally force Xcel to follow the state law that requires equal treatment, and provide undergrounding to all cities and counties in Xcel’s territory.

The “energy partnership” has lots of grand ideas, but is lacking in detailed deliverables with specific due dates. So measuring Xcel’s interim performance would be subjective. Besides, implementing many of these items requires PUC or legislative approval. Also, the “energy partnership” fails to equitably resolve how jointly implemented projects will be managed technically and financially.

I could go on, but the basic point is clear: These agreements are not even close to being ready for the ballot. The council should take as long as necessary to detail specific results, costs, and timelines. Council members should put in more frequent “opt outs.” And they should add terms so that upon “opting out,” municipalization can be more quickly accomplished and at a lower cost. This includes pricing Xcel’s assets at “rate base” values, eliminating stranded asset claims, rejecting the “going concern” notion, and minimizing separation needs.

Steve Pomerance is a former Boulder City Council member who has also served on the city’s energy task force. Email him at stevepomerance@yahoo.com.

Published in the August 17, 2020 Guest Opinion section of the Boulder Daily Camera

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