Boulder Ballot Measure 2C and Ballot Item 2D: Xcel Franchise Agreement

Ballot Measure 2C: Public Service Company Franchise

For the time being, solar panels won’t supply all of Boulder’s power needs. 2C and 2D could determine what happens with local electrical issues over the next 20 years, though.

In Brief: Passing Ballot Measure 2C would approve a 20-year franchise agreement between the City of Boulder and Public Service Company of Colorado (Xcel Energy), under which Xcel would provide utility services to the City and collect revenue from city ratepayers. Under this agreement Boulder’s effort to create a municipal electric utility (the “muni”) would at least “pause” for an indefinite period of time, if not end completely.

Ballot Item 2D is dependent on 2C passing, and if both 2C and 2D pass, 2D would repurpose and extend the city’s existing Utility Occupation Tax. There is no requirement that people vote the same way on 2C and 2D. There is more information on 2D after the 2C section on this page.

Why or Why Not? The City has been investigating the possibility of breaking away from Xcel and creating its own municipal electric utility for a number of years. I personally wrote about early staff work and consultant studies on municipalization for the first time in about 2005, as a reporter for the Colorado Daily. Nearly 30 cities in Colorado currently have a municipal utility, but most of those cities established their utilities long ago.

To be incredibly brief, much of the controversy around municipalization in Boulder has centered on the potential costs of obtaining infrastructure, taking on and managing debt, hiring staff, obtaining facilities, legal battles, and other expenses. However, municipalization advocates emphasize that Boulder ratepayers currently pay for their share of Xcel’s corporate overhead and debt, plus they point to a recent analysis showing that the City might be able to acquire renewable energy on wholesale markets cheaper than buying power from Xcel. The cost/benefit ratio was an issue in 2005, and remains a big part of the discussion today.

Climate change was also an issue in 2005, but it’s moved closer and closer to the forefront since then. The City of Boulder today has a goal of getting 100% of its electricity from renewable sources by 2030, and this is an important factor in climate discussions since a high percentage of Colorado’s electricity is fossil fuel-generated, primarily from burning coal or natural gas. Burning fossil fuels and extracting natural gas from the earth both release greenhouse gases, which trap heat in our atmosphere and contribute to climate change.

In 2018, Xcel announced its own goals of reaching zero-carbon electrical production by 2050 and to reduce carbon emissions 80 percent from 2005 levels by 2030. Remember, goals are goals, not necessarily guarantees of results, whether we’re talking about the City or Xcel. Older readers might remember that the City passed resolutions setting goals to meet Kyoto Protocol standards back in the “aughts” and no, it didn’t come to fruition.

The Boulder City Council decided not to renew a franchise agreement with Xcel in 2010, and City officials and residents have spent much of the past decade pursuing, debating, and in some cases opposing the municipalization effort. City voters approved several ballot measures to move forward with the municipalization effort, including two measures passed by narrow margins in 2011 – one to authorize exploration of a municipal utility, and another to increase and extend its Utility Occupation Tax (UOT) to fund the costs of working on municipalization and obtaining the electrical distribution system. In 2017, voters approved another extension of the UOT, by a narrow 51.7%-48.3% result.

To avoid re-telling a painfully long story, the City and Xcel have been through the wringer together over the past decade or so, including court battles regarding issues such as asset condemnation and lengthy cases before the state Public Utilities Commission (PUC).

But in 2020, the Boulder City Council approved putting a franchise settlement proposal with Xcel on the ballot, and that’s what Boulder would be voting on with 2C – with the future of the UOT at stake under 2D. I highly encourage visiting the City’s settlement web page to read some of the following in greater detail detail, including a 100-page pdf of the entire settlement package that’s worth a look – though in the interest of speed readers might try to skim past the boilerplate contract stuff – but for the bullet point version:

• The city would “pause” the muni effort if voters approve 2C, though it could re-start the effort at a future date even if the franchise agreement goes into effect.
• The settlement package includes “off-ramps” by which the City could exit the franchise agreement for Xcel missing carbon emissions targets in 2023, 2025, or 2028 – or the City could exit for any reason in 2026, 2031, or 2036.
• The City and Xcel would work together toward meeting Boulder’s 100% renewables goal by 2030. One entire section of the franchise agreement is titled the “Energy Partnership Agreement,” and it includes goals of collaborative planning, identifying projects that could help meet carbon goals, forming an Executive Team of City and Xcel officials, forming a Project Oversight Team of people with technical expertise, and forming an Advisory Panel that would include community members as well as officials from the City and Xcel.
• The settlement agreement document includes about 10 pages outlining potential Energy Partnership Agreement projects, how they might be paid for, and data sharing arrangements.
• Xcel would commit $33 million toward undergrounding power lines within Boulder, with at least half of this happening within the first five years of the franchise agreement.
• Xcel would commit to offering energy efficiency programs, including cash rebates for efficient lighting, energy design programs to assist architects and engineers, and demand side management (“DSM”) programs.
• The city would dismiss a current legal case before the Federal Energy Regulatory Commission.
• There would be a $200 million cap on future condemnation awards, in case the City decides to pursue municipalization and attempt to acquire Xcel’s distribution infrastructure.

Got it? Trust me, this is the super-abridged version. I’ve supplied links to additional sources of information above and below, and this is a topic worthy of deep consideration.

2C Pro:

• 2C supporter website: https://bouldersgreatgreendeal.org/
• Going forward with a franchise agreement will be easier for many people than municipalizing. Boulder won’t need to establish a utility from scratch, Xcel’s infrastructure is already in place, and most people will just turn on the power and send payments to Xcel, exactly as they do today.
• Like many cities, Boulder is going through economic tough times, and municipalizing would mean the City would take on a substantial amount of new debt, new interest on that debt, new staffing and administration, and other expenses and actions necessary to municipalize. The franchise agreement would eliminate the need for these types of decisions, at least for the near-term future.
• Xcel has committed to partnering with Boulder on meeting carbon goals.
• The potential exists to transition costs and efforts away from legal battles and toward tangible projects to modernize the electrical system within Boulder.
• There are still significant cost unknowns to municipalizing, such as stranded costs or the true cost of infrastructure, and passing the franchise agreement would at least postpone the need to deal directly with these considerations.

2C Con:

• 2C opponent website: https://empowerourfuture.org/climate/
• Boulder has set a robust goal of 100% renewable energy by 2030, and there’s no guarantee the City would get there under a franchise agreement with Xcel, even though Xcel has committed to partner toward meeting Boulder’s climate goals.
• This would be an abrupt end to the multi-year process of exploring municipalization that has entailed a great deal of community involvement. City voters have passed several “muni” ballot measures over the years, and as recently as last year people may have been expecting the next ballot measure to be a “go-no go” measure on the muni – including detailed information about the cost of municipalizing – rather than a measure to accept a franchise agreement.
• Utility revenues and profits will continue going to Xcel and its shareholders under an extended franchise agreement, while under a muni the city would collect substantial revenue well into the future.
• The wholesale cost of renewable energy is decreasing, and there are competitors who might be able to sell renewable energy to the City cheaper than Xcel.
• By staying with Xcel, the City would be on the hook for its share of paying down Xcel’s debt and debt servicing.
• There is no technical need to have a franchise agreement with Xcel, and Boulder actually hasn’t had one for the past decade even though Xcel has been providing power.
• The City and Xcel have been in court battles for a number of years, and there are no guarantees that court battles wouldn’t arise again at some point, such as if the City renews municipalization efforts.

Ballot Item 2D: Repurpose the Utility Occupation Tax

Ballot Item 2D is dependent upon 2C passing. It would repurpose a portion of the City’s existing Utility Occupation Tax (UOT) revenue worth $2,076,181 yearly in 2021 and 2022, and extend the tax from its current sunset date of Dec. 31, 2022, until Dec. 31, 2025. Another portion of the current UOT raises about $4.7 million per year for the city’s general fund. If the franchise agreement passes under 2C, this $4.7 million portion would be replaced by a franchise fee that city ratepayers will pay.

For perspective, a City estimate from before the 2017 election said the UOT would cost average residential ratepayers $2.37/month or $28.44/year in 2018, $1.78/month or $21.36/year in 2019, and 2020 through 2022 would be the same as 2017.

If 2C and 2D pass, the $2 million portion of the UOT revenue could be repurposed to a set of uses beyond its current use in the municipalization effort. The repurposed revenue could repay the City’s General Fund for costs associated with municipalization and fund projects, pilots, initiatives and research to support the City’s clean energy and racial equity goals, such as:

• Providing energy-related assistance to disadvantaged members of the community, including support for utility bill payments and access to renewable energy;
• Improving system reliability and modernizing, and supporting clean energy-related businesses, including new approaches in electrification of buildings and transportation, enhancement of resilience;
• Implementing a partnership agreement with Xcel; and
• Increasing access to energy efficiency and renewable energy solutions.

2D Pro:

• Passing 2D would repay past General Fund expenses of municipalization and pay for projects in the interest of social equity, climate action, and system reliability.
• Even small amounts of funding toward energy assistance could help lower-income residents in Boulder make ends meet.

2D Con:

• The tax was set to sunset in 2022, and extending it until 2025 will cost city taxpayers money without great assurances of personal benefit.
• With the revenue from a 20-year franchise agreement, Xcel could/should pay for some of the programs identified in 2D.
• The Utility Occupation Tax was not initially intended to pay for the items identified in 2D, so this is a switch in purpose relative to what voters of the past approved.
• The ordinance creating 2D does not provide a great deal of detail, so it’s tough to guess how much money would go toward any one type of use.

Richard’s Take: I don’t normally do this, but I’m taking a NEUTRAL position on 2C and 2D. This is partially because I’ve told people I had mixed views and wanted to stay true to my word, and partially because the most recent muni ballot measures wound up very close to 50-50 at the ballot box. Instead of endorsing or opposing, I’ve supplied my list of pros and cons and key points, plus links to additional information, and I actually believe this piece includes a whole bunch of fair considerations from both sides of the coin. I truly hope voters will do some solid research on 2C and 2D, since it’s complex and of serious significance.

As a side note, I still must say I’m disappointed that 2C and 2D are even on the ballot right now, especially given they were only officially placed on the ballot in September of 2020. It’s far too much information for many voters to digest considering we’re also in a Presidential/Senatorial election year, with other candidate races, 11 state ballot measures, and three other City measures on top of all the other things going on in society. The franchise agreement, which potentially ends years of discussion on municipalization, begged for an extended period of community outreach and education, especially since only a small percentage of voters have probably been able to immerse themselves in the issues. Ready or not, voters are being asked to make a really heavy decision with only a few weeks left to run megawatts of information through our collective neural distribution system.