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Boulder, Xcel send deal to Council in possible ceasefire on municipal utility litigation

With Council support, proposal goes to voters in November

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An end to Boulder’s decade-long exploration of a municipal electric utility is in sight.

City officials and Xcel Energy, the private power provider serving Boulder, have come to a settlement agreement in principle that would cease the city’s attempt to sever from the utility and enter it into a new franchise agreement with the company.

For the deal to take effect, though, City Council has to refer it to the November ballot and a majority of voters would have to support it.

Council received a briefing on the proposal Tuesday, and could vote to send the franchise agreement to the ballot on first reading next week, with a second reading and public hearing scheduled for Aug. 18.

The proposal, according to city staff, satisfies requests of community members to have an enforceable deal, as it gives Boulder options to leave the franchise if Xcel fails to hit key greenhouse gas reduction benchmarks over the next 10 years. Boulder’s desire for an electric grid that moves energy from fully renewable sources by 2030 has driven its consideration of condemning and seizing the company’s local assets through the courts to form a publicly owned utility with power generation, battery storage and other emerging technologies aimed at cutting planet-warming emissions from current energy consumption.

While there are lawsuits the city has filed to pursue that process in progress, the settlement agreement would put an end to those legal actions, at least for five years or until the company falls short of a greenhouse gas decrease goal. One of the cases, that was dismissed by the Boulder District Court and is now being appealed, will continue until the appeals court issues a decision, but then further court actions will be discontinued.

If necessary, the city could resume the litigation, and the franchise agreement includes provisions that would streamline the renewed action, city officials said. Those include a $200 million cap on costs that Boulder would incur for Xcel’s going concern surrounding a loss of city ratepayers and company assets eligible for condemnation by the local government, like poles, wires and meters. Also included in that price tag is the cost of the two substations, where high voltage is converted into low voltage, that the city would purchase to complete a municipal utility startup.

But the company is confident that language in the agreement, proposed to last 20 years, will not need to be used, and that its franchise proposal and intended progress on carbon reductions will satisfy Boulder electricity consumers.

“The agreement we’re putting in place is to be able to continue serving Boulder in the way that Boulder wants to be served,” Alice Jackson, president of Xcel’s Colorado division, said in an interview. “I hope the chance and opportunity to look at doing municipalization again are going to be very low.”

Specifically, that chance will come in 2023, 2025 and 2028, if Xcel’s total emissions respectively exceed 16.6 million tons of greenhouse gases in 2022, 13.6 million tons in 2024 or 11.5 million tons in 2027. The goal by 2030 is for Xcel to emit no more than 6.9 million tons, which would represent an 80% reduction from 2005 levels, to which Xcel has already committed outside of the proposed agreement with Boulder. The measurements will be performed by the Climate Registry, a nonprofit that works with governments internationally to measure and reduce carbon outputs. Xcel wants to be 100% carbon free by 2050.

Additionally, Boulder, for any reason, could leave the franchise at the five, 10, or 15-year marks of the agreement. Either a motion supported by at least six Council members, or a majority of voters could trigger Boulder’s exit from the agreement at any of those points, Jackson said. Any ballot measure regarding an opt out from the franchise would have to be referred to voters by Council.

“The settlement we are bringing forward today is the culmination of decades of community-led activism to build an energy future that’s better for our planet and our community,” Mayor Sam Weaver stated in a news release. “We have the opportunity to secure in this agreement historic changes in the relationship between the community and its energy provider. Boulder, a small city that thinks big, has long strived for a clean community energy system that shares our values, and I want to thank Xcel Energy for their willingness to grow and improve as a company through working with us.”

To reconcile the gap between Xcel’s commitment to hit an 80% emissions cut from 2005 by 2030, and the city’s goal to have 100% renewable energy by then, the company has agreed to allow Boulder to influence the evolution of the electric grid. Essentially, the city will be able to act as a research and development partner of Xcel, experimenting with battery storage, emerging technologies and microgrid concepts that could allow sections of the city, or certain critical buildings such as fire stations, hospitals or possible emergency shelters like churches, to self-generate enough power through solar panels or otherwise to not rely on connection to the grid.

While the city would have to fund pilots that Xcel feels have no immediate application to its entire portfolio, it could purchase such systems and replicate them in other places if Boulder demonstrated they worked to further environmental goals and lower costs of providing energy, Jackson said.

A board of community members would be formed to advise city and Xcel staff members on these experiments with the grid. Council may consider repurposing and possibly extending the current utility occupation tax, set to expire in 2022 if there is no franchise agreement, so that the funds from the duty on electricity consumption that support the city’s municipal utility effort could be used to support grid development. With a franchise agreement, the tax would expire, and a franchise fee would be placed on local Xcel bills, to compensate the city for the utility’s use of public space.

Furthermore, the proposed franchise includes an agreement between Xcel and Boulder to work together at the state Legislature to alter current regulations that limit innovation and local renewable energy development, including by repealing rules that prevent buildings from producing more than 120% of their individual annual energy use, and that prevent energy from moving directly between property boundaries without flowing back to the larger grid. Letting more energy production occur on a single property along with the option to more easily transfer the excess to a nearby consumer could be key to successful microgrids and developing enough renewable power generation to hit the city’s 2030 goal.

Simultaneously, the city is set to receive bids from renewable energy providers through the middle of next month, as well as proposals to finance work that would be needed to continue the municipal utility effort, in case the Xcel agreement fails to gain final approval.

“If I was a vendor looking at doing a proposal, I would have to think twice about working on one if our city is actually trying to put a franchise agreement on the ballot,” said Paul Culnan, a member of Empower Our Future, a group of locals that has worked on renewable energy issues in the city for more than a decade and has advocated caution in working with Xcel.

Boulder Chief Sustainability and Resilience Officer Jonathan Koehn dismissed those concerns, saying about 45 respondents were on a pre-bid call Tuesday regarding the city’s request for proposals. While he admitted some of those callers raised questions regarding the possible franchise agreement, which could make the city’s call for bids moot, if approved, he added such a level of interest for a pre-bid conference is “extraordinary.”

“There is no guarantee voters approve this franchise agreement,” Koehn said. “We have to keep moving forward (on a municipal utility) and part of that is to secure and lock down what the power source would be.”

The discussions between city officials and Xcel began in April, after city representatives earlier in the year agreed to resume settlement talks. Similar conversations proved unfruitful several years ago. Dozens of meetings were held over three months of talks.

“Slow down, please do not put (Xcel) on the ballot in November. We have a lot of local talent, we can do it,” Julia Gibbs said in a Monday email to City Council.

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