Opinion: Xcel franchise — an opportunity not to be missed


Xcel’s franchise in Boulder expires in August, and the negotiations about putting a new franchise agreement on the ballot have not yielded much of anything new. But there is an opportunity here, both for Xcel and for the citizens and businesses of Boulder, to do something really innovative.
For Xcel, the opportunity is to have a “laboratory” to learn how to deal with its customers when delivering a high percentage of renewable energy (RE) and managing it through its Smart Grid. For Boulderites, the opportunity is to receive “green electrons” for the majority of their electricity needs, and avoid, to some extent, the coming price inflation for fossil fuels.
Fundamentally, the franchise is an agreement between the city and Xcel. Xcel gets Boulder as a guaranteed customer base for 20 years (with an opt-out at 10), and the city gets a 3 percent “franchise fee.” However Xcel is required to serve the city with or without a franchise. And Xcel doesn’t actually pay the $3-plus million “franchise fee;” we the ratepayers do — it’s a line item right on our Xcel bill. So, at this point, there are limited choices as to what to put on the ballot: a standard franchise where we, in effect, tax ourselves and commit to 20 years of Xcel’s mostly fossil fuel generated electricity, or an ordinary tax paid directly to the city where we retain the option to take control of our electrons and our energy future. Why would anyone choose the former?
But Xcel and the city could do something innovative that would make the franchise agreement very attractive for both sides. Because the franchise expires in four months, they need to start right now with a collaborative process, not an adversarial negotiation. The goal would be to structure an operating agreement where Xcel would deliver a high percentage (60 percent or more) of renewably generated electricity, set a rate structure that is appropriate to the intermittent nature of that resource, and use their Smart Grid to manage energy flows, interruptible demand, etc. Xcel would agree to be transparent about costs and energy sources, so that Boulderites would know that they were getting what they paid for, and at appropriate prices. There would need to be rate caps (just like in HB1001, the “30 percent Renewable Energy Standard”) so that both residents and businesses would have some certainty as to cost. The accounting should ensure that Boulder neither subsidizes nor is subsidized by Xcel’s other ratepayers, and that Xcel makes a fair profit without our padding their bottom line. Basically, everyone gets a fair deal.
Can Xcel do this? The answer appears to be yes. Xcel has special rate arrangements with large industrial users, like CF&I and Climax. And the PUC has approved prototype rate structures, so they certainly could approve an “Accelerated Decarbonization” tariff for Boulder. Because Boulder is only about 5 percent of Xcel’s Colorado system, this would only require about 1/20th or so more RE than Xcel has already agreed to in HB1001, assuming that the City’s Climate Action Plan (CAP) programs reduce demand as projected.
Will Boulder ratepayers be better off? I think so. Colorado ratepayers got 10 percent RE with a 1 percent rate cap from Amendment 37, are on track to get 20 percent RE with a 2 percent cap in a few years, and without increasing 2 percent cap, we expect to get 30 percent RE by 2020. Meanwhile the cost for coal has gone up over 15 percent, and in 2009, coal prices had reached Xcel’s forecasts for 2035. In contrast, NREL predicts that solar generated electricity will reach grid-parity with fossil fuels in 2015. And the CAP programs should help Boulder ratepayers save additional energy and money.
So what’s the obstacle? The tough part is not in resolving the technical, legal, and financial issues. It is getting the key people in a room, having them get over the animosities that have built up over time, and changing the usual adversarial nature of such negotiations. Both sides must acknowledge that this is an opportunity whose time has come and that won’t come again. Boulder is a unique city with well informed and environmentally oriented citizens. Xcel is one of the leading utilities in shifting toward a more RE based system. So we are a perfect match, but can we work together? Given the condition of the planet, we better.


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