Opinion: The Xcel proposal and the ‘pause’ fantasy
Xcel is a for-profit
monopoly that was created in 1998 to take advantage of outmoded,
non-competitive, but highly profitable regulated utility systems in multiple
states. Xcel wants Boulder to give up its chance for freedom in exchange for a
new franchise that effectively locks Boulder to Xcel for 20 years, guarantees
nothing of substance in return, and from which the escape terms are so
expensive or painful that they could not ever be used.
As Camera readers, I
suspect you’ve already read about the flaws in Xcel’s proposal. But just to
reiterate some important points: Practically everything would have to go
through PUC review, and so could easily be stopped. The renewable energy
programs offered are either already available or overpriced. And giving Boulder
what it doesn’t offer to others would put Xcel at risk in all sorts of ways.
Perhaps the biggest flaw is
that Boulder could not really enforce the terms. It was clear going into
discussions over a year ago that it would be a non-starter if Boulder had to
spend millions of dollars and years of time at the PUC to implement proposals
or resolve disputes. So the only way to gain the needed leverage would be to
have a fast and inexpensive way to exit and then create a municipal utility.
But the two exits Xcel is
offering at the five-year point are unusable: 1) Boulder could “buy out” Xcel’s
facilities, or 2) Boulder could restart the PUC process, basically putting us
back where we are now, but in a much worse position with the PUC.
In the “buyout,” Xcel
wants Boulder to pay 80 percent more than what Xcel still has in its Boulder
facilities. This is almost $100 million more than Xcel would ever get if
Boulder remained a captive customer. To add insult to injury, Xcel also wants
25 percent of its then current revenues from Boulder to continue for 10 years
after Boulder takes over. By 2023, this would start at almost $40 million a
year, and would be for doing nothing, since Boulder would be running its own
system. Xcel’s terms for physical separation would likely add an additional
$100+ million above the city’s cost estimates. All together, these would push
the muni’s bond ratings far into junk bond territory and its electric rates
would be way above Xcel’s. So this “buyout” provides no leverage, simply
because it could never be used.
Xcel’s main proposal is
pretty much a standard 20-year franchise, but with a half-Xcel, half-Boulder
committee to supervise future efforts, so paralysis is guaranteed. One
interesting teaser is Xcel’s offer to buy any renewable power that Boulder
might generate. But Boulder would have to get proposals, contract with
suppliers, and then still go through the PUC/Xcel resource plan bidding process.
So for all that brain damage, Boulder would actually not be increasing the
renewable percentage in Xcel’s portfolio. Another teaser is that Xcel is
offering to pay Boulder the money for undergrounding that Xcel has not paid
since 2011. But this money should never have been shut off in the first place,
since state law requires equal treatment of all ratepayers.
A critical question is
what the PUC commissioners would think if a majority of the City Council hit
the “pause button” now, right before the PUC is about to make some important
decisions, and then put this Xcel proposal on the ballot. If I were in the
commissioners’ shoes, the first thing I’d do is ask my staff to evaluate this
proposal and see if there was anything really worthwhile for Boulder. Since
there isn’t, and it would be yet more work for the PUC, I’d start thinking that
the “pause” and ballot measure indicated that Boulder wasn’t really serious
about its energy future. So I would certainly view any future attempts to
reopen the municipalization process with a very jaundiced eye, compounded by my
irritation at having to get up to speed again on the issues.
So a “pause” will just
make things tougher. Let’s get the upcoming PUC decisions, and find out if we
will have a clear path to implement our constitutional right to municipalize.
We also need to remember that the utility universe is changing rapidly. The
Legislature could clarify the rules for municipalization, or Colorado could end
up with a competitive system with consumer choice, like much of the rest of the
country, including Texas! We certainly don’t want to be locked into in Xcel’s
1920s utility model when that shift occurs.