Opinion: Boulder’s legal work, the muni and the Xcel franchise

I thought it would be interesting to review the legal history around municipalization and the franchise.

In 2011, Boulder’s charter was amended to allow for creation of a municipal electric utility under certain conditions, the most significant of which was, “The city council shall establish a light and power utility only if it can demonstrate, with verification by a third-party independent expert, that the utility can acquire the electrical distribution system in Boulder and charge rates that do not exceed those rates charged by Xcel Energy at the time of acquisition …”

Even at that time, some of us raised concerns with the vagueness of the “can charge rates that do not exceed … at the time of acquisition” language, since it is not clear whether this rate test applies for a moment, for eternity or what. This unclarity, plus the use of the word “establish” would prove fateful down the road.

In 2013, a very public wrangle occurred over the city’s attempt to condemn Xcel’s circuits that served both inside and outside the city limits. The objective here was to save the cost of separating those circuits.

But this would have also required condemning Xcel’s Certificate of Public Convenience and Necessity, issued by the PUC to allow Xcel to serve that part of the county. The relevant legal cases were eventually reviewed (including by citizens following the muni project), and they showed that a CPCN is a license and not property, so could not be condemned. This whole PR disaster could have been completely avoided if the proper legal work had been done first.

Then in 2014, the city doubled down on the original vague charter language and “established” the municipal utility as a chartered city department, using a questionable legal maneuver to try to avoid a court challenge by Xcel. The city’s expressed motivation was that eventually the city would have to condemn Xcel’s facilities within the city limits, and the lack of a utility, even if only established on paper, could lead to future legal challenges.

Of course, the simple solution would have been to ask the citizens to amend the charter to make the utility’s actual operation (not its existence on paper) contingent on meeting the charter requirements, and to fix the charter’s unclear rate test that I discussed above. But none of that happened. And Xcel sued the city anyway.

That case finally ended up in the Colorado Supreme Court, where the court rewrote the charter standards to make them comprehensible, and then found for Xcel, sending the case back to the local court.

Finally, in 2019 Boulder’s city attorney settled with Xcel, apparently without seeking the consent of the council, though the terms did give the council an exit. However, the single sentence in the settlement identifying the city’s obligations was almost incomprehensible. (When I asked why its grammar was so convoluted, I was told that it was “written by a committee.”) Worse, these obligations were tied to sections of the city’s charter, but they failed to specify what would happen if the charter were amended, leaving the city in a new legal limbo.

This all led up to this year’s negotiations and franchise agreement. Based on extensive review of internal emails from the last year or so, it appears that these negotiations were conducted in violation of the charter requirement that, “All meetings of the council or committees thereof shall be public.”

The charter also requires that “The enumeration and specification of particular matters in this charter … must be included in every franchise or grant…” But some “matters” never show up in the franchise. The charter’s 10-day notice requirement before final passage of the ballot measure ordinance was manipulated, and the charter requirement that Xcel deposit the cost of the ballot measure before it could be submitted was apparently ignored.

The franchise goes to the PUC later in January for approval, modification or rejection. But the franchise’s language has it going into effect on New Year’s Day, even though Xcel cannot be bound by it unless the PUC approves it. So it is unclear what will happen if the PUC amends some of the terms in the Franchise, Settlement and Partnership Agreements, all of which contain substantial obligations for Xcel. Apparently this possibility was not considered in setting that date.

But in the end, this is not just about bad legal work. All of this may have cost us our best opportunity to significantly reduce greenhouse gas emissions, which was the overriding motivation for municipalization.

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