Opinion: The smartest guys in the room

Remember back when the executives of Enron, convinced that they were the “smartest guys in the room”, instigated the California energy crisis, lost billions of dollars, and some ended up in jail. That title is now used to identify any group that thinks they are way smarter than they actually are. Thus we come to Boulder’s franchise agreement with Xcel/PSCo, where the smartest guys told us last fall that this was a great deal, we’d get ten years of back undergrounding, a whole host of great projects, and maybe get to 100% renewables by 2030.

After the 53%/47% vote on the Franchise Agreement last November, Xcel/PSCo filed for PUC approval. Shortly thereafter I tried to intervene in the proceeding, because I wanted to ensure that specific issues would be considered. The Administrative Law Judge hearing the case, as well as the PUC itself, turned down my request to intervene, but not before I had communicated my issues. This triggered a closer look by both the PUC trial staff and the Office of Consumer Counsel staff. Here are some of those issues:

It appears that this franchise was done in complete ignorance of the requirements of Boulder’s charter. Charter Section 108 states that “no franchise shall be granted except upon a vote of the registered electors”, and Section 125 states that all relevant Charter requirements “must be included in every franchise”. These include Section 123, which grants both the council and the citizens the power to “regulate the rates”, and Section 118, which prohibits “the issuance of stock in excess of the sum which shall be fixed for said purpose by the council…”, just for two of many examples. Neither these nor many others were “included”.

Section 108 also requires that PSCo “deposit with the chief financial officer” the expense of the franchise election as “determined by the chief financial officer” upon submission of the franchise to a vote. Per the responses I received to multiple Open Records requests, none of this happened.

So it appears that the Franchise Agreement did not follow the Charter and was improperly placed on the ballot. These Charter sections could have been amended, rather than just ignoring their requirements.

Then there were all the open questions about what Xcel/PSCo would actually pay for. I pointed out that there were three intertwined agreements – the Franchise Agreement, the Settlement Agreement, and the Partnership Agreement – and that they contained interrelated commitments that should be inspected. To their credit, the PUC and OCC staff did just that. Although they avoided considering the issues with Boulder’s charter, they did resolve the big money issues, and not in Boulder’s favor. This did not surprise me, simply because these in three agreements, Boulder failed to include specific deliverable, timelines, and most importantly who would pay.

The final result was that the various parties just signed off on a settlement of the Franchise Agreement approval case. Boulder got exactly zero in terms of commitments that Xcel/PSCo would pay for any of the big items. And this settlement requires Xcel/PSCo to go back to the PUC with specific requests if they want to recover any money spent on Boulder’s behalf.

For example, the $11.5 million of back undergrounding that Boulder wanted will not happen unless the PUC decides that, in spite of it being inconsistent with their standard practice, they will force all the PSCo ratepayers to pay for this undergrounding. Since Xcel/PSCo said in the Franchise Agreement §14.4 that it is not willing to incur any costs that it doesn’t expect to recover from the ratepayers, I predict the chance of the undergrounding happening at close to zero, unless Boulder pays for it.

As to the Settlement Agreement and the Partnership Agreement, we’re on our own there – the PUC will not review or approve them. So we have nowhere to go if things go south, other than the courts.

Remarkably, in addition to Xcel/PSCo, the PUC trial staff, and the OCC staff, the City of Boulder staff also signed off. So Boulder in effect agreed that Xcel/PSco has no obligation to deliver any of what many people thought we would be getting, at least for items that cost real money. It’s hard to imagine anything less beneficial to Boulder.

The City should reverse course, refuse to sign the settlement, and ask that the PUC not approve the franchise. Then have the smartest guys in the room do this right and renegotiate with Xcel/PSCo, so that what the City will get financially is clear.

 

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