Dive Brief:

• Four months after settlement talks over municipalization began anew, the City of Boulder announced that it arrived at a proposed agreement with Xcel Energy on July 28.
• The proposed settlement preserves Boulder's right to pursue independent energy generation and will help the city achieve its clean energy goals in a cost-effective manner.
• Settlement talks were partially motivated by budget pressures triggered by COVID-19 and an upcoming tax deadline, according to Boulder's director of climate initiatives Steve Catanach.

Dive Insight:

After nearly a decade of pursuing municipal energy generation, the City of Boulder has announced a proposed settlement and 20-year franchise agreement with Xcel Energy.

According to Catanach, settlement talks began in April with a chance meeting of a city council member and an executive from Xcel's Colorado division. That prompted a conversation with the broader city council regarding why previous settlement talks had gone awry, which eventually led to the proposed solution. Boulder announced the settlement on July 28, and released the specific terms of the agreement late last week in anticipation of a planned public hearing on August 20.

Financial pressures contributed to the city's willingness to hash out a new deal, according to Catanach. The city had planned to borrow from its general fund for the municipalization effort, which was itself about to run out of money generated by a special tax. However, COVID-19 had a substantial impact on the city's savings, and so the general fund option was no longer available. The city needed to appeal to residents for an extension of the tax designed to fund a transition to municipal power generation, “and there is no appetite for a tax increase this year,” Catanach said.

Catanach said Xcel also seemed more open to a settlement, as demonstrated by its willingness to begin talks about distribution and grid planning—topics Catanach said were previously off the table. Xcel Energy did not respond to questions for this article.

The resulting settlement, if approved, would initiative a 20-year franchise agreement between the city and Xcel while preserving the city's right to opt out of the agreement to pursue municipalization in 2026, 2031, or 2036. The city could also terminate the agreement in 2022, 2024, or 2028, if Xcel Energy fails to meet key emissions benchmarks.

While Xcel's goal of cutting emissions 80% by 2030 is somewhat different from the city's desire to transition to 100% renewable energy by the same deadline, Catanach said the settlement contemplates some ways in which the two entities, acting as partners, could bridge the gap. He said the agreement also offers Boulder concessions with respect to its desire to democratize energy generation by creating more opportunities for public participation.

While the agreement does leave Boulder the option of waiting out the pandemic and resuming municipalization when funding is more readily available, Catanach said that's not the city's current approach. “We are very committed to making this work with Xcel,” he said.

Xcel pointed to key aspects of the proposed settlement while praising it.

“For us, the Energy Partnership Agreement and the Franchise Agreement are the most important provisions in the settlement. The Energy Partnership Agreement outlines how the city and Xcel Energy will work together in partnership to meet the city’s energy goals. This is a forward looking, positive agreement that we’re excited about. The Franchise Agreement is our long-term agreement we have with our cities that provides a framework on how we operate and coordinate our operations in the cities we serve,” Xcel said.

The company expressed confidence that it could meet the benchmarks laid out in the agreement, noting that when it announced its goal to provide 100% carbon-free electricity by 2050 back in late 2018, it “had already done significant work” to understand how it would reach its 80% carbon reduction goals by 2030, from 2005 levels. “The benchmarks within the settlement reflect this ongoing work,” the company noted.

“The partnership also offers our resources and expertise so that if Boulder wants to go beyond our standard portfolio, we can help. We also have agreement that if there are programs or products that can be offered in the future to our other communities and customers, there is a pathway for us to do so and to recognize Boulder,” Xcel said.

The settlement is subject to approval by both the Boulder city council and city voters. The city council is expected to determine whether the proposal will be put on this fall's ballot by September 1. If approved by voters, the Colorado Public Utilities Commission also review the agreement, so the settlement is not expected to take effect before early 2021, according to Emily Sandoval, a communications specialist for the City of Boulder.