Opinion: The next steps toward a clean, resilient electric supply

·         The Boulder City Council, at the request of some members, has made its draft letter to Xcel even stronger. Good for them! I hope the council passed it last night.

·         I agree that Xcel needs to pay financial penalties for unnecessary and/or overly long shutdowns, and compensate businesses that are financially damaged and customers who suffer negative impacts.

·         But the question remains: What leverage, besides bailing out of the franchise, does the city really have to get Xcel to bring its grid up to snuff, both in terms of surviving the windstorms and providing cleaner, cheaper electricity? Local efforts to provide resilience hubs — more neighborhood-level solar-plus-batteries, etc. — are good angles to pursue. But they all run up against the difficulties associated with a century-old regulatory structure, where Xcel gets to make a pile of money off of investing in self-owned capital facilities, but has no structural incentive to deliver the cleanest, most reliable power at the lowest cost. Clearly, we need to change the system to accelerate moving forward into the 21st century.

·         The Legislature could strongly help this process. A year or so ago they allowed all areas served by Xcel, not just those with franchises, to receive 1% of their payments back to pay for undergrounding power lines. That bill removed a significant financial disincentive to operating without a franchise.

Boulder County area legislators lay out priorities for 2026 session, and other top stories from February 01, 2026.

·         A new bill would require Xcel to sell any portion of its transmission/distribution system to the municipality (or county) in which a majority of that portion is located. Critically, the price would be limited to Xcel’s regulatory depreciated value.

·         Let me explain: Under the current reward system administered by the PUC, when Xcel invests, say, $40 million in a portion of the system with an expected lifetime of 40 years, it gets paid back 1/40th of this invested capital each year (i.e. $1 million per year) for that 40 years, plus a guaranteed rate of return (set by the PUC) on whatever capital has still not been paid off. Xcel’s current rate of return on invested equity is over 9%. For comparison, the tax-exempt municipal bond rate that the city faces is down in the 2%-plus range.

·         The problem is that if the city wants to take over a portion of the grid to make it more resilient, then it is forced to bargain with Xcel over the price. Based on our experience during the municipalization process, Xcel will ask for far more than the remaining value of its investment. And the city does not have any real leverage to get the number down to anything reasonable.

·         So, the bill would simply say that Xcel must sell at the depreciated value. That makes Xcel whole, but no more, and prevents such one-sided bargaining. And it would give municipalities a LOT more leverage either to escape Xcel or to take over and fix their infrastructure to make it more robust and sustainable. This would give Xcel a lot more motivation to get its system up to snuff.

·         The second new bill would forbid Xcel from collecting “franchise fees” as part of a franchise agreement. If you look at your Xcel bill, you will see this as a 3% additional charge. It goes straight to the city. In my opinion, it’s not a legitimate fee. The payees, you and I, get no benefit from it. In reality, it’s just a tax on the ratepayers to give the municipality more revenue.

·         So, it’s an incentive for officials to stick with Xcel even when there are good reasons to escape. In economists’ terms, it distorts the market, so cities would stick with Xcel even under less-than-ideal circumstances. It has no rational purpose, other than that.

·         Also, occupation taxes, as Boulder was allowed by Xcel to impose during its out-of-franchise period, would be forbidden, because they had the same effect. Only the costs associated with operating the utility should be collected as part of the rates, not extras to provide politicians with more money to spend.

·         A third big step would be to force Xcel to bid out all new power sources, and after that, all existing power plants, like what Texas did many years ago. This would likely yield lower prices, eliminate a bias toward Xcel’s self-owned expensive generation, and hopefully accelerate the shift toward clean, reliable, local energy.

·         Note: A big “Thank You” to the judge who ruled Wednesday that the citizen lawsuit over the South Boulder Creek dam was not frivolous, and so the city cannot collect attorneys’ fees that the city had (outrageously, in my opinion) sued the citizens for.