Boulder, Colorado’s decade-long effort to create a municipal electric utility ended on election day with voters’ decision to keep buying power from Xcel Energy.

More than 53% of Boulder voters favored Question 2C, which enters the city into a new 20-year franchise agreement with investor-owned utility Xcel.

Voters also approved Question 2D that will divert $2 million to the partnership from its previous use toward creation of a municipal electric utility. The funds will support programs aimed at addressing the city’s goal of increasing dependence on renewable energy sources such as wind and solar power.

“This partnership has potential to meet the city’s goals and make a broad impact, and we all must make our best efforts to ensure that the partnership delivers on its promise for a more democratic electricity system,” said Boulder Mayor Sam Weaver. “We will need to redouble our climate and energy commitments and continue to work towards a cleaner, more reliable, safer and affordable energy system.”

Amidst the COVID-19 pandemic, the city and Xcel reached agreement that would forestall the city’s plans to buy out the utility’s facilities in the affluent college town northwest of Denver.

The Boulder City Council placed the franchise agreement on the ballot in September after months of negotiations and several community town halls. Dozens of supporters and opponents participated in the public hearings leading up to the council vote, and campaigns developed for both sides of the issue during election season.

“We appreciate the passionate efforts on both sides of this issue and recognize that while many in our community celebrate, others are disappointed,” said Weaver. “I pledge to focus on efforts to unify our community. Climate and energy issues are urgent and difficult to face divided, and I hope that we can come together as a community to face challenges and seize opportunities.”

The partnership agreement seeks to make significant progress on Boulder’s clean energy and climate goals. Under the deal, the city and Xcel Energy will work together in a modern grid planning partnership, aimed at helping the city achieve 100% renewable electricity by 2030.

The community will play a key role in the partnership, officials said. The city and Xcel will share information on community involvement as details are determined.

Before 2011, the city and Xcel Energy had a shared agreement that governed the utility’s use of city streets, public easements and other city-owned property. In 2010, Boulder voters allowed the franchise agreement to expire. Since 2011, the city and Xcel Energy have operated without a franchise agreement.

In the Nov. 3 election, voters approved a measure that will enter the city and Xcel Energy into a new, 20-year franchise agreement with six potential exits from the agreement during the term. This franchise agreement must be approved by state regulators. The city expects the Colorado Public Utilities Commission to state its views in early 2021.

The franchise agreement includes terms that give the city the option to end the franchise agreement early under certain conditions. The city could opt out of the franchise in 2022, 2024 and 2028 if Xcel Energy fails to meet certain emission benchmarks, and could also opt-out in 2026, 2031 and 2036 for any reason. An opt-out would require a six-person vote of City Council or a majority vote of Boulder voters.

If the city opts out of the franchise, it could renew the process to create a local electric utility or explore other options that may arise in the future, like buying electricity directly from solar and wind farms.

Boulder’s experience demonstrated the difficulty of trying to carve a municipal utility out of an investor-owed utility. Voters in Pueblo in Southern Colorado rejected an MEU in a vote earlier this year; nearby Canon City is still considering the option.

“Municipalization over the past couple of decades has been a challenge,” according to a 2019 report from Concentric Energy Advisors. “Since 2000, over 60 communities have considered or are currently considering municipalization, and just nine have municipalized, with two of those communities subsequently selling the electric utility back to the IOU.

“The lengthy process of municipalization can result in escalating acquisition and transaction costs, with the length of some efforts exceeding a decade,” the report added. “In addition, the actual costs of municipalization often exceed initial estimates, as acquisition costs for the system are refined throughout the municipalization process.”

Boulder’s estimated costs to acquire the Xcel electric utility assets escalated from less than $140 million in the 2005 preliminary feasibility study to between $300 and $337 million by 2018. The 2018 cost estimates did not include costs for stranded investments, originally estimated at $26 million.

In 2019, Xcel and the city estimated buyout costs could reach $900 million.

“Given the protracted negotiation period and ongoing court battles, estimates for legal costs alone have risen dramatically over the past several years,” the Concentric study said.

“Whereas the city’s 2005 preliminary feasibility study did not estimate legal fees, the city’s
2011 final feasibility study included $3 million in legal fees. However, as of March 2019, Boulder had already incurred $20 million in costs associated with its municipalization efforts, and city voters had approved another $17 million to be spent over the next five years, for a total of $35 million by 2022.”

The University of Colorado's main campus signed an agreement to buy its power from the new city utility in 2017, but some major companies were leery of the switch, according to news reports.

Boulder, which already operates its own water utility, is launching construction this year of 65-mile fiber optic backbone to provide high-speed broadband service in the area, which is home to several high-tech and telecommunications companies.

The new network will be used for city and certain community purposes in the short term but could support gigabit speed internet services to homes and various city applications in later years, officials said.

In August 2019, the city issued $20 million of taxable certificates of participation to finance the broadband system with ratings of Aa1 from Moody’s Investors Service. Moody’s rates the city’s general obligation debt triple-A.