July 25, 2006

By Jerry Kopel

 

You don't have to be a Denver voter to have an interest in what happens to Denver ballot issue 1 A at the August 8th primary election.

 

Xcel Energy wants a new 20-year exclusive franchise beginning Jan. 1, 2007 for delivery of gas and electricity to Denver customer homes. Twenty years is the longest time allowed under Denver's charter granting an exclusive franchise.

 

Denver is the "crown jewel" in Xcel Energy's customer base in Colorado although the majority of customers appear to be beyond the city limits. To make sure Xcel Energy has every opportunity to gain the franchise, the contract with Denver allows a vote on August 8th. If that fails, the vote can be held again at the November  general election. If that fails, Xcel Energy enters a holding pattern with another vote possible in early 2007.

 

A 20-year exclusive franchise will help Xcel bolster shareholder comfort and credit rating. Xcel's dividends were up and there was a 25 percent jump in net earnings the first quarter of 2006. This was during the same time period that 371,000 Xcel customers in Colorado lost power on an extremely cold  (13 degrees below zero) February 18th, 2006. The company chief executive Richard Kelly, has promised another dividend boost in July.

 

What makes Xcel jittery enough to have already mailed five to seven pieces of literature to Denver voters extolling the virtues of the new franchise contract? The state's Public Utilities Commission (PUC), a body composed of two Republicans and one Democrat, all quite conservative, has released a 128 page report blaming Xcel for the February power failure. That received major coverage in the two Denver dailies.

 

On July 17th, a very hot day, 12,000 Xcel customers were again without electricity from overloaded transformers.

 

If the August 8th voters turn down the franchise contract, Xcel will be looking at protracted rate hike hearings before the PUC probably in September, long before the November general election, on its request of an annual $210 million rate increase for electric customers. That is in addition to a $2 million cost increase yearly to Denver customers who presently have immunity on the first $12.50 of the franchise fee paid through the Xcel conduit to the city.

 

There will be organized opposition to the rate increase from the Public Interest Research Group, the Colorado Progressive Coalition, and Progress Now Action. The increase would be an annual "average" of $78.24. Unfortunately, as Garrison Keillor points out on his radio show, everyone we know is "a little bit above average."

 

The last franchise agreement was approved in 1986 to then-Public Service Company, which later merged in 1996 with another utility to become Xcel Energy. Xcel continues to use Public Service Co. as a subsidiary.

 

Xcel reached a deal in 2005 with the PUC that it would not be fined or pay rebates for 2006 outages in exchange for $11 million to be spent on better services.

 

Thanks to past Denver administrations, the city never attempted to take over its public utility and lacks the funds to do so now. Many other towns and cities such as Colorado Springs, Fort Collins, Glenwood Springs, Fort Morgan and Gunnison had the foresight to own their public utilities for electric power. Boulder's agreement with Xcel expires in 2010, but the cost of buying out Xcel may be too high.

 

As August 8th approaches, the last thing Xcel Energy wanted was the major news story in late July reporting that J.D. Power and Associates has released a customer satisfaction survey that ranked Xcel LAST among 12 large Western electric utilities.

 

My guess, and it is only a guess, is that Xcel will be back before the voters in November.

 

(Jerry Kopel served 22 years in the Colorado House.)