The Boulder City Council late Tuesday voted against putting a 20-year franchise agreement with Xcel Energy on the ballot, indicating instead that they plan to ask the community to support a limited-term replacement tax on the utility.

The actions are designed to give the city more time to explore a variety of ways it could achieve its clean energy goals while ensuring long-term reliability and rate stability. The proposed limited-term utility tax would replace the franchise fee in the short term, minimizing negative impacts to the city’s budget and its ability to continue to fund other high priority services and programs.

The vote on the franchise followed a lengthy period of public participation, as well as comments by all council members. The vote was split, 6 to 2, with one council member absent.

The current franchise agreement technically expired on Tuesday, but the terms will remain in effect until Dec. 31, 2010, as a result of a temporary extension previously approved by both Xcel and the city.

The franchise agreement gives the utility access to the city’s streets, alleys and other rights-of-way for the purpose of providing service to Boulder consumers. Without this agreement, Xcel will continue to provide gas and electricity to Boulder customers in a manner consistent with existing operations and at the same cost to consumers. However, the utility’s operations in public rights of way will be regulated by the Boulder Revised Code rather than by the specifics of the franchise agreement.

While service levels are not expected to change, the decision not to put the franchise on the ballot could have financial implications for the city. Under the franchise agreement, the city charges Xcel a 3 percent franchise fee, which the utility passes through to its Boulder customers. Xcel remits these fees to the city and they are deposited into the General Fund. The revenue from this source has varied from year to year, based in part on rates and consumption, but over the past three years, the annual total has averaged $4.1 million. This money is used to pay for core services, including police and fire, public works, the library and human services.

The proposed replacement tax, which council approved unanimously for the November ballot on first reading Tuesday, would generate $4.1 million a year, the average amount that ratepayers would be paying already in franchise fees, and sunset after five years. It is expected that Xcel will pass this cost on to its customers, as it does the franchise fee. A final vote on whether to put this revenue measure on the ballot is scheduled for Tuesday. Aug. 17.

“The city is taking the time it needs to determine how to best reach our community’s clean energy goals, while being mindful of the difficult economic times our residents are experiencing,” said City Manager Jane Brautigam. “This is not a tax that will cost voters additional money. It replaces a fee that Xcel customers are already paying. The impact on household budgets will be almost non-existent; whereas the impact of not having the revenue for city programs will be substantial.”

While some of the community members who provided feedback Tuesday indicated that they hope this signals a step toward municipalization, Brautigam and several council members said that option has yet to be considered.

“We are not committing to any one option over another,” the city manager said. “We may discover, after further study, that a franchise with Xcel is the best approach, or we may decide to head in another direction. We need time to hear from the experts most familiar with this changing industry and all that Boulder is working to accomplish. Then we will decide on the best course of action.”

Additional information about the city’s decision and its clean energy goals can be found at http://www.bouldercolorado.gov/energyfuture.

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