This November, Denver voters will decide whether to approve Xcel Energy’s new franchise agreement with the city, a once-in-twenty-years occurrence, with the existing agreement expiring December 31.
A franchise agreement grants Xcel rights to use Denver’s streets and rights-of-way. The last franchise agreement was put into place in 2007. In 2025–by a 7 to 6 vote–the City Council refused to refer the new contract to the ballot, in part because “not enough was accomplished for clean energy and climate resilience goals.” In July 2026, the Council voted 10 to 2 to advance the new franchise agreement, which has been supplemented by an Energy Partnership Agreement.
Following the money
Under the agreement, Xcel collects a three percent pass-through fee from a line item on customers’ bills, about $34 million per year, and pays it back to the city general fund. Another one percent of revenue is for underground power lines, which is built into base rates. One percent of substation budgets will be allocated to beautification efforts, totaling about $6.4 million, capital that ends up rate based as well.
Mayor Mike Johnston said that the “proposed agreement makes it easier for people to heat and cool their homes with clean energy.” To that end, $2 million per year is carved out of the franchise fees for “programs such as heat pumps or electric vehicles.”
This is ratepayer money via the bill surcharge being redirected to electrification.
The terms of the deal now include $125,000 per year from Xcel Energy to the City for low-income energy assistance and energy conservation. Xcel will also kick in a $2.5 million one-time “donation” toward utility bill assistance for Denver residents. These provisions are supposed to come from Xcel’s shareholders.
Denver negotiated some public reporting requirements, which might sound like good news. There would be a city-hosted dashboard to track metrics and spending, and 5-year partnership reviews of the agreement. The partnership would be administered by Denver’s Office of Climate Action, Sustainability and Resiliency, though, so it’s unclear that affordability and reliability will take precedence over climate concerns.
Xcel not going anywhere
The franchise agreement does not mean that Denver can set utility rates (that’s the Public Utilities Commission’s responsibility) or dictate Xcel Energy’s generation mix. At the state level, Senate Bill 21-264 requires natural gas utilities to cut emissions by four percent by 2025 and 22 percent by 2030, from 2015 levels. Xcel Energy failed to meet the 2025 target, coming in 7.2 percent above the compliance level and higher than its 2015 levels.
The city’s FAQs explain the consequences of the vote, but they’re less dramatic than voters might expect. If the franchise agreement fails at the ballot, Xcel still remains a state-regulated monopoly with the exclusive right to sell gas and electricity in Denver. While the city is in the franchise agreement, Denver “is not restricted from exploring municipalization” (creating a publicly-owned utility using the existing Xcel assets).
Rejecting the agreement doesn’t automatically put Denver into a municipalization scenario.
The Denver Gazette reports that if voters vote no, they may still be on the hook to pay the three percent franchise fee (as Xcel and the City read it, though it’s disputed):
“So, while the franchise agreement requires Xcel to pay Denver 3% of its gross revenues, Xcel recovers that payment from Denver customers. Economically, the cost is borne by ratepayers — not the utility.”
No one comes out of this smelling like roses. Denver, for its part, used a right-of-way contract negotiation to get climate spending that it otherwise couldn’t mandate and recoup it from ratepayers. Xcel was happy to agree, because climate carve-outs are capital it earns a guaranteed return on anyway. The city never had a credible alternative to negotiation, given that it estimates municipalization to cost between $4 and $5 billion to buy the infrastructure from Xcel.
Denver loses out on real money in avoided costs if it wants to walk away, and Xcel loses very little except legal certainty to use rights-of-way.
No matter how Denverites vote come Nov, 3, Xcel retains its monopoly.
Sarah Montalbano is a policy analyst with Independence Institute’s Energy and Environmental Policy Center and a contributor at Always On Energy Research.
