#Pueblo election: Colorado’s steel city calculates risks and rewards of ousting its electrical utility — The Mountain Town News

From The Mountain Town News (Allen Best):

Pueblo debates risks and opportunities

Pueblo voters on May 5 will decide whether to stick with their existing electrical utility, Black Hills Energy, or municipalize operations.

Proponents and opponents frame their arguments in terms of opportunity and risk. The fulcrum for the debate is the high cost of electricity in Pueblo, which is among the highest in Colorado and some say the nation.

The most immediate comparison is to Colorado Springs, which has a municipal utility, similar to what is proposed for Pueblo. Residential rates in Pueblo are 36% higher, 33% higher for large commercial customers, and 41% higher for small commercial.

In metropolitan Denver, rates charged by Xcel Energy are also substantially lower. In fact, nearly all of Colorado’s several dozen utilities charge less than those charged by Black Hills, according to rate surveys conducted by the Colorado Association of Municipal Utilities. Steve Andrews, a proponent of municipalization, says those who get their power from public-power sources across Colorado similar to what he supports in Pueblo paid $82 per 700 kilowatt-hours of electricity compared to $112 for Pueblo.

Could Pueblo residents and businesses do better if the city—through its parallel agency, the Pueblo Board of Water Works—took over operations? That’s what voters must decide.

How much it would cost to take over Black Hills operations depends upon what portion of the service territory is included. A study completed last October by EES Consulting calculated the debt service for Black Hills operations only within Pueblo at $348 million over a 30-year period.

There are also provisions for creating a regional utility to deliver electricity to all of the current Black Hills electrical customers in Colorado, if they want to join Pueblo. All of Pueblo County, including Pueblo, would be $461 million. The estimated cost was $848 million for acquisition of the full Black Hills service territory in Colorado, which stretches from Cripple Creek and Westcliffe on the west to Rocky Ford and beyond to the east.

These figures include Black Hills’ generating assets, but whether they would be acquired would depend upon negotiations.

The Board of Water Works would be responsible for negotiating with Black Hills or, if necessary, for condemning the assets in legal proceedings. The board would also be responsible for financing the acquisition costs and court costs. The board members would continue to be elected by city voters.

The Water Board pointed to relatively simple arithmetic. The city had commissioned two studies. The first one established that a public power utility would reduce rates and costs over time. The Phase 2 study delivered in October offered more specifics. It said Black Hills generates between $250 million and $260 million in revenues, and after expenses, enough revenue would be left to cover bonds of $900 million to $1 billion. It also concluded that a community-owned electric utility could deliver current customer savings of 10% to 14%.

Electrical utilities are wonky things, so a brief primer might be useful. First, Colorado has two investor-owned utilities that deliver electricity: Black Hills and Xcel Energy. The latter serves metropolitan Denver and some other areas in Colorado. The remainder of Coloradans get their electricity from electrical co-ops or municipal providers.

Black Hills, which is based in Rapid City, S.D., in 2008 purchased Aquila, the previous utility serving Pueblo, for $282 million, according to a filing on the Federal Energy Regulatory Commission website. It soon got out of coal, replacing that with a gas-fired power plant east of Interstate 25 near the airport and industrial park. Pueblo’s franchise agreement with Black Hills continues to 2030.

Opponents of municipalization have a sturdy voice in the Pueblo Chieftain. Its just-vote-no editorial on April 10 reminded readers of instructions issued by judges in criminal cases: “Don’t vote to convict unless the prosecutors have proven their case beyond a reasonable doubt.” Proponents had failed that test, it said. Most of the information came from a single consultant’s report – and one tainted in the Chieftain’s telling by the guidance of the city officials who “were very transparent about their interest in hearing the virtues of municipal electric services,” the newspaper said.

“Relying so heavily on one source of information on a subject this complicated is a bit like reading the CliffsNotes on “Moby Dick” and then claiming to be an expert on whale hunting,” the newspaper said. “Proponents say a municipal electric company would save money, but it’s not clear how.”

Risks outweigh potential rewards, in the newspaper’s view. “It seems extremely unwise to put the city’s future at risk based on some vague hopes that it would all work out well in the end.”

The city council also adopted a resolution, on a 4-3 vote, opposing municipalization. Among those in the majority was Dennis Flores, the city council president. “Do not be fooled. This is not the panacea the other side would have you believe,” he wrote in the Chieftain.

The most prominent supporter of municipalization is Nick Gradisar, the mayor. He took office in January 2019, winning 57% of votes.

“Black Hills is an investor-owned utility and, as such, its primary allegiance and legal duty is to its shareholders to generate profits,” he wrote in a Jan. 28 op-ed published in the Chieftain. “A public electric company would have no shareholders, would not have to generate profits, and its primary legal duty would be to its customers and ratepayers.” But he warns against expecting lower rates immediately.

“Based on its current rates, over the remaining 10 years of the franchise agreement, Black Hills would take out of this community $130 million in profits. This is one of the reasons that we have the highest electric bills on the Front Range.”

The business community in Pueblo mostly seems to favor municipalization. The Pueblo Chamber of Commerce points to the consultant’s study—the same one seen by the Chieftain as wanting in depth and honesty—as showing transition to a community owned electric works would achieve “significant rate savings over a 20-year period.”

“When it comes to attracting new businesses to Pueblo, these rates can be a deal breaker,” says Andrew Lang, chief operating officer of TR Toppers, a Pueblo-based food processing and distribution company, in an op/ed in the Chieftain.

The Pueblo Chieftain in that story described her comments as “often scorching.” She sees Black Hills as taking actions that are scorching.

“The company is unstoppable—scorched earth litigation at the PUC, high-priced lobbyists, access to the governor,” she wrote in an April 10 op/ed, “End Black Hills’ predatory business practices.”

That strong language is tame in comparison with her remarks in an interview conducted by municipalization proponents on a Facebooks stream last Friday night. There she accused Black Hills of chicanery at every turn, describing the company as an “energizer vampire.” (See a partial abridged transcript.)

Much has been made by opponents of municipalization about Boulder’s much longer attempt to break away from Xcel Energy and form its own municipal utility. “Our neighbors in Boulder have spent a decade and millions of dollars in an attempt to municipalize their electric service, without an end in sight,” points out the Chieftain. Opponents also point out that many efforts to municipalize around the country have come to nothing.

But proponents say that Boulder went about things differently, and Pueblo has a better approach and has learned from Boulder’s mistakes. Too, Pueblo’s later start works in favor of Pueblo, while creating a drag on Boulder’s efforts. Prices of renewable energy have plunged in the last decade, allowing Pueblo more options and undermining the reason why Boulder sought independence: To more rapidly green up its power supply. Xcel Energy, its supplier, is now rapidly doing so—ironically by closing two of the three coal plants that are the city’s backdrop.

Boulder’s attempted break a decade ago was precipitated by a desire to accelerate the transition to emissions-free energy. In Pueblo, the municipalization effort has been almost purely about rates. That’s ironic, given that Pueblo was the first municipality in Colorado to formally embrace a 100% renewable energy goal. That was in 2016.

Larry Atencio, a city council member who initially was the public face of the 100% renewable goal, getting national attention, opposes municipalization but instead points to the work of Black Hills. It’s building a 200-megawatt renewable energy system, probably solar, that will result in a 5% decrease in rates. Proponents, however, question whether the solar farm will ever get built, given how much generation Black Hills already owns. As for the 100% renewable goal adopted by Pueblo, Gradisar, the mayor, says that municipalization should allow Pueblo to hit that target by 2035.

A poll conducted by the city in early March, part of a broader survey about municipal issues, found 70% favoring a new public-power utility. But that was before a public relations campaign was launched by a new group called Pueblo CARES with a barrage of TV and radio advertisements challenging municipalization. The Chieftain on April 16 reported that the group had received over $1.5 million in contributions from Dec. 19 through April 13. Several council members and others had contributed $250 or less to the group, and Black Hills Energy said it has contributed, but not exactly how much.

The proponent group, Bring Power Home 2020, a campaign-issue committee that grew out of the all-volunteer Pueblo’s Energy Future, reported $21,000 in contributions for the same period. That mismatch in the campaign war chest is one reason that Andrews, of Bring Power Home 2020, describes his group’s efforts as one of David vs. Goliath.

Still, municipal proponents mostly express optimism they will prevail. “I think we’re still in the running,” says David Cockrell, a former city planner and college administrator and a key figure for several years in the municipalization effort. “We are not convinced we’re going to lose. It’s still possible we may win substantially.”

And if David should win the vote next Tuesday? Koncilja, the former PUC commissioner, says it will be national news. It will also be the big pivot that will allow Pueblo, which even now remains best known in Colorado for its steel mill, to more fully participate in the great energy transition.

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