PUEBLO, Colo. (KOAA) — Voters in Pueblo have until 7 p.m. Tuesday to drop off their ballots on Issue 2A. As of Monday morning, about 20% of the ballots that were mailed out had been turned in.
Voters are being asked, “Should the City of Pueblo cancel its franchise agreement with Black Hills Colorado Electric, LLC and acquire the generation, transmission and distribution assets of Black Hills Colorado Elections, LLC, if determined feasible?”
Feasible is the key word, and it is a topic that those who want to separate from Black Hills are still navigating. Several city leaders, including the mayor, have been outspoken about the rates put in place by Black Hills Energy in recent years, believing the company is charging too much. Black Hills Energy doesn't believe the City can handle the costs associated with taking over.
If 2A passes, it doesn't mean an immediate takeover by the City of Pueblo. It would allow the city to terminate its franchise agreement with Black Hills Energy, signalling the start of finding a different utility provider.
Two reports were released in recent weeks, one commissioned by Black Hills Energy and the other prepared on behalf of the City of Pueblo.
Click here to read the full Preliminary Feasibility Study prepared for Black Hills Energy by Toby Bishop, Ann Bulkley, and Adam Wyonzek.
Click here to read the full "City of Pueblo Energy Strategy." The draft report was prepared by GDS Associates Inc. for the city.
Both reports came to similar conclusions, that right now it isn't feasible for the City of Pueblo to take over electricity operations for its residents. The report put together for the City does have four recommendations on opportunities for operating costs to be reduced.
"In particular, if the City were to partner on power supply with another utility or power marketer/developer, there could be opportunities for generation cost synergies at lower costs than in an independent supply approach," part of the report prepared for the City reads. "In addition, aggregating with other jurisdictions in a joint power authority of some type may present some economies of scale, although not likely to adjust feasibility significantly in and of itself without additional power supply benefits."
The report from GDS Associates included the following recommendation to the City if 2A passes:
1. Maintain a pulse on BHCE (Black Hills Colorado Energy) retail rates and where they are headed.
2. Formally or informally, continue to reassess the feasibility of municipalization relative to BHCE retail rates and changes in industry and power supply markets.
3. Consider collaboration with other interested jurisdictions to form a joint action agency or joint power authority.
4. Issue Request for Information (RFI) to evaluate indicative pricing offers from other interested utility or power marketer/developer partners. The study conservatively evaluates power costs based on market information in an independent supply scenario for the City; however, local power suppliers may offer strategic competitive supply alternatives.
The report prepared for Black Hills Energy showcased the following Key Takeaways:
1. The cost to acquire the electric distribution assets within the city limits of Pueblo and establish a new public electric utility is estimated to require financing of more than $1 billion.
2. While municipalization would allow a municipal utility in Pueblo to finance future electric operations entirely with tax-exempt debt without shareholder returns, this benefit is more than offset by the costs to acquire and operate the existing electric distribution system within the city.
3. Specifically, it is estimated that forming a municipal utility would cost Pueblo electric customers an additional $1.14 billion over the next 20 years as compared to the same electric service continuing to be provided by BHE, which equates to an average incremental cost of electric service to city customers of $57 million per year.
4. Importantly, the analysis herein also excludes any potential compensation that Pueblo would have to pay BHE related to going concern value, which could be a significant, and would need to be considered by the city and its voters.
The report prepared for the City points to data from the American Public Power Association (APPA) that states a total of 50 public power utilities have been formed in the last 30 years. Twelve of those have occurred in the past 20 years. The GDS Associates report adds, "In our experience successful implementation of public power is less than 10 percent." GDS Associates noted that the City of Boulder tried to part ways with Xcel starting in 2010, but ceased efforts in 2020.
The Senior Vice President of Education, Training, and Events at APPA, Ursula Schryver, says that about 15 cities try to turn to public power each year. The organization supports not-for-profit public power.
"I mean, it's definitely an undertaking," Schryver said of a city taking over a utility. "There's no doubt about it, and it does take time. But when you look at the benefits that public power provides over the course of time, it often is really beneficial,"
Schryver said that she believes local control is vital, and used Winter Park, Florida, as an example. Winter Park voted in 2003 to purchase the electric utility system from then, Progress Energy Florida. The City says this helped with reliability issues.
"It may not be in five years that you see all the benefits that you can achieve," Schryver added. "But if you look 50 years down the road, or 100 years down the road, that's when you'll continue to see the benefits of public power for the long term."
This isn't the first time the City of Pueblo has asked voters if they want to part ways with Black Hills Energy. In 2020, voters shot down the idea of the City separating from Black Hills, with 75 percent of the voters saying no to the proposal.
The report provided to Black Hills Energy talks about the potential cost to customers, estimating it would cost the City more than $1 billion to take over. The estimated annual electric bill increase for the average residential customer if Pueblo were to form a municipal utility is estimated at $269 in year one and $660 in year 20.
Ballots need to be turned in by 7 p.m. on Tuesday.
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