Community Engagement

Report details municipalization benefits for Pueblo, Colo.

Electric customers in Pueblo, Colorado, could “conservatively” save 10 percent to 12 percent on their bills if the city forms a public power utility, according to a report prepared for the city.

Pueblo’s city council in 2018 approved a resolution to do a related feasibility study. The city currently has a franchise agreement with Black Hills Energy.

Black Hills Energy is part of investor-owned Black Hills Corp., which is headquartered in Rapid City, South Dakota.

Pueblo, with a population of about 111,000, approved its 20-year franchise with Black Hills in 2010. Colorado law allows Pueblo to buy or condemn Black Hills’ electric facilities in the city ten and 15 years after the franchise agreement’s effective date.

The report, released earlier this month, found it may make sense for Pueblo to continue exploring forming a public power utility.

“Despite stranded generation asset costs, municipalization is feasible due to lower municipal utility operation and capital costs, and projected lower power supply costs,” the report said.

Pueblo would save about $164 million through 2039 by forming its own utility, according to the report.

Forming a public power utility can lead to lower rates, more local economic development, less greenhouse gas emissions and more local control over key energy decisions, said the report, prepared by EES Consulting, an engineering and management services firm based in Kirkland, Washington.

The initial feasibility report supports developing a more in-depth study on the possibility of forming a public power utility.

Black Hills sells about 891,350 megawatt-hours a year to customers in Pueblo and a total of 1.2 million MWh when including customers outside the city limits, according to the report.

The Colorado Public Utilities Commission lacks jurisdiction over public power utilities that serve customers within city boundaries, but the agency could get involved in a possible municipalization process if Pueblo opts to include customers outside its city limits, the report said.

If Pueblo decides to move forward with forming a public power utility, the city must take several key steps, including receiving a majority vote by its residents, according to the report.

Other measures include a vote to issue debt or get a loan to buy Black Hills’ assets. The city would also need PUC approval if it wants to include areas outside the city in the public power utility, according to the report.

The city may also need Federal Energy Regulatory Commission approval.

Finally, if Black Hills refuses to sell its assets, Pueblo would have to complete the condemnation process through a legal proceeding in Colorado district court, a process that could last three years if appeals are filed, the report said.

EES estimated it could cost as much as $334.4 million to buy Black Hills’ assets needed to serve Pueblo’s residents. However, the firm said the fair value for the utility assets likely wouldn’t be as high.

Pueblo’s effort has been interrupted by a mayoral election held earlier this month, according to Thomas Corlett, a member of the seven-member Electric Utility Commission, which was created to advise the Pueblo city council on municipalization.

The commission’s last meeting was in November 2018, Corlett said, noting that the city’s new mayor wasn’t involved in the process to consider municipalization.

If the mayor and city council decide to continue the process, the next phase would include a legal analysis and community outreach, according to Corlett.  A business plan would be developed as part of the second phase, he said.

Colorado has 29 public power utilities.

The EES report is available here.