Forming a municipal utility in Pueblo, Colorado, could conservatively save Black Hills Energy electric customers 10 percent to 14 percent, partly because of lower estimated power costs, according to a report finding the move to be feasible.
Other benefits of creating a public power utility include local control over power supply resource types, rates, local programs and key decision-making, according to the report released Oct. 11 by the city.
“There are adequate merits to warrant forming a municipal electric utility,” EES Consulting said in the report.
The report builds on an initial study released in the January by the engineering and management services firm.
Pueblo has a franchise agreement with Black Hills Energy, a utility owned by investor-owned Black Hills Corp., which is headquartered in Rapid City, South Dakota.
Pueblo, with about 111,000 residents, 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 10 and 15 years after the franchise agreement’s effective date.
The feasibility study analyzed buying three geographical areas where BHE provides electric service: within the city’s boundaries, all facilities in the County of Pueblo and all BHE facilities in Colorado. BHE has about 96,700 customers in seven southern Colorado counties, 73,000 customers in Pueblo County and 53,550 in Pueblo.
“There are tradeoffs for acquiring these three service area delineations; however, based on the field investigation and legal review by the project team, this study finds that acquisition of all three service territories is feasible,” the report said.
EES estimated it would cost $868 million to buy BHE’s distribution and substation facilities across its Colorado service territory, $561 million to buy assets in Pueblo County and $348 million to buy assets within the city of Pueblo.
BHE, which doesn’t want to sell its Colorado utility, contends it would cost Pueblo at least $402 million to buy the utility’s assets within the city, increasing annual costs by $17 million to $47 million, according to a study released last month. The estimate doesn’t include the value of the assets as a “going concern,” which could be “significant,” according to the study prepared by Concentric Energy Advisors.
However, buying all of BHE’s distribution facilities in Colorado would produce savings of $832 million over 20 years compared with savings of $455 million and $246 million for buying the distribution assets in the county and in the city, respectively, EES said.
EES contends its study is more thorough than the Concentric analysis. Concentric overestimated the cost of supply power to serve Colorado, according to EES.
Based on the results of a request for information, EES recommended the city not purchase BHE’s generation assets and instead buy wholesale electricity from a third party, the report said.
Black Hills sells about 1 million megawatt-hours a year to customers in Pueblo and about 2 million MWh when including customers outside the city limits, according to the report.
The Pueblo Electric Utility Commission is set to discuss the report at an Oct. 17 meeting. The seven-member panel was created to advise the Pueblo city council on municipalization.
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 EES.
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, EES said in its initial feasibility 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, according to EES.
Boulder municipalization efforts advance with PUC order
Meanwhile, the Colorado Public Utilities Commission on Oct. 10 granted the City of Boulder, Colo., approval to transfer some assets necessary for Boulder to create a community-owned, city-run electric utility. The decision ends a multi-year process before the commission that began in 2015.
In a future election, Boulder voters will determine whether the city will ultimately create a local electric utility. Prior to this vote, the city’s work is focused on identifying key costs. One of these is the cost to acquire parts of the existing electric system from investor-owned Xcel Energy.
