Imagine a great electric utility for Pueblo
By Steve Andrews and Susan Perkins
Imagine that David actually beats Goliath after a mammoth struggle between now and, say, July 2021. Yes, imagine that Pueblo actually breaks away from Black Hills Energy and gets to set up a new electric utility.
This isn’t an idle thought experiment since the appointments to Pueblo’s Electric Utility Commission were finalized last week. When they convene shortly, their broad goal will be to study the “off-ramp alternatives” to Black Hills Energy.
If you were on that Commission, what would you want from that new utility? What should it look like? What goals must drive the entire effort and shape the outcome?
Here’s our first cut at what Pueblo’s Energy Future thinks are the highest priorities for our future utility:
#1. The endless stream of increases in electric bills that BHE has delivered must end. Finito. No mas. Further, we should be able to expect that our new electric utility delivers at least a modest decrease in electric bills within the first few years.
Set your skepticism aside; this is definitely doable financially, but by no means guaranteed. And please realize that customers of public power systems nationwide, such as municipal electric utilities, pay on average 15% lower rates for their electricity than customers of investor-owned utilities (IOU, which Black Hills Energy is), according to the American Public Power Association (APPA).
#2. The system must be highly reliable; flip a switch and the lights must still come on.
For the record, during 2015 municipal utility customers experienced the lowest instances of power outages in both frequency and duration, averaging two hours of interrupted service while IOU customers averaged slightly more than three hours without electric service, according to nationwide statistics from the Energy Information Administration.
#3. The people and businesses of Pueblo should have a seat at the utility planning table. We need an opportunity to have input to the process to achieve a better outcome, not just limited opportunities to protest against the results of the process as is the case today.
#4. All residents and businesses should be treated as valued customers or possibly even members, not mere bill payers. A sense of equity and fairness, a missing component of the present relationship, needs to permeate the new entity.
#5. We need to keep more of our utility dollars within Pueblo and our surrounding communities and counties. Reducing the bleeding of utility bills paid to out-of-state corporations and shareholders today will boost Pueblo’s economy tomorrow.
#6. We seek to implement state-of-the-art rate designs that provide more options for saving energy, reducing demand and cutting electric bills.
For example, the Regulatory Assistance Project (RAP) states that the difference between a progressive and a regressive rate design can have a large effect—15% by one estimate, but possibly more—on customer usage. We can look north to Ft. Collins Utilities whose rate designs have been recognized by several industry analysts, including RAP, as a top-level example of municipal rate design from which to learn.
So, what type of utility will most effectively allow us to meet those objectives? Consider the following three scenarios, which we feel are likely to be scrutinized by the Commission:
—An enterprise utility. This would be a municipal utility formed as a separate enterprise, run by an independent board of directors (think Pueblo Water). Based on our preliminary analysis, we believe this would be the best form for a municipal utility to take.
With a municipal electric utility enterprise, the upside we see is that all five of the priorities outlined above could be achieved. The downside is that it will truly be a battle for Pueblo to break away on its own from Black Hills. And that battle will be costly.
But Pueblo can do this. Savings can offset those costs.
Jerry Warren, who has worked on municipalization feasibility studies for 20 groups scattered around the country and who is semi-retired now, reports that the financial side of taking over from an investor-owned electric utility nearly always pencils out positively. Warren says the pivot point is political will.
—A third-party hybrid. There are corporations that specialize in providing a range of electric supply services to municipalities, from just supplying the electric power purchased on the open market to full provision of services (supply, billing, full maintenance, new service, etc.). Three such companies we’ve spoken with are Tenaska Power Services Corp., ENCO Utility Services, and Guzman Energy.
The upside of working with a third-party player is that Pueblo could rely on their extensive expertise and financial backing during the break-away process, as several third-party utilities have assisted from start to finish in the switch from investor-owned utility to municipalization. If Pueblo worked with a third party, we suspect that the transition away from Black Hills would likely happen much sooner than “going it alone.”
—Buy-out by another utility. Xcel Energy already supplies natural gas to Pueblo and used to supply most of Pueblo’s power; perhaps they might be interested in taking over from Black Hills. San Isabel Electric Association already provides power to much of Pueblo West. It surrounds much of the current Black Hills service territory. Perhaps they might be an interested buyer.
The upside is that a buy-out by an existing utility could happen without Pueblo having to do much, if anything. It could happen fairly quickly. And rates could possibly decline quickly, though by variable amounts, depending very much on the purchasing player and the nature of the deal struck.
The bad news is that achieving priorities #3 through #6 becomes more problematic.
We’ll learn more as the exploration by the off-ramp Commission proceeds. Stay engaged. Contact City Council members Larry Atencio and Chris Nicoll, or Pueblo County Commissioner Terry Hart—all three are members of the new Commission—and provide them with your thoughtful input.
Steve Andrews (email@example.com) is a retired energy consultant. Susan Perkins (Susan@PerkinsEnergyLaw.com) is a lawyer in the energy sector. Both are members of the network Pueblo’s Energy Future.