APPA News

by Ethan Howland
APPA News
Posted February 13, 2020

Residents in Pueblo, Colorado, will vote on May 5 on a measure that would allow the city to leave investor-owned Black Hills Energy and form a public power utility.

The Pueblo City Council approved the special municipal election during a Feb. 10 meeting. If approved, the city would move to buy or condemn Black Hills Energy’s electric facilities in the city and Pueblo County.

The approved ballot question authorizes Pueblo’s Board of Water Works to form a water and power utility.

The Board of Water Works has developed an initial plan for a public power utility that includes a regional power supply authority and a regional distribution authority, according to a presentation given to the city council by Seth Clayton, the water utility’s executive director.

Forming a public power utility could take up to eight years, Clayton said. If approved by voters in May, the first steps would be to form agreements for the power supply and distribution authorities, according to Clayton.

Clayton said the water utility has had discussions with San Isabel Electric Association about working together on the initiative. San Isabel Electric, which serves southern Colorado and part of Pueblo County, has proposed operating the municipal utility, including maintaining poles, wires and other electrical equipment.

Clayton said there would also likely be a condemnation process involving the Colorado Public Utilities Commission, the Federal Energy Regulatory Commission and courts. Finally, the city would need to issue revenue bonds to pay for Black Hills Energy’s assets, he said.

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.

Black Hills Energy has about 96,700 customers in seven southern Colorado counties, 73,000 customers in Pueblo County and 53,550 in Pueblo.

The Pueblo Electric Utility Commission, a seven-member panel created by the city to consider the issue, voted unanimously on Nov. 21 to support breaking away from Black Hills Energy and forming a public power utility.

Creating a municipal utility in Pueblo could save Black Hills Energy electric customers 10 percent to 14 percent, partly because of lower estimated power costs, according to a report drafted for the city.

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 a mid-October report drafted by EES Consulting, an engineering and management services firm.

EES estimated it would cost $868 million to buy Black Hills Energy’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.

Black Hills Energy, 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 in September.

Based on the results of a request for information, EES recommended the city not purchase Black Hills Energy’s generation assets and instead buy wholesale electricity from a third party.

Black Hills Energy 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.

Boulder offers to buy Xcel Energy assets for $93.96 million

In other recent Colorado municipalization news, the City of Boulder, Colo., offered to purchase certain portions of Xcel Energy electric infrastructure for $93.96 million in a Nov. 20 letter to the investor-owned utility.

The city’s offer comes after an Oct. 28 Colorado Public Utilities Commission ruling that approved transfer of Xcel Energy assets outside substations to the city.

The appraised value of the assets outside substations is $62.3 million. The basis for the city’s offer is the value Xcel reports for financial filings; the offer is double the original cost of the assets, less depreciation.

In December, Boulder filed a petition to condemn Xcel Energy’s electric distribution assets in Boulder District Court following good faith negotiations with the Minneapolis-based company.

Additional news and resources about municipalization can be found on the American Public Power Association’s website here.