On May 5, Pueblo citizens will have the opportunity to vote to establish a local, not-for-profit public power utility by voting for charter amendment 2A.
There are many reasons to support that change and the first one is the long-term financial benefit. We must ask ourselves why we would be content to stay with Black Hills Energy and pay 50 percent more for our power than the 29 other communities across Colorado served by public power.
The Colorado Association of Municipal Utilities’ year-old sample shows that Colorado’s public power residents paid an average of $82 to purchase 700 kilowatt-hours of electricity (a common monthly total). Pueblo residents paid $122 for the same amount of electricity. Why would we want to stay with BHE and pay $40 a month more for electricity?
Pueblo’s homeowners, businesses and industries deserve long-term financial benefits. Yet that long-term financial gain is the benefit most frequently challenged by skeptics.
They wonder why rates eventually would be less than with BHE. Skeptics even fear rates will increase.
We suggest you consider an oft-repeated line from “All the President’s Men,” the political drama from the 1970s: “Follow the money!” The money trail tracks back to the mother ship in South Dakota.
First, our residents, businesses and industries send roughly $120 million every year to BHE’s South Dakota headquarters. What amps up that pain even more is that Pueblo’s electric bills with Black Hills are the highest among the Front Range’s larger communities.
Second, large potential savings would come from Pueblo’s new electric utility buying power through a combination of open markets and longer-term contracts rather than paying the BHE monopoly the way we do today. This gets a little complicated.
BHE already buys power ―in fact most of its power ― from other generators. A surprising 85 percent of its power is “purchased power.”
Some of its purchased power comes from Xcel Energy, Colorado Springs Utilities and 28 others. Black Hills paid them an average of $19 per megawatt-hour (MWH) of electricity. That’s a Walmart-like price.
Most of the purchased power comes from a subsidiary of BHE’s parent company. This subsidiary, an independent power producer (IPP), owns one of the two gas generators at the Pueblo Memorial Airport Generating Station.
The IPP generator runs almost constantly. We pay $86 per MWH for electricity from the IPP plant. That’s a Saks 5th Avenue-like price.
Half the power sold to BHE customers, or 1 million MWH, was bought at that very high price.
Even if we paid $50-$55 per MWH for “guaranteed power” (also called “firm power”), including the cost to transmit that power, it would save all customers up to $35 million a year.
Third, BHE already carries loans for $350 million on its books, at a cost of $18-plus million in interest payments a year. Your bills today cover 5.2 percent interest payments on that loan. A public power utility always will have access to lower rates, at any given time.
For example, a 3.75 percent rate to a new local power company would save customers $5 million a year on that loan.
Finally, all BHE’s costs of being a regulated monopoly are covered by customer bills. In its regulatory filing of April 2019, from which the above figures were all taken, BHE spent at least $7.4 million on legal costs, regulatory fees and “government affairs.”
By leaving the jurisdiction of the Colorado Public Utilities Commission, we estimate that legal and PUC-related expenses to customers would decline by around $5 million per year.
While those are likely to be three of the largest areas of savings, they certainly aren’t the only ones. Customers of a new public power utility would not have to cover the costs of building BHE’s planned new Pueblo Headquarters near Pueblo Boulevard and Lake Avenue. Customers would no longer pay for BHE’s return on its capital investment.
Add up Pueblo’s fraction of total savings and they should more than cover the cost to pay off the revenue bonds for the water board’s purchase of BHE’s condemned assets.
What about Pueblo Water’s fiscal responsibility? Skeptics call them out for steep water rate increases over time. The record shows that Pueblo’s water rates increased 39 percent since 2009, while BHE’s bills increased roughly 50 percent during those years.
More importantly, Pueblo’s water rates rank lowest among Front Range cities.
Bottom line: if you follow the money, the financial fundamentals are solid. They point towards local power. Vote for 2A on May 5!
Steve Andrews (firstname.lastname@example.org) is a retired energy consultant and a member of Pueblo’s Energy Future.