Since the time when we were little kids, we have experienced situations where we thought the option we didn’t select was the one we should have chosen. Whether it’s the checkout line at the grocery store that seems to be moving faster than the one we’re in or the earlier interstate exit that would have helped us avoid rush hour traffic, the grass sometimes seems to be greener on the other side of the fence.
That sort of thinking appears to be at work in discussions of forming a government-run utility in Pueblo. The question we must address is — is the grass really greener on the municipalization side of the fence?
I would argue, based on more than 40 years of experience in the electric utility industry working for the various types of entities — investor-owned utilities, rural electric cooperatives, public utility commissions, federal power marketing agencies, non-utility generators, irrigation districts and municipalities — that it is not. The rose-colored glasses that show greener grass on the municipalization side of the fence should be removed and the reality of the situation should be seen clearly instead.
Whether you’re a doctor or nurse taking care of patients or a skilled machinist for a manufacturing company, you rely on experience and expertise to do your job well. Similarly, electric utility personnel gain knowledge of how to operate and maintain the systems by virtue of time on the job. This so-called institutional knowledge generally requires years to obtain, is difficult to capture and is hard and time intensive to transfer to others. Starting a new Pueblo utility from scratch, as would occur through municipalization, leads to the risk that individuals will have insufficient institutional knowledge to keep the lights on.
Delivering safe, economic and reliable electric power requires expertise across generation, transmission and distribution, involving a very broad range of engineering disciplines. Other areas include environmental expertise and compliance, regulatory knowledge and compliance, finance, and customer billing, to name a few. Personnel must be hired with knowledge and expertise in each area, paid competitive salaries, and provided with challenging and meaningful work.
Ensuring that personnel are compensated commensurate with the market with rewards for outstanding performance and an ability to terminate employees who do not perform are not generally characteristics associated with government personnel policies. Those personnel policies are often fairly rigid with strict salary scales and promotional opportunities. Those policies do not facilitate quick responses to rapid changes in the market.
If a Pueblo government utility elects not to take over generation or transmission assets and to purchase these necessary services instead, someone at the new utility needs to understand the risks and costs associated with not owning generation or transmission. Purchasing generation and transmission is an option, but these are complex, volatile and fast-changing markets, and a bad bet or market swing might lead to an increase in the cost of purchased power.
In addition, personnel need to be completely informed as to alternatives that might be required to ensure safe, economic and reliable power is delivered to Pueblo 24 hours each day, seven days each week. The city cannot assume that a market provider would look out for the best interests of the Pueblo residents.
When Pueblo residents pay the city for their monthly electric bills, these payments need to add up to enough revenue for the city to deliver electric service. Running an electric utility takes money. In addition to power supply costs, any utility, including a government utility, will incur operation and maintenance costs for the distribution system (poles, wires, meters, substations), which directly correlate to safety and reliability. As power supply and operations and maintenance costs go up over time, as they inevitably will, these increases will be passed through to residents in the form of higher electricity bills.
Electricity will become part of the city’s budget and increases in the cost of electricity will compete with the needs of roads, police, fire and social services. Choices may need to be made — whether to fix a pothole or strengthen an electrical distribution system.
The economics of municipalization must be viewed realistically. Rose-colored glasses that only reveal greener grass on the municipalization side of the fence do not serve Pueblo taxpayers as they consider the ramifications of a decision of this magnitude.
Jill Tietjen, the president and chief executive officer of Technically Speaking, is a registered professional engineer in Colorado who has spent her more than 40-year career in the electric utility industry. Her experience is in planning for generation, transmission and fuels. Her consulting clients have included Black Hills Energy, Tri-State Generation and Transmission and the Empire District Electric Company.