FACT OR FICTION
What is the Electric Utility Commission?
The Electric Utility Commission (EUC) is a group of Pueblo residents who are working together to determine the next steps that the Pueblo community should take regarding their electric providers.
State law gives the City of Pueblo the option to cancel its 20-year franchise agreement with Black Hills in 2020, 10 years early. Due to concerns over high rates and restart costs, the City of Pueblo established the EUC to advise the best steps forward regarding electric energy service.
Why was the EUC Established?
The EUC was established as a non-biased group that would discuss the options Pueblo has to address the electric energy issue. The EUC is conducting the necessary research to ultimately recommend next steps to the newly elected Mayor and City Council.
What process does the EUC follow?
The EUC is following a process outlined by the American Public Power Association. This process details the necessary steps to establish a municipal electric.
The EUC, along with the Mayor and City Council, will review all findings related to the energy question and field input from residents in Pueblo and the surrounding areas. The EUC will then make a recommendation on the path forward.
At the end of this process, what will happen?
There are several potential results of the energy conversation; all solutions are intended to improve the situation for Pueblo residents.
Potential outcomes include:
- Establishing a municipal utility
- Renegotiating the franchise agreement with Black Hills
I’ve heard the EUC is biased towards separating from Black Hills Energy, no matter what the studies say. Is this accurate?
The city kick-started a conversation about electric utility service because they are able to lead a non-biased conversation. Options range from re-negotiating agreements with Black Hills to creating a Public Power utility. The EUC was established to lead the discussion and make a final recommendation to the Mayor and City Council. The EUC is still receiving information to make this final recommendation.
Why is a feasibility study important?
A feasibility study is the first step to determining the options available to the City in the energy conversation. The main purpose of the feasibility study is to determine whether it is possible for the City to create a municipal electric utility.
Why did it take so long for the public to see the feasibility study
The feasibility study was written by EES Consulting and it is critical to determine what is feasible in the energy conversation and what options the City has to resolve this problem.
The EUC, City Council, and other key stakeholders initially reviewed the draft feasibility study before it was made public to all residents. This wasn’t to change information, but to make recommendations for additional clarification and information so that the final report that is released was accurate and without error.
What did the Phase 1 Feasibility Study tell us?
With an analysis of finances, operations and legality, the Phase 1 Feasibility Study determined that a public power utility is achievable.
The Phase 1 Study offered specific insight into three of the most important issues identified by the Pueblo Community:
- Reduced Rates: Over time, establishing a City-owned electric utility will reduce costs by an estimated 10-12%.
- Stable Rates: Rate increases for a City-owned utility are projected to be less than the historic Black Hills increases.
- Local Dollars: A public electric utility would prevent money from leaving Pueblo every year in the form of taxes and entity profit.
Why conduct a Phase II Feasibility Study?
Now that we know a City-run electric utility is feasible, a Phase II study needs to be completed to shed light on more of the specifics associated with establishing a public power utility. Phase II includes:
- A step-by-step analysis of potential regulatory filings.
- A detailed analysis of the power distribution system to ensure its proper value and functionality. A business plan to estimate power costs, fees associated with the existing Black Hills facilities and the cost of serving the entire region with public power.
- A Phase II study includes detailed options for providing power independent of Black Hills under three scenarios: for the City only, for Pueblo County only and for the full Black Hills service area.
Is it normal to conduct a Phase II Feasibility Study?
Feasibility studies are often conducted in Phases. Phase 1 focused on the financial feasibility but left other questions about the specifics of creating a public utility. Phase II will dig into these issues to answer the questions in more detail.
After Phase II concludes, there may be a need for a Phase III Study, which could explore options to buy and sell Black Hills assets either voluntarily or otherwise.
What did the Phase II Feasibility Study tell us?
The Phase II Feasibility Study shed light on the specifics of establishing a public power utility and concluded that there are enough benefits to justify forming a municipal electric utility. Should the City move forward with creating a public power utility:
- Creating a public power utility requires the purchase of distribution assets from Black Hills.
- If Black Hills doesn’t want to sell their assets, the City can legally pursue condemnation.
- All the Black Hills equipment is functional and working properly.
- The all-inclusive cost estimate of acquiring all of BHE’s distribution assets is $868M. However, the study also shows that the community and ratepayers will save $832M over 20 years of operation.
- Purchasing the entire Black Hills distribution system, state-wide, is the best and most efficient path forward.
- Buying wholesale power from a third-party is more cost-effective than purchasing the Black Hills generation equipment, and also creates more opportunity for renewable energy.
- Black Hills transmission is already available through Federal requirements; acquisition of this system is unnecessary.
The City-Commissioned Phase II Feasibility Study also spoke to some of the results that could be seen if a public power utility was formed.
- A public power utility would result in lower operation costs, lower power supply costs and lower capital costs.
- As a result, customers would see reduced rates (approximately 10-14% lower).
- Providing power to the entire Black Hills service area (including areas outside of City limits) would help avoid interruptions in service and achieve greater rate discounts.
- A public power provider would also offer local control over power supply, rates, local programs and key decision-making.
Creating a public power utility is a critical conversation that impacts Pueblo’s future success; we’re committed to providing the Mayor, Council and the community with the necessary, nonbiased information needed to make an informed decision.
- The EUC will continue to gather public input as they discuss Phase II findings. The EUC will use this information to help inform their recommendation for next steps to the Mayor and City Council.
- There could be need for a Phase III that could explore options to engage the full distribution system.