History rhymed in Pueblo’s municipalization vote this week. But will Boulder sing a new tune?
by Allen Best
A maxim often attributed to Mark Twain holds that history itself doesn’t repeat but it often rhymes.
Pueblo rhymed on Tuesday when 78% of voters rejected a proposal to end the franchise for electrical service with Black Hills Energy. A similar proposal was rejected by 75% of voters in May 2020.
But will the Pueblo City Council decide to take an off-ramp anyway? That question was left dangling after the city’s mayor expressed a determination to examine alternative paths for the city.
Voters in Boulder in November 2020 similarly rejected a proposal to end that city’s municipal franchise, in its case with Xcel Energy. The vote was narrower than in Pueblo, 55% opposing and 44% favoring an exit from Xcel.
No vote has been scheduled in Boulder for November, but if one is, will that city’s votes form free-verse poetry instead of rhymes?
Leslie Glustrom, a resident of Boulder, said she and other proponents of municipalization must gather roughly 4,000 signatures to get it on the November ballot — that or persuade five of the nine city councilors to do so by late August. If that happens, she says, she believes the outcome can be different than it was in 2020, when the covid epidemic precluded door-to-door campaigning.
Black Hills Energy and Xcel Energy are Colorado’s two investor-owned electrical utilities. Black Hills is by far the smaller of the two. It provides electricity to Pueblo, Cañon City and some outlying areas in the Arkansas River Valley.
Xcel is Colorado’s largest utility, delivers electricity to more than half the state’s residents, including most of metropolitan Denver. Ironically, Xcel’s largest existing power plant lies in Pueblo. But other than the steel mill, it has no major customers there.
Pueblo’s quarrel with Black Hills has been primarily about rates. Electrical rates levied by Black Hills have consistently ranked among the highest in Colorado, according to surveys conducted by the Colorado Association of Municipal Utilities. Black Hills in March obtained permission from the Colorado Public Utilities Commission to hike rates 6.7%. The utility had first asked for a rate increase of 18%.
If Pueblo were to create its own municipal utility similar to that operated by Colorado Springs, Fountain, or any number of others in Colorado, it would need the distribution lines and other assets owned by Black Hills.
A Brattle Group study commissioned by Black Hills found that buying those assets and setting up a new public electric utility would require financing of more than $1 billion. That, according to Brattle, would cost Pueblo electric customers, on average, an additional $57 million per year over the next 20 years as compared to the same electric service if provided by Black Hills Electric.
Black Hills has a franchise agreement with Pueblo until 2030. However, the agreement provides the city with an off-ramp in 2025. Mayor Heather Graham told the Pueblo Chieftain after Tuesday’s vote that she will ask the city council in August to consider taking the 2025 off-ramp as allowed in the franchise agreement despite this week’s public vote.
Graham also said this: “Over the next five years, we’ll continue to work on a plan to hopefully find another energy provider or create our own so that we can provide cost-effective rates to the community.”
Sal Pace, a former Pueblo County commissioner and state legislator, takes Graham at her word. “The mayor has a lot of courage. She’s not afraid to take on an issue that she thinks is right.”
The crucial issue that Pace sees is whether the electricity rates of Black Hills have discouraged economic expansion in Pueblo.
“It’s a huge issue for economic development. We are having a hard time attracting manufacturing companies to Pueblo because of the (electrical) rates.”
Pace said he often disagrees with Graham about issues but in this case concurs with her intention. He does not see the public vote precluding her from taking the issue up with the city council.
As in 2020, Black Hills had a large budget devoted to the campaign against the proposal. Citing records at the Pueblo City Clerk’s Office, the Chieftain reported the company spent $1.5 million during March and April with another $30,000 coming from the Edison Electric Institute. Proponents this year spent nothing.
In 2020, a group called Pueblo CARES reported $1.5 million in contributions and proponents spent about $50,000.
“Voters made the right choice and we hope the city will respect their decision,” said James Williams, a regional manager of public affairs for Black Hills Energy, in a statement issued shortly after the polls closed. “There’s no practical path for an estimated $4 billion region-wide takeover effort, which would be highly complex and unlikely to succeed.”
Jamie Valdez, a Pueblo resident and director of Roots to Resilience, an advocacy group, said he believes the phrasing of the question put to voters was misleading and hence skewed the results.
The ballot question linked the exit of the franchise agreement with the cost of paying for the utility’s assets in Pueblo, he said. They should not have been been coupled. “Those are two separate questions,” he said. Pueblo might need to pay for Black Hills assets, but it’s also a possibility that another utility might be willing to pay.
“I think there are a lot of options on the table, and just because it is part of the conversation does not necessarily mean that the city ends up buying all the assets or that they would have to pay the full price.”
Valdez also faulted the city for a lackluster effort to educate voters.
Cañon City has been supplied electricity by Black Hills without a franchise since the previous agreement expired in 2017 and the city chose not to renew it.
A proposal for a new franchise was rejected by Cañon City voters in November 2020 by a nearly 2-to-1 vote. Unlike the Pueblo vote, Black Hills had put little effort into campaigning in favor of the approval. Since then, reports Emily Tracy, a member of the city council, Black Hills has approached the city to put the franchise agreement on the ballot, but the city has declined to do so. “The lack of a franchise has helped us to be able to have open conversations with other providers,” she reports.
Colorado’s electrical utilities in recent years have moved around a great deal, some with successes already measurable and others with outcomes still to be determined. Just across the border in New Mexico, Kit Carson Electric left Tri-State Generation and Transmission and so far has had spectacular success at creating a new energy system for itself in partnership with Guzman Energy.
Delta-Montrose Electric later left Tri-State as did Granby-based Mountain Parks Electric, and Durango-based La Plata Electric is scheduled to follow them next spring.
Xcel has also seen a number of departures. Fountain, a municipal utility, is scheduled to leave Xcel, and so have a handful of municipal utilities in southeastern Colorado. Yampa Valley Electric and Grand Valley Electric also decided they could get a better deal for their electricity from somebody other than Xcel.
The major difference in these cases with the Boulder situation is that the electrical cooperatives and the small municipalities have their own distribution assets. They changed their wholesale suppliers.
Can Boulder get a better deal? Unlike these others, it does not own its own distribution assets. It is, however, relatively wealthy.
Glustrom makes the argument that the interests of Xcel and its Boulder customers often don’t coincide. She cites the plans by the utility to spend up to $22 billion in the next five years in Colorado to meet demand that some suspect may not arrive or that could be addressed in other ways than buying new assets – investment costs then passed along to customers.
“Of course it’s an uphill battle,” she said. “You don’t break up a monopoly easily. They have unlimited resources and deep financial pockets.”
She believes the calculus has changed since she and other proponents of municipalization failed at the ballot box. Electrical outages have increased and rates have gone up. Boulder, she contends, needs to go shopping for a better deal.
Still, the odds are long. The Brattle Group – the same group that conducted the study for Black Hills – issued a paper in February that found that fewer than 10% of the efforts to municipalize electric utilities have succeeded in the last 25 years. A 2019 paper issued by Concentric Energy Advisors took a similarly dim view of municipalization efforts.
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It’s difficult to understand why Pueblo hasn’t considered an option that would eliminate the main obstacle to their choosing an alternate electricity provider, that obstacle being the high cost of buying Black Hills’ “poles and wires”. The option is similar to the one used by the co-ops mentioned in this article: Community Choice Energy (CCE). With CCE, Pueblo could shop for their own wholesale electricity supply, while Black Hills would continue to own their distribution system and deliver the electricity. Pueblo customers would have two line items on their electricity bills, one for the electricity itself and one for its delivery. They could procure much cheaper electricity from Guzman Energy or other suppliers, while paying to Black Hills only the actual cost of just delivering the electricity (which is set by the Public Utilities Commission). This would solve the problem of buying out the infrastructure of a utility that will fight every step of the way, while giving Pueblo freedom over their energy supply and lower costs. The state needs to authorize the CCE option, but a thoughtful and comprehensive CCE bill has already been written and just awaits legislative sponsorship. Perhaps Pueblo/Canon City, and Boulder, could propose a CCE pilot project as a stepping-stone to statewide authorization of CCE?
I agree that Community Choice Energy is an option. This may depend on municipal franchise agreements with incumbent electric utilities. Does the incumbent utility have exclusive rights to sell electricity within the municipality, or is it this non-exclusive? If non-exclusive, perhaps there is no need to wait for a franchise agreement to expire. Transmission open-access wheeling to deliver electric power supply from a 3rd party provider would be negotiated. A purpose of franchise agreement is to prevent construction of expensive duplicate distribution systems.
Good point Larry–and in Boulder we are looking very seriously at Community Choice Energy as a way to gain more options in selecting our energy provider.
Wow. Looking back to old BigPivots posts, I see one where a former PUC member called BH a “vampire” utility. I rooted around on Google and the BH website to try to find some breakdown of their generation and costs compared to others. One thing that popped out is that in CO, their supply appears to be almost all wind and gas. No coal. I assume some trade with others. So have their gas fuel costs just been very high? Is some of their renewable generation curtailed for some reason. Or are they over-building poles and wires? Or doing a lot of deferred maintenance.
If CO as a whole is going to rely on gas backup to wind, solar and storage, we need to make sure first that this fuel cost sensitive gas generation is an absolute minimum fraction, (like 20% or less, not 50%), and second that we get good pricing on our renewable generation, storage and any related T&D. For these to happen, we need the PUC to focus, focus, focus and provide meaningful oversight and direction and penalties if needed. I think, w/o much to back it up, that more statewide coordination is needed in generation and storage development, not just transmission.