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Municipalizing Pueblo, Colo., electric utility could save ratepayers 14%

Residents of Pueblo, Colo., could see retail electric rate savings of between 10% and 14% if the city were to take over Black Hills Energy assets and form a municipal utility, according to a new feasibility report commissioned by the city.

Net present value of the projected savings over two decades could be between $246 million and $832 million, depending on the assets purchased, a final draft of the "Phase 2 — Municipal Electric Utility Feasibility Study" said. The report said the predicted savings likely are understated because they are based on conservative estimates of the fair market value of assets and forecast retail rates.

However, the city still needs to determine which of three potential takeover scenarios outlined by the report authors, EES Consulting and Fairfield and Woods Law PC, it wants to pursue.

The report said the city can choose to purchase BHE's assets within the city limits, within the broader county limits, or across the state. But a takeover of all of BHE's distribution facilities in the state "is the best and most efficient path" as it would ease the process of defining the BHE property to be purchased and avoid certain "damages" to the utility's customers located outside the Pueblo county and city jurisdiction, the report said. That option also negates the need for joint-use agreement negotiations between BHE and the Colorado Public Utilities Commission and eliminates certain costs related to distribution facility separation.

"Operationally, the most appropriate BHE facilities to acquire are distribution equipment and substations in all of BHE's Colorado service territory," noted the report authors.

The new report was released Oct. 10 — about nine months after the publication of an initial feasibility report. Pueblo has been considering municipalization since at least 2017, when the city council also set a goal of sourcing all of the community's electric supply from renewable energy sources by 2035.

In September, BHE published its own study that found the city would need to spend $402 million to take over the company's electric service. In contrast, the city's high-end estimate was $334 million.