Optimistic Pueblo is Outspent in First Attempt at Utility Takeover — Episode 113 of Local Energy Rules Podcast

Jamie Valdez:

So one of the main talking points that they used and all of their mailers and TV and radio advertisements, et cetera, was the notion that this was a government takeover. I think that that played largely into fears of some of our public community members. They painted it as a government takeover, but really in, in our perspective, from our perspective, what really was the government takeover was our city council giving Black Hills Energy, that franchise, that exclusive franchise agreement in the first place.

John Farrell:

In the past decade, electricity costs have risen sharply Pueblo, Colorado motivating the city’s adoption of a 100% electricity goal for 2035 in the spring of 2020, the city also put municipalization on the ballot, hoping that a locally owned utility could lower costs and put the city on track for its clean energy goal in August, 2020, Jamie Valdez, Pueblo community team coordinator from Mothers Outfront and Sierra Club volunteer. Join me to talk about the results of the may ballot measure and what it means for the city’s aims of affordable, renewable energy. Jamie, welcome to Local Energy Rules.

Jamie Valdez:

Thank you. Great to be here.

John Farrell:

So I just wanted to start by asking, what is it that caused folks to organize around this idea of taking over the electric utility in Pueblo? Like what, what was important to the community enough to consider radically changing who owns the energy system?

Jamie Valdez:

A lot of it came down to what we feel was unfair treatment of our residents in Pueblo, by the investor own electric utility, black Hills Energy. We felt that that, well, it’s not just that we feel this way. It is actually a fact that can be corroborated with the little research that Pueblo pays anywhere from 35% to 40% more than the national or state average electric costs. Sorry. Yeah. We also felt that we needed some kind of local accountability because the way things operate with an investor owned utility is like for example, Black Hills Energy is headquartered in rapid city, South Dakota. And so the decisions for local rates and shut off and reconnect policies, et cetera, are all made in a boardroom in rapid city, South Dakota, and then argued before the PUC in Denver, rather than us residents here in Pueblo having any input into that. And so we felt that we wanted some local accountability. We also felt like we wanted local control, but local input into those policies and things like that. And so, you know, on the rates and things. And so we felt like by municipalize, that would give us that opportunity to kind of have self determination when it comes our communities electric needs.

John Farrell:

I may be mistaken, Pueblo was one of the first cities in Colorado to adopt a 100% renewable electricity goal. And I think it was by 2035, correct me if I’m wrong. So it seems like this could also be potentially useful in meeting the city’s goal around renewable energy.

Jamie Valdez:

Absolutely. Black Hills Energy has shown a reluctance to make, make, move towards renewable energy. And more than that, they’ve shown kind of, um, they seem to almost have a disdain for renewable owners, folks who have rooftop, solar and things like that. They’ve pushed for very unfair net metering policies that would target those folks that do have rooftops top solar with extra charges and things like that, which would really negate the benefits of them having rooftop solar beyond that, they just recently built the Pueblo area or polo airport generation station. It’s a fairly new generation station and as a natural gas station. And so their incentive is to stick with natural gas so that they can get all, they can get all the profits they can out of that capital construction projects.

John Farrell:

If I recall correctly. I spoke with Larry Atencio on city council in Pueblo a couple of years ago about the renewable energy goal. It was pretty fresh at that point. And I remember that he was saying something that if I’m not mistaken, Black Hills Energy was relatively new to serving Pueblo that there had been a different utility. Am I, am I getting that right? Or is there some story there about how the utility had already kind of changed?

Jamie Valdez:

Yeah. You know, you’re correct. Um, black Hills Energy has been serving Pueblo for about 10 years. I think it’s exactly 10 years now that I think about it, our franchise agreement with them by state statute gives us the opportunity to leave the franchise agreement at the 10 and 15 year mark and 2020 is that 10 year Mark. And so, yeah, we’ve, they’ve been serving our community for 10 years prior to that, it was a company called Akila. And within one year of Black Hills Energy taking over there were already reports from our local social security networks or social safety networks saying that they were having increases in families, needing assistance, paying their electric bills that wasn’t with within one year of Black Hills coming in and taking over.

John Farrell:

So you’ve got this issue about affordability and fair treatment. You have the renewable energy goal. And so you start this conversation about having a city owned utility instead. And I think it’s always, I always like to share with folks who are listening to these stories, that 2000 us cities already have city run utilities. So it’s just like another department of the city. So you have like Rochester, Minnesota, Austin, Texas, Sacramento, California. There’s a lot of them. So this is not a novel thing. Cities run electric companies, just like they want water departments all the time. Can you tell me a little bit about the city did a couple of studies of what this might look like to form a municipal utility? What did they learn when they did that research about buying out the utility system from Black Hills Energy?

Jamie Valdez:

Great question. I’m glad you asked. So the city commissioned a feasibility study, which showed that even using the most conservative estimates they could come up with given the, the information that they gathered, the residents of Pueblo, the rate payers stood to see a minimum of 10 to 14% decrease in energy rates. And so it definitely proved it definitely showed that the move to a municipal electricity could be not only feasible feasible for our community, but also beneficial. And then Black Hills Energy is actually the one who commissioned the second study and their study came out with nearly the exact same findings. The only difference came from at the very beginning of the study, the numbers that they used to work their way toward their end conclusions or based on information that they had access to. And the company that did the study for the city didn’t have access to that information because Black Hills Energy wouldn’t hand that information over when request, when it was requested. And so the company that did it for the city had to come up with numbers based on the reportings of Black Hills Energy to the public utilities commission, rather than being able to come up, come to Black Hills Energy and get the exact numbers from them and blast. So Black Hills Energy used different numbers starting out then the, the city’s study did

John Farrell:

I, in my experience with other communities that have gone through this fight that often has to do with the purchase price for the equipment that the utility will say, well, we’re not willing to share that that’s proprietary information. So you can’t find out how much our stuff is worth until you go to court basically to say, you’re going to take it with eminent domain. And then we start the negotiation. But I think that the second piece of that, so number one, it’s proprietary information is their defense to keep cities from learning about how much it might cost. But then it’s also the thing that they don’t tell you is it’s a negotiation. Like they don’t get to just set a price. You’re going to go to court over this, and you’re going to have a fight about how much you’re going to pay. And so of course, if I’m the one that’s selling the stuff unwillingly, I’m going to tell you it’s worth a trillion dollars to start with in order to try to set that range at a level, that’s going to make me a good profit. Is that true then? Is that what happened? You found that they have higher numbers and that they had said that they were proprietary.

Jamie Valdez:

Yes. And all along, we were willing to put that decision in the hands of a judge or magistrate, however that would have worked out. But yeah, you’re right. I think it really was an issue of them not being willing to give over that proprietary information.

John Farrell:

One of the things I thought was interesting as I was reading about this process toward municipalization, that took place roughly over the past year, at least a lot of the activity was in the past year. Was that in March when the city released the results of its findings, explain to citizens what this might look like, they did it, it looks like it was a regular survey that they do of residents about their concerns. And they included municipalization on that survey. And there was overwhelming support. I mean, it was maybe two thirds or more of folks looked at the information that the city had put together and said, Hey, this looks like it makes sense. The city could buy this. The city could run this. It should help reduce our rates. And as you pointed out, this is a big problem. What happened between then and when the valid initiative actually happened a couple of months later,

Jamie Valdez:

Oh, that’s another great question. Black Hills Energy through their political action arm, which was called Pueblo cares, spent upwards of actually above $1.5 million to defeat our effort compared to our campaign was able to raise through grassroots efforts about 31,000. So I think those numbers right there pretty much say it all, especially since, like you said, just a couple months prior to the election, we had this survey, not even a couple of months, like a month and some change prior to this election, we had this citizens satisfaction survey, which is done every year by the public city council. Only this year. They included that question of municipalization. Like you pointed out and it showed, like you say about two thirds, actually more, a little over two thirds support for breaking away from Black Hills Energy and forming a municipal utility. And then less than two months later, we have the election and we’re beat by about that same two-thirds margin. And I really feel that it was the money. The money played, the largest role in that Black Hills Energy was able to have commercials in nearly every commercial break on TV, on the channels that they advertised on. And that had a major effect on the people that buy well. They were able to really spread a lot of misinformation about kind of stoking the fears of the Pueblo community and admittedly, our community is kind of a, a risk averse community. And so in that really kind of played into Black Hills a strategy.

John Farrell:

Could you tell me a little bit about, or describe some of the things that they produced? I’m just, I’m imagining. I remember there was one in Boulder. I think it was before their 2011 ballot initiative. And they were out spent about 10 to one compared to your 50 to one. So obviously the still vastly outspent by the opposition there and they just eat a victory out. I remember one of the videos that I looked had a couple of people in their house sitting around and then the power started going out. And then they said to each other, Oh, you know, it’s the cause of the city decided to take over the utility. And I remember in Minneapolis, when we had a conversation about municipalization, there was like a two page glossy mailer that went to every household in the city that the utility paid for to tell us why it would be a terrible idea. Can you share a little bit about what were some of the things they were saying? Is there an example of a particularly striking example of, of something they put on video or whatever that really played to those fears?

Jamie Valdez:

Gladly will do. So one of the main talking points that they used and all of their mailers and TV and radio advertisements, et cetera, was the notion that this was a government takeover. I think that that played largely into fears of some of our Pueblo community members. They painted it as a government takeover, but really in, in our perspective, from our perspective, what really was the government takeover was our city council giving Black Hills Energy, that franchise, that exclusive franchise agreement in the first place, which really amounts to a legislative monopoly and it takes government to legislate a monopoly. So I, I feel that the reverse is actually true, but they, they very effectively played that narrative repeatedly over and over and over.

John Farrell:

We’re going to take a short break. When we come back, I asked Jamie what the incumbent utility suggested would be so bad about having a municipal utility, what role the nearby rural electric cooperative played and what advice Jamie has for other cities considering municipalization. Hey, thanks for listening to Local Energy Rules. If you’ve made it this far, you’re obviously a fan and we could use your help for just two minutes. As you’ve probably noticed, we don’t have any corporate sponsors or ads for any of our podcasts. The reason is that our mission at ISR is to reinvigorate democracy by decentralizing economic power. Instead, we rely on you, our listeners, your donations, not only underwrite this podcast, but also help us produce all of the research and resources that we make available on our website and all of the technical assistance we provide to grassroots organizations every year.

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I think it’s really interesting because did they talk about what there was to fear in a government takeover? Cause I, I guess I find it so surprising that, you know, municipal water utilities are a near universal thing. Cities run garbage departments. Like I said before, 2000 cities run municipal utilities. Is there something particular that they, that Black Hills Energy was targeting saying if the government runs this, it will be terrible.

Jamie Valdez:

Basically, their strategy was to make it to point out the failings of our city government. Like we have, for example, a problem here with illegal dumping and our government has failed for some time now to really curtail the problem. And so they pointed to those kinds of failures in trying to make the point that government can’t do anything. They can’t even handle trash service. They can’t even handle, you know, they tried to with a municipal dumb, but now the dump has been privatized and is too expensive for most people to afford and which they left out of the equation, that it was that privatization of the dump, that code that led to the high prices that are unaffordable, but they were able to effectively play to that narrative. That publicity government is incapable of running an electric utility.

John Farrell:

There is such a strong narrative, I think, in so many cities of that issue about the failures of government. And I think it’s so funny because we do have, whether it’s like long lines at the DMV to renew your license, which frankly I haven’t experienced the last couple times I’ve gone, but it’s just like this legend about the problems of government that we have. And I think a tendency to ignore the failures of, of private business, you know, it’s like, sure, the government might stick, get doing the dump, but boy, private business really sucks at offering me cable service. I hate my cable company. I’m not a big fan of my cell phone company either come to think of it. It’s like there are so many of these failings that afflict any kind of enterprise, whether it’s public or private, but it’s interesting. And here that they can target that sort of uniquely public characteristic with that. And of course, when you’ve got money like that, I mean, there’s spending your money against you, right. 50 to one in this experience, there is another utility that serves some customers and Pueblo, right? You have an electric cooperative in the area as well, or were they at all involved in this or was this really just about Black Hills center?

Jamie Valdez:

They actually did get involved with — it sounds like you’re referring to San Isabel electric association and they serve actually not areas in Pueblo, but some areas real close to quite low. They’re just on the outskirts. In fact, they do serve part of Pueblo West, which is its own separate municipality, but basically almost like a suburb of Pueblo are only suburb. But Santa Isabel electric came in and made an offer to the city that they would run the operations side of things, distribution and maintenance of the power lines and things like that while still the city to maintain the decision making power of a municipalized utility. And we felt like that was such a, an extremely good offer, especially because in the offer, the San Isabel electric included a stipulation that they would keep all current Black Hills Energy employees that wanted to stay on employed all the lines, men were still going to be needed and all those kinds of system maintenance employees and things like that we’re still going to be needed. And one of the great things that we tried to educate the community about was that this move to a municipal utility was likely to even bring more jobs to put low, um, including administrative jobs, clerical jobs, customer service, jobs that currently exist in rapid city, South Dakota.

John Farrell:

It’s really amazing that you had that kind of offer from a cooperative. Cause I think that operational piece can be a real challenge to think about. Obviously it’s like whoever’s smart and running a utility somewhere else could run a utility here. Like you can always go out and hire people, but to have a utility that is already familiar with your community, that’s willing to step in and basically capture the economies of scale of having a slightly bigger service territory. And I noticed in one of the advertisements or one of the commentary pieces, opposing municipalization, they’re like, Oh, well, Black Hills Energy is so much bigger. There’ll be so much more efficient at running things. And it’s like, well, but you have this deal with a local co-op where you would be able to capture some of those efficiencies. And to your point, you also with that comes that local decision making that you, that you will not be able to get with those economies of scale. I think there’s this often this separation of decision making power from efficiency and folks who are efficiency, experts are like, Oh, but you’ll save more money. It’s like, well, you know, is it really worth saving like 5% on my bill? Maybe only like 2% on my bill, just to be part of this big investor owned utility who also likes to pay its shareholders or is it better for us to be a public entity? I just think that’s a trade off. We don’t often get to discuss.

Jamie Valdez:

Right. And with the utilities of scale that you mentioned where San Isabel electric would have been taking on, I think it worked out to be over 50,000, new meters would have been added to their territory that would have significantly lowered their prices. And so we may not have even actually been paying more with them than with Black Hills Energy, regardless of how big Black Hills Energy is because we’re already paying such exorbitantly high rates with Black Hills, that San Isabel is right about even with them right now. And have they taken over all those extra meters, it would have decreased that price. And we would have been likely looking at a decrease.

John Farrell:

Anyway, I guess one question I have about this as, you know, in the context of Pueblo’s 100% renewable electricity goal. Obviously if you own the utility, you can make those changes. In fact, research that the Institute for Local Self Reliance has published shows that most of the communities that have been successful in reaching their a hundred percent clean energy goals are ones that do control their utility either through community choice aggregation, which is a policy in about nine States or through a city owned utility. Where does this leave Pueblo in terms of reaching that goal?

Jamie Valdez:

It leaves us in a real uncertain place. I think, as I mentioned before, Black Hills Energy has shown a reluctance to make the move towards renewables. And during the campaign they, they played to the community’s desires for renewable energy and made a lot of promises that I feel that they are not honestly willing to keep. I think that now that they won the election, they’re going to go back to kind of keeping it quiet about renewables and hoping that they will not feel the pressure from the community.

John Farrell:

So you mentioned in terms of the franchise agreement though, that this agreement expires, or there’s sorry, it doesn’t expire, but that there’s an opportunity through state law to reconsider at the 10 year mark, which was this year, but also at the 15 year mark, do you feel like you have an opportunity here five years from now to say to folks, okay, we had this vote five years ago. Have you gotten what you thought you would get in those five years from Black Hills Energy? Or is it time to put municipalization on the table? Again?

Jamie Valdez:

Absolutely. We, our campaign is still going. We still have regular meetings of our planning committee and we are definitely looking towards 2025 to continue this effort. We are going to start earlier this time. Last time we started, Oh, about a year and a half or two prior to the election. And this year, this time we’re planning on starting either sometime in the remainder of 2020 or 2021 at the latest, we want to begin our efforts at fundraising and educating the community right away. So that five years from now, hopefully folks will be primed and ready to make that move.

John Farrell:

So the last question I have for you, Jamie, and thanks again for taking the time to talk with me is about, I guess, about this issue of municipalization and local control. You’ve gone through this campaign. Unfortunately, you were on the losing side and obviously facing this immense inequity in terms of resources, Black Hills Energy, able to use all the money at collects from you as customers in Pueblo to lobby against you, making your own decisions. What advice do you have in what lessons learned do you have from this campaign that you hope to both apply in your renewed campaign or that you think other folks from other communities, maybe they’ve got a hundred percent goals, maybe they’re concerned about costs that they should pay attention to as they consider their work

Jamie Valdez:

Real quick. I just want to mention that you just reminded me of the excellent point. You made that they were using our own money, the rate payers money to our effort. And that’s just such a good point because when every time people saw those full page ads in the public chieftain, that was their repair money being used to influence their decision on whether or not to keep Black Hills Energy. And it just was, it’s like a conflict of interest that is give what gets by on a technicality. But I, I would like to point out that we feel like this investor owned utility, this investor owned model of a utility is it’s an extractive model. It extracts, especially in the case of, for example, Black Hills Energy. They are extracting very high profits, very exorbitant profits from our, our already low income community. And we’re paying higher rights rates than the state average or the national average.

So they’re pulling these exorbitant profits from our community, extracting them from our community and then redistributing them in the community, the economy of rapid city, South Dakota. And so we feel like, you know, imagine the good that those revenues could do Pueblo. If they were redistributed amongst our community, through the utility, paying their employees and those employees then spending their money locally, et cetera, imagine the good that that could do our community. If those funds, those revenues were redistributed into our own local economy. And so we definitely feel like it’s a worthwhile effort to continue this drive for a municipalized utility. And we are looking at the mainly the lesson of being outspent by so much. And that’s one of the reasons that we are starting our fundraising as early as we are, because we want to try to come up with a larger, a larger amount of funds in order to be able to give them a little more of a run for their money when it comes to that advertising and, you know, really being able to drive our point home like they did last time.

John Farrell:

Do you think there’s any room I, sorry. I know I said that. My other question was my last one, but in the news recently, we’ve seen some pretty spectacular stories of utility corruption in Ohio and in Illinois. And if you follow social media, you’re finding a lot of links to other, fairly spectacular sources of, uh, corruption among investor owned utilities. Obviously not all of them are corrupt, maybe Black Hills Energy is no more guilty of that than, than municipal utilities. But do you feel like that offers an opportunity in terms of talking about the different interests that Black Hills Energy might have from your community?

Jamie Valdez:

I think so again, the majority of their company are folks from either rapid city, South Dakota, or they’re like their shareholders are folks from all over the country. And so they don’t necessarily have the, in the best interest. So Pueblo in, when they’re making decisions for equivalent, I really feel like there is a disconnect there and that’s one of the main points that we want to correct when we talk about local control and local accountability.

John Farrell:

Well, Jamie, thank you so much for taking the time to talk with me about what has happened in Pueblo and the lessons that you’ve learned from that. I definitely wish you the best of luck and trying to help your community make the best choices for its future for its energy future.

Jamie Valdez:

Thank you for the opportunity to join you.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with Jamie Valdez, the Sierra club volunteer and organizer with mothers out front recorded in August, 2020 on the show page. Look for links to Pueblo’s phase one and two studies showing the opportunity and having a city owned utility as well as coverage by the American public power association of the ballot measure belt to learn about other cities that have considered a municipal takeover. Search our site for information about Boulder, Colorado, Dakota, Iowa in Minneapolis, Minnesota on the website of the Institute for Local Self Reliance. You can also find the entire list of cities committed to 100% renewable energy on our community power map and click through an interactive community power toolkit for stories and how cities have advanced toward their goals. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Local Energy Rules is produced by myself and Maria McCoy. Editing provided by audio engineer, Drew Birschbach. Until next time, keep your energy local and thanks for listening.