Colorado Springs Utilities — Low-Cost, Low-Risk Utilities

Our municipally-owned utility company has been a source of pride for decades. Today, our long-time competitive advantage for electricity and water rates is eroding compared to other municipalities along the Front Range and beyond. For many decades, we have benefited from a city-owned, non-profit enterprise running all four utility operations: electricity, gas, water and wastewater. After the devastating fire at the Martin Drake Power Plant, we learned that our electric rates—although less than those provided by the for-profit Xcel Energy in other parts of Colorado—were higher than those in Fort Collins.  High-reliability, low-cost utilities provide a benefit to residents and can also be used to help attract businesses to locate and grow here. Low costs and abundant water brought semiconductor companies here in the 70s, 80s and 90s. Today, data centers locate where they can get high-reliability, low-cost electricity.

A recent article published by the Gazette previewed the 2015 Colorado Springs Utilities budget (http://m.gazette.com/rate-hike-likely-for-colorado-springs-utilities-customers-along-with-staff-cuts/article/1535979). In the article, we see the challenges faced by our utility company. Lower revenues, higher costs and increased borrowing costs drive the need for increased electricity rates and staff reductions to balance the budget. According to the article, further rate increases are likely in order to invest capital in older coal-powered plants to meet emissions standards and to acquire renewable energy sources to meet future portfolio standards. How will we keep our costs low?

We see other regions with a growing base of renewable energy sources. The Colorado Springs Business Journal published a summary of the renewable energy challenge facing the region in 2013, showing that we have an effective renewable portfolio of around 10% including the wind energy we purchase from Xcel Energy and the hydropower from our own Tesla plant (http://csbj.com/2013/08/20/how-utilities-maneuvers-the-numbers-to-beat-renewable-standards/). For-profit companies such as Xcel Energy are held to higher requirements for meeting renewable energy portfolio standards. Whereas a municipally-owned company must achieve 20% renewables by 2020, a for-profit entity must achieve a level of 30%. Today, Xcel Energy generates almost 25% of their electric power output from renewable resources within their current rate structure: http://www.xcelenergy.com/About_Us/Our_Company/Power_Generation/Power_Generation_Fuel_Mix_-_PSCo.  Having a robust renewable energy portfolio is seen as desirable by companies and people looking to move to our region … can we compete?

The Southern Delivery System (SDS) Project, to bring water for the Arkansas River basin to Colorado Springs, is coming in under-budget and on-schedule—a tribute to the team and all the contractors involved. Our water rates have had to increase to fund this project.  Most of our water is used for irrigation; one significant need for irrigation is in our parks and medians. As water costs have gone up, our Parks, Recreation, and Cultural Services department budget has come under more and more pressure. Can we come up with innovative ways to keep our parks green and attractive enough to play in? We should consider how Denver Water supplies water to their parks under their Operating Rules Article X, Delivery of Water (http://www.denverwater.org/OperatingRules/OperRulesArticleX/):

10.1.12 City rates.  Commencing January 1, 1960, the Board shall furnish water to the municipal government of the City and County of Denver at rates which shall approximately equal but not exceed the cost of the water furnished, not including items in such rate for debt service, additions, extensions or betterments.  Such rate shall not be applicable to agencies or authorities sponsored by or supported by the City and County.  The Board shall own, control and operate all water, water rights, structures and facilities of the City and County of Denver pertaining to the Farmers and Gardeners Ditch and the City Ditch.  The Board shall furnish water out of the City Ditch or some equivalent source for the use of Denver in City Park and Washington Park, without any charge whatsoever.

Running a complex utility company is a challenging and demanding task.  Is our established form of utility governance appropriate for the decisions that must be made to keep our utility as effective as it was in the past and for meeting the needs of the citizens and the community in the decades ahead?