Back in 2012, Black Hills Energy finished the power plant north of us and implemented its new rates. Our electricity bill went up 41 percent overnight.
Krage Manufacturing was forced to implement cost saving measures to reduce our electrical usage. We started by staggering the starts of air compressors, production equipment and AC units by 30 minutes to reduce our demand spike.
We shifted our start times to 5 a.m. in the warm months to get ahead of the hot afternoons. Our air handlers were set to come on at 1 a.m. to exhaust warm plant air and bring in cool night air. We installed 20-foot diameter ceiling fans throughout the plant, along with industrial swamp coolers, and replaced our lighting with LEDs.
All of this helped reduce demand, but still left us paying considerably higher rates than the rest of Colorado. Recently, I received electrical bills for the same time frame from two Denver area manufacturers and a residential customer.
When I compared these bills, we paid 34 percent more than a co-op that buys all of its power. This mirrors how our local co-ops, San Isabel Electric and Southeast Colorado Power, operate.
We’re paying 55 percent more than an Xcel Energy customer and 64 percent more on the residential side. So how did Pueblo let this happen?
My first job after college was working for a large defense contractor as an industrial engineer focused on process improvements and cost reduction. However, I quickly realized my employer was not interested in these skills. The company was in the cost-plus business and was paid by their customers based on costs plus a profit.
So, the higher the cost, the greater the profit. I see a lot of similarities with this model and BHE. BHE persuades its government regulatory agency (the Public Utilities Commission) that it needs a new power plant, substation, etc. After approval, BHE builds the power plant or substation.
Then BHE charges us as customers with higher rates to cover the costs plus 8 to 9 percent profit. Several years ago, BHE added a gas turbine at approximately $71 million to generate power. This was approved by the PUC and projected to be used only 8.7 hrs./year for the first five years.
If that doesn’t get your blood boiling, I don’t know what will. As a business owner, relying on satisfied customers, I’d go bankrupt with a decision like that.
The PUC process allows companies to intervene and protest when BHE proposes new assets and higher rates. The company that has intervened in every BHE rate case is your own Pueblo Board of Water Works.
Why? Because it is a top-10 user of BHE electricity, which is used to pump water to all those water towers. Pueblo Water is driven to keep costs down and provide us with water at a rate 32 percent lower than the Front Range average.
Apparently, Pueblo Water has a customer-driven business model much different than BHE.
Now some may ask: “Why not wait until the BHE franchise agreement is up in 10 years?” All that does is delay what we are trying to do now.
BHE still will own the distribution, transmission and generation of power. We’ll have to buy it then, thus delaying local control and decision making for another decade.
Also, there is a misrepresentation that ballot issue 2A is a blank check. The locally elected water board, along with management, will continually review acquisition costs as we go through this process.
I am confident we will realize rate savings in the 15 percent range. However, if acquisition costs become unreasonably high and rate savings are unattainable, we will suspend acquiring BHE until it becomes financially viable.
Others might say: “If Boulder can’t do it, Pueblo can’t, either.” Well, we are not Boulder and our situation is different. Pueblo is unique with a proud 150-year history and a community of doers that always figures out a way!
Voting “yes” on 2A keeps BHE as our electric provider in the short term. 2A allows Pueblo Water to work with neighboring communities, setting up regional electrical distribution and generation partnerships.
Then we go through the PUC and courts to acquire BHE. So why wouldn’t we trade investor-owned BHE that is 34 to 64 percent higher and the PUC for locally controlled Pueblo Water?
We owe it to the citizens of Pueblo and the region to continue down this path for local control. Vote “yes” on 2A!
Sam Krage owns Krage Manufacturing, which was started in 2000 and employs more than 50 people. He was elected to the Pueblo Board of Water Works in November of 2019.