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More than six years after Owensville, Mo., decided to sell its electric utility, it finally closed the deal, netting the town of roughly 2,700 people more than $1 million.

"I got here in February 2008, and they had been working on this for three years then," says City Administrator John Tracy, "and it took me another 3½ years after that to write the contract."

In Fairbanks, Alaska, "We spent years bidding it," mayoral chief of staff Patrick Cole says of the 1997 and 1998 transactions. "It was very contentious times."

Which suggests that off-loading city-owned Colorado Springs Utilities' electric division, an option Mayor Steve Bach wants to explore, wouldn't happen overnight.

With Bach interested in funneling proceeds toward other city needs, work is under way to value the electric utility. The Utilities Policy Advisory Committee, appointed by City Council, is looking at a sale of generating capacity alone (the city's power plants) or the entire system (including transmission and distribution lines). The study, due in May, also will examine the cost to the remaining three utilities — water, wastewater and gas — of removing the electric utility from administrative costs, such as payroll, human resources and IT. Electricity sales represent 50.4 percent of Utilities' revenues.

Unusual move

If Springs Utilities were to put its electric up for sale, it would be unprecedented, at least in recent history.

In a report released earlier this year, the American Public Power Association makes clear that no municipally owned utility of its size — it has 213,000 electric customers — has sold its electric division in at least 32 years. In fact, the 76 cities and towns that did sell from 1980 to 2012 averaged about 1,200 customers.

The largest, in Sebring, Fla., with 12,278 customers, sold to Florida Power Corporation for $23.5 million in 1993. The reason: "High rates due to debt related to generating plant," according to the APPA report.

The APPA doesn't list reasons for every sale, but those given generally fall into three categories: desire for lower rates, need to sidestep capital investment, or an inability to attract qualified personnel.

Owensville, Tracy says, wanted to sell because as a member of the multi-city Missouri Public Utility Alliance, its rates were going up as the alliance issued debt to build more power plants. After the sale to investor-owned Ameren Missouri, Owensville's rates dropped by 40 percent, he says.

Fairbanks shed not only its electric utility, but also water, wastewater and telephone services, for which it received some $70 million, Cole says. It's since used that money to provide 12 percent of the city's annual $33 million budget, and it still has $106 million in the bank due to good investment returns. Meanwhile, power rates from Golden Valley Electric Association, the buyer, have stayed flat, he says.

Every utility is different, of course, and the price each commands depends on assets purchased. Prices varied from $988 per customer in Owensville's case to $2,747 per customer in DeSoto, Kan., to $4,211 in Fairbanks. Also, how much a city nets depends on how much debt must be paid off; Springs Utilities' debt is about $2.3 billion.

Overall, public ownership still reigns, with 62 percent of the 3,251 U.S. electricity providers in public hands, the APPA reports. Many of those publicly owned utilities are in large cities.

Stacking up

David White of the Colorado Springs Regional Business Alliance says when competing for new IT and manufacturing jobs, Colorado Springs' biggest rivals are Salt Lake City; Denver; Boise, Idaho; Austin, Texas; and Phoenix. The latter two have publicly owned electric utilities. In defense and aerospace, the Springs faces Albuquerque, N.M.; Wichita, Kan.; Oklahoma City; Omaha, Neb.; San Antonio; and Huntsville, Ala. Of those, the latter three are publicly owned.

Huntsville, with 163,000 customers, boasts on its website that it operates "free from political and profit motive influences," resulting in "rates that are envied throughout the United States."

Indeed, a big reason to retain ownership is money. Austin Energy, with 415,000 customers, "has provided $1.5 billion in dividends to the community since 1976," the website says, funding city services such as fire, police, EMS, parks and libraries. It gave $105 million in 2011-12, according to an April report, and Austin Energy spokesman Ed Clark says, "The city has never had an interest in having anything but a city-owned utility. We're a tremendous resource."

San Antonio's CPS Energy is even more generous, having provided $4.9 billion to city government since 1942, says CPS spokesman John Moreno. In 2011 alone, it paid the city of San Antonio $276.8 million, or roughly a quarter of the city's operating budget, he says.

Colorado Springs, too, benefits from Utilities' payment-in-lieu-of-taxes, or PILT, budgeted at $31.1 million for 2013 — about 13 percent of the city budget.

As for rates, it's lowest on average residential, commercial and industrial bills when compared to municipalities, cooperatives and investor-owned electric utilities in the state, according to a 2012 Colorado Association of Municipal Utilities survey.

Moreover, when marketing research firm J.D. Power conducted its 2012 Electric Utility Residential Customer Satisfaction Study, Springs Utilities scored third-highest among the nation's 126 largest electric utilities. It outperformed Xcel Energy, the only other Colorado outfit on the list, which supplies power to 1.4 million customers in Colorado (including the Denver market) in every category, including reliability, price, billing and payment, and customer service.

zubeck@csindy.com

  • Why some local officials sell, and why others wouldn't dream of it.

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