City officials on Thursday outlined for the 2010 Commission the city's proposal to buy the Aquila electric utility.
City Manager Dave Galli and Councilman Mike Occhiato described the proposed deal, which is up for voter approval in the city's Nov. 8 mail-ballot election, for the local citizens group.
The city wants voters' permission to try to purchase the whole Colorado system run by Aquila. The system stretches across parts of seven Southern Colorado counties and serves 90,000 households and businesses.
Galli said the system wouldn't be as efficient if Pueblo bought only the portion inside the city.
\"It's like buying a lung and a half (instead) of a whole body,\" he said.
Galli added that chopping up the Colorado network may give Aquila grounds to ask for more money for fragmenting it
Occhiato said the city would pay for the system with revenue bonds, which are loans made against the money the utility generates.
The city would not use its general fund money, he said.
2010 Commission members had questions about several aspects of the proposed sale, but did not take a formal position on it.
School District 60 board President Kitty Kennedy wondered if the city should buy the utility when the electricity is generated mostly in coal-fired plants. She asked if the city had looked into the long-term availability of coal and other fossil fuels.
\"Are we buying a button hook here?\" she asked.
She also asked about Pueblo's ability to buy coal in bulk, but learned that the utility buys most of its electricity from other sources, instead of generating it.
\"It's mostly a distribution system,\" Galli said. Another 2010 Commission member asked how the city could buy electricity cheaply when it is much smaller than Aquila.
Occhiato said Pueblo could join an existing group of city utilities and buy electricity for less. Aquila purchases most of the electricity for the Colorado network from Xcel, but there are other sources, Occhiato said.
Other topics included how Aquila employees would be integrated into the city personnel system, how City Council would govern the utility and whether the city has the expertise to run the utility.
Galli said most of Aquila's 200 employees in Colorado are members of the International Brotherhood of Electrical Workers union.
He didn't know yet how they would become city workers. Galli said it may require a combination of pension plans, allowing older Aquila workers to stay with their plan and letting younger employees join the Public Employees Retirement Association.
City Council is scheduled to discuss how the new utility would be governed, if the purchase goes through, during its 5:30 p.m. work session on Monday.
Occhiato said some people want an appointed utility board, but he'd rather have the utility director report directly to the city manager.
He said an advisory utility board would distract the director.
\"I do not see City Council having any hands-on management\" of the utility, the councilman said.
Making the utility another city department wouldn't be anything new, Occhiato said. The other city departments are run by people who specialize in that field and report to Galli, who reports to the council.
\"I don't know how to run a police department,\" Occhiato said.
The day-to-day utility operations would be done by the same workers as they are now, the councilman said.
\"We're buying a business,\" Occhiato said. \"And with a business come the employees and the equipment.\"
The city would have to create or supply the back office tasks now provided by Aquila's Kansas City. Mo., headquarters. Those include payroll, billing, legal services and hiring.
Much of that could be done by city staff or by expanding city departments, Galli said. Those costs already have been factored into the city's feasibility report.
The report said the utility makes enough money to allow the city to repay the bonds, set money aside for repairs and still make a profit.
The city will continue to pay all local governments in the network an amount of money equal to what Aquila paid in property taxes and franchise fees, Occhiato said.
City Council also plans to keep electric rates the same for both Pueblo and non-Pueblo customers, the councilman said.
The city's consultant said the network warranted an initial negotiating price of $140 million.
Aquila Vice President Gary Stone, who attended the Thursday meeting, said Aquila wants \"substantially\" more than that.
Stone, who is in charge of the whole Colorado network, said the network lost millions in 2002, when he arrived, and again in 2003.
It made a small profit in 2004 and this year is projected to earn all of its 8.76 percent state-approved maximum return on investment.
The earlier losses were due to the company's increased cost of electricity, he said.
Aquila raised its rates, which had been the same for 20 years, in 2003.