Consultants say municipal takeover of Black Hills assets inside Pueblo city limits is not economically feasible now

At a City Council meeting on April 7, 2025, consultants from GDS Associates presented a preliminary feasibility assessment finding that acquiring Black Hills Energy’s electric distribution assets located solely within the City of Pueblo would not be economically feasible under the study’s base-case assumptions.

The finding matters because Pueblo voters will decide in May whether to authorize city officials to pursue an early termination (an “off‑ramp”) of the franchise agreement with Black Hills. City staff and consultants told council that the study does not rule out other options — including a larger regional acquisition, different valuation methods, or competitive power‑supply procurements — and that those alternatives could change the economics.

GDS principal Matthew Butler said the study’s screening metric compared forecasted retail rates under a municipal utility with Black Hills’ approved rate forecast. Butler said the analysis focused on three principal drivers: Black Hills’ retail rate forecast, the method used to value the assets acquired, and the cost of power supply. “The base case utilizes an average of book value and reproduction cost new less depreciation,” Butler said. He added that as Black Hills’ forecasted rates rise, the case for municipalization improves.

Garrett Cole, vice president at GDS, said wholesale energy and capacity costs have risen substantially since a prior study in 2019. “We’re seeing a much more constrained capacity market, and those costs are reflected in a more significant manner here in 2025,” Cole said, noting increased forward market prices and higher resource‑adequacy (capacity) prices as major upward pressures on power supply costs.

GDS showed sensitivity testing indicating that, under the consultants’ assumptions, roughly a 20% increase in Black Hills’ retail rates (above the current forecast) would be enough to move the city‑only scenario toward breakeven. The consultants also said their base case assumed no stranded‑asset credits and used publicly available maps to define the city boundary acquisition.

Councilors pressed the consultants on next steps and timing. Andrew Hayes, the city’s public works director, and GDS explained the final written report would follow in about seven to 10 days; Hayes said the presentation tonight summarized the same broad findings the forthcoming report will document. Mark Davis of Fairfield and Woods, the city’s outside counsel on utility issues, and other legal advisers were present to answer procedural questions.

GDS recommended a range of follow-up actions if council wished to continue: (1) expand the analysis to a larger territory or “system‑wide” acquisition, (2) adjust assumptions about Black Hills’ future retail rates, (3) run an RFP to obtain firm power‑supply offers from market counterparties, and (4) consider franchise‑agreement renegotiation or targeted legislative advocacy. The consultants said those steps could materially change the economic screening but were outside the scope of the city‑only base case presented tonight.

Councilors repeatedly raised the meeting calendar and public‑education timeline: staff confirmed the final consultant report would be released in the coming week or so and noted the city faces an August 2025 deadline for exercising an off‑ramp provision in the existing franchise agreement. Several councilors said voters’ May direction would not by itself compel a council action in August; Council would still have to determine feasibility before taking an off‑ramp.

What council heard tonight: the preliminary, staff‑commissioned economic screen indicates an acquisition limited to assets inside Pueblo city limits is not financially feasible under the consultants’ base assumptions. The report highlights specific variables that, if they change, could alter that conclusion and lists additional studies and procurement steps the city could pursue before any decision to proceed.

Quotes in this article are taken from the meeting transcript and are attributed to speakers listed below.

Ending — The consultant report will be published to the city in the coming days. Council members said they expect additional public briefings and time to review the final document before any ordinance or formal action on the franchise off‑ramp.