May 23--The city's franchise agreement with Aquila gives it considerable leverage in deciding who will buy the electrical utility or whether the city itself can buy it.

And the director of the Colorado Association of Municipal Utilities says Pueblo should consider buying the electrical utility.

City Council voted 4-3 two weeks ago to let City Manager Dave Galli ask for Aquila's financial information. Galli has since signed a confidentiality agreement with the utility in order to see the information.

City Council member Mike Occhiato has argued that the city should look into buying the utility in order to give residents better electric rates. A city-run electrical company would take better care of the system and wouldn't have to make a profit for shareholders, he said.

Opponents, notably Councilman Randy Thurston, argue that the city doesn't have enough time to study the idea, doesn't have the expertise needed to run the utility and faces the risk of buying an old distribution network.

Indeed, the city did not seem to have much time, given the sale timeline announced by the New York brokers hired by Aquila to sell the Colorado portion of Aquila's network. The brokers want a preliminary offer by mid-June and want to close on the deal by next fall.

Occhiato and others said the hurry-up schedule seems designed by Aquila to make it hard for Pueblo or other governmental entities to study and bid on the utility.

Dave Lock, executive director of the Colorado Association of Municipal Utilities, agreed. He said Aquila is rumored to want to sell to Xcel Energy, which already supplies most of the power to the Colorado Aquila network.

Xcel won't comment about its interest in the Aquila network.

But Pueblo has a lot of power over the Aquila sale, due to the city's franchise agreement with Aquila. "They (Aquila) might be fast- tracking it because they know that franchise language is in there," Lock said.

The city's franchise agreement with Aquila:

Gives the city first right of refusal if Aquila sells its water or real estate assets located inside the city, if voters approve. It's not clear if "real estate" include all the Aquila assets.

Allows the city to condemn and buy the utility outright, including its power-purchase contracts with Xcel.

Gives City Council the power to approve or disapprove any sale or transfer of the utility to a third party, as long as the disapproval is for a valid reason.

With those controls, Pueblo could ask for or just demand more time to gather information about the utility, Occhiato and others say.

And Lock said he thinks Pueblo better take a serious look at buying the utility -- at least the portion of it around Pueblo.

"I think Pueblo would be a beneficiary of having its own system, if the numbers work," he said.

Lock's association consists of 29 cities that own and operate their own utilities, ranging in size from tiny Fleming to enormous Colorado Springs.

"The benefit is local control," said Lock. "The city council sets the rates and the money stays in town. It doesn't go off to Kansas City (Aquila's headquarters) or wherever. That's a huge benefit."

The Aquila utility in Colorado consists largely of distribution lines and equipment, which serve Pueblo and Canon City, Rocky Ford and Cripple Creek. Most of the power, as much as 80 percent, is purchased from Xcel, according to city officials.

Lock said Pueblo would have an economic development advantage in owning the electric utility, too.

"If the city owns its electrical utility, it can sit down and negotiate rates for a business it's trying to lure to town," Lock said. "That's what other cities do. Fort Collins does it with Anheuser-Busch. It's a huge economic development tool."

Owning the utility could put some money in Pueblo's general budget too, he said. The revenue cap in the state Taxpayers Bill of Rights would keep the city from taking all the utility's profits, Lock said. But the city could take some of that profit to make up for other shortfalls in the city budget, he said.

Lock doesn't buy the argument that Pueblo doesn't have the expertise to run its own electrical utility.

"The people who are opposed always throw that up as a roadblock," he said.

But many cities already run their own utilities and Pueblo could easily find the people who know how to do it, most likely among the present Aquila workers, he said.

Critics worry that the Aquila system is old and may be expensive to repair or replace. Lock said Pueblo would need to study that, probably by hiring an engineer to look at the system.

But repair and replacement of the system is just part of running a utility, he said. All utilities set aside part of their income for that work and Pueblo would be no different.

Some aspects of the idea are different. None of Colorado's municipal-owned utilities have been purchased from private companies in recent memory, Lock said. Most were created by the cities themselves around the turn of the century.

And none have the regional network that Aquila's Colorado division offers, serving customers far outside Pueblo.

Lock said that would bear special study and Pueblo may want to look instead at finding a way to buy just the Pueblo-area part of the network. The Pueblo franchise agreement allows it to do that, he said, and the franchise agreements of the other Aquila-supplied cities may let them do that same.

"It wouldn't be fatal," he said of the multi-city aspect of the network, "but it would probably be a significant kind of stumbling block."

If Pueblo did buy the utility, perhaps beating out Xcel to do so, it would not be stuck only buying power from Xcel. Lock said there are other companies selling power to Colorado cities, including a Nebraska company that will begin selling electricity to Fountain.

It's not known if the city's current negotiations with Xcel over annexing the Comanche power plant would affect the Aquila-purchase issue.

The city is in the midst of working out an a deal to annex the expanding power plant, which is located south of the city, which would allow the plant to buy city water. Xcel has agreed to give the city $17 million if the plant is annexed, although the deal has reportedly been complicated on issues concerning the steel mill's land and the use of union construction labor.

City Council will have closed-door meetings Monday night to hear an update from the city manager on the Aquila information and about the Xcel negotiations.

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