11/21/14 The Governance of Colorado Springs Utilities

Over the last two months, Colorado Springs Forward has initiated the effort to have a community discussion to explore the benefits of changing the oversight of Colorado Springs Utilities (CSU).

The City Council, which currently also serves as the board of directors of CSU, has agreed by a majority vote (Councilmembers Joel Miller and Helen Collins voting “No”) to have a community review process to discuss the best governance model for the future of CSU. However, the CSU board insisted that they, not Colorado Springs Forward or representatives from the community, lead the discussion. Colorado Springs Forward’s position is that the utility shareholders—we, the ratepayers—should lead the discussion and come up with the recommendations to present to the Utility Board. We also believe that representatives from the current CSU board of directors should  be invited to participate in this process.

Why does Colorado Springs Forward think that now is the time to discuss having CSU being governed in a different way, possibly by an independent board of directors?

  1. The utility business is very complex. An independent, experienced board of directors 100% focused on long-term strategic planning, risk management, compliance and organizational accountability, with a broad industry perspective, makes more sense instead of having City Council, with little utility or large business expertise, doing this on a part-time basis.
  2. CSU is a very large business with over $1 billion in revenue and $4 billion in assets that we as residents and ratepayers own. It is facing a $34 million budget shortfall in 2016 with further rate increases likely to cover this shortfall. The CSU borrowing limit has been reached with almost $2.5 billion in debt with minimal capital reserves. Is CSU being run in the best way possible to deliver low-cost utilities to the residents of Colorado Springs? Are we getting the best return from the utility company that we own?
  3. A change to the governance of CSU has been recommended many times but has not been acted upon. The Utilities Policy Advisory Committee (UPAC) Governance Structure Report dated February 2012:
    Primary Research of 27 Peer Utilities to CSU—25 out of 27 had an Independent Board.

    From the Sustainable Funding Committee 2009:
    A recent APPA (American Public Power Association) survey indicates that CSU’s governance model is an anomaly, as only 1 of 4 municipally-owned utilities with greater than 50,000 customers are governed by a city council.
    Note: CSU has over 250,000 customers.

    We should be responding to information like this and be willing to review and discuss changes to improve.

  4. A cost-effective, well-run utility company can support economic development, job growth and an improved quality of life. We used to have some of the lowest electricity rates in the nation which made Colorado Springs attractive to grow and attract businesses. Can we do more to explore cost-effective sources for renewable or alternative energy to address environmental concerns? How can we use our own utility company to help us grow and develop as a community that is attractive to citizens and business?
We believe that now is the time to consider a change to the governance of CSU to address these challenges.

We believe it is the community and the citizens, who are the shareholders in CSU, who should drive the process to review the governance of our utility company, not the existing board of directors or current management.

In 2015, we will be moving forward with significant involvement in the Utility Board’s public governance discussion, and look forward to engaging you and people throughout the region in a well-structured, open and action driven process.

Click the links below for more information regarding governance studies.

Utilities Policy Advisory Committee – Governance Structure Assignment 2012

 

Recommendation Paper

Governance Alternatives White Paper 2011

Colorado Springs Forward