Electric-utility losses are really no big deal

The Aspen Times
Aspen CO Colorado

The city of Aspen has yet to grapple with a substantial revenue decline (about 5 percent, or $370,000, in 2012) at its electricity utility, partially brought about by its own conservation initiatives over the past seven years.

From a policy standpoint, it will be interesting to see how Aspen’s administrative officials, and the elected ones on the City Council, tackle the issue. Businesses face downturns in sales all of the time, and they usually proceed with one of three options: cost-cutting, including layoffs; new products, services, marketing campaigns or price increases aimed at recapturing the loss; or a wait-and-see attitude to determine if the decline was a fluke.

But as some of Aspen’s elected leaders have reminded us in the recent past, government is not a business and shouldn’t be run as though it were one. To be fair, no one in City Hall has yet to advocate publicly that the revenue loss should be addressed by raising utility rates (a price increase), but that’s an option that certainly will be explored in the coming months.

We’d like to applaud the city for implementing numerous conservation measures in recent years, actions that have led to the current predicament. Jeff Rice, the city’s energy-efficiency manager, spoke

to council members on Monday, reading off a long list of the numerous programs the city and other conservation-promoting entities and government agencies have unveiled since 2006. Those include financial incentives and energy assessments that have helped commercial and residential customers reduce consumption.

Lee Ledesma, utility operations manager for the city, followed Rice and told of a steady decline in electric-energy use of about 1.3 percent annually since 2008 even though the number of customer accounts has risen 2 percent annually during the same five-year period. She didn’t advocate any particular course of action – that’s expected to come this summer. She said she simply wanted to apprise the council of the situation.

Frankly, we don’t see much of a problem. The city is the victim of its own success: Environmental programs and measures have resulted in a corresponding decline in revenue for the utility.

Too often, as is usually the case with casino or sin tax revenue, local governments become addicted to a certain level of money, and when they suddenly aren’t getting it, they grow overly concerned and awkwardly attempt to implement measures to reclaim it. It’s a bit like being a gambler whose unlucky streak has forced him to chase his losses with more (and bigger) bets.

Of course, Aspen doesn’t have a casino. But in the face of its outward pro-conservation policy, it was continuing to bet house money that consumption would stabilize in time. And in late 2011, the council supported a measure to restructure utility rates for customers large and small because of rising electricity costs. The “restructuring” meant rate increases, but because they are staggered over a multiyear period, their full effect has yet to be realized.

Our suggestion would be to wait a few years until the rate increases take effect before rushing toward some sort of stopgap measure to counter last year’s (and likely this year’s) loss in revenue. With the economy improving, energy use is bound to bounce back.

As Mayor Mick Ireland noted, “This is a good problem to have.” Yes, it is, and it’s one that municipal government can afford to live with for a while.