City Council was stunned to learn Monday that Black Hills Energy wants to more than double the annual cost of the city's high-efficiency LED street lights -- a $1-million increase that would erase the savings from the low-energy street lights.

That savings also is the money the city uses to pay off the $4.2million LED program -- which Black Hills helped create.

Council took the news like someone had just stolen their cars.

"This is a slap in the face," Council President Steve Nawrocki told City Manager Sam Azad after he explained that Black Hills wants an extra $940,000 a year for street light costs and $60,000 more for traffic lights. That basically doubles what the city has been paying.

District 1 Councilman Bob Schilling reminded the audience that Black Hills had supported the light-replacement program as a way for the city to save money.

"And now they want to take that money back," he said, shaking his head.

For example, the city spent $2.1 million on street lights in 2013. After the LED lights were installed, that annual bill dropped to $950,000 in 2016.

The details of the street-light plan are in Black Hills' Phase 2 rate request that is pending before the Colorado Public Utilities Commission. The city has a utilities lawyer under contract, William McEwan, and Azad told council McEwan will be fighting the street-light increase in the rate case.

In its filed testimony, Black Hills officials argue they need to get more revenue from city's street lights -- which they own. The mistake was to set the monthly costs for the new lighting too low from the start, according to testimony.

"In our discussions before the Phase 2 filing, we determined the company has not been charging enough to cover its fixed costs for the street light system after the city installed the LED lights," a senior Black Hills expert wrote.

Essentially, the utility wants to double the cost of what it charges the city to use its poles, electric lines and other infrastructure, even though the LED lights were installed to save power and money.

Back in 2014, council entered into a $4.2 million contract to install some 8,000 high-efficiency LED street lights because they would lower the annual charges from Black Hills. The financing came from Wells Fargo with the understanding the city would pay off the debt with savings from the LED lights. As collateral, the city listed its fire stations.

Even though the city paid for the new LED lights, Black Hills still owns them and the street light system. The city simply pays to use them.

The Phase 2 rate case is becoming a lightning rod of issues for Black Hills. At its heart, the case is a plan from Black Hills on how it will collect its allowed revenue from all its customers, from residential, to industrial and even municipal government.

For example, Black Hills is proposing to freeze the rates of residential customers who use less than 500 kilowatt hours per month (about 50 percent of households) and raise the rates on those that use more by about $2.40 a month.

Small businesses would get a sizable rate cut under the Phase 2 plan. But solar-power users -- who sometimes put power into the grid -- would see their monthly costs go up. Now, the city is looking at a $1-million hike in street light costs.

The PUC voted 2-1 in July to have an administrative law judge review the Phase 2 case and make a recommendation to the three-member commission. Commissioner Frances Koncilja voted against that, arguing the Phase 2 plan has important changes the commissioners should review themselves.

Although she lost that vote, Chairman Jeff Ackermann confirmed the commissioners can review any proposed settlement by the judge.

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