Stakeholders might not in the first instance look to Tupac Shakur in analyzing the troubles of the generation and transmission (G&T) model. But recent developments at the Federal Energy Regulatory Commission (FERC) suggest perhaps they should. 

On his 1995 track Dear Mama, Tupac riffs "I wish I could take the pain away, if you can make it through the night, there's a brighter day." This aptly describes the mindset of distribution cooperatives across the country with the opening of a Section 206 show cause proceeding against Tri-State Generation and Transmission Association, Inc. (Tri-State) in Docket No. EL21-75-000. The case involves the process for distribution cooperatives to obtain an exit charge calculation from Tri-State.

For too long, distribution cooperatives across the country have felt pain in the night (and day too) as many of them ineffectually pursue a different energy future for their customers — a future with lower costs, cleaner generation and increased flexibility. The Section 206 show cause proceeding is a critical development by FERC that should be applauded, as it can and should mark the beginning of brighter days for disenfranchised G&T members. After multiple years of no movement, Tri-State's response to the show cause order shows incremental improvements to the exit process and increased transparency — a response that must be attributed to the proactivity of FERC in issuing the show cause order.

But mere process changes are not enough to address the issues at the root of the G&T model. Distribution cooperatives across the country are seeking to shed the inflexible shackles of their G&T, and this is why the opening of Docket No. EL21-75-000 by FERC is timely and welcomed from a broader policy perspective. It illustrates the FERC commissioners proactively taking the reins to examine Tri-State's exit charge procedures, and this type of engagement at the commissioner level is exactly what is needed to begin the overdue probing of the dynamics of not just the Tri-State exit procedures, but the G&T model more holistically.

The fundamental question is whether the G&T model is delivering the policy outcomes this country needs and that distribution cooperatives — and most importantly their own customers — want?

A look at the story of Tri-State members seeking to exit membership as a case study shows the answer to that question is no. That story began in New Mexico and Colorado, where Kit Carson Electric Cooperative (KCEC) and Delta-Montrose Electric Association (DMEA) — after protracted negotiations and litigation battles with Tri-State — successfully exited membership with exit charges hundreds of millions of dollars lower than the exit charges originally demanded by Tri-State. Since the KCEC and DMEA exits, seven more Tri-State members have come forward seeking exit charges only to be stonewalled by the very G&T that they as members purportedly own.

G&T member discontent is not confined to Tri-State's service territory or the Rocky Mountain West. The problems with the G&T model — the lack of flexibility, member choice, shaky governance, and captivity to unreasonably long and one-sided contracts — exist across the country from South Carolina to Indiana to the Dakotas. 

The Section 206 proceeding is about Tri-State's "conduct" vis-a-vis its own member-owners; indeed, FERC notes that "[in] response to a lengthy history of utility member requests for CTP calculations, Tri-State has consistently failed to provide such a calculation" and "the lack of clear and transparent exit provisions has allowed Tri-State to impose substantial barriers for its utility members in evaluating whether to remain in Tri-State." But from an energy policy and G&T model perspective, the discussion should not end here. Rather, the Section 206 proceeding should mark the beginning of the reformation of the G&T model as the Tri-State course of conduct and process under examination are symptomatic of a broader problem.

Restrictive, opaque and one-sided exit charge processes — assuming members can get an exit charge at all — are hardly uncommon in the G&T world. The story of Tipmont REMC in Indiana and its struggles to obtain a just and reasonable exit charge from its G&T, Wabash Valley, reads just like that of the Tri-State members that are futilely asking for an exit charge of their own in Colorado, New Mexico and Nebraska. Black box models, delay, litigation, legal and consulting fees, the outright refusal to provide an exit charge, and other hallmarks of a broken relationship and business model exist in not only these instances, but in other areas — generally rural — across the country where the G&T model predominates.

The exit efforts of certain individual G&T members have been chronicled, but the common threads between them and other disputes between G&Ts and their own members have never been holistically examined. It is here where the Section 206 order provides an opening to begin the examination on a broader level and on the appropriate stage — in front of FERC itself.

FERC enthusiasts and G&T members alike should view the Section 206 proceeding as a strong, necessary and needed first step, and also as the opportunity to have the bigger conversation about a standardized exit charge methodology across G&Ts that satisfy basic regulatory principles of being just and reasonable, cost-based and transparent. This would ensure exit charges are fair to both the exiting member and the G&T and obviate the current status quo, where distribution cooperative members — many of whom are rural Americans — are getting left behind in the clean energy transition by virtue of being locked into one-sided contracts spanning decades that are a relic of another time in the power supply business. 

As the Section 206 proceeding gets underway with the eyes of the G&T world nationwide on it, it may mark the end of the painful night for distribution cooperatives seeking to exit G&T membership and the dawn of a brighter day by spurring a string of needed actions at FERC, from appropriate processes to get exit charge calculations to a standardized, fair, cost-based and transparent exit charge methodology for all G&Ts. These needed steps can simultaneously advance national energy policy objectives and give distribution cooperatives a pathway to chart their own brighter day — a clean and low-cost energy future for their customers.