Dive Brief:

• A Colorado Administrative Law Judge (ALJ) last week cleared the way for state regulators to determine the fees La Plata Electric Association (LPEA)​ and United Power will pay to exit Tri-State Generation and Transmission's service.
• In a May 15 decision, ALJ Robert Garvey granted a motion for summary judgment filed by the two cooperative power providers to not allow Tri–State to raise a federal preemption defense that could have blocked state regulators from considering the exit fee.
• United, LPEA and other members have pressed to leave Tri-State's service over dissatisfaction with its coal-heavy generation mix. A new case study by Rocky Mountain Institute, however, concludes the G&T provider's new clean energy plan is a "thoughtfully crafted, detailed, and forward-thinking" approach to phasing out 1 GW of coal.

Dive Insight:

Colorado regulators could soon be considering how much LPEA and United must pay to exit Tri-State's service, after Garvey determined the state's jurisdiction was appropriate.

Along with the summary judgment granted to LPEA and United, Garvey also said he would not be deciding the legality of Tri-State's move to add additional members in a bid to become FERC jurisdictional. Observers say the ruling essentially means the ALJ wants to decide only the exit fee issue, and not decide what is or is not lawful under Colorado corporate law.

"LPEA is pleased that the Colorado PUC continues to forge ahead to get to the merits of our proceeding – all we want is a just and reasonable exit charge and we look forward to getting an unbiased one from the Colorado PUC since we cannot get one from Tri-State," LPEA CEO Jessica Matlock said in a statement to Utility Dive.

Modifications to Tri-State's bylaws last year allowed for members to develop more of their own supply, but also cleared the way for Tri-State to add the new non-utility members which brought it under FERC jurisdiction. The ALJ ruled that arguments raised by LPEA and United regarding the addition of Tri-State’s non-utility members were irrelevant to the jurisdictional issue.

"This is an issue of contract law," Tri-State Senior Manager of Communications and Public Affairs Lee Boughey said in an email. He added that in 2007, LPEA and United "freely agreed to their wholesale power supply contracts and agreed to share costs with the other members of Tri-State over the remaining 30 years of their contracts.”

Now that the two rural power providers want to leave Tri-State's service, they are debating how large the exit fee should be.

"LPEA and United Power cannot financially make it work to terminate their contract with Tri-State, and then buy power from somewhere else, without withdrawing at an absurdly low cost and unloading more than $1 billion costs on their fellow cooperative members," Boughey said.

Other members have left Tri-State's service, and the issue of exit fees has been a closely-watched debate. Some members say the G&T provider requests exorbitant exit charges to keep members from leaving.

In 2016, Tri-State's $163 million exit charge offer to Kit Carson Electric Cooperative ended with a $37 million settlement. Then, Delta-Montrose Electric Association negotiated a 2019 exit settlement of $88.5 million down from Tri-State's initial $322 million figure.

Members say they are leaving in order to develop more local, affordable renewable energy. But a recent report from RMI concludes Tri-State is already on a path to cleaning up its generation mix.

A 'forward thinking' approach to renewables 

Tri-State provides generation to 43 electric co-ops in four states, and historically that power was mostly coal-fired power generated from a fleet of five plants constructed between 1959 and 2006.

"Today, bilateral and market purchases as well as changing economics are steering Tri-State toward a more diversified mix of fossil and renewable resources, and its recently released Responsible Energy Plan accelerates that trend," RMI concluded in its new analysis.

Tri-State says it is working to eliminate coal emissions in New Mexico by the end of 2020 and in Colorado by 2030, and is adding more than 1,000 MW of new wind and solar resources.

RMI's new report praised Tri-State's approach, saying the company's planned coal retirements and associated carbon reductions "will ensure Tri-State’s compliance with state energy policies, as well as lower the costs of power supply for the co-op’s members."

The new case study is a turnaround of a critical 2018 analysis, where RMI concluded Tri-State's 1 million consumers could save more than $600 million through 2030 by retiring some of its fossil-fuel plants and moving towards renewables.

Tri-State officials say they continue to increase the utility's renewables utilization, and on May 7 served 47% of member energy with renewables, peaking at 55%. "This is solid progress towards our goal of achieving 50% of the energy consumed by our members year-round by 2024 sourced from renewables," the company said in a statement.