Tri-State assesses FERC rate regulation to avoid potential inconsistency of state oversight

Dive Brief:

Tri-State Generation and Transmission Association is considering making changes to invite rate regulation by the Federal Energy Regulatory Commission (FERC), which would allow the utility to limit oversight in the four states where it operates, according to reporting by Clean Cooperative.
Becoming federally-regulated would eliminate inconsistency in rates and reduce state oversight in Colorado, Nebraska, Wyoming and New Mexico, according to Tri-State — though it could also prove costly for its 43 member cooperatives.
Tri-State currently avoids FERC regulation because all of its members are small electric cooperatives, but it could change that by adding a member who is not — possibly through the addition of a power marketer.

Dive Insight:

Tri-State has considered FERC regulation before, but said rate settlements in New Mexico and Colorado "reduced the urgency" of the issue in 2012.

However, with the potential for more state oversight across its operating territory, the generation and transmission utility says it is time to revisit the question.

Historically, Tri-State was exempt from FERC oversight as a Rural Utilities Service borrower; more recently, it has not been federally-regulated because it is wholly owned by small cooperatives or public power districts, which FERC does not regulate. However, the utility says it is "no longer in a situation where its board of directors has sole authority for setting rates."

In Colorado, Tri-State's rates can be subject to regulation if a single member complains; in New Mexico, three protests trigger regulation. Nebraska and Wyoming currently do not oversee Tri-State rates, but that could change.

The utility published an issue brief on FERC regulation, noting "there is political pressure in New Mexico and Colorado for additional Tri-State regulation on facilities and rates. At some point, Wyoming and Nebraska could also assert jurisdiction."

"FERC regulation would eliminate inconsistent rate treatment across the states," Tri-State said. But there are pros and cons to the move, according to the issue brief.

FERC regulation would eliminate the costs of case-by-case opposition to state rate regulation, while also providing more certainty surrounding rates, according to Tri-State. Federal regulation is also "likely a credit-positive with rating agencies," the utility said.

But the brief also warns "there would also be new costs," including an annual fee of approximately $1.3 million, litigation costs and increased staff.

Even if Tri-State is regulated by FERC, states would still regulate facilities or resource planning. Approximately half of Tri-State's generation comes from coal, and state policies and member preferences are pressing for more renewables.

The utility recently rejected a proposal from Guzman Energy to purchase and shutter three coal-fired units owned by Tri-State, and replace the power with a mix of generation more than 70% renewable. And Rocky Mountain Institute last year issued a report finding 1 million consumers could save more than $600 million through 2030 if Tri-State retired some of its fossil-fuel plants.

Tri-State officials rejected the idea, pointing out that the Guzman proposal lacked sufficient detail.

"Guzman Energy brought us an imaginative and creative high-level verbal proposal, which lacked any specific or meaningful detail or terms," Tri-State CEO Duane Highley said in a statement.