Tri-State faces growing member rebellion, challenges at Colorado PUC

Dive Brief:

Tri-State Generation & Transmission's (G&T) largest member, United Power, has asked Colorado regulators to help set a fair charge to exit the utility's service. It is the most recent sign of unrest among the G&T provider's cooperative members, which are seeking cheaper and cleaner power supplies.
Separately, La Plata Electric Association (LPEA) has filed a complaint with the Colorado Public Utilities Commission asking regulators to determine its own exit charge. According to La Plata, it requested an estimate from Tri-State four months ago but has not received the information.
Tri-State in July announced a Responsible Energy Plan aimed at reducing carbon emissions, and says it has been working with members to reach agreement on a methodology to determine buy-out values to exit its service. That process is expected to be complete early next year.

Dive Insight:

Tri-State officials say they are working as quickly as they can to add cleaner power resources, and are in the midst of a collaborative process with members to establish buy-out values and more flexible supply arrangements. But it is not clear those discussions are advancing.

"Conversations regarding our power agreement with Tri-State have stalled and the cooperative is seeking out all possible alternatives to build in rate reductions and offer more renewable options to our energy mix," United Power CEO John Parker said in a statement.

LPEA says that in addition to not responding to requests for an exit charge estimate, Tri-State "declared a moratorium on any exit charge discussions with any of its members."

“We have run out of options to obtain a fair exit charge from Tri-State,” LPEA CEO Jessica Matlock said in a statement. "Particularly in light of Tri-State’s exit charge moratorium, combined with its efforts to circumvent PUC jurisdiction over exit charges, we needed to act now."

Tri-State officials say the process to develop and review a buyout methodology takes time but that it has established a contract committee of all members, including United Power, to address the issue. The utility said it expects the committee will complete that process and make recommendations to the board in early 2020.

Cooperative members are now limited to procuring 5% of their own supply, but Tri-State is considering flexible supply agreements that would allow members to procure more clean energy on their own.

"Wholesale power contracts changes and the valuation of member contracts affect our entire cooperative and require significant review, analysis and negotiation among all of Tri-State’s members," Tri-State Board Chairman Rick Gordon said in a statement. "We must approach all contract issues in a coordinated, informed and thoughtful manner."

United Power and LPEA are not the only members to consider leaving Tri-State's service. Kit Carson Electric Cooperative in New Mexico parted ways with Tri-State in 2016, seeking more renewable energy. Delta-Montrose Electric Association, in Colorado, will exit Tri-State in May 2020.

Tri-State serves 43 cooperative members in New Mexico, Colorado, Wyoming and Nebraska.

According to an attorney representing LPEA, the cooperative is willing to negotiate but the PUC complaint was necessary to get Tri-State's attention. "They don't get serious until you have some legal or regulatory threat," Raymond Gifford, an attorney at Wilkinson Barker Knauer, told Utility Dive.

"The problem that has historically happened ... is when you ask Tri-State for a buyout number they give you something outsized and punitive, that will mean you'll never be able to leave," said Gifford.

Tri-State has historically been exempt from federal regulation due to its membership of small cooperatives, but has recently taken steps to bring itself under the purview of the Federal Energy Regulatory Commission. However, the commission last month rejected several filings, including Tri-State's rate tariff and 43 long-term wholesale electric service contracts with its members.

FERC dismissed the application without prejudice, and company officials say they intend to refile. Tri-State says federal regulation would bring consistency to its rates, while its detractors fear the utility is looking for ways to avoid state oversight and hold on to its coal fleet.

Tri-State's fleet is roughly 50% coal, but the utility also says that about a third of the energy consumed within the association comes from renewable resources. The utility has also announced new renewable projects it says will boost its wind and solar resources by 45%.