Tri-State rebuffs Guzman Energy offer to replace 3 coal plants mostly with renewables

UPDATE: May 29, 2019: Adds comment and reaction from Tri-State Generation and Transmission.

Dive Brief:

Guzman Energy announced Tuesday it reached out to Tri-State Generation and Transmission with a "large-scale, transformative, economic proposal" to help rapidly decarbonize the generation supply for dozens of rural electric cooperatives, but its offer was rejected.
Guzman offered 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 through a long-term fixed-price agreement.
According to Guzman, Tri-State officials indicated they are not currently interested in the proposal, but could revisit the idea after a legislative rulemaking process in Colorado has been finalized. Lawmakers in that state recently passed legislation subjecting Tri-State to oversight by the Colorado Public Utilities Commission.

Dive Insight:

Rocky Mountain Institute turned up the heat on Tri-State last year when it issued a report concluding 1 million consumers could save more than $600 million through 2030 if Tri-State retired some of its fossil-fuel plants. Now Guzman Energy says it has sufficient capital to help retire 800 MW of coal generation while also procuring cleaner energy.

"Rapidly changing economics, combined with new carbon reduction goals in states that include the majority of Tri-State’s members, mean there’s a lot at stake for those who own and are served by Tri-State," Guzman President Chris Riley said in a statement.

The company's proposal, said Riley, would help Tri-State and its members to immediately lower costs, "while simultaneously reaching compliance with new laws." And while Tri-State is not currently interested in the proposal, Riley said the company looks forward to "taking the proposal directly to Tri-State’s owners and facilitating an open and transparent dialogue."

Tri-State officials said the Guzman proposal lacked sufficient detail and “appeared to ask for exclusive negotiations.”

“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. The company “requested a written proposal but Guzman refused to provide one, instead deciding to go the press,” he added.

With new energy legislation and rules in both Colorado and New Mexico, the company said the timing is not right to make a major change.

“Signing [an] exclusive agreement with a for-profit entity prior to development of state rules is not in the best interests of Tri-State members,” the company said.

Tri-State supplies power to 43 rural electric cooperatives and some of those members have asked regulators to exit their supplier, seeking cheaper, cleaner power. The Colorado legislation increases state oversight of the company's integrated resource plan, which was not previously subject to PUC rulemaking.

Approximately half of Tri-State's generation comes from coal, while Colorado's climate goals require utilities to reduce emissions 80% by 2030.

Guzman offered to buy two units at Craig Generation Station in Colorado, a Tri-State coal mine near Craig and a third coal unit near Grants, New Mexico, according to Energy News Network.

Under Guzman's proposal, the company said it would have provided Tri-State with a "substantial direct cash infusion" to finance the early retirement of nearly half of the utility's coal generation not already slated for early closure.

Guzman said the proposal would also provide "substantial financial support to communities and workers negatively affected by the transition," adding that Tri-State members would begin seeing savings "even before the portfolio transition was complete."

Tri-State responded that it has been adding low-cost renewable resources and planning for the orderly retirement of coal units.

TriState has contracted energy from wind, solar and hydropower projects over the last decade, retired its share in one coal unit and seeks to retire two additional coal units by 2025.

“We may well want to discuss these issues with Guzman Energy and others, but at this point, it is not in our best interests to be locked into a single option,” Tri-State said.