A federal agency has issued an order in the ongoing faceoffs between the Tri-State Generation and Transmission Association and its members in Colorado and three other states, clearing the way for a potential reshaping of a significant chunk of the region’s energy landscape.
The Federal Energy Regulatory Commission adopted a formula for showing electric cooperatives what it would cost them to end their contracts with the wholesale power provider. The parties are poring over this week’s 247-page order and crunching numbers.
Tri-State has until Jan. 19 to submit the amounts for all 42 member cooperatives, 17 of which are in Colorado.
United Power, Tri-State’s largest member, didn’t wait to hear its exit fee before deciding to leave. The Brighton-based cooperative gave notice two years ago that it would terminate its contract May 1, 2024. The utility has signed an agreement to buy electricity from Guzman Energy, a wholesale supplier that has contracts with other former Tri-State members.
Mark Gabriel, United Power president and CEO, said the cooperative is still reviewing FERC’s order. He said he was pleased that the federal agency supports a variation of an exit-fee formula United proposed.
A plan filed by Tri-State would have calculated exit fees based on the revenue lost over the life of the contract. All the members’ contracts run until 2050. Tri-State, based in Westminster, has said it wants to ensue sure that remaining members aren’t harmed by the early withdrawal of other cooperatives.
The plan had been approved by Tri-State’s board of directors, which is made up of a representative from each member cooperative.
Under the proposed payout plan, United Power would have had to pay $1.6 billion to break its contract. In an initial decision in 2022, a federal administrative law judge found that Tri-State’s approach was “unjust and unreasonable.” The judge said the formula overestimated the money needed to make remaining members whole and would have provided a windfall to Tri-State.
FERC agreed with the judge and adopted a modified payout plan that looks at Tri-State’s balance sheet and assigns each cooperative a proportional share of the debt.
“Given the significance of the Commission’s order on Tri-State’s membership, a thorough review of the order is prudent and necessary,” Tri-State said in a statement Tuesday.
Robin Lunt, chief commercial officer for Guzman Energy, hesitated to predict how the exit fees will compare to payouts previously quoted by Tri-State because “people are still running the numbers.”
“But in general, the order is favorable to the distribution utilities and importantly provides them transparency that wasn’t otherwise available so they can make decisions,” Lunt said.
Electric cooperatives that have left Tri-State or explored leaving have complained about the company’s rates and what they considered over reliance on coal. They object to the 5% cap on the amount of power individual cooperatives can generate or buy from other sources, saying local energy projects would benefit local economies.
The Kit Carson Electric Cooperative in Taos, N.M., paid $37 million in 2016 to break its contract with Tri-State. The Delta-Montrose Electric Association in Montrose paid $62.5 million in 2020 to leave.
Tri-State points to plans to close coal-fired plants earlier than scheduled and its Responsible Energy Plan, which set goals for increasing renewable energy sources and cutting greenhouse gas emissions. A proposal recently filed by Tri-State with the Colorado Public Utilities Commission would add 1,250 megawatts of additional renewables and battery storage through 2031.
However, serious disagreements remain between Tri-State and some members. Besides United Power, Mountain Parks Electric in Granby and the Northwest Rural Public Power District in Hay Springs, Neb., have filed notices to end their electric service contracts, Tri-State said.
Earlier this month, the La Plata Electric Association filed a lawsuit against Tri-State, accusing the power supplier of breach of contract. Tri-State has dealt in bad faith by failing to offer a fair and just exit plan, the lawsuit said.
“We are very pleased with this latest step forward, towards more clarity from FERC that enables us to evaluate our options,” LPEA CEO Jessica Matlock said in a statement.
