Tri-State Generation and Transmission’s largest member, Brighton-based United Power, has agreed to start buying electricity from a different company as it prepares to end its contract with the wholesale power supplier.
United Power said Wednesday that it has signed an agreement with Guzman Energy, a wholesale energy provider whose customers include other rural electric associations that have cut ties with Tri-State.
United Power plans to leave Tri-State May 1, 2024. The lead-up to the planned departure has been marked by disagreements over how quickly to phase out coal as a power source, the transition to renewable energy, rates and how much of its own electricity United Power can produce.
The two utilities’ dispute has played out in court and before regulators, including the Federal Energy Regulatory Commission, or FERC.
United Power gave notice in 2021 that it would end its contract with Tri-State. United Power will have to pay to break its contract. But after a ruling by a federal administrative law judge, it expects the exit fee to be significantly less than the $1.6 billion quoted at one point by Tri-State.
An initial ruling by the law judge in 2022 rejected the methods used by Tri-State and United Power to calculate exit fees for members seeking to end their power-supply contracts. Using recommendations from FERC staff, United Power believes its payment for ending the contract before the 2050 date will be roughly $250 million.
“We’ve literally been waiting every day for the final FERC ruling. The administrative law judge gave us that calculator, but FERC has to give us their final stamp of approval,” said Mark Gabriel, United Power president and CEO.
A decision could come when FERC meets later this month or in its September meeting, Gabriel said.
“But we have to go full steam ahead no matter what because we’ve got a hard and fast departure date of May 1, 2024,” Gabriel said.
Tri-State Generation and Transmission declined to comment on United Power’s announcement of its contract with Guzman. When the administrative law judge issued an initial decision last year on the exit fees, Tri-State said it was “a first of many steps in this process.” The utility said it determined United Power’s obligation would be $736 million.
United Power won’t be the first Tri-State defector. Kit Carson Electric Cooperative in Taos, N.M., paid $37 million in 2016 to break its contract with Tri-State and signed up to get some of its electricity from Guzman Energy. The Delta-Montrose Electric Association in Montrose paid a $62.5 million exit fee in 2020 and struck a deal with Guzman.
Other members of the Westminster-based power supplier have pushed to produce more of their own energy, such as and solar and wind power, and have complained about rates. Tri-State had a 5% cap on the amount of energy that member electric associations could generate on their own or buy from other sources, but modified the requirement.
However, Gabriel criticized the policy as paying lip service to giving members more choice. He said members in the United Power service area, which serves roughly 300,000 people along Colorado’s growing Front Range, pay more than customers in adjacent areas served by Xcel Energy-Colorado.
Analysts have said similar clashes are occurring in other regions as customers and state and local governments demand more power from renewable energy sources and less reliance on coal and other fossil fuels. The state of Colorado has set goals for boosting the use of renewables and cutting greenhouse-gas emissions to improve air quality and address climate change.
Tri-State, like Xcel Energy and other utilities, has phased out some of its coal plants and built more wind and solar farms. As part of a plan released in 2020, Tri-State said 50% of its electricity will come from clean energy by 2025 and it will cut 100% of its emissions from coal generation in Colorado by 2030. The utility said it reduced rates in 2021 and 2022.
Tri-State is a nonprofit, wholesale supplier that serves 42 member electric cooperatives in Colorado, Wyoming, Nebraska and New Mexico. The utility has said it wants to make sure its members aren’t harmed if some cooperatives leave before their contracts are up.
United Power objects to Tri-State figuring exit fees by calculating how much a cooperative would have paid had they stayed. Gabriel said it’s unfair that United Power members pay about 20% of Tri-State’s overhead.
United Power has agreed to get about a third of its power from Guzman Energy under a 15-year contract that starts in May 2024. Gabriel said the cooperative will have more announcements soon about its plans.
“We’re going from one monopolistic provider to a portfolio approach in our power supply,” Gabriel said.
United Power’s territory totals roughly 900 square miles and includes parts of Adams, Boulder, Broomfield, Gilpin, Jefferson and Weld counties.
“We have 5 to 6 percent growth. We’re adding 4,000 to 5,000 meters per year,” Gabriel said. “We’ve added 13 million square feet of commercial and industrial space in the past two years alone.
“I think three years from May 1, 2024, we’re going to be looking at a noticeable reduction in costs and rates and, most importantly, different options for our members.”
