Electric Co-ops Closer to Securing Tri-State Exit Fees

Solar installation at Mesa Verde

Last week, La Plata Electric Association inched closer to gaining the basic information it has long desired to evaluate whether it makes sense to stay with Tri-State Generation and Transmission as its wholesale electricity supplier or jump ship to potentially cheaper, local renewable energy supplies.

An administrative law judge at the Colorado Public Utility Commission ruled on complaints filed by LPEA and United Power and agreed that Tri-State’s refusal to provide an exit fee to the two rural electric cooperatives amounted to unjust and unreasonable behavior. The administrative law judge also ruled Tri-State discriminated among its member co-ops because it provided some co-ops exit fees and refused to provide others the same treatment.

Tri-State has attempted to avoid good faith discussions with LPEA and United through years of evasion, obstruction and obfuscation. Tri-State has hoped that by refusing to engage in conversations with unhappy member co-ops, it can delay the day of reckoning.

In recent years, two of Tri-State’s member co-ops have exited their contracts after reaching agreements on just and reasonable fees that leave the co-ops remaining in Tri-State financially whole. Kit Carson Electric Cooperative in Taos, New Mexico, and Delta-Montrose Electric Association each wanted the flexibility to pursue local energy projects to both lower electric bills over the long term and pursue economic development opportunities within their service territories.

Both LPEA and United want information to evaluate the cost of exiting Tri-State’s contract against sticking with Tri-State’s energy choices for the contract’s 30-year duration. That contract prohibits LPEA from generating more than 5% of its energy locally, a cap that LPEA long ago reached.

The PUC’s administrative law judge reasonably ruled that Tri-State is discriminating against LPEA and United by treating their requests differently than the same requests from Kit Carson and Delta-Montrose. He called out Tri-State’s strategy of attempting to thwart the PUC of its jurisdiction over exit charges.

Another key part of the ruling is the PUC for the first time spelled out a formula for calculating just and reasonable exit fees. An expert hired by United provided a straight-forward approach that uses readily available financial information and suggests one can figure out an exit fee by simply tallying up a co-op’s fractional share of Tri-State’s overall debt and subtracting the co-op’s share of Tri-State’s assets. That approach closely approximates the buyout fees that Kit Carson and Delta-Montrose paid, $37 million and $62.5 million, respectively.

Tri-State’s evasive tactics may have finally caught up with it. Last year, Tri-State attempted to avoid the jurisdiction of the Colorado PUC by concocting a new membership category and adding a couple of random businesses as Tri-State members. That was done with the explicit intent to claim that only the federal government in Washington, D.C., at the Federal Energy Regulatory Commission could now regulate Tri-State, not state-based regulators where member co-ops are located.

Tri-State’s decision to pursue federal regulation broke its claim of being a family of member cooperatives. LPEA has nothing in common with a commercial greenhouse in Fort Lupton or a farm in Craig, two of the random new Tri-State members. Now, Tri-State is just a utility monopoly with a varied collection of customers.

Tri-State’s attempts to remake itself from a coal behemoth to a modern utility may be too little and too late. Rather than insisting on holding captive its member cooperatives that might no longer wish to be confined in Tri-State’s family, wouldn’t it make more sense for Tri-State to find equitable outcomes for everyone? Tri-State could then refocus on servicing the remaining co-ops that happily rely on the Denver-based monopoly and let the others pursue their own independent paths forward.

 

This content first published in the Durango Herald’s Thinking Green column here.

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