A federal agency has determined it is the sole regulatory authority with jurisdiction to rule on the methodology for figuring out a buyout cost in La Plata Electric Association’s effort to escape its long-term contract with its electricity provider, Tri-State Generation and Transmission Association.
The Federal Energy Regulatory Commission in a series of orders determined it has exclusive power to define the buyout methodology, preempting similar regulatory proceedings before the Colorado Public Utility Commission.
In an order issued last week, FERC said, “After further consideration, we are modifying the discussion of the Declaratory Order to find that Tri-State’s assessment of an exit charge constitutes a Commission-jurisdictional rate subject to our exclusive jurisdiction. As a result, we also conclude that the Colorado PUC’s jurisdiction over the complaints regarding Tri-State’s exit charges is preempted as of Sept. 3, 2019, the date that Tri-State became a public utility subject to the Commission’s ratemaking jurisdiction.”
The FERC order largely, but not completely, shuts the door on resolving the buyout cost dispute before the Colorado Public Utilities Commission, which is LPEA’s preferred venue for resolving buyout costs.
The Colorado PUC ruled in July that the refusal of Tri-State to offer an exit charge to La Plata Electric Association was unjust, unreasonable and discriminatory.
LPEA is exploring whether to buyout its contract, which requires LPEA to buy 95% of its electricity from Tri-State. The contract runs through 2050. Another electric cooperative, United Power of Brighton, also is looking to end its contract with Tri-State.
Tri-State CEO Duane Highley said, “This is a monumental decision for our members and Tri-State, and allows us all to move forward in our clean energy transition with much more certainty.”
LPEA believes a divorce from Tri-State would allow it to find cheaper power on the open market while increasing the amount of locally produced renewable power it can buy, an amount now capped at about 5% of LPEA’s electrical load.
Tri-State maintains it has loosened rules to allow member cooperatives to buy more renewable power and LPEA’s and United’s effort to end long-term contracts will hurt other Tri-State rural cooperative members that have all agreed to share costs of power generation.
LPEA CEO Jessica Matlock said the FERC decision does leave an opening for the state PUC to re-enter the picture to determine the formula to determine a Tri-State buyout cost.
Matthew Larson, a utility lawyer with Wilkinson, Barker, Knauer of Denver, is handling LPEA’s buyout regulatory and legal issues. Larson said if the PUC determines Tri-State illegally added nonutility members like Mieco, which trades natural gas and petroleum products, the FERC could send determination of a buyout methodology or even total regulation of Tri-State back to the state PUC.
“While FERC reversed itself as to preemption, Friday’s FERC order points out the ultimate decision belongs to the Colorado PUC about whether Tri-State improperly added nonutility members,” Matlock said in an email.
State courts also might rule that Tri-State illegally added nonutility members, which again could send the buyout case back to the PUC, Matlock said.
“LPEA’s position that these nonutility member additions were inconsistent with Colorado law is supported by expert testimony filed with the Colorado PUC. Accordingly, the final say here on preemption rests with the Colorado PUC, and we look forward to having an opportunity to be heard on that issue by the full Colorado PUC,” Matlock said.
Larson said LPEA has 30 days from Aug. 28 to file a reconsideration of the FERC orders and it is evaluating whether it will do so.
Currently, the PUC had delayed hearings on the buyout dispute until Nov. 5, to hear exceptions, a type of appeal, filed by Tri-State, LPEA and United Power seeking some modifications or reversals of its July order that largely favored LPEA.
Additional exceptions to the PUC ruling have been filed by a host of electric cooperatives from Colorado, Nebraska and New Mexico.
Because the other member electric cooperatives are not party to the case, the PUC considers their exceptions invalid and will not hear them – something Tri-State has objected to.
Tri-State said moving forward to determine a buyout cost before FERC will provide a venue for all parties affected by LPEA’s and United’s buyouts a chance to present their concerns.
“Member exit charges are now firmly in the jurisdiction of the FERC, which is the appropriate regulatory commission to consider these important issues,” Highley said. “At the FERC, each of our members, no matter in which state they are located, can participate fully, have a voice and be treated equally on wholesale contract and rate matters.”
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