Six rural electric cooperatives have joined La Plata Electric Association’s exploration of buying out their long-term contracts with their electricity supplier, Tri-State Generation and Transmission.
Matt Larson, a Denver attorney representing LPEA before the Federal Energy Regulatory Commission, said three cooperatives from Colorado, two from Nebraska and one from New Mexico are also exploring separating from Tri-State.
The rural cooperatives have joined LPEA’s effort before FERC, asking the federal agency to force Tri-State to provide them with a dollar estimate of what it would cost to buy out their 30-year power supply contracts with Tri-State.
“To date no contract termination payment figure has been given,” Larson told LPEA’s board of directors on Wednesday at its monthly meeting.
The six rural cooperatives joining LPEA are:
Wheat Belt Public Power District of Sidney, Nebraska.Northwest Rural Public Power District of Hay Springs, Nebraska.Springer Electric Cooperative of Springer, New Mexico.San Miguel Power Association of Nucla.San Isabel Electric Association of Pueblo West.Poudre Valley Rural Electric Association of Fort Collins.LPEA’s contract to purchase about 95% of its electricity from Tri-State runs through 2050.
Separately, United Power of Brighton is also asking FERC to force Tri-State to provide it with a dollar figure to buy out its 30-year power supply contract with Tri-State.
LPEA believes leaving Tri-State would allow it to find cheaper electricity on the open market while increasing the amount of locally produced renewable power it can buy, an amount now capped at just above 5% of LPEA’s electrical load.
Tri-State maintains it has loosened rules to allow member cooperatives to buy more renewable power, and rural cooperatives’ efforts to end long-term contracts will hurt other Tri-State members that have all agreed to share costs of power generation.
Besides examining a complete buyout of its power supply contract with Tri-State, LPEA is also looking at gaining more flexibility within the contract so it can purchase more locally generated renewable power. It is also exploring negotiating a partial contract with Tri-State.
In another complaint before FERC, LPEA is questioning whether electricity rate charges from Tri-State are appropriate, and FERC might issue a ruling on that complaint within the next month, Larson said.
Settlement talks with Tri-State are ongoing in the effort by LPEA, and now the other rural cooperatives, to get a dollar cost estimate of a buyout of their 30-year contracts. But there is no clear timeline for when the matter might be concluded, Larson said.
Finally, LPEA has also joined a civil lawsuit initially filed by United Power of Brighton, which claims Tri-State Generation and Transmission broke Colorado law by adding three nonutility members so it would become federally regulated.
The lawsuit, filed in November 2020 in state District Court of Adams County, is associated with United Power’s effort to escape its long-term power supply contract with Tri-State.
United Power, with 49,945 customers, is Tri-State’s largest member. Tri-State has 43 rural electric cooperative members, including LPEA, which has about 34,500 customers.
Both LPEA and United had sought jurisdiction for the methodology to determine buyout costs for their power supply contracts from the Colorado Public Utilities Commission.
However, Tri-State, which had traditionally been regulated by the state, added nonutility members in 2019 – a ranch, a greenhouse and a California natural gas supplier – to its membership roster. The addition of those members resulted in the Federal Energy Regulatory Commission, the preferred regulatory body of Tri-State, assuming jurisdiction in determining the contract-termination formula.
If United Power’s lawsuit succeeds, jurisdiction for determining the contract-termination formula might return to the state PUC.
The cost of buyouts could be tens of millions of dollars, possibly hundreds of millions of dollars, different based on whether Colorado regulators or federal regulators oversee the formula for buyouts.
Tri-State is a nonprofit wholesale electricity provider to rural co-op utilities serving 1.2 million consumers in Colorado, New Mexico, Nebraska and Wyoming.
It maintains its membership expansion was legal and appropriate, and that being federally regulated is the norm for multistate wholesale power companies.
In November 2020, the PUC ruled state courts should decide United Power’s complaint that the three nonutility members were added illegally.
In 2016, a smaller Tri-State member, Kit Carson Electric Cooperative in Taos, New Mexico, bought out its contract with Tri-State for $37 million.
In June 2020, Delta-Montrose Electric Association agreed to pay $62.5 million to leave Tri-State. In addition, in a related contract, it agreed to purchase Tri-State transmission assets for $26 million and forfeit $48 million in capital credits. The related contract brought the overall buyout cost to $88.5 million plus the capital credits forfeiture of $48 million.