Colorado Power Supplier, Co-Op Disputes Seen as “Bleeding Edge” of Changing Energy Landscape
According to Jessica Matlock, CEO of La Plata Electric Association, the cooperative's board is talking to Tri-State Generation and Transmission about producing more of its power locally in part as an economic development opportunity. Two other co-ops, the Delta-Montrose Electric Association and the Kit Carson Electric Cooperative in Taos, N.M. have reached agreements to break their contracts.
A little over a year ago, Tri-State Generation and Transmission Association released a blueprint for its energy future that was hailed by it and others as "transformative." The Colorado-based wholesale power provider, long criticized for reliance on coal, said it would significantly expand its use of renewable energy and slash greenhouse-gas emissions.
Less than a year later, Tri-State, which serves rural electric associations in four states, announced plans to further reduce emissions in Colorado. The utility, accused of having high rates and being inflexible, also said late last year that it will cut rates by 8% over three years and give its member electric cooperatives the opportunity to generate more of their own power.
Rates and the inability to produce more electricity locally helped drive the recent defections of two member cooperatives and have others exploring their options. Duane Highley, Tri-State CEO, said the board of directors heard "loud and clear" from the members who want more flexibility.
Tri-State has also been under fire for a while from critics for not switching to cleaner energy sources more quickly as the costs of wind and solar power have dropped dramatically. But Highley, who joined Tri-State in April 2019, said in an interview that he thinks the company is "moving at lightning speed for a utility."
"I challenge you to find someone who's moving more quickly, given where we were and where we're going," he said.
The latest figures on Tri-State's fuel mix shows that 36% is coal, 28% is renewable energy and 19% is natural gas. An additional 14% is supplied by a contract with the Basin Electric Power Cooperative, which critics say is heavily dependent on coal.
Tri-State's "Responsible Energy Plan" released in 2020 calls for getting 50% of the electricity from renewable sources by 2024 and 70% by 2030. The utility has closed coal plants in New Mexico and Colorado, but still has interests in Arizona and Wyoming coal plants and doesn't have plans to retire any of its six natural gas facilities.
The utility is adding eight wind and solar projects to its system, enough renewable energy to power 850,000 homes.
Highley, formerly president and CEO of the Arkansas Electric Cooperative Corp., sees Colorado as the "tip of the spear" in the green-energy transition. Gov. Jared Polis wants to see Colorado's electric grid be fossil-fuel free by 2040.
"If Tri-State can get on board with this and demonstrate how we can maintain reliability and affordability while also making a massive grid transformation, then I think it can become a model for others to replicate," Highley said.
Eyes on Colorado
Observers and electric cooperative members see Colorado as the tip of the spear not only on clean-energy issues, but also on the response by the country's generation and transmission associations to a landscape being transformed by changing energy markets and climate change concerns.
Tri-State, a not-for-profit organization, serves more than 1 million electric customers through a total of 42 electric cooperatives in Colorado, Wyoming, Nebraska and New Mexico. As costs for renewable energy and batteries to store the power have dropped, some cooperatives have pushed to produce more of their own electricity or buy it from cheaper sources.
However, Tri-State's contracts with the cooperatives run until 2050. That's frustrating for cooperatives like United Power in Brighton, the largest in Tri-State's territory, that hear from members about the cheaper rates charged by Xcel Energy or city-owned utilities just down the road.
"We're 25% to 30% out of the market. Their costs are that much cheaper than ours," said Bryant Robbins, United Power acting CEO. "I don't have to beat them, but I'd at least like to be in the same neighborhood as they are."
Robbins wants to lower costs for the 250,000 people United Power serves, which he said will ultimately put more money back into the communities.
"To me these issues are at the bleeding edge of the generation and transmission association model and its future," said Matt Larson, an attorney who represents the La Plata Electric Association.
The Durango-based La Plata and United Power filed a complaint with the Colorado Public Utilities Commission that has been transferred to the Federal Energy Regulatory Commission. The cooperatives want Tri-State to quote them a fair exit fee in case they decide to try to end their contracts.
United Power's complaint with the state said Tri-State's proposed exit fee of $1.2 billion was unfair and discriminatory. Tri-State has said the amount is what it would take to ensure remaining members aren't harmed.
Tri-State hasn't given La Plata a number, the cooperative said.
Like two cooperatives that reached agreements with Tri-State to break their contracts -- the Delta-Montrose Electric Association and the Kit Carson Electric Cooperative in Taos, N.M. -- United Power and the La Plata association say Tri-State's rates are too high. They've also chafed under the 5% cap on the amount of power individual cooperatives can generate themselves or buy from other sources.
In October, the Tri-State board approved easing the cap by allowing the cooperatives to apply to produce a portion of 300 megawatts it will make available.
At least five other cooperatives have filed notices with the federal energy commission, saying they want Tri-State to determine what their exit fees would be. They said the information is for "planning purposes."
"This is going on in other places. This issue is not unique to Colorado, but I do think Colorado is the epicenter and Tri-State is the epicenter of it," said Larson, who represented Delta-Montrose in its exit from Tri-State.
Seth Feaster, a data analyst at the Institute for Energy Economics and Financial Analysis, agreed that similar discord is percolating in other parts of the country. He worked with Karl Cates, another analyst at the institute, on a recent report that was highly critical of Tri-State. The analysis says Tri-State's own figures forecast that its wholesale rates will rise 55% from 2030 to 2050.
A rebuttal by Tri-State on its website calls the report misleading and says rates haven't increased in the past four years and will remain stable or decrease over the next decade. After 2030, rate changes will be less than the rate of inflation, according to the utility.
In addition, Tri-State said it is participating in a regional energy market with other power suppliers to coordinate transmission and generation with the goal of lowering costs.
"I think what's happening across the country is these battles in Colorado have started to raise people's awareness of the possibility of getting out from under these onerous contracts and being able to move in a more independent direction," Feaster added. "The utility world is changing at a rapid clip in a way that it hasn't changed in more than a hundred years."
Bottom up or top down?
Tri-State and its member cooperatives are part of a system started during The New Deal to deliver electricity to rural areas underserved or ignored by power companies because of the expense of serving vast areas with few customers. The Rural Electrification Act signed by President Franklin D. Roosevelt allowed the federal government to make low-cost loans to nonprofit cooperatives.
Tri-State, based in Westminster, supplies wholesale electricity across roughly 5,700 miles of transmission lines to electric cooperatives spread across 200,000 square miles. The distribution cooperatives are member-owners that elect representatives from their own boards to serve on Tri-State's board of directors.
But some cooperatives and Colorado lawmakers have questioned whether Tri-State has turned the bottom-up model of rural electric cooperatives on its head. Tri-State's decision in 2019 to seek federal regulation of its rates spurred complaints the utility is trying to circumvent state regulators because contract disputes with members weren't going its way at the Colorado Public Utilities Commission.
The disputes, along with Tri-State's proposed rates and process for determining exit fees, are now before the Federal Energy Regulatory Commission. At first, FERC said the complaints by United Power and La Plata on exit fees could be heard by the PUC and then backtracked, saying it has exclusive jurisdiction over Tri-State. The PUC subsequently dismissed the complaints and a ruling by a state administrative law judge that had sided with the two cooperatives.
"Tri-State seems to believe that Beltway bureaucrats somehow have a better sense of what is good for rural Colorado than the three-commissioner PUC, two of whom come from Western Slope communities and co-op backgrounds. That's arrogance at its worst," Rep Jeni Arndt, a Fort Collins Democrat, and Sen Don Coram, a Montrose Republican, wrote in an October 2020 opinion column.
The lawmakers suggested the commissioners can rule that Tri-State's addition of nonutility members to the organization wasn't legal, voiding FERC's regulation of the company. Tri-State's addition of the three new members -- a greenhouse, a ranch and a gas-marketing company -- fulfilled the federal agency's requirement that not all of Tri-State's members can be electric cooperatives.
United Power is challenging the addition of the new members in Adams County District Court. The La Plata association has asked to be added to the lawsuit.
Tri-State said it makes sense to be federally regulated rather than by four different states with different policies. The utility still has to get state approval for its electric resource plan in Colorado.
Jessica Matlock, the La Plata Electric Association CEO, said the cooperative's board is talking to Tri-State about producing more of its power locally in part as an economic development opportunity. She said La Plata has never said it wants to leave Tri-State. It just wants to explore its options.
However, Matlock disagrees with seeking federal regulation. She said it runs counter to the principles of electric cooperatives.
"Growing up in public power, I knew you fought against FERC regulation because then you'd have to go to D.C.," said Matlock, who previously held a number of positions with the Bonneville Power Administration and other utilities. "The fact that a public power entity would go to FERC and give up that local control, which is a part of the cooperative principles, is just mind boggling for most people you talk to who are familiar with this issue."
It's also expensive for local cooperatives, said Robbins of United Power.
"The cost of a FERC attorney is much greater because they're all located in Washington, D.C.," Robbins said. "It's much greater than what we're paying for the local attorneys here to battle at the PUC."
In support of Tri-State
The CEOs of the Otero County Electric Cooperative in Cloudcroft, N.M., and the Gunnison County Electric Association believe the switch to federal regulation will give them more of a voice. Like the power transmitted across state lines, decisions made by regulators in one state can ripple across Tri-State's entire territory.
Tri-State members in other states weren't able to weigh in on the complaints by United Power and La Plata before Colorado regulators, said Mario Romero, CEO and general manager of the Otero County electric association.
"There's been a huge concern from our board about members leaving," Romero said. "As more leave, rates could potentially go higher which, maybe would cause other people to investigate leaving. It's kind of that death spiral."
Mike McBride, CEO of the Gunnison County cooperative, said federal regulation provides one forum where all members are able to give input on rate-related matters.
"I think Tri-State had resisted going to FERC for a long time despite some of the claims that it hadn't talked to its membership, until they did it," McBride said.
Robbins said dealing with FERC is usually a longer process than at the state level, but he agrees with Tri-State that everyone has a voice there. He said that he and Highley are talking about their differences and have had good conversations.
Some kind of agreement about United Power's contract is possible, Robbins added. "All I'm trying to do here is what's in the best interest of United Power members."
- - -
Mark Duggan provided online production of this story for KSUT.This story was written in partnership with the Denver Post, through a collaboration powered by COLab, the Colorado News Collaborative — a nonprofit formed to strengthen local public-service journalism in Colorado. KSUT joined this historic collaboration with more than 40 news organizations to share in-depth local reporting to better serve Coloradans.