Into the fray
LPEA looks to join state in battle over Tri-State's bid for federal oversight

Into the fray

LPEA would like to add more locally produced renewables, like solar, to its mix but is limited by its contract with wholesale supplier Tri- State. The local coop is currently tyring to work out a deal with Tri-State but is concerned a recent move by the wholesaler that would place it under federal, instead of state, jurisdiction, could jeopardize plans./ File Photo

Tracy Chamberlin - 08/22/2019

It’s not something that happens every day, or every year, or even every 10 years. In fact, it’s been about 25 years since the Colorado Public Utilities Commission has been involved with a case before federal regulators.

But, this is no ordinary situation.

When to walk away

Over the past several years, rural electric cooperatives like La Plata Electric Association, which are also members of Tri-State Generation and Transmission, have been looking for ways to increase the amount of renewable energy they can produce locally.

However, under their contracts with Tri-State, that local energy production has been limited to just 5 percent of the total power they use. This has caused some rural coops to consider other options.

Kit Carson Electric, of Taos, was the first to walk away from Tri-State. Kit Carson paid the wholesale power provider $37 million to break its contract and ventured out into the open energy marketplace. The coop has plans to build solar arrays in its territory that would produce 35 MW of power and has contracted with Guzman Energy, a wholesale power provider that both supplies and trades power across the continent, to procure the rest.

Delta Montrose Electric Association followed suit not long after. Frustrated by Tri-State’s attempts to keep renewables capped at just 5 percent – or pay the price with higher rates by going over – Delta Montrose asked Tri- State last summer exactly how much it would cost to break its contract.

After about a year of battling over a buyout, Delta Montrose and Tri-State finally settled on a number in late July. The catch was the coop was not allowed to help others, like LPEA, do the same.

And, LPEA might have wanted the advice. Less than a month before the settlement was announced, LPEA had also asked Tri-State how much it would cost to buyout its contract.

It turns out, though, watching its list of members dwindle isn’t the only thing on Tri-State’s plate.

Changing of the guard

Over the past several months – in the midst of all these buyout debates – the wholesale power provider has been taking the final steps toward changing which agency regulates its rates and settles disputes with its members.

In the past, the home states for each of its 43 members – Wyoming, New Mexico, Nebraska and Colorado – have essentially taken the lead. But Tri-State wants to change that.

On July 23, the power provider formally asked the Federal Energy Regulatory Commission, or FERC, to be the agency with the final say. In order to even qualify for FERC regulation, though, Tri-State has to check off certain boxes. For example, it cannot have a membership made up entirely of small, rural electric cooperatives like LPEA. However, it does.

“Tri-State would already be FERC rate regulated but for a narrow exception in the law,” Lee Boughey, senior manager of communications and public affairs for Tri-State, said in an email. “With the addition of a member that is not a small electric cooperative, we will no longer be exempted from FERC rate regulation.”

Tri-State has already done the legwork on this by officially adding language to its bylaws that would allow for a new type of member. But no announcement’s been made on exactly who this new member will be.

By the rules

At the same time Tri-State was putting together its bid to be regulated by the feds, the Colorado Public Utilities Commission was on the eve of rolling out a new set of proposed rules regulating wholesale providers like Tri-State.

This spring, the Colorado Legislature passed Senate Bill 236, which – among other things – tasked the commission with creating requirements that wholesale providers submit an electric resource plan to be approved by the PUC. The plan needs to detail a host of things, including projected carbon dioxide, sulfur dioxide, particulate matter and  mercury emissions and the cost of those emissions. Tri-State contends that regardless of which agency oversees its rates, it plans to comply with the state’s new rules. “Rate regulation by FERC does not change compliance with other state requirements, including resource planning, compliance with renewable portfolio standards, state carbon reduction plans, the building of new facilities and the retirement of existing facilities,” Boughey explained. “We are committed to working with the Governor, the Legislature and the Colorado Public Utilities Commission to implement the state’s energy goals.”

Tri-State’s attempt to move under the federal umbrella in the midst of the rollout, however, still raised red flags on the Commission. The PUC filed an official protest and request to get involved with Tri-State’s application process Aug. 13 – a move it hasn’t made in decades.

“The PUC took this step because the state has a responsibility to protect its jurisdiction,” Terry Bote, external affairs manager for the Colorado Public Utilities Commission, said in an email. “There are matters yet to be resolved before the PUC that are pertinent to Tri-State’s filing, and such resolution needs to precede FERC action.”

Bote explained the matters yet to be resolved include both the recently proposed rules on electric resource planning and the possibility of Tri-State adding an unknown new member. So far, Tri-State has not responded to the filing.

Eyes on the prize

Just one day after the Commission filed its request to get involved – also called a “Motion to Intervene” – LPEA followed suit. On Aug. 14, the local coop asked the federal agency if it could also be involved with Tri-State’s request. Both have yet to receive an official response from the feds. Although responses are typically given within 60 days, the federal agency does have the authority to extend that.

At this point, it’s unknown if FERC will accept Tri-State and what it would mean. It’s also unknown how all of this  could affect LPEA’s bid to increase local renewable energy production – which is still the key driver behind all of this. LPEA’s strategy is to keep its options open. LPEA CEO Jessica Matlock said the coop plans to work with Tri-State to expand the 5 percent cap. The coop is also looking into Tri-State’s policy allowing for a partial contract. Matlock said this means LPEA could get a portion of its energy from Tri-State but not the 95 percent required under the current contract.

Thirdly, LPEA is still considering a full contract buyout, which means severing ties with Tri-State.

According to Matlock, Tri-State is working on a buyout formula that could apply to all of its members. It could mean a longer wait for LPEA to get a response on its buyout cost, but she explained the power supplier wants to be consistent and avoid any future settlements.

Matlock said the mission for LPEA is the same it’s always been – providing safe, reliable, affordable electricity while keeping environmental responsibility in mind.

Boughey said Tri-State shares that mission. “Our membership’s new vision for Tri-State is closely aligned with LPEA’s goals for clean, affordable power and the flexibility for more local renewable energy,” he added.