By - Jim Vess

Colorado co-op sues to block Tri-State’s move to FERC regulation, state lawmakers also concerned

Energize Weekly, July 10, 2019

Tri-State Generation and Transmission Association is going ahead with its deliberations on moving from state to federal regulatory oversight even as one of its rural Colorado electric cooperatives has gone to court to block the action.

Tri-State’s decision to seek regulation by the Federal Energy Regulatory Commission (FERC) has also sparked concern from Colorado legislative leaders who two months ago passed a bill giving the Colorado Public Utilities Commission (CPUC) added supervision of Tri-State.

The lawsuit by the Delta-Montrose Electric Association (DMEA) is the latest skirmish in a battle between the co-op and Tri-State over the last three years.

DMEA is seeking to buy out its 40-year contract with Tri-State so that it can develop more local renewable energy projects. DMEA executives say the move would cut rates and serve as a boost to local economic development.

After long negotiations, DMEA filed a petition with the CPUC in December 2018 seeking the commission’s intervention, saying that Tri-State’s demands were “discriminatory” and as a rate-setting issue, the dispute falls under the commission.

Tri-State ­– which serves 43 co-ops in Colorado, Nebraska, Wyoming and New Mexico – challenged the CPUC’s jurisdiction, but was rebuffed by the commission. It then filed an unsuccessful complaint in district court to block the CPUC.

In June, Tri-State proposed to its member co-ops to shift regulatory oversight of the association to the FERC saying it “makes sense” for the interstate operator to be overseen by the federal agency. The move would also take the DMEA case out of the jurisdiction of the CPUC.

To be eligible for FERC supervision, Tri-State must add a member that is not a rural co-op. At its July board meeting, the association will “continue its deliberations of FERC regulation,” according to company spokesman Lee Boughey.

Boughey did not say whether the board will vote on approving a new member nor has the association indicated who that new member would be.

“Tri-State’s sudden announcement only weeks ago that it would pursue broad FERC oversight is a last-minute effort to undermine the Colorado PUC and prevent it from deciding a fair and reasonable exit charge for DMEA,” Jason Bronec, DMEA’s CEO, said in a statement. “No one knows who the new member-owner will be or what business purpose it would serve within Tri-State. The sole purpose appears to be an attempt to evade Colorado law by forum shopping.”

DMEA in its complaint sought a ruling that the state was the proper regulator and for a temporary restraining order from Tri-State moving forward.

The co-op, however, could not get a court hearing before the July board meeting. Virginia Harman, DMEA’s chief operating officer, said she was not sure of the co-op’s “full strategy” if Tri-State goes ahead and adds a new member.

In May, Colorado Gov. Jared Polis signed into law a CPUC reauthorization bill that gave the commission clearer oversight of Tri-State in regard to its facility planning and in disputes between co-ops and the wholesale power provider.

The same day, Polis signed a clean energy bill setting a goal of net-zero carbon emissions in the state by 2050. Tri-State gets about half its electricity from burning coal.

Tri-State’s FERC move has sparked concerned among the Democratic leadership, which sent a letter to Tri-State’s CEO Duane Highley and board chairman Rick Gordon seeking a delay in the vote so there could be an assessment of the impacts of the switch.

The legislators said that they had “worked closely” with Tri-State over the details of the CPUC bill, but the association had never told the lawmakers that it was simultaneously considering move to FERC oversight.

“We are concerned that Tri-State was not more transparent,” the legislators said.

The letter was signed by Senate President Leroy Garcia, Senate Majority Leader Stephen Fenberg, House Speaker KC Becker and the chairmen of the energy committees of both houses. All are Democrats.

Boughey said the association has been considering FERC rate regulation “for some time.”

“FERC rate regulation provides a solution to inconsistent rate regulation across the states in which Tri-State has operated for decades, will save the association’s members money, provide consistency and reduce timelines for decisions,” Boughey said.

The move to FERC regulation would not affect the resource planning and carbon reduction targets, according to Boughey. But the legislative leaders said in their letter that resource planning and rates are linked.

FERC rate regulation will not impact the resource planning or carbon reduction requirements placed on Tri-State from energy legislation passed this year in Colorado.

Boughey added that the federal oversight would not impact the 100 percent clean energy law adopted in New Mexico this spring.

UPDATE:

The Tri-State Transmission and Association board voted Tuesday to moved forward with seeking regulatory oversight by the Federal Energy Regulatory Commission (FERC).

The  shift would remove any oversight of rates a contracts from state regulatory commissions. In May, Colorado adopted a law giving the Colorado Public Utilities Commission added supervision over Tri-State.

“Tri-State is rapidly changing to increase flexibility for our members and develop an ever cleaner and greener resource portfolio,” Tri-State Chairman Rick Gordon said in an email. “As we transition, our cooperative will benefit from lower costs and greater efficiency by having a single, consistent rate regulator across all the states in which we operate.”

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