Losing member co-ops, Tri-State seeks to sell its electricity on the wholesale power market

Losing member co-ops, Tri-State seeks to sell its electricity on the wholesale power market

Energize Weekly, September 13, 2023

Tri-State Generation and Transmission Association, a wholesale power supplier for rural electric cooperatives, is seeking to sell excess power on the open market as it loses some of its biggest members.

The association is offering energy and capacity from April 1, 2024 through Dec. 31, 2027 in the form of tolling agreements, block energy sales, and dispatchable capacity. The association said it would not sell any of its generating resources.

It is a sign of the shifting market, with lower-cost, clean generation now available, while Tri-State is saddled with coal-fired power plants and 5,800 miles of transmission lines to serve its 42 members in four western states.

Two cooperatives have already left, and three more are leaving, including the association’s largest and fastest growing member, Brighton, Colorado-based United Power, which in 2022 accounted for 18 percent of all revenue.

United Power will leave Tri-State in May of 2024.

In addition, two co-ops are seeking to get half their power outside the Tri-State system. All told, Tri-State is facing the potential loss of 25 percent of its revenue stream and being left with hundreds of surplus megawatts (MW).

Tri-State, however, isn’t alone among generation and transmission associations, called G&Ts, to see cooperatives bolt.

Connexus Energy, the largest co-op in Minnesota’s Great River Energy G&T, is leaving the group, although it will continue to buy power from the G&T. In 2022, cooperatives in North Dakota and South Carolina each unsuccessfully went to court trying to break long-term, wholesale power contracts.

The G&T model is based on central plants and long transmission lines to serve rural areas. However, the model is “breaking down,” according to Seth Feaster, an energy analyst with the nonprofit Institute for Energy Economics and Financial Analysis.

Tri-State, created 51 years ago, has 1,551 MW of coal-fired capacity and 882 MW of natural gas-powered generation.

Almost half of the electricity Tri-State provides comes from its coal-fired plants, although the association has already closed some coal units and plans to close more.

Still, some of its member cooperatives are looking for cheaper and cleaner power supplies and are impatient with the association’s plan to reach 80 percent renewables by 2030. They are also chafing under long-term contracts requiring co-ops to buy 95 percent of their power from Tri-State.

“They haven’t kept up with the times, holding on to coal assets, for example,” said Mark Gabriel, CEO of United Power, which has 106,000 metered customers on Colorado’s Front Range.

“And I want to be really clear, I’ve worked in coal there, I have no personal animus towards coal” Gabriel said, “other than it is too costly – in a world with low natural gas prices, in a world where renewable options are less expensive and, in a world where storage is becoming a real factor.”

The Kit Carson Electric Cooperative in Taos, New Mexico, was the first to leave in 2016, paying a $37 million exit fee. In 2020, the Delta-Montrose Electric Association, in western Colorado, paid a $136.5million exit fee and left.

Poised to leave are United Power, Mountain Parks Electric, in Granby, Colorado, and the Northwest Rural Public Power District. The co-ops and Tri-State have wrangled over exit fees at the Federal Energy Regulatory Commission (FERC).

In an effort to hold onto members, Tri-State proposed partial contracts that would allow co-ops to purchase up to half their power outside the association.

Two Colorado cooperatives – Poudre Valley Rural Electric Association (PVREA) and the La Plata Electric Association – opted to get 50 percent of their electricity from other suppliers. Poudre Valley is Tri-State’s second largest cooperative. La Plata is the fourth largest.

After objections by United Power that the compensatory fee the two cooperatives would pay Tri-State for opting out of the full contract was preferential compared to what Tri-State was demanding of United Power, the partial contracts were put on hold.

“Tri-State leadership team has committed to us they are going to resubmit the contracts by the end of 2023,” said Amy Rosier, PVREA vice president for government relations.

This will leave Tri-State not only with a gap in sales of electricity, but members to bear the overhead costs of running the system, Gabriel said.

In the face of the defections, Tri-State is looking to raise cash by selling electricity on the wholesale market.

“In a tightening regional power market, Tri-State has the opportunity to reduce cost pressures on our remaining members by selling power to other parties,” Duane Highley, Tri-State CEO, said in a statement. “Tri-State has the generating capacity to ensure power is always available to our members, and we can also provide this dispatchable power to others to help ensure reliability and resilience.”

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