Tri-State, facing economic, political pressures, moves to close its last two coal-fired plants
Energize Weekly, January 15, 2020
Under pressure from market forces, dissatisfied members and environmental policies, the Tri-State Generation and Transmission Association announced it will close the last two coal-fired plants it operates and move to add more renewable energy.
Tri-State said that it will close its Escalante Station, in Prewitt, N.M., by the end of 2020, and two units at Craig Station, in Craig, Colo., by 2030. It will also close the Colowyo Mine, which provides coal to the Craig units.
In 2019, Tri-State closed its coal-fired plant in Nucla, Colo. and the first unit at Craig was already slated to close by 2025. Tri-State is a wholesale power provider for 43 rural electric cooperatives in Nebraska, Wyoming, Colorado and New Mexico.
Almost 600 employees will be affected as will workers at the Trapper Mine in Craig, which also supplies the local power plant. In 2016, Trapper employed about 150 people.
Duane Highley, Tri-State’s CEO, speaking at a Jan. 9 press conference, said the move was “financially and environmentally responsible,” but added the association has “a responsibility to our employees and their communities.”
Highley said he is going to the affected communities to meet with local and state officials. Tri-State is making $5 million for economic development available in New Mexico, as well as economic severance packages for workers.
In Colorado, there are 10 years to develop a plan with local and state officials and the help of the legislature, Highley said.
In the first instance, Highley said, the decision was driven by “the economics of operating a coal plant and cheaper renewable energy.”
The prices for wind and solar generation have become so low, they are “well below” the variable costs of operating coal units and even some natural gas units, Highley said.
Tri-State is also facing pressure from dissatisfied co-op members, who have criticized the association for its high wholesale power prices and heavy reliance on coal. In 2017, 49 percent of its power came from coal, and its wholesale price is about twice the average Western wholesale power price, according to energy broker Guzman Energy.
Tri-State currently gets about 31 percent of its electricity from renewable sources and aims to raise that to 50 percent by 2024, Highley said.
Colorado adopted legislation last year setting a target of reducing greenhouse gas emissions over 2005 levels by 90 percent by 2050. New Mexico Gov. Michelle Lujan Grisham issued an executive order in January 2018 to reduce greenhouse gas emission 45 percent by 2030.
Highley said that with the closing of all its coal-fired power plants, it will reduce its emissions by 90 percent. Tri-State still gets power from some natural gas-fired plants and two coal-fired plants it does not operate, but in which it has a share.
Some co-op members have chafed under Tri-State’s long-term contracts that limit their ability to develop local power projects, especially local renewable energy projects. The 40-year contracts require the co-ops to purchase 95 percent of their power from the association.
Two cooperatives – the Kit Carson Electric Association, in Taos, N.M. and the Delta-Montrose Electric Association, in Delta, Colo. – have bought out their contracts and left Tri-State. Two additional members – United Power in Brighton, Colo. and the La Plata Electric Association in Durango, Colo. – are seeking to leave.
In November, Standard & Poor’s downgraded Tri-State’s long-term credit rating to A- from A, citing the efforts of co-ops to leave the association.
Highley said that a Tri-State member committee is working on drafting a more flexible contract to enable more local power projects. It should be completed by April.
“From member co-op unrest, to the poor economics of coal and environmental policy pressures, Tri-State can no longer ignore the benefits of retiring its coal and replacing it with local, clean energy,” Anna McDevitt, a senior manager of the Sierra Club’s Beyond Coal campaign, said in a statement.
The Escalante Power Plant has 257 megawatts (MW) of capacity. Closing the three units at Craig will shutter another 1,285 MW of capacity.
Tri-State will unveil its plan for replacement power on Jan. 15. The association has already issued calls for bids on wind and solar and is seeing “remarkably low prices,” Highley said.
There will also be $270 million undepreciated book value for the Escalante plant and $400 million for the Craig station. The terms of recovering those assets will be under the purview of the Federal Energy Regulatory Commission.