By - Jim Vess

Tri-State G&T co-ops pressure for lower prices and more renewables

Energize Weekly, August 15, 2018

Tri-State Generation and Transmission Association, which serves 43 electric cooperatives in four Western states, is getting pressure from some of its co-ops, which are seeking better electricity prices and more renewable energy.

The Kit Carson Electric Cooperative, in Taos, New Mexico, has already paid $37 million to get out of its Tri-State contract, and several other co-ops are exploring their options.

The push is the product of changes in the utility industry as power prices are falling due to cheap generation powered by natural gas, wind and solar, and growing demands from consumers for homegrown renewable energy.

“We are showing it can be done,” said Luis Reyes, Kit Carson CEO and general manager. “This is not pie in the sky.”

Kit Carson’s 2017 exit from Tri-State set the stage. “When Kit Carson left last year, the lightbulb went on at the other 42 co-ops,” said Jerry Marizza, new energy program coordinator for United Power. Brighton, Colo.-based United is Tri-State’s largest member with 78,000 accounts.

The Delta-Montrose Electric Association (DMEA), in western Colorado, is already in separation talks. The board of the La Plata Electric Association (LPEA), in Durango, Colo., has created a committee to explore its options.

Tri-State was created in 1952 to serve far-flung rural communities in Nebraska, Wyoming, Colorado and New Mexico. It operates 5,562 miles of high-voltage lines and an array of generating assets across four states, including interests in six coal-fired and five natural gas-fired power plants.

Some of the cooperative members seeking more renewable energy have criticized Tri-State’s reliance on coal, although the association has cut its electricity from coal to 49 percent in 2017 from 62 percent in 2010.

Tri-State was also the first generation and transmission association to build a utility-scale solar installation, and it has added wind farms. Tri-State now gets 30 percent of its electricity from renewable resources.

The association is committed to adding renewable energy generation and addressing member concerns, said Lee Boughey, a Tri-State spokesman.

“There is no question that the utility industry is changing,” Boughey said. “But things aren’t changing overnight, and there is the difficult task of making sure the lights stay on and that the cost of power is affordable.”

Each member co-op signed a long-term contract, took on its share of the operation costs and debt based on the kilowatt-hours it consumed and agreed not to generate more than 5 percent of its own electricity needs. Most Tri-State contracts now run to 2050.

The 5 percent stipulation was to ensure that each co-op paid its fair share and did not shift the burden to other members, Boughey said. Each co-op got one vote on Tri-State’s board.

But cooperatives seeking to add local renewable energy projects have bucked up against the cap. Four co-ops are at the 5 percent limit, and another four are nearing it.

DMEA, one of the co-ops that has hit the cap, used a section of the federal Public Utilities Regulatory Act (PURPA) requiring a utility to buy energy from a qualified local, renewable energy facility to add hydropower above the cap.

Tri-State challenged the purchase, but in 2015, the Federal Energy Regulatory Commission (FERC) ruled in DMEA’s favor. Tri-State asked for a rehearing.

Kit Carson had also bumped up against the cap and thought it could do better on prices for electricity, Reyes said.

Kit Carson already has 10 megawatts (MW) of solar, and that will grow to 40 MW in 2022, and provide 100 percent of the town’s daytime energy needs and about 50 percent of all the community’s electricity.

Guzman Energy, a Coral Gables, Fla-based energy company, helped Kit Carson finance its Tri-State exit and has a 10-year contract to provide electricity to the cooperative’s 30,000 members.

For the next six years, Kit Carson will be paying back the $37 million exit fee, but over the life of the contract, the co-op’s members should get $50 million to $70 million in savings compared to Tri-State rates, Reyes said

Guzman says the going rate for wholesale electric in the West is around 3.1 cents a kilowatt-hour. Tri-State charges 7.5 cents a kilowatt-hour, though, Boughey says, other services are bundled in that charge.

“We are working hard to control costs, and we anticipate that our rate remains flat over the next five years,” Boughey said.

Still, Tri-State cooperatives are finding cheaper electricity for their 5 percent share. Granby, Colo.-based Mountain Parks Electric negotiated the purchase of solar electricity for less than 4.5 cents a kilowatt-hour.

DMEA began talks to leave Tri-State in November 2016, and those talks are ongoing. Both sides declined to comment.

In 2017, LPEA placed a motion before the Tri-State board to raise the local generation cap to 10 percent. The Tri-State board rejected the motion. At the beginning of this year, the LPEA board created a committee to look into its options.

The board, however, is deeply split on what to do. “There is a lot of ingrained trust issues on how we do an unbiased analysis,” said Emily Bowie, energy and climate organizer for the San Juan Citizens Alliance, an environmental group.

A report by the committee in June didn’t change any minds.

“There is some long-term risk staying with Tri-State with its long-term debt and falling prices in the power market,” said Britt Bassett, a partner in a solar company and a member of the LPEA board.

But Davin Montoya, president of the LPEA board and a cattle rancher, said, “Tri-State is a leader in renewable energy in the last few years, so why they are complaining about Tri-State? We have $75 million in equity in Tri-State, and I don’t want to walk away from that.”

The LPEA board is continuing its deliberations.

United Power, the first cooperative in the country to develop a community solar garden, now has 56 MW of renewable generation and is at its cap. The co-op decided it would augment its system with a large-scale battery.

The battery, now under construction, would not be tied to any of the solar installations, but be charged with electricity from Tri-State and used to shave expensive peak loads.

“Our position is the battery is not a generator,” Marizza said. “Tri-State says it has the look and the feel of generator.” In June, the Tri-State board voted to add battery storage under the cap.

“We have a member-driven committee that is reviewing these issues, including self-generation and batteries, and will likely make recommendations to our board,” Boughey said, adding that the association’s battery policies follow those of FERC.

Leaving Tri-State isn’t a recipe for every cooperative. “This works for Kit Carson, but it may not work for other co-ops,” Reyes said. “But the business model has to change. Smaller co-ops may have to merge with larger co-ops.”

The San Miguel Power Association, which serves Telluride, Colo., is also at its cap. “We want more renewable energy,” said Rube Felicelli, San Miguel board president. “But we are reluctant to leave Tri-State. There are so many unknowns. We looked at it and decided it was economically unfeasible.”

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