The battle between a West Slope rural electric cooperative and one of the largest power wholesalers in the West has tumbled into the Colorado Public Utilities Commission.
The Delta-Montrose Electric Association, stymied in its efforts to quit its contract with power supplier Tri-State Generation and Transmission Association, has filed a complaint with the PUC asking it to “adjudicate” an exit fee.
DMEA and Tri-State have been in negotiations over an exit fee for about two years but have been far apart as Tri-State has set a very high figure, DMEA CEO Jason Bronec said. “Their practices and posture have been discriminatory and unfair.”
DMEA has sparred with Tri-State for nearly a decade as the co-op saw rates rise 56 percent since 2005 and the wholesaler tried to block local renewable energy projects because its contract requires members to get 95 percent of their electricity from the association.
Local control of generation is an economic development issue, an environmental issue and a way to blunt the impact of high rates, Bronec said.
Westminster-based Tri-State is the wholesale power supplier for electric cooperatives in four western states, including 18 co-ops in Colorado.
Tri-State representatives have said that the association has made investments in plants and lines in anticipation of servicing its long-term contracts and in fairness to the remaining members, a departing co-op needs to cover some of those costs.
“We are disappointed that DMEA has decided to attempt to litigate this matter rather than negotiate their withdrawal,” Lee Boughey, a spokesman for Westminster-based Tri-State, wrote in an email. “Tri-State continues to believe that negotiations on withdrawal are far preferable to litigating this matter. Tri-State has not seen a copy of the DMEA complaint and cannot comment further at this time.”
In 2016, the Kit Carson Electric Cooperative, in Taos, N.M., became the first co-op to buy its way out of Tri-State as it sought to add more renewable energy. Its exit fee was $37 million.
“Our overall sales are one-and-a-half times Kit Carson’s, but our buy-out number was magnitudes higher than Kit Carson’s,” Bronec said. The exact number is cloaked in a non-disclosure agreement.
DMEA asked Tri-State for the details on how it arrived at the Kit Carson exit fee, Bronec said. When Tri-State refused, DMEA filed a complaint with the Tri-State board seeking the information. The board backed management.
DMEA turned to the PUC arguing that this is a rate issue, since any exit fee would be paid through rates.
“Under Colorado public utilities law, the PUC has legal responsibility to ensure that public utility rates and charges are just, reasonable and nondiscriminatory,” the cooperative said in a statement.
The co-op wants the PUC to set-up a hearing to set an exit fee. “We need some regulatory intervention on behalf of our ratepayers,”Bronec said.
Bronec said there is some precedent as three rural cooperatives — La Plata Electric Association, White River Electric Association and Empire Electric Association — in 2013 filed with the PUC for rate relief from Tri-State. That complaint was settled without PUC action.
When Kit Carson left Tri-State, Miami-based Guzman Energy, who became the city’s power supplier, provided the $37 million exit fee, which it is recouping in rates for the first five years of a 10-year contract. The co-op estimates it will save $70 million over the life of that contract compared to Tri-State rates.
DMEA said it too will partner with Guzman Energy if it is successful in leaving Tri-State.
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