Guzman Energy made the Tri-State Generation and Transmission Association an offer that it apparently could refuse.
The Miami-based energy contractor is ready to pay about $500 million to buy three coal-fired power plants and a coal mine near Craig from Westminster-based Tri-State with plans to close them.
In their place Guzman would build a combination of wind, solar and natural gas-fired generation, along with battery storage, to supply Tri-State with electricity cheaper than the power generated by the shuttered coal plants.
The offer by Guzman underscores the economic pressure coal-fired power plants are under across the country and also the slower pace at which Tri-State has been moving out of coal — much to the chagrin of many of its member co-ops.
Last year a near-record 16 gigawatts of coal-fired plants closed in the U.S., and Xcel Energy, Colorado’s largest electricity provider, unveiled a plan to cut power plant carbon emissions to zero.
MORE: Climate change is a priority at the Capitol. These charts show how far Colorado needs to go.
By 2030, Xcel says that 80% of its energy will come from renewable resources. While Tri-State has announced the closure of two coal-fired plants — in Nucla and Craig — it still gets nearly 50% of its electricity from coal.
Brighton-based United Power, the largest co-op in the Tri-State system, has pushed for innovation and was briefed by Guzman on the offer. “It is an interesting idea, and it deserves a good hard look,” United’s CEO John Parker said
Guzman says it can manage to buy the plants and still provide cheaper energy because generating electricity with coal is so expensive. “It speaks to how far out of the money these assets are,” Guzman President Chris Riley said in an interview. “The assets are so expensive that to provide lower cost energy is not hard to do.”
When Tri-State, which provides power to 43 rural electric cooperatives including 18 in Colorado, demurred on the offer, Guzman went to the press and public.
“Guzman Energy brought us an imaginative and creative high-level verbal proposal, which lacked any specific or meaningful detail or terms,” Tri-State CEO Duane Highley said in a statement. “Tri-State requested a written proposal but Guzman refused to provide one, instead deciding to go to the press.”
Highley said it was not in the best interests of Tri-State or its members to enter into an “exclusive agreement” with a single company before other options are explored.
“We’ve put a proposal on the table that would help Tri-State and its members lower costs right now while simultaneously reaching compliance with new laws,” Riley said. “We look forward to taking the proposal directly to Tri-State’s owners and facilitating an open and transparent dialogue.”
Guzman helped the Kit Carson Electric Cooperative in Taos, New Mexico, leave Tri-State and is working with the Delta-Montrose Electric Association (DMEA), which also seeks to exit its long-term contract with Tri-State.
In recent months, several Tri-State members, who all are under long-term contracts, have criticized the association for its dependence on fossil fuel generation and for limiting local renewable energy projects to 5% of the local electricity load.
Tri-State, which also serves co-ops in New Mexico, Nebraska and Wyoming, has been lightly monitored by the Colorado Public Utilities Commission, contending as an interstate wholesale power vendor it was not under state jurisdiction.
But in the bill reauthorizing the agency this legislative session, lawmakers directed the commission to draw up rules for Tri-State to submit its power plans for state approval.
Both Colorado and New Mexico have also passed clean energy bills calling for sharp reductions in carbon emissions.
“With new energy legislation in both Colorado and New Mexico, state rulemakings still to come and a dynamic energy market, there is much work to be done within our association to evaluate options and set a path forward,” Highley said.
Time, however, is a key factor, Riley said, since the federal tax credits for wind and solar, which help the economics of these projects, are ratcheting down.
Under Guzman’s proposal it would purchase Unit 2 and Unit 3 at the Craig Station and the Escalante power plant in New Mexico — equal to about 800 megawatts of generating capacity. Craig Unit 1 is already scheduled to close in 2025.
The units, which represent all of Tri-State’s coal-fired generation in Colorado and about 50% of its total coal-fired generation not already under closure plans, would be shuttered.
The strip mine that serves the Craig Station would also be part of the package, and it would be closed and remediated unless another customer is found for the coal, Guzman spokeswoman Kathleen Staks said in an email.
Guzman said it would replace the coal-fired assets with 1,200 megawatts of renewable generation, storage and natural gas and sell the electricity to Tri-State. The company said the mix would be 70% renewable energy.
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“As technology has advanced, the costs of wind and solar have come down so much that building new wind and solar is less expensive than operating many legacy fossil fuel generating plants,” Will Toor, executive director of the Colorado Energy Office, said in an email. “This is opening up new market possibilities to retire fossil fuel plants and replace them with clean, renewable energy. While we can’t comment on any individual proposal from a private company to a utility, we are excited to see creative proposals coming forward.”
In Craig, a city of 9,500 in northwest Colorado, the power plant and the coal mine are the two largest employers and taxpayers.
“If a coal miner or power plant employee is making $80,000, where are they going to?” Moffat County Commissioner Ray Beck said in a recent interview about the potential impact of plant and mine closures. “What are their options? Leave the community or leave the state … You are talking about crippling a community financially for a very long time.”
Guzman said part of the package would be “substantial financial assistance to communities negatively impacted by the early retirement of coal plants.”
The Kit Carson co-op got the $37 million it needed to buy out its contract from Guzman, which then became the town’s power supplier with the advance absorbed in rates. Kit Carson says it will be on 100% renewable power by 2022.
When DMEA tried the same route, with Guzman as its partner, Tri-State demanded a fee so high that the co-op called it “discriminatory” and filed a case with the PUC for review. The case was set to be heard in June, but at the request of both parties has been pushed back to later in the summer.
“In recent weeks with new leadership at Tri-State, DMEA has been able to look at working with Tri-State to come to some resolution,” DMEA CEO Jason Bronec said in an interview. Highley took over as Tri-State’s CEO in April.
But DMEA still plans to leave Tri-State, Bronec said.
“Tri-State has to transition to a 21st Century utility, it has to look to markets,” Bronec said. “I applaud Guzman for bring forward viable solutions … Tri-State should be looking at those options.”