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After long battle, 3 Colorado electric co-ops may renegotiate with Tri-State instead of leaving outright

Partial contracts keep the co-ops in the association while enabling them to purchase cheaper power and build local, renewable energy projects

A few towers in the Niyol Wind Farm near Fleming in northeastern Colorado. The 74 wind turbines are capable of generating up to 200 megawatts of energy for Tri-State’s 42 cooperative and public power district members. The project employed about 300 people during construction and will require seven full-time jobs will support the day-to-day operations and maintenance. (Travis Heying, NextEra Energy Resources)
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In the jockeying for a new relationship between Tri-State Generation and Transmission Association and the rural cooperatives it supplies with electricity, three Colorado co-ops are seeking partial contracts with the power wholesaler — instead of leaving outright.

Tri-State and some of its cooperatives have been battling over the association’s long-term contract, which requires members to buy 95% of their electricity from the association, saying they are frustrated by the wholesaler’s high prices and dependence on coal-fired generation.

Two co-ops — the Kit Carson Electric Cooperative in Taos, New Mexico, and the Delta-Montrose Electric Association — have quit the group and Brighton-based United Power, Tri-State’s largest cooperative, is planning to join them.

The partial contracts offer a middle ground, keeping co-ops in the association while enabling them to purchase cheaper power and build local, renewable energy projects.

“This is a win-win,” Lee Boughey, a spokesman for Tri-State, said. “This allows flexibility while assuring members are kept whole.”

Tri-State provides wholesale power to 42 co-operatives in four states, including 17 in Colorado, and a major concern association officials say is that the departure of co-ops will unduly burden those left behind.

Still, there is growing pressure to change the relationship between the association and the co-ops.

“Our industry is changing so rapidly, we want to have options and flexibility,” said Amy Rosier, vice president of member and government relations at the Poudre Valley Rural Electric Association, one of the co-ops exploring a partial contract.

PVREA serves 50,000 homes and businesses in a 2,000-square-mile area in Larimer, Weld and Boulder counties and under its proposed partial contract it would get half its load, equal to 117 megawatts of capacity, from sources outside Tri-State that are still to be determined.

The Durango-based La Plata Electric Association is also seeking a contract to get half its electricity — 71 MW — from outside the Tri-State system.

LPEA already has an agreement with Crossover Energy Partners, a developer of renewable energy projects, to supply the electricity, including building projects in the association’s service area.

“It works for us because our power costs make up most of our rates and they are pretty high with Tri-State,” LPEA CEO Jessica Matlock said. “On average this will save our members $5 million to $7 million a year and cut our carbon footprint in half.”

The association charges about $72 for a megawatt-hour, while the comparable all-in wholesale market price is about $50 a MWh, according to an estimate by United Power. 

Tri-State hopes to be at 80% renewable generation by 2030

Tri-State generates its electricity predominantly from fossil fuels — 36% from coal and 19% from natural gas. On April 18, however, the Colorado Public Utilities Commission approved a plan that would set Tri-State on the path to providing 80% of its electricity  from renewable generation by 2030.

The association said it will issue a request for bids on an estimated 200 MW of new wind and solar and energy storage projects in May. The association has set a goal of adding 1,000 MW or new utility-scale wind and solar generation.

The San Miguel Power Association, serving all or parts of seven counties in western Colorado — including Ouray, San Juan, San Miguel, Montrose, Mesa, Hinsdale and Dolores — is seeking to get 35% of its peak load, 15 MW, outside of Tri-State.

The co-op has already selected Denver-based Guzman Energy as the new power provider. Guzman provides power to the Kit Carson and the Delta-Montrose co-ops and helped finance their departure from Tri-State.

“Supplying a portion of our power from Guzman may yield significant cost reductions for SMPA,” Rube Felicelli, the co-op board president, said in a statement.

The big dispute between Tri-State and the co-ops leaving the association has been over the required exit fee.

In the case of United Power, Tri-State was seeking an exit fee of as much $1.6 billion, based on the co-op’s debt obligations and all the power it would have purchased by the 2050 end of its contract.

The exit fee case is under review by the Federal Energy Regulatory Commission and analysis by a commission economist put the United Power exit fee at a fraction of Tri-State’s calculation.

Under the partial contracts the co-ops will also have to pay an exit fee for the portion of the contract they will no longer purchase. These partial contracts will also need FERC approval. The details of those proposed contracts have not been made public.

 “We have to understand what the economics are,” PVREA’s Rosier said. “We have to understand what we are working with before we move too far down that path.”

Not all co-ops will be able to get partial contracts. Tri-State offered a limited 300 MW of “self-supply” capacity available to cooperatives and the three co-ops took 69% of the capacity. The other 97 MW will be offered to other co-ops, Boughey said.

“The partial contracts are a step in the right direction,” said Eric Frankowski, executive director of the non-profit Western Clean Energy Campaign. “It isn’t sufficient, but it marks a step in the progress Tri-State is making.”

CORRECTION: This story has been updated to correct the number of co-op members of Tri-State and the price the electricity generator charges for a wholesale megawatt of power.


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