The sources of electrons flowing into about 290,000 suburban and rural homes and businesses on the Front Range are about to change. And while refrigerators will still hum and lights shine, it marks a new chapter in how Coloradans get their electricity.
The state’s two largest cooperatives, Sedalia-based CORE Electric Cooperative and Brighton-based United Power, are each poised to leave their long-time power suppliers and strike out on their own in the growing merchant power market.
“United and CORE and a few others are large enough where we can contract with utility-scale resources where the prices are driven down,” said Chris Hildred, power supply director for CORE, formerly the Intermountain Rural Electric Association.
“This is about local control and financial independence,” said Mark Gabriel, United Power’s CEO.
The first big step comes Wednesday, when United Power, which serves about 300,000 people in an area from Commerce City through Adams and Weld counties, leaves the Tri-State Generation and Transmission Association.
CORE, serving more than 375,000 residents in parts of 11 counties from west of Colorado Springs to east of Denver, is set to finish its contract with Xcel Energy at the end of 2025.
“The arrival of inexpensive utility-scale solar and the arrival of inexpensive utility-scale batteries has changed the landscape for co-ops,” said Seth Feaster, an energy data analyst with the Institute for Energy Economics and Financial Analysis.
“The great thing about solar is co-ops scale it to their needs,” Feaster said. “They can keep it local and they don’t need a big coal plant in another state anymore.”
Rural cooperatives traditionally bought their electricity wholesale in bulk from large generation and transmission associations, created to serve the co-ops, or an investor-owned utility, like Xcel Energy. Those purchases account for 60% to 70% of the cooperatives’ budgets.
But with more independent power suppliers and the opportunity to build their own smaller-scale projects, cooperatives have more options, said Robin Lunt, chief strategy officer at Guzman Energy, a power wholesaler, which has been instrumental in the departure of several co-ops from Tri-State.
“There’s increasing opportunity for the distribution utilities to look at the market and decide how they want to design their power supply and customize it to the community they serve,” Lunt said.
Guzman will supply United Power with about a third of its energy needs in a 15-year contract when the co-op leaves Tri-State.
The breakups do carry risks
The departures come with risks as the cooperatives now must strike a series of contracts with different providers for power to replace that single source with large generation and transmission resources.
At its April 3 annual meeting, Tri-State CEO Duane Highley outlined the association’s investments to provide 5,300 megawatts of generation for its member co-ops spread across Nebraska, Wyoming, Colorado and New Mexico.
“This is real reliability; this portfolio cannot be matched,” Highley told the meeting. “It is a hedge against market prices. … We know there’s going be less and less surplus capacity, and it’s going be a time of greater stress on the grid.”
The departing cooperatives also are leaving power providers regulated by state and federal agencies for less transparent private operators, Tri-State spokesman Lee Boughey said.
“The risk has always been there,” CORE’s Hildred said, pointing out that Xcel Energy has passed on costs it has incurred and is undertaking big projects — including a $2 billion Power Pathway transmission line and a proposed $15 billion clean energy plan — which will end up in customers’ bills.
“We will have control based on market prices our members are exposed to rather than the decision Xcel makes over which we have very little influence,” Hildred said
For United Power, Tri-State posed two problems. As its largest member, representing about 20% of its revenue, United Power was carrying a disproportionate amount of the association’s overhead, in essence subsidizing smaller co-ops.
“These cross-subsidies have to stop,” Gabriel said.
Second, Tri-State’s 50-year contracts require its cooperatives to buy 95% of their electricity from Tri-State thwarting local power projects.
Other cooperatives have chafed at these restrictions with two already having left — the Kit Carson Electric Cooperative, in Taos, New Mexico, and Delta Montrose Energy Association in southwestern Colorado.
Tri-State has responded by developing more renewable generation, which will reach 70% of its total by 2030, and by developing a contract that will enable co-ops to develop their own power projects.
Still, when United Power leaves, so will the Northwest Rural Public Power District, in Hay Springs, Nebraska. Mountain Parks Electric, in Granby, will leave in 2025 with a 20-year contract with Guzman Energy. Durango-based La Plata Electric Association also voted in March to leave Tri-State.
The departures trim Tri-State to 38 members and cut the association’s revenues by more than 25%.
United and Tri-State clashed over plans for a local co-op battery project and now that it is leaving, has embarked on projects such as a floating solar array on the Fort Lupton water treatment plant reservoir.
“We are going hyperlocal,” Gabriel said, trying to line up projects in or close to United Power’s service territory.
New power partnerships are emerging
As for the risks of the new business model — United Power has signed 23 power purchase and battery agreements, including one to buy wholesale power from Tri-State — Gabriel said it is up to the cooperative to manage that through its contracts.
“There have to be guarantees that electricity is provided … one way or another,” Gabriel said. The co-op is requiring some contractors to post bonds.
So, what do the new power supplies look like?
The centerpiece of CORE’s plan is a 20-year contract with Invenergy, a multinational power project developer, to provide electricity, including 400 megawatts of new solar and wind energy and 100 megawatts of battery storage, backed up by 300 MW of existing natural gas resources starting in 2026.
CORE is partnering with another co-op, Glenwood Springs-based Holy Cross Energy on a new 75-megawatt solar array in Arapahoe County. The cooperative also signed a contract with Onward Energy for extra natural gas-fired generation.
“We are contracting for individual resources of 350 MW in total wind, 200 MW of new solar on top of 190 MW existing, and looking to add batteries in the system in a year or two,” Hildred said.
CORE also owns a 25% share in Xcel Energy’s 750 MW Comanche 3 coal-fired plant “for as long as it lasts,” Hildred said. Comanche 3 is slated to close at the end of 2030.
Will this fill the co-ops needs? Hildred said the system’s historic peak load is 650 MW. The portfolio it has assembled with a maximum — so-called nameplate capacity — output of nearly 1,500 MW, although wind and solar being intermittent operate below their nameplate capacity.
“Once everything is online, we believe we are set until 2030 and 2031,” Hildred said. “When Comanche closes we will need to add some renewables and some more will be needed past 2031 due to ongoing growth.”
To fill its needs United has a portfolio of more than two dozen of its own generation and storage assets and contracts, including ones with the Western Area Power Authority for hydropower and an agreement with Xcel Energy to take some renewable power.
Among its contracts are agreements for approximately 230 MW of solar and 300 MW of other renewables and 440 MW of natural gas.
One 25-year agreement is with Whetstone Power for the output from its 30 MW Solar of Alamosa project starting in May. “That solar is going to come to us from the San Luis Valley over an Xcel transmission line and go right into a battery,” Gabriel said.
Under another 25-year agreement United Power will get the electricity from a 150 MW solar installation being built in Morgan County by NextEra Energy Resources.
To help handle the generation assets United Power has hired The Energy Authority, a Jacksonville, Florida-based nonprofit company that manages and aggregates electricity loads for public power providers.
In all, the cooperative has put together about 1,300 MW of nameplate generation to meet a peak load of about 650 MW and an off-peak demand of about 400 MW.
One of the other issues United Power and Tri-State batted over was the size of the exit fee the cooperative would have to pay to buyout its long-term contract. Tri-State’s initial figure was $1.6 billion. The cooperative’s estimated exit fee was between $200 million and $300 million.
After four years of sparring before the Federal Energy Regulatory Commission, which oversees Tri-State, the commission set a formula for calculating exit fees. Using that formula, Tri-State put the net exit fee at $627 million.
The cooperative is still challenging part of the calculation, Gabriel said, but has a funding agreement in place for the $627 million.
Gabriel said that while the aim is for rates to stabilize over time and then trend down, the exit will have an impact raising rates 9.5%, for a $12 to $14 increase a month for a residential customer.
“It is the price of local control,” Gabriel said. “It is the price of freedom.”