La Plata Electric Association could spend more than $500 million purchasing power from its electric supplier, Tri-State Generation and Transmission, until its contract expires in 2050.
The estimate, shared this week by Mike Dreyspring, CEO of the electric co-op, doesn’t anticipate growth in energy demand and excludes the cost of fuel, such as coal and natural gas. It is one of several estimates presented Wednesday to the LPEA board of directors to help the board understand its contract with Tri-State.
Dreyspring did not present an estimate of how much it would cost to buy out of its contract; rather, his evaluation was based on how Tri-State might evaluate the value of the contract. A buyout number is subject to negotiations.
“One of the reasons we are looking at the value of this contract is because of our members’ drive to utilize local renewable generation. ... That is clearly an expectation that LPEA’s members have,” Dreyspring said in an interview after his presentation.
LPEA’s contract with Tri-State caps how much outside power it can purchase at 5 percent of overall use, and the co-op is close to hitting that limit. LPEA must buy the rest of its power from Tri-State.
One of the next steps for the board could be determining the price of alternative power from other suppliers, Dreyspring said, although he has not made that recommendation.
Exploring alternative power options could reveal savings, said Emily Bowie with San Juan Citizens Alliance, a local group advocating for more clean power.
She would also like the contract to be valued by outside consultants who could provide additional perspectives, she said.
The value of the contract is a number that depends on many variables, such as rates and need for energy, Dreyspring said. The market is also changing, with coal plants being phased out and more natural gas plants and renewable energy sources coming online.
Some residents have expressed interest in leaving Tri-State, which would allow LPEA to develop or purchase more renewable energy. Some argue there would be savings, because renewable energy is cheaper to maintain than traditional energy generation methods, such as coal-fired power plants.
“Nobody is promoting a contract buyout that would raise rates,” Bowie said.
Others have expressed concern about the risk and costs associated with leaving.
In the next few years, the energy market in Colorado will move toward deregulation, and Tri-State will have to operate in a market with more price transparency and greater volatility, Dreyspring told his board of directors.
Deregulation of the market could lead to greater efficiency, he said.
The regional mix of power will also be changing. Coal-powered plants are scheduled to close in coming years in Craig, Nucla and other locations, which could make coal energy in the region more scarce.
“We are talking about a substantial amount of contraction,” he said
The change will likely necessitate more natural-gas plants to be built to help fill demand for power because renewable energy can’t yet meet total demands, he said.
Guinn Unger, a board member, said maintaining a contract with Tri-State does not eliminate risk in a changing market.
LPEA customers are already paying a high cost to Tri-State to help pay off coal-fired power plants, he said.
At the same time, the cost of renewable energy is going down, and those power sources are taking over more of the market, he said.
“It’s one of those things that needs a whole lot more discussion,” he said of future energy decisions.