La Plata Electric Association is requesting an estimate of how much it will cost to exit its contract with Tri-State Generation and Transmission.
LPEA has been exploring alternatives to purchasing electricity from Tri-State for months because Tri-State, the wholesale electric supplier, caps at 5% the amount of renewable energy LPEA can purchase from outside sources. LPEA is contracted to buy power from Tri-State until 2050.
Some LPEA members are interested in buying out of the Tri-State contract because it could give LPEA greater freedom to purchase renewable energy and lessen the co-op’s dependence on coal.
LPEA board member Britt Bassett said he believes a fair buyout could benefit LPEA by “giving us more options for local generation, more local economic development and perhaps lower rates over time.”
The board voted 7-1 Tuesday to request an initial exit-fee estimate from Tri-State. The board has not yet decided whether to pursue a buyout, said Ron Meier, manager of engineering and member services. The exit fee would have to be paid back to Tri-State over time through members’ rates if LPEA left Tri-State.
Board member Kohler McInnis opposed the measure. Board members Davin Montoya, Kirsten Skeehan, Dan Huntington and Joe Lewandowski were not present for the vote.
LPEA would have likely requested an exit-fee estimate in the natural course of exploring a buyout from Tri-State, but Tri-State’s recent actions spurred an early vote, said LPEA board member Guinn Unger.
“We would almost certainly not have asked for a number (Tuesday) if not for Tri-State forcing our hand,” Unger said..
Tri-State, which operates in four different states, may vote this month to seek federal oversight of its rate structure. Federal oversight would create one set of rate regulations for Tri-State to abide by, rather than differing state rate rules.
But federal oversight could make contract buyouts more expensive and time-consuming for co-ops like LPEA, Erin Overturf, deputy director of the Clean Energy Program for Western Resource Advocates, said in a previous interview with The Durango Herald.
As long as Colorado oversees utility-rate conflicts involving Tri-State, LPEA would argue a buyout case before the Colorado Public Utility Commission.
By asking for a buyout number now, ahead of Tri-State’s planned vote later this month to pursue federal regulations, it could improve LPEA’s chances at negotiating a fair buyout before the PUC, said Unger, expressing his personal opinion.
Not everyone agrees.
Meier said requesting a buyout number now doesn’t do anything to lock in LPEA’s ability to argue rates before the PUC.
Tri-State’s vote on whether to pursue federal regulations is scheduled before Delta-Montrose Electric Association’s buyout case against Tri-State is set to be heard at the PUC.
Some green energy advocates have said the timing of the Tri-State vote is highly suspect and could undermine the DMEA case.
LPEA was interested in submitting comments to the PUC about the DMEA case, but the PUC did not accept those comments because LPEA had no special interest in the case, Meier said.
Requesting an exit fee from Tri-State could set LPEA apart as a group that could submit comments in a federal DMEA case.
McInnis said he opposed requesting an exit fee from Tri-State because the new LPEA CEO starts later this month and he would like her to be in place before making the request.
He also would have liked to wait on the request until the DMEA case against Tri-State is settled. The DMEA case could set a precedent for LPEA’s buyout, making the recent request for a fee estimate obsolete, McInnis said.
Tri-State could charge LPEA a fee to produce a buyout number, and that money could be wasted if it is not relevant at a later date, McInnis said.
There are no guarantees a resolution to the DMEA case could provide relevant information to LPEA, said CEO Mike Dreyspring. It could be a stipulated “black box” agreement, Dreyspring said.
Tri-State has a process in place to provide LPEA with an exit fee, said Tri-State’s Board Chairman Rick Gordon, in a prepared statement.
However, he pointed out Tri-State adopted new goals in June to increase renewables and reduce emissions that are in line with LPEA’s goals.
“We look forward to demonstrating our commitment to meet LPEA’s and our other members’ needs,” he said in the written statement.