La Plata Electric Association is undeterred in exploring a buyout from Tri-State Generation and Transmission, even though a buyout may become more expensive after the wholesale energy supplier voted this week – despite objections from state lawmakers – to pursue federal rate regulation.
LPEA is interested in a buyout because Tri-State caps how much renewable energy LPEA can purchase from outside sources at 5% until 2050. Since the fall, LPEA has been exploring alternatives to Tri-State’s electricity that could include more local renewable generation.
Tri-State’s board approved pursuing federal regulation over rates earlier this week, saying federal oversight would eliminate inconsistent rules governing Tri-State’s electrical rates across multiple states. Tri-State operates in Colorado, Nebraska, New Mexico and Wyoming.
A single regulator is also expected to lower costs for Tri-State, according to a news release.
Tri-State must also pursue federal regulation in order to add members that are not considered small electrical cooperatives, as is LPEA. The wholesaler is exempt from federal rate regulation as long as it is wholly owned by cooperatives. Tri-State has not announced any names of potential new members.
Currently, Tri-State’s board is made up of 43 electrical co-ops that own and govern Tri-State. Other non-co-op members could include cities, for example.
Tri-State board members from LPEA, Delta-Montrose Electric Association and United Power, a co-op in the Denver area, voted against pursuing federal regulation of rates, said Ron Meier, LPEA’s manager of engineering and member relations.
In recent weeks, LPEA, state lawmakers and other co-ops asked Tri-State to delay a vote on pursuing federal regulation until they could learn more about the shift, the timing of the change and better understand how such a shift might affect buyout costs.
LPEA sent Tri-State a list of questions about how federal rate regulations might affect future buyout costs, among other topics, but LPEA never received a formal response, Meier said.
LPEA plans to continue seeking information about how federal regulations could affect a buyout negotiation between LPEA and Tri-State, he said.
LPEA believes leaving Tri-State could save the electrical co-op money, depending on the cost of an exit fee, he said.
Federal regulations could provide a process for calculating a buyout exit fee, which could be helpful, Meier said. But if LPEA and Tri-State disagreed on a buyout number, arguing a buyout case at the federal level could be far more expensive than arguing it at the state level, he said.
Kit Carson Electric Cooperative successfully exited its contract with Tri-State after negotiating a much lower exit fee than originally proposed by Tri-State. The first buyout estimate Kit Carson received from Tri-State was $137 million, The Taos News reported. In the end, Kit Carson’s exit fee was $37 million.
The new federal regulations could also hurt the state’s ability to oversee Tri-State’s plans for future clean energy production, lawmakers said in a letter last week.
However, Tri-State CEO Duane Highley said in a written statement that federal regulations wouldn’t interfere with Colorado’s oversight.
“Tri-State is committed to reducing emissions, expanding renewables, lowering costs to our members and creating opportunities in all the states we serve,” Highley said.
LPEA board member Guinn Unger said he is skeptical about Tri-State’s intentions.
“They are saying things, but they are not telling us what they are going to do, or how they are going do it,” he said.
LPEA has a representative who sits on Tri-State’s board. That representative, Kirsten Skeehan, has previously said Tri-State wants to repair its relationships with co-ops.
But Unger said the vote shows Tri-State is not changing its behavior to work more closely with its co-ops.
“It’s the same old Tri-State, doing the same old kind of stuff,” he said.