How renewables are scrambling electrical generation portfolios and lowering rates

Guzman Energy snares wholesale contract with Arkansas River Power Authority

by Allen Best

Electricity delivered to six towns and cities in southeastern Colorado will be coming from a new source beginning in February 2025—and likely at less cost.

Arkansas River Power Authority, the provider for the six municipalities, has entered into a contract with Guzman Energy through 2043.

“We wanted a wholesale power supplier capable of providing us with stable, long-term competitive pricing as well as the flexibility for self-supply renewable energy,” says Rick Rigel, general manager of Arkansas River Power.

Arkansas River currently gets the bulk of its power from Xcel Energy, but in late 2020 began exploring its options. The Lamar-based provider received a dozen responses with a range of proposals.

“We selected Guzman Energy because they provided the competitive pricing, reliability and service commitment necessary to best serve our communities,” Rigel says

After a troubling time caused by an investment in a coal-burning plant in Lamar, Arkansas River Power achieved rate stability. The last rate increase was in 2011. Since then, rates were reduced twice, in 2018 and 2021. Rigel says Arkansas River believes it will be able to reduce rates charged to its municipal utility members once again in 2025.

In addition to Trinidad, Arkansas River Power distributes power to its member municipal providers in La Junta, Las Animas, Lamar, Holly, and Springfield.

La Junta is one of six towns and cities in southeastern Colorado that will get power delivered by Guzman Energy. Top photo, downtown Springfield, another of the six municipal providers. Photos/Allen Best

Arkansas River gets 28% of its members’ energy from the Western Area Power Authority, the federal agency responsible for delivering power from federal dams. Another 6% of the power for the six towns of southeastern Colorado comes from wind energy that Arkansas River buys or generates itself. It has five turbines: one at Springfield and four others in the Lamar area.

The remainder comes from Xcel Energy’s Colorado operations, which as of 2020 consisted of 38% coal and 31% wind.

The contract with Guzman will allow Arkansas River Power to repower its existing wind turbines and possibly add solar electricity. Rigel was wary of disclosing further contract details governing self-generation. It will continue to get hydropower from the federal dams.

Arkansas River Valley’s new power wholesale provider will be responsible for scheduling the hydropower selections and oversee transmission of power as well as procure the power to replace that provided by Xcel Energy.

Guzman Energy was formed in 2015 by entrepreneurs who realized an opportunity to supply mostly rural communities with lower-priced electricity. Prices for wind power had tumbled, solar had begun to rapidly decline, and the company was unencumbered by investments in coal-fired generation.

The first contract was with the municipal power provider for Aztec, a city of 6,900 people along the San Juan River in northwestern New Mexico.

Next came another New Mexico utility, Kit Carson Electric Cooperative. Tri-State Generation and Transmission, the wholesale provider, required Kit Carson to pay $37 million to vacate its full-requirements contract to 2040.

Guzman financed that exit fee and also agreed to help Kit Carson build its solar capacity in Taos and the surrounding service territory, including Angel Fire. Kit Carson expects completion of solar projects in 2022 sufficient to provide 100% of electricity for its customers during daytime.

Kit Carson expects to pay off that debt to Tri-State next summer. Overseeing this transition was Luis Reyes, the long-time chief executive of Kit Carson.

“People thought (Reyes) was crazy and even crazier to try to service that debt in a six-year time frame, but by next July, his debt goes away,” says Jeffrey Heit, principal, managing director at Guzman Energy.

In New Mexico, Guzman began providing power to the Jicarilla Apache Nation and the Acoma Pueblo and, most recently, the city of Raton.

In Colorado Guzman began providing power to Delta-Montrose Electric in 2020, replacing Tri-State. It is to begin providing power to the city of Fountain at the end of 2026, replacing Xcel Energy.

Guzman also has an agreement with Holy Cross Energy, the electrical cooperative serving the Vail and Aspen areas. Holy Cross owns one-eighth of Comanche 3, the coal-fired power plant in Pueblo, and the agreement assigns that output to Guzman.

But Guzman has been adding its own renewable generation, now approaching 500 megawatts of wind and solar capacity coupled with storage. In this sense, Guzman is still a wholesale power provider but also becoming a utility, if one lacking in the distribution network of backyard and poles overseen municipal utilities such as those in the Arkansas River Power Authority or Xcel and other investor-owned utilities.

Heit worked for Xcel’s Colorado subsidiary, the Public Service Co. of Colorado, for 29 years in addition to other utilities. This, he says, is the most exciting time of his career.

The transition in electrical generation underway now has two principle components, he says. “One is what is the most cost-effective resource you can put into your mix right now. It’s definitely not a coal plant. It’s potentially some gas, but wind and solar—those are the most economical resources you can put in your portfolio right now,” he says.

In the background are rules and regulations governing carbon intensity of electrical generation. Shifting to the lower cost renewables removes utilities from exposure to the future liability of carbon, he says.

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