Get Big Pivots

Electric cooperative sets the two-year clock ticking with Tri-State G&T as it begins talks in earnest with new wholesale providers

 

by Allen Best

Mountain Parks Electric has served notice that it intends to leave Tri-State Generation and Transmission by Jan. 16, 2025.

“The board looked at a number of factors and made the determination that now would be the time to give notice of our intent to exit,” said Mark Johnston, the general manager of the Granby-based electrical cooperative. It serves 22,000 members in Colorado’s Grand and Jackson counties.

“We see the changes that are happening in the industry and the opportunities that they provide,” explained Johnston. “When you look at it in its totality, it made sense to make this decision now. It gives us an opportunity to work with somebody else, whoever that might be. It is definitely a process that takes time.”

Duane Highley, chief executive of Tri-State, said the organization will work with Mountain Parks “through the contract termination process to support an orderly withdrawal.”

For Mountain Parks, there’s no turning back. The Federal Energy Regulatory Commission has ruled that it’s not possible for coops to give conditional notices of departure. Either they’re leaving or they are not. Mountain Parks is leaving.

Six of Tri-State’s 42 members, including Mountain Parks, had given notice that they wanted greater flexibility in their procurement of generation. One other utility, United Power, the single largest member of Tri-State, responsible for nearly 20% of the electricity provided by Tri-State, has given notice it wants out by May 2024.

Informing the decision by Mountain Parks was a case winding through FERC that gives it and other cooperatives a somewhat clearer idea of what they will have to pay Tri-State to leave remaining members whole. Tri-State has $3.1 billion in debt although a strong asset in its transmission system across Colorado and three adjoining states where its members are located.

Mountain Parks began exploring its options more than three years ago when it indicated interest in pursuing a contract with Tri-State that would allow it to get more than 5% of its power from sources other than Tri-State. In the last 18 months, said Johnston, it has had discussions with both Guzman Energy and Crossover Capital.

Both companies are relatively new wholesale providers that have been gaining customers from among municipal utilities and cooperatives looking to shave costs of their electricity as power generation shifts from coal to other sources, most notably renewables but also natural gas.

All utilities have been buffeted by enormous changes underway in how we produce and consume electricity. Following a time of expansion in the 1990s and then relative stability, Tri-State lost two of its member cooperatives who were dissatisfied with Tri-State’s pace of change.

In New Mexico, Kit Carson Electric left in 2016 and last summer made the final payment of the $37 million it owned to Tri-State. It also completed enough solar plus storage to provide the daytime needs of its members. Colorado’s Delta-Montrose Electric, a much larger cooperative, left in 2020 after an agreement was stuck that has Delta-Montrose paying $62.5 million.

Guzman now provides wholesale power to both.

Two other Colorado electrical cooperatives have chosen a different path. Durango-based La Plata Electric and Ridgway-based San Miguel Power opted to stay with Tri-State but in the new partial-requirements configuration. In the case of La Plata, it is to get 50% of its power from Tri-State and San Miguel is to get 65%. La Plata has picked Crossover Capital as its alternative.

Several other Tri-State members are also pursuing partial-requirements contracts, including Colorado’s Poudre Valley REA, Wyoming’s High Plains Power, and New Mexico’s Jemez Mountain Electric.

Jeff Wadsworth, general manager of Poudre Valley, said the decision by Mountain Parks does not change the path forward of Poudre Valley.

These shifts await conclusive rulings by FERC commissioners. .

The case with the longer history is that involving what members—first United and now Mountain Parks—must pay if they want a complete divorce from the Tr-State family. The amount assessed the departing member must be “just, reasonable and non-discriminatory.”

There has been a Grand Canyon-sized difference in opinions about what exactly that means. United Power had submitted a methodology that would result in it paying $250 million. Tri-State had different ideas. It first set a fee of $1.6 billion for United then retreated to $1.4 billion.

An administrative law judge for the federal agency in September 2022 rejected both methodologies in a long and complex recommendation to FERC commissioners. However, if some uncertainty remains, the recommendation hews closer to the United proposal than that of Tri-State. FERC commissioners will make the final decision. That case is scheduled for resolution in July 2023.

The exit fees will be based on proportionality. For example, United has 108,000 members compared to the 22,000 of Mountain Parks. United also has a proportionately greater power demand. Alone it is responsible for nearly 20% of electrical demand in the Tr-State system compared to 2% for Mountain Parks.

Allen Best
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