Get Big Pivots

by Allen Best

Directors of an electrical cooperative serving Durango and several other communities in southwestern Colorado have identified a potential pathway that would allow it to accelerate decarbonization of its power supply.

The plan disclosed by La Plata Electric Association in a town-hall video meeting on Oct. 25 would result in half the electricity coming from Tri-State Generation and Transmission, the current wholesale supplier, and half from Crossover Energy Partners, a private company.

Crossover as of June had deployed more than $4.7 billion in renewable assets with a power generation capacity of 12.5 gigawatts. In June, it gained the financial backing of KKR, formerly called Kohlberg Kravis and Roberts, the investment firm. Crossover was described as the “exclusive energy transition solutions partner for KKR.” It has five offices nationally, from New York to San Francisco.

La Plata has made no commitments beyond a memorandum-of-understanding with Crossover. If the plan goes forward, said Dan Harms, the vice president of grid solutions for La Plata, the switch would occur sometime in 2023.

Dan Harms, La Plata story

Dan Harms

A 20-year contract is being negotiated that would require Crossover to deliver power to La Plata and develop local renewable resources. La Plata would have set prices, and the company would agree that 75% of the generation comes from renewable sources, achieving a more rapid decarbonization than would be possible by relying solely on Tri-State. Harms said the contract being negotiated would result in $7 million average annual savings for La Plata.

Importance of the proposed plan may extend beyond La Plata Electric. Others among Tri-State’s 43-member electrical cooperatives in Colorado and three other states have been exploring their options in the fast-changing world of energy.

The discontent has been about both the relatively high carbon footprint of the electrical generation but also the relatively high cost. There was also unhappiness about the all-requirements contract, which gave members authority to obtain only 5% of their power generation from sources other than Tri-State.

La Plata and seven other cooperatives in Colorado, New Mexico and Nebraska have wanted to know what it would cost them to exit their all-requirement contracts to 2050. Those eyeing the door have included United Power, the largest member, with 103,000 meters. La Plata has 55,000.

Tri-State has made two major announcements in the last two years. In January 2020 Duane Highley, the then-new chief executive, announced it was ditching its coal assets in Colorado during the coming decade for cheaper generation, especially wind and solar. It has not similarly agreed to exit its coal plants in Arizona and Wyoming.

In April 2020, Tri-State adopted a new partial-requirement contract option for members. The option, hammered out in the course of 11 meetings, allows members the flexibility to significantly increase the local renewable energy development and otherwise choose how to satisfy up to 50% of their power needs. In the first open season, three of Tri-state’s 42 members nominated proposals for an aggregate of 209 megawatts of new generation; the available pool was 300 megawatts, which is 10% of Tri-State’s system peak demand. Of these 209 megawatts, La Plata would be responsible for 71 megawatts.

Mark Gabriel, the chief executive of United Power, has insisted that United does not necessarily want to leave Tri-State but does want to see Tri-State reform its business mission to reflect the growing value of distributed generation. Last week, United announced it was seeking a financial partner to create a microgrid, which can be viewed as a self-contained network of generation and storage that can at least temporarily be isolated from the much larger electrical grid.

“It’s a win-win for our members and their consumers, and for Tri-State as we continue our clean energy transition,” said Lee Boughey, vice president of communications for Tri-State, of the partial-requirements contract.

At the town hall meeting in Durango, La Plata’s Harms explained La Plata’s journey thus far beginning in 2018. That’s when directors adopted a goal of reducing the carbon footprint associated with its electricity 50% by 2030 as compared to 2018 levels while keeping the cost of electricity of members lower than 70% of Colorado electrical cooperatives. The cost of wholesale power is the No. 1 driver of electricity costs, he said.

The board’s three-prong strategy called for flexibility in the current contract with Tri-State. That resulted in authority to install two megawatts of community solar in Southwestern Colorado. La Plata has also been the beneficiary, along with other Tri-State members, of a 4% decrease in wholesale rates by mid-2022. A second element was to seek a partial-requirements contract from Tri-State.

The third element was to investigate what it would cost to exit the Tri-State contract, as two other cooperatives—Kit Carson in 2016 and Delta-Montrose in 2020—have previously done after paying fees. That option remains on the table even if the contract with Crossover is completed, said Harms.

For background on that dispute, see: How exactly did Tri-State G&T come up with these huge contract buy-out figures?

Despite the tentative nature of this agreement, the plan was described in more definitive terms.

“Cooperatives like La Plata want to better meet the needs of their members, and Tri-State wants to partner to facilitate this,” said Pat Bridges, senior vice president and chief financial officer of Tri-State, at the Durango meeting. “The partial contract option can be a win-win for La Plata and other coops and Tri-State and the generation and transmission business model.”

Tri-State currently had 35% of electrical production from renewable sources but expects to hit 50% by 2024.

But Tri-State retains a valuable asset, 6,000 miles of high-voltage transmission lines cross its four-state service territory. The wholesaler was created by its member cooperatives in 1952, to transmit power from federal dams to members. Only later did it add massive amounts of generating capacity from coal plants.

Today, while coal plants will almost entirely be retired within the next decade, the transmission remains important in ferrying wind-generated power from the Great Plains.

In other news on Monday, Tri-State reported it has filed an uncontested, comprehensive settlement on the open access transmission tariff, or OATT, that it had originally filed in 2019. The settlement has several provisions, including reduced fees to members.

At United Power, Gabriel applauded the move “It’s important to have transparent rates that are applied broadly in a balanced and fair manner to all Tri-State members and customers,” he said in a prepared statement. “We look forward to the imminent expansion of OATT across the Tri-State system.”

Allen Best
Follow Me

Pin It on Pinterest

Share This