Pink slips at Tri-State G&T

Personnel cuts this time extend into ranks of senior vice presidents as electric provider starts addressing difficult realities

by Allen Best

A significant staff shuffle and downsizing has occurred at Tri-State Generation and Transmission, likely a recognition of the enormous challenges facing the wholesale provider to 42 electrical cooperatives in Colorado and three other states.

Duane Highley, the chief executive officer, announced that 30 positions – including several senior vice presidents – are being shed as part of a “strategic reorganization.”

Altogether, 18 corporate employees were pink-slipped in addition to 12 employees at generating plants in Escalante, N.M., and Rifle, Colo. The Escalante coal plant was closed in 2019 and the natural gas plant at Rifle will close later this year.

The layoffs represent 3% of Tri-State’s total personnel but are the first significant changes to Highley’s senior management team since he arrived at Tri-State in April 2019.

Joe Smyth, a member of a Tri-State cooperative who has followed Tri-State closely during the last decade at his website, Clean Coop, said Tri-State’s efforts to reduce costs show the benefits to ratepayers of increased competition to provide wholesale power to electric cooperatives.

“Instead of co-ops just being trapped in long-term contracts with a single power supplier, oversight by FERC to help ensure fair exit fees means that Tri-State now must cut costs to try to compete, to try and avoid losing more member co-ops,” he said in an e-mail. That dynamic, he added, will also benefit the co-ops that remain with Tri-State.

“Beyond the cost savings, one key question is if Tri-State’s executive team reorganization will allow Duane Highley to more quickly transform Tri-State so it is positioned to succeed in the transition from coal to clean energy,” said Smyth, who attended the monthly meeting of the board in late May.

Even before Highley arrived at Tri-State, it was clear that the staid wholesale provider would have to significantly change its business model. That model was built around centralized power generation, particularly coal-fired power plants, and one-way distribution of power. Just about everything in that model is turning sideways or more.

Why the personnel cuts now? The timing likely is not coincidental in that Tri-State has received a setback in its bid to slow the exit of its single largest member, United Power. United alone represents more than 20% of Tri-State’s demand. United insists it will be gone by May 1, 2024. The final outcome of what it must pay Tri-State and remaining members is being worked out in hearings at the Federal Energy Regulatory Commission.

Also before FERC are other issues. An administrative law judge for FERC in late May handed down decisions in United’s favor on three of four issues, according to a press release from United, and ordered Tri-State to give United Power significant refunds for energy storage resources.

Mark Gabriel, the chief executive of United Power, says the FERC rulings have far-reaching impacts to all Tri-State members.

The issues are complex, involving “unbundling of costs” in cost accounting and other issues. In the matter of Tri-State’s policy for certain community solar programs, the law judge ruled it unduly discriminatory as the cost-benefit ratio used by Tri-State varies widely depending on a member’s size.

Most illustrative of the dispute between United and Tri-State was the element of energy storage.

In this case, United Power had gone out on a climb in 2018 to erect four megabytes of Tesla batteries behind its office along Interstate 25 near Firestone, north of Denver. Tri-State had tried to prevent United from going forward with the battery storage. It remains the single largest battery storage in Colorado. (Xcel Energy will be putting in a 125-megawatt battery near Pueblo in 2023). The batteries allow United to better juggle its demand from Tri-State, potentially avoiding the most expensive power.

In this case, FERC found that Tri-State improperly charged United Power and must provide refunds from September 2019 going forward. But the FERC judge’s ruling fell short of addressing all issues, as it was outside the scope of the proceeding.

Other members have also been moving to partial-requirements contracts. Tri-State allocated 300 megawatts available to members to carve out for self-supply. In 2003, La Plata Electric, Poudre Valley Rural Electric, and San Miguel Power, all in Colorado, were allocated an aggregate of 203 megawatts.

In May, Tri-State allocated the remaining 97 megawatts to Mountain Parks Electric, based in Granby, Colo., and also High Plains Power in Riverton, Wyo., and Jemez Mountain Electric in Espanola, N.M.

But those changes will keep the cooperatives as members of Tri-State, reliant on transmission and some other services.

Highley’s reorganized senior team will consist of:

Barry Ingold will fill the new role of chief operating officer with consolidation of responsibilities for transmission, generation, and energy management. He previously had responsibilities limited to generation.

(The additional responsibilities were previously assigned to Joel Bladow and Brad Nebergall, who have been let go, according to a Securities and Exchange Commission filing. Also let go in the staff shuffle was Jennifer Goss, who had been the chief of technology and had also been responsible for member relations.)

Bob Frankmore, chief of staff, who will work with Highley to coordinate activities and oversee government relations and external affairs, communications and strategy.
Barbara Walz, who will be responsible for enterprise risk management and physical security in addition to her other responsibilities, which include environmental compliance and policy, reclamation and remediation, and corporate safety.
Reg Rudolph, the chief energy officer, who will take on member relations for the organization in addition to existing duties for beneficial electrification programs and development and implementation of competitive energy services.
Elda de La Peña will fill the new position of chief administrative officer. Peña will be responsible for human resources, people and culture, information technology, cybersecurity, and support service.
Two senior vice presidents — Ken Reif, the general counsel, and Patrick Bridges, the chief financial officer – will continue in their existing capacities.

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