Get Big Pivots

Jurors in Adams County are to hear arguments about whether Tri-State violated Colorado law in adding three new members 


by Allen Best

I’m not sure which astounds me more, the amount of money United Power has devoted to legal and expert witnesses in making its case against Tri-State Generation and Transmission or the amount of money that it claims it has lost because of Tri-State’s stalling.

The latter estimate, by the way, ranges from $483 million to $533 million.

The estimate comes from Kurt G. Strunk, from the National Economic Research Associates, in New York, who was asked to assess the economic damages to Brighton-based United because it could not leave Tri-State in 2020 as United says it originally intended.

Strunk’s firm is billing United $200,000 for 400 hours used to come up with this estimate. That’s $500 an hour.

The Feb. 20 filing in Adam’s County District Court, site of United’s lawsuit against Tri-State, also reports these fees charged to United by witnesses and lawyers:

  • Herrick K. Lidstone Jr. of Greenwood Village, billed 40 hours at $600 an hour for $24,000;
  • Jason Wiesner of Boulder billed 20 hours at $850 an hour for $17,000; and
  • Karl R. Rabago of Denver billed 33 hours at $250 an hour for $8,250.

This sort of filing makes lowly-paid journalists question their career choices. I assume Tri-State has also been throwing heaps of cash into the effort to fight United in court. Several years ago, I was at a Colorado Public Utilities Commission meeting when then-PUC commissioner, Frances Koncilja, asked the Tri-State lawyer how much he billed per hour. $500, replied Thomas Dougherty.

Money envy aside, why do any of these numbers matter? Why does Big Pivots yet again write about the legal war between Tri-State, Colorado’s second largest utility, and United Power, its single biggest member, alone responsible for more than 20% of Tri-State’s sales?

Because I believe this case indirectly poses the question of the future of the energy transition in rural Colorado.

Rural areas were slow to partake of the advantages of electrification early in the 21st century. Investor-owned utilities weren’t interested, and so Congress in 1936 passed the Rural Electrification Act. My grandparents became members of their local electrical cooperatives in eastern Colorado in 1942 and 1948.

The big question here is whether Tri-State can reinvent itself in a way that can help rural Colorado fully gain the benefits of the energy transition.

Let’s be very clear: Tri-State is very different from what it was 10 or 15 years ago when it thought that all questions were answered by another big coal (or possibly nuclear) power plant. It is making the effort to reinvent energy. But this case suggests something less than a full commitment. Why else is United so determined to leave—and now so many others, too?

As readers familiar with the story know, Tri-State first set an exit price for Kit Carson of $119 million, but they settled at $37 million when the Taos-based utility left in 2016.

Something similar happened with Delta-Montrose: an initial offer of $322 million and then, after two years of negotiations, $62.5 million.

United Power building, Allen Best

United Power alleges it has lost hundreds of millions of dollars as a result of delay by wholesale supplier Tri-State. Top photo, Olson’s Greenhouse near Fort Lupton became one of three non-electrical providers recruited for membership that allowed Tri-State to lose its exemption from federal regulation. Photos/Allen Best

With United, Tri-State in 2018 proposed an exit fee of $1.2 billion—then the next year reported a higher figure of $1.3 billion.

An administrative law judge with the Colorado Public Utilities Commission in August 2020 concluded that an exit fee of $235 million would be just and reasonable.

By that time, Tri-State had set out with another strategy. Even in May 2018, according to this most recent filing by the United legal team, Tri-State was plotting how to avoid jurisdiction in Colorado. Two strategies were contemplated to bypass Denver in favor of the Federal Energy Regulatory Commission.

(The Colorado PUC makes me dizzy at times; I am told that FERC is byzantine enough to make you forget your name).

To move this already slow-moving case to D.C., where things move far more slowly yet, Tri-State needed to add members who were not electrical utilities. Its first new member was MIECO. A marketing company, it had provided gas services to Tri-State. That was in September 2019.

Soon came two more non-utility members: Olson’s Greenhouse, a wholesale greenhouse, near Fort Lupton, and Ellgen Ranch, near Craig.

The disingenuousness of this strategy is described in the heavily footnoted filing (page 210) in this way:

“Tri-State’s purpose to admit Ellgen is to lease its Tri-State owned land for ranching, even though Tri-State already had an existing relationship and lease with Ellgen as of the date of the purported membership agreement. Tri-State’s purpose to admit Olson’s as a member is to sell it thermal energy for its greenhouse operations, even though Tri-State already had an agreement with Olson’s to sell thermal energy and is now giving Olson’s a discount for that thermal energy.”

To cut to the chase, Tri-State was able to shrug off any decisions by the Colorado PUC about how much United Power should have to pay when it got FERC jurisdiction. FERC still has not decided, although its administrative law judge last summer recommended a formula that looks an awful lot like the one devised by his Colorado PUC counterpart two years before. FERC commissioners themselves will do the deciding. That might happen this year, but whatever they decide might in turn be challenged legally.

All of this is the background for the central argument of this new filing. The United team alleges that this maneuvering to get FERC jurisdiction is not just ethically suspect (my words) but also illegal under Colorado law (their contention). That argument keys on something called “Article 55” under Colorado law.

The details of this, if pivotal, are tedious. The short story is that if United’s interpretation of Colorado law is proven correct, then Tri-State unlawfully sought federal jurisdiction.

That’s for a jury to decide. Nine days have been reserved in Adams County District Court for a jury trial beginning June 26.

Does this change anything? I suspect it sets the stage for a judgment against Tri-State, an organization already beleaguered by debt on a fleet of coal-fired power plants that, whatever their role in providing reliable electricity, have become very costly to operate.

Perhaps I’m missing something, but the big picture that I seem to see is that Tri-State managers should have found a way to make peace with United Power and other dissident members. Now, the dissidents have expanded.

We have two other coops, in addition to United, that have served notice they intend to leave, along with several others said to be considering their options. Taking things to Washington D.C. has prevented United from getting out but it may have precluded a number of other options that could have been advantageous for all the “family” members.

Is there a parallel to the strategic mistakes made by Colorado-Ute, whose coal plants at Craig Tri-State inherited? Maybe–but I’ll leave that alone for another day.

Allen Best
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