PUC asked for oversight to determine fair exit charges from fossil heavy utility

Utility Dive, July 2019

Facing escalating power costs and limits on the renewable generation it could produce on its own, DMEA turned to state regulators to adjudicate an exit charge. But with the generation provider now considering making moves to invite federal regulation, the small cooperative power supplier fears Tri-State could seek to restart the lengthy process in front of the Federal Energy Regulatory Commission (FERC).

DMEA’s lawsuit, filed in Colorado’s Adams County District Court, seeks to prevent Tri-State from adding a new member — one mechanism Tri-State is considering to trigger FERC regulation.

Tri-State operates in four states and currently does not face federal oversight because it is wholly owned by small cooperatives or public power districts, which FERC does not regulate. In Colorado, Tri-State’s rates can be subject to regulation if a single member complains; in New Mexico, three protests trigger regulation. Nebraska and Wyoming currently do not oversee Tri-State rates, but that could change.

Tri-State recently published an issue brief on FERC regulation, noting “there is political pressure in New Mexico and Colorado for additional Tri-State regulation on facilities and rates. At some point, Wyoming and Nebraska could also assert jurisdiction.” According to Tri-State, moving to become FERC-regulated would eliminate inconsistent rate treatment across the states where it operates. Some of its members see it different. 

“Tri-State’s sudden announcement only weeks ago that it would pursue broad FERC oversight is a last-minute effort to undermine the Colorado PUC and prevent it from deciding a fair and reasonable exit charge,” DMEA CEO, Jasen Bronec said in a statement. “No one knows who the new member-owner will be or what business purpose it would serve within Tri-State. The sole purpose appears to be an attempt to evade Colorado law by forum shopping.

DMEA is not the only cooperative to consider buying out of their contract. Kit Carson Electric Cooperative in New Mexico bought out in 2016. Now LPEA is looking to do the same, with its request for a cost estimate. Member officials say it is the next step in meeting a goal of reducing carbon emissions by 50% relative to 2018 levels.

“As we have been doing, we’re taking a look at this slowly and prudently – doing what is best for our membership, which includes reliability, cost and environmental responsibility,” LPEA CEO Mike Dreyspring said in a statement.

Tri-State provides generation for 43-member electric cooperatives and supplies 95% of LPEA’s electricity under a long-term contract, which extends through 2050. Determining how to move forward will require cost estimates from Tri-State, officials said.

“Until they can start giving us some numbers, we can’t begin to determine what it is going to cost our membership both for a buy-out and to purchase electricity for our members’ needs from other sources,” the utility said in a statement.