Colorado Public Utilities Commissioner questions “whether or not Tri-State has been candid with us”

A Colorado utility’s attempts to avoid oversight by state regulators appears to be backfiring.

 Joe Smyth  •  July 19, 2019

At a Colorado Public Utilities Commission hearing this week, Commissioner Frances Koncilja said she has “some serious questions about whether or not Tri-State has been candid with us,” and reminded the attorneys for electric utilities that “everyone who appears before a tribunal has an obligation of candor to the tribunal.”

Commissioner asked Tri-State in February if it planned to “run off to FERC”

The commissioner’s comments came during a July 15 hearing concerning the dispute between Delta-Montrose Electric Association (DMEA), an electric cooperative in western Colorado, and Tri-State Generation and Transmission Association, a wholesale power provider headquartered near Denver. DMEA has been seeking to end its contract with Tri-State, which requires the co-op to purchase wholesale power from Tri-State, in order to pursue more local renewable energy projects and reduce its wholesale power costs. The Colorado PUC has been holding hearings since the beginning of 2019 to determine the “exit fee” that DMEA will have to pay to Tri-State in order to end its contract.

But last month, Tri-State moved to become rate-regulated by the Federal Energy Regulatory Commission (FERC), which could preempt the Colorado PUC’s jurisdiction over the DMEA dispute and derail the case just as the PUC neared a decision in August. That forum shopping is what incited Commissioner Koncilja’s questioning of Tri-State’s candor with the PUC; she had asked Tri-State months earlier if Tri-State planned to try and move the case to FERC, and did not receive a direct answer.

During a hearing on February 6, commissioner Koncilja directly asked Tri-State attorney Thomas Dougherty, “Is any FERC jurisdiction implicated in this dispute?”

Dougherty responded: “I’m not sure I understand your question Commissioner.”

Koncilja asked again: “Is somebody going to run off to FERC at some point?”

Dougherty again dodged the question: “Umm… at some point in the future or during the pendency of this case?”

Commission requests Tri-State communications regarding FERC rate regulation 

Commissioner Koncilja questioned this week whether Dougherty had failed in his obligation to be candid to the PUC as an attorney, or whether the failure was Tri-State’s.

“We expect candor. And I am not saying that it is Mr. Dougherty who was not candid. It might well have been his client,” said Koncilja.

Koncilja also raised the possibility of public hearings to question Tri-State executives about the company’s conduct before the commission, and requested that Tri-State provide the commission with its communications regarding its pursuit of FERC rate regulation.

Colorado PUC Chairman Jeff Ackermann agreed with Commissioner Koncilja’s request for Tri-State’s communications, and on Thursday the commission ordered Tri-State to “file a summary of all actions” it took to pursue FERC rate regulation.

COLORADO PUC: “TRI-STATE IS ORDERED TO FILE A SUMMARY OF ALL ACTIONS” TO PURSUE FERC RATE REGULATION (p. 3)

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Tri-State’s pursuit of FERC rate regulation has raised a variety of concerns, including that it could make it harder for other co-ops to end their contracts with Tri-State.

Jeff Dennis@EnergyLawJeffReplying to @EnergyLawJeff @joesmyth

In accordance with Supreme Court precedent, FERC applies this much higher burden of proof to requests to modify or abrogate bilateral contracts. The late Justice Scalia once called the public interest standard “practically insurmountable.” 2/3 https://law.justia.com/cases/federal/appellate-courts/F2/723/950/320118/ …Papago Tribal Utility Authority, Petitioner, v. Federal Energy Regulatory Commission, Respondent,…Papago Tribal Utility Authority, Petitioner, v. Federal Energy Regulatory Commission, Respondent,arizona Public Service Company, Intervenor, 723 F.2d 950 (D.C. Cir. 1983) case opinion from the U.S….law.justia.com6:47 AM – Jul 9, 2019Twitter Ads info and privacySee Jeff Dennis’s other Tweets

Chairman Ackermann echoed those concerns during Monday’s hearing: “I think it’s clear that they will be captive as soon as that submission happens, or that sequence into jurisdiction, that you have captive members there and it’s a different path than the path through the Colorado PUC, clearly.”

Legislators are also concerned that FERC rate regulation of Tri-State could hamper the Colorado PUC’s oversight of Tri-State’s resource planning process, which was clarified in legislation that Colorado Governor Jared Polis signed in May.

Tri-State says it will comply with Colorado’s new climate policy, as well as New Mexico’s recently expanded renewable portfolio standard. But environmental advocates and some Colorado legislators are concerned that without oversight of Tri-State’s rates, the Colorado PUC could face challenges in enforcing its oversight of Tri-State’s resource planning. 

Tri-State also eroded trust with top Colorado legislators 

Key Colorado legislators highlighted those concerns in a July 3 letter to Tri-State CEO Duane Highley and Chairman of the Board Rick Gordon: “Given the connection between rates and resource planning, we are concerned that Tri-State was not more transparent about the possibility of transitioning to FERC oversight” during negotiations earlier this year. 

COLORADO LEGISLATORS “CONCERNED THAT TRI-STATE WAS NOT MORE TRANSPARENT”(p. 1)

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The letter was signed by the leadership of the Colorado Senate and Assembly, including Speaker of the House KC Becker, Senate President Leroy Garcia, House Majority Leader Alec Garnett, and Senate Majority Leader Stephen Fenberg, as well as the chairs of energy committees: Representative Dominique Jackson, Chairwoman of the House Energy and Environment Committee, Senator Faith Winter, Chairwoman of the Senate Energy and Transportation Committee, and Representative Chris Hansen, Chairman of the Interim Energy Legislation Review Committee, which will begin hearings this month to consider energy policy ideas for the 2020 legislative session.

The legislators left no doubt of their intent to respond in the next legislative session to Tri-State’s latest moves:

“The General Assembly looks forward to making clarifications through legislative initiatives in the coming session focused on cooperative governance, transparency, and accountability to the public interest.”

Several of Tri-State’s largest member co-ops also wrote to Tri-State requesting more information about the implications of FERC rate regulation before the Tri-State board voted on the matter. 

Despite those requests by legislative leaders and some of its major member co-ops, Tri-State approved a resolution during its July board meeting to move toward FERC rate regulation.

In Colorado, a coal-heavy co-op offers a climate plan — and suspicions rise

Benjamin Storrow / Climatewire, US Energy News

Tri-State says it’s pursuing FERC regulation in an attempt to avoid overlapping state regulation, but the proposal is generating concerns.

Colorado has big climate goals. But to meet them, one of the state’s largest power companies is going to have to stop burning so much coal. Tri-State Generation and Transmission Association Inc. is one of Colorado’s largest greenhouse gas emitters. Its two Colorado coal plants emitted 8.54 million tons of carbon dioxide in 2015, according to the most recent statistics. That represented roughly 25% of Colorado power-sector emissions, or nearly 7% of all state emissions.

Unlike Colorado’s investor-owned utilities, which are subject to state oversight, Tri-State has generally escaped the reach of regulators in Denver. The arrangement owes itself to Tri-State’s status as a rural electric cooperative, which are not subject to the same oversight as their investor-owned counterparts.

Until this year.

Colorado lawmakers passed a bill in the spring giving the state’s Public Utilities Commission a say over Tri-State’s long-term plans for generating electricity (Climatewire, May 31). Currently, almost half of Tri-State’s power comes from coal. The bill was part of a flurry of climate legislation, including a measure requiring the PUC to consider a social cost of carbon and another enshrining the state’s emission reductions in law.

Tri-State responded by announcing last month that it would seek to be regulated by the Federal Energy Regulatory Commission. The cooperative boasts of having members and power plants in four Western states, meaning federal officials can regulate its wholesale rates. FERC has traditionally elected not to exercise that authority over electric cooperatives.

The proposal has generated concerns from some Tri-State members and received an icy reception from Colorado regulators. One PUC commissioner accused the company of not being candid about its plans this week.

The showdown has raised questions about whether Tri-State is trying to subvert Colorado’s climate goals.

“They have been allergic to state regulation for a long time,” said Ron Binz, who noted the cooperative fought PUC oversight when he chaired the commission. “They are just learning the vocabulary of clean energy. They have done nothing meaningful in the past to show they are serious about it.”

The state will still have the ability to sign off on Tri-State’s resource plans, Binz said. The question is what will happen if FERC objects to the plan approved by the state.

“I would imagine there could be a conflict if FERC is going to have some say over what the resource mix is,” he said.

Less coal, more renewables

Tri-State says it is pursuing FERC regulation in an attempt to avoid overlapping state regulation. The cooperative also operates in Nebraska, New Mexico and Wyoming.

It is also talking about building more renewables. This week, Tri-State unveiled its “Responsible Energy Plan,” a proposal to move toward a cleaner energy portfolio.

The plan calls on retiring a small coal plant in western Colorado two years early. It also tasks former Gov. Bill Ritter, a Democrat with a green reputation, with leading a stakeholder process on how to make the shift.

The announcement builds on a series of recent moves by Tri-State to green its system. The company is closing one 446-megawatt unit at the 1,426 MW Craig power plant in western Colorado in 2025. This year, it announced moves to add 100 MW of solar and 104 MW of wind.

“Our board was unified in its direction to Tri-State staff to develop a responsible energy plan that is cleaner with lower emissions, while also having a goal of reducing rates,” said Lee Boughey, a spokesman for the cooperative. “It is a meaningful and substantive step forward to meeting the clean energy and flexibility needs of our members. It is a strong statement from our board on how we’re going to move forward in the future.”

He said worries that Tri-State is seeking to subvert Colorado’s climate goals by seeking FERC regulation were unfounded.

“Rate regulation by FERC has no impact on compliance with state environmental resource planning or carbon reduction requirements,” Boughey said. “We will fully comply with the new Colorado requirements for resource planning and carbon reductions. And we’ll fully comply with New Mexico requirements increasing their renewable portfolio standard.”

Green speak

Tri-State has come under pressure from some of its members in recent years to boost its supply of renewables. One Colorado member, the Delta-Montrose Electric Association, has pushed to exit Tri-State’s system in an attempt to increase its access to cleaner energy. On Monday, Tri-State and Delta-Montrose announced they had agreed in principle to a settlement. The terms were not disclosed.

Critics are unimpressed by the cooperative’s green speak. They note Tri-State’s moves pale next to Xcel Energy Inc., the state’s largest power company. Last year, Xcel announced it will close two coal units at its Comanche Generating Station by 2026, a decade before its initial retirement date, and replace the power with renewables (Climatewire, May 7, 2018). It followed up with a plan to reduce emissions 80% by 2030 across its eight-state system.

Read more: Xcel Energy has an aggressive clean energy goal. How will it get there?

Skeptics also noted there was little new in the “Responsible Energy Plan,” with most of the moves being announced in previous months.

“Over the last month, Tri-State has rushed to limit the oversight of the Colorado Public Utilities Commission by becoming FERC rate regulated, in a secretive manner that has eroded any remaining trust between Tri-State and the Colorado Legislature and Public Utilities Commission,” Joe Smyth, research and communication manager at the Energy and Policy Institute, wrote in an email. “This announcement looks more like a PR effort to try and repair that damage than a serious commitment.”

Colorado lawmakers passed a law this year that requires the state to cut its emissions 26% of 2005 levels by 2025, 50% by 2030 and 90% by 2050.

Yet the most recent state figures show how far Colorado has to go. It reported greenhouse gas emissions of 126 million tons in 2015, or 1% above 2005 levels.

Reaching its 2025 goal will require Colorado to cut roughly 34 million tons of carbon. Nationally, coal plant closures have been the leading source of emissions reductions. Yet that trend has been relatively muted in Colorado; roughly half the state’s power came from coal in 2017.

That has begun to change. Xcel’s Valmont plant outside Boulder closed in 2017. It emitted 1.1 million tons of carbon in 2015. State regulators estimate closing Xcel’s two Comanche units would slash 4.5 million tons annually. And the unit slated for closure at Craig, the Tri-State plant, reported emissions of 2.8 million tons in 2017, according to EPA figures.

But even if Colorado cut coal out of its electricity mix, the state would still fall short of its 2025 goal.

Reprinted from Climatewire with permission from E&E News, LLC. E&E provides daily coverage of essential energy and environment news at www.eenews.net.

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