The Delta-Montrose Electric Association is asking a state authority to decide how much it should have to pay to part ways with its wholesale power provider.
The local utility said in a news release Thursday it has filed a complaint asking the Colorado Public Utilities Commission to exercise its statutory authority and adjudicate a just, reasonable and nondiscriminatory exit charge that it should have to pay to Tri-State Generation and Transmission Association to get out of its contract. That contract is scheduled to run through 2040.
DMEA says despite its efforts, Tri-State has refused to agree on a fair charge, and the PUC has a legal responsibility to ensure that public utilities’ rates are just, reasonable and nondiscriminatory.
DMEA also said in its release Thursday that if it withdraws from Tri-State, it plans to partner with Guzman Energy, a Colorado wholesale power provider. Kit Carson Electric Cooperative in New Mexico partnered with Guzman Energy after agreeing to pay Tri-State $37 million for a contract buyout.
DMEA said in its release that Guzman Energy has helped bring significant economic benefits to Kit Carson Electric’s service territory, including through a plan to add 35 megawatts of local solar power.
“With support from Guzman Energy, DMEA intends to drive more local economic growth through expanded development of diverse, low-cost local energy. This provides the greatest economic benefit to the community with environmental advantages, as well as positive impacts on the long-term cost of power and the creation of local jobs,” DMEA said Thursday.
DMEA has been looking to sever its Tri-State contract in part because of concerns about the cost of Tri-State’s wholesale power. That cost is dictated to a significant degree by legacy investments in coal-fired power, which has become less cost-competitive compared to renewable energy sources. DMEA also wants to no longer be bound by Tri-State’s restriction keeping rural cooperatives from producing more than 5 percent of their energy on their own, which limits its ability to tap local renewable and other energy sources.
In October, DMEA’s members approved a charter change letting it issue stock to raise capital, which would provide it more financial flexibility in paying for a Tri-State buyout.
Tri-State is a nonprofit entity owned by more than 40 local cooperatives and public power districts. It says it has stabilized its rates, nearly a third of the energy consumed within the association will come from renewables this year, and it is the top solar generation and transmission cooperative in the country.
“We are disappointed that DMEA has decided to attempt to litigate this matter rather than negotiate their withdrawal,” said Tri-State spokesman Lee Boughey. “Tri-State continues to believe that negotiations on withdrawal are far preferable to litigating this matter. Tri-State has not seen a copy of the DMEA complaint and cannot comment further at this time.”
A threshold question the PUC may face in considering DMEA’s request is whether it has jurisdiction to decide the matter. PUC spokesman Terry Bote previously has said that generally, wholesale rates are regulated by the Federal Energy Regulatory Commission, and the PUC has jurisdiction over retail rates of investor-owned utilities. Bote said Thursday afternoon that the agency hadn’t yet seen DMEA’s request, and so it has no reaction.
Boughey declined Thursday to address the question of what level of jurisdiction the PUC does or doesn’t have over Tri-State.
DMEA says the state Constitution and Colorado’s public utilities law give PUC oversight over Tri-State as a public utility, and the PUC affirmed its jurisdiction over Tri-State in a 2013 case that involved a complaint by other Tri-State members.
Jeremy Nichols is with the conservation group WildEarth Guardians, which has been arguing that the PUC should use its authority to investigate Tri-State’s electric rates and what he says is a costly reliance on coal.
He said he thinks the DMEA complaint “may try to force (the PUC) to come to grips with their duties.”
He also thinks the complaint could open the door to further scrutiny of Tri-State and what he said is the “iron fist” by which it rules its members, and could allow for more members to break free of Tri-State.
“This could really be a game-changer,” he said.
Tri-State has noted that its members govern it, and has said they are overwhelmingly satisfied with Tri-State and supportive of the direction it is heading. But Nichols pointed to a recent letter written by the chairman of United Power, Tri-State’s largest member in terms of customers, in which the utility raised concerns about Tri-State’s costs and what it called a reluctance by Tri-State to embrace more renewable energy due to the constraints of its largely fossil-fuel-based power generation.
“United Power agitating like that is a pretty big deal,” Nichols said.
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