La Plata Electric Association is soon expected to present information about the value of the wholesale all-requirements agreement between LPEA and its electricity supplier, Tri-State Generation & Transmission.
Such a contract valuation is but half the equation. LPEA must couple that with estimates of rates and delivery from other suppliers. Without this part of the analysis, what’s the point?
If LPEA can get better rates in the competitive wholesale marketplace than with our current monopoly supplier, savings result. LPEA must incorporate industry-accepted valuation methodologies to provide a range of buy-out estimates.
Kit Carson Electric Co-op in New Mexico, about 27 percent of the size of LPEA, went through a similar exercise in 2016 resulting in an exit fee of $49.5 million offset by $12.5 million in accumulated capital credits. A simplistic estimate is that LPEA’s exit fee should be around $200 million, less $78 million in capital credits, totaling about $122 million.
That is a large figure, but don’t be fooled: if the savings with cheaper (and yes, cleaner) wholesale electricity from other suppliers cover the cost of a contract buyout in a few years, it promises lower rates. 0
With plenty of evidence now right in front of us of today’s availability of cheaper, cleaner local energy, and also a means to achieve it, LPEA owes its membership a complete and objective analysis of both a wholesale contract buyout and supply alternatives.
Jeff Berman
Durango
Editor’s note: Jeff Berman served as a director on the LPEA board from 2005 to 2017.
