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Can LPEA, Tri-State agree to partial contract buyout?

Nine power suppliers interested in delivering renewables to local co-op
La Plata Electric Association and Tri-State Generation & Transmission Association appear to be far apart on an effort by the local electricity cooperative to buy out its full contract with power supplier Tri-State. But the two appear much closer on agreeing to a partial contract buyout, which might come as soon as this fall. (Courtesy of LPEA)

While Tri-State Generation & Transmission’s figure of $449 million it gave to La Plata Electric Association to get out of its long-term power supply contract appears to be a non-starter, a partial contract buyout is becoming more likely.

LPEA CEO Jessica Matlock said the $449 million figure given by Tri-State was unreasonable, but said it was only the first offer in an ongoing settlement process overseen by the Federal Energy Regulatory Commission that might take years to resolve, and worst-case could end up in litigation.

Matlock

But parallel to negotiations about a full contract buyout, LPEA is also talking with Tri-State about a partial contract buyout, and those talks are much closer to fruition, Matlock said.

The partial contract buyout would allow LPEA to seek outside power suppliers to provide 50% of the electricity it delivers to its members. LPEA believes this will allow the cooperative to deliver more electricity generated from renewable and local sources.

Finding power from renewable and local sources was one of the reasons LPEA initially began exploring getting out of its long-term Tri-State contract, which runs through 2050.

LPEA also believes it can find electricity cheaper than prices it currently gets from Tri-State, which currently provides about 95% of LPEA’s electricity.

Nine responses from non-Tri-State power-suppliers have been submitted to LPEA on its request for proposal to supply it with 50% of the electricity.

The RFP is dependent on LPEA and Tri-State agreeing to a partial buyout figure, referred to as a buydown payment.

Matlock said the co-op is much closer to coming to terms on a partial contract buyout than a full contract buyout. Matlock declined to give a dollar figure that might be required for a partial contract buyout.

Matlock said LPEA and Tri-State could agree on a partial buyout figure as soon as October.

Lee Boughey, a spokesman for Tri-State, said Tri-State first approved a path for partial contract buyouts in February 2020 when it became apparent members wanted greater flexibility in their power-supply contracts.

In May, LPEA was one of three Tri-State members that applied for an “open season” allowing members to self-supply an aggregate of 300 megawatts of electricity.

Boughey said Tri-State members worked together to develop a recommendation for a new option for partial memberships and contracts.

“When we announced the development of the plan itself in 2020, we were very much focused on providing our members the flexibility that they desire to be able to increase their ability to self-supply power,” he said.

Boughey said the partial contract option was part of the Tri-State’s Responsible Energy Plan, which involved member input in delivering more flexibility for distribution cooperatives like LPEA to further develop local renewable resources and pursue additional power-supply options.

“We would be very pleased to have the partial requirements option wrapped up with our members this fall,” Boughey said. “The timeline is also dependent on the process at the FERC, where we are working expeditiously to advance this flexible contract option for our members.”

Ideally, La Plata Electric would like to hold public town hall meetings in October to present the finalists of nine proposals from outside power suppliers it has received to supply 50% of its electricity.

“We want to present these proposals to our membership,” Matlock said. “There’s great interest by our members, and they want to see these proposals, and we want to get their feedback,” she said.

Karl Ramsey, LPEA’s vice president of finance, said the proposal “guarantees” that power can be supplied to LPEA at rates lower than it currently gets from Tri-State.

Dan Harms, LPEA’s vice president of grid solutions, said the proposals from new power suppliers would not reduce the reliability of the electricity supplied to the local co-op.

He said the physical delivery of electricity from the grid would not change; only the financial arrangements to pay for the power would change.

parmijo@durangoherald.com

An earlier version of this story erred in saying La Plata Electric Association will hold town hall meetings on all nine proposals submitted to the co-op to provide 50% of its electricity. The meetings will examine only the finalists from the group of nine proposals.

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