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Electric co-ops cut costs through independence

June marks a significant milestone among rural electric cooperatives within the Tri-State system, notably for our neighbor Kit Carson Electric Cooperative in Taos, New Mexico.

Six years ago, Kit Carson blazed a new path for electric co-ops in our region looking for lower rates and more energy independence.

In the next few weeks, Kit Carson will mark the occasion of having entirely paid off its $37 million fee to exit its energy contract with Tri-State Generation and Transmission. Simultaneously, and intentionally, Kit Carson will also mark the energizing of local solar arrays that will supply 100% of its daytime electric needs.

Back in 2016, Kit Carson’s board of directors acted on dissatisfaction with a rigid contract that compelled their electric cooperative to purchase 95% of its electricity from Tri-State through the year 2040 at whatever price Tri-State deemed appropriate. Kit Carson directors watched Tri-State double the cost of electricity over the previous decade, an unsustainable burden on an economically challenged region of northern New Mexico.

Uncomfortable with its economic and energy fates held in the hands of a utility headquarters hundreds of miles distant in Denver, Kit Carson struck a deal with Tri-State to exit its 2040 contract early, at a price of $37 million. It marked the first domino to topple in Tri-State’s rigidly controlled cooperative system.

Kit Carson directors wanted to take control of their energy destiny, take advantage of cheaper new renewable energy sources and invest in local energy generation. Directors saw a win-win solution in abandoning Tri-State’s expensive and remote coal-fired electricity in favor of local, cheap, renewable solar energy.

Other Tri-State cooperatives similarly fidgeting over contracts tying them to expensive, coal-fired electricity for another 30 or 40 years took note of Kit Carson’s strategy. Delta-Montrose Electric Association reached agreement to exit Tri-State in 2020, and just this past year our own La Plata Electric Association chose to cut its dependence on Tri-State by half.

Kit Carson staff members recently completed a comparison of electricity rates with other regional electric cooperatives. The results of the analysis drive home the financial benefit to New Mexico customers whose cost of electricity is a good 30% less than other co-ops, including LPEA.

LPEA intends to achieve similar cost savings once its partial contract termination takes effect in a few years. But for now, Kit Carson has beat us to the punch with a significant head start in shaving customers’ electric bills.

Kit Carson staff members looked at the typical monthly bill for a home using 500 kwh of electricity. They took into account electric rates plus fixed base charges. LPEA falls into the middle of the pack in electric costs, but in a few years, LPEA aims to save $7 million annually on electric purchases, or about 10% of current costs, and to hold prices steady thereafter.

Rural electric co-op members are ever more sensitive to costs. When Sangre de Cristo Electric Association, the cooperative serving Salida and Buena Vista, proposed a 50% increase in its monthly base charge, members revolted. In May, incumbent board members were roundly voted out of office by a 3-to-1 margin, with new directors promising lower rates and better communication.

Tri-State has belatedly attempted to stem the stampede for the exits among its remaining 42 member cooperatives. It’s slashing costs by cutting one-third of its highly paid executive staff, and attempting to appease co-ops dissatisfied by the high costs of expensive legacy coal-fired power. It might be too little and too late given the irrefutable cost savings achieved by Kit Carson, and other co-ops soon to follow Kit Carson’s example of independence.

Mark Pearson is executive director at San Juan Citizens Alliance. Reach him at mark@sanjuancitizens.org.