A federal agency accepted Tri-State Generation and Transmission Association’s plan for determining the costs of terminating contracts with member cooperatives – including La Plata Electric Association, which is exploring a separation from the power provider.
On a separate regulatory path, the Colorado Public Utility Commission has accepted two different roadmaps for assessing contract buyout costs.
One plan accepted by the state PUC for assessing costs of a buyout from United Power of Brighton would lead to a $125 million charge for LPEA to buyout of its 30-year contract with Tri-State. United Power, like LPEA, is exploring a contract buyout.
LPEA’s own plan for determining a buyout cost was also accepted by the state PUC, and that plan would lead to a $40 million charge for a buyout.
The Federal Energy Regulatory Commission on June 12 accepted Tri-State’s plan to determine costs for contract termination, but it has not agreed to it, said Matthew Larson, the attorney hired by LPEA to represent the cooperative as it explores regulatory issues related to a buyout.
Larson spoke to LPEA’s Board of Directors on Wednesday at their June board meeting held on Zoom.
Tri-State provides electricity and transmission to LPEA and 43 other member rural electric cooperatives, principally in Colorado, New Mexico and Wyoming.
Frustrated by Tri-State’s cap on the amount of renewable energy that can be generated locally and by the cost of electricity provided by Tri-State, LPEA has been studying buying out of its Tri-State contract, which expires in 2050.
Larson said FERC had three options:
It could have rejected Tri-State’s plan for assessing costs to buyout a contract.It could have accepted Tri-State’s plan and agreed to its provisions to assess costs for a buyout.It could have accepted Tri-State’s plan, but not agreed to its various provisions; instead moving to study the provisions.By choosing the third option, to study Tri-State’s roadmap, Larson said FERC officials have suspended putting Tri-State’s plan in place. Now, the federal agency will move forward with an examination of the Tri-State roadmap to assess costs, potentially making modifications that could lower LPEA’s buyout costs.
Tri-State’s CEO Duane Highley said FERC’s acceptance of Tri-State’s plan to assess costs opens a path to fairly determine a contract buyout that would be fair to all parties – the cooperative that wants to depart, the cooperatives that remain in Tri-State and for Tri-State itself.
“We believe this issue is now properly before the appropriate regulatory commission. FERC will make a decision that is just and reasonable for all of our members, including those seeking to terminate their contracts. Our next step is to participate in FERC’s settlement and hearing process,” Highley said.
Highley said Tri-State’s contract termination payment methodology was developed by a committee of utility members and approved by Tri-State’s board of directors, in April 2020.
“The methodology determines a fair price for a member to terminate its wholesale power contract with Tri-State without shifting costs,” he said.
On the separate regulatory path at the state level, before the state PUC, Larson said the administrative law judge has accepted plans from United Power and LPEA. If the judge accepts United Power’s plan for separation, LPEA’s cost for contract buyout would be $125 million. If the judge accepts LPEA’s plan, the cost would be $40 million.
A ruling from the PUC administrative law judge could come in late June or early July.
Larson said Tri-State attempted to introduce its plan to assess buyout costs that FERC is now studying, but the PUC judge denied the submission because it was filed after a deadline.
parmijo@durangoherald.com
