La Plata Electric Association says it will need to raise an additional 7.7% from rate payers in 2025, citing high labor costs, inflation and its upcoming 2026 departure from its contract with Tri-State Generation & Transmission Association Inc.
The electric co-op has not yet determined how the rate increase will be achieved among its approximately 36,600 customers, which include individuals, businesses and oil and gas companies. The cooperative is awaiting the results of a third-party cost-of-service study.
After a review of the cooperative’s financials, the LPEA board concluded that a rate increase in 2025 was necessary to sustain a “strong financial position and meet operational needs,” the co-op said in a news release last week.
LPEA spokeswoman Amanda Anderson said the co-op would publish new proposed rates for a 30-day public review period after the study is complete. The formal rate tariff, detailing specific changes, will be posted in early 2025 and will take effect on April 1.
“These rates will detail how increases will be applied to each rate class, outlining the specific adjustments for individual members based on their usage and service type,” she said in an email.
According to the news release, the increase will help cover the costs of expanded tree-trimming efforts to mitigate wildfire risks, as well as rising expenses for construction materials and essential components like transformers and wire, driven by supply chain challenges.
“LPEA’s top priority is to deliver safe, reliable electricity at the lowest reasonable cost to our members,” said LPEA Board President Ted Compton in the release. “This budget addresses the higher cost of labor and materials due to inflation and incorporates the expected short-term costs needed for our energy transition. While we do not take the decision to raise rates lightly, it is essential for the effective management of your electric cooperative.”
According to data from LPEA’s budget presentation, the total cost of labor, including wages, medical benefits, workers’ compensation and the addition of new hires, has increased by 16% since 2024’s budget.
In addition, LPEA is facing the challenges with inflationary costs of materials. According to LPEA’s data, the cost of copper wire has increased by 218% since 2018 while the cost of electric poles has increased by 58% over that same period.
Costs for other materials like PVC pipe and electric pole crossarms have increased by over 100% as well.
LPEA still faces the cost of its contract buyout with Tri-State Generation & Transmission in 2026 which will have an impact on member rates. Tri-State has said the cost of buyout will be around $210 million, which LPEA has disputed.
“A portion of the rate increase is directly related to preparations for the 2026 departure from our current wholesale power supplier,” Anderson said. “This revenue increase is intended to help cover the costs associated with ensuring a smooth and reliable shift in the coming years.”
In March, the board of directors announced that LPEA would terminate its contract with Tri-State, which required the cooperative to purchase 95% of its power from the wholesaler until 2050.
The decision aimed to give LPEA greater flexibility in controlling power rates and expanding the availability of clean energy for its customers. However, the announcement raised several unresolved questions, including the cost of the contract buyout and how LPEA would secure power for its members moving forward.
LPEA officials have said that the $210 million figure may not be representative of the true cost.
The actual buyout price tag will not be calculated until one month before the exit, according to Federal Energy Regulatory Commission rules.
tbrown@durangoherald.com
