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La Plata Electric could save money if it left energy supplier

Estimated cost of a buyout not released to the public
La Plata Electric Association could save money if it left its wholesale energy supplier Tri-State Generation and Transmission. But it is unknown how much LPEA might have to spend to buyout its contract with Tri-State.

La Plata Electric Association’s investigation into greener power sources found that purchasing electricity from outside sources could save money without hurting reliability. But the cost of leaving LPEA’s wholesale power supplier remains a mystery to the public.

LPEA is contracted to purchase 95% of its power from Tri-State Generation and Transmission until 2050.

However, some LPEA board members are interested in alternatives to Tri-State because the cost of renewable electricity is falling, and Tri-State is heavily reliant on coal.

The LPEA board heard from consultants Wednesday who were hired to study the cost, reliability and risk of purchasing electricity from sources other than Tri-State. It was the culmination of work by LPEA’s power supply committee that started in September.

After hearing from the consultants, the LPEA board voted to continue studying a buyout in a variety of ways.

“Initial studies by the consultants indicate that there is potential savings for LPEA to engage with alternative power suppliers while maintaining reliability,” LPEA CEO Mike Dreyspring said in a news release. “But we’ve got more work ahead of us. We need to have further study of the transmission system – the availability of us to get electricity to our service territory from out of the area – and the costs affiliated with that.”

If LPEA was not contracted with Tri-State, it could purchase more renewable power at lower prices from other sources, Caitlin Liotiris, a partner in Energy Strategies told the LPEA board Wednesday. Energy Strategies was one of three consultants hired by LPEA to examine issues surrounding a buyout.

However, Energy Strategies did not include the cost of a potential buyout from Tri-State in its cost estimates.

The consultant did present the costs of purchasing various mixes of traditional and renewable power. If LPEA bought 50%, 80% or 100% green power on the open market, it would be cheaper than purchasing power from Tri-State, Liotiris said.

The cost of purchasing power from Tri-State is 7.48 cents per kilowatt hour. If LPEA purchased 100% green power on the open market in 2020, it would cost 6.84 cents per kilowatt hour, according to her presentation.

Renewable energy might cost more in the next few years as federal tax credits wind down, she said.

“This may be a good time to consider locking in a low price,” she said.

But costs of renewable energy are expected to lower and stabilize after about 2024, according to her presentation.

The consultant’s price estimates factored in electricity transmission and other ancillary costs, she said.

The reliability of power that LPEA customers purchase wouldn’t suffer from a buyout because power is governed by a power balancing authority that is responsible for maintaining electric service, Liotiris said.

If LPEA stayed with Tri-State, it is possible that the wholesaler’s energy prices could be competitive with market prices for energy by 2035 to 2040, said Edwin Reyes, principal with Enchantment Energy Consulting, a company that examined the value of LPEA’s contract with Tri-State.

Reyes did not share how much his firm estimated it might cost for LPEA to buyout Tri-State, saying that he did not want to harm the co-op’s negotiating position.

The consultants did share some of the factors that could affect a buyout. For example, LPEA would not need to pay Tri-State for future transmission costs because it is likely LPEA would continue paying Tri-State for transmission, Reyes said.

After hearing from consultants, the LPEA board voted to take several steps to continue researching new sources of power.

The board directed the staff to obtain pricing estimates from wholesale energy suppliers and determine how a potential buyout and alternative power supply would affect members’ rates and LPEA’s cash flow, according to a news release.

The staff was also directed to prepare for a study of LPEA’s transmission needs if the co-op left Tri-State. The staff needs to determine the cost of the study and the data required.

LPEA also plans to hold public forums in each of the LPEA district’s to inform the public about the consultants’ findings. Dates have not been announced.

mshinn@durangoherald.com

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