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LPEA Challenges Tri-State Contract

In its latest effort to gain control over the cost and generation sources of our local electric supplies, La Plata Electric Association recently sued its wholesale electric supplier for bad faith and breach of contract. LPEA is trapped in a long-term contract that runs until 2050 to purchase 95% of its electricity needs from Tri-State Generation and Transmission Association.

LPEA is a member-owned electric cooperative – anyone who has an electric meter account is an LPEA member. Tri-State is also a cooperative, but its members consist of 42 individual rural electric cooperatives including LPEA.

For the last several years, LPEA has worked diligently to gain more flexibility from Tri-State within the existing contract, but has been stymied repeatedly. Meanwhile, several other Tri-State member cooperatives have negotiated exits from their contracts. As Tri-State watches its base shrink, it has seemingly become ever more desperate to hang onto the remaining cooperatives by throwing every imaginable roadblock in front of other cooperatives desiring to leave.

Tri-State is saddled with a legacy of expensive, aging, and dirty coal-burning power plants. It recently announced plans to try to accelerate retirements of coal plants it owns in Craig, Colorado and Springerville, Arizona, but those plans depend on obtaining federal subsidies via the Inflation Reduction Act to allow Tri-State to pay off hundreds of millions of dollars in associated debt.

Meanwhile, rural cooperatives that have departed Tri-State, including Kit Carson Electric in Taos and Delta-Montrose, are enjoying the benefits of greatly reduced costs for their electric supply, and local investments in renewable energy projects. Kit Carson is now 100% powered by local solar projects during the daytime, and is working on renewable sources for the remainder of its supply.

LPEA sees the writing on the wall. In contrast to Kit Carson and Delta-Montrose, that are slashing their electricity costs, Tri-State is boosting rates starting in January. LPEA hopes to absorb some of that cost increase internally, but still has to increase rates in order pay Tri-State’s higher charges.

LPEA has bent over backwards to work with Tri-State to find ways to cooperate within the existing contract. They negotiated an agreement for a partial contract buyout to allow LPEA to secure 50% of its power locally, but that fell through, and Tri-State refused to consider other avenues for allowing greater flexibility.

Before resorting to litigation, LPEA tried time and again to work within the existing contract. But much like Charlie Brown and Lucy, every time LPEA ran up to kick the football, Tri-State pulled it away and left LPEA flat on its back.

LPEA’s means of last resort is to fully exit its contract with Tri-State. Hence, the lawsuit which accuses Tri-State of bad faith and breach of contract for refusing to provide a fair and reasonable offer to terminate the existing contract. The lawsuit includes colorful phrases describing Tri-State’s behavior as “sneaky and underhanded.”

LPEA’s lawsuit seems to put Tri-State on notice that the clock is ticking for LPEA’s departure. The attorneys representing LPEA are the same ones who successfully negotiated exits from Tri-State by Delta-Montrose and United rural electric coops. LPEA could partner with local power developers or tribes to develop energy supplies that reflect its members’ values, invest in local projects, and save money for members, but not until it is free of Tri-State’s yoke.

Expect a raucous court battle. Tri-State is nothing if not litigious, so much so the quip is Tri-State acts like a law firm that sells electricity on the side. Litigation will be worthwhile if LPEA can obtain its freedom to develop cheaper, local energy supplies and chart its own future course.

Mark Pearson is Executive Director at San Juan Citizens Alliance. Reach him at mark @sanjuancitizens.org.