Delta Montrose Electric members vote for new financing options, supporting a potential buyout of Tri-State contract

By Joe Smyth | joe@cleancooperative.com | @joesmyth

Delta-Montrose Electric Association members voted to approve changes to the electric cooperative's articles of incorporation this week, creating new financing options that will help the co-op end its contract with its power supplier, Tri-State Generation and Transmission Association. Under the new articles of incorporation, Delta-Montrose Electric Association (DMEA) will be able raise money by issuing capital stock, “which could be used to fund DMEA’s potential Tri-State buyout,” according to a press release.

“We believe addressing our power supply costs is essential for long-term rate stabilization for our members. This was the primary driver behind our recommendation to amend and restate the Articles of Incorporation,” said Delta-Montrose Electric CEO Jasen Bronec in a statement.

The DMEA board urged members to vote yes, including with a video that focused on how the changes would help DMEA finance a buyout of its contract with Tri-State. The co-op also hosted community meetings about the proposed changes. DMEA members voted by mail and at a special meeting on October 16, with 2,677 members voting yes (68%), and 1,248 voting no (32%).

You may have noticed that your electric rates keep going up. Why? Our supplier Tri-State has increased rates by more than 30% over the past ten years. This is frustrating because rates in the electric market have actually gone down. Being with Tri-State can feel like being on a ship on a course that is already set. DMEA has tried to influence Tri-State to modernize, to meet the needs of today's member. But because there are 42 other co-ops also at the wheel, it's hard to move the ship in a direction that would benefit you - OUR members.

Larger co-ops that buy power from Tri-State are considering other power suppliers
The changes to DMEA’s articles of incorporation and new financing options are the latest steps in the co-op’s efforts to end its contract with Tri-State, which DMEA announced in 2017. The decision to seek an exit followed DMEA's challenges to Tri-State’s restrictions on local energy projects at the Federal Energy Regulatory Commission (FERC). FERC ruled in favor of DMEA in 2016, establishing that the Public Utility Regulatory Policies Act (PURPA) supports electric cooperatives’ abilities to pursue local renewable energy projects despite Tri-State’s 5% limit on self-generation with local energy projects. Tri-State has challenged those FERC rulings, aiming to impose additional fees on co-ops that build more local generation projects.

Losing member co-ops like DMEA is one of the key risks facing Tri-State if it fails to shift away from its reliance on increasingly expensive coal-fired power plants, according to an August 2018 report from Rocky Mountain Institute:

Member exit: As emerging alternative resources fall in price, retail utilities (including co-ops) may seek to exit from all-requirements contracts with wholesale providers that continue to rely on high-cost assets, in order to take advantage of lower-cost wholesale service available from other providers or market purchases. For Tri-State, this risk is not hypothetical; one member, accounting for 1.5% of Tri-State’s load, has already exited Tri-State’s system, and several others are currently in negotiation to exit or are otherwise considering their options.

Figure 5 from Rocky Mountain Institute report: A Low-Cost Energy Future for Western Cooperatives

The co-ops that are "considering their options" include some of Tri-State’s largest customers. DMEA is the seventh largest of the 43 electric cooperatives that buy power from Tri-State, in terms of electricity sales, and the fifth largest in terms of members.

The largest Tri-State member, United Power, “is exploring alternatives to the G&T but is still far from making any decision on exiting," according to its CEO John Parker. In an email to the Denver Post, a United Power spokesperson said that "we are very unlikely to take the same approach as (Delta-Montrose) with changes to our articles of incorporation. It is safe to say we are exploring other options with Tri-State at this time." United Power has built several solar arrays, and last year reached Tri-State's 5% limit on local energy projects. In response to those limits, United shifted its focus from solar projects to energy storage, and plans to switch on a Tesla Powerpack lithium ion battery next month that is expected to save its members about $1 million each year.

The board of directors of La Plata Electric Association, the third largest Tri-State member in terms of electricity sales, voted at its August meeting to create a Power Supply Committee that will “complete an investigation into wholesale power market prospects and our Wholesale Electric Service Contract.” At the LPEA Power Supply Committee's first meeting on September 6, there was "consensus that a buyout was not a destination but may be a tool depending on the facts that are gathered."

Other large co-ops are taking a different approach. Poudre Valley Rural Electric Association, the second largest Tri-State member co-op, requested that Tri-State “determine if significant cost savings are achievable by adjusting Tri-State’s fuel mix and provide the findings to Tri-State’s members by the end of calendar year 2018.” PVREA emphasized its partnership with Tri-State, noting that it “has a vested interest in Tri-State to be successful," and also urged Tri-State "to develop policies that work on providing member-side electric supply resources, so Poudre Valley can actively participate with retail members who opt to move to such resources."

Further reading: 

Delta Montrose Electric seeks new financing options to end contract with Tri-State

Denver Post: Concern about costs, push for more renewables fuels utility’s possible exit from Tri-State

Energy News Network: Colorado co-op vote sets table for defection from coal power wholesaler

Durango Herald: LPEA studies power alternatives to wholesale supplier

Poudre Valley Electric requests Tri-State policy changes and fuel mix study​

Report: Tri-State could save $600 million by shifting from coal to renewable energy

Moody’s report shows Tri-State’s coal plants are more expensive than new renewable energy​

​Uncooperative: Tri-State policies are limiting Colorado communities from developing local renewable energy projects