Colorado Public Utilities Commission orders Tri-State to "satisfy or answer" exit charge complaint from Delta Montrose Electric

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

Delta-Montrose Electric Association (DMEA) took a major step forward in its effort to end its contract with Tri-State Generation and Transmission Association, by filing a formal complaint last week requesting that the Colorado Public Utilities Commission (PUC) "exercise its jurisdiction over Tri-State as a public utility" and "establish an exit charge that is just, reasonable, and nondiscriminatory."

On Monday morning, the Colorado PUC ordered Tri-State "to satisfy the matters in the complaint or to answer the complaint in writing within 20 days." On Monday afternoon, DMEA filed a request that the PUC establish a schedule for the hearings process that would result in a decision by July 11, 2019.

DMEA has sought for years to loosen the restrictions that Tri-State imposes on electric cooperatives, which prevent DMEA and other Colorado co-ops from pursuing more local renewable energy projects. In October, DMEA members voted to give the electric cooperative more financial options to pursue a buyout of its Tri-State contract.

DMEA noted in a press release that it "will partner with Guzman Energy," the same power supplier that supported Kit Carson Electric's $37 million buyout of its contract with Tri-State. Guzman Energy announced today that it is seeking Requests for Proposal for up to 200 megawatts of wind energy and 50 megawatts of solar energy, and has obtained a $200 million capital commitment to help bring on that new renewable energy. Guzman Energy President Chris Riley confirmed that a portion of the 250 megawatts of wind and solar would be used to serve DMEA, if the co-op succeeds in ending its contract with Tri-State.

Colorado utilities announce major new clean energy commitments
DMEA's latest move comes as other electric utilities in Colorado announced major new commitments to clean energy. Last week the state's largest utility, Xcel Energy, became the first major utility in the country to commit to 100% clean energy, and said it also plans to reduce carbon emissions 80 percent by 2030. At the Xcel Energy announcement, Governor-elect Jared Polis said he would like to see Colorado achieve the zero-carbon goal even earlier and wants to work with municipal utilities and rural electric cooperatives to achieve the goal.

Also last week, Platte River Power Authority, which provides power to the municipal utilities of Fort Collins, Loveland, Longmont, and Estes Park, voted to transition to a 100 percent non-carbon energy mix by 2030.

In contrast, Tri-State, which sells power to 18 of the 22 electric cooperatives in Colorado, has not set a target for increasing its use of renewable energy or reducing emissions, and its largest member cooperative, United Power, recently wrote to other co-ops expressing "grave concerns" about Tri-State, including the high cost of power it sells to member co-ops and "Tri-State’s reluctance to embrace additional sources of renewable energy generation due to constraints of its largely fossil fuel generating fleet."

Is membership in Tri-State "voluntary and open" or not?
One key issue raised by the DMEA complaint is the nature of each co-op's membership in Tri-State. Tri-State describes itself as a cooperative, whose members are the 43 electric cooperatives in Colorado, New Mexico, Wyoming, and Nebraska that sell electric power to ratepayers - their members. All cooperatives are supposed to follow seven foundational principles that have been adopted by the International Cooperative Alliance, and first among those is "voluntary and open membership." Tri-State also lists those cooperative principles on its website:

Image from Tri-State website

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But the electric cooperatives' memberships in Tri-State also include contracts that require each co-op to purchase 95% of their electricity needs from Tri-State until 2050 (or in the case of DMEA, until 2040). That requirement to buy wholesale power helps secure the billions of dollars in debt that Tri-State has taken on to build power plants - so when a co-op leaves Tri-State, it owes an exit charge.

DMEA's complaint details how it has sought information from Tri-State about the way it calculated the charge that DMEA would have to pay to end its contract with Tri-State. That figure has not been published because Tri-State considers it confidential, but DMEA's complaint describes it as "dramatically high," and "vastly disproportionate" to the $37 million exit charge for Kit Carson Electric's departure from Tri-State in 2016.  But even without the full details of how Tri-State calculated the exit charge, DMEA argues that it is unreasonable, in part because: "If DMEA's exit charge were proportioned out to all Tri-State cooperatives, the collective exit charge would exceed Tri-State's liabilities by billions of dollars"

The Tri-State board of directors voted in August 2018 against providing more information to DMEA about the way it calculated the exit charge, and also rejected DMEA's appeal of that decision. In response, DMEA requested the involvement of the PUC to help determine a fair exit charge. In that request, DMEA argues that this core cooperative principle of "voluntary and open membership" is "hollow if Tri-State can unilaterally set an exit charge that is unjust, unreasonable and discriminatory."

​That section also points to another key issue raised by the DMEA complaint, relevant for co-op directors, staff, and members throughout Colorado:

​Do Colorado co-ops put their members' interests first, or their power supplier's?
​
"DMEA and our Board of Directors have a fiduciary responsibility to serve the best interests of our members to remain a competitive, reliable and cost-effective co-op,” said DMEA Chief Executive Officer Jasen Bronec. “DMEA’s wholesale power costs from Tri-State have been escalating at an unsustainable rate. Tri-State's annual reports show that average member rates have increased 56 percent since 2005, which is more than double the increase in the Consumer Price Index over the same time period. This stands in stark contrast to the overall energy market in which prices have decreased significantly over the same period."

DMEA is focused on the impacts to its own members of the increased cost the co-op pays to Tri-State. But those costs have also been passed on to the nearly 400,000 co-op members that are served by one of the 18 electric cooperatives in Colorado with long-term contracts to buy power from Tri-State. DMEA raised that point in its effort to appeal the Tri-State board of director's August decision:

​This article was updated to include the Colorado PUC order to Tri-State to "satisfy or answer" DMEA's complaint, and DMEA's Motion for Procedural Schedule and Request for Hearing en Banc.


​DMEA's complaint filed with the Colorado Public Utilities Commission is titled "The Delta-Montrose Electric Association v Tri-State Generation" and is filed under PUC proceeding number 18F-0866E. The full list of documents that DMEA filed with the PUC on December 6 are available below, including the formal complaint and all attachments.

DMEA Formal Complaint

Attachment A TSGT Board Presentation Directors 
Attachment B Taos News Article 1
Attachment C TSGT Press Release
Attachment D TSGT Articles and Bylaws
Attachment E Decision No
Attachment F Decision No
Attachment G Taos News Article 2 
Attachment H DMEA Board Policy 406 Information Requests
Attachment I TSGT Letter Dated May 8, 2018 
Attachment J TSGT Board Decision Dated Aug
Attachment K TSGT Proposed Bylaw Amendments 
Attachment L DMEA Appeal of Board Policy 316
Attachment M TSGT Denial of DMEA Appeal