La Plata Electric concerned Tri-State debt will lead to higher rates

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

One of Colorado's largest electric cooperatives is concerned that it could face higher rates in the future from Tri-State Generation and Transmission Association, because the wholesale power provider isn't paying down over a billion dollars of its debt, even as costs increase for its aging coal plants.

​In a letter to Tri-State CEO Mike McInnes, La Plata Electric Association CEO Mike Dreyspring raised concerns that Tri-State's debt could lead to increased future rates for the co-op and its members. In particular, the letter notes La Plata Electric's concerns about a portion of Tri-State's debt "for which Tri-State is receiving through rates principal and interest repayment, but is not applying the principal to reduce that debt."

According to its 2017 10-K, Tri-State owes creditors over $3 billion, of which $1.25 billion is "bulleted" debt, or debt that is due to be repaid in a lump sum at the end of its term rather than paid off in regular installments. Tri-State executives have said that Tri-State is not paying down the principal on its bulleted debt, according to Dreyspring.

Tri-State executives met with La Plata Electric staff and directors at a meeting in December to discuss the debt concerns, but the letter notes that "LPEA does not feel [Tri-State] responded to these points, questions, and concerns" at that meeting. Dreyspring said that Tri-State also has not provided an adequate answer to its December 21 letter.

Financial analysts' reports also show that Tri-State is not paying down its $1.25 billion in bulleted debt.

An April 2016 Standard & Poor's report noted that "The use of significant bullet maturities defers to later years a sizable portion of the utility’s financial burden." It also explains how Tri-State's transactions in 2010 and 2014 had "reduced debt service for about 10 years," and "deferred about 30% of principal to later years through the use of bullet maturities."

Another Standard & Poor's report from September 2017 notes that "Tri-State expects that lower near-term debt service will reduce rate pressures," and "appease members that have challenged recent years' rate adjustments."

That report also notes that Tri-State's debt "includes $1.25 billion of bulleted maturities. The balloon payments are due in 2024, 2040, 2044, and 2046; lack sinking funds, and defer to later years a sizable portion of the utility's financial burden." Sinking funds refer to funds set aside to pay back the debt.

La Plata Electric is "disappointed with the inflexibility we experience with Tri-State."
The letter to Tri-State from La Plata Electric also brought up "Tri-State's current governance structure and the lack of options presented to its member systems."

Other large electric cooperatives in Colorado have also pressed Tri-State for more flexibility to pursue local renewable energy projects and other opportunities. Tri-State's largest member co-op, United Power, invited other co-ops to discuss solutions to "increasingly outmoded G&T business models," and explained at a meeting last month how Tri-State policies were turning away large customers.

Tri-State's second largest member co-op, Poudre Valley Electric passed a resolution that "requests 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."

Delta-Montrose Electric is seeking to end its contract with Tri-State, in order to pursue more local renewable energy development and cheaper wholesale power rates.

La Plata Electric is Tri-State's third largest member co-op, and last year it formed a power supply committee to study the possibility of switching to a different power supplier.

​In the letter, La Plata Electric says "we're disappointed with the inflexibility we experience with Tri-State," and explains that "while Tri-State commissions rates and contract committees to address member related issues, those processes have produced little to nothing in the way of flexibility that LPEA has sought for increased local renewable generation."

Further Reading: 

Colorado Public Utilities Commission asserts jurisdiction over Tri-State​

More Colorado co-ops announce clean energy goals
​
United Power says Tri-State policies are turning away large customers

United Power seeks solutions to "increasingly outmoded G&T business models"

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