Major co-op supports Biden coal debt relief proposal that NRECA has sought to undermine

By Joe Smyth | [email protected] | @joesmyth

The Biden administration, rural advocacy and environmental groups, and one of the largest cooperative power suppliers in the country are discussing proposals that could help electric cooperatives transition from coal to clean energy and avoid rate increases in rural America.
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But the National Rural Electric Cooperative Association (NRECA), the national trade association for electric cooperatives, has tried to stop its member utilities from working with environmental groups on the proposal, instead criticizing President Biden’s goal of decarbonizing the power sector by 2035. And although the coal debt relief proposal is directly targeted to benefit NRECA’s member utilities, the trade association made no mention of it in its response to the American Jobs Plan, nor in an article on its website titled “Biden’s Infrastructure Plan: What Co-ops Need to Know.”

A spokesperson for NRECA said: “There are not yet any details from the administration on this proposal so we have taken no position on it.” But according to the CEO of Tri-State Generation and Transmission Association, the White House is developing those details right now, with major implications for generation and transmission associations, electric cooperatives, and electric ratepayers across the country.

Biden administration and rural advocacy groups support co-op coal debt relief

The Biden administration proposed including a program to help electric cooperatives replace coal plants with clean energy in the American Jobs Plan. A White House fact sheet titled “How the American Jobs Plan Will Create Jobs in Rural America,” included:

As part of a nationwide plan to modernize our power infrastructure, the President’s proposal will invest $10 billion to partner with rural electric cooperatives that are eager to benefit from low-cost clean energy, by retiring expensive and polluting power plants and replacing them with modern systems – improving public health and supporting good jobs at the same time.

In February, rural advocacy groups wrote to federal policymakers to urge support for measures that would benefit rural communities by leveraging the federal government’s longstanding involvement with the electric cooperative sector, including a loan forgiveness program for electric cooperatives with conditions that “would facilitate the retirement of all coal plants currently in operation and potentially all outstanding electric cooperative debt in exchange for new investment in clean energy, distributed energy resources, energy efficiency, high-speed broadband, storage, and electric transportation with new loans at U.S. Treasury rates.”

Groups that signed the letter include Appalachian Voices, Partnership for Southern Equity, Western Organization of Resource Councils, CURE Minnesota, Kentuckians For The Commonwealth and Renew Missouri, among others.

A 2019 report from the Center for Rural Affairs, CURE and WeOwnIt explored solutions to the coal debt problem in rural America, and national climate policy groups such as Evergreen Action and the Center for American Progress later supported the idea. Most electric cooperatives purchase wholesale power from generation and transmission associations, which remain more reliant on coal than the rest of the U.S. power sector. Electric cooperatives and generation and transmission associations borrowed money to build coal plants through the U.S. Department of Agriculture’s Rural Utilities Service, although today many co-ops are also financed through other lenders, such as CoBank, Cooperative Finance Corporation, and major banks.


Tri-State supports co-op coal debt relief

The co-op coal debt relief proposal has also gained support from Tri-State Generation and Transmission Association, a power supplier for electric cooperatives in Colorado, Wyoming, New Mexico, and Nebraska, that plans to replace some of its coal plants with new renewable energy projects. Tri-State is the third largest generation and transmission association by annual revenue, according to the National Cooperative Bank’s latest annual report.

In an interview with the Energy and Policy Institute, Tri-State CEO Duane Highley said that he recently discussed the proposal with senior White House officials who are working to develop the details of a co-op coal debt relief program. Highley also said that over the last week, other generation and transmission associations have indicated their support for the proposal.

A Tri-State white paper outlines the power supplier’s stranded assets challenge and proposed solutions, including the Biden administration’s proposed $10 billion investment to help electric cooperatives that replace coal plants with clean energy.

The Tri-State white paper also notes that past investments by many electric cooperatives “were predominantly made in coal facilities, because many cooperatives and G&Ts were quickly expanding around the time of the 1970s energy crisis, when it was against federal law to build oil or gas-powered electric generating facilities.”

An NRECA presentation at an industry conference this year also highlighted how most of the coal plants owned by electric cooperatives were built during a time when federal policy favored the construction of coal plants instead of gas plants, following the oil embargo shock and 1978 Fuel Use Act.

Tri-State has lost two of its member cooperatives that sought cleaner and cheaper power supplies, and other co-ops are also considering leaving. Basin Electric, the largest generation and transmission association, is also facing potential defections from member co-ops and pressure from insurance companies and lenders over its reliance on coal.


NRECA opposed Tri-State's work on coal debt relief

While Tri-State has worked with the Sierra Club on the co-op coal debt relief proposal, NRECA has sought to disrupt that collaboration. During Tri-State’s monthly board meeting on April 7, Tri-State CEO Duane Highley notified the Tri-State board of directors that NRECA was upset with Tri-State because of its efforts on the proposal.

“We’d really like to see NRECA help us out and put some of their weight behind these requests, instead of asking us to not pursue these requests,” Highley explained.

On the same call, Tri-State Vice President of Policy and Compliance Barbara Walz said that Tri-State staff calculated that one of the proposals under discussion, which would offer $500/kW to co-ops that replace coal units over the next five years with clean energy, could lead to a 3% rate decrease for Tri-State member co-ops.

Tri-State Chief Financial Officer Pat Bridges noted that the Biden administration had recently asked NRECA and generation and transmission associations for details about their debt and the book value of their coal and gas plants, to inform the development of the debt relief proposal.

Tri-State board members expressed support for Tri-State staff’s efforts, despite NRECA’s opposition.
“If there’s a potential rate savings of 2, 3%, that’s huge,” said Tri-State board President Rick Gordon.
“You have to understand that we might be ruffling some NRECA feathers,” said Highley.

“I realize that, but it wouldn’t be the first time and probably won’t be the last time,” Gordon responded.

Tri-State began allowing co-op members to attend board meetings after Duane Highley became CEO, and last week Colorado Governor Jared Polis signed a new state law that requires Tri-State to open its meetings to the public, as other electric cooperatives in the state had been required to do for years.

crossposted from Energy and Policy Institute


Further Reading:

Rural Power Campaign

Tri-State white paper: The Challenge of Stranded Coal Assets for Tri-State Generation and Transmission Cooperative and Proposed Solutions

InsideClimate News: A Legacy of the New Deal, Electric Cooperatives Struggle to Democratize and Make a Green Transition

Rural America could power a renewable economy – but first we need to solve coal debt​

The Daily Yonder: Rural Electric Cooperatives on a Bumpy Road to Renewable Energy