Tri-State explores FERC rate regulation to limit state oversight

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

Tri-State Generation and Transmission Association is considering becoming rate regulated by the Federal Energy Regulatory Commission (FERC), in order to limit the oversight of state regulators.

According to an issue brief that Tri-State circulated to member co-ops last week, "FERC regulation would pre-empt individual state rate regulation for generation rates, transmission rates, rate design, buyout disputes and all other rate related matters."

​The issue brief shows that Tri-State believes it can choose its preferred regulator - and even claims that Tri-State could also simply remove itself from FERC regulation in the future if it wants to.

The issue brief makes clear that if Tri-State were to become rate regulated by FERC, "States could still regulate facilities or resource planning." Tri-State would still have to submit its resource plan for approval by the Colorado Public Utilities Commission, as clarified by state legislation signed by Colorado Governor Jared Polis last month.

FERC rate regulation also would not preempt new state climate and clean energy policies that will impact 80% of Tri-State's electricity sales, including the expansion of the renewable energy standard in New Mexico, and Colorado's new climate policy requiring statewide carbon pollution reductions and encouraging electric utilities to reduce emissions 80% by 2030.

But in other areas, FERC rate regulation would be a major change for Tri-State, and its 43 member electric cooperatives in Colorado, New Mexico, Wyoming, and Nebraska. The issue brief mentions some of the concerns of FERC regulation:

With FERC regulation, Tri-State would be fully rate-regulated on generation and transmission rates, securities approvals, interlocking directorates, the sale of assets, and mergers and acquisitions. There would also be new costs, including an annual fee (approximately $1.3 million), litigation costs and increased staff. The future nature of FERC regulation is uncertain.​

​But the issue brief also highlights the potential benefits to Tri-State of FERC rate regulation, including that it could be seen as credit-positive by rating agencies, and an assertion that "Tri-State would always have the option of leaving FERC regulation."

In an email, Delta-Montrose Electric Association CEO Jasen Bronec said:

"Tri-State claims to be able to hop in and out of FERC jurisdiction at its own convenience. Not only does this make their membership a pawn in a regulatory shopping game, it contradicts the purpose of regulatory bodies, which were designed to create certainty and protect consumers from such abuse of power.”

FERC rate regulation could also impact the dispute between Tri-State and Delta-Montrose Electric Association, by eliminating state jurisdiction over buyouts. The Colorado Public Utilities Commission ruled in February 2019 that it has jurisdiction to determine how much Delta-Montrose Electric should pay to end its contract with Tri-State, and last week set a date for an evidentiary hearing in the case for August 12-16.

Discussions between Tri-State and FERC may already be underway. During a conference in Denver this week, a Tri-State staff member said that Tri-State CEO Duane Highley was unable to attend as scheduled, because he was meeting with FERC.

Which generation and transmission associations are rate regulated by FERC?

The issue brief Tri-State distributed to member co-ops provides some information about FERC rate regulation of other generation and transmission associations:

A FERC spokesperson was unable this week to provide a current list of generation and transmission associations that are rate regulated by FERC.

But testimony by FERC's general counsel during a 2008 congressional hearing did include a list of cooperative entities that were rate regulated by FERC at that time. During that US House of Representatives Agriculture Committee hearing to review electricity reliability in rural America, FERC's general counsel noted:

For the handful of electric cooperatives that no longer have REA financing and that sell four million or more megawatt hours of electricity per year, the Commission must find the rates, terms and conditions of their wholesale power sales and transmission in interstate commerce to be just, reasonable and not unduly discriminatory or preferential, and their rate schedules or tariff authorizations must be on file at FERC. These electric cooperatives are also subject to regulation of some of their corporate activities. As noted above, only 15 of the over 900 electric cooperatives in the United States are subject to regulation by the Commission as public utilities under the FPA.

According to a footnote in that 2008 testimony, those 15 entities were:

ACES Power Marketing LLC; American Cooperative Services Inc.; Continental Electric Cooperative Services, Inc.; Cooperative Energy Incorporated; Energy Cooperative of New York, Inc.; Energy Cooperative of PA, Inc.; Georgia Energy Cooperative; Golden Spread Electric Cooperative, Inc.; GS Electric Generation Cooperative; Newcorp Resources Electric Cooperative, Inc.; Old Dominion Electric Cooperative, Inc.; PNGC Power; Rainbow Energy Marketing Corp.; Wabash Valley Power Assoc.; and, Wolverine Power Supply Cooperative.

Most of those 15 are power marketers or cooperatives that provide services to member cooperatives.
Five are generation and transmission associations: 

- Golden Spread Electric Cooperative, with member co-ops in Texas and Oklahoma
- Old Dominion Electric Cooperative, with member co-ops in Virginia, Maryland, and Delaware
- PNGC Power, with member co-ops in Oregon, Washington, Idaho, Montana, Utah, Nevada and Wyoming
- Wabash Valley Power Association, with member co-ops in Indiana, Illinois, and Missouri
- Wolverine Power Supply Cooperative, with member co-ops in Michigan, as well as a power marketer
​

Further reading:

Tri-State rate regulation issue brief
​
Congressional hearing in 2008 to review electricity reliability in rural America 
​
Colorado Public Utilities Commission will oversee Tri-State resource planning

Colorado Public Utilities Commission asserts jurisdiction over Tri-State​