By Joe Smyth | email@example.com | @joesmyth
United Power, the largest electric cooperative that buys power from Tri-State Generation and Transmission Association, is seeking changes to Tri-State's bylaws that would give more flexibility to United and other co-ops to purchase power from other providers.
In letters sent last week to the other electric cooperatives that buy power from Tri-State, United Power board president James Vigesaa wrote that "the Board members and management of United Power have grave concerns about key elements of Tri-State’s key generation products and services," including Tri-State's reluctance to embrace renewable energy and the high cost of power it sells to member co-ops. A United Power representative said that letters were sent to the board presidents and general managers of each of the 42 other Tri-State member co-ops.
Other electric cooperatives in Colorado and New Mexico have noted similar concerns about the high cost and heavy reliance on coal of the power they purchase from Tri-State, and have responded in a variety of ways. In September, Poudre Valley Electric Association urged Tri-State to study if adjusting its fuel mix could lower costs, as reports from Rocky Mountain Institute and Moody's Investors Service have found. Delta-Montrose Electric Association is pursuing an end to its contract with Tri-State, as Kit Carson Electric did in 2016. La Plata Electric Association is studying its options, and last month contracted with three consulting firms to analyze its contract with Tri-State and other power supply options.
United Power's letter suggests another approach: instead of only allowing all-requirements contracts, which require each co-op to purchase 95% of its power needs from Tri-State, United Power's proposal would "amend the Tri-State bylaws to include a partial requirements membership relationship."
A changing relationship between co-ops and generation and transmission associations
Both the letters from United Power and the resolution from Poudre Valley Electric Association describe the historical relationship between co-ops and Tri-State as mutually beneficial. But they also highlight how new realities in the utility industry have changed those dynamics and undermined what United Power calls "increasingly outmoded G&T business models."
A top concern is the relatively high cost of power that co-ops purchase from Tri-State. United Power explains that it would pay 28.5% less if it purchased wholesale power from Xcel Energy instead of Tri-State. United Power must pass those higher costs on to its members, in the form of higher electricity rates. In the past, that would simply be part of the cost of doing business, but today customers have many more options to reduce the amount of electricity they use, such as energy efficiency measures and on-site renewable energy projects. And since United Power's service territory neighbors that of Xcel, the co-op faces higher risks of losing major customers that could choose to relocate their operations in order to reduce their electricity costs.
Another serious concern for United Power is meeting the growing demands from companies for more renewable energy:
At the Colorado Rural Electric Association Energy Innovations Summit in October, hundreds of co-op board directors and staff heard more about the declining importance of generation and transmission associations. In addition to highlighting the implications of an eroding monopoly, Steve Collier said that "if we didn’t already have a G&T, we might not form one."
Steve Collier, Director of Smart Grid Strategies at Milsoft Utility Solutions, at minute 34:04:
I mean really, where is your energy coming from? Are you generating it? No, you’re buying it at wholesale and delivering it at retail, using your wires. What would prevent you from doing that, not necessarily, from the sources that you’re buying from now?
Tri-State, just keep your seats.
I got to tell you that in the world that we live in today, with workable wholesale power markets and the advent of distributed energy resources, if we didn’t already have a G&T, we might not form one, to do what we formed them to do originally.
I still believe in joint action, and we have to do joint action. But if we had this to do, knowing what was coming, we might have changed what we did a little bit. And so it’s an issue that we’re going to have to deal with, because we entered into those contracts and plants were built as a result of that, and it gives us a bit of a cost disadvantage as we move forward.
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