Delta-Montrose and Tri-State reach exit agreement

Tri-State operates three coal-fired generating units at Craig, Colo., one of them in conjunction with other utilities. Photo/Allen Best

Deal sealed for electrical co-op’s exit from Tri-State but the fee unknown 

by Allen Best

MONTROSE, Colo. – Tri-State Generation and Transmission and one of its 43 member co-operatives, Delta-Montrose Electric Association, have come to terms. Delta-Montrose will be leaving the “family,” as Tri-State members are sometimes called, on about May 1, 2020.

What it cost Delta-Montrose to exit its all-requirements contract with Tri-State, however, will remain a secret until then. The figure was redacted in the settlement agreement filed with the Colorado Public Utilities Commission last Friday. The figure can become public after the split occurs next year, according to Virginia Harman, the chief operating officer for Delta-Montrose.

See filing with the PUC: PUC filing attachment 7.19.19

Delta-Montrose will then be supplied by Guzman Energy, although the power purchase agreement has yet to be completed, Harman said.

Guzman also supplies energy to Kit Carson Electrical Cooperative, which is based in Taos, N.M., as well as the small town of Aztec, N.M.

In May, Guzman also revealed it was offering to buy several of Tri-State’s coal plants, close them down, and replace the lost generation from other sources.  See: A small Colorado company sees opportunity in revolutionizing Colorado’s energy supply.

The split reflects a fundamental disagreement over the future of electrical generation and the pace of change that has festered for about 15 years. Those different visions became apparent in about 2005 as Tri-State managers sought to build a major new coal plant near Holcomb, Kan., in partnership with Sunflower Electric.

The utilities were shocked when Kansas denied a permit for the plant, based on the time of the still-novel grounds of its carbon dioxide pollution. When Tri-State finally got its permit for the coal plant in 2017, it had spent nearly $100 million with nothing to show.

See: Twilight of an energy era as supplier of rural co-ops turns back on coal plant

Meanwhile, the electrical world had turned upside down. Wind had become the cheap energy, not coal, and it was being integrated into power supplies effectively. Even solar has become competitive in places.

Among the then-44 member cooperatives, only Kit Carson and Delta-Montrose had refused the 10-year contract extensions to 2050 that Tri-State had wanted to satisfy money markets for long-term loans. Their contracts remained at 2040. The contracts of other member co-ops—including those serving Durango, Telluride, Crested Butte and Winter Park—go until 2050.

Kit Carson was the first to get out. In 2016, assisted by Guzman, it paid the $37 million exit fee required by Tri-State and set out, also with the assistance of Guzman, to develop solar farms in dispersed parts of its service territory in northern New Mexico. It aims to have 100% solar capability by the end of 2022.

See: Is Kit Carson’s renewable goal also the answer to rural America’s woes?

In November 2016, Delta-Montrose informed Tri-State it wanted to buy out its contract, too. It asked for an exit figure. The negotiations did not yield an acceptable number to both, and in December Delta-Montrose asked the Colorado Public Utilities Commission to arbitrate. The PUC agreed over protests by Tri-State that it did have authority. A week was set aside in June, later delayed to begin Aug. 12, for the case.

No figures have ever been publicly revealed by either Tri-State or Delta-Montrose, although a court document filed early in July reported that Tri-State’s price had been reduced 40%.

Meanwhile, Tri-State got approval from its board of directors to seek regulation for rate making by the Federal Energy Regulatory Commission. That could possibly have moved the jurisdiction over the Delta-Montrose exit to Washington. It would not affect review by Colorado, New Mexico or other states in which Tri-State operates of the utility’s resource planning.

Delta-Montrose and Guzman have not completed plans for how the co-operative may develop its local energy resources. The co-op had reached Tri-State’s 5% allowance for local generation by harnessing of fast-moving water in an irrigation conveyance called the South Canal.

For Tri-State’s new chief executive, Duane Highley, the task at hand may be how to discourage more exits by other member co-ops. Tri-State has argued that it moved slowly but is now is in a position to realize much lower prices for renewable energy generation. It is moving forward on both wind and solar projects in eastern Colorado.

Delta-Montrose, with 33,000 members, is among the larger co-ops in Tri-State. But even larger co-ops, who together represent nearly half the electrical load supplied by Tri-State, have expressed dissatisfaction with Tri-State’s slow movement away from coal-fired generation.

In Southwestern Colorado, Durango-based LaPlata Electric recently asked for an exit figure, too.

Along the Front Range of Colorado, United Power, by far the largest-coop, with 91,000 members and booming demand from oil and gas operators north of Denver, has wanted more renewable energy and greater ability to develop its own resources. Poudre Valley has adopted a 80% clean energy goal.

The settlement agreement filed with the PUC says DMEA “shall not assist any other Tri-State member in pursuing withdrawal from Tri-State.” The agreement also says that DMEA and Tri-State agree to not disparage each other.

More than 30% of Tri-State’s generation comes from renewables, mostly from hydropower. This total is little different from that of Xcel Energy. But Xcel in 2017 announced plans to close two of its aging coal plants, leaving it at 55 percent renewable generation in Colorado by 2026.

Tri-State, too, is closing coal plants. A coal plant at Nucla, in southwestern Colorado, west of Telluride, will close early next year, several years earlier than previously scheduled. However, it’s small by coal plant standards, with a nameplate capacity of 104 megawatts, and operates only part time.

A larger reduction is scheduled to occur by 2025 when one of three coal units at Craig, in northwestern Colorado, will be retired. But a Tri-State official, speaking at a beneficial electrification conference in Denver during June, suggested that a second coal plant could also be retired early. That second coal unit is co-owned with other utilities in Colorado and other states, all of whom have indicated plans to hasten their retreats from coal.

Tri-State last week also announced a partnership with former Colorado Gov. Bill Ritter’s Center for the New Energy Economy to facilitate a stakeholder process intended to help define what Tri-State calls a Responsible Energy Plan. See: Tri-State Announces Responsible Energy Plan 20190717

This story was amended to correct several errors, most notably the date when the exit will occur and then also to reflect  Poudre Valley’s 80% renewable goal. 

 

 

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