La Plata Electric Association joins contract buyout lawsuit in Adams County
La Plata Electric Association has joined a civil lawsuit initially filed by United Power of Brighton claiming Tri-State Generation and Transmission broke Colorado law by adding three nonutility members so it would become federally regulated.
The lawsuit, filed in November in state District Court of Adams County, is associated with United Power’s effort to escape long-term power supply contracts with Tri-State, and LPEA, too, is exploring following the same path.
United Power, with 49,945 customers, is Tri-State’s largest member. Tri-State has 43 rural electric cooperative members, including LPEA with about 34,500 customers.
Both LPEA and United had sought jurisdiction for the methodology to determine buyout costs for their power supply contracts from the Colorado Public Utilities Commission.
However, Tri-State, which had traditionally been regulated by the state, added nonutility members in 2019 – a ranch, a greenhouse and a California natural gas supplier – to its membership. The addition of those members resulted in the Federal Energy Regulatory Commission, the preferred regulatory body of Tri-State, assuming jurisdiction in determining the contract termination formula.
If United Power’s lawsuit succeeds, jurisdiction for determining the contract termination formula would return to the state PUC.
Whether Colorado or federal regulators oversee Tri-State could change the cost of LPEA’s and United Power’s exit by tens of millions of dollars, possibly hundreds of millions of dollars.
LPEA believes leaving Tri-State, which currently provides it with 95% of its power, would allow it to find cheaper electricity on the open market while increasing the amount of locally produced renewable power it can buy, an amount now capped at just above 5% of LPEA’s electrical load.
Tri-State maintains it has loosened rules to allow member cooperatives to buy more renewable power, and LPEA’s effort to end long-term contracts will hurt other Tri-State rural cooperative members that have all agreed to share costs of power generation.
Besides examining a complete buyout of its power supply contract with Tri-State, LPEA is also looking at gaining more flexibility within the contract to purchase more renewable power generated locally and is looking at negotiating a partial contract with Tri-State.
The United Power lawsuit, now joined by LPEA, seeks undo Tri-State’s addition of the nonutility members. The lawsuit claims the expansion violated Tri-State’s own bylaws and contract law of Colorado.
Tri-State is a nonprofit wholesale electricity provider to rural co-op utilities serving 1.2 million consumers in Colorado, New Mexico, Nebraska and Wyoming. It maintains its membership expansion was legal and appropriate, and that being federally regulated is the norm for multistate wholesale power companies.
In November 2020, the PUC ruled that it did not have jurisdiction to determine the contract termination formula; instead, state courts should decide United Power’s complaint that the three nonutility members were added illegally.
In 2016, a smaller Tri-State member, Kit Carson Electric Cooperative in Taos, New Mexico, bought out its contract with Tri-State for $37 million.
In April, Delta-Montrose Electric Association agreed to pay $62.5 million to leave Tri-State. In addition, in a related contract, it agreed to purchase Tri-State transmission assets for $26 million and forfeit $48 million in capital credits. The related contract brought the overall buyout cost to $88.5 million.
parmijo@durangoherald.com