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This story has been updated to note that Tri-State Generation and Transmission has sought bids to add new renewable resources to its portfolio.
A Colorado electric cooperative could strike the latest blow against a regional power wholesaler facing complaints that it has moved too slowly in its transition to renewable energy.
The Delta-Montrose Electric Association will vote in October on rule changes that would allow another power supplier to help finance its exit from a contract with Tri-State Generation and Transmission.
The association is among Tri-State’s largest customers, and its defection could heighten the risk of a mass exodus as others are forced to cover a larger share of costs for operating the wholesaler’s infrastructure, including its coal-fired power plants.
Delta-Montrose members will decide whether to reorganize the co-op and allow it to issue stock to non-members. “It could be used to make it such that a third-party power supplier could finance an exit amount from our existing contract,” Delta-Montrose CEO Jasen Bronec said of the proposed reorganization.
The co-op board’s “Vote Yes” campaign comes after Delta-Montrose requested and was denied information on Kit Carson Electric Cooperative’s previous buyout from Tri-State, according to several people present at the Tri-State votes.
Tri-State spokesperson Lee Boughey declined to provide details on the votes, citing member privacy.
Bronec said Delta-Montrose’s long-term goal is “energy diversification and flexibility” and that issuing equity could open up the group’s financial options when pursuing local, alternative electricity generation options. Several co-ops have been stymied by Tri-State’s 5 percent cap on local generation, and Tri-State and Delta-Montrose continue to wait on a rehearing from the Federal Energy Regulatory Commission on the matter.
“We’ve been stifled from our ability to have flexibility to develop those resources and make them economical for our membership under the confines of our current contract,” Bronec said.
A new study from the Rocky Mountain Institute found that a shift to new solar and wind generation could save Tri-State members $600 million by 2030.
“The hard question that our study has raised is what to do with all this coal-fired capacity that is no longer in the end customers’ best interest,” said Mark Dyson, a co-author of the report and a principal in the nonprofit’s electricity program.
Tri-State claimed the study’s modeling could not forecast costs, and Boughey said in a statement: “Tri-State already takes advantage of the current low costs of market power and renewable resources. We blend these market opportunities in with our owned and contracted low-cost resources to deliver reliable, affordable power to our members.”
In addition to the pure cost savings, the report noted that Tri-State could face “load defection and loss of competitiveness due to increased customer access to competitive markets” and that a more aggressive transition to renewables could stave that off by decreasing rate increases by 30 to 60 percent.
Several other large co-ops purchasing electricity from Tri-State have expressed dissatisfaction with the G&T. John Parker is the CEO of United Power, the largest co-op tied to Tri-State, and he said his organization is exploring alternatives to the G&T but is still far from making any decision on exiting.
“I’ve heard some concerns that, if enough of us big [co-ops] leave, the smaller guys would be left with a whole bunch of fixed costs that they’d have to cover, and that’s a legitimate concern. I can’t fault them for thinking that way,” Parker said.
A pivot by larger customers could also imperil Tri-State’s ability to pay for the legally mandated cleanup of its coal mines.
Guzman Energy Group, the company that helped finance Kit Carson’s exit from Tri-State, announced in August that it had raised $130 million to grow its presence in the West. This has led to speculation from observers such as Dyson that Guzman or other companies might facilitate further buyouts.
The Colorado Public Utilities Commission recently voted to allow Xcel Energy to significantly increase its level of renewables and retire coal assets after gaining attention for receiving bids for cheap, new renewables that surprised many.
The Rocky Mountain Institute’s report also noted that, with a less favorable federal tax environment forthcoming, “near-term procurement of wind and solar can best take advantage of current low pricing, low interest rates, and tax incentives.”
In June, Tri-State called for bids for new renewable resources to add to its portfolio. The G&T will only consider proposals for generation of at least 30,000 megawatt-hours annually.
“There seems to be a real opportunity here at the G&T level to move at scale to lower cost resource,” Dyson said.
At Delta-Montrose, Bronec said he believes the reorganization will handily win the member vote scheduled for a special meeting on October 16. With the tally expected to be announced by the end of that month, another one of Tri-State’s largest co-ops could be a step closer to financing an exit.