Thursday, April 2, 2020

Seduced by the grid and ‘power too cheap to meter’ … History of the GCEA, Part 2

by Keriann Conroy and George Sibley

This is the second in a four-part history of electricity in the Upper Gunnison Valley, celebrating the 80th anniversary of the Gunnison County Electric Association.

In the aftermath of WWII, electricity consumption in the U.S. skyrocketed through the 1950s, and with more and more generators being built everywhere, they began to link up into “grids” laced together by high-voltage transmission lines delivering power to local distribution systems. A “grid” is best understood as a large lake of electricity into which generators pour large bucketsful of power while many electric users dip out small bucketsful. As user demand peaks and ebbs at different times, the generators power either up or down to try to keep the lake full but not overfull.

The Gunnison County Electric Association, however, did not enjoy this surge in grid development immediately. The GCEA’s relationship with the city of Gunnison remained expensive and resentful, and the search for a reliable and affordable wholesale source of power continued. Moreover, in 1945 the state assembly passed a Colorado Public Utilities Act that allowed large, for-profit utilities preference in rural service territory with significant customers, such as mines, leaving cooperative utilities with under-populated agriculture lands.

Immediately following the war, the Bureau of Reclamation forcefully pushed for mandates to build more dams and reservoirs for power production and saw a market in isolated rural communities with REA cooperatives. Most of Congress still supported the bureau agenda and was willing to declare “power emergencies” and fund lines to such areas. Thus, a line was run all the way from the Green Mountain Reservoir, near Kremmling, down to Chaffee County on the East Slope. The bureau promised the GCEA that they could get the “power emergency” extended to cover another line over Old Monarch Pass.

But the bureau could apply the designation only if everyone in the area needing power agreed, and the city of Gunnison resisted giving up its revenue from the GCEA customers. However, Gunnison eventually joined the GCEA under the condition that the city would receive a fee to keep its diesel generators ready as backup in case of emergency.

Thus, in 1951, the “power emergency” was designated and the bureau built a line over Old Monarch Pass into Gunnison, and the GCEA joined the regional grid, abandoning its local-generation plans at Peanut Lake. The Upper Gunnison inhabitants quickly joined in the electrification surge, with power use in the valley doubling every three to five years, from the end of the war through the 1950s. More lines were built, to Gothic for RMBL, into Taylor Canyon and down to Lake City.

Nationally, nuclear fission power plants were being built, and research into nuclear fusion led to predictions—still unfulfilled—of “electricity too cheap to meter” by the end of the century. The nation, however, continued to place most of its bets on coal—abundant in western Colorado.

In 1941, four co-ops west and south of the GCEA organized the Colorado-Ute Generation and Transmission cooperative, anticipating future needs; in 1955 the Rural Electrification Administration lent them $10.5 million to build a coal-fired power plant in Nucla. The plant was finally completed in 1959.

The GCEA joined Colorado-Ute in 1962, with the Crested Butte Ski Area coming on line, promising increased commercial and residential growth.

For 30 years, Colorado-Ute served as a reliable electricity supplier to the 200,000 members in its 14 co-ops. But in the 1970s and 1980s the G&T began to invest heavily in new generating capacity, in anticipation of an oil-shale boom and other projected growth that failed to materialize. By the late 1980s, with five coal-fired and three hydro plants, Colorado-Ute had accumulated more than $700 million in debt.

To market its unused capacity, Colorado-Ute decreased rates and reached out beyond its 14 co-ops for customers, providing some service for 49 of Colorado’s 63 counties and envisioning service for the entire Southwest. But because electricity demand was dwindling, the G&T inevitably spiraled into a crisis, causing a need finally for large rate increases instead. The crisis came after a long and arduous appeal process within the Colorado Public Utilities Commission for Colorado-Ute to establish a flat rate structure. The G&T lobbied through the state legislature, ignoring PUC disapproval, but when Colorado-Ute needed a rate increase to stall bankruptcy, it was the PUC it was required to turn to for help.

The PUC was not the only entity Colorado-Ute had alienated. The G&T upset the Rural Electrification Administration by pushing away from traditional cooperative financing toward private capital markets and ignoring REA warnings about Colorado-Ute’s risky rate policies. Poor relationships paired with bad business dealings led to collapse. In 1989, Colorado-Ute officially filed for bankruptcy, followed by its CEO stepping down and leaving behind an ill-equipped management board.

Bankruptcy trustee and former chief executive officer of Colorado-Ute Electric Association Victor Palmieri later said the success of Colorado-Ute’s growth-oriented managers “naturally reinforced their esteem” and “led to a strong manager, weak board corporate culture,” with top management making some unwise gambles on regional development that were rubber-stamped by the board.

In 1991, PacifiCorp, the Public Service Company of Colorado and Tri-State Generation & Transmission Association took over operations of Colorado-Ute, dividing the generating and transmission assets, and allowing the 14 co-ops to decide which of the three entities they would hook up with. The GCEA chose to go with Tri-State Generation & Transmission Association, another “co-op created by co-ops,” but already serving more than 30 co-ops, mostly on the East Slope and in the fast-growing Front Range area. The GCEA is now one relatively small service provider among 43 member co-ops on the Tri-State board.

After the war toppled the GCEA’s effort to generate its own power, the co-op embraced the convenience of the grid. But a lesson to be learned from the collapse of Colorado-Ute is that the grid has pitfalls of its own, and a great deal can be surrendered to strong top-down management.

Next Week: The valley divides again, and public concern over the shape of the future appears.

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