Thursday, August 22, 2019

Between a 20th-century rock and 21st-century hard places —History of the GCEA, Part 3—

by Keriann Conroy and George Sibley

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

In 1981, the Gunnison County Electric Association took a lead role in facing the future, becoming the first electric co-operative in Colorado (third in the nation) to institute an Energy Conservation Loan Program, making money available for local efforts to save electricity rather than using more of it—an act of courage at the time; most suppliers of electricity still saw conservation as a conundrum, not denying its value but seeing it as a revenue loss while system costs remained constant or increased.

That move was also counter to the rapid expansion of their principal power supplier, Colorado-Ute Generation and Transmission, whose rapid expansion in the 1980s had led to bankruptcy in 1989, as was covered in last week’s story. In the subsequent division of Colorado-Ute’s power assets and customers—a process that took until 1992—the GCEA was one of 10 former Colorado-Ute co-ops that opted to cast their destiny with much larger Tri-State G&T. The 10 newcomers brought the Tri-State total service area to 43 co-ops in Colorado, Nebraska, New Mexico and Wyoming. The other four co-ops went to the Public Service Company of Colorado, the parent company of what is now the Xcel empire.

One of Tri-State’s first acts locally was an attempt to modify the 1950s GCEA special rate for the city of Gunnison to keep its diesel generators on standby in the event of a loss of grid power, which had never occurred. Tri-State saw no need for continuing to subsidize the city users.

Rather than foregoing that subsidy from the other GCEA customers, the city went shopping on the electric grid in 1993, finding cheaper rates with the Municipal Energy Agency of Nebraska (MEAN), where stable or declining populations had resulted in excess capacity in Nebraska. It cost city users $501,076 to buy out of their contract (1993 to 1995) with the GCEA ($201,076) and Tri-State ($300,000), but city manager Bill Filson promised they would save money in the long run. MEAN financed the buy-out with an interest-free loan.

GCEA general manager Jim Somrak said of this action, “We were stuck in the middle—caught between the power supplier and the customer. We were a conduit, trying to act in the roles of both peacemaker and enforcer. We’re pleased to be able to resolve it, but not pleased in the resolution the way it came out.”

Since the split, both valley utilities have remained with their separate power suppliers, Tri-State G&T and MEAN. Serving the city, MEAN is publicly owned and headquartered in Lincoln, Nebraska. Like many power suppliers today, MEAN predominantly relies on coal to generate electricity, but the energy landscape is changing rapidly. Presently, Tri-State serves 18 Colorado cooperatives, including the GCEA.

Within the contracts for all municipalities served by MEAN and all cooperatives served by Tri-State exist strict limitations to “homegrown” power. Tri-State requires its members to purchase 95 percent of their electricity from the G&T, allotting a mere 5 percent for local projects. For municipalities served by MEAN, this number dwindles down to 2 percent.

The GCEA has yet to approach its 5 percent generation cap, but four Colorado cooperatives have, and four others are rapidly approaching the mark. In recent years, the sharp decline in prices for renewable energy development has sparked conflict over these caps and generated disputes among Tri-State’s co-ops.

But in the early 2000s, Tri-State instead seemed to double down on coal power, forging ahead with plans to build new coal-fired capacity in western Kansas. To cover this new cost, Tri-State began renegotiating its contracts with its member cooperatives, asking them to extend to 2050—with the same 5 percent limit on local production.

In 2016, Kit Carson Electric in Taos, N.M. exited its contract with Tri-State, paying $37 million and entering a short-term contract with Guzman Energy, a regional full-service wholesale power provider. Delta-Montrose Electric Association followed soon after, challenging Tri-State at the Colorado Public Utilities Commission to determine a “fair, just and reasonable” fee for DMEA to exit its contract with the G&T.

The Colorado PUC has agreed to do so, and decided to extend its oversight over the G&T, by requiring Tri-State to transition away from coal toward increased renewable generation. This, in tandem with Colorado’s recent legislation to develop a Just Transition Office to ease this transition for workers, represents an important step in Colorado to creating a new energy future. Yet, the winds of change are not expected to blow smoothly over coal-fired communities, Gunnison County included.

The GCEA does not rely exclusively on coal. Tri-State purchases power generated from the Blue Mesa and Morrow Point dams, and others, as part of its contract with the Western Area Power Administration. WAPA accounts for nearly 15 percent of Tri-State’s total generation, but because most of these hydroelectric projects were built in the 1960s and 70s, they do not represent the G&T’s future planning skills. Rather, WAPA projects further demonstrate the challenge of being between a 20th century rock and 21st century hard places: Large hydro projects have been excluded from Colorado renewable standards because of their dependence on an increasingly erratic water supply.

Tri-State assures its members that renewable energy accounts for 30 percent of its fuel portfolio, thus surpassing the Colorado’s requirement for the G&T to generate 20 percent from renewables by 2020, but ambiguity about the hydro component compromises the company’s claim. Meanwhile, its members have become increasingly aware of the rising costs associated with coal dependence and the increasingly affordable renewable development. A recent report released from Gunnison’s Sustainable Development Strategies Group found similar ambiguities and reluctance to embrace renewables in future planning from the city of Gunnison’s power supplier, MEAN.

Both the Gunnison County Electric Association and the city of Gunnison have begun to experience pressure from some of their users for a 21st-century electric system that will take advantage of local resources while reducing the valley’s carbon footprint—and both utilities have taken positive steps toward addressing those pressures locally. But both also find themselves contractually bound in weak-board/strong-management situations—not unlike the one that led to Colorado-Ute’s downfall in the 1980s: navigating the future between a 20th-century rock and the 21st century’s hard places.

Next week: Where do we go from here?

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