County wants to ensure Tri-State follows new state regs

GCEA defends its wholesale energy supplier

By Katherine Nettles

As local policymakers examine how to reduce carbon emissions and increase the amount of renewable energy available to local residents, there may be some growing pains (and tension) about clean energy legislation in Colorado and energy providers’ compliance that has a direct effect on the local success.

Colorado’s newly adopted energy legislation aims to reduce carbon emissions in three increments over 30 years and to enforce more energy efficient building practices. Those new energy laws mirror local goals adopted by the Crested Butte Town Council and Gunnison County, but the local governments are asking for more cooperation from large-scale energy provider Tri-State Generation and Transmission Association, Inc. and arguing that without enforceable regulation, local efforts can make only a very small dent.

Tri-State is responding that they are doing what they can and look forward to participating in the changing energy landscape. The local elected officials want to make sure that is the case and not just talk.

Colorado’s goal is to reduce statewide green house gases (GHGs) by 50 percent by 2030 and by 90 percent by 2050, based on baseline measurements from 2005. Major energy providers such as Tri-State—the wholesale power provider for Gunnison County Electric Association (GCEA) and supplier to all areas of Gunnison County except for the city of Gunnison—are newly required to produce an energy resource plan to the state Public Utilities Commission (PUC).

The Tri-State board of directors voted in July to seek rate regulation by the Federal Energy Regulatory Commission (FERC), which some argue could potentially cast confusion on state jurisdiction—particularly on the state’s oversight of wholesale rates and contract issues. Many policy leaders, including Gunnison County officials, viewed this as an effort to bypass the recently passed and stricter state regulations.

The county has taken a hard line on Tri-State Energy for its approach to regulation in recent months. Currently, almost half of Tri-State’s power is estimated to come from coal plants, and 70 percent overall comes from fossil fuels. Tri-State senior manager of corporate communications and public affairs spokesman Lee Boughey says while Tri-State has every intention of complying with state regulations and goals, it has a long way to go to make the transition to greener energy.

“There is a lot moving at the state level with Tri-State,” said Gunnison County sustainable operations director John Cattles. He first gave an overview of the situation to county commissioners on August 20, and discussed what direction to take in commenting to the PUC process.

“There is no way the county is going to make the 20 percent energy reduction happen without Tri-State’s participation,” Cattles said of Gunnison County’s adopted goals to reduce GHG by 20 percent. “It would be impossible without some changes. There is no path to get to there otherwise. The electric sector is just such a huge piece. I think our 20 percent is a moderate goal, considering what others are doing. The county’s greenhouse gas reduction goals are directly affected by Tri-State’s choices.”

The Colorado PUC issued a protest of Tri-State’s request to FERC, and Gunnison County joined several other entities in voicing its objection as well. Gunnison County commissioners signed a letter to the PUC on October 1 objecting to Tri-State’s attempt to seek federal regulation, as well as other aspects to its co-op model structure with GCEA and its other co-op members that span four states.

The letter stated, “Gunnison County supports the regulatory oversight responsibility of the Colorado PUC to regulate monopolized utilities, for the benefit and trust of the citizens of Colorado.” It went on to state that “dual oversight by FERC and the Colorado PUC will inevitably lead to conflict; as rates and resources are unavoidable related. Since FERC authority trumps state regulation, the process may be exploited to delay, confuse, and challenge a PUC-approved resource plan.”

Cattles said a lot of comments to Tri-State were really technical ones. For the purposes of this board, he said, he thought it best to take “a higher level view,” describing Tri-State’s dual-board representation as one that compels member co-op representatives to vote in the best interest of Tri-State rather than their co-op board or membership. “The representation of not only individual rate payers but up the tier is really broken,” he said.

Tri-State’s request to FERC was denied last week, but without prejudice, meaning the energy supplier can reapply. Tri-State is now working quickly to re-format its request and re-apply.

“FERC rejected our filings based on form and filing, not on the merit of the filings themselves. So they asked us to file in different formats. We are moving forward to file that information. They let us know we will need to file in a very timely manner, so we are moving expeditiously,” said Tri-State’s Boughey in a phone call Tuesday.

Boughey maintains that Tri-State will comply with all the state’s new resource planning requirements, renewable source increases and carbon reductions requirements, and says Tri-State only seeking federal regulation to be in compliance with rate standards as well.

When asked if the attempt to secure federal jurisdiction is an effort to avoid state regulations, Boughey replied, “No, not at all. That’s a misnomer out there. Tristate is jurisdictional to the FERC for our rate regulation, but all other regulations are at the state level—which we will comply with fully.”

The reason Tri-State says it is seeking FERC jurisdiction is to consolidate its rate regulations across the four states it supplies. Boughey later provided a statement:

“Under federal law, wholesale power suppliers are rate regulated by [FERC]. In Colorado, the FERC has jurisdiction over the wholesale rates of Xcel Energy and Black Hills Energy, and now Tri-State. In fact, with FERC regulation of our wholesale rates, Tri-State will be fully rate regulated for the first time. Tri-State is owned and governed by our members across four states… a single wholesale rate regulator, rather than differing rate regulation in each state, ensures uniform and predictable wholesale power rates for all members within our cooperative.”

Ultimately, Boughey explains, FERC rate regulation would avoid potential confusion and inequity of having differing rate regulations in each state.

“There’s a lot of things that are happening at the legislative front. And there is more with our own initiatives,” he said.

Tri-State wants a cleaner power supply to add to its renewable energy portfolio and help transition its resources, said Boughey. He pointed out that Tri-State announced in July the development of an energy plan as required. “We are going through an intensive plan to look at new state requirements, and to understand how to transition our resources and keep costs down. There is a lot of work to do to look at the resources that we have and the timelines for the transition,” he concluded. “The good news is that Tri-State is in a strong financial position. We are excited for the changes and ready to act.”

GCEA did not weigh in on the process prior to the county sending the letter, and Cattles said he had not yet reached out to the co-op back in August.

Commissioner Roland Mason said at the commissioner meeting on October 15 that he had heard from Bart Laemmel, president of the GCEA’s board of directors, that the GCEA would like to be in more open conversation with the county about their letter on Tri-State.

GCEA chief executive officer Mike McBride spoke to the Crested Butte News by phone that same day to say the co-op is not entirely in alignment with the county’s stance.

“We’ve expressed an interest in working with the county to find solutions, and hopefully we will have that opportunity. I don’t think we necessarily have the same concerns they expressed in their letter.”

McBride said, for instance, that he thinks the co-op business model is a lot stronger than the commissioner letter suggests. The commissioner letter stated that the current structure gives inordinate power to smaller co-ops, particularly those out of state.

“GCEA is an elected board, so it is full member representation on the board. But they also elect one of their members to sit on the Tri-State board. We do have a local, elected member on the board. I think that’s superior,” he said.

Mark Daily is the GCEA’s elected board member who sits on Tri-State’s board of directors.

When discussing accountability to the consumer, McBride said he believes FERC would regulate wholesale rates and PUC would regulate retail rates.

“We’re not aware of any instance where FERC has interfered with any regulation of retail rates. So we expect the same,” he said.

As for reduction targets, and renewable energy mandates, he said, “We haven’t seen them undermine it with other utilities.”

While the county’s letter concluded that dual oversight was problematic, McBride said, “I think we can look at how that dual oversight has been in place with other utilities for a long time and is working.

“On a positive note,” he added, “We have no concern with the request that the PUC have oversight with the resource planning. Between Mark Daily and me, we spend a lot of time at those Tri-State meetings… We are pretty close to the organization. I think that Tri-State is making significant progress.”

Colorado’s PUC held a public hearing to consider rules for regulating Tri-State’s resource planning on October 15, and extended its comment period to November 15.

Sierra Club spokesperson Sumer Shaikh stated that the hearing included significant input from co-op members in support of the PUC rulemaking.

“Tri-State has historically clung to fossil fuels to provide power to their co-ops, despite the ever-dropping prices of clean, renewable energy. Additionally, Colorado’s PUC has never extended its oversight to Tri-State’s long-term energy planning; this rule-making will ensure Tri-State is held accountable for providing affordable, reliable energy to its co-ops.

“In addition to the 350 written comments submitted by co-op member-owners who were not able to attend, five counties and six cities in Colorado asked that a new rulemaking provide a pathway to clean energy and flexible contracts for Tri-State co-ops,” wrote Shaikh.

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