The Crested Butte News Serving the Gunnison Valley since 1999
Money can help GCEA meet strategic goals
By Allen Best / Big Pivots
Three Colorado electrical cooperatives, including the primary supplier of energy to the Gunnison County Electric Association (GCEA), will be getting chunks of a $9.7 billion federal program designed to aid rural America in making the transition to a clean energy economy.
Tri-State Generation and Transmission Association, which delivers power to 41 member cooperatives across four states, including GCEA, is in line to get $679 million. That award is in the underwriting stage.
“We are optimistic that our application will move forward and be fully funded,” said Lee Boughey, vice president for communications at Tri-State.
The money comes from a program called New ERA (Empowering Rural America), which was funded through the Inflation Reduction Act passed by Congress in 2022. The program has been called the most important investment in rural America since President Franklin Roosevelt in 1936 signed the Rural Electrification Act. That law provided funding to promote electrification of widely dispersed customers in rural America that investor-owned utilities had found too expensive to serve.
In remarks in Wisconsin last week to celebrate the funding, President Joe Biden also drew comparisons to the legislation that created the interstate highway system in 1956.
GCEA chief executive officer Mike McBride said the announcement is good news for Tri-State and the local co-op. “GCEA relies on Tri-State for a large portion of our energy transition strategy because they can implement projects more cost-effectively than we can and have resources to do so much more,” he said. “Being selected as a finalist for New ERA funding enables Tri-State to more affordably make that clean transition, and GCEA is grateful to be a beneficiary of Tri-State’s clean energy portfolio to help us reach our strategic goals.”
New ERA funding will have impacts far larger than the dollar amounts, said Uday Varadarajan, senior principal on the electricity team at RMI (Rocky Mountain Institute). One key provision of the Inflation Reduction Act allows electrical cooperatives to access money for clean energy that was previously unavailable to them because of their nonprofit status. Tax credits for clean energy development were available to for-profit developers and utilities but not rural cooperatives. Provisions in the Inflation Reduction Act will level the playing field.
“There are strong reasons to believe that the program over time will increase their financial confidence in really moving more aggressively to take advantage of clean energy, which is increasingly competitive and reliable,” he said.
New ERA funding will allow rural electric co-ops to overcome their reluctance to go into further debt and by reducing the burden of their old debt. With less aversion to taking on new debt, explained Varadarajan. They can feel more confidence about investing in new renewable generation — and owning it instead of mostly buying the generation through power-purchase agreements.
Varadarajan credited Tri-State in making the pivot from being just a big cooperative to now becoming a leading cooperative in aggressively taking advantage of the incentives to move thoughtfully and carefully to transition their system from fossil fuel generation to renewable resources.
And Colorado’s prominence among the recipients also reflects on the state’s political leadership and the grassroots support, he said.
Tri-State lobbied hard for a carve-out in the Inflation Reduction Act that would allow it and other cooperatives that serve predominately rural areas of the United States to get assistance in the energy transition. Based in Westminster, Tri-State had become heavily anchored in coal-fired generation and was weighted down in the transition by the debt on some of these coal plants.
The federal money will be used by Tri-State to support the retirement of 1,100 megawatts of coal-fired generation. It shut down one coal plant in New Mexico in 2019 and has plans to close the three coal-burning units it operates at the Craig Generating Station from 2025 to 2027. It had originally planned to close Springerville 3, a coal plant in Arizona, in 2040, but the promise of the federal funding has given Tri-State the comfort to pay off undepreciated debt in the plant and move up its retirement to 2031. It has made plans not to divest from generation at the Laramie River coal plant in Wyoming.
The award will help Tri-State procure 1,480 megawatts of renewable energy in the form of solar, wind and battery storage. This conversion will reduce member costs an estimated $422 million over 20 years.
The original letter of intent for New ERA funding, submitted by Tri-State a year ago, was for $970 million. Because of the number of applications from across the country, Tri-State and other applicants were advised to moderate their requests. Tri-State was invited to submit a proposal for $679 million.
Through a mix of low-interest loans and grants, Tri-State would look to leverage this budget authority to support investments that could total more than $2 billion for 18 different projects. It plans to issue a request for proposals in September.
In an interview, Duane Highley, the chief executive, said that Tri-State began getting news in early August that it was in line to receive funding. That, along with news from the Federal Energy Regulatory Commission that aligned with Tri-State’s plans, made it his single best week since he joined Tri-State as chief executive in April 2018.
The financial award is also making Tri-State more attractive in the eyes of Wall Street analyst. Highley said Tri-State had been in conversation with Standard & Poor’s and the two other credit agencies. “They are extremely excited,” he said.
The federal money will result in “less risk, a stronger balance sheet and lower rates” for Tri-State’s members, he said.
Tri-State’s ratings had been declining in recent years as member cooperatives left Tri-State to pursue what they consider to be greener pastures elsewhere. Kit Carson Electric in New Mexico left in 2016 and has succeeded greatly. It was followed by Delta-Montrose Electric in Colorado and then, on May 1 this year, United Power. Three others are now in line to leave.
In rural Colorado, the announcement was welcomed by individuals who get power from cooperatives supplied by Tri-State.
“This is such exciting news,” said Jeff Delaney, a resident of Crested Butte and member of the Gunnison County Climate Crisis Coalition. “Rural communities have been looking in from the outside as the country transitions to clean energy, and this funding opens the door for our communities to be able to reap the benefits of the move to renewable energy and leave the harm of fossil fuels in the rear-view mirror.”
United Power, an electrical cooperative based in Brighton that has 112,000 members in northern Colorado, expects to get $261 million. Until May, it got all but 5% of its electricity from Tri-State. CORE Electric Cooperative, which is based in Sedalia, also was named a recipient. Colorado was the lone state to have multiple winners.
See more stories about Colorado’s energy transition at BigPivots.com
