La Plata Electric Association, the member-owned power co-op based in Durango, is suing its wholesale power supplier after years of stalemated negotiations over LPEA’s attempts to extricate itself from a restrictive contract.
Tri-State Generation and Transmission Association is owned by 42 distribution cooperatives, of which LPEA is one. Under the terms of membership, LPEA is obligated to purchase at least 95% of its power from the wholesaler through 2050.
Since 2019, the two co-ops have been engaged in various forms of negotiation to meet the desires of LPEA’s owners and leadership to partially or fully pull out of the contract early. The contract to purchase a vast majority of LPEA’s power from Tri-State has handcuffed the association and prevented it from pursuing local generation.
Now, LPEA alleges that Tri-State has engaged in “a bad faith course of conduct” by, among other actions, refusing to offer equitable terms and conditions for its withdrawal in violation of Tri-State’s contract and bylaws.
In a written statement provided by a spokesman, Tri-State CEO Duane Highley called the lawsuit “disappointing” and said LPEA’s claims are “meritless.”
The complaint filed in La Plata County District Court on Nov. 10 asks that LPEA be exempt from its obligations set out in Tri-State’s bylaws and contract, receive damages stemming from that breach of contract and receive compensation for other accrued fees and expenses.
In 2019, LPEA leaders began exploring the possibility of leaving Tri-State before 2050 in pursuit of cheaper, more reliable and greener energy.
But the discussions have been hindered by stumbling blocks at every turn, and LPEA is alleging that those blocks constitute bad-faith conduct.
The negotiations in question contend with the question of exit fees.
Despite repeated hearings before both the Colorado Public Utilities Commission and the Federal Energy Regulatory Commission (after Tri-State managed to alter operations such that the co-op fell under federal jurisdiction) the parties have never agreed on an amount LPEA should pay to fully or partially pull out of its Tri-State contract.
In 2021, Tri-State gave LPEA a $449 million price tag for a full divorce, which LPEA CEO Jessica Matlock called unreasonable.
Tri-State and several member co-ops pursuing a partial buyout continued negotiations. However, FERC shot down a set of partial buyout agreement terms submitted in 2022, concluding that certain provisions were not reasonable and just.
In the complaint, LPEA alleges it withdrew an appeal of that decision “with the understanding – based on Tri-State representations – that Tri-State would continue to work with LPEA.”
Now, the two co-ops blame each other for the breakdown in those negotiations and LPEA calls the lawsuit “the single option … to vindicate its rights.”
“LPEA’s claims lack any merit, and Tri-State will vigorously defend itself and its members from LPEA’s actions,” Tri-State spokesman Lee Boughey said in a written statement.
Last week, the wholesale power provider was widely applauded after the release of a plan outlining its commitment to close coal plants earlier than expected and transition to more green energy. LPEA has criticized that announcement, calling it an uncertain plan predicated upon the award of $970 million in federal grants – that Tri-State may not receive.
Highley pivoted back to the plan in a statement, calling LPEA “far outside the interests of both our members that are working for greater contract flexibility, and all those advancing a reliable and affordable clean energy transition.”
He argues that LPEA is trying to foist the cost of its exit onto the co-op’s other members.
Both parties in the lawsuit have thrown barbs at one another leading up to the filing, and the two co-ops now appear prepped for toothy litigation.
Tri-State lawyers have until Jan. 10 to file a response.
rschafir@durangoherald.com
