A judge for the Colorado Public Utilities Commission ruled the refusal of Tri-State Generation and Transmission to offer an exit charge to La Plata Electric Association is unjust, unreasonable and discriminatory.
The ruling comes as LPEA examines whether it will buyout its long-term contract with Tri-State, its power provider, and is complicated because the same matter is being heard by a separate regulatory agency, the Federal Energy Regulatory Commission.
Whatever future complications arise, the ruling – issued Friday by state PUC Administrative Law Judge Robert Garvey – was welcomed by LPEA, the provider of electricity to La Plata and Archuleta counties and portions of San Juan, Hinsdale and Mineral counties.
“The recommended decision provides one more piece of LPEA’s power supply puzzle,” said LPEA’s CEO Jessica Matlock in a news release. “We’ve been asking for this number for a long time so that we can fully evaluate our options and determine the best course of action for our members – and the ALJ has finally provided that for us.
“We aim to provide clean, reliable power to our members at a reasonable cost. Given the largest portion of our budget comes from purchasing power, it is our fiduciary responsibility to explore all cost-saving options. Now we will finally be able to do so.”
LPEA formally asked Tri-State to provide a fair and equitable exit charge in July of 2019 as LPEA’s board of directors began exploring multiple power-supply options to minimize costs and maximize local control and environmental sustainability.
Options LPEA are exploring include staying with Tri-State and working to increase contract flexibility, fully exiting the contract or finding a middle option. After failing to obtain an exit figure from Tri-State, LPEA filed a formal complaint with the PUC in November of 2019, asking the state’s regulating body to exercise its authority to help LPEA secure an equitable exit charge.
LPEA estimates it could save hundreds of millions of dollars over the life of its contract with Tri-State, which extends to 2050, by exiting early. It also claims exiting its Tri-State contract, which caps the amount of locally generated renewable power its members can buy, also will allow the regional electric distributor to meet its emission-reduction goal 10 times faster.
According to LPEA, that would reduce LPEA’s carbon-dioxide emissions by 8.8 million metric tons between 2020 and 2040, equivalent to removing 96,000 cars from the road every year for 20 years.
Mark Stutz, spokesman with Tri-State, said since LPEA began exploring an early buyout of its contract, Tri-State has adopted a policy that provides member cooperatives greater flexibility and increases the capacity of members to buy local renewable power.
“The goals of our Responsible Energy Plan are closely aligned (with) LPEA’s goals,” he said.
Friday’s ruling did not provide an exit fee number for LPEA.
However, it did approve a methodology to determine the exit fee number that was submitted by United Power, another regional electric distributor seeking to leave Tri-State that is based in Brighton.
The exit figure will be based on the process used in determining the exit figure fees for Delta-Montrose Electric Association and Kit Carson Electric Cooperative, two member cooperatives that have already left Tri-State.
Kit Carson eventually paid $37 million to buyout its contract with Tri-State, while DMEA paid $62.5 million.
Garvey wrote in his recommended order, “The exit charge should attempt to cause little to no disruption to the remaining members. Further, it should be just and reasonable in comparison to the exit charges paid by Kit Carson and DMEA.”
Stutz, the Tri-State spokesman, said all its members could be harmed if LPEA departs because debt and other liabilities are shared by all members, and he noted the state PUC did not allow other Tri-State members to participate and voice their concerns in the proceedings.
“Contracts are central to how members work together within Tri-State and with each other. Other utility members were not allowed to participate in the proceedings, even though they were directly affected by the outcome. At the FERC, all of our members can participate in proceedings on Tri-State’s contract termination payment methodology,” he said.
Stutz estimated LPEA’s share of Tri-State’s outstanding debt and other obligations is about $258 million.
He added that Tri-State believes FERC is the appropriate regulator to adjudicate the issues, and in June, FERC accepted Tri-State’s contract termination payment methodology filing and referred it to its settlement and hearing procedures.
Tri-State’s methodology was developed by its cooperative members, and all of Tri-State’s members can participate in the FERC settlement and hearing process, he said.
Hillary Knox, spokeswoman for LPEA, said the state PUC is the appropriate regulatory body to determine a fair buyout price.
“This is a Colorado case that should be decided in Colorado. Energy-supply concerns and considerations vary from region to region and state to state. To meet the unique needs of our communities in Southwest Colorado, LPEA believes that decisions around our power supply should be made at the state level, not at the national federal level,” she said.
The state’s PUC recommended decision is now in a 20-day period when it will accept exceptions, a type of appeal or challenge, to its recommended order. The PUC will respond to exceptions filed in the case within seven days before the recommended decision is made final.
Stutz said Tri-State, for one, expects to file several exceptions.
Beyond the hearing of exceptions, PUC decisions can also be appealed to state district court.
If a district judge’s decision of a PUC case is appealed, under Colorado law, it would go straight to the Colorado Supreme Court.