PUC Wants to Push Tri-State Toward More Renewables

DENVER – For windy weather, no place in Colorado beats the benchlands just south of the Wyoming and Nebraska state lines. Scenery aside, it’s not a place for paper-plate picnics.

But it’s a good place for generating electricity. Wind turbines capable of generating more than 800 megawatts – about as much as a good-sized coal-fired power plant – have been erected along that border during the last decade, representing well more than $1 billion in investment.

Ironically, the rural electrical cooperatives that service the area have not reaped the benefits of this wind. Quicker to see opportunity were private developers, including Xcel Energy, the investor-owned utility that services Denver and other urbanized areas.

Instead, Tri-State Generation and Transmission, the wholesale power provider to 44 rural electric cooperatives including the San Miguel Power Association and the Delta-Montrose Electric Association, was investing heavily in the potential for a coal-fired power plant along the Arkansas River, either in Kansas or Colorado. Nuclear power remains an alternative. Only lately has Tri-State turned its attention to opportunities to develop renewable energy resources in its own service territory.

Concerned that Tri-State and its member co-ops haven’t been changing rapidly enough and remain too isolated, the Colorado Public Utilities Commission last year announced intentions to assert regulatory authority over the Tri-State planning. The PUC does not seek to regulate rates, as it does for Xcel. It does want to push Tri-State into generating electricity in ways and places that better coincide with Gov. Bill Ritter’s goal of reducing carbon emissions.

But, at a hearing held last week in Denver, Tri-State and its member co-ops sharply contested the need for formal regulation.

PUC oversight would be “duplicative, counterproductive and the board lacks legal authority to regulate,” charged Ken Reif, the general counsel for Tri-State. Further, he added, regulation of Tri-State would violate the federal government’s ban of state regulation of interstate commerce.

In addition to cooperatives in Colorado, Tri-State has members in Nebraska, Wyoming and New Mexico.

Other speakers – including Neal Stephens, general manager director of Cortez-based Empire Electric – told PUC commissioners that regulation would add “unnecessary costs” that will be reflected in the bills of consumers. Empire already has been doing much to encourage energy efficiency and diversify its electrical sources, at a cost of $250,000 last year.

Co-op representatives also said that unlike Xcel Energy, which is accountable to investors, Tri-State’s member co-ops are answered to customers, who elect boardmembers that set policy.

“We are already sufficiently regulated,” said Chris Morgan, a director of the Gunnison Country Electric Association and also a former mayor of Mt. Crested Butte. Morgan said co-op members estimate that formal regulation by the PUC will cost them $4 million to $6 million per year.

“And we have gotten indications form Wall Street that because our portfolio would be governed by a governmental agency, we would be a higher credit risk, costing us $10 million appear year,” Morgan said in a later interview.

Delta-Montrose Electric Association, which has bucked other Tri-State co-ops on several key issues, also opposes formal regulation. However, Dan McClendon, the general manager, said his co-op favors a process that will yield greater transparency.

McClendon, in a later interview, said he believes Tri-State will be willing to work more cooperatively but in conversations unstructured by formal regulations. Informal negotiations, he suggested, can be much more productive.

But on the broader issue, that of global warming, much dispute remains – a point noted by one co-op representative who acknowledged that many rural residents still believe that the theory remains “a crock.” Binz, the PUC chairman, agreed: “We wouldn’t be here today if it weren’t for climate change.”

In an interview last year, Binz explain that the Ritter administration believes it needs oversight of Tri-State to help execute the aims of the Climate Action Plan, which calls for a reduction in greenhouse gas emissions of 80 percent by 2050.

As coal-fired power plants commonly have a life of 35 to 40 years, any power plant built during the next few years would impact that mid-century goal.

Burning of coal produces 70 percent of electricity in Colorado, somewhat higher for Tri-State members (75 percent) and somewhat less for Xcel (64 percent).

Tri-State, which is part owner of a coal mine, has discernibly changed course in the last year, if not to the extent that critics would like. As a “family,” the co-ops are starting to pay attention, DMEA’s McClendon said. “While it may be slower than some would like, I am pleased to see some movement.”

Earlier this year, Tri-State announced plans for a 31-megawatt solar farm in New Mexico and then a 51-megawatt wind farm in eastern Colorado. It also announced plans for 220 megawatts of additional generation by burning natural gas, which has half the carbon emissions of burning coal.

Several individual co-ops have been investigating ramped-up energy efficiency and renewable energy projects. Delta-Montrose, for example, hopes to eventually bring on line 10 to 20 megawatts of electricity produced from microhydro, biofuels, and other non-traditional sources. 
At peak times, DMEA needs 100 megawatts of power.

But despite these gains, representatives of environmental organizations and renewable energy companies charge that Tri-State remains unnecessarily secretive and too tied to fossil fuels, both coal and natural gas.

“We haven’t seen the diversification yet,” said Ron Lehr, a former PUC commissioner and now a regional representative of the American Wind Energy Association. Tri-State has done some small things, with a lot of noise, he added, “but the process hasn’t really worked that well yet.”

Lehr’s essential argument was that Tri-State must be forced to be more cooperative in planning with other electrical suppliers. While Tri-State representatives existed that they already cooperate, Lehr said it could be better, yielding economies of scale.

Renewable energy advocates identify transmission as a crucial element of this planning. Tri-State could enable greater development of renewable resources in rural areas, charges Nicholas G. Muller, executive Director of the Colorado Independent Energy Association. Tri-State, he said, has been known for its go-it-alone attitude.

The PUC expects to issue a decision about regulatory oversight later this year. While the issue has been cast in black-and-white terms, much of the discussion has focused on a continuum of possibilities. “Where on the spectrum does significant heartburn occur?” Questioned Jim Tarpley, Ritter’s Republican appointee on the PUC and a lawyer long involved in utility regulation.

Mt. Crested Butte’s Morgan thinks a compromise can be struck that “would allow information sharing at a level that would satisfy their needs while at the same time not requiring an official – meaning regulated – oversight.”

Will that planning include a new coal-fired plant?

“We are very aware in our current environment that coal might not be the most prudent resource into the future,” he answered.

But Michael Bowman, a member of the steering committee for 25 X 25, a national group that seeks to revitalize rural areas by promoting renewable energy, sees Tri-State trying to buy time while lobbying for a Republican governor who will back off on the climate agenda.

And if the PUC backs off on its own, he says, Tri-State will stall while continuing plans for either a coal or nuclear plant.

“That’s just the way these boards think,” added Bowman, a former wheat farmer from Wray.