The case for a partial
The most compelling evidence in the hour-long session was a chart (see top) showing costs of a full vs. a partial buyout. That chart showed much larger savings from the partial requirements.
The partial requirements contract will save La Plata $7 million a year.
Given that La Plata currently spends $68 million buying electricity, even 1% cut can make a big difference, Harms said.
None of the options are off the table permanently. It can go to a full exit later, said Harms.
The coop’s existing all-requirements contract was approved in 2006, a time when most coop directors could not envision the rapid dive of renewable prices.
La Plata began showing discontent with its contract with Tri-State in 2017. In early 2018 it began investigating its alternatives. It formally notified Tri-State later that year what it was up to and also asked what it would cost to get out of its contract.
Kit Carson Electric, a member in New Mexico, had left in 2016 after paying $37 million. Delta-Montrose Electric, a Colorado member, was then negotiating with Tri-State for its exit, which later was tabulated at $62 million. And United Power had also indicated it wanted to explore options.
The Colorado Public Utilities Commission likely would have determined the exit fee for La Plata had not Tri-State, by then under the leadership of Duane Highley, used a legal strategy to move such deliberations to FERC, the federal agency in Washington D.C. Much of this legal shuffling occurred during the dark of the covid lockdowns in 2020.
Tri-State has submitted methodologies for determining both buy-downs and buy-outs. They’re called and buy-down payments (PDPs) and contract-termination payments (CTP). FERC has not yet approved either methodology.
Mark Pearson, of the Durango-based San Juan Citizens Alliance, called the partial buy-out “a great step forward.”
“It’s a great way for us to accelerate our transition to a much less carbon-intensive electricity supply, and hopefully all 50% of La Plata’s generation will be local renewable energy,” he said. He also sees value in exploring the benefits of a full buyout, once that methodology has been approved by FERC.
Lee Boughey, communications officer for Tri-State, said he expects FERC to conduct a hearing on the contract termination methodology in May. “Our board will not need to take any additional actions for these processes to continue, and the Tri-State board will ultimately approve the partial requirements contracts before these are filed with FERC.”
Tri-State last year announced a pool of 300 megawatts of generation available to its 42 member cooperatives. Three of the coops bid in what Tri-State calls the open season, La Plata among them. The other two were not identified. Tri-State will extend its open-season in May.
Tri-State looks like a very different electrical supplier than it was in 2017. Then, it was still dragging its feet on embracing changes. La Plata was itching to make them.