In October 4, 2019, the Federal Energy Regulatory Commission (FERC) rejected a bid by the mountain west Tri-State Generation and Transmission Association (Tri-State) to put itself under FERC’s regulatory authority. FERC did, however, leave the door open for Tri-State to apply again in the future.
The electric power sector’s transition to cheaper and more reliable renewable power sources has put Tri-State under a great deal of pressure in recent years. A vertically integrated generation and transmission (G&T) association that provides for the generation and transmission needs of 43 rural electric co-ops in Colorado, New Mexico, Wyoming and Nebraska, Tri-State still generates about half of its electricity from coal. Neighboring investor-owned utilities such as Xcel Energy, meanwhile, are transitioning rapidly and successfully to renewable energy resources, taking advantage of the region’s abundant wind and solar resources. Falling renewable costs mean that Tri-State’s member co-ops are stuck paying higher prices for dirtier power than that available nearby.
Increasingly dissatisfied with Tri-State’s relatively high prices and fossil-fuel heavy power mix, Tri-State’s member co-ops are now trying to leave the association. But losing member co-ops would take an economic toll on Tri-State, which would have fewer customers to pay off the capital costs of its coal-fired power plants.
To deter defections, Tri-State has demanded extremely high exit fees from member co-ops that wish to break their contracts. The Kit-Carson Electric Association was forced to pay $37 million to leave the association in 2016. Delta-Montrose Electric Association (DMEA) was asked to pay what it described as a “disproportionately” higher fee when it sought to leave later that year. After DMEA filed a complaint with the Colorado Public Utility Commission (PUC) asking it to set a fair exit fee, Tri-State filed its request for FERC oversight in July 2019. If Tri-State were to gain FERC oversight, state authorities like the Colorado PUC would no longer have jurisdiction over the G&T’s contracts with its member co-ops. Tri-State evidently expects FERC to look more favorably on its high exit fees than it does state authorities.
In order to gain FERC oversight, Tri-State made arrangements to admit Mieco, Inc., a wholesale natural gas supplier. It then argued before FERC that it was no longer a “non-jurisdictional” utility, as it was no longer wholly owned by co-operatives (which are exempt from FERC jurisdiction under the Federal Power Act).
FERC’s October decision rejected Tri-State’s filing without prejudice, on procedural grounds. In essence, FERC ruled that Tr-State had failed to comply with its various filing requirements. The federal regulator did not, however, indicate that it would reject Tri-State’s bid out of hand, on the basis that it had admitted Mieco just to gain federal oversight. Instead, FERC instructed Tri-State to go back and improve its filings.
October’s decision has potentially important implications for other G&T’s and rural electric co-ops around the country. Like Tri-State, many other G&Ts and rural co-ops are faced with the costs of maintaining aging, and relatively expensive, fossil-fuel plants at a time when renewable prices are plunging. Member co-ops, seeking lower energy costs for their customers, and under pressure to be more environmentally responsible, will look to leave the G&Ts if they fail to improve their energy mix and cost structure. If Tri-State succeeds in its next filing in gaining FERC jurisdiction, and with it FERC authority over its rates and contracts, other G&T’s may look to follow suit.