FERC rules in favor of United Power buyout methodology

BRIGHTON — United Power’s plans to leave the Tri-State Generation and Transmission Association took a step forward last week when an administrative law judge with the Federal Energy Regulatory Commission rejected Tri-State’s proposed $1.6 billion exit fee in favor of a FERC trial staff approach.

“We are pleased to finally have a course for the future in our quest to lower our power costs for our members and have more control over how the power we purchase is generated,” United Power president and CEO Mark A. Gabriel said in a prepared statement.

Said Tri-State CEO Duane Highley in a statement: “Today’s initial ruling is a first of many steps in this process. We continue to review the initial decision and we will continue to make our case on behalf of our members to uphold the ‘make whole/hold harmless’ standard for determining contract termination payments.”

The decision gives United Power a pathway to move forward with its own proposed framework for exiting Tri-State. Tri-State had wanted to charge a $1.6 billion buyout fee; United Power argued that was too high. The ruling did not specify a new buyout number.

United Power is one of the largest utilities in Colorado, serving more than 100,000 members. The cooperative serves customers in areas north of the Denver metro area from Erie to Keenesburg, as well as rural areas west of Golden. It announced plans to leave Tri-State by 2024 in December 2021.

United Power has pointed to high energy rates and a requirement to purchase 95% of its electricity from Tri-State as key drivers of the decision to leave. United Power contends that rates charged by Tri-State are above market rate.

Tri-State argues that United Power leaving would harm financially the other members of the association. 

Tri-State recently filed a settlement with the Federal Energy Regulatory Commission to allow some utilities it has partnered with to source up to 50% of their own electricity. The San Miguel Power Association, La Plata Electric Association and Poudre Valley Rural Electric Association will all be able to self-source more of their power. Kit Carson Electric Cooperative and Delta-Montrose Electric Association have also left Tri-State.

United Power cited those agreements when arguing that the $1.6 billion buyout fee was excessive. In March, a FERC report indicated that a fair exit price for United Power would be around $154 million. 

“Exercising control over the cost and make up of our power generation is the future of the electric industry,” Gabriel said. “We know we can lower costs for our members and take advantage of many of the new opportunities that exist to purchase locally produced renewable resources. The electric cooperative of the future can no longer be restrained by old paradigms that only produce power from centrally located sources far from where it is consumed.”

Said Highley: ““While our team is diligently reviewing the Judge’s order to fully understand the financial impact this initial decision would have on our cooperative if it was adopted by FERC, we remain confident that a fair and just final decision will ultimately prevail.”

Source: BizWest