Tri-State files modified Contract Termination Payment Tariff with FERC
- CTP tariff revisions provide clear and objective procedures, a simpler and replicable calculation methodology, and ensure that remaining members are held financially harmless if a member terminates its long-term, full-requirements power supply contract early.
- Wholesale generation and transmission cooperative responds to federal regulator’s and members’ concerns.
(September 2, 2021 – Westminster, Colo.) Tri-State Generation and Transmission Association has filed revisions to its currently effective Contract Termination Payment (CTP) tariff with the Federal Energy Regulatory Commission (FERC). The CTP reflects the cost a utility member would pay to ensure remaining members are financially unharmed, should the utility member seek early termination of its long-term, full-requirements power supply contract with the wholesale generation and transmission cooperative.
“Tri-State’s modified CTP tariff is a key component to providing more flexibility to our members and meeting the goals outlined in our Responsible Energy Plan,” said Duane Highley, Tri-State’s CEO. “The modified CTP is fair to both the member considering early termination of its long-term, full-requirements power supply contract and the remaining members that will fulfill their obligations through the full term of their contracts.”
Under its member-driven Responsible Energy Plan, Tri-State is rapidly transitioning its generation resources to cleaner energy and lower carbon dioxide emissions, while lowering wholesale rates to its members. As part of the plan, Tri-State’s members have worked together to increase flexibility and allow for greater member self-supply of power through certain renewable member self-supply tariffs, partial requirements power supply contracts, and by allowing the early termination of long-term, full-requirements power supply contracts through the CTP tariff.
As Tri-State responds to FERC’s concerns in the filings made this week, its members continue to work together on the CTP.
“We believe in the cooperative business model and strongly agree with the direction Tri-State is headed,” said Jeff Wadsworth, CEO, of Tri-State member Poudre Valley Rural Electric Association. “The proposed modified CTP methodology is a starting point to allow Tri-State members to work together towards an agreement that is both fair and equitable.”
“We appreciate the engagement of our membership, and we want to be sure that all members, large or small, have a voice that is heard on these important matters, both in the boardroom and at FERC,” said Highley. “We encourage our membership to continue discussions as they work together to find agreement based on the CTP methodology filed today. We also appreciate the FERC commissioners’ and staff’s work on these issues, as we work with our members to resolve issues and move forward.”
The revisions are intended to make Tri-State’s CTP methodology more transparent and simpler, and to add clear and objective procedures by which interested members can obtain their CTP calculations and thereby evaluate the economics of early termination and withdrawal. The tariff revisions address concerns raised by FERC in recent orders, and by certain Tri-State utility members, and are referenced and described in Tri-State’s response, filed earlier today, to a recent FERC show cause order concerning Tri-State’s currently effective CTP tariff.
“The modified CTP is responsive to FERC and to our members’ concerns, resolving the transparency, replicability, and access issues by establishing a clear formula to determine each member’s cost to terminate its contract,” said Highley. “The modified CTP proposal contains clear and objective procedures, allowing a member to terminate its power supply contract early and pursue other power supply options, while keeping remaining members financially harmless.”
Details of the modified CTP
The modified CTP calculation methodology uses transparent and easily obtainable public data to ensure calculations can be performed quickly, allowing all Tri-State utility members immediate access to their CTP calculations, at no charge.
Along with the FERC filing, Tri-State provided the current CTP calculations for each of its 42 utility members. The CTP calculations will be updated annually each April 1 and will apply to member withdrawals effective upon two years’ advanced notice. No Tri-State board approval is required for a member’s contract termination and withdrawal once the applicable CTP amount is paid.
Although several Tri-State utility members have requested a CTP calculation, none of these members has asked to terminate its contract at this time.
Under the modified CTP tariff, a CTP calculation is based on the projected revenues the withdrawing member contractually agreed to pay over the remaining term of its contract, less other revenues Tri-State would receive from offsetting power sales, transmission revenues from the withdrawing member after termination, and the return of the net present value of the withdrawing member’s patronage capital balance.
The CTP payment ensures that Tri-State’s remaining members are held harmless and made whole financially for the continuing costs of servicing outstanding debt and operating and maintaining the entire Tri-State generation and transmission system without the revenues that were expected over the remaining term of a withdrawing member’s long-term contract with Tri-State.
Tri-State is power supply cooperative of 45 members, operating on a not-for-profit basis, including 42 utility electric distribution cooperative and public power district members in four states that together deliver reliable, affordable and responsible power to more than a million electricity consumers across nearly 200,000 square miles of the West. For more information about Tri-State, visit www.tristate.coop.
Certain information contained in this press statement are forward-looking statements including statements concerning Tri-State’s plans, future events, and other information that is not historical information. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described from time to time in Tri-State’s filings with the Securities and Exchange Commission. Tri-State’s expectations and beliefs are expressed in good faith, and Tri-State believes there is a reasonable basis for them. However, Tri-State cannot assure you that management’s expectations and beliefs will be achieved. There are a number of risks, uncertainties and other important factors that could cause actual results to differ materially from the forward-looking statements contained herein.