Tri-State files Statement of Position in Colorado Public Utilities Commission complaint proceeding
- United Power and LPEA buyout requests to the Colorado PUC are unreasonably low.
- Utilities claims of discrimination are unfounded.
- United Power and LPEA reject collaboration, push the clock to the detriment of other members.
(May 29, 2020 – Westminster, Colo.) – In its statement of position filed yesterday with the Colorado Public Utilities Commission (CPUC), Tri-State Generation and Transmission Association reiterated its position that United Power and La Plata Electric Association (LPEA) seek to terminate their contracts with Tri-State 30 years early at an unreasonably low price that would significantly increase costs for the remaining Tri-State utility members.
"United Power and LPEA are trying to avoid their contractual obligations with little regard for their fellow cooperative members," said Duane Highley, Tri-State's CEO. "United Power and LPEA can only afford to buy power somewhere else by first shifting $1 billion of their costs to other utilities customers."
United Power and LPEA freely signed long-term power contracts with Tri-State in 2007, and agreed to share the costs of power supply with Tri-State's other utility members through the terms of their contracts, which end in 2050. The two utilities filed complaints asking the CPUC to set a cost to terminate their contracts early.
"With the support of the majority of our member electric utilities, we are vigorously opposing United Power's and LPEA's complaints at the Colorado Public Utilities Commission," said Rick Gordon, chairman of the Tri-State board and director of Mountain View Electric Association in Limon, Colo. "We have filed with the Federal Energy Regulatory Commission a member-developed contract termination payment methodology that is fair to all of our cooperative's members and their customers."
An administrative law judge for the CPUC concluded three days of evidentiary hearings last Wednesday. The evidentiary hearing presented no substantive challenges to the pre-filed direct testimony of Tri-State's witnesses.
The other members of Tri-State were not allowed to intervene in the case, and Tri-State was not allowed to submit testimony on its contract termination payment methodology to be considered in the case. The methodology was approved by Tri-State's board of directors in early April.
United Power and LPEA buyout request to the Colorado PUC is unreasonably low
In their filings at the CPUC, United Power and LPEA have asked the commission to set the cost to terminate their contracts. United Power and LPEA have wholesale electric service contracts with Tri-State under which they committed to purchase 95% of their power needs from Tri-State for 30 more years. United Power pays Tri-State about $205 million per year under its contracts; LPEA pays Tri-State about $70 million per year.
"This is a matter of contract law," Highley said. "If United Power and LPEA prematurely terminate their contracts, Tri-State's other utility members are entitled to what they would have received under the full term of those contracts."
The two utilities requested contract buyout numbers far below any fair value of the contracts, and well below their share of Tri-State's debts and other obligations:
- United Power asked the CPUC to authorize a buyout of the remaining 30 years of its contract for approximately $268 million; United Power's share of Tri-State's outstanding debt and other obligations is approximately $762 million; and
- LPEA has asked CPUC to authorize a buyout of the remaining 30 years of its contract at approximately $23 million; LPEA's share of Tri-State's outstanding debt and other obligations is approximately $258 million.
In response to the commission's ruling that the contract termination payment methodology could not be entered at the hearing, Tri-State filed an Offer of Proof, which preserves the right to appeal the denial. The Offer of Proof establishes that the fair value of the buyout for LPEA exceeds $420 million. The fair value of the buyout for United Power exceeds $1.5 billion.
United Power and LPEA claims of discrimination are unfounded
In their testimony, United Power and LPEA failed to demonstrate that they are similarly situated to the withdrawal of two other Tri-State members, which is required under Colorado law to make a claim of discrimination. United Power and LPEA are not similarly situated to the negotiated and separate withdrawal agreements with Kit Carson Electric Cooperative, which withdrew from Tri-State in 2016, and Delta-Montrose Electric Association, which is scheduled to withdraw from Tri-State in June 2020. Further, United Power and LPEA distort past negotiated withdrawal agreements with misleading comparisons of figures.
"United Power's and LPEA's claims of discrimination are unfounded," Highley said. "Their arguments are apples to oranges comparison, as previous withdrawal agreements were settled in the context of negotiations, based on a variety of factors, including shorter contracts, projections from different time periods, and the factors unique to the timing of the withdrawals."
"With United Power and LPEA, there have been no negotiations, as these members chose instead to file a complaint without waiting for our membership's Contract Committee to complete its work to establish a standard contract termination payment methodology," Highley said.
United Power and LPEA reject cooperative collaboration, push the clock to the detriment of other members
LPEA and United Power rushed their complaints to the Colorado PUC to thwart the efforts of their fellow members to develop a fair contract termination payment methodology. The two utilities also have pushed to accelerate the procedural processes at the CPUC.
"Rather than work with the other members in good faith to reach consensus, LPEA and United Power rejected a collaborative process and instead sought litigation," Gordon said.
In early September 2019, Tri-State's Board of Directors announced a deadline of April 2020 for a member-led Contract Committee to develop a contract termination payment methodology. The contract Committee, with the full support of United Power and LPEA, began working to develop the partial requirements process and buyout methodologies, with a goal of finishing its work by April 2020. United Power and LPEA were full participants in the Contract Committee process and agreed to the April 2020 schedule.
Dismissing the process with Tri-State's other members, United Power and LPEA filed their complaints at the commission in November 2019. Tri-State's members were undeterred, held to their schedule and completed the work in April 2020. As required, Tri-State filed the methodology with the Federal Energy Regulatory Commission.
Tri-State is a not-for-profit cooperative of 46 members, including 43 member utility electric distribution cooperatives and public power districts 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 and our Responsible Energy Plan, visit www.tristate.coop.
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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.