Tri-State seeks certainty for member contract termination procedures

• Tri-State set to create procedures necessary to provide certainty and facilitate member withdrawals, while also protecting remaining members and Tri-State from harm if a withdrawing member does not withdraw, despite providing an unconditional withdrawal notice.
• Tri-State remains concerned with United Power’s preparations for achieving an orderly withdrawal.

(April 14, 2023 – Westminster, Colo.) With its members, not-for-profit power supply cooperative Tri-State Generation and Transmission Association will continue to advance efforts to facilitate orderly member withdrawals, even as it explores options for responding to the Federal Energy Regulatory Commission on proposed amendments to its Contract Termination Payment (CTP) tariff.

Tri-State is seeking greater certainty for both its remaining and withdrawing members, and to provide limited protections to remaining members and Tri-State if a withdrawing member does not withdraw, despite providing an unconditional notice.

“Our goal is that our members have ground rules that assure a fair and orderly contract termination process that protects both our remaining and withdrawing members,” said Tri-State CEO Duane Highley. 

Tri-State sought the timely execution of a withdrawal agreement, as well as ancillary agreements, between Tri-State and each withdrawing member, setting out the steps, timelines and responsibilities of each party to effectuate a member’s withdrawal. These agreements provide each party the certainty to undertake the necessary tasks, which have significant consequences for the withdrawing member and Tri-State, including electric system reliability. Given the complexity of separating a member, Tri-State has a large cross-functional team actively working on the wide range of issues necessary to facilitate member withdrawals.

“Tri-State and our member distribution systems have complex and intertwined transmission and distribution systems, as well as power supply arrangements, that require significant planning to reliably and cost-effectively separate,” Highley said. “We understand the complexity of these issues from previous member withdrawals, and while Tri-State is prepared to process the withdrawals, we remain uncertain about United Power’s preparedness to complete its exit over the next 12 months.”

United Power provided Tri-State an unconditional withdrawal notice effective May 1, 2024. Tri-State is concerned that United Power has yet to provide information on its future power supply or transmission needs, delaying Tri-State and other transmission providers ability to perform critical transmission studies to ensure reliable power delivery in the region.

In the event a withdrawing member is unwilling or unable to complete its withdrawal from Tri-State, its remaining members and Tri-State also seek limited protections, including cost reimbursement. United Power and two other withdrawing members position that Tri-State should only have the choice to either allow the members to withdraw without compensation or to retain these entities as members, with all of the attendant cost and reliability problems, if the members are not able or willing to withdraw.

United Power and Northwest Rural Public Power District, which separately submitted unconditional withdrawal notices effective May 1, 2024, as well as Mountain Parks Electric, which submitted a withdrawal notice effective Feb. 1, 2025, expressly subject their withdrawal notices to a Commission order that states Tri-State’s only current recourse if a member fails to pay its CTP is to prevent the member from terminating its membership. Subsequent filings by these three distribution utilities reinforce their position that there should be no recourse for the remaining members or Tri-State if they fail to withdraw.

In filings to the Commission, United Power explicitly acknowledges that, if it fails to withdraw and Tri-State continues to be required to serve United Power, it is putting Tri-State in a position where Tri-State will either incur significant costs to reacquire power for United Power, or else Tri-State may have to choose to not supply United Power—creating a tangible reliability issue.

“Tri-State and our remaining members cannot simultaneously plan for our future with the uncertainty that a member may not withdraw,” Highley said. “To mitigate the impacts of any member’s withdrawal from Tri-State, we must evaluate whether to market power and plan transmission services to other customers, knowing Tri-State and our remaining members would be harmed if a withdrawing member does not withdraw, despite providing an unconditional notice. We are working to protect our remaining members and Tri-State from this uncertainty, without unnecessarily discouraging member withdrawals.”

The Commission previously recognized that Tri-State requires certainty to undertake various resource planning, power supply and transmission changes relevant to mitigating the impacts of a member’s withdrawal. Tri-State is currently in the untenable position of having to plan for member withdrawals with no corresponding protection in the event the member does not withdraw. 

In rejecting Tri-State’s filing, the Commission observed that Tri-State’s current wholesale electric service contracts permit Tri-State to curtail electric service if there is a supply shortfall, which could arise if Tri-State’s resource planning relies on the member’s withdrawal notice, but the member then fails to withdraw. 

Tri-State does not believe simply relying on its curtailment rights sufficiently mitigates the risk to withdrawing members' end-use consumers or its remaining members. Tri-State will continue to explore means of protecting remaining members and withdrawing members’ end-use consumers from risks created by withdrawing members who do not fulfill their unconditional withdrawal notices.

Responding to the Commission’s order where it concluded Tri-State could use the requested tariff amendments to impose barriers on member withdrawals, Highley responded, “To be clear, Tri-State is focused on creating a pathway together with our withdrawing members to facilitate their withdrawal. We are committed to creating member flexibility, including a member withdrawing from our cooperative, but in the course of creating flexibility we must ensure that flexibility does not shift costs among members, and is fair and is transparent to all.” 

“We currently intend to seek rehearing on these amendments, which would provide certainty on the complex, costly and time-consuming activities necessary for a member to withdraw and terminate its all-requirements contract, so we can reliably and cost-effectively operate our respective electric systems,” said Highley.

Tri-State’s members developed the CTP tariff, which was accepted by the Commission, subject to refund, and became effective Nov. 1, 2021. The CTP tariff includes requirements for a two-year notice and a contract termination payment. Following hearings on the tariff, an initial decision was issued from the administrative law judge hearing the case. The Commission has yet to issue an order on the tariff, and a decision is expected later this year.

“The contract termination payment tariff on file with FERC ensures that any utility member’s withdrawal does not harm the remaining members of our cooperative or Tri-State,” Highley said. “Tri-State will continue to work through the FERC process to ensure the CTP tariff protects remaining members from harm if a member desires to terminate its contract early.”

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About Tri-State

Tri-State is a wholesale power supply cooperative, operating on a not-for-profit basis, with 45 members, 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.

Contact:

Lee Boughey, 303-254-3555, lboughey@tristategt.org

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.