Ruling supports local power generation
By Hank Lohmeyer
Published Tuesday, June 23, 2015 9:29 pm
The Federal Energy Regulatory Commission (FERC) on June 18 ruled in favor of DMEA in a dispute with Tri-State Generation.
The ruling says DMEA is obligated to purchase electricity from a proposed local hydroelectric project at rates that DMEA may negotiate with the hydropower project's owners.
Also in the ruling, FERC agreed with Tri-State that the federal agency does not have regulatory power over setting wholesale electric power rates that Tri-State charges its local co-op members.
"We got just what we wanted from the FERC decision," Olen Lund, DMEA board member, told the DCI. Lund served as president of the DMEA board during the FERC petition process.
The ruling apparently says FERC rules trump the contract agreement that DMEA has had with Tri-State requiring DMEA to purchase no less than 95 percent of its wholesale power from Tri-State.
DMEA has had a long-running and complicated dispute with Tri-State over the 95 percent clause. It has involved efforts by DMEA over a decade or more to include a larger percentage of local renewable energy sources in its energy mix.
In those efforts, DMEA has enlisted U.S. congressional support; it has made proposals to and had negotiations with Tri-State management; it has taken the issue to Tri-State's directors' board of 44-member co-ops for discussion; and DMEA has declined to sign a new contract offered by Tri-State because the document continues the 95 percent requirement.
DMEA has reached its 5 percent limit on non-Tri-State local renewable power by participation in the South Canal project, a partnership with Uncompahgre Valley Water Users Association. DMEA has since been approached by a partnership enterprise called Percheron, a different partnership project involving UVWUA, which is proposing another hydropower project on the South Canal.
Tri-State would not pay Percheron enough money for the project to make a profit on the power it proposes to generate, but DMEA could pay a profitable rate for Percheron's wholesale hydropower. However, the 95 percent clause stood in DMEA's way and threatened years of delays and legal expenses if DMEA went ahead and made a deal with Percheron if Tri-State maintained it was a violation of the contract.
DMEA then asked FERC to rule whether DMEA is obligated under federal law to buy power from small renewable energy producers like Percheron. FERC replied with its July 18 ruling.
Tri-State's corporate communications department issued a statement about the ruling at the DCI's request. It says:
"FERC (ruled) that DMEA is permitted to purchase power from qualifying facilities, which generally include small renewable projects and co-generation projects, offering energy and capacity under the Public Utility Regulatory Policies Act (PURPA) of 1978 and in accordance with the commission's regulations. We are evaluating this ruling and the potential ramification to Tri-State.
"Tri-State is committed to ensuring its renewable energy policies are equitable and sufficiently flexible to help meet all of its 44 members' needs."
DMEA's legal counsel told the DCI that Tri-State has 30 days from June 18 to ask for a rehearing from FERC; then FERC has 60 days to decide if it will rehear the petition. The administrative rehearing process could create "potentially significant" delays to a final administrative decision if a rehearing proceeds. Attorney Jeff Hurd told the DCI that DMEA would nevertheless move forward with its obligations under PURPA and conduct negotiations with Percheron.
There was a second issue which was part of the DMEA petition to FERC, and the ruling favored Tri-State. The issue involved whether FERC has jurisdiction over rates that Tri-State can charge its member co-ops. DMEA board member Lund said the second issue was pushed by the Washington, D.C., law firm which handled the FERC filing for DMEA, and it wasn't the issue DMEA was most interested in.
"We had no intention of trying to poke a stick at Tri-State on the rates issue," Lund said, "We were interested in the local power generation issues."
Tri-State objected quite strongly to the issue of rate oversight, Lund said.
Tri-State's statement on the FERC ruling issued at the DCI request concluded" "On June 18, the Federal Energy Regulatory Commission ruled that it does not have jurisdiction over Tri-State's rates. We are pleased that FERC affirmed that Tri-State's rates are regulated by the board of directors and the members they represent."
The statement goes on to say a committee has been formed to review Tri-State's policies regarding member generation. "The board will review member generation policies this year to identify potential opportunities to accommodate member systems that wish to install additional renewable and distributed generation."
Overall, DMEA's CEO Jasen Bronec said in a news release that the FERC decision will be good for DMEA and its members.
"This is a victory not just for DMEA and its members, but for people and communities throughout Delta and Montrose counties," Bronec said in the news release.
"Purchasing local renewable power will further DMEA's long-term strategic goal of diversifying our power supply, which means more stable rates to our members and lesser impacts from any future power rate increases."
Lund gives Bronec credit for work he has done on the renewables issue. "Jasen is doing a wonderful job and is most responsible for the progress made by DMEA in the past year," Lund said.
Opinions locally vary over when and how much "economic development" the FERC ruling will mean. Lund says his view is that locally produced renewable power will come "from a variety of small sources." He told the DCI he doesn't see a big economic development effect soon.
Locally produced electricity could eventually come from more hydropower projects like the one proposed by the Percheron partnership, from small hydro projects installed on smaller ditches and other water courses, from wind and also from coal bed methane generation at the North Fork Valley mines.