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DMEA thinks court should delay Tri-State vote

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Delta-Montrose Electric Association wants a court order blocking Tri-State Generation and Transmission Association from an action the local cooperative contends will deliberately stymie efforts to buy out its contract.

The association in turn said DMEA's filing is an "inappropriate attempt" to prevent it from considering policy decisions to benefit all its members.

DMEA on Tuesday filed in Adams County District Court for a temporary restraining order and an accompanying complaint alleging breach of contract, lack of good faith and lack of fair dealing.

It wants an emergency order to forestall an upcoming vote of the Tri-State board to add a new type of member owner -- one that is not a rural electric co-op like DMEA and more than 40 other members in three states that purchase power from Tri-State.

That type of new member -- as yet unnamed by Tri-State -- would place Tri-State under the rate authority of the Federal Energy Regulatory Commission.

Tri-State is the power wholesaler for DMEA, the latter of which wants to end its contract before a 2040 expiration date. After more than two years of negotiation resulted in a figure DMEA found "grossly" unreasonable, it asked the Colorado Public Utilities Commission to hear its petition for a "fair and non-discriminatory" exit fee.

The PUC previously handed DMEA a win, by ruling it has jurisdiction over the matter as a rate issue, although Tri-State had argued it was a contract dispute and contended the PUC did not have jurisdiction.

Tri-State's recent efforts to become FERC-regulated amount to little more than "forum shopping," DMEA said and on Tuesday, the co-op also said the move would strip oversight from the PUC.

It's Tri-State's third attempt to sidestep the law, DMEA's chief executive officer, Jasen Bronec, said, in a statement calling the move "a rushed, un-vetted and secretive proposal to add a new member."

Tri-State said its board of directors' job it is to make decisions on behalf of 43 members, such as whether to pursue FERC rate-regulation. The board "recognizes the challenges that come with being rate-regulated in several states with differing priorities and results," spokesman Lee Boughey said.

"FERC rate regulation would provide a single point of regulation for Tri-State and its members, as the association moves toward meeting the goals of becoming increasingly flexible and increasingly clean.

"It provides a pragmatic response to inconsistent rate regulation among the states in which Tri-State has operated for decades, saving the association's members money and reduces timelines for decisions."

DMEA hopes for an emergency injunction to prevent Tri-State's board vote, which could take place next week. The order, if granted, would also declare that under board policy, DMEA has the right to final resolution and Tri-State must therefore allow the PUC proceeding to run its course until that state body delivers a final ruling.

If the Tri-State board is allowed to proceed with the FERC vote before that time, DMEA "will suffer immediate and irreparable harm," the co-op's complaint and motion for injunction both argue: It will be deprived of its contractual right to withdraw from Tri-State's "voluntary" membership and have to begin anew the expensive process of seeking an exit fee.

"Tri-State's repeated and ill-conceived efforts to strip the (PUC) of its jurisdiction over the exit charge dispute ... constitutes a violation of the covenant of good faith and fair dealing implied to every Colorado contract, including the bylaw contract at issue here," DMEA's complaint says.

Tri-State has said previously that DMEA does not have an automatic right to have an exit fee set.

It also said it has considered FERC regulation well before the PUC complaint was filed. Further, it said in June, FERC regulation won't reduce the oversight under which Tri-State falls; instead, for the first time, the association would be fully rate-regulated, as would its wholesale contracts.

Additionally, FERC-rate regulation would not affect state energy-related laws and regulations, Tri-State has said.

On Wednesday, the Colorado Senate wrote Tri-State asking for "careful deliberation" before proceeding with the FERC vote. It said the Legislature worked closely with the company on a "historic and important piece of energy legislation" designed to advance the state energy policy in an environmentally conscious way.

Senate Bill 236 was a collaborative process meant to, among other things, ensure PUC "oversight of key aspects of Tri-State's resource planning," the letter, signed by Senate President Leroy Garcia and Senate and House leaders, states.

Yet, Tri-State did not inform lawmakers during these talks that it was planning to implement changes that would shift regulatory authority to the PUC, "thereby potentially undermining critical parts of the very resource planning oversight it was negotiating."

The Senate letter said lawmakers are concerned Tri-State "was not more transparent" about the possible transition and they want to better understand what might happen to rural co-op members if the PUC and Legislature lose their roles in ensuring fair rates.

" ... we strongly urge Tri-State to delay the vote of the board for several weeks in order to meaningfully review the consequences that this impactful decision will have for Colorado ratepayers," the letter states.

On Wednesday, Boughey reiterated FERC rate regulation won't affect resource planning or carbon reduction requirements placed on Tri-State under SB 236. The company will continue discussing the issue with legislators, as well as continue to work with the PUC to develop rules governing its integrated resource planning, he also said, and FERC rate regulation will aid Tri-State's board has "directed pursuit of an aggressive program to continue to further green our grid, reduce our emissions and lower rates," Boughey said.

Tri-State's consideration of the FERC matter was not prompted by the PUC complaint, Boughey also reiterated Tuesday.

"Tri-State considered FERC regulation well before DMEA filed its complaint with the Colorado Public Utilities Commision, in fact, DMEA itself has argued in the past Tri-State should be regulated by FERC," he said.

DMEA was dubious, per the Tuesday filing, which says the FERC vote would be held with scant information after only a few weeks' notice.

"No reason exists for this sudden urgency other than to attempt to preempt the PUC proceeding," the document states, going on to allege Tri-State "secretly created a framework" for the vote by "inducing" DMEA and other members to support bylaw changes, without disclosing these changes would be used in the attempt at FERC regulation.

This was "an undisclosed scheme" to obtain FERC jurisdiction, even though Tri-State represented the bylaw changes would not subject it to FERC jurisdiction, and would not automatically establish new classes of membership, the complaint goes on to detail.

On June 5, though, the wholesaler advised members that its board would "consider" in July whether to become rate-regulated by FERC, according to the document.

The document also cites concerns expressed by other cooperatives about inadequate information pertaining to FERC oversight and the need for more time to consider how such a change would affect costs.

Based on the preliminary agenda for the Tri-State board's meeting July 9 - 10, DMEA thinks a vote could be held on the FERC question.

The timing is suspicious to DMEA, given that in June, the PUC ordered Tri-State to make available for deposition witnesses who could answer further questions concern its proposal to seek FERC jurisdiction.

Yet the only dates Tri-State has suggested for such depositions would occur after its vote on the FERC matter, DMEA claims.

"In other words, if the FERC vote goes forward and (the board) votes to accept the new member and become FERC regulated, the court should expect that Tri-State will seek to stay, dismiss, or otherwise interfere with the PUC proceeding barely a month before the scheduled final evidentiary hearing," the complaint says.

This, the document also says, would reward Tri-State for "improper gamesmanship, forum shopping, bad faith conduct and breach of the duty of good faith and fair dealing it owes DMEA."

But Tri-State has been forthright with members, per Boughey. "Tri-State has been open, has engaged in discussion with the membership, and continues to meet with members and other stakeholders to discuss the potential decision," he said.

In its motion for the injunction, DMEA alleges Tri-State "dug in its heels," and refused to accept the PUC's jurisdiction, instead maintaining it is the only entity with the right to decide the exit charge.

The association, having been dealt legal defeats on the matter, is acting in bad faith to interfere with DMEA's action before the PUC, the filing alleges, calling immediate court intervention the only way to prevent Tri-State's attempt to divest the PUC of jurisdiction.

More is at stake than just the money and time DMEA invested in seeking the exit fee, it says: "DMEA also faces the prospect of remaining a hostage member of Tri-State indefinitely," and its customers will be deprived of opportunities that would stabilize rates.

Katharhynn Heidelberg is the Montrose Daily Press assistant editor and senior writer. Follow her on Twitter, @kathMDP.

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