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Tri-State consideration worries DMEA

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Tri-State Generation and Transmission Association may take steps to become rate-regulated by the Federal Energy Regulatory Commission, a move Montrose's local power cooperative views with skepticism.

If the wholesaler from which Delta-Montrose Electric Association purchases most of its power does become FERC rate-regulated, it would no longer fall under Colorado Public Utilities rate control, DMEA's chief operating officer Virginia Harman said last week.

That would affect DMEA's current case before the PUC, in which the co-op wants a "fair and equitable" amount set to buy its way out of its contract with Tri-State.

"The way we understand it is if they (fall under) FERC jurisdiction, then the case before the PUC would essentially be closed and we would have to start over with FERC," Harman said.

"We think it's outrageous the way Tri-State is forum-shopping in the middle of our PUC complaint. It's a way of wasting time and money."

Tri-State says that is not the motivation at play.

"Tri-State considered FERC regulation well before Delta-Montrose Electric Association filed its complaint with the Colorado Public Utilities Commission, and the consideration of FERC rate regulation is in no way a response to DMEA's complaint or any other current proceeding in the states; rather, it is a pragmatic response to inconsistent rate-regulation among the states in which Tri-State has operated for decades," Tri-State spokesman Lee Boughey said.

A Tri-State memo the Montrose Daily Press obtained said that with FERC regulation, the association would become fully rate-regulated on generation and transmission rates and other matters; this would "preempt" individual state regulations for rates and eliminate state jurisdiction in buyout disputes.

Currently, Tri-State's membership consists of only small electric cooperatives, like DMEA, or public power districts, a situation that exempts its rates from FERC regulation. If it adds a member that isn't a small co-op, it would no longer be exempt from FERC rate-regulation.

For that to happen, the Tri-State board would have to establish a new membership class, with defined rights, as defined by bylaws. If the board moves forward, it would then file with FERC for regulation.

The move would bring costs, including an annual fee, as well as rate case and litigation costs, but there are also costs in litigating state rate regulation cases, Boughey said.

Harman said the change being considered would be a drastic one that would substantially affect most distribution co-ops in Colorado and rural ratepayers, yet Tri-State management has provided only limited information about the possible overall effect.

DMEA hopes to exit its Tri-State contract, now valid through 2040, by paying a fee.

The co-op in filings said Tri-State refused to provide a just, non-discriminatory fee as had been done for a New Mexico-based cooperative that bought out its contract. DMEA asked the PUC to step in.

Tri-State contended DMEA has no automatic right to have an exit fee set and also said the PUC lacked jurisdiction over what was a rate issue. It also sued in Adams County, where it is headquartered.

The PUC subsequently agreed it has jurisdiction to hear DMEA's petition and the Adams County court separately dismissed the lawsuit.

"We think Tri-State didn't want to be in the PUC, so they took this case out of the county (to Adams County). They lost there and now they are taking it to FERC. We believe they are trying to move as far away from local accountability as possible," Harman said.

Boughey said as Tri-State shifts to more modern generation and transmission, a consistent environment for rate regulation benefits its members in four states, each of which has different regulatory priorities and requirements.

"Similar to many other generation and transmission cooperatives that are subject to rate regulation in multiple states, the board of directors is considering regulation under the FERC, which would provide a single regulator of Tri-State's rates."

"FERC regulation would not lessen the oversight of Tri-State's rates; in fact for the first time we would be fully rate-regulated. Tri-State would be required to file proposed rates with FERC and FERC would establish just and reasonable rates through its regular rate setting process. Any Tri-State member could intervene in a rate case or protest an existing rate," he said.

Boughey said if Tri-State becomes rate-regulated by FERC, its wholesale contracts would be, too, as DMEA had sought in 2015. (Distribution cooperatives like DMEA themselves are not regulated by FERC.)

DMEA Board President Bill Patterson, who previously was the co-op's representative on Tri-State's board, said the association's management had in the past recommended against pursuing FERC rate-regulation.

"Now they know most likely the PUC will rule for DMEA, or at least something that is favorable. All they are doing is gaming the system because they've said they can go in and out of FERC anytime they want," Patterson said.

Tri-State has been working against local cooperatives at the expense of ratepayers, Patterson alleged.

"We feel if long ago they had listened to their members and started controlling costs, we wouldn't even be here," he said.

DMEA is contacting the state legislators who supported its efforts before the Public Utilities Commission, as well as other cooperatives.

"We're trying to, I would say, create awareness," Harman said. "We have reached out to our legislators to let them know and some fellow cooperatives to ask for some support in getting Tri-State to slow down and give us more of an idea of what the costs associated with the FERC regulation is."

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DMEA, Tri-State
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