Tri-State takes significant step to increase member flexibility, sets contract termination payment methodology

Westminster, Colorado (April 9, 2020) – Tri-State has achieved a significant milestone in its transition to be a more flexible and even cleaner power supplier through its transformative Responsible Energy Plan. The cooperative’s board of directors, representing each utility member, approved a new partial requirements contract option that will deliver its utility members the flexibility to significantly increase local renewable energy development and the self-supply of power.

Tri-State’s board of directors also approved a methodology to calculate the contract termination payment of an existing utility member that seeks to understand the costs involved with the early termination of its power contract with Tri-State. The methodology sets a standard approach, applicable to any utility member, should that member be allowed to withdraw early from Tri-State.

“As a cooperative, our members tirelessly worked together to deliver flexibility and real change to those members that want to supply more of their own power,” said Rick Gordon, chairman of the Tri-State Board and director of Mountain View Electric Association in Limon, Colo. “We have taken significant steps on our Responsible Energy Plan commitments for cleaner energy, lower emissions, more flexibility and ultimately, lower wholesale rates.”

“Tri-State members worked together, debated options and built consensus around complex issues to arrive at an equitable solution for more flexibility,” said Scott Wolfe, Contract Committee chairman and director at the San Luis Valley REC in Monte Vista, Colo.

The membership’s Contract Committee, which includes representatives from all utility members, met 11 times since June 2019 and made recommendations to the Tri-State Board of Directors. The board adopted all of the recommendations.

“Both the partial requirements contract option and the contract termination payment methodology approved by the board protect the interests of all Tri-State utility members by ensuring that one member’s action does not unfairly shift costs to the other members,” said Duane Highley, Tri-State’s chief executive officer. “With our board’s action, our next steps are filings with the Federal Energy Regulatory Commission and implementing the other provisions passed by our board.”

The new partial requirements contract structure and the contract termination payment methodology are subject to the authority of the Federal Energy Regulatory Commission (FERC), and will be submitted for approval. FERC regulates the rates and contracts of wholesale public utilities, including Tri-State.

While there is still work to do to implement the board’s actions, including making filings to FERC, the approval allows Tri-State to move forward to develop the new contract options and related methodologies while awaiting FERC approvals.

Flexible partial requirements contracts, community solar provisions available to all utility members

When finalized, the new partial requirements contract option will give Tri-State’s utility members additional flexibility for the self-supply of power and more local renewable energy development. Partial requirements contracts address the needs of Tri-State utility members that desire self-supply above the 5% provisions in their current all-requirements contracts.

Utility members of Tri-State can express their intent to transition to partial requirements contracts by participating in an upcoming open season period to allocate an aggregate 300 megawatts of system- wide member self-supply capacity. The open season capacity is 10% of Tri-State’s system peak demand.

Under the new contract, utility members can self-supply up to 50% of their load requirements, subject to availability in the open season, in addition to the current 5% self-supply provisions and a new community solar provision. In late 2019, the board of directors approved the Contract Committee’s recommendation to expand member opportunities for community solar projects.

Contract termination payment methodology set

In September 2019, Tri-State’s Board of Directors assigned the membership’s Contract Committee to recommend a structure and methodology to calculate a utility member’s contract termination payment, should that member be allowed to terminate its contract early.

Several Tri-State utility members requested information on their contract termination payments in the same time period Tri-State was considering elements of its Responsible Energy Plan. The ongoing development of the plan, including partial requirements contracts, significant increases in renewable energy resources and the retirement of coal facilities, needed to be completed to properly inform the contract termination payment methodology.

The contract termination payment methodology is premised on a “make whole” concept that if a utility member is allowed to terminate its power contract with Tri-State, the remaining utility members are not financially harmed. The methodology will be filed with FERC for approval.

Expanded clean energy and lower emissions advances

In addition to greater flexibility, the Responsible Energy Plan announced by Tri-State in January 2020 significantly expands renewable energy generation, meaningfully reduces greenhouse gas emissions and extends the benefits of a clean grid to cooperative members while ensuring reliable, affordable and responsible electricity.

Tri-State will add eight additional renewable energy projects in Colorado and New Mexico by 2024, when 50% of the energy consumed will come from emissions-free renewables. Tri-State will have more than 2,000 megawatts of renewable capacity on its system, including 800 megawatts of solar power, 671 megawatts of wind power and 600 megawatts of large and small hydropower.

Tri-State is significantly decreasing greenhouse gas emissions to meet state laws and goals, and with the closures of all coal facilities it operates, will eliminate 100% of its greenhouse gas emissions from coal in New Mexico by the end of 2020 and in Colorado by 2030. Tri-State retired its Nucla Station coal plant in in 2019.