This opinion piece from TWW’s Colorado State Director Greg Brophy, originally ran in The Colorado Sun on January 25, 2021, and can be accessed here.
Opinion: Rural power utilities must have freedom to escape Tri-State
If rural cooperatives want to pursue more choice outside the Tri-State system, electricity regulators should absolutely let them do so.
By Greg Brophy
As someone from rural Colorado, I can say the benefits of living here clearly outweigh the challenges. But one thing I cannot stand is the double standard that applies to many services.
For some reason, people in rural communities are told they have to accept fewer choices and higher prices than their big-city counterparts.
The cost of electricity is a perfect example. Right now, there are dozens of communities in Colorado, Wyoming, Nebraska and New Mexico that are paying much higher electricity rates than they should.
The vast majority of their electricity comes from the Tri-State Generation and Transmission Association, which holds a series of exclusive long-term supply contracts with 42 rural electric cooperatives across the four states.
Tri-State was actually created by rural cooperatives almost 70 years ago to provide electricity at a lower price than the cooperatives could generate or purchase on their own. But in recent years, in my opinion, Tri-State has completely lost sight of this mission.
While wholesale electricity rates have been falling across the power sector, because of low-cost natural gas turbines and renewables like wind and solar, electricity on the coal-heavy Tri-State system keeps getting more expensive. Since 2011, for example, the average cost of electricity for Tri-State members has gone up 16%, from roughly $65 per megawatt-hour (MWh) to $76 per MWh.
This puts electric cooperatives and their customers at a huge disadvantage. For example, United Power – a cooperative in northern Colorado – says that its members are paying 25% to 35% more than the customers of neighboring utility companies. Why? Because United Power is forced to buy higher cost electricity from Tri-State, instead of accessing cheaper sources in the wholesale power market or generating its own power at a lower cost.
In effect, Tri-State has a monopoly, and has stubbornly resisted the trend towards newer and cheaper power sources. Tri-State has propped up its aging fleet of coal-fired power plants by taking on huge amounts of debt, and now payments on that debt are driving up electricity prices for rural cooperatives.
As the Colorado director of The Western Way – a conservative nonprofit that seeks pro-market solutions to environmental challenges – I have spent years working with community leaders, state legislators and electricity regulators to shed light on this unacceptable situation.
Our organization recently informed state electricity regulators that Tri-State’s debt was now equal to 75% of its total value, making it much more highly leveraged than investor-owned utility companies like Xcel Energy.
In a legal filing to the Colorado Public Utilities Commission – submitted in early October – we also warned that because of this high debt load, even more rate hikes on the Tri-State system are coming.
In November, a report from the Institute for Energy Economics and Financial Analysis warned how bad things could get. Over the next 30 years, the report predicted Tri-State rates will surge another 55% to a shocking $118 per MWh.
Even if this prediction is too pessimistic, it’s clear that United Power and other cooperatives served by Tri-State are paying too much for their electricity, with almost no hope of that changing – and this is why a growing number of rural electric cooperatives are leaving the Tri-State system.
The movement started with Kit Carson Electric Cooperative in New Mexico in 2016, followed by Delta-Montrose Electricity Association in Colorado in 2019. To escape their outdated, multi-decade contracts with Tri-State, these rural cooperatives paid tens of millions of dollars in so-called “exit charges.” It wasn’t easy or cheap, but the freedom to buy cheaper electricity from a range of competing sources will result in long-term savings.
Now other cooperatives in the Tri-State system, including United Power, are also looking for the exits. But Tri-State is trying to keep them captive, using state and federal regulatory maneuvers to slow the process down, impose prohibitive costs and keep a lid on damaging information that could trigger a stampede of other departures.
This approach is completely upside-down. Remember: Rural electric cooperatives created Tri-State. And they did so to provide cheaper electricity than individual rural cooperatives could generate or purchase on their own, not more expensive electricity.
Therefore, if rural cooperatives and the communities they serve want to pursue more choice and competition outside the Tri-State system, electricity regulators should absolutely let them do so.
But Tri-State, which is supposed to represent the interests of rural communities, evidently believes those communities should pay higher prices and have fewer choices than people who live in big cities and the suburbs.
That is more than ironic – that is a betrayal.
Greg Brophy, a former Colorado state legislator and a fourth-generation corn and melon farmer from Wray, is the Colorado director of The Western Way.
