44 • FEATURE
THE FIVE PERCENT RURAL ELECTRIC CO-OPS LAMENT THE CAP ON SELF-GENERATION OF RENEWABLES By D. Dion
D
UANE HIGHLEY, THE BRAND NEW CEO OF TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, DIDN’T EXPECT TO RECEIVE A PRESENT AT HIS VERY FIRST ANNUAL MEETING WITH THE COMPANY IN APRIL OF 2019.
Highley was presented with a gift basket: Colorado craft beer, a Rockies baseball cap, a New Mexico green chile, sunscreen and sunglasses for the state’s 300+ days of sunshine per year. It also contained a not-so-subtle message—an analysis by Rocky Mountain Institute showing $600 million in savings if TriState switched from coal to clean energy, and a letter signed by thousands of Tri-State co-op members and advocacy organizations asking Highley to prioritize a transition to sustainable, clean energy. Was the message received? Would Highley preside over a new era for Tri-State, which has been heavily invested in coal since the 1980s?
SWITCHING IT ON
Back in 1936, the Rural Electrification Act (REA) provided federal loans to install electrical distribution in rural areas, and small cooperative electric companies like San Miguel Power Association (SMPA) were formed. For a time, these co-ops purchased power from the Bureau of Reclamation and elsewhere in the wholesale market. Then, in 1952, Tri-State Generation & Transmission Association—itself a cooperative company, with members from each of the small distribution co-ops—was founded. Tri-State didn’t generate any of its own power until the 1970s. For decades, the company purchased power from Western Area Power Administration for distribution to the co-ops. When Tri-State began building its portfolio of energy in the 1980s they invested heavily in coal, which at the time, made the most economic sense and made rates affordable for its members. A federal law passed in 1978 had limited natural gas for power generation, and TellurideMagazine.com
WINTER/SPRING 2019-2020
solar and wind generation were not yet at utility scale. Coal was king. In 2007, Tri-State offered its forty-three member co-ops across New Mexico, Colorado, Wyoming, and Nebraska a ten-year extension of their already very long contract of 40 years— longer than most home mortgages even—to provide 95 percent of their power needs, with a 5 percent “carve-out” allowing co-ops to generate that amount of their own power. All but two agreed. “Back when the contracts were formed, the industry was in a different position and we were searching for reliability and rate stability. The carve-out allows co-ops to generate 5 percent locally, most of which happens to be renewable,” said Alex Shelley of SMPA. The energy industry today looks much different than it did in the past. Renewable energy sources such as solar and wind have become dramatically less expensive, and people in the industry sometimes refer to coal and nuclear plant investments as “stranded assets.” Like the flicking of a switch, the complicated calculus of the energy equation shifted in a way that almost no one could have anticipated. The co-ops that had so eagerly agreed to the 5 percent cap on self-generation suddenly found that they could save money and harness green power by building solar, wind, or hydropower projects on their own.
DISCONTENT AND THE DOMINO EFFECT
Kit Carson, a rural co-op that serves the Taos, New Mexico area, was the first to leave Tri-State. Kit Carson put out a request for proposals for a new wholesale energy provider; essentially they were shopping around for better rates and more