Yampa Valley Electric Association is working with another electric cooperative to pursue options for shoring up their long-term power supply.
YVEA's contract with Xcel Energy, its current supplier, doesn't end until 2020, but YVEA General Manager Larry Covillo said it's not too early to address the issue.
Covillo made the announcement at YVEA's annual meeting, held at Hayden High School on Saturday.
Coal-fired power plants take a long time to build, Covillo said. Obtaining the licenses and permits and building them can take a decade or longer.
YVEA currently gets a good deal on the wholesale power it buys from Xcel, Covillo said.
The co-op pays 4.2 cents per kilowatt-hour. Electric power on the open market is going for about 5.5 cents per kilowatt hour, Covillo said.
YVEA would see a 30 percent increase in the cost of its power if it didn't have the contract with Xcel.
On the other hand, Xcel could make more money selling its power on the open market rather than selling it to YVEA for the lower price.
"Why would they want to renew the contract when they could sell the power for more on the open market?" Covillo asked.
The co-op needs to take steps to make sure it won't see a large increase in the cost of power when the Xcel contract expires, Covillo said.
Also, the move to partner with Holy Cross Energy to find a long-term power solution is based on the unfavorable mix of coal and gas power Xcel currently provides. Xcel relies too heavily on gas-turbine plants, Covillo said.
YVEA would prefer that more of the base load of electricity is generated by coal-fired plants. Coal plants cost more to build, and they are slower to respond to spikes in consumption, but the price is stable.
Electricity generated by natural gas is "very volatile in terms of price," Covillo said.
However, gas plants need to be part of the mix, Covillo said. Gas plants take care of the seasonal fluctuations in demand for power, but should not be used to supply the base load, Covillo said.
"Xcel runs gas on a more constant basis," Covillo said.
The first project YVEA and Holy Cross are pursuing is a coal-fired plant in Pueblo.
It proposes adding another unit to an established plant.
By partnering with another rural co-op, "We think we can hold the prices," Covillo said.