Tri-State rebukes Guzman offer to shutter coal plants
Editor’s note: This report has been edited to add statements from Guzman Energy and Tri-State Generation & Transmission.
Tri-State Generation and Transmission has refused an offer by Denver’s Guzman Energy to buy and subsequently shut down the remaining coal-fired generators at Craig Station.
In a news release, Guzman Energy announced it had made an offer to Tri-State that would lower its costs and provide savings to members.
“The proposal consists of a substantial cash infusion into Tri-State designed to finance the accelerated retirement of nearly 50% of Tri-State’s coal capacity not already slated for early closure, putting it in quick compliance with recent legislation while maintaining reliability and simultaneously lowering costs to members,” Guzman said in the release. “Guzman would replace the retired coal generation with a new portfolio that is in excess of 70% renewable. If implemented, this proposal would lower Tri-State’s costs immediately, enabling Tri-State to provide significant savings to members without sacrificing reliability or Tri-State’s system control.”
The Colorado Sun reported Wednesday that “substantial cash infusion into Tri-State” was worth some $500 million. The Sun’s report quoted Guzman spokeswoman Kathleen Staks, who said the mine feeding Craig Station was part of Guzman’s offer “and it would be closed and remediated unless another customer is found for the coal.”
Tri-State has been criticized for its cap on local renewable generation to 5% of the area’s electricity load and the way it raised rates on some of Tri-State member co-ops over the years. These issues led to one electric co-op to take an offer from Guzman to buy out its remaining contract with Tri-State in order to make its power cheaper and more renewable.
According to a case study by the Institute for Energy Economics and Financial Analysis released in April, the Kit Carson Electric Co-op in northern New Mexico was one of the first to leave Tri-State in order to build its local renewable base. Once the co-op pays off an exit fee loan sometime in 2022, KCEC officials say their member’s electricity costs will plummet to $47MWh, well below Tri-State’s 2017 wholesale average of $75MWh.
“Tri-State, in the meantime, has shown limited interest in developing a truly post-coal generation model,” the report states. “While it has invested some in renewables, it still gets most of its power from coal-fired generation and is heavily invested in coal plants and coal mines — with significant ownership stakes at plants and mines in Arizona, Colorado, and Wyoming.”
According to its website, IEEFA “conducts global research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.”
IEEFA’s report also said three Tri-State members in Colorado — Delta Montrose Electric Association and two other electric suppliers are exploring Tri-State breakups.
In an interview Thursday, Tri-State’s senior communications and public affairs manager, Lee A. Boughey, said Kit Carson’s power has been more expensive after making a deal with Guzman.
“According to documents filed with the New Mexico Public Regulatory Commission, it would appear that Kit Carson in 2018 paid about 40 percent more for power than Tri-State’s members,” Bougher said.
Tri-State maintains they’ve kept rates stable and competitive for its members.
“We’ve only had one rate increase in the last five years,” Boughey said. “The outlook at least for the next three years shows stable rates. Even though we are selling more power in the last three years, we have not increased our costs. Tri-State is very focused on cost control and making sure we are a competitive power supplier for our members.”
In a statement Wednesday, Tri-State said Guzman ran to press outlets after being rebuked.
“Guzman Energy brought us an imaginative and creative high-level verbal proposal, which lacked any specific or meaningful detail or terms,” Tri-State’s CEO Duane Highley said in the news release. “Tri-State requested a written proposal but Guzman refused to provide one, instead deciding to go the press.”
Highley said Tri-State simply wants to keep options open instead of entering into the exclusive negotiations required by Guzman.
“It is not in the best interests of Tri-State, its members or its other stakeholders to enter into an exclusive arrangement with a single company like Guzman Energy before other options are also explored,” Highley said in the release.
Tri-State is treading lightly while they evaluate new energy legislation in Colorado and New Mexico.
“In both Colorado and New Mexico, legislation was passed in 2018 that will have an impact on our operations over the long-term,” Boughey said Thursday. “In New Mexico, the renewable portfolio standards were increased. And in Colorado, the state set aggressive goals for carbon reduction. We will comply with the law. There’s still a lot of work to be done. The Colorado Air Quality Control Commission is tasked to develop rules about how the state’s carbon rule goals will be implemented. So, there’s work to be done in the rulemaking process and there’s also a significant amount of analysis that Tri-State and our members will need to do understand our best options for complying with the law, maintaining reliability and affordability, and supporting our employees.”
What about those employees?
The coal industry accounts for a significant portion of Moffat County’s tax base and losing coal-related jobs could be devastating to this community. It seems both Guzman and Tri-State are aware of this looming problem.
“This proposal includes tens of millions of dollars of investment into the communities that will be negatively impacted by this transition,” Guzman’s Holly Shrewsbury said via email Thursday. “We recognize that this does not replace the jobs or businesses or tax base that will be impacted. However, as this transition continues to occur and even speed up through legislative and regulatory changes, we believe that private industry can and should step up to assist communities and workers. We proposed to work with Tri-State to engage with communities, local elected officials, and others to identify the most effective and efficient ways to invest, knowing that each community will have different needs and challenges.”
But Guzman admits their proposal won’t be a magic bullet for the job losses that are sure to come from increasingly cheaper renewable power generation whose market forces are making coal less competitive.
“To the extent it is possible to locate replacement resources and jobs in the impacted communities, we will work with Tri-State to do so,” Guzman said. “We are under no illusion that the financial investment that is part of this proposal will offset the lost jobs or tax base that will occur as a result of this transition. These are good paying jobs and are not easily replaced. We believe it is important to work with the communities to support the kind of transition and needs that they identify as the best path, whether that means investment in infrastructure, training programs, government planning, school programs, or something else.”
Boughey on Thursday said Tri-State will be working for Northwest Colorado and the interests of all its members.
“Northwest Colorado has always been supportive of Tri-State and we will continue to work for and support those communities,” Boughey said.
Tri-State says a good portion of their portfolio is renewable.
“Nearly a third of the energy consumed within our association comes from renewable resources,” Boughey said Thursday. “About 47 percent comes from coal. About 17 percent comes from contracts in the market and about 4 percent comes from natural gas.”
Going forward, Tri-State has plans to move even further into renewables.
“Tri-State is focused on serving the needs of our members,” Boughey said. “Reliability and affordability are central to our mission. As we move forward, we will be increasingly flexible and increasingly clean.”