The Tri-State Generation and Transmission Association board of directors has begun evaluating whether it should become subject to federal rate regulation.

Because the wholesale cooperative operates in four different states, Tri-State is currently subject to the differing rate regulations of Colorado, Nebraska, New Mexico, and Wyoming. Coming under Federal Energy Regulatory Commission regulation would resolve this issue, it said.

“As Tri-State is rapidly transitioning to become increasingly flexible and increasingly clean in our vision for a 21st Century generation and transmission cooperative, it benefits our membership to have a consistent environment for rate regulation,” Lee A. Boughey, Tri-State spokesman, said in an email to California Energy Markets.

“We are currently discussing with our membership the option to be rate regulated at the Federal Energy Regulatory Commission,” he said. “Similar to many other generation and transmission cooperatives that are subject to rate regulation in multiple states, the board of directors is considering regulation under the FERC, which would provide a single regulator of Tri-State’s rates.”

Boughey gave examples of the differences between states. In Colorado, in two specific cases, the Colorado Public Utilities Commission has held that it has rate jurisdiction when a single Tri-State member files a rate complaint; however, in New Mexico, that state’s Public Regulation Commission has jurisdiction if three members protest rates.

Whether an entity falls under FERC jurisdiction is incumbent on two factors, according to FERC. These are “whether the entity falls within the definition of ‘public utility’ under section 201 of the Federal Power Act to start with.” Then, it depends upon whether it is among the categories of utilities that are exempt from most, not all, FERC regulation under Section 201(f) of the Federal Power Act. This includes governmental entities and “certain cooperatives,” according to the agency.

Were a cooperative to change its structure and/or financing, it could come under FERC jurisdiction or leave FERC jurisdiction.

There are no hearings regarding jurisdiction. Whether a utility is or is not subject to FERC jurisdiction depends solely on whether it meets the description in the Federal Power Act. If it does, then it is required to file to FERC documents such as tariffs setting rates or terms and conditions of service. 

Although Westminster, Colorado-based Tri-State was once exempt from FERC oversight because it was a rural utilities service borrower, it refinanced and no longer falls under that exemption. Tri-State remains exempt from federal rate regulation because it is wholly-owned by small electric cooperatives that sell less than 4 million MWh per year.

In a two-page brief issued by Tri-State outlining the issues related to coming under FERC jurisdiction, it mentions “new costs, including an annual fee (approximately $1.3 million), litigation costs and increased staff.” And adds that “The future nature of FERC regulation is uncertain.”

Although FERC is provided an annual appropriation from Congress, its operating expenses are fully recovered by assessing annual fees and charges, which offsets the appropriation. “For electric utilities, the commission calculates a per-unit surcharge that is then applied to each company’s sales for the year to determine its specific assessment,” FERC stated.

FERC would not comment on the veracity of TriState’s estimated fees.

At least one Tri-State member cooperative objects to the proposed move: Delta-Montrose Electric Association. It characterizes the move as “a drastic change” with the potential to affect most Colorado electric cooperatives and their ratepayers, adding that there is “very limited information” regarding the potential issues for Tri-State’s members.

“DMEA is skeptical about the validity of what appears to be an attempt by Tri-State to ‘forum shop,’” DMEA COO Virginia Harman said in an email to California Markets. “It’s also concerning that, if successful, Tri-State’s action could raise costs for rural communities across Tri-State’s territory and remove important state accountability and oversight.”

There’s no love lost between the two organizations, which have been seeking to part ways. A Colorado district court dismissed a lawsuit filed Jan. 15 by Tri-State against DMEA, which is disputing an exit fee as it seeks to leave the power-supply association. DMEA, a 28,000-member rural electric cooperative, wants to end its relationship with Tri-State, but disputes the amount of the exit fee, which has not been announced publicly.

Tri-State filed the suit challenging the Colorado Public Utilities Commission’s authority to determine an exit charge for DMEA, arguing that the commission does not have jurisdiction in contractual issues between businesses. DMEA still has a complaint regarding the exit fee before the commission. (See CEM Nos. 1522 [14] and 1536 [18.1])

Harman contends Tri-State management intends to trigger events that would place it under FERC jurisdiction by adding “a new member that is not a small electric cooperative or a public power district.” To date, no information has been provided to Tri-State members regarding the identity of this entity, she said.

It appears Tri-State is attempting “to strip the Colorado Public Utilities Commission of jurisdiction over the DMEA exit charge proceeding,” she said. “Tri-State appears to want to have DMEA start over with its complaint at FERC and to waste to time, effort, and expense its rural member-owners have incurred thus far.”

Boughey countered, saying “Tri-State considered FERC regulation well before Delta-Montrose Electric Association filed its complaint with the Colorado Public Utilities Commission, and the consideration of FERC rate regulation is in no way a response to DMEA’s complaint or any other current proceeding in the states; rather, it is a pragmatic response to inconsistent rate regulation among the states in which Tri-State has operated for decades.”

Moving to federal rate regulation, he said, makes the organization fully rate regulated for the first time. A Tri-State member would still be able to intervene or protest in rate cases. It does not change or affect any state laws, such as New Mexico’s renewable portfolio standard.

Harman said she understands the matter could come up for a vote at Tri-State’s July meeting; however, Boughey said Tri-State does not have a target date or deadline in place by which in intends to become federally regulated. “Our board, representing our members, would first need to decide to pursue FERC rate regulation. The board would consider a new member, which has not yet been determined.”