The largest of Westminster, Colorado-based Tri-State Generation and Transmission Association's 43 electric distribution cooperative members on May 4 filed suit against the wholesale power provider and its three non-co-op members, alleging fraudulent dealing intended to bind members to Tri-State's expensive and restrictive long-term power contracts.
United Power of Brighton, Colorado, in its complaint filed to Colorado District Court in Adams County, alleges Tri-State's 2019 admission of non-co-op members Mieco, Ellgen Ranch Co. and Olson's Greenhouses is unlawful and invalid and that Tri-State, itself a cooperative, continues to be owned by its member co-ops. Tri-State needs United Power's load and annual subsidy "to survive," the suit claims, "so it has engaged in a multi-year fraud to prevent United Power from ever exercising its contractual right to withdraw" its membership in the association. The complaint accuses Tri-State of "fraudulently inducing" United to support a 2019 bylaw amendment, which, it says, Tri-State now seeks to use against United and the Colorado Public Utilities Commission.
Kit Carson Electric Cooperative of Taos, New Mexico, paid a $37-million exit charge to leave…
United in the filing says Tri-State's April 9 board resolutions allowing for more flexible contracts and establishing a methodology for becoming a partial-requirements member are illusory and "designed to imprison it and other Tri-State members" (see CEM No. 1586). The payment methodology for transitioning to partial requirements is "so punitive that no member can achieve a reasonable financial benefit" from doing so, United says in the complaint. The suit accuses Tri-State of "violating the duty of good faith and fair dealing" and of discriminating against United in favor of Kit Carson Electric Cooperative and Delta-Montrose Electric Association, smaller distribution co-ops that negotiated to leave Tri-State upon paying exit charges to buy out their wholesale electric services contracts.
United, a founding member of Tri-State, worked earnestly to help Tri-State and its other members amend the association's bylaws to create additional membership classes that allowed flexibility beyond the full-requirements contracts that had previously been required of members, United's complaint says. The contracts, which were executed in 2007 and expire in 2050, allow members to self-supply only 5 percent of their electricity needs. Tri-State management "failed to adapt to changes in the market and continued to source coal-generated power for its members instead of cheaper and greener renewable energy," the complaint says. Similar concerns motivated KCEC and DMEA to withdraw from Tri-State.
United and fellow Tri-State member La Plata Electric Association of Durango, Colorado, said in November complaints filed to the Colorado PUC that they wanted the option to invest in more local renewable energy and to purchase power on the wholesale market at prices now lower than those agreed to in the 2007 contracts. Both co-ops also asked the commission to intervene in developing fair exit charges. United had presented Tri-State with a draft partial-requirements contract in September, to which Tri-State did not respond by a Nov. 2 deadline [19F-0620E and 19F-0621E] (see CEM No. 1564).
The discovery process involved in pursuing its complaint against Tri-State at the Colorado PUC, United's suit claims, revealed fraudulent dealing by Tri-State to gain United's support for the April 2019 bylaws amendment. United spent years and hundreds of thousands of dollars working with Tri-State staff to modify its all-requirements relationship and promote the 2019 bylaws amendment to other Tri-State members, it says in the court filing. Tri-State never intended to allow United to make those modifications, the suit claims, "because it is United Power's load and purchases that have permitted Tri-State to avoid raising rates and prevented other member-owners from following Kit Carson and DMEA out the door." United represents nearly 17 percent of Tri-State's revenues, according to the complaint.
"Although Tri-State's publicly-stated purpose for amending the bylaws was to allow for partial requirements contracts, the amendment was only a pretext for Tri-State's actual purpose—creating a new class of membership that would permit the addition of non-utility members, to eliminate Tri-State's [Federal Energy Regulatory Commission] exemption and prevent United Power . . . from obtaining exit charges from the PUC," United says in its complaint. Tri-State added the non-co-op members following passage of the 2019 bylaws amendment, which brought the formerly exempt organization under FERC rate jurisdiction.
Tri-State attorneys "are desperately seeking the expedited assistance of [FERC] in creating a conflict that Tri-State will then use to claim that the [Colorado] PUC's jurisdiction has been pre-empted," United's suit alleges.
In a May 4 statement responding to the suit, Tri-State maintains it openly pursued FERC rate regulation in the interest of eliminating inconsistent rate treatment across the states in which it operates. "United Power voluntarily entered into a contract with its fellow members to share the costs of power, and now it seeks to leave without fairly sharing those costs," the statement says. "While consistently and repeatedly stating in Tri-State's boardroom and in the press that it has no desire to exit Tri-State, United Power sees an opportunity to buy power elsewhere, but it can only lower its own costs if it shifts more than $1 billion of costs onto its partners."
"United Power's motives and proposals should be examined by the FERC, where all utilities receive a fair hearing," Tri-State asserts in the statement. "Public utilities like Tri-State that are subject to FERC regulation must charge rates that are 'just and reasonable' and 'not unduly discriminatory or preferential.'"