Electricity Markets

Tri-State G&T cannot impose fee on co-op for buying from QF, says FERC

In a dispute between Tri-State Generation and Transmission Association and one of its members, Delta-Montrose Electric Association, over whether the Colorado co-op must pay Tri-State for unrecovered costs associated with Delta-Montrose's purchases from a Qualifying Facility (QF), the Federal Energy Regulatory Commission issued an order on June 16 that sides with Delta-Montrose (Docket EL16-39-000).

FERC nixed a Tri-State proposal that would have required Delta-Montrose to compensate Tri-State when it purchases more than 5 percent of its power from qualifying facilities under the Public Utility Regulatory Policies Act of 1978, or PURPA. FERC said that the Tri-State proposal to impose such a fee was inconsistent with Section 210 of the 1978 law.

The dispute stems from a wholesale power contract that Delta-Montrose executed in 2001 with Tri-State. That contract is in effect until 2040. Under it, Tri-State is responsible for meeting at least 95 percent of Delta-Montrose's needs for capacity and energy. The cooperative may elect to obtain up to 5 percent of its requirements from generation that it owns or controls.

Delta-Montrose received a request to interconnect with and purchase power from a small hydroelectric project to be built by Percheron Power LLC. Doing so would put Delta-Montrose over the 5 percent limit "for the first time, raising the question of whether the contract with Tri-State may affect its obligation to purchase from a QF under PURPA," FERC said in an order it issued in the proceeding in June 2015.

In that 2015 order, FERC said that Delta-Montrose "is obligated by Section 210 of PURPA and Section 292.303(a) of the commission's regulations to purchase power from any QF that can deliver its power to Delta-Montrose, regardless of the terms of Delta-Montrose's contract with Tri-State."

Further, FERC stated, "the terms of the contract cannot control the rights of a third party QF to sell power to any electric utility that it can deliver its electric energy to."

In July 2015, another of Tri-State's 44 member cooperatives, Kit Carson Electric Cooperative, asked FERC to clarify or rehear its June 2015 order. Kit Carson stated that it was similarly situated to Delta-Montrose and requested that FERC clarify that its order would apply to it as well. The commission responded last October, saying that its order had been clear (i.e., Tri-State members are obligated to purchase from QFs), and denied Kit Carson's request.

In February 2016, Tri-State filed a request with FERC asking the commission to approve its policy requiring compensation from any members such as Delta-Montrose, if they purchase power from QFs in excess of 5 percent of their requirements.

FERC said no.

"We find that Tri-State's proposal seeks to undermine the commission's prior order in Delta-Montrose, by imposing financial burdens on Delta-Montrose that could affect its purchasing from QFs above the contract's 5 percent limitation," FERC said in its June 16 order. The proposal "would also limit a QF's ability to sell its output at negotiated rates," FERC added.

Kit Carson to withdraw from Tri-State

On June 21, Tri-State signed an agreement with Kit Carson Electric Cooperative under which the New Mexico cooperative will withdraw its membership in Tri-State. The agreement is subject to KCEC's receipt of certain approvals and provides for the termination of the wholesale electric service contract between the two.

"We have reached a mutual and amicable agreement to part ways," said Tri-State Chief Executive Officer Mike McInnes. "The agreement is fair and equitable, and protects the interests of all the association's members."

"This separation serves both our cooperatives well, allowing us to move forward to best serve our respective members' needs and wants," said KCEC Chief Executive Officer and General Manager Luis Reyes.

Additionally, Tri-State and KCEC will sell to each other certain transmission and distribution infrastructure facilities and enter into operations agreements for jointly owned or collocated infrastructure.

KCEC became a member of Tri-State following the association's merger in 2000 with Plains Electric Generation and Transmission Cooperative of Albuquerque, N.M., which added 12 New Mexico cooperatives to Tri-State's member distribution system network.