United Power, Tri-State settle on terms for divorce

BRIGHTON and WESTMINSTER — A settlement agreement has been reached between Westminster-based nonprofit wholesale power supplier Tri-State Generation and Transmission Association Inc. and its largest member, Brighton-based electric cooperative United Power Inc., that will complete the companies’ contentious two-year divorce.

The companies this month executed a pact that sets forth terms for the two utilities to make good-faith efforts to execute a formal settlement agreement involving power purchases and the sale of utility assets from Tri-State to United Power.

Elements of the term sheet include a mutual release of claims and provisions specifying that the parties will cooperate to complete a settlement agreement and related agreements by Dec. 8. At that time, under the agreement, United Power and Tri-State will jointly file for dismissal of a lawsuit, with prejudice, that is pending in Adams County District Court. United Power had sued Tri-State in May 2020, alleging that Tri-State illegally granted members to its roster so it could become subject to the Federal Energy Regulatory Commission instead of the Colorado Public Utilities Commission. United Power had alleged a yearslong conspiracy to keep it from exiting the association of local electric providers.

Tri-State’s board of directors unanimously approved the term sheet on Nov. 1, and United Power’s board approved it on Monday.

The companies had taken steps during the same week in September to advance the separation. Tri-State filed an unexecuted version of the membership withdrawal agreement with the FERC that would break a contract that would have extended until 2050. Two days later, United Power announced a partnership with investor-owned utility Xcel Energy (Nasdaq: XEL) in which Xcel will provide United Power and its members with excess low-carbon, renewable electricity.

Under the newly ratified agreement, Tri-State and United Power will continue taking actions to ensure United Power’s exit by May 1 upon making a contract termination payment. That amount will be set by the FERC based on a rate schedule to be calculated April 24, and Tri-State would have the right to terminate the agreement if United Power defaults, as well as termination rights for either party. Tri-State requested that FERC accept the withdrawal agreement with an effective date of Nov. 12.

The settlement agreement will not address the FERC proceeding related to the contract termination payment that members will pay to Tri-State to terminate their contracts early and withdraw from membership. The parties expect the commission to issue a decision in that proceeding shortly.

United Power, a member-owned not-for-profit electric cooperative, serves nearly 110,000 meters and maintains and operates more than 6,500 miles of distribution line. Its 900-square mile service territory wraps around the north and west borders of Denver International Airport and includes the north and northeast metropolitan development corridors along Interstates 25 and 76, U.S. Highway 85, E-470 and Golden Gate and Coal Creek canyons. United Power’s system is experiencing significant demand and energy growth, averaging approximately 6% annually.

Tri-State is a power supply cooperative of 45 members, operating on a not-for-profit basis, including 42 utility electric distribution cooperative and public power district members in four states. It delivers power to more than a million electricity consumers across nearly 200,000 square miles of the West.

As they prepare to part ways, United Power and Tri-State have disagreed over how quickly coal can be phased out as a power source in favor of renewable energy, a dispute that has played out before FERC, other regulators and the courts.

Although neither United Power nor Tri-State would comment about the settlement agreement on Wednesday, Lee Boughey, Tri-State’s vice president for communication, said in an email to BizWest that his company’s focus will be on “continuing to provide reliable, affordable and responsible power and services to our members. We are excited for the future, and all the steps we identified in our Responsible Energy Plan announcement in January 2020 are moving forward.”

Tri-State, Boughey said, is building a 200-megawatt Escalante solar project in New Mexico and will host an event with its members at the project site on Thursday. He said half of the energy his members consume will come from renewable resources by 2025, and that Tri-State’s carbon emissions in Colorado will be reduced by more than 80% by 2030 from levels in 2005.

“Members continue to benefit from a 4% reduction in Tri-State’s wholesale rate, put in place in 2021-22 and continuing through 2023,” Boughey wrote. “Uniquely, Tri-State’s Class A wholesale rate covers all the costs of power delivered into our members’ distribution systems.”

He said Tri-State has filed with FERC for a new wholesale rate for its members that the company expects to be in place by Jan. 1.

“We are looking at ways to reduce rates in the future, including taking advantage of federal funding, and hope that we can go another seven years without another rate increase,” Boughey wrote.

“We will file our new Electric Resource Plan on Dec. 1,” Boughey wrote to BizWest. “We have proposed new reliability metrics that will help ensure the lights continue to stay on during the longest of winter storms or hottest summer days, even as we move to more renewable sources.”A United Power spokesperson declined to comment on the company’s plans and ventures on Wednesday, but referred BizWest to the goals set out in its “Cooperative Roadmap.”

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