Tri-State loses one member; sees fuel costs increase this year

The Tri-State Generation and Transmission Association lost one electric utility member and saw its fuel costs rise during the first half of 2016, according to a filing with the U.S. Securities and Exchange Commission (SEC).

Tri-State serves  distribution members in parts of Colorado, Nebraska, New Mexico and Wyoming.

Tri-State currently has 43 members after the June withdrawal of the Kit Carson Electric Cooperative (KCEC), according to the 10-Q report filed with the SEC.  

“We supply and transmit our Members’ electric power requirements through a portfolio of resources, including generating and transmission facilities, long-term purchase contracts, and forward, short-term and spot market energy purchases,” Tri-State said.

Tri-State serves about 600,000 retail electric meters over a nearly 200,000 square-mile area. Tri-State sold 8.8 million megawatt hours (MWh) for the six months ended June 30, of which 86.7% was to members.

“We also sell a portion of our generated electric power to other utilities in the region pursuant to long-term contracts and spot sale arrangements,” Tri-State said in the SEC filing.

Total revenue from electric sales was $604.1m for the six months ended June 30, of which 90.6% was from member sales.

The fuel expense, largely for coal and natural gas, increased $16m, or 44.9%, to $51.6m for the three months ended June 30, 2016 compared to $35.6m for the same period in 2015.

The increase in expense was primarily due to higher coal expense at the Craig Generating Station resulting from an increase in generation and lower coal expense in the second quarter of 2015 resulting from the one-time recognition of $24.4m as a reduction to fuel expense because of a Burlington Northern Santa Fe (BNSF) rate settlement.

The effect of the BNSF rate settlement was partially offset by lower coal expense at the Nucla Generating Station due to a planned outage, Tri-State reported.

The Kit Carson withdrawal agreement provided for the termination of the wholesale electric service contract between Tri-State and KCEC that extended through 2040 and the withdrawal of KCEC from membership in Tri-State.

As part of the withdrawal agreement, Tri-State received $37m net cash, which consists of $49.5m as an early termination fee for withdrawing from membership in us offset by $12.5m for the retirement of KCEC’s patronage capital, Tri-State reported.

There was also activity on the legal front during the quarter.

On Feb. 17, Tri-State filed a Petition for Declaratory Order with the Federal Energy Regulatory Commission (FERC) seeking a declaratory order from FERC finding that the fixed cost recovery mechanism in Tri-State’s proposed revised board policy is consistent with the provisions of Public Utility Regulatory Policies Act (PURPA) of 1978, as amended and the implementing regulations of FERC.

The revised provides for recovery of the unrecovered fixed costs directly from that member utility as a result of that member purchasing power from a “qualifying facility” (QF) in an amount that causes it to exceed the 5% limitation on that Member’s self-supply of power pursuant to its wholesale electric service contract, rather than allocating the costs among all of our members.

“The fixed cost recovery is calculated based on the difference between our wholesale rate to our Members and our avoided costs,” Tri-State said in the SEC filing.

“On June 16, 2016, FERC denied our Petition for Declaratory Order related to the fixed cost recovery mechanism in our revised Board policy. On July 18, 2016, we filed a Request for Rehearing with FERC regarding FERC’s June 16 order. In addition, five other generation and transmission cooperatives have filed a Request for Rehearing with FERC,” Tri-State said.

“We are evaluating the impact of FERC’s denial and cannot predict the outcome of our July 18 request for rehearing filed with FERC,” Tri-State said in the SEC filing.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.