A Colorado utility’s attempts to avoid oversight by state regulators appears to be backfiring.
At a Colorado Public Utilities Commission hearing this week, Commissioner Frances Koncilja said she has “some serious questions about whether or not Tri-State has been candid with us,” and reminded the attorneys for electric utilities that “everyone who appears before a tribunal has an obligation of candor to the tribunal.”
Commissioner asked Tri-State in February if it planned to “run off to FERC”
The commissioner’s comments came during a July 15 hearing concerning the dispute between Delta-Montrose Electric Association (DMEA), an electric cooperative in western Colorado, and Tri-State Generation and Transmission Association, a wholesale power provider headquartered near Denver. DMEA has been seeking to end its contract with Tri-State, which requires the co-op to purchase wholesale power from Tri-State, in order to pursue more local renewable energy projects and reduce its wholesale power costs. The Colorado PUC has been holding hearings since the beginning of 2019 to determine the “exit fee” that DMEA will have to pay to Tri-State in order to end its contract.
But last month, Tri-State moved to become rate-regulated by the Federal Energy Regulatory Commission (FERC), which could preempt the Colorado PUC’s jurisdiction over the DMEA dispute and derail the case just as the PUC neared a decision in August. That forum shopping is what incited Commissioner Koncilja’s questioning of Tri-State’s candor with the PUC; she had asked Tri-State months earlier if Tri-State planned to try and move the case to FERC, and did not receive a direct answer.
During a hearing on February 6, Commissioner Koncilja directly asked Tri-State attorney Thomas Dougherty, “Is any FERC jurisdiction implicated in this dispute?”
Dougherty responded: “I’m not sure I understand your question Commissioner.”
Koncilja asked again: “Is somebody going to run off to FERC at some point?”
Dougherty again dodged the question: “Umm… at some point in the future or during the pendency of this case?”
Commission requests Tri-State communications regarding FERC rate regulation
Commissioner Koncilja questioned this week whether Dougherty had failed in his obligation to be candid to the PUC as an attorney, or whether the failure was Tri-State’s.
“We expect candor. And I am not saying that it is Mr. Dougherty who was not candid. It might well have been his client,” said Koncilja.
Koncilja also raised the possibility of public hearings to question Tri-State executives about the company’s conduct before the commission, and requested that Tri-State provide the commission with its communications regarding its pursuit of FERC rate regulation.
Colorado PUC Chairman Jeff Ackermann agreed with Commissioner Koncilja’s request for Tri-State’s communications, and on Thursday the commission ordered Tri-State to “file a summary of all actions” it took to pursue FERC rate regulation.
Tri-State’s pursuit of FERC rate regulation has raised a variety of concerns, including that it could make it harder for other co-ops to end their contracts with Tri-State.
In accordance with Supreme Court precedent, FERC applies this much higher burden of proof to requests to modify or abrogate bilateral contracts. The late Justice Scalia once called the public interest standard “practically insurmountable.” 2/3 https://t.co/SUWM5m45BZ— Jeff Dennis (@EnergyLawJeff) July 9, 2019
Chairman Ackermann echoed those concerns during Monday’s hearing: “I think it’s clear that they will be captive as soon as that submission happens, or that sequence into jurisdiction, that you have captive members there and it’s a different path than the path through the Colorado PUC, clearly.”
Legislators are also concerned that FERC rate regulation of Tri-State could hamper the Colorado PUC’s oversight of Tri-State’s resource planning process, which was clarified in legislation that Colorado Governor Jared Polis signed in May.
Tri-State says it will comply with Colorado’s new climate policy, as well as New Mexico’s recently expanded renewable portfolio standard. But environmental advocates and some Colorado legislators are concerned that without oversight of Tri-State’s rates, the Colorado PUC could face challenges in enforcing its oversight of Tri-State’s resource planning.
Tri-State also eroded trust with top Colorado legislators
Key Colorado legislators highlighted those concerns in a July 3 letter to Tri-State CEO Duane Highley and Chairman of the Board Rick Gordon: “Given the connection between rates and resource planning, we are concerned that Tri-State was not more transparent about the possibility of transitioning to FERC oversight” during negotiations earlier this year.
The letter was signed by the leadership of the Colorado Senate and Assembly, including Speaker of the House KC Becker, Senate President Leroy Garcia, House Majority Leader Alec Garnett, and Senate Majority Leader Stephen Fenberg, as well as the chairs of energy committees: Representative Dominique Jackson, Chairwoman of the House Energy and Environment Committee, Senator Faith Winter, Chairwoman of the Senate Energy and Transportation Committee, and Representative Chris Hansen, Chairman of the Interim Energy Legislation Review Committee, which will begin hearings this month to consider energy policy ideas for the 2020 legislative session.
The legislators left no doubt of their intent to respond in the next legislative session to Tri-State’s latest moves:
“The General Assembly looks forward to making clarifications through legislative initiatives in the coming session focused on cooperative governance, transparency, and accountability to the public interest.”
Several of Tri-State’s largest member co-ops also wrote to Tri-State requesting more information about the implications of FERC rate regulation before the Tri-State board voted on the matter.
Despite those requests by legislative leaders and some of its major member co-ops, Tri-State approved a resolution during its July board meeting to move toward FERC rate regulation.