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Why would Tri-State invite federal energy regulation?

Have you ever heard of a large company that welcomed federal oversight? What about one that actually went so far as to invite regulation?

Most companies want government regulation about as much as they want to bleed money. But in a rare, legal twist, Tri-State Generation and Transmission Association recently asked the Federal Energy Regulatory Commission (FERC) to regulate its rates in Colorado and neighboring states.

Whats the play?

An independent reporter and electric cooperative member at Clean Cooperative posted the memo that Tri-State sent member co-ops. In it, Tri-State lists several reasons it now wants FERC oversight, including:

  • It would override state jurisdiction over contract buyouts by member co-ops
  • In turn, FERC oversight would get rid of the case-by-case costs of opposing state regulation
  • It would increase rate stability
  • Tri-State would only have to meet FERC rate formulas

Tri-State acknowledged that it would still have to follow state guidelines for facilities and resource planning. It also acknowledged that the move would mean some increased costs, such as:

  • An annual fee, now at roughly $1.3 million
  • Extra litigation
  • Extra staffing

However, Tri-State clearly felt the costs were acceptable. This is likely due, in part, to its recent contract disputes with member co-ops Kit Carson Electric Association and Delta-Montrose Electric Association.

As The Denver Post reported, those member co-ops wanted to exit the Tri-State co-operative because they felt Tri-State’s rates were too high and because they felt the company wasn’t moving fast enough toward renewable energy sources. When Delta-Montrose felt Tri-State’s exit fee was too high, they asked Colorado’s Public Utilities Commission to intervene.

By asking the FERC to regulate its business, Tri-State hopes to prevent Colorado’s PUC or other state PUCs from getting involved in future disputes. In fact, another conflict might have already been brewing as the La Plata County Electric Association had started looking at its own exit.

Can Tri-State ever get away from FERC oversight?

In one of the more telling lines from Tri-State’s memo, the company asserts, “Tri-State would always have the option of leaving FERC regulation.” Such a move would certainly be far more complex than the sentence that predicts it. But it suggests how Tri-State views the situation—as a shrewd legal gambit. This looks every bit like a clever legal play in which the company has bet its hand with federal law and oversight to escape competing pressure from the states.

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