FERC Rules Against Tri-State Fee on Local Renewable Power

by | Jun 29, 2016

In a unanimous decision (Docket No. EL16-39-000) issued June 16, the Federal Energy Regulatory Commission (FERC) struck down a fee imposed by Tri-State Generation & Transmission Association on its wholesale electric customers – among them, Delta-Montrose Electric Association (DMEA) – when purchase up to 5 percent of their power from other energy from other local qualifying facilities that generate renewable energy (such as solar or wind capacity).

Tri-State is a wholesale electric power supplier owned by the 44 electric cooperatives that it serves. Tri-State generates and transmits electricity to its member systems throughout a 200,000 square-mile service territory across Colorado, Nebraska, New Mexico and Wyoming.

The ruling came on the heels of a 2015 FERC finding that DMEA must buy from renewable generation projects at negotiated rates under the terms of the federal Public Utilities Regulatory Policy Act (PURPA).

The 2015 ruling confirmed that PURPA requires such negotiated purchases, regardless of whether they are allowed under Tri-State customers’ wholesale electric contracts.

In response to that 2015 ruling, Tri-State adopted a new board policy (Policy 101) – enabling the supplier to impose a “lost revenue recovery fee” on electric cooperatives, like DMEA, that make the required renewable purchases. The fee would have required DMEA to pay Tri-State for the revenue Tri-State “loses” when DMEA buys energy from the renewable projects instead of from Tri-State.

Last February, Tri-State filed its own action with FERC, asking the commission to declare that federal law allowed the fee. DMEA opposed Tri-State’s request, arguing that it would essentially undo FERC’s 2015 ruling.

FERC agreed with DMEA, denying Tri-State’s request and stating that Tri-State’s fee on the cooperative sought “to undermine the commission’s prior order” from 2015 “by imposing financing burdens” on DMEA that would inhibit DMEA’s required renewable purchases.

The commission concluded that, not only did Tri-State’s fee undermine FERC’s previous order, but it would also impermissibly “limit a [renewable generator’s] ability to sell its output at negotiated rates,” as required by PURPA.

“[This] ruling is a victory, not just for DMEA and its members, but for people and communities throughout Delta and Montrose counties [in Colorado],” said Bill Patterson, chairman of the DMEA Board of Directors. “FERC’s decision reaffirms that DMEA cannot be financially disadvantaged for following the law and purchasing local, renewable power.”

More than 120 individuals and organizations—from across the political spectrum—supported DMEA’s position before FERC. “Community support for DMEA was overwhelming,” said Patterson. “We are sincerely grateful to all of the members, communities, businesses, and chambers of commerce who supported us.”

DMEA CEO Jasen Bronec also noted that the FERC ruling “will further DMEA’s long-term strategic goal of diversifying our power supply, which means more stable rates to our members and lesser impacts from any future power rate increases.”

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