A Denver-based wholesale power provider is proposing a roughly half-billion-dollar deal under which Tri-State Generation and Transmission Association would retire coal assets in Moffat County and a New Mexico site and shift toward more renewable energy.
Guzman Energy's proposal would eliminate nearly half of Tri-State's coal-fired power capacity not already slated for early closure, with Guzman stepping in to supply that power to Tri-State, largely from renewable sources. It could help address the concerns of some of Tri-State's member local energy cooperatives who want to see Tri-State provide cheaper and cleaner power, and Guzman Energy says it also would help Tri-State comply with recent legislative requirements in Colorado and New Mexico.
The proposal would have serious economic consequences in Moffat County, where the Craig Station power plant and two local coal mines that supply it provide hundreds of jobs. Guzman Energy's proposal calls for the targeted coal-fired power plants to shut down by 2025. It is proposing providing what it says would be substantial financial assistance to impacted communities.
Guzman Energy has been providing wholesale power to Kit Carson Electric Cooperative in New Mexico after Kit Carson left Tri-State. Delta-Montrose Electric Association currently is trying to leave Tri-State and partner with Guzman Energy for power, and Colorado's Public Utilities Commission has agreed to consider its request for a determination on a fair exit fee from Tri-State.
Guzman Energy says senior Tri-State staff have agreed to evaluate its proposal but postponed consideration until implementation of the New Mexico laws and completion of the Colorado PUC and Air Quality Control Commission rulemakings, late next year at the soonest. Guzman says it is taking its proposal to Tri-State's member/owner co-ops and communities.
"There's a lot at stake for those who are ultimately on the hook for paying the bills," Guzman Energy Chairman Leopoldo Guzman said in a news release. "No matter what ultimately happens, the cooperative system will be better off having had an open dialogue about a matter that will affect their members and communities for decades to come."
In a written response Tuesday, Tri-State said Guzman Energy's proposal appears to ask for exclusive negotiations prior to development of state rules and exploration by Tri-State of a wide range of other options, which isn't in the best interests of Tri-State or its members.
Duane Highley, chief executive officer of Tri-State, said in the statement, "Guzman Energy brought us an imaginative and creative high-level verbal proposal, which lacked any specific or meaningful detail or terms. Tri-State requested a written proposal but Guzman refused to provide one, instead deciding to go the press."
He said Tri-State may well want to discuss the issues at hand with Guzman Energy and others. Tri-State has signed a nondisclosure agreement with Guzman should they have discussions, "and we would evaluate any proposal on its merits. We welcome Guzman to provide us with a more detailed written explanation of their proposal."
But Highley added, "Rather than entering into an exclusive agreement with a for-profit energy trader like Guzman Energy that drives financial returns for their hedge fund investors, we can likely accomplish our goals at a lower cost to our members by working within our not-for-profit cooperative business model."
Tri-State and partners that own the Unit 1 generating facility at the Craig Station already have agreed to shut down that plant by 2025, under an agreement to address haze in which it also will close its Nucla Station coal-fired plant in Montrose County by the end of 2022.
Under Guzman Energy's proposal, Tri-State would close the remaining two units in Craig. That would affect the nearby Colowyo mine and Trapper mines, which supply only the plant. Tri-State owns Colowyo and is a part-owner of Trapper.
Guzman Energy's proposal also would involve shutting down Tri-State's Escalante power plant in New Mexico.
Guzman Energy spokeswoman Kathleen Staks said the roughly half-billion-dollar amount is Guzman Energy's estimate of the costs of the early retirement of those assets, based on their book value, along with associated site remediation costs. "The assistance to communities is on top of that, and there are several other negotiating parts of the deal that could increase or decrease the cash portion of the proposal," she said.
This includes a proposal by Guzman Energy under which it would compensate Tri-State for increasing the cap on its members in terms of the local, often renewable energy they generate. Members can generate up to 5 percent on their own, with the rest having to come from Tri-State. That cap has been a point of aggravation for some Tri-State members, such as DMEA.
Staks said Guzman Energy isn't pretending that the money it proposes to help affected coal-based communities transition would offset the affected jobs or tax base, or even the indirect business that supports the power facilities and mine. But, she said, given the political winds in Colorado and New Mexico, such transitions are coming.
"We are trying to set an example of how a private company can be a part of this transition for the communities," she said.
She said that transition could involve anything from relocating people, bringing in business, broadband training opportunities, investment in schools, and locating renewable power sources such as wind and solar in the area. Existing transmission lines in Moffat County associated with coal-fired power could give it one edge in vying to host renewable power facilities.
"We definitely want to put as much (renewable power generation) in those communities as we possibly can," Staks said.
Guzman Energy doesn't currently own any power-generation assets of its own. Staks said that under its Tri-State proposal, it likely would put out requests for proposals to developers who would build and own the generation resources, with Guzman entering into a power purchase agreement with them.
She said the economics of its proposal are made possible by the fact that wind and solar power now costs less than coal power. In addition, current renewable energy tax credits help sweeten the deal, but those deals are slated to phase out, making Guzman anxious to reach a deal.
Its proposal comes as New Mexico lawmakers have set a renewable energy standard for utilities and electric cooperatives of 50 percent by 2030, with a goal of 80 percent by 2040, and zero-carbon requirements within the following decade.
In Colorado, lawmakers have set goals to reduce greenhouse gas emissions from 2005 levels by 26 percent by 2025, increasing to 90 percent by 2050, with it falling on air regulators to implement those goals. Lawmakers also are requiring the PUC to establish a base cost for carbon dioxide in energy resource plans, and requiring generation and transmission associations such as Tri-State to begin submitting such plans to the PUC. Staks said Gov. Jared Polis is scheduled to sign the bills Thursday.
Jasen Bronec, DMEA’s chief executive officer, said in an emailed statement that Guzman Energy’s proposal “does not affect our ongoing efforts to exit Tri-State in order to pursue rate stabilization and the ability to take advantage of more local generation.”
He added, “We believe that Guzman’s proposal presents an interesting opportunity for Tri-State to move towards a more modern, affordable, and environmentally friendly generation portfolio. We hope Tri-State takes it under consideration.”