Bill Patterson admitted to staying up Tuesday night, waiting with trepidation. The president of the Delta-Montrose Electric Association’s board knew something most people weren’t considering: After more than a year of contract wrangling with DMEA’s former wholesale supplier, the cooperative was officially switching over to supply from Guzman Energy.
“I was very happy when the lights didn’t flicker. It was smoothly transferred over,” Patterson said.
“It’s exciting times now. We can actually plan the future.”
DMEA formerly purchased power from Tri-State Generation & Transmission Association. After a lengthy battle involving the Colorado Public Utilities Commission and Federal Energy Regulatory Commission, Tri-State and DMEA reached an agreement that allowed the co-op to withdraw from its contract before the 2040 expiration date.
Cooperative CEO Jasen Bronec said the departure represents a new chapter and that both DMEA and Tri-State realize it is important to look forward to the benefit of their members.
“We recognize our ongoing partnership with Tri-State in various areas, such as transmission, and appreciate the importance of our continued operation. We wish Tri-State and its member-owners well,” Bronec said, in a joint news release with Tri-State.
Tri-State CEO Duane Highley also extended well-wishes to DMEA members and the co-op.
“The separating of a distribution cooperative and a generation and transmission cooperative after 28 years together is complex, and we appreciate the efforts of our respective teams to complete this work,” he said.
Under a 12.5-year contract with Denver-based Guzman Energy, Guzman paid DMEA’s $62.5 million exit fee from Tri-State and DMEA purchased $26 million for transmission assets from Tri-State, also forfeiting its capital credits.
Guzman agreed to supply at least 40% of power from renewable energy sources. The rest of the supply source is a mix of energy types, like with any other supplier, DMEA Chief Operating Officer Virginia Harman said.
“The whole thing is about price,” Patterson said. “They look at where they can get good power supply at the lowest cost.”
He said it would be difficult for Guzman to pinpoint, day-to-day, how much power came from wind, solar, or coal; the energy mix could be “all over the place.”
The contract further allows DMEA to obtain up to 20% of its power from other sources, such as local hydro projects, a method called “self generation.” That contract provision is far more generous than Tri-State’s cap for self-generated power, which was 5%, and which DMEA had already hit.
“Our focus on that 20% is local, renewable generation,” Harman said.
“Right away, we’re at 20% self generation,” Patterson said. “It’s quite a bit more. And we will be working with Guzman on locally generated power. Now we have a future we can plan on, so what can we do with that, and how do we end up where we want to be — which is for lowest-cost power and cleanest power.”
Guzman and DMEA are teaming up to build a large-scale solar project that would generate at least 10 megawatts.
“Local associations, like DMEA, are leading the nation in driving a cleaner, more sustainable energy future by exiting the agreements that limit their ability to innovate and better serve their members,” said Robin Lunt, Chief Strategy Officer of Guzman Energy, in a news release Guzman issued with DMEA.
“We are proud to see this partnership come to fruition and look forward to helping DMEA with this transformative solution.”
DMEA celebrated the official transition Wednesday, with an informal bagel-and-coffee reception at Backstreet Bagel, where more than 100 co-op members stopped by. The celebration capped off an agreement formalized in April, which had been in the works since DMEA began its efforts to end its Tri-State contract.
Among the many steps, DMEA needed to acquire physical transmission assets from Tri-State.
“We got all the agreements we needed in place with Tri-State and WAPA (Western Area Power Authority). As of yesterday, the transmission assets that belonged to Tri-State now belong to us,” Harman said.
Over the next six to eight weeks, transition of assets in substations DMEA shares with Tri-State will take place.
The shift to Guzman as power supplier also entailed finalizing agreements for meter-sharing and dark fiber.
“We were kind of anxiously waiting to see that no last-minute glitches showed up,” Patterson said of the transition Tuesday night into Wednesday morning. “They did, but they still made a very smooth transition for DMEA. We are officially out of Tri-State. All the money has been transferred and our power supply is Guzman Energy.”
Guzman has assisted other cooperatives and municipalities in exiting their supply agreements with large-scale generation and transmission companies.
“This partnership will make a significant impact on our local community, in the form of price stability, increased local generation and local economic development,” Bronec said, in the news release DMEA issued with Guzman.
“We expect to save millions of dollars over the next 12 years. In fact, we have no plans to increase energy rates for our members through 2021, thanks to this beneficial agreement.”