The Federal Energy Regulatory Commission has rejected, without prejudice, Tri-State Generation and Transmission Association’s filing to become rate-regulated under the federal body.
FERC said Tri-State’s application was deficient, including because of insufficient cost-support data. The commission is allowing the power wholesaler to correct those deficiencies in updated filings.
“Importantly, the order is specific to the information in our tariff filings,” Tri-State spokesman Lee Boughey said in a statement issued Friday. “The FERC order addresses the form and content to Tri-State’s filing and explicitly states that its decision does not address the merits of our filings or the merits of any protests.”
Tri-State, which supplies wholesale power to more than 40 electrical cooperatives in the West, applied in July for FERC regulation, after previously voting to accept a non-utility membership class that would place it under federal rate authority.
Previously, its membership was composed of small rural co-ops or public power districts. By voting to accept a non-utility, Tri-State became subject to federal rate-regulation and filed a wholesale rate tariff with FERC.
The body had 60 days to make a decision and on Friday, deemed the application deficient.
Tri-State’s membership-class change was hotly contested by some cooperatives, including — at first — Delta Montrose Electric Association, which has since reached an agreement to buy its way out of its contract with Tri-State and is not affected by FERC’s decision.
“I think that’s good for Colorado, but it doesn’t change or do anything for DMEA. We’ve come to a separation agreement, so we’re done,” DMEA’s board president Bill Patterson said.
DMEA reached an agreement to end its power contract with Tri-State early. The buyout figure is under wraps for now, because of binding provisions of the separation agreement, but will be disclosed as part of Tri-State’s annual financial filings next spring.
“We can plan our future now, because we have a separation agreement and we know what that entails,” Patterson said.
DMEA is securing its financing and transmission assets and is considering a possible contract with Guzman Energy to supply its power.
“The big thing is it gives us flexibility of really using our local resources,” Patterson said, of the ability to negotiate a new contract with another provider.
The Colorado Public Utilities Commission and multiple other parties objected to Tri-State’s bid for federal regulation, although the company said its filing would not affect its obligations under facilities-related regulation by the state, environmental regulations or new carbon-reduction regulations.
No PUC official authorized to speak about the matter was available for comment Friday.
In July, Tri-State submitted a rate tariff and open access transmission tariff, or OATT, as part of its application to FERC, as well as 43 wholesale electric service contracts.
Tri-State’s wholly owned subsidiary, Thermo Cogeneration Partnership, LP, submitted an application for market-based rate authority and Tri-State further submitted some non-conforming transmission service agreements and other related agreements.
FERC in its Friday decision is in effect allowing Tri-State to go back to the drawing board: the association can submit a more complete set of filings to address the issues FERC spotted. The rate-tariff and OATT filings as submitted were deemed “patently deficient” for not complying with requirements.
The company “provided insufficient cost support and has failed to comply with the commission’s rate schedule requirements,” FERC’s decision said.
Tri-State was required to submit estimates of transactions and revenues under a rate schedule, including for the year immediately following the month in which its services are to begin, but FERC found it did not provide such estimates as part of its tariff filing.
Tri-State also didn’t provide sufficient cost-support materials to justify the cost-of-service rate, the document says, nor did it sufficiently explain its rate-design or calculations it used in deriving some of the rates.
“Given these deficiencies, potentially interested parties cannot determine how the proposed state rate might affect them and the commission cannot assess whether Tri-State’s proposed stated rate tariff is just and reasonable,” Nathaniel Davis Sr., FERC deputy secretary, wrote in the decision.
FERC requires a formula-rate. and to be transparent, the rate’s inputs should come directly from publicly available data or be reconcilable to such data. “Critically,” FERC and interested parties should be able to replicate the output of the formula rate as implemented by the transmission owner, the decision states.
Tri-State’s formula-rate was derived from company records and other data that are not reconciled by “clearly supported and identifiable documentation provided in the record,” FERC found, deeming the filing deficient in that regard.
Because FERC rejected the stated rate-tariff, it also rejected the wholesale service contracts that were dependent on that rate-tariff. Tri-State’s filing for transmission service agreements was rejected because they incorporated its proposed OATT, which the commission also rejected.
FERC further determined Tri-State and Thermo Cogen failed to demonstrate a lack of vertical market power as required by regulations; therefore, the commission rejected their respective applications for market-based rate authority.
“First-time FERC filings are complex, especially for a wholesale power supply cooperative like Tri-State,” Boughey said.
Tri-State is reviewing the order and will act quickly to address the issues FERC raised, he said, adding that the “without prejudice” designation means the company can refile.
“Notably, FERC has 60 days to respond to our filings and notified us of the filing issue a month before that deadline. We appreciate FERC notifying us in a timely fashion and we look forward to refiling with additional information,” Boughey said.