La Plata Electric Association’s board of directors voted 9-3 on Monday to fully withdraw from its contract with Tri-State Generation and Transmission Association, its wholesale energy provider.

Under terms of the contract, LPEA is obligated to purchase at least 95% of its power from Tri-State through 2050. LPEA has objected to that limit, saying local demand to produce solar energy exceeds the 5% cap.

Since 2019, the two co-ops have been negotiating new terms of a contract or a full withdraw from the contract so that LPEA can meet the desires of its members to pursue more local generation.

Now that the board has voted to leave the contract, LPEA will enter a two-year exit period.

The exit period was part of an agreement between the Federal Energy Regulatory Commission, Tri-State and LPEA if one party wanted to part ways.

According to the board resolution, interim CEO Graham Smith has been instructed to file a nonconditional notice of intent to withdraw from Tri-State.

“This decision was not made lightly and is in alignment with the cooperative principles we were founded on almost 85 years ago,” said Ted Compton, board president of LPEA in news release Monday. “We want the autonomy to manage our future as we are more familiar with unique opportunities and challenges in our backyard than someone on the Front Range.”

Over the past five years, LPEA has presented multiple solutions for its energy future to Tri-State, but Tri-State has not developed any solution approved by its regulator, FERC, the release said.

LPEA wants out of its contract with Tri-State because it has been unable to have direct control over its own rates or ability to seek clean energy opportunities.

The co-op said staying with Tri-State creates risk for LPEA members, including potential rate increases through a formulaic equation that skirts FERC’s approval.

“That would allow Tri-State to change its rates without FERC regulation on a yearly basis, and that’s the sort of risk that we’re talking about,” Compton said Tuesday. “Historically, Tri-State has either had to get its rate increases or decreases approved by a regulatory agency.”

FERC has rejected Tri-State’s formulaic rate proposal previously but Compton said Tri-State is still trying to modify the proposal for approval.

On Monday, Tri-State issued a statement about LPEA’s decision to leave Tri-State. The statement said LPEA’s estimated contract termination payment would be around $209.7 million.

“Tri-State’s members have created tremendous momentum toward an energy transition that will provide long-term reliability and rate competitiveness, while reducing emissions and increasing flexibility to provide industry-leading optionality for members,” said Duane Highley, Tri-State CEO in the statement. “LPEA’s board has chosen not to be part of this future and to go it alone on a different path, even as the region faces increasing reliability challenges. Tri-State’s members, however, will continue to benefit from our transparent, not-for-profit solution for the changing electricity market.”

Compton said the $209.7 million figure has been thrown around in previous discussions but may not be representative of the true buyout cost. Factors such as Tri-State’s debt to its co-ops and its usage of purchase power agreements could adjust that number. LPEA won’t have a definitive answer about the buyout cost until April 1.

LPEA’s decision to withdraw from Tri-State is not without detractors.

Former La Plata County Commissioner Brad Blake said the public has been made aware of the potential buyout cost and whether it will lead to rate increases.

“Buying out of this contract is going to drive all the rates up for a minimum of 10 years, maybe even longer,” he said. “And that hurts the poorest people in our county. High energy prices, high electricity costs, hurts the people that can least afford it the most in our county, and it’s very disappointing that they don’t take that into consideration.”

Blake said more public notice should have been given leading up to the decision. It was a sentiment shared by LPEA District 4 candidate John Purser, who criticized the board for its lack of transparency.

In an email to The Durango Herald, Purser said the board failed to publish the resolution in advance of Monday’s meeting, state the buyout cost, address concerns about the dependability of alternate power sources and address questions about the economics of the buyout.

“I consider the meeting to be typical of the board’s lack of transparency and its lack of respect for LPEA members,” Purser said in the email.

Information about the special meeting held over Zoom and its agenda had been posted to the co-op’s website before the decision on Monday.

But the agenda item had been listed as “Power Supply Resolution 2024 – 03” and did not reference Tri-State. Compton said discussion of the Tri-State contract has always been referenced as “Power Supply” on meeting agendas.

Compton also said because LPEA purchases 95% of its power from Tri-State, it should be well understood what a power supply resolution is discussing.

“It’s difficult to be extremely transparent, and still strategic,” Compton said about the complaints.

He said it is difficult for an organization to highly publicize its strategies in negotiations without negatively impacting outcomes.

“We can’t say what we’re doing before we do it and expect to hold strategic advantage in that,” Compton said.

Board member Kohler McInnis, who represents south and west La Plata County, was among the three board members who voted against the contract buyout.

“We have goals we have come up with over the years, and this will shoot those goals out of the picture,” McInnis said. “It’s a real concern I have. I also think that if you spend too much buying out, do you have enough left to do some of these opportunities that are in front of you?”

McInnis also serves as a representative to Tri-State, according to LPEA’s website.

He said he is concerned LPEA does not have a replacement for Tri-State as a wholesaler. He is unsure if the move will involve multiple wholesalers or not.

“I think right now we’re looking at different contractors that can provide different types of power, different generation types, different location, stuff like that,” McInnis said.

He said the co-op will likely have to borrow a significant amount of money that will eventually have to be paid back, causing member rates to increase.

Compton said the board will continue to move forward and figure out wholesale options for LPEA. What that may look like has not yet been established.

“There are lots of other options and it could end up being – I don’t love this term – but it could end up being a smorgasbord of a lot of different power supply options,” Compton said.

tbrown@durangoherald.com