Energy & Industry A rural utility bucks against its power supplier In a coal-producing region, this western Colorado co-op fights for renewables.

The relationships between rural energy co-operatives and the utilities that provide their power are usually pretty subdued. Like partners in a long and stable marriage, they mostly understand each other and few disputes make it out of the boardroom.

But earlier this year, it became clear that things have deteriorated between Delta-Montrose Electric Association and its provider, Tri-State. The two have quietly—and not so quietly—been at odds for years over whether Delta-Montrose, a rural electricity cooperative based in Montrose, Colorado, could go outside their relationship to generate some of its own power. Finally, in February, Delta-Montrose called on federal regulators to resolve the dispute.

On Feb. 9, Delta-Montrose filed a petition with the Federal Energy Regulatory Commission (FERC), which regulates much of the nation’s energy transmission. In it, Delta-Montrose asked for the commission to clarify federal law, which could require Tri-State to loosen the ties that bind. Delta-Montrose is allowed to get a small fraction of its power—five percent—from a provider besides Tri-State. But it would like to sign up with a company hoping to construct a small hydro project. The company's plan is to essentially place a small hydropower turbine in one of the area’s many agricultural canals.

That kind of project would create local jobs and make energy cheaper in the long run for the 27,000 Western Colorado residents who are a part of the rural electric co-op, which powers three counties and the town of Paonia, where High Country News is headquartered. The filing could open the door for many more such projects for Delta-Montrose. But it could also encourage a wandering eye for other Tri-State co-ops, setting the stage for a drop in the amount of demand for Tri-State’s power.

The dispute between Delta-Montrose and Tri-State goes back years but mostly failed to attract much attention from the public. Delta-Montrose was one of two co-operatives that refused to extend their contracts past the current expiration date in 2040. The co-op also fought to renegotiate its existing contract last fall to open more space to generate its own power. That move failed, when 28 of the 44 co-ops under Tri-State voted against an altered contract.

That’s no surprise, though, because co-operatives like these have a reputation for a conservative loyalty to coal. That’s in part thanks to the structure of how energy gets to rural consumers.

Like layers of a wedding cake, rural energy providers are arranged in a set of stacked relationships. At the bottom are the energy consumers or cooperative “members,” the farmers, ranchers, grocery store owners, and schoolteachers who live in rural areas and are not served by municipal utilities. They receive their energy from the next level in the pyramid: distribution co-operatives like Delta-Montrose. At the top are giant providers like Tri-State, which generally invest in massive, long-term plants, mostly fired by coal.

This setup can make it difficult to push changes forward.

The cooperatives are run by elected boards, which make decisions about things like whether energy bills can be paid electronically and whether to set up an emergency fund for members experiencing a financial disaster. If a move to renewables means a hike in rates, members are unlikely to support it and their elected representatives are unlikely to risk getting voted out. Small cooperatives also typically struggle to find the capital to build their projects, which keeps them reliant on Tri-State’s energy. Those forces mostly keep everyone in line, and that’s why Delta-Montrose’s petition to FERC is so unusual.

“People get shut down pretty quickly in this process,” says Johnathan Hladik, the senior energy policy advocate for the Nebraska-based Center for Rural Affairs. “There are plenty of stories of local wind projects getting shut down because local energy providers (such as DMEA) won't buy the energy.” Most attempts to move to non-coal energy sources die off at this level.

That’s not the case for Delta-Montrose, where the board has aggressively pushed for renewables for years and where members have written letters of support to FERC.

In this case, the barrier is at the next layer, the generation and transmission level: Tri-State, who actually produces and sells the electricity that gets to rural consumers. A portion of the rates individual members pay to the co-ops go to these big guys, to pay for the high costs of energy infrastructure, like coal plants and transmission lines. In theory, the small co-ops may also help run the large-scale providers, many of which are co-ops as well.

But experts like Hladik say that the influence actually goes the other way, with the generators’ staff providing most of the information and policy guidance to the co-ops. And that influence typically means co-ops receive a pro-coal, or renewable-resistant, message. Generators are often locked into decades-long loans for coal plant construction and many have deep ties to the coal industry.

Tri-State itself has opposed the Environmental Protection Agency’s proposed Clean Power Plan and is backing construction of at least one coal plant, in Kansas. But it has also made strides in developing renewable power, which now makes up roughly 20 percent of the energy it provides to its co-ops, according to a January news release.

Still, several local generation projects in the Delta area and elsewhere have failed to gain traction, including power from coalmine methane releases and small-scale hydro projects.

All of that means the two sides are at loggerheads. The FERC petition, then, is Delta-Montrose’s attempt to break the stalemate. The language of the filing targets a provision in its contract with Tri-State that limits the amount of non-Tri-State generated power Delta-Montrose can purchase. If Delta-Montrose prevails with FERC, board members estimate they could provide as much as half of their own power, using local projects. It would also open the door for other Tri-State co-ops to begin generating more of their own power, a freedom at least a few are interested in. Given that Tri-State’s area covers four states, the implications could reverberate through a substantial portion of the West.

A decision in favor of Delta-Montrose could also affect a handful of other generation and transmission cooperatives with funding models similar to Tri-State. Previous attempts to force Tri-State’s hand were held up by a quirk of energy law, which regulates different providers based on who holds their loans. Until last fall, Tri-State’s substantial loans were held by the federal government, which, paradoxically, shielded it from many of the federal regulations other public utilities face. But last fall, Tri-State sought private investment, which Delta-Montrose says opened it to FERC regulation, and which helped precipitate this petition.

Still, many of Tri-State’s co-ops have fought against Delta-Montrose’s petition. For them, the decision could mean a steep increase in electricity rates, as the costs of electricity generation are shared among fewer co-ops and their rate-paying members. They may also lack the renewable resource abundance of the Delta-Montrose area, the financial resources to take advantage of it or the political will to make the change.

Tri-State has opposed the move as well, saying FERC has no jurisdiction and that Delta-Montrose failed to follow appropriate internal conflict resolution procedures. A decision is expected by April 16. It remains to be seen whether their arguments will hold up — or how their relationship might fare in the aftermath.

Kate Schimel is an editorial intern at High Country News. Follow @kateschimel