Tri-State Hands Down Another Wholesale Power Cost Increase
by Gus Jarvis
Oct 11, 2012 | 948 views | 0 0 comments | 5 5 recommendations | email to a friend | print

Increase Underscores Sobering Reality About Coal-Fired Power

By Gus Jarvis

WESTERN SAN JUANS – For the second straight year, the Tri-State Generation and Transmission Association, the wholesale power provider to the area’s two rural power cooperatives, is increasing its wholesale power rate by nearly five percent.

Prior to this year, the wholesale power rate Tri-State handed to its 44 member cooperatives, including the San Miguel Power Association and the Delta-Montrose Electric Association, held steady for two years. But Tri-State raised the wholesale power rate by 4.8 percent in 2012 and, most recently, the Tri-State Board of Directors announced that rates would be increased once again, this time by 4.9 percent for 2013.

Tri-State Spokesman Jim Van Someren said Tuesday that the vast majority of Tri-State’s operating budget is based on rising costs for power production, purchased power and transmission operation and maintenance costs; these increases, along with the cost of meeting the board’s stated financial goals and policies, call for a 4.9 percent rate increase in 2013.The rate hike also comes on the heels of rising regulatory costs for increased general and administrative overhead, as Tri-State works to comply with proposed rules and regulations in the environmental, legal and government arenas.

The rising costs suggest a sobering reality: that coal-fired energy is no longer the cheapest form of energy production for Tri-State’s consumers.

At its September meeting, Tri-State’s board of directors adopted a 2013 operating budget of $1.34 billion, incorporating a 4.9 percent increase in wholesale rates for cooperatives, effective Jan. 1, 2013. Van Someren said Tri-State’s board and management continually strive to hold costs down wherever they can and address expenses to mitigate increases in rates to the greatest extent possible.

At $522 million, the single highest expense in Tri-State’s operating budget is power production, a price tag that is significantly impacted by rising fuel and transportation costs, as well as by increasing environmental regulatory costs.

“In general, the cost of doing business in producing and delivering power continues to increase,” Van Someren said. “Our board’s philosophy has always been to control those costs. They also have the responsibility to meet financial goals to continue to operate this entire association as effectively as it can. Unfortunately, from time to time, it does mean an increase in rates.”

Van Someren said many people “lose sight” of the fact that the Tri-State board is made up of representatives from Tri-State’s 44 member co-ops.

“We are not a separate entity,” he said. “The co-ops own us and are represented by our directors. None of this was done lightly by any means.”

SMPA Boardmember Wes Perrin, who is also the SMPA representative on the Tri-State Board of Directors, attended Tri-State’s recent budget discussions and said the Tri-State board basically boiled the rate increase down to three things.

First, he said, the cost of coal, “their fuel,” is rising about 4.2 percent. Second, transmission, operation and maintenance costs increased about 17.5 percent. Third, he said, environmental regulations are increasing the cost of doing business with coal in the realm of 18 percent of Tri-State’s expenditures.

“For the last couple of years, a small contingency on the Tri-State board has been wanting Tri-State to evaluate the cost of regulations and fighting regulations,” Perrin said. “In my opinion, they did a very liberal analysis and they included every cost they could possibly find and attached it to environmental regulations. They came up with 18 percent of expenditures related to regulations/compliance of regulations or attempts to reform regulations.”

Perrin said it is misguided to criticize the federal government and the Environmental Protection Agency for being perceived as “anti-coal.” They are not anti-coal, he said, they are anti-carbon.

“They basically say, you can use the resources you want to produce power, but you can’t emit large amounts of carbon,” Perrin said. “In my opinion, we have come to a point in time where we have realized there are costs attached to fossil fuel production and they are being borne by the public at large.”

Perrin cited American Lung Association and American Heart Association statistics that between 15,000 and 30,000 lives are lost a year, due in part to the health effects from coal power plants.“Those are costs we don’t account for,” he said.

Furthermore, Perrin said the actual cost of coal on the world market isn’t going to go down in the future but will only go up.

“Coal is becoming an international commodity, and that’s causing an upward pressure on costs,” he said. “That upward pressure is tremendous. Most of the contracts Tri-State has with coal providers will be ending in the next ten years. Those contracts will have to be renegotiated and I seriously doubt that those new contracts will be lower than they are now. They will be higher.”

With natural gas prices continually coming in at a lower price, Perrin said now would be a good time for Tri-State to take a step back and reevaluate how it provides power to its cooperatives.

“I think this would be a good time to put a decade into research and development and advance ourselves into a clean coal infrastructure and increase our reliance on natural gas,” he said.

Twitter: @gusgusj

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