Natural gas prices across the country have soared over the past few years driving up the cost associated with generating electricity. Tri-State Generation and Transmission Association, a Colorado based cooperative providing electricity to San Miguel and 43 other distribution electric cooperatives in Colorado, Wyoming, Nebraska, and New Mexico, is feeling the effects of these increases.
Tri-State owns mostly coal-based generation facilities. However, increases in the demand for energy have outgrown Tri-State's current capacity, forcing them to purchase wholesale electricity on the open market. Market prices are driven by natural gas prices making it much more expensive than self-generation. In addition to a new generation facility just completed in Springerville, Ariz., Tri-State has plans for new facilities both in Holcomb, Kans., and southeast Colorado. Each of these additional resources will help to alleviate the capacity problem but they come with a huge price tag of about $5 billion.
The increasing prices in the wholesale power market combined with the high cost of building additional generation resources will force Tri-State to implement a wholesale power cost increase of about 12 percent on Jan. 1, 2007. If growth and market conditions continue at their current pace, Tri-State anticipates similar increases for the next few years.
Locally, San Miguel Power is seeing pressures from not only wholesale power costs but other sources as well. The cost of gasoline and line material has had a huge impact. The cost of transformers has increased 150 percent in the last 12 months alone. Gasoline and diesel fuel are at all time highs. In the past four years San Miguel has only passed on wholesale power cost increases. This is the first increase in several years that will actually provide additional revenue to San Miguel. In the past 10 years gasoline prices have almost doubled and natural gas is up 400 percent. SMPA's rates have only increased by 35 percent over the same time period.