We’ve previously discussed the barriers that rural electric cooperatives face when it comes to adding more renewable energy. The Delta-Montrose Electric Association (DMEA) in Colorado offers a perfect example. The cooperative is in the middle of a legal battle with Tri-State generation over the cooperative’s ability to generate its own electricity.
To understand this conflict, it is necessary to review a bit of history. Rural electric cooperatives formed in the 1930s because of the unwillingness of investor owned utilities (IOUs) to service these areas. The IOUs said they could not service rural territories in a cost-effective way. The cooperatives developed transmission but still needed to procure electricity from somewhere. Rather than buy from the IOUs, many cooperatives decided to form associations to build power plants.
These associations signed contracts with their constituent cooperatives that require the cooperatives to procure a guaranteed amount of their electricity from the association. DMEA is part of the Tri-State Generation Association. Tri-State requires that DMEA procure 95% of its electricity from the Tri-State.
This contract has become a burden for DMEA. Technology advancements mean that when it comes to electricity generation, bigger is no longer better. Cooperatives such as DMEA no longer need to heavily rely on a large central generator like Tri-State. The Paonia community offers a number of locally producible energy sources, including wind and solar, but is unable to make use of them because of DMEA’s agreement with Tri-State. Traditionally, with cheap Federal loans many of the generation co-ops made big investments in coal fired power plants. Many of those are no longer economically competitive and their environmental impact is worse than almost any other source of energy.
In an effort to come out from under Tri-State’s thumb, DMEA appealed to the Federal Energy Regulatory Commission (FERC). FERC ruled in DMEA’s favor under the Public Utility Regulatory Policies Act. This law, passed in the 1970’s, was designed to encourage competition in the utility market.
In response, Tri-State passed a policy that DMEA had to compensate the association for its losses. This makes switching to an alternative energy source financially unpalatable to the cooperative. DMEA has gone back to FERC to fight this policy. It is expected to rule soon.
This case could have broad implications. There are more than 800 rural electric cooperatives across the country. If DMEA is able to start producing more of its own electricity other cooperatives across the country could follow suit.