LPEA Fact Checker

No. Cooperative electric associations are not government entities under Colorado law and are not subject to government transparency laws. Electric coops are nonprofit businesses and have their own set of laws. These laws require open meetings but give the coops broad discretion to go into executive session to receive “documents or testimony given in confidence.” The law recognizes that electric coops need to participate with counterparties that are in a very competitive market where many contract terms are closely guarded trade secrets. So the law allows electric coops to conduct most of their contract negotiations outside of public sessions. But the law requires all final decisions to be made at a public board session.  

LPEA Policy 103(II)(C)(4)(g) defines our general purchasing requirements as follows: “Purchases should obtain the ‘best overall value’ to the Cooperative, considering price, reliability of product or service, customer service, availability, energy efficiencies, and vendor reputation. Whenever possible and practical, preference should be given to companies located within the Cooperative’s service territory or companies with a cooperative relationship, unless a cost difference exists, the item is not available, or the product cannot be obtained in a timely manner.” Because LPEA is required to prioritize “best overall value,” we need to make sure only contractors and vendors who can perform the work are invited to participate in our Request for Proposal (RFP) processes, sometimes called “pre-screening.” Sometimes LPEA does this by contracting with industry experts to manage the RFP process and screen out unqualified applicants for us, such as when we used Energy Strategies to assist us with the RFP process for a partial power supply. Otherwise, LPEA is constantly evaluating vendors and suppliers who might be interested in participating in future RFPs with LPEA—anything from excavation to vegetation management. If you are interested in submitting your company’s information, please click here.

• As the board resolution proposing this amendment states, the purpose is to “reflect state law on the percentage of membership required to call a special meeting and the timing of meeting notices.”
• This bylaw change also tries to clear up inconsistencies in the current LPEA bylaws. In 2011, the LPEA membership voted to require 10% of members as a threshold for member-driven bylaw amendments. However, not all the related bylaws were amended at that time, and that created inconsistencies. Specifically, Article II, Section 2 of the bylaws allows for a special meeting to be called upon the written request of 500 members. But Article II, Section 5 says members may only bring a matter to mail vote “at any meeting” (regular or special) with a petition with 10% of members. And Article XV says it takes 10% of the membership to bring a bylaw amendment. This inconsistency creates potential issues of unnecessary costs and barriers for members to bring matters to a member meeting. And the inconsistencies create uncertainty as to which article would prevail if 500 members petitioned to call a special meeting to amend the bylaws. The proposed changes would correct this inconsistency by aligning all of the percentages with Colorado state law.
• Similarly, there are internal deadline inconstancies in the bylaws that could result in unnecessary costs and duplicate balloting. The proposed changes would correct these inconsistencies by aligning them with Colorado state law. 
• Finally, recent changes in Colorado law allow for electronic voting and the board has included that to help increase options for member participation.
• In hopes of avoiding further inconsistency, the board presented these proposed changes as one amendment, rather than breaking them out into individual amendments.

LPEA’s Conflict of Interest Policy is part of LPEA’s Code of Ethics and Conduct and is located at Policy 129(II)(E). It frequently exceeds Colorado nonprofit law regarding conflicts of interest. For example, LPEA has a policy against directors and employees from receiving gifts over $50 from suppliers, contractors, or consultants. That prohibition is not required by any law that LPEA is subject to. Similarly, LPEA exceeds Colorado law in its requirements of director conflict disclosures. Colorado law requires the directors of cooperative electric associations to disclose a conflict of interest when a decision before the board could provide directly and as a proximate result of the decision a financial or other material benefits to the director, the director’s immediate family, or the director’s business. LPEA, on the other hand, requires its directors to make written disclosures annually and to update them throughout the year if there are any changes. In addition, LPEA also requires specific disclosure when a decision would provide a direct or proximate benefit to a director, the director’s immediate family, or the director’s business. 

In January 2019, LPEA adopted a Strategic Goal, under which LPEA would strive to reduce its carbon footprint by 50% from 2018 levels, year by year through 2030 while keeping members’ cost of electricity lower than 70% of Colorado cooperatives. Under Colorado’s Greenhouse Pollution Reduction Roadmap and Tri-State’s Responsible Energy Plan, Tri-State should be able to meet LPEA’s carbon goal. This is what has allowed LPEA to continue to negotiate with Tri-State under all three prongs of LPEA’s Three-Prong Strategy: (1) work with Tri-State to create flexibility under LPEA’s current contract with Tri-State; (2) explore options to source part of LPEA’s energy needs from Tri-State and part from other sources; and (3) explore options for a full exit from LPEA’s current Tri-State contract. 

This legislative session, Colorado enacted a law to ensure that all utilities are properly reporting the adequacy of their resources—in other words: do utilities switching to renewable resources have sufficient capacity to “keep the lights on.” This new law will require LPEA (through its suppliers) to report to the state that it has adequate resources to meet the energy demands of its members. This law will apply whether LPEA gets all, some, or none of its electricity from Tri-State. 

No electrical supply contracts have been signed besides the 50-year contract with Tri-State.  In February 2022, the LPEA Board of Directors authorized LPEA staff to start negotiating what an agreement would look like with Crossover Energy Partners to purchase power for a 71MW block of power. Under the terms of that agreement, LPEA had to keep the potential pricing confidential for trade secret reasons until the agreement was close to being finalized. Resolution 2022-02 required that LPEA’s board publicly review and authorize all contracts before they became final. In summary, no agreements have been reached on alternative power supply, and any final contract would have to be publicly brought to the board for final review and approval. 

LPEA and Crossover were unable to complete negotiations and no agreements were formed. LPEA is now free to examine other options. However, in December 2022, the Federal Energy Regulatory Commission (FERC) rejected the proposed settlement agreement between LPEA, other cooperatives and Tri-State that was the foundation of LPEA’s solicitation for PPAs. Until LPEA gets clear guidance from FERC on the terms of any full or partial replacement supply, it is premature to re-solicit proposals from potential power suppliers. To date, LPEA’s only electric supply contract is with Tri-State.

LPEA is used as an example by the National Rural Electric Association as one of the most transparent cooperatives in the United States. LPEA live streams, records and posts all board meetings. Agendas and approved minutes of its board of director meetings through 2015 are also posted on our website. This is well in excess of the six-month posing requirement under Colorado law. And videos of LPEA’s board of director meetings back to October 2018 are also available on its website. Likewise, LPEA’s annual meeting minutes for the last decade are available on its website, as are videos of its 2022, 2021, 2020, and 2018 annual meetings. 

Members can ask to see certain corporate documents under LPEA Policy 108 (though certain categories of documents are unavailable for legal purposes, including personnel files, member account information, litigation matters, and contract negotiations). 

And members are always encouraged to contact their district directors with questions or concerns. All director contact information is posted here. 

There are three main reasons that LPEA is exploring an exit from Tri-State (1) we have a right to explore all options that may benefit our members (2) high rates and (3) lack of local control. 

I.  Right to Explore Opportunities

LPEA has the right to explore an exit from our contract with Tri-State, which currently runs through the end of 2050. Tri-State is owned by 42 rural electric cooperatives and was formed on the principles that it would a) benefit its members and b) allow for its members to withdraw on equitable terms and conditions.

In July of 2019, LPEA asked Tri-State to provide a fair and equitable exit charge. The LPEA Board of Directors wanted to explore multiple options (Resolution 2019-10), which included (1) staying with Tri-State and working to increase contract flexibility (2) fully exiting the contract (3) or finding a middle option.

But, instead of supporting LPEA’s independent decision-making power, Tri-State passed bylaw changes and board resolutions that took away the local decision-making authority of the Colorado Public Utilities Commission in favor of federal regulation by the Federal Energy Regulatory Commission (FERC). 

Tri-State has also shown a reluctance to work with other utilities seeking to exit. They initially prescribed an exit charge of $137 million for Kit Carson, but ultimately agreed to $37 million. Likewise, they initially quoted Delta-Montrose $322 million but ultimately agreed to $62.5 million. These reductions only came after long, expensive, multi-year court battles. 

As we don’t yet have an exit figure, we can’t yet evaluate what option makes the most sense for our members.  

II.  Right to Affordability

The main way for LPEA to limit more rate increases is to explore options for cheaper energy, which makes up most of our expenditures. According to Standard and Poor’s, which downgraded Tri-State’s credit rating last November, Tri-State’s rates are 20% higher than average. Between 2000-2016, Tri-State raised its rates 12 times, doubling the price LPEA was paying for power over that period. Tri-State’s administrative expenses also increased 73% between 2017 and 2019. 

These cost increases are not indicative of all power sources. As just one example, Holy Cross Energy – a comparable cooperative in northwest Colorado that sources its own energy – spends 44% less on their energy than we do. What’s more, Tri-State estimates its rates will increase an additional 50% by 2050, even while energy costs are trending downwards. With more than 3 billion dollars in long-term debt, it will be difficult for Tri-State to do anything but raise rates for many years to come.

LPEA’s initial, conservative calculations for pursuing other energy options estimate hundreds of millions of dollars in cost savings over the life of LPEA’s existing contract with Tri-State. That is why we believe the costs being incurred for legal fees to pursue an exit charge are worth the initial investment. We only wish that Tri-State would work with us – and other members – so legal fees were not necessary in the first place.

III.  Right to Local Control

Two of the board’s initial concerns with Tri-State which led them to want to explore other options were their coal-heavy energy portfolio, and the limitation that only allowed LPEA to generate 5% of our power from local renewable sources. To their credit, they are working to fix these issues, but their solutions are still far from ideal.

Tri-State is working to clean up its energy portfolio, due largely to member pressure and to independent analysis like that of the Rocky Mountain Institute, which found in a 2018 report that Tri-State could save its members 600 million by closing coal plants and boosting renewables. According to that report, Tri-State’s commitment to its existing coal plants contributed to rates increasing more than 5 times the national average between 2007-2016. 

Tri-State is also pursuing options to allow its members to supply more of their own power, but there are limitations. If all of Tri-State’s members were to use the self-supply option, LPEA would only be able to provide renewables to 10% of our load, and we want to do much more than that. 

LPEA has an almost 30-year history with Tri-State. We appreciate this partnership and the valuable service they have provided to LPEA and our members for decades. We are asking them to remain a good partner by allowing us to examine all energy options and do what is best for our local communities – especially in light of the new economy in which we live.

For a full timeline of LPEA's engagement with Tri-State around this issue, CLICK HERE

Tri-State does have a very large debt load in relation to its overall assets but has been taking steps in 2020 to reduce its interest costs by refinancing much of its debt at a lower rate. They have also implemented other cost cutting measures. However, there are still concerns about the debt load and that is one of the reasons why LPEA is exploring its options and looking for more flexibility in its power supply options.

LPEA regularly evaluates our rate structure by performing Cost of Service analyses. These assess the costs incurred by LPEA and evaluate how much revenue must be generated from electric sales to members to cover these costs and provide a margin to finance the maintenance and operation of our electrical infrastructure. This ‘revenue requirement’ determines our electric rates and that requirement will decrease if power costs are substantially reduced.

Transmission services would still need to be purchased from either Tri-State or WAPA, as they are now. These costs have been considered when evaluating the economics of alternative power supply options.

Our legal costs to pursue a potential exit from Tri-State are as follows: 

2018: $18,327 
2019: $378,141 
2020: $1,520,416
2021 (to date): $17,321 

These expenditures represent a small fraction of LPEA’s total annual budget. LPEA’s initial estimates show that we could save hundreds of millions of dollars over the life of our contract with Tri-State by exiting early. That is why the board believes the costs being incurred for legal fees to pursue an exit charge are worth the initial investment. 

LPEA spends roughly $72 million each year sourcing power. This is roughly 64% of our total annual budget. Even a modest 2% decrease in power costs returns an annual savings of $1.44 million. That would repay the legal costs spent to achieve it quickly. 

These costs would not have been necessary if Tri-State had supplied an exit charge when initially requested in July of 2019. LPEA has the right to explore an exit from our contract with Tri-State, which currently runs through the end of 2050. Tri-State is owned by 42 rural electric cooperatives and was formed on the principles that it would a) benefit its members and b) allow for its members to withdraw on equitable terms and conditions determined by its Board of Directors.

Yes and no. If the solar production fed into the grid is later consumed by the producing member, then no. But, if over a one-year period the member has generated more electricity than they used, then that excess amount of electricity generated above and beyond what they used does count towards the 5%.

Energy commodity pricing moves up and down frequently, but LPEA’s power supply has very little exposure to these pricing fluctuations. 37% of LPEA’s power supply comes from renewables which have fixed pricing. 52% of our power supply currently comes from coal that is located at the generation source and owned by Tri-State (our wholesale power provider) so it's not susceptible to pricing fluctuations. Only 11% comes from natural gas and open markets and therefore has little impact on the overall total. Tri-State’s wholesale rates to LPEA remain fixed the entire year and absorb the small pricing fluctuations. If at the end of the year, commodity pricing is below what was budgeted, then that will produce margins at Tri-State that get allocated back to LPEA in the form of capital credits which are in turn allocated to our members.

There are several ways to time your usage for the benefit of the system in conjunction with solar. The first would be to remain on the standard rate and time your usage to coincide with your solar production. This will take full advantage of the power you are self-producing and minimize the reverse power flow onto the grid. Keeping reverse power flow to a minimum allows LPEA to interconnect even more distributed solar resources onto the system.

Another option would be to sign up for LPEA’s Time of Use (TOU) Program. As a general rule of thumb, if you have more controllable load than you have solar capacity, you should consider LPEA’s TOU rate. For instance, if you add a timer to a 4.5 kW electric water and your solar array is 4.5 kW or less, you should consider TOU.  If you have an electric vehicle, that is another 4-7 kW of controllable load.

40% of LPEA’s energy use occurs between the hours of 8am and 6pm when solar resources are plentiful.  Small, battery banks can be used in conjunction with the solar to ensure daytime cloud cover is mitigated.  Solar plus storage projects can be extremely cost effective and provide savings to LPEA and its members.

LPEA has an “obligation to serve”. This means that we must provide service to any member within our service territory who has applied for service and is willing to pay for that service. The amount a member is required to pay for service is governed by LPEA’s Line Extension Policy.

Unless significant amounts of energy storage are used, some form of “dispatchable” generation will be necessary to cover load when intermittent renewables are not available. Dispatchable generation is generation that can be ramped up and down at any time. Hydroelectric and natural gas are two common types of generation that can be used to serve peak load until energy storage becomes more prevalent.

Hydro generation is certainly an asset LPEA would like to have more of in our portfolio. We already purchase the output from Lemon Dam as part of our 5% and there are other hydroelectric opportunities with irrigation canals in our service area that could also be considered.

Yes. LPEA has considered biomass generation in the past and we will continue to do so if it is competitive with other renewable resources we can acquire. Biomass has other attributes that make it an attractive option such as its continuous generation profile, the creation of more jobs, and the benefits of forest thinning.

The primary benefit of installing solar on your home comes from LPEA’s net metering policy – in which we pay you for what you generate. The Renewable Energy Credits (RECs) are only the icing on top and are based upon market rates, which have fallen in recent years as the cost of solar installations has fallen dramatically.

LPEA strives to operate our lines within a standard 5% voltage tolerance. If LPEA finds any part of our system is not within 5% of expected voltage, a system improvement project is established to address it. There are areas within LPEA’s system where lines must operate at the high end of the 5% to serve our members across long distances. In these areas, a voltage rise from a solar PV system can push us over the 5% limit. To alleviate this issue, LPEA is using smart inverter settings that reduce the solar output (for a short time) if the voltage starts to get too high. There are also some areas where the footprint served by the LPEA’s substation (the voltage source) is relatively small and we have been able to lower the voltage for the entire area. If you were previously not able to install solar on your home or business, I recommend you contact us again at renewables@lpea.coop as these improvements are making more areas viable.

If a large solar project is installed in the Four Corners, there would be no impact to LPEA, but it could provide an opportunity for renewable power purchases.

Local PV can be competitive with purchased electricity during daylight hours, and a significant portion of LPEA’s load could be served by local PV even before the use of energy storage is required. With the dropping cost of solar over the last several years, it presents a great opportunity.

LPEA has seen interest in battery installations with dozens of systems in place already. Most of what we have seen are early adopters that are interested in what the technology can do. We have also seen the use of energy storage at locations where exporting power to the grid is limited. For LPEA to obtain value from energy storage, we would need some degree of control for charging and discharging. As such, will be investing in a Distributed Energy Resource (DER) software platform that can assist with the management of energy storage devices. Once systems like this are functional, LPEA may be able to offer incentives to increase battery installations in our area.