The growing price of power
Three new power plants lead to jump in local bills

SideStory: Clearing the air over the Four Corners

Power lines frame the view from Coal Bank Pass early this week. All La Plata Electric Association customers will see their month- ly power bills go up after the first of the year. The rate hike is being passed down by LPEA’s wholesale provider Tri-State, and the increase will cover the construction of three new coal-fired power plants in west Kansas and southeast Colorado. Opponents of hike charge that the additional power is not needed, and energy efficiency is a better answer to the dilemma./Photo by Jared Boyd

by Will Sands

Durangoans will be coughing up extra cash for coal-fired power after the first of the year. A substantial rate increase is coming to La Plata Electric Association customers in order to help cover the $5 billion price tag of constructing three new coal-fired power plants.

LPEA customers are not alone. Forty-four electric co-ops who buy wholesale electricity from Denver-based Tri-State Generation and Transmission are facing double-digit rate increases. Tri-State plans to expand its coal-fired power by 2,100 megawatts with construction of two 700-megawatt plants in western Kansas and one in southeastern Colorado. The cost of the three plants is pegged at $5 billion, and ratepayers will be forced to pick up the entire tab. Wholesale rates for electricity will jump by at least 64 percent over the next five years, according to Tri-State’s own analysis.

In 2007, Tri-State will pass a 12 percent rate hike along to LPEA to fund the plants. The local co-op will absorb some of the increase, but average residential electric customers will see their bills jump by 6 percent, or roughly $5 per month.

Tri-State notified LPEA of the coming hit in September, and the co-op is doing its best to lighten the blow on bill payers. Greg Munro, LPEA’s chief executive officer, commented, “Gasoline prices have soared. Heating oil and natural gas prices are taking flight. The last thing our members want to hear is more bad news about their energy costs. Despite the best efforts of electric co-ops across the country to hold the line, the monthly electric bills are unfortunately heading up.”

From LPEA’s perspective, the rate increase is somewhat justified. Munro explained that Tri-State is struggling to keep pace with energy demand and that demand is continuing to grow.

“When demand for electricity exceeds the supply generated by Tri-State, which is occurring, the company must purchase the needed power in the open market,” explained Munro. “Just like any commodity, buying on the spot market is generally the most expensive option, and that supply is rapidly decreasing.”

Watchdog groups and energy-efficiency advocates view the rate increases differently. Rick Gilliam, senior energy policy advisor of Western Resource Advocates, countered that his analysis shows that Tri-State is actually covering current demand. He alleged that the power supplier is instead speculating on future needs.

“Tri-State doesn’t have any solid justification for building even one of these plants,” Gilliam said. “Clearly, Tri-State already has enough resources in its portfolio to meet projected growth. So, the co-op members have to ask themselves if it’s worth such drastic rate increases to pay for something that’s only needed for speculative load and that won’t have any benefit for them.”4

Local energy-efficiency advocate, the Southwest Colorado Renewable Energy Society, concurred with Gilliam’s assessment. Chris Calwell, utility committee chair for SWCRES, noted that not only is Tri-State speculating on future power demand, the company may be trying to build the plants before more stringent regulations hit.

“There is definitely a mentality that if they’re ever going to build a coal-fired power plant, they need to do it now because more stringent regulations are on the way,” Calwell said. “I think that it’s not going to be that long before states start telling utilities that they’ll only accept cleaner types of power generation.”

Energy efficiency and use of power-saving measures are a much better way to deal with the energy crunch, according to Calwell. He added that Tri-State remains a dinosaur relative to many other utilities, which are beginning to embrace renewable energy and energy efficiency.

“I don’t completely fault utilities for thinking this way,” he said. “The traditional mentality is: You build a coal-fired power plant, market the power and once you use it up, you build another one. But most electricity providers are starting to change that trend.”

According to Western Resource Advocates’ analysis, energy-efficiency measures alone could cut 500 megawatts from Tri-State’s demand by 2019.

“It’s a lot cheaper to save energy than to build a new coal-fired power plant,” Calwell said. “Right now, most investors are asking to be paid a premium for building a coal-fired power plant because they know that things like carbon dioxide regulation is coming.”

Gilliam added, “We’re watching a great opportunity for local benefits slip away. Every dollar spent on coal is one that could have been invested in things like rural wind farms here.”

LPEA is also paying attention to the changing dynamic, according to Munro. Energy efficiency and alternative energy will become staples for the local co-op as it moves into the future.

“We are entering into a huge paradigm shift in the energy business,” Munro said. “We all use that wonderful thing called ‘electricity,’ and it has and continues to improve our lives in so many ways. But as we continue to use more and more, we must also use it more wisely and more efficiently.”

Calwell only hopes that Tri-State will listen to its consumers and the electricity co-ops that serve them.

“The sad thing here is that LPEA’s policies are quite a bit more progressive than Tri-State’s,” he concluded. “What we’re trying to do is get some of the policies that originate in our co-ops to start moving upwards to their wholesale providers.” •