by Missy Votel

Residents are asking the City of Durango to pull the plug on its exclusive contract with La Plata Electric Association, at least for the time being.
Known as a “franchise” or “purchase power” agreement, the 20-year contract was set to expire last April until the city extended the deadline six months. A new contract, which would guarantee LPEA a reliable long-term market for its power, would require City Council approval as well as passage from City voters in December.

However, local renewable energy advocates would like more time to negotiate the contract in order to get a seat at the bargaining table. “All the negotiations have been between city attorneys and LPEA,” said Harry Riegle, Smart Energy Committee coordinator for the Sustainability Alliance of Southwest Colorado. “Most of the City Council didn’t even know the contract was being negotiated.”

Riegle said with the contract up for renewal, now is prime time to add locally produced renewables to the mix. As per the current contract, the city is required to buy all of its power from LPEA. In turn, 95 percent of that comes from Tri-State, a wholesale power supplier that serves Colorado, Nebraska, New Mexico and Wyoming. The original intent of the agreement was to give LPEA and Tri-State leverage to finance facilities by ensuring that they would be in use for an extended period of time. Conversely, Durango, with its rural locale, was guaranteed a reliable source of power. However, Riegle notes that such contracts are far from commonplace, and Durango is the only city in its district to have such a deal.

Adding a renewable energy option to the contract, or doing away with the contract all together, would allow city residents more freedom in choosing where their electricity comes from, he argues. It would also create an incentive for private developers of local wind and solar projects.
“If we live in the city, we don’t have an alternative option to buy locally produced power,” said Riegle.

Recently, the City of Boulder cancelled its contract with Excel Energy Corp. and formed its own utility, providing power to its citizens. While that scenario may seem far-fetched for Durango, there are other options, such as the potential solar farm on Dept. of Energy land in Ridges Basin.

“If we could somehow utilize that opportunity, that would be a significant supply,” said Riegle. The energy generated there would still need to be transmitted via LPEA lines, and thus need LPEA approval, but Riegle does not see such a partnership as “unreasonable.”

Furthermore, Riegle maintains that “grid parody” – whereby renewable energy becomes as affordable as coal-generated power – is a decade off at the most. “Why would we commit to a 20-year contract when renewables will be as cost-effective in half that time?”

He also points to projections that in five years, Tri-State will reach capacity with its current coal-fired plants, forcing it to buy power on the open market. “If demand continues to increase, Tri-State won’t be able to provide, and this will increase prices,” Riegle said.

While Tri-State does expect its most “economical generation” to be used up by 2016/17, its long term resources should meet members’ needs into the future, LPEA’s Chief Executive Officer Greg Munro said. However, it will be more expensive. “The uncertainty lies in the costs and at what level of reliability, given the current uncertainty of energy policy in this country,” Munro said. “This requires both a long-term commitment and economies of scale so rural areas can meet this challenge.”

Munro said the best chance of mitigating such risks is for the City to go forward with LPEA. “Going it alone would put the City at even greater risk of not having a reliable supply of electricity, gambling whether another entity would come along and serve them for the long term,” he said.

LPEA now has a peak electric demand of approximately 170 megawatts, with the City of Durango accounting for about 20 percent of that.

According to Munro, an agreement is also advantageous for the City because it generates nearly $1.4 million per year for the City in franchise fees and sales and use tax. The contract also includes an option for the city to buy LPEA’s facilities it if wishes to become a municipal electrical utility; allows city residents and businesses to participate in LPEA’s Green Power program; and allows both parties to work together in siting facilities, new technologies, net metering and renewable generation.

In addition, Munro estimates that LPEA has helped the city save more than $100,000 over the past few years with energy-saving measures at City facilities such Chapman Hill, the Recycling Center and the Recreation Center. The two have also collaborated on “Dark Sky” compliant fixtures, solar PV farms, and arrays on City buildings. Furthermore, LPEA has purchase power agreements with two local renewable generation resources for about 6 megawatts and gets another 1,235 kilowatts of locally generated solar PV on its system, 400 of which is tied to the local grid. Furthermore, Tri-State recently brought one of the largest solar farms in the country online, accounting for 30 megawatts, and generates 51 megawatts of wind power.
Despite what happens, Munro said rates are likely, to go up 4 to 5 percent in 2012 with small increases for a number of years after. “This is true nationwide as electric utilities are forced to retire older power plants and build new ones to meet energy needs,” he said.

And what if a new franchise agreement between the City and LPEA is not struck? Munro said LPEA still has the obligation to serve its members, but for starters, it would no longer be able to collect franchise fees for the city, which totaled $886,221 in 2010.

Beyond that, Munro said the future raises more questions than answers. “Can LPEA still secure funding for new infrastructure and system improvements? Does LPEA even make those investments? Do LPEA and Tri-State continue to show the electric needs for the City of Durango in their respective load forecasts?” he postulated. “Many additional questions arise … and would need to be answered.”

For Riegle, there are many unknowns as well, which he feels can be explored with outside expertise and opinions. “But we can’t do that if we’re on a timeline.”