SMPA Charts Pathway Towards Reliability, Affordability, Renewables
SMPA Charts Pathway Toward More Local Renewable Energy, increased Reliability, and Affordability
The San Miguel Power Association (SMPA) Board of Directors has unanimously adopted a resolution confirming that SMPA’s continued membership in the wholesale power cooperative, Tri-State Generation and Transmission (Tri-State) is “…the best path to implementing more local renewable energy… without incurring strong upward rate pressures… compromising reliability, or the network communications crucial to the overall operations of the SMPA distribution grid.” The resolution also states that SMPA “…will not further pursue alternatives to the current Wholesale Electric Services Contract (WESC) with Tri-state, at this time…” This resolution signals the fulfillment of one of SMPA’s seven 2017 strategic objectives, which is to “Understand the full value, and options, of [SMPA’s] membership and contract with Tri-State G&T, while developing an all-encompassing program to expand local renewables.”
The year-old strategic objective, was designed amidst rapidly dropping prices of renewable energy such as utility-scale wind and solar in power markets across the nation. The low prices had caught the attention of many, who began to question the value of the SMPA / Tri-State contract which requires that SMPA purchase no less than 95% of its power from Tri-State through 2050. Tri-State has been aggressively procuring energy from renewable sources over the past several years and has recently reported that 30% of the energy consumed by its membership is now from sources other than fossil fuels.
Opponents have suggested that SMPA might follow the example of Kit Carson Electric, a New Mexico electric cooperative that recently bought out of its Tri-State contract, and Delta Montrose Electric Association (DMEA) who also may be pursuing alternatives to its contract with Tri-State. “As our recent resolution states, we will continue to monitor the situation at both cooperatives to better inform ourselves on this issue. However, there are several major factors in an issue like this which must be taken into consideration and are specific to each individual cooperative. Therefore, while we can gain knowledge from the actions of others, it would be a mistake to think one can apply what happens at another co-op directly to SMPA,” said SMPA CEO, Brad Zaporski.
Another factor mentioned in the Resolution is that Tri-State is currently working in partnership with SMPA on two of the largest reliability projects ever performed on the SMPA distribution grid. These large, capital intensive, construction projects are known as the Telluride/Mountain Village Reliability Project, which is providing a robust, underground backup line to SMPA’s largest load center and the Ridgway/Ouray Reliability Project or Red Mountain Pass Rebuild. This will be a true feat of engineering over some of the most difficult topography in the world, providing backup service to the fastest-growing part of SMPA’s service territory.
The SMPA / Tri-State relationship is also a crucial part of decade long project to implement fiber communications throughout the SMPA system. This allows significant improvements to network communications and enables the ability to operate crucial equipment throughout the SMPA grid. This may also accommodate commercial traffic, or retail broadband, at some point in the future. “The fiber communications system we have been working on for the past ten years is highly dependent on our ability to use Tri-State fiber. This system will only become more important to operating the grid of the future which will be more decentralized with much higher penetrations of intermittent energy from renewables, battery storage technologies, multi-directional power flows, and electric vehicles. Many people also believe that it will be integral to the future of the local economy”, said Zaporski.
“The financial, reliability and communications concerns alone are enough to merit cooperation,” said SMPA Board President, Rube Felicelli, “but, in addition, Tri-State is supporting our access to local renewable energy.” Tri-State provides incentives that made it possible for SMPA to help develop and purchase the energy from several local renewable energy projects such as Pandora Hydro, Bridal Veil Hydro, Ouray Hydro, Coal Creek Hydro, Paradox Solar, and the Norwood income qualified (I. Q.) solar array. SMPA also has the option to pursue Tri-State Board Policy 118 to increase local renewable energy generation. Policy 118 was instrumental in bringing Tri-State to the table for the development of the Ridgway Reservoir Hydro, which is now the largest renewable energy facility currently operating in the SMPA service territory.
In a 2017 SMPA Board Resolution, SMPA formally requested that Tri-State partner with SMPA to construct another utility scale renewable energy generation project. SMPA has officially entered into Policy 118 negotiations to fulfill this resolution request.
“It’s important to point out that today’s resolution, not to further pursue alternatives to SMPA’s contract with Tri-State, was met with unanimous approval,” said Felicelli. “The members of our Board represent a vast area with a wide variety of concerns and ideals... I am extremely proud of the work and effort our Board and staff have done in analyzing what the effects of pursuing alternatives to our contract with Tri-State would be to our membership before coming to this consensus.”
As a cooperative, SMPA relies on its democratically-elected board to chart the cooperative’s course for the ultimate benefit of the members. In an industry that is undergoing unprecedented change, the task can’t be an easy one.
For questions, please call (970) 626-5549.
The SMPA Board Resolution 2018-02 is below. Download a PDF here.
SAN MIGUEL POWER ASSOCIATION, INC.
BOARD OF DIRECTORS
WHEREAS, The Board of Directors (BOD) held a strategic planning session in February of 2017, where they set a strategic objective: To understand the full value, and options, of our membership and contract with Tri-State G & T, while developing an all-encompassing program for local renewable energy (the Tri-State Membership and Renewable Energy Objective); and
WHEREAS, San Miguel Power Association’s (SMPA) Strategic Planning occurs on an approximate three-year cycle and is when SMPA’s democratically elected BOD sets the direction and goals of SMPA in the form of strategic objectives. SMPA’s strategic planning is a fluid process and the objectives are not set in stone. They are meant to be nimble and able to respond and change to future circumstances. All of SMPA’s 2017 strategic objectives are available on the website and are updated as they evolve; and
WHEREAS, SMPA is currently in a legally binding contract with Tri-State G & T, known as the Wholesale Electric Services Contract or WESC. The WESC terminates Dec 31, 2050, and requires that SMPA purchases a minimum of 95% of its electrical service from Tri-State G & T; and
WHEREAS, on May 23, 2017, the SMPA BOD adopted Resolution 2017-03 and 2017-04 as an initiative to achieve the Tri-State Membership and Renewable Energy Objective. SMPA Board Resolution 2017-03 was a request to the Tri-State contracts committee. The Tri-State contracts committee is formed from time to time to examine the most current WESC among other things. The resolution request was to allow for more flexibility in developing small scale, local renewable energy through an amendment to either the WESC or through changes to Tri-State Board Policy 115. Tri- State Board Policy 115 administers the 95% requirement provision of the WESC. SMPA Board Resolution 2017-04 is a request to Tri-State to investigate options for a utility scale renewable energy generation facility to fill all or some of the transmission capacity that may become available with the closing of the Nucla station on the west end of the SMPA service territory; and
WHEREAS, SMPA staff and BOD met with the top leadership of Tri-State, in Ridgway, to discuss the Tri-State Membership and Renewable Energy Objective, SMPA Board Resolution 2017-03 and 2017-04, and several other issues on August 15, 2017; and
WHEREAS, as a result of the August 15th meeting, SMPA was provided confidential information on the value of the WESC in the form of indicative pricing to buy out of the contract; and
WHEREAS, as a result of the August 15th meeting and as a result of Board Resolution 2017-04, SMPA has officially entered into negotiations to fulfill the resolution request by pursuing a Tri-State Board Policy 118 project. Tri-State Board Policy 118 governs the process for SMPA to develop another local, renewable energy generation facility which would put SMPA significantly over the 5% allotment for local generation within the WESC; and
WHEREAS, SMPA is currently in partnership with Tri-State G & T on two of the largest reliability projects that have been performed on the SMPA distribution grid since the incorporation of San Miguel Power Association. These large, capital intensive, construction projects are known as the Telluride/Mountain Village Reliability Project and the Ridgway/Ouray Reliability Project or Red Mountain Pass Rebuild. The first providing a robust, underground backup line to SMPA’s largest load center and the second, a feat of engineering over the most difficult topography in the world, providing backup service to the fastest growing part of SMPA’s service territory; and
WHEREAS, without the partnership and participation of Tri-S
tate Generation and Transmission, these crucial reliability projects will be in jeopardy and/or would create significantly more upward rate pressure on the SMPA membership; and
WHEREAS, SMPA is nearing the completion of a nearly ten-year project to implement a telecommunication or “fiber” ring throughout the SMPA system, thereby significantly improving network communications and operations of major equipment throughout the SMPA distribution grid. SMPA has made every attempt to accommodate future commercial use of these fiber assets, whether by SMPA or another organization, throughout the project; and
WHEREAS this fiber communication system is highly dependent on SMPA’s ability to use Tri-State owned fiber, as a class A member of Tri-State, to complete many of the pathways throughout the system. This network is integral to the operations of current and future grid technologies and infrastructure. Many believe it is also integral to the future of the local economy; and
WHEREAS it is recognized by the SMPA BOD that there is risk associated with the carbon intensity of the current energy portfolio provided by, and generation assets owned by, Tri-State G & T as the electric services provider for SMPA; and
WHEREAS Tri- State G & T is currently a part of the Mountain West Transmission Group, a regional group of the largest utilities in Colorado and this portion of the United States. SMPA believes that Tri-State, through working with the Mountain West Transmission Group, will soon join the organized market known as the Southwest Power Pool (SPP); and
WHEREAS joining SPP will significantly change the market structure of how energy is generated, transmitted, and distributed throughout our region, and may also have a significant impact on the Integrated Resource Plan (IRP) and renewable portfolio of Tri-State G & T. The IRP process forms the basis of long term planning for future generation assets among many other things; and
WHEREAS Kit Carson Electric Cooperative (Kit Carson), a distribution cooperative in New Mexico, recently purchased out of their WESC with Tri-State and moved to short term contracts subject to the open market for electrical service. This will provide a valuable case study of buying out of the WESC and moving to the open market for power supply; and
WHEREAS Delta Montrose Electric Association (DMEA) is currently pursuing options to their WESC with Tri-State G & T. This may also provide a valuable case study of buying out of the WESC and moving to the open market for power supply; and
WHEREAS Kit Carson and DMEA had ten fewer years in the terms of their WESC as compared to SMPA, and therefore ten fewer years that would be necessary to include in the calculation of the cost to buy out of each of their respective contracts. A study for procurement of power supply is unique to each individual situation in which it is performed. Other than the term of the existing contracts there are several other major factors and assumptions that will be unique to any individual distribution cooperative. Therefore, while Kit Carson and DMEA may provide case studies that will be beneficial to better understanding the issue, it is not possible to apply their results as a direct comparison with SMPA.
NOW, THEREFORE BE IT RESOLVED that the San Miguel Power Association, Inc. Board of Directors, with knowledge of the information stated above, will move forward with the Tri-State Membership and Renewable Energy Objective in partnership with Tri-State Generation and Transmission, towards the goal of implementing the request contained in SMPA Board Resolution 2017-04.
AND FURTHER RESOLVED that this partnership provides the best path to implementing more local renewable energy, at this time, without incurring strong upward rate pressures, and without compromising existing and future reliability, or the network communications crucial to the overall operations of the SMPA distribution grid.
AND FURTHER RESOLVED that SMPA will not further pursue the investigation of alternatives to the current WESC, at this time, but will continue to monitor the results and actions of the distribution cooperatives that have or are currently pursuing such alternatives.