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San Miguel Power Awards 2008 Scholarships
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SMPA to conduct safety demonstration 04/11/2008.
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CONTRACT EXTENSION

San Miguel Power Association’s (SMPA) contractual relationship with Tri-State Generation and Transmission (Tri-State) continues to be a topic of discussion in and around the area. Specifically, the vote by SMPA’s Board of Directors approving the extension of the ‘All Requirements’ contract for an additional 10 years from 2040 to 2050. Comments questioning that decision still exist with the basic tenor of those comments being a dislike of coal being used as a fuel source for future power generation. The issues surrounding the contract extension are not as simple as they appear on the surface. Additionally, the contract extension question was a financial question that became confused with underlying environmental concerns. It is the desire of the SMPA Board of Directors and staff to share with its’ members some of the reasoning behind the decision to extend the contract.

Before getting into the nitty gritty details of the contract, let’s start with an explanation of the relationship between SMPA and Tri-State and how that relationship affects the local power system. Tri-State is a cooperative, owned by its’ 44 members, the same as SMPA is owned by our local members. Those members, numbering 44 in total, are located in Colorado, Wyoming, Nebraska and New Mexico. A Board of Directors from the 44 cooperatives directs Tri-State staff, again just like SMPA directors direct SMPA staff. Tri-State directors are elected by their cooperative which is allowed one board seat. Just as SMPA has a wide diversity in their membership, Tri-State has a variety of member systems, some summer time peaking and others winter peaking. Trying to meet the interest and concerns of all members is not only difficult but often times impossible without compromise among the members. SMPA is currently represented on the Tri-State board by Marcus Wilson of Ridgway. Wilson takes the comments and concerns expressed to the SMPA board and represents those interest at the monthly board meeting. Wilson is also tasked with making decisions that are best for Tri-State as a whole, not necessarily what’s best for SMPA individually. That is where compromise must be a part of the discussion. It’s not an easy task but Wilson’s commitment to the overall well-being of both Tri-State and SMPA will produce a sound future for both organizations. So while the local area’s interest, issues and concerns are represented, they do not always carry the day among the majority of the other 43 member’s representatives. Just as a single member, or small group of members, may not always get their desired outcome at the SMPA board level. When making decisions, whether at SMPA or Tri-State, the decision that benefits all members must be made. While not easy to do at times, the board is compelled to carry out their duties and responsibilities in a way that benefits the entire membership.

So how does that all tie in with the recent vote to extend the contract with Tri-State? The issue surrounding the request to extend the contract was financial only. In order for Tri-State to secure loan funds at the best interest rates possible, they needed to have member systems under contract for the additional years. As a cooperative, Tri-State’s only real collateral are the contracts it has with member systems. Without long term contracts to provide power, they would be unable to borrow funds to build generation facilities for an ever increasing growth in demand for power. By extending the contracts until 2050, Tri-State receives a better credit score, allowing them to negotiate a lower interest rate. The connection with SMPA comes in the form of lower interest rates for future Tri-State loans, meaning a lower debt payment amount, which in turn means lower wholesale power costs for SMPA. We know the cost of power is going to increase for the next few years, so anything that can be done to lower a portion of operational expenses needs to be taken advantage of. As a cooperative, Tri-State has only one place to get funds for operating its’ generation and transmission facilities, their 44 members, including SMPA. The decision to extend the contract will help Tri-State keep financial/loan costs down. Again, the issue was a financial decision only. No matter what sort of generation facilities are built in the future, coal, nuclear, renewable sources or a technology as yet undiscovered, the need for financing those projects will be needed. Taking action now to offset future costs is a good decision.

The environmental concerns that emerged as the contract extension discussion took place, concerns that were heard by the board, were actually not the issue being decided. The fuel choice for future generation facilities has yet to be made and may be as far out as 6-10 years. While it can be argued that Tri-State has long been a ‘coal generation company, it would be unfair to assume they will continue in that mindset. In fact, recent events and changes that have taken place within Tri-State indicate a new philosophy has been adopted. While not visibly apparent to the public, those of us in the industry have seen significant progress made in regards to energy conservation, renewable energy and best of all, the voice of the cooperative members is not only being listened to, but invited. A common assertion heard frequently concerning the decision to extend the contract is the vote tied SMPA to a coal based generation system until 2050. That assertion is not true. SMPA guarantees that any and all decisions made as to the best source of future power will be made with SMPA championing considerations for the environmental aspects be made. No one can accurately predict what future fuels will generate the power of the future. Advancements in technology are taking place at a rapid pace and will no doubt play a huge role in fuel choice decisions in the future. To attempt to predict what fuel will be used in the next few years, much less 2020 and beyond is just not possible. That decision will be based on technology and the best available fuel choice at the time.

Will renewable energy sources play a part in the future power scene? SMPA certainly thinks it will and exemplifies that philosophy by buying all available renewable energy in the service territory. Advancements in wind and solar energy production continues to make gains in both performance and expense of installation. Through our net metering program, members can install solar panels or a small wind turbine to offset their consumption of grid power, with any excess power generated being bought by SMPA at the one-time a year ‘true-up’ date. One of the hurdles of renewable energy as a significant power source for SMPA’s overall power needs is the technology available today does not provide power 24 hours a day and must be backed up with some other source of reliable power. Unfortunately, the sun doesn’t always shine or the wind blow. Even local hydro projects operate at varying outputs throughout the year, depending on water flow. SMPA will continue to monitor advances made in renewable technology in hopes that more and more hurdles can be overcome. In the meantime, SMPA has an obligation to serve the power requirements of its’ members. As the demand for power grows, SMPA must provide that power. That demand for more power then falls on Tri-State to provide SMPA with all the power necessary to meet our member’s power requirements. While we previously stated why the contract extension was good for Tri-State, the growing demand for power shows the positive side of having the contract in place for SMPA. Tri-State can aggregate their member’s power requirements and negotiate better rates on the open market than any single cooperative could find. The costs associated with any new generation facilities can be spread over all 44 members, while a lone cooperative would have to assume full costs should they decide to operate their own generation facility. By having a contract that Tri-State must provide SMPA with all our power requirements, keeps us from having to wade into the deep water of open market power purchasing as well as funding a generation project.

By working with Tri-State, extending the contract, keeping rates as low as we can into the future, we also continue to build on the great relationship we have with Tri-State. That put us in a much better position to help direct future power generation decisions, including fuel choice. It may have looked controversial to the public, but the decision to extend the contract with Tri-State was actually a very wise financial decision that will benefit SMPA well into the future by providing for reliable power throughout the term of the contract.

SMPA 2007 AWARDS SCHOLORSHIPS
Scholarship 2007 winners are as follows:

San Miguel Power Association $2000 scholarships:
Dustin McLeroy- Nucla
Sadie Hardman- Norwood
Harley Hollenbeck- Ouray
Alyssa Hill- Ridgway
Shannon Broderick- Telluride
We did not have anyone from Silverton this year.

Basin Electric Scholarship $1000:
Amber Moore- Nucla

Tri-State G&T Scholarships $500:
Lisa Eidsmo- Telluride
Margo Falk- Nucla