Administrative Law Judge issues initial decision in Tri-State Contract Termination Payment Tariff filing
- Tri-State is reviewing the near 200-page initial decision to understand the financial impact for Tri-State and its distribution system members.
- Administrative law judge correctly concludes that the calculation of the contract termination payment should be a rate-neutral to remaining members.
- Initial decision rejects United Power, Tri-State members and Tri-State contract termination payment approaches, and endorses FERC trial staff approach with adjustments suggested by Tri-State.
- Initial decision is one of many steps in process, and the only determinative decision is that of the FERC, which can be appealed.
(September 29, 2022 – Westminster, Colo.) A Federal Energy Regulatory Commission (FERC) administrative law judge today issued an initial decision in the Modified Contract Termination Payment (CTP) tariff case filed by Tri-State Generation and Transmission Association. Tri-State is reviewing the nearly 200-page initial decision, which rejects United Power, Tri-State members and Tri-State contract termination payment approaches, and endorses the FERC trial staff approach, with significant adjustments suggested by Tri-State.
The Modified CTP tariff sets forth the terms and conditions under which Tri-State members may terminate their Wholesale Electric Service Contracts and membership in Tri-State.
“Today’s initial ruling is a first of many steps in this process. We continue to review the initial decision and we will continue to make our case on behalf of our members to uphold the “make whole/hold harmless” standard for determining contract termination payments,” said Duane Highley, CEO of Tri-State.
“We agree with the administrative law judge who correctly concluded that the contract termination calculation should be rate-neutral to Tri-State’s remaining members, and while we may disagree in how the details of the calculation are made, we have the opportunity to file exceptions as the Commission’s process moves forward,” Highley said. “The judge accepted several Tri-State recommended changes to the FERC Trial Staff approach, including an important transmission adjustment.”
The administrative law judge’s initial decision states that FERC Trial staff’s proposal, with recommended changes from Tri-State, “appears to achieve an exit fee close to that of the DCO” (United Power’s debt covenant obligation to Tri-State). While the judge's initial decision does not include a buyout number, Tri-State filed in March 2022 with FERC that United Power’s DCO is $736.4 million. Tri-State is evaluating the methodology in the judge’s order.
Today’s initial decision from the administrative law judge is not determinative. Next steps in the FERC’s process include the filing of exceptions before the full Commission ultimately takes on the case.
Tri-State proposed a Modified CTP tariff to ensure remaining Tri-State members are held harmless if another member decides to terminate its long-term, full-requirements power supply contract early, prior to 2050. The tariff became effective Nov. 1, 2021, subject to refund and hearing procedures as established in FERC’s order. Hearings were held before Judge Renee Terry in May 2022.
“While our team is diligently reviewing the Judge’s order to fully understand the financial impact this initial decision would have on our cooperative if it was adopted by FERC, we remain confident that a fair and just final decision will ultimately prevail, as alternative proposals that don’t live up to the 'make whole/hold harmless' standard could cause significant financial burdens to our remaining cooperative members and their consumers, and to Tri-State,” said Highley.
In its order setting the Modified CTP tariff for hearing, FERC noted that the tariff includes clear, transparent, and objective procedures, and readily available CTP calculations that rely on publicly available data that can be updated annually for all utility members.
Tri-State’s Modified CTP tariff ensures that its remaining members are held harmless and made whole financially for the continuing costs of servicing outstanding debt, and operating and maintaining the entire Tri-State system, without the revenues that were expected over the remaining term of a withdrawing member’s long-term contract with Tri-State. The Modified CTP tariff calculation is based on the projected revenues the withdrawing member contractually agreed to pay over the remaining term of its contract, less other revenues Tri-State would receive from offsetting power sales, transmission revenues from the withdrawing member after termination, and the return of the net present value of the withdrawing member’s patronage capital balance.
Under its member-driven Responsible Energy Plan, Tri-State is rapidly transitioning its power generation resources to cleaner energy, while lowering wholesale rates for its members. As part of the plan, Tri-State’s members are working together to increase flexibility and allow for greater member self-supply of power through certain renewable member self-supply tariffs, partial requirements power supply contracts, and by allowing the early termination of long-term, full-requirements power supply contracts through the Modified CTP tariff.
Tri-State is a wholesale power supply cooperative, operating on a not-for-profit basis, with 45 members, including 42 utility electric distribution cooperative and public power district members in four states that together deliver reliable, affordable and responsible power to more than a million electricity consumers across nearly 200,000 square miles of the West. For more information about Tri-State, visit www.tristate.coop.
Certain information contained in this press statement are forward-looking statements including statements concerning Tri-State’s plans, future events, and other information that is not historical information. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described from time to time in Tri-State’s filings with the Securities and Exchange Commission. Tri-State’s expectations and beliefs are expressed in good faith, and Tri-State believes there is a reasonable basis for them. However, Tri-State cannot assure you that management’s expectations and beliefs will be achieved. There are a number of risks, uncertainties and other important factors that could cause actual results to differ materially from the forward-looking statements contained herein.