The falling cost of renewable electricity and the price volatility of fossil fuels are two of the main factors prompting eight rural energy cooperatives in Colorado to step away from longstanding business relationships with their wholesale electricity providers.
The co-ops “have left, are looking to leave, or renegotiate contracts with their traditional power suppliers,” specifically the Tri-State Generation and Transmission Association Xcel Energy, “enabling them to venture into a wholesale market filled with merchant power suppliers and brokers,” the Colorado Sun reported last month.
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“Traditionally, rural cooperatives bought their electricity from generation and transmission associations, created to serve the co-ops, or an investor-owned utility, like Xcel Energy,” the Sun explains. “Those purchases account for 60% to 70% of the cooperatives’ budgets.”
But now, “I think the old world is just fading away,” said Mark Gabriel, CEO of Brighton, CO-based United Power. With wind and solar costs falling and new technologies like battery storage now available, “those companies that don’t march with time end up just relics on the side of the road.”
With multiple suppliers lined up to provide power supply and storage, “it’s important to recognize we really will have a much more balanced portfolio than our current power supplier offers us,” Gabriel added.
“The energy transition is now providing lower-cost, local, and cleaner power solutions that offer a number of advantages to co-ops,” agreed Seth Feaster, an analyst with the Institute for Energy Economics and Financial Analysis. “It allows co-ops to forge their own energy independence.”
The co-ops leaving Tri-State and Xcel have overlapping but somewhat different motivations. The three that are ending their contracts with Xcel are focused on volatile wholesale electricity prices and have concerns about company management. One of them, the Sedalia-based CORE Electric Cooperative—the state’s biggest, with 175,000 members—is suing the utility for breach of contract after its 750-megawatt Comanche 3 coal plant logged “more than 700 days of breakdowns since it went online in 2010,” the Sun explains.
While “taking a share of Comanche 3 was probably the biggest mistake CORE ever made,” said Steve Figueroa, the co-op’s commercial operations director, there’s an opportunity now to replace the co-op’s power supply.
“Largely it is the transition from capital intensive resources, like coal plants, to more modular resources,” he said. “It’s the promise you don’t have to live with the historical mistakes anymore.”
Instead, CORE will be turning to multinational project developer Invenergy for solar, wind, and storage with gas backup, and to Onward Energy for additional gas-fired capacity.
The co-ops departing Xcel also had issues with “the explosive increase in rates due to natural gas prices,” beginning with Winter Storm Uri in 2021.
The Sun has details of the frustrations and control issues that are shifting the co-ops’ power supply arrangements.