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Growing Away from Big Coal

Rural electric co-ops make a slow push back toward community energy

 

Last month, a new type of farm sprouted in Brighton, Colo. United Power, the rural electric cooperative that serves the town and a large swath of communities and agricultural lands on the state's northern Front Range, unveiled what's been touted as the nation's first cooperative solar farm. Customers can "rent" one or more of the 48 panels in the 10-kilowatt array for $1,050 apiece, for a 25-year period. In return, United Power credits their monthly utility bills for the power their panels generate. Other electric co-ops see this project as a possible prototype: a way to distribute local renewable energy without forcing customers to pay for the equipment or its installation. "People can even come visit their solar panels," says Troy Whitmore, United Power's director of external affairs. "And the sky's the limit as to how many modules we can have, depending on demand."

Until recently, co-ops like United Power were unlikely to dream up projects like this. Co-op culture has a long history of conservatism. And United Power and 43 other co-ops in Colorado, New Mexico, Wyoming and Nebraska are locked into long-term power purchase contracts with the electricity wholesaler Tri-State Generation and Transmission. The utility has a reputation for being pro-coal and dismissive of renewable energy projects, which it has generally considered too costly and unreliable. And Tri-State's purchase contracts limit the amount of electricity member co-ops can own and control to 5 percent of their energy load. In effect, this has prevented co-ops from investing much in local and renewable power on their own.

But over the last couple years, the wholesaler's devotion to coal has started to wane, partly because of management changes and pressure from some member co-ops. Outside political forces are also a major factor: In 2007, Colorado and New Mexico passed renewable power generation requirements for rural co-ops, and national climate legislation looms on the horizon. Tri-State says it has committed to meeting the state requirements on behalf of its members. But a number of its member co-ops have begun to invest in and generate their own local renewable power as well, in part to ensure they can continue to offer cheap electricity in a changing world. And coal-fired power, which accounts for 82 percent of U.S. greenhouse gas emissions from electricity, doesn't look like it will be cheap forever.

The rural electric co-op system was created by President Franklin Delano Roosevelt during the Great Depression to provide power to remote farms and ranches that large urban utilities refused to handle or couldn't afford to reach. There are now 864 rural co-ops in the country, with their electricity supplied by 66 power wholesalers, including Tri-State. Unlike the much larger investor-owned utilities, such as Xcel Energy, utilities like Tri-State are not publicly traded and have remained largely free from government regulation over the decades. Because they've faced little pressure to change, they lacked incentive to help cut greenhouse gas emissions.

Tri-State's members get reliable electricity at the lowest feasible cost in exchange for a commitment to purchase their power from the company. Coal supplies 72 percent of Tri-State's energy mix -- well above the national utility average of about 49 percent. Hydroelectricity accounts for another 13 percent, and only 1 percent comes from non-hydro renewable sources. Historically, coal has been favored as the lowest-possible-cost power source. And Tri-State has another reason to promote it; it has a stake in three Western coal mines that supply its power plants.

But the fossil fuel binge may be finally slowing.

In 2006, two of Tri-State's member co-ops broke ranks from the Tri-State "family." In an unprecedented and financially risky act of defiance, Delta-Montrose Electric Association in western Colorado and Kit Carson Rural Electric Cooperative in Taos, N.M., refused to extend their power contract with Tri-State, slated to expire in 2040, for an additional 10 years. Tri-State wanted the added purchasing guarantee so it could secure financing for two 700-megawatt coal plants planned in Holcomb, Kan. The co-ops' leaders feared that Tri-State's investment in those plants could unduly raise their electricity rates, given federal plans to cap carbon emissions and penalize polluters. They also wanted to generate more local and renewable energy independently.

The two co-ops' rebellion has not gone unnoticed. Although Tri-State initially threatened to increase their rates, according to members of both co-ops' boards, it has not done so. And Tri-State has since decided to allow its co-ops flexibility to produce and control more renewable and distributed local energy, provided they sell any extra back to Tri-State. In turn, Delta-Montrose and Kit Carson have backed off a bit, though they never signed the extension. And they continue to press the wholesaler to be more open about its financial decision-making, and to grant members still more freedom to generate their own power and sell the extra to potentially higher-paying customers than just Tri-State. "It's become a power-struggle issue," says Kit Carson CEO Luis Reyes.

In 2007, both New Mexico and Colorado passed laws requiring rural electric co-operatives to generate 10 percent of their power from renewables by 2020. That's half of what investor-owned utilities in both states must achieve -- which has allowed Tri-State to be less aggressive in investing in renewables, such as wind and solar, on behalf of its members. But local environmentalists and co-op board members say that the utility has begun to embrace renewables and energy efficiency. Indeed, in addition to committing to the state renewable standards, Tri-State now offers its members seed money to help jumpstart local renewable projects.

Many attribute the changes to Ken Anderson, who was appointed last year as Tri-State's executive vice president and general manager. "The recent change in staff has had some effect on direction," says Bill Midcap, director of renewable energy at the Rocky Mountain Farmers Union, a former member of Tri-State's board of directors. "And the board of directors is also made up of rural folks who know their community will benefit from renewable energy projects. To keep opposing them may not be in their best interest."

Tri-State is also feeling some pressure from state regulators. In January, the Colorado Public Utilities Commission launched an investigation to determine whether to assert state authority over the wholesaler's energy resource planning. The PUC said that public concerns about climate change, uncertainty about future costs of generating power, and state mandates for more renewable energy spurred it to take a closer look at Tri-State's energy mix. The PUC will meet in mid-July with representatives of the company, member co-ops and environmentalist and consumer groups before reaching a final decision.

In response to the recent scrutiny, Tri-State began airing TV ads boasting of its push toward energy efficiency, conservation and renewable energy. In April -- after Kansas' then governor, Kathleen Sebelius, vetoed bills that would have allowed Tri-State and Sunflower Electric to build the two Holcomb coal plants -- Tri-State announced that it was re-evaluating its long-term resource plans. The company pledged to rely more on wind and solar and to depend less on conventional coal plants.

Environmental organizations lauded the new approach, which includes plans for a 30-megawatt solar photovoltaic plant in northeastern New Mexico and a wind project in Colorado. But their enthusiasm has since waned. In May, Kansas' new governor, Mark Parkinson, OK'd the construction of one 895-megawatt coal plant in Holcomb near the Colorado border, provided that it develops some wind energy on the side. Tri-State has invested roughly $60 million in the $3.8 billion project and plans to rely on the new plant for some of the 300 to 700 megawatts of increased capacity that it expects it will need over the next decade.

"With the Kansas plant back in play, there's a concern that Tri-State will fall back into its traditional way of doing business," says John Nielsen, energy project director at Western Resource Advocates in Boulder, Colo. 

Meanwhile, some of Tri-State's member co-ops continue their incremental push toward carbon-cutting goals. In fact, some have more ambitious goals than those mandated by the states. Kit Carson, for example, which serves many affluent and liberal Taos residents, aims to generate 15 percent of its energy mix from its own renewable projects by 2020, says Reyes, a more aggressive goal than New Mexico's mandate for rural electric co-ops. But it would be easier and more economically attractive to set and reach such goals if Tri-State allowed Kit Carson and other member co-ops to sell their locally generated power at market prices, he adds, not just the price set by Tri-State. Kit Carson, which is working on a relatively large photovoltaic array for the University of New Mexico and has installed photovoltaic panels on homes, schools and other buildings, still has a long way to go: The co-op currently controls and generates less than 1 percent of its power from local sources, although nearly 5 percent of the power it buys from Tri-State is from renewable resources.

Highline Electric Association in the northeastern Colorado city of Holyoke now meets 5 percent of its electricity needs with a 3.5-megawatt gas compression station that turns waste heat from natural gas turbines into electricity -- a process that qualifies under Colorado's renewable portfolio standards. Highline, like several other co-ops whose service territory depends heavily on agriculture, is trying to garner state grants for other renewable energy projects, such as small-scale hydroelectricity and community-scale wind farms.

Delta-Montrose, meanwhile, still generates less than 1 percent of its electricity from local and renewable sources, though it is a leader in energy efficiency and conservation. The co-op's greatest success so far has been in selling and installing about 600 ground-source heat pumps, or geothermal pumps, which offset the need for using natural gas and electricity to heat and cool homes and businesses. Delta-Montrose is also seeking funding for a 5-megawatt hydroelectric dam, as well as a project that would capture methane -- a greenhouse gas 21 times more potent than CO2 -- from nearby coal mines and convert it to natural gas-based electricity. 

Despite these steps toward greener power, don't expect Delta-Montrose leaders to trash-talk coal; after all, the three local coal mines are the co-op's biggest electricity consumers, as well as the biggest and among the highest-paying employers in the relatively low-income region. And coal's going to be a big part of the energy mix for a long time. "It takes a while to change culture and contracts," says Dan McClendon, Delta-Montrose's general manager. "There's a lot of 'new energy economy' jargon, but it just doesn't happen overnight."