UPDATE: Sept. 3, 2021: Tri-State said on Thursday that it has filed revisions to its contract termination payment tariff with the Federal Energy Regulatory Commission. The changes are intended to make the methodology for computing member exit fees "more transparent and simpler," the company said.

Tri-State said the modified calculation will be made by comparing projected revenues the withdrawing member agreed to pay, with other revenues the generation and transmission provider expects to receive from offsetting power sales, transmission revenues, and the return of the net present value of the member’s patronage capital balance.

The proposed modified methodology, which must be approved by FERC, "is a starting point to allow Tri-State members to work together towards an agreement that is both fair and equitable," Jeff Wadsworth, CEO of Tri-State member Poudre Valley Rural Electric Association, said in a statement.

Dive Brief:

• The Federal Energy Regulatory Commission on Thursday determined that Tri-State Generation and Transmission Association's tariff is unjust and unreasonable, based on the hurdles members face in considering whether to exit the G&T provider.

• Specifically, the commission's preliminary findings revealed that the G&T's tariff makes it difficult for members considering whether to exit Tri-State's service to determine how much terminating the contract will cost. "It is basically impossible for Tri-State's members to make a reasoned assessment as to whether to terminate their membership in Tri-State," said Commissioner Allison Clements during Thursday's open meeting.

• FERC's preliminary findings follow February complaints filed with the commission from seven Tri-State members, saying that the G&T has yet to calculate for its members what the cost of exiting its service would be. The complaint is still pending before federal regulators.

Dive Insight:

FERC's order on Thursday is the result of years of back and forth between Tri-State and its members. At least seven rural cooperatives are considering leaving the service of Tri-State, citing high costs in part due to a fossil-fuel dominant power mix, albeit one that Tri-State is working to change.

Tri-State last January proposed a strategy to move its members toward a cheaper, cleaner power mix by shuttering some of its coal-fired power plants and replacing the power with renewable energy resources, but members were still concerned about high prices. 

Tri-State, which came under FERC jurisdiction in 2019, filed a rate schedule with the commission by which member exit fees could be calculated last April. But it has yet to give any of its members an exit price, despite members requesting such a calculation since November.

FERC's Thursday order acknowledges this history, and further finds the G&T's tariff and bylaws are unjust and unreasonable in that they do not give its members a clear and transparent way to determine the cost of exiting its service. Because such a calculation relies on proprietary information, and Tri-State hasn't provided any of its members with a calculation, those cooperatives have no way to determine what the financial impact of their exit will be, FERC found.

"Today, several utility members have outstanding [contract termination payment] calculation requests, and cannot reasonably move forward in evaluating their continued membership until Tri-State responds to those requests," FERC wrote in its decision. "Thus, the lack of clear and transparent exit provisions has allowed Tri-State to impose substantial barriers for its utility members in evaluating whether to remain in Tri-State."

"Tri-State is reviewing the FERC order, and intends to continue to work through the Commission’s processes to resolve its concerns," said Duane Highley, Tri-State CEO, in a statement. "We recognize the concerns expressed by FERC and look forward to working with our board of directors and FERC to resolve these issues."

Tri-State must respond to the commission's order within 30 days of its publication in the Federal Register.