A FERC Administrative Law Judge issued an Initial Decision Sept. 29 to determine the methodology for calculating the exit fee to be paid by departing members of Tri-State Generation & Transmission Association.

The ALJ recommended adopting a balance sheet approach to measure the debt and other obligations incurred by Tri-State and to assign a departing member a proportional share of those liabilities.

Responsibility for Tri-State’s debt and power purchase agreements (PPAs) would be allocated to exiting cooperatives based upon the past three-year average share of member billings.

The dispute over the appropriate methodology stems from attempts by a number of Tri-State members to exit the Colorado-based generation and transmission cooperative.

FERC previously rejected Tri-State’s Contract Termination Payment (CTP) methodology that required exiting customers to pay all future revenues that would be lost to Tri-State. The commission found the proposed methodology failed to provide fair and transparent procedures for members considering termination. Members testified regarding exit fees so large as to “block” members from being able to pay the cost of departure or producing a windfall for remaining members.

Tri-State has 45 members—42 utility members and three non-utility members. Members consist of rural, not-for-profit electric distribution cooperatives and public power districts, including 17 in Colorado, 11 in New Mexico, 8 in Wyoming, and 6 in Nebraska. Some of Tri-State’s members provide retail service extending into Arizona, Utah, and Montana.

But Tri-State’s power prices and the pace of its transition away from coal-fired generation have led to growing differences between the company and some of its member distribution cooperatives, S&P Global reported in February. It said that three distribution cooperatives accounting for nearly 27% of the association’s member revenue announced they wanted out around that time, and this followed other departures in the preceding years.

United Power, Northwest and at least five other members are participating in a complaint before FERC over Tri-State’s exit fee calculations.

In addition, as part of the Initial Decision, the ALJ identified specific treatments for the following:

The Initial Decision is now subject to review by FERC, with a final decision expected next summer.

Guzman Energy, which works with distribution co-ops that seek full or partial generation & transmission exits in order to leverage competitive market pricing for power, intervened and participated in the proceeding.

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