Coal under fire: Colorado's No. 2 electric provider, Tri-State Generation and Transmission Association, faces pressure to reassess its reliance on coal—now 76 percent of total output

ColoradoBiz, March, 2008 by Allen Best

Last fall, Tri-State Generation and Transmission Association had to face an inconvenient truth: Its proposed coal-fired power plant was sacrificed in the name of environmentalism.

The directors of Colorado's second largest electrical provider were stunned when they got the news, one of them confides. Never before had a coal-fired power plant in the United States been rejected because of its emissions of a greenhouse gas, carbon dioxide.

Tri-State directors believed environmental rules had changed mid-game, well after Tri-State's partner, Kansas-based Sunflower Electric, had filed for permission to build two power plants along the banks of the Arkansas River near Holcomb, Kan. That the news had shown up first, and prominently so, in The Washington Post seemed telling. One Tri-State executive theorized that the veto--which has been appealed to the Kansas Supreme Court--was politically motivated, without a strong platform in legislated public policy.

Environmental activists applauded the decision by the Kansas Department of Health and Environment. A "huge gust of fresh air," declared Matt Baker, then executive director of Environment Colorado and now a member of the Colorado Public Utilities Commission. For utility directors across the country, the veto was added evidence of the mounting resistance to traditional electrical generation, as renewable energy initiatives gain greater political clout.

If the veto was a surprise, a fight wasn't. Another generation of coal-fired power plants had been controversial from the outset among many of the 44 rural co-ops in Colorado and the three other states that constitute Tri-State. Tri-State, which gets more than three-fourths of its power from coal plants, had said that projected growth in annual demand of up to 9 percent would require 2,000 to 3,200 additional megawatts of generating capacity during the next 18 years. Colorado's largest power plant, in Craig, generates 1,200 megawatts.

Objections were particularly loud and public in Gunnison and Telluride. Dissenters objected to further investments in large, centralized coal-generated electricity given the carbon constraints likely as the nation confronts climate-changing greenhouse gases. A better strategy, they said, is to invest in energy efficiency and renewable sources.

Two of the co-ops, Colorado's Delta-Montrose Electric Association and New Mexico's Kit Carson Electric, went further, refusing to extend their contracts another 10 years with Tri-State, now scheduled to expire in 2040. The extension, Tri-State said, was needed by financiers to confirm revenues. The two coal plants at Holcomb were projected to cost $1 billion each.

Luis Reyes, chief executive of Taos-based Kit Carson, said the plans were premature. "We believe there's no need to rush into a $2 billion decision," he said. Coal, while relatively cheap now, may not remain so, he said. The question, he advised, was "should we bind our rate-payers to the same old way of generating power, or should we try to encourage Tri-State to get a more robust portfolio that includes a good mix of renewables and a good mix of energy efficiency?"

The other defiant co-op, Delta-Montrose, had a similar stance. Directors describe it as a matter of local economic development. Why ship local money to distant locations when it can be generated--or saved--at home?

That stance has a curious irony given that some of Colorado's most productive coal mines are located in Delta County, near the town of Paonia, producing five to six trains per day that groan through the Moffat Tunnel and into Denver.

But then, Montrose had seen ambitious investments in coal backfire before. More than 30 years ago, during Colorado's last energy boom, Montrose was the headquarters for an electrical supplier called Colorado-Ute that delivered electricity for most of the Western Slope. Like Tri-State, it had projected major increases in demand.

"In the mid-1970s, there were lines at gasoline stations, and the rural electricity utility folks, who were our bankers, said build all you can," remembers Ken Norris, then an engineer for Colorado-Ute and now a member of the board of directors for Delta-Montrose Electric. "Our projection for load growth was nearly double-digit."

Colorado-Ute invested in new power plants at Craig and Hayden in expectation of a continued boom. Instead, there was a bust. The oil-shale industry collapsed in 1982, residential growth slowed, and Colorado-Ute was left trying to connect the dots. It never completely did, bellyflopping into bankruptcy in 1990.

Norris, by then the president of Colorado-Ute, now says: 'The parallels are haunting."

PROJECTING DEMAND

Tri-State Generation and Transmission delivers power to 15 percent of state residents, compared to 70 percent by Xcel. In geographic sweep, however, it dominates Colorado, covering roughly half the state in a broad arc of poles and lines. This wide brush explains an important statistic: Tri-State coops have 7.36 customers per line, compared to 35 customers per mile for Xcel and 58 for municipal utilities like Aspen and Fort Collins.