Copyright © 2019 Albuquerque Journal
Editor’s note: This is the second part of a three-day series exploring how New Mexico electric co-ops are struggling to move away from coal power to toward the lofty goals of the Energy Transition Act. See Tuesday’s paper for the conclusion.
Guzman Energy LLC made a bold proposal last May to buy nearly half of Tri-State Generation and Transmission Association’s coal generation for about $500 million as part of a broad plan to shut that power source down and replace it with clean energy.
Tri-State rejected the deal. But it demonstrated how aggressively Guzman is pushing into Tri-State’s service territory to offer rural electric utilities an opportunity to rapidly shed fossil fuels and build a renewable grid with potentially huge savings for consumers.
The Denver-based wholesale power company, which launched in 2013, is focused on helping utilities transition to clean energy. The company says its offer to Tri-State provided a way to meet carbon reduction mandates in New Mexico and Colorado without the potentially-crippling costs of writing off expensive, debt-laden assets that Tri-State must likely retire anyway in the near future.
In return, Guzman proposed to build about 1.2 gigawatts of solar and wind energy, covering about 70 percent of the lost power, which it would sell back to Tri-State to supply lower-cost renewable electricity to its distribution member cooperatives.
Tri-State executives said the proposal lacked sufficient detail and appeared to lock Tri-State into an exclusive agreement that would eclipse offers from other providers.
But Guzman is now using the publicity generated by its offer to negotiate directly with rural cooperatives and municipal utilities about independent power agreements similar to a contract it signed in 2016 with Kit Carson Electric Cooperative in Taos.
“We’ve got a long list of communities we’re in preliminary conversations with, but we can’t yet announce them,” said Guzman External Affairs Director Kathleen Staks. “Our proposal to Tri-State triggered a lot of interest. We’ve gotten pro-active calls from many co-ops and communities.”
Apart from Kit Carson, no other Tri-State member co-ops in New Mexico seem interested in leaving Tri-State, at least for now. But Guzman has signed an agreement with the city of Socorro to help it build a municipal utility independent of the Socorro County Electric Cooperative, a Tri-State member that has served the city and surrounding communities for 75 years.
Guzman also signed a letter of intent in June to provide wholesale power to the city of Bloomfield, which wants to separate from the Farmington Electric Utility System to form its own municipal utility. Guzman already supplies power to the city of Aztec, which broke away from Farmington Electric in the 1960s.
Tri-State is designing its own plans to steadily replace coal with renewables, including more flexibility for its member cooperatives to independently pursue clean energy projects.
But Guzman says the cooperatives will shoulder the costs for closing Tri-State coal plants, which could drive more distribution utilities into Guzman’s camp.
“Those are huge write-offs that will be collected through Tri-State’s wholesale rates,” said Guzman President Chris Riley. “They’ll have to raise member rates significantly.”
Even if more member co-ops don’t opt out of Tri-State, Guzman could still benefit from Tri-State’s agreement to let co-ops seek renewable power on their own.
“If the co-ops can get power elsewhere, that’s an opportunity for us to sign contracts with them,” Staks said.