“Implications of the Supreme Court Stay on the Clean Power Plan”
U.S. Senate Committee on Environment and Public Works
Thursday, June 9, 2016
Testimony by
Micheal McInnes,
Chief Executive Officer,
Tri-State Generation and Transmission Association, Inc.
Westminster, Colorado
Introduction
• Mr.Chairman,RankingMemberBoxerandMembersoftheCommittee,mynameisMikeMcInnes
andIamCEOofTri-StateGenerationandTransmissionAssociation.
• ThankyoufortheopportunitytodiscusstheCleanPowerPlan,itsimpacttomyorganizationand
theimplicationsoftheSupremeCourtStay.
• Tri-Stateisawhollymember-ownedgenerationandtransmissioncooperativeservinginColorado,
Nebraska,NewMexicoandWyoming.Theassociationgeneratesandtransmitswholesaleelectricity
toits44membercooperativesandpublicpowerdistricts,whichsupplyretailelectricitydirectlyto
consumersinaserviceareathatcoversapproximately200,000squaremileswithapopulationof
about1.5million.
• Tri-Stateisownedandgovernedbyitsmembers,andoperatesonanot-for-profitbasis.Ourboard
ofdirectors,whichconsistsofarepresentativefromeachofthe44members,makesdecisions
basedonsoundfinancialprinciples,industrybestpracticesand,mostimportantly,theneedsoftheir
members.
• Toserveourmembers,weusemorethan5,300milesoftransmissionlineandadiversemixof
generationsourcesincludingcoal,naturalgas,hydroelectric,windandsolarpower.
• Tri-Statereliesheavilyoncoalandnaturalgas-firedgenerationtomaintainreliabilityandcontrol
costs.However,overthelastdecadewehavemadesignificantinvestmentsinrenewables,energy
efficiencyanddistributedgenerationprojects.Since2008,Tri-Statehasaddednearly250MWof
renewableenergyandisundercontracttoaddanadditional281MWby2017.In2016,weproject
25percentofenergydeliveredbyTri-Stateanditsmembersystemstocooperativeconsumerswill
begeneratedfromnon-carbondioxideemittingsources.
• WealsoinvestheavilyinresearchthroughorganizationsliketheElectricPowerResearchInstitute,
whereweareparticipatinginresearchonbatteryandenergystoragetechnologies.Wearealso
fundinganewtestcenterinWyomingthatwillconductcutting-edgeresearchonfindinga
commercialuseforCO2andwaystocaptureit.TheXPRIZEFoundation,whichencourages
advancementoftechnologythroughincentivizedcompetition,hasagreedtobeoneofthefirst
tenantsinthecenter.
Ourrelianceoncoalandourbusinessmodelforceustobeactiveintheregulatoryandlegalarenas,
whichiswhatIamheretodiscuss.
TheCooperativeDifference
• Asacooperative,Tri-Stateoperatesdifferentlyandhasdifferentriskscomparedtoinvestor-owned
andmunicipalutilities,afactEPAignoredintheCleanPowerPlanandwhyTri-Stateandother
cooperativeswereactiveintherulemakingprocessandchallengedtheruleincourt.Letmeprovide
afewexamplesofhowwearedifferent:
o Cooperativeshavedifferentfinancialgoals–Unlikeinvestor-ownedutilities,ourinterests
arenotdrivenbyshareholderreturns,butbythoseweserve.Ourprimarygoal–and
contractualobligation–istoprovidereliable,affordableandresponsiblepowertoour
members.
Thisgoalisdifferentthaninvestor-ownedutilitieswhoserateofreturniscommonlytiedto
equity,whichgivesthemanincentivetobuildnewinfrastructure--themorenew
infrastructuretheybuild,themorereturnstheyreceive.Theseincentivesdonotexistfor
Tri-Stateandothercooperatives.
o Ourcostsarespreadoverfewercustomers–Tri-Stateanditsmembershavefewer
consumerspermileoflinethanothertypesofutilities,whichmeanswehavefewer
consumersamongwhomtospreadourcosts.Typically,cooperativeshave1-11consumers
permilewhileinvestor-ownedandmunicipalutilitiesaveragemorethanthirty-five.
o WhenTri-Stateneededgeneration,coalwasouronlyoption–Inthelate‘70sandearly
‘80s,Tri-State’smembersystemsweregrowingrapidly.Duringthesametimeperiod,the
PowerPlantandIndustrialFuelUseAct(FUA)waspassedbyCongressandconstructionof
naturalgasandoilplantswasnotallowed.Wehadtochoosebetweencoalandnuclear
plants--wechosecoalbecauseitwasprovenandaffordable.Onthepositiveside,ourcoal
fleetisrelativelynewcomparedtootherutilities.
o Cooperativesplantshavelongerremainingusefullife–Tri-Statehasinvestedhundredsof
millionsofdollarstoimproveefficiencyandonpollutioncontrolupgrades.Becauseofthese
investmentsandthefactourplantsarenewer;theystillhavesignificantremaininguseful
lifeandwefacelargestrandedcostsifweareforcedtoshutthemprematurely.
o Tri-Statedoesnotneednewgeneration–Whilesomeofourmembersareexperiencing
growth,ithasbeenoffsetbylossesbyothermembers.Tri-Statedoesnotprojecttheneed
tobuildnewgenerationuntil2024-2026,sotocomplywiththerequirementsoftheClean
PowerPlanwewouldlikelyhavetoshutdownexistingplants.
• SincetheEPAfailedtoaddresstheseissuesandotherlegalissuesweraisedduringtherulemaking
process,ourboardofdirectorsfeltitnecessarytochallengetheruleincourt,resultinginthecurrent
stay.
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Tri-Statecontinuestoworkwithstates:
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Whiletheruleisstayed,Tri-Statehascontinueddiscussionswithstateregulatorstoensureour
concernsareheard.
Thefivestatesweoperateinhavetakendifferentapproachestothestay.Twostatesare
continuingtodevelopplans–albeitataslowerpace--andthreestateshave“putthepencilsdown.”
SeveralstateregulatorsjustifymovingforwardbasedonEPA’sgentlethreatthatdeadlinesmay
remainthesameiftheruleisultimatelyupheld,butwehavearguedthereisstronglegalprecedent
supportingdeadlinesbeingtolled.
Wefeelitiswastefultospendtaxpayerandrate-payermoneydevelopingaplanforanunknown
target.Therearesomanyvariablesthatcouldchange–anewrule,amodifiedrule,anewpresident
withdrawstheruleorproposesanewone,marketscouldchange,newtechnologycouldbe
developed–soanyplandevelopedtodaywilllikelyhavetoberedoneandaswerealizedwiththe
CleanPowerPlan,earlyinvestmentsdonotalwaysreceivecreditinthefuture.
Tri-Stateisalsoconcernedthatifstatesunilaterallymoveforwarddevelopingaplan,itwillpreclude
manyoptionsallowedundertheCleanPowerPlantodevelopregionalcomplianceoptions.For
example:
o Aregionaltradingprogramwillonlybepossibleifstatesdeveloponetogether.
o Ifastateplanrequiresretirementorcurtailmentofgenerationsources,itwillitimpact
consumersandoperationsinotherstates.
o Stateplanscaneitherbe“mass”or“rate”based,andmakingaunilateraldecisionmay
causeissuesifsurroundingstatesdecideonadifferentoption.
o Transmissionplanningisdoneontheregionallevelandstatesneedtoworktogetherto
identifyregionalconstraintsandrequirementsfornewlines.
o Complianceformulti-stateutilitieslikeTri-Statebecomescomplicatedandincreases
compliancecostsifeffortsamongstatesarenotcoordinated.
Conclusion
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Iamoftenasked,ifyoudon’tsupporttheCleanPowerPlantoreducecarbonemissions,thenwhat
doyousuggest?
Tri-Stateisalreadyachievingreductionsincarbonemissionsasaresultofmaintaininghighly
efficientpowerplantsandinvestinginrenewableenergyprojects,andwecontinuetosupport
researchanddevelopmentofnewcarbonmanagementtechnologies.
Tri-Statebelievesthatcarbondioxideregulationsneedtoensuretheviabilityofallfuelsourcesand
anyemissionstandardsneedtobeattainableinareasonabletimeline.
Intheend,althoughTri-Stateandothercooperativesaredifferent,wedohaveadesiretoprotect
theenvironmentwhilecontinuingtoprovideaffordableandreliableenergytoourmembers.We
simplybelieveadifferentapproachisneededtomitigateCO2emissions.
Tri-State Generation and Transmission Association, Inc.
Member Territory Map