Case 1:13-cv-00085 Document 1
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
TRI-STATE GENERATION AND TRANSMISSION
ASSOCIATION, INC., a Colorado Nonprofit Cooperative Corporation,
Plaintiff,
v.
No. 13-CV-85
NEW MEXICO PUBLIC REGULATION COMMISSION,
a New Mexico Agency, and its members, Commissioners
Patrick H. Lyons, Theresa Becenti-Aguilar, Ben 1. Hall, Valerie Espinoza, and Karen 1.
Montoya, acting in their official capacities,
Defendants.
VERIFIED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
Plaintiff Tri-State Generation and Transmission Association, Inc. ("Tri-State"), for its
Complaint against the New Mexico Public Regulation Commission and its Commissioners
acting in their official capacities (collectively, the "Commission"), states and alleges as follows:
NATURE OF THE ACTION
1.
This is an action for declaratory judgment and injunctive relief involving Tri-
,
State's sale of electricity in interstate commerce to its member distribution cooperatives and
public power districts ("Member Systems") located in Colorado, Nebraska, New Mexico and
Wyoming that. then resell the electricity to their own members-consumers. To the extent New
Mexico's regulatory scheme described below PUl'pOlis to authorize the Commission to assert
jurisdiction and control over Tri-State's wholesale rates in New Mexico, it impermissibly
regulates interstate commerce in violation of the Commerce Clause of the United States
Constitution, Article I, Section 8, Clause 3 (the "Commerce Clause").
Case 1:13-cv-00085 Document 1
2.
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Tri-State is a not-for-profit, regional generation and transmission cooperative
corporation organized under the laws of the State of Colorado. Tri-State provides wholesale
electric power to forty-four Member Systems in four states that, in tUl'll, provide electricity at
retail to more than 1.5 million people.
3.
Tri-State's sales of electricity to its Member Systems occur in interstate
commerce. The United States Court of Appeals for the Tenth Circuit has held that Tri-State
generates, transports and sells electricity in interstate commerce since "[t]he electrical energy
involved in [its wholesale power] transactions undoubtedly moves across state lines." See Tri-
Siale Gen. & Trans. Ass'n, Inc. v. Public Servo Comm. o/Wyoming, 412 F.2d 115, 118 (10th Cir.
1969) ("Tri-State
V.
Wyoming Commission") ("We think it clear that the trial court erred in
determining that Tri-State was not engaged in interstate commerce."). The Tenth Circuit further
held that the Wyoming Public Service Commission had no jurisdiction over Tri-State's rates and
that the Commission had interfered with interstate commerce unlawfully when it entered
directives that resulted in Tri-State's Wyoming Member Systems not paying an increased
wholesale rate to Tri-State. Id at 118-19.
4.
Following the Tenth Circuit's decision in Tri-State
V.
Wyoming Commission, the
Public Utilities Commission of the State of Colorado (the "Colorado Commission") concluded
that it had no jurisdiction over Tri-State's wholesale rates:
There is no question as shown by substantial evidence of record in this
proceeding, and as determined by the U.S. COUlt of Appeals for the Tenth Circuit,
that Tri-State is engaged in interstate commerce. No specific permission has been
granted by Congress to Colorado or any other state to regulate the rates of
interstate transmission of power, and this Commission has no jurisdiction to
regulate the rates Tri-State charges to its wholesale customers.
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Colorado Commission Decision No. 86499 at 10; see also Colorado Commission Decision No.
C99-l285, p. 3 & n.1 (citing Tl'i-State v. Wyoming Commission and confirming that the Colorado
Commission "does not regulate" Tri-State's rates).
5.
As described below, to the extent New Mexico's regulatory scheme at issue in
this case purports to authorize the Commission to regulate Tri-State's wholesale electric rates,
the scheme has extraterritorial effects that adversely impact economic activity in other states,
including Colorado, Wyoming and Nebraska, and effectively allows the Commission to establish
wholesale electric rates for use in New Mexico that will necessarily and materialIy affect
Member System rates in the other states served by Tri-State. New Mexico's regulatory scheme
also discriminates against out-of-state producers of electricity such as Tri-State. As in Tl'i-State
v. Wyoming Commission, and for other reasons explained below, to the extent New Mexico's
regulatory scheme purP01iS to authorize the Commission to regulate Tri-State's wholesale
electric rates, it violates the Commerce Clause of the United States Constitution.
PARTIES
6.
Pursuant to Title VII, Article 55 of the Colorado Revised Statutes ("C.R.S."), Tri-
State is a Colorado member-owned, not-for-profit cooperative corporation having its principal
place of business at 1100 W. 116th Avenue, Westminster, Colorado 80234. See C.R.S. §§ 7-55-
101 et seq. Tri-State is not a New Mexico rural electric distribution cooperative and is not
organized under New Mexico's Rural Electric Cooperative Act, NMSA 1978, Chapter 16,
Section 15.
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Defendants are the Commission, a New Mexico governmental agency having its
principal place of business at 1120 Paseo De Peralta, Santa Fe, New Mexico 87801, and the
Commissioners of the Commission acting in their official capacities.!
JURISDICTION
8.
The Court has subject matter jurisdiction under 28 U.S.C. § 1331, 28 U.s.C.
§-220I and42 U.S.C.§ 1983.
9.
Venue is propel' in this District pursuant to 28 U.S.C. § 1391(b), because the
Defendants reside in this District and a substantial pOltion of the events or omissions giving rise
to Tri-State's claims occurred here.
FACTUAL ALLEGATIONS
A.
Tri-State's Corporate Mission and Structure
10.
Tri-State is a generation and transmission cooperative corporation ("G&T")
founded in 1952 by its original member systems. All of Tri-State's CUl1'ent fOlty-four Member
Systems are not-for-profit rural electric distribution cooperatives or public power districts.
Twelve ofTri-State's Member Systems are located in New Mexico.
11.
The primary characteristic of a cooperative corporation such as Tri-State is that its
business "shall not be carried on for profit, but for the mutual benefit of all the members."
C.R.S. §7-55-101(I)(b). Tri-State's mission is to provide its fOlty-four Member Systems located
in foul' states with a reliable supply of interstate electricity while maintaining a sound financial
position.
I Two of the present Commissioners, Commissioners Valerie Espinoza and Karen L. Montoya, were elected to the
Commission effective January 1,2013 and did not participate in the Order entered December 20, 2013 refen-ed to in
paragraph 53 of this Complaint. A copy ofthat Order is attached as Exhibit D.
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12.
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Tri-State is a wholesale electric supplier - an aggregator of its Member Systems'
Tri-State is not an investor owned utility.
Tri-State has Member Systems, not
shareholders, and does not seek to generate a profit for outside investors. Unlike an investor
owned utility or distribution cooperative, Tri-State has no retail customers or exclusive service
tel1'itory established by the Commission. Instead, Tri-State buys and generates electric power,
and transmits,delivers, and sells electricity, to its Member Systemsillillterstate-commcl'ce;-Tl1.e·---- - - Member Systems, in turn, distribute and resell the electricity they purchase at wholesale from
Tri-State to their own member-consumers. In short, Tri-State's Member Systems serve retail
customers but Tri-State does not.
13.
Tri-State's wholesale rates, service, and other business matters are governed by a
forty-foul' member, democratically elected Board of Directors consisting of one director elected
by each Member System, including the twelve Member Systems located in New Mexico.
Members of the Board of Directors live in the rural areas served by Tri-State's Member Systems.
Local, democratic control and service on the basis of mutuality between Member Systems are
fundamental principles of Tri-State's not-for-profit cooperative operations. Tri-State's Board is
directly accountable to its Member Systems and in turn to the Member Systems' retail memberconsumers.
n.
The Rural Electrification Act
14.
In 1936 Congress passed the Rural Electrification Act, 7 U.S.C. § 901 et seq.
("RE Act"). Among other things, the RE Act created the Rural Electrification Administration
("REA") as a federal agency empowered to provide rural areas of the United States with
affordable electricity by lending funds directly to rural electric systems at below market rates.
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TIu'ough a federal reorganization, the REA was later transferred to the
Department of Agriculture and, subsequently, renamed as the Rural Utilities Service ("RUS").
16.
Under the RE Act, providing affordable electricity to lUral America is a matter of
serious national concern. See, e.g., Tri-State Gen. & Trans. Ass'n, Inc. v. Shoshone River Powel~
Inc., 874 F.2d 1346, 1348-51 (10th Cir. 1989) ("Tri-State v. Shoshone IF'). As the Tenth Circuit
then engaged in the bllsiness of generating electrical energy had failed to extend electric service
to the rural communities of America and determined that the national interest would be served by
subsidizing the rural user of electricity." Id. at 1348.
17.
In response to the RE Act, rural electric distribution cooperatives were formed to
seek government subsidized loans and deliver electricity to rural consumers. These cooperatives,
in turn, banded together to form G&Ts, such as Tri-State, in an effort by the rural cooperatives to
secure and more economically obtain long-term, reliable sources of power.
18.
Among other things, Tri-State and other G&Ts borrow federal funds from the
RUS under the RE Act for the purposes of generating, purchasing, transmitting, and delivering
electric energy sold at wholesale to their respective rural electric cooperative members that, in
turn, distribute and sell electricity at retail to ultimate consumers.
19.
Only one G&T other than Tri-State presently sells electricity at wholesale to rural
electrical cooperative members in New Mexico. Western Farmers Electrical Cooperative serves
four members located in eastern New Mexico. 2
2
Western Farmers Electrical Cooperative also scrves nineteen electric cooperatives in Oklahoma.
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C.
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Tri-State's Multi-State Electrical System Operates In Interstate Comlncrcc
20.
As futther described below and as set forth in the maps attached hereto as
Exhibits A and B, Tri-State's electrical system is integrated into an interstate grid to facilitate the
generation and transmission of electricity across a 250,000 square-mile area in four states. TriState's fOlty-four Member Systems cover all or parts of29 counties in New Mexico, all or parts
of56cQuntiesin Colorado, all or paftsof20-counties in westei'n NebrasKa, and all-or paitsofTlI
counties in central and northern Wyoming. In addition, celtain of Tri-State's Member Systems
provide service that extends into Arizona, Utah and Montana. See Exhibits A and B (Tri-State's
Member Map and Tri"State's System Map).
21.
In 2011, Tri-State had $1.2 billion in operating revenues from its sales of
electricity, approximately 80% of which occurred in interstate commerce entirely outside of New
Mexico. As of June 30,2012, Tri-State owned physical assets in five states (including Arizona)
worth over $3 billion and calTied long-term debt exceeding $2.7 billion.
22.
In 2011, Tri-State sold 15.4 million megawatt-hours of electricity to its Member
Systems. Of that amount, approximately 3.0 million megawatt-hours of electricity -
01'
about
20% of the total- was sold to Tri-State's twelve Member Systems located in New Mexico.
23.
Tri-State currently owns and operates more than 2,900 megawatts ("MW") of
electrical generating capacity in Arizona, Colorado, New Mexico and Wyoming. Tri-State's
base load generation includes the 418 MW Springerville Generating Station Unit 3, near
Springerville, Arizona; a 24 percent interest in the 1,710 MW Laramie River Station near
Wheatland, Wyoming; 613 MW of capacity at Craig Station, neal' Craig Colorado (a 205 MW
share of Craig Units 1 and 2 and a 100% leasehold interest in Craig Unit 3); the 100 MW Nucla
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Station near Nucla, Colorado; a 40 MW share of San Juan Generating Station Unit 3 near
Farmington, New Mexico; and a 100% ownership interest in the 250 MW Escalante Generating
Station near Prewitt, New Mexico. Tl'i-State's intermediate generation and peaking resources
include the Brush Generation Facility in eastern Colorado (307 MW); combustion turbines that
comprise the Burlington Station near Burlington, Colorado (100 MW); combustion turbine units
---
th-at-conlpnsethe- Limon Generating-stationnear Liiriori;-Colorauo(r40-MW);
com15ushon~·- -
turbine units that comprise the Frank R. Knutson Generating Station near Brighton, Colorado
(140 MW); and combustion turbines that comprise the Pyramid Generating Station southeast of
Lordsburg, New Mexico (160 MW).
24.
Tri-State currently has more than 825 MW of renewable energy resources,.
including long-term power purchase agreements with the Kit Carson Windpower Project in
southeast Colorado (34 wind turbines generating 51 MW) and the Cimarron Solar Facility in
northeastern New Mexico (500,000 photovoltaic panels generating 30 MW).
25.
In addition to its own generating capacity, Tri-State purchases power from various
third parties, including the Western Area Power Administration ("WAPA") through long-term
federal hydropower allocations that are held by Tri-State. These allocations have a total annual
peak contract delivery rate of 669 MW. WAPA markets and transmits federally produced power
in 15 cenh'al and western states, specifically Arizona, California, Colorado, Kansas, Iowa,
Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Texas,
Utah and Wyoming. WAPA's corporate services office is located in Lakewood, Colorado, and
its Rocky Mountain Region office is located in Loveland, Colorado.
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26.
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Tri-State is also contracted to purchase aImually 285 MW of power from Basin
Electric Power Cooperative ("Basin"), whose generating facilities are located in North Dakota,
South Dakota, Wyoming, Montana, Minnesota and Iowa, and whose corporate headquarters is
located in Bismarck, North Dakota.
27.
~~~~
~
To facilitate the operation of its interstate system and the interstate sale of
~~-~-~-~~---~-~-~--~
_..
---
---
--~-
-
--~
----
electricity to its Members-Owners, Tri-State owns and operates more than 5,200 miles of highvoltage transmission lines in Colorado, Nebraska, New Mexico, and Wyoming. See Ex. B. TriState owns and operates approximately 128 substations and switching stations in those four
states. Its transmission system is interconnected with most of the major electric utilities in the
western United States. ld. Tri-State also owns and operates the David A. Hamil DC Tie at
Stegall, Nebraska, which joins the country's eastern and western power grids by convelting
alternating current to direct current, and then converting it back to alternating cunenl.
28.
Tri-State's New Mexico Member Systems do not receive electricity solely or even
substantially from Tri-State's generation resources located in New Mexico. Rather, Tri-State
injects electricity into the regional grid from its various generation resources in Arizona,
Colorado, New Mexico and Wyoming (and its separate power purchases from third parties in
various states described in Paragraphs 25 and 26 above) as part of interstate commerce that
serves all of Tri-State's Member Systems, whether located in Colorado, New Mexico, Nebraska
or Wyoming. See Exs. A and B.
29.
Tri-State's management is headed by a General Manager under the gove1'llance of
the forty-four member Board of Directors. All of Tri-State's business activities are directed by
the General Manager and staff located at Tri-State's corporate headquatters office in
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Westminster, Colorado (the "Colorado Office"). These activities include power marketing,
power generation, engineering, operations, maintenance, planning, finance, administrative
services, general counsel, environment, and other suppOlting services.
30.
Tri-State's multi-state transmission system is centrally managed through
executive and management staff located at its Colorado Office. The real-time operation of the
- - ----system is accompT1slle([lhrough a centralize,! coiitrol center at the -Colorado Office tliat peHorms--switching and security functions for the transmission system.
31.
Tri-State must work closely with state and federal regulators to assure that it is in
compliance with environmental and safety standards. The siting of new Tri-State generation and
transmission facilities is also coordinated with state and local governments through siting and
permitting processes. Tri-State's engineering activities, which include planning, design, and
construction, are accomplished at the Colorado Office.
32.
Tri-State's transmission maintenance activities are performed by employees in
field offices located throughout its Member Systems' four states. These field offices report to
management and staff at the Colorado Office.
Tri-State depends on the effective, reliable
operation of all of the generation and transmission facilities in all four states in order to meet its
power sales and service obligations. Tri-State management and staff participate in numerous
regional groups that jointly study interstate electrical system capabilities, implement operational
practices, plan and construct transmission expansion projects, monitor system security, and
assure adequate generation reserves for the Rocky Mountain Region of the Western Systems
Coordinating Council.
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33.
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In summary, Tri-State engages in commercial activity that spans more than foul'
states and that requires integration of resources, central management of assets, compliance with
federal and multi-state regulations, and integration with the activities of other interstate entities.
These facts confirm the Tenth Circuit Court of Appeals' decision holding that Tri-State
generates, transpotts and sells electricity in interstate commerce. See Tri-State v. Wyoming
Commission, 412 F.2d at 118.
D.
Tri-State's Federal Funding Requirements And The All Requirements Contracts
Establish The Rate-Setting Principles Applied by the Board of Directors In Setting
Tri-State's Historical "Postage Stamp" Wholesale Electric Rate
34.
All ofTri-State's Member Systems, including those in New Mexico, have entered
into long-term, all requirements wholesale power contracts with Tri-State for electric service (the
"All Requirements Contracts"). In 2007, forty-two of Tri-State's Member Systems (including
eleven of the twelve located in New Mexico) signed new AU Requirements Contracts extending
the term of the Contract by ten years through December 31, 2050. The All Requirements
Contracts of the other two Tri-State Member Systems (including Kit Carson Electric
Cooperative, Inc. ("Kit Carson") headqualtered in Taos, New Mexico) expire December 31,
2040.
35.
In general, the All Requirements Contracts provide that each Tri-State Member
System will purchase and receive from Tri-State (with nominal exceptions not relevant here) all
the electric power and energy the Member System requires to operate its electric system. As the
Tenth Circuit has recognized, "[w]ith the all-requirements contracts in place, the G&T system
provided a stable, interdependent network whereby the distribution cooperatives could pool their
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resources and band together to obtain power at wholesale prices, build central facilities, obtain
favorable loans, and attempt to keep costs down." Tri-State v. Shoshone II, 874 F.2d at 1349.
36.
Tri-State and other G&T's rely upon federal loan programs administered by RUS
(and previously REA) for a principal source of their capital structure. The long-term revenue
stream Tri-State receives under the All Requirements Contracts with its Member Systems is "an
essential factor to the cohesiveness and financial strength of the G&T systems" becausetne-contracts "place the financial strength of the distribution cooperatives behind G&T loans." Tl'i-
State v. Shoshone II, 874 F.2d at 1349-50.
37.
Each of the All Requirements Contracts between Tri-State and its forty-four
Member Systems include the following provision: "[Member] acknowledges that [Tri-State] and
the Government and other lenders are relying on this [all requirements] commitment from
[Member], and similar commitments from aU other [Tri-State] Members having similar contracts
to purchase electric service for its present and future load requirements hereunder and provide
for (a) the financing of [Td-State's] facilities, (b) the development of an organization to serve
[Member], and (c) for a long-term planning and power supply acquisition program."
38.
As partial security for the loans it makes and as mandated by federal law, RUS
requires Tri-State and other G&Ts to charge rates to their members-customers that produce
"revenues sufficient to enable the [G&T] to make payment on account of all indebtedness of the
[G&T]" to RUS. See 7 C.F.R. § 1717.301(b).
39.
Consistent with RUS requirements and federal law, the All Requirements
Contracts provide that Tri-State will charge rates to its Member Systems that generate revenues
which are sufficient, combined with other revenue sources, to meet Tri-State's cost of operation
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(inclusive of reasonable reserves), debt and lease costs and equity development, all as
established, voted upon and approved by Tri-State's Board of Directors.
40.
For many decades, Tri-State's Board of Directors has voted to adopt a single rate
at which Tl'i-State sells wholesale electric power to each of its Member Systems.
That is,
regardless of the size, location, and structure of a Member System, each Member System is
charged the same wholesale rate for the capacity and energy delivered to iissystem-:-Thfs
longstanding "postage stamp,,3 rate philosophy comports with the mutual support nature of the
cooperative corporation business model under which Tri-State is organized.
E.
Tri-State's Board of Directors Set Tri-State's Wholesale Rate For 2013
41.
As mandated by RUS requirements, federal law, and Tl'i-State's All Requirements
Contracts with its Member Systems, Tri-State's Board of Directors began the budget process for
2013 with the goal of charging a wholesale rate to its Member Systems that generates revenues
which are sufficient, combined with other revenue sources, to meet Tri-State's cost of operation
(inclusive of reasonable reserves), debt and lease costs and equity development. The allllual
budget process began with a review ofTri-State's consolidated budget (including cost of service
and capital), and a determination of the total 2013 revenue requirement for ratemaking purposes.
The Board also considered the results of its multi-year effort to examine new rate designs and
methodologies for calculating wholesale rates. During its August and September 2012 Board
meetings, Tri"State's Directors carefully reviewed forecasted costs and anticipated sales and
3 A "postage
stamp" rate structure refers to charging a single wholesale power rate to customers no matter
where they are located. "Postage stamp'; rate is derived from the fact that no matter how fur a letter
travels within the United States, the U.S. Postal Service charges the same amount per ounce to deliver itas opposed to charging by the mile for the distance the letter travels. Cf Pan-Alberta Gas Ltd. v.
F.E.R.C., 251 F.3d 173,175 (D.C. Cil'. 2001) (in the context of shipping natural gas, "postage stamp" rate
means "the same price [is charged] to ship gas across the country as ... to ship gas across town").
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revenues for calendar year 2013, and determined that, with a new rate design, a 4.9% rate
increase is necessary to maintain Tri-State's financial health. In early September 2012, the
Board of Directors formally voted on and passed a Resolution authorizing the rate increase and
new rate design to be effective January 1, 2013. Based upon consumption of 1,000 kWh per
month, an average end-use consumer served by one ofTri-State's Member Systems would see a
---
power supply cost increase of $3.37 per month.
42.
As a G&T cooperative corporation, Tri-State's mission is to provide its Member
Systems electricity at the lowest reasonable price on a basis of mutuality. As a Member-owned
and Member-governed organization, Tri-State has every incentive to keep the rates to its
Member Systems as low as possible. The Board of Directors, comprised of one representative
from every Member System, determined that the 2013 wholesale rate change is necessary to
cover the cooperative corporation's costs and sustain its financial health. Members of the Board
of Directors who voted on whether to approve the 2013 wholesale rate change included a
representative from each of Tri-State's twelve Member Systems located in New Mexico.
43.
After Tri-State's Board of Directors approved the 2013 budget and the wholesale
Member System rate, Tri-State filed an advice notice on October 19, 2012 ("Advice Notice No.
15") informing the Commission of the new rate. (Advice Notice No. 15 is contained in Ex. 1 to
Ex. C hereto.) A copy of Advice Notice No. 15 was simultaneously provided to Tri-State's
Member Systems. By filing Advice Notice No. 15 with the Commission voluntarily (as with
other Advice Notices Tl'i-State had previously filed), Tri-State did not agree to the Commission's
jurisdiction to review, suspend or set Tri-State's rates, nor did Tri-State waive any right to
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challenge the Commission's jurisdiction.
Filed 01/25/13 Page 15 of 25
Indeed, Tri-State expressly reserved the right to
challenge the Commission's jurisdiction at any time.
F.
New Mexico's Regulation Of G&T Electric Rates
44.
New Mexico law provides the Commission authority to regulate intrastate public
utilities that sell power at retail to end use customers. N.M. Const. Art. XI, Sec. 2; NMSA 1978,
§ 62-3-3G. Tri-State i~ not a public utility andifopei'ates iii Interstate commerce.-Assnch;-§-623-3G provides no authority to the Commission to regulate Tri-State's rates.
45.
New Mexico Statute § 62-6-4(A) provides that the Commission "shall have
general and exclusive power and jurisdiction to regulate and supervise every public utility in
respect to its rates and service regulations and in respect to its securities, all in accordance with
the provisions and subject to the reservations of the Public Utility Act [NMSA 1978, §§ 62-13-1
et seq.]." (Emphasis added).
46.
shall apply to
The Public Utility Act provides that "[n]either this act nor any provision thereof
01'
be construed to apply to commerce with foreign nations 01' commerce among the
several states of this Union, except insofar as the same may be permitted under the provisions of
the constitution of the United States and the acts of congress." NMSA 1978, § 62-13-4. That
provision limits application of the Public Utility Act, including Section 62-6-4, to intrastate
transactions, and prohibits application of the Public Utility Act to transactions in interstate
commerce. Therefore, read in harmony with other statutory provisions, Section 62-6-4(D) may
apply to G&Ts operating solely intrastate in New Mexico, but it does not apply to G&Ts such as
Tri-State, whose business and operations in New Mexico are solely interstate.
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47.
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Section 3(b) of the All Requirements Contracts between Tri-State and each of its
fotty-four Member Systems (including all of the New Mexico Member Systems) provides: "The
Board of Directors of [Td-State] at such intervals as it shall deem appropriate, but in any event
not less frequently than once each calendar year, shall review the rates for electric service
furnished hereunder ... and, if necessary, shal1 revise such rates ... , all as approved by the Board
of Directors of [Tri-State]." Section 3(a) of the All Requireinents Contracts fulther expressly
requires as follows:
"The Member shall pay [Td-State] for all electric service furnished
hereunder at the rates and on the terms and conditions set forth in the rate schedule(s), adopted
from time to time by [Td-State' s] Board of Directors." (Emphasis added).
48.
As mandated by Sections 3(a) and (b) of the All Requirements Contracts, the rate
at which Tl'i-State sells electricity to its forty-foul' Member Systems is determined wholly as a
matter of contract by Td-State's democratically elected Board of Directors, which includes
representatives from Tri-State's twelve Member Systems located in New Mexico. A protesting
Member Systems' remedies lie first in Tri-State's democratic process to which all Members have
agreed, and second, in judicial resolution of contractual disputes if the Member System or TriState choose to pursue such claims.
The Commission has no authority to offer protesting
Member Systems any remedy.
G.
A Minority of New Mexico Member Systems Protested T!'i-State's 2013 Rate
49.
The twelve Member Systems of Tri-State located in New Mexico and the site of
their respective headquarters are:
Central New Mexico Electric Cooperative, Inc. in
Mountainair; Columbus Electric Cooperative, Inc. in Deming; Continental Divide Electric
Cooperative, Inc. ("Continental Divide") in Grants; Jemez Mountains Electric Cooperative, Inc.
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in Espanola; Kit Carson in Taos; Mora-San Miguel Electric Cooperative, Inc. in Mora; NOlihern
Rio Arriba Electric Cooperative, Inc. in Chama; Otero County Electric Cooperative, Inc. in
Cloudcroft; Sierra Electric Cooperative, Inc. in Elephant Butte; Socorro Electric Cooperative,
Inc. in Socorro; Southwestern Electric Cooperative, Inc. in Clayion; and Springer Electric
Cooperative, Inc. ("Springer") in Springer.
50.
Only three of Tri-State's twelve New Mexico Member Systems - Continental
Divide, Kit Carson and Springer - filed protests with the Commission purpoliing to object to TriState's 2013 wholesale rate.
Those Member Systems are hereinafter referred to as the
"Protesting Member Systems."
H.
Tri-State Filed A Response To The Protests; The Commission Rejected Tl'i-State's
Objections -- And Entered An Order Suspending Tri-Statc's 2013 Rate
51.
Prior to filing this lawsuit, Tri-State filed a Response to the Protests (the
"Response") with the Commission on November 29, 2012 (a copy of the Response is attached
hereto as Exhibit C). As further explained in the Response, the 2013 rate approved by TriState's Board of Directors includes two components: (1) a rate increase; and (2) a change in rate
design. The Protests, as filed, did not object to the rate increase component. However, the two
components work together and cannot be considered or implemented in isolation. See Ex. C at
9-12.
52.
In its Response, Tri-State requested that the Commission refrain from exercising
jurisdiction over or suspending Tri-State's 2013 wholesale rate because: (1) the Constitution and
laws of the State of New Mexico do not provide authority to the Commission to regulate the
rates of an interstate entity selling wholesale power in interstate commerce such as Tri-State; (2)
to the extent New Mexico's regulatory scheme purports to authorize the Commission to assert
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jUl'isdiction over, suspend and determine Tri-State's rates in New Mexico, it is unconstitutional
under the Commerce Clause of the United States Constitution; (3) three New Mexico Member
Systems had not submitted valid protests to the rate; (4) the Protesting Member Systems had
failed to exhaust their remedies within Tri-State; and (5) "just cause" did not exist for the
Commission to review the 2013 rate change.
--
53.
State~s
At an open meeting held on December 20, 2012, the Commission rejected Tri-
Response and, by a 4-1 vote, suspended the 2013 rate by issuance of its December 20,
2012 Order Appointing Hearing Examiner and Suspending Rate Schedules. A copy of that
Order is attached as Exhibit D.
54.
Solely in an attempt to mitigate a pOliion of its damages pending determination by
this COUli of the issues raised by this Complaint, and to avoid unfairness to the nine New Mexico
Members which did not protest Tri-State's 2013 rate, Tri-State has filed with the Commission
three Advice Notices (Advice Notice Nos. 16, 17, and 18) concerning interim rates to be
effective pending issuance of injunctive relief andlor declaratory judgment in this case, filing of
a fmiher Original Rate Advice Notice, or further Order of the Commission. Copies of Advice
Notice Nos. 16, 17, and 18, and explanatory letters to the Commission concerning their filing,
are attached as Exhibits E, F, G, and H. -
FIRST CLAIM FOR RELIEFVIOLATION OF FEDERAL COMMERCE CLAUSE (Burden on Interstate Commerce)
55.
The allegations set forth above are incorporated into Tri-State's first claim for
-56.
To the extent the provisions of New Mexico Statute 62-6-4(D) purport to
relief.
empower the Commission to exercise jUl'isdiction over, suspend, and detelmine Tri-State's
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wholesale rates, those provisions have extraterritorial effects that impact adversely interstate
commerce, including economic activity in Colorado, Wyoming and Nebraska. Among other
things, if Section 4(D) is read to apply to interstate commerce, the practical effect would be to
control interstate commerce that occurs entirely outside the boundaries of New Mexico by,
among other things, allowing the Commission to establish rates for use in New Mexico that will
inevitably and materially affect rates for members in the tln'ee other states served by TI·i-State.
57.
By suspending Td-State's 2013 rate, the Commission has effectively forced Tri-
State to modify its postage stamp rate and business model, and increase its wholesale rate. This
is so because Tri-State's loan agreement with RUS and federal law requires Td-State to generate
revenues which are sufficient to meet its cost of operation (inclusive of reasonable reserves),
debt and lease costs and equity development. Since Tri-State has no investors, it cannot simply
reduce dividends 01' other shareholder distributions to cover a revenue shOltfall. Rather, as a notfor-profit cooperative corporation, the only way Trl-State could increase its revenues to make up
for a shortfall in revenues received from its New Mexico Member Systems would be to charge a
higher wholesale rate to its Member Systems in Colorado, Nebraska and Wyoming. Stated
another way, lack of recovery of revenues from a segment of Tri-State's Member Systems in
New Mexico would unfairly place additional financial burdens upon other Member Systems to
make up the difference. Accordingly, any differential rate treatment to New Mexico Member
Systems would inevitably have a material and detrimental impact on the rates paid by Member
Systems in other states and would attack the core business model and foundation upon which
Tri-State's interstate cooperative corporation rests. Even if Tri-State's interim rates (referred to
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Filed 01125113 Page 20 of25
in paragraph 54 of this Complaint) take effect, the issue of whether the Commission may
regulate Tri-State's wholesale rates will remain for decision by this Court.
58.
The Commission's exertion of jurisdiction to suspend and subsequently review
and establish Tri-State's rates in New Mexico constitute economic protectionism and impose a
burden on interstate commerce in violation of the Commerce Clause for this reason alone. See
Trl-State v. Wyoming Commission, 412 F.2d at 118-19.
SECOND CLAIM FOR RELIEF.VIOLATION OF FEDERAL COMMERCE CLAUSE (Out-of-State Discrimination)
59.
The allegations set fOlih above are incorporated into Tri-State's second claim for
60.
Section 4(D) discriminates against out-of-state producers of electricity by failing
relief.
to limit the time within which a G&T's proposed rate increase may be suspended pending a
hearing on the reasonableness of the rate. The comparable New Mexico law regulating in-state
investor owned public utilities, NMSA 1978, § 62-8-7(C), limits the duration of the
Commission's suspension of proposed rates. These differing regulatory schemes and others
described above discriminate against out-of-state wholesale suppliers of electricity such as TriState in violation of the Commerce Clause.
61.
For all of the foregoing reasons, New Mexico Statute 62-6-4(D) impermissibly
regulates interstate commerce in violation of the Commerce Clause of the United States
Constitlltion.
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THIRD CLAIM FOR RELIEF-
DECLARATORY JUDGMENT
62.
The allegations set forth above are incorporated into Tri-State's third claim for
63.
New Mexico law presently purports to mandate that Tri-State comply with
relief.
Section 4(D) and orders of the Commission relating to Tri-State's rates.
64.
Tri-State believes that, to the extent New Mexico's regulatory scheme purports to
authorize the Commission to assert jurisdiction over, suspend and determine Tri-State's rates in
New Mexico, the scheme violates the Commerce Clause of the United States Constitution.
65.
An actual controversy exists as to whether New Mexico's regulatory scheme
purports to authorize the Commission to assert jurisdiction over, suspend and determine TriState's rates in New Mexico and, if so, whether the scheme is unconstitutional under the United
States Constitution.
66.
A declaratory judgment of this Court will serve to establish the respective rights
and obligations of Tri-State and the Commission and terminate the uncertainty and controversy
as to whether the purported grant of jurisdiction to the Commission to regulate Tri-State's
interstate rates is unconstitutional.
67.
Pursuant to Fed. R. Civ. P. 57 and 28 U.S.C. § 2201, Tri-State requests an order
of the Court declaring that: (a) the Commission lacks jurisdiction over Tri-State's rates in New
Mexico and any attempt by the Commission to exercise jurisdiction over, suspend and/or
determine Tri-State's rates is unconstitutional under the United States Constitution; (b) the
Commission's order suspending Tri-State's 2013 wholesale rate and setting a rate hearing is
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unconstitutional under the United States Constitution; (c) the Commission may not take any
action with respect to Tri-State's rates.
FOURTH CLAIM FOR RELIEFVIOLATION OF 42 U.S.C. § 1983
68.
The allegations set fOlih above are incorporated into Tri-State's fourth claim for
69.
The Commission and its Commissioners act under color of New Mexico law in
relief.
considering whether to assert jurisdiction over Tri-State.
70..
To the extent New Mexico's regulatory scheme pUt'polis to authorize the
Commission and the Commissioners to assert jurisdiction over, suspend and determine TriState's rates in New Mexico, the scheme violates Tri-State's federal constitutional rights as set
fotih above.
71.
New Mexico law affords no remedies or the remedies available are inadequate to
address the deprivation of Tri-State's constitutional rights by the Commission and the
Commissioners. Tri-State is therefore entitled to entry of declaratory and injunctive relief in its
favor under 42 U.S.C. § 1983, and to an award of its costs incurred herein, including without
limitation attorneys' fees, pursuant to 42 U.S.C. § 1988.
FIFTH CLAIM FOR RELIEFINJUNCTIVE RELIEF
72.
The allegations set forth above are incorporated into Tri-State's fifth claim for
73.
Unless the Commission and its Commissioners are enjoined from asseliing
relief.
jurisdiction over Tri-State's rates and from suspending andlor determining Tri-State's 2013
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Filed 01/25/13 Page 23 of 25
wholesale rate, Tri-State, its Member Systems outside of New Mexico, and the consumers of
those Member Systems outside of New Mexico, will suffer immediate, irreparable harm.
74.
Tri-State has no adequate remedy at law, to wit: (a) absent an injunction, Tri-
State will have to respond to the Commission's attempts to regulate Tri-State's 2013 rate and
will also be unable to implement its 2013 rate in New Mexico in light of the Commission's
Order suspending Tri-State's 2013 wholesale rate; and (btTJ:i-State will suffer hTeparable injury
in the absence of an injunction.
75.
Tri-State is likely to prevail on the merits of its claims and any prejudice caused
to the Commission and(or its Commissioners is outweighed by the threatened injury to Tri-State.
76.
The injunctive relief requested by Tri-State is in the public interest.
77.
Tri-State requests a permanent injunction prohibiting the Commission and its
Commissioners from (a) asserting jurisdiction over Tri-State's rates, and (b) suspending and/or
determining Tri-State's 2013 wholesale rate. Tri-State reserves the right to file a Motion for
Preliminary Injunction prohibiting the Commission and its Commissioners from (a) asserting
jurisdiction over Tri-State's rates, and (b) suspending andlor determining Tri-State's 2013
wholesale rate.
PRAYER FOR RELIEF
WHEREFORE, Tri-State prays for relief as foJIows:
A.
A declaratory judgment as set fOlih above;
B.
Injunctive relief as set forth above;
C.
An award of Tri-State's costs incurred herein, including without limitation
attorneys' fees, pursuant to 42 U.S.C. § 1988 and as otherwise appropriate;
23
Case 1:13-cv-00085 Document 1
D.
Filed 01/25/13 Page240f25
For such other and fmiher relief as the Court may deem just and equitable under
the circumstances.
DATED this 25'" day of January, 2013.
MODRALL SPERLING ROEHL
HARRIS & SISK, P.A.
Electronically Filed
Bv lsi John R. Cooney, Attorney at Law
John R. Cooney (jcooney@modrall.com)
Earl E. DeBrine (edebrine@modrall.com)
Joan E. Drake (jdrake@modrall.com
Atto1'lleys for Plaintiffs
P. O. Box 2168
Albuquerque, NM 87103-2168
(505) 848-1800
Fax (505) 848-9710
and
Robert E. Youle (ryoule@shermanhoward.com)
Brian G. Eberle (beberle@shermanhoward.com)
SHERMAN & HOWARD, LLC
633 17th Street, Suite 3000
Denver, CO 80202
(303) 297-2900
Fax (303) 298-0940
24
Case 1:13-cv-00085 Document 1
Filed 01/25/13 Page 25 of25
VERIFICATION
I, KENNETH V. REIF, hereby swear, depose, and state as follows:
1.
I am Vice President and General Counsel of Tri-State Generation and
Transmission Association, Inc. (,'Tri'Stai()")
2.
I have read and know the contents of Tri-State's Complaint for Declaratory
Judgment and Injunctive Relief ("Complaint") in the above-captioned action. The statements
contained therein are true and COlTect to the best of my knowledge and belief.
3.
I have reviewed the following exhibits to Tri-State's Complaint and, to the best of
my knowledge and belief, they are true and correct copies of:
a.
Tri-State System Map (Exhibit A)
b.
Tri-State Member Map (Exhibit B)
c.
Tri-State's Response to Protests filed with the New Mexico Public
Regulation Commission (Exhibit C).
d.
The Commission's Order entered December 20,2012 (Exhibit D)
e.
Tri-State's filings of Advice Notices Nos. 16, 17, and 18 conce1'11ing
interim rates, letters to the Commission conce1'11ing such filings,
Notification of such filings, and certificates of service (Exhibits E, F, G,
and H).
/~u
Kenneth V. Reif
STATE OF COLORADO
COUNTY OF
AI>-A~
)
) ss.
)
SUBSCRIBED AND SWORN to before me
Kenneth V. Reif.
On~c.Nv.A~ d. ~
,2013, by
NotaryP
My commission expires:~;!:~L---=:Jc,~:LI.l..(2
25