Kit Carson Electric Cooperative is among four New Mexico co-ops protesting a rate increase proposed by wholesale power supplier Tri-State Power and Generation.

Kit Carson contends that the changes would mean an 8 percent rate increase for its customers starting in 2014. Tri-State counters that the co-op’s membership would actually see a net decrease under the new rate structure.

Kit Carson CEO Luís Reyes said the dispute warrants a thorough investigation. “Because there’s a conflict, we need a third party to determine who’s right and who’s wrong,” Reyes said. “We’ve said all along that these rates need to be based on some kind of cost of service.”

Denver-based Tri-State supplies nearly all of the electricity used by Kit Carson members, and the wholesale cost is passed directly to users. Tri-State serves 44 electric cooperative in four states, including 12 co-ops in New Mexico.

Last year, three co-ops — including Kit Carson — protested Tri-State’s original rate request, and the state Public Regulation Commission (PRC) ordered an investigation and hearings to determine if the rates were fair.

Under New Mexico law, three co-ops must protest a rate increase from Tri-State in order to bring the issue before regulators. Tri-State agreed to the terms of that law when it was allowed to merge with Plains Electric Generation thirteen years ago.

Tri-State responded to the PRC’s order by filing a lawsuit in federal court arguing that it was beyond the jurisdiction of the state regulators. That case continues to slog forward, but Tri-State announced this summer it was abandoning those rates.

Staff at the PRC suspended their investigation to give the parties a chance to find a compromise that would avoid the need for a new rate filing for 2014. That plan appears to have failed, and Tri-State filed notice of a new rate increase in September.

The PRC has not yet acted on the rate notice or the four protests. The commission will have to determine whether to close the previous rate case, and whether to call for an investigation into the new rates.

Reyes suspects Tri-State was hoping three co-ops would not protest, meaning the increase would go into effect without a regulatory review. “Tri-State’s strategy is to wear us down both financially and emotionally by browbeating us to the point where we’re broke,” Reyes said.

Reyes said the co-op has already spent about $100,000 in legal fees for the PRC case, with another $17,000 to participate in the federal court case. Reyes is quick to note that the co-op believes members have saved $1.2 million in added costs by stalling the rate increase.

Tri-State spokesman Lee Boughey disagreed with Reyes’ assessment. “The association values each of its member co-ops, implemented the new rate after three years of open discussion, evaluation and approval by our members, and we continue to work with members when they offer constructive input.”

The recently filed rates are similar to those filed in 2012, but include a clause for a “regulatory charge” Tri-State’s board can apply to any of the co-ops it serves.

Boughey said in an email that the clause “is intended to cover regulatory costs imposed by other regulatory bodies and ensures association members do not pay for mandated regulatory compliance costs incurred by the actions of others.”

Reyes says the clause opens the door to punishing Kit Carson and other co-ops that are exercising their right to protest. “The clause itself is ridiculous,” Reyes said. “It’s punitive, open-ended and discriminatory.”

While Kit Carson says Tri-State is financially sound and does not appear to need a rate increase, Tri-State counters that it is battling rising costs of fuel and regulatory costs.

Tri-State’s second quarter report for 2013 shows substantial increases in fuels and administrative costs for the first six months of the year. Overall, Tri-State reported net margins that were more than $8 million above 2012, despite the fact that a rate increase did not go into effect for New Mexico co-ops.

J.R. Logan is a reporter for The Taos News.

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