Kit Carson Electric Cooperative says new rates proposed by its wholesale power supplier would disincentivize energy conservation and would end up costing its members more money for electricity.
In a Sept. 19 letter to Tri-State Generation and Transmission CEO Kenneth Anderson, co-op CEO Luís Reyes wrote that Tri-State’s rate changes would “provide the wrong signals for members to use energy efficiently” and are “contrary to the policies that are being pursued by the state of New Mexico.”
Tri-State counters that the new rates would replace an “obsolete” model and would actually save the co-op money.
The co-op has long been at odds with Denver-based Tri-State over a cap that limits the amount of renewable energy Kit Carson can produce to 5 percent of its total usage.
That antagonism escalated in the last year after Tri-State first proposed a rate increase and rate design change. Kit Carson and two other New Mexico co-ops protested the rate, prompting the Public Regulation Commission to freeze the rates and order a hearing on the reasonableness of Tri-State’s proposal. In turn, Tri-State filed a lawsuit in federal court arguing it was beyond the jurisdiction of state regulators.
The PRC continues to review the case and the lawsuit is still working its way through the court.
Reyes’ letter to Anderson was part of an effort to reach a compromise after Tri-State gave notice that it intended to implement almost identical rates at the start of 2014.
The proposed rates would no longer differentiate between “on-peak” and ‘off-peak” energy usage, and co-ops would instead be billed for the total amount of energy they use each month. That means power would essentially cost the same any time of day.
At the moment, energy used at peak times — when demand is highest and Tri-State must produce more electricity — costs more than energy used at off hours. The idea, according to Reyes, is to promote energy conservation and balance energy generation over the entire day.
In his letter, Reyes writes that the new rate “would eliminate incentives for Kit Carson members” to use power at off-peak hours, “which we believe will result in substantial cost increases for Kit Carson and other Tri-State members in the long run.”
Reyes notes that Tri-State’s new rate would charge customers based on their overall usage per month, without considering whether that usage came at times of peak demand.
“That is not the direction that Tri-State and its members need to head in order to help reduce the cost of providing electric service to their customers in the future,” the letter reads.
In an interview Wednesday (Nov. 20), Reyes said he thought Tri-State was moving to an “all-energy” rate to ensure high-energy use, which would allow it to sell a lot of electricity. Reyes said promoting energy use could lead to the construction of additional power plants and additional costs to those who get power from Tri-State.
In response to Reyes’ letter, Anderson refuted many claims and instead said that the changes would result in a net savings for Kit Carson. Under the new rate design, Anderson said the co-op would see a 1.5 percent reduction in its power costs.
Anderson said the changes would replace an “obsolete” rate and would allow the company to use “incentives” rather than “penalties” to influence energy consumption. Anderson said peak energy production periods are “not costs drivers” for Tri-State.
Anderson wrote that the new rates would mean that all energy users would “pay their fair share.”
In his letter, Anderson also noted that Kit Carson would not be prevented from implementing its own retail rates that reward off-peak usage. Those different rates would not be reflected in the co-op’s wholesale cost.
Anderson also pointed out that there are many “high load factor” consumers — those whose energy use remains relatively constant — who are eager for the new rates to go into effect.