After six years later and $37 million in exit costs fully repaid to Tri-State Electric, Kit Carson Electric Co-op has lower electricity rates than any Tri-State member co-op and will reach 100 percent daytime solar powered in 2022.
After the six-year process, KCEC has reached a significant milestone in its plan to become one of the cleanest, most cost-effective energy cooperatives in the US. To stabilize and lower rates while shifting to more renewable, locally generated power, KCEC has made the final $37 million payment to exit its decades-long contract with Tri-State Generation and Transmission.
A Distribution Cooperative Exit
Since 2013, KCEC’s member owners have set on creating change when the co-op experienced 12 wholesale power rate increases in 13 years. It was serving a costly, fossil-heavy power mix to its members, and its ability to self-generate renewable power was capped at five percent. KCEC chose price stability, cost decrease, and the ability to serve additional renewable energy resources, and to restore local decision-making ability to better serve its member owners.
“We wanted to prepare for a new energy transition and serve our members’ specific needs,” said Luis A. Reyes, Jr., CEO of KCEC. “We wanted to take direction from our community on what they wanted from us, and within the contract with Tri-State we were unable to deliver.”
At that time, KCEC requested changes from Tri-State on these issues, but the changes were denied. Instead of resorting to litigation, in 2016 the co-op reached an agreement with Tri-State that allowed it to exit its contract for $37 million. The methodology used to calculate the $37 million figure was based on KCEC’s portion of Tri-State’s generation-related debt. KCEC remained a Tri-State Transmission customer. In essence, KCEC pre-paid its financial obligation as a member-owner of Tri-State at that time. Remaining Tri-State member co-ops still owe their portion of Tri-State financial obligation. In this exit model, all remaining Tri-State members were kept whole.
KCEC partnered with Guzman Energy, a wholesale power provider to help finance the exit costs and signed a new, 10-year wholesale power supply contract. The agreement with Guzman Energy provides for lower, fixed wholesale power rates – estimated to save the co-op $50-70 million over the term of the contract; no limits on local renewable energy generation; and a return to local decision making that is focused on members and local economic growth.
Phase 1 Transition Delivers Cheaper, Cleaner Power Milestones
- In the first six years since the shift KCEC has achieved the following milestones:
- KCEC has lower power rates than any Tri-State member co-op and has some of the lowest power rates among all New Mexico co-ops.
- Distributed 41 megawatts of local, solar power throughout KCEC’s service territory.
- Reached its goal of providing 100 percent of daytime energy through solar power.
- Developed 15 MW of accompanying battery storage for reliability and resiliency.
- Made significant progress toward New Mexico’s statewide objective to reduce greenhouse gas emissions by 45 percent by the year 2030.
“We gave our members a voice to influence the cost and type of power they are served,” Reyes said. “We paid a formula-based exit cost with nothing extra. This is what energy independence and restoration of local community decision-making looks like.”
Jeffrey M. Heit, Principal and Managing Director, Guzman Energy, added, “KCEC has provided a blueprint for all local co-ops and their members to be ready for the energy future. We are moving into a world that is going to be more focused on local distributed generation. Guzman is incredibly proud to be part of KCEC’s energy transition, and we look forward to helping them continue to innovate and move toward their next phase.”
Looking ahead to Phase 2, KCEC will continue to work with Guzman Energy on developing modern, resilient, and renewable energy initiatives. KCEC is putting 40 electric vehicle-charging stations in place to help reshape the local energy economy in the vision of its member-owners. It will also continue to expand distributed energy resources along with local storage.