Fire Mitigation, Reliability Projects to be Bolstered by Wholesale Power Rate Decrease
According to Colorado’s 2021 Wildfire Outlook and Preparedness Plan, produced by Governor Polis and Colorado state fire agencies, the summer of 2021 is expected to be one of the most devastating drought seasons yet recorded. “This threat poses operational and financial risks,” said Bill Mertz, Chief Financial Officer for San Miguel Power Association (SMPA). “I can’t imagine better timing for the wholesale rate decrease, that we helped influence, at the Federal Energy Regulatory Commission (FERC) rate review of wholesale power supplier, Tri-State Generation and Transmission (Tri-State). Simply said, we need this to help with fire mitigation measures now and in the future.”
SMPA is one of six other Tri-State member cooperatives that intervened in the “stated rate” case regarding Tri-State’s filing of their wholesale electric rates. “Our voice was heard, respected and considered. We worked hard, and now the settlement has a proposed rate reduction of 4%,” said Mertz.
Under the terms of the settlement, which is still pending FERC approval, Tri-State will immediately reduce its wholesale power rates by 2%, then follow with another 2% wholesale rate reduction in 2022. After that, Tri-State will switch to a FERC-regulated “Formulaic Rate” which will also be subject to review.
The settlement is good news for SMPA consumers, but it will not likely result in a retail rate reduction. Instead, the savings will be used to defray costs of a number of growing needs, the most urgent of which is fire mitigation.
“Since 2016, our state has seen four of the five largest fires in recorded history,” said Duane Oliver, Operations Manager for SMPA. “Lack of moisture, above-average temperatures, an increase in public visitation, and an abundance of tinder-dry vegetation are all contributing to these predictions.” As caretaker of the local electric distribution grid, which crisscrosses the threatened areas, SMPA must make equipment adjustments and upgrades in order to double down on fire prevention and mitigation.
This challenge is made even tougher by the unprecedented rise in material costs that has followed the global pandemic. “Anyone paying attention to the price of lumber will tell you they’ve never seen increases like this,” said Mike Therriault, SMPA Engineering Supervisor. Last year, material production came to a halt as lumber mills and manufacturing plants closed their doors. Then, demand went through the roof as quarantined consumers started construction projects at an unprecedented rate. The result was a lumber price increase of over 230%. Last year, we could get a sheet of plywood for $18,” said Therriault. “Today, that same sheet costs over $80.” Other electrical supply materials and equipment are experiencing similar price increases. Distributors of steel, aluminum, copper, molded products, fiberglass and fittings are all raising prices and imposing surcharges for fuels and logistics. “Protecting our forests is vital,” said Therriault, “…but it won’t be cheap.”
Another channel for wholesale power savings will be the various reliability projects that SMPA has taken on in order to “harden” the electric grid and lessen the number and impact of power outages. “Our next four-year work plan calls for the replacement of aging equipment and the installation of new protective equipment,” said SMPA Engineering Manager, Jeremy Fox. In addition to the recent Telluride / Mountain Village Reliability project, and the ongoing Nucla / Naturita Reliability project, SMPA is preparing to undertake its largest infrastructure improvement project in its 82-year history. The Red Mountain Electrical Reliability and Broadband Improvement Project will see the re-construction the 16.2 mile-long 46kV transmission line that spans the notoriously rugged Red Mountain Pass and serves as a redundant power feed to the communities of Ouray County. These projects, while unquestionably necessary, do not help bring in new revenue, the way that new construction typically does. “It’s a pretty heavy lift for a small cooperative like San Miguel,” said Fox. “The wholesale savings from Tri-State will definitely help.”
All told, the recent stated-rate settlement with Tri-State under FERC, is good news for the members of San Miguel Power. Although it won’t result in a retail rate decrease, it will help protect against damaging and dangerous forest fires, and it will help improve electric service reliability in a time of extreme weather challenges. As SMPA Operations Manager Oliver put it, “We can use some good news about now.”