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United Power Exits its Current Wholesale Contract Effective May 1, 2024
United Power caught the attention of electric distribution cooperatives nationwide in April when it filed its non-conditional Notice of Intent to Withdraw from its wholesale power contract with Tri-State Generation and Transmission (Tri-State). The cooperative entered a long-term contract with the generation cooperative when few viable sources of affordable and reliable power were available. At the time, it provided stability for United Power and assurance that members would continue to receive reliable power. But the industry has entered a transition, and the contract is no longer reflective of the cooperative or its members’ best interests.
The current contract is too restrictive, capping locally sourced power at just 5% of its total load and preventing United Power from bringing more local generation onto its system, which would lower costs and expand member options. Before making the difficult decision to exit its contract, leadership at the cooperative attempted to negotiate a revised “partial requirements” contract. The revised contract would have continued United Power’s membership relationship with Tri-State while also allowing the cooperative to explore and purchase lower cost, cleaner power options on the market. Unfortunately, negotiations to this end failed.
“Our first option was to continue a mutually beneficial relationship with our wholesale power supplier, where we would continue sourcing a portion of our power from them,” said Mark A. Gabriel, United Power’s President and Chief Executive Officer. “It is unfortunate they were unwilling to help us reach this goal. Although we feel the current contract does not represent shifts taking place in the industry, it was not a decision we made lightly. We spent countless hours weighing our options and discussing a course of action that would result in the best outcome for our members and our future.”
United Power also issued a request for proposal (RFP) for new wholesale power suppliers along with its Notice of Intent to Withdraw. Perspective power suppliers will have until early August to submit proposals outlining their ability to meet the cooperative’s energy needs. Proposals from suppliers are expected to meet three criteria:
- Energy, the critical resource keeping lights on for United Power members.
- Capacity, the ability to provide continuously reliable power even in adverse conditions.
- Resource adequacy, the assurance generation will be adequate to meet demand even on hot summer days during peak hours.
“We are expecting a healthy response to our RFP,” said Dean Hubbuck, United Power’s Chief Energy Resource Officer. “We’ll spend about two months evaluating proposals before selecting a handful of potential suppliers to work with directly. We hope to select a supplier, or group of suppliers, and begin contract negotiations early next year.”
The final step in United Power’s exit is determining an exit fee, which is currently pending with the Federal Energy Regulatory Commission (FERC). Although the fee hasn’t been determined, FERC has issued a number of decisions in the cooperative’s favor over the past few months. In March, FERC economist Greg Golino determined Tri-State’s methodology for calculating the exit fee was “flawed and unreasonable.” The exit fee could be decided as early as this summer.
“Our situation has substantially changed, with more affordable, reliable, and environmentally sustainable power supply options now available,” said Beth Martin, United Power’s Board Chairman. “We believe we should deliver electricity that is more reflective of the current market price, ultimately helping our members save.”
In June, United Power hosted a member forum to discuss its upcoming exit. Gabriel and Hubbuck provided detailed background of how United Power got to this point and where the cooperative is heading from here. The forum concluded with a question and answer session from attendees both online and in person.
Additional information, including a recording of the forum is available on our Power Supply page.
