Nebraska power co-ops sue Colorado-based provider

Tri-State Nebraska Co-ops Lawsuit challenges wholesale rate methodology, alleges captive members, contract buyout fees, and cross-subsidies under postage stamp pricing, impacting public power districts and consumer electricity costs across western Nebraska.

Five western Nebraska public power cooperatives are accusing a Colorado-based electric provider of grossly overcharging them for electricity.

The utilities also claim in a lawsuit that Tri-State Generation and Transmission Association Inc., as well as its president and several board members, are holding its Nebraska members captive by demanding they pay $220 million to buy out their Tri-State contracts, a demand they liken to a monopoly abuse case elsewhere in the utility sector.

Chimney Rock Public Power District of Bayard, Midwest Electric Cooperative Corp. of Grant, Northwest Rural Public Power District of Hay Springs, Panhandle Rural Electric Membership Association of Alliance and Roosevelt Public Power District of Mitchell filed the lawsuit, echoing the Snohomish case over energy contracts, in U.S. District Court in North Platte.

The utilities helped form Westminster, Colo.-based Tri-State with other rural electric cooperatives in 1952. Tri-State has grown substantially since then, even as it has faced a state oversight dispute in Colorado, now serving 44 electric cooperatives in Colorado, Wyoming, New Mexico and western Nebraska.

The western Nebraska cooperatives "no longer enjoy the mutual benefit that led them each to come together with other rural distribution entities.... Rather, (they) are now captive in an increasingly intolerable situation that Tri-State simply refuses to acknowledge, let alone correct," the lawsuit says.

The co-ops claim they are charged twice what it costs Tri-State to acquire electricity under a 1978 law debate that shapes procurement — costs that must be passed on to Nebraska consumers. They say Tri-State uses a "postage stamp" rate methodology, in which it charges all of its members the same rates.

That rate system is unfair, the lawsuit says, because it essentially forces the Nebraska members to subsidize capital investments in other, more populated states, a controversy reminiscent of Nevada's deregulation fight over fair rates.

Tri-State general manager Ken Anderson said in a statement that the rate system reflects the direct cost of service to meet members' power load requirements and the association's financial goals and its renewable energy plan objectives as well.

"Tri-State's wholesale rate is nondiscriminatory, cost-based and competitive in the marketplace we serve," Anderson said.

The lawsuit also accuses Tri-State president and board chairman Harold "Hub" Thompson of taking action to keep the Nebraska members from leaving Tri-State by putting an exorbitant price tag on their efforts to buy out their contracts — which are set to run through 2050.

"We believe all of our members continue to receive value, and contribute value, to the association, including the five Nebraska members, and that as a cooperative, we are stronger together than apart," Thompson said in Tri-State's statement.

The Nebraska utilities are asking the court to find, among other things, that Tri-State breached its contracts with them. They seek unspecified damages, as well as court costs and attorneys' fees.

Nebraska is the only state in the nation in which all electricity is provided by public power districts, and the state prides itself on maintaining relatively low electricity rates, a goal underscored by a recent power settlement that could save ratepayers money.

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