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Vail Valley electric co-op backs tiered rates, sparking criticism from Front Range utility
By David O. Williams

April 9, 2009 — A tiered system of electrical rates that increase as residential consumers increase their use, especially during peak consumption periods, has ignited a power play between Colorado’s electric co-ops.

According to one rural co-op CEO, who helped draft a bill that makes such rates possible, the industry’s future is moving to greater use of renewable sources and energy conservation.

Another co-op chief, heavily tied to coal-fired power, argues a voluntary alternative-energy system will sock residents in the pocketbook when they can least afford it.

“Some look at it as penalizing large consumers,” Holy Cross Energy CEO Del Worley said of Senate Bill 39. “On the other hand, you can look at it as it gives them better payback on conservation measures and consumer-sited renewable generation, and it’s a little more market-driven in that the more you use, eventually the more the co-op is going to have to go out and buy new and more expensive power.”

But critics argue that SB 39, which last week passed in both the Colorado House and Senate and needs only Gov. Bill Ritter’s signature to become law, goes against the prime directive of rural electric co-ops (REAs), which is to keep rates as low as possible for all members.

SB 39 is purely voluntary and leaves the implementation of tiered rates up to the member-elected boards of the state’s 22 nonprofit REAs, which distribute power throughout Colorado’s rural and suburban areas.

Worley said that Holy Cross, for instance, could charge one rate for the first 500 kilowatt hours a consumer uses and a higher rate for each subsequent 500 kilowatt-hour block.

William Schroeder, director of public affairs for Colorado’s largest electric co-op, the Intermountain Rural Electric Association (IREA), said the bill will jack up rates for those who can least afford to pay more.

“It’ll drive up rates in the long run if everybody adheres to it and doesn’t use energy in peak periods and uses it during the off period,” said Schroeder. He argued co-ops will have to increase rates during off periods to compensate for lost revenue, adding that anyone with on-site renewable energy such as solar or wind will abuse the system.

“People that have [renewable energy] will be able to use their energy any time, even when there’s a snowstorm and they’re using more energy during their peak time and they’re not producing anything, so it really falls back on the seniors and the low income and those who are not doing well in this economy,” Schroeder said.

The IREA pulled out of the state REA trade association, the Colorado Rural Electric Association (CREA), because of a long string of disagreements over policy matters connected to the state’s efforts to encourage alternative-energy production, including the CREA’s support of SB 39.

A consumer-advocacy group called IREA Voices was formed in response to several policies enacted by IREA’s board, including a $366 million investment in the new Comanche 3 coal-fired power plant near Pueblo; opposition to 2004’s Amendment 37, which mandated 10 percent of a utility’s power must come from renewable sources, and funding for global warming debunkers to dispute climate change.

Three candidates backed by renewable energy advocates IREA Voices are challenging long-time incumbents in a board election that will be decided April 18.

IREA’s critics say general manager Stan Lewandowski and most of his current board members oppose SB 39 because anything that encourages conservation cuts into consumption of electricity provided by Comanche 3.

“IREA is deeply noncompetitive and uncompetitive,” said Mike Galvin, of Woodland Park, who’s running for one of the three contested board seats. “This is a law that deregulates co-ops, and our co-op is opposing that deregulation so they can keep things the way they are. They want regulation to keep the status quo.”

Schroeder countered that IREA members, in a co-op-only vote, decided by a 4-to-1 margin to opt out of Amendment 37, even though the Legislature later brought REAs back into the 37 fold with House Bill 1281.

“I’m a former state senator, and if I had 80 percent of my constituents say this is the way we want to go, man, I’m not going to buck that, but the Legislature is bucking the people’s direction in that case,” Schroeder said. In the 2004 statewide vote on Amendment 37, though, voters in the IREA coverage area were split 50-50 on the renewable mandate.

That’s the difference between the Holy Cross and IREA memberships, Worley said, pointing to the fact that in the Aspen area Amendment 37 had nearly 80 percent support.

IREA’s service area encompasses a largely politically conservative region that forms a 10-county crescent between Metro Denver’s southerly and eastern reaches and small communities north and west of Colorado Springs. While Holy Cross serves the Roaring Fork, Eagle and Grand valleys, including the tony ski-resort towns of Vail and Aspen.

Holy Cross also invested about $100 million in Comanche 3, according to Worley, but that hasn’t stopped the co-op from simultaneously giving aggressive support to renewable energy industries such as wind and solar.

“Clearly, in our case you can argue, and probably rightfully so, that the solar rebates we give back are not particularly cost-effective, but one of the reasons we’re doing that is to support the solar industry, because long-term you want to drive those costs down, and so to be a piece of that action is responsible on Holy Cross’s part,” Worley said.

And that investment in renewables is the result of a direct mandate from the Holy Cross membership, which overwhelmingly favors conservation, efficiency and renewable energy programs, he said, from Vail to Aspen.

“They’re concerned about energy security, climate change, preserving fossil fuels,” Worley said of the Holy Cross membership, “and so we’re doing what we’re paid to do and that’s [to] listen to our customers and try to move down that road.”



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