April is bringing not only spring but major changes to Colorado utilities landscape as one more rural cooperative strikes out on its own and many of the state’s power providers join a regional wholesale market for the first time.
Durango-based La Plata Electric Association bolted from its wholesale power provider, the Tri-State Generation and Transmission Association, on April 1 in search of more local control over electricity production and rates.
LPEA is the fifth co-op to leave Tri-State, including four in Colorado. Four more members — in New Mexico and Nebraska — have signaled they may leave by 2028, creating potential challenges for the nonprofit association.
In 2016, before the defections began, the departing co-ops accounted for roughly 30% of Tri-State’s revenue. In 2025, revenue was down nearly $2.5 million, or 4.7%, due to the loss of two of the co-ops, according to Tri-State’s annual report.
The same day LPEA went solo, the co-op, Tri-State and six other Colorado utilities and power providers joined the Southwest Power Pool, a large regional wholesale electricity market and regional transmission organization or RTO, in hope of better managing electric supplies and cutting costs.
Notably missing were Xcel Energy, the state’s largest electricity provider with 1.6 million customers, and Core Electric, the state’s largest cooperative serving more than 375,000 people across 11 counties from west of Colorado Springs to east of Denver.
Xcel Energy balked at full membership, reluctant to cede control over transmission planning and construction to the RTO and Core Electric relies on Xcel Energy to help balance its system.
Still, both LPEA, with 205 miles of transmission, and Tri-State with 5,932 miles of high-voltage lines, expect a sea change in operations and savings by joining SPP. Tri-State projects $20 million in annual benefits for itself and $230 million regional benefits.
“It’s a new day,” said Chris Hansen, La Plata Electric’s CEO. Striking out on its own, he said, will enable LPEA to meet two main goals — moving to more clean energy and better control of its rates.
The impact was almost immediate. “In a week our wholesale power costs are going down by more than 20%,” Hansen said.
The exit comes with a price tag — $159.3 million. That is the amount LPEA had to pay as an exit fee from its long-term contract with Tri-State, which provides wholesale electricity to 39 rural cooperatives in four states.
The contract requires a member to buy 95% of its electricity from Tri-State, precluding a co-op from adding its own local generation or focusing on renewable energy. In recent years, Tri-State has offered contract modification trying to meet those concerns.
The battle over how to calculate exit fees was waged between Tri-State and Brighton-based United Power, the association’s largest member, at the Federal Energy Regulatory Commission and in the 10th U.S. Circuit Court of Appeals.
Tri-State argued that any co-op leaving was liable for all the revenue it would have provided over the remainder of its 50-year contract. For United Power that came to $1.6 billion. The co-op estimated the fee at about $300 million.
The FERC settled on a method based on Tri-State’s balance sheet and calculated United Power’s exit fee at $627 million — including a requirement to pay for $296.3 million in upfront transmission payments which will be credited back to the co-op as it uses Tri-State transmission services.
United Power’s actual payment to Tri-State was about $331 million.
Tri-State launched a court challenge to the FERC ruling and on March 24 the Denver appeals court upheld the commission’s exit fee methodology.
“This ruling is super important for us and the other co-ops who have exited Tri-State,” Hansen said. Tri-State said in a statement that it is “evaluating its legal options,”
As in United Power’s case, the LPEA exit fee includes $93 million upfront transmission service payment, so the base exit fee was about $66 million.
In leaving Tri-State, LPEA, like United Power, had to put together a portfolio of generation assets to meet the co-op’s winter peak of 160 megawatts and 110 MW summer peak
“We are decidedly a winter peaking system, which is true for most of the Western Slope. That’s in strong contrast to the Front Range, which is almost entirely summer peak because of August AC load,” Hansen said.
“We’ve designed a portfolio that can meet that load,” Hansen said. “We’re ready with all of our needs for the next two years.”
This includes 40 MW of capacity from Tri-State and electricity from Tri-State’s 110-MW Dolores Canyon Solar project in Montezuma County.
“Tri-State had two (purchase power agreements) that were very competitive, and we are very happy to be a business partner with them, but also very happy to not be a member of the system because of all the restrictions that came with it,” Hansen said.
About 6 MW of generation will come from a local hydropower power project and 6 MW from a local waste-heat plant. LPEA also has its 2 MW Sunnyside solar project and 26 MW of residential rooftop solar.
The Sunnyside project is set to be expanded to 5.3 MW with a 5 MW storage system.
La Plata Electric Association’s Sunnyside solar array. (Handout)The rest of the capacity will be provided through a contract with Mercuria, a large commodity trading company, to supply wholesale electricity through the end of 2027.
To bring that electricity to southwest Colorado La Plata Electric will rely on Tri-State transmission lines — paying a fee for transporting the electricity — and that is where the cooperative’s leaving Tri-State and joining the Southwest Power Pool mesh.
“The two very much support each other, ” Hansen said. “Becoming an independent co-op is easier because we are in an RTO.”
The Southwest Power Pool grid stretches across all or parts of 17 states from Texas to North Dakota and in the last few years has aggressively courted utilities and the West and Midwest.
On April 1, it added not only eight Colorado members to its grid, but also utilities in Arizona, Montana, Nebraska, New Mexico, Utah, and Wyoming.
Hansen offered “a very concrete example” of how being in a multi-state grid helps a small rural cooperative in a rural corner of Colorado.
“We are looking to acquire a (purchase power agreement) for wind resources,” Hansen said. “Obviously, the wind resources are located on the Eastern Plains. We need transmission to be able to deliver those types of assets for our members, and that’s one of the huge advantages of being inside of the Southwest Power Pool.”
Workers prepare to install power poles using a helicopter in southwestern Colorado. (Handout)The Southwest Power Pool uses a single tariff charge across all its states. Without that, a utility would have to pay a fee to each utility whose lines the electricity comes through, like multiple tolls on a road. It is called pancaking.
While many of the lines in Colorado will be in the Southwest Power Pool, electricity crossing Xcel Energy territory will still have to pay an extra fee.
“It’s one of the reasons I feel so strongly that Xcel should meet its obligations under state law to join an organized wholesale market, because everyone in the state will save if that is the case,” Hansen said.
Xcel Energy is joining SPP’s new Markets+, a wholesale pool for day-ahead sales. Members of the Colorado Public Utilities Commission say they hope it will be a first step to full membership.
Blacks Hill Energy, which serves 309,000 people in Southwest Colorado also opted to only join Markets+, which will begin operating in 2027.
In 2021, Hansen, then a state senator, was the prime sponsor of Senate Bill 72 requiring utilities with transmission lines to join a wholesale electric market by 2030.
“I worked so hard on Senate Bill 72,” Hansen said, “… because this is the key to unlocking efficiencies, lower costs, lower rates.”
Tri-State sees the Southwest Power Pool optimizing both the dispatch of electricity generation and the management and construction of transmission, as well as doing away with pancaking.
Duane Highley, Tri-State’s CEO, said in a statement, joining Southwest Power Pool is “about building a more efficient, resilient and affordable energy future.”
How beneficial an RTO will be depends on how it is designed, said Sydney Welter, energy markets policy advisor at Western Resource Advocates.
“There are still some knowns around ratepayer impact, so we expect to see some benefits, but really want to see how things go in the initial months and years of operations.,” Welter said.
Craig Unit 1 must return to service Friday
One of the issues to be evaluated is how joining Southwest Power Pool will affect Colorado’s climate goals of reducing carbon emission. On that score SPPl is off to a rocky start.
Facing outages and increased potential for low output from wind resources, the RTO issued a “resource advisory” for April 8 to 13 and asked Tri-State to put the closed Craig Unit 1 coal-fired plant back into operation starting April 10, the association said.
“If this is a result of being overly cautious and the SPP advisory is in effect for only a handful of days, is ramping an aging, expensive coal plant up really the best answer?” Eric Frankowski, executive director of the Western Clean Energy Campaign, said in an email.
Still, the benefits of an RTO can be considerable. A study done for the Colorado Public Utilities Commission estimated that if all Colorado utilities joined an integrated wholesale market it could generate $230 million in annual savings.
Other Colorado-based utilities and power providers joining SPP include Colorado Springs Utilities, Platte River Power Authority, Fountain Power, Guzman Energy, United Power, Delta-Montrose Electric Association and the Western Area Power Administration, which provides hydropower in the West.
The West along with the Southeast are the only two regions in the country that do not have regional grid operators and wholesale markets, and the Western grid is under increasing pressure.
The Western Electricity Coordinating Council, which is responsible for assuring adequate electricity for 14 Western states and two Canadian provinces, warns that the grid is having trouble meeting demand, especially for data centers.
With the West wide open, the Southwest Power Pool has been trying to snap up new members reaching as far as the Bonneville Power Administration in Oregon. SPP’s competition is a regional grid being developed by the California Independent System Operator, or CAISO, that stretches to New Mexico.
Competing transmission organizations will create divisions in the overall grid known as seams, which could reduce the effectiveness of regional markets.
“We are really seeing these markets come to fruition,” WRA’s Welter said. “But we’re going to see these seams, these potential inefficiencies, these disparate policies. … I do think it’s going to take some years to truly evaluate the costs and benefits of these RTOs.”
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