Joseph Krist
Publisher
TRI STATE LOSES LARGEST PARTICIPANT
This week, the electric cooperative United Power will officially end its 7 decade relationship with Tri-State Generation and Transmission. United Power must make a net payment of $627 million to end its contract early. That number was the result of a court-mandated recalculation of the exit fee required by Tri State. The Federal Energy Regulatory Commission that came up with a formula for calculating the exit fees of Tri-State members who want to break their contracts. Initially, Tri State asked United for $1.2 billion. A major sore spot for United Power and the La Plata Electric Association in Durango is a cap of 5% on the amount of energy that cooperatives can generate on their own.
The changes are being driven by the cooperative’s larger customer as much as anything. “We have industrial and commercial members who want a different fuel mix in a quicker time frame,” according to Tri State management. Tri-State has been working with its member cooperatives on a contract change that would allow them to get more of their electricity from other sources. Plans filed with state regulators call for Tri-State to get 50% of its power from clean-energy sources in 2025 and 70% by 2030. In addition, the company expects to cut its greenhouse gas emissions in Colorado by 2030 by 89% from 2005 levels.
United Power will still be paying to use Tri-State transmission lines and will buy roughly 30% of its power from the utility. Gabriel said United Power has signed four contracts with Tri-State, one of which will run for 20 years. United Power provides electricity to about 300,000 people with demand growing from 8% to 9% a year.
KENTUCKY COAL VS. JOBS?
For decades, northern Kentucky has had a significant aluminum smelting industry. It benefitted from an availability of locations for plants as well as access to coal for low-cost power and the Ohio River for transportation. It comes as no surprise then that Century Aluminium would like to build its plant in Northeast Kentucky. Century is the largest producer of primary aluminum in the United States. Like other entities in energy intensive industries, Century is under pressure to reduce the carbon footprint associated with its smelter operations.
Century already operates a smelter in Sebree, KY and has an idle smelter in Hawesville, KY. The new plant was selected for a cost share of up to $500 million, pending award negotiations, from the U.S. Department of Energy to support the proposed project as part of the Biden administration’s efforts to decarbonize key U.S. industries. There are only four operating primary aluminum smelters left in the U.S., and Century’s proposed plant would be the first built in 45 years.
According to the Department of Energy, Century’s new smelter would lower emissions by 75% relative to a traditional smelter due to “energy-efficient design and use of carbon-free energy.” It is the term carbon-free energy that is causing concern that the company might not be able to obtain sufficient clean power to allow the proposed plant to meet those emissions benchmarks. It will create 1,000 permanent jobs represented by the United Steelworkers union, and 5,500 additional construction jobs. Salary and benefits packages for workers at the smelter are expected to be over $100,000 annually, according to the company.
The issue comes up after coal advocates in the Kentucky legislature passed several bills aimed at federal environmental regulatory actions and slowing down the process of closing coal fired generation. Bills creating a new review board to analyze fossil-fuel power plant retirement decisions became law after the legislature overrode a gubernatorial veto. A second bill giving $3 million to the State Attorney General office from the state’s Budget Reserve Trust Fund or “rainy day” fund to create an “electric reliability defense program” also made it past the veto process. The money is intended to fund litigation challenging the recently published rules on coal fired power generation from the EPA.
While this is all unfolding, Louisville Gas and Electric Co. and Kentucky Utilities Co. (LG&E and KU) announced that they will replace two aging coal generation units at Mill Creek Generating Station in Kentucky—a combined 600 MW—with a 645-MW GE Vernova hydrogen-ready 7HA.03 gas turbine. The utilities have made it clear that they are making market based rather than ideology based decisions as to how to develop their generation base.
NUCLEAR
Georgia Power announced that Votgle 4 is in full commercial operation, seven years later than initially forecast. Their total price tag also blew past the original cost estimate of $14 billion to around $35 billion. Georgia Power owns the largest share in the Vogtle expansion with 45.7%, followed by Oglethorpe Power (30%), the Municipal Electric Authority of Georgia (22.7%) and Dalton Utilities (1.6%). The milestone allows the Votgle assets to be fully absorbed into customer rates. Estimates put the additional residential cost at about $14 per month for 1,000 kwh of power.
A federal appellate court has rejected environmentalists’ challenges under the National Environmental Policy Act (NEPA) and other laws to a decision by the Nuclear Regulatory Commission (NRC) to provide an exemption to a license renewal application deadline for the continued operation of California’s Diablo Canyon nuclear power plant, finding the agency did not act arbitrarily or capriciously.
CHICAGO TRANSIT
Legislation has been introduced by two Illinois legislators which would merge the Regional Transit Authority (RTA), the Chicago Transit Authority (CTA), Metra and Pace. The idea is to reduce administration, competition for funding and an unwieldy governance structure. It comes in the wake of recent estimates of a $750 million deficit to result from the end of COVID related federal aid.
Governance of the new body would be in the form of nearly 20 voting members, down from the nearly /50 split between the current agencies. Three members would be appointed by the governor. The mayor of Chicago and president of the Cook County Board would appoint five each. One member would be appointed by each of the county executives of DuPage, Kane, Lake, McHenry and Will counties.
Six non-voting members would also join the board: the secretary of the Illinois Department of Transportation, the chair of the Illinois Tollway, an organized labor representative chosen by the governor, the chair of the agency’s citizen advisory board and a representative each for the business and disabled communities, chosen by the board. This is considered streamlining by Chicago standards.
It is not clear what the impact of these proposed changes would be on the credit supporting debt issued by the agencies.
TRANSIT FUNDING CHALLENGES
In 2020, voters in Austin, TX approved the Austin Transit Partnership (ATP) — a local government corporation created to finance and oversee the development of a light rail system in the city. The vote also included approval of local taxes to support the plan. With that support, the ATP thought it would be prudent to go to the Texas courts to preemptively obtain validation for bonds it proposed to issue.
That process is now being challenged by Texas’ ideological firebrand, Ken Paxton. The Attorney General’s Office has to sign off on all bonds issued by local jurisdictions like cities, counties and local government corporations like ATP. He has assembled a group of plaintiffs to object to the validation of the bonds. The issues seem to come down to the meaning of words with the parties taking opposite views of what the law would require.
Property taxes in Austin are comprised of two components – maintenance and operations (M&O) rate and a levy for debt service. Raising the debt related rate requires an election and can only be done for a fixed dollar amount. The city argues by transferring M&O property tax revenue to a local government corporation like ATP effectively allows ATP to decide what the money can legally be used for. Once ATP receives the cash, it is “contract revenue,” not tax revenue, and can be used to pay down debts.
The City also argues that language in a resolution passed by the Austin City Council before the 2020 election called a “Contract with the Voters“, which says any changes to Project Connect require approval of the council, CapMetro and ATP board. All three bodies voted to approve the significant changes to the plan in 2023.
In 2021, the Colorado legislature enacted bills to[JK1] implement Proposition 117 to fund transportation projects throughout the state. Just like in Austin, conservative opponents are relying on interpretations of the law to halt funding. In this case, the restrictions in question are seen as violating the state’s TABOR restrictions which limit taxes.
The law created separate fees for a number of transportation-related activities like Uber and Lyft rides, food delivery and fuel. The revenue from each fee was then directed to separate government-owned businesses known as enterprises, each of which was individually projected to take in less than the $100 million limit over five years set out in Proposition 117. At issue is whether the law requires the fees to be evaluated for compliance as a whole or whether each fee is valuated individually.
In ruling against those challenging the fees, a district court judge found that each enterprise and fee had “differing purposes” and thus did not need to be combined. The bill’s sponsors are clear that they created separate fees and enterprises specifically to conform to Proposition 117.
COLORADO BALLOT INITIATIVE
Protect Colorado, is an advocacy group funded with millions from Chevron Energy, Occidental Petroleum Company and other smaller oil and gas companies operating in Colorado. It has submitted a ballot initiative to be voted on in November designed to make it harder for voter initiatives to make it to the ballot. To that end, it developed Initiative 77.
If approved, Proposed Initiative 77 would require all future ballot measures to appear below an extensive economic impact statement, which must include the estimated effect on jobs, state and local tax revenue and the overall state gross domestic product. The Colorado Secretary of State’s Office announced the backers had collected enough signatures to qualify for the ballot.
The measure would require the legislature’s chief economists to review potential economic impact statements submitted by “any interested party.” Within five days, the economist must write a summary with a range of all the qualifying statements. Protect Colorado is currently collecting signatures for another initiative to ban state and local governments from restricting “energy choice,” which could block policies to cut climate-warming emissions by limiting natural gas access in new buildings.
CALIFORNIA POPULATION
A rebound in legal immigration and drop in Covid-19 deaths drove an increase of 67,000, or 0.2 percent, in 2023 in California’s population. The data provides a contrast to the popular notion that folks are pouring out of California as fast as they can. California still lost more residents to other states than it gained from them — as has been the case for two decades — but the number of people leaving for other parts of the country fell to pre-pandemic levels. The net loss of California residents to other states fell from a peak of 356,000 in 2021 to 91,000 in 2023.
One of the things lost in much of the commentary on California’s population is that the phenomenon of residents leaving for other states is common to immigration centers like California and New York. Those places are the first stop for immigrants who often move through to other destinations. The housing situation would likely accelerate that movement of new immigrants inland. California added 116,000 units, or 0.8 percent of the state’s inventory. Around half of those were single-family homes, while most of the rest were multi-family homes.
CLIMATE AND THE MILITARY
It’s not the first thing that comes to mind when one thinks about things military but it turns out that the US DOD has been out front in many ways on the issue of climate change. The location of many facilities often puts them at risk of things like rising sea levels and flooding. To that end, DOD has been assessing the resilience of many of its installation for a decade.
The Air Force Research Laboratory is the primary scientific research and development center for the Department of the Air Force. AFRL officially launched in 1997 to consolidate the four former Air Force laboratories and the Air Force Office of Scientific Research. Its primary focus is on weapons development but its total scope includes some 40 areas of technology.
Now the DOD is looking at potential climate mitigation efforts from the adoption of new technologies. AFRL has signed a two-year subcontract to develop a hydrogen fuel cell microgrid (H2MG) that could be replicated by the US Department of Defense. The H2MG project will see gaseous and liquid hydrogen production, storage and utilization technologies integrated into an existing 1.5MW solar microgrid system at the Joint Base Pearl Harbor Hickman (JBPHH) in Hawaii.
That solar microgrid which would support the project has been in operation for eight years at the base.
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