Proceeding No. 18F-____E
Attachment E
Page 1 of 36

Decision No. R13-1119-I
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO
PROCEEDING NO. 13F-0145E
LA PLATA ELECTRIC ASSOCIATION, INC.; EMPIRE ELECTRIC ASSOCIATION, INC.;
WHITE RIVER ELECTRIC ASSOCIATION, INC.; BP AMERICA PRODUCTION
COMPANY, ENCANA OIL & GAS (USA), INC., ENTERPRISE PRODUCTS OPERATING
LLC, AND EXXONMOBIL PRODUCTION COMPANY AS MEMBERS OF THE RURAL
ELECTRIC CONSUMER ALLIANCE; AND KINDER MORGAN CO2 COMPANY, LP,
COMPLAINANTS,
V.

Colorado PUC E-Filings System

TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.,
RESPONDENT.
INTERIM DECISION OF
ADMINISTRATIVE LAW JUDGE
PAUL C. GOMEZ
DENYING MOTION TO DISMISS AND
CERTIFYING INTERIM DECISION AS
IMMEDIATELY APPEALABLE
Mailed Date: September 11, 2013
TABLE OF CONTENTS
I.

STATEMENT...........................................................................................................................2
A. Background........................................................................................................................2
1.

Complaint ...................................................................................................................2

2.

Motion to Dismiss ......................................................................................................5

3.

Complainants’ Response to Motion to Dismiss .......................................................10

4.

Decision on Limited Evidentiary Hearing ...............................................................15

II. FINDINGS ..............................................................................................................................17
A. Colorado Public Utilities Law .........................................................................................17
B. Commerce Clause ............................................................................................................27

 Proceeding No. 18F-____E
Attachment E
Page 2 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

C. Standing of Industrial Complainants ...............................................................................33
III. ORDER ...................................................................................................................................35
A. It Is Ordered That: ...........................................................................................................35

I.

STATEMENT
A.

Background
1.

1.

Complaint

On March 4, 2013, La Plata Electric Association, Inc. (La Plata) and Empire

Electric Association, Inc. (Empire), acting on behalf of themselves and their members; White
River Electric Association, Inc. (White River), acting on behalf of itself and its members; the
Rural Electric Consumer Alliance (Industrial Complainants), which consists of BP America
Production Company (BP), Encana Oil & Gas (USA), Inc. (Encana), Enterprise Products
Operating LLC (Enterprise), and ExxonMobil Power and Gas Services Inc., on behalf of
ExxonMobil Production Company, a division of ExxonMobil Corporation (Exxon); and Kinder
Morgan CO2 Company, L.P., as industrial customers of the above mentioned cooperative electric
associations (collectively, Complainants), pursuant to 4 Code of Colorado Regulations (CCR)
723-1-1302 of the Commission’s Rules of Practice and Procedure, filed a Formal Complaint
which initiated this proceeding before the Colorado Public Utilities Commission (Commission).
2.

The Formal Complaint alleges that Tri-State Generation and Transmission

Association, Inc. (Tri-State or Respondent) imposed a new rate referred to as “A-37”
implemented on January 1, 2013 which replaced the previously effective “A-36” rate.
Complainants allege that the A-37 rate resulted in a dramatic increase in rates for high load factor
distribution cooperatives and high load factor customers without regard to the cost of providing

2

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Page 3 of 36
Before the Public Utilities Commission of the State of Colorado
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PROCEEDING NO. 13F-0145E

service. Further, Complainants allege that the A-37 rate results in a 10 to 18 percent rate increase
for high load factory customers and cooperatives that serve high load factor customers based
solely on Respondent’s new allocation and rate design methodology. Additionally, Complainants
allege that the A-37 rate has an added deleterious impact on residential time-of-use customers.
3.

Complainants explain that generally, cost allocation and rate design methodology

includes two main components. Here however, the demand charges are not collected based on
peak demands as before. Instead, demand charges are assessed based exclusively on calculated
average demands.

Complainants state that an allocation and rate based on a customer’s

calculated average demand is mathematically equivalent to an allocation and rate based on a
customer’s energy consumption. Consequently, the A-37 methodology is equivalent to an allenergy allocation and rate which is a method previous rejected by the Commission. Second,
Complainants allege that Tri-State has adopted an arbitrary on-peak/off-peak differential for its
wholesale energy rates at a ratio of 4 to 1, which when coupled with the calculated average
demand, collapses to an all-energy rate and results in an on-peak/off-peak differential of only 1.4
to 1 ratio which is insufficient to provide the proper price signals to retail customers to encourage
them to shift load to off-peak periods.
4.

Complainants argue that the cumulative effect of the A-37 methodology is a

significant increase in rates for high-load factor distribution cooperatives and high-load factor
member-customers, and a simultaneous lowering of rates for low-load factor distribution
cooperatives and low-load factor customers without regard to the cost of providing service.
5.

Complainants make the following claims regarding Tri-State: that it failed to file

its A-37 rate with the Commission pursuant to § 40-3-103, C.R.S., including schedules showing
all rates collected together with all rules, regulations, and contracts that in any manner affect or

3

 Proceeding No. 18F-____E
Attachment E
Page 4 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

relate to its rates; that it failed to provide 30 days’ notice pursuant to § 40-3-104, C.R.S., of the
A-37 rate, and failed to seek a waiver of that requirement; that the A-37 rate cost allocation and
design is unjust and unreasonable pursuant to §§ 40-3-101 and 40-3-111(1), C.R.S.; and that the
A-37 rate is preferential or discriminatory pursuant to §§ 40-3-106(1), 111(1) and 111(4)(a),
C.R.S.
6.

As a result, Complainants seek review by the Commission of the new cost

allocation and rate design methodology as applied to Tri-State’s tariff rates to its Colorado
member-systems and their retail customers. Complainants also seek to prohibit Tri-State from
charging the A-37 rate from January 1, 2013 until such time as Tri-State complies with
§§ 40-3-103 and 104, C.R.S., and puts its rates on file with the Commission. Complainants
request a Commission Decision under §§ 40-3-101 and 102, C.R.S., finding that Tri-State’s cost
allocation and rate design methodology implemented on January 1, 2013 is unjust, unreasonable,
preferential, and discriminatory. Additionally, Complainants request a Commission Decision
under §§ 40-3-101 and 102, and §§ 40-3-111(1) and (2)(a), C.R.S., establishing a cost allocation
and rate design methodology for Tri-State that is just, reasonable, not preferential and not
discriminatory, as well as a Decision requiring Tri-state to pay an appropriate refund to any
cooperative that was billed under the A-37 rate higher than it would have been billed under the
A-36 rate, as well as any additional or other relief the Commission deems appropriate.
7.

On March 15, 2013, Commission Director Mr. Doug Dean served Tri-State with

an Order to Satisfy or Answer requiring it to satisfy the matters in the Complaint or answer the
Complaint in writing within 20 days from service upon Respondent of the Order. In addition,
Respondent was served with an Order Setting Hearing and Notice of Hearing. That Order set
this matter for an evidentiary hearing on May 22, 2013.

4

 Proceeding No. 18F-____E
Attachment E
Page 5 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

8.

PROCEEDING NO. 13F-0145E

On March 21, 2013, at its regular Weekly Meeting, the Commission, by minute

entry, referred this Formal Complaint to an Administrative Law Judge (ALJ). The matter was
subsequently assigned to the undersigned ALJ.
2.
9.

Motion to Dismiss

On April 4, 2013, Tri-State filed a Motion to Dismiss Formal Complaint (Motion

to Dismiss). Tri-State asserts that this Commission is without jurisdiction to hear this Formal
Complaint under several theories including that the Commerce Clause1 prohibits Commission
rate regulation of Tri-State and that Commission jurisdiction over its rates would improperly
interfere with Tri-State’s contracts with its Member Systems. The Formal Complaint should also
be dismissed, according to Respondent, since the Commission has never regulated Tri-State’s
rates and the Commission’s rules have recognized that fact for a period of time. While the
Formal Complaint requires that the Commission review the retail rates of Tri-State’s Member
Systems, it argues that the Formal Complaint fails to comply with the process required by
statute. Tri-State also asserts that it has not violated any statute or Commission rule. Regarding
standing, Tri-State takes the position that the Industrial Complainants lack standing to bring the
Formal Complaint and the Complainant Member Systems lack standing to assert Claims Three
and Four of the Formal Complaint.
10.

Tri-State argues that its integrated, interconnected electrical system operates

solely in interstate commerce, integrated into an interstate grid to facilitate the generation and
transmission of electricity across its four-state service area (Colorado, Nebraska, New Mexico,
and Wyoming). Tri-State represents that its Colorado member systems do not receive electricity

1

The power is reserved to Congress to regulate commerce among the several states. U.S. Const. art. 1,
sec. 8, cl. 3.

5

 Proceeding No. 18F-____E
Attachment E
Page 6 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

solely, or even substantially, from its generation resources located in Colorado. Rather, Tri-State
maintains that it injects electricity into the regional grid from its various generation resources
located in Arizona, Colorado, New Mexico, and Wyoming, as well as from independent power
producers in those states, as part of interstate commerce that serves all of Tri-State’s member
systems no matter which state those systems are located. Tri-State represents that it depends on
the operation of all the generation and transmission facilities in all four of the states in which it
operates in order to meet its power sales and service obligations.
11.

Because Tri-State operates solely in interstate commerce, it maintains that any

Commission regulation of its wholesale rates would represent a per se violation of the
Commerce Clause because it has the practical effect of extraterritorial control of commerce
occurring entirely outside the boundaries of Colorado even though the commerce may have
effects within Colorado. Tri-State takes the position (more fully addressed infra) that since it is
involved solely in interstate commerce, the effects of state regulation on interstate commerce are
not merely incidental, but are rather significant and substantial due to the economic
protectionism present in this proceeding.2 As an example, Tri-State asserts that were this
Commission to suspend the A-37 rate (or rate design) in whole or in part, and that a lower rate or
different rate design should be applied to Tri-State’s Colorado member systems, this would force
Tri-State to increase its wholesale rate to its member systems in Nebraska, New Mexico, and
Wyoming.
12.

Tri-State also points to various Commission Decisions issued over the years for

the proposition that the Commission has recognized that it lacks jurisdiction over Tri-State’s

2

Tri-State argues that because it owns and operates assets in five different states and provides wholesale
electric service in four states, each of those states would have an interest in ensuring that its rates were the lowest in
the Tri-State system, which would ultimately result to disallowance of full cost recovery for Tri-State.

6

 Proceeding No. 18F-____E
Attachment E
Page 7 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

rates and charges. Tri-State asserts that this recognition of lack of Commission oversight has
appropriately existed since 1975.
13.

In addition, Tri-State takes the position that Colorado Public Utilities Law (see,

Articles 1 through 7 of Title 40, Colorado Revised Statutes) supports the conclusion that
generation and transmission cooperatives (G&Ts) such as Tri-State are not subject to
Commission regulation. Tri-State cites to § 40-2-112(2), C.R.S., which states that nonprofit
G&Ts may be subject to less regulation and no rate regulation by the Commission. As well,
Tri-State notes § 40-7-113.5, C.R.S., which exempts G&Ts from Commission authority to
impose civil penalties for violations of the Public Utilities Law.
14.

As regards the participation of the Industrial Complainants, Tri-State argues that

they are not member systems of Tri-State and do not receive retail electric service from Tri-Sate.
Rather, the Industrial Complainants receive electric service from Tri-State’s member systems
which set their own retail rates independent of Tri-State and provide notice to their own
customers such as the Industrial Complainants of any changes to those retail rates. Since the
Complainant member systems have each voted to exempt themselves from Commission
jurisdiction under § 40-9.5-103, C.R.S., the Industrial Complainants are precluded from
indirectly creating Commission jurisdiction where none exists, since the Commission has no
authority over the retail rates of the Complainant member systems.
15.

Tri-State also claims that is has not violated any applicable provision of Colorado

Public Utilities Law or the Commission’s regulations. Tri-State enumerates the statutes under
which Complainants argue that Tri-State is in violation and counters that it is not in violation of
any of the statutes. Tri-State indicates that it has not violated § 40-3-103, C.R.S., because the
Commission has no rules pursuant to § 40-3-103, C.R.S., which require G&Ts such as Tri-State

7

 Proceeding No. 18F-____E
Attachment E
Page 8 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

to provide and keep on file with the Commission documents such as its current Colorado tariffs,
forms of contracts, and electric service agreements.3
16.

Tri-State further asserts that it has not violated § 40-3-104, C.R.S., or Rule 3109

of the Commission’s Rules Regulating Electric Utilities 4 CCR 723-3, which require a utility to
file a new or changed tariff with the Commission. Tri-State argues that Rule 3109 is not
applicable to G&Ts such as Tri-State, nor is § 40-3-101, C.R.S., implemented through
Rules 3108, 3109, and 3110.

Tri-State goes on to state that it has also not violated

§§ 40-3-106(1) and 111(1), C.R.S., which are implemented through Rules 3108 through 3110
since those rules are not applicable to Tri-State. Additionally, because the “postage stamp” rate
Tri-State charges to all its member systems is uniform, there is no distinction among customers
and since the rate is charged uniformly, no preferential or discriminatory treatment exists. To the
extent the A-37 rate affects Tri-State’s member systems differently based on load characteristics,
Tri-State argues that this does not equate to preferential or discriminatory rates or an
“unreasonable difference.”
17.

Finally, Tri-State maintains that it has not violated § 40-6-111(4), C.R.S., since the

Commission lacks authority to suspend Tri-State’s wholesale rates. Because § 40-6-111(4),
C.R.S., does not provide a different or independent basis for relief from §§ 40-3-106(1) or
111(1), C.R.S., then the same Commission Rules (3109 through 3110) are applicable to
§ 40-6-111(4), C.R.S., as to §§ 40-3-106(1) and 111(1), C.R.S.
18.

Tri-State contends that Commission regulation of Tri-State’s wholesale rates

would interfere with Tri-State’s wholesale electric service contracts with its member systems.

3

Tri-State points to Commission Rule 4 Code of Colorado Regulations 723-3-3108 of the Commission’s
Rules Regulating Electric Utilities which require utilities to keep those documents on file regarding their retail
electric service.

8

 Proceeding No. 18F-____E
Attachment E
Page 9 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

Tri-State describes the rate setting process its board of directors (BOD) implements in setting
new rates. Tri-State’s mission according to the company is to provide its member systems with
electricity at the lowest reasonable price on a basis of mutuality, which provides Tri-State with
the incentive to keep rates as low as possible based on its cooperative business model. In
addition, each member system in Colorado has a representative on the BOD who was able to
vote on the A-37 rate which allowed member systems to fully participate in the democratic
process of rate setting. Because each Tri-State member system has entered into a wholesale
electric service contract which obligates them to pay the rates duly adopted by Tri-State’s BOD,
Tri-State Contends that Complainant member systems seek to avoid their contractual obligations
by improperly invoking Commission jurisdiction here to interfere with those contractual
obligations.
19.

In addition, Tri-State argues that the Industrial Complainants lack standing to

bring the claims asserted. According to Tri-State, the Industrial Complainants have suffered no
actual injury-in-fact which is “sufficiently direct and palpable: to present the Commission with
fair assurance that the case is proper for Commission resolution.” Tri-State maintains that this is
so because it provides wholesale electric service to its Colorado member systems and not directly
to the Industrial Complainants. In addition, Tri-State takes the position that it has nothing to do
with the rate design that its member systems utilize to charge retail rates. Consequently, the
rate design implemented by the member systems providing electric service to the Industrial
Complainants further distances Tri-State from the alleged injury.
20.

Tri-State notes that the Complainants assert § 40-6-108(1)(b), C.R.S., for Claims

Three and Four, and § 40-6-111(4). C.R.S., for the Fifth Claim which provide them standing.
Industrial Complainants have no legally protected rights or cognizable interests involved in

9

 Proceeding No. 18F-____E
Attachment E
Page 10 of 36
Before the Public Utilities Commission of the State of Colorado
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PROCEEDING NO. 13F-0145E

Claims Three, Four, and Five, while the Complainant member systems have no legally protected
rights or cognizable interests in Claims Three and Four, according to Tri-State.
21.

Regarding the § 40-6-108(1)(b), C.R.S., source of the claim for standing for

Claims Three and Four, Tri-State indicates that the statute requires the signature of at least
25 customers of Tri-State for standing to bring a claim under that statute. Because the Industrial
Complainants are not customers of Tri-State, they are therefore without standing. Another
infirmity pointed out by Tri-State as to standing under § 40-6-108(1)(b), C.R.S., is that legal
counsel for Complainants signed the Complaint rather than actual customers as required by the
statute. Further, § 40-6-108(1)(b), C.R.S., was not meant to apply to G&Ts since it only has
18 Colorado member systems.
22.

As to § 40-6-111(4)(a), C.R.S., Tri-State maintains that since the Industrial

Complainants are not members or customers of Tri-State, they therefore lack standing to assert
the Fifth Claim. As such, Tri-State argues that the Complainants have no standing to bring the
Third and Fourth Claims of the Complaint, and the Industrial Complainants lack standing to
bring Claim Five.
3.
23.

Complainants’ Response to Motion to Dismiss

Complainants argue that the Commerce Clause does not preclude Commission

jurisdiction over Tri-State in this Complaint. Complainants argue that Commission jurisdiction
is not invalid per se because economic protectionism is not present here since Complainants have
not asked for Colorado rates to be lower than those of other states or that other states should be
asked to pay more than their fair share of the percentage of Tri-State’s revenue requirements.4

4

In addition, Complainants argue that Tri-State does not allege that the underlying statutes or rules
discriminate against out-of-state suppliers on their face, or that any in-state competitors are subject to more lenient
treatment or special benefits under Colorado statues or rules.

10

 Proceeding No. 18F-____E
Attachment E
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PROCEEDING NO. 13F-0145E

Rather, since Colorado statutes and Commission rules apply equally to interstate and intrastate
utilities providing services in Colorado, there is no economic protectionism.
24.

Complainants go on to state that no state action exists here that would directly

control commerce occurring wholly outside the boundaries of Colorado, which is also an
indication that the assertion of Commission jurisdiction here is not invalid per se. Complainants
also describe Tri-State’s electric offerings as having a strong intrastate component, as well as
being subject to Commission jurisdiction in several contexts presumably based on Colorado law
and Colorado state interests.
25.

Given Tri-State’s representations that its facilities are so interlinked that its

wholesale sales in Colorado are necessarily done in interstate commerce, then by Tri-State’s own
logic, any Commission ruling would have to impact Colorado, as part of its interstate network.
As a result, there can be no per se violation based on solely extraterritorial impact in this
proceeding.
26.

Under a balance test approach, Complainants assert that the Commission may

review Tri-State’s rate design without violating the Commerce Clause under the Pike v. Bruce
Church balancing test. This is so because state statutes regulate Tri-State evenhandedly to
effectuate a legitimate local public interest, and any effects on interstate commerce are merely
incidental. Complainants argue that the Commission regulates the rates of other public utilities
that operate in interstate commerce such as Black Hills Corporation and Xcel Energy.
Complainants note that the Commission has been able to work with these and other utilities to
reasonably accommodate the interstate nature of some of the utilities’ operations. Tri-State offers
no compelling reason why the Commission could not accomplish the same for it according to
Complainants.

11

 Proceeding No. 18F-____E
Attachment E
Page 12 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

27.

PROCEEDING NO. 13F-0145E

Complainants also argue that any effects of Commission rate regulation on

Tri-State’s interstate interests would only be incidental and no more than those experienced by
other interstate utilities as Complainants are not seeking a sweeping Commission decision, nor
are they asking Tri-State to decrease its overall Colorado rates to the detriment of other states, or
objecting to an across the board rate increase as long as it is lawfully established.
28.

Because Tri-State has almost 1500 megawatts (MW) of generating capacity in

Colorado alone, and sold 9.5 million megawatt-hours of electricity in Colorado in 2012, as well
as serving 56 Colorado counties, with extensive high-voltage transmission lines across Colorado,
Complainants conclude that the State of Colorado can and does have a particularly strong interest
in determining whether Tri-State’s rates are discriminatory.
29.

While Tri-State pointed out prior Commission decisions for the proposition that

the Commission has a significant history of demurring on jurisdiction over Tri-State’s rates,
Complainants point out that “no one has ever before squarely asked the Commission to assert its
statutory jurisdiction over Tri-State’s rates or rate design.” Nonetheless, Complainants also note
that the Commission has asserted jurisdiction over Tri-State in several other contexts. As for the
prior Commission decisions cited by Tri-State, Complainants argue that those decisions are
inapplicable to the matter at hand and further, the Commission is not bound by stare decisis and
may depart from prior decisions, when circumstances require.
30.

In response to Tri-State’s argument that under Colorado Public Utilities Law,

G&Ts are not regulated by the Commission, Complainants take the position that the statutes
cited by Tri-State, §§ 40-2-112 and 40-7-113.5, C.R.S., are inapplicable since neither deals with
the Commission’s regulation of a G&T’s rates.

Complainants assert that Tri-State fails to

provide specific statutory support for its position because there is none.

12

 Proceeding No. 18F-____E
Attachment E
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Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

31.

PROCEEDING NO. 13F-0145E

Complainants argue that their assertion that Tri-State has violated Colorado law in

the manner in which it implemented the A-37 rate states a claim upon which relief can be
granted. Although Tri-State insists that it has not violated § 40-3-103, C.R.S. (implemented
through Rule 3108) which requires utilities to file their tariffs with the Commission,
Complainants find Tri-State’s position “strained.” It is Complainants’ position that the statute
does not limit the obligation to only retail rates, but rather requires every public utility to file its
rates with the Commission. Consequently, it appears to Complainants that Tri-State is attempting
to create an ambiguity where none exists.5
32.

Regarding Tri-State’s contention that it has not violated §§ 40-3-101, 40-3-104,

40-3-106(1), 40-3-111(1), or 40-6-111(4), C.R.S., Complainants again call attention to the
specific language of those statutes which indicates that each statute is applicable to every public
utility including Tri-State.
33.

Complainants also address Tri-State’s claim that Commission regulation of its

wholesale rates would interfere with Tri-Sate’s wholesale electric service contracts with its
members. Complainants contend that the Complaint does not involve a contract dispute. Rather,
the issue is whether the A-37 rate violates Public Utilities Law prohibiting discriminatory rates.
Complainants argue that parties cannot privately contract to abrogate statutory requirements or
contravene public policy. As such, the wholesale electric service contracts have no bearing on
whether the A-37 rate is discriminatory. Complainants characterize Tri-State’s claim that this
matter is really a contractual dispute as defenses to the Complainants’ claims.

5

In addition, Complainants note Commission Rule 1210(a)(I) which requires “[a]ll utilities, unless
specifically exempted by the Commission” to have current tariffs for their jurisdictional services on file.

13

 Proceeding No. 18F-____E
Attachment E
Page 14 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

34.

PROCEEDING NO. 13F-0145E

As for the standing of the Industrial Complainants, Complainants disagree with

Tri-State that they have no standing in this proceeding since, as customers of the member
systems, they pay retail rates to the member systems rather than Tri-State’s wholesale rates, and
as such suffer no injury-in-fact.

Complainants take the position that pursuant to

§ 40-6-108(1)(d), C.R.S., the Commission, in its discretion, may entertain a complaint in the
absence of direct harm to a complainant. Tri-State’s position is belied by the fact that once its
costs are incurred by the member systems, there is little that can be done to stop those costs from
being passed along to the retail consumers, according to the Complainants, or a member system
could risk non-recovery if the member’s actual usage does not match the assumptions used in
designing wholesale rates. Further, the long term power supply contract between Tri-State and
its member systems does not give those system members a viable alternative from whom to
purchase their power supply. Complainants also assert that the Industrial Complainants have a
legally protected interest to prevent unjust and unreasonable and preferential charges, since those
rates are passed through to the retail consumers.
35.

In the alternative, even if the Commission finds that the Industrial Complainants

lack standing as Complainants on their own, then the Industrial Complainants could move
forward with the Complaint as intervenors in this proceeding because the proceeding would
substantially affect their pecuniary or tangible interests. The Industrial Complainants meet this
standard and the difference between a “complainant” and an “intervenor” in this context is
minimal in terms of how the case will proceed.
36.

Finally, Complainants address Tri-State’s claim that the member systems lack

standing as to Claims Three and Four because the complaint was signed by counsel for the three
cooperatives rather than the 25 member systems as it argues is required by § 40-6-108(1)(b),

14

 Proceeding No. 18F-____E
Attachment E
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PROCEEDING NO. 13F-0145E

C.R.S. Complainants point out that there are only 18 member systems in Tri-State’s Colorado
system leading to the conclusion that Tri-State’s interpretation that the complaint must be signed
by 25 member-systems is that the statute is a nullity, leading to an illogical result contrary to the
well-recognized analysis of statutory construction.
37.

Complainants take the position that § 40-6-108(1)(b), C.R.S., must be read in

conjunction with § 40-6-111(4)(a), C.R.S., which reveals that the legislature intended to give
members of customers of cooperative electric associations added protection by easing the
requirement to challenge a utility’s rate increase.6 Based on its analysis, Complainants conclude
that the only rational reading of § 40-6-108(1)(b), C.R.S., is that the Complainant member
systems have standing to bring this Complaint because they represent more than 25 end use
customers.7
4.
38.

Decision on Limited Evidentiary Hearing

Because of the nature and extent of the disputed facts regarding the issue of

Commission jurisdiction in this complaint proceeding, on May 16, 2013 Interim Decision
No. R13-0581-I was issued to hold a limited evidentiary hearing on the disputed facts regarding
Tri-State’s Motion to Dismiss. In that decision, the ALJ found it appropriate to conduct a limited
evidentiary hearing because the jurisdictional facts in this proceeding were in dispute, because
the determination of jurisdiction for the Commission to hear this Complaint could not be
determined on the face of the pleadings.8

6

Citing, Colo.-Ute Elec. Ass’n v. Pub. Utils. Comm’n, 760 P.2d 627, 637 (Colo. 1988).
In the event it is found that Complainants lack standing to bring one or more of the claims raised, they
urge the Commission to begin an investigation on its own motion to investigate whether the A-37 rate violates
Colorado Law.
8
Citing, Trinity Broadcasting of Denver, Inc. v. City of Westminster, 848, P.2d 916, 925 (Colo. 1993)
(citations omitted); and Medina v. State, 35 P.3d 443, 452 (Colo. 2001).
7

15

 Proceeding No. 18F-____E
Attachment E
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39.

PROCEEDING NO. 13F-0145E

A procedural schedule was adopted by Interim Decision No. R13-0648-I which

was issued May 31, 2013, which set deadlines for the filing of direct, answer, and rebuttal
testimony, and a limited evidentiary hearing was scheduled for July 29 through 31, 2013. A
discovery schedule was also adopted by the Interim Decision.
40.

In conformance with the procedural schedule, Complainants filed the direct

testimony and exhibits of Dr. Martin J. Blake, a consultant and former commissioner of the
New Mexico Public Regulatory Commission.
41.

Tri-State filed the answer testimony and exhibits of: Mr. Micheal S. McInnes,

Senior Vice President of Production for Tri-State; Mr. Daniel T. Walter, Senior Manager for
Energy Markets for Tri-State; Mr. Robert W. Wolaver, Senior Manager of Energy Resources for
Tri-State; Mr. James P. Spiers, Senior Vice President of Business Strategy/Chief Technology
Officer for Tri-State; Mr. Daniel M. Walker, a financial advisor and consultant with G&T
cooperative experience; Mr. John P. Corrigan, a utilities management consultant; and,
Dr. Joseph P. Kalt a professor from the Kennedy School of Government, Harvard University.
42.

Complainants filed the rebuttal testimony and exhibits of: Mr. Kevin C. Higgins, a

consultant specializing in economic and policy analysis applicable to energy production,
transportation, and consumption; Dr. Martin J. Blake; and, Mr. Michael P. Gorman, a public
utility regulation consultant.
43.

At the scheduled date and time, the limited evidentiary hearing was convened.

Appearances were entered for Complainants on behalf of Industrial Complainants including BP,
Encana, Enterprise, and Exxon, as well as White River, Empire, La Plata, and Kinder Morgan
CO2 Company. Appearances were also entered on behalf of Respondent Tri-State.

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44.

PROCEEDING NO. 13F-0145E

During the course of the hearing 74 hearing exhibits were either entered into

evidence or administrative notice was taken. Those exhibits offered and entered into evidence
include Hearing Exhibit Nos. 1 through 11, 27, 29 through 47, 48 through 57, 59 through 61, 64,
65, and 67 through 82. Administrative notice was taken of Hearing Exhibit Nos. 12 through 22.
45.

On August 16, 2013, Complainants and Respondent filed their respective Closing

Statements of Position.
II.

FINDINGS
A.

Colorado Public Utilities Law

46.

The narrow issue9 to be determined here is whether the Commission has subject

matter jurisdiction to hear the Formal Complaint. The examination of the issue and attendant
sub-issues begins with an analysis of the Colorado Public Utilities Law.10

Complainants’

position is that the Commission has subject matter jurisdiction over the Complaint under
Colorado law. Tri-State, while conceding that it is indeed a public utility under Colorado law,
nevertheless argues that the Commission lacks statutory rate jurisdiction over Tri-State’s
wholesale rates, and § 40-7-111, C.R.S., precludes that rate jurisdiction.
47.

A discussion of the Commission’s jurisdictional sphere necessarily begins with

Article XXV of the Colorado Constitution which states in relevant part:
… all power to regulate the facilities, service and rates and charges therefor,
including facilities and service and rates and charges therefor within home rule
cities and home rule towns, of every corporation, individual, or association of
individuals, wheresoever situate or operating within the State of Colorado,
whether within or without a home rule city or home rule town, as a public utility,
9

The term “narrow issue” may be somewhat of a misnomer. While the issue is narrow, the analysis is
broad and requires an examination of Colorado Public Utilities Law, the Rural Electrification Act (REA), the
Federal Power Act (FPA), and the Commerce Clause.
10
Indeed, if no state authority exists for Commission jurisdiction over the Complaint, the analysis
concludes with dismissal of the Complaint which vitiates the need to delve deeper into the federal issues
surrounding Commission jurisdiction.

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as presently or may hereafter be defined as a public utility by the laws of the State
of Colorado, is hereby vested in such agency of the State of Colorado as the
General Assembly shall by law designate.
48.

Pursuant to § 40-3-102, C.R.S., the legislature has vested the authority contained

in Article XXV to the Commission. That statute provided in relevant part as follows:
The power and authority is hereby vested in the public utilities commission of the
state of Colorado and it is hereby made its duty to adopt all necessary rates,
charges, and regulations to govern and regulate all rates, charges, and tariffs of
every public utility of this state; to generally supervise and regulate every public
utility in this state; and to do all things, whether specifically designated in articles
1 to 7 of this title or in addition thereto, which are necessary or convenient in the
exercise of such power …
It is evident that the General Assembly intended to place the primary duty and responsibility for
the determination of just and reasonable utility rates with the Commission, and provided a
complete procedural structure in the Colorado Public Utilities Law for the Commission to follow
in discharging its function. Pub. Utils. Comm’n v. Northwestern Water Corp., 451 P.2d 266
(1969).
49.

The primary purpose of utility regulation is to ensure that the rates charged by

utilities are not excessive or unjustly discriminatory. Cottrell v. City and County of Denver,
636 P.2d 703 (Colo. 1981). As such, the Commission has been charged with the general
responsibility to protect the public interest regarding utility rates and practices. Consolidated
Freightways Corp. v. Pub. Utils. Comm’n, 406 P.2d 83 (1965). This public interest charge has
been defined as protecting the interests of the general public from excessive or burdensome rates.
Pub. Utils. Comm’n. v. District Court, 572 P.2d 233 (1974).11 Unquestionably, the Commission

11

Section 40-3-101(1), C.R.S. prohibits and finds unlawful “every unjust and unreasonable charge made,
demanded, or received for such rate, fare, product or commodity or service …”

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is endowed with broad regulatory and ratemaking authority and is required to discharge those
duties when required to do so.
50.

While Tri-State concedes it is a “public utility” under Colorado law,12 it

nonetheless disputes that it is subject to the Commission’s rate jurisdiction.

It challenges

Complainants’ claim that § 40-6-111, C.R.S., is applicable here since it can find no regulatory
requirement under which Tri-State must file its rates with the Commission. Tri-State specifically
points to § 40-6-111(1)(a), C.R.S., which requires that “… there [must be] filed with the
[C]ommission any tariff or schedule stating any new or changed individual or joint rate …” in
order for the Commission to have jurisdiction either pursuant to a complaint or on its own
initiative. According to Tri-State’s reasoning, because § 40-6-111, C.R.S., requires that a tariff or
schedule be filed, and because Commission regulations do not require it to file its rates or tariffs
with the Commission (see, Rule 3000(c)), there can be no Commission jurisdiction over its rates.
51.

Complainants, however, rely on § 40-6-111(4)(a), C.R.S., which states in relevant

part:
Notwithstanding any other provision of law, no cooperative electric
association shall establish, charge, or collect a discriminatory or preferential
rate, charge, rule, or regulation which would be violative of section 40-3-106 (1)
or
section 40-3-111
According to Complainants, this statutory provision unequivocally expresses a state interest in
investigating rates of a G&T that are claimed to be discriminatory or improper.
52.

The canons of statutory construction have been cited and re-cited so often as to be

they are nearly axiomatic. Statutes concerning the same subject matter are to be read together as

12

Hrg. Exh. No. 3 – Answer Testimony and Exhibits of Tri-State witness Daniel T. Walker.

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much as possible in order to give effect to the legislative intent and it must be presumed that the
general assembly intended a just and reasonable result. See, § 2-4-201, C.R.S.; Avicomm, Inc., v.
Colo. Pub. Utils. Comm’n., 955 P.2d 1023 (Colo. 1998). Statutes should be interpreted, if
possible, to harmonize and give meaning to other potentially conflicting statutes. Ragsdale Bros.
Roofing v. United Bank, 744 P.2d 750 (Colo. App. 1987). A statute must be construed to further
the legislative intent evidenced by the entire statutory scheme. Martinez v. Cont’l. Enters.,
730 P.2d 308 (Colo. 1986). When construing statutes, determination and effect must be given to
the intent of the legislature, and a statutory construction must be adopted that best effectuates the
purposes of the legislative scheme. City and County of Denver v. Gonzales, 17 P.3d 137
(Colo. 2001).
53.

Section 40-6-111(4)(a), C.R.S., was crafted by the legislature in a manner to make

the Commission’s suspension of rate powers inapplicable to cooperative electric associations,
while nevertheless leaving those public utilities subject to the other provisions of not only that
section, but also the relevant rate jurisdiction provisions of the Public Utilities Law.
Colorado-Ute Electric Association, Inc., v. Pub. Utils. Comm’n, 760 P.2d 627, 637 (1988). The
statute expressly provides that subsection (4) is not to be construed to exempt cooperative
electric associations from any other provision of § 40-6-111, C.R.S., including conducting a
hearing regarding the propriety of a newly filed rate or changed rate upon complaint or on the
Commission’s own initiative. Id. (referring to §§ 40-6-111(1) and (2)(a), C.R.S.). Therefore,
cooperative electric associations are exempt only from the power of the Commission to suspend
a tariff, which provides a harmonious and consistent effect to the statute’s provisions. Id.
54.

The language of § 40-6-111(4)(a), C.R.S., precludes cooperative electric

associations from establishing, charging, or collecting discriminatory or preferential rates which

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would not only violate § 40-6-111, C.R.S., but also § 40-3-106(1), C.R.S.

Notably,

§ 40-3-106(1), C.R.S., does not contain a requirement that a rate considered under that section
must have been previously filed with the Commission. But most importantly, it is apparent that
the legislature provided a clear avenue for members or customers of electric cooperative
associations to seek relief for any rate violations pursuant to either of those two statutory
provisions.
55.

Further, incorporating §§ 40-6-108(1)(a) and (b), C.R.S. (the Commission’s

primary complaint procedure statute) into the interpretation of Commission rate jurisdiction with
§§ 40-6-111(1) and (4)(a), C.R.S., it becomes apparent that not only are these provisions
consistent with each other, but the last sentence of § 40-6-111(4)(a), C.R.S., in effect lessens the
requirements of § 40-6-108(1)(b), C.R.S., which requires that a complaint as to the
reasonableness of any rates or charges of an electric utility must be signed by not less than
25 customers or prospective customers of the public utility, which in turn, as stated supra, eases
the regulatory burden on cooperative electric associations. Colorado-Ute Electric Association,
Inc. at 637. This interpretation is further augmented by § 40-6-110, C.R.S., which provides that
“[a]ny public utility has a right to complain on any grounds upon which complaints are allowed
to be filed by other parties, and the same procedure shall be adopted and followed as in other
cases.” (Emphasis added).
56.

Reading those statutes together, along with § 40-3-102, C.R.S., nothing can be

ascertained which would diminish any of the Commission’s jurisdictional powers under Public
Utilities Law to investigate tariff changes and, if necessary, to prescribe just and reasonable rates

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as applicable to Tri-State.13

PROCEEDING NO. 13F-0145E

Consequently, it is found that the Public Utilities Law and

specifically the statutory provisions cited above (and harmonized) provide the Commission with
state jurisdiction over Tri-State’s rates. Based on those findings, it is also held that Complainants
have standing to bring Claim Three based on alleged violations of § 40-3-101 and § 40-3-111,
C.R.S., and Claim Four based on alleged violations of § 40-3-106(1) and § 40-3-111(1), C.R.S.,
of the Complaint.
57.

Tri-State takes the position that the Commission has recognized for nearly

40 years that it does not exercise ratemaking jurisdiction over Tri-State. In support of that
contention, Tri-State cites several Commission decisions which purport to establish the
Commission’s policy regarding Tri-State’s rates. It also points out that the Commission has
chosen not to promulgate rules requiring Tri-State to file its rates with the Commission and in
fact has promulgated rules excluding cooperative electric G&T associations from the application
of its tariff and rate rules.
58.

Complainants, however, argue that none of the cases cited by Tri-State address the

specific question of whether the Commission has jurisdictional authority to hear a complaint
brought by Tri-State member systems alleging Tri-State’s rates are discriminatory. Complainants
maintain that statements in prior Commission decisions regarding the scope of Commission rate
regulation over Tri-State are more likely an indication that the Commission acknowledges that it
regulates Tri-State very differently from the investor-owned utilities (IOUs) in the state.
Complainants assert that there is no basis to read into any of those Commission decisions, an

13

Section 40-6-111(4)(a), C.R.S., provides that the Commission shall, upon complaint filed by any member
or customer of a cooperative electric association, determine whether the rate or charge in question is contrary to this
section, § 40-3-106(1), or § 40-3-111, C.R.S.

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affirmative conclusion that the Commission has disclaimed jurisdiction to hear a lawfully filed
complaint that Tri-State’s rates are discriminatory.
59.

Due to the legislative nature of ratemaking, the Commission is not bound by stare

decisis. Colo.-Ute at 639. Nonetheless, Commission prior decisions are entitled to deference and
are to be accorded great weight. B & M Service, Inc. v. Pub. Utils. Comm’n., 429 P.2d 293, 295
(Colo. 1967) (citations omitted) (finding that although past Commission decisions should be
given great weight, the Commission could change its position and the mere fact that it is
inconsistent with at least one prior decision does not render it arbitrary, unlawful, unreasonable,
or capricious).
60.

A review of the decisions cited by Tri-State reveals that each addresses a discrete

issue unrelated to Commission jurisdiction to hear a complaint regarding Tri-State’s rates. For
example, in Decision No. 86499 issued March 18, 1975, the Commission considered an
application by Tri-State to issue securities for the construction of infrastructure. There, the
Commission relied on the bright line test articulated in Pub. Utils. Comm’n. of Rhode Island v.
Attleboro Steam and Electric, 273 U.S. 83 (1926) in determining it did not have authority to
approve the issuance of securities sought by Tri-State.
61.

In Decision No. C02-793, Proceeding No. 02R-137E issued July 22, 2002, the

issue involved proposed amendments to the Commission’s Electric Integrated Resource Planning
Rules. There, the Commission made a conclusory statement without analysis that it did not have
rate authority over Tri-State so it was inappropriate to subject it to the competitive resource
acquisition requirements.
62.

In Decision No. C06-0657, Proceeding No. 05M-375E issued June 6, 2006, Pubic

Service Company of Colorado’s Petition to Open a Docket to Consider Revisions to the

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Commission’s Electric Least Cost Resource Planning Rules, the Commission, relying on the
statement in Decision No. C02-793 again stated that it did not have rate authority over Tri-State.
Again, the statement was without supporting analysis as to the Commission’s reasoning.
63.

In Decision No. R99-891, Proceeding No. 99A-196E issued August 12, 1999, the

ALJ found that the Commission should not interfere with a merger of Tri-State with Plains
Electric Generation and Transmission Cooperative located in New Mexico. The ALJ determined
that the transaction was in interstate commerce and therefore beyond the jurisdiction of the
Commission. The ALJ also distinguished Arkansas Electric Cooperative v. Arkansas Pub. Serv.
Comm’n, 461 U.S. 375 (1983) from that particular transaction in that Tri-State was not similar in
basic operation to the Arkansas utility, and anything done in the merger application would not be
incidental to interstate commerce, but would directly interfere with it.14
64.

The prior Commission cases cited by Tri-State clearly deal with matters other than

whether a member system may bring a complaint based on Tri-State’s rates to the Commission.
As indicated supra, the various issues addressed by the Commission did not squarely address the
matter at hand.15

That the Commission determined that it did not have jurisdiction over

Tri-State’s rates appear to be mostly incidental to its ultimate findings on other issues in those
proceedings. Consequently, it is not necessary to use those prior Commission decisions as
precedent in this matter, and failing to do so does not render this decision arbitrary, unlawful,

14

While Tri-State uses these prior Commission decisions as support for its position that the Commission
does not possess jurisdiction to hear this Complaint, regarding Decision No. 86499 and in Proceeding
No. 99A-196E, Tri-State must have believed the Commission did have jurisdiction to decide its application to issue
securities and to approve its application to merge with Plains Electric Generation and Transmission Cooperative
located in New Mexico, or it would not have sought Commission approval in the first instance.
15
See, Hearing Transcript, Vol. 2, 7/30/13, 200:4 – 201:24, Spiers cross-examination

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unreasonable, or capricious. Further, the outcome of those prior Commission decisions does not
affect the analysis above of Commission jurisdiction based on Colorado Public Utilities Law.
65.

The finding regarding Commission jurisdiction pursuant to Colorado Public

Utilities Law is buttressed by the fact that federal rate regulation of Tri-State leaves a significant
regulatory gap in which the Commission is required and is permitted to assert jurisdiction.
66.

It is understood that the Federal Energy Regulatory Commission (FERC)

regulates the interstate wholesale electricity market through rate regulations pursuant to the
Federal Power Act (FPA) which requires utilities to charge “just and reasonable rates.”
16 U.S.C. § 824d(a). The FPA granted FERC the exclusive authority to enforce this provision by
regulating the rates, terms, and conditions governing the interstate transmission and sale of
wholesale energy in interstate commerce. Mississippi Power & Light Co. v. Mississippi ex rel.
Moore, 487 U.S. 354 (1988).

However, while the FPA generally grants FERC exclusive

jurisdiction over the regulation of wholesale power, FERC lacks jurisdiction over utilities that
are regulated by the Rural Electrification Administration (REA) under the Rural Electrification
Act (RE Act), the predecessor agency to the Rural Utilities Service (RUS), the agency charged
with promoting rural electrification by providing loans for infrastructure development.
Northeastern Rural Electric Membership Corp. v. Wabash Valley Power Association, Inc.,
707 F.3d 883 (7th Cir. 2013).

Importantly, different from FERC, the RUS does not have

exclusive jurisdiction over the regulation of wholesale electric rates, which provides the states
with a jurisdictional avenue to regulate wholesale power companies which are financed by the
RUS. Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm’n, 461 U.S. 375, 383-84 (1983).
67.

The FPA empowered FERC to regulate rates and services for interstate

transmission and wholesale sales by entities not specifically exempted, while leaving local

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distribution and purely intrastate transmission to state regulators. 16 U.S. C. § 824(b). FERC’s
broad authority over interstate transmission and sales is apparent.

However, FERC has

relinquished jurisdiction when an electric cooperative receives financing under the RE Act.
16 U.S.C. 824(f) as is the case with Tri-State.16
68.

As a result, Tri-State’s rates are regulated by the RUS pursuant to 7 Code of

Federal Regulations (CFR) 1717.300, et seq.17 Because the RUS makes and guarantees loans to
rural electric cooperatives such as Tri-State, it requires them to “charge rates for the sale of
electric power and energy which are sufficient to pay the principal and interest on loans made or
guaranteed by RUS in a timely manner and to meet the requirements of the RUS wholesale
power contract and other RUS documents.” Id. at 301(b). Further, the RUS recognizes that since
it does not require that cooperative electric utilities that have loans or guarantees through the
RUS to ensure that their rates are just and reasonable, there is room for state rate regulation of
wholesale rates. As such, the RUS will only pre-empt a state’s jurisdiction over rates where the
RUS Administrator “has determined that such [state] jurisdiction has compromised Federal
interests, including … the ability of the borrower to repay its secured loans in accordance with
the terms of the RUS documents.” Id. at 301(b) through (e).
69.

The RE Act clearly does not expressly empower or authorize the Administrator

Secretary to pre-empt the jurisdiction of a state regulatory agency or to regulate the rates of a
power supply borrower except in narrow circumstances. Nothing exists in the RE Act that
expressly pre-empts state rate regulation of a power cooperative financed by the REA. Arkansas
Elec. Coop. Corp. v. Arkansas Pub. Serv. Comm’n, 461 U.S. 375, 385-386. Rather, “the REA is

16
17

See, Tri-State’s Motion to Dismiss Formal Complaint, pp. 10-11.
Hearing Exhibit No. 54.

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a lending agency rather than a classic public utility regulatory body in the mold of either FERC
or the Arkansas PSC.” Id.
70.

In reviewing the Congressional history of the RE Act, the Court noted that “the

legislative history … makes abundantly clear … that although the REA was expected to play a
role in assisting the fledgling rural power cooperatives in setting their rate structures, it would do
so within the constraints of existing state regulatory schemes.” Id. at 386 (Congressional history
omitted).
71.

Given the lack of federal oversight over the wholesale rates of Tri-State, it is

incumbent upon the Commission to utilize its authorized jurisdiction to investigate claims that
the company’s rates may be unjust, unreasonable, or discriminatory.
72.

Despite the finding of jurisdiction to hear this Complaint under Public Utilities

Law, as Tri-State correctly observes, § 40-7-111, C.R.S., requires, in relevant part, that “[n]one of
the provisions of articles 1 to 7 of [title 40] except when specifically so stated, shall apply or be
construed to apply to commerce among the several states, except insofar as the same may be
permitted under the provisions of the constitution of the United States and the acts of congress.”
B.

Commerce Clause

73.

As indicated supra, the U.S. Constitute reserves to Congress the power to regulate

commerce among the several states. The dormant Commerce Clause applies when a state, in the
absence of any pre-empting federal action, passes a law or engages in conduct which interferes
with interstate commerce.
74.

Tri-State argues that regulation of its wholesale rates will have the “practical

effect” of controlling conduct beyond Colorado’s borders so that any Commission regulation of
its rates would be a per se violation of the Commerce Clause. Tri-State argues that a per se

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violation of the Commerce Clause occurs if a state’s actions have the “practical effect” of
controlling conduct beyond the state’s borders. Citing, American Booksellers Foundation v.
Dean, 342 F.3d 96, 104 (2nd Cir. 2003).
75.

Complainants, on the other hand, argue that Tri-State cannot use the Commerce

Clause to pre-empt Colorado law and Commission jurisdiction over the Complaint because the
federal government, exercising its power under the Commerce Clause, specifically reserved for
the states, rate authority over cooperative electric associations such as Tri-State. As a result,
Complainants argue that a balancing test must be employed to determine whether any legitimate
state interests are present which outweigh any burden on interstate commerce.
76.

A per se violation of the Commerce Clause involves a state law which overtly

blocks the flow of interstate commerce at a state’s border. City of Philadelphia v. State of
New Jersey, 437 U.S. 617, 623-24 (1978). This is the clearest example of state legislation which
effects simple economic protectionism. Id. However, “where other legislative objectives are
credibly advanced and there is no patent discrimination against interstate trade, the Court has
adopted a much more flexible approach. Id., citing Pike v. Bruce Church, Inc., 397 U.S. 137, 142
(1970):
Where a statute regulates evenhandedly to effectuate a legitimate local public
interest, and its effects on interstate commerce are only incidental, it will be
upheld unless the burden imposed on such commerce is clearly excessive in
relation to the putative local benefits … If a legitimate local purpose is found,
then the question becomes one of degree. And the extent of the burden that will
be tolerated will of course depend on the nature of the local interest involved, and
on whether it could be promoted as well with a lesser impact on interstate
activities.
Therefore, a crucial inquiry is to determine whether the state action is basically a protectionist
measure, or whether it can be fairly viewed as a law directed to legitimate local concerns, with

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effects upon interstate commerce that are only incidental. City of Philadelphia, 437 U.S. at 625
supra.
77.

It is undisputed that Tri-State operates in interstate commerce. It has member

systems to which it provides wholesale electricity sales in four states including Wyoming,
Colorado, New Mexico, and Nebraska. (Hrg. Exh. 2 Answer Testimony and exhibits of
Michael S. McInnes).

Those member systems in turn serve approximately 1.5 million

consumers. (Hrg. Exh 6 Answer Testimony and exhibits of Daniel M. Walker). Tri-State’s
member systems provide retail electric service extending into Arizona, Montana, and Utah. Id.
78.

Tri-State’s generation resources including baseload, intermediate, and peaking

resources located in Arizona, Colorado, New Mexico, and Wyoming. (Hrg. Exh. 3 Answer
Testimony and exhibits of Daniel T. Walter) Tri-State also purchases and sells large quantities of
power to and from other entities located throughout the western United States which is
transmitted through both the Western and Eastern Interconnections, including the Western Area
Power Administration, Public Service Company of Colorado, the Salt River Project, PacifiCorp,
Basin Electric, Shell Energy North America, and several renewable energy companies.
(Hrg. Exh. 8 Answer Testimony and exhibits of Joseph P. Kalt)
79.

Based on that evidence and referring to New York v. Federal Energy Regulation

Commission, 535 U.S. 1 (2002), which finds that “transmissions on the interconnected national
grids constitute transmissions in interstate commerce,” Id. at 16 since Tri-State is engaged in
interstate commerce, it argues that any attempt at rate regulation by the Commission will result
in a per se violation of the Commerce Clause.
80.

It is well-established that with the exception of Hawaii, Alaska, and Texas, “any

electricity that enters the grid immediately becomes a part of a vast pool of energy that is

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constantly moving in interstate commerce.” Id. at 7. See also, FPC v. Florida Power & Light
Co. 404 U.S. 453, 469 (1972). However, this is true for not only Tri-State, but also for the IOUs
in Colorado as well. Despite the understanding that the electricity generated by those IOUs
moves in interstate commerce the instant electrons are injected into the grid, they are nonetheless
not so intertwined in interstate commerce as to exempt them from Commission jurisdiction over
their retail rates.
81.

Tri-State’s argument that given the interstate character of its cooperative system

any Commission assertion of rate authority will result in a per se violation is less than
convincing given the fact that Congress made way for state regulation of Tri-State’s wholesale
rates.

Indeed, “[w]hen Congress so chooses, state actions which it plainly authorizes are

invulnerable to constitutional attack under the Commerce Clause.” Northeast Bancorp, Inc. v.
Board of Governors of the Federal Reserve System, 472 U.S. 159, 174 (1985). (Addressing
dormant Commerce Clause question whether an individual state acting entirely on its own
authority would run afoul of the dormant Commerce Clause if it sought to comprehensively
regulate acquisitions of local banks by out-of-state holding companies).
82.

As was discussed supra, FERC has ceded jurisdiction over rural cooperative

electric associations such as Tri-State to the RUS because Tri-State obtains loans or receives
guarantees for certain loans from the RUS (16 USC § 824(f)). In turn, the RUS has clearly made
accommodations for state regulation of the wholesale rates of those cooperative electric
associations such as Tri-State (7 CFR § 1717.300, et seq.)

It is apparent then that state

jurisdiction over a cooperative such as Tri-State is permitted by federal law. Since the RUS has
made room for regulation of Tri-State’s rates by this Commission, it appears that there can be no
attack on that authorization pursuant to the Commerce Clause.

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 Proceeding No. 18F-____E
Attachment E
Page 31 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

83.

PROCEEDING NO. 13F-0145E

Tri-State attempts to demonstrate that any rate regulation by the Commission

would necessarily require full rate regulation including the filing of its rates and a hearing on the
rates’ propriety. As a result, Tri-State argues that because its load and resources must always be
in balance, and because its current interstate system allows load and resources to balance across
the entirety of the Tri-State system, any rate regulation would likely create a situation where it
cannot schedule New Mexico and Wyoming generation resources throughout its interstate system
to serve load, for example, in Colorado.
84.

In addition, Tri-State maintains that a revision to its A-37 rates would change

power consumption behavior of its member systems in Colorado so that its integrated multi-state
system would be dispatched differently and less optimally across all Tri-State’s service area.
Tri-State goes on to state that Colorado, New Mexico, and Wyoming have competing interests in
ensuring that wholesale rates charged in their respective states are the lowest in the Tri-State
system, which could lead to a disallowance of full cost recovery for Tri-State.
85.

Tri-State’s concerns regarding the full rate regulation it assumes would be

asserted by the Commission here are speculative at best. Tri-State provides no evidence to the
record that this has occurred in the past. Additionally, Tri-State witness Mr. Corrigan testified on
cross-examination that Tri-State’s system would actually not be dispatched differently if there is
a cost-based differential based on two separate rates in two states:
Q:
Let me start off with a new question here. So are you agreeing with me
that if there is a cost-based differential driving the fact that there are two rates,
that regardless of the fact that there are two rates, Tri-State will still operate the
integrated system as a whole so as to minimize the system costs to the
membership as a whole; is that correct?
A:

That is correct.

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Attachment E
Page 32 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

Tri-State also argues that the Commission could not assert limited regulation as requested by
Complainants, as it must assert its full regulatory authority when required. However, as the court
found in Colorado-Ute Elec. Ass’n, Inc. the determination as to how to regulate rates lies
squarely within the discretion of the Commission.
86.

As a result, it is found that the Commerce Clause issues raised by Tri-State are not

available to it since Congress has provided an avenue for state regulation over Tri-State’s
wholesale interstate rates. Notwithstanding Tri-State’s claims of full rate regulation, the question
here is merely one of Commission jurisdiction to hear the Complaint. Because state public
utilities law provides for Commission jurisdiction over Tri-State’s wholesale rates, and because
there is no violation of the Commerce Clause by asserting that jurisdiction, it is found that the
Commission has jurisdiction to hear this Complaint.
87.

Tri-State cites several decisions for the proposition that Commission jurisdiction

here would result in a per se invalidity under the Commerce Clause even without a direct burden
on interstate commerce if a state’s actions have the “practical effect” of controlling conduct
beyond the state’s borders.18 However, it does not appear that in any of those cited cases, a
federal statute or regulation existed which provided the underlying local regulatory agency with
authority to regulate rates as exists here. In addition, as explained supra, Tri-State’s assumptions
regarding the degree to which the Commission may assert rate regulation is merely speculative
and premature at this point.

18

Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573 (1986); Healy v. Beer
Institute, 491 U.S. 324 (1989); Am. Booksellers Found. v. Dean, 342 F.3d 96 (2d Cir. 2003); TeleTech Sys., Inc. v.
Barbour, 866 F. Supp. 2d 571 (S.D. Miss. 2011).

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Attachment E
Page 33 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

88.

PROCEEDING NO. 13F-0145E

Further, under an analysis of the balancing test articulated in Pike v.

Bruce Church, 397 U.S. at 142, when “a statute regulates even-handedly to effectuate a
legitimate local public interest, and its effect on interstate commerce are only incidental, it will
be upheld unless the burden imposed on such commerce is clearly excessive in relation to the
putative local benefits.” There is simply no concrete evidence to determine that Commission
jurisdiction to hear the Complaint will be excessive in relation to ensuring that Tri-State’s rates
are just, reasonable, and non-discriminatory. The bulk of the testimony offered by Tri-State is
based on Tri-State’s assumption that any regulation by the Commission would necessarily be full
rate regulation similar to IOU rate regulation in Colorado.
89.

However, as indicated supra, there is no reason to believe that the Commission

would adopt a policy to rate regulate Tri-State in that manner. Further, much weight must be
given to the fact that the RUS has provided a place for Commission jurisdiction over Tri-State’s
rates, recognizing that states have an important public interest regarding rate regulation. This
weight clearly tips the Pike balancing test towards finding that the existence of those putative
local benefits outweigh any burden on interstate commerce, which as also indicated supra, is at
this point speculative at best.
C.

Standing of Industrial Complainants

90.

Tri-State seeks to dismiss the Industrial Complainants from the Complaint.

Tri-State argues that it exclusively provides wholesale service to its member systems that in turn
provide retail electric service to their Industrial Complainant customers. In addition, Tri-State
states that the notice of rate change applied only to the wholesale rates charged to its member
systems, and those member systems set their own rates independently of Tri-State and provide
such notice to their own customers, such as the Industrial Complainants. Tri-State concludes that

33

 Proceeding No. 18F-____E
Attachment E
Page 34 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

the Industrial Complainants are complaining about the retail rates charged by their respective
member systems which are not before the Commission in this proceeding. Therefore, the
Industrial Complainants should be dismissed from this proceeding since their true complaint lies
with the retail rates they are being charged by the member systems which provide retail electric
service to them.
91.

Complainants argue that all member-customers must purchase electricity from the

member systems in whose territory the customer resides.

Consequently, any rate increase

imposed by Tri-State will be passed on to the member-customers, including the Industrial
Complainants, who will in turn, be required to pay the discriminatory and unjust rate. In the
alternative, Complainants assert that even if the Industrial Complainants lack standing, if the
cooperative Complainants have standing, then the Complaint could move forward with the
Industrial Complainants as intervening parties.
92.

As typically found by the Commission in previous standing questions, standing is

a threshold question of law. Board of County Commissioners of La Plata County v. Colorado Oil
and Gas Conservation Commission, 81 P.3d 1119, 1122 (Colo. App. 2003).
93.

A two-part test is applied to resolve the issue of standing. The first prong of the

test is whether the party seeking relief alleges an injury-in-fact. The second prong of the test is
whether the alleged injury is to a legally protected or cognizable interest. Douglas County Board
of Commissioners v. Pub. Utils. Comm’n, 829 P.2d 1301, 1309 (Colo. 1992). The Industrial
Complainants bear the burden of proof that they have standing to participate as Complainants in
this case.
94.

Section 40-6-108(1)(d), C.R.S., provides that the Commission “is not required to

dismiss any complaint because of the absence of direct damage to the complainant.”

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Attachment E
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Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

This provision directly relates to the first prong of the standing test and permits the Commission,
should it choose, to hear a complaint even in the absence of direct harm to a complainant. The
Industrial Complainants must also establish they have a legally protected or cognizable interest
in the subject matter of the proceeding.
95.

Here, the Industrial Complainants argue that the wholesale rates in fact will be

passed on to them since the member systems must closely mirror wholesale rates to both ensure
they fully recover their costs and do not create inappropriate cross-subsidies between their
various member-consumers.

Further, due to the long-term power supply contract in place

between Tri-State and its member systems, Tri-State’s members have no other alternative from
whom to purchase their power supply and cannot decide to purchase their power supply
elsewhere.
96.

The first prong of the standing test is met by virtue of § 40-6-108(1)(d), C.R.S.

The second prong of the test relating to a legally protected or cognizable interest is met as well.
Certainly, the wholesale rates charged to the member systems are passed on to Tri-State’s
member system’s customers, including the Industrial Complainants. Because it is found that the
rate increases constitute a cognizable interest, Industrial Complainants have standing as
complainants in this proceeding.
III.

ORDER
A.

It Is Ordered That:

1.

The Motion of Tri-State Transmission and Generation Association to Dismiss

Formal Complaint is denied consistent with the discussion above.
2.

BP America Production Company, Encana Oil & Gas (USA), Inc., Enterprise

Products Operating LLC, and ExxonMobil Power and Gas Services Inc., on behalf of

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 Proceeding No. 18F-____E
Attachment E
Page 36 of 36
Before the Public Utilities Commission of the State of Colorado
Decision No. R13-1119-I

PROCEEDING NO. 13F-0145E

ExxonMobil Production Company, a division of ExxonMobil Corporation; and Kinder Morgan
CO2 Company, L.P. have standing as Complainants in this Complaint proceeding consistent with
the discussion above.
3.

This Interim Decision is certified as immediately appealable to the Commission

en banc pursuant to 4 Code of Colorado Regulations 723-1-1502(d).
4.

This Decision is effective immediately.
(S E A L)

THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO

PAUL C. GOMEZ
________________________________
Administrative Law Judge

ATTEST: A TRUE COPY

Doug Dean,
Director

36