Proceeding No. 18F-____E
Attachment F
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Decision No. C14-0006-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 POWER AND GAS SERVICES INC. ON BEHALF OF
EXXONMOBIL PRODUCTION COMPANY, A DIVISION OF EXXON MOBIL
CORPORATION, AS MEMBERS OF THE RURAL ELECTRIC CONSUMER ALLIANCE;
AND KINDER MORGAN CO2 COMPANY, LP,
COMPLAINANTS,

Colorado PUC E-Filings System

V.
TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.,
RESPONDENT.
INTERIM DECISION GRANTING
IN PART AND DENYING IN PART
RESPONDENT TRI-STATE GENERATION
AND TRANSMISSION ASSOCIATION,
INC.’S MOTION CONTESTING
INTERIM DECISION NO. R13-1119-I
Mailed Date:
Adopted Date:

January 3, 2014
December 18, 2013

TABLE OF CONTENTS
I.

BY THE COMMISSION .........................................................................................................2
A. Statement ...........................................................................................................................2
1.

The Complaint ............................................................................................................2

2.

Tri-State’s Motion to Dismiss Formal Complaint......................................................5

3.

The Administrative Law Judge’s Interim Decision ...................................................6

4.

Tri-State’s Motion Contesting Interim Decision and Complainants’ Response ......10

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B. Discussion........................................................................................................................12
1.

Part I .........................................................................................................................12

2.

Part II ........................................................................................................................22

3.

Part III ......................................................................................................................25
a.

Standing of the Industrial Complainants ...........................................................25

II. ORDER ...................................................................................................................................25
A. It Is Ordered That: ...........................................................................................................25
B. ADOPTED IN COMMISSIONERS’ WEEKLY MEETING December 18, 2013. ........26
III. COMMISSIONER JAMES K. TARPEY DISSENTING IN PART: ....................................26

I.

BY THE COMMISSION
A.

Statement
1.

1.

The Complaint

On March 4, 2013, 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; ExxonMobil Power and Gas
Services Inc.; and Kinder Morgan CO2 Company, LP (collectively, the Complainants), filed their
Formal Complaint against Respondent Tri-State Generation and Transmission Association, Inc.
(Tri-State).
2.

Tri-State is a generation and transmission cooperative corporation that provides

electricity on a wholesale basis to 44 member-system cooperatives located in Colorado,
Wyoming, Nebraska, and New Mexico, who in turn provide electricity to their retail
member-customers.1 The Complaint asserts that Tri-State is declared to be affected with a public
interest and is a “public utility” subject to the jurisdiction, control, and regulation of the

1

Formal Complaint, at ¶¶ 1, 3.

2

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Public Utilities Commission (Commission or PUC) under Title 40, Articles 1 through 7, of
Colorado’s public utilities law.2
3.

The Complaint raises issues of the structure and components of wholesale

electricity rates that account for the two major costs of producing electricity: capital investment
in the facilities used to produce the electricity; and fuel. The fixed costs of the facilities
necessary to produce electricity, or production capacity, are reflected in the “demand”
component of the rate. The variable fuel costs necessary to produce the electricity consumed
over time are contained in the “energy” component. Customers’ usage patterns affect demands
upon electricity production capacity: usage that coincides with peak times of the day or season
places relatively higher capital needs on the system than usage spread evenly throughout the
period.3

Consumers whose usage is concentrated during peak periods are referred to as

“low-load factor” customers, and those whose usage is relatively constant are “high-load factor”
customers.
4.

The Complainants allege that, prior to January 1, 2013, Tri-State charged a rate

design upon its members known as “A-36” that properly accounted for demand and energy
costs.4 Effective January 1, 2013, Tri-State implemented a new “A-37” wholesale rate design.5
The Complainants assert that A-37 charges only for the amount of energy consumed and does

2

Id., at ¶ 4.
See Colorado Ute Electric Association, Inc. v. Public Utilities Commission, 760 P.2d 627, 631-32, nn. 2,
3 (Colo. 1988). For example, a customer that consumes 24 units of electricity during only a one-hour period of a
day places higher demands upon production capacity than a customer that consumes 1 unit of electricity each hour
of a day, even though the two customers consume the same total amount of energy during that day. The former
requires capacity of at least 24 units at any one time; in contrast, the latter requires only one unit of production
capacity.
4
See Formal Complaint at ¶ 26.
5
Id., at ¶ 17.
3

3

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not account for demand costs, which allegedly shifts demand costs upon customers whose usage
does not impose the same degree of capacity burdens upon the system:
The cumulative effect of the methodology approved by Tri-State is a dramatic
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.6
5.

The Complainants allege that Colorado regulatory law imposes a requirement

upon utilities to charge its customers rates that accurately reflect the cost of service rendered.7
Therefore, the Complaint says, the A-37 rate is unjust, unreasonable, discriminatory, and
preferential in violation of Colorado’s public utilities law.8
6.

The Complainants object only to the rate design imposed upon its Colorado

members and the absence of a demand component to its structure; they are not attempting to alter
the total amount of revenue, or the “revenue requirement,” that otherwise would be generated for
Tri-State from its Colorado members through the A-37 rate design.9
7.

The Complainants also allege that Tri-State violated the public utilities law by not

filing the A-37 rate with the Commission and not providing notice to the Commission or
Tri-State’s customers of the A-37 rate change.10
8.

The Complaint requests the following relief:
•

An order finding that the A-37 rate is unjust, unreasonable, preferential,
and discriminatory;

6

Id., at ¶ 18.
Id., at ¶ 44.
8
Id., at ¶¶ 40-52.
9
Id., at ¶¶ 26, Relief Requested (i), (ii), at page 19.
10
Id., at ¶¶ 28-39.
7

4

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•

An order establishing a cost allocation and rate design methodology for
Tri-State that is just, reasonable, not preferential, and not discriminatory;

•

An order requiring Tri-State to pay an appropriate refund to any
cooperative that was billed more under the A-37 rate than it would have
been billed under the A-36 rate;

•

An award of such additional or other relief as the Commission deems
proper.11

2.
9.

PROCEEDING NO. 13F-0145E

Tri-State’s Motion to Dismiss Formal Complaint

On April 4, 2013, Tri-State filed its Motion to Dismiss Formal Complaint. In

summary, Tri-State asserts that it operates in interstate commerce by its production, purchase,
transmission, and sale of electricity in interstate commerce and to its member systems located in
four states, and thus the dormant Commerce Clause prohibits the Commission from rate
regulating Tri-State. The Motion argues that regulation of its wholesale rates violates the per se
test under the Commerce Clause, because it would have the practical effect of controlling
commerce occurring entirely outside the boundaries of Colorado.12

Alternatively, Tri-State

contends that Commission rate regulation is prohibited by the Commerce Clause test articulated
in Pike v. Bruce Church, which, in short, weighs the state interest in the subject regulation
against the burdens imposed on interstate commerce.13 Tri-State argues that Commission rate
design regulation would alter member rates in its other states and thus the effects of state

11

Id., Relief Requested (iii) through (vi), at page 20.
Tri-State Motion to Dismiss, filed April 4, 2013, at 17, citing KT&G Corp. v. Att'y Gen., 535 F.3d 1114,
1143 (10th Cir. 2008), ACLU v. Johnson, 194 F.3d 1149, 1161 (10th Cir. 1999), and Healy v. Beer Institute,
491 U.S. 324, 335-40 (1989).
13
Pike v. Bruce Church, 397 U.S. 137, 142 (1970).
12

5

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regulation on interstate commerce are significant and substantial, outweighing any state interest
in wholesale rate regulation.14
10.

Tri-State’s Motion to Dismiss cites Commission decisions and comments dating

back to 1975, in which the Commission made statements that it does not engage in rate
regulation of Tri-State. Tri-State argues that the Commission premised these statements in
recognition of the burdens such regulation would impose on interstate commerce, as held in
Tri-State Generation & Transmission Ass 'n, Inc. v. Pub. Serv. Comm 'n of Wyoming,
412 F.2d 115 (10th Cir. 1969).15
11.

Tri-State also moves to dismiss BP America Production Company; Encana Oil &

Gas (USA), Inc.; Enterprise Products Operating LLC; ExxonMobil Power and Gas Services Inc.;
and Kinder Morgan CO2 Company, LP (the Industrial Complainants), for lack of standing.
Tri-State contends that these are retail consumers and not members of Tri-State, and challenges
to retail rates should be asserted against their retail cooperatives under the procedures provided
in § 40-9.5-101, et seq., C.R.S.16

3.
12.

The Administrative Law Judge’s Interim Decision

Before taking evidence on the merits of the Complaint, the Administrative Law

Judge (ALJ) ordered the filing of written testimony and an evidentiary hearing on only the issues
raised in Tri-State’s Motion to Dismiss.17 After the parties filed written testimony, participated

14

Tri-State Motion to Dismiss at 22.
Id., at 24-29.
16
Id., at 32-36.
17
Interim Order of Administrative Law Judge Paul C. Gomez Granting in Part Unopposed Motion to
Vacate Procedural Schedule and Establish New Procedural Schedule; Decision No. R13-0648-I, issued May 31,
2013.
15

6

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in the evidentiary hearing, conducted cross examination, and submitted statements of position,
the ALJ issued his Interim Decision denying Tri-State’s Motion to Dismiss.18
13.

The Interim Decision first examines whether Colorado law authorizes the

Commission to hear rate claims against Tri-State. The Interim Decision cites Article XXV of the
Colorado constitution, the public utilities statutes, and Colorado Supreme Court precedent to find
that the Commission has the authority to protect the interests of the public from excessive,
unjustly discriminatory, and burdensome rates charged by utilities.19 The Interim Decision notes
Tri-State’s concession that it is a “public utility” under Colorado law and then cites
§ 40-6-111(4)(a), C.R.S., which says:
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 40-3-111.20
Based upon its analysis of this and other statutory provisions, the Interim Decision concludes
that Colorado law provides the Commission with jurisdiction over Tri-State’s rates.21
14.

The Interim Decision rules that the previous Commission decisions and comments

addressing Commission jurisdiction over Tri-State’s rates were not made in any proceeding in
which a complaint had been filed against Tri-State’s rates, and that those statements mostly were
incidental to the Commission’s ultimate findings on other issues.22

18

Interim Decision of Administrative Law Judge Paul C. Gomez Denying Motion to Dismiss and
Certifying Interim Decision as Immediately Appealable; Decision No. R13-1119-I, issued September 11, 2013
(Interim Decision).
19
Id., at ¶¶ 47-49.
20
Id., at ¶¶ 50-51.
21
Id., at ¶ 56.
22
Id., at ¶ 64.

7

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15.

PROCEEDING NO. 13F-0145E

The Interim Decision often references rules issued by the federal Rural Utilities

Service (RUS), which has authority over cooperatives like Tri-State that receive financing under
the Rural Electric Act. RUS exercises its rate authority only if the cooperative’s ability to repay
federal loans has been compromised, and its rules acknowledge state rate regulation authority
over cooperatives. The Interim Decision notes that “[g]iven 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.”23
16.

Tri-State’s principal Commerce Clause argument is that, as a generation and

transmission cooperative, it operates in interstate commerce, and any form of rate regulation
constitutes a Commerce Clause violation under both the per se and Pike balancing tests.
The Interim Decision finds Tri-State’s argument “less than convincing” due to the existence of
the RUS rules authorizing state rate regulation over cooperatives.24 The Interim Decision also
states:
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.25
17.

Tri-State argued that revising the A-37 rate would alter power consumption in

Colorado, which in turn would result in a less optimal dispatch of its overall system. However,
the Interim Decision quotes cross-examination evidence from Mr. Corrigan of Tri-State stating

23

Id., at ¶ 71.
Id., at ¶81.
25
Id., at ¶ 82.
24

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that setting a different rate in one state would not change operation of the system, and Tri-State
would continue to minimize the system costs to the membership as a whole.26
18.

Tri-State contended that Commission regulation of the A-37 rate design would

require full rate regulation, thus infringing upon the revenue requirements and cost structures in
its other states. The ALJ rules that “Tri-State’s assumptions regarding the degree to which the
Commission may assert rate regulation is merely speculative and premature at this point.”27 For
these and other reasons, the Interim Decision rules that Commission assertion of jurisdiction over
the Complaint does not violate the per se test.
19.

The Interim Decision finds that the Pike balancing test also does not deprive the

Commission of jurisdiction. The state’s interest is shown through the RUS rules granting state
commission oversight of a cooperative’s rates, which outweighs Tri-State’s “speculative”
contention that the Commission would engage in full rate regulation and thus burden its
interstate operations.28
20.

The Interim Decision denies Tri-State’s motion to dismiss the Industrial

Complainants on standing grounds.

The ALJ finds that these end users could purchase

electricity only from their retail cooperatives that in turn pass through any unjust or
discriminatory wholesale rate charged by Tri-State. The ALJ cites § 40-6-108(1)(d), C.R.S.,
which says that the Commission “is not required to dismiss any complaint because of the
absence of direct damage to the complainant.”

26

Id., at ¶85.
Id., at ¶ 87.
28
Id., at ¶ 88-89.
27

9

The Industrial Complainants satisfied the

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governing test for standing, because they asserted facts showing an injury in fact and have a
legally protected and cognizable interest in the justness of Tri-State’s rates.29
21.

The ALJ therefore denied Tri-State’s Motion to Dismiss and certified the Interim

Decision for an immediate appeal to the Commission pursuant to 4 Code of Colorado
Regulations (CCR) 723-1-1502(d) of the Commission’s Rules of Practice and Procedure.

4.
22.

Tri-State’s Motion Contesting Interim Decision and Complainants’
Response

Tri-State’s Motion Contesting Interim Decision argues several grounds,

summarized as follows:

29

•

The Interim Decision ignores 40 years of Commission precedent
recognizing that the Commerce Clause bars the Commission from
regulating Tri-State’s wholesale rates.

•

The ALJ’s application of the RUS rules, which acknowledge state
commission authority to rate regulate wholesale cooperatives, amounts to
a bar to Tri-State asserting a Commerce Clause challenge.

•

The Interim Decision incorrectly dismisses Tri-State’s contention that
Commission review of the A-37 rate design would result in full rate
regulation of Tri-State.

•

Commission regulation of Tri-State’s rates constitutes a per se violation of
the Commerce Clause on three grounds: rate design regulation would have
the practical effect of controlling conduct beyond Colorado’s borders;
interstate commerce would be burdened by the prospect of inconsistent
regulation across multiple states; and, the Tenth Circuit’s ruling in
Tri-State v. Wyoming, which Tri-State characterizes as barring state rate
regulation of an entity engaged in interstate commerce, governs in this
proceeding.

•

Commission review of the A-37 rate design cannot pass the Pike
balancing test, because the state’s interest is de minimis and is outweighed
by the impacts upon interstate commerce.

Id., at ¶¶ 90-96.

10

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•

PROCEEDING NO. 13F-0145E

The Industrial Complainants lack standing because their claims implicate
the retail rates charged by the member systems and thus must be
adjudicated pursuant to the statutes governing such claims.

The grounds and case citations underlying Tri-State’s Motion Contesting the Interim Decision
are addressed in more detail in our Discussion below.
23.

The Complainants responded to Tri-State’s Motion and, in short, argue that:

Colorado public utility law grants the Commission jurisdiction to hear claims over Tri-State’s
wholesale rate design; prior Commission rulings did not address its jurisdiction over the type of
rate complaint filed against Tri-State in this proceeding and thus do not bar the Commission
from exercising jurisdiction; the congressional grant of authority to state commissions to regulate
Tri-State’s wholesale rates bars a Commerce Clause challenge; Tri-State’s per se challenge,
which asserts that Commission regulation of Tri-State’s rates would control conduct outside
Colorado’s borders, fails because the complaint seeks regulation of rates charged only within the
borders of Colorado; Colorado’s interests in adjudicating Tri-State’s wholesale rate design
outweigh Tri-State’s speculative positions on potential burdens upon interstate commerce; and,
the Industrial Complainants have standing.30
24.

The Complainants’ brief also cites to the action pending in United States District

Court for the District of Colorado, in which members of Tri-State located in Nebraska brought
claims against Tri-State, including a common law claim alleging breach of Tri-State's obligation
to set utility rates fairly.31 As characterized by the federal court:
Tri-State moves to dismiss this claim, pointing out that choice of law provisions
in the governing contracts between Plaintiffs and Tri-State provide that Colorado
law governs the contracts. (ECF No. 1-41, at 13 n.9, 21 n.13.) Tri-State then
30

Complainants’ Response to Tri-State’s Motion Contesting Interim Decision No. R13-1119-I, submitted
October 21, 2013.
31
Chimney Rock Pub. Power Dist. v. Tri-State Gen. & Trans. Ass’n, Civ. Action No. 10-cv-03249-WJMKMT, 2012 WL 84572, 2012 U.S. Dist. LEXIS 3402 (D. Colo, Jan. 11, 2012).

11

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explains that the common law duty to fairly set utility rates has been preempted in
Colorado by a comprehensive scheme of state constitutional amendments,
statutes, and regulations that govern Colorado's public utilities. (Id. at 21-25.)
Therefore, Tri-State argues, this claim fails as a matter of law.32
B.

Discussion
1.

25.

Part I

Tri-State does not contest the findings and rulings in the Interim Decision that,

setting aside the Commerce Clause issues, the Commission has jurisdiction pursuant to
Article XXV and the public utilities statutes over Tri-State as a “public utility” and to hear a
complaint alleging that its rates are unjust, unreasonable, discriminatory, and preferential.
Rather, Tri-State’s objection to Commission jurisdiction relies upon the dormant Commerce
Clause. 33
26.

Tri-State argues that Commission regulation of the A-37 rate would have the

practical effect of controlling conduct outside of Colorado, thus constituting a per se violation of
the Commerce Clause. Tri-State’s principal citation is Healy v. Beer Institute, 491 U.S. 324
(1989), in which a Connecticut statute was found to inhibit out-of-state pricing decisions and
effectively set a price cap in bordering states.34 Tri-State also relies heavily upon the decisions in
Tri-State Generation & Transmission Association, Inc. v. Public Service Commission of
Wyoming, 412 F.2d 115 (10th Cir. 1969) (Tri-State v. Wyoming), and New York v. Federal
Energy Regulatory Commission, 535 U.S. 1 (2002) (New York v. FERC), for the proposition that

32

Id., 2012 WL 84572 at *5, 2012 U.S. Dist. LEXIS 3402 at *14.
As stated by Tri-State: “In summary, the Commission’s jurisdiction exists in this docket, if at all, only
within the confines permitted by the dormant Commerce Clause….where the exercise of the Commission’s
ostensible jurisdiction under Colorado law would violate federal Commerce Clause protections afforded to an
interstate G&T such as Tri-State, the Commission cannot act.” Tri-State's Motion Contesting Interim Decision, at
17 (emphasis that of Tri-State).
34
Healy, 491 U.S at 339.
33

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Tri-State is an electric cooperative operating in interstate commerce and any state commission
regulation of Tri-State constitutes a Commerce Clause violation as a matter of law.35
27.

The United States Supreme Court has rejected the proposition that, if an entity

operates within interstate commerce, any state regulation of the entity represents a violation of
the Commerce Clause. In Exxon Corp. v. Governor of Maryland,36 a Maryland statute prohibited
producers or refiners of petroleum products from operating retail service stations within the state.
Because no petroleum products were produced or refined in Maryland,37 the entities subject to
the statute all operated in interstate commerce. They argued that the Maryland statute interfered
"with the natural functioning of the interstate market either through prohibition or through
burdensome regulation.”38 The Court disagreed: “we cannot adopt appellants' novel suggestion
that because the economic market for petroleum products is nationwide, no State has the power
to regulate the retail marketing of gas.”39 Also, in Arkansas Electric Cooperative Corp. v.
Arkansas Public Service Commission, 461 U.S. 375 (1983), a case with facts similar to the
proceeding here, the Court noted that wholesale electric cooperatives operate in interstate
commerce;40 yet, the Court denied a wholesale cooperative’s Commerce Clause challenge to the
state commission’s assertion of rate jurisdiction.
28.

With regard to Tri-State v. Wyoming, the Tenth Circuit premised its holding—that

Tri-State’s contracts with sellers of power and its members’ operations were not subject to

35

Tri-State's Motion Contesting Interim Decision, at 12, n. 7, 16, 17-18, 27, n. 20, 31, n. 24, 33-34, 41, 43,

44.
36

Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978).
Id., 437 U.S. at 123.
38
Id., 437 U.S. at 127.
39
Id., 437 U.S. at 128.
40
Arkansas Electric Cooperative Corp. v. Arkansas Public Service Commission, 461 U.S. 375, 389-90
37

(1983).

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regulation by the Wyoming commission—upon the case line applicable at that time, specifically
citing Public Utilities Commission of Rhode Island v. Attleboro Steam & Electric Company,
273 U.S. 83 (1927). Attleboro established a bright line test that categorized wholesale electric
services as imposing a direct burden on interstate commerce and was thus beyond the purview of
state commissions, in contrast to retail services that were within state commission authority.41
The Attleboro wholesale/retail distinction as a dispositive test under the Commerce Clause was
overturned in Arkansas Electric, holding that “Attleboro can no longer be thought to provide the
sole standard by which to decide this case, and we proceed instead to undertake an analysis
grounded more solidly in our modern cases [referencing the Pike balancing test].”42 Thus,
Tri-State v Wyoming rests upon outdated law.
29.

Additionally, the interstate commerce analysis that the court applied to the facts in

Tri-State v. Wyoming actually impairs Tri-State’s argument. The Tenth Circuit affirmed that, at
the time the district court had issued its judgment, which was only a few months after the
Wyoming Commission had asserted jurisdiction over Tri-State, “the Commission’s orders had
had but a negligible impact upon interstate commerce.”43 The court held that the burden on
interstate commerce arose after Tri-State had been denied revenues from its members for over
two years.44 In the proceeding here, the Complainants have agreed to sustain the total amount of
revenue that Tri-State otherwise would receive under A-37; thus, under Tri-State v Wyoming,
Commission assertion of jurisdiction without affecting Tri-State’s revenue stream results in only
a “negligible impact” upon Tri-State’s interstate operations.

41

See the Supreme Court’s interpretation of Attleboro in Arkansas Electric, 461 U.S. at 389-93.
Arkansas Electric, 461 U.S. at 393.
43
Tri-State v. Wyoming, 412 F.2d 115, 118 (10th Cir. 1969) (emphasis added).
44
Id., 412 F.2d at 118-19.
42

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30.

The New York v. FERC case does not bar the Commission from hearing the

Complaint.

It addressed whether FERC had congressional authority to regulate retail

transmission services, which operated in interstate commerce. This case also affirmed that,
where FERC determined not to regulate a form of retail transmission service, state commissions
were permitted to do so, even though the service was interstate in nature.45 Further, New York v.
FERC does not address the issue here—the scope of a state commission’s authority to regulate a
cooperative operating in interstate commerce. In Arkansas Electric, the Court characterized the
interstate electricity market in essentially the same terms as it did in New York v. FERC,46 and yet
the Court held that the Commerce Clause did not preclude state regulation of a wholesale
utility’s rates.
31.

In this context the ALJ made his statements regarding the RUS rules. The ALJ

observed that Tri-State’s argument—that any state rate regulation upon a cooperative operating
in interstate commerce violates the Commerce Clause—“is less than convincing” in the
framework of established RUS rules authorizing state commission rate regulation of
cooperatives; otherwise, the RUS rules would be a nullity. We see the ALJ’s observation as
providing another reason that Tri-State’s interstate commerce position is overbroad.
32.

To the extent the Interim Decision could be interpreted as holding that the

RUS rules (“Congress may authorize the States to engage in regulation that the Commerce
Clause would otherwise forbid”) foreclose a Commerce Clause challenge, the congressional
intent to absolve the state from Commerce Clause challenges must be “unmistakably clear.”47

45

New York v. FERC, 535 U.S. 1, 16, 23 (“And, as discussed below, FERC did not assert jurisdiction over
bundled retail transmissions, leaving New York with control over even the transmission component of bundled retail
sales.”) (“We agree with FERC that transmissions on the interconnected national grids constitute transmissions in
interstate commerce.”)
46
Arkansas Electric, 461 U.S. at 381.
47
Maine v. Taylor, 477 U.S. 131, 139 (1986).

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We agree with Tri-State that the RUS rules do not reflect the intent necessary to absolve a state
from a Commerce Clause challenge, and thus we do not base this Decision in any way upon a
Commerce Clause exemption. As stated in the Interim Decision and elsewhere in this Decision,
however, the RUS rules may be relevant to consideration of the per se and Pike balancing tests.
33.

Tri-State relies heavily on its contention that any Commission regulation of

Tri-State’s rate design would result in full rate regulation, including establishment of a new,
Colorado-specific revenue requirement.

Tri-State says that setting a Colorado revenue

requirement impacts and burdens system-wide revenue requirements and rates charged to
customers located outside Colorado.48 The Complainants, however, have stipulated that the
revenue requirement for Colorado otherwise obtainable under the A-37 rate design will be
sustained. Further, the Commission typically bifurcates its rate cases into a revenue requirement
phase and a subsequent rate design phase, thus demonstrating the ability of the Commission to
consider rate design without altering a given revenue requirement. If Tri-State’s Colorado
revenue requirement is unaltered by adjudication of its rate design, then Tri-State’s out-of-state
revenue requirements and thus its rates should be unaffected.
34.

Tri-State argues that altering rate design would result in different and less than

optimal dispatching, which in turn will result in higher costs to be absorbed by out-of-state
members. This contention was countered by the cross-examination of Tri-State’s Mr. Corrigan,
who admitted that the setting of a different rate in one state would not change operation of the
Tri-State system and that Tri-State would continue to minimize system costs to the membership
as a whole.49

48
49

Tri-State Motion Contesting Interim Decision at 26-27 and testimony cited.
Interim Decision at ¶85.

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35.

PROCEEDING NO. 13F-0145E

Tri-State argues that the ALJ took Mr. Corrigan’s testimony out of context

without consideration of his complete testimony.50 The ALJ was in a position to hear, consider,
and evaluate all the testimony in its proper context, and we do not find a basis to overrule his
interpretation of Mr. Corrigan’s testimony. Further, the Commission has expertise in the area of
dispatching, and we are not persuaded by Tri-State’s position that a different rate design alters a
utility’s efforts to minimize system costs as a whole.
36.

Tri-State alleges that Commission rate design regulation would burden Tri-State’s

ability to engage in the buying and selling of electricity outside of Colorado.51 Although the
testimony cited in Tri-State's briefing describes its interstate transactions, it does not provide
evidence of how Commission regulation of its Colorado rate design would impair or even affect
them.

Further, the Court in Arkansas Electric characterized this same contention as a

“hypothetical possibility” and insufficient as a facial challenge to state commission assertion of
rate authority over a wholesale cooperative.52
37.

Tri-State also argues that state regulation will downgrade its credit rating, thus

increasing its borrowing costs. Complainants’ stipulation that Tri-State’s revenue amounts will
not change diminishes this risk. Further, this and other state commissions regulate the rates of
investor-owned utilities that operate on a multi-state basis, and Tri-State cites no case law that a

50

Tri-State Motion Contesting Interim Decision at 44-45.
Id., at 28.
52
Arkansas Electric, 461 U.S. at 395 (“[I]t is true that regulation of the prices AECC charges to its
members may have some effect on the price structure of the interstate grid of which AECC is a part. But, again, we
find it difficult to distinguish AECC in this respect from most relatively large utilities which sell power both directly
to the public and to other utilities. It is not inconceivable that a particular rate structure required by the
Arkansas PSC would be so unreasonable as to disturb appreciably the interstate market for electric power. But, as
we said in our discussion of the pre-emption issue, see supra, at 389, we are not willing to allow such a hypothetical
possibility to control this facial challenge to the PSC's mere assertion of regulatory jurisdiction.”).
51

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Commerce Clause violation results if the financial markets consider state regulation as part of a
utility’s credit rating.
38.

The prospect of inconsistent treatment if other states engage in similar regulation

is also part of Tri-State’s Commerce Clause challenge.53

Citing Healy, Tri-State says the

Commission must consider “how the challenged statute may interact with the legitimate
regulatory regimes of other States and what effect would arise if not one, but many or every,
State adopted similar legislation.”54
39.

In support, Tri-State first cites to the inability of Complainant witnesses to

identify a multi-state generating and transmission cooperative, other than Tri-State, that presently
is rate regulated.55 Tri-State however, fails to connect the nonexistence of other rate regulated
wholesale cooperatives with burdens upon interstate commerce resulting from multiple states
regulating wholesale cooperatives’ rate design.

Considering the long history of wholesale

cooperatives in the nation, the absence of similar regulation only undermines Tri-State’s
contention that there is a prospect of such regulation or any danger of burdens upon interstate
commerce.
40.

Tri-State’s second ground underlying its inconsistent regulation argument is that

“at least three states in which Tri-State has Member Systems—Colorado, New Mexico and
Wyoming—have competing interests in ensuring that the wholesale rates charged in their
respective states are the lowest in the Tri-State system, which could lead to disallowance of full
cost recovery for Tri-State.”56 Again, Complainants’ stipulation to maintain the same amount of

53

Tri-State's Motion Contesting Interim Decision at 28.
Id., at 28 (quoting Healy, 491 U.S. at 336).
55
Id., at 29.
56
Id., at 31.
54

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revenues diminishes Tri-State’s concern that resolving the Complaint will decrease its Colorado
revenues.
41.

For these reasons, Commission assertion of jurisdiction to hear the Complaint

does not amount to a practical effect of controlling conduct outside of Colorado that would
constitute a per se violation of the Commerce Clause.
42.

We agree with the ALJ’s conclusion that the Pike balancing test also does not

divest the Commission of jurisdiction to hear the Complaint.57 Under Pike:
Where a statute regulates even-handedly 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.58
43.

Tri-State argues that the effect of Commission regulation is substantial, rather

than incidental, and outweighs Colorado’s interest in such regulation.59 Tri-State begins by
characterizing the state’s interests as either non-existent or de minimis, citing what it contends is
a statutory exclusion of Commission authority over interstate commerce and an interest in not
violating the Commerce Clause.60 Tri-State says the Commission would be interfering with the
contractual relationships between Tri-State and its member systems.61

Tri-State cites to

comments previously filed by the Complainants that the Commission has no jurisdiction over
Tri-State’s rates and that a cooperative’s method of self-governance is the most efficient form of
regulation.62 Tri-State adds that the state has no interest in Tri-State’s rates, because any risk of

57

Interim Decision, at ¶¶ 88-89.
Pike, 397 U.S. at 142.
59
Tri-State's Motion Contesting Interim Decision at 35.
60
Id., at 36-37.
61
Id., at 37.
62
Id.
58

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imposing monopolistic prices is overcome by the cooperative model that refunds excesses back
to its members, in contrast to an investor-owned utility that distributes profits among its
shareholders.63

Tri-State also says that the cooperative model balances the interests of all

member systems and provides safeguards against undue rate discrimination.64 Finally, a member
system has the right to exit, thus preventing a majority of the Board from disadvantaging the
interests of minority members.65
44.

We find that Colorado has important interests in the Commission performing its

duties under Article XXV and the public utilities law to regulate public utilities. Colorado’s
interests are reflected in §§ 40-3-101, 106(1), and 111(1), C.R.S., which prevent a public utility
from charging unjust, unreasonable, discriminatory, or preferential rates. As stated by our
Supreme Court, the "PUC must therefore set rates which protect the right of consumers to pay a
rate which accurately reflects the cost of service rendered."66 Indeed, the Court also recognized
that:
[T]he Commission possesses not only the power and authority, but also the duty
to prescribe the rates of all utilities subject to its jurisdiction. The fact that the
instant case involves rate design, as opposed to rate increase, is irrelevant for
purposes of the analysis. After all, rate design, just as much as rate levels, could
produce unjust, unreasonable, discriminatory, or preferential results.67
45.

We also agree with the ALJ’s recognition of the regulatory gap over Tri-State’s

rates. Neither FERC nor the RUS protects Tri-State’s customers from allegedly improper rates,
and the RUS asserts rate authority only if Tri-State is unable to satisfy its federal debt

63

Id., at 39.
Id., at 39-40.
65
Id., at 40.
66
Colorado Ute, 760 P.2d at 642 (quoting Public Service Co. v. Public Utilities Comm'n, 644 P.2d 933,
939 (Colo. 1982)).
67
Id., at 639.
64

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obligations. The RUS rules, which acknowledge state commission rate regulation of wholesale
cooperatives, confirm a state’s interest to evaluate Tri-State’s rate design.
46.

We disagree with Tri-State’s evaluation of the state’s interests.

Tri-State’s

citation to § 40-7-111, C.R.S., and its assertion that the state has an interest in not violating the
Commerce Clause are circular and evade the issue of what constitutes a Commerce Clause
violation in this context. In Colorado Ute, our Supreme Court ruled that a cooperative’s ability
to set rates for its members does not rise above the Commission’s duty to regulate rate design.68
We also do not place much weight on Tri-State’s contention that its members have a right to exit.
The evidence shows that members are contractually obligated to Tri-State through 2050; and
there is no evidence, and Tri-State does not assert, that a member may leave without substantial
financial consequences.
47.

The purported burdens upon interstate commerce asserted by Tri-State, that are to

be weighed against state interests, are the same as those it advances in support of its per se
arguments: Tri-State’s credit may be impaired;69 the system’s overall operations would be
impacted by a state-specific rate design;70 regulation of Tri-State’s rate design would require a
state-specific revenue requirement and thus impact out-of-state rates; and, its broad contention
that, because it operates in interstate commerce, any regulation imposed upon it constitutes an
impermissible burden.71

68

Id., at 639.
Tri-State's Motion Contesting Interim Decision, at 41.
70
Id.
71
Id., at 41-43.
69

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48.

PROCEEDING NO. 13F-0145E

As already discussed, the alleged credit and revenue requirement concerns are

alleviated by Complainants’ stipulation to maintain the amount of revenues Tri-State receives
through its A-37 rate. The case law, particularly Exxon v. Maryland and Arkansas Electric
addressed above, demonstrate that state regulation of an entity engaged extensively in interstate
commerce does not constitute a violation of the Commerce Clause; rather, the courts and this
Commission must evaluate the specific state statute or regulation and its effects upon out-of-state
operations under the Pike balancing criteria.72
49.

For these reasons, we affirm the ALJ’s conclusion that the Pike balancing test

does not preclude the Commission from asserting jurisdiction over the Complaint at this stage of
the proceedings.
50.

Tri-State recently represented to the federal court sitting in Colorado that its rates

are subject to a “comprehensive scheme of state constitutional amendments, statutes, and
regulations that govern Colorado's public utilities.”73

We interpret this statement as an

acknowledgement of at least some room for Commission regulation of its rates.

2.
51.

Part II

Fundamental issues confront the Commission of what can and should the

Commission do with the various claims and requests for relief in the Complaint. The focus of

72

Tri-State argues that, because the cooperative in Arkansas Electric served only in-state customers with
power generated in-state, the Court’s holding in Arkansas Electric is distinguishable; however, the rate design at
issue in this proceeding also applies to only in-state members, not to any out-of-state member. In addition, Tri-State
fails to acknowledge that the Arkansas cooperative obtained at least a portion of its power from out-of-state sources
(461 U.S. at 381) not completely in-state as Tri-State suggests in its following statement: “Specifically, the Supreme
Court emphasized that Arkansas Electric Cooperative supplied ‘power from generating facilities located within the
State to member cooperatives, all of whom are located within the State.’” Tri-State's Motion Contesting Interim
Decision, at 32) (emphasis that of Tri-State).
73
See Chimney Rock Pub. Power Dist. v. Tri-State Gen. & Trans. Ass’n, Civ. Action
No. 10-cv-03249-WJM-KMT, 2012 WL 84572 at *5, 2012 U.S. Dist. LEXIS 3402 at *14 (D. Colo, Jan. 11, 2012).

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the ALJ’s Recommended Decision is whether an alleged absence of a demand component to the
A-37 rate results in unjust, unreasonable, preferential, and discriminatory rates in violation of
Colorado law. However, the Complaint’s claims and requests for relief extend much farther.
Complainants seek to have Tri-State file with the Commission “schedules showing all rates
collected together with all rules, regulations and contracts that in any manner affect or relate to
their rates.”74 The Complainants also allege that Tri-State must provide 30 days’ notice of any
change in rates.75 According to the Complaint, any rate changes would be prohibited absent
filing of a rate schedule or providing the requisite notice.76 The underlying basis for these
claims, if proven, would compel the Commission to recognize that the filing and notice
infirmities be remedied.
52.

The Complaint reaches beyond filing and notice requirements and requests a

Commission decision “establishing a cost allocation and rate design methodology for
Tri-State.”77 The Complaint requests the Commission not only to establish a methodology, but
also to deem the previous A-36 rate design as just and reasonable for Colorado and require
Tri-State “to pay an appropriate refund to any cooperative that was billed more under the
A-37 rate than it would have been billed under the A-36 rate.”78
53.

These other claims and requests for relief infringe upon our long-standing practice

of declining to engage in general rate regulation of Tri-State. In his Interim Decision, the ALJ
dismissed the 60 years of precedent in which the Commission specifically declined to rate
regulate Tri-State as “mostly incidental” and “[c]onsequently, it is not necessary to use those

74

Formal Complaint, at ¶ 29.
Id., at ¶¶ 35-37.
76
Id., at ¶¶ 32, 38.
77
Id., Relief Requested, ¶ (iv), at p. 20.
78
Id., Relief Requested, ¶ (v), at p. 20.
75

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prior Commission decisions as precedent in this matter….” “Further, the outcome of those prior
Commission decisions does not affect the analysis above of Commission jurisdiction based on
Colorado Public Utilities Law.”79 But, the practical effect of implementing and applying the law
to the claims and requests for relief is precisely what this Commission must address.
54.

The precedent cited by Tri-State in its filings and in the Interim Decision reflects

the judgment of the Commission not to interfere with the detailed rate making process in which
Tri-State engages. It recognizes that full rate regulation would require a comprehensive rate
case, necessitating the establishment of a Colorado-specific rate base and revenue requirement
for Tri-State that would interfere with its operations. For the Commission to undertake a partial
or full rate case would be a significant, and not mostly incidental, departure from the
Commission’s previous decisions that the PUC does not regulate Tri-State’s rates.
55.

This precedent also acknowledges the cooperative model of governance that has

served its members since Tri-State’s inception, and that the Commission should not be a forum
to resolve particularized rate disputes among Tri-State’s cooperative members. If we hear all of
the claims asserted in the Complaint, the Commission and its staff henceforth would be required
to entertain any claim that an alleged action by Tri-State fails statutorily required criteria.
56.

These policies are reflected in existing Commission Rule 3000(c) of the Rules

Regulating Electric Utilities 4 CCR 723-3, which exempts generation and transmission
cooperatives from the rules governing the filing of tariffs for changes in rates.
57.

The issues on Tri-State’s motion to dismiss include not only whether the

Commission is foreclosed constitutionally from reviewing the Complaint, but also whether the
Commission should depart from 60 years of precedent in which it specifically declined to rate

79

Interim Decision, ¶ 64

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regulate Tri-State. Therefore, we confine Commission review to a defined legal issue—whether
the failure to include a demand and energy charge is a violation of regulatory principles—which
is an inquiry consistent with Colorado law.
58.

We refer to the ALJ the claims of whether Tri-State’s A-37 rate contains a

demand component and whether Tri-State’s A-37 rate under the circumstances of this case
violates Colorado law and policy.

3.

Part III
a.

59.

Standing of the Industrial Complainants

For the reasons stated above in Part II in which we narrow the claims on remand,

dismiss other claims, and acknowledge the cooperative model of governance, we grant
Tri-State’s motion dismissing the Industrial Complainants as named complainants in this
proceeding. The interests asserted by the Industrial Complainants, however, satisfy the standards
for permissive intervention pursuant to 4 CCR 723-1-1401(c), and thus Commission grants them
intervenor status.

II.

ORDER
A.

It Is Ordered That:

1.

Respondent Tri-State Generation and Transmission Association, Inc.’s (Tri-State)

Motion Contesting Interim Decision No. R13-1119-I is granted in part and denied in part,
consistent with the Discussion in this Interim Decision.
2.

This proceeding is remanded to the Administrative Law Judge to hear and issue a

Recommended Decision on whether Tri-State’s A-37 rate contains a demand component and
whether Tri-State’s A-37 rate under the circumstances of this case violates Colorado law and
policy.
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3.

PROCEEDING NO. 13F-0145E

Consistent with 4 Code of Colorado Regulations 723-1-1502(b), this Decision is

not subject to exceptions or applications for rehearing, reargument, or reconsideration. Any
person aggrieved may challenge the matters determined in this Interim Decision in the
Recommended Decision to be issued by the Administrative Law Judge.
4.

This Decision is effective on its mailed date.

B.

ADOPTED IN COMMISSIONERS’ WEEKLY MEETING
December 18, 2013.

(S E A L)

THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO

JOSHUA B. EPEL
________________________________

ATTEST: A TRUE COPY

PAMELA J. PATTON
________________________________
Commissioners

COMMISSIONER JAMES K. TARPEY
DISSENTING IN PART.
Doug Dean,
Director

III.

COMMISSIONER JAMES K. TARPEY DISSENTING IN PART:
1.

I concur with Part I of the majority decision, but I respectfully dissent from

Parts II and III.

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2.

PROCEEDING NO. 13F-0145E

While the majority acknowledges the Public Utilities Commission’s (Commission

or PUC) jurisdiction to hear the Complaint and its duty to set rates which protect consumers, the
majority goes beyond the jurisdictional question before it and limits the next phase of the
proceeding to the legal issue of “whether Tri-State’s A-37 rate contains a demand component
and whether Tri-State’s A-37 rate under the circumstances of this case violated Colorado law and
policy.”
3.

With that limitation, any evidence addressing the “balancing of interests” concept

will be outside the scope of the proceeding. Any evidence addressing possible remedies that
would be consistent with the public interest will not be allowed. If Tri-State Generation and
Transmission Association, Inc.’s (Tri-State) A-37 rate is found to violate Colorado law and
policy, the majority opinion will result in the complaint being dismissed from further
consideration or remedial action.
4.

Among the reasons given by the majority are the following:

several of

Complainants’ requests for relief go too far and would compel the Commission to take remedial
action; and other requests would require the Commission to depart from its practice of over
60 years of not regulating Tri-State’s rates. Also, the majority notes the cooperative model of
governance in place since Tri-State’s inception, believes the Commission should not be the
forum for resolving disputes among members, and expresses its concern that the Commission
and its staff may become involved in future cases where allegations are made that Tri-State is
violating the public utilities law.
5.

The current procedural stage of this proceeding is central to this dissent. Tri-State

raises its Commerce Clause challenge to the mere assertion of Commission jurisdiction to hear
the Complaint. The parties have not submitted any evidence on the merits of the A-37 rate.

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Various remedial options have not been proposed or supported through evidence and the
Administrative Law Judge (ALJ) has not recommended any remedy.
6.

If Tri-State’s A-37 rate violates Colorado law and policy, I expect it to be difficult

to “balance the interests” and decide upon an appropriate remedy. While a “full-blown” rate
case may not be acceptable, there is no reason to assume that could be the only possible remedy.
It may be a determination that Tri-State needs to develop within a certain amount of time a rate
that is not in violation of Colorado law and policy. There may be other remedies but these will
be unknown because the parties are being denied the opportunity to present any remedies. As a
result, I emphasize the reason for my dissent—the majority has concluded, without any
evidentiary support, that no remedy is available and is closing off any exploration of possible
remedies.
7.

The majority’s rationale for limiting the scope of the reference back to the ALJ is

fatally flawed when compared with its duties as discussed by the Colorado Supreme Court in
Ohio and Colo. Smelting & Ref. Co. v. Public Util. Comm’n, 187 P. 1082 (1920). The case
involved judicial review of a PUC decision, which allowed a utility to increase rates to a
customer above those allowed in a contract between the utility and the customer.
8.

In that case, the Supreme Court discussed the necessity of establishing the value

of certain property80 and using that value as a basis for setting rates. The Commission had
established a rate but had no evidence to support its decision. The Supreme Court reversed the
Commission’s decision and, as pertinent here, said the following regarding the Commission:

80

The need to address value before setting rates is inapplicable here, because Complainants have stipulated
to the revenue requirement set by Tri-State.

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It is not a court to consider and determine only that which is brought before it. It
is a legislative agent, with certain administrative duties. One of its duties is to
investigate and determine in the interest of the State. For this purpose the State
has provided it with the proper engineers and other expert assistants to ascertain
whatever facts may be necessary or important to justify a conclusion in any case,
and this independent of, or in addition to, any testimony produced by the parties
directly interested. Indeed, the statute expressly provides that the commission
may investigate and determine as to any rate, rule or regulation, upon its own
initiative.
Ohio and Colo. Smelting & Ref. Co. v. Public Util. Comm’n, 187 P. 1082,
1086 (1920).
9.

Consistent with the 1920 Colorado Supreme Court decision, the Commission

frequently resolves proceedings where the relief granted differs from that sought by the parties;
where the staff is available to assist the Commissioners; and where the Commission is primarily
guided by the public interest and not the specific interest of a particular person or entity.
10.

The Commission’s responsibilities were also made clear in Colorado-Ute Electric

Association, Inc. v. Public Utilities Commission, 760 P.2d 627, 639 (Colo. 1988): “Until the
General Assembly changes the law, the Commission possesses not only the power and authority,
but also the duty to prescribe the rates of all utilities subject to its jurisdiction.”
11.

For all the above reasons, I dissent from parts II and III of the majority Decision.

Instead, I would affirm Decision No. R13-1119-I for the reasons set forth therein and direct the
ALJ to take evidence on the merits of the Complaint and issue a Recommended Decision.
This approach would allow the Commission to have before it evidence addressing Tri-State’s A37 rate; whether it violates Colorado law and policy; and, if necessary, what remedies would be

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available to allow the Commission to determine what would be in the public interest and an
appropriate “balancing of the interests.”
THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO

JAMES K. TARPEY
________________________________
Commissioner

30