May 30, 2013 06:01 PM UTC

The 'Sunflower Conundrum' and SB13-252

• 4 Comments
• by: MichaelBowman

(Promoted by Colorado Pols)

This week a US Court of Appeals dealt a blow to Sunflower Electric, a Kansas-based Generation & Transmission company that has proposed building a coal-plant complex in Holcomb, KS to supply electricity to Tri-State Generation and Transmission.  The court rejected arguments by the financially-plagued  Sunflower Electric to bypass new requirements for an Environmental Impact Statement [EIS].  Wall Street has even weighed in on the folly of this proposed plant.

This court decision is sadly the latest chapter of a much-maligned project that has been unable to find a pathway to construction.  First proposed as a series of three-700 Megawatt installations in southwestern Kansas, it has been scaled-back to a single, 895 Megawatt plant that would sell the bulk of its electrons to Westminster-based Tri-State Generation and Transmission.  As a result of this latest court decision, the ability of Sunflower to construct and operate the plant comes in to question. 

A 2007 veto statement by then-Governor Kathleen Sebilius read: “I veto this legislation [permitting the Holcomb construction] because while the rest of the country is trying to reduce greenhouse emissions, Kansas would be creating massive new emissions for power we don’t need. The bill before me attempts to take us down a failed path.  What was a bad idea last year, is an even worse idea today. We also know that according to Sunflower Electric’s own reports, their customers will not need additional power until 2018…These developments reaffirm that now is not the time for new coal plants in Kansas." 

The project is estimated to cost $2.8 billion and would ultimately require the approval of the Rural Utilities Service [RUS]  to commence.  Sunflower's financial difficulties led to restructuring of the cooperative's financial obligations in 2002; RUS conditioned refinancing [which included a massive write-down of taxpayer-funded debt] on Sunflower handing over significant control of its business operations to RUS.  So today Sunflower not only operates with oversight of the federal government, but would be seeking billions in new loans from that same government to build a coal plant and that sells the bulk of its electrons to Colorado-based Tri-State. 

It's akin to being broke, but asking your banker for another loan to double-down at the blackjack card table in Vegas. 

It begs the question: Why should taxpayers take both the financial and environmental risks of this plan while Sunflower rolls the dice again on a high-risk project?

I wish I was making his up. I'm not.  In a world where the private-sector financial institutions have nearly ended the practice of financing coal plants in the US, they are left with the only one viable financing mechanism: the federal government.  A program funded through the United States Department of Agriculture via the American taxpayer.

Nearly a decade ago Coloradans passed the first citizen-initiated renewable portfolio standard in the nation, Amendment 37. This historic vote dramatically altered the trajectory of the Colorado economy, politics and energy development. The campaign was overwhelmingly supported by urban and mountain ski-community citizens and rejected by most rural counties.

One might ask why would rural residents, [who would directly benefit from the mandated wind and solar developments] reject a mandate whereby the generally urban population has agreed to pay a premium for new energy resources – that would come from almost exclusively rural areas? 

The answer was simple: in the 2004 election cycle an aggressive 'No on 37' campaign was funded by Tri-State Generation and Transmission [even though they were exempt from the requirement], Intermountain Rural Electric Association and Xcel Energy. At that time the "Big Three" were led by a trifecta of old-guard CEO's whose mindset was stuck in the era of coal-fired generation: Wayne Burnetti of Xcel, Hub Thompson, then-Board Chairman for Tri-State and Stan Lewandowski of IREA. Their campaign was fueled by the tag-line, "It could cost you $2 billion".  Never mind there was no actual data of any kind to support their assertion. It was simply a sound-bite that played well with their constituents. And meant to scare their membership into voting no. It made for a great bumper sticker – and in the case of Tri-State and IREA, the plan worked.  They won their battle, but lost the war.

Fast forward to today. We listened politely during the 2013 legislative session to the questionable talking points in committee hearings as Tri-State attempted to kill Senate Bill 252. We've been inundated by TV and radio ads in the last 30 days as the faux-rage communications arm of Tri-State has attempted to make one believe there is a 'war on rural Colorado'.  We've heard the faux predictions of the accelerated demise of our rural communities. 

The truth of the matter is, there is a war. But not the kind of war your TV set is selling you.

Rural Colorado is in the midst of a self-inflicted war.  One that has discounted and summarily cast aside opportunities for the very communities served by our REA's from participating in any new energy frontier. A war that pits the sunken costs of coal mines and coal-plant infrastructure with the opportunities that await rural Colorado if there were simply a free-market, open-access infrastructure they could tap.  A war that pits the titans of an isolated generation system dedicated to coal – with the need to participate in regional electric markets, maximizing the value of existing infrastructure.

Since the 2004 election there has been, for all practical purposes, no discussions within the rural electric communities on how they might transition to a new energy future.  One that is based on a distributed generation model that would provide multitudes of new economic opportunity for their membership. A system that would mimic the current focus by our Department of Defense in its infrastructure choices.  A decade lost.

Instead, what we've witnessed is actions that support a 'yesterday' utility model.  Two of the three foes of the 2004 campaign have doubled down on 19th-century technology:  Intermountain Rural Electric Association, Colorado's largest REA, purchased a one-third ownership in the Commanche 3 coal plant in Pueblo.  In the same timeframe, Tri-State G&T has spent tens of millions of dollars attempting to achieve permitting for the Holcomb coal plant and has completed it's purchase [by its subsidiary Western Fuels], of the ColoWyo coal plant, a move arguably not in the long-term interests of its members. An increasingly risky bet that requires the construction of a plant outside of its service territory, employing Kansans and paying property taxes in Kansas – to generate electrons that would be transported to the Colorado REA market.  A $2.8 billion proposal that has failed to overcome nearly every political, regulatory and legal challenge thrown at them.  With no end in sight to the obstacles.

It's hard to miss the ironies in the Holcomb proposal. Absent an agreement with Tri-State to purchase the bulk of the output of the Holcomb plant, the construction of this facility by Sunflower wouldn't be possible.  A $2.8 billion project built outside their service territory, long-term debt serviced by Colorado members, creating Kansas jobs and establishing a significant, new property-tax base in Kansas – while providing Colorado members arguably zero economic benefits.   

This begs the question in regards to the Tri-State argument vis-a-vis SB252:  if Tri-State is willing to commit its balance sheet to a $2.8 billion investment in Kansas – why is it a stretch to think that simply substituting that obligation for one that would support the development of energy projects across its 20+ rural electric members shouldn't be on the table for discussion?  The investments needed to meet their 2022 obligation could likely be met with an equally robust commitment to its members.  Just imagine the kind of rural activity and prosperity that could be generated with a similar commitment?   A plan that traps the entirety of the associated economic benefits in Colorado.

This is what a 21st century rural electric will do:  facilitate economic opportunities in the communities they serve.

The war on our rural communities isn't coming from the outside, it's from within. We've suffered a decade of limited leadership that failed to identify the growing trend of local generation and the cost-curves of new wind and solar. Leadership that failed to engage in any thoughtful discussion about climate change, resource use [water for coal plants] and a framework that would build a new tax base in rural communities across their service area that would benefit all rural members. The failure of leadership to build a framework of opportunities for rural entrepreneurs. The failed leadership from an organization that owes its very existence to a public mandate: FDR's 'New Deal'

But as an old rural saying goes, "The two best times to plant a tree are 20 years ago – and today"  There is one week left in the countdown to the outcome of SB 252: 1) our Governor will sign it in to law, 2) he will allow it to become law without his signature, or 3) he will veto the legislation.  What will the outcome of this exercise in democracy deliver?  By signing the bill he may well exert, in one single stoke of his pen, more authentic leadership regarding what our rural future holds for us than from anything else we've seen in nearly a decade. 

The US Court of Appeals has offered us an opportunity.  An opportunity to end the real war on rural Colorado – a Kansas coal plant – and begin the transition to an energy system that provides new and expanding opportunities in our local communities.  And with that transition a new form of governance at Tri-State that returns these important decisions back to their local cooperative boards.