Discover how Tri-State and our members are embracing the opportunity to power the West in our new podcast, Western Watts!
We'll dive into the heart of energy issues, from reliability to wildfire mitigation, and share firsthand insights relevant to rural, agricultural and mountain communities across Colorado, Nebraska, New Mexico and Wyoming.
What we're building now is gonna serve our members into the 2060s. And isn't that exciting? It's not just our kids, but our grandkids. They're gonna benefit from the stuff we're doing today.
Elizabeth Schilling:Welcome to Western Watts, the podcast where Tri-State and our cooperative members explore what it takes to power the West. From reliability to wildfire mitigation, we dive into the energy issues that matter most to rural, agricultural, and mountain communities across Colorado, Nebraska, New Mexico, and Wyoming. Thank you for joining us for the Western Watts podcast. I'm Elizabeth Schilling joined by Julia Perry. And we have the pleasure today of interviewing mister Duane Highley, CEO of Tri-State Generation and Transmission Association.
Elizabeth Schilling:Thanks for being here, Duane.
Duane Highley:Thank you for having me.
Elizabeth Schilling:With 2024 firmly behind us, what are you excited about in 2025 for Tri-State and for our industry?
Duane Highley:I'm so excited for 2025, and we're at this point now where things that had been planned are coming to fruit, and now it's time to execute. For me, when we're building things for the future, that is the most exciting and fun times as a G and T. It's the core of us. And after all these years of planning, now we can go build. And these RFPs have been issued.
Duane Highley:I'm super excited about being able to get hundreds of megawatts of solar and wind and battery under construction for our members because what we're building now is gonna serve our members into the 2060s. And isn't that exciting? It's not just our kids, but our grandkids. They're gonna benefit from the stuff we're doing today. Sometimes it's hard to get excited about these long term things because they're just so far out in the future.
Duane Highley:It seems like maybe it'll never happen, but that's what we do. We invest for generations. We build something that's gonna last decades. You can tell them they'll have reliable power supply, and don't you wanna be part of that?
Julia Perry:I will say, on a personal note, I'm really excited for batteries just because they're named such insane things. Like, you have molten salt, you have iron air, and lead acid batteries. Does this not sound like a trio of, like, metal band?
Duane Highley:Okay. I I I I'll I'll get out my electric guitar for that one. Yeah. Yeah. Yeah.
Julia Perry:I'm gonna need you to do the soundtrack of that album.
Duane Highley:We're gonna do the jingle. Yeah. Can I do the jingle? Can I do it?
Julia Perry:You're first in line. Yeah.
Elizabeth Schilling:You mentioned that Tri-State's making investments that last for generations. What's the benefit of our members making these decisions together versus going out on their own?
Duane Highley:We make a commitment to the member. We're gonna serve your load no matter whether it grows or shrinks, and we're gonna manage that with all the other members. You can tell them they'll have reliable power supply and that they'll be sharing risk with their neighbors instead of out there on their own. We're gonna be building things that will last beyond 2050 now. We're making investments that'll go on through, what we say, at least 2066.
Duane Highley:So how about we have a contract extension? And and members are like, wait a minute. Why would I wanna do that? It's because you're doing something for your kids and your grandkids.
Elizabeth Schilling:At the end of the day, would you say that the reason that all these individual cooperatives came together still is there? It's stronger when everybody is working together versus going it alone. We haven't lost the value of doing this as a cooperative.
Duane Highley:Exactly. I think about Tri-State as not a large utility. We're the middle to small size utility, really, if you look how big some of these entities are. And if you're not at least as big as Tri-State, I don't think you can really play the way you need to play in the markets. And to be able to buy and sell and hedge risk, you've gotta have a certain amount of scale.
Duane Highley:If you're on your own and you suddenly get opportunity to serve a big load, you gotta say, oh, wait a minute. I gotta go see if I can get power supply because I wasn't planning for that. So now I gotta see if I can build it fast enough or buy it from somebody. And then if you're serving a large load and they go away, you gotta say, oh, crud. I just built a big power plant to serve that, and now I gotta pay for it, and they're gone.
Duane Highley:How am I gonna pay for it? My rates are gonna skyrocket. If you're part of a G and T, don't worry about any of that. Because you're sharing that risk with all your neighbors, and there's so many of them, you're not stuck with that. You just pay for what you're using.
Duane Highley:And I think that's one of the most important aspects of a G and T that gets missed. Right? Now you have an enormous obligation you didn't have before, which is to always match your resources to your load.
Julia Perry:Most likely too, you're still gonna have to buy energy from Tri-State, so why not get it at wholesale?
Duane Highley:And, again, this goes back to the contract extension question, why should we do this? And it's really about sharing risk with your neighbors that also have the same business model you do. So instead of going out and getting in bed with a company whose whole goal in life is to make a profit every moment possible, How about you partner with people who are in the same nonprofit sense as you are? Rural economies, rural people rely more on each other. Urban people forget about it.
Duane Highley:Right? I can just go to my apartment every night, and I don't ever have to talk to anybody. I don't ever have to ask anybody for anything. And I'll go to the store, and it'll all serve me. But if you're in a rural area, I'm pretty sure you're relying on your neighbors.
Duane Highley:Maybe you can't get your driveway graded. They're gonna help you. I know all of our farmer and rancher and small business board members are thinking that way, and they bring that value to the board table too to say, it's probably a good idea to share that with our neighbors, and let's work together. Maybe working together is a good idea.
Julia Perry:Who can say, let's make it a business model maybe?
Duane Highley:How about that? I like to
Julia Perry:get you. How about that?
Elizabeth Schilling:A big push in 2024 was to secure funding to help build all this new generation and ramp up in 2025. Can you speak to that?
Duane Highley:So I'm also really excited about the opportunity for us to access 2.5 billion, it's a hard number to say, $2,500,000,000 in federal funding over the next ten years or not even ten, six years under the New ERA program. It's gonna be completely transformational to Tri-State, and I'm so excited we have this opportunity to achieve these funds. Helps clean up our balance sheet. It eliminates stranded investment. It builds a capital stack, as Todd would say, of the lowest cost capital any entity could access.
Duane Highley:We're gonna have a lot of zero interest rate debt and 2% debt and even some treasury minus an eight, and no entity can borrow for those rates. So that positions us to serve our members into, again, decades in the future with extremely low cost money. Now currently, there's a concern about this because of the change administration. I think the new administration cares about rural America, and I think rural America maybe helped get the new administration in office. To me, it's in the best interest of an incoming administration who wants to make sure rural America isn't ignored to say, keep that money flowing if you keep anything flowing.
Duane Highley:And in particular, New Era funding, because it's going directly to, in this case, it's going to nonprofit entities like Tri-State, and we don't keep that money. Every dollar we save ends up saving a member at the end of line money. It goes back into the pockets of our rural consumers. It's not 100%. Nothing in life is, but it's going to be transformational for us to be able to receive those funds.
Duane Highley:Combining that with the the direct pay tax credit means this next tranche of generation we're building for our members is gonna be some of the lowest cost that they could ever achieve. And, again, it serves our members decades into the future.
Elizabeth Schilling:Tell us about the nature of that funding. How is that allocated to Tri-State? How do we use that?
Duane Highley:What's really cool about the New Era funding is our team, first of all, found a way to take what would have just been straightforward grants and amplify its impact on our rural members by taking the majority of the money as low interest rate loans, which actually are paid back. So the government really is just loaning money to us that they get back. There's really not a direct cash payment payout. It's the benefit of having a lower interest rate to our members that is the benefit that flows back to them. But a key thing a key consideration to remember is this really isn't free money.
Duane Highley:It gets paid back.
Julia Perry:I think it might be good to mention that we're a not for profit. Typically, all of those tax breaks were completely unavailable to us anyway. We're finally at a point where Tri State is able to build their own facilities, which is pretty wild.
Duane Highley:You know, our members are taxpayers just like every other taxpayer, and sometimes the rural areas feel like they don't really get any money back, so to speak, in that tax revenue game. If our members are out there paying taxes, they don't wanna see it all go to Downtown Denver. They wanna see some of it come back to rural area. And one of the best ways that can happen is to make sure that there's some funding coming to help them with their power supply, to help them with stranded investments, to help them have a leg up. You talk about co-ops, and they nationally serve the majority of the persistent poverty counties in this country, and Tri-State's no exception.
Duane Highley:We have a lot of those areas. The people we work for, a lot of them struggle to pay their utility bills, and they're also taxpayers. So why shouldn't they get something back from their government? It is great. As a nonprofit, it never seemed fair to me that we weren't gonna be able to take advantage of tax credits.
Duane Highley:Why should the for profit people get a tax credit to build something that the government says is in national interest and we wanna incentivize? So it's just to me, it was never fair. I'm really glad we got direct pay tax credit passed now. It cost the government exactly the same, but for some reason, we couldn't access that money. So, yay, now we've got it.
Duane Highley:We can go out and build Axial Basin in the Dolores Canyon and many other things for our members and get the same benefit that the for profit people have always been getting. So it sounds like
Elizabeth Schilling:this government funding is gonna help us build more generation projects, but how does it help us with cost control?
Duane Highley:I'm extremely proud of the work that this organization has done to try and figure out how to keep costs under control. And, again, you go back to 2019 and before, that was an issue members were preaching with us about. They were concerned about cost and concerned about cost rising, and they were saying Tri-State is not competitive in the marketplace. I heard that from all kinds of members and nonmembers. And then when you look at the metrics, you say, yeah, Tri-State was a high cost provider amongst G and Ts.
Duane Highley:Now there's a reason why we are, and that's because we have more transmission than anybody. And we serve some of the most remote parts of this country, which means we have to have more miles of transmission per megawatt sold per household, and that's a cost burden we have to carry that other people don't. They're not gonna give us a break for that and say, oh, just because you're serving us in the mountains, we're willing to pay twice as much for our power. No. They wanna be just as competitive as Xcel in Downtown Denver with 30 to 50 customers per mile.
Duane Highley:Because we're nonprofit, because we work for members, and we focus on cost, we can deliver power that is, most instances, absolutely directly comparable to an investor owned utility serving 10 times the density we serve. And that shouldn't even be the case, and yet it is. So it's that focus, and then you look at what the team has done since 2017 to say, we've only increased cost of net of 2%. And again, I'll say, is there another utility anybody can think of that's done that? Certainly not my cable television provider, not my cell phone provider, nor my natural gas provider, nor my water.
Duane Highley:None of those haven't gone up at least double digits, if not doubling, since that period of time. And here we are with only a 2% net increase, and then we start working on a 2025 budget, and the team comes in with the first cut is, and we're we're hoping to keep it below double digits. Maybe it'll be nine. I'm like, nine point something percent, please, not 10. And then the next meeting is 7%.
Duane Highley:The next meeting is 5%. The next meeting is and we don't need a rate increase. I was like, what happened here? Everybody worked really hard and redid plans that people thought were sacred, frankly. We couldn't touch the mine plan, for example.
Duane Highley:We had to say, what about the mine plan? And I regret anything that impacts employees, but as a result of that, look, we can maintain rates, which is really important to our members, and some of them are struggling to pay their bills. Right? So we do have a responsibility to them to keep our costs in line and be good stewards of their money. And I think that's what we've done here.
Duane Highley:I'm really proud of everybody that worked on that.
Elizabeth Schilling:So in your position, you have to be able to trust that you've put the right leadership team in place. You can't do everything to lead this organization on your own. Tell me about your leadership team. How they've been moving Tri State forward.
Duane Highley:I've never been more blessed to have such a strong leadership team than today, and everybody is just working together so well. First of all, they trust each other, and that goes so far in the senior staff room when we're talking about what to do next. And everybody can participate too. Everybody can weigh in. And I think it's just a tremendous strength that every member of the senior team is willing to listen to their peers and say, oh, that's a a good suggestion.
Duane Highley:Even if it didn't come from engineering and I'm an engineer, I'm willing to hear it. They got a lot of tenacity. The word everybody uses is probably grossly overused, but they do have it. And and so they're willing to go out there and fight really hard, and that's evidenced by what happened the last four years. Right?
Duane Highley:There were some dark days for us even two years ago, even one year ago. It's, oh my gosh. What's the future gonna be? I never saw a team fight harder than during those days. Because that's when you'd expect people just be giving up and say, I can't see a path out of here.
Duane Highley:I don't see how this is gonna work. I'm done. And instead, they're like, I'm gonna fight all the harder. And they did, and they prevailed. And so I'm super proud of all their effort.
Duane Highley:I'm proud to be part of them and for us to be doing this together. And I'd look I just look at the accomplishments and say, yeah. It would be through a lot of grit and determination. We finally got through it. And now have this beautiful path forward that says we're gonna get to execute on all these new things for our members for decades to come.
Duane Highley:It gives you so much gratification to know you've been part of that.
Elizabeth Schilling:What is it about Tri-State that inspires that level of tenacity?
Duane Highley:I think there's a virtuous cycle here, and then success breeds more success, and then people wanna be part of that. I'm especially excited when I see somebody who leaves Tri-State and then later comes back to Tri-State. That is a big win, because that's a that's an enormous validation to vote to say, yeah. I tried the other thing, and now I've decided it's better here.
Julia Perry:I think people actually believe and care about the mission. Like, as corny as it sounds, serving people at the end of the line, I think people actually believe it and get bit by the bug, and they wanna do something meaningful.
Duane Highley:I wish more people could come with me to the meetings like I had this morning. I went to visit with Midwest Electric, our member in Nebraska. And those are the members. That's who we serve and see their board, and that's the members. Right?
Duane Highley:Those are all people and they tell me how much they appreciate Tri0State. And I wish every employee could be there sitting with me to hear that when they say, you guys do a great job for us. That's not to me, that's to everybody. Right? They're they're thanking Tri-State.
Duane Highley:They're thanking every employee here. And every one of us I remember one time I talked about our mission, and somebody said, I don't have anything to do with reliability or or affordability. It's every one of us to us. Whatever you're doing is part of that machine that's making that happen. I just wish that they could all hear the the the wonderful compliments I hear from the members when I'm out with them, and they talk about how much they trust Tri-State and how how proud they are what we're doing.
Duane Highley:So that's to the credit of everybody here.
Elizabeth Schilling:Keep that part in. Don't amplify that part. So to wrap up, what are you listening to right now?
Duane Highley:Yeah. Foy Vance, he's been a real recent favorite. In fact, the album he did with the live orchestra is amazing. Just completed the Undaunted Courage. Isn't that the one about Lewis and Clark and their explorations of the West?
Duane Highley:And then that inspired me when I heard them talk about Zebulon Pike. So I also listened to the Zebulon Pike autobiography, which is very relevant for Colorado because he explored into the Arkansas Valley, in fact. And now Noah Webster is inspiring me because he's like a founding father who wasn't an official founding father. So I wanna learn more about that. When I finish that one, I'll be teeing up Ulysses Grant, the General Grant.
Duane Highley:That would
Julia Perry:be great. Like you have a very long commute.
Duane Highley:I wish I could use a longer commute to get through these because I'm telling you the, Undaunted Courage audio book was, like, twenty eight hours. So it takes you a while. You gotta listen to it at 1.5 x or something at least to get through it.
Elizabeth Schilling:That's your secret.
Julia Perry:I listened to it right on 1.25.
Duane Highley:Whoever listens to this podcast is probably gonna listen to it at least two x.
Julia Perry:Automatically place it at 1.25 in honor of
Duane Highley:the some people do that. I think there is a little bit of that gaming going on.
Julia Perry:They're like, twenty minutes. Hurry this up.
Duane Highley:Yes.
Elizabeth Schilling:Thanks for tuning in to Western Watts. You can find us on Spotify, Apple Podcast, YouTube, or on our website at tristate.coop/wwpod. We'll catch you next
Julia Perry:time.