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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.
This podcast may contain certain forward looking statements concerning Tri-State's plans, performance, and strategies. Actual results may differ materially because of numerous factors, and Tri-State undertakes no obligation to update these forward looking statements. We urge you to review Tri-State's filings with the Securities and Exchange Commission for a discussion of these factors.
Lisa Tiffin:We have to have a reliable grid. And what Tri-State reliability is first, that's what our members value. And the reality is whether it's the coldest day in Wyoming or the hottest day in the summer in New Mexico, reliability can make difference between life and death.
Elizabeth Schilling:Thank you for joining us for the Western Watts podcast. I'm Elizabeth Schilling.
Julia Perry:And I'm Julia Perry.
Elizabeth Schilling:And we are here today with Lisa Tiffin and Matt Fitzgibbon to talk about electric resource planning. So, Lisa and Matt, tell us about who you are and what your roles are here.
Lisa Tiffin:Well, I'm Lisa Tiffin. I'm the Senior Vice President of Energy Management for Tri-State. So I oversee the teams that forecast, plan, and acquire our resources along with the regulatory team that supports that effort.
Matt Fitzgibbon:And I am Matt Fitzgibbon, Senior Manager of Planning Analytics. So I get the joy and pleasure of working with some expert staff in resource planning in our load forecasting department.
Elizabeth Schilling:We're probably gonna use some terminology throughout this podcast that people might not be familiar with. For example, FERC, NERC, and the Colorado PUC. Can you tell me what each of those is?
Matt Fitzgibbon:So we'll work our way backwards through your definitions here. The Colorado PUC is the Colorado Public Utilities Commission. That commission regulates for resource planning. And then you have the Federal Electric Regulatory Commission. That is the body that regulates Tri-State for their wholesale rate.
Matt Fitzgibbon:And then you have NERC, the North American Electric Reliability Corporation that holds all utilities to certain standards, such as the standard of planning.
Julia Perry:That was a test. If you'd gotten any of those wrong, we would have kicked you out of the podcast.
Elizabeth Schilling:What is a resource plan at the high level? What does the process look like for your team? I know this isn't a one time thing, it's ongoing, but how does it break down into the different phases of an ERP and how often do you approach planning?
Matt Fitzgibbon:So Tri-State is regulated by the Colorado PUC for resource planning. When we start a resource plan process, which is every four years, it can take some time. And so we break it up into a couple of different phases. All in, you're probably looking about eighteen to twenty months to get through the entirety of the process. But we start with a Phase One process.
Lisa Tiffin:So Phase One is a fairly lengthy process, and we actually start the work long before there's ever a filing that goes out and the public and employees see the filing. The work starts with a series of stakeholder meetings, and we do this just because we have learned the way we come out with the best product is by getting all of the voices and all of the interested entities across all four states, whether that's member systems or environmental groups or state agencies, commissions, labor groups, developers. We get them all involved in the process, and we learn up front from them what their key issues are. So we're able to work through the process and our setup and our modeling towards the first filing and how that might impact our approach. We did for this current ERP process that started in 2023.
Lisa Tiffin:We started stakeholder meetings in January. We didn't start modeling till July, and then we filed in December. So it is a lengthy process, but you've got a lot of inputs. So we're doing hourly data for twenty years on resources, load, weather impacts, pricing impacts, transmission, multitude of things. So you're having to gather all that data and then determine how best you're going to differentiate between these scenarios.
Lisa Tiffin:We do multiple scenarios where we say, what if we don't allow a gas plant in this scenario? But what if we do in this one over here? What if we have a certain requirement for renewables in this scenario and a lesser requirement in another? So we're able to do multiple scenarios with all of these assumptions that go into the modeling so that we get an informed look at our system and we know what different actions could have a positive or negative impact on reliability, affordability, and responsibility. It's a very extensive report that we put together, over a thousand pages of data that comes out of that modeling.
Lisa Tiffin:We have a really strong team that does a great effort of getting really meaningful analysis into that report. And then that gets filed along with testimony from the various experts across not just energy management and the planning and analytics team, but also from the generation side and environmental side, the weigh in, and put in testimony to support our filing. And then we go into a process where it's a little back and forth with stakeholders. So we're just building a record to inform the commission of why we think a particular scenario in Phase One is the right path forward for and the members. Ultimately, what this can lead to is a hearing with the commission decision.
Lisa Tiffin:However, in our 2020 ERP, which was our first regulated ERP, and our 2023 ERP, which is the one we're currently in, in both cases, we were able to bring together almost 30 stakeholders and reach an unopposed comprehensive settlement instead of going to hearing and putting the fate of that scenario in the hands of an administrative law judge versus the whole commission. So through that process, we were able to reach a better outcome of what was really best for Tri-State and the interested parties as far as a Phase One portfolio that could be moved to the Phase Two process. And that's really where the rubber meets the road.
Julia Perry:And so you're doing all of these meetings, all of this stakeholder input gathering all this data, and you're doing it times four because you're having to do it across all four stage, which seems like a ton of work. I can't imagine having to process a thousand pages of data. I think I would cry.
Lisa Tiffin:So when we do our stakeholdering , we're grateful for the world of Microsoft Teams because we tend to do a lot of stakeholder virtually. And so we don't silo it because it's really important. We have a lot of members, a lot of member CEOs that are involved as stakeholders in our process across our system. We have some from each state, which is great. Some states come out a little bit more enforced than others.
Lisa Tiffin:But it's great for our members to be a part of the stakeholder process because they can send the message directly to other stakeholders about why reliability is job one at Tri-State because that's what they want and they expect and they own us. But also, just in general, we plan our territory as a system. We don't operate or plan individually. We always try to have everyone across all four states, whether they're the Wyoming commission or a labor group from New Mexico or whoever the case may be. It's important for everyone to be able to hear the perspectives of all the stakeholders.
Julia Perry:It does make sense that there's a democratic aspect for when you're planning something that's such a basic need that spans such a large territory.
Matt Fitzgibbon:I think another important aspect of the stakeholder process is education. So as we're having these conversations with the stakeholders, it is our responsibility to help educate them on who Tri-State is, how we are operating our system, the challenges or successes that certain perspectives may have, and how all these pieces interact to serve a service territory larger than the state of California.
Elizabeth Schilling:It feels like the education goes both ways. Tri-State informing these stakeholders and even our members about the constraints we're working within. Members emphasizing what they need, and then stakeholders saying, this is what we're aiming for. How can we find that solution? But I imagine everybody walks away knowing something that they didn't know before out of that process.
Elizabeth Schilling:So tell us about Phase Two as well.
Matt Fitzgibbon:Well, as Lisa said, Phase Two is where the rubber meets the road. So Phase Two really starts upon commission approval of your Phase One preferred plan. And what we look at there is what is reality? So we we put out a request for proposals that allows developers of the assets that we are pursuing within our preferred plans to submit bids for their resources, whether that is a gas plant or wind, solar, battery energy storage, or the like. They can submit their bids in to be assessed in our modeling process for Phase Two.
Matt Fitzgibbon:Once we have all those bids, our teams work really hard to go through a screening process to make sure that those bids are going to meet the standards by which we we hold them to. That can include an economic screening. Are they reasonably priced? That can include looking at the backgrounds of the developers. Do they have experience in building these?
Matt Fitzgibbon:Are they reliable? Are they going to be able to complete the project? What types of equipment are they sourcing? And so we're really doing a deep dive onto those bids to make sure that they are going to be viable. Once you get through that process, all of that information is put into our model, which is called Encompass.
Matt Fitzgibbon:And that is when we really start looking at, okay, what is the system gonna look like now? Because reality for us changes pretty much every hour. But by the time you go from your Phase One model to your Phase Two model, your system has changed. Your load forecasts have changed. Your knowns and unknowns all change.
Matt Fitzgibbon:And so we're working at looking at the point in time where we put that cutoff in and then looking at how these bids are gonna interact with that. The model itself is going to be held to all the constraints that we have, whether that's transmission constraints or how much generation you can build in a certain area or a variety of other things. And then it is going to look for the most economical solution while maintaining reliability. Reliability and affordability are big key things that model is really assessing to come up with its answer to the expansion plan.
Julia Perry:When you are getting these bids, how do you navigate costs and try to control those when you're bidding on having people bid on such large projects?
Lisa Tiffin:So there's a few ways we address that. As Matt mentioned, there's the screening process on economics, and that's based on Money. Looking at we have what we call generic resource pricing that we use in Phase One when we go into Phase Two because a lot changes in this country that impacts the resources that we purchase and the cost of those resources. So we have to be constantly refreshing those prices. So once we have that marker, then we're able to pass anything that does not exceed that price forward.
Lisa Tiffin:We know that is in the realm of reasonableness, and we bring that forward as long as we can get a sufficient set of each resource type and technology coming forward. Then that's where the really where the model comes in as well because the model is going to have all of those constraints, whether it's environmental transmission, all of the pricing information for the various areas, the fuel information for GAV, the low differences between our planning region, and the location of those resources, along with that price, is going to help the model determine what's truly the most affordable mix, what's Middle East cost mix. If you just took a spreadsheet of the resources, it's most likely not, oh, it's just the lowest 10 because there's a lot more to it, a lot more that can impact it. And ultimately, you've gotta be able to get that power to the load you need when you need it. So that's a big part of the process.
Lisa Tiffin:Also, in our 2020 ERP Phase Two process, experience the fact that developers don't always hold to their pricing. Now this all happens very quickly from our perspective because we're moving very fast, getting a lot of work done in a very short amount of time. But from the time we get bids in the fall to commission approval by July, we need those bid prices that came into us in the fall to be real. We got burned a little bit in the last ERP process. The way we're trying to address that in this ERP process is as we file our preferred plan in April, we're gonna require a collateral posting from the developers with projects that are moved into our preferred plans to hang on to that pricing and make that real.
Lisa Tiffin:Because one of the most important pillars of that modeling is that affordability. And with the changes that you see at the federal level and tariffs and other things that come in, you can quickly see developers shy away from the pricing.
Julia Perry:Can you touch on when we were talking about location before determining, oh, if I'm going to add new generation, I need to make sure that it's near either a substation or existing transmission, go a little bit deeper into location constraints when it comes to economics?
Matt Fitzgibbon:Yeah. The location of resources and the point at which they interconnect into the transmission system is critical, and it is actually an assessment that we performed within our Phase Two process for our 2023 ERP because we are seeing significant issues on the bulk transmission system with the cost of either upgrading a delivery point or upgrading the system itself to handle not only Tri-State's assets, but other companies in the region's assets as well. So when we went through the process this time as our model was coming up with the portfolios that we assessed, we were also looking at what those transmission upgrade costs were going to do to our economics, what that capital expenditure was going to do. And based on that information, we were able to inform the model and inform the process of that side of the economics so that it was considering not just the resource price or the dollar per megawatt hour or dollar per kilowatt. It's actually informing it of the bigger picture so that we can derive the most long term economical solution.
Julia Perry:So, basically, you're saying it's not as simple as just plugging in, for example, a solar farm anywhere on the grid. You have to make sure that the infrastructure that already exists can handle that additional electricity that it's gonna need to pass back and forth.
Matt Fitzgibbon:Yes. And you are also having to look at how any resource that is cited at a specific location is gonna interact with our other resources. The models themselves, we run them for forty eight hours or more when we are looking at these expansion plans because it's really assessing those interactions and all these little pieces to come up with, again, what is the best possible solution.
Elizabeth Schilling:For example, just to put it in really simple terms, if you're gonna build a grocery store, one, you don't wanna build it right next to an existing grocery store. Now you've got traffic coming into both, but you also don't wanna build it where there are no roads yet to that grocery store because then nobody can get there. Is that is that okay to say, like, you need to be thinking about the infrastructure. You need to be thinking about how much volume you're talking about, but just in really simple terms?
Lisa Tiffin:Yeah. I think that's a excellent analogy. I think you are also looking at what is somebody else about to put in a grocery store. That's the trickier part of it as well. When these bids are brought into an RFP process, they have some information about their interconnection.
Lisa Tiffin:But then as we start to put those resources into this model and we get different mixes that are picked up, we go back with our transmission group and more things would happen since then. And they're looking at, well, now given what else they know, we may not know exactly what's going on or who else is building the grocery store, but they have that view as to what's going on there. And now that maybe it's going to be more expensive because there's going to need to be a bigger road, and we're gonna be the ones on the hub for that.
Matt Fitzgibbon:It's also the opposite. You're looking at what if there's an existing grocery store, maybe I should put in a pet food store. Do two assets work well together that we could leverage the existing infrastructure to really continue to reduce cost?
Elizabeth Schilling:And as we're looking at what we're bringing on, like, how much are we talking about as far as how many megawatts of new generation?
Matt Fitzgibbon:We are looking 700 megawatts of renewable generation, 307 megawatts of thermal generation, and over 500 megawatts of storage resources. So a total of 1,657 megawatts of resources.
Julia Perry:What's a storage resource?
Matt Fitzgibbon:Battery energy storage.
Lisa Tiffin:So when we think about
Elizabeth Schilling:the resources we're bringing online and we think about renewables that are only available at certain times, like sun's not always shining, the wind's not always blowing, or resources that might be thermal generation like gas or coal, things that use heat to produce electricity, how do those play together to then say, okay. When we need the electricity, we know it'll be available because here's what we have to pull.
Lisa Tiffin:Really, what's happening is with as we bring renewables online, to your point, we we don't always know when the sun's gonna shine or the wind's going to blow, but we do know once we've got them built, the fuel is free. The operation and maintenance of these type of resources is a lot cheaper. You may need a hundred plus people for a coal plant. You don't need that for a solar farm. Maybe you need some sheep to keep the grass, keep the weeds down.
Lisa Tiffin:Getting them built is the biggest part of the expense. Once you have them online, you're getting some really low cost energy. We see prices go negative in the markets. That's really changing grid and how it's operating. And that's great, and affordability is key.
Lisa Tiffin:But on the coldest day of the year, you probably don't have sun, and you certainly don't have it at night. May not have wind either. So you have to have those resources that you can turn on, that you can count on, that you can control because we have to have a reliable grid. And we know at Tri-State, reliability is first. That's what our members value.
Lisa Tiffin:And the reality is whether it's the coldest day in Wyoming or the warmest day, hottest day in the summer in New Mexico, reliability in electric grid can make the deepest stream life and death. So it is job one, and that's why it's job one. Thermal resource, you can control when that comes on and off. Gas is a great example of the future of reliability and as we transition away from coal. Because like coal, you can turn that resource on and off.
Lisa Tiffin:You can move it up and down. Even has a lot more flexibility than coal. Gas resources are meant to be banged on and off. But those gas resources are what you're gonna be able to get you through those winter events, those summer events. Storage is part of the solution.
Lisa Tiffin:It's a little bit of both. Right? It's that semi dispatchable. I have to charge it up. What we're looking at in our ERP process are for our lithium ion batteries.
Lisa Tiffin:Many utilities have been using these resources for quite a few years now. The technology has evolved greatly. It's become a much safer technology. So it's exciting with well over 500 megawatts to take those batteries. And whether we're charging from the grid, whether it's somebody else's excess renewable power that's charging our batteries at a time when prices are negative, or our own renewable power that we're using to charge and then move into those cold winter evening hours, those hot summer evening hours of our peak, they will be part of that bridge that get gets us through those worst hours of the day.
Lisa Tiffin:So it really it is an all of the above plans.
Julia Perry:So that's an example when you mentioned resources working well together. Batteries are pairing really well with renewable resources. Right.
Lisa Tiffin:It's for it's both from how you operate them and then also to Matt's earlier point on transmission. For the first time, we're looking at what's called surplus interconnection. So this is available transmission access where if I already have an interconnection for a specific resource, say I have a hundred megawatt wind resource, and now I want to put in a 50 megawatt battery. But if I would put that in separately, I'd have to pay a transmission upgrade cost. The system couldn't take it.
Lisa Tiffin:A 50 megawatts is not a hundred now. Instead of doing that, I say, I'm up with this battery right here by this wind project, but I'm never going to put out more than a hundred megawatts. I'll have a 50 megawatts of resources, but I will manage my battery around that wind resource. I will charge from the wind, and I will discharge when the wind isn't blowing. And so we're able to avoid transmission upgrade costs by putting that resource on there, and then we're also able to basically operate the energy in the best way possible as well.
Lisa Tiffin:So that's an exciting part of our for this new ERP.
Julia Perry:The deeper you get, just the more pieces and trade offs and conditions there are just really does seem just like an insane puzzle or maybe like an insane Rube Goldberg machine.
Lisa Tiffin:I think there are plenty of days where our resource planning team would definitely identify with the word insane. Like you said too, you can
Elizabeth Schilling:put inputs in one day and then the next day, the next month. Things have changed. So this happens every few years, but what are you guys doing in between? Is there still constant process going on?
Lisa Tiffin:We started our first regulated resource plan in 2020. Someday when we get out of a resource planning process, we will let you know. We have yet to see that happening because they just keep one barely ends, and the next one has to begin.
Julia Perry:So Well, it's hard. Right? Because if there's gonna be continuous load growth I'm sorry to say it, but you're never ever gonna get to stop planning if load's always gonna keep growing.
Lisa Tiffin:And that's a really good point. We have a lot of beneficial electrification occurring across our system where we are seeing either through regulation or just through consumer choice where we're seeing consumers change from having something maybe before that it was a oil and gas company that had a gas compressor, and now they're going to electrify. That electrification is increasing our load. We've always seen that to some extent, but it's tough. There's definitely an uptick.
Lisa Tiffin:But separately, we're starting to see load requests around AI and data centers. And so we are now separately from a current resource planning process trying to establish a process for what we're calling high impact loads. Some of these loads are 50 megawatts, 200 megawatts, 500 megawatts, and gigawatt peaking system. Those are big numbers to try to add onto our system. There has to be a controlled way to do that.
Lisa Tiffin:So we're working with our member systems to develop a a FERC tariff to have a risk adverse way to bring on this low, make it beneficial to everyone no matter whose system it might be in, but making sure that the reliability, affordability, and responsibility metrics are all kept through the process. So if this goes as planned, we will get through this Phase Two process this summer with our commission approval, and we will likely be moving right back into some type of interim resource planning process to accommodate these high impact load requests before we even get to our next regulatory filing.
Julia Perry:Can you put a gigawatt of energy into perspective? Because I've heard, like, colloquially, it's enough to power a small country or something, or this is the energy use of New York City for a day. Like, how much is a gigawatt of energy, like, in perspective for someone that might not understand?
Lisa Tiffin:2.5 gig we're a 2.5 gigawatt peaking system. And with our member systems, we serve around a million electricity consumers across our four states. That's a little bit of a perspective there on what it takes to serve.
Matt Fitzgibbon:So if you take a gigawatt and you divide it by a million, you get a kilowatt. The average home is four kilowatts. But obviously, when we look at our load makeup, there's more than just residential consumers. So you have irrigation. You have, commercial and industrial load, oil and gas processing, C02 loops, compression stations.
Matt Fitzgibbon:We have a lot of varying load of varying shapes on our system, which is really even though our system is complex, this is really beneficial for us because it does provide the diversity that we need not only in our load makeup, but then when you look at our regional differences too, that diversity is a huge benefit to our system.
Julia Perry:Beneficial electrification, what is that?
Matt Fitzgibbon:So beneficial electrification, by definition, is when you move from a different fuel source for any type of operation. So let's keep it simple and say the heating in my home. Right? It might have been natural gas before. And when I electrify, if it saves me money economically, then that can be considered beneficial.
Matt Fitzgibbon:So I've changed my fuel source to electricity, and it has benefits to me economically or to the environment or even quite honestly, by the definition, to my mental health.
Julia Perry:Is that a good thing for Tri-State, though? Because it sounds like if you're adding more electric appliances or switching over, that means you're gonna have to factor that into your electric resource plan. Is that a net positive for Tri-State?
Matt Fitzgibbon:Yeah. Electrification presents both opportunities and challenges. Challenges because you have to plan for it, but opportunities because it is opening up the world of resource planning to demand side management. So demand side management means energy efficiency. So electrification generally is more efficient than its baseline technologies, and it also opens us up to demand response opportunities.
Matt Fitzgibbon:And so demand response are programs that we use to influence a consumer's use of load at any given point in time so that we can manage the supply side to the demand side. So, basically, changing the load shape to meet our existing resources at any given moment.
Julia Perry:What's an example of a demand response program?
Matt Fitzgibbon:Probably one of the ones that gets the most press and is the most well known with the consumer base is gonna be air conditioning demand response. In the summertime, we might be facing some really high load, a lot of stress on the system, and we'll call upon the consumers that are enrolled in that program to allow us to control their air conditioning units, reduce the usage of those air conditioning units, and really create less stress on the system without them noticing a change in the temperature of their home. So it's a fine balance.
Julia Perry:And so how does that scale for an operation as big as what Tri-State's doing?
Matt Fitzgibbon:Well, we rely on our members, quite honestly. So Tri-State doesn't hold a retail relationship with the end use consumers, but we do have very strong relationships with our distribution members who have that relationship with the consumer. So we rely on them to help us implement and scale that up to where it can become an efficient means of a resource on our system.
Elizabeth Schilling:So we've talked a little bit about renewables. We've talked a little bit about beneficial electrification. When we think about bringing thermal resources on, what considerations are there on that side, or what are we looking at as far as a gas plant?
Lisa Tiffin:So our current plan has selected a 307 megawatt gas plant to go in Moffett County in Western Colorado. This will be a plant that Tri-State owns. We'll use an EPC contractor to get it constructed, but we will then have ownership. And this is really important from several angles, and we are retiring 640 megawatts of Craig Station in 2028, another 419 megawatts of Springville Three in 2031. Even with other modifications around load to our system, there is a need to have replacement that's thermal dispatchable firm power that we can control.
Lisa Tiffin:We did model it carefully. We're very aware of the stranded asset costs that our members are bearing from the changes in the grid over the last several years and the changes that are going to continue. We only model the plant through the life of the contract, and 2050 is a key year for a couple of states. New Mexico has a zero carbon by 2050 Colorado actually is is looking more at what can it do by 2040 but definitely would intend to be zero carbon by that 2050 time frame.
Lisa Tiffin:We looked at current rules out there under consideration at the federal level and had some restrictions on the plant and its ability to run. We see it starting out at about a 40% capacity factor. So 40% of its total availability over the year is it's all that it's running, and it's running at those key times when when it's needed most with that variability. The model is really seeing the value of that capacity and that energy in this near term. That's what the members are getting that value for what we're gonna produce there and love that it's going to be cited in Moffett County to bring back jobs to that community, and that's exactly where we've landed, which is a good thing.
Julia Perry:So you mentioned the current coal that we do have at some point is just not going to be producing as much energy as it did before. Matt, can you talk about just the economics of retiring the coal plants and also how that factored into that decision?
Matt Fitzgibbon:There are three plants in particular that come to mind when we are looking at our Phase Two ERP model. The first being the Craig plant located in Moffitt County that is scheduled to be shut down in 2028. So that's an economics driven decision. That plant has become more efficient over time economically as coal prices from the mine that supplies it have changed and gone up. It's be becoming more and more expensive to run.
Matt Fitzgibbon:Similarly, we have the Springerville Three plant down in Arizona that we've seen that it's increasingly less competitive of a resource in terms of its costs, which creates some concerns as we look forward to maintaining affordability of our system. Last but not least, we have a very economic plant that projections show will continue to be very strong going forward in the LRS station up in Wyoming.
Elizabeth Schilling:When we think about putting in things like renewables or this new approach for Tri-State of having more storage as well, how do we interact with the development partners? What considerations are we looking at as far as where we cite those communities?
Lisa Tiffin:There's a limit to what we can do during the evaluation process and the modeling and then what we would do when the actual negotiation process and moving on to construction. But initially, when we're getting bids in, one of the things we're evaluating is where are these resources located? Are we aware of any concerns or problems? There are some counties that have put up moratoriums for rent to fund solar. We expect in the detailed response to know what kind of permitting or obstacles might be involved in those of a particular bids or particular projects.
Lisa Tiffin:And then the modeling is very agnostic to all that. It's looking at data and constraints and pricing and how the system is running. And so it's going to come out with the best mix based on that. When we turned around and did an extra pass in this preferred plan, we were looking at how do we avoid some of these transmission upgrades, and then we leaned in a little bit to that surplus interconnection idea of how can I make a storage resource go whimmer? I've already got a whim resource.
Lisa Tiffin:If you're just kind of adding on to where you've already put something in, then you've probably overcome most of the local problems in that area. If you're just trying to be efficient and reuse or repurpose or integrate to existing resources. Definitely, as we go through the negotiation process and then in the construction process with developers, there is sometimes that not in my backyard. It doesn't matter if it's wind, solar, or gas. You will run into that.
Lisa Tiffin:Don't expect to run into that Moffitt County. I think they will be very happy to have a gas plant and a battery bringing back jobs to their community. So one
Elizabeth Schilling:of the cooperative principles is concern for community. Can you tell me how that factors into where we're putting things and what we're considering along the way?
Lisa Tiffin:As we go through the modeling process since it's regulated, we can't necessarily put a finger on the scale for the communities or the member systems, and our resources end up in the best location based on the economics and reliability. But we do have what we call a non price factor screen where if a resource is on the cusp, when it's past economics, it's past transmission, it's being evaluated for some other non price factors, and it's a little bit on the cusp of whether it would make it into modeling or not. If it's in a member system or an impacted community, we will see that as a positive that can help push it towards modeling.
Elizabeth Schilling:When we're thinking about planning for reliability on the system, how do we account for the day to day needs and then those extreme situations when we're talking about the worst of the weather? What are we looking at?
Matt Fitzgibbon:The Tri-State plans our system to two different levels of reliability metrics, simply called level one and level two. Level one is what what I would call the standard of planning. It's one day loss of load every ten years. So we are looking at ensuring we maintain that level of reliability with our system or better. And then we have our level two metrics, which are where we take our system and the plans that come out of the model, and we stress it for extreme weather events.
Matt Fitzgibbon:And so every year of the modeling period, which covers twenty years for our 2023 ERP, we are stressing the load, the resources, and all things in between for a summer event and a winter event. So if you wanna put those into perspectives of things we've heard about, it could be a long duration heat wave in the summer or even a storm like winter storm Uri in the winter.
Julia Perry:What kind of factors do you prepare for when you're deciding on level two metrics?
Matt Fitzgibbon:Yeah. So when we look at the factors and the results of those models, we are ensuring a few things. One, that we are not relying on the open market and the fluctuation of prices that could come with the open market to maintain the reliability on our system, and that we maintain the the ability to serve all of our load at that point in time with our resources.
Julia Perry:How do these level two metrics that Tri-State developed, how do those compare to what other utilities are doing?
Lisa Tiffin:I would say that our level two viability metrics are unique. Not aware that anyone across the country is yet doing exactly this method. We developed these metrics in our 2020 ERP working with the Wyoming member CEOs and a consultant that they had hired. Now it's based on the premise that even during the worst times, the reliability expectation is still 99% plus reliability. And what does that take, and what was that most like?
Lisa Tiffin:So now we have been very vocal at industry conferences across the country in our conversations with NERC, with industry organizations, our conversations with other utilities, talking about this method and this approach. And we had a a mini stakeholder group while we were starting to develop the twenty twenty three ERP where we worked with entities, consultants from Feara Club and from one of the state agencies with Colorado, as well as our Wyoming members on this topic and used an outside consultant to help develop a database of both tri state specific and regional weather event, extreme event, and something that we can build on and that we're now sharing. We also had Rocky Mount Institute involved in that process. It was very interesting to have very diverse backgrounds and perspectives, and having a reliability event was a really common ground for all of those people. And we found some interesting approaches that all could agree on no matter what you thought the resource mix should be and why.
Lisa Tiffin:So it was a really interesting exercise. I mean, tend to keep that up as we go forward. I will say what you've seen happen in the industry, it's more on the level one side. A big key of level one is what is your planning reserve margin? What does that cushion of resource capacity over and above your load mean that you will hold to make sure that you can withstand the difficult times?
Lisa Tiffin:And you were seeing those reserve margins increase. We increased our reserve margin from the more typical 15% up to 22%, and it'll it will be over 30% by the time we retire Craig Station. We're now just seeing other utilities start to inch up and make those moves. Southwest Power Bull being one of the most interesting ones to watch as we're going to be joining their expansion into the West. And as we're doing that, we're watching how they're changing their reliability margins.
Lisa Tiffin:And what they're doing is not just having a reserve margin for the summer, they're also having one for the winter. We're now realizing as you change this resource mix, if you're no longer focusing on that one peak time of the year, it's becoming a multi season problem to make sure you're managing the liability. We see that in our expansion planning processes. We've developed these level two reliability metrics, and we've moved up our reserve margin. We're starting to see that our plans come out in a much more robust way, that they more easily meet these level two reliability metrics because we're informing it upfront by increasing that reserve margin.
Lisa Tiffin:So I think you're gonna see the industry evolve.
Julia Perry:So the reserve margins are talking about the excess capacity that you'll have in case of these events. Right?
Lisa Tiffin:So reserve margins really start from even under normal conditions, a resource will go offline. There will be a forced outage for an event or the wind won't blow. It can happen any time of the year. Normally, you better have some cushion. Then the level two reliability metrics lean more into what if it was the worst at the worst days?
Lisa Tiffin:What if I'm just really having a renewable drought of some sort? So it's a more extreme measure of how renewables could be going down and how thermals, a thermal resource, a gas or coal resource, could stop working on you at any moment. They all have minds of their own, and you never know when it's going to break. Right? Nothing is a 100% reliable.
Lisa Tiffin:To put extreme cold temperatures on those resources and the odds of it breaking go up exponentially. So that's really the difference between level one and level two. Level one is, hey. Nothing ever is a 100%. I better have some cushion.
Lisa Tiffin:And level two is, and when it's really bad, I better be sure I'm really robust. So they work together to complement each other.
Matt Fitzgibbon:I would note too that when we're looking at planning reserve margins and the development of those, it's very different than when we look at expansion plans and electric resource plans because those models still look at the future, but they look at more than one picture. They're running thousands of iterations, moving assumptions around, moving equipment failure around, or the generation out of any one type of resource and saying, okay. Based on these thousands of runs, this is where you need to plan to in order to cover anything that comes your way to meet the requirements in front of you.
Lisa Tiffin:So it
Elizabeth Schilling:feels like we've touched on a lot of themes where there is immense value in coming together as a group, as an industry, as a variety of different inputs because we can't do this alone. Can you tell me a little bit more about that?
Lisa Tiffin:I I think that's an absolute whether it's the beginning of the planning process and getting more input, that was a great way to educate stakeholders on who Tri-State is and how we're different in cooperative model. They were used to invest around utilities and that shareholder concept, and they you know, that we are our member owners at the end of the line. That is Tri-State. But we also learned a lot. We get a lot of perspective.
Lisa Tiffin:There are a lot of consultants that come with these stakeholders in our ERP processes, and they bring data and knowledge and experience from other utilities, ERP processes they've been involved in. And that collaboration helps us build a stronger plan.
Elizabeth Schilling:Because at the end of the day, what does success look like? If we do this well, what does that mean?
Lisa Tiffin:Reliable, affordable, and responsible. That's what that means.
Julia Perry:I would also like to just ask either of you, what is the most exciting part of the ERP process for each of you?
Lisa Tiffin:So for me, the most exciting part is the change, is the transition, is where we're at right now, where we're going to be putting resources in place from 2026 to 2031, but those resources are going to be serving our members for twenty years plus. And it's going to be not just about right now. It's about children and grandchildren and the future of the cooperative system and of the members and their families. That's the most exciting part. The results are going to keep a reliable, affordable grid for our member systems.
Matt Fitzgibbon:For me, it's twofold. During the process, I'm a big fan of not just the education part that we've talked about, but the learning part too. As we continue to have those conversations, not just internally, but with our membership or with stakeholders, everybody is learning and educating at the same time. The second half, I I would have to agree with Lisa. The thought that we are putting together what is the single largest resource acquisition in Tri-State history, and you look at what that means to not just our current members, but to the longevity of the communities, the children that will grow up there and bring their families there.
Matt Fitzgibbon:Our fingerprints are are on the system for a very long time, and doing it the right way for me is very important.
Julia Perry:It does seem like the process involves a lot of critical thinking and problem solving, and it must bring such a sense of satisfaction to be able to finally put the pieces into place and solve the puzzle.
Lisa Tiffin:Of course, the puzzle keeps changing. So this will solve this piece, and we'll get it in place. And it it does feel good, but we we have a little bit an internal joke that we get a win for about a day, and then we're on to the next the next puzzle to solve or the next problem to solve. But it keeps it interesting, keeps it challenging. And used to be come to work for utility if you want a nice quiet life, and that's no longer the way it is in the utility system.
Lisa Tiffin:If you want excitement, you come to work.
Julia Perry:It's one of those puzzles that doesn't have any edge pieces. Exactly.
Matt Fitzgibbon:Ever growing number of pieces. I will say when I first joined Tri-State, I had a family member say, you're gonna love it. Nothing ever changes. It's been constant change since. But the puzzle is part of the enjoyment.
Matt Fitzgibbon:This is really what we are here for, what we're here to solve, what we're here to continue to work on in order to, again, maintain reliability, affordability, for our members.
Elizabeth Schilling:Thanks for joining us for the Western Watts podcast. You can find us on Spotify, Apple Podcast, YouTube, or on our website at tristate.coop/wwpod. We'll catch you next time.