LEGAL	3 Months Ended
Mar. 31, 2020
LEGAL
LEGAL	NOTE 18 – LEGAL Other than as disclosed below, we do not expect any litigation or proceeding pending or threatened against us to have a potential material effect on our financial condition, results of operations or cash flows. Pursuant to a long-term transmission agreement with another utility, such utility pays for and has firm rights to transfer power and energy across a transmission path in Colorado. Such right to payment and obligation to provide the transfer is borne equally by us and another entity. Due to the current capacity of the transmission path, such utility’s firm rights have been curtailed. The utility disputes its obligation to pay due to the current capacity of the transmission path and claims we, along with the other entity, are in breach of such transmission agreement. The utility notified us and the other entity of its intent to arbitrate in accordance with the agreement and claimed damages caused by the alleged breach of approximately $6.9 million, plus interest, attorney fees, and any future damages. The other entity filed a cross-claim against us claiming we are responsible for such entity’s share of any damages. The matter was scheduled for arbitration to commence in January 2020. The arbitration was cancelled and the parties continue to discuss a resolution of this matter. It is not possible to predict whether this matter will be resolved without arbitration or whether we will incur any liability in connection with this matter. At our July 2019 Board meeting, our Board authorized us to take action to place us under wholesale rate regulation by FERC. On September 3, 2019, a membership agreement with a Non-Utility Member, MIECO, Inc., became effective. The admission of the new Non-Utility Member that was not an electric cooperative or governmental entity resulted in us no longer being exempt from FERC wholesale rate regulation pursuant to the Federal Power Act (“FPA”). During the week of December 23, 2019, we filed our tariff filings, including our stated rate cost of service filing, market based rate authorization, and transmission Open Access Transmission Tariff. The request was made to FERC to make the new tariffs retroactive to September 3, 2019. In addition, on December 23, 2019, we filed our Petition for Declaratory Order (“PDO”) with FERC asking FERC to confirm our jurisdiction under the FPA and that FERC’s jurisdiction preempts the jurisdiction of the Colorado Public Utilities Commission (“COPUC”) to address any rate related issues. Numerous parties filed interventions or protests with FERC. Some of the interveners and protestors, including some of our Utility Members and the COPUC alleged that we are not FERC jurisdictional and are still exempt from FERC wholesale rate regulation pursuant to the FPA. On March 20, 2020, FERC issued orders regarding our PDO and our tariff filings. FERC’s orders generally accepted our tariff filings and recognized that we became FERC jurisdictional on September 3, 2019, but did not make the tariffs retroactive to September 3, 2019. However, FERC did provide that FERC will not require refunds for our Utility Member rates and our transmission service rates prior to March 26, 2020. FERC did not impose any civil penalties on us. FERC also did not determine that our Utility Member rates and transmission service rates were just and reasonable and ordered a 206 proceeding to determine the justness and reasonableness of our rates and wholesale electric service contracts. The tariff rates were referred to an administrative law judge to encourage settlement of material issues and to hold a hearing if settlement is not reached. The settlement proceedings are continuing. Any refunds to the applicable tariff rates would only apply to after the above referenced dates. On April 13, 2020, we filed a request for rehearing limited to the issue of preemption of the COPUC related to the contract termination payment number as described in our PDO. Requests for rehearing related to both the PDO and tariff filings have been filed with FERC by other parties. It is not possible to predict if FERC will require us to refund amounts to our customers for sales after the above referenced date, if FERC will approve our current practices regarding use of regulatory assets are just and reasonable, or to estimate any liability associated with this matter. In addition, we cannot predict the outcome of the 206 proceedings, our April 13 request for rehearing or any other request for rehearing filed with FERC. On May 4, 2020, United Power, Inc. (“United”) filed a Complaint for Declaratory Judgement and Damages in the Adams County District Court alleging, among other things, that the April 2019 Bylaws amendment that allows our Board to establish one or more classes of membership in addition to the then existing all-requirements class of membership is void, the April 2020 Board approvals related to a “Make-Whole” methodology for a contract termination payment and buy-down payment formula are also void, and that we have breached the wholesale electric service contract with United. We are evaluating the complaint filed by United.

NOTE 18 – LEGAL

Other than as disclosed below, we do not expect any litigation or proceeding pending or threatened against us to have a potential material effect on our financial condition, results of operations or cash flows.

Pursuant to a long-term transmission agreement with another utility, such utility pays for and has firm rights to transfer power and energy across a transmission path in Colorado. Such right to payment and obligation to provide the transfer is borne equally by us and another entity. Due to the current capacity of the transmission path, such utility’s firm rights have been curtailed. The utility disputes its obligation to pay due to the current capacity of the transmission path and claims we, along with the other entity, are in breach of such transmission agreement. The utility notified us and the other entity of its intent to arbitrate in accordance with the agreement and claimed damages caused by the alleged breach of approximately $6.9 million, plus interest, attorney fees, and any future damages. The other entity filed a cross-claim against us claiming we are responsible for such entity’s share of any damages. The matter was scheduled for arbitration to commence in January 2020. The arbitration was cancelled and the parties continue to discuss a resolution of this matter. It is not possible to predict whether this matter will be resolved without arbitration or whether we will incur any liability in connection with this matter.

At our July 2019 Board meeting, our Board authorized us to take action to place us under wholesale rate regulation by FERC. On September 3, 2019, a membership agreement with a Non-Utility Member, MIECO, Inc., became effective. The admission of the new Non-Utility Member that was not an electric cooperative or governmental entity resulted in us no longer being exempt from FERC wholesale rate regulation pursuant to the Federal Power Act (“FPA”). During the week of December 23, 2019, we filed our tariff filings, including our stated rate cost of service filing, market based rate authorization, and transmission Open Access Transmission Tariff. The request was made to FERC to make the new tariffs retroactive to September 3, 2019. In addition, on December 23, 2019, we filed our Petition for Declaratory Order (“PDO”) with FERC asking FERC to confirm our jurisdiction under the FPA and that FERC’s jurisdiction preempts the jurisdiction of the Colorado Public Utilities Commission (“COPUC”) to address any rate related issues. Numerous parties filed interventions or protests with FERC. Some of the interveners and protestors, including some of our Utility Members and the COPUC alleged that we are not FERC jurisdictional and are still exempt from FERC wholesale rate regulation pursuant to the FPA. On March 20, 2020, FERC issued orders regarding our PDO and our tariff filings. FERC’s orders generally accepted our tariff filings and recognized that we became FERC jurisdictional on September 3, 2019, but did not make the tariffs retroactive to September 3, 2019. However, FERC did provide that FERC will not require refunds for our Utility Member rates and our transmission service rates prior to March 26, 2020. FERC did not impose any civil penalties on us. FERC also did not determine that our Utility Member rates and transmission service rates were just and reasonable and ordered a 206 proceeding to determine the justness and reasonableness of our rates and wholesale electric service contracts. The tariff rates were referred to an administrative law judge to encourage settlement of material issues and to hold a hearing if settlement is not reached. The settlement proceedings are continuing. Any refunds to the applicable tariff rates would only apply to after the above referenced dates. On April 13, 2020, we filed a request for rehearing limited to the issue of preemption of the COPUC related to the contract termination payment number as described in our PDO. Requests for rehearing related to both the PDO and tariff filings have been filed with FERC by other parties. It is not possible to predict if FERC will require us to refund amounts to our customers for sales after the above referenced date, if FERC will approve our current practices regarding use of regulatory assets are just and reasonable, or to estimate any liability associated with this matter. In addition, we cannot predict the outcome of the 206 proceedings, our April 13 request for rehearing or any other request for rehearing filed with FERC.

On May 4, 2020, United Power, Inc. (“United”) filed a Complaint for Declaratory Judgement and Damages in the Adams County District Court alleging, among other things, that the April 2019 Bylaws amendment that allows our Board to establish one or more classes of membership in addition to the then existing all-requirements class of membership is void, the April 2020 Board approvals related to a “Make-Whole” methodology for a contract termination payment and buy-down payment formula are also void, and that we have breached the wholesale electric service contract with United. We are evaluating the complaint filed by United.