The proposed merger of La Plata and Empire rural electric associations has been dropped until La Plata is freed from a member’s lawsuit.

"Cortez-based Empire Electric Association has put the year-old consolidation effort on hold because of all that’s going on in La Plata’s territory," said Neal Stephens, Empire’s general manager.

In the past year, Durango-based La Plata Electric has been immersed in controversy over its effort to diversify.

A lawsuit filed by William D. Bontrager, a member of the non-profit cooperative, challenges the legality of La Plata Electric’s sponsorship in the form of front money and loan guarantees to help found REANET Inc., a for-profit telecommunications company. It was called Tri-Corners Telecommunications Inc. at the time.

Empire also helped form REANET but is not named in the suit.

The lawsuit also claims La Plata Electric illegally formed a subsidiary, Western Energy Services of Durango Inc., an electrical facility construction company.

La Plata Electric’s attorneys filed a response last week to Bontrager’s motion for a summary judgment from District Judge David Dickinson. The response contends La Plata Electric lawfully formed and invested in REANET and Western Energy.

Stephens said Empire’s board of directors didn’t believe it would be able to garner the two-thirds support of the membership’s vote needed to make the consolidation happen.

He said that Empire is not concerned with La Plata’s ability to manage its cooperative.

"Generally there are no problems with the systems that would be consolidating," Stephens said. "It’s hard enough to get a vote to do that anyway in the most pristine of cooperative enviornments."

David Potter, La Plata Electric’s chief executive, said on Friday he understands Empire’s concern. "It’s not a good time to take the issue to members," Potter said. "Things need to settle down."

However, Potter is confident that La Plata will win the lawsuit.

Potter said the consolidation of the two electrical cooperatives has been a goal of La Plata Electric’s board of directors for the past five years as a defense against competition if deregulation of the electric industry occurs. "We don’t have the pressure of a bill passing on competition right now," Potter said. "We still have some time."

Already, La Plata Electric and Empire buy materials with joint orders to save money, and they have worked together to meet federal safety regulations, Potter said.

Several electrical cooperatives in Colorado are considering consolidation, but have not yet consolidated, Potter said.

Consolidation would create a larger economy of scale, allowing for better customer service, he said.

A feasibility study being conducted by the National Rural Electric Cooperative Association which began last year must be revised because of changing market conditions, Potter said.

Williams Field Services, a natural gas company and one of La Plata Electric’s major customers is renegotiating its service contract.

Also, the city of Monticello, Utah, served by Empire, wants to become a municipal utility and provide electricity.

If consolidation efforts are revived, the new utility would take on the debt from both companies — about $26.6 million for Empire and $57.8 million for La Plata Electric. Most of the debt is to the Rural Utilities Service, an agency of the U.S. Department of Agriculture, for loans used to build utility infrastructure, Stephens said. La Plata Electric has close to twice as many members as Empire, Stephens said, so the debt would be fairly distributed.

Potter said the consolidation would not result in any loss of jobs. If there are any personnel reductions, they would come through attrition, so when employees retire they would not be replaced, Potter said.

LPEA has 110 employees and Empire has 63. Empire Electric serves 15,000 customers in all of Montezuma and Dolores counties and parts of San Miguel County and San Juan County, Utah. La Plata Electric has 31,000 customers and serves all of La Plata and Archuleta counties and the southern portions of Hinsdale, San Juan and Mineral counties.