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Fitch and Moody’s downgrade wholesale provider’s rating. They also citing revenue generation problems


by Allen Best

Fitch Ratings, a credit ratings and analysis agency, was quick to lower the credit rating for Tri-State Generation and Transmission after directors of Durango-based La Plata Electric Association on March voted to leave.

The new rating is BBB+, down from the former stable A-. This puts Tri-State in a negative outlook.

“While disappointing, it is not unexpected,” Duane Highley, the chief executive, wrote in a note three days later to the wholesale provider’s 42 members.

Fitch also cited Tri-State’s problems at the Federal Energy Regulatory Commission, or FERC.

Highley wrote in the e-mail that based on questions and conversations with Moody’s, another credit rating agency, Tri-State also expected Moody’s to downgrade its rating.

That downgrade — from A3 to Baa1 — on two sets of bonds was announced by Moody’s on April 1. Moody’s said the rating affected $1.6 billion of debt.

S&P Global Ratings said it will not downgrade Tri-State’s ratings in wake of the La Plata decision.

“Tri-State’s ratings remain investment grade with all three agencies, so this rating action will not have an immediate impact on our ability to operate the business or raise the capital we need to move forward implementing our resource plan,” Highley wrote.

Driving Tri-State’s ratings downward, according to Highley’s message, were:

  • continued regulatory and financial risk resulting from FERC rulings, including the rejection of a proposed 6% rate increase and the resulting under-recovery of costs and financial performance in the absence of a new rate; and
  • member unrest and lack of a final ruling from FERC on the contract termination payment formula for those leaving.

In its announcement, S&P said it believes that La Plata’s notice “does not immediately affect the rating on Tri-State (BBB/Negative). We base our opinion on our expectation that FERC will establish contract termination payments from La Plata and other departing members that shield remaining Tri-State members from shouldering the costs Tri-State incurred on behalf of the departing members.”

In its announcement, Moody’s cited the FERC rejection of Tri-States formula rate request, “preventing Tri-State to recover ongoing higher fuel and purchased power costs on a timely basis, thereby straining the near-term cash flow.”

Moody’s also cited the “ongoing challenges faced by Tri-State in managing through member discontent.”

Tri-State is one of the largest generation and transmission cooperatives in the United State. It provides power supply to 42 utility members, including 17 member cooperatives in Colorado.

Two members – Brighton-based United Power, which alone was responsible for 19.65% of Tri-State’s member revenues in 2023, and Nebraska’s Northwest Rural Public Power District — are leaving effective May 1.

Granby-based Mountain Parks Electric will be leaving Feb. 1, 2025. La Plata will leave April 1, 2026.

Two members have left since 2016: Kit Carson Electric Cooperative and Delta-Montrose Electric Association. Together, they represented 4.9% of total member sales. United Power alone represents nearly 20% and La Plata 5.7%.

Working in Tri-State’s favor, said Moody’s was its relatively large size and the revenue diversification from the 38 members that will remain after two years. It said that Tri-State expects to receive $709 million from United Power and $41 million from the Nebraska power provider upon their exits in May.

In his message, Highley said that Tri-State has already taken steps to improve its credit ratings with its plans to file within FERC a new proposal for a rate increase within the next few months.

Despite the credit down-grade, the latest of several in the last three years, Highley strived to present a forward-looking face.

“Together we have created tremendous momentum toward an energy transition that will provide long-term reliability and rate competitiveness, while reducing emissions and increasing flexibility through the Bring Your Own Resource Program to provide industry leading optionality for members.”

Tri-State directors and management in 2019 chose to seek regulation by FERC, bypassing the Colorado Public Utility Commission in rates and determination of exit fees for United Power and La Plata. The jury remains out whether that decision has cost Tri-State and its remaining members more in the long term than any short-term benefits that may have accrued.


This story was revised on April 2 reflect the announcement of Moody’s that it was downgrading the rating for Tri-State debgt.



Allen Best
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