Tri-State Generation and Transmission Association Inc.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 11:34
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Tri-State is a taxable wholesale electric power generation and transmission cooperative operating on a not-for-profit basis. Tri-State was formed by its Utility Members for the purpose of providing wholesale power and transmission services to its Utility Members (which are distribution electric cooperatives and public power districts) for resale to their retail consumers. Utility Members serve large portions of Colorado, Nebraska, New Mexico and Wyoming. Tri-State also sells a portion of its generated power to other utilities pursuant to long-term contracts and short-term sale arrangements. Utility Members provide retail electric service to suburban and rural residences, farms and ranches, cities, towns and communities, as well as large and small businesses and industries.
Tri-State is owned entirely by its forty-two Members of which thirty-nine are Utility Members. Thirty-five of the Utility Members are not-for-profit, electric distribution cooperative associations. Four Utility Members are public power districts, which are political subdivisions of the State of Nebraska. Tri-State also has three Non-Utility Members. Tri-State is regulated as a public utility under Part II of the FPA.
Tri-State supplies and transmits its Utility Members' power requirements through a portfolio of resources, including generation and transmission facilities, long-term purchase contracts and short-term energy purchases. Tri-State owns, leases, has undivided interests in, or long-term purchase contracts with respect to various generating facilities. Tri-State's diverse generation portfolio has a maximum available power of 4,948 MWs, of which approximately 1,959 MWs comes from renewables.
During the nine months ended September 30, 2026, Tri-State's operating results benefited from continued Utility Member load growth, a 6.8 percent increase in the formulary rate charged to Utility Members, strong market demand for surplus energy sales and participation in wholesale energy markets, including the expansion of SPP's RTO to the Western Interconnection beginning April 1, 2026. Tri-State sold 13.7 million MWhs for the nine months ended September 30, 2026, of which 75.5 percent was to Utility Members. Total revenue from electric sales was $1.1 billion for the nine months ended September 30, 2026 of which 80.8 percent was from Utility Member sales. Non-member electric sales and transmission revenues benefited from higher bilateral and market activity. These increases in operating revenues were partially offset by higher purchased power and fuel costs and recognition of an estimated provision for transmission rate refunds associated with ongoing FERC proceedings regarding transmission rates of other transmission owners under SPP's OATT.
On April 1, 2026, LPEA withdrew from membership in Tri-State and paid its contract termination obligation. Consistent with prior Board actions regarding contract termination payments, a substantial portion of the withdrawal proceeds was deferred as regulatory liabilities for future rate stabilization and transmission credit obligations. Additionally, Tri-State executed a Membership Withdrawal Agreement with NRPPD in September 2026 and continues to evaluate the potential effects of withdrawal notices received from additional Nebraska and New Mexico Utility Members.
Tri-State continues to execute its long-term resource transition strategy while maintaining reliability and financial strength. FERC accepted Tri-State's High Impact Load Tariff, creating a framework to evaluate new high impact load opportunities, including data centers. Tri-State also continues to advance renewable and energy storage initiatives. Management believes its liquidity position, available credit facilities, commercial paper program, and anticipated future contract termination proceeds provide sufficient resources to fund operations, capital expenditures, and debt obligations.
Wholesale Electric Service Contracts
Tri-State's Bylaws require each Utility Member, unless otherwise specified in a written agreement or the terms of the Bylaws, to purchase from Tri-State power and energy as provided in the Utility Member's all-requirements wholesale electric service contract with Tri-State. Each contract obligates Tri-State to sell and deliver to the Utility Member, and the Utility Member to purchase and receive from Tri-State, all energy and capacity required for the operation of the Utility Member's system, as modified by two programs accepted by FERC (a self-supply percentage and the BYOR Program). See also "Item 1 - BUSINESS - MEMBERS" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
Thirty-two Utility Members have wholesale electric service contracts with an initial expiration date of December 31, 2066. Seven Utility Members have wholesale electric service contracts with an initial expiration date of December 31, 2050.
Member Withdrawals and Relationship with Members
Pursuant to Tri-State's Bylaws, a Member may only withdraw from membership in Tri-State upon compliance with such equitable terms and conditions as Tri-State's Board may prescribe provided, however, that no Member shall be permitted to withdraw until it has met all its contractual obligations to Tri-State. Tri-State's contract termination payment tariff on file with FERC as Rate Schedule No. 281 provides a process should a Utility Member elect to withdraw from membership in Tri-State and terminate its wholesale electric service contract. The tariff process includes requirements for a two-year notice and the payment to Tri-State of a contract termination payment. See also "Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
On April 1, 2026, LPEA withdrew from membership in Tri-State and pursuant to Tri-State's contract termination payment tariff and a membership withdrawal agreement, terminated its wholesale electric service contract with Tri-State. In accordance with the membership withdrawal agreement, LPEA paid Tri-State a final payment of $159.3 million, consisting of a total contract termination payment of $208.4 million, less a $49.1 million credit for the discounted value of LPEA's patronage capital in Tri-State. Of the total contract termination payment, $88.9 million was deferred as a regulatory liability for future transmission service as required by the contract termination payment tariff. The remaining $119.5 million membership withdrawal income was deferred as a regulatory liability for future rate stabilization. Tri-State also sold LPEA certain assets for $7.3 million that closed on April 24, 2026.
In December 2024, NRPPD, which is electrically served in the Eastern Interconnection, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with a January 1, 2027, withdrawal effective date. In September 2026, Tri-State filed with FERC a Membership Withdrawal Agreement containing the parties' agreement on terms of NRPPD's withdrawal. In reliance upon a July 2026 letter from Basin representing that neither NRPPD nor Tri-State owe Basin an exit fee or other payment as a result of NRPPD's withdrawal from Tri-State, the Membership Withdrawal Agreement includes an estimated final payment from Tri-State to NRPPD of approximately $4.1 million, reflecting payment for the discounted value of NRPPD's patronage capital net of estimated amounts owed by NRPPD to Tri-State for the purchase of certain assets and for Tri-State's costs incurred for NRPPD's previous attempt to withdraw from Tri-State in 2024. The final payment amount is subject to revision for final amounts, including if Basin provides new or additional information indicating a change to the amount Tri-State owes to Basin.
In November 2025, three Nebraska Utility Members provided Tri-State non-conditional notices to withdraw from membership in Tri-State, including CRPPD, which is electrically served in both the Eastern and Western Interconnections; PREMA, which is electrically served in the Eastern Interconnection; and RPPD, which is electrically served in the Western Interconnection, each with a December 1, 2027, withdrawal effective date. In March 2026, WBPPD, which is electrically served in both the Eastern and Western Interconnections, and Jemez, which is electrically served in the Western Interconnection, each provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with an April 1, 2028, withdrawal effective date. In May 2026, MECC, which is electrically served in the Eastern Interconnection, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with a June 1, 2028, withdrawal effective date.
Tri-State cannot predict if any of these seven Utility Members will actually withdraw from membership in Tri-State. These seven Utility Members comprised 10.4 percent of Tri-State's Utility Member revenue for the nine months ended September 30, 2026 and 8.7 percent of Tri-State's Utility Member revenue for the year ended December 31, 2025.
Certain elements of Tri-State's contract termination payment tariff remain subject to an ongoing proceeding at the United States Court of Appeals for the Tenth Circuit. See Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025 for further information.
Consistent with prior withdrawals of Utility Members, Tri-State anticipates that some or all of contract termination payments received may be deferred as regulatory liabilities, subject to Tri-State's Board's discretion, and the contract termination payments may be recognized as revenue in future periods to offset the revenue otherwise recoverable from Utility Members. See also "Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" and "RISK FACTORS - Members and Regulatory Risks" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
Recent Developments
In March 2026, Tri-State filed with FERC a new High Impact Load Tariff and pro forma agreement to create a repeatable process to address requests to serve high impact loads that have large load requirements, including data centers. In
August 2026, FERC accepted Tri-State's tariff and pro forma agreement. In September 2026, Tri-State commenced its first review cycle for proposed high impact load projects. Tri-State has received and is reviewing applications for seven projects with approximately five gigawatts of potential incremental load by 2034 under the high impact load cycle and associated BYOR projects under the BYOR Program. Results of Tri-State's evaluation processes, including screening for reliability, affordability, responsibility and transmission planning impacts, are expected in the first half of 2027. Tri-State cannot predict whether any proposed projects and resources will pass the evaluations, and if so, whether they will reach commercial operation.
In March 2025, Wyoming enacted House Bill 192, "Public utilities-wildfire mitigation and liability limits," which establishes liability and damages limitations for utilities that maintain Wildfire Mitigation Plans approved by the Wyoming Public Service Commission. Tri-State filed its Wildfire Mitigation Plan with the Wyoming Public Service Commission in March 2026, and the plan was approved in August 2026.
On September 25, 2026, Tri-State, the other joint owners, and SPP received an emergency order from the Department of Energy under Section 202(c) of the FPA directing that Craig Generating Station Unit 1 be available to operate through December 25, 2026, and for SPP to employ economic dispatch of Craig Generating Station Unit 1 to minimize costs to ratepayers.
Changing Environmental Regulations
Tri-State is subject to various federal, state and local laws, rules and regulations with regard to air quality, including greenhouse gases, water quality and other environmental matters. These environmental laws, rules and regulations are complex and change frequently.
For a discussion regarding potential effects on Tri-State's business from environmental regulations, see "Item 1 - BUSINESS - ENVIRONMENTAL REGULATION" and "Item 1 - RISK FACTORS" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025 and "Item 2- MANAGEMENT'S DISCUSSION AND ANALYSIS" in Tri-State's quarterly report on Form 10-Q for the quarter ended March 31, 2026.
Critical Accounting Policies
The preparation of Tri-State's financial statements in conformity with GAAP requires that its management make estimates and assumptions that affect the amounts reported in its consolidated financial statements. Tri-State based these estimates and assumptions on information available as of the date of the financial statements and they are not necessarily indicative of the results to be expected for the year. As of September 30, 2026, there were no material changes in Tri-State's critical accounting policies as disclosed in its annual report on Form 10-K for the year ended December 31, 2025.
Factors Affecting Results
Master Indenture
As of September 30, 2026, Tri-State had approximately $2.9 billion of secured indebtedness outstanding under its Master Indenture. Substantially all of Tri-State's tangible assets and certain of its intangible assets are pledged as collateral under its Master Indenture. Tri-State's Master Indenture requires Tri-State to establish rates annually that are reasonably expected to achieve a DSR of at least 1.10 on an annual basis and permits Tri-State to incur additional secured obligations as long as, after giving effect to the additional secured obligation, it will continue to meet the DSR requirement on both a historical and pro forma basis. Tri-State's Master Indenture also requires Tri-State to maintain an ECR of at least 18 percent at the end of each fiscal year. Pursuant to Tri-State's Master Indenture, the DSR and ECR are calculated based on unconsolidated Tri-State financials and calculated in accordance with the system of accounts proscribed by FERC.
Margins and Patronage Capital
Tri-State operates on a cooperative basis and, accordingly, seeks only to generate revenues sufficient to recover its cost of service and to generate margins sufficient to meet certain financial requirements and to establish reasonable reserves. Revenues in excess of current period costs in any year are designated as net margins in Tri-State's consolidated statements of operations. Net margins are treated as advances of capital by the Members and are allocated to its Utility Members on the basis of revenue from electricity purchases from Tri-State and to the Non-Utility Members as provided in their respective membership agreement.
Tri-State's Board Policy for Financial Goals and Capital Credits sets guidelines to achieve margins and retain patronage capital sufficient to maintain a sound financial position and to allow for the orderly retirement of capital credits
allocated to the Members. On a periodic basis, Tri-State's Board determines whether to retire patronage capital, and in what amounts, to its Members.
Tri-State's Board Policy for Financial Goals and Capital Credits includes three financial ratio goals for which Tri-State sets rates: (i) a minimum DSR of at least 1.15, (ii) a minimum ECR of at least 20 percent, and (iii) a minimum net margin attributable to Tri-State in each fiscal year of at least $20 million. Tri-State's Board Policy also provides that any extraordinary funds, such as contract termination payments, received by Tri-State will be recorded (a) in the year received to increase net margins, subject to loan agreement restrictions, (b) in the year received with the same amount of regulatory assets written off in the same fiscal year, resulting in no net change in net margins, or (c) deferred as a regulatory liability in the year received and recognized as revenue in future period or periods, with the oldest vintage year used first. Tri-State recognized $50.7 million of previously deferred membership withdrawal income during the nine months ended September 30, 2026.
Rates and Regulation
Tri-State's electric sales revenues are derived from wholesale electric service sales to the Utility Members and non-member purchasers. Revenues from power sales to the Utility Members are primarily from Tri-State's Class A wholesale rate schedule filed with FERC. Revenues from wholesale power sales to Tri-State's non-member purchasers are primarily pursuant to Tri-State's market-based rate authority.
Tri-State's Class A wholesale rate schedule (A-41) for power sales to its Utility Members on file with FERC is a postage stamp rate, with the same rate components for all Utility Members, and incorporates a formulary rate, which can be adjusted annually based on the budget approved by Tri-State's Board, and includes an annual true-up mechanism. The A-41 rate includes both energy-based and demand-based components. For further information, see "Item 1 - BUSINESS - RATE REGULATION" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
In September 2026, Tri-State's Board approved the 2027 budget, which is expected to result in a wholesale rate increase to the Utility Members of 6.5 percent for 2027.
Tri-State's Board may, from time to time, subject to FERC approval, create new regulatory assets or liabilities or modify the expected recovery period through rates of existing regulatory assets or liabilities.
Tax Status
Tri-State is a taxable cooperative subject to federal and state taxation. As a taxable electric cooperative, Tri-State is allowed a tax exclusion for margins allocated as patronage capital. Tri-State utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be determined based on the expected future income tax consequences of events that have been recognized in the consolidated financial statements. Tri-State and its subsidiaries use the flow-through method for recognizing deferred income taxes whereby changes in deferred tax assets or liabilities result in the establishment of a regulatory asset or liability, as approved by Tri-State's Board. A regulatory asset or liability associated with deferred income taxes generally represents the future increase or decrease in income taxes payable that will be settled or received through future rate revenues.
Results of Operations
General
Tri-State's electric sales revenues are derived from wholesale electric service sales to its Utility Members and non-member purchasers. See "Factors Affecting Results - Rates and Regulation" for a description of Tri-State's energy and demand rates to its Utility Members. Long-term contract sales to non-members generally include energy and demand components. Short-term sales to non-members are sold at market prices after consideration of incremental production costs. Demand billings to non-members are typically billed per kilowatt of capacity reserved or committed to that customer.
Weather has a significant effect on the peak demand and total usage of electricity and consequently, on revenues. Relatively higher summer or colder winter temperatures tend to increase the usage of electricity for heating, air conditioning and irrigation. Mild weather generally reduces the usage of electricity. The amount of precipitation during the growing season (generally May through September) impacts irrigation use. Other factors affecting the Utility Members' usage of electricity include:
•the amount, size and usage of machinery and electronic equipment;
•the expansion or contraction of operations among the Utility Members' commercial and industrial customers;
•the general growth in population; and
•economic conditions.
Other Impacts
Tri-State's ability to meet its Utility Members' power requirements and complete its capital projects is dependent on maintaining an efficient supply chain. The procurement and delivery of materials and equipment have been impacted by domestic and global supply chain disruptions. Tri-State is experiencing longer lead-times on procurement of certain materials and equipment. Supply chain inflation and tariffs have contributed to higher prices for materials and equipment. Tariffs are far reaching, widespread, and changing, making it difficult for Tri-State and its suppliers to plan for, avoid or mitigate the impacts of higher costs throughout the supply chain. Tri-State continues to monitor potential impacts to its operations and estimated capital expenditures and timing of projects related to inflationary pressures, tariffs, and supply chain disruptions.
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
Operating Revenues
Tri-State's operating revenues are primarily derived from power sales to its Utility Members and non-member purchasers. Other operating revenue consists primarily of transmission and lease revenue. The following is a comparison of Tri-State's operating revenues and energy sales in MWh by type of purchaser for the three months ended September 30, 2026 and 2025 (dollars in thousands):
| Three Months Ended September 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Utility Member electric sales | $ | 330,210 | $ | 306,568 | $ | 23,642 | 7.7 | % | |||||||||||||||
| Non-member electric sales | 92,553 | 54,489 | 38,064 | 69.9 | % | ||||||||||||||||||
| Rate stabilization | 16,491 | 57,343 | (40,852) | (71.2) | % | ||||||||||||||||||
| Provision for rate refunds | (28,320) | - | (28,320) | 100.0 | % | ||||||||||||||||||
| Other | 65,263 | 39,906 | 25,357 | 63.5 | % | ||||||||||||||||||
| Total operating revenues | $ | 476,197 | $ | 458,306 | $ | 17,891 | 3.9 | % | |||||||||||||||
| Energy sales (in MWh): | |||||||||||||||||||||||
| Utility Member electric sales | 3,897,984 | 3,873,290 | 24,694 | 0.6 | % | ||||||||||||||||||
| Non-member electric sales | 1,346,274 | 788,982 | 557,292 | 70.6 | % | ||||||||||||||||||
| 5,244,258 | 4,662,272 | 581,986 | 12.5 | % | |||||||||||||||||||
•Utility Member electric sales was higher during the three months ended September 30, 2026 compared to the same period in 2025 primarily due to a 7.0 percent increase in the average rates charged to Utility Members and higher energy sales to continuing Utility Members. Energy sales to continuing Utility Members resulted in an increase of $39.1 million or 218,279 MWhs for the three months ended September 30, 2026 compared to the same period in 2025. The favorable impact of the rate increase and higher continuing Utility Member load growth was partially offset by a loss of energy sales of $15.5 million or 193,585 MWhs to a former Utility Member.
•Non-member electric sales revenue increased primarily due to higher sales into wholesale energy markets, including the expansion of SPP's RTO to the Western Interconnection beginning April 1, 2026, and higher long-term sales. Wholesale energy market sales increased 392,005 MWhs for the three months ended September 30, 2026 compared to the same period in 2025. Long-term sales increased 164,175 MWhs to 622,546 MWhs for the three months ended September 30, 2026 compared to 458,371 MWhs for the same period in 2025.
•Tri-State recognized $16.5 million of previously deferred membership withdrawal income during the three months ended September 30, 2026 compared to $57.3 million of deferred membership withdrawal income being recognized during the same period in 2025 as part of its rate stabilization measures.
•Provision for rate refunds reduced revenues during the three months ended September 30, 2026 compared to the same period in 2025 due to the recording of estimated refunds for ongoing proceedings at FERC regarding inputs used in transmission rates of other transmission owners under SPP's OATT related to the expansion of SPP's RTO into the Western Interconnection.
•Other operating revenue increased primarily due to higher transmission revenue and an increase in lease revenue related to a tolling agreement for one combustion turbine unit that began in January 2026.
Operating Expenses
Tri-State's operating expenses are primarily comprised of the costs that Tri-State incurs to supply and transmit its Utility Members' power requirements through a portfolio of resources, including generation and transmission facilities, long-term purchase contracts and short-term energy purchases and the costs associated with any sales of power to non-members.
The following is a summary of the components of Tri-State's operating expenses for the three months ended September 30, 2026 and 2025 (dollars in thousands):
| Three Months Ended September 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power | $ | 165,790 | $ | 138,450 | $ | 27,340 | 19.7 | % | |||||||||||||||
| Fuel | 67,929 | 32,035 | 35,894 | 112.0 | % | ||||||||||||||||||
| Production | 43,764 | 44,842 | (1,078) | (2.4) | % | ||||||||||||||||||
| Transmission | 50,782 | 51,917 | (1,135) | (2.2) | % | ||||||||||||||||||
| General and administrative | 38,429 | 43,905 | (5,476) | (12.5) | % | ||||||||||||||||||
| Depreciation, amortization and depletion | 44,460 | 75,647 | (31,187) | (41.2) | % | ||||||||||||||||||
| Coal mining | (923) | 1,234 | (2,157) | (174.8) | % | ||||||||||||||||||
| Other | 2,507 | 2,432 | 75 | 3.1 | % | ||||||||||||||||||
| Total operating expenses | $ | 412,738 | $ | 390,462 | $ | 22,276 | 5.7 | % | |||||||||||||||
•Purchased power expense increased during the three months ended September 30, 2026 compared to the same period in 2025 primarily due to higher average costs of purchased power of 14.7 percent.
•Fuel expense increased during the three months ended September 30, 2026 compared to the same period in 2025 primarily due to an increase of 223,843 MWh in generation from Tri-State's natural gas-fired generating facilities.
•Depreciation, amortization and depletion expense decreased primarily due to Colowyo Mine related assets reaching the end of their useful lives which reduced depreciation, amortization and depletion expense by $28.4 million in the third quarter of 2026 compared to the same period in 2025.
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Operating Revenues
The following is a comparison of Tri-State's operating revenues and energy sales in MWh by type of purchaser for the nine months ended September 30, 2026 and 2025 (dollars in thousands):
| Nine Months Ended September 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Utility Member electric sales | $ | 861,595 | $ | 820,217 | $ | 41,378 | 5.0 | % | |||||||||||||||
| Non-member electric sales | 204,720 | 147,392 | 57,328 | 38.9 | % | ||||||||||||||||||
| Rate stabilization | 50,700 | 145,469 | (94,769) | (65.1) | % | ||||||||||||||||||
| Provision for rate refunds | (39,893) | 2,719 | (42,612) | 100.0 | % | ||||||||||||||||||
| Other | 170,528 | 107,836 | 62,692 | 58.1 | % | ||||||||||||||||||
| Total operating revenues | 1,247,650 | 1,223,633 | $ | 24,017 | 2.0 | % | |||||||||||||||||
| Energy sales (in MWh): | |||||||||||||||||||||||
| Utility Member electric sales | 10,308,457 | 10,484,083 | (175,626) | (1.7) | % | ||||||||||||||||||
| Non-member electric sales | 3,372,411 | 2,244,786 | 1,127,625 | 50.2 | % | ||||||||||||||||||
| 13,680,868 | 12,728,869 | 951,999 | 7.5 | % | |||||||||||||||||||
•Utility Member electric sales was higher during the nine months ended September 30, 2026 compared to the same period in 2025 primarily due to a 6.8 percent increase in the average rates charged to Utility Members and higher energy sales to continuing Utility Members. Energy sales to continuing Utility Members resulted in an increase of
$75.9 million or 283,224 MWhs for the nine months ended September 30, 2026 compared to the same period in 2025. The favorable impact of the rate increase and higher continuing Utility Member load growth was partially offset by a loss of energy sales of $34.5 million or 458,850 MWhs to former Utility Members.
•Non-member electric sales revenue increased primarily due to higher sales into wholesale energy markets and higher long-term sales. Wholesale energy market sales increased 678,172 MWhs for the nine months ended September 30, 2026 compared to the same period in 2025. Long-term sales increased 483,296 MWhs to 1,942,422 MWhs for the nine months ended September 30, 2026 compared to the same period in 2025.
•Tri-State recognized $50.7 million of deferred membership withdrawal income during the nine months ended September 30, 2026 compared to $145.5 million of deferred membership withdrawal during the same period in 2025 as part of its rate stabilization measures.
•Provision for rate refunds reduced revenues during the nine months ended September 30, 2026 compared to the same period in 2025 due to the recording of estimated refunds for ongoing proceedings at FERC regarding inputs used in transmission rates of other transmission owners under SPP's OATT related to the expansion of SPP's RTO into the Western Interconnection.
•Other operating revenue increased primarily due to higher transmission revenue and an increase in lease revenue related to a tolling agreement for one combustion turbine unit that began in January 2026.
Operating Expenses
The following is a summary of the components of Tri-State's operating expenses for the nine months ended September 30, 2026 and 2025 (dollars in thousands):
| Nine Months Ended September 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power | 401,202 | 345,999 | $ | 55,203 | 16.0 | % | |||||||||||||||||
| Fuel | 140,375 | 120,378 | 19,997 | 16.6 | % | ||||||||||||||||||
| Production | 138,008 | 119,022 | 18,986 | 16.0 | % | ||||||||||||||||||
| Transmission | 141,050 | 137,876 | 3,174 | 2.3 | % | ||||||||||||||||||
| General and administrative | 125,605 | 123,183 | 2,422 | 2.0 | % | ||||||||||||||||||
| Depreciation, amortization and depletion | 141,196 | 219,582 | (78,386) | (35.7) | % | ||||||||||||||||||
| Coal mining | 9,225 | 8,406 | 819 | 9.7 | % | ||||||||||||||||||
| Other | 8,377 | 7,474 | 903 | 12.1 | % | ||||||||||||||||||
| Total operating expenses | $ | 1,105,038 | $ | 1,081,920 | $ | 23,118 | 2.1 | % | |||||||||||||||
•Purchased power expense increased during the nine months ended September 30, 2026 compared to the same period in 2025 primarily due to higher average costs of 11.5 percent and higher energy purchases of 428,241 MWh, or 5.4 percent.
•Fuel expense increased during the nine months ended September 30, 2026 compared to the same period in 2025 primarily due to higher average fuel costs of 10.2 percent and a different mix of generating resources used to serve load. Generation from Tri-State's coal fired generating facilities decreased 320,184 MWhs for the nine months ended September 30, 2026, while generation from natural gas-fired and internal combustion facilities increased 246,430 MWhs. These changes resulted in increased fuel expense for the nine months ended September 30, 2026 compared to the same period in 2025.
•Production expense increased during the nine months ended September 30, 2026 compared to the same period in 2025 primarily due to increased maintenance expenses at Tri-State's coal-fired generating facilities.
•Depreciation, amortization and depletion expense decreased primarily due to Colowyo Mine related assets reaching the end of their useful lives which reduced depreciation, amortization and depletion expense by $79.5 million for the nine months ended September 30, 2026 compared to the same period in 2025.
Financial Condition as of September 30, 2026 Compared to December 31, 2025
The principal changes in Tri-State's financial condition from December 31, 2025 to September 30, 2026 were due to increases and decreases in the following:
Assets
•Construction work in progress increased $53.6 million, or 37.2 percent, to $197.5 million as of September 30, 2026
compared to $143.9 million as of December 31, 2025. The increase was primarily due to capital expenditures for various transmission and generation projects.
•Restricted cash and investments-current increased $16.8 million to $17.9 million as of September 30, 2026 compared to $1.1 million as of December 31, 2025. The increase was primarily due to $16.8 million deposited with Tri-State's Master Indenture trustee in September 2026 in advance of its October 1, 2026 debt service payments for the 2014 private placement and Moffat County Pollution Control Bonds. In accordance with Tri-State's Master Indenture, Tri-State is required to fund the account one day prior to debt service payments.
Liabilities
•Utility Member advances increased $9.6 million, or 92.3 percent, to $20.0 million as of September 30, 2026 compared to $10.4 million as of December 31, 2025. Utility Member advances represents the principal amount of funds received from Utility Members for prepayment of their monthly power bills. The balance varies depending on the amount Utility Members elect to apply to their power bill each month and or to roll to a future month. Utility Member prepaid balances earn a stated rate of interest.
•Accounts payable increased $72.5 million, or 55.9 percent, to $202.0 million as of September 30, 2026 compared to $129.5 million as of December 31, 2025. The increase was primarily due to a $40.6 million increase in the provision for rate refunds related to accruing for an estimated refund of SPP transmission revenue, a $6.1 million increase in transmission credits payable to former Utility Members, and timing of payment of trade and other payables.
•Short-term borrowings increased $181.8 million to $181.9 million as of September 30, 2026 compared to $0.1 million as of December 31, 2025. The increase was due to issuance of commercial paper to support capital expenditures and to repay the $160 million balance on Tri-State's 2022 Revolving Credit Agreement.
•Accrued interest increased $19.3 million, or 85.2 percent, to $41.9 million as of September 30, 2026 compared to $22.6 million as of December 31, 2025 due to timing of interest payments.
•Regulatory liabilities increased $152.3 million, or 42.5 percent, to $510.7 million as of September 30, 2026 compared to $358.4 million as of December 31, 2025. The increase was primarily due to LPEA's withdrawal from membership in Tri-State and the termination of its wholesale electric service contract with Tri-State. Regulatory liabilities was also impacted by the recognition of deferred membership withdrawal income of $50.7 million and amortization of transmission credit from former Utility Members of $7.3 million during the nine months ended September 30, 2026.
Liquidity and Capital Resources
Tri-State finances its operations, working capital needs and capital expenditures from operating revenues and issuance of short-term and long-term borrowings. As of September 30, 2026, Tri-State had $218.7 million in cash and cash equivalents. Tri-State's committed credit arrangement as of September 30, 2026 is as follows (dollars in thousands):
|
Authorized Amount |
Available September 30, 2026 |
|||||||||||||
| 2026 Credit Agreement | $ | 650,000 | $ | 462,843 | (1) | |||||||||
(1)The portion of this facility that was unavailable as of September 30, 2026 was $187 million which was dedicated to support outstanding commercial paper and letters of credit.
Tri-State has a secured 2026 Revolving Credit Agreement with aggregate commitments of $650 million. The 2026 Credit Agreement includes swingline loan and letter of credit sublimits of $150 million each, of which $150 million of the swingline loan sublimit and $145 million of the letter of credit sublimit remained available as of September 30, 2026. As of September 30, 2026, Tri-State had $462.8 million of availability under the 2026 Revolving Credit Agreement.
The 2026 Credit Agreement is secured under Tri-State's Master Indenture. Funds advanced under the 2026 Credit Agreement bear interest either at Term SOFR rates or alternate base rates, at Tri-State's option. The Term SOFR rate is the Term SOFR rate for the term of the advance plus a margin (1.250 percent as of September 30, 2026) based on Tri-State's credit ratings. Base rate loans bear interest at the alternate base rate plus a margin (0.250 percent as of September 30, 2026) based on Tri-State's credit ratings. The alternate base rate is the highest of (a) the federal funds rate plus 0.50 percent, (b) the prime rate, and (c) the Term SOFR rate plus 1.00 percent.
Tri-State has a commercial paper program under which it issues unsecured commercial paper. Under Tri-State's commercial paper program, the commercial paper aggregate amounts outstanding shall not exceed the lesser of $600 million or the amount available under the 2026 Credit Agreement, thereby providing 100 percent dedicated support for any commercial paper outstanding. As of September 30, 2026, Tri-State had $182 million commercial paper outstanding.
Tri-State has a secured Renewable Revolving Credit Agreement with CoBank as lead arranger and CFC as administrative agent, in the amount of $250 million. The proceeds from this facility are required to be used for eligible green investments, as defined in the Renewable Revolving Credit Agreement. As of September 30, 2026, Tri-State had borrowed $189 million in adjusted Term SOFR rate loans under such facility and $61 million of availability remained. Tri-State is required to use any investment tax credits received from the green investments to pay down amounts outstanding on this facility.
The Renewable Revolving Credit Agreement is secured under the Master Indenture and has a maturity date of June 18, 2030. The adjusted Term SOFR rate is the Term SOFR rate for the term of the advance plus 0.10 percent plus a margin (1.200 percent as of September 30, 2026) based on Tri-State's credit ratings. Base rate loans bear interest at the alternate base rate plus a margin (0.125 percent as of September 30, 2026) based on Tri-State's credit ratings. The alternate base rate is the highest of (a) the federal funds rate plus 0.50 percent, (b) the prime rate, and (c) the adjusted Term SOFR rate plus 1.00 percent.
The 2026 Credit Agreement and Renewable Revolving Credit Agreement contain customary representations, warranties, covenants, events of default and acceleration, including financial DSR and ECR requirements in line with the covenants contained in the Master Indenture. A violation of these covenants would result in the inability to borrow under the facilities.
In September 2023, Tri-State submitted a Letter of Interest to apply for a funding award of low-cost loans and grants through the New ERA Program, a $9.7 billion USDA program funded by the IRA. Tri-State's portfolio proposed in its Letter of Interest was the result of resource and financial modeling performed in connection with Tri-State's preferred IRA scenario as part of Phase I of its 2023 ERP. Tri-State has signed award commitment letters from USDA related to low-cost loans and grants through the New ERA Program. There is no guarantee as to the scope, amounts of funds, and the timing of such disbursements, if any.
Tri-State may, from time to time, raise additional capital through debt financing or retire outstanding debt through cash purchases. Such financing or purchases, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Tri-State is mindful of its debt and its maturities, and continually evaluates options to ensure that the balance sheet and capital structure are aligned with the business and the long-term health of the cooperative.
Tri-State believes it has sufficient liquidity to fund operations and capital financing needs from projected cash on hand, the commercial paper program, the 2026 Credit Agreement, and expected contract termination payments from withdrawing Utility Members.
Cash Flow
Cash is provided by operating activities and issuance of debt. Capital expenditures comprise a significant use of cash.
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Operating activities. Net cash provided by operating activities was $333.3 million for the nine months ended September 30, 2026 compared to $150.7 million for the same period in 2025, an increase in net cash provided by operating activities of $182.6 million. The increase in net cash provided by operating activities was due to LPEA's final payment of $159.3 million. Additionally, cash provided by operating activities was impacted by the timing of cash collected from Utility Member and nonmember accounts receivable and the payment of trade payables and accrued expenses.
Investing activities. Net cash used in investing activities was $164.0 million for the nine months ended September 30, 2026 compared to $281.9 million for the same period in 2025, a decrease in net cash used in investing activities of $117.9 million. The decrease in net cash used in investing activities was due to lower capital expenditures in the current year compared to prior year. The higher capital expenditures during 2025 were primarily related to construction of the Axial Basin and Dolores Canyon solar facilities. Capital expenditures during the nine months ended September 30, 2026 related to various transmission and generation projects.
Financing activities. Net cash used in financing activities was $112.0 million for the nine months ended September 30, 2026 compared to net cash provided by financing activities of $119.4 million for the same period in 2025, a decrease in net cash provided by financing activities of $231.4 million. The decrease was primarily due to payments of long-term debt of $257.2 million including $160 million for Tri-State's 2022 Revolving Credit Agreement and retirement of patronage capital of $49.1 million related to LPEA's withdrawal from membership. These decreases were partially offset by the issuance of
commercial paper to support capital expenditures and to repay the $160 million balance on Tri-State's 2022 Revolving Credit Agreement.
Capital Expenditures
Tri-State forecasts capital expenditures annually as part of its long-term planning, and its annual capital budget is approved by Tri-State's Board and long-term capital plan is reviewed by the Board. Tri-State regularly reviews these projections to update calculations to reflect changes in its future plans, facility closures, facility costs, market factors, and other items affecting its forecasts. In the years 2027 through 2029, Tri-State's Board approved capital plan forecasts investments of approximately $1.21 billion in new facilities and upgrades to existing facilities. Tri-State estimates total 2026 capital expenditures to be between $250 million and $270 million.
Tri-State's capital expenditures depend on a variety of factors, including assumptions related to Tri-State's 2023 ERP, Utility Member load growth, Utility Member withdrawals, BYOR Program, availability of necessary permits, regulatory changes, environmental requirements, inflation, tariffs, construction delays and costs, receipt of federal funding, and ability to access capital in credit markets. Thus, actual capital expenditures may vary significantly from Tri-State's capital budget forecasts.
Rating Triggers
Tri-State's current senior secured ratings are "Baa2 (stable outlook)" by Moody's, "BBB (stable outlook)" by S&P, and "BBB+ (stable outlook)" by Fitch. Tri-State's current short-term ratings are "A-2" by S&P and "F1" by Fitch.
Tri-State's 2026 Credit Agreement includes a pricing grid related to the Term SOFR spread, commitment fee and letter of credit fees due under the facility. Tri-State's Renewable Revolving Credit Agreement includes a pricing grid related to the Term SOFR spread and commitment fee. Certain of Tri-State's other loan agreements also include a pricing grid related to the Term SOFR spread. A downgrade of Tri-State's senior secured ratings could result in an increase in each of these pricing components. Tri-State does not believe that any such increase would have a material adverse effect on the financial condition or future results of operations. However, a downgrade of Tri-State's senior secured ratings could impact the costs associated with incurring additional debt and could make accessing the debt markets on favorable terms more difficult.
Tri-State currently has contracts and other obligations that require adequate assurance of performance. These include organized markets contracts, power contracts, natural gas supply contracts and financial risk management contracts. Some of the contracts are directly tied to Tri-State maintaining investment grade credit ratings by S&P and Moody's. Tri-State may enter into additional contracts which may contain adequate assurance requirements. If Tri-State is required to provide adequate assurances, it may impact Tri-State's liquidity and the amount of adequate assurance required will be dependent on Tri-State's credit ratings.
Tri-State Generation and Transmission Association Inc. published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 17:34 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]