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Tri-State’s Credit Rating Downgraded

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Jemez linemen (copy)

Jemez Mountains Electric Cooperative line workers repair an electric line, June 21, 2017, near the intersection of Calle Espinoza and Hunter Street.

Due to frustrated members and high rates, Standard and Poor’s Global Ratings has lowered Tri-State Generation and Transmission Association’s credit rating from an A to an A-.

Tri-State is an electrical cooperative formed of over 40 other electrical cooperatives in Wyoming, Nebraska, Colorado and New Mexico, to which Tri-State provides electricity. Jemez Mountains Electric Cooperative is one of its members.

The downgrade comes after one member, the Delta-Montrose Electric Association, announced its departure from Tri-State in July and two others, La Plata Electric Association and United Power, filed complaints in November with the Colorado Public Utilities Commission to determine how much it would cost for them to exit their contracts with Tri-State.

“The downgrade and negative outlook reflect regulatory filings to the Colorado Public Utilities Commission made by two of Tri-State’s member distribution cooperatives,” Standard and Poor’s credit analyst David Bodek in a Nov. 19 press release. “The two cooperatives are requesting that the regulator establish just and reasonable exit fees for the applicants.”

The announcement also lists a few other reasons for the lowering of the rating, including “member friction” and the fact that Tri-State’s average member rates are 20 percent higher than state averages, which may cause members to seek other arrangements.

An A- is still an investment-grade rating, as Tri-State CEO Duane Highley noted in a press release about the downgrade. According to Standard and Poor’s, it means that Tri-State is still able to meet its financial commitments, but that it is “somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions” than organizations with higher ratings.

One question that arises from the departure of Delta-Montrose and the filings by La Plata and United Power is how Tri-State would recover lost revenue, were La Plata and United Power to follow Delta-Montrose.

“We believe the imminent departure of one member and applications by two other members to the Colorado commission to establish an exit fee, expose the utility to the potential loss of 25 percent of its members’ energy sales, which could erode the revenue stream,” the announcement states.

Tri-State Public Relations Specialist Mark Stutz said Tri-State will not increase rates over the course of the coming year and called questions about whether the cooperative will raise rates “a bit premature,” seeing as La Plata and United Power have not yet announced any departures.

When asked whether there has been any talk of Jemez Mountains Electric Cooperative needing to raise rates due to Tri-State’s potential loss of revenue, Spokesperson Tabitha Clay said,  “Absolutely not. At no point has that been a discussion.”

(1) comment

losneals

Dave Neal here from JMEC District 6. It is really discouraging to me that it appears JMEC is not willing to at least consider the possibility of investigating why other distribution electric cooperatives in New Mexico and Colorado are terminating their contract with Tri-State. With Tri-State rates coming under the control of our Federal government, i.e., FERC, it seems to me that ability of member/owners to have any say in our rates will be diminished.

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