NOTE 1 – PRESENTATION OF FINANCIAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2016 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. Our consolidated financial position as of September 30, 2017, results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016 are not necessarily indicative of the results that may be expected for an entire year or any other period.

Basis of Consolidation

Our consolidated financial statements include the accounts of Tri-State Generation and Transmission Association, Inc. (“Tri-State”, “we”, “our”, “us” or “the Association”), our wholly-owned and majority-owned subsidiaries, and certain variable interest entities for which we or our subsidiaries are the primary beneficiaries. See Note 12 – Variable Interest Entities. Our consolidated financial statements also include our undivided interests in jointly owned facilities. All significant intercompany balances and transactions have been eliminated in consolidation.

Jointly Owned Facilities

We own undivided interests in three jointly owned generation facilities that are operated by the operating agent of each facility under joint facility ownership agreements with other utilities as tenants in common. These projects include the Yampa Project (operated by us), the Missouri Basin Power Project (“MBPP”) (operated by Basin Electric Power Cooperative (“Basin”)) and the San Juan Project (operated by Public Service Company of New Mexico). Each participant in these agreements receives a portion of the total output of the generation facilities, which approximates its percentage ownership. Each participant provides its own financing for its share of each facility and accounts for its share of the cost of each facility. The operating agent for each of these projects allocates the fuel and operating expenses to each participant based upon its share of the use of the facility. Therefore, our share of the plant asset cost, interest, depreciation and other operating expenses is included in our consolidated financial statements.

Our share in each jointly owned facility is as follows as of September 30, 2017 (dollars in thousands):


			Electric				Construction
	Tri-State		Plant in		Accumulated		Work In
	Share		Service		Depreciation		Progress
Yampa Project - Craig Generating Station Units 1 and 2	24.00	%	$	349,986	$	236,482	$	48,627
MBPP - Laramie River Station	24.13	%		413,234		298,440		24,154
San Juan Project – San Juan Unit 3	8.20	%		82,688		79,898		—
Total			$	845,908	$	614,820	$	72,781

Depreciation Rates

Effective January 1, 2017, we adopted depreciation rates that reflect rates determined in a depreciation rate study for our transmission plant and most of our general plant. We expect that the new rates will result in a reduction in 2017 transmission and general plant depreciation expense of approximately $20.0 million. A depreciation rate study was completed in 2017 for our generation plant and these rates were adopted beginning July 1, 2017. We expect that the new rates will result in an increase in 2017 generation plant depreciation expense of approximately $0.7 million.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the 2017 presentation.