PRESENTATION OF FINANCIAL INFORMATION

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

PRESENTATION OF FINANCIAL INFORMATION

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, 2023 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, 2024, results of operations for the three and nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024 and 2023 are not necessarily indicative of the results that may be expected for an entire year or any other period.

Basis of Consolidation

We are a taxable wholesale electric power generation and transmission cooperative operating on a not-for-profit basis serving large portions of Colorado, Nebraska, New Mexico and Wyoming. We were incorporated under the laws of the State of Colorado in 1952. We have three classes of membership: Class A - utility full requirements members, Class B - utility partial requirements members, and non-utility members. We have forty-one electric distribution member systems who are Class A members to which we provided electric power pursuant to long-term wholesale electric service contracts. We currently have no Class B members. We have three non-utility members (“Non-Utility Members”). Our Class A members and any Class B members are collectively referred to as our “Utility Members.” Our Class A members, any Class B members, and Non-Utility Members are collectively referred to as our “Members.” Our rates are subject to regulation by the Federal Energy Regulatory Commission (“FERC”). On December 23, 2019, our stated rate (A-40) to our Class A members was filed at FERC and was accepted by FERC on March 20, 2020. On August 2, 2021, FERC approved our settlement agreement related to our stated rate to our Class A members. On July 30, 2024, FERC issued an order accepting our A-41 formula rate to our Class A members, effective August 1, 2024, subject to refund. FERC further set our A-41 rate filing for settlement and hearing procedures and confirmed our accounting treatment, including amortization, and creation of regulatory assets for Escalante Generating Station, Rifle Generating Station, Craig Generating Station Units 2 and 3 and the New Horizon Mine environmental obligation. However, FERC did not authorize us to recover the regulatory assets that represent acquisition costs/goodwill for J.M Shafer Generating Station and Colowyo Coal Company LP (“Colowyo Coal”). See Note 2 - Accounting for Rate Regulation. These costs were on our books prior to us becoming subject to FERC's jurisdiction. FERC stated in its order accepting our A-41 rate schedule that we did not request express authorization to recover acquisition costs including goodwill in our rates. Therefore, we wrote off the J.M Shafer Generating Station and Colowyo Coal acquisition costs/goodwill in September 2024 which resulted in the recognition of expense of $68.2 million. We recognized deferred membership withdrawal income in September 2024 as part of our rate stabilization measures, therefore, the write off of the J.M. Shafer Generating Station and Colowyo acquisition costs/goodwill resulted in no impact to our Utility Members' wholesale rate.

On May 1, 2024, United Power, Inc. (“United Power") withdrew from membership in us and terminated their wholesale electric service contract with us pursuant to Rate Schedule 281 (contract termination payment methodology) on-file with FERC and a Membership Withdrawal Agreement with United Power. United Power’s contract termination payment amount was $709.4 million. United Power paid us an exit fee in cash of $627.2 million, after a regulatory liabilities credit and United Power relinquishing their right to any patronage capital in us resulting in a discounted patronage capital credit of $82.2 million. Such amounts remain subject to true up in accordance with Rate Schedule 281 and United Power's Membership Withdrawal Agreement. Of the total contract termination payment, $530.1 million was membership withdrawal that was deferred as a regulatory liability. The remaining $179.3 million of United Power's contract termination payment related to a transmission credit for the portion of transmission debt allocated to United Power that was deferred as required by FERC's order on our Rate Schedule 281.

We comply with the Uniform System of Accounts as prescribed by FERC. In conformity with GAAP, the accounting policies and practices applied by us in the determination of rates are also employed for financial reporting purposes.

The accompanying financial statements reflect the consolidated 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 17 – Variable Interest

Entities. Our consolidated financial statements also include our undivided interests in jointly owned facilities. We have eliminated all intercompany balances and transactions in consolidation.

Accounting Pronouncement - Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The purpose of ASU 2023-09 is to enhance the transparency and decision usefulness of income tax disclosures by providing additional information related to the following:

(1) Rate reconciliation: ASU 2023-09 requires a tabular rate reconciliation using both percentages and dollar amounts of the reported income tax expense (or benefit) from continuing operations to the product of income (or loss) from continuing operating before income taxes and the applicable statutory federal income tax rate of the county of domicile using specific categories. The following specific categories are required to be disclosed in the rate reconciliation; state and local income tax (qualitative disclosure required for states that make up over 50% of this category), foreign tax effect, effect of changes in tax laws or rates enacted in the current period, effect of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable or nondeductible items, changes in unrecognized tax benefits, and any other item that meets the 5 percent threshold.

(2) Income taxes paid: ASU 2023-09 requires all reporting entities to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions. It also requires additional disaggregation of income taxes paid to an individual jurisdiction equal to or greater than 5 percent of total income taxes paid (net of refunds). Entities are required to disclose pre-tax income (or loss) from continuing operations disaggregated by domestic and foreign along with income tax expense (or benefit) disaggregated by federal, state, and foreign components.

ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, with early adoption and retrospective or prospective application permitted. We have evaluated the impact of ASU 2023-09 and believe that the adoption of this update will not have a material impact on our consolidated financial statement disclosures.