NEW YORK - Standard & Poor's Ratings Services said today that the Western Area Power Administration's (WAPA) announcement that it is cutting by nearly 25% the power it sells from a series of hydro power plants called the Salt Lake City Area Integrated Projects (SLIP) due to an extended drought in the region will not affect the ratings of Tri-State Generation & Transmission Association (Tri-State; A/Stable/A-1), which has a 40% share of the project's output.
Tri-State has been in active discussions with WAPA for more than two years now to determine the reduction in firm power delivered, which was necessitated by a six-year drought that has reduced the Lake Powell reservoir down to 42% of its capacity. As a result, WAPA now determines the amount of firm power available based on the long-term median water level, rather than at a 90% exceedence level that it established in 1989. The reductions will peak in fiscal 2005 and decrease each year so as to reach the long-term median level by fiscal 2009, during which time the drought conditions should have moderated. Tri-State's contract extends through 2024 and WAPA power constitutes about 17% of Tri-State's total resources. The expected reduction in supply has already been factored into Tri-State's rates and financial forecast.