LIC-03-0040, 2002 Annual Financial Report

2002 Annual Financial Report

ML031010415
Person / Time
Site:	Fort Calhoun
Issue date:	03/28/2003
From:	Ridenoure R Omaha Public Power District
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
LIC-03-0040
Download: ML031010415 (41)

Text

Omaha Public Power District 444 South 16th Street Mall Omnaha NE 68102-2247 March 28, 2003 LIC-03-0040 U. S. Nuclear Regulatory Commission ATTN.: Document Control Desk Washington, DC 20555

Reference:

Docket No. 50-285

SUBJECT:

2002 Annual Financial Report In accordance with 10 CFR 50.71 (b), enclosed please find one copy of the Omaha Public Power District's 2002 Annual Report.

If you should have any questions, please contact Dr. Richard Jaworski at (402) 533-6833. No commitments are made to the NRC in this letter.

Sincerely,

.T.Rdenor Divisin Mnager uclelr 0 erations RTR/IrI Enc osure: Omaha Public Power District's 2002 Annual Report.

c: E. W. Merschoff, NRC Regional Administrator, Region IV A. B. Wang, NRC Project Manager J. G. Kramer, NRC Senior Resident Inspector Winston & Strawn Employment with Equal Opportunity i- O(Z)q-4171

co' OPPD 2002 Annual Report Executive Offices Paying Agents Minibond Administration Energy Plaza Bank One Trust Conmpany, Oinama Public Power District 444 Soutlh 16th Street Mall NationalAssociation Finance & Capital Management Onmala, NE 68102-2247 Chicago, Illinois Departnent New York, Nev York Trustee General Counsel Bank One Tnist Comnpany, Wells Fargo Bank Nebraska, N.A. Fraser,Stryker, AMeusey, Olson, Boyer &

NationalAssociation Omnalha, Nebraska Bloch, P.C. ,

Chicago, Illinois Omnala, Nebraska OPPo Corporate Officers Geoffrey C. Hall Charles N. Eldred Roger L. Sorenson Clainnanof the Board Vice President, Vice President '

Chief FinancialOfficer Anne L. McGuire Dale F. Widoe Assistant Treasurer Vice Chairof the Board Vice President Assistant Secretary Charles P. Moriarty Del D. Weber TimothyJ. Burke Treasurer Senior Financial Officer Vice President Assistant Treasurer Kirk E. Brumbaugh 'V. Gary Gates Assistant Secretary Secretary Vice President Fred M. Petersen Adrian J. Minks President, Vice President Chief Executive Officer COVER:

As a public utility, our customers are our owners, and we like taking good care of them. On the cover, apprentice line technician Tony Crooks, left, and line technicians Tim Potts, center, and Mark Gorseth are amnong those who ensure customers have electricity when they need it.

t A- : tb

• = _t- ad. * -.. a '.I h I.. - I-,; I cost electricity production, and ranked Fort Calhoun Station nationally among the nuclear power plants with the lowest non-fuel operation and maintenance costs.

OPPD power plants and transmission and distribution systems were strongly tested last summer and performed well. OPPD met record customer demand of 2,037 megawatts on July 19, 2002. And, OPPD continued to meet customer requirements while complying with environmental and regulatory standards.

We realize that the electric industry continues to change in many ways that were unimaginable in the past.

At OPPD, we view this change as a great opportunity, and we will continue to seek new technologies and business opportunities that benefit our customer-owners.

For example, in the evolving field of distributed generation, we installed a 60-kilowatt microturbine at our office in Blair, Nebraska, working in collaboration with the Electric Power Research Institute. Over the past several years, OPPD has been testing various technologies in this growing field, including a 4.8-kilowatt photovoltaic system at one of our major service centers and a 200-kilowatt fuel cell at Omaha's world-famous Henry Doorly Zoo. We don't know to what extent and into which market segments distributed generation will come to fruition, but we will be prepared, and we will understand how these technologies work with our systems.

In 2002, OPPD expanded its Green Power Program after placing a landfill-gas generating plant into service.

This unit isthe largest single generator of renewable energy in the state of Nebraska. Ithad produced almost 20 million kilowatt-hours of energy by the end of 2002, while operating at higher than 98 percent of capacity.

The Environmental Protection Agency recognized OPPD as an "Energy Partner of the Year" for its renewable energy efforts related to the new Elk City Station.

In addition, our joint venture with Valmont Industries into wind power completed its initial phase. We partnered with this international company to test a unique tower design intended to make wind power more affordable. As a result of this partnership, the tower design has advanced from a prototype to a construction-grade model. OPPD's objective is to provide additional renewable energy to our customers in a way that is increasingly efficient and economical. We will continue to further explore, develop and make use of renewable technologies as their feasibility increases.

While working to develop new energy resources, we also continue to encourage customers to use existing energy resources wisely. OPPD presented its 2002 J.M. Harding Award of Excellence to Creighton University for its commitment to smart energy use. OPPD has presented the award to a large customer annually since 1984. The university implemented numerous energy-saving projects, including installation of an energy-monitoring system that measures energy consumption in 28 of its buildings. Over time, the system is expected to yield a 15-percent reduction in Creighton's energy consumption.

Whether our employees are helping customers find ways to maximize energy efficiency or helping the utility do the same, we are committed to ensuring that our workforce is well-trained and diverse. Our Diversity Advisory Council continued to foster an environment of inclusion, knowledge and understanding, in which employees learn to value diversity and respect the differences and similarities that enrich OPPD and the customers we serve.

OPPD enjoys these successes because of excellent employees who focus on delivering the benefits of public power to customer-owners. Itis with these dedicated employees, our well-maintained equipment, a solid balance sheet and a strong Board of Directors that we stand ready for the challenges that lie ahead of us as we continue our commitment to the public ... for which we stand.

Fred M.Petersen Geoffrey C.Hall President and Chief Executive Officer Chairman of the Board 2002 OPPe Annual Report 3

7 tblic fbr Which We Stand s an ob on OPPD is deeply rooted in the p ei nties it serves. Based inOmaha, jPRovd Ntak the utility has always focused on being ie a an energy partner with its customers, and that ao. focus is reflected in its work culture. Account more executives, electrical service designers, customer p iservice representatives and other field personnel r work closely with customers to understand their b obvious and no-so-obvious md shopkeepers, requirements. Employees b ~lear about customoers

, businesses. They ask about -

tipndng an d antipt - customers' ninsWAd needs. As aresult, the utlity For the second year in a row, OPPD has for highest customer

.responses. The top 1_

wer Frakdi the stuod y.a J.D. Power and Associates

_ tn a rdow, OPD 2001-2002 Electric ha Utility 2002 Study based on a total medium electric companies t Electricalseric designer John Mullen, left, land working line crew leader Pat Callahan, tat a downtown Omaha job site.

2002 OPPIO Annul Report 5

baeetiM02 he crafted a spot where he coud use his power tools.

~lp Scut(u Anhon MainlL, lft and Brendan Sweeneiy work on Pinewood Derby cars.

ree Lin USA program is~sponsored that provide electricity during the summer ral Arbor Da Foudaionr 'in months, when demand isat its highest. From Oith fth National Association of the generating units, the power istransported to s.Tefoundation give the honor customers over more than 13,700 miles of p qualitrcare electric line. OPPD services its equipment - and tualworer raiing n tee-arethus its customers - from five major service I ubi te-patigeducation centers and several smaller offices strategically qDisInole inman other located across its territory.

gnatopervel an enhance the inJune, employees successfully completed a refueling outage at Fort Calhoun Station in the totaincaedofur shortest time ever. Planning, efficiency and a~aidcustoers.teamwork contributed to the successful effort, eamjrpowerplnts the ca- which was accomplished under budget. Later in maiadNebraska City~stations: the year, Fort Calhoun Station drew excellent a-fedFotCalounStatio.I reviews for its operating performance from the tilit hsevra peakin plant Institute of Nuclear Power Operations (INPO).

2002 PrIr Annual RePrt I

P utme As partof a mutual aid agreement, OPPD sent 76 v and protect employees and 27 contractors to Kansas City and 4 to I southeastern Kansas to help restorepower to almost vdntrai 300,000 customers after a harsh Januarystorm.

udar

.This s t light a photographer's studio, mist foliage in a tt ad more greenhouse or run adishwasher in ahome, Zcronlc bill customers expect electricity to be there when they ainsther need it.That's the bottom line for the utility eutms business, and OPPD does what it must to provide Afrt a dable, reliable electricity to customers.

o tansr a Acritical element of the utility's success in doing this isfound in its detailed planning for the y isdoing agood future, OPPD's Integrated Resource Plan aeo with its consolidates much of the utility's planning into a Un.OPPD roadmap for the future. This roadmap combines i cuo key forecasts of future customer needs with an commitments to analysis of the most cost-effective and dependable Will gie advance options available to meet those needs. As a result eof this process, OPPD knows what it must do to cspect customers' meet the needs of customers years from now, and ty fails to meet plans accordingly.

its, it pa $100 The work the utility isdoing reflects today's ga has commitment to providing tomorrow's customers mtion to with reliable service at an affordable cost. It isa at d ig commitment that OPPD has always taken seriously, and always will. Working for the public -

Wi this futre this isOPPD's pledge. -

n eipment an elOmtary mit incubators, Ii roery store, 2002 OPr Appual Report 9

MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW Public power is an American tradition that works for local communities and consumers across the country. The purpose of public power is to provide excellent, efficient service to its customer-owners. Unlike private power companies, public power utilities do not have to serve stockholders as well as customers. OPPD's hometown advantages - low rates, commitment to local communities, public accountability, local decision makling and strong customer service - have made OPPD a community success. OPPD has always been dedicated to providing reliable, dependable and affordable energy to its customers. By operating efficient power plants, controlling costs and effective financial planning, OPPl) will continue to provide superior customer satisfaction for many years to come.

The following unaudited Management's Discussion and Analysis should be read in conjunction with the financial statements and related notes beginning on page 22 and contains forward-looking statements based largely on OPPD's current plans.

FINANCIAL POSITION AND RESULTS OF OPERATIONS The following table summarizes OPPD's financial position at December 31, 2002 and 2001 (in thousands!.

Condensed Balance Sheets 2002 2001 Current Assets $ 200,445 $ 208,050 Capital Assets 1,816,950 1,657,549 Other Long-Term Assets 454,296 394 147 Total Assets $2,471,691 $2,259,746 Current Liabilities $ 175,869 $ 165,891 long-Term Liabilities 1,062,56 941,22 Total Liabilities 1,238,435 1,107,111 Equity 1,233,256 1,152,635 Total Liabilities and Equity $2,471,691 S2,259,746 The following table summarizes OPPD's strong operating results (in thousands).

Operating Results 2002 2001 2000 Operating Revenues $ 553,024 $ 568,795 $ 567,189 Operating Expenses (444,774) (475,144) (469,940)

Operating Income 108,250 93,651 97,249 Other Income 12,380 15,956 17,059 Interest Expense (40,009) (39,740) (43,458)

Net Income $ 8(0,621 $ 69,867 $ 70,850 Operating Revenues 2002 Compared to 2001 Total operating revenues were $553,024,000 for the year ended December 31, 2002, a decrease of $15,771,000 or 2.8%6 from 2001 operating revenues of $568,795,000.

XReductions from retail sales for rate stabilization were $10,500,000 and $5,000,000 for 2002 and 2001, respectively.

XPrior to the reduction for rate stabilization, revenues from retail sales were $478,911,000 for 2002, an increase of

$10,892,000 or 2.3% over 2001 revenues of $468,019,000. The increase in revenues was due to a 0.5% increase in energy sales to retail customers and more energy sold at summer rates.

• Revenues from off-system sales were $73,256,000 for 2002, a decrease of $17,789,000 or 19.5%) from 2001 revenues of

$91,045,000. Revenues for 2002 were down from 2001 due to a combination of lower energy prices and lower sales volume.

10 2002 OPPo Annual Report

2001 Compared to 2000 Total operating revenues were $568,795,000 for the year ended December 31, 2001, an increase of $1,606,000 or 0.3% over 2000 operating revenues of $567,189,000.

• Reductions from retail sales for rate stabilization were $5,000,000 and $11,500,000 for 2001 and 2000, respectively.

• Prior to the reduction for rate stabilization, revenues from retail sales were $468,019,000 for 2001, an increase of

$13,868,000 or 3.1% over 2000 revenues of $454,151,000. The increase in revenues was primarily due to a 3.9%

increase in energy sales to retail customers.

• Revenues from off-system sales were $91,045,000 for 2001, a decrease of $19,255,000 or 17.5% from 2000 record revenues of $110,300,000. Off-system sales revenues were down due to a combination of lower energy prices and lower sales volume.

The chart, below left, illustrates the mix of OPPD's operating revenues (inmillions). The chart, below right, illustrates the percentage share of revenues by customer class for 2002. Other revenues include connection charges, customers' forfeited discounts, rent from electric property and transmission wheeling fees.

Energy Sales 2002 Compared to 2001 Total energy sales were 12,385,527 megawatt-hours (MWH) for the year ended December 31, 2002, a decrease of 292,190 MWH or 2.3% from 2001 energy sales of 12,677,717 MWH.

• Energy sales to retail customers were 8,772,187 MWH for 2002, an increase of 47,102 MWH or 0.5% over 2001 retail energy sales of 8,725,085 MWH. Retail sales have shown steady increases over the years due to OPPD's increasing customer base.

• Off-system energy sales were 3,613,340 MWH for 2002, a decrease of 339,292 MWH or 8.6% from 2001 off-system energy sales of 3,952,632 MWH. The decrease in off-system energy sales was primarily due to additional generation resources in the marketplace, scheduled maintenance of OPPD's generating facilities and higher retail sales.

2001 Compared to 2000 Total energy sales were 12,677,717 MWH for the year ended December 31, 2001, an increase of 68,677 MWH or 0.5% over 2000 energy sales of 12,609,040 MWH.

• Energy sales to retail customers were 8,725,085 MWH for 2001, an increase of 324,988 MWH or 3.9% over 2000 retail energy sales of 8,400,097 MWH. Retail sales have shown steady increases over the years due to OPPD's increasing customer base.

• Off-system energy sales were 3,952,632 MWH for 2001, a decrease of 256,311 M4WH or 6.1% from 2000 off-system energy sales of 4,208,943 MWH. Off-system energy sales decreased due to additional generation resources in the marketplace and higher retail sales.

2002 OPPO Annual Report 11

The following table shows energy sales by customer class (inMWH).

Residential 3,151,895 3,065,377 2,880,289 General Service - Small 3,272,028 3,279,890 3,097,835 General Service - Large 2,290,368 2,302,311 2,287,966 Government and Municipal 81,593 82,775 81,268 Unbilled Energy Sales (23,697) (5,268 52,739 Total Retail Sales 8,772,187 8,725,085 8,400,097 Off-System Sales 3,613,340 3,952,632 4,208,943 Total Energy Sales 12,385,527 12,677,717 12,609,040 The chart, shown at right, illustrates the mix of retail and off-system energy sales (inMWH).

Operating Expenses 2002 Compared to 2001 Total operating expenses were $444,774,000 for the year ended December 31, 2002, a decrease of $30,370,000 or 6.4% from 2001 operating expenses of $475,144,000.

• Depreciation expense was $20,462,000 or 20.6%

lower than in 2001 due to the change in the depreciable life estimates of the Fort Calhoun Station as a result of application for license renewal with the Nuclear Regulatory Commission.

• Production expenses were $8,625,000 or 9.6% lower than in 2001 due to increased charges to construction programs in 2002.

• Decommissioning expense was $3,581,000 lower than 2001 expense. Based on current cost estimates, inflation rates and fund earnings projections, no funding was necessary for decommissioning expense for the year 2002.

• Administrative and general expenses were $9,341,000 or 24.1% higher than in 2001 primarily due to increased costs for the retirement plan, supplemental retirement savings plan and health insurance.

2001 Compared to 2000 Total operating expenses were $475,144,000 for the year ended December 31, 2001, an increase of $5,204,000 or 1.1% over 2000 operating expenses of $469,940,000.

e Maintenance expenses were $11,910,000 or 27.6% more than in 2000 due to the completion of several transmission and production maintenance projects in 2001.

• Customer accounts expenses were $6,601,000 or 54.3% more than in 2000 due to the amortization of costs related to the new customer information system and an increase in uncollectible accounts expense.

• Production expenses were $3,593,000 or 4.2% more than in 2000 primarily due to expenses incurred related to the application for license renewal at the Fort Calhoun Station.

e Fuel expense was $12,178,000 or 13.7% less in 2001 primarily due to a write-off of deferred expenditures in 2000 for costs incurred for the disposal of spent nuclear fuel.

e Decommissioning expense was $5,342,000 or 59.9% lower than 2000 expense because funding-was decreased based on an analysis of current cost estimates, inflation rates and fund earnings projections.

12 2002 OPPe Annual Report ~/ g I

The following chart illustrates the percentage share of operating expenses for 2002 by functional expense classification.

Interest Expense Total interest expense was $40,009,000 for the year ended December 31, 2002, an increase of $269,000 or 0.7% over 2001 interest expense of $39,740,000, due to an increase in long-term debt.

Total interest expense was $39,740,000 for the year ended December 31, 2001, a decrease of $3,718,000 or 8.6% from 2000 interest expense of $43,4S8,000, due to a decrease in long-term debt and lower interest rates.

Products and Services OPPD offers a variety of products and services, which provide value both to the customer and OPPD. These offerings include such products as Performance Contracting, Energy Information Systems, Power Quality, Ground Source Heat Pumps, and Residential and Commercial Surge Protection.

• Net income from products and services was $342,000 for the year ended December 31, 2002, a decrease of $923,000 from 2001 net income of $1,265,000. This decrease is primarily due to a reduction in revenues earned from marketing contract activities.

• Net income from products and services was $1,265,000 for the year ended December 31, 2001, an increase of $928,000 over 2000 net income of $337,000. This increase isprimarily due to revenues earned from marketing contract activities.

Number of Customers OPPD has a stable customer base which continues to grow at a steady rate.

s OPPD served an average of 305,036 customers for the year ended December 31, 2002, an increase of 6,022 customers or 2.0% over the average number of customers for 2001 of 299,014.

• OPPD served an average of 299,014 customers for the year ended December 31, 2001, an increase of 5,683 customers or 1.9% over the average number of customers for 2000 of 293,331.

The following table shows the average number of customers by customer class.

Residential 266,464 261,286 256,541 General Service - Small 37,807 37,008 36,088 General Service - Large 117 116 110 Government and Municipal 594 555 543 Off-System 54 49 49 Total 305,036 299,014 293,331 2002 OPPO Annual Report 13

Cents per kWh 2002 was the tenth consecutive year without a general rate increase for OPPD customers, and OPPD's rates remain well below the national average. The average cents per kWh fluctuates between years due to differences in seasonal consumption.

• Residential customers paid an average of 6.80, 6.62 and 6.84 cents per kWh for the years ended December 31, 2002, 2001 and 2000, respectively.

e Retail customers paid an average of 5.46, 5.36 and 5.41 cents per kWh for the years ended December 31, 2002, 2001 and 2000, respectively.

The chart on the right shows the average retail cents per kWh compared to the national average. The cents per kWh for the national average for 2002 and 2001 are based on preliminary year-to-date data as of October 31 of these respective years, according to the Energy Information Administration, U.S. Department of Energy.

CASE AND LIQUIDITY OPPD has achieved a high degree of liquidity by maintaining strong credit ratings, expanding its Commercial Paper program, implementing cost-containment programs and investing in projects that provide returns in excess of OPPD's weighted average cost of capital.

OPPD relies on bond offerings as a significant source of liquidity for capital requirements not provided by cash from OPPD's operations. OPPD's ability to attract required capital at reasonable terms is important to its overall business plan and will be critical in the years to come to support the significant planned construction program.

Financing In March 2002, the Commercial Paper program was increased from $100,000,000 to $150,000,000 and is supported by a credit agreement which expires on October 1,2004.

InJune 2002, OPPD issued $80,000,000 of bonds which were sold at interest rates ranging from 3.45% to 5.20%, depending on the term. The proceeds from the sale of the bonds were used for capital expenditures.

In November 2002, OPPD issued $190,000,000 of bonds which were sold at interest rates ranging from 4.25% to 5.00%,

depending on the term. The proceeds from the sale were used for the defeasance of OPPD's 1993 Series C 2017 Term Bonds and 1993 Series D2013 and 2016 Term Bonds. This refunding will result in an overall economic gain of $13,198,000 over the life of the bonds.

The chart, below left, illustrates OPPD's long-term debt mix (inmillions). The chart, below right, shows OPPD's declining amount of current indebtedness (inmillions) and indicates OPPD has sufficient capacity to issue debt to fund the construction of Unit 2 at the Nebraska City Station and other capital programs.

14 2002 OPPO Annual Report

Ratings The company's bond ratings affect OPPD's ability to borrow funds at low rates. Both quantitative (financial strength) and qualitative (business or operating characteristics) factors are considered by the bond-rating agencies in establishing a company's credit rating. Standard &Poor's Ratings Group (S&P) and Moody's Investors Service (Moody's), independent bond-rating agencies, rated OPPD's Electric System Revenue Bonds AA and Aa2, respectively, in 2002. These are among the highest ratings given to public power districts and indicate the agencies' assessment of OPPD's ability to pay interest and principal on its debt.

The following ratings at December 31, 2002, are indicative of OPPD's strong financial strength.

Eectnc ystem o ecaT Revenue Bonds Minibonds* Paper Moody's _ _ Aa2 Aaa 7 77T-

• Payment of the principal of and interest on the Minibonds when due isinsured by a financial guaranty bond insurance policy.

Cash Flows OPPD incurred a net decrease in cash of $18,780,000 for the year ended December 31, 2002, and a net increase in cash of

$17,238,000 and $14,270,000 for the years ended December 31, 2001 and 2000, respectively. The following table illustrates the cash flows by activities (inthousands).

CashRo ws0V i Cash Flows from Operating Activities $183,361 $239,748 $241,955 Cash Flows from Capital and Financing Activities (183,128) (248,956) (240,055)

Cash Flows from Investing Activities (19,013) 26,446 12,370 Increase (Decrease) in Cash $(18,780) $ 17,238 $ 14,270 Cash flows from operating activities consist of transactions involving changes in current assets, current liabilities and other transactions that affect operating income.

s Cash flows for 2002 decreased $56,387,000 from 2001 primarily due to an increase in cash payments to operations and maintenance suppliers and a decline in cash receipts from off-system customers.

• Cash flows for 2001 decreased $2,207,000 from 2000 due to increases in cash payments to operations and maintenance suppliers and employees for operating activities. These additional cash payments were partially offset by an increase in cash receipts from retail customers.

Cash flows used for capital and related financing activities consist of transactions involving long-term debt and the acquisition and construction of capital assets.

• Cash flows used for 2002 decreased $65,828,000 from 2001 due to the issuance of the 2002 Series Aand BBonds and additional commercial paper. These additional cash receipts were partially offset by an increase in cash expenditures for capital assets.

• Cash flows used for 2001 increased $8,901,000 over 2000 due mainly to an increase in cash expenditures for capital assets. These additional cash expenditures were partially offset by cash receipts from 2001 minibonds financing.

Cash flows from investing activities consist of transactions involving the purchase and maturities of investment securities and interest income.

• Cash flows for 2002 decreased $45,459,000 from 2001 due to purchases of investment securities and a decrease in interest income.

• Cash flows for 2001 increased $14,076,000 over 2000 due to a reduction in the Electric System Revenue Bond Fund.

2002 oPPO Annual Report 15

Debt Service Coverage OPPD is required by its bond covenants to maintain a debt service coverage of 1.4 times. The following table reflects the calculation of debt service coverage, indicating OPPD's solid ability to make required debt service payments (inthousands).

,DiertWiceCoi rag. - _ ---

Operating revenues $553,024 $568,795 $567,189 Operation and maintenance expenses (347,121) (353,767) (345,378)

Payments in lieu of taxes (18,553) (18,234) (17,645)

Net operating revenues 187,350 196,794 204,166 Investment income of related reserve fund 1,411 1,673 1,851 Net receipts $188,761 $198,467 $206,017 Total debt service* $ 74,688 $ 73,466 $ 92,969 Debt service coverage 2.52 2.70 2.21

• Total debt service for Resolution No. 1788 Bonds is accrued on a calendar-year basis similar to the computation of net receipts. Interest funded from bond proceeds, when applicable, is not included in total debt service.

Debt Ratio The debt ratio is a measure of financial solvency. OPPD's debt ratio was 40.6% and 39.1% as of December 31, 2002 and 2001, respectively. The debt ratio increased slightly from 2001 due to the issuance of additional bonds and commercial paper.

Retirement Plan Employees contribute 4.0% of their covered pay to OPPD's Retirement Plan (the "Plan"). OPPD is required to contribute the balance of the funds needed in the Plan as determined by the actuary. Due to declining investment returns and increasing liabilities, the funded ratio for the Plan declined to 128.0% as of January 1, 2002, from 138.3% and 143.9%, as of January 1, 2001 and 2000, respectively. In addition, due to experiencing lower returns in recent years, the expected rate of return on assets used in computing the actuarial liability was decreased to 8.75% for 2002 from 9.0% for both 2001 and 2000. The annual required employer contribution to the Plan was $5,625,000 for the year ended December 31, 2002. OPPD was not required to contribute to the Plan for the years ended December 31, 2001 and 2000. OPPD has budgeted $12,900,000 for employer pension contributions for 2003 based in part on a decrease in the expected rate of return on assets to 8 5%.

Risk Management Practices Since negotiating power marketing and fuel purchase activities are within the normal course of OPPD's business, OPPD is exposed to certain risks associated with these transactions. Risks associated with power marketing and fuel contracting transactions are identified, quantified and managed within a nsk management control framework that isconsistent with OPPD's overall tolerance for risk. Fuel expense represents a significant portion of OPPD's generation costs and affects its ability to market competitively priced power. ARisk Management Committee isresponsible for identifying, measunng and mitigating various risk exposures.

OPPD competes in the wholesale marketplace with other electric utilities and power marketers for off-system sales. To successfully compete, OPPD must be able to offer energy products at competitive prices and obtain transmission services from utility and regional tariffs. Energy prices may fluctuate substantially in a short period of time due to abrupt changes in the demand and supply of electricity. In the energy trading and marketing business, it isanticipated that operations will continue to experience competition and downward pressure on prices. In addition, other risks, such as counter-party credit risks, are monitored closely on an ongoing basis.

ARate Stabilization Reserve was established in 1999 to help OPPD maintain stable customer electric rates. This funded reserve isintended to minimize the impact on rates from significant occurrences such as major storm damage or an unscheduled outage of a generating unit during a period of high replacement power costs. Additions are made to the reserve based upon the achievement of specific financial performance measures. Additions to the reserve were $10,500,000,

$5,000,000 and $11,500,000 for the years ended December 31, 2002, 2001 and 2000, respectively. The reserve balance was

$32,000,000 and $21,500,000 at December 31, 2002 and 2001, respectively.

16 2002 OPPD Annual Report

CAPITAL RESOUDRCES Generating Capabilitv OPPD owns and operates seven generating stations, six of which have a maximum summer net accredited capability of 2,227,100 kW The net capability of the Valley Station (wind) is not accredited.

OPPD's power requirements are provided from these generating stations, from leased generation and from purchases of power. The table, shown at right, illustrates the diverse fuel mix and maximum summer net accredited capability in kW of OPPD's generating facilities.

The chart, below left, illustrates OPPD's generating capability and system peak load for the past three years, along with projections for the next two years (inMW).

The chart, below right, represents the diversity of OPPD's generating capability by fuel type (inMW).

A Capital Program OPPD continually evaluates electric system requirements and makes long-range recommendations for capital expenditures necessary to serve the growing load requirements with a reliable and economical power supply. The following table shows OPPD's actual capital program expenditures and nuclear fuel expenditures for the years ended December 31, 2002, 2001 and 2000, and projected expenditures for 2003 and 2004 (inmillions). OPPD finances its capital and nuclear fuel programs with revenues from operations, investment income, financing proceeds and cash on hand.

aIrnMIMMslonMU1aIMs1butullnlnx MI YU.3 I L.,) z 6'.L ) 04.z li oz. I General Plant 24.2 17.3 22.1 21.2 19.0 Production Plant 48.2 49.7 58.0 48.7 37.7 Additional Power Supply 42.3 53.1 70.1 38.8 9.4 Total Capital Program 205.0 192.4 233.4 172.9 128.2 Total Nuclear Fuel Program 6.1 21.3 18.3 9.2 18.0 Total $211.1 $213.7 $251.7 $182.1 $146.2 2OAa/t lp 2002 OPPO Annual flepon 17

Additional power supply expenditures include construction of the Cass County Station and a second coal-fired power plant at the Nebraska City Station and capital projects related to the renewal of the operating license for the Fort Calhoun Station.

• The Cass County Station, located near Murray, Nebraska, isscheduled to be operational in June 2003. The plant will include two combustion turbine units with a total capacity of 320 megawatts. The plant will burn natural gas and will be primarily used for peaking purposes.

• OPPD has plans for the construction of up to a 600-MW coal-fired power plant. The unit will be located at the existing Nebraska City Station site and is expected to be operational in 2009. Plans are for the new unit to have a capacity of at least 300 MW in order to meet forecasted load requirements for OPPD's customers. The Nebraska Power Review Board approved a plant size of up to 600 MW depending on the ability of OPPD to enter into long-term (at least 25 years) participation agreements for the remaining 300 MW of capacity.

o The current operating license for the Fort Calhoun Station expires in 2013. In 2002, OPPD prepared and submitted an application to the Nuclear Regulatory Commission for a twenty-year license renewal. The process is proceeding well, and approval isexpected in late 2003.

FACTORS AFFECTING OPPO AND THE ELECTRIC UTILITY INDUSTRY GENERALLY OPPD and the electric industry in general continue to be affected by a number of factors which could impact the competitiveness and financial condition of all electric utilities.

Central Interstate Low-Level Radioactive Waste Compact Under the federal Low-Level Radioactive Waste Policy Act, the state of Nebraska joined the states of Arkansas, Kansas, Louisiana and Oklahoma to form the Compact for the purpose of providing a low-level radioactive waste (LLRW) disposal facility for member states. The Compact created the Central Interstate LLRW Commission to carry out the goals of the Compact. In 1998, the site-specific license application to the Nebraska Departments of Environmental Quality and Health was denied. Plaintiffs (including OPPD), which are owners and operators of nuclear power generating units within the Compact region, and which have provided funding for the activities of the Commission, filed suit against the state of Nebraska in federal court. Inlate 2001, OPPD withdrew from this lawsuit but has continued to monitor recovery of its share of expenses through the Commission's claim. In 2002, a federal district court awarded the Commission $151 million in damages. The state of Nebraska appealed this judgment. OPPD has expended approximately $12.1 million to fund the activities of the Compact and has notified the Commission of its interest in any funds collected by the Commission.

High-Level Nuclear Waste Repository Under the federal Nuclear Waste Disposal Act of 1982, the federal government assumed responsibility for the permanent disposal of spent nuclear fuel. The Department of Energy facility is not expected to be operational until at least 2010. OPPD remains responsible for the safe storage of spent nuclear fuel until the federal government takes delivery. In 1994, OPPD completed a re-rack project at the Fort Calhoun Station that provides adequate capacity for spent fuel storage through at least the year 2005 and iscurrently investigating alternatives for spent fuel storage beyond 2005.

Competitive Environment in Nebraska In 1996, the Nebraska Legislature commissioned a three-year study to review Nebraska's electric system to determine whether retail competition would be beneficial for Nebraska ratepayers. The study was created through Legislative Resolution 455 (L.R. 455). The final L.R. 455 report, which was completed in 2000, recommended that deregulation be considered only ifa "conditions certain" framework exists. Under this approach, the State would not set a date certain for retail competition to occur in Nebraska.

During the 2000 session, the Nebraska Legislature enacted Legislative Bill 901 (L.B. 901) which implemented the recommendations set out in L.R. 455. LB.901 directs the preparation of an annual report for the Governor and Legislature 18 2002OPPD AnnualIReport

which monitors the conditions in the electric industry that may indicate whether retail competition would be beneficial for Nebraska's citizens. These conditions are as follows:

• Whether a viable regional transmission organization and adequate transmission exist in Nebraska or in a region that includes Nebraska.

• Whether aviable wholesale electricity market exists in a region that includes Nebraska.

• To what extent retail rates have been unbundled in Nebraska.

• Acomparison of Nebraska's wholesale electricity prices to the prices in the region.

• Any other information the Nebraska Power Review Board believes to be beneficial to the Governor, the Legislature and Nebraska's citizens when considering whether retail electric competition would be beneficial, such as an update on deregulation activities in other states or at the federal level.

None of the aforementioned conditions have been met based on the summary of the findings from the latest annual report published in October 2002.

In December 1999, FERC issued Order 2000 requiring public utilities that own, operate or control interstate transmission facilities to provide open and equal access to their transmission facilities. Although OPPD isnot subject to FERC jurisdiction, and therefore not required to comply with FERC Order 2000, OPPD iscontinuing to evaluate the implications of Order 2000 on its transmission operations, as well as its wholesale energy trading activities.

Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and the disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.

These judgments, in and of themselves, could materially impact the financial statements and disclosures based on varying assumptions, which may be appropriate to use. Inaddition, the financial and operating environment also may have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even ifthe nature of the accounting policies has not changed.

The following is a list of accounting policies that are significant to OPPD's financial condition and results of operation, and require management's most difficult, subjective or complex judgments. Each of these has a higher likelihood of resulting in materially different reported amounts under different conditions or using different assumptions.

Summary of the Financial Statements The financial statements, related notes and management's discussion and analysis provide information about OPPD's financial position and activities. The balance sheets present OPPD's assets, liabilities and equity as of December 31, 2002 and 2001, with current and long-term portions of assets and liabilities separately identified. The Statements of Revenues, Expenses and Changes in Equity present OPPD's operating results and changes in equity for the three years ended December 31, 2002. The Statements of Cash Flows provide information about the flow of cash within OPPD by activities for the three years ended December 31, 2002. The Notes to Financial Statements provide additional detailed information.

2002 OPPD Annual Report 19

Report of Management The management of OPPD isresponsible for the preparation of the following financial statements and for their integrity and objectivity. These financial statements conform to generally accepted accounting principles and, where required, include amounts which represent management's best judgments and estimates. The Company's management also prepared the other information inthis Annual Report and isresponsible for its accuracy and consistency with the financial statements.

To fulfill its responsibility, management maintains a strong internal control structure, supported by formal policies and procedures that are communicated throughout OPPD. Management also maintains a staff of internal auditors who evaluate the adequacy of and investigate the adherence to these controls, policies and procedures.

Our independent public accountants have audited the financial statements and have rendered an opinion as to the statements' fairness of presentation, inall material respects, inconformity with generally accepted accounting principles. During the audit, they obtained an understanding of OPPD's internal control structure and performed tests and other procedures to the extent required by generally accepted auditing standards.

The Board of Directors pursues its oversight with respect to OPPD's financial statements through the Audit Committee, which iscomprised solely of non-management directors. The committee meets periodically with the independent public accountants, internal auditors and management to ensure that all are properly discharging their responsibilities.

The committee approves the scope of the annual audit and reviews the recommendations the independent public accountants have for improving the internal control structure. The Board of Directors, on the recommendation of the Audit Committee, engages the independent public accountants who have unrestricted access to the Audit Committee.

Fred M.Petersen Charles N.Eldred President and Chief Executive Officer Vice President and Chief Financial Officer 20 2002 OPPD Annual Report

Independent Auditors' Report Omaha Public Power District:

We have audited the accompanying balance sheets of the Omaha Public Power District (OPPD) as of December 31, 2002 and 2001, and the related statements of revenues, expenses and changes in equity and of cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of OPPD's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Omaha Public Power District as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As described in Note 1, OPPD has implemented a new financial reporting model as required by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic FinancialStatements and Management's Discussion and Analysis for State and Local Governments, in 2002.

The Management's Discussion and Analysis on pages 10 through 19 is not a required part of the basic financial statements, but is supplementary information required by GASB. This supplementary information is the responsibility of OPPD's management. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information.

However, we did not audit such information, and we do not express an opinion on it.

In accordance with Government Auditing Standards, we have also issued a report dated February 26, 2003, on our consideration of OPPD's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Governnment Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

To LL aP DELOITTE &TOUCHE LLP Omaha, Nebraska February 26, 2003 2002 OPPD Annual Report 21

Balance Sheets as of December 31,2002 and 2001 ASSETS 20027- , __ 200 -

(thousands)

UTILITY PLANT -at cost (Notes 2 and 10)

Electric plant ................................................ $3,042,528 $2,854,767 Less accumulated depreciation .................... .................. 1,248,773 1,219,250 Electric plant -net ............................................... 1,793,755 1,635,517 Nuclear fuel - at amortized cost .................. ................... 23,195 22,032 Total utility plant - net . ......................................... 1,816,950 1,657,549 SPECIAL PURPOSE FUNDS -primarily at fair value (Notes 3 and 4)

Construction fund ............................................... 101,084 71,099 Electric system revenue bond fund -net of current portion ....... ......... 31,656 30,860 Segregated fund -rate stabilization ................................... 21,500 16,500 Segregated fund - other ........................................... 16,975 17,130 Decommissioning funds ........................................... 230,347 217,983 Total special purpose funds ..................... .................. 401,562 353,572 CURRENT ASSETS Cash and cash equivalents (Note 4).............. .................... 12,817 31,597 Electric system revenue bond fund -current portion ........ ............. 51,874 50,847 Accounts receivable - net . ......................................... 63,491 60,769 Fossil fuels -at average cost .............................. ........... 13,803 10,757 Materials and supplies -at average cost ............ ................... 53,010 47,812 Other......................................................... 5,450 6,268 Total current assets ............................................. 200,445 208,050 DEFERRED CHARGES (Note 5).................. ................... 52,734 40,575 TOTAL........................................................... $2,471,691 $2,259,746 See notes to financial statements 22 2002 OPPD Annual Report

LIABILITIES E3OO7: 2ODK (thousands)

LONG-TERM DEBT (Note 2)

Electric system revenue bonds -net of current portion Serial bonds, 3.45% to 5.5% due annually from 2003 to 2022 ............. $ 517,210 $ 292,215 Term bonds, 5.25% due annually from 2011 to 2017 ........... ............ 68,920 242,870 Total electric system revenue bonds .. 5.................

86,130 535,085 Electric revenue notes -commercial paper series ............................ 150,000 100,000 Electric revenue minibonds ............................................ 59,556 58,673 Subordinated obligation -net of currrent portion ........................... 3,279 3,450 Total........................................................... 798,965 697,208 Unamortized discounts and premiums ................................... 1,325 (4,264)

Unamortized loss on refunded debt .................... (22,310) (16,810)

Total long-term debt -net ........................................... 777,980 676,134 COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)

LIABILITIES PAYABLE FROM SEGREGATED FUNDS (Note 3) . ...... 43,195 30,872 CURRENT LIABILITIES Electric system revenue bonds -current portion (Note 2)..................... 45,005 41,925 Subordinated obligation -current portion (Note 2) .......................... 171 157 Accounts payable ................................................ 69,875 62,250 Accrued payments in lieu of taxes ....................................... 17,497 17,183 Accrued interest ................................................ 12,031 13,750 Accrued payroll ................................................ 14,653 13,030 Accrued production outage costs ........................................ 7,146 11,791 Other.............................................................. 9,491 5,805 Total current liabilities ............................................. 175,869 165,891 OTHER LIABILITIES Decommissioning costs ........................................... 230,347 217,983 Other (Notes 8 and 9) ............................................ 11,044 16,231 Total other liabilities .......................................... 241,391 234,214 EQUITY Invested in capital assets, net of related debt ............. ............. 1,094,878 1,010,432 Restricted ................................................ 30,503 29,715 Unrestricted.................................................... 107,875 112,488 Total equity ................................................ 1,233,256 1,152,635 TOTAL.......................................................... $2,471,691 $2,259,746 2002 OPPD Annual Report 23

Statements of Revenues, Expenses and Changes inENuity for the Three Years Ended December 31,2002 0 (thousands)

OPERATING REVENUES Retail sales ........................................ $ 468,411 $ 463,019 $ 442,651 Off-system sales ....................................... 73,256 91,045 110,300 Other electric revenues ...................... ........... 11,357 14,731 14,238 Total operating revenues ............................. 553,024 568,795 567,189 OPERATING EXPENSES Operation Fuel ........................................ 76,721 76,704 88,882 Purchased power .................................... 33,752 37,247 40,950 Production......................................... 80,873 89,498 85,905 Transmission ....................................... 4,208 4,916 5,152 Distribution ........................................ 21,935 23,539 21,621 Customer accounts ................................... 16,103 18,751 12,150 Customer service and information .......... ............. 9,070 9,394 9,993 Administrative and general ............. ............... 48,062 38,721 37,638 Maintenance ........................................ 56,39 54,997 43,087 Total operation and maintenance ......... ............ 347,121 353,767 345,378 Depreciation ........................................ 79,100 99,562 97,994 Decommissioning............. - 3,581 8,923 Payments in lieu of taxes ................................ 18,553 18,23 17,645 Total operating expenses ............. ............... 444,774 475,144 469,940 OPERATING INCOME ...................... ........... 108,250 93,651 97,249 OTHER INCOME (EXPENSES)

Interest income - all funds .17,756 22,031 22,733 Operating funds -net increase in fair value .26 881 1,176 Decommissioning funds - net increase in fair value 50 3,473 6,057 Decommissioning interest and change in fair value transfer (12,364) (16,890) (18,032)

Allowances for funds used .5,806 4,674 4,465 Products and services - net .342 1,265 337 Other - net .764 522 323 Total other income - net .12,380 15,956 17,059 INTEREST EXPENSE .40,009 39,740 43,458 NET INCOME .80,621 69,867 70,850 EQUITY, BEGINNING OF YEAR .............. ........... 1,152,635 1,082,768 1,011,918 EQUITY, END OF YEAR .$1,233,256 $1,152,635 $1,082,768 See notes to financial statements 24 2002 OFPD Annual Report

Statements of Cash Flows for the Three Years Ended Decemher 31,2002 Z0u CASH FLOWS FROM OPERATING ACTIVITIES (thousands)

Cash received from Retail customers ............................................ $497,355 $487,114 $474,241 Off-system customers ........................................ 68,085 92,411 95,021 Cash paid to Operations and maintenance suppliers ........................... (238,626) (191,667) (179,353)

Off-system suppliers ......................................... (28,824) (34,245) (37,540)

Cash paid to employees ........................................ (96,390) (92,668) (84,493)

Cash paid for in lieu of taxes and other taxes........................ (18,239) (17,616) (16,998)

Cash paid for nuclear decommissioning ......................... (3,581 (8,923 Net cash provided from operating activities ......................... 183,361 239,748 241,955 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from long-term borrowings .............................. 146,050 25,000 Principal reduction of long-term debt............................ (43,968) (60,605) (59,274)

Interest paid on long-term debt .................................. (39,043) (37,017) (41,128)

Acquisition and construction of capital assets ....................... (231,596) (171,181) (126,498)

Acquisition of nuclear fuel ...................................... (14,571) (5,153) (13,155 Net cash used for capital and related financing activities ............... (183,128) (248,956 (240,055)

CASH FLOWS FROM INVESTING ACTIVITIES A Purchase of special purpose funds -investment securities............... (556,807) (437,964) (360,330)

Maturities and sales of special purpose funds -investment securities ...... 533,836 438,492 364,928 Net change in electric system revenue bond fund -current ............. (1,027) 17,970 (233)

Interest income on investments .................................. 4,985 7,948 8,005 Net cash provided from (used for) investing activities ................. (19,013) 26,446 12,370 INCREASE (DECREASE) INCASH AND CASH EQUIVALENTS .......... (18,780) 17,238 14,270 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............. 31,597 14,359 89 CASH AND CASH EQUIVALENTS, END OF YEAR ................... $ 12,817 $31,597 $ 14,359 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES Operating income. ...................................... $108,250 $93,651 $ 97,249 Adjustments to reconcile operating income to net cash provided from operating activities Depreciation ............................................... 79,100 99,562 97,994 Amortization of nuclear fuel................................... 13,472 13,411 13,908 Change in other liabilities .................................... 6,062 2,147 12,136 Other .................................................... (10,881) 12,960 5,993 Changes in current assets and liabilities Accounts receivable ......................................... (2,722) 606 (16,407)

Fossil fuels ................................................ (3,046) (2,683) 5,897 Materials and supplies ....................................... (5,198) (489) (2,252)

Accounts payable....................................... (3,088) 18,408 12,898 Accrued payments in lieu of taxes.................................. 314 619 646 Accrued payroll ................................................ 1,623 1,057 (37)

Accrued production outage costs................................... (4,645) (88) 10,635 Other ........................................................ 4,120 587 3,295 Net cash provided from operating activities ......................... $183,361 $239,748 $241,955 See notes to financial statements 2002 OPPO Annual Report 25

Notes to Financial Statements for the Three Years Ended December 31,2002

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business - The Omaha Public Power District (OPPD), a political subdivision of the state of Nebraska, isa public utility engaged in the generation, transmission and distribution of electric power and energy and other related activities. The Board of Directors isauthorized to establish rates. OPPD is not liable for federal and state income or ad valorem taxes on property; however, payments in lieu of taxes are made to various local governments.

Basis of Accounting - The financial statements of OPPD are presented in accordance with generally accepted accounting principles for proprietary funds of governmental entities. Accounting records are maintained generally in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) and all applicable pronouncements of the Governmental Accounting Standards Board (GASB). In accordance with GASB Statement No. 20, Accounting and FinancialReportingfor ProprietaryFunds and Other Governmental Entities That Use ProprietaryFund Accounting, OPPD has elected not to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989.

OPPD applies the accounting policies established in Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71). In general, SFAS No. 71 permits an entity with cost-based rates to defer certain costs or income that would otherwise be recognized when incurred to the extent that the rate-regulated entity isrecovering or expects to recover such amounts in rates charged to its customers.

If,as a result of changes in regulation or competition, OPPD's ability to recover these assets and liabilities would not be assured, then pursuant to SFAS No. 101, Accounting for the Disconitiniuiationof Applicationt of SFAS No. 71 (SFAS No. 101) and SFAS No. 90, Regulated Enterprises - Accounting for Abandonments and Disallowances of PlantCosts (SFAS No. 90), OPPD would be required to write off or write down such regulatory assets and liabilities, unless some form of transition cost recovery continues through established rates. Inaddition, OPPD would be required to determine any impairment to the carrying costs of deregulated plant and inventory assets. To reduce exposure to costs related to potentially stranded assets, OPPD's Board of Directors approved additional depreciation expense of

$15,000,000 and $23,000,000 for the years ended December 31, 2001 and 2000, respectively, based on an asset evaluation study performed by an independent consulting firm. There was no additional depreciation expense for the year ended December 31, 2002.

Revenue Recognition - Meters are read and bills are rendered on a cycle basis. Revenues earned after meters are read are estimated and accrued as unbilled revenues at the end of each accounting period. Accounts receivable includes $21,213,000 and $22,482,000 in unbilled revenues as of December 31, 2002 and 2001, respectively.

Cash and Cash Equivalents - OPPD considers highly liquid investments of the Revenue Fund purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable - An estimate ismade for the provision for uncollectible accounts based on an analysis of the aging of accounts receivable and historical write-offs net of recoveries. Additional amounts may be included based on the credit risks of significant parties. Accounts receivable isreported net of the provision for uncollectible accounts of $6,017,000 and $5,926,000 as of December 31, 2002 and 2001, respectively.

Utility Plant - The costs of property additions, replacements of units of property and betterments are charged to electric plant. Maintenance and replacement of minor items are charged to operating expenses. Costs of depreciable units of electric plant retired are eliminated from electric plant accounts by charges, less salvage plus removal expenses, to the accumulated depreciation account. Electric plant includes construction work in progress of

$274,790,000 and $233,784,000 as of December 31, 2002 and 2001, respectively. Electric plant activity for the year ended December 31, 2002, was as follows (inthousands):

- 2001 Additions Retirements 2002 Electric plant - $2,854,767 $237,345 $(49,584) $3,042,528 Less accumulated depreciation - 1,219,250 -- 81,231 51,708 1,248,773

.: - . $1,635,517 $156,114:. $ 2,124- $1,793,755 Allowances for funds used, approximating OPPD's current cost of financing electric plant construction and the purchase of nuclear fuel, are capitalized as a component of the cost of the utility plant. These allowances were 26 20029PPD~nriualftnort

computed at 3.2%, 4.1% and 3.7% for both construction work in progress and nuclear fuel for the years ended December 31, 2002, 2001 and 2000, respectively.

Depreciation and Amortization - Depreciation for most assets is computed on the straight-line basis at rates based on the estimated useful lives of the various classes of property. OPPD performed an asset evaluation which identified potentially stranded generation equipment in a competitive environment. This assessment continues to be refined based on current information and forecasts. Changes were made in the method of depreciation for certain assets as a result of this evaluation. Depreciation expense has averaged approximately 3.0%, 4.0% and 3.9% of depreciable property for the years ended December 31, 2002, 2001 and 2000, respectively. Depreciation expense was lower in 2002 due to the change in the depreciable life estimates of the Fort Calhoun Station as a result of application for license renewal with the Nuclear Regulatory Commission. Amortization of nuclear fuel is based upon the cost thereof, which is prorated by fuel assembly in accordance with the thermal energy that each assembly produces.

Nuclear Fuel Disposal Costs - Permanent disposal of spent nuclear fuel is the responsibility of the Federal Government under an agreement entered into with the United States Department of Energy (DOE). Under the agreement, OPPD is subject to a fee of one mill per net kilowatt-hour on all nuclear energy generation, which is paid quarterly to the DOE. The spent nuclear fuel disposal costs are included in OPPD's nuclear fuel amortization and are collected from customers as part of fuel costs. Nuclear fuel disposal costs were $3,629,000, $3,051,000, $3,484,000 for the years ended December 31, 2002, 2001 and 2000, respectively. OPPD's contract required the Federal Government to begin accepting high-level nuclear waste by January 1998; however, the DOE's facility is not expected to be operational until at least 2010. In May 1998, the U.S. Court of Appeals confirmed DOE's statutory obligation to accept spent fuel by 1998, but rejected the request that a move-fuel order be issued. In March 2001, OPPD, along with a number of other utilities, filed suit against the DOE in the United States Court of Federal Claims alleging breach of contract.

Nuclear Decommissioning - OPPD's Board of Directors has approved the collection of nuclear decommissioning costs based on an independent engineering study of the costs to decommission the Fort Calhoun Station. The decommissioning estimates accepted by OPPD's Board of Directors (which exceed the Nuclear Regulatory Commission's minimum funding requirements) totaled $400,445,000, $391,257,000 and $376,903,000 for the fiscal years ending June 30, 2003, 2002 and 2001, respectively. Based on cost estimates, inflation rates and fund earnings projections, no funding was necessary for decommissioning for 2002.

Regulatory Assets and Liabilities - OPPD is regulated by Nebraska State Law and the Nuclear Regulatory Commission (NRC). As a result, OPPD is subject to the provisions of SFAS No. 71. Under this statement, regulatory assets are deferred expenses which are expected to be recovered over some future period, and regulatory liabilities are costs recovered (or reductions in earnings) for expenses expected to be incurred in the future.

Regulatory assets, which are included in deferred charges (Note 5), consist of deferred expenditures for customer energy conservation programs and unamortized loss on extinguished debt. The balance of deferred expenditures for customer energy conservation programs was $12,827,000 and $10,570,000 as of December 31, 2002 and 2001, respectively. The balance of unamortized loss on extinguished debt was $13,643,000 and $14,657,000 as of December 31, 2002 and 2001, respectively.

Regulatory liabilities consist of reserves for uncollectible accounts from off-system sales and rate stabilization. The rate stabilization reserve was established to help maintain stability in OPPD's long-term rate structure. The balance of the reserve for uncollectible accounts from off-system sales was $5,000,000 as of December 31, 2002 and 2001. The balance of the rate stabilization reserve was $32,000,000 and $21,500,000 as of December 31, 2002 and 2001, respectively.

Accrued Production Outage Costs - For major planned production outages, estimated incremental operation and maintenance expenses are accrued prior to the outage. The next major planned production outage is scheduled to begin in September 2003 at the Fort Calhoun Station.

Natural Gas Contracts - Natural gas is one of the fuels used by OPPD in the generation of electricity. During 2001 and 2000, OPPD entered into futures contracts for the purpose of hedging natural gas prices. These transactions were hedges of anticipated acquisitions of natural gas and any gain or loss on these contracts was offset against the cost of natural gas. As a result of these hedging contracts, OPPD incurred additional fuel expense of $375,000 and a net reduction in fuel expense of $77,000 for the years ended December 31, 2001 and 2000, respectively. OPPD did not enter into any natural gas hedging contracts during 2002. mnn) IPPA Annfiil Rnnrt 97 LULU"llUUllpU s -L

Notes to Financial Statements for the Three Years Ended December 31,2002 Fair Value of Financial Instruments - Unless otherwise specified, the carrying amount of financial instruments approximates their fair value.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements - In 2002, OPPD implemented GASB Statement No. 34, Basic Financial Statements - and Managemnent's Discussion and Analysis - for State and Local Governments, which establishes new financial reporting requirements for state and local governments, and GASB Statement No. 38, CertainFinancial Statement Note Disclosures, which modifies, establishes and rescinds certain financial statement disclosure requirements. Significant changes to OPPD's financial statements, as a result of these accounting pronouncements, include the addition of a Management's Discussion and Analysis section to introduce the basic financial statements and provide an analytical overview of OPPD's financial activities, the presentation of the Statements of Cash Flows using the direct method, and additional disclosures in the Notes to Financial Statements.

Reclassifications - Certain amounts in the pnor year's financial statements have been reclassified to conform to the 2002 presentation. These reclassifications had no effect on net income.

2. LONG-TERM DEBT OPPD utilizes proceeds of debt issues primarily in financing its construction program. Long-term debt activity, including the current portion, for the year ended December 31, 2002, was as follows (in thousands):

-  ; , - 2001' Additiors Reductions.'- 2002

'Electric system revenue bonds $577,010 $270,000 $(215,875) $631,135

!'Electric revenue notes - commercial paper series - 100,000 50,000 150,000 Electric revenue minibonds' 58,673 1,092 - (209) 59,556 Subordinated obligation 3,607 (157) 3,450 ETotal e Sse R739 290 $321,092ar s flo ( $844t141d Electric System Revenue Bonds - Electric System Revenue Bonds payments are as follows (in thousands):

Principal Interest OPPD's bond indenture provides for certain restrictions, the most significant of 2003 - $ 45,005, $ 27,462 which are:

. 2004 - 46,815 27,442 Additional bonds may not be issued unless estimated net receipts (as defined) for

- 2005' .. 49,105 25,122 each future year will equal or exceed 1.4 times the debt service on all bonds 2006 51,200 22,656+ outstanding, including the additional bonds being issued or to be issued in the 2007 50,140 20,165 case of a power plant (as defined) being financed in increments.

2008-2012 - 172,710 72,454 In any three-year period, at least 7-1/2% of general business income (as defined) 2013-2017 186,160 30,635 must be spent for replacements, renewals, or additions to the electric system. Any 2018-2022- 7,020 deficiency is to be spent within two years thereafter for such purposes or, if not Total - $631,135- .232 956 so spent, is to be used for bond retirements in advance of maturity.

The average borrowing rates were 4.9%, 5.2% and 5.1% for the years ended December 31, 2002, 2001 and 2000, respectively. The 1993 Series C 2017 Term Bonds and the 1993 Series D 2013 and 2016 Term Bonds were refunded with proceeds from the 2002 Series B Bonds. The advance refunding reduced total debt service payments over the next 15 years by $18,813,000 and resulted in an economic gain (difference between the present values of the old and new debt service payments) of $13,198,000. The following Electric System Revenue Bonds, with outstanding principal amounts of $522,660,000 and $361,075,000 as of December 31, 2002 and 2001, respectively, have been legally defeased: 1973, 1986 Series A,1992 Series A,1992 Series B,1993 Series BTerm, 1993 Series C 2017 Term and 1993 Series D2013 and 2016 Term Bonds. Such bonds are funded by Government securities deposited by OPPD in irrevocable escrow accounts. Accordingly, the bonds and the related Government securities escrow accounts have been removed from OPPD's balance sheets.

Electric Revenue Notes - Commercial Paper Series - OPPD has a Commercial Paper program supported by a credit 28 2002OPPn AnnualReport

agreement for $150,000,000 which expires on October 1, 2004. OPPD had outstanding commercial paper of

$150,000,000 and $100,000,000 as of December 31, 2002 and 2001, respectively. The average borrowing rates were 2.0%, 2.9% and 4.1% for the years ended December 31, 2002, 2001 and 2000, respectively.

Electric Revenue Minibonds - The minibonds consist of current interest-bearing and capital P Irincipal--

appreciation minibonds, which are payable on a H iids7dif&2007 (6.0074- V9,3;4 - $ 9,333 parity with OPPD's Electric Revenue Notes - s, ue . _ ,

Commercial Paper Series, both of which are Ydue 2021 (5.05%) 24,928 25,0 subordinated to the Electric System Revenue -~bot153,206 ~ 53,414 Bonds. The outstanding balances at December 31 L rete interest on capital appreciation minibonds 6,350 5,259 were as shown at right (in thousands): a r -_-$39,5 6$5856 73 Subordinated Obligation - The subordinated obligation is payable in annual installments of $481,815, including interest at 9.0%, through 2014. _n -

Fair Value Disclosure - The aggregate carrying amount and fair value of OPPD's long-term debt, IFYng Fair Carrying Fair including current portion at December 31, were as shown at right (in thousands): = _ _________ 6, (

The estimated fair value amounts were determined using rates that are currently available for issuance of debt with similar credit ratings and maturities. As market interest rates decline in relation to the issuer's outstanding debt, the Id fair value of outstanding debt financial instruments with fixed interest rates and maturities will tend to rise.

Conversely, as market interest rates increase, the fair value of outstanding debt financial instruments will tend to decline. Fair value will normally approximate carrying amount as the debt financial instrument nears its maturity date.

The use of different market assumptions may have an effect on the estimated fair value amount. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that bondholders could realize in a current market exchange.

3. SPECIAL PURPOSE FUNDS Special purpose funds of OPPD are as follows:

The Construction Fund is to be used for capital improvements, additions and betterments to and extensions of OPPD's electric system, or for payment of principal and interest on Electric System Revenue Bonds.

The Electric System Revenue Bond Fund isto be used for the retirement of term and serial bonds and the payment of the related interest.

Segregated Fund - Rate Stabilization is to be used to stabilize rates over future periods through the transfer of funds to operations as necessary. The balance of the Rate Stabilization Fund was $21,500,000 and $16,500,000 as of December 31, 2002 and 2001, respectively. In January 2003, $10,500,000 was funded for the 2002 provision for rate stabilization.

Segregated Fund - Other represents assets held for payment of customer deposits, refundable advances, certain other liabilities or refunds, and funds set aside as part of OPPD's self-insured health insurance plans (see Notes 8 and 9). The balances of the funds at December 31 were as follows (inthousands):

The Decommissioning Funds are for the cost of I egregated Fund - self-insurance Seregate un - other

$5,16, decommissioning Fort Calhoun Station when its operating license expires. The Decommissioning Funds are held by outside trustees in compliance with the decommissioning funding plans approved by OPPD's Board of Directors (see Note 1). The 1990 Plan was established in accordance with NRC regulations, for the purpose of discharging OPPD's obligation to decommission, as defined by the NRC, the Fort Calhoun Station. The 1992 Plan was established to retain funds in excess of NRC ---.

minimum funding requirements based on a 1992 independent -2 engineering study which indicated that decommissioning costs _

Iecommissioning ru-st -_9 Man 5,69 would exceed the NRC minimum requirements. The balances of the funds at December 31 were as shown at right (in thousands):

2002 OPPO Annual Report 29

Notes to Financial Statements for the Three Years Ended December 31,2002

4. DEPOSITS AND INVESTMENTS Bank Deposits - OPPD's bank deposits at December 31, 2002 and 2001, were entirely insured or collateralized with securities held by OPPD or by its agent in OPPD's name.

Investments - OPPD's cash equivalents and investments included in the Construction Fund, Electric System Revenue Bond Fund, Rate Stabilization Fund, Segregated Funds and Decommissioning Funds are held by OPPD's agents in OPPD's name in trust in accordance with OPPD's bond covenants and Nebraska state statutes. OPPD does not invest in securities such as mortgage-backed investments and reverse repurchase agreements. The investments, which are primarily recorded at fair market value, consist of U.S. Government and Agency securities, Investment Grade Corporate Bonds and Secured Investments collateralized by U.S. Government Securities. Fair values were determined based upon quotes received from the trustee's market valuation service.

5. DEFERRED CHARGES -

The composition of deferred charges at DIeferred financing costs $15,920 $15,747 December 31 was as shown at right (in Capitalized software - 15,350 9,123 thousands): Customer energy conservation programs 12,827 10,570 Other -- ^ v8,637 5135

6. RETIREMENT PLAN Total - $52,734 $40,575 Substantially all employees are covered by OPPD's Retirement Plan (the "Plan"). It is a single-employer defined benefit plan which provides retirement and death benefits. Generally, employees at the normal retirement age of 65 are entitled to annual pension benefits equal to 2.25% of their average compensation times years of credited service. The Plan was established and may be amended under the direction of OPPD's Board of Directors, and is administered by OPPD. Cost-of-living adjustments are provided to retirees and beneficiaries at the discretion of the Board of Directors.

The Plan information, based on the actuarial valuation on January 1, was:

. __. . Aver I_

-- 7 0FrFfiund AAas -a - .....

Actuanal Value Actuanal Accrued - - Percentage of

- of Assets Liability (AAL) Over Funded AAL I Funded Ratio Covered Payroll Covered Payroll I (a) - - - Nd - ', - fa-b) . LaN , &((a-b ci I I (thousands) - I (thousands) -.

2002 $544,184 $425,267 . $118,917

• 128 0% $126,587 93.9%

• 2001 $533,668 $385,747 $147,921

$ 1383% $121,300 121.9%

2000 $509,772 $354,291- $155,481 143.9% $114,099 - 136.3%

Contribution requirements are actuarially determined, using the Attained Age (level percent of pay) Method.

Employees contribute 4.0% of their covered pay to the Plan. OPPD is obligated to contribute the balance of the funds needed on an actuarially-determined basis. For the year ended December 31, 2002, the annual pension cost and required contribution by OPPD was $5,625,000. There was no net pension obligation for the year ended December 31, 2002. For the years ended December 31, 2001 and 2000, there was no annual pension cost, net pension obligation or OPPD contribution made to the Plan. Plan contributions by OPPD employees were

$5,483,000, $5,063,000 and $4,802,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

The assumptions used in computing the actuarial 2002 2001 2000 liability for each year were as shown at right:

Discount rate - 6.85% - 6.21% 6.31%

Audited financial statements for the Retirement Plan Expected rate of retum 8.75% 9.00% 9.00%

may be reviewed by contacting the Pension Rate of compensation increase- 5.20% 5.20% 5.20%

Administrator at OPPD's Energy Plaza, Omaha, Cost-of-living adjustment 2.00% -3.0% 2.50%

Nebraska.

OPPD provides for other employee benefit obligations to allow certain current and former employees to retain the benefits to which they would have been entitled under OPPD's Retirement Plan, except for federally mandated limits and to provide supplemental pension benefits. The related pension expense, fund balance and employee benefit obligation are not material for the years ended December 31, 2002, 2001 and 2000.

30 2002 OPD Annual Report

7. SUPPLEMENTAL RETIREMENT SAVINGS PLAN OPPD sponsors a Defined Contribution Supplemental Retirement Savings Plan - 401(k) and a Defined Contribution Supplemental Retirement Savings Plan - 457. Both plans cover all full-time employees, and allow contributions by employees that are partially matched by OPPD. Each Plan's assets and income are held in an external trust account in the employee's name. OPPD's matching share of contributions was $6,258,000, $5,327,000 and $4,882,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

8. OTHER LIABILITIES The composition of other liabilities at December 31 was as shown at ar enrcment _ 4,408 $ 5,769 right (inthousands): i r v OWN 2,961 ,

_ _thP insurance reserve 1 =3r

9. SELF-INSURANCE HEALTH PROGRAM AA OPPD's Administrative Services Only (ASO) Health Insurance 1,778 1,98 Program is used to account for the health insurance claims of ota 11044 all active and retired employees. With respect to the ASO program, reserves sufficient to satisfy both statutory and OPPD-directed requirements have been established to provide risk protection (see Note 8).

Additionally, private insurance covering claims in excess of 120% of expected levels, as actuarially determined, has been purchased. Actual net claim payments, which did not exceed 120% of the expected claims level during 2002, 2001 and 2000, were $23,080,000, $18,833,000 and $18,008,000, respectively.

Id

10. COMMITMENTS OPPD's Construction Budget provides for expenditures of $192,440,000 during 2003 and $1,395,736,000 for 2004 through 2012, of which approximately $34,054,000 was under contract at December 31, 2002.

OPPD has wholesale power sales commitments which extend through 2010 of $37,180,000. OPPD has wholesale power purchase commitments which extend through 2003 of $106,000.

OPPD has coal supply contracts which extend through 2003 with minimum future payments of $21,660,000. OPPD also has coal transportation contracts which extend through 2003 with minimum future payments of $26,831,770. These contracts are subject to price escalation adjustments. In 1998, OPPD purchased 56.7 miles of rail line running from the Nebraska City Station to Collegeview, Nebraska, located south and east of Lincoln, Nebraska (the "Rail Spur"). The Rail Spur was purchased from Burlington Northern Santa Fe Railroad to provide competitive access to the Nebraska City Station. In order to operate over and maintain the Rail Spur, OPPD has a rail transportation contract with Kyle Railroad and a rail maintenance contract with Kelly Hill Company. Both contracts are expected to be renegotiated upon their expiration at the end of 2003.

Contracts are in effect through 2005 with estimated future payments of $25,040,000 for the purchase, conversion and enrichment of nuclear fuel. Additionally, OPPD has contracts through 2005 for the fabrication of nuclear fuel assemblies with estimated future payments of $6,800,000.

11. CONTINGENCIES Effective August 20, 1998, the Price-Anderson Act was amended. Under the provisions of the Act, OPPD and all other licensed nuclear power plant operators could each be assessed for claims and legal costs in the event of a nuclear incident in amounts not to exceed a total of $88,095,000 per reactor per incident with a maximum of $10,000,000 per incident in any one calendar year. These amounts are subject to adjustment every five years in accordance with the Consumer Price Index.

OPPD is engaged in routine litigation incidental to the conduct of its business and, in the opinion of Management, based upon the advice of its General Counsel, the aggregate amounts recoverable from OPPD, taking into account estimated amounts provided in the financial statements and insurance coverage, are not material.

2002 OPPo Annual Report 31

Electric System Revenue Bonds Outstanding l$ inthousandsl as of December 31,2002

- E1993 ISSUE 1993 ISSUE 1993 ISSUE. 1993 ISSUE SERIES A SERIES B SERIES C - SERIES D 5- .] Amount, ,

Maturity Date Interest Interest Interest Interest February I Rate Amount Rate Amount Rate Rate Amount 2003 5.10' 16,140, 5.00 6,340 4.70 6,080 2004 r 5.25.. 18,220 5.00 4,670 t - 4.75 6,960 2005 -5.30 18,780 - 5.10 5,710 r 4.80 7,110 2006 5.40 20,150 5.20 5,710 t '- 4.90 7,280 2007 5.50 21,330 5.30 6,230 .. 5.00 10,080 2008 4 5.40 9,340 5.40 13,230 5.10 11,000 2009 b 5.40 14,020' 2010 , 5.50 14,860 2011 . 5.50* 15,750 2012 t ' 5.50* 16,700 .

2013 I 5.50* 17,700 2014 5.50* - 18,770 2015 2016 ti I 2017 - _ . _ ___.

2018 -

2019 2020 .. '

2021 -

2022 S > . ^F -.

Total ,

Outstanding 94,620;] 38,000 -111,030 48,510 Bonds Redeemed 162  :. 6 to 12/31/02 Original Issue 1

I

-184,700 1

90,080, _._63,330 126,200 1

164,200 1,

-174,360 1 153,890 2

202,400

• Term Bonds

• The 1973 Issue was defeased to maturity ssith final maturity on February 1,2003 *The 1993 Series BTenm Bonds ssere defeased to maturity wth final maturity on February 1,2017.

• The 1986 Series AIssue was defeased to maturity smth final maturity on February 1,2015. OPPD has expressly and absolutely retained its nght to call and redeem these bonds

• The 1992 Senes BIssue sias defeased to maturity with final matunty on February 1,2017 pnor to their stated matunhr 32 2002OPPD Annual Report

1998 ISSUE 2002 ISSUE SERIES A SERIES B i

Interest Interest Rate Amount Rate Amount 4.50 7,145 II 4.05 7,145 i

4.10 7,145 i 4.20 7,130 i 4.50 16,050 I 4.50 11,430 i i

4.50 11,970 4.50 12,590 4.50 13,270 5.00 13,990 5.00 14,730 4.25 35,410 4.25 38,200 4.25 22,360 28,565 190,000 21,435 50,000 190,000

• The 1993 Series C2017 Term Bonds were defeased to the call date of February 1,2003.

• The 1993 Series D2013 and 2016 Term Bonds were defeased to the call date of February 1,2003.

2002 OPPD Annual Report 33

I I

.~4 .

3 I, S 1*,

Geoffrey C. Hall Anne L.McGuire Del V. Weber Chairman of the Board Vice Chair of the Board Treasurer Attorney at Law Nurse Educator President, Omaha Community Foundation; Chancellor Emeritus University of Nebraska at Omaha F1{

Kirk E.Brumbaugh Mlchael J. Cavanaugn N.P. Dodge Jr.

Secretary Board Member Board Member Senior Partner and Principal, Police Lieutenant, City of Omaha; President, N.P. Dodge Company Brumbaugh &Quandahl Law Firm Real Estate Investor - Manager V I _

II t'

I-I, il JOflfl K. Green Frederick J. Ulrich II Board Member Board Member i

Attorney at Law Farmer, Cattle Feeder II l** '

• 4 I

-K- I I 3 anagement Fred M.Petersen Charles N. Eldred Timothy J. Burke President, Vice President, Vice President Chief Executive Officer Chief Financial Officer

'resic

Statistics 202~20Q 199 12O 19TX19 19:'19 11194 9 3j Total Utility Plant (at year end)

(in thousands of dollars) 3,065,723 2,876,799 2,735,437 2,621,444 2,455,004 2,360,495 2,309,733 2,235,631 2,188,106 2,113,562 Bonded Indebtedness (at year end)

(in thousands of dollars) 631,135 577,010 637,235 696,040 745,630 813,860 761,020 947,390 974,510 998,060 Operating Revenues (in thousands of dollars)

Residential ....... 214,447 202,984 196,923 188,187 192,481 183,178 170,021 171,687 165,813 160,489 General Service - Small... 177,063 176,145 166,441 161,901 159,844 157,406 150,388 145,096 147,669 144,312 General Service - Large .. 75,946 76,197 75,976 76,513 79,359 76,806 75,016 73,395 75,483 77,760 Govemnment and Municipal 12,723 12,589 12,270 11,936 11,687 11,356 10,937 8,577 10,626 10,505 Off-System Sales 73,256 91,045 110,300 78,741 62,550 44,484 39,908 29,170 4,211 3,673 Accrued Unbilled Revenues (1,268) 104 2,541 1,650 282 1,554 (161) 998 (279) (283)

Provision for Rate Stabilization (10,500) (5,000) (11,500) (5,000) - - - - - -

Other Electric Revenues 11,357 14,731 14,238 9,802 8,747 9,169 7,413 6,424 6,173 5,904 Total 553,024 568,795 567,189 523,730 514,950 483,953 453,522 435,347 409,696 402,360 Operation &Maintenance Expenses (inthousands of dollars) . 347,121 353,767 345,378 329,323 306,864 283,307 278,251 261,981 229,976 226,903 Payments in Lieu of Taxes (inthousands of dollars) 18,553 18,234 17,645 16,852 16,638 16,447 15,499 15,263 15,515 15,104 Net Operating Revenues before Depreciation and Decommissioning (inthousands of dollars) 187,350 196,794 204,166 177,555 191,448 184,199 159,772 158,103 164,205 160,353 Net Income (inthousands of dollars) 80,621 69,867 70,850 49,014 63,993 47,152 39,339 47,835 52,115 45,203 Kilowatt-Hour Sales (inthousands)

Residential ............. 3,151,895 3,065,377 2,880,289 2,718,585 2,796,585 2,688,951 2,577,624 2,571,881 2,467,405 2,361,565 General Service - Small ... 3,272,028 3,279,890 3,097,835 3,014,202 2,971,390 2,894,595 2,787,471 2,657,948 2,580,258 2,434,023 General Service - Uarge ... 2,290,368 2,302,311 2,287,966 2,304,441 2,443,625 2,323,253 2,305,328 2,124,023 1,930,664 1,853,975 Govemnment and Municipal 81,593 82,775 81,268 80,868 80,286 79,572 78,710 79,732 80,906 81,081 Off-System Sales-.....3,613,340 3,952,632 4,208,943 3,318,409 3,105,942 2,544,508 2,492,385 1,855,154 177,489 153,396 Accrued Unbilled kVh ... (23,697) (5,268) 52,739 23,168 9,369 54,222 7,358 23,161 7,707 (4,676)

Total -...... 12,385,527 12,677,717 12,609,040 11,459,673 11,407,197 10,585,101 10,248,876 9,311,899 7,244,429 6,879,364 Number of Customers (average per year)

Residential 266,464 261,286 256,541 251,057 245,890 241,626 237,584 233,879 230,391 227,181 General Service - Small 37,807 37,008 36,088 35,553 34,932 34,555 33,993 33,137 32,438 31,685 General Service -Large 117 116 110 105 103 99 99 97 95 94 Govemnment and Municipal 594 555 543 560 567 551 555 542 516 503 Other Electnic Utilities 54 49 49 45 40 36 34 31 7 5 Total. - - 305,036 299,014 293,331 287,320 281,532 276,867 272,265 267,686 263,447 2546- -

Residential Statistics (average) kWh/Customer .... 11,829 11,732 11,227 10,829 11,373 11,129 10,849 10,997 10,710 10,395 Dollar Revenue/Customer 804 79 776 87 767 61 749 58 782 79 758 11 715 62 734 08 719 70 706.43 Cents/kWh-....... 680 6 62 684 6 92 688 6 81 665 676 672 6.80 Generating Capability (at year end)

(in kiowatts) ..-2,227,100 2,211,600 2,209,600 2,100,000 2,089,500 2,067,000 2,033,100 1,924,200 1,924,200 1,924,200 System Peak Load (in kilowatts) 2,037,400 1,994,100 1,976,900 1,965,600 1,914,000 1,851,800 1,813,900 1,827,900 1,645,900 1,603,100 Net System Requirements (kilowatt-hours in thousands)

Generated .... 11,428,893 11,516,924 11,760,938 10,724,976 10,679,310 9,698,231 9,260,923 9,073,968 8,876,535 8,846,354 Purchased and Net Interchanged ...- (2,122,701) (2,557,704) (2,833,243) (2,190,252) (1,960,844) (1,281,496) (1,096,996) (1,206,817) (1,418,694) (1,697,288)

Net . ............. 9,306,192 8,959,220 8,927,695 8,534,724 8,718,466 8,416,735 8,163,927 7,867,151 7,457,841 7,149,066 Certain aniounts haive been reclassified to confonn with the 2002 presentation 36 2002OFPPfAnnualIReport

I