Text

Transmittal of Omaha Public Power District (OPPD) 2006 Annual Financial Report
	ML071140097
Person / Time
Site:	Fort Calhoun
Issue date:	04/12/2007
From:	Mcmanis J; Omaha Public Power District
To:	; Document Control Desk, NRC/NRR/ADRO
References
	LIC-07-0032
	Download: ML071140097 (49)
	v • d • e

Omaha Public Power District 444 South 16th Street Mall Omaha NE 68102-2247 April 12, 2007 LIC-07-0032 U, S. Nuclear Regulatory Commission ATTN.: Document Control Desk Washington, DC 20555

Reference:

Docket No. 50-285

SUBJECT:

2006 Annual Financial Report In accordance with 10 CFR 50.7 1(b), enclosed please find one copy of the Omaha Public Power District's (OPPD) 2006 Annual Report.

If you should have any questions, please contact Tom Matthews at (402) 533-6938. No commitments are made to the NRC in this letter.

erely, rSi J . McManis nager - Nuclear Licensing JLM/mle

Enclosure:

OPPD Annual Report.

c: B. S, Mallett, NRC Regional Administrator, Region IV A. B. Wang, NRC Project Manager J. D. Hanna, NRC Senior Resident Inspector Hb--_4 Employment with Equal Opportunity

I hank you for-yourinterest in Omaha Public Power District's arinual report. The purpose of this document is to provide you with financial and operat ional information regarding the past year.

It was a historic year for the utility, and numbers alone don't tell the whole story. The 'big' outage at Fort Calhoun Station (OPPD's nuclear power plant), continued work on our new coal plant (Nebraska City Station Unit 2), and the move toward automated meter reading are among the many reasons OPPD spent the year Making History.

7 stor e,as "W. AWfill continue to give our customers that same outstanding service that has always characterized our operations... the type of service to which our customers have become accustomed and which has put our company in the forefront among the electrical utilities of America."

- J.E. Davidson, OPPD'sfirst President, 1946-1949 "As we look to the next 60 years, we must never forget how important our work is to the customers we serve. Our product is as important to them as air, food and water. Our work must continue to be stamped with our commitment to excellence. It must always be driven by our goal of exceeding customer expectations."

- W. Gary Gates, OPPD Presidentand Chief Executive Officer, 2004-present

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H4istdrChonr

/ J.D. Power and Associates: received sixth consecutive award for the highest residential custoer fisatisfaction rating among medium-sized utilities

Gold Well Workplace: awarded Gold Well Workplace honor from the Wellness Council of America for outstanding efforts in addressing employee health and wellness Tree Line USA Utility: received sixth consecutive honor from the National Arbor Day Foundation and the National Association of State Foresters Better Business Bureau Integrity: earned Better Business Bureau Integrity Award for distinguishing itself among companies with more than 100 employees regarding integrity, ethics, customer interaction, community service and planning issues On the cover:

Construction continues on Nebraska City Station Unit 2,a 663-megawatt coal plant; one of the old steam generators is removed from the Fort Calhoun Station containment buildingduring the historic2006 outage; the full force of meter readers assembles prior to the changeover to automated meter reading.

Service Area Map ............................................................................... 2 Chairm an and CEO Message ......................................... .................... 4 Board of Directors ............................. ........ ....... 5 Senior Managem ent ................................................

Operations Review ................................ .................. .......... 66...............

Managem ent's Discussion and An lys ............................................................ 14 Report of Managem ent .............. .. ......................................................... 26,/

Independent Auditors' Report . . ... ...... . ,.... . ............. 27 Balance Sheets.Bala .>.--ce... h...

ee s..... ... ... ... : ... ......: .. ... , ........ ..... . , ... :...... 228 Statements of Revenues, Exoeiises and Changes in/Equity ................... ............ ...... ... 30 Statem ents of Cash Flow s ... .... ....... I.......... ..... .... ..................... 31...............

31 Notes to Financial Statem ents ............. . .... .... ....... .... . ...... ,32 2

Statistics '....-...............44 Sta. .t .sti .s ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...: .. . . . . . .'. . . . . . . . . . . . . . . . . . .;

4 Investor Relations Corporate Information and Corporate Officers......................... ... '.45

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J.D. Power and Associates 2001-2006 Electric Utility Residential Customer Satisfaction Studies.SM 2006 study based on a total of 26,688 consumer responses. The top 21 medium electric companies were ranked in the study. www.jdpower.com

5outb 7 '

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o. a publly ownnedelectric eseaNbaska that serves pou1, "N~ih mah Stý nand Nebrask, bthcoa lplans,and R Staio, Sttoancla lytproie Of the squae-rme sevf&tenitory.

0 as-load plants are; by three pe gplants and tenewab]

resources, ding landfill as and, 2 zooo OrFD)AnnuaKport

Business leaders sometimes use the term 'history-making' to tout company accomplishments others may regard as quite ordinary. If we describe the events of 2006 at Omaha Public Power District as history-making, we do so with a clear conscience. It was, literally, a remarkable, historic year.

The 'big' outage at Fort Calhoun Station (FCS),

OPPD's nuclear facility, grabbed the biggest headlines because of its significance to the future of nuclear energy in the U.S. During the 85-day refueling and refurbishment outage, most of the plant's major components were replaced, essentially giving OPPD customers a 'new' plant that will provide safe, clean energy to 2033 and beyond. W. Gary Gates and Del D. Weber FCS benefits from a modest power upgrade as a result of the refurbishment, but the resulting extra capacity is not nearly enough to meet the expected future energy demands of our customers. That is the reason Nebraska City Station Unit 2 (NC2) is being constructed. The 663-megawatt facility, expected to be operational in 2009, reached nearly 20-percent completion by the close of 2006.

It is difficult to express the tremendous pride we feel regarding the people involved with these projects and the results they were able to achieve. The FCS outage finished $36 million under budget and five days ahead of schedule. NC2 construction proceeded ahead of schedule and under budget, as well, and is being built at one of the lowest costs per megawatt of any fossil fuel plant under construction across the nation.

These extensive projects in no way diminish the many smaller-scale projects accomplished during the year or the outstanding work by members of OPPD's family performing daily operations. We invite you to read the remainder of the annual report to learn about the many historic events of 2006, a year which, fittingly, is also OPPD's 60th anniversary.

Our thanks go out again to our colleagues on the Board of Directors and in Senior Management, to all the fine men and women of OPPD for their diligent, consistent efforts and support, and to you, for your interest in OPPD - a company we believe is one of the finest utilities in the nation.

W.Gary Gates Del D. Weber President and ChiefExecutive Officer Chairman of the Board

ý+- 206OOF D Annual Report

Del D.Weber Chairman of the Board Chancellor Emeritus, University of Nebraska at Omaha Frederick J. Ulrich Vice Chairman of the Board Farmer, Cattle Feeder N.P. Dodge Jr.

Secretary President, N.P, Dodge Company John K.Green Treasurer Attorney at Law Michael J. Cavanaugh Board Member Police Lieutenant, The OPPDBoard of Directors includes, from the left: Anne L.McGuire, Michael J.Cavanaugh, City of Omaha (Retired);

John R. Thompson, N.P. Dodge Jr., Del D.Weber, Geoffrey C.Hall, John K.Green and FrederickI. Ulrich. Real Estate Investor -Manager Geoffrey C. Hall Board Member Attorney at Law Anne L. McGuire Board Member Nurse Educator John R.Thompson Board Member Land Developer W. Gary Gates President, Chief Executive Officer Charles P. Moriarty Vice President, Chief Financial Officer Ross T. Ridenoure Vice President, Chief Nuclear Officer Timothy J. Burke Vice President Adrian J. Minks Vice President Roger L. Sorenson Vice President The OPPD senior management team includes, from the left: Roger L. Sorenson, Ross T Ridenoure, Adrian J.Minks, W. Gary Gates, Dale F. Widoe, Charles P. Moriarty and Timothy f. Burke. Dale F.Widoe Vice President zoo6 OFFD Annual Keport 5

Sperahons, "eview Makm"n mstorujq witIA jt abegan, vision assparked mosft great by theworks goalsbegin, with a vision...

of1xceeding our customers' expectations and anticipating their

/' future needs.

As the 21st century approached, a growing economy and tlih "digitalization" of households in OPPD's service territory triggered increasing energy demands. OPPD's 478-megawatt nuclear facility, Fort Calhoun Station, was nearing the end of its licensed "life," and OPPD's leaders faced a decision: begin steps to decommission the plant or step up to extend its life.

Nuclear power was gaining favor again in our country as a popular energy choice, but the fact remained that no U.S. nuclear facility had been built since 1973.

To meet regulatory requirements and maximize the benefits of relicensing Fort Calhoun Station for 20 additional years, the plant essentially would need to be

rebuilt;You might say OPPD owned a classic auto with a well-kept chassis, but it needed a new power train.

4;1,V After thorough research, a vision emerged of extending .~ NJ

~'1 OPPD's nuclear energy production to 2033 and, poten--

tially, even longer. The vision took shape as a plan under -

the name PLEX, or Plant Life-Extension. I, To take advantage of economies of size, scale and time, OPPD's leaders decided to embark on nothing less than the most ambitious refueling and refurbishment outagecr---::-

in nuclear industry history. I Hundreds of people combined their talents to complete the extraordinary feat in 85 days, five days ahead of schedule and $36 million under budget.

Avision realized. By many, for many.

6 zoo6 OFFD Annual Kcport

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Making 5storU. 40: 10 Wk I it CO-'N

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irm ing our va ues utomated meters were~being installed. High-Performance Organization efforts were in Historic (iJrJte\s Meter readers manually \

full swing. Nebraska

// City Unit 2 construction recorded usage in the early was progressing at a vigorous pace. Fort Calhoun

'days. In 2006, the first 80,000 Station was undergoing the most aggressive nuclear

I of 330,000 automated meters outage ever attempted.

were installed. The conversion Change isinevitable. It can bring progress. It can means increased service for bring challenges. And, sometimes, the best change is customers and decreased expenses no change at all.

for OPPD. After a seven-year Amid a whirlwind of historically significant events payback period, savings of and changes in 2006, some things remained the same.

$3.3 million per year are Chief among them were OPPD's core values.

projected.

Our list of core values could just as accurately be labeled: What motivates us? What is most important to us? Why do we do what we do? OPPD employees affirm these values on a daily basis by the work they do and the way they do it.

OPPD's core values are Safety (our most important value), Accountability, Commitment to Customers, Excellence, Teamwork and Family Orientation.

Amid a whirlwind of historically significant events and changes in 2006, some things remained the same.

And that isgood.

0o6 OrF'D Annual Report 9

Making 1istor . thk etermining what ishistoric and what isnot is a subjective matter. On a personal level, the occasions that form our identity and make up the "plot points" of our life may be remarkable events.

But, just as likely, they may be seemingly ordinary incidents that go unnoticed by others.

The same istrue in the life of OPP.D. One event in 2006 that could be categQrized as great or small, historic or not historic, depending on your point of view, isthe expansion of Elk City Station, our landfill-gas plant. The amount of energy the plant produces is significant. The fact that itis renewable is of great importance.

Another act that may be viewed as great or small oc-curred in December, when OPPD sent 21 field employees to help people in the St. Louis area who'were, literally, in the dark. Amajor ice storm had left' approximately 2.4 million people in central and southern Illinois and parts of Missouri without power.

From OPPD's point of view, lending a hand in times of trouble and expanding our renewable energy portfolio are responsibilities we view as privileges. Both are vital to our future and significant for the health of our enation and world. Will the expansion of Elk City Station or the assistance we provided to our Midwestern neighbors one day be considered

> historic? Only time and perspective will tell.

Pesto the pandemic bug

acts great and small His5toric Campaign OPPD must be prepared for any emergency, as it learned early ii' its history with the flood of 1952. Employees built a flood wall, earthen dikes and filled hundreds of sandbags to keep the swollen Missouri River from Jones Street Station, at left. In addition to natural disasters, OPPD now has emergency plans addressing concerns such as terrorism and a potential influenza pandemic. Enter Pesto the pandemic bug, who has become OPPD's mascot for pandemic awareness. Through a unique in-house communication campaign, the Anti-Pesto Campaign©, employees have been educated about what they can do to prevent little bugs from causing big problems.

NAaking istor~p.~

5 ince its humble beginning in 1946, Omaha Public Power District has grown from serving more than 85,000 customers in a 2,500 square-mile service territory to serving nearly four times the customers in double the geographic area. Early on, OPPD delivered roughly 116,000 kilowatts of power.

The 1950s ushered in a megawatt mind-set to keep pace with the proliferation of consumer appliances and advancements in agriculture. Steady growth in subsequent decades and adherence to the principles of providing low-cost, reliable energy and outstanding customer service has brought OPPD to a position as one of the most respected public utilities in the nation.

As for recent history, OPPD implemented the second in a series of three general rate increases, necessary and prudent during this period of unprecedented capital spending. Even with the modest rate increases, OPPD's rates remain more than 20 pe~rcent below the national average and are

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driving'force behind the area's economic growth and high quality of life.

As we forge our future with projects such7 as'the refur-bishment of Fort Calhoun Station or the/ construction of

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Nebraska City Station Unit 2, we relish our national/ stature. /,

-This is especially meaningful to'6ur company since we do business in the only all-public-power state in the U.S.

In-fact, one ofQOPPD's goals is to become a leader among national utilities, public or private.

We understand that achieving that goal can only come as a result of achieving our goals today while strivings>

<toward innovative solutions for tomorrow. We know that true excellence comes from honoring commitments in the present, responsibilities of the future and traditions of the past. / 'V \

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iz..zbo6QFP \nmu~al Report

_ing the uture andionorin thc past H istoric Demand When some people think of Nebraska, they think only of plows and pastures. Those who know Omaha and the surrounding area understand that, while agriculture is and always will be a core industry, this region's best economic descriptor is diversity. Information services, insurance, medicine, banking and business - all are major economic pillars and substantial energy users.

You may be surprised to learn that Omaha ranks eighth among the nation's 50 largest cities in both billionaires and Fortune 500 companies per-capita, a higher dual-list ranking than can be claimed by any coastal city. In 2006 Cabela's, pictured below, "The World's Foremost Outfitter" of hunting, fishing and outdoor gear, joined OPPD's customer base. Its showroom contrasts with this 1960-era retail store, at left.

The area's business climate is strong. It's growing. And it's fueled in no small measure by the availability and reliability of low-cost energy provided by OPPD.

OVERVIEW OPPD isa fully integrated electric utility serving a 5,000-square-mile, 13-county region in eastern Nebraska. All corporate powers of OPPD are vested in aBoard of Directors consisting of eight members representing specific areas of the service territory. OPPD's revenues are from retail sales, off-system sales and other electric products and services. The economy of the service territory is ex-panding, and deregulation in Nebraska does not appear to be imminent at this time. Corporate headquarters islocated in Omaha, Nebraska, with generating plants, service centers and customer service offices strategically located throughout the service territory.

In December 2006, OPPD proudly celebrated 60 years of service to its customer-owners. Public power isa critical element in the energy future of this nation. Public power companies are directly accountable to the people they serve, not to private stockholders.

Across the country, publicly owned utilities, like OPPD, continue to lead the way by providing reliable, low-cost energy with re-sponsive service to their customer-owners. To ensure OPPD's customers reap the numerous benefits of public power, OPPD focuses on strong strategic planning, effective risk management practices and sound financial policies and business practices.

OPPD continually plans for the future energy needs of its customer-owners. InDecember 2006, OPPD finished amajor life-exten-sion outage at the Fort Calhoun Station, which will enable the plant to operate beyond the term of its license in 2033. This suc-cessful 85-day effort marked the most ambitious refueling and maintenance outage undertaken in the history of the commercial nuclear power industry.

In addition, construction continues on the Nebraska City Station Unit 2,a 663-megawatt fossil fuel facility adjacent to the Nebraska City Station Unit 1.The District will use 50% of the output for its customers and has executed long-term Participation Power Agreements with seven public power utilities in.Nebraska, Missouri and Minnesota for the remaining half of the output.

With the significant capital expenditures during 2006 and over the next several years, OPPD has a financing plan that ensures its financial stability during this period of high capital spending. Management focuses on cost control and the efficient utilization of resources to achieve OPPD's mission of delivering high-value electricity and other essential services to our customers.

Effective planning and cost-control efforts have enabled OPPD to successfully hold rates well below the national average. In 2006, a general rate increase of 3%was approved along with a revenue strategy which provided for additional revenues of

'approximately $16,000,000 per year for 2007 and 2008 for capital financings. For 2007, these additional revenue requirements will be attained through a general rate increase of approximately 2.8%. Even with these increases, OPPD's rates will still remain well below the national average.

-OPPD has a Debt Retirement Reserve to help manage the long-term risks associated with the significant additional capital expenditures and related debt issues. In 2006, OPPD had a net increase of $15,000,000 to this reserve to use in future years for the retirement of debt and the maintenance of adequate debt service coverage ratios. The balance of the Debt Retirement Reserve was $105,000,000 at December 31, 2006.

OPPD isrequired to have sulfur dioxide allowances equal to its emission levels. One sulfur dioxide allowance must be owned for each ton of sulfur emitted by the plants. Due to a surplus inventory of currently usable sulfur dioxide allowances, OPPD sold 25,000 current allowances and purchased 25,000 allowances usable between 2010 and 2014. This transaction increased other electric revenues by $18,555,000 for 2006, while maintaining an equivalent number of allowances to meet future requirements.

OPPD has a stable, diversified customer base which continues to grow steadily. Services to Offutt Air Force Base (Offutt) have been expanded with the transfer of ownership of its distribution system to OPPD in January 2007. Inaddition, OPPD began providing electric transmission and distribution services for Offu.tt's military housing area in 2006.

Specific performance measures addressing safety, return on the business, customer satisfaction and cost management continue to be used to align employees around a consistent, clear vision. Thanks to the contributions and teamwork of OPPD's employees, these measures were exceeded for 2006. This success translates into benefits for customer-owners and supports OPPD's main thing of exceeding customer expectations. As "your energy partner," OPPD will continue to work with its customer-owners to meet their energy needs safely, reliably, and affordably, as it has for the past 60 years.

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

e+ 2006 OFD An,,u-al Keport

FINANCIAL POSITION AND RE$ULTS OF OPERATIONS The following summarizes OPPD's financial position at December 31 (inthousands).

Current Assets $ 561,411 $ 435,489 Capital Assets 2,655,755 2,224,529 Other Long-Term Assets 586,299 460,813 Total Assets $3,803,465 $3,120,831 Current Liabilities $ 413,766 $ 281,516 Long-Term Liabilities 1,939,260 1,473,166 Total Liabilities 2,353,026 1,754,682 Equity 1,450,439 1,366,149 Total Liabilities and Equity $3,803,465 $3,120,831 The following summarizes OPPD's operating results for the years ended December 31 (inthousands).

Operating Revenues $676,828 $666,552 $566,315 Operating Expenses 574,098 554,995 507,340 Operating Income 102,730 111,557 58,975 Other Income 47,755 21,313 10,995 Interest Expense 66,195 50,699 45,126 Net Income $84,290 $ 82,171 $ 24,844 Operating Revenues The following chart, left, illustrates the composition of OPPD's operating revenues (inmillions) for the past three years. The following chart, right, illustrates the percentage share of revenues by customer class for 2006. Other electric revenues include proceeds from the sale of sulfur dioxide allowances, connection charges, customers' forfeited discounts, rent from electric property, transmission wheeling fees and miscellaneous revenues.

Operating Revenues Operating Revenues - 2006

$800 Commercial

$60029 Street &Highway Industrial

$400 Lighting 14% /

2%

$200 Off-System 14%

Residential 2006 2005 2004 36% Other 0 Retail Sales 0 Off-System Sales Other Electric Revenues 5%

2006 Compared to 2005 Total operating revenues were $676,828,000 for 2006, an increase of $10,276,000 or 1.5% over 2005 operating revenues of

$666,552,000.

The increase in 2006 total operating revenues compared to 2005 was mainly due to the increase in other electric revenues.

The increase was partly offset by an addition in 2006 to the Debt Retirement Reserve of $15,000,000 which reduced operating revenues for 2006.

e Prior to the reduction for the Debt Retirement Reserve, revenues from retail sales were $559,124,000 for 2006, an increase of $26,038,000 or 4.9% over 2005 revenues of $533,086,000. The increase in retail revenues was primarily due to the implementation of a 3.0% general rate increase on April 1,2006, and increased energy sales from warmer weather in 2006 compared to 2005.

200o6 0D Annul Keport I

Revenues from off-system sales were $96,500,000 for 2006, a decrease of $23,530,000 or 19.6% from 2005 revenues of

$120,030,000. The decrease was primarily due to the 2006 major planned production outage at the Fort Calhoun Station that resulted in less energy available for off-system sales coupled with lower energy prices in 2006 compared to 2005.

a Other electric revenues were $36,204,000 for 2006, an increase of $22,768,000 over 2005 revenues of $13,436,000. The increase was primarily due to the $18,555,000 gain on the sale of sulfur dioxide allowances and several settlements.

2005 Compared to 2004 Total operating revenues were $666,552,000 for 2005, an increase of $100,237,000 or 17.7% over 2004 operating revenues of

$566,315,000.

@The increase in 2005 total operating revenues compared to 2004 was partly due to an addition in 2004 to the Debt Retirement Reserve of $55,000,000 which reduced operating revenues for 2004.

Revenues from retail sales were $533,086,000 for 2005, an increase of $36,636,000 or 7.4% over 2004 revenues of

$496,450,000 (before adjustments to revenues for additions to the Debt Retirement Reserve). The increase in retail revenues was primarily due to increased energy sales from warmer weather in 2005 compared to 2004.

, Revenues from off-system sales were $120,030,000 for 2005, an increase of $10,507,000 or 9.6% over 2004 revenues of

$109,523,000. The increase in revenues was due mainly to higher energy prices.

e Other electric revenues were $13,436,000 for 2005, a decrease of $1,906,000 or 12.4% from 2004 revenues of $15,342,000.

The decrease was due mainly to the revenues realized from the sale of a bankruptcy claim in 2004.

Operating Expenses

/ The following chart, top, illustrates the composition of OPPD's operating expenses (in millions) for the past three years. The following chart, bottom, illustrates the percentage share of operating expenses by expense classification for 2006.

Operating I~xpense5s

$600

$400

$200 2006 2005 2004 0 Operations & M Depreciation Payments in Lieu Maintenance of Taxes Operating Lxpenses -zoo6 Fuel Customer & Sales 20% 5%

Administrative &General Transmission & 15%

Distribution 8% c Depreciation 16 Prolductlion 24% Payments in Lieu Purchased of Taxes Power 4%

8%

1 zoo6 QFFD Annual Keport

2006 Compared to 2005 Total operating expenses were $574,098,000 for 2006, an increase of $19,103,000 or 3.4% over 2005 operating expenses of

$554,995,000.

Fuel expense increased $15,377,000 over 2005 primarily due to the higher prices of fossil fuels and greater utilization of gas-fired peaking stations. 1-

@Purchased power expense decreased $7,726,000 from 2005 primarily due to fewer energy purchases and lower energy prices.

, Customer service and information expense decreased $4,710,000 from 2005 due mainly to the completion of the amortization of the customer energy conservation costs in 2005.

a Administrative and general expense was $7,114,000 higher than in 2005 due mainly to increased costs of employee benefits.

s Depreciation expense was $4,724,000 higher than in 2005 due to an increase in plant assets.

2005 Compared to 2004 Total operating expenses were $554,995,000 for 2005, an increase of $47,655,000 or 9.4% over 2004 operating expenses of

$507,340,000.

Fuel expense increased $12,896,000 over 2004 primarily due to a larger share of fossil generation because of the extended outage at the Fort Calhoun nuclear station and higher fossil fuel prices.

@Purchased power expense increased $23,621,000 over 2004 due mainly to higher energy prices and additional purchases required during production outages.

@Production expense increased $7,412,000 over 2004 primarily due to higher maintenance expenses at the power stations.

, Distribution expense was $2,860,000 lower than in 2004 due to the allocation of more resources to capital projects.

a Administrative and general expense was $4,429,000 higher than in 2004 due mainly to increased costs of employee benefits.

Other Income Other income was $47,755,000 in 2006, an increase of $26,442,000 over 2005 other income of $21,313,000. Investment income was $15,930,000 higher than in 2005 due to the increase in funds invested from participants and bond proceeds for the Nebraska City Station Unit 2. Allowances for funds used during construction increased $9,079,000 primarily due to significant construction expenditures for the Nebraska City Station Unit 2 and the Fort Calhoun Station. There was no impact on net income from the participants' share of the Nebraska City Station Unit 2 because allowances for funds used during construction was the actual interest cost of their funds.

In 2006, contributions in aid of construction (CIAC) and the related offsetting expense, reduction of plant costs recovered through contributions in aid of construction, were $37,745,000 higher than in 2005 primarily due to capital contributions from the Nebraska City Station Unit 2 participants and a settlement from the Department of Energy for the reimbursement of construction costs for the dry-cask storage facility.

Other income was $21,313,000 in 2005, an increase of $10,318,000 over 2004 other income of $10,995,000 primarily due to higher allowances for funds used during construction for expenditures for the Fort Calhoun Station and Nebraska City Station Unit 2.

OPPD offers a variety of products and services, which provide value both to the customer and OPPD. These offerings include products such as Performance Contracting, Energy Information Services, Residential and Commercial Surge Protection and Energy Solutions. Offering these products and services provides opportunities to build strong relationships with customers by helping them efficiently and economically meet their energy needs.

s Income from products and services was $1,886,000 for 2006, an increase of $917,000 over 2005 income of $969,000. This was primarily due to greater revenues from sales of the Energy Solutions and Residential Surge Protection products.

e Income from products and services was $969,000 for 2005, a decrease of $43,000 from 2004 income of $1,012,000. This was primarily due to less revenue from sales of the Energy Solutions products.

Interest Expense Interest expense was $66,195,000 for 2006, an increase of $15,496,000 over 2005 interest expense of $50,699,000. This increase was due to interest on additional borrowings for capital projects and interest accrued on construction deposits received from the Nebraska City Station Unit 2 participants. The interest expense accrued on the construction deposits was equivalent to the interest income earned on these funds, resulting in no impact on net income. Inaddition, there was no impact on net income from the participants' share of interest expense for the Nebraska City Station Unit 2 because allowances for funds used during construction was the actual interest cost of their funds.

Interest expense was $50,699,000 for 2005, an increase of $5,573,000 over 2004 interest expense of $45,126,000. This increase was due to higher interest rates for commercial paper, interest on bonds issued in 2005 for capital projects and interest accrued on construction deposits received from the Nebraska City Station Unit 2 participants.

20z60FFD Annual ,eport 17

Net Income Net income, after revenue reductions for reserves, was $84,290,000, $82,171,000 and $24,844,000 for 2006, 2005 and 2004, respectively. Operating revenues and net income were reduced by $15,000,000 and $55,000,000 for additions made to the Debt Retirement Reserve in 2006 and 2004, respectively.

Number of Customers OPPD has a stable, diverse customer base, which continues to grow at a steady rate. The economy of OPPD's service territory is expanding, which is expected to support continued growth of OPPD's customer base and load requirements.

OPPD served an average of 331,370 customers in 2006, an increase of 8,223 or 2.5% over the average number of customers for 2005 of 323,147.

OPPD served an average of 323,147 customers in 2005, an increase of 7,279 or 2.3% over the average number of customers for 2004 of 315,868.

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

Residential 289,713 282,310 275,854 Commercial 41,165 40,372 39,482 Industrial 132 133 135 Street and Highway Lighting 323 293 352 Off-System 37 39 45

/ Total 331,370 323,147 315,868 Additional services are being provided to Offutt Air Force Base. OPPD began providing transmission and distribution services for the military housing area in 2006 and will commence distribution services for the Base in 2007.

- Cents per kWh OPPD is sensitive to the rates it charges and strives to maximize the public power advantage of low-cost energy for its customers.

Residential customers paid an average of 7.40, 7.07 and 6.95 cents per kWh in 2006, 2005 and 2004, respectively. The national average residential cents per kWh according to the Energy Information Administration, U.S. Department of Energy, was 10.46 for 2006 (preliminary year-to-date November 2006) and 9.45 and 8.95 cents per kWh for 2005 and 2004, respectively. Based on the preliminary data for 2006, OPPD residential rates were 29.2% below the national average.

Retail customers paid an average of 5.81, 5.58 and 5.48 cents per kWh in 2006, 2005 and 2004, respectively. The national average retail cents per kWh according to the Energy Information Administration, U.S. Department of Energy, was 8.88 for 2006 (preliminary year-to-date November 2006) and 8.14 and 7.61 cents per kWh for 2005 and 2004, respectively. Based on the preliminary data for 2006, OPPD retail rates were 34.5% below the national average.

The following charts show OPPD's average residential and retail cents per kWh compared to the national average.

Average Kesidential Cents per kWh AverageKetail Cents per kWh 12 10 6

2006 2005 2004 2006 2005 2004 OPPD U National Average OPPD U National Average OPPD implemented a modest basic service charge rate increase effective January 1,2006, and a general rate increase of 3.0%

effective April 1,2006. The general rate increase, along with the approval of a revenue strategy, provide for additional revenues of approximately $16,000,000 per year for 2007 and 2008 for capital financings. For 2007, these additional revenue requirements will be attained through a general rate increase of approximately 2.8%. Even with these increases, OPPD's rates will continue to remain well below the national average.

I s zoo6 OFVD Annual FKeport

CASH AND LIQUIDITY OPPD has a high degree of liquidity as a result of maintaining strong credit ratings, utilizing its Commercial Paper Program, executing additional credit agreements, implementing cost-containment programs and investing in projects that provide returns in excess of OPPD's cost of capital.

OPPD relies on bond offerings as a significant source of liquidity for capital requirements not provided for with cash from operations. OPPD's ability to obtain required capital at the lowest possible rates is very important for the success of its overall business plan for capital expenditures.

Financing OPPD's financing plan included the issuance of additional debt in 2006 for capital expenditures. The plan optimizes the debt mix to ensure liquidity needs are met and OPPD's strong financial position is maintained by utilizing the lowest cost debt possible.

In2006, OPPD issued $200,000,000 of Electric System Revenue Bonds, $75,000,000 of Periodically Issued Bonds (PIBS) and

$100,000,000 of Commercial Paper to finance capital expenditures. OPPD plans to refinance this additional $100,000,000 of Commercial Paper with long-term bonds in 2007. OPPD repaid $58,200,000 of Electric System Revenue Bonds and reduced the amount available to borrow under its Revolving Credit Agreement (RCA) from $350,000,000 to $200,000,000. The RCA is a facility that allows for revolving loans during a five-year period from January 2005 through December 2009, which may be converted to term loans of up to three years. There were no amounts outstanding under the RCA at December 31, 2006.

In September 2006, OPPD issued $115,000,000 of NC2 Separate Electric System Revenue Bonds. The NC2 Separate Electric System is a 50% interest in the output of OPPD's new coal-fired unit, Nebraska City Station Unit 2, secured by revenues from Participation Agreements with seven public power and municipal utilities. Participants were given the choice to provide their own funds or to finance their respective funding requirements with separate system bonds issued by OPPD. The proceeds from the issuance of the Separate Electric System Revenue Bonds, together with additional funds provided by the participants, are used to pay the participants' portion of the construction costs of the Nebraska City Station Unit 2.

The 2007 financing plan for OPPD includes additional issues of Periodically Issued Bonds and other Electric System Subordinated Revenue Bonds.

The following chart, left, illustrates OPPD's debt mix (in millions) for the past three years. The following chart, right, illustrates OPPD's amount of Long-Term Debt compared to the Total Assets of OPPD (in millions).

Debt Mix Long-Term Debt to Total Assets

$1,600 4,000 3,000 /

2,000

$800 1,000 2006 2005 2004 2006 2005 2004 . Long-Term Debt N Total Assets

NC2 Separate Electric System Revenue Bonds

Electric System Subordinated Revenue Bonds

Electric Revenue Minibonds and Subordinated Obligation Electric Revenue Notes - Commercial Paper Series

Electric System Revenue Bonds 2006 OFFD Annual Keport I9

Ratings OPPD's excellent bond ratings allow it to borrow funds at low rates. Both quantitative (financial strength) and qualitative (business and operating characteristics) factors are considered by the bond-rating agencies in establishing a company's credit rating. The ratings received from Standard &Poor's Ratings Services (S&P) and Moody's Investors Service (Moody's), independent bond-rating agencies for the latest Electric System Revenue Bond issue, were among the highest ratings given to public power districts and confirm the agencies' assessment of OPPD's strong ability to meet its debt service requirements.

The following ratings at December 31, 2006, are indicative of OPPD's solid financial strength.

M~dyAa2AaaM Aaa Aaa

Payment of the principal and interest on the Minibonds, PeriodicallyIssued Bonds and NC2 Separate System Bonds, when due, is insured by financialguaranty bond insurancepolicies.

Cash Flows OPPD experienced a net decrease in cash of $11,371,000 for 2006, a net increase in cash of $28,163,000 for 2005 and a net decrease in cash of $9,288,000 for 2004. The following table illustrates the cash flows by activities for the years ended December 31 (in thousands).

Cas Flow 200 205 00 Cash Flows from Operating Activities $203,999 $189,697 $227,038 Cash Flows from Capital and Financing Activities (36,802) (34,865) (257,402)

Cash Flows from Investing Activities (178,568) (126,669) 21,076 Increase (Decrease) in Cash and Cash Equivalents $(11,371) $28,163 $ (9,288)

Cash flows from operating activities consist of transactions involving changes in current assets, current liabilities and other transactions that affect operating income.

I Cash flows for 2006 increased $14,302,000 over 2005 primarily due to an increase in cash receipts from the sale of sulfur dioxide allowances and retail customers. The increase was partially offset by higher payments for fuel, payroll and other operating expenses.

, Cash flows for 2005 decreased $37,341,000 from 2004 primarily due to an increase in cash payments for operating expenses for fuel, purchased power and maintenance expenses. The increase in cash payments for operating expenses was partially offset by increases in cash receipts from retail and off-system customers.

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

Cash flows used for 2006 increased $1,937,000 over 2005 primarily due to greater capital expenditures. Cash flows used for 2005 decreased $222,537,000 from 2004 due to additional bond proceeds and CIAC from certain Nebraska City Station Unit 2 participants. These additional cash flows for 2005 were partially offset by increased expenditures for capital assets.

Cash flows from investing activities consist of transactions involving purchases and maturities of investment securities and investment income.

, Cash flows used for 2006 increased $51,899,000 over 2005 and cash flows used for 2005 increased $147,745,000 over 2004 cash received of $21,076,000. Changes for both years were due to more purchases of investment securities. These additional cash flows were partially offset by maturities and sales of investments.

20 zoo f'0PPD Annual Report

Debt Service Coverage OPPD is required by Electric System Revenbe Bonds covenants to maintain a debt service coverage of 1.40 times. The following table reflects the calculation of debt service coverage, indicating OPPD's solid ability to make required debt service payments on Electric System Revenue Bonds (in thousands).

Operating revenues 1 $676,828 $666,552 $566,315 Operations and maintenance expenses (461,101) (447,270) (401,778)

Payments in lieu of taxes (20,241) (19,693) (18,591)

Net operating revenues 195,486 199,589 145,946 Investment income of related reserve fund 1,612 1,110 1,093 Net receipts $197,098 $200,699 $147,039 Total debt service 2 $ 95,237 $ 91,021 $86,975 Debt service coverage 2.06 2.20 1.69 i Operating revenues were reduced by $15,000,000 and $55,000,000 for additions to the Debt Retirement Reserve for 2006 and 2004, respectively.

2 Total debt service for Resolution No. 1788 Bonds is accrued on a calendar-yearbasis 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 and represents the share of OPPD's debt to its total capitalization (debt and equity). This ratio does not include the NC2 Separate Electric System Debt as it is secured by revenues of the separate system.

OPPD's debt ratio was 48.0% and 42.8% as of December 31, 2006 and 2005, respectively. The 2006 debt ratio was higher than 2005 due to an increase in debt from additional issuances of bonds.

Retirement Plan OPPD has a defined benefit Retirement Plan (Plan). Under this type of plan, the employee's benefit payments are calculated using a specific formula outlined in the Plan and are based on an employee's age, length of service and covered payroll.

To ensure funds will be available to pay future benefits, the retirement plan actuary projects Plan assets and the liability for future benefits. Actuarial assumptions are reviewed annually and changed, when appropriate. The investment return (discount rate) assumption was lowered to 8.2% in 2006 from 8.4% for 2005 and 2004. The actuary uses this information to determine the current_

annual amount that must be contributed by employees and OPPD in order to meet projected Plan benefits. The valuation cost method used was the Entry Age Normal (EAN) method which is a level percentage of pay method.

OPPD contributed $32,361,000, $25,934,000 and $22,907,000 to the Plan for the years 2006, 2005 and 2004, respectively. OPPD's contributions are estimated at $30,584,000 and $31,535,000 for 2007 and 2008, respectively. The estimated employer contributions for 2007 and 2008 are lower than the contributions for 2006 because of the anticipated implementation of Plan design changes.

Participating OPPD employees contributed 4.0% of their covered payroll to the Plan, which was $6,270,000, $6,072,000 and

$5,832,000 for the years 2006, 2005 and 2004, respectively.

The Plan's funded status, based on the actuarial value of assets to the present value of accrued plan benefits was 100.4%, 104.4%

and 105.9% for 2006, 2005 and 2004, respectively. The net assets of the Plan available for benefits increased to $620,S00,000 at December 31, 2006, from $574,287,000 at December 31, 2005, due to additional contributions and favorable market conditions.

SUMMARY

OF THE FINANCIAL STATEMENTS The financial statements, related notes and Management's Discussion and Analysis provide information regarding OPPD's financial position and activities. The Balance Sheets present OPPD's assets, liabilities and equity as of December 31, 2006 and 2005, with the 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 each of the three years in the period ended December 31, 2006.

The Statements of Cash Flows provide information about the flow of cash within OPPD by activities for each of the three years in the period ended December 31, 2006. The Notes to Financial Statements provide additional detailed information. The basic financial statements, notes, and Management's Discussion and Analysis are designed to provide a general overview of OPPD's financial position.

Questions concerning any of the information provided in this report should be directed to Investor Relations, 402-636-3286.

zoo6 OFFP A-n*l Report 25

The management of OPPD is responsible 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. OPPD's management also prepared the other information in this Annual Report and is responsible for its accuracy and consistency with the financial statements.

To fulfill its responsibility, management maintains strong internal controls, 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. OPPD is deeply committed to conducting business with integrity, in accordance with the highest ethical standards, and in compliance with all applicable laws, rules and regulations. OPPD has adopted a Code of Ethics for the Senior Executive and Financial Officers and the Controller, stating our responsibilities and standards for professional and ethical conduct.

Our independent auditors have audited the financial statements and have rendered an unqualified opinion as to the statements' fairness of presentation, in all material respects, in conformity with accounting principles generally accepted in the United States of America. During the audit, they considered OPPD's internal controls over financial reporting 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 is comprised solely of non-management directors. The committee meets periodically with the independent auditors, 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 auditors have for improving the internal control structure. The Board of Directors, on the recommendation of the Audit Committee, engages the independent auditors who have unrestricted access to the Audit Committee.

41.4 W.Gary Gates Charles P.Moriar t J President and Chief Executive Officer Vice President and Chief Financial Officer 26 2oo60F6D Annual RKport

Board of Directors Omaha Public Power District Omaha, Nebraska We have audited the accompanying balance sheets of the Omaha Public Power District (OPPD) as of December 31, 2006 and 2005, 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, 2006. 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 the 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of OPPD's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the respective financial statements, 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, the financial statements referred to above present fairly, in all material respects, the financial position of OPPD as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

The Management's Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. 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 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 our report dated February 28, 2007, on our consideration of OPPD's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

DELOITTE & TOUCHE LLP Omaha, Nebraska February 28, 2007 2oo6 0FFD Annual Report 27

ASSETS 2006 2005 (thousands)

UTILITY PLANT - at cost (Notes 10 and 16)

Electric plant ........................................................... $ 4,133,718 $3,633,937 Less accumulated depreciation ............................................. 1,511,242 1,431,904 Electric plant - net ....................................................... 2,622,476 2,202,033 Nuclear fuel - at am ortized cost ............................................ 33,279 22,496 Total utility plant - net .............................................. 2,655,755 2,224,529 SPECIAL PURPOSE FUNDS - primarily at fair value (Notes 3 and 4)

Electric system revenue bond fund - net of current ............................. 41,757 34,641 Segregated fund -debt retirement .......................................... 105,000 90,000 Segregated fund -rate stabilization ......................................... 32,000 19,600 Segregated fund -other ................................................... 25,566 25,850 Decom missioning funds .................................................. 268,098 254,744 NC2 separate electric system revenue bond fund -net of current ................. 19,699 14,520 NC2 separate system construction fund -net of current ......................... 51,552 Total special purpose funds ............................................ 543,672 439,355 CURRENT ASSETS Cash and cash equivalents (Note 4)......................................... 44,852 56,223

. Electric system revenue bond fund - current (Notes 3 and 4)..................... 71,116 67,779 Electric system subordinated revenue bond fund (Notes 3 and 4)................. 2,354 451 Electric system construction fund (Notes 3 and 4) ............................. 64,600 NC2 separate electric system revenue bond fund - current (Notes 3 and 4) ......... 9,748 3,501 NC2 separate system construction fund -current (Notes 3 and 4) ............. 166,374 127,068 Accounts receivable -net ....... . ......................................... 96,280 89,463 Fossil fuels - at average cost ............................................... 25,857 19,237 Materials and supplies -at average cost .............. ....................... 72,435 64,948 Other ................................................................. 7,795 6,8 19 Total current assets ................................................... 561,411 435,489 DEFERRED CHARGES (Note 5)............................................ 42,627 21,458 TO TAL ................................................................... $ 3,803,465 $3,120,831 See notes to financialstatements 28 2006 OFFD Annual Report

LIABILITIES 2006 2005 (thousands)

LONG-TERM DEBT (Note 2)

Electric system revenue bonds - net of current ............................................................... $ 840,370 $ 697,510 Electric system subordinated revenue bonds ........................................................................... 125,000 50,000 Electric revenue notes - com mercial paper series ..................................................................... 250,000 150,000 Electric revenue minibonds - net of currrent ........................................................................... 50,879 62,572 Subordinated obligation - net of currrent ................................................................................. 2,425 2,667 NC2 separate electric system revenue bonds ........................................................................... 227,000 112,000 Total ...................................................................................................................................... 1,495,674 1,074,749 Unam ortized discounts and prem ium s .................................................................................... 9,345 6,076 Unam ortized loss on refunded debt .......................................................................................... (15,297) (17,792)

Total long-term debt - net ................................................................................................... 1,489,722 1,063,033 COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)

LIABILITIES PAYABLE FROM SEGREGATED FUNDS (Notes 3 and 9)......................... 159,567 145,105 CURRENT LIABILITIES Electric system revenue bonds -current (Note 2).................................................................... 57,140 58,200" Electric revenue minibonds - current (Note 2)......................................................................... 12,751 Subordinated obligation - current (Note 2).............................................................................. 242 222 Accounts payable ........................................................................................................................ 167,401 97,945 Accrued paym ents in lieu of taxes ............................................................................................ 19,185 18,638 Accrued interest .......................................................................................................................... 26,387 17,384 Accrued payroll ........................................................................................................................... 19,249 17,459 Accrued production outage costs ..............................................................................................- - 6,978 Construction deposits (Note 12) ............................................................................................... 102,019 55,656 Other ........................................................................................................................................... 9,392 9,034 Total current liabilities ......................................................................................................... 413,766 281,516 OTHER LIABILITIES Decom missioning costs .................................................................................................... 268,098 254,744 Other (Note 8)................................................................................................................... 21,873 10,284 Total other liabilities .................................................................................................. 289,971 265,028 EQUITY Invested in capital assets, net of related debt ................................................................. 1,343,991 1,226,700 Restricted .......................................................................................................................... 56,761 56,094 Unrestricted ...................................................................................................................... 49,687 83,355 Total equity .................................................................................................................. 1,450,439 1,366,149 TOTAL ................................................................................................................................... $3,803,465 $3,120,831 zoo6 OFFD Annual Keport 29

2006 2005 2004 (thousands)

OPERATING REVENUES Retail sales (Note 13) ........................................................................................... $ 544,124 $ 533,086 $ 441,450 Off-system sales .................................................................................................... 96,500 120,030 109,523 Other electric revenues (Notes 14 and 15) .......................................................... 36,204 13,436 15,342 Total operating revenues ............................................................................... 676,828 666,552 566,315 OPERATING EXPENSES Operations and maintenance Fuel ................................................................................................................... 114,137 98,760 85,864 Purchased power (Note 13) .............................................................................. 45,178 52,904 29,283 Production ........................................................................................................ 139,047 140,359 132,947 Transmission ..................................................................................................... 7,033 6,597 6,373 Distribution ...................................................................................................... 41,119 37,482 40,342 Customer accounts ........................................................................................... 17,265 16,250 15,817 Customer service and information .................................................................. 11,603 16,313 16,976 Administrative and general........... . ................... 85,719 78,605 74,176 Total operations and maintenance .............................................................. 461,101 447,270 401,778 Depreciation and amortization ............................... 92,756 88,032 86,971 Payments in lieu of taxes ..................................................................................... 20,241 19,693 18,591 Total operating expenses................................ 574,098 554,995 507,340 OPERATING INCOME ................................... 102,730 111,557 58,975 OTHER INCOME (EXPENSES)

Contributions in aid of construction (Note 16) ................................................. 80,284 42,539 12,006 Reduction of plant costs recovered through contributions in aid of construction (Note 16) ..................................................................... (80,284) (42,539) (12,006)

Decommissioning funds - investment income ................................................... 13,354 5,445 8,766 Decommissioning funds - reinvestment ............................................................. (13,354) (5,445) (8,766)

Investment income ............................................................................................. 23,432 7,502 3,927 Allowances for funds used during construction ................................................. 22,057 12,978 5,340 Products and services - net .................................................................................. 1,886 969 1,012 Other - net (Note 17) ........................................................................................... 380 (136) 716 Total other income - net ............................................................................. 47,755 21,313 10,995 INTEREST EXPENSE ........................................................................................... 66,195 50,699 45,126 NET INCOME ...................................................................................................... 84,290 82,171 24,844 EQUITY, BEGINNING OF YEAR ........................................................................ 1,366,149 1,283,978 1,259,134 EQUITY, END OF YEAR ................................................................................... $1,450,439 $1,366,149 $1,283,978 See notes to financialstatements 50 2oo6 OVFD Annual Report

2006 2005 2004 (thousands)

CASH FLOWS FROM OPERATING ACTIVITIES Cash received from retail customers...................................... $ 573,346 $ 537,172 $ 517,944 Cash received from the sale of sulfur dioxide allowances (Note 14) ............. 18,750 Cash received from off-system customers .................................. 114,522 117,678 113,834 Cash paid to operations and maintenance suppliers ......................... (306,412) (277,954) (243,613)

Cash paid to off-system suppliers ......................................... (48,972) (56,872) (37,975)

Cash paid to em ployees ................................................ (119,416) (111,692) (104,949)

Cash paid for the purchase of sulfur dioxide allowances (Note 14) .............. (8,125)

Cash paid for in lieu of taxes and other taxes ............................... (19,694) (18,635) (18,203)

Net cash provided from operating activities ................................ 203,999 189,697 227,038 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from long-term borrowings ...................................... 490,000 362,000 Principal reduction of long-term debt ..................................... (58,698) (127,424) (47,168)

Interest paid on long-term debt .......................................... (53,533) (41,374) (37,481)

Acquisition and construction of capital assets .............................. (501,483) (324,394) (172,436)

Proceeds from NC2 participants (Note 12) ................................. 95,030 84,061 Contributions in aid of construction ...................................... 12,715 16,558 12,006 Acquisition of nuclear fuel .............................................. (20,833) (4,292)

Net cash used for capital and related financing activities ...................... (36,802) (34,865)

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investm ents ............................ ................... (1,187,970) (883,743)

Maturities and sales of investments ....................................... 993,088 752,323 Purchases of investments for decommissioning funds ........................ (68,798) (84,927)

Maturities and sales of investments in decommissioning funds ................ 68,798 84,927 Investm ent incom e .................................................... 16,314 4,751 Net cash provided from (used for) investing activities ........................ (178,568) (126,669)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ (11,371) 28,163 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................... 56,223 28,060 CASH AND CASH EQUIVALENTS, END OF YEAR .......................... $ 44,852 $ 56,223 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES Operating incom e ..................................................... $ 102,730 $111,557 $ 58,975 Adjustments to reconcile operating income to net cash provided from operating activities Depreciation and am ortizaton ......................................... 92,756 88,032 86,971 Am ortization of nuclear fuel .......................................... 10,220 9,245 13,300 Changes in assets and liabilities Accounts receivable ................................................. (6,817) (16,556) 5 Fo ssil fu els . . .. . . . .. . . . .. . . .. . . .. . . .. . .. . . .. . . .. . .. . . .. . . .. . . .. . .. . (6,620) (244) (1,189)

Materials and supplies ............................................... (7,487) (4,538) (7,830)

Accounts payable ................................................... 5,869 4,144 6,768 Accrued paym ents in lieu of taxes ......................................... 547 1,059 389 Accrued payroll ......................................................... 1,790 (219) 1,509 Accrued production outage costs .......................................... (6,978) (10,438) 17,416 Other . .. .. .. .. . .. .. .. . ... . .. ... . .. .. .. .. .. .. ... . ... .. .. .. .. .. .. .. .. .. . 17,989 7,655 50,724 Net cash provided from operating activities ................................ $ 203,999 $189,697 $ 227,038 See notes to financial statements 2006 OFFD Annual Report 5I

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business - The Omaha Public Power District (OPPD), a political subdivision of the state of Nebraska, is a public utility engaged in the generation, transmission and distribution of electric power and energy and other related activities.

The Board of Directors is authorized to establish rates. OPPD is generally 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 pronounce-ments of the Governmental Accounting Standards Board (GASB). In accordance with GASB Statement No. 20, Accounting and FinancialReporting for ProprietaryFunds and Other Governmental Entities That Use ProprietaryFundAccounting, OPPD has elected not to follow the pronouncements of the Financial Accounting Standards Board 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). This guidance permits an entity with cost-based rates to include costs in a period other than the period in which the costs would be charged to expense by an unregulated entity if it is probable that these costs will be recovered through the rates charged to customers. SFAS No. 71 also permits an entity to defer revenues by recogniz-ing liabilities to cover future expenditures.

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, Regulated Enterprises-Accounting for the Discontinuationof Application of SFAS No. 71 (SIAS 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. In addition, OPPD would be required to determine any impairment to the carrying costs of deregulated plant and inventory assets. There were no write-downs of regulatory assets for each of the three years in the period ended December 31, 2006.

.Revenue Recognition - OPPD recognizes electric operating revenues as earned. 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 account-ing period. Accounts receivable includes $27,322,000 and $24,795,000 in unbilled revenues as of December 31, 2006 and 2005, respectively.

OPPD acts as an agent in the buying and selling of power for other public power utilities through joint marketing agreements and receives an agreed-upon percentage share of the net profits from the energy marketed under these agreements. The profit from joint marketing activities is reported in off-system sales revenues and purchased power expense includes only power purchased for OPPD's operations.

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

Accounts Receivable - An estimate is made for the reserve for uncollectible accounts, based on an analysis of the aging of accounts receivable and historical write-offs net of recoveries, for retail customers. Additional amounts may be included based on the credit risks of significant parties. Included in the reserve is the greater of $5,000,000 or an estimate based on the previous year's accounts receivable for off-system sales customers. Accounts receivable was reported net of the reserve for uncollectible accounts of $5,566,000 and $5,476,000 as of December 31, 2006 and 2005, respectively.

Utility Plant - Utility plant is stated at cost, which includes property additions, replacements of units of property and betterments. Maintenance and replacement of minor items are charged to operating expenses. Costs of depreciable units of elec-tric plant retired are eliminated from electric plant accounts by charges, less salvage plus removal expenses, to the accumulated depreciation account. Electric plant includes both tangible and intangible assets. Intangible assets include the costs of software and licenses. Electric plant includes construction work in progress of $569,527,000 and $442,110,000 as of December 31, 2006 and 2005, respectively.

Electric plant activity for 2006 was as follows (in thousands):

2005 Additions Retirements 2006 Electric plant $3,633,937 $518,393 $ (18,612) $ 4,133,718 Nuclear fuel 49,953 23,971 (18,642) 55,282 Less accumulated depreciation and amortization 1,459,361 109,647 (35,763) 1,533,245 Total $2,224,529 $432,717 $ (1,491) $2,655,755 2z o006 OFFD Annual Report

Allowances for funds used during construction, approximating OPPD's current weighted average cost of debt, were capitalized as a component of the cost of utility plant. These allowances were computed at 4.4%, 4.3% and 4.1% for both construction work in progress and nuclear fuel for the years ended December 31, 2006, 2005 and 2004, respectively. Allowances for funds used during construction for the participants' share of Nebraska City Station Unit 2 were offset by the actual interest cost of their funds, resulting in no impact on net income.

OPPD periodically reviews the carrying amount of long-lived assets for impairment. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. There were no impairments for each of the three years in the period ended December 31, 2006.

Contributions in Aid of Construction (CIAC) - OPPD receives payments from customers for construction costs primarily relat-ing to the expansion of OPPD's electric system. OPPD follows FERC guidelines in the recording of CIAC, which directs the reduc-tion of utility plant assets by the amount of contributions received toward the construction of utility plant. Inorder to comply with GASB Statement No. 33, Accounting and FinancialReportingfor Nonexchange Transactions,while continuing to follow FERC guidelines, CIAC is recorded as other income and offset by an expense in the same amount representing the recovery of plant costs. CIAC from participants for the construction of Nebraska City Station Unit 2 was $54,569,000 and $25,981,000 for the years ended December 31, 2006 and 2005, respectively. CIAC from the United States Department of Energy (DOE) for reimbursement of capital costs incurred for the construction of a dry-cask storage facility for high-level nuclear waste was $17,948,000 for the year ended December 31, 2006.

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. Depreciation expense has averaged approximately 2.8% of depreciable property for the year ended December 31, 2006, and 2.9% of depreciable property for the years ended December 31, 2005 and 2004.

Amortization of nuclear fuel is based upon the cost thereof, which isprorated by fuel assembly in accordance with the thermal energy that each assembly produces.

Intangible assets are amortized over their expected useful life. Amortization of intangible assets included with depreciation and amortization expense in the financial statements was $4,280,000, $3,052,000 and $3,015,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

In 2004, OPPD's Board of Directors approved a change in the depreciation estimate for Fort Calhoun production plant assets to 2043, which is 10 years beyond the term of Fort Calhoun Station's current license. Aregulatory asset was established for the difference in depreciation expense resulting from the use of the estimated economic life of the asset versus the license term. The reduction in depreciation expense will be recorded each year as a regulatory asset in deferred charges until 2033. The regulatory asset will be reduced through the recognition of depreciation expense over the assets' remaining economic life in the years 2034 through 2043. This regulatory asset was $14,228,000 and $9,048,000 as of December 31, 2006 and 2005, respectively, and was recorded in deferred charges on the balance sheet.

Nuclear Fuel Disposal Costs - Permanent disposal of spent nuclear fuel isthe 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 kilowatt-hour on net electricity generated and sold from the Fort Calhoun Station. 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 dis-posal costs were $3,694,000, $2,791,000 and $3,489,000 for the years ended December 31, 2006, 2005 and 2004, 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 2017. In May 1998, the U.S. Court of Appeals confirmed the 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.

In 2006, the DOE agreed to reimburse OPPD for allowable costs for managing and storing spent nuclear fuel and high-level waste that OPPD incurred due to the DOE's delay in accepting waste. InJune 2006, OPPD received a reimbursement of $4,948,000 for capital costs incurred through June 2005 for the construction of a dry-cask storage facility, which is recorded in electric plant.

Construction of the facility and loading of the first storage canisters was completed in 2006. This facility will provide adequate spent-fuel storage capacity for continued operation of the Fort Calhoun Station to the year 2033. Areceivable from the DOE for costs incurred from July 2005 through December 2006 for the facility was $13,000,000 as of December 31, 2006. OPPD will periodically submit applications to the DOE for reimbursement of costs incurred.

z206 OFFD Annual Keport )5

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. Based on cost estimates, infla-tion rates and fund earnings projections, no funding has been necessary since 2001. Decommissioning funds are reported at fair value. The decommissioning cost liability is adjusted for interest income and changes in fair value, resulting in no impact on net income. Interest income was $11,573,000, $9,779,000 and $10,849,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The fair value of the decommissioning funds increased $1,781,000 for the year ended December 31, 2006, and decreased $4,334,000 and $2,083,000 for the years ended December 31, 2005 and 2004, respectively. The decom-missioning estimates, which exceed the Nuclear Regulatory Commission's (NRC) minimum funding requirements, totaled

$533,299,000, $519,884,000 and $503,492,000 for the fiscal years ending June 30, 2006, 2005 and 2004, respectively.

Regulatory Assets and Liabilities - OPPD is regulated by Nebraska State Law and the 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 through customer rates over some future period, and regulatory liabilities are reductions in earnings (or costs recovered) to cover future expenditures.

The regulatory asset is included in deferred charges (Note 5), and consists of deferred depreciation expense for Fort Calhoun's production assets. In 2004, OPPD's Board of Directors approved a change in the depreciation estimate for Fort Calhoun production plant assets to 2043, which is 10 years beyond the term of the current license. The balance of deferred depreciation expense was $14,228,000 and $9,048,000 as of December 31, 2006 and 2005, respectively.

Regulatory liabilities, which are primarily included in liabilities payable from segregated funds, consist of reserves for debt retirement, rate stabilization and uncollectible accounts from off-system sales. The Debt Retirement Reserve was established for the retirement of outstanding debt and to help maintain debt service coverage ratios at appropriate levels (Note 13). The Rate Stabilization Reserve was established to help maintain stability in OPPD's long-term rate structure (Note 13). The Reserve for Uncollectible Accounts from off-system sales, which is included as a reduction to accounts receivable, was established to recognize a loss contingency for uncollectible accounts from off-system sales customers. The balance of the Debt Retirement Reserve was $105,000,000 and $90,000,000 as of December 31, 2006 and 2005, respectively. The balance of the Rate Stabiliza-tion Reserve was $32,000,000 as of December 31, 2006 and 2005. The balance of the Reserve for Uncollectible Accounts from off-system sales was $5,000,000 as of December 31, 2006 and 2005.

Accrued Production Outage Costs - For major planned production outages, estimated incremental operations and mainte-nance expenses of $5,000,000 or more are accrued prior to the outage. The Fort Calhoun Station completed a major refueling and maintenance outage in 2006. Outage activities included the replacement of the pressurizer, reactor vessel head and two steam generators. The next major planned production outage is scheduled to begin in April 2008 at the Fort Calhoun Station.

The balance of accrued production outage costs was $758,000 long-term and $6,978,000 short-term as of December 31, 2006 and 2005, respectively.

Natural Gas Inventories and Contracts - Natural gas inventories are maintained for the Cass County Station, and the weight-ed average cost of natural gas consumed is used to expense natural gas from inventories. OPPD is exposed to market price fluc-tuations on its purchases of natural gas. To ensure financial protection on these purchases, OPPD enters into futures contracts and purchases options to manage the risk of volatility in the market price of gas on anticipated purchase transactions.

OPPD had natural gas futures contracts with the New York Mercantile Exchange (NYMEX) based on the notional amount of 2,010,000 mmBtu as of December 31, 2006. The contracts will mature in the months of June, July and August of 2007 through 2009. OPPD had futures contracts based on the notional amount of 300,000 mmBtu as of December 31, 2005. These contracts had an unrealized loss of $1,630,000 and an unrealized gain of $1,328,000 as of December 31, 2006 and 2005, respectively.

At December 31, 2004, OPPD also had purchased option contracts with Tenaska Marketing Ventures for $195,000. The option contracts were for the right, but not the obligation, to buy 300,000 mmBtu of natural gas (150,000 mmBtu per month) for July and August 2005. These options were exercised in 2005.

As a result of hedging contracts and the exercise of options, there was an increase in fuel expense of $1,802,000 and $111,000 for the years ended December 31, 2006 and 2005, respectively, and a decrease in fuel expense of $670,000 for the year ended December 31, 2004. In accordance with generally accepted accounting principles for proprietary funds of government entities, the futures contracts are not recorded on the balance sheet.

Equity - Equity is reported in three separate components on the Balance Sheets. Equity invested in capital assets, net of related debt, is the equity share attributable to net utility plant assets reduced by outstanding related debt. Restricted equity represents net assets with usage restraints imposed by law or through debt covenants. Unrestricted equity represents net assets that are neither restricted nor invested in capital assets.

3+ 2006tOFF"D Annual Keport

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 June 2004, GASB issued Statement No. 45, Accounting and FinancialReporting by Employers for PostemploymentBenefits Other Than Pensions. Prior to 2007, OPPD recognized the cost of other post employment benefits (OPEB) on a pay-as-you-go basis. This statement requires the accounting for OPEB costs using an actuarial approach similar to OPPD's Retirement Plan (Note 6). The annual required contribution (ARC) for OPEB, in excess of the pay-as-you-go costs are expected to be $18,306,000 and $18,452,000 for the years ended December 31, 2007 and 2008, respectively (Note 9).

In June 2006, GASB issued Technical Bulletin No. 2006-1, Accounting and FinancialReporting by Employers and OPEB Plans for Payments from the Federal Government Pursuantto the Provisions of Medicare PartD. This technical bulletin clarifies guidance for reporting payments received from the Federal Government under provisions of Medicare Part D.Payments from the Federal Government are recorded as revenues. Other electric revenues included $501,000 for Medicare Part D payments from the Federal Government for the year ended December 31, 2006.

In December 2006, GASB issued Statement No. 49, Accounting and FinancialReportingfor Pollution Remediation Obligations.This statement requires the accounting for reporting of potential liabilities related to the cleanup and removal of pollution. The state-ment is effective for fiscal years beginning after December 15, 2007. OPPD is reviewing this guidance to determine the impact, if any, on the financial statements.

Reclassifications - Certain amounts in the prior year's financial statements have been reclassified to conform to the 2006 pre-sentation. These reclassifications were insignificant individually and in the aggregate and had no effect on previously reported net income, cash flows or equity. For the Statements of Revenues, Expenses and Changes in Equity, maintenance expenses were reported within the functional area. For the Statements of Cash Flows, investing activities related to decommissioning funds were reported as a gross presentation rather than a net presentation.

2. LONG-TERM DEBT OPPD utilizes the proceeds of debt issued primarily in financing its construction program. Long-term debt activity, including the current portion, for 2006 was as follows (in thousands):

2005 Additions Retirements 2006 Electric system revenue bonds $ 755,710 $ 200,000 $ (58,200) $ 897,510 Electric system subordinated revenue bonds 50,000 75,000 - 125,000 Electric revenue notes - commercial paper series 150,000 100,000 - 250,000 Electric revenue minibonds 62,572 1,335 (277) 63,630 Subordinated obligation 2,889 - (222) 2,667 NC2 separate electric system revenue bonds 112,000 115,000 - 227,000 Total $1,133,171 $ 491,335 $ (58,699) $1,565,807 Electric System Revenue Bonds - Electric System Revenue Bond payments are as follows (in thousands):

Principal Interest 2007 $ 57,140 $ 40,331 2008 56,620 37,689 2009 35,450 35,560 2010 36,830 33,934 2011 36,340 32,236 2012-2016 222,110 130,815 2017-2021 156,620 85,830 2022-2026 91,400 60,368 2027-2031 72,000 39,941 2032-2036 45,000 25,162 2037-2041 30,000 17,287 2042-2046 58,000 10,244 Total $897,510 $549,397 2006 O)FD Annual RKeort ,55

On February 1, 2006, a principal payment of $58,200,000 was made for the Electric System Revenue Bonds. On May 24, 2006, OPPD issued 2006 Series AElectric System Revenue Bonds for $200,000,000. This issue consists of serial bonds of $62,000,000, with maturity dates between 2018 and 2044, with interest rates between 4.25%, and 4.75%, and term bonds of $138,000,000, with maturity dates between 2029 and 2046, with interest rates between 4.65% and 5.0%.

On April 28, 2005, OPPD issued 2005 Series A Electric System Revenue Bonds for $128,000,000 and 2005 Series B Bonds for

$72,000,000. The 2005 Series Aissue consists of $95,000,000 of serial bonds, with maturity dates between 2009 and 2026, with interest rates between 3.1% and 4.6%, and $33,000,000 of term bonds, with maturity dates between 2027 and 2030, with an interest rate of 4.7%. The 2005 Series B issue consists of serial bonds, with maturity dates between 2012 and 2022, with interest rates between 3.5% and 5.0%.

At December 31, 2006, Electric System Revenue Bonds consisted of $636,590,000 of serial bonds, with interest rates between 2.25% and 5.5%, due annually from 2007 to 2044, and $260,920,000 of term bonds, with interest rates between 4.25% and 5.5%,

due annually from 2011 to 2046. At December 31, 2005, Electric System Revenue Bonds consisted of $632,790,000 of serial bonds, with interest rates between 1.8% and 5.5%, due annually from 2006 to 2026, and $122,920,000 of term bonds, with interest rates between 4.25% and 5.5%, due annually from 2011 to 2030.

The 2002 Series A Bonds maturing in 2012, 2017 and 2022 for $67,500,000 were refunded with proceeds from the 2005 Series B Bonds. The advance refunding reduced total debt service payments over the next 17 years by $5,470,000 and resulted in an economic gain (difference between the present values of the old and new debt service payments) of $2,197,000. The following Electric System Revenue Bonds, with outstanding principal amounts of $285,440,000 and $292,750,000 as of December 31, 2006 and 2005, respectively, were legally defeased: 1986 Series A, 1992 Series B, 1993 Series B Term Bonds and 2002 Series A maturing in 2012, 2017 and 2022. Defeased 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.

OPPD's bond indenture provides for certain restrictions, the most significant of which are:

Additional bonds may not be issued unless estimated net receipts (as defined) for each future year will equal or exceed 1.4 times the debt service on all bonds outstanding, including the additional bonds being issued or to be issued in the case of a power plant (as defined) being financed in increments.

In any three-year period, at least 7.5% of general business income (as defined) must be spent for replacements, renewals or additions to the electric system. Any deficiency is to be spent within two years thereafter for such purposes or, if not so spent, is to be used for bond retirements in advance of maturity.

The average interest rates were 4.6% for each of the three years ended December 31, 2006.

Electric System Subordinated Revenue Bonds - Electric System Subordinated Revenue Bond payments are as follows (in thousands):

Principal Interest 2007 $ - $ 5,647 2008 - 5,631 2009 - 5,631 2010 - 5,631 2011 - 5,631 2012-2016 - 28,156 2017-2021 - 28,156 2022-2026 - 28,156 2027-2031 - 28,156 2032-2036 50,000 25,969 2037-2042 75,000 15,284 Total $125,000 $182,048 OPPD is authorized to offer up to $300,000,000 of Electric System Subordinated Revenue Bonds, or Periodically Issued Bonds (PIBS). OPPD intends to issue the PIBS on a series-by-series basis through August 1, 2009. Payment of the principal and interest on the PIBS will be secured by a subordinate lien on the revenues of OPPD's Electric System and will be subject to the prior payment of operations and maintenance expenses of the Electric System and the prior payment of OPPD's Electric System Revenue Bonds.

36 20060FD An,,ua[ KRport

On February 24, 2006, OPPD issued 2006 Series AElectric System Subordinated Revenue Bonds for $25,000,000. The 2006 Series Aissue is term bonds due 2040 with an interest rate of 4.375%. On March 23, 2006, OPPD issued 2006 Series BElectric System Subordinated Revenue Bonds for $25,000,000. The 2006 Series Bissue is term bonds due 2036, with an interest rate of 4.75%.

On July 26, 2006, OPPD issued 2006 Series C Electric System Subordinated Revenue Bonds for $25,000,000. The 2006 Series C issue is term bonds due 2042, with an interest rate of 4.65%.

On October 4, 2005, OPPD issued 2005 Series AElectric System Subordinated Revenue Bonds for $25,000,000. The 2005 Series Aissue isterm bonds due 2035, with an interest rate of 4.25%. On October 28, 2005, OPPD issued 2005 Series BElectric System Subordinated Revenue Bonds for $25,000,000. The 2005 Series Bissue is term bonds due 2041, with an interest rate of 4.5%.

Electric Revenue Notes - Commercial Paper Series - OPPD has a Commercial Paper Program supported by a credit agreement for $250,000,000 which expires on October 1,2007. OPPD intends to extend this credit agreement on a long-term basis before its expiration. In November 2006, OPPD sold an additional $100,000,000 of Commercial Paper to meet interim financing needs for the fourth quarter of 2006. OPPD plans to refinance this additional $100,000,000 of Commercial Paper with the issuance in 2007 of subordinated revenue bonds. The average borrowing rates were 3.5%, 2.4% and 1.2% for the years ended December 31, 2006, 2005 and 2004, respectively. The outstanding balances were $250,000,000 and $150,000,000 as of December 31, 2006 and 2005, respectively.

Electric Revenue Minibonds - The minibonds consist of current interest-bearing and capital appreciation minibonds, which are payable on a parity with OPPD's Electric System Revenue Notes and Electric Revenue Notes - Commercial Paper Series, all of which are subordinated to the Electric System Revenue Bonds. The minibonds may be redeemed prior to their maturity dates at the request of a holder, subject to certain conditions as outlined in the Minibond Official Statements. The current balance at December 31, 2006, was $12,751,000, which was principal and accreted interest due on October 1,2007, for the 1992 mini-bonds. The outstanding balances at December 31 were as follows (in thousands):

Principal 2006 2005 1992 minibonds, due 2007 (6.00%) $ 9,102 $ 9,118 1993 minibonds, due 2008 (5.35%) 9,215 9,274 1994 minibonds, due 2009 (5.95%) 9,473 9,496 2001 minibonds, due 2021 (5.05%) 24,563 24,741 Subtotal 52,353 52,629 Accreted interest on capital appreciation minibonds 11,277 9,943 Total $63,630 $62,572 Subordinated Obligation - The subordinated obligation is payable in annual installments of $481,815, including interest at 9.0%, through 2014.

Revolving Credit Agreement - InJanuary 2005, OPPD executed a $350,000,000 Revolving Credit Agreement (RCA) with JPMorgan Chase Bank, N.A., as Agent. The RCA is a facility that allows for revolving loans during a five-year period from Janu-ary 3, 2005, through December 31, 2009, which may be converted to term loans of up to three years. The facility allows OPPD to draw, as needed, subject to customary conditions, to support its capital program. Atotal of six banks (including three banks with offices in Omaha) are part of the facility. In December 2006, OPPD reduced the amount available to borrow under the RCA to $200,000,000. There were no amounts outstanding under the RCA at December 31, 2006.

Promissory Note - In February 2006, OPPD renewed a one-year $100,000,000 Fixed Rate Promissory Note (Note) with JPMorgan Chase Bank, N.A., with an optional one-year renewal. The Note is an uncommitted line of credit that OPPD can access as needed to support its capital program. There are no amounts outstanding under the Note. The Note was not renewed in 2007.

NC2 Separate Electric System Revenue Bonds - OPPD executed Participation Power Agreements with seven public power and municipal utilities for 50% of the output of its new coal-fired unit, Nebraska City Station Unit 2 (NC2). The Participants' rights to receive, and obligations to pay costs related to, 50% of the output is the "Separate System."

On September 28, 2006, OPPD issued $115,000,000 of NC2 Separate Electric System Revenue Bonds. The issue consists of

$19,890,000 of serial bonds, with maturity dates between 2011 and 2026, with interest rates between 3.55% and 4.2% and

$95,110,000 of term bonds, with maturity dates between 2027 and 2049, with interest rates between 4.25% and 5.0%.

On December 1,2005, OPPD issued $112,000,000 of NC2 Separate Electric System Revenue Bonds. The issue consists of

$31,535,000 of serial bonds, with maturity dates between 2011 and 2031, with interest rates between 3.55% and 4.75%, and

$80,465,000 of term bonds, with maturity dates between 2027 and 2046, with an interest rate of 5.0%.

zoo6 OFFD Annual Keport 57

NC2 Separate Electric System Revenue Bond payments are as follows (in thousands):

Principal Interest 2007 $ - $ 9,908 2008 - 10,761 2009 - 10,761 2010 - 10,761 2011 2,245 10,721 2012-2016 12,575 52,261 2017-2021 15,380 49,490 2022-2026 19,090 45,805 2027-2031 24,085 40,878 2032-2036 30,695 34,500 2037-2041 39,180 26,026 2042-2046 50,000 14,931 2047-2051 33,750 2,469 Total $227,000 $319,272 Fair Value Disclosure - The aggregate carrying amount and fair value of OPPD's long-term debt, including current portion and excluding unamortized loss on refunded debt, at December 31 were as follows (in thousands):

2006 2005 Carrying Fair Carrying Fair Amount Value Amount Value

$1,575,152 $1,623,832 $1,139,247 $1,165,294 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 fair value of outstanding

"-debtfinancial 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:

Electric System Revenue Bond Fund, Electric System Subordinated Revenue Bond Fund and NC2 Separate Electric System Revenue Bond Fund - These funds are to be used for the retirement of their respective revenue bonds and the payment of the related interest and reserves as required.

Electric System Construction Fund and NC2 Separate System Construction Fund - These funds are to be used for capital improvements, additions and betterments to and extensions of their respective electric system.

Segregated Fund - Debt Retirement - This fund is to be used for the retirement of outstanding debt and to help maintain debt service coverage ratios at appropriate levels. As there is no funding requirement for the Debt Retirement Reserve, this fund also may be used to provide additional liquidity for operations as necessary. The balance of the Debt Retirement Fund was

$105,000,000 and $90,000,000 as of December 31, 2006 and 2005, respectively (Note 13).

Segregated Fund - Rate Stabilization - This fund is to be used to help stabilize rates over future periods through the transfer of funds to operations as necessary for significant unforeseen occurrences, such as major storm damage or unscheduled outages. As there is no funding requirement for the Rate Stabilization Reserve, this fund also may be used to provide additional liquidity for operations as necessary. The balance of the Rate Stabilization Fund was $32,000,000 and $19,600,000 as of December 31, 2006 and 2005, respectively (Note 13).

58 zoo6VOFFD Annual Keport

Segregated Fund - Other - This fund represents assets held for payment of customer deposits, refundable advances, certain other liabilities and funds set aside as part of OPPD's self-insured health insurance plans (Note 9). The balances of the funds at December 31 were as follows (in thousands): 2006 2005 Segregated Fund - self-insurance $ 5,832 $ 5,785 Segregated Fund - other 19,734 20,065 Total $25,566 $25,850 Decommissioning Funds - These funds are for the costs to decommission the 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 (Note 1). The 1990 Plan was established in accordance with NRC regulations, for the purpose of discharging OPPD's obligation to decommission the Fort Calhoun Station. The 1992 Plan was established to retain funds in excess of NRC minimum funding requirements based on an independent engineering study which indicated that decommissioning costs would exceed the NRC minimum requirements. The balances of the funds at December 31 were as follows (in thousands):

2006 2005 Decommissioning Trust -1990 Plan $205,536 $195,280 Decommissioning Trust -1992 Plan 62,562 59,464 Total $268,098 $254,744

4. DEPOSITS AND INVESTMENTS Investments - OPPD has investments in cash equivalents and special purpose funds. Fair values were determined based on quotes received from the trustees' market valuation service. The weighted average maturity was based on the face value for investments. As of December 31, 2006 and 2005, OPPD investments were as follows (in thousands):

2006 2005 Weighted Average Weighted Average Investment Type Fair Value Maturity (Years) Fair Value Maturity (Years)

Money markets $ 970 - $ 773 0.1 U.S. agencies 782,843 1.1 584,424 1.1 Corporate bonds 1,564 2.0 1,586 3.0 Mutual funds 111,958 - 105,581 -

Total $897,335 $692,364 Portfolio weighted average maturity 1.0 1.0 Interest Rate Risk - OPPD's investment in relatively short-term securities reduces interest rate risk, as evidenced by its portfolio weighted average maturity of 1.0 year as of December 31, 2006 and 2005. In addition, OPPD is a buy-and-hold investor, which minimizes interest rate risk.

Credit Risk - OPPD's investment policy is to comply with OPPD's bond covenants and state statutes for governmental entities, which limit investments to investment grade fixed income obligations. The weighted average credit quality of the invest-ments held by OPPD was rated AAA by Standard &Poor's Ratings Services and Aaa by Moody's Investors Service at December 31, 2006 and 2005.

Custodial Credit Risk - OPPD's bank deposits were entirely insured or collateralized with securities held by OPPD or by its agent in OPPD's name at December 31, 2006 and 2005. OPPD delivers all of its investment securities under contractual trust agreements.

5. DEFERRED CHARGES The composition of deferred charges at December 31 was as follows (in thousands):

2006 2005 Deferred financing costs $15,274 $ 9,199 Sulfur dioxide allowance inventory - long-term 8,125 Deferred depreciation expense 14,228 9,048 Other 5,000 3,211 Total $42,627 $21,458 2006 OFFD Annual Report 59

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

Funding Policy -Employees contribute 4.0% of their covered payroll to the Plan. OPPD is obligated to contribute the balance of the funds needed on an actuarially determined basis.

GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, requires employers to follow an actu-arial approach for the accounting and reporting of the annual cost of pension benefits and the related outstanding liability. This approach requires paying to a pension plan an amount that is expected to be sufficient, if invested now, to finance the benefits of employees during their retirement. Pension benefits are a part of the compensation that employees earn each year, even though these benefits are not paid until after employment has ended. Therefore, the cost of these future benefits is recognized while the employee is still working.

The Present Value of Accrued Plan Benefits (PVAPB) is the present value of benefits based on compensation and service to that date. This is the amount the Plan would owe participants if the Plan were frozen on the valuation date. The PVAPB is presented in the table below based on the actuarial valuation as of January 1:

Present Value of Over Funded PVAPB Actuarial Value Accrued Plan Over as a Percentage of of Assets Benefits (PVAPB) Funded PVAPB Funded Ratio Covered Payroll Covered Payroll

()( (a-b) a/bc) ((a-b)ac)

(thousands) (thousands) 2006 $611,925 $609,285 $2,640 100.4% $154,082 1.7%

.Z2D5 $577,885 $553,592 $24,293 104.4% $148,682 16.3%

2004 $545,565 $515,351 $30,214 105.9% $145,094 20.8%

,The Actuarial Accrued Liability (AAL) is the present value of retirement benefits adjusted for assumptions for future increases in compensation and service attributable to past accounting periods. The funded ratio for the AAL was lower than the PVAPB because the AAL method assumes future compensation and service increases. The annual contributions to the Plan consist of the cost for the current period plus a portion of the unfunded accrued liability. The AAL is presented in the table below based on the actuarial valuation as of January 1:

Unfunded UAL Actuarial Value Actuarial Accrued Accrued Percentage of of Assets Liability (AAL) Liability (UAL) Funded Ratio Covered Payroll Covered Payroll (thousands) (thousands) 2006 $611,925 $771,907 $159,982 79.3% $154,082 103.8%

2005 $577,885 $702,300 $124,415 82.3% $148,682 83.7%

2004 $545,565 $658,260 $112,695 82.9% $145,094 77.7%

Annual Pension Cost -The annual pension cost and required contribution by OPPD was $32,361,000, $25,934,000 and

$22,907,000 for the years ended December 31, 2006, 2005 and 2004, respectively. There was no net pension obligation as of December 31, 2006, 2005 and 2004. Plan contributions by OPPD employees were $6,270,000, $6,072,000 and $5,832,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

The Entry Age Normal (Level Percent of Pay) cost method was used to determine contributions to the Plan. Under this actuarial method, an allocation to past service and future service is made by spreading the costs over an employee's career as a level percentage of pay. Other actuarial assumptions used in the valuation are shown in the following table. The investment return assumption, net of administrative expenses, was reduced to 8.2% for the 2006 valuation from 8.4% for the 2005 and 2004 valuations. The actuarial value of plan assets was determined using a method which smoothes the effect of short-term volatility in the market value of investments over approximately five years. Cost-of-living adjustments are provided to retirees and beneficiaries at the discretion of the Board of Directors. Ad-hoc cost-of-living increases granted to retirees and beneficiaries are

-o zoo6rrFFu Annual Report

amortized in the year for which the increase is authorized by the Board of Directors. Except for the liability associated with cost-of-living increases, the unfunded actuarial accrued liability is amortized on a level basis (closed group) over 15 years. Effective January 1, 2007, the Board of Directors authorized a 1.0% cost-of-living adjustment for retirees and beneficiaries.

2006 2005 2004 Investment return (discount rate) 8.20% 8.40% 8.40%

Average rate of compensation increase 5.20% 5.20% 5.20%

Ad-hoc cost-of-living adjustment 1.50% 1.25% 1.25%

Audited financial statements for the Plan may be reviewed by contacting the Pension Administrator at OPPD's Corporate Head-quarters, Omaha, 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 Plan except for federally mandated limits and to provide supplemental pen-sion benefits. The related pension expense, fund balance and employee benefit obligation were not material for each of the three years ended December 31, 2006.

7. SUPPLEMENTAL RETIREMENT SAVINGS PLAN OPPD sponsors a Defined Contribution Supplemental Retirement Savings Plan - 401(k) and a Defined Contribution Supple-mental Retirement Savings Plan - 457. Both Plans cover all full-time employees and allow contributions by employees that are partially matched by OPPD. Each of these Plan's assets and income are held in an external trust account in the employee's name.

OPPD's matching share of contributions was $5,763,000, $5,617,000 and $5,601,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

8. OTHER LIABILITIES The composition of other liabilities at December 31 was as follows (in thousands):

2006 2005 Contractors' retention - long-term $15,268 $ 4,880 Workers' compensation reserve 2,727 2,644 Deferred revenues 1,424 1,468 Public liability reserve 1,086 629 Accrued production outage costs - long-term 758 -

Other 610 663 Total $21,873 $10,284

9. SELF-INSURANCE HEALTH PROGRAM AND POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS OPPD provides employee health care and life insurance benefits to substantially all active and retired employees. An Adminis-trative Services Only (ASO) Health Insurance Program is used to account for the health insurance claims. With respect to the ASO program, reserves sufficient to satisfy both statutory and OPPD-directed requirements have been established to provide risk protection (Note 3). Additionally, private insurance covering claims in excess of 120% of expected levels has been purchased.

Health care expenses (reduced by premium payments from participants) were $28,796,000, $28,253,000 and $24,540,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The claim payments during those years did not exceed 120%

of the expected claims levels. As of December 31, 2006, 2,311 active employees, 27 employees on long-term disability and 1,182 retirees and beneficiaries had health care coverage through OPPD. The total cost of life and long-term disability insurance was

$2,159,000, $1,725,000 and $2,238,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The Incurred but not Presented Reserve was $2,702,000 and $2,899,000 as of December 31, 2006 and 2005, respectively, and was recorded in liabilities payable from segregated funds.

Health care and life insurance benefits provided to retirees and their dependents are considered other post employment benefits (OPEB). Prior to 2007, OPPD recognized the cost of OPEB on a pay-as-you-go basis. Because of a new accounting standard, OPPD is required to recognize OPEB costs using an actuarial approach similar to OPPD's Retirement Plan (Note 6) in 2007. Aprelimi-nary actuarial valuation was completed by an independent actuary in 2006 using 2005 demographic data. The valuation indicat-ed that OPPD had an actuarial accrued liability (AAL) of approximately $300,000,000 as of December 31, 2006. The accounting standard requires recognition of an OPEB liability on the balance sheet only for unfunded annual required contributions (ARC).

In 2006, OPPD decided to fully fund the ARC to reduce OPEB costs, avoid the recognition of a liability on the financial state-ments and address its obligations to employees. The ARC, in excess of the pay-as-you-go costs, are expected to be $18,306,000 200i* OFFD Annual Report +1i

and $18,452,000 for the years ended December 31, 2007 and 2008, respectively. These costs include anticipated reductions from the implementation of plan design changes. An irrevocable grantor trust for OPEB was established in 2006.

10. COMMITMENTS OPPD's obligation for the uncompleted portion of construction contracts was approximately $306,449,000 at December 31, 2006. Most of this obligation was for the engineering, procurement and construction contract for the Nebraska City Station Unit 2.

OPPD has power sales commitments which extend through 2027 of $65,750,000 at December 31, 2006. OPPD has power purchase commitments which extend through 2020 of $103,455,000 at December 31, 2006. These amounts do not include the Participation Power Agreements (PPAs) for the Nebraska City Station Unit 2 or OPPD's portion of the NPPD wind-turbine facility.

OPPD has 40-year PPAs with seven public power and municipal utilities (the Participants) for the sale of 50% of the 663-MW net capacity of the planned Nebraska City Station Unit 2. The Participants have agreed to purchase their respective shares of the output on a "take-or-pay" basis even ifthe power is not available, delivered to or taken by the Participant. The Participants are subject to a step-up provision, whereby in the event of a Participant default, the remaining Participants are ob-ligated to pay a share of any deficit in funds resulting from the default. On September 7, 2006, OPPD executed a NC2 Transmis-sion Facilities Cost Agreement with the Participants which addresses the cost allocation, payment and cost recovery for delivery of their respective power.

OPPD has a PPA with the Nebraska Public Power District (NPPD) for a 16.8% share, or approximately 10 MW, of a 59.4-MW wind-turbine facility near Ainsworth, Nebraska. OPPD is obligated, on a "take-or-pay" basis, under the PPA to make payments for purchased power even ifthe power is not available, delivered to or taken by OPPD. In the event another power purchaser defaults, OPPD is obligated, through a step-up provision, to pay a share of any deficit in funds resulting from the default. OPPD's commitment through 2025 under the PPA is $29,122,000 at December 31, 2006. Commercial operation of the facility began on September 15, 2005.

OPPD has coal supply contracts which extend through 2008 with minimum future payments of $68,158,000 at December 31, 2006. OPPD also has coal transportation contracts which extend through 2008 with minimum future payments of $55,608,000 at December 31, 2006. These contracts are subject to price adjustments.

Contracts for uranium concentrate and conversion services are in effect until 2016 with estimated future payments of

$59,400,000 at December 31, 2006. Contracts for the enrichment of nuclear fuel are in effect through 2008 with estimated future payments of $13,400,000 at December 31, 2006. Additionally, OPPD has contracts through 2012 for the fabrication of nuclear fuel assemblies with estimated future payments of $21,100,000 at December 31, 2006.

In 2006, OPPD entered into an agreement with the University of Nebraska-Omaha (UNO) to fund an Energy Saving Potential (ESP) program to be administered by UNO for five years. This program isdesigned to reduce energy usage by residential consum-ers through conservation. OPPD committed up to $500,000 per year for the five-year program until 2011.

In 2006, OPPD entered into a 50-year contract with the Department of Defense (DOD) to provide distribution services to Offutt Air Force Base (Offutt). The electricity for Offutt is provided by the Western Area Power Administration.

11. CONTINGENCIES Under the provisions of the Price-Anderson Act at December 31, 2006, OPPD and all other licensed nuclear power plant opera-tors could each be assessed for claims and legal costs in the event of a nuclear incident in amounts not to exceed a total of

$100,590,000 per reactor per incident with a maximum of $15,000,000 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 or payable from OPPD, taking into account amounts provided in the financial statements, are not significant.

12. CONSTRUCTION DEPOSITS Participants were given the option to provide their own funds or to finance with OPPD separate electric system revenue bonds their share of the construction costs of Nebraska City Station Unit 2. This liability represents the amount the Participants' own funds, including interest, exceeded their share of the incurred construction costs. Construction deposits were $102,019,000 and

$55,656,000 as of December 31, 2006 and 2005, respectively.

4-2 2006 OFFLD Annual Report

13. ADDITIONS TO AND UTILIZATIONS OF RESERVES In May 2006, $5,000,000 of the DebtRetirement Reserve was used, as planned, to provide additional revenues and funding for capital expenditures. In December 2006, $20,000,0000 was added to the Debt Retirement Fund as a result of strong financial per-formance. The net impact on retail sales revenues and net income for changes to the Debt Retirement Reserve was a reduction of

$15,000,000 for the year ended December 31, 2006.

Additional purchased power expense attributed to extended outages at the Fort Calhoun and Nebraska City stations in the first half of 2005 was offset in June 2005 by the use of $12,400,000 of the Rate Stabilization Reserve. As a result of strong financial performance in the latter half of 2005, the Rate Stabilization Reserve was restored to $32,000,000 in December 2005. Accord-ingly, there was no impact on purchased power expense or net income from the Rate Stabilization Reserve for the year ended December 31, 2005.

Retail sales revenues and net income were reduced for an addition to the Debt Retirement Reserve of $55,000,000 for the year ended December 31, 2004.

14. SALE AND PURCHASE OF SULFUR DIOXIDE ALLOWANCES OPPD isrequired to have sulfur dioxide allowances equal to its emission levels. One sulfur dioxide allowance must be owned for each ton of sulfur emitted by the plants. In April 2006, due to a surplus inventory of currently usable sulfur dioxide allow-ances, OPPD sold 25,000 current allowances and purchased 25,000 allowances usable between 2010 and 2014. The transaction increased other electric revenues by $18,555,000 for the year ended December 31, 2006.

15. LOW-LEVEL RADIOACTIVE WASTE SETTLEMENT The Central Interstate Low-Level Radioactive Waste (LLRW) Commission was awarded damages in 2002 from a lawsuit against the State of Nebraska for the denial of a site-specific license application by the Nebraska Departments of Environmental Quality and Health. The Commission and the State entered into a settlement agreement for a single payment on August 1,2005. The Major Generators (i.e., OPPD and other owners and operators of nuclear power generating units within the Compact region which have provided funding for the activities of the Commission) requested reimbursement from the Commission from the -

proceeds of the settlement payment. InJuly 2005, the Commission adopted a resolution to pay Major Generators $114,746,000 and to retain $15,000,000 to cover potential future expenses. OPPD received its share, $15,468,000, on August 1, 2005. The settlement proceeds received by OPPD were returned to its customer-owners prior to the end of 2005 as authorized by the Board of Directors. Accordingly, there was no impact on net income from this settlement for the year ended December 31, 2005. In February 2006, the Commission voted to release $10,000,000 of the $15,000,000 previously retained as an additional settlement.

OPPD's share, $1,348,000, was received in April 2006 and was included in other electric revenues for the year ended December 31, 2006.

16. HIGH-LEVEL RADIOACTIVE WASTE SETTLEMENT In 2006, a settlement agreement was reached between OPPD and the Department of Energy (DOE) related to DOE's responsibili-ties under the terms of the Nuclear Waste Disposal Act. The DOE agreed to reimburse OPPD for allowable costs for managing and storing spent nuclear fuel and high-level waste incurred due to the DOE's delay in accepting waste. InJune 2006, OPPD received a reimbursement of $4,948,000 from the DOE for capital expenditures incurred through June 2005 for the construction of a dry-cask storage facility. The receivable from the DOE for costs incurred from July 2005 through December 2006 for the dry-cask storage facility was $13,000,000 as of December 31, 2006. OPPD will periodically submit applications to the DOE for reimburse-ment of costs incurred. Utility plant assets were reduced by and contributions in aid of construction included $17,948,000 for the year ended December 31, 2006, for these reimbursements.

17. OTHER -NET For the year ended December 31, 2005, $837,000 of costs related to a steam supply study for industrial use were expensed since the project was not implemented. In 2006, this study was resumed with an agreement by the customer to reimburse OPPD for

$310,000 of expenses from 2005 as well as future expenses. The reimbursement for 2005 expenses was included in other income for the year ended December 31, 2006.

18. SUBSEQUENT EVENT OPPD purchased Offutt Air Force Base's distribution system for $3,009,000 in January 2007, which will be paid over a 15-year period through contract rates.

2oo6rrVDAnnual Keport +4

2006 2005 2004 2003 2002 2001 2000 1999 1998 1 Total Utility Plant (at year end)

(inthousands of dollars)........4,166,997 3,656,433 3,363,909 3,224,851 3,081,073 2,876,799 2,735,437 2,621,444 2,455,004 2,3(

Bonded Indebtedness (at year end)

(inthousands of dollars)........1,249,510 917,710 679,315 726,130 631,135 577,010 637,235 696,040 745,630 8]

Operating Revenues (inthousands of dollars)

Residential......................... 249,174 237,798 211,913 208,426 214,447 202,984 196,923 188,187 192,481 1V Commercial......__............. 198,089 190,128 180,867 176,664 177,063 176,145 166,441 161,901 159,844 11 Industrial ............................ 94,109 90,344 90,987 85,406 75,946 76,197 75,976 76,513 79,359 Street and Highway Lighting 15,225 14,186 13,817 13,156 12,723 12,589 12,270 11,936 11,687 Off-System Sales .................... 96,500 120,030 109,523 108,795 65,885 91,045 110,300 78,741 62,550 Accrued Unbilled Revenues 2,527 630 (1,134) 4,086 (1,268) 104 2,541 1,650 282 Provision for Rate Stabilization.. - - - (10,500) (5,000) (11,500) (5,000) -

Provision for Debt Retirement .. (15,000) - (55,000) (35,000) - - - - -

Other Electric Revenues ........... 36,204 13,436 15,342 11,541 11,357 14,731 14,238 9,802 8,747 Total ............................. 676,828 666,552 566,315 573,074 545,653 568,795 567,189 523,730 514,950 4E Operations & Maintenance Expenses (inthousands of dollars)........461,101 447,270 401,778 404,040 339,750 353,767 345,378 329,323 306,864 2E Payments in Lieu of Taxes (in thousands of dollars) .......... 20,241 19,693 18,591 18,067 18,553 18,234 17,645 16,852 16,638 1 Net Operating Revenues before Depreciation and Decommissioning (inthousands of dollars)........195,486 199,589 145,946 150,967 187,350 196,794 204,166 177,555 191,448 15 Net Income (inthousands of dollars) .......... 84,290 82,171 24,844 25,878 80,621 69,867 70,850 49,014 63,993 4 Energy Sales (inmegawatt-hours)

Residential ........................ 3,374,053 3,356,196 3,054,576 3,079,589 3,151,895 3,065,377 2,880,289 2,718,585 2,796,585 2,6E Commercial....................... 3,489,241 3,449,908 3,285,896 3,264,369 3,272,028 3,279,890 3,097,835 3,014,202 2,971,390 2,85 Industrial........................... 2,664,743 2,644,634 2,630,038 2,561,569 2,290,368 2,302,311 2,287,966 2,304,441 2,443,625 2,32 Street and Highway Lighting ... 88,195 85,128 83,817 82,845 81,593 82,775 81,268 80,868 80,286 Off-System Sales .................. 2,486,483 2,502,433 3,646,043 3,775,362 3,273,359 3,952,632 4,208,943 3,318,409 3,105,942 2,54 Accrued Unbilled MWh........... 9,628 21,285 6,890 61,165 (23,697) (5,268) 52,739 23,168 9,369 5 Total............................. 12,112,343 12,059,584 12,707,260 12,824,899 12,045,546 12,677,717 12,609,040 11,459,673 11,407,197 10,58 Number of Customers (average per year)

Residential......................... 289,713 282,310 275,854 270,579 266,464 261,286 256,541 251,057 245,890 24 Commercial........................ 41,165 40,372 39,482 38,525 37,807 37,008 36,088 35,553 34,932 3 Industrial ............................. 132 133 135 127 117 116 110 105 103 Street and Highway Lighting ... 323 293 352 436 594 555 543 560 567 Off System........................... 37 39 45 48 54 49 49 45 40 Total ............................. 331,370 323,147 315,868 309,715 ý305,036 299,014 293,331 287,320 281,532 27 Cents Per kWh (average)

Residential ........................... 7.40 7.07 6.95 6.73 6.81 6.63 6.84 6.94 6.89 Commercial ......................... 5.99 5.77 5.76 5.69 5.41 5.38 5.37 5.37 5.38 Industrial ............................ 3.55 3.46 3.40 3.39 3.32 3.32 3.32 3.32 3.24 Retail ................................. 5.81 5.58 5.48 5.39 5.46 5.36 5.41 5.40 5.34 Generating Capability (at year end)

(inmegawatts)..................... 2,544.1 2,542.5 2,540.5 2,540.5 2,220.5 2,205.0 2,203.0 2,093.4 2,082.9 2, System Peak Load (inmegawatts)..................... 2,271.9 2,223.3 2,143.8 2,144.8 2,037.4 1,994.1 1,976.9 1,965.6 1,914.0 1 Net System Requirements (inmegawatt-hours)

Generated......................... 11,341,827 11,180,808 12,235,044 12,000,873 11,428,893 11,516,924 11,760,938 10,724,976 10,679,310 9,69 Purchased and Net Interchanged ................... (1,268,780) (1,148,903) (2,716,242) (2,557,981) (2,122,701) (2,557,704) (2,833,243) (2,190,252) (1,960,844) (1,28]

Net................................. 10,073,047 10,031,905 9,518,802 9,442,892 9,306,192 8,959,220 8,927,695 8,534,724 8,718,466 8,41 Certain amounts have been reclassified to conform with the 2006 presentation.

+o6OFFD Annual Keport

OPPD Minibondholders.

Investor Relations OPPD is the Paying Agent, Transfer'. Coporate Icers Corporate Informati n Agent and Registrar on OPPD's Minibonds. OPPD Minibond.'

D~el D. Weber Corporate Headquarters Cha./rirmanr of the B oard Administration provides information Energy Plaza and assistance to Minibond holders Frederick J. Ulrich 444 South 16th Street Mall regarding: Vice Chairman of the Board Omaha, Nebraska 68102-2247

" Interest Payments N.P. Dodge Jr.

402-636-2000 Interest on Current Interest-Bearing Secretary www.oppd.com Minibonds is paid on April 1 and General Counsel October 1 of each year. John K. Green FraserStryker PC LLO Treasurer

" Ownership Transfer Omaha, Nebraska Minibond Transfer Information W. Gary Gates Financial Advisor Forms can be obtained via President Lehman Brothers www.oppd.com or by contacting ChiefExecutive Officer ...

New York, New York the Minibond Administrator, listed Consulting Engineer below. Charles P. Moriarty Vice President R.W. Beck, Inc. " Optional Early Redemption Seattle, Washington Chief FinancialOfficer

" Replacement of Lost Minibond Assistant Treasurer Independent Auditors Certificate Assistant Secretary Deloitte & Touche LLP Please contact the Minibond Omaha, Nebraska Ross T. Ridenoure Administrator to request a Minibond Vice President Bond Counsel Transfer Information Form or to Chief Nuclear Officer Kutak Rock LLP change your Minibond holder Assistant Secretary Omaha, Nebraska address. You may contact the Commercial Paper Issuing and Minibond Administrator via e-mail at Timothy J. Burke Paying Agent minibonds@oppd.com, at OPPD's Vice President The Bank of New York Trust Company,N.A. website www.oppd.com or through Assistant Secretary New York, New York the following address and telephone numbers: Adrian J. Minks Senior and Subordinate Vice President Minibond Administrator Bondholders Assistant Secretary Finance & Investor Relations You may contact OPPD with questions Omaha Public Power District Roger L. Sorenson about OPPD debt at the"following address 444 South 16th Street Mall Vice President and telephone number:

Omaha, NE 68102-2247 Assistant Secretary Finance & Investor Relations Omaha Public Power District Omaha, Nebraska area 402-636-3286 Dale F. Widoe 444 South 16th Street Mall Outstate Nebraska 800-428-5584 Vice President Omaha, NE 68102-2247 Assistant Secretary Available Financial Information e-mail: flnfo@oppd.com In compliance with Securities 402-636-2000 and Exchange Commission Senior and Subordinate Debt Rule 15c2-12, information regarding Trustee OPPD is available at any nationally The Bank of New York Trust Company, N.A. recognized municipal security New York, New York information repository. Copies of Senior and Subordinate Debt its most recent annual reports, Paying Agents interim reports and official statements The Bank of New York Trust Company, N.A. also are available upon request at Chicago, Illinois finfo@oppd.com or through the New York, New York following address:

Wells Fargo Bank, N.A. Omaha Public Power District FinanceDivision Omaha, Nebraska 444 South 16th Street Mall The Trustee and Paying Agent on OPPD's Omaha, NE 68102-2247 Senior Lien Debt, Subordinated Revenue Bonds and Separate System Revenue Financial information in the Bonds is The Bank of New York Trust annual report also is available at www.oppd.com Company, N.A. You may contact The Bank of New York Trust Company, N.A.

directly at the following address and telephone number:

The Bank of New York Trust Company, N.A.

Corporate Trust Division 2 North LaSalle Street, 7th Floor Chicago, Illinois 60602 Investor Relations: 800-275-2048 zoo6 OVVD Annual Report 45

LIC-07-0032, Transmittal of Omaha Public Power District (OPPD) 2006 Annual Financial Report

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LIC-07-0032, Transmittal of Omaha Public Power District (OPPD) 2006 Annual Financial Report

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