ML041330422
| ML041330422 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 03/11/2004 |
| From: | Southern California Public Power Authority |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML041330422 (70) | |
Text
SCPPA 2002-2003 Annual Report
SCPPA Members Mission Statement 1 Vision 1 What is SCPPA? 1 Presidents Letter 3 Executive Directors Letter 4 Table of Contents Leading the Way to the Future 5 Operations and Projects 6 Palo Verde Project 6 San Juan Unit 3 Project 8 Mead-Phoenix/Mead-Adelanto Transmission Projects 10 Hoover Uprating Project 12 Southern Transmission System Project 12 Magnolia Power Project 13 Financing Activities 14 Southern Transmission Legislative Report 15 System Project Municipalities 16 Mead-Phoenix Managements Discussion and Analysis 20 Transmission Project Mead-Adelanto Report of Independent Accountants 39 Transmission Project Combined Financial Statements 40 Palo Verde Nuclear Supplemental Financial Information 59 Generating Station Hoover Uprating Project San Juan Generating Station Magnolia Power Project Member Agencies Salt Lake City NEVADA Intermountain Converter Lake Tahoe Station IA RN UTAH FO LI CA Southern Transmission System Las Vegas San Juan Unit 3 Mead-Adelanto Project Farmington Adelanto Hoover Converter Station 500 KV AC ARIZONA Adelanto 0 Substation 50 Mead 500KV KV substation AC Pasadena NEW MEXICO Burbank Mead-Phoenix Project Glendale Los Angeles Westwing Station Vernon Palo Verde Phoenix Anaheim Azusa Colton Cerritos Riverside Banning Imperial Irrigation District
Mission SCPPA will provide coordination, facilitation, implementation, and communication on issues and projects of mutual interest to the members as determined by the Board of Directors.
SCPPA will provide cost-effective joint action Vision services that supplement member programs and activities to assure continued member success.
What is SCPPA?
he Southern California Public Power Authority (SCPPA) is a joint powers authority consisting of T the original ten municipal utilities and one irrigation district, plus one new SCPPA member utility who joined last year. SCPPA members currently deliver electricity to approximately 2 million customers over an area of 7,000 square miles, with a total population of 4.8 million.
The members are the municipal utilities of the cities of Anaheim, Azusa, Banning, Burbank, Colton, utility of Cerritos.
deliver Glendale, Los Angeles, Pasadena, Riverside, and Vernon, the Imperial Irrigation District, and the municipal SCPPA was formed in 1980 to finance the acquisition of generation and transmission resources for its members. Currently, SCPPA has three generation projects and three transmission projects in operation, generating and bringing power from Arizona, New Mexico, Utah, and Nevada. A fourth generation project is in the construction phase.
The projects were financed through the issuance of tax-exempt bonds, backed by the combined credit of the SCPPA members participating in each project. As of June 30, 2003, SCPPA had issued $9.7 billion in bonds, notes, and refunding bonds, of which $3.0 billion was outstanding.
SCPPAs role has evolved over the years to include legislative advocacy at the state and national levels, and various cooperative efforts to reduce member costs and improve efficiency.
efficiency 1
We dedicate this years annual report to Alan R.Watts. Alan was one of the original organizers of SCPPA, and became Special Counsel in October 1982.
He served as Special and Corporate Counsel on a continuous basis for the past 21 years. His dedicated service and tireless efforts over those many years contributed greatly to SCPPAs success. We will miss him.
Alan R.Watts (1935-2003)
SCPPA Officers Ronald E. Davis, President; Ronald O.Vazquez, Secretary; Bill D. Carnahan, Executive Director; Thomas K. Clarke,Vice President.
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SCPPA has taken advantage of low interest rates and continues to restructure its generation and transmission debt, which reduces costs to our Members and ultimately our customers.
Presidents Letter dynamic s the President of the Southern California Public Power Authority (SCPPA), I am proud to be a part of the many A accomplishments and the exciting opportunities for the Southern California public power utilities. I am pleased that the Authority and its individual Members are building new generation in California under the strictest environmental regulations in the nation. At the same time, we continue to work cooperatively to restore a healthy regulatory environment. We are prepared for the future with a recently developed Strategic Plan and one of the strongest financial ratings in the utility industry. Through collaboration, along with sound financial investments and a focus on the communities we serve, SCPPA is delivering reliability and competitive and stable rates every day to the 4.8 million people served by our Members.
In order to meet the growing needs of their customers, the cities of Anaheim, Burbank, Colton, Glendale, Pasadena, and Cerritos (the newest SCPPA member) joined together to begin the planning and construction of the Magnolia Power Project (Magnolia). This SCPPA-owned project held its official groundbreaking on June 10, 2003 and Magnolia is scheduled to begin producing power in 2005. When completed, Magnolia will be a combined cycled natural gas-fired generating plant with a peaking capacity of 310 megawatts and will be built on an existing site in Burbank, California.
Magnolia will continue to meet the reliability needs of the project participants and will be one of the most efficient power plants thereby saving precious resources by replacing older and less-efficient power plants. By working together, these six communities will benefit by receiving locally produced and reliable energy, at competitive and stable rates.
SCPPAs executive team has spent a great deal of time developing and implementing a dynamic Strategic Plan that provides SCPPA with a focused strategic direction. In addition, SCPPA has taken advantage of low interest rates and continues to restructure its generation and transmission debt, which reduces costs to our Members and ultimately our customers. Last year, over $50 million in gross debt savings were realized to SCPPA Members. With a clear direction charted for the future and the financial strength to accomplish our goals, the opportunities abound for SCPPAs public accomplishments power utilities.
Whether it is impacting energy legislation in Sacramento or on Capitol Hill or working together to meet our commitments to conservation and renewable energy resources or managing the construction of a major generating power plant, working together through SCPPA has provided our Members with proven value in financing, construction, and operation and maintenance of generation and transmissions projects. Through a combination of critical resourceful strategic planning and new load center generation, SCPPA is meeting todays and tomorrows energy needs of our Members customers and the communities they serve. As we look to the future, I am confident that SCPPA is poised and ready to respond to the new challenges in our industry.
Ronald E. Davis President 3
SCPPA is a leader in creating new ideas and developing new programs that continue to bring value to our Members and the communities they serve.
Executive Directors Letter CPPAs role continues to evolve as we find new ways, as a Joint Action Agency, to bring value to S our Members so they are positioned to meet the challenges in our industry. The twelve Members of SCPPA are each independent and locally owned highly successful utilities. They provide reliable energy at competitive and stable rates with sensitivity to the communities and the environment in which they serve. Working together through SCPPA, these agencies have leveraged their talents, resources, and financial strength to collectively bring more value to their communities. I am very proud to be included in their legacy of success.
SCPPA was created in 1980 and continues in its traditional roles of providing financing for our Members generation and transmission projects, managing various projects, and finding ways to reduce capital costs through debt refinancing. Over the last few years, SCPPA has been expanding its role in order to meet the challenges facing our industry.
- We have increased our involvement in legislative and regulatory activities, taking a proactive approach to advocacy of public power issues in Sacramento and Washington, D.C.
- As owner of the Magnolia Power Project (Magnolia) in Burbank, California, we continue to monitor the construction and development of the new generating facility, which is scheduled for completion and operation in May 2005. Magnolia was financed on schedule and within the financing goals established by SCPPA and the six project participants, the cities of Anaheim, Burbank, Colton, Glendale, Pasadena, and Cerritos (the newest SCPPA Member). Magnolia will use the latest technology, requires less fuel, and is more efficient with significantly less pollution than the older power plants it replaces.
Magnolia will also meet the strictest environmental standards and regulations in the nation.
- We have developed new committees for Customer Service and Transmission & Distribution Engineering & Operations.
These new committees are working with the Members to produce benchmarking studies of best practices.
- SCPPA has developed a comprehensive and dynamic Strategic Plan that forms a common vision for our Members.
To maintain and solidify our financial strength, we continue to take advantage of low interest rates and in 2003 we restructured debt, which resulted in over $30 million in gross debt service savings for our Members.
Today, providing financing for new projects and seeking ways to reduce financing costs for existing projects remain SCPPAs primary goals. However, with the experience and benefits of working together through SCPPA, the Members have realized the value of collective leadership and are applying it in new and exciting directions. By working collaboratively in the areas of legislative activity, Public Benefits program development, resource planning and renewable resources acquisition, customer service implementation, training programs, and Transmission & Distribution Engineering & Operations, our Members are responding to the challenges and opportunities in our industry.
SCPPA, in partnership with its Members, is a leader in creating new ideas and developing new programs that continue to bring value to our Members and the communities they serve. Together, we are accomplishing more.
Bill D. Carnahan Executive Director 4
Leading the Way to the Future unique The Southern California Public Power Authority (SCPPA) was created in 1980 by all eleven of the public power systems in Southern California to provide financing for their participation in electric generating facilities and high voltage transmission lines. The SCPPA member systems include:
the cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles, Pasadena, Riverside,Vernon and the Imperial Irrigation District. The newest SCPPA member is the City of Cerritos. Together, these members serve over 2 million residential and business customers in Southern California representing a population of approximately 4.8 million people.
Collectively, SCPPAs twelve members have several unique characteristics. They are non-profit based, governed locally, have direct participation in the decision making process, and are committed and maintain the obligation to serve and consistently plan for all of the electric needs of the communities they serve. Throughout the California energy crisis, the only success story has been the public power systems through the diversity of their resources and investment in renewable energy sources. Over the years, the Southern California public power systems have invested in or have secured under long-term purchase contracts power generation transmission facilities throughout the West. These facilities provide not only the diversity of fuel and technology, diversity but the location that has served SCPPA members well by providing constant and predictable electrical prices.
Traditional investments have been made in the areas of hydroelectric, nuclear, coal, and natural gas-fired generation. To meet the challenges and growing demand for energy needs, new investments in local base load and peaking natural gas-fired units will satisfy these needs and increase system reliability. In addition, new renewable projects will further diversify generation portfolios, and also benefit the environment through better pollution control technologies.
When these projects are completed, SCPPA members will have installed in excess of 2,000 megawatts of new gas-fired generation, such as the Magnolia Power Project, to meet base load growth, peaking requirements, or retire older less efficient units. This investment, representing approximately $2 billion, illustrates how seriously SCPPA members take their obligation to serve and plan for the future of their customers.
SCPPA members are well positioned to serve and meet their customers energy needs today and in the future. Through the use of new investments in local base load and peaking natural gas-fired units and prudent use of electricity, SCPPA, in partnership with its members, is leading the way to the future.
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Palo Verde Project 2002-2003 OPERATIONS Burbank/Glendale/Pasadena Percentage of (4.4% each)
Generation Capacity Azusa/Banning/Colton SCPPA member (Millions of MWHs) Utilization (%) (1% each) participation in Vernon Palo Verde Unit 1 9.5 86.9% Project Imperial Irrigation District Unit 2 11.1 101.7% Riverside Unit 3 9.8 90.0% Los Angeles Aggregate 30.4 92.9%
0% 10% 20% 30% 40% 50% 60% 70%
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Palo Verde set a national generation record of 30.8 million MWHs.
power P alo Verde completed another high production year, surpassing a 90%
capacity factor for the sixth consecutive year. SCPPA owns 5.91% of the station on behalf of 10 of its members.
Palo Verde Nuclear Generating Station continues to be the largest producer of PRODUCTION electricity in the United States. During calendar 2002, Palo Verde set a national COST (Operation and generation record of 30.8 million MWHs. Maintenance plus Nuclear Fuel)
Calendar Cents The Independent Spent Fuel Storage Installation (dry cask storage) was completed Year per kWh and began receiving spent fuel from the wet pool.
1993 2.02 1994 1.93 Palo Verde received its fifth consecutive INPO #1 rating (the highest possible) 1995 1.61 1996 1.45 from the Institute of Nuclear Power Operations.
1997 1.33 1998 1.28 At the end of the fiscal year, preparations were being made for the replacement 1999 1.25 2000 1.25 of Unit 2 steam generators in the fall of 2003. The replacement project and 2001 1.27 largest producer related modifications will result in a 92 MW capacity increase. 2002 1.28 7
San Juan Unit 3 Project Glendale Percentage of SCPPA member Banning participation in San Juan Colton Project Azusa Imperial Irrigation District 0% 10% 20% 30% 40% 50% 60% 70%
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Fuel from the underground mine will be both lower cost and lower ash, yielding added benefits in efficiency and maintenance costs.
ive SCPPA participants own 41.8% of Unit 3 at the San Juan F Generating Station, a coal-fired plant in New Mexico. A series of Interim Invoicing Agreements for fuel has led to high quality capacity factors and lower per unit fuel costs.
After two decades of surface strip mining at the adjacent coal mine, operations have transitioned to long-wall underground mining.
Fuel from the underground mine will be both lower cost and lower ash, yielding added benefits in efficiency and maintenance costs.
dependable 9
Mead-Phoenix/Mead-Adelanto Transmission Projects benefits Pasadena Percentage of Glendale SCPPA member participation in Burbank Mead-Phoenix Azusa/Banning/Colton Project (1% each)
Riverside Anaheim Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%
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serve he two 500-kV transmission lines, which T connect Phoenix to Las Vegas, and Las Vegas to Southern California, completed their sixth year of dependable operation for the nine SCPPA members who participate in the projects.
Pasadena Glendale Burbank Colton Banning Percentage of SCPPA member low-cost participation in Mead-Adelanto Project Azusa Anaheim/Riverside (13.5% each)
Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%
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Hoover Uprating Project Southern Transmission System Project (STS) s usual, the STS operated with T he Hoover Uprating Project continues to provide six SCPPA members with low-cost, renewable A near-perfect availability (99.54%),
delivering over 14 million MWHs to energy (hydro). A SCPPA representa- the six SCPPA members who are tive is active in the development of the participants. The power comes 488 miles Lower Colorado River Multi-Species from the Intermountain Power Project, Conservation Program. in Utah, over the +/-500-kV DC line.
Burbank Percentage of Pasadena Percentage of SCPPA SCPPA member member participation Colton Glendale participation in in Southern Banning Hoover Uprating Burbank Transmission System Project Project Azusa Riverside Riverside Anaheim Anaheim Los Angeles 0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% 60% 70%
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The result will be more power from less fuel, with less pollution.
Magnolia Power Project onstruction has begun on the Magnolia Power C Project, a 240 megawatt natural gas-fired, renewable combined cycle plant, to be located on the site of an existing plant in the City of Burbank. It will replace an older, less-efficient, dirtier unit. The result will be more power from less fuel, with less pollution.
Licensing and financing were completed during the fiscal year, and the official groundbreaking was held The ground breaking shovels are put to work by project participant representatives in planting a dwarf magnolia Percentage of Pasadena SCPPA member on June 10, 2003. The plant could be operational by tree to symbolize the start of 24 months of MPP site work.
Glendale participation in spring of 2005, and will be the first project to be Burbank Magnolia Power Project wholly-owned by SCPPA members. The participants Colton availability Anaheim are Anaheim, Burbank, Cerritos, Colton, Glendale, Cerritos and Pasadena.
0% 10% 20% 30% 40% 50% 60% 70%
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SCPPAs Finance Committee continues to look for opportunities to lower financing costs through bond refunding and escrow Financing Activities restructuring.
STS Project 2002 Series B Bond Refunding On October 1, 2002, SCPPA sold $38,755,000 Southern Transmission System Project 2002 Refunding Series B subordinate lien bonds maturing 2007 through 2012 at a true interest cost of 3.48 percent. The bond proceeds, along with other sources of funds amounting to $7,308,028, were used to current refund, on December 26, 2002, $46,400,000 bonds (the Residual Interest Bonds and Select Auction Variable Rate Securities (together the RIBS/SAVRS)) maturing in 2012, as part of the Projects 1992 issue. The RIBS were called at a redemption price of 104 percent and the SAVRS were called at par.
Together the RIBS/SAVRS (which share a combined coupon of 6%) were called at a redemption price of 102 percent. Net present value savings from the transaction, after adjusting for forgone interest earnings on prior funds on hand, amounted to $5,675,172, or 12.23% of the bonds refunded. Bear Stearns senior managed the transaction with Loop Capital Markets and Salomon Smith Barney acting as co-managers. The triple-A rated bonds were issued by Financial Security Assurance, Inc. Underlying ratings of A1 and A+ were assigned to the bonds by Moodys and S&P, respectively.
San Juan Project Unit 3 Bond Refunding On October 24, 2002, SCPPA sold $71,850,000 San Juan Power Project Revenue Bonds, 2002 Refunding Series B, to UBS PaineWebber, Inc. The bonds, referred to as Auction Rate Certificates (ARCs), have an initial fixed interest rate to January 1, 2012, after which the ARCs will bear variable rates to their maturity in 2020. The ARCs were sold with a coupon of 5.25%, priced to yield 3.65% with a true interest cost of 3.86%. They will replace the 5.00%, $70,800,000 bonds from the Projects 1993 issue. The refunding net present value savings were $8,131,998, representing 11.48% of the refunded bonds. An investment agreement for the refunding debt service reserve account was entered into with triple-A rated AIG Matched Funding Corp. with a winning bid of 4.442%. The bonds were insured by Financial Security Assurance, Inc. and were assigned triple-A ratings from Moodys Investors Service and Standard & Poors. Underlying ratings of A2 and A+ were assigned to the bonds by Moodys and S&P.
Palo Verde Escrow Restructuring In February 2003, SCPPA closed an escrow restructuring associated with the Projects 1997 Subordinate Refunding Series B bonds, and the refunded Project Revenue Bonds, 1993 Refunding Series A and the 1993 Subordinate Refunding Series. The restructuring involved liquidation of open-market Refcorps securities; the redemption of SLGS interest-bearing and zero coupon securities; the partial termination of a Float Forward Agreement with Lehman Brothers Special Financing, Inc. (at a cost of $3,509,000); the purchase a of U. S.Treasury Note; and the redemption of defeased Series 1993 Bonds on July 1, 2003.
Utilizing a competitive bid process for the sale of securities and the purchase of a replacement security, net present value cash savings in the amount of $16,696,539 were achieved from the restructuring after payment of the Float Forward Agreement breakage fee to Lehman. SCPPA entered into agreements with UBS PaineWebber, Inc. and Public Financial Management, Inc. to execute the restructuring.
Magnolia Power Project Financing On April 2, 2003, SCPPA successfully financed its new Magnolia Power Plant, a natural gas-fired, high-efficiency, combined-cycle generating facility with a nominally rated net base capacity of 240 MW that is being constructed in Burbank. The bonds were sold in two series consisting of $299,975,000 Project A bonds, secured by take or pay power sales agreements with Anaheim, Burbank, Colton, Glendale and Pasadena, and $14,105,000 Project B bonds, secured by base rental payments by Cerritos from its general fund and other legally available funds under a lease agreement with SCPPA. The combined Project bonds, maturing in 2036, were sold at an all-in true interest cost of 4.910%. The triple-A bonds were insured by Ambac Assurance Corporation, and underwritten by co-senior managers UBS PaineWebber, Inc., (as book runner) and Salomon Smith Barney, with co-managers Bank of America Securities, LLC, Banc One Capital Markets, Inc., Bear Stearns
& Co., Inc., Samuel A. Ramirez & Co., Inc., and Siebert Brandford Shank & Co., LLC. Underlying ratings of A1 and A+ were assigned the Project A bonds by Moodys and S&P, respectively. S&P assigned an underlying rating of AA+ to the Project B bonds.
STS Project 2003 Series A Bond Refunding In connection with the issuance of the 2003 Auction Rate Security (ARS) revenue bonds, two transactions took place. On April 24, 2003 SCPPA entered into a 65 percent of LIBOR floating-to-fixed forward interest rate swap with Citigroup Financial Products, Inc. The purpose of the forward swap was to lock in favorable interest rates. The forward start 19-year (16.9-year weighted average life of bonds) interest rate swap replaced an average coupon bond rate of 5.07 percent with a fixed rate of 3.266% that SCPPA will pay Citigroup and in return receive 65% of 1-month LIBOR. On May 20, 2003, SCPPA sold $51,750,000 Southern Transmission System Project Revenue Bonds, 2003 Subordinate Refunding Series A, as Auction Rate Securities (ARS) to Citigroup. The bond proceeds, along with other sources of funds amounting to
$10,094,935, were used to current refund, on July 1, 2003, $58,495,000 1993 Subordinate bonds maturing 2003 to 2023.
Most of the 1993 Subordinate bonds were called at par, with the balance called at 102 percent. Net present value savings from 14
As of June 30, 2003 Bond Ratings Moodys Investors Standard &
Financing Activities (continued) SCPPA BONDS Service Poors Hoover Uprating Project1 Aa3 AA-Southern Transmission System Senior Lien Bonds Aa3 AA-Subordinate Lien Bonds2 Aaa/VMIG1 AAA/A-1+
Subordinate Lien (underlying) A1 A+
Palo Verde Project3 Senior Lien Bonds A2 AA-the transaction, after adjusting for forgone interest earnings on prior funds Subordinate Lien Bonds Aaa/VMIG1 A+
on hand, amounted to $6,937,640, or 11.86% of the bonds refunded. Multiple Project Revenue Bonds Citigroup Global Markets, Inc. was the underwriter for the transaction. Mead-Adelanto Aa3 -
Mead-Phoenix Aa3 -
The triple-A rated bonds were insured by MBIA Insurance Corporation. Multiple Project4 A2 A Underlying ratings of A1 and A+ were assigned to the bonds by Moodys Mead-Adelanto Revenue Bonds5 Aaa AAA and S&P, respectively. Mead-Phoenix Revenue Bonds5 Aaa AAA San Juan Unit 36 Aaa AAA Other Refundings San Juan Unit 3 (underlying) A2 A+
Magnolia Power Project A7 A1 A+
SCPPAs Finance Committee continues to look for opportunities to lower Magnolia Power Project B7 - AA+
financing costs through bond refundings and escrow restructurings. At year-end, refundings of additional San Juan and Mead Adelanto/Mead 1 Insured: 2001 Refunding Series A (FSA) 2 Phoenix Project bonds were under consideration. Insured: 1991 Subordinate Variable Rate Bonds (AMBAC); 1993 Subordinate Series (MBIA); 1996 Subordinate Series A Bonds (MBIA); 1996 Subordinate Variable Rate Series B Bonds (FSA); 1998 Subordinate Series A (MBIA); 2000 Subordinate Variable Rate Series A Bonds (FSA); 2001 Subordinate Series A (FSA); 2002 Subordinate Series A (FSA); 2002 Subordinate Series B (FSA).
SCPPA Legislative Report 3 Insured: 1992 Senior Lien Bonds (AMBAC); 1993 Subordinate Bonds (FGIC);
1996 Subordinate Series A (AMBAC); 1996 Subordinate Variable Rate Series B and C Bonds (AMBAC); 1997 Subordinate Series A and B Bonds (FSA);
Installment Deposits to Defease the 1987 and 1989 Bonds (FSA); 1999 Subordinate Refunding Series A Bonds (FSA).
Californias governor, as well as the state Senate and Assembly, were forced 4 Uncommitted bond proceeds secured by a guaranteed rate investment contract.
5 to face a budget crisis during this first year of the new two-year legislative 6 Insured: 1994 Series A Bonds (AMBAC).
Insured: 1993 Series A Bonds (MBIA); 2002 Refunding Series A (FSA).
session. The combination of mismanagement of the states 2003 budget 7 Insured (AMBAC) crisis and the electricity crisis of 2000-01 resulted in the October 7th recall and ouster of Democrat Governor Gray Davis, replacing him with Republican Arnold Schwarzenegger. For the first time in nearly three years, however, the legislature did not face urgent electricity issues. Regardless, several legislative proposals contained weighty policy shifts requiring SCPPA action, either supporting or opposing individual proposals.
Rarely in the legislative arena does a proposal emerge to gather support based purely on public policy since it is the right position to take, irrespective of benefits or lack thereof. Support for Senate Bill 888 (Dunn) by SCPPA and its member utilities is one of those instances. Our combined support became critical to the bills survival through its thorny, yet unfinished legislative journey. SB 888 represents a major policy step toward correcting the failures of electricity restructuring and AB 1890. In 1996, Californias municipal utilities, guided by the wisdom of local officials who govern and set rates, were unconvinced of the promised benefits of deregulation and its business model, requiring investor-owned utilities to sell the assets that produced the product sold. SB 888 once again confirms the traditional regulatory compact for investor-owned utilities. SB 888s concepts are clear - to investor-owned utilities, it restores the obligation to serve, including the obligation to plan for the future electricity needs. Planning encompasses utility ownership and procurement of generation, transmission and distribution resources. It requires that generation assets are dedicated to the consumers who pay for them. The California Public Utilities Commissions (CPUC) mandated role is to assure that investor-owned utilities have the ability to meet their obligation to serve.
The bill stalled in the Assembly and is pending action next year. Its legislative future and the stability it would offer to Californias electricity market are uncertain.
For a second year, legislation focused on the Magnolia Power Plant project was introduced. Last years Assembly Bill 80 (Havice) authorized cities participating in the Magnolia Power Plant project to aggregate their electricity loads and provide direct access to their residents and was signed by the Governor on September 24, 2002. The 2003 proposal, AB 1169 (Bermudez),
would allow municipal entities participating in the Magnolia Power Plant project to provide electricity to local public agencies located within or contiguous to a project citys jurisdiction. Because the bill is not definitive, it would apply to any project participant as provided by lease revenue bonds. AB 1169 is pending in the Senate Energy, Utilities and Communications Committee and could be reactivated in January. SB 520, sponsored by the California Municipal Utilities Association and supported by SCPPA and its members, would have required the Independent System Operator (ISO) to conduct an internal performance review and operational cost analysis. The ISO would then submit a report on its findings and conclusions to the legislature. The purpose of the review would be to compare the California ISOs costs with system operators in other states. The bill failed in the Senate policy committee. AB 1051 (Goldberg), sponsored by the City of Los Angeles, redefines capital facilities fee to mean any nondiscriminatory charge imposed to pay for public utility facilities, not to exceed reasonable costs; unfortunately Governor Davis vetoed the bill.
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Joseph F. Hsu Ronald E. Davis Thomas K. Clarke Director of Utilities General Manager Utility Director City of Azusa Light & Water Burbank Water and Power City of Colton Marcie L. Edwards Paul Toor Art Gallucci General Manager Director of Public City Manager Anaheim Public Utilities Works/Assistant City Manager City of Cerritos Department City of Banning SCPPA Municipalities City of Anaheim Innovative solutions City of Azusa The Citys electric City of Burbank Burbank Water and designed to meet the energy needs of a utility was incorporated in 1898 when it Power began serving both water and electric dynamic community have been a hallmark of purchased the assets of a private utility on customers in 1913 and installed on-site Anaheim Public Utilities since its inception the brink of bankruptcy. The foresight and generation in response to a surge in in 1894. Today, the City of Anaheim is the planning of those early pioneers continues to industrial and residential growth in the 1940s growth only community in Orange County with a be the cornerstone of todays Azusa Light and 1950s. Today the City receives power publicly owned water and electric utility. and Water. Diligent planning of system from three SCPPA projects, as well as firm Anaheim residents enjoy rates that are signif- improvements and power resource procure- and interruptible supplies from other utilities icantly lower than the electric rates charged ment has enabled Azusa Light and Water to and government agencies, and continues to in neighboring communities, reliable electric maintain retail rate stability and competitiveness operate its own local power plants.
service, and an array of more than 40 targeted despite the turmoil in the industry in recent energy efficiency programs. In the coming years. Azusa Light and Water has also been years,Anaheim Public Utilities will continue recognized as one of the proactive to work to the best advantage of Anaheim leaders in prompting energy conservation consumers. With a strong, creative manage- and efficiency programs and renewable energy City of Cerritos The first new member to join Southern California Public Power valuable ment team, sound resource and financial in the State, earning the recognition of planning, and a cadre of experienced and CMUA 2002 Community Services/ Authority in over 20 years, the City of dedicated employees, we will maintain sharp Resource Efficiency Award for its 2001 Cerritos is preparing to serve the electricity focus on meeting the communitys long- Load Reduction Program and being one of demands of its residential and business term power needs and offer measures that the first utilities in procuring renewable energy communities. To further these efforts, will help our customers make efficient use from High Winds windpower project, which Cerritos is participating in the development of electricity. is expected to provide up to 8% of Azusas of the Magnolia Power Project. With the annual retail load requirement, and thus goal of providing a stable and affordable substantially exceeding SB 1078s mandate. supply of electricity, Cerritos intends on developing a diverse portfolio of power to be delivered as competitively and economically as possible.
City of Banning Established in 1913, the Banning electrical system now serves an area of approximately 22 square miles. The City continues to optimize its power resources City of Colton The Colton Municipal diligent through innovative planning. Bannings Utility was established in 1895 and has pro-energy resource base includes portions of vided our customers with reliable and coal, nuclear and hydro generating plants, affordable electric service for over one which provide the majority of electricity hundred years. We are proud of this accom-required to meet its summer peak load of 42 plishment, and have positioned ourselves to MW. The Utility has further improved its continue this high level of service over the service and reliability through significant next century. By making firm commitments upgrades to its distribution system, and is for resource planning, system maintenance, committed to continue providing quality community involvement, and employee service to its customers in a reliable manner, enrichment, we believe this pledge to our and at reasonable rates. customers will provide the value that they deserve.
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Glenn O. Steiger Phyllis E. Currie Kenneth J. De Dario Manager, Energy Department General Manager Director of Utilities Imperial Irrigation District Pasadena Water and Power City of Vernon Ignacio R. Trancoso Ronald O.Vazquez Thomas P. Evans Director of Utilities Chief Financial Officer Public Utilities Director Glendale Water and Power Los Angeles Department City of Riverside of Water and Power innovative City of Glendale Incorporated in 1906, Glendale purchased its electric utility in 1909, obtaining power from outside suppliers.
Los Angeles Department of Water and Power Providing service for more than a century, the Los Angeles Department City of Riverside The City of Riverside Public Utilities provides electric service to more than 98,000 metered accounts, It received its first power from Hoover of Water and Power began delivering water representing a service area population of Dam in 1937 and inaugurated the first unit to the city in 1902, and with the water came over 274,000. The utility is committed to of its own steam generating plant in 1941. power. In 1916, LADWP first delivered the highest quality water and electric Now called the Grayson Power Plant, this electicity to the city purchased from the services at the lowest possible rates to facility today has eight generating units. Pasadena Municipal Plant. A year later, benefit the community. To maintain their Glendale continues to purchase 85 percent of LADWP began generating its own hydro- commitment, Riverside has positioned itself its power from outside sources. electric power at the San Francisquito well in the electric market by utilizing short, Power Plant No. 1. After purchasing the mid, and long term contracts from power remaining distribution system of Southern suppliers, and by building power generation California Edison within the city limits in sources with its own power grid, including 1922, LADWP became the sole water and a 40 MW power plant in 2002. Riversides electricity provider for the City of Los portfolio includes 28 MW of renewable Angeles. It is now the largest municipally resources which includes 350 kW of photo-owned electric utility in the nation, serving voltaic systems within the City.
a population of 3.8 million residents over a 464 square mile area. LADWP remains on firm financial footing and serves as a valuable asset to the City of Los Angeles.
City of Vernon Vernons Utilities commitment Department began serving industrial customers in 1933, with completion of its diesel generating plant. In addition to its City of Pasadena Established in 1906, own power from diesel units and gas the city built its first electric generating turbines, Vernon also receives power from steam plant in 1907 and took over operation Palo Verde, Hoover, and various suppliers.
of its municipal street lighting from Edison Vernon also is in the process of constructing Imperial Irrigation District IID Electric. In 1909, Pasadena began the a 134 MW gas-fired combined cycle power entered the power industry in 1936 and extension of its operations to commercial plant within its city limits. Vernon resides today serves a peak load of 704 MW with and residential customers that resulted in within the California Independent System 850 MW of generating resources. Among the replacement of all Edison Electric Operator (CAISO) Control Area and is a IID-owned resources are 24 MW of low service in the city by 1920. Participating Transmission Owner.
head hydro units along the All American Canal, 307 MW of gas-fired steam and combined cycle units, and 162 MW of peaking gas turbines. In addition to IIDs share of SCPPA resources comprising 104 MW at San Juan and 14 MW at Palo Verde, IID has 179 MW of other resources under long-term purchase contracts.
affordable 17
SCPPA Legislative Report (continued)
Replacing the authority of local government decision-making with mandatory state standards for the purchase of renewable resources for generating electricity remains a threat for municipal utilities. SCPPA members continue to assert that such decisions are and should remain with local elected officials who, along with the communitys consumers, determine the mix in their generation portfolio. Though no legislation emerged this year, threats of amendments to force community-owned utilities to meet state renewable portfolio standards were constantly looming and could have been added to several of the bills included in this writing. Committed to acquiring resources sensitive to the environment and air quality concerns, SCPPA members continue to build and purchase renewable assets as well as argue the need to include large hydroelectric investments in the definition of qualifying renewable resources.
SCPPA, its members and other California municipal utilities were also active in their opposition to legislation. AB 816 (Reyes) would impose exit fees on new and existing consumers purchasing electricity service from a municipal utility. SCPPAs position on the bill is unambiguous: customers who move into a new development in local publicly owned utility service territory and were never served by an IOU should not pay any exit fees. A second, equally contentious issue addressed by AB 816 would reinstate direct access, the right of retail end use customers to acquire electricity service from suppliers other than investor-owned utilities. The bill stalled in the Senate, but is subject to action in early 2004. SB 18 (Burton) failed in the Assembly during the final day of this years legislative session. The bill would create a procedure to determine whether a proposed project may adversely change a traditional tribal cultural site and recommend project changes and mitigation measures to avoid or reduce those changes.
The direction of the new governors electricity policy is at this writing still being developed. What is certain is SCPPA remains committed to building and acquiring generation assets for its members, with particular commitment to renewable generating assets. This commitment along with the combined influence of SCPPA and its members culminates in a common voice on issues on vital electricity policy issues in Sacramento and Washington, D.C., providing greater influence by public power.
In Washington, D.C., Congress tried but failed to pass a comprehensive energy bill that included significant changes in federal electricity policy. Despite strong support from the White House and the Republican leadership in the House and Senate, the final version of the bill proved to be too costly and too controversial to win the 60 votes needed to end a filibuster by Democratic and Republican opponents. Following the failed closure vote, the Senate leadership pulled the bill but pledged to return to it in January, 2004. Given the significant regional differences that emerged on several key issues, it remains to be seen whether Congress can craft a consensus and pass a broad-based energy bill, particularly in a presidential election year. From the point of view of SCPPA member utilities and the consumers they serve, the demise of the energy bill is a good result. Although the electricity title had some positive provisions for consumer-owned utilities, its overall impact on SCPPA members would have been more negative than positive.
On the positive side, the bill authorized voluntary - not mandatory - Regional Transmission Organizations (RTOs) and expressly stated that the Federal Energy Regulatory Commission (FERC) could not order unregulated public power systems and federal utilities into an RTO. SCPPA strongly supported both of those concepts. In other ways, however, the bill significantly encroached upon public powers local control. For example, the bill gave FERC new authority over transmission facilities owned and operated by consumer-owned and federal utilities (the so-called FERC Lite provision) and new authority to order refunds of short-term wholesale power sales by large public power systems if market rules are violated. These provisions would have substituted decisions of FERC for the judgments of local officials and utilities. While SCPPA endorsed the bills delay of FERCs complex new rules on Standard Market Design (SMD), the delay did not apply to the California ISOs Market Design 2002 (MD 02) initiative. Thus, the delay provision provided no benefits for California municipal utilities that believe the ISO should proceed more cautiously with market protocols and rules that differ from those in the rest of the Western market.
Also of concern to SCPPA, the bill repealed the Public Utility Holding Company Act (PUHCA), a 1935 law designed to protect investors and consumers against the risks of holding company diversifications and other transactions. PUHCA also provides barriers to mergers that SCPPA believes promote competition. To mitigate the impact of PUHCA repeal, SCPPA and other consumer interests advocated giving FERC stronger merger review authority and power to deal effectively with market manipulation and deception. Unfortunately, the final version of the energy bill contained none of these additional consumer protection.
Finally, in the last stage of congressional negotiations on the energy bill, the tradable tax credits for consumer-owned electric utilities that develop renewable resources were deleted. Elimination of the tradable tax credits puts SCPPA members and other public power systems at a distinct economic disadvantage, vis--vis private power companies, which benefit from automatic tax credits that effectively buy down the cost of new renewable energy projects. Its elimination was another key reason that SCPPA found the final energy bill wanting. Because the issues at stake in the energy bill are so critical for SCPPA members, we spent considerable time and resources in Washington, D.C. in 2003, working with members of the California congressional delegation and others to inform them of the impact of the electricity title on consumers in Southern California. If Congress takes up the energy bill again in the second session of the 108th Congress, SCPPA will again mount a vigorous effort to protect and promote local control and the interests of the approximately two million consumers we serve.
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SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED FINANCIAL STATEMENTS INDEX pages Managements Discussion and Analysis . . . . . . . . . . . . . . . . . . . . 20-38 Report and Combined Financial Statements:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 39 Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 40-45 Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . . . 46-57 Supplemental Financial Information:
Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003:
Palo Verde Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Southern Transmission System Project . . . . . . . . . . . . . . . . . . . . . 60 Hoover Uprating Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Mead-Phoenix Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Mead-Adelanto Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Multiple Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 San Juan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Magnolia Power Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 19
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 The following discussion and analysis of the financial performance of each of the projects in which the Southern California Public Power Authority (the Authorityor SCPPA) has interests,provides an overview of the projectsfinancial activities for the fiscal year ended June 30,2003. Descriptions and other details pertaining to the projects are included in the Notes to Combined Financial Statements. Please read this discussion and analysis in conjunction with the Authoritys Combined Financial Statements, which begin on page 40.
The Authority is a joint powers authority whose primary purpose has been to provide joint financing for its member agencies that consist of eleven municipal electric utilities and one irrigation district in California. On a combined basis,these entities provide electricity to more than 2 million retail electric customers. A Board of Directors (the Board) governs the Authority, which consists of one representative from each member agency. Two new member agencies, the Cities of Cerritos and San Marcos, joined the Authority in July 2001.
In August 2003, the Authority by a Board resolution rescinded the membership of the city of San Marcos, as the city no longer met the criteria for membership.
The Authority has interests in the following projects:
Palo Verde Project - On August 14, 1981, the Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (PVNGS), a 3,810 megawatt nuclear-fueled generating station near Phoenix, Arizona, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System (collectively, the Palo Verde Project). Units 1, 2 and 3 of the Palo Verde Project began commer-cial operations in January 1986, September 1986, and January 1988, respectively.
Southern Transmission System Project - On May 1, 1983, the Authority entered into an agreement with the Intermountain Power Agency (IPA) to defray all the costs of acquisition and construction of the Southern Transmission System Project (STS) which provides for the transmission of energy from the Intermountain Generating Station in Utah to Southern California. STS commenced commercial operations in July 1986. The Department of Water and Power of the City of Los Angeles (LADWP), a member of the Authority, serves as project manager and operating agent of the Intermountain Power Project (IPP).
Hoover Uprating Project - As of March 1, 1986, the Authority and six participants entered into an agreement pursuant to which each participant assigned its entitlement to capacity and associated firm energy to the Authority in return for the Authoritys agreement to make advance payments to the United States Bureau of Reclamation (USBR) on behalf of such participants. The Authority has an 18.68% interest in the contingent capac-ity of the Hoover Uprating Project (HU).
Mead-Phoenix and Mead-Adelanto Projects - As of December 17, 1991, the Authority entered into an agreement to acquire an interest in the Mead-Phoenix Project (Mead-Phoenix), a transmission line extending between the Westwing substation in Arizona and the Marketplace substation in Nevada. The agreement provides the Authority with an 18.31% interest in the Westwing-Mead project component, a 17.76% interest in the Mead Substation project component and a 22.41% interest in the Mead-Marketplace project component.
As of December 17, 1991, the Authority also entered into an agreement to acquire a 67.92% interest in the Mead-Adelanto Project (Mead-Adelanto), a transmission line extending between the Adelanto substation in Southern California and the Marketplace substation in Nevada.
Funding for these projects was provided by a transfer of funds from the Multiple Project Fund and commercial operations commenced in April 1996. LADWP serves as the operations manager of Mead-Adelanto.
Multiple Project Fund - During fiscal year 1990, the Authority issued Multiple Project Revenue Bonds for net proceeds of approximately $600 mil-lion to provide funds to finance costs of construction and acquisition of ownership interests or capacity rights in one or more, then unspecified, projects for the generation or transmission of electric energy. Certain of these funds were used to finance the Authoritys interests in Mead-Phoenix and Mead-Adelanto.
San Juan Project - Effective July 1, 1993, the Authority purchased a 41.80% interest in Unit 3 and related common facilities, of the San Juan Generating Station (SJGS) from Century Power Corporation. Unit 3, a 488 megawatt unit, is one unit of a four-unit coal-fired power generating station in New Mexico.
Magnolia Power Project (The Project) - In March 2003, the Authority received approval from the California Energy Commission for construc-tion of the Magnolia Power Project. The Project will consist of a combined cycle natural gas-fired generating plant with a nominally rated net base capacity of 242 megawatts and will be built on a site in the City of Burbank, California. The plant is the first that is wholly owned by the Authority and entitlements to 100% of the capacity and energy of the Project have been sold to six of its members. The City of Burbank, a Project participant, will manage its construction and operation. Construction is under way and commercial operation is expected to begin in mid-2005.
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SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 ProjectsStabilization Fund - In fiscal year 1997, the Authority authorized the creation of a ProjectsStabilization Fund. Deposits may be made into the fund from budget under-runs, after authorization of individual participants, and by direct contributions from the participants. Participants have discretion over the use of their deposits within SCPPA project purposes. This fund is not a project-related fund; therefore, it is not governed by any project Indenture of Trust.
The members participate in the Projects Stabilization Fund by making deposits to the fund at their discretion.
Participant Ownership Interests - The Authoritys participants may elect to participate in the projects. As of June 30, 2003, the members have the following participation percentages in the Authoritys interest in the projects:
Magnolia Palo Hoover Mead- Mead- San Power Participants Verde STS Uprating Phoenix Adelanto Juan Project City of Los Angeles 67.0% 59.5% 24.8% 35.7%
City of Anaheim 17.6% 42.6% 24.2% 13.5% 38.0%
City of Riverside 5.4% 10.2% 31.9% 4.0% 13.5%
Imperial Irrigation District 6.5% 51.0%
City of Vernon 4.9%
City of Azusa 1.0% 4.2% 1.0% 2.2% 14.7%
City of Banning 1.0% 2.1% 1.0% 1.3% 9.8%
City of Colton 1.0% 3.2% 1.0% 2.6% 14.7% 4.2%
City of Burbank 4.4% 4.5% 16.0% 15.4% 11.5% 31.0%
City of Glendale 4.4% 2.3% 14.8% 11.1% 9.8% 16.5%
City of Cerritos 4.2%
City of Pasadena 4.4% 5.9% 13.8% 8.6% 6.1%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
The Authority has entered into power sales and transmission service agreements with the above project participants. Under the terms of the con-tracts, the participants are entitled to power output or transmission service, as applicable. The participants are obligated to make payments on a take or pay basis for their proportionate share of operating and maintenance expenses and debt service. The contracts cannot be terminated or amended in any manner which will impair or adversely affect the rights of the bondholders as long as any bonds issued by the specific project remain outstanding.
The contracts expire as follows:
Palo Verde Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2030 Southern Transmission System Project . . . . . . . . . . . . . . . . . . . . . . . . 2027 Hoover Uprating Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 Mead-Phoenix Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2030 Mead-Adelanto Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2030 San Juan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2030 Magnolia Power Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2036 21
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Critical Accounting Policies Method of Accounting - The accounting records of the Authority are maintained in accordance with accounting principles generally accepted in the United States of America. As a government-owned utility, in prior years the Authority applied all statements issued by the Governmental Accounting Standards Board (GASB) and all statements and interpretations issued by the Financial Accounting Standards Board (FASB) which were not in conflict with statements issued by the GASB. Effective July 1, 2002, the Authority changed its election under the guidance in GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, to follow all GASB statements and only FASB statements and interpretations issued before November 30, 1989. See Note 2 to the financial state-ments discussing the results of this change in accounting principle.
Costs Recoverable - The Authoritys billing amounts to the participants are determined by its Board of Directors and are subject to review and approval by the participants. Billings to participants are designed to recover costs as defined by the power sales and transmission service agreements. The billings are structured to systematically provide for debt service requirements, operating funds and reserves in accordance with these agreements. The difference between billings and the Authoritys expenses calculated in accordance with generally accepted accounting principles are deferred as costs recoverable in future periods and are presented as net assets. It is intended that the deferred amounts will be recovered through billings for repayment of principal on the related bonds.
Investment Policy and Controls - The Authoritys investment function operates within a legal framework established by Sections 6509.5 and 53600 et. seq. of the California Government Code, Indentures of Trust, instruments governing financial arrangements entered into by the Authority to finance and operate Projects, and the Authoritys Investment Policy. The Indentures of Trust authorize the establishment of specific Project funds and accounts, specify how monies are to be applied, and name third party Trustees.
Funds available for investment include proceeds from bonds and notes sales, payments from the participants, maturities of previous investments, earnings, exchanges of securities and interest from swap agreements. Funds are managed and invested on a separate accounting basis and prin-cipal and earnings are credited and allocated to designated funds or accounts as outlined in each Projects Indenture of Trust, or in the Projects Stabilization Fund which was established by a Board Resolution.
The three fundamental criteria in the investment program, ranked in accordance of importance, are: safety of principal, liquidity and return. An exception to the preceding criteria is made for the Palo Verde Nuclear Decommissioning Trust Funds, as liquidity will not be a factor until 2023. The investment criteria for the Decommissioning Trust Funds, in order of importance, is as follows: safety of principal, return and liquidity.
Debt Management Program - The Authoritys financing goal is to obtain the lowest prudent rates of interest on debt issues and to issue debt in the most cost-effective manner. In addition, the Authority will continue to utilize debt management strategies that reduce the overall cost of borrowing for its members. In general, the Authority issues new money debt and refunding debt on either a negotiated or competitive basis as determined by the Board. A minimum net present value savings of 5%, as a percent of the refunded par amount, is the general target when deter-mining the potential to refund existing Authority debt. The Authority may also use interest rate swaps or other derivative products to help meet important financial objectives.
Using This Financial Report This annual financial report consists of a series of financial statements and reflects the self-supporting activities of the Authority that are funded primarily through the sale of energy and transmission services to member agencies under project specific take or paycontracts that require each member agency to pay its proportionate share of operating and maintenance expenses and debt service with respect to such projects.
Combined Statements of Net Assets (Deficit), Combined Statements of Revenues, Expenses and Changes in Net Assets (Deficit),
and Combined Statements of Cash Flows The Combined Financial Statements provide an indication of the Authoritys financial health. The Combined Statements of Net Assets (Deficit) include all of the Authoritys assets and liabilities, using an accrual basis of accounting, as well as an indication about which assets can be utilized for general purposes and which assets are restricted as a result of bond covenants and other commitments. The Combined Statements of Revenues, Expenses and Changes in Net Assets (Deficit) report all of the revenues and expenses during the time periods indicated. The Combined Statements of Cash Flows report the cash provided and used by operating activities, as well as other cash sources such as investment income, cash payments for bond principal payments, and capital additions and betterments.
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SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Palo Verde Project Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 183,818 $ 213,923 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,924 542,513 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,142 60,149 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,658 14,532
$ 978,542 $ 831,117 Liabilities and Net Assets Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 609,150 $ 629,554 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,030 102,024 723,180 731,578 Net assets (deficit):
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . (469,233) (459,192)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706,613 536,840 Unrestricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,982 21,891 Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,362 99,539
$ 978,542 $ 831,117 Revenues, Expenses and Changes in Net Assets Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 180,529 $ 175,374 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,650) (71,266)
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,879 104,108 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,885 43,301 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,941) (53,867)
Increase in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,823 93,542 Beginning balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,539 5,997 Ending balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 255,362 $ 99,539 Net Assets - The Palo Verde Projects Net Assets increased by $155.8 million, mainly due to a $147.4 million increase in Assets and a decrease in Liabilities of $8.4 million. The increase in the Assets of the Project is primarily due to Participant contributions to the Deposit Installment Escrow Fund under a debt-restructuring plan adopted by the Board through a resolution in 1998 to increase the competitiveness of the Palo Verde Project by accelerating the repayment of the Projects debt. Under the debt-restructuring plan, an additional $65 million per year will be added to the Palo Verde Project Participantsbillings through June 30, 2004. (Refer to Revenues in Note 2 of the Notes to Combined Financial Statements). During the year, the Authority restructured the 1997 B Escrow Restructuring Account, which resulted in a gain of $16.7 million after expenses, which was deferred and is being amortized over the life of the related bonds (see Note 5 of the Notes to Combined Financial Statements).
The decrease in Liabilities is primarily due to a decrease in long term debt of $20.4 million as a result of principal bond maturities and the amortiza-tion of the bond discounts, premiums and losses on refunding on the related debt, offset by the deferral of the $16.7 million gain on restructuring of the Escrow accounts.
Investment Income - The increase in the PV investment income of $53.6 million is primarily due to the unrealized gain recorded from the increases in the market value of Escrow accounts as a result of the downward movement of interest rates during the current fiscal year.
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SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - The Authority financed the acquisition of the assets of the Palo Verde Project through the issuance of revenue bonds. Currently, capital additions to the Project are financed from revenues received from participants.
The following graph provides an indication of the principal and interest payments on the Palo Verde Project that are due each year following June 30, 2003 until the bonds mature in 2018. Interest is reflected on an accrual basis.
Palo Verde Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.
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SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Southern Transmission System Project (STS)
Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 361,785 $ 381,414 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,802 83,474 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,936 33,532 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,001 20,603
$ 481,524 $ 519,023 Liabilities and Net Deficit Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 807,669 $ 830,680 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,229 44,568 847,898 875,248 Net assets (deficit):
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . (466,659) (467,080)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,939 115,910 Unrestricted net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (654) (5,055)
Total net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (366,374) (356,225)
$ 481,524 $ 519,023 Revenues, Expenses and Changes in Net Deficit Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,229 $ 77,573 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,433) (36,864)
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,796 40,709 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,131 4,961 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,592) (62,458)
Extraordinary loss on debt refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,484) (1,538)
Increase in net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,149) (18,326)
Beginning balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (356,225) (337,899)
Ending balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (366,374) $ (356,225)
Net Deficit - The Net Deficit of STS increased in 2003 by $10.1 million due to a $37.5 million decrease in Total Assets and a decrease in Liabilities of
$27.4 million.The decrease in Total Assets consists mainly of:
an increase in accumulated depreciation of $19.6 million, a decrease in investments of $24.7 million, and a $6.8 million increase in Current Assets.
The increase in accumulated depreciation was due to scheduled depreciation. The decrease of $24.7 million in Investments is primarily due to the release of $15.0 million and $2.1 million from the Debt Service accounts and General Reserve Fund, respectively, to fund a portion of the related refunded bonds (See Note 5 of the Notes to Combined Financial Statements).
The decrease in Liabilities of $27.4 million is due to the following:
a decrease of $23.0 million in long-term debt due to maturities and refundings, and a decrease of $4.4 million in Current liabilities.
25
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 The Net Deficit of $366.4 million at June 30, 2003 consists of non-cash expenses which are not billed to the participants but are required to be recorded as expenses under generally accepted accounting principles. These non-cash expenses are primarily comprised of depreciation on utility plant, amortization of debt related expenses, amortization of bond premiums and discounts, and losses on refundings. These costs will be recovered at the time the Authority collects revenues to pay the principal portion of debt service costs.
Operating Income - The increase in STS operating income of $8.1 million is largely due to billings to Participants in excess of period costs and lower operating expenses. The primary reason for the higher billings in the current year is increased debt service requirements.
Long-term Debt - The Authority acquired the STS assets through the issuance of revenue bonds. Capital additions are currently financed with revenues received from participants. Principal bond maturities redeemed on July 1,2002 totaled $26.7 million. During the year the Authority issued new refunding bonds as follows:
Par Amount of Par Amount of Debt Service Present Bond Ratings Description of Bonds Refunded Bonds Refunding Issue Savings Value Savings by Moodys Transmission Project Revenue Bonds
$ 46,400,000 $ 38,755,000 $ 8,697,986 $ 5,675,172 A1 2002 Subordinate Refunding Series B Transmission Project Revenue Bonds
$ 58,495,000 $ 51,750,000 $ 13,257,524 $ 6,937,640 A1 2003 Subordinate Refunding Series A As of June 30, 2003, Moodys increased the ratings on the STS 2002 and 2003 Subordinate Refunding Bonds to Aaa.
The following graph provides an indication of the principal and interest payments on the STS Project that are due each year following June 30,2003 until the bonds mature in 2024. Interest is reflected on an accrual basis.
Southern Transmission System Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.
26
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Hoover Uprating Project Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 4 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 3,972 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,726 127 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,674 21,757
$ 24,900 $ 25,860 Liabilities and Net Assets Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,404 $ 20,275 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,643 1,423 21,047 21,698 Net assets:
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,699 3,187 Unrestricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,154 971 Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,853 4,162
$ 24,900 $ 25,860 Revenues, Expenses and Changes in Net Assets Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,330 $ 2,352 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,381) (2,236)
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51) 116 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 187 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (331) (840)
Extraordinary loss on debt refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (735)
Decrease in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (309) (1,272)
Beginning balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,162 5,434 Ending balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,853 $ 4,162 Net Assets - The Net Assets of the Hoover Uprating Project decreased by $309,000.The net decrease is primarily due to a decrease in the Advances for capacity and energy balance. This balance consists of $20.2 million in advances provided by the Participants to the Hoover Power Plant, net of credits provided by the plant manager. In accordance with the agreements, these advances are returned through an annual amount of energy and capacity credits billed by the plant. Annual billings decrease the Advances for capacity and energy balance, up to the amount of principal paid on debt by the Authority. Credits in excess of principal paid on debt decrease the Projects current year interest expense. During the current year, the project billed $2.124 million, of which $970,000 was used to decrease the Advances balance. The remaining credits were utilized to offset debt expense.
27
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - The Authority acquired its interest in the Hoover Uprating Project through the issuance of revenue bonds. The following graph provides an indication of the principal and interest payments on the Hoover Uprating Project that are due each year following June 30, 2003 until the bonds mature in 2018. Interest is reflected on an accrual basis.
Hoover Uprating Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 2,500 2,000 1,500 1,000 500 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Principal Interest Interest payments on the bonds are payable semi-annually on October 1 and April 1 of each year. Principal maturities of $905,000 were paid on October 1, 2002.
28
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Mead-Phoenix Project Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,786 $ 44,191 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,751 9,209 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,617 2,081 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,957 4,665
$ 59,111 $ 60,146 Liabilities and Net Deficit Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,224 $ 63,720 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,841 3,274 67,065 66,994 Net assets (deficit):
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . (20,672) (18,686)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,495 12,986 Unrestricted net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (777) (1,148)
Total net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,954) (6,848)
$ 59,111 $ 60,146 Revenues, Expenses and Changes in Net Deficit Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,987 $ 4,251 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,557) (2,840)
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,430 1,411 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 707 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,236) (4,362)
Increase in net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,106) (2,244)
Beginning balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,848) (4,604)
Ending balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,954) $ (6,848)
Net Deficit - Net Deficit of the Mead-Phoenix Project increased by $1.1 million mainly due to an increase in accumulated depreciation on utility plant of $1.4 million.
29
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - The acquisition of the assets of the Mead-Phoenix Project was provided by a transfer of funds from the Multiple Project Fund (See Note 1 of the Notes to Combined Financial Statements). In March 1994,the Authority issued Mead-Phoenix Project Revenue Bonds to advance refund the Multiple Project Fund Bonds.
The following graph provides an indication of the principal and interest payments on the Mead-Phoenix Project that are due each year following June 30, 2003 until the bonds mature in 2021. Interest is reflected on an accrual basis.
Mead-Phoenix Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.
30
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Mead-Adelanto Project Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 140,031 $ 144,532 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,471 26,461 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,791 3,894 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,236 13,453
$ 184,529 $ 188,340 Liabilities and Net Deficit Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 207,307 $ 205,678 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,338 8,043 214,645 213,721 Net assets (deficit):
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . (64,540) (58,184)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,469 34,329 Unrestricted net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,045) (1,526)
Total net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,116) (25,381)
$ 184,529 $ 188,340 Revenues, Expenses and Changes in Net Deficit Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,792 $ 11,593 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,955) (5,778)
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,837 5,815 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,860 1,915 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,432) (13,476)
Increase in net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,735) (5,746)
Beginning balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,381) (19,635)
Ending balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (30,116) $ (25,381)
Net Deficit - The Net Deficit of the Mead-Adelanto Project increased by $4.7 million largely due to an increase in accumulated depreciation on utility plant of $4.5 million.
31
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - Similar to the Mead-Phoenix Project, the interest in the Mead-Adelanto Project was acquired by the Authority through a transfer of funds, and the bonds issued to obtain these funds, from the Multiple Project Fund (See Note 1 of the Notes to Combined Financial Statements). In March 1994, the Authority issued Mead-Adelanto Project Revenue Bonds to advance refund the Multiple Project Fund Bonds.
The following graph provides an indication of the principal and interest payments on the Mead-Adelanto Project that are due each year following June 30, 2003 until the bonds mature in 2021. Interest is reflected on an accrual basis.
Mead-Adelanto Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 25,000 20,000 15,000 10,000 5,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.
32
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Multiple Project Fund Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 243,437 $ 247,584 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,673 8,960
$ 252,110 $ 256,545 Liabilities and Net Assets Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 216,445 $ 222,865 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,973 27,325 245,418 250,190 Net assets:
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,692 6,355 Unrestricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,692 6,355
$ 252,110 $ 256,545 Revenues, Expenses and Changes in Net Assets Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,275 $ 18,036 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,938) (17,242)
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 794 Beginning balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,355 5,561 Ending balance of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,692 $ 6,355 Net Assets - There was no significant change in the Net Assets of the Multiple Project Fund for the year. The increase of $337,000 represents the difference between investment income earned on bond proceeds deposited in the Multiple Project Fund and the interest expense on such bonds.
33
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - The Multiple Project Fund was established by the issuance of revenue bonds. The bond proceeds are to be used to finance costs of construction and acquisition of ownership interests or capacity rights in one or more projects that the Authority expects to undertake. Certain of these funds were used to finance the Authoritys interest in the Mead-Phoenix and Mead-Adelanto Projects (See Note 1 of the Notes to Combined Financial Statements).
The following graph provides an indication of the principal and interest payments on the Multiple Project Fund that are due each year following June 30, 2003 until the bonds mature in 2021. Interest is reflected on an accrual basis.
Multiple Project Fund Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year. Par value of bonds that matured and were redeemed on July 1, 2002 was $6.6 million. A total of $125.5 million of the outstanding Multiple Project Revenue Bonds are not subject to redemption prior to maturity.
34
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 San Juan Project Financial Highlights (In thousands)
June 30 2003 2002 (As restated)
Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,989 $ 93,851 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,602 16,052 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,930 15,063 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,859 6,143
$ 133,380 $ 131,109 Liabilities and Net Deficit Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,699 $ 200,675 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,980 19,030 217,679 219,705 Net assets (deficit):
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . (125,669) (105,828)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,548 14,601 Unrestricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,822 2,631 Total net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,299) (88,596)
$ 133,380 $ 131,109 Revenues, Expenses and Changes in Net Deficit Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,636 $ 50,258 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,783) (56,195)
Net operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,853 (5,937)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,289 724 Debt expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,771) (11,013)
Extraordinary loss on debt refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74) (274)
Decrease (increase) in net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,297 (16,500)
Beginning balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88,596) (72,096)
Ending balance of net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (84,299) $ (88,596)
Net Deficit - The Net Deficit of the San Juan Project decreased by $4.3 million, primarily due to an increase of $2.3 million in Total Assets and a decrease in Total Liabilities of $2.0 million. The increase in Total Assets of $2.3 million is largely due to an increase in investments of $5.6 million, due mainly to the new Debt Service Reserve Account that was created when the 2002 Refunding Series B Bonds were issued in October 2002.
In addition, Current Assets increased by $9.7 million largely due to the recognition of a receivable from Participants to fund actual costs for the current year. These increases were offset by a $12.9 million decrease in Utility Plant due to scheduled depreciation.
Net Operating Income (Loss) - Net Operating Income increased by $19.8 million when compared to last year. This increase is primarily due to the
$8.9 million reduced billings to Participants during the 2002 fiscal year as a result of applying the $8.9 million transfer amount from the Debt Service Reserve Fund to the 2002 fiscal year billings. No such transfers from the Debt Service Reserve Fund were made to reduce current year billings. Also included in current years revenues is the $9.9 million billing for the Coal Contract Buyout made in December 2002 (See Note 2 of the Notes to Combined Financial Statements).
35
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Long-term Debt - The Authority financed its acquisition of the assets of the San Juan Project by the issuance of revenue bonds. Currently, capital additions are financed from revenues received from participants. Principal bond maturities that were redeemed on January 1, 2003 totaled
$1.6 million. During the year, the Authority issued new refunding bonds as follows:
Par Amount of Par Amount of Debt Service Present Bond Ratings Description of Bonds Refunded Bonds Refunding Issue Savings Value Savings by Moodys San Juan Power Project Bonds,
$ 70,800,000 $ 71,850,000 $ 12,932,905 $ 8,131,998 A2 2002 Refunding Series B The graph below provides an indication of the principal and interest payments on the San Juan Project that are due each year following June 30, 2003 until the bonds mature in 2020. Interest is reflected on an accrual basis.
San Juan Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 30,000 25,000 20,000 15,000 10,000 5,000 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Principal Interest Interest payment on the bonds are payable semi-annually on July 1 and January 1 of each year.
36
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Magnolia Power Project (The Project)
Background - In 2000, the City of Burbank (the City), an Authority member, began exploring ways to replace an aging power plant within the city limits and decided that it would be more economical to build a plant with more capacity than required to meet its power demands. To build the plant, the City needed other participants to buy the excess power and it presented the idea to the Authority. Four members, the Cities of Anaheim, Colton, Glendale, and Pasadena (the Project A Participants), indicated their interest in joining the City of Burbank in the Project. The City of Cerritos (the Project B Participant), who became a member of the Authority in July 2001, also decided to participate in the Project.
In March 2003, the California Energy Commission gave its approval for construction of the Magnolia Power Project. The Project is a natural gas-fired generator and is designed to generate 242 megawatts to meet baseload capacity but will be able to generate more than 300 megawatts for short periods of time during peak demand periods. The plant is the first to be owned by the Authority, and the City of Burbank will manage its construction and operation. To finance the Project, the Authority issued $299.975 million of Magnolia Power Project A, Revenue Bonds, 2003-1 and
$14.105 million of Magnolia Power Project B, Lease Revenue Bonds (City of Cerritos, California) 2003-1 in April 2003 (Refer to Note 5 of the Notes to Combined Financial Statements).
The following table summarizes the financial position of the Project as of June 30, 2003. Amounts are in thousands.
June 30 2003 Assets Utility plant,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,610 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,426 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,381 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,234
$ 333,651 Liabilities and Net Assets Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 321,730 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,921 333,651 Net assets:
Invested in capital assets,net of related debt . . . . . . . . . . . . . . . . . . . . . . . . . . -
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Unrestricted net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -
During the current year, the Project had no revenues and is not anticipated to have any until the Project becomes operational. Costs related to the construction of the plant of $91.6 million and debt service costs of $3.7 million offset by investment income of $1.7 million, were capitalized as part of the utility plant balance. Once the plant becomes operational, these costs will be recovered through future billings to participants.
37
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 The following graph provides an indication of the principal and interest payments on the Project that are due each year on July 1 until the bonds mature in 2036. Interest is reflected on an accrual basis.
Magnolia Power Project Debt Service Requirements Fiscal Year Ending June 30
($ in thousands) 60,000 50,000 40,000 30,000 20,000 10,000 0 20 20 20 2004 05 06 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2007 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2023 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Principal Interest Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.
Projects Stabilization Fund - In 1996 the Board adopted a resolution to establish the Projects Stabilization Fund. Monies deposited by the participants to this Fund are used to pay for Authority costs as directed by the Participants (See Note 1 of the Notes to Combined Financial Statements). At June 30, 2003 the Fund had a balance of $96.4 million.
Financial Outlook - The Authoritys credit strength is based on:
The collective credit strengths of each project participant; The absence of concentration risk as evidenced by the lack of substantial reliance by one participant on the resources financed; The low cost power the Project provides the participants; and, Strong legal provisions.
The Authority has take-or-pay power sales and transmission service contracts which unconditionally require the Participants to pay for the cost of operating and maintaining the Projects,including debt service,whether or not the Projects are operating or operable. Although the contracts have not been court-tested,a municipal utilitys authority to enter into such contracts is rooted in the States constitutional provisions for municipal elec-tric utilities.
The Authority continues to play an important role as a legislative advocate and its focused strategic plan continues to provide benefits to member agencies as they prepare for increased competition. The Authoritys management has been very focused on lowering the fixed costs of each project to ensure the flexibility needed to perform in a more competitive marketplace. An example is the refunding of $175.7 million of the Authoritys long-term debt during the fiscal year, which generated $34.9 million of debt service savings. In addition, in February 2003 the Authority restructured the Palo Verde 1993 Escrow Funds resulting in a net gain of $16.7 million, which was deferred and is being amortized over the remaining period of the related bonds.
38
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Participants of the Southern California Public Power Authority:
In our opinion, the accompanying combined statements of net assets (deficit) and the related combined statements of revenues, expenses and changes in net assets (deficit) and cash flows present fairly,in all material respects,the financial position of the Southern California Public Power Authority (the Authority) at June 30, 2003 and 2002, and the changes in its net assets (deficit) and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Authoritys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America,which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying combined statements of net assets (deficit) and the related combined statements of revenues, expenses and changes in net assets (deficit) and cash flows present fairly, in all material respects, the financial position of each of the Authoritys Palo Verde Project,Southern Transmission System Project,Hoover Uprating Project,Mead-Phoenix Project,Mead-Adelanto Project, Multiple Project Fund, San Juan Project, and Projects Stabilization Fund at June 30, 2003 and 2002, and the changes in their net assets (deficit) and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the accompanying combined statement of net assets and the related combined statement of revenues, expenses and changes in net assets and cash flows present fairly, in all material respects, the financial position of the Authoritys Magnolia Power Project at June 30, 2003, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Authoritys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the financial statements, effective July 1, 2002, the Authority changed its election under Governmental Accounting Standards Board Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, and no longer applies Financial Accounting Standards Board statements and interpretations issued after November 30, 1989. The Authority has restated all prior years presented to give effect of this change in election.
The managements discussion and analysis included on pages 20-38 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. 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 the information and express no opinion on it.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental financial information, as listed in the accompanying index, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
September 8, 2003 39
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF NET ASSETS (DEFICIT)
JUNE 30, 2003 (Amounts in thousands)
June 30, 2003 Southern Palo Transmission Hoover Mead- Mead- Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total ASSETS Noncurrent Assets Utility plant:
Production . . . . . . . . . . . . . . . . $ 623,352 $ - $ - $ - $ - $ - $ 172,475 $ - $ - $ 795,827 Transmission . . . . . . . . . . . . . . . 14,062 674,606 - 50,770 172,319 - - - - 911,757 General . . . . . . . . . . . . . . . . . 2,705 18,911 22 2,640 473 - 8,067 - - 32,818 640,119 693,517 22 53,410 172,792 - 180,542 - - 1,740,402 Less - Accumulated depreciation . . . . . 489,707 331,732 22 10,624 32,761 - 99,826 - - 964,672 150,412 361,785 - 42,786 140,031 - 80,716 - - 775,730 Construction work in progress . . . . . . 18,862 - - - - - 273 93,610 - 112,745 Nuclear fuel,at amortized cost . . . . . . 14,544 - - - - - - - - 14,544 Net utility plant . . . . . . . . . . . . 183,818 361,785 - 42,786 140,031 - 80,989 93,610 - 903,019 Special funds:
Restricted investments Escrow accounts . . . . . . . . . . . . 420,766 16,883 - - - - - - - 437,649 Decommissioning fund . . . . . . . . . 116,936 - - - - - - - - 116,936 Other funds . . . . . . . . . . . . . . . 124,227 41,919 - 9,751 27,471 243,437 21,602 70,426 53,044 591,877 661,929 58,802 - 9,751 27,471 243,437 21,602 70,426 53,044 1,146,462 Unrestricted Investments Other funds . . . . . . . . . . . . . . . 12,995 - 500 - - - - - - 13,495 Total special funds . . . . . . . . . . . 674,924 58,802 500 9,751 27,471 243,437 21,602 70,426 53,044 1,159,957 Other Noncurrent Assets Advance to IPA - restricted . . . . . . . . . - 11,550 - - - - - - - 11,550 Advances for capacity and energy, net - restricted . . . . . . . . . . . . . . - - 20,197 - - - - - - 20,197 Unamortized debt expenses . . . . . . . . 5,382 8,945 476 766 2,736 - 2,590 6,100 - 26,995 Total other noncurrent assets . . . . . . . 5,382 20,495 20,673 766 2,736 - 2,590 6,100 - 58,742 Total noncurrent assets . . . . . . . . . . 864,124 441,082 21,173 53,303 170,238 243,437 105,181 170,136 53,044 2,121,718 Current Assets Special funds:
Cash and cash equivalents - restricted . . 96,075 37,372 2,884 1,498 2,616 - 11,236 162,381 42,941 357,003 Cash and cash equivalents - unrestricted . 9,067 564 842 119 175 - 4,694 - - 15,461 Interest receivable . . . . . . . . . . . . 1,405 137 1 343 915 8,673 13 1,061 436 12,984 Accounts receivable . . . . . . . . . . . . 1,043 2,369 - - 3 - 9,021 73 - 12,509 Due from other project - restricted . . . . . - - - 3,848 10,582 - - - - 14,430 Materials and supplies . . . . . . . . . . . 6,828 - - - - - 3,235 - - 10,063 Total current assets . . . . . . . . . . . 114,418 40,442 3,727 5,808 14,291 8,673 28,199 163,515 43,377 422,450 Total assets . . . . . . . . . . . . . . . . . . 978,542 481,524 24,900 59,111 184,529 252,110 133,380 333,651 96,421 2,544,168 LIABILITIES Noncurrent liabilities Long-term debt . . . . . . . . . . . . . . 609,150 807,669 19,404 64,224 207,307 216,445 200,699 321,730 - 2,446,628 Commitments and contingencies (Note 7) . - - - - - - - - - -
Total noncurrent liabilities . . . . . . . . 609,150 807,669 19,404 64,224 207,307 216,445 200,699 321,730 - 2,446,628 Current liabilities:
Debt due within one year . . . . . . . . . 49,190 29,720 1,190 - - 7,100 8,390 - - 95,590 Accrued interest . . . . . . . . . . . . . . 7,197 6,922 265 1,945 6,116 7,443 5,303 4,467 - 39,658 Accounts payable and accruals . . . . . . . 56,095 3,587 188 896 1,222 - 2,887 7,454 - 72,329 Accrued property tax . . . . . . . . . . . . 1,548 - - - - - 400 - - 1,948 Coal contracts buyout . . . . . . . . . . . - - - - - - - - - -
Due to other projects . . . . . . . . . . . . - - - - - 14,430 - - - 14,430 Total current liabilities . . . . . . . . . 114,030 40,229 1,643 2,841 7,338 28,973 16,980 11,921 - 223,955 Total liabilities . . . . . . . . . . . . . . . . 723,180 847,898 21,047 67,065 214,645 245,418 217,679 333,651 - 2,670,583 NET ASSETS (DEFICIT)
Invested in capital assets,net of related debt and deferred credits . . . . . . . . . (469,233) (466,659) - (20,672) (64,540) - (125,669) - - (1,146,773)
Restricted net assets . . . . . . . . . . . . . 706,613 100,939 2,699 13,495 35,469 6,692 27,548 - 96,421 989,876 Unrestricted net assets (deficit) . . . . . . . . 17,982 (654) 1,154 (777) (1,045) - 13,822 - - 30,482 Total net assets (deficit) . . . . . . . . . $ 255,362 $ (366,374) $ 3,853 $ (7,954) $ (30,116) $ 6,692 $ (84,299) $ - $ 96,421 $ (126,415)
The accompanying notes are an integral part of the combined financial statements.
40
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF NET ASSETS (DEFICIT)
JUNE 30, 2002 (Amounts in thousands)
June 30, 2002 (Restated)
Southern Palo Transmission Hoover Mead- Mead- Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total ASSETS Noncurrent Assets Utility plant:
Production . . . . . . . . . . . . . . . . . . . . . . . . $ 620,719 $ - $ - $ - $ - $ - $ 175,111 $ - $ 795,830 Transmission . . . . . . . . . . . . . . . . . . . . . . . 14,062 674,606 - 50,770 172,319 - - - 911,757 General . . . . . . . . . . . . . . . . . . . . . . . . . . 2,583 18,911 22 2,640 473 - 8,089 - 32,718 637,364 693,517 22 53,410 172,792 - 183,200 - 1,740,305 Less - Accumulated depreciation . . . . . . . . . . . . . 452,747 312,103 18 9,219 28,260 - 90,204 - 892,551 184,617 381,414 4 44,191 144,532 - 92,996 - 847,754 Construction work in progress . . . . . . . . . . . . . . . 14,325 - - - - - 855 - 15,180 Nuclear fuel,at amortized cost . . . . . . . . . . . . . . 14,981 - - - - - - - 14,981 Net utility plant . . . . . . . . . . . . . . . . . . . . 213,923 381,414 4 44,191 144,532 - 93,851 - 877,915 Special funds:
Restricted Investments Escrow accounts . . . . . . . . . . . . . . . . . . . . . 284,327 21,639 - - - - - - 305,966 Decommissioning fund . . . . . . . . . . . . . . . . . 104,671 - - - - - - - 104,671 Other funds . . . . . . . . . . . . . . . . . . . . . . . 139,987 61,835 2,861 9,209 26,461 247,584 16,052 158,320 662,309 528,985 83,474 2,861 9,209 26,461 247,584 16,052 158,320 1,072,946 Unrestricted Investments Other funds . . . . . . . . . . . . . . . . . . . . . . . 13,528 - 1,111 - - - - - 14,639 Total special funds . . . . . . . . . . . . . . . . . . . . 542,513 83,474 3,972 9,209 26,461 247,584 16,052 158,320 1,087,585 Other Noncurrent Assets Advance to IPA - restricted . . . . . . . . . . . . . . . . . - 11,550 - - - - - - 11,550 Advances for capacity and energy,net - restricted . . . . . . - - 21,169 - - - - - 21,169 Unamortized debt expenses . . . . . . . . . . . . . . . . 3,912 8,881 572 843 2,962 - 2,693 - 19,863 Total other noncurrent assets . . . . . . . . . . . . . . . 3,912 20,431 21,741 843 2,962 - 2,693 - 52,582 Total noncurrent assets . . . . . . . . . . . . . . . . . . 760,348 485,319 25,717 54,243 173,955 247,584 112,596 158,320 2,018,082 Current Assets Special funds:
Cash and cash equivalents - restricted . . . . . . . . . . 48,371 29,171 29 1,900 3,493 1 11,779 14,970 109,714 Cash and cash equivalents - unrestricted . . . . . . . . . 11,778 4,361 98 181 401 - 3,284 - 20,103 Interest receivable . . . . . . . . . . . . . . . . . . . . . 2,483 172 16 340 916 8,960 18 495 13,400 Accounts receivable . . . . . . . . . . . . . . . . . . . . . 1,244 - - - - - 209 - 1,453 Due from other project - restricted . . . . . . . . . . . . . - - - 3,482 9,575 - - - 13,057 Materials and supplies . . . . . . . . . . . . . . . . . . . 6,893 - - - - - 3,223 - 10,116 Total current assets . . . . . . . . . . . . . . . . . . . 70,769 33,704 143 5,903 14,385 8,961 18,513 15,465 167,843 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . 831,117 519,023 25,860 60,146 188,340 256,545 131,109 173,785 2,185,925 LIABILITIES Noncurrent liabilities Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 629,554 830,680 20,275 63,720 205,678 222,865 200,675 - 2,173,447 Commitments and contingencies (Note 7) . . . . . . . . . - - - - - - - - -
Total other noncurrent liabilities . . . . . . . . . . . . . . 629,554 830,680 20,275 63,720 205,678 222,865 200,675 - 2,173,447 Current liabilities:
Debt due within one year . . . . . . . . . . . . . . . . . . 47,395 26,695 905 - - 6,600 1,600 - 83,195 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . 8,122 8,457 274 1,945 6,116 7,668 3,325 - 35,907 Accounts payable and accruals . . . . . . . . . . . . . . . 44,557 9,416 244 550 963 - 3,732 - 59,462 Accrued property tax . . . . . . . . . . . . . . . . . . . . 1,950 - - 779 964 - 450 - 4,143 Coal contracts buyout . . . . . . . . . . . . . . . . . . . . - - - - - - 9,923 - 9,923 Due to other projects . . . . . . . . . . . . . . . . . . . . - - - - - 13,057 - - 13,057 Total current liabilities . . . . . . . . . . . . . . . . . . 102,024 44,568 1,423 3,274 8,043 27,325 19,030 - 205,687 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 731,578 875,248 21,698 66,994 213,721 250,190 219,705 - 2,379,134 NET ASSETS (DEFICIT)
Invested in capital assets net of related debt and deferred credits . . . . . . . . . . . . . . . . . . (459,192) (467,080) 4 (18,686) (58,184) - (105,828) - (1,108,966)
Restricted net assets . . . . . . . . . . . . . . . . . . . . . . 536,840 115,910 3,187 12,986 34,329 6,355 14,601 173,785 897,993 Unrestricted net assets (deficit) . . . . . . . . . . . . . . . . 21,891 (5,055) 971 (1,148) (1,526) - 2,631 - 17,764 Total net assets (deficit) . . . . . . . . . . . . . . . . . $ 99,539 $ (356,225) $ 4,162 $ (6,848) $ (25,381) $ 6,355 $ (88,596) $ 173,785 $ (193,209)
The accompanying notes are an integral part of the combined financial statements.
41
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Year Ended June 30, 2003 Southern Palo Transmission Hoover Mead- Mead- Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total Operating revenues:
Sales of electric energy . . . . . . . . . . . $ 180,529 $ - $ 2,330 $ - $ - $ - $ 70,636 $ - $ - $ 253,495 Sales of transmission services . . . . . . . - 82,229 - 3,987 11,792 - - - - 98,008 Total operating revenues . . . . . . . . . . . 180,529 82,229 2,330 3,987 11,792 - 70,636 - - 351,503 Operating expenses:
Operations and maintenance . . . . . . . . 27,462 13,804 2,377 152 454 - 43,586 - - 87,835 Depreciation . . . . . . . . . . . . . . . . 26,702 19,629 4 1,405 4,501 - 10,084 - - 62,325 Amortization of nuclear fuel . . . . . . . . 8,586 - - - - - - - - 8,586 Decommissioning . . . . . . . . . . . . . 10,900 - - - - - 3,113 - - 14,013 Total operating expenses . . . . . . . . . . . 73,650 33,433 2,381 1,557 4,955 - 56,783 - - 172,759 Operating income (loss) . . . . . . . . . . 106,879 48,796 (51) 2,430 6,837 - 13,853 - - 178,744 Non operating revenues (expenses)
Investment income . . . . . . . . . . . . 96,885 6,131 73 700 1,860 17,275 1,289 - 2,372 126,585 Debt expense . . . . . . . . . . . . . . . (47,941) (62,592) (331) (4,236) (13,432) (16,938) (10,771) - - (156,241)
Net non operating revenues (expenses) . . . . . . . . . . . . . . . . . 48,944 (56,461) (258) (3,536) (11,572) 337 (9,482) - 2,372 (29,656)
Increase (decrease) in net assets (deficit) before extraordinary items . . . . . . . . . 155,823 (7,665) (309) (1,106) (4,735) 337 4,371 - 2,372 149,088 Extraordinary loss on refunding of debt . . . . . . . . . . . . . . . . . - (2,484) - - - - (74) - - (2,558)
Net increase (decrease) in net assets (deficit) . . . . . . . . . . . . . . . 155,823 (10,149) (309) (1,106) (4,735) 337 4,297 - 2,372 146,530 Net assets (deficit) - beginning of year . . . . 99,539 (356,225) 4,162 (6,848) (25,381) 6,355 (88,596) - 173,785 (193,209)
Net withdrawals by participants . . . . . . . - - - - - - - - (79,736) (79,736)
Net assets (deficit) - end of year . . . . . . . $ 255,362 $ (366,374) $ 3,853 $ (7,954) $ (30,116) $ 6,692 $ (84,299) $ - $ 96,421 $ (126,415)
The accompanying notes are an integral part of the combined financial statements.
42
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 2002 (Amounts in thousands)
Year Ended June 30, 2002 (Restated)
Southern Palo Transmission Hoover Mead- Mead- Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Operating revenues:
Sales of electric energy . . . . . . . . . . . . . . . . . . . $ 175,374 $ - $ 2,352 $ - $ - $ - $ 50,258 $ - $ 227,984 Sales of transmission services . . . . . . . . . . . . . . . . - 77,573 - 4,251 11,593 - - - 93,417 Total operating revenues . . . . . . . . . . . . . . . . . . . 175,374 77,573 2,352 4,251 11,593 - 50,258 - 321,401 Operating expenses:
Operations and maintenance . . . . . . . . . . . . . . . . 24,434 17,231 2,232 1,434 1,276 - 43,010 - 89,617 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 26,701 19,633 4 1,406 4,502 - 10,072 - 62,318 Amortization of nuclear fuel . . . . . . . . . . . . . . . . 8,259 - - - - - - - 8,259 Decommissioning . . . . . . . . . . . . . . . . . . . . . . 11,872 - - - - - 3,113 - 14,985 Total operating expenses . . . . . . . . . . . . . . . . . . . 71,266 36,864 2,236 2,840 5,778 - 56,195 - 175,179 Operating income (loss) . . . . . . . . . . . . . . . . . 104,108 40,709 116 1,411 5,815 - (5,937) - 146,222 Non operating revenues (expenses):
Investment income . . . . . . . . . . . . . . . . . . . . . 43,301 4,961 187 707 1,915 18,036 724 10,561 80,392 Debt expense . . . . . . . . . . . . . . . . . . . . . . . . (53,867) (62,458) (840) (4,362) (13,476) (17,242) (11,013) - (163,258)
Net non operating revenues ( expenses) . . . . . . . . . . . (10,566) (57,497) (653) (3,655) (11,561) 794 (10,289) 10,561 (82,866)
Increase (decrease) in net assets (deficit) before extraordinary items 93,542 (16,788) (537) (2,244) (5,746) 794 (16,226) 10,561 63,356 Extraordinary loss on refunding of debt . . . . . . . . . . - (1,538) (735) - - - (274) - (2,547)
Net increase (decrease) in net assets (deficit) . . . . . . . . . 93,542 (18,326) (1,272) (2,244) (5,746) 794 (16,500) 10,561 60,809 Net assets (deficit) - beginning of year . . . . . . . . . . . . 5,997 (337,899) 5,434 (4,604) (19,635) 5,561 (72,096) 200,350 (216,892)
Net withdrawals from participants . . . . . . . . . . . . . . - - - - - - - (37,126) (37,126)
Net assets (deficit) - end of year . . . . . . . . . . . . . . . . $ 99,539 $ (356,225) $ 4,162 $ (6,848) $ (25,381) $ 6,355 $ (88,596) $ 173,785 $ (193,209)
The accompanying notes are an integral part of the combined financial statements.
43
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Year Ended June 30, 2003 Southern Palo Transmission Hoover Mead- Mead- Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total Cash flows from operating activities:
Receipts from participants . . . . . . . . $ 191,357 $ 72,665 $ 2,289 $ 4,179 $ 11,407 $ - $ 61,123 $ - $ - $ 343,020 Payments to operating managers . . . . (29,317) (13,475) (261) (1,009) (1,125) - (53,811) - - (98,998)
Other receipts . . . . . . . . . . . . . . 166 3 3 100 4 - - - - 276 Net cash flow from operating activities . . . . . . . . . . . . . . . 162,206 59,193 2,031 3,270 10,286 - 7,312 - - 244,298 Cash flows from noncapital financing activities:
Withdrawals by participants,net . . . . . - - - - - - - - (79,736) (79,736)
Cash flows from capital and related financing activities:
Additions to plant,net . . . . . . . . . . (15,996) - - - - - (290) (84,119) - (100,405)
Debt interest payments . . . . . . . . . (35,192) (42,149) (1,077) (3,889) (12,232) (15,111) (7,485) - - (117,135)
Proceeds from sale of bonds . . . . . . . - 93,658 - - - - 80,750 322,582 - 496,990 Proceeds from bond escrow restructuring . . . . . . . . . . . . . 17,292 - - - - - - - - 17,292 Payment for defeasance of revenue bonds . . . . . . . . . . . . - (108,945) - - - - (72,344) - - (181,289)
Principal payments on debt . . . . . . . (47,395) (26,695) (905) - - (6,600) (1,600) - - (83,195)
Transfer of funds from escrow . . . . . . - - - - - - - - - -
Payment for bond issue costs . . . . . . (580) (1,605) (1,982) - - - (1,218) (6,270) - (9,673)
Net cash provided by (used for) capital and related financing activities . . . . . . . . . . . . . . . (81,871) (85,736) (1,982) (3,889) (12,232) (21,711) (2,187) 232,193 - 22,585 Cash flows from investing activities:
Interest received on investments . . . . . 9,017 4,217 77 689 1,832 17,564 1,270 199 2,421 37,286 Purchases of investments . . . . . . . . (550,977) (47,544) (4,122) (609) (4,894) (1,188) (15,553) (75,783) (92,323) (792,993)
Proceeds from sale/maturity of investments . . . . . . . . . . . . 506,618 74,274 7,595 75 3,905 5,334 10,025 5,772 197,609 811,207 Net cash provided by (used for) investing activities . . . . . . . . . . (35,342) 30,947 3,550 155 843 21,710 (4,258) (69,812) 107,707 55,500 Net increase (decrease) in cash and cash equivalents . . . . . . . . . 44,993 4,404 3,599 (464) (1,103) (1) 867 162,381 27,971 242,647 Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . 60,149 33,532 127 2,081 3,894 1 15,063 - 14,970 129,817 Cash and cash equivalents at end of year . . . $ 105,142 $ 37,936 $ 3,726 $ 1,617 $ 2,791 $ - $ 15,930 $ 162,381 $ 42,941 $ 372,464 Reconciliation of operating income to net cash provided by operating activities:
Operating income (loss) . . . . . . . . . $ 106,879 $ 48,796 $ (51) $ 2,430 $ 6,838 $ - $ 13,853 $ - $ - $ 178,745 Adjustments to reconcile operating income to net cash provided (used) by operating activities:
Depreciation . . . . . . . . . . . . 26,702 19,629 4 1,405 4,501 - 10,084 - - 62,325 Decommissioning . . . . . . . . . 10,900 - - - - - 3,113 - - 14,013 Advances for capacity and energy . . - - 2,124 - - - - - - 2,124 Amortization of nuclear fuel . . . . 8,586 - - - - - - - - 8,586 Changes in assets and liabilities:
Accounts receivable . . . . . . . . . 201 (2,369) - - (3) - (8,812) - - (10,983)
Accounts payable and accruals . . . 8,888 (5,829) (56) (565) (1,058) - (10,855) - - (9,475)
Other . . . . . . . . . . . . . . . . 50 (1,034) 10 - 8 - (71) - - (1,037)
Net cash provided by operating activities . . . . . . . . . . . . . . . $ 162,206 $ 59,193 $ 2,031 $ 3,270 $ 10,286 $ - $ 7,312 $ - $ - $ 244,298 The accompanying notes are an integral part of the combined financial statements.
44
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2002 (Amounts in thousands)
Year Ended June 30, 2002 (Restated)
Southern Palo Transmission Hoover Mead- Mead- Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Cash flows from operating activities:
Receipts from participants . . . . . . . . . . . . . . . . . $ 184,347 $ 82,431 $ 2,568 $ 4,064 $ 10,737 $ - $ 52,134 $ - $ 336,281 Payments to operating managers . . . . . . . . . . . . . . (24,762) (16,959) (270) (1,168) (1,037) - (43,887) - (88,083)
Other receipts (payments) . . . . . . . . . . . . . . . . . 27 (622) (6) 153 148 - 1,069 - 769 Net cash flow from operating activities . . . . . . . . . . . 159,612 64,850 2,292 3,049 9,848 - 9,316 - 248,967 Cash flows from noncapital financing activities:
Withdrawals by participants,net . . . . . . . . . . . . . . - - - - - - - (37,126) (37,126)
Cash flows from capital and related financing activities:
Additions to plant,net . . . . . . . . . . . . . . . . . . . (15,751) - - 78 3 - (103) - (15,773)
Debt interest payments . . . . . . . . . . . . . . . . . . . (37,413) (45,191) (1,101) (3,947) (12,363) (15,547) (10,542) - (126,104)
Proceeds from sale of bonds . . . . . . . . . . . . . . . . - 65,236 25,336 - - - 135,548 - 226,120 Payment for defeasance of revenue bonds . . . . . . . . . - (76,183) (28,816) - - - (124,828) - (229,827)
Principal payments on debt . . . . . . . . . . . . . . . . . (45,105) (19,210) (650) (1,710) (3,895) (6,200) (7,480) - (84,250)
Payment for bond issue costs . . . . . . . . . . . . . . . . - (1,301) (627) - - - (1,530) - (3,458)
Net cash used for capital and related financing activities . . . . . . . . . . . . . . . . . . . . (98,269) (76,649) (5,858) (5,579) (16,255) (21,747) (8,935) - (233,292)
Cash flows from investing activities:
Interest received on investments . . . . . . . . . . . . . . 11,713 4,390 249 706 2,001 18,299 727 10,576 48,661 Purchases of investments . . . . . . . . . . . . . . . . . . (516,905) (36,833) (7,024) (1,682) (6,415) (8,857) (23,561) (68,403) (669,680)
Proceeds from sale/maturity of investments . . . . . . . . 423,713 53,262 8,354 2,258 8,140 12,288 19,762 92,432 620,209 Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . (81,479) 20,819 1,579 1,282 3,726 21,730 (3,072) 34,605 (810)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . (20,136) 9,020 (1,987) (1,248) (2,681) (17) (2,691) (2,521) (22,261)
Cash and cash equivalents at beginning of year . . . . . . . . 80,285 24,512 2,114 3,329 6,575 18 17,754 17,491 152,078 Cash and cash equivalents at end of year . . . . . . . . . . . $ 60,149 $ 33,532 $ 127 $ 2,081 $ 3,894 $ 1 $ 15,063 $ 14,970 $ 129,817 Reconciliation of operating income to net cash provided by operating activities:
Operating income (loss) . . . . . . . . . . . . . . . . . $ 104,108 $ 40,709 $ 116 $ 1,411 $ 5,815 $ - $ (5,937) $ - $ 146,222 Adjustments to reconcile operating income to net cash provided (used) by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . 26,701 19,633 4 1,406 4,502 - 10,073 - 62,319 Decommissioning . . . . . . . . . . . . . . . . . . 11,872 - - - - - 3,113 - 14,985 Advances for capacity and energy . . . . . . . . . . - - 1,954 - - - - - 1,954 Amortization of nuclear fuel . . . . . . . . . . . . . 8,259 - - - - - - - 8,259 Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . 47 - 33 - 371 - 1,168 - 1,619 Accounts payable and accruals . . . . . . . . . . . . . 8,811 4,508 185 232 (840) - 861 - 13,757 Other . . . . . . . . . . . . . . . . . . . . . . . . . (186) - - - - - 38 - (148)
Net cash provided by operating activities . . . . . . . . . . $ 159,612 $ 64,850 $ 2,292 $ 3,049 $ 9,848 $ - $ 9,316 $ - $ 248,967 The accompanying notes are an integral part of the combined financial statements.
45
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and Purpose component, a 17.76% interest in the Mead Substation project com-The Southern California Public Power Authority (the Authority), a ponent and a 22.41% interest in the Mead-Marketplace project com-public entity organized under the laws of the State of California, was ponent.
formed by a Joint Powers Agreement dated as of November 1, 1980 As of December 17, 1991, the Authority also entered into an agree-pursuant to the Joint Exercise of Powers Act of the State of California. ment to acquire a 67.92% interest in the Mead-Adelanto Project The Authoritys participants consist of eleven Southern California cities (Mead-Adelanto), a transmission line extending between the and one public district of the State of California. The Authority was Adelanto substation in Southern California and the Marketplace formed for the purpose of planning, financing, developing, acquiring, substation in Nevada. Funding for these projects was provided by constructing, operating and maintaining projects for the generation a transfer of funds from the Multiple Project Fund and commercial and transmission of electric energy for sale to its participants. The Joint operations commenced in April 1996. LADWP serves as the operations Powers Agreement has a term of fifty years. manager of Mead-Adelanto.
The Joint Powers Agreement authorizes the Authority to admit new members to the agreement. The Cities of Cerritos of Los Angeles Multiple Project Fund - During fiscal year 1990, the Authority issued County and San Marcos of San Diego County have applied for mem- Multiple Project Revenue Bonds for net proceeds of approximately bership under the agreement. In July 2001, the Authority adopted a $600 million to provide funds to finance costs of construction and policy to establish the criteria for admitting new members. The two acquisition of ownership interests or capacity rights in one or more, cities met all of the established criteria and became members to then unspecified, projects for the generation or transmission of electric the agreement in July 2001. In August 2003, the Authority, by resolu- energy. Certain of these funds were used to finance the Authoritys tion of the Board of Directors (the Board), rescinded the membership interests in Mead-Phoenix and Mead-Adelanto.
of the City of San Marcos, as the city no longer met the criteria for membership. San Juan Project - Effective July 1, 1993, the Authority purchased a 41.80% interest in Unit 3 and related common facilities, of the San Juan The Authority has interests in the following projects: Generating Station (SJGS) from Century Power Corporation. Unit 3, a 488 megawatt unit, is one unit of a four-unit coal-fired power gener-Palo Verde Project - On August 14, 1981, the Authority purchased a ating station in New Mexico.
5.91% interest in the Palo Verde Nuclear Generating Station (PVNGS),
a 3,810 megawatt nuclear-fueled generating station near Phoenix, Magnolia Power Project (The Project) - In March 2003, the Arizona, and a 6.55% share of the right to use certain portions of the Authority received approval from the California Energy Commission for Arizona Nuclear Power Project Valley Transmission System (collectively, construction of the Magnolia Power Project. The Project will consist of the Palo Verde Project). Units 1, 2 and 3 of the Palo Verde Project a combined cycle natural gas-fired generating plant with a nominally began commercial operations in January 1986, September 1986, and rated net base capacity of 242 megawatts and will be built on a site in January 1988, respectively. the City of Burbank,California. The plant is the first that is wholly owned by the Authority and entitlements to 100% of the capacity and energy Southern Transmission System Project - On May 1, 1983, the of the Project have been sold to six of its members. The City of Burbank, Authority entered into an agreement with the Intermountain Power a Project participant, will manage its construction and operation.
Agency (IPA), to defray all the costs of acquisition and construction of Construction is under way and commercial operation is expected to the Southern Transmission System Project (STS) which provides for begin in mid-2005. During the current year, the Project had no rev-the transmission of energy from the Intermountain Generating Station enues and is not anticipated to have any until the Project becomes in Utah to Southern California. STS commenced commercial opera- operational. Costs related to the construction of the plant of $91.6 mil-tions in July 1986. The Department of Water and Power of the City of lion and debt service costs of $3.7 million offset by investment income Los Angeles (LADWP), a member of the Authority, serves as project of $1.7 million, were capitalized as part of the utility plant balance.
manager and operating agent of the Intermountain Power Project Once the plant becomes operational, these costs will be recovered (IPP). through future billings to participants.
Hoover Uprating Project - As of March 1, 1986, the Authority and six Projects Stabilization Fund - In fiscal year 1997, the Authority autho-participants entered into an agreement pursuant to which each partic- rized the creation of a Projects Stabilization Fund. Deposits may be ipant assigned its entitlement to capacity and associated firm energy to made into the fund from budget under-runs, after authorization of the Authority in return for the Authoritys agreement to make advance individual participants, and by direct contributions from the partici-payments to the United States Bureau of Reclamation (USBR) on pants. Participants have discretion over the use of their deposits within behalf of such participants. The Authority has an 18.68% interest in the SCPPA project purposes. This fund is not a project-related fund; there-contingent capacity of the Hoover Uprating Project (HU). fore, it is not governed by any project Indenture of Trust.
The members participate in the ProjectsStabilization Fund by mak-Mead-Phoenix and Mead-Adelanto Projects - As of December 17, ing deposits to the fund at their discretion.
1991, the Authority entered into an agreement to acquire an interest in the Mead-Phoenix Project (Mead-Phoenix), a transmission line Participant Ownership Interests - The Authoritys participants may extending between the Westwing substation in Arizona and the elect to participate in the projects. As of June 30, 2003, the members Marketplace substation in Nevada. The agreement provides the have the following participation percentages in the Authoritys interest Authority with an 18.31% interest in the Westwing-Mead project in the projects:
46
Magnolia impact on the Authoritys financial statements as a result of this change Palo Hoover Mead- Mead- San Power was the discontinuation of the application of FASB Statement No. 133, Participants Verde STS Uprating Phoenix Adelanto Juan Project Accounting for Derivative Instruments and Hedging Activities (FASB 133).
City of Los Angeles 67.0% 59.5% 24.8% 35.7% The Authority adopted FASB 133 in fiscal year 2001 and consequently City of Anaheim 17.6% 42.6% 24.2% 13.5% 38.0% began reporting its derivative instruments at fair value. With this City of Riverside 5.4% 10.2% 31.9% 4.0% 13.5% accounting change, the Authority is no longer required to report its Imperial Irrigation derivative instruments at fair value under the guidance applicable to District 6.5% 51.0% state and local governments. The Authority restated its prior year finan-City of Vernon 4.9% cial statements to retroactively apply this change in election under City of Azusa 1.0% 4.2% 1.0% 2.2% 14.7% GASB 20. The Authority believes that this was a change to a preferable City of Banning 1.0% 2.1% 1.0% 1.3% 9.8% method of accounting. The restatement of the fiscal year 2002 financial City of Colton 1.0% 3.2% 1.0% 2.6% 14.7% 4.2% statements was limited to STS, as it was the only project with derivative City of Burbank 4.4% 4.5% 16.0% 15.4% 11.5% 31.0% instruments.
City of Glendale 4.4% 2.3% 14.8% 11.1% 9.8% 16.5% Included in the derivative commitments caption in the prior years City of Cerritos 4.2% was the $7.9 million premium received by the Authority in consid-City of Pasadena 4.4% 5.9% 13.8% 8.6% 6.1% eration for entering into an agreement whereby the Authority sold 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% an option (the Swaption) on a floating-to-fixed interest rate swap.
Previously the value of this option was recorded at fair value; however, The Authority has entered into power sales and transmission ser- with this change in accounting principle, it is now reported as part of vice agreements with the above project participants. Under the terms the debt value and amortized to interest expense as a downward yield of the contracts, the participants are entitled to power output or adjustment over the life of the related debt. See Note 4 for derivative transmission service, as applicable. The participants are obligated to instrument disclosures.
make payments on a take or paybasis for their proportionate share of The following summarizes the impact on the combined financial operating and maintenance expenses and debt service. The contracts statements from this change in accounting principle:
cannot be terminated or amended in any manner which will impair or As Previously adversely affect the rights of the bondholders as long as any bonds Reported Adjustments As Restated issued by the specific project remain outstanding. June 30, 2002 The contracts expire as follows:
Combined Statements of Net Assets (Deficit)
Palo Verde Project . . . . . . . . . . . . . . . . . . . 2030 Long-term debt . . . . . . . . . . . . . . . . . $ 2,166,175 $ 7,272 $ 2,173,447 Southern Transmission System Project . . . . . . . . . . . 2027 Derivative commitments . . . . . . . . . . . . . $ 99,695 $ (99,695) $ -
Hoover Uprating Project . . . . . . . . . . . . . . . . 2018 Net assets (deficit) . . . . . . . . . . . . . . . . $ (285,632) $ 92,423 $ (193,209)
Mead-Phoenix Project . . . . . . . . . . . . . . . . . 2030 Year Ended June 30, 2002 Mead-Adelanto Project . . . . . . . . . . . . . . . . . 2030 San Juan Project . . . . . . . . . . . . . . . . . . . . 2030 Combined Statements of Revenues, Magnolia Power Project . . . . . . . . . . . . . . . . . 2036 Expenses and Changes in Net Assets (Deficit)
Debt expenses . . . . . . . . . . . . . . . . . . $ (163,701) $ 443 $ (163,258)
The Authoritys interests in generation and transmission projects Unrealized loss on derivative commitment . . . . $ (36,675) $ 36,675 $ -
are jointly owned with other utilities. Each joint plant participant, Net assets (deficit) -beginning of year including the Authority, is responsible for financing its share of con- (June 30,2001) . . . . . . . . . . . . . . . . $ (272,197) $ 55,305 $ (216,892) struction and operating costs. The financial statements reflect the Authoritys interest in each jointly-owned project as well as the project Adoption of GASB Statements Nos. 34, 37, and 38 - On July 1, 2001, the that it owns. Authority adopted GASB Statement No. 34 (GASB 34), Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments; GASB Statement No. 37 (GASB 37), Basic Financial
- 2. Summary of Significant Accounting Policies Statements and Managements Discussion and Analysis for State and The accounting records of the Authority are maintained in accordance Local Governments: Omnibus - an Amendment of GASB Statements with accounting principles generally accepted in the United States of No. 21 and No. 34 and GASB Statement No. 38 Certain Financial America. As a government-owned utility, in prior years the Authority Statement Note Disclosures (GASB 38). GASB 34, as amended, and applied all statements issued by the Governmental Accounting GASB 38 establish specific standards for external financial reporting Standards Board (GASB) and all statements and interpretations issued for all state and local governments. As a result of adopting these by the Financial Accounting Standards Board (FASB) which were not in Standards, the basic financial statement presentation was significantly conflict with statements issued by the GASB. Effective July 1, 2002, the changed, including adding managements discussion and analysis of Authority changed its election under the guidance in GASB Statement operating, investing and financing activities. GASB 34 also requires the No. 20, Accounting and Financial Reporting for Proprietary Funds and classification of net assets (deficit) into three components - invested in Other Governmental Entities that Use Proprietary Fund Accounting, to capital assets, net of related debt; restricted; and unrestricted. These follow all GASB statements and only FASB statements and interpreta- classifications are defined as follows:
tions issued before November 30, 1989.
Invested in capital assets, net of related debt - This component Accounting Changes of net assets consists of (a) capital assets, (b) net of accumulated Change in Election of Application of GASB 20 - Effective July 1, 2002, the depreciation and (c) unamortized debt expenses, reduced by the Authority changed its election under the guidance in GASB 20 and no outstanding balances of any bonds or other borrowings that are longer follows FASB statements issued after November 30, 1989. The attributable to the acquisition, construction, or improvement of 47
those assets. If there are significant unspent related debt proceeds on the basic combined financial statements, except for the change at year-end, the portion of the debt attributable to the unspent pro- from the indirect method to the direct method of reporting cash flows ceeds is not included in the calculation of Invested in capital assets, and the reclassification of cost recoverable, deferred credits and funds net of related debt. Rather, that portion of the debt is included in due to participants to net assets (deficit) in accordance with the the same net assets component as the unspent proceeds. Statement.
Restricted - This component consists of net assets on which con- Use of Estimates - The preparation of financial statements in confor-straints are placed as to their use. Constraints include those mity with accounting principles generally accepted in the United imposed by creditors (such as through debt covenants), contri- States of America requires management to make estimates and butors, or laws or regulation of other governments or constraints assumptions that affect the reported amounts of assets and liabilities imposed by law through constitutional provisions or through and disclosure of contingent assets and liabilities at the date of the enabling legislation. financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from Unrestricted net assets - This component of net assets consists of those estimates.
net assets that do not meet the definition of restrictedor invested in capital assets, net of related debt. Utility Plant - The Authoritys share of construction and better-ment costs associated with PVNGS, STS, Mead-Phoenix, Mead-Under GASB 34, the statements of equity and of other comprehen- Adelanto, SJGS and Magnolia Power Project are included as utility sive income were eliminated; the statement of income was renamed plant. Depreciation expense is computed using the straight-line the statement of revenues,expenses and changes in net assets (deficit); method based on the estimated service lives, principally thirty-five and the statement of cash flows presentation was changed to the years for PVNGS, STS, Mead-Phoenix and Mead-Adelanto and twenty-direct method (including a reconciliation of operating cash flows to one years for SJGS.
operating income). The adoption of GASB 34 had no significant effect A summary of changes in Utility plant follows (amounts in thousands):
Balance Balance June 30, June 30, 2002 Additions Disposals Transfers 2003 Nondepreciable Utility Plant Land . . . . . . . . . . . . . . . . . . . . . . . . $ 36,187 $ - $ - $ - $ 36,187 Construction work in progress . . . . . . . . . . . 15,180 101,904 - (4,339) 112,745 Nuclear fuel* . . . . . . . . . . . . . . . . . . . . 14,981 5,892 (6,329) - 14,544 Total nondepreciable utility plant . . . . . . . . . . . 66,348 107,796 (6,329) (4,339) 163,476 Depreciable Utility Plant Production Nuclear generation (Palo Verde Project) . . . . . 620,003 3,247 (614) - 622,636 Coal-fired plant (San Juan Unit 3 Project) . . . . 175,111 868 (3,504) - 172,475 Transmission . . . . . . . . . . . . . . . . . . . . 876,286 - - - 876,286 General . . . . . . . . . . . . . . . . . . . . . . . 32,718 224 (124) - 32,818 Total depreciable utility plant . . . . . . . . . . . . . 1,704,118 4,339 (4,242) - 1,704,215 Less accumulated depreciation . . . . . . . . . . . . . (892,551) (76,337) 4,216 - (964,672)
Total utility plant,net . . . . . . . . . . . . . . . . . $ 877,915 $ 35,798 $ (6,355) $ (4,339) $ 903,019
- Nuclear fuel disposals represent amortization.
48
Nuclear Fuel - Nuclear fuel is amortized and charged to expense on Unamortized Debt Expenses - Debt premiums, discounts and issue the basis of actual thermal energy produced relative to total thermal expenses are deferred and amortized to expense over the lives of the energy expected to be produced over the life of the fuel. Under the related debt issues. Losses on refunding related to bonds redeemed by provisions of the Nuclear Waste Policy Act of 1982, the federal govern- refunding bonds are amortized over the shorter of the life of the ment assesses each entity with nuclear operations, including the par- refunding bonds or the remaining term of bonds refunded. Losses on ticipants in PVNGS, $1 per megawatt hour of nuclear generation. The early extinguishment of debt are recognized immediately.
Authority records this charge as a current year expense. See Note 7 for information about spent nuclear fuel disposal. Arbitrage Rebate - The unused proceeds from the issuance of Multiple Project Revenue Bonds have been invested in taxable financial Nuclear Decommissioning - Decommissioning of PVNGS is expected instruments. The excess of interest income over expense associated to commence subsequent to the year 2024. The total cost to decom- with the bonds, if any, is payable to the IRS within five years of the date mission the Authoritys interest in PVNGS is estimated to be $116.6 mil- of the bond offering and each consecutive five years thereafter.
lion in 2002 dollars ($375.0 million in 2022 dollars, assuming a 6% esti- At June 30, 2003, cumulative savings due to the rebate calculation mated annual inflation rate). This estimate is based on an updated site amounted to $14.4 million. As a result, the Multiple Project Fund has specific study prepared by an independent consultant in 2001. The recorded liabilities of $3.8 million and $10.6 million to the Mead-Authority is providing for its share of the estimated future decommis- Phoenix Project and Mead-Adelanto Projects, respectively.
sioning costs over the remaining life of the nuclear power plant through The next rebate payment to the IRS for these issues, if any, is due in annual charges to expense, which amounted to $10.9 and $11.9 million fiscal year 2006.
in fiscal years 2003 and 2002, respectively. The decommissioning liabi-lity is included as a component of accumulated depreciation and was Revenues - Revenues consist of billings to participants for the sales of
$170.8 and $159.9 million at June 30, 2003 and 2002, respectively. electric energy and transmission service in accordance with the partic-The Authority contributes to external trusts set up in accordance ipation agreements. Generally, revenues are fixed at a level to recover with the Arizona Nuclear Power Plant participation agreement and all operating and debt service costs over the commercial life of the Nuclear Regulatory Commission requirements. As of June 30, 2003, property.
decommissioning funds totaled approximately $117.8 million, includ- In September 1998, the Palo Verde participants approved a resolu-ing approximately $902,000 of interest receivable. tion authorizing the Authority to bill the participants $65 million annu-ally through June 30, 2004 to pay for increased debt service costs as a Demolition and Site Reclamation - Demolition and site reclamation result of a refunding completed in October 1997. In addition, the par-of SJGS, which involves restoring the site to a green condition, is ticipants resolved to transfer any overbillings,renewal and replacement projected to commence subsequent to the year 2014. Based upon the excess funds or surplus amounts through June 30, 2004 into the Palo study performed by an independent engineering firm, the Authoritys Verde reserve account. Amounts on deposit in the reserve account are share of the estimated demolition and site reclamation costs is intended to be used to enhance the competitiveness of the Palo Verde
$18.7 million in 1992 dollars. The Authority is providing for its share of Project, at the discretion of the Board of Directors. Funds held in the the estimated future demolition costs over the remaining life of the reserve account as a result of this resolution totaled $45.5 million and power plant through annual charges to expense of $3.1 million. The $34.8 million as of June 30, 2003 and 2002, respectively.
demolition liability is included as a component of accumulated depre- San Juan Coal Agreements - On October 17, 2000, an agreement ciation and totaled $31.1 million and $28.0 million at June 30, 2003 and was reached on the principles of a new long-term fuel sourcing and 2002, respectively. pricing plan between the participants of SJGS and its coal supplier. The As of June 30, 2003, the Authority has not billed participants for the agreement authorizes the supplier to develop an underground long-cost of demolition nor has it established a demolition fund. wall mine to replace production from two existing surface mines. To terminate the existing agreement, the Authority made a $9.9 million Investments - Investments include United States government and payment on December 31, 2002, which was its share of the require-governmental agency securities and repurchase agreements which are ment of the new contract. Included in the current year revenues are collateralized by such securities. These investments are reported at fair billings to project participants for the required proceeds to settle the value and changes in unrealized gains and losses are recorded in the $9.9 million buyout. The new underground mine will result in signifi-statement of revenues, expenses and changes in net assets (deficit). cantly reduced costs of coal supplied to SJGS through 2017,the term of Gains and losses realized on the sale of investments are generally the new contract.
determined using the specific identification method.
The Bond Indentures for the six Projects and the Multiple Project Reclassifications - Certain prior period amounts have been reclassi-Fund require the use of trust funds to account for the Authoritys fied to conform to the current presentation.
receipts and disbursements. Cash and investments held in these funds are restricted to specific purposes as stipulated in the Bond Indentures.
- 3. Investments Advances for Capacity and Energy - Advance payments to the The Authoritys investment function operates within a legal frame-United States Bureau of Reclamation for the uprating of the 17 genera- work established by Sections 6509.5 and 53600 et.Seq.of the California tors at the Hoover Power Plant are included in advances for capacity Government Code,Indentures of Trust,instruments governing financial and energy. These advances are being reduced by the principal portion arrangements entered into by SCPPA to finance and operate Projects of the credits on billings to the Authority for energy and capacity. and the SCPPA Investment Policy.
Eligible securities and general limitations are derived from each Cash and Cash Equivalents - Cash and cash equivalents include cash Projects Indenture of Trust for the issuance of senior and subordinate and investments with original maturities of 90 days or less. lien bonds. Additional limitations are derived from the Government Code and SCPPAs evolving investment practices.
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The operative Indentures of Trust in which securities are authorized Negotiable Certificates of Deposit, which are deposit liabilities for investment purposes relate to the Hoover Uprating Project Bonds, issued by a nationally or state-chartered bank, a savings or a federal the San Juan Project Bonds, the Palo Verde Project Bonds, the Southern association or by a state-licensed branch of a foreign bank which Transmission System Project Bonds, the Mead-Phoenix Project Bonds, has a short-term ratings of at least A-1 by S&P and at least P-1 by the Mead-Adelanto Project Bonds,the Multiple Project Fund Bonds and Moodys; the Magnolia Power Project Bonds. Authorized investments for the ProjectsStabilization Fund are set forth in a resolution approved by the Bankers Acceptances, a short term draft or bill of exchange guaran-Board in 1996. teed for payment at face value to the holder of the instrument on its maturity date, which has a short-term rating of at least A-1 by S&P Eligible securities include: and at least P-1 by Moodys; United States Treasury Securities, which are bonds or other obliga-Commercial Paper, a short-term unsecured promissory note issued tions secured by the full faith and credit of the United States of by non-financial or financial firms with a rating of A-1 by S&P and America; P-1 by Moodys; Federal Agency Obligations, which have the full financial backing of Medium Term Notes rated A or better and only those issued by the U.S. Government; corporations organized and operating within the United States, or by depository institutions licensed by the United States or any state Government Sponsored Enterprise Obligations, which are created and operating within the United States; by acts of Congress to provide liquidity for selected lending pro-grams targeted by Congress; Equity-Linked Notes, which are categorized as medium-term cor-porate notes and are subject to the constraints set forth in the Repurchase Agreements, which are collateralized loan contracts Government code.
where the seller includes a written agreement to repurchase the securities at a later date for a specified amount; Investments at June 30, 2003 and 2002 are as follows:
June 30, 2003 Southern Palo Transmission Hoover Mead- Mead- Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total Federal agencies . . . . . . . . . . . . . . . . . . . . . . $ 351,717 $ 40,265 $ 2,955 $ 437 $ 3,283 $ 7,435 $ 15,514 $ 46,945 $ 89,239 $ 557,790 U.S.government securities . . . . . . . . . . . . . . . . . 420,763 10,337 - - - - - - 5,711 436,811 Guaranteed investment contracts . . . . . . . . . . . . . . - 36,423 - 9,314 24,898 236,002 21,599 35,397 - 363,633 Repurchase agreements . . . . . . . . . . . . . . . . . . - - - - - - - - - -
Money market investment account . . . . . . . . . . . . . 3,123 9,673 1,253 1,605 2,069 - 397 150,465 1,035 169,620 Medium term notes . . . . . . . . . . . . . . . . . . . . . 4,367 - - - - - - - - 4,367 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 40 18 12 12 - 22 - - 200 Total $ 780,066 $ 96,738 $ 4,226 $ 11,368 $ 30,262 $ 243,437 $ 37,532 $ 232,807 $ 95,985 $ 1,532,421 Restricted investments . . . . . . . . . . . . . . . . . . . $ 661,929 $ 58,802 $ - $ 9,751 $ 27,471 $ 243,437 $ 21,602 $ 70,426 $ 53,044 $ 1,146,462 Unrestricted investments . . . . . . . . . . . . . . . . . . 12,995 - 500 - - - - - - 13,495 Cash and cash equivalents . . . . . . . . . . . . . . . . . 105,142 37,936 3,726 1,617 2,791 - 15,930 162,381 42,941 372,464 Total $ 780,066 $ 96,738 $ 4,226 $ 11,368 $ 30,262 $ 243,437 $ 37,532 $ 232,807 $ 95,985 $ 1,532,421 June 30, 2002 Southern Palo Transmission Hoover Mead- Mead- Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Federal agencies . . . . . . . . . . . . . . . . . . . . . . $ 304,433 $ 44,247 $ 3,972 $ 1,815 $ 5,015 $ 7,435 $ 16,668 $ 156,067 $ 539,652 U.S.government securities . . . . . . . . . . . . . . . . . 290,244 15,094 - - - - - 13,104 318,442 Guaranteed investment contracts . . . . . . . . . . . . . . - 40,412 - 9,209 24,906 240,149 13,524 - 328,200 Repurchase agreements . . . . . . . . . . . . . . . . . . - 6,559 - - - - - - 6,559 Money market investment account . . . . . . . . . . . . . 3,389 10,656 105 254 422 1 903 3,088 18,818 Medium term notes . . . . . . . . . . . . . . . . . . . . . 4,500 - - - - - - - 4,500 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 38 22 12 12 - 20 1,031 1,231 Total $ 602,662 $ 117,006 $ 4,099 $ 11,290 $ 30,355 $ 247,585 $ 31,115 $ 173,290 $ 1,217,402 Restricted investments . . . . . . . . . . . . . . . . . . . $ 528,985 $ 83,474 $ 2,861 $ 9,209 $ 26,461 $ 247,584 $ 16,052 $ 158,320 $ 1,072,946 Unrestricted investments . . . . . . . . . . . . . . . . . . 13,528 - 1,111 - - - - - 14,639 Cash and cash equivalents . . . . . . . . . . . . . . . . . 60,149 33,532 127 2,081 3,894 1 15,063 14,970 129,817 Total $ 602,662 $ 117,006 $ 4,099 $ 11,290 $ 30,355 $ 247,585 $ 31,115 $ 173,290 $ 1,217,402 50
- 4. Derivative Instruments System Project Revenue Bonds. The notional amount of the Swap Objective of the swaps. In order to protect against the potential of ris- Agreement is equal to the par value of the bonds. The Swap ing interest rates, the Authority entered into four separate pay- Agreement provides for the Authority to make payments to the fixed, receive-variable interest rate swaps at a cost less than what the third party on a fixed rate basis of 4.24%, and for the third party Authority would have paid to issue fixed-rate debt. to make reciprocal payments based on a variable rate. The reset dates of the variable rate occur weekly and the rate for a reset date Terms, fair values, and credit risk. The terms, including the fair values will be the rate determined by the Bond Market Association and credit ratings of the outstanding swaps as of June 30, 2003, are Municipal Swap Index (BMA) minus 40 basis points. The counter-included below. The notional amounts of the swaps match the princi- party has the option to terminate the agreement on or after July 1, pal amounts of the associated debt. Except as discussed under the 2006 should the BMA index average more than 7% over a consecu-rollover risk, the Authoritys swap agreements contain scheduled tive 180-day period. The floating rates on the bonds were 0.95%
reductions to outstanding notional amounts that are expected to and 1.10% at June 30, 2003 and 2002, respectively. The bonds approximately follow scheduled or anticipated reductions in the mature in 2021.
associated bonds payable category.
1991 Swap - In fiscal year 1991, the Authority entered into an 2003 Swap - In April 2003, the Authority entered into an Interest Interest Rate Swap Agreement with a third party for the purpose of Rate Swap agreement with a third party for the purpose of hedg- hedging against interest rate fluctuations arising from the issuance ing against interest rate variations arising from the issuance of of 1991 Subordinate Refunding Series Southern Transmission the 2003 Subordinate Refunding Series A Southern Transmission Project Revenue Bonds. The notional amount of the Swap System Project Revenue Bonds. The notional amount of the Agreement is equal to the par value of the bonds. The Swap Swap Agreement is equal to the par value of the bonds. The Agreement provides for the Authority to make payments to the Swap Agreement provides for the Authority to make payments to third party on a fixed rate basis at 6.38%, and for the third party to the third party on a fixed rate basis of 3.266%,and for the third party make reciprocal payments mirroring the bond variable coupon rate to make reciprocal payments based on a floating rate priced at (0.85% and 1.10% at June 30, 2003 and 2002, respectively). The 65% of one-month LIBOR. The floating rate on the related bonds at bonds mature in 2019.
June 30, 2003 was 0.857%. The termination of the agreement is July 1, 2022. Fair value. Because interest rates have declined since inception date of each swap, all swaps had negative fair value as of June 30, 2003. All fair Swaption/2000 Swap - In February 2001, the Authority entered values were estimated using the zero-coupon method. This method into a transaction whereby it sold an option (the Swaption) on a calculates the future payments required by the swap, assuming that floating-to-fixed interest rate swap. The Swaption, if exercised, will the current forward rates implied by the yield curve correctly anticipate effectively convert the $125 million Subordinate Refunding Series A future spot interest rates. These payments are then discounted using bonds issued by the Southern Transmission System Project in May the spot rates implied by the current yield curve for hypothetical zero-2000, into a synthetic fixed-rate debt obligation with a coupon of coupon rate bonds due on the date of each future net settlement on 4.25%. The floating rate on the Swaption is priced at 60% of one- the swaps.
month LIBOR. In exchange for the right to exercise the swaption, the counterparty paid the Authority a one-time up front option Credit risk. As of June 30, 2003, the Authority was not exposed to credit premium amount of $7.9 million. risk on any of its outstanding swaps because the swaps had negative fair On April 1, 2002, the counterparty exercised its option and the values. However, should interest rates change and the fair values of the Authority is now obligated to pay floating for fixed payments on the swaps become positive,the Authority would be exposed to credit risk in 2000 Subordinate Refunding Series A bonds based on the terms the amount of the derivatives fair value.
described above. The floating rate on the related bonds at June 30, The swap agreements contain varying collateral agreements with 2003 and 2002 was 0.95% and 1.11%, respectively. the counterparties. The swaps require full collateralization of the fair value of the swap should the counterpartys credit rating fall below A -
2001 Swap - In June 2001, the Authority entered into an interest as issued by Standard & Poors or A3 as issued by Moodys Investors rate swap agreement with a third party for the purpose of hedg- Service for the 1991 Swap, AA-/Aa3 for the 2000 swap, and A3/A1 for ing against interest rate variations arising from the issuance of the the 2001 swap. Collateral on all swaps is to be in the form of US gov-2001 Subordinate Refunding Series A Southern Transmission ernment securities held by a third-party custodian.
(Amounts in thousands)
Variable Swap Counterparty Notional Effective Fixed Rate Rate Fair Termination Credit Associated Bond Issues Amount Date Paid Received Values Date Rating Bond variable STS 1991 Revenue Bonds Series A . . . . . . . . . . . . . . . . . . $ 285,400 4/17/1991 6.38% $ (100,134) 6/30/2019 AAA/Aaa coupon rate STS 2000 Subordinate Refunding Series A Bonds . . . . . . . . . . 125,000 2/1/2001 4.25% 60% of LIBOR (31,398) 7/1/2022 AA-/Aa1 BMA less STS 2001 Subordinate Refunding Series A Bonds . . . . . . . . . . 79,795 6/14/2001 4.24% (14,470) 7/1/2021 AA+/Aa2 40 basis points STS 2003 Subordinate Refunding Series A Bonds . . . . . . . . . . 51,750 4/24/2003 3.266% 65% of LIBOR (2,068) 7/1/2022 AA-/Aa1
$ 541,945 $ (148,070) 51
The Authority also enters into master netting agreements when the Fiscal Year Variable-Rate Bonds Interest Rate Authority has more than one derivative transaction with one counter- Ending June 30 Principal Interest Swaps, Net Total party. Under the terms of these agreements, should one party become 2004 $ 1,575 $ 4,798 $ 24,310 $ 29,108 insolvent or otherwise default on its obligations, close-out netting pro- 2005 1,725 4,783 24,217 29,000 visions permit the nondefaulting party to accelerate and terminate all 2006 1,850 4,768 24,119 28,887 outstanding transactions and net the transactions fair values so that a 2007 1,950 4,751 24,014 28,765 single sum will be owed by, or owed to, the nondefaulting party. 2008 14,875 4,625 23,197 27,822 2009-2013 134,900 20,267 99,388 119,655 Basis risk. The Authoritys variable-rate bond coupon payment for 2014-2018 247,220 9,829 48,218 58,047 the 2001 swap is based on the BMA rate. For the 2000 and 2003 swaps 2019-2022 137,850 1,633 6,088 7,721 for which the Authority receives a variable-rate payment other than $ 541,945 $ 55,454 $ 273,551 $ 329,005 BMA, the Authority is exposed to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings may not 5. Long-Term Debt be realized. As of June 30,2003,the BMA rate was 0.635%,whereas 60% Long-term debt outstanding at June 30, 2003 consists of revenue of LIBOR was 0.792%, and 65% of LIBOR was 0.857 %. The following is bonds and subordinate refunding bonds due serially in varying annual a summary of interest rates paid and received from the counterparties amounts through 2036. The revenue bonds were issued to finance the as of June 30, 2003: purchase and construction of the Authoritys share of each of the Projects. The subordinate refunding bonds were issued to advance Type of Derivative refund specified revenue bonds. The Multiple Project Revenue Bonds 1991 Swap 2000 Swap 2001 Swap 2003 Swap were issued on August 1, 1989 to finance acquisition of ownership Fixed payments to counterparty 6.380% 4.250% 4.240% 3.266% interests in one or more Projects expected to be undertaken within five Less,variable payments from counterparty 0.850% 0.792% 0.635% 0.857% years after issuance. In October 1992, $103.6 million and $285.0 million of these bonds were transferred to the Mead-Phoenix Project and the Net interest rate swap payments 5.530% 3.458% 3.605% 2.409%
Mead-Adelanto Project, respectively.
In accordance with the bond indentures, the revenue bonds and Add,variable-rate bond coupon payments 0.850% 0.950% 0.950% 0.850% subordinate refunding bonds are special, limited obligations of the Synthetic interest rate on bonds 6.380% 4.408% 4.555% 3.259% Authority. With the exception of the Magnolia Power Project B, Lease Revenue bonds (City of Cerritos, California) 2003-1 (Project B Bonds),
Termination risk. The Authority or the counterparty may terminate any the bonds issued by each project are payable solely from and secured of the swaps if the other party fails to perform under the terms of the solely by interests in the issuing project as follows:
contract.In addition,the 2001 Swap provides the counterparty with the Proceeds from the sale of bonds; option to terminate the swap agreement commencing July 1, 2006. If any of the swaps are terminated, the associated variable-rate bonds All revenues, incomes, rents and receipts attributable to the issu-would no longer carry synthetic interest rates. If at the time of termi-nation the swap has a negative fair value, the Authority would be liable ing project and related interest on securities held under the bond to the counterparty for a payment equal to the swaps fair value. indentures; and All funds established by the indentures.
Rollover risk. The Authority is exposed to rollover risk on the 2001 swap as the counterparty has the option to terminate the agreement prior to the maturity of the associated debt should the BMA index average The Authority has agreed to certain covenants with respect to more than 7% over a consecutive 180-day period. When this swap ter- bonded indebtedness,including the requirement to enforce the power minates, the Authority will not realize the synthetic rate offered by the and transmission sales agreements with the participants. At the option swap on the underlying debt issue. The following debt is exposed to of the Authority, all outstanding Power Project Revenue Bonds and rollover risk: Subordinate Refunding Term Bonds are subject to redemption prior to maturity, except for the 1996 Subordinate Refunding Series A and por-Associated Debt Optional tions of the 1989A,1992A,1992B and 1993A Series bonds issued by the Debt Issuance Maturity Date Swap Termination Date Palo Verde Project; the 1996 Subordinate Refunding Series A bonds STS 2001 Subordinate issued by the Southern Transmission System; and, a total of $125.5 mil-7/01/2021 July 5,2006 lion of the outstanding Multiple Project Revenue Bonds.
Refunding Series A Swap payments and associated debt. Using rates as of June 30, 2003, Revenue Bonds debt service requirements of the Authoritys outstanding variable-rate Magnolia Power Project Revenue Bonds - To finance the acquisition and debt and net swap payments are as follows. As rates vary, variable-rate construction of the Magnolia Power Project, the Authority, on April bond interest payments and net swap payments will vary. 2003, issued $299.975 million Magnolia Power Project A, Revenue Bonds, 2003-1 (Project A Bonds). Simultaneously with the issuance of the Project A Bonds, the Authority issued $14.105 million Project B Bonds. The Project Manager expects that proceeds of both the Project A and Project B Bonds, together with applicable interest earn-ings, will be sufficient to pay all costs necessary to construct and acquire the Project.
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The Project B Bonds will be secured by lease rental payments to be SJ 1993 Revenue Series A Bonds (refunded bonds).The refunded bonds made by the City of Cerritos (the City) in connection with the lease of were redeemed beginning on January 1, 2003 and will continue to be certain facilities and premises owned by the City to the Authority and redeemed as they become due every January 1 through January 1,2014.
the leaseback of such facilities and premises to the City. The Base Rental The refunding is expected to reduce total debt service payments over Payments will be equal to the principal and interest on the Project B the life of the refunding issue by approximately $8.9 million and is Bonds. In accordance with the Assignment Agreement between the expected to result in present value savings of approximately $4.0 million Authority and the Trustee, the Authority will assign certain of its rights based on an average cost of 5.33% on the new bonds.
under the Lease, including its right to receive the Base Rental Payments, This transaction resulted in a net loss for accounting purposes of to the Trustee for the benefit of the Owners of the Project B Bonds. $7.3 million, consisting primarily of the write-off of unamortized debt The City has covenanted to budget and appropriate sufficient funds expense and the discount associated with the refunded bonds. The to make all payments required to be made under the Lease. The Lease Authority has proportionately allocated this loss between bonds has a term of 55 years. refunded through funds released from the debt service accounts and The bonds mature on July 1, 2036. through the issuance of refunding bonds. The loss allocated to the new bonds of $7.0 million was deferred and will be amortized over the life Hoover Uprating Project Refunding - In December 2001, the Authority of the new bonds. The portion refunded with cash resulted in immedi-issued $24.7 million par value Hoover 2001 Refunding Series A Bonds ate recognition of a $0.3 million extraordinary loss in fiscal year 2002.
(refunding bonds) to refund $28.1 million of Hoover 1991 Refunding Series A Bonds (refunded bonds). The remaining amount of $3.4 mil- Subordinate Refunding Bonds lion was funded through the release of funds from the debt service Southern Transmission Project Refunding - In May 2003, the Authority accounts related to the refunded bonds. The refunded bonds were issued $51.75 par value STS 2003 Subordinate Refunding Series A Bonds redeemed on January 1, 2002. The refunding is expected to reduce (refunding bonds) to refund $58.5 million of STS 1993 Subordinate total debt service payments over the life of the refunding issue by Refunding Series A Bonds (refunded bonds). Funds released from the approximately $9.3 million and is expected to result in present value debt service accounts related to the refunded bonds were $9.8 million.
savings of approximately $2.9 million based on an average cost of The refunded bonds are expected to be redeemed on July 1, 2003.The 4.74% on the new bonds. refunding is expected to reduce total debt service payments over the This transaction resulted in a net loss for accounting purposes of life of the refunding issue by approximately $13.3 million and is expected
$5.0 million, consisting primarily of the write-off of unamortized debt to result in present value savings of approximately $9.9 million based expense, deferred loss on prior refunding and the discount associated on an average cost of 3.27% on the new bonds.
with the refunded bonds. The Authority has proportionately allocated The refunding bonds are issued as Auction Rate Securities bearing this loss between bonds refunded through funds released from the interest at a weekly Auction Rate (0.85% at June 24,2003) as determined debt service accounts and through the issuance of refunding bonds. by the Auction Agent. The Authority entered into an interest rate swap The loss allocated to the new bonds of $4.3 million was deferred and agreement to fix the interest rate at 3.266% (see Note 4).
will be amortized over the life of the new bonds. The portion refunded This transaction resulted in a net loss for accounting purposes of with cash resulted in immediate recognition of a $0.7 million extra- $9.8 million, consisting primarily of the write-off of unamortized debt ordinary loss in fiscal year 2002. expense, deferred loss on prior refundings and the discount associated with the refunded bonds. The Authority has proportionately allocated San Juan Unit 3 Project Refunding - In October 2002, the Authority this loss between bonds refunded through funds released from issued $71.85 million par value SJ 2002 Refunding Series B Bonds the debt service accounts and through the issuance of subordinate (refunding bonds) to refund $70.8 million of SJGS 1993 Series A refunding bonds. The loss allocated to the new bonds of $8.2 million Bonds (refunded bonds). The refunding bonds are being issued as was deferred and will be amortized over the life of the new bonds.
Auction Rate Certificates (ARCs). The initial interest period of the The portion refunded with cash resulted in immediate recognition of a refunding bonds commenced from the date of delivery of the bonds $1.6 million extraordinary loss in fiscal year 2003.
and ends on January 1, 2012. During this period the interest payable In October 2002, the Authority issued $38.76 million par value STS on the bonds will accrue at 5.25% per annum. After the initial interest 2002 Subordinate Refunding Series B Bonds (refunding bonds) to period, the refunding bonds will bear interest at the applicable Auction refund $46.40 million of STS 1992 Subordinate Refunding Series A Rate. The Auction Dates for the 2002 Series B Bonds will generally occur Bonds (refunded bonds). The remaining $5.2 million was funded every thirty-five (35) days. from debt service accounts related to the refunded bonds and $2.1 The refunding is expected to reduce total debt service payments million from the General Reserve Fund. The refunding is expected to over the life of the refunding issue by approximately $12.9 million and is reduce total debt service payments over the life of the refunding issue expected to result in present value savings of approximately $8.1 million by approximately $8.7 million and is expected to result in present value based on an average cost of 4.80% on the new bonds. The refunded savings of approximately $7.3 million based on an average cost of bonds were redeemed on January 1, 2003. 4.57% on the new bonds. The refunded bonds were redeemed in This transaction resulted in a net loss for accounting purposes of December 2002.
$6.04 million, consisting primarily of the write-off of unamortized debt This transaction resulted in a net loss for accounting purposes of expense and the discount associated with the refunded bonds. The $5.93 million, consisting primarily of the write-off of unamortized debt Authority has proportionately allocated this loss between bonds expense, deferred loss on prior refundings and the discount associated refunded through funds released from the debt service accounts and with the refunded bonds. The Authority has proportionately allocated through the issuance of refunding bonds. The loss allocated to the new this loss between bonds refunded through funds released from the bonds of $5.97 million was deferred and will be amortized over the life debt service accounts and through the issuance of subordinate refund-of the new bonds. The portion refunded with cash resulted in immedi- ing bonds. The loss allocated to the new bonds of $5.03 million was ate recognition of a $74 thousand extraordinary loss in fiscal year 2003. deferred and will be amortized over the life of the new bonds. The In May 2002, the Authority issued $125.3 million par value SJ 2002 portion refunded with cash resulted in immediate recognition of an Refunding Series A Bonds (refunding bonds) to refund $118.1 million of $892 thousand extraordinary loss in fiscal year 2003.
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In May 2002, the Authority issued $63.9 million par value STS 2002 In February 2003, the Palo Verde 1993 Escrow Funds which were Subordinate Refunding Series A Bonds (refunding bonds) to refund created to defease to maturity $238.3 million of Palo Verde 1993
$73.3 million of STS 1992 Subordinate Refunding Series A Bonds Refunding Series A and $98.2 million of 1993 Palo Verde Subordinate (refunded bonds). The remaining amount of $9.4 million was funded Refunding Series Bonds, together the 1993 Defeased Bonds, were through the release of funds from the debt service accounts related to restructured. The Escrow Securities held to call the 1993 Defeased the refunded bonds. The refunded bonds were redeemed on July 1, Bonds were sold and the proceeds were used to purchase securities of 2002. The refunding is expected to reduce total debt service payments the new 1993 Escrow Funds for the purpose of redeeming the 1993 over the life of the refunding issue by approximately $4.7 million and is Defeased Bonds on July 1, 2003.
expected to result in present value savings of approximately $3.4 mil- The transaction resulted in a gain of $16.7 million, net of expenses lion based on an average cost of 4.97% on the new bonds. of $580,000. For accounting purposes, this gain is being deferred and This transaction resulted in a net loss for accounting purposes of amortized as a downward yield adjustment over the life of the debt
$9.7 million, consisting primarily of the write-off of unamortized debt used to advance refund the 1993 Defeased Bonds. The funds will be expense, deferred loss on prior refundings and the discount associated used to pay a portion of the 2004 fiscal year capital improvements with the refunded bonds. The Authority has proportionately allocated and the debt service in the amounts of $8.9 million and $7.8 million, this loss between bonds refunded through funds released from the respectively.
debt service accounts and through the issuance of subordinate refund-ing bonds. The loss allocated to the new bonds of $8.2 million was Prior Year Defeasance of Debt - In prior years, the Authority defeased deferred and will be amortized over the life of the new bonds. The specified revenue bonds by placing the proceeds from issuance of sub-portion refunded with cash resulted in immediate recognition of a ordinate refunding bonds in irrevocable trusts to provide for all future
$1.5 million extraordinary loss in fiscal year 2002. debt service payments on the refunded bonds. The trust investments and related liability for defeased bonds are not included in the Advance Refundings - In prior years, the Authority established irrevo- Authoritys financial statements. At June 30, 2003 and 2002, $555.9 mil-cable escrow trusts with the proceeds from issuance of subordinate lion and $790.6 million, respectively, of revenue bonds outstanding are refunding bonds. These investments will be used to call specified rev- considered defeased.
enue bonds at scheduled redemption dates.
A summary of changes in long-term debt follows:
(Amounts in thousands)
Southern Transmission Hoover Mead- Mead- Multiple Magnolia Palo Verde System Uprating Phoenix Adelanto Project San Juan Power Project Project Project Project Project Fund Project Project Total Total Long-term debt at June 30,2002 . . . . . . . . . . . . . $ 629,554 $ 830,680 $ 20,275 $ 63,720 $ 205,678 $ 222,865 $ 200,675 $ - $ 2,173,447 Total Debt due within one year at June 30,2002 . . . . . . . . 47,395 26,695 905 - - 6,600 1,600 - 83,195 Total Debt at June 30,2002 . . . . . . . . . . . . . . . . 676,949 857,375 21,180 63,720 205,678 229,465 202,275 - 2,256,642 Principal payments . . . . . . . . . . . . . . . . . . . . . . . (47,395) (26,695) (905) - - (6,600) (1,600) - (83,195)
Revenue bonds issued . . . . . . . . . . . . . . . . . . . . . - - - - - - - 314,080 314,080 Bonds refunded . . . . . . . . . . . . . . . . . . . . . . . . - (104,895) - - - - (70,800) - (175,695)
Refunding bonds issued . . . . . . . . . . . . . . . . . . . . - 90,505 - - - - 71,850 - 162,355 Decrease in Unamortized debt-related costs,net . . . . . . . . 28,786 21,099 319 504 1,629 680 7,364 7,650 68,031 Total Debt at June 30,2003 . . . . . . . . . . . . . . . . $ 658,340 $ 837,389 $ 20,594 $ 64,224 $ 207,307 $ 223,545 $ 209,089 $ 321,730 $ 2,542,218 Total Debt due within one year at June 30,2003 . . . . . . . . (49,190) (29,720) (1,190) - - (7,100) (8,390) - (95,590)
Total Long-term debt at June 30, 2003 . . . . . . . . . . . . . $ 609,150 $ 807,669 $ 19,404 $ 64,224 $ 207,307 $ 216,445 $ 200,699 $ 321,730 $ 2,446,628 Unamortized debt-related costs, net are as follows as of June 30,2003 (amounts in thousands):
Loss on (Premium)
Unamortized debt-related costs, net: Refunding Discount Total Palo Verde Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,011 $ 61,104 $ 103,115 Southern Transmission System Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,141 33,545 160,686 Hoover Uprating Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,634 (448) 3,186 Mead-Phoenix Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,249 2,441 7,690 Mead-Adelanto Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,435 7,434 21,869 Multiple Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11,555 11,555 San Juan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,556 (16,835) (5,279)
Magnolia Power Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (7,650) (7,650)
$ 204,026 $ 91,146 $ 295,172 54
The scheduled debt service payments for future years ending June 30, Fair Value - The fair value of the Authoritys long-term debt (including are included in the table below. The variable rates used for the PV 1996 the current portion) is approximately $3.0 billion and $2.6 billion at Subordinate Refunding Series B and C, and the STS 1996 Subordinate June 30, 2003 and 2002, respectively. Management has estimated fair Refunding Series B were the rates at June 30, 2003 of 0.85% and 0.90%, value based on the quoted market prices for the same or similar issues respectively. The variable rates are set by the bond remarketing agent or on the current average rates offered to the Authority for debt of on a weekly basis based on economic conditions and bond ratings. The approximately the same remaining maturities, net of the effect of a variable rate used for the SJ 2002 Revenue Refunding Series B was related interest rate swap agreement.
assumed at 4% per annum starting in January 1, 2012.
(Amounts in thousands)
Southern Transmission Hoover Mead- Mead- Multiple Magnolia Palo Verde System Uprating Phoenix Adelanto Project San Juan Power Project Project Project Project Project Fund Project Project Total 2004 Principal . . . . . . . . . . . . . . . . . . . . . $ 49,190 $ 29,720 $ 1,190 $ - $ - $ 7,100 $ 8,390 $ - $ 95,590 Interest . . . . . . . . . . . . . . . . . . . . . 30,799 37,992 1,030 3,889 12,232 14,396 10,398 15,170 125,906 2005 Principal . . . . . . . . . . . . . . . . . . . . . 51,800 28,535 1,230 - - 7,600 8,805 - 97,970 Interest . . . . . . . . . . . . . . . . . . . . . 28,426 37,381 987 3,889 12,232 13,864 10,013 15,170 121,962 2006 Principal . . . . . . . . . . . . . . . . . . . . . - 31,470 1,275 - - 8,100 9,160 - 50,005 Interest . . . . . . . . . . . . . . . . . . . . . 28,426 36,844 943 3,889 12,232 13,297 9,631 15,170 120,432 2007 Principal . . . . . . . . . . . . . . . . . . . . . - 34,230 1,315 3,040 10,135 - 9,570 3,735 62,025 Interest . . . . . . . . . . . . . . . . . . . . . 28,426 36,279 893 3,748 11,763 13,297 9,186 15,096 118,688 2008 Principal . . . . . . . . . . . . . . . . . . . . . - 30,950 1,370 3,175 10,600 - 10,050 4,520 60,665 Interest . . . . . . . . . . . . . . . . . . . . . 28,426 34,668 838 3,598 11,260 13,297 8,695 15,005 115,787 2009-2013 Principal . . . . . . . . . . . . . . . . . . . . . 108,120 185,600 7,715 21,340 62,655 74,900 58,735 24,610 543,675 Interest . . . . . . . . . . . . . . . . . . . . . 139,885 145,015 3,279 14,617 46,184 50,892 33,304 72,542 505,718 2014-2018 Principal . . . . . . . . . . . . . . . . . . . . . 552,345 254,155 9,685 26,005 84,400 13,800 83,600 30,485 1,054,475 Interest . . . . . . . . . . . . . . . . . . . . . 108,925 95,674 1,190 7,097 23,778 36,069 10,730 66,056 349,519 2019-2023 Principal . . . . . . . . . . . . . . . . . . . . . - 333,900 - 18,355 61,385 123,600 15,500 39,100 591,840 Interest . . . . . . . . . . . . . . . . . . . . . - 28,788 - 924 3,088 4,454 785 56,997 95,036 2024-2028 Principal . . . . . . . . . . . . . . . . . . . . . - 69,515 - - - - - 49,910 119,425 Interest . . . . . . . . . . . . . . . . . . . . . - - - - - - - 45,664 45,664 2029-2033 Principal . . . . . . . . . . . . . . . . . . . . . - - - - - - - 63,695 63,695 Interest . . . . . . . . . . . . . . . . . . . . . - - - - - - - 31,186 31,186 2034-2037 Principal . . . . . . . . . . . . . . . . . . . . . - - - - - - - 98,025 98,025 Interest . . . . . . . . . . . . . . . . . . . . . - - - - - - - 10,142 10,142 Principal . . . . . . . . . . . . . . . . . . . . . $ 761,455 $ 998,075 $ 23,780 $ 71,915 $ 229,175 $ 235,100 $ 203,810 $ 314,080 $ 2,837,390 Interest . . . . . . . . . . . . . . . . . . . . . $ 393,313 $ 452,641 $ 9,160 $ 41,651 $ 132,769 $ 159,566 $ 92,742 $ 358,198 $ 1,640,040 Effective costs of capital . . . . . . . . . . . . . . . . . . . . 5.52% 4.71% 4.15% 5.57% 5.71% 6.99% 3.98% 4.76%
55
- 6. Net Assets (Deficit) $600 million to provide funds to finance costs of construction and As a result of the adoption of GASB 34,costs recoverable,deferred cred- acquisition of ownership interests or capacity rights in one or more, its and funds due to participants were reclassified to net assets (deficit) then unspecified, projects for the generation or transmission of electric in accordance with this statement. energy. Certain of these funds were used to finance the Authoritys interests in Mead-Phoenix and Mead-Adelanto. The remaining funds Costs Recoverable - Billings to participants are designed to recover are held in the Multiple Project Fund. Deferred credits represent the costs as defined by the power sales and transmission service agree- accumulated net earnings of the fund.
ments. The billings are structured to systematically provide for debt service requirements, operating funds and reserves in accordance with Funds Due to Participants - In fiscal year 1997, the Authority autho-these agreements. The difference between billings and the Authoritys rized the creation of a Projects Stabilization Fund. Deposits may be expenses calculated in accordance with generally accepted account- made into the fund from budget under-runs,after authorization of indi-ing principles are deferred as costs recoverable in future periods and vidual participants, and by direct contributions from the participants.
are presented as net assets (deficit). It is intended that the deferred Monies deposited by the participants to this Fund are used to pay for amounts will be recovered through billings for repayment of principal Authority costs as directed by the participants. This fund is not a pro-on the related bonds. ject-related fund, therefore, it is not governed by any project Indenture of Trust. Funds due to Participants represents the net amount of contri-Deferred Credits - During fiscal year 1990, the Authority issued butions and net earnings on the invested contributed funds.
Multiple Project Revenue Bonds for net proceeds of approximately Net assets (deficit) are comprised of the following (in thousands):
(Amounts in thousands)
June 30, Fiscal Year June 30, Fiscal Year June 30, 2001 2002 Activity 2002 2003 Activity 2003 GAAP items not included in billings to participants:
Depreciation of plant . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (689,743) $ (62,318) $ (752,061) $ (62,325) $ (814,386)
Nuclear fuel amortization . . . . . . . . . . . . . . . . . . . . . . . . . (19,548) - (19,548) - (19,548)
Decommissioning expense . . . . . . . . . . . . . . . . . . . . . . . . (118,264) (6,982) (125,246) (6,009) (131,255)
Amortization of bond discount,debt issue costs, and loss on refundings . . . . . . . . . . . . . . . . . . . . . . . . . (508,404) (40,956) (549,360) (35,096) (548,456)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,766) 835 (63,931) 1,654 (62,277)
Bond requirements included in billings to participants:
Operations and maintenance,net of investment income . . . . . . . . . . 144,484 31,091 175,575 99,330 274,905 Costs of acquisition of capacity . . . . . . . . . . . . . . . . . . . . . . . 17,810 959 18,769 1,153 19,922 Billings to amortize costs recoverable . . . . . . . . . . . . . . . . . . . 230,820 50,410 281,230 50,410 331,640 Reduction in debt service billings due to transfer of excess funds . . . . . . . . . . . . . . . . . . . . . . . . (81,110) (8,910) (90,020) - (90,020)
Principal repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,579 77,868 693,447 86,871 780,318 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,339 7,457 57,796 7,833 65,629 (422,803) 49,454 (373,349) 143,821 (229,528)
Multiple Project Fund Net Assets . . . . . . . . . . . . . . . . . . . . . . 5,561 794 6,355 337 6,692 ProjectsStabilization Fund Net Assets . . . . . . . . . . . . . . . . . . . 200,350 (26,565) 173,785 (77,364) 96,421
$ (216,892) $ 23,683 $ (193,209) $ 66,794 $ (126,415) 56
- 7. Commitments and Contingencies Nuclear Insurance - The Price-Anderson Act (the Act) requires that all Deregulation - In September 1996, Assembly Bill 1890 (the Bill) was utilities with nuclear generating facilities share in payment for claims given final approval. The Bill, which provides for broad deregulation resulting from a nuclear incident. The Act limits liability from third-of the power generation industry in California, requires the participa- party claims to approximately $9.5 billion per incident. Participants in tion of the states investor-owned utilities. Consumer-owned utilities the Palo Verde Nuclear Generating Station currently insure potential can participate on a voluntary basis but must hold public hearings as claims and liability through commercial insurance with a $300 million part of their decision making process. The Bill, which was supported limit; the remainder of the potential liability is covered by the industry-by the Authority, authorizes the collection of a transition charge for wide retrospective assessment program provided under the Act. This generation when a consumer-owned utility opens its service area to program limits assessments to $88 million for each licensee for each competition and participates in the independent transmission system nuclear incident occurring at any nuclear reactor in the United States; established by the legislation. The Bill also mandates the collection payments under the program are limited to $10 million, per incident, of a public benefit charge from all electric utility customers in the state. per year. Based on the Authoritys 5.91% interest in Palo Verde, the Although these funds (approximately 2.85% of gross revenues) must Authority would be responsible for a maximum assessment of $5.2 mil-be spent on renewable resources, conservation, research and develop- lion, limited to payments of $591,000 per incident, per year.
ment, or low income rate subsidies, the governing authority of each consumer-owned utility controls actual expenditures. Due to insta- Other Legal Matters - Claims and a lawsuit for damages have been bility in power open markets in California, in 2001 direct access ceased. filed with the Authority, Intermountain Power Authority (the IPA) and The Authority cannot predict the impact of any future direct access or the Department of Water and Power of the City of Los Angeles (the deregulation programs on energy markets or its participants. Department) seeking $100 million in special damages and a like amount in general damages. The claimants allege,among other things, Nuclear Spent Fuel and Waste Disposal - Under the Nuclear Waste that due to improper grounding of the transmission line of STS, their Policy Act, the Department of Energy (DOE) was to develop the dairy herds were damaged and the value of their land was diminished.
facilities necessary for the storage and disposal of spent fuel and to The claimants also seek injunctive relief. The Authority, IPA and the have the first such facility in operation by 1998. That facility was to be Department intend to vigorously defend the claims.
a permanent repository,but the DOE has announced that such a repos- The Authority is also involved in various other legal actions. In the itory now cannot be completed before 2010. There is ongoing litiga- opinion of management, the outcome of such litigation or claims will tion with respect to the DOEs ability to accept spent nuclear fuel; how- not have a material effect on the financial position or the results of ever, no permanent resolution has been reached. operations of the Authority or the respective separate Projects.
In July 2002, a measure was signed into law designating the Yucca Mountain in the state of Nevada as the nations high-level nuclear waste repository. This means the DOE can now file a construction and operation plan for Yucca Mountain with the Nuclear Regulatory Commission (NRC). The DOE expects that the Yucca Mountain site will be open by 2010, a date which is believed to be highly optimistic.
The State of Nevada and its congressional delegation are determined to halt the project through the NRC process or through legal chal-lenges.
Feud over funding of the repository, however, ensues. The Administration and Congressional leaders continue to push for full and adequate funding, in order for the DOE to meet the application dead-line of 2004. The Nevada delegation has been working diligently to try to delay the DOEs work on the license application for the Yucca site, in hopes of halting the transfer of nuclear waste to the Nevada facility.
The spent fuel storage in the wet pool at PVNGS exhausted its capacity in 2003. A Dry Cask Storage Facility (also called the Independent Spent Fuel Storage Facility) was built and completed in 2003 at a total cost of $33.9 million (about $2 million for the Authority).
In addition to the facility, the costs also account for heavy lift equip-ment inside the units and at the yard, railroad track, tractors, trans-porter, transport canister, and surveillance equipment. The facility has the capacity to store all the spent fuel generated by the plant until 2026, the end of its lifetime. To date, five casks, each containing 24 fuel assemblies, from Unit 2 were placed in the Storage Facility. Moving of the spent fuel from Unit 1 to the Storage Facility is in progress. The current plan calls for the removal of between 240 and 288 fuel assem-blies from the units to the Storage Facility every year. The costs incurred by the procurement, packing, preparation and transportation of the casks are included as part of the fuel expenses, and would cost approx-imately $12 million a year (about $700,000 for the Authority). If the per-manent repository in Yucca Mountain is opened as scheduled in 2010, the spent fuel from PVNGS will be shipped to the repository starting in 2031.
57
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SUPPLEMENTAL FINANCIAL INFORMATION INDEX Palo Verde Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Southern Transmission System Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Hoover Uprating Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Mead-Phoenix Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Mead-Adelanto Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Multiple Project Fund Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 San Juan Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 Magnolia Power Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30, 2003 58
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY PALO VERDE PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Decom-Debt Service missioning Deposit General Service Reserve Trust Deposit Reserve Escrow Reserve Issue Operating Reserve & Revenue Fund Fund Fund Installment Installment Account Account Account Account Contingency Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . $ 40,636 $ 34,629 $ 103,104 $ 6,161 $ 1,000 $ 571,690 $ - $ 46,144 $ 25,399 $ 57,973 $ - $ 886,736 Additions:
Investment earnings . . . . . . . . . . . . . . . 267 1,418 4,320 14 42 12,345 1 160 557 2,232 6 21,362 Discount on investment purchases . . . . . . . . 174 59 213 34 1 135,783 53 464 126 1,033 24 137,964 Distribution of investment earnings . . . . . . . (331) (1,455) - (48) (43) - (57) (614) (673) (2,437) 5,658 -
Revenue from power sales . . . . . . . . . . . . - - - - - - - - - - 191,357 191,357 Distribution of revenue . . . . . . . . . . . . . . 21,614 - 8,671 - - - 122,297 - 35,790 9,096 (196,801) 667 Transfer from escrow fund for principal and interest payments . . . . . . . . . . . . 30,447 - - - - (39,997) - 9,550 - - - -
Transfer from escrow restructuring . . . . . . . . - - - - - (17,291) 7,783 - 580 8,928 - -
Other . . . . . . . . . . . . . . . . . . . . . . (2,334) - - - - 50,450 (128,198) 60,574 (2,283) 22,495 - 704 Total . . . . . . . . . . . . . . . . . . . . 49,837 22 13,204 - - 141,290 1,879 70,134 34,097 41,347 244 352,054 Deductions:
Construction expenditures . . . . . . . . . . . . - - - - - - - - - 7,865 - 7,865 Operating expenditures . . . . . . . . . . . . . - - 3 - - - - - 29,314 - - 29,317 Debt issue cost . . . . . . . . . . . . . . . . . . - - - - - 3,509 - - - - - 3,509 Remarketing/Commitment Fees . . . . . . . . . - - - - - - - 432 - - - 432 Fuel costs . . . . . . . . . . . . . . . . . . . . - - - - - - - - 8,131 - - 8,131 Payment of principal . . . . . . . . . . . . . . . 24,150 - - - - - - 23,245 - - - 47,395 Interest paid - non-escrow . . . . . . . . . . . . 5,172 - - - - - - 29,588 - - - 34,760 Premium and interest paid on investment purchases . . . . . . . . . . . 3 - - - - - - 4 - 43 - 50 Payment of principal and interest paid - escrow . . . . . . . . . . . . . . . . . . 30,447 - - - - - - 9,550 - - - 39,997 Total . . . . . . . . . . . . . . . . . . . . 59,772 - 3 - - 3,509 - 62,819 37,445 7,908 - 171,456 Balance at June 30,2003 . . . . . . . . . . . . . . $ 30,701 $ 34,651 $ 116,305 $ 6,161 $ 1,000 $ 709,471 $ 1,879 $ 53,459 $ 22,051 $ 91,412 $ 244 $1,067,334 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on balance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $96 held in the revolving fund at June 30,2003 and 2002, respectively.
59
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SOUTHERN TRANSMISSION SYSTEM PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt General Service Escrow Reserve Issue Operating Revenue Fund Fund Fund Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,165 $ 189,875 $ 460 $ 76,809 $ 4,425 $ - $ 283,734 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3,040 4 4,104 43 7 7,257 Discount on investment purchases . . . . . . . . . . . . . . . . . . . . . . . . . 36 2,386 1 1,172 25 22 3,642 Distribution of investment earnings . . . . . . . . . . . . . . . . . . . . . . . . (94) (1) (5) (4,401) (69) 4,570 -
Revenue from transmission sales . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - 72,665 72,665 Distribution of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,501 - 1,565 62,591 9,575 (77,232) -
Transfer to escrow fund required by refunding bonds issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,545 (163,111) - 156,566 - - -
Bond proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 100,249 (2,023) (4,568) - - 93,658 Other transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,047 (57,437) (458) 215,464 9,574 32 177,222 Deductions:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - 13,475 - 13,475 Debt issue cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - 1,605 - - 1,605 Payment of principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,675 - - 9,020 - - 26,695 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - 42,149 - - 42,149 Premium and interest paid on investment purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,073 - - - 32 2,105 Payment of principal and interest -
escrow bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 48,685 - 165,263 - - 213,948 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,675 50,758 218,037 13,475 32 299,977 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,537 $ 81,680 $ 2 $ 74,236 $ 524 $ - $ 160,979 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on balance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $40 and $38 held in the revolving fund at June 30,2003 and 2002, respectively.
60
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY HOOVER UPRATING PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Debt Service General Advance Service Reserve Escrow Reserve Payment Operating Revenue Account Account Fund Fund Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . $ 1,240 $ - $ - $ 1,623 $ 3 $ 1,184 $ - $ 4,050 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . 7 - - 51 - 18 1 77 Discount on investment purchases . . . . . . . . . . . . . . . 8 - - 19 - 7 - 34 Distribution of investment earnings . . . . . . . . . . . . . . . (15) - - (70) - (25) 110 -
Revenue from power sales . . . . . . . . . . . . . . . . . . . . - - - - - - 2,289 2,289 Distribution of revenues . . . . . . . . . . . . . . . . . . . . . 1,923 - - 78 - 399 (2,400) -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,923 - - 78 - 399 - 2,400 Deductions:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . - - - - - 261 - 261 Payment of principal . . . . . . . . . . . . . . . . . . . . . . . 905 - - - - - - 905 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077 - - - - - - 1,077 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,982 - - - - 261 - 2,243 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . $ 1,181 $ - $ - $ 1,701 $ 3 $ 1,322 $ - $ 4,207 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $18 and $22 held in the revolving fund at June 30,2003 and 2002,respectively.
61
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MEAD-PHOENIX PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Debt Service Reserve &
Acquisition Service Reserve Operating Contingency Revenue Account Account Account Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 3,387 $ 5,915 $ 169 $ 1,806 $ - $ 11,277 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 129 431 1 127 1 689 Distribution of investment earnings . . . . . . . . . . . . . . . . . . . . . . . . - 431 (435) - (127) 131 -
Transmission revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - 4,179 4,179 Refunds from operating manager . . . . . . . . . . . . . . . . . . . . . . . . . - - - 27 - - 27 Refunds from Arizona Department of Taxation . . . . . . . . . . . . . . . . . . . - - - 168 - - 168 Transfer of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,287 - 840 12 (4,139) -
Payments from Western Area Power Administration . . . . . . . . . . . . . . . . - - - - - 100 100 Other transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 168 - 104 - (272) -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,015 (4) 1,140 12 - 5,163 Deductions:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 1,202 - - 1,202 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,889 - - - - 3,889 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,889 - 1,202 - - 5,091 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 3,513 $ 5,911 $ 107 $ 1,818 $ - $ 11,349 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $12 held in the revolving fund at both June 30,2003 and 2002.
62
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MEAD-ADELANTO PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Debt Service Reserve &
Acquisition Service Reserve Operating Contingency Revenue Surplus Account Account Account Fund Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . $ - $ 6,850 $ 16,267 $ 389 $ 6,826 $ - $ - $ 30,332 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . - 132 1,196 2 500 2 - 1,832 Discount on investment earnings . . . . . . . . . . . . . . . . - 25 - - - - - 25 Distribution of investment earnings . . . . . . . . . . . . . . . - 1,422 (1,196) - (500) 274 - -
Transmission revenue . . . . . . . . . . . . . . . . . . . . . . - - - - - 11,407 - 11,407 Distribution of revenues . . . . . . . . . . . . . . . . . . . . . - 10,787 - 896 - (11,683) - -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12,366 - 896 - - - 13,264 Deductions:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12,232 - - - - - 12,232 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . - - - 1,125 - - - 1,125 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12,232 - 1,125 - - - 13,357 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . $ - $ 6,984 $ 16,267 $ 162 $ 6,826 $ - $ - $ 30,239 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $12 held in the revolving fund at June 30,2003 and 2002,respectively.
63
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MULTIPLE PROJECT FUND SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Proceeds Service Earnings Account Account Account Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,188 $ 1 $ 1,395 $ 247,584 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,514 - 50 17,564 Transfer of investment earnings to earnings account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,452) - 21,452 -
Transfer to debt service account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21,710 (21,710) -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,938) 21,710 (208) 17,564 Deductions:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15,111 - 15,111 Payment of principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6,600 - 6,600 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21,711 - 21,711 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 242,250 $ - $ 1,187 $ 243,437 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable.
64
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SAN JUAN PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Debt Service Cost of Reserve & General Service Reserve Escrow Issuance Operating Contingency Reserve Revenue Account Account Account Fund Fund Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . $ 4,148 $ 13,524 $ 124,828 $ 51 $ 3,256 $ 9,342 $ 622 $ - $ 155,771 Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . 4 1,116 1,845 1 5 98 5 8 3,082 Discount on investments . . . . . . . . . . . . . . . . . . 65 - 33 - 36 85 2 16 237 Distribution of investment earnings . . . . . . . . . . . . (69) (1,116) - (1) (41) (230) (7) 1,464 -
Revenue from power sales . . . . . . . . . . . . . . . . . - - - - - - - 61,123 61,123 Distribution of revenues . . . . . . . . . . . . . . . . . . 11,205 - - 10 51,762 (366) - (62,611) -
Bond proceeds . . . . . . . . . . . . . . . . . . . . . . . - 8,075 71,459 1,216 - - - - 80,750 Transfer from escrow for principal and interest payments . . . . . . . . . . . . . . . . . . 199,050 - (199,050) - - - - - -
Transfer to escrow funds required by refunding bond issuance . . . . . . . . . . . . . . . . (885) - 885 - - - - - -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - (59) - - 59 - -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,370 8,075 (124,828) 1,167 51,762 (413) 59 - 145,192 Deductions:
Operating expenses . . . . . . . . . . . . . . . . . . . . . - - - - 53,811 - - - 53,811 Construction expenditures . . . . . . . . . . . . . . . . . - - - - - 290 - - 290 Debt issue cost . . . . . . . . . . . . . . . . . . . . . . . - - - 1,218 - - - - 1,218 Payment of principal . . . . . . . . . . . . . . . . . . . . 1,600 - - - - - - - 1,600 Interest paid - non-escrow . . . . . . . . . . . . . . . . . 7,485 - - - - - - - 7,485 Payment of principal and interest - escrow . . . . . . . . . . . . . . . . . . . . . 199,050 - - - - - - - 199,050 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208,135 - - 1,218 53,811 290 - - 263,454 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . $ 5,383 $ 21,599 $ - $ - $ 1,207 $ 8,639 $ 681 $ - $ 37,509 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on bal-ance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable, unrealized gain (loss) on investment, and $22 and $20 held in the revolving fund at June 30, 2003 and 2002, respectively.
65
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MAGNOLIA POWER PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)
Debt Debt Service Operating Reserve &
Service Reserve Project Reserve Contingency Account Account Fund Fund Fund Total Balance at June 30,2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ - $ - $ -
Additions:
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 - 62 - - 199 Bond proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,918 19,620 255,044 5,000 10,000 322,582 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 727 - - 727 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,055 19,620 255,833 5,000 10,000 323,508 Deductions:
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 84,584 - - 84,584 Debt issue cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 6,270 - - 6,270 Premium and interest paid on investment purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 72 - 6 36 114 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 72 90,854 6 36 90,968 Balance at June 30,2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,055 $ 19,548 $ 164,979 $ 4,994 $ 9,964 $ 232,540 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable and unrealized gain (loss) on investment at June 30,2003.
66
City of Anaheim City of Azusa City of Banning Customers - Retail. . . . . . . . . . . . . . . . . . . . . . 109,981 Customers Served . . . . . . . . . . . . . . . . . . 15,170 Customers Served . . . . . . . . . . . . . . . . . . 10,969 Power Generated and Purchased Power Generated and Purchased Power Generated and Purchased (in Megawatt-Hours) (in Megawatt-Hours) (in Megawatt-Hours)
Self-Generated . . . . . . . . . . . . . . . . . . . . 1,079,753 Self-Generated. . . . . . . . . . . . . . . . . . . . . . . 0 Self-Generated. . . . . . . . . . . . . . . . . . . . . . . 0 Purchased . . . . . . . . . . . . . . . . . . . . . . . . 2,441,837 Purchased . . . . . . . . . . . . . . . . . . . . . 258,320 Purchased . . . . . . . . . . . . . . . . . . . . . 147,641 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,521,590 Sales Total . . . . . . . . . . . . . . . . . . . . . . . . . . 147,641 Total Revenues (000s) . . . . . . . . . . . . . . . . . . $280,550* Retail. . . . . . . . . . . . . . . . . . . . . . . . . . 255,021 Total Revenues (000s). . . . . . . . . . . . . . . $17,159*
Operating Costs (000s) . . . . . . . . . . . . . . . . . $264,258* Total Revenues (000s). . . . . . . . . . . . . . . $20,630* Operating Costs (000s) . . . . . . . . . . . . . . $16,105*
- Unaudited Operating Costs (000s) . . . . . . . . . . . . . . $24,173* *Unaudited
- Unaudited City of Burbank City of Cerritos City of Colton Customers Served . . . . . . . . . . . . . . . . . . 51,438 Customers Served . . . . . . . . .To be determined Customers Served . . . . . . . . . . . . . . . . . .17,769 Power Generated and Purchased Power Generated and Purchased Power Generated and Purchased (in Megawatt-Hours) (in Megawatt-Hours) (in Megawatt-Hours)
Self-Generated . . . . . . . . . . . . . . . . . . 77,000 Self-Generated . . . . . . . . . . . . . . . . . . . . . . .0 Self-Generated . . . . . . . . . . . . . . . . . . . . . . .0 Purchased . . . . . . . . . . . . . . . . . . . . 1,090,987 Purchased . . . . . . . . . . . . .To be determined Purchased . . . . . . . . . . . . . . . . . . . . .338,466 Total . . . . . . . . . . . . . . . . . . . . . . . . . 1,167,987 Total Revenues (000s) . . . . . . . . . . . . . . . . . . .$0 Total . . . . . . . . . . . . . . . . . . . . . . . . . .338,466 Total Revenues (000s) . . . . . . . . . . . . . . $215,435* Operating Costs (000s) . . . . . . . . . . . . . . . . . .$0 Total Revenues (000s). . . . . . . . . . . . . . . $36,142*
Operating Costs (000s) . . . . . . . . . . . . . $192,076* Operating Costs (000s) . . . . . . . . . . . . . . $34,186*
- Unaudited *Unaudited City of Glendale Imperial Irrigation District Los Angeles Department Customers Served . . . . . . . . . . . . . . . . . . 83,147 Customers Served. . . . . . . . . . . . . . . . . . 104,678 of Water and Power Power Generated and Purchased Power Generated and Purchased Customers Served . . . . . . . . . . . . . . . . 1,420,814 (in Megawatt-Hours) (in Megawatt-Hours)
Power Generated and Purchased Self-Generated . . . . . . . . . . . . . . . . . 166,950 Self-Generated . . . . . . . . . . . . . . . . 1,044,015 (in Megawatt-Hours)
Purchased . . . . . . . . . . . . . . . . . . . . 1,322,548 Purchased . . . . . . . . . . . . . . . . . . . . 1,985,331 Self-Generated . . . . . . . . . . . . . . . 12,935,821 Total . . . . . . . . . . . . . . . . . . . . . . . . . 1,489,498 Total . . . . . . . . . . . . . . . . . . . . . . . . . 3,029,346 Purchased . . . . . . . . . . . . . . . . . . . 14,751,367 Total Revenues (000s) . . . . . . . . . . . . . . $195,648* Total Revenues (000s) . . . . . . . . . . . . . . $281,906 Total . . . . . . . . . . . . . . . . . . . . . . . . 27,687,188 Operating Costs (000s) . . . . . . . . . . . . . $135,945* Operating Costs (000s) . . . . . . . . . . . . . $232,265 Total Revenues (000s) . . . . . . . . . . . . $2,140,752*
- Unaudited Operating Costs (000s). . . . . . . . . . . . $1,974,501*
- Unaudited City of Pasadena City of Riverside City of Vernon Customers Served . . . . . . . . . . . . . . . . . . 59,075 Customers Served . . . . . . . . . . . . . . . . . . 98,459 Customers Served . . . . . . . . . . . . . . . . . . .2,059 Power Generated and Purchased Power Generated and Purchased Power Generated and Purchased (in Megawatt-Hours) (in Megawatt-Hours) (in Megawatt-Hours)
Self-Generated . . . . . . . . . . . . . . . . . 161,979 Self-Generated . . . . . . . . . . . . . . . . . 331,600 Self-Generated . . . . . . . . . . . . . . . . . . . .350 Purchased . . . . . . . . . . . . . . . . . . . . 1,157,817 Purchased . . . . . . . . . . . . . . . . . . . . 2,014,600 Purchased . . . . . . . . . . . . . . . . . . .1,315,686 Total . . . . . . . . . . . . . . . . . . . . . . . . . 1,319,796 Total . . . . . . . . . . . . . . . . . . . . . . . . . 2,346,200 Total . . . . . . . . . . . . . . . . . . . . . . . . .1,316,036 Total Revenues (000s) . . . . . . . . . . . . . . $142,721 Total Revenues (000s) . . . . . . . . . . . . . . $203,101* Total Revenues (000s) . . . . . . . . . . . . .$101,393 Operating Costs (000s) . . . . . . . . . . . . . $127,131 Operating Costs (000s) . . . . . . . . . . . . . $189,100* Operating Costs (000s) . . . . . . . . . . . . . .$87,530
- Unaudited
Southern California Public Power Authority 225 S. Lake Avenue, Suite 1250, Pasadena, CA 91101 Tel: (626) 793-9364 Fax: (626) 793-9461 Website: www.scppa.org