ML053290324
| ML053290324 | |
| Person / Time | |
|---|---|
| Site: | Washington Public Power Supply System |
| Issue date: | 11/11/2005 |
| From: | Coleman D Energy Northwest |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| GO1-05-0035 | |
| Download: ML053290324 (46) | |
Text
ENERGY NORTHWEST People *Visions Solutions P.O. Box 968
- Richland, WA
- 99352-096S November 11, 2005 10 CFR 50.71(b)
GO 0035 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555-0001
Subject:
NUCLEAR PROJECT NO. I (WNP-1), DOCKET NO. 50-460 CONSTRUCTION PERMIT CPPR-134 2005 ANNUAL FINANCIAL REPORT
Dear Sir or Madam:
In accordance with 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest annual financial report for the subject facility.
There are no commitments being made to the NRC by this letter. Should you have any questions, please call GV Cullen at (509) 377-6105.
Respectfully, DW Coleman Manager, Regulatory Programs Mail Drop PE20
Enclosure:
As stated cc:
BS Mallett - NRC RIV RN Sherman - BPA/1 399 w/o WA Horin - Winston & Strawn w/o
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Management Report on Responsibility for Financial Reporting The management of Energy Northwest is responsible for preparing the accompanying financial statements and for their integrity. The statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis, and include amounts that are based on management's best estimates and judgments.
The financial statements have been audited by PricewaterhouseCoopers LLP, Energy Northwest's independent accountants. Management has made available to PricewaterhouseCoopers LLP all financial records and related data, and believes that all representations made to PricewaterhouseCoopers LLP during its audit were valid and appropriate.
Management has established and maintains internal control procedures that provide reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures.
Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto.
In addition, PricewaterhouseCoopers LLP has considered the internal control structure in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered recommendations made by the internal auditor and PricewaterhouseCoopers LLP concerning the control procedures and has taken appropriate action to respond to the recommendations. Management believes that, as of June 30, 2005, internal control procedures are adequate.
J.V. Parrish A.E. Mouncer Chief Executive Officer Vice President, Corporate Services/General Counsel/CFO Audit, Legal and Finance Committee Chairman's Letter The Executive Board's Audit, Legal and Finance Committee is composed of six independent directors. Members of the Committee are Larry Kenney, Chairman; Vera Claussen; Sid Morrison; Jack Janda, David Remington, Amy Solomon; Roger Sparks; and Ted Coates, Ex Officio. The Committee held 10 meetings during the fiscal year ended June 30, 2005.
The Committee oversees Energy Northwest's financial reporting process on behalf of the Executive Board. In fulfilling its responsibilities, the Committee discussed with the internal auditor and the independent accountants, the overall scope and specific plans for their respective audits, and reviewed Energy Northwest's financial statements and the adequacy of Energy Northwest's internal controls.
The Committee met regularly with Energy Northwest's internal auditor and independent accountants to discuss the results of their examinations, their evaluations of Energy Northwest's internal controls, and the overall quality of Energy Northwest's financial reporting. The meetings were designed to facilitate any private communications with the Committee desired by the internal auditor or independent accountants.
Larry Kenney
- Chairman, Audit Legal and Finance Committee 2
www.enerpy-northwest.com Annual Report www.ener-av-northwest.com Annual Report
Report of Independent Auditors To the Executive Board of Energy Northwest We have audited the accompanying balance sheet of Energy'Nortfiwesttand th9 related individual balance sheets of Energy Northwest's business units and internal service'fund as of June 30, 2005, and the related statement of operations and fund equity and of cashoflowsfor the year then ended. Energy NRrthwast's businefs'urifts include the Columbia Generating Station, PackwooU',Lako.Hydr6electric Project, NuclearOrfr6jectitio. 1t Nuclearr'Project No. 3, the Business Development Fund, Grays Har.,or, Energy Facility and the Nine Caoyon WMd Pr(ject. These basic financial statements are the responsibility of Energy Northwest's mhahig6ment. 'Our responsibility is1to express an opinion on these basic financial statements based on our, audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the basic financial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Energy Northwest and Energy Northwest's businessunits and internal service fund as of June 30, 2005, and the results of their operations and cash flows for the yeart then ended in conformity, with accounting principles generally accepted in the United States of America.
The Management's Discussion and Analysis listed in the table of contents 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 consist6d. principally of Inquiries of management regarding the methods of measurement and presentation of the required supplemi4entae'y information. However, we did not audit the information and express no opinion on it.
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3 www.enerav-northwest.com Annual Report
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Management's Discussion and Analysis Energy Northwest is a municipal corporation and joint operating agency of the State of Washington. Each Energy Northwest Business Unit is financed and accounted for separately from all other current or future business assets. The following discussion and analysis is organized by Business Unit.
The management discussion and analysis of the financial performance and activity is provided as an introduction and to aid in comparing the basic financial statements for, the Fiscal Year ended June 30, 2005 with the basic financial statements for the Fiscal Year ended June 30, 2004. Energy Northwest has adopted accounting policies and principles that are in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. Energy Northwest applies GAAP to the extent it does not conflict with Governmental Accounting Standards Board (GASB) standards (see Note B to the Financial Statements).
The financial statements include the Balance Sheets; Statements of Operations and Fund Equity; Statements of Cash Flows; Supplementary Schedules of Outstanding Long-Term Debt and Debt Service Requirements; and Notes to Financial Statements for each of the Business Units. The Balance Sheets present the financial position of each Business Unit based on an accrual basis.
The Balance Sheets report information about construction work in progress, amount of resources and obligations, restricted accounts and due to/due from balances (see Note B to'the financial statements) that reflect what is owed by each Business Unit The Statements of Operations and Fund Equity reports information relating to all expenses, revenues and equity that reflect the results of each Business Unit and its related activities over the course of the Fiscal Year. The information provided aids in benchmarking activities, conducting comparisons to evaluate
- progress, and determining whether the Business Unit has successfully recovered its costs.-
The Statements of Cash Flows reflects cash receipts and disbursements and net changes resulting from operating, financiing and investment' activities. The statements pride insight into wAkhat generates cash, where the cash comes from, and what it was used for.
The Notes to Financial Statements present disclosures that contribute to the understanding of the material presented in the financial statements. This includes but is not limited to, accounting policies, significant balances and activities, materials risks, commitments and obligations and subsequent events, if applicable.
Columbia Generating Station The Columbia Generating Station Nuclear Power Plant (Columbia) is owned by Energy Northwest and its Participants and operated by Energy Northwest.
The Plant is a 5f33 megawatt (MWe) boiling water nuclear power sta n located on tWe ;Dep.-Imcent of'Energy's Hanford Rbservation north of Richland, Washington.
Columbia Generatirng Station (CGS) Completed more than a year of 6intinuous generation, seftng a station record for operating a total of 393 days extending partially into Fiscal Year (FY) 2005 (July 3, 2003 to July 30, 2004).
Columbia produced 7,599 GWh of electricity in FY 2005, as compared to 9,520 GWh of electricity in FY Year 2004, which included economic dispatch of 0 GWh and 16 GWh respectively. Columbia successfully completed its second two-year refueling and maintenance outage (R-1 7) in June of 2005. CGS completed R-17 within the 35 day budget with costs totaling $52.9' million.
However there were three forced outages in FY 2005, in addition to the R-17 planned outage, that resulted in the decreased generation levels in FY 2005 from FY 2004 levels.
5 www.enerav-northwest.com Annual Report
Columbia Generating Station Net Generation GWhrs FY2005 FY2004 FY2003 FY 2002 FY2001 0
2,000 4,000 6,000 8,000 10,000 Energy Northwest's performance is measured in several ways, including cost of power at Columbia Generating Station. The industry cost of power fluctuates somewhat year to year depending on various factors such as refueling outages and other planned activities.
Columbio Generating Station Cost of Power Cents/kWh 350 3.0 0 -igl11_li 2.5 0 -lll1_l_
2.00 1.50 1.00 0.50 0.00I on this project in FY 2005 with a two year project cost of
$15.9 million. Other major components of the change in plant and CWIP were upgrades to the StationSecurity System Computer, which runs all of the security systems inside the protected area of CGS ($5.4 million); Jet Pump Clamps, which modified seals to reduce fatigue and extend continued operation out 20 years past R-17
($2.0 million).
Nuclear fuel, net of, accumulated amortization, increased $24.1 million from? FY 2004 to $126.1 million for FY 2005. During FY 2005, CGS purchased $51.0 million of nuclear fuel, which was offset by current year amortization of $26.9 million. The fuel purchases were associated with the R-18 and R-19 maintenance and refueling planned outages in FY 2007 and FY 2009.
The Restricted Assets Special Funds increased
$65.7 million from FY 2004 levels to $117.2 million in.
FY 2005. This was due to additional financing for future fuel purchases associated with the two year refueling and maintenance outages and capital improvements. It.
is expected this increase will supply necessary funding for the next two refueling outages (R-18 and R-19 in.
FY 2007 and FY 2009). The increase in restricted assets was partially offset by the $19.4 million in Construction fund spending.
The Debt Service Funds increased $11.2 million in FY 2005 to $32.9 million. The increase was: due to interest payable being larger in FY 2005 than in FY 2004.
Long-term receivables and current assets remained relatively stable from FY 2004 to FY 2005.
The long term receivable account increased slightly due to an FY 2004 adjustment to a $3.3 million reclassification made for a 1992 Settlement Agreement with a.third party. The estimate made in FY 2005 was in anticipation of the R-17 related discounts that would be forthcoming in the next year; however the amounts received in FY 2005 were lower than originally estimated.
6 J-o(
Annual Report FY 2005 FV 2004 FY 2003 FY 2002 FY 2001 Balance Sheet Analysis Increase to total Plant in Service and Construction Work In Progress (CWIP) from FY 2004 to FY 2005 was $24.4 million.
The total increase was mostly a result of $15.9 million spent on the Nuclear Regulatory Commission (NRC) Mandated Security Project.
The NRC, after the September 11, 2001 terrorist attacks, mandated heightened security improvements to all nuclear facilities.
These improvements were substantially completed in 2005. Energy Northwest spent $10.3 million www.energv-northwest.com
U_
Costs in Excess of Billings have increased
$69.3 million in FY 2005 from
$494.3 million to
$563.2 million, largely due to refunding current maturities while extending the overall maturities on the refunding debt. In addition, the accumulated decommissioning and site restoration accrued costs are not currently billed to Bonneville Power Administration (BPA). BPA holds and manages a trust fund for the purpose of funding decommissioning and site restoration (see Note e to the financial statements, Decommissioning and Site Restoration).
The balances in these external trust funds are not reflected on Energy Northwest's Balance Sheet.
Long-Term Debt increased $217.6 million in FY 2005 from $2.05 billion to $2.27 billion, which was a result of the FY 2005 Bond Issue. As explained above, in FY 2005, new debt was issued for various GGS; construction projects, fuel purchases, as well as being issued as part of the Debt Optimization Plan Debt (see Note E to the financial statements).
Statement of Operations Analysis Columbia Generating Station is a net-billed Project.
Energy Northwest recognizes revenues equal to expense for each period on net-billed projects. No net revenues or loss is recognized and no equity is accumulated.
As a whole, the operating revenues and expenses remained relatively the same from FY 2004 to FY 2005, with overall Operating Revenues needed to cover expenditures decreasing slightly from last year.
Four individual components of operating expenses related to the successful completion of R-17 and the three unplanned outages were:
Nuclear Fuel-Decreased from $35.3 million in FY 2004 to $28.6 million in FY 2005; Fuel Disposal Fee-Decreased from $9.0 million in FY 2004 to $7.2 million in FY 2005; Generation tax-Decreased from $3.2 million in FY 2004 to $2.3 million in FY 2005; Operations and Maintenance-Increased from
$129.6 million in FY 2004 to $178.7 million (see R-1 7 costs discussed above) in FY 2005; The first three points were a result of lower generation while the fourth point was a result of increased wages due to R-17.
Other major changes in CGS operations were:
Administrative
& General-Decreased from
$21.6 million to $18.6 million reflecting the continuing concerted effort to reduce overall costs for CGS; Decommissioning-Decreased from $43.0 million to $5.4 million because FY 2004 included an increase to the value of the Asset Retirement Obligation (ARO),
which was offset by an increase fib Cost int Excess of Billings in compliance with the Net Billing Agreement.
The amount is a combination of probable cases for accomplishing the required retirement obligations-and their associated probabilities.
The liability will also be increased each year to account for the accretion value of the obligation. This yearly accretion value is the amount represented by the FY 2005 value of $4.8 million. (See Note G to the financial statements for further explanation).
7 Columbia Generating Station Total Operating Costs (000's)
$450,000
$300,000
$300,000 0 iother il_
$250,000 le_ IExenses
$200,000
. Operating
$150,000 panses
$100, 000
$50,000 FY2005 FY2O04 FY 2003 FY 2002 FY 2001 www.enernv-northwest.com Annual Report www.energY-northwest.com Annual Report
Other Income and Expense changes are the net effects on Columbia Debt (see Note E to the financial statements).
Investment Income was affected by favorable rates in FY 2005 resulting in an increase of
$2.3 million from FY 2004 income to $4.2 million in FY 2005.
Additionally, interest expense increased slightly in FY2005 from $114.2 million to $116.3 million due to $461.7 million of new debt issued in FY 2004 at a 3.75% to 5.5% interest rate.
Amortization of Bond Discount Expense and Amortization of Bond Refunding netted a decrease in expense of $1.9 as a result of the Bond Refunding issues.
Packwood Lake Hydroelectric Project The Packwood Lake Hydroelectric Project is owned and operated by Energy Northwest. The Project consists of a dam at Packwood Lake and powerhouse 1800 feet below the dam that is located south of Packwood, Washington. Packwood produced 88.31 GWh of electricity in FY 2005 versus 90.03 GWh in FY 2004.
Packwood Lake Hydroelectric Project MWhrs FY 2005 FY 2002 FY 2001 _l 0
20,000 40,000 600000 00.000 100,000 Balance Sheet Analysis Current Assets have decreased $.3 million from
$2.3 million in FY 2004 to $2.0 million in FY 2005.
Majority of the decrease was due to timing of power sales.
There were no significant changes to current liabilities other than a decrease in due to other business units of $649K from $682K in FY 2004 to $33K in FY 2005.
No new debt was issued and the total debt continues to decrease per the current debt schedules.
As a result of operations, Packwood accrued $338K in excess funding that has been agreed to by participants in October of 2005, to be returned to the Packwood business unit for FY 2006 operating reserves.
Packwood incurred $.6 million in re-licensing costs for FY 2005.
These costs are shown as other deferred charges on the Balance Sheet. The FY 2006 projections are for an additional $.6 million in costs to continue the re-licensing efforts. The Federal Regulatory Commission (FERC) issued a 50-year operating license to Packwood on March 1, 1960. The current license will expire on February 28, 2010.
Statement of Operations Analysis The agreement with Project Participants obligates them to pay annual costs and they receive excess revenues.
Accordingly, Energy Northwest recognizes revenues equal to expenses for each period.
No net revenue or loss is recognized and hn equity is' accumulated. Revenues decreased because of the cost decreases detailed below:
Total Operating Expenses decreased $.7 million, frorn $1.8 million in FY 2004 to $1.1 million in FY 2005. Major drivers for this change were:
'e Decrease to Depreciation and Amortization of $.3 million as -the majority of the plant assets continue to become completely depreciated Operations and Maintenance, along with Administrative and General expenditures, decreased $.4 million from $1X4 million in FY 2001 to $rn.6 milion,h FY 2005.
This Was dUeto the deoreas~d operations and maintenancoicosts' due to insurance savings and completion of annual outage under budget.
8 ww~nea-orheso Anua Reor www.enerav-northwest.com Annual Report 0 -c3
M Packwood Lake Hydroelectric Project Total Operating Costs (000's)
$2 750
$, 7510Z lZ
$1,500 I
=!/_xenses
$1,250 noeEesS
$1,000 Operatng
$750 Expenses
$500
$250 Nuclear Project No. 3 Nuclear Project No. 3, a 1,240 MWe plant, was placed in extended construction delay status in 1983, when it was 75 percent complete.
On May 13, 1994, Energy Northwest's Board of Directors adopted a resolution terminating Nuclear Project No. 3.
Energy Northwest is no longer responsible for any site restoration costs as they were transferred with the assets to the Satsop Redevelopment Project (see Note F).
The debt service related activities remain and are net-billed.
Nuclear Project No. 1 Nuclear Project No. 1, a 1,250 MWe plant, was placed in extended construction delay status in 1982, when it was 65 percent complete.
On May 13, 1994, Energy Northwest's Board of Directors adopted a resolution terminating Nuclear Project No. 1.
In FY 1999, the assets and liabilities of the Hanford Generating Project were consolidated into Nuclear Project No. 1.
The Hanford Generating Project site restoration activities were completed on May 19, 2004.
All funding requirements are net-billed obligations of Nuclear Project No. 1. Energy Northwest wholly owns Nuclear Project No. 1. Termination expenses and debt service costs comprise the activity on Nuclear Project No. 1.
Balance Sheet Analysis Under the debt optimization program, long-term debt increased $4.6 million from $1.961 billion in FY 2004 to $1.966 billion in FY 2005, due to debt restructuring to take advantage of lower interest rates.
Statement of Operations Analysis Investment Income increased $1.2 million from
$1.3 million in FY 2004 to $2.5 million in FY 2005, as rates of return began to increase from historical lows.
Balance Sheet Analysis Under the debt optimization program, long-term debt was increased $24.7 million from $1.790 billion in FY 2004 to $1.814 million in FY 2005 due to debt restructuring to take advantage of lower interest rates.
Statement of Operations Analysis Investment Income increased $1.0 million, from
$0.9 million in FY 2004 to $1.9 million in FY 2005, as rates of return began to increase from historical lows.
Business Development Fund The Business Development Fund (BDF) was created by Executive Board Resolution No. 1006 in April 1997, for the purpose of holding, administering, disbursing, and accounting for Energy Northwest costs and revenues generated from engaging in new energy business opportunities.
The BDF is managed as an enterprise fund.
Three business sectors have been created within the fund:
General Services, Generation, and Professional Services.
Each sector may have one or more programs that are managed as a unique business activity. A fourth business sector, Business Unit Support, has been created to capture costs associated with developing programs.
9 www.energy-northwest.com Annual Report
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Statement of Operations Analysis Operating Revenues in FY 2005 totaled
$8.1 million as compared to FY 2004 revenues of
$14.7 million, a decrease of $6.6 million. The Department of Energy (DOE) and Energy Northwest had an agreement for the completion of restoration and cleanup of the Hanford Generating Project.
Under the agreement DOE would be billed for 50% of the restoration and cleanup efforts.
The project was completed in FY 2004 with Energy Northwest recognizing revenue of $3.8M.
The reduction in intra-company business was the other driver to decreased revenues.
Total operating revenues decreased 45% in FY 2005; however net revenues for the FY 2005 showed a
$697K loss as compared to a $987K loss in FY 2004.
Other Income and Expenses includes $2.4 million' of Energy Business 'Services overhead that were credited to this account. The offset debit to this entry resides as'an operating expense. Other income and expenses, less these overheads, was'approximately $0.6 millon.
Energy Northwest was created to enable Washington public power utilities and municipalitie's!to build and operate generation projects. Three of Energy Northwest's Research and Investigation business projects, BioEnergy Solutions,; Wind Mining 'and 'Integrated Gasification Combined Cycle (IGCC), accounted for
$1.1 million in expenditures with no revenues.
Energy BioEnergy Solutions is a business line of Energy Northwest that in FY 2005 worked on a full-scale biomass power test unit at a dairy farm near Pasco, Washington which was unable to meet expectations for biogas production. The business line is in the process of evaluating options for moving forward.
In FY 2005, approximately $0.4 million was expended on developing this project.
Wind Mining efforts continued in FY 2005 with approximately $0.3 million being expended. These efforts are to explore, site and demonstrate wind resources for potential new wind sites.
Initial investigation into developing an Integrated Gasification Combined Cy0r% (IGCC) iproject was kicked off in FY 2005, with apkro~iatel'yl0.4ntXillion expended.
In July 2005, Energyf Nrthwerst't "rd Wf.Directors passed a resolution, to pbmuepirmis(ng d possible construction of an Integrated Gasificaftoh Combined Cycle (IGCC) power plant in western Washington. The proposal calls for a 600 MW power plant, designed to operate on a
'synthesis gas' with regulated ermissions'similarto'. a natural gas plant. The clean-burning synthesis gas can be produced by gasifying rather than 'burning a variety of carbon-based feed stocks including petroleum'coke and coal. Initial operation of the completed plant could be as early as 2011.
'The Business Development Fund receives cofifrlbutions from the Intemal Service Fund to cover cash needs during this startup period. Initial startup costs are not 'expected to be paid back 'and are shown as contributions. As an operating business unit, requests can be made to fund incurred operating expenses. 46' FY 2005, the Business Development Fund received' cohtributions (transfers) of $1.7 million.
Grays Harbor Energy Facility The Grays Harbor ErA&lo Faciiitj iroject wis' established in July 1990 to collecit advances and contributions to pay the costs of investigating 'new generating projects,," including the feasibility of ai combustion turbine near Satsop, Washington. The project purpose was amended during FY 2002 to include the operation and naintenarnce,-of.a gas-fire&t coombustion'.
turbine placed on the Grays Harbor site (owned, byl Duke Energy Grays Harbor LLC) and included,the option to purchase up to 50MW of power generated by the facility.
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In September 2002, due to market conditions, Duke Energy North America (DENA) placed the project in "Construction Suspension."
In February 2004, DENA announced it has no intention to complete the facility with their own funds.
Per the agreement with DENA, if construction was not restarted by August 31, 2004, such that the project reaches substantial completion eleven months later, or if the project fails to achieve commercial operation by December 31, 2005, Energy Northwest may request payment of approximately
$5 million and dissolution of the (&M contract.
Energy Northwest received this payment in March of 2005. Remaining cash and investments were transferred to the Internal Service Fund - Performance Fee Account in June of 2005. All obligations of this fund have been completed and the fund was dissolved by the Executive Board in July 2005.
transmission grid via a substation and transmission lines constructed by the Benton County Public Utility District.
Phase I of the project, which began commercial operation in September 2002, consists of 37 wind turbines, each with a
maximum generating capacity of approximately 1.3 megawatts of electricity, for a total wind capacity of 48.1 megawatts. Phase II of the project, which was declared operational December 31, 2003, includes an additional 12 wind turbines with an aggregate generating capacity of approximately 15.6 megawatts. The total project generating capability is approximately 63.7 megawatts, which produces enough energy capacity for approximately 26,000 average homes.
Nine Canyon Wind Project produced 154.52 GWh of electricity in FY 2005 versus 138.44 GWh in FY 2004.
Statement of Operations Analysis Non-Operating revenues were $0.4 million and
$4.9 million for FY 2004 and FY 2005 respectively, with the increase due to the dissolution of O&M contract discussed above.
Nine Canyon Wind Project The Nine Canyon Wind Energy Project is owned and operated by Energy Northwest. The Project is located in the Horse Heaven Hills area southwest of Kennewick, Washington.
Electricity generated by the Project is purchased by Pacific Northwest Public Utility Districts whose customers have expressed an interest in purchasing at least a portion of their electricity from green power sources. Each purchaser of Phase I has signed a 22-year power purchase agreement with Energy Northwest and each purchaser of Phase II has signed a 20-year power purchase agreement.
The project is connected to the Bonneville Power Administration Nine Canyon Wind Project MWhrs FY 2005llll.ll.
FY 2004 FY 200_3 l 0
25,000 50,000 75,000 100.000 125,000 150,000 175,000 The turbines are installed in rows with about 500 feet between turbines.
Each three-blade turbine consists of a tubular steel tower approximately 200 feet in height, three 100-foot turbine blades attached to a rotor, and a nacelle that houses a generator, gear box and braking mechanism.
Balance Sheet Analysis Receivables increased by $0.7 million corresponding to the increased size of the Renewable Energy Performance Incentive (REPI) payment accrued. The Fund Equity decreased by $2.7 million because the 11 www.energv-northwest.com Annual Report C.""t -
original plan anticipated operating at a loss in the early years and gradually increasing the rate charged to the purchasers to avoid a large rate increase after the REPI expires in ten years. Reserves that were established are used to facilitate this plan. Long-term debt decreased by
$3.6 million due to the effects of the refinancing of the Phase I debt in January 2005.
Statement of Operations Analysis Operating Revenues increased' $0.9M from $5.3M in FY 2004 to $6.2M in FY 2005. This was due to a full year of operation of Phase II of the project in FY 2005 as'l well as a planned billing increase to project participants of 3%. The project received revenue from the billing of the project purchasers at an average rate of $35.09 per MWh for FY 2005.
Energy Northwest has accrued as income (contribution) from, the DOE, REPI payments that enable the Nine Canyon Wind Project to receive funds based on generation as it applies to the REPI bill. The REPI was created as part of the Energy Policy Act of 1992 to promote increases:itrLthe-generation, ancd utilization of electricity from renewable energy sources and to further the advances of renewablel; energy technidlogies. This program, authorized under section 1212 of the Energy Policy Act of 1992, provides financial incentive payments for electricity produced and sold by new qualifying renewable energy generation facilities. The Nine Canyon Wind Project recorded a receivable for sixty-eight percent of the applied REPI funding in the amount of $2.3 million for FY 2005. The payment stream and the REPI receipts were projected to cover the total costs over the life of the purchase agreement.
Permanent shortfalls in REPI funding will lead to increases in the billing of the Project participants in order to cover total Project costs.
The agreement with project purchasers anticipates a loss in FY 2006 with additional cash needs being paid from existing project reserve funds.
The reserve funds were established so that the participant payments would increase at a rate of three percent per year over the life of each power purchaser agreement.
Operating Costs are expended for debt service and for operational and maintenance items.
Nine Canyon Wind Project Total Operating Costs (000's)
S1.,000
$9,000
$6,000 Ilth.,
S~~~~~ts~~~Ioome'llllil-lllf1Expenses l
$4,000-Epne
$3,000
$2,000 FY 2005 Y 200 11 _20ll_
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'3 Internal Service Fund, The Internal Service Fund (ISF) (formerly the General Fund) was established in May 1957. The Internal Service Fund provides services, to the other funds.
This fund accounts for the central procurement of certain common goods and services for the business units on a cost reimbursement basis (see Note A and Note B to financial statements).
Balance Sheet Analysis The FY 2005 Balance Sheet increased $1.3 million from FYY2004. The net increase in Assets is primarily from a $0.5 million increase in Net Plant in Service and a
$1.0 million increase in Current Assets. The net increase in Fund Equity and Liabilities is from a $4.9 million increase in Fund Equity offset by a $3.6 million decrease in Liabilities.
The increase in the Net Plant in Service is primarily due to the purchase of new Computer Equipment.
The net change in Current Assets was a result of Interfund Transfers due to other Funds that are eliminated in the Combining of the Financial Statements and changes in cash and investment mix. The increase in 12 www.eneraiv-northwest.com Annual Report O42-~
2
Fund Equity of $4.9 million is primarily due to dissolution and transfer of Grays Harbor business unit assets. The decrease in Current Liabilities is composed of a $.7 million increase in Accounts Payable offset by a $3.5 million decrease in Interfund Transfers due to other Funds that are eliminated in the Combining of the Financial Statements. The increase in Accounts Payable is primarily comprised of an increase in accrued costs, primarily related to contractor work incurred during R-17, but not paid by June 30, 2005.
Statement of Operations Analysis Net Revenues for FY 2005 increased $0.1 million as rates of return on investments began to increase from historical lows.
13 www.enerov-northwest-com Annual Report
BALANCE SHEETS As ofjune 3O. 2005 (Dollas In Ttasano)
- COLuM9i, GENERATIAN STATION PACKWOOD LAKE PROJECT NUCLEAR PROJECT NO.A -
NUCLEAR USINESS GRAYS HARBOR NNY CANYON PROJECT DEVELOPMENT ENERGY WIND N
FUND FACILITY PROCECT SUSTOTAL INTERNAL SERVICE FUND 2005 COMBINED TOTAL ASSETS UTILITY PLANT (NOTE B)
In service Not in service Accumulated depreciation Nuclear fuel, net of accumulated amortization Construction work in:progress RESTRICTED ASSETS (NOTE B)
Special funds Cash Available-for-sale investments Accounts and other receivables Debt service funds Cash Available-for-sale Investments LONG-TERM RECEIVABLES (NOTE B)
CURRENT ASSETS Cash Available-for-sale investments Accounts and other receivables Due from Participants Due from other business units Due from other funds Materials and supplies Prepayments and other Nuclear fuel held for sale DEFERRED CHARGES Costs in excess of billings Unamortized debt expense Other deterred charges TOTAL ASSETS Prq'ec secorded on a kqjidaion bAis See notes to nw" statemengs
$s 3,500,570 12,991 25,253 925 $
68,486
$ 3,582,972 $
25,253 46,029 3,629,001 25,253 (2,029,594)
(12,442)
(25,253)
(364)
(7,942)
(2,075,595)
(31,768)
(2,107,363) 1,470,976 549 561 60,544 1,532,630 14,261 1,546,891 126,143 126,143 126,143 30,784' 36,784 36,784 1,63j,903 549 561 60,544 1,695,557 14,261 1,709,818 17,393 1
180 313 1,806 19,693 1,468 21,161 99,804 285 12,367 12,073 1,645 126,174 1,254 127,428 2,299 2,299 2,299 32,187 8
37,160 19,087 100 88,542 88,542 701>
743 8,469 9,192 6,455 25,560 25,560 150,085 1,037 58,176 40,665 12,305 262,268 2,722 264,990 3,527 3,527 3,527 89 1
535 25 363 464 1,477 3,070 4,547 4,629 1,691 5,939 5,575 305 18,139 27,589 45,728 1,583 218 34 1,659 3,494 76 3,570 6
1 7
7 4.555 17 133 4,705 780 16,353 13 9,728 9,717 149 35,960 77,801 226 78,027 78,027 681 56 70 807 182 989 1,095 1,095 1,095 105,697 1,979 17,349 15,450 2,397 839 143,711 31,697 133,963 563,566 643 1,948,519 1,784,811 4,297,539 4,297,539 15,063 1
14,275 11,986 1,961 43,286 43,286 638 4,894 5,532 5,532 578,629 1,282 1,962,794 1,796,797 6,855 4,346.357 4,346,357 2,471,841 4,847 $
2,038,319 1,852,912 2,958 80,543
$ 6,451,420 $
48,680 6,458,655 www.energnorthwestcorn 14 Annual Report
BALANCE SHEETS (Continued)
AS 01June30,2005 (DOWs in nuss)
COLLUAA GENERATING STATION PACKWOOO LAKE PROJECT NUCLEAR PROJECT NO.I -
NUcLEAR BuSINESS GRAYS HARBOR NNE CANYON PROJECT DEVELOPMENT ENERGY WIND NJ I FUN FACILITY PROJECT SUeTOTAL INTERNAL SERVICE FLMJ 2005 COMBINED TOTAL FUND EQUIY MAD UABlUIES I
FUND EQUITY LONG-TERM DEBT (NOTE E)
Revenue bonds payable Unamortized discount on bonds - net Unamortized galni/(Ioss) on bond refundings LIABILITIES-PAYABLE FROM RESTRICTED ASSETS (NOTE B)
Special funds Accounts payable and accrued expenses Due to other funds Other deterred credits Debt service funds Accrued interest payable Due to other funds OTHER NONCURRENT LIABILITIES CURRENT LIABILITIES Current maturities ot long-term debt Accounts payable and accrued expenses Due to Participants Due to other business units DEFERRED CREDITS Advances from Members and others Other deterred credits TOTAL LIABILITIES TOTAL FUND EQUITY AND LIABILITIES 1,862 S (8,245) $
(6,383) $
11,835 $
5,452 2,243,235 2,546 1,971,850 1,922,165 89,960 6,229,756 6,229,756 3,750 3,750 3,750 69,928 (4) 52,097 (81,239)
(6,311) 34,471 34,471 (41,148) 25 (58,073)
(26,753)
(125,949)
(125,949) 2,272,015 2,567 1,965,874 1,814,173 87,399 6,142,028 6,142,028 97,130 13,307 529 110,966 1,807 112,773 15,976 6
9,370 9,076 149 34,577 1,275 185 1,460 1,460 32,512 39 45,272 27,638 105,461 105,461 377 7
358 641 1,383 145,995 52 69,582 37,355 185 678 253,847 1,807 219,694 25,659 25,659 25,659 615 615 615 22,111 101 1,086 190 854 20 24,362 29,426 53,788 6,061 1,479 1,777 1,194 10,511 10,511 33 57 691 781 4,704 28,172 2,228 2,863 1,384 911 711 36,269 34,130 64,914 1
1 907 907 908 908 2,471,841 4,847 2,038,319 1,852,912 1,096 88,788 6,457,803 36,845 6,453,203 2,471,841 4,847 $
2,038,319 $
1,852,912 $
2,958 $
S 80,543 $ 6,451,420 S 48,680 S 6,458,655
- Propad tso edon asIddtion basis Sss now s0 RnaUID SteTnets www.energy-norlhwesL.cor 15 Annual Report
STATEMENTS OF OPERATIONS AND FUND EQUITY For the year ended June 30, 2005 (Dollars In Thousands)
COLUMBIA OENERAnNW STATlON PAOCWOOD LAKE -.
PROJECT NMCLEAR PROJECT ND.1 '
NUCLEAR BUSINESS GRAYSHRBRSOR PROJECT
.DEVELOPMENT
..ENERG' Nt.3*
FUND FACILITY NNE CANYON P. WINDE PROJECT SUBTOTAL INTERNAL SERIYCE.
FUlD 2005 COMBINED TOTAL OPERATING REVENUES 430,570. $.
1,121 $
8,099 $
6,178 $
445,968 446,162 OPERATING EXPENSES Services to other business units Nuclear fuel Spent fuel disposal fee Decommissioning Depreciation and amortization Operations and maintenance Administrative & general Generation tax Total operating expenses 28,570 7,241 5,397 76,866 178,659 18,637 2,315 317,685 28 825 185 19 1,057 229 10,429 58 3,569 1,987 28 33 5.675 28,570 7,241 5,455 80,692 191,900 18,850 2,367 335.075 28,570 7,241 5,455 80,692 191,900 18,850 2,367 335,075 10,658 NET OPERATING REVENUES(EXPENSES) 112,885 64 (2,559) 503 110,893 111,087 OTHER INCOME & EXPENSE Non-operating revenues Investment income Gain on bond redemption Interest expense and discount amortization Plant preservation and terminatioi Depreciation and amortization Revaluation of Site Restoration Services to other business units Other NET REVENUES(EXPENSES)
Distribution & Contributions+A4 Beginning Fund Equity ENDING FUND EQUITY I costs 944316 4,160.
..... 64 2,453 4
89,962.
< 1,938
-99.. -
.. 4,927 50.
189,205 295 9,059 4
(116,306)
(132)
(3,500)
(104,995)
(9,331)
(14) 12,866 (89,766)
(2,134)
(5,644)
(316,843)
(11,465)
(3,489) 12,866 53,741 197 (1,507)
(52,237) 189,205 9,059 4
25 (316,843)
(11,465)
(3,489) 12,866 2,761 4,705 1,763 (187) 9,042
. 0 9,042 (697) 4,815 (4,846)
(728) 194 (534) 1,995 (6,171) 2,124 (2,052) 4,660 2,608 564 1,356 (5,523Y (3,603) 6,981 3,378 1,862 (8,245) $
(6,383) 11,835 5,452
' Prosct recorded on a Iiquidabon basis See notes to inarncitl statements www.energy-northwest.com1 16 Annuad Report
STATEMENTS OF CASH FLOWS Fo, ft yw.nedkns 30, 2005 (OoDl in Thouinds)
COU.AUIA PACKWOOD NUCL.EAR NUCLEAR BUSIESS GRAYS VARDOR NPIE CANYON HNTEANAI.
GENERATING LAKE PROJECT PROJECT DEVELOhPMEN ENERGY WIND0 SERVICE RTAfl PROF" NC01*PFUND FACILITY PROJECT P1*ND 2W0 CIED TOTAL CASH FLOWS FROM OPERATING AND OTHER ACTiViTIES Operatng revenue receipts Cash payments for operatbng eOPeses Non-operating revenue receipts Cash payments tor preservation, termination expense Cash payments tbr services Cash payments tor new business Receipts (payrnents) for grants/ontributions Net cash provided (used) by operating and other activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIViTtES Proceeds fromn bond retundings Refunded bond escrow requirement Payment tor bond Issuance and financing costs Capital and nucdear fuel acquisitions Interest paid on revenue bonds Principal paid on revenue bond maturities Interest paid on Notes Notes Payable Construction Work in Progress Net cash provided (used) by capital and refateed anancing activities CASH FLOWS FROM INVESTING ACTiViTES PurLchases of Investnent securities Sates of investment securities interest on investments Receipts from saies Ot plant assets Net cash provided (used) by Investing actvities NET INCREASE(DECREASE) IN CASH CASH AT JUNE 30, 2004 CASH AT JUNE 30,2005 (NOTE B) 360,724 2,895 $
(204,911)
(1,626)
- S 101,919 73,96 (31,266)
(15,31:
- S 5,194 S (8,134) 5,980 S 162 5,088 (1,441) 374,793 (214,509) 180,975 (46,578)
(1,232) 0 209 (4,864) 4.864 0
155,813 1,269 70,653 58,656 (2,940)
(1,217) 6,142 5,073 293,449 218,784 80,317 143,011 65.581 507,693 (127.148)
(80,836)
(142,618)
(64,014)
(414,616)
(2,177)
(677)
(1,010)
(1,135)
(4,999)
(73,055)
(638)
(43) 1 (73,735)
(97,788)
(137)
(97.349)
(62.111)
(6,867)
(264.252)
(590)
(3,290)
(3,880)
(1,371)
(663)
(892)
(2,926)
(165)
(165)
(2,060)
(2,060)
(82,755)
(1,365)
(99,208)
(63,620)
(43)
(11,949)
(258,940)
(1.285,492)
(9,720)
(556,245)
(412,852)
(36.170)
(9.925)
(58,685)
(136.301)
(2,505.390) 1,221,104 9,806 583,591 415.375 39,413 11,060 62,075 131,792 2,474,216 4,87 47 2.508 1,931 102 51 264 476 9.666 6,115 6,115 (60,101) 133 35,969 4,454 3,345 1,186 3,654 (4,033)
(15,393) 12,957 37 7,414 (510) 362 (31)
(2,153) 1,040 19,116 36,712 (27i 30,461 19,935 1
31 4.523 3,498 95,134 S
49,669 S
10 S
37,875 S
19,425 S
363 S
2,370 S
4,538 114,250 IProlad rcorded ma kqumd&Abn huala w.erergy-ranhwest.com i7 Anual Repsort
STATEMENTS OF CASH FLOWS (Contnued)
Foa t yasw rd ne Xn
, 2005 (Da/Mm in Thowas)
COwoMIIA PACKWOOD NUCLASR NUCLEAR BUSNESS GRAYS HARBOR NMNE CANYON GENERATH LAKE PROJECT PROJECT EVEL/NT
- EPI/RGY RvCow STATION PROJECT NC.1 N03
- FUND PACLITY PROJECT INTERNA&
EERVICE FUND 2005 COMBINED TOTAL RECONCILIATiON OF OPERATING INCOME TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITES Net operating revenues (expenses)
Adjustments to reconcile net operating revenues to cash provided by operating activities:
Depredation and amortization Decommissioning Oher Change In operating assets and liabilities:
Deterred charges/costs in excess of billings Accounts receivable Materials and supplies Prepaid and other assets Due from/to other business units, funds and Participants Accounts payable Non-operating revenue receipts Cash payments for preservation, termination expense Cash payments for services Receipts (payments) for grants/contributions Net cash provided(used) by operating and other activities S
112,885 $
64 (2,559) 503$
110,893 103,765 25 118 3,560 107,468 5,398 58 5,456 3,251 638 1,763 (270) 5,382 (69,516)
(23)
(69,539) 2,646 237 409 1,537 4,829 (6,320)
(6,320)
(254) 2 24 (1)
(229) 3,125 286 (2,886) 860 1,385 833 40 191 (105) 959 101,919 73,968 5,0088 180,975 (31,266)
(15,312)
(48,578)
(1,441) 209 (1,232) 14,864) 4,864 0
155,813 $
1269 $
70,653 $
58,656 $
(2,940) $
(1,217) $
6,142 $
5,073 293,449
- PAl sdnod ona.qudbonbOa sm inot t Anio"a1 w.energ-ortmestcom 18 Anr~iu Report
OUTSTANDING LONG-TERM DEBT AJ odxae 30, 2W5 (00asm infUward COUPON SERIES RATE SERLAL OR TERM MATURITIES AMOUNT COLUMBIA GENERTNG STATION REFUNDING REVENUE BO 1990A 7.25 7-1-2006 2,115 2,115 1991A (A) 7-1-06/2007 1992A 6.10 7-1-2006 6.30 7-1-2012 1993A 5.70-5.80 7-1-062008 1993B 5.50-5.65 7-1-06/2008 1994A 4.80-6.00 (A) 5.40 7-1-06r207 7-1-2009 7-1-2012 1996A 5.60-6.00 7-1-06(2012 1997A 5.10-5.20 7-1-10/2012 1997B 5.00-5.50 7-1-06r2011 1998A 5.00-5.75 7-1-06r2012 2001A 5.00-5.50 7-1-13/2017 2001B 5.50 7-1-2018 2002A 5.20-5.75 7-1-17/2018 2002B 5.35-6.00 7-1-2018 10,267 10,267 11,345 50,000 61,345 36,490 36,490 39,330 39,330 89,950 4,776 100,200 194,926 165,635 165,635 50,355 50,355 20,000 20,000 161,785 161,785 186,600 186.600 48,000 48,000 157,260 157,260 123,815 123,815 www.energy-northwwstcoorn 19 Mnual Report
OUTSTANDING LONG-TERM DEBT (Continued)
As oJfste 30, 2005 (Dolars in Thousands)
SERIAL COUPON OR TERM SERIES RATE MATURITIES AMOUNT COLUMBIA GENERATING STATION REFUNDING REVENUE BONDS (Continued) 2003A 5.50 7-1-1012015 154,490 154,490 2003B 4.15 7-1-2009 4,530 4,530 2003F 5.00-5.25 7-1-07/2018 41,330 41,330 2004A 3.75-5.25 7-1-08/2018 422,350 422,350 2004B 5.50 7-1-2013 12,715 12,715 2004C 5.25 7-1'0712018 26,620 26,620 2005A 5.00 7-1-15/2018 114,985 114,985 2005B 4.11 7-1-2008 1,600 1,600 2005C 4.34-4.74 7-1-9/2015 91,890 91,890 1997-2A-1 VARIABLE 45,045 45,045 1997-2A-2 VARIABLE 45.040 45,040 Compound interest bonds accretion 24,717 Revenue bonds payable S
2,243.235 Estimated fair value at June 30, 2005 2,222,214 (B)
(A) Compound Interest Bonds (B) The estimated fair value shown has been reported to meet the disclosure requirements of the Statement of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.
www. en orgy -north west. corn 20 Annual Report
OUTSTANDING LONG-TERM DEBT (Contbnueo)
As ofJmue 30, 2005 (DLaas i Tlmusads)
SERLAL COUPON OR TERM SERIES RATE MATURITIES AMOUNT PACKWOOD LAKE PROJECT REVENUE BONDS 1962 3.625 1965 3.75 Revenue ponds payable Estimated Fair Value at June 30, 2005 3-1-2012 2.271 3-1-2012 890 3,161 3,222 (B)
(B) The estinated fair vahle shown has been reported to meet the disclosure requirements of the Statement of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.
NUCLEAR PROJECT NO, I REFUNDING REVENUE BONDS 1989B 7.125 1990B 7.25 1993A 7.00 1993B 5.60-7.00 1993C 5.00-5.20 1996A 5.70-6.00 1996C 5.20-6.00 5.50 1997A 6.00 1997B 5.00-5.125 1998A 5.00-5.75 2001A 4.125-5.50 2001B 5.50 7-1-2016 41,070 41,070 7-1-2009 3,590 3,590 7-1-07i2008 7-1-07/2009 15,325 15,325 25,570 25,570 7-1-06/2008 5,675 5,675 7-1-0612012 291,745 291,745 7-1-06/2015 7-1-2017 70,840 24,860 95,700 7-1-06/2008 20,400 20,400 7-1-06/2017 7-1-06/2017 7-1-07/2013 242,465 242,465 78,650 78,650 77,160 77,160 7-1-2017 23,600 (C) 23,600 waw.energy-northwest.corn 21 Annual Report
OUTSTANDING LONG-TERM DEBT (Conbnued)
As soAme 30, 2005 (tDolars
D~rrn {r_._.._
JYUbL.LrJ11 rirIJrL,-I N(J.I KtuVUlNI, KEVzNVu DUF.) iCOanitredi 2002A 5.50-5.75 7-1-13/2017 S
248,485 248,485 2002B 6.00 7-1-2017 2003A 5.50 7-1-13/2017 2003B 4.06 2004A 5.25 7-1-2009 7-1-2013 101,950 101,950 241,455 241,455 18,210 18,210 62,485 62,485 1,135 1,135 72,175 72,175 2004B 5.50 7-1-2013 2005A 5.00 7-1-13/2015 2005B 4.11 7-1-2008 925 925 1993-IA-I VARIABLE 1993-IA-2 VARIABLE 1993-IA-3 VARIABLE 2003-C-I VARIABLE 2003-C-2 VARIABLE 2003-C-3 VARIABLE 2003-C4 VARIABLE Revenue bonds payable Estimated fair value at June 30, 2005 44,505 44,505 44,505 44,505 14,585 14,585 50,235 50,235 50,000 50.000 50,250 50,250 50,000 50,000 1.971,850 S
2.141,322 (B)
(B) The estimated fair value shown has been reported to meet the disclosure requrernents of the Statement of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.
(C) Auction Rate Certificates that will have a rate of 5.50 through 7/112008 and a variable rate thereafter until 7/lf2017 wwwronergy-northwest.como 22 A^nnual Repon
OUTSTANDING LONG-TERM DEBT (Conbnued)
As ofd ae 30, 2005 Do/ials in Thosands SERLAL COUPON OR TERM SERIES RATE MATURIrES AMOUNT NUCLEAR PROJECT NO 3 REFUNDING REVENUE BONDS 1989A (A) 1989B (A) 7.125 1990B (A) 1993B 5.60-7.00 1993C 5.00-7.50 (A) 1996A 5.50-6.00 1997A 5.00-6.00 1998A 5.125 2001A 5.50 2001B 5.50 2002B 6.00 2003A 5.50 2003B 4.15 2004A 5.25 2004B 5.50 2005A 5.00 2005B 4.11 7-1-07/2014 S
13,057 13,057 7-1-07/2014 44,772 7-1-2016 76,145 120,917 7-1-07/2010 11,650 11,650 7-1-0712009 34,215 34,215 7-1-062008 51,570 7-1-1312018 23,963 75,533 7-1-06r2009 30,080 30,080 7-1-06(2018 106,620 106,620 7-1-2018 53,825 53,825 7-1-10/2018 151,380 151,380 7-01-2018 10,675 10,675 7-01-2016 75,360 75,360 7-1-11/2017 241,915 241,915 7-1-2009 21,575 21,575 7-1-14/2016 83,835 83,835 7-1-2013 1,515 1,515 7-1-13/2015 129,265 129,265 7-1-2008 1,060 1,060 www.energy-northwestcorn 23 Annual Report
OUTSTANDING LONG-TERM DEBT (Continued)
As lJume 30, 2005 (Dolan n Thousands)
SERIAL COUPON OR TERM SERIES RATE MATURrITES AMOUNT NUCLEAR PROJECT NO. 3 REFUNDING REVEJNUE BONDS (Continued) 1993-3A-3 VARIABLE 1998-3A VARIABLE 2001B-3-1 VARIABLE 2001B-3-2 VARIABLE 2003D-I VARIABLE 2003D-2 VARIABLE 2003E VARIABLE Compound interest bonds accretion Revenue bonds payable Estimated fair value at June 30, 2005 20,345 20,345 132,650 132,650 5,000 (C) 5,000 10,000 (C) 10,000 100,665 100,665 100,400 100,400 98,025 98.025 292,603 1,922,165 1.975,474 (B)
(A) Compound Interest Bonds (B) The estimated fair value shown has been reported to meet the disclosure requirements of the Statement of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.
(C) Auction Rate Certificates that will have a rate of 5.50 through 71112010 and a variable rate thereafter until 711/2018 NINE CANYON WIND PROJECT REVENUEBNDS 2001A 4.554.95 2001B 4.55-4.95 7-1-0612008 S
5,035 7-1-06/2008 2,025 7,060 2003 3.00-5.00 7-1406/2023 20,950 20,950 2005 4.00-5.00 7-1-06/2023 Revenue bond payable Estimated fair value at June 30, 2005 61,950 61,950 S
89,960 100,029 (B)
(B) The estimated fair value shown has been reported to meet the disclosure requirements of the Statement of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.
REVENUE BONDS PAYABLE TOTAL ALL PROJECTS EST. FAIR VALUE 6,230,371 6,442,261 www.energy-norstwest.corn 24 Annual Report
DEBT SERVICE REQUIREMENTS As ofduW30, 5 Dolaa in n-ads)
COLUMBIA GENERATING STATION FCAL YEMR PRNCPAL RNTEREST TOTAL PACKWOOD LAKE HYDROELECTRIC PROJECT FISCAL YEAR PRINCIPAL INTEREST TOTAL 6/30/2005 Balance-205 S
39 $
244 6r30/2005 Balarmew.
S S
31,735 S
31,735 2006 2007 2008 2009 2010 2011-2015 2016-2018 94,046 153,686 144,905 146,201 233.335 787,300 659,045 129,994 224,040 118,866 272,552 103,983 248,888 102,564 248,765 89,041 322,376 288,068 1,075,368 93.031 752,076 2006 2007 2008 2009 2010 2011-2012 623 648 674 572 274 165 108 85 62 37 16 8
731 733 736 609 290 173 A,.&-f -
24,717 (24,717) 2,243,235 $
932,565 $
3,175,800 Psfta, m0d intacst dWAm l1d 1.2006 An r*t" to ConourtAId bs Al Ba oatat Conpasod Inmtst Bonds mE sated at aub ftos siot 1m dscout on ths balsn su S
3,161 355 $
3,516 P
Pbtimid Intent dim Ji I, i206.
h A4imtvn to ConVpwd lIntsit Bom stlon: Coapound Intmset Rond vs IstBatrd f
at dub ten nmou I1o dlscout on th balsbo slu NUCLEAR PROJECT NO. 1 NUCLEAR PROJECT NO. 3 FWSAL YEA PRNCIPX 6/30/2005 Balate:
S 2006 2007 2008 2009 2010 2011-2015 2016-2018 55.82 64,57 79.92 86,71 80.45 846,53 757,82 FMIAL NTEREST TOTAI.
YEAR 613012005 44.597 44,597 Balance?
5 103,120 158,945 2006 5
99,615 164,190 2007 5
95,944 175,869 2008 o
91,160 177,870 2009 5
86,490 166,945 2010 5
332706 1,179,241 2011-2015 5
59,601 817,426 2016-2018 PRNCPAL INTEREST TOTAL S
28.391 S
26.391 42,275 76,065 118,340 60.176 104,627 164,803 64,390 101,635 166,025 68.433 100,937 169,370 38,862 98,828 137.690 521,085 402,307 923,392 834.341 112,604 946,945 292,603 (292,603)
I Af--td"AI 1,971,850 $
913,233 $
2,885,083
$ 1,922,165 $
730,791
$ 2,652,956 PIb n id ntscsl den JII I, i200.
sturt Ih Compaard lromst Raids z Canpourd cal Bonds -
rsllslst dub In. onio las docost on th bals shlt
- PtxS ttrd Intsst dn bAy 1. 20!.
hA*ts*iMt Is Conyornd fIront Bords acoonw Corpaid Itsa Bainds we Eisals at dub to wemon 1ao ducauat on dt bals sspnt NINE CANYON WIND PROJECT YEA PRINCPAL 5NTEREST TOTAL 6/30/2005 Balancer S
S S
2006 2007 2008 2009 2010 201 1-2015 2016-2020 2021-2023 A
t *-
3,240 3,380 4,315 3,705 3,885 22,455 28,390 20,590 4,247 7,487 4.113 7,493 3,968 8,283 3,772 7,477 3,596 7,481 15,011 37,468 9,198 37,588 2,080 22,670 S
89,960 S 45,985 S 135,945 11Prkva tmd Interal di Jin I 2005.
- Adsnsot Is Conyoiad Iass Bonds mweclo Cacpound Ibaalt Bonds ws rntled at tub In.
atou las da latao on du ba rm u
e0nergy-nordtlcsICor 25 AmW Repon
Notes to Financial Statements NOTE A - GENERAL Organization Energy Northwest, a municipal corporation and joint operating agency of the State of Washington, was organized in 1957. It is empowered to finance, acquire, construct and operate facilities for the generation and transmission of electric power.
On June 30, 2005, its membership consisted of 16 public utility districts and 3 cities, Richland, Seattle and Tacoma. All members own and operate electric systems within the State of Washington.
Energy Northwest is exempt from federal income tax. Energy Northwest has no taxing authority.
Energy Northwest Business Units Each Energy Northwest Business Unit is financed and accounted for separate from all other current or future Business Units.
All electrical energy produced by Energy Northwest net-billed Business Units is ultimately delivered to electrical distribution facilities owned and operated by Bonneville Power Administration (BPA) as part of the Federal Columbia River Power System.
BPA in turn distributes the electricity to electric utility systems throughout the Northwest, including Participants in Energy Northwest's Business Units, for ultimate distribution to consumers. Participants in Energy Northwest's net-billed Business Units consist of publicly owned utilities and rural electric cooperatives located in the western United States who have entered into net-billing agreements with Energy Northwest and BPA for participation in one or more of Energy Northwest's Business Units. BPA is obligated by law to establish rates for electric power which will recover the cost of electric energy acquired from Energy Northwest and other sources as well as BPA's other costs (See Note E).
Energy Northwest operates the Columbia Generating Station, a 1,153 MWe (Design Electric Rating, net) generating plant completed in 1984.
Energy Northwest has obtained all permits and licenses required to operate Columbia, including a Nuclear Regulatory Commission (NRC) operating license that expires in December 2023.
Energy Northwest -also operates. the Packwood Lake Hydroelectric Project (Packwood), a 27.5 MWe generating plant completed in 1964. Packwood operates under a fifty-year license from the Federal Energy Regulatory Commission (FERC) that expires on February 28, 2010.
The electric power produced by Packwood is sold to 12 utilities, which pay the costs of Packwood, including the debt service on the Packwood Lake Hydroelectric revenue bonds. The Packwood Participants are obligated to pay annual costs of the Project including debt service, whether or not the Project is operable, until the outstanding bonds are paid or provisions are made for bond retirement, in accordance with the requirements of the bond resolution. The Participants share Project revenue as well.
Nuclear Project No. 1, a 1,250 MWe plant, was placed in extended construction delay status in 1982, when it was 65 percent complete. Nuclear Project No. 3, a 1,240 MWe plant, was placed in extended construction delay status in 1983, when it was 75 percent complete.
On May 13, 1994, Energy Northwest's Board of Directors adopted resolutions terminating Nuclear Projects Nos. 1 and 3 (see Note F -
Nuclear Projects Nos. 1 and 3 Termination).
All funding requirements are net-billed obligations of Nuclear Project No. 1. Energy Northwest wholly owns Nuclear Project No. 1.
Energy Northwest also manages the Business Development Fund and the Nine Canyon Wind Project, and managed the Grays Harbor Energy Facility Project:
26 www.energy-northwest.com Annual Report
The Business Development Fund was established in April 1997 to pursue and develop new energy-related business opportunities.
The Nine Canyon Wind Project was established in January 2001 for the purpose of exploring and establishing a wind energy project. Phase I of the project was completed in FY 2003. Phase I of the project consists of turbines which are rated at 48 MWe. Phase II of the project was declared operational December 31, 2003. Phase II of the project consists of turbines which are rated at 15.6 MWe. The total project generating capability is approximately 64 MWe.
The Grays Harbor Energy Facility Project was established in July 1990 to collect advances and contributions to pay the costs of investigating new generating projects, including the feasibility of a combustion turbine near Satsop, Washington.
The project purpose was amended during FY 2002 to include the operation and maintenance of a gas fired combustion turbine placed on the Grays Harbor site (owned by Duke Energy Grays Harbor LLC) and included the option to purchase up to 50MW of power generated by the facility. In September 2002, due to market conditions, Duke Energy North America (DENA) placed the project in "Construction Suspension." In February 2004, DENA announced it has no intention to complete the facility with its own funds. All obligations of this business unit have been completed and the fund was dissolved, effective June 30, by the Executive Board in July 2005.
The Internal Service Fund (formerly General Fund) was established in May 1957. It is currently used to account for the central procurement of certain common goods and services for the Business Units on a cost reimbursement basis.
The fund balances (net assets) for Business Development, Nine Canyon Wind Project and the Internal Service Fund includes (in thousands): invested in capital assets, net of related debt, $561, ($24,894) and $14,261, restricted assets of $0, $12,305, $2,722; and unrestricted assets (deficit) of $1,301,
$4,344, and
($5,148),
respectively.
NOTE B -
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting Energy Northwest has adopted accounting policies and principles that are in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America.
Energy Northwest applies GAAP to the extent it does not conflict with Governmental Accounting Standards Board (GASB) standards (see Note B to the financial statements).
Accounts are maintained in accordance with the uniform system of accounts of the Federal Energy Regulatory Commission (FERC).
Separate funds and books of account are maintained for each Business Unit.
Payment of obligations of one Business Unit with funds of another Business Unit is prohibited, and would constitute violation of bond resolution covenants.
Energy Northwest maintains an Internal Service Fund for centralized control and accounting of certain fixed assets such as data processing equipment, and for payment and accounting of internal services, payroll, benefits, administrative and general expenses, and certain contracted services on a cost reimbursement basis.
Certain assets in the Internal Service Fund are also owned by the Fund and operated for the benefit of other Projects.
Depreciation relating to fixed assets is charged to the appropriate Business Units based upon assets held by each Project.
27 www.enerav-northwest.com Annu al Report
Liabilities of the Internal Service Fund represent accrued payroll, vacation pay, employee benefits, and common accounts payable which have been charged directly or indirectly to Business Units and will be funded by the Business Units when paid. Net amounts owed to or receivable from Energy Northwest Business Units are recorded under Current Liabilities - Due to other Business Units, or Current Assets - Due from other Business Units on the Internal Serice Fund Balance Sheet.
The Combined Total column on the financial statements is for presentation only' as each Energy Northwest Business Unit is financed and accounted for separately from all other current and future Business Units.
The Fiscal Year (FY) 2005 Combined Total includes eliminations for transactions between Business Units as required in Statement No. 34, "Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments" of the Governmental Accounting Standards Board (GASB).
Pursuant to GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other.,
Governmental Entities That Use Proprietary Fund Accounting," Energy Northwest has elected to apply all Financial Accounting Standards Board statements and interpretations, except for those that conflict with or contradict GASB pronouncements.
Specifically,,
Statement of Governmental Accounting Standard No. 7
'Advance Refundings Resulting in Defeasance of Debr and No. 23 'Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities' conflict with Statement of Financial Accounting Standard (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." As such, the guidance under Statement of Governmental Accounting Standard No. 7 and No. 23 is followed. Such guidance governs the accounting for bond defeasances and refundings.
The preparation of Energy Northwest financial statements in conformity with GAAP requires 28 management to make estimates and assumptions that directly affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from these estimates. Certain incurred expenses and revenues are allocated to the Business Units based on'specific allocation methods and management considers the allocation methods to be reasonable.
Energy Northwest's fiscal year begins on July 1s' and ends on June 30th.
Utility Plant Utility plant is stated at original cost.
Plant in service is depreciated by the straight-line method over the esfimated useful lives of the 'various classes of plant, which range from five to 60 years.
During the normal construction phase of a Capital Facility,'Energy Northwest's policy is to capitalizd'all costs relating to the Project, including interest expense, related adniinistrative and general expense, less any interest income earned.
The utility plant and net assets of Nuclear Projects Nos. 1 and 3 have' been reduced toltheir 'estimated net realizable values due to termination.
A write-down of Nuclear Projects Nos. 1 and 3 was recorded in FY 1995 and-Was included in Cbst in Excess of Billings. Interest expense; termination expenses and asset disposition costs for Nuclear Projeicts Nos. 1 and 3 have been charged to operations. Utility Plant activity for'the year ended June 30, 2005, was as follows:
www.enerav-northwest.com Annual Report
Utility Plant Activity (Amount in Thousands)
BEGINNING BALANCE Columbia Generation 3,451,35' Decommission 31,114 Construction Work-in-Progress 30,50 Accumulated Depreciation (1,943,134 Accumulated Amortization (10,384 Utility Plant net 1,559,454 Nine Canyon Generation 68,034 Decommission 441 Construction Work-in-Progress Accumulated Depreciation (4,574 Accumulated Amortization.1
.i Utility Plant net 63,874 Packwood Generation 12,99 Accumulated Depreciation (12,41' Utility Plant net 57.
Business Development Generation 88, Construction Work-in-Progress Accumulated Depreciation (24 Utility Plant net 631 Internal Service Fund Generation 43,83' Construction Work-in-Progress 51!
Accumulated Depreciation (30,601 Utility Plant net 13,741 Nuclear Fuel All expenditures related to the initial purchase of nuclear fuel for Columbia, including interest, were capitalized and carried at cost. When the fuel is placed in the reactor, the fuel cost is amortized to operating expense on the basis of quantity of. heat produced for generation of electric energy. Accumulated nuclear fuel amortization (the amortization of the cost of nuclear fuel assemblies in the reactor used in the production of energy and in the fuel pool for less than six months per FERC guidelines) is $161.1 million as of June 30, 2005 for Columbia.
ENDING BALANCE INCREASES DECREASES 7$
3 1
3) 3)
16,744 $
1,359 21,869 (75,504)
(580)
(15,586) 3,468,101 32,469 36,784 (2,018,634)
(10,960) 3 $
(36,112) $
(15,586) $
1,507,760 3 $
1 $
68,037 A49
-1 (1) )
- 3)
(3,305)
(7,883)
- (22)
(59)
D $
(3,325) $
(1) $
60,544 1 $
12,991
- 7)
(25)
(12,442) 4.$
(25) $
549 2 $
43 $
925 43 (43)
- 3)
(118)
(364) 3 $
(32) $
(43) $
561 7$
1,783 $
45,620 5
409 (515) 409
))
(1,162)
(31,768) 3 $
1,030 $
(515) $
14,261 Energy Northwest has a contract with the Department of Energy (DOE) that requires the DOE to accept title and dispose of spent nuclear fuel. Although the courts have ruled that the DOE had the obligation to accept title to spent nuclear fuel by January 31, 1998, the repository is not expected to be in operation before 2010.
The current period operating expense for Columbia includes a $7.2 million charge from the DOE for future spent nuclear fuel storage and disposal in accordance with the Nuclear Waste Policy Act of 1982.
29 www.enerav-northwest.com Annual Report
Energy Northwest has completed a Project to store the spent fuel in commercially available dry storage casks on a concrete pad at the Columbia site. Spent Fuel will be transferred from the Spent Fuel pool to the Independent Spent Fuel Storage Installation (ISFSI) periodically to allow for future refuelings. Current period operating costs include $27.2 million for nuclear fuel and
$1.4 million accrued liability for future dry cask storage costs.
Restricted Assets In accordance with Project bond resolutions, related agreements: or state law, separate restricted funds have been establishedl for each Business Unit:
The assets held in these funds are restricted for specific uses including construction, debt service, capital additions, extraordinary operation and maintenance costs,'
termination, decommissioning, hazardous waste disposal, and workers' compensation claims.
Long-Term Receivables Long-term receivables include minimum guaranteed amounts adjusted annually pertaining to future discounts for certain goods and services to be provided to Columbia as the result of a litigation settlement and subsequent revisions.
Accounts and Other Receivables Accounts and other receivables for the Internal Service Fund include miscellaneous receivables outstanding from other Business Units that have not yet been collected. The amounts due to each Business Unit are reflected in the due to/from other Business Units account. Accounts and other receivables specific to each Business Unit are recorded in the residing Business Unit.
Asset Retirement Obligation Energy Northwest adopted the Statement of Financial Accounting Standards No. 143, Accounting for Obligations Associated with the Retirement of Long-Uved Asset (SFAS 143) on July 1, 2002. SFAS 143 requires an entity to recognize the fair value of a liability for an asset retirement obligation (ARO), such as nuclear decommissioning and site restoration liabilities, in the period in which it is incurred, rather than using a cost-accumulation approach.
See Note G, Accounting Change for Asset Retirement Obligations.
Decommissioning and Site Restoriation Energy Northwest established decommissioning and site restoration funds for Columbia' and monies are being deposHed each year in accordance with an established funding plan.
The NRC has issued rules to provide guidance to licensees of operating nuclear plants on decommissioning the plants at the end of each' plant's operating life. In Seotember 1998, the NRC approved and published its
'Final Rule on Financial Assurance Requirements for Decommissioning Power Reactors." As provided in this rule, each power reactor licensee is required to report to the flRC the status of its decommissioning funding for each reactor or share of a reactor it owns. This reporting requirement began on March 31, 1999 and reports are required every two years thereafter. Energy Northwest submitted its most recent report to the NRC in March 200>.
Energy Northwest's current estimate of Columbia's' decommissioning costs is $632.1 million (in 2005 dollars). This estimate, which is updated biannually,'
is based' on the NRC minimum amount required 'to demonstrate reasonable financial assurance for a boiling water reactor with the power level of Columbia.
Site restoration requirements for Columbia are governed by the site certification agreements between 30 www.enerciv-northwest.com AnnualReport
Energy Northwest and the State of Washington and regulations adopted by the Washington Energy Facility Site Evaluation Council (EFSEC).
Energy Northwest submitted a site restoration plan for Columbia that was approved by the EFSEC on June 12, 1995.
Energy Northwest's current estimate of Columbia's site restoration costs is $79.6 million in constant dollars (based on 2005 Study) and is updated biannually along with the decommissioning estimate.
Both decommissioning and site restoration estimates (based on 2005 Study) are used as the basis for establishing a funding plan that includes escalation and interest earnings until decommissioning activities occur.
Payments to the decommissioning and site restoration funds have been made since January 1985.
The fair value of cash and investment securities in thee decommissioning and site restoration funds as of June 30, 2005 totaled approximately $92.0 million and $11.0 million, respectively.
Since September 1996 these amounts have been held and managed by BPA in external trust funds in accordance with NRC requirements and site certification agreements.
Materials and Supplies Materials and supplies are valued at cost, using a weighted-average cost method.
Financing Expense, Bond Discount and Deferred Gain and Losses Financing expenses and bond discounts.are amortized over the terms of the respective bond issues using the bonds outstanding method.
In. accordance with the Statement of Governmental Accounting Standard No.23, losses on debt refundings have been deferred and amortized as a component of interest expense over the shorter of the remaining life of the old or new debt. The balance sheet includes the original deferred amount less recognized amortization expense and is included as a reduction to the new debt.
Current Maturities of Revenue Bonds Current maturities (less than one year) of revenue bonds payable from restricted assets are reflected as current maturities.
Debt that matures greater than one year is reflected as Long-Term Debt.
Accounts Payable and Accrued Expenses Liabilities-Payable From Restricted Assets-Columbia includes $96.9 million for decommissioning and site restoration.
Nuclear Project No. 1 includes
$13.3 million for decommissioning and site restoration.
The Nine Canyon Wind Project includes $0.5 million for decommissioning and site restoration.
Current Uabilities-lnternal Service Fund accounts payable and accrued expenses include $4.0 million for payroll and related benefits, $17.2 million for compensated absences, and $2.4 million for outstanding warrants.
Other Non-Current Uabilities-lncludes deferrals to cask liability and uranium enrichment assessment. Cask liability relates to the storage and disposal of spent fuel.
Uranium enrichment assessment is related to fuel and is scheduled to be completed in two years.
Fair Value of Financial Instruments The fair value of financial instruments has been estimated using available market information and certain assumptions.
Considerable judgment is required in interpreting market data to develop fair value estimates and such estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. The following methods and assumptions were used to estimate the fair value of each of the following financial instruments.
Financial instruments for which the carrying value is considered a reasonable approximation of fair value include: cash, accounts and other receivables, accounts 31 www.energrv-northwest.com
~,Annual Report
payable and accrued expenses, advances from Members and others, other non-current liabilities and due to/from Participants, funds, and other BusIness.-Units. The fair values of investments (see Note C) and revenue bonds payable (see Outstanding Long-Term Debt Schedule) have been estimated based on quoted market prices for such instruments or based on the fair value of financial instruments of a similar nature and degree of risk.
Revenues Energy Northwest accounts.for expenses on an accrual basis, and recovers, through various agreements, actual cash requirements for operations and debt service for Columbia, Packwood, Nuclear Project No. 1 and Nuclear Project No. 3. For these Business Units, Energy Northwest recognizes revenues equal to expenses for each period. No net revenue or loss is recognized, and no equity is accumulated.
The difference between, cumulative billings received and cumulative expenses is recorded as either, billings in excess of costs (liability) or as costs in excess of billings (asset), as appropriate.
Such amounts will be settled during future operating periods.
Energy Northwest accounts for revenues and expenses on an accrual basis for the remaining Business Units. The difference between cumulative revenues and cumulative expenses is recognized as net revenue or losses and included in fund equity for each period.
Energy Northwest has accrued as income (contribution) from the
- DOE, Renewable Energy Performance Incentive (REPI) payments that enable the Nine Canyon Wind Project to receive funds based on generation as it applies to the REPI bill. The REPI was created as part of the Energy Policy Act of 1992 to promote increases in the generation and utilization of electricity from renewable energy sources and to further the advances of renewable energy technologies.
This program, authorized under section 1212 of the Energy Policy Act of 1992, provides financial incentive payments for electricity produced and sold by new qualifying renewable energy generation facilities. For the first time in the history of the program, congressional funding for qualified wind programs was not fully funded. The Nine Canyon Wind Project recorded a receivable for sixty-eight (68%) of the applied REPI funding in the amount of $2.3 million for FY 2005, representing its share of funded amounts. The payment stream and the REPI receipts were projected to cover the total 'costs' over the purchase agreement. Permanent shortfalls in REPI funding will lead to future increases in the billing of the -Project participants in order to cover total Project costs.
Concentration of Credit Risk Financial instruments which potentially subject Energy Northwest to concentratibohs of credit risk consist of avaflable-for-sale investments, accounts receivable, other receivables, long-term receivables and costs in excess of billings.' 'Energy Northwest invests exclusively 'in U.S.
Government securities and agencies. Energy Northwest's accounts receivable and costs in excess of billings are concentrated with Project Particpants'tiric)fA 'tiag the net billing agreements. See Note E, Long-Term Debt, Security-Nuclear Projects Nos. 1; 3, Columbia and Packwood Lake Hydroelectric Project.
The long-term receivabl&Iis',with.lao Irge-aand:-stable ~co.cpay wh Energy Northwest considers-t6 be oi budreditiisk :Other" large receivables are secured through the use of letters of credit and other similar security mechanisms or are with large and stable companies which Energy Northwest considers to be of low credit risk. As a consequence, Energy Northwest considers the exposure of the Business Units to concentration of credit risk to be limited.
32 www.eneraiv-northwest acom Annual Report
Statements of Cash Flows For purposes of the statements of cash flows, cash includes unrestricted and restricted cash balances.
Short-term, highly liquid investments are not considered cash equivalents but are classified as available for sale investments.
NOTE C - CASH AND INVESTMENTS Cash and investments for each Business Unit are separately maintained. Energy Northwest's deposits are insured by federal depository insurance or through the Washington Public Deposit Protection Commission.
Energy Northwest resolutions and investment policies limit investment authority to obligations of the United States Treasury, Federal National Mortgage Association and Federal Home Loan Banks.
Safekeeping agents, custodians, or trustees hold all investments for the benefit of the individual Energy Northwest Business Units.
Investments are classified as available-or-sale and are stated at fair value with unrealized gains and losses reported in investment income.
Available-for-sale investments at June 30, 2005 are categorized below.to give an indication of the types and amounts as well as maturities of investments held by each Business Unit at year-end. (See tables below) 33 www.enerav-northwest.com Annual Report
Available-For-Sale Investments (Dollars In Thousands)
Amortized Cost Unrealized Gains Unrealized Losses Fair Value Columbia U.S. Govemrnment Agencies Total 105,144 (10) 105,134 105,144 (10) 105,134 Packwood U.S. Govermnent Treasury Bills 2719 t
2,719 Total 2719
.2,719 Nuclear Project No. 1 U.S. Govermient Agencies Total 26,778 (3) i 26,775 26,778 (3) 26,775 Nuclear Project No. 3 U.S. Government Agencies Total Business Development Fund U.S. Government Agencies Total 26,43 (3) 26,843
~ -, $
(3) 305 305 26,840 26,840 '
305 305 Grays Harbor U.S. Govemment Agencies Total Internal Service Fund U.S. Govemrnment Agencies Total Nine Canyon Wind U.S. Govemment Agencies Total 28,849 i
(6) 28,849 (6) 8,101 (1) 8,101 (1) 28,843 28,843 8,100 8,100 34 :}
www en rpv nothw st o An ua Re or www.enerclv-northwest.com Annual Report
Available-For-Sale Investments (continued)
< 1 year 1-5 years Columbia U.S. Government Agencies Total Packwood U.S. Government Treasury Bills Total Nuclear Project No. 1 U.S. Government Agencies Total Nuclear Project No. 3 U.S. Government Agencies Total Business Development Fund U.S. Government Agencies Total Grays Harbor U.S. Government Agencies Total Internal Service Fund U.S. Government Agencies Total Nine Canyon Wind U.S. Government Agencies Total 105,134_
105,134-2,719.
2,719 26,775_
26,775 26,840 26,840-305 305 28,843 28,843 8,100 8,100-5-10 years
=
> 10 years Total 105,134 105,134 2,719 2,719 26,775 26,775 26,840 26,840 305 305 28,843 28,843 8,100 8,100 35 www.enerav-nortthwest.comA Annual Report
NOTE D - RETIREMENT BENEFITS Substantially all Energy Northwest full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans.
The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirements Systems, Administrative Services Division, P.O. Box 48380, Olympia, WA 98504-8380.
The following disclosures are made pursuant to GASB Statement No. 27, "Accounting for Pensions by State and Local Government Employers."
Public Employee's Retirement System (PERS) Plans 1, 2, and 3 Plan Description PERS is a cost-sharing, multiple-employer defined benefit pension plan.
Membership in the plan includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges in a judicial retirement system); employees of legislative committees; college and university employees not in national higher education retirement programs; judges of district and municipal courts; non-certificated employees of school districts; and employees of local government, including Energy Northwest.
The PERS system includes three plans. Participants who joined the system by September 30, 1977 are Plan 1 members.
Those joining thereafter are enrolled in Plan 2, unless they exercise an option to transfer their membership to Plan 3.
PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees have the option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Retirement benefits are financed from employee and employer contributions and investment earnings.
Retirement benefits in Plan 1 and Plan 2 are vested after completion of five years of eligible service.
PERS Plan 3 participants are vested immediately.
Funding Policy Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer
-- and-employee rates, and Plan 3'employer contribution
-"rates. Employee contribution rates for Plan 1 are established by statute at six percent and do not vary from year. to year.
The employer and employee contribution rates for Plan 2 and employer rate for Plan 3 are set by the director of the Department of Retirement Systems based on recommendations by the Office of the State Actuary to continue to fully fund the plan. All employers are required to contribute at the level established by state law. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.40 and 41.45 Revised Code of Washington.
The required contribution rates for the' defined benefit plan expressed as a percentage of current year covered payroll, as of June 30, 2005 were:
36 www.enerav-northwest.com Annual Report
PERS PERS PERS Plan 1 Plan 2 Plan 3 Employer*
1.40%
1.40%
1.40%**
Employee 6.00%
1.1 8%.*
- The employer rates include the employer administrative expense fee currently set at 0.19%. This rate reflects the change effective September 1, 2004.
Previous to this period the rate was 0.22%.
- Plan 3 defined benefits portion only.
- Variable from 5.0%
minimum to 15.0%
maximum based on rate selected by PERS 3 member.
Both Energy Northwest and the employees made the required contributions. Energy Northwest's required contributions for the years ended June 30 was: -
PERS Plan PERS Plan PERS Plan 1
l 2
3 2005
$86,067
$958,601
$364,653 2004
$101,132
$905,073
$336,973 2003
$108,239
$1,077,106
$ 95,821 who retired after January 1, 1995 is $2.33 per $1,000 of coverage with a maximum limit of $10,000. Employees who retired prior to January 1, 1995 contribute $.58 per
$1,000 of coverage while Energy Northwest pays the remainder. Premiums are paid to the insurer on a current period basis.
At the time each employee retires, Energy Northwest accrues a liability for the actuarial value of estimated future premiums, net of retiree contributions.
The total liability recorded at June 30, 2005 was $0.9 million for these benefits.
During FY 2005, pension costs for Energy Northwest employees and post-employment life insurance benefit costs for retirees were calculated and allocated to each Business Unit based on direct labor dollars.
Approximately 93 percent of all such costs were allocated to Columbia during FY 2005.
401(k) and 457 Plan Deferred Compensation Plan Energy Northwest provides a 401 (k) Deferred Compensation Plan (the 401(k) Plan), and a 457 Deferred Compensation Plan. Both Plans are defined contribution plans that were established to provide a means for investing savings by employees for retirement purposes.
All permanent, full time employees are eligible to enroll in the Plans. Each participant may elect to contribute pre-tax annual compensation, subject to current Internal Revenue Service limitations. For the 401(k) Plan, Energy Northwest matches 50% of the portion of the participant's salary deferral amount, which does not exceed 5% of the participant's 401(k) eligible earnings for the 401(k) Plan year.
Participants direct the investment of their contributions. Participants are immediately vested in their contributions plus actual earnings thereon.
During FY 2005 Energy Northwest contributed $2.1 million in employer matching funds.
In addition to the pension benefits available through PERS, Energy Northwest offers post-employment life insurance benefits to retirees who are eligible 'to receive pensions under PERS Plan 1, Plan 2, and Plan 3.
Ninety-seven retirees have elected to participate in this insurance. In 1994, Energy Northwest's Execubve Board approved provisions which continued the life insurance benefit to retirees at 25 percent of the premium for employees who retire prior to January 1, 1995 and charged the full 100 percent premium to employees who retired after December 31, 1994.
The life insurance benefit is equal to the employee's annual rate of salary at retirement for non-bargaining employees retiring prior to January 1, 1995.
The cost of coverage for employees 37 www.enerav-northwest.com Annual Report
NOTE E - LONG-TERM DEBT Each Energy Northwest Business Unit is financed separately.
The resolutions of Energy Northwest authorizing issuance of revenue bonds for each Business Unit provide that such bonds are payable from the revenues of that Business Unit. All bonds issued under Resolutions Nos. 769, 775 and 640 for Nuclear Projects Nos. 1, 3 and Columbia, respectively, have the same priority of payment within the Business Unit (the 'Prior Lien Bondsl). All bonds issued under Resolutions Nos.
835, 838 and 1042 (the "Electric Revenue Bonds") for Nuclear Projects Nos. 1; 3 and Columbia, respectively, are subordinate to the Prior Lien Bonds and have the same subordinated priority of payment within the Business Unit.
During the year ended June 30, 2005, Energy Northwest issued, for Nuclear Projects 1, 3, and Columbia, the Series 2005-A Bonos, Series 2005-El Bonds and Series 2005-C Bonds. The Series 2005-A,-
2005-B, and 2005-C Bonds, issued for Nuclear Project No. 1, Nuclear Project No. 3, and Columbia are fixed rate bonds with a weighted average coupon interest rate of 5.00%.
The Series 2005-A Bond Proceeds of $346.6 million refunded
$346.8
- million, par
- amount, of outstanding bonds having a weighted average coupon interest rate of 5.88%. The $346.6 million of proceeds associated with the Series 2005-A Bonds were allocated to Nuclear Project No. 1 ($79.4 million), Columbia ($125.2 million), and Nuclear Project No. 3 ($142.0 million). This transaction resulted in a net loss for accounting purposes of $1.4 million for Nuclear Project 1, a net loss of
$1.0 million for Nuclear Project 3, and a net gain of
$.2 million for Columbia. According to GASB Statement No. 7, 'Advance Refundings Resulting in Defeasance of Debt", the amortization of the gains and losses on the refundings are calculated based on the shorter of the life of the new debt compared to the old debt.
The Series 2005-A bonds resulted in the recognition of a net accounting loss of $2.2 million for the year ended June 30, 2005. Energy Northwest increased its aggregate debt service by $121.0 million over the next 13 years due to extending the date of maturibes; however an economic gain of $4.2 million was obtained.
The Series 2005-B Bonds, issued for Nuclear Project No.1, Nuclear Project No. 3 and Columbia, in the aggregate amount of $3.6 million, are taxable fixed-rate bonds with a weighted average coupon interest rate of 4.11%.
The 2005-B Bond Proceeds were used for the purpose of paying costs relating to the issuance of the Series 2005-A and Series 2005-B Bonds as well as certain costs relating to the refunding of certain outstanding bonds.
Lastly, some of the Series 2005-B Bond Proceeds will be used to finance a portion of the cost of certain capital improvements.
The Series 2005-C Bonds, issued for Columbia, in the amount of $91.9. million, are fixed-rate bonds with an average coupon interest rate of 4.60%. The Series 2005-C Bonds were issued to finance a portion of the cost of certain capital improvements at Columbia and to pay costs relating to nuclear fuel purchases.
During the year ended June 30, 2005, Energy Northwest issued, for Nine Canyon Wind Project, the Series 2005 Bonds. The Series 2005 Bonds, issued for Nine,Canyon Wind Project are fixed-rate bonds with a weighted average coupon interest rate of 4.77%.
The Series 2005. Bond Proceeds of $65.6 million refunded
$59.4 million of outstanding bonds having a.weighted average coupon interest rate of 5.77%. This transaction resulted in a net loss for accounting purposes of $7.2 million for Nine Canyon Wind Project. According to GASB Statement No. 7, "Advance Refundings Resulting in Defeasance of Debt", the amortization of the gains and losses on the refundings are calculated based on the shorter of the life of the -new debt compared to the old debt.
38 www.e ne ra-ynort hwest.co m Annual Report
The Series 2005 Bonds resulted in the recognition of an accounting loss of $7.2 million for the year ended June 30, 2005. Energy Northwest decreased its aggregate debt service payments by $3.7 million over the next 19 years and obtained an economic gain of $2.8 million.
In prior fiscal years, Energy Northwest also defeased certain revenue bonds by placing the net proceeds from the refunding bonds in irrevocable trusts to provide for all required future debt service payments on the refunded bonds until their dates of redemption.
Accordingly, the trust account assets and liability for the defeased bonds are not included in the financial statements in accordance with GASB statements No. 7 and 23. Including the FY 2005 defeasements, $260.5 million, $151.5 million, $304.1 million, and $59.4 million of defeased bonds were not called or had not matured at June 30, 2005, for Nuclear Projects Nos. 1 and 3, Columbia, and Nine Canyon Wind Project respectively.
Outstanding revenue bonds for the various Business Units as of June 30, 2005, and future debt service requirements for these bonds are presented as supplementary information at the end of the Financial Section of this report.
Security - Nuclear Projects.Nos. 1 and 3 and.
Columbia are obligated to make such payments whether or not the Projects are completed, operable or operating and notwithstanding the suspension, interruption, interference, reduction or curtailment of the Projects' output.
On May 13, 1994, Energy Northwest's Board of Directors adopted resolutions terminating Nuclear Projects Nos. 1 and 3. The Nuclear Projects Nos. 1 and 3 Project agreements and the net-billing agreements, except for certain sections which relate only to billing processes and accrued liabilities and obligations under the net-billing agreements, ended upon termination of the Projects.
Energy Northwest entered into an agreement with BPA to provide for continuation of the present budget approval, billing and payment processes. With respect to Nuclear Project No. 3, the ownership agreement among Energy Northwest and private companies was terminated in FY 1999.
The ownership of all real and personal property interests was transferred to Energy Northwest.
Security - Packwood Lake Hydroelectric Project Energy Northwest, Benton County PUD and Franklin County PUD have signed Power Sales agreements which became effective November 4, 2002 and ran through October 30, 2004. A one-year extension was negotiated for the period beginning November 1, 2004 and extending through October 30, 2005. A new contract effective October 1, 2005 and extending through September 30, 2008 has been signed.
Benton and Franklin County PUD's agree to pay Energy Northwest in exchange for the total output of electric capacity and energy delivered from the Packwood Generation Project.
The Packwood Participants are obligated to pay annual costs of the Project including debt service, whether or not the Project is operable, until the outstanding bonds are paid or provisions are made for bond retirement, in accordance with the requirements of the bond resolution.
The Participants also share project revenue to the extent that the amounts exceed project costs.
Project Participants have purchased all of the capability of Nuclear Projects Nos. 1 and 3 and Columbia.
BPA has in turn acquired the entire capability from the Participants under contracts referred to as net-billing agreements. Under the net-billing agreements for each of the Business Units, Participants are obligated to pay Energy Northwest a pro rata share of the total annual costs of the respective Projects, including debt service on bonds relating to each Business Unit. BPA is then obligated to reduce amounts from Participants under BPA power sales agreements by the same amount.
The net-billing agreements provide that Participants and BPA 39 www.enerav-northwest.com Annual Report
NOTE F - COMMITMENTS AND CONTINGENCIES Nuclear Project No. 1 Termination Since the Nuclear Project No.1 termination, Energy Northwest has been planning for the demolition of Nuclear Project No. 1 and restoration of the site, recognizing the fact that there is no market for the sale of the Project in its entirety and to-date, no viable alternative use has been found. The final level of demolition and restoration will be in accordance with agreements discussed later in Note F under "Nuclear Projects Nos. 1 and 4 Site Restoration."
Nuclear Project No. 3 Termination In June 1994, the Nuclear Project No. 3 Owners Committee voted unanimously to terminate the Project.
During 1995, a group from Grays Harbor County, Washington,' formed the Satsop Redevelopment Project (SRP). The Satsop Redevelopment Project introduced legislation with the State of Washington under Senate Bill No. 6427, which passed and was signed by the Governor of the State of Washington on March 7, 1996.
The legislation enables local governments and Energy Northwest to negotiate an arrangement allowing such local governments to assume an interest in the -site on which.Nuclear Project No. 3 and Nuclear Project No. 5 exist for economic development by transferring ownership of all or a portion of the site to local government entities.
This legislation also provides for the local government entities to assume regulatory-responsibilities for site restoration requirements and control of water rights., In February 1999, Energy Northwest entered into a transfer agreement with the Satsop Redevelopment Project (SRP) to transfer the real and personal property at the site of Nuclear Project No. 3 and Nuclear Project No. 5. The SRP also agreed to assume regulatory responsibility for site restoration. Therefore, Energy Northwest is no longer responsible to the State of Washington and EFSEC for any site restoration costs.
Nuclear Projects Nos. 1 and 4 Site Restoration Site restoration requirements for Nuclear Projects Nos. 1 and 4 are governed by site certification agreements between Energy Northwest and the State of Washington and regulations adopted by EFSEC, and a lease agreement with the DOE.
Energy Northwest submitted a site restoration plan for Nuclear Projects Nos. 1 and 4 to EFSEC on March 8, 1995, which complied with EFSEC requirements to remove the assets and restore the sites by demolition, burial, entombment, or other techniques'such that the sites pose minimal hazard to the public. EFSEC approved Energy Northwest's'site restoration plan on June 12, 1995. In its approval, EFSEC recognized that there is uncertainty associated with Energy Northwest's proposed plan. Accordingly, EFSEC's conditional approval provides for additional reviews once the details of the plan are finalized. A new plan with additional details was submitted in FY 2003. This submittal was used to calculate the ARO discussed in Note G of the financial statements.
Business Development Fund Interest in Nofthwest Open}Accessc Networki k"'
i The Business Development Fund is a member of the-Northwest Open Access Network
("NoaNet).
Members formed NoaNet pursuant to an Interlocal Cooperation Agreement for the development and efficient use of a communication network in conjunction with BPA for use by the Members and others.
The Business Development Fund has a'7.38%
interest in NoaNet with an additional 25 percent' step-up possible for a maximum'9.23 percent.
As of June 30, 2005, NoaNet has $24.6 million in outstanding bonds. The members are obligated to pay the principal and interest on the bonds when due in the event and to the extent that 40 www.enerpv-northwest.comA Annual Report
NoaNet's Gross Revenue (after payment of costs of Maintenance and Operation) is insufficient for this purpose.
The maximum principal share (with step-up) that the Business Development Fund could be required to pay is $2.3 million. It is important to note that the Business Development Fund is not obligated to reimburse losses of NoaNet unless an assessment is made to NoaNet's members based on a two-thirds vote of the membership.
In FY 2005 the Business Development Fund contributed
$136K to NoaNet based on an assessment by the NoaNet members. This equity contribution was reduced to zero at year-end because NoaNet had a negative net equity position of $15.3 million. Future equity contributions, if any, will be treated the same until NoaNet has a positive equity position.
Business Development Fund Enriched Uranium Lease In January 2004, the Business Development Fund entered into an enriched uranium lease agreement with two third parties whereby one third party leases enriched uranium to the Business Development Fund and concurrently allows the Business Development Fund to lease the enriched uranium to the other third party. The Business Development Fund earns a net margin of 0.625% per annum (through June 30, 2006) on the market value of the leased enriched uranium. The lease revenues and expenses are presented on a net basis in the Statements of Operations as the Business Development Fund does not take title to the enriched uranium, does not have inventory risk and is only at risk for the net margin.
For FY 2005 the Busirness Development Fund recorded net revenues of $0.1 million in operating revenues under this agreement.
Other Litigation and Commitments Energy Northwest is involved in various claims, legal actions and contractual commitments and in certain claims and contracts arising in the normal course of business. Although some suits, claims and commitments are significant in amount, final disposition is not determinable. In the opinion of management, the outcome of such litigation, claims or commitments will not have a material adverse effect on the financial positions of the Business Units or Energy Northwest as a whole.
The future annual cost of the Business Units, however, may either be increased or decreased as a result of the outcome of these matters.
Nuclear Licensing and Insurance Energy Northwest is a licensee of the Nuclear Regulatory Commission and is subject to routine licensing and user fees, to retrospective premiums for nuclear liability insurance, and to license modification, suspension, or revocation or civil penalties in the event of violations of various regulatory and license requirements.
The Price Anderson Act currently provides for nuclear liability insurance of over $10.7 billion per incident, which is covered by a combination of commercial nuclear insurance and mandatory industry self-insurance. Energy Northwest has purchased the maximum commercial insurance available of $300 million, which is the first layer of protection. The second layer of protection is provided through a mandatory industry self-insurance plan wherein each licensed nuclear facility required to participate in the plan (currently 104 participants) may be assessed up to
$100.6 million per incident, subject to a maximum annual assessment of $10 million per year.
Nuclear property damage and decontamination liability insurance requirements are met through a combination of commercial nuclear insurance policies purchased by Energy Northwest and BPA.
The total amount of insurance purchased is currently $2.75 billion.
The deductible for this coverage is $5.0 million per occurrence.
41 www.enerov-northwest.com Annual Report
NOTE G - ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS Energy Northwest adopted SFAS 143 on July 1, 2002 (see Note B, Summary of Significant Accounting Policies). This Statement requires an entity to recognize the fair value of a liability for an ARO, measured at estimated fair value, for legal obligations related to the dismantlement and restoration costs associated with the retirement of tangible long-lived assets, such as nuclear decommissioning and site restoration liabilities, in the period in which it is' incurred.
Upon initial recognifibi of the AROs that are measurable, the probability weighted future cash flows for the associated retirement costs, discounted using a credit-adjusted-risk-free rate, are recognized as both a liability and as an increase in the capitalized carrying amount of the related long-lived assets. Capitalized asset retirement costs are depreciated over the life of the related asset with accretion of the ARO liability classified as an operating expense on the statement of operations and fund equity each period.
Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss" if the actual costs differ from the recorded amount.
However, with regard to the net billed Projects, BPA is obligated to provide for the entire cost of decommissioning and site restoration, therefore, any gain or loss recognized upon settlement of the ARO results in an adjustment to either the billings in excess of costs (liability) or costs in excess of billings (asset), as appropriate, as no net revenue or loss is recognized, and no equity is accumulated for the net billed projects.
Energy Northwest has identified legal obligations to retire generating plant assets at the following business units: Columbia Generating Station, Nuclear Project No. 1 and Nine Canyon Wind Project. Decommissioning and site restoration requirements for Columbia and Nuclear Project No. 1 are governed by the NRC regulations and site certification agreements between Energy Northwest and the State of Washington and regulations adopted by the EFSEC and a lease agreement with the DOE (see Notes B and F). Prior obligations recorded with regard to the decommissioning obligation of Columbia and Nuclear Project No. 1 were reversed as of the adoption date, with revised obligations being recorded in accordance with SFAS No. 143. As a result of the net billing arrangement, the adoption of SFAS No. 143 for Columbia Generating Station and Nuclear Project No. 1 did not result in a cumulative effect adjustment on the statement of operations and fund equity, but resulted in a charge to costs in excess of billings.
Energy Northwest applied SFAS 143 to the ISFSI project, which is part of CGS, beginning in FY 2005 resulting in decommissioning and accretion expenses of
$0.2 million and recognition of $1.4 million as the ARO.
Anwadjustment was made in FY 2005 for Nuclear, Project No. 1 to account for costs incurred for decommissioning and site restoration. Costs incurred in FY 2005 of $6.2 million combined with a downward revision in future cash flows resulted in a downward adjustment to the ARO of $13.9 million.
As of June 30, 2005, Columbia Generating Station has a net asset value of $21.5 million and an accumulated liability of $96.9 million (includes ISFSI). Nuclear Project No. 1 has an accumulated liability 9f $13.3 million with a net asset value of $0.
Under the current agreement, the Nine Canyon Wind Project has the obligation to remove the generation facilities upon expiration of the lease agreement if requested by the lessors. The Nine Canyon Wind Project recorded the related ARO in FY 2003.
As of June 30, 2005, the Nine Canyon Wind Project has a net asset value of $0.4 million and an accumulated liability of $0.5 million.
Packwood's obligation has not been calculated because the time frame and extent of the obligation was considered under this statement as indeterminate. As a result, no reasonable estimate of the asset retirement obligation can be made. An ARO will be required to be 42 www.enesav-northwest.com Annual Report
recorded if circumstances change. Management believes that these assets will be used in utility operations for the foreseeable future.
The following table describes the changes to Energy Northwest's ARO liabilities for the year ended June 30, 2005:
43 ww~w.enerav-northfwest.com Annual Report
Asset Retirement Obligation (Millions of dollars)
Columbia Generating Station Balance at June 30, 2004
$90.75 Current year accretion expense 4.75 ARO at June 30, 2005
$95.50 ISFSI Balance at June 30, 2004
$0.00 Asset Retirement Obligation incurred 1.36 Current year accretion expense 0.07 ARO at June 30, 2005
$1.43 Nuclear Project No. 1 Balance at June 30, 2004
$26.17 Less: Restoration costs incurred (6.22)
Current year accretion expense 1.04 Revision in future restoration estimates (7.68)
ARO at June 30, 2005
$13.31 Nine Canyon Wind Project Balance at June 30, 2004
$0.50 Current year accretion expense 0.03 ARO at June 30,2005
$0.53 44.
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CURRENT DEBT RATINGS (Unaudited)
Net Billed Nine Canyon Energy Northwest (Long-Term)
Ratina Rating Fitch, Inc AA-A-
Moody's Investors Service, Inc.
Aaa A3 Standard & Poor's Ratings Service (S&P)
AA-A-
Variable Rate Debt S&P Fitch Moody's Letter of Credit Banks Bank of America Long-Term AA-AA-Aal Short-Term A-1 +
F1+
P-1 JP Morgan Chase Bank Long-Term AA-A+
Aa3 Short-Term A-1 +
F1 VMIG1 Bond Insurance (Long-Term)
MBIA Insurance Corporation AAA AAA Aaa AMBAC Assurance Corporation AAA AAA Aaa Financial Guaranty Insurance Company AAA AAA Aaa XL Capital Assurance Inc.
AAA AAA Aaa Financial Security Assurance AAA AAA Aaa Liquidity Provider (Short-Term)
Credit Suisse First Boston A-1 P-1 Dexia A-1 +
F1+
VMIG-1 45 www.energv-northwest.com Annual Report