ML070240548
| ML070240548 | |
| Person / Time | |
|---|---|
| Site: | Washington Public Power Supply System |
| Issue date: | 12/31/2006 |
| From: | Coates E, Parrish J Energy Northwest |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| GO1-07-0003 | |
| Download: ML070240548 (22) | |
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Front row, from left to right-Tom Casey, Dave Remington, Sid Morrison, Kathy Vaughn, Edward (Ted) Coates, and Bill Gordon.
Back row, from left to right-Dan Gunkel, Tim Sheldon, Jack Janda, and Larry Kenney.
Not pictured-K.C. Golden.
22
" Columbia Generating Station surpasses longest continuous run record (July 30, 2006).
" Columbia Generating Station marks significant improvement in three areas of primary focus: Equipment Reliability, Human Performance and Training Excellence.
National Nuclear Accrediting Board renews Energy Northwest Operations and Engineering Support Personnel training accreditations.
Nuclear fuel procurement team announces agreements netting a total market value of over $500 million in savings to regional ratepayers for the period extending from 2003 to 2015.
- At Columbia Generating Station, the Operations Aggregate Impact Index, an indicator of how much plant conditions challenge Control Room staff, significantly improves due to reductions in maintenance backlog.
Engineering drives improvement in equipment reliability through the establishment of a Columbia Generating Station Plant Health Committee. System Engineering, using a Top Ten Equipment Issues list, tackles equipment vulnerabilities in a planned and focused manner.
" The move to online repair of systems, such as Diesel Generator 2, 125-volt batteries, condenser tubes, and service water pumps, allows Columbia Generating Station to continue producing needed power for the region.
Columbia Generating Station fuel procurement team announces the Uranium Tailings Pilot Project, expected to sve rat an estimated $50 million over the next decade.
- State and local governments receive $2.64 million in Energy Northwest privilege taxes.
" Alternative procurement legislation is signed into law, allowing Energy Northwest the authority to use a competitive negotiated procurement process on renewable projects.
Energy Northwest returns to the bond market for an unprecedented, 100 percent uninsured $907,475,000 bond sale, constituting one of the largest in agency history.
" BPA and Energy Northwest announce a change in the debt repayment method that is expected to save Northwest consumers five percent on wholesale power rates in fiscal years 2007-2009.
Board of Directors approves Nine Canyon Phase III and Reardan Twin Buttes Wind Projects.
Board of Directors approves the Pacific Mountain Energy Center project, and signs 50-year lease on a proposed site at Kalama, Washington.
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g/on KesponsiDilIty Tor financial Keporting 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.
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, 2006, internal control procedures are adequate.
J.V. Parrish A.E. Mouncer Chief Executive Officer Vice President, Corporate Services/General Counsel/CEO KTh
of lndependent Auditors I
To the Executive Board of Energy Northwest We have audited the accompanying balance sheet of Energy Northwest and the of Energy Northwest's business units and internal service fund as of June 30, 2(
operations and fund equity and of cash flows for the year then ended. Energy Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Pr Business Development Fund, and the Nine Canyon Wind Project. These basic fi of Energy Northwest's management. Our responsibility is to express an opinior based on our audits.
We conducted our audits in accordance with auditinq sitandards qeneraly accep ial balance sheets of the
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, 2006 with the basic financial statements for the Fiscal Year ended June 30, 2005. 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's records are maintained as prescribed by the Governmental Accounting Standards Board (GASB) and, when not in conflict with GASB pronouncements, accounting principles prescribed by the Financial Accounting Standards Board (FASB). (See Note B to the Financial Statements).
Because each Business Unit is financed and accounted for separately, the following section on financial performance is discussed by Business Unit to aid in analysis of assessing the financial position of each individual Business Unit. For comparative purposes only, the following table represents a memorandum total only for Energy Northwest, as a whole, for FY 2005 and FY 2006 in accordance with GASB No. 34, "Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments".
Certain reclassifications have been made to the 2005 financial statements to conform to the 2006 presentation:
The financial statements for Energy Northwest include the financing and investment activities. The statements provide Balance Sheets; Statements of Operations and Fund Equity; insight into what generates cash, where the cash comes and the Statements of Cash Flows for each of the Business from, and what it was used for.
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The Notes to Financial Statements present disclosures that The Balance Sheets present the financial position of each contribute to the understanding of the material presented Business Unit based on an accrual basis. The Balance Sheets in the financial statements. This includes but is not limited report information about construction work in progress, to, Schedule of Outstanding Long-Term Debt and Debt amount of resources and obligations, restricted accounts and Service Rquirements(Note E-Long-Term Debt) accountii due to/from balances (see Note B to the financial statements) policies, significant balances and activities, meria
- sks, that reflect what is owed by each Business Unit.
The Statements of Operations and Fund Equity reportsaplcbe information rel~ating ~to allexessreeusadeutThbaifiacasttmnsoechBiesUithul 0
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
Energy Northwest's performance is measured in several ways, including cost of power at CGS. The cost of power for FY 2006 was 2.12 cents per KwH as compared with 3.34 cents per Kwh in FY 2005. The industry cost of power fluctuates year to year depending on various factors such as refueling outages and other planned activities. The bi-annual maintenance and refueling outage (R-1 7) occurred in FY 2005 resulting in the increased cost of power compared with FY 2006.
Balance Sheet Analysis Increase to Plant in Service and Construction Work In Progress (CWIP) from FY 2005 to FY 2006 (excluding nuclear fuel) was $14.4 million. The majority of the increase was related to CGS pump, battery and monitoring improvements. The additions to Plant were offset by an increase to Accumulated Depreciation of $73.0 million resulting in a net decrease to Plant of $58.7 million.
and manages a trust fund for the purpose of funding decommissioning and site restoration (see Note B 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 $77.4 million in FY 2006 from
$2.27 billion to $2.35 billion, which was a result of the FY 2006 Bond Issue. In FY 2006, new debt was issued for various CGS construction projects, as well as being issued as part of the Debt Optimization Plan Debt (see Note E to the financial statements).
Through June 30, 2006 Energy Northwest was being paid by the Participants for Net Billings. The payments were based on a percentage of ownership in CGS and Nuclear Projects No. 1 and 3 and reflected budgeted costs for operations of the fiscal year. Beginning in FY 2007, Energy Northwest will bill Bonneville Power Administration on a monthly basis for estimated expenses, not to exceed the approved budgeted value instead of billing and receiving the participants' legal obligations. The change in billing arrangement does not impact the Net Billing Agreements for CGS and Nuclear Projects No. 1 and 3.
Nuclear fuel, net of accumulated amortization, increased
$64.3 million from FY 2005 to $190.5 million for FY 2006, During FY 2006, CGS purchased $100.0 million of nuclear fuel, which was offset by current year amortization of
$35.7 million. There was a bi-annual write-off of fuel and amortization for the removal of fuel assemblies related to the maintenance and refuelina outaae (R-1 7). The write-
$200,000
$150,000
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01 01 01 Mi 01 01 01 FY hrnc ttOther Incomne/Enmenses 0 Ooeratina Expoenses
I Other Income and Expenses remained relatively constant from FY 2005 to FY 2006 at $116.4 million. The slight increase of $3.5 million was generally related to the net effects of CGS Debt activity (see Note E to the financial statements) and investment activity. Higher interest earnings on investments of $5.1 million were offset by the higher interest expense for FY 2006 of the same amount.
Amortization of Bond Discount Expense ($0.9 million decrease) and Amortization of Bond Refunding ($5.0 million increase) netted an increase of $4.1 million as a result of the Bond Refunding issues. The remaining $0.6 million decrease was related to CGS general services and lease activity.
CGS total revenue dropped from $430.6 million in FY 2005 to $397.9 million in FY 2006. The decrease of $32.7 million is due to lower expenses and the related effect of the net billing agreements on revenue recognition.
Packwood Lake Hydroelectric Project I
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be included as part of the power purchase agreements with the participants of the Packwood Project, (see Note E, Long Term Debt, Security - Packwood Lake Hydroelectric Project).
The FERC billing represents a billing for charges of $59k that represent administrative costs accrued by FERC for the last 6 years. Recent FERC litigation, not associated with Energy Northwest, resulted in their ability to now bill for those costs.
Other income and expenses decreased from $64k in FY 2005 to $8k in FY 2006 mainly due to increased interest earnings of $34k and decreased bond interest expenses of
$22k.
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. 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 and are net-billed.
$1.971 billion in FY 2006, due to debt restructuring to take advantage of lower interest rates.
Statement of Non-Operating
$94.3 million ir
but is offset by the increase in Due From Other Business Units of $0.6 million.
Statement of Operations Analysis on a "synthesis gas" with regulated emissions similar to 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. In FY 2006, $1.5 million was expended on developing this project.
Operating Revenues in FY 2006 totaled $7.8 million as compared to FY 2005 revenues of $8.1 million, a decrease of $0.3 million; however, net revenues for FY 2006 showed a $2.3 million loss as compared to a $0.7 million loss for FY 2005.
Wind Mining efforts continued in FY 2006 with approximately $0.5 million being expended. These efforts are to explore, site, and demonstrate wind resources for potential new wind sites.
Three of Energy Northwest's Research and Investigation business projects, Integrated Gasification Combined Cycle (renamed Pacific Mountain Energy Center (PMEC) in FY 2006), Wind Mining and BioEnergy Solutions, accounted for $2.3 million in expenditures with no revenue, with the majority of expenses related to PMEC.
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The Nine Canyon Wind Project produced 158.34 GWh of electricity in FY 2006 versus 154.52 GWh in FY 2005.
Balance Sheet Analysis Receivables decreased by $1.1 million which corresponds to the decrease in amount of the Renewable Energy Performance Incentive (REPI) payment accrued. The FY 2005 accrual was $2.3 million compared to $1.2 million accrued for FY 2006. Net change in assets was negligible, though there was a reclassification of a contributed substation asset from Benton PUD to plant from a deferred charge. The decrease in Fund Equity was $4.1 million in FY 2006 as compared to a $2.7 million decrease in FY 2005. The continued decline in Fund Equity is because the 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. Revenue Bonds Payable decreased by $3.2 million as the current portion was moved to Current Debt Maturities.
netted an increase to costs of $5.6 million, an increase of
$0.3 million from FY 2005. This trend is reflected in the declining Fund Equity balance.
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 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. The Nine Canyon Wind Project recorded a receivable of $1.2 million which represented forty-four percent of the $2.7 million applied for REPI funding in FY 2006. The payment stream and the REPI receipts were Droiected to cover the total costs over the life of
ENERGY NORTHWEST BALANCE SHEETS As of June 30, 2006 (Dollars in Thousands)
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In service Not in service Accumulated depreciation
$ 3,529,544
$ 12,991 (2,102,609) 1,426,935 25,2 (25,2 1,039
$ 74,066
$ 3,617,640 253 25,253 253)
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(12,392)
(2,153,142) 617 61,674 1,489,751
$ 46,631
$ 3,664,271 25,253 (33,708)
(2,186,850) 12,923 1,502,674 (12,466) 525 Nuclear fuel, net of accumulated amortization 190,483 190,483 Construction work in progress
ENERGY NORTHWEST BALANCE SHEETS (continued)
As of June 30, 2006 (Dollars in T 0
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Revenue bonds payable 2,292 Unamortized discount on bonds - net 88 Unamortized gain/(loss) on bond refundings (31 617 (25,728) $
11,877 (25,111) $
11,877 12,923 1,205 (12,188) 13,082 1,593 1,514 3,107 (4,030)
(923) 2,210 (12,337)
(10,127) 10,098 (29)
.,555 1,507 1,906 1,961,960 1,919,315 (3) 64,813 (64,635) 86,720 6,262,456 3,424 92,106 6,262,456 92,106 1,683)
I 22 (55,846) 1,925 1,970,927 (21,983) 1,832,697 0 13.696')
2,349,379 UABILTIES-PAYABLE FROM RESTRICTED ASSETS (NOTE B)
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ENERGY NORTHWEST STATEMENTS OF OPERATIONS AND FUND EQUITY For the year ended June 30, 2006 (Dollars in Thousands) 0 U 0
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1.Ow OPERATING REVENUES 397,857 1,439 OPERATING EXPENSES 7,813 6,303
$ 413,412 413,919 Services to other business units Nuclear fuel 37.812 Spent fuel disposal fee Decommissioning Depreciation and amortization Operations and maintenance Other power supply expense 9,106 6,127 73,734 37,812 9,106 59 6,186 37,812 9,106 6,186 77,718 35 210 3,739 77,718 132,452 950
ENERGY NORTHWEST STATEMENTS OF CASH FLOWS For the year ended June 30, 2006
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$ 302,036 2,258 (167,710)
(1,899) 4,990 6,192 (4,108)
(27)
$ 315,476 (173,744) 188,093 (7,904) 109,705 78,388 (6,288)
(1,616)
(5,161)
(5,161) 134,326 359 103,417 76,772 882 6,165 (5,161) 316,760 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bond refundings 532,082 366,920 Refunded bond escrow requirement (466,138)
(370,366) ment fc
ENERGY NORTHWEST STATEMENTS OF CASH FLOWS (continued)
For the year ended June 30, 2006 (Dollars in Thousands)
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RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net operating revenues
$ 116,367 8
(4,075) $
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Adjustments to reconcile net operating revenues to cash provided by operating activities Depreciation and amortization Decommissioning Other Change in operating assets and liabilities 109,417 6,127 5,042 25 79 3,728 22 1,738 45 113,249 6,149 6,825
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+/- Aen 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, 2006, its membership consisted of 16 public utility districts and three 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.
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 Project Participant 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. In 2002, the Project and its participants entered into a Power Sales Aclreement with Benton and Franklin