ML070240553
| ML070240553 | |
| 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: ML070240553 (22) | |
Text
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.
NOTE B-
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The Combined Tol financial statements is v Northwest Business Energy Northwest has ac principles that are in acc
Utility Plant Utility plant is stated at original cost. Plant in service is depreciated by the straight-line method over the estimated useful lives of the various classes of plant, which range from five to 60 years.
During the normal construction phase of a Capital Facility, which historically has been defined as construction of a generation facility, Energy Northwest's policy is to capitalize all costs relating to the Project, including interest expense, related administrative and general expense, less any interest income earned. For financing not related to a Capital Facility, Energy Northwest analyzes the gross interest expense relating to the cost of the bond sale, taking into account interest earnings and draws for purchase or construction reimbursements for the purpose of analyzing impact to the recording of capitalized interest. CGS is a net-billed business unit, therefore costs whether expense or capital, are reimbursed each year.
However, if estimated costs are more than inconsequential an adjustment will be made to allocate capitalized interest to the appropriate plant account.
The utility plant and net assets of Nuclear Projects Nos. 1 and 3 have been reduced to their 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 Cost in Excess of Billings. Interest expense, termination expenses and asset disposition costs for Nuclear Projects Nos. 1 and 3 have been charged to operations. Utility Plant activity for the year ended June 30, 2006, was as follows:
Nuclear Fuel All expenditures related to the initial purchase of nuclear fuel for Columbia, including interest, were capitalized and carried at cost. Fuel expenditures relating to the use of funds from the Series 2005-C Bonds for purchases of nuclear fuel 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 $93.3 million as of June 30, 2006 for Columbia.
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 SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Asset", 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 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
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 the decommissioning and site restoration funds as of June 30, 2006 totaled approximately $100.5 million and $12.9 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 and as discussed in the Management's Discussion and Analysis under the Balance Sheet Analysis for CGS, the balances in these external trust funds are not reflected on Energy Northwest's Balance Sheet.
related benefits, $16.6 million for compensated absences, and $3.2 million for outstanding warrants, taxes, and retention withheld.
Other Non-Current Liabilities-Includes deferrals to cask liability of $26.4 million which relates to the storage and disposal of spent fuel.
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.
Materials and Supplies Materials and supplies are valued at cost, using a weighted-average cost method.
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 for 44 percent of the applied REPI funding in the amount of $1.2 million for FY 2006, representing its share of funded amounts.
The payment stream from project participants 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.
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 Participants and BPA through the net billing agreements (see Note E, Long-Term Debt, Security-Nuclear Projects Nos. 1, 3, CGS and Packwood Lake Hydroelectric Project). The long-term receivable is with a large and stable company which Energy Northwest considers to be of low credit risk. 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.
AMUK LEDWLS1 UNREALIZED) (,AINS UNREALIZED LOSSES EAIR VALUE U.S. Government Agencies 111,365 (193)
$111,172 Total 111,3651 (193) 111,172 U.S. Government Treasury Bills 2,439 $
2,439 Total 2,439 2,439 U.S. Government Agencies 48,222 (9) $
48,213 Total 48,22 (9) $48,213 U.S. Government Agencies 51,630 (9$
5,2 Total 51,630
$(9)
$51,621 u.s,. uovernmenT Agencies IO Total
$1,6 U.S. Government Agencies 8,2
~Total 1 28.529$
I U.S. (aovernment Agencies I
Total
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 oursuant to GASB Statement No. 27. "Accountinn for at the age of 55 with 25 years of service. The annual benefit is 2 percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months.
If qualified, after reaching the age of 66 a cost-of-living allowance is granted based on years of service credit and is capped at 3 percent annually.
Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 55 with 20 years of service, with an allowance of 2 percent of the average final compensation per year
--- -ý I Funding Policy Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local government unit employees, and 7.5 percent for state government elected officers. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature.
PERS Plan 3 defined contribution is a non-contributing plan for employers. Employees who participate in the defined contribution portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan
- 3. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are graduated rates dependent on the employee's age. The methods used to determine the contribution reauirements 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 Executive 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 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 eml accrues a liability for
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 Bonds"). 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.
gain of $8.1 million, based on the present value of debt service comparison, was obtained. The economic gain was recorded according to GASB 7, "Advance Refundings Resulting in Defeasance of Debt."
The Series 2006-B Bonds, issued for Nuclear Project No.1, Nuclear Project No. 3 and Columbia, in the aggregate amount of $14.1 million, are taxable fixed-rate bonds with a weighted average coupon interest rate of 5.16% for Nuclear Project 1; 5.21% for Nuclear Project 3; and 5.23%
for Columbia. The 2006-B Bond Proceeds were used for the purpose of paying costs relating to the issuance of the Series 2006-A and Series 2006-B Bonds as well as certain costs relating to the refunding of certain outstanding bonds.
During the year ended June 30, issued, for Nuclear Projects 1, 3, 2006-A Bonds, Series 2006-B B(
Rnndr and SPrips 2006F-D Bond d
ENEGY ORTWES 1 7l OUTSTAND ING LO[G-TERM D cl~ I~EBT~
1992AI b.30 1 201Z
$5)0,000
$50,000 1993A 5.70-5.80 7-1-07/2008
$8,595
$8,595 1994A 6.00 7-1-2007
$79,405 (A) 7-1-2009
$4,776 5.40 7-1-2012
$100,200
$184,381 1996A 6.00 7-1-2008
$17,475
$17,475 1997B 5.00-5.20 7-1-09/2011
$15,000
$15,000 1998A 5.00-5.75 7-1-07/2012
$161,230
$161,230 2001A 5.00-5.50 7-1-13/2017
$186,600
$186,600 2001 B 5.50 7-1-2018
$48,000
$48,000 2002A 5
5 7-1-17/2018
$157,260
$1 57,260 2003b ]
4.15
/-1-20099
$4,530
$4,530 2003FT-5.00-5.25 7-1-07/2018
$41,330
$41,330 2004A 3.75-5.25 7-1-08/2018
$403,080
$403,080 2004B 5.50 7-1-2013
$12,715
$12,715 2004C 5.25 7-1-07/2018
$26,620
$26,620 2005AT 5.00 7-1-15/2018
$114,985
$114,985 2005B 4.11 7-1-2008
$1,600
$1,600 2005C 1 4.34474 7-1-09/2015
$91,890
$91.890 q/AI "1()
ENEGYNOTHES O1TSTANDING]
L~
c ONG-[TER UI 'DEBTU
$41,070 1990B 7.25 7-1-2009
$3,590
$3,590 1993A 7.00 7-1-07/2008
$15,325
$15,325 1993B 5.60-7.00 7-1-07/2009
$21,970
$21,970 1993C 5.10-5.20 7-1-07/2008
$3,875
$3,875 1996A 6.00 7-1-2008
$40,050
$40,050 1996C 5.25-6.00 7-1-07/2009
$8,925
$8,925 1997A 6.00 7-1-07/2008
$13,850
ý p~ll~
2003B 4.06 7-1-2009
$18,210
___$18,210 2004A 5.25 7-1-2013
$62,485
$62,485 2004B 5.50 7-1-2013
$1,135
$1,135 2005A 5.00 7-1-13/2015
$72,175
$72,175 2005B 4.11 7-1-2008
$925
$925 2006A 5.00 7-1-07/2017
$338,775 I_
_'$338,775 20068 5.16 7-1-2007
$9,160
_1 I
I_
$9,160 1993-lA-i VARIABLE
$41,845
(,l I
ENEGY ORTWES 1il OUSTAND
~ING LO GTR D
C S
C 1iiEBT 19bA [
A) /-[-U//ZU14 ]
- I _,Ut)/
$13,057 1989B (A) 7-1-07/2014
$44,772 7.125 7-1-2016
$76,145
$120,917 1990B (A) 7-1-07/2010
$11,650
$11,650 1993B 5.60-7.00 7-1-07/2009
$34,215
$34,215 1993C 5.10-7.50 7-1-07/2008
$29,565 (A) 7-1-13/2018
$23,963
$53,528 1996A 5.50 7-1-2007
$7,315
$7,315 1997A 5.10-6.00 7-1-07/2018
$100,650
$100,650 1998A 5.125 7-1-17/2018T
$53,825
$53,825 2001 A 5.50 7-1-10/2~018
$151,380
$151,380 2001B 5.50 7-01-2018
$10,675
ý 1f f_71 ZUU4A 5.L1
/-1-14/2Ulb
$63,835
$83,835 2004B 5.50 7-1-2013
$1,515
$1,515 2005A 5.00 7-1-13/2015
$129,265
$129,265 2005B 4.11 7-1-2008T
$1,060
$1,060 2006A 5.00 7-1-08/2018
$54,760
$54,760 2006B 5.21 7-1-2008
$525
$525 1993-3A-3 VARIABLE
$19,310
$19,310 1998-3A VARIABLE
$126,290
~11M290 I
qr(I; lCn I
3I U.UUU
m-YEAR***
PRINCIPAL INTEREST TOTAL 6/30/2006 Balance:*
$40,637
$40,637 2007 88,455 120,562 209,017 2008 126,285 115,305 241,590 2009 115,806 114,765 230,571 2010 157,650 102,782 260,432 2011 95,405 94,604 190,009 2012-2016 622,745 366,962 989,707 2017-2021 765,585 177,813 943,398 2022-2024 314,400 32,008 346,408 Adjustment 6,224 (6,224)
$2,292,555
$1,159,214
$3,451,769
-KWOI-KEPOJC YEAR***
PRINCIPAL INTEREST TOTAL 6/30/2006 Balance:*
$213
$31
$244 2007 648 85 733 2008 674 62 736 2009 572 37 609 2010 274 16 290 2011 122 6
128 2012 43 2
45
$2,546
$239
$2,785
-ý 111
1111
ý I -,""I'll I
Security-Nuclear Projects Nos. 1 and 3 and Columbia Project Participants have purchased all of the capability of Nuclear Projects Nos. 1 and 3 and CGS. 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 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.
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 a Power Sales agreement, as amended, which extends the period through October 1, 2008. The agreement became effective November 1, 2002. Benton and Franklin County PUDs agree to pay Energy Northwest in exchange for the total output of electric capacity and energy delivered from the Packwood Generation Project. In addition, the Project is required to supply a specified amount of power to Benton and Franklin County PUDs. If power production does not supply the required amount of power, the Project is required to provide any shortfall by purchasing power on the open market. 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 Particio~ants also share Droiect 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
NOTE F-COMMITMENTS AND CONTINGENCIES Nuclear Project No. I 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 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 Northwest Open Access Network The Business Development Fund is a member of the Northwest Open Access Network ("NoaNet"). Members formed NoaNet pursuant to an Interlocal Cooperation In June 1994, the Nuclear Project No. 3 Committee voted unanimously to term Durinq 1995, a cirour from Grays Harb ers the Project.
ise by
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 2006 the Business Development Fund recorded net revenues of $128.4K 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.
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 $10.8 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 $15 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 Nuclear Licensing and Insurance Energy Northwest is a licensee of the Nu Commission and is subject to routine lic(
ry 1u M
An adjustment was made in FY 2006 for Nuclear Project No. 1 to account for costs incurred for decommissioning and site restoration. Costs incurred in FY 2006 of $0.48 million combined with current year accretion expense of $0.67 million and revision in future restoration estimates of $0.25 million resulted in a small decrease to the ARO of $0.06 million. Nuclear Project No. 1 has a capital decommissioning net asset value of $0 and an accumulated liability of $13.2 million.
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, 2006, the Nine Canyon Wind Project has a capital decommissioning net asset value of $0.4 million and an accumulated liability of $0.6 million.
ENEGY ORTWES ASSTRTRMN OBIATO Balance at June 30, 2005
$ 95.50 Current year accretion expense 5.00 ARO at June 30, 2006
$100.50 Balance at June 30, 2005
$ 1.43 Current year accretion expense 0.07 ARO at June 30, 2006
$ 1.50 Balance at June 30, 2005
$13.31 Less: Restoration costs incurred
(.48)
Current year accretion expense
.67 Revision in future restoration estimates
(.25)
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 ARO at June 30, 2006 S 13.25
I I'L I DILLLLJ n'l lll.J I
I IVIIIL ýýN T UN nMI 114Q I
FII( H M( )( II IY' BanK ot America Long Term AA-Aal Short-Term I
A-l+
I JPMorgan Chase Bank IP-i Long-Term Short-Term mbl)
AM[
Finai XL C rance (
L_
Energy Northwest pays special tribute to our Fiscal Year 2006 Board members and officers.
Edward (Ted) Coates, Chairman Dan Gunkel, Vice Chairman Roger Sparks, Secretary Tim Sheldon, Assistant Secretary Tom Casey Vera Claussen K.C. Golden
Asotin County PUD Benton County PUD Chelan County PUD City of Richland COVVIItZ County PUD Ferry County PUD Franklin COUnty PUD Grant County PUD Grays Harbor County PUD Kýttltas County PUD Klickitat COUIlly PUD Mason County PUD No. 1 Mason COUntv PUD No, 3 Okanogan County PUD Pacific Countv PUD No. 2 Seattle City Light Skarnania County PUD Snohomish County PUD Tacoma Povver Wahk!akum County PUD 2006 Annual Report design by WnSome Design, Inc, Photography, unless otherývse noted, by Mark Roberts Commercial Photography