ML13120A423

2012 Annual and Financial Report, Page 10 of Financial Report Through End

ML13120A423
Person / Time
Site:	Fort Calhoun
Issue date:	04/08/2013
From:	Omaha Public Power District
To:	Office of Nuclear Reactor Regulation
References
LIC-13-0042
Download: ML13120A423 (35)

Text

Debt Service Coverage for Electric System Revenue Bonds Debt service coverage for the Elect System Revenue Bonds was 2.21,2.18 and 2.47 in 2012, 2011 and 2010, respectively.

OPPD's senior lien bond Ideture provides that additional bonds may not be issued unless estimat net receipts for each future year shall equal or aeceed 1.4 times the d6 service on all Electric System Revenue Bonds outstanding, including the additional bonds being issued. ransacons in 2012, 2011 and 2010 for the NC2 Separate Electric System wee not included in the calculation because the Electric System Revenue Bonds ae not secured by the Separate System.Debt Ratio The debt ratio is a measure of finurll slvency and represents the shae of debt to total capitaliation (debt and net position).

This ratio does not inde NC2 Selpmteclcc System. venm Bonds since thls debt isecured by revenues of the NC2 Participation Power Agreements.

The debt rato was 53.1% and S1.1% as of December 31,2012 and 2011, respectively.

Retirement Plan and Other Post Employment Benefits The Company provides retirement and other post employment benefits (OPM) a ftime employees ae not covered by Social Security.

tom have ben takem to help oW eth increase in these costs with plan design c g MPan chmge have npacted most employees, ncldq an increase in the minim.m age for rtement eligibility from 50 to S5 effective in 2013, a mandatory Cash Balance Reti ent povislon fir employs hid ater December 31, 2012, and the establishene of a separate OPU Plan for employees hid atr December 31, 2007.The annual required cotributions (ARC) bf the defined employee benefit plans me calculated using acturi valuations and are fully fudd to ensure the Company is able to meet its obligations to plan members. Th ARC for th defined benefit Retirement an was $53,463,000, $47,58,000 ad $42,045,000 for the yea 2012, 2011 ad 2010, mpectively.

The employees' contribution percentage of pay was 6.2% for etch of the the yars in the period ended December 31,2012. Emoe contributions to the Retirement Plan were $11,517,000, $11,369,000 and $11,313,000 for the yeas 2012, 2011 and 2010, respectivly.

The ARC far the two OPUl plans totaled $30,69^,000, $29,11,000 and fo the yew 2012, 2011 and 2010, repetl. The increase in 2012 costs for benefit plans was primarily due to lower than epected investment returns on plan assets.The Retirement lN's Ne sus was reported In two dierent ways -the Katr value of assets as a pmentage of the present value of accrued plma benefits (VAR) and the actuarial value of assets as a p n of the actuari accrued ability (AAL).The PVAP is t p v f beneftsbased on ompensation and sere to thdate of the actuaral valuation.

The PVAPB is the almou the etirement Plan would owe particiats if the Retirement PN wet frmo on the valuation date. The ML Is the present value of Mrewrt benefits Wjut for asumptun for fut increases in mpe ion and srvce attributable to past accounting periods, wbhis more representative of the xpected benefit obligaons.

h Retirement Pan's funded stMu f the actuarial valuations was 81.8% 83% and 85.8 wing WVAR and 69.7%, 70.5% and 72% using AAM, as of Januay 1, 201Z2,211 and 2010, re.pectil Risk Management Practices An Enterprise Risk Management ) pogranm Is sed to kent, quantify, prioritize and mane risks tWoughout:

the Company.As part of the ERM program, secific riskmnitation plans and procedures ar maintained to provide for cused and consistent efforts to mitigate various risk expoimr Several coss-unctional risk committees ae utlzd to discuss and any potential rsks tht could hinder the achevement of OPMY strategic objectives.

Additionally, an Executve EM Committee has been establhed to specifically discuss risk-related issues at the sei managmet level of the Company. An overview of the EM program is provided to the Board of Dictors =aa .Power muketing and fue puicae actdvit e conducted within the norml crse of business, Risks asociated with power marketing and fuel contracting are manag within a fsk-management control frtameworL Fuel expense represents a significant portion of generation costs ad affects the ability to generate and marke competitiely

-power A risk-management working group is responsible for identifyi measuring and mitigating various risk posures reatd to power marketing and fuel prchase activities.

2012 OPPD Financial Report 10 OPPD competes in the wholesale marketplace with other electric utilities and power marketers for offsystem energy sales. To*successfully compete m this market, the Company must be able to offer ener at competitive pikes and obtain transmissionl services.

Energy market prices may fluctuate substantially in a short period of time due to changes in the supply anddemand of electricity.

Counterparty credit risks are monitored closely on an ongoing basis. Significant changes in the Company's energy* trading and marketing practices and procmses are anticipated with the mplementaton the Integrated Marketplace by the OSouthwest Power Pool (SPP). The risks associated with these chne are being idrtfe and pln are being esalse for their* mitigation.

A Rate Stabilization Reserve was established in 1999 to assist in stabiizing ra electric rates. Funds from this reserve wee ased to help finance higher fuel costs and unexpected energy purchases in 2011 due to the extended oa at FCS to lessen the imp Son customer-owners.

The funds were partially with FPPA recmries and insiune pwr ds in 2012. The balance of O the fund was $24,612,000 and $0 as of December 31, 2012 and 2011, repectively.

Addiin poceeds fm inum ce rcoveries were used to return the fund balance to $32,000,000 In Jmn 2013. The balance of the reserve was maintained at $3,000,000 a O of December 31, 2012 and 2011.* A Debt Retirement Reserve was atablished in 2003 to assist in managn the longterm risks associated with siglc capital* expenditures and related debt issuances.

This rsv is vied to meet challenges in rti debt and maintainin adequate debt service coverage ratios. The reserve was used to provide additional rue and fads of $17,0000 and M000,00 in 2012*and 2011, respectively.

With the strong financial results for 2010, $13,000,000 was added to the rerve to help me economic* challenges in future years. The balance of the fund was $14,000,000 and $48,000,000 as of Deember 31, 2012 and 2011, Srespectively.

In 2013, $3,000,000 was transferred to fad, which increased the fwa to $17,000,000.

The balance of meerve was $17,000,000 and $34,000,000 as of December 31,2012 and 2011, rmecvdy.The Company promotes ethical business practices and the highest stadards, in the reptng d W os of financial* informmation.

The Sarbanes4Oxey Act (Act) Jis intnde to strngten corporate gover anc fpubidy traded companiti Asa* ~~public utility, the Company is not reqluired to comply with the Act but the applicatio, of these requiements, wher appropilate,* eu continued public trust in OPPD, protects the Wiest of Its staeholders and s a s=a businre pctice. On of th mnt sigpificant requirements of the Act pertaims to manrgenets dociamentation and assessment of n a contros. The Co anys O management assesses internal controls for significant business processes that Imp fnacal por .This assessmen t Iues documenting procedures, risks and controls for these processes and assessing the effectveness and opeaton of the internall controls.

In addition, the Company contracts with an kinde n third party to adme ste the cipt, and*retention of employee concerns regarding business and financial p tices.Other Reserves SOther resv are maintained to recognize potential Aftes that aise in ft nomal course of sness. Addionl imation* about other reserves Mo*

• The Uncollectible Accounts Reserve is established for estimated uncollectible accounts from both retail and off-system sales, SAccounts Receivable is reported net of the rsv for retail sals. A $5,000,000 reserve for As = sales was estmshed by the Board of Directors.

This reserve is separately reported as a deferred inflow on the Statement of Net Position.O

• The Workers' Compensation and Public Lability Reserves are established for te etmad liability for current workers'* compenstimon and public liability claims.O .The Incurred But Not Presented Reserve is an insurance reserve that Is required by state law due to the Company being self-* insured for health cma costs. The reserve is based on health insurance claims that have been Incud but not yet prented for payment.11 2012 OPPD Financial Report 0 0 0 0 0 h CAPITAL RESOURCES Generating Capability Power requirements are supplied from the generating stations, leased generation and puinha of powet OPP owns a oeaes eight generating stations, seven of which have a maximum summer net accredited capability of 3,208.8 megawatts (MW). (The net capability of the Valley Station wind turbine is not accredited.)

The following table lists owned generating units by fuel source and identifies the maximrn summer net accredited capability (in MW) and percentage of the total for 2012.The following chart shows the change in ene sources as compared to ior yean due to he at FC O M ).Energy Sources (MWh)(in millions)3 4 3 2 1 0 Power U 2012 0 2011 0 2010 Renewable Capability including Purchased Power Contracts Renewable portfolio standards are currently mandated in several states but not in Nebruaka.

The lord of Directors has established a proactive goal to provide 10% of retail energy from renewable sources by 2020. The perentag of renewale e y increased from 4% in 2011 to 5.3% in 2012 and is expected to increase 15.1% in 2014. A purchased power contract with the Western Area Power Administration for 82 MW of hydro power is excluded from the goal.2012 OPPD Financial Report 12

• The following table shows the renewable generation owned or purchased 0 OPPD Owned Generation El iySato M~s* Valley Station (wind)Pd Windl Generation Suot OPPD Owned G* Akworth* ~Elkhor MVd Flat Water Pet-rhBroken Bow I* ~Croftoni Snus Subtotal Purchased Wind G* Total " Generation n of Deambe 31, 2012 0*2014 Pwdhed YAd Generation roken Bow 2*Pra.b,'e Dreew Subtotal 2014 Purchased W Total Expected Renewable Generation as of Decemler 31, 201 0*Capital Program Electric system requirements, includinig the ideafficatian of fuMe capital loa requirements ar servied by a renlable, divem and ecnwlmical powers SOperations, bond proceeds, investment i ,,come and cas on han Certain* ~~result of current FCS outage-related challenges.

Capta expenditure were* T~~he following table shows actual capital pogam expenditures, inicluding

• years and pojected expenditures for 2013 and 2014 (in millions).

• Capital Program 14 II Production

$306.5 $ 79.7 Transmission and Distribution 86.3 66.8 General 21.9 17.6 STotal $414.7 $166.1* ~Production includes expenditures related to generating fadhltides AMdtoru o FCS expenditures include the extended power uprate and other plant completion in 2013 has been poltponed to focus efth on the remta*completed, but no further related activites e fecasted primo to 201* , Production expenditures and projections, include additional capital c SA natural gas pipeline and other equipment m benginstalled at the stabilization fuel source as an alternative to fue oil.*Ransmission and distribution system upgrades include the instailation of Smaintai system reliability, enhance efliciency and respond to load growd* lines, new substations and equipment for mcreased system capacity.*General plant expenditures for 2012 and projected expenditures for 20131 equipment and information technology upgrades.13 2012 OPPD Financial Report (in MW).6.2 0.7 MaO 6.9 10.0 25.0 60.0 40.5 18.0 13.6 eneratio 167.1 174.0 45.0 200.6 Ind Generatlon 245.6 4 419.6 i we routiely evaluated to mmu current and future apply. Capital investment ae financed with renues fm capital expenditure halve been dered,* where possible, as a$17,027,000 under budget far 2012.ADowIIces fo unds used duWg coMntMun, f the last three Actual 2012 2011 2010$ 89.6 $103.3 $111.7 74.0 65.0 57.7 16.6 27.5 40.6$180.2 $195.8 $210.0 I nformation on signiflcarf expenditures folows.improvement prc The extended power upate scheduled for and operatlon of FCS. Acdvft that were in pre will be 5.st to comply with increasing environmental regulations.

Nebraska City Station to use natural gas for a start-up and new tenoloues and sustation and distribution facilities to.The projected expediure include the addition of transmission ard 2014 include the purchase of construction and transportation

• Fort Calhoun Station Outage Update*FCS was taken out of service for a normal refueling outag in April 2011. Outage activities wee suspended in June 2011 to pot facilities from rising river levels caused by the release of record amounts of water from dams along the Missouri River by the US.Army Corps of Engineers.

TheNRC placed FCS into a special oryof theirinspection manual, Chalpt 03S0, in December 2011. This Chapter is for nudear power plants that are in extended shutdowns with pue mance issu. A Confirutory Action Letter (CAL) with a restart checklist was Issued by the NRC in June 2012 and revised on February 26, 2013. FCS will rsm normal operations when all items on the NRC restart checklist ar resolved.Both the NRC's inspection and review process and OPPD's internal review process hav proceebd more slowly than oriinally expected and have identified additional action items that will require more time than previouy estimated.

The most signifIcant single action item identified was related to electrical penetrations in the containment building.

After thorough analysis, it was determined that the replacement of selected electrical penetrations between the contaiment bin and the gerl plat was the best long.term option for FCS. This project has an esmated cost of $10,0000 and will delay the expected restart of normal FCS operations until late In the second quarter of 2013. Cmmercially reasonablie elorts to restart CS are being made u qukkly as is prudently prticable, sbject to NIC regulatio and oversight A precise restart date cannot be deeund beau of ongoing inspections and unfinished items on the restart chckist.The extended outage has resulted in significant unplanned costs for OPPD. Internal cost redctions oua"e insurance proceeds and the use of regulatory accounting have lessened the financial Wat fromn these unexpected cos. The boad of DeMtors athorized the use of regulatory accounting to defer $70,627,000 of Recovery Costs (as previou dMe ) in 2012. The Recomy Costs will be amortized over a 10-year period after KS ope ons resume and the station's mratory ring is an increased to a more favorable NRC regulatory atgory. Any dday beyond the second quarter of 2013 willesult in additional costs. The hupact, If any, on OPPDYs financial position due to any delays in the restart dae beyond the second quarter of 2013 cannot be estimated at this time. Returning FCS to service continues to be a high priority as activities we being complekd to reolve NIC concerns and rntart normal operations GENERAL FACTORS AFFECTING OPPD AND THE ELECTRIC UTILflY ITNDSTRY OPPD and the electric industry continue to be affected by a nmber of fors that could Impat the competitiveness and financial condition of all electric utilities.

Environmental Issues The Cross-State Air Pollution Rule (CSAPR) was publishied on August 8, 2011, to Imprv ai quality by redcing power plant emissions contribtig to oone and fine-particle pollution In other states The final rule establishes, a capand-trad system, with state and unit specific allowance allomctons to achieve desired emission reductions for nimg oxide san f diox Implementation of Phase I of the final rule was scheduled to be in 2012,bu States Cort of Appeals for the Dlstct of Columbia issued an order on December 30,2011, stay" CSAPK pending udicial review. On Auls 21,2012, the federal court vacated R stng the rule exceeds the sta authority of the Environmental Prmection Agency (EPA). The EVA will continue administer the Clean Air Inersta Rule (CAR), the predeces to CSA.i pendi the pmlgtion of a valid replacement rule. The Staft of Nebraska is not cvered by CAIR; therefore, OPFD remains unafmected at this tim However; the Company continues to prepare for strictel iegulatim with the execution, If necessary, of ultra low-sf coal puchase apeement acquisition of additional renewable energy sousc continued Implementatio of sustinable energy and aenv mental stewardship Initiatives and comprehensive studies on opportunities for older coal-fired generating units.On December 16,2011, the EPA finalized the Mercury and ir Toxs Standard (MATS). Compance with this rule will be necessary by April 16, 2015. An additional yea may be granted by local aglencles to facilitate installation of polhltio control equipment.

In October 2012, the Company requested a one-year extension for Nebraska City Station Unit and North Omaha Station Units 1-5. In November 2012, these extensions were granted by the Nebraska Department of Environmental Quality and the City of Omaha, respectively.

Studies are being conducted to determine optimal gmen g options for OPPD as a result of these and other environmental regulations.

2012 OPPD Financial Report 14 O Federal Energy Legislation

• As a mult of the 2012 elections, the 113th Congress wi likely have a very similar position on energy issues to the previous Congress.SRepublicans continue to control the How of Representatives which greatly decreases the pombability of legislation for a carbon cap.and-trade pogram for the electric utility industry being passed into law through the end of 2014. In 2011, the Hause of Representatives passed legislation that would block efforts by the EPA to regulate greenhouse gas emissions under the Clean Air Act. In 2012 the House O of Representatives as passed legislation to block or delay other EPA regulatory proposals that are aimed primarly at foss-r electric Sgeneration facilities.

The Democratic-controlled Senate did not pas similar legislation and, given the same Senate leadership In the 113th Congress, would likely continue to block any similar legislation passed by the House in 2013 and 2014.Efforts on energy legislatio are likely to be very limited and would focus on mrket-based approaches that will help ceatejb and grow O the economy, as well as possibly addressing the ise of long-term storage of high-level nuclear waste. While provisions like carbon cap-* and-trade and a Renmeb Energy Standard or a Clean Inery Standad could result in substantial rat ncreases if enacted into law, neither is considered likely during the t legislative session of the 113th Congres OPPD will continue to monitor the sttu of er and dmaeha legislation in Congress and ontinue to povide input through pbI poDw Industry groups and the Nebrasa Congressional 0Deeaon* State of Nebraska Energy Legislation

• During the 2012 session, the Nebaska Legislaure did not enact my major changes affectIng the electric utility industry.

No mor co" Sareexpected in 2013.L 388 (LI. 31), C h C Pv keft to Public and hovide for Cosuction of Certain TRansmisso ines, was introduced in the Nebraska Legislature in Juary 2013. LI. 38 would provide eectc transmilssion ors, who ong to a Ra l* tansmission Orpniztion OM , the right of lst es to complet transmission projects in N&r*a that have been approved by O the 0. The is to clda that pbic power entities In Ndeb have the first right to consc own, and maintain approved SDuring the 2010 session, the Neb Lqgsatm enacted LMgst 111048 (1.1. 1048), WWn for Export LB. 1048 provides new requirements to Ao deve rs to build wind Vneation facilities for the purpme of exportiqg power outside the state of Nerka subec to certain reuments that prodc th ratae of cfumervwned utilities.

SDuring the 2000 sesskdio e Nersa Legislature enacted Le atie N 1901, which Impemented recommendations to determie whether*retail competitin would be beneficial fo Nebm k ratepayers.

eports for the Governor and Legislature on the conditions in th electric industry Indicating whether retail competition would be beneficial for Nebraska's ctin are prepared at the request of the Power kview SBoard. Al of the conditions for retall competition have not been me, based on the findings from the latest report, dated October 20.* Transmission Access eOn Apmb e, 2009, ore) b:mea mem ber of SPP, and all of the Companys transmission facilities were placed under* the SP open access transmission tU .In addon to ti administration services, SPP also provides reliability coordination services, generation seve shang, enMery imlc market services and transmission planning services to OPPD and SP's other transmission-owning members.SSEP is expected to chang to an Intrd Maeoce on Match 1, 2014. The Integted Mauketplace is a centrally deared energy market* where OEPD generation assets wil be dispatched and load obligations served accordingly based on inputs to the cearinghouse from all SEP Smarket p tipa. Concurrently, OPYs crent blancing Authority will be replaced by SPPs Consolidated ,alancing Authority A 345-,klovolt power line being built by OEPD and Kua City Pow and Lght (Midwest Transmion Project) will run from a substation at the Nebms City Station to Sibley Missouri This project is one of several priority ptojects as determined by SPP and is expected to relieve* congestion on the region' transmission system; imprve rMability on the naton's energy gid; provide an additional gateway for renewable O energy to reach utility customers ao eastern Nebraska, northwest Missouri and the surrounding region; and Ipm opportunities for wind energy distribution once it becomes available.

The prJect is currently in the transmission route selection phase, which indudes input f rom the public and key stalk oldr and is planned to be in service in 2017.SOPPD is a member of the Nidwest ability Orgad:aton relability region of the North American Electric Reliability Corporation.

A Sreliability region is responsible for ri t standads and compliance for the interconnected utilities.

15 2012 OPPD Financial Report 0 0 0 0 0 High-Level Nuclear Waste Repository Under the Federal Nuclear Waste Disposal Act of 1982, the federal government assumed responsibility for the permanent disposal of spent nuclear fuel. The Department of Energy (DOE) currently does not have a federal government facility available for the long-term storage of spent nuclear Ae OPP) remains responsible for the safe storage of spent nuclear fuel until the federal government takes deiM of thls wate. The DOE has ageed to reimburse the Company for allowable costs incurred for managing and storing spent nulear u and hilve waste due to the DOE's delay in accepting waste. No reimbursements were received in 2012. OPPD received$295,000 ad $5,811,000 from the DOE in 2011 and 2010, respectively.

Critical Accounting Policies The peparatio of fan staitments in conformity with generally accepted accoumlting principles accepted in the United States of America requires magement to mak estimates and assumptions that affect the reported amounts of assets and liablltie as of the date of the hiandl statemet the reported amouns of revenues and expenses during the reporting period and the disclosure of ctent amtes and bilities as of the date of the financial statements.

Actual results could differ from those estimat Those Wdgets coul materially imspact the financial sthatements and disclosures based on varying assumptions, which may be appropriate to use. In edition, the financial and opmerig environment may have a significant effect on the opeaon of the business and on the reu reported through the application of accounting measures used in preparing the financial statements and related disclosues, even if the natue of the accounting policies has not changed The olowing Is a is of accounting policies that are significant to OPPD's financial condirt and results of operatio and require marnem s mas sigsuKcanIt subjective or complex Judgments.

Each of thee has a higher likihood of resulting in maeally dierent rq d amrs under different conditions or using diftent assumptin Accw-ng Policies Fhvlroun"t Issues and Poluation-Remedolaon Nuclea Plant Decoimnisslonlng Regulatory Mechanisms and Cost Recovery Redtient Plan and Other Post lnefits Seit-Insuralace Reserves for Gai-s for Employee-lated Healthcare Denefits, Workers Compe tim and Public liability Uncollectible Accounts Reserve Unbilled Revenue udgme /Uncetantles Afectig A ,atlon# Approved methods for cleanup* Governmental regulations and standards* Cost estimates for future remedlatlon opto* Cost estimates for future

• Availability of facilities for waste disposal# Approved methods for waste disposal# Useful life of Fort Calhoun Station e External regulatory requirements e Anticipated future regulatory decisions and their Impact e Assumptions used in computing the actuarial liability, including expected rate of return on Plan assets* Plan design# Cost estimates for claims e Assumptions used in computing the liabilities

• Economic conditions affecting customers* Assumptions used in computing the liabilities e Estimates for customer energy use and prices

SUMMARY

OF THE FINANCIAL STATEMENTS The basic Financial Statements, Notes and Management's Discussion and Analysis are designed to provide a general overview of OPPD's financial position.

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

2012 OPPD Financial Report 16 0 0 S 0 0 0 0 0 0 0 0 0 0 0 0 0 0 S Report of Management The management of Omaha Pu blcPwer District (OPPD) is resposible for the prpaaton of the follwing financial.

statements and for their integrity and objectivity.

These financial Statemlnts conform to generally accepted accomnting principles and, where required, include amounts which represent managementis best judgments and estimates.

OPPD's management also prepared the other information in this Anma Rtport and is respnsWe for its accuracy and consistency with the financial statements.

To fuill its responsibility, mnwagement maintains strong internal contols supported by formal policies and procedures that are communicated throughout OPPD. Management also maintain a staff of internal auditors who evaluate the adequacy of and investigate the adherence to thee controls, policies and pmedures.

OFP) is committed to conducting business with Integrity, In accordance with the highest ethical st~andrs and In compliance with all applicable laws, rules and regulations.

OPPD has adopted a Code of Ethics for the Senior Executive and Financial Officers and the Controller, stating their responsiMilties and standards for professional and ethical conduct Our independent audiors have audited the financial statements and have rendered an unmodifled opinion as to the statements' fafiness of presentation, in all material respects, in conformity with accounting pinciples generally accete in the United States of America. During the audit, they considered OPPD'Ys internal controls over financial reporting as required by generally accepte auditing standards.

The Board of Directors pursues its oversight with resct to OPPD's financial statements through the Audit Cmmittee, which Is comprised solely of nocn-management directors.

The committee meets periodcally with the Independent auditors, internal auditors and management to ensure that all ar prpery dcharging their responsibilities The committee reviews the annual audit plan and any ommaIs the indqn auditors have relat to the internal control structure.

The Board of Directors, on the recommendation of the Audit Committee, engages the independent auditors who have urestricted access to the Audit Committee W. Gary Gates Pesident and Chief Executive Officer Edward E. Easteri Vice President and Chief Financial Officer 17 2012 OPPD Financial Report 0* Independent Auditors' Report To the loWd of Dkrtor Omaha Fitc Powe District* ~Omaha, Nebraska We have audited the acompanying financial statements of Omaha Public Power District (OPPD), which comprise the statments of net poston as of December 31, 2012 and 2011, and the related statements of revenues, expenses, and changes in net position, and cash flows for each of the three years in the period ended December 31, 2012, and the related notes to the financial statements, which coilectively comprise OPPD's financial statements.

ifMmmmts nm i ty e the RUm duM l Stfatmats*ManemeM is Mrenibl for te prep ton and fair presentation of these financial statements in accordance with acoutg pnci* enay accepted in the United States of Amef; this Includes the design, implementation, and mainteiance of internal control relevant to the preparation and far presentation of financial statements that ae free frm mateal misatement, whether due to fraud or erro AuifbtmWMadMty Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits* ~~~in accordailnce with audtin sandards geneally accepted in the United States of America. Those standards reqire that we plan and ped n the audit to obtain r sona assuranceabout whether the financial statements a free from material misstement.

An audit invoilves p mf an plocedures to obtain audit evidence about the amounts and disclosures In the financial statemeint The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstement of the financial statements, whether due to frand or erroc In making those risk assessments, the auditor considers iternal control relvant to OPPIYs preparation and fair presentation of the financial statements in older to design audit procedures that ae appropriate in the circlimstances, but not for the purpose of expressing an ophiion on the effectiveness of OPIPs intemal control. Accordngl, we express no such opinion. An audit also inciudes nevau g the approprteness of accounting policies used and the reasonableness of significant acounting estimates made by management as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained Is sufficient and appropriate to provide a basis for our audit In our opio the fanc sttments reerred to above present fairly, in all material respects, the financial position of OPPD as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three yea in the period ended December 31, 2012 in accordance with accounting principles generally accepted in the United States of America.Jmpuhs of MattW As discussed in Note 1 to the financial statements, in 2012, OPPD adopted new accounting guidance to conform to Government Acunting Sandards Board Statements No. 63, Fmaoa R""epor ofDferre Ouos ofRsowes,ws mof RAwves, and Net PoSitir, and No. 65, Iems PreMus kpr as Assets and Our opinion is not modified with respect to this matte 2012 OPPD Financial Report 18 0 0 0 0 0-eure S.. lma1y biafrrmtim Accounting principles generally accepted in the United States of America require that the Marnaement's Discussion and Analysis on pags 2 through 16 be presented to supplement the financial statements.

Such information, although not a pat of the financial statements, is reluired by the Governmental Accounting Standards Board who considers It to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the infrmation and comparing the information for consistency with managements responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the financial statements.

We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with suffiient evidence to express an opinion or provide any assurance.

DELOrri & TOUCHE LIP Omaha, Nebukh March 21, 2013 19 2012 OPPD Financial Report 0* Statements of Net Position*as of December 31, 2012 and 2011 ASSETS 2012 2011 CURRENT ASSETS Cash and cash equivalents

..............................................

$ 60,456 $ 30,661 Electric system revenue fund ............................................

12,248 Electric system revenue bond fund ........................................

6,"90 60,464 Electric system subordinated revenue bond fund ............................

6,440 6,445 Elctric system construction fund .........................................

324,191 192,427 NC2 separate electric system revenue fund .................................

13,827 13,782 NC2 separate electric system revenue bond fund ............................

arms 8,504 NC2 separate electric system capital costs fund ..............................

3,371 3,819 Accounts receivable-net ...............................................

15,,99 125,213 Fossil fuels -at average cost .............................................

46,485 51,683 Materials and supplies -at average cost ....................................

109,199 101,610 Other (Note 2) ........................................................

M A 2D,307 Total current assets ..................................................

I4" 6 6 627,163 SPECAML mPuPm)E FUNDS .at fair value Electric system revenue bond find -net of current ...........................

6,%44 54,914 Segqated fund -debt reirement (Note 3) .................................

14,M0 48,000 Segrqepted fund. rat stabilzation (Note 3) ................................

24,612 Segegated fund -other (Note 3) ..........................................

4,19 30,306 Sfunds (Note 3) .........................................

3 4 ,724 336,891 Total special purpose funds ...........................................

4363 470,111 UTnMlf PLANT -at cost Electric plant .........................................................

S,6 ,(630 4,943,363 Less accumulated depreiation and amortization

............................

U1A.0 1,741.1%Electric plant -net .....................................................

3,241,966 3,202,167 Nucear fuel -at amortized cost ..........................................

100,75 83,730 Total utility plant -net ...............................................

3,342,731 3,M ,897 0TUM LONG-UhI ASSETS (Note 2)..............................

200,24713 I TOTAL ASSETS ........................................................

4,836W13 4,514.452 DEFERRED OUTFLOWS Of RESOURCES Unamortized loss on refunded debt .......................................

33,000 20,820 Accumulated decrease in fair value of hedging derivatives (Note 9) ..............

502 1.444 Total deferred outflows of resources

..................................

33,502 2264 TOTAL ASSETS AND DEFERRED OUTFWOWS ............................. 1 $4,536.716 See Motes to fWaWnAsmenfts 2012 OPPD Financial Report 20 0 0 UAInUS 2012 2011 CURREIT UAIHBflFS Elctri system revenue bonds (Note 5) .....................................

$ 26,125 $ 29,620 SEectric revenue notes -commercial paper series (Note 5) ..........................

1508,* NC2 separate electric system revenue bonds (* oe) ..............................

28 2765 SSubordinated obligation (N S) ..............................................

406 372 A ountspa ...........................................................

p9 M 826 Acauedpayments in lieu of taxes .............................................

29,M 27,156 A c c r u edet..............

n t er...............

t.. 39j36 3A2M*amed pyrol .............................................................

d313 29,337 NC2 particpant deposits (Note 7) .............................................

9A,939 Other (Note 2) ..............................................................

• Total cument liabiliaite

....................................................

30.*LIANLYHES PAYABLE FROM SEGREGATED FUNM (Note 2)........

N*LONGTRM DEE (Note 5)* Electric system revenue bonds -net of cunnt ................................

102,375 1,24, 0 Electric system subordinated revenue bonds .....................................

34M70 346,730 Bectric revenue notes -commercial pap res ..................................

150,000* * .................................................................

2 ,117 27,756 NC2 separate dectdc system revenue bonds- net of cure ........................

239,S 242,S60 Sodnated obligation

-net of current............

............................

0*Total longterm ddbt ...... ..........

.............................

2,116,900 0 733*Unamrinotzd discouts and premiuns.................................

i$* Total lo,,mdtnet

..................

l................................2 ,M Z1076 O'7ML'ImnUt M Seom s sg ..................................................

349,724 336,891 Other (Note 2) .........................................................

BA 15,219 STotal otherlibte

.................................................

36,114 3M2,11o* COlIMEN i AND CONTINGENCI ote 14)TOTAL LIAB T ....................................................

3,01,3 2,706,233 O DEER INBOWS OF RESOURES Rate stabilization reserve (Note 8) .........................................

32,0 32,000 O Debt retirement reserve (Note 8) ..........................................

17,0W 34,000 O Uncollectible accounts reserve -off-system

..................................

SAN* Total defieed infls ofr c ..................................

71* NeT POStION O Net investment in capital assets ...........................................

1,=,9O, 1,435,789 O Restricted

.............................................................

25,2 5 37,200 Unrestricted

...........................................................

.6 ,0 2K* Total net position ...................................................

1,814312 1,759,483 TOTAL LUABIMIIES, DEFERR MILOWS AND NET POSmON ............

$43676 see notes to finacia tatements 21 2012 OPPD Financial Report S

• Statements of Revenues, Expenses and Changes in Net Position*for the Three Years Ended December 31, 2012 2012 2011 2010 OFERATIN uIVEMES 0101111s:11,1)

SRetaild .................

s....................................

$ 80 ,906 $ 852,678 $ 772,816 Off-system sales. ................................................

123,1M 159,732 184,374 Other electric revenues...............................................

2,S29,160 Tot operating

......................................

1,067,997 1,041,72 986,350 OPERATlG EPN Operations anld maintenance Fuel ........................................................

236,U 7 276,030 252,275 Puihaed power ..............................................

731, 6 64,079 40,2 2 Po cto ...................................................

22 ,559 23S,004 223,050 Tranm lsdlon .................................................

21,99 15,351 14,225 Distrition..................................................

37,073 35,965 39,357 customer accounts ............................................

13,94 14,024 14,213 Customer service and Information

................................

16,30 13,537 16,015 Administrative and ne......................................

14L6j 13Z 121,537 Total operons and mitenance

..............................

770,73 789,516 720,957 Depredatim and amortization

....................................

126,794 126,077 123,193 Payments in lieu of taxes .........................................

2,9 17 27,551 Total op ting expenses ......................................

9 M1 943,81 872,001 OPERATNG INCOM .........................................

119.036 97.92 114,349 Contrtionsin a ofconstruction

................................

13,066 7,470 3,867 Reduction of plant costs recovered through contributons in aid of comtruction

..........................................

(13,066) (7,470) (3,867)Decommissioni funds -investment income ........................

12,833 14,631 16,631 Decommissio id -reinvestmet

.............................

(12,M) (14,631) (16,631)Investment income .............................................

2,041 3,121 2,815 ADowances for funds used during constructon

...................

14234 12,15S 8,699 Products and services-net ........................................

3,279 2,596 2,720 Other- net (Note 10) ............................................ I1905 7,021 Total other income -net ...................................... 37.Z,7 21.255 IN E S ...........................................

92,625 1 ! 87,177 NT NOME RM SPECIAL u ITEM...........................

HI9 46,060 48,427 SPECIAL ITEM (Note 11) ........................................

(8,380)NIX INCOME .................................................

54,M 54,440 40,047 NET POUiHON, BEGINN-NG OF YEAR ..........................

1,7591483 1,705,043 1,664,996 NET POITION, END OF YEAR .................................

1 2 $11759,4983

$1,705,04 See nofts to finacia statMents 2012 OPPD Financial Report 22 0 Statements of Cash Flows for the Three Years Ended December 31, 2012 S 0 0 S 0 0 S 0 2012 2011 (Wouwuis)2010 CASH ROS FOM OPEA ACTVITIES Cash received from retail customers

......................................

Cash received from Offsysm WU prt ...............................

Cash received from insurance companies

..................................

Cash paid to opermatis and maintenance

.........................

Cash paid to offsystem counterparties

....................................

Cash pa to employees

................................................

Cash paid for tn lieu o taw and othe taxes ...............................

Net cash -from oprating vites ................................

CASE ROWS RW CAPITAL AND REAM FDUNCOIG ACTIVnIM Proceeds from i n g-ten b ......................................

Principal reduction of .........................................

Interest paid on debt ..................................................

aquisit and constuctio of capital Assets ..............................

Proceeds from NC2 participants

..........................................

in aid of construction and other remubursements

..........

Acquisitim o n uc fu ..............................................

Net cash used for capital and related ancing activities

......................

CANE ROWM FPOM DUlll ACTIV Purchases of investments

...............................................

Maturities and sales of investments

.......................................

Puottoes ofivsm ert fo deomsinn ftunds ........................

Maturities ad sales of investments ecommi ng funds ................

hw t e t n o e.. .... ..... ..............

o~o .o~o ....oo o o .o o.... ......Net cash povided frm (used for) investing activitie

........................

CHANG DI CASE AND CASM M ..........................

CAM AND CASE BQMVAVALUI1 1161111110 OF YEA ................

CAN AND CAMS EQUIVALUII END 09 i .......................

EECAWICIJAION Of OFUATM NG K)ME TONMIT CASE OVMUD NFOM OFUAMLNG ACrIVnITS-m in ico e .....................................................

Adjltments to reconcile operating income to net cash pov- from -TUA activities Depredation and amortization

........................................

Amortizatim on nuclear fuel ..........................................

Chanm in mets and lbilities Accounts oea .........

... o...........

.........FoSSOlfu$ls........................................

Materials and supplies ...............................................

Regulatory asset for ............................................

Accouts payable ...............................................

Accr ed Payments in lieut a mes .........................................

Ac uedp yrol .........................................................

Accued p -t i out e costs ..........................................

Debt retiLement resew .............................................

Oher........

....................................

Net cash provided from operating activities

................................

NONCASH CAPITAL ACTIVITIE Utilty plant addtions from outstanding lialiles ...........................$ 820,042 $ 821,041 107,733 167,152 169,903 17,65 7,000 -(626,679)

(623,956)

(555,820)(59,940) (41,719) (13,290)(156,361)

(147,173)

(128,784)~ ) (27,853)8467,314 120,000 (2619,15)

(348,694)

(46,182)(106,411)

(102,072)

(5,491)(178,755)

(206,99) (199,474)2,M 2,84 2,805 13,29 10,213 11,664 (072) (192443) (2,2)(6,M6) (714,429)

(84I,357)743,025 745,472 813,916 (291,M3) (297,537)

(369,587)291,237 297,537 36957 (11366 34,106 J 29525 (4,844) 14,552" I66 35,50 20,953 WA60,416 $ 30,661 $ 35,505$119,036 $ 97,952 $114,349 128,794 126,077 5,873 (25,54)(289)3,237 3,432 1,575 2,493 (17,500)(61,197)(4,572)14,334 (8,899)(35,345)8,770 364 (4,218)(24,840)(24,000)13493 123,193 20,738 (23,517)(4,339)(7,111)(5,671)2,957 6,056 24,840 13,000 2,661$ 30,590 $ 25,025 $ 39,678 see 3 22es to financal Raemprt 23 2012 OPPD Financial Report Notes to Financial Statements as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Orpgalued Dudelm se. -The Omaha Public Pow District (OPPD or Company), a political subdivision of the state of Nebraska, Is a public utility engaged in the gfnation, transmission and distribution of electric power and energy and other r lated aclivities.

The Boad of Dlectolsis authocized to establish rates. OPD is generally not liable for federal and state income or ad valorem taxes on property;, howeve payments in lieu of taxes me made to various local governments.

Duos o Accaemut -Te fnancuial stments arm presented in accordan with generally accepted accounting principles (GAAP) for proprietary fiud of governmental entite Accounting records ma e maintained generally in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (WC) and all applicable pronounce-ments of the Governmental Amounting Stnad lourd (GASS).O"1 applies the accountilg policies established in GASI Statement No. 62, Codic-ton ofAmu and Finam=al Rekprt.it Guidace in tabWvowm 30, 1W9, FASE ad AMCA fowmt, and GASB Statement No. 65, Ites I Pev Repod as Asseb wnd W s This guidace permits an entity with cost-bused ras to include costs in a period ot than the perod in which the osts would be charged to expeme by an unregulated entity if it s probable that the costs ll be recovered through at charged to customm. This guidance also permits an entity to defer revues by recognizing liabilities to cover future expeditures.

The guidance apples to OPD because the raes of regulated operatiom e established and approved by th governingboard If, a a result of changes in regulation or comptition, the ability to recover thes assets and to sat these liabilities would not be assued, 0PPD would be required to write off or write down such regulatory assets and liabilities, unless some form of transition cost recovery continues through established res In addtlion, any impairment to the carrying costs of deregulated plant and iventory assets would be determined.

There were no write-downs of regulatory assets In any of the thre years in the period ended December 31,2012 Omult lun tl mua hipem. -Revenue and expenses related to providing energ services in connection with the Companys principal ongoing operations me clasiffied as operatin.

All other revenues and expenses ar classified as non-operating and eported as other Income (expenm) on the Statements of 1evenues, Expenses and Changes in Net Position.Revelue RKepitlus

-Electric operating revenues me recognized as earned. Meters ae read and bills are rendered on a cycle besh Revenues earned afte meters ae read me estimad and accrued as unbilled revenues at the end of each accounting period-Cash an Cub Eqlvdmt -The operating fund account is called the Electric System Revenue Fund (Note 3). Highly liquid investments for the Electric System Revenue Fund with an original maturity of three months or less me considereed to be cash equivalents.

Cash and cash equivalent in the Special Pp Funds a reported as investments.

Accemuts RoculvOk -Accounts Receivable includes outstanding amounts from customers and an estimate for unbilled revenues.

An estimte is made for the Ieserve for Uncollectb Accounts for real customers based on an analysis of the aging of Accounts Receivable and historical wrieofs net of recoveries.

Additional amounts may be included based on the credit risks of Asig ant parties. Accounts Revciable incudes $41,415,0 and $36,896,000 in unbie revenues as of December 31, 2012 and 2011, respectively.

Acounts Receivable was repored net of the Reserve for Uncollectible Accounts of $1,020,000 and$774,000 as of December 31, 2012 and 2011, respectively.

Utily PUt -Utility plant I stated at cost, which includes property additon, rplacements of units of property and better.ments. Maintenance and replacement of minor itms ae charged to operating expenses.

Costs of depreciable units of electric plant retirements ae elminae from electric plant accounts by charges, less salvage plus removal expenses, to the accumulated depreciation account. Electric plant includes both tangible and intangible asset Intangible assets include the costs of software and lienses. Electric plant includes construction work in progress of $394,415,000 and $360,085,000 as of December 31,2012 and 2011, respectively.

Electric plant balances as of December 31, 2011, activity for 2012 and balances as of December 31, 2012, were as follows (in thousands):

2011 Addiom Detirenusts 2012 Electric plant $4,943,363

$177,226 $(33,959)

$5,086,630 Less accumulated deprecation and amortization 1,741,196 13746 (33.978) 1,844,664 Electric plant -net 13,202.167

$ 39.780 L--1.2 $3 N21 2012 OPPD Financial Report 24 Allowances for funds used during construction, approximating the current weighted average cost of debt, were capitalized as a 0 componentof the cost of utility plant These allownces for both construction work in progress and nuclear fuel were computed* ~at 4.3% for the years ended December 31, 2012 and 2010, and 4.2% for the year ended December 31, 2011.* ~The carrying amount of long-lived, assets fur impairment are periodically reviewed.

An asset is considered impaied when the magnitude of the decline in service utility is significant and not part of the normal life cycle of the capital asset Impaired.

capital assets that will no longer be used are reported at the lower of carrying value or fair value. Impairment losses on capital asset that* ~will continue to be used are measured using a method that best reflects the dimininshed service utility of the capital asset.FS assets were not considered impaired because the service utility has not been diminished and the extended outage is not unusal to the life cycle of a nuclear generating station. KS is expected to return to service In 2013. There were no write-downs

• ~Cuutrlhdiums Is Ai d ofCembuk tI (aAC -Payments are received from customers fur construction costs primarily relating to the expansion of the electric system. FlRC guidelines are followed in recording CIAC, which direct the reduction* ~of utility plant assets by the amount of contributions received toward the construction Of Utility plant. TO comply with GASI* ~~Co adifcton Section NSO, ?Jezcwdia Tiusuciw (formerly GASI Statement No. 33, Amcoutb~ and Financil Rgtqft Nw* ~ ~ ao ex h umlanclleu), while continuing to fallow FERC guidelines, CIAC is recorded as other income and offset by an expense in the same amount representing the recovery of plant costs. CIAC from participants for the capital costs of NC2 was $4,725,000

• and $3,407,000 foe the years ended December 31,2012 and 2011, respectively.

CIAC from NC2 participants was inin fucntfr* ~the year ende December 31,2010.* ~~Depremtdeta and Amartinatfu

-Depreciation for assets, is computed on the straight-line basis at rats based on the esti-mated useful lives of the various classes, of property.

Depreciation expense for depreciable property has averaged approximately

• 27.9% for the year ended December 31, 2012, and 2.8% fur the year ended December 31, 2011 and 2010.* ~Amortization of nuclea fuel is basled on the cost thereof, which is prorated by fuel assembly in accordance with the thermnal energy that each assembly produces.

Inagble~ assets are amortized over their expected usefu life. Amortization of intangbl 0 assets~, Included within depreciation and amortization expens, was $4669,000, $4,478,000 and $3,940,000 fur the years ended* December 31, 2012, 2011 and 20,10, respectively.

In 2009, NC2 was placed in commercial operation.

Half of the output Is sold under 40-year Participation Power Agreements (PPMs). Cerabin participants funded their share of construction costs with NC2 Separate Electric System Revenue Bonds. These* ~~participants awe billed for the debt service related to these bonds. The amounts recovere fur debt service fur the electric plant construction and other coats are included in off-system sales revenues.

The revenues related to principal repayment will equal related deprecatio and othe deferred NC2 expenses over the 40-year term of the "PAs To maintain revenue nieutrality in the interim ye, a regulatory assed was established to aeut expenses and the amount included in off-system sawe revenues fur principal rpayment.

This regulatory asset will increase annually until 2030. After 2030, as pn cipal repayments aceed deprecia-tion and other ddefeWe expenses, the regultory asset will be reduced annually by recognizing deferred depreciation and other a~~~~t 43 teym until itselminaio 31, 2D012 whic s10 thand 4ofr the inital enet D merm 31, the11.TIn 2004, the boad of Diro appved as a ng in the depredation estimate for Fort Calhoun production plant assets to 2043, which Is ten years beyond the term of Fort Calhoun Station's (KS) current operating license. A regulatory asse was established fur the d leence in depreciation epense resulting from the use of the estimated economic le of the asset versus the license sterm. The rducýt in depreciation xpense will be recorded each year as a regulatory asset in deferred charges until 2033. The S regulatory asset will be reduced through the recognition of depreciation epense oe the assets' remaining economic l in the years 2034 through 2043.* ~~Nwclea Fue Diapoend Cats -Permanent disposal of spent nuclear fuel is the responsibility of the federal government under* an agreement enteried into with the DOE Under the agireement, there is a fee of one mfi per kiowatt-hour on net electricityand sold from KS. The spent nuclear fu disposal costs are included in nucl fuel amortization.

and are collected from customers as part of fuel costs. There were no nuclear fuel disposal costs for the year end December 31, 2012. Nuclear fuel S disposal costs were $1,124,000 and $4,073,000 for the years ended December 31, 2011 and 2010, respectively.

The agreement eur the federal government to begin accepting high-level nuclear waste by January 1998; however, the DOE does not have a storage facility In May 1998, the United States Court of Appeals confirmed the DOE's statutory obligation to ac-* cep ent fuerby 998,butree thereques at amove-fuelorder beied. InMarch2O QPPD, alongwithanumber of other utilities, filed. suit against the DOE in the United States Court of Federal Clams alleging breach of contract.2S 2012 OPPD Financial Report Notes to Financial Statements as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 In 2006, the DOE agreed to reimburse OPPD for allowable costs for managing and storing spent nuclear fuel and high-level waste Incurred due to the DOE's delay in accepting waste. Applications are submitted periodically to the DOE for reimbure-ment of costs Incurred for the storage of high-level nuclear waste and any reimbursements are included in CIAC.Nuclisn D kf g -The Board of Directors has approved the collection of nuclear cmosts sed on an Indepedent engineering study of the costs to decommission FCS. lased on cost estimates, inflation rates and fund earnings prections, no funding has been necessary since 2001. Decommissioning funds ae ported at fair value. The decommission-ing cost lablity is adusted for investment Income and changes in fair vale resulting In no impact on net Income. Invest-ment income was $7,534,000, $8,873,000 and $9,898,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

The fair value of the d s g funds increased

$5,299,000, $5,758,000 and $6,733,000 during 2012,2011 and 2010, respective.

The present value of the total decommissioning cost estimate for KS was $733,314,000 and $717,548,000 as of June 30,2012 and 2011, respectively.

Iquduy Assets amd UnIMitis -Rates for regulated opertions me established ad apprve by the Boad of Directors.

The provisiom of GASI Statement No. 62 and GASB Statement No. 65 ae applied, and under this guidance, regulatory assets are rights to additional revenues or deferred expenses, which me expected to be recovered through customer rates oe some futue period, and regulatory liabilities are reductions in earnings (or costs recovered) to cover future expenditures.

A Fuel and Purchased Power Adfustment (FPPA) was implemented In the rate *uc a 2010. The Boad of Director au-thorized the use of reglatory accounting to maintain reven neutrality by matching MW rvum avtrbe to fuel ard puhaed power coats with the actual costs incurred.

As a euit of the extMd outage at KCS, additional fuel and purchased power expenses were incurred, which resulted in FPPA under-recoveries of and $36,8710 fmr the years ended December 31,2012 and 2011, respectively.

The FPPA regulatory assets were reduced for customer cections of $11,969,000 and KCS outage insurace recoveries of $36,643,000 in 2012.The Regulatory Asset for FPPA, included in Other Current Assets, was $19,95S,000 and $11,969,000 as of Decmber 31, 2012 and 2011, respectively (Note 2). The Regulatory Asset for FPPA, included in Other Loa isma Assets, was $12,422,000 and$23,645,000 as of December 31, 2012 and 2011, respectively (Note 2). This regdatory met represented the rights to addiional revenues based on incurred expenses due to under-recoveries of fuel and puchased power costs.Additional regulatory assets included in Other Long-Term Assets consist of defed auagci coats and other deferred expenses for FCS and NC2. In 2004, the Bond of Directors approved a chang in the deptedation estimate for KCS production assets to 2043, which is ten years beyond the term of the current operating icense. In May 2W9, NC2 was placed in commerdal opera-tion. As prviously noted, certain NC2 expenses were de ed to maintain revenue n rlty from transactions with putki-pants who funded their share of construction costs with NC2 Sepamte Electric Systm Bonds. In June 2012, the board of Directors athorwd the use of regulatory accounting for debt issuance costs because of new accounting standards which would have required these costs to be expensed In the period Incurred.

These costs wig continue to be amortized ve the life of the associated bond issues consistent with the rate methodology.

In September 2012, the load of Diectors the use of regulatory accounting for significant, unplanned operations and maintenance coo incured at KCS to address concems from the Nuclear Regulatory Commisslon (NRC) and enhance operations.

These costs will be amoFrie over a ten-yea period commencing with KS's return to service.The balances of the Regulatory Assets as of December 31, 2011, activity for 2012 and balances as of December 31, 2012, wee as follows (in thousands):

2011 Adifiam Iehuwtm 212 Regulatory asset for KS- Recovery Costs $ -$ 70,627 $ $ 70,627 Regulatory asset for KS -depreciation 48,477 6,228 54,705 Regulatory asset for NC2 31,127 8,823 (2,83) 37,067 Regulatory asset for FPPA 35,614 45,375 (48,612) 32,377 Rglatory asset for financing costs 18,36 1J87 (2,4) 1 L = $132,923 S5.5) $1,4 2012 OPPD Financial Report 26 Regulatory liabilities, which me deferred inflows of resources, consist of reserves for debt retrement, rate st atn and uncollectible accounts from off-system sales. The Debt Retirement Reserve was established for the rtirment of outstanding

• debt and to help maintain debt service coverage ratios at appropriate levels (Note 8). The R StabilizatiRmsve was*established to help maintain stability in OPPIYs long-term rate structure (Note 8). The Reserve for Uncollectible Accounts from off-system sales was established to recognize a loss contingency for uncollectib acconts from offsystem sales customers*based on the greater of $5,000,000 or an estimate (as defined) considering the previous y's accounts receivab balances for off-system sales customers*The balances of the Relatory liabilities as of December 31, 2011, activity for 2012 and balances e of December 31, 2012,* were as follows (in thousands):

2011 Addtkm 19ctm 312 Debt Retirement Reserve $34,000 $ $(17,000)

$17,000 Rate Stabilization Reserve 32,000 -32,000 Reserve for Uncollectible Accounts from off-sysnte sales S,000 -S,000* Accmud Pedactim Outge Cob -Costs of maor planned poduction outages with tumatfd iMcmeal and maintenance expemes of $5,000,000 or more are accrued during the pe-od after a station is retuned to srie =ti It is taken out of service for a planned outage. CS sWt a major refuling and outage in Ap1 2011". Ou activities were suspended to focus n flood mitigtion dorts, but wer resumed in Septmber 011. in Dectimb2011, the* ~~NRC placed FCS into a special caftgr of their Vinsecio manual1, Chapter 0350. ThM Chapter Is for nDe.K -h that aWe in extended shut-downs with performance defidencles.

Efforts are under way to sdsacol a6dees al pfefoman concerns.

Normal opmtons of FCS me expected to resme in 2013. The next majo planned prducdon outW is scheduled*to begin eighteen months after KS is rturned to serike. The were no accrued prductin outg costs as of December 31, 2012 and 2011.* ~~Natural Go luveatwi.

sd Caftiacts

-Natural gas inventorie are maintained for the Cass Covaity Staton. The weighted aver cost of natural gas consumed is used to expense natural gas hom inventories.

OPF) is eposed to mae prce fuctua tions on its purchases of natural gas. The Company may enter into futures contracts and purchs op to mage the risk of* volatility In the market price of gas on anticipated purchase trsactions (ote 9).* Net FealPUN= -Net position is repoted in thre sepaat components on the Statement of Net Position.

Net investment in Capital Assets is the net position share attributable to ae utility plant nasets r ced by outanding related deb Retricted*is the share of net position that has usage restraints imposed by law or by debt covenants, such as certain rvenue bond funds*and segregated fuds, net of related liabilities.

Unestricted is the shar of net position that Is neither restricted n invested in capital assets.use at Estimate -The preparation of financiai statements in conformity with accounting princdl generally accepted in the*United States of America reures management to make estimates and assumplio that affect th reported amounts of assets*and liabilities and disclosure of contingent assets and liabilities at the date of the financial sttemets and the eported amounts of revenues and expenses during the reporting period. Actual results could differ from those esdtates.*Recet AcwimaitlqgPrioweu

-In December 2010, GASI issued Statement No. 62, Ce~ A~e of Accaath and* FnanlR f Guimdc W m n Pre-N.mov f 30,1989 FASBJwad AICPA Pfmunomcimt.

This statement is intended to enhance the usefulness of GAS's codification by tncorpoating certain accounting guidance issued by the Financial Accounting Standards Boards (FASB) and the American Institute of Certife Public Accountants (lCPA) tha is applicable to state and local*governments into GASB's authoritative literatute.

This statement is effective for reporting periods beginning after December 15, 2011, and was implemented in 2012. The implementation of this statement had no significant impact on OPPlys financial posi.-tion, results of operations or cash flows.27 2012 OPPD Financial Report Notes to Financial Statements as of December 31, 2012 and 2011,* and for the Three Years Ended December 31, 2012 In June 2011, GASS Wsud Statement No. 63, Pwia of Defimd Oulws of Resoums, Deftwd Infow of Resow=, and Net Posim. This statement provides financial reporting guidance for defered outflows of resources and deferred inflows of resources, which ae distinct from assets and liabilities.

This statment also amends the net asset reporting requirements in Statement No. 34, BAuk Fbxial Stuemd-aw MwWamns Discssion od Awnsis- Stae and Local Govmenm , and other Pr m t by o9orting deferred outflows of resources and deferred inflows of resources into the finanl ste-ments. This statement wa effective for reporting periods beginning after December 15, 2011, and was implemented in 2012. The Implementtion impaced the Statement of Net Position, as certain assets and liabilities were reclassified as deferred outflows or deferied inflows.In Much 2012, GASI Issued Statement No. 65,/ts Nk. Repoqote as Asuft an Liabiliks.

This statement establishes ac-* ~counting and financial rportin stanldardsi that reclassify as defere outflows of resourices; or defered inflows of resources, cean itms that wm prioly reported as assets and liablti7.

requirements of this statement will improve financal reporting by clarifyi the apppriate use of the financial staement elements to en consistency in financial eporting.

This statement is effective 14 repori riods beginning after December 1S, 2012, and was implemented In 2012. The implemen.tation impacted the Statement of Net Position, as certain assets and lbilitie were reclassified as deferred outflows or deferred inflows. This changed total assets, as previously reported, from $4,S10,896,000 to $4,514,452,000 and toa liabilities from$2,751,413,000 to $2,706,233,000 as of December 31, 2011. The diffences were due to the reclassification for dered inflows Und outflows In June 2012, GASU isued Statemant No. 68, g and Fbwinvi R t -an me d ofGASE Stamen No. 27. The ective of this statement is to ImpMve accounting and financial report for penions. This statement requires govemen to moa cnedweasvy ad comprably measure the annual costs of pension benefits.

This statement also enhamces accountaly and Vansparency throwu revised and new note disclosures and required supplementay information.

This statement is effective for rprting perods beginning after June 15, 2014. The impact of this statement on financial position and mru of operations is in the process of being evauatedL 2. ASSETS AND UAMIUTIES DETAIL BALANCES Other Cwrmt Am The as of Decmber 31 was as follows (hi thousands):

2012 2011 Regulatory ae for FPPA $19,955 $11,969 Prepayments 4,948 4,369 Sulfur dioxide alwance inventory 2,799 2,580 Interest receivable 642 1,113 Commodity deriatve instruments (Note 9) 416 91 Other 18__._5 Total $2 3$21.&307 oter Iuq.Tm Austs The composition as of Decembe 31 was as follows (In thousands):

2012 2011 Regulatory asset for PaS- Recomy Costs $ 70,627 $ -Regulatory asset for " -depreciation 54,705 48,477 Regulatory asset for NC2 37,067 31,127 Regulatory asset for financing costs 17,266 18,360 Regulatory asset for FPPA 12,422 23,645 Sulfur dioxide allowance inventory 1,625 3,250 Other 6.422 TOWt20l4 $131,2811 2012 OPPD Financial Report 28 S* ~Other Cerreat Lhbities The composition as of December 31 was as .lows (in thousands):

201 2011 Unearmed revenues $ 2,441 $ 5,785 Payroll taxes and other employee lablities 1,963 708*Deposits 804 832 Other 429 891 STotal 5,637 $ 8,216[iU UM. Payablelr, fm Segregaed Fads The composition as of December 31 was as fows (in thousands):

• 212 2011 Custome deposits $ 24,293 $ 20,600 Customer advacs for construction 3,413 2,164* Incurrd but no prsented merve 2,310 2,177 Other 1,668 1,301 Total $ 31,684 $ 26,242 The compositIon a of December 31 was as follows (in thousands):

• 12 2011 Uneamd revenues $ 9,219 $ 10,855 Capital puch agreement 2,175 2,387* Wo compensation reserve 1,344 1,345 Pubc liability emave 199 111 Other 453 521* TOta T 13,3W $ 1,21 3. FUNDS a foow Funds of OFF) wee as S Eectrkic Systoem eleme Food ma NO Sqe uat lectri System levese F1ld- These funds are to be used for op-eratiug activities for their mpectiv electric sysbem. Cash and cash equiva in the Electric System Revenue Fund are shown* ~~sepwartely from investments on the Statement of Net Postion.Ecric st" m Uwaue Dread 1.d, 2ler1 ystm Saddlnatod D aue Mea d .d ea d NO2 s$ rate eC-trk System Rename Dead 1usd- These funds are to be ueed for the retirement of their respective revenue bonds and the*payment of the elated interest and reserves as required.

Investments with maturity dates within the next year are designated as curent.*Elctri System Ceaseratie. md NO Spmaat Elcti System Cail Ces 1u d -These fuds are to be*used for cqiW Improvements, add and betterments to and extensions of their respective ect sstem.S Seete hod -Deb letirmaelM t -This fund Is to be used for the retirement of outtanding debt and to assist In main-taing debt servic-e cove ratos A approptate levels. Since there is no funding requirement for the Debt Retrement Reserve, this fund also may be used to proid additional liquidity for operatos as necessary.

The balance of the Debt Re-S irment Fund was $14,000,000 and $48,000,000 as of December 31, 2012 and 2011, respectively.

As of February 28, 2013,*$3,000,000 was transferred to the fund, which brought the balance to $17,000,000, the amount of the related reserve.29 2012 OPPD Financial Report S I Notes to Financial Statements as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 Fied -late Stln" -This fund is to be used to assist in stabilizing raes through the transfer of funds to operations as necessary.

Since there is no funding requirement for the Rate Stabilization Reserve, this fund also may be used to provide additional liquidity for operations as necessary.

This fund was used to help finance higher fuel costs and unexpected en-ergy purchases in 2011, due to the extended outage at FCS. Proceeds from the outage insurance policy and customer collections for prior year FPPA underrecoveries were used to partially replenish this fund in 2012. The balance of the Rate Stabilization Fund was $24,612,000 and $0 as of December 31, 2012 and 2011, respectively.

The fund balance was returned to $32,000,000 in January 2013, after the rect of additional proceeds from the outage insurance policy.Serleated ld -Otbw -This fnd represents assets held for payment of customer deposits, refundable advances, certain other liabilities and hulds set asde for tminal removal costs for NC2 and OPls self-insured health insurance plans (Note 6).The balances of the funds at Decmber 31 wee as follows (in thousands):

2012 2011 Segreged Fund -self-inurwance

$ 5,106 $ 6,145 Segregated Fund -other 24,161-A TOt a $30,306 Decmmdomin Plds- These funds me for the costs to decommission FCS when its operating license expireF. Tde Decommaeon Fud held by an outside trustee in compliance with the decommissioning funding pln approved by the Board of Directors.

1Th 1990 Plan was established in accordanc with NRC regulations for the purpose of discharging the obligation to decommission FS. The 1992 Plan was established to retain funds in exms of NRC minimum funding requirements based on an independent ope g study which that omm costs would exceed the NIC minimum reqirements.

The balances of the unds at December 31 were as follows (in thousands):

2012 2011 Trust -1990 Plan $267,278 $257,849 Decommissioning Trust -1992 Plan &4 Q TOta $34j724 S36.91 4. DEPOSITS AND INVESTMENTS uvamtaeds

-FPa value of insmets were detmined based on quotes received from trustees'marke valuation services The weighted average matu-ity was based on the face value for Investments.

As of December 31, investments wer u fows (in thousands):

2012 2011 Weighted Aveage W~eighed Averag Javutmeat Type lai Valu Maturity (Von) Fabr Value Maltuariy (Years)Cash $ $ 8,935 Commercial paper 4,936 0.1 Money market 25,825 57,975 Mutual funds 186,842 -174,121 U.S. agencies 538,450 1.4 480,469 1.2 U.S. treasuries 126,902 2.2 28,975 3.8 Corporate bonds 18,548 3.3 World bank security notes 10,460 0.1 Total $896,567 $765,871 Portfolio weighted average maturity 1.2 0.9 laterest Rate lik -The investment In relatively short-term securities reduces interest rate risk, as evidenced by its portfolio weighted average maturity of 1.2 and 0.9 years as of December 31, 2012 and 2011, respectively.

In addition, OPPD is a buy-and-hold Investor, which minimizes Interest rate risk.2012 OPPD Financial Report 30 Credit Risk -The investment policy is to comply with bond covenants and state statutes for goerimental entitles, which limit investments to investment-grade fixed income obligations.

OPPD was in full compliance with bond covenants and state swu as of December 31, 2012 and 2011.Custdial Credlt ]i sk -Bank deposits were entirely insured or collateralized with securities held by OPPD or by its agent in OPPD's name at December 31, 2012 and 2011. All investment securities are delivered under contractual trust ageemets.5. DEBT The proceeds of debt issued are utilized primarily to finance the construction program.Debt balances as of December 31, 2011, activity for 2012 and balances as of December 31, 2012, wee as follows (in thousad): 3011 Additias Idfrnmunts 3*12 Electric system revenue bonds $1,314,510

$499,370 $(285,30 $1,525,500 Electric system subordinated revenue bonds 346,730 (460) 346,270 Electric revenue notes -commercial paper series 150,00 150,000 Minibonds 27,756 514 (143) 28,127 NC2 separate electric system revenue bonds 245,32S (2,765) 242,560 Subordinated obligation 1,219 ( 848 TOta $2,065540

$499,884 $ "209119) gM 30 Lien Stctwe -In the event of a default, subject to the tern and conditions of debt covenants, OPD is reqired to satisfy all Electric System Revenue Bond obligations before paying second-tier bonds and notes which m Electric System Subarnated Revenue Bonds, Electric Revenue Notes -Commercial Paper Series and Miibonds.

OPP) will pay the Svbmdiae Obligation after second-ier debt.Iectbc Syste.RLvemuevl2s-These bonds w payl from and s ed by a pledge of andllien upon the enues of the Electric System, subject to the prior payment therefrom of the operations and maintenance expense of the Electric System. The Electric System Revenue Bonds are the Senior Bonds.Moodys Investors Service and Standard & Poor's Ratin Services rated the Electric System Revenue londs as MI and AA, respec-tively, in 2012 and 2011.Outstanding Electric System Revenue Bonds as of December 31, 2012, were a folo (in thousands):

Issue Mauriy Daes ype Intws tes Amount 1993 Series C 2013-2014 Term 5.5% $ 27,620 2003 Series A 2013 Serial 3.8% 7,000 2005 Series B 2017-2022 Serial 5.0% 17,740 2007 Series A 2018-2027 Serial 4.0%-5.0%

109,705 2007 Series A 2029-2043 Term 4.75%- 5.0% 136,295 2008 Series A 2018-2028 Serial 4.6%-S.S%

34,710 2008 Series A 2029-2039 Term 5.5% 70,290 2009 Series A 2023-2029 Serial 4,0% 4.75% 2S,700 2009 Series A 2030-2039 Term 5.0% 59,300 2010 Series A 2022 -2041 Term 5.431% 120,000 2011 Series A 2014- 2024 Serial 3.0% -5.0% 143,375 2011 Series B 2023-2029 Serial 3.25% -5.0% 34,570 2011 Series B 2031 -2042 Term 4.0% -5.0% 103,360 2011 Series C 2013-2030 Serial 2.0%- 5.0% 140,465 2012 Series A 2023-2034 Serial 4.0%-5.0%

139,480 2012 Series A 2035- 2042 Term 5.0% 133,175 2012 Series B 2017-2034 Serial 3.0% -5.0% 141,295 2012 Series B 2038-2046 Term 3.75%-S.0%

95,420 Total $W1$2S00 31 2012 OPPD Financial Report Notes to Financial Statements as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 Outstanding Electric System Revenue Blods as of Decembe 31, 2011, wer as follows (in tihsands):

brew Maharky Dan Type Interest ae Amount 1993 Series C 2012-2014 Term 5.5% $ 44,820 2003 Series 5 2012.2013 Serial 4.S%-5.0%

27,260 2003 Series A 2012-2013 Serial 3.7%. 3.8% 14,000 2005 Series A 2012 Serial 3.55% 1,000 2005 Series 1 2017 -2022 Serial 5.0% 50,660 2006 Series A 2015-2044 Serial 4.25% -4.75% 62,000 2006 Series A 2029.2046 Term 4.65%-S.0%

138,000 2007 Series A 2018 -2027 Serial 4.0%- 5.0% 108,705 2007 Series A 20 2-2043 Term 4.75%.5.0%

136,295 20 Series A 2018 -2028 Seal 4.6%-5.5%

34,710 2008 SeriesA 2029.2039 Term 5.5% 70,290 2009Series A 2023-2029 Serial 4.0%-4.75%

25,700 2009 Series A 2030-2039 Term 5.0% 59,300 2010 Series A 2022 -2041 Term 5.431% 120,000 2011 Series A 2014 -24 Serial 3.0%-5.0%

143,375 2011 Series .2023-29 Serial 3.25% -5.0% 34,570 2011 Series A 2031- 2042 Term 4.0%-5.0%

103,360 2011 Series C 2013 -2030 Serial 2.0% -5.0% 140,465 Total $1,314,510 On February 1, 2012, a principal paymen of $29,62,000 was made for the Ektric System Revenue Bands. On August 1, 2012, a principal payment of $8,50,000 was made for the call of the 1993 Series C term bands due Frebuary 1, 2013. Term bands me subject to call every six mwths. On November 1, 2012, a principal payment of $13,M90,000 was made for t call of the 2002 Series B Electric System Levenue Bonds due on February 1, 2013. On Octar 10, 2012, OPPD ismed 2012 Series A Electric System Revenue loands and Series I Electi S"m Revenue Bonds. The 2012 Series I Electric System Reemne Bonds were used for th refunding of portims of the 2005 Seits land 2006 Series A lands. The refunding reduced total deb sevice payments ove the life of tfe bonds by $39,963,000 and resulted in an economic gin (Mdfe between ft present Values of the old and new debt service payments) of $25,357,000.

On February 1, 2011, a principal payment of $28,465,000 was made fo te Elcr System Revenue Bonds. On August 1, 2011, a principal payment of $8,350,000 was made for th early call of the 1993 Series C term bonds due February 1, 2012. Term bands are subjct to call every six monft On june 15, 2011, OPPD issued 2011 Series A Electric System Revenue lands. On December 16, 2011, OY) issued 2011 Series B Electric System Rtevmue Mfls and Seies C Electric System Revenue londs.The 2011 Series A Electric System Revmue flonds wee used for the runding of portias of the 2002 Series B and 2005 Series A Bonds. The refunding reduced total debt service payments ovu the ife of the bands by $10,554,000 and resulted in an ecanom-ic pin of $9,642,000.

The 2011 Seies C Electric System Revenue lands were used for the refunding of 2003 Series A and the remaining portion of the 200 Series A londs. The emunding reduced the total debt service payments over the Ii of the bands by $15,329,000 and resulted in an economic pin of $11,238,000.

lectric System Revenue foods, from e foowing series, with outstanding principal amounts of $426,125,000 as of December 31,2012, wer legally deleased 1986 Series A, 1"2 Series B, 193 Series 1, 2003 Series A, 2005 Series B and 2006 Series A. Electric System Rtevenre lands, from the foilowing seres, with outstanding principal amounts of $4S9,850,000 as of December 31, 2011, were legally defeased:

1986 Sefies A, 1992 Series 1,1993 Series 1, 2002 Series A, 2002 Series B, 2003 Series A and 2005 Series I. Defeased bonds are funded by government securities deposited in irrevocable er accounts.Accordingly, the bonds and the related government securities escrow accounts are not induded in the Statement of Net Position.2012 OPPD Financial Report 32

• ~OPPD's b** Adkiti the de***0 h Electric S**NucIrkS* payment*The Electd redeemned* ~ElectricS 6 S 33at S nd indenture, amended effective March 4, 2009, provides for certain restrictions, the most significant of which are: ona bonds may not be issued unless estimated net reeipts (as defined) for each future year equal or exceed 1.4 times Sservice on all Electric System Revemne Bonds outstanding, including the additional bonds being Issued or to be is-m the cae of a power plant (as defined) being financed in Increments.

ectric System is required to be maintained by the Company in good condition.

There is no longer a prescribed amount iacements, renewals or additions to the Electric System.stem Revenu Bond payments are as follows (in thousands):

Piheips lutreri 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 2033-2D037 2038-2042 2043-2046 Total$ 26,125 30,545 40,465 43,065 45,900 223,225 226,160 268,565 251,040 290,255 83,155$1,528,500

$ 68,180 71,251 69,448 67,573 65,636 296,387 245,093 185,733 122,250 47,555 6,457$1,24,S63 lterest rate for Electric System Reveu Bonds was 4.8% for the years ended December 31, 2012 and 2010, and 4.9%i ended December 31, 2011.iyva Suburibeted eveu Dmeds -These bonds are payable from and secured by a pledge of mev of the stem, subect to the prior payment of the operations and maintenance expenses of the Electric System and the prior if the Electric System Revenue Bonds. The payment of the principal and Interest on these bonds is nured by a munid-asurance poiky.t System Subordinated Revenuie Bonds Include Periodically Issued Bonds (Ms). Certain Iss of the PMis may be prior to maturity upon the death of the holder subJect to certain conditions as outlined in the offering document.stem Subordinated Reveu Bonds (Bs) payments are as follows (in thousands):

Princip Interest 2013 2014 2015 2016 2017 2018-202 2023-2027 2028-2032 2033-2037 2038-2042 Total$$ 6,540 6,540 6,540 6,540 6,540 32,701 32,702 32,702 74,230 27,743 72,040 11,455 2012 OPPD Financial Report

• Notes to Financial Statements

• as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 Eetrc System Sbordinae Revenue Bond payments for the 2007 Series AA ar as follows (in thousands):

• rbipal Uterst 2013 $ $ 8,901 2014 8,901 2015 8,902 2016 8,902 2017 8,902 2018-2022 6,000 44,042 W23-2027 34,000 40,658 2028-2032 58,000 29,971 2033-2037 85,000 12,713 2038 17,000 382*Total $200,000 $172,274 DTa averag inerest r& for the lecthic Systm Subordinated eenue Bonds ( -Is d the 2007 Sere AA) w 4.5 f e of the t alsee yw in the period ended December 31, 2012.JEcbt lhmyme N -ts. Cumckl Paper eries -The ding balance of Commucial Paper was $1S0, ,000 as of December 31,2012 and 2011. The averagp borrowing raes were 0.2% for the year ended December 31,2012, and 0.3% for the years ended Dwmbe 31,2011 and 2010. A Credit Agreement with Bank of Amerlca, NA., includes a covenat to retain draw-ing cpcty at Ies equal to the Issumed and outstanding amount of Commercial Paer Notes.Uiumlbosi

-Mnbond comist of current interest-bearing and capital appreciation minibonds.

The miniboads may be M deemed pdor to their maturity dates at the request of a holder, subject to certain conditions as outhnd in the Muibond Official Statemeni Tiere were no M on maturitie in 2012 other than redemptions for the annual put option. The avere inrest rotes were 5.05% for each of the three years in the period ended December 31,2012. The pncipal and interst on these bonds is insured by a municipal bond insuranc pokiy.The outsanding balances as of Decemb 31 wee as follows (in thousands):

Pr~aispu 2012 2011 2001 minfbonds, due 2021 (5.05%) $23,604 $23,711 Accreted ianteet on capital appreciation minuhonds 4,523 4,045 Total $28,127 $27,756 Smbeimtu Olitu. -The subordinod obligtion is payable i annual of $481,815, including interest at 99, throug 2014.Credit Arememt -On September 21,2010, a Credit Agreement was executed with the Bank of America, NA., for$250,000,000 that will epr on Octob 1, 2013. The Credit Agreement includes a covenat to retain drawing capacity at least equal to the issued and outstnding amount of Commercial Paper notes. Thiee wee no amounts outstanding under this Credit Agreement as of December 31,2012 and 2011.NC2 Sopui It e htrk Syc s em Revmue llUs S -Participation Power Agreements wee executed with seven public power and municipal for half of the output of NC2. The participants' rghts to receive, and obligations to pay costs reat to, half of the oput is the 'Se System." 2012 OPPD Financial Report 34

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

2013 $ 2,865 $ 11,607* 2014 2,970 11,498 2015 3,060 11,381 2016 3,200 11,258 2017 3,330 11,128 2018.2022 18,25 53,382 2023-2027 23,375 48,695 2029-2032 29,450 42,460* 2033-2037 37,255 34,441 2039-2042 43,510 24,158 2043-2047 52,450 12,370 2046-2049 22,20 1,069 Total $242,560 $273,447*The payment of principal and interst on the 2005 Stes A and 2006 Sties A Bonds is insured by municipal bond insuancle policies.

The average Interest rate for NC2 Separate Electric System Revenue Bonds was 4.8% for each of the three yea in the*period ended Decembe 31, 2012.*Fair Value DI dswe -The aggpepte carrying mount and fair value of long-term debt, including currt porion and excluding unamortized loss on refunded debt as of December 31 were as follows (in thousands):

2012 2011*wb f*cm~g Fai Amt lu Am" VOW The eimated fair value amounts were determined using rates that me currently available for issuance of debt with smila*credit ratings and matuities.

As market interest rat decline in rdation to the Issuer's outstanding debt, the fair valu*of outstanding debt financial intruments with fixed Interest rates and maturift will tend to rise. Conveely, as market interest rates increase, the fair value of outstanding debt financial ins ts will tend to decline. Fair value will normally*approwcma the carrying amount as the debt financial instrument ner its maturity date. The use of dffenmt market* assumptiom may effect on the estimated fair value amount. Accordingly, the estimates pmsented herdn we not necessarily indicative of the amounts that bondholders could rlize in a current market exchange.*I 6. BENEFIT PLANS FOR EMPLOYEES AND RETIREES-E11 PLAN*1am DhucrptlIm

-Al l-time employees me covered by the Rtrement Plan ( rement Plan) as they are not covere*by Social Security.

It is a snlemploye, defined benef plan that provides rirement and death benefits to Retirement Plan members and beneficiaries.

The Retirement lan was established and may be amended at the direction of the Board of Directo and Is adminstered by OPD. Actuarlal valuatons m complet as of January I of each year. As of January 1, 2012,1,674 of the*4,436 total participants were eeiving benefits.

Ges ,ally employees at the normal retirement age of 65 ar entitled to annual* pension benefits equal to 2.25% of the avem e compensation (as defined) times years of credited service (as defined) under the Traditional provision (as defined).

Under the Cash Balan provision (as defined), members can receive the total vested value of*their Cash Balance Account at separation from employment.

Employees were allowed to make a one-time irrevocable election to*have benefits determined based on the Cash Balance provision instead of the Traditional provision.

There were 88 members with the Cash Balance provision as of December 31, 2012. Effective January 1, 2013, most new employees will only be eligible for the*cash Aance pro on.35 2012 OPPD Financial Report

• Notes to Financial Statements

• as of December 31, 2012 and 2011,*and for the Three Years Ended December 31, 2012 Fadd Staftus maud Fmdlag Prep. -Employe contributed 6.2% of their covered payroll to the Retirement Plan for each of the three years In the period ended December 31, 2012. OPPD is obligated to contribute the balance of the funds needed on an actuarially determined basis.The Present Value of Accrued Plan 8enelits (PVAP) Is the present value of benefits based on compensation and service to the date of the actuarial valuation.

This is the amount the Retirement Plan would owe participants If the Retirement Plan were frozen on the valuation date.The PVAPB is presented in the table below based on the actuarial valuation as of January I (dollars in thousands):

P -va n of U111" IPiu AcbmW ld1im A FXd Fi Unft FiMda PVAPS w a PFamap 2012 $805,763 $965,638 $179,875 81.8% $192169 93.6%2011 $771,588 $929,439 $157,851 83.09 $187,285 84.3%2010 $733,227 $854,121 $120,894 SSA9 $188,277 64.2%*The Actuarial Accred Uility (AAL) is the present value of retirement beneft adtusted for assumptions for future Increases in compensation and service attributable to past accounting periods. The funded ratio for the AAL was lowe than the PVAPB because the AAL method assumes future compensation and service Incremes.

The annual contibutions to the Retirement Plan consit of the cost fo the curn peio phis poitio of th Unune Accrue abLit.The AAL is presented In the table below based on the actuarial valuation as of January 1 (dollars in thousands):

us .i UAL AdhIW Win AdvW Mamud AwUUM FMy" of GiAuiu Ubby ("U1 LWMWy 4UI oJnubi Ab Cwvu Nyrd csvur P""n 2012 $805,763 $1,155,410

$349,647 69.7% $192,169 181.9%2011 $771,588 $1,094,909

$323,321 70.5% $187,285 172.6%2010 $733,227 $1,015,914

$285,697 72.0% $188,277 151.7%Anamal Cost sd Acuil Am=.Wd -The annual pension cost and annual mreqired contribution (ARC) was$53,463,000, $47,585,000 and $42,045,000 for the years ended December 31,2012,2011 and 2010, respectively.

Since the entire ARC was funded, there was no net pension obligation as of December 31,2012 and 2011. Retireumnt Plan contributions by em-ployees for their covered annual payr-ol wer $11,517,000, $11,369,000 and $11,313,000 for the years ended December 31, 2012, 2011 and 2010, respecivly The Entry Age Normal (lvel Pecent of Pay) cost method was used to determine contributions to the Retirement Plan. Under this actuarial method, an allocation to pat service and future service is made by spreading the costs over an employee's career as a level percentage of pay. The actuarial value of Retirement Plan assets was &etenmined using a method that smoothes the effect of short-term voatility in the market value of investments over appeoximately five years. Cost-of-living adjustments are provided to retirees and beneficiaries at the discretion of the Board of Directors.

Ad-hoc cost-of-living increases granted to retirees and beneficiaries ar amortized in the year for which the Incease is authorlized by the Boud of Director Except for the liability associated with cost-of-living increses, the unfunded actuarial accrued liability was amottized on a level basis (closed group) over 15 yea. A 15-year fresh start was used for the valuation as of January 1, 2010, with futu mresumption changes, plan changes and actual gains or losses amortized over 15 yams. The healthy mortality table used was the Static Mortality Table for Annuitants and Non-Annuitants for 2012 and the RP-2000 Combined Healthy Mortality Table projected to the valuation date for 2011 and 2010.The disabled mortality table used was the Static Mortality Table for Annuitants and Non-Annuitants for 2012 and the RP-2000 Disabled Retiree Mortality Table for 2011 and 2010.2012 OPPD Financial Report 36 0 0* Other actuarial aumptions are prmesented in the table below based on the actuarial valuation as of January 1: 2012 2011 2010 Investment return (discount rate) 7.75% 7.75% 8.00%* Average rate of compensation increase 5.20% 5.20% 5.20%*Ad-hoc cost-living adfstment*Other employee benefit oblitions are provided to allow certain current and former employees to retain the benefits to which*they would have been entitled under the Retirement Plan, except for federally mandated limits and to provide supplemental pen-sion benefits.

The related pension expense, fund balance and employee benefit obligation wee not material for any of the three*years in the period ended December 31, 2012.* DNUM RKIUDNT SAVINGS PLAN -01(k)I/47*OPPD, sponsors a Defined Contribution Retirement Savings Plan -401(k) (401k Plan) and a Defined Contribution Retremnt Say-* ings Plan -457 (457 Plan). Both the 401k Plan and 457 Plan cover all full-time employees and allow contributions by employees that mw p lly matched by OPPD. The 401k Plans and 457 Plan's assets and income are held in an external ftusta coumtinthe

• employee's name. The matching share of conftions was $7,128,000, $7,143,000 and $7,279,000 for the years ended Decem-ber 31, 2012,2011 and 2010, respectively.

The employer maximum annual match on employee contributions was $4,000 per employee for each of the three years in the period ended December 31, 2012.POST DiPLOYMIf dENT 9WIfS OTME THAN PENSIONS S Thele are two separte plan for Other Post Employment Benefits (OPBl). OPM Plan A provides post-employment hel care* ~~and lie Iwnsuac benefits to qualifying members. OPEB Plan B provides post-employment health cure prmiwun coverage for the Company's sht to quWfyi members who were hired after December 31, 27..Plan Daupm -OM Plan A (Pan A) provides post employment healh care benefits to reties suviving souses, and em-* ~~ployees on lqongtm disability and their dependents and life insurance benefits to retirees and employees on 1on4mgtm disability.

Health care benefits are based on the coverage elected by Plan A members. OPPIYs Medical Plan become a secondlary p when 0 the members me retired and eligible for Medicare benefits.

As of January 1, 2012,1,S39 of the 3,860 total members were receiving** fludWd Statum ud Funding Pjrp -Plan A members are required to pay a monthly premium balsed an the elected cover-age and the reVective premium cost shar agreement at the time of retirement OPPD contributes the ban of the funds needed* ~on an actuarially determined basis.* The Actuarial Accrued lability (AAL) is the pr-sent value of benefits attributable to past accounting periods.* The AAL Is pesented in the table below based on the actuarial valuation as of January 1 (in thousands):

IUmis UAL ACUiNh WN AciuI Acwusi Awusid ?ucinp 41 fdAui LWMq (U4) I~ilty (UA~I iu am d Bob CWmi N"A~ C&Wei Pay"d 2012 $68,130 $380,426 $312,296 17.9% $192,169 162.5%* 2011 $51,274 $360,200 $308,926 14.2% $187,285 164.9%* 2010 $37,729 $316,629 $278,900 11.9% $188,277 148.1%S Annual OM Cot land Actuaial Aunmptfim

-The annual OPEB cost and ARC for OPEl Plan A was $30,698,000,* $29,511,000 and $25,751,000 for the years ended December 31, 2012,2011 and 2010, respectively.

Accounting standards require 0 0 0 0 0 0 0

• Notes to Financial Statements

• as of December 31, 2012 and 2011,* and for the Three Years Ended December 31, 2012 remogntion of an OPEB liability on the Statement of Net Position for the amount of any unfunded ARC. Since the entire ARC was funded, there was no net OPEB obligation as of December 31, 2012 and 2011. Contributions by Plan A members were $2,819,000,$2,303,000 and $2,096,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

The actuarial assumptions and methods used for the valuations on Janary 1, 2012, 2011 and 2010, were as follows* The pre-Medicare health care trend rates ranged from 8% initial to 5% ultimate for 2012 and 2011 and 9% initial to 5% ulti.mate for 2010.* The post-Medicare health care trend rates ranged from 7.5% inital to 5% ultmate for 2012 and 2011 and 9% initial to 5%ultimate for 2010.0 The investment return (discount rate) used was 7.5% for 2012 and 2011 and 7.85% for 2010, which was based on OPPD's expected long-term return on aets used to finance the payment of plan beneft.* The average rate of compensation increase used for all three yeas was 5.2%.e The actuarial cost method used was the Projected Unit Credit.SAmortilation for the initial unfunded AAL and OPEB Plan changes was deterned using a period of 30 years and the increas-ing method at arate of 3% per year.* Amortization for all changes (inuding s/ assumption an plan provisions) after the initial year were determined using a dosed period of 15 yews and the level dollar method.* The mortality table used for healthy participants was the Static Mortality Table for Annuitants and Non-Annuitants for 2012 and the IP-2000 Combined Healthy Mortality T" projected to the valuation date for 2011 and 2010.Phs Duurptio -OPEB Plan I (an 1) provides post-employment heat cae premium coverage for the Company's share for retirees and surviving spouses and their dependents to qualifying members who wee hied after December 31, 2007. Benefits are based on the coveage elected by the Plan I members and the balance in the members hypothetical account, which is a bookkeep-ing account. The hypoltheical accounts ar credited with $10,000 upon cmmencement of lM e employmet, $1,000 annu-ally on the members annWersary daft and interest income at 5% am a4. Pla I benefits are for the payment of OPPlYs share of the members' health care premiums.

N benefits will continue until the member and eligible spouse ceme to be covered under OPPDYs Med Plan, the member's hypothedt acount Is depeed or Pan B , whichever occurs first Benefits a forfited for any member who falls to retire or who retire but does not Immedately commence payments.

As of January 1, 2012, only I of the 440 Plan B members was receiving benefits.FnMdu Stature ad FuMIng PreV -OPPD contributes funds needed on an actuarially detrined basis. Members do not contribute to Plan B.The ML is pmented in the table below based on the actuarial valuations as ofJanuary 1 (In thomands):

O~wfmhi GAL AkhMNi V1 AcihA Anmid AaM od ?am"Mg .1 eAWmts thUbtty (AM4 Lbay MA1 hdIhttb CWm Paymdn n Cvadni pan 2012 $3,507 $ 756 $2,751 463.9% $33,193 8.396 2011 $3,281 $ 486 $2,795 675.1% $23,888 11.7%2010 $3,098 $ 176 $2,922 1,760.2% $18,494 15.86%Ansual OPED Cut and Actuarial Asnmuptlam

-There was no ARC for OM Plan B for any of the three years in the period ended December 31,2012. The annual OPEB cost was $96,000, $91,000 and $87,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

There was an OPEB net asset of $1,667,000 and $1,764,000 as of December 31, 2012 and 2011, respeltvely.

The actuarial assumptions and methods used for the valuations on Janutry 1,2012, 2011 and 2010 were as flw' The investment return (discount rate) used for all three years was 5.5%, which was based on OPPD's expected long-term return on assets used to finance the payment of plan benefits.' The actuarial cost method used was Projected Unit Credit for all three years.2012 OPPD Financial Report 38

• Amortization for gainsAosses was determined using a dosed period of 15 years and the level dollar method.** The mortality table for healthy participants was the Static Mortality for Annuitants and Non-Annuitants for 2012 and the*RP-2000 Combined Healthy Mortality Table projected to the vahution date for 2011 and 2010.*IF.DINSIJRANCG HEALTH PIOGIAM*Employee health care and life insurance benefits are provided to substantially all fulltime employes There we Z110 &An 2,170 full-time employees with medical coverage as of December 31, 2012 and 2011, respectively.

An Administtive Services Only (ASO)*Health Insurance Program is used to account for the health insurance claims. With respect to the ASO program, reserm sufficient to S satisfy both statutory and OPPDdirected requirements have been established to pvi k r otctn (N0te 3). Additionally, prate insuance has been purchased to covm claims in excess of 125% of expected aggregate levels and $400 per membet Health care expenses for full-time employees (reduce by premim payments m ptdpn) wee $23,107,000, $22,603,0 and*$26,s57,000 for the years ended December 31, 2012, 2011 and 2010, respectivel.y S The ttal cot of life and bl tem disability insurance for full-ime mpkym was $1,01S,000, $1,19000 and $5 00 for the yeas ended December 31, 2012,2011 and 2010, respectively.

The balance of the incurred But Not Presented Reserve was $2,310,000, $2,177,0 and $2,221,000 as of Decemblr 31, 012,2011 and 2010, respectively.

• Audited, financial statements for the Retiement lan, Defined C0ontrtUtlon IRiement Savings Plans and O Plan may be revywed by contacting the Pension Administrato at Corporate Headqarters.

S 17. NC2 PARTICIPANT DEPOSITS*NC2 Participants were given the option to provide their own funds or to use Separate Electric System kRe Swnds to uN their share*of construction and start-up costs. In addition, since commercal operation, Participants have provided M fd fr Cpi enewals and ex-penditures.

This liability represents the mont that the Participants' fd including intes, exceee allocaed co NC2 *deposits were $8,926,000 and $9,939,000 as of December 31, 2012 and 2011, respective.

• I 8. ADDITIONS TO AND UTIUZATIONS OF RESERVES*The Debt Retirement Reserve was used to provd additional revenues and funding fo captad expenditures ad debt re mnt in dte*amount of $17,000,000 and $24,000,000 for the years ended December 31, 2012 and 2011, respectiMy.

Revenues of $13,000,00 were transferred to the Debt Retirement Reserve to use in futme year for die year ended Decemba 31,2010.The Bard of Directors approved a $4,200,000 expense in 2010 for 2011 wind ener purchases to it* the 2011 FPA. The Rat Wt W-*tion Reserve was used to offset the financial impact from this expense. Due to " financial results, the Board approved t $4,200,000

• replenishment:

of this reserve for 2010. There were no net revenue adjustimts from changes to the Rate Stabilization Reerve fo any of the three years in the period ended December 31, 2012.*9. DERIVATIVES OPP) entered into natural gas futures contracts with the New York Merantile Exchange RNME) to hedge expected cash flows assod-ated with purchases of natural gas fo operatios.

As required by gmeerl accepted acconting principles, OM natral gas futures*contracts were evaluated and determined to be effective hedges. Accordhnn , the dferred cash Bow hedges for the unrealized losses and the fair value of the commodity derivative instruments were reported on the Statement of Net Position.There were futures contracts with NYMEX based on the notional amount of 280,000 and 60,000 Million Metric riti Thermal Units (mmlft) of natural gas with negative fair values and deferred cash outflows of $502,000 and $1,444,000 as of December 31, 2012 and*2011, rpectively.

The fair value and deferred cash outflows for these contracts were detemined using published pricing benchmarks obtained through independent sources. All of these contracts will be settled based on the pricing point at Hery Hub on their respective

• expiration date. The accumulated decrease in fair value of hedging derivatives was reported in deferred outflows of resuces.*The balance in the margin account of $918,000 was reported with the fair value of the derivative instruments.

The net aount for com-*modity derivative instruments reported in other current assets was $416,000 and $91,000 as of December 31, 2012 and 2011, respKtvely (Note 2). There were realized losses of $1,176,000, $2,213,000 and $2,600,000 for the years ended December 31, 2012, 2011 and 2010,* respectively.

Realized gains or losses from effective hedges are included in fuel expense.39 2012 OPPD Financial Report 0*@1@1 Notes to Financial Statements as of December 31, 2012 and 2011, and for the Three Years Ended December 31, 2012 Information regarding the NYMEX natural gas contracts outtanding, along with the deferred cash outflows of the aggregate con-tracts by maturity dates, as of December 31, 2012, was as follows (dollars in thousands):

Netoad Effetiv Maftury lefreuce Ansmut hit va ml/Date Date late (Bmlt) Ia Fr Value Various June 2013 Pay average $S.206/mmltu 50,000 $ (85)Various July 2013 Pay avm e $S.503mmft 80,000 (1S5)Various August 2013 Pay average $S.446/mmitu 70,000 (130)Various June 2014 Pay average S.S,78/mmntu 10,000 (16)Various July 2014 Pay average $S.626/mmku 40,000 (66)Various August 2014 Pay avrae $5.670/mmktu 30A (SO)ToWt 20,00 $ (502)3Bob ]sh -Basis risk is the ik that arises when variable rates or prices of a hedging derivattve instrument an a heg Item are based on different reference rates. Location basis rs Is created by putchasing natural gas at the Northr Natural Gas"Demarcation' pricing point and entering Into the futures contract at the Henry Hub picing point. Critical tems rs ests because the hedging instrument is a monthly transaction and the purchase of physical natural gas is typically a daily transaction.

These two fferences ate the greatest amount of variation between the hedging and the price paid for physical ilverm M -Rolloveft is dI risk that a hegn derivative instrument associated with a hedgeable item does not exend to the maturity of that hedgeable item Rollover risk exi because th purchase of natra gas for the generation of electricity is an ongoing process whereas th hedgs ae only for the summer load moont 10. OTHER -NET The composition for the years ended December 31 was as follows (in thousands):

2012 3011 2010 Grants from FEMA $S,062 $15,645 $4,593 Interest subsidies from th federl oement 2,211 2,281 279 Health care subsidies from the federal govemment 617 1,031 1,967 Other 864 96 182 Total $864 $19,055 $7,021 11. SPECIAL ITEM OPPD provded notce to SPP in 21O of its tto change membershp status from a mu ssion-owi member to a non sm on-o ng member. A Special Item and related ability for the estimated fees of $8,380,000 to change membership status was recorded in 2010. The decision was made in 2011 to retain the same membership status because of several changes made by SPP including the approval of a 20.Yar Integrated Transmission

&a with substantial benefits to OPPIYs service area, the creation of a task force to address unintended consequences of the lransmission cost allocation, and the planned move to an Integrated Markftplace in 2014. In 2011, the $8,380,000 liability for the estimated fees to change membership status was removed and a corresponding amount was recorded as a Special Item.12. LOSSES AND RECOVERIES Due to record snowfall in the R Mountains and high water levels in the Missouri River Reservoirs, the United States Army Corps of Engineers released record amounts of water from dams along the Missouri Riv In 2011. This release of water caused flooding in areas near the Missouri River and impacted the operation of FCS. The reactor has been in cold shut-down since April 2011, which was the start of a planned refueling outage. In June 2011, outage activities were suspended to protect FCS facilities from rising river levels. In September 2011, water levels had receded enough to allow outage activities to resume and inspections for any flood damage to begin.2012 OPPD Financial Report 40 0*The Missouri River flood (Rood Event) impacted all of the coal and nuclear generating units and some transmission and distribu-tion structem Expenditures for the Flood Event woe $11,493,000 and $47,525,000 for the years ended December 31, 2012 and 2011, respectively.

Thes expenditures were partially offset by Isrance recoveries of $1,910,000 and $11,536,000 for the years*ended December 31, 2012 and 2011, mpectively.

Crtain areas of the service territory were declared disaster areas which made OPPD eligl* for total disaster asistance of $20,406,000 from FEMA. Grants from FEMA for this Flood Event and other qualify.ing disasters were recorded In non-ep i income (Note 10). The balance of the FEMA receivable for the Flood Event was*$19,941,000 and $15,6M,000 as of December 31, 2012 and 2011, respectively.

• Increased fuel costs and unexpected energy purchses were incurred due to the MS extended outage, which resulted in FPPA under-recoveries for 2012 and 2011. Insurance rceries of $36,643,000 were recognized in weekly indemnities from an insur-*ance policy for outages caused by accdental prperty damage in 2012 at KCS. The insurance policy was acquired to mitigate* the financial ima of qualifying outages Including additional fuel and purchased power expenses.

The Board of Directors authorized the use of hse inmance pmrce to reduce the FPPA regulatory asset, consistent with the objective of this po.icyýInsurance proceeds of $24,000,000 and $12,643,000 woe received in January 2D013 and October 2012, respectively.

Insurance*recoveries for propty damage from a breaker fire at aS of $1,750,000 were recognized for the year ended December 31, 2012.The balance of receivables frm insurance cmpanies was $25,432,000 and $4,536,000 as of December 31, 2012 and 2011, repectivly.

• The provisio of GASB Codcation Section 1400.177, lmuwwe Awoses (fomerly GASB Statement No. 42, ACWWUft and Fb=acia R~ frus b*m f Cqddu Asuftsa .sfor muw~ Recwrs) were folowed, which provides that insurance recoveries should be rmo Ized only when realized or realzble (Le., when the insurer has admitted or ackowledged coverage).

• In addition, the Statement provides that impment losses shou be reported net of the associated insurance Me r when*the recovery and the loss occur In the same year and Insurance recm ies reported In subsequent years should be reported as* progrwam revenue, non-operatin revenue, or extraordinary item, as appropriate.

A summary of the impac on the financial statements for Insurance recoveries for the years ended December 31 were as follows S (in thousans):

2012 2011 Increase in Other Electric Reenlues $23,080 $ -Decrease in Operating Expene 15,115 11,536 Increase in CIAC 2.106 Total Lm $11"536 13. NUCLEAR REGULATORY COMMISSION OVERSIGHT*The NRC placed FCS into a special regulatory category of their Inspection manual, Chapter 0350, in December 2011. This Chap-*ter is for nuclear plants that ae in extended shutdowns with pebmance issues. Efforts are under way to satisfactorily address all issues. Normal operations of FCS ae expected to rume in 2013.In August 2012, the Blord of Directors authorized management to enter into a long-term operating service agreement with*Exelon Generation Company, LLC, (Exelon) to provide operating and management support at FCS for 20 yeam OPPD will remain*the owner and licensed operator of the pat while Exelon will provide the day-to-day operations management of the plant. The Exelon Nuce Management Model will be used to imp an sustain performance at FCS.Significant, unplanned recovery costs (ecovery Costs) are being incurred to resolve performance and operational concerns and*to enhance future operations of FCS. Recovery Costs consist of operations and maintenance expenses incurred for the plan.*nln& execution and monitonrig of restart and recovery activities.

The Board of Directors authorized management to establish a regulatory asset for the Recovery Costs, which will be recovered ftough customer rates in future periods. These costs will be* amortized over a ten-year period, commencing with FCSs return to service. Recovery Costs were $70,627,000 for the year ended December 31, 2012 (Note 2). Recovery Costs will tue to be deferred until S moves to a more favorable NRC regulatory category.4 0 0 0 041 2012 OPPD Financial Report 0

• 14. COMMITMENTS AND CONTINGENCIES

• At December 31, 2012, the commitment for the uncompleed portion of construction contracts was approximately

$35,671,000.

• Power sales commitments that extend through 2027 were $112,972,000 at December 31, 2012. Power purchase commit-ments that extend through 2020 were $96,943,000 at December 31, 2012. These amounts do not Include the Participation Power Agreements (PPAs) for NC2 or commitments for wind energy purchases.

There are 40year PPAs with seven public power and municipal utilities (the Participants) for the sale of half of the 684.6-megawatt (MW) net capacity of NC2. The Participants have agreed to purchase their respective shares of the output on a p"-m-pay" basis even if the pmoer is not available, delivered to or taken by the Participants.

The Participants are subject to a ste provision, whereby in the event of a Participant default, the remaining Participants are obligated to pay a share of any deficit in funds resulting from the default. There is an NC2 RTansmission Facilities Cost Agreement with the Participants that addresses the cost allocatim, payment and cot recovery for delivery of their respective power There is a 20-year PPA with the Nebraska Public Power District (NPPD) for a 16.8% share, or approximately 10 MW, of a 59.4-MW wind-turbine facility near Ainsworth, Nebraska.

The commitment through 2025 under the PPA is $23,735,000 at December 31, 20121 OPPD Is obligated, on a "take-of-pay basi, under the PPA to make payments for purchased power even If the power Is not available, delivered to or taken by OPPD. In the event another power purchaser defaults, OPPD is obligated, through a step-u provision., to pay a share of any deficit In funds resulting from the default.There is a 20-year PPA with NPPD for a 3125% share, or 25-MW, of an 80-MW wind-turbine facility near Bloomfield, N&e ka The commitment though 22 under the PPA is $10,464,000 at December 31, 2012. OPPD is obligated, on a"take-ad-pay bais, under the PPA to make payments for purchased power delivered to OPPD.There is a 20-year PPA with Flat Water Wind Farm, LLC with an obligation for 100% of the output of the 60-MW wind-tubi clity near Humboldt Nebraska.

OPP) is obligated under the PPA to make payments for purchased power only when the power is made availabie to O?!). The commitment through 2030 under the PPA is $162,000 at December 31, 2012.There is a 2"0 PPA with TPW Petersburg, LLC with an obligation for 100% of the output of the 40.5-MW wind-turbine facility near Petersburg, Nebraska.

OfPD) is obigated under the PPA to make payments for purchased power only when the power Is made available to O0PD. The commitment through 2031 under the PPA is $354,000 at December 31, 2012.Coal supply contacts that extend through 2015 with minimum ftr payments of $158,650,000 were in effect at December 31,2012. Coaltranuportation contacts that extend through 2013 with minimum future payments of$103,369,000 were In effect at December 31, 2012. These contracts ae subject to price adjustments.

Contracts for vraium concentrate and conversion services are in effect through 2016 with estimated future payments of$43,400,000 at December 31, 2012. Contracts for the enrichment of nuclear fuel are in effect through 2026 with estimated future payments of $185,727,000 at December 31, 2012. Additionally, there are contracts through 2022 for the fabrication of nruclea fuel assemblies with estimated future payments of $47,015,000 at December 31,2012.In 2007, OD and the Metropolitan Community College (MCC) executed an Educational Services Agreement for$1,000,000 of educational services (as deffied in the Agreement) over a ten-year period. If OPPD has not purchased the educational services by the end of the term, MCC shall have the right to extend the Agreement for an additional five years. As of December 31, 2012, the remaining commitment was $554,000.Under the provisions of the Price-Anderson Act at December 31, 2012, OPPD and all other licensed nuclear power plant operators could each be assessed for claims and legal costs in the event of a nuclear incident in amounts not to exceed a total of $117,495,000 per reactor per incident with a maximum of $17,500,000 per incident in any one calendar year These amounts are subject to austment every five years in accordance with the Consumer Price Index.OPPD is engaged in routine litigation incidental to the conduct of Its business and, in the opinion of Management, based upon the advice of General Counsel, the agegte amounts recoverable or payable from OPPD, taking into account amounts provided in the financial statements, are not significant.

15. SUBSEQUENT EVENTS On February 8, 2013, the Nebraska Power Review Board unanimously approved OPPIYs application for the Prairie Breeze Wind Project. Construction of this 200.6-MW wind-energy project is scheduled to start in May 2013 and to be completed in January 2014. OPPD has agreed to buy energy from this project for 25 years at a predetermined, fixed price.2012 OPPD Financial Report 42 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Statistics (Unaudited) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 TOMd Uwq Ir Min (tyw mnO (hi nt wm d eo dds) ..... 5,U,39 5,027,093 4,865,417 4,678,449 4,561,815 4,259,501 4,166,997 3,656,433 1T1d kiuhemlu (hI Vui= d ddm) ..........

296,M 2,085,40 2,011,969 1,937,704 1,902,403 1,866,472 1,565,807 1,133,171-bl-(im ouud f d"no 1111imk .............................

36%,3M 337,053 335,294 292,887 271,935 267,042 249,174 237,796 CwuimcK ..........

29%m... 274,102 284,400 265,668 238,496 228,060 213,314 204,314 IMd .............................

.. 197,22= 186,417 164,621 139,865 109,827 100,2M3 94,109 90,344 O-Mymi Sa ..... 13,191 159,732 184,374 158,354 127,676 110,39 96,500 120,030 M %iM.........

(3,27 35,3S 269 -----U i u. .4A17 (4,239) 1,232 7,449 3,391 1,742 2,527 630 Pw ftin f DOW k omuL 17)5M 24,000 (13,000) 13,000 20,000 27,000 (15,000) -OhW BttKk li1n 5490i 29,352 29,160 22,743 16,646 15,771 36,204 13,436..... 1,W ,1997 1,041,762 986,30 899,966 787,973 750,253 676,82 66,5 770,1d d73s) .... 789,516 720,957 653,993 561,3% 505,524 461,101 447,270 Pq be hUm lof Taw (in IhM* d Ms). ) ........ 369 28,217 27,851 24,810 22,426 21,39 20,241 19,693 (in VW "ds desa).......

267,138 224,029 237,542 221,163 204,151 220,331 195,466 1 M9,539 3,3%3,909 3,224,35 54,0 939,972 211,913 205,46 194,684 1,I3D 90,97 91,406 (1,134) 4,1M (ss,000) (31,oo 1,342 11,41 S66,31S 573,074 401,773 404,040 15,51 15,067 145,96 150,37 24,344 A5,578 (in --A" d dabs).......

542 54,440 40,047 46,557 79,186 69,49 54,90 32,171 him i -------...............-

.3,~94316 3,602,973 3,644,400 3,361,672 3,466,3 3,546116 3,374,0A3 3,3^16 3,004,576 3,09,569 CiwmnmedW

... ...... 3^274 3,401,459 3,777,092 3,672,912 3,753,553 3,750,634 3,577,436 3,535,036 3,39,713 3,347,214............

3... 313 3,696,719 3,427,710 3,039,396 2,877,232 2,759,067 2,664,743 2,44,634 2,630,03 2,561,569 Of-Sm Sds ...........

3,717 4,631,175 ss52,645 5,534, 3,003,10 2,5,004 2,416,463 2,5 433 3,646,O43 3,77S,32 U Salts .............

5 (85,917) (24,109) 74,416 50,374 13,5 9,6X 21,255 k,390 61,165 T14.................

1 1328,409 16,377,738 1S,693,2 13,177,25 12,97,69 1,11343 12,09,55 12,707,20 12,3243 Mmobw of Cbmm A iimidI......

3W16 308,412 303,374 299,813 296,643 293,642 289,713 232,310 275,3M 270,579 C wcW........................

43,39 43,56 43,22S 43,134 42,867 42,214 41,4M5 40,665 39,334 3^1 230 206 154 151 142 134 132 133 135 127 Of-sotam ................

.. 36 41 38 34 32 35 37 39 45 4a TOtW ... .... ..........

3582,35 352,223 346,791 343,132 339,689 336,02S 331,370 323,147 315,36 309,715 Comb Pu WA (aWig)................

.3A12 9.37 9.22 8.77 7.82 7.51 7.40 7.07 6.95 6.73 Cmnwdi ...... .,4 7.89 7.S4 7.29 6.36 6.07 5.99 5.77 5.76 5.69 L". .5.05 4.83 4.62 3.82 3.64 3.55 3.46 3.40 3.39 l ...........

7A4 7.42 7.26 6.96 6.13 5.93 5.31 5.53 5.4A 5.39 (a)ty)W d (hin ................

3,583 3,222.7 3,224.7 3,223.9 2,548.8 2,546.5 2,4.1 2,542.5 24.5 2,540."- Puk Lowa (mega). .....................

2,416 2,468.3 2,402.8 2,316.4 2,181.1 2,197.4 2,271.9 2,223.3 2,143.5 2,144.8 (hi magawat-hows)

G ....d.............

.12,53 13,807,712 15,870,513 15,263,983 12,477,032 12,274,660 11,341,827 11,180,M0 12,235,044 12,000,373 hwchmrd md Not r ...................... (IA2,643)

(2,576,167)

(4,428,059)

(4,627,627)

(1,864,214)

(1,738,6)

(1,26,780)

(1,143,903)

(2,714,242)

(2,S57,911)

Nt ............................................

11,32,746 11,231,S45 11,442,454 10,636,356 10,612,818 10,535,827 10,073,047 10,031,905 9,518,802 9,442,892 43 2012 OPPD Financial Report