ML17306B051

Los Angeles Dept of Water & Power 1990-1991 Annual Rept

ML17306B051
Person / Time
Site:	Palo Verde
Issue date:	06/30/1991
From:	Gage M, Waters D LOS ANGELES DEPT. OF WATER & POWER
To:
Shared Package
ML17306B046	List: ML17306B048 ML17306B049 ML17306B051
References
NUDOCS 9210190168
Download: ML17306B051 (53)

Text

Los AN(".EI.Es INEPARTMFNT DF WATEIt ANI) I)owFR r (g 9 0- I () 9 I AN N rr A r, R E P D RI

~ ~ ~

Mr.r:TrN(, To+or(rrow "s Crr~r,r,r;N(;rs Ton~Y 92101)r0168 921008 PDR ADOCK 05000528 PDR

LOS ANGELES DEPhRTMENT OF WATER AND POWER MEET1'NG TOMORROW S CHALLENGES TODAY Tlie operating landscape of the utilityindustry

~

U has chaiiged sharply in recent years, driveii by deregiilation, l

groiving concern over the natural environment arid rising custonier expectations.

The Departnient of Water and Poiver.

must accominodate these changes as it plans for the fut'ure I

and prepares to meet the challeiiges of tomorrow.

WATER AND POWER DOLLAR WATER REVENUE DOLI,AR IN CENTS WATER EXPENDITURE DOLLhR IN CENTS I

Fire hydrant Other 6

Governmental

. 34 Residential 55 Commercial and industrial 5

. Payments to[he City 9

Retirement Plan costs related to operations, r

Capital improvements 11 Debt service costs Operating salaries at)d wages ~

2?

Other operating expenses 23 Purchased water and energy EMPOWER REVENUE DOLLAR IN CENTS PO'WER EXPENDITURE DOLLAR IN CENTS I

Street lighting 3

Other 12 Industrial

'29

, Residential

'5 Commercial 3

Capital improvements 5

Retirement Plin costs related to operatiorts 5

Payments to the City 10

. Deb't service'costs 12

~

Fuel 13 Operating salaries and wages 15 Other operating expenses

" 37 Purchased energy

LOS. hNGBLBS DBPhRTMBNT OF WhTBR hND POWER COMPARATIVE HIGHLIGHTS Year ended June 30 1991 Water

'/o Increase (Decrease) 1991 Power

'lo Increase

1990, (Decrease)

Seruire '

Gallons in billions Kiiowattbours in billions Sales 188i4 '08.8 (9.7%)

r 22.0, 21.8 1.0%

Customers average number.

(thousands) 646.9, 643.4

.0.5%

1,357.8 1;344.6

.1.2%

Finanrinl In millions fn millions Revenue (A)

Operating Costs (9}

, Nct Income

~

~

r

$356.0'

$354,6

'.4%

252. 2'30. 4 '. 5%

40.0 62.6 (36.1%)

$j,830. 1

$1,866.7 (2.0%)

1,452.0 '1,455.9 (0 3%)

95. 9 156. 5 (38.7%)

/

Payments to City ofLos'AIIgeles Capital expenditures Nct utilityplant 17.4 178.7

'I 1510

- 113 1.

.1,426.1 1,282.1 1'6.0%

580 11.2%

'99.0,.360.4, t

3,987.2 3,744.8 10 7%

6.Sod

92. 5

~

85. 8

7. 8%

Capitalization 'equity and long-tcrm debt

'1,421.5 1,319.4 7.3%

',207.6.

3,904.4 7.8%

(rI) lnrlndrr'orltrrinrome-nrr (BJ Excluding depreciation rxprnsr 3

LOS hNCELES DEPhRTMBNT OF WhTBR hND POWER

'I PREsiDENT s LETTER

,I Drowglit: The'risis Deferred A fifthyear ofdrought sent a compelling message to Californians in igloo-gi, reminding us how thin we have stretched our water resources to meet the needs of a g'rowing population and serving notice that our long-term water problems must be addressed soon.

For the Los Angeles Department ofWater and Power, the drought brought an added measure ofchal-.

lenge in a year ofdynamic change: Following two'ears ofconservation effort,, the city implemented

'andatory water rationing for the first time in r4 years, and DwP customers responded beyond expectations.

~

Your Board ofWater and Power Commissioners is gratified by the sup'port these efforts have received I

" from our customers, the. media, our city's elected officials and the ii,ooo employees ofthe Department throughout this difficultyear.

, Headivay oli Other Challeiiges The drought was not the only event of consequence last year at, the DwP, however. Our Power System began work on one of the most far-reaching energy conservatiori programs ofany utilityin the U.S.

We have taken dramatic steps to lower CO, emissions over the rest ofthis century. We are responding

/

to the increasing ethnic diversity ofour workforce. And we are making solid headway in o'ur ongoing

'rogram to make customer service our leading priority.

Efforts 'to enhance quality management and encourage innovation among'our employees also moved forward in i99o-gi.,Employee empowerment giving everyone a greater stake in the success of the owP became another high priority.

But th'.drought took center stage for most ofthe year. It provided a continuing test ofthe city' water supply strategies, as runofffrom the Eastern Sierra Nevada our traditional'mainstay declined sharply again in igloo-yi. 'Additional purchase'd water from the Colorado River and the State Water Project, took up most ofthe slack, but ifthe drought persists these supplies. willbecome

" increasingly uncertain.

Takiug the Lead In response, the DwP has launched a multi-faceted campaign to reduce customer demand through C

changes in household plumbing, to expand the use ofreclaimed.and recycled water, 'and to'nur'ture the conservation ethic tha( prompted a 3o percent reduction in water use',duiing the last three months of i9go-9r. Our'city has been a leader in implementing tough, effective measures to beat the drought.

Your j3oard ofWater and Power Commissioners willcontinue to meet challenges on many different fronts as we carry out our responsibilities as stewards ofthe Department.

We willseek the counsel and guidance ofcustomers, community leaders, elected officials and employees in positioniIIg the Department as a leader in the utilityindustry.

hIICHAEL GAGE President 199I BOARD OF WATER AND FOWBR COMMISSIONERS MICHAEL GAGE President f

RICK J.

CARUSO Vire President, DOROTHY GREEN Comtnissioner r-

<<t~~~it jilt

.Wg ANGEL M. ECHBVARRIA r

Cotntttisslottef MARY D. NICHOLS Comntissioner

l Los hNGBLBs.DB'PARTMBNT. OP whTBR AND PowBR GENERAL MANAGER s LETTER.

'ositive Results,in a Digtettlt. Year The Departtnent 'ofWater and Power 'performed exceptionally well'during I990-9I, in thc'ace of k

\\

unusual adversities. Both the 'Water and Power Systems turned in positive financial and operating r'esults, while meeting the challenges ofa.fifth year ofdrought and record demands for electricity.. "

k External and Organizational Services continued to lead the w'ay in our efforts to improve customer

ervice and the quality ofthe workplace.".

~-

Other events ofthe year were overshadowed by 'the, effects from California's origoing drought,'which l

triggered an aggressive conservation campaign and the imposition ofmandatory water rationing start-

\\

ing last March.. These moves resulted in consumption dropping z8 percent below normal by the cnd of the fiscal year.'

Coltservation: Priorityfor-the yos Onthd Power side, the DwP is escalating its energy conservation efforts, hoping'o moderate future electrical demand and postpone or avoid construction ofadditional generating capaciiy.'long with improving air quality, this campaign willcontinue to be a major pr'iority for the Department during the decade ofthe I990s.

DwP employees responded'to the challenge's of I990-9I by working harder; being more innovativc and

'improving tlie level ofcustomer service throughout the system. Several programs are uridcr'way in the

- 'eparts'Ient that willbuild. upon this success and make quality, service and'innovation.a'hallma'rk of Dwp operations.

k High'Ratitigs, Lower Costs k

The financial strength ofthe DwP continues to be a primary concern ofoperating management.

Thanks to our high double-A bond rating; wc are able to save our customers millions ofdollars per year in k

~ inte'rest expense to finance future capital needs.

I A key to'his s'tr'ength is the Department's'rate structure, whicli provides the cash for day-to-day oper-ating'expenses, as well.as scrvicin'g our debt.. The Water System received its last revenue increase in I

April I99o, to help meet thc higher operating expenses. The Power.System has not liad a rate increase in three years. The routes ofboth systems were under review as we cntcred the I99I-9z fiscal year.

k k

6

-'I Cleaner Airand Water Airand water quality issues loom ever larger on the DwP's horizon as we move toward the QIst Century. The Power System confronts major investments in environmental controls to meet the rigor-ous standards coming down the road in, the Los Angeles Basin and elsewhere in our operatmg spliere.

And we continue to invest in new technologies, like electric vehicles, that willhelp our customers improve air quality.

The Water System's investment in water quality improvement willalso continue to rise in coming

years, as we. strive to meet tougher state and federal standards. While we do this, we also seek ways to reclaim'nd reuse trcatcd waste water we now dump into the ocean..lf even a third ok'this water could be recaptured for iprigatioI> or recharging the underground water table, we could substantially reduce our dependence on scarcer, more expensive outsi'de sources.

1 Thc past year., has been an exciting aIId eventful one, reminding us that water and electricity play criti-cal roles in improving the environment and standard ofliving ofour community.

DANIEL W.

WATERS Ccncral.hfanagcr and'hief Enginicr

~

~

Los ANGELES DBPARTMBNT OF WATER AND POWER t

THE DEPARTMENT IN BRIEF I

The Los Angeles Department ofWater. and Power supplies water"-and electricity to the morc than 3.5 million residents ofthe nation.'s second largest city. As the largest

~ municipally owned utilityin the nation, DwP has more than II,ooo employees serv-

- ing a 465-square-mile area ranging from thc San Gabriel Mountains to the Pacific II Ocean. It began'municipal distribution ofwater in Igoa and electricity in Iyi6.

.As a 'proprietary agency ofthe Los Angeles city government, the'DwP receives no tax support. Its operations are financed entirely by the sale ofwater and electricity, Revenue bonds are"its main source ofcxtcrnal financing.

Thc DwP is administered by the Board ofWater and Power Commissioners, whose five members are appointed by th'e Mayor and confirmed by the City Council for staggered terms of five years. The Board establishes water and electric rates, subject, to "approval by the City Council.

=

k I

DEPARTMENT OF WATER AND POWER DANIEL W.

WATBRS

'Ceneral Manager and Chief Engitteer BLDON A. COTTON Assistant Ceneral 'Manager-Potuer'AMES F.

WICKSER Assiitant.General Aiahager-II'ater r

t NORM'AN L. BUEHRING Assistant Ceneral Manager-.Exteinal'and Organizatiotial Seruiees NORMAN J.

POWERS Chief Finantial Obiter

MEETING TOMORROW.'S CHALLENGES TODAY

~ '

The changes thnt have sivept over tlr'e Department of Water and Power iu the last decade from deregiilation to diversityshoiv.no signs ofslackening as ive enter tliefinal years ofthe zoth century. Infact, all.indicators point to stillgreater change ahead.

The ivorkforc'e-ivill beconie more diverse. Conipetition ivillbecome keener. Custo'mers-iuill demand more services. Environmental protection ivillniove euen higher ou thc piiblic's agenda.

To p'repare for this. new world,'the DwP <<uist be more innovative, more jlexible and niore responsive.'This Annual Report examines many 'ofCre steps the DtvP has taken to prclrnrefor the eirvironrrrent ahead.

Since change precipitates change, the DlvP has also been required to resliape itselfinternally.

. A major reorgaiiizatiou annouriced, early iii thc tgyt-yzfiscal year is designed to niake tire

~

1 Departnient'inore efficient aud shift its priorities to nieet its iiew challenges.

\\"

The reorganizationfocuses ou tivo areas ofconcern. Ciistonier service and environmental

\\

protection, fiinctions previoiisly dispersed throiighout thc Departinent, ivill,noiu be consolidated arul elevnted to rejlcct their increasirig importance.

I I

I

'The heads ofthese units ivillbe "change agents"-instigators ofnew and better ivays to solve problenis aud move lhe DtuPfonuard. Many ofthe services covered iu the Extr,mal and Organizational Services (EOs) sectiou ofthis.Anriual Report (e.g., Hiimau Resources,

= Managenient Services) ivillnoiv be nssigned to one ofthe operating systems.

We expect

,this to niake these orgauiz'atioris <<tore responsive'to the needs ofthc operating

systems, theit customers'.

The underlying aim oftfiese changes is to provide our customers ivith the best possible product (quality ivater and'reliable power) at th'e loivest cost consistent,iuith soiuidfinancial practices and our public responsibility.

MEETING TOMORROW S CHALLENGES TODAY

.OPERATIONS OVERVIBW Strains on the Systetn Persistent hot, dry weather throughout California during.the last six months of I99o put massive strains on the city's water delivery system and added several million dollars to'he Dwp's purchased water costs for the fiscal year.

1 Deliveries from the Los Angeles Aqueduct, once'he mainstay of the city's water sup-ply, dropped to only 2o percent ofdemand, the lowest level since the Aqueduct was,

. completed. Local groundwater accounted for another I5 percent ofsupply, pushing deliveries from the Metropolitan Water District to a record 40I,38I acre feet, or 65.per-cent ofneeds.

Water Usage Declines The Water System sold I88.4 billion gallons ofwater to its 646,90o cust'omers last year compared with 208.8'billion gallons to 643,400 customers in I989-90. Daily pet capita

/

usc fell from I79.3 gallons last year to I54.9 gallons in I990-9I.

'inter snowpack conditions in the Eastern Sierra'were far below normal through the end of February, but with heavy precipitation in March and thc imposition ofmanda-tory water rationiiIg by thc DwP starting the same month, demand slackened signifi-cantly and the supply situation improved. Prospects for a'return to normal in the near future remain dim, however.

~

/

Cnstonier Base Expands The DwP's Power System, meariwhile, was able to meet record energy demands in a ycar that, saw new efforts to slow growth rates through greater emphasis on cncrgy efficieiIcy.

In all, the Power'ystem sold zz.o gigawatt-hours (billion kilowatt-hours) ofelectricity in I99o-9I, vs, ai.8 gigawatt-hours in I989-9'o, an incrcasc ofaround i percent. Its cus-tomer base went from I,344,558 at year cnd I989-9o to I,357,785 on Junc 3o, I99I.

Daniel'W. Waters.Jr. was confirmed by'the Board of Water and Power Comniissioners as general Manager and Chief Engineer ofthe Department in November I99o.

4

WhTER SYSTEM Emphasis on Demand Side Spurred by a fifth year ofdrought, thy Water System implcinentcd a sweeping progra~ of"demand-side" strategicN in 1990-91 dcsigncd to,help the city through the current supply ciisis and reduce its.exposure to future water shortages:

A key feature of these strategic's is the subsidized installation oflow-capacity plumbing fixtures,'such as ultra-low-flush toilets and restricted-flow shower heads, which assure that conservation steps taken today willremain in place for the long term.,

'/

By. the end of the fiscal year, the DwP had paid customers about $5 million:insubsidies to install ultra-low-flow toilets, and distributed more than r.5 million free low-flow shower h'eads.

Emergency Conservation Plan r

Starting March 1, 1991, thc city implemented PhaSe 11 of the Em'ergcncy Water Conscr-vation Plan, which required a ro percent reduction in water usage below r986 levels.

Phase 111, requiring a 15 percent reduction, went into effect on May 1.

Average daily use, which had been 9 percent below normal just before rationing went I

J

, into effect, ran z3 percent below normal in March, z8 percent below in 'April, z8 pcr-ccnt below in May and 28 percent below in Junc. In all, customers achieved more than

.half the annual conservation goal injust fouz. months.

. Mono Basiii Rnling An El Dor'ado County court in Aprilco'ntinucd its injunction against the city'to'prc-

- vcnt diversions ofwater from the Mono Basin. This "action extends the 1989 ruling that no water can be diverted until thc surface ofMono Lake has reached 6,377 feet.

II This decision has temporarily 'cut offaround 6o;ooo acre feet ofLos Angeles'ater supply that had previously come from this area. Meanwhile, the court has ordered the State Water Resources Control Board to review the city's Mono Basin water diversion licenses and prcparc an environmental impact rcport that evaniines the impacts ofvar-.

ious diversion sc'enarios on the lake's ecosystem and on the City of Los An'gelcs.

Reclaiming the'Fntnre I

The DwP renew'ed and expanded its commitment to water reclamation in 199o-9r, with a.program aimed at making this resource a major part of the solution to the city's long-I term.water needs. By zoio, the pity hopes to be reclaiming up to 4o percent ofit5 waste water for irrigation and ground water recharging. This willresult in a ro percent sav-ings on potable (drinking)'water demand.

1 11

MEETING TOMORROW S CiihLLENGES TODhY Work got under way carly in I99I on the Greenbelt Project, which willutilize "i,6oo acre feet per year of reclaimed water from the Los Angeles-Glendale Water Treatment Plant for landscape irrigation at Forest Lawn Memorial Park Hollywood Hills, Mt..

Sinai Memorial Park, Lakeside GolfClub and Universal Studios.

The DwP willdesign and build a pipeline to service a new Sepulveda Dam Basin irriga-tion project that willuse about i,zoo acre feet pcr year to irrigate parks an'd golf courses in the Basin, and another Io,ooo acre feet to form an artificial lake.'Construc-tion began in August I99I, with completion expected early in I992.

Several other projects for reclaimed water use are in the planning phase. Ifthese pro-

'ects are fullyimplemented, more than Ioo,ooo acre feet per year may be 'used. In all,

,the DwP spent around $ 5 million for various water reclamation programs in I990-9I.

Safeguarding the Product Water quality improvement efforts continued to get a high priorityin I99o-9I. A new gioundwater purification plant was completed, using new, state-of-the-art technology called advanced oxidation. The process involves chemically neutralizing contaminants and converting them into environmentally benign byproducts. Another innovation introduced last year was REos (for remote electro-optical sensing),

a system for mon-.,

itoring water in Silver Lake Reservoir to achieve optimum quality on a continuous basis.

Efforts to safeguard and improve water quality in'Io"urban rescrvoiis took a new, turn in I99o-9I, with grcatcr emphasis on community. involvement in keeping with the Water System's strati:gic plan. Under the new Open Reservoir and Water Quality'Con--

~ sensus Process, Water System managers ineet with local residents and, with thc aid of a professional mediator, seek solutions that are sensitive to community concerns as well as thc city's water quality needs..

Facts in Brief l

Other developments ofnote within the Water System last year included:

o Grouhdwaier cleanup studies by the DwP continue on the Nortlt'HollywoodEnviron-mental Protection Agency (EPA) superfund site in the Fast San Fernando Valley, where years ofimproper industrial waste disposal has contaminated groundwater with indus-trial solvents. The problem area is being defined, and work is moving ahead on clean-ing up the contamination with a combination of proven and new technologies. Much of'he ultimate costs of cleanup willbe met through Fcdcral "Superfund" monies:

o A i,goo-foot section ofa,9-foot-diameter steel pipeline that carries Los Angeles

'queduct water from Crowley Lake to the Owens River Gorge was crushed "like

'Gorge'ous Opportunity A burst pipeline restored water to Ihe Owciis River Corge for Ihefirst time infour decades last April, and Ihe D>vp agreed to inaintain the jloiv, creating opportimi tiesfor sports fisherinen and reviving a long-idle trontfishery.

13

Standing Tall Mono Lake's picturesqiie liifa lowers, calcium carbonate struc-tures formed ivhen fresh water from underground springs reacts with Ihe mineralized water of the saline lake, are noiv part of a Slate reserve created in ty8t.

Several groues ofthese loivers haue been gradually exposed as Ihe lake's wafer level lras dropped. A court order has halted diversions ofivaterfrom lhe Motto Basin iinlilthe surface of the lake reaches 6,377 feet. The Basin once provided I3 percent oftire city's water supply.

~

a

~

~

I> g

~

~

g II 4 li 0

~ ~

Rousing Response Thefirslfour months ofinanda-tory ivater conseruation in Los Angeles this year mel ivilh out-standing support from otvp nistomers, iulio responded to an intensive media and direct-mail campaign by culling back oa usage by almost 3o percent through the end ofJunc, iyyi.

Thefountain symbols (below) represent tlie drop beloiv normal use for this period. In all, the four-month sauings ainounled to abiuit 63,ooo acre feet-or around y percent ofwhat oivl customers use during an entire year.

4 Drought Busters In ilsfirstfiillyear ofopera-tion, Ihc oivl Drought Basters issued a tolal of ty,a73 citations for uiolations ranging froin ivatering during restricted hours tofailing to repair leaks.

Notices werigiven in a spirit offriendly cooperation, however, and most recipients ceased Ihe proliibited acliuity without fiirlheraction. From October tyyo to June tyyt lhe Department's lVater Coaserua-tion Control Group received some yy,ooo telephone and 3,8oo letter inquiries, or about one euery four minutes.

I,'

V>

h.~

I cc~

Q Building Productivity Cost containment and produc-tiuily-gellingmore from less

-look on rcaeivcd importance in the ll'ater Sysleai last year.

A Productivity Measurcmenl System (Pats) ivas implemnited Ihal helps monitor perfonnance by crews alfive Dislricl Yards, rewarding those who achieve ioo percent oftheir goals.

As a result ofthe pr'ogram, the cost ofsmall seruice installa-tions decreased more than to percent, and leaks are noiu repaired for I7.7 percent less than last year-for anrnial sauings ofaround St.3 million.

MEETING TOMORROW S CHALLENGES TODAY aluminum foil"when a downstream valve at the poweJ plant closed the line suddenly, triggering a "water hammer" that punched through high pressure pipe with walls nearly an inch thick. About'4o acre feet ofwater (I3 million gallons) escaped before the line could be shut down. It was reopened Io days later, at a cost of$6 million.

ra The City of Los Angeles and Inyo County supervisors reached a historic agreement on.water management policies, for the area in I989. A draft environmental impact report (EIR) covering DwP water management practices based on this agreement was filed for public review and comment last year. The final report, which willbe completed in late I99I, willcontain the Department's and Inyo County's responses.

Stream Florus Restored Two of'four streams affected by diversions ofwater from the Mono Basin prior to I989 were restored to normal flows by the DwP in I990"9I, under a court order. Parker and Walker creeks,w'ill now support fish life, and the other two streams, Lee Vining and Rush creeks, willbe restored to normal flows in I99I-92. The DwP agreement to replenish the streams came as part of the mitigation process leading to a State Water Resources Control Board ruling on, the Mono Basin sometime after I992.

In addition to its Open Reservoir and Water Quality Conscn'sus

Process, the Water Sys-tem has launched a series ofroundtable discussions designed to elicit customers'iews

'on water quality and how tile DwP can be more responsive to their concerns. The pro-gram is expected to be broadened in I99I-92.

Water, System Facts-In Brief Year ended June Io Use of IVater Average Los Angeles population served

'verage daily use per capita (gallons)

Water'sales for fiscal year (billion gallons)

Maximum daily demand (milliongallons) l99l 1990 3,563,000 3>485>000 I54 9 I79 3 I88.4

'o8.8 778.2 835.7 IVat'er Supply (in billions ofgallons)

Local supply (groundwater)

Los Angeles Aqueduct (Owens Valley)

Metropolitan Water District (California and'olorado River Aqueducts)

'ross Supply Diversion to/from local storage Net supply to distribution systcins

40. 5 29.8

67. I 3o.6 0.3 20I.4

00. 0 226.4 I3o.8 i28.7 20I. I 226.4 15

MEETING TOMORROW S CHALLENGESTODAY PowER SYSTEM Positioned for Tomorrow In a year ofchallenge for the DWP, the Power System began a sweeping long-term,

~

"program ofcustomer energy efficiency tIiat is expected to improve environment'al performance and'significantly reduce the need for new power generating facilities.

Thanks to a decade ofinvestment in and planning for future needs, the Power System today finds itself well positioned to ineet projected electrical demand through the end ofthis century. The currerit program is designed to improve its position and reduce its vulnerability in the uncertain energy world,oftoniorrow.

Energy Efficiency and the Customer The. Power System continued to place heavy emphasis on customer service. A Con-

'- servation and Planning Division was established, responsible for coordinating and

'. broadening the System's wide-ranging programs to encourage more efficient use

~

ofits pro'duct.

P

~

Among the existing organizations now folded into this Div'ision is the Major Accounts Group, which works with large customers to assure they are receiving quality service and to assist them in using electricity in a more cost-effective manner.

Conservation and Planning's new Customer Energy Efficiency (cEE) effort is charged

. with finding solutions to future energy needs, in effect building, through conservation, an "invisible power plant" that willeliminate the need for up to 6oo megawatts ofnew generating capacity by the year aooo. This could save ratepayers hundreds ofmillions of dollars in future construction costs.

A plan to distribute free energy-eAiciqnt fluorescent lightbulbs and other energy-saving P

devices to customers is scheduled to get under way early in rgyi-g2. Neighborhood groups will,be enlisted to.help in the distribution. The DwP expects.to recoup the cost of the new bulbs from savings that willresult from lower capital spending on generat-ing capacity in future years.

Cleaner Solutions, Too Along with encouraging more efficient use ofits product, the Power System is working to improve the environment we livein.-

In May, the Dwp unveiled a program designed to reduce emissions ofcarbon dioxide-(CO,') from its power plants by 2o percent below i988 levels by. the year zoio. Halfthe savings will,be achieved by the year aooo. Carbon dioxide in the atmosphere is believed to contribute to global warming, which could have negative effects on the earth' future climate.

Power Plays Demand-side management prograins in the Dtvt Power System are aimed at encouraging custonier efficiencies that could save ratepayers hundreds ofmillions ofdollars over the next decade.

Draivings below symbolize results expected from the Dlvps aggressive plans to cwt emissions ofCOa, prime suspect in global warniing, between noiv aiid the year 2oot.

17

Road Charger The Dn'P's support ofelectric vehicle technology continued in 1990.9r with $5.q inillion in fimding commitments lo the city's Electric Vehicle Initiative.

The money ivas used to help manufacturers develop prototype vehicles, and ultimately lo deliver a prodwctioir nrodel some lime in rye. The city's initia-tive aims at briugiug some'o,ooo electric vehicles to Ihe streets of Los Angeles by tyy5.

By the year oooo, a million electric vehicles willbe needed to ineel air quality targets.

Less Demanding Tlie top ofeach bar represents the amount ofnciv generating capacity the Drvt would have to build in order lo nreel cxpcctcd demaird by llic year sot I if current consumption levels continue. Bul thanks lo tire DIVI"snciv Customer Energy EJJ'rciency (Ct!o) prograin, shoivn iu red, more than half tliesc needs rvillbc cancelled out tlirowgli loivered consumption of electricity, saving Los Angeles customers millions ofdollars in nciv capital spending over thc nexl livo decades.

"I-.t+

Bright Idea Ifevery incandescent light bulb in Los Angeles iverc replaced by a new compactfllrro-rescent bulb Ihat gave ogjust as nmch light (bul considerably less heat), electric bills could be reduced significantly, and lhc DwP would save money in avoided costs ofneiv generating capacity in Ihe years ahead. Iu Iyyr-yz, with the help of neighborliood groups, the DIVP ivillbegin free distribution of fluorescent bi<lbs lo thousands of hoineowners in lire city, as part oflhe Customer Energy Egiciclrcy (ct!8) program.

~Wkiskk Fiber Op-Art The Divl ivillcuter lhe Fiber Optics Age this year, with installation ofa g-mile com-municalions hookup bcliveen lhc dorvntoivn lierrdqwarters build-ing and the Syhnar Converter Station. Tirefiber optics cable, only a third ofan inch iu diameter, ivillcarry voice, video and data on tiny beams that defy electric aud magnetic fields, and convey messages withgreater clarity and reliability. A helicopter strung Iliccable along existing "live" transinission lines.

18

MBBTING TOMORROW S CHALLBNGBS TODAY The DwP is also committed to improving air quality in Southern California by reducing emissions ofnitrogen oxides (NOx) from its generating stations. There are three major programs aimed at achieving this goal:

~ A commitmcnt to eliminate the usc offuel oil in all but emergency situ'ations;

~ Adding state-of-the-art NOx reduction equipment to each of the Los Angeles Basin generating stations;

~ Repowcring old generating equipmcnt with modern, clean,'fficient systems.

InJanuary, as part ofthe fuel oil substitution. program, the Power System announced the signing ofcontracts to dclivcr up to z5o millioricubic feet per day of patur'al gas through two new pipclines scheduled to bc completed in early i99z.

The Power System's fuel substitution strategy was'the major factor in reducing fuel oil usc by nearly 97 percent from'989-9o to i99o-9i.

Repoivering at Harbor Construction has begun on the Harbor Generating Station repowering project, which willmake this 5o-year-old fa'cility in V/ilmington one of the most fuel efficient plants

, in the nation and a vital component in the DWP's effort to reduce NQx emissions in the Los Angeles Basin. This Si 5o million project, to be cotnpleted in 1993, willreplace II the station's five fossil-fueled boilers with two state-of-the-art turbine units fueled by natural gas.

The problem ofatmospheric haze in the Grand, Canyon, which (he National Park Ser-

'ice attributes in part to emissions from the Navajo Generating Station in Arizona, moved a step closer to solution in r99o-9t. The Dwr, a zi percent owner of the station, has agrccd along with the other owners to support the Environmental Protection Agency's Best Availablc Retrofit Technology process, which calls for use of scrubbers to reduce sulfur dioxide (SO2) emissions from the three generating units by 9o percent over the next eight years.

Electric "Wlieels".

I As the battle against air pollution focuses increasingly'on private automobiles, the Dcpartmcnt has accelerated its campaign to bring'clean-running, cost-effectiy'e electric r

'vehicles to the market in Southcgri California.

In 1990-9I, tile DwP invested $5.4 million in the Los Angeles Electric Vehicle Initiative (i.hrvi), chiefly in the form ofsubsidies to manufacturers ofprototype vehicles. In addi-tion, thc Power System annouriccd a rate reduction for certain owners ofelectric vehi-

, cles. Tlie DwP is als'o sharing the cost of advanced trans'portation studies into making storage batteries more eAicient.

19

MEETING TOMORROW S CHhLLENCES TODhY Electrifying public transportation is also a priority for the Department. The new Los Angeles Blue Line commuter train was helped on its way when the Dwr short-,cut the process ofelectrifying the system.

EMF Research Continues Increastng public con'cern over possible health impacts from eIcctric and magnetic fields

'EMF) has prompted the Power System to step up its support ofinvestigations. into this area.

EMFs occur around most electric appliances, as well as power lines, with unc'ertain effects on human tissues.

DwP, which started its EMr investigations in the>mid-I98os, is supporting several EMF reseaich programs at 'present, including one by, the Health Effects Institute, in which the Department has invested $3oo,ooo.

~

~

~

~

>'otver System Facts In Brief Year ended June Io Number ofCustomers Residential customers L

Commercial customers IndtIstrial customers Allothers

. Total cu'stomers, all classes t99l I > I63 >020 I72,972 I8,868 2'>925 I>357>785 1990 I,I5I",82o I7cr>755 19,098 2,885 I,344,558 Pott>er Use Sales to ultimate customers-kilowatt (kW) hours Sales to other utilities-kWhours'

~

Average annual kW hours per residen-tial customer Net dependable capacity, kilowatts 5,2I I 7,263 >000

~

5,084 7>249,000 2I,795>883,504 2I,321,44I>000 2IO>59I>90I 442>449>000 20'

ExTRRNAL AND ORGANizATioNAL SERvicHs An Accent on the Fntnre 4

Preparing the DWP for the operating envii'onment of the next ccntuiy became the top priorityofExternal and Organizational Ser'vices in I990-9I. This emphasis took three basic forms:.

o Employee Empowerment. Implementing new programs and policies to give DwP employees greater responsibility and control'of their work product arid workplace.

I o Celebrating Div'ersity.,Building awareness and appreciation among DwP emplo'yees for the.,richncss ofcultural and ethnic diversity. in today's workplace.

o Customer Service. Working.harder to meet th'c needs of customers through getter training, better systems and'better understanding oftoday's dynamic Inarketplace.

In addition, Ros efforts last year were directed toward a range ofwork and family issues, including broadening the Department's widely heralded child car'e program, improving education through the public school syst'm aswell as internal trainiiig, programs, and putting even greater emphasis on employee safety.

Employee Empoiverment'rom Detroit to Tokyo to Stuttgart, the benefits ofgiving employees a bigger stake in their workplace and work product have bccn abundantly, demonstrated in recent years.

S'uch involvement leads to improvements irIpro'ductivity, as well as stimulating cre-

. ativity and innovation throughout the ranks.

Last year tile DwP launched a Department-wide initiative aimed at empowering its I I,ooo employees to play a larger role in achieving their job objectives: A Department study group is leadin'g the way in this effort, examining the potential ofnew manage-ment systems that encourage employee empowerment.

'ne of these, called Total Quality Management (TQI I), is under close review as a possi-ble'model for a,DWP management developincnt program. TqM strives to improve cus-tom'er satisfaction through a contiiiuous reexamination of processes to]ieighten quality, with strong employee involvement and innovation.

The Department continues to pu't increased emphasis on established programs driven by employee ideas, Quality Circles and thc Dwi Suggestion Plan, to gain~ headstart on

~

its long-ter'm goals for employee empowerment; Celebrating Diversity The growing ethnicity of today's workforce has major implications for institutions everywhcrc, but especially those in Southern California, the most culturally diverse 21

MEETING TOMORROW S CBhLLBNGBS TODhY community in the world. The DwP, with 52. I percent of its employees from minority

,groups, today finds itself at. the center of these developments.

'ne recent development on this front. is'thc appearance in the Dwiiworkforce ofgrow-.

irig numbers ofemployees from the Middle'East, Asia and Central America.'In all, the Department now includes people from at least Ioo nations and/or ethnic groups.'inding ways to build upon and celcbratc this diversity to strengthen the Department's competitive position is a primary Human Resources Division objective, in the next decade.

It is being addressed in a number 'ofways, from broider employee and management

'raining programs to jobsite affirmative action committees, from changes in cafeteria menus to helping managers build cultural diversity into their long-range operating plans.'I Better Management Training To help take advantage ofthis cultural ri'chness, traimng sessions have been held for more than I,ooo managers and supervisors, 'emphasizing ways to smooth the transition ofriew employees into their jobs and to mediate and resolve tensions among minority groups.

Another z,ooo cmployecs are scheduled to take part in these sessions in I99I-92.

Highlights of DwP minority/female employmcnt:

o Representation in the Officials'and Administrators categories is now 33 percent minorities, compared with 22.) percent in I986. Women now comprise Io.6 percent in this category, up from only I.6 percent in:i985.,

o Mino'rities and females now comprise 54.8 percent of the professionals'ategory "at the Dwp.

I.

Opportunities for Entrepreneurs 1

'Thc DWP also continues to pursue greater opportunitics for minority business owners through its Woinen and MinorityBusiness Enterprise (w/MBEf program. Nearly

$78 millionin contracts were. awarded last year to female-or minority-run businesses, representing Io.3 and I4.3 percent, respectively, oftotal DWP construction, services and personal services awarded. InJanuary I99i, the woincn's contract goals 'were incrcascd from 4 to 7 percent, and minorities'rom Iz to. Ig percent...

Ir I

More than'45o female and minority vendors were hosted at the thi'rd annual,puichasing Services w/MBB Outreach Workshop in November. In addition to thc DwP representa-tives, more than zo other organizations, including government agencies, general con-tractors and members ofpurchasing associations, were on hand.

.22

3 Doting Dads A highlight ofthe DtvP's leading-cdgc child care egort is an extensive "fathering" program for the DivP dads tvho notu participate. Tivo-income families are on the rise in America (see inset), leading to increased pressure for better child-carc facilities in thc tvorkplacc.

23

Ring!cadets for Quality The world's oldest labor-sauing device-human ingenuity is enjoying a coineback al Ihe Drvt'. The Krrrrcklebuslers, a team ofinechanics in lhe Cerreral Services Division, have formed their own quality circle, aimed at culling costs and increasing producli vily.

By brainstorming, trying new melhods and encouraging nero ideas, the team is sauing thousands in repair costs, while cutting vehicle "doiun time." Another way ofgetling more orit ofpeople by "getting out oftheir ivay."

Everybody Into the Pool The Drvl', ivith one ofIhe most active ride sharing programs in Ihc city, broaderred the egort in Ir?yo-rtt ivilh nearly z,ooo einployces participating in either a uan pool (some Iso vans are norv inuolved), car pool or subsidized public trans-portation prograin. This effort results in an annual reduction of more than ay million passeiiger milesfrom area streets and free-ivays-about thc equivalent of 5o round-trips to Ihe moon-and sauing about a million gallons ofgasoline and around y5o tons ofair pollutants.

Questions, Anyone?

IVhal s Ihe best toilet to buy?

Horv can Iappeal a iuater con-servation penally charge?

IVhere can Iget a Drvl lorv-Jlow shower head?

These arejust afeiv ofthc nrany thousands ofquestions Ihat stream into Ihe Divt"s Cus-tomer Service Call Center and Branch vices euery iveekday

-questions lhat are usually aiisrvercd on tire spot.

Customer Service professionals whofield these questions are specially trained to handle everything froin simple inquiries lo lhe most complex problems, even Ihose that haue little to do ivilh Dive business.

Spurred by a alr percent increase in customer phone inquiries (see drawing, left),

crrstomer service has taken a lop spot on the Divl agenda, and last year's expansion to round-lhe-clock service seven days a rveek rejlecls that cmpliasis.

Crislomer Telephone Service representatives are upbeat aborit the changes.

Buoyed by their neiv apprecia-tion within lhe Drub and an innouatiue recognition program, tlrey have steadily iinproved productivily and quality ofservice.

Response times are closing in on the magical ao-second goal, and more and more calls are being handled at the priinary contact point, in spite ofsharp increases in volume since water conserua-lion began.

Divp crrstomer service represcn-tatiues find comfort in one other fact these days: Ciucrr the heightened cinphasis on crrs-tomer satisfaction, llreirfimclion is ainong Ihe most vital and rewarding in the organization.

MBBTINC TOMORROW S CHhLLBNCBS TODhY 1

Customer Service I

With the worsening Southern California drought and the onset ofmandatory water conservation, customer inquiries and complaints to the DwP increased by soine'29 per-cent iti the first six months of r99r, over the same period of i99o.

'To cope with this accelerating pace of calls, letters and in-person visits, customer ser-vice resources were strengthened and broadened last year. Phone coverage was extended

~ to 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day, seven days a week, and the Customer Service Call Center team now numbers just over 3oo, and several branch offices have expanded their hours.

Field Service groups have expanded their service days as well. Service calls are now being routinely scheduled for Saturdays, as well as the standard Monday-through-,

Friday schedule. Technical enhancements such as an expanded Voice Response Unit

'ave also improved overall productivity.

0 r

I "One-Stop ".Service 1

The ultimate measurements ofcustomer service are response time and "one-stop" han-

'dling ofcustomers-usually by the same'person who "answers the phone. The DWP goal has been. to answer 8o percent ofall incoming calls within zo seconds (approxirtiately

-three rings), while minimizing the transfer of calls. At year end, 6o:4 percent ofcalls were being answered within the targ'et time.

In i99o-9r,'despite the rising'curve ofcustomer service requests, the average telephone response time'.improved by 65 percent, with about 9o.percent of calls handled by the initial respondent;,

To reach these levels, Customer Telephone Service personnel'are receiving additional training that prepares them 'to deal with questions ranging from water con'servation to electric vehicles, from billing inquiries to electric trouble and more.

Drought Aivareness A key element in the success of the DwP water conservation effort ill 1990-9I was build-irig public support through a wide range ofpublic information programs.

The Public Affairs Division took lead responsibility for this effort, developing new public outreach initiatives through media advertising, utilitybill inserts and intensive efforts to generate print and electronic media coverage ofthe crisis.

One measurement of the campaign's success was the outstanding response of DwP water customers. P.lthough inquiries were up significantly, customers'lodged relatively..

I few complaints about the inconvenience, and media coverage was almost uniformly supportive.

~

a 25

MEETING TOMORROW S CHhLLENGBS TODhY Facts in Brief Other developments of note within External and Organizational Services last year wery:

o The DwP's pace-setting child care program received special Congressional, recognition when a Department representative was invited to testify before a House committee looking into child care reforms. The DwP representative told lawmakers that the pro-gram now covers more than a quarter ofall employees, and includes many unique fea-tures, including a "fathering" progra'm for male employees. The DwP llas documented that every dollar invested in child care returns $2.5o in lower absenteeismend turnover.

I o Improving the quality ofeducation has become a major priority for the Department.

Its educational outreach effort now reaches more than 3,ooo teachers and roo,ooo stu-dents, making it onc of the largest partnership programs in the city. A major initiative

'ast year was the $5 million DwP grant to the Los Angeles Unified-School District for its Youth Service Academy, a program to prepare local students for 'careers in city gov-ernment. The funds are used to pay r,ooo students who are taking on-the-job training.

The, youngsters have good academic records, but are regarded as high-risk drop-out

'andidates.

DwP employees also participate at seven schools in the L.A. Unified School District in its'Adopt-a-School Program.

o Employee safety standards continued to improve at the DwP in rggo-gr; with lost

.workday 'injuries down by 47 percent in the last three years, thanks to improved train-(

. ing and intensive safety awarcncss programs throughout the systems. The record among employees performing hazardous tasks has shown even greater.-improvement,*

with 87 percent fewer lost workday injuries over,the last dec'ade.

. o Recycling efforts at the DwP were intensified in imago-yr, with sales ofnearly

$4 million, up 5o percent from the previous year. Recycling programs forcardboard, plas-tics and glass were initiated, and thc disposal process was made more efficient through the use,of price-and-time contractors: The Department alsa eliminated $2 million worth ofobsolete and slow-moving materials from its inventory, creating significant savings in storage space and inventory carrying costs. In addition to the cash benefits, thc recycling program has reduced waste and increased employee awareness of resource management issues.

26

,LOS ANGELES DEPARTMENT OF WATER AND POWER 1990-1991 FINANCIAL STAT'EMENTS The Water Systent Statement ofIncome Statement ofRetained Income Reinvested in the Business Balance Sheet N \\

Statement ofCash Flows Notes to Financial Statements The Po tv e r S y s t e'nt Statement ofIncome Statement ofRetained Income Reinvested in the Business Balance Sheet, Statement ofCash Flows Notes to Financial Statements 27.

LOS hNGBLBS DBPhRTMBNT OF WATER AND POWER FINANCIAL REVIEW Operations for fiscal year 1990-'91 resulted in a 0.5 percent increase in sales ofelectric energy and a decrease of.

9.7'ercent in wa'ter sales due to conservation.

Combined operating revcnucs for the Department's Water and Power Systems totaled approximately $2.2 billion, a decrease of$38 million over the previous fiscal year. Most ofthe decrease was in the Power System where I

savings from lower energy costs were passed on to cusiomers.

The operating revenue ofthe Water System decreased slightly from 1989-90 to a total of$347.7 million. The conseivation-related decrease in consumption was partially'offset by the, full year effect ofa 6.5% reveriue increase implemented in April 1990. Net income amounted to $40 million, or 36 percent below the previous fiscal year duo in part to increased'expenditures associated with creating public awareness ofand support for the con-

. servation effort.

A total of$179 millionwas spent by the Water System on capital construction, most ofwhich went toward the improveinent ofthe water distribution and supply system, as well as water quality programs.

Lower Power Systein operating revenues'nd increases in operating and debt expenses resulted in net income of

$96 million, down 39 percent. from prior year's total of$156 million.

.The Power System invested $399 million in capital construction for the year. Major expenditures werc additions and modifications to the electrical distribution, generation, and transmission facilities.

Total assets ofthe Department at June 30, 1991, were.ap'proximately $6.4 billion. ef this amount, $4.8 billion was recorded in the Power System and the remainder in the Water System.'

Fiuauciiig Activities During the year, the Po+er Systcin sold thrcc issues ofrevenue bonds in the amounts of$100, $ 150, and $100 mil-lion at the interest rates of7.32, 7.18, and 6:82 percent, respectively. The Water System sold one issue of$75 mil-4 lion revcnuc bonds at the interest rate of7..05. Outstanding bonds and revenue certificates at June 30, 1991 totaled

$2.35 billion.for the Power System and $568 million for the Water System. Both Systems met their maturing payments on bonds.

Costs aalu/ Transfers 0

In accordance with basic fiscal policy, thc Department pays'all costs'of operation, debt service and part ofthe cost ofcapital improvements from current revenues. The remainder ofthe cost ofca'pital improvements is mct through sales ofrevenue,bonds or notes and from contributions in aid ofconstruction.

'esides meeting all costs ofoperation from current revenues, the Department paid $110 millioninto the reserve, fund ofthe City in support ofgener'al City'overmncnt. More. than 84 percent ofthat amount came from the Power Revciiue Fund.

I' Operations ofthe Water and Power Systems 'are entirely self-supporting and no financial obligation or tax burden is placed on the citizens ofLos Angeles.

28

LOS hNGBLBS DBPhRTMBNT OP. WATER hND POWER h

WATER SYSTEM STATBIIBNT OF INCOMB'In Thousands) t Year ended June 30'991.

1989 Operating Revent tes

'Residential Commercial and industrial.

Other Total operating revenues

$119,156,$ 125,470

$110,069 189,518

.191,236 166,558

, 39,025 31,450 23,621 347,699 348,156

'300,248 Operatii Ig Expenses Purchased water Purchased energy

'ther operating, expenses Maintenance Depreciation Total o'perating expenses 69,911" 10,501.

128,277 43,485 37,972 290,146 71,814 44,988 12,962

'2,991

, 105,725...,109,627 39,849 38,424 35,270 32,814 265,620 '38,844 Operating 'Income Other Income and Expettses, Net Income before debt expenses 57,553 8,281 6,428 65,834

'8,964 6, 477 67,881 82,536, 61,404" Debt Expenses Interest on debt

, A'llowance for borrowed funds used during construction Total debt expenses 29,098 28,518 (3;258);

(2,196) 25,840 26,382 27,556 (2,006) 25,550 Net Incoine

$ 39,994

$ 62,582 3 42,331 r

~STATBMB'NT OF 'RBTAINBD INCOME REINVBSTBD IIhl TH t

B BUSINESS (In Thousands)

Balance at beginning ofyear Net income for the year Les's-Payments to tlie reserve fund ofthe City Balance at end ofyear Year ended June 30 1991

$541,549

.. 39,994 581,543 17,408

'564,135 1990

$493,979, 62,582 556,561

'51012

$541,549 1989

$464,500 42,331

'06,831 12,852

$493,979 Thr rstrompanyintt nota arr an in(st(rat part ofthese finantiai staten)rnts.

29

LOS ANGELES DEPhRTMENT OF WhTER hND POWER WATER SYSTEM BALANCE SHEET gn Thousands)

~

~ Assets UtilityPlant, at original cost Source ofwater supply Pumping Purification Distribution General Junc 30 1991

'247,247 59,927 149,422

= 1,295,076 145,751 244,792 56,229 146;754

, 1',208,083

. 126,030 Less Accumulated d'epreciation 1,897,423 1,781,888 616,501 577,678

'onstruction work in progress

. Net utilityplant

,1,280,922 145,159 1,426,081 1,204,210 77,879 1,282,089 Current Assets Cash and investments Customer and other accounts receivable Accrued unbilled revenue'aterials and suppliest at average cost Prepayments and other current assets Total current assets 58,404, 47,032 32,734 19,318 9,764 167,252 71,878 58,384

'29,998 20,259 9,574 190;093 "Total'utilityplant and assets 51,593,333 51,472,182 Capitalization and Liabilities Capitalization

- Equity Retained income reinvested in thc business

'ontributions in aid ofconstrbction

'ong-term*debt 564,135 427,096

, 991,231 430,313 541,549 410,378 951,927 367,477 Total capitalization 1,421,544

',3'19,404 Current Liabilities Long-term debt due within,one year Accrued interest A'ccounts payable and accrued exp'enses Over-recovered purchased water and energy costs Customer deposits Total current liabilities 12,360 9,401 79,321 20,716 42,991 171,789 12,460 8,270 83,501 8,393 40,154 152,778 I

Comtnitments and Contingencies Total'capitalization and liabilities

$1,593,333

$1,472,182 Thc attompanyintt notrs are an intrttral part oftharfinantial aatrmrnts.

30

LOS 'ANGBLBS DEPARTMENT OF WATER AND POWBR WATER SYSTEM STATEMENT OF CASH FLOWS 1989 Year ended June 3Q 1991 (In Thousands)

Cash Flotys From Operating Activities:

Net inc'ome Adjustments to reconcile net inco'me to net cash provided by operating activities:

Depreciation Allowance for borrowed funds used during construction Changes in current assets and liabilities:

Customer and other accounts receivable Accrued unbilled revcnuc

~

~

Materials and supplies Prepayments and other current assets Accrued interest Accounts payable and accrued expenses Over-recovered purchased water and energy costs Customer deposits Net cash provided by operating activities

$ 39,994

$ 62,582

$ 42,331 32,814 (2,006) 35,270 (2,196) 37,972 (3,258) 606" (7,288)

(623)

~ 3,367, 1,680 13,928 (97) 2,830 (4,218)

(3,791)

(4,147) 1,965 (1,162) 29 11,242 1,512 11,352 (2,736) 941 (190) 1',131 (4,180) 19,323 2,837 103, 186 87,542 97,086 Cash Floivs Frotn Financing Activities:

Sale ofrevcnuc bonds Sale ofadvance refunding bonds Contributions in aid ofconstruction Reduction oflong-term debt

'Amount deposited in escrow accounts and offset against advance

. refunding bonds Payments to thc reserve fund ofthe City, Net cash provided by (used in) financing activities 74,254 16,718 (11,518)

(17,408) 62,046

,36,598.

. 33,779 (19,967)

(36,598)

(15,012)

(1,200) 49,500 18,770 (20,054)

(12,852)

. 35,364 Cash Flows From Investing Activities:

Expenditures for plant and equipment (178,'706)

(113,099)

(118;144)

Cash and investments:

Net increase (decrease)

Beginning ofyear End of year (13,474)

(17,213) 71,878

'9,091

$ 58,404

$ 71,878 4,762 84,329

$ 89.091 Snppleniental tlisclosnre ofcash flotvinforntationi Cash paid during the year for interest

$ 36,880

$ 36,799

$ 32,223 Thr arrampony1'ng nates arr an integral port %herr Jinanrr'al statements.

31

'LOS hNCELES DEPARTMENT OP WhTER AND POWER

'WAT'ER SYSTEM 'NOTES TO FINANCIAL STATEMENTS Note ASutnntary ofSignificant Accounting Policies

(

C The Department-The Department ofWater and Power ofthe City ofLos Angeles exists under'and by virtue of

'I

'he City Charter enacted, in 1925 as a separate proprietary agency ofthe City: The Water System is responsible for the quality and distribution ofwater for sale in the City.

Fina'ncial statenrent presentation The financial statements ofthe Water System are presented in conformity with r

generally accepted accounting principles. The financial statements are substantially, in conformity with the uni-form system'of accounts prescribed by tlie California Public Utilities Commission except for the method of accounting for contributions in aid ofconstruction described below. The Department, is not subject to regulations ofsuch commission.

Utilityplagt-The costs ofadditions to utilityplant and replacements ofretired units ofproperty are capitalized.

Costs include labor, materials and allocated indirect charges such as engineering, supervision, transportation and

~,

.construction equipment, retirement plan contributions, and certain administrative and general expenses. The costs ofrepairs and minor replacements are charged to appropriate maintenance accounts. The original cost ofproperty "retired, plus removal cost, less salvage, is charged to accumulated depreciation.

Depreciation Depreciation expense is computed by the straight-line method based on estimated service lives.

Depreciation provision as a percentage ofaverage,depreciable utiliiyplant in servrce,was 2.5% for each ofthe fiscal years 1991, 1990 and 1989.

Cash and inveslnients The Department's cash is deposited with the City Treasurer who invests the funds in securi-ties under the City Treasurer's pooled investment program. Under the progr'am, available funds ofthe City and its independent operating departments are invested on a combined basis. These investments are valued at cost, which approximates market.

Contributions in aid.ofconstruction Under the provisions ofthe'City Charter, amounts receive/ from customers

/

and others for'constructing utilityplant are combined with retained income reinvested in the business to represent equity for purposes ofcomputing the Water System's bo'rrowing limits..Accordingly, contributions in aid ofcon-

~

struction are shown in the accompanying balance sheet as an equity'account and are not offset against utility.plant.

II Revetutes Revenues consist ofbillings to.customers for'ater consumption 'and include amounts resulting from a purchased water and energy cost adjustment formula designed to peimit the full recovery ofpurchased water and energy costs. The Department projects these 'costs to establish the co'st recovery componen't ofcustomer billings

'nd any difference between. billed,and actual costs,'resulting'in over-or under-recovery ofpurchased water and

'nergy costs, is adjusted in subsequent billings.:.

The Water System recognizes purchased wa'ter and energy costs in the period incurred and accrues for estimated water sold but not yet billed.

The.Water System's rates are established by a rate ordinance which is approved b'y the City'ouncil. The'Water

'ystem sells water to other Departments ofthe City at rates provided in the ordinance.

Debt expenses Debt premium, discount and issue expenses are deferred and ainortized to expense over the lives ofthe related issues.

I F

Alloivanceforfiuids used during'construction (AFUDC)AFUDC represents the cost ofborrowed funds used for the construction ofutilityplant. Capitalized AFUDc is shown as-part ofthe cost ofutilityplant and as a reduction of 32'

l debt expenses.

The average AFUDC rates were 7.5%, 7.8% and 8.1% for fiscal years 1991, 1990 and 1989, respectively.

Note B-Long-Tenn Debt Long-term debt outstanding at June 30, 1991, consisted ofrevenue bonds due serially in varying annual amounts through 2031. Interest rates; which vary among individual maturities, averaged approximately 7.1% and 7.2% at June 30, 1991 and 1990, respectively. The revenue bonds generally are callable ten years after issuance.

Scheduled annual principal m'aturities during the five years succeeding June 30, 1991 are $ 12, $13, $13, $ 13 and $ 13 million, respectively. Revenue bonds are secured by thc future revenues ofthe Water System.

In prior years, the Department sold advance refunding bonds, the proceeds ofwhich were. placed in an irrevo'ca-

ble trust and willbe used to redeem bonds'currently included within long-term debt at scheduled call dates. Until the bonds to be refunded are called, interest on the advance refunding bonds is payable from'interest" earned on securities ofthe United States government purchased out ofthe proceeds ofthe sales and held in bank escrow

'ccounts",

After the monies in the escrow accounts arc applied to redeem the bonds to be called, principally through 1995, interest on the advance refunding bonds willbe payable from Water System revenues. The trust account assets and the liabilityfor thc refunding bonds are-not included in the Department's financial statements.

AtJune 30, 1991, $122 millionofthese trust assets have been offset against advance refunding bonds.

Note C-Shared Operating Expenses I'he Water System shares certain administrative functions with the Departmei1t YPower'ystem. Generally, the

'osts ofthese'functions are allocated on the basis ofberiefits provided to the Systems.

Operating expenses shared with'the Power System were $295, $275 and $251 millionfor fiscal years 1991, 1990 and 1989, respectively, ofwhich $95, $89 and $85 millionwere allocated to the Water System.

1989

$10 41, (61) 39 29 1991 1990

$ 12

$ 12 47 40 (42) '

(41) 11

.14

'28 25 Service cost Interest cost

~

Actual return on plan assets Net amortization and deferraL

\\

Net retirement plan cost Disability and death benefit plan costs and administrative expenses 5

5 Total benefit plan costs

$33

$30

'mployee contributions to the plan'totaled $4 million for each ofthe fiscal years 1991, 1990 and covered payroll during 1991, 1990 and 1989 was $115, $110 and $110 million, respectively.

$34 1989. Total Note D-, Eniployee Benefits RetirenTent, disability and death benefit insiirance plan The Department has a funded contributory retirement, dis-.

ability and death benefit insurance plan'covering substantially all ofits employees. Plan benefits are generally based on years ofservice, age at retirement and the employees'ighest 12 consecutive months ofsalary before.

,retirement. The Department funds the retirement plan on an entry'age normal method as determined by the plan's

- independent actuary. Fot funding purposes; prior service costs relating to the plan are amortized generally over a 30-year period ending June 30, 2003. Total'iscal year benefit plan costs for the Water System include the following (amounts in millions):

33

LOS hNGBLBS 'DBPhRTMBNT OF WhTER hND POWER WATER SYsTEM NoTEs To'INANGIAJ. STATEMENTS The followingschedule reconciles the funded status ofthe plan with amounts reported in the financial statements (amounts in millions):

r June 30, 1991 June 30, 1990 Actuarial present value ofbenefit obligations:

Vested benefits I

Non-vested benefits Accumulated benefit obligation

.Effect ofprojected future compensation level Projected benefit obligation Plan assets at fair value

'Projected benefit obligation in excess. ofplan assets Unrecognized net gain and effects ofchanges in assumptions Unrecognized net obligation at July 1, 1987 being recognized over 15 years Accrued pension liability

$531 1

532 99 631 520 111 (13)

(80)

S 18

$484 484

',88 572 476 96 12 (86)

S 22

~

The discount rate used in determining the plan's projected benefit obligation was 8.0% in both 1991 and 1990.

The assumed rate ofincrease in future compensation levels was 6.0% in both 1991 and 1990. The long-term rate of

\\

return on plan assets was 8.0% in both 1991 and 1990. Plan assets consist primarilyofcorporate and government bonds, common stocks, mortgage-backed securities and short-term investments.

Health care costs The Department provides ceitain health care benefits to active employees. The cost to thc" Water System ofproviding such benefits to active employees amounted to $9, $8 and $7 millionfor fiscal years 1991, 1990 and 1989, respectively. In addition, health care and life insurance are provided as postretirement benefits to retired employees and their dependents.

The cost to the Water System ofproviding such benefits to retired employees amounted to $3, $3 and $2 millionfor fiscal years 1991, 1990 and 1989, respectively. The costs of providing these benefits are accounted for on the pay-as-you-go-method.

In December 1990, the Financial Accounting Standards Board issued Statement ofFinancial Accounting Standards No. 106, "Employers'ccounting for Postretirement Benefits Other Than Pensions." The new statement requires systematic recognition ofthe costs ofpostretiremcnt benefits over cmployccs'ervice periods.

The Depaitment is required to implement this statement no later than fiscal yea'r 1994 and does not expect adop-tion to have a material effect on results ofoperations.

Note ECommitments. and Contingencies Paytnents to the reservefimd ofthe CityUnder the provisions ofthe City Charter, the Water System transfers funds-at its discretion to the reserve fund ofthe City. Sue}i payments are not in lieu oftaxes and are recorded as distribu-tions ofretained income. The Department expects to make payments of$17 millionin fiscal year 1992 from the Water, System to the reserve fund ofthe City.

LitigationA number ofclaims and suits*are pending against the Department for alleged damages to persons and property and for other alleged liabilities arising out ofits operations. In the opinion ofmanagcmcnt, any ultimate liabilitywhich may arise from these actions millnot materially affect the Water System's financial position as of Junc 30, 1991.

'EPORT OF INDE'PENDENT ACCOUNTANTS September 5, 1991 To the Board ofWater arid Power Commissioners Department ofWater and Power City ofLos Angeles C

In our opinion, thc accompanying balance sheet and the related statements of income, retained income rcinvcsted in the busiriess and ofcash flows present fairly, in all material respects, the financial position ofthe Water System of the Department ofWater and Power ofthe City ofLos Angeles at June 30,-

1991 and 1990, and the results ofits operations and its cash flows for each of

- the three years in the period ended June 30, 1991, ih conformity with gener-ally accepted accounting principles. These financial statements are the

'esponsibility ofthe Department's man'agement; our responsibility. is to express an opinion on these financial statements based on our.audits. We con-

'ducted our audits ofthese statements in accordahce with generally accepted auditing standards which retluire that we plan and perform the audit to obtain reasonable assurance about whether thc financial statements arc free of material misstatement." An audit includes examining, on a test basis, evidence supporting the amount's.and disclosures in the financial statements, assessing the accounting-principles used and significant estimates made by manage-ment, and evaluating the overall financial statement presentation.

We believ'e that our audits provide a reasonable basis for the opinion expiessed above.

35

LOS ANGELES DEPARTMENT,OF WATBR AND" POWER POWER SYSTEM STATEMENT OF INCOME (In Thousands)

Year ended June 30 1991 1990 1989 "Operating Revenues Residential Commercial and industrial Other Total operating t(evenues 526,860 1,216,664 68,431 1,811,955 519,339 1,251,296 79,258 484,591.

1,162,027'9,703 1,849,893

',716,321 Operating Expenses Fuel for gerieration Purchased power Other operating expenses Maintenance Depreciation, Total operating expenses 211,127 664,389 412,556

, 163,910 152,190 1>604,172 247,592 647,585 392,202 168,482 139,031 1,594,891 253,576 534,462

'64,394 148,742-136,954 1,438,128 Operating Income Other Income and Expenses, Net Income before debt expenses 207,783 255,002 18,157 16,835 225,940 '71,837 278,193 18,257 296,450 Debt Expenses Interest on debt Allowance for borrowed funds used during construction

'Total debt expenses 136,156 128,128 (6,143)

(2,757) 130,013 115,371

'10,289 (7,268) 103,021 Net Income 95,927 156,466 193,429 STATEMENT OF RETAINED INCOMB REINVESTED IN THE BUSINESS (In Thousands)

Balance at beginning ofyear Net incoine for the year

'ess Payments to the reserve fund ofthe City Balance at end 'of year Year ended June 30 1991

$1,971,276 95,927 2,067,203 92,494 81.974;709 1990

$1,900,628 156,466 2,057,094 85,818 51,971,276 1989

$1,785,701 193,429 1,979,130 78,502 51,900,628 Thr atrompa'nying notes arr an integra/ part oftheta finanrral ttatrmrntt.

I LOS hNGBLBS DBPARTMBNT OF WATER hND POWER I

~

l (In,jhoussufIs}

Assets

~

UtilityPlant, at original cost Production

~

'ransmisSion'istribution General Less Accumulated depreciation Construction work in progress Nuclear fuel, at amortized cost

'et utili'typlant P0%'ER SYSTEM BALANCE SHEET June 30 1991

$1,850865 680,492 2,404,479 446,484

, 5,382,420 1,688,976 3,693,444 278,947 14,802 3,987,193 1990

$1,795,244

'659,553 2,225,202 374,715 5,054,714 1,574r733';479,981 244,412 20,401 3,744,794 Current Assets

'ash and investments Customer and other accounts receivable, less $3,600 and. $3,400 allowance for losses'Receivable from.Intermountain Power Agency r

Accrued unbilled revenue Materials and supplies, it avciage cost Fuelinventory

'repayments and other current as'sets Total current assets Total utility,plant and,assets 237,663 179,038 24,634 91,981 115,216 107,226 16,894 772,652

~

$4,759,845 125,506 187,242 64,'556 109,911 105,663 59,338

)5,521 667,137

'4,411,931 Capitalidatiott rmd Liabilities.

Capitalization

'Equity Retained income reinvcsted in the business Cont'ributions in aid ofconstruction, Long-term debt Total capitalization f

$ 1 974 709 141,823 2,116,532 2,091,020 4,207,552 It

$1,971,276 135,213 2,106,489 1',797,950 3,904,439 Current Liabilities Long-term debt due within one year r

Revenue certificates Accrued interest Accounts payable and accrued expenses

'Over-rccovercd energy costs Extension and other deposits Deferred creditIntermountain Power,Agency Total current liabilities Cottimit>iiesits and Cotitingetteies Total capitalization and liabilities, 55,050 90,000

'38,606 214,259 50,319 9,255 94,804 552,293 53,180 90,000 33,069 231,530

- 19,372-15,785 64,556 507,492

$4,759,845

$4,411,931 r

I I

Tlfrarrompanying noses ari an inrrgral pars ofshrsr finanrial srarrmrhfrs.

37

LOS hNGELES DEPhRTMENT OF WhTER hND POWER (In Thousands)

POWER SYSTEM STATEMENT OF CASH FLOWS 1990 Year ended June 30 1989 Cash Flows From Operating Activitiesi Net income Adjustments to rcconcilc net income to net cash provided by operating activities:

Depreciation Amortization ofnuclear fuel Allowance for borrowed funds used during construction Changes in current assets and liabilities:

Customer and other accounts receivable Receivable from Intermountain Power Agency Accrued unbilled revenue Materials and supplies Fuel inventory Prepayments and other current assets Accrued interest Accounts payable and accrued expenses Over-recovered energy costs

, Extension and other deposits Deferred creditIntcnnountain Power Agency Net cash provided by operating activities 152,190 10,567 (6r 143) 139,031

.3,258 (2,757) 136,954 7,527

'(7,268) 8,204 39,922 17,930 (10,153)

(47,888)

(1,373) 5,537 (17,271) 30,947

~

(6,530) 30,248 302,114 (18,158)

(14,983)

(15,335)

(20,002)

~

1,383 12,142 (3,457)

(6;506)

(28,315) 1,877 14,983 219,627 (25,774)

(49,573)

(5,794)

(10,398)

(4,598) 10,113 5,878 25,656 (9,865)

(2,019)

'9,573 313,841 1

$ 95,927

$156,466

'193,429 Cash Flotvs Frot>> Financing Activities:

Sale ofrevenue bonds Sale ofadvance re'funding bonds Amount received from escrow account Contributions jn aid ofconstruction

'eduction oflong-term debt

. Amount deposited in escrow accounts and offset against advance refunding bonds Long-term debt redeemed, including call premium Payments to the rcservc fund ofthe City Net cash provided by (used in) financing activities 346,673 38,007 6,610 (51,733)

'47,929

.85,216.

12,172 (51,198) 99,527 18,216 (52,843)

~

(85,216)'85,818) 123,085 (38,007)

(92;494)

'(78,502) 209,056 (13,602)

Cash Flows From Investing Activities:

Expenditures for plant and equipment

. (399,013)

(360,389)

(336,226)

Cash and Investments:

Net incr'ease (decrease)

Beginning ofyear End ofyear 112,157 (17,677) 125,506 143,183

$237;663 -

$125,506 (35,987) 170, 170 5143,183 Suppletnental disclosure ofcash flotvinforntationi

'Cash paid during the year for interest

$136,656

$126,236

$ 105,602 Thr accampanying notts arc an integral part %htsr financiaL statcmcnts.

38,

II LOS ANGELES DEPARTMENT OP WATER AND POWER POWER SYSTEM NOTES TO FINANCIAL STATEMENTS Pote ASwmmary ofSignificant 'Accownting'Policies

\\

The Department -The Department ofWater and Power ofthe City ofLos Angeles exists under and by virtue of "

the City Charter enacted in 1925 as a separate proprietary agency ofthe City. The Power System is responsible for the generation, transmission and distribution ofelectric power for sale in the City.

Financial statement presentation The financial statements of the Power-System are presented in conformity with generally acceptecl accounting principles. The financial statements are substantially in conformity with the uniform system ofaccounts prescribed by tfie Federal Energy Regulatory Commission and the California Public Utilities Commission except for the metliod ofaccounting for contributions in aid ofconstruction described below. The Department is not subject to regulations ofsuch, commissions.

Utilityplant The costs ofadditions to utility'lantand replacements ofretired units ofproperty are capitalized.

Costs include labor, materials and allocated indirect charges'such as engineering, supervision, transportation and construction equipmcnt, retirement plan contributions, and certain administrative and general expenses. The costs

\\

ofrepairs and minor replacements are charged to appropriate maintenance accounts. The oiiginal cost ofproperty retired, plus'removal cost, less salvage, is charged to accumulated dcprcciation.

A Depreciation and deconnnissioning-Depreciation expense is computed by the straight-line method for all major projects completed after July 1, 1973 and for all office an'd shop structures, related furniture and equipment, and transportation and construction cquipmcnt. Depreciation for facilities completed prior to this date is computed by tile 5% sinking fund method based on cstimatcd service lives. Depreciation provision as a percentage ofaverage depreciable utilityplant in service was 3.2%; 3.1% and 3.2% for fiscal years 1991, 1990 and 1989, respectively.

'Decommissioning ofthe Palo Verde Nuclear Generating Station, in which the Power System has an ownership interest, is projected to start sonictimc'after 2022. Based upon a study performed by an independent'nginccring firm, the Department's sharc ofthe estimated decommissioning costs is'$44 millionin 1989 dollars. Decommis--

sioning costs arc charged as part ofdepreciation expense over the life ofthe nuclear power plant. A Nuclear Decommissi'oning Fund has been established and the Power System is.setting aside funds for its sharc ofthe, cstiniatcd future decommissioning costs.

NwclearfiielNuclear fuel is amortized and charged to Fuel. for Generation in the Statement ofIncome on the basis ofactual therma) energy produced rclativ'e to total thermal energy expected to be produced over thc lifeofthe fuel. Under the provisions ofthc Nuclear Waste Policy Act of 1982, the federal government assumed responsibility for the future disposal Ofspent nuclear fuel.

Cash and inuestineiits The Department's cash is deposited with the City Treasurer 'who. invests the funds in securi-

. ties under the City Treasurer's pooled investment program". Under the program,'availablc funds ofthc City and its

'ndependen't.operating depa'rtments arc invested on a combined basis. These investmcnts are valued at cost, which approximates market. AtJune 30, 1991 and 1990, cash and investments include $20 and $16 million, respectively, ofrcstrictcd balances relating to bond redemption and interest funds, self-insurance fund and nuclear decommis-sioning fund. In addition, cash and investments at Junc 30, 1991 includes $70 million relating to'the energy cost' adgustmcnt stabilization account.

Fwel inuentory Coal inventories are stated at average cost. Fuel oil inventories are stated at cost, using thc last-in, first-out method.

Contributions in aiii ofconstrwclion

'Under the provisions ofthe City Charter, amounts rcccived fr'om customers and others for. constructing utilityplant are combined with retained income reinvestcd in the business to represent 39

LOS hNGBLBS DBPARTMBNT OF WATER hND POWBR t

I POWER SYSTEM NOTES.TO FINANCIAL STATEMENTS equity fo'r purposes ofcomputing the Power.System's borrowing li'mits. Accordingly, contributions in aid ofcon-struction are shown in the accompanying balance sheet as an equity account and are not offset against utilityplant.

Revenues-'Revenues consist ofbillings to customers for'consumption ofelectric energy and include amounts

. resulting from an energy cost adjustment formula designed to permit the full recovery ofenergy costs. The Department projects 'these, costs to establish the energy cost rec'overy coniponent ofcustomer billin'gs and any difference between billed and actual energy costs, resulting in over-or under-recovery ofenergy costs, is adjusted in subsequent billings.

I The Power System recognizes energy costs in the perio'd incurred and accrues for estimated energy sold but not yet billed.

The Power System's rates are established by a rate ordinance which is approved by the 'City'ouncil. The Power System sells electric energy to other Ddpartments ofthe City at rates provided in the ordinance.

Debt expenses-Debt premium, discount and issue cxpcnses are deferred and amortized to expense,over thc lives

'f the related issues.-

~

Allowanceforfimds used during construction (AFUDc)AFUDc represents the cost ofborrowed funds used for the, construction ofutilityplant. Capitalized AFUDC is shown as part ofthe cost ofutilityplant and as a reduction of debt expenses.

The average AFUDC rates were 7.2'/o, 7.7 /o and 7.6 /o for fiscal years 1991, 1990 and 1989, respectively."

Note BReceivable and Deferred CreditInterrnountain Power Agency r

=

As ofJuly 1, 1988, an amendment to an Intermountain Power Agency (IPA) bond resolution provided for the use h

ofsurplus construction funds froth the Intermountain Power Project. As a member participant ofthis project, the Department's share ofsuch surplus funds totaled $155 million through June 30, 1991, ofwhich $130 million was collected from IPA and $25 millionremained as.receivable.

Iri fiscal 1989$ 60 millionofsuch surplus fttnds'were used as an offset against the purchased power expense.'ursuant to a City Ordinance ofJanuary 2,.1991,.the Department established an energy cost adjustment stabiliza-I tion account in which the $95 million balance" ofthe IPA surplus funds are accumulated. At the discreti'on ofthe

'I Department's Chief Accounting Employee, funds may be transferred from this account to stabilize the effect of future purchased power expense on customer billings over a period not to exceed seven years.

¹te C-Jointly-Otvned UtilityPlant The Power System has undivided interests in pev'eral electrical generating stations and transmission systems which a arejointly-owned with other utilities.".Each project participant is responsible for financing its share ofconstruction and operating costs. The followingschedule shows the Power System's investment in e'ach"jointly-owned utility plant as included in the balance sheetat June 30, 1991 (dollar amounts in millions):

0 Phnt'n 'S<<r vice

're ot Ownership, Capacity Accumuhted

. Work in Projects Interest (megawatts)

Cost Depreciation Progress Palo Verde Nuclear Generating Station (Note H) 5.7/o, 217 490 '54,,

$13 Navajo Stcam Generating Station 21.2 lo 477

~

186 82 1

Mohavc Coal Generating Station 20.0'lo 316

'9' 34'0 Pacific Intertie DC Transmission System 40.0'/o 800 173 19' 2',

Other transmission systems Various 73 '8 1

$1,011

,$207

'27 40

The Power System willincur certain minimum operating costs on the jointly-owned facilities, regardless ofthe amount, ofenergy generated or the ability to take delivery ofits share ofenergy. generated. The proportionate share ofthese expenses is included in the'appropriate categories ofoperating expenses.

Note DRevenue Certifieates AtJune 30, 1991 and 1990, the average interest rate ofrevenue certificates payable was 4.2% and 5.7% with various maturities ofup to 150 and 127 days, respectively.

¹te E-Long-Term Debt Long-term debt outstanding at June 30, 1991, consisted ofrevenue bonds due serially in varying annual amounts through 2031. Interest rates, which vary among individual maturities, averaged approximately 6.8% at June 30, 1991 and 1990. The revenue bonds generally are callable tcn years after issuance.

Scheduled annual principal matu-

- rities during the five years succeeding June,30, 1991 are $55, $56, $58, $58 and $62 million, respectively. Revenue bonds are secured by the future revenues ofthe Power System.

In prior years, the Department sold advance refunding bonds, the proceeds ofwhich were placed in an irrevoc-able trust and willbe used to redeem bonds currently included within long-term debt at scheduled call dales.

Until the bonds to be refun'ded are called, interest on the advance refunding bonds is'payable from interest earned on securities ofthe United States government purchased out o'fthe proceeds ofthe sales and held in Bank escrow accounts. After the monies in the escrow accounts are applied to redeem the bond's to be called, principally through 1995, interest on the advance refunding bonds willbe payable from Power System revenues. The trust account assets and the liabilityfor the refunding bonds'a're not included in thc Department's financial statements.

AtJune 30, 1991, $96 millionofthese trust assets have bccn offset against advance refunding bonds.

Note FShared Operating Expenses

'he Power System shares certain administrative functions with the Depaitment's Water System. Generally, the

. costs ofthese functions are allocated on the basis ofbenefits provided to the Systems.

Operating expenses shared with'the Water System were $295, $275 and $251 millionfor fiscal years 1991, 1990 and 1989, respectively, ofwhich $200, $186 and $166 millionwere allocated to the Power System.

Note O'- E>>iployee Benefits Retirement, disability and death benefit insurance plan The Department has a funded contributory retirement, dis-ability and death benefit insurance plan covering substantially all ofits employees. Plan benefits are geneially based on years ofservice, age at retirement and the employees'ighest 12 consecutive months ofsalary bcforc retireinent. The Depkrtment fu'nds the retirement plan on an entry age normal method as determined by the plan's independent actuary. For funding purposes, prior service costs relating to the plan are amortized generally

Los ANGELES DEPARTMENT QF wATER fiND PowBR

/

POWER SYSTEM NOTES TO FINANCIAL ST'ATEMBNTS h

over a 30-year period ending June 30, 2003. Total fiscal year benefit plan costs for the Power System include the. following(amounts in,millions):

Service cost Interest cost Actual return on plan assets, Net amortization and deferral

~

Net retirement plan cost Disability and death benefit plan costs and administrative eXpenses Total benefit plan costs 1991 S 38 148.

(134) 34 86 13 S 99 1990 S 36 127

. (130) 43 76 13 S 89 1989 S 33 130 (194) 122 91

~

13'104 Employee contributions to the plan totaled $12, $ 11 and $ 12 millionduring 1991, 1990 and 1989, rcspcctively.

Total covered payroll during 1991, 1990 and 1989 was $360, $350 and $330 million, respectively,'he followingschedule reconciles the funded status ofthe'plan w'ith amounts reported in the. financial 1

r statements (amounts in millions):

Actuarial present value ofbenefit obligations:

Vested benefits Non-vested benefits Accumulated benefit obligation

'ffect ofprojected future compensation level Projected benefit obligation Plan assets at fair value Projected benefit obligation in excess ofplan assets Unrecognized net gain'and effects ofchanges in assumptions Unrecognized net obligation at July 1, 1987 being

-,.re'cognized over 15 years Accrued pension liability June 30, 1991

. $ 1,683 I

1,684

'13 1,997 1,645 352 (40)

(253)

S -59 June 30, 1990

$1,532 1

1,533 278 I)811, 1,509 302 38 (277) 63

~

I The discount rate used in determining the plan's projected benefit obligation'was 8.0% in both 1991 and 1990.

The assumed rate ofincrease in'future compensation levels was 6.0% in both 1991 and 1990. The long-term rate of.

return on plan assets wa's 8.0% in both 1991 and 1990. Flan assets consist primarilyofcorporate and government, bonds, common stocks, mort'gage-backed securities and short-teim investmettts.

')

Health care costs The Department provides ceitain health care benefits to active employees. The cost to the Power System ofproviding such benefits to active einployees amounted to $29, $24 and $21 millionfor fiscal years 1991,

)

1990 and'1989, respectively. In addition, health care and life insur'ance are provided as postretirqment benefits to retired employees and their depe'ndcnts. The cost to the Power Sys'em ofproviding such benefits to retired employcds amounted to $11, $9 and $8 millionfor fiscal years 1991; 1990 and 1989, respectively." The costs of

'roviding these benefits arc accounte'd, for on the pay-as-.you-go-method.

42

In Dccembcr, 1990, the Financial Accounting Standards Board issued Statement ofFinancial Accounting Standards No. 106, "Employersccounting for Postretirement Benefits Other Than Pensions." The new state'-

ment requires systematic recognition ofthe costs ofpostretirement benefits over employees'ervice periods. The Department is required to implement this statement no later than fiscal year 1994 and does not expect adoption to r have a material effect on results ofoperations.

I Note HCornrnitrnents 'and Contingencies Paynients to the reservefimd ofthe CityUnder the provisions. ofthe City Charter, the Power System transfers funds at its discretion to the reserve fund ofthe City. Such payments are not in lieu oftaxes and are recorded as distributions ofretained income. The Department expects to make payments of$91 millionin fiscal year 1992 from the Power System to the reserve fund ofthe City.

Department Share of Capacity (megawatts) 151 Total Bonds Outstanding (millions)

$1,034 4,985 1,065 Palo Verde Nuclear Generating Station (through sCpph)

Intermountain Power Proje'ct Southern Trans'mission System (for Ipp power through scpph) 1,004 1,142 o

Allthc'se agreements require the Power System to make certain minimum payments, which are based upon debt serv'ice requirements. While these payments are fixed charges (ofapproximately $340 millionin each ofthe next five years), the Department is also required to pay additional amounts (ofapproximately $140 millionin each of the next five y'ears) for operating and maintenance costs related to actual deliveries ofenergy under these agree-ments. Total payments under these contracts were approximately $450 million, $530 millionand $440 millionin fiscal years 1991, 1990 and 1989, respectively. These aggregate purchased power costs are recovered through the energy cost recovery component ofcustomer billings.

The Department also has a contract through 2017 with the U.S. Department ofEnergy for the purchase of available energy gcncrated at thc Hoover Power Plant. The Department's share ofcapacity at Hoover is approx-imately 500 megawatts..

Long-term purchased power and transmission contracts-The Department has entered into a number ofenergy and transmission service contracts which involve substantial commitments. These include an agreement with the Intermountain Power Agency, a Utah State Agency, for purchase ofenergy from the Intermountain Power Project (Ipp) for which the Power System has served as the project manager ttnd operating agent. The Department's total interest in lpp includes a 44.6% "take or pay" ob/igation and an excess power contract for 18.2% for a total of 62.8%. The Department also has two agreements with the Southern California Public Power Authority (scPPA), a California Joint Powers Agency, for 67% ofSCPPA s 5.9% entitlemcnt to the energy generated at the Palo Verde Nuclear Generating Station and for 59.5% ofthe capacity ofthe Southern Transmission System, which transmits energy from Ipp in Utah to Southern California. Significant data related to these agreements, which are scheduled tq eRpire from 2022 to 2027, at June 30, 1991 are as follows:

43

LOS hNCBLBS DBPhRTMBNT OP WhTBR hND POWER k

POWER 'SYSTEM'NOTES gTO FINhNCIhL SThTEMENTS Nuclear insurance As a participant in the Palo Verde Nuclear Generating Station, the Department could be subject to assessment ofretrospective insurance premium adjustments in the event ofa nuclear incident at Palo Verde or at i

any other licensed reactor in the United States.

I Environmental matters-Numerous environmental laws and regulations affect the Power System's facilities and

'operations.'Pursuant to recently amended regulations ofthe, South Coast AirQuality Management District, the V

Power System may be required to burn natural gas to.the extent available, instead offuel oil, and is committed to step down yearly the emissiori limits ofits four steam generating stations in the Los'Angeles Basin until the final limitis reached in the year 2000. The stations'oilers willlikelybe either repowered as combined cycles or retro-fitted withNox control systems that willreduce nitrous oxide emissions. The estimated cost ofthe reirofitting program, which willpeak in the mid 1990's, is approximately $250 million. In addition, construction is in"process to repower the Harbor Generating Station for an estimated cost ofapproximately $180 millionand the Valley 4

Generating Station may be repowered beginning in 1997 for an estimated cost ofapproximately $300 million.

r The above estimates are in 1991 dollars.

LitigalionA numbe'r ofclaims and suits are pending against the Department for alleged damages to persons and

'roperty and for other alleged liabilities arising out ofi)s operations. In the opinion ofmanagement, any ultimate liabilitywhich may arise from these actions willnot.materially affect the Power System's financial position as of June 30, 1991.

44 I

REPORT OF INDEPENDENT ACCOUNTANTS September 5, 1991 To the Board ofWater and Power Commissioners

.Department ofWater and Power City ofLos Angeles In our opinion, the accompanying balance sheet and the related statements of income, retained income reinvestcd in the business and of cash flows present fairly, in all material respects, the financial position ofthe Power System of the Department o'fWater and Power ofthe City ofLos Angeles at June 30, 1991 and 1990,.and the results ofits operations and its cash flows for each of the three years in the period ended June 30, 1991, in conformity with gener-ally accepted accounting principles. These financial stat'ements are the

.responsibility ofthe Department's management; our responsibility is to'xpress an opinion on these financial statements based on our audits. We con-ducted our audits ofthese statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financi'al statements are freq of material misstatement. An audit includes examining, on a test basis, evidence

. supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by managc-ment, and evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for the opinion expressed'above.

45

LOS ANGELES DEPARTMENT OF'ATER AND -POWER WATER SYSTEM SELECTED F IN AN CI'AL DATA AND STATISTICS (S Millions) 1991

'990 1989 1988 I

1987 Statement ofIneonse Operating revenues Residential Commercial and industrial Governmental and other Fire hydrants Miscellaneous 119.2 125.5 189.5 191.2 2042 19.5 4.8 4,5 14.0 7.5 110.1 166.5 17.8 4,4 1.4 94.5 140.4 14.3 4.1 1.7 92.4 135.2 14.8 4.1 1.9 Total revenues Operating income As % ofrevenues Net income 347.7 348.2 300.2 257.0 248.4 57.6 82.5'1.4 54.1 69.9 16.6% '3.7%

20.5%

21.1%"

28.1%

40.0 62.6 42.3 34.4 44.6 Balance Sheet Net utilityplant Capital expenditures Capitalization Equity Long-term debt.

991.2 430.3 951.9 367.5

$1,426. I

$1,282.1 178.7 113.1

$1,202.1 118.1 870.6 379.7

$ 1,114.7 97.8 822.3

.350.2

$1,046.1 91.7 768.5'85.6 Total capitalization Debt as % ofnet utilityplant(>)

Interest on debt

'Payments to City ofL.A.

1,421.5 30 2%

29.1 17.4 1,319.4 28 7%

28.6 15.0 1,250.3 1,172.5 1,054.1-31.6%,

30. 2%

25. 3%

27.6 23.7 '2.0 12.9 12.4 11.3 Operations Gallons sold (billions)

~ - Customers-average number (thousands)

Average revenue per hundred cu. ft. sold (in cents)

Residential-Commercial and industrial Water supply (billions ofgallons)

Local supply DWP Aqueduct Metropolitan Water District Gross supply Diversion from (to) local storage Nct supply to distribution systems 130.7

, 134.2 119.0 124.2 4

106.0 107.9'2.8 87.2 93.6 87.5 40.5,,

29.8 130.8 '0.6 67.1 128.7 44.3 35.5 33.1 39.5 32.3 134.9 154.4 49.1 43.1 201.1 0.3 226.4 0.0 226.0 0.5 201.4 226.4 226.5 223.5 229.8 (0.1)

(0.5) 223.4 229.3'88.4 208.8 208.1 '03.6

=

210.1 646.9

'43.4 640.6 637.8 632.3 (A) Exstudrs rrvsnur n4nrs 42nd ndvanos rrfunding rrvrnus bonds.

'6

OPERATING REVENUES 5 in Millions WATER SUPPLY In BillionsofGallons 360 r

ISO 87 88 89 9l 87 88 89 90 9l a Residential,.

a Commercial and lnduwrial a Other a Fire Hydrants a Miscelbneous a Local Supply a DWP Aqueduct a Metropolian Water District AVERAGE NUMBER OF CUSTOMERS In Thousands GALLONS SOLP In Billions I10 I75 55 87 88 89 90 9l 87 88 a89 90 9l,

LOS ANGBLBS DEPARTMENT OP WATER AND POWBR POWER SYSTEM.,SELECTED FINANCIAL DATA AND STATISTICS (S Millions)

Statement ofIncome Operating revenues Residential Commercial and industrial Street lighting and other Miscellaneous Total revenues Operating income As % ofrevenues Net income 1987 526.9 519.3 484.6 1,216.6 1,251.3 1,162.0 42.5 54.5 53.5 25.9 24.8 16.2 430.7 1,085.5 39.7 14.1 388.7 963.1 38.2 13.4

$1,811.9

$1,849.9

$1,716.3 207.8 255.0 278.2

'1.5%

13.8%

16.2%

95.9 156.5 193,4

$1,570,0

$1,403.4 254.3 256.3 16.2%

18.3%

175.6 186.8 1991 1990 1989

1988 Balance Slieet.

~

Net utilityplant Capital expenditures Capitalization

'quity Long-.term debt Total capitalization Debt as %. ofnet utilityplant(A)

Interest on debt Payments to City ofL.A.

$3,987.2 399.0 2,116.5 2,091.0 4,207.5 52 4ofo 136.2 92.5

$3,7A4.8 360.4 2,106.5 1,797.9 3,904.4 48 0%

118.1 85.8

$3,523.9 336.2 2,023.7 1,602.4 3,626,1, 45.5%

110.3 7825

$3,324.9 317.3

$3,133.5 303.4 1,890.5 1,554',771.7 1,408.9 3,444.7 3,180.6 46.7%

44 5%

102.4 96.9 70.2 '7.9 Operations Kilowatt hours sold (billion~)

Customers average number (thousands)

Average revenue per kwh sold (in cents)

Residential Commercial and industrial Energy production (billionkwh)

Hydro Thermal Total generation, Purchases Total produc'tion l

Net system capability (thousand megawatts)

~

Hydro Oil and gas owned Jointly owned and firm purchases 22.0

'1,'357.8 21.8 1,344.6 8.7 8.0 1.3 20.3 21.6 3.7 25.3 8.9 8.3 1.4 22.0 23.4 1.9 25.3 1.4

" 1.4 3.2 3.1 4.6 4.5 2.9 2.9 7.5 7.4 21.9 1,325.3 21.1 1,304.6 20.5 1,275.9 8.2 7.7 77 73 7.1 6.8 1.8 20.8(B) 22.6 2.9(>>

1.8 21.0(>>

22.8 1.7(>>

2.9 16.7(>>

19.6 3.5(>>

23.1 1.4 3.1 4.5 2.8

'73 1.9 1.9 3.1 3,3 5.0 5.2

'2.3 2.4 7.3 7.6 25.5 24.5 (A) Exsludrs ravrnur nosrs and'advansr rrfundinit rrvrnua bonds.

(E) Rrssasrd duo so rrslassifiraston.

48

OPERATING REVENUES

$ in Millions ENERGY PRO DUCT ION Kwh in Billions 1425 14 475 87 88 89 90 91 87 88 89 90 91 a Residential a Comme'rcial and Industrial 18 Street Lighting and Other ta Miscellaneous 4

a Hydro 18 Thermal 12 Purchases hVERhGE NUMBER OF CUSTOMERS In'Ihoussnds KJ LOWhTT HOURS SOLD In Billions

1400, 22 0 16.5 11.0 5.5 0

,87 88 89 90 91 0

87 88 89,90 91 49

Los hNGELES DEPhRTMENT QF whTER AND PowER WATER/POWER NETWORK Ceido AC.DC Convener Statian A

OrjEGON CALIPO~I NEVADA Iacrmownai ~

Cencncing Station Cah(ernie Attvohan IStarc cPatn Paojcn)

~~m'vcr Add~a Scacion Canak Scaticn lhvavcr Dam Powcc Plane

~ Mead Swicchng Stanon I<<PI Dorado Sohdtnicn Mohavc Gencndng Scatiaa I

UTAH Navajo Cence acing Sndon Loa Angcka Area~~

A Vathy Gencratirag Simian v A Scattngood Generating Statnn $

A Haynea Gcncranng Scanon A Harhoc CPOwwcrin Pecten Q Tchtca Recriving Scatien 0 Ccncay Rcccivang Station Vanavigc Swicching Station ARIZONA Palo '%rde v Gcncr ac'ng Stathm

~, Cdorado Rivec Atyacdon Water Supply Poiver SItpply Generating facilities in other western states are pbying larger

, roles in the City's power supply. Water, also imported from hundreds ofmiles away, is brought to L.A. by aqueduct to serve the needs ofthe more than 3.5 million populatiori:

a 50

IRP ll CITY OF LOS ANGELES BOhRD OF WhTER hND POWER COMMISSIONERS Los Angeles Department ofWater and Poxver General Office Building III North Hope Street Los Angeles, California 9ooi2 Telephone 2I3 48I 42I I For additional copies contact:

Public Affairs Division Room I5I4 Post OAice Box III Los Angeles, CA 9oogi Telephone 213 48I 64I4 Eighty five percent ofthis report is printed on recyclcd paper.

IOM/1.92

-NGTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE INFORMATION 8 REPORTS MANAGEMENT BRANCH.

THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RE-CORDS 8 ARCHIVES SERVICES SEC-TION P1-22 WHITE FLINT. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE RE-FERRED TO FILE PERSONNEL.