ML20036A365

Forwards Util Re Update on District Bond Rating. Ltr Updates & Confirms Rept at Page 19 of Util Response on District Current Bond Ratings.Svc List Encl

ML20036A365
Person / Time
Site:	Rancho Seco
Issue date:	04/07/1993
From:	Baxter T SACRAMENTO MUNICIPAL UTILITY DISTRICT, SHAW, PITTMAN, POTTS & TROWBRIDGE
To:	Bechhoefer C, Cole R, Murphy T Atomic Safety and Licensing Board Panel
References
CON-#293-13861 DCOM, NUDOCS 9305110133
Download: ML20036A365 (13)

Text

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I SHAW, PITTMAN, PoTTs & TROWBRIDGE c A PARTht R$MiP #NCLwDiNG PROF E S$'ONAL CCRAOnattONS 2300 N STREET, N. W.

T E LE x /Ca sLE WASHINGTON. D. C. 20037 h) [tN -8 P 3 M9 v'-o>~ A or CE 89 2693 (S**Awtaw ws.4) ison ranM CatDsf DRivt (0

90 900 vttg owg (202)663-8090

'rCtf,. ( Q j [,,, y Mi gzoz es'3 No, UOO\\E I' THOM AS A. BAXTER, P.C.

April 7, 1993 Charles Bechhoefer, Esq.

Dr. Richard F. Cole Administrative Judge Administrative Judge Atomic Safety and Licensing Atomic Safety and Licensing Board Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C.

20555 Washington, D.C.

20555 Mr. Thomas D. Murphy Administrative Judge Atomic Safety and Licensing Board U.S. Nuclear Regulatory Commission Washington, D.C.

20555 In the Matter of SACRAMENTO MUNICIPAL UTILITY DISTRICT (Rancho Seco Nuclear Generating Station)

Docket No. 50-312-DCOM Administrative Judges Bechhoefer, Cole and Murphy:

Please find enclosed a copy of District letter DAGM/NUC 93-080, Update on the District's Bond Rating.

This updates District letter AGM/NUC 91-132, August 22, 1991, which is to " Licensee's Response to ECO's Proposed Decommissioning Funding Plan Contention," April 1, 1993, and confirms the report at page 19 of Licensee's Response on the District's current bond ratings.

Respectfully submitted, kr c.

- _ =

Thomas A.

Baxter Counsel for Licensee cc (w/ encl.):

Service List h())

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UNITED STATES OF AMERICA

.i NUCLEAR REGULATORY COMMISSION

'93 APR -8 P 349 i

In the Matter of

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Docket No. i30~31'2~-DCOMlCI SACRAMENTO MUNICIPAL UTILITY

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DISTRICT

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(Decommissioning Plan)

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(Rancho Seco Nuclear Generating

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.ASLBP No. 92-663-02-DCOM j

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SERVICE LIST i

t Administrative Judge office of the' secretary Charles Bechhoefer, Esq., Chairman Attn Docketing and Service' Branch.

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' Atomic Safety and Licensing Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission Washington, D.C.

20555 Washington, D.C.

20555 Adjudicatory File Administrative Judge.

Atomic' Safety and Licensing Board Dr. Richard F. Cole U.S. Nuclear Regulatory Commission Atomic Safety and Licensing Board Washington,:D.C.

20555 l

U.S. Nuclear Regulatory Commission Washington, D.C.

20555 office of Commission Appellate.

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Adjudication l

Administrative Judge U.S. Nuclear Regulatory Commission Mr. Thomas D. Murphy Washington, D.C.

20555 t

Atomic Safety and Licensing Board i

U.S. Nuclear Regulatory Commission

. James P. McGranery, Jr., Esq.

Washington, D.C.

20555 1255 - 23rd Street, N.W.

Suite 750 Charles A. Barth, Esq.

Washington, D.C.

20037 office of the General Counsel U.S. Nuclear Regulatory Commission Washington, D.C.

20555 Jan Schori, Esq.

General Counsel Sacramento Municipal Utility District P.O. Box'15830 Sacramento, CA 95813 0124/030 tab.93

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$SMUD SACRAMENTO MUNICIPAL UTILITY DISTRICT C P. O. Box 1583o, Secremento CA 95852 183o,(916) 452 3211 AN ELECTRIC SYSTEM SERVING THE HEART OF CALIFORNIA DAGM/NUC 93-080 April 6,1993 U.S. Nuclear Regulatory Commission Attn: Document Control Desk Washington, DC 20555 Docket No. 50-312 Rancho Seco Nuclear Generating Station License No. DPR-54 UPDATE ON THE DISTRICT'S BOND RATING Attention: Seymour Weiss In District letter AGM/NUC 91-132, dated August 22,1991, weinformed you ofrecent reviews and upgrades to our bond ratings. This letter provides further information regarding more recent upgrades to our revenue bond ratings.

On M ay 6,1992 Fitch Investors Service, Inc. rated $372.4 million of electric revenue refunding bonds, and $125 million ofelectric revenue bonds as A-(Series A and B). Fitch also upgraded the rating ofoutstanding parity bonds from BBB+ to A. Fitch noted that the District's credit trend is stable, and that the higher ratings reflect our strong economic base, very competitive electric rates, and improved interconnection arrangements with Pacific Gas and Electric Company.

i On March 31,1993, Standard and Poor's (S&P) upgraded the District's outstanding electric revenue bonds from BBB+ to A, and our subordinated electric revenue bonds from BBB-to i

BBB+. In addition, S&P assigned an A-rating to an additional $75 million of electric revenue l

i bonds, and $419 million of electric revenue refunding bonds (Series D and E). These rating i

upgrades reflect substantial development in our independent power projects, and the significant l

progress made towards improved financial results and stable operations.

DISTRICT HEADQUARTERS O 6201 S Street. Sacramento CA 95817-1899

S. Weiss 2-DAGM/NUC 93-080 Attached are copies of S&P's and Fitch's comments regarding the bond rating increase, and a description of our senior bond rating history.

Members of your staff with questions requiring additional information or clarification may contact Bob Jones at (916)452-3211, extension 4676.

Sincerely, GNj y

r James R. Shetler i

Deputy Assistant General Manager Nuclear Attachments i

cc:

J.B. Martin, NRC, Walnut Creek 1

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i SACRAMENTO MUNICIPAL UTILITY DISTRICT SR. BOND RATING HISTORY l

Standard & Poor'4 1984 - AA 4/22/86 - 8/27/88 - AA-8/27/86 - 6/4/87 - A 6/4/87 5/6/92 - BBB 5/6/92 - 3/29/93 - BBB+

3/29/93 - Present - A.

Moody's 1984 - AA l

4/30/86 - 11/25/86 - A1 11/25/86 - 2/2/87 - A 1

2/2/87 - 9/28/87 - Baa1 9/28/87 8/1/91 - Baa l

8/1/91 - Present - A l

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12/28/89 - 5/6/92 BBB 5/6/92 - Present - A-l

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Sacramento Munieipa l

Uti ity District, California.

New Rating Outlook l

$372.400.000 E'ec'ric Revenue Sacramento Municipal Utility District's 5"

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(SMUD) $372.4 million electric revenue re-i

$125 sc funding bonds,1992 series A, and $125 i

Revenue Sonds,1992 Senes S..

A-i million electric revenue bonds,1992 series l

Outstand'g Ra?ing B, are rated 'A '. The rating on $1.28 billion l

$1.285.095.000 dectnc of outstanding parity electric revenue bonds Revenue Bonds.

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is u raded to 'A ' from 'BBB+'. The credit tren is stable.

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Credit Trend.

. Stable The higher rating reRects the district's l

ROI sts strong economic base, very competitive elec-Y g

1 (212)(s.oS9s tric rates, and improved interconnection ar-i rangements with Pacific Gas & Electric Co.

i Susan M. Courtney (PG&E). Also viewed favorably are contin-

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(212) 90SD503 ved improvement in financial performance and projections of only modest future rate issuer Contact increases. The improved relationsh be-l tween SMUD management and its card, l

s sta t Tr surer l

Finance ced Financ:c! Plannina along with the recent completion of a com-

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prehensive resourceplan, are additionalfac-l tors supporting the rating upgrade. The new I

resource plan incorporates demand-side

• • " 9'*'"' P'*9'**' *"0 '. Concern re-

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ec5c evenue Re ding Bonds.1 c92 Senes sized enerahon pro}'ects A. and E'ectric Revenue Bonds,1992 Senes B, cre scheduied to be sold en o necot.cted bes:s garding e SMUDboarc s over-involvement by a Goldman, Sachs & Co syndicate the in management decisions should be less of

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i week of May 11, 1992.

On issue with the closure of Rancho Seco and j

the stabilization of financial operations.

i Credit risks centerprimarily on the need for i

i final approvals, funding, and construction of new generating resources. In addition, while helped by lower natural gas prices and inex-l l

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sac amemo Wcpai us W Dsw C Momia Role Covenant: Distoct net revenues will equal at least l.20x annual debt service on the bonds and all parity C bonds outstanding.

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l Additional Bonds Test: Additional parity bonds may be

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issued if on independent engineer certifies that net revenues, offer Completion of improvements proposed to be financed i

Sacram.nto y

3 with odditional bonds, will Cover debt service on outstanding L>

7,,$a,,,"'-

ponty bonds and the additional bonds to be issued. In s

ddition. for 12 consecutive months dunng the 24 months 7 Califomia immediately preceding issuonce of odditional revenue bonds. net revenues must equal or least 1.25x maximum 1

annual debt service (MADS) on all ponry bonds outstanding A, to, ang.%

and the additional revenue bonds. Net revenues moy be L

adjusted to incorporate o cortion of the gains associated with increased rates.

Reserve Fund: A reserve fund will be maintoined in on amount equal to at least the current annual interest require-pensive economy energy purchases, Collomic s extended ments on all outstanding bonds and parity bonds. If the drought and the effects of the recession are other points of dis,,;ers deb, sery;ee coverone rosio falls below 1 Aox ;n

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ony fiscal year, funds from the first available net revenues l

concern-will be set aside in specified reserve funds in on amount Strengths equal to at least 15% of the total current monthly interest

- Stable sendce creo.

requirements of all parity bonds until the debt service i

- Belowoverage electric rates for the region.

coverage ratio reaches 1 A0x, or until the aggregate

- Imolementation of the new generating resource plan, amount in the reserve funds equois MADS on oil parity following acceptance by the SMUD boord.

bonds, whichever occurs first.

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- Continued improvement in financial position, including a fmedcharge ratio of 1.52 times (4 in 1991.

Flow of Funds

- improved relationship be+ ween the board and monoge-District revenues will be distributed in the following order of ment.

priority to poy for:

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- Operating and maintenance (O&M) expenses and Risks energy payments not included in O&M; Deposits to the electric revenue bond interest fund;

- Need for final opprosc s, funding, and construction of i

- Deposits to the electric revenue bond redemption fund; new generot.ng resources.

- Continuanon of Califomic's drought may adversely and imooct the district, o!though financial stability has been

- Deposits to the efectric revenue bond reserve fund.

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mo:ntained in recent years.

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- History of active community involvement in SMUD Any remaining funds will be ovoilable for all towful district i

offoirs.

purposes.

The District Purpose l

Bond proceeds will be used to refund a portion of the SMUD's service creo covers approximately 900 square d:stricfs outstanding electric revenue bonds and reimburse miles in centrol California, with a population of more than SMUD for certain previous capitol improvements.

one million. Socromento, the state capitol and seventh most populous crea in Cotifomio, is included in the service area.

Security Features According to Wharton tconometnc Forecosting Associates, l

the reo is pr jected to be the notion's fourth fostestgrowing Pledged Revenues: The 1992 series A and 1992 series B are, based on population, over the next few years. The l

bonds wil! be secured by net revenues of the efectric system.

ver ge number of customers served in 1991 was i

The bonds are on a parity with outstonding electric revenue 460,555 representing o 3.1% overage annual increase i

bonds and are payable crior to subordinate ten bonds and since 1987. SMUD's customer base is projected to grow i

commercici paper.

2.6% annually during 1992-1996. Residential customers I

acm.esus sincex 2

er p,

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Soc om Man c.cci ut% Doct Ca ama u

cccount for 43% of energy sales, whde commerac! cnd SMUD is ect.tled to a 50% owne sh;o share in two geotne~

industnci customers account for 571 mal units hosing a combined rated ecoccity of 132 mw The distnct hes provided c!! electnc recuirements in its The other CCPA No. I partiaponts mciude Mccesto lrngc-

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service crec since 1947, when SMUD occuired a porton tion District with a 40% shcre end the C# of Santa Cla c.

cf PG&E's e'ectric system. The distnct is govemed by o 10%. Due to technical problems. i e. Iow s'ecm supply and frve-member eected board of directors serving staggered poor quality of steam actually suppled. the two un,ts he.e f

fouryear terms. The bocrd :s responsible for policy deci-not run at full copocity since initicl cperation The present siens. including rate cdjustments, and ciso cppoints the combined net copcaty for the two units is 48 mw.

general mancger, who is responsibie for distnct manage-Prior to March 31,1992. CCPA No.1 obtemed steem ment and operction.

for the project under a contract wis subsidiones of Geother.

4 Previous concems regarding the reictionship be' ween mal Resources Intemational. Inc., which had been in bank-menegement end the board have been mitigated in recent ruptcy sincejune 1989. On Morch 31. the stecmf, eld essets vects. part y due to the ococintment end subsequent accony were sold to CCPA No.1, which subsequently executed en l

plisnments of David Freemen the new general manager.

agreement with on outside party to eperate the steamf. eld.

During his first two years at SMUD. Mr. Freeman successfully CCPA No. I believes that prudent steemfield management cut costs. cvoided further rete inc ecses and improved will improve the units' productivity. Plons to dnli additienci SMUD's image in the community. The board's more cohesive wells and undertake other steamfieid improvements are cmtude of late ciso has been he!ced by +e cic3ure of under consideration for 1992, solely to increase steam Rancho Seco.

production. Increased production levels should encble the CCPA No.1 participants to recover their investment in the Power Resources project. For planning purposes. SMUD essumes both units Through ownership interes+s and power purchese crrange.

wdl be operational by 1994.

ments. SMUD's c<adcble cepeaty for 1992 is esSmc'ec et 2.348 r egowc ts Imw), compared with c forecasted peck Power Purchose Agreements demand of 2.275 mw The d: strict's cwn generation system A large portion of SMUD's resource requirements are satis-consists of eight hydroeiectric plants, iree geothermal units.

fied through various power purchase agreements with West-c combustion turbine, and c sciar photovoltaic focdity, for ern Area Power Administration (Western}, PG&E and c 700 mw combined net generating ccccary. The district Southern California Edison Co. (SCE). cmong others.

rehes en vcrious power purchase agreements to satisfy its SMUD's contract with Western will provide the district wie remem ng recuirements.

360 mw of Central Valley Project (CVP) pcwer through The 642-mw hydroe'ectnc Upper American River Project 2004. A contract amendment provided the district with the IUARP) is se district's icrgest-cwned generating resource.

right to purchase opproximately 100 mw of pecking power Under everage water condit1cns. the protect facdthes cre end c!so gave SMUD the right to purchese cpproximately copcble of generating ceproximately 180 billion kilowatt 31% of CVP power between 2004-2015. Western and hours (kwh! cf energy per vect Currently in its sixth year.

PG&E cre engaged in litigorion regarding various issues.

Cchfern:c s ongomg drought has resulted in belowaverage including a d:spute over Western's cbility to sell 100 rnw of h c oe:ectnc gereret,on since 1987. In 1991. UARP gen-peaking cower to the district. If PG&E is successful m e3 e cncn wcs 970 mdlion k.vn, cnd cpprcximately 9c5 Lt genon, curchasers of Western power, includ1ng SMUD.

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don kwh are projected for 1992. SMUD has oEset se could experience some increased cests.

I reduced hydroelectric generenen through economy energy in resoonse to operational uncertaint;es regardmg +e j

pucheses from the Pacific Northwest cnd expects this Rancho Seco nuclect unit, which wcs c!osed inJune 1969 resource to remain ovcilable if the drought contmues.

SMUD entered into long term power purchase egreernees SMUD relies on three geothermal units for apprcximately with PG&E cnd SCE in 1989 for totcl copooty of 850 mu 09 mw cf capacity. The SMUDGEO # 1 unit is a 70-mw.

PG&E ogreed to sell 550 mw of firm capac:r cnd assoc-v d:strictened feahty located in the Geysers Known Geo-cted energy to the district through Dec. 31,1999, and gase thermal Resource Area (Geysers). Stud:es conduced by the SMUD the option to reduce the purchased amount at any pnvate steam supplier indicate that there is a general decime time with five years' notice. The district has given PG&E the in se ovcilable steem supply, and capocry is expected to required nonfidation and will reduce its purchases to 500 decline to 21 mw by 2010. The district is pcrticipcting with mw in 1994 and to zero in Februcry 1997. In the pcs!.

cther pcrties in attempt ng to identh ways to improve SMUD has been able to dtsplace energy associated we utkanon of tne Geysers.

this power sale agreement from other supphers at o Icwer Through its portiapation in Central Cahfornia Power cost and wdl continue to do so in the future.

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Agency No.1 (CCPA No.1). a joint-powers agency, 3

mCH INVESTCd SENCE INC 1

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o Sacromemo snccol u% Dect Codom.o SCE centrac'ed to supply the d; strict weh 300 mw of initiol orojects twoyear performance E!ccisvo ccHs for uo ccccesy cnd essoccred energy through Dec. 31.1999, to 200 mw of Pacific Northwest resources to be on hne by wah transmission provided accordrng to the PG&E trcnsmis-1997. SMUD will purchese power en a tekeend-pcy bes:s scn rate senedule. The distnct hcs exercised its opten to from c 130-mw ges-fued unit to be constructed southecst of reduce es SCE purchases te 200 mw upon hve yects' notice British Columbia, Canada. Also, a power exchange agree-cnd wdl do so in March 1996. won 100 mw remcinmg in ment will provide the distnct wah addaienci copocay from place untd contract expironon.

this project dunng SMUD's peck summer period. This in odd ten to the ebeve cgreements. SMUD has c resource is contingent upon finclizmg transmission arrange-contrcct w th Pacific Power & bght Co. which provides 100 ments. Block three includes 350 mw-400 mw of reneweble mw of fam power through 2015. Also. the d:stricts part.cF or advanced technology resources to be en hne by the year i

l petion in various power pool cgreements proudes access 2000. The specific projects for blocks one and two were to economiccl power resources approved by the board and cuthorizction was given for SMUD management to proceed with deveicpment. Whde Future Power Resources no specif c preiects were approved fer block three, the Since 1987, SMUD's peck demend inc ecsed at a 3.8%

board established a threeyear progrcm to identJy renew-overace cnnuci rate, whde enercy se!es rose 3 2*6 cnnu.

obie and advanced +echnology resources for development c!fy. Project: ens through 1996 fcIeccs c 2v3% cverage Io'er this decade.

onnual growth rate in energy sc!es and c nse in forecasted SMUD will be respons.ble for fuel procurement for the peck demand by cbout 2% cnnuch SMUD annc>petes it cogeneration projects and wdl begm negotionng wah gas will be oble to control future energy and cemend crowth supp!iers icter mis year. Current plans include executing through cearessive demand-side monecement prcgrcms, short and long-term gas contracts and purchasing cbout

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Wah theselrocroms. SMUD manecement oeheves energy 15%-20% of the requirements on the spot market.

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scles growth [cn be contcinec t[coout 1.4% conucily The cogeneration projects are subject to environmental l

l through 19Yo, whde planned peck demcnd cciucily udl reviews under the Cohfornic Environmental Ouclity Act and dechne to 2.C40 mw in 1700 from 2.080 mw in 1992.

to obroming cir quoliv permits and other cpprovals by the The d stncts demanc-side manecement procrom in.

Cohfornic Energy Commission. In addition to receiving final

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2 ciudes: tocd menacement. desianed to he:c contr01 peck approvcis and permes for the projects. funding and construc-summer loces: censervanon eHess. *o,merose eH;c:ency cf ten stdl needs to be achieved

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ecsting homes and budd,ncs cnd a new construc'en program cered at encouraging construcnon of new hcmes TrQn5mI55 ion end build:ngs that cre more energy eH,c ent men required Currently, the district has a transmissen contract with certcin by state and federcI budd ng s'ancards Ihe ccmbmed Cchforno investorowned utdaies 6ct entales it to 200 mw efforts of trese progrcms are crciected to reduce SMUD's of copccay over extra high-voltage transmission lines linking peck cernand by 195 ma n 1992 and cser 500 mw by

'he Pacific Northwest and Coldomic (the Intertie). The 2000 contract extends through Dec. 31,2004 However, termr l

Aleng wen +e demand-s ce mencgement prog *cm neten of the services received under the contrcct is sub ect i

SMUD Fos desgned a rescurce snc egy mot w.li cUcw me te se Federal Energy Regulctory Commiss;on (FERC) co-I d.stnct to reciate ocwer curchased under the PG&E and crcving ebendonment of these services l

SCE contracts w:th new generencn resources Aher on Along wah numerous other pornc: pen's, SMUD is c l

extensne reveu and negoteten precess. the new rescurce perncipent m the Trcnsmtssion Agency of Northern Cohfor-strategy was presented to the SMUD becrd m August 1091.

nc (TANC). which is developing the CchforncOegen wah hno! board coproval given in December 1971 The Transmission Project (COTP), c 500Movoit transmission line f,nci ccproval incorporated the deveicpment of the ceu ccocble of 1,600 mw. The COTP currently is being con-resources in three dishnct blocks.

structed between Oregon and centrol Cohfornic. As of Eleck one consists cf 465 mu-cCO mw cf iccci March 1992, the project was cpproximctel 66% compiere y

cogeneranon rescurces and a 50 mu und plent. AB ine and scheduled for commercel operaten in eody 1993 ct cogenerenon projects wdi be naturci godred. rcng:ng f om an estimated cost excluding interest, of $420 mdhon.

50 mu-150 mw. Prcject deo cen ent regetenens are Following the decision by three Cohfomic investorewned

%pected to be completed byJune 1992 The teeway oudt utihties not to pomcipate directly in the COTP ofter being mto the constructen t.metable enc me s:cncerd technoicgy denied the right to porticipate severcl times by the Cchfornic invched should ehminate mest of 6e crc:ect nsk. The wmd Public Utilities Corrnission, TANC's ownership and cest-prcject nitictly wd! be developed as o ibe-mw project, unh shonng interest in the project increased to 84 93% from its develocment of an cddirenal 45 mw condacned ucen the inaial 43.5% shore. SMUD is obligated to pay 27.13% of FITCH INVE57CE5 SEMCE. iNC a

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3 Sacromemo Mscpot Uniav D.stnct Caidenc TANC's shore of the project end will be entitled to cpprcx-supply resources, demand-side management programs.

f imetely 338 mw of ccpocity on en uncond tionel toke.or-and improvements to existing transmission facilities. distnbu-pcy bcsis. The district expects to use this transmission tion system, and general plant. Over the next 10 yects.

ccoccity to import firm capacity resources from the Pacific revenue bond issuance is forecost to be $930 mdlion, with Northwest and Conodo. The Bonneville Power Administro-

$550 million for system improvements and $380 million in tion cnd the Pccific Northwest utAties are responssle for new generation focihties.

certcin upgrades to the Northwest trcnsmission system SMUD's financing plans for the new cogeneration projects required to accommodcte the add:tional transmission co-are intended to maintain the benefits of lowcost, tex, exempt pacity provided by the COTP.

financing and avoid project risk cs much as possble. To TANC's shore of the estimated COTP construction costs is achieve these objectives, the district plans to establish a approximately $356.7 million, exdusive of interest end jointpowers egency with Modesto Irrigation District. to serve allowance for funds used during construction end any as o financing mechanism for these projects. Since the financing costs. Should a project portiepent feil to make the jointpowers agency would be o separcte legal entify from recuired payments for its share within the sceofied penod, SMUD, financing for the projects would be off balance sheet its entitlement to COTP transfer capabihty mcy be conceled.

end payable os o distrjet operating expense. There wiH be in this ccse, TANC would be recuired to assume the separate tekeendpay contracts between SMUD and the defaulting participants' shores of the COTP, unless the jointpowers agency for each project. SMUD o!so plans to nondefaulting participants reach enother agreement. If a secure a credit enhancement for this debt. The estimated ecst participant defaults on its payment ebligation tc TANC, the of these projects is cpproximately $550 million. The Cono-nondefaulting partic;ponts are subject to o pro reto step-up dien project will be financed by the developer end the in their entitlements end payments. hmited to c 25% increase cepocity will be a purchased power expense for SMUD.

in the enhtlement shore.

Since there is no direct connecticn beween the COTP Rates and Regulation termino: points and the distncfs service creo. the district is SMUD's rates are set by the boord and are not subject to working with Westem to negoricte on agreement whereby any outside review or regulation. The rates are composed Western will transmit power from the COTP to SMUD's of a power supply cost rate through which power supply service creo. SMUD c!so has the eption cf ebtaining cests are recovered, and a base rete, which recovers the bi directiencl rrensmission service from PG&E. os outlined in district's remaining cests. District policy is to review the the interconnection agreement beween the two porties-power supply cost rete semiannually. In December 1991 TANC and PG&E also have erronged for PG&E to provide the board odopted a new rate structure that brought rates TANC with 300 mw of firm, bidirectional transmission for oil customer classes more in line with SMUD's cest of caccety on its system. The district's shore of this service is service. The result was on overall rate decrease of 0.9%.

cnticipcted to be 46 mw.

with c ost of the decrease going to business customers Certcin outstanding disputes beween SMUD cnd PG&E paying more than 110% of their cost of service.

were resolved under the transmission rate schedu!e end the Althouch SMUD's rotes exceed the national overage, they

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inte connection cgreement. The transmission rete schedule compare favorably to PG&E and other West Coast utihties.

provides for 400 mw cf bi-d.rectionel transmission service As of Jan.1,1992, the overage residential rote for a SMUD to +he district that SMUD uses to purchese cepcary and customer was 8.09 cents per kwh versus on estimated energy from SCE ond other ut& ties. The district expects to 12.36 cents per kwh for a PGSE customer. The distnct has pcy PG&E cpproximately $3 milhon a yecr hrough expiro-not increased rates since 1990 cnd does not antic pare c tien on Dec. 31, 1999. The interconnection agreement rate increase until 1993 or 1994. Future rate increcses c'e provides SMUD the opportunity to plcn and budd resources expected to opproximate 3%-4% onnualy Current funcing to meet its load requirements and obligotes PG&E to sell for the decommissioning of Rancho Seco oiready is built into transmission service to the district et cost bcsed rctes. Ser-rates. Going forward. SMUD expects its rates to remain vice under this agreement commenced June 1,1991 cnd approximately 25% below PG&E's rates.

will termincte Dec. 31,2009 subject to FERC approval.

Decommissioning Cap.tal improvements SMUD's proposed decommissioning plon for the Rancho i

and Future Fmancmg Seco nuclear plant was filed with the Nuclear Regulatorr SMUD's copital improvements for 1902-1996 are pro-Commission (NRC) in May 1991. NRC approval of the

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jected at $968.5 million. This figure does not include costs plan is expected by mid-1992. The first stage of b

to finance the new cogeneration projectsL However. in-decommissioning is a storage phase; this involves stonng cluded among the ccpitol requirements are other power the plant for opproximately 16 years. After this phase, the 5

mCH INVESTCRS SENCE. INC

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sacromevo Mun.csoi utey Doct. C:Mormo Financial Summary

($000. Yects Ended Dec. 3 l)

Actual Projected 1988 1969 1990 1991 1992 1994 Operet:nc Revenues 581.480 585.741 649,987 644.393 661.105 717.876 Other income. Net 34.991 82.963 55,447 42.501 50.1C9 22 084

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Total Revenues 616.471 668 704 705,434 686.894 711.304 739. 60 Total O&M Expenses 411.853 422.824 452,465 424.776 432.252 457.748 Net Revenues 204.618 245.880 252.969 262.118 279.052 282.212 Total Debt Service

• 120.873 127,131 137,390 144.022 157.I15 173.726 Debt Service Coverece !x) 1.69 1.93 1.84 1.82 1.78 1.62 Fmed Chc ge Rctio $'

1 13 1.26 1 47 1.52 1 56 1.50

• Cebr serv 4Ce on cd ocr}f o"o swoord."C'e 'e.eNe DCF:s * *C:*o. red cec'sevCe Cove'oge on oi! owtsCnc ng ceof. exC!uces ceT e nonccs, eveNes cro expeases picnt will be decontamincted by removing c!! fuei and other year, primanly due to the transfer of $18.4 mdhon of radiocctive meterials to off-site loconens.

revenues into o rate stcbilization fund. Increased customer The district anticioctes that tne tctcl ccst for both sales contnbuted an additional $ 13.2 miBion to operating decomm:ssioning phases will opprcxirnc*e $281 mdten in revenues. Reduced purchased power costs largely were 1991 dollars, plus cpereximc+ely $38 miHion in 1991 responsible for a $27.6 million, or 6%. decline in O&M dailors for s.te restoronon. The NRC has cecreved SMUD's expenses. Despite the continued drought in Cohfornic the fmancici assurance pian and granted c cessession-only district has offset the negative hnencicl impact through license for Rancho Seco Beth cct:ers will take eHect economy energy purcheses from the Pactfic Northwest and 1

pending the NRC's review of c chchenge by the Environ-lower naturcl gas prices. Sub tentiel cost savings recentiy mental Conservetten Organicanon. The deccmmiss.oning have been incurred by the district. As a result. SMUD's cbility trust fund currendy totc!s $97 mnen Annual contnbut ens to reduce expenses further is Lkely to be mere dithcult in the to the trust wdl ecuci $8 mdlion per 3ect until *he d:str ct future.

receives NRC cporovci fer the deccmmissacnmg plcn. The The district's fixed,chcrge ratio shewed further improve-cnnual contr.bunon then wdl mcrease to $ 12 mdhen cer ment, recching 1.52x in 1991. The fixedcharge reno is tre considered the mest conservctive form ci debt servce year through 2008 Af'er NRC cccresc! cf the plan estrict wit! beg:n mckmg wedrowc!s frc~ se trust to ccver coverage since ;t excludes certain noncash revenues and excencitures for cient momrencnce evpenses and includes debt service on el cutstandmg debt of the d! strict. It is SMUD's intennon ? neer certain f nonc:ci Finances c sers. incluems a 150x faedche se reno cod o $75 macn umestncted ccsh bclence, and to ecmeve en equ 9 For the vect ended Dec. 31,1701 ccerctmg reveses rce cbove 20%

dechned by $5 6 mAon. cr less han % cver me cr.cr C:c>nc"i ? !c02 ty Uca mes' ors $es ce +c C ae 5'c'e E'ee' 50 NY Ny10004 Te echere i!400172 ETCH :2 ! 2; c0 SEO ;:., 21214 Da437 3,ron D (cocet P ons er Vo. Bo ey 50 t-C'e' f/ccere O C rrei A :dscnon Monoge<: Karen Cenet Mcnaget Ceshec %lishing a

Wnce! R Cecn. Assoc c'e E ;rcr Orc.e Les An:c c'e E -ti CH me necica DesHop Puchsning Cperetcr: jocquehne Moody. C:oy Edoci Arred by A+encon D. rect McJ Co. Mc NY V i CC la F tch retings are based on informohon cbc red E:* sise s c?er ccoc rs ecerwnte 5. their expe"s. cnd orer sources f rtch te: eves t be rehcte f e oces not oud i or venf te truth or occuracy ar scn ri:~ o"cr. Retr'gs r6, be encegeo. suspenced, er withdrown as o result of chcnges in. or the uncycJoosy f

of snior ncron or for cfher recsons 8ctegs : e nct c ec:ve oct'en c en :.e<l. or t c.d eny security. Ronngs do not co nrnent on the odecuocy of cror=e' once !$e veoivy of any secety for o perhca'cr e,arar ce *e cee act acture or 'oxcoay of pcryments f*ooe in respect to onv secur@ Fach receives ees f om ssa s mue s o contors. :eer ocuccis crd ecerwnse s *ar retng secant.es Such fees generally very frorn $ 1.000 to $ 1CO.000 pe< issue. :n

k.,

l f

ce em cc3es Etch wdl rcie c!I or a nur-te or 7.s es mec ov c Oc tc.Jor ce' or insured or guar 6cleed by a porticular insurer or guoronsot or o singe uo' fee Such fees are expected to scry'rc- $ !C 000 e 1i 500 CCO %e oss gnment, puchconon or dissewnonon of a ranng by Facn shall not constve c-r o corsent by f 'cn o use its ecPe Os en eace t n ::~ac$on *th cry eg sn: Son statement Med unoer te federal secunt'es laws FliCH INVESTCRS SERVICE. lNC.

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HEADLINE: S&p Raises sacramento Muni Util Revs 'To &=passigns var Rtgs my - say creditWire 3/31/93 -- sap raises its ratings en Saoramento l

Nunicipal Utility Distriot, Calif. 's (SNUD) $568 million electric revenue bonds series 3-s V-W, and 1993A to single 'A'-minus from triple =55'-plus and i

SNUD's$337millkessubordinatedelectriarevenuebondsseries1988to i

i triple 'B'aplus from triple

'B'.

in addithon, Sep assigns its single Sh'= sinus rating to the SNUp's $75 nillion electrio revenue bonds series 19935 and approw'inately $351 million i

olectric revenue refunding bonds series 1993D.

The rating upgrades refleet the reduoed risk associated with the resource acquisition plan due to substantial development of the local area independent i

power projects -- phase 1. While uncertainty remains regarding has-side i

transmission neo)ess with the operation of the 00Tp (California. oregon canagement (DsN and late 1990s capacity additions, improved Marthwest rransmission project provides SNUD suffielent flexibility to manage resouree plan variances. Bowev)er,il phase one, p,re$ sots are ope 4

new resources including DSN will prefida over 50% of f

SNUD's load in 2003. Unt over 500aw -- and the Board has implemented rate increases to fund the increasin further. g purchased power expenses, the district reting is unlikely to abange i

SNUD is utilising a diverse resource stpategy to aos iRVester-owned utility power ses and provide for load growth, al to the plan is an officient program anticipated to allow SNUD to 1 t capacity requirements to current levels. Demand-side programs eseounted for attar of capacity in 1991, approximately att of the 7senw projected DdN for 2003. The remainder of the power supply resources will some from gas-fired ind dont power projects and advanced technology siternatives.

ominately 50 of gas capacity in four projoots is well under way and a led for operation prior to the onpacity needs occiarring in 1997 as a resels of the termination of 586aw of purebased capacity. Should some pre cavings not materialise, SNUD has sufficient fle$eet espeeity be delayed or DsN xibility to lace the capacity through the transmission network. SNUD's peak oosure ing the cummer cooling season with 1991's peak approximately 700aw higher than the November to.Tanuary avarage peak. The transmission assess allows the distriot to purchase short-tera summer onpacity from the Northwest has excess sunner onpacity. Additionally, SNUD has 400er o,f.trensaissionwhich traditionally capacity between the distriot and southern California Edisen Co., which provides an ability to purchase attractively priced onpasity due to the impact i

cf the southern california recession and southwest capacity ourplus.

The resouros plas will be expensive but primarily financed en an off-balance-sheet basis. sNUD is proje,ctine s.e4 annual rate increases in ceder to maintain the strong financial position the utility has estahliehed over the last three years while paying for the project especity. The rate increases are reasonable taking into effect both the slower load growth of the storamento county area and expensive tariff natural sas prises for the projects. While a Moolellan AFB closing would lever load requirements further, alower growth will reduce the pressure on the resouros plan. ghe Sacramento coonomy has softened, but still has significant strongl j

the oeunty is up to 7.7%, but is a function of slower em.h.

Loyment for emple t geollnes p1 growth, not

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's rates are.very competitive, benefiting from the distriet's hydroelectrie espasity on the Upper American River and 6=t WApA (Western j

e

i i

i i

Arca Power Administration) onpacity, nasidential rates at 8.18 cents l

below PG45. SMUD seditionally has established a $49.7 million rates i

1 j

1993 and will smooth the rate impact of higher,purchased power costs.

The ratings outlook is stable. SNUD's opertt;,onal ano financial flexibility J

support a single

'A' category rating. Bowever, until the phase one resource nequisition plan is completed and in the rate base, a higher rating is

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j unlikely, s&P said. --CreditWire I

cantact Mark Ryan (212) 200=1848, Willias chew (212) 80s=1850, William Cox (212) 20s-1866.

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