Text

Annual Rept 1989
	ML20043B011
Person / Time
Site:	Rancho Seco
Issue date:	12/31/1989
From:	; SACRAMENTO MUNICIPAL UTILITY DISTRICT
To:	;
References
	NUDOCS 9005240054
	Download: ML20043B011 (16)
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A. N N E ' A L ~ R E PLO R T s

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Municips l U--t l l I t y D 'l s t t I c t A YE AP OF

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TRANSITION

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e S M U D: S E R V I N G T H E H E A R T O F C A L,l F O R N I A The Sacramemo municipal (Jtility' District's service area

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encornpasses 9(K) squhre miles within

'1989 ST ATISTICS SiiUI[li2Iktal A N D MlLEST 0 N E S:

i city. The District h po'ver'ned by a fisc m'emher lloard of.

NEW SERVICE

~ Directors elected for CONNECTIONS *'

~ staggered four year.

15 8-19 terms, The lloard of f-Directors mate,, policy TOTAL CUSTOMERS POWER PURCHASF 5t1' decisions for the Dis.

SERVED:

AGREEMENTS:

trict and appoints the General Manager, w h9 A new record high of The District entered

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44),212 inic separate ten-year n

is responsible for the ag'reements with >

District's operations.

Pacific Gas and PEAK OEMAND:.

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'1989's peak reached l

1,999 MW on July 15

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record peak of ;,109

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set in July 1988 NEW ENERGY

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SMUD SERVICE AREA MANAGEMENT.

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ENERGY SALES TO CENTER:

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Opened. Mart,489 7.9 billion LWh-RANCHOSECO

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' OUTAGES:

NUCLEAR GENERATING '

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STATION:

Outages averaped L ss

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than 1,5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months , pc.

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customer for thq year j

em wi CUSTOMER CALLS:

COST CONTAINMENT /

_ improved capability.

MANAGEMENTa enabled SMUD to SYSTEMS:

handle an average of Reduced non nuclear 1 lb,(KX) customer staffing by'over 15 phone calls a month-percent; improved effi-

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t SACAAMENTO MUlllCIPAL UTILITY DitTRICT I

1 9 8 9:

A YE AR OF TR ANSITION These were a iew of the year's significant esents:

N many firsts and a year of sigmficant NEW ENERGY MANAGEMENT CENTER. At the stroke of nudnight, Decemtwr 31,1o89. SMl'D meteen ciphty.nine was a year of became a fully mdependent utility. That was when an miepration agreement with Pacific Gas and change !i w as a year m w tuch the thstrict entered Electric Company terminated and an interconnec-a new era of greater mdependence, closed its tion aprecinent began. SMUD's new Energy nuclear pencratmp plant, negotiated important Management Center, the nerve center for District long-term purt based power apreements, and re.

operations, will play a key role in a f uture w herc

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emphasized a commitment to ener > management.

SMUD makes its own mmute-by-minute decisions Clearh.1989 was a year of tranution.

on managing energy resources. giving SMUD As SMUi) closed the chapter of the 1980s, the capability to choose the most economical Sacramento's publicI) owned utility began the resources in ailable.

new decade with efficiency and independence as RANCHO SECO, On June 7,1989, Rancho Seco its guidmp prmeiples.

Nuclear Generating Station was taken of f-line and JY y,,

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Ai The new Energy Management Center enables the District to efficiently manage j

diverse resources.

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1989 ABORIAL llEPORT ted to the Nuclear Regulatory Comnussion m December, with fmal program changes to be submitted in mid-1940 These submittak are actmties to close :he plant began. The action intended to reduce the econontic eyxwures of a came in swif t response to a June 6 election in clmed plant wlute stiH complying with NRC which 514 percent of the soters called for SMUD pmdehnet A final deconunissiomnp plan is alw scheduled to be submitted m 1490.

to no longer operate the plant. It w as the first time in history that an operating nuclear plant was shut As part of its 1490 Request for Power Supply down by pubhc sote.

Proposals (for pow er during the next 20 years), the On Decemtwr 8, Distnct emplosces remosed Distnct is accepting bids to re-pawer Rancho Seco the planti last tuel assembly f ronithe reactor with natural pas m other fuelt core and placed it in the spent f uel pool. Closure RATE ACil0N. The Distnct's goal to keep rates actmties continue on a numbei of fronts, m(lud.

competiti,c w as met in 1984, with s,o increases m mp the deselopment of plans for decommissioning rates dunny the year. A rule increase of 7.5 the plant. Intenm program changes were submit.

percent was approved for IWO, with residential rates nsing a modest 2 percent on userape.

According to a statewide sursey, SMUD's averaFC 4 p;, M @A g3; @s % gQW Y

residentml rates remain among the lowest in the

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$@@GQMMM@8M@$Mdk N 'EgM$y@ggg$ p g y JM ig Ugy jg hancements made in customer service, including a n

new phone system that reduced "all busy" lines q

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h fC NMh h (( d / h d@ J customer would yet a busy signal six out of ten MMM$gjf tmco Now a customer will yet a busy signal only one call out of a hundred Aserage on hold time M%fh t

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%yp%p$fi@O g N h4 kW V U[ u W lD dropivd f rom atxmt six minutes to less than one

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of calls handled averaped i16,(K10 per month, up qC

%W khg;g[g from 70,(KKI" month m 1988. On September 5 by i

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.a when it recened 6,770 calk during the day. Prior hM$N N

1-to IW the one day reemd for calls was 3,630.

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gMw f3 g, g SYSTEM REllABil.lTY. During 1989, SMt D p% A[$qhdhk N--

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continued its long-standing tradition of excellence

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in system reliability. The duration of outapes 4y averaged less than 1.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months per customer for the pA M6 5 &

h h jkQ year. This compares with a national utility aserage hhij[ s %

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of apprmimately 2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months per customer per year.

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SACRAMENTO MUNICIPAL UTauTY DISTIUCT GENERATi#G RESOURCES, SMUD maintains its own diverse mix of generating resources. These include hydroelectric, prothermal, photovoltaic POWER PURCHASE AGREEMENTS, A power and gas turbine generating plants. The 639-sale agreement executed in 1989 between SMUD megawatt Upper American River Hydroelectric c nd Pacific Gas and Electric Company calls for ihe Project poduced approximately 1.2 billion District to purchase $50 megawatts of firm kilowatt hours in 1989. SMUDGEO #1 continued capacity and associated energy from 1990 through to set prothermal industry standards for perfonn-the end of 1999. The District may reduce ith ance and reliability. Since it first went on-line in power purchase commitments upon five years ad-1983, SMUDGEO has prmiuced over 3.9 billion

.vance notice.

Lilowatt hours, operating at a 96.26 percent The District and Southern California Edison capacity factor and a 97.87 availability factor.

Company entered into a power sale agreement in SMUD is a member of the Central California 1989 calling for the District to receive 300 mega-Power Agency, which operates the Coldwater watts of capacity and associated energy from '

Crcek Geothennal Plant kieated near SMUDGEO January 1,1990, through December 31,1999.

1 in Sonoma County.

This first ever agreement between the two utilities also en.bles SMUD to sell surplus energy to IMPROVED EFFICIENCY. Two major efforts Edison.

One hundred megawatts of power will also during the year significantly streamlined the come to the District from the Pacific Northwest.

organization and improved management and information systems.

A series of agreements with Pacific power & Light A cost containment program reviewed the Company will pmvide this power for twenty fisc years begm, nmg m 1990.

District's overall operations with a goal of improving efficiency, Ily the end of the year, For the first time, finn (non.m. terruptible).

power was dehvered from Canada to California non nuclear staffing levels had been reduced by w hen SMUD, liritish Columbia Hydro and over 15 percent, creating a more streamlined Bonneville Power Admmistration entered into an organization and lowering the operations budget by about $30 million, agreement that brought 150 megawatts of power to The District continued to make needed Sacramento. 'I,he agreement was in elfeet from September I through December 31,1989, and was improvements in management and infonnation estimated to have saved SMUD ratepayers systems. The 1989 Management and Information approximately 51 milh,on a month.

Systems Plan lays the groundwork for enhancing systems and perfonnance throughout District operations.

ENERGY MANAGEMENT PROGRAMS. The District's energy management programs are designed to give customers op' ions for saving on their energy bills. At the same time, these pro-grams enable the District to control its peak demand and to shift energy use to off-peak hours.

In 1989 the District re dedicated itself to energy management-or " demand-side planning"-with a clear directmn toward even more aggressive goals in the future. Ily year end. SMUD had over 85,000 customers who participated in its energy management programs 'Ihis gave the District 62 megawatts of dispatchable load reduction capability, while lowering its permanent demand by 73 megawatts. Aggressive programs in air conditioning load management, thennal energy storage and other technologies are aimed at making SMUD a national leader in energy management and conservation.

3

1989 AMUAL REPORT F 1 V E Y E A R S U M M A R Y (unaudited) 1989 1988' 1987 1986 1985 OPERATING STATISTICS Customers at Year-l.nd 441,212 426336 414,079 349,130 3k3,7%

K Wil hales < thousands i hules to Customers -

Resident uil 3J67J50 3,546,445 3,229.269 3.106,721 3,193.193 Commers ial. Industruil A Other 4.5H2,957 4.564 693 4.189.308 3,908.215 3,688,438 hub 'I otal 7,950J87 8.111.138 7,418,577 7,014,936 6,881.631 Sales of Surplus Powci 210,012 386,028 74.8(J2 566,883 k.497, I 66 7,418.577 7.089.738 7,44H,514 lotal 8,160J._i 9 Resenues tthousands of dollaru holes to Custonrrs -

Residennal 5 26N,908 5 285.T63 5 234.438 5 185.8b8 5 156.920 Commerual. Indusinal A Othei 314,5H0 289,776 252322 192.350 149,659 sub loial

$N3,4NN 575,139 486,7to 378,238 306,579 sales ot surphn Powet 3,7N0 7.991 26.475 34.697 50,957 l otal 5 $N7.268 5 Sk3.130 5 513,235 5 412,935 5 357,536 As erage KWil sales per Resulennal Customer N,730 8.982 "

8,914 8 401 9,544 b erage Resenue per Residential KWil Sold icentu 7,99 8.05 7.26 5 98 4.91 l'owei supply ilhousands of KWill 11 dioclectni 1,203,394 775,116 951,194 2,621,270 1,348,244 3

Nusleat Gencianon 1,439,327 2.812.065

( 56,7 IN (41,326) 1,889.885 Geothermal 578,187 615.676 614,783 574,811 609,636 Photos ottan 1,669 1,453 2,245 3,607 1.986 Gas Iurbine 2.954 3,855 1,839 3373 Purt hases 5,340,629 4.308,048 6,274 386 4,291.263 4,034 428 Sy shm Peak Demand iKWi 1,999.145 2,109 3 72 1,886341 1,797,540 1,850.695 1.qua alent i ull tmie I.mploy ces at Year l.nd 2.324 2.816 2.842 2,743 2,562 FINANCIAL STATISTICS uhousands of douarst Operatmy Resenues S 587,268 5 583,130 5 513.235 5 412.935 53 357,536 Operaimp Lspenses.

Purt hased and Interchanped Power 199,940 153.814 165.639 130,431 94,327 Operation anil M,untenance i N6,560 272,382 226,854 185,845 200327 Depiccianon A Amorti/ation HI,945 59.545 50,567 46,166 41,074 Deconunnsionmp 13,905 12,255 3,705

$,061

. A881 Total Operannp I Apenses 4N2,350 447,996 446,765 367,5(!3 341.609 Operaimp Income 104,91N 85.134 66,470 45,432 15,927

()iher Income 36,119 33,575 35,826 30,535 48,656 Ins ome llelore Interest Charges 141,037 118,709 102,296 75,467 64,583 Interest Charges 131,136 113,208 91,753 79,630 73,739 income tietore \\bandonment Lo s 9,901 5,501 10.543 (3563)

(Ofl5h Nei l oss on Abandonment of Nuclear Plant

$84,430 4-NIEl INCOMI. tl.OSSi I: ROM OPl.R ATIONS

$ ( 574,529 >

5,50_1 5_

10,543

_5__t 3,663 )

5 (9.156) lbe for Resenue liond Debt Sen ice

$ 246,57N 5 205.118 5

171.773 5 142,483

$ 115,001 iunds A Resenue liond Debt hen he 5 131.140 5 124.252 5

102.840

$ 86,809 5

88326 Res enue liond Debt Seruce Coserage Ratio 1.88 I 65 1.67 1 64 130 lotal All lionds kepaid 12,644 5

12.403 5

6,554 5

5.535 5

16,490 1:let us t obt) I'lani Net

$1,084,516 5 1.465,684 5 1,896.809 51.689.827

$ 1,533.419 Capitah/ anon I ong 'lerm Debt

$ 1,517.379 5 1,531,499 5 1,365,431 51,035,545 5 894,038 C ustomeri i inuty 5

96,720 5 671,250 5

665.744 5 655.206 5 658,869 198k KWil sales and resenue amounts mclude the uutial accrual ni unbilled resenues 4 *

1.u ludes the one-time eltes t of the imtial accrual of unhilled res enues

"* Includes amorti/ anon of abandoned nuslear plant md f uel

SACILARIEllTO IIUIIICIPAL UTIUTY DISTillCY FIN ANCI AL ST ATEMENTS Report ofIndependent Public Accountants To the Board of Directors of Sacramento Municipal Utility District:

We have audited the accompanying balance sheets of SACRAMENTO MUNICIPAL UTILITY DISTRICT (a political suNlivision of the State of Califomia) as of December 31,1989 and 1988, and the related statements of income and cush flows for each of the three years in the period ended December 31,1989. These financial state-ments are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits b accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates marle by management, as well as evaluating the overall financial statement presentation. We bel'. eve that our audits provide a reasonable basis for our opinion, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sacramento Municipal Utility District as of December 31,1989 and 1988, and the results of its operations and its cash Dows for each of the three years in the period enddd December 31,1989, in conformity with generally accepted accounting principles.

As discussed further in Note 3, the operator of the steam field and certain of its subsidiaries have encountered financial difficulties which include the Bling for bankruptcy by certain of these subsidiaries. The operator is attempt-ing to agree on a workout plan with its major bank creditors which will permit it to continue to operate the field. As a result of the steam field developer's financial difficulties and the bankruptcy litigation,it is uncertain as to whether the District will recover approximately $50 million bvested in steam field development. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of the District's investment in CCPA No.1.

ARTilVR ANDERSEN & CO.

Sacramento, California February 15,1990 FINANCIAL CONTENTS Page1 Report ofIndependent Public Accountants Page 2 Balance Sheets Page 4 Statements of income Page 5 Statements of Cash Flows Page 6 Notes to Financial Statements 1

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l 19M AlllillALllEP0lli B A L A N C E S il E E 'l S A84ETg accember31.

1989 1988 (thousands of dollars)

ELECTRIC UTILITY PLANT Plant in sen ice, at ongmal cost

$1,235,176 51,981.372 less accumulated depreciation.

281,761 47l.049 Plant in service - net.

953,415 1,510.323 Construction wott m progreu.

NO,646 195,892 investment m joint powet nFencies 50,455 52,463 Nuclear f uel, at amortired cost.

-0 207,(06 Total electnc utility plant - net.

1,0N4,516 1.965,684 RESTRICTED FUNDS Revenue bond resene lunas.

I19.054 115,450 Nuclear deconunissioning f und.

67,961 54,190 Total restncied Iunds.

187,015 169.640 CURRENT ASSETS Cash and insestments Unrestncted.

195,519 258.154 Restncied for payment of debt service.

44,191 39,057 Designated for detened compensation benefits.

17,635 14,989 Accounts receivable. net liilled customer res enues.

42,872 39,993 Unbilled customer resenues.

31,NH3 31,311 Other.

I1,346 8,205 Defened power supply costs to be recosered within one year.

0-54,999 Regulatory costs to be recos ered withm one year.

43,487 0-Materials and wpphes, at as enige cost.

21.619 38,358 Accrued interest.

8,529 6,540 Prepayments.

Sc606 10,677 Total current assets.

422,687 502,2k3 NONCURRENT ASSETS AND DEFERRED CHARGES Regulatory costs for future recosery Plant.

469,895 0-Decommissioning.

148,506 Advance capacity payments.

1%,N86 I 86,27 i Unamortiied low (,n refundmg.

51,262 54,472 Unamortized debt expense 23,446 24,438 Other.

9,144 9,732 Total noncurrent assets and deferred charges.

899,139 274,913

'Iotal aweis.

$2,593,357

$2,912,520 2 The accompanying notes are an integral part of these financial statements.

.. ~.

~ SACRAMEllTO MU50CIPAL UTEITY DISTillCT s

C APIT ALIZATION AND LI ABILITIES.

December 31, 1989 1988 (thausands of dollars)

Customers' equity employed in the business B alance, be gi ni.ing of yea r............................................................

.5 671,250

$ ~ 665,749 Ne t income for the year.........................,.....

J574,529) 5,501-l Total c o smme rs' eq uit y.....................................................................

96,721 67i,250 j

Long. term deot.............

1,517,379

-. 1.5M92

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Total ca pi t al izat ion...................................................,..........................

J614,100 _

2,203.249 3

CURRENT LIABILITIES-Commercial paper notes........................

195,087 195,086 ~

l Aecounts payable....

40,986

.60498

[

Payable for pow er purchases..,,,,,,,,......................,,..

46,749 13,416 -

i Long term debt due within one year...

16,338

'13,211

-j Acerued nuclear plant hyup costs.,.

34,000 Accrued interest,,,..,

36,144

'32,464 Customer deposits.......,,,

13,138 II,792.

Accrued salaries and vacation..

11,422

.13,583

-i Energy exchange account......

0-21,803 Advance capacity obligations......................,,,,.....,,,,.....,,,

_ IM29 13,300.

Total current liabilities.....

409,193 375,253 NONCURRENT LIABillTIES AND DEFERRED CREDITS 1

Advance capacity obligations.,

142,331 147,044 Unamortized gain on refunding.,,,

96,423 101,522 j

thcommissioning accrual,

230,681:

54,190 Energy exchange account...

46,228 7.479 Accrued maclear plant layup costs..

26,600- l Deferred compensation benefits.....,....

17,635-14,989 i

Other.,.

10,l66

_8,794 j

Total noncurrent liabilities and deferred credits.......

570,064 334,018 1

COMMITMENTS AND CONTINGENCIES (NOTES 7 AND 8)

Total capitalization and liabilities.

$2,593,357

$2,912,520 i

3

. 1999 ANIRIAL REPORT-

. j STATEMENTS OF INCOME Year Ended December 31.

1989 1988 1987 l

r (thousands of doHars) i

~ OPERATING REVENUES R e s ide n t i a l................................................................

$ 268,908 5285.363

$234,438 Commercial and industrial..............

306,208 282,916 234,655 S ales o f s urpl u s power.......................................................

3,780 7,991 26.475 other.................

8,372 6,860

_ L7,667 -

s Total operating revenues..........................................

587,268 583.130 513.235

[

OPERATING EXPENSES Operation Purchased and interchanged power.........................

199,940

$ 53,814 208.309.

Power supply costs over/(under) recovery - net...

(37,852).

12.671.

(42,670)-

Nuclear fuel used for generation......

10,955 21.692 '

Prod uction.........................

59,092 105,303 89.787 =

- Administrative and general and other.....

_ 82,134

.71.066 66.844-Maintenance..

38,393 61,650 70,223 Depreciation.....

47,045-

'59.545

'50,567 Decommissioning...

' 13,%5

.l2,255 3.705 i

Abandoned nuclear plant operations costs............

33,839.0-

' Amortization of abandoned nuclear p! ant & fuel.........,

34,899_............

482,350-497,996

- 446,765 Total operating expenses..

Operating income.'........

' 104,918 85,134 66,470-OTHER INCOME Interest income and other...

32,275 25,682 27,710 f

3,844_

7.893 8,116 Allowance for equity funds used during construction.......

Income before interest charges..

._141,037

-118,709 102,296 INTEREST CHARGES Interest on debt..................

135,106 124.689 105,665 (13,912)

Allowance for borrowed funds used during construction............,,,

(3,970)

(11.481)

Net interest charges...

131,136

.I13.208-91,753 Income before net abandonment loss......

' 9,901 5,501 =

i 10,543 l.

i-ABANDONED NUCLEAR PLANT COSTS '

Loss on abandonment of nuclear p' nt.

1,246,317 -.

Future recovery of abandoned nuclear plant,,.

( 661,887)....

Net abandonment loss.

584,430

-0......

NET INCOME (LOSS)....

$( 574,529)

$ 5,501 s 10.543 1

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SACRAMEllTO MulilCIPAL UTIUTY DISTillCT ST ATEMENTS 0F C ASH FL0WS vear Ended Decemwr 31 Increase (Decrease)in Cash and Cash Equisalents 1989 1988 1987 (thousands of dollars)

CASH FLOWS FROM OPERATING ACTMTIES Net income

$( 574,5291 5 5.501 5 10,543 Adjustments to reconcile net income to net cash provided by operaung activities:

Interest on long tenu debt.

120,839 114,118 98,599 Interest on commercial paper.

14,267 10.571 7,066 Depreeiation.

69,000 59,545 50,567 Decommissioning and amortvation of nuclear tuel.

37,805 31,N4 3.705 Energy bank drawdowns trepayments).

16,946

( 7.859) 4,848 PSCR recosery (deferralj.

( 37,852)

I1,67 I (42,670)

Abandoned nuclear plant costs (net).

584,430 Allow ance lor equity funds used during construction.

( 3,844 )

I 7,893 )

(8,116)

Other, net.

7,046 2,628 3fM Purchase of advance capaeny.

( 13,300)

( 25,925) Change in operating assets and liabilities:

Accounts receis able

( 6,591)

( 23,236)

( 25.654)

Accounts payable 41,862

( 23,518)

(6.153)

Other working capital.

( 8,580)

( 8,693)

(295i Net cash provided by operating actiuties.

247,499 138,954 96,104 CASH FLOWS FROM INVESTING ACTIVITIES Construction espenditures.

(117,736)

(144,720)

(263,575)

Cost of nuclear fuel.

( 5,346)

( l I,075 )

(3,694)

Purchases 01 long-temi im estments.

(592,688)

(552,432)

(607,860)

Proceeds of long-temi im estments.

551.216 529,843 567.737 Other, net.

6,171 4,623 6.084 Non. cash adjustments to imesting actisities:

Accounk pay able and other accruals.

( 29,134 )

(3,530) 17.694 Allowance for equity f unds used during construction.

3,844 7,893 8,116 Net cash :: sed in imesting actn ities..

(183,673)

(169.398)

(275,498)

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Proceeds f rom bond issues.

0-324,984 546,207 Repay ment and refundmg of bonds.

(13,210)

(176,313)

(238.632; Imerest on long.tenu debt.

(l15,603)

(106,036)

(98.072)

Pmceeds trom sale of equipment.

1,115 1,596 1.654 Other, net.

( 489)

(1,676 )

(1.188)

Net cash provided by tused in) capital financing activities.

(128,187) 42,555 209,974 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Proceeds t repayment) of commercial paper. 73,286 (3,200)

Interest paid on commeretal paper.

(14.593)

(9.555i (6,725i Net cash provided by msed m) noncapital financing actn ities.

t 14,593 )

63 731 (9,925)

Net increase (decreases in cash and cash equis alents.

( 78,954) 75,842 20.655 Cash and cash equisalents at the beginning of the year.

212,030 136,188 l 15,533 Cash and cash equisalents at the end of the year.

$ 133,076

$ 212,030

$ 136.188 The accompanying notes are an integral part of these financial statements 5

1989 ANNUAL REPOR7 NOTliS TO FIN A NCI A L ST ATEM ENTS N OT E 1. SU M M AR Y O F SIG NIFIC AN T AC C O U N TIN G P O LICIES ORGANIZATION AND EXEMPTION FROM INCOME AND PROP-CASH AND CASH EQUlVALENTS. For purposes of the statement of ERTY TAXES. The Sacramento M unicipal Utility District (District) cash flows, cash equivalents hwlude all debt instruments purchased was formed and operates under the State of California Municipal with a maturity of three months or less and all investments in the Utility District Act (Act). The Act confers upon the District the Local Agency investment Fund. For the years ended December 31, rights and powers to fix rates and charges for commodities or 1489,1988 and 1987 the investments considered cash or cash services fumished, to incur indebtedness and issue bonds or other equivalents were $ 1 16.6 million,5203.0 million and $ 136.9 million, obligatiws and, under certain circumstances.to levy and collect ad respectively.

valorem property taxes.The District's pow er to levy property taxes RATE MAKING BALANCING ACCOUNTS. The District's Board of is restricted by the California Constitution, Article Xill A, w hich Directors has authority to establish the level of rates charged for all places limits on the taxing pow er of all California public agencies.

District services. The Board of Directors has established a rate.

The District is exempt from payment of federal and state income making balancing account to-remove the effect on the results of taxes and real and personal property taxes.

operations of fluctuations in net power supply costs (purchased and METH00 0F ACCOUNTING. The accounting records of the Dis-interchanged power, nuclear fuel and steam supply costs, offset by trict are maintained in accordance with generally accepted ac-surplus power salest counting principles forrate regulatedenterprises as prescribed by Fluctuations from budgeted levels utilized in the rate-setting the Financial Accounting Standards Board (FASB) and, w here aP-process are recorded in the Power Supply Cost Rate (PSCR) balanc-plicable, the Govemmental Accounting Standards Board (G ASH),

ing account, and will be reflected in future rates.The December 31, and generally follow the Uniform System of Accounts for Public 1989 PSCR balance of $92.9 million was included in the write off Utilities and Licensees prescribed by the Federal Energy Regula-of abandoned nuclear plant costs (see Note 6). The Board of tory Commission (FERC). The District's accounting records are Directors has also established a rate-making account for deferral of maintained on a comparable basis with imestor owned electric material losses, arising from adverse resolutions or settlements of utilities operating in California-claims and litigation, not previously considered in District rates CASH AND INVESTMENTS.The im estments in restricted and un-(See Note 7),

restricted funds ace valued at cost which approximates market.

ENERGY EXCHANGE ACCOUNT TRANSACTIONS. Prior to 1988, The District invests its funds in accordance with the Municipal under the terms of the Integration Contract with Pacific Gas and Utility District Act and other Califomia statutes. All securities are Electric Company (PG&E) that expired December 31,1989;any held by the District's agent in its name. A summary of the District's capacity and energy which was not required to serve District load investments at December 31,1989 and 1988 is shown below, was sold to PG&E, The contract also established im energy ex-change account from which the District could withdraw energy, within certain limits, when needed to meet District load. Energy which was withdrawn from the energy exchange account was December 31*

recorded as purchased power and energy deposited in the bank was 1989 1988 recorded as surplus power sales. Since 1986, the District has meeded the limits placed on the energy exchange account and has Ohousands of dollars) paid for all energy received from PG&b.

U.S. Government Secm hies,

$168,774

$102.183 As of January 1988, under the terms of a 1988 Amendment and Co'rporate Securities.

14,461 22,930 a Dispute Settlement Agreement with PG&E, the District could no Commercial Paper.

43,765 45,554 longer withdraw energy from the energy exchange account and paid for all energy and certain capacity in cash. During 1989, all surplus Certificates Of Deposit.,,

5,000 13,(X)0 power was used to reduce the en'ergy bank obligation. After 1989, Bankers' Acceptances.

140,926 234,337 the District may sell surplus energy to PG&B tmd other utilities Local Agency whether or not the balance has been repaid. As of December 31, Investment Fund.

55,000 54.h14 the emg@anMgadon to N&E was BEp vubd at approximately $46.2 million. Repaymem of th,s obhpan,on is i

$427,926 5472,818 recorded as surplus power sales. If the District has not retumed the energy by December 31,1999, then the District must pay for any Tetal investments are composed of the following remaining balance at rates specified in the Dispute Settlement

^ E "'* " "

""'E Y

"" E " " #""* ""

"*d # I Unrestricted funds.

$195,519

$258,154 estimated cost of purchasing power on the Califonna and Northwest Funds restricted for payment of markets at the time planned to return the obligation.

debt service.

44,191 39,057 DEPRECIATION. The District provides for depreciation on the Revenue bond reserve funds.

119,054 l 15.450 historical cost of e'ectric properties on a straight 4ine, service life basis at rates determined by engineering studies. The as erage annual Nuclear decommissioning lund 67,961 54,190 camposite depreciatic.. iates for the years ended December 31, Checks issued but unpaid.

1,417 6.186 Less-cash on hand.

(216)

(219)

I 6

517bI8

$4hM26 1

q l

l

1, SACRAMEllTO MulilCIPAL UTILITY Di$fRICT 1989,1988 and 1987 were 3.79 percent,3.64 percent and 3.34 item and is capitalized and depreciated along with the related fixed percent, respectively, assets and reflected in rates for future recovery, in the majority of The costs of replacement property units are capitalized. Repair applications, the amount capitalized is detennined by a formula pre-i and maintenance costs are charged to expense.

scribed by FERC, The total allowance for funds.used during DECOMMIS$10NING. The District maintains a fund restricted by constmeti n fonhe years ended 1989,1988 and 1987 amounted to the Board of Directors to provide for eventual payment of decom.

approximately 7.9 percent,7.7 percent and 7.3 percent, respec-l missioning costs. Fund management is currently under District lively, of eligible plant under construction, nuclear fuel, and panici-control. The District's policy is to make levelized contributions to pation injoin@ owned pmjens under construction. AFUDC capi-the fund in amounts which, along with interest earned by investing talized during 1989,1988 and 1o87 relating to Rancho Seco was

. fund assets, will be sufficient to provide for payment of decommis-appmximately $4I million, $11.3 million and $12.7 million re-sioning costs as incurred.

P*C' 'b l

DEFERRED COMPENSAil0N PLAN. The District offers its em-Pn.or to the abandonment of the Rancho h.eco Nuclear Power Plant (Rancho Seco), the District conducted a study, perfomied by ployees a deferred compensation plan created in accordance with an independent specialist, to estimate the cost of deconumssiomng internal Revenue Code Section 457. Until paid or made available to I

Rancho Seco. This study resulted m an estimated cost of $230 the employee or other beneficiary, all amounts of deferred compen-milhon ny 1989 dollars and is the basis for the current provision f or nation, all property and rights purchased with thosc amounts, and all i

decommissiomng. The study assumes that decommissioning will nmi%Mo Mose amounts, property or rights are subject

~

occur after the expiration of the plant s operating license in 2008' to the claims of the District's bondholders and general creditors, and that the di, mantling / removal method will be used. During Participants' rights under the ;'lan are equal to those of general

.1990, a new study to detenume the techmeal requirements and the creditors. The District has the duty of reasonable care in the i ofi nu smives but neither the District nor its cost estimates for decomnussionmg the plant will be prepared. This h

W Mil ty for losses under the plan, study wd, i tale mto consideration the shortened operating life of the plant and the effects this will have on the final costs for decommis.

UN8ILLED REVENUES. The District records an estimate for un, sioning. As of December 31,1989, the entire estimate for decom.

billed revenues earned from the dates the customers were last billed missioning had been established as a liability on the District's to the end of the month. The accrual at December 31,1989 and balance sheet and an additionat $ 162.7 million of decommissioning December 31,- 1988 for unbilled revenues was $31,9 million and expense was included in the write-off of abandoned nuclear plant

$31.3 million, respectively, costs (see Note 6). A regulatory asset was created Io collect through ACCOUNTING GAINS / LOSSES ON BOND REFUNOINGS. The gains rates, or interest earnings on the decommissioning fund, over a or losses from bond refundings have been deferred pursuant to period of seventeen years, the unfunded portion of this liability Board of Directors' resolutions for rate-making purposes, and are I

which was approximately $162,7 million.

recognized through amortization over the life of the applicable in June 1988, the Nuclear Regulatory Commission (NRC) bonds issued for pumoses of the refundings, issued Final Rules governing certain aspects of decommissioning DEFERRED NUCLEAR PLANT COSTS. The District has established funding plans. As a result of these Final Rules, the District will be a regulatory asset for the unrecovered debt-financed portion of required to have a Financial Assurance Plan submitted to the NRC abandoned nuclear plant costs (see Note 6) for rate-making pur-by July 1990 and is planning to place a portion of its funds with an poses. As of December 31,1989, the regulatory asset was $661,9 outside trustee by December 31,1990 and may be required to adopt million and will be amortized and collected through rates over a certain other changes regarding escalation and eamings assump-period of seventeen years beginning January I,1990.

time ABANDONED NUCLEAR PLANT OPERATIONS COSTS. The District NUCLEAR FUEL. The District amortized the cost of nuclear fuel will be incurring continuing costs for m' intaining Rancho Seco in a

to nuclear fuel expense on a unit of-prmiuction basis. Under the a state of donnancy (SafStor) until the eventual decontamination of Nuclear Waste Policy Act of 1982, the Federal government as-the plant. For rate making purposes these costs will be reflected as sumed responsibility for the permanent disposal of spent nuclear current period expenditures.

fuel and has charged the District for the disposal of spent nuclear ACCRUED NUCLEAR PLANT LAYUP COSTS. The District has esti-i fuel in the amount of one mill per kWh on electricity generated by mated that it will expend approximately $60.6 million over the next the nuclear power reactor. The District recorded this charge as a three years to prepare Rancho Seco for the SafStor period. These current period expense. As of December 31,1989, the S188.4 costs have been accrued and written-off as part of the abandoned million of unamortized nuclear fuel cost was included in the write-nuclear plant costs (see Note 6).

off of abandoned nuclear plant costs (see Note 6).

RECLASSIFICATIONS. Certain amounts in the 1988 and 1987 fi-5 ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. The nancial statements have been reclassified in order to conform with District capitalizes, as an additional cost of construction work in the 1989 presentation.

progress mid its participation in jointly owned projects under con-struction,an allowance for funds used during construction ( AFU DC) which represents the cost of borrowed funds used for such purposes and a return on equity funds w hen so used. AFUDC is a non-cash 1

7 I

1989 AMUAl.IIEP0fli N O T E 2. D E FIN E D B E N E FIT P E N SIO N P L AN The District contributes to the Public Employees Retirement Current employees:

System of the State of California (PERS), an agent multiple-Accumulated employee contributions including employer retirement system that acts as a common investment and administrative agent for participating state and local governmental allocated investment earnings.......

57.2 entities in California.The District's payroll for employees covered Employer financed vested o, 91.6 by PERS for the year ended December 31.1989 was $98.8 million:

Employer financed non vested....

5.0 the District's total payroll for the same period was $109.1 million.

Total pension benefit obligation.

270.1-All permanent District employees working more than twenty Net assets available for benefits. at cost hours per week are eligible to participate in PERS. Benefits vest after five years of service. Upon retirement. participants are entitled (market value = $280.9 million)..........,,,

248.3 to un annual retirement benefit, payable monthly for life, in an Unfunded pension benefit obligation,,

$ 21.8 amount equal to u benefit factor times theit highest average monthly Talary over any 36 consecutive months of employment.The appli-cable benefit factor is based on age at retirement and years of PERS uses the EntrYAge Nomial Actuarial Cost Method which credited service, and ranges from 1.1 percent per year of credited is a projected benefit cost method. That ts, it takes into account service for retirement at age 50 to 2.4 percent per year of credited those benefits that are expected to be carned in the future as well as service for retirement at or after age 63. PERS also provides death those already accrued, and disability benefits to covered employees, Benefit provisions According to this cost method, the normal cost for an employee and all other requirements are established and governed by state is the level amount which would fund the projected benefit ifit were statute.

paid annually from date of employment until retirement. PERS The " pension benefit obligation" is a standardized disclosure uses a modification of the Entry Age Cost Method in which the em-measure of the present value of pension benefits, adjusted for the pl yer's total normal cost is expressed as a level percentage of effects of projected salary increases and step-rate benefits, esti-payr 11. PERS also uses the level percentage of payroll raethod to mated to be payable in the future as a result of employee service to

".natize any unfunded actuarial liabilities. The amortization pe-date. The measure is intended to help users assess, on a going-nod of the unfunded actuarial liability ends on June 30,2000.-

concern basis, the funding status of PERS, assess progress made in The significant actuarial ~ assumptions used to compute the.

accumulating sufficient assets to pay benefits when due, and make actuarially detennined contribution requirement are the same as comparisons among employers. The measure is the actuarial pres.

those used to compute the Pension Benefit Obligation as described ent value of credited projected benefits and is independent of the above.

funding method used to detennine contributions to PERS.

The contribution to PERS for the plan year ended June 30,1989 i

The pension benefit obligation was computed as part of an of $20.6 million was made in accordance with actuarially deter-actuarial valuation performed as of June 30,1988 (the most recent mined requirements computed through the actuarial valuation -

actuarial valuation). Significant actuarial assumptions used in the performed as of June 30,1988. The contribution consisted of (a) -

valuation include (a) a rate of return on the investment of present

$ 16.0 million normal cost (15.1 percent of current covered payroll) and future assets of 8.5 percent compounded annually,(b) projected and (b) $4.6 million amortization of the unfunded uctuarial liability i

salary increases of 5 percent per year compounded annually attrib-(4.3 percent of current covered payroll). The District contributed utable to inflation (c) additiona! salary increases of 2 percent per

$18.0 million (16.9 percent of current covered payroll) and em-P oyees contributed $2.6 million (2.5 percent of current covered -

l l

year compounded annually attributable to merit and general salary L

increases, and (d) post. retirement benefits increases of up to 5 Payroll).

percent per year compounded annually.

Trend infonnation gives an indication of the progress made in The total unfunded pension benefit obligation applicable to the accumulating sufficient assets to pay benefits when due. Sys-District's employees was $21.8 million at June 30,1988 as follows temwide ten-year trend information may be found in the California (in millions):

Public Employees' Retirement System Annual Reports. For the years ended June 30,1988 and 1987, available assets were suffi-Pension benefit obligation:

cient to fund 91.9 and 85.1 percent of the pension benefit obliga.

tion, respectively. Unfunded pension benefit obligation repre-

' Retirees and beneficianes currently rece,v, g sented 20.5 and 36.0 percent o' :he annual payroll for employees im benefits and terminated employees not yet covered by the PERS for the jan' year ended June 30,1989 and receiving benefits.

$116.3 1988, respectively, For the years ended June 30,1989 and 1988, the District's contributions to PERS were made in accordance with actuarially detennined requirements and were 12.7 and 15.2 per-cent of annual covered payroll, respectively.

3 8

l

I SACRAMENTO hlUlllCIPAL UTIUTY Dl8TRICT N O T E 3. P A R TICIP A TIO N IN J OIN T L Y O W N E 0 P R O J E C T S CENTRAL CAUFORNIA POWER A0ENCY N0.1. In 1982, the technical difficulties, steam deliveries have been less, and of a District and two other northern California public agencies (City of poorer quality, than contracted for. The result is that the present Santa Clara and Modesto irrigation District) formed ajoint pow ers combined electrical production capacity of unit one and unit two is agency entitled Central California Power Agency No.1 (CCPA No.

only 66 MW compared with the rated capacity of 132 MW. How-1), for the purpose of participating in the exploration, development ever, the supplier and certain ofits subsidiaries have had fm' ancial and pnxtuction of electricity from geothermal resources. Since its difficulties-including the filing for bankruptcy by certain of these fonnation,CCPA No. I has entered into a series of agreements for subsidiaries and the filing against the subsidiaries of certain me-the development of a geothem al steam project with certain entities chanics liens-which have prevented the supplier from obtaining having leasehold interests in the Califomia Geysers geothennat the funds necessary to fully complete the required corrective action.

{

area. Under this series of agreements, CCPA No. I advanced $26 The supplier is attempting to agree on a workout plan with its major 4

million towards the acquisition of rights to purchase steam, pro-bank creditors which will pemlit it to continue to operate the field vided additional funds toward steam field exploration and develop-and complete such corrective action. The District is unable to ment costs for approved acreage, and committed to construct two predict whether the supplier will be able to continue to be able to 65 MW geothenuat steam electric generating units. In exchange, operate this field and when full pnxluction of the two units will be CCPA No. I acquired rights to a pnxtuction payment (a royalty achieved. The District believes that there are actions which can be based on the revenue from steam sales) and the exclusive right to taken that will increase steam pr xluction and quality to the level purchase steam under a contract. The steam contract tenus require required for full power production from the two units.

CCPA No. I m take a minimum of, or otherwise make payment for, As a result of the steamfield developer's financial difficulties 50 percent of the annual steam requirement.The District's invest-and the bankruptcy litigation. It is uncertain as to whether the ment under the series of agreements for steam field exploration and District will recover approximately $50.0 million invested in development, including AFUDC,is $50.0 million.

steamfield development.

CCPA No. I has constructed and is responsile for operating a A recent study recommended that CCPA No. I be operated by two-unit generating plant, Coldwater Creek Geothemial Power a staff of its own rather than by the staff of the District or another Plant (CCGPP). The District has been designated project manager CCPA No. I participant.The District has indicated that it is willing for the construction and operadon of both units. Unit No. l was to relinquish the operation of CCPA No. I and that under the declared commercially operable on June 1,1988 and Unit No. 2 was appropriate circumstances, the District might be willing to sell its declared commercially operable on July 18,1988. The District's interest in CCPA No.1.

ownership interest in thejointly owned facilities as of December 31, 1989 is as follows:

TRANSMIS$10N AGENCY 0F NORTHERN CAUFORNIA. in 1984 the District and fourteen other Califomia municipal utilities formed a joint powers agency entitled the Transmission Agency of Northem CCGPP Units No. l&2 California (TANC). TANC has joined with nearly all California (thousands of dollars) utilities to share in the construction and ownership of a 500 KV Plant in service (District share)

$96,032 transmisdon Hne Mween cemmi CaMomia and southern Oregon j

which will facilitate power exchanges with the Pacific Northwest.

i Less - accumulated depreciation 4,684 TANC has agreed to pay 45.1I percent of the estimated $454

$91,348 million cost of the project for approximately 42.29 percent of the transmission capacity estimated to be 1,600 MW The District has I

1989 Operating Expenses (District share)

$ 11,791 a 30.6 percent interest in TANC and will be entitled to 207 MW of transmission capacity at an estimated cost of $63 milhon. The Plant Capacity - MW 130 District anticipates that TANC will finance its share of the Califor-District's Share 509 nia/ Oregon Transmission Pmject, although the District will have ultimate responsibility for the cost.

CCPA No. I obtains steam for the operation of this project under The TANC members have agreed, subject to approval by their contract with a developer and operator of the steam fields geting governing bodies, to finance and own the other participants share through certain subsidiaries) which requires that certain quantities of the California / Oregon Transmission Project if the other partici-and quality of steam te made available for these units. Because of pants are not able to participate.

t 9

~ 1999 Aill10AL llEP0lli.

N O T E 4. L O N G T E R M 0 E B T.

Long term debt outstanding at December 31,1989 and 1988 was as follows:

1989 1988 i

Revenue Ilonds (thousands of dollars) -

Electric Revenue lionds, 5 1/49 -8 5/8%,1990-2018.......,,.......

$1,052,045

$1,063,725 Subordinated Electric Revenue !!onds,71/2099,1993 2010.......

491,495 ~

491,495-1 Total revenue bonds....

1,543,540 1.555.220 l:

General Obligation Bonds, 2 04 3/4 4, 1990- 1992.........................................,,,,,

2,043 3,007 South Sutter Water District, Hydmelectric Revenue Bonds, I10113/49,1990-2002...

-14,805.

'15,310 Purchase Agreement,3 3/4 %,1990-200().............

_ 861 924 Total long-term debt outstanding..............................................,

1,561,249 1.574.461 Less -A mount due within one year.,..........,............................,,,.......

16,338 13.211 7

Bond Discount Electric Revenue Bonds,........,,,,.....,...

21,118

= 22,413 SuborJinated Electric Revenue Bonds...

6,414 6,838-Total long. term debt,..............

$1,517,379

$1,531,999 '

i On January 24,1990.the District issued Electric Revenue Bonds approximately $2.0 million withont regard for the level of operation Series X,5 3/4079,1990-2020,in the muount of $100,(XXI,(XK).

of the project. Payments for debt service under this agreement have.

Annual debt maturities for 1990 through 1994 are $ 16.2 million, been reported as purchased power expense.

. $20A million, $21.4 million, $24.4 million and $29.0 million, RURAL ELECTRIFICATION ADMINISTRATION BORROWINGS. At -

respectively.

December 31,1989, the District had the following principal amount SOUTH SUTTER WATER OlSTRICT, HYDROELECTRIC REVENUE of geneml obligation bonds outstanding, due to the United States of-BONDS. The District is obligated to purchase power from the South : America and issued through the Rural Electrification Administra-Sutter Water District project under a contract that has the effect of tion (REAh

. transferring substantially all the economic benefits ofIhe project to i

the District and making the District liable for all debt service on

' Sixth 2% Series, due November 15,1990 5243 (KK) bonds issued by the South Sutter Water District to finance the con-struction cost of theproject. On February 14,1990, the South Sutter During the year ended December 31.1989, the Fifth 2% Series Water District issued $ 17.0 million of 1990 llydroelectric Refund

matured. The District remitted $424,000 of principal payments and ing Revenue Bonds to refinance the cost of the project at an effec-recorded approximately $10.645 of interest expense associated

ttve mterest cost of 6.88 percent. Accordingly, the obligation and with the Fifth and Sixth 2% Series bonds during the year ended project have been capitahzed, effective m February 1985 when the December 31,1989, project became operational. The bonds mature serially through 2002. The District is obligated for annual debt service payments of 5

N O T E 5. C O M M E R C I A L P A P E,._R N.sOTES

~

- As of December 31.1989, $195.1 miHian punciM mucunt of provision (with an additional $38 million authorized but unissued).

t the District's commercial paper.noteere outstandmg. ~c op-The Municipal Utility District Act provides an additional $75 proximate effective uterest me for the conrmercial paper notes million of short tenn borrowing authority which is limited to the sold during the 12 months ended December 31,1989 wa. ' 17 purchase of electricity. As of December 31.1989, the District has t

percent, the wrage corrimercial paper notes.outstarxKse, was utilized $73 million of this borrowing authority.

$195.1 million and 'he averap >enu was 45 days. The Dis 6ct's Two letters of credit are maintained to support the sale of

[

authority to issue commercial paper not s, for other than the commercial paper notes.The District compensates the banks for the -

purchase of electricity,is lintited tiy state law to approximately letters of credit by fee payments. There has not been a term advance

$383 million, based upor, a porcemy of outstanding long-ten" under either of the letters of credit agreements.

debt.The District currently hd.n2 milhon outstanding under this 10 g

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SACRAMEllTO MUlllCIPAL UTILITY DISTRICT i

i N_0_T E 6. R A N C H O S E C O N U C L E A R P O W E R P L A N T HISTORY. Rancho Seco is a 913 MW nuclear power plant which sary. During the 1,ay-Up state, the District is required to preserve was first placed in service in 1974, Prior to 1985, Rancho Seco the plant and its staffing at much higher levels than will be required i

provided approximately 55 percent of the District's generating during the storage phase of decommissioning The District expects capacity and energy pnxluction and had operated at an average that it willincur costs of approximately $61 million to maintain the j

capacity factor of 50 percent as compared to an industry averagt of plant and its programs during this Lay.Up period.

- 1[

approximately 60 percent As of December 31,1989, the cost of in 1987, the District completed a study w hich estimated that the Rancho Seco (including plant modifications) was $1.207 million cost of decontaminating the plant site and restoring it to its natural and its net look value w as $945 million (including $188.4 million condition in the year 2008 would approximate $230 million in 1989 L

of fuel net of amortization and certain inmsmission and general dollars. The actual costs of decommissioning Rancho Seco will be facilities not included in the write off of abandoned nuclear plant more or less than IN: estimate and will depend upon many factors

[

costs). Rancho Seco experienced unexpected outages over its life, w hich include technical, regulatory and legal challenges that must I

the longest of w hich began in December 1985 and extended for ap-be overcome. The District has been recoverihg through rates the proximately 27 months. As a result of this outage, the District cost of decommissioning since 1980. At December 31,1989 the undertook an extensive program of upgrades to plant and pctsonnel District had collected and funded in a restricted reserve approxi.

to improve Rancho Seco's reliability and availability.This progrmn mately $68.0 million. The unfunded estimated decommissioning _

was completed and the plant restaned in March 1988. On June 6, liability of $162.7 million will be collected through future rates 1939 a referendum permitting continued operation of Rancho Seco charged to customers.

by the District was rejected by the voters. On June 7,1989, the FINANCIAL EFFECTS. Due to the June 7,1989 shutdown of District began the process of shutting down Rancho Seco and Rancho Seco, resulting from the June 6,1989 votc, the District has abandoned the plant as an operating nuclear generating facility, abandoned Rancho Seco as an operating nuclear generating facil-4 DECOMMIS$10NING. The District has detennined that it will ity. The amounts the District has written oft relating to the aban-proceed with decommissioning of Rancho Seco and has begun to donment are as follow s at December 31,1989 (in millions):

i initiate actions to accomplish such decommissioning. The District will be subject to continuing regulat,on by the U.S. Nuclear Nuclear Plant, net Imk value..

S 713.1 l

i Regulatory Commission (NRC) until the decommissioning of Nuclear Fuel, net book value..

188.4 Rancho Seco is completed. The District has not yet completed its Materials and Supplies..

28.6 plans for decommissioning Rancho Seco and, consequently, has Unrecovered Deferred PSCR Costs.

92.9 not yet detennined all that will be required. Rancho Seco is one of the first large commercial nuclear power plants in the United States Future Lay-Up Costs..

60.6 j

to be taken out of service and there is very little historical back.

Unfunded Decommissioning Liability.,.

_162.7 ground to rely upon in planning forIhe decommissioning of a plant Total.

$ 1,246.3 i

of Rancho Seco's size. Due to substantial technjeal, regulatory and legal challenges w h!ch will be faced in connection with the decom' On November 16,1989 the District's Board of Directors ap-missioning, the District cannot predict with great certainty how long various decomnyissioning actions will take nor w hat the even-prosed the recovery of $661.9 million of abandoned Rancho Seco tual cost of decommissionmg will be, MWough future rates to be charged to customers over a period of seventeen years. The Board's rate action addressed $499.2 The District is planning to decommission Rancho Seco in two million of Rancho Seco assets and $ 162.7 million of unfunded de-steps-the storage phase followed by a decontamination phase, commissioning liability. The future rate recovery of the $661.9 Prior to commencing the storage phase of decommissionmg, the million was recorded as a regulatory asset in the District's balance NRC is requiring the District to preserve the plant in a Lay-Up state, sheet and results in a net abandonment loss at December 31,1989 during which all systems are being preserved to the extent neces-of $584.4 milhon.

t 1

N O T E 7. C O M M I T M E N T S l

PG&E POWER SALE AGREEMENT.The PG&E Power Sale agree-SOUTHERN CAllFORNIA EDISON (EDISON) POWER SALE AGREE-ment ptovides for the purchase by the District from PG&E, during

. MENT. In August 1988, the District and Edison entered into the the period January 1,1990 through December 31,1999,of 550 MW Edison Power Sale Agreement providing for the purchase from

- of finn capacity and associated energy. The District may reduce its Edison, from January 1,1990 through December 31,1999, of power purchase commitment to zero upon five years advance between 300 and 700 MW of capacity and associated energy, and notice. PG& E is obligated to deliver capacity und energy purchased for Edison to purchase from the District a portion of its surplus from it by the District to the Rarn ho Seco switchyard orother points energy. On November 29,1989 the District notified Edison of its of interconnection between the District and PG&E. Based on the decision to purchase 300 MW for the tenn of the ag :ement. Based minimum amount of capacity the District is required to purchase on the minimum amount of capacity the District is required to under the PG&E Power Sale Agreement, the District will pay purchase under the Edison Power Sale Agreement, the District will PG& E approximately $212 million forcapacity during the first five pay Edison approximately $240 million forcapacity over the life of years of the agreement. Additionally, the District will pay for any the agreement. Additionally, the District will pay for any energy energy received at rates specified in the contract.

received at rates specified in the contract.

11 i

1989 AnUAL REPORT PACIFIC POWER & LIGHT CO. (PP&L) POWER SALE AGREE-energy of apprcximately $4 million beginning in 1990 and contino.

MENT. The District has entered into a series of agreements with ing through the term of the agreement.

PP&L providing for the purchase by the District of 100 MW of CAPITAL EXPENDITURES. The District's capital expenditures firm power for a period of 25 years, beginning January 1,1990. By (cxcluding allowance for funds used during construction) for 1990 recent amendment to the PP& L Power Sale Agreement, the pur-through 1992 are estimated to be $348.6 million. Approximately chase price for this capacity entitlement has been set at il17.8

$207.3 million is for transmission and distribution projects and the milhon as of December 31,1989. The District will make quarterly remaining $141.3 million is for other construction.

installment payments of principal and interest to PP& L beginning STEAM PURCHASES. The District's first geothermal unit, March 31,1990 and continuing through December 31,1992, at S M U DG EO # 1, became commercially operable in December 1983.

which time the remaining unamortized balance of the purchase Under its steam supply agreement, the District is obligated to pay price of $111.5 million will be due and payable to PP&L. The a minirnum of 56.6 million annually during the operating life of the District has a minimum annual take or pay commitment for this plant subject to price level adjustments.

N O T E 8. C O N T I N G E N C I E S LITIGATION. A $1 billion class action suit was filed against the and the dealer prepare, submit and implement a remedial investiga.

District alleging the District allowed excessive amounts of radioac-tion (testing) plan for soils and groundwater to the Department, tivity in the liquid effluent discharges from the District's nuclear Testing has been completed and shows no groundwater contamina.

power plant, Rancho Seco, injuring the claimants and their land, tion, however, soil testing results show that the extent and depth of crops,livestockandbusiness TheCourtsdeniedcertificationof the contamination is greater than originally anticipated. The District class. Unless the ruling is reversed, the plaintiffs can proceed only has implemented an interim remedial measure and removed por-as a group of individuals with individual claims. A second class tions of a contaminated soil as well as a large quantity of action claim in the amount of $500 million was filed alleging inten-trar '.mers from the site.

tional misconduct and deceit in connection with such releases. An District has completed a feasibility study which evaluated amended complaint combining the $500 million claim with the $1 13

.sible soil remedies at the site, from passive containment to billion suit was filed on February 10,1987.

orr: site incineration, with cost estimates ranging from $900.000 to Tests conducted by nationally recognized experts show that

$22.7 million. Once the feasibility study has been approved a maximum exposure to any one individual in the Rancho Seco area remedial action plan will be subntitted for appmval. Until the is well below the rate allowed by the United States Environmental.

remedial action plan is approved, the cost of remediation at the site Protection Agency.

remains uncertain. Based on estimates prepared by a consultant, the On October 25,1989, the District was served with another class District believes that the total cost of compliance will be approxi-action claim by the plaintiffs for personal !njuries and property mately $3 million which has been accrued. The District believes damage. This claim names nine present and fonner District em.

that compliance with the Order and final clean-up costs will not ployees as defendants, and alleges that those employees made in, have a material adverse impact on the District's customers' equity tentional false representations to the NRC and public regarding the and future statements of income.

effluent releases. The claim seeks $ 1 billion in compensatory dam-NUCLEAR LIABILITY INSURANCE. The District's potential public ages and $100 million per individual in punitive and exemplary liability for claims resulting from nuclear or radioactive incidents damages.

is limited to approximately $7.4 billion as ofJanuary 1,1990, under Any liability of the District forcompensatory damages due to the provisions of the Price-Anderson Act. The District has insurance discharges alleged should be within the limits of the insurance and coverage of $200 million, through private insurance pools. The

. indemnity agreement. The District does not believe that the claim remaining $7.2 billion in financial protection would be provided by against the named employees will result m any punitive damages assessments against utilities owning nuclear reactors The District award. Under California law. punitive damages may not be insured, is subject to a retrospective assessment of up to $63 million per but the District itself is exempt from such damages. The District nuclear incident, payable in annual installments of no more than believes that any liability on account of such discharges is limited

$ 10 million. In addition,if the sum of all public liability claims and to an amount covered by liability insurance and a federal govern.

legal costs arising from any nuclear incident exceeds the maximum ment indemnity agreement and will not have a material adverse amant of financial protection, each licensee can be assessed an impact on the District's financial position and results of operations. -additional 5 percent ($3.2 million) of the maximum retrospective i

aussinent for each of its licensed reactors.

The District has been notified that scrapped distribution trans-fonners w hich were sold by the District and disposed of by a dealer The District insures against losses for nuclear property damage

- are suspected ofcontaining polychlorinated biphenyls (PCB's) and and decontamination liability using several layers of coverage. The responsible for contaminating the dealer's site, in April 1986, the first layer of coverage, through American Nuclear Insurers ( ANI),

California State Department of Ilealth Services (Department) is.

provides the first $500 million in coverage limits. Excess layers sued a Detennination of Imminent or Substantial Endangerment from ANI and Nuclear Electric insurance Limited, Pool 11 (NEIL and Remedial Action / Director's Order (Order)against the District II), provide $560.0 million in additional coverage. Total piotection and the dealer. The Order required that a remedial measure be is 51.06 billion, which meets the NRC requirement.The District is developed and implemented at the site to contain contaminants subject to a maximum retrospective premium assessment of $1.3 during the rainy season. The Order further required that the District million per year in the event of a loss by any NEIL 11 member.

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