ML20053A214

Annual Financial Rept 1981

ML20053A214
Person / Time
Site:	Fermi
Issue date:	02/19/1982
From:	NORTHERN MICHIGAN ELECTRIC COOPERATIVE, INC.
To:
Shared Package
ML20053A199	List: ML20053A198 ML20053A211 ML20053A214 ML20053A220
References
NUDOCS 8205250089
Download: ML20053A214 (26)

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BOYNE CITY l

l NORTHERN MICHIGAN ELECTRIC COOPERATIVE,INC.

BOYNE CITY, MICHIGAN l

TABLE OF CONTENTS I

Board of Directors 2

President's Message 4

l General Manager's Report 5

Electric Sales to Members 7

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Average Cost for Coal and Oil 8

I Number of Customers Served, Electric Sales to Cooperatives 3

Electric Revenues, Cost of Electric Service, Wages 9

j Fuel Costs, Purchased Power, Taxes, Plant Additions 9

J.H. Campbell Facility 10 Financial Report 11 I

Comparatise Summary of Electricd Operations 1972-1981 12 i

Balance Sheets - Assets 17 Balance Sheet Liabilities 18 Statement of Operations 19 Statement of Patronage Capital 20 Statement of Changes in Financial Position 21 Notes to Consolidated Financial Statements 22 Staff and Attorney 25 I

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Board of Directors CHERRYLAND RURAL ELECTRIC COOPERATIVE ASSOCIATION

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H AROLD DELL O W AYNE NORDDECK D ARRIC LIGHTFOOT DIRECTOR PRESIDENT TREASURER PRESOUE ISLE ELECTRIC COOPERATIVE INCORPORATED

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,3 ';_l ~ ;., y MELVIN D ASEL MELVIN M AXWELL F. EDG AR RENDER VICE PRESIDENT DI R ECTO R DIRECTOR j

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HOWARD C ARSON JOHN TANNER ARTHURDIEHL SECRETARY DIRECTOR DI R ECTO R 2--

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Member Cooperatives CHERRYLAND RURAL ELECTRIC COOPERATIVE ASSOCIATION PHILIP COLE, M AN AGER Number of customers served 17.332 i

a 4.gyfi ; in Miles of line 1,828 g

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PRESQUE ISLE ELECTRIC COOPERATIVE INCORPORATED l

l MICH AEL O'ME AR A, M AN AGER Number of customers served 23,657 s

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THOM A!:s H ANN A, M AN AGER Number of customers sen.ed 34,775 c

~ sY Miles of line 4,720

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Chairman's Message l

j lt is gratif ying to see so many directors, man-agers, employees, and spouses taking an active in-terest in Northerns' activities as we move ahead

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together to meet our power supply ecsponsibili-I ties to the member / consumers we serve.

j Thi., annual meeting gives us an opportunity sl <

l to review Northerns' operations for 1981 and to c :i'

y examine our f uture plans.

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- j Electricity has become one of the most im-portant commodities in your life and will contin-ue to become even more important in the f uture.

Loan f unds required to build new generation, transmission and distribution f acilities are current-ly obt, lined through REA guaranteed and insured loans. The f uture of electric cooperatives, to a large ex tent, depends on '.hese financing programs.

During recent months we have seen the Rural Electrificmion financing program again come un-l der attack. We will continue to make every elfort l

to keep present RE A loan programs while exam-1 ining the new financing methods the administration suggests will be necessary for f uture viability.

It is becoming more obvious that in order approach the solution to these problems with un-for Northern to meet its ongoing challenges, we precedented vigor.

as directors will have to be better prepared than Truman Cummings, Top 7 Michigan Director ever before The future dictates that wewill need to Northern resigned as of the February,1982 Board access to a constant flow of information from as Meeting. John Tanner was elected to fill his post.

many sources as possible in order to make respon-I would like to take this opportunity to thank sible decisions. No longer can we rely on histor-Truman for his many years of conscientious ser-l ical data alone to answer questions relating to fi-vice on the Northern Board.

nancing, power supply or load growth.

In closing, I wish to thank my fellow direc-We are suf f ering f rom one of the longest and tors, management and all employees of Northern worst inflation periods in history, which coupled for their dedication and support.

with our service areas recession, distorts economic decisions. I believe all of us desire for things to Wayne Nordbeck, get back io " normal", but we must also realize President nothing will remain as it was. The eighties will surely point our direction in power supply mat-ters. We can look forward to changes and challeng-es, which are unprecedented, and Northern must 4

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General Manager's Report From July,1952 to January,1982, a period of just under 30 years, John Clark served the in-terests of Northern with every ounce of his abili-ty. Directors, empolyces, suppliars and consult-y~;y '

ants specifically want him to know his wise coun-

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sel will be missed and all of us wi';h him well in retirement.

-9 The SPEED project was conceived as a demon-R.a g.

stration peaking plant. The idea was to replace

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energy produced from gas and oil f ueled genera-Q ),

tion with the less costly energy produced from hM k%<i nuclear or coal generation. The Department of Energy unilaterally terminated the project. The

' g' DOE's reason for this termination was given, at the time, as cooperatives' inability to obtain Pub-d b.

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lic Service Commission approval for c'ooperatives N

0;l portion of required financing.WEC/NMEC at this writing, are negotiating settlement costs with DOE.

M Construction of the Fermi il Nuclear Plant con-g tinues with plant construction estimated as being 89% complete. Detroit Edison estimates the plant will be declared commercial in November,1983.

to increase at a compound rate of 2.15% or f rom Northern thinks it unlikely the plant will be on 526.9GWH to 691.6 GWH inclusive of losses.

line before April,1984. To this end Nortnern is During March,1982 a revised Coordinated preparing and will file a deficiency loan with REA Operating Agreement between the MCP and Con-and MPSC in the near future. Intervernors will sumers Power Company was approved. The agree-probably cause delay and therefore increase ment incorporates the provisions won in the anti Northern's cost. This probability is indeed unfor-trust settlement. Among the most important tunate. Michigan Public Service Commissioner changes are articles which allow third party trans-Matthew McLogan at the 1982 MECA Annual actions and provide for firm and non-firm trans-Meeting in response to a question stated power mission schedules. Increased opportunity for util-supply availability in Michigan would be adequata ization of this agreement may occur if favorable upon completion of the two nuclear plants under results are achieved in studies being performed construction and that this supply would be avail-concerning the concept of " Power Brokering."

able at a competitive price. Delays of any sort This idea is being successfully used in several other will dramatically increase cost and therefore re-areas and refers to buy / sell of economy energy.

doce the competitive price he referred to.

Simply stated from the on line surplus generation, By December 31,1981, the Airport to Atlanta highest priced energy is matched against lowest 138 KV Transmission Line (Approximately thirty priced energy with the sale made at the mid miles) and the associated 50 MVA Substation point.

was near completion. This interconnection facil-Northern and Wolverine are examining the pos-ity provides back-up to the Presque Isle c.nd Top sibility of a " Safe Harbor Lease" where Fermi ll O' Michigan systems. The investment totals about is concerned. Safe Harber Leasing came about 3.8 million dollars and represents Northerns' first through provisions in the Economic Recovery Tax use of Federal Financing Bank funds for trans-Act of 1981 which permits the sale of accelerated mission purposes.

depreciation, investment tax credit and in certain A Power Requirement Study based on 1980 instances an energy tax credit from companies data was completed during 1981. Capacity re-which cannot achieve full utilization of these cred-quirements were projected to increase at a com-its to organizations which can benefit f rom their pound rate of 2.59% from 1981 to 1995 or from implementation. Safe Harbor Leasing is under con-130.9 MW to 181 MW inclusive of losses and re-gressional attack and at this writing we are not cer-serves; for the same period energy was projected tain of its potential for survival. -

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During 1981 the MPSC conducted a hearing Northern is a people-orientated organization concerning PURPA and a generic hearing on de which sincerely cares about the important work cornmissioning nuclear plants. In both instances it is doing. We a<e involved in a very complex bus-testimony was prepared and mariageinent was sub-iness which requires the best ef forts of employees jected to cross exarninatioa. We believe the unique and direttors pulling together to achieve success.

characteristics of cooperatives were noted by the commission and we expect f avorable decisions.

Clyde L. Johnson Northern received a rate inuease ef f ective General Manager April 1,1981 which allowed it to conclude the years operation with a small rnargm. A rate in-crease will again be neccssary in 1982. We shall re.

quest the commission to make the increase of-l fective August 1st. The increase will amount to 8.79% of which about 4% is attributable to the Airport-Atlanta line and substation being put into service, i

The examination of a proposed merger between

,l Northern and Wolverine is continuing. Monthly meetings have resolved numerous problems. Tne l

merger committee will be releasing its recommen-dations in this regard during 1982.

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DOLLARS / TON

Electric Revenues Fuel Costs Revenues f rom the sale of ' electric energy m 1981 Coal purchased in 1981 for the Advance Steam totaled $26,345,866, up 22.7% over 1980. Part Plant totaled 112,447 tons with a total cost of of the mcrease can be attnbuted to increases in

$5,549,991. The average unit cost increased f rom fuel and purchased power costs, and sale of

$1.78 to $1.98 per trulhon BTU or 11% danny Campbell capacity and energy to Consumers the year. The pnce per gallon paid for fuel oil Power Company, however mornber cooperatives was $1.01 at the beginrung of the year and had kilowatt hour sales increased 2.2% over 1980.

inaeawd to $1.06 per gallon by the years end.

During 1981 member cooperatives purchased

$23.215.217 in electric energy whicii represented 13.6% duliar increase in their purchases over the previous year.

During the past ten years, the number of kilowatt hours soid to member cooperahves has inaeased Purchased Power substantially in 1972 our sales to members 1 he cost of purchased now detmas,2d $934.466 amounted to 324 million kilowatt hours while in in W81 with the price of such power averague 1981 they reached 514 million kilowat t hours, 37.6 rnius l>er kilowatt hours. This is an mcrease an increase of 59E of 31 mills per kilowatt over 1980 cos's. Most The trend of rising fuel and purchased power of this inaease was due to higher f uel adpist costs continued in 1981. Application of the f uel ment charges and base rate mcreases by the in-and purchased power adjustment charge caused vester owned utilities.

the average price per kilowatt hour to members to reath 45.2 mills, an increase of 11% over the The pr unary sourtes of our purchased power was f rom the City of Lansing and Detroit Edison 1980 cost.

Company..lointly, they supplied 48% of the co-Cost of Electric Service The average cost of electric service was 40.7 mills per KWH in 1980. In 1981, this cost was 44.9 rnills per KWH, representing a 10.3%

mcrease f or 1981.

Taxes The total cost of electric service in 1981 was

$26,341,068, an increase over 1980 of 22%

Tax vnpense u) WS1 totaled 3BG7 815. an in

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P"M" Tty taxes and $9@c46P f or emNc,yn in cost, compared to an increase of 11% in the total number of kilowatt hours sold. 71%

taxes Rme im imoW R, o' We tota!

of the 1981 electric costs was f or fuel and pur-cos o ectnc wrme N W8!.

chased power,9% for wages, nutet uls, supplies and 20% f or depreciation, taxes, interest and nuintenance.

Wages Plant Additions Gross waq, s earned in 1981 were $1,446,712.

Total utility plant addi' ions in 1981, mcludmg an inacase ut $85,237 over 1980 gross wages the Fermi Il project amounted to $52,856,089 amountmg to $1,361,476. $1,285,548 of 1981 a 28% increase in total utihty piant.

waqes were charged as operating and mainten.

During the year, nine miles of 69,000 volt line ance costs. $ 146,810 capitahzed and $ 14,354 was constr ucted.

were ch.uged to other accounts.

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s and StatemeQt of Revenue and Expense of the

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& Holly of Traverse City, Michigan reflect that j;

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a m:nqin of $89,990 ad n3n-operating margins i

.,f) totaled $i 39,102. $109,389 of non-operating g}l

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M ative's projected total investment in capital term cortificams through 1984 is 51.402,842.

'Donng 1981, the, cooperative r"mived R.E.A.

ins.on>d loan f und advances of $957,000 to h-nante construction of approved loan projects'. In addition $47,1 %,000 of R.E.A. guaran teed Inns were advanced to finance the Fermi 11 p a-ject and $3.000,000 in guaranteed loans to finmce transmission projects and $8,489,000 in guaran-teed loans to finance the Campbell lil project.

Substantial progress was achieved on the Fermi ll nuclear generating station during the year.

During 1981, Southern Engineering Company has reported to the cooperative on construction progress and cost monitoring of the Fermi 11 pro-lect. Their reports address topics such as cost re-Wa ting systems, and contracts relevant to fuel sanisition for the plant.

Barrie Lightfoot Treasurer

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COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1972-1981 (MILLS PER KWH) 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 Total Operating Revenue (1) 45.1 40.7 37.8 34 0 30.4 31.4 29.0 25.3 18.3 16 8 Operating Costs:

Production Expense (2) 34.3 32.6 31.2 27.9 25.2 25 2 23.4 19.6 13.3 11 2 Transmission Expense 1.0

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.6 Other Adm. & General Expense 1.6 1.5 1.3 1.2 1.4 1.2 1.0

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.7 Depreciation & Amort.

2.2 2.0 1.8 1.7 1.5 1.5 1.5 1.6 1.6 1.7 Taxes 1.1 1.1 1,1 1.0

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.9 Interest 4.7 2.8 2.0 1.6 1.4 1.2 1.3 1.1

.9 10 TOTAL OPERATING COSTS 44.9 40.9 38.2 34.3 31.0, 30.7 28.7 24.8 18 2 16 1 Net Operating Margin (Loss)

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.7 (1) Memter Cooperative Sales 45.2 40.7 38.0 34.5 30.8 31.4 28 9 25.3 18.3 16 7 Wholesale and Other 43.0 41.9 33.4 25 5 24.3 26.7 30 3 27 2 16 8 18 9 (2) Generated Power Cost of Fuel Steam Generation 24.4 22.3 22.5 20.4 18 2 17.8 16.6 10 0 70 68 Internal Combustion 129.5 96.8 48.7 34.3 42.1 34.9 34.8 33.4 23 4 17.1 Purchased Power Cost 37.6 34.6 31.1 29.0 24.8 24.8 23 1 27.1 18.0 14 0 !

COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1972-1981 s

ELECTRICITY GENERATED AND PURCHASED-IN THOUSANDS OF KILOWATT HOURS 1981 1980 1979 Generated 315.426 262,512 181,539 Purchased for System 291,440 290,228 339,295 606,866 552 740 520,834 ELECTRIC SALES -

IN THOUSANDS OF KILOWATT HOURS Member Sales 513,765 502,505 495,018 Wholesale and Other 72.917 24,929 1 317 58C.682 527,434 507,335 ELECTRICAL SALES TO MEMBER COOPER ATIVES-IN THOUSANDS OF KILOWATT HOURS Cherryland Rural Electric Cooperative, Ass'n.

130,665 128,868 125.049 Presque Isle Electric Cooperative, Inc.

132,876 132,471 134,958 Top O' Michigan Rural Electric Company 250,224 241,166 235,011 513 765 502 505 495,0_1 h 1

MAXIMUM KILOWATT DEMAND AT MEMBER DELIVERY POINTS 106,862 101,348 101,309 ANNUAL LOAD FACTOR PERCENT MEMBER COOPER ATIVES 55 56 56 LINE LOSSES PERCENT 3.3 4.6 2.6 l

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l COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1972 1981 1978 1977 1976 1975 1974 1973 1972 243,347 253,491 281,412 310,365 288,730 290.850 294,580 267,320 247,675 192,531 129,575 124,186 92,887 50,885 Sg 5012 66 473,943 439,940 412,916 383,737 345,465 471,489 444,737 438,169 404,510 383,762 354,407 324,285 25,274 33,229

_ _9,297 12,714 3,435 12,088 6,557 4g 477,966 447,466 43 224 387,197 366 g 330,842 117,005 106,753 103,185 93.658 88,087 84,462 75,707 133,443 129,067 129,266 123,120 120,915 116,265 111,830 221,041 208,917 205,718 187,732 174.760 153,680 136,748 4,73 9, 4 y4 438,169 4p g 383,762 354,407 324,285 99,861 100,153 91,472 86,898 82,828 75,749 70,752 54 51 55 53 53 53 52 2.7 4.6 5.6 5.2 6.2 4.5 4.2 4 !

v COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1972-1981 1981 1980 1979 1978 ELECTRIC ENERGY SALES Member Cooperatives 23,215.217 20,432,735 18,817,402 16.246,253 Wholesale and Other y15.840 1,035,861 360,142 645,356 TOTAL OPERATING REVENUES 26,431,057 21,468,596 19,177,544 16,891,609 OPERATING EXPENSES Operation Expense Generated Power 8,686,463 6,679,079 4,691.040 5,628,937 Operation Expense - Purchased Power 10,960,637 10,026,172 10.556,900 7,737,500 Operation Expense Transmission 388,369 318,865 317,381 244,001 Other Admin. & General Expenses 938,583 798,775 640,810 545,867 Maint. Expense - Generated Power 416,269 481,349 560,963 485.542 Maint. Expense - Transmission 187,815 154,139 89,592 174,068 Maint. Expense - General Pla it 26,602 19,848 27,395 41,975 Depreciation & Amortization 1,297,148 1,035,561 899,238 850,928 Taxes 667,814 603,399 564,036 499,937 Interen on Long Term Debt 21.225,162 13,632,796 9,235,453 6,822,288 Less Interest charged to const.

(18,992,372)

(12.481,391)

(8,450,340)

(6,112.280)

Other Interest 538,577 315,096 225,398 97,991 TOTAL COST OF ELECTRICAL SERVICE 26 34_LO67 21,583.688 19,357,866 17,016,754 GAIN (LOSS) IN OPERATING MARGINS 89,990 (115,092)

(180,322)

(125,145)

NON OPERATING MARGINS 139.102 40,670 130,237 601,148 GAIN (LOSS) IN TOTAL MARGINS 229,092

_ _174,422)

(50,085) 476,003 1

1977 1976 1975 1974 1973 1972 13,712,248 13,776,658 11,697,592 9,691,622 6.491,195 5,431,332

_ 80_8.9_75 247,795 384,840 93.2E 202,793 123 199 14,521,223 14,024,453 12,082,432 9,784,893 6.693,988 5,555.131 5,389,864 5,910,629 6.344,738 3,963.109 2.939,425 2.757,483 6,144,278 4,768,538 2,991,890 3,369,138 1,674,092 713.540 212,151 185,646 135,636

18,067 81,058 73,175 664,000 497,785 402,046 323,148 237.114 224,424 485,663 596,799 414,952 259,175 254,754 230,243 82,Gd7 137,075 106,131 164,438 220,568 106,017 33,418 23,649 23,674 16,006 12,922 20.164 715.040 672,121 626,986 607,732 592,960 568.506 428,784 380,570 398,910 359,930 321,252 312,628 4,279.591 487,944 368,757 339,933 332,001 331,364 (3,661,306)

(1,947) 33.55_7 48,440 162,616 75.776 15.294 817 14,807,727 13,709 196 11,976,336 1 596 452 6.681,440 5 336,414 (286,504) 315,257 106,096 188.441 12.548 218,717 165.232 22,147 11,584 17.263 6,156 5.410

_Q21,2 72) 337,404 117,680 205,704 18,704 224,127 t

MICHIGAN 47 CHEBOYGAN NORTHERN MICHIGAN ELECTRIC COOPERATIVE, INC.

BOYNE CITY, MICHIGAN BALANCE SHEET ASSETS December 31, 1981 1980 UTILITY PLANT:

Electric plant in service S34,217,749

$33,230,136 Construction work in progress 207,636,629 155,750,020 Electric plant acquisition adjustment 89.988 89,988 241,944,366 189,070,144 Less accumulated depreciation and amortization 12,495,248 11,448,352 NET UTILITY PLANT 229,449,118 177,621,792 INVESTMENTS:

Investments in associated organizations 2,002,965 1,775,846 Nonutility property, net of accumulated depreciation 6,381 6,623 TOTAL INVESTMENTS 2,009,346 1,782,469 CURRENT ASSETS:

Cash 126.434 110,928 Cash, restricted for construction 166,532 741,889 Advance on construction refundable 25,000,000 Accounts receivable 2,293.523 1,966,998 Materials and supplies 5,582,439 6.097,351 Prepayments 73,478 113,176 TOTAL CURRENT ASSETS 33,242,406 9,030,342 DEFERRED CHARGES 284,812 188,006

$264,985,682

$188,622,609 See accompanying summary of accounting policies and notes to financial statements. _ _ _ _ _ _.

LI ABILITIES December 31, 1981 1980 EOUlTIES AND MARGINS:

Memberships S

600 S

600 Patronam capital 2.096,592 2,006,602 Other equities 313,316 174,214 2,181,416 TOTAL EQUITIES AND MARGINS LONG TERM DEBT:

Mortgage notes to:

Rural Electrification Administration 27,356,064 27,395,937 Federal Financing Bank 203,736,000 145,052,000 Breeder Reactor Corporation 26,487 26,487 TOTAL LONG TERM DEBT 231,118,551 172,474,424 CURRENT LI ABILITIES:

Notes payable to National Rural Utilities Cooperative Finance Corporation 29,200,000 11,399,018 Accounts payable 1,454,824 1,831,413 Accruals:

Taxes 554,828 520,370 Interest 70,161 60,435 Other 176,810 155,533 TOTAL CURRENT LI ABILITIES 31,456,623 13.966,769 S264,985_ G82

$188,622,609

MICHIGAN 47 CHEBOYGAN NORTHERN MICHIGAN ELECTRIC COOPERATIVE, INC.

BOYNE CITY, MICHIGAN STATEMENTS OF OPERATIONS Year ended December 31, 1981 1980 OPERATING REVENUES AND PATRONAGE CAPITAL

$26,431.057

$21,468.596 OPERATING EXPENSES:

Steam power generation:

Operation 8,463,063 6,419,319 Maintenance 299,945 385,202 Hydraulic power generation:

Operation 52,766 66,485 Maintenance 71,277 7,287 Other power generation:

Operation 170,634 193,275 Maintenance 45,047 88,866 Purchased power 10,960,637 10,026,172 Transmission:

Operation 294,631 226,970 Maintenance 149,201 125,440 Distribution:

Operation 76,636 80,158 Maintenance 38,614 28,699 Consumer accounts 17,102 11,737 Administrative and general 938,583 791,751 General plant maintenance 26,602 19,848 Depreciation and amortization 1,297,148 1,035,561 Tax es 667,814 603,399 Interest:

Long term 894,723 839,370 Intermediate loan 20,330,439 12,793,426 Interest charged to construction (18,992,372)

(12,481,391)

Other interest 538.577 315.096 TOTAL EXPENSE 26,341,067 21,576,664 1

Operating margins (deficit) 89,990

(

108,068)

NONOPERATING MARGINS:

Interest in dividend income 136,281 43,423 Other income - gain on sale of utility property 2,187 Rental income (loss) 634

(

2,753)

Nonoperating margins 139,102 40,670 NET MARGINS (DEFICIT)

$ 229,092

($

67,398)

See accompanying summary of accounting policies and notes to financial statements g_

MICHIGAN 47 CHEBOYGAN NORTHERN MICHIGAN ELECTRIC COOPERATIVE, INC.

BOYNE CITY, MICHIGAN STATEMENTS OF OTHER EQUITIES Year ended December 31, 1981 1980 BALANCE, at beginning of year

$174,214

$241,612 ADD (DEDUCT):

Nonoperating margins for the year 139,102 40,670 Operating deficit for the year

( 108.068)

BALANCE, at end of year

$313.316

$174,214 STATEMENT OF PATRONAGE CAPITAL 1981 1980 Balance, at beginning of year S2,006,602

$2,006,602 Add - Net operating margins for the year 89.990 Balance, at end of year

$2 096.59_2

$2,006,602 2

See accompanying summary of accounting policies and notes to financial statements. 1

MICHIGAN 47 CHEBOYGAN NORTHERN MICHIGAN ELECTRIC COOPERATIVE, INC.

BOYNE CITY, MICHIGAN STATEMENT OF CHANGES IN FINANCIAL POSITION Year ended December 31, 1981 1980 FUNDS WERE PRO'/tDED BY:

Net margins before provision for depreciation and amortization of (1981 - $1,334,128 -- 1980 - $1,071,305)

$ 1,563,220

$ 1,003,907 Advances from REA and FFB 59,641,000 31,984,000 Material returned to stock from retirements 233,010 10,724 Sale of utility plant 437 61,437,667 32,998,631 FUNDS WERE USED FOR:

Extension and replacement of plant, net 53,371,893 39,102,640 Repayment of long-term debt to REA principal when due 972,527 915,948 Decrease in deferred interest 24,346 24,346 increase in investments 226,877 145,212 Plant removal costs 23,008 12,858 Increase in deferred charges 96,806 90,861 54,715,457 40,291,865 INCREASE (DECREASE) IN WORKING CAPITAL

$ 6,722,210

$ 7,293,234 CHANGES IN WORKING CAPITAL ITEMS:

Increase (decrease) in current assets:

Cash 15,506

($

5,883)

Cash, restricted

(

575,357) 585,667 Advance on construction - refundable 25,000,000 Accounts receivable 326,525

(

19,024)

Materials and supplies

(

514,912) 944,920 Prepayments

(

39,698

(

72,473) 24,212,064 1,433,207 Decrease (increase) in current liabilities:

Notes payable

( 17,800,982) 8,699,018 l

l Accounts payable 376,589 17,731 Accruals

(

65,461) 9,692

( 17,489,854) 8,726.441 INCREASE (DECRE ASE) IN WORKING CAPITAL

$ 6,722,210 (S 7,293,234)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31,1981 AND 1980 Accounts receivable All accounts receivable are considered by management

1. Summary of significant policies:

g g gg;g System of accounts lectible accounts has been provided.

The accounting records of the ( - 3 perative conform to the Uniform System of Accounts prescrib(d by the Materials and supplies Federal Energy Regulatory Commission modified for Operating materials and supplies are valued at average electric borrowers of the Rural Electrification cost.

Administration.

2. ELECTRIC PLANT Major classes of electric plant at year end Electric revenues and fuel costs consisted of:

Electric revenues are recorded monthly as of the date December 31, meters are read and accounts are billed.

1981 1980 ang an 53,727 45,445 Fuel costs are charged to production expense Steam production plant 10,396,296 10,396,296 as fuel is consumed.

Hydraulic prod. plant 916,575 917,012 Other power prod, plant 2,653,545 2,655,572 Plant additions and retirements Transmission plant 14,410,604 14,114,044 The cost of additions to electric plant in service rep-D stribution plant 4,768,908 4,139,782 resents the original cost of the contracted services, "t

1,018,094 963,985 direct labor and material, interest on construction loans e

t where applicable and indirect charges for engineering, supervision and similar overhead items. Maintenance 34,217,749 33,230,136 C

tim M and repairs of property, replacements and renewals of items determined to be less than units of p6operty are 207,636,629 155,750,020 ri g-charged to maintenance expense. For property replaced isition adjustment 89,988 89'988 or renewed, the original cost plus removal cost,less salvage is charged to accumulated provision for depre-Electric plant

$241,944,366

$189,070,144_

ciation. The cost of related replacements and renew-als is added to electric plant. Contributions in aid of Major classes of construction work in progress at the construction are credited to the applicable plant year end consisted of:

accounts.

December 31, 1981 1980 Depreciation Detroit Edison-FermiII $191,806,031

$144,315,518 Provision has been made for depreciation on a straight U"

line basis at annual rates as follows:

8,207,061 7,300,078 Other Construction 7.623,537 4,134,424 Franchises and consents 4.00%

Steam prod. plant comp. rate 3.10%

$207.636,62_9

$155,750,020 Hydraulic production plant 2.00%

Other production plant 3.00 7.00%

3. LONG TERM DE8T Trans. plant composite rate 2.75%

Distribution plant-composite rate 2.88%

Mortgage notes payable to RE A are represented by note Power operated equipment 10.00 33.00%

instruments payable to the United States of America Other general plant 2.00 -20.00 %

bearing interest at the rate of two percent to five percent.

The notes are for 35 year periods each, and principal and Investments in associated organizations interest installments are due quarterly in amounts of The investments in associated organizations referred to approximately $485,000 each, it is estimated that in-in the financial statement were as follows:

stallments of $1,940,000 payable within the next twelve December 31 months will include $1,000,000 in principal. The notes 198*

1980 are scheduled to be fully repa;d at various times from National Rural Utilities Finance Corporation October,1984, to March. 2012. Unadvanced loan funds Capital Term Ce-tificates of $1,207,974 are available to the Cooperative on loan

$1,031,245

$ 897,035 c mmitments from the Rural Electrification Administra-Patronage Capital tion and there is a contract outstanding to borrow an ad-Certificates 966,889 873,980 ditional $7,097,000.

Other 4,831 4.831 TOTAL

$'[002,965

$1.775,846 1

On February 8,1977. Northern Michigan Electric Co-

6. PATRONAGE CAPITAL AND OTHER EQUITIES operative, Inc. concluded negotiations for the purchase Patronage capital consisted of:

of 11.22 percent of the Enrico Fermi 11 Nuclear Energy December 31, Generating Facility, owned by Detroit Edison Comp-1981 1980 any, located in Monroe County, Michigan. Long-term Assignable

$ 89,990 financing arrangemen s were made in 1978 with the Assigned 2,006,602 2,006.602 Federal Financing 8ank through the United States TOTAL

$2,096,592_

$2,006,60.2 Department of Agriculture for $127,873,000. Of the

~ ~ ~ ~

proceeds from the loan, $122,905,000 are for the En-OTHER EQUITIES (DEFICIT) rico Fermi 11 and the balance being used for other plant Other equities (deficit) by class consisted of:

additions. The loans remaining unadvanced at December December 31, 31,1981 were $7,364,000 and are advanced from time 81 280 to time, as required and at varying interest rates. Amounts n peradng have been advanced from August 10,1978, through Dec-margins, net

$ m,027

$ W,1 R ember 31,1981, maturing on January 2,1982, through Capital gains (losses),

December 31,1983, at interest rates of 8.260 percent to incurred prior to 1979 (5,898)

(5,898) 16.725 percent. The Cooperative has arranged additional apital gains, incurred in 81 2,187 long term financing with Federal Financing Bank for

$101,337,756 maturing at varying times and interest TOTAL

$ 313,316

$ 174,214 rates.

During 1972, the Board of Directors authorized the ex-

7. On August 15,1980, the Cooperative agreed to purchase penditure of $52,973 for participation in the Liquid 1.26% ownership or approximately 10 megawatts in Con-Metal Reactor Demonstration Program, to be paid in sumers Power James H. Campbell lli generating plant. Af-ten equal annual installments. There were five install-ter the plant began generation, the cooperative realized ments remaining at December 31,1981 electrical power sales during the year of $2,632,782 or approximately 10% of total power sales. The total sales

4. LINE OF CREDIT AGREEMENT to nonmembers were $3,130,649 or approximately 12%

lhe Cooperative has established a line of credit for short of total power sales.

term financing, with NRUCFC for $12,000,000. At Dec-ember 31,1981 the amount owed NRUCFC under such

8. ADVANCE ON CONSTRUCTION REFUNDABLE agreement is $4,200,000.00.

On September 18,1981, the Cooperative had an un-secured line of credit approved from National Rural Util-

5. RETIREMENT PLAN ities Cooperative Finance Corporation for an additional Savings plan benefits for substantially all employees are

$25,000,000. This amount was then distributed to De-provided through participation in a retirement and se.

troit Edison as an unsecured advance payment for the curity program and savings plan for employees of the construction of Enrico Fermi 11. The Cooperative shall be National Rural Electric Cooperative Association and its refunded such advances at their request within twelve member systems. Contributions for the retirement and months of that advance. Detroit Edison is required to pay security program were approximately $96,400 in 1981 to the Cooperative the out-of-pocket expences, including and $87,800 in 1980. Contributions for the savings plan interest and charges incurred specifically in connection program were approximately $73,600 in 1981 and with these advances.

$44,300 in 1980.

l

9. RESTATEMENT The financial statements for 1980 have been restated to reflect as a deferred debt $7,024 of previously expenses costs. These costs directly relate to preliminary surveys, plans and investigations concerning the feasibility of a potential future merger with Wolverine Electric Coop-erative, Inc. _________ _ _ _ _.

rT Breadon & Holl, P.C.

Y r.V CERTIFIED PUBLIC ACCOUNTANTS February 19, 1982 Board of Directors Northern Michigan Electric Cooperative, Inc.

Boyne City, Michigan We have examined the balance sheets of Northern Michigan Electric Cooperative, Inc. as of December 31, 1981 and 1980, and the related statements of operations, patronage capital, other equities, and changes in financial position for the years then ended.

Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements mentioned above present fairly the financial position of Northern Michigan Electric Cooperative, Inc. at December 31, 1981 and 1980, and the results of operations and changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

h)t.f G CWU f f'

/

DONALD R. BREADON. C P A DENNIS L HOLLY, C P.A.

1534 EAST FRONT a TRAVERSE CITY, MICHIGAN 49684 m TELEPHONE: (616) 946 8930 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

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