ML20107G719

South Mi Electric Power Assoc 1995 Annual Rept

ML20107G719
Person / Time
Site:	Grand Gulf
Issue date:	04/19/1996
From:	Mckamy W, Thomas H SOUTH MISSISSIPPI ELECTRIC POWER ASSOCIATION
To:
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ML20107G722	List: ML20107G719 ML20107G775
References
NUDOCS 9604230319
Download: ML20107G719 (34)

Text

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3 S0unt MississtPrt ELECTRIC POWER Ass 0CIAn0N 1995 ANNUAL REPORT 1995 PERFORMANCE HIGHLIGHTS FINANCIAL

($ In Thousands)

ACRt4sE "41sCRetsE 1995 1994 (DECREUE)

(DECREASE)

Total Revenue S 294,247

$ 285.080 5 9,167 3.2 %

Current Net Margins

$ 10,182

$ 13.824

($ 3,642)

(26.3) %

i Total Assets

$ 759,043

$ 763,033

($ 3.990)

(0.5) ek Total Equity 5 67,403

$ 57,221

$ 10,182 17.8 %

Equity as "o of Assets 8.9 C4 7.5 %

TIER 1.23 1.31 DSC 1.22 1.27 Average Cost of Long-Term Debt 6.66 %

6.64 %

OPERATIONAL Wholesale Rate to Members-Mills /KWil 43.71 44.64 (0.93)

(2.1) %

Energy Sales (MWil)

Members 6.368.144 5,979,874 388,270 6.5 %

Non-Members 520,262 651,485 (131,223)

(20.l > r4 Total 6,888,406 6.631,359 25'7.047 3.9 %

Net Generation (MWil) 3,347,874 3,391.859 (43,985)

(l.3) %

Total System Demand (MW) 1,654 1,494 160 10.7 %

TABLE OF CONTENTS EXECl715E NIMAGE.

TWO AIUlBER SusTots.

111REE BOARD OF DIRECTL)RS.

libi R GtvERAL 1An>R3fA110s..

Six DauRTattvis..

Saty Ol'ERATING NU1)RT.

EIGIIT FisAsCIAL Rus)RT.

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EXECUH,VE MESSAGE 1[95 South Mississippi Electric Power Association's directors and employees continued to work with a unity of purpose to meet the challenges of a changing industry during 1995. Internal and external activities and relations were closely examined to determine the best process and plan to fulfill members' needs in an industry moving from traditional to non-traditional operations.

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This report reflects successes achieved in 4 U.gA every area and within every department, t

SSIEPA experienced another rate decrease l

resulting in the lowest rates to members since l

1981. Equity continued to increase as projected and capital projects were completed using internal funds. Ilealth care costs remained constant and all-time safety records were achieved reflecting employee commitment.

As we approach 1996, aggressive evaluations l

will continue and changes will be made as j

necessary. SMEPXs employees and leadership j

have played a vital role in meeting historical l

change and are committed to being a positive j

part of a changing future.

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l Ilenry Thomas j

General Manager M,

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3 President I

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MEMBER SYSTEMS O IhXIE EPA, LAUREL James T. Dudley, Jr., General Manager

1) ate energized 7/28/39 i

4,016 miles of line 29,262 meters g MAGNOLIA EPA, McCoun Sammy Williams, Manager Date energized 9/19/39 4,739 miles of line 23,158 meters g PEARL RIVER VALLEY EPA, COwMBIA W.T. Shows, General Manager Date energized 5/19/39 4,990 miles of line 30,866 meters g SINGING RIVER EPA, LUCEDALE Jack Ware, General Manager Date energized 12/5/39 5,092 miles of line 50,557 meters g SOUTilERN PINE EPA, TAYLORSVILLE Donald Jordan, General Manager Date energized 5/13/39 8,950 miles of line 51,943 meters O SOUTliwEST MississlPPI EPA, LORMAN Robert St. John, General Manager Date energized 3/27/38 3,921 miles of line g COA 110MA EPA, LYON 21,863 meters Giles Bounds, Manager Date energized 1/18/38 g Twin COUNTY EPA, il0LLANDALE 1,446 miles of line vesper llagley, Manager 6,192 meters Date energized 12/24/38 2.207 miles of line g COAST EPA, BAY ST. LOUIS 12,066 meters Robert Occhi, General Manager Date energized 5/20/38 g YAZOO VALIEY EPA, YAZOO CITY 4,183 miles of line Charles 11. Shelton, General Manager 50,729 meters Date energized 3/23/38 2,634 miles of line g DELTA EPA, GREENWOOD 8,825 meters llarry 11. Bonner, General Manager Date energized 1/30/39 5,192 miles of line 25,122 meters l

BOARD OF DIRECTORS

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CoAllo\\lA Ell:CTRIC Powl.R AssoCI ATioN James llumber Giles llounds..\\lanager CoAsr Etl.CTRic Pow LR AssoCirrioN Robert J. Occhi. General Slanager l'rancis L 1.ee E@

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GENERAL INFORMATION g SMEPA IIEADQUARTERS Location:llattiesburg, Forrest County Employees: 116 SMEPA is fortunate to have its Morrow and Moselle generating stations located approximately fifteen miles from headquarters. Energy from both stations is dispatched from SMEPAs Control Center in llattiesburg.

1 GRAND GULF NiuEAR STATION (10% Undivided Interest)

Commercial Operation: 1985 Location: Port Gibson, Claiborne County Capacity: 125 MW Fuel: Nuclear Employees: 1 SMEPA counts one employee among Entergy's 900+ who work at the nuclear site. Joe Czaika is the Association's nuclear specialist. Grand Gulf Nuclear Station is located approximately 145 miles from SMEPXs headquarters.

g R.D. MORROW, SR., CENERATING STATION Commercial Operation: 1978 Location: Lamar County Capacity: 400 MW Fuel: Bituminous Coal Employees: 97 d MOSELLE GENERATING STATION Commercial Operation: 1970 Location: Moselle, Jones County Capacity:177 MW Fuel: Natural Gas / Fuel Oil Employees: 29 E pal'LDING UNIT SMEPXs two combustion turbines, Paulding Commercial Operation: 1972 and Benndale, are unmanned stations remotely Location: Jasper County operated by the SMEPA lieadquarters facility Capacity: 20 MW Control Center. Personnel from Plant Moselle Fuel: Diesel Fuel maintain the two units.

1995 Production: 363 MWil During 1993, the units were operated on occasion to support load demand. The units g ISENNDALE UNIT were also placed in service from time to time Commercial Operation: 1969 for test purposes to assure continued Location: George County availability and reliability.

Capacity: 16 MW 1

Fuel: Natural Gas 1995 Production: 2390 MWil

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DEPARTMENTS i

in 1995, SMEPAs management team joined with board members and employees to prepare a strategic plan for the Association's future. SMEPAs six CORPORATE PLANNING &

departments are responsible for many ongoing i -

OPERATIONS activities which support its missions and objectives.

DEPARTMENT The new strategic plan identifies those additional i

actions which will enhance SMEPAs value to its John Carley member systems. SMEPA directors and employees are committed corporately and individually to achieving these common goals.

MISSION STATEMENT SMEPA is committed to being the preferred power provider of its members and customers.

i FINANCE DEPARTMENT A

+ SMEPA will preserve its present strong financial Jack liarpole condition.

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+ SMEPA will deliver high quality power to its

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member systems at a competitive price and more reliably than neighboring utilities.

+ SMEPA will attract, develop, and retain dedicated and capable board members and employees while providing a workplace conducive to good morale ENGINEERING and increasing productivity.

DEPARTMENT

+ SMEPA will continuously strengthen its Terry Lee competitive position through improvements in all planning processes.

+ SMEPA will assist member systems to better serve their end users, to attract new loads, and to keep existing loads.

IlUMAN RESOURCES &

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DEVELOPMENT

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DEPARTMENT

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1-4 Benny Murray PRODUCTION 9

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TRANSMISSION Marcus Ware DEPARTMENT

MOsEUR GENERATING 87m0N Plant Moselle was again operated OPERATING REPORT in an intermediate and peaking mode for the entire year. The net generation during 1995 amounted to 662.214 MWil - nearly 12% more fu \\rSmmmvarfn Tuovnuv no hicman Scorr JInty rut A than in 199k and the highest WntR HMK Ar Pu \\r Alwm\\ INT 3 Gl\\tRATOR DiRi\\G A ACHIDIITU

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• Al" production since 1978.

The increase in output can be contributed to y,

high availability of the a.

Moselle units and the

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availability of natural O t gas at economically attractive price levels.

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During a spring

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outage, a scheduled five-7 dY year inspection of the Unit 3 turbine and generator was completed.

J As part of the process, new retaining rings were installed on the generator rotor to address an industry-wide problem with the components.

This was the first full year of operation with the Continuous Emissions Monitoring System (CEMS) equipment in service.

Natural gas purchases were scheduled monthly to The equipment was installed on meet projected generation requirements. Usage each of the stacks to monitor amounted to 7,719,800 MMBtu for the year, which was exhaust emissions as required by about 10% more than the volume used during 1991 and provisions of Clean Air Act was the Nghest annual mlunw of gas usage in the E Amendments.

of tlw plant.

ORRO$ 8R. GMAIM SIMON ma ( t r

d ii t installation of a combustion turbine Plant Morrow was primarily operated in an generator at Plant Moselle. The new intermediate and base load mode during 1995.

unit is intended to be instrumental Simultaneous operation of the two Morrow units in meeting the peaking reqidrements occurred primarily during the summer load season from of SMEPA's growing system demand.

May through September. Coal usage amounted to 812.120 An additional 20 acres of property tons, and the annual net generation from the facility were purchased to provide ample amounted to 1,881,648 MWil, which was about 2A above i

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space for expansion of the station 199i production. The output was more than the average C

switchyard and for the installation annual generation provided by the facility during the of the new unit. The equipment will past ten years.

provide an additional 80 megawatts N'

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> n h>nuie n e tuMne inspection was pdrnwd dunng a sMng a

al trl 1)

of 37,000 tons. This improsement l

(ll'lk 410k\\ [ tRR> tVillh.4 %I) [of n $$Non \\ tirnfluR Ol'IR lIltn ni l %Il iI \\l%

NEC3MU pObN5NlU Y llN CUNAUCVWVUIS Till Int R DbPL4) V RilM Of l'i.1 \\1 N I).tloRRon \\l W DhlKl/U 110 OnlRui made in the Coal Combustion process

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39) h35 (y$9l\\yd lp (hy (ppyy\\ypt 10 C#1 %f3 ID/lR lill) /#1 OLD OnTRol BO.lRll produc[jon of a marketable quality ash. The combined I

volume of dry ash and landfill material marketed during the scar totaled 62,000 tons.

Approximately 90"oof the ash produced in 1995 was marketed.

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Overall,1995 was a moderately successful ll et, J

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sear for Grand Gulf. The

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=4 1995 was 79.h, the plant availability factor was g

p.m 78"o, and net generation g

m was 8,013.50151Wil at an average thermal efficiency of 10.811 Blu/KWil. The thermal efficiency was 1.9"o better maintenance outage. As planned, the twenty-first stage than in 199i, due mainly to the blading was replaced with a new high efficiency design.

upgrade of the high pressure Inspection of steam path components concluded with turbine during a 1995 refueling replacement of ninth stage blading along with an outage. In fact, the yearly average expected amount of diaphragm and seal renewal.

heat rate was the best ever for Restart of the unit was on schedule and without Grand Gulf.

incident and enhanced performance was confirmed during the subsequent hig' h load demands of the The plant staff replaced the high summer season.

pressure turbine rotor with a new, W&

dWm incre ing n

Plant Morrow was successful in reducing sulfur plant output by 37 31W (the dioxide and nitric oxide emissions as a participant in expected gain was 27 MW ). A the Substitution Program, w hich resulted from the record power lesel was established Clean Air Act Amendments of 1990. The sulfur dioxide on I)ecember 10 at 1.261 MW Net, removal capacity of the scrubber was utilized more and the aserage power level for that during 1995 because of the reduced emission limits for 11 hours1.273148e-4 days <br />0.00306 hours <br />1.818783e-5 weeks <br />4.1855e-6 months <br /> was IJ58 MW. More l

sulfur dioxide. Plant Morrow took advantage of production records are expected to j

operating at the lower nitric oxide limit a year in be established in 1996 and be>ond advance to insure that the As30ciation could maintain as each of the low pressure turbine the new emission rate for 1996. By participating in the rotors are also upgraded during program. SMEPA carned emission credits which may be refueling outages.

either marketed or held for u3e to offset future sulfur dm.ude emissions.

Grand Gulf celebrated its tenth year of. commerual operation in i

The total quantity of ash sold during 1995 was 15""

July of 1995 and reflected on the greater than in 1991. The solume of good quality drF many positive aspects of its ash sold increased by 25"o, reaching a new annual record operating history. Accomplishments

-. -- _.- - -~ - -

include receiving the highest Iharcrou or G>tnHoss A'oGin siirrii a VD snrziilkvarcizza Aia Nicitoras possible ratings from the Institute ruaa niE siointar of 1/rrnic.or DIMt ruo31 S.VElm a2Vrroz ca ns IV.

of Nuclear Power Operations for EARLY OCToHER. A% iMRr or HIE AWCiAHON:% DUKISCY OJVmGDCY MN, hie three consecutive years - an LDHR n Rihnb%v8LE foR Sta\\iroRIVG K'tAHILR Co.\\DITioM nliiCII ColID i

i ninEaumciricims ruanaum accomplishment which very few plants have consistently achieved. Grand Gulf's staff increased the

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Nuclear Regulatory Commission's Systematic

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Assessment of Licensee

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Performance (SALP) scores from an average of 1.14 in 1989, to an h

average of 1.0, a perfect score. The plant has 7

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managed to lower its j".

s three-year production costs by more than 21"o i

since 1986, and planned

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cost improvement programs are expected to result in further reductions. In addition, the rolling three-year average for Grand Gulf since 1992 has been more than 10% above the industry average for nuclear plants during total of nine wells throughout the remainder of the the same time period.

year. Beginning in February, revenue was also provided from a limited amount of oil production.

KENTUCKY COAL PROPERTY ENGINEERLyc SERVICES Ikerd Bandy, a coal m. ing firm, m

continued to develop reserves on A new look was given to power bills sent to member SSIEPAs property in eastern cooperatives, thanks to an upgraded and revised format Kentucky under the provisions of a developed by the billing group. Also, a new Interruptible property lease arrangement. Clean Service Rate was adopted by the board that will coal production during 1995 promote the sale of more off-peak kilowatt-hours of amounted to approximately 261,720 energy.

tons from both surface and deep Work was begun with four other utilities on the joint mine operations.

design and procurement of a new control system.

Under an Oil & Gas Lease Substantial dollar savings will be realized because of Agreement with AKSEnergy this cooperative effort.

Corporation, SSIEPA received payments as a result of oil and gas AIARKETINC production from the property. In 4

January 1995, AKS completed the SSIEPXs marketing section assisted its member j

installation of a pipeline gathering cooperatives in their efforts to develop successful in-system and initiated flow of natural house marketing programs, and focused on education gas from wells on the SMEPA and training of the commercial sector in energy-reserves. A relatively small but efficient electric technology. As part of those efforts, steady volume of gas flowed from a marketing hosted an educational geothermal i

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members, and permitting for a j

proposed new generating unit.

h,-~M In the area of a.ir quality,, Title \\,,

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. e Air Operating Permit applications i

for all SMEPA generating units were j

deemed to be complete and acceptable by the Mississippi lg-Department of Environmental g

Quality (MDEQ). The ' Title \\"

f program, which quantifies and G.

limits emissions of 189 pollutants, W'

- N consolidates state and federal 4

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a*

y guidelines into a single permitting l

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process. In addition, the Continuous j

k Emissions Monitoring Systems j

(CEMS) on the Plant Morrow and

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Plant Moselle units were l

94 successfully recertified in 1995.

Certification of these systems will g

be required on an annual basis in j

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SMEPAs generating units.

1 order to quantify emissions from s

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k4 Borrower's Environmental Reports

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j,.~j and approved by the Rural Utilities j

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j.t f y 1... MS y or Assessments were submitted to M

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Service (RUS)for -16 miles of y-j

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e transmission lines, a SMEPA 230 kV

.s substation, five member cooperative j

stations, and two microwave towers.

l S3fElm cut.n s retrter 70 str a Iliroor coAcetit rutt to lncluding member cooperatives in scomromrt a runn-us surrcit aras Braarnv.

SMEPAs llotrower's Environmental Reports has resulted in more timely review and approval by RUS.

teleconference on residential heating, cooling and water h ironenW g>mi% for &

dealers who lA also sponsored two training schools for heating. SMEl

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ombh mbine ad med mstall and service geothermal systems.

j mbimd @> d a Malk ns Manufactured homes are a significant source of submitted to RUS and MDEQ. At the billing complaints and non-payment for SMEPA's end of the year, RUS had issued a member cooperatives. SMEPAis therefore represented on Finding of No Significant impact the board of directors of a non-profit corporation that (FONSI), and MDEQ had approved develops, demonstrates, and promotes energy efficient the Construction and Operating methods in manufactured housing. SMEPA is also Permit applications.

represented on the board of directors of Energy Rated llomes of Mississippi, an organization that develops and EzrcruoNics MALyrrNANcr implements uniform home energy ratings. These ratings aid builders in obtaining energy-efficient mortgages for The existing microwave m

new homes.

equipment was replaced with new equipment at flattiesburg, Plant

?"*'"h improved transfer system" ? M ENVIRON 3frNTAL Armins in a muc Environmental efforts during 1995 centered around for data from the transmission air quality, transmission projects for SMEPA and its system back to the control center.

The electronics group assisted data processing in the installation of new PCs and peripherals, along with Inarty mrr Rtw>; uisity ni run, Traci'stictra axo n/tt Rec.i urr a upgrading the local area networks, umacortvr rou 3ar M na ams 3rastr 03r mit or M/ A r ruanvavov un ersom> inna a mum mmoum thcar.

to assure that data is effectively and efficiently moved around the headquarters facility and to the outlying generating plants.

OPERATIONS y.

CONTROL CENTER S, ;.

-Change" is the best word to describe control

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center operations throughout 1995. For the first time, SMEPA i

accessed the power market through power marketers, non-utility companies that buy and sell bulk wholesale energy. This option provides opportunities to save substantial dollars in the power market, with these savings passed on to our member cooperatives in crews assisted in the installation of motor operators at the form of lower power costs.

Prentiss, Newton, and Polkville. In addition, line adjustments were made due to stream erosion, highway A new concept in serving large relocations and general line improvements.

power customers was used on a trial basis allowing the sale of The transmission department was responsible for economically priced energy during coordinating the surveying and construction certain hours normally defined as management of several on-going projects, including a peak usage hours. This allowed the 230 kV transmission line, two 115 kV lines for Magnolia delivery of 4.000 plus megawatt.

EPA, a 115 kV line for Delta EPA, and a 69 FV line for hours of energy that normally Pearl Riser Valley EPA. Also, plans were being made to would not have been available. The upgrade certain line switches by installing load break concept proved profitable for interrupters.

SMEPA, the member cooperatives, and the customers, and was added TRANSMISSION SVSTEM MAINTENANCE as a permanent rate.

The transmission system is an integral part of SMEPA being a reliable power supplier, therefore significant IRANSMISSION UP6RAIJES emphasis is placed on maintaining SMEPA's ANI) CONSTRUCTION approximately 1,450 miles of transmission lines, rights o way an numerous swhches.

3 South Mississippi Electric Power Association crews completed SMEPA's line crews performed climbing inspections on installation of a three-way switch 4,050 structures and completed 961 line maintenance to serve Southern Pine Electric work orders which included changing or repairing Power Association's future 115 kV broken crossarms, braces, insulators, guys, damaged East Whitfield substation. SMEPA conductors and poles.

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and loadflow equivalents for The I

Southern Company.

The electronic metering project was completed with installation of nine Quantum meters using cellular phones. At the end of 1995, all SSIEPA delivery point meters were remotely accessible. There are 167 installed meters in 157 delivery r

f points with SstEPA-owned metering.

The Association uses cellular phones to communicate with meters at all b

but five sites. Two of those five sites P!

use power line carriers and three R

use llell South land lines.

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RELAl' ann METER KUNTENANCE SNIEPA relay technicians performed relay acceptance, calibration, and control circuit i

verification for the new relay j

panels at South llattiesburg and Oak Grove. In routine calibration checks l-member sites containing SMEPA at 13 S)lEPA substations and various relay and telemetry equipment, the relay technicians calibrated 1,769 S.tfEPA\\ CRE W5 IMT4tt nlE JU\\T tr*lillHFin GUAll salwil, willcli nlays and transducers in 1995.

Klli MRG E.4 Al u M B\\T4 TION R)R Sol'nifRN l'I'd EllC1RIC l'0W f R a w m not Meter technicians assembled, wired, and installed new electronic meter boxes at nine different sites.

The annual reclea:ing of approximately 2% of the liased on new load projections from transmission system's right of way consisted of member cooperatises, the meter reclearing 4,200 line acres. A total of 2,013 danger trees technicians increased CT (current were removed from critical transmission line sections.

transformer) capacity at four Pole groundline inspections and treatments were member delivery points. Meter performed on 2,788 poles in the transmission system.

technicians also calibrated meters at i

Seasonal vegetation control was also performed at 100 all SMEPA wholesale delivery points.

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line switch locations and stations, and aerial patrol insp(ctions of the entire transmission systen were cowcucted on an as-needed and periodic basis.

'/NEERING

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In substation design, highlights PLANNING AND PROTECTION I"'I"0'0 '"* U "" " f """

l facilities, including transformer,

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The Planning and Protection Section worked with circuit switcher, and relay panel, for 2

consultant Illack & Veatch to complete a long-range the South llattiesburg and Oak transmission study for the Association. They also Grme substations. Site work was participated with two member cooperatives in the also begun for two major projects -

review of the members' construction work plans and the Missionary 230/69 kV substation long-range system study. This group also developed short and Moselle 161 kV additions circuit equivalent data for seven member cooperatives (associated with the new generator).

This group was responsible for the permanent installation of the system spare 30/40/50 MVA 161/69 kV auto Simunuv Trolvians GEORct JIORcn;ftur IbRumD Kavr Gu vnd transformer at Benndale before the PREP 4RE A 90XXhivihD, SIRIPPUHMN.y TR.0\\f0RAIER TO BE UlTED O.vTo A summer peak. They also ordered and "d '#"> '# " '"" '""#" ' 6 '" d " "" '"# #""'#*

received a replacement for the spare unit before lj h,

LM l'd the end of 1995.

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ugy As the year ch> sed, MJ l

?,e design on the new M) kV sg fq M g?3

!a line from West

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Waynesboro to Missionary was 90?s f'

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complete, and the design guide was bemg readied for submittal to RUS for a

w approval. In

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s communications, 9%d b

engineering employees also

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completed the 2 to 6 Gilz microwave system u3 grade at Plant Moselle, lieadquarters, and Plant Morrow.

SUMTAHON MAIh7ENANCE The substation maintenance crew completed routine testing of One of the first steps in the client / server transition 51 bushings stored in the new included rewriting SMEPKs payroll system, an effort bushings storage building at Plant which required both time and expertise by system Moselle. Maintenance en eight auto analysts. In addition, a new Oracle database format for transformers, including replacement screens and reports was completed.

of three load tap changing (ITC)

By the end of 1995, the computer information mechanisms for refurbished un4 was also performed. Inspectim. w"'

systems section had been successful in setting up four servers and plans were made to have all users completed on nine 69 kV GCBs (gas circutt breakers), one 115 kV oil connected by mid-1996.

circuit breaker (OCB), and 27 motor operated switches.

PERSONNEL A more competitive discount plan was negotiated COMPUTER IATORMATION with a new preferred health care provider, which SYSTEMS allowed for cost savings to the Association's medical plan and participating employees in 1995. The SMEPA continued its efforts to implementation of a cost-neutral prescription drug card move from a distributed terminal plan also proved to be a positive move for the system to a clicnt/ server Association's self-insured medical plan and provided

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environment. A new Novell network low-cost prescriptions to SMEPA employees.

was installed throughout SMEPA, 2

including Plant Morrow, to allow all Personnel staff continued cost-effective management personal computer users to better of the Association's health care plan and employees share files.

continued to utilize SMEPAs preferred health care providers. The efforts of all employees made 1995 the

AssocLtnox Rustnoss

'Ihe lluman Resources and fil/Plo)// \\ // A N \\ //ou 10 />f ptop tr crigf f gf f; \\P u r uivii s I,i urw \\ if f 7 3 IR (I\\lW.41 l'I t \\ T Nil.tloKkou. l'lll) Vi \\ lRio\\ 4NI l \\ll> 1o rlitt I.tl{ Rt ti.

l)evelopment l)epartment I

lill RfACil.tPritc.4110%

Coordi M d & k '& y.M d'a revised Strategic Plan for the Association in 1991

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f r,1 SMEPA's original Strategic t

Plan was developed in

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1989. Consultants were w, ?7

= ap lq evaluated and Resource m:

.r.

1, A_...

g C.

pr-

4,

- 1

+q Slanagement l

i International was k h.

selected to facilitate the (3

J s

~ig / e 7

q planning process as

'[

c-management, key

(

.Nx employees, and members of the board of directors g

V collectiselv developed a

/

g

]Q new Strategic Plan for the Associater The plan

~

X identifies specific j

p kA initiatives that support f

SMFl* mission and i

diectives in an 3-ir.cmasingly competitive martetplace.

Regaests for Mformation sixth consecutive year that the Association was able to abounded from a broad range of provide quality health care benefits without an increase publics during 1991 SMEPA in funding requirements of the self-insured medica welcomed opportunities to share its plan.1)uring the year,8,040 medical insurance claims story as the " Cooperative's Cooperative" and to explain how were processed by the SMEPA benefits section.

electricity has played a vital role in the ever-growing world of SI N technology. Plant tours and u adond presentations were SMEPA employees continued to set new safety records provided for member systems, school in 1995 In July, all employees achieved a long-time goal oug out the u

an o of working one million man hours and more than two year, upon request' years without a lost-time accident. The number of reportable accidents tied the previous year's record of SMEPA employees continued to giw voluntarily of both their time four, and accidents requiring medical attention were and money for such causes as the reduced to an all-time low of six for the year.

United Way, St.Jude's, and the l

The 1995 safety record is an outstanding American Cancer Society. Employee 3 accomplishment which can be attributed to increased remained highly visible throughout l

employee safety awareness, a successful safety program, their communities as they supported and employee involvement. The Association plans to a variety of academic and civic

!I continue building on this ambitious safety record in organizations. I:ach day, community l

19 %

involvement opportunities, such as SMEPA's Adopt-A-School partnership l'

with North Forrest Elementary, l

reflects the pride and integrity of l

those employed by South Mississippi Electric Power Association.

l FINANCIAL REPORT The year 1995 was another year of solid financial results for SMEPA. The wholesale power rate to SMEPAs eleven member

'peratives was reduced 2"o and averaged slightly less than 44 mills per kil, hour, the lowest level since 1981. For the eighth consecutive year, the i a.uel components of the wholesale rate structure have been reduced.

Revenues from members amounted to $278 million for 1995, up 4.3"o or

$11 million from the previous year. Energy sales were up 6.5"o to 6.37 million megawatt hours - the highest eser. Demand billings to members were up 8.4% to a n.onthly average of 1,250 megawatts - also the highest ever recorded. All eleven member cooperatives had increased individual purchases of energy from SMEPA in 1995, ranging from 21'i, to 14%. Overall, the member cooperatives are growing at a strong five-year compounded rate of 4.3"i Margins for 1995 were $10.2 million compared to the record $13.8 million last year. SMEPAs equity increased to $67.4 million and is now 8.9% of total assets, the highest ever.

Total debt outstanding at pr end 1995 was $652 million, down

$20 million from the previous year and the lowest debt balance since 1982.

The average interest rate on long-term debt was 6.7%. SMEPAs interest expense in 1995 was slightly less than $46 million, the lowest since 1980.

Between 1994 and the two years prior, SMEPA was able to reprice or refinance over $330 million of debt which reduced interest costs about

$15 million per year. When coupled with the steady debt reduction over the past eight years including a $40 million reduction for 1995 and 1994, interest cost savings have been a major factor in wholesale rate decreases.

Discretionary investments amounted to $65 million at year end compared to $55 million at the end of 1994. The discretionary investments were earning 6"o at year end. SMEPA anticipates using about $36 million of internal funds (discretionary investments) to pay for capital projects in 1996 compared to

$11 million and $8 million used in 1995 and 1994, respectively. The largest project is a gas-fired combustion turbine mentioned elsewhere in this report.

m

Equilles and Patronage Capital t

,1/illions Ikdlars Generation Afillions of

.111F#

g Sales to Mesnbers

-I.

.flillions

,11ftI Wholesale Rate to Mernbers

.flills/

I'

~

b KlVH

ELEMENTS OF COST TOTAL SYSTEM-MILLS /KWil 0F SALES Im M

1m im im Production costs, purchased power, and interchanged power 28.99 28.03 27.90 26.24 26.14 Transmission O&M 1.65 1.70 1.62 1.60 1.70 A&G expense

.84

.80

.79

.76

.79 Depreciation and amortization 3.60 3.66 3.57 3.72 3.81 Interest (Net) 6.39 6.78 8.66 a.37 10.34 Taxes and other

.44

.41

.50

.21

,14 TOTAL-MILLS /KWil 0F SALES 41.91

~ Ji.38

~

~

~~41,90'

~ ~l192' 43.04 COMPARATIVE BALANCE SHEETS AND SELECTED FINANCIAL RATIOS (nv nwrsm)

(

1m im im im im i

UTILITY PLANT In service

$ 762,221

$ 751,5)8

$ 737,175

$ 733,882

$ 731,832 Construction work in process 13,161 13,396 20,213 16,987 7,605 775,382

"'76 {914

~ " 757,388

'750,869 739,437 Depreciation 261,583 240,410 218,934 199.257 182,675 NFT UTILITY PLANT

$ 513,799

$ 524,504

$ 538,454

$ 551,612

$ 556,762 OTilER ASSETS Unrecovered plant cost 75.213 78.036 80,789 83,489 86,096 Cash and temporary investments 31,522 27,591 51,421 21,990 25,571 Inventories 25,169 24,759 21/dM 32,568 28,234 Deferred charges 33,221 35,228 12,809 7,696 1,932 Other 80,119 72,915 67,555 59,253 60,432 TOTAL OTilER ASSETS

'245,244

~~238,529

234,178

'204,996

~~202,265 TOTAL ASSETS

$ 759,043

$ 763,033

$ 772,632

$ 756/d)8

$ 759,027 EQUITIES AND LIABILITIES Equities and patronage capital

$ 67,403

$ 57,221 i 43,397

$ 34,556 5 30.088 Long-term debt 626,735 651,518 67,, 597 686.045 693,319 Other liabilities 64,905 54.294 54,6M 36,007 35,620 TOTAL EQUITIES AND L1 ABILITIES

~$ 759,043

~ $ 763,033

~~$ 772,632

' $ 756,608

~$ 759,027 RATIOS T'ER I.23 1.31 1.15 1.07 1.05 DSC 1.22 1.27 1.24 1.17 1.17 Equity as % of assets 8.88 %

7.50%

5.62 %

4.57%

3.96%

DEBT long-term debt

$ 626,735

$ 651,518

$ 674,597

$ f,86,(M5

$ 693,319 z

Current maturities 25.677 20,294 16,791 15,375 14,274 l

TOTAL DEBT

'$ 652,412

$ 671,812

~$ 691,388

~$ 701,420

~$ 707,593 3

Average rate 6.66 %

6.M%

7.969 8.41%

8.85 %

Wil0LESALE RATE TO MEMBERS Mills /KWil 43.71 44.64 47.02 45.32 46.12

COMPARAT[VE OPERATING STATEMENTS (s u nonom>

1225 199.:l M

M 12911 REVENLE Sa1:s of energy

$ 292,760

$ 283,345 5 293,440

$ 267,898

$ 261,908 Other 1,487 1,735

~(108) 22 232 TOTAL REVENUE

$ 294,247

$ 285,080

$ 293,332

$ 267,920

$ 262,140 EXPENSE Operation Expense:

Pnxtuction-fuel cost 59,770 59,9(M 64,674 52,149 55,(M9 Other pnxluction expenses 15,661 12.034 15.338 14 MK) 12.278 Purchased power 119,143 106,704 99,571 93.881 86,614

. Transmission 9,306 9,391 9,243 8,587 8,764 Const mer accounts 46 64 66 55 52 Sales expense 170 151 132 121 93 Administrative & general 5,180 4,529 4,484 4,086 4.056 Total Operation Expense 209,276 192,777 193,508 172,879 166,906 hiaintenance expense Prmiuction 5,145 7,238 6,636 6,724 6,080 Transmission 2,060 1,880 1,546 1.593 I,629 General plant 581 584 593 569 637 Total hiaintenance Expense 7,786 9,702 8,775 8,886 8,346 Depreciation and amortization 24.803 24,293 23,822 23,614 23,330 Taxes 1,064 1,039 1,121 1,031 791 Interest expense (net) and other deductions 45,504 46,623 58,501

_ 59,880 63.603 TOTAL EXPENSE 288,433 274,434 285,727 266.290 262,976 OPERATING hlARGINS 5,814 10,646 7,605 1,630 (836)

NON-OPERATING hlARGINS 4,368 3,178 1,236 2,838 3,874 NET h!ARGINS

$ 10,182

$ 13,824

$ 8,841

$ 4,468

$ 3,038 2

COMPARATIVE

SUMMARY

ENERGYSOURCES AND SALES m

m m

e e

ENERGY SOURCES-MWil Generated 3,347,874 3,391,859 3,342,187 2,892,049 3,071,853 Purchased 1,498,994 1.559,822 1,870,626 1,958,228 1,725,706 Interchanged Power (Net) 2,146,362 1,795,851 1,579,;36 1,597.162 1,434,367 TOTAL ENERGY AVAILAIllE FOR SALE 41WIi 6,993,230 6,747,532 6,791,949 6,447,439 6.231,926 l

ENERGY SALES 41Wil Members Coahoma EPA 107,630 101,366 100,573 89,130 90,591

)

Coast EPA 998,341 923,389 863,922 823,751 743,020 i

Ikita EPA 428,443 399,291 399,880 367,242 366,018 Dixie EPA 554,745 505,377 505,394 491,085 462,245 1

Magnolia EPA 442,355 428,158 420,146 380,878 375,319 Pearl River Valley EPA 571,759 503,356 475,793 440,102 445,467 Singing River EPA 985,226 911,066 880,723 847,965 808,434 Southern Pine EPA 1,413,4M 1,389,295 1,374,206 1,267,927 1,215,764 Southwest Mississippi EPA 389,941 372,818 378,546 348,734 336,997 Twin County EPA 247,178 229,376 217,716 2N,507 217,231 Yazoo Valley EPA 229,062 216,382 214,072 219,443 232,134 TOTAL SALES TO MEMilERS 6,368,144 5,979,874 5,830,971 5,480,764 5,293,220 Non-Members

$20,262 651,485 843,908 873,955 828,500 TOTAL SALES 6,888,406 6,631,359 6,674,879 6J54,719 6,121,720 TOTAL SYSTEM DEMAND-KW (Illlling Demand-Non-concurrent) 1,653,633 1,494,243 1,475,070 1,380,688 1,332,e01

)

w h

1 H

I

INDEPENDENT AumTons' REPORT To the Board of Directors of South Mississippi Electric Power Association We have audited the accompanying balance sheets of South Mississippi Electric Power Association ("SMEPA") as of December 31,1993 and 1994, and the related statements of net margins and patronage capital and of cash flows for the years then ended. These financial statements are the responsibility of SMEPA's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing

,andards and Corernment Aud/t/ngStandardsissued by the Comptroller General of the United States. 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 disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overail financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly,in all material respects, the financial position of SMEPA as of December 31,1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles, in accordance with Government Auditing Standards we have also issued a report dated February 9,1996, on our consideration of SMEPA's internal control structure and a report dated February 9,1996, on its compliance with laws and regulations.

Midit +T5uche. LLP

?

f o

February 9,1996

BALANCE SHEEIS mv hannm)

Decemher 31 1225 1924 ASSETS ELECTRIC UTILITY PLANT in service - at cost

$ 762,221

$ 751,518 Construction work in process 13,161 13.396 775,382 7M,914 Less allowance for depreciation 261,583 240,410 Net utility plant 513,799 524,504 OTilER ASSETS AND INVESTMENTS Unrecovered plant cost - al cost 75,213 78,036 investments in associated organizations 10,646 10,714 Debt service reserve investments 4,473 8,502 Decommissioning trust investments 4,311 3,474 Other investments 1,500 15.444 Other noncurrent asse s

_ 4

._4 96,147 116,174 CURRENT ASSETS Cash - general funds and cash equivalent investments 31,522 27,591 Other invested funds 32,433 11,002 Accounts receivable (including receivables from members of approximately $23,589 [1995]

and $20,366 l1994})

25,013 22,180 inventories (at average cost)-

Coal and other fuel i I,347 10,989 Materials and supplies 13,822 13,770 25,169 24,759 Other 1,739 1,595 Total Current Assets 115,876 87,127 DEFERRED Cil ARGES 33,221 35,228 0

is H

TOTAL ASSETS

$ 759,043

$ 763,033

+

l=e e

See Notes to financial Statements

• December 31 1225 IM

' EQUITIES AND LIABILITIES EQUITIES Memberships and donated capital 5

535 535 Patronage capital.

66.868 56,686 i

67,403 57,221 LONG TERM DEBT, excluding current maturities-626,735 651,518 j

ACCRUED DECOMMLSS10NING OBLIGATION 4,311 3,474 DEFERRED CREDITS AND OTilER LONG-TERM LIABILITIES 3,714 3,473 CURRENT LIABILITIES Accounts payable 19,197 14,703 Accrued interest 10,018 10,555 Other accrued expenses 1,988 1,795 Current maturities of long-term debt 25,677 20,294 56,880 47,347 COMMITMENTS AND CONTINGENCIES s

81 e4

[

TOTAL EQUITIES AND LIABILITIES

$ 759,043

$ 763,033

~

STATEtlEN15 0F NET MARGINS AND PATRONAGE CAmAI. o tv nwcaw)

Years Ended December 31 1995 19N OPERATING REVENUE Electric energy revenue 5 292,760

$ 283.345 Other - net 1,487 1,735 294,247 285,080 OPERATING EXPENSES Fuel 59,770 59,9n4 Production 15.661 12,034 Purchased power 119,143 106,704 Transmission 9.306 9.391 Administrative and general 5,396 4,744 Maintenatice expenses:

Prodt'ction 5,145 7,238 Transmission 2.060 1,880 General 581 584 Depreciation and amortization 24,803 24,293 Taxes I,oM I,039 242,929 227,811 OPERATING MARGINS BEFORE INTEREST AND OTilER DEDUCTIONS 51,318 57,269 INTEREST AND OTilER DEDUCTIONS Interest 45,665 46,778 Allowance for funds used during construction (236)

(224)

Other deductions 75 69

.. ~... -

45,104 46,623 OPERATING MARGINS 5,914 10,646 NON-OPERATING MARGINS - PRINCIPALLY INTEREST INCOME 4,368 3,178 NET M ARGINS 10,182 13,824 PATRONAGE CAPITAL AT BEGINNING OF YEAR 56,686 42,862 A

PATRONAGE CAPITAL AT END OF YEAR

$ 66,868

$ 56,686 See " Notes to financial Statements"

.Stu1EstEns or CAsu Fiows (su ruonum)

Years Ended December 31 D95 1993 CASil FLOWS FR0h! OPER ATING ACTIVITIES Net margins

$ 10,182 5 13,824 Adjustments necessary to reconcile net margins to net cash provided by operating activilles:

Depreciation, amortization, and depletion 27,201 26,681 i

(Increase) decrease in accounts receivable (2,833) 3,294 (lucrease) decrease in inventories (408)

(3,156)

(facrease) decrease in other assets t145)

(280)

Increase (decrease) in accounts payable and other liabilities 4,924 (1,811)

Increase (decrease) in accrued interest payable (537)

(2,713)

Increase in accrued decommissioning payable 837 676 1

Net Cash Provided by Operating Activities 39,221 36,515 CASil FLOWS FRO 11 INVESTING ACTIVITIES Construction and acquisitions of electric utility plant (l l,843)

(8.331)

Retirements of electric utility plant (net of removal costs) 174 213 Increase in decommissioning trust investments (837)

(676)

Purchases of investments (7,487)

(17,472)

Proceeds from maturity of investments 68 9,(X X)

Net Cash Used in Investing Activities (19,925)

(17,266)

CASil FLOWS FRO)I FINANCING ACTIVITIES Principal payments on long-term debt (16,154)

(18,786)

Penalty associated with repricing of debt (24,293)

Proceeds from long-term borrowings 789 Net Cash Used in Financing Activities (15,365)

(43,079)

NET INCREASE (DECREASE)IN CASil AND CASil EQUIVALENTS 3,931 (23,830)

CASil AND CASil EQl'lVALENTS AT llEGINNING OF YEAR 27,591 51,421 CASil AND CASil EQUIVALENTS AT END OF YEAR

$ 31,522

$ 27,591 Cash - general funds s

709 186 Commercial paper 30,813 27,4n5

$ 31.522

$ 27,591 y

o Supplemental Disclosure of Noncash investing and Financing Activities:

~

Securities held by creditor as a cushion of credit and used to reduce long-term indebtedness

$4,029

$780

?

See " Notes to Emancial Statements'

NOTES TORNANCIALSTATEMENTS YEARS ENDEn DEGIIBER )),1995 AND 1994 NOTE 1 - SU5151ARY OF SIGNIFICANT ACCOUNTING POLICIES South Mississippi Electric Power Association ("SMEPA') is a membermwned, not-for-profit electric generation and transmission cooperative supplying wholesale electricity and other services to eleven member systems w hich, in turn, provide retail electric service to approximately 30@00 consumers in certain areas of Mississippi. Financing assistance is provided by the l'nited States Department of Agriculture, Rural l'tikties Service PRUS*). In addition to being subject to regulation by its own governing board of directors, SMEPAis subject to certain rules and regulations promulgated for rural electric borrowers by RUS. SMEPA maintains its accounting records in accordance with the Federal Energy Regulatory Commimon's Chart of Accounts as modified and adopted by RUS. The preparation of financial statements in conformity with generally acceptal accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses durmg the reporting period. Actual results could differ from those estimates. As a regulated utility, the methods of allocating costs and revenue to time periods may differ from those principles generally applied by nonregulated companies. The more significant accounting policies are generally described as follows:

A. liLECTRIC IITILITYl'LAST AhD l)El'RECIAlloS Electr!c utility plant is stated at cost, which includes contract work, materials and direct labor, allowance for funds used during construction, and allocable overhead costs. The cost of electric generating stations and related facilities also includes costs of training and production incurred,less revenue earned, prior to the date of commercial operation.

Depreciation is provided by the straight-line method for utility plant at the following annual composite rates:

Nuclear generation plant 2.85%

Non-nuclear generation plant Transmission plant 3.00% to 310%

2.75%

General plant and transportation equipment 2.00% to 2100%

At the time units of electric utility plant are retired, their original cost and cost of removal,less net salvage value, are charged to the allowance for depreciation. Replacements of electric utility plant involving less than a designated unit value of property are charged to maintenance expense.

& Cost of f)lCOMfilWo\\ LAG NCCIL4R l'LA vT AND A floRTIZATiov of ihREcotlRED l'LANT QAs15 SMEPNs portion of the estimated decommissioning cost of Grand Gulf Nuclear Station ('GGNS") Unit I is charged to operating expenses over the service life of Unit I of approximately 35 years.

SMEPNs portion of the unrecovered plant costs of GGNS Unit 11(which has been abandoned) of $75,213,000 and $78,036,000 at December 31,1995 and 1994, respectively, is being amortized over the remaining life of the related debt of approximately 26 years, and was $2,823,000 and $2,752,000 in 1995 and 1994, respectively.

C. Ano\\ LANCE IDR lhDs DED l)URLvG QWTRUCTioN Allowance for funds used during construction represents the cost of directly related borrowed funds used for construction of the electric plant, where applicable, and an allowance based on the average cost of appropriate borrowings when general funds are used to fund construction. The allowance is capitalized as a component of the cost of the electric plant while it is under construction. Capitalization ceasts when the electric plant is placed in service, or in the case of electric generating stations and related facilities, at the date of commercial operation.

u IvresTMEsT SECterTils Investment securities are classifial as held to maturity and are carried at amortized cost, adjusted for the amortization of i

premiums and accretion of discounts. Premiums and discounts are amortized and accretal to operations using the level yield method, adjustal for prepayments as applicable. SMEPA has the intent and the ability to hold these assets as investments until their estimated maturities. Under certain circumstances (including the significant deterioration of the issuer's credit worthiness or a significant change in statutory or regulatory requirements), securities held to maturity may be sold.

L l)lf1RRID OfARGLs Cost of prehininary surveys for development of possible methods to obtain and deliver energy to fulfill members' future requirements, including feasibility studies leading to fmancing necessary plant expenditures, are recorded as deferral e

9 charges. If construction of a project results from such surveys, the deferred charges are transfermi to the cost of the facilities. If a preliminary survey is ab:mdoned, the costs incurred are written off.

liond issue costs are being amortized by the straight line method, which does not differ materially from the interest methml, over the term of the related debt. The amortization during the period of construction is capitalized.

i I

1 e

Deferr'ed decontamination and decommissioning of past uranium enrichment operations represents SMEPKs ten percent portion of the GGNS assessment pursuant to provisions of the Energy Policy Act of 1992. The Act assesses domestic nuclear utilitfes fees which will be used to establish a fund into which payments from utilities and the federal government will be placut The Act requires that regulators treat these assessments as costs of fuel when paid. SMEPA plans to expense these amounts as they are paid over fifteen years.

r, branvAGE C4 Pit:41 The bylaws of SMEPA provide that any excess of revenue over expenses and accumulated prior year deficits shall be treated as advances of capital by the member patrons and credited to them on the basis of their patronage.

c. bnRat.tscE Po\\nR SMEPA record 3 the electdcal power received or provided on an interchange basis at its cost as determined under various contractual arrangements.

II. EstPLOYEE HDEFH5 Substantially all of SMEPNs employees participate in the National Rural Electric Q) operative Association ("NRECA")

retirement programs, which include both a defined benefit pension plan and a defined contribution pension plan. Both plans are qualified under Section 401 and are tax-exempt under Section 501(a) of the internal Revenue Code. SMEPA makes annual contributions to the defined benefit pension plan equal to the amounts paid to NRECA for pension expense except for the period since July 1,1987, when a moratorium on contributions was placed in effect due to reaching full funding limitation. In this multiemployer plan, which is available to all member cooperatives of NRECA, the accumulated benefits and plan assets are not determined or alk)cated separately by individual employer. SMEPA paid $35000 in pension expense for the defined benefit pension plan in 1995 due to the lifting of the moratorium and $159.000 in 1994. SMEPA makes monthly payments to NRECA for the bcnefit of those employees who voluntarily participate in the defined contribution pension plan. SMEPA expenses the payments as they are accrued and such expense amounted to $316,000 and $475,000 for 1995 and 1994, respectively.

L IvCu\\tE E4XES SMEPA is exempt from United States income taxes pursuant to Section 501(c)(12) of the Internal Revenue Code, which requires that at least 85% of SMEPAs gross income be derived from its members.

J. C4ut no C4ut E UIV4LEAT5 Q

l'or purposes of reporting cash flows, all temporary investments with maturities of three months or less when purchased are deemal to be cash equivalents.

K. NECLAWHC4HoAS Certain reclassifications have been made in the 1994 financial statements to conform to the 1995 methal of presentation.

NOTE 2 - ELECTRIC UTILITY PLANT Electric utility plant consisted of the following (in thousands):

1Ei 1924 Nuclear generation plant 5 400,273

$ 3%,n60 Non-nuclear generation plant 214,418 213,128 Transmission plant 95.669 91,258 Coal properties and preparation plant 23,235 23,235 Land and land rights 13,692 13,665 General plant and equipment

_ 14334 14.172 Electric plant in service 762,221 751,518 Construction work in process 13,161

__ _ 13,396 5 775,382

$ 764,914

-4 NOTE 3 - COMMITMENTS REGARDING GRAND GULF NUCLEAR STATION O

SMEPA owns a 10% undivided interest in a nuclear generating station known as " Grand Gulf Nuclear Station'(GGNS), which was to consist of two 1250-megawatt generating units. Commercial operation for Unit i began on July 1,1985. In September 1985, the construction of Unit 11 was suspended by regulatory authorities.

In September 1989, the majority owner elected to abandon Unit II. SMEPKs accumulated cost in Unit 11 was $104,000,000, includmg allowance for funds used during construction of $42,000,000. After transfers to GGNS Unit I of Inventories and property, $91,180,000 was transferred to unrecovered plant cost on the balance sheet and $10,130,000 was included as a loss in the statement of net margins and patronage capital for 1989. This accounting for Unit 11 has been reviewed and approved by Rl'S (see Note 1).

\\

s In 1990, SilEPA submitted a formal plan to the Nuclear Regulatory Commission ( NRC") that demonstrated ' assurance that sufficient financial resources would be available at the time it becomes necessary to decommission l' nit I ld addition, SilEPA received approval from the Internal Revenue Service to establish a tax free" grantor trust as a vehicle to fund the estimated decommissioning costs. SAIEPA has contributed to the trust amounts sufficient to fund the estimated accrued decommissioning obligation that existed at December 31,1995 and 1994. SalEPA estimates, based on a revised calculation, that the funding requirement will approximate $571,000 annually through 2022, the expected date of decommissioning. The estimated funding requiremer,t will continue to be recalculated and adjusted periodically.

NOTE 4 - INVESTMENTS IN ASSOCIATED ORGANIZATIONS Investments in associated organizations are stated at cost and consisted of the following (in thousands)

L925 1294 National Rural Utilities Cooperative F! nance Corporation ( CFC") Certificates:

Alembership subscription

$ 6,223 5 6.223 Loan and guarantee 4,018 4,089 Other 405 402

~ Tio,646

~515,'714 CFC membership subscription certificates bear interest at a 5.0% rate and mature in 2070 through 2080. The loan and guarantee certificates bear interest at rates between 3.0% and 99t and mature in 2007 through 2015.

i NOTE 5 - INVESTMENT SECURITIES TO BE IIEl.D TO M ATURITY The amortized cost and related approximate fair values of investment securities to be held to maturity were as follows (in thousands)

Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31,1995 Investments in associated organizations

$ 10,646

$ (2,613)

$ 8,033 Debt service reserve - obligations of states and political subdivisions 4,473

$ 508 4,981 Decommissioning trust investments 4,311 565 4,876 Other long term investments - primarily CFC obligations 1,500 8

1,508 Other invested funds - primarily CFC obligations

___ 32,433

_ _32,643 210 Total

$ 53,363

$ 1,291

$ (2,613)

$ 52,041 December 31,1994 Investments in associated organizations

$ 10,714

$ (3,899)

$ 6,815 Debt service reserve - obligations of states and political subdivisions 8,502

$ 283 8,785 Decommissioning trust investments 3,474 18 (134) 3,358 l

Other long-term investments - primarily CFC obligations 15,444 70 (45) 15,469 Other invested funds - primarily CFCobligations 11,002 (15) 10.987 o

w Total

$ 49,136

$ 371

$ (4,093)

$ 45,414 ed iS H

e The amortized cpst and approximate fair value of investment securities to be held to maturity at December 31. lW5, by contract,ual maturity, were as follows (in thousands)

Amortized Fair Cost Value l

l Due in one year or less

$ 32,433

$ 32,M3 Due after one year through five years 4,488 4,835 Due after ten years 16,442 14.563

$ 53,363

$ 52,041

=::

Actual maturities may differ from contractual maturities because of the borrowers' right to call or prepay obligations.

NOTE 6 - DEFERRED CilARGES

' The followiiig is a summary of amounts recorded as deferred charges (in thousmas) 1225 1914 Unamortized penalties on repriced debt

$ 30.025 5 31,696 l'namortized debt discount and issuance cost 1,212 1,297 Past service retirement benefit cost 350 420 Nuclear fuel costs 47 27 Deferred decontamination and decommissioning of past uranium enrichment operations 1,587 1,788

$ 33,221

$ 35,228 i

4 NOTE 7-PATRONAGE CAPITAL Patronage capital consisted of the following (in thousa ids) 1225 L924 Cumulative margins

$ 72,721 5 62,539 Less: Retirements to date

_,5,853 5,853

$ 66,868

$ 56,686

-Under the provisions of debt covenants, until the patronage capital equals or exceeds forty percent of the total assets of SMEPA, the return to patrons of contributed capital is generally limited to twenty-five percent of the patronage capital or margins received by SMEPA in the prior calendar year. The patronage capital of SMEPA represents 8.9% and 7St of the total assets at December 31,19)5 and 17)1 respectively NOTE 8 - Sil0RT-TERM BORROWINGS SMEPA has a $25,000,000 short-term line of credit available with CFC which expires in September,1936 and a $5,000,000 short-term line of credit with a bank which expires in July,19)6. At December 31,1915 and 17)4, SMEPA had no borrowings against these lines of credit.

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e NOTE 9 - 1.ONG TERM DEllT Long term debt consisted of the following (in thousandsk L995 1994 Morto, age notes payable to Federal Financing lkink (-FFil") at interest rates varying from 5.48tb to 10.989t, due in quarterly installments through 2020

$ 527,767 5 542,545 2% RUS mortgage notes payable, due in quarterly installments through 2009 19,276 21,189 5% RUS mortgage notes payable, due in quarterly installments through 2015 17,276 18.010 5% RUS mortgage notes payable, due in monthly installments through 2019 11,309 10,732 Mortgage notes payable to National Ittnk for Cooperatives at interest rates varying from 697t to 8.50%, due in quarterly installments through 2019 2,695 2,810 Lamar County, Mississippi, Pollution Control lk)nds.

1978 A Series,5.85% to 6.129t, due semi-annually ti. rough 2008 1,790 1,885 1978 A-1 Series,6.25% due semi-annually through 2008 655 685 1993 S Series,415% to 5.00%, due annually through 2007 24.335 25,825 Claiborne County, Mississippi, Pollution Control llands:

a 1985 G Series, variable interest rates (3.45% to 43rb at December 31,1995) due annually through 2015 45,txxi 45.800 Mortgage notes payable to CFC bearing interest at variable rates (6.20% at December 31,1995) due in quarterly installments through 20"

'"l 2,236 Unamortized net premium on 1993 S Series ikmds

,_ _ 88 95 652,412 671,812 Less current maturities 25.677 20.294

$ 626,735

$ 651,51H Substantially all assets of SMEPA are pkdged as collateral on long term debt.

Approximate annual maturities (schedukd periodic principal payments) of long-term debt for the next five years are as follows (in thousands)

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1996

$25,677 2

1997

$22,359

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1998

$24,060 1999

$25,184 2txx)

$27,178 The unamortind net premium on bonds issued is being amortized over the remaining life of the affected innds using a method which approximates the interest method

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SMEPA pa'id approtimately $44,H0,000 and $47,94000 in 1995 and 1994, respectively,in interest on long term debt.

SMEPA is regulrdt by mortgage covenants to maintain certain financial ratios of interest coverage and annual debt senice e

coveragd SMEPA was in compliance with such requirements at December 31,1995 and 1991 SMEPA amended certain FFli mortgage notes in 1994 accomplishing a repricing of $232.171,000. Penalties of $24,291000 were paid upon execution and will be deferred and amortized by equal monthly amounts over the life of the debt. Amortization of repricing penalties was $1,655000 in 1995 and $1,577,000 in 1994.

NOTE 10 - DEFERRED CREDITS AND OTilER LONG-TERM LIAlllLITIES The following is a summary of deferred credits and other long-term liabilities (In thousands)

IM 1214 Postretirement benefit obligation (other than pensions)

$ 2,248

$ i,997 Deferred decontamination and decommissioning of past uranium enrichment operations

~ I,438 1,435 Prior service pension benefit cost

_ _ _ 28 41

$ 3,714

$ 3,473 NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by SMEPA in estimating its fair value dischisures for financial instruments-Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value.

Investment securities: The fair values for marketable debt and equity securities are based on quoted market prices and the present value of future cash flows discounted at a commensurate market rate. (See Note 5 for additional information.)

1.ong-term debt: The fair values of SMEPA's long-term debt are estimated using discounted cash flow analyses based on SMEPA'r current incremental borrowing rates for similar types of borrowing arrangements and rates which would be charged by the applicable issuer where appropriate.

The carrying amounts and approximate fair values of long-term debt are as follows (in thousands)

IM IM L914 1224 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value long-term debt, including current maturities:

FFB

$ $27,767

$ 570,690

$ 542,545 5 495,84i RUS 47,861 44,736 49,931 41,94i Pollution Cont;'ol Bonds 71,868 72,062 74,290 72,231 Other 4,916

_ 4,916 5,046

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$ 652,412

$ 692,404

$ 671,812

$ 615,058 There was no material difference between the contract or notional amount and the estimated fair value of kran commitments.

The aggregate estimated fair value amounts presented do not represent the underlying value of SMEPA and may not be Indicative of amounts that might ultimately be realized upon disposition or settlement of these assets and liabilities.

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NOTE 12-EMPLOYEE BENEFITS

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SMEPA provides certain health benefits to retired employees and their eligible dependents and also provides life insurance

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benefits to a closed group of seven employees who retired prior to January 1,1990. The approximate perk >dic expense for postretirement benefits included the following components (in thousands) j IM 1214 e

i Service cost of benefits earned S 85

$ 85 interest cost on accumulated benefit obligation Total current year expense 167

, 141

$252

$226

s The Accumulated Postretirement lienefit Obligallon ('APilO')is comprised of the following (in thousandsk*

1995 1994 Retirees and dependents 5 359

$ 319 Fully eligible active plan participants 213 189 Active participants not yet eligible 1,676 lA89

$ 2,24N

$ 1,997 The weighted average discount rate used in determining the APB0 was nine percent. The assumed health care cost trend rate of increase used in measuring the APB0 was 11.3 and 11.5 percent in 1995 and 1994, respectively, declining to six percent by the year 2005.

The health care cost trend rate of increase assumption has a significant effect on the APliO and perkKlic expense. A one percent increase in the trend rate for health care costs would have increased the APB0 by approximately 231, and service and interest costs by approx!mately 253,.

NOTE 13 - ACCOUNTING STANDARDTOBE ADOPTEDIN TilEFUTURE in 199i the Financial Accounting Standards lioard issued Statement of Financial Accounting Standards No.121," Accounting for the Impairment of I.ong 1.ival Assets and for 1.ong-l.ived Assets to tw Disposed or, which is effective for fiscal years twginning after December 15,1995. This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management anticipates the adoption of SFAS 121 will not have a material effect on SMEPAs financial statements.

NOTE 14 - CONIMITMENTS AND CONTINGENCIES SMEPAs coal supply agreement provides for minimum annual purchase requirements.

SMEPA has construction commitments for various non nuclear utility projects totaling approximately $3,591,000.

SMEPA is a defendant in certain litigation incurred in the normal course of business. Management, based on advice of kgal counsel,is of the opinion that the ultimate resolution of the litigation will not have a material adverse effect on SMEPAs financial statements.

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