ML20115E289
| ML20115E289 | |
| Person / Time | |
|---|---|
| Site: | Trojan File:Portland General Electric icon.png |
| Issue date: | 04/09/2020 |
| From: | Eugene Water & Electric Board |
| To: | Office of Nuclear Material Safety and Safeguards |
| Shared Package | |
| ML20115E321 | List: |
| References | |
| VPN-005-2020 | |
| Download: ML20115E289 (101) | |
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Table of Contents PAGE Board of Commissioners and Officers 1 Report of Independent Auditors 2-3 Management's Discussion and Analysis 4-22 Financial Statements
. Statements of net position 23-24 Statements of revenues, expenses, and changes in net position 25-26 Statements of cash flows 27-29 Statements of changes in fiduciary net position 30-31 Notes to financial statements 32-80 Required supplementary information 81-85 Supplementary Information Electric system long-term bonded debt and interest payment requirements, including current portion (unaudited) 86-75 Water system long-term bonded debt and interest payment requirements, including current portion (unaudited) 88 Electric system analysis of certain restricted cash and investments for debt service (unaudited) 89 Water system analysis of certain restricted cash and investments for debt service (unaudited) 90 Sustainability accounting standards disclosures (unaudited) 91-92 Audit Comments Report of independent auditors on compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Oregon Minimum Audit Standards 93-94
Board of Commissioners Mr. Steve Mital Wards 1 & 8 President Ms. Mindy Schlossberg "At Large" Vice-President Mr. John Brown Wards 4 & 5 Member Ms. Sonya Carlson Wards 6 & 7 Member Mr. Dick Helgeson Wards 2 & 3 Member Officers Mr. Frank Lawson General Manager, Secretary Ms. Anne Kah Assistant Secretary Ms. Susan Fahey Treasurer Ms. Deborah Hart Assistant Treasurer Commissioners' contact information may be found at www.eweb.org. Written communication may be sent to the attention of commissioners or officers at this address:
- EWEB, 4200 Roosevelt Boulevard Eugene, OR 97 402 1
Report of Independent Auditors The Board of Commissioners Eugene Water & Electric Board Report on the Financial Statements We have audited the accompanying statements of net position of the Electric System, Water System and Combined Total Systems, and the statements of fiduciary net position of the Retirement Benefits Trust (the Trust) of Eugene Water & Electric Board (the "Board"), as of December 31, 2019 and 2018, and the related statements of revenues, expenses and changes in net position and cash flows of the Electric System, Water System and Combined Total Systems for the years then ended, and the statements of changes in fiduciary net position of the Trust for the years then ended, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Electric System, the Water System, Combined Total Systems and the Retirement Benefits Trust of the Board as of December 31, 2019 and 2018, and the respective changes in financial position and cash flows for the Electric System, the Water System, and Combined Total Systems, and changes in financial position for the Retirement Benefits Trust of the Board for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, schedule of proportionate share of the net pension liability, schedule of contributions - pension, schedule of employer contributions - post-employment health care benefits, schedule of changes in total OPES liability and related ratios, and the schedule of investment returns be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Board's financial statements. The Electric System and Water System long-term bonded debt and interest payment requirements (including current portion) schedules and the Electric System and Water System analysis of certain restricted cash and investments for debt service schedules and sustainability accounting standards disclosures ("supplementary information") are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Report on Other Legal and Regulatory Requirements In accordance with the Minimum Standards for Audits of Oregon Municipal Corporations, we have issued our report dated March 13, 2020, on our consideration of the Board's compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statues as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance.
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Eugene Water & Electric Board Management's Discussion and Analysis The following discussion provides an overview of the financial results of the Eugene Water & Electric Board (EWES) for the years ended 2019, 2018, and 2017. This unaudited discussion is intended to be used in conjunction with the financial statements and note disclosures following this section.
EWEB is the largest publicly-owned electric and water utility in Oregon. The City of Eugene (the City) commenced utility operations in 1908 wihthe purchase of a privately-owned water system. In 1911, upon completion of the City's first municipal hydroelectric power plant, the City organized the Eugene Water Board to operate the City's electric and water utilities. The name of the Eugene Water Board was changed to the Eugene Water & Electric Board in 1949.
EWES is chartered by the City and supplies electric and water service within the city limits of Eugene and to certain areas outside the city limits. EWES operates as a primary government, and is not considered a component unit of the City. EWES is governed by a five member Board of Commissioners who are elected by voters residing in the City. The Board of Commissioners has authority to set prices for water and electric services. Prices are set based on the cost of service delivery, including operating, capital, and debt service expenses.
The Statements of Net Position report assets, deferred outflows, liabilities, deferred inflows and net position as of the end of the financial year, December 31. The Statements of Revenues, Expenses and Changes in Net Position report revenues and expenses occurring during the financial year. The Statements of Cash Flows report cash from operating activities, investing activities, non-capital financing activities as well as capital and related financing activities.
Electric System The Electric System supplies service to 94,000 residential, commercial, and industrial customers within the City of Eugene and areas along the McKenzie River between the cities of Walterville and Vida where two of EWES's hydro-power plants are located. The total service area covers 236 square miles. The Electric System owns and operates approximately 1,100 circuit miles of overhead and underground distribution lines, 129 circuit miles of transmission lines, and 38 distribution substations. Power delivered to customers is supplied by Bonneville Power Administration (BPA) contracts, EWES-owned generation resources, other contracted resources, and purchases from the wholesale energy markets. EWEB's power supply sources are primarily hydro-power, but also includes wind, biomass, steam, and solar.
2019 MWh Hydro-power 2,371,222 59%
Wind 158,169 4%
Steam 236,042 6%
Biomass 114,588 3%
Other market purchases 1,130,227 28%
4,010,248 100%
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Eugene Water & Electric Board Management's Discussion and Analysis 2019 MWh EWEB-owned generation 421,512 11%
Contracted generation 2,458,509 61%
Market purchases 1,130,227 28%
4,010,248 100%
Net Operating Revenue Electric System net operating revenue for 2019 decreased compared to 2018 and 2017. Higher power market prices in the first quarter of 2019 influenced the rise in both revenues and expenses compared to prior years. In 2019, a change in accounting for certain wholesale market transactions presented figures at gross amounts whereas 2018 and 2017 netted similar transaction amounts in each year. The change did not influence net operating revenue.
A snowstorm in February 2019 caused severe outages in the region. Restoration efforts totaled over $4 million. FEMA allocated funds to reimburse 75% of eligible restoration costs, and management expects to receive the funds in 2020. 2018 and 2017 did not have severe storm events requiring extensive restoration.
The 2017 financial statements were restated for comparability due to accounting and financial reporting requirements for Other Post-employment Benefit Plans (OPEB).
Electric S;!'.stem - Net Operatin~ Revenue Increase Increase (Restated) (Decrease) (Decrease)
(in thousands} 2019 2018 2017 2019/2018 2019/2017 Operating revenue $ 263,339 $ 248,973 $ 254,645 $ 14,366 $ 8,694 Operating expense (262,654} (232,694} (227,324) (29,960} (35,330)
Net operating revenue $ 685 $ 16,279 $ 27,321 $ (15,594) $ (26,636)
Operating Revenue Operating revenue varies from year to year based on customer load, generation available for sale, and the market prices for generation available for sale. Residential customers make up approximately 90% of EWEB's customer base and approximately 50% of customer revenue. Sales to residential customers are variable based on weather trends. Operating revenue from residential customers was impacted by cold weather in the first quarter of 2019 and 2017, a time when consumption is generally at its peak for the year. The first quarter of 2018 was warm compared to historical weather trends.
Recent residential price adjustments have been as follows:
2019 No change 2018 No change 2017 No change 5
Eugene Water & Electric Board Management's Discussion and Analysis Commercial and industrial accounts make up approximately 10% of the EWEB customer base, and approximately 50% of customer revenue. Commercial and industrial sales are more reactive to economic conditions rather than weather conditions. Commercial and industrial consumption was flat compared to 2018 and dropped slightly compared to 2017.
Electric Sz'.stem - Sales to Customers Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Residential $ 100,560 $ 97,673 $ 104,263 $ 2,887 $ (3,703)
Commercial and industrial 100,605 102,214 103,115 (1,609) (2,510)
$ 201,165 $ 199,887 $ 207,378 $ 1,278 $ (6,213)
Electric Sz'.stem - Sales to Customers mWh Increase Increase (Decrease) (Decrease) 2019 2018 2017 2019/2018 2019/2017 Residential 938,625 914,754 986,093 23,871 (47,468)
Commercial and industrial 1,429,042 1,427,882 1,468,808 1,160 (39,766) 2,367,667 2,342,636 2,454,901 25,031 (87,234)
EWEB sold power supply in excess of load into the wholesale markets. The Electric System has an active hedging program to manage price risk associated with wholesale power sales. Market prices have steadily improved over the past three years. Several factors contributed to higher prices in 2019, including reduced supply due to unfavorable hydro conditions in the region, low renewable resources availability, and limited natural gas supply. 2017 prices were particularly lower in comparison with an excess of supply due to a favorable spring runoff that increased overall volumes available to the wholesale market.
2019 2018 2017 Retail sales $ 201,165,722 $ 199,887,212 $ 207,378,148 Retail volume 2,367,667 2,342,636 2,454,901 Average price per mWh $ 84.96 $ 85.33 $ 84.48 Wholesale sales $ 51,885,415 $ 41,201,400 $ 39,249,845 Wholesale volume 1,588,379 1,477,941 1,997,333 Average price per mWh $ 32.67 $ 27.88 $ 19.65 6
Eugene Water & Electric Board Management's Discussion and Analysis Operating Expenses Electric System operating expenses include purchased power and wheeling expense. Prices are set for BPA and contracted resources by their respective contracts, which may escalate over time. Market purchases are made at times when resources aren't adequate for customer load or to support the EWEB hedging program, and are subject to price variability to the extent those sales are not fully hedged.
Purchased power costs increased compared to 2018 and 2017, as a result of cost escalations in contracted resources, and an increase in market prices. In addition, an accounting change for contracted power trades occurred in 2019. Gross amounts are recorded for offsetting purchase and sale transactions for the same delivery period and the same location, rather than net amounts. Wheeling decreased in 2019 due to the sale of the Foote Creek wind generation project.
Transmission and distribution expense was higher in 2019 due to restoration efforts following a severe snow storm in February 2019. Steam and hydraulic generation costs increased in 2019 and 2018, compared to 2017, due to maintenance for a co-generation plant. The Electric System's allocation of shared costs with the Water System was updated in 2019 to 80% from 82%. The 2% decrease contributed to declines in customer accounting and administrative and general. Conservation expense increased from 2018 due to increased investments in customer conservation projects. Depreciation expense has been stable over the past three years. In 2019, EWEB received a forty-year operating license for the Carmen-Smith Hydroelectric Project. Preliminary costs for implementing the license were placed into service and are being amortized over the term of the license.
Electric S:tstem - Oeeratin9 Exeenses Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Purchased power $ 153,922 $ 125,272 $ 118,166 $ 28,650 $ 35,756 System control 4,269 4,383 4,896 (114) (627)
Wheeling 13,107 13,312 13,915 (205) (808)
Steam and hydraulic generation 12,277 12,824 11,338 (547) 939 Transmission and distribution 24,526 22,585 21,658 1,941 2,868 Customer accounting 7,668 7,990 8,350 (322) (682)
Conservation expenses 3,633 3,299 4,060 334 (427)
Administrative and general 20,467 21,892 22,718 (1,425) (2,251)
Depreciation on utility plant 22,785 21,137 22,223 1,648 562 Operating expenses $ 262,654 $ 232,694 $ 227,324 $ 29,960 $ 35,330 Other Non-operating Revenue, Expense, and Capital Contributions For the Electric System, non-operating revenue was primarily miscellaneous revenue from sources unrelated to core business functions, including investment earnings, rental revenue and claims revenue.
In 2019, non-operating revenue increased compared to 2018 primarily due to settlement of a claim for damages incurred on a hydro-generating project. Non-operating revenue was higher in 2017 due to an approximately $3 million interest payment from the Water System and $3.5 million in FEMA grant revenue. Non-operating expense is primarily interest expense for long-term debt and other revenue deductions including taxes and losses on the disposition of property. It is lower in 2019. In 2018, non-operating expenses included a $4.1 million accounting loss on the disposition of surplus riverfront property. In 2017, non-operating expenses increased due to a $15.7 million accounting loss related to the in-substance defeasance of bonds.
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Eugene Water & Electric Board Management's Discussion and Analysis Capital contributions represent amounts customers contribute to construct assets that become part of plant in service for the Electric Utility. Capital contributions can fluctuate due to the timing of customer-driven work.
(in thousands) Electric System - Non-operating Revenue and Expense Increase Increase (Decrease) (Decrease) 2019 2018 2017 2019/2018 2019/2017 Non-operating revenue $ 10,273 $ 8,292 $ 12,572 $ 1,981 $ (2,299)
Non-operating expense (8,723) (12,056) (25,587) 3,333 16,864 Capital contributions 2,606 4,274 5,287 (1,668) (2,681)
Total $ 4,156 $ 510 $ (7,728) $ 3,646 =$=====1=1,=88=4=
Special Item In 2019, the Electric System made a $16.7 million deposit to an Oregon Public Employee Retirement System (OPERS) side-account. It reduced EWEB's employer contribution rate as of November 1, 2019 and will provide ongoing savings. In addition, this deposit received a $4.2 million match from the state's Employer Incentive Fund.
- In 2017 the Board elected to join the State & Local Government Rate Pool (SLGRP) to mitigate risks related to employer contribution rates. Previously, the Board's status was as an independent employer participating in OPERS. As an independent employer, actuarial valuations to determine employer contribution rates used Board specific demographics. As a participant in the SLGRP, valuations to determine employer contribution rates use the demographics of pool participants. The Board's specific demographics generally resulted in contribution rates higher than the SLGRP, and the Board's SLGRP employer contribution rates were lower once they took effect in July 2019. Based on OPERS actuarial calculations, $32.6 million of the Board's actuarial liability as an independent employer, was assigned as the transition liability to move from independent to SLGRP status. This maintained future rate equity among other SLGRP participants. During 2018, the Electric System recognized $24.8 million for its portion of the transition liability as a special item expense.
During 2018, the Electric System also recognized $1.5 million as a special item expense to fund the OPEB trust. Board policy requires contribution levels be evaluated when the funded status of the OPEB plan is 70% or less.
Total Assets and Deferred Outflows of Resources Total assets for the Electric System include utility plant net of depreciation, current assets representing cash and investments, accounts receivable, materials inventory, pre-paid expenses, long term investments, and non-current assets such as jointly-owned companies accounted for under the equity method for investments.
Current assets are influenced by cash balances, investments having maturities one year or less, and changes in balances of customer and other receivables at year end. In 2019, current assets decreased compared to 2018 due to a payment of $16.7 million to OPERS. In 2018, a payment of $26.3 million in one-time pension and OPEB expenses also reduced cash balances.
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Eugene Water & Electric Board Management's Discussion and Analysis In 2019, the investments classified as non-current decreased compared to 2018 and 2017 due in part to overall portfolio reductions. Reduced purchase activity for investment securities increased amounts classified as current, and current funds were used for payments to OPERS. In addition, $23.5 million of preliminary costs associated with the Carmen-Smith operating license moved to plant in service during 2019. The regulatory asset for pension debits also declined by $17.1 million in 2019 as costs were recognized in the current year through payroll and special one-time contributions. In 2018, non-current assets decreased from 2017 due in part to the disposition of surplus riverfront property.
Deferred outflows of resources represent transactions occurring in future periods and are not classified as assets. In 2019, deferred outflows of resources increased primarily due to the $20.9 million pension contributions after the measurement date for actuarial reporting.
Electric Slstem - Assets and Deferred Outflows Increase Increase (Restated) (Decrease) (Decrease)
(in thousands l 2019 2018 2017 2019/2018 2019/2017 Net utility plant $ 407,800 $ 367,758 $ 353,877 $ 40,042 $ 53,923 Current assets 153,657 170,448 185,698 (16,791) (32,041)
Non-current assets 87,369 150,381 157,451 (63,012) (70,082)
Deferred outflows of resources 52,351 45,530 46,746 6,821 5,605 Total assets and deferred outflows of resources $ 701,177 $ 734,117 $ 743,772 $ (32,940) $ (42,595)
Capital Asset Activity Capital projects for the Electric System are categorized as Compulsory, Strategic, or Risk Based Elective Improvements.
Compulsory work is mandatory to ensure EWES meets minimum service, regulatory, and safety requirements. Compulsory work develops from both internal and external drivers. There is minimal opportunity to change the compulsory portion of capital plans due to legal and policy requirements.
Strategic projects and programs are derived from strategic direction and are typically multiyear and multimillion-dollar efforts. Strategic improvements are moderately flexible in nature and can be balanced with efforts to prioritize compulsory work or other drivers, such as affordability or operational improvements.
Risk Based Elective Improvements are elective in that Staff can plan and schedule them to balance within the boundaries of the capital plans and the long term financial plans as well as staffing and resources available. This work is driven by the goal to maintain system condition and Age of Asset metrics in order to maintain reliability. Reducing the level of work in this area will ultimately result in the increase of compulsory work and reduction in reliability.
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Eugene Water & Electric Board Management's Discussion and Analysis Electric System - Capital Assets Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Plant in service $ 816,318 $ 786,987 $ 760,426 $ 29,331 $ 55,892 Accumulated depreciation (446,919) (436,984) (422,005) (9,935) (24,914)
Property for future use 1,345 783 943 562 402 Construction work in progress 37,056 16,972 14,513 20,084 22,543 Net utility plant $ 407,800 $ 367,758 $ 353,877 $ 40,042 $ 53,923
=
Ongoing capital improvements included:
Electric System - Capital Projects 2019 2018 2017 Transmission & Distribution Transmission & Distribution Buildings & Land Generation Generation Transmission & Distribution Information Technology Information Technology Transportation Equipment Substations & Telecom Substations & Telecom Generation Buildings & Land Information Technology Transportation Equipment Substations & Telecom AMI AMI AMI Downtown Network Downtown Network Downtown Network Holden Creek Substation Holden Creek Substation Holden Creek Substation Consolidation of Operations Leaburg Roll Gate Rebuild Leaburg Roll Gate Rebuild Distribution Resiliency Lane Transit District EMX Upgrades Project Information Technology-WAM Carmen Smith License Carmen Smith License Carmen Smith License Implementation Implementation Implementation More detailed information about plant activity can be found in the note disclosures to the financial statements, Note 3 - Utility Plant.
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Eugene Water & Electric Board Management's Discussion and Analysis Debt Activity The Electric System issues revenue bonds or notes payable to fund certain capital projects. During 2019, the Electric System made scheduled debt service payments which decreased outstanding debt compared to 2018 and 2017. For more detailed information, see Note 12 - Long-Term Debt.
Electric System bonds are rated Aa2 by Moody's Investors Service, AA- by Standard and Poor's Rating Services, and AA- by Fitch Ratings.
Electric System - Debt Activity Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Total outstanding debt $ 198,672 $ 209,279 $ 219,934 $ (10,607) =$===(2=1=,2=62::::::::)
Liabilities and Deferred Inflows of Resources Current liabilities are primarily accounts payable, accrued payroll, and the current portion of long-term debt. Current liabilities decreased in 2019 compared to 2018 due to fluctuations in accounts payable and accrued payroll. Total liabilities were influenced by decreases in the net pension liability and net OPEB liability, as well as regular debt service payments mentioned above.
The increase in deferred inflows of resources in 2019 was primarily due to changes in the employer proportion related to EWEB's PERS net pension liability.
Electric System - Liabilities and Deferred Inflows Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Current liabilities $ 38,378 $ 41,051 $ 36,479 $ (2,673) $ 1,899 Total liabilities 301,461 336,181 339,042 (34,720) (37,581)
Deferred inflows of resources 21,277 11,811 8,591 9,466 12,686 Total liabilities and deferred inflows of resources $ 322,738 $ 347,992 $ 347,633 $ (25,254) $ (24,895)
Net Position The net investment in capital assets component of net position, which reflects the value of capital assets net of the debt incurred to acquire those assets, has increased each year since 2017. Capital assets have been added each year, while corresponding debt levels associated to capital improvements have declined.
Restricted net position is subject to external legal restrictions on its use and is primarily representative of reserves for payments of debt service, customer donations, and amounts deposited in escrow accounts relating to the Harvest Wind Project. Restricted net position increased in 2019 due to investment income on the debt service reserve and donations to the customer care program.
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Eugene Water & Electric Board Management's Discussion and Analysis Unrestricted net position represents the accumulation of net assets that are not capital assets, or subject to external restrictions on their use. In 2019 and 2018, unrestricted net position decreased due to payments made from existing cash reserves for unfunded liabilities related to retirement benefits.
Overall net position has decreased by 4.5% compared to 2017.
Electric Sl'.stem - Net Position Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Net investment in capital assets $ 241,620 $ 206,740 $ 195,359 $ 34,880 $ 46,261 Restricted 6,552 6,122 6,367 430 185 Unrestricted 130,267 173,264 194,414 (42,997) (64,147)
Total net position $ 378,439 $ 386,126 $ 396,140 $ (7,687) $ (17,701)
Reserves and Investment Activity The Board of Commissioners has established Electric System designated reserve accounts for specific purposes including funding routine capital activity, significant one-time expenses, and to protect customers from the effects of large fluctuations in power prices, generation volume and counterparty risk.
The Board has authority to re-evaluate and redirect designated and unrestricted reserves based on current priorities.
In 2019, the Board used $16. 7 million of reserves to participate in an Employer Incentive Fund program with PERS. State contributed funds matched 25% of EWEB contributions and reduced EWEB's employer contribution rate starting on November 1, 2019. During 2018, the Board used $24.8 million of reserves to pay a transition liability to Oregon PERS, and $1.5 million to fund its OPEB trust in order to reduce employer contribution rates. In 2017, the Board approved the use of $24.2 million in designated funds to defease debt. Each year the Board reviews reserves in excess of target for the highest and best use of cash.
(in thousands) Electric Sl'.stem - Reserve Balances Target 2019 Working cash $ 36,000 $ 37,664 Designated funds Operating reserve 4,000 4,083 Self-insurance reserve 1,720 1,774 Power reserve 17,000 17,000 Capital improvement reserve 22,000 22,188 Rate stabilization fund 5,000 24,469 Business growth & retention loan fund 1,997 Designated funds total $ 49,720 $ 71,511 The Electric System also maintained restricted reserves for purposes including the payment of principal and interest on debt, and proceeds from bond issuance restricted for use on capital projects.
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Eugene Water & Electric Board Management's Discussion and Analysis Working cash and short-term investments are not held in reserve and were available for the day-to-day operations of the utility. They were classified as unrestricted.
All Electric System working cash and reserves were held in depository accounts, the Local Government Investment Pool, or in high quality securities. Investment strategy focused on the following in priority order: preserving principal, liquidity of funds, and investment returns.
Water System The source of supply for the Water System is the McKenzie River, with headwaters in the Cascade Range east of Eugene. Intake and purification of water occurs at the Hayden Bridge Water Filtration Plant. In addition to the filtration plant, the Water System owns and operates 23 reservoirs, 27 pump stations, and approximately 800 miles of transmission and distribution mains. The Water System provides water service to 54,000 residential, commercial, and industrial customers within the EWEB service territory, and also supplies wholesale water to the River Road and Santa Clara water districts outside Eugene. In addition, EWEB has surplus water contracts with the City of Veneta and the Willamette Water Company.
Net Operating Revenue 2019 water net operating revenue decreased by 16% compared to 2018 and 17% compared to 2017.
Water Slstem - Net Oeeratin9 Revenue Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Operating revenue $ 38,092 $ 39,393 $ 39,565 $ (1,301) $ (1,473)
Operating expen_se (26,044) (24,792) (24,952) (1,092) (1,092)
Net operating revenue $ 12,048 $ 14,601 $ 14,613 $ (2,393) $ (2,565)
Operating Revenue Consumption of water varies depending on the season and the weather pattern of a particular year. Peak consumption is in the summer months. Consumption decreased in 2019 compared to the prior two years.
There was an earlier start to fall precipitation in 2019, compared to prior years, which shortened the irrigation season. Although retail consumption was comparable to 2017, overall revenue declined from 2017 by 4%. In 2013, the Board approved a price increase designed to accumulate funds for a Willamette Treatment Plant and a 2018 price decrease suspended the collection of those reserve funds while the Board refines the capacity and timing of the project.
Residential accounts make up 90% of the customer base of the Water System, and approximately 60% of retail consumption. Similar to the Electric system, residential consumption is more responsive to weather conditions than commercial and industrial. Water sales revenue for retail customers was lower compared to 2018, and decreased by 7% compared to 2017.
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Eugene Water & Electric Board Management's Discussion and Analysis Recent residential price adjustments have been as follows:
2019 No change 2018 (effective February 2018) 4.5% decrease 2017 No change Commercial and industrial accounts make up 10% of the Water System's customer base, and approximately 40% of retail sales. 2019 commercial and industrial sales were 3.6% lower than 2018 due to similar drops in consumption. 2019 and 2017 were comparable in terms of both sales and consumption levels.
Water S:i'.stem - Sales to Customers Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Residential $ 19,492 $ 20,419 $ 20,982 $ (927) $ (1,490)
Commercial and industrial 14,768 15,315 14,713 (547) 55
$ 34,260 $ 35,734 $ 35,695 $ (1,474) $ (1,435)
Water S:i'.stem - Sales to Customers K9al Increase Increase (Decrease) (Decrease) 2019 2018 2017 2019/2018 2019/2017 Residential 3,810 4,040 3,872 (230) (62)
Commercial and industrial 3,487 3,604 3,473 (117) 14 7,297 7,644 7,345 (347) (48)
Wholesale sales include sales to River Road and Santa Clara Water Districts, the City of Veneta, and the Willamette Water Company.
2019 2018 2017 Retail sales $ 34,259,654 $ 35,733,979 $ 35,695,436 Retail volume 7,297,482 7,643,762 7,345,422 Average price per Kgal $ 4.69 $ 4.67 $ 4.86 Wholesale sales $ 2,121,747 $ 2,267,375 $ 2,186,021 Wholesale volume 687,435 735,292 714,566 Average price per Kgal $ 3.09 $ 3.08 $ 3.06 14
Eugene Water & Electric Board Management's Discussion and Analysis Operating Expenses The Water System pumps and purifies all water sold and does not have wholesale purchase expense.
The largest production expenses are purification and transmission and distribution of water. Other significant expenses are administrative and general, and depreciation. During 2019, water operating expenses increased 5% compared to 2018 and increased 4% compared to 2017.
The Water System's allocation of shared costs with the Electric System was updated in 2019 to 20% from 18%. The 2% increase contributed to increases in customer accounting, conservation expense and administrative and general. Transmission and distribution costs were 4% lower compared to 2018 due to reduced maintenance costs. The source of supply, pumping and purification expense was comparable to 2018 and 14% higher than 2017. Maintenance work performed during 2018 and 2019 at pump stations and the treatment plant drove the increases compared to 2017.
Water S:z'.stem - Oeeratin~ Exeenses Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Transmission and distribution $ 5,840 $ 6,082 $ 6,256 $ (242) $ (416)
Sources of supply, pumping, and purification 6,796 6,876 5,963 (80) 833 Customer accounting 1,780 1,364 1,660 416 120 Conservation expenses 492 344 359 148 133 Administrative and general 4,491 3,906 4,543 585 (52)
Depreciation on utility plant 6,645 6,220 6,170 425 475 Operating expenses $ 26,044 $ 24,792 $ 24,951 $ 1,252 $ 1,093 Other Non-operating Revenue, Expense, Capital Contributions, and System Development Charges Non-operating revenue of the Water System consists primarily of miscellaneous revenue not associated with core business activities, as well as interest and investment revenue. Non-operating revenue has increased compared to 2017 and decreased compared to 2018. During 2018, the Board sold property to the City of Eugene, and the Water System recorded a $437,000 gain from the disposition. Investment earnings increased $277,000 compared to 2018 and $648,000 compared to 2017 as interest rates have risen across the investment portfolio.
Non-operating expense is primarily interest expense for long-term debt and intercompany debt. During 2017, the Water System transferred $11 million to the Electric Utility as payment on intercompany debt.
Interest expense recognized from this transaction drove an increase in non-operating expense for the year.
Capital contributions are related to customer work to extend or relocate water mains and services. During 2019, activity included contributed plant assets associated with roadwork projects and subdivisions.
15
Eugene Water & Electric Board Management's Discussion and Analysis (in thousands) Water Sz:stem - Non-oeeratin9 Revenue and Exeense Increase Increase (Decrease) (Decrease) 2019 2018 2017 2019/2018 2019/2017 Non-operating revenue $ 1,486 $ 1,744 $ 590 $ (258) $ 896 Non-operating expense (2,250) (2,274) (5,941) 24 3,691 Capital contributions 4,675 3,071 3,130 1,604 1,545 Total $ 3,911 $ 2,541 $ (2,221) $ 1,370 $ 6,132 Special Items In 2019, the Water System made a $5.3 million deposit to an OPERS side-account. It reduced EWEB's employer contribution rate as of November 1, 2019 and will provide ongoing savings. In addition, this deposit received a $1.3 million match from the state's Employer Incentive Fund.
In 2017 the Board elected to join the State & Local Government Rate Pool (SLGRP) to mitigate risks related to the employer contribution rates. Previously, the Board's status was as an independent employer participating in OPERS. As an independent employer, actuarial valuations to determine employer contribution rates used Board specific demographics. As a participant in the SLGRP, valuations to determine employer contribution rates use the demographics of pool participants. The Board's specific demographics generally resulted in contribution rates higher than the SLGRP, and the Board's SLGRP employer contribution rates were lower once they took effect in July 2019. Based on OPERS actuarial calculations, $32.6 million of the Board's actuarial liability as an independent employer, was assigned as the transition liability to move from independent to SLGRP status. This maintained future rate equity among other SLGRP participants. During 2018, the Water System recognized $7.8 million for its portion of the transition liability as a special item expense.
During 2018, the Water System also recognized $480,000 as a special item expense to fund the OPES trust. Board policy requires contribution levels be evaluated when the funded status of the OPES plan is 70% or less.
Total Assets and Deferred Outflows of Resources Total assets for the Water System include utility plant, net of depreciation, current assets representing cash and short-term investments, accounts receivable, materials inventory, and pre-paid expenses, as well as non-current assets such as long-term investments.
In 2019, current assets increased compared to 2018 and decreased compared to 2017. Reasons for the decline since 2017 include payments of $5.3 million in 2019 and $8.3 million in 2018 used to pay unfunded liabilities related to retirement benefits. The increase from 2018 to 2019 is due in part to continued strong operations and a reduction in purchase activity for investments. Capital project activity also reduced cash reserves from bond proceeds.
In 2019, the investments classified as non-current decreased compared to 2018 and 2017 due in part to the use of funds for OPERS. Fluctuations in other regulatory assets related to pensions and OPES also contribute to the change in amounts classified as non-current assets each year.
16
Eugene Water & Electric Board Management's Discussion and Analysis Deferred outflows of resources represent transactions occurring in future periods and are not classified as assets. In 2019, deferred outflows of resources increased primarily due to the $6.6 million pension contributions after the-measurement date for actuarial reporting.
Water S:tstem - Assets and Deferred Outflows Increase Increase (Restated) (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Net utility plant $ 185,692 $ 175,611 $ 165,424 $ 10,081 $ 20,268 Current assets 37,989 36,520 41,454 1,469 (3,465)
Non-current assets 18,617 21,919 19,365 (3,302) (748)
Deferred outflows of resources 15,201 9,648 9,797 5,553 5,404 Total assets and deferred outflows of resources $ 257,499 $ 243,698 $ 236,040 $ 13,801 $ 21,459 Capital Asset Activity Capital projects for the Water System are categorized as Compulsory, Strategic, or Risk Based Elective Improvements.
Compulsory work is mandatory to ensure EWEB meets minimum service, regulatory, and safety requirements. Compulsory work develops from both internal and external drivers. There is minimal opportunity to change the compulsory portion of capital plans due to legal and policy requirements.
Strategic projects and programs are derived from strategic direction and are typically multiyear and multimillion-dollar efforts. Strategic improvements are moderately flexible in nature and can be balanced with efforts to prioritize compulsory work or other drivers, such as affordability or operational improvements.
Risk Based Elective Improvements are elective in that Staff can plan and schedule them to balance within the boundaries of the capital plans and the long term financial plans as well as staffing and resources available. This work is driven by the goal to maintain system condition and Age of Asset metrics in order to maintain reliability. Reducing the level of work in this area will ultimately result in the increase of compulsory work and reduction in reliability.
Water S:tstem - Caeital Assets Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Plant in service $ 300,822 $ 289,808 $ 276,661 $ 11,014 $ 24,161 Accumulated depreciation (129,025) (123,146) (117,297) (5,879) (11,728)
Property for future use 2,397 2,397 2,397 (0) (0)
Construction work in progress 11,498 6,552 3,663 4,946 7,835 Net utility plant $ 185,692 $ 175,611 $ 165,424 $ 10,081 $ 20,268 17
Eugene Water & Electric Board Management's Discussion and Analysis Ongoing capital improvements included:
Water System - Capital Projects 2019 2018 2017 Water Intake and Filtration Water Intake and Filtration Water Intake and Filtration Plant Plant Plant Water Mains Water Mains Water Mains Services and meters Services and meters Services and meters Transportation Equipment Reservoirs Reservoirs Pump stations Transportation Equipment Transportation Equipment Reservoirs Pump stations Pump stations AMI AMI AMI Disinfection System Distribution system Distribution system Water Laboratory Lane Transit District EmX Project Filtration Plant Upgrades Emergency Water Supply Source of Supply Second source More detailed information about plant activity is available in Note 3 - Utility Plant, in the note disclosures to the financial statements.
Debt Activity The Water System issues revenue bonds or notes payable to fund certain capital projects. During 2019, the Water System made scheduled debt service payments which decreased outstanding debt compared to 2018 and 2017. For more detailed information, see Note 12- Long-Term Debt and Note 13-lntersystem items.
Water System bonds are rated Aa2 by Moody's Investors Service, AA by Standard and Poor's Rating Services, and AA+ by Fitch Ratings.
Water System - Debt Activity Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Total outstanding debt $ 53,644 $ 56,298 $ 58,903 $ (2,654) $ (5,259)
==-
18
Eugene Water & Electric Board Management's Discussion and Analysis Liabilities and Deferred Inflows of Resources While 2018 liabilities are comparable to 2017, total liabilities decreased substantially from 2016 due to the
$11 million payment in 2017 on intersystem items and ongoing debt service mentioned above.
Current liabilities are primarily accounts payable, accrued payroll, and the current portion of long-term debt. Current liability balances have decreased compared to 2018 and are comparable to 2017 primarily due to changes in accounts payable. The payables balance at 2018 included larger amounts for construction activity and equipment purchases compared to 2017 or 2019.
Water S:tstem - Liabilities and Deferred Inflows Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Current liabilities $ 5,810 $ 6,630 $ 5,503 $ (820) $ 307 Total liabilities 86,424 88,541 90,863 (2,117) (4,439)
Deferred inflows of resources 6,396 2,480 1,877 3,916 4,519 Total liabilities and deferred inflows of resources $ 92,820 $ 91,021 $ 92,740 $ 1,799 $ 80 Net Position The net investment in capital assets component of net position, which reflects the value of capital assets net of the debt incurred to acquire those assets has increased each year since 2017. Capital asset additions such as main replacements and improvements, AMI, and Hayden Bridge improvements have increased plant values and associated debt has decreased.
Restricted net position is subject to external legal restrictions on its use and is primarily representative of reserves for payment of debt service and deposits of System Development Charges (SOC) for work not yet completed. Increases in 2019 and 2018 are due to SOC activity.
Unrestricted net position represents the accumulation of assets that are not capital assets, or subject to external restrictions on their use. The Water System's unrestricted net position has increased by 13% and 3% compared to 2018 and 2017, respectively reflecting strong operating activity for the year. The decline in unrestricted net position in 2018 was due in part to payments made from cash reserves to reduce unfunded liabilities related to retirement benefits.
Overall net position has increased by approximately 8% compared to 2018, and 15% compared to 2017.
Water S:tstem - Net Position Increase Increase (Decrease) (Decrease)
(in thousands) 2019 2018 2017 2019/2018 2019/2017 Net investment in capital assets $ 126,446 $ 119,474 $ 108,380 $ 6,972 $ 18,066 Restricted 9,396 7,539 6,690 1,857 2,706 Unrestricted 28,837 25,663 28,229 3,174 608 Total net position $ 164,679 $ 152,676 $ 143,299 $ 12,003 $ 21,380 19
Eugene Water & Electric Board Management's Discussion and Analysis Reserves and Investment Activity The Board of Commissioners has established Water System designated reserves for specific purposes including the funding of routine capital activity and significant one-time expenses. In addition, designated reserves accumulate funding for pension and post-retirement benefits. Designated funds are considered unrestricted because the Board has authority to re-evaluate and redirect reserves based on current priorities.
In 2019, the Board used $5.3 million of reserves to participate in an Employer Incentive Fund program with PERS. State contributed funds matched 25% of EWEB contributions and reduced EWEB's employer contribution rate starting on November 1, 2019. During 2018, the Board used $7 .8 million of reserves to pay down its pension liability with Oregon PERS, and $480,000 to fund the OPEB Trust. In 2017, the most significant reserve activity was the use of funds to pay down intersystem debt, as well as continued additions to the Second Source Fund. Each year the Board reviews reserves in excess of target for the highest and best use of cash.
(in thousands) Water S:tstem - Reserve Balances Target 2019 Working cash $ 3,400 $ 11,579 Designated funds Operating reserve 1,000 1,012 Self-insurance reserve 280 288 Capital improvement reserve 7,000 11,207 Rate stabilization fund 1,000 1,000 Water stewardship fund - septic repairs 74 Business growth & retention loan fund 210 Second source fund 5,862 Designated funds total $ 9,280 $ 19,653 The Water System maintained restricted reserves for purposes including the payment of principal and interest on debt. Restricted reserves also included proceeds from bond issuance restricted for use on capital projects and funds collected through System Development Charges.
Working cash and short-term investments were unrestricted and available for the day-to-day operations of the utility.
All Water System working cash and reserves were held in bank accounts, the Local Government Investment Pool, or in high quality securities. Investment strategy focused on the following in priority order: preserving principal, liquidity of funds and investment returns.
Retirement Benefits Trust The Eugene Water & Electric Board Retirement Benefits Trust (the Trust) was created in 2007 to fund postemployment benefits other than pension (OPEB). The plan provides $5,000 life insurance coverage for all retirees and subsidies toward health insurance coverage for retirees meeting eligibility criteria. Plan changes in 2016 and 2017 removed the healthcare subsidies available to employees upon retirement if they were hired after 2002.
20
/
Eugene Water & Electric Board Management's Discussion and Analysis Financial statements for the OPEB plan, including accompanying notes, are a set of two statements. The statement of fiduciary net position reports the assets, liabilities, and net position held in trust on the day of December 31 for the years presented. The statement of changes in net position, reflects the sources and uses of plan assets over the one-year periods presented. More information about the plan is in Note 16 and Required Supplementary Information. Significant totals from the financial statements are below.
Condensed Financial Information (in thousands of dollars) 2019 2018 2017 Total assets $ 19,273 $ 17,185 $ 17,461 Total liabilities 23 14 11 Total net position $ 19,250 $ 17,171 $ 17,450 Contributions $ 1,854 $ 4,124 $ 1,720 Net investment income 3,228 (952) 2,205 Total additions 5,082 3,172 3,925 Total deductions 3,003 3,451 3,467 Net increase (decrease) in net position $ 2,079 $ (279) $ 458 Analysis Assets represent the Trust's investment portfolio, which increases for contributions from the Board and investment income. Assets decrease for benefit payments and reductions in the market value of investments held. Liabilities were for administrative and benefit payments pending at the end of each year.
Total assets were approximately the same at the end of 2018 compared to December 31, 2017, and they were up by $2.1 million at the end of 2019. The increase was due to a $2 million contribution from EWEB, and investment returns. The Board paid the actuarially determined contribution (ADC) to the Trust in 2018 and an additional $2 million in December of 2018 in order to improve the funded status of its OPEB liability.
The net position of the Trust as of December 31, 2018 remained essentially equal to its beginning balance for the year, however. The reason for this was a significant decrease in fair value of the Trust's portfolio in December 2018. The decline in market value recovered in early 2019, and further increases in market value during the year were the highest experienced by the Trust since its inception.
21
Eugene Water & Electric Board Management's Discussion and Analysis The plan recognizes contributions from the Board and from retirees who participate in the EWEB group medical coverage. The Board contributes to the Trust monthly according the most recent ADC available.
Contributions from retirees varied with participation: $775,000 in 2018, which was an increase of $35,000 from year 2017, and $717,000 in 2019, a decrease of $58,000.
Changes in the fair value of investments held by the Trust were the primary reason for fluctuations in net investment income. Changes in fair value were an increase of $1.7 million in 2017, a decrease in 2018 of
$1.6 million and an increase of $2.6 million in 2019. See Note 16 for further information on the portfolio's composition and investment returns.
Total deductions are benefit and administrative expenses. Benefit expenses were level seven years in a row until dipping by approximately $400,000 in year 2019. In recent years, including years 2017-2019 reflected in the condensed financial information above, benefit payments for EWEB group medical have decreased as retirees reach age 65 and transfer from the EWEB group insurance to Medicare supplement plans. Medicare supplement plans are less expensive than EWES group medical insurance.
Simultaneously, subsidies for Medicare supplement coverage have increased with the increased number of retirees receiving that benefit and with premium increases for the Medicare supplement plans provided through the Oregon PERS Health Insurance Program (PHIP): a 14% increase in premiums in 2017, 13%
in 2018 and 9% in 2019, on average. The cost of EWES group coverage was managed well and experienced smaller increases of 2% in 2017 and 2% in 2019. Overall, annual benefit payments were level. The drop in overall payments during 2019, corresponds to a decrease in the retiree participation.
Census data for the latest actuarial valuation dated August 31, 2019, showed a population decrease of 40 retirees compared to August 31, 2018. Additionally, 27 retirees included in the latest valuation, opted out of the medical coverage they had within the plan as of the 2018 census.
Overall, the plan's financial position has improved and payments for medical subsidies are expected to continue to decrease over time. The plan is near its maximum possible number of participants who will receive subsidies from EWES for healthcare and the majority of retiree participants with medical insurance are on the PHIP Medicare supplement plans.
22
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Eugene Water & Electric Board Statements of Net Position December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 ASSETS Capital assets Utility plant in service $ 816,317,582 $ 786,986,954 $ 300,821,753 $ 289,808,333 $ 1,117,139,335 $ 1,076,795,287 Less accumulated depreciation 446,919,036 436,984,343 129,025,071 123,146,121 575,944,107 560,130,464 Net utility plant in service 369,398,546 350,002,611 171,796,682 166,662,212 541,195,228 516,664,823 Property held for future use 1,344,855 782,512 2,396,812 2,396,812 3,741,667 3,179,324 Construction work in progress 37,056,305 16,972,396 11,498,352 6,551,690 48,554,657 23,524,086 Net utility plant 407,799,706 367,757,519 185,691,846 175,610,714 593,491,552 543,368,233 Current assets Cash and cash equivalents 35,565,584 26,166,176 9,972,388 3,779,089 45,537,972 29,945,265 Short-term investments 1,240,592 13,142,182 949,633 4,151,199 2,190,225 17,293,381 Restricted cash and investments 22,038,663 32,167,547 7,329,452 9,730,458 29,368,115 41,898,005 Designated cash and investments 53,265,411 59,585,413 14,638,363 13,617,354 67,903,774 73,202,767 Receivables, less allowances 34,006,020 33,463,018 3,645,886 3,875,593 37,651,906 37,338,611 Due from Water System 367,124 359,313 Materials and supplies 5,052,847 4,220,226 1,295,886 1,231,895 6,348,733 5,452,121 Prepaids 1,018,922 962,180 157,364 134,164 1,176,286 1,096,344 Option premiums short-term 1,101,632 381,872 1,101,632 381,872 Total current assets 153,656,795 170,447,927 37,988,972 36,519,752 191,278,643 206,608,366 Non-current assets Investments - designated 18,245,411 26,005,872 5,014,191 5,943,253 23,259,602 31,949,125 Investments - unrestricted 857,893 8,910,455 656,688 2,814,530 1,514,581 11,724,985 Investments - restricted 7,851,931 13,690,675 3,004,866 4,583,871 10,856,797 18,274,546 Receivables, conservation, and other 3,514,596 3,861,835 120,067 103,152 3,634,663 3,964,987 Due from Water System 6,781,253 7,133,833 Investment in WGA 3,752,194 3,019,316 3,752,194 3,019,316 Investment in Harvest Wind 19,995,274 21,122,631 19,995,274 21,122,631 Preliminary investigations 8,109,450 32,797,954 1,302,816 1,302,816 9,412,266 34,100,770 Other assets 18,260,621 33,838,796 8,518,546 7,171,567 26,779,167 41,010,363 Total non-current assets 87,368,623 150,381,367 18,617,174 21,919,189 99,204,544 165,166,723 DEFERRED OUTFLOWS OF RESOURCES 52,351,407 45,530,443 15,200,954 9,648,321 67,552,361 55,178,764 Total assets and deferred outflows of resources $ 701,176,531 $ 734,117,256 $ 257,498,946 $ 243,697,976 $ 951,527,100 $ 970,322,086 Note: Inter-system obligations and payments are eliminated in the total systems columns.
23 See accompanying notes.
Eugene Water & Electric Board Statements of Net Position December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 LIABILITIES Current liabilities Payables $ 22,735,996 $ 25,063,950 $ 1,002,012 $ 2,073,824 $ 23,738,008 $ 27,137,774 Accrued payroll and benefits 3,902,781 4,238,395 1,224,996 1,041,307 5,127,777 5,279,702 Due to Electric System 367,124 359,313 Payable from restricted assets Accrued interest on long-term debt 3,199,135 3,303,289 891,006 925,328 4,090,141 4,228,617 Long-term debt due within one year 8,540,000 8,445,000 2,325,000 2,230,000 10,865,000 10,675,000 Total current liabilities 38,377,912 41,050,634 5,810,138 6,629,772 43,820,926 47,321,093 Non-current liabilities Long-term debt 190,132,051 200,833,824 51,318,716 54,068,194 241,450,767 254,902,018 Due to Electric System 6,781,253 7,133,833 Net pension liability 58,544,416 73,641,246 18,487,710 16,165,151 77,032,126 89,806,397 Net OPEB liability 11,898,235 19,123,772 3,757,338 4,197,901 15,655,573 23,321,673 Other liabilities 2,508,453 1,531,026 268,431 346,374 2,776,884 1,877,400 Total liabilities 301,461,067 336,180,502 86,423,586 88,541,225 380,736,276 417,228,581 DEFERRED INFLOWS OF RESOURCES 21,276,767 11,810,972 6,396,488 2,480,130 27,673,255 14,291,102 NET POSITION Net investment in capital assets 241,619,954 206,740,056 126,446,037 119,474,131 368,065,991 326,214,187 Restricted 6,552,063 6,122,041 9,395,512 7,539,068 15,947,575 13,661,109 Unrestricted 130,266,680 173,263,685 28,837,323 25,663,422 159,104,003 198,927,107 Total net position 378,438,697 386,125,782 164,678,872 152,676,621 543,117,569 538,802,403 Total liabilities, deferred inflows of resources, and net position $ 701,176,531 $ 734,117,256 $ 257,498,946 $ 243,697,976 $ 951,527,100 $ 970,322,086 Note: Inter-system obligations and payments are eliminated in the total systems columns.
See accompanying notes. 24
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Eugene Water & Electric Board Statements of Revenues, Expenses, and Changes in Net Position Years Ended December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 Residential $ 100,560,494 $ 97,673,393 $ 19,491,803 $ 20,418,763 $ 120,052,297 $ 118,092, 156 Commercial and industrial 100,605,227 102,213,819 14,767,851 15,315,216 115,373,078 117,529,035 Sales for resale and other 62,172,896 49,086,139 3,832,676 3,658,757 66,005,572 52,744,896 Operating revenues 263,338,617 248,973,351 38,092,330 39,392,736 301,430,947 288,366,087 Purchased power 153,922,009 125,271,625 153,922,009 125,271,625 System control 4,268,927 4,383,217 4,268,927 4,383,217 Wheeling 13,106,600 13,311,829 13,106,600 13,311,829 Steam and hydraulic generation 12,277,003 12,823,624 12,277,003 12,823,624 Transmission and distribution 24,526,361 22,585,431 5,840,408 6,081,694 30,366,769 28,667,125 Source of supply, pumping, and purification 6,795,617 6,875,770 6,795,617 6,875,770 Customer accounting 7,667,709 7,989,867 1,780,201 1,364,150 9,447,910 9,354,017 Conservation expenses 3,632,917 3,299,365 492,380 344,131 4,125,297 3,643,496 Administrative and general 20,466,788 21,892,241 4,490,847 3,906,444 24,957,635 25,798,685 Depreciation on utility plant 22,785,219 21,136,539 6,644,469 6,219,542 29,429,688 27,356,081 Operating expenses 262,653,533 232,693,738 26,043,922 24,791,731 288,697,455 257,485,469 Net operating income 685,084 16,279,613 12,048,408 14,601,005 12,733,492 30,880,618 Investment earnings 3,807,359 3,212,715 1,105,381 827,966 4,912,740 4,040,681 Interest earnings, Water 178,404 203,611 Other revenue 6,287,209 4,875,885 380,552 915,757 6,667,761 5,791,642 Non-operating revenues 10,272,972 8,292,211 1,485,933 1,743,723 11,580,501 9,832,323 Note: Inter-system obligations and payments are eliminated in the total systems columns.
25 See accompanying notes.
Eugene Water & Electric Board Statements of Revenues, Expenses, and Changes in Net Position Years Ended December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 Other revenue deductions $ 1,729,912 $ 4,815,740 $ 92,276 $ 28,549 $ 1,822,188 $ 4,844,289 Interest expense and related amortization 6,992,977 7,240,453 1,979,532 2,041,350 8,972,509 9,281,803 Interest expense, Electric 178,404 203,611 Non-operating expenses 8,722,889 12,056,193 2,250,212 2,273,510 10,794,697 14,126,092 Income before capital contributions and special items 2,235,167 12,515,631 11,284,129 14,071,218 13,519,296 26,586,849 Contributions in aid of construction 1,704,748 2,156,060 1,443,114 784,423 3,147,862 2,940,483 Contributed plant assets 901,624 2,117,536 1,566,473 1,066,499 2,468,097 3,184,035 System development charges 1,664,943 1,220,040 1,664,943 1,220,040 Capital contributions 2,606,372 4,273,596 4,674,530 3,070,962 7,280,902 7,344,558 lntersystem transfer 531,573 (531,573)
Special items - Pension revenue 4,176,208 1,318,802 5,495,010 Special items - Pension expense (16,704,832) (26,271,516) (5,275,210) (8,296,268) (21,980,042) (34,567,784)
Change in net position (7,687,085) (10,013,862) 12,002,251 9,377,485 4,315,166 (636,377)
Total net position at beginning of year 386,125,782 396,139,644 152,676,621 143,299,136 538,802,403 539,438,780 Total net position at end of year $ 378,438,697 $ 386,125,782 $ 164,678,872 $ 152,676,621 $ 543,117,569 $ 538,802,403 Note: Inter-system obligations and payments are eliminated in the total systems columns.
See accompanying notes. 26
Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 275,929,543 $ 265,821,431 $ 38,276,953 $ 39,559,380 $ 314,206,496 $ 305,380,811 Other receipts 4,649,151 6,425,615 792,780 930,362 5,441,931 7,355,977 Power purchases (155,522,419) (124,632,205) (155,522,419) (124,632,205)
Payments to employees, employer paid benefits (63,334,017) (72,122,671) {19,123,421) (21,278,183) {82,457,438) {93,400,854)
Payments to suppliers (36,668,716) (37,623,125) (6,575,058) {4,927,232) (43,243,774) (42,550,357)
Contributions in lieu of taxes (13,498,505) (13,699,561) (13,498,505) (13,699,561)
Net cash from operating activities 11,555,037 24,169,484 13,371,254 14,284,327 24,926,291 38,453,811 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities (51,240,705) (95,817,376) (13,227,821) (25,407,106) (64,468,526) (121,224,482)
Proceeds from sale and maturities of investments 106,639,120 95,252,500 25,260,880 20,614,502 131,900,000 115,867,002 Interest on investments 1,897,990 1,757,319 423,040 370,078 2,321,030 2,127,397 Distributions from equity investments 2,617,424 3,907,856 2,617,424 3,907,856 Net cash from investing activities 59,913,829 5,100,299 12,456,099 (4,422,526) 72,369,928 677,773 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES lntersystem obligations paid to Electric from Water 344,067 1,617,788 (344,067) (1,617,788)
Interest receipts/(payments) to Electric from Water 179,106 206,910 (179,106) (206,910)
Net cash from non-capital financing activities 523,173 1,824,698 (523,173) (1,824,698)
Note: lntersystem obligations and payments are eliminated in the total systems columns ..
27 See accompanying notes.
Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments $ (8,445,000) $ (8,370,000) $ (2,230,000) $ (2,160,000) $ (10,675,000) $ (10,530,000)
Additions to plant and non-utility property, net (43,688,665) (30,694,681) (16,784,294) (15,445,568) (60,472,959) (46,140,249)
Interest payments (7,927,892) (7,915,523) (2,220,788) (2,282,249) (10,148,680) (10,197,772)
Additions to preliminary surveys and other (776,422) (135,548) (776,422) (135,548)
Capital contributions 2,606,372 4,273,596 4,674,530 3,070,961 7,280,902 7,344,557 Net cash from capital and related financing activities (58,231,607) (42,842,156) (16,560,552) (16,816,856) (74,792, 159) (59,659,012)
CHANGE IN CASH AND CASH EQUIVALENTS 13,760,432 (11,747,675) 8,743,628 (8,779,753) 22,504,060 (20,527,428)
CASH AND CASH EQUIVALENTS, beginning of year 59,370,020 71,117,695 11,600,267 20,380,020 70,970,287 91,497,715 CASH AND CASH EQUIVALENTS, end of year Including cash and cash equivalents restricted and designated: $37,564,870 and $10,371,505
($33,203,844 and $7,821,178 in 2018) for Electric and Water, respectively $ 73,130,452 $ 59,370,020 $ 20,343,895 $ 11,600,267 $ 93,474,347 $ 70,970,287 NON-CASH CAPITAL ACTIVITY In 2019, plant assets contributed by developers were $901,624 for the electric system and $1,566,473 for the water system ($2,117,536 for the electric system and $1,066,499 for the water system in 2018).
Note: Inter-system obligations and payments are eliminated in the total systems columns.
See accompanying notes. 28
Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2019 and 2018 Electric System Water System Total System 2019 2018 2019 2018 2019 2018 Net operating income $ 685,084 $ 16,279,613 $ 12,048,408 $ 14,601,005 $ 12,733,492 $ 30,880,618 Adjustments to reconcile net operating income to net cash from operating activities Depreciation, including allocated 23,993,206 22,356,077 6,644,469 6,219,542 30,637,675 28,575,619 Other revenue 4,599,375 2,920,789 747,695 1,003,184 5,347,070 3,923,973 Other revenue deductions (17,052,694) (26,775,445) (5,275,209) (8,318,840) (22,327,903) (35,094,285)
(Increase) decrease in assets Receivables 970,613 7,433,807 229,707 116,394 1,200,320 7,550,201 Materials and supplies (832,620) (279,305) (63,991) (342,181) (896,611) (621,486)
Prepayments and special deposits (56,743) 231,596 (23,201) 21,666 (79,944) 253,262 Conservation loans, net (1,166,376) (713,504) (1,166,376) (713,504)
Other assets 1,634,408 (257,700) 1,634,408 (257,700)
(Increase) decrease in deferred outflows Fair value of hedging derivatives (1,063,280) 117,088 (1,063,280) 117,088 Increase (decrease) in liabilities Accounts payable, accrued payroll, and benefits (1,641,984) 2,486,504 (936,624) 983,557 (2,578,608) 3,470,061 Other liabilities 977,426 (102,076) 977,426 (102,076)
Increase in deferred inflows of resources 508,622 472,040 508,622 472,040 Net cash from operating activities $ 11,555,037 $ 24,169,484 $ 13,371,254 $ 14,284,327 $ 24,926,291 $ 38,453,811 29 See accompanying notes.
Eugene Water & Electric Board Statements of Fiduciary Net Position - OPEB Trust December 31, 2019 and 2018 Retirement Benefits Trust 2019 2018 ASSETS Money market investments $ 210,113 $ 209,969 Interest and dividends receivable 5,712 6,347 Prepaid expenses 1,214 1,227 Investments, at fair value Corporate bonds Domestic 385,019 384,022 Mutual funds and exchange traded funds Fixed income 7,081,247 6,502,818 International 4,248,903 2,577,802 Domestic 6,365,091 6,190,232 Real estate 975,639 968,976 Commodities 343,657 Total investments 19,055,899 16,967,507 Total assets $ 19,272,938 $ 17,185,050 LIABILITIES Administrative costs payable $ 22,516 $ 13,912 Net position restricted for postemployment benefits other than pensions $ 19,250,423 $ 17,171,138 See accompanying notes. 30
Eugene Water & Electric Board Statements of Changes in Fiduciary Net Position - OPEB Trust Years Ended December 31, 2019 and 2018 Retirement Benefits Trust 2019 2018 ADDITIONS Contributions Employer $ 1,137,500 $ 3,348,797 Members - EWES group plan, only 716,560 775,345 Total contributions 1,854,060 4,124,142 Investment income Net increase (decrease) in fair value of investments 2,563,041 (1,640,413)
Interest 18,854 27,071 Dividends 476,664 363,491 Capital gain distributions 221,805 345,414 3,280,364 (904,437)
Less investment expense 51,944 47,987 Net investment income (expense) 3,228,420 (952,424)
Total additions $ 5,082,480 $ 3,171,718 DEDUCTIONS Benefits $ 2,205,648 $ 2,586,617 Benefits funded by retirees - EWES group plan 716,560 775,345 Administrative expenses 80,987 88,919 Total deductions 3,003,195 3,450,881 Net increase (decrease) in net position 2,079,285 (279,163)
NET POSITION RESTRICTED FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Beginning of year 17,171,138 17,450,301 End of year $ 19,250,423 $ 17,171,138 31 See accompanying notes.
Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies Reporting entity The Eugene Water & Electric Board (Board or EWEB) is an administrative unit of the City of Eugene, Oregon. However, as established by the Governmental Accounting Standards Board (GASB) definition of a reporting entity, the Board is a primary government and is not a component unit of another entity. The Board is responsible for the ownership and operation of the Electric and Water Systems, and the basic financial statements include these two Systems.
The Board has a trust for funding post-employment retirement benefits other than pensions (OPEB),
which is a component unit of the Board. Financial statements for the OPEB trust are presented as a fiduciary fund.
The Board provides energy and water service to residential, commercial and industrial customers located in a 236 square mile area, including the City of Eugene and adjacent suburban areas. The Board has the authority to fix rates and charges. In order to secure power resources, the Board has taken ownership of various generation facilities, and entered into various power purchase agreements.
In addition, the Board has partial ownership in various generation facilities, which are joint ventures or separate entities where the Board has taken an equity position in various generation facilities.* The operations and sale of energy generated from the Board's relationship with each of the facilities is subject to certain risks. Operations are contingent on various factors, such as regulation, licensing agreements, river flow levels and weather patterns.
The Board is subject to various forms of regulation under federal, state and local laws and is subject to various Federal Energy Regulatory Commission (FERC) regulations. Laws and regulations are subject to change and may have a direct impact on the operations of the Board.
Eliminations Amounts receivable and payable between the Electric and Water Systems and related interest earnings and expenses are eliminated in the Total Systems columns of the financial statements (see Note 13).
Method of accounting The Board maintains its accounting records in accordance with accounting principles generally accepted in the United States of America. The Board applies accounting and reporting standards of the GASB. The financial statements use a flow of economic resources measurement focus to determine financial position and the change in financial position. The accounting principles used are similar to those applicable to businesses in the private sector and are maintained on the accrual basis of accounting. Revenues are recognized when earned, and expenses are recognized when incurred.
32
Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)
Effective January 1, 2019, the Board adopted GASB Statement No. 83, Certain Asset Retirement Obligations and GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements. Statement No. 83 requires recognition of liabilities when incurred and reasonably estimable and measurement using probability weighting of current costs. Statement No. 88 is to improve the information disclosed in the notes to the financial statements related to debt, including separate information for direct borrowings and direct placements, unused lines of credit, assets pledged as collateral for the debt, and terms specified in debt agreements related to other specific significant events. It also clarifies which liabilities should be included when disclosing information related to debt.
The accounting and reporting standards established by these statements did not have any impact during the year of implementation.
Effective January 1, 2019, the Board adopted GASB Statement No. 84, Fiduciary Activities. The statement requires reporting of fiduciary funds like EWEB's Retirement Benefits Trust for other post-employment benefits (OPEB). Implementation added presentation of the Statements of Fiduciary Net Position and Statements of Changes in Fiduciary Net Position as well as related disclosures for the OPEB Plan to the Board's financial statements.
Effective January 1, 2018, the Board adopted GASB Statement No. 85, Omnibus 2017, and GASB Statement No. 86, Certain Debt Extinguishment Issues. The accounting and reporting standards established by these statements did not have any impact during the year of implementation.
Prior to January 1, 2019, the Board followed FASB EITF 03-11 to account for power related transactions that did not result in physical delivery of power. FASB's EITF is not applicable to the Board under GASB.
Under the EITF, realized gains and losses on these transactions were reported net within wholesale sales and purchased power. Starting in 2019, the Board reported these transactions at gross amounts. The change is expected to reduce the complexity of budgeting and reporting for these transactions. The change has no effect on net operating income in 2019, and prior year amounts were not reclassified.
Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting 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 during the reporting period.
Actual results could differ from those estimates.
Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications have no effect on previous net revenue or net position.
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Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)
Utility plant in service and depreciation Utility plant is stated at original cost. Costs include labor, materials and related indirect costs, such as engineering, transportation and allowance for funds used during construction (i.e. interest). Additions, renewals, and betterments with a minimum cost of $5,000 or greater per item are capitalized. Repairs and minor replacements are recorded as operating expenses. Depreciation is computed using straight-line group rates. When property is retired, the property cost and any removal costs are charged to accumulated depreciation. The estimated useful lives of assets are those used commonly in the utility industry or they are based on the Board's experience with similar assets.
Estimated Depreciable Lives Asset Class in Years Electric Water System System Land n/a n/a Intangible assets n/a n/a Distribution plant 20-50 Hydraulic production 15-50 Steam production 15-50 Other production 15-50 Telecommunications 10 Transmission plant 25-50 General plant 3-50 3-50 Pumping plant 15-50 Supply plant 20-50 Treatment plant 15-50 Transmission & distribution plant 15-50 Cash equivalents For purposes of these statements, cash equivalents are defined as short-term, highly liquid investments both readily convertible to known amounts of cash and so near maturity they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less meet this definition. The Board considers money market accounts and government investment pool holdings to be cash equivalents.
Fair value of financial instruments The carrying amounts of current assets, including unrestricted, designated and restricted cash and investments, and current liabilities approximate fair value due to the short-term maturity of those instruments. The fair value of the Board's investments and debt are estimated based on the quoted market prices for the same or similar issues.
34
Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)
Restricted assets Cash and investments restricted by provisions of bond resolutions and agreements with other parties are identified as restricted assets. When the restricted assets are expendable within the terms of the agreements, it is the Board's policy to spend restricted resources first; then unrestricted resources as needed.
Materials and supplies Materials and supplies provide for additions and repairs to utility plant and are stated at weighted average cost.
Preliminary investigations -At December 31, 2019, the Electric System had $8.1 million ($32.8 million at December 31, 2018) in deferred costs for the preliminary investigation of projects it believes will be viable in the future. Most of the balance was for preconstruction relicensing costs of the Carmen-Smith Project.
At December 31, 2019, the Water System had $1.3 million ($1.3 million at December 31, 2018) in deferred costs for preconstruction activity related to the Willamette River water treatment plant.
Regulatory assets The Board has other assets to be charged to future periods matching the reporting periods when the expenses are included for rate-making purposes.
- Conservation assets - Conservation assets for the Electric System represent installations of energy saving measures at customer properties. The conservation asset balance is reduced as costs are recovered, which for the most part represent debt service payments included in rates for related borrowing.
- Unamortized bond issue costs - Unamortized bond issue costs represent the remaining expense related to various debt issuances. The asset is amortized over the duration of the related debt and recognition of these costs is included in the rate making process.
- Pension debits - Pension debits represent a portion of the change in net pension liability, as defined under GASS Statement No. 68. Regulatory accounting is used to recognize pension expense in accordance with the required employer contribution rates set by the Oregon Public Employees Retirement System.
- Other Post-employment Benefits (OPEB) debits - OPES debits represent a portion of the change in net OPEB liability, as defined under GASB Statement No. 75. Regulatory accounting is used to recognize components of OPES expense in accordance with employer contributions made by the Board.
35
Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)
Debt refundings For current and advance refundings resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt (gain or loss) is deferred and amortized as a component of interest expense over the remaining life of the old debt or the new debt, whichever is shorter. These amounts are reported as a deferred outflow of resources on the statement of net position.
Net position Net position consists of:
- Net investment in capital assets - Net investment in capital assets is capital assets, net of accumulated depreciation and outstanding balances of any bonds and other borrowings attributable to the acquisition, construction, or improvement of those assets.
- Restricted - Restricted components of net position have constraints placed on their use. Constraints include those imposed by creditors (such as through debt covenants), contributors, or laws or regulation of other governments or constraints imposed by law through constitutional provisions or through enabling legislation.
- Unrestricted - The unrestricted component of net position includes remaining amounts neither "restricted" nor "net investment in capital assets."
Net position was as follows:
2019 2018 Electric Water Electric Water S:tstem S:tstem S:tstem S:tstem Net investment in capital assets $ 241,619,954 $ 126,446,037 $ 206,740,056 $ 119,474,131 Restricted for:
Customer care program 1,126,491 916,139 Harvest Wind escrow 1,985,591 2,020,694 System development changes 7,887,954 6,100,233 Debt service 3,439,981 1,507,558 3,185,208 1,418,835 Wetland treatment 20,000 6,552,063 9,395,512 6,122,041 7,539,068 Unrestricted 130,266,680 28,837,323 173,263,685 25,663,422
$ 378,438,697 $ 164,678,872 $ 386,125,782 $ 152,676,621 36
Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)
Operating revenue and expense Operating revenues are recorded on the basis of service delivered while operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.
Revenues are derived primarily from the sale and transmission of electricity and from the sale of water.
Revenue is recognized when power or water is delivered to and received by the customer. Approximately 10% of 2019 Electric System retail revenues were the result of sales to one industrial customer (11 % in 2018). Estimated revenues are accrued for power and water delivered but not yet billed to customers.
At the discretion of management, a deposit may be obtained from the customer. Concentrations of credit risk with respect to receivables for residential customers are limited due to the large number of customers comprising the Board's customer base. Credit losses have been within management's expectations.
Similar to its evaluation of residential, commercial and industrial customers' credit reviews, the Board continually evaluates its wholesale power customers (sales for resale revenue) by reviewing credit ratings and financial credit worthiness of existing and new wholesale customers.
Receivables are recorded net of the allowance for doubtful accounts. The allowance is determined by an examination of write off experience in the preceding five years, and consideration of other influences as appropriate. Total amounts written off for the year ended December 31, 2019 were $582,000 ($582,000 for 2018) for the Electric System and $45,000 ($72,000 for 2018) for the Water System.
Contributions in lieu of taxes In accordance with ORS 225.270, Use of surplus earnings, the Electric System makes contributions in lieu of tax (CIL T) payments to the City of Eugene at the rate of 6% of retail sales and a fixed component equal to $882,000 for 2019 ($866,000 for 2018). The fixed amount is subject to certain annual inflationary adjustments. The Board makes CILT payments to the City of Springfield at the rate of 3% of retail sales for a customer within the boundaries of the City of Springfield. Total contributions in lieu of taxes for the year ended December 31, 2019 were $13.4 million ($13.6 million for 2018).
Environmental expenses Fish and plant habitat enhancements, as well as pollution prevention improvements are expensed or capitalized depending on their future economic benefits. Most pollution remediation outlays, legal obligations to address existing pollution, do not qualify for capitalization and are accrued as liabilities and expenses according to the estimated remediation costs on a current cost basis (rather than present value of future costs).
37
Eugene Water & Electric Board Notes to Financial Statements Note 2 - Power Risk Management The Board's Power Risk Management Guidelines set forth policies, limits and control systems governing power purchase and sale activities for the Electric System. The objectives of such policies are to maximize benefits to the customers from wholesale activities while minimizing the risk wholesale activities will adversely affect retail prices. The Board does not enter into contracts for speculative purposes.
During periods when resources are in excess of retail load, the Board may sell excess capacity into the wholesale markets, and is exposed to commodity price risk. The Board enters into forward contracts intended to manage the price risk associated with power sales in the wholesale market.
Derivative financial instruments In accordance with policy guidelines, the Board utilizes derivative instruments to minimize its exposure to commodity price risk. Hedging derivatives are reported on the statement of net position at fair value. The fair value of options and swaptions are determined using the Black formula. The fair value of financial swaps is determined by comparing the contract prices with the forecasted market prices.
All potential hedging derivatives were evaluated for effectiveness using the consistent critical terms method. A derivative instrument is effective under criteria for consistent critical terms when the significant terms of the hedging instrument and the hedgeable item are alike. The significant terms for hedging*
derivatives are the time period, quantity, price index, and point of delivery.
As of December 31, 2019, hedging derivatives with a fair value of $1.0 million were reported as other assets and deferred inflows. Hedging derivatives with a fair value of $1.4 million were reported as other liabilities and deferred outflows. Changes in fair value are reported as an increase in other assets or other liabilities and deferred inflows or outflows of resources until the time of settlement. When hedging derivatives settle, revenue or expense is recorded as either purchased power or wholesale sales.
Investment derivatives Hedging derivatives found through testing to be ineffective are classified as investment derivatives. At that time, the fair value, including any fair value changes previously deferred on the balance sheet, are recorded as investment revenue and a deferred inflow or outflow. As of December 31, 2019 and 2018, there were no investment derivatives or related investment revenue.
Options and Swaps Hedging Derivatives Investment Derivatives 2019 2018 2019 2018 Notional value $ 1,833,592 $ 381,872 $ $
Fair value - asset 1,021,222 512,600 Fair value - liability 1,445,152 381,872 Cash paid 1,833,592 381,872 Reference rates Mid-C index Mid-C index Dates entered into 4/19 - 8/19 2/18- 9/18 Dates of maturity 1/20 - 3/21 1/19- 6/19 38
Eugene Water & Electric Board Notes to Financial Statements Note 2 - Power Risk Management (continued)
Credit risk The Board enters into forward purchase and sale contracts for electricity with other industry participants such as public and investor owned utilities, financial institutions, gas and oil producers and energy marketers. Through this participation, the utility is exposed to credit risk related to the possibility of non-performance by its counterparties. To limit the risk of counterparty default or non-performance, the Board uses an evaluation process assigning an internal measure of credit worthiness to the Board's counterparties and sets limits to the dollar value of business transacted with counterparties. On a case-by-case basis, the Board may require letters of credit, cash collateral, pre-payment or other forms of credit support to ensure counterparty performance. Other assurances may include accelerated invoicing or pre-payment. In addition, the Board generally establishes netting arrangements with counterparties.
As of December 31, 2019, all derivative instrument assets were with three counterparties and the aggregate fair value was $1.0 million. This represents the maximum loss that would be recognized if the counterparty to the derivative instrument assets failed to perform as contracted. The counterparty credit rating is A+. This maximum exposure is reduced by $838,000 of liabilities included in a netting arrangement.
Termination risk Hedging derivative contracts may be terminated by mutual agreement of the Board and the counterparty, or upon the occurrence of a termination event. Termination events include non-payment, non-delivery, deterioration of creditworthiness, or other material adverse changes. During the years 2019 and 2018, there were no terminations.
39
Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant The major classifications of utility plant in service are as follows:
Electric Utility Plant Balance Balance December 31, December 31, 2018 Increases Decreases 2019 Plant in service not subject to depreciation Land $ 8,969,999 $ 367,836 $ $ 9,337,835 Intangible assets 231,716 23,526,562 23,758,278 Plant in service subject to depreciation Steam production 10,363,488 10,363,488 Hydro production 162,579,170 8,036,955 (10,864) 170,605,261 Wind production 11,789,767 (11,789,767)
Transmission 84,785,666 684,789 (1,263,445) 84,207,010 Distribution 313,808,256 14,964,158 (3,133,666) 325,638,748 Telecommunications 19,452,087 302,425 (809) 19,753,703 General plant 158,027,521 3,404,343 (245,144) 161,186,720 Completed construction, not yet classified 16,979,284 11,466,538 (16,979,283} 11,466,539 Total utility plant in service 786,986,954 62,753,606 (33,422,978) 816,317,582 Accumulated depreciation (436,984,343) (23,997,144) 14,062,451 (446,919,036)
Plant not subject to depreciation Property held for future use 782,512 562,343 1,344,855 Construction work in progress 16,972,396 33,613,421 (13,529,512} 37,056,305 Net utility plant $ 367,757,519 $ 72,932,226 $ (32,890,039} $ 407,799,706 40
Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant (continued)
Electric Utilitt Plant Balance Balance December 31, December 31, 2017 Increases Decreases 2018 Plant in service not subject to depreciation Land $ 8,643,245 $ 326,854 $ (100) $ 8,969,999 Intangible assets 231,716 231,716 Plant in service subject to depreciation Steam production 10,363,488 10,363,488 Hydro production 158,157,810 5,781,416 (1,360,056) 162,579,170 Wind production 11,789,767 11,789,767 Transmission 84,456,973 582,494 (253,801) 84,785,666 Distribution 297,428,233 20,710,570 (4,330,547) 313,808,256 Telecommunications 19,008,899 443,188 19,452,087 General plant 155,295,511 5,700,095 (2,968,085) 158,027,521 Completed construction, not yet classified 15,050,755 16,979,283 (15,050,754} 16,979,284 Total utility plant in service 760,426,397 50,523,900 (2;3,963,343) 786,986,954 Accumulated depreciation (422,004,832) (22,358,397) 7,378,886 (436,984,343)
Plant not subject to depreciation Property held for future use 943,148 9,364 (170,000) 782,512 Construction work in progress 14,512,880 30,586,324 (28,126,808} 16,972,396 Net utility plant $ 353,877,593 $ 58,761,191 $ (44,881,265} $ 367,757,519 41
Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant (continued)
Water Utility Plant Balance Balance December 31, December 31, 2018 Increases Decreases 2019 Plant in service not subject to depreciation Land $ 1,258,733 $ $ $ 1,258,733 Intangible assets 58,188 58,188 Plant in service subject to depreciation Source of supply 24,411,213 259,684 24,670,897 Pumping 12,404,017 1,955,915 (114,771) 14,245,161 Water treatment 35,742,975 3,060,367 38,803,342 Transmission & distribution 171,666,471 9,496,135 (968,750) 180,193,856 General plant 37,847,775 1,021,504 (36,826) 38,832,453 Completed construction, not yet classified 6,418,961 2,759,123 (6,418,961} 2,759,123 Total utility plant in service 289,808,333 18,552,728 (7,539,308) 300,821,753 Accumulated depreciation (123,146,121) (6,932,826) 1,053,876 (129,025,071)
Plant not subject to depreciation Property held for future use 2,396,812 2,396,812 Construction work in progress 6,551,690 13,227,151 (8,280,489} 11,498,352 Net utility plant $ 175,610,714 $ 24,847,053 $ (14,765,921} $ 185,691,846 42
Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant (continued)
Water Utilitl Plant Balance Balance December 31, December 31, 2017 Increases Decreases 2018 Plant in service not subject to depreciation Land $ 1,435,733 $ $ (177,000) $ 1,258,733 Intangible assets 58,188 58,188 Plant in service subject to depreciation Source of supply 24,411,213 24,411,213 Pumping 12,382,998 21,019 12,404,017 Water treatment 35,324,695 418,280 35,742,975 Transmission & distribution 163,569,125 8,097,346 171,666,471 General plant 36,758,474 1,716,228 (626,927) 37,847,775 Completed construction, not yet classified 2,720,942 6,418,961 (2,720,942} 6,418,961 Total utility plant in service 276,661,368 16,671,834 (3,524,869) 289,808,333 Accumulated depreciation (117,297,391) (6,514,264) 665,534 (123,146,121)
Plant not subject to depreciation Property held for future use 2,396,812 2,396,812 Construction work in progress 3,663,042 13,348,202 (10,459,554} 6,551,690 Net utility plant $ 165,423,831 $ 23,505,772 $ (13,318,889} $ 175,610,714 Capital contributions Contributions in Aid of Construction and System Development Charges are paid by developers and customers to cover the cost of new electric and water infrastructure (capital assets). When developers install and cover the costs of the infrastructure directly, those assets are referred to as Contributed Plant Assets.
Note 4 - Cash and Investments The Board maintains cash and investments in several fund accounts in accordance with bond resolutions and Board authorization. Descriptions of these fund account types are as follows:
Restricted cash and investments Customer deposits and other- Used to account for 1) deposits collected from retail customers and held for future refund or application to customer account balances, and 2) donations to the Customer Care Program.
Harvest Wind escrow accounts - Funds include amounts held in escrow related to EWEB's investment in the Harvest Wind Project, consisting of funds deposited to escrow from the receipt of federal energy grant funds in 2010, and a deposit in lieu of letter of credit with regard to the Project's transmission contract with Klickitat PUD.
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Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)
Construction funds - Used to account for legally restricted cash and investments for the purpose of construction of capital projects. Funds include proceeds from the issuance of bonds and notes.
System development charge reserves - Used to account for charges assessed and collected in conjunction with installation of new water services in the Water System and are restricted by State of Oregon Statutes to system enhanceme~ts and other related capital expenditures.
Debt service reserves - Deposits held for debt service coverage pursuant to bond indentures and/or in lieu of bond sureties.
Investments for bond principal and interest- Used to account for cash and investments restricted by Bond Indentures of Trust for future payment of principal and interest on debt.
Detailed amounts for restricted cash and investments were as follows:
2019 2018 Electric Water Electric Water System System System System Debt service reserves $ 6,638,349 $ 2,398,358 $ 6,487,818 $ 2,343,973 Customer deposit and other 1,800,310 2,192,046 20,000 Harvest Wind escrow accounts 1,985,591 2,020,694 Construction funds 19,465,578 35,156,986 5,675,771 System development charge reserves 7,935,754 6,274,395 Investments for bond principal and interest 766 206 678 190 Total restricted cash and investments $ 29,890,594 $ 10,334,318 $ 45,858,222 $ 14,314,329 Designated cash and investments Rate stabilization fund - Used to account for cash and investments the Board has designated to reserve for one time expenditures, with any allocations made at Board discretion.
Power reserve - Used to account for cash and investments the Board has designated to reserve for fluctuations in purchased power costs, load, generation levels, or margin requirements.
Capital improvement reserve - Used to account for cash and investments the Board has designated to reserve for capital improvements.
Second source fund - Used to account for cash and investments the Board has designated to reserve for costs incurred to create a secondary water source.
Operating reserves - Used to account for cash and investments the Board has designated for payments of emergency operating costs and self-insured claims.
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Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)
Detailed amounts for designated cash and investments were as follows:
2019 2018 Electric Water Electric Water Slstem Slstem Slstem Slstem Rate stabilization fund $ 24,468,927 $ 1,000,000 $ 37,048,759 $ 1,307,263 Power reserve 17,000,000 17,000,000 Capital improvement reserve 22,188,327 11,206,669 25,692,598 10,283,765 Second source fund 5,861,521 6,377,023 Operating reserve 7,853,568 1,584,364 5,849,928 1,592,556 Total designated cash and investments $ 71,510,822 $ 19,652,554 $ 85,591,285 $ 19,560,607 Deposits with financial institutions are comprised of bank demand deposits, certificates of deposit, and money market accounts. The total bank balances, as recorded in bank records at December 31, 2019, were $49.0 million. Of the bank balances, $4.1 million were covered by federal depository insurance and
$44.9 million were collateralized with securities.
Custodial credit risk for deposits is in the event of failure of a depository financial institution a depositor will not be able to recover deposits or will not be able to recover collateral securities in possession of an outside party. Deposits not covered by depository insurance are exposed to custodial credit risk when collateral for deposits is held by the pledging institution or its trust department or agency, but not in the name of the depositor. Within the Public Funds Collateralization Program (PFCP) in Oregon, securities pledged by financial institutions are required to be held in the name of the pool, and, therefore, cannot be in the Board's name. However, provided an entity is recognized by the PFCP administrator as an entity covered by the pool, balances in excess of FDIC are covered by the collateral of the pool.
The Board's investments during the year, which included obligations of the U.S. Government, are authorized by State of Oregon Statutes and bond resolution and by the Board's investment policy.
Authorized investments include the Oregon Local Government Investment Pool (LGIP), U.S. Treasury securities, U.S. Government Agency securities, public funds money market accounts, corporate commercial paper and bonds, and other investments enumerated in and authorized by ORS 294.035, Investments of surplus funds of political subdivisions.
The LGIP is included in the Oregon Short Term Fund (OSTF), which was established by the State Treasurer. The OSTF is not subject to SEC regulation. The OSTF is subject to requirements established in Oregon Revised Statutes, investment policies adopted by the Oregon Investment Council, and portfolio guidelines established by the OSTF Board. The Governor appoints the members of the Oregon Investment Council and OSTF Board. The fair value of the Board's position in the pool is the same as the value of the pool shares. Financial statements for the OSTF may be obtained from the Oregon State Treasurer's website.
45
Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)
As of December 31, 2019, the Board held the following investments (Electric and Water Systems combined):
Weighted Average Investment Tlee Credit Rating Car~ing Value Maturitl (Years) % of Portfolio Local Government Investment Pool Unrated $ 49,528,363 0.00 36.2%
U.S. Agency Securities FHLB 15,762,207 11.5%
FNMA 5,299,224 3.9%
FHLMC 14,406,218 10.5%
FFCB 11,479,910 8.4%
FAMCA 7,259,676 5.3%
Other Agency 2,044,460 1.5%
Subtotal U.S. Agency AA 56,251,695 1.00 41.1%
U.S. Treasury Securities AAA 23,022,572 0.44 16.9%
Corporate Bonds AA 7,882,452 1.24 5.8%
Subtotal all securities 87,156,719 0.93 63.8%
Total $ 136,685,082 0.59 100.0%
As of December 31, 2018, the Board held the following investments (Electric and Water Systems combined):
Weighted Average Investment Tlee Credit Rating Car~ing Value Maturitl (Years) % of Portfolio Local Government Investment Pool Unrated $ 48,991,021 0.00 24.2%
U.S. Agency Securities FHLB 34,739,120 17.2%
FNMA 13,022,762 6.4%
FHLMC 23,091,909 11.4%
FFCB 17,705,776 8.8%
FAMCA 7,139,032 3.5%
Other Agency 2,052,600 1.0%
Subtotal U.S. Agency AA 97,751,199 1.03 48.3%
U.S. Treasury Securities AAA 47,391,498 0.92 23.5%
Municipal Bonds AA 389,045 0.49 0.2%
Corporate Bonds AA 7,786,046 0.99 3.8%
Subtotal all securities 153,317,788 1.00 75.8%
Total $ 202,308,809 0.76 100.0%
46
Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)
Concentration risk is when investments are concentrated in one issuer. This concentration presents a heightened risk of potential loss. This does not apply for pooled investments or investments directly in the U.S. government. ORS 294.035 limits investment in any single issuer of bonds to 5% of a portfolio; there is not a limit for investment in U.S. Agencies. Many government-sponsored agency securities are not backed by the full faith and credit of the U.S. government, including those held by the Board, although market participants widely believe the government would provide financial support to an agency if the need arose. The Board does not have a policy for investment concentration in those agencies. Regarding the LGIP, with the exception of pass-through funds, the maximum amount of pooled investments to be placed in the pool is limited by ORS 294.810, Local governments authorized to place limited funds in pool, to $50.4 million as of December 31, 2019.
The "weighted average maturity in years" calculation assumes all investments are held until maturity.
As a means of limiting its exposure to fair value losses resulting from changes in interest rates, the Board's investment policy limits at least 25% of its investment portfolio to maturities of less than 180 days.
Investment maturities are limited as follows:
Maturity Minimum Investment Less than 180 days 25%
Less than 1 year 40%
Less than 3 years 100%
Custodial credit risk for investments is in the event of the failure of the counterparty, the Board will not be able to recover the value of its investments or collateral securities in the possession of an outside party because they are neither insured nor registered and they are held by the counterparty or the counterparty's trust department or agent, but not in the investor's name. All of the aforementioned investments, and the investments in the LGIP, which are not evidenced by securities, are held in the Board's name by a third-party custodian. The Board's policy, which adheres to Oregon statutes, is to limit its investments to the top two ratings issued by nationally recognized credit rating organizations. As a general practice, and in a further effort to minimize credit risk, the Board invests primarily in U.S. agency investments and in the LGIP.
47
Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)
Cash and investments consisted of the following:
Cash and Cash Equivalents and Total Carrying Total Carrying Restricted Cash Short-Term Designated Amount Amount and Investments Investments Funds 2019 2018 ELECTRIC SYSTEM Cash on hand $ $ 13,560 $ $ 13,560 $ 13,560 Cash in bank 3,113,658 31,812,781 34,926,439 20,483,440 Investments in the State of Oregon local government investment pool 7,570,376 3,739,243 26,880,836 38,190,455 38,873,020 Investments - U.S. Agencies, Treasuries, and Corp. 19,206,560 2,098,485 44,629,986 65,935,031 120,298,300 Total electric system 29,890,594 37,664,069 71,510,822 139,065,485 179,668,320 WATER SYSTEM Cash in bank 1,092 9,004,893 9,005,985 1,482,265 Investments in the State of Oregon local government investment pool 2,983,041 967,495 7,387,372 11,337,908 10,118,002 Investments - U.S. Agencies, Treasuries, and Corp. 7,350,185 1,606,321 12,265,182 21,221,688 33,019,487 Total water system 10,334,318 11,578,709 19,652,554 41,565,581 44,619,754
$ 40,224,912 $ 49,242,778 $ 91,163,376 $ 180,631,066 $ 224,288,074 48
Eugene Water & Electric Board Notes to Financial Statements Note 5 - Fair Value Measurement The Board categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.
The Board determines disclosures related to these investments only need to be disaggregated by major type because investing is not a core part of the Board's mission. The Board has the following recurring fair value measurements:
As of December 31, 2019:
Fair Value Measurements Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs 2019 (Level 1) (Level 2) (Level 3)
Investments by fair value level Debt securities U.S. treasury securities $ 23,022,572 $ 23,022,572 $ $
U.S. agencies 56,251,695 56,251,695 Corporate bonds 7,882,452 7,882,452 Total debt securities $ 87,156,719 $ 23,022,572 $ 64,134,147 $
Derivative instruments Effective hedge-asset $ 1,021,222 $ $ 1,021,222 $
Effective hedge-liability (1,445,152) (1,445,152)
Total derivatives $ (423,930) $ $ (423,930) $
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Eugene Water & Electric Board Notes to Financial Statements Note 5 - Fair Value Measurement (continued)
As of December 31, 2018:
Fair Value Measurements Usin9 Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs 2018 (Level 1) (Level 2) (Level 3)
Investments by fair value level Debt securities U.S. treasury securities $ 47,391,498 $ 42,430,928 $ 4,960,570 $
U.S. agencies 97,751,199 97,751,199 Corporate bonds 7,786,046 7,786,046 Municipal bonds 389,045 389,045 Total debt securities $ 153,317,788 $ 42,430,928 $ 110,886,860 $
Derivative instruments Effective hedge-asset $ 512,600 $ $ 512,600 $
Effective hedge-liability (381,872) (381,872)
Total derivatives $ 130,728 $ $ 130,728 $
Debt securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities.
Debt securities classified in Level 2 of the fair value hierarchy are valued using various market and industry inputs, including institutional bond quotes.
Derivative instruments classified in Level 2 of the fair value hierarchy are valued using an approach considering contract prices with forecast market prices.
50
Eugene Water & Electric Board Notes to Financial Statements Note 6 - Receivables Significant receivables were as follows:
2019 2018 Electric Water Electric Water System System System System Current receivables Accounts receivable $ 30,385,872 $ 3,505,329 $ 31,426,390 $ 3,701,181 Allowance for doubtful accounts (414,708) (29,972) (443,356) (20,868)
Net accounts receivable 29,971,164 3,475,357 30,983,034 3,680,313 Loans to customers 3,250,137 69,486 1,788,148 66,067 Receivable from FEMA 51,625 Interest receivable 297,616 101,043 454,796 129,213 Miscellaneous receivables 435,478 237,040 Receivables, less allowance $ 34,006,020 $ 3,645,886 $ 33,463,018 $ 3,875,593 Long-term receivables Incentive loans to customers $ 3,514,596 $ 120,067 $ 3,861,835 $ 103,152 Long-term receivables, conservation, and other $ 3,514,596 $ 120,067 $ 3,861,835 $ 103,152 Note 7 - Payables Current payables were as follows:
2019 2018 Electric Water Electric Water System System System System Accounts payable $ 6,218,459 $ 689,330 $ 6,220,668 $ 900,660 Accrued purchased power 12,908,326 13,445,457 Construction payables 1,469,368 162,841 1,815,920 518,865 Contributions in lieu of taxes 1,223,831 1,283,829 Customer deposits 673,819 1,275,907 Equipment purchases 175,274 118,239 850,307 591,854 Miscellaneous payables 66,919 31,602 171,862 62,445 Total payables $ 22,735,996 $ 1,002,012 $ 25,063,950 $ 2,073,824 51
Eugene Water & Electric Board Notes to Financial Statements Note 8 - Other Assets and Other Liabilities Other assets and other liabilities were as follows:
2019 2018 Electric Water Electric Water Sz'.stem Sz'.stem Sz'.stem Sz'.stem Other assets Non-utility property $ 196,585 $ 181,639 $ 231,685 $ 181,639 Research & demonstration projects 25,137 Derivatives at fair value 1,021,222 512,600 Option premiums long-term 343,520 Prepaid transmission expense -
Harvest Wind 867,160 964,411 Regulatory assets Pension debits 9,654,702 6,142,460 26,729,643 5,867,481 OPEB debits 3,900,071 1,756,345 2,941,413 645,676 Conservation assets 1,077,582 1,148,679 Unamortized bond issue costs 1,174,642 438,102 1,310,365 476,771 Other assets $ 18,260,621 $ 8,518,546 $ 33,838,796 $ 7,171,567 Other liabilities Derivatives at fair value $ 1,445,152 $ $ 381,872 $
Environmental clean* up 364,640 364,639 Sick leave - upon retirement 698,661 220,630 784,515 172,212 System development charge 47,801 174,162 Other liabilities $ 2,508,453 $ 268,431 $ 1,531,026 $ 346,374 52
Eugene Water & Electric Board Notes to Financial Statements Note 9 - Deferred Outflows of Resources and Deferred Inflows of Resources Deferred outflows of resources and deferred inflows of resources were as follows:
2019 2018 Electric Water Electric Water S~stem S~stem S~stem S~stem Deferred outflows of resources Accumulated decrease in fair value of hedging derivatives $ 1,445,152 $ $ 381,872 $
Unamortized losses on bond refunding 7,169,238 1,389,262 8,338,851 1,568,139 Pension - differences between expected and actual experience 3,228,553 1,019,542 2,505,055 549,890 Pension - changes of assumptions 7,942,218 2,508,069 17,121,450 3,758,366 Pension - differences between Board contributions and proportionate share of contributions 3,285,869 1,037,643 2,489,665 546,513 Pension contributions subsequent to measurement date 23,763,750 7,504,342 3,961,535 869,605 OPEB - net difference between projected and actual earnings on investments 879,033 192,958 OPEB - differences between expected and actual experience 2,387,471 524,079 OPEB - changes of assumptions 5,516,627 1,742,096 7,465,511 1,638,771 Deferred outflows of resources $ 52,351,407 $ 15,200,954 $ 45,530,443 $ 9,648,321 Deferred inflows of resources Accumulated increase in fair value of hedging derivatives $ 1,021,222 $ $ 512,600 $
Pension - net difference between projected and actual earnings on investments 1,659,674 524,108 3,270,088 717,824 Pension - changes in proportion 15,627,064 4,934,861 8,028,284 1,762,306 OPEB - net difference between projected and actual earnings on investments 2,968,807 937,519 Deferred inflows of resources $ 21,276,767 $ 6,396,488 $ 11,810,972 $ 2,480,130 53
Eugene Water & Electric Board Notes to Financial Statements Note 10 - Investment in WGA The Board is a party to an Intergovernmental Agency, which is governed equally by the Board and Clatskanie PUD. The Board was obligated to make equity investments in the Western Generation Agency (the Agency) as partial funding for the construction of the Wauna Cogeneration Project (the Project). As of December 31, 1996, the Board had made all required equity investments, totaling $15.1 million, to the Agency. The Project agreements allow the Board to be repaid its equity investment plus a cumulative preferred dividend at 7.875% should the operating revenues of the Project be sufficient to cover operating costs, debt service, plus other reserve requirements. In October 2006, the Agency accomplished a refunding of its debt, which allowed the Board to be repaid a significant portion of its remaining equity investment ($10.4 million was repaid in 2006). The balance of the original investment at December 31, 2006 was $2.2 million. Repayment of the equity investment was restricted from payment until the Agency's Series C 2006 debt was paid off, which was accomplished during 2016. During 2018, the Board received $1.6 million, full repayment from the Agency of the remaining original equity contribution and the preferred dividend which was in arrears. Revenue from preferred dividends is included with investment earnings.
The investment in Western Generation Agency consists of 50% of the Agency's net income and losses, and distributions from excess cash. Under bond agreements, distributions to the Board were limited to
$400,000 per year until the outstanding balance of the Board's original investment was paid in full. During 2019, $1.0 million in distributions were received ($629,000 in 2018). The balance of the investment as of December 31, 2019 was $3.8 million including estimated income of $1.8 million ($3.0 million at December 31, in 2018 including estimated income of $1.5 million). Income is reported with investment earnings.
The Board is committed, through a power purchase agreement, to purchase the output from the Project through April 2021. The Board suspended its agreement with the Agency in favor of a separate purchase power agreement between the Agency and BPA, which was in effect through April 2016, after which the Board and Clatskanie PUD each purchase 50% of the output. Financial information for the Project is included in the financial statements of the Agency and may be obtained from the Agency's trustee, US Bank.
Note 11 - Investment in Harvest Wind The Board is a party to a joint ownership agreement, whereby the Board made an equity investment in the Harvest Wind project, a 98.9 megawatt wind generating facility located in Klickitat County, Washington. The Board's ownership share of Harvest Wind is 20%. Other owners are Peninsula Light Co., 20%, Cowlitz PUD, 30%, and Lakeview Light & Power, 30%. Commercial operations began on December 15, 2009.
During 2009, the joint owners of Harvest Wind elected to classify the project as an association taxable as a corporation. At the time of the election, all project assets were treated as contributed to the corporation.
The corporation received a 4% share, and the joint owners received shares in proportion to their ownership. Owners share in power output, income and expenses according to their ownership shares.
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Eugene Water & Electric Board Notes to Financial Statements Note 11 - Investment in Harvest Wind (continued)
The investment in Harvest Wind consists of the Board's share of the costs to develop the project, 20% of the Project's net income and losses, and any distributions. At December 31, 2019, the balance of the Board's investment in Harvest Wind was $20.0 million ($21.1 million at December 31, 2018) including estimated income of $451,000 ($504,000 in 2018) and distributions of $1.6 million ($1.7 million in 2018).
The Board is committed, through an energy purchase agreement, to purchase its share of the output from the Project, and pay its share of project expenses through year 2029. Additionally, the Board is committed, through a transmission service agreement and a transmission payment agreement, to subsidize the construction and replacement of transmission lines, deposit funds to ensure contract performance, and purchase transmission from the owner of the transmission lines through the year 2029.
Under the terms of a payment agreement, the Board deposited $1,340,000 from 2010 treasury grant proceeds in an escrow account to ensure payment of its share of contingent liabilities of the corporation. If no such contingencies occur, the funds will be released from escrow.
Under the terms of a transmission agreement, the Board has $610,000 as of December 31, 2019
($645,000 at December 31, 2018) on deposit in an escrow account to ensure the payment of monthly transmission interconnection expenses.
Financial information for the project is included in the financial statements of the project and may be obtained from the Board.
Note 12 - Long-Term Debt The Board defeased bonds by placing proceeds and other sources of cash in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Board's financial statements. At December 31, 2019, $63,148,000 of Electric System bonds are considered defeased ($65,693,000 at December 31, 2018).
The resolutions authorizing the issuance of revenue bonds contain various covenants, sinking fund requirements and obligations with which the Board must comply. The principal and interest requirements are reflected in the supplementary schedule "Long-Term Bonded Debt and Interest Payment Requirements." To comply with sinking fund deposit requirements, the Board makes semi-annual deposits with the trustee, less accumulated interest earnings. The interest payments are made semi-annually on February 1 and August 1, and principal payments on August 1. At December 31, 2019 and 2018, no assets were pledged as security for the outstanding bonds of the Electric and Water Systems.
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Eugene Water & Electric Board Notes to Financial Statements Note 12 - Long-Term Debt (continued)
Bonds and notes payable were as follows:
2019 2018 Electric Utility System Revenue and Refunding Bonds 2011 Series A, 6-08-11 issue Serial bonds 1.90%-2.85%, due 2017-2020 $ 2,475,000 $ 4,810,000 2011 Series B, 6-08-11 issue Serial bonds 1.00%-4.35%, due 2013-2023 3,720,000 4,560,000 2012 Series, 8-1-12 issue Serial bonds 2.00%-5.00%, due 2013-2032 14,510,000 14,960,000 Term bonds, 5.00%, due 2033-2038 10,165,000 10,165,000 Term bonds, 3.75%, due 2039-2042 8,475,000 8,475,000 2016 Series A, 9-7-16 issue Serial bonds 2.00%-5.00%, due 2017-2036 81,565,000 82,840,000 Term bonds 4.00%, due 2037-2040 8,065,000 8,065,000 2016 Series B, 9-7-16 issue Serial bonds .835%-1.840%, due 2017-2022 12,405,000 15,950,000 2017 Series, 9-21-17 issue Serial bonds 5.00%, due 2027-2043 24,450,000 24,450,000 Term bonds 5.00%, due 2047 9,345,000 9,345,000 175,175,000 183,620,000 Add unamortized premium 23,497,051 25,658,824 Electric System bonds payable 198,672,051 209,278,824 Less current portion 8,540,000 8,445,000 Electric System bonds payable, net of current portion $ 190,132,051 $ 200,833,824 56
,----------------- ---~------------------ ----------------------- ---,
1.
Eugene Water & Electric Board Notes to Financial Statements Note 12 - Long-Term Debt (continued) 2019 2018 Water Utility System Revenue and Refunding Bonds Serial bonds, 2.00%-4.25%, due 2014-2031 $ 6,790,000 $ 7,245,000 Term bonds, 4.50%-5.00%, due 2032-2040 7,935,000 7,935,000 2016 Series, 5-19-16 issue Serial bonds, 2.00%-5.00%, due 2017-2037 27,425,000 29,200,000 Term bonds, 4.00%, due 2038-2045 6,860,000 6,860,000 49,010,000 51,240,000 Add unamortized premium 4,633,716 5,058,194 Water System bonds payable 53,643,716 56,298,194 Less current portion 2,325,000 2,230,000 Water System bonds payable, net of current portion 51,318,716 54,068,194 Total System long-term debt, net of current portion $ 241,450,767 $ 254,902,018 The schedule of maturities for principal and interest on bonded debt is as follows:
Electric S:z::stem Water S:z::stem Princieal Interest Princieal Interest 2020 $ 8,540,000 $ 7,677,921 $ 2,325,000 $ 2,138,413 2021 6,745,000 7,432,356 2,415,000 2,050,113 2022 8,260,000 7,256,751 2,525,000 1,938,963 2023 9,095,000 7,015,067 1,850,000 1,821,375 2024 7,665,000 6,584,819 1,945,000 1,736,525 2025-2029 41,535,000 27,049,845 11,025,000 7,378,450 2030-2034 41,350,000 16,716,301 10,275,000 4,902,550 2035-2039 26,340,000 9,551,665 10,890,000 2,625,750 2040-2044 18,470,000 3,897,413 4,900,000 697,450 2045-2047 7,175,000 729,250 860,000 34,400
$ 175, 175,000 $ 93,911,388 $ 49,010,000 $ 25,323,989 Long-term debt activity for the year ended December 31, 2019 was as follows:
Outstanding Outstanding December 31, Due Within Janua~ 1, 2019 Additions Reductions 2019 One Year Electric revenue bonds $ 183,620,000 $ - $ (8,445,000) $ 175,175,000 $ 8,540,000 Water revenue bonds 51,240,000 (2,230,000) 49,010,000 2,325,000 Total bonded debt $ 234,860,000 $ - $ (10,675,000) $ 224,185,000 $ 10,865,000 57
Eugene Water & Electric Board Notes to Financial Statements Note 12 - Long-Term Debt (continued)
Long-term debt activity for the year ended December 31, 2018 was as follows:
Outstanding Outstanding December 31, Due Within Janua~ 1, 2018 Additions Reductions 2018 One Year Electric revenue bonds $ 191,990,000 $ - $ (8,370,000) $ 183,620,000 $ 8,445,000 Water revenue bonds 53,400,000 (2, 160,000l 51,240,000 2,230,000 Total bonded debt $ 245,390,000 $ - $ (10,530,000) $ 234,860,000 $ 10,675,000 Note 13 - lntersystem Items
- 1. Obligations 2019 Electric Water Total System System Systems Due from Water, (Due to) Electric Current Interest $ 14,544 $ (14,544) $
Roosevelt Operations Center 352,580 (352,580) 367,124 (367,124)
Non-current Roosevelt Operations Center 6,781,253 (6,781,253)
Totals $ 7,148,377 $ (7, 148,377) $
2018 Electric Water Total System System Systems Due from Water, (Due to) Electric Current Interest $ 15,246 $ (15,246) $
Roosevelt Operations Center 344,067 (344,067) 359,313 {359,313)
Non-current Roosevelt Operations Center 7,133,833 (7, 133,833)
Totals $ 7,493,146 $ (7,493,146) $
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Eugene Water & Electric Board Notes to Financial Statements Note 13 - lntersystem Items (continued)
Amounts receivable and payable between the Electric and Water Systems and related interest earnings and expense are eliminated in the Total System columns of the financial statements.
Roosevelt Operations Center The Electric System financed the acquisition and construction of the Board's Roosevelt Operations Center consisting of land, buildings, equipment and personal property placed into service during November 2010. Both the Electric and Water Systems occupy the property. A payment schedule was established in November 2010 whereby the Water System will repay the Electric System for its estimated share of the fair value of the property and the associated financing costs incurred by the Electric System without gain to the Electric System. The Roosevelt Operations Center was recorded in equal amounts as Plant in Service and an obligation for the Water System, along with depreciation expense and a receivable for the Electric System.
Payments are revised for refinancing of underlying debt incurred by the Electric System. The obligation is also revised for capitalized improvements at the facility if they are financed by the Electric System.
Monthly payments were approximately $44,000 as of December 31, 2019 and December 31, 2018 on a capitalized value of $17.6 million for the Water System.
Annual totals for payments (including interest) as of December 31, 2019 were as follows:
2020 $ 523,173 2021 523,173 2022 523,173 2023 523,173 2024 523,173 2025-2029 2,615,863 2029-2033 2,615,863 2034-2036 840,426
$ 8,688,017
- 2. lntersystem Transfer - The Electric System has received rental income in part for property occupied by the Electric and Water Systems. The Water System does not have a capitalized interest in certain rental property; however it has made payments to the Electric System for capital improvements and ongoing maintenance of the property. In recognition of those investments, the Electric System transferred approximately $532,000 to the Water System in 2018, which was a measurement of cumulative rental income in proportion to the Water System's outlays.
59
Eugene Water & Electric Board Notes to Financial Statements Note 14 - Special Items In 2019, the Board made a $22.0 million deposit to an Oregon Public Employees Retirement System (OPERS) side-account. It reduced EWEB's employer contribution rate as of November 1, 2019 and will provide ongoing savings. In addition, this deposit received a $5.5 million match from the state's Employer Incentive Fund.
In 2017 the Board elected to join the State & Local Government Rate Pool (SLGRP). Previously the Board's status was as an independent employer participating in the OPERS. As an independent employer, actuarial valuations to determine employer contribution rates used Board specific demographics. As a participant in the SLGRP, valuations to determine employer contribution rates use the demographics of pool participants. Based on OPERS actuarial calculations, $32.6 million of the Board's actuarial liability as an independent employer, was assigned as the transition liability to move from independent to SLGRP status. This maintained future rate equity among other SLGRP participants.
The Board recognized the expense as a special item in 2018 and used cash reserves to pay the full amount.
The Board also made a one-time contribution of $2 million to the OPEB trust in 2018 in an effort to pay down its net OPEB liability. The contribution is significant to the plan and due to the infrequent nature, it is reported as a special item ($1,520,000 for the Electric System and $480,000 for the Water System).
Note 15 - Power Supply Resources Bonneville Power Administration Bonneville Power Administration Contracts - A contract was signed on December 4, 2008 providing power to EWEB from October 1, 2011 through September 30, 2028. The Board reselected a combination of both Block and Slice System power products from those offered by Bonneville Power Administration (BPA) in the previous contract which ended September 30, 2011. While Slice and Block are still the offered products, BPA implemented new policies on how it sells power and what it will charge to meet customer's future load growth. Under BPA's tiered rate methodology policy, BPA has allocated the power output and operational costs of the existing low-cost federal resources into a tier 1 pool. The tier 1 power was allocated to public power customers like EWEB based on each customer's 2010 actual weather-adjusted load. The allocation determined the maximum planned amount of tier 1 power.
Each product provides attributes bringing different kinds of flexibility to the Board's power portfolio. The Slice product provides a percentage of BPA's resources rather than a guaranteed amount of power and in exchange the Board pays its Slice contract percentage share of BPA's costs. Slice output, in combination with the Block and other EWEB resources, may be more or less than what is needed to serve EWEB's hourly retail loads. In the spring months, available must- run water in the Columbia system is typically high due to the runoff from snow melting, and the increased power generation may require BPA to rely on spilling water as a tool to balance generation with demand. However, in order to maintain safe water conditions to protect fish, spills are limited. The risk associated with the Slice product is managing the water variability and available Slice storage to economically meet hourly load obligations and to optimally dispatch the value of the surplus portion of the Slice product.
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Eugene Water & Electric Board Notes to Financial Statements Note 15 - Power Supply Resources (continued)
The Slice product consists of a Slice share of BPA's Federal Base System generation. Under the contract, the Board's initial Slice percentage share is 1.81%, compared to the historical 2.40% in the previous Requirements contract. The amount of actual power received under the Slice product will vary with seasonal water year conditions, the performance of the Columbia Generating Station (CGS) nuclear plant and the performance and availability of all other Federal Base System resources. In years of heavy water flow and lack of overall storage in the Federal System, the Board may have rights to power in excess of their needs, and in low water years the Board would need to augment its share of Slice output with its own generation, market purchases, or storage releases from EWEB's share of Slice storage.
The second BPA product purchased is the Block, which provides a fixed hourly amount for the month, and varies by month. The value of the Block product is the certainty of a fixed volume of power shaped to monthly load requirement and the monthly predictability of prices for the known quantity of power.
The annual amount of power the Board is entitled to under this contract is based on the actual weather adjusted load during the period between October 1, 2009 and September 30, 2010, with some adjustments specified in BPA's tiered rate methodology, is approximately 250 aMW.
BPA Transmission Contract- In 2001, the Board signed the Network Integration Transmission Service contract with BPA to provide transmission for the Board's generation projects and BPA power to serve EWEB's load. The current contract term extends through September 30, 2028. EWEB has firm roll-over rights with this contract.
EWEB-owned resources Carmen-Smith Hydroelectric Project - EWEB owns and operates the Carmen-Smith Hydroelectric Project (Carmen-Smith Project) within the McKenzie River basin. The Carmen-Smith Project includes the Carmen Power House with two generating units with a nameplate capacity of 52 MW each. The Carmen-Smith Project also includes the Trail Bridge re-regulating facility, with an additional generating unit with a nameplate capacity of 10 MW.
A new 40-year federal operating license for the Carmen-Smith Project was issued on May 17, 2019. The license, which includes requirements for fish, wildlife, vegetation, water quality, land and road management and recreation enhancements, is supplemented by a Settlement Agreement that was filed with FERG in November 2016. Of note, EWEB will be modifying the Carmen-Smith Project for fish passage at Trail Bridge Dam. When complete, the Trail Bridge Powerhouse will transition from a re-regulating generation facility to the low-level outlet from Trail Bridge Reservoir. In addition, the Board is refurbishing the power plant to perform over the life of the new license.
International Paper Industrial Energy Center Cogeneration Project - The Board and International Paper Company jointly operate a cogeneration facility at the International Paper Springfield plant. The unit, which has a nameplate capacity of 25.4 MW (average output is approximately 20 aMW), is owned by the Board, with International Paper providing operation support and fuel. Under terms of the current agreement (which expires in September 2023), the project costs and output for this unit are shared equally by the parties.
61
Eugene Water & Electric Board Notes to Financial Statements Note 15 - Power Supply Resources (continued)
Leaburg Waltervil/e Hydroelectric Project - The Board owns and operates the Leaburg Walterville Hydroelectric Project (L-W Project) on the McKenzie River in Lane County, Oregon. The L-W Project is comprised of two run-of-river facilities located at different points on the McKenzie River. The Leaburg facility includes a diversion dam on the McKenzie River, a canal and two generating units with a combined nameplate capacity of 15.9 MW. The Walterville facility includes a canal diverting water from the McKenzie River and one generating unit with a nameplate capacity of 8 MW. In April 2000, FERC granted the Board a new hydroelectric license for the L-W Project. The license is for a term of 40 years.
Stone Creek Hydroelectric Project- The Stone Creek Project has one turbine with a peak capacity of 12 MW. The facility is on the Clackamas River approximately 45 miles southeast of Portland. The project is a run-of-the-river development located between two hydroelectric facilities that are owned and operated by Portland General Electric (PGE). The Stone Creek facility is operated and maintained for EWEB by PGE and is licensed through August 2039.
Jointly-owned resources Foote Creek I Wind Project - The Board and PacifiCorp were the joint owners of the Foote Creek I Wind Project with the Board having a 21.21 % ownership, which translates to 8.8 MW of the project capacity.
The project is located along the Foote Creek Rim in Carbon County, Wyoming. EWEB has sold 26% or 2.3 MW of its share to BPA under terms of a 25 year power purchase agreement, pursuant to which BPA has committed to purchase 15.3 MW of the Project's total capacity. Net of sales to BPA, the Board received approximately 2.5 aMW per year from the Foote Creek I Project. EWEB sold its interest in the project in June of 2019.
Harvest Wind Project- The Board, Cowlitz PUD, Lakeview Light and Power, and Peninsula Light Company are the joint owners of the Harvest Wind Project, with the Board having a 20% ownership share. The project has a nameplate capacity of 98.9 MW and is located in Klickitat County, Washington.
All project assets are held by a corporation formed by the owners. The Board and other owners have committed to purchase power from the corporation in proportion to their ownership shares through December 2029.
Western Generation Agency- The Board and Clatskanie People's Utility District (CPUD) equally govern the Western Generation Agency, which owns a 36 MW nameplate cogeneration project at the Georgia Pacific mill in Wauna, Oregon. The generation facility includes a steam turbine and a fluidized bed boiler.
EWEB and CPUD each purchase 50% of the output. The power purchase agreement expires in April 2021.
Contract resources Stateline Wind Project - In 2002, the Board. agreed to purchase 25 MW from Phase 1 of the Stateline Wind Project located in Walla Walla County, Washington and Umatilla County, Oregon. The project consists of 454 wind turbines with a total project nameplate capacity of 300 MW. The contract for this power expires on December 31, 2026.
62
Eugene Water & Electric Board Notes to Financial Statements Note 15 - Power Supply Resources (continued)
Klondike Ill Wind Project- In 2006, the Board agreed to purchase 25 MW from Phase 3 of the Klondike Wind project located near the town of Wasco in Sherman County, Oregon. The project consists of 125 wind turbines with a total nameplate capacity of 224 MW. The contract for this power expires on October 31, 2027.
Seneca Sustainable Energy- In 2010, the Board entered into a Renewable Power Purchase Agreement with Seneca Sustainable Energy LLC to purchase the total output of the biomass fueled electric cogeneration facility located in Eugene, Oregon. Nameplate capacity is 19.8 MW. Expected average output is approximately 14 aMW. The contract for this power expires on April 5, 2026.
Priest Rapids and Wanapum Hydroelectric Projects - The Board purchases power from the Priest Rapids Project composed of the Priest Rapids Dam and the Wanapum Dam, two large hydroelectric developments on the Columbia River in Washington owned by Public Utility District No. 2 of Grant County, Washington (Grant County PUD). Under this contract, EWEB's share of purchased physical power from Grant County PUD is 0.14% of the project output or about 1.4 aMW per year. The contract for this power continues through March 31, 2052.
Smith Creek Hydroelectric Project - The Smith Creek project is a run-of-the-river hydroelectric project on Smith Creek, a tributary of the Kootenai River in Northern Idaho. It is comprised of three units with a combined nameplate capacity of 38.3 MW. The Board sold this project for $22.3 million in May of 2016, entering into a three year power purchase agreement with the new owner. The current contract for this power expired on June 30, 2019.
Energy Northwest- Energy Northwest is a Washington municipal corporation, engaged in the construction of five nuclear generation facilities (Projects Nos. 1,2,3,4 and 5), of which EWEB purchased a 0.061 percent share of Project No 1. The Board is not a member of Energy Northwest. EWEB, Energy Northwest, and Bonneville entered into a separate Net Billing Agreement, under which EWEB purchased from Energy Northwest, and in turn, assigned to Bonneville, EWEB's share of the capability. Construction of Project No 1 was terminated in 1994. However, under the Net Billing Agreement, Bonneville is responsible for EWEB's percentage share of the total annual cost of Projects No 1, including debt service on revenue bonds issued to finance the cost of construction, whether or not the Project was completed.
This has resulted in zero payments by, or credits to EWEB under the Net Billing Agreement. In the event that Bonneville fails to make a payment, or the parties terminate the agreement to directly pay, the original obligations of the Net Billing Agreements would resume. Bonneville has always met all of its obligations to Energy Northwest.
Solar PV Purchases - EWEB supports the development of Solar PV generation in Eugene through the provision of net metering rates to those customers with small systems that wish to self-generate power and renewable generation rates for customers with larger systems. To date, EWEB's Net Metered program has a total installed capacity of slightly over 5.5 MW and 0.68 aMW of energy and direct generation contracts with a total capacity of just over 2.5 MW and 0.34 aMW of energy.
63
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits
- 1. Pension Plan Plan description - Board employees are provided with pensions through OPERS. It is a cost sharing multiple-employer defined benefit pension plan. All Board employees are eligible to participate in OPERS after six months of employment. Oregon PERS, a component unit of the State of Oregon, issues a comprehensive annual financial report, which may be obtained from the OPERS website, www.oregon.gov/pers.
Description of Benefit Terms - All benefits of the OPERS are established by the legislature pursuant to ORS Chapters 238 and 238A.
- Tier One/Tier Two Retirement Benefit (Chapter 238) Tier One/Tier Two Retirement Benefit plan is closed to new members hired on or after August 29, 2003.
Pension benefits - The PERS retirement allowance is payable monthly for life. It may be selected from 13 retirement benefit options. These options include survivorship benefits and lump-sum refunds. Retirement benefits are determined as 1.67 percent of the employee's final average salary times the employee's years of retirement credit. Benefits may also be calculated under either a formula plus annuity (for members who were contributing before August 21, 1981) or a money match computation if a greater benefit results.
A member is considered vested and will be eligible at minimum retirement age for a service retirement allowance if he or she has had a contribution in each of five calendar years or has reached at least 50 years of age before ceasing employment with the Board. General service employees may retire after reaching age 55. Tier One general service employee benefits are reduced if retirement occurs prior to age 58 with fewer than 30 years of service. Tier Two members are eligible for full benefits at age 60. The ORS Chapter 238 Defined Benefit Pension Plan is closed to new members hired on or after August 29, 2003.
Death benefits - Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of the member's account balance (accumulated contributions and interest). In addition, the beneficiary will receive a lump-sum payment from employer funds equal to the account balance, provided one or more of the following conditions are met:
- the member was employed by a PERS employer at the time of death,
- the member died within 120 days after termination of PERS-covered employment,
- the member died as a result of injury sustained while employed in a PERS-covered job, or
- the member was on an official leave of absence from a PERS-covered job at the time of death.
64
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Disability benefits - A member with 10 or more years of creditable service who becomes disabled from other than duty-connected causes may receive a non-duty disability benefit. A disability resulting from a job-incurred injury or illness qualifies a member (including PERS judge members) for disability benefits regardless of the length of PERS-covered service. Upon qualifying for either a non-duty or duty disability, service time is computed to age 58 (55 for police and fire members) when determining the monthly benefit.
Benefit changes after retirement - Members may choose to continue participation in a variable equities investment account after retiring and may experience annual benefit fluctuations due to changes in the market value of equity investments.
Under ORS 238.360 monthly benefits are adjusted annually through cost-of-living changes.
Under current law, the cap on the COLA in fiscal year 2015 and beyond will vary based on 1.25 percent on the first $60,000 of annual benefit and 0.15 percent on annual benefits above
$60,000.
- OPSRP Pension Program (OPSRP DB) Pension Benefits Pension benefits - The Pension Program (ORS Chapter 238A) provides benefits to members hired on or after August 29, 2003.
This portion of OPSRP provides a life pension funded by employer contributions. Benefits are calculated with the following formula for members who attain normal retirement age: General service: 1.5 percent is multiplied by the number of years of service and the final average salary.
Normal retirement age for general service members is age 65, or age 58 with 30 years of retirement credit.
A member of the OPSRP Pension Program becomes vested on the earliest of the following dates: the date the member completes 600 hours0.00694 days <br />0.167 hours <br />9.920635e-4 weeks <br />2.283e-4 months <br /> of service in each of five calendar years, the date the member reaches normal retirement age, and, if the pension program is terminated, the date on which termination becomes effective.
Death benefits - Upon the death of a non-retired member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would otherwise have been paid to the deceased member.
Disability benefits - A member who has accrued 10 or more years of retirement credits before the member becomes disabled or a member who becomes disabled due to job-related injury shall receive a disability benefit of 45 percent of the member's salary determined as of the last full month of employment before the disability occurred.
65
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Benefit changes after retirement - Under ORS 238A.210 monthly benefits are adjusted annually through cost-of-living changes. Under current law, the cap on the COLA in fiscal year 2015 and beyond will vary based on 1.25 percent on the first $60,000 of annual benefit and 0.15 percent on annual benefits above $60,000.
Contributions PERS funding policy provides for monthly employer contributions at actuarially determined rates. These contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay benefits when due. This funding policy applies to the PERS Defined Benefit Plan and the Other Postemployment Benefit Plans.
Effective in 2017, the Board elected to join the State & Local Government Rate Pool (SLGRP) rather than continue as an independent employer. The Board made a one-time contribution of $32.6 million in 2018 to cover the transition liability associated with joining the pool. The transition liability was the estimated amount needed to achieve rate equity with other members of the pool. During 2019, the Board made a lump-sum contribution of $22 million to qualify for a matching contribution from the Oregon Employer Incentive Fund of $5.5 million. The decreased employer contribution rates effective November 1, 2019 include the impact of these contributions.
Employer contribution rates during the period were based on the December 31, 2015 actuarial valuation. The rates based on a percentage of payroll, first became effective July 1, 2017. Employer contribution rates changed during 2019, based on the December 31, 2017 actuarial valuation. The state of Oregon and certain schools, community colleges, and political subdivisions have made lump sum payments to establish side accounts, and their rates have been reduced. The Board has elected to make lump-sum payments to OPERS during 2019, 2007, and 2001, which has had the effect of lowering the employer contribution rate. The Board's contribution rates effective July 1, 2017 were 27.51 % for Tier One/Tier Two members and 21.33% for OPSRP General service members. The Board's contribution rates effective July 1, 2019 were 30.5% for Tier One/Tier Two members and 24.94% for OPSRP General service members. Effective November 1, 2019 following a side-account deposit, employer contribution rates dropped to 19.35% for Tier One/Tier Two members and 13.79% for OPSRP. Employer contributions based on payroll for the year ended December 31, 2019 were $9.2 million ($9.5 million in 2018).
Pension liability, pension expense, deferred outflows of resources, and deferred inflows of resources related to pensions At December 31, 2019, the Board reported a net pension liability of $69.3 million for its proportionate share of the OPERS net pension liability ($89.8 million in 2018). The net pension liability was measured as of June 30, 2019 and the total pension liability for each plan used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2018 rolled forward to June 30, 2019 using standard update procedures. The Board's proportion of the net pension liability was based on a projection of the Board's long-term share of contributions to the plan relative to the projected contributions for all participating employers, actuarially determined. The Board's proportionate share of the net pension liability as of June 30, 2019 was 0.44533405%.
66
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
For the year ended December 31, 2019, the Board's proportionate share of system pension expense was
$19.7 million ($17.4 million in 2018). The Board has elected to use regulatory accounting to recognize pension expense in conjunction with the required employer contribution rates. Accordingly, the Board recognized pension expense related to Tier One/Tier Two and OPSRP of $9.2 million.
As of December 31, 2019, the Board reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred Outflows of Inflows of Resources Resources Net difference between projected and actual earnings on plan investments $ $ 2,183,782 Differences between expected and actual experience 4,248,095 Changes in assumptions 10,450,287 Changes in employer proportion 20,561,925 Differences between employer contributions and proportionate share of contributions 4,323,512 Pension contributions subsequent to measurement date 31,268,092
$ 50,289,986 $ 22,745,707
$31.2 million reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2020.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions are to be amortized as pension debits and pension credits as follows:
Difference Between Net Difference Differences Employer Between Between Contributions Projected and Expected and and Proportionate Actual Earnings Actual Changes of Changes in Share of Fiscal i'.ear on Investments Exeerience Assumetions Proeortion Contributions 2020 $ 1,496,467 $ 1,613,295 $ 6,837,084 $ (6,448,694) $ 1,454,685 2021 (4,932,775) 1,128,617 1,926,566 (5,577,026) 1,223,966 2022 (343,530) 769,428 1,926,566 (4,389,470) 907,052 2023 1,596,056 615,945 (114,880) (3,478,224) 622,355 2024 120,810 (125,049) (668,511) 115,454
$ (2,183,782) $ 4,248,095 $ 10,450,287 $ (20,561,925) $ 4,323,512 67
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Actuarial methods and assumptions used in developing the total pension liability The total pension liability in the December 31, 2016 actuarial valuations were determined using the following actuarial assumptions.
Valuation date December 31, 2016 Measurement date June 30, 2019 Actuarial cost method Entry age normal Actuarial assumptions:
Discount rate 7.20%
Inflation 2.50%
Payroll growth 3.50%
Projected salary increase 3.50%
Investment rate of return 7.20%
Mortality rates for healthy retirees and beneficiaries were based on the RP-2014 sex-distinct tables, as appropriate. Mortality rates for active members are a percentage of healthy retiree rates that vary by group, as described in the valuation. For disabled retirees, mortality rates are based on the RP-2014 generational disabled mortality sex-distinct table.
Actuarial valuations of an ongoing plan involve estimates of the value of projected benefits and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Experience studies are performed as of December 31 of even numbered years.
The methods and assumptions shown above are based on the 2016 Experience Study which reviewed experience for the four-year period ending on December 31, 2016.
Discount rate The discount rate used to measure the total pension liability was 7 .20 percent for the Defined Benefit Pension Plan. The projection of cash flows used to determine the discount rate assumed contributions from plan members and those of the contributing employers are made at the contractually required rates, as actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.
Therefore, the long-term expected rate of return on pension plan investments for the Defined Benefit Pension Plan was applied to all periods of projected benefit payments to determine the total pension liability.
Long-term expected rate of return To develop an analytical basis for the selection of the long-term expected rate of return assumption, the PERS Board reviewed long-term assumptions developed by both Milliman's capital market assumptions team and the Oregon Investment Council's (OIC) investment advisors. The table below shows Milliman's assumptions for each of the asset classes in which the plan was invested based on the OIC long-term target asset allocation. The OIC's description of each asset class was used to map the target allocation to the asset classes shown below. Each asset class assumption is based on a consistent set of underlying assumptions, and includes adjustment for the inflation assumption.
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Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
These assumptions are not based on historical returns, but instead are based on a forward-looking capital market economic model.
Compound Annual Return Asset Class Target (Geometric)
Core Fixed Income 8.00% 3.49%
Short-Term Bonds 8.00% 3.38%
Bank/Leveraged Loans 3.00% 5.09%
High Yield Bonds 1.00% 6.45%
Large/Mid Cap US Equities 15.75% 6.30%
Small Cap US Equities 1.31% 6.69%
Micro Cap US Equities 1.31% 6.80%
Developed Foreign Equities 13.13% 6.71%
Emerging Market Equities 4.13% 7.45%
Non-US Small Cap Equities 1.88% 7.01%
Private Equity 17.50% 7.82%
Real Estate (Property) 10.00% 5.51%
Real Estate (REITS) 2.50% 6.37%
Hedge Fund of Funds - Diversified 2.50% 4.09%
Hedge Fund - Event-Driven 0.63% 5.86%
Timber 1.88% 5.62%
Farmland 1.88_% 6.15%
Infrastructure 3.75% 6.60%
Commodities 1.88% 3.84%
Assumed Inflation - Mean 2.50%
Sensitivity of Net Pension Liability to Changes in the Discount Rate (in Millions) As of June 30, 2019:
Current 1% Decrease Discount Rate 1% Increase Employers' Net Pension Liability (6.2%) (7.2%) (8.2%)
Defined Benefit Pension Plan $ 123,360,204 $ 77,032,126 $ 38,261,766 Pension plan fiduciary net position Detailed information about each pension plan's fiduciary net position is available in the separately issued OPERS financial reports.
Payable to the pension plan The Board had no contributions payable to the pension plan for the year ended December 31, 2019.
69 L_ ___ _
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Changes in plan provisions during the measurement period There were no changes in plan provisions during the measurement period.
Changes in plan provisions subsequent to the measurement period There were no changes in plan provision subsequent to the measurement period.
Defined contribution pension - OPSRP Individual Account Program (OPSRP IAP)
Pension benefits - Participants in the OPERS defined benefit pension plan also participate in the OPERS defined contribution plan. An IAP member becomes vested on the date the employee account is established or on the date the rollover account was established. If the employer makes optional employer contributions for a member, the member becomes vested on the earliest of the following dates: the date the member completes 600 hours0.00694 days <br />0.167 hours <br />9.920635e-4 weeks <br />2.283e-4 months <br /> of service in each of five calendar years, the date the member reaches normal retirement age, the date the IAP is terminated, the date the active member becomes disabled, or the date the active member dies.
Upon retirement, a member of the OPSRP Individual Account Program (IAP) may receive the amounts in his or her employee account, rollover account, and vested employer account as a lump- sum payment or in equal installments over a 5-, 10-, 15-, 20-year period or an anticipated life span option. Each distribution option has a $200 minimum distribution limit.
Death benefits - Upon the death of a non-retired member, the beneficiary receives in a lump sum the member's account balance, rollover account balance, and vested employer optional contribution account balance. If a retired member dies before the installment. payments are completed, the beneficiary may receive the remaining installment payments or choose a lump-sum payment.
Recordkeeping - PERS contracts with VOYA Financial to maintain IAP participant records.
Contributions - Covered employees are required to contribute 6% of their salary to the plan. The Board has chosen to pay the employees' contributions to the plan. For 2019, the Board contributed $2.6 million for employees.
- 2. Postemployment Benefits Plan Other than Pensions Eugene Water & Electric Board Retirement Benefits Trust Summary of significant accounting policies Basis of accounting - The accrual basis of accounting is used; plan member contributions are recognized when they are due, benefit expenses and refunds are recognized when they are due and payable.
Employer contributions are recognized only when they are due and accompanied by a formal commitment from the employer to pay them. Changes in the fair value of investments are recognized as increases or decreases to income.
Investment values- Investments are measured at fair value as provided by the Corporate Co-Trustee using recognized pricing services. Purchases and sales are recognized on a trade-date basis. Investment income is recognized as it is earned. '
70
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Plan description The Board provides postemployment health care and life insurance benefits to certain employees who retire under OPERS with at least 11 years of service at EWEB. The plan is administered by a board of trustees, acting solely on the authorization of EWEB, as the Eugene Water & Electric Board Retirement Benefits Trust {The Trust). The board of trustees consists of 5 voting members and on commissioner of EWEB who serves as an ex-officio member with no voting power. The plan is a single-employer defined benefits plan. Plan assets are dedicated solely to providing benefits to retirees and their beneficiaries, and plan assets are legally protected from creditors of the Board and the plan's administrators.
The life insurance benefit is a fixed amount of $5,000 per retiree. Health care coverage is provided in the form of a subsidy toward insurance premiums. The subsidy varies with years of service and the benefits offered by the Board at the time of an employee's hire and retirement. Medicare eligible retirees choose from Medicare supplement plans offered through OPERS. The subsidy for Medicare supplement coverage is established by the Board; however, the coverage is administered by OPERS as a cost sharing plan. Eligible retirees under the age of 65 receive coverage under the group plan the Board offers to its active employees, until such time as retirees reach Medicare eligibility. Those group benefit provisions are established by the Board, and coverage is generally 80% of eligible medical costs. Dental and/or vision benefits are offered through the group plan for retirees with earlier hire and retirement dates.
During 2016 and 2017, the Board changed plan provisions for active employees hired on or after January 1, 2003. At retirement, those employees will not receive a subsidy toward health care coverage.
Employees retiring before age 65 continue to have access to EWEB healthcare insurance offered to the active employees; however, the retirees pay the insurance premiums in full. This access to coverage before age 65 is also required by Oregon law.
The obligation for payment of insured benefits rests with the insurance companies providing coverage.
The Board does not guarantee benefits in the event of an insurance company's insolvency.
Plan membership Enrolling in health care coverage is at the time of retirement. Therefore, there are no inactive plan members entitled to but not yet receiving benefits. Once a retiree opts out of coverage, there is no reinstatement. The plan's latest actuarial valuation dated August 31, 2019, rolled forward to December 31, 2019 included 531 retirees or surviving spouses of retired employees, of which 115 opted out of health care coverage, and 455 active employees.
Investments The Trust has a third-party investment manager who has discretionary investment authority within the guidelines of the Trust's investment policy as approved by the board of trustees. The investment policy has a long-term objective of full funding for the plan through capital appreciation and reasonable consistency of earnings and growth. The policy acknowledges ongoing needs for liquidity to pay benefits and diversification of investments to minimize capital erosion. The Trust's adopted asset allocation as of July 31, 2019 was a target 40% fixed income, 55% equities and 5% real estate.
71
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
For the years ended December 31, 2019 and 2018, the annual money-weighted rate of return on investments, net of investment expense, was 19.8% and negative 5.6%, respectively. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for changing amounts actually invested.
The fixed income portfolio of the Trust is to be diversified with respect to average maturity, duration, and credit quality.
Credit ratings and maturities at December 31, 2019 were as follows:
Maturi Credit 12 Months 13 to 24 25 to 36 37 to 60 More Than Investment tz'.ee Rating Fair Value or Less Months Months Months 60 Months Corporate bonds AA $ 154,896 $ $ 154,896 $ $ $
Corporate bonds AA- 76,480 76,480 Corporate bonds A 153,644 153,644 Total $ 385,020 $ 76,480 $ 308,540 $ $ $
Credit ratings and maturities at December 31, 2018 were as follows:
Maturity Credit 12 Months 13 to 24 25 to 36 37 to 60 More Than Investment tz'.ee Ratin9 Fair Value or Less Months Months Months 60 Months Corporate bonds AA $ 153,260 $ $ $ 153,260 $ $
Corporate bonds AA- 154,245 154,245 Corporate bonds A 76,517 76,517 Total $ 384,022 $ $ 76,517 $ 307,505 $ $
Custodial credit risk - Custodial credit risk for investments is the risk that in the event of the counterparty's failure, the Trust would not be able to recover the value of its investments that are in the possession of an outside party. Investments of the Trust are book entry securities held by the Corporate Co-Trustee who is both the investment manager and custodial trustee. Investments are held in a trust account under the name of the Corporate Co-Trustee, however, custodial credit risk is avoided because the custodian's internal records identify the Trust as the owner of the securities.
Bank trust accounts, being neither depository nor brokerage accounts are not insured.
Fair value measurements - Fair values are the estimated prices that would be received to sell these investments in their principal market. Level 1 inputs showing a quoted market price for an identical asset in an active market provides the most reliable evidence of fair value. Level 2 inputs are quoted prices for similar assets in active markets. Level 3 inputs, which is the last category, and doesn't apply to the investments held at December 31, 2019 and 2018 for the OPEB Trust, would include valuation techniques which make use of unobservable inputs using the best information available under the circumstances.
72
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Fair Value Measurements Using Quoted Prices in Active Markets for Significant Other Identical Assets Observable Inputs 12/31/2019 (Level 1) (Level 2)
Investments by fair value level Corporate bonds Domestic $ 385,019 $ $ 385,019 Mutual funds Fixed income 7,081,247 7,081,247 International 4,248,903 4,248,903 Domestic 6,365,091 6,365,091 Real estate 975,639 975,639 Total investments by fair value level $ 19,055,899 $ 18,670,880 $ 385,019 Fair Value Measurements Using Quoted Prices in Active Markets for Significant Other Identical Assets Observable Inputs 12/31/2018 (Level 1) (Level 2)
Investments by fair value level Corporate bonds Domestic $ 384,022 $ $ 384,022 Mutual funds Fixed income 6,502,818 6,502,818 International 2,577,802 2,577,802 Domestic 6,190,232 6,190,232 Real estate 968,976 968,976 Commodities 343,657 343,657 Total investments by fair value level $ 16,967,507 $ 16,583,485 $ 384,022 Contributions Contributions toward health care premiums required from retirees are established in the plan and may be amended by the Board. Contributions from participating retirees are either a flat rate or a percentage of premium costs and vary by participant according to the benefits in place when the participant was hired and/or retired. The Board's subsidies toward premiums are capped for the more recent retirees. The cap is expressed as a percentage of the Board's share of premium increases each year compared to premiums beginning in a base year of 2003. The cap was 6% beginning in 2017 and is to remain that amount each year thereafter.
73
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
During 2019, the plan recognized $716,560 in contributions from retirees who had insurance coverage under the Board's group plan for active employees. The contributions are applied to insurance premiums.
Retirees with Medicare Supplement coverage also pay a portion of their premiums, however, those contributions are recognized by the OPERS OPEB plan.
Funding It is the Board's intent to pay the actuarially determined contribution (ADC) to the trust annually.
The ADC for year 2019 was approximately $501,000. The Board contributed the ADC and recognized it in administrative and general expenses ($381,000 for the Electric System and $120,000 for the Water System). This differs from the Board's OPEB expense determined on an actuarial basis, which was
$3,866,361. The Board has elected to apply regulatory accounting to recognize OPEB expense based on the timing and amount of contributions included in the rate making process.
During the year ended December 31, 2018, the Board contributed the ADC of $1.3 million and also made a one-time contribution of $2 million to the trust in an effort to pay down its net OPEB liability. The plan recognized the total of these contributions from the Board for 2018: $3,348,798. The Board recognized the one-time contribution as a special item ($1,520,000 for the Electric System and $480,000 for the Water System) and the ADC was reported within administrative and general expenses ($1,025,087 for the Electric System and $323,711 for the Water System). This differs from the Board's OPEB expense determined on an actuarial basis, which was $5,342,636 for 2018.
Components of the actuarially determined OPEB expense are shown below:
2019 2018 Service cost $ 235,056 $ 279,685 Interest cost 1,468,903 1,747,818 Expected earnings (1,086,400) (1,248,809)
Administrative earnings 132,931 106,096 Change in benefits Recognition of deferred outflows 3,568,730 4,681,969 Recognition of deferred inflows (452,859) (224,123)
$ 3,866,361 $ 5,342,636 74
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
At December 31, 2019 the Board reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ $ 3,011,179 Changes of assumptions 7,258,722 Net difference between projected and actual earnings on OPEB plan investments 895,147 Total $ 7,258,722 $ 3,906,326 Amounts recorded as deferred inflows and outflows of resources will be subject to amortization and regulatory deferral in future years as follows:
Net Deferred Outflows/
(Inflows)
Amortization 2020 $ 3,115,871 2021 2,394,067 2022 (905,885) 2023 (1,251,657)
$ 3,352,396 Net OPEB liability Components of the net OPEB liability and funded percentage are below:
2019 2018 Total OPEB liability $ 34,905,996 $ 40,505,496 Plan fiduciary net position (19,250,423) (17,171,138)
EWEB's net OPEB liability $ 15,655,573 $ 23,334,358 Plan fiduciary net position as a percentage of the total OPEB liability 55% 42%
75
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
Changes in the net OPEB liability The Board's total net OPEB liability of $15.6 million was measured as of December 31, 2019.
Total OPEB Fiduciary Net Net OPEB Liability Position Liability Beginning of year 1/1/2019 $ 40,505,496 $ (17, 171,138) $ 23,334,358 Employer contributions (1,137,500) (1,137,500)
Retiree contributions (716,560) 716,560 Expected investment income (1,086,100) (1,086,100)
Difference between expected and actual investment income (2,193,964) (2,193,964)
Benefit payments - implicit (672,219) (672,219)
Benefit payments (1,489,088) 1,489,088 Administrative and trust expenses 132,931 132,931 Service cost 235,056 235,056 Interest on total OPEB liability 1,468,903 1,468,903 Changes of assumptions 1,723,170 1,723,170 Difference between expected and actual experience (6,148,762) (6,148,762)
End of year 12/31 /19 $ 34,905,996 $ (19,250,123) $ 15,655,873 Actuarial assumptions The total OPEB liability as of December 31, 2019 was determined using the following significant actuarial assumptions and inputs:
Discount rate 3.76%
Inflation rate 2.50%
Salary increases 3.50%
Healthcare cost trend rates 3.00%-7.00%
Mortality rates used are the same as those used in the December 31, 2018 Oregon PERS Actuarial Valuation and are based on the Pub-2010 tables.
Retirement and termination rates are based on an experience study covering data from 2010 through 2014.
The discount rate used to measure the total OPEB liability was 3.76%. Based on an expected 6.53%
long- term rate of return on plan assets, the fiduciary net position was projected to be available to make projected OPEB payments for plan participants through 2034. Therefore, the expected long-term rate of return is blended with the December 31, 2019 rate of 2.74% from the 20-year General Obligation Municipal Bond Index as published by the Bond Buyer.
76
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
The long-term expected rate of return on the Trust's investments was determined using a building-block method in which estimates of expected future real rates of return (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the current asset allocation percentage, and by adding expected inflation. The asset allocation estimates of arithmetic real rates of return for each asset class are summarized below:
Expected Long-Term
% of Total Real Rate of Fund Type Portfolio Return Domestic equity 33% 5.9%
Foreign equity 22% 6.3%
Fixed income 39% 1.5%
Real estate 5% 5.4%
Three-month treasury bills 1% -0.5 100% 4.2%
The following table presents the sensitivity of the net OPEB liability to changes in the discount rate, assuming the current rate, and rates that are one percentage point lower, and one percentage point higher than the current rate as of December 31, 2019:
1% Decrease Current Rate 1% Increase (2.76%) (3.76%) (4.76%)
Total OPEB liability $ 39,269,994 $ 34,905,996 $ 31,312,386 Fiduciary net position (19,250,423) (19,250,423) (19,250,423)
Net OPEB liability $ 20,019,571 $ 15,655,573 $ 12,061,963 The following presents the sensitivity of the net OPEB liability to changes in the healthcare cost trend rates assuming the current rate, rates that are one percentage point lower, and one percentage point higher than the current rate:
1% Decrease Current Rates 1% Increase Total OPEB liability $ 31,309,233 $ 34,905,996 $ 39,213,568 Fiduciary net position (19,250,423) (19,250,423) (19,250,423)
Net OPEB liability $ 12,058,810 $ 15,655,573 $ 19,963,145 77
Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)
The actuarial funding method used to determine the plan cost is the entry age normal cost method. Under this method the actuarial present value of the projected benefits of each active employee included in the valuation is allocated on a level percentage of pay basis over the service life of the employee between entry age (date of hire) and assumed exit age.
Note 17 - Deferred Compensation The Board offers all employees a deferred compensation plan created in accordance with Internal Revenue Code (IRC) Section 457. The plan permits them to defer a portion of their salary until future years. Participation in the plan is optional. Payment from the plan is not available to employees until termination, retirement, death, or unforeseeable emergency.
The Board works with separate investment providers who also provide third-party administration for all deferred compensation program funds. Participating employees have several investment options with varying degrees of market risk. The Board has no liability for losses under the plan.
The Board has little administrative involvement with the plan and does not perform the investing function.
Therefore, in accordance with GASB No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, the plan assets are not included in the accompanying Statements of Net Position.
Note 18 -Trojan Nuclear Plant The Trojan Nuclear Plant (Project) is jointly owned by Portland General Electric Company (PGE), 67.5%;
the City of Eugene, acting by and through Eugene Water & Electric Board, 30%; and Pacific Power and Light Company, 2.5%; as tenants in common. The Project ceased commercial operation in 1993 and is decommissioned. The Project is now classified as an Independent Spent Fuel Storage Installation. In accordance with GASB No. 14, The Financial Reporting Entity, the Project is reported as a joint venture on the equity method of accounting.
Under the terms of the Net Billing Agreements, executed in 1970, BPA is obligated to pay the Board amounts sufficient to pay all of the Board's costs related to the Project including decommissioning and debt service, notwithstanding the termination of plant output. BPA pays those costs primarily by issuing credits against the Net Billing Participant's purchases of electricity from BPA, but in some cases also makes payments in cash. The Board is required to transfer from its Electric System Fund to the Trojan Project Fund an amount equal to all net billing credits received through this agreement. The Board is then responsible for making payments from the Trojan Project Fund to the Trojan Project for the Board's share of costs.
78
I Eugene Water & Electric Board Notes to Financial Statements Note 18 - Trojan Nuclear Plant (continued)
Since BPA is obligated to pay the Board's share of all Trojan Project costs and has provided the Board with legally binding written assurances of its commitment to that obligation, the Board does not expect the closure and decommissioning of the Trojan Project to have any adverse effect on the Board's Electric or Water Systems. As such, the equity interest in the Project is zero. However, under the terms of the original agreements, if one of the tenants in common fails to perform on their financial obligation, the other tenants may be liable. This obligation may not be covered under the Net Billing Agreement mentioned previously. However, the Board believes this risk is minimal.
A summary of the balance sheets for EWEB's share of the Trojan Project as of September 30, 2019 and September 30, 2018 is as follows.
Unaudited Unaudited September 30, September 30, 2019 2018 ASSETS Current assets $ 1,905,206 $ 2,042,697 Long-term receivable, BPA, net 32,655,240 33,487,238 Total assets $ 34,560,446 $ 35,529,935 LIABILITIES Current liabilities $ 1,873,472 $ 1,910,000 Accumulated provision for decommissioning costs 32,686,974 33,619,935 Total liabilities $ 34,560,446 $ 35,529,935 The Trojan Nuclear Plant financial statements can be obtained from the Board.
Note 19 - Commitments and Contingencies Electric Projects
- Construction - Design and construction contracts, primarily for powerhouse upgrades at Carmen-Smith, were $16.8 million. Committed purchases and upgrades for the Carmen substation were
$322,000 ($22.7 million for Carmen-Smith powerhouse upgrades and $1.6 million for substation transformers and a radio system at December 31, 2018).
- Carmen-Smith relicensing - Preconstruction contracts, primarily for fish passage and trap-and-haul design were $1.3 million, and $350,000 for spillway modifications at Trail Bridge.
79
Eugene Water & Electric Board Notes to Financial Statements Note 19- Commitments and Contingencies (continued)
The Board has an arrangement with the U.S. Forest Service is to provide for maintenance and enhancement measures on the National Forest Service land where the project is located. The Board expects to make annual payments of varying, prescheduled amounts to the Forest Service in accordance with settlement provisions. The payments are to total approximately $1.5 million before inflation indexing over the life of the license.
Water projects Construction contracts for the design of a water quality lab were approximately $131,000 ($565,000 at December 31, 2018 for reservoir rehabilitation and a disinfection system).
Other projects Contractual commitments for construction at the Roosevelt Operations Center were $1.2 million, for advanced metering $1.4 million, and for software were $313,000 ($300,000 for software at December 31, 2018).
Self-insurance The Board is exposed to various risks of loss because of the Board's self-insurance retention, up to the first $2,000,000 of exposure, per occurrence. Excess liability coverage protects the Board after the Board's self-insured limit is exhausted. However, public entities are also protected under State of Oregon tort limits ORS 30.260 - 30.300, Tort actions against public bodies, which reduce the liability for any single occurrence for property damage or personal injury. Limits are adjusted for the cost of living annually by the Oregon State Court Administrator. The most recent limits are $122,900 for a single claimant and $614,300 to call claimants for property damage. For injury or death, the most recent limits are $749,000 for a single claimant and $1,498,000 for multiple claimants. Consequently, except in extreme cases, the Board's exposure is mitigated by law. The limit is subject to change by State of Oregon legislation.
Claims liabilities recorded in the financial statements are based on the estimated ultimate loss as of the statement of net position date, adjusted from curr~nt trends through a case-by-case review of all claims, including incurred but not reported claims. Non-incremental claims adjustment costs such as salaries are not included in the claims estimates. At December 31, 2019 a total claims liability of approximately
$99,290 is reported in the financial statements. All prior and current-year claim liabilities were fully reserved and have not been discounted.
Current Year Liability Balance Claims and at Beginning Changes in Liability Balance of Year Estimates Claim Pa:z'.ments at End of Year 2017 General Liability $ 69,550 $ 311,845 $ (215,847) $ 165,548 2018 General Liability $ 165,548 $ 146,426 $ (105,119) $ 206,855 2019 General Liability $ 206,855 $ 233,291 $ (340,856) $ 99,290 Claims and other legal proceedings The Board is involved in various litigations. In the opinion of management, the ultimate outcome of these claims will not have a material effect on the Board's financial position beyond amounts already accrued as of December 31, 2019.
80
Required Supplementary Information Eugene Water & Electric Board Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2019 Last Ten Years*
2014 2015 2016 2017 2018 2019 Proportion of the net pension asset 0.86138989% 0.79250364% 0.70531024% 0.62730522% 0.59283304% 0.44533405%
Proportionate share of the net pension asset/(liability) $ 19,525,251 $ (45,501,290) $ (105,883,444) $ (84,560,981) $ (86,806,397) $ (77,032,126)
Covered-employee payroll $ 41,130,143 $ 45,250,685 $ 44,141,193 $ 44,353,971 $ 39,905,750 $ 43,024,470 Proportionate share of the net pension asset/(liability) as percentage of covered-employee payroll 47% 101% 240% 191% 225% 179%
Plan's fiduciary net position $ 65,401,492,664 $ 64,923,626,094 $ 62,082,059,102 $ 66,371,703,247 $ 69,327,500,445 $ 70,203,720,619 Plan's fiduciary net position as a percentage of the total pension liability 103.60% 91.90% 80.50% 83.10% 82.10% 80.20%
- 1 O year trend information will be presented prospectively.
81
Eugene Water & Electric Board Schedule of Contributions Pension As of June 30, 2019 Last Ten Years*
2014 2015 2016 2017 2018 2019 Contractually required contribution (actuarially determined) $ 9,544,586 $ 9,734,173 $ 8,189,904 $ 8,256,069 $ 9,413,237 $ 7,660,562 Contributions in relation to the actuarially determined contribution $ 9,544,586 $ 9,734,173 $ 8,189,904 $ 8,256,069 $ 9,413,237 $ 10,662,356 Contributions deficiency (excess) $ $ $ $ $ $ (3,001,794)
Covered-employee payroll $ 41,130,143 $ 45,250,685 $ 44,141,193 $ 44,353,971 $ 39,905,750 $ 43,024,470 Contributions as a percentage of covered-employee payroll 23.21% 21.51% 18.55% 18.61% 23.59% 24.78%
Notes to Schedule Valuation date:
Methods and assumptions used to determine contribution rates:
Single and agent employers Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal 2012, published 2012, published 2014, published 2014, published 2016, published 2016, published Experience study report September 18, 2013 September 18, 2013 September 23, 2015 September 23, 2015 July 26, 2017 July 26, 2017 Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Amortization method payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed Remaining amortization period Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/tier two -
20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP -
16 years 16 years 16 years 16 years 16 years 16 years Asset valuation method Market value of assets Market value of assets Market value of assets Market value of assets Market value of assets Fair value Inflation 2.75% 2.75% 2.50% 2.50% 2.50% 2.50%
Salary increases 3.75% 3.75% 3.50% 3.50% 3.50% 3.50%
Investment rate of return 7.75% 7.75% 7.50% 7.50% 7.20% 7.20%
Retirement age 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 65 forOPSRP 65 forOPSRP 65forOPSRP 65 for OPSRP 65 forOPSRP 65for0PSRP Mortality RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2014 Sex-distinct RP-2014 Sex-distinct tables tables tables tables tables tables Discount rate 7.75% 7.75% 7.50% 7.50% 7.20% 7.20%
- 1 O year trend information will be presented prospectively.
82
Eugene Water & Electric Board Schedule of Employer Contributions Post-Employment Health Care Benefits As of December 31, 2019 Last Ten Years*
2019 2018 2017 Actuarially determined contribution $ 501,342 $ 1,284,204 $ 1,348,797 Contributions in relation to the actuarially determined contribution 1,137,500 3,348,797 980,298 Contribution excess (deficiency) $ 636,158 $ 2,064,593 $ (368,499)
Covered-employee payroll $ 47,799,139 $ 44,880,815 $ 44,353,971 Contributions as a percentage of covered-employee payroll 2.38% 7.46% 2.21%
- 1 Oyear trend information will be presented prospectively.
Valuation dates: August 31, 2019 and December 31, 2017 Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age normal Amortization method Level percentage of payroll, closed Amortization method 10 years Asset valuation method Market value Inflation 2.5%
Healthcare cost trend increases OPERS Medicare and Medicare Supplemental RX 5%
Dental 5%
Vision 3%
Vision 3%
Salary increases 3.5%
Retirement age Based on experience study years 2010-2014 Age 55-58 10%
Age 59--64 15%
Age65 100%
Withdrawal age Age 18-29 6.3%
Age 30--49 4.7%
Age 50--64 3.7%
Methods and assumptions used to determine contribution rates, which varied by year:
Mortality Pub 2010 RP-2014 General Service Investment rate of return 3.76% 4.32%
Healthcare cost trend increases EWEB group medical, December, 31 2017 valuation: 10%, decreasing to ultimate rate of 4% by 2025 EWEB group medical, December, 31 2019 valuation: 7%, decreasing to ultimate rate of 4% by 2027 83
Eugene Water & Electric Board Schedule of Changes in Total OPEB Liability and Related Ratios Post-Employment Health Care Benefits As of December 31, 2019 Last Ten Years*
Total OPEB Liabilit:z:
2019 2018 2017 Service cost $ 235,056 $ 279,685 $ 270,227 Interest 1,468,903 1,747,818 977,047 Changes in benefit terms (263,950)
Differences between expected and actual experience (6,148,762) 4,969,184 Changes in assumptions 1,723,170 15,538,406 Benefit payments {2,877,867l {3,402, 142l (3,280,201 l Net change in OPEB liability {5,599,SOOl {1,374,639l 18,210,713 Total OPEB liability- beginning 40,505,496 41,880,135 23,669,422 Total OPEB liability- ending $ 34,905,996 $ 40,505,496 $ 41,880,135 Plan Fiducia!::z: Net Position 2019 2018 2017 Contributions $ (1,137,500) $ (3,348,797) $ (980,298)
Contributions from plan members - EWEB group insurance (716,560) (775,345) (740,089)
Net investment income (3,280,364) 952,424 (2,204,942)
Benefit payments 2,922,208 3,361,962 3,385,729 Administrative expense 132,931 88,919 81,076 Net change in plan fiduciary net position {2,079,285l 279,163 {458,524l Plan fiduciary net position - beginning (17,171,138l (17,450,301l (16,991,777l Plan fiduciary net position - ending $ (19,250,423} $ (17,171,138} $ (17,450,301)
Net OPEB liability $ 15,655,573 $ 23,334,358 $ 24,429,834 Plan fiduciary net position as a percentage of the total OPEB liability 55.1% 42.4% 41.7%
Covered-employee payroll $ 47,799,139 $ 44,880,815 $ 44,353,971 Net OPEB liability as a percentage of covered payroll 32.8% 52.0% 55.1%
- 10 year trend information will be presented prospectively.
Notes to schedule:
Benefit changes: During 2016 and 2017, the subsidy for employees hired on or after January 1, 2003 was discontinued.
Changes in assumptions: For the valuation dated December 31, 2017: The discount rate decreased from 6% to 4.32%.
Health care cost trend increases for the Oregon PERS Medicare plans and EWEB supplemental Rx plans went up from 4% to 5%. The mortality table, RP-2000, projected to 2016 using Scale AA, was replaced with RP-2014.
For the August 31, 2019 valuation: The expected long-term rate of return was decreased from 7% to 6.53%; blended with the 20-year General Obligation Municipal Bond Index rate of 2.74% as of December 31, 2019, the investment and discount rate decreased from 4.32% to 3.76%.
84
Eugene Water & Electric Board Schedule of Investment Returns Post-Employment Health Care Benefits As of December 31, 2019 Last Ten Years*
2019 2018 2017 Annual money-weighted rate of return, net of investment expense 19.8% -5.6% 14.1%
- 10 year trend information will be presented prospectively.
85
Supplementary Information Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2019 Revenue and Revenue Refunding Revenue Refunding Revenue and Revenue Refunding Revenue Refunding 2011 A Series 2011 B Series 2012 Series 2016 A Series 6-8-11 6-29-11 8-1-12 9-7-16 Principal Interest Princieal Interest Princieal Interest Princieal Interest 2020 $ 2,475,000 $ 99,000 $ 875,000 $ 155,983 $ 470,000 $ 1,415,269 $ 900,000 $ 4,109,550 2021 915,000 120,983 485,000 1,396,469 1,215,000 4,073,550 2022 945,000 83,010 515,000 1,377,069 2,345,000 4,024,950 2023 985,000 42,848 1,810,000 1,351,319 6,300,000 3,931,150 2024 1,040,000 1,278,919 6,625,000 3,616,150 2025 1,085,000 1,237,319 6,875,000 3,284,900 2026 1,135,000 1,183,069 6,675,000 2,941,150 2027 1,195,000 1,126,319 6,000,000 2,607,400 2028 1,255,000 1,066,569 6,400,000 2,307,400 2029 1,315,000 1,003,819 6,615,000 1,987,400 2030 1,360,000 962,725 6,945,000 1,656,650 2031 1,400,000 918,525 7,290,000 1,309,400 2032 1,445,000 873,025 6,935,000 1,017,800 2033 1,495,000 826,063 5,175,000 740,400 2034 1,570,000 751,313 1,685,000 533,400 2035 1,650,000 672,813 1,755,000 466,000 2036 1,730,000 590,313 1,830,000 395,800 2037 1,815,000 503,813 1,900,000 322,600 2038 1,905,000 413,063 1,975,000 246,600 2039 2,005,000 317,813 2,050,000 167,600 2040 2,080,000 242,625 2,140,000 85,600 2041 2,155,000 164,625 2042 2,235,000 83,813 2043 2044 2045 2046 2047 2,475,000 99,000 3,720,000 402,824 33,150,000 19,756,669 89,630,000 39,825,450 Less current portion 2,475,000 875,000 470,000 900,000
$ $ 99,000 $ 2,845,000 $ 402,824 $ 32,680,000 $ 19,756,669 $ 88,730,000 $ 39,825,450 86
Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2019 Revenue and Revenue Refunding Revenue 2016 B Series 2017 9-7-16 9-21-17 Total Electric Ststem Patments Princieal Interest Princieal Interest Princieal Interest Totals 2020 $ 3,820,000 $ 208,369 $ $ 1,689,750 $ 8,540,000 $ 7,677,921 $ 16,217,921 2021 4,130,000 151,604 1,689,750 6,745,000 7,432,356 14,177,356 2022 4,455,000 81,972 1,689,750 8,260,000 7,256,751 15,516,751 2023 1,689,750 9,095,000 7,015,067 16,110,067 2024 1,689,750 7,665,000 6,584,819 14,249,819 2025 1,689,750 7,960,000 6,211,969 14,171,969 2026 1,689,750 7,810,000 5,813,969 13,623,969 2027 945,000 1,689,750 8,140,000 5,423,469 13,563,469 2028 995,000 1,642,500 8,650,000 5,016,469 13,666,469 2029 1,045,000 1,592,750 8,975,000 4,583,969 13,558,969 2030 1,095,000 1,540,500 9,400,000 4,159,875 13,559,875 2031 1,150,000 1,485,750 9,840,000 3,713,675 13,553,675 2032 1,205,000 1,428,250 9,585,000 3,319,075 12,904,075 2033 1,270,000 1,368,000 7,940,000 2,934,463 10,874,463 2034 1,330,000 1,304,500 4,585,000 2,589,213 7,174,213 2035 1,400,000 1,238,000 4,805,000 2,376,813 7,181,813 2036 1,465,000 1,168,000 5,025,000 2,154,113 7,179,113 2037 1,540,000 1,094,750 5,255,000 1,921,163 7,176,163 2038 1,620,000 1,017,750 5,500,000 1,677,413 7,177,413 2039 1,700,000 936,750 5,755,000 1,422,163 7,177,163 2040 1,785,000 851,750 6,005,000 1,179,975 7,184,975 2041 1,875,000 762,500 4,030,000 927,125 4,957,125 2042 1,965,000 668,750 4,200,000 752,563 4,952,563 2043 2,065,000 570,500 2,065,000 570,500 2,635,500 2044 2,170,000 467,250 2,170,000 467,250 2,637,250 2045 2,275,000 358,750 2,275,000 358,750 2,633,750 2046 2,390,000 245,000 2,390,000 245,000 2,635,000 2047 2,510,000 125,500 2,510,000 125,500 2,635,500 12,405,000 441,945 33,795,000 33,385,500 175,175,000 93,911,388 269,086,388 Less current portion 3,820,000 8,540,000
$ 8,585,000 $ 441,945 $ 33,795,000 $ 33,385,500 $ 166,635,000 $ 93,911,388 $ 269,086,388 87
Eugene Water & Electric Board Water System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2019 Revenue Revenue and Revenue Refunding 2011 Series 2016 Series 6-29-11 5-9-16 Total Water System Pa:tments Princieal Interest PrincieaI Interest Principal Interest Totals 2020 $ 470,000 $ 647,963 $ 1,855,000 $ 1,490,450 $ 2,325,000 $ 2,138,413 $ 4,463,413 2021 480,000 633,863 1,935,000 1,416,250 2,415,000 2,050,113 4,465,113 2022 495,000 619,463 2,030,000 1,319,500 2,525,000 1,938,963 4,463,963 2023 510,000 603,375 1,340,000 1,218,000 1,850,000 1,821,375 3,671,375 2024 530,000 585,525 1,415,000 1,151,000 1,945,000 1,736,525 3,681,525 2025 550,000 566,975 1,470,000 1,094,400 2,020,000 1,661,375 3,681,375 2026 570,000 546,350 1,530,000 1,035,600 2,100,000 1,581,950 3,681,950 2027 590,000 524,975 1,610,000 959,100 2,200,000 1,484,075 3,684,075 2028 610,000 501,375 1,690,000 878,600 2,300,000 1,379,975 3,679,975 2029 635,000 476,975 1,770,000 . 794,100 2,405,000 1,271,075 3,676,075 2030 660,000 451,575 1,860,000 705,600 2,520,000 1,157,175 3,677,175 2031 690,000 423,525 1,125,000 631,200 1,815,000 1,054,725 2,869,725 2032 720,000 394,200 1,175,000 586,200 1,895,000 980,400 2,875,400 2033 755,000 358,875 1,225,000 539,200 1,980,000 898,075 2,878,075 2034 795,000 321,975 1,270,000 490,200 2,065,000 812,175 2,877,175 2035 830,000 283,250 1,320,000 439,400 2,150,000 722,650 2,872,650 2036 875,000 241,750 1,375,000 386,600 2,250,000 628,350 2,878,350 2037 920,000 198,000 1,430,000 331,600 2,350,000 529,600 2,879,600 2038 965,000 152,000 1,485,000 274,400 2,450,000 426,400 2,876,400 2039 1,010,000 103,750 680,000 215,000 1,690,000 318,750 2,008,750 2040 1,065,000 53,250 710,000 187,800 1,775,000 241,050 2,016,050 2041 735,000 159,400 735,000 159,400 894,400 2042 765,000 130,000 765,000 130,000 895,000 2043 795,000 99,400 795,000 99,400 894,400 2044 830,000 67,600 830,000 67,600 897,600 2045 860,000 34,400 860,000 34,400 894,400 14,725,000 8,688,989 34,285,000 16,635,000 49,010,000 25,323,989 74,333,989 Less current portion 470,000 1,855,000 2,325,000
$ 14,255,000 $ 8,688,989 $ 32,430,000 $ 16,635,000 $ 46,685,000 $ 25,323,989 $ 74,333,989 88
Eugene Water & Electric Board Electric System Analysis of Certain Restricted Cash and Investments for Bond Service Year Ended December 31, 2019 Investments for Customer &
Bond Principal Debt Service Construction Escrow Deposit Total
& Interest Reserve Funds Reserve All Funds Ending balance - December 31, 2018 $ 678 $ 6,487,818 $ 35, 156,986 $ 4,212,740 $ 45,858,222 Deposits from general fund 16,371,871 255,980 16,627,851 Investment earnings 1,108 150,531 887,385 1,039,024 Other transfers Receipts 16,372,979 150,531 887,385 255,980 17,666,875 Principal payments 8,445,000 8,445,000 Interest payments 7,927,892 7,927,892 Transfers to general fund 16,578,793 682,819 17,261,612 Disbursements 16,372,892 16,578,793 682,819 33,634,504 U.S. securities, at market 6,637,539 11,504,962 1,064,059 19,206,560 Cash in bank 765 810 1,031,126 2,080,957 3,113,658 State of Oregon Local Government Investment Pool 6,929,489 640,887 7,570,376 Ending balance - December 31, 2019 $ 765 $ 6,638,349 $ 19,465,577 $ 3,785,903 $ 29,890,594 89
Eugene Water & Electric Board Water System Analysis of Certain Restricted Cash and Investments for Bond Service Year Ended Pecember 31, 2019 Investments for Bond Principal Debt Service Construction Total
& Interest Reserves SDC Reserves Funds All Funds Ending balance - December 31, 2018 $ 191 $ 2,343,973 $ 6,274,395 $ 5,675,771 $ 14,294,330 Deposits from general fund 4,450,515 1,497,695 5,948,210 Investment earnings 288 54,385 191,058 77,681 323,412 Receipts 4,450,803 54,385 1,688,753 77,681 6,271,622 Principal payments 2,230,000 2,230,000 Interest payments 2,220,788 2,220,788 Transfers to general fund 27,395 5,753,452 5,780,847 Disbursements 4,450,788 27,395 5,753,452 10,231,635 U.S. securities, at market 2,397,472 4,952,713 7,350,185 Cash in bank 206 886 1,092 State of Oregon Local Government Investment Pool 2,983,041 2,983,041 Ending balance - December 31, 2019 $ 206 $ 2,398,358 $ 7,935,754 $ $ 10,334,318 90
Eugene Water & Electric Board Sustainability Accounting Standards Disclosures Years Ended December 31, 2019 and 2018 The following metrics are standardized disclosures recommended by the Sustainability Accounting Standards Board for electric and water utilities.
The disclosures are voluntary and are not meant to demonstrate compliance with laws or regulations.
Electric System Topic Metric 2019 2018 2017 Number ot customers served in marKets subJect to renewable portfolio standards (RPS). 94,000 93,000 93,000 (All retail customers)
Greenhouse Gas Emissions & Energy RPS target before exemptions 361,808 MWh 365,674 MWh 378,936 MWh Resource Planning Percentage fulfillment of RPS target by market Greater than 100% Greater than 100% Greater than 100%
Number of incidents of non-compliance with water quality and/or Water Management None None None quantity permits, standards, and regulations Workforce Health & Total recordable injury rate 3.9 4 2.62 Safetv Fatalitv rate 1 0 0 Customer electricity savings from 10,958 MWh 13,238 MWh 8,715 MWh efficiency measures End-Use Efficiency 2.2 MW reduction in 3.5 MW reduction in 2.6 MW reduction in (In total across all customer types) peak demand peak demand peak demand System Average Interruption Duration Index (SAIDI),
69.37 minutes 53.63 minutes 52.85 minutes per customer Grid Resiliency System Average Interruption Frequency Index (SAIFI),
0.47 outages 0.44 outages 0.36 outages per customer Customer Average Interruption Duration Index (CAIDI), 146.91 minutes 121.19 minutes 148.87 minutes.
per outaQe RPS compliance information above is preliminary. Final information is published to eweb.org annually by June 1. Savings from efficiency measures are calculated based on the Regional Technical Forum of the Northwest Power and Conservation Council as adopted by Bonneville Power Administration for its regional resource acquisitions. During December 2016, there was a significant ice storm affecting approximately 22,500 customers, requiring up to 8 days to restore service to some customers. Interruption results above are consistent with Institute of Electrical and Electronics Engineers (IEEE) standard 1336.2003, whereby 7 of the storm days were above the major event threshold and were excluded from the indices.
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Eugene Water & Electric Board Sustainability Accounting Standards Disclosures Years Ended December 31, 2019 and 2018 Water System Topic Metric 2019 2018 2017 Total fresh water sourced from regions with high or extremely None None None high baseline water stress Water Scarcity Fresh water purchased from a third party None None None Volume of recycled water delivered None None None Number of acute health-based, non-acute health-based, and non-Drinking Water Quality None None None health-based drinking water violations Distribution Network .2% of 814 miles .3% of 811 miles .2% of 805 miles Water pipe replacement rate Efficiency or 1.9 miles or 2.6 miles or 1.8 miles Treatment plant is Treatment plant is Treatment plant is Water treatment capacity located in FEMA Special Flood outside flood zone, outside flood zone, outside flood zone, Network Resiliency & Hazard Areas intake is within intake is within intake is within Impacts of Climate 286 268 279 Change Number of service disruptions, population affected, and 1152 customers 973 customers 1,349 customers average duration 125 minutes 99 minutes 257 minutes Water pipe is distribution pipe for potable water measuring 2 inches to 60 inches in diameter. Replacements do not include new construction. Total miles for these pipelines is all pipe including new construction.
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Audit Comments Report of Independent Auditors on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Oregon Minimum Audit Standards Board of Commissioners Eugene Water & Electric Board We have audited the individual and combined financial statements of the Eugene Water & Electric Board (the "Board") as of and for the year ended December 31, 2019 and have issued our report thereon dated March 13, 2020. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
Compliance As part of obtaining reasonable assurance about whether the Board's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, grants, including provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules OAR 162-10-0000 to 162-10-0330, as set forth below, noncompliance with which could have a direct and material effect on the determination of financial statement amounts:
- The accounting records and related internal control structure.
- The use of various depositories to secure the deposit of public funds.
- The requirements relating to insurance and fidelity bond coverage.
- The appropriate laws, rules and regulations pertaining to programs funded wholly or partially by other governmental agencies.
- The statutory requirements pertaining to the investment of public funds.
- The requirements pertaining to the awarding of public contracts and the construction of public improvements.
However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State.
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Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Board's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control. Accordingly, we do not express an opinion on the effectiveness of the Board's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Purpose of the Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State, in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
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/' Jufie Desimone, Partner, for Moss Adams LLP Portland, Oregon March 13, 2020 94