ML20128H039

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Brazos Electric Power Cooperative,Inc 1984 Annual Rept
ML20128H039
Person / Time
Site: Comanche Peak  Luminant icon.png
Issue date: 12/31/1984
From: Mccaskill R, Parker W
BRAZOS ELECTRIC POWER COOPERATIVE, INC.
To:
Shared Package
ML20128H037 List:
References
NUDOCS 8507090390
Download: ML20128H039 (42)
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BRAZOS ELECTRIC POWER COOPERATIVE, INC.

1984 ANNUAL REPORT 1

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'is' are 230 people do dis ated to t I mating the energr nads ofhulai and thtlklurrfor ou r.ifHl. (lllH a vn ainir n I and others u ha u illjoin them. Ric hard E.\\f< Cadill Emutite I *ia e noida nt and General.\\lanage r i 1 i ~~ ) [ i 8507090390 850702 PDR ADOCK 05000445 x I PDR I s N". _. N. j j ~

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1 K-FINANCIAL AND OPERATING HIGHLIGHTS 1984 1983 1982 $186,164 $174,860 $173,107 TotatOperating Revenues (000's) $180,394 $172,479 $172,757 TotalOperating Expenses (000's) $ 5,770 $ 2,381 350 Operating Margins (Loss)(000's) $400,826 $351,987 $305,640 Total Assets (000's) $ 29,949 $ 23,497 $ 20,753 Total Equity (000's) 1.22 1.10 1.03 TimesInterest Earned Ratio (TIER) 1.27 1.15 1.09 Debt Service Coverage (DSC) Energy Sales (Megawatt hours) 2.846,999 2,498,886 2.389.141 Member Cooperatives 341,058 303,299 272,603 Municipalinterchange Customers 370,149 461,793 1,003.469 Economy Sales 3.558.206 3,263,978 3.665,213 Total 650 624 531 Peak Demand (Megawatts) Revenues & Expenses (in S millions) Net Utility Plant (in S millions) Energy Sales on

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2 REPORT TO MEMBERS We opened last year's Annual Report with the words: "Olir activities and accomplishments during 1983 have established our direction for many years to come." In 1984, the Brazos employees made such significant progress along our intended track-in some cases exceeding goals-that we proudly dedicate this annual report to them. Not only do they work for you, they also are motivated by the satisfaction of accomplishments which benefit you and your consumers. One can overhear that message in their daily conversations. One can see it in their output. \\\\c mentioned in our 1983 report our plan to construct a 25-mile natural gas pipeline. We completed it on August 3 at a cost of S4.3 million, slightly below budget. The effort involved people from almost every division. But here is what all of us want you to note: by year-end, this project had saved you S1.77 million in fuel charges. A " spot" gas market exists because of a nation-wide surplus of natural gas. By connecting us to this market, our pipeline has brought competition to our gas purchases. We are now buying significant volumes of gas at prices more than 20% below those at the beginning of the year. We anticipate that the project will pay for itself within ibur years. asi year we reported that our involvement with the San Miguel Electric Coopera-tive and the efforts of personnel at the San Miguel Plant had brouglu down the cost of wholesale electricity by year-end. It was not a passing highlight. This year's average power cost has been lowered another live percent. Because we continue to grow, the trend cannot persist. We will need a rate increase early in

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1986. Our ongoing efforts to control operating costs will enable us to lessen the 4 effect of this rate increase. It will be used to pay for our 3.8% si are of Coman-che Peak Unit #1. According to the latest schedule of the project manager, Texas Utilities Generating Company, Unit #1 should begin commercial opera-tion in 1986. Because the project has been subject to delays and cost overruns, we have implemented a special program to monitor the progress of construct and testing. We do believe that Brazos will benefit from the addition of anoth fuel to those fuels presently represented in our generation capacity. We continue to believe that nuclear power is one of our nation's better alternatives for electric power. Those who blindly oppose this source of power ironically force our Our most immediate objective industry to turn to less desirable alternatives. in 1985 is to complete plans for our next generation project: to obtain a partner, permits and financing. Because of our membership in the Texas Mun Power Pool, we have been able to delay this plant from 1987 to 1992. The delay will save our consumers approximately S40 million per year for those five years. I Project conceptual design and fuels studies are complete. An evaluation l power needs (Power Requirements Study) has been approved by the l Electrification Administration. Our board has selected as its preference a jointly-owned unit at the San Miguel plant site where our partner wou South Texas Electric Cooperative. Financing may not continue to be avail-able in its present form from the Rural Electrification Administration. REA's program seems to have been placed in a state of regression by the cur

5 rent administration. Removal of this financing source could create considerable j hardship for our members. But, we believe that Brazos could obtain other i financing. The Rural Electrification Program Thice vutstansing soard members step down. is celebratmg its 50th anniversary this year. What its adherents and participants have accom-ly;bgt 11. nunting Coopnant e, Inc. plished is hard to comprehend in light of today's Grover F. Furr technology. Ninety percent of America's rural to,, u,ep aa,ic a Coopna:ive, Inc citizens were brought fmm a pioneer existence to A contemporary conditions within two decades. To [,'),'d$".',fs$'" Coornatii e.-1 s w< ration believe that a few administrative decisions can threaten our existence and progress is nonsense. We would not have come this far if we were that weak. During the year, J.D. Copeland, Jr., was appointed Assistant General Manager. Mr. Copeland bring 8a financial back-ground to our general management and his appointment assures continuity of management in any contingency. In closing, we would like to recognize three fine gentlemen, Robert H. Bunting, Grover E Furr and William Sanders, who have given much to us in their years of service on the Brazos board. We accept their decisions to step down but we will miss them. Wkf $ $ & 'l of William G. Parker Richard E. McCaskill President Executive l' ice Praident and General Manayr L

s TREASURER'S REPORT The Consolidated Statement of Revenue and Patmn-4 age Capital and Other Equities of the Cooperative and [. its wholly owned subsidiary, the Brazos Fuel 4. Company, Inc., reflects that operations produced net

q margins of S6,451,275 for the calendar year 1984.

Margins improved significantly compared to the net margins of $2,744,917 reported in 1983. The margins from 1984 resulted in a Times Interest Earned Ratio (TIER) of 1.22 and a Debt Service Coverage (DSC) of 1.27. The TIER l and DSC ratios are key financial indicators used by the Rural Electrification Administration in assessing the ability of the Cooperative to meet its mortgage l requirements. Operating margins from the Cooperative's operations for 1984 were S5,813,999. These margins and patronage capital allocations received have been allocated to customers on a patronage basis. Total patron-age capital allocated was S6,229,728. This year. total assets exceeded $400 million. Total revenues were S186 million. The distribution of revenues indi-cates that purchased power continues to be the major cost item. We present below the distribution of both the 1983 and the 1984 revenue dollars. The Cooperative received Rural Electrification Administration and Federal Finane-ing Bank loan fund advances of $54,009,400 during 1984. Of these funds. S3,603,000 were REA insured and $50,406,400 were REA guaranteed. These advances were used to finance the construction of transmission fhcilities and to

J I 7 l finance the cost of our 3.8% interest in the Comanche Peak Nuclear Plant. E j Long-term debt at year-end was just under S348 million. The Coopera-tive's total margins and equities of $29.9 million represent 7.5% of the S400.8 million total assets. l man Joe Forman surnary-neamrer i DISTRIBUTION 4 l OF 1983 IlEVENUE DOLLAR i l Purchased Power 53 Bc Operat;ng Margins 1.4 C Other Deductions 9C Interest 5 84 Depreciation & Amortization 3 2c Transmission 4 80 Administrative & General 1.9C Taxes 6C l Wages & Other Costs 1.1c Fuel Cost 26 Sc Generated Power 27 6C 100 0 l DISTRIBUTION OF 1984 REVENUE l DOLLAR i Purchased Power 52 2C Operating Margins 3 tc Interest 5 8C Depreciation & Amortization 3 3C Transmission 43 Administrative & General 2 Oc Taxes .7C Wages & Other Costs 1 OC Fuel Cost 27 6e Generated Power 28 6C =? i l l

8 M ACHIEVEMENTS We have dedicated this annual report to our employees. Becaus'c of their cation and teamwork, their accomplishments have produced achievemen Brazos greater than the sum of their individual contributions. In prese what they have done for our member cooperatives, municipal custom Texas Municipal Power Pool memberc; we feel the frustration of having to limit our recognition. Please understand that The corporate r*"#'"/ behind each achievement is the support of many ' Bra:os is projetted by allof employees. And for each major achievement rec-our emplo;ces. Emphpa in ognized here, there are several not mentioned. tran$misfion crcits, accounting, computer scitices, printing, untralfiles, land The corporate image of Brazos is not maintained acquisition and others in by designated individuals. In fact, it is projected by contact icith our pu6/ics tring the coopnatirefrequent all of our employees and it is very favorable praise. because of them. Employees in transmission crews, accounting, computer services, printing, central files, land a and others in contact with our publics bring the Cooperative frequen Such praise initiated the letters of commendation listed at the end

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10 1984 REVIEW Outstripping our growth rate of recent years, sales to our member cooperatives and municipal customers increased 14% this year. They purchast d 3,188,057 megawatt hours compared to 2,802,185 megawatt hours in 1983. The net load on our transmission system increased 15% to 2,817,027 megawatt hours. Our system peak was 650 megawatts,16% greater than our 1983 sunnner peak During the year, we suspected this rapid growth might be due to the.wcather. In hindsight, we see that climatic conditions were average with the exception of low rainfall. It will take further analysis to determine the causes of this acceler-ated growth. Our strong growth enabled us to use general runds to Unance a long-needed addition to our headquarters building and our 25-mile natura The average gas pipeline. Margins at year-end were a healthy S6.5 million. price charged to our members and municipal customers dropped from 53.72 mills per kilowatt hour. Purchased power represented over half the 198 cost of electric service. Our single largest expense was the 1,642,639 megawatt hours received from San Miguel Electric Cooperative at a cost of S66.3 million. Natural gas continued to be a signi6 cant expense representing approx 28% of our total cost. However, we have achieved additional control of fu In 1976, our Prqject Construction & costs as discussed later in this report. Engineering employees had to be moved to rented 00 ice space sev from our headquarters building. Even then our space remained limited. T has sunnner, we completed an addition to the headquarters huilding. It

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i M enabled us to bring all our Waco employees together in one building. 12 ~ During the year, our Corporate Planning employees complcted a_new Powe Requirements Study which was submitted to the Rural Electrification Ad tration. This intensive study. projects our power needs through the year 1997. 1,- shows a 5.7 % per year growth rate and the need for a new power plant in 1 In a series of meetings throughout the year, our Board of Directors reviewed this need for new generation capacity and available alternatives. They selec as the preferred alternative, a second unit at the San Miguel Plant site last quarter of the year, we worked toward the development of a project With the recession in nership with South Texas Electric Cooperative, Inc. 1981, a glut developed in the natural gas market. In time, gas prices beg drift lower and a spot market developed. In 1983, we saw that a gas pipeli connecting us to the spot market would be economical. Construction o inch pipeline began on May 15 and the pipeline became operational on 3, connecting our R.W. Miller Plant to 36-inch pipelines of Lone St Valero Transmission. The economic benefits have exceeded our expecta By year-end, this $4.3 million pipeline had saved us $1.77 mil charges. The employees of our subsidiary, Brazos Fuel Compan ated agreements enabling us to purchase unlimited volumes of spo at S3.05 per MMBTU. Offers oflower price gas came almost week more, the soft spot market and the pipeline put us in a positio the contracts with our dedicated producers. We and our producers a m

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H the process of executing contract amendments Using a daily urit which lower the gas price and institute more cur-cormnilinent/ production cost prograin, Systern Operations rent terms and conditions. MoreoIver, Southwest-ernplorres tvere able to better ern Gas Pipeline has lowered its transportation plan gcncrating unit operation, encrsr sales and charge for producer gas purchased under these purchases, andfuelpurchasn mended contracts. We recognize that the gas glut for nrazos and thc other inernben orthe 7ha' will not last forever, but it is giving us' the oppor-Alunicipall'oiver l'ool. tunity to obtain more realistic contracts which reflect the current market. Our system operations employees made improvements in operations planning and energy accounting. Using a daily unit conunitment/ production cost program, they were able to study and better plan generating unit operation, energy sales and purchases, and fuel purchases for Brazos and the other members of the Texas Municipal Power Pool (TMPP). Our employees also developed computer programs to record and allocate purchases and sales within TMPP systems. During 1984, our Power Production employees conducted major inspections and overhauls of Miller Plant Unit #2 low pressure turbine and generator, and of North Texas Unit #3 turbine and generator. They installed a new turbine control system on Miller Plant Unit #2 lbr increased performance and safety. And, they signiti-cantly improved the fuel elliciency of our largest generating plant Our Transmission Department employees accomplished goals which had been established for 1984. They instituted a program ofinspection and modification

15 l t 9 t l 1 l l l t l 4 l I I l j j E'- .? i 1 l l i t ( 6 l J i it;' hai e bre n a sied vflat. somitimr, in ir,t. 'lI h n trill the t ost of alea tric it; a vmr dvu n ' ~ 'It has beo n a dnam. but I;a the jast tu o oan a iv;s hap),o n,ddne to indi;idnalc onnihtaio n of v :rn anth>vo s. Some of thosa,vntrii>ntivrn air vnr l << onomit dispat< hing vpaation, < ornf frlivv v! e a. r l naturalgas jaj>r!ine higli outj :a from th, &>.\\l:::oI I'lant, and agen s sii e sah, <>l a; arb:1.', < h a ni, you a r to otha utilitirs I itipnt mentro>n d ra vnomi, disj a!. l.:nu in v:a t l't:12. In nual Re prat Thn> neb vn > nn mir nk:j. :n the ~lhar.\\lunia it al l'on a l'vvi. <,n r Sn,t. n (lj aation s rmj lov a s ha; < c onnn:o d to a< i. n., l l substa :nal sat ings laa vnr nia nd. n l;a l'Uli t,,,, l amounted to 5I n un!/noi l-iatha t! n, p, *. j saiings hat e baa n 5ll.>' mil!n.n lir v!ba fr vi l n:o mhr n -the Cinn of ih n an. IL 'i! > ( ; i r ia ':. wi (,'rra ni dir-ha; a a< hia. <,1juvp.atninat,.; : ve. 1

]6 M of reclosers. Practical guards were developed and installed to control contami-nation of the insulators on' a 345 KV transmission line, conta'mination created by roosting buzzards. From 1981 through 1984, all poles ten years or older in our system were inspected and treated. During 1984, our line crews rein-forced or replaced 537 poles. This program has improved system reliability and helped to reduce outages. The average outage time in 1984 was 60.39 minutes per substation as compared to 61.4 minutes in 1983. Project construction & Engineering employees completed projects in 1984 which increased our dis-tribution substation capacity by 63,624 KVA and converted 31.9 miles of trans-mission line to 138 KV. MANAGEMENT Richard E. McCaskill Encurit e Via finident and Gennat Afanaga J. D. Copeland.J r. A nistant Gennal Afanagn Francis M. llushnell.Jr. Emutize Assistant and Afanagn l'ubluc Relatoons Clarence W. Carpenter Afanaga Funanaand Adminiaration Ililly W. Dyess Afanagn-l'roint Constrw tion and Enginenung Dan II. S wenke, J r. Afanagn Opnations William B. Townsend,Jr. Afanagn-Corporate /*lanning Subsiduary tiraios Fuel Company, Inc. Clifford L. Sartin Afanagn Furlopnations

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22 M FINANCIAL STATEMENT Thefinancial strength and resilience of the Bra:os System stemfrom its member cooperatives and customers, listed below. They serve consumers in rural, suburban, and urban areas totaling nearly 20 To of Texas. This vast service area provides diversityfor income sources of residential, agricultural and industrial loads. It also provides stronggrowth in energy sales. Member Cooperatives Bartlett Electric Cooperative, Inc. B-K Electric Cooperative, Inc. Belfalls Electric Cooperative, Inc. Comanche County Electric Cooperative Assn. Cooke County Electric Cooperative Assn. Denton County Electric Cooperative, Inc. Erath County Electric Cooperative Assn. Fort Belknap Electric Cooperative, Inc. Hamilton County Electric Cooperative Assn. Ilill County Electric Cooperative, Inc. J-A-C Electric Cooperative, Inc. Johnson County Electric Cooperative Assn. Limestone County Electric Cooperative, Inc. AlcLennan County Electric Cooperative, Inc. hiid-South Electric Cooperative Assn. Navarro County Electric Cooperative, Inc. Robertson Electric Cooperative, Inc. Tri-County Electric Cooperative, Inc. Wise Electric Cooperative, Inc. Municipal Customers Bartlett Granbury Hearne Sanger Seymour Weatherford Whitesboro Other Texas A & hi University

21 1984 FINANCIAL STATEMENT 6 9

24 COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1980-1984* 1 1984 1983 1982 1981 1980 Electricity Generated and purchased-in Megawatt Hours Generated at W.R. " Bob" Poage Plant Generated at North Texas Plant 5,131 8,814 22,890 71,897 99,986 Generated at Randle W. Miller Plant 1,291,634 1,118,547 1,499,573 1,494,217 1,782,357 Purchased for system A. From San Miguel Electric Cooperative 1,707,432 1,668,411 1,654,877 366,664 B. From other utilities 206,859 229,462 170,161 295,685 286,930 Purchased atisolated meter points 509,537 460,553 458,434 412,529 413,856 3,720,593 3,485,787 3,805,935 2,640,992 2,583,129 Electric Sales-In Megawatt Hours A. Firm Member Cooperatives 2,846,999 2,498,886 2,389,141 2,226,904 2,214,371 Cities-regularinterchange 341,058 303,299 272.603 218.956 224,843 3,188,057 2,802,185 2,661,744 2,445,860 2,439,214 B. Economy Sales 370,149 461,793 1,003,469 83,595 23,748 3,558,206 3,263,978 3,665,213 2,529,455 2,462,962 Electric Sales to Member Cooperatives-In Megawatt Hours Bartlett Electric Cooperative, Inc. 53,251 47,297 47,221 43,646 44,297 Belfalls Electric Cooperative, Inc. 42,152 39,125 42,317 46,837 42.859 B-K Electric Cooperative,Inc. 68,565 61.230 61,530 62,194 66,430 Comanche County Electric Cooperative Assn. 150,106 141,177 136,675 123,059 113,760 Cooke County Electric Cooperative Assn. 257,327 244,152 234,604 220,337 221,999 Denton County Electric Cooperative,Inc. 292,555 242,089 218,286 195,937 195,123 Erath County Electric Cooperative Assn. 167,941 153,394 146,638 137,763 140,736 Fort Belknap Electric Cooperative, Inc. 113,499 105,013 94,726 84,994 75,466 Hamilton County Electric Cooperative Assn. 82,260 75,894 75,602 69,983 72,741 Hill County Electric Cooperative, Inc. 133,026 115,100 111,916 103,032 108,514 J-A-C Electric Cooperative,inc. 97,748 87,038 32,017 73,085 66,765 Johnson County Electric Cooperative Assn. 345,719 299,957 286,371 259,155 262,235 Limestone County Electric Cooperative, Inc. 67,473 59,878 61,201 58,552 61,404 McLennan County Electric Cooperative,Inc. 87,206 77,712 77,009 75,815 74,774 Mid-South Electric Cooperative Assn. 179,825 155,889 156,657 141,804 117,957 Navarro County Electric Cooperative, Inc. 139,314 91,528 86,241 95,233 106.045 Robertson Electric Cooperative, Inc. 54,631 48,201 48,626 41,757 41,568 Tri-County Electric Cooperative, Inc. 372,215 323,536 301,061 283,580 290,372 Wise Electric Cooperative,inc. 142,186 130,676 120.443 110.141 111,326 2,846,999 2,498,886 2,389.141 2,226,904 2,214,371 l

23 COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1980-1984* 1984 1983 1982 1981 1980 (Mills per KWH) TotalOperating Revenue (1) 52.3 53.3 46.8 40.1 34.6 Operating Costs Production expenses (2) 42.3 43.4 39.5 34.1 29.1 Transmission expenses 2.3 2.5 2.2 1.6 .8 Administrative and general expenses .6 .6 .8 1.0 .9 Depreciation, taxes, insurance, interest 5.5 6.0 4.1 3.4 3.2 TotalOperating Costs 50.7 52.5 46.6 40.1 34.0 Net Operating Margin (Loss) 1.8 .8 .2 (-) .6 (1) Average sales price by class Firm power sales MemberCooperatives 53.7 55.6 49.9 40.1 34.5 Cities 53.9 56.4 50.8 42.4 36.0 Surplus power sales Cities 39.3 38.0 37.9 33.9 34.5 (2)Furtheranalyzed by source Generated power Cost of fuel 39.6 40.9 39.1 34.1 27.6 Wages and other costs 1.5 1.7 1.2 1.0 .6 Purchased power For system 38.7 38.6 36.3 24.9 22.9 Atisolated meter points 45.5 43.8 41.6 35.6 29.1

  • Excludes operations of Brazos Fuel Company, Inc.

~ 26 CONSOLIDATED BALANCE SHEET As of December 31,1984 and1983 1984 1983 ASSETS (Note 2) Utility Plant (Notes 1,3 and 13): Electric plantin service,atcost $201,032,449 $179,060,951 Completed construction not classified 4,380,007 13,251,288 Construction workin progress 195,096,121 161,589.306 Nuclear fuel in process of refinement i and enrichment 8,747,213 6,906,277 409,255,790 360,807,822 Less accumulated provision for depreciation and amortization 50,893,788 46,480.898 Utility plant, net 358,362,002 314,326,924 Otherpropertyandinvestments: Investments in associated organizations: Capitalterm certificates (Note 13) 7,070,764 5,666,914 Patronage capital (Note 1) 1,114,644 956,632 Other 6,036 6,250 Restricted assets and other investmerts: Certificates of deposit 13,859 13',497 17,500 Other 8,205,303 6,660,793 Current assets: Cash-general 2,040,418 1,754.488 Cash-loan funds 47,156 6,624 Specialdeposits 64,675 127,635 Temporary cashinvestments 1,445,600 Accounts receivable 18,445,453 18,222,009 Fuelinventory,at average cost 3,344,797 771,732 Material and supplies, at average cost 5,953,419 6,629,439 Prepayments 84,320 84,090 Tota! current assets 31,425,838 27,596.017 Deferred debits: Unrecovered purchased fuel costs, less allowance for unrecoverable gas of $160,880 and $336,077 (Notes 1 and 13) 543,759 704,894 Fixed transmission costs, less amortization of $1,274,694 and $849,796(Note 8) 803,165 1,228.062 Other 1,486,017 1,470,365 2,832,941 3,403,321 $400,826,084 $351,987,055

25 m 1984 1983 1982 198.1 1980 Maximum Kilowatt Demand At Member Delivery Points 683,450 612,297 568,681 556,837 551,656 AnnualLcsd Factor Percent Member Cooperatives 47 47 48 46 46 Electric Energy Sales MemberCooperatives $152,868,791 $138,873,457 $119,214,939 $ 89,373,467 $ 76,382,941 Municipaland Economy 32,956,026 34,699,138 51,976,783 11,830,747 8,848,000 $185,824,817 $173,572,595 $171,191,722 $101,204,214 $ 85.230,941 Other Electric Revenue 371,785 233,616 184,241 245,027 102,932 TotalOperating Revenues $186,196,602 $173,806,211 $171,375,963 $101,449,241 $ 85,333,873 Operating Expenses Production Expense-Generated Power S 53,333,538 $ 48,018,505 $ 59,530,029 $ 54,979,207 $ 53,184,446 Production Expense-Purchased Power 97,200,643 93,506,213 85,265,221 31,174,730 18,633,493 Transmission Expense 8,036,110 8,264,545 8,121,976 4,092,502 1,962,736 Insurance and Welfare Expense 1,459,113 1,344,556 1,200,410 954,435 841,434 Other Administrative & GeneralExpenses 2,274,458 1,955,285 1,783,918 1,635,066 1,337,628 Depreciation and Amortization 6,048,486 5,631,674 5,126,312 3,826,420 3,519,135 Taxes 1,279,700 1,046,208 1,082,647 1,014,270 913,757 Interest on Long-Term Debt 29,081,630 26,620,960 22,403,479 15,530,709 11,343,930 OtherInterest 487,041 972,492 1,047,359 583,981 576,205 LessInterest Charged to Construction (18,820,116) (17,466,851) (14,735,721) (12,438,836) (8.462,767) Other Operating Deductions 1,566,127 144,739 179,555 3,779 TotalCost of Electric Service 180,380,603 $171,459,714 $170,970,369 $101,532,039 $ 83,853,776 Gain (Loss)in Operating Margins 5,815,999 $ 2,346,497 405,594 $ (82,798) $ 1,480,097 Non-Operating Margins 701,313 366,651 337,760 92,624 247,537 Gain (Loss)in TotalMargins S 6,517,312 $ 2,713,148 743,354 9,826 $ 1,727,634

  • Excludes operations of Brazos Fuel Company, Inc.

28 CONSOLIDATED STATEMENT OF REVENUE AND PATRONAGE CAPITAL AND OTHER EQUITIES AsofDecember31,1984 and1983 1984 1983 Operating revenues: Sales of electric energy (Notes 1 and 11) $185,824,817 $173,572,595 Salesof naturalgas 1,094,380 Other 338,823 193,449 186,163,640 174.860,424 Operating costs and expenses: Cost of naturalgas sold 1,057,943 Operating expense: Operation expense: Production-fuel (Note 1) 51,129,695 45,843,552 Production-other 1,014,299 998,341 Purchased power 97,200,643 93,506,213 Transmission 5,883,761 6,268,391 Distribution 287,857 268,835 Administrative and general 3,801,710 3,421,521 Maintenance expense: Production 961,584 886,402 Transmission 1,098,378 946,474 Distribution 766,114 780,845 Generalplant 160,223 139,746 Depreciation and amortization (Note 1) 6,050,623 5,634,087 Taxes 1,290,384 1,055,956 Interest on long-term debt 29,081,630 26,620,960 Otherinterest 487,041 950,131 interest charged to construction (Note 1) (18,820,116) (17,466.851) Otherdeductions 1,566,127 Totaloperating costs and expenses 180,393,826 172,478,673 Operating margins 5,769,814 2,381,751 G & T CapitalCredits 281,750 Other capital credits and patronage dividends 131,979 105,609 Non-operating margins: Interestincome 261,443 263.306 Other 540 Margins before Federalincome tax 6,445,526 2.750,666 Federal income tax (benefit)(Note 12) (5,749) 5,749 Net margins 6,451,275 2,744,917 Patronage capital and other equities, beginning of year 23,497,355 20.752,438 Patronage capital and other equities, end of year S 29,948,630 $ 23.497,355 The accompanyeg notes m en wegretpart at mese nnancet statements

2: 1984 1983 LIABILITIES Equity and margins: Memberships 95 95 Patronage capital and other equities (Note 4) 29,948,630 23,497,355 29,948,725 23,497,450 Long-term debt: REA mortgage notes (Notes 4 and 5) 84,728,820 84,051,471 NRUCFC mortgage notes (Notes 4 and 6) 10,545,339 9,805,443 FFB mortgage notes (Notes 4 and 7) 252,629,000 203,487,000 347,903,159 297,343,914 Currentliabilities: Current maturities of long-term debt 3,520,000 3,698,000 Accounts payable 15,250,203 16,997,734 Notes payable-NRUCFC(Note 9) 2,900,000 4,800,000 Notes payable-banks 17,500 Other accruedliabilities 1,142,027 5,412,438 Totalcurrentliabilities 22,812,230 30,925.672 Deferred credits (Note 1) 161,970 220,019 $400,826,084 $351,987,055 The accompanying notes are an etegralpart of these francial statements.

30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1-Summary of Significant Maintenance and repairs of property Accounting Policies and replacements and renewals of Principles ofConsolidation items determined to be less than units The consolidated financial of property are charged to operations. statements include the accounts of the For property replaced or renewed, the Cooperative and its wholly-owned original cost plus removal cost less subsidiary, Brazos Fuel Company. salvage is charged to accumulated All intercompany items have been provision for depreciation. The cost eliminated in consolidation. of related replacements and renewals System ofAccounts is added to electric plant. The accounting records of the Contributions in aid of construction Cooperative conform to the Uniform are credited to the applicable plant System of Accounts prescribed by the accounts. Federal Energy Regulatory Interest Charged to Construction Commission for Class A and B The Cooperative has capitalized as electric utilities modified for electric a part of electric plant the cost of borrowers of the Rural Electrification borrowed funds used for such Administration (REA). purposes, net ofinterest earned on Electric Revenues and Fuel Costs " idle" advances of the borrowings. Electric revenues are recorded This procedure is in accordance with monthly as of the date meters are read that prescribed by REA. and accounts are billed. Depreciation Fuel costs are charged to Provision has been made for production expense as fuel is depreciation on a straight-line basis at consumed. annual composite rates as follows: Plant Additions and Retirements Production plant 3.10 % The cost of additions to electric [';*31, uIo* p"I t Ns! "S* plant in service represents the original ceneraipiant: Structures andimprovements 2.50 % cost of the contracted services, d.irect Transportation 15.50 % communications 6.50 % labor and material, interest on Othergeneralplant 6.00 % construction loans, and indirect EDP equipment 16.00 % charges for engineering, supervision and similar overhead items.

2L CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION Asof December 31,1984 and1983 1984 1983 Working capitalprovided from: Net margins $ 6,451,275 $ 2,744,917 Depreciation and amortization 6,050,623 5,634,087 Patronage capitalaliocations (413,729) (105,609) Working capital provided from operations 12,088,169 8,273,395 Advances from REA 3,603,000 9,807,000 Advances from FFB 49,142,000 40,548,000 Advances from CFC 1,264,400 Salvage value of retirements 786,055 284,203 Contributions for line removal and relocation 345,569 11,252 Decrease in unrecovered purchased fuel costs 161,135 71,004 Decreasein deferred debits 514,035 Totalworking capitalprovided 67,390,328 59,508,889 Working capitalused for: Additions to utility plant 50,417,528 53,411,986 Payments on long-term debt to REA 2,925,651 3,183,242 Payments on long-term debt to CFC 524,504 487,697 Plant removalcosts 374,900 408,246 Decreasein deferred credits 58,050 48,241 Increasein otherdeferred debits 15,652 Increase in other property and investments 1,130,780 533,806 Totalworking capitalused 55,447,065 58,073.218 Increasein working capital $11,943,263 $ 1,435,671 Changesin working capital: increase (decrease) in current assets? ,g } 326 Cash' 752,378 Temporarycashinvestments ' Ii N 1,4M00 (600,000) SpecialDeposits (62,960) 6,035 Accounts receivable 213,444 (774,611) Materialand supplies - ( 1,897,045 (854,659) Prepayments c 4 230 (127,564) 3,829,821 (1,598,421) Increase (decrease)in current liabilities: Current maturities of long-term debt (178,000) 43,000 Accounts payable (1,747,531) (6.938,579) Notes payable (1,917,500) (505,000) Other accruedliabilities (4,270,411) 4,366,467 (8,113,442) (3,034,092) increasein working capital $11,943,263 $ 1,435,671 The accompen,*m notes are an etegrs!part of these twancet statements.

32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4-Patronage Capital and Other 5-Long-Term D'ebt-REA Equities Mortgage Notes Detail of patronage capital: Mortgage notes to REA are 2 % Decernber st, and 5 %, 35-year notes payable with 1984 1983 principal and interest installments of Assignable $ 6,242,912 $ 2,452,106 approximately $1,400,000 due Assigned 20,016,665 17,577,743 26,259,577 20,029,849 quarterly. The debt includes an Detailof other equities: estimated $2,995,000 of principal and Capitalgains andlosses 9,383 9,383 Nonoperating margins 3,471,291 3,183,707. deferred interest payable within the Retained earnings of subsidiary 208,379 274,416 next twelve months. The notes are ^ scheduled to be fully repaid at various Totaipatronage capitai and other equities $ 29,948,630 $ 23,497,355 dates from May 15,1985 to September 12, 2018. Unadvanced Under provisions of the long-term loan funds of S11,565,000 at 5% are debt agreements, until the total of available to the Cooperative on loan equities and margins equals or commitments from REA. exceeds 40 % of the total assets of the 6-Long-Term Debt-CFC Cooperative, the return to patrons of Mortgage Notes capital contributed by them is limited Long-term debt to CFC consists of generally to 25% of the patronage 7% to 14% mortgage notes payable capital or margins received by the with principal and interest Cooperative in the next preceding installments of approximately year. S360,000 due quarterly with The by-laws of the Cooperative do $525,000 principal payable within the not provide for the assignment of next twelve months. The notes are non-operating margins or earnings of scheduled to be fully repaid at various subsidiaries. The by-laws permit the dates from May 31,1989 to offsetting of current year operating November 30, 2016. Unadvanced margins against operating deficits of loan funds of S7,423,600 at 11 % are pnor years. available to the Cooperative on loan commitments from CFC.

31 Patronage Capital Certi icates 3-Utility P1 ant f Patronage capital from associated Listed below are the niajor classes organizations is recorded at the stated of utility plant as of December 31, amount of the certificates. 1984 and 1983: UnrecoveredPurchasedFuel Costs December 31, Natural gas purchased under the 1984 1983 Intangible Plant 2,170 $ 2,170 take-or-pay terms of contracts with Production plant 59,953,744 59,936,639 various individual producers is Transmission plant 103,028,281 84,391,302 Distribution plant 33,663,622 30,544,187 . Tecqrded at contract cost, which Generaipiant 4,384,632 - 4,186,6s3 1 lu bb prb~ duction taxes hnd Completed construction not classified 4,380,007 13,251,288 royalties. The amount of gas paid for Electric pfantin service 205,412,456 192,312,239 in advance is classified as a deferred Construction workin progress 195,096,121 161,589,306 Nuclear fuelin process of debit. Unpaid production taxes and refinement and enrichment 8,747,213 6,906,277 royalties, related to the above $409,255,790 $360,807,822 contracts, are included in deferred Included in construction work in credits until such time that the gas progress at December 31,1984, are purchased and not taken will actually costs of S175,006,107 for the purchase be recovered by the Cooperative. of 3.8% ownership in the Comanche An allowance for unrecoverable gas Peak Nuclear Plant. The Cooperative is provided for by charges to income. estimates the remaining cost to The allowance is based upon a complete its 3.8 % share in the plant deferntination by the Cooperative's to be approximately S66,250,000 of consulting engineers as to the volume which loan funds of $10,356,581 are of gas losses in each well. available from commitments from 2-Assets Pledged FFB. All assets are pledged as security for the long-term debt to REA, National Rural Utilities Cooperative Finance Corporation (CFC) and Federal Financing Bank.(FFB).

34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-Retirement Plan 12-Federal Income Taxes The Cooperative has a Federal income taxes are paid on contributory retirement plan covering taxable income of the subsidiary only. substantially all ofits employees. No provision has been made for Total retirement costs charged to Federal income taxes for the operations for 1984 and 1983, were Cooperative in reliance on a $333,251 and $356,179, respectively, determination letter, dated March 12, and include charges for current and 1969, issued by Internal Revenue prior service costs. The Cooperative's Service, which states thm in the policy is to fund retirement cost opinion of the Service the annually as it is accrued. Cooperative meets t'ae requirements The actuarially computed value of of Section 501(c)(12) of the Internal vested benefits at December 31,1983 Revenue Code and is entitled to (date oflatest information available) exemption from Federal income tax. was S5,670,029. The book value of 12-Federal Income Taxes the retirement fund assets at (Continued) December 31,1983 was $7,820,573. The tax benefit of S5,749 in the 11-Transactions with Member year ended December 31,1984, Cooperatives represents a refund due from Internal The Cooperative has contracts with Revenue Service resulting from a net 18 ofits 19 member distribution operating loss of the subsidiary in cooperatives, throughJune 30, 2020, 1984. for the sale of wholesale electric 13-Commitments and energy. The contract with the other Contingencies member cooperative is through the Unrecovered Purchased Fuel Costs periodJune 30, 2010. Sales of electric The Cooperative has contracted to energy to the 19 members were purchase gas from various individual $152,868,791 and $138,873,457 for producers, in addition to other 1984 and 1983, respectively. suppliers. The remaining term of the majority of these contracts is approximately 9 years. Under the terms of the contract agreements, the

33 7-Long-Term Debt-FFB (Plant) to a point ofinterconnection Mortgage Notes with another utility. Power is Long-term debt to FFB consists of transmitted from the Plant to the 10.361 % to 13.081 %,2 to 32 year point ofinterconnection and is notes payable with interest payments wheeled by other utilities into the due quarterly. The notes are Brazos transmission system. Certain scheduled to be fully repaid at various fixed costs associated with the line, dates from September 8,1985 to and charges from other utilitie,s for December 31, 2017. The Cooperative wheeling services, were deferred has an option to extend the due dates, pending commercial operation of the of the 2 year notes, for a period not Plant which occurred in early 1982. less than two years nor greater than The deferred costs are being seven years after the date of the amortized to expense on a straight-advance; or to extend the maturity line basis over a period of 5 years. date to thirty-four years after the end 9-Line of Credit Agreement of the calendar year in which the The Cooperative has established a advance was made. At December 31, line of credit, for short-term 1984, the Cooperative had financing, with CFC for S40,000,000. S21,164,000 of advances with short-At December 31,1984, the amount term maturity dates which they owed CFC under such agreement was intend to refinance under the above S2,900,000 due February 15,1985 at options. These advances have been an annual interest rate of 113/4%. In classified as long-term debt for addition, the Cooperative has financial statement purposes. established a line of credit, for short-Unadvanced loan funds of term financing, with a bank for $50,432,000 are available to the S20,000,000 at the prime interest Cooperative on loan commitments rate. Prior approval from CFC is from FFB. required if the combined borrowing 8-Deferred Debits under the lines of credit will exceed The Cooperative has constructed a S40,000,000. The Cooperative has 78 mile,345KV transmission line not borrowed any funds under the from the San Miguel Electric agreement with the bank. Cooperative, Inc. generating plant

36 Main @Hurdman Cerbfed Ptbic Accotritants Central Texas Tower,P.O. Box 7616,Waco.TX 76714 7616,817/776-4190 The Board of Directors Brazos Electric Power Cooperative, Inc. We have examined the consolidated balance sheet of Brazos Electric Power Cooperative, Inc. and subsidiary as of December 31,1984 and 1983, and the related consolidated statements of revenue and patronage capital and other equities and changes in financial position for the years then ended. Our exami-nations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements present fairly the financial posi-tion of Brazos Electric Power Cooperative, Inc. and subsidiary at December 31,1984 and 1983, and the results of their operations and the changes in their financial positions for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. hd n March 1,1985

35 Cooperative has agreed to purchase agreements with the various and receive, or pay for if available producers. Management anticipates and not taken, an average daily that proposed contract amendments quantity of gas as set forth in the will eliminate the uncertainty and contracts. The contracts provide for potentialliability imposed by the the recovery of gas paid for, but not take-or-pay provisions of previous taken, over the remaining life of the contracts with the producers. contracts. It is the opinion of Construction Commitments management, that with proper The Cooperative's expenditures for monitoring of reservoir performance its 1985 construction progr am are and field surveillance of operating estimated to be approximately conditions, failure to recover gas paid S46,100,000 of which S44,700,000 for but not taken above the allowance will be financed by REA, CFC and for unrecoverable gas, will be FFB loan funds and $1,400,000 by minimal; and that such failures, general funds. Approximately should they occur, are a proper $14,335,000 of the estimated 1985 increment of the cost of actual gas construction program expenditures delivered and therefore recoverable, are for additions to the Comanche under the Cooperative's rate Peak Nuclear Plant. Structure, from its customers. The Cooperative is presently renegotiating its gas purchase

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