ML20141J271
| ML20141J271 | |
| Person / Time | |
|---|---|
| Site: | Rancho Seco |
| Issue date: | 12/31/1996 |
| From: | Delezenski J, Schori J SACRAMENTO MUNICIPAL UTILITY DISTRICT |
| To: | Weiss S NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| NQA-97-037, NQA-97-37, NUDOCS 9705280024 | |
| Download: ML20141J271 (33) | |
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SACRAMENTO MUNICIPAL UTluTY DISTRICT O 6201 S Street. F'.o. Box 1583Q Sacramento CA 95852 1830.(916) 452-3211 6 '
AN ELECTRIC SYSTEM SERVING THE HEART OF CA!.lFORNIA NQA 97-037 May 19,1997 l
, U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555 l
Docket No. 50-312 Rancho Seco Nuclear Station License No. DPR-54 i
ANNUAL FINANCIAL REPORT l
Attention: Seymour Weiss In accordance with 10 CFR 50.71(b), the District provides the enclosed l Sacramento Municipal Utility District 1996 Annual Financial Report, which
! includes the certified financial statements.
) Members c'your staff requiring additional information or clarification may l
contact Jerry Delezenski at (916) 452-3211, extension 4914.
l
- Sincerely, fh Delezenski
- l. u rintendent Quality Assurance / Licensing / Administration cc w/atch: E. W. Merschoff, NRC, Arlington, Texas R. Dudley, NRC, Rockville 9705280024 961231 ^
O!{I!kllll l{lllhlll((ll{l((lll l PDR ADOCK 05000312- ia a a ! I PDR l RANCHO SECo NUCLEAR GENERATING STATION D 14440 Twin Cities Road, Herald, CA 95638 9799;(209) 333-2935
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Q ? a g , 'e financial picture was[b'right in'1996 for; the Sacramento Mtinicipal utility District; SMUD met its199
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ry dildEd chsge tathethAt year-end, $19 m' don Ocadable th transfer , into'the be Stabilizatiori Fund; For the seventh consecu;
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i 7 Nikpekthf Bdard spr6vcd sno rats increse bsdget( 4 s ,3 hM h INe'ne energy resourc$ pNI$rmed wellN Winter; storms produced 150 percent of normdNmkiavin'g the biitricti
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C L$lfdeilion wlihits hydioelstrib generation in El Dorado Cobnty The Carson lce cogeneration' plant; operated;all yearipr6duci , sf sQing enottsh low cow clectriats to serve the anndal en' rgye needs o;f 54,000 Sacramento houselml.dsWwo cogeneratioh planto
? tithder c6nniuc6on proceeded bn scheduleWith the plant at'Proctef a Camble producing power by the end of the yeargThe1 (G, /
M M*ShisOoiWed the U,5cDepartment 4f Energy and 'nine '
' oth'eipartisipants to3b' ring SolarTwodhsiworl -
mu . - v: A~, n.. v g $idvahced'661ar' power plantthat $n linpaiwell; " iNOMThi Didrict m6veddecisively to tii <- 4 6Mddel6pment of phase ido of a Qdd p6wer pla$ bEchdie of operational prdblemsMth'ihe inidal phaseLof thiproject)Thseoritrach "" % $@iad been desidned td ensura that if the wirid pow'er iechnology did not work ifficien't lN thi second phisE would not proc'ecdAhej ' [N # M y lkerd afs60ted toietireigeothermdnlani at Coldwaier; Creek; which has been experiencing heady' declines in'sieam suppliec $ NhNstart bf 1997[Sacrainentd4 commdnity ownhelectric)tIlity is on de bridof hisr6nc ch$nkWSiddid5 bNsinch , m $6mbethiorunditate laws are framforming the electric utility industry f rom imonopolistic market to one that is'competitivelyl +
' Tdriven by customerspectations and choice; SMUDs challenge is to retain the qualities that make communitifowned utilitiest &
%niqtieswhile anhe}same time %ompfting sticcessfully in the new marketplacci ? O a" ~
$SMdD hai positimied iself well for the chdienge. Our resources include elficient; environmenially sensitiv5 Ihoelektricf G .
c '" and natural gas planirJSMUD does not have a surplus of pc +eneration, which means that'we cad take fall adva6tage of1 <;
- ;/{the lower mafket printhai should result from increased competition 1SMUD rates are aniong the y, '
16 w e pystem rates average 25 percen't lowSr than CalifNnia's investor-6wned unlities/ , , , n k ((k
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h ' dIhourse/ pride will not be the onlyIbingihh iustomers will c6nsiNr wiien' choosing electric supplihsflNIIabilikyla Icrvice? L~'/ rankhigh as welli : ;;
' > 4 b NVith directiob kom our cust'omers o' erkhk v course oI the year, we have crafted A itrategic hlan that will ailow SkiUD'to' . ' '
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/ (conipetelsuchessfully/while"continuins to offer' outstanding rehability and servicec m M , hint [wd will rtmde competitive on price and paphf our non pfod0ctivehtranded') costs as ' quick ly as po'ssiblEbWe plan 16 { N 3 freeze rates throudh 2006then besin reducing'thein: By 2002l we intend to have paid off 70 percent of more of the stranded i ~
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y$Weydl mainum high reliability continuing our trend oITincresedlspendmg in thk area? In 1996 foiexansple; treei rimming
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s was stepped up to protect the electricity distribution system during storms SMUD's phone system was enhanaed to handle moret 4 m gncoming customer calli during emergencies; field squirnent inspecuons increased and ~m6re'ehuinmest3as fe'placedf5everalp W r WQ4 gosamywpre begiin t6 iniprove c6mmunidati6ns betwehniw'orld giospiand strefigthen systerrimainteinnceF - 375 [ , q@WhErde b pMSur stratNih 012n is[Asto'stly a$thkeadd$er utifilies bytoph'asin'g $/$$ '4 in ng ihat the'electricijy d4tribbtionistem stays hi4hly
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reliable early as summern1997 dome cust6nser(will be able choose ' (f sshelir'elictricit(nipplR "g@D J$ a esearch hd{ AIC$lifNndmoiicsIritoLat p g$ pen electricityMarlietplice, we will continue nur support r jn o
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' r r nient as lic well g6ods aschargeiTe our idweincomFassistance will.also 16troduce " green p.ncing" program options by'to devoting allow'environmentMly) 3(pergent of 199 g$
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%nd Mtsmars'the chance to tontribute tq .the developrhent of renewable projestM dkN p j s N[
j(uperiorjefvice Fohnyears to the thepeople"of. Sacr ~ainentotheMunicipai
$acramentofAlong wayJthe Didridutil'iti has met manyi bIstricIhis pe j
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!@ ! ' $ gyhallenges[In the early years, there were power shorthges and an out-of repair Wectricitys ' # M c %p.J "
f idntdbutioh systemJTwo 'decadh of expfosive growth 4nd expansion' fotidwed. Then ' m Q AdF'
. ; icame the energy crisis [thi nuclear power years, andlthe post nuclearyears of energV?
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! efficiency and the developmsnt of diverse'and renewableiesources. Now, we enter an era L ,
..a imp p . AQof dynamicchange and'conspeti. tion!With the guidance'of our cuhomereownerslSMUD - WyyM !vf11 expandlervice licyond our existing bbundaries and offer new products and seivices, ,
,'V d ( Ihniinuing td' change and thrivein a dynamic and increasingly competitive marketplace, s ,%/
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READY FOR C O M P ETI TI O N SMUD is once again a leader in the utshty industry by being the hrst in the state to of fer customers the choice of where they will buy their electricity. Some residential and commercial customers will be able to buy their electricity from another power company startmg in June, 1997 - six months earlier than customers of other California utihties. Under the General Manager's proposal, up to 100 mega. watts of the District's load will be available to a hmited number of customers who may buy power from a supplier of their choice. By moving months ahead of the other utilities, SMUD will gain valuable information and experience. SMUD customers wdl have the first opportunity to participate in the new energy marketplace, and as always the Distnct will base its decisions on what benehts our customers and community. _ SMUD c!ectric rates are already 25 percent lower than those of Cahfornia's investor. owned utihties, and SMUD directors recently voted to freeze rates through 2001. Our services are recognized nationwide for their excellence, and we are expanding services and addmg more options, No matter who customers choose to buy their electriaty from, SMUD customers wdl still be able to count on SMUD to keep the power on. SMUD's electrical system is among the most rehable in the country. Our crews will continue to maintain the system that bnngs power directly to every home and business in Sacramento County. , R E A D 'Y FOR EMERGENCIES Preparing for stormy weather and other emergenaes was another important activity in 1996. Summer brought the highest temperatures on record. Sacramento endured 15 days of 105 degrees or higher, includmg three days where temperatures reached I to degrees. Electricity usage m Sacramento skyrocketed, and distnbution and transmission systems throughout the West were challenged Then in July, and a month later in August, two separate failures occurred on the Cahfomia-Oregon AC Intertie, the major power trans-mission source for the West. Planning, quick response, and a reliable system kept most SMUD customers from noticing the hrst fadure, which affected more than two mdhon people across eight states and two Canadian provinces About 40.000 SMUD customers lost power for eight minutes The second failure occurred on one of the hottest days of the year. About 194,000 SMUD customers lost power, with most back on line within five hours In other parts of the state, people were stdl without power severa' hours later. Throughout the summer and fall, employees readied the electric distnbution system for other emergencies hke these and for antici-pated winter storms. In addition to a stepped-up tree trimming program, an additional telephone number was introduced for report-ing outages, field equipment was inspected and replaced, insulated wire was installed where tree-related outages could be expected, and an in-house task force was put together to determine how SMUD could respond to outages with even greater efficier,cy. SUPERIOR SERVICE in 1996, SMUD stepped-up its customer service elforts and continued the programs that customers say they value. The Distnct established a site on the Internet's World Wide Web, featuring more than 50 pages of information At the District's Energy & Technology Center in the new Customer Service Center (6301 S Street), "E-House" was unveiled, a full-scale model of an energy-efficient home that teaches visitors the latest techniques and materials in home framing, sidmg, roofing, and ductwork j to help reduce electric bills. The District's well received Key Aucunt Services program, aimed at the District's largest customers, expanded to take part in more recruiting and retention cfforts. In coordmation with several departments, Key Account Services helped negotiate service agreements with companies such as Kikkoman, Ebara, and JVC to attract or retain business in the Sacramento area -
, all representing over 2,000 local jobs.
Businesses of all sizes say they value SMUD services. In 1996, SMUD continued with its useful services to businesses. providmg information and helpmg with electric technologies, energy ethciency, power quality, land use and environmental services. w musn>unw nm umovin e , al - - 1
1, 1 Another popular aspect of Dntrict operations is the recreational areas made available as part of our hcensing agreements The Rancho Seco Recreational Area m southern Sacramento County served over i16,000 visitors who came for camping, boating, and hshing in the well stocked lake. Through careful planning with the U.S. Forest Semce, the District has budt a variety of recreational facdities around the District's beautiful mountain reservoirs in the Crystal llasin, as a condition of operating within national forest lands. Here, visitors can take part in camping, fishing, boating, horseback ridmg, and hiking. Working with the forest Service, SMUD contmues to develop campgrounds, boat ramps, and trails. T A IL G E T S M ET AND MONEY IN THE 15A N K The District enjoyed another strong Imancial year in 1996, hittmg or exceedmg its targets for net income and fixed charge ratio and adding to the Rate Stabihzation Fund. lor the seventh consecutive year, a no-rate increase budget was approved by SMUDs Board of Directors. Net income for the year was $10 million, which matched the budgeted net income target for the year, after a net transfer of more than $19 mdhon in revenues to the Rate Stabih ation fund The fixed charge ratio was 1JS for the year, exceedmg the target of 1.56. This means that the Dntrict produced enough net revenues, af ter deducting operating expenses, to cover its debt service payments by one and three quarters times. Savings on power supply costs and capital projects also made for strong budget perfonnan(c, despite the f act that the Operations and Maintenance (O&M) budget was hit hard by storms and severe summer heat that increased overnme and repair costs. buoyed by strong sales to customers, total operatmg revenues hit $670 milhon Not only were sales higher than anticipated, the number of customers grew more than projected. Higher than planned customer revenues contnbuted to the sizable transfer to the Rate Stabih:ation Fund as did lower power supply costs. The fund, which now totals more than $ 155 mdhon, will be used over time to pay down the Distnct's debt, thereby strengthening the Dittrict for the coming competitive utdity environment. Plentiful, low-priced hydro and natural gas power helped the District's strong performance. Thanks to abundant rainfall, electric power generated by SMUD's hydroelectric plants alony *be Upper Amencan Rrver Project (UARP) saved $15 milhon in power that did not have to be purchased on the wholesale marku. The scorching summer swelled demand for electricity, as well, bring-ing in unexpectedly high revenues in.luly and August. Savings also resuhed from a conti.iued reducoon in the size of Datrict staf f through attrition, early retirement, a voluntary separation program, and from budget-cutting in almost every department. for the OsM budget, the goal was $1.3 milhon in savings. Howeser, by year-end, expenses had exceeded savings in this category by over $4 mdhon. The same storms and severe summer weather that boosted our supply and revenues also increased our costs to fix downed imes and other damage to the system. More than 28 acres of debris was removed from three UARP resemurs. In mid year we also changed the way we account for certam expenditures, moving some expenses from capital to OsM Ratings agenaes continue to view SMUD favorably. Standard and Poors maintained its ratings on Dntrict bonds at As whde htch and Moody's investors Services sustained SMUD's bond rating at an A. R E L I A I1 L E POWER To our customers, reliabihty is as important as rates. People want to know the lights will always come on. SMUD's dninbution system is sohdly constructed, and it n designed and engmeered to be compact, with power sources close to customert This adds up to a service reliabihty record that is among the best m the naoon in 1996, SMUD employees took steps to improve that good record A two-year process was completed to inspect all Distnct
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overhead dntnbution hne faahties. Several mdes of 69 kilovolt backup Ime was constructed in Rancho Muneta to provide even more rehable service to residents there. This hne is scheduled to be completed by the end of summer,1997. In stepped up main-tenance of SMUD's system, the Tree Division tommed 45,500 trees and removed 3.100 trees that interfered with overhead knes. The Lme Division tested and treated over 13,000 wood poles and replaced approximately 60,000 feet of underground cable. su -n- ~ w u ni rn n.s nm 4
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1 SMUD POWER R ES O U RC ES SMUD rebes on economical, reliable, and environmentally sensitive energy generation. Under the Integrated Resource Plan, District strategy is to take advantage of both new power sources and the wholesale power market. SNtUD's diverse, competi. tively priced resource mix includes hydroelectric power, cogeneration, energy elficiency programs, and renewable technologies such as wind and solar power, as well as power purchased from the wholesale market C O M M U NIT Y I N VO LV E M E N T A nonprofit, community-owned unlity hke SMUD is more than just a provider of power. It must also be a good neighbor. As part of its ef fort to be a good neighbor, SMUD successfully lobbied the City Council to adopt a Neighborhood Street Lighting
- Program to place street hghts in two city neighborhoods. Also in 1996, SMUD helped recruit and retain businesses in the Sacramento area that brought or kept 2,030 jobs 8 megawatts of load and $2.5 million m annual revenue to the area. Over the past five years, SMUlys cooperative community efforts have created or saved more than 13.000 jobs in Sacramento County.
Through the District's Employee Volunteer Program, employees volunteered more than 2,300 hours to assist nonprofit organizations in the gO" pmm,%p% 1 j
, Je ."r- OA.
Sacramento area. They built a wildhfe -x
+ .. 1%w gsd ' deOl884t$ SCI $MS GA. .L refuge at Rancho b,eco for an exotic ani. gggg g ,
mal refuge, cleaned up a stretch of pag gm,g- ' - - Highway 50, tutored young gg g pg people, conducted food drives, 4g ,,4.gA,y jy % l , Qk$MN, g435 % k %g W@ / }gL l and took part in walk.a-thons l and bow 1 a thons. SMUD L'
/ , ;g I1N,Mf8]$nkm@je)qjirspenGiimd% $p6 SMubli j ? > 9} t supplins)pideoggleltigsegegslet4l@lQ(.
gy g% }4[+h, l volunteers also raised u approximately $20,000 kg, ' 7;g m W' jggg~ ~ g gglg g-p[Q[{b}U{g cM - ~- . l for local nonproht g w gdny q ;a
~~
-- py S .- -MentddPandpup<wU If$k%&eers~
agencies and donated 4 MU[)enoemd< W" p" 7edelko - - ~2 7MblAngdlW J m M W s"yNN wy
%mv4 473 pints to the Red ?, ns ps ap.7-gummmqw ' age ~ ggt. .wg pg ga.m ay
. , g@j dig lE00 MllF,4f yg.yg g g.
x m . . . . gp{4pg yM#g -. . m Cross, includmg one citywide record b[, t , ' , $ - VRQeemtabie l # day of donations M'fM d 'n/ M M g$leyMijsf [ [ j - ? J g [@WkMW; hgg%37, in Decemher. A [ ~ d Sacramento family became the proud
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.S y y g T (Wende I hitheise(_MM dheelltM [.C$ptiggjd hh$hd q Mdhf{hy S T4M owners of their first 's [M[ %f Aiddeigt)m4 sit;%,k$ndNikI.[,y'iWMill(dg
[ *eacqueNediedtsatt$tsequ kIf }N home, thanks to
%@ a f 4 7 808tist#44R$10ltreefssedB88ss hlIn$ess$eelly ead$i8I M 7
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SMUD employees who iillueysk. Wy volunteered their time to build a house through the
); N; WM@,,a $ismopf wedes .Alllld Mltheisspellun M 2 7As%stineoi%% M [g [hljM-Sacramento Habitat for %, OJ M s,vw-c
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<wem g: gy Humanity. Employee contnbu. \ ~.4The 1 Residalso appsosenluntamespe savesed Appt palmeidedle1 eefiel#1hed #y'
, tions reached an all-time high IMZ .MofMonenpalhNdufbudinces'atMTwkilidnNM '
of $321,000 during the t996
#k!aigpOcasi'psWciplespowiddhebaniewesikkl hMnNll MgiMbes,ist'W. addthensidi,stWiceiand,)oi
. Combined Charities Campaign, ~ - ,ca, , , ~ . m w
- e six percent higher than 1995 and 3.5 Jamtet outside,c,ier service arean "F';
percent above goal. N W,3 n a _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ -
FIVE YEAR S U M .M A R 'Y . (U N A U D I T E D) I ? O P E R ATI N G STATISTICS < r> 1 9 9 e. 1 9 9.4 1994 1993 1992 Lustomers at Year fnd 486,146 480,303 475,090 467,177 468,671 KWH Sales (thousands). Sales to Customers - Residential .. ., . .. 5 851,605 3.567,584 3,680,243 3.635,715 3,620,303 Commercial, Industrial a Other . 5,037,656 4,891,304 4.778,913 4.812,504 4,850.899 Subtotal . 8,889,261 8,458,888 8,459,156 8,448,219 8.471,202 Sales of Surplus Power / Energy Bank Deposits. 335,108 151,647 12.678 335,187 468,659 Total 9 224 369 8 610 535
- 8 471 834 8 783 406 8 939 861 Revenues (thousands of dollars)
Sales to Customers - Residential... . $ 319.604 $ 290,896 $ 299,095 $ 294,977 Commercial, Industrial & Other .
$ 296,640 368.257 358,921 355.955 359,238 366,196 Subtotal . 687,861 649,817 655,050 654,215 662,836 Sales of Surplus Power. 1,525 992 31 1,916 Total on . $ 689 386 $ 650 809 $ 655 081 $ 656 131 $ 662 836 Average KWIi Sales per Residential Customer.. 8,982 8,412 8,8 t o 8,732 8,742 Average Revenue per Residennal KWH sold (cents) .. 8 30 Pow er Supply (Thousands of KWH)
- 8. I 5 8. I 3 8 II 8 19 Hydroelectric . 2,557,145 3,039,067 738,745 2,162.609 812.236 Geothermal . 464,756 447,024 332,370 506,084 479,762 Cogeneration . 322,524 99,900 Windpower . 10,023 13.088 7,450 o- o-Photovoltaic. . 1,622 2,846 2,452 2.673 2,505 Gas TurbineTuel Cells . 8,089 5,950 3,858 3,086 7,177 Purchases .. ~ ,.
6,366,520 5,532.892 7,877,380 6,613.205 8,228.215 Net System Peak Demand - I hour (KW) . 2,373,000 2,223,000 2,044,000 2,145,000 2,103.000 En'ployees (Permanent & Other) at Ye ar End. 2,247 2,308 2,437 2,411 2,409 l' I N A N C I A L STATISTICS ( i i. o u . . . d . ofdollor.) Operating Revenues.. $ 670,283 $ 613,896 $ 644,342 5 617,117 $ 648,170 Operating Expenses Pun hased and Interchanged Power.. 220,056 230,517 290,843 275,754 292,963 Operation and Maintenance . 198 I49, turn 176.65 l 137,683 125,023 120,819 Depreciation and Amortization orn.. 123,786 96,773 88,33') 79,875 72,909 Decommissioning . 22,421 21,649 20,426 20.088 15,422 Total Operating Expenses . 542,914 547,088 537,291 500.740 502, t 13 Operatmg income . 127,369 66,808 107.051 116.377 146,057 Other income itnn . 31,027 39,414 52,409 50,815 33,879 income Before Interest Charges. 158,396 106,222 159,460 167,192 179,936 Interest Charges , 148,329 140.711 136,463 140.193 142,035 Net locome (Loss).. $ 10 067 $ (34 489) 22 997
$ 5 26 999 $ 37 901 Funds Available for Revenue Bond Debt Serme . $ 300,237 $ 264,950 $ 269.451 $ 267,126 Revenue Bond Debt Service $ 268.645
$ 159,6 I I $ 156,137 $ 159,342 $ 152.082 $ 152,646 Revenue Bond Debt Service Coverage ratio.. L88 1.70 1.69 1.76 1.76 Total All Bonds Repaid . $ 37,360 34,563
$ $ 42,940 $ 28 652 $ 26,490 Electric Ut lity Plant Net $ 1,65 3,975 $ 1,511,145 $ 1,465,534 $ 1,320.270 $ 1,22 4,32 3 Capitahzation
- Long term Debt $ 2,403,410 $ 2.374,162 $ 2,085,773 $ 2 I 10,555 $ I,891,4 36 Customers' Eqmty $ 217,235 $ 215,720 $ 225,545 $ 214.786 $ 187,787 s The ,ov sous I nanual wjo matwn unomblated trucpt tiv bbt wvue mformatum i tt Vcws to the net hjervalofirre mn to dw Rate Stahkaten Fund ($ ro e mdhou m n uvs. S us e mdlwn m ov9 s $ no 7 mdlum m n uut $ so o mdlum m nov s aond $
nt Indudn the amortcahon of abanJsncJ tmdrar plant {maulma fucH. du montment m ( ( PA [w o vus) and dw unuctmer* m energy efia sens y nn Intludn dw moanawn of dw V[R hurplus of $ n 2 mdhon m s son. the Watern-VWE ><tlirmort of $2 r o mahon m s ouo and the reu.amtwn of th< VER 5 realixatwn mdbon, dw DOE nudwJud Japowlfre refurJ of $n a muhon and dw cam on the ormaunhmoit of hbt of $a 1 mdiwn m suu s titrt indudo si,e empaammt of dw mentmaa w ((PA No s of S n24 s m&m An unpawment In of $ o o mAm and a naulatory wtlafutuu momy of $1v s mdhon uve mmhJ m ,ou f %M kAhH NI( a MtINk IPAl. LiI H IiY t usl RK. I L .J
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sJ WE p(Ti$( - " Sacramento Municipal Utility District M' 'N^ 4 , dh m yM e If[ In our opinion, the accompanying consblidAiNd tialance $htsts NidtElitNcorblida ath ,.. of income and of cash flows present faldy,in all maSrialk%thNnancialMsitiSrMSicrahths Municipal Utility District (the Districh snd itscomponenfhat DecembyjIi,1956 a$d 1995, aMheh A results of their operations and thel (cMiiflodMhlw years th$ ended 16 condrnlity " dth generally adcgitch Y accounting principles. These financiafsdtsments aEprespob)i5ii@y$ responsibility is to c press hopinidn sn'thhe financial statements tissed on*od audits. eo audits of these statementiin asedrdanceMtl$ndally4 diaudsGa$rida(rAwhich refiuire tha plan and perform the abdAbo bNain reasonabis issuyandMahNtUwhether the filna$cialstateme'nis are free I s of matuial misstatement 2 An adddrMludes w .n~
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C O N S O L I. D A T E D ... B A L A N C E S H E ETS ? T .s .% 1. 1 .% I) c . e n. l. c r 31. l *a *a o l 9 9 r, E 1. I C T lt I C U TI1.1 T Y P I. A N T ( . l. . u . . .. .l . .. f .l ., i 1 , 4 ) Plant . ervice, at onginal u>st . $ 1,810,462 $ 1,660,596 Less accumulated depreciation (542,475) (480,310) I'lant in service net . 1,267,987 1.180.286 . Construction wmL in progress . 383 695 328,526 Investment in joint powers agencies . 2.293 2.333 To,ial elecinc utihty plant - net . , 1,653,975 1,511,145 - 1 IL E S T il I C I F D . D ES I G N AT E D A N I) T il U S T l' U N I) S Resenue bond reserve debt serme and uinstruction funds .' 367,174 489,176 Nut! car decommissioning trust fund . I18.497 115.484 Designated for rate stabih:ation f und . 155,523 12,,420 l Designated for defened compensation benefits 40,359 36,315 l l Designated for CCl% No.1. 12,542 11,411 1 1.ess current portion . (168,1481 (296,727) Total rotricted. designated and trust funds . 525,947 492.079 C U It it E N T ASSETS Cad) and investments. Linrestricted . 17,318 41,350 Restrated. designated and trust funds . 168,148 296,727 Receivables - net-Customer revenues and other . W II8 90,485 Conservation loans due within one year. i ,397 24 635 Attrued interest . 6,939 7.644 Regulatory costs to be recovered within one year. 85,177 83,486 Matenals and supphes, at average cost . 19.297 20 696 PERS prepa d employer contnbutions , 4.531 18,400 l'r epayments . 12.245 13.467 l Total current assets . 519.170 597,390 1 , N O N C U lt It E N T ASSETS A N 1) I) E l' E It it E D C 1 I A It G 10 S Regulatory costs for future recovery 773,161 808,515 Advance capacity payments. 96,170 113,756 Unamortized debt -suance costs.. 35,383 36.859 Conservation loans - net . 76.721 60,289 PERS prepaid employer c ontnhutrons . 0- 9,200 Prehminary proicct studies . 2,685 14.545 Other 8.o81 to 293 Tbtal nonturrent assets and deferred charges 992,801 1,059.457 I k b.. I e /
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C O NJ O L I D A T E D l B A E A' N C E S H E ETS l l 1 1 ( \ l' I l' A I I / A l' I ( ) N A N I) I.IAItiI I I l l . .% 1 ) . . .. ... I , e r 31 199 0 1995 C A l' 1 T A 1.1 Z A T I O N ( . 1, . u . . n J . .1 J .. l l .) Customers' equity, llalance, beginnmg of year . $ 203 293 $ 237,782
- Net income!(loss) for the year l o.t i67 (34.489)
Unreah:ed holding gains on investments . 3.875 12.427 Total customers' equity . 217.235 215.720 Long term debt . . 2,403 410 2 174 162 Total c.apitalization . 2.620 645 2.589.882 C U lt It is N T I I A 11 I 1.1 T I E S ' A N 1) I) E l' li lt it li 1) C lt E 1) 1 TS Commercial paper notes . 195,121 195.121 Accounts payable . 44,761 79.182 l'ayable for power rurchases . 18,263 22.752 I ong term dtht due within one year . 64.335 38,313 Decommissioning accrual . 30.141 22,l99 47.825 42,052 Accrued interest . Customer deposits . 8.707 8.098 Acc rued salaries and compensated absences . 17.234 14.651 Re,ulatory deferrals to be recognized within one year . 4 531 55,400 Other 3.015 6.200 433.932 483,968 Total tunent habilities and deferred ciecits.. N O N C U lt It E N T 1.I A 15I 1 I T I E S A N 1) I) E l' E It it E 1) C It E 1) I TS Decommissioning accreal 401,091 40' ""4 Deferred compens7 tion benefits . 40,359 5 Enrichment facility decommissioning assessment . H.990 9.692 Regulatory deferrals for future revenue recognition . 155.523 108.620 Other 31.352 30 640 Total nontunent habihties and deferred credits . 637.315 586221 Total liabilities . I M71.24 8 1.070.1 N9 C O M M I T M E N TS A N 1) CONTINGENCIES ( N .. . . . is onJ i e, ) . l l l Total capitalizatmo and liabihties 5 3 691 893 5 3 tino 07 n, m uw.,ums ,. .. mon.ae...' pi d s j,,i.nio.,i u.an na, {ym . m ., ~ , , , s ,o s s .i n io n i ,,s nu ,
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C O N S O L I D A T E D , 5 FW;1' E M E N TS OF L N C O .M E F Y, r E .. .I c ol Dc. .. ,n t . c r r, 1 , i996 9 9 r, O l' E ll A T I N G lt E V E N U E S ( e li .. u . n d , of . loll Residential r.)
$ 219,604 $ 290,896 Commercial and industnal .
360,938 351.715 Street lighting and other.. 8,844 8,197 Rate stabihzation fund transfers.. 37,000 25,500 < Rate stabikzation fund deferrals.. (56,103) (62,412) Total operating revenues . 670,283 613.896 O lE It A T I N G EXPENSES Operationo Purchased power . 220.056 230,517 Production.. 3;,257 24.799 Transmission and distnbution . 30,020 29,769 Impairment of investment in CCPA No.1 project . 44,985 Administrative, general and other . 75,437 67,929 Maintenance . 33,937 30.667 Depreciation . 67,471 54,356 Decommissioning . 22,421 21,649 Amortization of regulatory asset plant . 33,624 30,317 Amortization of energy efficiency investment . 22.691 12,100 Total operating expenses . 542,914 547,088 Operating inceme . 127.369 66.808 O T il E IL INCOME
~
Interest income and other . 16,858 39,414 PERS surplus asset recogmtion . 14,169 0 Total other income . 31,027 39,414 income before interest charges . ~ 158,396 106.222 I N T E R E S T C il A It G E S - Interest on debt . 151,870 144,825 Allowance for borrowed funds used dunng constmotion . (3,541) (4,114) Total interest charges . I48,329 I40,711 NET I N C O M E ,/ ( L O S S ) . $ 10 067 $ (34 489)
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C O N.S O L I D A T E D \ STXI'EME N TS O F C A S H F LOW 1 i Y,r E .. 1, J D cre...l.e, 3i i99o i995 CASil l' I. O W S l'It O M ( 1. o u . . .. .l . ..f 1.11 ..) O 12 E It A T I N G ACTIVITIES S 127,369 $ 66,808 Operating inc ome . Adjustments to reconcile operating income to net cash provided by operating activities: 67,471 54,356 Depreciation . Amortization of regulatory assets . 78,736 64,066 Amortization of advance capacity 17,586 18,569 Energy bank repayments. (8.985) (1,160) 19,103 36.912 Net deferral of rever.ucs to rate stahibzation fund.. Impairment of investment in CCI A No. I project . 44,985 Changes in operating assets and liabihties. (827) (21,715) Accounts receivable . Accounts payable and other accruals . (19,704) (13,688) 12,242 (18,454) O ther .. Net cash provided by operating activities.. 292,991 230,679 CASil FIOWS l'1L O M IN V ESTI N G ACTIVITIES (232,223) (235,583) Purchases of investments . 155,501 299,129 Procetds from investments . 58,192 50.690 Interest incomt on investments . Net cash provided by/(used in) investing activities . (18,530) I14,236 CASil F LOWS F it O M C A I* I T A L FI N A N CI N G ACTIVITIES Construction expenditures.. (229,992) (231,536) Energy ef fiuent y program expend'tures . (29,179) (46,289) 83,584 313,023 Net p oteeds from bond issues. (38,763) (34,873) Repayment and refundmg of bonds. Interest on long term debt . (147.011) (127,832) Interest on commercial paper . (4,333) (5,204) 2,976 2,824 Proceeds imm sale of assets . Other 3,955 _. 4.587 Net cash used in capital financing activities.. (358,763) (125.300) CASII F LOWS FILOM N O N C A l*ITA L FI N A N CI N G ACTIVITIES Interest paid on commercial paper . (2.611) (3.136) Net cash t, sed m noncapital hnancin; activities . (2.01I) (3,1361
' Net increase /(decrease) in cash and cash equivalents. . .... ....... .
. . . . . . . . . . .. (86,913) 216,4B
- Cash and cash equivalcats at the beginning of the year . .. . . . . . . . . . . . .
436,535 220.056 e Cash and cash equivalents at the end of the year .. . ... . . . . . . . . . . . . . . . . . $ 349 622 $ 4in 535 l The auompanyma urs are as marcal part of tbnr fnanual uatra.c.iti ui,uusniuu~anwiuinniiuuan, _ _ _ _ _ - . , yc r {3 , 1
NOTES TO CO N S O LI DAT E D " F 1 'N~ A N C l A L STAT E M E N TS ' S NOTE 1. O lt G A N I Z A T I O N Organt:ation an) Exonption from lntome and Propofy Taxn The Sacramento Municipal Unhty Distnct (District I was form under the State of Cahfornia Municipal Utihty Distnct Act (Act). The Act confers upon the Distnct the rights and powers and charges for commodiues or services furnished, to incur indebtedness and issue bonds or other obligations and, unde cumstances, to levy and collrt ad valorem property taxes The District's power to levy property taxes is restricted by the Cahforni Consutution, Art de XIll A, which places hmits on the taxing power of all Cahfornia pubhc agencies. The District is e payment of federal and state income taxes and real and personal property taxes. NOTE li . S U M M A IL Y O l' S I G N I I' I C A N T ACCO U N TI N G P O I. l C I 10 S Atctbod o.f AccomumJ The accounting records of the District are mamtained in accordance with generally accep , for propnetary funds as presenhed by the Governmental Accounung Standards lloard (CASil) and, where not m conthct pror,ouncements, accounting principles prescobed by the financial Accounting Standards lloard. These hnancial statements were prepared in wnformity with generally accepted acwunting Miples and contam management's best esumates when no better mation was available. The District's accounting records generally follow the Undorm System of Accou .ts for Pubhc Unhties and Licensees prescr. bed by the Federal Energy Regelatory Commission (FERC). The Fmancial Reportmg Entay As required by generally accepted accounting principles, these co wolidated hnancial sta indude the District and its component umts. Ahhough the component umts are legally separite from the Distnct they a blended mto and reported as if they were part of the Distnct. because of the extent of their operational or hn with the District. All signihcant inter-component transactions have been ehminated in const lidation. Compound Unds The component units mdude the Central Valley Fmancing Authonty (CVFA), th Sacramento Munia Distnct Financing Authority (SMUDFA), the Sacramenio rocci wrion Authonty (SCA), and the Sacramento Power The pnmary purpose of the wmponent units is to hnance, wnstruct, own and operate electric unhty plants that wd the Datnct The Distnct's lloard of Directors (lloard) compnse the commissions that govern the respective mmpone tiens, Separate componem umt hnancial statements may be obtained from the District's Accounung Department. Eintric UthyIbnt The District provides for depreciation on the historical cost of Plant lo Service on a straight.hne, service-basis. The average annual composite depreciauon rates for the years ended December 31,1996, and 1995 were 3 3.79 percent, respectively The cost of replacement property units are capitahzed. R:prar and maintenance costs are char cApense. Then the District ret res portions of its Electric Utihty Plant, retirements are rewrded against Accumulated De and the retired portion of Electric Unhty Plant is removel from Plant in Service. The costs of removal and the relate if any, are (harged or credited as appropnate to Accumulatei Depreciation Investmmt m lomt Ikm Almdes investments in Jomt powers agencies m whic h the Distnct does not have a controlhng in under the equity method of accounung. Prior to plant dosure (see Note 9), the Distnct recorded its share of Cen No 1 (CCPA No.1) operaimns and maintenance expense, mduse e of amoruzation, deprecianon and decommis expense Subsequent to piu chnure. the District retords its share of thwure and decommissionmg wsts as a redumon to the d ing habihty. The Distnct recordst ns share of he Transmission Agency of Northem Cahtomia (TANC)) debt service cost maintenance expense, indusive of depreuation as whechng expenses which are induded m Transmission and Dntnbuuon Operan fash an) Ge Eamvalnus Cash equivalents indude all debt msimments purchased with an onginal matunty of three months all investments in the I ocal Agency Investment Fund (LAIF), Vnta Fund and vanous money market mutual funds. Inentmentt All of the Dntnct's investments have been dassified as avadable for-sale and are reported at fair value. Unreah:c hold ng gains and losses are reported as a separate part of Customers' Equay Reah:ed gains and losses are rewgmzed i penod in which the individual sewnues are sold Premiums and dscounts on investments are amoruzed usmg the ellective interest method over the term of the respecove secunties. . Runcahin The Distnct rewynizes an estimate of uncollectible acwants for its eletinc sernce and tustomer loans receivables based upon its hntoncal experience with collections. At December 31,19% and 1995, the Distnct ictorded an
- Allh ante for Doubtful Accounts of $2.6 mdhon and $3.1 mdhon, respectively related to its receivables ham its wstomers for electnc enr' other servicet At December 31,1996 and 1995, the Distnct also rewided an Allowarxe for Doubtful A< wunts for its receiv-ables related to energy efhciency mnservation loans of $5.5 mdhon and $4 0 nuthon, respecovely.
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1; ", UnklkJ Rennun The Distnct records an estimate for unhdled revenues earned f rom the dates the customers were last bdled to the end of the month. The accrual at December 31,1996 and 19%, for unbdled revenues was $391 milhon and 532 A milhon. respectively PERS Prepaid Employrr Contnbutions in 1995, the District estabbshed the Caldornia Pubhc Employees' Retirement System (PERS) Prepaid Employer Contnbuuons account to reflect the account balance of funds that had been over contnbuted by the Distnct in previous years to PERS. on behalf of the Distnct's employees and retirees. CompcmatJ Absenas The D strict acomes vacanon leave and compensatorv ome earned as habdities when the benefits are earned by the employees. The Distnct does not record sick leave or other leave as a habihty unal such time as it is taken by the employee, since there are no cash payments for uck or other leave made when employees terminate or retire. The total estimated hability for vacation and other compensated absences at December 31,1996 and 1995, was $15 2 nulhon and $135 mdhon, respectively. Regulatory Dcferrah. The Board has the authority to establish the level of rates charged for all Distnct services Certain expenses and credits, normally retlected in the Consohdated Statements of income as mcurred, are recognized when included in rates and recovered from, or refunded to customers PrrLmmary Propt Studies. All expenditures for preliminary :,urveys, plans, investigations, hcenses, etc., for the purpose of deter. mining the feasibihty of utihty projects under contemplation are capitalized untd such time as a decision is made to either commence conc s non of the utitty project under consideration or to discononue any future work related to the prehminary project. Prehn..aaiy projects that do not result in construction of a utihty project are wntten of f in the year in which the deter-mmation is made. Prehminary progets that result m construction are transferred to Construction Work in Progress in the year in which the determination to construct the utility project is made. (InamorterJ Det hsuame Costs Costs incurred in connection with the issuance of debt obhgations, principally underwriters' fees, direct legal fees mJ accounting fees are recorded as Unamortized Debt issumce Costs and are amortized over the terms of the related obligat;ons usmg the bonds outstanding method Premiums and Discounts on Ibn.h The premitms and discoums on bonds issued are amortized over the hves of the bonds using the bonds outstanding method. GainsLsses on Ibnd Refundmp Gains and losses resulung from bond refundmgs are included in long Term Debt and amoro:ed as a part olinterest Expense, over the shorter of the hfe of the refunded debt or the new debt using the bonds outstandmg method Albmanafor Funds lleJ During Comincton The Distnct capuahres, as an addinonal cost of Construction Work In Progress. an allowance for funds used during construcuon ( AfuDC), which represents the cost of borrowed funds used for such purposes and a return on equity funds when so used ALUDC is a non-cash item and is capitah:ed and depreciated along with the related fixed asset and reflected in rates for future recovery. The amount capitah cd is detemiined by a famiuta prestnbed by I ERC. The total AFUDC for the years ended December 31,1996 and 1995, was approximately 6 8 percent and 6 9 pen.ent. respecovely, of eligible Construction Woil in Progress. Imprana Pm/ rams The Distnct and its component unas record I abihues br unpaid claims at their present value when they are probable in occurrence and the amount can be reasonably estirr.ated. The Distnct records a habihty for unpaid r.laims associated with generd and auto liabihty, ba ed upon an estimate derived by ti;e District's claims administrator, which compnses the present value of the claims outstanding, and includes an ammmt for claims mcurred but not reponed based upon the District's expenence, kss the amount of claims and settlements paid The habihty for workers' compensanon is an actuanal valuation mainly based on the Distnct's histoncal experience and industry expenence from the Workers' Compensation losurance Rating Bureau of Cahfornia for outstandmg and incurred but not reported workers' compensation daims. Grants The Distnct has received monies from federally assisted grant programs for its advanced and renewable technologies and electnc vehide programs The District has also received monies from federally asshted grant programs as paroal reimbursements
,~
Ior(osts it has incuned as a result of stonn damages These programs may be subject to hnancial and comphance audits, such as the Smgle Audit, pursuant to regulatory requirements. The amount, if any, of expenditures which may be disallowcd by the granong agencies cannot be determined at this ome, ahhough the Distnct expects such amounts to be immatenal. The District records
) expenditure dnven grants as a reducuan in Construction Work In Progress when the funds are retened, pursuant to IERC uuide-hnes for the years ended December 31,1996 and 1995, the Distnct received expenditure-dnven grants of $2 8 milhon and $2 5 mdhon, respecovely, and pass through grants of $0.5 mdhon and $o 7 rmthon, respectively Redamfscatwm Certa n amounts in the 1995 consohdated hnancial statements have been redasuhed m order to conform with the 1996 presentahon.
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NOTE s. D 1 It IE G U I. A T I O N OF TII E U T I L I 'I' Y I N D U S T ILY A sembly fintric Bil, iwo. In September 1996, the Governor signed Assembly thll 1890 (All 1890), which placed into law certam rul s for a broad-based restructunna of Cahfornia's electric utihty industry in order to create and develop a compeutive pencration market for electricity. In this new market, generahon will be competitive, but transmission and distnbuuon wdl u)ntinue to be reguiated Although AB 1890 applies pnmarily to investor-owned utihties (IOUst because customer-owned unhues are not subico to the jurisdicoon of the Cahfornia Pubhc Unhoes Commission tCPUC), it strongly encourages customer-owned utihties to partnipate in the competiuve framework of the Cahforma electriaty market and contams certam other provisions relating to their participation. AB 1890 requires customer-owned utihres selbng electncity to the retad customers of another utihty permit direct access to its retad customers. In 1995, the CPUC issued an order requiring lOUs to implement direu auess for their customers begmning in 1998, with all .- consumers narticipatirg by 2003. The order which was incorpoiated as part of the provisions of AB 1890, also called for the creation of the Power Exchange (PX), responsible for managing the dispatch of IOU utility generation. and for the creation of the Indepenc'ent System Operator (ISO), responsible for managing the transmission gnd in Cahfornia. AB 1890 recognized that as part of movmg to a competitive electnc market, unlities would mcur transition costs. These costs are primarily comprised of generation-related assets and obhgations, includmg power purchase contracts that would essentially become uneconomic in a espehuve market and employec related transioon costs. AB 1890 further provided for the recovery of these tran. sition costs through the implementation of an auelerated non bypassable competiuve transition charge (LTC), subjeu to certain restrictions. For IOUs, the Cl C wd! be levied against all customers based upon the amount of eleuricity each customer purchases and is non-bypasable m that, any customer who engages in direct transacoons for the purchase of electricity from a third party, must pay the CTC to the uuhty providmg electriaty distnbuuon m the customer's servae terntory. AB 1890 requires IOUs and customer owned unhties to collect and spend certain amounts between January I,1998, and December 31,2001, on certam publu goods programs Speutic *,pu of pubhc goods programs include er Egy ethaency and conservation, pubhc research and development, renewable resou rces and low income assistance programs. The pubhc goods charges imposed on customers to fund these program < wdl be a non-bypassable element of the local distnbuuon services and wdl be (ollccted on the basis of elecincity usage. PotentalflJetts of Restnatunny The District is actively participa mg in the restructuring ef fort of the Cahfornia uuhty industry to protect its interests as they may appear. The effects of electra utdity industry restructuring on the 1)istnct and other utdit es are uncertain. However, some potential ef fects include: (a) loss of customers partaularly large mdustrial and u>mmeraal customers; (b) increastd costs to remainmg cus*omers and, (c) decreased revenues Other potential ef fects may include: (a) a net gain of customers, (b) lower costs to certain existing cusu>mers. (c) more ef huent use of resources, and (d) increased revenues. FERC Open Aurss - Order No m in Apol 1906, I ERC issued Order No. 888 which required unhties subiect to its jurisdiction, to have in place "open access" transmission taniis to allow customers to uuhze unused transmission capauty at those tanils. Although. the Distnct is not subject to I ERC junsdauon except under hmited arcumstances, f ERC Order No. 888 may have an aFeu on the terms under which the District sells and purchases transmission services m the future. He hnancialimpact of FERC Order No 888 is uncerta n. Neosed Sale of fcloalber Atarketmg AJmhmtratens The federal government has proposed the sale of some of the federal power marketing admimstrations, indudmg tbc Western Area Power Admmistranon (Western), to their customers. The Distrki has a (ontractual entitlement to 460 megawatts (MW) from Western, which is approximately 20 percent of the Distnct's power resource portfoho of total long-term, hrm purchased power The District has been the largest cusu,mer of power generated by the Central
%Iley Proiett for 40 years Under the Distnct's contrau, as amended, the Distna is enutled to receive power at cost based rates through the year 2014. Although the Distria has an excellent claim to preserving existmg contractual rights, rates o>uld inucase
- as a result of povatization. The Distna u>uld incur annual costs of between $35 0 milhon and $50 o mdhon if the Distrio had to replace Western power with new power sources and sach costs would have to be rea>vered from the Distnas customers Ior this reason. and the possible negative impact the sale could have on the local economy and h cal air quahty problems by moeasing dependence on fossd fuels. the District has taken a posioon m opposition to a sale of Western, unic>s it is sok! to the <.ustomers at a su m. m . uow im mu o r os r ax i g))
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I,' . pnce reflecting the net present value of the required mterest and pnncipal payments on the Central %Iley Project debt allocated to the electric portion. The posuble sale of Western wdl be monitored closely by the Distnct to ensus its concerns are considered as part of any proposed legislation alfectmg Western. The Distnct is unable to predict the final outcome and impact on its financial position or resuks of operations from the sales of power marketing administrations Prnm>ing Mumoral Values Nsinns Strategy February 1997, the Board adopted the " Preserving Municipal Values Business Strategy" which is designed to balance the competing goals of compeutive rates and providing municipal services that District customers value.The busmess strategy was dehned by the set of pohcies that were adopted by the Board The policies include taking advan-tage OI low cost market surpluses of electric power; maintainmg the competitiveness of District owned generation, freezmg rates at current levels through the transition period; fundmg pubhc goods charges at a level of at least 3 7 percent of 1994 revenues;
., expensing public goods charges in the period incurred, offering customers the abiiity to support products and programs that improve the environment, accelerating the repayment of outstanding debt to mmimize dcht service payments by the end of the transition period, insututing a competiuve transition charge for all customers, reducing discretionary expenditures, and allowing an early phase-in of direct access for up to 100 MW of customer load.
NOTE 4, IL E G U L A T o ltY ITEMS Based on regulatory actions taken by the Board, the Distnct has recorded the following regulatory assets which wdl be included in the rate making process and recovered in future periods. DrferrcJ Ninlear Plant Costt The Dntrict has estabbshed a regulatory asset for the unrecovered debt-financed portion of abandoned nuclear plant costs (see Note i O for rate making purposet As of December 31,1996 and 1995, the regulatory asset was $293.6 mdlion and $323 o milhon, respectively, and will be amortized and collected in rates through the year 2006. Decommissionmg The District has estabbshed a regulatory asset for the unfunded poruon of the decommisuoning habihty which is to be collected in rates and through interest earnmgs on the Decommissioning Trust Fund through the year 200R As of December 31, 1996 and 1995, the decommissionmg regulatory asset was $296.7 mdlion and $308 6 mdhon. respectively. The site restoration h-abihty is to be (ollectcJ in rates commencing in the year 2009. Energy E#iorncy inentment The District defers, as a regulatory asset, cenain eneigy ef hciency investment expenditures As of December 31,1996 and 1995, the energy eihciency investment was $170.3 mdhon and $162.2 mdhon, respectively. The energy efhciency invest-ment is amortized and collected in rates over the expected bencht period of the mvestment, up to a maximum penod of hf teen years. Enruhwnt Faohty Dewmmisuomng Assnsment The District has estabhshed a regulatory asset for the decontaminanon and decommis-sioning of federal nuclear fuel ennchment facihties as a result of the Energy Policy Act of 1992. As of December 31,1996 and 1995, the regulatory asset was $119 milhon and $12.5 mdlion, respectively, and is being amortized based on cash payments made and collected in rates through the year 2008 TANC Operahons Costs The District defers as a regulatory asset, the difference between its cash payments made to TANC and its share of TANC's costs of operations. This regulatory asset Ch he amortized when tie District's cash payments made to TANC exceed the District's share of TANC's costs of operations. As of December 31, i996 and 1995, the TANC regulatory asset was
$6.7 milhon and $6 6 mdhon, respectively.
Impairment ofInentment in CCPA No s Proirci In 1995, the District recognized an impairment m its investment m CCPA No. l (see Note 9). The District imanced a portion of its investment in CCPA No I with tax-exempt bonds. The debt service associated with the bonds has been included in the District's rates and is being recovered over anc hfe of the bonds in 1995, the Dntrict , recorded as a regulatory asset $79 6 mdlion, which was comprised of $75 6 milhon reflecting the Districn net investment in the CCPA Nc I project anc $4.0 million for the District's share of the estimated costs .o decommission the CCPA No I power plant and steam field (set Note 9). In 1996, the CCPA No.1 Commission mcreased its habde for decomnussmnmg and lay-up { ; costs to approximately $15.0 mdlion As a result, the Distnct increased its habdity and the related regulatory esset by $6 o mil-hoa, to recognize District management's best esuman of its share of the alumate cost for CCPA No 1 decommissionmg and lay;up The Distnct is amortizing the regulatory asset over the remaming hfe of the outstandmg bonds. g1 w wo e,unwnm unon ..u.mi w1
f. As of 3ecember 31,1996 and 1995, the CCPA No. I regulatory asset was $79.2 million and $79 6 milhon, respectively. The District's total regulatory costs for future recovery are presented below: D ,..,mI,,, 3i. i99o i994 (ilum..ml. of .lolla .) Regulatory Costs for Future Recovery: Deferred nuclear plant costs . $ 293,627 $ 322,982 Decommissioning . 296,694 308,558 Energy elficiency investment . 170,294 162,222 Enrichment facility decommissioning assessment . 11.874 12,516 TANC operations costs . 6,668 6,640 - Impairment of investment in CCPA No. I project . 79,181 79.583 i I Total regulatory costs . 858,338 892,501 ' Less: regulatory costs to be recovered within one year . (85,177) (83,986) Total regulatory costs for future recovery . $ 773 161 i 808 515 llased on regulatory actions taken by the Ibard, the District has recorded the following regulatory habihnes which were deferred as part of the rate-making process, and will be recognized as revenues m future periods. Po~r Supply Cost Rate llalancing Accounts The lloard has estabbshed a rate making balancing account to remove the ellect on the results of operations of iluctuations in net power supply costs (purchased and interchanged power, fuel and steam supply costs, oilset by surplus pow er sales and steam revenues if available). Fluctuations from budgeted levels utilized in the rate-setting process are recorded in the Power Supply Cost Rate (PSCR) balancing account, and will be reflected in future rates. Ratt StaMeation Fund The District defers revenues and designates them to the Rate Stabihzation Fund which is used to deler the need for future rate increases. The funds in this account are recognized as revenues and the cash unrestricted upon direction from the lloard in 1996 and 1995, the Distnct recognized $37.0 milhon and $25.5 milhon, respectively, in revenues that had been deferred into the Rate Stabihzaoon Fund in prior years Additionally, for the years ended December 31,1996 and 1995, the floard deferred $47.2 million and $62.4 milhon, respectively, of over. recovered power supply cost evenues to the Rate Stabihzation Fund. For the year ended December 31,1996, the lloard deferred $8.9 million of base rate revenues to the Rate Stabil::ation Fund. PERS Surplus Account Dcferral The District is a member of PERS, and as such, contnbutes to the funds based upon a rate calculated by PERS to meet current and future retirement obhgations on behalf of the Distnct's employees and reirees (see Nc:e 12). Due to changes in actuarial assumptions and higher earnmgs on PERS assets, the District had a PERS surplus asset account balance as of December 31, 1995. In accordance with PERS policy, this surplus can be unhzed by the District to offset current employer ud employee contnbu. tions through June 30,1997, or can be left in the asset base and utihred in the actuanal calculations for future employer contnbution rates. In 1995, the Distric* estabbshed a regulatory deferral of $27.6 milhon, the estimated amount of revenue to be recognized for . retirement expenst ' at through June 30,1997. In 1996. the District offset $14.2 milhon of retirement expenses and is projecting to ofIset $4.5 mL w i 1997. The regulatory deferral was adjested in 1996 to recognize the remaining projected of fsets. Any unused surplus asset balance at June 30,1997, will be utihred in the actuarial calculations to determine future employer contnbution rates. The Distnct's total regulatory deferrals for future revenue recognition are presented below: D,.,mI.,, a1, i996 t99s (elum. ml. .I Joll.u. ) a Regulatory Deferrals For Future Revenue Recognition: Rate stabih-anon fund . $ 155,523 $ 136,420 PERS surplus account deferral . 27,600 ' 4.531 Total regulatory habilities . 160,054 164,020 Less regulatory credits to be recogmzed within one year. (4,531) (55,400) s Total regulatory deferrals for future revenue recognition . tos 620 L 15s 523 $ w w.mn,uuwumurnminomv '5 P"$ ___. _ __ _a NA2 -
I, , NOTE 5. C O M M E it C I A L P A P E lt N OT ES As of December 31,1996 and 1995, the total principal amount outstanding of the District's commercial paper notes (Notes) was
$195.1 million. The ef fective interest rate for the Notes outstanding during the years ended December 31,1996 and 1995, was approximately 3.66 percent and 4.18 percent, respectively, and the average term was 71 days and 49 days, respectively.
He District's authonty to iscue Notes is provided under two separate artides of the Act To date, the District has the short-tenn authonty to issue $275.0 milhon of Notes. At December 31,1996, $84 0 milhon of Notes outstanding were issued under the short-term authonty and $111.1 million of Notes outstanding were issued ur. der the bond authonty The District maintains a letter of credit in the amount of
$200 0 milhon to support the sale of these outstandmg Notes There has not been a term advance under the letter of creda agreement.
NOTE e, L O N G T E lt M D E 15 T The District's total long term debt is presented below: D e e e n 1. , r 31, i 9 9 e, i99s 01nou..n l. of .1 1 lor. ) Electric Revenue Bonds: Electric Resenue Bonds, 3.6o7.6%,1997 2024. $ 2.091.675 $ 2,046,035 Subordmated Electnc Revenue Bonds, 8 0 %,2010. 24.575 24.575 Total electric revenue bonds . 2,i16,250 2,07c 610 CVFA Cogeneration Protect Revenue Bonds, 5.0 % 6.2 %,1998-2020. 142,700 14 4700 CVFA Note Payable. 11 %,1997-2025. 4,988 5,000 SCA Cogeneration Project Revenue Bonds. 5.4 % 7.0 %, 1998 2021 163.600 163,600 SPA Cogeneration Project Revenue Bonds, 6 0 % 6.5 %, 1999-2022. 152,800 152,800 South Sutter Water Distnct,1990 Hydroelettric Revenue Bonds, 6.5 % 6.85 %,1997-2002. 9,790 11,090 Georgetown Divide Purchase Agreement, 3.75 %,1997-2000.. 354 435 US Windpos er Transmission Corporation Promissory Note, 10.0 %, 1997. 1,100 1,100 Grace Industnes Promissory Notes, 3.9 %, 1997-2014. 180 190 Total long-term debt outstanding . 2.591,762 2.547,525 Bond premiums /(discountsbnet . (31,148) (31,272) Gains /(losses) on bond refundings-net . (92,869) (103 778) Subtotal . 2,467,745 2,412,475 Less - amount due within one year . (64,335) (3H,313) Total long-term debt-noncurrent portion . $ 2 40a 410 S 2 174 162 The annual debt service payments for 1997 through 2001 are as follows: P r; n < ; p.1 In+,rc.. ToeoI ( el.ou. nJ. ..I .l..IIo r. ) l 1997 $ 64,335 $ 153,127 $ 217,462 1998 73,826 148,502 222,328 1999 80,14 H 145,224 225,372
, 2000 85,830 139,503 225,333
! 2001 89,901 135,326 225,227 I Totals . $ 394 040 $ 721 682 $ i lls 722 The principal portion of long term debt outstandmg thereaf ter, is $2.1 bilhon
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en i 1996 Eletinc RnmeIhmJs in Apol 19% the District issued $83.0 milhon in Electnc Revenue Ik>nds, IW6 SeriesJ. with interest rates ranging from 3 60 percent - 5 / 0 pertent and annual matunties through 2024 2 South Sutter W,ncr Disind Hy.lrorledric Rnienne Ikn.ls. f'he District is ohhgated to purchase power from the South Sutter Water District project under a contract that has the effect of transferring substantially 'il of the economic benefits of the project to the District and making the Distnc t hable for all debt service on hands issued by the South Sutter Water District to finance the construction cost of the project. The D: strict is obbgated for annual debt serv ce payments of approximately $2.0 milhon without regard to the level of operation of the project. Payments for debt service under this agreement are reported as purchased power expense. Component thulihmds The component units of the District have each issued bonds to finance the development, engineering and construction of the respective cogeneration projects. These bonds are non-recourse to the Distnct. Pnncipal and interest associ-ated with these bonds are paid solely from the component units' revenues and receipts denved in connection with the operation
- of the cogeneration projects. The ability of the component units to service the debt is dependent upon the siiccessful completion and operation of the respective cogeneration projects (see Note 10).
l h f a 6 SM R ANTI N1( 7 MUM ( tMI UillilY l efs f leN I
i , NOTE 7. CASil AND I N V E ST M E N TS A summary of the District's cash and investments is presented below: D e c e m i, c r 31, i996 i99s Ol.ou aml of.lullar.) Cash and Casn Equivalents: Cash $ 34,347 $ 17,9(>6
.- Vista fund . 21,508 14,628 Locai agency investment fund . 103,156 109.694 Corporate securities . t 0,856 Commercial paper.. 33,472 Certificates of deposit . 0 13,000 Money market mutual funds . 40,582 36,447 Guaranteed investment contracts . I16,557 233,944 "Iijtal cash and cash equivalents . 349,622 436.535 investments:
U.S. government secunties . 354,135 361,577 Corporate securities . 34,984 44 Commercial paper.. 24,398 15,000 Certificates of deposit . 38.500 17,000 Bankers' acceptances . 9,774 0 Total investments , 461,791 393.621 Total cash cash equivalents and investments. $ sig $ aan is6 Total Cash, Cash Equivalents and Investments Revenue bond reserve, debt service and consouction funds. Revenue bond reserve fund . $ 123,628 $ 120,836 Debt service fund . 52,797 42,299 CVFA bond reserve and construction funds . 31,825 ?1,307 SCA bond reserve and construction funds . 55,944 142,806 SPA bond reserse and construction funds . 100,056 151,928 SMUDFA letter of credit. 2.924 -0 Total revet ue bond reserve, debt service and construction funds. 367,174 489,176 Nuclear decommissioning trust fund . i I 8,497 l 15,484 Designated for rate stabili::ation fund, 155,523 136.420 D: %: tated for deferred compensation benehts . 40,359 36,315 Designated for CCPA No.1. 12,542 11,411 Unrestricted funds . 117,318 41,350 Total cash, cash equivalents and investments.. $ sii 413 $ Hao 156
Cash deposits are held in institutions insured by the Federal Deposit Insurance Corporation and, es required by the District's bond resolutions, in a bank, savings and loan association or trust company of the United States (U.S ) or national banking association having
, capital stock, surplus and undivided earnings segregated of at least $ 10 0 milhon. Deposits to the extent possible are invested. In accor-dance with state laws and the District's bond resolutions, the District is authorized to invest in the following tvpes of instruments.
obhgations which are unconditionally guaranteed by the U.S. or its agencies or instrumentahues, direct and general obhgations of the State of Cahforr na or any kical district withm the State, bankers' acceptances, certificates of deposit, iepurchase agreements, reverse repurchase agreements; interest rate swap agreements; secunties lending agreements. c.nd corporate indebtedness, including w mu e unw um u nu n i .,siw i l - _ _ _ _ _ - _ _ _ _ _ _ _ _ . 4 \
commercial paper and medium term notes with a maximum tenn of hve years lovestments in corporate indebtedness must be rated "A l'or its equivalent for commercial paper, and "A"or equivalent for medium term notes by a nationally recognized rating agency. The component units' bond indentuies allow investing m various other securiues in addioon to the ones mennoned erlier. The Distnct may enter into securities lendmg agreements only with counterparties that have senior debt credit raung in the "A" category or better by either Standard & Poors Corporation or Moody's Investors Services, at the time the agreement is entered into. The District's cuaodial agent mamtains records showing the secunues are solely owned by the Distnct, or by one of its component units, where aopbcable. The District and its component umti deposits and investments are insured or collaterahzed wah secunnes held by the District or by its agent, in the District's name or in the name of one of us component units, where applicable. LAIF is a component . of the Pooled Money lovestment Account Portfoi o managed by the Treasurer for the State of Cahfornia. The Pooled Money invest. ment Account Portfoho balance at December 31,1996 was $28.3 billion of which LAIF compnsed $10.9 billion. The District and its component units' totalinvestment in LAlf at December 31,1996 was $103.2 million The Pooled Money Investment Account Portfoho mcludes approsimately 5.1 percent in certain derivative type products. These products which are in the form of structured notes and asset. backed securities, denvc tl.eir value from one or more indices or are dependent upon cash flows from receivable payments. IAIF comprised approximately 38 6 percent of the total balance in the Pooled Money Investment Account Portfobo, and as such, had approximately totahng $412.5 milhon in structured notes, and $144.5 milhon in asset bac ked securities IAIFs (and the District's) exposure to risk (credit. market or legal) is not currently available. Investments in l AIF and Vista funds are not insured or collaterah:ed However, due to the stringent investment policies of these funds, management considers the risk of loss of pnncipal to be mmote. NOTE s. F A l lt VA I.U E Oi e i N A N C I A I. I N S T It U M E N TS The following methods and assumptions were used to esumate the f air value of each class of financial instruments for which it is practicable to estimate the value: Inmtments The fair values of investments are based upon quoted market prices. Cash and Cash Equimlarts The carrying values approximate fair value because of the short matunty of the investments. Long-Term Debt The fair value of Long Term Debt. which includes the short-term poroon, was calculated by determining the net present value of future debt semce payments discounted at the Bond lluyers' 25-year Revenue Bond index, which was 5.96 peicent at December 31,1996 and 5.71 percent at December 31, tW5. A simdar fair value calculation was performed for the component units' Bonds except that an amount ranging from 0 33 percent to 0.50 percent was added to the liond Buyers' 25 year Revenue Bond Index to account for the spread at the date of bond issuance in companson to the index and the fact that the Bonds are non-recourse bonds to the District and have a rating of ~BBB . 9
.c
%M RAM NU 7 W.ANM 'H'M Ui H I TY l HVI Gus ~ T
The estimated fair value of the District's financial instruments and related unreahzed holding gains and losses are presented Lvlow: D .. nL,, 3i i 9 9 e, Unreahzed Amortized Holding Cost Fair Value GainJ( Loss _es_) (ii.onw nd, of dolle. ) Investments: U.S. government securities . $ 349,624 $ 354,135 $ 4,5 i i Corporate securities . 35,026 34,984 (42) Certificates of deposit . 38,503 38,500 (3) s !!ankers' acceptances . 9,916 9,774 ( I 4' , Commercial paper.. 24.847 24,398 (449) Total investments . $ 457 916 $ 461.791 $ 3 875 Cash and cash equivalents . $ 349,622 $ 349,622 # Long term debt . $ (2,467,745) $ (2,585,699) D ,c,.nI,er 3i i99s Unrea!,:ed Amortized Holding Cost Fair Value Gains (il.on.ond. of dollu.) Investments. U.S. government securities . $ 349.262 $ 361,577 $ 12,315 Corporate secunties . 44 44 Cernficates of deposit . 16,971 17,000 29 Commernal paperBankers' acceptances .. 14,917 15.000 83 Total investments . $ 381.194 $ 393 621 $ 12 427 Cash and cash equivalents . $ 436,535 $ 436,535 Long term debt . $ f 2,412,475) $ (2,627 989) . NOTE 9 I N V EST M E N T IN .I O I N T P O W' E IL S AGENCIES ) Central Cdfornia Puer Apncy & r. In 1982, the District, together with the hiodesto Irngation District (hilD) and the City of Santa Clara, formed CCPA No 1, a joint powers agency, for the purpose of panicipatmg in the exploration, development and production of electricity from geothermal resources. CCPA No. I constructed and was responsible for operating the Coldwater Creek Geothermal Power Plant (Plant), which originally was a 130 htW two-unit generating plant. CCPA No. I purchased the Coldwater Creek Steam Field (Steam Field) assets and assumed all of the Steam Field leases in hiarch 1992. The CCPA No. I Project was compnsed of the Plant and the Steam Field. The District was designated project manager for the operat on of both units, which were declared commercially operable in 1988. Each member participant of CCPA No. I to provided its own financing to pay for its share of CCPA No.1 Project costs. From commencement of operations, the Steam Field produced insufficient steam to operate the Pl;nt at its rated capaaty. In 1995
- the Distnct recognized an impairment in its investment in CCPA No 1 of $124.6 nulhon, due to the uncertainty of the steam supply and the inabihty of the Plant to produce power at an economically attractive cost to its members. The Distnct wrote of f its investment in CCPA No. I in December 1995, which resuhed in the recogninon of a net impairment loss of $45 0 milhon related J
to the Distnct's investment in the Steam Field, and the creaoon of a regulatory asset for future recovery of $79 6 milhon related to its investment in the Plant (see Note 4). In June 1996, the CCPA No I Commission unanimously decided to cease operations of the Plant and place it in a lav-up condition pending a possible sale or dismantlement. At that time, the Distnct added $6 0 milhon to the regulatory cost for future recovery to u>ver the Distncts share of the estimated increase in costs to decommission the Plant w mi un , mu~,. ...u u no n ni n.o i {'yA
4 and th- Steam field. Prior to the shutdown of CCPA No. I's operations, the District recognized its share of operating costs of CCPA No I as purchased power expenses. For the years ended December 31,1996 and 1995, the Distnct recorded purchased power costs of $5.7 mdhon and $11.2 milhon, respectively, for its 50 percent share of the electricity generated by CCPA No.1. Since the shutdown of CCPA No.I's operations, the District records its share of closure costs as a reduction in the decommissioning habihty. Summary hnancial informanon for CCPA No. I as of December 31,1996 and 1995, is presenteo below: D . . e m i. c r 31, 199o 99s
,(alum..ml. of lollau )
Total awets $ t 4 061 $ 22 224
/
Total habihties . 14,063
$ $ 18,707 Total members' equity .
-o- 3.517 Total liabihties and members' equity. $ t 4 063 $ 22 224 Net income /t loss) for the year . U8
$ $ (208 919)
Transmission Scwy qf Nordm G#omia The District and fourteen other Cahfornia municipal unhties are members of TANC, a joint powers agency TANC along with nearly all Cahfornia unhties own and operate the Cahforma Oregon Transmission Protect <COTPt a 500 kilo-volt (LV) transmission hne between central Cahfornia and southem Oregon which faahtates power exchanges with the Paci6c Northwest. Under an Intenm Panicipanon Agreement, TANCs ownership of COTP transfer capabihty is 1,269 AtW or 79.3 percent of the total Ip)0 h1W rated transmission capaci:y. TANCs cost-sharing responsibihty for COTP operations and maintenance costs range from 66.7 pment to 723 percent TANCs cost-shanng percentage responsihihty for COTP construction-related costs is 84.5 percent Total COTP clectric utihty plant is approximately $427.5 mill on The District is ohhgated to pay approximately 27.1 percent of TANCs COTP hnanc-ing and operations costs in exchange for ownen, hip of 339 h1W of TANCs 1,269 A1W trand:r capabihty. Addioonally, TANC receives 300 htW of hnn %direcuonal transmission over Pacific Gas and Elecinc Company's (PCAEs) system between PC4Es Tesla and hiidway substations The Distnct has a 46 htW share of the 300 htW transnussion service with a cost sharing percentage of 15.3 percent as of December 31,1996. In July and August 1996, there were some signihcant power disturbances that occurred which challenged the conh-dence in the operanonal level of the COTP and the related interties that compnse the electric systems of the Paabc Northwest and Cahfornia As a result, the Western Systems Coordinaang Counal executive committee agreed on a temporary basis, to redehne the oper-ating hmits of the internes that compnse the Paahc Nonhwest region, which includes the COTP. The interim operating hmit for COTP is 1,067 htW. This intenm hmit is temporary pendmg the idenohcanon, evaluanon and resolution of thevroblems affecting the interties. TANC is actively mvolved in this matter and mtends to take all actions necessary to retum the operanona! hmit of COTP to its onginal
! #)0 hlW capacity and vigorously oppose any action that would permanently change its operational hmit to the 'ower hmit. For the years ended December 31,1996 and 1995, the Distnct recorded transmission whcchng costs of $11.5 milhon and $I i .4 milhon. respectively.
Summary hnancialinformation for TANC as of December 31,1996 and 1995, is presented below: De . .- m b .- r 31 i99o 99a (ilm.uomi. otilollar. ) Total assets $ 494 158 $ Soa osa Total habitines .
$ 493.742 $ 502,707 Total members' eqmty .
416 347 , Total habdines and members' equity . $ 494 i5s $ soa 054 Net income ,or the year.. $ at $ u : The Diarict's net investment in these ioint powers agenaes at December 31,1996 and 1995, was $2 3 milhon, and was com-pnsed su'ely of its investment in TANC. The Distnct's investment in TANC mcludes cosn. that were capitahzed during the construction of COTP which were not reimbursed by TANC. w u.mn , unw au u nu n nimi. , wa p 1
l 4s a NOTE 10. C O M l' O N E N T U N I TS CVFA Canon Ice-Gor Projat CVFA was formed by a. joint powers agreement between the Distnct and the Sacramento Regional County San ration District. CVFA constructed the Caison ke-Gen project, a 99 MW cogeneration f acility, which became commercially operable in October 1995 and was financed pnmarily by CVFA non-recourse revenue bonds. SCA Procter & Gamble Proint. SMUDFA was formed by a joint powers agreement between the District and MID. SCA was formed by the execution of two separate Joint powers agreements between the District and SMUDFA SCA is currently constructing the j Procter & Gamble project, a i 17 MW natural gas bred cogeneration facihty. At December 31,1996 the Procter sand Gamble project was approximately 94 percent complete and is projected to be operational m early 1997 The Procter & Camble project is being financed primanly through SCA non-recourse revenue bonds. which were issued in 1995. SPA GmpMI Soup Pwpt SPA was formed by the execonon of two separate joint powers agreements between the Distnct and
- SMUDFA. SPA is currently constmcting a 146 MT natural gas hred cogeneration power plant adjacent to a Campbell Soup facihty.
At December 31,1996, the Campbell Soup project was approximately 55 percent complete and is projected to be operational in early 1998. The Campbell Soup project is bemg hnanced primanly through SPA non-recourse revenue bonds, which were issued in 1995. NOTE I1. It A N C 1I O SECO N U C 1. E A Il P O W E It 12 1. A N T llatoy Rancho Seco is a 913 MW nuclear power plant which was placed in service in 1974 in June 1989, voters rejected a referendam permittmg continued operation of Rancho Seco by the District, and as a result, the District began the process of shutting down Rancho Seco and abandoned the plant as m operating nuclear generating facihty. Decommisuoning The District obtamed Nuclear Regulatory Commission (NRC) approval of its decommissionmg plan in 1995 and will be subject to contmuing regulation by the NRC unal the decommissioning of Rancho Seco is complete. Under the approved decommission-ing plan. the District will proceed with the decommissioning of Rancho Seco in tw o phases a storage phase follawed by a decontamina. tion phase. Dunng the storage phase, the plant will be mamtained to the extent necessary to protect the fuel and other radioactive materials. At the end of the storage phase in 2008, the plant wdl be decontaminated by removing all radioactive materials and radioactive plant components to off-site locatnns yet to be determined by tederal and state authonties. Decontaminanon of the plant and its site wdl be completed when the remainmg detectable radioactivity has been reduced below the pre approved release criteria, at which time the Rancho Seco plant will be released from regulation by the NRC The nuclear fuel wdl be stored in dry camsters at a new on-site indepen-dent spent fuels storage facihty (ISFSI) unal it is removed by the U S. Department of Energy (DOE) at a date yet to be detemuned by DOE The ISFSI will remain under the regulanon of NRC unal such tima as the nuclear fuel is removed by the DOE Ranc ho Seco is one of the hrst large commercial nu< lear power plaats to be removed from service. Due to the substantial technical, regulatoiy and legal issues bemg faced in connection with the decommissioning, the District cannot predict with certainty how long various decommissioning actions wdl take nor the eventual cost of decomnussionmg. These fmancia! statements reflect the Distnct's current estimate of its obligation for the cost of decommission;ng. The District undertook a reevaluation of the decommissioning approach for Rancho Seco and determined that cost savings could be reahred by accelerating the schedule and commencing some decommissioning tasks m 1997 instead of 2008 as originally planned. The Board approved this incremental decommissioning project inJanuary 1997. The District will pursue incremental decommissioning as long as it is economical to do so. In 1996, the Distnct became aware of some problems with its vendor's efforts to hcense the dry fuel storage system, in addition to notinc,non by NRC of some problems with the vendor The problems have resulted in a minimum of a one year delay in the dry fuel storage system efforts related to decommissioning The staff has evaluated the expected savings from incremental decommissaning and determined that they pnmanly offset the expected cost increase as a result of the delay m the dry fuel storage system FnumialElJects. In November 1989, the Board approved the recovery of $66 f.9 mdhon of abandoned Rancho Seco costs through future rates to be charged to customen over a penod of seventeen years. The Board's rate action addressed $499.2 nulhon of Rancho Seco assets
' that had been wntten off and $162.7 mdhon of unfunded decommissioning habihty Several studies of the cost of decommissionma have been conducted since 1989, which have rmhed in adjustments to the decomnussioning habihty in addnion to adiustrnents for inflation. '
in 1995, the District updated the study of the cost to decommission Rancho Seco which resulted in an increase in the dewmnussionmg estimate of $88.2 milhon. At December 3 t,1996, the decommissioning habihty totaled $418 5 nulhon whah ncluded $42.9 nulho , .or
%M R 4%H N IE b Att IM H%t llill il s I ll5 l kis I
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. . La
4 4 minimum site restoration. The Distnct has been fundmg the decommissioning habihty at a rate of $15 5 milhon per year This amount will be increased to $ 16.5 milhon per year in 1997. The Distnct expects to review its annual contnbunon rate in 1997 to ensure it wdl be fully funded (with the exception of site restoration) by the commencement of the hnal decommissioning process m 2008, N O T 11 12. l' E N S I O N l' L A N S Dcfned iknt[d Pcmion PLnt The District contnbutes to PERS. an nt muluple-employer retirement system that acts as a common investment and admmistrative agent for participating state and > .d governmental entines in Cali fornia. The District's payroll for employees covered by PERS for the years ended December 31,1996 and 1995 was $125.7 mdlion and $122.2 million, - respectively. The Districts total payroll for the same penod was $132.2 mdhon and $129.7 million, respectively. All permanent District employees working more than twenty hours per week are chgible to partiopate in PERS. Benehts vest af ter hve f years of servac. Upon retiiement, partiupants are entitled to an annual retirement beneht, payable monthly for hfe, in an amount equal to a beneht factor times their highest average monthly salary over any 36 consecouve months of employment. The appbcable bencht factor is based on age at retirement and years of credited sernce, and ranges from 1.1 percent per year of credited service for retirement at age 50, to 2 4 percent per year of credited service for retirement at or after age 63. PERS also provides death and disabihty benefits to covered employees. Beneht provisions and all other requirements are estabbshed and governed by Cahfornia statute. The ' pension beneht obligation"is a standardized disclosure measure of the present value of pension benehts, adjusted for the effects of projected salary inacaso and step-rate benchts, estimated to be payable m the future as a result of employee seruce to date. The measure is intended to help readers of the hnancial statements assess, on a going-concern baus, the fundmg status of PERS, the progress made in accumulating sufhcient assets to pay benehts when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the fundmg method used to deter-mine contnbuticos to PERS. The pension beneht obh tation was computed as pait of an actuarial valuation nerformed as of June 30,1995 (the most recent actuarial valuation). The total pension beneht obhgation applaable to the Distnct is presented below;
.l o n . 30. 1995 (diouwnJ. of Jollu.)
Pension beneht obligation: Retirees and benchciaries currently receivmg benefits and terminated employees not yet receivmg benefits. $ 208,634 Current -mployees: Accumulated employee contribunons includmg allocated mvestment earnings . I12.476 Employer financed vested . 138.259 Employer financed non-vested. 4.538 Total pension beneht obhgation . 465,907 Less-Net assets available for benefits at cost (market value - $6l 3.3 milhon) . (576.977) Total overfunded pensmn beneht obhgation . $ (i il 070) PERS uses the Enuy Age Normal Actuanal Cost Method which is a projected bencht cost method. That is, it takes mto account those benehts that are expected to be earned m the future as well as those already accrued Accordmg to this cost method, the normal cost for an employee is the level amount which would fund the projected beneht if it were paid annually from date of employment untd retirement. PERS uses a modificanon of the Entry Age Normal Actuarial Cost Method in w hich the employer's ' total normal cost is expressed as a level percentage of payroll PERS also uses the lesel percentage of payroll method to amotore any unfunded actuarial habihties The signihtant actuanal assumptions used to compute the actuanally determsed contnbuoon requirement are the same as those used to compute the pension benefit obhgation as destnbed abose. The xtuanally assumed i annual mvestment return was 8.5 percent. The salary scale used assumed salary mcreases vaned by length of service, and the total increase in any future year included an assumed inflation rate of 4.5 percent. Theic were no changes m the xtuanal assumptmns used in the valuanon performed as of June 30,199 s Contequently. there were m additional costs resulting hom 1 changes in the actuarial assumpoons l 6%L k AMI Fild ) Ml WM ll M U l it l' r) I al% I ktE 'l s
The contnbution to PERS for the plan year ended June 30,1996, af $18.5 mdhon was made in accordance with actuarially Jetermmed requirements computed through the actuanal valuauon perfonned as of June 30,1995 The contnbution consisted of (a) $19.4 mdhon normal cost (15.6 pert.ent of current covered payroll) and (b) $0.9 mdlion amortization d the over funded actuarial habihty (4L7 per-cent of current covered payroli). The District contributed $10.0 million (8.1 percent of current covered payroth and employees con-tnbuted $8.5 milhon (6 9 percent of current covered payroll), of whrch $8 4 mdlion was paid by the Distnct on behalf of its employees. Trend information provides an indication of the progress made in accumi lating suthciert assets to pay benehts when due. Trend information for the past seven years related to the pension plan is presented below: Underfunded10verlunded) g Nei Assets as a Pension Bencht Obhganon Employ er Contnbunons Years Ended Percentage of Pension as a Percentage as a Percentage of lune 30, Benehts Obbganon of Covered Payroll Covered Pauoll 1989 99.4 1.7 12.7 1990 100.3 (l.2) I 1.4 1991 104.1 l15 0) 9.3 1992 103 4 ( 12,0) 10.2 1933 106.5 (23.0) H2 994 126.3 ( 89. 3 ) H.8 1995 124 4 (91.6) 8.1 Prior to 1989, the financial information presented in the table above was not avadable. System-wide ten year trend informaeon is not yet available through the PERS Annual Reports. Dcfmed Contnhution Plan. The District provides a cash deferred compensation plan pursuant to Internal Revenucc Code Section 401(L) [401(k) Plan] in which all of its chgeble full-ume or permantnt part time employees may participate. The 401ik) Plan is a (onuibu-tory plan in w hich the funds are pnmanly contnbuted by the District's employees and are held by a Trustee m trust for the employ-y ees upon reurement from District service and subsequently are not subject to the genera! claims of the District's creditors In 1995, the District committed to make annual contnbuuons to the Distnct's 401(k) Plan on behalf of some of its employees pursuant to a memorandum of understandir.g with one of its collective bargaining units District employees participating in the 401(k) Plan are considered vested once enrolled and are responsible for determin<ng how their funds are to be invested The District is responsible for ensunng comphance with Internal Revenue Code requirements concerning the 40nk) Plan and not for market variations in the 40U k) Plan value. Currendy, the Distnct does not match any contnbutions. However, commencing in 1999 pt aant to a collective bargainmg agreement the Distnct will match employee contributions on a dollar for dollar basis up to a specihed dollar hmit for the employees covered under the particular collective bargaining agreement who are parucipaung in the 40lt k) Plan All ongoing fees related to the 401(k) Plan are paid by the Distnct employees participating in ^- 401(k) Plan The 40ltk) F n is a governmen-tal plan and is currently not subject to discnmination testing or the requirements of the Employee Reurement mcome Secunty Act of 1974. The District employees participaung in the 40la ) Plan are allowed to coninbute up to 20 percent of the'r gross income not to exceed the annual dollar hmits rresenbed b" the Internal Revenue Code. Drferred Companaticii 8cnefit Plan The Distnct offers its employees a deferred compensation plan created la accordance with Internal Revenue Code Secuon 457 (457 Plan). Until paid or made avadable to the employee or other benehaary, all amoums of deferred compensation, .dl property and nghts purchased with those amounts, and all mcome attnbutable to those amounts,
. property or rights are subject to the claims of the District's bondholders and general creditors. Paruapants' nghts under the 457 Plan are equal to those of general creditors The lhsuict has the duty of reasonable care in the selection of iiwestment alte:na-tives, but neither the Distnct nor its directors or othcers have any habihty for losses under the 457 Plan Thc Distric t does not 1
match employee contributions nor make contribuuons on behall of its employees to the 457 Plan The deferred compensation habihty at December 31,1996 and 1995, was $40.4 mdhon and $36 3 mdhon, respecovely P m o . uu,* um u i n m om nm i
-- - m
s NOTE is. O T il E lt P O S T- E M P l.O Y M E N T IS E N E F I TS In addition to the employee pension benefits described in Note 12, the Districi provides post-employment health care benefits in accordance with District pohcy and negotiated agreements with employee representation groups to all employees who retire from the District on or af ter attaining age 50 with at least 5 years of service. Currently,881 retirees and survivmg spouses meet those chgibility requirements. The Distnct contributes the full cost of coverage for employees hired before January 1,1991, and a portion of the cost based on credited years of service for empicyees hired after January 1,1991. The District records post-employment health care benefit expenses on a pay.as you.go basis. During the years ended December 31,1996 and 1995, post-employment health care beneht expenditures were $2.4 milhon and $2 6 million, respectively. The District estimates that - the net present value of its post employment benefit obhgation is approximately $86 3 million at December 31,1996. NOTE 14. I N S U lt A N C E P IL O G IL A M S The District and its component units are exposed to various risks of loss related to torts, theft of and destruction to assets, errors 3 and omissions, and natural disasters In addition, the Distnct is exposed to risks of loss due to injuries to, and illnesses of, its emplovees. The Distnct and its component units purchase commercial insurance coverage to cover any daim in excess of spe-cific dollar thresholds, which range from $3.2 milhon to $1.0 milhon pcr daim, with additional excess insurance coverages for daims over $20 million for the componcat units and $100 milhon for the District As a result, the maximum nsk that the Distnct and its component units would be expesed to is hmited to $0 2 milhon to $1.0 mdhon per claim. There have been no signihcant reductions in insurance coverages as rompared to December 31,1995; and for the years ended December 31,1996 and 1995, the insurance pohaes in ef fect have adequately covered all settlements of the daims against the District and its component units. The daims habihty is recorded in Other Noncurrent Liabihties and Deferred Credits. The daims habihty at December 31,1996 and 1995 is presented below: i99o i99a (, lion.on.l. of .l..!Iu. ) Workers' compensation claims. $ 6,803 $ 5,348 General and auto daims.. 2,000 2,200 , Short and long-term disabihty daims . <00 500 Claims liabihty, end of year . $ 9 503 $ H.04 8 Changes in the daims liabihty balance during 1996 and 1995 were as follows; iuno i994 p in u.. uni. of .lolle. ) Claims liabihty, beginning of year . $ 8,048 $ 7,257 Add: Provisions for claims incurred m current and previous years. 6,498 4,017 Less: Payments on daims attributable to current and previous years . (5.043) (3.226) Claims habihty, a.d af year . $ 9 503 $ 8 048 N O TI' is. C O M M I T M E N TS PG4E Per Sak Acrement. The PC&E Power Die Agreement provides for the purchase by the District from PGat:, through , December 31,1999, of 500 MW of hrm capacity and associated energy. The Distna has given PG&E the required hve years' advance notice to reduce this commitment to zero in february 1997. PCsE is obligated to dehver capacity and energy purchased , f rom it by the District to the Rancho Seco switchyaid or nther pomts of interconnection b.:iween the Distnct and PCsE Ilased on ' the minimum amount of capacity the Distntt is reqaned to purchase under the PGgE Pou r Sale Agreement, the Distnct will pav PG5E approximately 57.5 mdhon in 1997, for capauty poor to the terminaoon of its commitment m lebruary 1997. Although the Distnct is not obhgated to take energy, should it deodt to, it would pay for an) energy received at rates speuhed in the contract.
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9 Senhun Calfornia i Ednon (EJnon) Pome Sale Apremrut The Distnct's Power Sale Agreement with Edison provides for year round capacity of 200 MW and additional capacity of 200 MW in certain months. Based on the minimum amount of capacity the Distnct is required to purchase under the Edison Power Sale Agreement. the Disuict wdl pay Edison $78.1 million for capacity over the remaining hfe of the agreemtnt. Additionally, the Distnct wdl pay for any energy received at rates specified in the contract. Paufc Pomer & Light Co (PP&L) Pomer Sale Aperment The Distnct has entered into a series of agreements with PP&L providing for the purchase by the District of 100 MW of firm power through 2015. The District has a minimum annual take-or pay commit-ment for this energy of approximately $5 6 milhon through the term of the agreement. Puhhc Utday Distnti No r ef Snohomish County (Snohomnh) Power Sa!r Acccmon The District has agiced to purchase up to 36 MW from a wood-fired togenerauon pli it being budt by Snohomish and Scott Paper Company. The Ihtrict provides Snohomish i energy dunng the winter months w ien Snohomish needs the energy, and in return the District can schedule up to 42 MW in the summer months when the Distnct needs the energy to meet its load requirements. Prices for capacity and energy are fixed, and the minimum annual capacity lactor is 60 percent. The District will pay Snohomish a mimmum of approxnnately $112.4 mdlion over the remaining hfe of the agreement. Westmi Area Pomer AJmimstraron Pomer Sale Aarmnent The Distnct has a long-term contract with Western that allows the District to pur-chase 361 MW of capacity and associated energy from the Central %Iley Proiect. The total nunimum obhgation under this contract is approximately $49.1 mdlion for capacity and energy, subject to rate changes The Distnct has the nght to reduce its energy obhgation with six months' advance notice and to reduce its capacity obhgation with eighteen months advance nonce. Calpine Corporation (Calpinr) Str.nn Saln Armnent The District has entered into a steam sales agreement with Calpine to purchase steam for the District's grothermal unit, SMUDGEOn l. The District's mimmum obhgati,n is for the purchase of the amount of steam necessary to run SMUDGEO#I at 39 MW The District has the nuht to terminate the contract upon 180 days notice, should Calpine f ail to dehver the amount of steam necessary to operate SMUI)Cl Ou t at 39 MW. Based on the terms of this contract, the District's minimem ohhgation is approximately $9.5 mdlion. Albrna Natural Gas and Paqla Gas Ensport Capacny Accewnt The Distnct has entered into a contract with Alberta Natural Gas and Pacihc Gas Transport to reserve capacay of 12.101 mdlion British Thermal Units (MMBtus) per day, over a 30 year period. on a new interstate natural gas pipehne from the Canadian border to the Califorma' Oregon border The District is obhgated to make capacity payments of approximately $1.8 million per year through 202 3. These capacity payments are reduced by sales of avail. able capacify to other agencies under this agreement. Transmntern Piprhnt Company Ensport Capauty Aperment The District has entered mro an agreement wah the Transwestern Pipehne Company for firm natural gas transport capacity of 10,000 MMBtus per day, on the San Juan lateral Expansion from New Mexico to the Arizona!Cahfornia border. The District is ohhgated to make payments of " proximately 50.6 milhon per year commencing in 1997 through February 2006. The Pipehne Purchase Ag crment Wah PG&E The District has entered mio an agreement wah PCsE to purchase an equny interest in PCsE's backbone gas transmission haes 300A, 3000 and 401. Under the agreement, which is contingent upon CPUC approval, the District will acquire 80.000 mdhon cubic feet (mcf) pcr day of firm gas transport capacay for $56.3 mdhon with a one-time option at closing, to acquire 20,000 mcf:' day of additional firm capacity for an additional $12.8 milhon. The purchase pnce includes the District's portion of any costs associated with the abandonment or removal of the pipelines but does not include normal monthly operations cnd maintenance and other costs For the first ten years of the agreement, the Distoct's use of the i pipehnes is hmited to supplymg natural gas m suppon f the District's electric utility operations. Any addamnal use, including supplying natural gas to any current or prospective PCsE gas system customer, may result in addnional compensation of hficen
.. cents per MMBtu, up to $10.0 mdlion bemn due to PCsE.
Er thbrop Aperment Wah PG&E The District entered into the Backstop Agreement with PCsE which would provide hrm backbone level service at a discounted rate, as an interim and wntmgency measure untd the closmg of the Pipehne Purchase Agreement with PCsE. The Backston Agreement provides the District wah an option to take up to 40,000 MMHtus/ day on each of PCsE's Lines 300A. 3008 and 401 for hfteen years. Unless superseded by the Pipehne Purchase Agreement wah PGsE, the Backstop Agreement may be extended by the Disinct for an addnional hv r years, for a total term of twenty years. Within 7 days after CPUC approval, the District must commit to a hrm quantity which would fix ns take or pay obhgation at a speuhed g)i a s., - m - - u i n m m i wu i
e 4 discount from the pubhsh-d tarif fs. The District is not obligated to make cny payments until it elects to take a minimum volume of natural gas The District anticipates the CPUC's approval m the Summer of 1997. The District's total purchased power, steam and gas purchases and transportation commitments for the years 1997 through 2001 are $96.9 milhon, $52 9 million, $45.6 million, $18.1 million and $18.3 milhon, respectively. CapitalExpenditures The District's budgeted capital expenditures (excluding AFUDC) for 1997 total $188.5 milhon. Approxi. mately $60.7 mdlion is for fuels development, $31.0 is for energy efliciency investments, $32.6 milhon is for transmission and distribution projects and the remaining $64.2 milhon is for other construction. Budgeted capital expenditures for component uruts for 1997 total $50.7 million. NOTE la CO N TI N C E N Cl ES / Environmental Atarters The District is one of many potentially responsible parties that has been named in a number of actions relating to environmental claims and'or complamts. Due to the nature of these claims, legal actions or complamts, the District is unable to predict the range of costs for resolution of these actions and intends to do all things necessary to defend its position. The Distnct does not beheve that the outcome of any of these environmenal actions wdl have a material adverse impact on the Distnct's fmancial position or results of operations Sacramento Porver incorporated Lnemt. In 1996, Sacramento Power Incorporated (Sacramento Power) filed a lawsuit agaih t the District seeking injunctive rehef to prevent the District f rom terminat'ng the Sutter Ethanol Cogeneration Project (SEPCO), and for damages due to the District's alleged breach of the project aweements. In the prehminary hearing in June 1996, the judge ruled that the Distnct was permitted to terminate the SEPCO project and draw on the letters of credit which the devel-oper had posted as a secunty deposit. In January 1997, the District and Sacramento Power reached a tentative confidential settle-ment, the outcome of which is awaiting final approval of all parties. The final settlement is anticipated by the middle of 1997. U S Burran of Reclamation Water Servia Contract Ibihng Dispute. The District entered into a 40 year water service contract with the U S. Bureau of Reclamation (Bureau), which expires in 2012, for the delivery of up to 75.000 acre feet of water per year to meet the Distnct's needs at Rancho Seco. This amount includes 60,000 acre icer of municipal and industrial (Mal) water from the Central Valley Project (CVPt Over time, Bureau revenues have been insuf ficient to cover actual CVP operations and mamtenance (OsM) costs, contractor payments have been insufficient to cover amortization of their respective shares of CVP capital costs and, in the case of Msl contractors, have been insufficient to cover interest on unpaid capital. Although the District's contrac t contains a specific rate methodology, the Bureau now maintains that the Distnct and other Mal contractors are rtmning substantial OsM deficits which, by the Bureau's delimtion, includes as OsM costs. both unpaid interest on capital and interest on the OsM deficit. The Bureau claims interest charges on these unpaid capital interest and OsM deficits. As a result, the Bureau claims the District owes approximately $8 0 mdhon. Management believes the District comphed fully with the terms and conditions of its contract, which t ontains specific rate methodology for recovery of OsM costs, and intends to vigorously oppose any action by the Bureau to recover its purported bdhng dehcit from the Distnct. Other Atatters In the normal operation of business, the Distnct is party to various claims, legal actions and complaints. Management and the District's legal counsel are of the opinion that there are no other material loss contingencies that would have a material adverse impact on the hnancial position of the District, except as disclosed within the footnotes to these hnancial statements. 4M lt AMI N l t e MUNM MW l j f H f f Y { 3fN l RK ~T s ,
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