ML20150B342

City Public Svc 1986-87 Annual Rept - Fy Ended 870131

ML20150B342
Person / Time
Site:	South Texas
Issue date:	12/31/1987
From:	Biggs G SAN ANTONIO CITY PUBLIC SERVICE BOARD
To:
Shared Package
ML20150B316	List: ML20150B321 ML20150B337 ML20150B342 ST-HL-AE-2661, Forwards Annual Financial Repts for 1987
References
NUDOCS 8807110493
Download: ML20150B342 (52)

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't n San Antonio, the outlook remains optimis-I tic, despite a regional economic attributed to declines in the petroleum indus-try. Although growth has been somewhat slower than a few years ago, the Alamo City continues to achieve steady economic progress and appears ready for further development as this decade draws to a close and the 1990s appear on the

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The traditional mainstays of the San

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Antonio economy - services, the military and i

f tourism - have been stabilizing influences while r

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,f the community looks to diversify into areas such M

e as biomedical technology. Meanwhile, multi-b fj k.

q'Q' million-dollar projects under construction such

^ L as the Sea World of Texas marine life theme park, downtown's Rivercenter Mall (a large retail complex on the San Antonio River) and three new major hotels will steadily strengthen San Antonio's attractiveness as a tourist and convention center.

One of the keys to past and fut ire progress is an adequate, reliable, cost-competitive energy supply. The job of providing vital day-today natural gas and electric senice in San Antonio is readily accepted by City Public Senice (CPS).

CPS meets the enero needs each day of historie, yet dynamically modern San Antonio.

2

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l Highlights of the Year o Assets increased by

• 821 gas customers j

$485,154,000 to.

$3,639,018,000 were added to total.

285,697 o City equity increased

• 167 miles of electric transmission

$183,579,000 to.

51,296,005,000 and distribution lines were added o City payments were down $7,781,000 to.

$ 96,191,000

• Si miles of gas mains were added to total.

3,696 o Gross revenues decreaseo

$64,615,000 to.

S 804,218,000

• Amount of gas (MCF) saved through use of coal o Maximum electric system load for generation.

39,706,538 increased 246,000 KW to.

2,596,000

• Purchase of fuel, power and gas e 11,4M electric customers declined $81,163,000 to total... $ 3!6,251,000 were added to total.

458,037 Summary of Application of Revenue Gross revenue for 1986-87.

$__8N,218,000 Application of Revenue:

Fuel, purchased power and resale gas..

$ 316,251,000 Other operating and general expenses..

69,003,000 Maintenance of the systems..

32,761,000 Operating fund.

For debt requirements.

. $218,407,000 Less interest charged to construction..

101,402,000 117,005,000 Payments to the City of San Antonio.

%,191,000 Balance from operations available for construction.

173.007,000 Total

$ 804,218,00_0 Amount spent for replacements, improvements and expansion of gas and electric systems.

$ 430,610,000 Amount provided 'or future construction.

57,853,000

$ 488,463,000 Funds obtained from:

Bond Funds..

$ 200,159,000 Operations.

173,007,000 Contributions and advances in aid of construction..

7,018,000 Sale of property.

5,000 Tax Exempt Commercial Paper.

78,274,000 Litigation Settlement Proceeds.

30,000,000 Total

$_ 488,463,000 3

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CPS serves the nation's 10th largest city he number of new electric customers was and outlying areas electrically with facilities T up 2.6% over the previous year as CPS throughout Bexar County and portions of seven

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made 11,464 additional connections to EtJCTRIC CUSTOMERS adjoining cour"ies - 1,566 square miles in all.

the electric system. While this figure is less than Natural gas sersice is available in the San increases in each of the past two years, it is still a Antonio urban area.

major innuence on overall generation.

n l' g l since 1942 when it purchased the gas and elec-The City of San Antonio has owned CPS Total power generated and purchased in 1986-87 reached the iI billion kilowatt hour tric systems by issuing $319 million in revenue (KWil) mark, an increase of 3.8% over 1985-1 onds. Almost a half-century later, CPS stands

86. Summer temperatures in San Antonio as one of the largest municipally-owned utilities helped produce a record peak demand of in the country.

2,596,000 kilowatts and a 24-hour consumption

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San Antonio's push forward is renected represents an increase f 10.5% over the previous both in installation of new electric and gas year.

facilities and in increasing customer demand.

The fiscal year which ended January 31 proved The increase in new electric customers and to be another solid year of progress in CPS their demand on the system, plus preparations opc: ions.

for future development, required the installation of 167 miles of electric transmission and distribu-p s' ' N hi tion lines. The total number of gas customers b

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rose by 821 to 285,697, w hile gas main additions i

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amounted to 51 miles, increasing the system 6

e total to 3,696 miles.

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During San Antonio's recent growth, CPS

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has provided an adequate, reasonably-priced elec-y tric supply through fuels diversification. To con-

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mined the electric system will need to add 1,000 megawatts (MW) of generating capacity by the

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late 1990s.

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A combination of corscrvation and steady expansion of CPS' fuels base to include nuclear,

', h additional Western coal ard lignite is seen as the WA m best approach for meeting future electric needs.

Coal, already a steady performer in CPS' fuels mix, satisfied 36.9% of San Antonio's 1986-87 electric requirements, a lesser percen-tage than in previous years. This is due to avail-ability ofless-expensive gas for generation, CPS purchase of 398.4 million KWII this year at a

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very favorable rate, and year-end modifications to CPS' coal fired power plant which caused cne unit to be unavailable during that time, g

Total fuel savings by burning coal as compared a.

to higher priced natural gas since Decly Plant

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went on line in 1978 have ame'- ea O $720.7 million. Reduced coal-hauling

_ h saved ratepayers $31 million compareti.

,; paid prior to a new transportation agreement with Sea world of Texas is expected to draw more tha" Western Railroad Properties Inc. and the Union three million hitors in the park 'sfirstyear of opera.

Pacific System m l985.

tion. Abow, Cl*S linemen help prepare the sitefor con struction.

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urthermore,in January, the CPS Board of The price of a kilowatt hour fell further in F Trustees accepted a $111.5 million settle-1986-87 as natural gas prices for generation fuel ment offer from former coal haulers Bur-declined to leuls not seen since the mid-1970s.

lington Northern (BN) and Southern Pacific CPS was quick to take advantage oflower fuel GROWTilIN PEAK DEMAND (SP) railroads which ended a 10-year-old dis-costs by purchasing maximum permissible quan-

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pute over the transportation fees BN and SP tities of low-priced gas in accordance with its 8

$3 charged CPS for moving coal from Gillette, contractual agreement at prices as low as $1.44 7

Wyo., to San Antonio.

per thousand cubic feet (MCF). Also, due to competitive cil prices and availability oflower-In March 1986, the Interstate Commerce

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dMsW Commission had ruled BN and SP violated a system, CPS was able to obtain lower-cost gas price provision in the Lortikr Amendment t for gene ation from subsidiary companies of the Staggers Rail Act of 1980 and thus over-Valero linergy Corporation, San Antonio's charged CPS customers $40 million. %ith Principal gas supplier. With the lower cost of interest, the ICC decision amounted to $59 natural gas, dectnc pducon frmn % fuel millios This decision covered only the period s urce ac; unted for 62.5% of total generation at from October 19E,0 to March 1984 and CPS a price mmpetitive with coal. The lower overall

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had filed with t!c ICC to cover a greater period fuel co<t resulted in an 11.5% reduction in the of time. The railroads first appealed the ICC rewed cost per WowaMour. Sanngs n u n finding; however, after negotiating with CPS, the dependent n abundant, relatiwly low-priced parties decided to settle the entire mat'.cr out of gas may be short lived a-, reports from energy court. The $111.5 million settlement is believed industry analysts point to a probable turnaround to be the !r.c gst of its kind in rail oad traw o

and r sing prices for natural gas in the future.

portation history.

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used to reimburse CPS for an earlier payment to

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the railroads, plus interest, which had been i

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required by a U.S. Supreme Court decision.

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g*g a fees relating to the railroad tariff case. The g'

y remaining $80.5 inilbon will be received in 1

sesen annual installments.

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Reduced coal hauling rates and a substantial settlement with CPS'former coal-hauler produced savings to customers h

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,j l4]Y Coal has prown to be a mise inwstment a

for San Antonio. At CPS *Enstronmental Lab near the utility's coall,lant, constant tests help assure coalis emironmentally soundfor the city.

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D spite possible increases in gas costs, CPS In August, STP took a giant step closer to should be able to maintain stable electric rates an operating license as the Atomic Safety and by burning coal and again expanding its fuel mix Licensing Board (ASLB) issued a 300-page GAS Cl;STO%f ERS to include nuclear energy from the South Texas report stating STP can be completed properly r

Project (STP) power plant near Bay City c,n the and operated safely. The ASLB document also i! " j j [

p Texas coast. CPS and three other utilities -

brought STP licensing hearinp to a close.

llouston Lighting & Power, Central Power and Light of Corpus Christi and the City of Austin hiajor testing of Unit I is scheduled for the first quarter of 1987. Fuel load and further l

- are co-owners of the Project.

testing is then slated for the summer, and an Antonio also is counting on kilowatts commercial operation of the first of STP's twin S crease in electric demand. At year's end, from STP to help meet the projected in.

1,250-N1W units should commence in Decem-ber. Unit 2 is still on track for commercial l

the Project was witnin budget and ahead of operation by mid-1989.

schedule, with Unit I at 97.97 complete, Unit 2 in conjunction with the 700 NiW of power r.t 71.4T complete and the overall plant at 86.8'I from the South Texas Project, CPS planners l

complete. Good construction progress during the hase identified the need for additional genera-I n u n n.

o year plus favorable Nudear Regulatory Commis-tion capacity t.y 1992 to keep pace with grow-sion (NRC) findings helped prepare the Project ing electric demand. In the last five years, CPS for expected final licensing review in summer has added almost 103,000 new electric cus-1987.

tomers and 685,000 KW to its peak load. New in the first half of 1986, the NRC issued customer projections for the next fise years are favorable inspection reports dealing with STP in the 15,000 to 18,000 per year range and construction, safety and environmental impact, represent a steadi:y increasing need for more All of the voluminous studies found the Project electric energy.

can operate "without endangering the health and The CPS staff recommendation for a new safety of the public."

500-N1W coal unit to help meet capacity require-

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ments came after many months of study compar-

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ing numerous alternatives such as lignite and co-generation as well as factoring in the effects of

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conservation. The coal option became the clear 4.

k, choice because of projected reductions in rail

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transportation costs with meressed tonnage, M

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4 lower market cost for Western coal, plus the fact that coal handling facilitk s, water and a site 4f q ~

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already exist at CPS' present coal-fired plant.

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PS has not abanioned lignite and co.

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generation possibilities, but revised their

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range energy plan. Lignite reserves, which will L

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continue to be acquired as they become avail-I 6:j Q $ g g C;% N [g. <9 QP@7.g able near current holdings in the Bastrop Elgin

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century. Cogeneration available to CPS, most of ief~

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it natural gas-produced, likely will not be ik. - Mnb 'L,--

counted on in any large measure so long as other

.\\reeting and surraning emstruction uhrdules broughtfavorable reportsfrom sip in s m.

forms of energy continue to be less expensive.

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Cl%' Alain Office re nawtion added neceswry office j%

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enhancement to thrfamed han Antonio Riwrmalk.

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CPS and City of San Antonio Pubhe Works staff members continued to study another possi-bihty a refuse-to-electncity projest Although the incineration of garbage would reduce the need for expensn e aty lar.Jfill sites. only slightly more than 1" of CPS' needs, or M MW of k

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power, woulJ be generatcJ lhe utihty and the hpy.

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't uty are continuing to stuJ) whether the 5150 milhon project can bene 6t hith CPS ratera)ers arJ the sommunity As part of its ongoing effort ta impose the garage will be adJed along with customer senice to customers. City Pubhc Sen he uf Parking and a skybridge connecting the garage graJeJ anJ aJJeJ to surrent faahties Janng the to the Main Office. With this new adJition, year current lease spase in an aJjoining bui! Jing will be ehminated The C.PS Main Othee renosation son-cluded after two scars of sonstrustion CPS' 69-anne the sear, CPS opened its third year-old headquarters now has two new floors neighhithood Customer Senice Cer.ter and a lower door at rner !esel of aJJitional to prouJe for greater customer con-offae space in adJinon to prouJing a more senience In :ts !irst year of operation. the new pn.Juctne work ata,osphere, the renosauon WestsiJ-Ceuer posted ;he second highest features energy elfisienes enhansements and an number of su tomer transactions, surpassed only oserdll reonenlation of the building tow arJ the by the dow ntean Center s enic Jowntown Rner Walk along the San s

(,ustomer consenience also took on a new Antonio Rner h>ok as (,PS Jeseloped a new Jesign for gas and UpgraJing et ('PS' Jow ntou n faah;c ",ill elettnc billt T he impnned bill format al!ows connnue, as Trustees authon/ed the purshase of room for more customer information w hich the Nasarro Parking Garage asross from the prouJes a better understanding of daily energy Main OtGce \\ grounJ lesel section beneath the use A team of CPS employees researshed.

garagt currently houe CPS' main Customer designcJ and implemented the new blue and

% nice Center, w hhh will be renos ated f -i, w hite bill form.

aJJihon. three new Goors of oflise spa e atop

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Three other projects begun in 1986 87 will in the downtown area, the upgrading of the mean major imprm ements to the electric and 10th Street Substation neared completion to gas systems.

handle nower requirements of central San Antomo's growth.10th Street serves about four At the coal fired Deely Power Plant and one half square miles of the downtown area located m. southeast llexar County, a $24 million including P,ivercenter Mall, new hotels and precipitator consersion project got underway.

hi6ir Plata. CPS personnel designed, The electrostatic precipitators, which collect fly engineered and corstructed all phases of the ash after coal combustion, will become more 10th Street project.

efficient and better able to meet ensironmental standards set forth by local, state end federal To the north in CPS' service area, the gas l

agencies. Entthermore, the convenion will distribution system is in the p:ocess of obtaining

)

eliminate costly plant shutdow ns to remose accu-a third major suppy point. A 12.9 mile,24-inch i

mulated ash. These shutdowns in the past hase diameter pipeline will be constructed to tie into necessitated the substitution of more expensive Valero Energy's pipeline in northern Bexar fuels in electric product on.

County. The $8.5 million project should be com-i p!eted next year and will bolster the gas rystem's

)

reliabdity.

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n ust as these three major construction jobs f

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will provide greater operaung efficiency,

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U other CPS initiatives this past year saved

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c.

customers millions of dollars.

[;

Two advance refunding bond issues total-r,

-V ing $712.4 million will sase $130 0 million in e.

j interest for CPS customers over the next two and a half decades. During the early 1980s, N,r,, g g e- [.

capital improsements bonds were sold at

~

D-various, higher interest rates to pay for ongoing j

construction. CPS took advantage of fasorable Sg market conditiom to refund bonds with rates as s

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high as 11.251 and substantiall> reduced interest 8

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--.- ---~~ ----m---

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payments over the life of the bonds. The two

~

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refunding issues accomplished in 1986-87 plus an additional refunding in the previous fiscal p

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year will mean total interest savings of $139.4 I

million by the year 2014.

2 aving energy dollars for San Antonio is an f

important objective in CPS' day to-day L activities, and that conservation raenage is

. j.

relayed to customers through numerous i

programs.

~

City Public Service's Consumer Informa.

tion Disision made more than 95,000 contacts

~

in the community this past year emphasizing the safe and efficient use of gas and electricity.The h ' ' ' ~'

• lC. 1 'j, contacts included Home Energy Surveys; school, I

business and community sersice presentations;

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and more than 50,000 telephone inquiries.

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. 'R On the opposite page, Rintcenter Mallis a healthy economic additionfor downtown %2n Antonio.

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Scrnesfor naious construction projects on this paer demonstrate the Alamo Orv's continued outer-city gro wth.

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A new type of energy survey was aho initiated in 1986 to help area farmers and ranchers manage their energy consumption more efficiently. The Rural and Agricultural Audit Program (RA AP) is designed to assess the specialised energy usye patterns of farms and ranches and suF8est methods for controlling energy costs. CPS' agribusiness energy audit i

program was the first of its kind in Texas.

I Wise use of natural gas and ekdricity applies not only to energy efficiency but also to safety. CPS' Public Safety Awareness programs were presented to schools, civic and social

^

organizations, as well as City of San Antonio i

and area fire ilepartments.

1,. '

W PS emg loyees not only demonstrated Mg their tet hn; cal competence but also their y.

g, M commu.1ity support by contributing more

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h-than a quarter of a million dollars to the 1986

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United Way campaign. Per capita giving was up g

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'. ' 8.81 as both actise and retired employees helped make 1986 the most successful year of j

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United Way giving in CPS history. Without the j

cooperation and dedication of its work force,

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CPS would be unable to accomplish its essential

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mission of service.

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ANNUAL RESIDENTIAL E LECI RIC l'SE ks...n Hom t

I gi!I I

At the stafflevel, Assistant General I

hianager for Operations Jesse B. Poston retired after 38 years of sersice with CPS. Poston led an engineering team which introduced many tech-A nologicsl improsements to CPS and also served as San Antonio's principal representative to the s

South Texas Project.

p PS General hianager J.K. Spruce, a past s

4 president of the American Public Power bs#;;i,

. j Association ( APPA), was named local e.

i N

> r ? q. h;j arrangements chairman for the organization's Y

1987 National Conference in San Antonio.

lo Afore than 2,000 utility officials from the U.S.

J and Canada discussed the challenges and consumer benefits of public power. City Public CPS Trustees and management staff also Service was honored to be the host utility and distinguished themsches both locally and serses as a good example of a city owned utility nationally.

working for community progtess. For, as the Board member hiayor llenry Cisneros com, record indicates, CPS met the 1986 87 energy pleted a productive term as National League of challenges of this growing metropolitan area and Cities (NLC) president. San Antonio hosted the kept consumer costs among the lowest in the NLC National convention w hich brought state and nation. As for the future, CPS' outlook together municipalleaders from around the continues to be optimistic.

nation.

CPS Board Chairman Glenn Biggs con-Sincerely, clmfed the second longest tenure as a Trustee in CPS' 44 year history. Biggs, a member of the du, Board for almost 13 years and Chairman the past seven years, was instrumental in helping Glenn Biggs guide CPS during the stormy aftermath of the Chairman, Board of Trustees 1970s energy crisis.

Board Vice Chairman Earl C. Ilill suc-be t_

ceeded Biggs as Chairman, and Trustee hirs. Lila I

Cockrell moved up to the nost liill vacated.

J.K. Spruce hirs. Cockrell also was elected to her second General 51anager five-year term on the Board.

Cl"i' commitment to gas and electric mfety brings ut;;ity perwnnelin contact mich thouwnds of San A ntonians enry year.

II

wwm i

1 e ipCEM 1986-87 Financial Review he cost of fuel for electric generation CPS customers will realize $130.0 million T continued to decline in fiscal year 1986-in interest savings from the $320.6 million in

37. The average cost of coal fell 6% to refunding bonds delivered in March 1986, and

$29.18 per ton compared to $31.23 last

$391.8 million which were priced in January January. With the purchase of more than 22% of and delivered in February 1987. These bonds, generation gas at spot market prices, the average which were sold at interest rates of 7.835% and cost of gas declined 38% to $2.17 per MCF, as 6.837% respectively, replace bonds bearing compared to $3.48 last year, Overall, electric interest costs of 8.9% to 11.25%. In addition, generation fuel costs dropped 27% when all fuel

$185 million in AA rated bonds were issued in sources are considered.

July 1986, at an average rate of 8.765% to A CPS rece d was set on August 19,1986, when a system hourly peak of 2,596 MW was At the end of fiscal year 1986-87, CPS' reached, eclipsing the 1985 86 mark of 2,350 total assets exceeded $3.63 billion, increasing MW. Electric generation totaled 10.6 million

$485 million, or 15%, over last year. Utility MWil, about the same as the previous fiscal plant stood at $1.48 billion, a 7% increase over year. Ilowever, an additional 398 million KWil fiscal year 1985 86. Construction Wori: in Pro-was purchased, and when combined with genera-gress rose to $1.78 billion, with the South Texas tion, power available for sale rose 3.8%. Nstural Project (STP) accounting for 96%, or $1.70 gas provided fuel for 62.5% of the electric genera-billion, of this total. Outstanding revenue bonds tion due to the availability of low priced spot totaled $2.04 billion, with an average interest gas. This is the largest percentage of clmtricity rate of 8.2% (excluding the 1987 Refunding fueled by natural gas since 1977 78. Elxtric flonds). The City of San Antonio equity in CPS generation from CPS' coal fuel power plants increased to $1.3 billion, growing 17% in fiscal provided 36.9% of requirements, with the year 1986-87.

balance of 0.6% from fuel oil.

CPS had record electne sales of nearly 10.4 billion KWil in fiscal year 1986-87. This was up 326.8 million KWil, or 3.3%, ove, last year.

FUELS & PURCilASED POWER The average use per residential customer exceeded the 10,000 KWil mark for the first Q

time and was up 2.1% over last year; however, M

lower use per customer by commercial and 3

industrial customers caused os erall use per customer to decline by 1.14. The number of elec-1 a

l Total residential ekxtric sales rose 6.7% while tric customers stood at 458,037 at year end.

I commercial and industrial sales rose 3.8%. Gas sales of 25.0 million MCF decreased 4.9%, or 1.3 million MCF. Although there was a smallin-crease in the number of gas ;ustomers, usage per customer declined 5.81. Sales to all claws of gas customers fell, with residential sales declining 5.3%.

E!

al il 87 l

i 1

l l

l Gross revenues for fiscal year 1986-87 opersting revenue advanced $ti.3 mulion, or totaled $804.2 million, and were $64.6 million, 2.2%, to $301.3 million.

or 7.4%, lower than the previous year. Electric Construction exoenditures of $430.6 revenues of $639.6 million dropped $60.7 million, gg,.

g g,

or 0.7%, and gas revenues of $127.8 m0 lion fell pletion of STP nears. Expenditures for San

$8.7 million, or 6.4%. A $112.3 million dechne Antonio's share of STP amounted to $322.3

]

in fuel cost recoveries was partly offset by $25.8 milli n, t 75%, of the total capital expenditures, million from greater sales and $22.3 mnlion in long-term debt was used to finance 46.5% of the added revenue from the January 1936, rate capital program, while 26.8% was from intern-increase. Interest and other non-operating income rose 15.1%, or $4.8 million, to $36.8

• Hy Bennatgd funds. Proceeds from the Brown 1

and Root litigation settlement, Tas Exempt Com-million.

mercial Paper Program and customer contribu-Both electric and gas operating expenses tions provided the balance of construction funds, declined sharply. Electric operating expenses Neiinterest and debt expense increased declitied $73.1 mulion, or 19.4%, to $303.3 06.9 million to $64.6 million. Interest on long-million, as production fuel was $83.8 million term debt climbed to $160.8 million, up 12%

lower than last year. Partit!!y eff: tting were o er last year; however, the Allowance for purchased power costs which increased $8.1 Funds Used for Construction of $101.4 million million and electric distribution expenses w hich reduced interest chargeable to operations to were up $3.1 million. Gat operating expenses

$59.4 mDlion. Amortization of debt expense was declined to $113.2 million, a $5.0 million, or a

" 8 "' **

4.2%, drop from fiscal year 1985-86. Resale gas "8

expense decreased $5.5 million due to 1.3% less cas being purchased at lower prices. The average Benefits and payments to the City of San price of resale i;as dropped to $3.52 per MCF Antonio decreased $7.8 million, or 7.5%, to from $3.69. Depreciation expense was $1.5

$96.2 million acd represented 12.0% of gross million, or 3.6%, higher than last year and revenue. Reduced benefits were the direct result totaled $41.8 million. Net electric and gas of lower fuel costs achieved during the year.

CPS REVENUES Sources Distribution Pay ments to City or San Antonio Debt Requirements Public Authorities

$96.2 = 12.01 5117.0 = 14.5%

ResksentW

$7a.5 = 9.8)

I3N A

• d3E I"'""'

E At alf able for

"'i"

$61.2 = 7.8%

01 6%

Other Operations /%taintenance Commercial &

Fuel, Purchased Power bpenses e

Inductrial

& Resale Gas

$101.7 = 12.6%

$311.1 = 3&.7%

1316.3 = 39A%

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Tof AL %A44.2 hiinions of DoRars 13

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l l

i U

C4, Pwade Seev,, e Balance Sheets January 31,1987 and 1986 ASSETS Notes 1987 1986 (in thousJMs)

UTILITY PLANT - At cost:

1 Electric.,

51,221,198 51,168,943 Gas.

1%,620 184,559 General.

60,956 28,390 Const uction work in progress.

7 1,675,726 1,361,134 Nuclear fuel in process, 7

100,979 95.821 Total utility plant..

3,255,479 2,838,847 less accumulated depreciation..

446,913 418.743 Utility plant - net..

. 2.808,566 2.420.I N RESTRICTED CASil (Temporary cash investments and U.S. Government obligations -

at cost which approximates narket):

2 Bond Construction Fund..

41,335 65,678 Bond Reserve - Old Series Bonds.

3 17,353 17,437 Bond Reserve - New Series Bonds.

3 173,786 147,715 improvements and Contingencies Fund.

131,439 73,586 Other.

I 5,150 8,123 Total restricted cash.

.369,063 312.539 CURRENT ASSETS:

Cash, including temporary cash insestments.

19,045 22,362 Short-term investments 4

51,724 Customer accounts receivable,less allowance for doubtful accounts of $1,222,000 in 1987 and $1,151,000 in 1986.

54,947 51,233 i

Other receivables.

8 42,352 33,337 Inventories and supplies - at average cost:

Materials and supplies.

20,642 18,647 i

Fuel stock.

42,089 33,644

)

Prepayments and other..

8 1,859 27,964

]

Total current assets.

180,934 238,911 i

LITIGATION SETTLEMENTS BENEFITS RECEIVABLE..

7,8 205,500

'65.000 DEFERRED DEllITS.

I 74,955

__ 17J10 TOTAL.

5A639,0__18

}3y3 864_

14

l LIABILITIES

_ Notes 1987 1986 (on thomnds)

LONG TERM DEET - Revenue Improvement Bonds:

2,3 Old Series.

$ 105,785

$ 115,220 New Series.

1,903,425 1,676,500 Less: Unamortized disccunt on New Series Bonds..

(20,812)

(11,530)

Net long term debt..

1,988.398 1,780,190 EQUITY:

Appropriated retained earnings:

2 Bond Reserve - Old Series Bonds.

17,353 17,437 Bond Reserve - New Series Bonds.

12'.,328 101,216 Improvements and Contingencies Fund..

131,439 73,586 Total..

270,120 192,239 Reinvested earnings..

1,025,885 920.187 Total equity..

.1,296,005 1,112.426 CURRENT LIABILITIES:

Current maturities of!ong term debt.

3 34,820 32,350 Short-term debt..

4 100,000 100,000 Accounts payable and accrued liabilities.

61,610 55,492 Litigation settlement benefits payable to customers.

8 834 Customer service deposits.

14,079 10.984 Tota! cunent liabilities..

211,343 198.826 DEFERRED CREDITS:

Customer advances for construction.

14,751 12,976 Other.

1,965 6.340 Total deferred credits.

16,716 19,316 LITIG ATION SETTLEMENT BENEFITS PAYABLE..

8 79,666 CONTRIBUTIONS IN AlD OF CONSTRUCTION.

1 46,890 43,106 COMMITMENTS AND CONTINGENCIES.

5,7,8 TOTAL..

$A639 0_18

$3,153,864 See noers toflnaniia!swements 15

i t

\\

h;m.d Statements of Earnings and Application of Earnings Years ended January 31, Notes 1987__

1986 (in thousaris, REVENUE:

1 Electric..

$639,626

$700,371 G as.,

127,814 136,500 Interest and other income..

36,778 31,962 Gross revenue.

80 L218 868.833 EXPENSES:

1 Fuel, purchased power and resale gas.

316,251 397,414 Other operating and generd.

68,998 65,035 Maintenance.

32,761 33,379 Depreciation.

41,811 40,351 Interest and debt expense.

166,029 144,989 Allowance for interest used during construction..

(101,402)

(87,296)

Payments to the City of San Antonio 6

%.191 103.972 Total expenses.

620,619 697.844 NET EARNINGS 183,579 170,989 Add:

Deptreistion..

41,811 40,351 Interest requirements on New Series lionds (payable from improvements and Contingencies Fund)..

Jj),4I[

l35.235 AVAILAllLE FOR APPLICATION.

Jg,8J0j jl4p,575, APPL.! CATION:

To pay long term debt requirements -

Old Series Bonds:

Principal payments

$ 9,000

$ 51,600 liond reserve (84)

(46)

To reinvested earnings - Net gain on sale of asset-5 4

To improvements and Contingencies Fund:

Minimum requirement (12%% of gross revenue).

2 100,527 108,604 Balance of available revenue.

2692 53 229.413 APPLICATION.

J378,83 J346,5J See notes la finavtal statemer,tt 16

1 Statements of Changes in Equity Years ended January 31, 1987 1986 (Os thousands)

BOND RESERVE - OLD SERIES BONDS:

Balance, beginning of year..

$ 17,437

$ 17,483 Deductions - transfer of earnings.

(84)

(46)

Balance, end of year..

$ 17.353

$ 17.437 BOND RESERVE - NEW SERIES BONDS.

Balance, beginning of year..

$ 101,216 5 89,713 Additions - from Improvements and Contingencies Fund..

20.112 11.503 Balance, end of year..

$ 121,328

$101,216 IMPROVEMENTS AND CONTINGENCIES FUND:

Balance, beginning of year..

$ 73,586

$ 80,068 Additions - from application of earnings:

Minimum requirement (12%% of gross revenue).,

100,527 108,6G4 Balance of available revenue..

269,353 229.413 Total.

443,466 418.085 1

Deductions-New Series Bonds:

Additions to reserve..

20,112 11,503 Payment of bond interest..

153,411 135,235 Payment of bond principal.

23,350 21,440 i

Construction expenditures..

115,154 173,821 For working capital.

2,500 Total.

312.027 344.499 Balance, end of year..

$ 131,439

$ 73.586 REINVESTED EARNINGS:

Balance, beginning of year..

$ 920,187

$754,173 Additions:

From Improvements and Contingencies Fund:

For construction..

115,154 173,821 For New Series Bonds principal payments..

23,350 21,440 For working capital..

2,500 Frem application of earnings:

Old Serics Bonds principal payments..

9,000 8,600 Net gain on sale of assets..

4 Total..

147.509 206.365 Deduction - Depreciation.

41,811 40.351 Balance, end of year..

$1,025.88_5

$920,187 see notes tojInanaalnasemena l7

l a

iL u,__-_.

Statements of Changes in Financial Position Years ended.'anuary 31, 1987 1986 (vs thon anis)

SOURCES OF FUNDS:

Net earnings.

$ 183,579

$170,989 Add (deduct) amounts not affecting working capital:

Amortization of New Series Bond discount..

1,081 536 Amortization of deferred debts..

4,140 1,461 Depreciation.

41,811 40,351 Allowance for interest used during construction..

(101,402)

(87,296)

Working capital presided from operations..

129,209 126,N1 Contributions in aid and customer advances for construction..

7,018 7,735 Sale of rever:ue improvement bonds,.

181.772 270,202 Sale of refunding bonds.

310,242 113,301 Litigation sett'ement..

111,500 210,000 1.281 Othtr..

Total.

739.741 728.560 APPLICATION OF FUNDS:

Acquisition of utility plant - net of allowance for interest used during construction.

329,208 347,764 Increase in c',her receivable..

40,500 165,000 Retirement of bonds..

32,350 30,M0 Defeasance of bonds refunded.

253,350 97,130 Increase in current maturities of long-term debt..

2,470 2,310 Increase in restricted cash..

56,524 59,821 Litigation settlement received.

31,000 Excess of reaguisition amount over principal of bonds refunded in advance..

57,649 15,978 Other..

7.184 498 Total.

810E 718.541 i

INCREASE (DECREASE) IN WORKING CAPITAL.

,U70 494)

$ 10,019 l

CilANGES IN WORKING CAPITAL COMPONENTS:

Increase (decrease) in current assets:

Cash and temporary investments.

5 (3,317)

$ (7,569)

Short term insestments.

(51,724)

(21,874)

Customer accounts receivable.

3,714 (4,405)

Other receivables..

9,015 28,458 inventories and supplies.

10,441 679 Prepayments and other..

(26,106) 222 Decrease (increase) in current liabilities:

{

Current maturities of long-te m debt.

(2,470)

(2,310) i Accounts payable and accrued liabilities (6,118) 10,894 Litigation settlement benefits payable to customers.

(834) 7,660 Customer service deposits.

(3.095)

(I,736)

INCREASE (DECREASE) IN WORKING CAPITAL.

(70,494) 10,019 WORKING CAPITAL, BEGINNING OF YEAR.,

40.085 30.066 WORKING CAPITAL (DEF1 CIT), END OF YEAR.

_U30 409)

L10 085, 1

1 see was notw.cialswe oa

N:tes to Financial Statements - January 31,1987 and 1986 1.

Summary of Signincant Accounting Policies 2.

Revenue Bond Indenture Requirements Basis of Accounting - City Public Service (CPS) uses the The Trust Indenture executed by the City of San Antonio (the accrual method of accounting based upon the Uniform System of "City") in conjunction with the issuance of the revenue bonds Accounts for Gas and Electric Utilities issued by the National dated February 1,1951 through August 1,1974,"Old Series

{

Association of Regulatory Utility Commissioners.

Bonds," contains, among others, the following provisions:

Fiscal Year - The fiscal year ended January 31,1987, is referred

1) All of the assets of the gas and electric syatems, together with to herein as 1987 and the year ended January 31,1986, as 1986, the net revenues of the systems, as defined, are pledged with the llarris Trust and Savings Bank of Chicago, Illinois, as Cor-Revenues and Espenses - Revenue is recognized as billed on a porate Trustee, to secure the payment of the "Old Series cycle basis. Rate schedules include fuel and gas cost adjustment Bonds."

clauses that permit recovery of fuei and gas costs in the month incurred. CPS charges to expense the cost of electric production

2) Gross revenues of the gas and electric systems shall be applied fuel as it is consumed and the cost of resale gas at the time of to: (a) expenses of operating and maintaining the systems; (b)

purchase, debt service and reserve requirements on the "Old Series Bonds";(c) payment of an "in lieu of tax" amount to the City; Utility Plant - These assets are stated at the cost of construction, (d) an arnount equal to 12%% of gross revenues to the Improve-including costs of contracted services, direct material and labor, in-ments and C<mtbencies Fund;(e) additional benefits and pay.

direct costs, including general engineering, labor and matetial ments to the City'to bring City benefits and payments to 14% of overhe d, and an allowance for interest used during construction gm revenues; (f) additional payments to the Improvements

("AIUDC"). CPS computes AIUDC using rates representing the and Contingencies Fund until such fund equals 707 of th-

ue cost of borrowed funds on projects estimated to cost in excess of of fixed capital assets; t;d (g) balance to a surplus luno.

one million dollars and expected to require more than one year to complete. Retirements of utility plant, together with removal cost

3) The following funds are established: (a) General Fund;(b) !m-

)

less salvage, are charged to accumulated depreciation. The prosements and Contingencies Fund;(c) Bond Construction maintenance of property, and replacement and renewals of items Fund (containing the proceeds of revenue bonds);(d) Principal determined to be less than a unit of property, are charged to and Interest Current Requirements (containing the monthly pay-maintenance expense. General utility plant assets consist of land, ments of annual debt requirements); and (e) Bond Reserve buildings and equipment for general and administrative purposes Fund (containing an amount equal to the next fiscal year's pnn-that are used commonly in electric and gas operations.

cipal and interest requirements). These funds may be invested with authorized depository banks or in U.S. Government CPS computes depreciation principally using the straight line securities.

muhod over the estimated senice lives of the assets as determined by periodic engineering studies. Depreciation as a percentage of Beginning with the year ended January 31,1976, New Series aserage depreciable plant was 3.07% in 1987 and 3.16% in 1986.

Electric and Gas Systems Revenue improvement Bonds ("New Series Bonds") were issued. These bonds are junior and sub-Contributions in aid of construction are amortired over a period ordinate to the "Old Series Bonds." The bond ordinances authoriz-equal to the lives of the related assets, ing these issues provide that no further bonds or obligations w,11 be authorized or issued under the terms of the Trust Indenture for Other Restricted Cash - These amounts ccnsist primarily of funds being held in escrow as required under a contract with a gas "Old Series Bonds" and, at such time as the Trust Indenture supplier.

becomes inoperative, the Trust Estate will revert to the City. While any of the "Old Series Bands" are outstanding, the "New Senes Deferred Debits - These amounts consist of the unamortised Bonds" are payable solely from the net revenues of the systems (1) balance of bond issue expense, and ti.e unamortized excess of the deposited and available for deposit in the Improvements and Con-reacquisition amount oser the resenue bond principal refunded in tingencies Fund and (2) from funds payable to the City. At such advance. Amounts are being amortised over the period during time as the Trust Indenture covering the "Old Series Bonds" which the bonds will be outstanding.

becomes inoperatise, revenues will be applied as follow s: (a) for maintenance and operating expenses of the systems;(b) for pay-ments of the "New Series Bonds";(c) for the paymem of any ob.

ligations inferior in lien to the "New Series Ikmds" which may be 19

wl Ii.

Notes to Financial Statements issued;(d) for an amount equal to 6% of the gross revenues of the New Series 1986 Revenue Refunding Bonds. Although the systems to be deposited in a Repair and Replacement Fund;(e) for advance refunding resulted in reacquisition amounts in excess of cash payments and benefits to the City not to exceed 14% of the the bond principal amounts refunded of approximately gross revenues of the systems; and (f) any remaining revenues to 161,358,000, the issuance of refunding debt at interest rates lower the Repair and Replacement Fund. The funds created by the "New then the previous rates will cause aggregate debt service pay ments Series Bonds" ordinance are similar to those set forth under the to be reduced by approximately $56,283,000. United States "Old Series Bonds" Trust Indenture.

Government securities were purchased with the net proceeds ot' the 1986 issue and deposited in an irrevocable trust to satisfy 3.

Long Term Debt scheduled principal and interest payments of the refunded issues.

'The refunded bond issues and trust accounts of the New Series A summary of long-term debt is as follows:

1986 Refunding Bonds as well as previous refundings are not included in CPS financial statements. At January 31,1987, the weeie4A*erire l'ar*4 following portions of each respective bond series are considered rinal latetent Raie On Prmpel CW

, Mamty Outuanang bnds 1987 1986 New senen 1984-A 191.400.0LN)

OUEm%

New senes 1934 g R2AlofR10 tw6M1 4 1984-1997 6U1

$ lis.220 5 124.220 Ne. senes l9al. A 79.390.010

% se,ck Nem serm 1982 48.14 s.0lO 197 $-l a%

1994 2014 8 241 1 92R M 0 1 699Rio Nem ence WRI. A 44.9A sfA O T tal 8 20s 2.044.010 1.824 070

!" mens ent=

_ 9 20. _ 12299 During January 1987, the City of 53n Antonio approsed the

.=a dw ener une n.,

pm:0 sV'U29 issuance of New Series 1987 Refunding Bonds in an amount of Principal due (in thouunds) for the next five years are:

$391,780,000 to be delisered on or about February 19,1987,The proceeds from the bonds will be used to adsance refund h""*

$48,025,000 principal amount of New Series 1980 flonds, D"

Y"

~ ~ - ~ ~-

$34,825,000 principal amount of New Series 1980-A Bonds,

$32,675,003 principal amount of New Senes 1981 Ekmds,

[

dj

'y 544,620,000 principal amount of New Series 1982-A Ilonds, 5

19e 10.375

.ts.725 50,300,000 principal amount of New Series 1984 A Bonds, iwl 1094s 42.t 20

$12,500,000 principal amount of New Series 1984 il Bonds,

'"2 d'**

$109,800,000 principal amount of New Series 1985 A Ik>nds, and As of January 31,1987, bond reserve requirements for the Old

$38,125,000 principal amount of New Series 1985 il Bonds and to Series flonds and New Scrict Bonds have been met. Additional pay costs and expenses related to the issuance of the New Series bond resene requirements of 56.0 million for the New Series 1987 Bonds. Although the advance refunding resulted in 1086-A Ikmds were included in the amount borrowed and were reacquisiti n amounts in excess of the bond principal amounts deposited in the Bond Reserve restricted cash fund in a lump sum refunded of approximately $$9,489,000, the issuance of refunding in 1987, Similarly, additional bond requirements of approximately debt at interest rates lower than the previous rates will cause 518.8 million for the New Series 1985 A and 198511 Ilonds were aggregate debt service payments to be reduced by approsimately deposited in the ik3nd Reserse restricted cash fund in a lump sum

$73,698,000. Also during January 1987 the City of San Antonio in 1986. Prior to the 1983 A Bonds, reserve requirements were gen-gave notice of its intention to inue New Series 1987 A Ilonds in ersted from earnings and deposited over a 61 month period as pre-an amount of $160,000,000 to be delivered on or about March 26, siously allowed; beginning with the 1983 A flonds, ikmd Reserve 1987. The proceeds from the t onds will provide funds for the requirements have been funded from bond proceeds.

purposes of improving and extending the electric and gas systems of the City.

During the fiscal year ended January 31,1987, New Series 1983-A Ilonds at coupon rates of 10.4% to 10.51, New Series 1984 A 4,

Short Term Debt ik nds at coupon rates of 11.01 to 11.25% and New Series 1984 B in Nosember,1983, the City Council of the City of San Antonio ik3nds at coupon rates of 10.75% to 11.125% in the principal authorized the issuance of $100 million in tax-exempt commercial amounts of $79,350,000,591,400,000 and 182,600,000, paper (the "Commercial Paper") to assist in the financing of respectively, were adsance refunded by issuance of $320,660,000 clig;ble projects, including fuel acquisition and capital improve-20

ments to the utility systems (the "Systems"). As of January 31, Actuarial present value of accumulated plan benefits as of the end 1987, $100 million in principal amount was outstanding, with a of the plan year:

weighted average interest rate of approximately 3.85% and an average life outstanding of about 65 days. When available, im in, proceeds remaining from the Commercial Paper have been placed m,%an in short-term investments consisting of U.S. Government vesica benerai sio4.75:

5 a9.372 ooligations et cost, w hich approximates market. During 1987, all

%w d,,,o..

3 yos a

remaining proceeds were used for construction purposes.

uni..

sinnv, t; i s.923 W et* r tilaNe ter clae beneGas..

510r,, s i g The Commercial Paper is equally and ratably payable from and is

-sir 075 secured by (i) the Net Revenues of the systems and (ii) a lien on the sale and pledge of the proceeds from the sale of other Commer-An assumcd rate of retum of 8% was used in determining the cial Paper, the subsequent sale of bonds, and borrowings under the actuarial present value of accumulated plan benefits.

Credit Agreement (as defined herein). Such pledge on Net Revenues in addition to providing pension benefits, CPS provides certain is subordinate and inferior to the pledge securing payment of(i) health care and life insurance benefits for retired employees. All of the Old Series Bonds (ii) the New Series Bonds and (iii) any New CPS' emp!oyees are eligible for these benefits upon retirement from Series Bonds to be issued in the future. The City and Texas Com-CPS. The cost of retiree health care and life insurance benefits, merce Bank National Association hase entered into a revolving fundcd by CPS and retired employee contributions, is recognized credit agreement (the "Credit Agreement") pursuant to which such as an expense of CPS as employer contributions are made to the bank is obligated under the Credit Agreement to loan to the City programs. These costs approximated $734,000 and $731,000 for an aggregate amount not to exceed $100 million for the purpose of 1987 and 1986, respectisely.

paying amounts due on the Commercial Paper. Any borrowings under the Credit Agreement are equally and ratably secured by 6.

Payments to the City of San Antonio and payable from the above described sources pledged for payment of the Commercial Paper. There have been no borrowings under

.!1e Trust Indenture provides for benefits and services totaling 14%

the Credit Agreement as of January 31,1987.

of CPS gross resenues, as defined, to be paid or provided to the City. The City has elected to accept benefits that are less than 147 5.

Pension Plan f gr ss revenue. The reduction of City benefits has no effect on financial operations.

Pric.r to 1983, CPS had an insured pension plan under whieh insurance was purchased for each participating employee in an Payments to the City of San Antonio for 1987 and 1986 were as tmount calculated to yield cash value at retirement sufficient to I U "5 provide an annuity equal to prescribed benefits. To the extent bene-fits represented amounts attributable to wage increases received after an employee reached age 60%, CPS assumed all of the incre-

'jg,"

5 7;[

5y mental cost. The incremental costs for these individuals are paid 4w m.m,.

,y%

t,m directly to retirees by CPS.

sei sin 972 In 1983, CPS adopted a self administered, defined-benefit con-tributory pension plan covering substantially all employees. The 7,

South Texas Project tot:1 ernployer pension cost (all funded), w hich includes amortiza.

tion of past sersice costs over 30 years using the Unit Credit Cost CPS is one of four participants in the South Texas Project ("STP"),

actuarial method,is summarized as follows:

w hich consists of two 1,250 megawatt nuclear generating units under construction at a site in Matagorda County, Texas. The in, a

other participants in the project are flouston Lighting & Power m,uan Company ("IlLP"), the project manager; Central Power and Light n,J demo mud emr4mm 5 in s 712 Company ("CPL") and the City of Austin ("Austin"). Under the

^**au der =w in s cr s terms of the STP participation agreement, each participant pro-vides financing for its sh;.re of construction expenditures with CPS'

==

participating interest in the project being 28% or 700 megawatts.

A comparison of accumulated plan benefits and plan net assets for Projected commercial eperation dates are December 1987 and CPS' defined-benefit plan is as follows:

June 1989 for Units I and 2, respectisely.

21

c i

I G;;.Y.

c Nstes to Financial Statements in 1986, a suit insohing the project was settled on the agreement the railroads $19.8 million less for their services than the railroads of Brown & Root, the former architect / engineer and constructor claimed was due under their tariffs. This amount ($26.4 million) for STP, to pay the plaintiffs, CPS and the other participants, $750 was paid and classified with Prepayments and Other in the 1986 million. CPS commenced receipt of its $210 million share of the balance sheet pending final ruling in related matters.

settlement with receipt of approximately $15 million on January 1, in December 1986, CPS approved a settlement ofter from the 1986, and $30 million in 1987. The remainder, without interest, inv Ived railroads for all disputed iss.ies. Both parties sought will be received in $7.5 million quarterly installments oser six dismissal of actions pending before the ICC and in two Federal years pursuant to an unqualified contractual obligation of Aetna District Courts. As a result, CPS recched a $31 million payment Life Insurance Company. The remaining payments have been fr m the railroads in January 1987, most of which will be used to recorded as both current receivables and as Litigation Settlements replace utility funds used to make the $26.4 million court-ordered Benefits Receivable.

rail tariff payments and to offset legal expenses incurred during the The estimated total direct cost of the project is $5.495 billM.

dispute, in additici, CPS will receise annual payments ranging before consideration of the Brown & Root settlement. CF-S' from $10 to $13 million, totaling $80.5 million, oser the next portion of the total costs for STP would be $2.2 billion for seven years from the railroads, w hich is expected to be returned to construction and interest during construction and $110 million for customers as payments are recched. The remaining amounts due fuel to be purchased prior to commercial operation. CPS' share of hase been recorded as both current receivables and Litigation remaining costs is estimated to be $183.7 million for plant Settlements Benefits Receivable, constri : tion oser the next three years, exclusive of interest, nuclear fuel ano other costs. These costs may vary from the e:timated Other - CPS is insolved in various legal proceedings related to amount vue to inflation, changes in equipment delivery and alleged personal and property damages, breach of contract, environ-cons;ruct on schedules. and regulatory changes.

mental matters, condemnation appeals and discrimination cases. In the opinion of management of CPS, the outcome of such proceed.

As of January 31, i987, CPS has expended approximately $1.699 ings will not hase a material adserse e,Tect on the financial position billion in the project (net of the $210 million settlement with or results of operations of CPS.

Brown & Root), including interest during construction ef $381 million and advance payment on fuel of $101 million.

Cther purchase and construction commitments amounted to approximately $65.1 million at Janutry 31,1987. As of January Prior to the initialleading of nuclear fuel and operation of STP, an 31,1987, CPS has no significant lease commitments.

operating license must be issued by the Nuclear Regulatory Com-mission. In order to meet the scheduled in-service date for Unit 1, a license for fuel loadi,ig and low power testing must be obtained by Jane 198 L Ilearings before the Nuclear Regulatory Commis-sion's Atomic safety and Licensing Board hase been fasorably completed and CPS anticipates that the license will be issued by June 1987.

8.

Commitments and Contingencies Coal Freight Rate Dhpute - For the past ten years, CPS has been engaged in continuous litigation with certain railroads (Bur-lington Northern, Inc. and Southern Pacific) which, prior to August 1985, tramported subbituminous cal to the J.T. Deely Station. The question involved the proper or lawful freight rate that CPS was legally required to pay these railroads for coal transportation services during the period 1978 through August 1985.

In December of 1984, the Federal District Court issued an order authorizing the railroads to collect the principal sum of $19.8 million, plus interest of $6.6 million from a subsidiary dispute intohing ten months in 1980 and 1981 during which CPS paid 22

9. Segment Information Segment information is as follows:

1987 1986 (un thousands)

(un thousands)

Electric Gas Total Electric Gas Total REVENUE..

$ 639.626

$127,814

$ 767,440

$ 700,371

$136,500

$ 836,871 EXPENSES:

Operating and maintenance expenses.

304,816 113,194 418,010 377,654 118,174 495,828 Depreciation.

36.501 5,310 41,811 35.435 4.916 40,351 Total.

341,317 118,504 459,821 413,089 123,090 536.179 EARNINGS BEFORE INTEREST AND DEBT EXPENSE, ALLOWANCE FOR INTEREST CilARGED TO CONSTRUCTION, AND PAYMENTS TO Tile CITY OF SAN ANTONIO.

$ 298,309

$ o.310

$ 307 6_ l_9

$ 287,282

$ 13.410

$_3_00 692 1

1 CAPITAL EXPENDITURES

$ 409.090

_$ 21,520

$ 430,610

$ 416,071 J_18,989

$ 435 060 1

UTILITY ASSETS.

$1,617,023

$245,290

$1,862,313

$1,476,729

$220,180

$1,696,909 CONSTRUCTION WORK IN PROGRESS.

1,769.801 6.904 1,776,705 1,446.519 10.436

_1,456,955 TOTAL ASSETS

$3,386,824 5252,194

$3.639,018

$2 923 248

$2E616

$3153,864 1

m Report of Certified Public Accountants Board of Trustees City Public Service We have examined the balance sheets of City Public Service at In our opinion, the statements mentioned abme present fairly the January 31,1987 and 1986, and the related statements of earnings financial position of City Public Service at January 31,1987 and and cpplication of earnings, changes in equity and changes in finan-1986, and the results of oper.itions and changes in financial cial position for the years then ended. Our examinations were position for the years then ended, in conformity with generally made in accordance with enerally accepted auditing standards accepted accounting principles applied on a consistent basis during F

and, accordingly, included such tests of the accounting records and the period.

such other auditing procedures as we comidered necessary in the circumstances.

L h.9

-b*JV March 2,1987 23

I che.

i Five-Year Financial Review Years ended January 31, 1987 1986 1985 1984 1983 (dollan in thousands)

REVENUE AND APPLICATION Revenues:

Electric sales.

5 639,626 5 700,371 $

636,364 3 544,125 $

$21,435 Gas sales.

127,814 136,500 133,301 147,890 140,283 Other income..

36.778 31M2 34.589 23.452 25.975 Total revenues.

8N 218 $

868.833 $

804.254 $

715.467 5 687.693 2

Revenues applied:

Cc:t of operating systems:

Gas, electricity and fuel purchased.

316,251 $

397,414 5 394,321 $

390,0N $

379,470 Other operating expenses.

69,003 65,039 57,392 50,861 49,085 Maintenance..

32,761 33.379 28.164 25.432 25.423 Total..

418,015 $

495.832 $

479.877 $

466.297 $

453.978 Operating Fund..

-0 2,500 $ $ $

-0 Debt requirements for Old Series Bonds:

Interest..

7,426 5 7,875 5 8,303 $

8,696 $

9,018 Principal requirements.

9,000 8,600 8,195 7,835 7,540 Reserve requirements..

(84)

(46)

(17) 25 26 Debt expense -.

14 12 12 13 13 Total..

16.356 5 16.441 $

16.493 $

16.569 $

16.597 Payments and services to City:

Payment in lieu of taxes 7,799 $

7,096 $

6,401 5 6,028 i 5,673 Refunds for services.

15,286 17,009 16,351 14,163 13,453 Additional payment..

73.106 79.867 72.755 61.502 59.696 Total 5

%,191 $

103.972 5 95.507 $

81.693 $

78.822 Debt requirements for New Series Bonds:

Interest expense..

153,411 $

135,235 $

110,165 5 86,645 $

73,5N Principa1 requirements.

23,350 21,440 19,730 18,120 14,825 Reserve requirements..

20,112 11,503 6,049 15,298 20,378 Debt expense.

5,178 1,867 229 119 113 Total 202,051 $

170.045 $

136.173 $

120.182 5 108.820 Allowance for funds used during construction -

(101,402)

(87.296)

(64.467)

(48.439)

(40.871)

Additions to plant:

Total expenditures for year.

430,610 $

435,060 $

390,035 $

259,083 $

184,712 less construction funds provided by sources other than revenues.

315,456 261.239 259.677 187.852 115.091 Revenues used for additions to plant 115,154 5 173,821 5 130,358 $

71,231 5 69,621 Addition to Improvements and Contingencies Fund.

57.853 (6.482) 10.313 7.934 726 Total.

173,007 $

167.339 $

140.671. 5 79.165 5 70.347 Tatal revenues applied S

804J18 $

868.833 $

804,254 5 715 467 5 687,693 1

BALANCE SIIEET DATA Utility plant at cost.

3,255,479 $

2,838,847 5 2,620,511 $

2,236,613 $

1,983,694 Annual construction additions.

430,610 435.060 390,035 259,083 184,712 Accumulated depreciation 446,914 418,743 384,084 350,654 319,898 Annual depreciation allowance..

41,811 40,351 37,837 35,918 34,953 1

Principal and interest coserage 2.00s 2.15x 2.22x 2.05x 2.23x 24

Five-Year Operations Review Years ended January 31, 1987 1986 1985 1984 1983 (dollars in thovands)

OPERATING REVENUES Electric:

Residential.

276,307 $

292,216 $

263,217 $

219,067 $

208,969 Commercial and industrial.

266,747 295,158 268,950 230,528 214,096 Street lighting.

7,781 8,241 7,990 6,864 6,637 Public authorities.

71,073 80,007 75,491 65,032 61,271 Other utilities..

13,982 20,638 15,836 18,928 26,917 hiiscellaneous.

3,736 4.111 4.880 3.706 3,545 Total electric..

639,626 $

700,371 5 636,364 5 544,125 $

521,435 Gas:

Residential..

75,091 $

79,346 $

75,803 $

85,716 5 79,293 Commercial and industrial.

44,357 47,957 48,452 52,388 50,955 Public authorities..

7,442 8,153 8,031 9,324 8,923 hiiscellaneous.

924 1.044 1.015 462 1,112 Total gas..

127,814 $

136,500 $

133,301 $

147,890 $

140,283 SALES (000 OhilTTED)

Electric - KWit:

Residential.

4,036,562 3,782,693 3,491,219 3,139,333 3,084;901 Commercial and industrial...

4,636,308 4,465,682 4,107,615 3,839,434 3,715362 Street lighting.

78,732 78,445 76,565 78,034 78,508 j

Public authorities.

1,358,027 1,300,515 1,246,417 1,197,944 1,175,742 Other utilities.

257,848 413.381 181,741 194.636 332,730 Total.

10,367,477 10,040,716 9,103,557 8,449,381 8,387,243 Gas - htCF:

Residential.

12,516 14,332 13,643 15,493 14,847 Commere'.al and industrial.

9,770 10,2n6 10,152 10,677 10,752 Public authorities.

1,657 1.764 i.708 I 425 1.895 Total.

25,003 26,302 25,503 28,095 27,494 PURCHASE FOR RESALE:

Electric (1,000) KWH.

398,401 842 -0 Gas (1,000) htCF..

25,701 26,040 26,367 29,398 28,322 ELECTRIC GENERATION -

(),000) KWH 10,617,859 10,607,972 9,774,125 8,992,120 8,913,801 Electric Gen. Capacity, KW (Gas)'.

2,400,000 2,400,000 2,400,000 2,600,000 2,400,000 Electric Gen. Capacity, KW (Coal).

836,000 836,000 836,000 836,000 836,000 ELECTRIC PEAK DEhiAND - KW.

2,5 %,000 2,350,000 2,210,000 2,148,000 1,984,000 NUhiBER OF CUSTOhiERS:

Electric.

458,037 446,573 423,316 398,983 372,235 Gas.

285,697 284,876 280,575 279,116 272,331 RESIDENTIAL AVERAGES:

Electric:

Revenue per customer.

692.51 $

765.21 5 724.92 5 647.97 $

654.37 KWil per customer 10,117 9,906 9,615 9,285 9,660 Revenue per KWil 6.84e 7.73C 7.54C 6.98C 6.77C Gas:

Revenue per customer.

5 284.45 $

303.34 $

293.06 $

337.11 $

317.26 htCF per customer.

51,4 54.8 52.7 60.9 59.4 Revenue per htCF.

5.53 $

5.54 5 5.56 5 5.53 $

5.34

• O.I ranngfor the gas unu u 2.198,000 K Wfor sheJin. year penal

'41%,

l c.,,...

I CPS Board of Trustees Management Staff alNan.ser

~ '

Glenn Byg Earl C.11111 Chairman Ylce Chairman Vice Chairman of the Attorney-at law Dh e

i.

4

~~

Board. InterFirst Bank of s

San Antonio, N.A.

E Ilomard L Kenneth flar Arthur von Freeman Assistant General Rosenberg Assistant General M nager for Assistant General Manager for Administration Manager for

~,, d ~.

Finance Plannmg and sp y Desetopment t

nepartment Managers Ruben M. Facobedo IJla Cockrell Jamie E. Aalell John J. leal Trustee Trustee Gener:6on and Penonnel Administradon Ensironmental Planning f

Certified Public Accountant, President, Atkins Travel

• 'I Ruben Escobedo and Agency p

, p Compny Matenals and Transportatwa Plant Emgineenns i

i i

Stesen Dralmer Bob McCunough l

Administrative Senices Public Relations I

Robert J. CosteBo Robert C. Mecke

~6 Transmission ard Construction D

Distnbution Engincenns James W. Pettinos Fe :iun L. Ilsegelin Operatens Perennel Senxes 11enry G. Cisneros Donait R. khnits Ex Officio Trustee Ceca J. llenne Gas Engmeering am Na Customer Senkes Mayor of San Antonio, Texas si,,,,, s,,g, i

Cy liutchininn legal and Benefit Sersices Data Processing Senxes Donald S. Thomaa Financial Senices 26 1

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Financial Highlights Interim Report l 3rd Quarter 1987 2 Electric sales of 3 2 billeon KWH were 0 8% r Quarter Ended October 31,1987 ower than y the third quarter of last year Residential commerc ra' a nd industrial and pubhc authorities usage per c ustomer declined as weather this year was generahy mdder The a e* age number Of eleCir1C Custorr,rs w as 46 ? 10% 193 up Gas sale )f 3 7 mohon MCF advanced 0 9% Pub"r authorit *3 and indus trial usage per customer rose * * :e fewer commerciai and industr al customars reduced t~e sa:es crease The averrp number of gas custome's *as 283 864 down 0 2% Total revenues fen 6 4% to $213 6 m*on E 'ec t n c revenues dropped 6 f % due 'o $112 m,u,on.n iower fue: cost reco,er Gas rever es and i t 7 mui,or due to dec reased sa'es mes cech,ed 4 9% eth $2 0 monon en 'ower gas cost recover es be og partiy of' set by the b g*er sa es interes' an 3 ciner <ncome was down 4 2% tower y eids on.n.est nents were pari aay c'f set b, more fu^cs avacat!e for o.estment Total operating and maintenance costs of $94 8 mron were b DA 'e *er t*an last year Coat costs doch"ed 8 2% as settaem(nt frt successful renegot,atton of the cosi contract v.as apphed to in,emory reducmg the c os t per ton The cost at aca t>ona' gas generaben of f set the tower c >st of pc*er purc hases as onf y 7 6 m n o-vWH

• ere purchased tNs quarter versus 352 7 men on *WH purchased a year ay Mad % on and e sa.e gas c the c os' of gene a' r

c' xd to decone to an aserage c' $ 190 per MCF Other eperat,ng and mainte nance c osts were up 3 0% r-a,nis due to ma>ntenar<e costs at tr e puner plants interest and Debt expense rose 3 2% to 44 9 mahon e The interest Saungs acNeved through advan.e refundmg l s higher enterest rate issues was evident as enterest on a am v-7 * .". l, .,4-*3'g

== greater volume of bonds rose minimally og Hegher a mort 28-( tion of debt cos's shght's offset 'he lower add t ons 'c

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==**.*/ Constructioe, empend t/es cf $% 9 mohon = were 71% less tha^ f aht year Pa, meats of $70 2 mohon f cr tr .g South Te -- Prolect accc /ted for 92 7% of to'a C rod uc e 1-tion C' ant enf enditu res o' $ '$ 7 mohon Con strJCfW O' re - e s, - O m a,no1&ee $ o 0 m,and gas catr,but on p m *as $4 5 -on City Public Service

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,. u ;,s u .e ~' $ 163,000 '4p c v Currer t Assets C a s" a nd Ie, pe,a' y, e, e s.,,, e n g C s' 'me r aC C Oun t s rec e',d D:e r e' '4 b$ f Of t e' rec e,a b e s 42.'436 4',o;

• .4 r e n s a r, seco, es 46,120 33 i a3 5 <.e s mc =

20.640 9a'3-P r e pa er,w s a n a,, q, 21.964 3E 66' r EM.--- Tn,3 (162) 101 m De' e : De n..s $ 172,230 $ 248 7, 'c7A, A W Ts 5 126,830 $ 4,03 9,946 $ 3 s '9 f,f-; ,n lC,j ' Liabilities New %nes 5 115,22C $ 1;4 ;;n ' a" rr ze, ,e,,- ,s. 2.151 720 95; 3y s ss c r e ~ a., (25 317) si ,, s g c,.; l Trta. 34,820 32 3ss l _. Fa" r,,ne ,<g e,, $ 2,206,803 $; <; gr I ! ) .,e,- g $1.485 64 7 $4 093 4, e-'na' cer $ 34 820 j < as ^:< '"tsca,ar e ao13-96.000 Ay }. ,,at <r-me s se. -e ye; -s,, 57.806 41aa. F ',,ta 16.010 ia433 .) $ 206.636 $ 99 py <s,..,.,r,e.. ,s . s f "" e ' a y, a, e s. st,uc "he' 14 976 14 3,. e ,a 2,389 33 E , a,,. 3 p a. a 17'365

5 d45

~ - - ' - r-- Sa- ~ ' em o r s a 72.160 r I ~ < o,, pq 51,335 4'4y i $ 4,0; 9,94 6 $ 3 5 '9 66; Gas SMstics ~ s '1. a '- E n c e : ir i8-j y; ,,3g, h >as sa es McF -.% gays Gasou1* 3.669 . e ec gem,,,, ~, yc, n 26 841 p gg, qi, A. e ' a g e m w pe,, e s c,e, 3 20 604 3 < 64.706 2264 2 ,,.,,,g, y,p bis ' s' 63 s a. e, a p.,,, r e,,, pe,. } 56 7 283.864 ei !4'2 254 706 cps '"c' ease. decrease v ro, c,e, a pe,, y 1 .I .T m

l {' Ovarter Ended 12 Months Ended October 1987 O_ciober 1987 cey cw. g. e r,o-1987

366 1987 1986._

THE REVENUE FROM OPERAllONS W AS Elec tric sa!es Cm sa es $ 168,140 $ r 13 344) $ 620.535 $ <29 328)

nterest and other 16,829

<,9 7to 131.754 8 646 TOT AL Rf VENUE 8,639 (38:' 42,284 8 798 try" m __ ,. p g g g g pg $ 213,608 $ (14 595 $ 794,C 73 $ U1884) THE REVENUE WAS APPLIED AS FOLLOWS .' a,, rj f 7,.3. g 4

g. --

F OR OPE A A TIONS AND MONTEN ANCE s k. ' '- s # 'y j-g.,. -f p, F ue) = g'$ f.' gas and purchased power i'f ) '?/ th;g s $ 65.678 <7845; $ 292,258 5 (32 628i Operat,ng a nc genera' eipen ses ,$' N 'M. dim-k -$ #t' % Ma ntenance 19,505 c1'3-70.839 < 1 6 56 > 'le '[./ F N ", Tota-9,629 954 35,816 1 159 hi 8 ,.(.' A;( $ 94,812 (7.004- $ 396,913 $ (33125i y

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,[# F O A OPE R ATING F UND ADDITIONS s o. f 0 0-0- $ - ^ ~ - - ~ ~ - FORDEB7 AEQu' AE ME NTS vierest a nd cett e n c ense Actue-e-' o' bonas $ 44.913 ' 396 $ 176.623 $ 14 989 8,705 618 34,202 2 430 Add tions 12 dena Reser,e r A 'owance f or f unds used una 2 963 il '55i 13.449 .2 749' du mg co"struc t. on r To'a' (26,282) (4691 (105,665) (7 344' $ 30,299 3M $ 118 609 $ '327 f OR PA v VENTS AND SERVICES TO 1 T HE CITY OF SAN ANTONIO $ 28,077 p'3't $ 94,727 $ (2 293; 3 6 C A ADC:~f 0NS TO U Titt'4 PLANT Ti f a e a r+nd t Jres h [ rl $ 96,915 7 451 $ 422,650 s'449 -. f; i. /V w l I A dd t' e s to impro.emen ts a nd l g ' v tmgenc es Fund .I icta 34,139 ( 3 ' ? 73;151 29.074 A. $ 131.054 $ t 14 'M $ 495.801 $ 27625 <essf ncs ' rom B $nas fd- *- 6 neet }., yy u gg}g T E CP cortr t trons e' 3,i ' .h Y $ 70,634 $ (? 921: $ 313,4 77 $ 11 418

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Tota) revenue avaaatle f or .w .*f.y g'- h'. - pla nt 's ;^. ^.-: $ 60,420 $ (6e4di $ 182,324 $ $6 207 T O; A L PE '* E NUE A PN 'E D $ 213,608 'd59' $ 794,573 $ ' i Be s' M 'I I3~-, b necresms dec ease

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(, t, Electric Statistics La w E-ud 10 31 8' '; Mc.~ s E r de l ' O 3 9 87 E pc N sa'es t k A H n trcesa nd s 3 2;7.124 ua m d.-m a nc ' M W ' r t h o u sa nc s 24 59' 10 427.525 '1 749 um e'ec ' r Aeage use per es certa custorver 2,551 45 2 551 4

iaWH, i45!

3.390 12' 10.102 ' 998 E4cs e c ustomers ia e' age n eber ' pa nod; 461.193 a560 459 315 6 289 inc rease idec rease ' t'o-E re, ( os rerod

.,.....~ u. vuor ter enced October 31,1987 To Our Customers and Bondholders: T he third quarter which ended October 31 was a perod o' orogress for City Pubhc Sen The actton marked the beginnmg of a period vq e with w ork beginning on a pipe' ne pro-of examin.n; equrpment in preparation for sect wh ch win an ow add,fional ser testing at $ percent of power Tne current i sice to c ou tomers an J with a ma,or eg.y p er 'ne completed schedule can 'or low pcwer testing to begtn mo r 4 j f eg. g.g, g at me woih Texas Pro;ect >n late December so the Nuclear Regulatory y.-3,7 uction began in September on n e Commission r an consider a hcense to test at ?,.[g',j,Jpf gy Constr Nu t-Gate P petre a 1712 mue 24-'nt r {% f. r successfuuy h;gher te.els of power San j O d M, *,6 p A yJ r're ine wn,ch 6..; connec t the CPS gas loep Antonio e=pects to begin receuing e!ectn- N

• In the Va'ero and Oasls p pe nes on San t,t > trom the Project in early 1988 during

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-f U f Anton.o s narth s de ' he pipeL ne e rh p ros 'de power ascens on testing The brief detay in -6.hh y d( - ?[ ? ~. %p a th.rd stanon f o> the gas s, stem loading f uel caused the Project Manage thu s inc rea s - q' / _ % a d \\ ' .,4.I ~ r to mg the rm at4 t, c' P" s y s tem an .nc rease the est: mated cost to complete the - k u prov'd.ng ser, ce 'nertr Proset t by $300 mm n t j, ag i 'D- )g.T, ero parts o' Be nar C ou r' t y i o T he CPS share of ...( !, j ' J 3, -

1. Nr tr rrenUr are no' sersed in add,t.on s.nc rease is apr o.

m $84 mon n u f tre poem s es pected to mcre ase competr m o N Q Q[', @,((k. C PS has a 28 percer ' .< 4

• a'e of the 2 500

';,).y' t< a succ,'ng "atu ra gas to C PS **er. egawatt capac't> plant te>ng budt near Ba, Cit y on the Texas coast When both r e c c> n n r f.

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c se rece,ed sho Ja be e.a6ated by San Antonio s share of t% Pr o,ect should prcphe er a in 3t % +/.,. A the en-,' Dec e-ber so a c ont rac t c a n t'e '00 megawatts of electricity N1 appro m rmatet, '~ a warded ear,e.t year one-th'rd of the c ity s reau'rernents ( l (:P$ ce r mated 45 yea's ot rr Dunng the quarter O' o c ma:nw"er assets reached $4 m ' oc 4 ter boi!on Ngm ght,ng the t,enet.ts tc an md cat on of the strength of the l c uste ' e" +at ha se ac tmt, s

• m anc a pos+on T he Cit y c' San

< l mec r er a se P o r Am s eau t, s'a nds a' 51 " on , s w ea t., tm C.t r o' Sa-A r % Fron G '7t er 1942 through September 1987 C PS r 'c.,,ce; t e Cit y of San An tonio w.th S $999 4 72 > " c a sh a nd ser.,c es w < th %ncerel y ann ual f.a y n e n ts in re( ent y eP's reaC h'ng a pp r o n i ma te', $ 100 M Hlior Mu ro. ipa' o w cer sh ip 8'so has meant ion rates f or ( ustomer s The October study of res'. larlC Hth dentia rates prepared by the Tex as Utiht)es Elecfor r e mpe, shows that San h ad M bus % man A n tonio s electtg rates rar m ed th f d Iowest of the 26 largest ci! es r ! e Umfed States In A ug a s t

ea r fuet r-was iOaaed at the South Te x as P'. e< t n

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• s e e ao / f eV n } ' 2 REPORT OR1 CERTIFIED JPUBLIC' ACCOUNTANTS n'.

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da A MEMBER OF ARTHUR 'CUNG INTERNATIONAL Arthur Young 0 2 r '4 D F t,. i,3 rmn. u., a u w,o ~ 1J REPORT OF CERTIFIED PUBLIC ACCOUNTANTS The Board of Trustees City public Service We have examined the balance s h e,e t s of City Pubite Service at Ja nt:a r y 31, 1988 and 1987, and the related stateme.its of earnings and application of earnings, changes in equity and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standarde and, 1 accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the statements mentioned above present fairly the financial position of City Public Service at January 31, 1988 and

1987, and the results of operations and changes in financial position for the years then ended, in conformity with generally

= accepted accounting principles applied on a consistent basis during the period.

1. 9 Y

March 9, 1988 9 0 9 0

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em eu h emp =a b = 9 a E D BALANCE SliEETS m O 9 r r8 ~li + Y h

CITY PUBLIC SERVICE BALANCE SHEETS, JANUARY 31, 1988 and 1987 ASSETS NOTES 1988 1987 (in thousands) UTILITY PLANT - At cost: 1 Electric $1,292,661 $1,221,198 Gas 208,101 196,620 General 70,995 60,956 Construction work in progress 8 1,973,012 1,675,726 I Nuclear fuel in process 8 102,089 100,979 Total utility plant 3,646,858 3,255,479 Less accumulated depreciation 473,275 446,913 Utility plant - net 3,173,583 2,808,566 l RESTRICTED CASH AND INVESTMENTS: 1,2,3 l Bond Construction Fund 41,335 j l Bond Reserve - Old Series Bonds 4 17,279 17,353 l Bond Reserve - New Series Bonds 4 182,639 173,786 Improvements and Contingencies Fund 140,078 131,439 Other 1 17,711 5,150 Total restricted cash and investments 357,707 369,063 CURRENT ASSETS: Cash, including temporary cash investments 1,2 37,687 19,045 Customer accounts receivable, less allowance for doubtful accounts of $1,297,000 in 1988 and $1,222,000 in 1987 Other receivables 60,503 54,947 9 46,952 42,352 Inventories and supplies - at m average cost: Laterials and supplies Fuel stock 22,235 20,642 Prepay > ten t s 32,775 42,089 1,547 1,859 Total current assets 201,699 180,934 LITIGATION SETTLEMENTS BENEFITS RECEIVABLE 8,9 165,000 205,500 DEFERRED DEBITS AND OTHER 1 130,561 74,955 I a TOTAL $4,028,550 $3,639,018

e I ~ a 'n LIABILITIES NOTES 1988 1987 (in thousands). LONG-TERM DEBT - Revenue Improvement Bonds: 3,4 Old Series S 95,880 105,785 New Series 2,098,800 1,903,425 Less: Unamortized discount on ~~ New Series Bonds (24,940) (20,812) Net long-term debt 2,169,740 1,988,398 ~ EQUITY: /, Appropriated retained earnings: 3 Bond Reserve - Old Series Bonds 17,279 17,353 Bond Reserve - New Series Bonds 130,180 121,328 m ,3, Improvements and Contingencies Fund 140,078 131,439 Total 287,537 270,120 7 Reinvested earnings 1,189,963 1,025,885 /. Total equity 1,477,500 1,296,005 CURRENT LIABILITIES: Current maturities of long-term debt 4 37,440 34,820 Short-term debt 5 98,000 100,000 Accounts payable and accrued liabilities 75,906 61,610 Litigation settlement benefits payable to customers 9 10,l'77 834 Customer service deposits 16,283 14,079 j Total current liabilities 237,806 111,343 } DEFERRED CREDITS AND OTHER: Customer advances for construction 14,860 14,751 ) Other 8,280 1,965 Total deferred credits and other 23,140 16,716 { LITIGATION STCTLEMENT BENEFITS ,l PAYABLE 9 69,625 79,666

1. 8 CONTRIBUTIONS

'.N AID OF CONSTRUCTION 1 50,739 46,890 T gl COWWITWENTS AND CONTINGENCIES 6,8,9 TOTAL $4.028.550 $3.639.018 1 o See notes to financial statements. t ' Ip

0 i,' CITY PUBLIC SERVICE i STATEMENTS OF EARNINGS AND APPLICATION OF EARNINGS FOR THE YEARS ENDED JANUARY 31, 1988 and 1987 NOTES 1988 1987 (in thousands) H REVENUE: 1 Electric $626,726 $639,626 Gas 126,581 127,814 Interest and other income 38,450 36,778 Gross revenuo 791,757 804,218> I EXPENSES: 1 Fuel, purchased power and resale gas 284,019 316,251 Other operating and general 74,921 68,998 ] Waintenance 36,025 32,761 1 Depreciation 44,609 41,811 Interest and debt expense 178,067 166,029 Allowance for interest used during construction (107,025) (101,402) Payments to the City of San Antonio 7 99,646 __96,191 Total expenses 610,262 620,639 NET EARNINGS 181,495 183,579 ADD: Depreciation 44,609 41,811 Interest requirements on New Series T Bonds (payable from improvements and Contingencies Fund) 162,143 153,411 AVAILABLE FOR APPLICATION $388.247 $378,801 APPLICATION: To pay long-term debt requirements - i j Old Series Bonds: Principal payments 9,435 9,000 = Bond reserve (74) (84) l To reinvested earnings - Net gain on sale of assets 300 5 To Improvements and Contingencies Fund: Minimum requirement (12-1/2% of l 7 i gross revenue) 3 98,970 100,527 Balance of available revenue 279,616 269,353 APPLICATION $388.247 $378.801 I' See notes to financial statements. a

l 1 u CITY PUBLIC SERVICE STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED JANUARY 31, 1988 and 1987 1988 1987 (in thousands) BOND RESERVE - OLD SERIES BONDS: Balance, beginning of year 17,353 17,437 Deductions - transfer of earnings (74) (84) Balance, enc of year 17,279 17,353 BOND RESERVE - NEW SERIES BONDS: j Balance, beginning of year 121,328 101,216 A Additions - from Improvements and Contingencies Fund 8,852 20,112 Balance, end of year 130,180 121,328 IMPROVEMENTS AND CONTINGENCIES FUND: E Balance, beginning of year 131,439 6 73,586 ) Additions - from application of earnings: Minimum requirement (12-1/2% of gross revenue) 98,970 100,527 Balance of available revenue 279,616 269,353 Total 510,025 443,466 Deductions: New Ser.ies Bonds: Additions to reserve 8,852 20,112 Payment of bond interest 162,143 153,411 Payment of bond principal 25,385 23,350 Construction expenditures 173,567 115,154 Total 369,947 312,027 B a l a r.ce, end of year 140,078 131,439 l REINVESTED EARNINGS: Balance, beginning of year $1,025,885 920,187 Additions: 3 From Improvements and Contingencies Fund: g For construction 173,567 115,154 For New Series Bonds principal payments 25,385 23,350 From application of earnings: Old Series Bonds principal payments 9,435 9,000 'd Net gain on sale of assets 300 5 Total 208,687 147,509 Deduction - Depreciation 44,609 41,811 Balance, end of year $1,189,963 11,025.885 See notes to financial statements.

1 ]- CITY PUBLIC SERVICE STATEMENTS OF CHANGES IN FINANCIAL POSITION E FOR THE YEARS ENDED JANUARY 31, 1988 and 1987 1988 1987 (in thousands) SOURCES OF FUNDS: Net earnings 181,495 183,579 j Add (deduct) amounts not affecting } working capital: d Amortization of New Series Bond discount 1,453 1,081 Amortization of deferred debits 7,546 4,140 ] Depreciation 44,609 41,811 J Allowance for interest used during construction (107,025) (101,402) Working capital provided from operations 128,078 129,209 m Contributions la aid and customer r advances for construction 5,536 7,018 Sale of revenue improvement bonds 158,143 181,772 Sale of refunding bonds 385,166 310,242 Litigation settlement 111,500 Decrease in restricted cash and 7 investments 11,356 I Decrease in litigation settlements benefits receivable 40,500 Other 6,315 Total 735,094 739,741 APPLICATION OF FUNDS: h Acquisition of utility plant - net of allowance for interest used during construction 301,827 329,208 h Increase in litigation settlements benefits receivable 40,500 Retirement of bonds 34,820 32,350 g Defeasance of bonds refunded 328,870 253,350 y Increase in current maturities of long-term debt 2,620 2,470 Increase in restricted cash 56,524 ft Litigation settlement received 31,000 Excess of reacquisition amount over principal of bonds refunded in C advance 53,897 57,649 s Decrease in litigation settlement benefits payable 10,041 834 q Other 8,717 6,350 3 Total 740,792 810,235 f DECREASE IN WORKING CAPITAL (5,698) (70.494) c l s,

1 j w ] CITY PUBLIC SERVICE STATEMENTS OF CHANGES IN FINANCI AL POSITION FOR THE YEARS ENDED JANUARY 31, 1988 and 1987 1988 1987 (in thousands) g] CHANGES IN WORKING CAPITAL COMPONENTS: ) Increase (decrease) in current assets: Cash, including temporary casb investments 18,642 (55,041) Customer accounts receivable 5,556 3,714 Other receivables 4,600 9,015 R Inventories and supplies (7,721) 10,441 3 -Prepayments (312) (26,106) Decrease (increase) in current liabilities: Current maturities of long-term debt (2,620) (2,470) Short-term debt 2,000 Accounts payable and accrued liabilities (14,296) (6,118) Litigation settlement benafits payable to customers (9,343) (834) Customer service deposits (2,204) (3,095) 3 DECREASE IN WORKING CAPITAL (5,698) (70,494) y WORKING CAPITAL (DEFICIT), BEGINNING OF YEAR (30,409) 40,085 WORKING CAPITAL (DEFICIT), END OF YEAR (36,107) (30,40Q) k-i i e r See notes to financial statements. e ~6-

J CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES j Basis of Accounting City Public Service ("CPS") uses the accrual method of accounting based upon the Uniform System of Accounts for Gas and Electric Utilities issued by the National Association of Regulatory Utility Commissioners. Fiscal Year The fiscal year ended January 31, 1988 is re-ferred to herein as 1988 and the year ended January 31, 1987 as 1987. Revenues and Expenses Revenue is recognized as billed on a I cycle basis. Rate schedules include fuel and gas cost adjust-ment clauses that permit recovery of fuel and gas costs in the month incurred. CPS charges to expense the cost of electric production fuel in the period that it is consumed and the cost of resale gas in the period of purchase. = j' Utility Plant These assets are stated at the cost of construction, including costs of contracted services, direct material and

labor, indirect

costs, including general g

engineering, labor and material overhead, and an allowance for to interest used during construction ("AIUDC"). CPS computes AIUDC using rates representing 'the cost of borrowed funds on projects estimated to cost l'n excess of one million dollars and 0 expected to require more than one year to complete. Retire,- ments of utility

plant, together with removal cost less

salvage, are charged to accumulated depreciation.

The q maintenance of property, and replacement and renewals of items g determined to be less than a unit of property, are charged to maintenance expense. General utility plant assets consist of land, buildings, and equipment for general and administrative l purposes that are used commonly in electric and gas operations. CPS computes depreciation using the straight-line method over 1 the estimated service lives of the various classes of depre-W ciable property as determined by periodic engineering studies. Depreciation as a percentage of average depreciable plant was 3.08% in 1988 and 3.07% in 1987. Contributions in aid of construction are amortized over a period equal to the lives of the related assets, ,f Other Restricted Cash These amounts consist primarily of lunds being held in escrow as required under contracts with a q gas supplier and a public housing authority, and other funds not generally available for current operations. I,'. e

f CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 d 1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (continued) Investments - Investments are stated at cost which approximates market value. The specific identification method is used to determine cost in computing gain or-loss on sales of securities. Amortization of premium and accretion of discount is recorded over the term of the investment. } Deferred Debits and Other - These amounts consist primarily of 1 the unamortized balances of bond issuance expenses and excess of reacquisition amounts over revenue bond principal amounts I refunded in advance. Amortization is recorded over the period 1 of the outstanding bonds. 2. CASH, TEMPORARY CASH INVESTMENTS AND INVESTMENTS CPS deposits at January 31, 1988 and 1987 were entirely J collateralized by banks for the account of CPS. CPS' 1 investments, including both restricted and unrestricted, at January 31, 1988 and 1987, were all in U.S. Treasury securities and were beld at the Board's general depository bank for the f account of ' CPS. CPS' investments are generally limited to U. S. Government obligations. ( Fully collateralized cash and certificates of

deposit, including restricted amounts of

$11.0

million, were

$20.1 million at January 31, 1988. Investments in U. S. Government obligations, including restricted amounts of $346.7 million, were $375.3 million with a market value of $375.7 million at January 31, 1988. l 3. REVENUE BOND INDENTURE REQUIREMENTS The Trust Indenture executed by the City of San Antonio (the ~ "City") in conjunction with the issuance of the revenue bonds dated February 1, 1951 through August 1,

1974, "Old Series Bonds," contains, among others, the f ollot'ing provisions:

n y1 1) All of the assets of the gas and electric systems, together with the net revenues of the systems, as defined, are pledged with the Harris Trust and Savings Bank of Chicago, h Illinois, as Corporate Trustee, to secure the payment o.f the "Old Series Bonds." q1 2) Gross revenues of the gas and electric system shall be j applied to: (a) expenses of operating and maintaining the systems; (b) debt service and reserve requirements on the "Old Series Bonds"; (c) payment of an "in lieu of tax"

1. ne

~

J CITY pVF.LIC SERVICE 4 NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 3. REVENUE BOND INDENTURE REQUIREMENTS (continued) 2) amount to the City; (d) an amount equal to 12-1/2% of gross revenues to the Improvements and Contingencies Fundi (e) additional benefits and payments to the City to bring City } benefits and payments to 14% of grosa revenues; (f) addi-tional payments to the Improvements and Contingencies Fund until such fund equals 20% of the value of fixed capital 7 assets; and (g) balance to a surplus fund. ~ 3) The following funds are established: (a). General Fund; (b) Improvements and Contingencies Fund; (c) Bond Construction ] Fund (containing the procneds of revenue bonds); (d) Principal and Interest Current Requirements (containing the monthly payments of annual debt requirements), and (e) Bond ? Reserve Fund (containing an amount equal to the next fiscal year's principal and interest requirements). These funds may be invested with authorized depository banks or in U. S. Government securities. ~ Beginning with the year ended January 31, 1976, New Series Electric and Gas Systems Revenue Improvement Bonds ("New Series f Bonds") were issued. These bonds are junior and subordinate to the "Old Series Bonds. " The bond ordinances authorizing these issues provide that no further bonds or obligations will be Tj authorized or issued under the terms of the Trust Indenture for "Old Series Bonds." While any of the "Old ' Series Bonds" are outstanding, the "New Series Bonds" are payable solely from the 3 net revenues of the systems (1) deposited and available for 4 deposit in the Improvements and Contingencies Fund and (2) from funds payable to the City. At such time as the Trust Indenture covering the "Old Series Bonds" becomes inoperative, revenues 1 ] will be applied as follows: (a) for maintenance and operating expenses of the sys t ems'; (b) for payments of the "New Series Bonds"; (c) for the payment of any obligations inferior in lien ? to the "New Series Bonds" which may be issued; (d) for an i amount equal to 6% of the gross revenues of the systems to be deposited in a Repair and Replacement. Fundi (e) for cash payments and benefits to the City not to exceed 14% of the [ gross revenues of the systems; and (f) any remaining revenues to the Repair and Replacement Fund. The funds created by the "New Series Bonds" ordinance are similar to those set forth ] under the "Old Series Bonds" Trust Indenture. O e T* lle 9 e

= 4 CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 4. LONG-TERM DEBT A summary of long-term debt is as follows: Weighted-Average Interest Final Rate on Ou t-Unpaid Principal Maturity standing Bonds 1988 1987 (in thousands) Old Series, j 1968-1974 1989-1997 6.39% 105,785 115,220 Naw Series, 1975-1987 1989-2014 7.54% 2,126,335 1,928,810 [ Total 7.52% 2,232,120 2,044,030 Less current maturities 37,440 34,820 7 Amounts due after one year $2,194,680 $2,009.210 7 Principal due (in thousands) for the next five years are: J Principal Due 7 01d Series New Series Year Bonds bonds Total 1989 9,905 $27,535 $37,440 } 1990 10,375 42,440 52,815 1991 10,945 46,045 56,990 1992 11,500 49,905 61,405 7 1993 12,090 54,195 66,285 J As of January 31, 1988, bond reserve requirements for the Old 7 Series Bonds and New Series Bonds have been met. a In February

1987, CPS refunded

$328,870,000 of previously issued and outstanding New Series Bonds through the issuance of $391,780,000 New Series 1987 Revenue Refunding Bonds. Although the advance refunding resulted in reacquisition amounts in excess of bond principal amounts refunded of $57.3 million, the { present value of the economic savings at the, time of sale was approximately $36.7 million and aggregate debt service payments were reduced by $72.1 million. United States Government g securities were purchased with the net proceeds of the 1987 L refunding issue and deposited in an irrevocable trust to satisfy scheduled principal and interest payments of the refunded issues. The refunded bond issues and trust accounts, e n o

.i { CITY pVBLIC SERVICE NOTES TO FINANCIAL STATEMENTS ~ JANUARY 31, 1988 and 1987 4. LONG-TERM DEBT (continued) as well as those of previous refundings, are not included in CPS financial statements. At January 31, 1988, portions of the bonds which were defeased in-substance were still outstanding, 7 l as follows: Fiscal year 1986 Refunding $ 97,130,000 Fiscal year 1987 Refunding 253,350,000 Fiscal year 1988 Refunding 328,870,000 During January 1988, the City of San Antonio gave notice of its intention to issue New Series 1988 Bonds in an amount of $160 1 ~ million to be delivered on or about April 7, 1988. The proceeds from the bonds will provide funds for the purposes of { improving and extending the electric and gas systems of the City. i 5. SHORT-TERM DEBT In November 1983, the City Council of the City of San Antonio f authorized the issuance of $100 million in tax-exempt commercial paper (the "Commercial Paper") to assist in the financing of eligible projects, including fuel acquisition and { capital improvements to the utility systems (the "Systems"). As of January 31, 1988, $98' million in principal amount was outstanding, with a weighted average interest rate of approxi-mately 4.98% and an average life outstanding of about 62 days. All proceeds have been used for construction purposes. The Commercial Paper is equally and ratably payable from and is secured,by (1) the Net Revenues of the systems and (ii) a lien on the sale and pledge of the proceeds from the sale of other Commercial Paper, the subsequent sale of bonds, and borrowings ? under the Credit Agreement (as defined herein). Such pledge on Net Revenues is subordinate and inferior to the pledge securing j 2 payment of (i) the Old Series Bonds (ii) the New Series Bonds e and (iii) any New Series Bonds to be issued in the future. The i City and Texas Commerce Bank National Association bave entered into a revolving credit agreement (the "Credit Agreement") pursuant to which such bank is obligated under the Credit h Agreement to loan to the City an aggregate amount not to exceed $100 million for the' purpose of paying amounts due on the Commercial Paper. Any borrowings under the Credit Agreement are equally and ratably secured by and payable from the above-described sources pledged for payment of the Commercial Paper. There have been no borrowings under the Credit Agreement as of January 31, 1988. . J

l l-CITY PUBLIC SERVICE NOTES TO FINANCIAL STAT 8MENTS JANUARY 31, 1988 and 1987 6. PENSION PLAN L CPS has a self-administered, defined-benefit contributory pension plan covering substantially all employees. Partici-pating employees contribute 5% of their base pay bi-weekly. Normal retirement age is 65;

however, early retirement is available with 25 years of benefit service.

Benefits are reduced for retirement under age 55. The total employer pension cost (all funded), which includes amortization of past service costs over 30 years using the Unit Credit Cost actuar.al method, is summarized as follows: 1988 1987 (in thousands) Amounts deposited in the CPS i Employees' Pension Trust $9.345 $9.136 Percentage of covered payroll 12% 12% Governmental Accounting Standards Board Statement (GASB) No. 5, { effective for years beginning after December 1986, requires that a pension benefit obligation be measured using the actuarial present value of Credited Projected

Benefits, as 7

adjusted for projected salary increases. This measure is independent of the funding method used to determine contri-butions to the plan. The actuarial valuation as of December 31, 1987, was computed using an assumed rate of return of 8.5% and projected salary increases averaging 6.5%. As a result, under GASB No. 5 the following represents CPS' pension benefit obligation (in thousands) as of December 31, 1987: 1 For retirees, beneficiaries and inactive participants $ 54,862 For active participants: Employer and employee-financed j vested benefits 146,473 { Employer-financed nonvested benefits 25,848 Total Pension Benefit Obligation $227.183 ) Net Assets Available for Plan Benefits (at fair market value) $148.962 Unfunded Pension Benefit Obligation S 78.221 . j

CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS ~ JANUARY 31, 1988 and 1987 6. PENSION PLAN (continued) Prior to GASB No. 5, CPS reported the plan status as the i actuarial present value of accumulated plan benefits. Under such method, the actuarial present values of accumulated plan benefits using an assumed rate of return of 8% was $137,856,000 at December 31, 1986. At that time, net assets available for plan benefits were $132,075,000 at fair market value. 1 The actuarial present value of accumulated plan benefits as of December 31, 1987 is $158,565,000 based on the same actuarial 7 method with some changes in actuarial assumptions, including an i 8.5% rate of return. This value compares to the net asset value of $148,962,000 as reported above. I Employees that retired prior to 1983 are receiving annuity a payments from an insurance carrier as well as receiving some benefits directly from CPS. These incremental costs for 1988 T and 1987 were $723,000 and $711,000, respectively, and were i recorded when paid. CPS also provides certain health care and life insurance benefits for retired employees. CPS' employees are eligible for these benefits upon retirement from CPS. The r l cost of retiree health care and life insurance benefits, funded by CPS and retired employee contributions, is recognized as an expense of CPS as employer contributions are made to the T programs. These costs approximated $792,000 and $734,000 for a 1988 and 1987, respectively. 7 J, 7. PAYMENTS TO THE CITY OF SAN ANTONIO The Trust Indenture provides for benefits and services totaling f* 14% of CPS gross revenues, as defined, to be paid or provided to the City. The Ci t y had previously elected to accept benefits less than 14% of gross revenue; however, on October 1, 7 1987, the City reinstated benefits at the full 14% of allowable revenues. The reduction of City benefits had no effect on financial operations. f Payments to the City of San Antonio for 1988 and 1987 were as follows: 1988 1987 h (in thousands) In lieu of taxes 8,946 7,799 Refund gas and electric services 15,656 15,286 ~ Additional payments 75,044 73,106 $ 99.646 $ 96.191 J

~ CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS ~ JANUARY 31, 1988 and 1987 8. SOUTH TEXAS PROJECT CPS is one of four participants in the South Texas Project ("STP"), which consists of two 1,250 megawatt nuclear generat-ing units under construction at a site in Matagorda County, Texas. The other participants in the project are Houston Lighting & Powe'r Company ("HL&P"), the project manager, Central Power and Light Company ("CPL") and the City of Austin ("Austin"). Under the terms of the STP participation agree-ment, each participant provides financing for its share of construction expenditures with CPS' participating interest in the project being 28% or 700 megawatts. Projected commercial [ operation dates are the summer of 1988 and June 1989 for Units 1 and 2, respectively. 7 In 1982, the City of Austin filed suit against HL&P, originally seeking rescission of its obligations in connection with the Project. That suit is now pending in a State District Court in Dallas County, Texas, and includes claims that HL&P breached i its duties and mismanaged the Project as Project

Manager, seekicg damages on various theories ranging from $406 million to approximately $938 million.

On January 7, 1988, HL&P filed pleadings against CPS, CPL and its parent company,. Central and South West Corporation ("CSW"), in the City of Austin liti-gation in Dallas County snd in the State District Court in Matagorda County seeking a declaratory judgment that HL&P has no liability to the other participants in the Project and seeking contribution and indemnity f rom CPS, CPL and CSW for 7 any damages for which it is held liable to the City of i Austin. In March 1988, CPS and CPL made a call for binding arbitration concerning their disputes with HL&P over the South Texas Project including any mismanagement by HL&P, under the l terms of the South Texas Project Participation Agreement, and have requested that any proceedings on HL&P's pleadings against CPS and CPL be stayed pending the arbitration. In December 1985, a suit involving the project was settled on the agreement of Brown & Root, the former architect / engineer and constructor for STP, to pay the plai nti f f s, CPS and the other participants, $750 million. CPS commenced receipt of its $210 million share of the settlement in January 1986. Quarterly installments, without interest, in the amount of $7.5 million a r.e remitted purcuant to an unqualified contractual obligation of Aetna Life Insurance Company. The. remaining payments have been recorded as current other receivables and as Litigation Settlements Benefits Receivable. = s

8 ~ CITY pVBLIC SERVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 ~ 8. SOUTH TEXAS PROJECT (continued) The estimated total direct cost of the project is $5.278 billion after consideration of the net present value of the ~ Brown & Root settlement and other project related credits. CPS' portion of the total costs for STP is $2.1 billion for construction and interest during construction and $115 million for fuel to be purchased prior to commercial operation of each Unit. CPS' share of remaining costs is estimated to be $105 million for plant construction and $13 million for nuclear fuel over the next two years, exclusive of interest. The costs may vary from the estimated amount due to inflation, changes in ~ equipment

delivery, construction schedules, and regulatory changes.

T As of January 31, 1988, CPS has expended approximately $1.988 1 billion on the project (net of the $210 million settlement with Brown & Root), including interest during construction of $479 million and advance payments on fuel of $102 million. A license authorizing the loading of fuel and operation of ~ Unit 1 of the STP at power levels up to 5% of rated thermal power was issued by the Nuclear Regulatory Commission ("NRC") on August 21, 1987. The Project Manager loaded fuel shortly thereafter and commenced an initial startup test program. Unit 1 achieved its initial criticality in early March and HL&P was expected to seek authorization f rom the NRC to proceed with its test program up to full power operation shortly thereafter. In connection with the licensing and operation of STP, the participants have obtained all nuclear property and nucle 9.P ~ liability insurance required to date. However, there can be no { assurance that all potential losses or liabilities will be insurable or that the amount of insurance carried will be sufficient to cover all potential losces and liabilities. The participants currently maintain property damage insurance of ~ $1.23 billion through American Nuclear Insurers ("ANI") and L'uclear Electric Insurance Limited ("NEIL") and are planning to purchase additional $165 million limits from NEIL following Unit l's initial criticality. The NEIL excess property damage insurance (totaling $500 million) must be used to cover decontamination and clean-up expenses before being used to .[] cover direct losses to property. The participants have purchased all available private insurance (currently $160 million) against liability claims that may result from a nuclear incident, the total of which claiins are limited under the Price-Anderson Act to $720 million as of January 1988. In January 1987, the participants executed with a.

a, _ CITY PUBLIC SERVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 SOUTH TEXAS PROJECT (continued) 8. the NRC an indemnification agreement under the provisions of the Price-Anderson Act, which could result in STP participants being assessed retrospective premiums of up to $5 million per incident (but not more than $10 million per year) to cover claims in excess of that covered by private insurance. The Price-Anderson Act expired August 1, 1987. Congress is currently considering bills that would extend the Price-Anderson Act and could substantially increase the liability for nuclear plant owners. Until a new Law is passed, the current provisions continue to apply to STP. 9. COMMITWENTS AND CONTINGENCIES In December

1986, CPS approved a

settlement offer from railroads involved in disputed issues about the proper and lawful freight rates. As a result, CPS received a $31 million ~ pa ymen t from the railroads in January 1987, most of which was used to replace utility funds used to make prior $26.4 million court-ordered rail tariff payments and to offset legal expenses incurred during the dispute. In January 1988, CPS received an additional $10 million, and CPS will receive additional annual ~' paymen ts ranging from $10.5 to $13 million, totaling $70.5 million, over the next six years from the railroads, which is expected to be returned to customers as paymen ts are received. The remaining amounts due have been recorded as current other receivables and Litigation Settlements Benefits ~ Receivable. l ~ Other - CPS is involved in various legal proceedings related to alleged personal and property

damages, breach of contract, environmental matters, condemnation appeals, and discrimination cases.

In the opinion of management of CPS, the outcome of such proceedings will not have a material adverse effect on the i financial position or results of operations of CPS. l 1 Other purchase and construction commitments a"ounted to approximately $525.5 million at January 31,

1988, including

$441 million for a turnkey contract for construction of a new coal fired power plant to be completed by the summer of 1992. As of January 31,

1988, CPS has no significant lease commitments.

u -u M m - +

( c. CITY PUBLIC SEaVICE NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1988 and 1987 ~ 10. SEGMENT INFORMATION Segment information is as follows: 1988 1987 (in thatsands) (in thousands) Electric Gas Total Electric Gas Total ~ REVDUE $ 626,726 $126,581 $ 753,307 $ 639,626 _$127,814 $ 767,440 EXPENSE: Operating and stintenance expenses 289,591 105,374 394,965 341,816 113,194 418,010 Depreciation 38,683 5,926 44,609 36,501 5,310 41,811 Total 328,274 111,300 439,574 341,317 118,504 459,821 Operating Incam $ 298,452 $ 15.281 313,733 $ 298,309 $ 9,310 3 W,619 1 Interest and other incam 33,450 36,778 1 % ~ rating expenses 170,688 160,818 Net earnings $ 181,495 $ 183,579 CAPITAL EXPHOI'IURE $ 385,306 $ 23,516 $ 408,852 $ 409.090 $ 21,520 $ 430,610 (TTILITI ASSEIS $1,687,501 $265,945 $1,953,449 $1,617,023 $245,290 $1,862,313 ENSIRUCTION WORK IN PftXRESS 2,060,485 14,616 2,MS,101 1,769,801 6,901 1,7T3,705 } 'IUTAL ASSEIS $3,747,989 $280,561 $4,028,550 $3,386,824 $252,194 $3,639,018 d 6 em W ]. .}}