ML20150D569
| ML20150D569 | |
| Person / Time | |
|---|---|
| Site: | Grand Gulf  |
| Issue date: | 12/31/1987 |
| From: | Mckamy W, Thomas H SOUTH MISSISSIPPI ELECTRIC POWER ASSOCIATION |
| To: | |
| Shared Package | |
| ML20150D533 | List: |
| References | |
| NUDOCS 8807140049 | |
| Download: ML20150D569 (40) | |
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1 1. Coahoma Electric Power Association
, Giles Bounds, General Manager i lleadquaners - Lyon, MS
- 2. Delta Electric Power Association liarry Donner, General Manager lleadquarters - Greenw ood, M S
- 3. Twin County Electric Power Association Flcv.! 8.ynk, General Manager l' adquaners - IIollandale, MS
& Y noo Valley Electric Power Assuelation L. R. Parker. General M anager lleadquaners - Yazoo City, MS
- 5. Southwest Mississippl Electric Power i Association Roben St. John, General Manager IIcadquaners - terman, MS
- 6. Magnolla Electric Power Association E. C. Parker, General M anager ficadquaners - McComb, MS
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- 7. Pearl Riser Valley Electric Power Association
- W. T. Show s, General Manager licadquaners - Columbia, MS
- 8. Coast Electric Power Association Roben J. Occhi, General Manager !
licadquaners - Bay St. Louis, MS l
- 9. Singing Riser Electric Power Association
, Jack Ware, General Manager , licadquarters - Lucedale, MS i
- 10. Dixie Electric Power Association
, J. T. Dudicy, Jr., General Manager l IIcadquaners - Laurel, MS
- 11. Southern Pine Electric Power Association l Don Jordan, General Manager lleadquaners - Taylorsville, MS 4
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SOUTH MISSISSIPPI ELECTRIC POWER TABLE OF ASSOCIATION CONTENTS M Unity of People, Unity of Purpose 3 E President and General South Mississippi Electric Power Association Manager's Report is a rural electric generation and transmission 4 E The Board of Directors cooperative (G&T). As the wholesale power 7 E Production supplier for 11 member distribmion coopera-11 E Engineering, Construction, tives throughout Mississsippi, South Missis-and Maintenance sippi serves as an economical power source 13 E Corporate Planning and for over 255,000 Mississippians, a purpose Operations we have served since the Association was 15 E Human Resources and formed in 1941. Development 17 E Finance The employees of South Mississippi numNr 18 E The Elements of Cost 220 and work in three locations: the Head-19 E The Comparative Summary quarters Office located on Highway 49 North l 20 E Comparative Operating Cost in Hattiesburg; Plant Moselle located in 22 E Distribution of Revenue Jones County; and Plant Morrow located in Dollar Lamar County. Each employee is dedicated l 23 E Auditor's Report to providing dependable power to South 24 5 The Balance Sheets Mississippi's members at the lowest possit% 26 E Statements of Net Margins cost. and Patronage Capital 28 E Statements of Changes in United in purpose, the efforts of South Financial Position Mississippi's employees, directors, and l 29 E Notes to Financial Statements members are evident by the accomplish-36 E Statistics ments reported in this publication.
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As South Mississippi faces a new year, we are challenged to make a good organization even better. This challenge will be met with the united efforts of people dedicated toward a common purpose.
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i 1 PRFSIDENT AND GENF>RAL MANAGER'S REPORT 1987 was a year of challenge, commitment, and change at SMEPA. Accom-plishments were made in every job in every area of operation through the effort of dedi-cated employees working for common goals. The Board of Directors, through management, has taken many positive actions which have resulted and will continue to result, in substantial savings while improv-ing the efficiency of operation. Previously established plans of action are beginning to yield quantitative and qualitative results, enchancing SMEPA's growing commit-ments and responsibilities to its membership. Reorganization of departments and streamlining procedures have expanded its efforts in long-range planning, economic development, marketing, and area assistance programs. Internally and externally, the face of SMEPA changeo with much-needed space additions and renovations, creating more efficient and environmentally improved workplaces. A major goal achieved in 1987 was that SMEPA operated approximately 12% under budget and finished the year with a positive cash position. As a result, SMEPA's 1988 budget is lower than 1987's, with cost decreases projected in every area of operation. ( The member systems, through their Boards of Directors and management, have supported mutually beneficial plans which continue to improve SMEPA's position within the industry and at the marketplace.
! 'Ihe success of 1987 could not have occurred without the committed effort of all employees supported by families who share our pride in being a people business, totally service oriented.
This report is visual and graphic evidence that SMEPA has resolved many l areas of historical concern while meeting present needs with visionary plans for the future. kMV W. C. McKamy, Jr. L m-s Henry L. Thomas President General Manager 3-
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Gili3 Bounds Horace H. Twiford, Jr. Harry Bonner
. Coahoma EPA Coahoma EPA Delta EPA i
Henry C. Waterer Floyd Lynk .. W. C. hicKamy, Jr. (Pres.) Delta EPA Twin County EPA ^ Twin County EPA U
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1987 HIGHLIGHTS BENNDALE AND PAULDING GAS-PRODUCTION TURBINES l The Benndale Gas Turbine Unit , rated at 16 megawatts, is' located in George County and - burns natural gas as a primaryfuel. : The unit-TIIE MOSELLE entered commercial operation in 1%9 and was GENERATING STATION South Mississippi'sfirst generatingfacility. South Mississippi's Moselle Generating Station The Paulding Gas Turbine Unit is located in is situated in Jones County, adjacent to the Leaf Jasper County ar.d entered commercial operation River, en 65 acres ofland. The plant , which in 1972: The unit is rated at 20 megawatts and entered ' commercial operation in 1970, has a is designed to burn dieselfuel or natural gas staf of 23 employees and a total capacity of177: Both units, which are unmanned stations ' a, 3 megawatts provided by three 59-megawatt remotely operated by South Mississippi's Con-power units. Plant Moselle was originally de- trcl Center, serve primarily during emergency signed to burn natural gas; however, in 1974, situationsfor peaking power and voltage control.
?hs ylant ~ vas converted to also burn fuel oil.
During 1987, the Paulding and Benndale Stations During 1987, the Moselle Generating Station underwent their first major inspection. He completed replacement of Unit 3's boiler water- combustion turbines were completely disas-wall tubes, which resulted in improved operating sembled, inspected. repaired as necessary, and safety and reliability of the unit. The boiler tube reassembled during spring and fall outages at the replacement, insulation and lagging work, and respective stations. The integrity of the intemal subsequent boiler chemical cleaning were com- components and the associated design clearances pleted under separate contracts with coordination were restored during the process in order to and administration provided by South Mississippi maintain unit capacity, availability, and reliability. l personnel, t With assistance from water treatment specialists TIIE R.D. MORROW, SR., from two chemical supply fimis, Plant Moselle's GENERATING STATION staff was successful in reducing costs associated with chemically treating the circulating water The R. D. Morrow, Sr., Generating Station is
- system by approximately $50,000 per year. located in Lanar County'on 884 acres ofland
\ near Black Creek . The plant entered commer-l A fuel cost savings of 2.2 million dallars was cial op; ration in 1978 and is South Mississippi's achieved for South Mississippi and its members largest generatingfacility. Plant Morrow has a due to the availability of natural gas for Plant staff of 89 emp;oyees and a total capacity of 400 Moselle at attractive and competitive rates. Dur- megantts provided by two 200-megawatt : ing 1987, the price of natural gas decreased 24%, power units. Plant Morrow burns bituminous l dropping from $2.12/MCF m 1986, to $1.70/MCF coalas its primaryfuel. in 1987. Plant Morrow'sfuel source originatesfrom This reduction promoted increased usage of Plant 17,000 acres of coal land which South Mississip-Moselle, which produced 442,168 megawatt-hours pi owns is eastern Kentucky. The coalproperty ot' generation in 1987, representmg 1.2 times more is leased to a contract minerfor mining purposer. production than last year. The 1987 output re- The coalis run through a washing plant to-flects the highest annual production from the remove shale and otherforeign material and is facility since 1978. %e Moselle Station also then delivered to South Mississippi by afleet of. achieved a 2.5% improvement over 1986 in net 160 railcars owned by the Association, h, at rate, a measure of operating efficiency. l a _ _-
1 i l During 1987, external and internal boiler system In addition, a contract was awarded for specified improvements were made at Plant Morrow, maintenance on South Mississippi's approximately i Sloped metal canopies were installed over the two miles of railroad track. About 2,700 ties were plant's boilers to replace original sheetmetal roofs replaced, maintenance was performed on rail which had warped due to rainwater, heat, and cor- switches, and track elevation and movement rosion. problems were addressed. Internally, the boiler feed pumps on Unit I were After completing r.egotiations with the CSX and subjected to major inspection procedures during Norfolk-Southern Railroads, South Mi,sissippi se-1987, which included the main turbine-driven cured a $0.50/ ton reduction in transportation boiler feed pump, the motor driven booster pump, charges for coal deliveries to Plant Morrow. The and motor driven startup boiler feed pump. rate decrease became effective October 1, and resulted in a savings of $100,000 for South Missis-As a result of the manufacturer's recommendation sippi and its members. after inspection, the lead potted standoff bushings in the Morrow generators were rcplaced with an epoxy-potted design which has proven to have a TIIE GRAND GULF longer useful life. The replacement promotes NUCLEAR STATION continued availabilit y and reliability of the Mor-row generators. South Mississippi owns a 10% undivided interest ' in the Grand GulfNuclear Station which is Sequential events recorders, which are used to log located on 2,300 acres ofland on the east bank of operating conditions of plant systems and equip- the Mississippi River in Claiborne County, about ment, were replaced during 1987 due to continued 6 miles northwest ofPort Gibson,25 miles south-problems with the old system and the west of Vicksburg, and 37 miles northeast of unavailability of spare parts. The Morrow staff Natchez. installed a new system during planned outages on the respective units. Under the terms of the agreement, South Missis-sippipays 10% of the operating cost of Grand In early 1987, an aluminum dome measuring fifty- Gulf TJnit 1 and, in return, receives up to 10% of two feet in diameter was installed over Plant the unit's rated output ofl,250 megawatts. Morrow's raw water storage tank to provide a Grand Gulfis 90% owned by System Energy more dependable source of water for plant Resources, inc., and entered commercial oper-operation and better water quality ccntrol. The ation in July,1985. The nuclear unitproduces dome also prevents the growth af an aquatic weed electricity by the atomicfission of uranitun. which had previously caused pluggage problems in the water system. Grand Gulf Unit I set a nev/ world's record during 1987, remaining in service for 171 consecutive Paving repairs were initiated on heavily used days. This replaces the previous world's record of roadways and other areas surrounding Plant 157 days and represents the longest continuous Morrow during 1987. Approximately 11,000 operation for a boiling water reactor during the square yards of paving were repaired or resur- second fuel cycle. faced. Grand Gulf'c second refueling outage (RF02) Plant Monow completed the installation of 1,150 began in early November,1987. The unit was feet of railroad track during 1987 to enhance the returned to service on January 6,1988. As pan of maintenance of South Mi3sissippi's railcar fleet the refueling process, about one-third of the and the handling and storage of spare cars. The nuclear fuel was replaced. work was completed by a local contractor, with South Mississippi personnel providing the material Other major outage work included the inspection and coordinating the project. of one of three low pressure sections of the main
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turbine; ehemical cleaning of the condenser tubes FUEL and standby service water system; inspection of - IIISTORY the station emergency diesel generators; control room renovation and expansion; and various other During 1987, 795,281 tons of coal were delivered surveillance and maintenance projects. to Plant Morrow. Shipments from Sandy Fork Mining Company totaled 762,207 tons, and spot South Mississippi aceived a total generation of coal purchases of 25,936 tons and 7,138 tons were 774,262 megawatt-hours from the nuclear station secured from Westmoreland and Addington during 1987, which represents an 88% increase Resources, Inc., respectively. over 1986. 1987 FUEL CONSUMPTION PLANT FUEL' USAGE Monow Coal 723,508 Tons Fuel Oil 328,208 Gallons Moselle Natural Gas 5,250,477 MCF Fuel Oil 50,994 Gallons Benndale Natural Gas ~ 20,733 MCF Paulding Fuel Oil - 29,443 Gallons M^ l i 1 l 1987 ENERGY SOURCES I E Plant Morrow - 34.19 't 1,737,185 MWII
*I E Plant Moselle -
442,168 M WII O Grand Gulf Unit 1 - 774,262 MWil
. ye O Purchased and nMybb Interchanged Power -
1,534,515 MWil 7g 17.25 % 9.85 % Nae: Total net energyfor i937 eqmals 4,489452 megamun hows (AfWil). Thh includes
!,322 AfWilofgevrationfrown South Afushsippi's gas twbine units which b not shown in the above chart (less thou D1%).
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1987 HIGHLIGHTS In addition, South Mississippi performed an ENGINEERING, Appliance Saturation Survey for its eleven mem-b"S i".e mpliance with the Rural Electrif ration CONSTRUCTION AND $ Admimstration. The survey, which is conducted MAINTENANCE every three years, provides data for South Mississippi's Power Requirements Study and also serves as a good marketmg database for Ic,ad man-agement projects. SUBSTATION MAINTENANCE CREW ADDED CONSTRUCTION PROJECTS UNDER. In order to meet the increasing maiatenance TAKEN TO MEET LOAD GROWTH responsibilities demanded by South Mississippi's transmission system, the Association added a sub- To meet increased member load, South Mississippi station maintenance crew, consisting of an engi- completed a 115 KV switching station and trans-neer, foreman, and four technicians. The crew is mission line at Heathman to serve Delta EPA; a implementing a preventive maintenance program 115 KV switching station at Isola to serve Twin which includes maintenance of SMEPA's circuit County EPA; a 115 KV switching station and breakers, transformers, and station equipment. transmission line at Shady Grove to serve South-ern Pine EPA; and a 69 KV GOAB (Ground In the fall of 1987, South Mississippi received ti e Operated Air Break Switch) tower and transmis-- first of two 161/69 KV 200 MVA transformers sion line at Pickwick to serve Pearl River Valley ordered for the Moselle Generating Station. The EPA, Modifications to Dixie EPA's Cleo delivery . transformers will replace two 50 MVA units point were also completed, providing greater presently at the facility, allowing more flexibility reliability. and reliability in system operation. Construction projects nearing completion at the Prior to transformer delivery, the substation main- end of 1987 include the construction of a 115 KV ' tenance crew installed four 69 KV SF, gas circuit ' transmission line at Derby to serve Coast EPA and breakers at Plant Moselle, replacing units rated too upgrading the Cumbest Bluff to Vancleave 69 KV low for the two new transfomiers. Two of the aansmission line to 115 KV to serve Singing River retired oil circuit breakers were installed in the EPA's Vancleave Substation. Cleo Substation in conjunction with a new relay-ing protection scheme. Other major projects which began in 1987 include survey and design of 30 miles of 161 KV transmis-South Mississippi's Relaying Department installed sion line from Hintonville to Benndale, additions underfrequency relaying packages in the to the Hintonville Substation, and a new Benndale Association's off-system (MP&L) area. The load 161/69 KV Substation. preservation scheme gives South Mississippi's members the ability to serve as much load as pos-sible during a catastrophic loss of generation. RIGHT-OF-WAY MAINTENANCE PROGRAM INITI ATED POWER REQUIREMENTS STUDY In order to assure the continuing overall reliability of the transmission system, the regular program of South Mississippi completed s Power Require- right-of-way reclearing and pole treatment was ments Study which uses eccnometric modeling completed during 1987. A program was also and forecasts load requirements for South initiated to clear all critical transmission lines Mississippi's members through the year 2007. (lines in which service cannot be restored by Approval by the Rural Electrification Administra- switching when failure occurs) of danger trees an-tion is expected in early 1988. nually. l
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1987 HIGHLIGHTS Estimator Prograi.1, which constantly monitors South Mississippi's transmission devices for nor-CORPORATE PLANNING mal operation. Abnormal readings are reported through the Harris Control System for preventive AND OPERATIONS I maintenance. The features of the new Harris System translate into significant long-range sav-ings for South Mississippi and its members. SOUTH MISSISSIPPI FORMS NEW DEPARTMENT IN 1987 NEW HIGH-LOAD FACTOR RATE n INCORPORATED FOR MEMBERS I : November,1987, South Mississippiformed a new Corporate Planning and Operations Depart. ' South Mississippi, in a move to encourage market-ment. The new department provides much ing among its member systems, incorporated a needed marketing supportfor member systems in high load factor rate with an industrial incentive designing rate structures, incentives, and load discount to encourage new and expanding indus-managementprograms which will encourage trial loads. Qualifications for the new rate include maximum efficiency ofSouth Mississippi's gen- a monthly demand of not less than 5,000 KW, and erat!on, transmission andpurchasedpower re- the use of at least 545 KWH per KW demand, a sources, usage requirement which produces a 75% or higher load factor. By spreading the fixed cost of Directfunctions of Corporate Planning and generation capacity over the sale of more kilowatt-Operations include marketing and industrial ' hours, South Mississippi can offer its member development concepts, system rate analysis systems a lower rate per kilowatt-hour for delivery and billing, environmental requirements, points serving industrial loads. system communications, and the operation of ' South Mississippi's Control Center. The overall effect of serving such consumers increases South Mississippi's load factor by ng consumedemanq more eyenh mer NEW CONTROL CENTER COMPUTER time, which benefits South Mississippi,its mem-INSTALLATION COMPLETE bers, and the consumer. The new rate, whien was approved in 1987, is viewed as the firs'. innovative After two years of design and construction, South move in the area of marketing, a trend e~pected to Mississippi installed a new Control Center com- continue during 1988. puter system cunng 1987, replacing its onginal ten-year-old system. The new Harris System features several unique software programs t TOTAL SALES improve both reliability and the economics of MEGAWATT-HOURS purchased and generated power for South 1983 1987 Mississippi's eleven member rural electric distri- ( sy , , , , , , ,,, , , , bution cooperatives. 93,,,,,
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88"d" An On-Line Dispatchers' Load Flow Program, which contains a simulated model of South 8d"d" 2 8"d" Mississippi's transmission system,is used by dispatchers to determine what happens to voltage 2."u" levels if a breaker is opened on the transmission 8.snan system at a given load. A Transaction Evaluation i.n u w Program tells dispatchers when to generate power, saea when to buy and sell power, and the most eco-
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nomical price to pay for each transaction. Another softwary feature of the Harris System is the State
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1987 HIGHLIGHTS building additions, including the resurfacing of existing parking areas. ( HUMAN RESOURCES A renovation of the Headquarters office building . AND was also completed, resulting in an improved work DEVELOPMENT environment for employees.- nummmmmmmmmmmmmmmmes
- NEW SERVICES OFFERED TO.
RETIREMENT PROGRAM ENII ANCED MEMBER SYSTEMS - On May 1,1987, South Mississippi improved During 1987, South Mississippi implemented an retirement programs for employees by adopting a orientation program to better inform ' its members 401(k) option to its existing supplemental savings of the G&T's operations. The eight hour program plan. The revised plan offers tax-deferral advan- was offered to directors of each member coopera-tages to employees which allow for greater ease of tive and consisted of department overviews, tours employee financial planning for retirement. of Sath Mississippi's facilities, and basic instrbe-tion in power plant generation and high-voltage, transmissi n. The pmgram will be expanded NEW COMPENS ATION PLAN during 1988 to include key cooperative employees. IM'LEMENTED The purchase of a desktop publishing system South Mississippi itroduced a new wage and during 1987 enabled South Mississippi to offer salary plan to emp' >yees on November 1,1987. member cooperatives and internal departments Plan development iacluded an analysis of all support in publication design and layout. The position responsibilities; collection and analys.is of system greatly enhances production time and survey data within appropriate marketplaces; quality, while minimizing publication cost, design of pay structures; development of adm.ims- . trative policies; and supervisory training. 'Ite new Further support in the area of video production compensation plan is designed to recognize inter- was offered to members and internal departments.- nal and external market values of positions while The Association is now in the process of develop . basing pay determinations on employee perform- ing a video commiinications program for educat-ance and pmgress. ing, training, and updating employees and mem- - bers. NEW AND IMPROVED llEADQUARTERS FACILITIES FLEET IMPROVEMENTS CONTINUE IN 1987 A 10,000-square-foot vehicle storage and mainte-nance building and a 3,000-square-foot materials Included in South Missis.ppi's 1987 fleet im-storage building were constructed in 1987. The provements was the purchase of a new Mack tmek new vehicle building provides an enclosed facility outfitted with a specially designed Telelect Com-for protection and maintenance of the mander III hydraulic derrick. The only one ofits Association's vehicle and equipment fleet. The kind operating in the Southeastern United States, materials building provides relief from over- the rig contains a four-stage hydraulic boom which crowded warehouse conditions. Over 3,600 tons extends to a maximum height of 70 feet and has a of asphalt were laid on the areas surrounding the horizontal rotation capacity of 360 degrees.
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N 1 l STREAMLINING OPERATING COSTS
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1987 HIGHLIGHTS FINANCE GRAND GULF UNIT 2 REVENUES AND SALES South Mississippi's investment in Grand Gulf Unit 2 decreased from $114,546,741 at December Total revenues from sales of electricity by South 31,1986, to $104,409,295 at December 31,1987. Mississippi totaled $231,025,124 in 1987, reflect- The decrease resulted from a transfer of invest-ing an increase of 2.6% over 1986. Sales of ment from Unit 2 to Unit I upon' completion of energy to members amounted to 4,383,903 mega- property records for the initial nuclear plant invest-watt-hours in 1987, a 1.6% increase from 1986. ment by Systems Energy Resources, Inc., and also Overall energy sales rose three-tenths of 1% from from application of part of the tax net operating 1986 to 1987. Average revenue from sales to loss carryover. At the end of 1987, construction of members was 52.68 mills per kilowatt-hour in Unit 2 remained suspended, with the Association's 1987, compared to 51.90 mills per kilowatt-hour in maximum remaining obligvion totaling 1986, reflecting an increase in revenues per kilo- $1,899,961. watt-hour of 1.5%. CONSTRUCTION LOANS / 2.1% DECREASE IN TOTAL OUTSTANDING DEBTS COST OF ELECTRICITY In May,1987, South Mississippi received a Incmased sales revenue, coupled with decreased; commitment from the Rural Electrification Ad-expenses, resulted in net inargins for the yearf ministration (REA) to make or guarantee loans ended December 31l 1987, of $5,148,686, as com- totaling $14,772,000 for the construction of new pared to net margins of $100,960 for the year control center and transmission facilities over the ended December 31,1986. The total cost of elec- - next three years. As part of the commitment, tric service in 1987 decreased 2.1% from total ex. South Mississippi was required to obtak an addi-yenses for 1986. l The decrease resulted from a ; tional loan of $2,306,000 from a private lender for dmber of factors including a substantial increase' the remainder ofits capital requirements. In De-in the' proportion of total energy requirements met - cember,1987, the Association executed docu-l ments for a $2,306,122 loan (including $46,122 of l Gy SMEPA generation, lower cost of power par? l chased for the borderline system, lower costs for . capital stock) from National Rural Utilities Coop-l natural gas and nuclear fuel, a decrease in interest : erative. Finance Corporation, for an insured loan [ expense, and improved operation and maiatenance from REA of $5,960,000, and for an REA guaran-expenses which reflect South Mississippi's. con- c teed loan from the Federal Financing Bank of tinuing commitment to cost containment. $8,812,000. Total Association assets declined from - Advances in 1987 against previously executed
$810,904,532 at December 31,1986, to .
loans were relatively small as the Association
$776,674,877 at December 31,1987, resulting ; drew $428,000 from the Federal Financing Bank at primarily from the absorption of $22,259,493 of. an 8.357% long-term interest rate and $665,600 margins and revenucs deferred from previous ; under a concurrent loan from the Jackson Bank for years due to the delayed commercial operation of . Cooperatives at intermediate rates averaging Grand Gulf Unit 1; Receipt of approximately ' 8.85%. Approximately $8.682,815 of maturing
$10,676,000 from System Energy Resources,'Inc., short-term FFB notes were extended short-term at for the Association's share of a tax net operating rates averaging 8.612%.
loss carryover also contributed to the decrease in total assets as well as to a decrease in long term The Association's overalllong-term debt cost was
' debt as the proceeds from the carryover were used little changed from December 31,1986, to Decem-to repay loans fmm the Federal Financing Bank.' ber 31,1987, rising from 8.82% to 8.85%.
THE ELEMENTS OF COST mummmmmmma 1983 1984 1985 1986 1987 I. SMEPA's Own Generation & Transmission System Cost of Fuel Burned in SMEPA's Plants - c/MMBTU 222.27 227.00 214.54 195.27 176.38 Production Costs and Purchased Power / Interchanged Power - Mills /KWii 25.88 26.16 23.09 27.66 25.49 Transmission O&M - Mills /KWH 2.26 2.41 2.44 2.50 2.77 A & G Expense Mills /KWil .90 1.00 1.12 1.14 1.25 Depreciation and Amortization - Mills /KWil 2.89 2.85 4.30 4.79 6.16 Interest - Mills /KWII 9.23 7.11 12.77 21.23 20.81
.14 .14 .19 .88 .41 Taxes and Other - Mills /KWII TOTAL - Mills /KWII of Sales 41.30 39.67 48.91 58.20 56.89 11.11orde line System Purchased Power / Interchanged Power Mills /KWII 42.41 41.65 41.62 40.12 38.91 Depreciation & Amortization - Mills /KWII .03 .03 .03 .02 .02 Interest Mills /KWil .M .M .N .03 .05 TOTAL - Mills /KWil of Sales 42.48 41.72 41.69 40.17 38.98 III. Total System Production Costs and Purchased Power / Interchanged Power -Mills /KWII 30.32 30.48 31.79 31.08 29.23 Transmission O & M - Mills /KWii 1.65 1.74 1.77 1.81 2.00 l
A & G Expense Mills /KWii .66 .72 .82 .83 .90 l Depreciation and Amortization Mills /KWil 2.12 2.06 3.13 3.48 4.46 Interest - Mills /KWII 6.77 5.14 9.29 15.41 15.N Taxes and Other Mills /KWII .10 .10 .13 .64 .29 TOTAL (A)- Mills /KWil of Sales 41.62 40.24 46.93 53.25(B) 51.92 (A) Excludes Kentucky coal operations. (B) Extraordinary item excluded.
-l8-
l 4 l i I THE COMPARATIVE
SUMMARY
summmmmmmmme ( 1983 1984 1985 1986 1987 ENERGY SOURCES - MWH Generated: 2,126,192 2,218,262 2,625,376 2,686,598 2,953,U15 Stearn 328 663 505 1,910 1,3_22 Other Generation 2,126,520 2,218,925 2,625,881 2,688,508 2,934,937 Purchased: 539,305 488,178 197,317 519,003 298,487 Direct Purchase 78,741 97334 73,236 61,120 72,098 Borderline - (SEPA) 618,046 585,512 270,553 580,123 370,585 985,675 1,105,403 1,215 490 1,200,497 1,163,930 Interchanged Power -(Net) 3,730,241 3,909,840 4,111,924 4,469,128 4,489,452 , Total SALES - MWH Southwest Mississippi EPA 249,7 8 247,112 270,005 290,948 287,278 369,094 395,807 392,633 413,306 400,435 Dixic EPA Pearl River Valley EPA 362,338 380,715 401,597 415,442 410,533 617,347 661,742 675,179 710,062 716,158 Singing River EPA 720,195 735,695 7 %,395 911,339 946,401 Southern Pine EPA 231,348 238,029 251,781 276,749 301,036 Magnolia EPA 485,972 535,605 563,372 630,812 645,410 Coast EPA 167,346 167,883 181,129 123,316 118,094 Yazoo Valley EPA 76,829 75,782 79,219 81,165 83,143 Coahoma EPA 239,791 255,659 269,094 297,388 305,681 Delta EPA 129,085 135,276 149,521 162,473 169,734 Twin County EPA Arkansas Electric Cooperative Corp. - 5,967 - - Alabama Electric Cooperative - - - 62,285 3,015 Cajun Electric Power Cooperative - 567 - - 7DTAL 3 649,143 3,835,839 4,029,925 4,375,285 4,386,918 1UTAL SYS711M 938,112 1,177,057 1,006,570 1,211,133 1,067,395 DEMAND KW
o COMPARATIVE OPERATING COST mmmmmmmmmmmmmmmmmmmme (A) 1983 1984 1985 1986 1987 REVENUE Sales of Energy $156,462,892 $156,606,556 $192,307,266 $225,201,107 $231,025,124 Other 960,113 1,636,127 697.9M 249,449 138,691 Total Revenue 157,423,005 158,242,683 193,005,230 225,450,556 231,163,815 I EXPENSE Operation Expense: Production-Fuel Cost 49,745,001 53,932,527 61,653,239 57 970,573 57,521431 , Other Pmduction , Expenses 2,379,5M 2,211,866 7,038,621 11,324,392 10,270,142 Purchased Power 56,760,906 59,082,453 55,137,353 60,107,447 53,892,1M Transmission 5,013,509 5,540,686 6,002,402 6,912,131 7,269,310 Consumer Accounts 48,440 38,523 47,527 53,9M 56,447 Administrative & ' General 2,116,8N 2,418,037 2,849,402 3,211,115 3,468,286 I l Total Operation l Exper.se 116,0M,314 123,224,092 132,728,544 139,579,622 132,477,880 Maintenance Expense: Production 1,762,051 1,672,461 4,278,423 6,579,862 6,525,996 Transmission 1,025,266 1,128,478 1,130,358 1,030,377 1,509,539 General Plant 232,330 294,279 3 %,459 358,880 433,135 Total Mainten.nce Expense 3,019,647 3,095,218 5,805,240 7,969,119 8,468,670 Depreciation 7,734,269 7,921,214 12,626,522 15,233,182 19,559,144 Taxes 324,269 380,939 515,171 M9,579 650,720 Intemst Expense (Net) and Other Deductions 25,358,307 20,572,428 41,302,119 61,870,198 66,902,M4 Total Expense 152,500,806 155,193,891 192,977,5 % 225,301,700 228,059,058 OPERATING MARGINS 4,922,199 3,N8,702 27,6M 148,856 3,1N,757 NON-OPERATING MARGINS 1,446,654 M3,867 681,947 2,026,816 2,N3,929 NET MARGINS BEFORE EXTRAORDINARY ITEM $ 6,368,853 $ 3,592,659 $ 709,581 $ 2,175,672 $ 5,148,686 (A) 'The financial statements for year ended December 31,1985, have been restated to correct the recording of allowance for funds used during construction of Grand Gulf Nuclear Station Unit No. 2. The effect of the restatement was to decrease net margins for 1985 and patronage capital and constmetion work in progress at December 31,1985, by $3,366,841.
- j) .
y., COMPARATIVE OPERAT1NG COST (Continued) 1983- 1984 1985 1986 1987 (B) FXIRAORDINARY ITEM . $ 2,074,712 NET MARGINS $- 6,368,853 $ 3,592,659 $ -709,581 $ 100,960 $ 5,148,686 t (B) Net loss on early extinguishment of debt.
l DISTRIBUTION OF REVENUE DOLLAR - l DISTRIBUTION OF 1987 REVENUE DOLLAR (</$1.00) 1 w 4+ E Purchased Power-23.1 E Fuel-24.7 E Production - Operations and {.\
^ DdINhl.,..
Mair.tenance-7.2 O Interest 28.4 j ' - ' O r ;preciatiori ;c Amortization-8.4 ih(W[f f / ;cc -.;gj. j.e 3 if'/s, k E Transmission - Operations & w9 .c 4 q; d . hWtenance-3.7
%l.' ; f 4'S "
. ,7 E Administrative & General-2 0 2
> ;en 1r j (],i ' ' ,-p- E Taxer-0.3(Negligfole) 3 E Net Margms 2.2 L
2% M < DISTRIBUTION OF 1986 REVENUE DOLLAR (v/$1.00) i i q s E Purchased Power-26 7 E Fuel 25.7 D Production-Operations '1 ["Fg cQ.; Maintenance-7.9 4 N' , ; O Interest 27.5 lplO .p ji O Depreciation & Amortization-6.8 a NIUs j. l E Transmission Operations &
- M WM.
hQ
. q,,, ;6 Maintenance-3.5 h f* .y . , gf W Administrative & General 1.6 II E Taxe- 6.3
~
.m
' a .M s.q "'9u,." , -
8 Net Margins 0(Negligible)
' . c,j ~ %r -
J% *
-wem-w - ]
I
AUDITOR'S REPORT 3 1 1 Report of Touche Ross & Co. Independent Auditors '. n .Q Board of Duec*. ors .. L ,,., ., South Mississippi Elmtric 1%wer Association .
.i Helnahurg, Mississippi . ., <
1 We have examined the balance sheets of South Mississippi Electric ' Power Association as of December 31,1987 and 1986, and the relased statements of net margins and patronage capital and changes.in financini - position for the years then ended. Our examinations were ma6c in accor- l dance with generally accepted auditing standards, ard, uccordmgly, included such tests of the accounting records ard such other audaing procedures as we ccchd wa===ry in the circumstances. W- .; y a. p. y . In our opmion, the fmandal miements referred to above present
~
fairly the financial position of Soush Mississippi Electric Power Association as of December 31,1987 and 1986, and the remits etits operadons and the ' . changes in its fmancial position for the years then ended, in conf.mr.!ty with ? l generally acccpted accounting principles applied on a consistent basis. ~ . i . OMA 0$$. Certified Public Accountants I l
)> -l
^Kc
'~
jarksor:, Mississippi R . ary 16,1988 -
- o. ,n j
_ ._ ._.._s
4 i . i THE BALANCE SHEETS December 31. 1987 1986 ASSETS ELECIRIC IJrILITY PLANT (Notes A-1, A-2, A 3, B and C): In service $704,144,750 $703,970,625 Construct'on work in process 114,293,585 118.192.271 818,438,335 822,162,8 % Less adowance for depreciation 112,824,748 93.958.093 705,613,587 728,204,803 OIIIER ASSETS AND INVESTMENTS: Investment in associated organizations (Note D) 11,226,031 11,192,324 Debt arvice reserve for pollution control bonds 4,460,847 4,464,133 Other noncurrent assets 15.897 16.437 15,702,775 15,672,894 CURRENT ASSETS: General fund ca.sh and temporary cash equivalent investments 7,005,131 14,765,301 Construction fund cash 1,657 1,657 Accounts receivable (including recCyables frora members of approximately $17,238,000 (1937) and $24,392,000 (1986)) (no allowance for doubtful xcount> deemed necessary) 18,503,954 27,033,237 Inventories (Note A-4): Coal 15,464,338 11,636,612 Other fuel 1,340,088 1,397,997 Material and supplies 9,217,885 6.9&4.J48 26,022,311 20,0'8,657 Other 1,236,6E 1,215,99_1 52,769,712 63,064,843 DEFERRED CilARGES (Note A-5) 2,5E,80_3 _ 3,961.992
$776,673,877 $810M$g See notes to financial statements.
- p. '4-
'{ b;;s a, .,[ i :, De@mber 31. 1987 1986 EOUITIES 'AND LIABILITIES EQUITIES (Note A-6):
- Memberships $ 55 $ 55 Donated capital 535,436 535,436 Patronage capital 17,161,258 12,012,572 17,6 % ,749 12,548,063 LONG 7ERM DEBT, excluding current maturitics (Note F) 730,012,835 749,862,503 CURRENT LIABILITIES:
Accounts payable 16,849,721 16,487,514
' Accrued interest ,
1,091,104 850,411 Other accmed extenses 986,413 635,093 Current matt rities of long-term deh _10,038.055 - 8,261,455 28,965,293 26,234,473 DEFERRED REVENUE AND MARGINS (Note G) 22,259,493 COMMITMENTS AND CONTINGENCIES (Notet. C and J)
$776.674.877 $810f04,532 2$-
STATEMENTS OF NET MARGINS AND PATRONAGE CAPITAL Year Ended December 31, 1987 1986 OPERATING REVENUE: Electric energy revenue (Note G) $231,025,124 $225,201,107 Other income 138,691 249,449 231,163,815 225,450,556 OPERATING EXPENSES: Operation expenses: Fuel 57,521,531 57,970,573 Production 10,270,142 11,324,392 Purchased Power 53,892,164 60,107,447 Transmi % 7,269,310 6,912,131 Adminis,.ative and general 3,524,733 3,265,079 132,477,880 139,579,622 Maintenance expenses: Production 6,525,9 % 6,579,862 Transmission 1,509,539 1,030,377 General _ 433,135 358,880 8,468,670 7,969,119 Depreciation and amortization (Na A-1) 19,559,144 15,233,182 Taxes 650,720 659._579_ 161,156,414 ~~163,4'i,502 OPERATING MARGIN BEIORE INTEREST AND OTHER DEDUCTIONS AND EXTRAORDINARY ITEM 70,007,401 62,019,054 INTEREST AND OTHER DEDUCTIONS: Interest 66,680,675 67,812,934 Allowance for borrowed funds used during construction (Note A-3) (4M,872) (127,905) Refunds received on purchased power (Note 1) (8,520,276) Refunds paid to members (Note I) 2,620.276 Other deductions - net 656,841 85,169 66,902,654 61,870,198 OPERATING MARGIN BEIORt EXTRAORDINARY ITEM 3,105,757 148,856 NON-OPERATING MARGIN PRINCIPA1.LY LVEREST INCOME 2,G43,929 2,026,816 NET MARGIN BEFORE EXTRAORr'IB%RY LEM 5,148,686 2,175,672 L e
4 6 STATEMENTS OF NET MARGINS AND PA7RONAGE CAPITAL (Continutvi) Year Ended December 31. 1987 1986 EXTRAORDINARY ITEM. Net loss on early exting tishment of debt (Note F) $ $ 2,074,712 NET MARGIN 5,148,686 100,960 PATRONAGE CAPITAL AT BEGINNING OF YEAR 12.012.572 11.911.612 PATRONAGE CAPrfAL AT END OF YEAR $ 17.161.258 $ 12.012.572 See notes to financial statements.
a
- l STATEMENTS OF l CHANGES IN FINANCIAL POSITION YearludciDXcmbcL3L 1987 1986 SOURCES OF FUNDS:
From operations: Net mvgins before extraonlinary item S 5,148,686 $ 2,175,672 Items not affecting working capital: Provision for depreciation, amortization, and depletion 20,727,236 16,065,799 Recngnition of deferred revenue and margins (22,259,493) (17,055,538) Funds provided by operations 3,616,429 1,185,933 Extraordinary item (2,074,712) Additionallong term borrowings 1,093,600 64,171,400 Decrease in other noncurrent assets 540 Decrease in deferred charges 1,269,019 Decrease in debt senice resene 35,619 Disposals of electric utility plant, net of additions 1,971,436 Decrease in workiag capital 13,025,951 S20,976,975 $63318240 USES OF TUNDS: Additions to electric utility plant less carrying amount of retirements S 7,844,182 Payments of long term debt $20,N3,268 8,050,360 Increase in invesunent in associated organizatior.s 33,707 120,768 Ircrease in deferred charges 201,015 Increase in other noncurrent assets 3,837 Increase in working caoital 47,098,078 S20,975,975 563 318,240 CilANGES IN COMPONENTS OF WORKING CAFITAL: General fund cash and temporary cuh equivalent investments ($ 7,760,170) $14,087,332 Construction fund cash (111,087) Pollution control revenue bonds proceeds (41,873,000) Accoun:s receivable (8,529,283) 10,084,638 Inventories 6,003,654 1,749,222 Other (9,332) 80,218 Notes payable 25,173,507 Accounts payable (362,207) (1,863,006) Accrued interest and other accrued expenses (592,013) (141,437) Current maturities of long-term debt (1,776,600) 39,911,681 l _(S13,025.951) $47,098,078 See notes to financial statements. l
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NOTES TO FINANCIAL STATEMENTS nummmmmmmmmmmmmm For the Years Ended December 31,1987 and 1986 NOTE A Summary of Significant Accounting Policies: South Mississippi Electric Power Association (ShiEPA)is a rural electric cooperative established under the hws of the State of hiississippi. ShiEPA is a generation and transmission cooperative which provides electric power to eleven owner / members which are rural electric distribution cooperatives providing electric power to customers in certain areas of hiississippi. Financing assistance is provided by the United States Department of Agriculture, Rural Electrification Administration (REA). In addition to being subject to regulation by its own governing board of directors, ShiEPA is subject to certain rules and regulations promulgated for rural electric borrowers by REA. ShiEPA maintains its accounting records in accordance with the Federal Energy Regulatory Commission's Char: of Accounts as modified and adopted by REA. As a regulated utility, the methods of allocating costs and revenue to time periods may differ from those principles generally applied by nonregulated companies. The more significant accounting policies are generally described as follows:
- 1. Electric Utility Plant and Depreciation Electric utility plant is stated at cost, which includes contract work, materials and direct labor, allowance for funds used during constiumion and allocable overhead costs. The cost of electric generating stations and related facilities also includes costs of training and production incurred, less revenue camed, prior to toe date of commercial operation.
l l Depreciation is provided on the straight-line method f or utility plant at the following annual compo : rates: l 1 ! Nuclear plant 2.85 % Non-nuclear plant 3.00% to 3.10% Transmission plant 2.75 % General plant and transportation equipment 2.00% to 25.00% Prior to 1987, depreciation for nuclear utility plant was provided on the units of production method. At the time units of electric utility plant are retired, their original cost and cost of removal, less net salvage value, are charged to the allowance for depreciation. Replacement; of electric utility plant inve'ving less than a designated unit of property are charged to maintenance expense. Coal reserves are stated at cost. Depletion is provided by the units mined method. The coal mine is operated under an operating agreement with a third pany. A majority of the coal used in ShiEPA's generation of electricity is supphed from coal mines located on ShiEPA's property. l
\ ,
NOTE A - Summary of Significant Accounting Policies (Continued):
- 2. Cost of Decommissioning Nuclear Plant SMEPA's wrtion of the utimated decommissioning cost of Grand Gulf Nuclear Station Unit 1 (GGNS)is charged to operating expenses.
- 3. Allowance for Funds Used During Constmetion Allowance for funds used during construction represents the cost of directly related borrowed funds used for constmetion of the electric plant, where applicable, and an allowance based on the average cost of appropriate borrowings when general funds are used to fund construction, ne allowance is capitalized as a component of the cost of the electric plant while it is under construction.
Capitalization ceases when :he electric plant is placed in service, or in the case of electric generating s:ations and related facilities, at the date of commercial operation.
- 4. Inventories Inventories are stated at average costs.
- 5. Deferred Charges Costs of preliminary surveys for development of possible methods to obtain and deliver energy to fulfill members' future requirements, including feasibihty studies leading to financing necessary plant expenditures, are recorded as deferred charges. If construction of a project results from such surveys, the deferred charges are transferred to the cost of the facilities. If a preliminary survey is abandoned, the costs incurred are written-off.
Bond issue costs are beiag amortized by the straight-line method, which does not differ materially from the interest method, over the term of the related debt. The amortization during the period of construction is capitalized.
- 6. Patronage Capital The By-laws of ShiEPA provide that any excess of revenue over expenses and accumulated prior year deficits shall be treated as advances of capital by the member patrons and credited to them on the basis of their patronage.
, 7. Interchange Power l l ShtEPA records the electrical power received or provided on an interchange basis at its cost as determined under various contractual arrangements.
- 8. Income Taxes SN1 EPA is exempt from United States income taxes pursuant to Section 501 (c) (12) of the Intemal Revenue Code, which requires that at least 85% of Sh1 EPA s gross income come from its members.
j NOTE B - Electric Utility Plant: Electric utility plant consists of the following: l _________v_. , im, NOTE B - Ekdric Utility Plant (Continued): December 31. 1987 1986 Nuclear production plant $394,039,690 $398,340,296 Non-nuclear production plant 208,041,205 208,111,278 Transmission plant 59,167,458 55,613,353 Coal properties and p:eparation plant 24,687,603 24,607,879 Land and land rights 10,898,014 10,614,616 General plant knd transponation equipment 7,310,780 6,683,203 ELECTRIC PLANTIN SERVICE 704,144,750 703,970,625 Construction work in process 114,293,585 118,192,271
$818,438,335 $822,162,896 NOTE C Construction Work in Process and Commitments:
ShiEPA is a 10% participant in the construction and operation of a 2,500 megawatt nuclear generating station known as "Grand Gulf Nuclear Station" (GONS), consisting of two 1,250 megawatt generating units. Commercial operation for Unit i began on July 1,1985. The hiississippi Public Setvice Commission hc.id hearings in 1984 to consider rescinding the Cenificate of Necessity authorizing construction of Unit 2. On September 18,1985, t'.e Commission issued an Order suspending construction on Unit
- 2. During 1986, the majority owner announced its intention to defer any final decision on die status of Unit 2 until 1990.
On Augiist 1,1985, ShiEPA discontinued payments on Unit 2 and began negotiations to limit its investment in Unit 2. On February 7,1986, ShiEPA signed a Supplementary Agreement hmiting its future obligation for Unit 2. The Agreement provides that ShiEPA's obligation to pay its proporuonate share of the cost of constmetion of Umt 2 incurred subsequent to July 31,1985, will not exceed appmxiniately $4,951,000. ShiEPA's share of such costs incurred to December 31,1987 and 1986, amounted to approximately $3,051,000 and approximately $2,085,000, respectively, and have been included in the accompanymg balance shests. In the event the majority owner r :ects to resume full construction, the Supplementary Agreement provides Sh1 EPA with the option to either have payments made subsequent to July 31,1985 refunded or to leave such payments invested in Unit 2. In the event full construccon resumes, the ownership interest of the panicipants will be adjusted periodically to reflect die proportionate investment of each pamcipant. The failure of the 90% owner to complete Unit 2 due to an inability to obtain regulatory approval for the completion of construction would be excused under the forte majeure pmvision of the Joint Ownership Agn:ement, and ShiEPA would have no recocrse against the 90% owner. If this occurs, ShiEPA would have to recover the costs of Unit 2 through future rate increares even though no power would be generated by Unit 2. If Unit 2 is abandoned, and if the carrying amount of the unit exceeded the present value of the future revenue (discounted using ShiEPA's incremental bonowing . ate) that is expected to result from inclusica of the cost of Unit 2 for cate-making purposes: a loss w ould be _ NOTE C Construction Work in Process and Commitments (Continued): immediately recognized to the extent of the excess. The remaining cost would be deferred and amortized over the penod of the future revenue. At December 31,1987, SMEPA's accumulated cost in Unit 2, included in construction work in process, was approximately $104,409,000 including allowance for funds used during construction of approximately $42,340,000. Prior to SMEPA's entry as a participant in Grand Gulf, the construction of Grand Gulf generated tax net operating losses for the other participant. During 1987, the other participant utilized part of these losses and refunded approximately $10,676,000 to SMEPA, which was credited to utility plant. SMEPA could receive an additional refund of approximately $3,400,000 if the additional tax net operating losses of the other participant are utilized to offset income taxes in future years. SMEPA has construction commitments for various projects other than GGNS te:11ing approximately $1,261,000 at December 31,1987. NOTE D - Investments in Associated Organizations: Investments in associated organizations are stated at cost and consisted of the following: December 31. 1987 1986 _ National Rural Utilities Cooperative Finance Corporation (CFC) Capital Temi Certificates $ 8,414,533 5 8,414,533 CFC Subordinated Term Certificates 2,490,000 2,490,000 Other 321.498 287,791
$11,226,031 511,192,324 Capital Temi Certificates bear interest at 3% and 4% and begin maturing in 2007. The Subordinated Term Certificates bear interest at 9.873% and mature in 2015.
NOTE E Short term Ilorrowings: SMEPA has a $25,000,000 short-tenn line of credit available with National Rura: 'tilities Cooperative Finance Corporation (CFC). At December 31,1987 and 1986, SMEPA had no borro gs against this line of credit Interest rates on short-tenn borrowings with CFC averaged approximately 7.68% and 8.25% for 1987 and 1986, respectively. Capital Temi Certificates in CFC, which are included in other assets and investments, cannot be redeemed so long as the line of credit is in place. NOTE F - Long term Debt: Long-tenn debt consisted of the following: 2 0 NOTE F - Long term Debt (Continued): December 31, 1987 1986 2% REA mongage notes payable, due in quarterly installments through 2009. S 33,438,857 $ 34,835,090 5% REA mongage notes payable, due in quanerly installments through 2015. 22,241,011 22,692,(M5 5% REA mortgage notes payable, due in monthly installments (beginning in 1987) through 2019. 3,90 ,507 3,926,000 Mortgage notes payable to Federal Financing Bank (FFB) at interest rates varying fmm 7.160% to 14.512%, due in quanerly installments between 1987 and 2018. 591,979,283 607,179,099 Notes payable to Jac. son Bank for Cooperatives at interest rates varying from 8.5% to 9.0%, due in quarterly installments (beginning in 1988) through 2,022. 1,794,000 1,128,400 Lamar County, Mississippi, Pollution Control Bonds: 1977 Series,4.6% to 6.125%, due 1987 through 2007 33,870,000 34,770,000 1978 A Series,4.7% to 6.125%, due 1987 through 2008 2,415,000 2,475,000 1978 A-1 Series,6.25% due 1987 through 2008. 870,000 890,000 Claibome County, Mississippi, Pollution Control Bonds - 1985 G Series,3.75% to 4.375%, I due 1987 through 2015. 49,400,000 49,800,000 Other 141,232_ 428,324_ 740,050,890 758,123,958 Lers current maturities 10,038,055 8,261,455 i $730,012,835 $749,862,503 l Substantially all assets of SMEPA were pledged as collateral on long-temi debt. 4 NOTE F - Long term Debt (Continued): De net proceeds of the Claibome County, Mississippi, Pollution Control Bonds were used in 1986 u : pay FFB for funds borrowed to pay original project costs. Initially SMEPA has the option on FFB prorimsory note advances to elect (subject to REA approval) interim maturity dates of two years after the date of the advance or a long-term maturity rc.nging from approximately 27 to 34 years (depending on the terms of the particular note) after the end of the calendar year in which the advance was made. If the lonpterm maturity date is not initially selected, then on subsequent interim maturity dates, SMEPA may designate that it desires either another two-year interim raaturity or the long-term maturity date as specified in the note. In 1986, SMEPA repaid or refinanced $97,353,000 principal amount of notes payable to the Federal Financing Bank prior to scheduled maturities. Of this amount $27,372,000 was refinanced (pursuant to REA directives) with a portion of the proceeds of the 1985G Sedes Pollution Control Bonds issued by Claibome County for facihties at the Grand Gulf Nuclear Station. The remainder, approximately $69,981,000, resulted from the early conversion cf short-term debt payable to the FFB in advance of normal maturity dates ranging from July 2,1986 to October 1,1987. In conformity with generally &ccepted accounting principles, the early payments of interest at discounted amounts were reported as an extraordinary loss of apprdximately $2,075,000. To the extent that the bond refinancing and the early extension of FFB debt resulted in interest savings in 1987, such savings decreased the interest expense as reported on the Statement of Net Margins and 1*tronage Capital. Approximate annual maturities of long-term debt for the next five years are as follows: 1988 $10,038.000 1989 10,986,000 1990 12,697,000 1991 13,979,000 1992 15,124,000 The above maturity schedule reflects mana advances at interim maturity dates from 1988 through 199hement's prerogative of conver rate it estimates to be an appropriate long-term rate, based on the December 31,1987 interest rates, to compute the annual principal requirenwnt. At December 31,1987, SMEPA had unfunded loan commitments from FFB and REA of
$55,791,000 and $3,926,000, respectively. SMEPA had a loan commitment from the Jackson Bank for Cooperatives for $3,542,000, of which $665,600 and $1,128,400 were advanced in 1987 and 1986, respectively.
In additicn, SMEPA authorized aggregate additional borrowings of approximately
$17,078,000, subject to approval by the lending agency.
SMEPA is required by mortgage convenants to maintain certain levels ofinterest coverage and annual debt service coverage. SMEPA was in compliance with such requirements at December 31, ( 1987. NOTE G Defert Resenue and Margins: SMEPA established its wholesale power rates on March 1,1983 and 1984, in anticipation of Grand Gulf Nuclear Station Unit I beginning commercial operation in October 1983 and September 1,
O NOTE G - Deferred Revenue and Margins (Continued): 1984, respectively. A portion of these rates was designed to recover increased cost of power after Unit I began commercial operation. His portion, prior to commercial operation on July 1,1985 was deferred and was amortized in such a manner as to reflect the revenue in the period the cost being recovered was incurred. He de.ferral was approved by the Board of Directors of SMEPA and by REA. During 1984, SMEPA's operations produced margins in excess of those budgeted necessary to meet levels ofinterest coverage and annual debt service coverage required by mortgage convenants. Dese excess margins were deferred by action of the Board of Directors, ne deferral was approved by REA on January 15,1987. The deferred margins were amortized on the same basis as the deferred revenue. NOTE II - Pension Plan: Substantially all of SMEPA's employees participate in the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program, a defined benefit pension plan quahfied under section 401 and tax-exempt under section 501(a) of the Intemal Revenue Code. SMEPA makes annual conaibutions to the program equal to the amounts accrued for pension expense except for the period since July 1,1987 when a moratenum on contribution was alaced m effect due to reachmg full funding limitation. In this multiemployer plan, which is available to a.1 member coo ratives of NRECA, th'e accumulated benefits and plan assets are not determined or allocated separately individual employer. SMEPA's pensien expense for this plan for 1987 and 1986 was approximately $145, and $418,000, respectively. In addition to providing pension benefits, SMEPA provides certain health care insurance t benefits for retired employees. Substantially all of SMEPA's employees may become eligible for those b nefits if they reach normal retirement r.ge while working for SMEPA. SMEPA recogmzes the cost of providing these bene.its by expensing the annual insurance premiums, which were approximately $15,000 and $11,000 for 1987 and 1986, respectively, NOTE I - Purchased Power Refund: During 1986, SMEPA recorded refunds due from Mississippi Power & Light Company of approximately $8,520,000 as a result oi Mississippi Power & Light Company's settlement oflitigation with a natural gas supplier. Of this amcunt, approximately $2,620,000 was refunded by SMEPA to its members. This method of accounting for the refunds was approved by REA and SMEPA's Board of Directors. NOTE J - Contingencies: SMEPA is defendant in certain litigation incurred in the normal course of business. Management, based on advice oflegal counsel, is of the opinion that the tiltimate resolution of the litigation will not have a material adverse effect on SMEPA's financial condition. NOTE K - Subsequent Event: On January 25,1988, SMEPA terminated its existing coal supply agreement and lease agreement and entered into new agreements with anoth r corporation. These agreements are subject to approval by REA.
^
. STATISTICS REVENUE FROM SALES OF ELECTRICITY N (MILLS /KWH) I "" an "" g M (MIT I S/KWID am 1983 42.88 1984 45.70* "" 1985 47.72** 1986 51.47 1987 52.66 .
**N : 985 re in ix s of commercal crerstkun for Gnad Gulf ,, , , , ,
Nuclear Station Unit I. m em m im w i ! TOTAL COST OF ELECTRIC SERVICE Del m e (hill,LS/KWil) COST l M (MIT i S/KWIn .. I 1983 41.79 l 1984 4130 "" 1985 48.28 1986 53.32 l 1987 52.09 ,,, m im m im im l ANNUAL COINCIDENTAL Om PEAK DEM AND (KTV) no COINCIDENTAL w M PEAK DEMAND (KW)"* , 1983 632,000 1984 624,000 '" i
'985 635,000 m !
1986 752,000
, {
1987 691,000
'"Demmi on SMUA genention coly. ,
e i e i i ANNUAL LOAD FACTOR (PERC,EMI) N I I ANNUAL LOAD ,,, M FACTORf%) f 1983 48.22 mm. 1 19M 50.50 1985 52.M ""- 1986 47.10 1987 51.M
. : sm .
,- i i , , i i 3
TRIBUTE umuuuuuuum ! af ;- l .
, e-L W. T. R u ffin 1913-1987 South Mississippi Electric pays tribute to W. T. "B uster" Ruffin, former Director of South Mississippi Electric Power Association, who died on September 29,1987.
He served as Director of South Missis-sippi Electric from November 19,1980, until his death. Ruffin was elected as a Director of South-crn Pine Electric Power Association, South . Mississippi's largest member system, in 1957. He served as Director of Southern Pine for
- thirty years, with 13 years as Board Vice-Presi-dent. His dedication and efforts to the Rural Electrification Program will not be forgotten.
1
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