ML20151M787

Forwards Annual Financial Rept & Cetified Financial Statements for 1986 & 1987.Annual Rept for 1987 Will Be Forwarded as Soon as Possible

ML20151M787
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	04/18/1988
From:	Mueller R DAIRYLAND POWER COOPERATIVE
To:	NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
References
LAC-12537, NUDOCS 8804250128
Download: ML20151M787 (17)

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• DlDA/RYLAND hh[M[COOPERATlVE

• 2615 EAST AVE. SO.

• PO. BOX 817 LA CR (608) 788-400o April 18, 1988 RE: LAC-12537 DOCKET N0. 50-409 U.S. Nuclear Regulatory Commission Attn: Document Control Desk Washington, D.C. 20555 Gentlemen:

DAIRYLAND POWER COOPERATIVE LA CROSSE BOILING WATER REACTOR (LACBWR)

PROVISIONAL LICENSE N0. DPR-45 FINANCIAL STATEMENTS AND AUDITORS' REPORT

Reference:

1) 10 CFR 50.71.(b)

In accord.?,nce wit [the requirements of Reference 1, we are forwarding three (3) copies of the annual financial report and certified financial statements for Dairyland Power Cooperative for the years 1987 and 1986. We will forward our 1987 Annual Report to you as soon as it is completed.

Sincerely, DAIRYLAND POWER COOPERATIVE

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Robert C. Mueller Assistant General Manager and Controller RCM:).e Enclosures cc: C. Bert Davis, Regional Administrator, NRC-DR0 III NRC Resident Inspector - LACBWR

, Peter B. Erickson, NRC Project Manager J. Parkyn, LACBWR 80

,j 8804250128 880418 9 PDR ADOCK 05000

. ARTHUR 4 ANDERSEN

&GQ)

Jairy anc Power Coooerative

anc Suosiciary

} ConsolidatedFinancial Statements i

as ofDecember31,1987 and 1986 l- Together with Auditors' Report f '

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.y AnTuun ANDERSEN & CO.

MINNE APO W S. MINN ESOTA To the Members and the Board of Directors, Dairyland Power Cooperative:

We have examined the consolidated balance sheetn of DAIRYLAND POWER COOPERATIVE (a Wisconsin cooperative) AND SUBSIDIARY as of December 31, 1987 and 1986-and the related consolidated statements of revenues, expenses and patronage

- capital and cash flows for the years then ended. Our examinations 1

were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in L

g the circumstances.

In our opinion, the conso11 dated financial statements

{! referred to above present fairly the financial position of

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f Dairyland Power Cooperative and Subsidiary as of December 31, 1987 I and 1986 and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

ARTHUR ANDERSEN & CO.

March 3, 1988.

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^l DAIRTLAND POWER COOPERATIVE CONSOLIDATE 3 BALANCE SHEETS--DECEMBER 31 i

(in Thousands) 9 ASSETS CAPITALIZATION AND LIABILITIES 1987 1986 1987 _ _19d6 ELECTRIC PLANT (Notes 1, 2, 7 and 10): CAPITALIZATION:

Plant and equipment, at original cost $491,803 $499,041 Member and patron equities-Less- Accumulated depractation (202,653) (197,911) Membership fees $ 10 $ 10

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-------- Pattorage capital (Note 4) 70,351 71,505 289,150 301,130 --------

Total member and patron equities 70,361 71,515 Construction work in progress 7,634 4,786 Nuclear fuel, at amortized cost - 16,446 Long-term obligations (Note 2) 363,705 353,718 Total electric plant 296,784 322,J62 Total capitalization 434,066 425,233 OTHER ASSETS:

Investments (Note 1) 36,887 32,271 Invest ment in fiber optics venture (Note 9) 3,126 G,351 Investments in capital term certificates DEFERRED CREDITS (Notes 5 and 8) 20,194 21,989 of National Rural Utilities Cooperative Finance Corporation 9,256 9,056 Pollution Control Bond proceeds or-deposit with trustee 2,041 1,869 Deferred charges-LACRWR costs, net (Note 10) 17,199 -

COMMITMESTS AND CONTIt. GENT LIARILITIES (Note 6)

Other (Note 8) 4,103 5,087 Total otter assets 73,212 55,434 CURRENT ASSETS: Ct9 RENT LIABILITIES:

Cash and tempora ry cash investments 51,542 25,951 Current maturities of long-term obligations 8,614 8,185 Accounts receivanle- Advances from member cooperatives (Note 3) 8,471 7,278 Energy sales 14,982 15,002 Accounts payable 6,785 2,734 Other 4,819 1,850 Accrued liabilities-Inventories, at' average cost- Payroll and vacation pay 2,416 2,0d1 Fossil fuels 35,622 40,924 Taxes. 2,108 1,310 Materials and supplies 8,442 9,516 Interest 939 937 Pretaid expenses 779 915 Other 2,589 2,207 Total carrent asset s 116,186 94,158 Total current liabilities 31,922 24,732

$486,182 $471,954 $486,182 $471,954 The accompanying notes are an integral part of these consolidated balance sheets

DATRYLAND POWER COOPERATIVE

_ CONSOLIDATED STATEMENTS OF REVENUES _,_

EXPENSES AND PATRONAGE CAPITAL FOR THE YEARS ENDED DECEMBER 31 (In Thousands) 1987 1986 OPERATING REVENUES:

Sales of electric energy $151,764 $155,325 Other 789 896 Total. operating revenues 152,553 156,221 OPERATING EXPENSES:

k Fuel 62,790 72,737 Purchased and interchanged power, net 6,488 3,968 Other operations 23,241 23,708 Maintenance 8,894 8,836 Depreciation and amortization (Notes 1 and 10) 17,715 16,453 Taxes 6,682 5,651 Total operating expenses 125,810 131,353

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f Operating margin before interest y and other deductions 26,743 24,868 t INTEREST AND OTHER DEDUCTIONS:

Interest 24,623 24,552 I Allowance for borrowed funds used t during construction (Note 1) (467) (1,105) 1 Other (Note 9) 5,179 511

! Total interest and other deductions 29,335 23,958 Operating margin (deficit) (2,592) 910 NONOPERATING MARGIN, principally investment income 5,440 4,853 i:

Net margin 2,848 5,763 PATRONAGE CAPITAL, beginning of year 71,505 69,670 RETIREMENT OF CAPITAL CREDITS (Note 4) (4,002) (3,928)

PATRONAGE CAPITAL, end of year, including margins assignable of $2,848 in 1987 and $5,763 in 1986 $ 70,351 $ 71,505 The accompanying notes are an integral part of those consolidated statements

DAIRYLANC' POWER COOPERATIVE,

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'CONSOI,IDATED STATEMENTS OF CASH PLOWS P

FOR THE YEARS ENDED DECEMBER 31

'(In Thousands) l 1987 __1986 CASH FLOW PROVIDED BY (USED IN):

Operating activities-1 Net margin $ 2,848 i 5,763 Depreciation and amortization 16,486 16,453 l 1,968 2,751 Amortization of nuclear fuel ,

j Amortization of deferred charges- LACBWR 1,228 -

! Reduction in carrying value of fiber optics venture 5,567 -

Other 2,400 2,792

- Change in current operating items:

Accounts receivable 352 39 Inventories 5,988 (8,648)

Prepaid expenses 136 94 Accounts payable 3,201 (2,035)

. Accrued liabilities 1,517 (572) l Cash provided by operating activities 41,691 16,637 i Financing activities-j Proceeds from long-term obligations 18,608 9,980 i Change in Pollution Control Eond proceeds on deposit with trustee (172) .242 Repayment of long-term obligations (6,999) (7,904)

Retirement of capital credits (4,002) (3,928)

Cash provided by (used for) financing activities 7,435 (1,610) j Investing activities-f Electric plant additions, net (15,034)' (12,552)

Changes due to termination of LACBWR operations:

j Electric plant 20,408 -

Deferred charges (18,427) -

j Other (1,981) -

Increase in other investments (4,616) ,.(6,455)

Investment in fiber optics venture (2,342) (5,079) i Other, net (1,543) 4,899 i Cash used in investing activities (23,535) (19,187) i Cash flow during the year $25,591 sf4,160) 3333333 assassa.

I The accompanying notes are an integral part of these consolidated statements a

DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summarv-of Significant Accounting Policies-Organization:

Dairyland Power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of Wisconsin.

The Cooperative provides wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa, Illinois and Michigan and provides electric and other services to Class C, D and E members.

The accounting records ot the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.

The consolidated financial statements include the accounts of the Cooperative and its wholly owned

- subsidiary, Curtis Telecommunications, Inc. (CTI).

All intercompany accounts and transactions between the Cooperative and CTI have been eliminated.

Dep.eciation:

Depreciation is provided based on the straight-line method at rates which are designed to amortize the original cost of properties over their estimated useful lives and include a provision for the cost of removal and decommissioning of the properties.

The provision for depreciation averaged 3.8% of d.epreciable plant balances for 1987 and 1986.

Amortization of Nuclear Fuel: ,

f Prior to April 30, 1987, the cost of nuclear fuel l

was charged to fuel expense based on heat produced l

for the generation of electricity. The cost of disposal of spent fuel was recorded over the lives of individual assemblies. See Note 10 for further discussion regarding the cessation of operations of the Cooperative's nuclear generating facility.

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Income Taxes:

l I The Cooperative is exempt from federal and state l

income taxes and, accordingly, no provision for l

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DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (continued)-

Income Taxes (continued):

such taxes is reflected in the consolidated financial statements.

Allowance for Funds Used During Construction:

Allowance for funds used during construction represents the cost of borrowed funds used for construction purposes and is capitalized as a component of electric plant. The amount of such allowance is determined by applying a rate to certain electric plant additions under con-struction and, for periods prior to May 1, 1987, to the balance of nuclear fuel in stock and in fabrication. The rates used varied from 7.0% to 8.1% and from 6.6% to 11.1% in 1987 and 1986, respectively, depending on the source of funds.

Procerty Additions:

i The cost of renewals and betterments of units of property (as distinguished from minor items of property) is charged to electric plant accounts.

The cost of units of property retired, sold, or otherwise disposed of, plus removal costs, .ess salvage, is charged to accumulated depreciation.

No profit or loss is recognized in connecticn with ordinary retirements of property units.

Maintenance and repair costs, and replacement and renewal of minor items of property are charged to operating expenses.

Inves_tments:

Investments of the Cooperative consist primarily of commercial paper and government obligations. All investinents are recorded at the lower of aggregate cost or quoted market value. The carrying value of the investments is adjusted for amortization of premiums and discounts.

DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (2) Long-Term Obligations-Long-term obligations at December 31 consist of the following (in thousands):

1987 1986 REA Obligations, 2% $ 72,537 $ 77,302 REA Obligations, 5% 33,400 33,973 FFB Obligations, 7.5% to 10.9% 225,511 208,668 NRUCFC Obligations, 8% 6,477 6,810 City of Alma, Wisconsin, Pollution Control Bonds:

Fixed rate (6.383%) 11,620 11,910 Adjustable rate (5.31% at December 31, 1987) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds, adjustable rate (5.31% at December 31, 1987) 4,160 4,160 Capitalized lease obl4gations, principally at im* cit interest rates of , due 5,180 I' in varying amountr co 1995 4,714 372,319 361,903 Less- Current maturities (8,614:

(8,185)

Total long-term obligations $363,705 $353,718 Long-term obligations to the REA are payable in equal quarterly principal and interest installments through 2015. Principal repayments on the long-term. obligation to the Federal Financing Bank (FFB) extend through 2021.

Principal and interest payments on the National Pural Utilities Cooperative Finance Corporation (NRUCFC) obli' itions are payable quarterly through 1999. The fixed rate Pollution Control Bonds are payable in increasing annual amounts through 2008.

The adjustable rate Pollution Control and Industrial Development Revenue Bonds mature in 2015 unless pre-viously called for redemption. Bank letters of credit aggregating $19,000,000 and terminating in February 1991 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date. Accordingly, the entire principal amount of these bonds is classified as long-term debt.

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DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) Long-Term Obligations (continued)-

Substantially all of the Cooperative's assets are pledged as collateral for these obligations. The Cooperative is required to and has maintained certain financial ratios related to earnings and liquidity in accordance with the covenants of its loan agreements.

Maturities of the Cooperative's long-term obligations are as follows (in thousands):

Year Amount 1989 $ 8,960 1990 9,329 1991 9,630 1992 10,003 Thereafter 325,783 Total $363,705

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(3) Lines of Credit-

.I To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $27.3 million, principally through NRUCFC. Borrowings (which were not significant in either 1967 or 1986) are at the prime interest rate and prime minus 3/4%. Compensating balance requirements or fees relating to the lines of credit are not significant.

The Cooperative also allows member cooperatives to prepay their power bills, and pays interest on these prepayments based on current short-term borrowing rates. Interest l

expense on member cooperative advances has been netted against interest income earned by the Cooperative on prepayments in excess of its working capital requirements and reflected as nonoperating margins in the accompanying consolidated statements of revenues and expenses.

j (4) Retirement of Capital Credits-The Cooperative's Board of Directors has adopted a policy i of retiring capital credits allocated to members on a "first-in, first-out" basis so that at all times the Cooperative will not retain as patronage capital any capital contributed or deposited more than 20 years prior to the current year. Accordingly, the 1967 and 1966

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DAIRYLAND POWER C_OOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) Retirement of Capital Credits (continued)-

capital credits were retired in 1987 and 1986, respec-l tively. Implementation of this policy is subje.ct to annual review and approval by the Board of Directors and the REA, and no cash retirements are to be made which would impair the financial condition of the Cooperative or violate any terms of its-agreements.

(5) Shared Transmission Acreements-The Cooperative has entered into shared transmission agreements with the Southern Minnesota Municipal Power Agency (SMMPA) and the Western Wisconsin Municipal Power Group (WWMPG) which provide SMMPA and WWMPG use of the Cooperative-owned transmission system to deliver power and energy requirements to SMMPA and WWMPG members in the Cooperative's electric service area for a period of 50 years. Payments received from SMMPA and WWMPG for use of the Cooperative's transmission system are reflected as deferred credits in the consolidated balance sheets and are being amortized to operations over the terms of the related agreements. The Cooperative may be entitled to y further payments depending on the investment in, and joint use of, the system.

(6) Commitments and Contincencies-The Cooperative has been named a defendant in several lawsuits and claims, primarily related to construction r and operation of its electric plant. Although the outcome of these matters cannot be determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material adverse effect on the financial position of the Cooperative.

(7) Construction-The Cooperative's 1988 estimated construction program is

$30.6 million. Financing of construction is expected to be provided by borrowings from the FFB, proceeds from the issuance of Pollution Control Bonds, short-term lines of credit with the NRUCFC, advances from member cooperatives and funds generated internally.

(8) Pension Plan-Pension benefits for substantially all employees are provided through participation in the National Rural

-DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8) Pension Plan (continued)-

Electric Cooperative Association (NRECA) Retirement and I Security Program. The cost for this defined benefit pension program was approximately $759,000 in 1987 and

$2,030,000 in 1986. Contributions are determined in accordance with the provisions of the program and are based on salaries, as defined, of each participant.

During 1987, NRECA declared a moratorium on plan contributions effective July 1, 1987 through December 31, 1988. As of December 31, 1985, the date of the last available actuarial valuation, net assets of the plan available for benefits exceeded the actuarial present value of accumulated plan benefits.

s Effective January 1, 1986, the Cooperative adopted an amend-ment to the pension plan which reduced the normal retirement age from 65 to 62. This amendment resulted in the creation of an unfunded prior service cost of

$2,452,000, which is included in deferred credits in the consolidated balance sheet with an intangible asset of the same amount recorded in deferred charges to reflect the expected future economic benefits associated with the amendment. The intangible asset is being amortized to

. expense on a straight-line basis over 30 years.

Additionally, interest at 8% is also being recognized on the unfunded prior service costs.

(9) Fiber Ootics Venture-h The Cooperative's wholly owned subsidiary, CTI, owns a 23.8% partnership interest in NorLight, a venture with

- four other partners, to own and operate a fiber optics network in the Upper Midwest.

Prior to 1987, losses incurred by CTI (principally due to recognition of its proportionate share of NorLight l

losses) and payments received by the Cooperative from NorLight for use of the Cooperative's right-of-way were deferred based on a Board of Directors' resolution to l

4 allow recovery of such deferrals through future service l

rates. Such deferred amounts were to be amortized to

! operations (with appropriate recognition in service rates charged to members) over a period commencing the first year in which CTI became profitable, with all deferred amounts amortized by 1997. Amounts deferred in 1986 included an approximate $1 million loss of NorLight and a

$1.3 million payment received for right-of-way which are included in investment in fiber optics venture and deferred credits, respectively, in the consolidated balance sheets.

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DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (9) Fiber ODtics Venture (continued)-

As a result of a resolution adopted by its members during 1987 which effectively prohibits future service rate l

increases as a result of losses of CTI, the Cooperative ceased the policy of deferring CTI losses and charged the previous deferred losses and right-of-way payments to operating expenses. In addition, in recognition of developments in the fiber optics industry, the carrying value of CTI's investment in NorLight was reduced to reflect CTI's proportionate interest in the estimated current value of the NorLight venture. The effect of the above actions was to reduce 1987 margins by $5.6 million.

Based upon information currently available, the Cooperative expects to continue its involvement in the venture and to be able to recover the remaining carrying value of its investment either through operations of the venture or divestiture of its ownership interest.

In November 1987, CTI assigned its interest in NorLight to a bank as collateral securing NorLight's financing.

(10) N_uclear Reactor-5 The La Crosse Boiling Water Nuclear Reactor (LACBWR) was l

voluntarily removed from service by the Cooperative

" effective April 30, 1987. The intent was to terminate operation of the reactor and a "possession only" license has been obtained from the Nuclear Regulatory Commission I during August 1987. The facility is being placed in a "safe storage" status and will remain so until 2010 to 2014 at which time decommissioning will be completed.

All LACBWR-related property (net of depreciation),

construction work-in-progress, inventories and nuclear fuel (net of amortization and salvage value) totaling

$18.4 million has been transferred to a deferred charge and is being amortized to operating expense over a ten-year period with appropriate recognition in rates charged to members for electric service.

The provision for depreciation includes $1.8 million to provide for the estimated costs of decommissioning the nuclear generating facility; however, the manner of decommissioning the facility has not been determined.

The Cooperative continues to review its decommissioning cost estimates and expects that any increases in such costs will be recovered through future rates. The Cooperative has adopted a policy of funding decommission-ing costs currently and the related investments are

DAIRYLAND POWER COOPERATIVE NOTES TO CONSOLIDATED FTNANCIAL STATEMENTS (10) Nuclear Reactor (continued)-

included in investments in the consolidated balance sheets, while the decommissioning reserve of $9.4 million is included in accumulated depreciation.

Under the Nuclear Waste Policy Act of 1982 (Act), the United States Department of Energy (DOE) is responsible for the storage and disposal of spent nuclear fuel removed from nuclear reactors. Under the provisions of the Act and a contract with the DOE, the Cooperative made quarterly payments for nuclear fuel burned during the year.

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