ML20196B735

Brazos Electric Power Cooperative Inc 1987 Annual Rept

ML20196B735
Person / Time
Site:	Comanche Peak
Issue date:	12/31/1987
From:	Parker W BRAZOS ELECTRIC POWER COOPERATIVE, INC.
To:
Shared Package
ML20196B712	List: ML20196B706 ML20196B720 ML20196B735 ML20196B747
References
NUDOCS 8806300360
Download: ML20196B735 (40)

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- THE BRAZOS SYSTEM, Brazos Electric Power Cooperative,' Inc. is a -

. generation and transmission cooperative which provides elec' tric

.56,777 square miles of.

. power to its 20 member Texas. Brazos and its

.-distribution cooperatives members comprise the l whose setvice areas cover

' Brazos System. Brazos also provides electric =

. power to the municipal systems of the cities -

Whitesboro and to Texas of Bartlett, Granbury, A&M University. Brazos -

Hearne, Sanger, Seymot.

s a member of the Texas -

Weatherford, and -

Municipal Power Pool:

with the cities of Bryan,._

Denton, Garland, and Greenville.The combined' generation capacity of the Texas Municipal Power Pool is 2,084 megawatts.

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g-1%oJent Itil! sam G. Ifuler a id Ihra ts:e Ii<r 1%rula:t and Gouval.tlanayr Ro<hard.tla Caskill

f e i

Our em por.uc reliability. we impe yon will j

objective is to appreciate their contributions as i

i provide reliable you read this report.

1 electric service at PRICE DECREASE y

c th"lowest possible g c,,

. g., g,g n,,

l===n cost. In that regard, another decrease in the cost of.

we are particularly O

w holesale power..I his y car, the proud ol'u hat our cost of,our members, power empim ers purchases averaged U.ib nulls accomplished during 1%.l'hc.

per kilowatt hour, dow n 1.4 ir cilbris brought another decrease percent f. rom l!mi We has e m the average cost of. pow er.

reduced the cost 13.e percent

.I.hev aclu.eved a record f,or smce lim.3 and we project a 1.a-service reliability, and they pricent decrease f.orlim8.

improved our power generation At S car end, we temporarily loweied our ates. Consumers will benclit from a total irduction of $10 million during the period 3

)

i j

. R E-P ot T

-7 o

ht 1 M t.E R5 C o.N T I N U E D.

s; l

December 1987 through Alarch.

indefinitely. Therefore, we

. Administration (REA) denied j

1988.This action reflects the continue looking for long term fur ther funds for that purpose commitment of Brazos and its supplies ofgas. Until recently, it fter Alay 1985.

J members to minimize the cost of has been diflicult to make In August 1987, we did receive i

electricity for our consumers.

agreements with a duration of approval from REA for a loan to

FUEL COST SAVINGS more than one year. This year, pay some of the interest on our however, we made a four-year, L manche Peak loans. But even When we completed buildm.g fixed-price agreement for a small by. ear end, we had been unable ~

our gas pipelme m, August 1984, we gained access to the natural package ofgas.

to draw funds. The Federal We also have been Financing Bank (FFB) is our gas spot market. It provided competition, and we were able t investigating other possibilities primary source ofloan funds.

that m'ay further improve our For more than a year, REA and negotiate contract amendments -

con el of gas prices. One FFB had not reached an reducing our cost of producer consideration is to use a reservoir greement on lending. Through gas by about seven percent for a for storage ofgas. Another is to the vigorous efTorts of U.S.

two-year penod. Additionally, we achieved an 80 percent participate in a drilling program RcPresentativeJoe Barton,REA reduction, to $0.06 per AICF,, n.

that might economically provide and FFB signed an agreement part ofour future resenes.

in September. We also the price of transportmg the gas.

lower natural gas costs have ~

In past years, we have failed to give some very deserved been a sigmficant cause ofour recognition to the individuals contmumg cost reductions.

I,his past September, we who guide our fuel operations.

A<

[ q['

I negotiated a 44 percent reduction

& dimors of on holh-owned subsidiaq, Brazos Fuel

'",'I',*'

Company, Inc., are listed in this k

g, e c st e

o O cr "f

AICI, for the year starting report under BRAZOS FUEL, s

COhlPANY. Fuel cost is about September 1,1987. In 1983, f

,0 percent ofour total expenses gg 2

natural gas cost about 4.le for

.nd these people haye made each kilowatt hour produced.

Using that basis for comparison, si[nif[t c ntributions to we have saved about $50 milhon during the past four years. We FINANONG HOW DOES have passed the savmgs to our Alinimizing our consumers, ELECTRICIT/ CET customers and they to their cost ofelectncity is a entical part TO OUR HOME?

consumers.

. ofour mission. 'Ib do so, we Nve The weak pricing in the a policy of generating revenues Electricity is generated at a natural gas market will not last just above the lese) recluired by power plant that runs on fuel our mortgage. la recent years, or water. Right outside of the revenues higher than this goal plant is a step up substation have been used to make interest that transforms the electricity t a higher voltage. The payments on debt borrowed for the Comanche Peak Nuclear electricity then travels long distances n hiph-voltage Plant. Normally, we would have transmission lines until it used loan fimds to pay such reacher your area. 3ere, a interest during the period of step down substation plant construction. Ilowever, the transforms the electricity to Rural Electrification lower voltage, and it trave!s on distribution lines to your home. Outside of your home, there is a transformer, often on top of a pole, that transforms the distribution electricity to household voltage available for your use.

A1e b l J

4

received strong support from appreciated the help of these cost us $96.5 million.This figure Speaker, Jim Wiight, Senators legislators who have shown their was based on TU Electric's llentsen and Gramm, and dedication to the intt rests ofour estimate of the plant cost at that Representatives lxath, Stenholm, consumers. We owe them our time.We have now spent more and floulter.

sincere thanks.

than $248 million on construction Since that time, Senator COMANCHE PEAK LITIGATION and interest.The project is more than eight years behind the lleni<en and Representative g

yg

[g 7.;

llarton have mtroduced schedule outimed in our

.MW) of the Comanche Peak lemslation requiring that such an Nuclear Project. Texas Utilities

" 4 "' C " "' " ' "

I" '\\ I Y I983'""CC"*Cd agreement always be m ellect. In Eina-ie Compnv TU Electric) the !!ouse, it was co-sponsored owns the major slIa(re of the making construction payments Icause the project had exceeded by Representatives Leath ami project and is project manager.

Stenholm. l'he legislation will When w e acquired our share in

""f approved loan funds. In i

also beneh,t other rural electrie domg so, we cited among other

9 9 du- @ u summed to emperatises requesting REA-tlu,ngs the fact that l'U Electnc guaranteed loans. We certainly had failed to complete the project Ste p-u p substation

%%m,o,Y

• d, San Miguel I. ignite L

I#

j Generating Plant

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iiign.soiiate

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transmission ines

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HOW DOES (sien-ae n ELECTRICIT(

GETTO OUR HOME?

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inw.voliage bution lines f

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N.y umumnoia u.iuge x

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0 l P oR T ro M Ea 8 t a s C0 N T I N U E D as planned. In Alay 1986,TU Electric filed suit against Brazos and the other owners to collect unpaid construction bills and for a declaration that TU Electric had not failed to perform its Our goal remair.s to get out of obligations under theJoint the project, recover our Ownership Agreement. We investment, and be reimbursed countersued. Litigation has for damages. It is fair and, if progressed into the discoven-achieved, will serve the best RELIABluTY stage. % hat we have found has interest ofour consumers.

allirmed our beliefin the strength At year end,TU Electric In 1987 we had the best ofo-c position.The trial is settled potential claims against system reliability record in the scheduled to begin October 1, Gibbs & Hill, the original 16 years for which records have 1988.

architect-engineer of the plant.

been compiled. It is further TU Electric has again We were not a party to the discuswd in our Report on extended its projected date for negotiations or the final Operations. We will continue to initial plant operation. It now settlement agreement. According strive for even greater reliability believes the first of two units will toTU Electric:

because it is such an important not be operational until "Under the terms ofthe P" ' ' f " ' "" S *'

December 1989.TU Electric se/ dement, TU Electric and the It has been a good year. N.

have been presented challenges estimates its share of the project of3,r owners oftheproject..

will receire a totalofS3 nq we have nu t them. %e will cost $7.981 illion. We behm W88 w m be at least as estimate the total project will mi# ion in cash, deferred R*0 '

cost more than $9.0 billion.

parments andfuture engineering smices which will beprovided'

'(Y*" """'""Y'l"U*"'

to TU Ekctric on non-nuclear

" """ ' "" ' " P" ' i"" b '"I l "'

pmj. ts..

write us. Better yet, drop by ec

~

for a visit.

We do not have a copy of the settlement agreement and we g,

d have recewed no payment related William G. Parker to this agreement from l'U 3,,jj,,,

Electric or Gibbs & 11i11.

o.@.

).?

Yb $

0 Richard E. NicCaskill o y S'10 16autive Ila hrsident

" " - " " " ' ~ "

8 and s

ANSWHS WHAT CAUSES THE LIGHTS TO DIM)

A i

~

When more people try to use water at the same time, the pressure in your garden hose sometimes drops I

to a trickle. When many consumers are using electricity, Il the voltage, or pressure, decreases. When there is a

\\

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e momentary surge in usage, the voltage may drop h

.',,,,,'i

,I 'W' enough to dim your lights. Of course, we are always working to prevent this.

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T

o 86

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w REVENUES AND AVERACE POWER COSTTO MEMBERS REDUCTIONS

(.si i 1.1. s Pna K w 11 >

IN COST

- U For the fburth g

year, our customers 7-paid a lower average

. *h cost fbr electricity from Brazos. Our 4

~

1987 revenues from y

sale s of electricity were $186,199,836, an annual increase ofless than one percent.

There are two major reasons for the good results. First, we a

reduced our annual fuel expense by $3.7 million and passed the Our total electric sales LC X'ER FUEL FACTOR savings to consumers. Secondiv, ecc.:omical power was availabic increased 3.5 percent to State regulation requires our from other utilities. Therefore, 3,961,988 megawatt he"rs. A rates to have a "fixed fuel factor."

we often were able to make detailed look at firm electricity This factor sets our fuel charge sales shows the fbliowing per kilowa.t hour. We have purchases at very competitive changes:

achieved declining fuel costs fbr prices. Ilecause consumers pav SALES lbur years and have passed these the actual cost of such purchases, M*"

""l they benefitted from additional Percent s vings to our customers.

savings.

1987 1986 diange Ilecause the gas price we Our cost-conscious philosophy Alembers 3,500 3,217 8.8 negoti ted in August reduced the actual fuel cost considerably of oper ations contributed other Alunicipal ciliciencies and savings of smaller customers 312 m -11.7 more, we obtained approval for a size. Regardless of the size of

'Ibtal firm sales 3,812 3.570 6.8 lower lhed fuel factor from the these savings, that underlying Ln. firm sales 151 262 11.3 Public l'tility Commission.

attitude ofour employees is ven-TOIAI. 5.\\l.Es 3,965 3,832 3.5 TEMPORARY RATE REDUCTION im portan t.

In suburban service areas, a De3pite the continued Ibw ofour members are fieling sluggishness of the'lixas economy, sales to our members intensive competition from increase'd 8.8 percent compared neichboring utilities. At ycar end, we were able to make a to 1986. In that year, we had ontv nine month's of sales to our temporary rate reduction at the two new members, Dickens niemhers' request to help them Electric and Gate Citt Electric.

C""lPete. From December 1987 through.\\tarch 1988, we reduced Putting member sales on a comparable basis Ihr the two customers' power bills by a total of slo million. The reduction years still show s an annual herease of 7.0 percent.

was about 17 pc cent for the (bur-month period.

REllABILFfY In considering reliability, we must look at two sections ofour transmission system. One is the major portion of the system 7

i

RI P oa7 oN OP t a4 7 t oN 5 con 7 i N uE D LOAD CROWHi The service we provide to our customers comes primarily from our transmission system, but also from systems ofother utilities.The peak demand on our tiansmission system in 1987 was 162 megawatts, compared to last y ear's 764. This lack of Despite these maintenance chan ;c contrasts starkly with the and operational improvements, a incrcase of 6.0 percent the year with severe weather can prev ous year, but it is good mask all ofour progress.

news.The less the peak grows, Therefore,it is important to the bnger we can delay building consider long-term averages.

new facilities.

We are dissatisfied with

'I he decrease has another reliability on the newly acquired goo.1 aspect. Firm electricity section of our system. Its average sale i from our transmission which yve have built and outage time per substation was syst em alone increased 5.6 mamtamed over the years.,I,he 225 minutes in 1987. We have percent in 1987.The more other is a section for which we been working diligentiv with the kilc watt hours we sell without took responsibility last year power supplier in this area to inc casing our transmission when two new membersjomed improve reliability and are also sys'em peak, the better our load Brazos. In this new area, we in the process ofdesigning more fac or becomes. In turn, the purchase power from another eflicient transmission facilities aw rage cost of power decreases, utHity.

that will increase reliability.

Tl is concept is discussed

, \\\\,c are extremely proud of our Construction is scheduled to be els ewhere in this report.

nuprovements, : reliability to completed in 1989. When We do see substantial growth the major port

,a of the system.

reliability reaches our standards, de celoping in specific areas of

\\\\ithm this i.

on, outages we will integrate the reported at r system..\\lobil Oil has decreased 52,-

ent compared results with those of the rest of cc mnhitted to build oil field to 1986. Average outage time per our system.

fa cilities with a load of about 40 substation in 1987 was 32 minutes compared ig our ten-AVERACE OUTAGE TWE year average of 6/ mmutes. \\\\.e

.\\11 N U T E S PER S U 11 S Te F I O X think that a number of factors 10 gear mor ing a:erage have made significant contributions to this achievement. They are:

1. Prerentire maintenance pmgrams including infra-red inspection ofsubstation Jacilities and a program of systematicpole inspection.

2. Impro:rdmaintenance planning andpmcedures.

3. Impnned operating proadures and radio communications.

1..ldditional superrisoy contml and data acquisition equipment.

5. Transmission system improirmtnis.

8 )-

I h______.______.___.__.____._.._-._______-.-------------_________________________-____

megawatts. International llusiness Machines is building an ollice park, the initial load of which will be about 30 megawatts. It could grow to 100 costly source in the southeastern megawatts in the next few years, part ofour system.This new We expect both of these loads to power will provide some have high load factors and, reduction in overall power cost.

[l ") >-

therefore, be beneficial lbr our pOTER SUPPLY PLANNING memben,. Our current study of

%.c cononued purchas.mg

\\<

power requirements indicates R " " " '" "" " "" P" ' " Y " '

[ ;-

load growth of 5.7 percent per economical rates from the.l.exas T

year and energy growth of,6.3 y ;

pg pg4 ggg f

s s

y percent through 1992. Should we are a member. Ih.1990, we (1 f }

the U.S.1)cpartment oflu,nergy,s may need to acquire or build f

massive superconductmg

.."""" M"""'" """ "" P""I ' Y' I' '

supercollider be located in

."I broughout the year, we have 2

central.lexas, we would expect

" " """ "" " " 4 "P ' I"" * ' I I' ' '

significant additfonalload

" " "" d ""l" P " R d '"'" " P """'

\\VHY DONT i

dowth. We anticipate the

'd '"d '" d'" '"""'"coon of ou r ELEC.Tqir RATES GO 1)epanment wiH announce its Own generation, in particular, DOWN IN preferred pmject locan.on m 1988.

as Mines. We win then PROPORTION TO CONSTRUCflON compare these options to We had a pmductive y ear of purchased capacity (conventional DECREASES IN THE construction to meet pmjected and cogeneration)'and load PRICE OF load grow th. We undertook more management alternatives. There NATURAL GAS?

than 50 pmjects with a total are many sources fiom w hich we When the price of gasoline value of more than $27 million, could pu'rchase power. We are io pe This year's construction currently reviewing the proposals

,Qggperat our car nuluded:

of l{cogenerators and nine drop to percent? Not unless

• the addition of9/,000 Kl:1 to utihties. Ibgether, they have you forget to include the our de/it(Tr Jub3tation mom than 5,300 megawatts

' costs of insurance, taxes, available until the mid-1990s.

maintenance, and interest on capacitr including men nele We will make oui selection based your auto loan. These costs substationr.

e constmction ofl0 miles of on cost and reliability.

are big enough to make the U3,W#1 toll tramminion line.

Power supply planning can be effect of the gasoline price decrease seem small.

conumction 4 3##1.04) compleniented by demand-side Many people think that o

Kl:1 bulk porcer 3ubstation nianageinen t, pros i<ging an g

gg to impnnr 3m ice reliability alternaove to purchasmg or the price of natural gas. But in the central, more heaci/r building addioonal power our cost of fuelis only a populated, area ofour stuem.

supph,es.1)cmand-side portion of the expenses of

• """R"*""'

running Brazos. Hesides Of the numerous projects, managenwnt plus dw nuuko.ng paying ior gas 13razos stiH about 85 wrcent were I

to develop consumer interest. Its must build efhcient and constructed by our own d is to devdg ww moul of environmentally safe power personnel.

du m ran pm of power plants. They are expensive.

NET ALLOCATION We still must borrow money OF FEDERAL POTER to build the plants, transmissi n I;aes, and At year end, we received a substations and we must pay new a'llocation of 5.2 megawatts interest on the money. We still of power from the Southwestern must buy insurance, ' pay taxes, Power Adminisaation. With this and operate and mainta'in the addition we will reduce system.

purchases of power from a more 9

i

R E ? oR T oN OP E R A T I oN s con T I N uE o

?

usage on a utility's system. If 3

that can be done, the utility can reduce its [xmcr cost and/or 3

delay addition of new power

]

sources. Ifyou can fill more seats

=

on the school buses, then you i

can delay buying addithmal NORTH TEXAS CAS buses. In our situanon, if w e can PIPELINE CONNECTION 5

sell more kilowatt hours from our a

,Fhis year, we installed a existing system, then we can delay adding new facilities, connectmn from our natural gas i

We have retained consultants pipeline to a pipeline serving J

ur North Texas Plant. The g

p

=

to conduct a demand-side management study of the Brazos c nnecti n willimprove the

-. /p

/-

System. We are also conducting reliability and quantity of

)

a' marketing suncy of the gas supplied to the North 4

consumers ofeach member

.lext.s Plant. In previous V

1 l

cooperative.The survey will y( n, another pipeline M]

4 I

i determine what appliances oper tor had been unable

'g j

O l

t provide enough gas in g

g people have, and what they might be willing to do to help us periods of peak load.

At such times, we had to modify the pattern of power burn ml at the plant. Io j

usage. The demand-side management study will haw another supply opu,on, g

incorporate this information into we plan to instaH anothn f l an analysis of management y nnection between the North p

Fex s PI nt p pehne and l

options-methods of modifying a transmission pipeline. A construction the pattern of power usage. Hv next September, we hope to h' ve schedule has not yet bet n estabHshed.

N g

a a selection ofoptions that will be MODERNIZATION h

etrective in changing power use.

OF SYSTEM OPERATIONS f

The benefit of any option selected From the System Operations will have to exceed its cost, over Center, our employees monitor f

a reasonable period of time.The and control our transmission study will also produce a five-system and power plants.

year marketing plan to help us From it, they monitor implement a program.

Brazos' 223 substations, e

g 2.300 miles ofline,and the v

'j Texas.\\lunicipal Power a

Pool's 40 generating units.

7/ n _

/

From it, these system M

j operators evaluate the

~

g weather and its etTect on p

42 j

[C system loads. They direct e'

g

, (,'

maintenance crews. And.

1 throughout the year, they C

q handle millions of dollars of Q

energy generation and of v j economy sales and purchases, y

a m

=M x10 7 4

? y.

1:.

6mf 1

[S 'lo o-and s

We have begun preparations for mstalling an energy

' ". " " " wnt spian ONS) that wdl s?"ficantly upgrade and WHY ARE RURAL igm ELECTRIC expand the capabilities of the COOPERATIVE system operations Center. It RATES HICHER THAN w'ill be delivered in the spring of RATES FOR 1989 and will be operational by INVESTOR OWNED that fall.

IMPROVEMENTS TO UTILITIES?

The present system is more than 15 vears old and outdated.

EMPLOYEE BENEFITS Brazos' cost of generating The new EhlS will centralize the The Ihregoing summary electric power is not very functions of the thrmer sv. stem relates u hat our employees are into one, highly reliable,'

doing for our members. We are ti. \\\\'h n rates are higher, the difference comes computer system. It will provide pleased to have made an from the cost of distributing load fhrecasting, economic improvement to our employees, cl:ctricity to consumers.

evaluation of available power benefits this year At year end, Rural electric cooperatives supplies, and accounting fbr we instituted a 40lK savings serve less densely populated energy transactions.

plan that became effective early areas. When a cooperative The EMS will allow system in 1988. Under our guidelines builds a distribution line, it operators to more c1Tectivelv and the restrictions of Federal may serve only three or four monitor our system and respond regulations, employees will be

~

connections per mile of line.

to outages and other emergency able to save a portion of their P

5 "'

~

'g,'n conditions. It will nprove their pretax earnings. The savings wil:

connections per mile.

ed'ectiveness in using the'Icxas be held in an account that wit 1 A mile of an electric Municipal Power Pool's not be subject to tax'ation untd, cooperative's line costs about generating units to provide the funds are withdrawn. The the same to build as another most economical power Ihr our Cooperative will ntatch one-third utility's mile of line. How ever, customers and those ofother ofeach dollar an employee saves in the country, the Pool members.

up to a limit where the connections are primarily Cooperative's contribution residences. For investor-equals one percent of the owned and municipal systems, employce's base pav, there are more connections.

Many of them are businesses and industries that use many kilowatt hours. The more kilowatt hours that are sold to pay for a mile of line, the less each kilowatt hour costs. This is the important concept we refer to under Fixed Costs in the section % Simple Look into How an Electric Cooperativs Works."

11

)

i f

/l$

s - A s fo a w n Efn opfsq#be krirtler-THE TECHNICAL:

AMPS When we measure the quantity of water.

unit. We sometimes call this process steam Dowing through a pipe, we say "10 gallons per generation of electricity. We say "electricity is second." Amps are how we measure electric genera ted."

current. We express the rate ofelectricity Dowing

'Ib make electricity w, always need the through a wire by saying "25 amps."

generator - a magnet moving past the copper BTU If vou have been near a are latelv, vou felt wires. In seme cases, we use.aier nowing through the en'ect ofIrl Us. A IIFLT is a measure oflicat. We a dam to spm the turbine.This is hydroelectric usa BTUs to measure how much heat a fuel like gas Power. In other cases, we direct the exhaust from or lignite coal can produce w hen it is burned.

the burned fuel into the turbine to spin it and the Remember that heat and temperature are not the magnet.This turbine is same.. w hen you add heat to a substance like called a gas water, the temperature increases.

combustion D

turbine.

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GENERATION UNITWe produce

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clectricity at a power plant.'Ib do

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so, we must first have a fuel such

\\')

as natural gas or lignite coal. We

/ /f N"[>)l/l' a

hurn this fuel to create heat.The O

heat boils water in a closed

(

i container (boiler).The steam from v

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the container spins a turbine, which

-s is like a windmill. A magnet f

__.,j /

attached to this turbine j

spins past copper j

wires. This spinning creates a voltage q

./

causing electrons to mo(c. All of these components

, l'

{

make a generation l.'

I w,

M I

GENERATION W 4 6

4__

f k

1. ^

f S

e l.

u m,.

u e.

4.=7 12 '

1

w a' b5 //

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g s

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1,y;g <

f

'y A

CURRENT

@ A.'s2&c9-M k

Md

.\\luch like water i

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flowing through a

.'ko )g '

f hose, electricity

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110ws through a f

w ire (conductor).

N I

ti ia i is N

. f.I %

l

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called current.

hj+l1 Safety Tip: If *hrn s

lWl k

)~l i

caterJ oirs, it icill alu ar sflo:c E

?

T dca nhill. Ein tricity, on the other hand,

)g s

lq

-~

QQ

[-

will alicanJ!nic to; card the gnaind. Don 't get i

U?

ricar a "hot " u ire. either dirn tir or crith c r ummu 5

?

ohjert Ymr body icilllikely fain the shortest,

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ta casiest, path Sor the electricip toJl<n. to the

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ground. The tvu er af the ein tiicity < ould se:crelr

~w-burn _wu.. or worse. The u ire that canies

.Nya 't ela tricityjrum the plug to wur lamp dses the wme thing var r undua tor does. The bilq difin nce is that the u ire to ELECTRICVn, Electricity is simply the 3 -):;-

utovement of electrons. Electruns are in all

y..,..q y

?

wur lamp is insulated,or u rapped, and conduc tor is_just Jy7,aj,,,

materials, but are too small to see. l'hese movm_ g

• L -s.

P clectrons, or electricity, are channeled to us by El@59l

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wires. We sometimes call electricity energy or

~ ;-

power.

i pyrno KILOWATT HOURS we measure how much r_

J' water is coming out of the hose by the gallons

{

M ' y lO we collect. We measm e how muc h electricity "0

is used with kilowatt homs. Kilowatt hours

/

sj ' '

s-ty

~d O

are the"gallons" of electricity. A kilowatt

]

hour is a thousand watt hours. A megawatt g

i Oe hour is a million watt hours.

lly the way, using a loo-watt light i

~~~~

e e

e buib m r in hear,censu m es inoo w a n hours.

a

[

or one kilowatt hour.

l e

I KILOTATT HOURS h

13

-.. d

.j-a F

C VOLTAGE Water pressure makes water flow through a pipe. Voltage is the pressure that makes t -

' g[y'2. ([..(

electricity flow through a wire. The voltage in y our g

house is 120 volts,220 volts for large appliances.

,.~ p ;a THE ERCOT Brazos has lines with voltages of 69 KV,138 KV and 345 KY. "KV" means kilovolt, or a thousand

• [^

- I I SYSTEM volts.

Ifeveryone turns on the water faucets in the y

d' f5Gd house, the water pressure in your shower may get

,M low. As with water, when more people use 4

electricity, the voltage decreases. One of ourjobs is 4*

to insure that electric voltage is always at a usable

/I level.

o O,

e i i O o o

'o h.

lu

• 'd W;

e 6

Q

,o,o,c 4 o

{ f

,'; t a The system of ERCOT utilities is like a network

@O O of water hoses all connected to each other. Each plo

,o generating member is like a water pump, supplying f

oig f {hi,.

6-water to the system. If one pump simts down ihr

{.-

o, some reason, the other pumps will a6 more water n

0

[

l to the system to keep the hoses full.

, y b'

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o

'A ERCOT ENERGY BROKER SYSTE" with all of o

o O

the connections between utilities,it makes sense to I(g OOO use them not only in emergencies, but for our o

LOW benefit even day. Since large quantities of j {s Po e

o VOLTAGE electriciiv cannot be stored easilv, they must be o Q(7 o,

O

<.O used.

~

o O

Pg o If an ERCOT member can produce more

',O do electricity than its consumers are using, it can sell N

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q g

the extra electricity to the highest bidder through

)

the Energy Broker System. Another ERCOT

~

O k

ro

1. t, O.

., ~.

O member can try to buy the most economical electricity available.This power may be even more s

economical than w hat the member is generating at its own power plants. The system ofotfering available energy and bidding on it is the Energv THE Si, STEM:

nroker Svstem.

BREAKERS Breakers are the "faucets" or ECONOMIC DISPATCHING You own a electricity. With a breaker, we can turn the flow of hatchback and a sedan. 'Ib go to the grocery store electricity in a wire on or off. Your light suitch is a lbr some eggs, it makes sense to choose the small simple breaker.

and thrifty hatchback. If you are taking your family CONDUCTOR What a garden hose is to water, on a long driving vacation, the bigger sedan is the a conductor is to electricity.The conductor holds better choice.

electricity as it travels.

Some power plants are more economical lbr periodic, short-term use, others,

E'rI""xcr ELECTRIC RELIABilm COUNCIL OF TEXAS ec"""""c"16"v"cr"'i"R clec'"ju e more c"Y (ERCOT) nrazo, along wiin other utilities in the nononiic dispatching, Brazos pe o o une.

state, is a member of ERCOT. ERCOT is an most economically.q available plants the one that organization created to improve the reliability of hts our needs.

electne power and to prevent l.exas from experiencing a power blac kout.

I i 14.

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7 M

?@UVS

$, Cps G6LOQ

. tor

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E ECONOhiY ENERGY pM's PURCHASES Even when we have power plants

'4.l;Q[d

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t

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1-E available Ihr generation, e-

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sometimes it is more 4

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economical to buy power s

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than to start up a power

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h

/ f a,,

plant and generate our own.

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When we buy, we naturally t

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buy the cheapest electricity

' 'r s

ECONOhiY that is fbr sale.

These are ENERGY economy energy purchases.

g, PURCHASES FIRhi KILOWArr HOUR SALES Willie has arranged with 10 homeowners to mow their lawns

~.

weekly. Ilis nc WonderWacker mower does the 10 lawns in about half the time he thought possible.

SCADA SYSTEh! Supen-isory control and Data So, to make as much money as possible (and to pay Acquisition is such a mouthful that someone said, Ihr the mower), he cuts other lawns as he has time-

"let's call it SCADA." A SCADA system allows The original 10 homes are Willie's firm sales-operators to open and close breakers and monitor Willie mows the other lawns as he has time and as the condition of the transmission system by remote people need help.Thesejobs are ceonomy sales.

control-all from miles away.

~

For them, he charges the going rate. For firm sales' DEllVERY SUBSTATION Ib fill your car up he and each homeowner set the price when they widi gas, you go to a gas station instead of to a big made their arrangennent.

tanker tru'ck. In the same way, when our customers Ilrazos, too, has f,irm sales and economy sales.

receive electricity from our transmission system,

\\\\,e are bound to [)rovide as much electricity to our they get it from a delivery substation.

firm sales. \\\\e make "unk,rm,,jecd. \\\\e call these The gas station gets b'ulk gasoline from a tanker.

member cooperatwes as they i or economy, sales t llulk power substations provide pcwer to our other utihues that need extra power when we have system of delivery substations.

it. Economy purchases occur when we buv someone

, int MARKET CAS lirazos charges a specified s

else's economy sales.

rate for "firm" electricity sales. We charge the Mg If you blew up a very going rate (br power sold without a long-term large balloim,you might put T"

an AICF of air m it.

y -

contract. Our gas suppliers do the same.

ifIlrazos signs a hng-term contract Ihr gas, AICF is a measurement the gas producers charge us a set price.

of gas volume. It stands They can do this because they know we are a ihr a thousjmd cubic uaranteed buycr.

fiet. l' hat is a big balloon!

~

f The spot market offers variable prices lirazos uses the term AICF dependingon the short term availability of to measure the amount of d gas. Neither the supplier nor the buyer h'as a natural gas we buy and burn

..-g of the obligation can be very short. Ilecause of long term obligation. In fact, the duration in our plant i.

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i this lack ofreliability, the spot market usually i

olli rs low er prices.

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SUBSTATION o

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,4 SUBSTATION When a basebaH player (step up transformer) wants to get a ball (electricity) to a base, he throws the ball as hard as he can (high voltage). A ball thrown that hard is diflicult to use, LlAlllLITIESThe bills you owe and your loans so another player (step-down transformer) must (car loan, ho ne mortgage) are your liabilities. The stop it by catching it. lie then uses the ball to tag liabilities ofBrazos are all that we owe.

the runner.

%UlU f f ou add up all your assets and A substation is an enclose (1 area that contains subtract vour liabilities, w hat's left is your net transli>rmers. \\\\e use substanons and their worth. In our case, it is celled our equitv.

transli>rmers fi>r two purposes. \\\\ hen a transformer f

"steps up" voltage at a substation, it makes m m,

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@d W V -

electricity travel more etliciently. When a "s.

j-. 3 trans%rmer "steps down" voltage,it makes the

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electricity more usable for consumers.

SSET5; THE FINANCIAL:

gLiAsiLmES ASSETS Your assets are all that you own.They

=EQU) may include a car, your house and furniture, and

,i

'jj l money in the bank.The assets of an organization

'[(

4 are al that it ow ns.The organization's assets can f

y include such things as real estate, furniture, cash and accounts receivable (money that is owed to

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the organization).

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FINANONG If you need a new clothes washer, you have two options (br paying fbr it: cash or credit. When it comes to financing, liratos works in much the same way as a household. We have two ways to pay our bills.. out of cash funds (general MILL At a gas station, you might buy a gallon of funds) or with borrowed money. When we borrow, gas for 99 cents. People use cents to measure the we may go to the Rural Electrification cost of gasoline, llecause a kilowatt hour of Admmistration (REA), the National Rural Utilities Cooperatise Financing Corporation (CFC), or

-N~E

1. W private banks.

oO CONCURRENT LOANSibu loaned your son J

one mill =

money for a car and he borrowed the rest from a

.a cent bank. He received concurrent loans. REA and CFC often work together to provide concurrent loans to member cooperatives.

FIXED COSTS When you own a car, you have to make loan payments, buy insurance, and pay the registration tax even ifyou never drive a mile.The g

more you drive, the less these lixed costs areper 4

mile For example,if the fixed costs were $10,000 and you drove one mile, they would cost you

$10,000 per mile. Ifyou drove 100,000 miles they 7--7 would cost you 10 cents per mile.

electricity is cheap, we use mills to measure its israzos has to pay interest insurance, depicciation, and thes regar,dless of the number of mt. One mill is 1/10 of a cent (or 1/1000th of a dollar).1,or examph, the price of a kilowatt hour kilowatt hours we sell. These are our fixed costs.

inight be 80 nWis. T,ou uould pay 8 cents for it.

The more kilowatt hours we sell without increasing these fixed costs, the lower will be the REVENUES ibur take-home pay and any other average cost ofeach kilowatt hour,just as we saw in earnings (such as interest on your bank account) the preceding car example.This concept is r<rr are your revenues. At Israzos, our revenues come important in our business.

from the sale of electricity and from any interest we MEMBER PREPAYMENT PLAN Ifyou pay a hill

' night e rn.

carly or pay more than you owe, you will receise a VARIABLE COSTSibur car may get 20 miles to credit on your account When our members have a the gallon. If a gallon of gas costs $1.00, fuel costs credit, or prepayment, we pay them interest on it, you 5 cents per mile. Oil and maintenance add a The rate we pay is higher than they can get from small additional cost Ihr each mile you drive.These their banks. However, it is lower than we would are your variable costs because they depend on the have to pay to borrow money at our bank.

number of miles you drive, lirazos' variable costs Therethre, lirazos and the member both benefit.

are related to the number of kilowatt hours we This is our.\\fember Prepayment Plan.

generate. Ily far, fuel is our largest variable cost.

PATRONAGE CAPlTAL If you add up what vou TORKING CAPITALibu may have money in earned in a year and subtract w hat you spent,'

Sour purse or wallet and some in a checking what is left is w hat you have saved. What we have account. You use it to run your househohl and left are called our niargins.

day-to-day affairs. We do, too. We call it working liccause our member cooperatives (our patrons) capital.

own us, the margins really belor." to them in p!oportion to hoW much electricity cadt IMugInt from us. We record the amount of patronage capital owned by cath member and can pay it back in the future. Ilowever, w hen we need money for the grow th and operation of our system, we may continue using these funds.

17 J

SUPPLY AND DEMAND:

. uinities, too, can manage dicir demand. we can it demand-side management. Demand-side COCENERATION When you turn on your car management can keep die peak load from being heater in the winter, that's cogeneration.The car is higher. We want that because it can help us delay using engine [mwer to make it move. The heat construction of new facilities, saving consumers created in the process is used to warm the air-monev.

Olien, large coriipanies use steam ihr so,'netimes demand-side management is used to manufacturing.They can use the excess steam to fill the low usage periods mentioned in load generate electricity. This process is cHicient. The Cuive. liv taking some showers at night, you'll get company may also sell extra electricity, or more showers out of the bathnom.

cogeneration, to electric utilities.

DEMAND When you are driving yimr car, tlje PEAK DEMAND available horsepower of the engme is its capacity.

The demand, or load, you put on the engine is how hard you push down on the accelerator. When you "Hoorboard" the pedal, demand equals the capacity. At a utility. we also use the terms "demand." "load." and "capacity."

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Demand on your car engine is like demand on a

\\,

y utility. When consumers use more air conditioning in the summer, they are pushing down on the accelerator of demand. On that one day a year w hen they are using the most electricity, they are putting the peak demand on our system.

We have to have enough capacity to meet that demand.

and some extra to take care of emergencies. You probably want s

i a reseire of powei w ben you are l

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passing another car.

DEMAND. SIDE MANAGEMENT

~

Remember the morning rush hour in the O

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bathroom? If evertone wants to take

\\

~ p\\ (v) showers and brush their teeth between 6:30 and 7:30 in the morning, it uill be au fully crowded. Someone may miss a showcr.

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7 This demand can

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be managed by 1

scheduling more

/'1 I h showers at night.

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wash their faces in j..

the morning.This is called the I

base load.

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LOAD CURVEThis is a graph that shows load as it YEARLY LOAD (URVE DAILY LOAD CURVE s u si si c x varies with time.

Every day, there is a fairly predictable way in which our O

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consumers will use power.

.f During the summer, when e

e Ilrazos usually records its j

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peak demand, people use g

nmst electricity in the

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evening.This is because they return home from work

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and turn on their air conditioners. In the winter,

i

.0 ti 'E W k 3 siJ i U G a.m.

12 7 p.m.

12 6 a.m.

tgic peag occurs in the 4 :.t pp1 ji C y g j noon midnis;ht mormng when people get out of bed and turn up the heat. During the spring and fall, there is the least PEAKING CAPACITY when you go grocerv demand on our resources, I,his makes our daily 4

ing every week, the space in your car tr'unk is 1oad curve relauvely flat; there is not much change sullicient for carrying your groceries. When you m load at different ames of the day.

re lly load your car foi a vacation, you use the LOAD FAcroR with their dump truck, Danny luggage rack on ion or the car, too. The luggage and his partners made 10 trips between the fdl and rack is designed fbr your peaking capacity.

dump sites on Tuesday.That was their peak day lbr Our peaking capacity is our generation capacity the week-the most trip 4 in a single day.

that is designed and used to meet the peak demand Their weekly load fictor would have been 100 on our system.

percent if they had made 10 trips on each of the five REGULATION Brazos, like all other utilities in days m the week-50 trips. Il(mever, they were Texas, is regulated by a variety ofg' overnment able to make only 25 trips durmg the week.

agencies including the Public Utility Commission.

I herefore, their load f actor for the week was:

.\\luch like a parent tells a child what it can and 25 the PUc regulates the activities of c""""t d",his protects the consumer and the un,lity x 100 = 50%

uiilines..I 50 The partners' capacity is more than their peak from fights and unfair practices.

lice use we are an electric co perative that of 10 trips per day. If they worked around the clock, bormws money from the l'ede.al Government, we they would be able to make many more trips in a are also regulated by the Rural Electrificatmn day.

Adnu..niuranon.

These terms are used in our business, u>o. In any perimi of time 'a day, month, or year) there will be a peak load on a substation (or a power plant or even our entire system). We determine the load factor for that substation the same way Danny did. When we do, we look at the kilowatt peak and the number of kilowatt hours that are used.

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BRAZOS FUEL

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COMPANY,INC.

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Brazos Fuei company, inc.

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is a wholly owned subsidiary

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of Brazos Electric Power Cooperative. It was formed in May 1974 for the purpose of 5-1

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buying and selling natural gas

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and other fuels with Bra 70s Electric as its primary F

customer.

Brazos Fuel manages t

natural gas contracts and j

operations with about 60 dedicated producers.To supplement this gas supply and take advantage of preferential prices, it purchases gas from the spct.

market. Brazos Fuel operates a gas pipeline owned by Brazos Electric. It also conducts an ongoing program of research and acquisition for gas reserves and delivery

systems, f

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1, BOARD OF DIRECTORS I:

William G. Parker t

Pnsident Richard E. hfcCaskill Lt Executiw iice President Luther L. Parks i

iice Pre ident Joe Forman g

Secrria7.Terasur Jack Elam i

J.E Herring,Jr.

hiichael E. Sloan MANACFR FUEL.0PERAT10NS

[

ClifTord L. Sartin, age 58,

}

joined Brazos Fuel Company in 1974.

Sartin graduated from y

Texas Tech University in 1954 with a Bachelor of Science i

Degree in Petroleum Geology and a minor in Chemistry.

Beforejoining Brazos Fuel, he had extensive experience as an oil and gas exploration geologist and spent three years primarily explonng for lignite reserves. He worked for Cities Service Petroleum Company for seven and one-half years. He also served as Senior Geologist for National Soil Sen ices, Inc.

from 1966-1974.

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-MANAGEMENT EXECUTIVE VICE PRESIDENT EXECUTIVE ASSISTANT AND Operating Subcommittee and AND GENERAL MANAGER MANAGER-PUBLIC REUTIONS continues m serve on this conunittee.

Richard hicCaskill, age 51, joined I'rancis 51,llushnell, r., age 44' MANAGER-PROJECT lirams in 1979. lie was elected to his jomed lirazos in 1979 as xecutive CONSTRUCTION AND

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current positmn mJanuary,1981.

Assistant and was given the added ENGINEERING h!(Caskillis a graduate ofTexas responsibilityof Alanager-Public

. Ililly Dyess, age 57, joined lirams Tech University, w here he earned a Relations in 1980.

m 1974 as Construction Supenisor llachelor of Science Degree in liushnell received his llachelor of Electrical Engineering. He has Science Degree in Engineering and nd was promoted io his present worked in the electric utility industry llusiness Administration from Imu n m 1981.

for 27 years, including positions as Princeton University in 1965. lie Pri r to coming to Ilrazos, Dyess

"'"5 C*I? yed by Hic,ks anu Ragland Assistant Division hianager, Safety spent nine years as a submarine Engineer, Training Director, and ollicer in th'e U.S. Navy Nuclear Consultmg Engmeering Company.

Division Alanager for Central Power Power Program. lie was employed lie advanced in the company to serve as \\ ice President-Director of and 1.ight Company in Corpus by Stone & Webster Engineering Christi. Upm comi'ng to Brazos in C'orporation for four > cars, w here he Field Operations from 1968-1974. In 1979, hicCaskill assumed the duties was responsible for administration this,posuion, he was responsible for of hianager Engineering, Power on a nuclear power plant project and design and construction and pubhc relat, ulatory processes managenyent, reg Supply and Construction. He also was a Alarketing Engineer, mns.

was General hlanager of the San lie is Accredited by the Public Aliguel Electric Cooperative for four Relations Society ofAmerica Dyess sened two terms m the years.

(PRSA), of which he is a member.

United States Army m 1918-1949 AlcCaskill is a registered lie is Past President of the Central apd IMI,951, w here he continued fus edusanon through vanous Professional Engineer in the State of

'Ibxas Chapter of PRS A.

Texas and a director of Mrst Republic-corresp>ndence courses.

Ilank Waco, lie is President of the MANAGER-RNANCE AND f[h.k,R-CORPORATE National G &T hianager's ADMINISTRATION Association, \\' ice Chairman of the Clarence W. Carpenter, age 55, Wilham II. Townsend,Jr., age 48, Executive lloard of the Electric joined Ilrazos in 1967 as hianager-jomed lirazos m 1961 as aJunior Reliability Council of'Ibxas and a Accounting Department. lie was irector of San Aliguel Electric goted t his current position in

[""#C y;dPg "'

CIlIef r

ng neenng (includmg o

Carpenter received a llachelor of ASSISTANT CENERALMANAGER Ilusiness Administration Degree C"".'"Cli"".) in 1970 and Admimstranve Assistant in 1980. He J.D, Copeland, age 43, joined from llay lor University and became liraios in 1971 as an accountant, a Certified Public Acchuntant in Fd' Piminted to Ins current postuon

• I98I-became 51anager of the Accounting 1963. Prior to coming to llrazos, He received a llachelor ofArts Department in 1977, and was Carpenter worked for the Internal Degree in Alath from'lexas A&hl promoted to his current position in Revenue Service for seven years.

1981. Ile was also Assistant to the Carpenter is Director of the Texas Univeruty m 1963 and a Ilachelor of General hianager of San.\\liguel Society ofCertified Public Science Degree m Electncal h,"R!nernng m 1966., tered Eicctric Cooperative, Inc. In Accountants and Past President of

, low nsend is a Jourdanton, Texas.

the Central Texas Chapter of Professional Eng,regismeer m lexas and Copeland received a llachelor of Certified Public Accountants lieis llusiness Administration Degree in Past President of the National G&T the lirazos representante on the 1970 and a h! asters ofIlusiness Accountants Association.

Electric Reliability Council of Ibxas (ERCO'I1-Techmcal Advisory Administration Degree in 1977, both from llaylor University, lie became MANAGER-OPERATIONS Committee. lie has held the positions a Certified Public Accountant in Dan 11. Swenke, age 49, joined of Secretary, \\ ice President, and 1972. lie is also a member of the tirazos in 1966 as aJunior f:ngineer.

President of the Central Ibxas American institute ofCertified Ile has sened in numerous positions Chapter of the Texas Society of Public Accountants and the'Ibxas including Design Engineer, Chief Professional 1.ngineers.

Society of Certified Public System Operator and Atanager-Accountanis.

Transmission Department.

Prior to coming to lirazos, Swenke had construction experience as an officer in the United States Army Corps of Engineers, lic earned a llachelor of Science Degree in Cisil Engineering in 1963 from"IbxasTech University, and is a registered Professional Engineer in 'Ibxas. He is Past Chairman of the ERCOT m:

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Alay 1985, but have continued will signincantly improve our

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making interest payments on financial st rength, f

debt associated with the Project.

Our long-term debt grew from In 1987, these payments

$374,256,223 to $378,635,762 in amounted to $16.7 million.

1987. The Cooperative's as crage Since previous loan funds interest rate on long-term debt

~

were exhausted in Alay 1985, we decreased to 7.68 percent from have been paying this interest 8.88 percent in 1986.

out of funds generated from

]

operations, in Alay 1986, we

_~..%

applied fbr a $55.5 million loan g

guarantee for funds to make The Consoii.

these interest payments. REA d^^"C fo"" "

"#d N'* """

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3 dated Statement approved the loan guarantee in h\\(g August 1987.These loan funds q of Revenue and Patronage Capital and Other Equities of the D!STRIBUTION OF 1987 l

Cooperative and its u holly REVENUE DOLLAR owned subsidiary, lirazos Fuel M %'

52.lc Purchased

/

Power Company, Inc., renect net margins of $16,596,189 for the 9. -Q.

calendar year 1987. llecause of e"

these mar' gins, we increased our 0' N kh??

equity to 17.0 percent of gmets

,gn),;,3,;[ $5c # k [ h 4'

"C I from 14.4 percent in 1986.

Fransmission 4.lc - (zgg C

Early in Alarch 1987, the g,.

Rural Electrincation

& General 4.se yf s t -p4

.\\dminisiratis e Administration (REA) announced approval of a loan Interest 6.6c %

guarantec of $38,135,000 for y

l lirazos. The funds were Net.\\targins 8.8c 1.6c \\\\, ages & Other i

I des.ignated f,or the construction 18.0c Fuel l

of three substations to serve 19.6c Generatect Power about 100 megawatts of new load.

l The funds also were designated DISTRIBUTION OF 19S6 for construction and REVENUE DOLIAR 50.3c Purchased Po" e r impros ement of certain transmission facilities.

Our dispute involving the Comanche Peak Nuclear Plant Tases.9c %

Project is discussed in our Report to Alembers. We discontinued jd'"i"i'j {ig /

making construction payments y

on our share of the Project in Transmission 3.4c Depreciation & [

.\\mortization 3.6c Interest 6.6c Net.\\targins ll.ic 1.5c Wages & Other 20.0c Furl 21.5c Generated Power 22 L.

v 1987-FINANCIAL STATEMENT The fmancial strength and resilience of the lirazos System stems from its member cooperatives and customers.They serve consumers in rural, suburban. and urban aicas totaling more than '

20 percent of Texas.This vast service are,a provides diversity for income sources of residential, agricultural, and industrial loads. It also provides.

strong growin in energy sales.

N COMPARATIVE

SUMMARY

OF ELECTRICAL OPERATIONS 1983-1987*

1987 198G 1985 1981 1983 (Mills per KWil)

Total Opciating Revenue (1) 47.2 48.4 50.8 52.3 53.3 Operating Costs Production expenses (2) 34.3 35.6 39.1 42.3 43.4' Transmission expenses 1.9 1.7 2.0 2.3 2.5

~ Administrative and general expenses 1.7

.8

,.6

.6 -

.6 Depreciation, taxes, insurance, interest 5.6 5.8 5.3 5.5 6.0

'Ibtal operating costs 43.5 43.9 47.0 50.7 52.5 Net operating margin (loss) 3.7 4.5 3.8 I.6

.8 (I) Average sales price by class lirm power sales 48.0 50.2 53.5 53.7 55.6

.\\lember cooperatives 50.7-50.8 52.3

-53.9 56.4

.Citjes.

Surplus power sales Other utilities.

16.7 20.6 33.3 39.3 38.0 (2) l'urther analyzed by source

' Generated power Cost of fuel....

25.4 28.4 33.5 39.6.

40.9 Wages and other costs..

2.2 2.2 1.4 1.5 1.7 Pt.rchased poiver l'or sys:em 33.6 34.0 36.1 38.7 38.6

'At isolateo n.:-tering points 43,1 41.8 48.5 45.5 43.8

• Euleda opvanom ofB aus kl Compay, hc.

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f COMPARATIVE

SUMMARY

OF ELECTRICAL OI)EMTIONS 1983-1987t 1987 1986 1985 1981

'1983 Electricity Generated and Purchased-In Alegawatt //oun Generated at North Texas Plant 20,412 5,404' 100,473 5,131 8,814 Generated at Randle E Aliller Plant 1,337,051 1,339,210- 1,570,41'8 1,291,63,4 '1,118,547' 5

Purchased for system.

A. From' San hliguel Electric Cooperative 1,251,351 1,469,983 1,558,827 1,707,432 1,668,411

11..I' rom Otlier Utilities,

. '. 734,629 517,800:

'355,562 206,859 229,462 v

Ptirchased at isolated metering points.,,

736,727 660,448-

' 548,418 509,537 460,553 4,080,170 3,992,845 4,133,698 3,720,593 3,~485,787 Electric Sales-in Afegawatt Ihun A Hrm Sales

. 3,499,704 3,217,290' 3,033,643 2,846,999 -2,498,886 Alember cooperatives A16nicipal customers 311,524 352,870 386,707 341,058'

.303,299

' 3,811,228. 3,570,160 3gl20,350 3,188,057 2,802,185 153,760 261,915 523,226 370,1l9 461,793 IE Economy Sales i

3,964,988 s 3,832,075 - 3,943,576 3,558,206 3,263,978

~

Electric Sales to Member Cooperatives-In Alegawatt //oun e

, ~,

Bartlett Electric Cooperative,1nc.

63,085 57,975 57,341 53,251 47,297 Belfalls Electric Cooperative, Inc....

52,190 46,427 44,270 42,152-39,125 B.K Electric Cooperative, Inc:.

62,305' 61,298 65,057 68,565 61,230, -

Comanche County Electric Cooperative Assn.

143,205 142,531

' 152,581 150,106 141,177

~

Cooke County Electric Cooperative Assn.

247,756 250,198 266f9 257,327 244,152 Denton County Electric Cooperative,'Inc.

401,513 361,363 336,826 292,555 242,089 Dickens Electric Cooperative, I Ac.

206,224 133,201 i

Erath County Electric Cooperative Assn...

177,282 166,697 169,997 167,941 153,394

. Ibrt Belknap Electric Cooperative, Inc..

98,334 107,82!,

117,100 113,499 105,013 Gate City I{lectric Coop'erative, Inc. '..

31,972 21,473 llamilton County Electric Cooperative Assn.

89,338 86,479 86,380 82,260 75,894 11111 Count'y Electric Cooperative, Inc.

157,601 146,$46

, 143,915 133,026

< 115,100s.

-J-A-C Electric Cooperative, Inc.

80,933 81,142 98,332 97,748 i 8's,038 Johnsontounty Electric Cd> perative Assn.

430,631 391,618 382,877

, 345,719 299,957 Slciennan County Electric Cooperative, Inc.

106,943 9'3,987 9 (132 87,206 77,712 Alid-South Electric Cooperative Assn..

198,'894 18' t,931 192,881 179,825 155,889 Navarro County Electric Co6 perative, Inc.

158,982-148,616 130,092 139,314 91,528 a

c Navasota Vallcy Electric Cooperative, Inc "

195,611 169,364 137.'490 122,104 108,079 Tri-County Electric Cooperative, Inc..

442.791 413.127 406,035 372,215 323,536 Wise Electric Cooperative, Ine.

154,114 149,493 150.988 142,186 130,676 3,499,704 3.2'17,290 3,033343 2.816,999 2.498,886 A

s i

Eulud<s epration of thaus lwl Compans, lu.

1

• %rwwd by th mergn eflimnton Cnm Elatric Cooprata, lu. a d Marwn f.le tru coopmtm. tv.

l en Apid 1%tt Sain in(m edungyars ha:e ban miaud.

s

)

s d,

e

~

/

I, 1986 o 1985 1984 1983 1987

~ '

Maximum Kilowatt Demand

- At Alember Delivery Points :-

851,554 _

'36221 759,495 683,450 612,297,

Annual Load Factor Percent hiember Cooperatives..s.

47 46 47 47

' Ele,ctric Energy Sales i

x Niember cool eratives

' $167,818,968 $161,435,oa9 $162,216,739 $152,868,791 $138,873,457 i

Afunicipal and Economy 18,380,868 23,310,455 37,662,418 32,956,026 34,699,138-

$186,199,836 $184,746,114 $199,879,157 $185,824,817 $173,572,595 -

Other Electric Revenue.

1,071,887 581,285 584.387 371.785 233,6l6 Total Operating Revenues... $187,271,723 $185,327,399 $200,463,544 $186,196,602 $173,809 21_1 Operating Expenses y.

Production expense--

generated power....

$,37,470,189 $ 41,095,852 $ 58,382,299 $ 53,333,538 $ 48,018,505-Production expense-

~

purchased power.. <.

98,455,818 95,136,544 - 95,760,789 97,200,643 93,506,2!3 Trarysmission expeose.....

7,688,789 6,390,050.

7,920,251 8,036,110

.8,264,545 Insurance and welfare

?

e

,1,118,816

,1,543,894 1,304,137, 1,459,113 1,344,556 expense

' Other administrative and general expenses 6',845,474 3,083,501 2,421,413 2.274,458 1,955,285 -

Depreciation and amo'rtization..

6,564,454 6,701,675 '

6,434,379

'6,018,486 5,631,674 1,820,543 1,607,255 1,393,705

'1,279,700

'1,046,2'08 Taxes 1nterest on long-term debt 29,366,048 33,539,856, 33,798,340 2'J,081,630 26,620,960-Other interest.

1,190,258 718,311

, 280,301 '

487,041 9.72,492 Less interest charged to.

(17,954,008).(21,750,77.3) (22,403,872) '(l8,820,116) (l7,466,85l)

-(

, construction ^

Other operali.ng deductions J,566,127 -

, Tokal Cost of Electric Service. $172,566,381 $168,066,165.gr5,300,742 $180,380,603 $171.459,714 s

Gain (less) in Operating' Afargins. '.

$ 14,705,342 $ 17,261,234 $ 15,162,802 $ 5,815,999 $ 2,346,497 Other Af argins' 1,858,113 3,739,291 2,121,009 701,313 366,651 Gain (Loss) in Total $f argins

$ 16,563,455' $ 21,000$525 $ 17,283.811 $ 6,517,312 $ 2,7!3,148 f

~~

l I

/ r 1

4

)

, t r,.

^

A Brazos E!cetrie Power Cooperative, Inc. and Suliskliar~y

. CONSOLIDATED.HALANCE SHE, ETS

. December 31 ASSETS

'1987 19f3G

~

Utility plant-Notes C and K:

. $242,817,380 $229,368,663 Electric plant in service

. Complet<d construction not classilled

.I1,386,856 730,178 Construction work in proi;ress 256,196,051 247,990,498 Nuclear fuel in process of refinement and enrichment 9,758,886

'9,758,886 520,159,173 487,848,225 Less accinnulated prbvision for depreciation and amortiza' tion 67,061,599 61.930,375 U,TILITY Pts ?, F-NET J.

453,097,574. 425,917,850 Other property and investments:

J Invest:6ents in associated organizations.

s Capital term certificates-CFC.

, 7,070,764 7,070,764 Patronage capital-Note ll.......

5,446,435 4,768,239 s -

Other 61,324 10.800

' 12,578,523 11,849,803 ~

~

Current assets:

Ca:ii-general 200,272 454,044 Cash-loan funds..,.'.

62,6f8 50,723 Special deposits

' 73,804 66,715 Temporary cash investments 6,200,000-6,480,000 Accounts releivable 14,753,312 17,459,335 Fuel inventory 3,236,595 3,236,595 s

.\\taterial and supplies.

. e.

6,386,993 6,758,313 Prepayments 662,9'33 30.372, TO'.FAL CURRENT ASSETS

,31,576,598 3.,536,097 Deferred chargas-Note D 2,147,683 2,003.788 l

t

$499,400,378 $474.307,538 l

1 I

(

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a

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s k

2G

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_ ~ - _ -

.i y

^)

A December 31 1987 1986 LIABIt.lTIES AND EQUmES.

Equity and margins:

A l e m bersh ips.............................

100 S'

100 j

Patronage capital an'd other equities-Nc'e E.......

^

84,917,581 68,321,392 84,917,681 68,321s492, Long tarm' debt-Notes F and G:

(

.REA mortgage notes 81,504,210 80,326,360 16,032,482.

16,713,165 CFC mortgage notes.

FFB mortgage notes

~

281,099,070 277,216,698

~

. 378,635,762 374,256,223 Current liabilities:

Cun ent maturitiec oflong-term debt 5,263,000 6,232,000 Acmounts payable....

29,074,426

-24,471,498' Other accrued liabilities '

1,509,509-1,026,325

^

\\

TOFAL CURRENT LI ABILITIES.

35,846,935 31,729,823 COMMIThfENTS AND CONilNGENCIES-Note K -

f s

s

~

\\

+.,

$499,400,378 '$474.507.538 J

N

~

F f

Sch nelet to con wlidatedjinancial stateme'n;;

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s.

i j

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I

. lirazo' Electric Power Cooperative, Inc. and Subsidiary

,.3 s

'CONSOUDATED STATEMENTS bF REVENUE AND PATRONAGE CAPITAL AND Year Ended Decemser 31' 1987 1986 Operating reven'ues:

clectric energy-Note ll

$186,199,836 $ 184,746,114 '

Sales a Other.

978,472 546,891 3

s f

,.I87,178,308 185,293,005 Operating costs and expenses:

i

~

i

.Oper'ating expenses:

~

Operation expense:

Production - fuel....

34,091,538 3'7,822,058 Production - other.......

^ 1,313,489

' 1,234,83 J

. Purchased power-Note 11 98,455,817 95,136,544' l

Transmission ^.

5,511,709

- 4,414,965 Distribution C..

.40s,052 335,446 i

, Administrative and general 7,995,379 4,'712,81sE

]

Af aintenance expen l

Production.

1,685,790 1,660,686 I

l Transmission 1,170,972 1,001,643 Distribution 597,056 6'37,966

,. s.

. General plant 211,477 179,316.

l j

Depreciation'and amortization.

6,581,436.

(2,715,920 Taxes,.

I',831,247 1,617,624. '

., Interes,t on long-term debt 29,366,048

,33,539,856 y

Other interest.

1,177,802 699,650 intere'st cha'rged to construction (deduction).

'(17,954,008)

(21,750,773)

~ Ot'her(deduction).

./

(9,840)

(8,201) l 4

s Total operating costs and expenses

~.y 172,434,964 167.950.387

. v.

Operating margins..

14,743,344 17,3,42,618

' c

.G & T capital credits-Note II 624,522 2,688,993 f

Other capital credits and natronage dividends 187,278 126,471

~

~

. Nonoperating marginsi 1,047,316

'921,140

' ' Interest income Other.

2,475 Af argins before federal ircome tax

{'

Federal income tax -Note I.

16,602,460,

-21,081,697

^

6,271 13,077

/

Net mari; ins

'16,596,189 21,068,620

. Patronage capital and other equities '

s s

s at beginning of year 68,321,392, 47.252,772

~

PATRONAGE CAPITAL, AND OrilER

~

, EQUITIES AT END OF YEAR

$ 84,917,581 $ 68,321,392 See,wtts to consoli/attJJiwxcial statments.

N J

28

.~

lira /os Electric Power Cooperative, Inc, and Subsidiary l-b C NSOUDATED STATEMENTS OF CHANGES IN RNANCIAL POSITION Year Endeit De ember 31 1986 1987 Working capital provided from:

~

521,068,620 Net margins

$16,596,189 s

Depreciation and amortization 6.,581,436 6,715,920 Natronage capital allocations (811,80'))

(2,815,4b4)

' Working capital provided from operations 22,365,825 24,969,076

~

Advances fmm REA 4,727,000 '

2,149,000

.s.

Advances from CFC 1,775,600 3,503,000 4,909,000 Advances from FFH Increase in long-term debt d.uc to maturity extensions-FFil 379,372 Salvage value of retirements 727,951 1,274,413 Contributions fbr line removal and relocation 57,000 Decrease in other property and invesiments-net of capital credits and patronage capital allocations 83,080 18'1,303 Decrease in deferred cliarges.

256,532 Increase in memberships 10 Total wprking capital provided 31,786,228

, 35,574,934 Working capital used for:

Additions to utility plant 34,489,111 38,000,307 Re4iction, oflong-term' debt to REA 3,549,150 3,277,424 Reduction oflong-term debt to CFC 680,683 689,283 2,308,302 Reduction oflong-term debt to FFB Increase in deferred charges 143,895 Total working capital used -

38,862,839 44,275.316 DECREASE IN WORKING CAPFFAL S (7,076,611) S (8,700,382) i Changes in working capital:

i g

Iricrease (decrease) in current essets:

Cash.

S (241,827) 5, (325,982)

Temporary cash invest ments (280,000)

(l,420,000)

Special deposits 7,089 (5,960)

Accounts receivable (2,7.06,023)

(966,453)

.\\laterial and supplies (371,319) 275,03p Prepayments 632,581 16.2.13 Increase (decrease) in current liabilities:

(2,427,132)

(2,959,499)

Current maturities oflong7 erm debt (969,000) 2,414,200 t

Accounts payable,

'4,602,928 4.057,886 Other accrued liabilities 483,184 (198,856) 4.I17.I12 6.273,230 DECREASE IN WORKING CAPITAL

$ (7,076,611) $ (8,700.382) see swirs to umird.aeJjinam,al statmenis.

^-

29

~

. Brazos Electric Power Cooperative, Ine.* and Subsiu:ary s.;

NOTESTO CONSOLIDATED Inventory: Inventories are carried at average FINANCIAL STATEMENTS c st. L wer pcost or market is not determ.ined

.since the majon,ty ofinventory is for production of

' P ""' ' I ' P'acements t pl nt. Thia method December 31,1987 and 1986 '

provides a more accurate determinate ofcost of.

~'

power or replacements to plant a'sset's.

. Patronage Capital Certificates: Pa'tronage capital from associated orga.nizations is recorded at the stated amount i>f the certificates.

NOTE A-

SUMMARY

OF Unrec vered Purchased Fuel Costs: Natural SIGNIFICANT ACCOUNTING PCLICIES gas purchased un' der the take or pay terms of Principles"of Consolidation:The contracts with various individual producers is

~

consolidated financia! statements include the recorded dt contract cost, w hich includes accounts of the Cooperative and its wholly owned goduction taxes and royalties.The amount ofgas subsidiary, Brazos Fuel Company. Allintercompany paid for in advance is classified as a deferred debit items have been eliminated in unsolidation.

less unpaid production taxes and royaltie'.

s System of Accounts:The accounting recordis An allowance for unrecoverable gas is provided of the Cooperative conform to the Uniforfn System for by charges to income. The allowance is based ofAccounts prescribed by the' Federal Energy upon a determination by the Cooperative's.

Regulatory Commission Ihr Class A and B electric cons'ulting engineers as to the volume ofgas losses uti;ities modified for electric borrowers of the Rural in each well.

Electrification Administration'(REA);

NOTE B-ASSETS PLEDGED

\\

Electric Revenues and Fuel Costs: Electric revenues are recorded moritbly as of the date nieters All ssets are pledged as securify for the long-are read and accounts are billed. ~

term debt to the Rural Electrification Administration (REA), National Rural Utilities f.uel costs are charged to production expens6 as

%serative Finance Corporation (CFC), and fuel is consumed.

Federal Hnancing Bank (FFB).

Plant Additions and Retirements: The cost NOTE C-UTIUTY PLANT of ad inions to dectnc plant in sen ice represents.

s the origmal cost of the contracted services, direct Listed below are the major clsses of utility plant labor and material, ihterest on constntetion loans, as of December 31,1987 and 1986:

~

an'd indirect charges for engineering, supenisionl Dec' ember 31 and similar overhead itemse Alamtenance and 1987

_1986 repairs of property and replacements and renewals

.ofitems determined to be less than units of property-Intangible plani 2,170 $

2,170-are charged to' operations. For property replaced or Production plant 64,378,238 61,373,169

- renewed, the original cost plus removal cost less Transmission plant 126,451,834 117.619,897 e

- salvage is charged to accu

• mulated provision for-Distribution plant 45,191,604

.40,969,377 depreciation. I he cost of related replacements and

~

renewals is added to electnc plant. Contributions Generalplant 6,793,534 6,401,050 in aid ofconstruction are credited to tlic applicable Completed construction

^

plarit accounts. -

n tdassified

~ l1,386,856 730.178 interest Charged to Construction:The Electric plant in senice 254,204,236 230,098.811 Cooperative has capitalized as a part of electric Construction work plant the cost of borrowed ftmds used for such in progress 256,196,051 247,990,498 purposes, net orinterest earned on "idle" advances

'.Nudear fuelin process

, of the borrowings. I lus procedure,s in accordance i

N'I****"!.

' -with that prescribed by REA, the result ofwhich and enrichment 9,758,886 9.758.886 is not m' terially diiTerent from that prescribed a

' by Statement on Financial Accounting Standards No. 34.

$520,159,173 $187.848.225 4

30

\\

s Depreciation: Provision has been made for Under provisions of the long-term debt deineciation on a straight line basis at annual agreements, until the total of equities and margins composite rates as (bilows:

equals or execeds 40% of the total' assets of the Cwperative, the return to patrons of capital 3.10 %

Production olant mntributed by ilu m is limited generally to 25% of Transmissi$n plant 2.7P' P""*uge cap tal or margms received by the o

Distribution plant 2.83 %

Cooperative m the n' ext preceding year.

G,eneral plant:

The bv-law s of the Cooperative do not prov.ide Structures andimpraements 2.50 %

lbr the assignment of nonoperating margins or

, Transportation

'15.50 %

carnb.gs ofsubsidiaries.The by-laws permit the

- Communicalidns 6.50 %

offsetting ofcurrent year operatirg margins against Other general plant

~

6.00 %

operating de6cits of prior years.

EDP equipment 16.00 % 1NOYE F-LONG-TERM DEBT Included in construction work in progress at December 31,1987 and 1986, are costs of long-term debt consisted of the fbliowing at

$238,810,812 and $222,158,837 including interest December 31,1987 and 1986:

1987 1936 charged to construction of $130,338,361 and REA-installment -

$113,656,386, respectively, for the purchase of 3.8%

ownership of the Comanche Peak Nuclear.

mingage notes:

Generating Station.

2%, various ma-ity d' '*

NOTE D-DEFERRED CHARGES hmember 28,2011

$ 50,210,763 5 52,986,61l-l'ollowing is a summan of deferred charges at 5%, various matuity

~

December 31,1987 and 1386:

dates to 1987

'l936 L.nreowered purthawd fuel costs, Novmber 3,202!

34,717,447 30.527.719 84,928,2i0 83,514,360 less allowanceIbr unrecou.we f xss current maturities 3,414,000 3.183.000 gas of $215.052 and $247,4L, 81,504,214 80,326,360 deferred production taxes of

,CFC-installment

$29,353 and $31,959; and defern-d ropities ofSl3,047 and mortgage notes:

550,959 73,925 $

132.118 7%, matures November 30.2007 6,088,192 6.223,956 Preliminary survey and insestigaticn charges 1,795,566 1,756,971 7%, matures Other 278,192 11;.699 3f ay 31,1989 756,062 1,218.103 Y '"*l>er 30,2016

$ 2,147,683 5 9 N3.783 Aovem 1,277,660

,1.280,755

=.

il%, makres NOTE E-PATRONAGF. CAPITAL AND OTHER EQumES Auguu31,2018 8,647,568 8faul6 December 31 16,769,482 17,403.165 1987 1986 lxss current maturities 737,000' 6MC

~

Detail of patronage capital:

16,032,482 16,713,165 Assignable

$ 15,517,142 $20.0M693 f f B-mortga:e notes:

Assigned 62,772,910 12.6 % 212 Various interest ram from 7.2% to 78,290,052 62,772.910 11.89%, maturing at nuious dates from Decembo 12013 to Detail ofother equities:

Capital gains and losses 9,383 9.33 ;

December 31,2021 282,201,070 279.570.693 Lnoperating margins 6,288,603 1242.295 Lemunent maturities 1,102,000 2.354.0u0 Retainedcarningsof ubsidiary 329,538 2%804 281,099,070 277.216.Wd 6,627,529 1 513.432

$378,635,762 5371.256.223 Total patronaze capital and other equities

$ 84,917,581 ' 5 2.321 i92 31

g

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lirazos Ele (tric Pow er Cooperatis e, Inc. and Subsidiary Unadvanced loan funds ofS26,612,000 at 5%

Aliguel). San Miguel owns and operates a 100 A!W

~

interest rate are available to the Cooperative at lignite-lired generatin'g plant and associated mining December 31,1987 from commitments from REA.

facilities, which was constructed Ihr the purpose of included in the unadvanced loan fund balance is furnishing power and energy to the Cooperative an insured loan commitment of$21,953,000 and STEC.

received from R EA in 1986 w hich became available The Cooperative and STEC have entered into-d in 1987. A supi ementalloan conunitment fiom wholesale power contracts with San Aliguel through

, ' CFC in the amount of$9,600,000 was received in Jmie 30,2020,to purchase the entire output of San 1986. No funds were drawn on this loan in'1987.

Aliguel.The contracts provide that the Cooperative '

Principal and interest installments of and STEC are collectively responsible for San approximately $2,113,000 are due quarterly on the MigueFs totdl cost ofowning and operating the abord REA and CFC notes.

plant, including San Aliguel's debt sen' ice long-term debt to FFil consists of 26 to 34 year ' obligations. Such responsibilny is allocated between notes payable with principal and interest pavments the Cooperative and STEC,by reference to their s

of approximately $6,388,000 due cuarterly.

respective power purchase obligations for any Unadvanced loan funds of S58,09 M00 are available given year.

to the Cooperative on loan commitments from FFil.

The Cooperative purchased $52,482,425 and Included in the unadvanced lam fund balance is a

$36.433,065 of electric energy from San Aliguel in i

guaranteed loan conunitment 6fS38,135.000 1987 and 1986, respectively. Patronage capital

~

received from the FFilin 1987. An additionalloan credits were assigned to tfic Cooperative by San commitment was received in 1987 lbr $35,500,000, Miguel of S624,522 in 1987 and $2,688,993 in 1986 but was not available until 1988.

with cumulative totais of S1,747,193 at December '

s At December 31,1987, estimated annual 31,1987 and $1,122,671'at Decerpher 31,1986.

maturities of princi~ al oflong-term debt Accounts payable'due San Miguel fmm the p

~ outstanding for the next live years are as fbllows:

Cooperative 'were $5,11'2,913 and $4,930,451 at REI CFC FFH Total December 31l1987 and 1986, respectively.

In 1984 the lloard of Directors approved a 19F>3

$ 3.424M $ 737A0 1,102M $. 5,263,000 management plan under w'hich San Miguel would 1939 1,172 # i0 518 # 0 1.481.(O) 5,474,000 pay the Cooperative for its general manager to serve IW 3.564MUO 280F0 1011#0 5,855,000 as San Miguel's general manager. Further, San.

IMI 3.fAlp00 305A0 2.530.roo 6,436,000 Migtrel would pay STEC for its general manager IW2 3,523m 33250 3.31950 7,174,000 to serve as San Miguel's manager of fuel Thereafter 67,311,210 14.597.282 2h.7,55S70 353,696,762 operations. Payments acre made monthly in 1986 and 1987 in compliance with this management

$81.928.210 516.769.482 5232,201.070 ~ $383.898,762 plan. In October 1987 this plan was revised to provide far the employment of an interim general di h

NOTE G-LINE OF CREDIT \\GREEMENT manager (br San Miguel, The Cooperative has establided a Rnc of er dit, NOTE l-FEDERAL INCOME TAXES Ihr short-term financing, with GFC fi r $10.000,000.

Federal income taxes are paid on taxable income t

At December 31,1987, no limdi w cre owed under of the subsidiary only. No provision has been made such agreement.

for G deral income taxes for the Co, perative in NOTE H-TRANSACTIONS WITH reliance on a determination leuer, dated March 12,

1. 9' I""'d h !"'S"."' R'""""# SC"'ic"' " hi'h

?

MEMBER COOPERATIVES AND AFFILIATES states that in tne opnuon of the Service the The Cooperative has contracts with 19 ofits 20 Cooperative meets the re(juirements of Section member distribution moperativet throughJune 301(c)('2) of the internal Revenue Code and is 30,2025. fbr the sale of w holesale electric energy.

emitted to exemption from federalincome tax.

The conoact u ith the other member cooperative is NOTE J-PENSION PLAN throughJ une 30,2010. Sales nf electric energy to the member cooperatives were $167,-818,968 and The Cooperative has a denned benent plan

$161,435,659 for 1987 and 1986 r'espectively.

covering substantially all ofits employees. The The Cooperative and South Texas Elecnic beneGis are based on years of service and the Cooperative, Inc. (STEC), another generation and employ ce's compensation during the last Gvc > cars transmission cooperat.ive (G&T), an memben of of employment. The Cooperative's policy has been s

San Miguel Electric Cooperative, Inc. (San to fimd retirement costs annually as they accrue.

32

s.

s

/'

In 1987, the Cooperative adopted FASIk As a result of Project cost overruns and delays, Statement No. 87 "Employers' Acqountin'g fgr the Cooperative notified TUEC of the existence of a,

Pensions."The Cooperative continued to l'und the dispute regarding the' Project and began,

plan as in prior years.The effect of this adoption withimiding constructioij progress payments was to reduce pension costs from approximately in 1985.

$100,000 a year in prior years to a negative cost of On Alay 29,1986,TUEC fileil suit in the 14th

$.392,151 in 1987. Pension expense Ihr 1986 has not Judicial District Court of Dallas County,'li xas,-

been res'tated.

against lirazos and the two other ininority interest The following taple srts forth the plan's funded owners of the Project.The suit requests a status and amounts recognized in the Cooperative's-declaratorvjudgment on TU EC's allegation that it

')

bala'nce sheet af' December 31,1987:

has performed all its obligations under thejoint I

Ownedip Agreement in accordance with that i

actuarial prewnt s alue of benefit obligations:

e

~

Accumulated benefit obligation,induding agreement's standard oPprudent utility practice vested benefits of$7,126/90

' $ (7.691M5) nd it alleges, amcg other' things, breach of

~

contract by 13razos m withholdmg construction progress payments. O ijun 20,1986, Brazos filed Projected benefit obligation for senice countir claims agdinst TUEC alleging, among -

rendered to date

$ @874,315)' other things, that TUEC has not met the

' Plan assets at fair alue, primarih cash Texas'DeceptiveTrade Practices Act.The agreement's standards and is'in violation of the equivalents such as commercial paper, listed i

stocks, and debt securities 11.991.867 countersuit asks that theJoint Ownership Excess of plan assets over projected benefit Agreement be rescinded and Brazos' investment be

~ bligation 3,117,532 returned, plus damages. Factual discovery is in, o

Unrecognized net gain 213.282 progress. While the outcome of the litigation cannot Unrecognikd r.j t obligation (asset) at be predicted with certai.n'ty, the Cooperative views January 1,1987

~

(2.938.363) its claims against TUEC as fullyjustifying the reliefsought.

Prepaid pension mst indaded in othet asseis S

392.451 As of December 31,1987, the Cooperative had invested $248,09 697 in the Project as construction

'~

payments, nuclear fuel, associated transmission Net pensioiy cost included the follow.mg facilities, interest during construction, and other components (m thousands):

indirect costs, exclusive ofS78,400,000 in withheld l

Senice costs-beneGts carned during the perkd 170,036 progress payments. Loans from FFB, guaranteed.

Interest cost on projected LeneGt obligation 740,802 by RE'A, totaling $196 million have been uwd for tiie PiLject, incl' ding $3,00'0,000 advaneed in Actual retum on' plan assets (1,121,120) u Net amortization and defernl, (179,169) ' Feinuiry 1988.

Should Brr00s file an application for a rate f.

Net periodic pension cost 5 (392.451) increase, which wludes costs ofComanche Peak in its cost of service, an :nquiry by the Public Utility The weighted-average discount rate and rate of

' Commission of Texas into the pruunce of Brazos' increase in future compensation levels used in investment in the Projbct may result. Should 'he y'

determining the actuarial present value of the Commission find that some_ portion of the Project is projectgd benefit obligation were 8.5% and 5%,

to be disallowed for rate making purposes, the respectively, at December 31,1987.The expected Cooperative mayhe required to write otTthat long-term rate of return on plan assets in 1987 portion of the cost of the Project which is was 9.5%.

disallowed.The Cooperative is unable to determine NOTE K-COMMITMENTS whether or not some portion of the Project cost will AND CONTINGENCIES be disall wed; dditipnally, he Cooperative is unable to determme the materiality of any joint Ownership Agreement: The disallo'wance should it occur and its efTect on

, Cooperative has an undivide(I 3.8% ownership Brazos' rates and earnings,' inasmuch a's Brazos' interest in the Comanche Peak Nuclear Generating return on invested capital has been treated Station (Project) pursuant to ajoint Ownership historically by the Commission as a function of Agreement with TU Electric (TUEC) and alliliates Rmzos' cash requirement and not determined _

thereof, executed onJune 1,1979.

independently thereof.

~

33

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f Report of Ernst & Whinney, Independent Auditors -

I The Board of Directors Brazos Electric Power Cooperative, Inc.

We have examined the consolidated l$ lance sheet of Brazos Electric Power Cooperative, Inc. and subsidiary as of December 31,1987, and the iciated consolidated statenrents of revenue and patronage capital and other equities and changes in financial position ihr the year then ended. Our examination was made in accordance with generally accepted 4.uditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.The financial statements oflirazos Electric Power Cooperative, Inc. and subs;diaiy (br the year ended December 31,1986 were examined by other auditors u hose opinion, dated February 28,1987, on those statements was qualified as being subjec: to the clrects on the 1986 financial

' statements ofsuch adjustments,if any, as might have been required had the outcome of the uncertainty discussed in Note K to the financial statements been kno'wn.

As discussed in Note K, the recovery of certain construction costs associated with the 3.8% joint ownership of the Comanche Peak Nuclear Generating Station is dependent upon future events, the outcome ofwhich cannot presently be determined.

i In our opinion, subject to the effects on the financial statements ofsuch adjustments, if any, as might have been required had the outcome of th.e uncertainty referred to in the preceding paragraph been known, such financial statements present finirly the financial position oflirazos Electric Power Cooperative, Inc. and subsidiary at December 31,1987, and the results of their operations and the changes in their financial position for the year

'then ended,in conformity with generally accepted accolmting principles applied on a basis consistent with that of the precedin'g year.

+

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MEMBER COOPERATIVES AIanager Bartlett Electric Cooperative,Inc.

Bartlett, Texas Lawrence Karl B-K Electric Cooperative,Inc.

Smmur, Texas.

Don Gregg Belfalls Electric Cooperative,Inc.

hrbud, Texas Luther L. Parks Comanche County Electric Cooperative Assn.

Comandie, Texas William G. Parker Cooke County Electric Cooperative Assn.

Muenster, Txas Alichael E. Sloan Denton County Electric Cooperative, Inc.

Denton, Texas Bill AlcGinnis Dickens Electric Cooperative, Inc.

Spur, Texas Bailey Reece Erath County Electric Cooperative Assn.

Stephenville, Texas Don Stone Fort Belknap Electric Cooperative,Inc.

Olng, Texas Phil Stater Gate City Electric Cooperative, Inc.

Childress, Texas James Driver llamilton County Electric Cooperative Assn.

Hamilton, Texas John liartgraves 11111 County Electric Cooperative, Inc.

Itasca, 'tJxas Sam liouston J-A-C E!cctric Cooperative, Inc.

Bluegrorr, Texas Sarah Sears Johnson County Electric Cooperative Assn.

Cleburne,7dxas llollis E.Joslin hicLennan County Electric Cooperative, Inc.

McGregor, Texas Ron Golden Alid South Electric Cooperative Assn.

Namsota, Texas Kenneth Camp Ncvarro County Electric Cooperative, Inc.

Corsicana, Texas Billy Gillespie Navasota Valley Electric Cooperative, Inc.

Manklin, Texas Walt Pierce Tri-County Electric Cooperative,Inc.

Ade, Texas D. L. Knight Wise Electric Cooperative, Inc.

Decatur, Texas Joe Forman MUNICIPALCUSTOMERS City of Bartlett City of Granbury City of Ilearne City of Sanger City of Seymour City of Weatherford City of Whitesboro OTHER

'liwas A& At University

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