ML20211B751
| ML20211B751 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 12/31/1986 |
| From: | Caruso R LOS ANGELES DEPT. OF WATER & POWER |
| To: | |
| Shared Package | |
| ML17303A285 | List: |
| References | |
| NUDOCS 8702190546 | |
| Download: ML20211B751 (40) | |
Text
{{#Wiki_filter:_ . . . . . . Los Angeles Department of Water and Power 1985-1986 Annual Report fg f ., . . .. )
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inter andelectricity have been skalelementsin the i gnmsh ofli>s Angeles, l cme ofthe uvrid's great ; cities. ' r a I l l l Fh>nt Gnwr: %>unguers at Sunrise Elementary Schoollearn the basics ofjumergeneration with the aiJofa DHP
, exhibit. The Depart-mentfurnishes a bruutd mnge ofeducational nunerials to li>s Angeles schools.
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Tlie Depin triierit iii Biief
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Tom Bradley Mayor of k' ^8'I'5 The Los Angeles Department of Water and Power (DWP) is the largest municipally owned
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utility in the United States. A unit of the Los Angeles city government,
.h" the DWP has more than 10,600 employees p
.4 .- serving the 3.1 million residents of the second U most populous American city in a 464-square-g ,
mile area. The Department's operations are financed solely by the sale of water and electricity; they 8 are not tax supported. The DWP is administered by the Board of los Angeles City Councilt Water and Power Commissioners, whose five it members are appointed by the mayor and con- $sfde i oun$l firmed by the City Council for terms of five Joel Wachs. Second District Joy Picus! Third District years. The Board establishes the DWP's rates, John Ferraro, Fourth District subject to approval by the council. Zev Yaroslassky,* Fifth District Los Angeles obtains about 75 percent ofits Ernini Bernardi, Seventh water from the Owens River and other sources District in the Eastern Sierra Nevada via the Los y,(>ert; C. Farrell, Eighth Angeles Aqueduct,15 percent from the San Fernando Valley and other local groundwater Gilbert W. Lindsay, Ninth District basins, and 10 percent from the Metropolitan Mir in Braude, Eleventh Water District of Southern California, whose District water comes from the Colorado River and the Illi Bernson, Twelfth District State Water Project. SIi',hael
;s Woo, Eneenth A vast network of power stations and trans-Richard Alatorre, Fourteenth mission facilities, some located outside Califor-District nia, supplies electrical energy to D'VP Joan Milke Flores, Fifteenth customers Power sources include coal, hydro-District electric, steam, oil and natural gas. Nuclear
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((,'q*yhCiy,tu 1 p wer, imported from Arizona, became avail-Resources Committee able to the DWP for the first time in fiscal 1986.
*First and Tcnth council district seats are vacant City Controller Rick Tuttle City Attorney J mes Kenneth IIahn r
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Comparative Ilighlight.s WATER POWER Fiscal Year Fiscal Year Fiscal Year Fiscal Year SERVICE 1986 1985 1986 1985 Sales 204.3 billion 203.4 billion 20.3 billion 19.9 billion gallons gallons kilcwatt kilowatt hours hours Average number of customers 630,105 630,353 1,261,972 1,251,206 FINANCIAL (in thousands) Revenue from water and electric sales, and other income-Net $234,195 $220,440 $1,386,118 $1,319,943 Operation costs of the water and electric systems
- 133,674 118,697 991,260 907,963 Net income 61,844 63,322 193,585 213,630 !
Transferred to City of Los Angeles ' reserve fund 10,415 9,885 64,353 58,867
- Excludmg depreciation expense The 1985-86 Water Dollar 24c Resenues Expenditures w$r e kicntial 7c Interess Canernrnental P'"$'
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23c 25c (kher operstmg Available for additums and enpenws ements syvem and The 1985-86 Power Dollar Resenues Espenditures ( ranng whnes
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i The City of Los Angeles Honorable Tom Bradley, Mayor Honorable Members of the City Council %
.M We take great pleasure in transmitting this -
85th annual report which reviews the accom- ig plishments and progress of the Department of FV 1 Water and Pbwer during the 1985-86 fiscal I year, in accordance with the City Charter. Rick J. caruso As the gateway to the Ibeific, the setter of President trends and the center for a growing and diverse population, the City of Los Angeles is dynamic and ever-changing. It is a constant challenge to mcet the water and electrical needs of residents, d ;9
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businesses and industries. We have been successful in this endeavor 4 through proper planning and reliable service at reasonable rates. We take pride in our accom- 'k plishments, but know each year we must renew Jack W. Leeney Angel M. Echevarria our efforts to continue meeting customers' Vice President needs. E 'W Water and electricity have helped Los Angeles grow into a modern metropolis. Today, we serve a population of more than 3.1 million y '$ j ', $ while keeping an eye toward the needs of the d I' future. This year we contributed more than $74 )y million to the city's general reserve fund in y addition to meeting all operating expenses. We are grateful for the support and coopera-J Carol Wheeler Walter A. Zelman tion received from you and the City Council. Our appreciation is also extended to other elected city officials and boards and manage-ments of other city departments. We also com-mend the efforts of our own management and personnel for their continued service and dedication.
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Rick J. Caruso President Board of Water and Power Commissioners 3
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? s Cellerill Fiscal 1986 was an especially significant year ti>r the Department. I am pleased to report ens ironment ot'Owens Valley. our principal water source. In addition, we continued to
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1\Illnager,s tnat we compieted sesermi iony term pro;ects 3 detend the cit 3 s uono isa,in water riynts in j
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that will make a protound impact on our opera- sarious law suits. IlepOrg tions in three critical areas: the improsement of s water qualits. the improsement ot customer ser-wer 5 tem Deselopmeats 4 s ice. and the deselopment of cost-sas mg power - The Palo Verde Nuclear Generating Station, a _3 sources as alternatives to oil and natural gas. 3.8(X)-megawatt t'acility in Ari/ona becanic an g The highlights for the year were as tollow s: important source of power t'or Los Angeles w hen the first ot'its three units began commer-( g Water System Deselopments
-Construction neared completion on the 5150 cial operation in f_iscal 1986. The Department =
million Los Angeles Aqueduct Filtration Plant. exchanged its 30 percent ow nership in a j
.: the largest ot'its ty pe in the country. 'I he plant coal-tueled plant, also in Ari/ona. tiir an ,
will remose turbidity t' rom all water delisered - approximately 6 percent interest in the y through the aqueduct-about 75 percent ot the larger Palo Verde l'acility. city 's supply. -The 1.6(X)-megawatt Intermountain Power "
-We greatly expanded our water conservation Project (IPPL a 55 billion coal-tueled plant in N actis ities. Utah for w hich the DWP served as project
-We continued programs to protect water in desiener and construction manauer, also went the San Fernando Valley G,roundwater Basin a on-line. with Unit I and the Northeti and 4 trom f urther contamination and to clean up eustme contamination.
Soudu'rn .FransnMon R,stt'nis bein : placed in J,
-We a' Iso continued an intensis e procram to "'n ice. Under a long-term contract. we will y repair and replace older water lines. pumping operate the t'acility and receive about 45 percent _
1 stations and reser oirs. This insolsed an outlay of the project's output. . of 552 million durine the sear. IPP and Palo Verde represent major steps
-We made significa'nt progress in our work toward one ot the Department's kg objectives, with Inyo County to protect and enhance the to become less dependent on eil and natural gas y to produce electricity. j i
Im P n.p m,ma ca n a m t w,m, I G r e i ss o o m vai m,ma c< r u ur r ihmuiH Hae r r iv m vner ' mama e, r , n n r nal attau IW ll lw a rat mama ea r an.) , ha i e n em< a r % .im m I It a a s
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Administration and Personnel Financial Results
-We installed a state-of-the-art, $2.5 million -Sales of water and electric power attained telephone system in the headquarters building record levels, although net income for both the to handle customer inquiries faster. The system Water System and the Ibwer System declined has increased our efficiency and significantly from the previous year's all-time highs owing to reduced customer complaints about long increased expenses. The financial condition of delays, enabling us to be more responsive to both units is very strong; their combined total our customers' needs. assets at year-end stood at $4.8 billion, with all -Computer operations were upgraded with obligations amply covered.
the addition of a $4.5 million mainframe com- Our operating budget for fiscal 1987 is $2.4 puter that increases our processing capacity billion. Transfers to the city reserve fund will 45 percent. amount to a record $79 million (5 percent of the
-There were four major executive appoint- 1985 86 fiscal year gross revenues.)
ments during the year. In other internal matters, we increased Daniel W. Waters, who began his career emphasis on improving our safety record, our with us as a civil engineer in the Ibwer System affirmative action program continued to pro-in 1%2, was appointed to the new position of duce good results as more women and minority assistant general manager-external affairs. group members gained employment and pro-His responsibilities include public affairs, motion, and we expanded our supplier relation-management services, legislative affairs and ships with female and minority businesses. exccutive office administration. I wish to thank Mayor Bradley, the City Eldon A. Cotton, a 20-year veteran of the Council, and the Board of Water and Ibwer Department who had headed the Ibwer Sys- Commissioners for their counsel and support. tem's System Development Division for four Their assistance has been most valuable to the years, succeeded Mr. Waters as assistant chief DWP, not only in the past year but over a period cicetricalengineer. of many years. I also would like to express my Vernon L. Pruett, whojoined the DWP in appreciation to my fellow employees for their 1%3, succeeded Mr. Cotton. In his previous excellent, dedicated work. assignment, he served as assistant project All of us in the Department look forward to 1 director for the Intermountain Ibwer Project, expanding and improving our service to the Lloyd B. Dennis, former senior vice presi- people of Los Angeles during fiscal 1987. dent and director of public affairs for First Interstate Bank of California, was named to the new post of executive director of public affairs. His appointment reflects the increasing im-portance the Department attaches to effective Ibul H. Lane organizational communications. General Manager and Chief Engineer 4 ) l l b
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l i The Water A Prime Objective: Improving Water Protecting San Fernando Valley 0""li'Y G "" " d "~"'" S) stem Chief among the Department's concerns in its A Precious Source. The San Fernando Valley
. water-related activities in fiscal 1986 as it prob- Groundwater Basin, made up oflayers of clay, l ably will be for at least several more years, was sand and gravel, naturally contains large quan-l improving water quality. There were notable tities of water. About 15 percent of the Los accomplishments in this area. Angeles water supply is drawn from wells Additionally, we undertook important located in this basin. It normally serves about environmental programs in the Owens Valley, 500,000 people, but because of its storage continued our efforts to resolve water rights liti- capacity it can supply 1 million people during a gation, expanded our conservation activities, drought or emergency.
and continued an intensive program to repair Several years ago, when sensitive monitor-and replace older water facilities. ing equipment became available for water test-
. Filtration Plant Nears Completion ing, trace amounts of two industrial solvents, ! Construction on the Los Angeles Aqueduct trichloroethylene (ICE) and perchloroethylene Filtration Plant, a landmark project for the (PCE), were found in a sizable number of the Department, was substantially completed. basin's wells. These contaminants probably had After three years of construction, testing is now been present for many years but previously underway, and the plant is scheduled to begin were undetectable.
full-scale operation next spring. IAcated in Syimar in the north San los angeles municiput Fernando Valley, the plant will treat up to 600 pools rely on nurer million gallons otbter daily. This con- , supplied try the DWR stitutes the entire flow of the two Los Angeles aqueducts, which bring water t j some 340 miles to Los Angeles i from the Owens Valley and Mono g Basin. The plant forms the term- 0 inus of the aqueduct system and the beginnir.g of the water i distribution system. I The plant, built at a cost of $150 million, is one of the largest and most i advanced water treatment facilities in the world. Filtration will remove turbidity, or cloudiness, found naturally in surface water supplies, making the water clearer and more easily disinfected. Ozone will be a 'ded as l an aid to filtration. It will i also provide the benefits of superior disinfection, reduced color, improved taste and odor, and a reduction in the formation of chlorinated organic compounds.
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==========='= In the aeration process, contaminated underground water is pumped through pipes While waterconsumption by to the top of the tower. As the water falls by DWP customersis safe, the gravity through packing material in the tower, spreadofcontamination in the it is blasted with air. This causes the contami-San Fernando Basin is nants, volatile organic compounds, to separate reducing the numberof and vaporize. Granular activated carbon filters, added to the end of this treatment wcils arallab/cfor use, process, will remove the contaminants from the air emissions.
The aeration facility proposal was the prod-uct of a two-year study of groundwater man-The Department has minimized the poten- agement in the San Fernando Valley that the tial risks posed by these chemicals through two Department completed in 1983 under an EPA mecsures: shutting down certain wells, and grant. Other measures recommended in that blending contaminated water with clean water study that are now being carried out include so that the contamination level is below educating the public on toxic waste, monitoring permissible state and federallevels. toxie waste storage facilities, eliminating cer-While water consumed by DWP customers tain septie disposal systems, and increasing is safe, the spread of contamination in the San enforcement of hazardous waste disposal laws. Fernando Basin is reducing the number of wells Protecting and Enhancing the Owens available for use. We are moving on several Valley Environment. In 1984 Inyo County and fronts to control this situation. Los Angeles, in an attempt to resolve their Working With the EPA.The Department long-standing differences over water rights, signcd an agreement with the U.S. Environ- entered into an agreement to set aside litigation mental Protection Agency (EPA) to conduct a and tojointly conduct vegetation and ground-study on how best to clean up the San Fernando Valley groundwater and prevent further contamination. We estimate the study will cost about $4 million and take two years Water Use Deliveries to complete. Four well fields within the San Fernando um= ar ce=
" "' " #'"I"d' Vallcy Basin have been placed on the EPA's 22 national priorities list for hazardous waste cleanup and are eligible for EPA Superfund financing. Because these funds have not yet l !
been made available, the DWP plans to proceed i with the first stage of the study using $300,000 ,
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of its own money. 2a - Aeration Tower Approved. A major ele- l ment in our groundwater protection plan is an , t acration tower to be built in the San Fernando , l l l Valley community of North Hollywood. The j j m I ; ' l 48-foot-high tower would remove trace levels of , contaminants, mainly TCE and PCE, from j the water. A lengthy process of governmental review , and public hearings on the environmental j < cffects of the tower was completed. With the k necessary permits for the $2.5 million project in hand, construction will begin early in 1987.
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f~ .~ . . .. u . a L . w ( & ~:.~ d.~ :-M w water studies, implement several enhancement Using about 18,000 acre-feet of water annu-and beautification projects in the Owens Valley, ally from the aqueduct, the project will provide and develop a long-term groundwater manage- a continuous flow of water from Black Rock ment plan. Springs downstream to Owens Lake. New wells At present, various pmjects ranging from under construction elsewhere in the valley will revegetation, to providing wildlife habitat, to replace the diverted water.
- In addition to reviving the river, the project
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will sustain water fowl habitat in five small lakes and ponds. The new fishery will support
. such warm-water species as largemouth bass, A inajor eleinentIn our bluegill, catfish, and carp. In the next few groundwaterprotectwn plan years, the DWP will work with the state Depart-is an aeration towerto be ment of Fish and Game to develop a wildlife built in the San Fernando manacement plan for the Lower Owens
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, Valley corninunity ofNorth River area. Iloll Jwood. Water Rights Litigation The Department is involved in a number of
- ~ ~ ~ = = = court cases in which our long-standing water rights in the Mono Basin are being challenged.
the creation of recreation areas are under way. We re defending ourselves vigorously in these Other pmgrams will be implemented in the m tiers. Mono Basm is of great importance to fut ire the DWP since it supphes about 17 percent of Last year saw the culmination of the most our water supply and large amounts of hydro-electric power. ambitious of these programs-the $750.000 Lower Owens River Project-which established Followmg is a br,ef i summary of the suits that proceeded in fiscal 1986: a warm water fishery and wildlife habitat along the normally dry riverbed. On June 5, water 41ono Lake. This suit was filed by the Audu-was released from the Los Angeles Aqueduct bon Society in l979, challenging our rights to into a 25-mile section of the river that had been the entire Mono Basin water supply. Separate essentially dry since the early 1900s. appeals, relating to the site of an eventual trial, 8
The DWP camduc es a repor ous testung program to help ernure the high qualsts of it< auter suppis
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were filed by the society and California and initially, we will be able to monitor reser-have delayed resolution of this issue. voir levels, water flow and pressure, and the
-Iower Rush Creek. The ensironmental condition of pumps and valves at 77 locations groups are seeking to have the DWP maintain a throughout the Water System. That number ,
trout fishery that developed in the normally dry F'entually will rise to 250. creek during several years of unusually heavy The new equipment will enable us to flag run-offin the Mono Basin. Additional studies minor problems and correct them before they ordered by the court will be conducted over the escalate to cause major damage or service next two years. interruptions. We also will be able to assess the effects of earthquake tremors on our facilities. Conservation Efforts Increased An imp rtant attribute of the system is that , DWP completed a sweeping plan designed to . it will allow better regulation of power usage by increase water conservation in Los Angeles. wells and pumping stations, thus s,gmficantly i Designated as the Urban Water Management plan, it was prepared in response to 1983 state yeducing our electricity costs. The system includes two identical computers, either of leg.islation. which can perform all critical tasks if the other The plan .meludes numerous conservation is down. measures that will be expanded or newly imple-i mented to promote efficient water usage in the city through the year 2010. The plan was com- } piled over two years with the assistance of ' environmental organizations, community groups, water conservation agencies, and other j groups and individuals knowledgeable about [ [. conservation. l Key measures under the plan include: g]
-Seasonal water rates implemented in Decem-ber 1985.
-A pilot program to distribute free consen'a-tion kits, including low-volume shower heads, to 110,000 lifeline customers.
-Participation in the Large Turf Audit program of the state Department of Water Resources, which is aimed at increasing the efficiency of irrigation for areas such as golf courses and cemeteries. This effort can be significant, since landscaping accounts for almost one-fourth of all water use in Los Angeles.
-Distributing thousands oflawn watering guides to residential customers.
-Speaking programs to promote residential consen>ation.
-A biannual business and industry water conservation awards program.
Major Computer System Set for Start-Up A $15 million computer system that will moni-tor and control DWP water distribution facili- d N' "I'*"'"d" K'"' C"""""'"" ic ""d ""'". ties from our headquarters building neared energy ni, ,,,, ef,c,iency advice to a customer at her home,,,; completion. Under design and development for customers. i more than three years, the system, scheduled to begin operating early in 1987, will improve the Water System's reliability as well as substantially reduce its operating costs. 10
Wcter System Facts in Brief 1985-86 1984-85 Use of Water Average Los Angeles population served * - 3,214,000 3,103,000 Av: rage daily use per capita, gallons 187.2 193.6 Water sales for fiscal year, billion gallons 204.3 203.4 Maximum daily demand, million gallons 915.2 882.9 Water Supply to City Area From local supply, cu. ft. per second (c.f.s.) 144.5 164.8 From DWP Aqueduct, c.f.s. 671.8 709.3 From Metropolitan Water District, c.f.s. (California Aqueduct and Colorado River Aqueduct) 123.9 64.8 Gross supply, c.f.s. 940.2 938.9 Diversion from (to) local storage, c.f.s. (6.6) (6.4) Net supply to distribution systems, c.f.s. 933.6 932.5
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* ( Ne*st sranc The City ofles Angeles encompasses 461 square miles and Castaic e Ibwer Plant has a population of 3.1 million. A vast network of facilities is in place to serve customers with a reliable supply of water and electricity. Water is imported from hundreds of miles away and brought to les Angeles through aqueducts.
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- I Tlie Power Developing New Energy Sources Angeles Basin. By contrast, in fiscal 1986 those In Pursuing its overall goal of supplying Los sources accounted for only 31.5 percent of our S)'steiii Angeles with energy that is clean, safe, reliable energy, with DWP-owned hydroelectric (5.4 and economical, the Department has several percent), lioover Dam power (11.2 percent),
interrelated, long-term objectives. coal (26.1 percent), purchased energy (25.3 For reasons both of economy and stability percent), and nuclear (.5 percent) making up ! of supply, we continuously seek to develop new the rest of the supply. fuel sources other than oil or natural gas. The Intermountain I\mer Project Comes On-Line long-term price increases of both oil and gas A major new source of clean and economical probably will exceed the inflation rate, and both energy became available to Los Angeles last the price and availability of our oil supplies spring when the first of two generators of the depend on unpredictable world economic and Intermountain Ibwer Project (IPP) near Delta, j political developments. Utah, began commercial production. Therefore coal, which is abundant domesti- A 1,600-megawatt, coal-fueled facility i cally and relatively inexpensive, figures impor- owned by the Intermountain Power Agency tantly in our energy future. Similarly, but to a (IPA), a Utah public authority, IPP will distrib-lesser degree, nuclear power will be part of that ute power to 36 project participants in Utah, future energy mix. Nevada, Wyoming, Idaho, and Southern Durmg the early 1970s, the Department California. i produced about 80 percent ofits energy from The DWP is by far the largest buyer ofIPP oil and natural gas-fueled generators in the Los output. Initially we will purchase more than 62
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p F . ;. g - . . . , V F t The intermountain Amer Project. a huge coal-fueled pcmerplant in Utah, began supplying electricity to liss Angeles last spring. 14
DWP Acquires Interest in Nuclear Plant After ten years of planning, designing, con- l Like IPP, Palo Verde consti- struction, and testing, the Palo Verde Nuclear tutes an linportant step in the Generating Station, located about 50 miles west Departinent's efforts to derclop of Phoenix, Arizona, began producing com-alternativefuel resources, mercial power for utilities in Arizona, Texas, New Mexico, and California last winter.
- Los Angeles will be a beneficiary of the
$5.9 billion facility (this figure excludes financ-ing c sts), since the DWP has a 5.7 percent percent of the project's power, although our
"*"*rship-equivalent to about 217 megawatts long-term entitlement is about 45 percent. Our ..
power will be delivered through one of the -'"[ccording to a 1977 agreement between the major components of the project, the 490-mile Department and the Salt River Project, an long Southern Transmission System, to our
. converter station at Adelanto, California, Ariz n agency, we exchanged our 30 percent interest in the coal-fueled Coronado power 100 miles northeast of Los Angeles, in the pl nt, located near St. Johns, Arizona, for Mojave Desert.
equivalent electrical capacity in the new Palo
, All IPP facilities, except the Southern Verde facility when it went on-line. -
Transmission System, have been financed by In addition to that entitlement, the DWP the sale ofIPA bonds and commercial paper. . will receive an energy and capacity interest of 4 The transmission system was funded by bonds almost 4 percent, or about 151 megawatts, issued by the Southern California Public lbwer though SCPPA.
! Authority (SCPPA), of which DWP is the Like IPP, Palo Verde constitutes an impor-largest member.
tant step in the Department's efforts to develop The start-up of the first IPP generating unit alternative fuel resources. When fully opera-
-ahead of schedule and well below budget- .
ti n 1, it should supply about 8 percent of our I marked an extraordinary achievement by the P *#' *9" " j Department, which has served as the project's manager since its inception in the 1970s. p,; ye d joint venture of six / [ l DWP emph>yces have been deeply mvolved j , public utilities, is F m the $5 billion project since it was first con-l 1 ceived. At one time, as many as 4,200 people comprised of three y identical 1270- - j (including a small DWP contingent) worked on megawatt generat-the construction site at IPP, one of the largest and most complex power projects undertaken ing units. Unit I went into operation h{' h in the United States in many years. About 70 in January 1986. Department emphiyees were assigned to the The project will bc . project as of last year. completed when _ in addition to the two generating units (Unit Unit 3 begins serv-2,si scheduled to go on-line next summer), ice next year. The which melude state-of-the-art air quality con- *
- plant is expected to l trol devices, IPP comprises two transmission generate about 23 f
systems, converter facilities, a microwa e com- million megawatt-munication and control system, and a railcar hours annually by service center in Provo, Utah. " the early 1990s. The plant, whose fuel requirements will l average 4 million tons of coal a year, is highly , automated. It is the first power plant to use i decentralized computers to run all major operations. Each computer controlling a major ni,3rore ans,housans, oforherfaciliiics in to, system has a back-up to assure that system's "Rrl dere"d o" elric? furnished !'y 'h' ( l j reliability. U"'""'"'" i l
; e 15 i 1
Expanskm of Transmission System We began exploring the Coso Known Geother-The Department spent about $39 million mal Resource Area in 1981, when we acquired improving and expanding the high voltage leases to 6,825 acres located a few miles from transmission system in Hscal 1986. The most DWP transmission lines. important of these projects was the award of a Three exploratory wells were drilled in contract to expand the electrical capacity of the 1985 with favorable results, and more wells will Sylmar Converter Station, the southern termi- be drilled to denne the reservoir. Our long-nus of the 846-mile Pacine Intertie Transmis- range plans call for a demonstration plant to be sion System, which is a major power link operating in the early 1990s, and fcr cominer-between Southern California and the Pacific cial units to operate later in that decade. Northwest. Geothermal is a proven technology. Com-The $171 million expansion, scheduled for mercial plants have been operating in the United completion in 1989, will increase the trans- States and other countries for many years. mission system's capacity 55 percent, to 3,100 White Pine County limer Project. To be megawatts. It calls for the construction of paral- located near Ely, Nevada, the White Pine Power lel valve groups, converter valve halls, a control Project is a proposed coal-fueled generating building and related equipment, station that would be jointly owned by White Work also began on the new Victorville-to. Pine County and two Nevada power companies. Rinaldi Transmission Line, a 500-kilovolt, Development work on White Pine continued single-circuit line that will be used to transmit last year. Under current plans, the DWP will power from coal-fueled generating stations in acquire a portion of the project's output. the southwest. Expected to be completed next Hydroelectrie. Environmentally clean and July, the 86-mile project represents a $67 mil- reliable, hydroelectric power has long been an lion investment, including the purchase of important element in the Department's energy rights-of-way, sources. Under a recent agreement, the city In the Future: Alternative Energy will e ntinue to receive power from Hoover Dam for the next 30 years. In addition to relying on a variety of conven. The DWP was a close partner of the federal tional energy sources, the Department also is Bureau of Reclamation in conceiving and build-seeking to develop alternative sources such ing the dam, which was the main source of as geothermal, solar and biomass energy and power for Los Angeles for many years. The other emerging technologies to address the future power needs of Los Angeles. Department, which has been operating 13 of the dam's 17 huge generators for the Bureau since Although these methods are not now tech-1935, began phasing out of its involvement in nically or economically feasible for our opera. this work last year, tions, they hold promise for the future. Last Landfill Gas Recovery. The Department year we spent $5.4 million on alternative energy has tested a 40-kilowatt fuel cell powered by research and development. I ndGli gas to produce electricity and heat. The Geothermal Projects. The Department DWP and Southern Califorma Edison were continued its development of geothermal power j mt participants m this project, part of a pro-(underground steam or hot water) in the China Er m Sponsored by the federal Department of Lake region of the Coso Range in Inyo County. 16
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Energy and the Gas Research Institute that is consumptions of any California city. testing more than 40 fuel cells in the United In the seven years that the Department has States and Japan. The program was highly been surveying business and industrial estab-successful, lishments, which c;nsume about 80 percent of We continue to use landfill gas as supple- the energy used in the city, about 800 audits mental boiler fuel at our Valley Generating have been completed through the year-end. Station. Landtill gas is recovered at a nearby These saved an estimated 250 million kilowatt landfilland piped to the station. hours. Conservation Programs Continue Through our conservation loan program,
!!9 I ans t taling 5539,000 were granted during Besides the activities cited above, the Depart-fiscal 1986 for solar and heat pump mstallations ment has operated a comprehensive energy and master-meter conversions. Smce its incep-conservation program since 1971. At present, ti n, the program has provided $4.3 milhon m, these efforts mainly comprise free, customer- I ns to residential customers. ,
requested audits for both residential and busi-The Department presented awards to 167 ness customers designed to improve energy businesses for their achievements in energy efficiency, and a broad education campaign for eff ciency management during the year. both customergroups. Largely as a result of these programs, Los Angeles has one of the lowest per capita energy Power System Peak Demand Forecasts Electric Energy Reqmrements u (actual and projected) 5soo Billiomof Kilow g.ggo,,, (actualand projected) Electric Energy Sources 25 g,,,,,g,g
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7 Power System Facts in Brief Pow;r production in kilowatt-hours (including all generation of Hoover units connected to DWP system) 1985-86 1984-85 Pbwer Use Domestic Customers 1,078,074 1,069,622 Commercial Customers 157,484 155,176 Industrial Customers 20,233 _ - 20,434 Total Customers- All Classes 1,261,972
- 1,251,206 Sales to Ultimate Consumers-Kilowatt-hours 20,034,676,000 19,554,854,000 Sal:s to Other Utilities- -
Kilowatt-hours 215,819,000 337,857,000 Average Annual Kilowatt-hours per Domestic Customer 5,102 ~- 5,185 Status of System Utility Plant (Less Accumulated Provision for Depreciation) $2,943,900,000 $2,656,056,000 . Generating Stations- , Net Dependable Capability, Kilowatts 7,309,000* 6,534,000* - 'Inchales purchased capacity; does not deduct short-term sales of escess capacity. , j 4, 19
Customer TheYearSeesImportant Advances Computer Services Improved The continuing, paramount objective of the In most large business and governmental orga-Service Department is to provide ever-improving nizations, there is an important, if sometimes service to our customers, the people of indirect, relationship between the quality of the Los Angeles. Last year we achieved much enterprise's computer services and the quality of in that regard. its end product. This is the case with the DWP. A very large, sophisticated computer A New Telephone System Is Installed services operation-the operating budget is A h:ghly advanced telephone system that will about $33 million-enhances all aspects of the provide much faster response to customer calls Department's administrative work, and that, in for service and information went into operation , turn, is reflected m improved customer service. i last spring. The computer-controlled system, which Last year we purchased a powerful main-cost about $2.5 million, does something our frame computer which increased our process-previous electro-mechanical system could not: ing capacity by about 45 percent. The new machine, which cost about $4.5 million, pro-it assures that customers get first-call, first. served treatment. It also can answer a call cesses information at the rate of 30 million immediately and place a customer on hold instructions per second-twice as fast as the until a service representative is available to larger of our two older mainframes. Depart-take the call, ment personnel operating more than 1,600 remote terminals access these computers to The new equipment also continuously pro _ , , vides our service supervisors with informa. carry out myriad admimstrative tasks. In 1983, the Department initiated a program tion such as call length, volume and location which enables them to manage the system t train and assist employees in using personal c mputers. About 90 PCs were installed more efficiently. throughout the DWP last year, bringing the In order to implement the new system, the total at year-end to about 230. Each of these telephone service operations of our Van Nuys machines is used by a cluster ofemployees. and headquarters offices were consolidated, and the new unit was relocated to a remodeled Assisting Low-Income Customers area of the headquarters building lobby floor. Project ANGEL, the Department's program to The telephone service staff consists of assist customers who because of hardship can-about 175 representatives, including about 40 not pay their DWP bills, distributed more than who work part-time during high volume periods $130,000 during the year. and 12 " leads or supervisors. These people Funding for Project ANGEL, an acronym handle, on average, a total of 7,000 to 8,000 for Assist Neighbors by Giving Energy for calls a day. Living, comes from contributions by DWP customers and employees and other city employees. The program is administered by the United Way. f,i Since the program's inception
.J, ;
% d! ' @, i in 1983, grants of more than 1 $566.000 have been made to some
, .. . 5,500 families. Assistance is p
} yw .h
[ 9
. % limited to $150 per family in
- - 1 any 12-month period.
-t i v
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se A new, computert:rd tele-
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[f phme system has imprmed
, ;# , . y greatly the Department's y/'y/%_ b y*//
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% *l "Y unformatwn calls.
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N t. I Developing Our Most Important Asset The Department has provided extensive DWP Among the more important responsibilities of training to more than 1,700 supervisors in ree-the DWP are safeguarding the on-the-job wel- ognizing the signs of drug use and in the refer. pgOp gL, fare and nurturing the talents and capabilities of ral techniques necessary for rehabilitation. the more than 10,600 men and women com-Safety Record Improves prising the wurkforce. Last year the Human
, The Department expanded its safety programs Resources Division began several major new considerably in fiscal 1986.
programs to help accomplish those ends. Department-wide recognition of outstanding Management Development Program safety records occurred with the establishment Launched and first presentation of the General Manager's Woiking with a consulting firm, we completed Safety Awards, which will be presented annu-the first phase of the most comprehensive man- ally. The General Services, Water Operating, agement training program the Department has and Power Distribution Divisions won the ever undertaken. awards for reducing their serious accidents by The task was a complex one, involving 25 percent to 34 percent. more than 350 managers representing the entire We also established an Industrial Hygiene Department. Surveys, focus groups and indi- unit that is responsible for assuring that DWP vidual interviews were analyzed to determine operations involving hazardous chemicals are the program's major areas of concentration. conducted safely and in compliance with govern-The findings of this study will help us both ment regulations. The unit developed and pre-identify the needs ofindividual managers and sented "right-to-know" training for 7,000 DWP chart the course for a complete management field employees. It is now monitoring Depart-i development program for the Department. ment worksites and preparing evaluations for in a related development, we also intro- operating managers. , duced a formal performance evaluation and Additionally, we invested substantial , development system for all engineering sums in new safety equipment, carried out management personnel. employee tests under Occupational Safety and The system seeks to promote regular, open Health Administration (OSHA) standards, and communication between superiors and subordi- expanded our safety awareness programs. I nates onjob performance, with a view toward developing better performance by the subordi- "^W ^ T' DWP crews demonstrare nate and increasing thejob satisfaction and pro- p 'I ' - ~k ,
"j,"',,'"[g'l{' j[,',
fessional growth of both parties. This program schmas. was developed with the help of many of our engineering personnel at various levels. Dealing With Substance Abuse Recognizing that drug and alcohol abuse among DWP employees can pose serious health l risks for them as well as create hazardous work-ing conditions which could affect the public, we instituted a firm policy on the use of these substances. The policy, which was agreed to by our various employee unions, is aimed at maintain-ing safe and efficient working conditions that are alcohol and drug free. It also provides employees involved in substance abuse with a 't-l
,, j full opportunity for rehabilitation. Referral of
^
employees through the Department's Employee s ,
~' #
Assistance Program to a variety of community-based rehabilitation programs is an integral part @1' -
- m e. a of the policy.
21 - - - _ _ - - - - . _ _ - _ - . -_-_. _ - - . - _ ~ _ . . _ - - - - - - _
Finances Operations for fiscal year 1985-86 produced Outstanding bonds, notes and revenue cer-- increases of.5 percent in water sales and tificates on June 30,1986, totaled $1.63 billion 1.8 percent in the sales of electric energy. for the Pbwer System and $324.4 million for the Operating revenues of the Department's Water System. Both systems met their maturing Water and Pbwer Systems totaled more than payments on bonds and notes.
$1.58 billion, a gain of $88 million over the Totaled assets of the Department at June 30, previous fiscal year. The Water System _ 1986, were approximately $4.84 billion. Of this accounted for $18 million of the increase due amount, $3.70 billion was recorded in the Pbwer primarily to higher energy and purchased water System and the remainder in the Water System.
costs billed to customers. The Pbwer System In accordance with its basic fiscal policy, added $70 million to the total. This came the Department pays all costs of operation, mainly from an increase in energy costs billed debt service and part of the cost of capital to customers combined with the November improvements from current revenues. The 1985 rate increase. remainder of the cost of capital improvements Higher Water System operating revenues is met through sales of revenue bonds or notes
; partially offset by an increase in operating and and from contributions in aid of construction.
maintenance expenses resulted in net income of Besides meeting all costs of operation from
$61.8 million. current revenues, the Department paid more A total of $112.8 million was spent by the than $74 million into the Reserve Fund of the Water System on capital construction, most of city in support of general city government.
which went towards the improvement of the Almost 90 percent of that amount came from water distribution system and continued con- the Pbwer Revenue Fund. Operations of the struction of the Los Angeles Aqueduct Filtra- Water and Pbwer Systems are entirely self-tion Plant project. Water filtration is necessary supporting and no financial obligation or tax to comply with federal and state drinking water burden is placed on the citizens of Los Angeles. quality regulations. The operating revenue of the Pbwer System increa. sed by 5.4 percent from 1984-85 to a total , of $1.36 billion. Net income amounted to j
$193.6 million.
The Pbwer System invested $404.4 million in capital construction for the year. Major expenditures were for additions and modifica-tions to the electrical distribution system in Los Angeles, additions and improvements to trans-mission facilities, and the Coronado/Palo Verde power generation project. Two $50 million issues of Pbwer System revenue bonds were sold during the year. Inter-est rates for these issues averaged 8.6 percent. l The Water System sold two advance refunding l- bond issuYs for almost $67 million. Proceeds of the sales were pledged to retire the higher-interest cost Water Works Revenue Bond issues of 1982 and 1984. This transaction will ulti-mately yield interest cost savings in excess of
$18 million over the life of the refunding issues.
22
Water System Statement ofIncome Year ended June 30 (in Thousands) 1986 1985 1984 Operating revenues: Sales of water $220,433 $203,(M2 $180,851 Fire hydrant rentals 4,N2 4,015 3,926 Other operating revenues 1,544 1,243 %5 Total operating revenues 226,019 208,300 185,742 Operating expenses: Purchased water 17,192 9,139 6,775 Purchased energy 8,050 7,524 6,006 Purchased water and energy costs 25,242 16,663 12,781 Other operation 78,715 72,308 69,107 Maintenance 27,145 27,351 25,919 Provision for depreciation 22,983 21,844 20,956 Taxes on property outside the City 2,572 2,375 2,342 Total operating expenses 156,657 140,541 131,105 Operating income 69,362 67,759 54,637 Other income-net 8,176 12,140 7,715 Income before debt expenses 77,538 79,899 62,352 Debt expenses: Interest on debt 23,239 23,254 18,263 Allowance for borrowed funds used during construction (7,545) (6,677) (2,392) Net debt expenses 15,694 16,577 15,87I Income before nonrecurring credit 61,844 63,322 46,481 Nonrecurring credit related to accounting changes - - 11, % 2 Net income $ 61,844 $ 63,322 $58,443 Statement of Retained Income Reinvested in the Business 9 Balance at beginning of year $357,757 $3N,320 $253,673 Net income for the year 61,844 63,322 58,443 419,601 367,642 312,116 Less-Payments to the resene fund of the City 10.415 9,885 7,796 Balance at end of year $409,186 $357,757 $304,320 The accompanying notes are an integral part of these financial statements. 23
Water System Balance Sheet June 30 (In Thousands) 1986 1985 Assets Utility plant, at original cost: Source of water supply $ 223,350 $ 220,698 Pumping 23,656 22,489 Purification 9,654 9,323 Distribution 904,277 8M,406 General 97,614 83,793 1,258,551 1,200,709 Less- Accumulated provision for depreciation 453,695 429,510 804,856 771,199 Construction work in progress 183,941 131,048 988,797 902,247 Iamg-term receivables 1,076 1,573 Current assets: Deposits with City Treasurer-Revenue fund M,227 103,514 Bond redemption and interest funds 2,772 6,837 Cash on hand and revolving funds 556 249 Customer and other accounts receivable, less $600 allowance for losses 35,009 32,231 Accrued unbilled revenue 17,890 15,817 Materials and supplies, at average cost 13,423 13,304 Prepayments and other current assets 13,826 2,289 147,703 174,241 Unamortlied debt expenses 409 846
$1,137,985 $1,078,907 Liabilities and Equity Equity:
Retained income reinvested in the business, per accompanying statement $ 409,186 $ 357,757 Contributions in aid of construction 302,946 284,884 712,132 642,641 lemg-term debt, excluding advance refunding bonds: Revenue bonds 296,546 309,242 Revenue notes 27,861 34,801 324,407 344,G43 Less-Long-term debt due within one year (see beh>w) 19,370 19,450 305,037 324,593 Current liabilities: leng-term debt due within one year (see above) 19,370 19,450 Accrued interest 6,746 6,226 Accounts payable and accrued expenses 66,873 61,281 Customer deposits 27,827 24,716 120,816 111,6/3
$I,137,985 $1,078,907 The accompany ing notes are an integral part of thew financial statements.
24
r. Water System Staternent of Changes in Financial Pbsition Year ended June 30 (In Thousands) 1986 1985 1984 Financial resources prmided by: Operations-Net income $ 61,844 $ 63,322 $ 58,443 Charges and credits to income not affecting working capital-Depreciation 26,291 25,793 25,270 Other, net 748 570 489 Resources provided by operations 88,883 89,685 84,202 Sale of revenue bonds and notes - 34,706 49,471 Sale of advance refunding bonds 65,928 I8,597 - Amount received from escrow account 13,025 20,600 - Contributions in aid of construction 18,062 18,945 15,890 185,898 182,533 149,563 Financial resources used for: Expenditures for plant and equipment i12,841 101,482 90,788 Reduction oflong-term debt 19,370 19,450 12,375 Amount deposited in escrow accounts and offset against advance refunding bonds (Note B) 65,928 18,597 - leng-term debt redeemed, including call premium 13,025 20,600 - lhyments to the resere fund of the City 10,415 9,885 7,796 221,579 170,014 110,959 Increase (decrease) in working capital $ (35,681) $ 12.519 5 38,604 Increase (decrease) in components of working capital: Deposits with City Treasurer-Revenue fund $ (39,287) $ 19,712 $ 40,673 Bond redemption and interest funds (4,065) 5,219 (497) Cash on hand and revolving funds 307 21 (159) Cuvomer and other accounts receivable 2,778 4,853 4,664 Accrued unbilled revenue 2,073 M7 15,170 Materials and supplies 119 2,350 805 Deferred purchased water costs - - (2,024) Prepayments and other current assets 11,537 (153) 592 Net change in current assets (26,538) 32,M9 59,224 Long-term debt due within one year 80 (7,075) 250 Accrued interest (520) (144) 2 Accounts payable and accrued expenses (5,592) (10,110) (16,727) Customer deposits (3,111) (2,801) (4,145) Net change in current liabilities (9,143) (20,130) (20,620) Increase (decrease) in working capital $ (35,681) $ 12,519 $ 38,6(M The accompanying notes are an integral part of these financial statements. 25
Water System Notes to Financial Statements NOTE A-Summary of signifi- with removal cost, less salvage, is amounts billed and actual purchased cant accounting policies: charged to accumulated depreciation water costs results in over- or under-The Department-The Depart- when property is removed from recovered purchased water costs, ment of Water and Power of the City service. which are adjusted in subsequent of Los Angeles exists under and by Utility plant depreciation is pro- billings. virtue of the City Charter enacted vided by the straight-line method Under the rate ordinance approved in 1925 as a separate proprietary based on estimated service lives. August 30,1983, the Water System agency of the City. The Water Sys- The depreciation expense was " changed its method of recognizing tem is responsible for delivering 2.28%,2.28% and 2.36% of aver- purchased water costs to expense water to the City's inhabitants. age depreciable plant for the years and bill these costs in the period Financial statement presenta- ended June 30,1986,1985 and 1984. incurred; previously, billable pur-tion-The financial statements of Deposits with City Treasurer- chased water costs were deferred the Water System are presented in Of the deposits with the City Trea- until actually billed. To provide a conformity with generally accepted surer, $57,584,000 and $101,396,000 better matching of costs and reve-accounting principles, and substan- at June 30,1986 and 1985, were nues, effective June 30,1984, the tially in conformity with accounting invested in short-term securities Water System changed its account-principles prescribed by the Califor- under the City Treasurer's pooled ing policy for recognizing revenue to nia Public Utilities Commission investment program, whereby avail- a method which provides for accru-except for the method of accounting able funds of the City and its inde- ing estimated unbilled revenues for for contributions in aid of construc- pendent operating departments are water sold but not billed at the end of tion described below. The Depart- invested on a combined basis. These a fiscal period; previously, revenues ment is not subject to regulations of investments are valued at cost, were recognized when billed. At such commission. which approximates market. June 30,1984, as required by the Utility plant and depreciation- Contributions in aid of con- rate ordinance, deferred purchased The costs of additions to utility plant struction-Under the provisions of v. uter costs of $3,208,000 were and replacements of retired units of the City Charter, amounts received charged to expense. The net effect of property are capitalized. Costs from customers and others for con- the two changes was to increase net include labor, materials and allo- structing utility plant are combined income for the year ended June 30, cated indirect charges such as engi- with retained income reinvested 1984 by $11,962,000. neering, supervision, transportation in the business to represent equity Under a rate ordinance approved and construction equipment, retire- for purposes of computing the November 24,1985, to be effective ment plan contributions and other Water System's borrowing limits. January 1,1986, the Water System fringe benefits, and certain adminis- Accordingly, contributions in aid will recover all energy purchased trative and general expenses. of construction are shown in the as part of the purchased water cost For projects over a specified dollar accompanying balance sheet as an recovery rates. Previously, pur-amount, the Water System also capi- equity account and are not offset chased energy was recovered talizes an allowance for funds used against utility plant; depreciation through base rate billings. This during construction equivalent to the provided for the related utility plant change had no significant effect cost oflong-term debt incurred to is expensed. on net income for the year ended finance plant under construction. Revenues-The Water System's June 30,1986. Research and development costs rates are fixed by the Department The Water System sells water to directly related to current and future and approved by the City Council. other departments of the City at reg-construction projects are capitalized Revenues include amounts resulting ular rates provided in the ordinance. and all other such costs are expensed from a purchased water cost adjust- Shared operating expenses-as incurred. The cost of relatively ment formula designed to permit full The Water System shares certain minor replacements is included in recovery of purchased water costs. administrative functions with the maintenance expense. The original The Department projects these costs Department's Power System. Gener-cost of property retired, together to establish the purchased water cost ally, the cost of these functions is recovery component of customer alh>cated on the basis of benefits billings. Any difference between provided to the Systems. 26
Debt expenses-Debt premium, deemed through 1994), the advance for capital expenditures of approxi-i discount, and issue expenses are refunding bonds will be payable mately $114,000,000 in the Water deferred and amortized to income from Water System revenues. System. Also, the Department has over the lives of the related issues. N(HE C-Shared operating budgeted payments of $11,391,000 3 Payments to the reserve fund of expenses: for the year ending June 30,1987 the City-Under the provisions of Operating expenses shared from the Water System's revenue the City Charter, the Water System with the Power System were fund to the reserve fund of the City. transfers funds at its discretion to $216,276,000, $197,265,000 and Litigation- A number of claims ; the reserve fund of the City. Such $165,089,000 for the years ended and suits are pending against the payments are not in lieu of taxes June 30,1986,1985 and 1984, of Department for alleged damages to and are recorded as distributions of which $74.347,000, $67,139,000 and persons and property and for other retained income. $51,033,000 were allocated to the alleged liabilities arising out of its N(YrE H-leng-term debt: Water System. operations. In the opinion of man-Long-term debt outstanding at NOTE D-Employees' retirement agement, the uninsured liability June 30,1986, consisted of revenue plan: under these actions would not mate-bonds and notes due serially in vary- The Department has a funded con. rially affect the Water System's ing annual amounts through 2024. tributory retirement, disability and financial position as of June 30, Interest rates, which vary among death benefit insurance plan cover. 1986. individual maturities, averaged ing substantially all ofits employees. approximately 7.14% and 7.59% at The Water System was allocated June 30,1986 and 1985. The revenue approximately 26% of the plan's bonds are callable generally ten total costs for the years ended June years after issuance. Scheduled prin- 30,1986,1985 and 1984 amounting cipal maturities during the five years to $32,247,000, $29,156.000 and succeeding June 30,1986 are $30,618,000. These costs include
$19,370,000, $19,560,000, amortization of prior service costs
$20,270,000, $20,180,000, and generally over a 30-year period end-
$12,460,000, respectively ing June 30,2003. The Department In liscal years ended June 30, funds retirement plan costs in accor-1986,1985 and 1977, the Water Sys- 0 nce with the recommendations of l tem sold advance refunding bonds the plan's independent actuary. In
! totaling $66,585,000, $18,785,000 1986, no significant amendments
! and $33,625,000, respectively. Until were made to the plan.
l the bonds to be refunded are called, The actuarially computed present I interest on the advance refunding value of accumulated retirement bonds is payable from interest plan benefits attributable to the earned on securities of the United Water System aggregated
! States government purchased out of $461,000,000 and $434,000,000 at the proceeds of the sales and held in June 30,1986 and 1985, of which escrow accounts with Citibank, N. A., $459,000,000 and $433,000,000 were New York. At June 30,1986 and vested. An assumed rate of return of 1985, $85,370,000 and $31,810,000 of 8% was used in determining these 1 these escrow accounts have been off- actuarially computed values. The set against the advance refunding retirement plan's assets at market l bonds in the accompanying balance value alhicated to the Water System sheet ($l2.650,000 face value was were $397,000,000 and $313,000,000 redeemed during the year ended at such dates.
June 30,1986). After the monies in N(HE E-Commitments and the escrow accounts are applied to contingencies: redeem the bonds to be called Capital program and other-
- ($tl2,890,000 face value to be re- The Department's budget for the year ending June 30,1987 provides l
l 27 i ' __ _ _ _ _ _ _ _ _ _ _ ._ _ _ . _ _ _ _ _ _ _ _ _~ _
Report ofIndependent In our opinion, the financial state-Accountants ments examined by us present fairly To the Board of Water the financial position of the Water and Ibwer Commissioners System of the Department of Water Department of Water and Ibwer of the City of Los and Ibwer Angeles at June 30,1986 and 1985, City of Los Angeles and the results ofits operations and We have examined the balance the changes in its financial position sheet of the Water System of the for each of the three years in the Department of Water and Power of period ended June 30,1986, in con-the City of Los Angeles as of June f rmity with generally accepted 30,1986 and 1985, and the related accountmg prmeiples consistently statements ofincome, of retained applied during the period except for income reinvested in the business the changes, with which we concur, and ofchanges in financial position referred to in the preceding for each of the three years in the per- Paragraph. iod ended June 30,1986. Our exami-nations were made in accordance with generally accepted auditing Mh
/)
standards and accordingly included 7
- such tests of the accounting records and such other auditing procedures hh ( .
as we considered necessary in the Los Angeles, Califbrnia circumstances. October 10,1986 As more fully described in Note A l to the financial statements, effective June 30,1984, the Water System of the Department changed its method of accounting for unbilled revenues and the method of recognizing pur-chased water costs. 1 28
Ihwer System Statement ofIncome Year ended June 30 (In Thousands) 1986 1985 1984 Operating revenues: Sales of electric energy $1,349,579 $1,280,632 $1,170,953 Other operating revenues 8,555 7,335 ' 6,5 ' 6 Total operating revenues 1,358,134 1,287,967 1,177,469 Operating expenses: Fuel for generation 348,069 347,591 313,850 Purchased power 203,i16 181,961 169,615
~
Energy costs 551,185 529,552 483,465 Other operation 288,954 240,090 232,525 Maintenance 142,461 129,425 110,598 Provision for depreciation 107,419 105,483 98.521 Taxes on property outside the City 8,660 8,896 10,%5 Total operating expenses 1,098,679 1,013,446 936,074 Operating income 259,455 274,521 241,395 Other income-net 27,984 31,976 22,032 Income before debt expenses 287,439 3 % ,497 263,427 Debt expenses: Interest on debt 97,464 96,075 98,548 Allowance for borrowed funds used during construction (3,610) (3,208) (575) Net debt expenses 93,854 92,867 97,973 Net income $ 193,585 $ 213,630 $ 165,454 Statement of Retained Income Reinvested in the Business Balance at beginning of year $1,432,156 $1,277,393 $1,167,259 Net income for the year 193,585 213,630 165,454 1,625,741 1,491,023 1,332,713 Less-Payments to the reserve fund of the City 64,353 58,867 55,320 Balance at end of year $1,561,388 $1,432,156 $1,277,393 The accompanying notes are an integral part of these financial statements. 29
Pbwer System Balance Sheet June 30 . (In Thousands) 1986 1985 Assets Utility plant, at original cost: Production $1,379,279 $1,483,086 Transmission 501,453 508,148 Distribution 1,571,148 .1,471,489 General 235,012 210,213 3,686.892 3,672,936 Ixss- Accumulated provision for depreciation 1,157,138 1,106,NO 2,529,754 2,566,896 Construction work in progress 383,9N 89,160 Nuclear fuel, at amortized cost 30,242 -- 2,943,900 2.656,056 Current assets: Deposits with City Treasurer-Revenue fund 355,565 283,118 Bond redemption and interest funds 17,226 40,872 Cash on hand and revolving funds 1,166 1,222 Customer and other accounts receivable, less
$3,300 and $2,900 allowance for losses 140,M3 148,752 Accrued unbilled revenue 83,729 57,483 Materials and supplies, at average cost 61,820 57,149 Fuel for generation 61,819 83,851 Deferred energy costs 26,784 40,537 Prepayments and other current assets 9,397 9,569 757,549 722,553 Unamortized debt expenses 1,N5 2,118
$3,702,494 $3,380,727
- 1. labilities and Equity Equity:
Retained income reinvested in the business, per accompanying statement $1,561,388 $1,432,156 Contributions in aid of construction 84,708 79,625 1,M6,096 1,511,781 long-term debt, excluding advance refunding bonds: Revenue bonds 1,512,710 17465,200 Revenue notes 24,955 60,000 1,537,665 1,525,200 Less- Long-term debt due within one year (see beknv) 61,526 84,996 1,476,139 1,440,204 Current liabilities: long-term debt due within one year (see above) 61,526 84,996 Revenue certificates 90,000 90,0fX) Accrued interest 26,5N 23,746 Accounts payable and accrued expenses 315,519 209,934 Ovei-recovered energy costs 69,261 13,102 Extension and other deposits 17,449 6,9 M l 580.259 428,742
$3,702.494 $3,380,727 The accompanying notes are an integral part of these financia; statemem M
. . . ~ , - - - , - - - - - - - . , . - - . . - - - - - . - - . - - - - . - - -
Pbwer System Statement of Changes in Financial Pusition Year ended June 30 (In Thousands) 1986 1985 1984 l Financial resources prmided by: Operations-Net income $ 193,585 $213,630 $165,454 l Charges and credits to income not affecting wurking capital-
- Depreciation 115,599 113,328 1(M,832 l
Amortization of nuclear fuel 925 - - Other, net (32) 385 582 Resources provided by operations 310,077 327,343 270,868 [ Sale of revenue bonds 98,566 49,586 - Amount received from escrmv account 72,920 88,786 - Contributions in aid of construction 5,083 15,489 4,576 486,M6 481,2(M 275,444 Financial resources used for: Expenditures for plant and equipment 404,368 177,674 150,926 Reduction oflong-term debt 61,526 84,996 79,126 Long-term debt redeemed, including call premium 72,920 88,786 - Payments to the reserve fund of the City M,353 58,867 55,320 603,167 410,323 285,372 f increase (decrease) in working capital $(116,521) $ 70,881 $ (9,928) Increase (decrease) in components of wurking capital: Deposits with City Treasurer-Revenue fund $ 72,447 $ 71,000 $ 35,038 - i Bond redemption and interest funds (23,M6) 32,534 (7,273) Cash on hand and revolving funds (56) (5) 318 Customer and other accounts receivable (8,709) 44,738 1,054 Accrued unbill'ed revenue 26,246 (4,397) 61,880 Materials and supplies 4,671 1,919 1,515 l Fuel for generation (22,032) 6,174 (14,242) Deferred energy costs (13,753) (10,48I) (59,213) Prepayments and other current assets (172) 475 207 Net change in current assets 34,996 141,957 19,284 ? Long term debt due within one year 23,470 (5,870) (7,315) Accrued interest (2,758) (169) 8,399 Accounts payable and accrued expenses (105,585) (49,352) (28,909) Over-recovered energy costs (56,159) (13,102) - Extensionandother deposits (10,485) (2,583) (1,387) Net change in current liabilities (151,517) (71,076) (29,212) Increase (decrease) in working capital $ (116,521) $ 70,881 $ (9,928) The accompanying notes are an integral part of these financial statemenn. 2 31
Power System Notes to Financial Statements NOTE A-Summary of signifi- charged to accumulated depreciation Contributions in aid of con-cant accounting policies: when property is removed from struction- Under the provisions of The Department-The Depart- service. the City Charter, amounts received ment of Water and Rmer of the City Utility plant depreciation is pro- from customers and others for con-of Los Angeles exists under and by vided for a large portion of the facil- structing utility plant are combined virtue of the City Charter enacted ities by the 5% sinking fund method with retained income reinvested in 1925 as a separate proprietary based on the estimated service lives. in the business to represent equity agency of the City. The Rmer Sys- The straight-line method is used for for purposes of computing the tem is responsible for delivering major projects completed after Rnver System's borrowing limits. electric power to the City's July 1,1973 and for all office and Accordingly, contributions in aid inhabitants. shop structures, related furniture of construction are shown in the Financial statement presenta- and equipment, and transportation accompanying balarce sheet as an tion-The financial statements of and construction equipment. The equity account and are not offset the R)wer System are presented in aggregate provision was 3.27%, against utility plant; depreciation conformity with generally accepted 3.24% and 3.13% of average depre- provided for the related utility plant accounting principles, and substan- ciable plant for the years ended June is expensed. tially in confbrmity with accounting 30,1986,1985 and 1984. Nuclear Revenues-The Rmer System's principles prescribed by the Federal fuel is amortized and charged to rates are fixed by the Department Energy Regulatory Commission and Fuel fbr Generation on the basis of and approved by the City Council. the California Public Utilities Com- actual thermal energy produced rela- Revenues include amounts resulting mission except for the method of tive to total thermal energy expected from an energy cost adjustment fbr-accounting for contributions in aid to be produced over the life of the mula designed to permit the full of construction described behiw. fuel. A contract has been entered recovery of energy costs The The Department is not subject to into with the United States Depart- Department projects these costs to regulations of such commissions. ment of Energy for the disposal of establish the energy cost recovery Utility plant and depreciation- the spent fuel. component of customer billings. The costs of additions to utility plant Nuclear decommissioning- Any difference between amounts and replacements of retired units of Decommissioning of the Palo Verde billed and actual energy costs results property are capitalized. Costs Nuclear Generating Station in over- or under-recovery of energy include labor, materials and allo- (PVNGS) is projected to commence costs, which are adjusted in subse-cated indirect charges such as engi- in approximately 35 to 40 years. The quent billings. neering, supervision, transportation Rmer System is providing fbr esti- Under the rate ordinance approved and construction equipment, retire- mated future decommissioning costs August 30,1983, the Rmer System ment plan contributions and other over the life of the PVNGS through changed its method of recognizing fringe benefits, and certain adminis- annual charges to expense. energy costs to expense and bill trative and general expenses. Deposits with City Treasurer- these costs in the period incurred; For projects over a specified dollar Of the deposits with the City Trea- previously, billable energy costs amount, the Ibwer System capital- surer, $337,034,000 and were deferred until actually billed. izes an allowance ihr funds used dur- $279,025,000 at June 30,1986 and Also, to provide a better matching of ing construction equivalent to the 1985 were invested in short-term costs and revenues, effective June cost oflong-term debt incurred to securities under the City Treasurer's 30,1984, the Ibwer System changed finance plant under construction. pooled investment program, its accounting policy fbr recognizing Research and development costs whereby available funds of the City revenue to a method which provides directly related to current and future and its independent operating ihr accruing estimated unbilled reve-construction projects are capitalized departments are invested on a com- nues fbr energy sold but not billed at and all other such costs are expensed bined basis. These investments are the end of a fiscal period; previ-as incurred. The cost of relatively valued at cost, which approximates ously, revenues were recognized minor replacements is included in market. when billed At June 30,1984, as maintenance expense. The original Fuel ihr generation-Coal required by the rate ordinance, an cost of property retired, together inventories are stated at average amount of deferred energy cost with removal cost, less salvage, is cost. Fuel oil inventories are stated equal to the accrued unbilled reve-at cost, using the last-in, first-out nues was charged to expense and, method. therefbre, has no etfeet on net 32
income. Deferred energy costs will At June 30,1986 and 1985, the approximately 74% of the plan's be billed in future periods. Rwer System's investment in such total costs for the years ended June The Rmer System sells electric projects totaled $853,748,000 and 30,1986,1985 and 1984 amounting energy to other departments of the $671,917,000. to $90,677,000, $82,983,000 and City tt regular rates provided in N(YrE D-lamg-term debt: $86,744,000. These costs include the ordinance. Long-term debt outstanding at amortization of prior service costs Shared operating expenses- June 30,1986, consisted of revenue generally over a 30-year period end-The Ruer System shares certain bonds and notes due serially in vary- ing June 30,2003. The Department administrative functions with the ing annual amounts through 2026. funds retirement plan costs in accor-Department's Water System. Gener- Interest rates, which vary among dance with the recommendations of ally, the cost of these functions is individual maturities, averaged the plan's independent actuary. In alk)cated on the basis of benefits approximately 6.56% and 6.29% 1986, no significant amendments provided to the Systems. at June 30,1986 and 1985. The were made to the plan. Debt expenses-Debt premium, revenue txmds are callable generally The actuarially computed present discount, and issue expenses are ten years after issuance. Scheduled value of accumulated retirement deferred and amortized to income principal maturities during the plan benefits attributable to the over the lives of the related issues. five years succeeding June 30,1986 Rmer System aggregated Payments to the reserve fund of are $61,526,000, $67,916,000, $1,151,000,000 and $1,084,000,000 at the City-Under the provisions of $53,545,000, $51,930,000, and June 30,1986 and 1985, of which the City Charter, the R>wer System $53,180/XX), respectively. $1,147,000.000 and $1,080,000,000 transfers funds at its discretion to in the fiscal year ended June 30, were vested. An assumed rate of the reserve fund of the City. Such 1977, the Rmer System sold return of 8% was used in determin-payments are not in lieu of taxes advance refunding tmnds totaling ing these actuarially computed val-and are recorded as distributions of $161,700,000. Until the bonds to be ues. The retirement plan's assets at retained income. refunded were called, interest on the market value allocated to the Rmer N(IFE H-Revenue certificates: advance refunding bonds was pay- System were $992,000,000 and At June 30,1986 and 1985, the able from interest earned on securi- $783,000,000 at such dates. average interest rate of revenue cer. ties of the United States Government N(TIE G-Commitments and tificates outstanding was 4.55 % and purchased out of the proceeds of the contingencies: 4.80% with maturities ranging from sales and held in escrow accounts Capital program and other-19 to 152 days and 34 to 180 days, with Citibank, N. A., New York. At The Department's budget fi)r the respectively. The Department has an June 30,1986, all refunded bonds year ending June 30,1987 provides unsecured standby line of credit of had been called and the related for capital expenditures of approxi-
$90/XX)JXX) which can be used if the escrow accounts liquidated; the mately $478,000,000 in the Rmer certificates cannot be refinanced as advance refunding bonds are now System. Also, the Department has they mature. payable from Rmer System reve- budgeted payments of $67,913,000 N(yTE C-Jointly-<m ned electrie nues. During the years ended June fiir the year ending June 30,1987 utility plant: 30,1986 and 1985, $70,800,000 and from the Ruer System's revenue The Rmer System has an undi. $86,2001X)0 face value of the fund to the reserve fund of the City.
vided interest in several electrical refunded b<mds were redeemed. bmg-term purchased p<mer generating stations and transmission N(YTE E-Shared operating and transmission contracts-The systems which arejointlysuned expenses: Department has entered into a num-with various utilities. Each partici- Operating expenses shared with ber of energy and capacity contracts pant provides its own construction the Water System were $216,276,000, which involve substantial commit-linancing. The Rmer System's pro- $197,265,000 and $165,089fXX) fiir ments. These include an agreement portionate share of construction and the years ended June 30,1986,1985 with the Intermountain Rmer improvement costs is included in the and 1984, of which $141,929fXX), Agency (IPA), a Utah State Agency, appropriate categories of utility $ 130,126.000 and $114,056fXX) were and two agreements with the South-plant. The Rmer System will incur alh>eated to the Rmer System. ern Califi>rnia Public hmer Author-certain minimum operating costs on N(YrE F-Employees' retirement ity (SCPPA), a Califlirnia Public jointly-owned facilities, w hether or plan: Authority. Under the IPA agree-not it is able to take delivery ofits The Department has a funded con. ment, as amended, the Rmer Sys-share of energy generated. The pro- tributory retirement, disability and tem has committed to purchase portionate share of these expenses death benefit insurance plan cover. 62.89, of which 44.69 is a "take or incurred is included in the appropri- ing substantially all of its employees. pay" obligation. of,the energy gen-ate categories of operating expenses. The Rmer System was alhicated 33
erated by the Intermountain Rmer Report ofIndependent Project (IPP), a coal-fueled generat- Accountants tng station that became operational To the Board of Water July 1,1986. At June 30,1986, IPA and Rmer Commissioners - . had issued $5,120,142,000 of Rmer Department of Water Supply Revenue Bonds and had and Ibwer made expenditures of approximately City of Los Angeles
$2,592,000,000. Subsequent to June We have examined the balance 30,1986, IPA issued an additional sheet of the Rwer System of the $1,635,000,000 of Special Obligation Department of Water and Ibwer of Crossover Bonds, the proceeds of the City of Los Angeles as of June which will be used to redeem 30,1986 and 1985, and the related $1,532,000,000 of Rmer Supply statements ofincome, of retained Revenue Refunding Bonds. income reinvested in the business Under a power sales agreement and of changes in financial position with SCPPA, the Ibwer System will for each of the three years in the per-purchase 67 % of SCPPA's entitle- iod ended June 30,1986. Our exami-ment to the Rdo Verde Nuclear nations were made in accordance Project. At June 30,1986, SCPPA with generally accepted auditing had issued $1,033,000,000 of Ibwer standards and accordingly included Project Bond Anticipation Notes and such tests of the accounting records ibwer Project Revenue Bonds and and such other auditing procedures had made expenditures of approxi- as we considered necessary in the mately $584,873,000. circumstances.
Under a transmission service con- As more fully described in Note A tract with SCPPA, the Ibwer System to the financial statements, effective is to purchase 59.5% of the capacity June 30,1984, the Ibwer System of of the Southern Transmission Sys- the Department changed its method tem, a 500kV DC transmission line, of accounting for unbilled revenues which will transmit energy from and the method of recognizing IPPtoSouthernCalifornia. At energy costs. Adoption of these new June 30,1986 SCPPA had issued accounting policies, with which we
$1,058,000,000 of Transmission concur, had no efrect on net income Project Bond Anticipation Notes and for 1984.
Transmission Project Revenue in our opinion, the financial state-llonds and had made expenditures of ments examined by us present fairly approximately $636,706,000, the financial position of the Rmer All these agreements require the System of the Department of Water Rmer System to make certam mim- and Rmer of the City of Los mum payments whether or not Angeles at June 30,1986 and 1985, power is produced or it is able to and the results ofits operations and take delivery of the power. Mim- the changes in its financial position mum payments are based upon debt for each of the three years in the service requirements plus produc- period ended June 30,1986, in con-tion costs and, therefore, cannot formity with generally accepted presently be determmed, accounting principles consistently Litigation- A number of claims applied. and suits are pending against the Department for alleged damages to persons and property and for other QM alleged liabilities arising out of its , operations. In the opinion of man-agement, the uninsured liability ' Q4 l [ under these actions would not mate-rially affect the Rmer System's Los Angeles, California October 10,1986 financial position as of June 30 1986. l 34
i Water Sales Commercial Power City Other . All Classes Residential & Industrial irrigation System Governmental Governmental Combined itevenue from sales of water: Year ended June 30-1986 $ 84,147,000 $122,917,000 $305,000 $ 783,000 $5,321,000 $6,960,000 $220,433,000 1985 78,960,000 111,082,000 324,000 651,000 5,880,000 6,145,000 203,N2,000 Increase (decrease) 5,187,000 11.835,000 (19,000) 132,000 (559,000) 815,000 17,391,000 Percent increase (decrease) 6.57 10.65 (5.86) 20.28 (9.51) 13.26 8.57 Unit of 100 cubic feet sold: Ye:r ended June 30-1986 102,935,903 150,414,530 783,087 1,001,851 8,789,111 9,178,955 273,103,437 1985 104,339,796 146,600,867 920,556 889,851 10,081,941 9,055,702 271,888,713 incre se(decrease) (1,403,893) 3,813,663 (137,469) 112,000 (1,292,830) 123,253 1,214,724 Percent increase (decrease) (1.35) 2.60 (14.93) 12.59 (12.82) 1.36 0.45 Average hilling price per 100 cubic feet: Ye:r ended June 30 1986 0.8175 0.8172 0.3895 0.7816 0.6054 0.7583 0.8071 1985 0.7568 0.7577 0.3520 0.7316 0.5832 0.6786 0.7468 Increr.se (decrease) 0.0607 0.0595 0.0375 0.0500 0.0222 0.0797 0.0603 Percent increase (decrease) 8.02 7.85 10.65 6.83 3.81 11.74 8.07 Aserage number of customers (culculated on no, of billings): Ye:r ended June 30-1986 455,553 169,388 32 366 3,031 1,735 630,105 1985 462,384 162,631 35 4N 3,719 1,180 630,353 Incre se(decrease) (6,831) 6.757 (3) (38) (688) 555 (248) Percent increase (decrease) (1.48) 4.15 (8.57) (9.41) (18.50) 47.03 (0.N) Aserage annual consumption per customer (in units of 100 cubic feet): Ye:r ended June 30-1986 226 888 24,471 1985 225 901 26,302 Increase (decrease) 0 (13) (1,831) Percent increase (decrease) 0.00 _ (l.44) (6.96) 35
Pbwer Sales Public Street and Other liighway Water Electric All Classes Residential Commercial Inc'ustrial Lighting System Utilities Combined Revenue from sales of electric energy: Year ended June 30-1986 $379,488,000 $691,897,000 $240,290,000 $22.120,000 $8,050,000 $ 7,734,000 $1,349,579,000 1985 372,959,000 629,013,000 230,187,000 21,595,000 7,524,000 19,354,000 1,280,632,000 Increase (decrease) 6,529,000 62,884,000 10,103,000 525,000 526,000 (l1,620,000) 68,947,000 Percent increase (decrease) 1.75 10.00 4.39 2.43 6.99 (60.04) 5.38 Kilowatt hours sold (in thousands): Year ended June 30-1986 5,499,851 10,279,185 3,818,084 308,167 129,389 215,819 20,250,495 1985 5,545,726 9,754,748 3,818,476 309,679 126,225 337,857 19,892,711 Increase (decrease) (45,875) 524,437 (392) (I,512) 3,1M (122,038) 357,784 Percent increase (decrease) (0.83) 5.38 (0.01) (0.49) 2.51 (36.12) 1.80 Average hilling price per kilowatt hour: Year ended June 30-1986 0.0690 0.0673 0.0629 0.0718 0.0622 0.0358 0.0666 1985 0.0673 0.0 M 5 0.0603 0. % 97 0.0596 0.0573 0.0644 Increase (decrease) 0.0017 0.0028 0.0026 0.0021 0.0026 (0.0215) 0.0022 Percent increase (decrease) 2.53 4.34 4.31 3.01 4.36 (37.52) 3 42 Average number of customers (calculated on no. of billings): Year ended June 30-1986 1,078,074 157,484 20,233 5,806 369 6 1,261.972 1985 1,069,622 155,176 20,434 5,595 372 7 1,251,2 % Increase (decrease) 8,452 2,308 (201) 211 (3) (I) 10.766 Itreent increase (decrease) 0.79 1.49 (0.98) 3.77 (0.81) (14.29) 0.86 Aserage annual consumption per customers (in l kilowatt hours): Year ended June 30-1986 5,102 65,271 188,706 1985 5,185 62,862 186,869 Increase (decrease) (83) 2,409 1,837 Percent increase (decrease) (1.60) 3.83 0.98 36 1
For additional copies contact Public Affairs Division Room 1509, P.O. Box 111 Los Angeles, CA 90051 (213) 4 81-6114
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