ML20214H299
| ML20214H299 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 12/31/1986 |
| From: | Mccaskill R, Parker W BRAZOS ELECTRIC POWER COOPERATIVE, INC. |
| To: | |
| Shared Package | |
| ML20214H218 | List: |
| References | |
| NUDOCS 8705270343 | |
| Download: ML20214H299 (50) | |
Text
.
- wmm, nn -
- q. v ;,
..-3; i
k.'
U. a' a
O lxsA *Gt,.
s,.
...Q'l t '.'J - }{,~AbJn, '~ie
. c
~
y,..
r, e
4',.
%'?c v
4 4
kp..
I p
l l
l l
i BRAZOS ELECTRIC POWER COOPERATIVE, INC.
1986 ANNUAL REPORT 8705270343 870519 PDR ADOCK 05000445 I
THE BRAZOS SYSTEM -
Brazos Electric Power Cooperative. Inc. is a
- generation and transmission cooperative which provides electric power to its 20 member distribution cooperatives whose service areas cover 56.777 square miles of Texas. Brazos and its members comprise the Brazos System. Brazos also provides electric power to the municipal systems of the cities of Bartlett, Granbury, Hearne Sanger, Seymour, Weatherford and whitesboro and to Texas A&M University. Brazos is a member of the Texas Municipal Power Pool with the cities of Bryan, Denton, Garland and Greenville. The combined generation capacity of the Texas Municipal Power Pool is 2.063 megawatts.
MEMBER COOPERATIVES Bartlett Electric Cooperative. Inc.
B-K Electric Cooperative. Inc.
Belfalls Electric Cooperative. Inc.
Comanche County Electric Cooperative Assn.
Cooke County Electric Cooperative Assn.
Denton County Electric Cooperative. Inc.
Dickens Electric Cooperative. Inc.
Erath Count'; Electric Cooperative Assn.
Fort Belknap Electric Cooperative Inc.
Gate City Electric Cooperative. Inc.
llamilton County Electric Cooperative Assn.
Hill County Electric Cooperative. Inc.
J-A-C Electric Cooperative. Inc.
Jo'anson County Electric Cooperative Assn.
Mct.ennan County Electric Cooperative. Inc.
Mid-South Electric Cooperative Assn.
Navarro County Electric Cooperative, Inc.
Navasota Valley Electric Cooperative, Inc.
Tri-County Electric Cooperative. Inc.
Wise Electric Cooperative. Inc.
MunicipalCustomers Bartlett Granbury Hearne Sanger Seymour Weatherford on The cover, The nver that gave Brazos Electric its name also Whitesboro
,,,,,g,g,y,,,,,, p,,,,,,,,s,,,,,,,,,,,g
' ' W '" " '" " I" ""! S'"d
Other Moms Sheppard Dam on Possum Kingdom Lake Texas A & M University contmues to provide power for the Brazos system.
FINANCIAL AND OPERATING HIGHLIGHTS 1986 1985 Total Operating Revenues (000's)
$185.293
$200,430 Total Operating Expenws (000's)
$167,950
$185.243 Operating Margins (Loss)(000's)
$ 17,343
$ 15,187 Total Assets (000's)
$474,308
$444,407 Total Equity (000's)
$ 68,321
$ 47,253 l
TimesInterest Earned Ratio (TIER) 1.62 1.51 Debt Service Coverage (DSC) 1.64 1,54 Energy Sales (Megawatt hours)
Member Cooperatives 3,217,290 3,033,643 MunicipalInterchange Customers 352,870 386,707 Economy Sales 261,915 523.226 Total 3,832,075 3.943.576 Peak Demand (Megawatts) 764 721 AVERAGE POWER COST TO REVENUES & EXPENSES MEMBERS (millsperKWH)
(in $ millions) g O
2 E~
3:
5 4
O O m
a
=
a z
2 3
~i g
O Revenues o
a
..'J Expe m
'82 '83 '84 '85 '86
'82
'8) '84 '85 '86 ENERGY SALES NATURAL GAS COST ($ per MCF)
(in millions of megawatt hours)
(average, including transportation)
N E E o
R 2
'82 '83 '84 '85 '86
'82 '83 '84 '85 '86 Member Cooperatives MunicipalInterchange Customers PEAK DEMAND NET UTILrrY PLANT e
(megawatts) g On $ millions) g e
Z S
2 rk
'82
'8 )
'84
'85
'80
'82 '83 '84 '85 '86
I
^ '
1/y A
1 Executive Vice Presiden t and General Manager Richard E. McCaskaland President Wdliam G. Parker.
The Brazos River and her tributaries cut a broad path through Texas. Over thousands of years, this watershed encouraged man's existence in the area.
More recently, the Brazos was instrumental to the development of Texas as a republic and, later, a state. Water, essential anywhere, is precious in the drier climate of the southwest. After water and food, perhaps energy is our next most vital need.
Brazos Electric Power Cooperative took its name from this same river whose watershed cuts a broad path through our service area. When we were formed in 1941 there was the river, but little light in her rural sweep. The job of our predecessors was to bring economical and reliable power to our member cooperatives to allow them to effectively light the area. That dream and much more have been accomplished. As the river has supported development of the area, so has electrification.
We use the Brazos River as the theme of this year's annual report because her course and contribution are linked with ours and our consumers'.
We commend our superb employees for their enthusiastic and persistent efforts throughout 1986. They benefited our consumers with a third consecutive decrease in the annual average cost of wholesale power. In that period, we have lowered the cost a total of 10 percent. When today's dollars are adjusted for the mild inflation of the past three years, the decrease is effectively 15 percent.
., +. ~ : x.
f,{
.wm_1 2
Particularly satisfying this year beenlooking for additionallong-To limit our peak demand, have been our gas operations.
term reserves. Additionally, we we have begun considering a Using our 24-mile naturalgas have been studying delivery sys-demand-side management pro-pipeline, we have aggressively tems to make more economical gram for Brazos and its members.
capitalized on opportunities use of such reserves.
" Demand-side management"is provided by the gas spot market.
These activities seek economi-influencing or controlling system our efforts saved our members cal fuelsupplies for ourgas-fired load and marketing the methods and municipal customers plants for the next decade.
to do so. The Board of Directors
$12,182,000 in 1986 and Arranging for sufficient genera.
has appointed a Marketing and
$17,461,000 in the pipeline's tion plant capacity is another Load Management Committee to 28 months of operation.
major effort. Presently, our power investigate what Brazos should do we sense a decline of over-supply needs are greater than the in these areas. We are enthusiastic supply conditionsin the natural capacity that we own and have about the interest of our members gas market. Prices have ceased to underlong-term contract. We and about the possibilities that fall, stabilizingin the range of have made up the difference by demand-side management holds
$1.40 - $1.60 per mmBtu. Last buying generation capacity at for the entire Brazos System.
summer, some producers " shut economical rates through our We are particularly pleased to in" their gas rather than sellit at membership in the Texas Munici-welcome Dickens Electric Cooper-lower prices. Gas prices may fall pal Power Pool. However, by 1989 ative of Spur. Texas, and Gate City again before they rise. but fore-or 1990, the Poolwill no longer Electric Cooperative, of Childress, casters are beginning to predict have excess capacity. We will Texas, to Brazos. On April 1, these the end of the glut. Some foretell then need to increase our own first additions since 1950 brought the end within two years. Other plant capacity, purchase capacity our membership to twenty. Ned feel there willbe subsequent such as cogeneration, limit the Ward, a rancher and businessman shortages.
peak demand en our system. or a from Aspermont, and James i
To take advantage of the favor-combination thereof.
Driver, manager of able market conditions, we have
L
~
L Gate City Electric, were elected In ourearly years, we had a Another trendis consolidation
~ directors to represent these new friend who helped us fight for the of utilities. Investor-owned members.
well.being of our consumers. W.R.
utilities with diminishing con-One of our more serious chal-(Bob)Poage, former Congressman struction programs are generating 1:nges hasbeen ourinvolvement from CentralTexas. We were sad.
large cash reserves. Looking for
. in the Comanche Peak Nuclear dened by theloss of Chairman ways to earn a return on these Plant Project. We began negotla-Poage on January 3,1987 and we assets, some are movinginto non-l tionswith Texas Utilities Electric dedicate our annualreport to the utility fields. Others are trying to l
Company (TUEC)in February 1985 memory of thislongtime friend of buy cooperatives and smallutili-tolimit ourinvestment in the ruralelectrification, ties. We, ourselves, were
. project. In December 1985, we The passage of time brings approached with an expression of i
agreed on a proposed settlement, changes of many natures. Our interest, though there was no SPecificoffer. Afterreview,the subject to approvalof the Rural industry and its operating envi.
Electrification Administration.
ronment are becoming more B ard elected not to pursueit at jl On May 29 while REA was competitive and dynamic. Two or that time.
reviewingtheagreement TUEC three years ago, deregulation was In 1985, the state legislature sued the three minority owners-an issue to be considered. Now,it appointed the Joint SpecialCom-
)
Brazos, Tex-La Electric Coopera-has begun.The first signs were mittee on Cogeneration. Its mis-si n was t examinec generation tive, and Texas Municipal Power the efforts ofindustrialcustomers i
Agtncy. This unexpected suit to find othersources of power and smallpower production as i
endtd our consideration of the supply, be they cogeneration, self. C mPonents of the state's electric l
proposed settlement agreement generation,orotherutilities. A Power supply, theirimportance to i
' and further negotiations.
more recent development is the industry, and the consequences of The suit contends we have not plan of alarge utility to market current state policy.Throughout met our obligation to pay our excess powerdirectly to cucm-1986, we participated in the forum 4
proportionate share of the ers outsideits service areas.
Provided by this committee.The remaining construction costs Additionalissues facing us stem committee madeits report to the l
according to the Comanche Peak fromlegislative and regulatory legislature early in 1987, and
}
Joint Ownership Agreement.
change.of major concern is the related bills are now beingintro-TUEC seeks a declaration that it changing nature of the Rural Elec-duced. We see benefits to coge-neration,but we have also seen j
has not failed to performits obli-trification Administration.The gationsunder the Agreement.
present administration has repeat-regulati ns to encourageits devel-In June, we filed a responding edly attempted to reduce Federal Pment that canincrease costs to ur c nsumers. So, we are work-countersuit. We contend that, support to ruralelectrification l
among other things, the Coman-with a stated gor.1of phasing out ing to ensure thatlegislation reflects the interests and needs of che Peak project has not been most functions of REA by 1992.
completedin a timely fashion at a For Brazositself, the primary prob-1 urc nsumm.
reasonable cost.
Iem is to operate efficiently It's a challengingand exciting The cohesiveness and single-within the ever-changing rules.
environment. With change comes nessof purpose of our directors We remain confident that we the opportunity to take advan-and members on thisissue has could obtain different sources of tage ofit. We will.
j been superb. We have confidence financing and we are keeping our-f) l In our case, We will do allin our selves prepared for that possibil-gessg/iM,
power to prevent any unreasona*
Ity. For our members, the severity ble plant costs from being shoul-oflosing REA financing would
[h',
dered by our 229,000 consumers.
vary with their financialstrength.
Further discussion and review of density ofconsumers, and related gg g4 thisimportant issue is contained factors.
in our Report on Operations.
Richard E. McCaskill Executive Vke President andGeneralManager
...... - ~ _ -... _.. -. - - - -... -.... ~. - - - -...
_. _. -.. -.. _ - _ -. -. _. ~ _ _..
i i
.~
^:
l
,v.
..s i
.. t*
l 4
t 4
1 The landalong the Brazos River has many faces.
From the dry redsands of the Texas Panhandle to the lush. fertile farmlandin her southemmost reaches, the Brazos River valley has been a wellspring ofprospenty.
l I
f i
l
?
Opposite Page I
The Brazos River village ofOld Washington. where i
Stephen F. Austin hrst settledin 1321, was the l
location ofone of the hrst feny crossings of the river. It was also the home of the Texas Declaration ofIndependence in 1830.
l l
i i
i
SALES AND GROWTH Last year we reported withholding refusing" to make required construction payments and construction payments. It asks the Our electric revenucs totalled negotiating with Texas Utilities court to find, among other things,
$184,746,114. The 7.6 percent Electric Company (TUEC). which that the project manager has reduction sincelast year was passed serves as the project manager and our operated prudently, that on to our consumers and was due tc, agent under the Comanche Peak Joint it has adhered to the requirements of decliningcosts of both fueland Ownership Agreement.
the Joint ownership Agreement,and economy energy purchases. While By early 1985, the project cost thatit has been timely in pursuing firm kilowatt hour sales (to member estimate had increased six-fold.
construction and obtaining a license.
cooperatives and municipal Construction was more than six years We think that the project has not increased 4.4 percent, behind the schedule we had been been completedin a timely fashion customers) decreased 2.8 percent to given in 1979. When we ceased and at a reasonable cost. In June we totalsales 3.832,075 megawatt hours. This making construction paymentsin responded with a suit in State District decrease was caused by a reductionin htay 1985,it was because the project Court in Travis County, Texas, for sales to other utilities, a reflection of had not been brought into operation breach of contract and numerous economic conditions in the state.
at a reasonable cost.
other grounds. Subsequently, we Sales to membersincreased 6.1 We continued our negotiations filed a like response to the Dallas suit.
percent primarily from the additions until December 1985 when a Presently, the litigationis being of Dickens Electric and Gate City Pmposed agreement was reached.
pursued onlyin the Dallas court.
Electric to our membership. Our We then sought REA approval. REA We have confidencein our current study of power requirements reviewed the agreement and position. In our negotiations for indicates that our energy growth will requested some changes which we ownership,we were told that the average about 7.8 percent through made and TUEC accepted. In January project's total cost would be $1.7 the end of the decade.
1986, we returned the proposed billion. It has grown to about $7.6 The peak demand on our agreement to REA forapproval. We billion. Unit No. I was to begin transmission system increased 6.0 exerted considerable effort commercialoperationin 1981 and percent to 764 megawatts from 721in attempting to facilitate the Unit No. 2 in 1983. Today, those 1985. We had a productive yearin understanding of govemment dates are projected to be 1989 or construction to meet the growing officials and gain their approval. From later. We bought 3.8 percent share demand. We added 113,814 KVA to our viewpoint, the agreement was in (87.4 megawatts) of the project when our delivery substation capacity, an the bestinterest of both Brazos and our cost was estimated to be $96 8.5 percent increase. Additionally we the U.S. Govemment. It would have million, including borrowing costs.
5 constructed 20 miles of new 138 KV limited our investment in the project Based on the present project cost transmissionline and converted 15 and made additional non-nuclear estimate and schedule, our cost miles of otherline to 138 KV. hiuch of generation capacity available to us.
would be more than $404 million.
this work wasin the vicinity of the For the government,it would have Brazos presently has about $232 Dallas-Fort Worth metroplex where Protected the federal mortgage to us.
million invested in the project's two most of our growth continues to on htay 29, an unexpected event units.
occur.
stopped further action on the GAS OPERATIONS proposed agreement. TUEC filed a gO A C EPEAKNUCLEAR suitin the State District Court in We reported that our 24-mile Dallas County, Texas, naming the natural gas pipeline has enabled us to The Comanche Peak Nuclear Plant three minority owners-Brazos Tex-save our members $12,182,000 this Pro ect has been a majorissuein 1986.
I.a Electric Cooperative, and Texas year. We now have spot market in d ealing with it, our sole objective hiunicipalIbwer Agency-as co-suppliers bid monthly to meet our has been and willbe to ensure that defendants.
gas needs above the usage met by our our 229.000 consumers do not have to The suit contends that Brazos has long-term contracts. We then buy gas bear any unreasonable plant costs.
breached the contract by "failing and from the suppliersin the most ceconomicalquantities.
?
b=~.
6 % 2 S M W lQ@ Q.
$d?l D*
a m: ; - %ww 2
% h l $ ' ~' ~'*: iO h N-:U.:
O : '. %
1
-$.N@fiMM5MEbiYEOMENcME5fN*
erga _ vgym }g,.y
- m. g 4
%<gE as h;sz
~ %LdQ pm pyyv s
,% d yn
.s hw q.5-C._,. -
=,
Ng d
,m
'w d s e
c%' y%
s 4
[N g>
l The spot market has evolved to the state I
where the suppliers may offer " blocks" of gas at i
different prices depending on their arrangements with producers. To optimize costs and reliability, we have installed a computer at l
the Miller Plant to control the quantity of gas j
taken from each source according to price and i
contractual conditions.
We saw prices decrease to the point where, at times, producers in the area ceased to sell their j
gas. Such action indicates at least a temporary low in market prices. To pre are for the future while the market is favora e. we have been
.i"MF looking for additional long-term gas supplies.
e
' ~ '
Initially, we found that "long-term" meant one year. Producers were willing to propose
+
contracts of five-years' duration, but vith the price open for negotiation each year and the i
l contract cancellable by either party on short notice. Now, we are beginning to see more producer interest in longer-term arrangements.
3 j
We have also been studying the delivery
)
systems that would allow best utilization of the I
long-term supplies we are investigating. One of our studies is evaluating construction of a gas p!pehne to the North Texas Plant site from one of severalintra-state pipelines.
l t
p,.-.,-
t i
l i
i i
i l
t I
l l
I l
l 4
1
. m.,n
.q.
..m,.
- s. -x
~
.. J
_
- 4,,
-=,
'.f t;
...e.
&;&y i.,
}f
.m 4
p
- i
' (. 4
-,3f Q. 4 e;
. e, ;d; p.'-
m j
l,'
, y.$, :
T 4
.. 3
=e-
=j
+
www,.a. n. :.~ n. n m,,,.
_,4 s
.f-
.,,.7 q nN..
- 4. - -
.~
- 1 7.~.w....
.. r,.;;;. a
- ~
e s,:; -
,... _ _ *pr ~-
D' p+ >' it. (lY:). f w..N ^.
l*
- ': h,4
, f ? >. <..,
- y, $.E -
' i,.vdd.N. _
M.fONS[UQ.i.
k 1 34 g
.e.g.
myy;q
..;,. e -
4A g;j;w..r:.: c
~
~,,'
=
, ".w;... =..
Lf=s Hww %j
.3 'f7. - -
- ...;?..+.- p_ &; a ?g s!.,.ti;dGi:' m;.
e m
p :Q.
,s
&r l
~ :);.> :.
sq' y., _,.. M.._.... 3, 3..g. '.i
...m r
x.
.....s c,, -,3 -.
y
<=
..~.: --
j-L -
sh g.
'n ' ' **),j
',,p. i.' *.*
3 t % *r '
- e s
ge.
-v
.-3' ". y
- p. -., p s:;,.'a
~ * * :.
g,
- v
~
y 4
I i
A rocky stream bed near Mineral Wells. Texas. In some areas the Brazos River has a southern appearance; in orhers. a western look.
I i
The gas pipeline presently serving the plant can no longer provide a flow of gas sufficient for the plant to operate at full capacity. We will i
)
increasingly need this capacity as our load grows j
for the rest of the decade. Moreover, the plant site is a candidate fer gas combustion turbines j
should we choose them to provide peaking capacity. At this point in our evaluation,it i
appears that the economic justification of the new pipeline is not as strong as the operational need. So, we are reviewing other options, too.
Another matter under consideration is the practicality and feasibility of acquiring a gas i
reservoir. As we look for long term sources of l
natural gas, one constraint on our negotiations is j
the large variation, both easonal and daily, in our gas demand. Suppliers are looking for a steady income to Justify their investment.
The more variable our demand, the more unfavorable will be the terms they offer us. A reservcir would allow placing a more constant demar d on suppliers. Gas would be stored in it during periods oflow usage and withdrawn when our demand is high. Our investigations are still preliminary.
GENERATION CAPACITY PLANNING j
l We have continued to refine evaluations of 8
how we will meet the demand on our system in i
I ks the next few years. In 1986, we purchased l
generation capacity at economical rates from the Texas Municipal Power Pool, of which we are a member. We estimate that by 1989 or 1990, the Pool will no longer have excess capacity to sell. We will then need to add or purchase
(
capacity orlimit our peak.
i We have studied cogeneration and gas turbines as choices for meeting the system's peak demand. To date. cogenerators have not been willing to consider an agreement for l
peaking power and consequently have not been
(
able to make an economical offer. Gas turbines (somewhat like jet engines connected to a i
generator, but muffled to reduce noise) would l
give us the required capacity at low capital cost.
They would be fueled by natural gas for their short periods of operation each year. Distillate (light) oil would be a back-up fuel.
To limit the increase in our peak demand, we began considering a demand-side management program as discussed in our Report to Members There are techniques with potential for us to gain substantial control of our peak load growth and load factor. The results can improve rates, competitive position and relationships among Brazos. Its members and their consumers.
NewMeuseRs improv2 and incr:ase th2 arra cov: rag 2 of our On April 1 Dickens Electric Cooperative and c mmunications. Atyear-end,weinitiateda right-of-way clearing pmgram that should also Gate City Electric Cooperative joined Brazos.
Dickens, with headquarters in Spur, Texas, improve reliability.
Overall, we are n t satisfied with our record serves about 4,700 consumers in Crosby.
f utages this year. We have 184 substations j
Dickens. Garza, Kent, King. Motley, and Stonewall counties. Dickens has 56 miles of 69 serving ur customers. Our goal is to reduce KV transmission line and seven substations. It average annua utage time to kss 6an 30 has 2,697 miles of distribution line. The minutes per substation. An unfortunate cooperative's peak demand is 17.5 megawatts weather-related casualty to another utility's with a very high load factor,88 percent, due to transmission line added 11 minutes to this year's oil fieldload.
average figure. The line fell, broken by a Gate City is headquartered in Ch;ldress, tomado, and created numerous outages at points where it crossed our transmission lines.
Texas. It serves about 1,800 consumers through 1.375 miles of distribution line in Childress.
The recent history ofoutagesis:
Cottie Dickens, Foard, King. Hardeman, Hall.
YEAR AVERAGE ANNUAL and Motley counties. One consumer of substotion outoge particular note is the historic 6666 Ranch (read knute )
"four sixes"). At one time one of the largest 1981 87.00 ranches, it is now a highly innovative operation 1982 100.00 that has diversified into such areas as raising 1983 61.45 registered. quarter horses for racing. Gate City 1984 60.44 has th.ee distribution substations. The 1985 47.96 cooperative's peak demand is 6.0 megawatts.
1986 58.60*
With the addition of these cooperatives, the Brazos System now serves approximately
'67.20 (including new, off-system load) 229,000 consumers in 66 counties covering 56,777 square miles of Texas.
We are making steady progress but have 9
much workleft.
Three other West Texas cooperatives considered membership in Brazos, but elected ECONOMIC DISPATCHING OPERATIONS not to request it at the time.
c ey ganin 1982. economic PRODUCTION dispatching operations within the Texas During the year, we initiated a plant life Municipal Power Pool have saved Brazos extension and betterment study for ourlargest approximately $10 million. In 1986, the smaller natural gas-fired plant, R.W. Miller. This study is differential between natural gas and lignite costs investigating ways to upgrade the plants' three limited savings to approximately $500,000. The boilers and primarily their tubing (in which benefits of the program will continue at varying water is heated to steam). Our system's demand levels depending on economic conditions.
and capacity characteristics frequently require Economic dispatching operations consist of the electric generation units of our gas-fired choosing the best combinations of generating plants to respond rapidly to large changes in units to meet the load and reserve requirements demand. Such changes create thermal and of a system or pool and then loading the units in mechanical stresses in the boilers and turbines, relation to their fuel costs per kilowatt hour to thereby shortening their lifespans.
minimize the cost of electricity.
Another dispatching program that should RELIABILITY help us minimize the cost of electricity is the This year we completed ourlong-term Electric Reliability Council of Texas (ERCOT) program of pole groundline inspecticn and Energy Broker System. It was reinstituted at treatment. We think it has improved system year-end with revised operating procedures. It reliability because there were substantially attempts to increase the savings of all utilities in fewer outages related to pole failures. To the council through an hourly bidding process improve our responsiveness and reliability, we for available electric energy. Experience with acquired a fourth mobile substation. one having earlier versions of this system should make our a capacity of 20 MVA. We also initiated the use ofit more effective.
Installation of an 800-megahertz radio system to
hM WW,;N U.
J nx
- Y l$
- 4 in The yearis 1541.and thirst envision an unglorified end to their quest. Up ahead of the thr:atens to overcome Spanish
]'
- d. sperate conquistadors, a river quietly courses through the explorerCoronado and his men.
landscape. When they reach its banks, the men fall to their As they wander aimlessly over the knees in thankfulness and christen their savior "Brazos de Dios" trackless plains ofTexas, their
- The Arms of God."
water supply exhausted. they Legend though it may be, it is a fitting tale for the naming of the Brazos: a river that was the key to settlement and prosperity l
in the 1.200-mile-long path she cuts through Texas. The lush bottomlands along her banks made cotton " King" in Texas, and the plantation owners who lived along the Brazos saw her as their highway to riches.
From this powerful river Brazes Electric Power
[
Cooperative took its name. More than a century 5-'..:
I-l-has passed since the river valley's bounty was 1
at its peak, but today, the power supplied c
rf I
by Brazos Electric is in its own way the key to development and growth in that same
~E
~
I fertile valley. For this reason we have
-1 used the Brazos River as the theme of this annual report. In telling this brief
~~4 story, we willlook at the times of hardship and the times of prosperity.
4 and we willlook at the strongbreed of working people who have played
~
r rolesin the story oflife along the Brazos River.
/
,- ;. W,N.
.-;L...' 4:..
~
\\
A'~'
t, - 6..
7
,g.~~
{ A.* '
\\
a~
,.,g...
p.f,.,Q '.:.
n':
a, f '.., '. '
- g n
's Y
n
' ~.
,e f
m f
. 3.,.: -
ga
. ;.=
. -y.
ll\\
' hmq'N'$ [h
.j bl h
c, L1 m
'.,.~ :
6 Gsa a-p=~Q c p-
Q.
(,
M
'7
.g
ETN F N N3 W V W " ] h ef""'@
' N i i d;,., 7
['~
iidb an
%g Mtb PW Q-Q[
The Brazos River basin,with a total ?
During the next few decades, vast
&ainage area of 44.000 square miles.
%.eplantations thrivedin thelower is the largest in the state. The present.
Brazos valley, and permanent riveris about 3.000 years old andis A settlementsmovedgraduallyupthe 3
h river. In these years the determined geologically known as an underfit river,or one that is too smallforits
, L men and women who wrestled the i([ sourcesofwealth: cotton cattle,and valley. There is evidence that a trend land from savagery developed three of water drainage was established as early as 40 million years ago.
later, oil. Frequently, the settlers About one million years ago, the
/
were at the river's mercy, for the ancestral river increased its drainage Brazos was a moody, occasionally area by capturing the headwaters vicious stream. She was often nearly w
of the Leon Riverin the Texas dry,but could and sometimes did Panhandle. Today,in this area where become a raging torrent, spilling out the Brazos River first took in the over theland killing hvestock and clear. Double hiountain and Salt man and child were discoveredin a men,inundatingcotton fields and Forks, the Brazos System, too,is series of caves on the river.These burying oilwells under tons of mud.
expanding. Our addition of Gate City skeletons are two of only five that The extremes of herbehavior were Electric Cooperative and Dickens have been found from this time so great that men soon realized she Electric Cooperativein 1986 periodin either North or South must be tamed and controlledif they incorporated this same region of
- America, were to prosper. From the earhest 11 West Texas, increasing our service Theintersect:en of the Brazos days ofsettlement they dreamed of area by nine counties.
Riverand the Balcones Escarpment in doing it.
With all that the river h2s given to hicLennan County accounts for the in common with allTexas rivers, thelife that has come to rely on her, abundance of archecilogical finds in the Brazos was simply not designed she has not hesitated to take away.
the area. This intersection marks the by nature to accommodate About 28.000 years ago,15 woolly meeting of two major climatic steamboat travel. But, to the people mammoths gathered at the ancestral regionsin Texas: the forests to the wholived on her,orby her, the river Brazos, only to be trapped by the east and the plains to the west. It was a symbol. representing far more veiled quagmire at hershores, formed a naturalgathering place for than a means of access to the Gulfof becoming victims of starvation, man and beast alike.
Mexico. Continuing efforts to But in her taking, the river aho The recent history of the area navigate her established a record for gives. In 1978, the bones of the began when Stephen F. Austin,in Persistence.Thoseindividuals who mammoths were discovered near the August of1821. obtained permission tried shared the conviction that the present river. Scientists consider from the Spanish Govemor of Texas steamboat was the noblest form of them to be thelargest group of and Coahuila to explore the country transportation ever devised by remains of the prehistoric creatures along the Brazos River.This civilized minds. From the 1850s to the to have died from a single event. In exploration convinced Austin of the tum of the century, almost 100 the mammoths gravesalsoliesa great fertility of the land along the different steamboats attempted to unique teaming opportunity. The southem reaches of the river and he force their way up the river,but with fmd willbe reconstructed for a walk-retumedin De.cmber cf the same only partial success. The lower p;rt of through display in the new $8 million year with his settlers.
the river was heavily traveledin the Strecker hiuseum facility being built At this site the settlers founded a years before the CivilWar,but few by Baylor University on thebmks of ferry crossingof the Brazos, called vessels ventured farther north than the Brazos River in Waco.
LaBahia Road.The village of Old Old Washington.
hian, too, was attracted by the Washington now stands at the same At one time there were as many as offerings of the Brazos. In 1983, the location,wherein 1836 the Texas 70 towns along the Brazos expecting 10.000-year-old sk eletons of an Indian Declaration ofIndependence was her to be developed as a trading signed.
thoroughfare. Around the tum of the
7
- 7. -
g
' 1%.
.. -w ~.a_ -waaa.~
w.a..
v- -
a i
4 g
.x'
' * ' _k
.r
,;.,.va:
x
_.y y m,; a.
,.e
.x s
~
_)
4 i
(sF
~*
g e
c i
l l
c l
l l
g
- .e r
t.
l 1
i
\\ j, y
Mr.,
'l R
'j_ '.
- q.
i i
i The Fallsofthe Brazos River, locatednear i
Marlin. formeda tuturalfordmg l
pixeforfrontier travel.
i l
l i
century, though. It became apparent that she enterprise was producing dry-pressed bricks in would not live up to their expectations.
the most modern facility west of the Mississippi Frequent floods deposited submerged debris
- River, that hampered even the most powerful boats.
Profits soared as Thurber brick found ready Left with no means of commercial trade. many markets in the Southwest for buildings, streets, river towns died and most are now ghost towns.
highways, and heavy construction. The Debris left by floods was not the only barrier Galveston Sea Wall was built of Thurber brick, to the successful navigation of the river. The as were Congress Avenue in Austin and most of Falls of the Brazos, located 5 miles southwest of the streets in Fort Worth. But perhaps more Marlin, marked the limit of the river's traffic.
importantly. Thurber brick was used to pave
{
But once again the river delivered disguised streets in innumerable small towns in the Brazos j
blessings. The falls formed a natural fording River valley. Such towns might have died were l
place for frontier travel. as the rocky stream bed they not lifted from the suffocating mire of rain-was the only hardbottom crossing of the Brazos soaked roads, infrequent though the occurrence.
within 200 miles of the coast.
The appearance of oil-buming locomotives on While steamboat travel up and down the the Texas & Pacific tracks boldly announced a river was difficult, crossing the river also proved technological change that immediately reduced a malor challenge for early settlers and, later, for the need for Thurber coal. A strike followed a I
the lucrative cattle business. The Kimball cut in pay and the coal mines were closed in Crossing of the famous Chisolm Trailin Bosque 1921. The brick plant survived until 1930, when County was the location of the perilous ford by the depression curtailed censtruction and the western wagon routes and cattle drives until a need for brick. Thurber has now dwindled to a ferry wasbuilt in 1865.
few delapidated buildings and a tall red brick But cattle trails and steamboats waned in smokestack: the tattered remnants of the importance as the snort of the Iron Horse began prosperity the town once knew.
to awaken the solitude of the prairies. As the population of Texas grew, settlement gradually moved away from the familiar rivers, taking
- ~r
~ ' ' '
U with it miles of newly laid track. Railroads were to become the key to economic development in I
the river valley that the river herself never was.
About 15 miles from the banks of the Brazos in Palo Pinto County lie the remnants of a town
~p%
- {j that once bore tecimony to the power of a
- cmfuotm wa
'e dependable transportation system. In 1886, coal
-.,. m e m cao * '-
sfr:: -l;rT "5 6 f'
was discovered here by W.W. Johnson. Two
$m$lf,f;55@7..',.'".;l,7,".71L';
years later Johnson sold his rights to the Texas &
a Pacific Coal Company, which provided fuel for l
frq;//~';n'."lll.51'Z~~'
j;,
l 2[1:
the Texas & Pacific Railroad.
Z Z,'.'C.~ ~.7 For the next 30 years, the town named
. " ~ ~ ~ C ",'Jt?"J.;
s
/'=TJ.!?"%
i y) 7"""*" AJg[^^*~ /
Thurber was the most important mine site in
(
~
'7' b
/
U Texas and. with a population of more than t
10.000, just about the biggest thing between l
Fort Worth and El Paso. Thurber was a company 9
/.
I town that enjoyed the status of having its own Y [ "i ;.
),'
i I
ice plant. Its generating statun made it one of
\\ 4'E e the first towns in Texas to be fully electrified.
%DJ~
hLj f-l Thurber left a mark on the development of towns not only up and down the Brazos but all
.9 fy
(}
4*
over the state. In 1897. enterprising Thurberites
- Y ;
.?
N * \\j l
capitalized on the large deposits of shale in the 1 4 g '
- Ag nearby hills and pea coal that could be used to
. \\i[
fire brick kilns. They erected a brick plant in the d
.Oj southeast part of town, and by fall the new
.w s ~.'h a~a.w
Y r;f i:
L L wi.wmua a.w.w.i.a n_ mum--~du.-._wn u.snu.w.-u.nwaan-
_a i
1 i
a i
i l
I 4
4 i
I 1
14 l
l 1
i j
l
.dd s u.
Not far from the Brazos Riverin Palo hnto County is Thurber: a town that helpedpave the way for settlement in the river valley with its sturdy. dry-pressed brick Thurber brick can stdlbe found m the streets ofFort Worth and many smaller Te.us towns.
l 1
4 M
- _w w.
1 l
l Without coal mining the river valley rely only on the land for their sustinence.
inhbitants relied on an economy based Agriculture and oil still play important roles in rtr nrily on farming and oil. During this period, the economic life around the river. But today, ru.a Texans were waging a struggle for a modem, multi-million dollar companies such as comfortable life as fiercely as the settlers of the the Westinghouse Electronic Assembly Plant in 1830s fought for their survival. When President College Station and Hexcel Corporation in Franklin D. Roosevelt established the Rural Graham thrive in towns along the Brazos River.
Electrification Administration in May of 1935,it providing jobs, prosperity. and most was estimated that only about two percent of importantly, products to carry our world into the rural areas of Texas were served with the 21st century.
Glectric power. Residents of the other 98 The Westinghouse Electric Assembly Plant in percent lived much as Stephen F. Austin't.
College Station is a $25 million facility that settlers-without light. refrigeration or power.
manufactures printed wiring assemblies for By 1940, the efforts of small rural distribution radar systems in our country's most advanced cooperatives had b rought electric power to military aircraft: the B-1B bomber and F-16 nearly one quarter of the rural families.
fighter. The plant, which is a part of the Energy However, the distribution cooperatives were and Advanced Technology group of also concemed about the reliability and cost of Westinghouse, employs about 500 people. It is wholesale power. So in 1941. eleven Central one of only two such plants in the country that Texas rural electric distribution cooperatives build the wiring boards: the heart of the formed a generation and transmission protection systems for these planes and their cooperative. This Brazos River Transmission pilots.
Electric Cooperative. Inc. later changed its name Perhaps what the plant produces is not even to Brazcs Electric Power Cooperative. Inc.
as important as how it produces. Westinghouse The river that provided Brazos Electric its employs innovative management techniques.
l name began providing the power that would including employee task forces, self-managing nourish the fledgling cooperative. In 1941, the work teams and flexible training. These first Brazos transmission line was built to techniques assure that all areas of the plant will 15 transport electricity generated at the Brazos have an adequate work force when time is River Authority's new dam at Possum Kingdom essential. Videotapes ari frequent workshops Lake on the Brazos River.
help management convey to the employees the The far-reaching effects of the joint efforts of importance of their work: a moment's the Brazos River Authority and Brazos Electric distraction on the job could lead to the loss of Power Cooperative in providing power to rural protection for a fighter pilot. The quality of their Texans is exemplified in this typical editorial workis unparalleled.
from the Marlin Democrat on March 26,1941:
About 400 miles north of College Station.
The completion oftheIbssum Kingdom near the banks of the Brazos River and nestled Dam marked the firststepin the am ng the hills surrounding Possum Km, gdom realization ofa dream ofmanyyears.
I.ake, is the quiet town of Graham. The hub of Thedevelopment ofhydro-electric the area s oil-and gas-related industry Graham powerisa by-product ofthe majoraim has suffered from the bearish fuels market.
ofconservation and reclamation ofthe Based in this unlikely locale is Hexcel, a $40 rich farmlands which have been milli n plant that produces honeycomb: the denuded by unchecked floods. The sale structural material that is used in almost every ofpoweris on a non-profit basis. The c mmerci 1and military aircraft built today.
aim is to reach ruralareas not served by Honeycomb: lightweight, with an unusually the existing utilities thusgiving the high strength-to-weight ratio /Its practical uses farms the advantage ofelectricalpower aye endless. In aircraft. it is used m engines, andlight and rendering rurallife more airf il sections, stabilizers, rotors and even attractive andcomfortable.
interior appointments. In construction, honeycomb can be sandwiched into exterior Finally, the river was being tamed.
walls of skyscrapers to allow a tough marble Today. Brazos Electric Power sells wholesale finish without the excessive marble weight.
power to its 20 member cooperatives which Honeycomb. with its excellent capacity for serve 229.000 consumers in 66 counties that energy absorption, was used as a shock absorber surround the Brazos River. And that power has in the landing apparatus on the Apollo made a difference. No longer do those consumers spaceship when it landed on the moon.
- g
=
m;g%
.w s.
.y.
. 9 _.
m a,,a w g a g _ _
- .1. a w a ;,a m m.a.,m a,
s m m m u A,.L g -
.%,;~
l l
i The voyager, which recently completed its historic round-the-world flight on one tank of fuel, was made almost exclusively of Hexcelhoneycomb.
Mf;&,@d h W W A.M:[R W &.Myr%..
w - 4..
q#@:kyME Hexcelhasbeen producing honeycomb
.. O MM C@.T ".l.??:W T Mgygs in Graham since 1964 when it opened with 41.k.i MR a 25.000 square-foot plant and 25
' y:c:{.0. igjg r%{4.M.D'J E j[.h. %. Q Q;lM Qhh:Y.$.3 ycp
.g G ;. g g r O
employees. Today, it employs 350-400 1:..:
people in its 300.000 square-foot facility W'i. W,mJ..
P..' W:L.J.cx.%> <d W
@ W ;. W L k 2:M.V?.3 -
and is the largest producer of honeycomb N446f:
3 ~- [.'-[ h.Y.f[.YW
'.l ' 'O in Hexcel's world-wide scope. Plant J
g hMllh);;>> g"
.;;j; Manager Frank Jones said the source of his
~ L.y c; M ' * % g Q g j M plant's successlies in the work ethic of the
%ggp$ _ p '
~
i N, wMbM% i s
~
W[Wyh Mhr;W - -ej people in the area, which he said is g
k
- ;Aqf %, ~ (. Md [
~ ' A M N!(
$$fd superior to any he has seen in his 35 years y4J
^
with the company.
of course, we already knew that.
3/s..:, fQk ;
3
.44 1.w m
n;m t
i w.
- .y y %o And so, withm.the last few pages, we
.. _,.gm
......L
~
M@A j.l1 R I
' M. '. '
'1$Q have explored but a fragment of the c
- }{(.!.i'. ;.G. Y,f.,
f4 i.. l(.ge:: '. '.
"i geological, anthropological, sociological N(;.+8. p#.
-~:
y.
and economic history of the Brazos River and her surrounding floodplain. The Q d., h o.. ?
2
.: M s
trevity enforced by these pages does not ti6 f.f':.56 V U a.
?f.J-nz a ' S.. ?.? ;;, ;;. ~ "
l do justice to the history of the river around
'g W$@
l V!i. ~cEn i ? M, P;j f::.1..
ggy which Brazos Electric Power Cooperative yd{f ~ it,f!l':.fl g/.;&.).N 'l - { $g9.M [@Q2.=g was founded, has prospered and will m 9 6.
f f
.!...;. ~
- 5. <.
~-
continue to grow.
./., NMh 16 It is to those settlers who followed 6Vi:".:4 f ' ' 4 ' l. t.
.,c l
Stephen F. Austin into the wilds along the 7.V.i ?. i i.
. ".i.. i ~. f
" Q r. Mn
@ ? C: ? (3..c J. -.,
.... ~j
-1. 9 ?
shores of the Brazos, to the river captains y, f.@g J.# C.:.l fj.
4:.. 4.J ~ " ' J i.
fl who spent a lifetime trying to tame her, to V.y.J/,.l;:.7..;-
i g f l. :.
. '.O ;. '
j the farsighted men who recognized the
>-J-
..; ?@4:ft4 need for power in her rural sweep and to g., g : 1 jT' ~, L:.1 Gy:.f. f.'
c l.t.,
i i;;.Qyt.4.;.a ; i.S.. J t M X the men and women who have worked g p :=.
- .;n-e c
~ lc C !?
.. r@p@.fGW :.Q ls and lived in towns in her valley that we Vq 1.': ;. ' ;.
- 2 d
Q i A'-
- f;: 1
- t. ~ i.d. M: P '
may give our recognition and thanks. For 7 1. '.' '...
J
-iGf$ O.); h ;(7 h;c<c.~.lf; M :. p ;
.. j j '. Q
. Y. ;. [. A.f.# [
the story of their lives and works is the
$4; ?
4 VM ';4 ;J:
source of today's prosperity and our Jg E. + ;
y&. :..' W M *f E [w
..R.91. '. L., lO M.d 7$. '..
unlimited potential.
WQ'
- c -
.;.. t;
-.: 7
.7 s>.
9:
5 y;;;;._. : : _.:.n,.yW;/ -m e. 'y
. '?,.
_.a.c-
... ~. ;- : y. ;...
.s
., ; v y..
y>
A c. y... '
1 :.::
n.. ~. i 3 :. : a. - ~ ;..
.a.i. '
- f. ;;;..
?.:?.
".?:-
c'
- r
^. yQ[... L e
) * " ! Q.,. 7.,'n '. ;.k' '.h', 'A c.fl" l' GL.;f. - - -
.T~:
l,
_ l,1,ij,4 i
Hexcel honeycomb. producedin Graham near l
the Brazos River. is the ntiuctural material used l
m almost every commercialand rmlitany aircraft I
bwlt today.
?
i l
l wv--,.-,,---,----.--e m.,. -.,, - - - - - -
--w-
l Q.s.
. __w.,n,_aaaw;a : :. ;.,
.;.,..l:. c
.-w.
..v.y..,,
.c
,.(y.p._.,,,_,
3.'
,s..-
.. ~,... _ _.. :. g &:.$lh0$[:'?k.' ' '
....s
@ Y-3G.. :;p-m y c r%gp' y' q;,y;.gm
.. -;r 7.
" ' '. ^ j K m. ?
- , u.
' :L';
h.ilx JMNMk h 5
.h, '-
,.. ?:$ 1%%.%"s m.
. ; gpj e
2 k-Vgs f
4 %.
9,,
4' 3.-.
he,.
T r.(
.V ". % y g.
.A
)
v g,
y f
~ ~
- ,e k,,...-
. &,-. V y.,
. t *' ** n s.%.
- 't/
o w$ ~
- . ^>.,
=
.a #
7 e.
~ L h 93
- [f.1, ~.;
,49f W
.p'r Tl h;-
.:. es.
.. ~ ~
q-1;*
,NW g_ _ Q.[3 r-&_.
17
~
' ']
]
.A
,h
. s:. -
b a-I i
t.
I-l l
i WITH SPECIALTHANKS To Frank Jones Jamie James and Mark Tooley of Hexcel:Jeannie PIass of Westinghouse: Kay Yount of the Fort Worth Street Department: Calvin Smith. David Lintz and Ted Hollingsworth of Strecker Museum: Dr. John Fox of the Baylor anthropology department and to Brazos employees Erme Pars' ns. Bobby Jenkins and Woody Baldwin. They shared their knowledge. they shared their time and they shared their mterest. Without them this tribute to the Brazos River would not have been possible.
Our thanks also to Patrick Pollet for the Bob Poage illustration.
BOARDOF DesecToes
- - +.. - ~, ~ _. -.
. ~ ~.. -. - -..
~ w _.~
~- w
- a
- .. _ u. x -._ a - w :...ar
.u i
- b. Nth William G. Parker Luther L. Parks Joe Forman Don Gregg Lawrence Karl i
President Vice President Secretary B-K Electnc Bartlett Electnc 1
Comanche County Belfalls Electnc Wise Elecinc Coopera tive. Inc.
Cooperative. Inc.
1 Elecinc Cooperative Cooperatsve. Inc.
Cooperative. Inc.
l Assn.
-\\ g[ q
,s
. r a
m
'9 l
,L 1
Robert T. Lewis Jr.
M.E. IIolley Ned Ward Fred Parker Philip E. Slater Cooke County Elecint Denton County Eiectnc Dickens Elecinc Erath County Electrtic Fort Be knap Elecinc Cooperative Assn Cooperative Assa Cooperative. Inc Cooperative Assn Cooperative. Inc 18 pt.
y q
p 1
)*_.
j 1
4 a OS25
's i
James Driver Jack Elam Sam flouston Bernard liilbers Billy J. Poland Gate City Elecinc Harndton County Hal County Elecinc J-A-C Electnc Johnson County Electnc Cooperative. Inc.
Electnc Cooperative Cooperative. Inc Cooperative. Inc.
Cooperative Assn Assn
- c
,s J'I J5y
%m ]
1 w
wA j
.g
?
Ron Golaen Woodrow liensarling Aubrey Berry J.W. Richards. Jr.
Tn-Couniv E.g. Jr.
J.F. Herrin Afr Lennan County Afid Scath Elet tnc Navarro Countv Elet tne Navasota t*J!Iev Electnc ettnc Elet inc Cooperain c. Ins Cooperatae Assn Cooperative. Inc Coo;'erative. Inc Cooperative. Inc
j Executive Vice President and GeneralManager Cities Service Petroleum Company for seven and one-Richard E. McCaskill, age 50 joined Brazos in 1979.
half years. He also served as Senior Geologist for He is also the General Manager of San Miguel Electric National Soil Services. Inc. from 1966-1974.
Cooperative. Inc. in Jourdanton. Texas.
Manager-Finance and Administration McCaskillis a graduate of Texas Tech University.
Clarence W. Carpenter, age 54. joined Brazos in where he earned a Bachelor of Science Degree in 1967 as Manager-Accounting Department. He was Electrical Engineering. He has worked in the electric promoted to his current position in 1977.
utility industry for 26 years, including positions as Carpenter received a Bachelor of Business Assistant Division Manager. Safety Engineer. TraininS Administration Degree from Baylor University and Director and Division Manager for Central Power and became a Certified Public Accountant in 1963. Prior to Light Company in Corpus Christi. Upon comin to coming to Brazos. Carpenter worked for the Intemal Brazos in 1979. McCaskill assumed the duties o Revenue Service for seven years.
Manager-Engineering. Power Supply and Carpenter is Director of the Texas Society of l
Construction. He was elected to his current position Certified Public Accountants and Past President of the in January,1981.
Central Texas Chapter of Certified Public McCaskill is a registered Professional Engineer in Accountants. He is Past President of the National G&T the State of Texas and a director ofInterFirst Bank in Accountants Association.
Vdaco. He is also First Vice President of the National G&T Manager's Association and Vice Chairman of the MJnJBet-O erations P
Executive Board of the Electric Reliability Council of Dan B. Swenke, age 48 joined Brazos m, 1966 as a Texas.
Junior Engineer. He has served m numerous positions including Design Engineer. Chief System Operator Assistant GeneralManager and Manager-Transmission Department.
J.D. Copeland, age 42. joined Brazos in 1971 as Prior to coming to Brazos. Swenke had an accountant, became Manager of the Accounting construction experience as an officer in the United Department in 1977 and was promoted to his current States Army Corps of Engineers. He eamed a Bachelor position in 1984. He also is Assistant to the General of Science Degree in Civil Engineering in 1963 from Manager of San Miguel Electric Cooperative. Inc. in Texas Tech University, and is a registered Professional Jourdanton. Texas.
Engineer in Texas. He is presently Chairman of the Copeland received a Bachelor of Business ERCOT Operating Subcommittee.
Administration Degree in 1970 and a Masters of er-Project Constmction and Engineering Manhy Dyess, age 56 joined Brazos in 1974 as Business Administration Degree m 1977, both from Bi Baylor University. He became a Certified Pubhc Accountant in 1972. He is also a member of the Construction Supervisor and was promoted to his American Institute of Certified Public Accountants Pf*s osi n m 1981 p
and the Texas Society of Certified Pubhc Accountants.
Hicks and Ragland Consulting Engineering Company.
He advanced in the company to serve as Vice Executive Assistant and Manager-Public Relations President-Director of Field Operations from 1968-Francis M. Bushnell Jr., age 43. Joined Brazos in 1974. In this position, he was responsible for design 1979 as Executive Assistant and was given the added and construction management, regulatory processes responsibility of Manager-Public Relations in 1980.
and public relations.
Bushnell received his Bachelor of Science Degree in Dyess served two terms in the United States Army Engineering and Business Administration from in 1947-1948 and 1950-1951, where he continued his Princeton University in 1965. He spent nine years as a education through various correspondence courses.
submarine officer in the U.S. Navy Nuclear Power Man er-Corporate Planning Program. He was employed b Stone & Webster Engmeen,ng Corporation for our years, where he was W llam B. Townsend, Jr. age 47. Joined Brazos in responsible for administration on a nuclear power 1964 as a Junior Engineer. He was appointed to Chief plant project and was a Marketm Engineer.
System Operator in 1967. Manager of Engineering He is a certified instructor for t e Dale Camegie (including construction)in 1970 and Administrative Course and is also President of the CentralTexas Assistant in 1980. He was appointed to his current Chapter of the Public Relations Society of America.
Pos ti nin 19 Manacer-Fue! Operations from Texas ASM University in 1963 and a Bachelor of Clilford L. Sou dn. age 57, joined Brazos Fuel Science Degree in Electrical Engineering in 1966.
Company in 1974.
Townsend is a registered Professional Engineer in Sartin graduated from Texas Tech University in Texas and the Brazos representative on the Electric 1954 with a Bachelor of Science Degree in Petroleum Reliability Council of Texas (ERCOT)-Technical Geology and minor in Chemistry. Before joining Advisory committee. He has held the positions of Brazos Fuel, he had extensive experience as an oil and Secretary. Vice President and President of the Central gas exploration geologist and spent three years Texas Chapter of the Texas Society of Professional primarily exploring for lignite reserves. He worked for Engineers.
, a
\\.
w l
A l
5 4
i i f
l l
l The Consolidated Statement of Revenue and Patronage Capital and Other Equities of the Cooperative and its wholly owned subsidiary. Brazos Fuel Company. Inc., reflect net margins l
of $21.068.620 for the calendar year 1986. Because of these margins, we increased our equity to 14.4 percent of assets from 10.6 percent.
As previously reported, we discontinued construction payments on the Cooperative's interest in the Comanche Peak Nuclear Plant Project in mid-1985. We continued to make project interest payments using $20.5 million of General Funds in 1986 since Federal Financing Bank loan funds for the project had been exhausted. Consequently, on a cash basis, we did little more than break even. The loan payments from General Funds were accounted for as capitalized-interest-during-construction.
We filed two transmission loan applications in 1986. In the last quarter, we received approval of a $31.4 million concurrent Rural Electrification Administration / National Rural Utilities Cooperative Finance Corporation loan. A Federal Financing Bank loan application is still pending. Our totallong-term debt grew from $375.5 million to $380.5 million.
20 Reductions in Federal Financing Bank interest rates continued. The Cooperative's average interest rate on long-term debt decreased from 9.187 percent to 8.876 percent. The effect of this change is an annual reduction of approximately $1.2 million in our interest payments for long-term debt based on the long-term debt outstanding on January 1.1986.
Despite the overwhelmingly positive nature of our financial report for this year, we must note that interest payments on debt associated with the Comanche Peak Nuclear Project periodically strained our cash flow during 1986. A call was made to members for advanced power bill payments under the Member Prepayment Plan. Their superb response provided working capital throughout the year.
m Joe Forman Secretary-Treasurer Distribution of1981 Distributfor* :,Ih v86 Resence Dollar Reseaue Dollar PurchasedPower 47,$'
Q.
PurchasedPower 51.)*
4 Taxes
.1*
._L f'#
'\\~
Wages & Other Depreciation &
Q_
F~~
g g.
Wages & Other X-1.2* Costs AmortI2Jtion 3.O'
's Danstmsssco 4.C '
- N 27.9* FuelCosts Dansmission S.4'
^W.
20.6* FuelCosts P
29.t' GeneratedPower
_ g, Admmistrativea,
gg,g, GeneratedPower Generaf 2.5 Interett 9.S' g,,,,,,, s g.
Cperatrrg Margms 1.O*
OperatmgMargins S.}e
1986 FINANCIALSTATEMENT
- The financial strength and resilience of the Brazos System stems from its member cooperatives and customers. They serve consumers in rural, suburban, and urban areas totaling more than 20 percent of Texas. This vast service area provides diversity for income sources of residential agricultural and industrialloads. It also provides strong growth in energy sales.
COMPARATIVE
SUMMARY
OF ELECTRICAL OPERATIONS 19821946' 1986 1985 1984 1983 1982 (Mills per KWH)
TotalOperating Revenue (1) 48.4 50.8 52.3 53.3 46.8 Operating Costs Production expenses (2) 35.6 39.1 42.3 43.4 39.5 -
Transmission expenses 1.7 2.0 -
2.3 2.5 2.2 Administrative and general expenses
.8
.6 -
.6
.6
.8 Depieciation, taxes, insurance, interest 5.8 5.3 5.5 60 4.1 Total Operating Costs '
43.9 47.0 50.7 52.5 46.6 Net Operating Margin (Loss) 4.5 3.8 1.6
.8
.2 (1) Average sales price by class Firm power sales 21 Member Cooperatives 50.2 53.5 53.7 55.6 49.9 Cities 50.8 52.3 53.9 56.4 50.8 Surpluspower sales Cities 20.6 33.3 39.3 38.0 37.9 (2)Further analyzed by source Generated power Cost of fuel 28.4 33.5-39.6 40.9 39.1
~ Wages and other costs 1.5 1.4 1.5 1.7 1.2 Parchased power For system 34.0 36.1 38.7 38.6 36.3 Atisolated meter points 41.8 48.5 45.5 43.8 41.6
- Excludes operations ofBrazos Fuel Company. Inc.
l l
COMPARATIVE
SUMMARY
oF ELECTRICAL OPERATIONS 19821986*
1986 1985 1984 1983 1982 Electricity Generated and Purchased-in Megawatt Hours Generated at North Texas Plant 5,404 100.473 5.131 8.314 22,890 Generated at Randle W. Miller Plant 1.339,210 1.570.418 1,291.634 1.118,547 1,499.573 Purchased for system A. From San Miguel Electric Cooperative 1,469,983 1.558,827 1,707.432 1,668.411 1.654,87I B. From other utilities 517,800 355.562 206,850 229,462 170,161 Purchased at isolated meter points 660,448 548.418 509.537 460.553 458,434 3.922.845 4,133,698 3,720,593 3.485,787 3.805.935 Electric Sales-in Megawatt Hours A. Firm Member Cooperatives 3,217,290 3,033,643 2,846.999 2,498.886 2,389,141 MunicipalCustomers 352,870 386.707 341,058 303,299 272,603 3,570,160 3.420,350 3.188,057 2,802.185 2,661,744 B. Economy Sales 261.915 523.226 370.149 461.793 1,003,469 3,832.075 3.943,576 _3.558.206 3.263.978 3,665.213 Electric Sales to Member Cooperatives-In Megawatt Hours Bartlett Electric Cooperative. Inc.
57.975 57.341 53.251 47.297 47,221 Belfalls Electric Cooperative, Inc.
46,427 44.270 ~
42,152 39.125 42,317 22 B-K Electric Cooperative. Inc.
61,298 65,057 68.565 61,230 61.530 Comanche County Electric Cooperative Assn.142,531 152.581 150,106 141,177 136,675 Cooke County Electric Cooperative Assn.
250,198 266.709 257,327 244.152 234,604 Derston County Electric Cooperative, Inc.
3r1,363 336,826 292.555 242.089 218,286 Dickens Electric Cooperative. Inc.
133,204 Erath County Electric Cooperative Assn.
166.697 169.997 167,941 153,394 146,638 Fort Belknap Electric Cooperative. Inc.
107,821 117.100 113.499 105.013 94.726 Gate City Electric Cooperative, Inc.
21.473 Hamilton County Electric Cooperative Assn.
86.479 86,380 82,260 75,894 75,602 Hill County Electric Cooperative. Inc.
146,546 143,945 133,026 115.100 111,916 J-A-C Electric Ccoperative,Inc.
84,142 98.332 97.748 87,038 82.017 Johnson County Electric Cooperative Assn.
391,618 382,877 345,719 299.957 286,371 McLennan County Electric Cooperative Inc. 93,987 94.132 87,206 77,712 77,009 Mid-South Electric Cooperative Assn.
184,931 192,881 179,825 155.889 156,657 Navarro County Electric Cooperative. Inc.
148,616 130.092 139.314 91.528 86,241 Navasota Valley Electric Cooperative Inc.**
169,364 137,990 122.104 10L,079 109,827 Tri-County Electric Cooperatise. Inc.
413,127 406.035 372.215 323.536 301.061 Wise Electric Cooperative. Inc.
149.493 150,988 142,186 130.676 120.443 3,217,290 3,033,643 2.846,999 2,498,886 2.389.141
- Excludes operations ofBrazos Fuel Company. Inc.
- Formed by the merger of Limestone County Electric Cooperative. Inc. and Robertson Electric Coopera-tive, Inc. in April 1985. Salesin precedingyears have been restated.
i
l 1986 1985 1984 198?
1982 Maximum Kilowatt Demand At Member Delivery Points 836.721 759.495 683.450 612.297 568.681 AnnualLoad Factor Percent Mercher Cooperatives 44 46 47 47 48 Electric Energy Sales Member Cooperatives
$161 135.659
$162.216.739
$152.868.791
$138.873.457
$119.214.939 Municipaland Economy 23,310.455 37.662.418 32.956.026 34.699.138 51.976.783
$184.746.114
$199.879,157
$185.824.817
$173.572.595
$171.191.722 Other Electric Revenue 581,285 _
584.387 371,785 233.616 184.241 TotalOperating Revenues $185.327.399
$200.463.544
$186.196.602
$173.806.211
$171,375.963 Operating Expenses Production Expense-Generated Power
$ 41,095.852
$ 58.382.299
$ 53.333.538
$ 48.018.505
$ 59.530.029 Production Expense-Purchased Power 95.136.544 95.769.789 97,200,643 93.506.213 85.265,221 Transmission Expense 6,390.050 7.920.251 8.036.110 8.264.545 8.121.976 Insurance and Welfare Expense 1.543.894 1.304.137 1.459.113 1.344.556 1.200.410 Other Administrative &
GeneralExpenses 3.083.501 2.421.413 2.274.458 1.955.285 1.783.918 Depreciationand Amortization 6.701.675 6.434.379 6.048.486 5.631.674 5,126.312 Taxes 1.607,255 1.393.705 1.279.700 1.046,208 1.082.647 Interest on Long-Term Debt 33.539.856 33,798.340 29.081.630 26.620.960 22,403.479 OtherInterest 718,311 280.301 487.041 972.492 1,047.359 LessInterest Charged to Construction (21.750.773)
(22.403.872)
(18.820,116)
(17.466.851)
(14.735.721)
Other Operating Deductions 1.566.127 144.739 Total Cost of Electric Service $168.066,165
$185.300,742
$180.380.603
$171.459.714
$170.970,369 Gain (Loss)in Operating Margins
$ 17,261.234
$ 15.162.802
$ 5.815.999
$ 2.346.497 405.594 Non-Operating Margins 3,739.291 2.121,009 701.313 366.651 337,760 Gain (Loss)in TotalMargins$ 21.000.525
$ 17.283.811
$ 6.517.312
$ 2.713.148 743.354
CONSOLIDATED BALANCE SHEET December 31.1986 and 1985 1986 1985 ASSETS (Note ~.)
Utility Plant (Notes 1. 3 and 11):
Electric plant in service, at cost
$229,368.663
$212.365.725 Completed construction not classified 730.178 4.306.888 Construction workin progress 247.990.498 225.153.717 Nuclear fuel in process of refinement and enrichment 9.758.886 9.758.886 487.848.225 451.585.216 9
Less accumulated provision for depreciation and amortization 61.930.375 55.998.607 Utility plant, net 425.917,850 395.586.609 Other property andinvestments:
Investments in associated organizations:
Capitalterm certificates (CFC) 7.070.764 7.070.764 Patronage capital (Notes 1 and 9) 4.768.239 2.137.204 Other 5.585 5.819 Restricted assets and other investments:
Certificates of deposit 5.215 4 855 24 11.849.803 9.218.642 Current assets:
Cash-general 454.044 714.795 Cash-loan funds 50.723 115.954 Specialdeposits 66.715 72.675 Temporary cashinvestments 6.480,000 7.900.000 Accounts receivable 17.459.335 18.425.788 Fuelinventory, at average cost 3.236.595 3.242.111 Material and supplies, at average cost 6.758.313 6.477.767 Prepayments 30.372 14.159 Totalcurrent assets 34.536.097 36.963.249 Deferred charges (Note 4):
2.003.788 2.638.587 bAIA'?l!IE
'A0l'05
=
1986 1985 LIABILITIES Equity and margins:
Memberships 100 90 Patronage capital and other equities (Note 5) 68,321.392 47,252,772 68,321,492 47,252,862 Long term debt:(Notes 5 and 6)
REA mortgage notes 80,326,360 81,454,784 CFC mortgage notes 16,713.165 15,626,848 FFB mortgage notes 277,216,698 274.616,000 374,256,223 371,697,632 Currentliabilities:
Current maturities oflong-term debt 6,232,000 3,817,800 Accounts payable 24,471,498 20,413,612 Other accruedliabilities 1,026,325 1,225,181 Totalcurrent liabilities 31.729.823 25,456,593 I
Commitments and contingencies (Note 11)
$474,307,538
$444,407.087 The accompanying notes are an integral part of these financial statements.
/
d
%6.
CONSOLIDATED STATEMENT OF REVENUE AND PATR3NACE CAPITAL AND OTHER ECUITIES Years Ended December 31,1986 and 1985 1986 1985 Operating revenues:
Sales of electric energy (Notes 1 and 9)
$184,746,114
$199,879.157 Other 546,891 550.637 185,293.005 200.429.794 Operating costs and expenses:
Operating expenses:
Operation expense:
Production-fuel (Note 1) 37,822.058 55.712.307 Production-other 1,234,838 1,222.445 Purchased power (Note 9) 95.136,544 95,769.790 Transmission 4,414,965 5.891,140 Distribution 335,446 289,243 Administrative and general 4.712.819 3,808,866 Maintenance expense:
Production 1,660,686 1,120.766 Transmission 1,001,643 1,142,007 Distribution 637,996 597.861
[
Generalplant 179,316 181,513 Depreciation and amortization (Note 1) 6.715,920 6,436,805 Taxes 1,617,624 1.404,227 Interest onlong-term debt 33.539.856 33,798,340 26 Otherinterest 699,650 271,740 Interest charged to construction (Note 1)
(21,750,773)
(22.403.872)
Other (8.201)
Totaloperating costs and expenses 167,950,387 185.243,178 Operating margins 17,342,618 15,186,616 G & T capitalcredits(Note 9) 2.688.993 1,151.928 Other capital credits and patronage dividends 126.471 121,905 Nonoperating margins:
Interestincome 921,140 842,565 Other 2.475 1,128 Margins before Federalincome tax 21,081,697 17.304,142 Federalincome tax (Note 10) 13,077 Net margins 21,068,620 17.304,142 Patronage capital and other equities, beginning of year
_ _ 47,252.772 29,948.630 Patronage capital and other equities, end of year
$ 68.321.392
$ 47.252.772 The accompanying notes are an integral part of these financial statements.
l CONSOLIDATED STATEMENT OF @ HANGES IN FINANCIAL POSITION
. Years Ended December 31,1986 and 1985 1986 1985 l-Working capitalprovided from:
Net margins
$21,068,620
$17,304,142 Depreciation and amortization.
6.715,920 6.436,805 Patronage capitalallocations (2,815.464)
(1,273.833)
Working capital provided from operations 24,969,076 22.467.114 Advances from REA -
-2.149,000 Advances from CFC 1.775,600 5.648.000 Advances from FFB -
4,909.000 22,061.000 Salvage value of retirements 1.573,580 1,003,864 Contributions for line removal and relocation 57,000 15,328 Decrease in other property and investments-net of capitalcredits and patronage capitalallocations 184,303 260,494 Decreasein deferred charges 256,532 Increasein memberships 10 Totalworking capitalprovided 35,874,101
_ St.455,800 Working capitalused for:
Additions to utility plant 38.000.307 43,794,346
. Reduction oflong-term debt to REA 3,277.424 3.274,036 Reduction oflong-term debt to CFC 689,283 566.491 Reduction oflong-term debt to FFB 2.308.302 74,000 27 Plant removalcosts 299,167 461,361 increasein deferred charges 389,436 Decreasein memberships 5
Totalworking capitalprovided 44,574,483 48,559,675 Increase (decrease) in working capital
$(8,700,382)
$ 2,896,125 Changesin working capital:
Increase (decrease) in current assets:
Cash
$ (325,982)
$(1.256.325)
Temporary cashinvestments (1,420,000) 6.454,400 Specialdeposits (5.960) 8,000 Accounts receivable (966,453)
(19,665)
Materialand supplies 275,030 421,662 Prepayments 16.213 (70.161)
(2,427,152) 5.537,411 Increase (decrease) in current liabilities:
Current maturities oflong-term debt 2,414,200 297.800 Accounts payable 4,057.886 5.163,409 Notes payable (2,900,000)
Otheraccruedliabilities (198,856) 80,077 6,273,230 2,641.286 Increase (decrease) in working capital
$(8.700,382)
$ 2.896.125 The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED amount of gas paid for in advance is classified as a FINANCIAL STATEMENTS deferred debit leSS unpaid production taxes and royalties.
An allowance for unrecoverable gas is provided l
1--
SUMMARY
OF SIGNIFICANT for by charges to income. The allowance is based ACCOUNTING POUCIES upon a determination by the Cooperative's Principles of Consolidation c nsulting engineers as to the volume of gas losses in each well.
The consolidated financial statements include the accounts of the Cooperative and its wholly-2-ASSETS PLEDGED owned subsidiary. Brazos Fuel Company. All intercompany items have been eliminated in All assets are pledged as security for the consolidation.
long-term debt to the Rural Electrification System of Accounts Administration (REA). National Rural Utilities The accounting records of the Cooperative Cooperative Finance Corporation (CFC) and Federal 4
conform to the Uniform System of Accounts Financing Bank (FFB).
prescribed by the Federal Energy Regulatory
=
p Commission for Class A and B electric utilities modified for electric borrowers of the Rural Listed below are the major classes of utility Electrification Administration (REA).
plant as of December 31,1986 and 1985:
Electric Revenues and Fuel Costs December 31.
Electric revenues are recorded monthly as of 1986 1985 the date meters are read and accounts are billed.
Fuel costs are charged to production expense as Intangible plant 2,170 $
2,170 fuelis consumed.
Production plant 64,373,169 60,395,163 Transmission plant 117,619,897 108,876.114 Plant Additions and Retirements Distribution plant 40.969,377 36.897.188 The cost of additions to electric plant in service Generalplant 6,404,050 6,195.090 represents the original cost of the contracted Completed construction services, direct labor and material interest on not classified 730,178 4.306.888 construction loans, and indirect charges for engineering, supervision and similar overhead Electricplantinservice 230,098,841 216,672.613 Construction workin items. Maintenance and repairs of property and replacements and renewals ofitems determined to Pmgress 247,990.498 225,153.717 be less than units of property are charged to Nuclear fuelin process of refinement and operations. For property replaced or renewed. the enrichment 9.758,886 9.758.886 original cost plus removal cost less salvage is charged to accumulated provision for depreciation.
$487,848,225 $451.585.216 The cost of related replacements and renewals is added to electric plant. Contributions in aid of DEPRECIATION construction are credited to the applicable plant Provision has been made for depreciation on a accounts.
straight-line basis at annual composite rates as f H ws:
Interest Charged to Construction The Cooperative has capitalized as a part of Production plant 3.10 %
electric plant the cost of borrowed funds used for Transmission plant 2.75%
such pmposes net ofinterest er d on " idle" Distributionplant 2.83%
advances of the borrowings. Thiyocedure is in Generalplant:
accordance with that prescribed by REA. the result Structures andimprovements 2.50 %
of which is not materially different from that Transportation 15.50%
prescribed by Statement on Financial Accounting Communications 6.50%
Standards No. 34.
Othergeneralplant 6.00 %
EDP equipment 16.00 %
Patronage Capital Certificates Patronage capital from associated organizations Included in construction work in progress is recorded at the stated amount of the certificates.
at December 31,1986 and 1985, are corts of Unrecovered Purchased Fuel Costs
$222.158,837 and $201,625,464 including interest charged to construction of $113,656.386 and Natural gas purchased under the tske or pay
$93.144,648 respectively,forthepurchaseof 3.8%
terms of contracts with various individual wnership of the comanche Peak Nuclear producers is recorded at contract cost, which Generating Station.
includes production taxes and royalties. The
4-DEFERRED CHARGES 6-Lcng T:rm Dsbt Following h a summary of deferred charges at Long-term debt consisted of the following at December 31,1986 and 1985.
December 31,1986 and 1985.
1986 1985 1986 1985 Unrecovered purchased REA-Installment fuelcosts,less mortgage notes:
allowance for 2%, various maturity unrecoverable gas of dates to
$247,455 and $255.034; November 28,2014
$52.986,611
$55,860,848 deferred production 5%,various maturity taxesof$34.959 and dates to
$43,965;and deferred September 12,2018 30,527,749 28,768,936 royaltiesof$50.959 83.514.360 84,629.784 and $64,106
$ 132,118
$ 274,627 Less: Current maturities 3,188,000 3,175.000 Fixed transmission costs, less amortization of 80.326,360 81,454,784
$2,077,859 and
$1.699,592 378,267 CFC-Installment Preliminary survey and mortgage notes:
investigation charges 1,756,971 1,754,946 7% maturesNovember Other 114.6 %
230,747 30,2007 6.223,956 6,350,619
$2,003.788
$2.638.587 7%, matures May 31, 1.218.108 1,649,178 1989 MONAGE CAPITAL AND OTHER 3
16 1.280.755 1,283,451 11%, matures August Detailof patronage capital:
31.D18 8.680.346 6,912.400 December 31, 17,403,165 16,195.648 Less: Current maturities 690,000 568,800 16,71),165 15,626.848 29 Assignable
$20.076.698
$16,449.819 Assigned 42,696,212 26,246,393 FFB-Mortgage notes 62,772,910 42,696,212 Variousinterest rates from 7.2% to 12.914%
Detailof other equities:
maturing at various es from F26-87 Capitalgains andlosses 9,383 9,383 to 12-31-2020 279,570,698 274.690,000 Nonoperatingmargins 5,242,295 4,318,468 ess n ma s
- 2. m, W M
Retained eamings of subsidiary 296,804 228,709 277.216,698 274,616,000 5.548,482 4,556.560
$374,256,223 $371,697,632 Totalpatronage capital and other equities
$68.321.392
$47,252,772 Unadvanced loan funds of $9,416,000 at 5% inter-est rate are available to the Cooperative at Decem-Under provisions of the long-term debt agree-ber 31,1986 from commitments from REA, ments, until the total of equities and margins Principal and interest installments of approxi-equals or exceeds 40% of the total assets of the mately $1,977,000 are due quarterly on the above Cooperative, the return to patrons of capital con-REA and CFC notes.
tributed by them is limited generally to 25% of the Long-term debt to FFB consists of 2 to 32 year patronage capital or margins received by the Coop.
notes payable with principal and interest payments erativein the next preceding year.
of approximately $6,896.000 due quarterly. The The by-laws of the Cooperative do not provide Cooperative has an option to extend the due dates, for the assignment of nonoperating margins or of the 2 year notes, for a period not less than two eamings of subsidiaries. The by-laws permit the years nor greater than seven years after the date of offsetting of current year operating margins against the advance; or to extend the maturity date to operating deficits ofprior years.
thirty-four years after the end of the calendar year in which the advance was made. At December 31, 1986, the Cooperative had $39,340,353 of advances
with short-t:rm maturity dates which they intend fired generating plant and associated mining to rzfinance under the above options. These facilities, which was constructed for the purpose of advances have been classified as long-term debt for fumishing power and energy to the Cooperative financial statement purposes. Unadvanced loan and STEC.
funds of $23.4162,000 are available to the Coopera-The Cooperative and STEC have entered into tive onloan commitments from FFB.
wholesale power contracts with San Miguel At December 31,1986 estimated annual maturi-through June 30,2020. to purchase the entire ties of principal oflong-term debt outstanding for output of San Miguel. The contracts provide the next five years are as follows:
that the Cooperative and STEC are collectively responsWor San MguePs total cost obwnMg REA CFC FFB Total and operating the plant. including San Miguel's 1987
$ 3,188,000 $ 690,000 $ 2.354.000 $ 6,232,000 debt service obligations. Such responsibility is 1988 3.385,000 737.000 - 2.765,000 6,887,000 allocated between the Cooperative and STEC by 1989 3.417,000 524.000 3,277.000 7,218.000 reference to their respective power purchase 1990 3.459,000 287,000 4,216,000 7.962,000 bligations for any given year.
1991 3.489.000 313.000 4.905.000 8.707,000 The Cooperative purchased $56.433.065 and
$16.938.000 $2.551.000 $17.517.000 $37.006.000
$60,208.491 of electric energy from San Miguel in 1986 and 1985. respectively. Patronage capital 7-LINE OF CREDIT AGREEMENT credits were assigned to the Cooperative by San Miguel of $2.688.993 in 1986 and $1.151,928 in 1985 The Cooperative has established a line of credit, with cumulative totals of $4,122.671 at December for short-term financing, with CFC for $40,000,000.
31.1986 and $1.433.678 at December 31,1985 At December 31,1986, no funds were owed under Accounts payable due San Miguel from the such agreement. In addition,1he Cooperative Cooperative were $4,930,451 and $6,550.457 at has established a line of credit. for short-term December 31.1986 and 1985, respectively.
financing, with a bank for $3,000.000 at the prime In 1984 the Board of Directors approved a interest rate. Prior approval from CFC is required if management plan under which San Miguel would the combined borrowing under the lines of credit pay the Cooperative for its general manager to will exceed $40,000.000. The Cooperative has not serve as San Miguel's general manager. Further. San borrowed any funds under the agreement with Miguel would pay STEC for its general manager to the bank.
30 serve as San Miguel's Manager of Fuel Operations.
Payments were made monthly in 1986 and 1985 in 8-RETIREMENT PLAN compliance with this management plan.
The Cooperative has a contributory retirement plan covering substantially all ofits employees.
10-FEDERALINCOME TAXES L
Total retirement costs charged to operations for 1986 and 1985, were $406.772 and $388,084.
Fedelal income taxes are paid on taxable income respectively, and include charges for current and of the subsidiary only. No provision has been made prior service costs. The Cooperative's policy is to for Federal income taxes for the Cooperative in fund retirement cost annually as it is accrued.
reliance on a determination letter, dated March 12.
The actuarially computed value of vested 1969, issued by Intemal Revenue Service. which benefits at December 31.1985 (date oflatest states that in the opinion of the Service the information available) was $7.635.000. The book Cooperative meets the requirements of Section value of the retirement fund assets at December 501(c)(12) of the Internal Revenue Code and is 31,1985 was $10.495,982.
entitled to exemption from Federalincome tax.
9-TRANSACTIONS WITH MEMBER 11-COMMITMENTS AND CONTINGENCIES COOPERATIVES AND AFFILIATES JOINTOWNERSHIP AGREEMENT The Cooperative has contracts with 19 of its 20 The Cooperative has an undivided 3.8% owner-member distribution cooperatives, through June ship interest in the Comanche Peak Nuclear Gener-30, 2020. for the sale of wholesale electric energy.
ating Station (Project) pursuant to a Joint Owner-The contract with the other member cooperative ship Agreement with Texas Utilities Electric is through June 30, 2010. Sales of electric energy to Company (TUEC) and affiliates thereof. executed the member cooperatives were $161.435.659 and on June 1,1979.
$162,216,740 for 1936 and 1985 respectively.
During 1985. the Cooperative and TUEC began The Cooperative and South Texas Electric negotiations intended to limit the Cooperative's Cooperative. Inc. (STEC). another generation and financial obligation with regard to the Project.
transmission cooperative (G&T) are members of Also, during 1985, the Cooperative notified TUEC San Miguel Electric Cooperative. Inc.. (San Miguel.)
of the existence of a dispute regarding the Project San Miguel owns and operates a 400 MW lignite.
and began withholding construction progress payments.
~
. lOn May 29,1986' TUEC filed suit in the 14th.
- Judicial District Court of Dallas County. Texas.
- against Brazos and the two other minority interest
- owners of the Project. The suit requests a declara-tory judgmer;t on TUEC's allegation that it has
' performed all its obligations under the Joint Own-i trship Agreement in accordance with that agree-ment's standard of " prudent utility practice and it -
alleges, among other things, breach of contract by Brazcs in withholding construction progress pay- '
. ments. On June 20.1986. Brazos filed counter
'l
. claims against TUEC alleging, among other things.
~ that TUEC has not met the agreement's standards
- and is in violation of the Texas Deceptive Trade :
- Practices Act. The countersuit asks that the Joint
~
Ownership Agreement be rescinded and Brazos'.
investment be returned, plus damages. Factual dis-covery is in progress. While the outcome of the -
' litigation cannot be predicted with certainty, the Cooperative views its claims against TUEC as fully justifying the reliefsought.'
. As of December 31,1986, the Cooperative had
= invested _$231,917.723 in the Project as construction payments. nuclear fuel, associated transmission '
facilities, interest during construction and other -
- - indirect costs, exclusive of $42.338.524 in withheld :
progress payments. Loans from FFB guaranteed by -
REA. totalling $193 million have been used for the
- Project.
l
[..
Should Brazos file an application for a rate increase, which includes costs of Comanche Peak 31 inits cost ofservice, aninquiry
- Commission of Texas into the p,by the Public Utility rudence of Brazos; investment in the Project may result. Should the commission find that some portion of the Project
' is to be disallowed for rate making purposes, the -
Cooperative may be required to write off that por- -
tion of the cost of the Project which is disallowed.
- The Cooperative is unable to determine whether or not some portion of the Project cost will be dis-
- allowed: additionally, the Cooperative is unable to d:termine the materiality of any disallowance.
should it occur and its effect on Brazos* rates and eamings, inasmuch as Brazos* retum on invested :
capital has been treated historically by the com-mission as a function of Brazos' cash requirement
- and not determined independently thereof.
Vain -urcman Certified Public Accountants Central Texas Tower Tele;; hone: (817) 776-4190 t
P.O. Box 7616 Waco, TX 76714-7616 i
The Board of Directors Brazos Electric Power Cooperative, Inc.
I We have examined the consolidated balance sheet of Brazos Electric Power Cooperative, Inc. and subsidiary as of December 31,1986 and 1985, and the related consolidated statements of revenue and patronage capital and other equities and changes in financial o
position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
As discussed in Note 11, the recovery of certain construction costs associated with the 3.8%
Joint ownership of the Comanche Peak Nuclear Generating Station is dependent upon future 32 events, the outcome of which cannot presently be determined.
In our opinion, subject to the effects on the financial statements of such adjustments, if any, as might have been required had the outcome of the uncertainty referred to in the preceding paragraph been known, such financial statements present fairly the financial position of Brazos Electric Power Cooperative, Inc. and subsidiary at December 31.1986 and 1985, and the results of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
_ e +-
February 28,1987 Member of Klyrveld Main Goerdeler
SystemStatistics Fuel Nameplate Operating Transmission Lines:
Generation Capacity:
345 KV..
96 miles San hiiguel Plant Lignite 195.5 htW 195.5 h1W.
I33 KV.
627 miles R.W. hidler Plant N. Gas 366 h1W 391 htW 69 KV.
1.510 miles North Texas Plant N. Gas 66 htW 75.5 hiW 2.233 miles Hydro (by contract) 50 hiW 54 htW h*b '**Phange Cu' stomers..... '.'10
'IV * *
- Capacity allocation as hiuniciPalInterc 7
a faint owner.
677.5 hiW 716.0 h!W Ultimate Consumers (meters)...
. 229.000 Counties Served..
. 66 Nod Texas Comanche Peak NaturalGas N"'I
ElectricPower Electric Power Generation Plant Generation Plant Randle W. Miller (jointly owned.
NJturJlGJS underconstruction)
Electnc Power i
~i j
Generation Plan.
~
y ir 7 i
33 San Miguel Lignite Electnc Power Generation Plant yointly owne&
Tanumotoot Awo AssasvunoNs UsED rN nns Rxrost KW-.
- Kilowatt.....l.000 watts A measure of demand for power. Typical bght bulbs are raced at 60 and 100 watts.
MW..
Megawatt.....I mdlion watts. A measure of demand for power.
KWH-Kilowatt hour....l.000 watts used for 1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> A measure of energy. Energy used by a 100-watt hght bu'b danng ten hours.
MWH-Megawatt hour...1.000 lulowatt hours. A measure of enerp K V -.-
. Kilovolt....l.000 volts A measure of electncal potential Household voltage is typically 115 volts.
KVA.
- Kilovolt. ampere....l.000 volt amperes A measure of capabthty of electrical equipment to operate under load without heat damage. This figure is the mathematical product of voltage times current (ampere).
BTU
. British Thermal Unit. A measure of heat.
MMBTU...
..One Mdhon BTU's Lignite --
A low quality coal.
Mill
- One tenth of a cent. A measure of cost of electncity.
MCF --
1.000 cubic feet. Volumetnc measurement used for natural gas.
b nemicau MM AsMR awm, Y
>mmer gn,ma s
-;g
~
e wMr 1 si a
,g r g g
{!s;
-4
~
w rs
.w w
}
i rl.
e f,}:
t$
~,
g 41 4
i
(
- t'4
- g. 4 t-l Q'??
(,. ;
.:e f
f-P
(
- f.
IN MEMORIAM...
When W.R. (Bob) Poage died on Jan. 3,1987, Brazos Electric Power, our state and our nation lost a great friend. Poage served 42 years as the Congressman from Central Texas. For each of those 42 years, he was singularly dedicated to one goal: the betterment of Texas.
Bob Poage was instrumental in building the fledgling rural electrification program and became known as one of the foremost advocates of public power. Poage's impassioned efforts assured the month-old Brazos River Transmission Electric Cooperative its first power supply, a contract for the power generated at the new Possum Kingdom hydroelectric project.
Poage was recognized as one of the most knowledgeable men in the country on farm programs and agriculture. His love of the land led him to become a leading advocate of water conservation and flood control projects: his work helped pass the bills authorizing construction of Lakes Whitney, Belton, Stillhouse Hollow. Proctor, Somervell and Waco in CentralTexas.
" Bob Poage had the most incredible foresight of anyone I have ever known. Fifty years ago he could see that the country was going to need water. The nice, comfortable life we enjoy now in Central Texas is a result of the foresight of Bob Poage," said his successor, U.S.
Representative Marvin Leath.
Bob Poage, unlike many politicians, will be remembered not only in the history books or on plaques. The real monuments to "the man with the built-in smile" will endure forever in the lives of rural Texans. The daily tasks of filling a glass of water or Hipping on a light switch are shining tributes to Bob Poage and his great work. He will be missed.
^
t
. i;..
_9
- : r 4
s f
9 TH$ BRAZO' SYSTEM' S
-Brazos Electric Power Cooperative, Inc.
2404 LaSalle P,0.' Box 2585.
- Waco,' Texas 76702-2585
~
- 817/750-6500 ~
k ap.
A
.' 5 g
k
)
OI B
+
k
.e a
mise a
I l
l TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC, FINANCIAL STATEMENTS December 31, 1986 and 1985 and ACCOUNTANTS' REPORT l
AXLEY & RODE CERTIFIED PUBLIC ACCOUNTANTS LUFMIN. N ACOGDOCHES. CROCK ETT. LIVINGSTON TEXAS
l IL
{;
I '.
s i
(
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
FINANCIAL STATEMENTS December 31, 1986 and 1985
-4, and ACCOUNTANTS' REPORT l
.1
.[
4 I
g 4
AXLEY a RODE CEltTIFIED PUBLIC ACCOUNTANTS LUFKIN - NACOGOOCHES = CitOCKETT LIVINGSTON TEMAS l
... =...
_.J
';O c' m..
R l-17 I':
t
.l TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
FINANCIAL STATEMENTS I '-
December 31, 1986 and 1985
\\
and ACCOUNTANTS' REPORT I' p
'/
,[.
)
'l e
.(
?
t r
4 AXLEY& RODE CERTIFIED PUBLIC ACCOUNTANTS
W.
7',
y
, tw
- . i. L C 0 N T_E N T S
...r!,
.I?'t 7
- Ac coun t an t s ' ' R ep o r t : - e z. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -,- - -.- - - - - ~
1 Y
?
Financisi Statements:
.\\i t 4 i.
Balance Sheets /s------------------------------'---------------------------
2 S tat ements of Revenue and Expens es ----------------------------------------
3 1;%
Statements of Pe;tronsge Capital and Other Equitie:J ------------------------
4 Statements of Changes in Financial Position -----. -------------------------
-5 Notes to Financial Statements -----------------------r 6
e.
e 1
h
%5
)
...'(*
g,.
I f l'
, - +
l
,D
- t l
l k
)
<<.f f
I 4
- s>
s s
?'
t AXLEY& RODE CERTIFIED PUBLic ACCOUNTANTS
/ p' f
AXLEY Q RODE CERTIFIED PUBLIC ACCOUNTANTS LUFKlH N ACOGDOCHES CROCMETT LivlNGSTON TEMAS March 5, 1987 The Board of Directors Tcx-La Electric Cooperative of Texas, Inc.
1 We have examined the balance sheets of Tex-La Electric Cooperative of Texas, Inc. (the Cooperative) as of December 31, 1986 and 1985, and the related statements cf revenue and expenses, patronage capital and other equities, and changes in financial position for the years then ended.
Our examinations were made in cccordance with generally accepted auditing standards and, accordingly, included cuch tests of the accounting records and such other auditing procedures as we c::nsidered necessary in the circumstances.
As discussed in Note 11, in June 1986, litigation was instituted by the Cooperative and the other minority owners of a two-unit nuclear fueled power g:neration plant (Comanche Peak).
The suit claims various breaches of a 1980 Joint Ownership Agreement for the Comanche Peak project.
At this time the Cooperative cannot predict the ultimate outcome of this litigation or the impact thereof on its financial statements.
As more fully discussed in Notes 11 and 12, on May 20, 1986, the Cooperative ceased making payments for construction expenditures related to Comanche Peak.
The Cooperative and the other minority owners have been sued by the majority owner of Comanche Peak for their failure to continue making payments.
The Cooperative has cubmitted a deficiency loan application to the Rural Electrification Administration (REA).
At this time, the Cooperative cannot predict the ultimate outcome of such litigation or the final determination by REA of the deficiency loan application.
In our report dated March 25, 1986, our opinion on the 1985 financial ctatements was not qualified with respect to the matters described in the preceding paragraphs; however, in view of the recent uncertainties referred to above, our present opinion on the 1985 financial statements, as presented herein, is different from that expressed in our previous report.
In our opinion, subject to the effect of the outcome of the uncertainties discussed above, the financial statements referred to above present fairly the financial position of Tex-La Electric Cooperative of Texas, Inc. as of December 31, 1986 and 1985, and the results of its operations and the changes in its financial position for the years then ended in conformity with generally accepted accounting principles applied on a consistent basis.
Y CERTIFIED BLIC ACCOUNTANTS
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
BALANCE SHEETS j
December 31, 1986 and 1985 1986 1985 ASSETS Electric Plant, At Cost:
(
Furniture and fixtures 24 753 16 251 Office building 91 102 115 855 16 251 Less accumulated depreciation 8 651 3 912
[
107 204 12 339 Construction work in progress (Notes 2 and 6) 170 128 561 147 431 383 170 235 765 147 443 722 I
Other Assets and Investments:
Investment in associated organizations (Note 3) 2 838 157 2 838 157 Other assets 3 731 Current Assets:
Cash, including temporary cash investments I
of $987,839 and $610,546 in 1986 and 1985 -
General funds 1 011 071 635 283 Cash, including temporary cash investments of $152,632 and $1,571,540 in 1986 and 1985 -
I Construction funds 259 763 1 573 186 Accounts receivable (includes receivables from member cooperatives of $1,654,900 in 1986 I
and $2,372,807 in 1985) 1 723 594 2 459 005 Prepaid expenses 50 625 7 1_36 3 045 053 4 674 610
$176 122 706
$154 956 489 EQUITIES AND LIABILITIES Patronage Capital and Other Equities (Notes 10, I
11 and 12):
Memberships 700 700 Patronage capital (Note 4) 359 819 258 101 I
Other equities (Note 5) 152 100 97 075 512 619 355 876 Long-term debt (Note 6) 173 035 986 151 778 000 Current Liabilities:
Accounts payable 2 574 101 2 817 652 1
Accrued interest 4 961 2 574 101 2 822 613
$176 122 706
$154 956 489 The accompanying notes are an integral part of these financial statements. AXLEY aRODE CERTWIED PUBLic ACCOUNTANTS
L TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
[
STATEMENTS OF REVENUE AND EXPENSES L
For The Years Ended December 31, 1986 and 1985 1986 1985 Operating Revenue:
Power sales (Note 7)
$27 412 058
$30 537 181 Operating Expenses:
I Cost of purchased power 26 526 304 29 638 267 Administrative and general (Notes 8 and 9) 766 547 741 995 Depreciation 4 739 1 131 27 297 590 30 381 393 Operating margins before interest expense 114 468 155 788 Interest Expense:
Interest on long-term debt 16 577 621 14 522 125 I
Allowance for borrowed funds used during construction 16 577 621 14 522 125 Operating margin 114 468 155 788 Nonoperating Margin:
I Interest income 42 275 55 025 Net margin 156 743 210 813 I
I I
I l
l The accompanying notes are an integral part of these financial statements. AxLEY& RODE CERTIFIED PUBLIC ACCOUNTANTS
[
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
{
STATEMENTS OF PATRONAGE CAPITAL AND OTHER EQUITIES For The Years Ended December 31, 1986 and 1985 PATRONAGE OTHER MEMBERSHIPS CAPITAL EQUITIES TOTAL Balance, December 31, 1984
$700
$ 76 348
$ 68 015
$145 063
[
Net margin 210 813 210 813
~
Transfer to appropriated margins (29 060) 29 060 Balance, December 31, 1985 700 258 101 97 075 355 876
[
Net margin 156 743 156 743 Transfer to appropriated margins (55 025) 55 025
[
Balance, December 31, 1986
$J,QQ
$359 819
$152 100
$512 619
[
[
[
[
[
l
[
[
The accompanying notes are an integral part of these financial statements.
[ L AXLEY & RODE CERTIFIED PUBLIC ACCOUNTANTS
b TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
{
STATEMENTS OF CHANGES IN FINANCIAL POSITION For The Years Ended December 31, 1986 and 1985 1986 1985 Funds Were Provided By:
Net margin 156 743 210 813 p
(
Add Items Not Requiring Funds:
Depreciation 4 739 1 131 TOTAL FROM OPERATIONS 161 482 211 944 f
L Advances from REA 21 257 986 30 751 000 Decrease in nonutility property 12 887 Decrease in working capital 1 381 045 c
L
$22 800 513
$30 975 831 Funds Vere Used For:
Additions to construction work in progress
$22 697 178
$26 643 348 Additions to furniture and fixtures 8 502 407 Additions to building 91 102 F
Additions to other assets 3 731 L
Increase in working capital 4 332 076
$22 800 513
$30 975 831 Increase (Decrease) in Working Capital By Components:
Cash - General 375 788 326 097 Cash - Construction (1 313 423) 1 365 420 I
Accounts receivable (735 411)
(264 664)
L Prepaid expenses 43 489 6 695 Accrued interest (789)
Accounts payable 243 551 (217 657) r L
Accrued interest 4 961 3 116 974
$(1 381 045)
$ 4 332 076 r
l r
L e
L k
r t
r L
The accompanying notes are an integral part of these financial statements.
( AXLEY & RODE CERTIFIED PUBLIC ACCOUNTANTS
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
{
NOTES TO FINANCIAL STATEMENTS N07T. 1 -
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Organization and Operation:
(- '
Tex-La Electric Cooperative of Texas, Inc. (the Cooperative) is an electric generating and' transmission cooperative formed pursuant to the Texas Electric Cooperative Corporation Act. -The Cooperative provides wholesale electric service to f-the distribution cooperatives of. Cherokee County Electric Cooperative Association, L
Deep East Texas Electric Cooperative, Inc.,
Jasper-Newton Electric Cooperative,.
Inc., Houston County Electric Cooperative, Inc., Rusk County Electric Cooperative, Inc., Sam Houston Electric Cooperative, Inc. and Wood County Electric Cooperative, b
Inc. (Members).
l The Cooperative was formed principally to provide dependable power and energy
{
to its members at the lowest cost possible.
In doing so, the Cooperative works closely with its members in determining their power requirements and in contracting with its respective bulk power suppliers to satisfy such requirenents.
Chart of Accounts:
The Cooperative maintains its accounting records in accordance with the Federal
(
Energy Regulatory Commission's Uniform System of Accounts as adopted by the Rural Electrification Administration.
The more significant accounting policies are described below.
Electric Plant:
p Office building and furniture and fixtures are stated at historical cost.
L-
_ Depreciation of these assets is computed at a straight-line composite rate of 4% and 7%, respectively.
{
Construction work in progress represents the Cooperative's share of the project costs for the construction of the Comanche Peak Steam Electric Station not yet in production.
Allowance for Borrowed Funds Used During Construction:
p.
The Cooperative has capitalized to electric plant the cost of borrowed funds L
used for the construction of the Comanche Peak Steam Electric Station net of the related interest income from invested construction funds.
{
Income Taxes:
The Cooperative is exempt from Federal income tax under the provisions of Section 501(c)(12) of the Internal Revenue Code.
E.
{ Ax LEY & RODE CERTIFIED PUBLIC ACCOUNTANTS
j>
. TEX-LA' ELECTRIC COOPERATIVE OF TEXAS, INC.
(
?!OTES TO FINANCIAL STATEMENTS - C0ffrINUED NOTE 2 -' JOINTLY-0WNED FACILITIES
[-
On December'9, 1980, the Cooperative executed a Joint Ownership Agreement with Texas Power & Light company to. acquire a 4 1/3% undivided ownership interest in the
(,
-Comanche Peak-Steam Electric Station, a two unit 1150 megawatts. each nuclear fueled electric generating station, located near Glen Rose, Texas' in Hood and Somervell Counties, Texas, being constructed by Texas Utilities Generating Company.
On February 12, 1982, - following the announcement of a substantial increase in
-the costiof' the project and delay in the projected commercial operation date, the Cooperative agreed to reduce its ~ interest in the project to 2 1/6%.
In ~1982 the h
Cooperative, based on Texas Utilities-Electric ' Company's (Texas Utilities) estimates, upected that Comanche Peak Units 1 and 2 would be licensed by the
- Nuclear Regulatory Commission - (NRC) and commence commercial operation in 1984 and
{
1985, respectively, and that the Cooperative's share of the. project would cost a j
total ' of $120 million.. The Cooperative planned to fund its participation in the l
project by means of a loan from the Federal Financing Bank of up to $180 million, guaranteed by the Rural Electrification Administration-(REA).
As a result of difficulties which Texas Utilities has encountered in the NRC licensing. process, primarily -in convincing the NRC that Comanche. Peak has been h.
properly constructed, the NRC to date has not issued an operating license for either Unit 1 or 2.
Based on Texas Utilities' present estimate, the Cooperative does not expect commercial operation of the project to commence prior to 1989.
As of
[
December 31, 1986, the Cooperative's total expenditures for its 2-1/6 percent share of-the project is approximately $170 million.
Pased on the Cooperative's current estimates for the completion and licensing of the project, the Cooperative's share of Comanche Peak is expected ultimately to cost approximately $279 million.
This figure could increase further in the event of added delays or other difficulties
.with the project beyond those currently anticipated.
Construction of Unit 1 of Comanche Peak is virtually complete, but because of numerous uncertainties in the
[..
dates of these units can be met or that the current estimated completion costs licensing process no assurance can be given that the estimated commercial operation thereof will not be exceeded.
Failure to secure timely and favorable regulatory
[.
approvals or any further delay occasioned by reinspections or possible rework resulting therefrom will increase the cost of the plant.
The Cooperative has not yet determined how it will fund the portion of the
(-
project cost which is in excess of the current REA loan guarantee limit of $180 million.
The Cooperative has flied an application with the REA for a deficiency loan and has requested authorization from the Public Utility Commission of Texas for
{
cn. increase in the Cooperative's electric rates.
L
[
{ AxLEY & RODE CEftTfFIED PUBLIC ACCOUNTANTS
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
~
NOTE 3 - INVESTMENTS IN ASSOCIATED ORGANIZATIONS l
Investments in associated organizations at Decembar 31, 1986 and 1985 consisted u
of the following:
1986 1985 1
Patronage capital from the National Rural Utilities Cooperative Finance Corporation (CFC)
$2 837 157
$2 837 157 Memberships 1 000 1 000 i
$2 838 157
$2 838 157 The investment in CFC represents patronage capital credits allocated to the Cooperative. Realization of cash from this investment is within the control of CFC.
NOTE 4 - PATRONAGE CAPITAL The details of Patronage Capital at December 31, 1986 and 1985 are as follows:
1986 1985 I
Assignable
$359 819
$258 101 Assigned 359 819 258 101 I
Less:
Retired
$359 819
$258 101 NOTE 5 - OTHER EQUITIES The details of other equities at December 31, 1986 and 1985 are as follows:
1986 1985 Appropriated margins
$152 100
$97 075 The by-laws of the Cooperative provide that non-operating margins be used initially to offset any losses incurred during the current or any prior fiscal year.
Upon recovery of any losses, a fund in the amount of $400,000 shall be accumulated from these remaining non-operating margins and funded each year, if necessary, to maintain the $400,000
- alance.
NOTE 6 - LONG-TERM DEBT Long-term debt at December 31, 1986 and 1985 consisted of the following:
1986 1985 Mortgage notes payable to the Federal Financing Bank at interest rates from 7.294%
to 11.911% with the Rural Electrification Administration (REA) as administrator
$173 035 986
$151 778 000 AXLEY & RODE CERTIFIED PUBLIC ACCOUNTANTS
L TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
[
NOTES TO FINANCIAL STATEMENTS - CONTINUED w
p-
-NOTE 6 - LONG-TERM DEBT - CONTINUED' In July 1981, the Cooperative entered into a loan agreement not to exceed
~
$180,000,000 to finance the construction and operation of generating facilities, electric-transmission, distribution and service lines by the. Cooperative payable to the Federal Financing. Bank (FFB) pursuant to an agreement between the FFB and the.
REA.
[.
The maturity date of each amount advanced under the loan agreement shall not be less than two years nor more than seven years after the date of the advance and chall be' designated in writing at'the time of request by the borrower subject to REA
(
spproval.
Under the - terms of the agreement, the Cooperative may designate a naturity date of thirty-four years after the end of the calendar year in which such cdvance was made.
The interest rate applicable to each advance is the respective
{
rate established by the FFB at the time of the advance.
The Cooperative has designated a long-term maturity of thirty-four years for a portion of the FFB
.i
.Edvances.
It is anticipated that the amounts due in 1986 and 1987, together with future additional borrowings from FFB, will be extended.
[.
Substantially all of the Cooperative's assets are pledged as security for the long-term debt owed FFB.
[
The Cooperative has available a $12,000,000 line of credit which expires in 1987 with the CFC under which there were no borrowings outstanding at December 31,
{.
1986.
NOTE 7 - PCWER CONTRACTS f
The Cooperative has wholesale power contracts with each of its members which require the members to buy and receive from the Cooperative all their power and energy requirements and require the Cooperative to sell and deliver power and energy
[
in satisfaction of such requirements.
The contracts extend to December 30, 2026 and thereafter, as permitted by law until the expiration of six months after notice of cancellation by either the Cooperative or the Members.
The - Cooperative purchased all of its power at wholesale from Texas Utilities Electric Company, the Southwestern Power Administration (SWPA), an agency of the
. Department of Energy, and Southwestern Electric Power Company'(SWEPCO).
NOTE 8 - PENSION PLAN l
The employees of the Cooperative participate in the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program.
The Cooperative makes annual contributions to the plan equal to the amounts accrued for pension expense.
In this master multiple-employer plan, which is available to all member l
cooperatives of NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer.
Pension expense for this plan for the years' ended December 31, 1986 and 1985 was $14,333 and $11,020, respectively. AxLEY& RODE CERTIFIED PUSLIC ACCOUNTANTS
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
NMES TO FINANCIAL STATEMENTS - CONTINUED NME 9 - RELATED PARTY TRANSACTIONS The Cooperative and Sam Rayburn G & T, Inc. (SRG&T), an electric generating and.
transmission cooperative, share facilities and personnel.
SRG&T reimburses the Cooperative for its proportionate share of the related expenses and equipment purchases. - The total reimbursement for the years. ended December 31, _1986 and 1985 was $131,582. and $116,274, respectively. Certain '. members of the Cooperative are tembers of SRG&T.
NOTE 10'- LITIGATION
(~
The Cooperative has 'been advised by legal counsel ' that litigation has been.
brought ' against the : Southwestern Power ' Administration (SWPA) by Brazos Electric Power Cooperative,
'Inc.
.(Brazos),
concerning a power contract. between the
{.
Cooperative and the SWPA.
Brazos has challenged the power contract as well as SWPA's power allocations ~ as to the power the Cooperative receives from the Denison Dam.
Furthermore,. by the terms of the Scheduling Agent Agreement dated October 30,
(
1984 between the Cooperative and Texas Utilities Electric Company (Texas. Utilities),
t the Cooperative has agreed to hold harmless Texas Utilities from any monetary
' damages and attorney fees that might result from any claim brought by Brazos against Texas Utilities as a result of the Scheduling Agent Agreement.
(
In a letter agreement signed by the Cooperative, it was agreed that if Texas.
-Utilities intervenes in' this action, the Cooperative will not be obligated to
[-
indemnify Texas Utilities for any attorney fees it incurs as a result of Texas t-Utilities intervening in this action.
On January 23, 1985 Texas Utilities flied a motion to intervene in the case of Brazos v. SWPA.
f'-
On December 30,
- 1985, the District Court granted the defendants' and intervenors' motions for summary judgment against Brazos, and dismissed the entire action.
Brazos has appealed the District Court's ruling.
If necessary, the
{
Cooperative intends to vigorously pursue the litigation.
- However, it-is not possible at present for the Cooperative and its counsel to predict the outcome which might result from the actions of Brazos.
Accordingly, no provision for any l-liability that -might result therefrom has been recorded in the accompanying financial statements.
NOTE 11 - COMANCHE PEAK LITIGATION In May, 1986, the Cooperative and the other minority owners of the Comanche i
Peak Steam Electric Station (Comanche Peak), a two-unit nuclear fueled power generation plant, were sued by the majority owner, Texas Utilities Electrk Company
. (Texas Utilities).
The suit seeks a declaration that Texas Utilities has properly performed all its obligations under the Joint Ownership Agreement relating to Comanche Peak and seeks to force those minority owners who have discontinued making payments to Texas Utilities to resume making payments.
Texas Utilities' lawsuit was filed after months of settlement negotiations with the Cooperative had reached an impasse ard after the Cooperative, in a letter dated May 20, 1986 to Texas Utilities, formally notified Texas Utilities that future payments would not be made AxLEY & RODE CERTIFIED PUSLIC ACCOUNTANTS
v-TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
' NOTES TO FINANCIAL STATEMENTS - CONTINUED r_
. NOTE 11 - COMANCHE PEAK LITIGATION - CONTINUED L
because the Cooperative believes that Texas Utilities has mismanaged the construc-tion of Comanche Peak and has failed to ' provide a cost estimate and a schedule of
-completion to the to the Cooperative as required by a Joint Ownership Agreement.
At this time, the Cooperative is not making any payments.
{
In ' June, 1986, the Cooperative and two minority owners (Texas Municipal Power Agency and Brazos Electric Power Cooperative, = Inc. ) of the Comanche Peak project instituted litigation against Texas Utilities claiming various breaches of the Joint g_
0wnership Agreement by Texas Utilities.
The estimated cost of the Comanche Peak l
[
project increased from $764 million in 1974 to $7.5 billion as currently satimated.
Completion dates of these two units were estimated in 1972 to be 1980 and - 1982 for units one and two.
On November 18, 1985,. Texas Utilities announced
{
that, assuming no further unforeseen difficulties, commercial operations of unit one could not commence until mid-1987, with unit two commencing commercial operations 6 months later.
On - April ' 18, 1986, Texas Utilities announced that, because of new problems that had been uncovered through its reinspection program, the estimate for commercial operation made in November, 1986 was no longer valid.
At present, Texas Utilities has indicated that Comanche Peak will not begin operating before early 1989.
In the litigation, all three minority owners assert their rights under the Texas Deceptive Trade Practices Act (DTPA).
They seek to be compensated for their damages, including, but not limited to, damages related to increased costs of completion, delay damages and attorney's fees and expenses.
Furthermore,_under the DTPA,' the minority owners may recover up to three times the amount of actual damages, plus court costs and reasonable attorney's fees.
Previous settlement discussions have been unproductive and, at present, there are no settlement discussions underway.
The lawsuit currently is in the early phases of discovery. When the trial will take place is still uncertain.
NOTE 12 - REA DEFICIENCY LOAN The Cooperative has financed its share of the Comanche Peak project with debt.
On August 3, 1981 the Cooperative received a $180 million loan commitment from the Rural Electrification Administration to finance the Cooperative's share of the Comanche Peak project.
Through December 31, 1986 the Cooperative has utilized approximately $173 million of the loan commitment.
Based on the Cooperative's projections and expectation for commercial operation dates, the Cooperative
.catimates its'2 1/6% share of the project will cost in excess of $279 million.
As a result, the Cooperative has submitted a deficiency loan application to the Rural Electrification Administration in regard to the Comanche Peak project.
At this time, the Cooperative cannot predict the outcome of such application. AxLEY& RODE CERilFIED PUBLIC ACCOUNT ANTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.