ML20216F993

Piedmont Municipal Power Agency 1998 Annual Rept

ML20216F993
Person / Time
Site:	Oconee, Mcguire, Catawba, McGuire
Issue date:	12/31/1998
From:	Duncan D, Ouchley D PIEDMONT MUNICIPAL POWER AGENCY
To:
Shared Package
ML15112A770	List: ML20216F993
References
NUDOCS 9909270196
Download: ML20216F993 (31)

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s l The Piedmont Municipal Power Agency is a joint action agency formed by 10 municipal . 4 electric utilities in northwestern South Carolina. Its mission is to assist its members in providing competitive electric energy and related services, as well as to contribute to the economic vitality of each member community.

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The Piedmont Municipal Power Agency is a joint action agency formed by 10 municipal .

electric utilities in northwestern South Carolina. Its mission is to assist its members in providing competitive ' electric energy and related services, as well as to contribute to the economic vitality of each member community.

l PMPA owns 25 percent of the Catawba Nuclear Plant Unit No. 2 and buys additional power from Duke Energy. The agency's corporate office is located in Greer, S.C.

s we approach the 21st century, South Carolina's electric

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utilities are poised to enter a new wodd of customer choice

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30 - communities it serves. With new leadership, a r iewed sense Q' g)TW' %.g Q". of optimism and a willingness to form ne v partne ships and 2 O'-alliances PMPA remains et to ensuring th our

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r Management Letter is our pleasure to include all utilities - municipal, p cooperative and investor owned annual i< port. This - m deregulation. Also, the I: resent PMPA's 1998 year, we began chartmg a new course that we believe will plan recognizes that a system fiir recovenng stranded costs is critical to the successful strengthen both our deregulation of the electric internal alhances among mdustry and that this system our members and their must be understood prior to communities, and our legislative action. The plan is being external relationships with used by legislators to develop other utilities, businesses, legislation fbr 1999.

legislators and regulators.

Ieading us in this new course is in the S.C. Senate, Senator Donald Don A. Ouchley, who joined Holland, Chairman of the Senate PMPA as General hianager in Judiciary Committee, created a Task the summer of 1998. Don Force on Electric Deregulation to replaced James A. Ilauer, who evaluate if, when and how South retired in September, afier Carolina's electric industry should be serving 14 years as General deregulated. The Task Force is Manager. chaired by Senator Thomas Moore and is comprised of State Senators, Over the year, our primary focus members of the PSC, and utility and has been on preparing our agency i industry representatives. PMPA is and its members for deregulation of fortunate to be represented on the the electric industry. Our efforts Task Force by General Manager, have, and will continue to be, Don Ouchley.

fbcused in four primary areas: Don A. Ouchley, Cencral 31anager (left), ami legislative involvement, Dasial V. Duncan, Chainnan, Hoani of Director

• As a part of our legislative and customer service, power supply regulatory involvement, PMPA and finance. has worked to educate its members and their governing bodies about in 1998, the S.C. House of Representatives, on how South electric deregulation and the i Representatives Public Utilities Sub- Carolina should proceed with legislative process. In February, we f Committee continued to debate the deregulation. The plan does not hosted a power conference for our Competitive Power Act, which was address whether deregulation would directors and the elected ofUcials introduced in 1997 by Rep. Doug he beneficial to South Carolina; from our member utilities. The Smith. At the end of the legislative instead,it identified the issues that conference Ibcused on the current session, no action was taken on the must be addressed if deregulation is legislative and regulatory process and bill and new legislation must be to occur here. The plan does not on ways each individual member and introduced in 1999 lbr debate to specifically address public power the agency as a whole couki best continue. The PSC presented a plan, utilities; however, it does recognize prepare lbr the challenges ahead.

in early 1998 to the House of that special consideration is needed to Representative Harry Cato, 2 Piedmont Municipal Power Agency

n y Chairman of the House I.ahor, members have met with their addition, plans were begun in late Commerce and Industry Committee, legislators to explain our position, 1998 to reGnance a portion of the participated in the conference and and this involvement is continuing to agency's 1996A Refunding Series.

discussed how his committee will grow as the deregulation debate Over the past three years, our proceed with the deregulation debate. continues. Our director oflegislative reGnancing efTorts have generated Participants also heard from other affairs coordinates these efli>rts in more than 5180 million in gross debt public power utilities and learned both Columbia and Washington, service savings. The majority of these about programs and services that D.C., to give PMPA a strong voice in savings has been concentrated in the could help position them fi>r the legislative arena. years between 2002 and 2008, and competition. Of particular interest to will result in savings of more than the member utilities were programs This year, we have continued to look $13 million per year during that to help buikt stronger relationships for opportunities to increase our period.

with their existing customers. flexibility regarding power supply and generation costs. One such As a public power utility, it is our Following the conference, the Board opportunity is the Department of sole mission to provide afTordable, of Directors authorized PMPA to hire Energy's (DOE) program to burn reliable electric resources to our a Key Accounts Coordinator to work Mixed Oxide Plutonium (MOX) in member utilities while enabling them with the member utilities and their commercial nuclear plants. In to continue contributing to the customers. Todd Kilsdonk joined August, the joint owners of the economic vitality of their individual PMPA in October and is working Catawba Nuclear Plant, teamed up communities. The potential for with each member to develop a key with Duke Engineering and Services, electric deregulation does not change accounts program that meets their COGEMA Inc. (an international fuel that mission. In fact, it is that needs. He is also exploring various fabrication company) and Stone & mission that will guide us in charting rate options and service programs Webster (a global provider of a new course to meet the many that may be offered through PMPA. engineering and related services) in challenges that lie ahead. From responding to a DOE call for legislative and regulatory activities, to PMPA has worked throughout the proposals to use MOX fuel in nuclear customer service programs and year to keep its members informed of reactors beginning in 2007. The use communications, to changes in power and active in the deregulation debate. of MOX fuel at Catawba could supply, to re6nancings, we will In December, we hosted a half-day reduce PMPA's fuel cost over the always act to protect the interests of workshop for mayors and 15-year life of the project. The DOE our member utilities and to assure commission chairmen on is expected to announce which that public power utilities are a part deregulation to update these key reactors will be used in the MOX of all elTorts to deregulate the electric representatives on the upcoming project in 1999. industry.

legislative agenda. We hosted a Round Table on deregulation and cconomic development for ut bry A signi6 cant improvement to agency costs was achieved this yeas through Q g management, chambers of commerce the 1998A bond reGnancing. The DM E Duncan Ibn A. Ouchley and economic development reGnancing generated approximately Gairmam Aarda/Dirum" G<=amamwr organizations in October and have $8.9 million in gross debt service participated in evcnts and programs savings, which is equal to a 5.2 in our member communities. percent reduction in debt service Representatives from all of our costs over the life of the bonds. In Piedmont Municipal Power Agency 3

Abbeville

• A close4 nit, small community demands the personal touch that only locally owned public power can provide. Togethe, we have solved the problems of the past, and, together we willmeet the challenges of the new millineum."

-David H. Krumwiede, Cit > Manager, City of Abbeville hinHe's hinwk pra hem, honw of downs oHegendarperfwnianM ever the years-western South Carolina, the Located in the footh:lls of historic city of Abbeville is . N g

surrounded by rolling countryside 1

and small rivers that flow into the Savannah River. City leaders have chaned a new course for this quaint city by taking a fond look back at its

• rich history and applying the work ethics of yesterday into the bright and , ,

thriving business climate of today.

The downtown economy is booming.

thanks to the concerted efTorts of . _ w ,

s business and civic leaders who have .~

renovated historic buiklings into -

1. ~

restaurants, specialrv shops and .

overnight accommodations. Tourists  % 1 '. - - -

from throughout the nation regularly J) 3 3

visit Abbeville for its exquisite ~

downmwn square, stately homes and professional Opera House. Abbeville

~

~

,k, \

is also located on the South Carolina -

,.. 1 4 National lieritage Corridor - a ,

=

select series of highways, roads, -

4 towns, cities and sights that define ~ ". "

1 l the state's history, culture and natural beauty.The area is also home to two g -

y , ,

major educational institutions: j Erskine College and Lander College ...

E ".*~ *

- both within minutes of downtown Abbeville. Industrial companies have electricity, to customers both inside from PMPA and operates its own found the area to be ideal lbr their and outside the city limits. The city distribution system. The city of business needs, with over 30 began providing electricity in the Abbeville has charted its fiiture by manufacturing and distribution early 1900s and prides itself on honoring its rich history and -

companies located within the region. providing a high level of personal supplying quality power for In addition, Abbeville County is service to its entire customer base future growth into the next [Irf[f; home to three industrial parks and is almost 100 years later. These personal cen tury. ./

in close proximity to Interstate 85. services include levelized billing, , _

demand-side management and a ~/

The City of Abbeville provides public proactive approach to customer utilities, including water, sewer and concerns. The utility purchases power c(.

Peak Demand for 1998: July-15 MW (includes 2.3 MW from N SEPA and 3.1 MW from hydroplant) 4E4%*

• Usage for 1998: 67,012 MWh (includes 8,047 MWh from * 'A SEPA and 9,500 MWh from hydroplant) %7 Peak Generation: 3.1 MW .

Population: 6,000 Customers: Residential-3,075; usage-32,300 MWh N

Commercial-458; usage-27,278 MWh 4 Piedmont Municipal Power Agency

h Clinton "One of the greatest benefits of public power is that retail rates, ser,' ice policies and customer-service programs are established locally by residents of the community. Our ability to quickly react to custorner-service requirements and tailor services -

to theirneeds willbeourgreatestassetin the deregulatedenvironment!

-Charles B. Utchfield, City Manager, City of Clinton

"* h'h 9 trategically located near major '#""'""Ch"'"i"****h''Y*"*i"I*'"'"d**'**"""*"'l' S 26 and 85, Clinton is known as highway systems - Interstates the " Gateway" to the Upstate. This (

historic city primarily began as a .

textile town with Climon Mills being .

the largest employer in the area. In .a I the past few years, h.istonc

. "%  : q.*' \

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preservation has played a major role '

f,/

i in the economic revitalization of the .

downtown area. In the past three 4 .

years,75 percent of all buildings in 1 the historic district have been renovated, and the majority of these are now occupied by a thriving business community. Civic and

~

. _g business leaders have charted a new e- J < .,,, * . 1 course for the future by conunumg  ? .,. .

its preservation etTorts and  !- *'

j. i 4 AA .

strategically plannmg ways to ensure + -

the local economy remains successful. ;x _ w _, . _ . . , ., . . . .. . .

N A priority has been set for the

~

renovation of the remaining buildings ,

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in the historic district - with the

~

goal of using these buildings for The population of C!inton is 8,203 diesel generators totaling housing. In addition, city leaders and and Laurens Counif, an estimated approximately 2 MW. This system private developers are in the early 62,540. City leaders continue to also provides a valuable back-up to planning stages for developing the work closely with the business and the municipal water treatment "Eastside Industrial Park" to lure new residential community to improve the facility. As part of providing superior and expanding industries into quality oflife in Clinton, showing customer relations, the city offers Clinton. These industries will join their strong sense of ownership in the such programs as a water heater other forces in the local economy community with their theme of maintenance program, which allows such as the Whinen Center, the " Pride in Service." The city of customers to pay a nominal monthly Thornwell Home and Asten-Press. Clinton's utility system was founded fee for the repair or replacement of in 1907 and provides water, sewer their water heaters at no additional

(,. ) Clinton is also home to Presbyterian College - a and ek ctric service to its customers. cost. By supplying superior customer 1 e m The city purchases its power from relations and Ae highest quality

, g@home private, liberal to over 1,000 studentsarts college,PMPA, operates its own distnbution service available, the city of Clinton is y - which pmvides cultural, system and is able to lower peak utilizing its power to continue on a l sporting and educational events for demand as well as reduce course set for success.

l the surrounding community, supplemental power costs through 3

.gh Peak Demand for 1998: August-24 MW (includes 1.9 from SEPA) g Usage for 1998: 123,369 MWh (includes 2,123 MWh from SEPA)

J Peak Generation: Diesel generators totaling approximately 2 MW I Population: 8,203 Customers: Residential-3,650; usage-34,933 MWh Commercial-575; usage-41,012 MWh industrial-6; usage-30,352 MWh Piedmont Municipal Power Agency 5 D

Easley

'The primary strength of Easley Combined Utihties is the flexibility provided by local control. We are able to respond quickly to our customers' wlshes The abihty to rapidly provide products and services that our customers desire willprovide Easley Combined Utilities an advantage in the deregulated market.'-JoelD. Ledbetter, General Manager, Easley Combined Utilities Easley's clock totyer, a wgfl.knemin csty lanelmark.

ince its origins as a textile

~

S city of Easley continues to be manufacturing community, the  ; .

one of the Upstate's most .

economically successfbl ,

municipalitics. Due to the visionary leadership of government and civic ' ~

leaders, as wcll as its location in the - - - - .

pro-business climate of Pickens 4 .

County, Easley has seen tremendous .

residential gmwth in the past several .

~

years. That growth is largely due to ,  ;

the approximately 150 manufacturing .

. T

e.  ;

plants that base expanded or relocated to Easley and its surrounding communities. Since 1985, Pickens -

4-====--

. ; 9 .,

County has attracted more than $406 million in capital investments, .

creating over 2,800 new jobs. The '. -

g .

superior quality oflife in the region was noted in the publication " Crime,

~

Justice and Society 1998," ranking .

e.n g g '.

Pickens County as the best overall r - . - 84 -

' 4k .

county in the state due to its low . .

-~ .

crime rate, superior SAT scores and ,, ^

Iow taxes. Continuing on its charted '

~-

course for economic success, Easley is responsible for nearly 50 percent of all .

retail saks in Pickens County. Easley is also adjacent to major educational L. .

institutions including Clemson University, which has earned national t

prominence in the areas of engineering, agriculture, architecture, ECU purchases power from PMPA a PMPA member utility, the ECU forestry and textiles, and Southern and is able to meet peak electric continues to meet the

~%

Wesleyan University, a four-year generation through diesel generators diverse needs of

= '

liberal arts college. totaling approximately 6 MW. The residential and utility otters special value-added business customers, I The Easley Combined Utilities programs for their customers ensuring that the (I-CU) was founded in 1927 to including a water heater maintenance area continues to Y -

provide utility services, including plan, which allows customers to pay a prosper in the new [~ jW ,. f water, sewer and electricity, to Easley nominal monthly fee ihr the repair or millennium. 4' and the surrounding community. The replacement of their water heaters. As (%,..

m 9

):4 Peak Demand for 1998: July-56 MW (includes 6.7 MW from SEPA) dl Usage for 1998: 263,058 MWh (includes 21,989 MWh from SEPA)

Peak Generation: Diesel generators totaling approximately 6 MW Population: 16,880 Customers: Residential-9,%9; usage 122,390 MWh Commercial and Industrial 1,486; usage-92,556 MWh 6 Piedmont Municipal Power Agency

Gaffney "The Board of Public Works is Gaffney's ' hometown utility.' We are dedicated to providing our community with the most reliable and competitivelypriced utilitic s possible."

-Donnie L Hardin, General Manager, Gaffney Board of Public Works 6*#"'Y**'d "b"'**'k'""ih'*H*"'*"""***"kka""

Carolina, the city of GalTncy is Located in northwest South located in Cherokee County -

and has a population of 13,275.

Gaffney's location in Cherokee -

County, between the Greenville- '

Spartanburg area of South Carolina and Charlotte, North Carolina, -

makes it an ideal location for , . . .-

individuals and businesses seeking - -

small town life with easy access to big-city amenities. Since World War 11, industry has played a major part in - -

the local economy and, today, GalTncy is home to a variety of .

industrial businesses including Nestle,

(.-

hiilliken and several international  ; -:

textile companies. GafTney has a well.

deserved reputation as a major supplier of peaches, the area's largest .

crop, and GafTney plays host to the -

annual South Carolina Peach Festival. '

l.,- '

The stately homes that line the -

downtown area are proud testaments

.i to Gaffney's rich history, and civic f f

leaders have recently renovated hiain Street in the Historic Downtown District. GalTney is also home to '

l.imestone College, a four-year, liberal arts wilege.

Founded in 1907, the Gaffney Board of Public Works provides electric, also able to meet peak electric overall welfare of the community water and wastewater services to the generation through diesel generators with the altruistic Proicct Hope city and surrounding community. totaling approximately 8 hiW. program. The Board of Pub lic Works The BPW purchases power fmm Committed to quality service to the continues to chart a successful course PhiPA and is able to meet the community, the BPW routinely offers for Gaffney and its residents by service needs of any size special programs such as energy supplying quality power for future electrical load at the most audits and billing options to help growth in the new millennium.

competitive prices customers save on their energy bills.

% available. The BPW is In addition, the BPW helps with the A w b, s

,, h Peak Demand for 1998: August-44 MW (includes 5.4 MW from SEPA)

Usage for 1998: 231,690 MWh (includes 17,827 MWh from SEPA)

Peak Generation: Diesel generators totaling opproximately 8 MW Population: 13.275 Customers: Residential-6,057; usage-62,825 MWh Commercial-1,092; usage-75,457 MWh Industeial-33; usage-50,106 MWh Other-41; usage-16,267 MWh Piedmont Municipal Power Agency 7

Greer

• lostyear, Greer Introduced Destination 2000, o customer-motivated program that raises service to a higherlevel.

Customer service has always been a priority, and we're moving it to an even higher level.'

-H. Jerry Balding, GeneralManager, Greer Commission of Public Works

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' M'***"'"~5*"N'""**'*"*'*'*"h**8'**"'"'*

P one of the finest :airportsin'the country, sthpdily meeting the scenic illue Ridge Mountains, upstate s ever-increasin, needs. .

Located at the foothills of dx-

~~

the city of Greer has an , ., )

estimated populatiori of 14,500. ,

,~

Strategically located along Interstate .' . '. , ' -

85. Greer is midway between Adanta ,

i

' ~

and Charlotte in the - - '-

Spartanburg/Greenville Metropolitan >

l area and adjacent to an international -

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/ ,

I airport. The area provides a strong industrial corridor, a force made even -

- , I stronger with the recent addition of the IlMW automotive assembly .

. . ' , I(

.1. V -1

'-] o plant. In calling Greer home, llMW ,

joins other major industrial <A 3

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companies such as Spartan Food

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.4 n System Inc., Springs Industries and g'a/ - " ',

i y We .3,8 8 g Phil Chem as major contributors to -

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the local economy - all customers of ,

i ., ' I T I J & #P the Greer Commission of Public / -

Works. With a strong foundation in  ; L. ,J '

.s  ; .

C '# '

industrial recruitment, city and ,

business leaders have positioned - AgT" f < . . .

y.

Greer as a prime business location for - .- ,' .? .

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new and expanding industry. The . -l ,

• 2 '

g.;

~

Chamber of Comrnerce has joined .

forces with other chambers as part of, ..

the I-85 Ilusiness Belt Group, a j, , - '

p group dedicated to the promotion of

- H.

the I-85 business corridor as a viable >

~ ' ,c, .

economic region with a high qualiry

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• of life. . , ,

t .

l A member of PMPA, the Greer Commission of Public Works (CPW) accounts program, which fi>cuses on World Wide Web was established in 1913. The CPW the precise and individual needs of (www.greercpw.com/). By planning provides natural gas, electricity, water the CPW's largest industrid for the future, focusing on improving and wastewater service to more than customers. The CPW is able to meet the local economy and anticipating <

9,000 customers in the Greer area. In peak electric generation through the needs ofits customers, the 1998, the CPW launched diesel generators totaling Greer CPW has charted a

" Destination 2000," a utility-wide approximately 2.5 MW. Customer successftd, ambitious course initiative focused on improving service programs of the CPW include for the futur.

customer relations. One component billing options, outage systems and 8 f'n[ _ _ _ -

of this program includes a key an infi>rmative home page on the g _

I. ,o, g Peak Demand for 1998: July-45 MW(includes 7.3 MW from SEPA) *f . [

Usage for 1998: 202,411 MWh (includes 23,986 MWh from SEPA) h- ^$

Peak Generation: Diesel generators totaling approximately 2.5 MW ~b/<

Population: 14,500 3 Customers (1997): Residential-0,560; usage-102,367 MWh Commercial-1,347; usage-100,044 MWh 8 Piedmont Municipal Power Agency

3 1

1 Laurens

'The Laurens CPW is dedicated to offering to our customers tailored choices of services of the desired quality and reliability at competitive prices."

--Colemun F. Smoak Jr General Manager, Laurens Commission of Public Works l """ " " #""# " * ""

to the historn slowntown area of Laurens.

• Loc,ited in the roHinb iills of South Caro,iina, the city of Laurens is but a short distance .

'i from Greenville and Spartanburg, which together form the 36th largest market in the United States. The city . .

ofl2urens joins other small towns throughout the state which are deeply committed to revitalizing their ,

downtown corridors. With civic and

~

business leaders joining forces with the I.aurens Main Street USA program, laurens has recently undergone major renmations to .

~

bring consumers back to the historic . .

downtown district. Renovations to the area include a streetscape plan , [.

that includes lush landscaping, period '

e lighting and streets restored to their original brick covering. In addition, '*

the "Laurens Lights" program was l initiated in Christmas of 1998, creating splendid lighting displays throughout the downtown area. In ,

addition to improving the downtown business district, laurens is also home -

to a solid industrial base that includes manufacturing, logging and textile compames.

A member utility of PMPA, the Laurens Commission of Public Works (1 CI'W) olTers water, sewer, leaders to bring a consistently high programs that include customer gas and electric service to customers quality oflife to its residents. These billing options, a charitable donation both within and out of the city efLrts include participation in the program called Community Change limits. The 1 CPW was created in "Laurens I ights" program, the and an informative customer home 1922 for the imprmement and downtown renovation project and page on the World Wide Web expansion of the existing utilities helping develop Ilunter Industrial (www.lcpw.com). ily partnering with g system and, over 75 years later, the Park. The 1 CPW has allocated other crucial entities and ftdfilling a LCPW continues to anticipate and money for the design of commitment for future development, facilitate the changing utility needs improvements to four new sites at the the laurens CPW is ensuring the o, fits customers. In addition, park and is actively participating in course for Laurens is on the fast track

,8,the LCPW works diligently marketing efTo ts. The 1 CPW offers for success.

with municipal and civic a variety of senice and informative e )

Peak Demand for 1998: July-23 MW (includes 4.7 MW from SEPA) yg-d Usage for 1998: 104,931 MWh (includes 15.315 MWh from SEPA)

Peak Generation: None Population: 10,000 Custorrors: Residential-3,776; usage-44,5% MWh Commercial-645; usage-46.915 MWh Piedmont Municipal Power Agency 9

r Newberry

' Working together with our base ofresidential and business customers, the City ofNewberry is truly a partner for progress in making our city a prosperous place to work and live. Customer satisfaction has, and rernains, our primary goal, and it is our duty and pleasure to use public power as a source for improving the quality of hfe In Newberty.*-Charles H, Guerry, City of Newberry Utility Director

' "' The Newberry Opera House, one of many dty builefings on the National Register of

'"ewherry, located in the central Midlands of South ~

.- Carolina, has a population .

of 10.581. The city's strategic ,

location along Interstate 26, between Columbia, the state capital and .

Greenville, allows easy access to two major metropolitan areas. Since the late 1800s, textile industries have

• g provided Newberry County':: y ._ f' ,g [- , -

• cconomic foundation and, today, b a.i -b :h.

they are joined by wood processing i b ' ' t,f -

and wood products firms as well as 4

• gl 7:g -

~

. ,} ' '

food processing industries. The recently renovated Newberry Opera #<9g.4 ?r.j .

w House has emerged as a proud , f.; . . .,

symbol of a city that remembers its j .

rich, significant past and has taken great strides to preserve its history for 7.. , .c 4 future generations. T here are several y ....

i blocks within the downtown business . -

district on which every building is N . .. ..

listed on the National Register of -

~T ' . '

Historic Places. Newberry is also gf  %,, t , y 4 k,

home to Newberry College, a fully ;p.3 ; yl [-

accredited fi>ur-year, coeducational sr - .- .g liberal arts college supported by the .h 6 NE'j:$g*3' ,.[  : .

?

South Carolina, Southeastern and .,fdk []'"$$' # l* ; ' / . .

Horida Synods of the Lutheran Church of America. ,

load, the city offers the most Newberry holds firm in its )

The city of Newberry began utility competitive prices available and is commitment to offer the necessary service in the late 1800s and now actively involved with civic and other power and perfi>rmance that will provides water. sevar and electrical governmental entities to promote chart the course for future growth )

service to both residential and Newberry as a excellent location for and development.

business customers. Meeting the new and expanding industries. As a service needs of any size electrical member of PMPA, the city of Peak Demand for 1998: July-33 MW (includes 22 MW from SEPA) l Usage for 1998: 168,374 MWh (includes 2,337 MWh from SEPA) i Peak Generation: None Population: 10,581 Customers: Residential-3,926; usage-42,470 MWh Commercial-821; usage-55,630 MWh Industrial-13; usage-54,420 10 Piedmont Municipal Power Agency

Rock Hill

" Rock Hillhas always investedin meeting the growing needs of our customers, and every day, we're working harder, smarter and more creatively for customer service excellence. As a publicpower entity, we know where we are, we know where we want to be, and we'll be quite resourceful and competitive in getting there."

~) Russell AIIen, City Manager, City of Rock Hill he city of Rock Hill, located

'"**"*'""'"'"""**"'""f*""*'***""Y''*"'

creating a vision for the city for the list (entury.

, York C,ounty, is the In county's largest city and continues to be one of the fastest- .

e growing South Carolina cities. Rock liill is part of the Charlotte-Gastonia. Rock liill metropolitan statistical area, the Southeast's second largest business hub and the nation's -

fifth largest trade area. The city is home to Winthrop University, York Technical College and Clinton Junior College, which are all known for offering high-quality education. Rock

~

liill has strategically positioned itself as a progressive community with an b,h) excellent quality oflife and a strong

/

tradition of actively pursuing business '

and industrial gmwth. Through an -

aggressive economic devclopment program, the city has developed four -

.[! k -

premier business parks which are

(#

home to more than forty businesses. . _ .

Civic and business leaders have ~,

developed strong financial incentives -

]g .

.k to encourage new and expanding -

1 business development in the ~ -

downtown area, including loan . .. -

programs to support business growth -

and histork preservation. The g C

Downtown Rock liill Association i' -

helps organize and sponsor special community events which bring more and sanitary sewer service to more program, security lighting and than 22,000 people annually to the than 23,000 customers. Established cus:omer energy audits. To prepare Main Street area. At the entrance of in 1911, the public power utility fi>r electric industry restructuring, Rock liilfs historic district, visitors operates a system consisting of more Rock Hill Utilities created a key are greeted by the Gateway Plaza, a than 500 miles of electric distribution accounts program in 1998 to help civic art monument that stands as a lines, fi ur delivery subsiations and a fi>cus on and meet the needs ofits true symbol of this city's fifth substation planned for 2002. commercial and industrial customers.

commitment to growth and Rock Ifill provides superior customer Rock Hilfs leaders have charted the prosperity. The Gateway service by offering such programs as future growth of the city with a features four majestic statues the "AIK'all" automated service collective vision of quality that honoring the beautification, reporting system, the residential honors the past and will successfully educational, cultural, historical Smart Switch load management carry it into the next millennium.

and business efTorts ofits citizens.

Peak Demand for 1998: July-133 MW (includes 14.8 MW from SEPA)

The City of Rock Hill Utilities Usage for 1998: 628,406 MWh (includes 48,5 0 MWh from SEPA)

Department supplies electric, water Peak Generation: Diesel generators totaling approximately 3 MW Population: 50,289 Customers: Residential-21,611; usage 236,550 MWh Commercial & industrial-2,952: usage-360,483 MWh Piedmont Municipal Power Agency 11

Union "Being a public power utility, the city of Union is dedicated to providing the finest customer-service available. By offering superior customer incentives, along with the most reliable and competitive rates available, we've formedpersonalrelationships with our family of customers-relationships that will see us through successfullyinto the nextcentury *

-Charles H. Potts Oly Administrator, Oty of Union Unmn's downtown area reflects the charm of Southern communities.

he unique combination of .

small-town charm, proximity to the metropolitan cammunities of Greenville and -

Spartanburg and location in a county .

that includes 55,000 acres of the Sumter National Forest makes the city of Union an ideal home for

• families and businesses. With an estimated population of nearly i

10,700, Union is home to a diverse business community that includes Torrington, Conso, Fieldcrest Cannon, and Kohler - all served by City of Union utilities. Since the mid s .

1990s, economic growth in Union ~

has been tremendous. A unique ,

development of the city and county has led to the devclopment of the

• 165-acre Mac Johnston Industrial e

i Park, fast becoming home to a wide -

variety of industrial businesses. With  : x, a dedicated workforce, available - ' I industnal sites, access to three interstate highways within 35 miles of . , E -

the city, a revitalized downtown . .

i shopping district, rolling rural Y- g g ., ,5 3 .

acreage, and higher education ,

I opportunities at the local campus of , ,.

the University of South Carolina, Union is a city that ofTers a proud 1I ^

i ( ,, i. ,*

heritage, a superior quality oflife and a firm grasp on future development.

The City of Union began supplying its citizens with water and electric utility to residents such as Community industrial customers have service in 1898, wastewater treatment in 1917 and gas service in 1956. The Change, a charitable donation program for needy residents. As a the power and the energy to chart the course for

(-

(

City of Union is committed to its optimum growth into the customers both within and out of the PMPA member city, Union olTers superior service and quality programs next century. ,[b /

city limits and offers special programs to ensure residential, business and

(,

4

)

Peak Demand for 1998: July-31 MW (includes 2.3 MW from SEPA)

Usage for 1998: 142,264 MWh (includes 2,486 MWh from SEPA)

Peak Generation: None Population: 10,700 . (y.

Customers: Residential-6,029; usage-64,678 MWh Commercial-883; usage--45,587 MWh Industrial-15; usage-8.986 MWh

]Q 'W Other-99; usage--12,918 MWh gN(Q 12 Piedmont Municipal Power Agency k

__ _ _ ____ _ _ _ - - _ _ _ - - - - - - - - - - ~ - -

Westminster "There is a personal touch between our workers and the city of Westminster. That's one of the pluses of being in a small service area. When deregulation comes about, we can capitalize on our personal touch."

~R. Buck Marcingill, Chairman Westminster Commission of Public Works Westminster s f uHy restored tram depot. which today ocated in Oconee C,ounty, g ,,,,,g , ,,, ,,,,g,, ,c ,, ,,,,, ,,c , , ,,,,,

known as the " Golden Corner" of the state, the City of Westminster is in the foothills of the beautiful Appalachian Mountains.

Wesuninster's population is 4,351 ,

and Oconee County's population is over 62,000. The city's economic '/,

hase is diversified, thanks to the development efli)rts of civic and husiness leaders. That base ranges 8 from modern industry to a revitalized Main Street District. The city also features outstanding architecture, hoasting over 100 period homes

• dating back to the late 1800s. Home '-

to the Chamber of Comenerce, the restored train depot is a prime example of Westminster's

• commitment to the reuse and renewal s of historic buildings. Westminster .

plays host to the South Carolina Apple Festival and offers a wide variety of recreational opportunities -

with the rivers, lakes, forests, s f mountains and golf courses fi>und .

throughout Oconee County.

Westminster is also kicated on the South Carolina National Heritage Corridor - a select series of highways, roads, towns, cities and .

~

o sights that define the state's history, culture and natural beauty.

A PMPA member city, Westminster established a Commission of

{f A f

C Public Works in 1921 and provides electricity, water 4 and wastewater providing a high level of personal service to its entire customer base -

life. Weitminster continues to provide the energy needs and g treatment facilities to services that include demand-side economic expertise for both residents J/ (F customers both within and management, personalized customer and business to ensure they continue 4 out of the city limits. service and a deep commitment to on a successful course fi>r future il / Westminster prides itself on the community's overall quality of growth and development.

) 4 Peak Demand for 1998: July-7 MW (indudes .4 MW from SEPA)

[;% Usage for 1998: 34,458 MWh (includes 483 MWh from SEPA)

Peak Generation: None f Population: 4,351 g Customers: Residential-1,447; usage-18,084 MWh

, Commercial-220; usage-16,374 MWh dmont Municipal Power Agency 13

Operations Report Tlie Catawha Projeet For many months of the year, load was Surplus Power Sales n 1998, the Catawba Nuclear Plant less dian retained capacity from the oft-system, surplus power sales have Iachieved a net capacity 88.9 percent and a net availability of Catawba Project. During these months, the load management programs were factor of continued to produce net revenue improvements for PhiPA. In 1998, 89.0 percent. Catawba Unit One had a not operated. the agency sold 193,358-megawat:

90.0 percent capacity factor and 90.5 hours of surplus energy to utilities Energy ruid Deniand percent availability. The unit was ofr- ana marketers across the region line at the start of 1998 due to a The 1998 annual peak demand generating total revenues of scheduled refueling outage and returned occurred in July and equaled 406.6 $2.795,296. These sales represent a to service on January 5. In early August, megawatts. Energy usage for the year net improvement to revenues of Unit One was taken off-line to repair equalal 1,963,367 megawatt hours, $ 1,217,294.

components ofits ice condenser and which represents a 8.5 percent increase was returned to service in early over 1997. The increase in usage is PhiPA sold power to 12 utilities in September. Catawba Unit Two had a attributed primarily to warmer weather. several states cast of the hiississippi 87.7 percent capacity factor and 86.5 Retainal capacity from the Catawba River and participated in two regional percent availability for the year. It Project was 232.4 mq;awatts. Included automated sales systems: the completed a record 381 continuous in the energy and demand figures are Automated Interchange Matching days of operation prior to its schedukd alh> cations of power from the System and the Energy Broker refueling outage. Southeastem Power Administration Network. a (SEPA). In 1998, the members receival boad Manageniienit a totai ef 48.2 megawatts ona i43,355 In 1998, PhiPA reduced peak demand megawatt hours from SEPA. Year 2000 Update by approximately 49 megawatts through P AIPA completed an impact analysis the operation ofits load-side generation, Coincident of all systems that could be affected residential demand-side management Year Energy Usage Peak Demand by year 2000 (Y2K) in hiay 1998 and municipalload management 1998 1,963,367 MWh 406.6 MW and found minimal exposure. Two 1997 1,809,768 MWh 383.8 MW programs. primary systems, the accounting .

1996 1,809,897 MWh 382.7 MW 1995 1,760,088 MWh 387.8 MW system and the SL,ADA system, will Eh'e Ph1PA members operated load-side 1994 1,667,343 MWh 340.2 MW be replaced or upgraded by late generation programs in 1998 that 1999 to ensure Y2K compliance.

1998 Coincident Peak Demand-MW allowrd the agency to save 18

. Abbeville 11.9 megawatts of pcakm.g generation. 24.4 In add. .itmn to efforts to assure Clinton Easley 56.0 internal compliance, Ph1PA has PMPA continued to operate its Gaffney 43.0 worked closely with its n ember residential demand-side management Greer 4s.3 utilities and with Duke Power to u s 22 7 prepare for 2000.

program, PowerPartners, during 1998.

At year s end,18,431 customers were gocg g;i, 333,3 participating in the volunteer program. Union 31.0 Duke Power, the operator of the PowerPartners generated approximately Westminster 7.0 Catawba Nuclear Plant, has assured five megawatts ofload reduction and Total 406.6 the joint owners of Catawba that all was activated an average of 2.25 days 1998 Energy Usage-MWh systems w be operational in 2000, per month for an average of 2.22 hours2.546296e-4 days <br />0.00611 hours <br />3.637566e-5 weeks <br />8.371e-6 months <br /> Abbevitse 57,683 PhiPA and its members will per day. Clinton 123,369 participate in industry-wide, Y2K Easley 263,058 test; conducted by Duke in April hiunicipal load-management programs ",'Y and September 1999, implemented during periods of high 1.aurens 104,931 demand providal approximately 26 Newberry 168,374 megawatts ofload rahiction. Rock Hill 628,406 Union 142,264 Westminster 34.458 Total 1,963,367 14 Piedmont Municipal Power Agency

Financial Iligliliglit8 levels of variable rate debt and the Portfolio Statistics PMPA's murce of funds comes from 1998A Refunding Issue provided for (dollarsin thousands) three major areas, which include this decrease of approximately $5 operating revenues, interest income milhon in mterest expense.

(98 $3 97%

1997 $34,668 7.10 %

and withdrawals from other funds on hand. Total operating revenue Remaining significant uses of funds Market value a

for 1998 was $140 million and indude operations and maintenance mcluded Sales to Participants of

^8(12/31 99 0 638 4. ye expense, and purchased power 1997 $476,988 5.11

$107 million and Sales to Other expenses, which account for 17.7 Utilities of $33 million, which percent and 15.2 percent, Transactions Number Amount represent 56.9 percent and 17.6 percent of total sources of funds, respectively, of total uses of funds.

Operations and maintenance have

[ ]

respectively.1998 Sales to remained constant over the past two Debt outstanding Participants of $107 million is years, while purchased power has (dollars in thousands) about $10 million more than 1997 increased by $3 million.

sales. Increased demand and energy d["tstan

,3 19 $1,346,399 issued requirements, along with a 2.5 After all operating and capital Series 1998A $161,380 percent rate increase effective May expenses were dispersed, PMPA had Matured January 1,1998 $19,370 1,1998, are the primary excess working capital for the year Refunded $144,090 contributors to the increase in of over $3.5 million, which was 8 "d t" D= r3 I $1,344,319 participant sales.1998 Sales to deposited mto workmg capital Other Utilities of $33 million is a accounts. This increase in working Interest income 16.9%

$7 million decrease from 1997 sales, capital is a combination of positive Withdrawaf from Other Funds 8.6%

due largely to reductions in sales to net operations results and lower. Sales to Participants 56.9%

Duke Energy. Contractual than-anticipated capital requirements of the Interconnection expenditures.

Agreement between Duke Energy and PMPA call for annual reductions in the sellback provision, which ends in 2001.

Sources of Fumls t Interest income provided a $32 S million source of funds along with x the withdrawals of $16 million from Debt service 50.4%

PMPA's Rate Stabilization Fund. Special fund Deposits 0.6%

. Other Deposits 2.0%

At year s end, the agency's Rate op,,,,;ons g Stabilization Fund totaled $207 aintenance 17.6% Sales to Other Utilities 17.6%

million. This is a net decrease from 1997 of $16 million, which includes the net of planned withdrawals and interest deposits. Interest earnings in the Rate Stabilization Fund produced an average yield of 7.22 " b,H WI8 percent on deposited funds for the year.

Debt service makes up 50.4 percent of PMPA's total use of funds. In 1998, interest expense, the major Payment in Lieu of axes .5%

component of debt service, Administrative 8.6%

@'s",%8jgn 9 decreased by 7 percent. Increased Transmission 2.2%

Purchased Power 15.2%

Piedmont Municipal Power Agency 15

Board of Directors and Staff t

f 3 '

3 }

s

.s-k~ .; o,; - g.. .

g, ,

1 Board from left DaQld H.'Krumwsede, Abbeville;&

Charles H. Guerry, Newberry; R. Buck Marcengill, Westininster; ,,.[ .[

J. RusseII Allen, Rod; Hill; Charles B. litchneld Clinton,\, . i David V Duncan (CharimanL Greer: Charles H. Potts, Union: [K;~j'*

Richard S. Hale, Easley; Donnie l, Harden Gaffney; ' s , .

Coleman F. Smoak, Layrens. N . +\.. .

,~ .: . , .

\ %,_. *

' . ~,e ,

., ( ,

5  ; F /'

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. p . ( 'e

~

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n Statf from left: Calvin W. Daniels, Engineering Manager; John N. Glover, Finance

,- Director; S. Scott Griffin, Director of Legislative Affairs; Todd Kilsdonk. Key Accounts r" Coordinator; Robin Broumas Public Relations Manager;SandyBoozer,Information

~. Technology Manager; Don Ouchley. GeneralManager.

k 16 Piedmont Municipal Power Agency

.c 9

Independent Auditors' Report a

KPMG Peat Marwick LLP One Insignia Financial Plaza P.O. Box 10529 Greenville, SC 29603 The Board of Directors Piedmont Municipal Power Agency:

We have audited the accomnanying balance sheets of Piedmont Meaicipal Power Agency (the " Agency") as of December 31,1998 and 1997, and the related statements of revenues and expenses and changes in retained earnings and cash flows lbr the years then ended. These financial statements are the responsibility of the Agency's management. Our responsibility is to express an opinion on these financial statensents based on our audits, p Except as discussed in the following paragr ph, we conducted our audits in accordance veith generally accepted auditing standards. Tho<,e standards require that w. plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits pmvide a reasonable basis for our opinion.

Governmemal Accounting Standards lloard Technical Bulletin 98-1, Disdosures about Frar 2000 /ssues, requires disclosure of ccriain matters regarding the Year 2000 issue. The Agency has included such disclosures in Note 18. Because of the unprecedented nature of the Year 2000 issues, its effects and the success of related remediation efforts will not be fully determinable until the Year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support the Agency's disclosures with respect to the Year 2000 issue made in Note 18. Further, we do not provide assurance that the Agency is, or will be, Year 2000 ready, that the Agency's Year 2000 remediation efTorts will be successful in whole or in part, or that parties with which the Agency does business will be Year 2000 ready.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necesnry had we been able to examine evidence regarding Year 2000 disclosures, the financial statements referred to sbove present fairly, in all material respects, the financial position of PMPA, as of December 31,1998 and 1997, and the results ofits opcrations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary infc mation included in Schedules 1 and 2 is presemed for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic fir.an.ial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole, f (g & ct)~ k ntICC LLT March 3,1999 Piedmont Munle' pal Power Agency 17

x. -

't l, "

b 3 Balance Sheets December 31,1998 and 1997 (Dollarn in thousamin)

Assets 1998 1997 .

Utility plant (note 5):

Electric plant in service 5 550,236 551,094 Nuclear fuel 32,547 44,109 Construction work-in-progress 2.831 2.083 585,614 597,286 Ins accumulated depreciation and amortization (228.0101 (223.129)

Net utility plant 357.598 374.157 Restricted funds (notes 2 and 6) 193.o43 188.108 Revenue fund assets (notes 2 and 7):

Cash 7,105 8,339 Marketable debt securities 273,265 284,636 Accrued interest receivable 3,111 4,124 Due from restricted funds 419 120 Participant accounts receivable 8,292 6,941 Other accounts receivable 2,430 1,791 Materials and supplies 5.148 5.158 Total revenue fund assets 299.770 311.109 3

Deferred charges:

Unamortized debt issuance costs 22,789 22,134 Net deferred expenses to be recovered froni future revenues (notes 2 and 8) 323,010 296,202 ,

Excess costs on advance refundings of debt 190,470 188,213 Other 3.041 3.219 ,

Total deferred charges 539.310 509.768

$ 1,390.521 1,383,142 Retained Earnings and Liabilities s

1.ong-term debt (notes 9 and 10):

Bonds 1,344,319 1,346,399 Unamortized discounts (53,393) (52,420)

Unamortized premiums 1.663 1.060 1.292.589 1.295.039 Restricted fund liabilities:

Accrued interest pavable 46,463 45,995 Reserve for decommissioning (note 11) 26.803 23.017 73.266 69.012 Revenue fund liabilities - accounts payable (note 7) 8.249 6.230 Retained earnings 16.41? 12.861 e

Commitments and contingencies (notes i1,15 and 16)

See accompanying notes sopnancialst,;rements.

• 18 Piedmon MunicipalPower Agency

... \-

Y and S'tEximes atements and Changes in Retained Earnings of Revenues

' Years ended Deecmher 31,19911 and 1997 (Dollars in :) unands) 1998 1997 Operating revenues:

Sales of electricity to participants $ 105,731 95,968 Sales of electricity to other utility (note 4) 32,970 40,078 Other 1.239 1.220 Total operating revenues 139.940 137.266 Operating expenses:

Operation and maintenance 22,444 22,627 Nuclear fuel amortization 6,795 6,925 Purchased power (note 4) 28,647 25,242 Transmission 4,131 4,128 L)istribution 1,617 1,738 Administrative and general 10,136 13,370 Depreciation 18,271 18,381 Decommissioning 3,786 3,980 Payments in lieu of property taxes 4.645 4.503 Total operating expenses 100.472 100.894 Net operating income 39.468 36.372 Other income (expenses):

Interest income 31,799 34,668 Net increase (decrease) in fair value ofinvestments 115 (364)

Interest expense (74,912) (80,070)

Amortization expense (13,746) (13,762)

Other (5.976) (5.617)

Total other expenses, net (62.720) (65.145)

Revenues under expenses before deferred items (23,252) (28,773)

Deferred items to be recovered from future revenues, net (notes 2 and 8) 26.808 29.666 Revenues over expenses 3,556 893 Retained earnings at beginning of year 12.861 11.968 Retained earnings at end of year $ 16,417 12,861 See accompanying no,es topnancialstatements.

P3edmont Municipal Power Agency 19

Statements of Cash Flows

Years emled Decemtwr 31,1998 and 1997 (Dollars in thoumande)

m. _ . .

1998 1997 Cash Hows from operating activities:

Revenues over expenses 5 3,556 893 Adjustments to reconcile revenues over expenses to net cash provided by operating activities:

Depreciation and amortization 38,812 39,068 Nc (increase) decrease in fair value ofinvestments (l15) 364 Net deferred expenses to be recovered from future revenue (26,808) (29,666)

Reserve for decommissioning 3,786 3,980 Decrease (increase) in.

Participant accounts receivable (1,351) 1,687 Other accounts receivable (639) 1,101 Accrued interest receivable 995 620 Materials and supplies 10 (174)

Increase (decrease) in: ,

Other liabilities -

(351)

Accounts payable 2,019 1,189 Accrued interest payable 468 1.443 l Net cash provided by operating activities 20.733 20.154 5

Cash flows from investing activities:

Purchase ofinvestment securities (767,366) (609,160) .

Proceeds from sales and maturities ofimestment securities 772,836 615,448 Expenditures for electric plant in service (1,453) (? ,545)

Expenditures for nuclear fuel (7.054) N.4s7)

Net cash used in investing activities (3.037) 14.714)

Cash flows from Gnancing activities:

Payment of bond principal (19,370) (7,340)

Proceeds from issuance oflong-term debt 155,779 141,300 Refuncing of bonds (144,090) (142,145)

Defcasance losses (7,029) (1,576) -

Increase in debt issuance costs (4.220) (4.468)

Net cash used in financing activities (18.930) (14.229)

Net increase (decrease) in cash (1,234) 1,211 Cash at beginning of year 8.339 7.128 s Cash at end of year $ 7,105 8,339 '

Supplemental disclosure of cash flow information:

Cash paid during the year for interest $ 72,417 78,627 _

See accompanying notes tofinancialstatements.

s

?

20 Piedmont Municipal Power Agency l

./<

Xotes to Financial Statements Deceml er 31,1998 aml 1997 (llollars in thousamis)

(I) Ekscription of the Ist/ty and Industry #ct clofiments The Agenc)'s Generaliknal Raohinon retjuins that its rat" structure he Pitsimont Municipal Power Ageory ( Agency) was i worporated in 19'9 under designni to pnnluce rnenues sufficient to pa) operatmg debt senice and other the South (.arolma joint Municipal 1:lectnc Power and bwrg) Act. The Act, adopted spidied rosts. The Agencys lloard, which is compnsist of repnsentatms of the April 19'H, enabhsl the formanon, by Nmth Carolma mureipalnies and municipal Participants. is respmsible for rnwwmg and approving dw rate structure. The comnussions of puhhc works, of a imnt ageng to plan, fmance, darkip, oun and upphcanon of a ghen iate st,ucture to a gmm period s ehrtricity sales may operate chrtric generation and transmission facihues Ten municipal unhty splems pnniuce rnenues not inten&s! to pay that pt riod s costs, and converst4y, that (Participants) comprise the Agencyi mendwrship. The participants, locah d in p timi's nesb may not he instuded as he nro tit-d in period rtumues. The northwatern South Carohna, are the cens of Ahlwsille, Chnton, l.asin, Gaffin-), afferted n tmuts and/or costs are, in such cases, deferred for future nrognihon.

Uns r, laurens, Newherr), ehrk lhil, I nion and Westminster. The ulumate nrogmuon of defern d items is correlated with specific future nents; The Agency and Duke Power Company (Duke) are paran to agreements giving prunarily payment of debt pnncipal.

the Agtmcy a 25% undni&sl ownerslup inten se in Catawha Nuclear Stauon I nit 2 / mamortisedIkbt /ssmance Costs (ProprtL Duke is the operaCng owner of the Prokrt. The Agencfs Pruject power t n.unortled debt issuance costs at December 31, IW8 and IE of $21'H9 output enullements (apprmimatcl) 2H6 MW) come from Catawha Nuck ar Stauon and $22,134, nspectacly, (net of accumulattd amoruntion of $17,301 and I nits i and 2, subject to the terms of the "Catasha Rehabihty I'xchange" un& r

$ 15,753, n spectnel3 ) are tring amorumi on the honds outstandmg methml.

which the Agenq pap 12.5% of the costs and nrenes 12.5% of the power output Excess Gests om A4cance Refundings oftk6t a3smiated with each of thne 1,145 MR umts. A&htionally, the terms of the liens costs on ad ance refundmgs of debt at ihremher 31, IWN and IE of "McGuire Rekahiht) tuhange" allow transfers of emig) hetween PMP A's resuhing $190,4'O and $18M,213, nspecovel), (net of accumulated amornation of enullements l rom the Catawha I nits and Dukei two nuclear units at McGuire $ 1016?l and $9L427, nspectnei)) are being amortized on the Imnds outstandmg Nudear Sutum. The opratmg hcenses for Cauwba l mt 1 and I nit 2 expire on methml.

Diremlwr 6,2024 and February 24,2026, respirinely Organtzstlos Gsts The passage of the NanonalI;nergs Puhey Act of 1912 (1:ncrgy Act) is causing Organi/.ation cosb at December 31, IWH and 19)' of $?S6 and $785, the evolunon of a traditional rate regulated industry into a competiuve market resptttnely, (net of accumulated amortuatmn of $411 and $3x1 respruvel)) are envinmment The I:ncrg) Act is intemhst to pnnnote competuon among uuhty and bemg amortized on the straight kne metluni mer 40 years.

non-utihty gernrators in die whoinale electric gentratiori market. The I wrgy Act, INscomats on Bonds Payable coupled with inenming customer demands for lov er-priced ek ctricity, has The dncounts on twnids pa>able at ihrember 31, IW8 and IW7 of $53,393 accelerated industry restructunng and has intensifusi interest in lucreased mid $52,420, resp rtnely, (net of accumulaksi amortizauon of $3LN60 and com;wtmon at the retail level. $31,243, rnpectnelp are inung amortued on the honds outstandmg methml.

In Iwh, the Federal deregulanon debate intensifitsi as sneral bills were Pwmlums om lloads Payabic intnniuced to shape the compc*tuve ekrinc mari et. Activin in South Carolma also The pnsmums on honds payable at ihrember 31, Iwx and IE of $1,664 imensified as the legislature and Public Senice Commission (PSC) worktd to and $1,060, respectnel), (net of accumulaid amortitation of $691 and $3N4.

develop a better understandir g of deregulation issues in IW6, the PSC conducted respectivel)) are being anmrtized on the lumds out3undmg methal.

an informal sune) of the Statei utihues to (k1ci.aine the industry's posinon on income Taxes th' regulation. The Agenc) is emupt fnim Fethral income taxa under Internal Rnenue Oule in IW7, two hills to restructure dw chttnc utihn industn in South Carohna Section 115 h) reference, therefore, the Agency is also nempt from state income were introducal in die South Can> lina General Assemhi) - llouse Ilill 3414 and laws Senate Ilill 3 66. In addition,jome Rew>luunns were imnatured in tmth the ihmse Cash flou's and Senate to create an ehrtric industr> dentulation stud) comminx and task For purpose of dw sutements of cash flows, the Agency considers imensi-font to study electric industn deregulation. None of these hill or resolutions were hearing deposib with banks and Duke to be cash.

acted upm or pasvsl and, accordmgh, dwy have dad Maractable Ikht Securttles At the nspwst of the Speaker of the llouse of Representatises of the South As autnon/ts! b) the lxmd rewdution, imestments in markeuble debt wruntws Girohna General Assembly, the Pubhc Senice G mmissmn issiksi a report dansi irwlude onl) direct ohhgations of the Unittsi States gournmerit, and ohhgations of ichruary 3. IwH uthsl"Propowsl1:krtnc Restn etunng implementatmn Pnwns" l nited States gmernment agencies. These imesunents are unmsurtti and (the "PSC Report"). The PSL Report us forth the pnectslurn the Pubhc Senkt unregistered aint are held b) the Agengi trustees or by the Agency, as trustee.

Onumission would follow to implenwnt electnc restnwturing if and when nslmrts! During IW, the Agenc) implenrtued the pnwisions of Gncrnnwntal h) South Caruhna law. Accounting Stamfards Ikiard Staiement (Gelu No. 31 Accounting aiulhnunckd in the fall of IwM, ifw Chairman of the SenateJudician Qimmatee appoinksl a Re/wstingfr Certas: /mestnu nts andfr Lrternal/mestment he w hich task force to twgin die procos of drafung k gblanon to handle the marn bsues nsluires miestnwnts in marketable debt urunties to be reported at fair value. The related to the dentulation of South Carnhnai ek ctric uuhty business. effect of dw adoption of this pronouncement uas to it crease investmenb in The first Session cf the i13th beneral Assembly of dw South Girolina legblature marketahic debt secunnes and dernec m t defernst e penses to h reementi (which mclinin caletular yean, !?N and 2txxu will commence on Jannan 12, from future nsenuts h) $25,%3 at Ikremher 31, IW5.

IPN. It is anucipaust that uvral hills will le intnnluced What the results of Onme /kparciation Ecpense legislause imuatnes will be or whettwr any such legislation will latome law cannot tjectnc plant in senwe, includmg unclassifust assets, is stated at cosi and is he pndicted dipreciated on a straight-kne basis at rain calrulated to amortue the composite Itsleral kWslation tus twen pawsl whwh ermourages compeution among unkt) assets mer their resperuse esthnated useful ines. Depnriation twgms w hen assets ami non utihty power pniducers. Together with increasing customer demand for art placed into senice. The Agengi armual pnnision for depnrianon nprms!

lower.pnced ekttrwin and other energy senices, time mtwuns base accekrated as a lwrcentage ofilw merage balance of depnriable uuht) plant was 3 3% for the inaustry's mmeurnt inuard more comp ouve pncmg structuns. IwN and IW.

PMPA has desclopal a strak gic plan, that was adopkst by its Ikiard of Dinttors Materials and Supplies in IPA to help guide it through the impetuimg industry changes PMPAi strategic Maiertals and supphn imentono are stain: at lower of cml or ma-ket usmg pl.m irwindch twnstw resiews of the recuserahlht) of regulatory asseb and the dw userage cmt methml.

Impact of such nrmer) on the Agenc)) rates Also, the agenc) has dneh ped a ise of1st/ mates comprehenshe pmmon un den gulation. The Agengi management b partwipalmg The pnparauon of financial sutements in confonnits with generally accepusi m the deregulation debate, both on the nanonal and state ksel. accounung pnnciples retpans managenumt to make esumain and assumpuuns (1) Summary ofilgnifkant ArrountinJ; Adkles that affect the reporud amounts of aswb aad habihtus and discimure of Basis ofAccuanting conungent assets and liabihins at the date of the fmancial sutemeno and the The Agetais atvauritmg rewords are maintairwd ort an accrital basis in reportisi amot its of nsemies imd npimses dunng the nportmg gwrim!. Acmal confonnity unh generally accepust accountmg pnnciphw and subst.mtially in resulb could difier fnun thme esumates.

confornut) wah the Federal 1.nergy Regulator) Onnmissioni t niform Spiem of I'inanci~/ Itcpo:1/ng Accounts.

I nder Gbli Suumwnt No 24 Accountmp andhuancialNc/wrtmpfa _

The Agimc) follows tlw mvountmg practices >ct furth in Stannwnt of financial l'ropnet ig lunds and tither tiorernment s nhtuw that I w t'nyretarr f und Acanmung Stamlards No 714S1 e No. 71), Acenun/ingfr t/w Ifferts <!/&rtain Accumm/1g. tlw Agenn has miopust the opuun to appl) Imancial Accountmg hpes s/Reyedatmn. as unwndal. Tlus standard allows amutws to capitahac or St.mdard3 Ikeard tlBlu stammeno and inu rpretauons that do not conthct with or defer certam costs or revemus based on the A;tengi ongomg assessment dial it n contrahct Lbli pnmountennmis probable that such items will he nrmensi through future nsemms.

Piedmont Municipal Power Agency 21

is m.

y Notes to Financial Statements f -

Decemlier 31,1998,aml 1997 (Dollars hi ilmunamin)-

- a la ,-.

(3) Power Sales kreements (4) Prvject Agreernents Y

Cataulus l'rofwt Amer ides Agrectrwnts Pnsject Agreements twtween the Agent) and Duke consist of the Catawha The Agency and each Parucipant are paruts to Catawba Project Power Sain Nudear Stanon Purchase, Omstruction and Ownership Agreement (the Purchase Agntinents (Sain AgramumtsL These Sales Agntments oblige the Agency to Agrttment), the Citawha Nuclear Stanon Operaung and fuel Agrmnimt tthe provhle each Participant a share of Pn>iert pmer output and, in turn, each Operaung Agrtemeno, and the Catawha Nuclear Stahon Interconnection Agreement Parucipant must pay its share of Prop ct costs. Participants make their payments on (the Interconnection Agnennmi).

1:"take-or-pa)" hasis whether or not the Prokct is operable or operaung. Such I'uname Agrn> ment payments are not subject to ruluction or offsd and are not conditumal upon This agreement between the Agency and Duke pnr,ido for the purchaw of the p-rformance by the Agency or any given Participant. The Salo Agreements are in Catawba Project h) the Agenq. h also details Duke's t esponsibilitin, as engineer-effect umil the carber of August I,2035, or the compk tmn of f syments on the contractor, for construcunn, initial fuchng, and placmg the Catawba Nuclear Statum bonds and sausfacnon of ohhganons undn the Prowet agreements into commercial operanon.

Operating 4grwrrwnt The Participants' Shares of the Agenc)'ii Catawha Project Output are as folk.s: This agn-ment, between the Agtmo and Duke, pnnido for Duke, as operator City of Ahlwville 2 6M% for the Ageng, to be respoasible fg the up rauon, mamkmpce, and fuchng of Oly of Chnton 7.84 Catasha and for enakleg of renewals, repiaccments and capind aMuons. In tah of Eashy 13.24 addiuon, the opnatmg Agreement provido for derommiwonmg of Quawha at the -

3 Cit) of Gaffney 10.05 cud of us useful hfe through a future decommi3siofung agrenami. sepaaie from City of Unvr 9 34 the operatmg Agnement. 4 Cit) of I.aurens 6 49 Intammm'ction 4mwent Cuy of Newtwrr) 10.47 This agnssntmt, hetunm the Agt1n-) and Duke, pnwides for the interchange of City of Rock thll 2M.04 pmer supply and power supply senicn. It also defmes a fifteen year arrangemtml >_

tity ofl'nion 10.01 terminaung on Jamttry 1,2001, whereby tlw Agent) sells a porunn of its Pniect Cit) of testminster i M4 pmer output enutlennst to Duke. These sales commenent upon commercial .

1IMm. operadon of each falawb11 nn and d" crease amadly owr the contract term The

• Agency may, with nouce, decrease but not increase thne sales. Sale to Duke Sup/4wental Amer Wes Amwents reduce the like amount of pmer the Ageno purchaws from Duke until, upm The Agenq and each brucipant are also parues to Supph mental Power Sales npiranon of the cc, tract the Agency retuns its ftdl Pn. ject pmer output Agreements (Supplementd Agn etmmts) under which each Participant has agrmi enhilement and no longer pt rthases the njuisalent amount of pmer from Duke.

to prv, in nchange for supplemental bulk pmer supply, as share of supphmumtd bulk pmer suppl) costs. A Parucipant may termmate its Suppk1mmtal Agn ement uIth u n years advance notice.

4 (4) hvject Agreements - continued in a separate agreement between Duke and the Ageng, Duke has agrwd to purchase addiuonal puruons of prop ct pmer output for the period 1996 through 14N. The following sclwdule refk cts historical and future transacuuns and includes adibuonal megawatt (M4) sales to Duke for the permd 1996 through IW9 resultmg from the agn ements mennoned ahme.

Catawha t' nit 1 Catawba 1 nit 2 Total Annual Annual Amntd Iner incr Incr Total (Ikcr) Total (Decr) Total (Dect)

Retunn! Sold Owned Sold Retamni  %!d Owned Sold Retained kid Owm d Sold har M4 M4 MW MW MW M4 MW M4 M4 MW M4 M4~

19M5 4.77 13M36 143 13 0.00 143 13 11314 4 ~7 2Mt 49 2Nt2b 19M6 4.77 13M.46 143 13 0 00 4.77 13M 46 143 13 (4 77) 9 Si 2'672 2M(t 26 (477) 38 1987 9 55 1335M 14314 (4 'M) 4 77 IW36 14113 0 00 14 32 2'136 2M6 26 (4 7M) 198M 14 32 128.81 143 13 (4 771 9 55 1315M 143.13 (4 7M) li k' 262.39 2M6 26 (9 %)

1989 19 08 124 05 143 13 (4.76) 14 32 12MMI 14U3 (4 77) 3340 252 86 2M6 26 (9 54) 1990 218' i19.26 143 15 (4 79) 19 08 124 05 143 lJ ( 4 '6) il 95 243 31 2M(t26 (9 %)

IWI 2M.63 11430 143 13' (476) 2187 t 19 26 143 13 (4 '9) 52 50 233 76 286.26 (9 55) 1992 3139 10974 143 13 (4*6) 2863 114 50 143 13 (476) 62 02 221.24 2Wt26 (9 52) 1993 3M 18 104 95 16313 (4.79) 33 39 109.74 143 13 (476) 71 57 214 69 286 26 (9 55) e 1994 42 94 100 19 14313 (476) 3M 18 104 95 Isi 13 (4.79) 81 12 205 14 2M6 26 (9 %)

IWS 119.27 23 86 143 13 ('6.33) 4194 100 19 143 13 (4 76) 16121 124 05 2M(t26 (8109) '

19 % 94 05 49 0M 143 13 25 22 M9.27 $3 86 143 13 (46.33) IMi.32 102 94 2M6.26 (21. l l) 1997 10(t32 36 HI 193 13 (12.27) 10135 41.5M 14314 (1128) 20'.M' 'M 39 2M6.26 (24 %)

IWM llMAM 24 55 14313 (12.26) ll3 M2 29 31 143 13 (12.27) 232 40 5186 2Wt26 (24 53) 1999 125.87 17.26 1411 (7.29) 121.08 2105 143 13 (7.26) 246 95 39 31 2Wt26 (14 55) 2000 143 13 0 00 14113 (IL26) 13M.37 4 76 143 13 (17.29) 2MI 5O 476 2M6.26 (34 %)

2001 14113 0 00 14113 0 00 143 13 0 00 tii li 14.76) 2M6 26 0 00 2M6 26 (47td in lk. .tmher IW', the Agency's floard of Directors mini to issue nonce, pursuam to the contraa to cancel the Interconnernon agreement with Duke. The cancellabon is effechwjanuary 1,2006, f rom 1985 thnnigh 1994 rmmun from parucipants substanually ncmh d net costs. Such ncess nsenues have been set ashle in a Rate Stabihzauon account As revenun fnnu sales to Duke dimimsh in accurdance with pnwiwms of the inntconnect, m Agrmuent, Rate Stabiluanon funds will be unh/nt, m a schnluksi manner, to mmmuze rate mcreases and raaumne a compenuw rate pasioon.

v 22 Piedmont Municipal Power Agency

(, .G Notes to' Financial Statements

. Deccmiser 31,1998 and 1997 (Dollars in timusanels)-

(5) l'lility Plant (8) Net Defened bpenses to be Rmireredfrvm future ketenues Origmal costs of maior classes of the Ageng% chttnc plant in menice at As desenim! in 'inte 2 rain charged lo Participants are structunsi to Iwember 31,199X and 19C are as follows: systematically pnnid- for debt nquinsnimts and operaung costs of the Agency. The experbes and nsemas excludnl fnnn rates are deternsi to such penmis as dry 1998 1997 arc inteintnl to be included in rate; land $ 3% 146 Net deferrni expenses to he recovend from future rnenues include the Structures and improvtinents 156359 156,400 followmg-Reactor plant nimpment 237,096 236,895 Tvbo generator umts 69,2'O 69,27d 1998 1997 Change _

Acctssor) chttric equipment 48#>4 50,134 (Lumulauve Miscellcr,eous plant equipment 16,646 16,3M6 Totab)

Station equipment 4,777 4,77" items lo be nrownst in future Other 23M)2 1,900 Participani billmgs:

I nclassified 14 9 % 14936 Intenst expense $ 3251 42 321109 1,933

$ 950,236 941,096 Ikparianon expmc 230,N 212,903 l',4No Amortiution of nsiemption l uclassifini anseb are m senice but not yet classified to spect'ic plant accounts. and defcasance hnses ID4,2td 92,Nto iI,493 Nuclear fuel at Iktember 31,14m and 1917 of $32347 and $44.109, 4mortizauon of bond dncounb nspirinely, repnsents costs associatal with acqmring and pnwes3ing reload fuel and debt issuance costs 51,633 4',777 3,856 asseinblics as well as the cost of nuclear fuel in the reactor, Nuck ar fuel is Nuclear fuel capenses 873 8'3 -

amortued hasnl on burn rak s usmg a unit of pnalucuan basis. The Ageng letter of crain lees Sh49 5,649 -

regulari) removes full) amortized nuclear fuel cosb from its lumks when fuel Other 2.392 2.392 -

batches are replaced dunng core nfuchng ogwiations. Costs in IYm of $1N,617 720,269 6M5.503 34,762 were reimnist. Items reducmg future Participants' A summary of accuew!ated depnriation and amortintion at f kremher 31, hillmgs:

19tm and 1997 followa Imestment income $ (76328) ('6328) -

1998 199' incn ase in fair value of Accumulated depnrianon of imestmtmts (9,9N9) (9,H'4) (lI5) chttnc plant in utnke $ 210.424 I i'l5 Rate stahihuuan (nsenue Accumulak d anmruution nrehed to reduce future of nuch ar luel l'392 .9 414 bdhngs to rarnopanb) (477,224) (460.912) (16.312)

$ 2 2M.016 223.129 Resene and conungeng del units G 4.294 ) H i,0'O (l.219)

(6) Restrictedfunds mx.0w (5so.5mo W.tum The General Hund Resolutmn, Project agn cmenb, and Agency pohcies restrict Deferrnl nienues (eApenses) the use of bond procents, Agency rewnues, and Agene) funds on haml Grtun nrognizn!.

restncuons define the order in whah available funds mas he used to pay costs, Deferred interest, o,o r.on, oiler n stnctions nquire minimum bahntes or accumulanon of balances for amortuation expense w ciudn!

spe cific purgmses. 4:Disember 31,1918 and 1997, the Agenc) was in comph.uice in Participant bdhngs for debt wt h all such restrichons and held the followmg nstrictnl assets: principal payments (72,469) ( 4M,6'4) (21775)

Rate stahdianon draws 1998 1997 appkal to expenses 2'0,406 237,883 32,523 Fair Amorti/cd l' air Amortlied Resme and conungeng

)alue Cmt ialue Cost rnenuc applwd in expenses 2.822 1.H'M 944 Ikh senice - imnd pnncipal $ 21774 21775 19,369 19,3'O Dcht senite twmd fim! rate inten'st 31.M66 31,N67 31331 31331 Net defernti e\penses to be Ikh senice hond retin nwnt 1 1 1 I nrmensi from future Ikh senice nwene 86549 85##7 8',649 86328 rewnues $ 323.010 296,202 26.kOM Reserve and ctmiingency M "92 H304 8,939 Mh43 Decommissioning 27,ki 1 26.H03 216H3 21017 The following deferrn! expenses will tw nrognized in future periods shen raks Spirial reserve _190 15.t00 15.136 15 AH chargni to Parucipants pnxiuce rnemus sufficient to reure the debt which funded

$ 193.k+3 19tt997 IMM 10M Iggyue those costs.

Funds are compriwd of.

• Inten st expense on the Agenc>iinnds and tariable rate demand ohhganon Marketable debt sectnties 192,929 1903* 3 186,914 1M4396 along with asuriatni kiter of tnskt banking and re markeung fas (escept Accrunt inenst nreivable 1,3 15 1,333 1,314 1,314 interest and fees relatal to Capital Appn ciauon ihmds) paid from Imnd Due to rnenue fund (419) (4191 (12nJ (l201 pnwnsb dunng a defuust "funstruccon Penn!," (net of income can cd on

$ 193.M43 190 99' I KM.10M IM9 Mi the teinporar) imestment of those hond pnntnis);

• Intenu exlwnse on Capnal Appreciation ikmds accrun! hui not p,ud ened (7) Revenue fund Assets and liabilities matunty Rnenue fund aswis and liabihties are usn!in the Ageng's dapto< lay

• Amortuauon of deh issuance expenses, Innd dncounts, ddeasarwe losses, operanons. The assets are allocaust for the following purimses, nsiempoon losses, and organuation cosb paul from or includnl m Imnd pnweeds, 199M 1997

• Depnttanon on utihts plant construcint with hom! pnwnds and amortintmn iair Amortlied Fair Amortised of nuclear fuel acquinst with luxl pnx n ds and 4 alue Cmt_ ,_ talue Cost

• Q rtam other project costs paid from imnd pnx ceds.

Rorking rapitd $ 5',482  %,552 it,tok Sigr Fuel acqunamn 29,257 29,257 29,517 29,517 Rate stahihatmn _JI 4 031 204814 220.894 223 029

$299,"o 192 42'l311.109 30 1443 1.iabihurs of $8.249 and $6.230 at thremher 31, IN mi R ' espectnel),

will be paid out of workmg capital aset3.

Piedmont Municipal Power Agency 23

Notes to Financial Statements

Seemier 31,1998 and '97 (Dallani in thounanda)

The Agency has also deferred Participant rnemues which, during the 1998 1997 Omstruction Peraxi, were estabhshed at ksels to ciner Pnattt unts not paid fne 19FC Refunthng N rin 1:ht1ric Rnenue Ikmds, Imnd pnweeds, as well as scheduktl deposits to a Rate Nahihiation account. The payable annually Inn 1999 to 2003 and 2016 to rnenue associated w ith dune scheduks! deposits and the intenst income thenon 2019 with iariable interest rates (4.1 x, at will be nrognized when timse funds are drawn upon to pay Project costs. Also, Ikvemh131,19)H) 38,300 38,300 certam settlement rnenues and excess rotmues in certam funa hse been 199M Refunding Siries I:ketric Revenue ikmds, transfernsi to the ILite Stabilization account and have bien defermi for recogmuon parable armuall) fnu 2000 to 2025 with until the time the funds are appinxi to the payment of Propst costs. intenst ranging Inmi 4 4% to 5 5% 16Uxo -

Rnenues associated with incnases In une fair value of investmems hase been Total long-tenn debt 1,34%319 1,3*,3w defermi until such time the securities hase matumi or are wid.

Aikhtionally, the Agenc)i General ikmd Resoluuon nyuires Participant less unamortued discount (53,393) (52,420) rnenues to be estabbshed at ksels suffici-nt to p-ovkle specified deposits into a Plus unanortued pn mium I 664 ijm Reserve and Omungency fund. Monws in that fund are used for the construction or $ 1,291%N9 IJ99 059 acquisluon of utihty plant. The recogmuon of such rnenun is defermi unut such time as the depnrianon is reconkst on the assets constructed or acquimi uth tinne monies. The hone are special ohhganons of the Agenci and are secund b) fumre (9)long term Debt rnenue ami pksiged monin and wrunnes as proskled by the txmd nsolunon.

tamg term debt at December 31,19M and IPP consists of the following: The hands generally pnnide for early rulemption begmmag ten years after 199M 19E_ issuance at pnces ranging from 100% to 103% of the bond principal anmunts.

1986 Refundmg krin ikctnc Roeme lione, The Agenc) has athance refunded certain lxmd issun as discribed in note 10.

payable in 2025 with interest at 5% $ 33,620 33,620 19M6A Refundmg Series 1:kitric Rnenue ikmds, The following is a summary of total debt utvice degunit requirements for honds payable in 2023 and 2021 with interest at 5 75% 103.815 li s815 outstandmg at December 31,14R 1988 Refundmg kries Ek ctric Rnenue ihmds, ) ear _Mncipal interest payable annudly in 14* and from 2010 to 2013 Total _

19N $ 21,200 71,963 93,163 with interest rangmg from 6 ~0% to 7,75%  ?,745 10,435 2tmo 16,025 70.H73 N6,H9M s984 Refundmg Senn 1:httnc Roenue ihme, 2001 19,3'O '0jNi5 N9A35 payable aimually from 2tNH to 2015 with interest 2tx12 20,4'O 68.9)3 89,463 ranging from 7.3% to 7.65% 4,2M4 4,2M 2003 20,8x0 68.893 89,773 14)! kefundmg Series Iketric Rnenue ikmds, 2004 23,015 67.689 90,*04 payable antiually from 2005 to 2023 uth interest 2005 2t?28 66,402 91,130 ranging fram i% Io b.H5% 213,550 213,550 2tMNi 31,'72 64?44 96,"15 1991 A Refundmg Senes dectric Rotmue ikmds, 2007 33.993 63,063 9',056 pa>ahle annually from 19)N to 2007 and from 2tNE 41056 61,22x I R2x4 2013 to 2018 with internt rangmg from 5% to 6 5% 161,855 169,225 2009 3',390 66,*30 Ita 120 1992 Refundmg Series I:httnc Roenue Ikm6, 2010 3',310 (A721 IM03]

payable annually fnmi 2010 to 2025 with intenst 2011 39JH9 64.861 101910 rangmy from 6.30% to 6.3'5% 19,940 16toio 2012 38,759 62p27 101,6M6 1913 Refamdmg & ries EkTinc Revenue ikmds, 2013 52,36? 50,598 102,%5 payable annually from 2000 to 2025 with interest 2014 56,660 4",3x2 INJH2 ranging from 4 9% to 5 6% 80.150 80,150 2015 60,3xi 12 504 1018x9 IWM Refunding Serus 1:httric Revenue Ikm6, 2016 6(2'o 39.122 101392 pavahle annualh from 2013 to 2021 mith inten st 2017 6',360 35,M"9 101239 rangmt from 6 55% Io 6 6% 1615M 1615M 20lM 6K995 32,402 101,48' 1916H Rtfundmg krns Eh ctric Revenue lhme, 2019 80.220 2M,'08 108,928 payable annually from 19)x to 2013 with imerest F20 M,450 21616 DPMx4 ra n mg inim 4 M% to 6 0% 151115 162A25 2021 90A80 18,M89 109,369 19)hc Refundmg Serin 1:lecinc Roenue ikmds, 2022 919'5 14.619 10',594 payable annually in 2021 to 2022 with variable 2023 100,590 9,902 110392 inhvest rates (3 M% at December 31,19m) 50Jmo 50,000 2024  %"5 4 6x l 9x356 19)hD lb funding Se rits l'}ectric Revenue lhmds, $ 1,320.444 1.2N3 '43 2.6(H . 2M 7 parable annually from 2022 to 2025 with vanable interest rates (3 95% at Dewmher 31, IP)M) 50 000 503NN) The debt senice deposit n quirenwnts for pnncipal differ from total long term y 199'A Refunding Series 1:krtnc Rnenue ikw.ds, debt outstandmg at December 31.14)M. herause the principal payment of $21775 i parable unmiall) fwn 1999 to 2f NN) and in 2024 m hth is due January i 1999, was deimsited dunng lWN. All pnncyal payments with variable inwrest rates R 1% at are due on J.imiary I of the year subsequent to the deposit requirement.

December 31,19*) 32,300 32,3tm iW)'B Refundmg Senn 13ectre Rnenue ihme, pasable annualh from 1979 to 2003 and 2016 to 2019 with variable inwrest rates (iM% at December 31,19)h) '0,'00 *0,~00 24 Piedmont Municipal Power Agency

.1 ,

n; . ,

a , , ~.

r l- - #

m ,bL b * -I' 4^Wf to' Finiancial Stateiniesitsi -

lhemeber 31.1998 med 1997 (Dollars in sinousmade) -

Eww mn _ o .a 1 x . .au , .m u & i. m ao ,_ _

j . ,,g (10) /nJmbstance Ikht Ikfrasance The following describes the methmis and assumptions usal by the Agency in On January 1,19)8, the Agency assued $161,380 of Ilw 19)RA Refmding Series determining carr)ing value and estimated fair value of Gnancial instruments:

thmds carrying intenst rates from 4.4% to 5.5% The 19)RA pnxeeds were used to (a) Cash refund a ponion of the 1992A Refundmg Series ikmds. These pnreeds were used Carning value equals estimated fair value, to purchase l'.S. Gwrnment Secunties and were placal in an irremcable trust (b) Marketable Ikbt Scrurities with r.n nerow agent to pnnide for all future debt senice payments on the I.stmuted f.ur ulue, which is the carrying value, of all marketable debt refunded hands. Tlw nfunding resuhnt in a net defcasance kns of $13M)l, which securines is derival from quotal mari et pnces.

is the difference betwen the acquisinun price of the new lxmds and the net (c) Participant Accounts Rece/rable, and Other Arrounts carrying amount of the reftmdat bonds. Receirable in pnor years, the Agency defcased in-substance certain Ehttric Rtwnue ikmds Carrying amount appnnimates fair salue due to the short.kym nature of these hy placing the proemb of new luuls in an irrnocable trust fund to provide for instruments.

future debt service pavmems on the old debt. Accordingly, the trust account asset (d) 1.ong term ikbf and the liabihty her the defeaxsl lumh are not includalin the accompanying Carrying value of longaerm dehi coupon securibes includes par, less unacental fin.mcial statements On December 31,19)M, $330A55 of the bonds are discoents, plus aconwd interest payable. Carrying value altio includa Capaal consideral defensal in-substance. Appnclathm Term ihmds valuni at original price plus accreted discount.

(11) Reserreforlkrommissioning Estimated fair value of all long term debt wcurines is derival from quoted The Agency is in compliance with Suclear Regulatory Commission requirements markd prices and includes accrued interest.

for fundmg future decommissioning costs. Since 19H5, the Agency has been making The esumated fair values of the Agencrs long term debt with carrying valuts regular deposns to segnphd decommissioning accounts. Deposits pertaining to different from Il cir esumatist fair value at December 31, IW8 and 1997 are as contammatal portions of the Project are hekt hy a f rustee. The Agency has custmly follows:

of funds set aside to decommission non-contammated portmns of the Proicct. The 199H 1997 Agency's share of denunmissisming costs, hasal on decommissioning studies Estimated Estimated compkied in IPH, is estimard to be $81,700, which includes an esumate for Carr)ing Fair Carrying Fair infl.aion from IPH to IP)H. This estimate presumes the Catawha Nuckar Station Amount ialue Amount ialue will he decommissionn! as soim as lamg-term debt.

operaung hcenses in 2024 and r%possible folkming the expiranon of itsRoenue 1986 I:lectric (11) Employer Benefit 1%ns Refundmg ikmds $ 26434 33,101 26,331 31,956 The Agenc) maintains a defiaed tontribution money purchase plan in 19H6A 1:lectric Rotmoe compliance with Section 401(a) of the Internal Rnenue Cutle. On behalf of all full. Refundmg ihmds 94,007 106,919 93,4Mi 106,H62 time empimns, the Agency cor. tributes 10% of hase salary into the money 198M IArtric Revenue pureb pm Agency contribuunns totalal $94 and $80 in 199N and 1997, Refundmg ikmds - - 2,'H2 2,782 nspoel) imployee contributions may also he made to the Plan, pnniding 1988 11ctric Revenue combinal emphner and emph,)ee annual contnhutions do me oceed 25% of Refunding ikmds 17,569 35,820 16,283 23,H14 taxable income, or $30, whichever is kss. 19MMA thctnc Rntmue The Agency also mamtains a deferral comptmsation plan under Secuan 457 of Refunding ikmds 9,056 17,114 M,410 11,268 the internal Roenue Code. trum time to hme, on behalf of selectal empimees, the 1991 lhttric Roenue Agency contributes to the deferred compensaunu plan Employee contribu0nns ma) Refundmg ikmds 202,993 235,386 202,191 231901 also be made to the deferrai compensation plan providmg comhuwd employer and 1991A lactric Revenue emphiyt* annual contrihubons do not ncent certain hmitadons. Refunding ikmds 16i A0H I81,052 168,Mi l iM8,582 Assets of the money purchase plan and defern'd compensation plan are held by 1972 13ectric Rnenue NM Recrement Corporahon, adminimator and trusta , for the Agency for the Refundmg ihmds 20,397 22,3'O 166,102 1H1453 nchisive beneDt of the empimees. 1993 Electric Revenue (13) Disclosures Pegar; sting Fair Value ofFinancial Refundmg ihmds K0.~62 87,57I no,6MM s6bo2 1:struinents 1996A 11ttric Rnenue Statement of Financial Accounung Standards No.107 (St AS No.10'), Refunding ihmds 168,311  !?0,2H9 168.27b  !?O,201 Disclomre About fair hdue offinancialhastruments, requires disck>sure of fair 19968 11ctric Roenue salue infonnanon about hnancial instruments whether or not recognized in the Refundmg ikmds 155,803 Iti6,292 165,390 173,523 halance statt, for which it is pracucable to esumate fair value. Fair value estimates 1996C/D lhttne Rnenue are made as of a specific point in time hasal on the characterisucs of the financial Refundmg ikmds 100,283 100,2H3 100,326 100,320 histruments and the reinant market infonnation There asailable, quoted snarket IW7A thctric Roenue I prices are used. In ottwr cases, fair values are has d on esumates using present Refunding ikmds 32,391 32,391 32MH 32MH value or other valuatkm techniques. These tithniques invohe uncertainues and are 19TIVC Ekctric Roenue sigmficand) alktte.1 hv die assumptions usal and the ,udgments made n gardmg Refundmg ikmds 109,3m) 109,309 109,355 109,355 l risk characterisnts of tarious financialinstruments, vount rates, prepayments, 199MA Eln1ric R,wenue i estinates of future cash Gows, future expntalloss nyritmce and other factors. Refundmg ikmds 159 9ti 16t091 - -

Changes in assumpoons could significantly affect these estimales. Derhed fair value $ 1,339.093 1M99MM  !.41.04 i M 7,232 eshmaks cannot he substantiatal hv compartum to indepemkmt markets and, in many cases ma) or may not he realunt in an immniiate sale of the instrument. (14) AuclearInsurance I nder SMS No.10', fair value esumans are based on cusung financtal Duke mamtains nuckar insurance cmcrage in three program areas: habiht)

Instrume its without attempting to esumate the salue of andci(raksi future business cmerage; progwny. decontaminauon and thrommissioning coverage; and husmess and the salue of the assets and habihues that are not financial instruments. imerruphon and/or extra npense coverage. Duke is reunhurust by the other joint A(cordmgly, the aggregate fair value amounts presented do not represent the owners of Catawha for ceruun openses associatal with miclear msurance tmderlying value of the Agency. pmmiums paid by the Corporation.

Piedmont Municipal Power Agency 25 l

y ,

% p, h tes to Finneild Statements .

Decemlwr 31,1998 ami 1997 (I)ollare in thounamia)

U w P iant he Price-Anderson Act, Duke is required to insure This Agreement invol es an element of interest rate risk in excess of against public liability claims resulting frorr, auclear incidents to the amounts recognized in the financial statements. This risk arises from full limit of hability of approximatelv $9.H billion. the possible unfavorabir changes in market interest rates.

Primary //ab///ty Insurance. The maximum required prbate in exchange for the Agency receiving a fixed monthly fee of $98, primary hability insurance of $9.6 million has been purchased along the Agency has given up interest income which will be earned on with a like amount to cover certain worker tort claims. scheduled monthly deposits into certain debt service principal and Excess Itab///ty /nsurance. This policy currently provides interest accounts through December 31,1999. This Agreement allows approximately $9.6 billion of coverage through the Price- Anderson the Agency to earn a yield of 6.58% on short-term funds.15ccause of Act's mandatory industry-wide excess secondary insurance program of the decrease in short term interest rates,if the Agency had terminated risk pooling. The 59.6 billion of coverage is the sum of the current the Agreement at December 31,199M, it would have recched an potential cumulative retrospective premium assessments of $hM additional payment of $508. Ilouever, the Agency has the intent to taillion per licensed commercial nuclear reactor. This $9.6 bilhou continue with this Agreement through its contractual maturity.

ud! be increased by $M8 million as each additional commercial The future value of the Agreement is not reflected in 'he Agency's nuclear reactor is licensed, or reduced by $H8 million for certain financial statements. The level )ield income relating to this agreement nuclear reactors that are no longer operational and may be exempted is recognized in the statements of revenue and expenses as a from the risk pooling insurance program. I'nder this program, component of interest income.

licensees could be assessed retrospective premiums to compensate (17) Substguest fremt for damages in the event of a nuclear incident at any licensed facility la Febr. ary 1999, the Agency issued $97,510 in Electric Revenue in the nation. If such an incident occurs and public liability damages  !!onds,19994 Refunding Series, with interest at 5.25L The proceeds exceed primary insurances, licensees may be assessed up to $88 mill be used to current refund $94A25 Electric Revenue Iknds, milhon for each of their licensed reactors, payable at a rate not to 1996A Refunding Series, bearing interest rates ranging from 6.55% to exceed $10 million a year per licensed reactor for each incident. The 6.60E The refunding resulted in a net defeasance loss of $5,611.

$88 mil; ion amount is subject to indexing for inflation and may be (1#) lear 2000 subject to state premium taxes. The Agency began considering the impact of its Year 2000 issues in Duke is a member of Suclear Elec*ric Insurance Limited (Sell.), 1996. Management established a project team which reports Year which provides property and business interruption insurance 2000 progress to the lloard of Directors on a regular basis. The coverages for nuclear facilities under the following three policy Agency conducted at mpact analysis of internal operations including programs: hardware, application nnd sprem software, network and Primary Property Insurance. This policy provides $500 million in telecommunications, and facihties to identify and assess their date primary property damage coverage for each of Duke's nuclear sensitivity. An inventory of all computer sptems was completed and a facilities. plan mas developed to address all non-compliant systems. The Agency 1:xcess I'roperty /nsurance. This policy provides excess property, also conducted an impact analysis of external operations including decontamination and decommissioning liability insurance in the vendors and service providers.

follouing amounts; $2.25 billion for Catauba and $l.5 billion for A portion of the computer software and hardware embedded each of the Oconee and McGuire Nuclear Stations. technology used by the Agency was not designed to recognize Business /nterruption /nsurance. This policy provides business calendar ) cars after 1999 - the so-called " Year 2000 Problem." The interruption and/or extra expense coverage resulting from an Agency has identified the Accounting / Financial Reporting S) stem and accidental outage of a nuclear unit. Each unit of the McGuire and the I.oad Control / Demand Side Management system (SCADO as its Catamba Nuclear Stations is insured for up to approximately $4 mission-critical systems. The replacement of the Accounting 4fnancial million per urek and the Oconce huclear Station units are insured Reporting System is currently in progress, and the Agency expects to for up to approximately $3 million per week. Coverage amounts per complete the conversion by October 1999. The SCAD 4 system is in the unit decline if more than one unit is involved in an accidental outage, assessment stage and ronversion to a Year 2000 compliant system is initial coverage begins after a 17-week deductible period and expected by December 1999 continues rt 100 percent for 52 weeks and 80 percent for the next The Agency is significantly dependent upon the Year 2000 104 weeks. readiness of Duke Power and the Participants. The failure of the ll NEll's losses ever exceed its reserves for any of the above three Agency or others with whom the Agency conducts business to become programs, Duke will be liable for assessments of up to I:ve times its icar 2000 compliant on a timely basis could result in disruptions in annual premiums. The current potential maximum assessments are as electric service in the service areas of the Agency and its participants follous: Primary Property insurance - $30 million; Excess Property and could result in a significant loss of revenues to the Agency, insurance - $23 million; llusiness interruption insurance - $20 Therefore, the Agenc) is actively involved in Duke romer's icar 2000 million. efforts and shares information on a regular basis with the The other joint owners of Catauba are obligated to assume their Participants. In addition, the Agency has assessed the Year 2000 pro rata share of any liabilities for retrospective premiums and other compliance of external vendors. The majority of the vendors have premium assessments resulting from the Price-Anderson Act's excess indicated that they will be Year 2000 compliant by the end of 1999.

secondary insurance program of risk pooling or the NEli. policies. As of December 31,199M, the Agency has budgeted more than (1J) Contingencies $250 to replace current systems inc!uding the accounting and load The Department of Energy (DOE) has been determined to be side demand monitoring systems for 1999. These costs include responsible for storage and disposal of spent fuel from nuclear replacement systems that, in addition to being Year 2000 comphant, facilities as of January 1,1998. Ilecause the DOE does not have provide significantly enhanced capabilities which ullt benefit adequale facilities to handle the spent fuel, PMPA and Duke have operations in future periods.

incurred additional costs. ?MPA anticipates litigation will be required The Agency believes that, based on available information, it ulll be to resolve this matter. Management is unable to estimate the costs able to manage its icar 2000 transition for sptems and associated alth such litigation at this time. Ilecause such llahikty is infrastructure, without any material adverse effect on its business not yet probable and reasonably estimable, the accompanying operations or financial prospects. lioucter, there can be no financial statements do not include any provision for such costs. assurance that failure to resche any issue relating to such transition (16) forsrarst f>rl/rcry Agreement would not have a material adverse effect on the Agency  ;

in order to mitigate its exposure to fluctuations in interest rates, the Agency has entered into a Forward Delhery Agreement which requires certain actions and obligations on the part of the Agency and incurs certain off balance sheet risks through December 25,1999 26 Piedrnont Municipal Power Agency

Schedule Schedule of Revenue and Exnemes ..

1 Per.the Bond Resolution and Other Agreements Year ended December 31,1998 (Dollars in thousand )

Actual Budgeted Actual Revenues Revenues Over and and Extvenses Expenses

~

(H_Under) udeet Revenue:

~

Sales of electricity to Participants $ 105,731 104,656 1,075 Sales of electricity to Duke 30,174 29,443 731 Sales of electricity to others 2,795 1,543 1,252 Interest income 31,799 30,410 1,389 Other 1,239 1.228 11 Total revenue $ 171,738 167,280 4,458 Expenses:

Catawha operating expenses:

Operation and maintenance $ 22,444 21,895 549 Nuclear fuel 6,795 7,264 (469)

Purchased power - Duke 7,765 7,265 500 ,

Payments in lieu of taxes 4,645 4,692 (47)

Interconnection services: l Purchased power:

Duke 12,603 10.358 2,245 Participants 8,200 8,243 (43)

Other 79 48 31 Transmission services 4,131 3,564 567 Distribution services 1,617 1,753 (136)

Administrative and general:

Agency 3,016 4,114 (l.098)

Duke 7,120 8,823 (1,703)

Other 5,976 4,324 1,652 Special funds deposits (withdrawals):

Bond fund:

Deposits from revenues 94,043 97,488 (3,445)

Liquidity facility fees 700 708 (8)

Refundings (1,381) - (1,381)

Reserve and Contingency fund:

Deposits from revenue 9,404 9,749 (345)

Capital additions (1,219) (1,174) (45)

Transfer excess funds (8,186) (8,575) 389 Refundings (138) -

(138)

Decommissioning fund:

Deposits from revenue 2,048 2.048 -

Interest income (1) 1,738 1,686 52 Revenue fund:

Working capital s 3,526 (1,255) 4,78i Fuct 6 (7,055) (6,416) (639)

Rate stabilization:

Interest income (1) 16,312 15,485 827 Net deposits (draws) (32,523) (32,523) -

Supplemental power reserve:

Interest mcome (1) 998 1,007 (9)

Transfer exccss ftmds (998) (1,007) 9 Other capital transactions:

Plant additions:

Reserve and contingency fund 1,219 1,174 45 General plant 105 51 54 Transmission plant 128 75 53 Fuel acquisitions 7,055 6,416 639 Bondings:

Bond proceeds ()55,779) - (l55,779)

Bond payments 144,090 - l 44,090 Debt issuance 12,881 _ 12,ggi Refunded series interest 379 __

379 Total expenses $ _171,738 167,280  ! 4,458

( t) Induded in "Rocnue: Imeteu intorne."

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