ML20247J095

Wolverine Power Supply Cooperative,Inc 1988 Annual Rept

ML20247J095
Person / Time
Site:	Fermi
Issue date:	12/31/1988
From:	Nordbeck W WOLVERINE POWER SUPPLY COOPERATIVE, INC. (FORMERLY
To:
Shared Package
ML20247J067	List: ML20247J069 ML20247J095 NRC-89-0071, Forwards 1988 Annual Financial Repts for Detroit Edison Co & Wolverine Power Supply Cooperative,Inc
References
NUDOCS 8906010036
Download: ML20247J095 (27)

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~ p .}  ;; 7 ~ . g, y a. t gy@ s ,, - .: 7 , . .. ; ,;; f' ; 'fng: '+- . ., .l*  ; j@g p Rgyg ? L !f.f 3 g  ; 'g- l: , _ __ ' e , v y y. , j p; 4 y - . n v h db+ . . - . . . .. [ . .U.Is . # . - .. ... . . , ._.: . . . . . 1mi JMdd l Employ @@s Contents Financial Highlights Execunv.

• Artnur D Binghani. D.,ece Job safety a noining *Croig A sor, and Member Systems. ,,1 Dueca Communcatens a Mamehng *Deooran u Brace. t*o '

Secretary *Dichard L Long General Counsei *Artene R Moore. President accuse Swetary *Roymond G Towne. ceneroi Manager and General Manager's Report . . 2 Department Highlights , ,4 nnonce & Administrant. service. Board of Directors . . .8

• Craig S Bortm Human kesources Coordinator *Teresa L Eitrs.

Accountant W

• Scott H. Fredenck, Accountant fl

• Walter J Garcio. Financial Statements . . .9 Manager. Finance & Admin strative Services *Pommy S taBrecque.

Compute Opsoror eBa tura M Matthew Accountoni W *>omes E Meredith, Purchasing Agent Warehouse ecori J Mauron. Accountant I eXimbedy B Mohtor. Accounhng Wpervoor IntIOduct,on i f Woiverine Power Supply Cooperative, Power Proouction inc., w th headquarters in Boyne City,

• Neti L Anderson. Chsef Power Dispatch Supennsor *Jettrev Arnok.1 l

Operations Supervisor *2 chard C Arnold. Supentencent Gas Turbine. D.esel & Hydro Generation *Jimrny D Ashbough. Apprentice Michigan, is a non-profit rural electric Dieseinureine oprotor

• Gary Bond Laborer A/Rehet ooerator A

• Enc generation and transmission Cooperative D. Baker. Electrcot En@neer

• James C. Bedtuss. Apprentece Desel Operator *M6 cheat D Beow. Operator *R chard D B:getow Chief supplying wholesale electric energy to Operator *shmey J smett. Secretary / Receptionist *Donoid P Bowe

Mobde Cool Ooerator *Richord C. Brod ey. Shrtt Supervisor *Lomce R me rmd d&hk dWNHm erody. Reponman A emchard F Bnssette CNef Oper@or

• Rex A Brownen, taborer@ehet Operdor *Darvel J CaWedey, Apprentice Cooperatives serving a total Consumer-Dieseinurbme Opemu *wmiam a Carson. Asniant Pioni membership exceeding 140,000 ,n i 35 Supenntencent Mamtenance

• Michael P. Chase ' shift Supe > visor

• wmom K Crows. Operator

• Frank M Dotwick. Supervitendent s%beid Michigan counties. Wo:verine owns and H Droves Jr . Assrstant Plant Superintendent - Operatens

• Ernest G Evans. Boder Opwdor

• John Gdlespes Diesei Operator *Patnck M operates approximately 1,600 miles of Greenman. Boner Operator

• James B Habasco /mdory Operator exennetn R Hams, Auxu ory Operator

• John W, Holt. Computer transmission line and more than 100 I f Programmer Supsvisor

• Leo Hoppe. Bo6er Operattar

• Gory L Jaques. substations.

Operator *Chodes A Johnson. Switchboard Turbino Operator

• Archie R. Klein, Satichboard Turo6ne Operator

• James A. Kotrba Operator

• Meton: G gromer. Boner Operator erwry C. xua:a. Chet Operato'

• Leroy J Lowing. Boner Operator *C G Luce. Mo ntenance Operator Wolverine also owns and/or operates 157

• wmiam R Lyon Ch er Opereor

• Robert J. Matts. '.areer/Mooae cool megawatts of Coal-fired natural gas, Operator Reher Operator *Mounce L. McBnde Operator

• Harold E Mar. Auxdory Opemm *Waam u uin. Bow Owata *Donau diesel, and hydroelectn.c generation. In

• J Nessen. Switchboard Turbme Operator *Jorres R Nicket Pows Producion Monage *wmem C ence Bon Opmota *Dee wmea. addition rWolverine is on approximately 15 Ewica uecronico pepairmon exenneth t Roggow. Mau*mnce Operator

• Ronald P. Rowe. Communcottons SupervisorTngineer

• John percent owner, with The Detroit Edison Company, in the 1,093 megawatt Ferml 11 u Rorycu.tobotermew Op ator *Buu.P St Pet. snm Supemor ,

• Oavid W. Seeley. Auadory Operator *Craig J. Show EL3Her Operator

• Rarph E Snea. Operator

• Thomas H Skottke. Computer Programmer Nuclear Power Plant near Monroe, exenneffi D Slagter. Maintenance Operator stugene E Smtgen CNe' Operator *Dorre1 R Sumervhe. Boder Operator *Rota,rt W. St Irwell. Shift Michigan, However, Wolverine and Detroit Supenosor *Je ry C Sweet. Repairman B

• Jerry R raber sheer Supervisor Edison reached an agreement call!ng for

• Jack R ThompsonAntenance OperNor

• Rex E Thompson. Operator exeith R fissue. Shift Sur>ervisor

• James N iucuer. Maintenance the sole of Fermi ll by Wolverine to Detro.t i Operator

• Ronald C. West. Switchtcard Turbine Operator *Bert J.

Wersmo. Operator

• John L Wilson. CNe' Operator

• Chip L Witte. Edison in 1990. Wolverine also maintains an j Janitu *was zimmemon. Os uru approximate 15 megawatt ownership, with Coneumers Power Company, in the 770 tron. muon. Engin..m a Op.onon.

• Becky S Benz. Computer Operator

• Dean E Bishop.ut#v Mon *Dowd megawatt J.H. Campbell Unit #3 coal-fired L Mw Apprentce Uneman *4cnord J Chondo. Transmtsson Superintendent - North

• Richard B Choppeil Monoger. Transmission.

generating facility located near Grand Engme ina & Owotons *Rona.d w Cowat sencr uremon evenek Haven, Michigan. M Domgan. Computw Technecon *Chegl A. Dr'vis. Assistant Computer Oncea *;onn J DeGear. meeyman uneman

• Der ms P+ottz. Senc' DraftsmarVEngineenno Technician

• James G Groinger. Joumeyman Anad MeehnU Uremon *4:)bert O Grcy. Ironsmoon Superintendent - Soutn *Sabro P Hoyden, Secretary. Receptionist. Ironsm;ssion. Engineenng &

Operatons Department *Jimme D Hansen. $emot Uneman *DOvio M Wolverine Power Supply Cooperative's l Howard. Joumeymon Uneman *Edwin J Kersey Instrumentation Seventh Annual Meeting of Members will Communce ons Technt.:on C: ass m .=ene r R teacn. Joumeym " Unemon

• Rchard D Love. Environroentoi Engmeeregnt-of Way M hed on Thurs@' @H N* 1989 at Sup ny *Ryan x uecoows Dransmanangmeenna tecnncon

• Dennis L Ordrway. Instrumenkaton Communcohuns Technicon Class 10.00 a.m. at the Amway Grand Plaza t *LeigNon L Recs. Awstant Monogw. Travmucn Engineereg & Hotel, Grand Rapids, Michigan.

Operat ons North / Transmission Devge Engmeer *MichaelJ Roberge ElectncolEngmeer *Genn C Robrosoc. SeNot bremon

• Gary D Rogers.

Joumeyman Uneman gertn i Sarns. Joumeyman Uneman exennern I R Scect -me-ce C-nce-hncen Ces ~~ W Terryn. Utmty Man etnomos A Thecker Joumeyman Uneman W*llard i Haenke Memorial l

• Theodore t Unden*ood Assistant Manager transmissen Engmeenng This OnnuOl report is

& Orerchons South

• David K vo@eeren. Ins %mentabon '* dedtCOfed tO Mr. Wdlord Communicates techncon Class Ili

• Dome, von Siemuouck instrumental on CommJncatCDs Techncon Co0S ll

• Norman J Vogt' HQenke. O director Of Utmty Man

• James t Watsn. Jr Senor Uneman *8 nan L womer, both Wolverine Power j Assistan' Environmental Eng< ee-Anstant raget or-wov Serdsor were . Supply COOperChve and l x Wmrer. Semor bneman *Le.gh w Woodbury Sero unomon

• Wham TrFCounty Electric CO-L Zuedema instrumentohon Commncatons ischmcnn Cioss I -

Operhe W hoe %e pOSSed Oway On october i 25.1989 ? He had served On the TrF CounN BOOrd Of DeeCtOr5 S;nCe 1946 Ond wCS O member Of the Wolvenne BOOrd Since 196i I __ . m______._.-___-_ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - . - _ Financial Highlights increase  % Increase 1988 1987 (Decrease) (Decrease) Assets 885.909,656 873.308.955 12,600.701 1.44 Operating Rever.ues 55.841.118 47,774,568 8.066.550 16.88 q Operating Expenses 54.383.594 46.701.802 7,681,792 16 45 Non-Operating Margins 680,362 570,841 109,521 19.19

Net Margins 2.137.886 1,643.607 494.279 30.07

, System Peak Demand (mW) 234 223 ii 4.93 Energy Sales (mWh) 1,198.316 1,125.202 73.114 6 50 To Member Systems 1,186.557 1,104.237 82,320 7.45 To Others i1.759 20.965 (9.206) (43.91) Members Revenue per kWh Sold (mills /kWh) 46.55 42.34 Purchased Power Costs (mills /kWh) 30.65 26 00 Total Cost of Electnc Service per kWh Sold 45.38 41.51 { Advance Plant Fuel Cost { mills /kWh) 24 11 23 46 Purchosed Cool ($/ ton) 49.16 51.69 1 Full Time Ernoloyees 119 116 Member-Systems 1 l l l Wolverine Power Supply I Cooperative, Inc. m Providing Wholesale Electric Power To Seven , Michigan Rural Electric Distnhution Cooperatives a Cherryland Electric Cooperofive, Inc. P O. Box 500 Grown. MI 49637 e (616) 276-9212 0 & A Electric Cooperative 490 Quarterhne Road Newaygo. MI 49337

a (616) 652-1651 l Oceano Electric Cooperative s '

j l ', P O. Box 232 Horf, MI 49420 (616) 873 2155 Presque Isle Electric Cooperative, Inc. ' 8 19831 M-68 Onoway. MI 49765 (517) 733 8515 "o Top O' Michigan Rural Electric Company 1123 E Division. P.O. Box 70 Boyne City. MI 49712 (616) 582-6521 l Tri County Electric Cooperative

h. 1100 W Grand River. P O Bcx 379 Portiond. MI 48S75 (517) 647 7554 e Member System Offices Western Michigan Electric Cooperative a Generating Plant O Box 248 ScoWine. MI 49454 1 I

g Energy Control Center (616) 757-4724 l l I 1 iJ l U L I! two major generation related undertak- home heating systems of those member ings this past year - the federal licens- consumers who consent to such con-ing of the Tower and Kleber hydroelec- trol. In return, the member-consumer . tric facilities and discussions involving receives a monthly billing credit. With 3 a power pooling arrangement with the a load management system, Wolverine Michigan Public Power Agency (MPPA). has the ability to minimize the purchase License proceedings at Tower and of high cost energy and capacity for Kleber involved a great deal of coor- peak demand periods. A load dination and planning by our staff in management system will provide i g conjunction with numerous local, state significant benefit to the member- i and federal agencies. We anticipate consumer, the member-system and ) a reply to our license application by Wolverine. i MPPA a o cent ued n n effort fm Finally, Wolverine and its member-a power pooling relationship with systems are becoming much more ag- j several of ine state's municipal electric gressive with respect to marketing and i utilities, economic development. Since our I power suppiy future is now secure, we Wniie woiverine is continuing to nave ine abiiity to porsue new commer-prepare for the growth of the member- cial and industrial member-consumers systems, efforts are also being focused in conjunction with our member-on achieving such growth in a manner systems. We are happy to report suc-that will balance increased energy cess in having been selected to pro-sales and electrical demand. Effective vide electrical service to a number of load management is one way to new commercial and industrial facilities achieve this delicate balance. during the past year. However, we too - need to strengthen the ties and services 1 Evaluation of several load manage- provided to our existing member-ment systems is presently underway in consumers. We cannot afford to com-anticipation of having such a system in promise our services and must continue operation by 1990-91. When installed, improving an excellent relationship that this system will allow Wolverine to con- was started more than 50 years ago, trol electric hot water heaters and i __ he past year has been one of transition. We recognize this fact and feel we have the ability to capitalize on the growth of our system so as to create a strong and responsive organization well into the 1990's and beyond. We are confident that Wolverine and its member-systems have the people and resources to ac-l complish that goal. fS; { / -V y [. /}h $$ - r?oymond G. Towne 1 Wayne Nordbeck - Executive vice President 1 .... . President - and General Manager i Financial Highlights { increase  % Increase 1988 1987 (Decrease) (Decrease) Assets 885.909,656 873.308,955 12,600.701 1.44 Operating Revenues 55.841,118 47.774.568 8,066,550 16 88 q Operating Expenses 54.383,594 46.701,802 7.681,792 16A5 Non-Operating Margins 680.362 570.841 109.521 19.19 ). Not Morgins 2.137,886 1.643,607 494.279 30.07 i_ System Peak Demand (rnW) 234 223 11 4 93 Energy Sales (mWh) 1.198,316 1.125,202 73,114 6.50 To Member Systems 1.186.557 1,104.237 82.320 7.45 To Others 11.759 20.965 (9,206) (43.91) Members Revenue per kWh Sold (mills /kWh) 46.55 42.34 Purchased Power Costs (mills /kWh) 30.65 26.00 Total Cost of Electric Service por kWh SoH 45.38 41 51 Advance Plant fuel Cost (mills /kWh) 24.i1 23 46 Purchased Cool (S/ ton) 49.16 51.69 Full Time Employees 119 116 Member-Systems u l \ a I Wolverine Power Supply Cooperative, Inc. g Providing Wholesale Electric Power To Seven e Michigan Rural Electric Distribution Cooperatives a Cherryland Electric Cooperative, Inc. P.O. Box 500 Grown. MI 49637 e (616) 276-9212 O & A Electric Cooperative

• 490 Quarterline Road Newaygo, MI 49337 m (616) 652 1651 Oceano Electric Cooperative 8 '

P.O. Box 232 l Hart, Mi 49420 (616) 873-2155 Presque Isle Electric Cooperative, Inc.

• 8 19831 M 68 N Onoway, MI 49765 (517) 733-8515 8

"e Top O' Michigan Rural Electric Company 1423 E Division. P O Box 70 Boyne City. MI 49712 1 (616) 582-6521 I Tri-County Electric Cooperative N 1100 W Grand River, P O. Box 379 Portland, MI 48875 (517) 647 7554 e Member system Offices Western higan Electric Cooperative p , a Generating Plant Sccitvitie. MI 49454

• Energy Control Center I ( 16) 757-4724

two major generation related undertak ' home heating systems of those member ings this past year - the federal licens- consumers who consent to such con-ing of the Tower and Kleber hydroelec- trol. In return, the member-consumer tric facilities and discussions involving receives a monthly billing credit. With 3 a power pooling arrangement with the a load management system, Wolverine Michigan Public Power Agency (MPPA). has the ability to minimize the purchase / Ucense proceedings at Tower and of high cost energy and capacity for Kleber involved a great deal of coor- peak demand periods. A load dination and planning by our staff in management system will provide conjunction with numerous local, state significant benefit to .the member-and federal agencies. We anticipate consumer, the member-system and a reply to our license application by Wolverine. summer. Extensive discussions with the MPPA also continued in on effort to form Finally, Wolverine and its member-a power pooling relationship. with systems are becoming much more ag- ' l several of the state's municipal electric gressive with respect to marketing and , utilities. economic development. Since our ) power supply future is now secure, we ' Wniie woiverine is continuing to nave tne abiiity to pursue new commer-prepare for the growth of the member- cial and industrial member-consumers systems, efforts are also being focused in conjunction with our member-on achieving such growth in a manner systems. We are happy to report suc-that will balance increased energy cess in having been selected to pro-sales and electrical demand. Effective vide electrical :,arvice to a number of load management is one way to new commercial and industrial facilities achieve this delicate balance. during the past year. However, we too l need to strengthen the ties and services j Evaluation of several load manage- provided to our existing member- I ment systems is presently underway in consumers. We cannot afford to com-anticipation of having such a system in promise our services and must continue l operation by 1990-91. When installed, improving on excellent relationship that I this system will allow Wolverine to con- was started more than 50 years ago, trol electric hot water heaters and he past year has been one of transition. We recognize this fact and feel we have the ability to capitalize on the growth of our system so as to create a strong and responsive organization well into the 1990's and beyond. We are confident that Wolverine and its member-systems have the people and resources to ac-complish that goal. l

34 l

~ g/ gg ' ymas.,M. erazd

1. Teoymond G Towne Wayne Nordbeck Executwe vice President Presiden' and General Manager

.J President & Genoral Manager's Report i Wolverine's sixth year can be described as one of transition. l From new leadership to a renewed emphasis in a number of j 2 areas, the Cooperative has found this past year to be one of / preparation for the future - for Wolverine, its member-systems and, most importantly, the member-consumers who comprise our $ l systems. l We clearly understand that the next tinued electrical growth of the year will provide even more challenges Cooperative's member-systems. to the men and women who comprise i our organization But as we prepare for Electrical system growth was readily the 1990's and beyond, we do so with evident during the past year as energy an added sense of vigor knowing that sales to our seven member-systems in-the future holds a host of new and ex- creased at a rate of 7.5% - the highest citing opportunities. in our history. This continued growth meant the sale of more than 1.4 billion Like each of the past several years, kilowatt hours of energy to the member- ] many of our collective energies were systems. Record sales also meant  ! tocused upon the 1990 sale of our record electrical demand. A new ownership interest in the Fermi ll Nuclear system peak of 233 megawatts was Power Plant. This past year the reached on December 12 - surpassing Michigan Public Service Commission the previous peak by approximately 10 granted our request for a wholesale megawatts. The Municipal and rate increase totaling six mills per Cooperative Pool, comprised of kilowatt hour to be phased in over a Wolverine and municipal electric threc. year period. While a rate in- utilities in Grand Haven, Lowell, Traverse crease is generally not looked upon as City and Zeeland, also reached a new , a positive measure, this increase was collective peak demand this past year. a significant factor in resolving our Fer- i , mi ll concerns Most importantly, the ad- I ncreased electrical growth also meant ditional costs resulting from this three- that our generating facilities, most of step. rate increase still allow our which are not operated as base-load member-systems to maintain rate com- units, were called upon to meet this de-parability with neighboring utilities. mand. While not operated on a daily basis, these generating units again pro-The Rural Electrification Administrationved their immeasurable value to the also played on important and valued security and electrical integrity of our , role this past year - particularly with system. Even when not in operation, ( respect to the Fermi ll sale agreement. these units give Wolverine the flexibili- ) in conjunction with the REA, a Power Re- ty to purchase low-cost wholesale quirements Study (PRS) update and power from other Michigan utilities. Ma-Work Plan was initiated to serve as the jor repair work was undertaken at both basis for Wolverine's presently-pending the Tower and Kleber hydroelectric $21 million construction loan package. facilities and the Tower diesel plant. Ef- 1 Each of these very important planning forts were also initiated to secure a flex- I tools will provide further guidance and ible and economical natural gas con-direction for Wolverine's power supply tract to allow for the operation of the and transmission improvement and 23.000 kW Burnips STAG Unit. construction programs. These planning processes are vital to meet the con- We were also extensively involved with l p i two major generation related undertak- home heating systems of those member ings this past year - the federal licens- consumers who consent to such con- - ing of the Tower and Kleber hydroelec- trol, in return, the member-consumer tric facilities and discussions involving receives a monthly billing credit. With 3 a power pooling arrangement with the a load management system, Wolverine Michigan Public Power Agency (MPPA). has the ability to minimize the purchase - License proceedings at Tower and of high cost energy and capacity for Kleber involved a great deal of coor- peak demand periods. A load dination and planning by our staff in management system will provide conjunction with numerous local, state significant benefit to the member-and federal agencies. We anticipate consumer, the member-system and a reply to our license application by Wolverine. summer. Extensive discussions with the MPPA also continued in on effort to form Finally, Wolverine and its member-a power pooling relationship with systems are becoming much more og-several of the state's municipal electric gressive with respect to marketing and utilities. economic development. Since our power supply future is now secure, we While Wolverine is continuing to have the ability to pursue new commer-prepare for the growth of the member- cial and industrial member-consumers systems, efforts are also being focused in conjunction with our member-on achieving such growth in a manner systems. We are happy to report suc-that will balance increased energy cess in having been selected to pro-sales and electrical demand. Effective vide electrical service to a number of load management is one way to new commercial and industrial facilities achieve this delicate balance. during the past year. However, we too need to strengthen the ties and services Evaluation of several load manage- provided to our existing member-ment systems is presently underway in consumers. We cannot afford to com-anticipation of having such a system in promise our services and must continue operation by 1990 91. When Installed, improving on excellent relationship that this system will allow Wolverine to con- was started more than 50 years ago, trol electric hot water heaters and i he past year has been one of transition. We recognize this fact I and feel we have the ability to capitalize on the growth of our system so as tc create a strong and responsive organization well into the 1990's and beyond. We are confident that Wolverine and its member-systems have the people and resources to ac-complish that goal. g) g pf f :: O htu220 i ~ Paymond G Towne

Woyne Nordbeck Executive Vice President i President and General Manager

Department Highlights Finance & Administrative .n ~ "9 i Services - M e . ewmg swg w . p V V ith the commercial operation of Ferrni 11 on h 4 l January 24.1988, the Finance and Administrative Ser-vices Department spent the next eleven months lear-M gg g#% - . { [ ning the accounting for on operating nuclear power f l plant. Even though Wolvenne's ownership in the Fer- < Nb T i mi ll facility will be sold back in January 1990 to the >i f majonty owner (The Detroit Edison Company). the r , Cooperative occounting treatment was that of a nor mot joint ownership in a generating foCilit/ However, the segrung of the Seventh Amendment created . several different accounting treatments {j[ [ l er= - , , w l In compliance with the Seventh Arnendment.  ; . 4. ~ . a P Mg '~ l

• W #" " l Wolverine had to establish a Nuclear Fuel Funds l

Escrow. o Decommissioning Trust Fund. and a Rote in- I%  ! l crease Funds Escrow Also. Wolvenne had to record l Its share of revenue, operation, and maintenance Ine cmuowe and as seven memt.orsycoms have wonea closeiy sn me mom Nuc smvce commisson during the pa9 year la costs associated with Fermi 11 and maintain o cash empew a nurnte of specoued rates for homes and buonesses neutral position with respect to the Statement of 1. mated rem nonia Mcnon mon o Manufaciunng company is o* * "+ Fw

• Uechc coorwahve a large9 memte Operations. With the help of the accounting staff from " " "" " " # #I'#*

Detroi! Edison, our accounting staff has developed financial procedures and records to comply with the allow us to store the original minutes and use the Seventh Amendment and leave suffi cient audit trails bound copy for historical reference and a working for REA and Detroit Edison in less than a year. copy for management We hove closed out three con-Wolverine's accounting staff will need to account for struction contracts and processed 200 work orders the sole of Wolvenne's ownership to Detroit Edtson. We totaling 54.500.000 (exclud:ng Fermi 11 which total op-are presently planning a meeting with the accoun- proximately $733,346.000.00) to plant in service lost ting staff from Detroit Edtson to go through a trio! clos- year. ing with the December 31,1988 balances to assure that there will be no accounting surpnses in January As was evident by the 52,100,000 of margins in 1988, of 1990. Wolvenne's mWh soles increased 7 A5% over 1987 soles. Member sales were of on all-time high of Although Fermi 11 accounting activity played a signrfi- 1,186.500 mWh and 555.200.000 in revenue dollars. cont role in 1988. it was by for not the only accomphsh- For our members. this amounted to 46 55 mills per kWh  ! ment With the help from the dato processing area, for their overage power cost. we were able to create on R-base program for the transmission spore ports inventory. This post year was also the lost year for the sell back agreement relating to the J H. Campbell #3 coobfired The personal computers have made on important im- Unit (owned by Consumers Power Company) for which pact to the Finance and Administrative Services Wolvenne owns 189k Depor1 ment They hove improved the work perfor- 7 mance immensely We have become more occurate I here were two significant insurance cloims in 1988. , and efficient in our accounting records onc pro- The first one involved the fire of our Tower Generating ! cedures which has lead to on increase in our produc- Plant These repairs took over a year to complete of l tivity. We have mode improvements in several areas a cost of $374.900 The other claim related to the this post year The most significant are the PSCR (Power repairs of a 50/75 MVA 438/69 kW LTC outo Supply Cost Recovery) fihngs and the Consolidated transformer. located of our Redwood transmission I con Budget recoros With oil the changes in the RE A substation near Hort. Michigan. The repairs for this loan programs, it hos become necessary to keep transformer were estimated at $400.000 more detailed internal records This program should be completed shortly and will be very helpful dunng With oli the changes in the tax lows and innge benefits our toon Fund Audit Reviews performed by REA . %rb nother creo of improvement danng 1988 Involved y microfilming We have microfilmed all general ledgers and journals from 1949 through 1986 in addition, we Y .- ' [^ ' .. f have copied all vouchers and invoices from 1974 through 1987 and purchase orders from 1983 througn 1988. We are continuing io microhlm histoncol dato and correspondence This will enable US to rbineve information more promptly and improve our filing  ; system We have also copied and bound oll boord minutes from 1949 through 1988 Although the ongino! Walter J Go+cio minutes must be retained by the Cooperchve. this witt Monoger progroms, we are continuing to review ond onclyze Wolverine has incurred considerable Cost in trying to the effect of these changes in on effort to keep both obtain operating licenses from the Federal Energy management and employees well informed. Regulatory Commission (FERC) for the continued L operation of the Tower and Kleber Hydro facilities, The post year hos been very productive for the Wolverine has retained the services of R.W. Beck and Finance and Administrative Services Department. The Associates os consulting engineers to assist in this 5 accomplishments and improvements for the 1988 year lengthy and time consuming process. Not only is FERC > con be credited to the cedicated employees within interested in the safe'v and design ospects of the this department along with the cooperation and sup- dams and facilities but Wolvenne is also having to per-port of those employees within the other departments. form numerous wildhfe and fish entrainment studies, A special thanks for all their efforts in 1988. os well os preporing recreational improvement plans for public use of Wolvenne's property and other pro-perties It is hoped that both facilities con be licens-ed within the next year without having to install very General Counsel costiy fisn screening devices and witnout putting substantial amounts of money into recreational facilities which 'would require Wolverine's The post year was on active year of the Cooperative. maintenance and increase exposure to liobihty. Beginning wrth lost year's Annual Meeting. the hrticles and Byfows were amended and the State filings were Much time has been spent in negotiating natural gas completed so os to kmit ilobility exposure of directors contracts for the Burnips Generating Plant to allow it and officers under new State low. The Bylows were to run of lower costs than purchasing Detroit Edison omended to provide flexibility as to the place of interruptible power Wolverine has entered into holding meetings. pipeline and local distribution contracts to provide the gas. We have contacted numerous suppliers in Texas A comprehensive review of oli of the corporation's and Louisiono. It is hoped that Wolvenne will have o policies was undertaken and completed during the supplier contract completed so that we con begin year. Severo! new policies were added relating to joint operating the plant os base lood generofion on April l use of focihties, purchasing protsdures and providing i,1989. Incentives for new electric loads. Wolverine petitioned for property tax assessment We have had several claims involving our insurance reductions at its Beaver Island Vestoburg, and Tower coverage, resulting from continued monitonng ex- Plants. A small reduction was obtained at Tower and pense at the Burnips Generating Plant due to the oil o substantial reduction of almost one-half was obtain-spill that occurred three years ago and oiso pertain- ed on the Vestoburg Plant property. A one-year reaac-ing to transformer failures Satisfactory settlements tion of obout 40% was obtained at the Beover Island have been reoched with our insurance carriers Plant. The Vestoburg reduction was based upon o Michigan State Tax Commission oppraisal which sup-Wolverine petitioned several townships where we ported our claims for reduced voluotion. Wolverine have electnc subsfotions or other facihties, requesting hos greatly reduced its outsde consulting charges by the granting of franchises under State law. Irrevocable doing more legal and engineering work "in house". 30-year franchises have been obtained and rottfted by the voters in Eaton Township. Kolomo Township. Du,ing tne next vear. Wolvenne ioous forward io Chester Township (Ecton County). Westpholio moving its general offices to the new facihty next to Township Greenbush Township (Chnton County), and the Energy Control Center near Codillac. Wolverine Peoine Township (Beaver Island. Charlevoix County) will be entering into o new collective borgoining con-tract with the internotronor Brotherhood of Electrical Wolverine has been working with the Michigan Workers Addrtional Bylow revisions will be proposed Public Power Agency (MPPA) pertorning to estoolishing of the Annual Meeting Wolverine is now proceeding on operating pool agreement and a dispatch ogree- with condemnation octions through Circuit Court for ment between MPPA and Wolverine it is anticipated eosements for transmission knes mnd a substation pur-that this could provide Wolvenne with add:fional chose in the Lake Odesso and 1 xtse City oreas Ad-capacity of potential lower cost, in add: tion to increas- ditional fronchises will be sought fi n local townships ed purchases of interruptible power under the Detroit where Wolvenne has facilities onc Jwns iond Edison Power Supply Ag'eement. In completing the pool ogreement and dispatching ogreement with MPPA, it will be necessary to amend or assign other ,, agreements between Wolvenne and the Municipal p . y~ .~ ' , $ and Cooperative Poof [MCP) and between MCP and [! Consumers Power Company and Detroit Edison Much time will be spent on these contractuot matters in the k b }A ' next few months [-( ~' We ore now completing on interchange agreement with Consumers Power Company so os to o!iow on in- y g terconnection of both componies' transmission " facihtes near Brod!ey of the southern end of Wolvenne s system This wW c' ford more rehabthty for [urm oppioomoroiy 100.000 to,a or nw. reached in August New peak demand levels in the * # ** # Municipal and Cooperative Pool were also set this securing a flexible natural gas Contract for the 23 post summer Record high temperatures and strong residential and commercial growth, throughout the megowott Burnips Combined Cycle unit. While service creo, were the primary conthbutors to these operating the plant will require the hiring and froin-new peak demand levels. For 1988, electnc energy ing of addvional personnel, it will result in a net reduc-sales to the member-systems increased at a rate of tion of power costs, while of the some time strengthen- l 7 5%, while electrical demand increased 4 5% ing the southern portion of the service creo. The Bur-nips Combined Cycle unit. because of its unique Record demand levels and increased sales of elec- design, is the most efficient generating facility on , Wolverine's system. I tric energy also meant higher purchased power costs to Wolverine during the post year. The cost of purcnos-ed powegumped to 30 65 mills per kilowatt hour on scussions with the Michigan Public Power Agen-increase from last year's level of 26 00 mills per kilowatt cy and several state and federal agencies again hour. One reason for increased purchased power received considerable ottention from department per- ) ' costs from our predominant supplier. Detroit Edison, sonnel throughout the post year. The municipal elec-was the commercial operation of the nearly S5 billion inc members comprising the MPPA are involved in ex- k Fermi ll Nuclear Power Plant and increased summer tensive discussions with tne Cooperative regarding the i I loads. The impact of Fermi 11 on our wholesale power formation of a joint power pool. While our discussions purchases from Detroit Edison will continue to be felt involve a number of utilities. It is anticipated that a in successive years - particularly with respect to in- power pooling relationship with benefits accruing to creased energy and copocity purchases required oil porties con be ottoined. Federal licensing of the under the Seventh Amendment to the Fermi 11 Par- Tower and Kleber hydroelectric generating facilities ticipation Agreement was also o prionty throughout the department. A fecerol license is required for Wolverine to maintain Wniie nu,cnosed powe, ma,niained o w,de mo,g,n its operoiing cootroi over inese two iow.cosi over internal generation in out overall generation /pur- generoting tocilities L.icensing discussions have in-chose mix. Wolvenne's approximately 157 megowotts cluded a number of locol state and federal agen-of internal generation continued to play a very impor- cies and have proven to be o major undertaking tant role During peak demand periods lost summer. many of the Cooperative's diesel and gas fired This report only focuses ( n the major issues prevalent generating units were colled upon to meet recoro de- in the deportmen' throughout the post year. Efforts are mand levels and to maintoin system integrity. otso progressing on the review of various load monogement systems, even greater use of the Energy A number of efforts were focused upon ensuring that Control Center's copobihtles and continued opero-internal generation would play on even more vital role tional improvements at all generating facilities. In the years ahead Boiler inspections were completed of the Cooperative's largest fully-owned generating 7' [ facility the 31 mogowott Advance Steam Plont C [p Testing indicated that the 35 year old boders on Units

1. 1 and #2 were structurally sound and in good work- Y C]

l ing condition Unit #3 at the Advance Steam Plant, with f] on Ovoilobility foCior of Oi% dunng the post year. Con- % ' [ l tinued to ploy its essentici port in the Cooperottve s 1 generation mix. Major overhauls were completed at j '. k' J both the lower and Kleber hydroelectric focllifies with plans calling for similar overhauls on the remaining , units of botn facilities in future years These overhouls have resulted in significant increases in operational fd 7 M@ . [A James R Nici<el Monager efficiencies of both plants Significant resources were o!so devoted toworcs a Transmission, Engineering The eMods of ounighteway personnel and brushing crews oiso continued to pay dividends throughout the & Operations past year. Tnis cieoring and brusnino prorrom has resulted in continued high levels of rehabihty for the With a service crea encompassing 35 count #es and member-systems of Wolverine However, the , Cooperative would be remiss not to mention the ef-neor'y 6.900 square mdes. the responstbihty of morn l forts of Richard Love who retired earher this year. Mr. I fair.ing o reliable flow of electrical energy for the love estobbshed the Cooperative) environmental seven member systems of Wolvenne is o large one The tosk of ensunng reliable whoiesole power is and nghtdway programs and his expertise and many conthbutions will be missed ovadable at the more than 110 substation deli,ery points through nearly 1.600 miles of transmission kne Wnnew*eooemnsm,ssionandweenoen is one that is not token hghtly by department person-sonnel have been focusing their offentr 7 nel A number of measures were taken dunng the post maintenance and new construction, more o' ,n year to maintain this consistently high level of wih 0150 begin to center upon the long range needs wholesale electric service to the seven member- of the transmission system The transmission system is systems of Wolvenne, one of the Coope otg, most valued assets and One of the reasons for this unparalelied degree of departmuntol efforts must begin to examine addi-system rehabihty is the number of transmiss,on inter-tionat methods of upgradh.g this fesource so its benetirs wdl contsnue to occrue well into the next Cen-conneCfion points with Consumers Power Company tury Speciot engineenng is ongoing to review the lood that the Cooperative owns and maintains These high carrying hmits of the system and to further examine o voltage ties serve as accen points for the receipt of bulk pr wer from other utdties whde further rnointo% schedute for instoihng a 138 kV transmission sy tem oveday with ossocuted tie substations Ing system integnty. Located near Hart, the Redwood 50/75 MVA interconnection received considerooie at A number of other oreos received considerable at-tention from departmont personnel this post year' tent on from department personnel, including the Cooperchve personnel were forced to take the giant evoluotion of sohd state metering. nght-of way pro-Pedwood transformer out of service for repair in Chicago in Chicago, the onsformer underwent a curement franchise elections, updating kne and subscotson drawings and the completion of Borrowers complete three-phase rt . . and is expected back Environmentot Reports Energies were otso focused in service by mid 1989 Planning for a simdar 50/75 upon providing member system kr;emen with substo-MVA transmission tie at Bradley is also prog'essing tron refusing training in on effort to further improve When completed. the Bradley interconnection will fur. rehabihty to the nearly 450.000 member consumers ther strengthen the transmission system receiving electricity through the member-systems of Wolvenne. Construction of new distnbution substohons and several miles of new 138/69 kV transmission hne was -- also completed duong the post year. Similar effort, , have been of the forefront of departments' achvities = for the post several years The :or0est of these projects , was the construction of a new substat on. circuit s. breaker station, and severo; mdes of transmission hne . l enabhng in-County Electnc Cooperative to serve the [. State of Michigan's Montcalm Correctional Facihty located near Carson City Ine facihVs approximate- ~ b g . , ty 1,000 k# electncol lood was one of several new . commercialhndustnal member consumers added to the system th!s past year - . Richmd B Choppeh Manager number of maintenance tosks were o!so cor.finued dunng the past g ear, including transmission pole Changeouts. copoCitor insfollahon, regulator retrofdts. and the continuchon of pole numbenng throughout the system In add hon. a spdl containment and con-trol plan for substot ons and on ttorage focdities has also been implemented Department p(trsonnEH have also uodated polyCh!orinated biphenyls (f'CB) records and organized a new envu onmental computer oota base All ma or transformers and regulators now have PCB levefs bEdow 440 par +s per milhon To ensure the depa7 ment keeps up-to Jte in the ever Changing electnc uWy 0%ronment a numbe' of in-ihahves were token in pu'Chaing new eauipmE+nt and tecnnolog.es A new a:1 terro n fiex troc vehrCIO for po:e sethng and a new computenyed dro%ng ystem V,W soon be in plOce and rE> placing olde'. Manual procE+Sses p;rp, , m. , ; , > , u . - 4 -, , c , , r '.a (R i j h .3 'd rG  :,4 : , , ' .i, , ^ -, 9 ' l1-L r .c ,d s --.e, ^'a< " ' 9"i i b1' ' r j j.'. 4+ b p,4 MWBOQIdTOf!DirGClOTS? ,.c- ,- - ~ l l ~;7p r; ps c !;p - :3, . ., v ,L ',l, y P , . . y; i , - y;y, i C . .;p . p , i,[. t 6 . - , ers g 4 .o . .. .m e , y. .p:; . .3., , y (s , <J - ] $;1 , . , W ' t " t j* ~ ' g s .I t p ;2)' ;},. [hs y;, Q h), < '

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Yj m -L - . ff * . .yyu r [th ' ' . g,. .) Robert Hosenbank Wallace Hoffrnon- , Wil$ orn Korthose, Jr. Terry Loutner Western Michigor) Oceano Top O' Michigan . Cherryland c [', .,e $7].Q . ti'Y.['[.D. m ', [:?d[o il l'.,Y.' '- }"--~ c .s e. , . 184;ng, , r fj 7.;f[L hylj/ g.q '. f c.n , y - ] t y Ns - I 'h ' i .. ' i, ~ ( g ~ f. Burton Scott Robert Thurow Thomas VonPeft Richard Walsworth O&A Western Mehigan Cherryland Oceano t <

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, ,9 'l - ' I, ' ' * ^ c: ? 9 m MICHIGAN 46, NEWAYGO ' WOLVERINE POWER SUPPLY COOPERATIVE, INC.  : BOYNE CITY, MICHIGAN - f - 1 Report on Audit of Financial Statements 1 for the-years ended December 31,1988 and 1987 l 1 l s < , CONTENTS  : i ) -Pages . ' Report of Independent Accountants' 10-11 Financial Statements: ' Balance Sheets ~ 12-13 -) Statements'of Revenue .14 15 i Statements of Patronage Capital i and Other Equities 16 Statements of Cash Flows 17' Notes to Financial Statements 18-23 h I i _ _ - - - _ - - _ - - - - - - _ _ _ - - _ - - - - - _ . - - _ - - _ . _ _ - - J p T ? Y y ~5 ' certded pubiic accouritanl$ Coo]ers. 1 i 1 g &Ly] rand 'I 4 2 To the' Board of Directors and Members of Wolverine Power Supply Coop'erativet Inc.: , We have audited the accompanying balance sh.eets of Wolverine Power Supply , ' Cooperative, Inc. as of December 31,1988 and 1987,'and the related statements of revenue, patronage capital and other equities, and cash flows for the years then ' ended. These financial statements are the responsibility.of fthe Cooperative's management. Our responsibility is to express an o' pinion on these financial statements ' ' based on our audits. < ~ We conducted our audits in accordance with generally accepted auceg n standards. Those. standards require that we plan and perform the audit to obtain - reasonable assurance about whether the financial statements are free of material. misstatement. Ari audit includes examining, on a test basis, e'vidence' supporting . the amounts and. disclosures in the financial sta.tements. An audit also includes assessing the accounting principles used and significant estimates. made by management, ds well as evaluating the overall financial state'nent r presentation. We believe that our audits provide a reasonable ~ basis'for~our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wolverine Power Supply Cooperative, Inc. as of December 31,1988-and 1987, and the results of its operations and its cash flows for the -years then ended in conformity with generally accepted accounting principles: As more fully described in Note D to the financial statements, construction delays and cost overruns at the Fermi 11 Nuclear Power Plant (Fermi II); in which the Cooperative has an undivided ownership . interest, have adversely affected the . Cooperative's financial condition. On December .14,1987, the Cooperative entered into an agreement with The Detroit Edison Company (Detroit Edison)'to sell its remaining ownership interest in Fermi 11 to Detroit Edison on or about January 2,1990.. - Under the agreement, the selling price is equal to the Cooperative's. Fermi 11 i indebtedness less S200 million. Detroit ~ Edison is obligated to assume responsibility i ) _ _ _ . _ _ _ _ _ _ ___ u _ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ ..m.. __ .__ ._ __

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)4 d. ifor the Cooperative's Fermi 11 debt with the Federal Financin"g Bank (FFB) less $200 .million for which the Cooperative will remain liable >With respect to the remaining. $200 mill!on indebtedness not being assumed by Detrait Edison, the Cooperative and the Rural Electrification Administration (guarantor oi he FFB debt) have entered into'a Debt Restructuring Agree. ment which will require the Cooperative to make annual debt service payments of $8,148,000, plus adc.itional amounts based on load growth. On. June 21, 1988, the Cooperative received approval from the-Michigan Public Service Commission to implement rate ncreases necessary to meet ' n its future restructured debt obligations. - l m h & b L South Bend, Indiana February 24, .1989 1 l , l - l l 5 1 -_-____-______--___-__----_-__-__-_-_.A -l A. s. , , - , i

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~ - .a I' ^ MICHIGAN' 46, NEWAYGO , '- BALANCE SHEETS, as of December 31,1988 and 1987 i 12 .1 ~ ASSETS -1988- 1987 Electric plant 61 cost - . (Notes A.B.G and I)- ' in service S 115,746,264 S 111,629.042 .i Construction work in progress 2.160,566 3,883,497 117,906,830 - 115,542,239. Less, Accumulated depreciation and * ' ' amortization '> 44,278,291 40,962,141 ~ Net electric plant 73,628,539 74.550,098 - I investment in Fermi 11, at net realizable w .. 766,415,653 774,471,457- ' value (Notes A D and G) , ( ~ ~ Other assets and investments: . investments in associated . . organizations (Note C) . 3.598,848 4,303,543 Note receivable 235,558 244,400 y Total other assets and investments 3,834.406 4,547,643' Current assets:. Cash and cash investments 1 General funds .7,249,301 5,811,254 , Cash - Construction funds -; 114,807 93.845 Rate increase escrow fund (Note D) 715,720 g - + Accounts receivable . 6.397A16 5,507,829 Receivable from Detroit Edisco (Note D) 19,211,742 - Materials and supoiles (Note A) 7,807A48 7,539,176 Other current and eccrued assets 534,624 760.966 Total current assets - 42,031,058 19,713,070 Deferred cho'rges . - 26,687 Tot'at assets S 885,909.656 S 873,308,955 4 1 4 p. 4 The accompanying notes are a part of the financial statements. 1

• d ____.___z.__________. . _ _ _ _ _

_ _ _ _ _ . _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _______________________________.____________._________._._______________._____._____j EQUITIES AND LIABILITIES 1988 1987 I Eat . ties: Memberships S 1,400 S 1.400 Patronage capital 15.341.774 13.884.250 Other equities '2.892,807 2,212.445 Total equities 18.235.981 16.098.095 Long term debt (Notes 0 and G). Fermi ll 763.881.701 764.822.943 Other 69.708.707 74.500.972 Total long term cebt 833.590.408 839.323.915 f Commitments and contingencies (Notes D and I) Current liabilities-Current maturities of long terrn debt (Note G): Fermi 11 7.000.000 7.405,000 , - Otner 2.529.600 2.212.000 l Accounts payable purchased power 4.396.541 3.776.357 Accounts payable other . 578.988 1.048.351 i Refunds payable to members (Note F) 975.159 893.293 Taxes and wages payable 1.982.633 4.812.854 l Accrued vocofion and' sick leave 611.945 569.465 l Accrued interest (Note D) 16.008.401 169.625 Total current liabilities 34.083.267 17.886.945 Total equities and liabilities S 885.909.656 S 873.308.955 I l l 4 i The' accompanying notes are o port of the financial statements _ ~ - . _ _ . - - _ - _ - - . _ - - - _ - - . _ . - _ _ _ _ _ _ _ _ _ - - - _ - - _ . - _ _ L s. -

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l t m l STATEMENTS OF REVENUE b for the years ended December 31,1988 and 1987 j i 14 J1 1988 i i Percent of  ;

• , . - - Operating i Amount . Revenues l

Operating revenues . S 55.841.118 100.0 %- . p. . Operating expenses: _ Purchased power 29,041.980 52.0-7 . Power generation: Operation 9.611.071 17.2 i Maintenance 1.470.676 2.6 ' Transmission expense: ' l' Operation ' 1,187,324 2.4 Maintenance ' 543.990 .9 Distribution exoense: ,. Operation ._ 236A99 .5 ., Maintenance 155.945 .3 Administrative and generot. Operation 2,245,614 ' 4.0 ~ ~~ Maintenance 163.277 .3 Depreclotion and i ' . amortization (Note B) 3,419.336 6.1 Taxes 2.221.948 4.0 l l Total operating expenses . 50.267,660 . 90.0 Operating mo' gins before fixed charges 5.573.458 10.0 Fixed charges: Interest on debt (Note A) . 4.115.934 7.4 Operating margins offer fixed charges ' 1 A57,524 , 2.6 Capitol credits 15.821 - Net operating margins i 1,473.345 2.6 ' i Noneperating margins: - Interest income .664,541 . i .2 1 ~' Net margins from continuing operations 2.437.886 - 3.8 Income from discontinued Fermi ll operations ., , (Note D) i Net rnorgins. S 2.137.886 3.8% k 1 s -i The accompanying notes are o port of the financial statements. o. r .6 u._.______.__ _ _ _ . _ _ _ _ _ _ . _ _ s I Y , 'i . + , i , , , I ,/ i 1987 ' Percent of , l Operating increase a ' Amount Revenues - (Decrease) S 47,774.568 100 0% S 6.066.550 23.343.065 48.9 5.698.915 8.412.810 17.6 1.198,261 , 895.924 .i9 574.752 - 973.764 2.0 213,560 772.668 1.6 (2S8,678). T 249.843 .5 (13,344) 265.468 .6 - (109:523) 2.421,965 4,4 123.649 - 138.347 .3 24.930 ! 3.287,107 6.9 - 132.229 l 2.026.602, 42 195.346 '42.487.563 88.9 7.760,097 { 5.287.005 i 1.1 286.453 4.214.239 88 (98.305) 1,072.766 2.3 384.758 14.525 - 1.296 1.087.291 2.3 386.054 ' ' 556,316 1.2 108.225 , 1.643.607 3.5 494.279 S 1.643.607 3.5% S 494.279 s l l The accompanying notes are o port of the financial statements. g- . S p ;. , , - j qv . . -- , t. .. n. , m / , , - m; 1' 2 I g ...) ) o , . 3 1 4 i STATEMENTS OF PATRONAGE CAPCAL AND OTHER EQUITIES . for the years ended December 31,1988 and 1987 - .,,, N 16 , PATRONAGE CAPITAL _. ~ ' l 1988 1987 ' ~ ,i ' Botonce, beginning of year > . $- -13,884.250' .$ . 52,815,484 ' I !' Operating margins - ossignobis 1,457,524- i,072,766.. E ,. 4 , l, Bolonce, end of year $ 15,341,774 i 6 13,884,250 r , - Assignoble ' S 1,457,524 S 1,072,766 Assigned to date ' - 13,834,250 ' 12,811 A84 L. 1 ' .' Totol' . ' $ 15,341,774 ~S 13,884.250 r ' l l , 1

- OTHER EQUITIES 1988 ,.

1987-- - Bolonce, beginning of year S 2,212,445 $ 1,641,604 v Noneperating margins : s 664,541 556,316 Capital credits '. 115,821 14.525 - , v- .., Bolonce, en,d of year .$ 2.892,807 $ 2.212,445 l 1 t 4 J 4 s '~s h9' i 1 The accompanyag rotes are o part of the financlot statements.  ; i ^ ' a f

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. STATEMENTS OF CASH FLOWS + for the years ended December 31,1988 and 1987 17 1988 1987' Cosh flows provide.dhy (used in) operating activihes:L ' Net margins from continuing operations S 2,137.886 S 1.643.607 ~ Adjustments to reconcile net margins to net cash provided by operating actwitles: Depreciation and amortization 3.529.526 3.396.259 Capitol credits assigned from CF , (15.821). (14.525) Other deferred charges 26.687 , (4.482) (increase) decrease in current assets: ) . Rote increase escrow fund , -(715.720) .- Accounts receivable (B89.587) (133A02) k Receivable from Dettoit. Edison (19,211.742) 40.371.302 - Materiots and supphes (268.272) (1.035.332) Other current and accrued assets 226.342 (57.231) Increase (decrease)in current liabilities: . A Accounts payable purchased power 620.184 (284.683) , Accounts payable other - (469.363) 381A46 Refunds payable to members 81.866 (448.375)  ! Taxes and wages payable 169.779 (215,613) > Accrued vocation and sick leave 42A80 6.985 l Accrued interest 15.838,776 (437.635) Net cosh provided by continuing l operating activities 1,103,021 43.168.321 ) Net cash provided by (used in) discontinued j . operating activities - .- Net cash provided by operating activities 1.103.021 43.168.321 l Cash flows provided by (used in) investing octivities- ! Proceeds from sole of investments in FermiJI ' 4.322 A64 117,300,730 , Capital credits refunded from CFC .721.516 197.220 Payments received on note fer sole of office building 8.542 1.644 , Purchase of other investments _(1.000) - I-Poyments for interest and other costs capitalized l relating to Fermi 11' (2.100.892) (112A48.469) ~ Purchase of electric plant (2.607.967) (2.170.515) i I Net cash provided by investing activities .342.663 -2.830.610 Cash flows provided by (used in) financing activities-Advances from REA 1.155,000 - Payments on short-term borrowings - (39,769.673) Payments of long-term debt (1,141.675) (8 A57.104) , Cash provioed by (used in) financing activities 13,325 (48.226.777) increase (decrease) in cash and cash investments 1 A59.009 (2.177.846) Cash 'ond cash investments, beginning of year 5.905.099 8.082.945 Cash and cash lovestments, end of year S 7.364,108 S 5.905.099 Supplemental disclosures of cash flow information: Cosh paid during the years ended December 31,1988 and 1987 for: Interest, not of interest capito!ized S 3.621.894 S 4.651,874 The accompanying notes are a port of the financial statements. _z________.___1____ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ z-------- -- - 7 m. 1 .,t '. n y .r a j i 4 e ' NOTES TO RNANCIAL STATEMENTS ' for the years endea December 31i1988 and 1987 - u ' NOTE A: ' ACCOUNTING POLICIES A . . The following is a summary of the accounting policies adopted by Wolverine Power Supply Cooperative, Inc. - (the "Coopetotive") which have o, significant, effect on the financial statements; Inventory Voluotion - Materials and supplies are stated at overage unit cost, which is not in' excess of 'morket. , Fermi 11 Costs The Cooperative has capitalized all costs' incurred in' connection with Fermi 11 including , interest costs on Fermi ll related debt (see Note D). Total interest costs of S5,211,745 and $70,706,843 " L were capitalized during the years ended December 31,1988 and 1987, respectively. Fermi li is under on ogreement for sole and is presented separately in the bolonce sheets. The carrying amount of December 31,1988 and 1987 includes approximately S200 million of estimated loss on disposol, which is being deferred in accordance with Statement of Financial Accounting Standards ' ' No. 90 (see Note D). Federal income Ta'xes - The Cooperotve is exempi from federal income taxes under Section 501(c)(12) of the Internal Revenue Coca Therefore, no provision for federal income taxes hos been made in . these financial statements, r NOTE B: , ELECTRIC' PLANT AND DEPRECIATIOfV - Electric plant'in service consisted of the following at December 31,1988 o'nd 1987: 1988 -1987~ J' ' ntangible i plant S 628.005 S . '628,005 Production plant 38,594,088 38.525,430 , Transmission plant 54,784,332 .'52,911.901 ' Distribution plant "14,442,594 c- 13.836,555 General plant 7,297,245 2 - 5.727.451 Toto! . $ 115.746,264 S 111,629,042 , . Provision hos been made for depreciation of production, transmission and distribution plants at straight- . line composite annual rates of 3.10%,2.75% and 2.88% respectively. . General plant annual depreciation rote's have been opplied on a straight-line basis and are os follows:  ; , -i Percent  ! Structures and improvements 2 Transportation equipment 14 17 Power operated equipment 1011 Communications equipment , 8 Office furniture and fixtures ' 6-10 Tools qnd shop equipment 6

• Laborotory equipment 6 Other general plant -

5-10 Depreciation and amortization of the e!ectric plant in service was charged as follows for the years ended December 31,1988 and 1987. 4 1988 1987 Chorged to: q Depreciation and amortization S 3.419,336 S 3,287,107 'l Fuel handling expense 12.208 12.208 j Clearing accounts 97.982 96.944 1 I Total S 3,529.526 S 3.396.259 au __ _ _ _ _ _ ___ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ j NOTES TO FINANCIAL STATEMENTS, Continued. for the years ended December 31,1988 and 1987 NOTE C; INVESTMENTS IN ASSOCIATED ORGANIZATIONS Investments in associated organtzotions consisted of the following at December 31,1988 o'nd 1987: 1988 1987 National Rurat Utilities Cooperative Finance Corporation: Copitoi term certificates S 2.880.695 S 2.880.695 Patronage capital credits 703.492 1.408.187 Other 14.661 14.664 Total S 3.598.848 $ 4.303.543 NOTE D. FERMA l'. Fermi 11 costs consisted of the following of December 31. 1988: Plant in service S 733,898.424 Nuclear fuel 38.234.885 Escrow Funds 7.037.267 Motorials and supplies 2.205.896 Deferred operating expenses and depreciation 11,073.864 Total 792.450.336 } ' l Less. Accumulated depreciation and amortization 26.034.683 Total, net S 766.415.653 l By a Participation Agreement dated February 8.1977 the Cooperative and The Detroit Edison Company l (" Detroit Edison") are joint owners as tenants in common. of a 1.093 megawatt nuclear generating l ur%1 known as Enrico Fermi Nuclear Power Plant Unit No. II (" Fermi 11"). located in French;own l Township. Monroe County, Michigan. Under the Porticipotion Agreement, the Cooperative agreed to purchase o twenty percent (20%) undividcid interest Iri Fermi 11 and receive o twenty percent (20%) entitlement to the plant's copocity and net energy output. When the Cooperative entered into the Participation Agreement in 1977, it was anticipated that fermi 11 would be completed in i .30 of a cost of less than Si billion. To date. Fermi ll's cost hos nsen to more than $4 5 billion. The plant achieved commercial operofion on January 23.1988. The construction delOVs and cost overruns hovu odversely oftected the Cooperative's financial condition and caused the Cooperative and Detroit Edtson to enter into a numoer of amendments to the initial Participation Agreement. The most relevant of these amendments is the Seventh Amendment dated December 14.1987, which cotts for the sole of the Cooperative's entire Fermi ll ownership interest as originody outlined in o Term Sheet signed by the Coor>erotive. Detroit Edison and the Rural Electrification Administration (REA) on August 7.1987. _ _ _ _ _ _ _ _ _ _ _ _ __ _ I , _= _ _ _ __ , m- ., 4 t P ~ . NOTES'TO FINANCIAL STATEMENTS, Continued for the years ended Decernber 301988 and 1987 ' 20 - NOTE D. FERMI II, Continued. " ' n~ The terms of the Seventh Amendment, which hove beeniormally approved by the Cooperative and its mernoer- , distribution cooperatives, Detroit Edisan and REA include the following . ~ 7 . Detroit Edison will purchase the Cooperative's remaining Fer ni ll ownership interest on or abo'ut January 2, 1990, of which time titie will pass to Detroit Edison. The amount which Detroit Ed: son will pay the Cooperai,ive wilt be equal to the Cooperative's total unornortized Fermi ll debt on January 2.1990, less S200 million, and any additionat Fermi 11 related costs - , not financed it_is anticipated ,that the selling ' price will approximate S550 million and Detroit Edrson will ossume responsibility for payment to the Federo: Financing Bonk (FFB) relotive to such omount. . Detroit Edison will provide the Cooperative with funds necessary to meet its quarterly Fermi ll related principal and interest obligations to the FF B through December 31,1989. Total principot and interest payments mode . to the FFB by Detroit Edison for the years ended December 31, W88 and 1987 were $50,972,407and $ 117,300,730, respectively. The receivable from Detroit Edison and the majority of the ocCrued interest payable at December 31,1988 is a result of the fourth quarter 1988 payment not being made until Joi.uory 3,1989c The Cooperative will convert. when requested by Detroit Edison, its Fermi 11 related short and intermediate term FFB debt into long-term debt, and the Coof>erative will be responsible for any prepayment pen'alties ossocidted with such debt converslun, it any. The Cooperative hos entered into o Power Supply Agreement with Detroit Edison requiring the purchase 'of major portions of capacity and energy requirements, on a firm and interruptible basis, from Detroit Edison through December 31,2025. . The Cooperative and Detroit Edtson have obtained all regulatory approvals necessory to implement the Seventh Amendment With respect to the Cooperative's remaining S 200 million in Fermi il indebtedness not being assumed by Detroit i-Edison. the Cooperative and REA have entered into o Debt Restructurit'g Agreement which is incorporated into the Seventh Amendment. Op April 5.1988, the Cooperative received approval from the Michigan Public ' Service Commission (the " Commission") to enter into said Debt Restructuring Agreement with REA. Consis' tent with the Debt Restructuring Agreement, this temoining $200 million of debt'will be separated intb two notes: o S 100 million Fixed Obhgation Note and a S 100 mitilon Lood Growth Note. Each note shall bear j interest at a rote 'of 7.5% per annum comrriencing on the dote 'of sole, ] On June 21,19B'8. the Cooperative received opproval from the Commissir n. per Order No. U 8994, to implement rote increases necessary to meet the $100 million Fixed Obligation Note. It was determined tnot o $100 -. l million debt repoyoble over 36 years at 7.5% lnterest per year resulted in on annuoi debt service payment j of $8,148.000. The Cooperative and REA then determined that the annuoi required payments of $8.148,000 , j could be met through the equivalent of a six mit!S per kWh rote increase effective January 1.1990. ~ The rate increase is being accomplished in three steps - one mill per kWh on June i,1988. and on additional two and one hott milis per kWh on January 1, 4989 and January 1 1990. This three-step rate increase reflects the Cooperative's desarc to avoid sudden and disruptive rate increases to its member distnbution cooperatives. With respect to the $100 rolliion Lood Growth Note. payments thereon are based upon the Cooperative's tood growth as defined in the Debt Restructunng Agreement. The formula for repayment of the $100 million load Growth Note !s based upon o 1.1 growth multipher derived by calculating the overage load growth of the - three preceeding years. In any instance. the CooperatNe's annual payment pursuant to the $100 mill 6on . Load Growth Note will not be less than the annual payment for the prior year. In addition. portions of the $100 mdlion Load Growth Note which are not repaid by December 31. 2025 will be discharged by REA. ___.___a-.-. _ _ - _ _ _ . - _ _ _ _ _ _ _ _ _ _ _ _ . . _ - L , m e i .; I o NOTES TO FINANCIAL STATEMENTS, Continued , for.the years ended December 31,1988 and 1987 , 21 . NOTE D: FERMI II. Concluded.t , Until the January 2,1990 closing date. funds generated from the rote increases will be placed in a Rote .-- Increase Escrow Fund to be used to pay prepoyment penalties incurred prior to January 2,1990. If any. If otter meeting the above obligotion there are funds still remaining in the Rote increase Escrow Fund, such funds shall be used to reduce non-Fermi ll related debt, t The Cooperative receives funds from Detroit Edison for the decommissioning of Fermi 11 and nuclear fuel expense, and the decommissioning omountis deposited into o Decommissioning Trust Fund. The difference . between the nuclear fuel expense and the principal payment of debt ossociated with the nuclear fuel in the reactor is deposited into the Nuclear Fuel Fund Escrow account. Upon completion of the sole to Detroit Edison, the Decommissioning Trust Fund will be assigned to Detroit Edison and the Nuclear Fuel Fund Escrow account will be used to repoy the FFB debt related to Fermi ll. - Operating results of Fermi 11 for 1988 ore reported separately as discontinued operations in the statements of revenues and are summarized below. Revenues S 88.829.022 Operating expenses, excluding ,. ' depreciation 81.063.689 s Depreciation 17,703.697 Total expenses 98.767.386 Less, deterrod expenses ~9 .938.364

• 1

- Net expenses 88.829.022 - i income from discontinued operations S - -] Depreclotion has been provided since the date of commercial operation on o stroight-line boMs over 38 years. 1 Depreciation in excess of principal pold by Detroit Edison on the Fermi 11 reloled debt has been deferred. 'he transaction is being accounted for in accordance with the Statement of Financial Accounting Sfondords . NFAS) No.15,'" Accounting by Debtors and Creditors for Troubled Debt Restructuring" and SFAS No. 71.+ l " Accounting for the Effects of Certain Types of Regulation." as amended by SFAS No. 90/ " Regulated j Enterprises - Accounting for Abandonments und Disallowances of Plant Costs." whereby the remolning Fermi . Il related deferred charges offer the sole to Detroit Edison of approximately $200 million will be amortized to expense over the term of the Debt Restructuring Agreement in amounts approximating pnncipoi repayments on the $200 million debt. NOTE E: UNE OF CREDIT. l l 4 The Cooperative has ovallable on unsecured line-of-credit with the National Rural Utilities Cooperative Finance Corporat on (CFC), whereby advances of S12.000.000 for general operations are avoilable until April 1989, j subject to CFC approval for advances requested Interest on advances is determined monthly by CFC.  ! NOTE F: REFUNDS PAYABLE TO MEMBERS. . l l Refunds poyoble to members consist of two separate refunds. The first is deterrnined under o Michigan statute.1982 PA304. whereby estimated power cost for o twelve-rnanth period is bihed by the Cooperative to its member-distribution cooperotwes each month. On a monthly basis, o reconCillotion of actual power cost to estimated power cost determines the under or over-coHection with the appropriate amount being ' collected from of refunded to the member distribution cooperatives. Total over-collechons in 1988 ond 1987 were S t917,514 ands 4195.379, respectively At December 31.1988 and 1987, the Cooperative had over-collected $569.849 and $893.293. respectively, which is refundable to its member distribution cooperotwes. The seednd is a t35 TIER Refund opproved by the Board of Directors in 1988. The refund is the difference between 35% of the interest on long term debt and net morgins before TIE R Refund. The refund is OHocated I to the members based on each member's percentage of power purchased to total purchased by members. The amount of the 1.35 TIER Refund payable of December 31.1988 is $405.310. 5 ) k J .,J s - m ,- , 1 ! NOTES TO FINANCIAL STkTEMENTS, Continued o , ' g for' the years ended December-31, j988 and 1987 j 22 i N'OTE G: LONG-TERM DEBT. s , Substantially oil assets are pledged os collateral for long-term debt. Long-term debt c'onsisted of the following ^ ' of December 31,1988 and 1987: ' 1988 1987 Fermi ll Fermi 11 Other _ Other ' CFC S - ' ' S 1.217.344 $ - S 4.222.368 . 50.640,790 e 49.946.965 REA ' .- 21,073.998 FFB 770.881.701 772.227.943 24.849.814 Total 770.881.701 172.238.307 7.72.227,943 76.712.972 3 Less. Current , maturities . 7.000.000 2,529.600 7.405.000 2,212.000 Long term debt S- 763.881,701 S' '69.708.707 S 764.822.943 $ 74.500.972 Nationo! Rural Utilities Cooperative Finance Corporation (CFC) note bears interest at 10.5% per annum. The note is payoble in quarterly installments to the year 2019. ~ Rural Electrification Administration (REA) mortgage notes. bearing interest at 2% and 5% per annum. The notes are payoble in quarterly installments to the year 2018. Federal Fina'ncing Bank (FFB) notes. guaranteed by RE A and bearing interest at 7.156h. 10.645% per annum of December 31,1988. The rate of interest is redetermined by FFB of each change of maturity date. 1 . Advances made under FF8 notes is ued prior to October 1.1983 have o seven year deferment before the repayment of pnncipal is required. The final principal payment of all loans is established when the notes are issued. At the time of each advance. the Cooperative con select on initial maturity date for that advance - of not less than two years or more than seven years. Extensions of the initial maturity dates are available. however, not to be less than two years in length. The total period of the infliol maturity date and extensions connot exceed a moximum of seven years. After the maximum seven year maturliy, the advances are to < + be repold according to the FFB guidelines. Maturity dotes of all Fermill related advances issued offer October 1.1983 were determined by REA based on the project's estimated commercial operation date. All advances under these notes are to be repaid according to FFB guidelines. " All notes issued prior to October 1,1983 are 34 year mortgage notes and all notes issued ofter October 1, 1983 are 30 year. mortgage notes. ] ' .i Unadvanced loan funds of $630.000 and S3.545.000 are available to the Cooperative on loan commitments 1 from REA and FFB. respectively, of December 31.1988. Annual motunties of long-term debt for those nobs being repaid, excluding FFB notes in deferment at December 31,1988, in accordance with the Debt Restructuring Agreement. for the next five years are os follows: 1989 - S9.529.600,1990 - S6.262.700.1991 - S6.363.600.1992 S6.478.300 and 1993 S6.597.000. I 4 3 ,w - < 6 4 - ~ . , ~ m ,: , + + I' + . , . NOTES TO FINANCIAL STATEMENTS, Concluded ' 1 for the years ended December 31,11988 and 1987 + - 23 NOTE H: RETIREMENT PLAN. - ~ .'k' ~ Retirement plan tienefits for substantially all employees ore'provided through participation in a retirement ] and security program and savings plon for employees of the National Rural Electric Cooperative Association { ' (NRECA) and its member systems. The retirement and security program provides benefits to employees - based on years of service and the highest five years of compensation for the lost ten years of employment. l Contributions to the reti:amont and security program, which are determined by the NRECA. were $67,302 in 1987. There was no 1988 contribution due to the NRECA declaring on 18-month moratorium on contributions-for the period July 1/1987 through December 31,1988 os a result of the retirement and security prograrn 7j being overfunded. The moratoriam hos since been extended to Decembe, 31,1989. Contr!butions to the 'sovings plon, which are based on a percentage of the employees' compensation, were $137,804 In 1988 ~ 4 and $140,614 in 1987. f , NOTE I . COMMITMENTS AND CONTINGENCIES. ( The Cooperative leases its Boyne City office and certain other warehouses and equipment. Minimum ontiuoi

rental commitments under these operating leases are os follows

1989 - $47,940; 1990 - $37 A20; 1991 .S8,500; j 1992 S7,120.1993'- $7,420 and thereotter > $21.360. ,

o ) .-- Rental expense under o operating leases aggregated $63,268 and $42.908 for the years ended December - 31,1988 and 1987; respectively. ~ n The Cooperative is o defendant in various legal proceedings crising in the normal course of business, in the . opinion of management, based on the advice of legal counset, the ultimate resolution of these proceedings will not have o material.effect on the Cooperative's results of operations or financial position. 3 -1 i L ' I i 1 ~J l s \ , 4 I \ l l 1 ) 1 l k 4 5 <l hm_.__.-__-__________-_-__m... ___-__m_ - - . . _ _ _ . . . __A

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-) A 4 ) I $ T l 4' 9 NOTES 24 t, b .r4 ' ,,.4 'i F i N i k .\ r P , J 4 1 k + t s k b 1 i ,i .^ 8 I l l I ~ . I I I, 9 a g 5 ', k 1 ? t t / 1 4 4 4 / r _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ ___ h WOLVERINE POWER SUPPLY COOPERATIVE, INC. < GENERATION PROFILE installed Date Plant Unit kW Copacity installed Fuel j Advance Steam Plant Unit i 7,500 kW 1953 Cool Advance,MI Unit 2 7,500 kW 1953 Cool l Unit 3 22,000 kW 1968 Cool Beaver Istond Unit i 74 kW 1950 Oil St James, MI Unit 2 100 kW 1960 Oil Unit 3 200 kW 1967 Oil Unit 4 350 kW 1982 Oil ) Unit 5 500 kW 1984 Oil Burnips Unit 2 380 kW 1949 Gos/ Oil (Claude VonDyke) Unit 4 645 kW 1950 Gos/ Oil Dorr. MI Unit 5 3,500 kW 1969 Gos/ Oil Unit 6 23.000 kW 1967 Gos/Oli ).H. Campbell #3 1.89% 15,000 kW 1981 Cool , West Olive, MI Ownership l Hersey Unit i 700 kW 1947 Gos/ Oil (George W. Johnson) Unrt 2 700 kW 1947 Gos/ Oil , Hersey, MI Unit 3 1.165 kW 1949 Gos/ Oil l Unit 4 2,500 kW 1952 Gos/ Oil Unit 5 2,500 kW 1952 Gos/ Oil Unit 6 2,500 kW 1952 Gos/ Oil ) Unit 7 14.450 kW 1973 Gos/ Oil Unit 8 14.450 kW 1973 Gos/ Oil Kleber Dom Unit i 600 kW 1949 Water Tower. MI Unit 2 600 kW 1949 Water Portland Unit i 1,000 kW 1043 Oil l (C.A. Wender) Unit 2 1,100 kW 1943 Oil l Portland. MI Unit 3 1,000 kW 1948 Oil Unit 4 493 kW 4948 Oil Unit 5 493 kW 1950 Oil Scotiville Unit i 340 kW 194i Oil ScotMile, MI Unit 2 340 kW 1941 Oil Unit 3 340 kW 1941 Oil Unit 4 1.100 kW 1947 Oil l Unit 5 1,i00 kW 1947 Oil Unit 6 1,850 kW 1960 Oil Tower Uniti 1,313 kW 1948 Cil Tower, MI Unit 2 1.313 kW 1949 Oil Unit 3 1,313 kW 1951 Oil Unit 4 21.300 kW 1971 Oil Unit i 280 kW 1917 Water Unit 2 280 kW 1917 Water Vestoburg Unit 2 347 kW 1939 Gos/ Oil Vestoburg. MI Unit 4 700 kW 1939 Gos/ Oil Unit 5 700 kW 1941 Gos/ Oil Unit 6 3,000 kW 1959 Gos/ Oil Unit 7 3.000 kW 1961 Gos/ Oil 1 i l @umwUR,guw W W ~wm;w M L v A v.W wpm p me. V. xaw wMOQ ,M sn, . W n ~ R w ,r &@ a,mw , nW w; .rP w ,%w;n nA w k5 ,s,%a.,,, s @s.9 xQ(m['m+% m u %n  : 7n . g $nyfV T -" s yM L: ..Y nM.i, Q ib 2 4.wl' M$ 4.% QNS%C; .jbW W. M l n y WM@%, n a_. f q, u? $ Vf.4b e wa. s %mQ mm g~ja..%m  ;;, , j nAj%%_: j:;qq q m% > n@w.w ~:DVMg.; g m;v,af _W As r i pm%mm; Qf_p 'som..  : . m:W.m w$ u QQP sPj% m. m Qk n , My'l% % . ..%n,M-m# >tp:W+p Agmyi%,wunn.y %%% x .m ye~~n: *j@kWnhy:+ m f 4p

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