ML20248B533

1988 Annual Rept

ML20248B533
Person / Time
Site:	Rancho Seco
Issue date:	12/31/1988
From:	Boggs D SACRAMENTO MUNICIPAL UTILITY DISTRICT
To:
References
NUDOCS 8906090088
Download: ML20248B533 (20)

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,t fl I L i T T I) I $ l R I C 'I 1988 Annual Report Sacramento Municipal Utility District W

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• • • **"*V' STAGGERLD foUR-t' EAR TERMLI 1

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O-d Tut BOARD of DIRECTOR 5i l

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• 1988 HIGULlGHTS New Service Connections:

New Resources:

a 12,257, an average of over 1,000 m Two 65 MW Geothermal Parr Plants a month.

(CCPA) began commer<tial op ration.

Total Cust.nners Served:

Cmt Contairunent s A new record high of 426,336.

s Rate increase held to 4.3 % instead of

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7.0 % predicted.

l'enk Dernand; e Ref unding bor ds luut'd; net benefit e An All-Time record peak of 2,109 to SMUD 510.2 million.

MW set July 18-223 MW above 1987's peak.

Recognition:

a Ran(ho Seco training program received All0UT T*:4 'OVI

Energy Sales to Custorners:

accreditation from lNPo.

The gi nt fountain un the 4 cuter anall at CAI e An All-Time high of 8.1 biPian LWh; a APPA cited SMUD's Residential Con.

EXPO of/cr3 special appeal to younggers 4hering a 10 % increase over 1987 sales.

servation Service as one of nation's the California State Iair. (l'hoto by George Elicht top ten most cffcctive programs.

1 9 N ti A N ' N U A 1.

R I. P O R I Growth, Challenge and Success Genemi Manager's Report ne of the ten best places to live Sen>ic c Beyvrul &c Meter. More than a theme, A-and work in America today," is that is a way of life at SMUD. Employees are how Newswcck magazine re-keenly aware of the need to listen to our cently described the Sacramento area. Iloth owners ~the public, and to heed their m

population and number of jobs in the area concerns. They realize that public owner-are increasing steadily, as diverse busi-ship carries with it both privileges and nesses from high-tech manufacturers to unique responsibilities. In this spirit the insurance companies, and many Japanese District was able to bring together a Rate firms, look for a premium California loca-Advisory Committee, a Citizens Advisory tion.

Committee, lloard members and SMUD

,M specialists to evaluate and improve rate pu Keying Pace. I am pleased to report that structuring. The results werc highly benefi-C' SMUD's employees are successfully meet-cial to our customer-owners.

ing the challenges of this rapid growth. Our responsibility to our customer-owners is to The People's Unice.1988 saw major changes Davi.f A. Ikus preserve atfordable rates without sacrificing on the SMUD Board of Directors. Three the quality of service.

seats were up for election in November, with two being vacated by retiring mem-Meetiny thcDemand. Sacramento's hot sum-bers. The people's choice for these seats mer temperatures repeatedly challenge our offers the District a fresh new blend of busi-system's ability to meet customer needs.

ness leadership, expertise and planning That challenge is compounded by a cus-skills on the Board. We look forward to the tomer growth rate averaging over 1,(XK) prospects for progress through its policy new connections per month. In July of setting. My special thanks go to the outgo-1986 our electrical demand hit an all-time

'ing members of the Board for their dedica-high, peaking at 2,109 megawatts, flow-tion and years of untiring efforts on the ever, wth our diversified power resources, District's behalf.

load maregement, and conservation, iChat's Ahead? looking to the future, both coupled with y mchased pow 'r agreements, ur new Business Plan and our Resource we met the demand We should continue Plan show cause for optimism. We have to do so in the years ahead identified new energy sources and explored our ptions for the 1990s and beyond. Our Cost Containment. To assure we meet our studies assure SMUD's ability to meet its responsibilities, a comprehensive organiza-obligations while providing service at tional right-sizing" and cost containment program was initiated in late 1988. Goals competitive rates. The Ifistrict's resources and options hold more diversity and capac-were designed to make the total operation ity potential than ever before. Our plans leaner, more efficient, and self-sufficient.

call for doing even more to provide cost-fly the end of the year we had eliminated eHecth mim 200 contract positions.Through consolida-tion of several departments, we were also able to eliminate several layers of manage-ment. This belt-tightening not only short-a ened the chain of command, it improved internal communications.

David A. Boggs Rate Control. The first tangible evidence of success in our new mode of operation came when we were able to reduce a predicted 7%

rate increase to an actual of only 4.3%. Our average ra:es now are 17% lower than those paid in surrounding communities.

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Setting the Pace j

Challenges, Changes Ahead Ilusiness and community le;.ders S""'P"M""M'"j'"p"""PNF%

throughout the District point with pride

,j"N]gUNW.gf, N 4 aGy to the area's selection as one of the " ten

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bh m.:1, best places to live." The SM UD service area i

an continues to enjoy strong growth in

,0 gr y employment and income, as well as in-

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ch struction. All indications are that it will j

E grow faster than most of the other areas in

@Es California.

Uff ha downtown Sacramento alone over 11-million square feet of new develop-suvirs ruPtorrrs ARr ment is planned, proposed, or under con-struction.The Capitof River Business Park Succrssrva r MrrnNG is moving ahead, and there is continued ntr cnAtttNor or business development in the waterfront THE ARrA's RAPID area.

The area to the nortly of downtown is cRownt,1NctUniNG also seeing an increase in office and busi-Old sacrainento's waterfront area rRoriptNG roR NrW ness space, with additional major indus-ces70utas sucn As trial development underway.

the economy. Shopping centers, homes, The northeastern quarter of the SMUD and industry are all helping the area to nir -RINaiss4Ncr rvice area, including Carmichael, fair greater pro.;perity.

TowtR-(Asoru.

Oaks, Folsom and Rancho Cordova, con-SMUD is staying abreast of this growth tinues to experience a phenomenal resi-and development by providing service to dential growth balanced with an appropri-new customers at a fast pace. Among ate industrial and business expansion.

businesses added to our line in 1988 were Areas in the south half of the county, the beautiful 502-room Hyatt Regency including I'lorin-Perkins, Elk Grove and Hotel, downtown, and the giant new Arco Galt, are enjoying rapid, but controlled, Arena,homecourtof theSacramentoKings growth that strengthens employment and basketball franchise.

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a I ong terrn transonirsion planning helps ShIUD rncet the Sacrarnento area's growing needs.

SMUD Targets EnergyIndependence Transmission Action Plan Approved markets. The 1IT plan is designed to meet Company and Pacific Power k 1.ight on a I n order to better serve SMUD's customer-owners and provide electrical service at the growing needs of the Sacramento area power purchase contract. The contract is the *least cost," the District targeted 1988 into the next century.

related to the proposed SMUD/ Sierra Pa-as a year of long-tenu planning and devel.

SMUD is following a clear direction in di-cific Intertie Project to interconnect the opment. Using input from several techni-versifying energy options through trans-two utilities across the Sierra Nevada.

cal resources, t he District developed a n *In-mission interconnections. In the years

• Negotiation of a project feasibility dependence Through ~1 transmission" (I IT) ahead, the District will not be overly de-study agreement with Southern California plan.

pendent on any single resource, uti'ity, or 1.dison (Scil and California Department of An IIT task force was formed to in-transmission access. Significant, positive Water itesources for the "I'.ast Side Tie" vestigate various transmission potentials steps have been taken to provide reliable, Project to interconnect SMUD with SCI..

i available after a power (ontract with PGkt af fordable energy in the 1990s and beyond

. Advocacy of open access to transmis-terminates in 1984. The task iorce focused for customer-owners.

sion service in the l'ederal I.nergy llegu-on SMUD's options for energy independ-The flT plan calls for:

latory Commission's (ll.itC) regulatory ence through purchasing, selling, and trad-

+ lteaffirmation of the District's parti-prm ess.

Support for federal legislation to mod-ing power throughout the western U.S.

cipation in the California-Oregon Trans-

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SMUD also recognized the need for mission project (COT) and the District's ify and expand i1,itC's jurisdiction over unencumbered transmission capability intent to sign the Project Participation t transmission.

Creat.on of state legislation to resolve through new transmission lines as well as Agreement.

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using existinglines to reac h low-cost power

+ Negotiation with Sierra Pacific Power transmission issues.

E PAGI 3

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s;( Rl\\M.IK IO hi l ' N I (. I l' A 1 l' I l I i1Y 111 % 1 R l i i Our Front Line:

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recognize situations where

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seniorcustomers arehaving g"

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difficulties. When this in their efforts to work M,

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with customers and satisfacto-g.

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promptly contact a " gate-f*(..

keeper" or county repre-is anarduous task when techni-5

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sentative.

calissuesareinvolved orspecial biliing questions need to be Y

gram at SMUD also contin-investigated and resolved.

pgg,ic tVatts greets custorner inquiries with a srnile in her wice.

SMUD Customer Services ues to be in demand. This P"*'"'*"""'*""'"

1 personnel pwcess over 2,sw "SMUD has Challenced its Staff to calls per day, or over 56,(XK) o effect since 1986, offers a 50% discount for the first telephme calls per month. To ppgyfdg '[frS[ C/gSS' Sgryfcg {g cgs [gggrS" better serve customers' needs, 500 kilowatt hours usedper SMUD extended telephone service from 7 de corps," the program had to succeed. And month to qualified customers.

a.m. to 7 p.m. In 1988. This open line it did!

In order to promote energy conservation service offers customers more time to reach The Senior Citizen Identification and measures, such as adding home insulation, the Customer Services Department.

Third-Party Notification program has been WATT-wise financing is offered at attrac-In addition, the quality of the staff is well received. Seniors, age 62 and over, are tive interest rates.

enhanced by specialized and advanced invited to enroll in a program to aid in pre-for low-income and certain elderly cus-educational training programs. These pro-venting the inappropriate disconnection tomers the District makes referrals to a va.

grams teach them to resolve customer calls of service for nonpayment of bills. SMUD riety of assistance agencies, such as the as quickly and effectively as possible. One of contacts the county office for Adult Service Women's Civic Improvement Club and the remarkable results of this program is Programs;theyin turn senda" gatekeeper" the 1lome Energy Assistance Program that customer service representatives chal-representative to the home to check on the (HEAP). IIEAP is a state-funded program lenged themselves to provide *first class"

senior, offering those in need financial help for service to customers who need assistance.

SMUD's meter readers, service adjusters payment of utility bills.

With that kind of high morale and " esprit and customer representatives are trained to E

PAGI 4

1988 ANNUAI H I l' ( Hi l'

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w The area % residential expansion is exemplified by many new homes, condominiums and apartments.

Energy Services & Conservation provided a permanent system load reduc-of all our customers, a Community Out-SMUD's energy conservation program concentrates on two types of load con-tion of 72.5 megawatts (MW) and an an-reach program has been established. M ulti-trol. They are:

nual 200 gigawatt hours (GWh) of energy lingual energy workshops are held for the

• Permanent load reduction which is savings. This is the equivalent of the en-benefit of various groups of non-F.nglish achieved through procedural or physical ergy needed for about 22,000 homes.

speaking customers. Information presented change of equipment or structures, and The dispatchable load reduction avail-through interpreters allows workshop

• Dispatchable load reduction which able for peak summer days amounts to 57 participants, from such places as Vietnam, involves items that can be sch ctively t urned MW. This form of load control offers the Cambodia,1.aos, Romania,lran and China, off during peak periods (air conditioners, equivalent of adding a small peaking plant to learn how to manage their energy bills appliances, etc.).

t and find out about the encrgy conserva-liy the end of 1988, SMUD customers I o the system.

In a continuing effort to meet the needs tion programs available to them.

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Load Management HelpingBalance Supply with Demand

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oad management programs are a ma-qualify for these pr'> grams, the District

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jor part of SMUD's overall energy offers a free inspection and will arrange for supply plan. Both residentialand com-the installation of controls or equipment by mercial customers voluntarily participate a private contractor. Financing is available in these efforts. In 1988 the Residential Air for all purchased products. These programs Conditioning Load Management program pay for themselves and are not subsidized (ACLM) participation grew to more than by SMUD.

50,(XK) customers who have volunteered to Home Energy Manager (IIEM) is a resi-allow the District to cycle their air condi-dential program designed to reduce energy tioners during peak de..iand hours. For demand and consumption in existing swimming pool and spa owners, SMUD homes. Ilome surveys identify needs for offers a program for shifting operation of peak reduction measures while encourag-rtrcTRICIAN ux At ter equipment, such as pumps and heating ing the installation of conservation mea.

units, to off-peak hours.

sures.

urPs THr sysnu oN.uNr The residential insulation program, in-Thermal Energy Storage (TES) is a prom-ATsuvocroal.

troduced in 1977, targets under-insulated ising new technology. SMUD is now con-CUsRMfER PARTICIPA Tion

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.N A$ib NY Residential ansi cornmercial cuunoners participate in the overall energy supply plan.

homes (with less than R-19 value insula-ducting on-site testing for both commer-tion) for improvement. It features free attic cial and residential applications. This tech-inspections and attractive financing. The nelogy shif ts energy used for cooling to the sale and installation of shade screens, of-off-peak period. Using TES, a storage me-fered since 1983, continues to be a popular dium (such as water) is cooled or frozen at program. In August 1988, the District intro-night (of f-peak) and stored. The cold water duced a pilot program of fering whole house is then used during the day (on-peak) to fans and clock thermostats to improve provide cooling. This reduces on-peak energy conservation. To customers who demand and usage. Prototype systems PAGI 6

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The District and the Trustees of Califor-q nia State University have signed a contract r.

l for installation of a T15 system at the Uni-Versity's Sacramento campus. A load re-duction of 1.7 MW is expected from that system. The unit is expected to be opera-

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M tional byJune 1990.

1. coking to the future, SMUD currently has some 70 new homes participating in a residential thermal energy storage pilot

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program.

Agricultural Advisory / Pump Testing includes SMUD staff working with agricul-tural customers on a regular basis. Employ-ces conduct on-site audits and work with

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area universities to esaluate new energy conservation methods. Considerable work is done to coordinate irrigation and pump-ing to improve efficiencv and corres;xmd-e.- - " " " #"

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.ng reductions in peak load factors.

j SMUD also offers commercial customers analytical and technical assistance to help i

them reduce demand and energy. This program has proven to be extremely bene-i ficial to customers who take advantage of the service. This program has achieved a L Ecctrija&quihment h replNied nydarly for safety a$i epoolt0O cumulative peak load reduction since its s

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inception of approximately 32 MW.

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v p rompt, accurate infonnation is the key it also communicates where SMUD'is-AJ

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- f to management : success in today's going, what is of value, and where priort-N N-

ever changing business climate; SMUD ties are placed. The finalLresult will be >

1 managers are. faced with making tuore l better service to our customersc

'decistoris,fmorefquickly; and accurately

. To further improve financial manage' ?

s than ever before. Automated rystems ef{

ment, the District is replacing major com-

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i fectively capture, develop, store and de,

lponents of the existing Budget and Ac-liver the needed information. SMUD fully counting' systems. Automated functions recognizes 'the need to develop and kn.

include the budgetary. system,L general prove information processing systems and ledger / responsibility reporting and a new fabilities, and to do so in a fiscally fespon.

work order system.- '

sible manner that supports the District's -

' The District has replaced its outdated.

Customer-Information and Billing sys.

Business Plan.;.

tem with a new data base syst_em'.This up-In order to provide more cost-effective service to the user, SMUD has created a graded system allows data changes to, be Project Plan for the future..The plan bal.

made faster and at less cost., improved ances the;need for more sophisticated staff productivity allows for more timely Residential prograrns arc destyned to rcJuce energy dernand and consmnprion.

Information systems and facilities against response to customers' inquiries <,

the limits of budget and human resources.

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The Source Of Our Power

. Y ueeting rower neess into rue 1990s pQ MUD relies on a variety of power re-SMUD was fortunate in one respect; crews sources.The District owns and oper-were able to perform major maintenance ates extensive hydroelectric facilities, throughout the system at a substantial cost geot hermal generating resources, two small savings.The low water levels allowed crews

$g photovoltaic units and a gas turbine unit, to work on dry ground, without specialized as well as the Rancho Seco nuclear power equipment, in normally inaccessible areas.

plant. SMUD also rdies on power pur.

The District owns and operates a 72-MW t

chases or exchanges to meet some of the geothermal unit, known as SMUDGLO # 1, needs of its customer-owners.This includes in the California Geysers area, approxi-power from the Western Area Power Ad-mately 100 miles west of Sacramento. Since ministration, Pacific Northwest Utilities, the plant began commercial operation in and through agreements with Pacific Gas &

December 1983, it has produced approxi-Electric and Southern California Edison. In mately 3-billion kWh of electrical energy UNrAfAN DAN gar cittcu total, these resources should be sufficient and has operated at a 96.6 percent capacity twf R coNNrLTloAS to assure customer needs into the 1990s.

factor. Production in 1988 was 626.6 mil-ON 4 Unzrn rott.

The Upper American River Project (U ARP) lion kWh, and operation was at a 99.54 is the District's hydroelectric system lo-percent capacity factor.

suvas Risovacts witt.

cated on the South Fork of the American The District, along with Modesto irriga-AsscRr nir AREA's River and its tributaries. UARP consists of tion District and the City of Santa Clara, VoWrk NLrDs.

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2510 system Peak Demand 15(o HHH

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1950 l 1955 g 19m g 1965 l 1970 1975 g 19hD l 19NS g 1990 l 1995 Pacarm Northwest coniracW Hydnwlectnc Gas'Iurbme/ solar Photovoli.ndGenent Peakmy Western Area Power Admmatranon*

Geothennal Pacirac Gus & I:lectnc and sci?

Ranchu seco Nuclear Power Plant

• Purcha'*cd Pomer SMUD's AvailaNel'ower Resources eleven reservoirs, and even powerhouses has formed the Central California Power containing ten turbines, with a combined Agency No.1 (CCPA), a California joint capacity of approximately 659 MW. These power agency, which also owns and oper-f acilities are capable of generating approxi-ates two geothermal units in the Geysers mately 1.8 billion kWh annually under area. CCPA has completed construction of average conditions.

two geothermal units at the Coldwater The severe drought conditions through-Creek steam field. Unit I was declared com-out the West during the past two years mercially operable onjune l,1988 and Unit limited hydroelectrical power generation 2 was declared commercially operable on for SMUD and other utilities in California.

July 18,1988.

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!s;' s p.7 f 1 h it l p g {l- % A n'j i. J, Ida. .Q !j i ivv 4 "I, kf', ~ l 19M i 198s 1 1986 1 19M7 1 1988 i R Ns System Peak Demand The District, in conjunction with the Nb [ ,pf, jff)g yy(( ;1; y"2gp % n[pf ' ~ United States Air Force, operates a 49-MW peaking combustion turbine generating , a a p, plant at the McClellan Air Force Base site. .,c

• ?L }J g This project was completed inJ.nuary 1986 d' ( gh, W.

and is operated either to meet ine District's g peak-load ratuirements or the emergency p. '*'*"" ""0 l"'h leam atmut Ran w 5eco during the september open twuse. n1 )t I i tti,in cooperation with the U. S. Department of Energy (DOL) and NUCLEAR POWER UPDATE the plant achieved a 1988 annual capacity l California Energy Commission (CLC), be-factor of 36.59 percent. I gan developing a solar photovoltaic instal-For the past two years Rancho Seco As a result of a referendum (Measure C), lation at a site adjacent to Rancho Seco. The Nuclear Power Plant has been undergoing SMUD ratepayers will vote on J une 6,1989 first 1-MW unit (PV-1) became operational an extensive renovation. The extended on whether to continue operation of Ran-inJuly 1984. PV-1 went out of service April outage was taken to assure total safe opera-cho Seco as a nuclear power plant. The 30,1987, when a fire destroyed hs control tion and an improvement in its reliability District has assessed the nature and mag-system. Repairs were completed and the and availability. nitude of Rancho Sec) being taken out of facility returned to service in January 1989. Rancho Seco was restarted on March 30, service in 1989. Capacity and energy that PV-2, the second 1-MW unit, became op-1988 and tested at a series of planned would normally be provided by Rancho erationalin October 1985 and remains in output plateaus making up the Power Seco would have to be replaced primarily service turmng California sunlight into Ascension program. Although there werc by purchased power. electricity for SMUD. a number of outages during this period, B PAGE 9

s\\< H A M i.N I O M l! N,1 ( l l' $ I 1: 'l 1 1 I l Y

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'.' $ a f. j 4 . y j@- { a-(: 'h i ~ g [ dkhb EU A. fSblu.a.. ( .t s>. EDUCATIONAL SERVICE 3 - %.

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SACRAMENTD AREA YOUNGSTERS, INCLUDING b. n $,s.7 eg.- 1 TIIESE TWo Curious TD15 Gh ib AT SMUD5 "olTNING Tile y; Door $ 1D ENERGY .m 's EDUCKnoN" %Tik. n, e.. g eng.; w 3%w Aw C g p.+ v, 7:j a Educators, custorners and friends experience presentations, hands-on acthities and individual projects. he District has been involved in en-in excess of 12,000 persons. Tergy education programs for many As part of Energy Awareness Month in years. These programs address a broad October, SMUD co-sponsored a program spectrum of subjects and ages. Audiences of workshops, energy displays, demon-include elementary school students, strations and activity ideas for the class-teachers, and senior citizens. room. Educational service activities reach out The annual " Opening the Doors to to thousands of Sacramento area residents Energy Education" is a week-long course, throughout the year and especially to a widely accepted and acclaimed by educa-large segment of school and civic organt-tors.Through the use of classroom presen-zations. Programs cover all aspects from tations, hands-on activities and individ-electrical safety to the importance of ual projects, educators are able to tailor energy conservation. Workshops for teac h-energy, science and math basics to their ers are also conducted. They incorporate individual classroom needs. SMUD coor-the use of energy science curriculum as dinates this program with California State well as nuclear science and technology in University-Sacramento, which offers con-today's environment. tinuing educational credit for teachers SMUD produces and distributes a wide completing the course. The knowledge variety of printed materials, visual aids and skills acquired allow the educators and film programs for student education to effectively introduce concepts of en-as well as teacher training. SMUD experts ergy and energy management to their offered over 300 youth and adult pro-

students, grams in 1988 with an overall attendance E

P A G 1. 10

I9MM A N N l' A 1. .RLpoR1 Safety Starts With Attitude Maximizing Our Potential in 1988 the Sacramento Safety Center / g 7g. presented the District with its first place v. safety award for northern California utili-ties with more than 500 employees. Ran-y cho Seco took second place honors in the .i 's g competition. ~ SMUD has many unsung heroes, em- \\ \\.-

n. g

'i T S ployees who as part of their regularwork assignment take corrective action such as ..w'- t j repairs to equipment that to them are just ..B routine. Keeping eyes and ears open for [ cq. potential problem areas is a normal part of .'s this routine. Safety awareness a nd a positive Q 4,. , g[V[<. attitude that " safety is everybody's busi- ., p ness," results in early detection and correc-j' M f f ; tion of problems. J .,( F ' Typical examples include Brian Smith, a 6;?.'. fleet inspector, and Del Strain, Buildmgs g y and Grounds division, who received special y Certificates of Safety for their prompt atten-tion to detail in what were considered life-saving efforts. Through the years extensive training l$EDIMEdbM ' ' and quick action of SMUD employees have saved many lives and prevented numerous injuries, as well as averting countless acci-Mk dents both on and off the job. y y Rancho Seco Nuclear Power Plant re- ~~" g-gap corded more than one million hours with- + -. out a lost-time injury accident for the year. [ $r District-wide, the " total case rate" for all lob-related injuries resulting in medical 4 I treatment was only 6.6 case hours per 100 i employees. This rate is one of the lowest in 7 the utility industry. l ~ i E v6 + l 1 .mL a i i ShiUlfS S1AIT 15 UTDICAT1D TO GETHNG THE IOB DONE IN Till kf0ST ElllCllNT' ANU COST. EHECTnT AIANNllL CRAIG S\\ffTil. DARCLI kOEN, GIORGE TURNER AND IOSIE TUkklS LCLOCKWISE TRGAl TOP LLITI ARE 10UR hifhfBLRh Of ShtVD'S TLAh!. 1 l l PAGI 11

S A C R A M.E N T O M U N I, C I S A L .U T ilL t T Y D I S T R I C T 'll Five-Year Suminary (unaudited) 1988 1987 1986 1985 1984 ' OPERATING STATISTICS Customers at Year-End 426,336 414,079 399,130 383,796 369,179 KWH Sales (thousands): Sales to Customers - Residential 3,546,445 3,229,269 3,106,721 3,193,193 3,086,443 Commercial, Industrial and Other 4,564,693 4,189,308 3,908,215 3,688,438 3,273,368 Total 8,111,138 7,418,577 7,014,936 6,881,631 6,359,811 ' Sales of Surplus Power _ 38.6,028 74J02 566,883 __2,539,326 Total 8,497,166 7,418,577 7,089,738 7,448,514 8,899,137 Revenues (thousands of dollars): Sales to Customers - Residential 5 285,363 5 234,438 5 185,888 5 156,920 5 130,604 Commercial, Industrial and Other 289,776 252,322 192,350 149,659 111,888 Total 575,139 486,760 378,238 306,579 242,492 Sales of Surplus Power 7,991 26,475 34,697 50,957 102,300 Total 5 583,130 5 513,235 5 412,935 5 357,536 5 344,792 Avg. KWH Sales per Residential Customer ' 8,982* 8,914 8,901 9,544 9,609 Average Revenue per Residential KWH Sold 8.05 C 7.26c 5.98 t 4.91t 4.23 t Power Supply (thousands of KWH): Hydroelectric Generation 775,116 951,194 2,621,270 1,348,244 2,196,200 Nuclear Generation 2,812,065 (56,716) (41,326) 1,889,885 3,747,854 Geothermal 615,676 614,783 574,811 609,636 600,873 Photovoltaic 1,453 2,245 3,607 1,986 327 Gas Turbine 3,855 1,839 3,375 Purchases 4,308,048 6,274,386 4,291,263 4,034,428 2,829,598 System Peak Demand-(KW) 2,109,372 1,886,341 1,797,540 1,850,695 1,730,128 Equiv. Full-Time Employees at Year-End 2,816 2,842 2,743 2,562 2,419 ~ FINANCIAL STATISTICS (thousands of dollars): Operating Revenues $ _583,130 $_ 513,235 5 412,93_5 5 357,536 5 344,792 Operating Expenses: Purchased and Interchanged Power 153,814 165,639 130,431 94,327 32,827 Operation and Maintenance 272,382 226,854 185,845 200,327 171,926 Depreciation 59,545 50,567 46,166 41,074 35,991 Decommissioning 12,255 3,705 5,061 5,881 6,217 Total operating expenses 497,996 446,765 367 503 341 609 _. 246,961 1 1 - Operating income 85,134 66,470 45,432 15,927 97,831 Other income 33,575 35,826 30,535 48,656 34,329 - '5)J67 64,5fd ~T31,150 Income before interest charges ~flii,~769 102,296 7 113,208 _9U53 79,630 _ 73,739 _ 60,402 Interest Charges 5 5,501 5 10,543 5 (3,663) 5 (9,156) 5 71,758 Net income (loss) from operations Funds Available for Revenue Bond Debt Service 5 205,118 $ 171,773 5 142,483 5 115,001 5 191,602 Revenue Bond Debt Service 5 124,252 5 102,890 $ 86,809 5 88,326 5 78,643 Revenue Bond Debt Service Coverage Ratio 1.65 1.67 1.64 1.30 2.44 Total All Bonds Repaid 5 12,403 5 6,584 5 5,535 5 16,490 5 15,445 Electric Utility Plant-Net 5 1,965,684 51,896,809 51,689,827 51,533,419 51,398,352 Capitalization: Long-Term Debt 5 1,531,999 51,365,931 51,035,545 5 894,038 5 975,983 Customers' Equity 5 671,250 $ 665,749 5 655,206 5 658,869 5 668,025

• l uludes one-tune iuni of reoinhnr unMint uwer i \\(, i 1:

e SACRAMENTO MUNICIPAL UTILITY DISTRICT l FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTAbTFS To the Iloard of Directon of ' Srcramento Municipal Utility District: We have audited the accompanying balance sheets of SACRAMENTO MUNICIPAL LTI1LITY DISTRICT (a political subdivision of the State of California) as of December 31,1988 and 1987, and the related statements of income and cash flows for each of the three years in the period ended December 31,1988. These financial statements are the responsibility of the District's management. Our responsi-bility is to express an opinion on these financial statements based on our audits. We conducted our audtts in accordance with generally accepted auditing 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. 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 provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the f' ancial position of Sacramento Municipal Utility District as of December 31,1988 and 1987, and the m results of its operations and its cash flows for each of the three years in the period ended December 31, 1988, in conformity with generally accepted accounting principles. As more fully discussed in Note 6, the status of future operations of the District's nuclear power plant (Rancho Seco)is subject to the significant uncertainty presented by the Measure C Referendum and the related proposition on theJune 1989 ballot. The Measure C Referendum requires the District to use all due diligence to divest itself of Rancho Seco, close Rancho Seco if certain performance levels are not achieved, and have the proposition of continued operation of Rancho Seco be re-ratified by a majority of the voters.The District has placed the proposition required by the Measure C Referendum on the June 1989 regular election ballot. If significant portions of the investment in Rancho Seco are not recovered through successful operation of the plant, or the rate-making process, the adverse impact upon the District's customers' equity and future statements of income would be substantial. ARTIIUR ANDERSEN & CO. Sacramento, California March 7,1989 IlN ANCIAL CONTENTS Page 1 Auditors Report Page 2 iialance Sheets Page 4 Statement 3 of Income Page S Statements of Cash Flows Page 6 Notes to Iinancial Statements l' A G 1 1

l 1988 ANNUAL REPORT IIALANCE SHEETS December 31, ASSE15 1988 1987 (thousands of dollars) ELECTRIC UTILITY Pl. ANT Plant in service, at original cost. $ 1,981,372 $1,692,292 1 ess - accumulated depreciation.. _ 471 049 415,510 Plant in service - net. 1,510,323 1,276,782 Construction work in progress. 195,892 272,152 Investment in joint power agencies (Note 3). 52,463 133,155 Nuclear fuel, at amortized cost (Note 1). 207,006 214,720 Total electric utility plant - net. 1,965,684 1,896,809 RESTRICTED FUNDS Revenue bond reserve funds. 115,450 109,423 Nuclear decommissioning fund (Note 1). 54,190 42,054 _ _ _ 24,683 Funds for jointly owned projects under construction (Note 3). _169,640 176,160 Total restricted funds. CURRENT ASSETS Cash and investments Unrestricted.. 258,154 157,506 Restricted for payment of debt service. 39,057 36,8()9 Designated for deferred compensation benefits (Note 1).. 14,989 12,935 Accounts receivable, net Ililled customer revenues.. 39,993 37,735 Unbilled customer revenues (Note 1). 31,311 Sale of surplus power (Note 7). 12,114 Other.. 8,205 6,424 Deferred power supply costs to be recovered within one year (Note 1). 54,999 37,111 Materials and supplies, at average cost. 38,358 32,014 Accrued interest. 6,540 6,477 Prepayments. _ 10,677 5,005 Total current assets.. 502,283 344,130 NONCURRENT ASSETS AND DEFERRED CllARGES Advance capacity payments (Notes 7 and 8). 186,271 Unamortized loss on refunding (Note 4). 54,472 41,308 l Unamortized debt expense. 24,438 23,931 Noncurrent deferred power supply costs (Note 1). 30,559 9232 _ _ 8,798 Other. __274,913 104,596 Total noncurrent assets and deferred charges.. Total assets.. 52,912',520 5f,55i,~Mj5 The accompanying notes are an integral part of these fir.ancial statements. I' A 61. 2

e. SACRAMENTO MUNICIPAL U TI LIT Y DISTRICT l December 3k CAPITALIZATION AND LIAlllLITIES 1988 1987 (thousands of dollars) CAPITALIZATION Customers' equity employed in the business llalance, beginning of year. 5 665,749 5 655,206 Net income for the year.. 5,501 10,543 Total customers' equity. 671,250 665,749 Long-term debt (Note 4). _1,531,999 1,365j)31 Total capitalization. 2,203,249 2,031,680 CURRENT LIAlllLITIES Commercial paper notes (Note 5). 195,086 121,800 Accounts payable, 67,313 84,615 Payable for power purchases (Note 7). 6,701 16.341 Long-term debt due within one year (Note 4). 13,211 12,918 Accrued interest 32,464 23,294 Customer deposits. 11,792 10,745 Accrued salaries and vacation. 13,583 12,554 Energy and capacity exchange account (Note 1). 21,803 32,015 Advance capacity obligations (Note 7).. _ 13,3_00 _ _ Total current liabilities. 375,253 314,282 NONCURRENT LIABILITIES AND DEFERRED CREDI15 Advance capacity obligations (Notes 7 and 8). 147,044.. Unamortized gain on refunding (Notes 1 and 4). 101,522 106,073 Decommissioning accrual (Note 1). 54,190 42,054 Energy exchange account (Note 1). 7,479 5,126 Deferred compensation benefits (Note 1). 14,989 12,935 Other. 8,794 9,545 Total noncurrent liabilities and deferred credits.. _ 334,018 _ 175,733 COMMITMENTS AND CONTINGENCIES (Notes 6,7 and 8) Total capitalization and liabilities. 53 912,520 52,52L695 PAGI 3

l 1988 ANNUAL REPORT STATEMENTS OF INCOME Year Ended December 31, 1988 1987 1986 OPERATING REVENUES Residential. 5 285,363 $ 234,438 $ 185,888 Commercial and industrial.. 282,916 234,655 177,335 Sales of surplus power (Notes 1 and 7). 7,991 26,475 34,697 Other. _,,6360 _ 17,66_7 15,015 Total operating revenues. 583,130 _513,235 412,935 OPERATING EXPENSES Operation Purchased and interchanged power (Note 1). 153,814 208,309 155,431 Power supply costs - over/(under) recovery - net (Note 1). 12,671 (42,670) (25,000) Nuclear fuel used for generation. 21,692 100 Production. 105,303 89,787 72,895 Administrative and general and other.. 71,066 66,844 59,677 Maintenance. 61,650 70,223 53,173 Depreciation (Note 1). 59,545 50,567 46,166 Decommissioning (Note 1).. 12,255 3,705 5,061 Total operating expenses. 497,996 446,765 367,503 Operating income.. 85,134 66.470 45,432 OTHER INCOME Interest income and other (Note 1). 25,682 27,710 19,350 Allowance for equity funds used during construction (Note 1). 7,893 8,116 11,185 Income before interest charges. 118,709 __102,29_6 _ 75,967 INTEREST CHARGES Interest on debt. 124,689 105,665 88,025 _ 13,912) _ 8,395) (11,4_81) ( Allowance for borrowed funds used during construction (Note 1) _113,208 91,753 79,630 ( Net interest charges. NET INCOME (LOSS). 5 5,501 $ 10,543 $(3,6g) The accompanying notes are an integral part of these financial statements. PAGL 4

~ ,h l SACRAMENTO MUNICIPAL UTILITY DISTRICT l STATEMENTS OF CASH FLOWS Year Ended December 31, INCREASE (DECREASE)IN CASH AND CASH EQUIVALENl$ 1988 1987 1986 CASil FLOWS FROM OPERATING ACTIVITIES Net income. 5 5,501 5 10,543 5 (3,663) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation. 59,545 50,567 46,166 Decommissioning and amortization of nuclear fuel. 31,044 3,705 5,061 Energy bank drawdowns (repayments). (7,859) 4,848 5,826 PSCR recovery (deferral). 12,671 (42,670) (25,000) Allowance for equity funds used during construction.. (7,893) (8,116) (11,185) Other, net. 3,760 4,790 5,840 Purchase of advance capacity. (25,925) 5 Change in operating assets and liabilities: Accounts receivable. (23,236) (25,654) 3,688 Accounts payable.. (23,518) (6,153) 23,827 Other working capital. __(3,642) (727) (553) Net cash provided by operations. 23,363 (8,693) 46,918 CASil FLOWS l' ROM INVESTING ACTIVITIES Construction expenditures.. (144,720) (263,575) (193,567) Cost of nuclear fuel. (11,075) (3,694) (13,502) Purchases of long-term investments.. (552,432) (607,860) (453,346) Proceeds of long-term investments. 529,843 567,737 501,643 Other, net. 6,219 7,743 4,448 Non. cash adjustments to investing activities: Accounts payable and other accruals. (3,530) 17,694 9,998 Allowance for equity funds used during construction.. _7y93 _ 8,11_6 11,185 Net cash used in investing activities. (167,802) (273,839) (133] 41) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bond issues.. 324,984 546,207 146,850 Repayment and refunding of bonds. (176,313) (238,632) (5,905) Proceeds (repayment) of commercial paper.. 73,286 (3,200) 25,000 Other, net. (1,676) _(1,188) (1,211) Net cash provided by financing activities.. _2_20,281 _303,187 164f/34 Net increase /(decrease)in cash and cash equivalents.. 75,842 20,655 78,511 Cash and cash equivalents at the beginning of the year. _136,188 115,533 37,022 Cash and cash equivalents at the end of the year.. 5 212,030 5 136,188 5 115,533 The accompanying notes are an integral part of these financial statements. PAGE 5

t l 1988 ANNUAL REPORT [ NOTES TO FINANCIAL STATEMENTS NOTE 1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZAlloN ANu Ext MPTloN IRoM INcoML AND PHoPIIrry Total investments are composed of the following: tax s. The Sacramento Municipal Utility District (District) was December 31, formed and operates under the State of California Municipal 1988 1987 Utility District Act (Act). The Act confers upon the District the (thousands of dollars) rights and powers to fix rates and charges for commodities or Unrestricted funds. 5 258,154 5 157,506 services furnished, to incur indebtedness and issue bonds or PY " other obligations and, under certain circumstances, to levy and 7d i 39,057 36,809 collect ad valorem property taxes. The District's power to levy Revenue bond reserve funds. ~. 115,450 109,423 property taxes is restricted by the California Constitution, Nuclear decommissionmg fund. 54,190 42,054 Article Xill A, which places limits on the taxing power of all Funds for jointly owned projects California public agencies. The District is exempt from under construction... 24,683 payment of federal and state income taxes and real and Checks issued but unpaid. 6,186 13,934 personal property taxes, bess - cash on hand. _ (219) _ (335) Mtinon or AccorvnNG. The accounting records of the 5 472,818 5 384,074 ~= District are maintained in accordance wSh generally accepted accounting principles for rate-regulated enterprises, as pre-CASH AND CASH lhUlvALLNTs. For purposes of the state-scribed by the Financial Accounting Standards lloard (FASB) ments of cash flows, cash equivalents incmde all debt and, where applicable, the Governmental Accounting Stan-instruments purchased with a maturity of three months or dards Board (G ASB), and generally follow the Uniform System less and all investments in the Local Agency investment of. Accounts for Public Utilities and Licensees prescribed by the Fund. For the years ended December 31,1988,1987 and Federal Energy Regulatory Commission (FERC). The Distriu's 1986 the investments considered cash equivalents were accounting records are maintained on a comparable basis with $203.0 million,5136.9 million and $132.3 million, respec-investor-owned electric utilities operating in California, tively. CASH AND INvtsrMEN15. The investments in restricted and R4lt-MAKING liri ANcING AccoCNis. The District's Board unrestricted funds are valued at cost which approximates of Directors has authority to establish the level of rates

market, charged for all District services. During 1986, the Board of The District invests its funds in accordance with the Munici-Directors established a rate-making balancing account to pal Utility District Act and other California statutes. All remove the effect on the results of operations of fluctuations securities are held by the District's agent in its name. A in net power supply costs (purchased and interchanged i

summary of the District's investments at December 31,1988 power, nuclear fuel and steam supply costs, offset by surplus and 1987 is shown below. power sales). Fluctuations from budgeted levels utilized in the rate- _1988_ _ 1987__ setting process are recorded in the Power Supply Cost Rate _ _ _.Ilece_mber_31,_ (PSCR) balancing account and will be reflected in future rates. (thousands of dollars) The unrecovered deferred power supply costs to be reflected U.S. Government Securities.. 5 138,113 5 47,022 in future rates at December 31,1988 were 555.0 million. Commercial Paper.. 45,554 4,977 The Board of Directors has also established a rate-making llankers' Acceptances. 234,337 278,075 account for deferral of material losses, arising from adverse Local Agency investment Fund. _ 5L8.14 _54,000 resolutions or settlements of claims and litigation, not 5 472,818 5.384 074 previously considered in District rates (See Note 7). ScnPt t's Pow! n TRANsAc' lions. Prior to 1988, under the terms of the Integration Contract with Pacific Gas and Electric Company (PGRE) that expires December 31,1989, any capacity and energy which was not required to serve District load was sold to PGkE. The contract also established an energy exchange account from which the District could withdraw energy, within certain limits, when needed to meet District load. Energy which was withdrawn from the energy exchange account was recorded as purchased power and energy deposited in the bank was recorded as surplus power sales. Since 1986, the District has exceeded the limits placed PAGI 6

pl SACRAMENTO MUNICIPAL UTILITY DISTRICT l on the energy exchange account and has paid for all energy Nutti An I ri t. The District amortizes the cost of nuclear received from PG&E. fuel to nuclear fuel expense on a unit-of-production basis. As of January 1988, under the terms of the 1988 Amend-Under the Nuclear Waste Policy Act of 1982, the Federal ment and the Dispute Settlement Agreement with PGkE (see government assumed responsibility for the permanent Note 7), the District may no longer withdraw energy from the disposal of spent nuclear fuel The District is charged a fee for energy exchange account and must pay for all energy and the disposal of spent nuclear fuel in the amount of one mill certain capacity in cash. District surplus energy will be applied per kWh on electricity generated by the nuclear power reactor against the balance of the energy exchange account, which after April 7,1983. The District records this charge as a current was an obligation to PG&E of 1,627 GWh as of December 31, period expense. 1988 valued at approximately 129.3 million. Repayment of AnowAsct ron FUNos Usi n DURisc Cons 1RUCUoN. The this obligation is recorded as surplus power sales. During 1989, District capitalizes, as an additional cost of construction work all surplus power must be used to reduce the energy bank in progress, nuclear fuel, and its participation in jointly owned obligation or sold to PGRE. After 1989, the District may sell projects under construction, an allowance for funds used surplus energy to PGkE and other utilities whether or not the during construction (AFUDC) which represents the cost of balance has been repaid. If the District has not retumed the borrowed funds used for such purposes and a retum on equity energy within ten years of the termination of the Integration funds when so used. Al UDC is a non-cash item and is Contract with PG&E, then the District must pay for any capitalized and depreciated along with the related fixed assets remaining balance at rates specified in the Dispute Settlement and reflected in rates for future recovery, in the majority of Agreement. Energy exchange account liabilities are valued at applications, the amount capitalized is determirwd by a the production cost of the future generation which is planned formula prescribed by FERC. The total allowance for funds to return the obligation. used during construction for the years ended 1988,1987 and DU'RtclAUoN. The District provides for depreciation on the 1986 amounted to approximately 7.7 percent,7.3 percent and historical cost of electric properties on a straight-line, service-7.5 percent, respectively, of eligible plant under construction, life basis at rates determined by engineering studies. The nuclear fuel, and participation in jointly owned projects under average annual composite depreciation rates for the years construction. AFUDC capitalized during 1988,1987 and 1986 ended December 31,1988,1987 and 1986 were 3.64 percent, relating to Rancho Seco was approximately $11.3 million, 3.34 percent and 3.35 percent, respectively. 512.7 million and 513.2 million, respectively. The costs of replacement property units are capitalized. Dui nuro CoMPINsViloN PLAN. The District offers its em-Repair and maintenance costs are charged to expense, includ-ployees a deferred compensation plan created in accordance ing such costs associated with refueling the Rancho Seco with internal Revenue Code Section 457. Until paid or made nuclear plant. Plant modifications that do not meet the available to the employee or other beneficiary, all amounts of criteria for capitalization are also charged to expense. deferred compensation, all property and rights purchased with DumimssiosiNu. The District maintains a fund restricted those amounts, and all income attributable to those amounts, by the Board of Directors to provide for eventual payment of property or rights are subject to the claims of the District's decommissioning costs. Fund management is currently under bondholders and general creditors. Participants' rights under District control. The District's policy is to make levelized con-the plan are equal to those of general creditors. The District tributions to the fund in amounts which, along with interest has the duty of reasonable care in the selection of investment earned by investing fund assets, will be sufficient to provide for altematives but neither the District nor its directors or of ficers payment of decommissioning costs as incurred. have any liability for lo3ses under the plan. The District conducted a study, performed by an independ-UNiuui n RivrNUI s. In accordance with a 1988 rate resolu-ent specialist, to estimate the cost of decommissioning the tion, the District began recording an estimate for unbilled Rancho Seco Nuclear Power Plant (Rancho Seco). This study revenues earned from the dates the customers were last billed. resulted in an estimated cost of $218 million in 1988 dollars The accrual at December 31,1988 for unbilled revenues was and is the basis for the current provision for decommissioning. 531.3 million. The change is concurrent with the thange in The study assumes that decommissioning will occur after the the revenue recognition method for rate-making purposes, expiration of the plant's operating license in 2008 and that the therefore, the increase in revenues had no material elfeet on dismantlinghemoval method will be used. net income. In June 1988, the Nuclear Regulatory Commission (NRC) At ( otN ust Guss/1.ossts oN lloNo Ru cNmsu. The gains issued Final Rules goveming certain aspects of decommission-or losses f rora bond refundings have been deferred pursuant to ing funding plans. As a result of these Iinal Rules, the District lloard of Directors' resolutions for rate-making and accounting will be required to place its funds with an outside trustee purposes, and are recognized through amortization over the within two years and will be required to adopt certain other life of the applicable bonds issued for purposes of the changes regarding escalation and earnings assumptions. refundings. PAGI 7

l 1988 ANNUAL REPORT l NOTE 2. DEHNED llENEFIT PENSION PLAN The District contributes to the Public Employees Retire. Pension benefit obligation: ment System of the State of California (PERS), an agent Itetirees and beneficianes currently receiving multiple-employer retirement system that acts as a common benefits and terminated employees not yet investment and administrative agent for participating state and local governmental entities in California. The District's f*M"E "dI5 - I Lumnt employes payroll for employees covered by PERS for the year ended ~ ~ Accumulated employee contributions December 31,1988 was 599.4 million; the District's total 50.3 including allocated mvestment camings.. payroll for the same period was 5113.4 million. Employer hnanced vested. 92.5 All permanent District employees working more than Employer financed non vested. 4. twenty hours per week are eligible to participate in PIRS. 'I. tal pension benefit obligation. 5249.1 llenefits vest after five years of service. Upon retirement, Net assets available for benefits - at cost participants are entitled to an annual retirement benefit, (market value = 5265.4 million). 212.0 payable monthly for life, in an amount equal to a benefit Unfunded pension benefit obligation. 5 37.1 factor times their highest average monthly salary over any 36 conseative months of employment. The applicable PfRS uses the Entry Age Normal Actuarial Cost Method benefit factor is based on age at retirement and years of which is a projected benefit cost method. That is, it takes credited service, and ranges from 1.1 percent per year of into account those benefits that are expected to be carned in credited service for retirement at age 50 to 2.4 percent per the f uture as well as those already accrued. year of credited service for retirement at or after age 63. PIRS According to this cost method, the normal cost for an also provides death and disability benefit', to covered em-employee is the level amount which would fund the pro-ployees. Benefit provisions and all other requirements are jected benefit if it were paid annually from date of employ-established and govemed by state statute. ment until retirement. PERS uses a modification of the Entry The " pension benefit obligation" is a standardized dis-Age Cost hfethod in which the employer's total normal cost dosure measure of the present value of pension benefits, is expressed as a tevel percentage of payroll. PERS also uses adjusted for the eftects of projected salary increases and step-the level percentage of payroll method to amortize any rate benefits, estimated to be payable in the future as a result untunded actuarialliabilities. The amortization period of the of employee service to date. The measure is intended to help unfunded actuarial liability ends on June 30,2000, users assess, on a going-concern basis, the funding status of The signliicant actuarial assumptions used to compute the PERS, assess progress made in accumulating sufficient assets actuarially determined contribution requirement are the to pay benefits when due, and make comparisons among same as those used to compute the Pension Benefit obliga-employers. The measure is the actuarial present value of tion as described above. credited projected benefits and is independent of the funding The contribution to PERS for the plan year ended June method used to determine contributions to PERS. 30,1988 of $18.1 million was made in accordance with The pension benefit obligation was computed as part of an actuarially determined requirements computed through the actuarial valuation performed as of June 30,1987 (the most actuarial valuation performed as of June 30,1987. The con-recent actuarial valuation). Significant actuarial assumptions tribution consisted of (a) 58.2 million normal cost (8.4 per-used in the valuation include (a) a rate of return on the in-cent of current covered payroll) and (b) 56.6 million amorti-vestment of present and future assets of 8.5 percent com-zation of the unfunded actuarial liability (6.8 percent of cur-pounded annually, (b) projected salary increases of 5 percent rent covered payroll). The District contributed $14.8 million per year compounded annually attributable to inflation, (c) (15.2 percent of current covered paymil) and employees con-additional salary increases of 2 percent per year compounded tributed 53.3.nillion (3.3 percent of current covered payroll). annually attributable to merit and general salary increases- 'lrend information gives an indication of the progress and Id) post-retirement benefits increases of up to 5 percent made in accumulating sufficient assets to pay benefits when per year compounded annually-due. Systemwide ten-year trend information may be found The total unfunded pension benefit obligation applicable in the California Public 1.mployees' Retirement s'ystem to the District's employees was 537.1 million at June 30,1987 Annual Reports. Ior the year ended June 30,1987, available as follows (in millions): assets were sufficient to fund 85.1 percent of the pension benefit obligation. Unfunded pemion benefit obligation represents 38.1 percent of the annual payroll for employees covered by the PERS for the plan year ended June 30,1988. eu,t 8

Jl SACRAMENTO MUNICIPAL UTILITY DISTRICT l NOTE 3. PARTICIPATION IN IOINTLY OWNED PROJECTS CarrRAL CAlnoRM A poWI R AGIACY No.1. In 1982, the members of CCPA No.1 have agreed to run both units at District and two other northern Califomia public agencies rated output for the first year of operations to test the limits (City of Santa Clara and Modesto irrigation District) formed a for equipment warranties and to test the steam deliverability joint powers agency entitled Central California Power Agency of the geothermal reservoir. No.1 (CCPA No.1), for the purpose of participating in the Events Subsequent to Date of Auditors' Report. Geother-exploration, development and production of electricity from mal Resources Inc. and certain of its subsidiaries (GLO) have geothermal resources. Since its formation, CCPA No. I has leasehold interests in the Fields which GLO has developed entered into a series of agreements for the development of a and operates and from which CCPA No.1 is obligated to geothermal steam project with certain entities having Itase-purchase the steam for the CCPA No.1 Project. GEO is hold interests in the Califomia Geysers geothermal area (the experiencing technical and financial difficulties in providing Fields). Under this series of agreements, CCPA No. I ad-the contracted quantity of steam required for the full opera-vanced 526 million towards the acquisition of rights to tion of the CCPA No.1 Project. The technical difficulties purchase steam, provided additional funds toward steam field include, primarily, deterioration of well casings, blockage of exploration and development costs for approved acreage, and several existing steam wells and piping corrosion caused by committed to construct two 65 MW geothermal steam corrosive chemicals in the steam, all of which have resulted electric generating units. In exchange, CCPA No.1 acquired in restricted steam availability. GEO is also experiencing rights to a production payment (a royalty based on the financial difficulties, including the inability to service the revenue from steam sales) and the exclusive right to purchase debt it incurred to develop the Iield and failure to pay for steam under a contract. The steam contract terms require certain completed field development work resulting in CCPA No. I to take a minimum of, or othenvise make mechanics liens being filed against the field and the equip-payment for,50 percent of the annual steam requirement. ment that provides steam to the CCPA No.1 Project. As a The District's investment under the series of agreements for result, GLO has been prevented from obtaining the funds steam field exploration and development, including Al UDC, necessary to correct the above-mentioned technical difficul-is 152.3 million. ties and further develop the field. Consequently, steam flow CCPA No. I has constructed and is responsible for available to the CCPA No.1 Project is less than adequate to operating a two-unit generating plant, Coldwater Creek maintain operating levels in excess of H percent of the CCPA Geothermal Power Plant (CCGPP). The District has been des-No.1 Project's rated capacity. CCPA No.1 is evahiating all Ignated project manager for the construction and operation remedies available to it to allow the plant to operate at rated of both units. Unit No. I was declared commercially oper-output. able on June 1,1988 and Unit No. 2 was declared commer-THANsNnWoN AU NLY of NoIU m RN CA1 norm A. In 1984 cially operable on July 18,1988. The District's ownership the District and fou -teen other California municipal utilities interest in the jointly owned facilities as of December 31, formed a joint powers agency entitled the Transmission 1988 is as follows: Agency of Northern California (TANC). TANC ha< ioined CCGPP Units No. Ik2 with nearly all California utilities to share in the construction (thousands of dollars) and ownership of a 500 KV transmission line between central j Plant in service (District share). 593,730 California and southern Oregon which will facilitate power l.ess - accumulated depreciation. 1,514 exchanges with the Pacific Northwest. 592,216 TANC has agreed to pay 45.11 percent of the estimated 5425 million cost of the project for approximately 42.29 1988 Operating Expenses (District share). 5 5,921 percent of the transmission capacity estimated to be 1,600 Plant Capacity - MW. 130 MW. The District has a 30.6 percent interest in TANC and District's Share 50 % will be entitled to approximately 200 MW of transmission capacity at an estimated cost of 560 midion. The District it is the intent of the District and the other members of anticipates that TANC will finance its share of the California! CCPA No.1 to enter into power sales contracts with CCPA Oregon Transmission Project, although the District will No. I to take or pay for all of the power from the plant. The have ultimate responsibility for the cost. e u. i "

e l0 1988 ANNUAL REPORT NOTE 4. LONG-TERM DEBT . long-term debt outstanding at December 31,1988 and 1987 was as follows: 1988 1987 (thousands of dollars) l Revenue Bonds 51,063,725 5 743,270 Electric Revenue Bonds, 4 3/4%8 5/8% 1989-2018. Taxable Electric Revenue Bonds, 10 9/10 % 11 3/8 % 1993-1997... 150,000 Subordinated Electric Revenue Bonds, 71/2%9% 1993-2010. 491,495 491,495 Total Revenue Bonds..... 1,555,220 1,384,765 General Obligation Bonds,244 3/4% 1939-1992. 3,(X)7 3,960 South Sutter Water District, Hydroelectric Revenue Bonds, 10 9/10b113/4% 1989-2002. 15,310 15,765 924 984 Purchase Agreement,3 3/4% 1989-2000. Total long-term debt outstanding. 1,574,461 1,405,474 Less - Amount due within one year.. 13,211 12,918 Bond Discount Electric Revenue Donds 22,413 19,363 Subordinated Electric Revenue Bonds., 6,838 7,262 Total long-term debt. 51,531,999 51,365,931 Annual debt maturities for 1989 through 1993 are $13.2 million, $16.3 million, $19.1 million,519.8 million and $22.8 million, respectively. Souni SuTTI.R Wati.R District, Hynnor1.1cTsuc Rt:vt. Net. and redemption of (at the earliest call date) the Series T and U bonds. The District is obligated to purchase power from the bonds. As a result, the Series T and U bonds have been legal. South Sutter Water District project under a contract that has ly defeased, under the terms c,f the bonds, and the liability the effect of transferring substantially all the economic bene-for these bonds have been removed from the Balance Sheet. fits of the project to the District and making the I)istrict Although the refunding resulted in the recognition of an liable for all debt service on $16.9 million of bonds issued at accounting loss under generally accepted accounting an effective cost of 11.48 percent by the South Sutter Water principles of $15.8 million for the year ended December 31, District in August 1982. Accordingly, the obligation and 1988, and the District increased its aggregate debt service project have been capitaliml, effective in February 1985 payments by $152.6 million over the next 30 years,it ob-when the project becarne operational. The bonds mature tained an economic gain (difference between the present - serially through 2002. The District is obligated for annual. values of the old and new debt service payments) of $10.9 debt service payments of approximately $2.3 million without million. In accordance with District policy, the loss of 515.8 regard for thelevel of operation of the project. Amounts million has been deferred. expended under this agreement have been reported as RURAL El.lCTRnicA'lloN ADMINISTRATION BoRRoWINGs. At purchased power expense. December 31,1988, the District had the following principal 1988 Rt reno NG llosos. On November 2,1988, the amount of general obligation bonds outstanding, due to the District issued 5161.9 million of its Electric Revenue Bonds, United States of America and issued through the Rural Series V, with an average interest rate of 7.75 percent, to Electrification Administration (REA): refund $150 million of outstanding taxable Electric Revenue Bonds,. Series T and U, with average interest rates of 10.9 Fifth 2% Series, due May 5,1989 5154,0(X) percent and 11.38 percent, respectively. The net proceeds Sixth 2% Series, due November 15,1989 to 1990 _513f)00 of $157.7 million (after payment of $2.2 million in under-Total outstanding ---5667fXX) writing fees and other issuance costs, and after deducting the 52.0 million original issue discount), plus an additional 59.3 During the year ended December 31,1988, the Fourth 2% million of Electric Revenue Bond Reserve Fund and Sinking Series matured. The District remitted $443,(X)0 of principal Fund monies applicable to Series T and U bonds, were used to payments and recorded approximately 519,480 of interest repurchase Series T and U bonds (5152.4 million) and U.S. expense associated with the Fourth through the Sixth 2% government securities ($14.6 million). The securities were Series bonds during the year ended December 31,1988. deposited in an irrevocable trust with an escrow agent to Annual REA bond maturities for 1989 and 1990 are 5424,000 provide for all remaining future debt service payments on and 5243,000, respectively. P A G 1.10

o l SACRAMENTO M U N I C I P A L-UTILITY DISTRICT l O NOTE 5. COMMERCIAL PAPER NOTES As of December 31,1988,5195.1 million principal amount 538 million authorized but unissued). The Municipal Utility of the District's commercial paper notes were outstanding. The District Act provides an additional 575 million of short-term approximate effective interest rate for the commercial paper borrowing authority which is limited to the purchase of notes sold during the 12 months ended December 31,1988, electricity. As of December 31,1988, the District has utilized was 6.28 percent, the average commercial paper notes out-573 million of this borrowing authority. standing was 5170.7 million and the average term was 38 days. Two letters of credit are maintained to support the sale of The District's authority to issue commercial paper notes, for commercial paper notes. The District compensates the other than the purchase of electricity, is limited by state law to banks for the letters of credit by fee payments. There has not approximately $386 million, based upon a percentage of been a term advance under either of the letter of credit outstanding long-term debt. The District currently has $122 agreements. million outstanding under this provision (with an additional NOTE 6. RANCHO SECO NUCLEAR POWER PLANT Rancho Seco is a 913 MW generating plant with the April 1,1988 to February 28,1989 was 44.8 percent. nuclear steam supply system designed by Babcock and Wilcox The most recent outage occurnsi on January 31,1989, due (WW). Prior to 1985, Rancho Seco provided approximately 55 to the failure of a governor in the auxiliary feedwater system. percent of the District's generating capacity and energy pro-On February 1,1989, the District received a Confirmatory duction and had operated at an average capacity factor of 50 Action letter from the NRC. This letter requires that the percent as compared to an industry average of District not restart Rancho Seco prior to receiving NRC approximately 60 percent. concurrence. The District has substantially completed all On December 26,1985, a loss of power to the plant's required and necessary investigatory and corrective action integrated control system (ICS) resulted in a plant trip and items related to this unscheduled outage. The District also subsequent rapid cooldown of the reactor coolant system and requested an assistance visit by tir institute of Nuclear Power the reactor vessel. An NRC fact-finding team concluded the Operations (INPO) to assist with determining the causes of the fundamental cause of this incident was design weaknesses in unscheduled outage. The INPO report cited numerous the ICS and the equipment it controlled and that, while problems in plant operation, engineering practices and man-known to the District and the NRC, had not been adequately agement as the causes which led to this outage. The District compensated for by corrective action. has met with the NRC and INPO to address the causes of the RtsTArr. The District decided not to attempt a restart of outage and the corrective action items that have been imple. Rancho Seco until a comprehensive program twhich looked mented. The restart of Rancho Seco is dependent on the beyond the specific causes of the December 1985 outage) of successful completion of corrective action items, testing, identifying and correcting the reasons for the deterioration in reviews and NRC concurrence. The District believes that the the performance of Rancho Seco and its staff was completed. items will be completed and NRC concurrence will be obtained The District developed a restart plan (the Restart Plan) which in March 1989, which will allow Rancho Seco to restart and provided for a comprehensive review and upgrading of Rancho operate in 1989 as planned. Seco's systems and equipment,its management systems and The future of Rancho Seco is subject to the signihcant programs, and its management and operating personnel. uncertainty presented by the Measure C Referendum discussed On March 30,1988, Rancho Seco was restarted. Since that below. In addition, the continued successful operation of date, the plant has been operated and tested at a series of Rancho Seco is also subject to uncertainties outside of the planned power output plateaus making up the District's Power control of the District, including but not limited to the Ascension Program. Rancho Seco was declared commercially following: unanticipated operational problems; equipment or operable at the 80 percent power plateau in August 1988. systems failures at the plant; possible future shortages of Since then, the plant has reached the 92 percent power plateau operators and other personnel; the possible effects of incidents and the testing requirements through this power level have at other nuclear plants; or the failure of the District to satisfy been successfully completed. Rancho Seco, however, like all tne criteria of NRC, INPO and other independent appraisal nuclear plants, is subject to periodic unscheduled outages and teams in future inspections or evaluations of plant, operator or periods of reduced power production which will affect the management performance. plant's overall output level. The plant has experienced three The District believes that Rancho Seco should be operable in such outages since restart. The actual capacity factor from the future, as planned, unless it is required to be removed from P AG r 11

lt l 1988 ANNUAL REPORT service by the hicasure C Referendum discussed be.ow. close Rancho Seco, a power descension process will begin Jun 1989 PwPost noN. In the statewide primary election immediately. held in June 1988, two measures relating to Rancho Seco were rimcm lurac1 of RANeno Sico. Rancho Seco repre-presented to the voters of the District (the hicasure 11 Initiative sents a significant portion of the District's assets and and the hicasure C Referendum). The Measure 11 Initiative generating capacity. At December 31,1988, the net book would have, if enacted, required the permanent shut-down of value of Rancho Seco was approximately 5919.2 million, Rancho Seco as a nuclear generating station. In response to the including $207.0 million of nuclear fuel. Plant costs includ-hieasure il initiative, the District adopted and placed on the June ing decommissioning are being amortized over 30 years, The 7,1988 ballot the hieasure C Referendum. The hieasure C most recent estimate of the total decommissioning cost of the Referendum provided that Rancho Seco would be operated by plant is $218 million in 1988 dollars of which $54.2 million the District for the duration of the current refueling cycle, a has been funded as of December 31,1988. period of approximately eighteen months. If performance fell The continued operation of Rancho Seco is subject to the below a minimum monthly capacity factor of 50 percent for uncertainty of the requirements of the Measure C Refer-four successive months after December 31,1988, then the plant endum (including theJune 1989 proposition), and other would be permanently closed. To restart the plant thereafter, or uncertainties, which are outside the control of the District to close the plant for other than not meeting minimum per-and, accordingly, the District is unable to provide assurance formance levels, would require a four-fif ths vote of the District's as to whether Rancho Seco will continue in operation. Iloard. In addition, the Referendum called for the District to use Realization of the District's investment in Rancho Seco and all due diligence to divest itself of Rancho Seco in the eighteen associated nuclear fuel and the adequacy of the provision month period following the election. for estimated future decommissioning costs are dependent At theJune 1988 election, the Measure B Initiative was upon future events. If significant portions of the investment narrowly defeated and the Measure C Referendum was narrowly in Rancho Seco are not recovered through successful opera-passed by the voters. The Mtasure C Referendum requires that tion of the plant, or the rate-making process, the adverse the continued operation of Rancho Seco be re-ratified by the impact upon the District's customers' equity and future majority of the voters. The District will place this proposition statements of income would be substantial, on theJune 1989 regular election ballot. If the voters choose to NOTE 7. DISPUTED SURPLUS POWER SALES Ilu mocNo. In February 1986, citing the prolonged Rancho ber 1985, "because SMUD (the District) has failed over an Seco outage as a basis for its action, PGkE requested modifica-extended time period, including 1985, to operate and tions to the Integration contract. PGkE proposed to pay for maintain its Rancho Seco Nuclear Power Plant in a manner capacity only on an as delivered basis until commercial reliabil-intended to reasonably ensure Rancho Seco's reliability and ity was established and to require the District to pay cash usability" The remaining 57.3 million represents amounts currently for interest on negative capacity and energy exchange the District had offset PGkE billings to that date as discussed account balances. PGkE stated it would withhold payment for above. The District formally rejected the PGkE claim. On undelivered capacity and withheld payments aggregating 55.8 April 23,1986, PGNE filed in the Superior Court a " complaint million for December 1985 and 529 million for the 12 months for declaratory reli(f on written contract" naming the District ended December 31,1986. The District believed that the as defendant. PGkE sought a judgment on matters relating position PGkE took was not in accord with the contract and on to the operation of Rancho Seco and its impact on the March 11,1986, initiated a proceeding before FLRC to obtain a surplus power sales contract. The Court stayed the action ruling that PGhl/s action was improper. FERC ruled on pending the outcome of the FERC pmceedings. December 30,1986 it had jurisdiction over the dispute. The Surplus power sales for 1986,1987 and 1988 include FERC hearing before an administrative law judge commenced billings to PGkl subject to the dispute described above of on September 29,1987 and concluded on October 30,1987. In 530 million,510.3 million and 50, respectively. The District January 1988, before a decision was rendered, the administrative recovered payments withheld by PGkt for 1986 of 529 law judge resigned and a new judge was assigned to the case. million by of fsetting payments due to PGkE for power On April 4,1986, PGkE filed with the District a formal claim purchased by the District under the contract. against the District for 534.8 million plus interest. PGkE The District and PGkl. entered into an agreement dated claimed that the District wrongfully collected 527.5 million of July 6,1987 which provides that, effectiveJanuary 1,1987 capacity payments for the period January 1985 through Novem-and until December 31,1987, the District would pay PGkE in i' A L i 12

'l SACRAMENTO MUNICIPAL UTILITY D I S T il l C T full for all energy provid-d without of fsets of any kind, and chases by the District, after January 1,1988, must be paid for PGkE would deposit in an escrow account all amounts in cash. billed by the District for excess capacity under the terms of THANsMisMoN AGRII Mt Ni[ Transmission RAlt Scut octt, the contract. The agreements between the District and PGkE required PGkE PGkE Disruit. Si rrttMi N1. Based on a March 1988 to file a unilateral Transmission Rate Schedule by November 1, Memorandum of Understanding, the District and PGkE 1988 if the parties were unable to negotiate a Transmission adopted a Dispute Settlement Agreement onJuly 27,1988 Agreement by that date. Having failed to negotiate that which was effective as of January 1,1988. The Dispute agreement PGkE has filed a ' Transmission Rate Schedule and Settlement provides for settlement of all existing PGkE the District is asking FERC for a modification of that schedule. claims against the District related to Rancho Swo. In return The District has also filed a motion requesting an expedited for PGkE's abandonment of those claims and for other hearing and a FERC decision by July 31,1989. benefits that the District will receive under the agreements, Po M NU Al EHIC1 oN 1Hr D61RIC1. The Dispute Settlement among them PGkE's commitment to sell capacity to the Agreement provides that if it, the 1988 Contract Amendment, District at favorable rates from 1990 through 1994, the a Transmission Agreement, an Interconnection Agreement, District has released 58.6 million held in escrow for PGNE and a new PGkE Power Sale Agreement are not approved by capacity purchases, will pay 566.5 mill 5n in five equal ITRC beforeJuly 16,1991, then the District and PGkE would installments over four years, beginning August 1988, and be restored to their respective positions as of January 1,1988 as forego 54.1 million in receivables for surplus capacity and if the Dispute Settlement Agreement had never been executed. energy sales. If the Dispute Setti" ment Agreement is treated as never having The total cost of the settlement to the District is approxi-been executed, the disputes between PGkE and the District mately 579.1 million. In recognition of future reduced would, presumably, again become active. In February 1989, capacity charges trom a new power purchase agreement FERC approved the 1988 Contract Amendment, the Dispute with PGkE, that resulted from the settlement, the Board of Settlement Agreement and the new PGkE Power Sale Directors has established that this cost will be recovens! Agreement. through rates over the life of the new power purchase The District's Board of Directors, which has authc ity to agreement. Thus, the District has deferred the cost of the establish the level of rates charged for all District services, has settlement in the Balance Sheet pending future rate established a rate-making balancing account for deferring n covery. material losses arising from adverse resolutions or settlements 1988 AMtNir.itNT. The District also adopted a 1988 of claims and litigation that have not been previout,1y consid-Ammdment to the existing PGkE Contract. The Amend-ered in District rates. Under this balancing actount mecha-ment provides that the District is not required to return to nism, recognition of any loss resulting from the PGkE dispute PGkE any capacity which was borrowed as of January 1, would be deferred for rate-making purposes and recovered over 1988. The Amendment further provides that the provisions a future period of time and, therefore, the ultimate outcome of of the energy exchange account are no longer applicable the disputed surplus power sales will not have a material except for the return of energy borrowed, plus in kind adverse impact on the District's customers' equity and future interest, over the term of the 1988 Amendment and the statements of income. Power Sale Agreement. Future energy and capacity pur-r A c, t t3

d l* l 1988 ANNUAL REPORT NOTE 8. COMMITMENTS AND CONTINGENCIES Cowunmus. The District's capital expenditures (excluding agreement providing for the purchase by the Dktrict from allowance for funds used during construction) for 1989 through PGkE, during the period January 1,1990 through December 1991 are estimated to be 5497.6 million. Approximately 5151.6 31,1999, of a minimum of 600 MW and the option, which million is for transmission and distribution projects, 5209.4 expires on July 1,1989, to increase the commitment up to million for nuclear plant modifications and repairs, and 5136.6 1,00() MW. Additionally, the District has the option to million for nuclear fuel and other construction. reduce the commitment to 400 MW from January 1,1990 The District's hrst geothermal unit became commercially through December 31,1994 and to O MW thereafter. The operationalin December 1983. Under its steam supply minimum contract obligation is estimated to be 5148 million agreement, the District is obligated to pay a minimum of 56.6 over the life of the contract. million annually during the operating life of the plant subject to LUMUoN. A 51 billion class action suit was filed against price level adjustments and, under a transmission service the District alleging the District allowed excessive amounts of agreement, the District is also obligated to pay a minimum of radioactivity in the liquid ef fluent discharges from the $1.1 million annually until 1990 for transmission of the energy District's nuclear power plant, Itancho Seco, injuring the to the District. claimants and their land, crops, livestock and business. The On June 10,1987 the District entered into a Power Entitle-Courts denied certif: cation of the class. Unless the ruling is ment Assignment Agreement with Pacific Power and Eight reversed, the plaintiffs can proceed only as a group of which will make available 100 hiW of firm capacity and associ-individuals with individual claims. A second class action ated energy from 1990 through 2014. In exchange for the firm claim in the amount of 5500 million was filed alleging capacity entitlement, the District was obligated to pay approxi-intentional misconduct and deceit in connection with such mately 598 million on January 1,1988. The District had the releases. An amended complaint combining the 5500 option to defer this payment until December 31,1989 or, under million claim with the 51 billion suit was filed on f ebruary certain conditions, to pay it in monthly installments over the 10,1987. term of the agreement. The District elected to defer payment Tests c(>nducted by nationally recognized experts show and interest began accruing from January 1,1988 at the lesser of that maximum exposure to any one individual in the llancho the prime interest rate or 9.5 percent. Energy received under the Seco area is well below the rate allowed by the United States agreement will be paid for as delivered and cannot exceed Environmental Protection Agency. The District believes that 657,000 megawatt-hours per year. The District has a minimum any liability on account of such discharges is limited to an annual take-or. pay commitment for this energy of approxi-amount covered by liability insurance and a federal govern-mately 54 million beginning in 1990 through the term of the ment indemnity agreement and will not have a material agreement. adverse impact on the District's financial position and resuhs in August 1988, based on the hiarch 1988 hiemorandum of of operations. Understanding, the District and Southern California Edison The District has been notified that scrapped distribution (Edison) entered into a power sale agreement effective January transformers which were sold by the District and disposed of 1,1990 through December 31,1999 allowing the District to by a dealer are suspected of containing polychlorinated purchase up to 700 hiW of capacity and associated energy and biphenyls (PCIPs) and responsible for contaminating the providing for &lison to purchase from the District a portion of dealer's site. In April 1986, the California State Department its surplus energy. The District is committed to purchase a of Health Services (Department) issued a Determination minimum of 300 htW,250 K1W of which the District may elect of imminent or Substantial Endangerment and Remedial to purchase only during the summer months, and has an Action / Director's Order (Order) against the District and the option, which expires July 31,1989, to purchase up to an dealer. The Order requires that a remedial measure be devel-i l additional 400 hiW of capacity. If the District elects to purchase oped and implemented at the site to contain contaminants l 250 htW of the 300 NfW minimum obligation as summer du:ing the rainy season. The Order further requires that the capacity, then the District has the option to reduce the commit-District and the dealer prepare, submit and implement a ment to 50 h1W after 1994. The District is responsible for remedial investigation gesting) plan for soils and ground-arranging for transmission of all capacity and energy and if the water to the Department. Testing has been completed and District does not notify Edison of such arrangements byJuly 31, shows no groundwa'er contamination, however, soil testing 1989, then the Edison Power Sale Agreement is terminated. The results show that the extent and depth of contamination is Edison Power Sale Agreement is expected to be filed and greater than originally anticipated. The District has imple-approved by FERC by h1 arch 1989. The minimum contract niented an interim reme<hal measure and removed portions obligation is estimated to be 5180 million over the life of the cf the contaminated soil as well as a large quantity of trans-contract. f ormers f rom the site. In July 1988, the District and PGkE entered into a power sale The District recently completed a feasibility study which PAbi 14

w 44 l SACRAMENTO M U N 'I C I P.A L U TI LITY D I S T R I'C T l 1 ^ '9 evaluated 13 possible soil remedies at the site, frorr passive The District has insurance coverage of 5160 million, through - containment to off-site incineration, with cost estimates private insurance pools. The rernalning 57.1 billion in financial ranging from 5900,000 to $22.7 million. Once the feasibility protection would be provided by assessments against utilities i . study has been approved a remedial action plan will be owning nuclean reactors. The District is subject to a retrospec-L submitted for approval. Until the remedial action plan is tive assessment of up to 563 million per nuclear incident, . approved, th.* cost of remediation at the site remains uncer-payable in annualinstallments of no more than 510 million.

tain. Based on estimates prepared by a consultant, the The District insures against losses for nuclear property j.

District believes that the total cost of compliance will be damage and decontamination liability using several layers of j approximately 53 million which has been accrued as of coverage. The first layer of coverage, through American Nuclear l December 31,1988. The District believes that compliance Insurers (AN1), provides the first 5500 million in coverage limits. with the Order and final clean-up costs will not have a Excess layers from ANI and Nuclear Electric insurance 1.imited. material adverse impact on the District's customers' equity Pool 11 (NEIL 11), provide 5731.6 million in additional coverage. ' and future statements of income. Total protection is 51.3 billion, which exceeds the NitC require-NucuAR LI ABIU n ins 0RANct. The District's potential ' ment of 51.1 billion. The District is subject to a maximum public liability for claims resulting from nuclear or radio-retrospective premium assessment of 57.7 million per year in the active incidents is limited to approximately 57.3 billion as of event of a loss by any NEll.11 member. January 1,1989, under provisions of the Price-Anderson Act. I s i P A G r '15

e 0 ) i 1 I I 1 1 80SMUD SACRAMENTO MUNICIPAL UTILITY DISTRICT Main Office of the District: 6201 S Street 1 Sacrarnento, CA 95N17-1849 i Mailing Address: P. 0, ilox 15830 i Sacrarnento, CA 95h521830 l 4916)452-3211 I

~~ ~ .I 9 8 8 ANNUAL.REPOR1 Directory i BOARD OF DIRECTORS 1985 SPECIAL SERVICES CIMford R. Wilcox, President ORRICK, HERRINGTON k SUTCLIITE Cortus T. Koehler, Vice President fdl,}"""'l,'#" j , yj John T. Kehoe Edward A. Smeloff,Jr. BANK OF AMERICA NATIONAL TRUST Ann L. Taylor AND SAVINGS ASSOCIATION San Francisco BOARD OF DIRECTORS 1989 Trustee and Paying Agent, Senior Lien Bonds Joseph M. Buonaiuto, President SECURITY PAClflC NATIONAL BANK Dave Cox, Vice President Los Angeles Peter R. Keat leastee and Paying Agent, Subordinated Bonds Edward A. Smeloff,Jr. Clifford R. Wilcox R.W. BECK AND ASSOCIATES Sacramento EXECUTIVE hlANAGEhiENT Consulting Engineer David A. Boggs ARTHUR ANDERSEN 61 CO. General Manager Sacramento SMUD Chief Executive Officer Auditors Leo A. fassler Joseph F. Firlit RAUSCHER PIERCE REFSNES, INC. Assistant General Manager and Chief Executive Officer, NutIvar San Tranchco Chief Operations officer Tinancial Consultant District Operations Bob G. Croley Assistant General Manager Walter Gachlet U Nuclear Technical Services Assistant General Maruger, finance and ChiefFinancial Officer Danny R. Keuter Assistant General Manager -s Frank J. Hahn Nmlear Plant Manager Assistant General Manager Q Corporate Planning and Contracts James R. Shetler

r Auistant General Manager Juhn L. Ravera y,(g,,ar Support Senices Assistant General Manager Corporate and Cmtorner Services y g y, ygg q uygg AniMant General Manager Jan Schori Nuclear Qualdy an Industrial Safety Secretary 6.

,vs z General Counsel and W Richard W. Vorpe D '/ Treasurer \\ 4 ..m ~, gg Gall R. Ilullibarger -x - o d' f Controller h l Judy R. Habecker Add Executive Anistant l to the General Manager a. y, -.. R

==esme ~.s - / This Annual Report was produced by the SMUD 1 Public Affairs Department. Allphotos are by y$,.- y h} SMl'D Staff unten otherwite iskniified. l .,,.c

o t i l $)SMUD SACRAMENTO MUNICIPAL UTILITY DISTRICT Main Office of the District: 6201 S Street Sacramento, CA 95817-1899 Mailing Askiress: P. O. Ilux 15830 Sacrarnento, CA 95852-1830 (916)452-3211}}