ML20248F142

Forwards Annual Financial Rept & Certified Financial Statements for 1987 & 1988.W/o Annual Financial Rept

ML20248F142
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	04/07/1989
From:	Mueller R DAIRYLAND POWER COOPERATIVE
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
LAC-12739, NUDOCS 8904120494
Download: ML20248F142 (16)

Text

_.

/

D DA/RYLAND kb[M[' COOPERATIVE

• 2616 EAST AVE SO.

• PO. BOX 817. LA C (G08) 788-4000 April 7, 1989 RE: IAC-12739 i

DCCKET NO. 50-409 U.S. Nuclear Regulatory Commission Attn: Document Control Desk Washington,-D.C. 20555 1

Gentlemen:

DAIRYLAND POWER COOPERATIVE IA CROSSE BOILING WATER REACTOR (LACBWR)

PROVISIONAL LICENSE NO. DPR-45 FINANCIAL STATEMENTS AND AUDITORS' REPORT

Reference:

1) 10 CFR 50.71.(b)

In accordance with the requirements of Reference 1, we are forwarding three (3) copies of.the annual financial report and certified financial statements for Dairyland Power Cooperative for the years 1988 and 1987..We will forward our 1988 Annual Report to you as soon as it is completed.

Sincerely, DAIRYIAND POWER COOPERATIVE f

Robert C. Mueller Assistant General Manager and Controller l

RCM:pls Enclosures cc:

C. Bert Davis, Regional Administrator, NRC-DRO III fp -

Peter B. Erickson, NRC Project Manager gi J. Parkyn, IACBWR gi t

i 8904120494 890407 jFj ADOCK0500g9 i

PDR i

AnTnun ANDEnSEN & CO.

MI NNE A PO Lr s, MI NN E SOTA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members and the Board of Directors, Dairyland Power Cooperative:

We have audited the accompanying consolidated balance sheets of DAIRYLAND POWER COOPERATIVE (a Wisconsin cooperative)

AND SUBSIDIARY as of December 31, 1988 and 1987, and the related consolidated statements of revenues, expenses and patronage capital and cash flows for the years then ended.

These financial statements are the responsibility of the Cooperative's management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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 disclosure 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 financial position of Dairyland Power Cooperative and Subsidiary as of December 31, 1988 and 1987, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN & CO.

March 2, 1989.

l

1 7

7 6

3 4.

3 4

04 4

3 7

7 410 9249 9

3.

19 0

5 5

9 476 7118 6

2..

4, 5,

2, 7,

0, 9, 4, 0, 5,6,6,3, 6,

5,.

8 8

9 3

3 5

8 0

880 2151 8

7.

1 7

7 5

2 2

1 3

8.

4.

3 4

S E

I T

I L

I s

B n)

A o3 I

i L

s t e e

at D

i go N

t A

i

)

iN 6

l(

u b

N q

e os s

O e

t e

e I

o mv i

T n

)

N ri t

A o

)

8

(

t a l

et i

Z r

2 L

)

t n

I 4

a e o d

S

- r i

n E

ge y

b A

s p

t i

T e e o

t a

I np a

a N

a C

oo p

i I

i t

d

(

z 5

N l o l

P t

o n E

c n

A i

N a

i C

u

(

s l

s G

f o

t q

r n a e

N or

- i n

e l

e o t

t I

e st e

a b

i i o

T

sb ea r

nst m

t p

N N

Sem ic r

O Eieet a u

Y oei e

a a

(

R 1

rep m g

c C

It mli v c

S Ti bl A

3 tf a i

I

a c

l l

l T

D I rmaid l

D R

N pp a

b a

I N

L u o yb n a

I E

O ie t

o t

D A

I t raaa t

S B

Idh g o

o E

Baf pi t

o B

M Tnsa T

m T

R S

Am ll s

T U

E Aarn r

C T

I ss l

e N

Ltetdosrr S

C eo e

D E

ncnereee E

l rbr t

D D

Lemt E

M Tenuuyxth e

N Abea g

R T

N raor aant A

TmMP n

R I

ErvccPTI O S

I e o

E M

R udcc E

T

)

PM L

F M

RCAAA s

V E

d A

E O

U I

E n

C D

C C

T H

a A

S s

R u

E E

o P

C h

O N

T

)

O A

33 0

4 4

76 6

1 93 2

2 29 229 6

2.

C L

n 05 5

3 8

82 5

4 90 1

4 81 247 8

8.

8, 6, 1,

6, 7,

8,1, 8,

0, 1,1, 2,

5, 9,8, 6,4,7 1,

1,.

.c A

I 7

8 R

B

(

9 12 9

7 6

63 9

2 74 3

1 44 58 6

6.

EW D

1 90 8

9 3

1 7

5 1

3 1

8.

1 4.

O E

42 2

2 P

T

$(

A D

D A

L 89 9

3 2

47 6

4 45 - 0 1

17 598 1

3.

)

N I

L O

06 3

6 0

44 5

0 57 - 8

?

76 506 4

2 e..

3, 4, 8,

5, 4,

0,1, 8,

0, 2, 5, 8,

6, 1, 4, 8,4,6 2,

5, Y

S 8

R N

8 I

C 9

76 0

9 0

53 9

2 51 - 6 1

62 08 0

7.

A C

1 91 8

1 0

4 1

- 7 5

1 3

1 8.

1 4.

D 42 2

3

$(

m

+

u

)

9 e

w esv t ei S

ott T

t (Naa E

s cr s

S

)

o ie S

0 c ef p n

t A

1 rio o

ne l

uto da t rC s

m nnn ne d

ts aio s

ecs e

)

e t

s gi s

t v e e 0

7it e

n mi c

1 v

s t

ra r

a srt o

s n

o e

,oi g

l cei r

e t

i c

s 2

c o

p itl p

t e

s s

o s

h e e a

e r

t i

,tar p

c plt de N

s s

g i

(

a a

a l

t 1

p i

) oaUnne

,e n

r t

oot c-r p

n std i

t 1 rili Bs t

r e

e p

e en c

epat u

e e

yl v

u r

t ed k

e ebaral r - n) h rb a

s r

ome l

ti curot s t

aa s

u N pt ie e

of Ror e

,B o

rv t

de c

N n

pthgs ois asns (ia w

( nil r nt rte l

an l

pee

,l ul l

e e

a aooiast a

S mcl Tqu n

a

s snCCwhoo t

Teea susp t

i Nem o

t A

u i

o St tt o ccN o Et rs efl x o

P nc c

Eeeet coidR(

T S

i ae T

Ld c t

T Tnnnient Sdsy rli aA u

S mmmaniseWr Ant groird C

r Stt tNat orBe anr et sei I t -

t Asss nuprCh T

uehnst a R ns s

eeefil eeAt Nhont eoap Tas n

RvvvoFldf LO EscEOvFM e Cl e o

Ennn o

e R ac n

r EPL C

HI I I P

D PCA I

P U

L T

E O

C

_(

)))

)

)))))

)

8577 0

28617 1 _

8292 5 _

4 871803 5 - 1 1

2 =

7 4166 0

58301

? _

0790 3 _

3 028054 3 - 9 5

4 =

8,7,9,5, 4,

3 9,1 2,5, 6,

5,(1 9,0, 4,

0, 4 4,9,7,2,5, 5,

5, 9,

5, 8

9 1

2715 2

5 31 1 -

8 64 7 _

5 081421 - 3 5

5 1 =

1 21( (( (

- 2 2

2 5 =

1

((

1 4

(

(

(

$=

8

))

)

)

))

)

25 399 30152 9

729

_4 8

3 74

_ 6 _ 9 2

1 =

8 86 688 60174 7

323 2 -

8 0

58 2 _ 2 4

7 =

9, 8,

- 0, 2, 7, 1,8,1 2,1, 4,

1, 8, 9, _

2, 1 - 10, -

_4

,_1 5,

6, =

8 9

1 57 121 14 33 1

82 0 _

1 81

_ 0 _

1 1 = 5 5 =

1 4

((

1 _

2

((

%=

(

(

(

Y R

A S

Y W

D O

I L

1 S

F 3

B U

H R

S e

S E

e A

B D

t C

M N

e s

E A

r I

F C

)

u r

O E

E s

t t

D V

d n

S T

n e

h T

D T

a v

t N

E A

s i

E D

R u

s w

s M

N E

o c

e E

E P

h i

t i

T O

T t

i t

A S

O p

s i

T R

C n

o o

v S

A p

i I

E R

(

r e

t s

D Y

E e

d c

n E

W b

a o

T E

O i

n i

A H

P f

s o

g t

D T

e n

a D

f i

s i

r I

L R

o t

d c

e s

W O

O A

i e

n p

e S

F L

e v

e a

o i

N Y

u i

c n

t O

R l1 t

o i

R i

C I

a8 c

sr f

W v

a nps B

se i

A v

D e

s o

n

)

C t r t

gt m

g ido r

A nu c

no e

n t ni o

L et a

r S

iN t

i aot f

mn a

T n

y(

i t

gBas tf t e g

e N

)

ol r a

i gt d

eo sv n

y E

R i ere g

r llii e

n e

i M

O t uag n e

bold s

n vs t

e T

F af cr i p

orbe u

,o nc s

h S

z a

t o

t or

(

si ii e

t E

D i rnh a

mn c nt t

v V

E t aic r

y rom y

oa rp n

g N

S re ee s

b eCrl b

i n eo i n I

U ol nd pl e

t ea ti h

i

(

mcoe ob i

d

- - ntt d

- i m t r r

r H

s auir a

set e

sgo i e

sd r s

oe o

u S

Ye nt r t v eli d

enigp d ede e

b f

d A

Bi d

ce ni sbl i i ot na i iatt g fi C

t nf uf ee nai v

tl uoc v t

nr of d

w r

Di aode rc e yb o i ll o

it oaa e

o Ya Ev ed respaa r

vml f

r vntlh sn s

l Re Di nnr u r e x pi p ioof o p i a pc ei u

f A y I t oo f

c ie l

t rPo tl e s

R Vcniid o sr s

h cf t

h cpucd att h

h Of Oaitt n nt odtd s

a nt n s

a die h ne s

s Po r

R gaaaf i nti ne a

sine a

c rr cen a

a M

a C

C E g e

rrrm, Pgriz f

unauu C

gd em C

gist Tn y

naciso eoepor neeme nreceeut Wimet eergcvecc i egyr it gefh psr i

Ot rrst encnrcc ccnai t cnl et ee Dn f

Lat posihaAI PAA noapt seaEDOt vh N n o F reemorth arh ee elh ent Ai eNDALWOC nPCRR vEC NI O g d Hp i

n He n

SO F

I SB E

A A

C C

1ll[

l

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1)

Summary of Significant Accounting ?olicies-Organization:

Dairyland Power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of Wisconsin and Minnesota.

The Cooperative's principal offices are located in Wisconsin.

The Cooperative provides wholesale electric service to Class A members engaged in the retail sale of electricity to l

member consumers located in Wisconsin, Minnesota, Iowa, Illinois and Michigan and provides electric and other services to Class C, D and E members.

The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.

The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Telecomniunications, Inc. (CTI).

All intercompany balances and transactions between the Cooperative and CTI have been eliminated.

Depreciation:

Depreciation is provided based on the straight-line method at rates which are designed to amortize the l

original cost of properties over their estimated l

useful lives and includes a provision for the cost of removal and decommissioning of the properties.

The provision for depreciation averaged 3.8% of depreciable plant balances for 1988 and 1987.

Income Taxes:

The Cooperative is exempt from federal and state income taxes and, accordingly, no provision for such taxes is reflected in the consolidated financial statements.

Allowance for Funds Used During Construction:

Allowance for funds used during construction repre-sents the cort of external and internal funds used for construction purposes and is capitalized as a _.. _ _.. _ _ _ _ _ _ _ _ _. _ _... _ _. _.. _ _ _... _ _.. _ _.. _ _ _ _ _ _. _..... _.... _.... _.... _

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1)

Summary of Significant Accounting Policies (continued)-

Allowance for Funds Used During Construction (continued):

component of electric plant.

The amount of such allowance is determined by applying a rate to certain electric plant additions under construc-tion.

The rates used varied from 7.1% to 8.5% in 1988 and from 7.0% to 8.1% in 1987, depending on the source of funds.

Property Additions:

The cost of renewals and betterments of units of property (as distinguished from minor items of property) is charged to electric plant accounts.

The cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation.

No profit or loss is recognized in connection with ordinary retirements of property units.

Maintenance and repair costs and replacement and renewal of minor items of property are charged to operating expenses.

Investments:

Investments consist primarily of commercial paper and government obligations.

All investments are recorded at the lower of aggregate cost or quoted market value.

The carrying value of the invest-ments is adjusted for amortizatioli of premiums and accretion of discounts.

Supplemental Cash Flow Information:

During 1988, the Cooperative paid interest of

$21,059,000.

Reclassifications:

Certain 1987 amounts in the accompanying consolidated financial statements have been reclassified to conform to the 1988 presentation.

These reclassi-fications have no effect on previously reported net margin or patronage capital. --

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED F'INANCIAL STATEMENTS (2)

Long-Term Obligations-Long-term obligations at December 31 consist of the i

following (in thousands):

1988 1987 REA Obligations, 2%

$ 67,764

$ 72,537 REA Obligations, 5%

32,798 33,400 FFB Obligations, 7.5% to 10.6%

223,938 225,511 NRUCFC Obligations, 9.5%

6,116 6,477 City of Alma, Wisconsin, Pollution Control Bonds:

Fixed rate (6.383%)

11,315 11,620 Adjustable rate (6.18%

at December 31, 1988) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds, adjustable rate (6.18% at December 31, 1988) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7%, due in varying amounts to 1995 4,206 4,714 364,197 372,319 Less-Current maturities (8,944)

(8,614)

Total long-term obligations

$355,253

$363,705

==

Long-term obligations to the REA are payable in equal quarterly principal and interest installments through l

2015.

Principal repayments on the long-term obligation to the Federal Financing Bank (FFB) extend through 2021.

Principal and interest payments on the National Rural Utilities Cooperative Finance Corporation (NRUCFC) l obligations are payable quarterly through 1999.

The fixed rate Pollution Control Bonds are payable in increasing annual amounts through 2008.

The adjustable rate Pollution Control and Industrial Development Revenue Bonds mature in 2015 unless pre-viously called for redemption.

Bank letters of credit aggregating $19,000,000 which terminate in February 1991 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date.

Accordingly, the entire principal amount of these bonds is classified as long-term obligations..

h

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY e

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2)

Long-Term Obligations (continued)-

Substantially all of the Cooperative's assets are pledged as collateral for these obligations.

The Cooperative is required to and has maintained certain financial ratios related to earnings and liquidity in accordance with the covenants of its loan agreements.

Maturities of the Cooperative's long-term obligations are as follows (in thousands):

Year Amount 1990 9,343 1991 9,630 1992 10,008 1993 10,396 Thereafter 315,876 Total

$355,253

==

(3)

Lines of Credit-To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $25.4 million, principally through NRUCFC.

Borrowings are at a rate no greater than prime plus 1% and were not significant in either 1988 or 1987.

Compensating balance requirements or fees relating to the lines of credit are not signifi-cant.

While the lines of credit expire in May 1989, the Cooperative believes it will renew them.

The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates.

Interest expense on member cooperative advances ($1,098,000 in 1988 and $877,000 in 1987) has been included in interest expense while interest income earned by the Cooperative on prepayments ($1,077,000 in 1988 and $881,000 in 1987) is reflected as nonoperating margin.

(4)

Retirement of Caoital Credits-l The Cooperative's board of directors has adopted a policy of retiring capital credits allocated to members on a "first-in, first-out" basis so that at all times the Cooperative will not retain as patronage capital any capital contributed or deposited more than 20 years prior to the current year.

Accordingly, the 1968 and 1967

_4-

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4)

Retirement of Capital Credits (continued)-

capital credits were retired in 1988 and 1987, respec-tively.

Implementation of this policy is subject to annual review and approval by the board of directors and the REA, and no cash retirements are to be made which would impair the financial condition of the Cooperative or violate any terms of its agreements.

(5)

Shared Transmission Agreements-The Cooperative has entered into shared transmission agreements with the Southern Minnesota Municipal Power Agency (SMMPA) and the Western Wisconsin Municipal Power Group (WWMPG) which provide SMMPA and WWMPG use of the Cooperative-owned transmission system to deliver power and energy requirements to SMMPA and WWMPG members in the Cooperative's electric service area for a period of 50 years.

Payments received from SKMPA and WWMPG for use of the Cooperative's transmission system are reflected as deferred credits and are being amortized to operations over the terms of the related agreements.

The Cooperative may be entitled to further payments depending on the investment in, and joint use of, the system.

(6)

Commitments and Contingencies-The Cooperative has been named a defendant in several lawsuits and claims, primarily related to construction and operation of its electric plant.

Although the outcome of these matters cannot be determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material effect on the financial position of the Cooperative.

(7)

Construction-The Cooperative's 1989 estimated construction program is

$28 million.

Financing of construction is expected to be provided by borrowings from the FFB and funds generated internally.

(8)

Pension Plan-Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program.

Contributions are determined in accordance with the provisions of the program and are DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8)

Pension Plan (continued)-

based on salaries, as defined, of each participant.

NRECA declared a moratorium on plan contributions effective July 1, 1987 through December 31, 1989, and accordingly, pension expense was reduced or substantially eliminated in 1987 and 1988.

As of December 31, 1985, the date of the last available actuarial valuation, net assets of the plan exceeded the actuarial present value of accumulated plan benefits.

Effective January 1, 1986, the Cooperative adopted an amendment to the pension plan which reduced the normal retirement age from 65 to 62.

This amendment resulted in the creation of a liability for unfunded prior service cost of $2,407,000, the unpaid portion of which is included in deferred credits.

A deferred charge of the same amount was recorded to reflect the expected recovery of this amount from future customers.

During 1988, the Cooperative's board of directors passed a resolution preventing the Cooperative from affecting service rates charged to members to recover the unfunded prior service cost.

Accordingly, $2,289,000 was charged to expense as an other deduction in 1988 to reflect the elimination of this deferred charge.

(9)

Fiber Optics Venture-The Cooperative's wholly owned subsidiary, CTI, owns a 31.9% partnership interest in NorLight, a venture with three other partners to own and operate a fiber optics network in the Upper Midwest.

Prior to 1987, losses incurred by CTI (principally due to recognition of its proportionate share of NorLight losses) and payments received by the Cooperative from NorLight for use of the Cooperative's right-of-way were deferred based on a board of directors' resolution to allow recovery of such deferrals through future service rates.

As a result of a resolution adopted by its members during 1987 which effectively prohibits future service rate increases as a result of losses of CTI, the Cooperative ceased the policy of deferring CTI losses and charged all previously deferred amounts to expense.

In addition, in recognition of developments in the fiber optics industry, the carrying value of CTI's investment in NorLight was reduced to reflect CTI's proportionate interest in the estimated current value of the NorLight DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (9)

Fiber Optics Venture (continued)-

venture.

The effect of the above actions was to reduce 1987 margins by $5.6 million.

During 1988, CTI made additional capital contributions to NorLight of $1,000,000 and purchased an additional 8.1%

interest in NorLight from a former partner for $84,000.

CTI's share of NorLight losses for 1988 was approximately

$1,063,000.

During 1987, CTI made capital contributions to NorLight of $2,250,000.

In November 1987, CTI assigned its interest in NorLight to a bank as collateral securing NorLight's financing.

Based upon information currently available, the Cooperative expects to continue its involvement in the NorLight venture and to be able to recover the carrying value of its investment either through operations of NorLight or divestiture of its ownership interest.

(10) Nuclear Reactor-The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987.

The intent was to terminate operation of the reactor and a " possession only" license was obtained from the Nuclear Regulatory Commission in August 1987.

The facility is being placed in a " safe storage" status and will remain so until the year 2010 to 2014 at which time decommissioning will be completed.

All LACBWR-related property, construction work-in-progress, inventories and nuclear fuel totaling $18.4 million was transferred to a deferred charge in 1987 and is being amortized to operating expense over a ten-year period ending in 1997 with appropriate recognition in rates charged to members for electric service.

The provision for depreciation includes $2.1 million in 1988 and $1.8 million in 1987 to provide for the estimated costs of decommissioning the nuclear generating facility; however, the manner of decommissioning the facility has not been determined.

The Cooperative continues to review its decommissioning cost estimates and expects that any increases in such costs will be recovered through future rates.

The Cooperative has adopted a policy of funding decommissioning costs currently and the related invest-ments are included in investments in the consolidated balance sheets, while the decommissioning reserve of

$11.5 million is included in accumulated depreciation.. _ _... _.....

ARTHUR ANDERSEN

&GO)

Dairylanc 3ower Cooperative and Su osiciary ConsolidatedFinancial Statements as ofDecember31,1988 and 1987 Together with Auditors' Report l

ei ni i

i