ML20249A783
ML20249A783 | |
Person / Time | |
---|---|
Site: | Rancho Seco |
Issue date: | 12/31/1997 |
From: | Schori J SACRAMENTO MUNICIPAL UTILITY DISTRICT |
To: | |
References | |
NUDOCS 9806180234 | |
Download: ML20249A783 (47) | |
Text
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i A k A MESSAGE FROM SMUD'S GENERAL MANAGER n 1997 California's electric utility indu try moved toward a restructured,open market environment. i This meant that SMU1), to remain competitive.had to continue to change the way we did business. 1 lust as importantly, though, we stayed focused on our values as a municipal utility, pmviding the services - and support that our customers have come to expect. i Two historic acts crystallized our efforts to adapt to the emerging marketplace. First, we started a pilot direct access program that allows other energy providers and marketers to sell electricity to our y customers. Secondly, we began testing the waters for providing electricity to customers outside our n. service area by r,igning Raley's and the San Juan Water 1)istrict to service agreements. Iloth of these O pilot projects helped us get started in identifying the changes we need to make when and if we expand the programs. ] 1 We also initiated a reengineering process that drastically cut our order delivery time. In examining j our business pmcesses we realized the need to completely alter the way we responded to customer requests for building substations, new connections, street lights and tmuhle calls, to name a few of the areas that are affected.The results are exciting-customer order fulfillment within Distribution Services j l cut costs and turnaround times by as much as 35 percent. While all this change was going on.one important aspect of SMUD remained constant. For the seventh straight year, the SMUI) lloard of Directors a,pproved no rate increase. We also brought on-line our newest power plant, CoGen Two, at Proctor & Gamble. This is one of three cogeneration plants that we have developed since 19%. Through our economic development program we helped to attract or retain 15,000 jobs for greater Sacramento during the past two years. We also offered customers competitive rate options that could better fit their needs. A new renewable energy program called Greenergy* gives customers the opportunity to help us replace polluting fossil fuel power with cleaner resources. More than 2,000 customers signed up in the first six months of the program, helping us make a difference. Our fmancial results were very bright in 1997, with our hydmelectric facilities on the Upper American River Project saving the District $10 million in power costs compared to buying this power on the open o market. We were able to reduce expenditures in other areas as well, and made greater strides than planned in lowering our stranded investment costs. This means that we are well on our way toward making our L rate goals of maintaining steady rates through 2001, and then lowering them. Two ma.ior bond rating agencies also agreed that we are on track by upgrading our senior lien revenue bond ratings to'A." I As you hiok through this annual report, you will see that what we've done in 1997 pmves SMUD can change to stay ahead of the industry and remain faithful to our municipal values. With more changes in store,I feel confident that we will continue to meet the many needs of our customer-owners. j l i ~ JAN SCHORI GENERAL MANAGER s m j
m. m c r , y ) < m M i T ,{ 1997: AYEAR OF TRANSITION. MEETINGTHE CHALLENGES. MEETING AYEAR OF SUCCESS. THE DYNAMIC NEEDS OF CUSTOMERS. In 1997, California's electric utility industry As a municipal utility and a premier electric began the transformation into a competitive service provider in Northern California, SMUD U retail environment. SMUD is ready for the offers residential, commercial, industrial and '{ challenge. SMUD is keeping municipal values governmental customers important advantages !,i T*. in balance to maintain a strong position that in myriad ways: = y ^s Economic development rates help gives the District and its customers the a = programs and services necessary to succeed. communities grow, which spreads SMUD's For example, SMUD was the first utility in fixed costs over more customers, helping ] California to allow customers to choose their to keep rates down for all. Environmental programs respect and electricity supplier and to market " green power," demonstrating leadership once again as one conserve nuura resources while helping of America's most progressive electric providers. to clean up the air we breathe. H E S M U D'S E L E C T RIC RATES- -25 Percent ower + l THANTHOSE OF C A LIF O R NI A'S -IN V E STO R OW N E D UTILITIES- ^ Meeting the changing needs of today', TO R E DUCE T H E M EV E N F U RTH E R IN 2 002. customer-a challenge that SMUD embraced in 1997,a year of Since the first full year of operation in
- A diverse and strong portfolio of power remarkable change 1947, one thing at SMUD has remained to ensure quality and reliability, including in the electric utility mn and kw rah in M.MWs eled a green power opdon.
industry. rates - already 25
- A higher percentage of SMUD revenues D.
percent lower than are invested in renewahles research and .,. m9; m,r; I MP those of California's development - more than any of the +g e g2 i n
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Ih .k I investor-owned utilities utilities in California. [g kIf Community ownership and partnerships - have been frozen through 2001.Then, enable SMUD to work with other agencies n SMUD plans to and groups for the greater good of ( lower rates in 2002. Sacramento. W-Full range of customer services from 4 - consultation to complete customer g energy solutions. k [aa_t,,,_e_a.com,
A STRONG FINANCIAL POSITION A BRIGHT OUTLOOK SMUD is pleased to report that Standard & For the future, SMUD will steer a steady Poor's and Fitch upgraded SMUD's senior lien course of providing safe, dependable services -- ~ y.g revenue bond ratings to"A." a particularly and of staying competitive by freezing rates y notable occurrence given the uncertainties of for five years. To maintain leadership in clean, gg# deregulation. The upgrades reflect the progress energy-efficient energy sources, SM UD invests D j 3 SMUD has made toward implementing its 28 percent more than the state requires for i" Competitive Business Strategy adopted in 1997. energy-efficiency programs, renewable
- j; liigher revenues from the growing Saaamento technologies, research and development, and 4
j{ economy reduced by $39 million the amount limited income programs. To improve internal v.:n L ] f. n en ss es n Total kwh Sales 5. 4 y i L., s [,,: l (w nuunne) =1 . b Hil-h i 4 ? E. v.j k lq. 3;j vy. O si f~ h of funds needed from the rate stabilization operations, SMUD is streamlining decision-f,' h h [ fund in 1997. This will help ensure that SMUD making procedures and reengineering business 3* j} reaches the competitive rate goals set for processes. As always, SMUD supports active N NN the year 2001. community partnerships to attract new jobs a{[ and keep existing ones. And, SMUD continues s. jN to enhance delivery of customer services - from answering calls promptly to keeping d RevenuesTotals 6 ; lights turned on without interruption. am = >. t' SMUD 8997 ANNU AL REPORT
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'_ t; $ T 0 m ~ THE POWERTO COMPETE. INCREASED CHOICES IN A THE COM3tlTMENTTO SERVE. COMPETITIVE ENVIRONMENT gg The District i forging strong partnerships By offering new, exciting choices in 1997, in both the put 'ic and private sectors. SMUD expanded its efforts to keep customers' The privately wned Raley's supermarket needs the highest priority. At the same time, chain, for example signed a four-year SMUD began California's first direct-access agreement with SM:'D for power to their program to give customers the option to choose stores both within ana outside the historical an alternate energy provider. Although SMUD SMUD service area. "i a like the idea of was not mandated to allow competitors into the working with SMUD an i keeping electric historical service area, the District began direct service delivery kical." says Ed Estberg. director access in order to stay ahead of the industry. of facilities for Raley's 115 supermarkets in in 1997, SMUD customers had the option to Northern California and Northern Nevada. choose a variety of rates that met their needs: The District will provide competitively priced Greenergy* -- cleaner energy sources E"*#' ""#*'"
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"'" "E#" 'E STEPPING UPTO THE PLATE FORTHE ~ CHINET COMPANY The Chinet Company's 1 ustomer-ailored Rates .m obtain more competitive FOR COMME RCI AL C U S T O M E R S '- rates while protecting them against fluctuating P ROVID E TH F O P PO RT U NIT Y TO P A RT t C i P AT E IN prices.SMUD also RATE D E SIG NS TH AT MEET INDIVIDUAL P R E F E R E N C E S. pecwided low-cost loans and rebates, allowing the plant to lastall more efncient technologies, while sharing any savings of acquiring power Time-of-Use Rates - a way to shift electricity during the first year. "Another plus is usage to less expensive off-peak hours. the convenience of SMUD's
- Monthly Indexed Rates - a base price for a
~ g, ', consolidated billing" fixed amount of power with competitive 1.stberg says, noting that market prices for new load. eight electric service Real-Time Pricing - a base price for a fixed I bills will be whittled amount of power with competitive hourly into one. raarket prices for new load. CUSTOMER TAILORED RATES SMUD's competitive agreements include extended-term contracts, bundled services, hedging options and retention packages. Customer-tailored rates for commercial customers provide the opportunity to participate in rate designs that meet individual preferences. [4 $ MUD $997 ANNUAL REPORT i
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i f FOR A GREATER SACRAMENTO Internally, staff continually seeks out 3 When it comes to attracting new jobs to better ways to develop and market use of the 'I greater Sacramento, SMUD is an active land and facilities at Rancho Seco, SMUD's supporter of community partnerships. f or retired nuclear power plant; diversify SMUD many years now, the District has made a services; and keep the community informed BANK OF AMERICAL long term commitment to promote and of our developing policies and programs. BANKS ON SMUD. j support economic growth and diversity, job BRINGING IN MORE l retention and creation,a healthy business moved its mortsase and i e SMUD uses a multidisciplinary process that climate and a better quality of life for SMUD's equity tending proceising L coordinates the expertise and experience customers - all of which are mnsistent with center (shown below) ofits staff from a variety of areas to assist ' elsewhere, but chose to keep prudent planning for future energy needs. major companies in moving to or expanding 1,100 jobs in Sacramento. In partnership with Sacramento C,ounty operations m metropolitan Sacramento. M fact,5 MUD's economic i and other regional development agencies, From analys.is of rate options to a review of retentioa agreement is one. j SMUD works to retain local businesses, customer operations and SMUD electrical of the key reasons they recruit new ones to the area, and facilitate remain in Sacramento.*l J found alllevels of SMUD to ] be very sup9or*1ve - from j "I " "W E A R E P l. E A S E D T H A T SMUD PROVIDES US WITH economic development i ~- contract all the way to the \\ ) General Manager and the R E 5 P O N 5iV E D 15 T R I B U T 4 O N 5ERVICE.D Board of Directors. I work with a number of utilities and - MIK E B f A U D 4 N O P E R A T I O M s e* T N A G E R, POLYpt AD L A MIN AT f 1 SMUD," says Nancy Chl,the Bank's vice president of real estate procurement services. local enter prises in establishing, growing and system supp(,rt capabilities, an integrated expanding their operations. And, by increasing team approec1 has attracted j the customer base, SMUD spreads out its and retained n.ajor businesses. fixed costs over a greater number of customers, Over the last twa years alone, which helps SM UD keep its prices down. emnomic development Economic development rates, for example, activities have helped give businesses discounts on their power to secure more than when they kicate in the Sacramento area or 15,000 jobs for expand their existing operations here, greater Sacramento. SMUD is also an active participant in military base conversion and technology transfer partnerships t V i %j (7g ra $NUD 19 9 7 A N N U A L R E PO R T 1
n F [;'.\\ 3 f. ', (.) ( '. purchases. Total generation at UARP served ~p'. RELIABLE POWERTODAY . f x...,, n' AND TOMORROW the equivalent of nearly 247,000 residential 1 h .T As alwap, SA1UD is committed to generating customers in the Sacramento community. ..% 9 reliable electricity that is economical and
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has minimalimpact on the environment. WHENTHE HEAT'S ON, 4 SACRAMENTO STAYS COOL - ')\\6 Sh1Ulfs diverse resource mix includes md-In 1997, SN1UD had an average outage of '~ hydmelectric power, natural gas cogeneration. only one hour per customer per year - half the cod-effective energy efh..ciency programs, mdustry average of two hours per customer i and advanced and renewable technologies per year. In the 3weiter Ng August heat, SA1UD M.', ~. such as w. d and solar power. m responded to a retord usage of 2,442 megawatts .L .C... ~?E - l While nearly half of SN1Ulfs own power A;.l? : '.... p (hfW), breaking a high of;,392 h1W set the 'djWMN4,'. ? f. 3. -.. '.. is generated through efficient, renewable e> t. 3 cp previous August.To assure continuous system e.
- 37
- y 17 9 resources, the District also purchases power improvement and maintenance, SNIUD E*5-on the wholesa!c n arket to meet load 2-74 6.%yr_,..,4/.4 7 .W -. E 4..n invests considerable employee and financial p agf.s -.-.,_cf. requirements and to reduce costs throughout a r r resources - and a strong measure of diligence. .~ the year.
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'""" POT 0l50*'P0wer-M- ' " '" ;.,W ' Th-TO PROVIDE R E LI ABILIT Y A N D S U F FICIE N T ~ Q <e E LE CTKlC A L POWER FORALL ITS CUSTOMERS-SMUD's geothermal, TODAY A N D T O M O R R O W. wind, solar and hydro power plants (top to i bottom) supply clean, I HYDRO POWER: ABUNDANT. Staff keeps trees trimmed away from high-voltage renewable energy to NATURAL COST. EFFECTIVE. Sacramento. lines and regularly ins}wcts them, along with the ShtUlfs hydro facilities at the Upper seven million feet of cable laid during the building American River Project (UARP)in boom of the late 1960s and early 1970s. Timely + Northern California turn snow internal communications help assure that .y ina by droelectricity - a cost-resources are deployed most effectively during effective power source for sptem outages. "W tl ShlUD customers. COGENERATION PLANTS SERVE Winter storms in 1997 ,a Y produced 132 percent of SN1UD completed the final two natural gas normal runoff. Thanks to cogeneration plants at Campbell Soup and 4 UARP hydro generation, Procter & Gamble (see photo, opposite page), SNIUD saved approximately allowing the District to replace power it had M QP' j $10 million in power a -b. been buying through the open market. h 1g m ggy SMUD 19 9 7 A N N U A L R E P O RT
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i I ln initiated in 1997, allows homeowners to PLUG INTO - CLEANER AIR FOR A l SMUD*5 ELECTRIC CLEANER SACRAMENTO l purchase their own PV units and sell any TRANSPORTATION in 1997, $hlUD made it even casier for excess power back to the District. PROGRAM customers to increaw the uw of renewables. DIVERSE ENERGY-SAVING PROGRAMS Recogni. ting that fossil SMUD's green-pricing program, called fxi-burning vehicles are "E # "" " "#"" N " G ng* dves customers the opportunity ths 1:ading cause of air ' O' ON "
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to help SMUD purchase more electricity from pollution in the Sacramento Efficiency improvement Program in 1997 g g g region,SMUD has led the saved SMUD residential customers and the Greenergy customers in 1997 helped SMUD buy District 1.66 gigJwatt-hours (GWil) by thirge to PJde Electric and additional geothermal (underground sicam) put non-polluting electric providing financing for the purchase of energy resources instead of. energy from power markets vehicles (EVs) on the road efficient heat pumps, air conditioners, attic induding fossil. fuels and nudear power. eince 1990. Along with the and wall insuLion, shade screens, high-Community Solar
- allows customers to environmental benefits, performance windows and solar water heaters.
help buy photovoltaic (PV) systems for the elsctric transportation Additionally, the Commercial / industrial rooftops of con munity buildings. lly supporting offers SMUD opportunities program saved 15.89 GWil by providing rebates Community Solar,ShtVD (ustomers help to tratte new revenus ginzrtting sources in an increasingly competitive j merket.Today,in addition N E A R LV O N E-H A L F 0F 5 H U D'$ POWER to operating the largest. l :== """'" Renewable Resources businesses and govemment INCLUDING GEOTHERNAL, HY D ROE L ECT RIC WIN D to Install public elect.lc vehicla charging stations AND P H O TO VO LT A1C CELL 5, throughout the region, non-profit organizations cut their energy costs and financing for the replacement or retrofit 1 while encouraging the expansion of of inefficient lighting, IIVAC and process renewable resources, equipment with high-effkiency equipment. SMUD is also creating Through the Sacramento Shade Program, long-term strategies to provide SMUD joined with residential customers commercial and residential to plant 17,200 free shade trees. They are customers with access helping the homeowners cut down on their { to PV equipment at air conditioner usage, saving them energy [ reduced costs. The PV and money. v Pioneer 11 pilot program. Mow Down Air Ibtlution - a rebate program fi,r customers who trade in air-polluting gas mowers and purchase new electric mowers - %Iton Iturunwau (left) shps the brought in No gas-powered mowers. awgn mt, hu ceneral wwo I vi at a dwyng smtum in trent of the Arden law hfall "Ilow st'It\\ fun to Jrn and stfals gut us be wntnbutmg wward smprmwg the enwonnwnt? wn Dwnineau of hn new Ev pq }le) sMUD 19 9 7 A N N U AL R E P O RT
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r i A TURN TOWARD THE WILD SIDE
- Outdoor security lighting provides energy-The I)is;rict's Rancho $cco Recreational Area ef6cient security lights at reduced prices.
is now home to exotic animals who roam and
- Advantage llome program promotes greie freely at the Amanda Blake Memorial new homes exceeding minimum state Wildlife Refuge. More than two dozen oryx energy-ef6ciency requirements.
(an endangered species of antelope) and
- Home EnerFy Audits help customers other animals were rescued by the Performing control their energy usage.
) Animal Wclfare Society (PAWS) from the l
- Motor and pump testing, audits, process OM ONNE I
evaluation and customi7ed lighting analysis illegal underworld of exotic animal trade. SMUD RANGE Other animals sharing the refuge include an help bring down customers' operating costs. "$ MUD has provided cland, emus, ostrihes and rheas.
- Energy-tracking services give commercial a secure area for the Visitors can observe the non-natise animah customers the ability to manage energy vyx, beautiful animals j
in a near-natural environment. Plans call for costs, forecast energy budgets, verify utility we rescued from an an intern program for veterinary students bills, analy7e load pro 6les, and produce auction where they and 6 eld trips for school groups. reports and graphs. could have ended up at a hunting ranch," explains Ed Stewart, co-director of PAWS. 5HUD 8 RIN G S MORETHAN POWER TO GREATER SACRAMEHTO. "SMUD's offer presented SMUD HAS FORMED A POWERFUL PARTNERSHIP FOR educational opportunity that allows PAWS to share the animals /
- * * " " ' " " I AND 1HE Q U A LIT Y OF LIF E FOR ALLWHO LIVE HERE.
while elevating public awareness about the animals' plight in j C8Ptivity. Plus, the Other community services include
- Peak Corps program of 115,0 o residential refuge gives us a place customer and Energy Services programs and small commercial customers can help I
that's ready for other for Sacramento agencies: decrease load in case of a systemwide animals in danger." l Iducating customers in planting and electrical emergency. j i ?4 ) stewardship of shade trees. in partnership ' f' M l } ~ " >, /': - 7 with the Sacramento Tree lo mdation. .{ = Limited income and multi-family home education provides information on energy-effkies.cy measures, s I [ } 'T .jg F.3 gl3d JM SMUD is97 ANNU AL REPORT E.- kh*..
. W,"T S 7 CUSTOMER SERVICE CENTE8L ENERGY TECHNOLOGY CENTER ShtUD's new 180,000 square-foot The new I nergy & Technology Center is a Customer Service Center houses many of mini-campus of classes and workshops offering the District's customer programs under the latest on electrotechnologies, energy efficiency g one roof. The Center is an easily accessible and electrical safety for design professionals, %,y - locetion for paying bills and obtaining businesses and the general public. energy-efficiency services. The Center features a variety of interactive With the latest in energy-efficient displays and demonstrations. A favorite attraction ...p r p technology, the Customer Service Center is SMUD's E-liouse, which showcases the latest u keeps employees and visitors comfortable in energy-saving techniques and materials, 9 year-round while cutting heating, cooling including residential framing, siding, roofing and lighting expenses. and insulation. The Lilouse also includes r-1.ike everyone else in today's world, energy-efficient windows, new daylighting ShtUD customers are busy people. That's products, a ground-source heat pump, whole-m~ why the Customer Service Center lobby house fan and an interactive video center. h5 j 8 S M U D'S NEW CUSTOMEd SERVICE CENTER 15 juST ONE OFTHE MANY NE W WAYS THE DISTRICT IS PROVi ) Reducing energy costs TO R E S I D E N T I A L. C O M M E R C l A t, A N D INDUS TRI AL in a local grocery store, trimming trees away from C U S TO M E R S.
- j. power lines,cWcking a
~ homeowner) air conditioner or helping an industrial i variety of services, including SERVICE FIRST PROGRAM customer with new an ATht,information on SMUD employment At SMUD, delivering excellent service is a top technologies, SMUD employees are the vital opportunities, postage stamps, Regional priority. To provide the largest customers with link with the community. Transit passes, a pG&E payment a single point of contact for SM UD services, a 'i. /, drop, food services and even Fey Account Managers serve as liaisons with all A.
- 9.. *N an art gallery.
SMUD departments. Account executives can I tailor specialized services and are available 24 g 4. hours a day to answer questions or resolve im.. mi:D;- energy-related concerns. gr p To improve services to residential customers when they call, SMUD began a multi-year h program to meet its goal of world-class response [ . [' to customer calls. s W ,e i.. h yg f14j $ MUD 19 9 7 A N N U A L R E P O RT t a
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Fitf E.YE AR SUMM ARY (UNAUDITED) OPEPXrtNG STATISTICS (i) 1997 1996 1995 1994 1993 Customers at Year-ind. 491,646 - 4R6,146 480,303 475,090 467,177 KWil 5 ales (thousands): Sales to Customers - Residential. 3,823,697 3,851,605 3,567,584 3,680,243 3,635,715 Commercial, industrial & Other. 5,152,254 3,037,656 4,891304 4,778,413 4,812,504
- Subtotal, 8,975,951 8,889,261 8,458,888 8,459,156 8,448,219 Sales of Surplus Power / Energy liank Deposits..
206,679 335,108 151,647 12,678 335,187 Total.. 9,182,630 9,224,369 8,610,535 8,471,834 8,783,400 Revenues (thousands of dollars) Sales to Customers - Residential. $ 319,260 $ 319.604 290.896 $ 299,095 $ 294,977 Commercial, industrial & Other. 370,287 368,257 649,817 655,050 654,215 358,921 355,955 359,238
- Subtotal, 689,547 687,861 Sales of Surplus Power.
3,576 1,525 992 31 1,916 Total tiil. $ 693,123 689.386 650.809 $ 655,081 $ 656,131 Average KWil Sales per Residential Customer, 8,829 8,982 8,412 8,8 !0 8,732 A<erage Revenue per Residential KWil sold (tents). 8.35 8.30 8.15 8.13 8.11 Power Supply (Thousands of KWill liydroelectric. 2,180,302 2,557,145 3.039,067 738,745 2,162,609 Geothermal. 471,152 464,756 447,024 332,370 506,084 Cogeneration. 1,079,401 322,524 99,900 Windpower. 5,875 10,023 13,088 7,450 Photovutaic. 2,286 1,622 2,846 2,452 2,673 Gas Turbine /I uci Cells. 5,570 8,0x9 5,950 3,858 3,086 Pun.hases. 5,978,408 6,366,520 5,532,892 7,877,380 6,613,205 Net Sptem Peak Demand - I hour (KW), 2,442,000 2,392.000 2,223,000 2,044,000 2,145,000 i mployees { Permanent & Other) at Year Lnd. 2,152 2,289 2J40 2,437 2,505 FINANCIAL STATISTICS (thousands of dallars) (i) Operating Revenues. $ 714,159 - $ 670,283 613,8 % $ 644,342 $ 617.117 Operating Expenses Purchawd and Interchanged ibwer. 158,272 220,056 230,517 290,843 275,754 Operation and Maintenance.. 236,071 176,651 198,149 137,683 125,023 Depreciation and Amortization 182,226 123,786 96,773 88,339 79,875 Decomminioning. 24,003 22,421 21,649 20,426 20.088 Total Operatmg l.xpenws. 600,572 542,914 547,0M 537,291 500,740 Operating lncome.. 113,587 127,369 66,808 107,051 116,377 Other Income 45,912 31,027 39,414 52,409 50,815 locame Before Interest Charges. 159,499 158,39h 106,222 159,460 167,192 Interest Charges 159,499 I48,329 140,711 136,463 140,193 Net income (loal. 0-10,067 (34,489) $ 22,997 26,w9 Funds Available for Revenue Ibnd Debt Service. ~$ 314,473 $ 300,237 $ 264,950 $ 26s.451 $ 267,126 Revenuc ibnd Debt Service, 185,138 $ 159,611 $ 156,137 $ 159 342 $ 152,082 Revenue Bond Debt Service Coverage Ratio. 1,70. l.88 1.70 1.69 1.76 Total Allibnds Repaid. 91,735 $ 37,360 34,563 42,940 28,652 flectric Utility Plant-Net. $ 1,744,586 $ 1,653,975 $ 1,511,145 5 1,465,534 $ 1,320,270 Capitalization long term Debt, $ 2,393,7291 $ 2,403,410 $ 2,374,162 $ 2,085,773 $ 2,110.555 Customers' Equity.. l $, 219,652 $ 217,235 $ 215,720 $ 225,545 $ 214,786 i Financial information is consolidated (except the debt wrvite information1. ii Prior to the net deferral / transfer of revenues to/from the Rate Stabilrzarion fund. SNUD 19 9 7 A N N U A L R E P O R T g;
FIN ANCI Al. STATEMENTS FINANCIAL CONTENTS i REPORT OF INDEPENDENT ACCOUNTANTS Report of Independent Public AccounMnts 17 To the Board of Directors of Il4ance sheets 18 Statements of income 20 Statements of in our opinion, the accompanying consolidated balance sheets and the relatcd consolidated Cash flows 21 statements of income and of cash flows present fairly, m. all material respects, the Gnancial Notes to position of Sacramento Municipal Utility !)istrict (the I)istrict) and its component units at financial Statements 22 I)ecen ber 31,1997 and 19%, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting prinsiples. These financial statements are the responsibility of the l>istrict's management; our responsibility is to express n opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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 tbc amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the oserall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. ,4.u.a. 1N $If (c($2h W Sacramento, Cahfornia february 13,1998 h 9 e sfly $ MUD 19 9 7 A N N U A L R E P O R T m
CONSOLIDATED BALANCE SHEETS ASSETS December 31, (tlwusands o(dollarsI l997 I996 ELECTRIC UTluTY PLANT Plant in service, at original cost. 5 2,226,973 $ 1,810,462 1 css - accumulated depreciation (619,488) (542,475) Plant in service - net, 1,607,487 1,267,987 Construction work in progrew. 134,722 383,695 Investment in joint powers agencies. 2,377 2,293 lbtal electric utility plant - net..... 1,744,586 1,653,975 RESTRICTED, DE51GNATED AND TRUST FUNDS itevenue bond rewrve, ddat savice and construction funds. 306J07 367,174 Nutlear demmmWor.;ng trust fund. 125,037 118,497 !)esignatei for r.de stabili7ation fund. 134,487 155,523 l 1)edgnated for deferred compensation benefits 47,269-40,359 I)ca.lgnated for CCPA No. I 12,104 12,542 se(urities lending collateral. 76,120. _ as - current portion. (215,433) I168,148) Total restricted,designatni and trust funds. 485,891 525,947 CURRENT ASEET5 Cnh and inetments: Unraricted. 220,909 l 17,318 itestricted, designated and trust funds. 215,433 168.148 Receivables - net: Customer revenues and other. 99,364 94,118 Conservation loans due within onc > car. 10,347 11,397 Accrued interest. 12,699 6,939 Regulatory costs to be recovered within one year. 140,487 85,177 Materials and supplies, at average cost. 19,904 19,297 Prepayments. 13,946 16,776 Total current assets. 733,089 519,170 NONCURRENT ASSETS AND DEFERRED CHARGES Regulatory costs for future recovery 627,809 773,161 Advance capacity payrnents, 88,081 96,170 Unamortiicd debt issuance costs. 34,440 35,383 Conservation loans - net 71,323 76,721 Preliminary proicct studies and other. ~,685 11,366 8 liital noncurrent assets and deferred charges. 830,338 992, 38 Total assets, $3,793,904 5 3,691,893 The accompanying notes are an integral part of these financial statements. r~m til! SMUD 19 9 7 A N N U A L REPORT
CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES December 31, (tlwmamis of dollard I997 I996 CAPITALtIATIOt4 Customers' equit y; lialance,beginning of year. $ 213,360 5 203,293 Net income for the year. 10,067 Unrealized holding gains on nwestments. 6,292 3,875 Total c ustomers' equity. 219,652 217,233 1.ong-term debt. 2,395,729 2,403,410 _ Total capitalization. 2,615,381 2,620,645 CURRENT LIABILITIES AND DEFERRED CREDITS Commercial paper notes. 175,300 195DI Accounts payable 60,771 44,761 Payable for power purchases. 12,556 18,263 long term debt due within one year. 117,603 64,335 !) commissioning accrual 32,473 30,141 Accrued interest, 50,510 47,825 1 Customer deposits. 9,162 8,707 Accrued salaries and compensated absences. 19,570 17,234 llegulatory deferrals to be recognized within one year. 4,531 Scturities lending collateral. 76,120 Other. 3,471 3.015 Total current liabilities and deferred credits. 557,736 433,933 NONCURRENT LIABILITIES AND DEFERRED CEDITS !) commissioning accrual 403,638 401,091 Deferred compensation benefits. 47,269 40,359 1.nrichment facility decommissioning assessment.. 8,169 8,990 llegulatory deferrals for future revenue recognition. 134,487 155,523 Other. 27,224 31,352 Total noncurrent liabilities and deferred credits. 620,787 637,315 lotalliabilities. 1,178,523 1,071,248 e COMMITMENTS AND CONTINGENCIES (Notes 15 and Itd. Total capitalization and liabilities. 5 3,793,904 5 3.691,893 The anompanying notes are an integral part of these financial statements. 7,lf! $ fi U D 19 9 7 A N N U A L R E P O R T
CONSOLIDATED STATEMENTS OF INCOME December 31, (tlwusands ofdollars) 1997 l996 OPERATING REVENUES Residential. $ 319,260 5 319,604 Commercial and industrial. 365,832 360,938 Street lighting and other. 13,662 8,844 Rate stabilization fund transfers. 21,036 (19,103) Test power revenue. (5,631) _ Total operating revenues. 714,159 670,283 OPERATING EXPENSES Operations: Purchased power. 158,272 - 220,056 Produc tion. 52,284 37,257 Transmission and distribution.. 31,235 30,020 Administrative, general and customer. 93,145 ' 75,437 Public good. 22,894. Maintenance. 36fil3 33,937 !)cpreciation. 87,000 67,471 I)econunissioning. 24,003 22,421 Amorti7ation of regulatory deferrals-plant and other. 64,523 33.624 Amortization of segulatory deferrah-energy effkiency. 30,703 - 22,691 Total operating expenses. 600,572 542,914 Operating income. I13,587 127,369 OTHER INCOME Interest income and other. 41,113 16,858 PrRS surplus asset recognition. 4,799 14,169 Total other income. 45,912 31,027 Income before interest charges. 159,499 158,396 INTEREST CHARGES Interest on debt. 161,504 151,870 Allowance for borrowed funds used during construction. (2,005) (3,541) Total interest tharges. 159,499 148,329 NET INCOME 10.067 The accompanying notes are an integral part of these financial statements. ems I29j SMUD 19 9 7 A N N U A L REPORT
__m CONSOLIDATED STATEMENTS OF CASH FLOW December 3I, (thousar.L uf dollars) 1997 1996 CASH FLOWS FROM OPERATING ACTlYlTIES Operating intome. $ 113,587 5 127,369 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation. 87,000 67,471 Amortization of regulatory assets. 119,229 78,736 Amortization of auvance capacity. 8,089 17,586 Energy bank repayments. (545) (8,985) Rate stabilization fund (21,036) 19,103 Changes in operating asscts and liabilities: Accounts receivable. 1,202 (H27) Accounts payable and other accruals. 13,584 (19,704) Other. (8,229) 12,242 Net cash provided by operating activities 312,881 292.991 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments. (202,993) (232,223) Proceeds from investments. 140,751 155,501 Scturities lendmg collateral received. 76,120 Interest income on imestmen" 49,365 58.192 Net cash provided by/(used m) imestiny atrivities. 63,243 (18,530) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Construction expenditures. (193,614) (229.992) Energy ef6ciency program expenditures. (5,704) (29,179) Net proceeds from bond issues. 369,525 83,584 Repayment and refunding of bonds. (334,095) (38,763) Interest on long-term debt.. (142,042) (147,011) Interest on commercial paper. (4,117) (4,333) i l Other. 2,862 6,93i Net cash used in capital Gnancing activities. (307,185) (358,763) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Repayments of commercial paper. (19,821) Interest paid on commercial paper (2,957) t 2,611 ) Net cash used in noncapital Snancing attivities. (22,778) (2,611i Net increase /(decrease) in cash and cash equivalents. 46,16! (86,913) Ca h and cash equivalents at the beginning of the yeae. 349,622 436.535 1 Cash and cash equivalents at the end of the year. $ 195,783 $ 349.622 l The accompanying notes are an integral part of these Gnancial statements. 2 sMuo ever AnwuAt neront (.
~_ NOTES TO CONSOLIDATED FINANCIAL STATEMEfdTS Note 1. Organization W Hnandal Rep rting Entity. As required by generally accepted accmnting principles, these consolidated financial Organization and Exemption from income and statements i rlude the District and its component units. PropertyTaxes.The Sacramento Municipal Utility [htrict Although the omponent units are !: gally separate from the (District) was formed and operates under the $ tate at District, they ai blended into and reported as if they were California Municipal Utility District Act (Act).The Act confers part of tne District because of the extent of their operational upon the Distritt the rights and puers to fix rates and charges or financial relationships with the District. All significant l for commodities or services furnished, to incur indebtedness inter-component transactions have been eliminated and issue bonds or other obligations an 1. under certain in consolidation circumstances, to levy and collect ad *.alorem propeuy taxes. Component Units. The component units include the .t he Distnct.s power to levy property taxes is restricted by a Central Valley financing Authority (CVFA), the Sacramento the Caliform. C, constitution, Artnic Xill A, which places Cogeneration Authority (SCA), and the Sacramento Power limits on the taxing n>wer of all Caliform.a public agencies. Authority (SPA).The primary purpose of the component .I.he Distnct is cr.empt from payment of federal and state units is to finanse, construct,own and operate electric utility income taxo. and real and peramal property taxes. plants that will supply power to the District. The District's lloard of Director.,(floard) comprise the commissions that Note 2. Sunnnar/ o/f v govern the respective component unit.s operations. Separate Significant AccountingPolicies component unit ananci.a statements may be obtained fmm the District's Accounting Department. W thod of Accounting. The acceunting records of the Di trict are maintained in accordance with generally accepted Electric Utility Plant. t he District generally provides for ai counting principles for proprietary funds as prescribed depreciation on the historical cost of Plant in Service on a ov i c,c,conental Accounting Standards lloard (GASil) straight-line, service-life basis. In May 1997, the District and, where not in con 0ict with GASil pronouncements, accelerated depreciation on geother;nal, photovohaic and accounting principles prescribed by the Iinancial Accounting certain other generation facilities so that they will be fully Standards lloard 'Ihese finencial statements were prepared depreciated by December 31,2001.This change in accounting in conformity with generally accepted accounting principles estimate resulted in depreciation expense being 511.8 million and contain managements best estimates when no better more in 1997 then it would have been if the prior service information was available. The District's accounting records lives had been used. All depreciation, including depreciation generally follow the Unifarm System of Accounts for Public resulting from this change in service lives, will be fully Utilities and Licensees prescribed by the Federal Inergy recovered in rates. The average annual composite depreciation Regulatory Commission (FERC). rates for the years ended December 31,1997 ard 1996 were 4.55 percent and 3.73 percent, respectively. The cost of replacement property units are capitalized. Repair and maintenance costs are charged to expense. When the District retires porticas of its Electric Utility Plant, retirements are recmded against Accumulated Depreciation and the retired portion of Electric Utility Plant is removed from Plant in Service. The costs of removal and the related salvage value,if any, are charged or credited as appropriate to Accumulated Depredation. s""?
- 21 j SMUD 19 9 7 A N N U A L R E P O R T
NOTES TO CONSOLIDATED FINAldCIAL STATEMENTS Investment in joint Powers Agencies. Investments in sold. Premiums and discounts on investments are ammtized joint powers agencies in which the District does not have a using the effective interest method over the term of the controlling interest are accounted for under the equity respective securities. method of accounting. Prior to plant closure (see Note 9), Securities LendingTransactions. State statutes and board the District recorded its share of Central Cahfornia Power of director's policies permit the District to lend its secunties Agency No.1 (CCPA No.1) operations and maintenance to broker-dealers and other entities for collateral with a expense,indusive of amottiration, depreciation and decom-simultaneous agreement to return the collateral for the same minioning, as purthased power expense. Subsequent to securities in the future District policy requires cash collateral plant dosure, the District records its share of dosure and of 102 percent of the market value of the loaned securities. decommissioning msts as a reduction to the decommissioning Both the investments purchased with the collateral received liability. The District records its share of the Transmission and the related liability to repay the collateral are reported Agency of Northern California (TANC) debt service costs in We balance sheet. and operations and maintenance expense, inclusive of Allowance for Doubtful Accounts. The District recognizes depreciation, as wheeling expenses which are induded in an estimate of uncollectible accounts for its receivables related Transmission and Distribution Operations costs. to elytric service and conservation loans based upon its Nuclear Decommissioning Trust Fund. Contributions are historical experience with collectiom. At December 31,1997 expensed when contributed. Interest earnings on the fund and 1996, the District recorded an Allowance for Doubtful awets are recorded as interest income and are accumulated in Accounts of $2.8 million and $2.6 million, respectively, the fund. Expenditures for decommissioning activities are related to its receivables from its customers for electric and recorded as reductions to the decommissioning liability. other services. At liecember 31,1997 and 1996, the District Changes in decommissioning liability estimates, arising from also recorded an Allowance for Doubtful Accounts for its new studies or annual intiation adjustments, are remrded receivables related to energy efficiency conservation loans direttly to the liability with a corresponding adjustment to of $6.1 million and $3.5 million, respectively. the related regulatory deferral. The District expects to review Unbilled Revenues. The District records an estimate for its annual contribution rate in 1998 to ensure it will remain unbilled revenues earned from the dates the customers were fully funded (with the eueption of site restoration and fuel last billed to the end of the month.The accrual at December storage)in 2008,with the commencement of the final 31,1997 and 1996, for unbilled revenues was $36.8 million demmmissioning pro (ess, and $39.1 million, respectively. Cas5 and Cash Equivalents. Cash equivalents indude a'l Compensated Absences.The District accrues vacation debt instruments purdiased with an original maturity of leave and compensatory time carned as liabilities when the three months or less and all investments in the Local Agency benefits are carned by the employees. The District does not Investment fund (LAIF), Vista fund and various money e record sick leave or other leave as a liability until such time market mutual funds. as it is taken by the employee, since there a e no cash payments investments. All of the District's imestments have been for sick leave or other leave made when employees terminate classified as available.for. sale and are reported at fair value. or retire.The total estimated liability for vacation and other Unrealized holding gains and losses are reported as a separate compensated absences at December 31,1997 and 1996, was part of Customers' Equity. Realized gains and losses are rec- $16.5 million and $15.2 million, respectively. ogniicd in the period in which the individual securities are sMUD 19 9 7 A N N U A l. R E P O R T
pp.a., 4 ,e ,5, -4 ,a ..a ,..s. .-r s... .o s. -y 1N'1;TES.TQCONSOLl? ATE *D FINANCIAL STATEMENT 5; i Regulatory Deferrals.The floard has the authority to insurance Programs. The District and its component units establish the level of rates charged for all District services. record liabilities for unpaid claims at their present value Certain expenses and credits, normally reflected in the when they are probable of occurrence and the amount can Consolidated Statements of income as incurred, are recog-be reasonably estimated.The District records a liability for nized when included in rates and recovered from, or refunded unpaid claims associated with general and auto liability, to customers. In May 1997, the District began an accelerated based upon an estimate derived by the District's claims recovery of certain regulatory deferrals so that they will administrator, which comprises the present value of the claims P be fully amortized by December 31,2001.This change in outstanding, and includes an amount for claims incurred recovery period resulted in the amortization of regulatory but not reported based upon the District's experience,less assets being $34.0 million more than it would have been if the amount of claims and settlements paid.The liability for the prior recovery period method had been used. workers' compensation is based on the District's historical experience for outstanding and incurred but not reported Public Good. Public Good expenses are comprised of the workersNompensation claims. District's expenditures for energy efficiency programs and investments in renewable energy resources and technologies, Grants. The District receives monies from federally assisted which until May 1997 were capitalized. grant programs for its advanced and renewable technologies and electric vehicle programs. The District also receives Gains / Losses on Bond Refundings. Gains and losses m nies from federally assisted grant programs as partial resulting from bond refundings are included in 1.ong-Term reimbursements for costs it has incurred as a result of storm Debt and amortized as a part of Interest Experse, over the damages. These programs may be subject to financial and shorter of the life of the refunded debt or the new debt using cmnpliance audits, such as the Single Audit, pursuant to reg-the bonds outstanding method. ulatory requirements.The amount,if any,of expenditures Gains / Losses on Bond Defeasance. Gains and losses which may be disallowed by the granting agencies cannot be resulting from bond defeasance which were not financed determined at this time, although the District expects such with the issuance of new debt are reported as part of amounts to be immaterial.The District recorjs expenditure-Interest income and Other in the statement of income. driven grants as a reduction in Construction Work In Progress Allowance for Funds Used During Construction.The when the funds are received, pursuant to FERC guidelines. For District capitali/cs, as an additional cost of C mstruction the years ended December M.1997 and 1996, the District Work in Progress, an allowance for funds used during con-received expenditure-driven grants of $1.6 million and $2.8 struction ( AFUDC), which represents the cost of borrowed million, respectively, and pass.through grants of $0.8 million funds used for such purposet The amount capitalized is and 50.5 million, respectively, determined by a formula prescribed by FERC. The total Reclassifications. Certain amounts in the 1996 consolidated AFUDC for the years ended December 31,1997 and 1996, financial statements have been reclassified in order to conform i was approximately 6.7 percent and 6.8 percent. respectively, wah the 1997 presentation. of chgible Construction Work In Progress. sNUD 19 9 7 AN NU AL RE PO RT - y _.___.____.]
NOTES TO CONSOLIDATED FINANCIAL STAYEMENTS Note 3. Deregulation of """' '"s" ' * 'c' " "' " r '" " r*c"' "" * "" "c* expensing public good charges in the period incurred; offering the Utih.tv Industru ..I .. 2.., customers the ability to support products and programs in September 1996, the Governor signed Assembly liill 1890 that improve the emironment; accelerating the repayment ( All 1890), whi(h provides for a broad-based restructuring of outstandmg debt to minimize debt service payments by of Cahfornia's electric utility industry. In this new market, the end of the transition period; instituting a competitive generation will be competitive, but transmission and distri-transition charge for all customers; reducing discretionary bution will continue to be regulated. All 1890 mandated expenditures, and allowing an early phase-in of direct access, all investor-owned utilities to allow direct access to their for up to 100 MW of customer load. As of December 31, customers beginning in 1998, with all(ustomers participating 1997,36 MW of customer load had switched to alternative by 2003. The bill also called for the creation of a Power providers for their energy. Exchange, respon ible for managing the dispatch af Imestor-Proposed Sale of Federal Power Marketing Ow ned Utility (IOU) generation, and an Independent Syste Administrations. The federal government is attempting to Operator (150) responsible for managing the transmission reform some of the federal power marketing administrations, grid in California. Additionally,it authori/ed the recovery induding the Western Area Power Administration (Western), of certain "tramition tosts" whith would not be recovered to meet the changes of the electricity industry as it moves to through market-based revenues, a public good charge to fund an open, competitive market.The District has a contractual research and development, low income assistante and energy entitlement to -162 megawatts (MW) of totallong-term, firm effkiency programs. Although All 1890 applies primarily purchar.ed power from Western, which is approximately 20 to IOUs,it strongly encourages customer-owned utilities percent of the District's power resource portfolio. Under the to participate in the competitive framework and contains Disteict's contract, as amended, the District is entitled to certain other provisions relating to their participation. nceive power at co+ based rates through the year 2014. Customer-owned utilities selling electricity to the retail Ahhough the District has an excellent claim to preserving customers of another utility must pumit dirett access t" existing contractual rights, rates could increase as a resuh of their retail customers. the government restructuring or selling Western 'Ihe District Direct Access. In lebruary 1997, the lloard adopted the could incur additional costs of between $15.0 million and j " Competitive ilusiness $trategy", which is designed to balante 520.0 million annually if the District had to replace Western the competing goals of competitive rates and prmiding power with new power sources.The possible restructuring municipal services that District customers value. The business of Western will be monitored cicsely by the District to ensure strategy was deGned by a set of policies that were adopted its concerm are considered and its contract rights are pre-by th Itoard. The policies include taking advantage of low served. The District is nnable to predict the final outcome cost mirket surpluses of electric power; maintaining the and impact on its financial position or results of operations competitiveness of District-owned generation; freezing rates from the restructuring of power marketing administrations, at current levels through the transition period; funding public pq sMUD 4997 ANNU AL REPORT '257
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS I - Potential Effe.:ts of Restructuring. While the District Enrichment Facility Decommissioning Assessment. is actively participating in the restructuring effort of the The District has established a regulatory asset for the decon-California utility industry to protect its interests,it has tamination and decommis4oning of federal nuclear fuel tentatively chosen not to participate in the 150 at this time. enrichment facilities as a result of the 1:nergy Policy Act of The effects of electric utility industry restructuring on the 1992, which is being arnortized based on cash payments made District and other utilities are uncertain. and collected in rates through the year 2008. TANC Operations Costs. The District defers as a regulatory Note 4. Regulatory Items am, the dMmnce between its cash payments made to TANC and its share of TANC's costs of operations. This regulatory liased on regulatory actions taken by the lioard, the District asset wd. l be amortized when the District,s cash payments has recorded the following regulatory assets which will be made to TANC exceed the District's share of TANC's costs included in the rate-making process and recovered in of operations. future periods. Impairment ofInvestment in CCPA No.1 Project.The Deferred Nuclear Plant Costs.The District has established D.istrict has established a regulatory asset for the unrecovered a regulatory asset for the unrecovered debt-financed portion debt. financed portion of its investment in CCPA No. I and of abandoned nuclear plant costs (see Note 11) for rate-making the related impairment of CCPA No. I's power plant and steam purposes, which is being amortized and collected in rates field. The District is amorti7ing the regulatory asset through through the year 2001. the year 2001. Decommissioning. The District has established a regulatory The Dn.trtct's total regulatory costs for future recovery are asset for the unfunded portion of the decommissioning lia-presented below: bility which is to be collected in rates and through interest earnings on the Decommissioning Trust Fund through the December 31, year 2008. The site restoration and fuel storage liabihties are (gww,g3 perg l997 1996 to be collected in rates commencing in the year 2009 Regulatory Costs for l uture Recovery: Plant and other Energy Efficiency investment.The District def' erred Deferred nuclear plant costs. 5 243,291 5 293,627 as a regulatory asset certain energy efficiency investment l nrichment fauhty expenthtures incurred before May 1,1997. Through th.it decommissioning assessment. 11,136 11,874 date, these energy ciliciency investments were amortized and TANC operations costs. 7,384 6.668 collected in rates over the expected benefit period of impairment of investment in CCpA No. I project. 65,986 79,181 the investment, up to a maximum period of fifteen years. Total plant and other. 327,797 391.350 i ffective May 1,1997 the maximum amortization period Decommissioning. 296,353 296.694 was reduced to 56 months to coincide with the District's Energy etliciency investment. 144,146 170.294 Competithe liusiness Strategy. Total regulatory costs. 768,296 858,338 Less: regulatory costs to be retmered within one year. (140,487) (83,177) Total regulatory costs for future recovery. $ 627,809 5 773,161 liased on regulatory actions taken by the lloard, the District has recorded the following regulatory liabilities which were deferred as part of the rate-making process, and will be recognited as revenues in future period <. m lME sMUD 19 9 7 A N N U A L R E P O RT
MOYES TO CONSOLIDATED FINANCIAL STAYEMENTS Rate Stabilization Fund. The District defers revenues and Note 5. Commercial designates them to the Rate Stabilization l und which is used Paper Notes to dcfer the need for future rate increases. T he funds m. this account are recognized as revenues and the cash unrestricted As of December 31,1997 and 1996, the total principal amount upon direction from the Ibard. In 1997 the District recognized outstanding of the District's commercial paper notes (Notes) 4 $21.0 million in revenues that had been deferred into the Rate was $175.3 million and $195.1 million, respectively. lhe Stabilization Fund in prior years. In 1996 the lloard deferred effective interest rate for the Notes outstanding during the $19.1 million of revenues to the Rate Stabilization iund. years ended December 31,1997 and 199o, was approximate-California Public Employees' Retirement System (PERS) ly 3.83 percent and 3.66 percent, respectively, and the aver-Surplus Account Deferral.The District is a member of age term was 67 days and 71 days, respectively. PERS, and as such, contributes to the funds based upon a The District's authority to issue Notes is provided under rate cakulated by PERS to meet current and future retirement two separate articles of the Act. To date, the District has the obligations on behalf of the District's employees and retirees short term authority to issue $275.0 million of Notes. At bec Note 12). Due to changes in atti arial assumptions and December 31,1997, $59.6 million of Notes outstanding were higher earnings on PERS assets, the District had a PERS issued under the short-term authority and $115.7 million surplus asset account balance as of December 31,1995. In of Notes outstanding were issued under the bond authority. accordance with PERS policy, this surplus was utilized by the l he District maintains a letter cf credit in the amount of Distritt to offset current employer and employee contributions $179.6 million to support the sale of these outstanding through June 30,1997. For the years ending December 31, Notes.There has not been a term advance under the letter 1997 and 1996, the Distei<t offset $4.8 million and $14.2 of credit agreement. million of rctirement expenses, respectively. Interest Rate Swap Agreement. The District has entered The District's total regulatory deferrals for future revenue into a variable to fixed rate swap agreement with Smith recognition are presented below: llarney Capital Services, Inc., to hedge interest risk associated with the issuance of $28.9 million in Notes. The Notes were Decmber D' issued to refund Series R and S Electric Revenue bonds due (them h of lollard 1997 1996 in 1999,2000 and 2001.The initial notional amount of the Regulatory I)eferrals f or Futuie swap was $30.0 million, and will step down in conjunction Revenue Recopition: '#*#"I
- E'I#
Rate stabilintion fund. $ 134,487 155.523 PF Rhurplus aaount deferral. 4,531 n February 1,1999, to $10.0 million on February 1,2000, Total replatory liabilities. 134,487 Imou and to $0 on February 1,2001. Less: regulatory (redits to be recognized mthin one year. (4,531) ^ Total regulatory deferrals for future revenue recognition. $ 134,487 155,523 Y** sMUD $ 997 ANNU AL REPORT 17
l [ NOTES 70 CONSOLIDATED FIN ANCIAL STATEMENTS Note 6. Lorig-Term Debt The District's total long-term debt is presented below: December 31, ulwusands of dollars > 1997 l996 Electric Revenue Ik>nds: liet tric Revenue Ikinds,3.6 % 7.6 %,1998 2024. $ 2,142,830 5 2 091,675 Sulmrdinated Flettric Revenue Ikmds,8.0%,2010. 24,575 24,575 Total electric revenue honds. 2,167,405 2,116.250 CVI A Cogeneration Project Resenue Ibnds,5% 6.2%,1998 2020. 142,700 142.700 CVI A Note Payable, i1%,1998-2025. 4,%I 4.988 SCA Cogeneration Project Revenue Ibnds,5.447.0%,199x.202). 163,600 163,600 SPA Cogeneration Project Revenue Ibnds,6M46.5%,1499 2022. 152,800 152 Nou South butter Water 16trict.1990 llydmelectric Reve:nue Ibnds 6.546.85%,199f.-2002. 8,410 9.790 l Georgetown thvide Purchase Agreement,3.75%,1998 2000. 270 354 US Windpower Transmiwinn Corporation Promiwory Note,10.0%. 1,100 Grace Industries Prominory Notes,3.9% 180 Tetallong term debt outstanding. 2,640,146 2,591,762 lbnd premiums /(dncounte net. (25,161) 01,148) Gains /(lossed on tend refundmp net. (101,453) (92,869)
- Subtotal, 2,513,532 2,467,745 leu. amount due within one year.
(117,803) (64.335) Totallong term debFnonturrent portion $ 2J95,729 5 2,403,410 't he annual debt service payments for 1998 through 2002 proceeds plus an additional 50.5 million contribution by the are as follows: District and $20.4 million of llectric Revenue liond Resene l und and debt service monies applicable to the refunded (thouwndw[ dollars) Principal Interest Total previously issued bonds were used to fund the resene and 1994 5 117,803 5 150,921 5 268,724 debt service funds of the new 1997 Series 1. bonds ($12.3 1999. 78,597 146,309 224306 miUion) and to purchase United States (U.S.) government
- 2000, 99,501 140.869 240,370 2001.
104,128 136.174 240,302 securities ($245.3 million).The securities and cash were 2002. 89,429 129,289 218,718 deposited in an irrevocable trust with an escrow agent to Totah, 5 489,458 5 703,562 51,191020 provide for all remaining future debt service payments on the refunded bonds. As a result, the refunded bonds have The principal portion of long-term debt outstanding bi &feased, and the liability for these bonds has thereafter,is $2.1 billion. d frm Iq.'h Wbt. This refunding resulted k-o 1997 Electric Revenue Bonds, On July 2,1997, the in the recognition of a deferred accounting loss of $22.5 District issued $131.0 million of l'.lectric Revenue lionds, million, which is being amorti/cd over the life of the refunding 1997 - Series K-issue. The refunding reduced future aggregate debt service On July 22,1997, the Distric: also issued $243.5 milhon of pay ents by 539.7 miUion and resulted in an economic gain ilettric Revenue Refunding lionds,1997 - Series L to refund of $12.2 million, the difference between the present values $231.6 million of previously issued Revenue lionds. The net of the old and new debt service payments. yg 524 ! SMUD 19 9 7 A N N U A L REPORT
NOTES TO CONSOLIDATED FINA'NCIAL STATEME'NTS - Defeasance of Debt. In October 1997, the District defeased the price that the District would pay would be the par value a portion ofits 1992 Series C Electric Revenue 11onds having of the bonds and the swap is terminated with no cost to a principal amount of $30.0 million with an interest rate the District.The total fees received by the District from the of 5.75 percent by depositing U.S. Treasury securities in an interest rate swap and the sale of the put will be equal to the irrevocable trust with an escrow agent to provide for all coupon payments on Series K, plus 8 basis points (.08 percent). remaining future debt service payments on the defeased The combination of these financial transactions brings the bonds. Securities for the trust were purchased at a cost of District's net cost of borrowing to the PSA Index less 8 basis $29.8 million with unrestricted cash. As a result, the bonds points. The term of both the swap and the put is equal to have been !cgally defeased, and the liability for those bonds the maturity of the Series K bonds. has been removed from 1.ong-Term Dcbt.The defcasance South SutterWater District Hydroelectric Revenue resulted in an accounting gain under generally accepted Bonds. The District is obligated to purchase power from accounting principles of $0.1 million for the year ended - the South Sutter Water District project under a contract that December 31,1997.The defeasance reduced the District's has the effect of transferring substantially all of the economic aggregate debt-service payments by $49.0 million over the benefits of the project to the District and making the District next 11 yean. liable for all debt service on bonds issued by the South Sutter Interest Rate Swap Agreement. In July 1997, the District Water District to finance the construction cost of the project. l entered into a fixed to variable interest rate swap agreement The District is obligated for annual debt service payments with Goldman Sachs Capital Markets, LP. for a total notional of approximately $2.0 million without regard to the level of amount of $131.0 million, which is equivalent to the principal operation of the project. Payments for debt service under amount of the 1997 Series K bonds. Under this swap, the this agreement are reported as purchased power expense. District will pay a variable rate equivalent to the PSA Municipal Component Unit Bonds.The component units of the Index (pSA Index), published weekly by the Public Securities District have each issued bonds to finance the development, Association.The District will receive a series of payments engineering and construction of the respective cogeneration for each of the Series K maturities. In connection with the projects. These bonds are non. recourse to the District. swap, the District sold a put option to Goldman, Sachs & pr ncipal and interest associated with these bonds are paid Co. (Goldman), aho in the amount of $131.0 million.This solely from the component units' revenues and receipts put option gives Goldman the right to sell to the District the derived in connection with the operation of the cogeneration Series K bonds, or a portfolio of"AAA" rated Municipal projects. The ability of the component units to service the debt bonds sufficient to defease the Series K lunds, at some point is dependent upon the successful completion and operation in the future, in the event that Goldman exercises the right of the respective cogeneration projects (see Note 10). to sell the Series K (or other equivalent) bonds to the District, l i l l 6 MUD 8 997 ANNU AL RErORT M
[ N'NES TS'C5NSUL.1$, ATE'D FI'NANCIAL' STATENENTS l Note 7. Cash, Investinents and Securities Lending A summary of the District's cash, investments and scourities lending is presented below: December 31, (tiwusands ofdollars) 1991 l996 Cash and Cash I'quivalents Cawh.... I $ ' 51,921 '- $ 34.347 Vista fund.... 22,442. 21,508 local agency investment fund.... 100,615 1 103,156 Repurchase Agreements... 76,120.......................... U.S. Government Securities.. 6,867 :.................. Commercial paper.. 'l6,887 1 33,472 Certificates of deposit.. 26,500 -0 Ilanker's Acceptance....... '9,999.. Money market mutual ftmds.... .47,269 40:582 Guaranteed investment contracts. 37,163 - l 16.557 lbtal cash and cash equivalents.. 395.783 349.622 investments - Category 1 (lleid by the District's agent in the District's name.): U.S. government securities., 248,517 354.135 Corporate securities.. 59.990. 34.984 Commercial paper.. 26,972 24,398 Certificates of deposit... .116,959 - 38.500 llankers' acceptances. 9,774 Total Category 1 investments. 452,438 461.791 investments - Not categorized investments held by broker-dealers / agents under securities loans with cash collateral: U.S. government securities. 74,012. lbtal noncategorized investments... 74,012 -0 1btal investments. 526,450 461.791 Total cash, cash equivalents and investments.. $ 922.233 ' $ 811,413 l-Total Cash, Cash liquivalents and Investments: Revenue bond reserve, debt service and construction funds: Revenue bond reserve fund. . $ 122.859 $ 123,628 Debt service fund. 62,310 : 52,797 C\\TA bond reserve and construction funds. 27,805 - 31.825 SCA bond reserve and construction funds.... 48,169: 55,944 SPA bond reserve and construction funds... 45,164 :. 100,056 Other.. 2,924 Total revenue bond reserve, debt service and construction funds. 306,307 - 367,174 L . Nuclear decommissioning trust fund...................... 125,037 118.497 I~ Designated for rate stabilization fund.......... 134,487~ 155,523 Designated for deferred compensation benefits. - 47,269. 40.359 l - Securities tending cohateral..... .-76,120 :......... l' ' Designated for CCPA No.1. -12,104 12,542 l-Unrestricted funds. ' 220,909 117.318 Total cash, cash equivalents and investments. ~$ ' 922,233 5 811.413 h sNuo #997 ANNUAL REPORT m g,
MOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash and investments. Cash degusits are held in institutions These products which are in the form of structured notes insured by the lederal 1)eposit Insurante Corporation and, as and asset-backed seturities, derise their value from one or required by the I)istrict's bond resolutions,in a bank, savings more indices or are dependent upon cash flows from receivable and loan awxiation or trust company of the U.S.or national payments. l.AIF's (and the 1)istrict's) exposure to risk kredit, bank ing awotiation having capital stock, surplus and undivided market or legal) is not currently available. Investments in I.Alf earnings segregated of at least $10.0 million.1)eposits to the and Vista funds are not insured or collaterahied. Ilowever, extent possible are invested. In accordance with state laws due to the stringent investment polities of these funds, man-and the l>istritt's bond resolutions, the 1)istrict is authorized agement considers the risk of loss of principal to be remote. to invest in the following types of instruments: obligations Securities LendingTransactions. The I)istrict may enter which are unconditionally guaranteed by the U.S. or its into securities lending agreements, up to $75 million, only agencies or instrumentalities; direct and general obhgations with counterparties that have senior debt tredit rating of the State of California or any local distiitt within the in the"A" category or better by either Standard & Poors state; bankers' acceptances;(ertifkates of deposit; repurchase Cmporation or Moody's investors Services, at the time of agreements; reverse rerun base agreements; interest rate swap the agreement. All securities lending transactions during agreements; securities lending agreements, and corporate 1997 were collacrali/ed in the form of cash at 102 percent indebtedness, including commercial paper and medium ter of the loaned securities value. Secmities on loan at year-end notes with a maximum term of five years. Investments in are presented as unclassiGed in the preceding schedule. At torporate indebtedness must be rated "A.1"or its equivalent I)ctember 31,1997, the !)istrict had no credit risk exposure for mmmercial paper, and "A"or equivalent for mediurn to borrowers because the amounts the 1)istrict owes the term notes by a nationally retognized rating agency. The borrowers exceeds the amounts the borrowers owe the mmponent units' bond indentures allow imesting in various 1)istrict.The mntratt with the 1)istritt's custodial bank other securities in addition to the ones mentioned earher. rqmres it to indemnify the 1)istrict if the borrowers fail l he 1)istrict's custodial agent maintains remrds showing the to return the securities tand the collateral is inadequate to securities are solely owned by the 1)istritt, or by one of its replace the securities lent) or fail to pay the I)istritt for mmponent units,where applicable.The 1)istrict and its inmme distributions by the se urities' issuers while the mmponent units' deposits and investments are in ared or ,,carities were on loan. All securities loans can be terminated collateralized with sec urities held by the 1)istrict or by its on demand by either the I)istrict or the borrower, although agent,in the l>istrict's name or in the name of one of its the average term of the loans is one day. Cash milateral is mmponent units, where applicable. innued in xcordance with 1)istrict investment policies and 8 1.All is a mmponent of the Pooled Money Investment reported in the preceding schedule. Account Portfolio managed by the Treasurer for the State Repurchase Agreements. The 1)istrict occasionally enters of California.1 he 1)istrict and its component units' total into repurchase agreements. Only one transaction was entered investment in lAll at 1)ccember 31,1997 was $100.6 nullion. into during 1997 wherein bond proceeds were invested in an The Pooled Money investment Account Portfoho includes overnight repurchase agreement mliateraliicd at 102 percent approximately 3.9 percent in (crtain derivative-t) pc products. with UA Tremry bills sMUD 19 9 7 A N N U A L REPORT e
NOTES TO CONSOLIDATED FIN ANCI AL. STATEMENTS Note 8. Fair Value of '"'c"""""""'"""'""""'""'""'""' ments and related unrealized holding gains and losses are I,1110ticial histrintictifs prewnted below.. The following methods and assumptions were used to December 31,1997 estimate the fair value of rath dass of financial instruments l' realind for which it is practicable to estimate the value: llokhng Amortved Gains / Investments. The fair values of investments are based upon (t/mnwuh vt dollan) Omt Ian Wlue time) e quoted market pritet invntments: Long Term Debt. The fair value of lung /lcrm Debt (Itonds), U 8""*#"' ""' I 3'63*5 5 321529 I "'464 Girporate setuneies, 59,9M 59,990 H2 which indudes the short-teim portion, was takulated by Certifitatn of dqmsit, 116,97M 116,959 (19) determining the net preent value of future debt service g,,, ;,, ,r, 77,yg7 73,y77
- gy33, payments dixounted at the liond Ituyers' 25 year Revenue I;,tal imotmenn.
5 520.1% 5 526.4 9) 5 6,292 Itond Irdex, which was 5A0 penent at I)etember 31,1997 1.ong term debt. 5(2.513,532) 5 t 2.780,009) and 5.96 penent at December.31,1996. A similar fair value Internt rate swap '" I"' 'E""*#"' takulation was performed for the component units'ltonds cucpt that an amount ranging from 0E percent 10 0.50 penent was added to the liond lluyers' 25 year Revenue liond December 31,1996 inJex to auount for the spread at the date of bond issuante in t'nrealized tomparison to the index and the fati that the lionds are non-U"Id'"8 Amortved Gains / retourse lmnds to the District and have a rating of"Illilt." r rimuum.6 of.Wlan) Cost Iair value Ilmsesi Swap Agreement.The Series K swap and put agreements Imntments: l 6 ""'"*""' 'C' """#* 5 3'9 624 5 354 I35 5 4 533 are linked to the underlymg Seties K bonds,and effectively F Coqmrate set uritin. 33.026 31,984 (42) tonvert Series K honds from a h.ied to a floatmg interest ( crtiikatn ot delusit. 38,503 38, ion (.1) rate.'lhe f.tir market values of the swap and put together are llanken, ucptani n. 9,916 9.774 (14D equal to the differente between the f air market value and Gimmercial p.iper. R8C R398 6M9) the carrying tost of the Series K bond' Total imestments. 5 457,916 5 461.791 5 3.875 1 ong term debt. 5 (2,467,74 M $ ( 2,583,699) O VW$ {32k SMUD 19 9 7 A N N U A L R E P O R T
NOTES Tr> CONSOLIDATED FINANCIAL STATEMENTS Note 9. Investment in Joint '^ N '" "' ""'" " * * "a "r"'"""' ">'" '" "' h'" sc for ownership of 339 MW of TANC's 1,269 MW transfer Powers Avencies ...o,, capability. Additionally, the th. strict has a 46 MW share Central California Power Agency No. l.The District of TANC's 300 MW of firm, bi-directional transmission owns a 50 percent undivided interest in CCPA No.1,a joint over Paci6c Gas and Ilectric Company's (PG&E's) system powers agency, formed for the purpose of participating in between PG&E's Tesla and Midway substations. Ior years the exploration, development and production of electricity ended December 31,1997 and 1996, the Dietrict recorded e from geothermal resources in June 1996,CCPA No. I teased wheeling costs related to TANC of $9.5 million and $11.5 operati ins and placed it's power plant and steam field in a million, respectively. lay.up wndition pending a possible sale or dismantlement. Summary financialinformation for TANC as of December Summary Hnancialinformation for CCPA No. I as of 31.1997 and 1996, is presented below: December 31,1997 and 1996,is presented below: December 31, December 31 (rhaoandw/dollarn 1997 1996 e Ohousmidwfdollard 1997 1996 Total assets $ 482,797 $ 494.158 Total assets. 25,392 5 25.918 Totalliabilit:es. $ 482,301 5 493,742 lotalliabilitic. 16,322 5 16,84g fatal members' equity. 4% 416 lotal av emhen'eguity.. 9,070 9.070 Total liabilities and members' equity 5 482,797 $ 494.158 ktalliahdities and members' equity. $ 25,392 5 25.918 Net income for the sear. 17 5 31 Net income /Ilow) for the year. $ 5 (964) Transmission Agency of Northern California. The District and fourteen other California municipal utilities are members of the TANC, a joint powers agency. TANC along with nearly all Cahfornia utilities own and operate the California Oregon Transmission Project (CO fP),a 500 kilovolt transmission line between central California and southern Oregon. The District is obligated to pay approximately 27.1 percent of n $ MUD 19 9 7 A N N U A L R E P O R T
[. norES ro CoNSouDATED FINANCIAL STATEMENYS Note 10. Component Units Note 11. Rancho Seco CVFA Carson Ice-Gen Project. CVFA was formed by Nuclear Power Plant a joint powers agreement between the District and the History. Rancho Seco, a 913 MW nuclear power plant, was Sacramento Regional County Sanitation District.CVFA placed in service in 1974. In June 1989, voters rejected a wnstructed the Carson Ice-Gen project, a 99 MW natural referendum permitting continued operation of Rancho Seco gas-fired regeneration facility, which became wmmercially by the District, and as a result, the District began the process operable in October 1995 and was financed primarily by of shutting down Rancho Seco and abandoned the plant as CVFA non remurse revenue bonds. an operating nuclear generating facility. SCA Procter & Gamble Project.The Sacramento Decommissioning.The District obtained Nuclear Regulatory Municipal Utility District Financing Authority (SMUDI A) Commission (NRC) approval of its decon.missioning pbn was formed by a joint powers agreement between the District in 1995 and will be subject to continuing regulation by the and the Modesto Irrigation District. SCA was formed by the NRC until the decommissioning of Rancho Seco is complete. execution of two separate joint powers agreements between Under the approved decommissioning plan, the District will the District and SMUDFA. SCA constructed the Procter & promd with the decommissioning of Rancho Seco in two Gamble project,a 117 MW natural gas-fired cogeneration phases - a storage phase followed by a decontamination phase, facility, which became commercially operable in March 1997 During the storage phase, the plant will be maintained to and was financed primarily through SCA non-recourse the extent necessary to protect the fuel and other radioactive revenue bonds, materials. At the end of the storage phase in 2008, the plant will SPA Campbell Soup Project. SPA was formed by the exe-be decontaminated by removing all radioactive materials and curion of two separate joint powers agreements between the radioactive plant components to off site k) cations yet to be District and SMUDI A. SPA constructed the Campbell Soup determined by federal and state authorities. Decontamination project, a 159 MW natural gas-fired cogeneration facility, of the plant and its site will be completed when the remaining whi6h became commercially operable in December 1997 detectable radioactivity has been reduced below the pre-and was financed primarily through SPA non-retourse approved release criteria, at which time the Rancho Seco revenue bonds. plant will be released from regulation by the NRC. The nuclear fuel will be stored in dry canisters at a new on-site independent spent fuels storage facility (ISFSI) until it is removed by the U.S. Department of Energy (DOE) at a date yet to be determined by DOE. The ISFSI will remain under the regulation of NRC until such time as the nuclear fuel is removed by the DOE and the ISI S1 is decommissioned. m $34; sMUD 19 9 7 A N N U A L REPORT
NOTES TO CONSOLIDATED FIN ANCI AL STATEMENTS Rancho Seco is one of the first large commercial nudear Financial Effects. In November 1989, the Iloard approved power plants to be removed from service.1)ue to the sub-the recovery of $661.9 million of abandoned Rancho Seco stantial technical, regulatory and legal issun being faced in costs through future rates to be charged to customers over a connection with the decommissioning, the District cannot period of seventeen years. The floard's rate action addressed predict with certainty how long various decommissioning $499.2 million of Rancho Seco assets that had been written-off actions will take nor the eventual cost of decommissioning. and $162.7 million of unfunded decommissioning liability. These financial statements reflect the 1)istrict's current esti-several studies and updates of the cost of decommissioning s mate ofits obligation for the cost of decommissioning.The have been wnducted since 1989, which have resulted in District undertook a reevaluation of the decommissioning adjustments to the decommissioning liability in addition to approach for Rancho Sew and determined that wst savings adjustments for inflation. The 1997 study induded the effetts wuld be reali/cd by accelerating the schedule and are currently of the dry fuel storage. As a result, the District increased the 1 wmmencing some decommissioning tasks instead of in demmmissioning liability and the related regulatory asset by I 2008 as originally planned. The lloard approved this incre- $23,6 million which relates primarily to recognition of fuel mental demmmissionin8 froject in January 1997. The storage decommissioning cost to be incurred after completion District will pursue incremental decommissioning as long of primary dewmmissioning activities. At December 31, as it is economical to do so. 1997, the decommissioning liability totaled $422.0 million, which included $44.3 mJlion for minimum site restoration in 1996, the District became aware of problems with a vendor's efforts to license its dry fuel storage system with the NRC. and $21.4 million for fuel storage.The District has been The problems resulted in the vendor terminating fabrication funding the demnunissioning liability at a rate of $16.5 million activities on the dry fuel storage system in January 1997 and per year. This amount will be increased to $17.5 million per filing for bankruptcy protection. In October 1997, the vendor Y#d' i" 1998-sold its nudear fuel business to TransNudear. Negotiations for a wntract with the new owner are expected to begin in the first quarter of 1998; meanwhile, the new owner is actively pursuing resolution of the licensing problems and other NRC issues. Until a new timetable for the dry fuel storage system is developed, the impact on Rancho Seco's demmmissioning schedule cannot be accurately estimated. Ilowever, staff believes spent fuel will be in dry storage by 3 the end of 1999. e W W:p SMUD 19 9 7 A N N U A L R E P O R T 73$ j
f 5 fN$TUS.U,. CSN5hL'ISATE3 FINANCI AL STATEMENTS : ~ Note 12. Pension Plans Tbe re"'i"" be"e'i' "biisi " "*""*P"'ed a' r" f *" actuarial valuation performed as of June 30,1996 (the most l Defined Benefit Pension Pian.The Districi contributes t recent actuarial valuation). The total pension benefit obligation PERS,an agent multiple-employer public retirement system applicable to the District is presented below: that acts as a comon investment and administrative agent for participating public entities within the State of California. _ june 30,1996 The 1)istrict's payroll fc. employees covered by PERS for the (thouands ofdottars) years ended Deceinber 31,1997 and 1996 was $124.2 million Pension benefit obligation. Retirees and beneficiaries currently receiving benefits and $125.7 million, respectively. The District's total payroH and terminaad employees not yet receivmg benefits. 5 213,357 for the same period was $132.0 milliu and $132.2 million' Current employees: a respectively. Accumulated employee contributions induding allocated investment earnings. 124.865 All permanent District employees working more than twenty I mployer financed vested. 168,281 hours per week are eligible to participate in PERS. Benefits Employer financed non-vested. 3.148 vest after five years of service. Up(m retirement, participants Total pension benefit obligation. 529,651 are entitled to an annual retirement benefit, payable momhly kss-Net awts available for benefits - at cost (mar va e = 5697.3 rnWion). M33U for life,in an amount equal to a beneti factor times their Total overfunded pension benefit obligation. .5 (119.681) highest average monthly salary over any 36 consecutive months of employment. The applicable benefit factor is based on PERS uses the Emry Age Normal Actuarial Co,t Method age at retirement and years of credited service,and ranges which is a projected benefit cost method. That isJ.: takes from 1.1 percent per year of credited service for retirement into account those benefits that are expected to be earned in at age 50, to 2.4 percent per year of credited service for the foture as weil as those already accrued. According to this retirement at or efter age 63. PERS also provides death and cost method, the normal cost for an employee is the level disability benefits to cot _d employees. Benefit provisions amount which would fund the projeacd benefit if it were and all other requ'remenu ar established and governed by paid annually from date of employment until retirement. California statute, PERS uses a modification of the Entry Age Normal Actuarial The "pemion benefit obligation"is a standardiicd disclosure Cost Method in which the employer's total normal cost is measure of the present value of pension benefits, adjusted expressed as a level percentage oipayroll. PERS also uses the for the effects of projected salary inc: cases and step-rate level percentage of payroll method to amortize any unfunded benefits, estimated to be payable in the future as a result of actuarial liabilities. The significant actuarial assumptions employee service to date. The measure is intended to help used to compute the actuarially determined contribution readers of the financial statements assess,on a going-concern requirement are the same as those used to compute the pen-basis, the funding status of PERS, the progress made i" sion twnefit obligation as described above.The actuarially e accumulating suflicient assets to pay benefits when due,and assumul annual investment return was 8.5 percent. Tne make comparisons amc.:., employers. The measure is the salary scale used assumed salary increases v ried by length of acarial present value of credited projected benefits and service, and the total increase in any future year included an is independent of th' funding method used to determine e assumed inflation rate of 4.5 percent. There were no changes comributions a PERS. in the actuarial assumptions used in the valuation performed as of June 30,1996. C(msequently, there were no additional costs resulting from changes in the actuarial assumptions. SMUD 19 9 7 A N N U A L A E F O RT - k. g
1 1 ~ NOTES TO CINSOLl"ATED FINANCIAL' STATEMENTS l l The contribution to Pf.RS tor the plan year ended June 30, of some ofits employees pursuant to a memorandum of 1997, of $9.7 million was made in accordance with actuarially understanding with one of its co!!ective i;argaining units. l determined requirements computed through the actuanal District employees participating in the 401(k) Plan are j valuation performed as of June 30,1994.The contribution considered vested once enrolled and are responsible for l consisted of (a) $17.0 million normal cost (13.5 percent of determining how their funds are to be invested. The District turren* covered payroll) and (b) a credit of $7.3 million is responsible for ensuring compliance with Inter ial Revenue amortnation of the over funded actuarialliability (-5.8 percent Code requirements concerning the 401(k) Plan and not for 4 of current covered payroll). The District contributed $1.0 market variations in the 401(k) Plan asset values. Currently, million (0.8 percent of current covered payroll) and employees the District does not match any contributions. However, e contributed $8.7 million (6.9 per;ent of current covered commenchg in,999 pursuant to a collective bargaining payroll), of which $8.6 million was paid by the District on agreement, the District will match employee contributions behalf ofits employees, on a dollar for dollar basis up to a specified dollar limit for the employees covered under the particular collective Trend information provides an indication of the progress made bargaining agreement who are participating in the 401(k) in accumulating sufficient asset, to pay benefits when due. Plan. All ongoing fecs related to the 401(k) Plan are paid by Trend information for the past ten years related to the pension the District employees participating in the 401(k) Plan. The plan is presented below: 40llk) Plan is a governmental plan and is currently not Underfunded/ subject to discrimination testing or the requirements of the (Overfunded) enient income ecunty Act M NGe n yee e Net Asets as a itnsion iknefit Employer Pertentage of obhpnon as a Contributions District employers participating in the 4nM ) Phn are alkmed Years I nded Pension Iknefiq Percentage of rs a Percentage of to contribute up to 20 percent of their gross income not to June 30, Obligation (overed Pavroll (. overed Payroll I 1987 8 5. ' 37.0 20.8 benue Ne. 1988 91.9 71.7 15.2 1989 99.4 1.8 12.7 The District also offers its employees a defined contribution 1990 100.3 ( 1.2) i 1.4 pl.m created in accordance with Internal Revenue Code 1991 104.1 (14 l} 9.3 i Section 457 (457 Plan). The 457 Plan is a contributory plan 1992 103.4 (13.0) 10.2 l 1 in which the funds are primarily contributed by the Distr;ct's 1993 106.5 (26.21 8.2 employees and, by the end of the first quaner of 1998, will 1994 126.3 (109.5) 8.8 1995 124.4 (113.1) 8,1 be held by a trustee in trust for the employees uptm retirement i 1996 121b (119.7) 8.1 from District service. Subsequently, these funds will not be subject to the general claims of the District's creditors. The j Defined Contribution Plans. The District pmvides a cash District has the duty of reasonable care in the selection of deferred compensation plan pursuant to Internal Revenue investment alternatives,but neither the District nor its directors Code Section 401(L) [40llk) Plan] in which all of its chgible or officers have any liability for losses under the 457 Plan. full-time or permanent part time employees may panicipate. The District does not match employee contributions nor make Tht 401(k) Plan is a contributory plan in which the funds contributions on behalf ofits employees to the 457 Plan. are primarily contributed by the District's employees and are held by a Trustee in trust for the employees upon retirement from District service and subsequently are not subject to the general daims of the District's creditors.The District makes annual contributions to the District's 401(k) Plan on behalf sMuo t ve7 ANNUAL REPORT r
INSTE5 55 CdNSULIUATED F'INANCIAl. STATEME'N.TS Note 13. Other Post-Note 14. Insurance Programs Employment Benefits ne Di,irict ana iis componeni uniis arc exposed ie vatious ris f loss related to torts, theft of and destruction to assets, in additior so the employee pension benefits described in ermrs und omissions, and natural disasters. In addition, the Note 12,the District provides post-employment health care District is exposed to risks of loss due to injuries to, and benefits in accordance with District policy and negotiated illnesses f, its employees. The District and its component arrements with employee representation groups to all units purchase commercial insurance coverage to cover any employees who retire from the District on or after attaining claim in excess of specif c dollar thresholds,which range age 50 with at least 5 years of service The District also fr m $0.2 million to $1.0 million per claim, with additional provides post-employment health care benefits to covered excess insurance c verage for claims over $20 million for the employees who are eligible for disability retirement. Currently, c mponent un ts and $100 million for the District. As a 1,513 participants, including retirees, spouses of retirees and result, the maximum risk that the District and its component surviving spouses participate in the D: strict's health care units would be exposed to is limited to $0.2 million to $1.0 benefits program. The District contributes the full cost of milli n per claim.There have been no significant reductions coverage for employees hired before January 1,1991, and a in insurance coverages as c mpared to December 31,1996; portion of the cost based on credited years of service for and b 6e years enM Nember M, Wn and m,& employees hired after January 1,1991.The District contributes insurance policies in elkct have adaguately covered all settle-a portion of the cost for dependent coverage as well. The ments of the claims ag. inst the District and its component District records rst employment health care benefit crpense:: units. The claims liability is recorded in Other No~:"**~" on a pay-as-you-go basis. During the years ended December I.iabilities and Deferred Credits. 31,1997 and 1996, post-employment health care benefit expenditures were $2.8 million and $2.4 million, respectively. The claims liability at December 31,1997 and 1996 is The District estimates that the net present value of its post. presented below: tmployment benefit obligation was approximately $80.9 ] million and $75.8 million at December 31,1997 and 1996, Workers' compensation claims.. 5,467 6,803 respectWely. General end auto claims. 2,125 2.000 Short-and long-term disability daims 640: 700 Claims liabilitv, end of year. 8,232 5 9,503 Changes in the claims liability balance during 1997 and 19% were as follows: (thousands ofdollars) !997 l996 Clairns liability, beginning of year, ,$ f 9,503 i $ 8,048 l Add: Provisions for claims incurred in current and previous years. . 6,590 ' 6,498 l Ins: Payments on daims attributable to current and previous years, , (7,861) (5,043) Claims liabilitv, end of year. 8,232 : $ 9,503 I i E M UD 19 9 7 AN N U AL RE P O RT m
f~ NOTES TO CCNSOL'lDATED FIN'ANCIAL CTAIEMENTS Note 15. Commitments ""#'8""We'"" "'hanges. The District has the right to reduce its energy obligation with six months advance notice Swthern California Edison (Edison) Power Sale and to reduce itmp: city ohiigation with eighteen months Agreement.The District's Power Sale Agreement with advance notice. Fdimn pmvides for year round capacity of 200 MW and Calpine Corporation (Calpine) Steam Sales Agreement. addm.unal capacity of 200 MW in certam months through 1he District has entered into a steam sales agreement with j December 1999. Itased on the minimum amount of capacity Calpine to purchase stea:n for the District's geothermal I the District is required to purchase under the Edison Power unit, SMUDGI O#1. The District's minimum obligation is Sale Agreement, the Distnct will pay Edium $53.6 million for for the purchase of the amount of steam necessary to run capacity over the remaining hfe of the agreement. Additionally, 9 SMUDCLost at 39 MW. The District has the right to the District will pay for any energy received at rates specified terminate the contract upon 180 d notice, should Calpine , the contract. m fail to meet its steam delivery obligations which are necessary P:cificorp (PAC) Power Sale Agreement. The District to operate SMUDGEOsI at 39 MW. Ilased on the terms has entered into a seria of agreements with PAC providing of this contract, the District's minimum obligation is for the purcha.=e by the District of 100 MW of firm power approximately $13.3 million. through 2015.The District has a minimum annual take-or-pay Altaerta Natural Gas and Pacific GasTransport Capacity wmmitment for this energy of.approximately $5.6 million Agreement. The District has entered into a contract with through the term of the agreement. Alberta Natural Gas and Pacific Gas Transport to reserve Public Utility District No, I of Snohomish County c pacity of 12,101 million Dekatherms (Dths) per day, over (Snohomish) Power Sale Agreement. The District has a 30 year period,on a new interstate natural gas pipeline agreed to purchase up to.6 MW from a wombfired cogen-fmm the Canadian border to the Califirnia/ Oregon border. cration plant built by Snohomish and Scott Paper Company. The District is obligated to make capacity payments of 1he District provides Snohomish energy during the winter appmximately $1.8 million per year through 2023. These months when Snohomish needs the energy,and in return capacity payments are reduced by sales of available capacity the District can schedule up to 42 MW in the summer to other agencies under this agreement. l months when the District needs the energy to meet its load The District's total purchased power, steam and gas purchases requirements. Pn.ces for capacity and energy are fixed, and and transpouation commitments for the years 1998 through i the minimum annual capacity factor is 60 percent. The 2002 are $95.0 million. 546.3 million, $18.8 million. $19.0 District will pay Snohom,sh a minimum of approximately i million and $19.1 million, respectively. i $105.0 million through September 2007. l Penhde McMm@ed ca# cyn-Western Area Power Administration Power Safe ditures (excluding AFUDC) for 1998 total $100.8 million. Agreement.The District has a long-term contract with Approximately $19.7 million is for power supply projects, ' Western that allows the District to purchase 361 MW of $33.1 million is for transmission and distribution proiccts capacity and associated energy from the Central Valicy and the remaining $48.0 million is for other construction. i Pro;.cct (CVP). In addition to the long-term capacity, the liudgeted capital expenditures for component units for 1998 District also has access to an additional 100 MW during June, total $0.9 million. July,and August.The total minimum obligation under this contract is approximately $40.2 saillion for capacity and sM UD 1997 A N N U AL R E P o RT _x_
- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
""*c'r""""*"'*'"'"""""""'s*""* Note 16. Contingencies oppose any action by the !!ureau to recover its purported Environmental Matters. The District is one of many billing deficit from the District. Further, management beheves potentia:ly responsible parties that has been named in a the ultimate outcorne of the matter will not resuh ici a material number of actions relating to environmental daims and/or settlement or liability due to the ILreau and accordingly, no wmplaints. Due to the nature of these claims, legal actions hability has been recorded. or complaints, the District is unable to predist the range of Other Matters. In the normal operation of business, the costs for resolution of the e actions and intends to do all a District is party to various claims, legal actions and complaints. things necessary to defend its position. The District does not Management and the District's legal counsel are of the opinion beheve that the outcome of any of these environmental that there are no other materialloss contingencies that would ( actions will base a material adverse impact on the District have a material adverse impac: on the financial position of 6nancial position or rcsults of operations. the District, except as disclosed within the footnotes to these U.S. Bureau of ReciamationWater Service Contract financial statements. Billing Dispute. The District entered into a 40-year water service contract with the U.S. Itureau o' Reclamation (l'tureau), which expires in 2012, for the delivery of up to 75,000 acre-feet of water per year to meet the Di trict's iceds at Rancho Seco. This amount includes 60,000 acre-feet of municipal and industrial (M&I) water from CVP. Over time,ilureau revenues have been insufficient to cover actual CVP operations and maintenance (O&M) costs; contractor paymenn have been insuf6cient to cover amortization of theiz respective shares of CVP capital cost.,nd,in the case of M&l contractors, have been insuffident to cover interest on unpaid capital. Although the District's contract contains a specific rate methodology, the llureau now maintains that the District and other M&l contractors are running substantial O&M deficits which, by the !!ureau's dc6nition, includes as O&M costs, both unpaid interest on capital and interest on the O&M de6 cit. The liureau claims interest charges on these i unpaid capitalinterest and O&M de6cits. As a r
- t, the llureau's '997 Rate 11ook (the most recent information published at this writing) lists a deficit of approximately 59.5 million for the District. Since this figure is based on financial data from Oscal year 1995, the actual de6 cit claimed f
by the llureau wili be somewhat larger. Management believes the District complied fully with the terms and conditions of its contract, which contains specific rate methodology for 1 (4)e sMUD 19 9 7 A N N U A L R E P O RT
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