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{{Adams
#REDIRECT [[GO2-08-005, 2007 Annual Financial Report]]
| number = ML080240242
| issue date = 01/10/2008
| title = Columbia - 2007 Annual Financial Report
| author name = Cullen G V
| author affiliation = Energy Northwest
| addressee name =
| addressee affiliation = NRC/Document Control Desk, NRC/NRR
| docket = 05000397
| license number =
| contact person =
| case reference number = GO2-08-005
| document type = Annual Report, Letter
| page count = 72
}}
 
=Text=
{{#Wiki_filter:ENERGY NORTHWEST Gregory V. Cullen Manager, Regulatory Programs P.O. Box 968, Mail Drop PE20 Richland, WA 99352-0968 Ph. 509-377-6105 F. 509-377-4317 gvcullen@energy-northwest.com January 10, 2008 G02-08-005 10 CFR 50.71(b)U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555-0001
 
==Subject:==
COLUMBIA GENERATING STATION, DOCKET 50-397 2007 ANNUAL FINANCIAL REPORT
 
==Dear Sir or Madam:==
In accordance with 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2007 Annual Report for the subject facility.There are no commitments being made to the NRC by this letter. Should you have any questions, please contact DW Gregoire at (509) 377-8616.Respectfully, GV Cullen Manager, Regulatory Programs
 
==Enclosure:==
 
As stated cc: EE Collins -NRC RIV w/o CF Lyon -NRC -NRR w/o NRC Sr. Resident Inspector
-988C w/o RN Sherman -BPA/1 399 w/o WA Horin -Winston & Strawn w/o ApAicq ENERGY NORTHWEST 20S7 ANN AL REPOR OUR VSIO Th reins preferre sorc fo energ soutos.OUR M SSO Prvie resonsbl and cos-efetv energ souin fo th regions ratpaer.,
CONTENTS i A Message From Our Executive Board Chairman and CEO 3 50 YEARS SERVING PUBLIC POWER 4 Generating Resources io Energy/Business Services 16 Commitment to Our Community 17 Environmental Management System 18 Looking Ahead 20 50 Years in Review 23 FINANCIAL DATA AND INFORMATION 24 Management Report on Responsibility for Financial Reporting 24 Audit, Legal and Finance Committee Chairman's Letter 25 Report of Independent Auditors 26 Energy Northwest Management's Discussion and Analysis 38 Balance Sheets 40 Statements of Operations and Fund Equity 41 Statements of Cash Flows 43 Notes to Financial Statements 64 Current Debt Ratings I
 
Dan Gunkel Larry Kenney Tom Casey, Vice Chairman Kathy Vaughn, Assistant Secretary EXECUTIVE Sid Morrison, Chairman Dave Remington, Secretary BOA RD Edward (Ted) Coates Bill Gordon JackJanda Tim Sheldon Not pictured -K.C. Golden (left to right)
Aler .Moncr Vic Prsdet Coprt Sevcs/eea Counel/hie Fiaca Officer EXEC TIV Sct W. Oxnfd Vic Presden , IPAssgmn Joseph V. (Vc ParsCifExctv fie MANAGEMENT Jac Baer Vic PrsdnEeg/uiesSrie Chery W ito b Vic Prsdet Oraiatoa Pefrac and*.* --.~. Stafn/he Knweg Officer Dale* 3 Atisn iePeietaula eeain he ula fie (lf to right 50 Yer Sevn Puli Power anuar 31 207 make th 50t aniesayo Washinto Sat Cosrvto an Deeomn Wehvebe Enrg Notws.net5er and As~~~~~~~~~~~~~~~~~~S we ceertS0Yý1sO'slvcew
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'a ri PUD will upgrade the Nine Canyon elec-kstructure to support the Phase III intercon-the Bonneville Power Administration's grid.-it schedule has the new turbines generating ,wable power for the region by spring 2oo8.iases I and 11, the expansion is financed with bonds.l igOneofth e larg(
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I" I Th Puli Po e Moem n ha it ad6n in th 1920s Pubi Utilty istictswer cratedto rovde rliale nd lw cst owe fo h gro in stt .-6 6 6 6 ~
* 6 6 6 Th loia exeso wa t 6 for a join agnc tobuldan oer 5 0 ~~ at elcria geeatn failtis Poe wa to 6epovdda the*6 cos of prdcin totertpyr ftepriiaigpbi utltis Suhajitoeaigaecyw satoie6n rae onJnay3,150 h ahngo ulcPwrSpl ytm nowEnrgyNothwst Th1is97s@sheSI~lýSIICIIwst Of the five nuclear projects started, only one -WNP-2 -\ýould ever be completed.
The other pl a nts were even- so MESON MENEM MmM:M tually mothballed and terminated.
The ON :: H H H ME SOMME:: MMMM:: MZMMMCM :: M:MMmM end of'thc Cold War brought a SUdden on so so on ME no on MEMMEM MEN MENEM SEEN MESON reduction in the need for Plutonium f'()l defense purposes.
In Febl'Ual) 1988, the N-Reaclor
\%as closed fffl- good.For the organization as a whole, the establishirient of Core ValUeS -Teamwork, Excellence, Accountability, and MUtual TrUSt through Open and" onest Communications
-led to rising standards of'professionalism and higher 19 9 0 S levels ofachievement.
A gro\k ingregional econorny and widespread concern for the environment led SLIP].-)Iy SýStCnl leaders to investigate and propose new projects to ineet the needs of merriber Utilities.
The first pUblic power wind project in the region -the Nine Canyon Wind Project -was dedicated in October 2002.White BIL]Ifs Solar Station came next, With 242 photovoltaic panels, it was dedicated in May 2002. In keeping with 2 0 0 0 s the commitment to responsible steNý-ardship, Energy Northwest has adopted an Environmental Management System that has been certified as meeting the stringent standards of'ISO 14001:200,1.
5 0 Y E ARS SERVING PUBLIC POWER 2007
 
F-inancia Data and Information Management Report on Responsibility for Financial Reporting The management of Energy Northwest is responsible for preparing the accompanying financial statements and for their integrity.
The statements were prepared in accordance with generally accepted accounting princi-ples applied on a consistent basis, and include amounts that are based on management's best estimates and judgments.
The financial statements have been audited by PricewaterhouseCoopers LLP, Energy Northwest's inde-pendent accountants.
Management has made available to PricewaterhouseCoopers LLP all financial records and related data, and believes that all representations made to PricewaterhouseCoopers LLP during its audit were valid and appropriate.
Management has established and maintains internal control procedures that provide reasonable assurance as to the integrity and reliability of the finan-cial statements, the protection of assets from unauthor-ized use or disposition, and the prevention and detec-tion of fraudulent financial reporting.
These control procedures provide appropriate division of respon-sibility and are documented by written policies and procedures.
Energy Northwest maintains an ongoing internal auditing program that provides for independent assess-ment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, PricewaterhouseCoopers LLP has considered the internal control structure in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements.
Management has considered recommendations made by the internal auditor and PricewaterhouseCoopers LLP concerning the control procedures and has taken appropriate action to respond to the recommendations.
Management believes that, as of June 30, 2007, internal control proce-dures are adequate.J.V. Parrish CHIEF EXECUTIVE OFFICER A.E. Mouncer VICE PRESIDENT, CORPORATE SERVICES/GENERAL COUNSEL/CFO Audit, Legal and Finance Committee Chairman's Letter The Executive Board's Audit, Legal and Finance Committee is composed of six independent direc-tors. Members of the Committee are Chairman Larry Kenney, K.C. Golden, Bill Gordon, Jack Janda, Dave Remington, Kathy Vaughn and Sid Morrison, Ex Officio.The Committee held ii meetings during the fiscal year ended June 30, 2007.The Committee oversees Energy Northwest's financial reporting process on behalf of the Executive Board. In fulfilling its responsibilities, the Committee discussed with, the internal auditor and the indepen-dent accountants, the overall scope and specific plans for their respective audits, and reviewed Energy North-west's financial statements and the adequacy of Energy Northwest's internal controls.The Committee met regularly with Energy North-west's internal auditor and independent accountants to discuss the results of their examinations, their evalu-ations of Energy Northwest's internal controls, and the overall quality of Energy Northwest's financial reporting.
The meetings were designed to facilitate any private communications with the Committee desired by the internal auditor or independent accountants.
Larry Kenney CHAIRMAN, AUDIT LEGAL AND FINANCE COMMITTEE I Financial Data and Information Report of Independent Auditors To the Executive Board of Energy Northwest We have audited the accompanying balance sheet of Energy Northwest and the related individual balance sheets of Energy Northwest's business units and internal service fund as of June 30, 2007, and the related statements of operations and fund equity and of cash flows for the year then ended. Energy Northwest's busi-ness units include the Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No. i, Nuclear Project No. 3, the Business Development Fund, and the Nine Canyon Wind Project. These basic financial statements are the responsibility of Energy Northwest's management.
Our responsibility is to express an opinion on these basic financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement.
An audit includes exam-ining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements.
An audit also includes assessing the accounting principles Portland, Oregon September 24, 2007 used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a rea-sonable basis for our opinions.In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Energy Northwest and Energy Northwest's business units and internal service fund at June 30, 2007, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.The Management's Discussion and Analysis listed in the table of contents is not a required part of the basic financial statements but-is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of manage-ment, regarding the methods of measurement and pre-sentation of the required supplementary information.
However, we did not audit the information and express no opinion on it.-7 Energy Northwest 2007 Annual Report Energy [Discussi(Jorthwest Mana)n and Analysis gement's F nergy Northxaest is a municipal corporation and joint operating agency (r 1 .- .IrTAT I
* 1- 1 T- IT .11 T
* T T J.,.-AU1 LI -i VvdasIII116LUII. Ellergy NnI UIIIL financed and accounted for separately from all other current or future I I business assets. The following discussion and analysis is organized by Business Unit. The management discussion and analysis of the financial performance and activity is provided as an introduction and to aid in com-paring the basic financial statements for the Fiscal Year (FY) ended June 30, 2007, with the basic financial statements for the FY ended June 30, 2oo6.Energy Northwest has adopted accounting policies and principles that are in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. Energy Northwest's records are maintained as prescribed Dy tne UovernmentaI Accounting btanaaras tioara kGASB)I I and, when not in conflict with GASB pronouncements, accounting prin-I ciples prescribed by the Financial Accounting Standards Board (FASB).(SEE NOTE B TO THE FINANCIAL STATEMENTS).
Because each Business Unit is financed and Operations and Fund Equity, the Statements of accounted for separately, the following section Cash Flows for each of the Business Units and I !on financial performance is discussed by Notes to Financial Statements.
Business Unit to aid in analysis of assessing the The Balance Sheets present the financial financial position of each individual Business position of each Business Unit on an accrual Unit. For comparative purposes only, the table basis. The Balance Sheets report financial infor-on the following page represents a memorandum mation about construction work in progress, the total only for Energy Northwest, as a whole, amount of resources and obligations, restricted for FY 2007 and FY 2006 in accordance with GASB No. 34, "Basic Financial Statements-and ,I Management's Discussion and Analysis-for State and Local Governments!" The financial statements for Energy North-west include the Balance Sheets, Statements of accounts and duei to/from balances (see Note B to the Financial Statements) for each Business Unit. !The Statements of Operations and Fund I Equity provide financial information relating to all expenses, revenues and equity that reflect the Financial Data and Information results of each Business Unit ahid its related activ- statements.
This includ~s, but is not limited to;ities over the course of the Fiscal Year. The finan- Schedule of Outstanding Long-Term Debt and IJ cial information provided aids in benchmarking Debt Service Requirements (see Note E -Long-I.activities, conducting comparisons to evaluate Term Debt), accounting policies, significant progress, and determining whIether the Business balances and activities, Imaterial risks, commit-~I Unit has successfully recovered its costs. ments and obligations and subsequent events, if The Statements of Cash Flows reflect cash applicable.
receipts and disbursements and net changes The basic financial statements of each Busi-resulting-from-operating,-financing-and-invest.---ness-Unit.should-be-used.individually-along-with ment activities.
The statements provide insight the notes to the financial statements and the into what generates cash, where the cash comes management discussion land analysis to provide from, and purpose of cash actility.
an overview of Energy Northwest's financial The Notes to Financial Statements present performance.
Questions!
concerning any of the I I disclosures that contribute to the understanding information provided in this report should be of the material presented in the financial addressed to Energy Northwest at PO Box 968, Richland, WA, 99352.COMBINED FINANCIAL INFORMATION June 30, 2007 and 2006 (000's)2006 2007 Change Assets Net Plant $ 1,524,835
$ 1,512,222
$ (12,613)Nuclear Fuel 190,483 235,742 45,259 Current and Restricted Assets 439,728 497,562 57,834 Long-term Receivables and Deferred Charges 4,434,978 4,517,173 82,195 TOTAL ASSETS $ 6,590,024
$ 6,762,699
$ 172,675 i Fund Equity (29):$ (7,667): $ (7,638)Long-Term Debt $ 6,240,866
:$ 6,379,097
$ 138,231 Restricted and Non-current Liabilities 262,620 274,625 12,005 Current Liabilities 85,118 113,504 28,386 Deferred Credits 1,449 3,140 1,691!TOTAL EQUITY AND LIABILITIES 6,590,024 6,762,699 172,675 Operating Revenues $ 413,919 $ 452,402 $ 38,483 Operating Expenses 300,582 355,675 55,093 Net Operating Revenues $ 113,337 $ 96,727 $ (16,610)Other Income and Expense (120,202):
(105,136) i 15,066 Distribution and Contributions 1,384 771 (613)Beginning Fund Equity 5,452 (29):: (5,481)ENDING FUND EQUITY $ (29)1 $ (7,667)1$
(7,638), E Energy Northwest 1 2007 Annual Report COLUMBIA GENERATING STATION The Columbia Generating Station (Columbia) is owned by Energy Northwest and its Participants and operated by Energy Northwest.
The Plant 8,017 is a 1,157 megawatt electric (MWe, Design Electric Rating, net) boiling water nuclear power station located on the Department of Energy's 9,636-,-(D.OE)_HanfordR~seryation-nor~th-of-Richland,-
Washington.
Columbia ac ieved a record run for genera-tion which ended in FY 2007. The record genera-92tion run began on July 2, 2005, ending October 31, 2006, resulting in a continuous daily record run of 486 days.Columbia produced 8,017 gigawatt-hours (GWh) of electric~ity in FY 2007, as compared-to 9,636 GWh of~electricity in FY 2oo6, which included economic dispatch of 33 GWh and loi GWh respectively}
Columbia successfully com-pleted its two-year refueling and maintenance I outage (R-18) in June of 2007, in 44 days with costs totaling $12o.o million. Generation was less in FY 2007 asl compared to FY 2006, due to R-18, three forced outages (November 2006, April 2007 and June 2007) and the effects of the entire FY 2006 being included in the record generation run discussed previously.
Columbia's performance is measured in sev-...... ... eral ways, including cost of power at Columbia.The cost of powei for FY 2007 was 3.69 cents per kilowatt-hour i(kWh) as compared with 2.12 cents per kWh in !FY 2006. The industry cost of power fluctuates year to year depending on var-ious factors such as refueling outages and other planned activities.
R-18 was the major driver for 7 Y 26 FY 25 F 2 F 2 the increased cost of power as compared with FY 2006.Financial Data and Information Balance Sheet Analysis million which were related to R-i8 and budgeted The net decrease to Plantl in Service and maintenance items.Construction Work In Progress (CWIP) from Deferred charges increased
$27.5 million FY 2006 to FY 2007 (excluding nuclear fuel) was in 2007 from $667.0 million to $694.5 million.$18.6 million. The additions to Plant/cwIP of $53.5 Costs in Excess of Billings increased
$27.9 million million were offset by an increase to Accumulated which was offset slightly, by a decrease to unam-Depreciation of $72.1 million resulting in the net ortized debt expense of $0.4 million. The increase decrease to Plant of $18.6 million. The majority of to Costs in Excess was due to refunding current additions-to-plant.for-FY-2o0o.
resulted-from-the-maturities-while-extending-the-overall-maturi_
work performed up to and during R-18. Seven major ties on the refunding debt. In addition, the accu-projects (Feedwater Heaters! Digital Electro- mulated decommissioning and site restoration Hydraulic (DEH) upgrade, Reactor Recirculation accrued costs are not currently billed to Bonnev-Motor Refurbishment, Condensate Valve work, ille Power Administration (BPA). BPA holds and Control Rod Blade Replacement, Radiation manages a trust fund for! the purpose of funding Monitor Replacement, and High Pressure Core decommissioning and site restoration (see Note B Spray (HPCS) Pump Refurbishment/Replacement) to the Financial Statements, Decommissioning resulted in 71 percent of the additions to plant. and Site Restoration").
The balances in these Nuclear fuel, net of accumulated amorti- external trust funds are not reflected on Energy zation, increased
$45.3 million from FY 2006 Northwest's Balance Sheet.to $235.7 million for FY 20071 During FY 2007, Long-Term Debt increased
$42.6 million in Columbia purchased
$69.1 millIion of nuclear fuel, FY 2007 from $2.35 billion to $2.39 billion, which which completed the planned 1purchases for R-19 was a result of the FY 200,7 Bond Issue. In FY 2007, and R-2o. The increase to nuclear fuel was offset new debt was issued for, various Columbia con-by current year amortization of $23.8 million.The Restricted Assets Special Funds decreased
$41.3 million from IFY 2006 levels to$63.4 million in FY 2007. Construction Fund spending and the completion of the planned fuel purchases for R-i 9 and R-2o Contributed to the decrease.The Debt Service Funds increased
$6.8 mil-lion in FY 2007 to $54.3 million. The increase was created from funding increases in FY 2007 due to borrowing activities.
I Long-term receivables remained relatively stable, increasing from $0.4 million in FY 2006 to $1.1 million in FY 2007. The slight increase was I struction projects, as well as for part of the Debt Optimization Program (see Note E to the Finan-cial Statements).
I Through June 30, 2 oo6, Energy Northwest was being paid by the lParticipants for Net Bill-ings. The payments were based on a percentage of ownership in ColumbIia and Nuclear Projects No. i and 3 and reflected budgeted costs for oper-ations of the fiscal year.I Beginning in FY 2007, Energy Northwest began billing Bonneville Power Administration on a monthly basis for estimated expenses, not to exceed the approved budget, I..instead of billing and receiving the participants' legal obligations.
The chlange in billing arrange-due to a change in estimate resulting from R-18 activity.
Current assets increased
$44.1 million in FY 2007 to $175.4 million. The majority of the increase was due to $26.7 million of reimburse-ments of operations using the' direct pay billing and increases to materials anld supplies of $17.4 ment does not impact the Net Billing Agreements for Columbia and Nuclear Projects No. i and 3.Energy Northwest 12007 Annual Report Statement of Operations Analysis Columbia is a net-billed Project. Energy Northwest recognizes revenues equal to expense for each period on net-billed projects.
No net revenue or loss is recognized and no equity is accumulated.
Operating expenses increased
$53.7 mil-lion from FY 2oo6 to $335.2 million mostly due to the effect of R-18 completed in FY 2007, with operations and maintenance increasing
$66.2 million from FY 2oo6. There were decreases in fuel and fuel disposal of $14.o million and genera-tion taxes of $0.5 million which were related to the decreased generation for FY 2007. There were other nominal increases of $2.0 million relating to general operations and depreciation.
Other Income and Expenses decreased
$14.6 million from FY 2006 to $ioi.8 million in FY 2007.The majority of the overall decrease was due to increases in net revenues from a building sale of $5.5 million and loaned fuel revenue of $6.9 million combined with a decrease of $6.5 mil-lion relating to the net effects of Columbia Debt activity (see Note E to the Financial Statements).
A slight decrease in interest earnings of $1.2 mil-lion and Columbia general services and sales activity decreases of $3.1 million accounted for the remainder of the changes. The loaned fuel agreement associated with the FY 2007 revenue was completed in FY 2007. A new fuel lease agree-ment is in effect through FY 2009, which provides for an exchange of uranium oxide (u 3 o 8) for an equivalent amount of uranium hexafluoride (UF 6)plus the cash value of conversion services.Columbia total revenue increased from$397.9 million in FY 2006 to $437.0 million in FY 2007. The increase of $39.1 million is due to the increased costs incurred for R-18 and the related effect of the net billing agreements on total revenue.Financial Data and Information PACKWOOD LAKE 1 -HYDROELECTRIC PROJECTR...................................................................
! ........................................
o f The Packwood Lake Hydroelectric Project (Packwood) is owned and operated by Energy Northwest.
Packwood consists of a dam at S Packwood Lake and a powerhouse 18oo feet below the dam that is located sIouth of Packwood, 8 Washington._Packwood-produced_97.8oG.W.h-of electricity in FY 2007 versus 85.22 GWh in FY 2006. Due to good wateri conditions and a 88.31 successful outage, Packwood experienced its highest generation levels in last five years, 90.10 which were 6.3 percent above t;he 30-year average of 92 GWh. Water conditions reflected the oppo-19 site scenario that was prevalent in FY 2006 when generation was impacted due to the Northwest drought situation, resulting in the lowest genera- -tion on record for July and August, 2005. In November 2006, Lewis County was declared a disaster area because of torrential rain and flooding.
During this event a large slide occurred P L goe t Pj adjacent to the Packwood underground pipeline.
C o Energy Northwest submitted a Public Assistance Grant" request to the Washington State Military Department (Emergency Management Division)and Federal Emergency Management Agency 2.20 (FEMA) for financial aid to stabilize and repair the slide area. The acceptan.ce of the grant is pending; preliminary estimates of repair are $1.7 million. I Packwood's performance is measured in several ways, including cost of!power.
The cost of power for FY 2007 was $1.31 cents/kWh as com-pared to $i.61 cents/kWh in FY 2006. The cost of power fluctuates year to year depending on various factors such as outa maintenance and Y 207 FY. ,, Y , F00 other operating activities.
Th'e FY 2007 cost of 7 power decrease was due to a 6.3 percent higher than anticipated generation increase and lower operations and maintenance costs due to under running the outage budget.Energy Northwest 2007 Annual Report Balance Sheet Analysis Total Assets increased
$1.4 million from FY 2006, with $1.o million of the increase due to costs incurred and capitalized for the relicensing effort.There were no significant changes to current liabilities other than a decrease in Revenue Bonds Payable of $0.7 million and the related increase in Deferred Credits of $1.7 million due to opera-tions, relicensing and bond retirements.
No new debt was issued and the total debt continues to decrease per the current debt schedules.
Similar to the previous fiscal year, there was no excess funding accrued in FY 2007. Participants have agreed to retain all excess within the Packwood business unit for relicensing efforts.Packwood has incurred $2.4 million in reli-censing costs through FY 2007. These costs are shown as Deferred Charges on the Balance Sheet.The FY 2008 projections call for an additional
$0.7 million in costs to continue the relicensing efforts. The Federal Regulatory Commission (FERC) issued a fifty-year operating license to Packwood on March i, 196o. The current license will expire on February 28, 2010.Statement of Operations Analysis The agreement with Project Participants (see Note A to the Financial Statements) obligates them to pay annual costs and to receive excess revenues.
Accordingly, Energy Northwest recog-nizes revenues equal to expenses for each period.No net revenue or loss is recognized and no equity is accumulated.
Operating expenses decreased
$4 3 k in FY 2007 due to a decrease in purchased power costs of $16 5 k which was slightly offset by an increase to operations and maintenance expense of $121k.Packwood is obligated to supply a speci-fied amount of power. If power production from Packwood does not supply the required amount of power, the shortfall is provided by purchasing power on the open market. The decrease in FY 2007 expenses reflects the change in water conditions from FY 2006. Conversely, if there is excess capacity per the power sales agreement with Benton and Franklin PUDs, Energy North-west sells the excess on the open market for addi-tional revenues to be included as part of the power purchase agreements with the participants of the Project (see Note E, Long-Term Debt, "Security
-Packwood Lake Hydroelectric Project").
Other income and expenses changed from a net expense of $8k to an income of $6 5 k.The increase is due to decreasing interest and other bond related expenses ($2 7 k savings from FY 2006) and increase interest earnings of $4 6k over FY 2006 levels on invested funds.Financial Data and Information NUCLEAR PROJECT NO., 1 Energy Northwest wholly owns Nuclear Project No. i. Nuclear Project No. i, a 1,250 MWe plant, was placed in extended construction delay status in 1982, when it was 651percent complete.On May 13, 1994, Energy Northwest's Board of Directors adopted a resolution terminating.Nuclear-Project.No..1..All.funding-requirements are net-billed obligations of Nuclear Project No. i. Termination expenses and debt service costs comprise the activity on Nuclear Project No. i and are net-billed.
I NUCLEAR PROJECT NO. 3 Nuclear Project No. 3, a 1,240 MWe plant, was placed in extended construction delay status in 1983, when it was 75 percent complete.
On May 13, 1994, Energy Northw~est's Board of Directors adopted a resolution terminating Nuclear Project No. 3. Energy Northwest is no longer I responsible fora- site restoration costs as the Balance Sheet Analysis Under the Debt Optimization I debt increased
$5.3 million frc FY 2oo6 to $1.976 billion in F restructuring to take advantal rates.rogram, long-term m $1.971 billion in 1 2007 due to debt e of lower interest were transferred with the assets to the Satsop Redevelopment Project (see Note F, Commitments I and Contingencies).
Thie debt service related activities remain and are net-billed.
I Balance Sheet Analysis Under the Debt Optimization Program, long-term debt increased
$2o0.1 million from si.833 billion in FY 2oo6 to $1.853 billion in FY 2007 due to debt restructuring to take advantage of lower interest rates.Statement of Operations Analysis Overall expenses increased
$4.o million from Statement of Operations Analysis I Other Income and Expenses showed a net increase to other expenses of $8.2 million, up from $105.2 million in FY 200ý6 to $113.4 million in FY 2007. The net increase was due to increased bond related expenses of $5.9 !million, decreased revenues from investment income of $1.9 million, decreases to gain on sales of assets of $o.9 million, and increased costs for decommissioning and plant preservation of $0.5 million.FY 2006. Bond related expenses increased
$3.6 million as a result of the debt restructuring.
The remaining change [in other expenses was a combination of lower, investment income of$o.6 million due to market conditions and the continued decrease to plant preservation costs of$0.2 million.Energy Northwest 12007 Annual Report BUSINESS DEVELOPMENT FUND PMEC is a proposed 68o MWe $1.5 billion............................................................................................................
Integrated G asific tion Com bined Cycle (IGCC)Energy Northwest was created to enable power generation plant in western Washington.
Washington public power utilities and municipal-Permitting efforts are currently ongoing for ities to build and operate generation projects.
The PMEC, which totaled $1.7 million for FY 2007.Business Development Fund (BDF) was created When the permit is granted financing efforts will by Executive Board Resolution No. ioo6 in April commence.
I 1997, for the purpose of holding, administering, Wind generation development resulted disb~ursing,.and.accountingfor.Energy-Nor thw~est-in-$o.2_million-in-expenditures-and_$o.4.mil-costs and revenues generated from engaging in lion in revenues.
The Nine Canyon Phase III 36 new energy business opportunities.
MW developmentl in Kennewick, Washington, The BDF is managed as an enterprise fund. completed a financial bond sale of $72.6 mil-Four business sectors have been created within lion that resulted in $0.3 million in revenue and the fund: General Services and Facilities, Genera- cost recovery.
Additional revenue of $5 5 k was tion, Professional Services and Business Unit Sup- obtained by selling abandoned wind mining site port. Each sector may have one or more programs data. The other FY'J 2007 wind prospecting efforts that are managed as a unique business activity, resulted in two project land leases accounting for$0.3 million in expenditures.
Permitting activity Balance Sheet Analysis and technical evaluations are being conducted at There was a slight overall decrease to the Balance each site with an anticipated resource of 6o MW Sheet from FY 2006 to FY 2007. The $0.5 million per site.decrease in net assets consisted of a $o.6 million The BioEnergy Solutions business line was d i .r in a net ex.endi-decrease in receivables. ,which was due to timing, minimized in 2007T resultl inL ante~ni of FY 2oo6 year end receivables and a $o.1 million dollar increase in allocated Internal Service Fund plant. Accounts Payable and Accrued Expenses increased slightly from $1.5 million in FY 2006 to$1.8 million in FY 2007.Statement of Operations Analysis Operating Revenues in FY 2007 totaled $7.6 million as compared to FY 2006 revenues of $7.8 million, a slight decreas of$o.2 million; operating expenses were steady at $11 9 million. Net opera-tions for FY 2007 showed a loss of $2.6 million compared to a loss in FY 2006 of $2.3 million.Power generation development activities are ture of $3 6k for FY 2007. This business line will respond to and evaluate opportunities but limit proactive expenditures for new development.
Future activities in this area will concentrate on I. .supporting an existing consulting agreement with King County, Washington.
The Business Development Fund receives contributions from the Internal Service Fund to cover cash needs during startup periods. Initial startup costs are not expected to be paid back and are shown as contributions.
As an operating busi-ness unit, requests can be made to fund incurred operating expenses.
In FY 2007, the Business Development Fund received contributions (trans-centered around the Pacific Mountain Energy Center (PMEC) and three wind generation proj-ects that are being developed in the Northwest.
fers) of $i.8 millioA, down slightly from $2.4 mil-lion from FY 2 oo6J Financial Data and Information Financial Data and Information NINE CANYON WIND PROJECT Nine Canyon's performance is measured in...................................................................
!. ........................................
I several ways, including cost of power. The cost of The Nine Canyon Wind Energy Project (Nine power for FY 2007 was $8.20 cents/kWh as com-Canyon) is owned and operated by Energy pared to $7.30 cents/kW hl in FY 2oo6. The cost of Northwest.
Nine Canyon is located in the Horse power fluctuates year to year depending on var-Heaven Hills area southwest of Kennewick, ious factors such as wirdd totals and unplanned Washington.
Electricitygenerated byNine Canyon maintenance.
The FY 2007 cost of power increase is purchased by Pacific Northwest Public Utility was mostly due to unanticipated increases in wind Districts-(purchasers).-Each-purchaser-of-Phase.i-turbine.maintenance-due-to-gear-box.failures.
has signed a 28-year power purchase agreement I I with Energy Northwest; each purchaser of Phase 11 has signed a 27-year powe'r purchase agree- Nin Cayo WidPrjc ment, and each purchaser of Phase III has signed a 23-year power purchase agreement.
The agree-I ments are part of the 2nd Amended and Restated 156.70 Nine Canyon Wind Projectj Power Purchase Agreement which now have an agreement end date of 2030. Nine Canyon is connected to the 158.34 Bonneville Power Administration transmission grid via a substation and transmission lines 154.52 constructed by the Benton County Public Utility District.
tI .138.45 Phase I of Nine Canyon, which began com-mercial operation in September 2002, consists of 37 wind turbines, each with a maximum gener- Y 29069 ating capacity of approximatel 4 1.3 MW, for a total 1 0 20 40 60 8 0 100 12 140 16 capacity of 48.1 MW. Phase I of Nine Canyon, _.which was declared operational in December 2003, includes an additionall 12 wind turbines with an aggregate generating capacity of approxi-mately 15.6 MW. The current total Nine Canyon N generating capability is 63.7 MW , which produces enough energy for approximately 26,000 average homes. Phase III of Nine Canyon, currently under construction and scheduled for completion in February 2008, includes 14 wind turbines, each I with a maximum generating capacity of 2.3 MW, for an aggregate generating ca'pacity of 32.2 MW. .... .4. 6. 0.Phase III will increase the total Nine Canyon gen-I erating capability to 95.9 MW, which will produce enough energy for approximatIely 39,000 average homes. 1 Nine Canyon produced 156.71 GWh of elec-tricity in FY 2007 versus 158.34 GWh in FY 2006.6 Y 207F666 F 00 Y20 Y20 Energy Northwest 2007 Annual Report Balance Sheet Analysis Assets increased from $8o.2 million in FY 2006 to $148.4 million in FY 2007 mostly due to the receipts of funds relating to the $72.6 million bond sale for funding of Phase Ill. The increase to assets related to the bond sale was slightly offset by an increase to accumulated depreciation of$3.7 million from FY 2oo6 to FY 2007. Receivables decreased slightly by $0.4 million which corresponds to the decrease in amount of the Renewable Energy Performance Incentive (REPI)payment accrued. The FY 2006 REPI accrual was $1.2 million compared to $0.8 million for FY 2007. The increase of $73.8 million to liabilities was a direct result of the Phase III bond sale. The decrease in Fund Equity was $5.6 million in FY 2007 as compared to a $4.1 million decrease in FY 20o6. The continued decline in Fund Equity is because the original plan anticipated operating at a loss in the early years and gradually increasing the rate charged to the purchasers to avoid a large rate increase after the REPI expires. The REPI incentive expires ten years from the initial opera-tion startup date for each Phase. Reserves that were established are used to facilitate this plan.Statement of Operations Analysis Operating Revenues increased slightly from $6.3 million in FY 2oo6 to $6.5 million in FY 2007. The project received revenue from the billing of the project purchasers at an average rate of $37.2 per MWh for FY 2007 which was a planned 3 percent increase from FY 2oo6. There was an increase in operating expenses of $1.4 mil-lion from $5.8 million in FY 20o6 to $7.2 million in FY 2007 due to increased maintenance costs.Other revenue and expenses decreased
$0.2 mil-lion from FY 20o6 to $5.5 million in FY 2007. Net losses of $6.2 million for FY 2007 continued the trend from previous years. This trend is reflected in the declining Fund Equity balance.Energy Northwest has accrued, as income (contribution) from the DOE, REPI payments that enable Nine Canyon to receive funds based on generation as it applies to the REPI bill. The REPI was created as part of the Energy Policy Act of 1992 to promote increases in the generation and utilization of electricity from renewable energy sources and to further the advances of renewable energy technologies.
This program, authorized under section 1212 of the Energy Policy Act of 1992, provides financial incentive payments for electricity produced and sold by new qualifying renewable energy generation facilities.
Nine Canyon recorded a receivable of $o.8 million which represented twenty-seven percent of the$3.0 million applied for REPI funding in FY 2007.The payment stream and the REPI receipts were projected to cover the total costs over the life of the purchase agreement.
The reserve funds were established so that the participant payments would increase at a rate of three percent per year over the life of each power purchaser agreement.
Permanent shortfalls in REPI funding will lead to increases in the billing for FY 20o8 and subse-quent years to the participants in order to cover total Nine Canyon costs.Financial Data and Information INTERNAL SERVICE FUND......................................................
! .....................................................
The Internal Service Fund (ISF) (formerly the General Fund) was established in May 1957.The Internal Service Fund provides services to the other funds. This fund accounts for the central procurement of certain common goods and services for the business units on a cost reimbursement-basis-(sele-Note.A-and-Note-B3o--
-, Financial Statements).
Balance Sheet Analysis The FY 2007 Balance Sheet increased slightly from FY 2006. Assets lincreased
$0.2 million primarily due to an incre ase of $3.1 million in due from other business units related to end of year obligations and a $0.2 million dollar increase to cash and investments tor personal time bank (employee leave program), disability, and worker's compensation requirements.
These changes were offset by a $2.0 million increase in accumulated depreciation, and a sia. 'million decrease due to business unit activity in performance fee invest-ments. The net increase in Fund Equity and Liabilities is from an increase of $1.4 million to Payroll related expenses!
$o.5 million in current liabilities related to Accounts Payables which was offset by a decrease of $1o.5 million to employee benefits and reserves and $1.2 million decrease relating to Performance Fee draw downs.I Statement of Operations Analysis Net Revenues for FY 2007 remained relatively steady from FY 2006 (down $io9k). Investment income was up $6 3 k due to better return on investments.
Rental revenues for available build-ings at corporate headqdarters were down $2 7 1k as lease utilization was lower in FY 2007. There were slight increases to non-utility revenues of $9oK with daily operations resulting in the remainder of the change from FY 2006.Energy Northwest 2007 Annual Report I J BALANCE SHEETS As of June 30, 2007 (Dollars in Thousands)
Columbia Business !.2007 Generating Packwood Lake Nuclear Project Nuclear Project 3 Development Nine Canyon Internal Service Combined Station Project No.1
* No.3* -Fund Wind Project Subtotal Fund Total Assets UTILITY PLANT (NOTE B)Inservice
$ 3,578,218
$ 13,098 $ $ 1,230 $ 74,268 $ 3,666814 46,765 $ 3,713,579 Not in service 25,253 25,253 25,253 Accumulated depreciation (2,174,753)
(12,492) (25,253):
(496) (16,041) (2,229,035);
(35,751) (2,264,786) 1,403,465 606 734 58,227 1,463,032 11,014 1,474,046 Nuclear fuel, net of accumulated amortization 235,742 235,742 235,742 Construction work in progress 26,999 11,177 38,176 38,176 1,666,206 606 734: 69,404: 1 , 7 3 6 , 9 5 0  11,014 1,747,964 RESTRICTED ASSETS (NOTE B)Special funds Cash 9,014 173 1793 23 9,368 860 10,228 Available-for-sale investments 54,409 294 7,412 10,633 3 53,730 3 126,478 903 127,381............
......Accounts and other receivables 790 790 790 Debt service funds Cash 54,337 6 389 1,379 7,149 63,260 63,260 Available-for-sale investments 763 49,862 28,467 13,869 92,961 92,961 Due from other funds : 296 3 134 430 117,760 1,063 1 58,132 40,792 75,540 293,287 1,763 294,620 LONG-TERM RECEIVABLES " " (NOTE B) 1,104 -:" 1,104 -1,104 CURRENT ASSETS Cash 15,052 4243 7963 23 53 1083 16,435 1,096 17,531 Available-for-sale investments 40,689 1,536 3 6,504 4,210 1,081 54,020 25,546 79,566 Accounts and other receivables 738 233 1,587 277 2,835 61 2,896 Due from other business units 22 988 1,010 3,686 Due from other funds 16,134 39 3,723 7,376 338 27,610 Materials and supplies 101,550 101,550 101,550 Prepayments and other 1,234 60 2 30 7 1,333 66 i 1,399 175,397 2,292 12,634 11,588 2,429 453 204,793 30,455 202,942 DEFERRED CHARGES Costs in excess of billings 681,202 1,965,219 3 1,828,338 3 4,474,759 4,474,759 Unamortized debt expense 13,255 12,454 3 10,254 2,960 3 38,923 3 38,923 Other deferred charges 2,387 3 _ 2,387 3 2,387 694,457 3 2,387 3 1,977,673 3 1,838,592 3 -2,960 3 4,516,069 3 " 3 4,516,069 TOTALASSETS 3$ 2,654,924 3$ 6,348 3$ 2,048,439 3$ 1,890,972 3$ 3,163 3$ 148,357 3$ 6,752,203 3$ 43,232 3$ 6,762,699'Project recorded on a liquidation basis See notes to financial statements Financial Data and Information I
BALANCE SHEETS (CONT'D)As of June 30, 2007 (Dollars in Thousands)
Columbia Business 2007 Generating Packwood Lake Nuclear Project Nuclear Project Development Nine Canyon Internal Service Combined Station Project No.1 No.3* Fund Wind Project Subtotal Fund Total Fund Equity and Liabilities FUND EQUITY Invested in capital assets, net of related debt ES-C-ES -S -E -ES 734E (87,812) $ (87,078):;
$11,014 E$ (76,064)Restricted, net 7 _ _ _ " 700,836 70,836 1,399 72,235 Unrestricted, net 649 (945)!: (296)i (3,542):;
(3,838)1,383 (17,921)E (16,538):
8,871 (7,667)LONG-TERM DEBT (NOTE E)Revenue bonds payable 2,327,420 1,241 1,938,640 1,909,430 152,750 6,329,481 6,329,481 Unamortized (discount)/premium on bonds- net 88,223 (1)E 81,295 (38,511):
6,148 137,154 137,154 Unamortized gain/(loss) on bond refundings (23,690):
18 (43,688) (18,075)::
(2,103)::
(87,538):
(87,538)2,391,953 1,258 1,976,247 1,852,844 156,795 6,379,097 6,379,097 LIABILITIES-PAYABLE FROM RESTRICTED ASSETS (NOTE B)Special funds Accounts payable and accrued expenses 107,358i!
13,787 598 121,743 363 122,106 Due to other funds 15,875 i 14 4,019 7,510i 338 27,756 Debt service funds Accrued interest payable 49,797 23 41,394 29,980 i 3,768 124,962 124,962 Due to other funds 259 25 -284 173,289 62 59,200 37,490 E -4,704 274,745 363 247,068 OTHER NONCURRENT
--LIABILITIES 27,557 ----27,557 27,557 CURRENT LIABILITIES Current maturities of long-term debt 4,280 660 9,160 3,380 17,480 17,480 Accounts payable and accrued expenses 47,550 374 1,392 427 1,780 622 52,145 32,289 84,434 Due to Participants 7,667 1,483 2,440 11,590 11,590 Due toother business units 2,628 70 211 777 3,686 1,010 62,125 2,587 -12,992 638 1,780 4,779 84,901 33,299 -113,504 DEFERRED CREDITS Advances from Members and " others _ __ _37 __37 Other deferred credits 2,441 2,441 662 E 3,103*- 2,441 2-i --2,441 699 3,140 TOTAL LIABILITIES E 2,654,924 6,348 2,048,439 1,890,972 1,780 166,278 6,768,741 34,361 6,770,366 TOTAL FUND EQUITY AND S 2,654,924 ES LIABILITIES2,654,924 6,348 $S 2,048,439
:S 1,890,972
$ 3,163 E$ 148,357 :! 6,752,203 ES 43,232 ES 6,762,699*Project recorded on a liquidatio See notes to financial statemen on basis nts Energy Northwest 12007 Annual Report STATEMENTS OF OPERATIONS AND FUND EQUITY For the year ended June 30, 2007 (Dollars in Thousands)
Columbia Business 2007 Generating Packwood Lake Nuclear Project Nuclear Project Development Nine Canyon Internal Service Combined Station Project No.1 No.3* Fund Wind Project Subtotal Fund Total OPERATING REVENUES i$ 436,972 l$ 1,323 $ -i$ -$ 7,615 !$ 6,492 i$ 452,402 $ -$ 452,402 OPERATING EXPENSES Nuclear fuel 25,318i : 25,318 25,318 Spent fuel disposal fee 7,634 i 7,634 5 l 7,634 Decommissioning 5,885 555 5,940 i 5,940____ I. C 4 ---- --;Depreciation and amortization 74,678 34 i 196 3,642 78,550 78,550 Operations and maintenance 198,717 1,071 11,668 3,448 214,904 214,904 Other power supply expense 58 .58 58 Administrative and general : 20,436 205 i i .47 20,688 20,688 Generation tax l 2,529 20 i 34 i 2,583 2,583 TOTAL OPERATING EXPENSES 335,197 1,388 " 11,864 7,226 i 355,675 355,675 NET OPERATING REVENUES S (EXPENSES) 101,775 (65) (4,249)i (734): 96,727 96,727 OTHER INCOME AND EXPENSE Non-operating revenues 113,381 97,499 210,880 52,895 211,278 Investment income 8,070 144 1,909 2,191 92 623 13,029 532 13,029 Interest expense and discount amortization (122,518)5 (79)' (114,218):
(97,773)::
(6,069)i (340,657)(340,657)Plant preservation and termination costs (4,695)::
(1 ,917):: (6,612) (6,612)Depreciation and amortization (18) (18) (2,043) (18)Decommissioning (540):" (540):: (540)Services to other business units (50,986)Other 12,673 4,181 1,530 18,384 18,384 TOTAL OTHER INCOME AND Z EXPENSES (101,775) 3 65 -1,622 (5,446)i (105,534)3 398 (105,136)NET REVENUES (EXPENSES)
---3 (2,627): (6,180); (8,807): 398 (8,409)Distribution and Contributions " -" -1,800 596 2,396 (1,625)::
771 Beginning Fund Equity ----2,210 (12,337)i (10,127):
10,098 (29)ENDING FUND EQUITY 5$ -5$ -s$ -5$ -5$ 1,383 3$ (17921)i$
(16,538)3$
8,871 5$ (7,667),*Project recorded on a liquidation basis See notes to financial statements Financial Data and Information STATEMENTS OF CASH FLOWS For the year ended June 30, 2007 (Dollars in Thousands)
Columbia i Business Generating Packwood Lake Nuclear Project Nuclear Project Development i Nine Canyon Internal Service 2007 Station Project i No.1 No.3* Fund Wind Project Fund Combined Total CASH FLOWS FROM OPERATING AND OTHER ACTIVITIES Operating revenue receipts $ 416,768 S 3,297 -$ -3,836 iS 6,492 i$ -430,393 Cash payments for operating expenses (221,013)
: (1,115) _ _ : _ (4,102)::
(1,496)::
(227,726)Non-operating revenue receipts 93,480 i 67,875 161,355 Cash payments for preservation, i : termination expense (3,933): (59) (3,992)Cash payments for services (3,007)::
(3,007)Net cash provided/(used) by operating and i other activities 195,755 2,182 89,547 67,816 (266) 4,996 (3,007): 357,023 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bond refundings 132,555 .299,965 159,324 72,554 664,398 Refunded bond escrow requirement (85,611) (299,854)
(159,265)
(544,730)Payment for bond issuance and financing costs (1,330)1; (43): (4,519): (3,001) (2): (1,445) : _ (10,340)Capital (49,891) (980)i i_"_i__ (180): (11,218):
539 (61,730)Receipts from sales of plant assets 5,368 3,385 8,753 Nuclear fuel acquisitions (87,788) (87,788)Interest paid on revenue bonds (116,747)i (90)i (95,473)i (75,210)i (4,180): _ (291,700)Principal paid on revenue bond maturities (644) i (3,240): (3,884)Interest paid on Notes (1,321):i (307):i (911)i W i (2,539)Net cash provided/(used) by capital and " related financing activities (204,765)" (1,757): (96,803), (79,063)i (182)i 52,471 i 539 i (329,560) i CASH FLOWS FROM NON-CAPITAL i .FINANCE ACTIVITIES
.: -." ." -CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities (878,738)::
(8,233):i (264,753):i (224,180):
(8,069):i (295,391)
(62,214)i (1,741,578)
Sales of investment securities
.894,134 8,086 248,772 i 232,302 8,451 i 237,370 64,205 i 1,693,320 Interest on investments 8,759 i 137 i 2,324 2,379 g 90 2,111 1,519 17,319 Net cash provided/(used) by investing activities 24,155 (10)i (13,657):
10,501 472 (55,910) 3,510 (30,939)'NET INCREASE (DECREASE)
IN CASH 15,145 415 (20,913), (746)i 24 i 1,557 i 1,042 i (3,476)CASH AT JUNE 30, 2006 63,258 15 i 22,271 i 2,306 i 29 5,702 i 914 94,495 iCASH AT JUNE 30, 2007 (NOTE B) ES 78,403 i$ 430 i$ 1,358 i$ 1,560 i$ 53 i$ 7,259 i$ 1,956 i$ 91,019*Project recorded on a liquidation basis See notes to financial statements Energy Northwest 12007 Annual Report STATEMENTS OF CASH FLOWS (CONT'D)For the year ended June 30, 2007 (Dollars in Thousands)
Columbia Generating Packwood Lake Nuclear Project Nuclear Project Station Project No.1 No.3*Business Development Nine Canyon Internal Service 2007 Fund Wind Project Fund Combined Total RECONCILIATION OF NET OPERATING REVENUES TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net operating revenues (expenses)
$ 101,775 $ (65):$ -$- $ (4,249)i$
(734)i$ -i$ 96,727 Adjustments to reconcile net operating revenues to cash provided by operating activities:
Depreciation and amortization i 97,714 25 73 3,628 101,440 Decommissioning 5,885 22 5,907 Other 7,404 1,023 1,522 41 j 9,990 Change in operating assets and liabilities:
Deferred charges/costs in excess of .billings (20,204):
(22) (20,226)Accounts receivable 2,468 160 i , 647 -3,275 Materials and supplies (17,370):
226 (17,144)Prepaid and other assets (19): 21 37 (3) 36 Due from/to other business units, funds and Participants 8,355 916 (421) 491 9341 Accounts payable 9,747 124 325 321 10,517 Non-operating revenue receipts 93,480 67,875 161,355 Cash payments for preservation, termination expense (3,933)::
(59):: (3,992)Cash payments for services (3,007): (3,007)Receipts for grants/contributions 1800 1004 2804 Net cash provided (used) by operating and other activities 195,755 $ 2,182 $ 89,547 $ 67,816 $ (266) $ 4,996 '$ (3,007): $ 357,023*Project recorded on a liquidation basis See notes to financial statements Financial Data and Information I I I Energy No Notes to F NOTE A -GENERAL rthwest nancial Stateme nts Organization I Energy Northwest, a municipal corporation and joint operating agency of the State ofWashington, was organized in 1957. It is empowered to finance, acquire, construct and operate facilities for the generation and transmission lof electric power.On June 30, 2007, its membership consisted of 17 public utility districts and three cities, Richland, Seattle and Tacoma. All members own and operate electric systems within the State of Washington.
Energy Northwest is exempt from federal income tax. Energy Northwest has no taxing authority.
Units. BPA is obligated by law to establish rates for electric power whichl will recover the cost of electric energy acquiredifrom Energy Northwest and other sources as well as BPA's other costs (see Note E).Energy Northwest operates the Columbia Generating Station (Columbia), a 1,157 MWe (Design Electric RatingI net) generating plant completed in 1984. Energy Northwest has obtained all permits and licenses required to operate Columbia, inclulding a Nuclear Regula-tory Commission (NRC)i operating license that exnires in December 2021.Energy Northwest Business Units Each Energy Northwest Business Unit is financed and accounted for separate from all other current or future Business Units. I All electrical energy produced by Energy Northwest net-billed Business IUnits is ultimately delivered to electrical distribution facilities owned and operated by Bonneville Power Admin-istration (BPA) as part of the Federal Columbia River Power System. BPA in turn distributes the electricity to electric utility systems throughout the Northwest, including Participants in Energy Northwest's Business Units, Ifor ultimate dis-tribution to consumers.
Participants in Energy JE ......Energy Northwest
'also operates the Pack-wood Lake Hydroelectric Project (Packwood), a 27.5 MWe generating plant completed in 1964.Packwood operates under a fifty-year license from the Federal Energy iRegulatory Commission (FERC) that expires on lFebruary 28, 2010. The electric power producedi by Packwood is sold to 12 Project Participant utilities which pay the costs of Packwood, including Ithe debt service on the Packwood revenue bonds. The Packwood Partici-pants are obligated to pay annual costs of Pack-wood including debt service, whether or not Pack-wood is operable, until the outstanding bonds are paid or provisions are made for bond retirement, Northwest's net-billed Business Units consist of publicly owned utilities and rural electric coop-I eratives located in the western United States I who have entered into net-billing agreements I with Energy Northwest and BPA for participation i in one or more of Energy Northwest's Business in accordance with the requirements of the bond resolution.
The Participants share Packwood rev-I enue as well. In 2002, Packwood and its partici-I pants entered into a Power Sales Agreement with I Benton and Franklin PUDs to guarantee a speci-fied level of power generation from the Packwood Energy Northwest 12007 Annual Report project (see Note E, "Security-Packwood Lake Hydroelectric Project").
Nuclear Project No. i, a 1,250 MWe plant, was placed in extended construction delay status in 1982, when it was 65 percent complete.Nuclear Project No. 3, a 1,240 MWe plant, was placed in extended construction delay status in 1983, when it was 75 percent complete.
On May a13,p994,EnergeyNorthkest'sNBoardgofNDirectors
-adopted resolutions terminating Nuclear Proj-The Internal ýService Fund was established in May 1957. It is currently used to account for the central procurement of certain common goods and services for the Business Units on a cost reimbursement basis.NOTE B -SUMM1IARY OF SIGNIFICANT o-ACCOUNTINGPOLICIES ects Nos. 1 and 3 (see Note F, "Nuclear Projects Nos. i and 3 Termination").
All funding require- Basis of Accounting ments remain as net-billed obligations of Nuclear Energy Northwestl has adopted accounting poli-Projects Nos. i and 3. Energy Northwest wholly cies and principles that are in accordance with owns Nuclear Project Nb. 1. Energy Northwest is GenerallyAccepted Accounting Principles (GAAP)no longer responsible for site restoration costs for in the United State' ofAmerica.
Energy Northwest Nuclear Project No. 3 (s&e Note F, Commitments applies Financial lAccounting Standards Board and Contingencies). (FASB) standards to the extent it does not conflict Energy Northwest
!also manages the Busi- with Governmental Accounting Standards Board ness Development Fund and the Nine Canyon (GASB) standards.I Accounts are maintained in Wind Project (Nine Canyon): accordance with the uniform system of accounts of the FERC. Energy Northwest uses the full E The Business Development Fund was estab- accrual basis of accounting where revenues are lished in April 1997 to pursue and develop new recognized when I earned and expenses recog-energy related business opportunities.
nized when incurred.
Revenues and expenses related to principal operations are considered to 0 Nine Canyon was established in January 20o1 be operating revenues and expenses; while reve-for the purpose of exploring and establishing nues and expenses related to capital, financing a wind energy project. Phase I of the project and investing activities are considered to be was completed in Fiscal Year (FY) 2003. Phase non-operating revenues and expenses.
Separate I of Nine Canyon consists of turbines which funds and books of account are maintained for have a capacity of 48t1 MWe. Phase ii of Nine each Business Unit. Payment of obligations of Canyon consists of turbines which have a ca- one Business Unit with funds of another Business pacity of 15.6 MWe. The total Nine Canyon Unit is prohibited, and would constitute violation generating capability, for Phase I and II is ap- of bond resolutionicovenants.
proximately 63.7 MWe. Phase III of Nine Can- Energy Northwest maintains an Internal Ser-yon is currently under construction and will vice Fund for centralized control and accounting consist of an additioAfal 14 wind turbines with of certain capital assets such as data processing an aggregate capaciiy of approximately 32.2 equipment, and f6r payment and accounting of MWe. Phase III is scheduled for commercial internal services, lpayroll, benefits, administra-operation in February 2oo8. tive and general expenses, and certain contracted services on a cost Ireimbursement basis. Certain assets in the Internal Service Fund are also owned 4--1 Financial Data and Information by this Fund and operated for 1he benefit of other in conformity with GAAP requires management Projects.
Depreciation relating to capital assets is to make estimates and assumptions that directly charged to the appropriate Business Units based affect the reported amounts of assets and liabili-upon assets held by each Project. ties, disclosures of contingent assets and liabili-Liabilities of the Internal Service Fund repre- ties at the date of the financial statements, and sent accrued payroll, vacation pay, employee ben- the reported amounts of revenue and expenses efits, and common accounts payable which have during the reporting period. Actual results could been charged directly or indirectly to Business differ from these estimates.
Certain incurred Units-and-w.ill-be-funded-by-t~heBusiness-Units-expenses.and.rev.enues-are~allocatedtothe.Busi-..
when paid. Net amounts owed! to or from Energy ness Units based on specific allocation methods Northwest Business Units are recorded under that management considers to be reasonable.
Current Liabilities-Due to other Business Units, Energy Northwest's fiscal year begins on July or Current Assets-Due from other Business Units 1st and ends on June 30t on the Internal Service Fund Balance Sheet.The Combined Total column on the finan- Utility Plant cial statements is for presentation only as each Utility plant is stated at original cost. Plant in Energy Northwest Business Unit is financed and service is depreciated by the straight-line method accounted for separately from all other current over the estimated useful lives of the various and future Business Units. The FY 2007 Com- classes of plant, which range from five to 6o bined Total includes eliminations for transac- years.tions between Business Units as required in During the normal construction phase of Statement No. 34, "Basic FinIancial Statements a Capital Facility, which historically has been and Management's Discussion and Analysis for defined as constructionlof a generation facility, State and Local Governments," of the Govern-mental Accounting Standards Board (GASB).Pursuant to GASB Statement No. 20,"Accounting and Financial Reporting for Propri-etary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, Energy Northwest has elected to ap ly all FASB state-ments and interpretations, except for those that conflict with, or contradict, GASB pronounce-ments. Specifically, GASB No. I'"Advance Refund-ings Resulting in Defeasance of Debt," and GASB No. 23, 'Accounting and Financial Reporting I for Refundings of Debt Reported by Proprietary Activities," conflict with Statement of Financial Energy Northwest's polIicy is to capitalize all costs relating to the Project, including interest expense, related administrative and general expense, less any interest income earned. For financing not related to a' Capital Facility, Energy Northwest analyzes thel gross interest expense relating to the cost of the bond sale, taking into account interest earnings and draws for purchase or construction reimbursements for the purpose of analyzing impact to the recording of capital-ized interest.
Columbia is a net-billed business unit, therefore costs whether expense or capital, are reimbursed each year. However, if estimated I costs are more than inconsequential, an adjust-Accounting Standard (SFAS) No. 140, "Accounting for Transfers and Servicing oIf Financial Assets and Extinguishments of Liabilities." As such, I the guidance under GASB No. ,7 and No. 23 is fol-lowed. Such guidance governs jthe accounting for bond defeasances and refundings.
The prepara-I tion of Energy Northwest financial statements ment will be made to allocate capitalized interest I to the appropriate plant account. Nine Canyon is currently constructing Phase III of the generation project and capitalized
$1.71 million of interest costs to construction work in progress.The utility plant and net assets of Nuclear Projects Nos. i and 3 havle been reduced to their Energy Northwest 12007 Annual Report estimated net realizable values due to termina-tion. A write-down of Nuclear Projects Nos. i and I 3 was recorded in FY 1995 and was included in Cost in Excess of Billings.
Interest expense, ter-mination expenses and asset disposition costs for Nuclear Projects Nos. i and 3 have been charged to operations.
Utility Plant activity for the year ended June 30, 2007, was as follows: I Nuclear Fuel All expenditures related to the initial purchase of nuclear fuel forl Columbia, including interest, were capitalized and carried at cost. Fuel expen-ditures relating to the use of funds from the Series 200 5-C Bonds for purchases of nuclear fuel were capitalized and carried at cost. When the fuel is placed in the reactor, the fuel cost is I UTILITY PLANT ACTIVITY (Dollars in Thousands)
Beginning Balance Increases Decreases Ending Balance Columbia Generating Station Generation
$ 3,497,075
$ 50,194 $ (1,520)1$
3,545,749 Decommissioning 32,469 32,469 Construction Work-in-Progress 22,161 51,381 (46,543)::
26,999 Accumulated Depreciation (2,102,609)::
(73,346) 1,202 (2,174,753)
UTILITY PLANT, net* $ 1,449,096 E$ 28,229 E$ (46,861):-$
1,430,464 Packwood Lake Hydroelectric Project Generation
$ 12,991 :$ 107 E$ -$ 13,098 Accumulated Depreciation (12,466) (26) -(12,492)UTILITY PLANT, net i$ 525 '$ 81 E$ -ES 606 Business Development Generation iS 1,039 :$ 191 $ $ 1,230 Construction Work-in-Progress
---Accumulated Depreciation (422) : (74) -(496)UTILITY PLANT, net !$ 617 ES 117 i$ -734 Nine Canyon Wind Project Generation
$ 73,617 $ 221 :$ (19):is 73,819 Decommissioning 449 449 Construction Work-in-Progress
-11,177 -.11,177 Accumulated Depreciation
.(12,392):
(3,649) --(16,041)UTILITY PLANT, net 61 674 $ 7,749 i$ (19).'$ 69,404 Internal Service Fund Generation
$ 46,631 $ 134 E$ -i$ 46,765 Construction Work-in-Progress  Accumulated Depreciation (33,708)::
(2,043) i -(35,751)UTILITY PLANT, net 12,923 E$ (1,909)S -7$ 11,014*Does not include Nuclear Fuel Amount of $236 million, net of amortization.
Financial Data and Information amortized to operating expense on the basis of Long-Term Receivables quantity of heat produced for generation of elec- Long-term receivables include an estimate of II tric energy. Accumulated nuclear fuel amortiza-future discounts for certain goods and services to tion (the amortization of the cost of nuclear fuel be provided to Columbial These amounts are the assemblies in the reactor usedl in the production result of a litigation settlement and subsequent of energy and in the fuel pool for less than six revisions of that settlement.
months per FERC guidelines) is, $117.1 million as of June 30, 2007, for Columbia.
Accounts and Other Receivables EnergyNorthwest-has-a contract-with-the-Accounts-and-other.receivables-for-theInternal Department of Energy (DOE) that requires the Service Fund include miscellaneous receivables DOE to accept title and dispose of spent nuclear outstanding from other Business Units that have fuel. Although the courts have ruled that the DOE not yet been collected.
The amounts due to each had the obligation to accept title to spent nuclear Business Unit are reflected in the Due To/From fuel by January 31, 1998, the repository is not other Business *Units account. Accounts and expected to be in operation before 2017. other receivables specific to each Business Unit I .The current period operating expense for are recorded in the residing Business Unit.Columbia includes a $7.6 million charge from I the DOE for future spent nuclear fuel storage and Asset Retirement Obligation disposal in accordance with the Nuclear Waste Energy Northwest adopted SFAS No. 143, Policy Act of 1982. 'Accounting for Obligations Associated with the Energy Northwest has completed the Inde- Retirement of Long Lived Asset," on July 1, 2002.I pendent Spent Fuel Storage installation (ISFSI) SFAS 143 requires an entity to recognize the fair_project, which is a temporary dry cask storage value of a liability for ani asset retirement obliga-until the DOE completes its plan for a national tion (ARO), such as nuclear decommissioning and repository.
ISFSI will store theispent fuel in com- site restoration liabilities!
in the period in which mercially available dry storage casks on a con- it is incurred, rather than using a cost accumula-crete pad at the Columbia site.j Spent Fuel will be tion approach (see Note I Accounting for Asset transferred from the Spent Fuel pool to the ISFSI Retirement Obligations).
periodically to allow for future refuelings.
Cur-rent period operating costs include $24.2 million Decommissioning and Site Restoration for nuclear fuel and $i.i million dry cask storage Energy Northwest established decommissioning costs. and site restoration fuInds for Columbia and monies are being deposited each year in accor-Restricted Assets dance with an established funding plan.Separate restricted funds have been established The NRC has issued rules to provide guid-for each Business Unit, in accordance with Project ance to licensees of operating nuclear plants on bond resolutions, related agreements or state decommissioning the plants at the end of each law. The assets held in these fu! nds are restricted plant's operating life. In September 1998, the NRC for specific uses including construction, debt approved and published its "Final Rule on Finan-service, capital additions an'd fuel purchases, cial Assurance Requirements for Decommis-extraordinary operation and maintenance costs, sioning Power Reactors."As provided in this rule, I i.termination, decommissioning, hazardous waste each power reactor licensee is required to report disposal, operating reserves, financing, long-term to the NRC the status of its decommissioning disability and workers' compensation claims.SEnergyNorthwest 12007 Annual Report I II funding for each reactor or share of a reactor Materials and Siipplies it owns. This reporting requirement began on Materials and supplies are valued at cost using a March 31,1999, and reports are required every two weighted average cost method.years thereafter.
Energy Northwest submitted its I most recent report to the NRC in March 2007. Financing Expense, Bond Discount and Energy Northwest's current estimate of Deferred Gain and Losses , t I Columbia's decommissioning costs in 2007 dol- Financing expenses and bond discounts are lars is $573.2 million (Columbia-$57o.o million amortized over the terms of the respective bond_andISESI=$3.2_million).bThis-estimate,_which-is-issues-using-the bonds-outstanding-method updated biannually, is based on the NRC min- which Energy Nor~thwest has determined to not imum amount required to demonstrate rea- be materially different from the effective interest sonable financial assurance for a boiling water method of bond accounting.
reactor with the power level of Columbia.
In accordance with GASB No. 23, losses on Site restoration requirements for Columbia debt refundings have been deferred and amor-are governed by the site certification agreements tized as a component of interest expense over between Energy Northwest and the State ofWash- the shorter of the remaining life of the old or ington and by regulations adopted by the Wash- new debt. The balance sheet includes the original ington Energy Facility Site Evaluation Council deferred amount 'less recognized amortization (EFSEC). Energy Northwest submitted a site res- expense and is included as a reduction to the new toration plan for Columbia that was approved by debt.the EFSEC on June 12, 1995. Energy Northwest's current estimate of Columbia's site restoration Current Maturities of Revenue Bonds costs k. V.Rn6 millinn in cnn.tant dollar. (ha.qed Current maturitie. (le-s. than one vear) of revenue on 2007 Study) and is uIpdated biannually along....with the decommissioning estimate.Both decommissioning and site restora-tion estimates (based on 2007 Study) are used as the basis for establishing a funding plan that includes escalation and interest earnings until decommissioning activities occur. Payments to the decommissioning and site restoration funds have been made sinceI January 1985. The fair value of cash and investment securities in the decommissioning and site restoration funds as of June 30, 2007, totaled approximately
$118.1 mil-lion and $16.1 million, Irespectively.
Since Sep-tember 1996, these amounts have been held and managed by BPA in external trust funds in accor-dance with NRC requirements and site certifica-tion agreements; the balances in these external trust funds are not reflIected on Energy North-west's Balance Sheet.0Financial Data and Information bonds payable fror as current matu greater than one Debt.i restricted assets are reflected ities. Debt with maturities ,ear is reflected as Long-Term Accounts Payable and Accrued Expenses Liabilities-Payablel From Restricted Assets-Columbia includeIs
$107.4 million for decom-missioning and site restoration.
Nuclear Project No. i includes $13.8 million for decommissioning and site restoration.
Nine Canyon includes $o.6 million for decommissioning and site restora-tion. The other large amount of payables from restricted assets relate to accrued interest payable........ .... .. .... .....There was $125.0 1million accrued amongst the five business units (none for the Internal Service Fund) for this item.Current Liabilities-Internal Service Fund accounts payable land accrued expenses include$6.3 million for payroll and related benefits, $17.2 million for compensated abseitces, lion for outstanding warrants!
taxe tion withheld.
Other Business Unit accounted for the other $52.1 Milli4 sents general Business Unit activity Other Non Current Lialbilitie million is the Columbia defeIrred which relates to the storage an'd dis fiele I 1 and $8.8 mil- expenses is recorded as leither billings in excess es, and reten- of costs (liability) or costs in excess of billings accrued costs (asset), as appropriate.
jSuch amounts will be on and repre- settled during future operating periods.I Energy Northwest accounts for revenues and s-The $27.6 expenses on an accrual lbasis for the remaining cask liability Business Units. The difference between cumu-posal of spent lative revenues and cumulative expenses is rec-I-ognized-as-net-revenue-or-lossesoandaincludednin.......
......fund equity for each perilod.ants Energy Northwest has accrued, as income ents has been (contribution) from the DOE, Renewable Energy information Performance Incentive (REPI) payments that able judgment enable Nine Canyon to 1 receive funds based on ata to develop generation as it applies to the REPI bill. The REPI nates are not was created as part of the Energy Policy Act of its that could 1992 to promote increases in the generation and iange. utilization of electricityjfrom renewable.
energy hich the car- sources and to further the advances of renewable able approxi- energy technologies.
I accounts and This program, authorized under section 1212 and accrued of the Energy PolicyAct of1 9 9 2, provides financial s and others, incentive payments for electricity produced and Fair Value of Financial Instiume The fair value of financial instrum4 estimated using available market and certain assumptions.
Considera is required in interpreting market d.fair value estimates and suchj estii necessarily indicative of the amour be realized in a current market excl Financial instruments for wi rying value is considered a reason mation of fair value include: cash, other receivables, accounts payable expenses, advances from Member._.ýix_and Due To/From Participants, funds, and other Business Units. The fair values of investments (see Note C, Cash and Investments) and revenue bonds payable (see Note E, Long-Term Debt) have been estimated based on quoted market prices for such instruments or on the fair market value of financial instruments of a similar nature and degree of risk. I sold by new qualifying renewable energy genera-tion facilities.
Nine Canyon recorded a receivable for 27 percent of the applied REPI funding in the amount of $o.8 million fbr FY 2007, representing its share of funded amounts. The payment stream from Nine Canyon participants and the REPI receipts were projected to cover the total costs over the purchase agreement.
Permanent short-falls in REPI funding will lead to future increases in the billing of the Nine' Canyon participants in order to cover total ProjeIct costs.Concentration of Credit Risk I Financial instruments which potentially subject Revenues Energy Northwest accounts an accrual basis, and recover agreements, actual cash requi tions and debt service for Col for expenses on , through various rements for opera-umbia, Packwood, Nuclear Project No. 1 and Nu(For these Business Units, I recognizes revenues equal to period. No net revenue or loss no equity is accumulated.
The cumulative billings receive&lear Project No. 3.tnergy Northwest expenses for each is recognized, and lifference between and cumulative Energy Northwest to concentrations of credit risk consist of available-for-sale investments, accounts receivable, other receivables, long-term receivables and costs in excess of billings.
Energy Northwest invests exclusively in U.S. Government securities and agencies.
Energy Northwest's accounts receivable and costs in excess of billings Energy Northwest 12007 Annual Report are concentrated with Project Participants and NOTE C -CASH AND INVESTMENTS BP th ough t e net- Ill n g e m n s ( e ..................................................................................................
BPA through the net-billing agreements (see Note E, Long-Term Debt, "Security-Nuclear Cash and investments for each Business Unit Projects Nos. 1, 3 and Columbia" and "Security are separately maintained.
Energy Northwest's
-Packwood Lake Hydroelectric Project").
The deposits are insured by federal depository insur-long-term receivable is Iwith a large and stable ance or through the Washington Public Deposit company which Energy Northwest considers Protection Commission.
Energy Northwest reso-to be of low credit risk! Other large receivables lutions and investment policies limit investment
--ar~e-secur~ed..thr~ough
_the--use-,of-letters-o f-credit -_authorit~y-to-obligations-of-the..United .States-Trea
..........
and other similar security mechanisms or are sury, Federal National Mortgage Association and with large and stable companies which Energy Federal Home Loan Banks. Safekeeping agents, Northwest considers to jbe of low credit risk. As custodians, or trustees hold all investments for the a consequence, Energy Northwest considers the benefit of the individual Energy Northwest Busi-exposure of the Business Units to concentration ness Units.of credit risk to be limited. Investments are classified as available-for-sale and are stated at fair value with unrealized I I Statements of Cash Flows gains and losses reported in investment income.For purposes of the statements of cash flows, Available-for-sale investments at June 30, 2007, are cash includes unrestricted and restricted cash categorized below to give an indication of the types balances.
Short-term, highly liquid investments and amounts as well as maturities of investments are not considered cash 1equivalents but are clas- held by each Business Unit at year end: sified as available for sale investments.
AVAILABLE-FOR-SALE-INVESTMENTS (Dollars in Thousands)
Amortized Cost Unrealized Gains Unrealized Losses Fair Value (1) (2)Columbia Generating Station $ 95,135 $ -$ (37) 1$ 95,098 Packwood Lake Hydroelectric Project 2,592 1 2,593 Nuclear Project No. 1 63,797 -(19) 63,778 Nuclear Project No. 3 43,323 -(13) 43,310 Business Development Fund 1,081 -1,081 Internal Service Fund 26,460 -(11) 26,449 Nine Canyon Wind Project 67,628 -(29) 67,599 (1) All investments are in U.S. Government Agencies with the exception of Packwood which holds only U.S. Government Treasury Bills.(2) All investments have maturities of less than 1 year.Financial Data and Information I I-NOTE D -RETIREMENT!
BENEFITS unless they exercise an option to transfer their...................................................................
i.........................................
Ieb r h p t l n 3 E S p r i i a t o n n membership to Plan 3. PERS participants joining Substantially all Energy Northwest full-time the system on or after March 1, 2002, for state and qualifying part-time employees participate and higher education employees, or September in one of the following statewide retirement 1, 2002, for local government employees have systems administered by the Washington State the irrevocable option oIf choosing membership Department of Retirement Systems, under cost- in either PERS Plan 2 or PERS Plan 3. The option sharing multiple-employer public employee defined must be exercised within' 90 days of employment.
~b~enefit.and-defined-contributiotn.r~etirement-plans.-An-emplo~yee-is-repor~ted-~in.Plan-2_until-a-choice The Department of Retirement Systems (DRS), a is made. Employees who fail to choose within 90 department within the primary, government of the days default to PERS Plan 3. PERS defined benefit I t State of Washington, issues a publicly available retirement benefits are financed from a combina-comprehensive annual financial report (CAFR) tion of investment earnings and employer and that includes financial statements and required employee contributions.
IPERS retirement benefit supplementary information for each plan. The DRS provisions are established in state statute and CAFR may be obtained by writing to: Department may be amended only by the State Legislature.
of Retirements Systems, Communications Unit, Plan i retirement benefits are vested after an P.O. Box 48380, Olympia, WA' 98504-8380.
The employee completes five years of eligible service.following disclosures are made pursuant to GASB Plan i members are eligible for retirement at any age Statement No. 27, "Accountin~g for Pensions by after 30 years of service, or at the age of 6o with five State and Local Government Employers.
years of service, or at the Iage of 55 with 25 years of service. The annual benefit is 2 percent of the average Public Employee's Retirement System final compensation per year of service, capped at 6o (PERS) Plans 1, 2, and 3 PlAn Description percent. The average final compensation is based PERS is a cost-sharing multiple-employer retire- on the greatest compensation during any 24 eligible ment system comprised of three separate plans for consecutive compensation months. If qualified, after membership purposes:
Plans it and 2 are defined reaching the age of 66 a cost-of-living allowance is benefit plans and Plan 3 is a combination defined granted based on years ofservice credit and is capped benefit/defined contribution plan. Membership at 3 percent annually.in the system includes:
elected officials; state Plan 2 retirement benefits are vested after an employees; employees of the Supreme, Appeals, employee completes five years of eligible service. Plan and Superior courts (other than judges in a judi- 2 members may retire at the age of 65 with five years cial retirement system); employees of legislative of service, or at the age of 55 with 20 years of service,.1 committees; college and university employees with an allowance of 2 percent of the average final not in national higher eduIcation retirement compensation per year of service. The average final programs; judges of district and municipal courts; compensation is based on the greatest compensation and employees of local government, including during any eligible consecutive 6o-month period.Energy Northwest.
Participants who joined the Plan 2 retirements prior to the age of 65 receive system by September 30,1977, are Plan i members, reduced benefits.
If retirement is at age 55 or older Those who joined on or after October 1, 1977, and with at least 30 years of service, a 3 percent per year by either, February 28, 2002, for state and higher reduction applies; otherwise an actuarial reduction education employees, or August 31, 2002, for will apply. There is no cap on years of service credit;local government employees, are Plan 2 members and a cost-of-living allowance is granted (indexed to Energy Northwest 12007 Annual Report the Seattle Consumer Price Index), capped at 3 per- Funding Policy cent annually.
Each biennium, the state Pension Funding Council Plan 3 has a dual benefit structure.
Employer adopts Plan i employer contribution rates, Plan 2 contributions finance a defined benefit component, employer and employee contribution rates, and and member contributions finance a defined contri- Plan 3 employer contribution rates. Employee bution component.
The defined benefit portion pro- contribution rates for Plan 1 are established by vides a benefit calculated at 1 percent of the average statute at 6 percent for state agencies and local final compensation per year of service. The average government unit employees, and 7.5 percent for final-compensation is-balsedon-the-greatest-com:-
state-goyvernment elected-officers.-The-emplo~yer pensation during any eligible consecutive 6o-month and employee contribution rates for Plan 2 and period. Effective June 7, 2oo6, Plan 3 members are the employer contribution rate for Plan 3 are vested in the defined benefit portion of their plan developed by the Office of the State Actuary to after ten years of service; or after five years if twelve fully fund Plan 2 and the defined benefit portion months of that service are earned after age 44; or of Plan 3. All employers are required to contribute after five service credit years earned in PERS Plan at the level established by the Legislature.
Under prr t 2 prior to June 1, 2003. Plan 3 members are imme- PERS Plan 3, emplpyer contributions finance the diately vested in the defined contribution portion defined benefit portion of the plan, and member of their plan. Vested Pla 3 members are eligible to contributions finance the defined contribution retire with full benefits at age 65, or at age 55 with portion. The Employee Retirement Benefits io years of service. Retirements prior to the age of 65 Board sets Plan 31 employee contribution rates.receive reduced benefits.
If retirement is at age 55 or Six rate options are available ranging from 5 to older with at least 30 years of service, a 3 percent per 15 percent; two of tihe options are graduated rates year reduction applies; otherwise an actuarial reduc- dependent on thel emDlovee's arze. The methods tion will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service cre dit; and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accor-dance with an option sele cted by the member, either as a lump sum or pursuant to other options autho-rized by the Employee Retirement Benefits Board.There are 1,181 participating employers in PERS.Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and Beneficiaries Receiving Benefits 68,609 Terminated Plan Members Entitled to But Not Yet 22,567 Receiving Benefits Active Plan Members Vested 104,574 Active Plan Members Nonvested 51,004 used to determine ithe contribution requirements are established under state statute in accordance with chapters 41.4o and 41.45 RCW.The required contribution rates for the defined benefit plan expressed as a percentage of current year covered payroll, as of June 30, 2007, were: PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer*
5.46% 5.46% 5.46%**Employee 6.00% 3.50%*The employer rates include the employer administrative expense fee currently set at 0.18%. This rate reflects the change effective December 31, 2006. Previous to this period son rase was Um.l/.**Plan 3 defined benefit portion only.-Variable from 5.0% minimum to 15.0% maximum based on rate selected by PERS 3 member.Total 246,754 Financial Data and Information I
Both Energy Northwest And the employees make the required contributions.
The required employer contribution increased January 1, 2007, 1 from 3.69 percent for all plans to the current level I of 5.46 percent. For FY 2005 and FY 20o6 the rates I ranged from 1.38 percent to 2.44 percent. Energy Northwest's required contributions for the years ended June 30 was: PERS Plan 1 PERS Plan 2 PERS Plan 3 2007 $ 174,813 $ 3,235,922
$ 1,269,321 2006 $ 107,096 $ 1,458,655
$ 564,242 2005 $ 86,067 $ 958,601 $ 364,653 During FY 2007, pension costs for Energy Northwest employees and post-employment life insurance benefit costs for retirees were calcu-lated and allocated to each Business Unit based on direct labor dollarst This allocation basis resulted in the following percentages by Business Unit for FY 2007 for this and other allocated costs;Columbia at 92 percent, Business Development at-6-percent,.and.Project.i,_NineCanyon,-Packwood and Project 3 receiving the residual amount of 2 percent.401(k) and 457 Plan Deferred Compensation Plan Energy Northwest provides a 4o1(k) Deferred Compensation Plan (40,1(k) Plan), and a 457 Deferred CompensationI Plan. Both Plans are defined contribution plans that were established to provide a means fo'r investing savings by employees for retirement purposes.
All perma-nent, full-time employees are eligible to enroll in the Plans. Participants are immediately vested in their contributions and d1irect the investment of I In addition to the pension benefits available through PERS, Energy Northwest offers post-employment life insurance benefits to retirees who are eligible to receive pensions under PERS Plan 1, Plan 2, and Plan 3. Ninety-seven retirees have elected to participate in this insurance.
In 1994, Energy Northwest's Executive Board approved provisions which continued the life insurance benefit to retirees at 25 percent of the premium for employees who retire prior to Jan-I uary 1, 1995, and charged the full loo percent pre-mium to employees who retired after December 31, 1994. The life insurance benefit is equal to the employee's annual rate of salary at retirement for non-bargaining employees retiring prior to Jan-uary 1, 1995. The cost of coverage for employees who retired after January 1, 11995, is $2.33 per S$,ooo of coverage with a maximum limit of$1o,ooo. Employees who retired prior to January i, 1995, contribute
$.58 per of coverage while I Energy Northwest pays the remainder.
Premiums are paid to the insurer on a current period basis.their contribution.
Each Iparticipant may elect to contribute pre-tax annual compensation, subject to current Internal Reve~nue Service limitations.
For the 4o1(k) Plan, Energy Northwest may elect to make an Employer matching contribution for each of its Employees who are a Participant during the Plan Year. The amount of such an Employer match shall be 50 percent of the maximum salary deferral percentage.
During FY 2007 Energy Northwest contributed
$2.0 million in employer matching funds.NOTE E -LONG-TERM DEBT At the time each employee retires, Energy Northwest accrues a liability 1 for the actuarial value of estimated future premiums, net of retiree I contributions.
The total liability recorded at June 30, 2007, was $0.7 million for these benefits.Each Energy Northwest Business Unit is financed separately.
The resolutions of Energy Northwest authorizing issuance of revenue bonds for each Business Unit provide that such bonds are payable from the revenues of that Business Unit. All bonds Energy Northwest 12007 Annual Report issued under Resolution, Nos. 769,775 and 640 for 'costs relating to the issuance of the Series 2007-A, Nuclear Projects Nos. 1,13 and Columbia, respec- Series 200 7-B, and Series 2007-C Bonds as well as tively, have the same priority of payment within certain costs relating to the refunding of certain the Business Unit (the "Prior Lien Bonds"). All outstanding bonds.bonds issued under Resolutions Nos. 835, 838 and The Series 2007-C Bonds, issued for Nuclear 1042 (the "Electric Revenue Bonds") for Nuclear Project No. 1 and Nuclear Project No. 3 are tax Projects Nos. 1, 3 and Columbia, respectively, are exempt fixed-rate bonds that created savings subordinate to the PriorlLien Bonds and have the based on improved interest rates._- same~subordinated.priority.of.payment.within.the_
TheSeries20o.7=D.Bondsissued.for.Columbia Business Unit. Nine Canyon's bonds were autho- are tax exempt fixed-rate bonds to finance a por-rized by the following resolutions:
Resolution No. tion of the cost of certain capital improvements 1214 2OO1 Bonds, Resolution No. 1299 2003 Bonds, at Columbia.Resolution No. 1376 2005 Bonds and Resolution Nuclear Projects Nos. i and 3 have long debt No.1482 the 2006 Bonds. The Packwood Bonds that contains variable rate interest.
These rates were authorized by Resiolution 325 for the 1962 are set periodically through a weekly auction Bonds and Resolution 328 for the 1965 Bonds. rate. These rates ranged from 3.102 percent to During the year ended June 30, 2007, Energy 4.000 percent during FY 2007.Northwest issued, for INuclear Projects No. 1 The Bond Proceeds, Weighted Average and 3, and Columbia, the Series 2007-A Bonds, Coupon Interest Rates, Net Accounting Loss, Eco-Series 200 7-B Bonds, Series 200 7-C Bonds, nomic Gain, and total defeased bonds for 2007-A, and Series 200 7-D Bonds. The Series 200 7-A, 200 7-B, 200 7-C, and 200 7-D are presented in the 200 7-B, 200 7-C, and 200 7-D Bonds issued for following tables: Nuclear Project No. 1, Nuclear Project No. -, and Columbia are fixed rate bonds with a weighted average coupon interest rate ranging from 4.50 percent to 5.33 percent. This transaction resulted I.in a net-loss for accounting purposes of $24.82 million. According to GASB No. 23, "Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities," gains and losses on the refundings are deferred and amor-tized over the remaining life of the old debt or the new debt, whichever is shorter. However an eco-nomic gain of $19.13 million, based on the present value of debt service comparison, was obtained.The economic gain was recorded according to GASB 7, 'Advance Refundlings Resulting in Defea-Bond Proceeds ($ in millions)2007A 2007B 2007C 2007D Total Project 1 $ 56.17 $ 6.74 $ 237.05 $ -$ 299.96 Columbia 84.17 10.67 -37.72 '132.56 Project 3 91.43 1.72 66.17 -159.32 Total $ 231.77 $ 19.13 $ 303.22 $ 37.72 $ 591.84 Weighted Average Coupon Interest Rate for Refunded Bonds 2007A 2007B 2007C 2007Dj Total 5.64% -5.16%Weighted Average Coupon Interest Rate for New Bonds 2007A 20078 2007C 2007D Total 4.99% 5.26% 5.00% 5.00%sance of Debt." I The Series 200 7-A Bonds, issued for Nuclear I Project No. 1, Nuclear Project No. 3, and Columbia are tax exempt fixed-ratte bonds that create sav-ings based on improved ;interest rates.The Series 2007-B Bonds, issued for Nuclear Project No.l, Nuclear Project No. 3 and Columbia are taxable fixed-rate for the purpose of paying Financial Data and Information Net Accounting Loss ($ in millions)2007A 2007B 2007C 2007D To0tal Project 1 $ 0.05 $ 6.70 $ 12.20 $ $ 18.95 Columbia -0.57 0.72 --0.15 Project 3 0.54 1.71 3.47 -5.72 Total $ 0.02 $ 9.13 $ 15.67 $ $ 24.82 Total Defeased ($ in millions)L 2007A 2007B 2007C 2007D Total Project 1 $ 56.17 $ $ 235.48 $ -$291.65 Columbia 84.18 NA 84.18 Project 3 91.45 65.71 -157.16 Total $231.80 $ $ 301.19 $ $ 532.99 During the Fiscal Year ended June 30, 2007, Energy Northwest also issuedI Nine Canyon, the Series 2007 Wind Project Revenue Bonds. The Series 2007 Bonds, in aggregate principal amount of $69.4 million, are fixed-rate bonds with an In prior fiscal years! Energy Northwest also defeased certain revenue ,bonds by placing the net proceeds from the refunding bonds in irrevocable trusts to provide for all required future debt service payments on the refunded bonds until their dates of redemption.
Accordingly, the trust account assets and liability for the defeased bonds are not included in the financial in accordance-w~ithGASB-statements_
No..7-and.23..Including-the...
FY 2007 defeasements, $440.4 million, $159.9 mil-lion, and $314.3 million of defeased bonds were not called or had not matured at June 30, 2007, for Nuclear Projects Nos! i and 3, and Columbia respectively.
Outstanding principal on revenue and refunding bonds for the various Business Units as of June 30, 2007, and future debt service require-ments for these bonds are presented in the fol-lowing tables: average coupon interest rate of 5.0 percent. The Series 2007 Bonds were issued to finance the costs of acquiring, constructing and installing Phase III of Nine Canyon which consists of an additional 14 wind turbines.Energy Northwest did not issue or refund any bonds associated with Packwooqd for FY 2007.Energy Northwest 12007 Annual Report I OUTSTANDING LONG-TERM DEBT As of June 30, 2007 (Dollars in Thousands)
Columbia Generating Refunding Revenue Serial or Term Series Coupon Rate Maturities Ami 1992A 6.30 7-1-2012 $1993A 5.70-5.80 7-1-2008 1994A (A) 7-1-2009 5.40 7-1-2012 Bonds ount Nuclear Project No.1 Refunding Revenue Bonds Series Coupon Rate 1996A 6.00 7-1-2008 1997B 5.00-5.20 7-1-09/2011 1998A 5.00-5.75 7- -08/2012 2001A 5.00-5.50 7-1-13/2017 2001B 5.50 7- -2018 2002A 5.20-5.75 7-1-17/2018 2002B 5.35-6.00 7-1-2018 2003A 5.50 7-1-10/2015 2003B 4.15 7-1 -2009 2003F 5.00-5.25 7- -07/2018 2004A 3.75-5.25 7- -08/2018 2004B 5.50 7- -2013 2004C 5.25 7-1-07/2018 2005A 5.00 7-1-15/2018 2005B 4.11 7-1-2008 2005C 4.34-4.74 7-1-09/2015 2006A 5.00 7-1-20/2024 2006B 5.23 7-1-2011 2006C 5.00 7-1-20/2024 2006D 5.80 7- -2023 2007A 5.00 7-1-13/2018 2007B 5.07-5.33 7-1-12/2021 2007D 5.00 7-1-21/2024 50,000 1989B 7.125 4,415 1990B 7.25 4,776 1993A 7.00 100,200 1993D 7.00 104,976 19930 5.20 17,475 1996A 6.00 15,000 1996C 6.00 160,640 1997A 6.00 186,600 1997B 5.00-5.125 48,000 1998A 5.00-5.75 157,260 2001A 4.50-5.50 123,815 20018B 5.50 132,970 2002A 5.50-5.75 4,530 2002B 6.00 41,330 2003A 5.50 403,080 20038 4.06 12,715 2004A 5.25 26,620 2004B 5.50 114,985 2005A 5.00 1,600 2005B 4.11 91,890 2006A 5.00 434,210 2006B 5.16 4,420 2007A 5.00 62,200 2007B 5.07-5.10 3,425 2007C 5.00 77,575 1993-lA- 1 VARIABLE 10,665 1993-lA-2 VARIABLE 35,080 1993-lA-3 VARIABLE 2003-C- 1 VARIABLE 6,224 2003-C-2 VARIABLE 2,331,700 2003-C-3 i VARIABLE 2,446,584 (B) 2003-C-4 i VARIABLE Serial or Term Maturities 7-1-2016 l$7-1-2009 7-1-2008 7-1-08/2009 7-1-2008 7-1-2008 7-1-2009 7-1-2008 7-1 -08/2011 7-1-08/2017 7-1-10/2013 7-1-2017 7-1-13/2017 7-1-2017 7-1-13/2017 7-1-2009 7-1-2013 7-1-2013 7-1-13/2015 7-1-2008 7-1-08/2017 7/11/2007 7-1-13/2017  112/2013 7-1-1312017 Amount 41,070 3,590 13,075 15,090 1,985 40,050 8,445 7,080 4,885 78,260 76,560 23,600 (C)248,485 101,950 241,455 18,210 62,485$1,135 72,175 925 309,205 9,160 51,730 6,740 219,020 39,070 39,070 12,810 50,235 50,000 50,250 50,000 Compound interest bonds accretion Revenue bonds payable $Estimated fair value at June 30, 2007 i $(A) Compound Interest Bonds Revenue bonds payable i $ 1,947,800 Estimated fair value at June 30, 2007: $ 2,046,150 (B)(B) The estimated fair value shown has been reported to meet the disclosure requirements of the State-ment of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at (B) The estimated fair value shown has been reported to meet the disclosure requirements of the State-which these obligations would be settled. ment of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.(C) Auction Rate Certificates that will have a rate of 5.50 through 7/112008 and a variable rate there-after until 7/1/2017.Financial Data and Information I I OUTSTANDING LONG-TERM DEBT (CONT'D)As of June 30, 2007 (Dollars in Thousands)
Nuclear Project No.3 Refunding Revenue Bonds Packwood Lake Hydroelectric Project Refunding Revenue Bonds Series 1989A 1989B Coupon Rate (A)(A)7.125 Serial or T erm* Maturities 7-1-08/2014
$7-1-08/2014 7-1-2016 Amount Serial or Term Series Coupon Rate Maturities Amount 1962 3.625 3-1-08/2010
$ 1,271 1965 3.75 3-1-08/2012 630 113,682 1990B 1993B 1993C (A)5.65-7.00 7.50 (A)7-1-08/2010
* 7-1-08/2009 7-1-2008 7-1-13/2018 8,225 23,460 14,150 23,963 38,113 Revenue bonds payablei$Estimated fair value at June 30, 2007: $1,901 1,898 (B)1997A 5.10-6.00 1998A 5.125 2001A 5.50 2001B 5.50 2002B 6.00 2003A 5.50 20038 4.15 2004A 5.25 2004B 5.50 2005A 5.00 2005B 4.11 2006A 5.00 2006B 5.21 2007A 4.50-5.00 2007B 5.07 2007C 5.00 1 993-3A-3 VARIABLE 1998-3A VARIABLE 2001 8-3 1 VARIABLE 2001 B 2 VARIABLE 2003D-1 VARIABLE 2003D-2 VARIABLE 2003E VARIABLE 7-1-08/2011 7-1-17/2018 7-1-10/2018 7-01-2018 7-01-2016 7-1-11/2017 7-1-2009 7-1-14/2016 7-1-2013 7-1-13/2015 7-1-2008 7-1-08/2018 7-1-2008 7-1-13/2018 7-1-2012 7-1-12/2018 28,690 53,825 151,380 10,675 75,360 241,915 21,575 83,835 1,515 129,265 1,060 54,760 525 84,465 1,725 61,085 18,205 (B) The estimated fair value shown has been reported to meet the disclosure requirements of the State-ment of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.Nine Canyon Wind Project Refunding Revenue Bonds Serial or Term Series Coupon Rate Maturities Amount 2001A 4.75 7-1-2007 $ 1,675 2001A 4.95 7-1-2008 1,760 2001B 4.75 7-1-2007 675 20018B 4.95 7-1-2008 705 2003 i 3.00 7-1-2007 3.75-5.00 7-1-0812023 4,815 820 19,335 20,155 210 61,540 61,750 69,410 2005 4.00 i 7-1-2007 4.00-5.00 7-1 -08/2023 119,560 5,000 (C)2006 / 4.50-5.00 7-1 -1 0/2030 (C)Revenue bonds payable $ 156,130 Estimated fair value at June 30, 2007! $ 161,375 (B)(B) The estimated fair value shown has been reported to meet the disclosure requirements of the State-ment of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.-Compound interest bonds accretiont Revenue bonds payable::
$Estimated fair value at June 30, 2007: $261,328 1,909,430 1,923,111 (B)(A) Compound Interest Bonds (B) The estimated fair value shown has been reported to meet the disclosure requirements of the State-ment of Financial Accounting Standards (SFAS) 107 and does not purport to represent the amounts at which these obligations would be settled.(C) Auction Rate Certificates that will have a rate of 5.50 through 7/1/2010 and a variable rate there-after until 7/1/2018.Total Bonds Payable -Energy Northwest::
$ 6,346,961 Estimated fair value at June 30, 2007:! $ 6,579,118 1 Energy Northwest 12007 Annual Report DEBT SERVICE REQUIREMENTS As of June 30, 2007 (Dollars in Thousands)
Columbia Generating Station Fiscal Year Principal Interest Tota 6/30/2007 Balance- $ 4,280 $ 48,711 $2008 126,285 121,5041 2009 115,806i 120,964: 2010 157,650 108,982 2011 95,4051 100,803 2012 267,885 95,958 2013-2017 535,020: 358,871 2018-2022 789,120::
148,067 2023-2024 234,025 17,723 Adjustment
** 6224 (6,224)$ 2,331,700$
1,115,359$
3 Nuclear Project No. 1 Fiscal Year Principal Interest j Total 52,991 6/30/2007 Balance $ 9160 :$ 40,371 1$ 49,531 247,789 2008 80,310 100,452;:
180,762 236,770 2009 87,110 95,623: 182,733 266,632 2010 80,620 91,161 171,781 196,208 2011 89,090 87,204 : 176,294 363,843 2012 87,475 82,828 170,303 893,891 2013-2017 1,514,035i 253,831 1,767,866 937,187 $ 1,947,800
$ 751,470 $ 2,699,270 251,748 ,447,059* Principal and interest due July 1, 2007.* Principal and interest due July 1, 2007.** Adjustment for Compound Interest Bonds accretion; Compound Interest Bonds are reflected at their face amount less discount on the balance sheet Nuclear Project No. 3 Packwood Lake Hydroelectric Project Fiscal Year Principal Interest Total Fiscal Year Principal Interest Total 6/30/2007 Balance' $ -$ 27,603 $ 27,603 6/30/2007 Balance"'
t$ 660 $ 68 $ 728 2008 64,426; 109,861 174,287 2008 690: 46 736 2009 68,378; 109,1581 177,536 2009 336: 20; 356 2010 38,862 107,074::
145,936 2010 150:: 81 158 2011 87,514: 97,697:; 185,211 2011 651 2i 67 2012 74,832 93,937 168,769 $ 1,901 $ 144 $ 2,045 2013-2017 921,780 i 349,942::
1,271,722 " Principal and Interest due March 1, 2008.2018 392,310i 26,464! 418,774 Adjustment
* 261,328::
(261,328)
-$ 1,909,430
$ 660,408 $ 2,569,838 Principal and interest due July 1, 2007.** Adjustment for Compound Interest Bonds accretion; Compound Interest Bonds are reflected at their face amount less discount on the balance sheet Nine Canyon Wind Project Fiscal Year Principal Interest Total 6/30/2007 Balance i$ 3,380:$ 3,768;$ 7,148 2008 4,315: 7,335; 11,650 2009 3,705! 7,139:: 10,844 2010 3,965:: 6,963: 10,928 2011 4,260i 6,774: 11,034 2012 4,575i 6,570: 11,145 2013-2017 38,240:: 28,224:: 66,464 2018-2022 48,495:: 18,134: 66,629 2023-2030 45,195; 8,692: 53,887$ 156,130 $ 93,599 $ 249,729'Principal and interest due July 1, 2007.Fi Financial Data and Information Security -Nuclear Projects Nos. 1 and 3 Security -Packwood Lake and Columbia Hydroelectric ProjectI Project Participants have purchased all of the Energy Northwest, Benton County PUD and capability of Nuclear Projects Nos. i and 3 and Franklin County PUD I have signed a Power Columbia.
BPA has in turn acquired the entire Sales agreemept, as amended, which extends capability from the Participants under contracts the period through October 1, 2o08. The agree-referred to as net-billing agreements.
Under the ment became effective November 1, 2002. Benton II net-billing agreements for each of the Business and Franklin County PUDs agree to pay Energy.Units,_Par~ticipants-are-obligated-to-payEnergy_.__Nor.thw.est-in-exchange for-the-totaloutputof Northwest a pro rata share oIf the total annual electric capacity and energy delivered from the costs of the respective Projects, including debt Packwood Generation Project. In addition, the service on bonds relating to each Business Unit. Project is required to supply a specified amount BPA is then obligated to reduce amounts from of power to Benton and Franklin County PUDs. If Participants under BPA power! sales agreements power production does not supply the required by the same amount. The net-billing agreements amount of power, the Project is required to provide that Participants andIBPA are obligated provide any shortfall by purchasing power on to make such payments whether or not the the open market. The Packwood Participants Projects are completed, operable or operating are obligated to pay annual costs of the Project and notwithstanding the suspension, interrup-including debt service, whether or not the Project tion, interference, reduction r curtailment of is operable, until the outstanding bonds are paid the Projects' output. or provisions are made 'for bond retirement, in On May 13, 1994, Energy Northwest's Board accordance with the requirements of the bond I. .t of Directors adopted resolutions terminating resolution.
The Participants also share project Nuclear Projects Nos. i and 3. The Nuclear Proj- revenue to the extent that the amounts exceed ects Nos. 1 and 3 Project agreements and the project costs.net-billing agreements, except for certain sec-tions which relate only to billing processes and accrued -liabilities and obligations under the net-billing agreements, ended upon termination of the Projects.
Energy Northwest entered into an agreement with BPA to provide for continuation of the present budget approval, billing and pay-ment processes.
With respect to Nuclear Project No. 3, the ownership agreement among Energy Northwest and private companies was termi-nated in FY 1999 (see Note F, Commitments and Contingencies).
Energy Northwest 2007 Annual Report I NOTE F -COMMITMENTS AND Nuclear Projects Nos. 1 and 4 Site CONTINGENCIES Restoration
...............................................
Site restoration requirements for Nuclear Projects Nos. 1 and 4 are 'governed by site certification Nuclear Project No. 1 Termination agreements between Energy Northwest and the SincetheNuclearProjectNo.itermination, Energy State of Washington and regulations adopted Northwest has been planning for the demolition by EFSEC, and a lease agreement with the DOE.of Nuclear Project No. i and restoration of the site, Energy Northwesf submitted a site restoration recognizing-the-fact-that..there-is-no-market-forplan-forNuclear Projects.Nos._z1and4_toEESEC the sale of the Project in its entirety and to-date, on March 8, 1995, which complied with EFSEC no viable alternative use has been found. The requirements to remove the assets and restore final level of demolition and restoration will be the sites by demolition, burial, entombment, or in accordance with agreements discussed later in other techniques such that the sites pose minimal Note F under "Nuclear Projects Nos. i and 4 Site hazard to the public. EFSEC approved Energy Restoration." Northwest's site restoration plan on June 12,1995.In its approval, EFSEC recognized that there is Nuclear Project No. 31 Termination uncertainty associated with Energy Northwest's In June 1994, the Nuclear Project No. 3 Owners proposed plan. Accordingly, EFSEC'S conditional Committee voted unanimously to terminate approval provides; for additional reviews once the Project. During 1995, a group from Grays the details of the plan are finalized.
A new plan Harbor County, WashinIgton, formed the Satsop with additional details was submitted in FY 2003.Redevelopment Project] (SRP). The SRP intro- This submittal was used to calculate the ARO duced legislation with the State of Washington discussed in Note G of the financial statements.
I under Senate Bill No. 6427, which passed and was signed by the Governor of the State of Washington on March 17, 1996. The legislation enables local governments and Energy Northwest to negotiate an arrangement allowing such local governments to assume Ian interest in the site on which Nuclear Project I0o. 3 exists for economic development by transferring ownership of all or a portion of the site to local government entities.
This legislation also provides for the local government entities to assume regulatory responsibilities for site restoration requirements and control of water rights. In February 1999, Energy Northwest entered into a transfer agree-Business Development Fund Interest in Northwest Open Access Network The Business Development Fund is a member of the Northwest Open Access Network (NoaNet).Members formed NoaNet pursuant to an Interlocal Cooperation Agreement for the devel-opment and efficient use of a communication network in conjunction with BPA for use by the Members and others.The Business Development Fund has a 7.38 percent interest in NoaNet with a potential man-date of an additional 25 percent step-up possible for a maximum 9.23 percent. As of December ment with the Satsop Redevelopment Project (SRP) to transfer the real and personal property I at the site of Nuclear Project No. 3. The SRP also agreed to assume regulatory responsibility for site restoration.
Therefore, Energy Northwest is no longer responsible tolthe State of Washington and EFSEC for any site restoration costs.31, 2006, (last audited statements), NoaNet has 1$20.1 million in network revenue bonds out-I standing.
The members are obligated to pay the principal and interest on the bonds when due in the event and to the extent that NoaNet's Gross Revenue (after payment of costs of Maintenance
___________________________________________________________
I 1~Financial Data and Information II and Operation) is insufficient!
for this purpose. civil penalties in the event of violations of various The maximum principal shareI (based on step-up regulatory and license relquirements.
potential) that the Business Development Fund Federal law under the Price Anderson Act could be required to pay is j$2.1 million. It is currently limits public Iliability claims from a important to note that the Business Develop- nuclear incident to $io.8 billion. As required by ment Fund is not obligated to reimburse losses law, Energy Northwest has purchased the max-of NoaNet unless an assessment is made to Noa- imum commercial insurance available of $300 Net's members based on a two-thirds vote of the million, which is the primary layer of protection.
-membership._In.F.Y_2oo7_theBusinessD.evelop-The-balance-is-co.vered by the-industr.y's-retro-ment Fund contributed
$22 3 k to NoaNet based spective rating plan that. uses deferred premium I I on an assessment by the NoaNet members, charges to every reactor licensee if a nuclear inci-This equity contribution was reduced to zero dent at any licensed reactor in the United States at year-end because NoaNet had a negative net results in claims that exceed the individual equity position of $13.8 million as of December licensee's primary insurance layer. The current 31, 20o6. Future equity contributions, if any, will maximum deferred premium for each nuclear be treated the same until NoaNet has a positive incident is $1oo.59 million per reactor, but not equity position.
Financial statements for NoaNet more than $15 million per reactor may be charged may be obtained by writing to: Northwest Open in any one year for each incident.Access Network, iii Devereese Road, Chehalis, Nuclear property damage and decontami-WA 98532. nation liability insurance requirements are met through a combination of commercial nuclear Other Litigation and Commitments insurance policies purchased by Energy North-Energy Northwest is involved in various claims, west and BPA. The total aImount of insurance pur-legal actions and contractual commitments chased is currently
$2.75 billion. The deductible and in certain claims and contracts arising in for this coverage is $5.o million per occurrence.
the normal course of business.
Although some suits, claims and commitments are significant in amount, final disposition is not determinable.
In the opinion of management, the outcome of such litigation, claims or commitments will not have a material adverse effect on the !financial positions of the Business Units or Energy Northwest as a whole. The future annual cost of the Business Units, however, may either be increased or decreased as a result of the outcome of these matters.Nuclear Licensing and Insu'rance Energy Northwest is a licensee of the Nuclear Regulatory Commission and1 is subject to routine licensing and user fees, to retrospective premiums for nuclear liability insurance, and to license modification, suspension, or revocation or Energy Northwest 2007 Annual Report g e D NOTE G -ACCOUNITING FOR ASSET RETIREMENT OBLIGATIONS
.. ...................................................................
Energy Northwest adopted SFAS No. 143 on July 1, 2002, (see Note B, Summary of Significant Accounting Policies").
This Statement requires an entity to recognize the fair value of a liability for an ARO, measured at estimated fair value, for legal nhli~atinng related _tn ihp disrnantlpment
.. .... ... .........
... .... ..... ..... ........n....men t and restoration costs associated with the retire-ment of tangible long-livxed assets, such as nuclear decommissioning and site restoration liabilities, in the period in which it, is incurred.
Upon initial recognition of the AROs that are measurable, the probability weighted future cash flows for the associated retirement costs, discounted using a credit-adjusted-risk-free!
rate, and is recognized as both a liability and as an increase in the capitalized carrying amount of the related long-lived assets. Capitalized asset retirement costs are depreciated over the life of the related asset with accretion of the ARO liability classified as an operating expense on the statement of operations between Energy N6rthwest and the State of Wash-ington and regulations adopted by the EFSEC and a lease agreement with the DOE (see Notes B and F). Additionally, there are separate lease agree-ments for land located at Nine Canyon. Leases at these locations are considered operating leases and expenses were $7 2 7.9 k for Columbia, $7.4 k for Nuclear Project No. i and $268.6k for the Nine_Canyon-project.
I__.. .... .As of June 30, 2007, Columbia has a capital decommissioning net asset value of $18.7 million and an accumulated liability of $105.7 million for the generating plant and a net asset value of $1.2 million and an accumulated liability of $i.6 mil-lion for the ISFSI.L An adjustment was made in FY 2007 for Nuclear Project No. i to account for costs incurred for decommissioning and site restoration.
Costs incurred in FY 2007 of $1 3 k combined with cur-rent year accretion expense of $o.69 million and revision in future restoration estimates of $(o.14)million resulted in! a small increase to the ARO of$o.'4 million. Nuclear Project No. i has a capital-- ---------
-----and fund equity each period. Upon settlement of the liability, an entity either settles the obligation for its recorded amount bor incurs a gain or loss if the actual costs differ from the recorded amount.However, with regard to the net-billed Projects, BPA is obligated to provide for the entire cost of decommissioning and site restoration, therefore, any gain or loss recogn~ized upon settlement of the ARO results in an adjustment to either the billings in excess of costs (liability) or costs in excess of billings (asset),I as appropriate, as no net revenue or loss is recognized, and no equity is accumulated for the netibilled projects.Energy Northwest has identified legal obli-decommissioning jnet asset value of $o and an accumulated liability of $13.8 million.Under the current agreement, Nine Canyon has the obligation to remove the generation facil-ities upon expiration of the lease agreement if requested by the lessors. The Nine Canyon Wind I Project recorded the related ARO in FY 2003. As of June 30, 2007, Nine Canyon has a capital decom-missioning net asset value of $0.3 million and an accumulated liability of $o.6 million.Packwood's obligation has not been calcu-lated because the jtime frame and extent of the obligation was considered under this statement as indeterminate.
As a result, no reasonable esti-gations to retire generating plant assets at the fol-lowing business units: Iolumbia, Nuclear Project No. 1 and Nine Canyon. Decommissioning and site restoration requirements for Columbia and Nuclear Project No. 1 are governed by the NRC regulations and site certification agreements mate of the ARO obligation can be made. An ARO I will be required to be recorded if circumstances change. Managenrent believes that these assets will be used in utility operations for the foresee-able future. I i I i an Financial Data and Information I I I I The following table desqribes the changes to Energy Northwest's ARO liabilities for the year ended June 30, 2007: Asset Retirement Obligation (Millions of Dollars)Columbia Generating Station Balance at June 30, 2006 i $ 100.50 Current year accretion expense .5.24 ARO at June 30, 2007 $ 105.74 ISFSI Balance at June 30, 2006 $ 1.50 Current year accretion expense 0.08 ARO at June 30, 2007 $ 1.58 Nuclear Project No. 1 Balance at June 30, 2006 $ 13.25 Less: Restoration costs incurred (0.01)Current year accretion expense .0.69 Revision in future restoration estimates (0.14)ARO at June 30, 2007 $ 13.79: Nine Canyon Wind Project Balance at June 30, 2006 $ 0.57 Current year accretion expense 0.03 ARO at June 30, 2007 $ 0.60.Energy Northwest 12007 Annual Report CURRENT DEBT RATINGS (unaudited)
Energy Northwest (Long-Term)
Net-Billed Rating Nine Canyon Rating Fitch, Inc. AA- A-Moodys Investors Service, Inc. (Moodys) Aaa A3 Standard and Poor's Ratings Services (S & P) AA- A-Variable Rate Debt S&P FITCH MOODYS Letter of Credit Banks Bank of America Long-Term
-AA Aal Short-Term
.A-1 + P-I JPMorgan Chase Bank Long-Term AA A+ Aa3 Short-Term A-I+ FI VMIG-1 Bond Insurance (Long-Term)
_..... ...t MBIA Insurance Corporation AAA AAA Aaa AMBAC Assurance Corporation AAA AAA Aaa Financial Guaranty Insurance Company AAA AAA Aaa XL Capital Assurance Inc. AAA AAA Aaa Financial Security Assurance AAA AAA Aaa FSA (Short-Term)
Dexia A-1+ F1+ VMIG-1
 
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