GO2-16-017, Transmittal of 2015 Annual Financial Report: Difference between revisions

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{{#Wiki_filter:QNORT WESTDonald
{{#Wiki_filter:ENERGYBoxo                                                          96,P2 QNORT   WESTDonald NORTH WESTPh.                                                          w.Gregoire Richland, WA 99352-0968 509-377-8616 j F. 509-377-4317 dwgregoire@ energy-northwest.comn 10 CFR 50.71 (b)
: w. Gregoire ENERGYBoxo 96,P2 Richland, WA 99352-0968 NORTH WESTPh. 509-377-8616 j F. 509-377-4317 dwgregoire@
January 19, 201.6 G02-16-017 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555-0001
energy-northwest.comn 10 CFR 50.71 (b)January 19, 201.6 G02-16-017 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555-0001


==Subject:==
==Subject:==
COLUMBIA GENERATING STATION, DOCKET NO. 50-397;2015 ANNUAL FINANCIAL REPORT  
COLUMBIA GENERATING STATION, DOCKET NO. 50-397; 2015 ANNUAL FINANCIAL REPORT


==Dear Sir or Madam:==
==Dear Sir or Madam:==
In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility.
 
An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.There are no commitments contained in this letter or the enclosure.
In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility. An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.
Should you have any questions, please call DM Wolfgramm at (509) 377-4792.Respectfully, ,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement
There are no commitments contained in this letter or the enclosure. Should you have any questions, please call DM Wolfgramm at (509) 377-4792.
Respectfully,
,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement


==Enclosures:==
==Enclosures:==
As stated Cc:    NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector - 9880 w/o C Sonoda - BPA/1 399 w/o WA Horin - Winston & Strawn w/o
ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures
: 4. A Message to our Stakeholders 6    Executive Board 7    Board of Directors 8    Senior Leadership 9    Sustainability Reporting 12  Columbia Generating Station 14  Refueling and Maintenance Outage 22 15  Energy Services & Development 18  FINANCIAL DATA & IN FORMATION 19  Management Report on Responsibility for Financial Reporting 19  Audit, Legal and Finance Committee Chair's Letter 20  Independent Auditor's Report 21  Energy Northwest Management's Discussion and Analysis 30  Current Debt Ratings 31  Statement of Net Position 33  Statements of Revenues, Expenses and Changes in Net Position 34  Statements of Cash Flows 36  Notes to Financial Statements 54  Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT
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t]EXL      &*DELYERI, INNOVJrflN ANtVALUA AMessage TO OUR STAKEHOLDERS We are proud to shareEnergy Northwest's accomplishments through our annual report.
The agency continues to deliver carbon-free
                                                                                                                  -  -  U electricity to the PacificNorthwest.                                                                                      []
We attribute the success of Energy                                                                              outage. Columbia achieved what's Northwest to our dedicated team                                                                                      known as a "breaker to breaker" of nearly 1,100 professionals. Their                                                                                run, meaning the plant operated focus on    performance    excellence                                                                              non-stop since reconnecting to the ensured    our    energy    generation                                                                              grid June 25, 2013, following its projects and equipment continued                                                                                    previous refueling outage.
to operate reliably and predictably                                                                                      During its 683-day run, Columbia throughout the fiscal year.                                                                                          produced        nearly    18    million During December 2014, the agency                                                                                megawatt-hours of electricity and celebrated the 30th anniversary of                                                                                  operated at more than 98 percent commercial operation for Columbia                                                                                    capacity. Columbia also broke its Generating Station, the region's only                                                                                third  consecutive    calendar  year nuclear energy facility and the state's                                                                              generation record, sending nearly third  largest  generating  resource                                                                              9.5 million megawatt-hours of clean (behind    Grand    Coulee and    Chief                                                                            nuclear energy to the Northwest Joseph dams). With today's social focus                                                                              power grid.
on improving our global air quality,                                                                                    In May, we        began a 50-day Columbia's      carbon-free    baseload                                                                              refueling and maintenance outage generation is more vital than ever to the interests of regional ratepayers,  at Columbia that included installation of key modifications to further the power plant annually prevents about 4.4 million metric tons of carbon    strengthen plant safety and gain greater efficiencies. Completion dioxide from entering the atmosphere (3.6 million if natural gas is used as  of these projects raised Columbia's capacity by approximately 28 the sole source option).                                                      megawatts-electric. That equates to more than 200,000 megawatt-Performance                                                                  hours of additional generation per year. Employees completed all of the On the morning of May 9, Columbia set a new record for its longest        work during the outage safely, without a single Occupational Safety and continuous operational run    -  683 days  -  when operators shut down      Health Administration recordable or lost-time accident.
the reactor for start of the station's biennial refueling and maintenance        Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I.      '    'I.
s L4t(lliflq      EXCELLENCE
                                                                                    & ELVE* NGINNlOVatION ANU VALUEh Project set a new availability record - 99.2 percent. We recognized our team      safety of wind technicians for this historical achievement and their implementation          Our agency emphasizes safety in everyday work activities. During fiscal of innovative preventative maintenance to minimize turbine unavailability.        2015, Energy Northwest received the first place Northwest Public Power On Feb. 9, 2015, we launched a demand response pilot project in                Association safety award for our strong industrial safety performance. We partnership with the City of Richland, Cowlitz County Public Utility District,    continue to strengthen our safety performance, while continuously reaching Pend Oreille County PUD and the Bonneville Power Administration.                  for the highest levels of excellence.
Demand-side resources have the potential to defer or displace the need for
                                                                                                                                                    'pl new generation in the region and make the most efficient use of existing generation    - resulting in overall cost savings for Northwest ratepayers.
V**
We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a      Sustainability solar program for their customers.                                                    This year we integrated sustainability reporting into our annual report.
Building and maintaining trust with key stakeholders is important to all Small Modular Reactors                                                            Energy Northwest employees.
Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with                We believe sustainability reporting is another work on the Carbon Free Power Project, a small modular reactor facility            way to build awareness of Energy Northwvest's overall planned for construction in southeastern Idaho within the next 10 years.          positive impact on our environment, including social We are supporting early siting work and the startup of licensing and training      and economic aspects.
programs.
We believe small modular reactors will eventually play a role in future            Our employees continue to volunteer their time and talents to support power generation here in Washington state and the Northwest.                      those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.
As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions. Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.
Respectfully, Sid Morrison                    Mark Reddemann Chair, Executive Board          Chief Executive Officer
SID MORRISON            JACK JANDA        LORI SANDERS            DAVE REMINGTON Chair                  Vice Chair        Secretary                Assistant Secretary Outside Dire tot        inside Dire~cto  ineside Dire(1to1          ml bem tonial Appointee Zillah, Wash.          SIhetiito, Wash. Kesnnew c, Wash.        Spok~ane, Wash MARC DAUDON            LINDA GOTT        JAMES MOSS              WILL PURSER GubernatoriaI Appointee lns(idePDiCeor    Gubhernatorial Appomi ei  sIC IiDiretor Seattle, Wash            Phelton, Wa sh. Edi ;ewoo WashI          Seqi    Wansh Executive BOARD SKiP ORSER              TIM SHELDON      KATHY VAUGHN Outside Dirretor        Oumtside Director  ns idSDiiretor Raleigh, N C            PoJtlatch, Wash. tyinnwood, Wash
                                                                          ~Ut1iIU1UJ X                                  ~    NNVAf TERRY BREWER                  BARNEY BURKE                    BILL GORDON                    ARIE CALLAGHAN                  DOUG AUBERTIN                    CARNAN BERGREN                BILL GAINES President                    Vice President                  Sec'retary                      Ass istcant Secretary            Commissioner,                    Commissioner,                  Director of Utilities.
Commissioner.                Commissioner,                  Commissioner,                  Commissioner,                    Ferry County PUG                  Clintan County PUG            Tacoma Public Uttlinies Grant County PUD2            Jefferson County PUG            Franklin County PUG            Grays Harbor County PUG 1 LINDA GOTT Commissioner, LIZ GREEN Commissioner, DAN GUNKEL Commissioner, UUItI AWMMONU Energy Services Director, 51ILVL" UU*IUIN Commissioner, JAbK JANUA Commissioner, UIKL  ~JUNIL*
Power Supply and Mason County PUD 3            Skamania Counny PUG              Klickitat County PUG          City of Richland                Okanogan County PUG              Mason County PUG 1            Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS                CURT KNAPP                      PHIL LUSK                      JIN NALINOWSKI                  M.L NORTON                        NED PIPER                      WILL PURSER Commissioner,                Commissioner,                    Power Resources Manager,      Commissioner.                    General Manager,                  Commissioner,                  Commissioner, Wahikiakium County PUD        PeniS Oreille County PUG        City of Port Angeles          Clark Public Utilities          City of Centralia                Cowlitz County PUG            Clallam County PUG JUUn KEUUf~j Commissioner,
                                              *HAN KUWI5U I 11AM Commissioner, LUKEIbANUEIb Commissioner, UII¶UUK~l ~I1,NA:
Commissioner, UEAANA I UIIUIMI'U11 Commissioner, h I'.I! VRUUI*III Commissioner, Asotno County PUG              Kitttas County PUG              Renton PUG                      Lewis County PUG                Pacific County PUG 2            Snoohomisfi County PUG
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[5l  O[ VERNGAiI5U/!    fh AsLVAL SE NIOR Leadership The senior leadershipteam manages dazj-to-daij operations, executes progjrais and Jpro*ects, establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essentialhanids-on leadlership tofoster continual improvement and strengthen organizationalcore 'alites in the vorkforce.
MARK        REDDEMANN Chief Executive Officer BRAD SAWATZKE                                              GROVER          HETTEL                                            BOB General DUTTON  Counsel Chief Operating Officer                                    Vice President for Operations
& Chief Nuclear Officer                                                                                                        & Chief Ethics Officer BRENT        RIDGE                                                          ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services Vice President for Corporate  Services; Chief Financial & Risk Officer                                                                                                            & Development
SUISltlftJ            A LLE*C ELVELANG    INNOVATEO LN* NA
                                                                                                                                            ,i' Environmental                                                      Social                                                  Economic The environmental dimension of                        The social dimension of susta inability                The economic dimension of sustainability sustainability concerns the organization's              concerns the impacts the organization has on                concerns the organization's impacts on the impact on living and non-living natural systems,                the social systems it operates within.                economic conditions of its stakeholders and including land, air, water and ecosystems.                                                                          on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.
Environmental Stewardship Environmental        Stewardship    is    the    cornerstone      of    the waste    generation    and  increase  community      outreach  and  electrical Energy      Northwest    Environmental    Management        System      and    all    efficiency. Energy Northwest reduced hazardous waste generation by more employees consider the environment in the conduct of daily work                        than 10 percent from fiscal 2014. Columbia Generating Station reduced activities. Commitment      to  regulatory    compliance      and  pollution      mixed waste generation by more than 20 percent from 2013 (a refueling prevention      are key    to continuation    of  Energy  Northwest's      EMS      and maintenance outage year).
registration    to the  International  Organization    for  Standardization            Energy Northwest's solid waste recycling efforts bested fiscal year 2014 14001:2004, Each year Energy Northwest              is subject to third-party          by more than 10 percent and the agency achieved more than 100 megawatt-oversight by NSF International Strategic Registrations, an accredited                  hours of electrical efficiency gain.
registrar, which ensures conformance with the rigorous requirements of                      Additionally, Energy Northwest surpassed its goal of recycling 1,500 the standard. Following a successful external, independent maintenance                  pounds of surplus refrigerants stored at Columbia.
audit, Energy Northwest maintained its EMS                                                  Energy Northwest      recycled approximately 29 million pounds of certification to the ISO 14001 Standard.                                                metals, in association with site restoration activities at the Industrial During fiscal year 2015, Energy Northwest achieved its environmental goals to reduce i5                Development Complex.
For fiscal 2016, Energy Northwest h~as again established aggressive
sus*[fItiinhi    EAELLENCtO£ELVEROC INNOVA*IOli ANOOALE environmental targets to reduce waste generation of all waste types, including hazardous, mixed and solid wastes, and increase energy efficiency gains.
Energy/ Northwest installed and began operating at Columbia its Liquid Effluent Evaporation Facility, a lined pond which eliminates a significant volume of wastewater discharges to the ground.
We empower our team to make an environmental impact at work and in our communities.
Energy Northwest      volunteers teamed    with AREVA to celebrate Earth  Day by    holding  a community    clean-up  project along  the Yakima River.
Economic Value                                                                    Since  2001,  Energy  Northwest    and  the  Bonneville  Power in  addition    to  generating    massive    amounts  of  power,    Administration have worked together to refinance certain maturities Energy Northwest generates a huge cash flow for the economy.                  of Net Billed    Bonds. These  refinancings are currently  known as During fiscal year 2015,      Energy Northwest added to its 1,100        "Regional Cooperation Debt." In 2014 and 2015, Energy Northwest workforce 1,500 temporary workers from the local area and across              issued approximately $461 million of bonds to refinance outstanding the country in support of Columbia Generating Station's refueling and        Net Billed Bonds that matured in 2014 and 2015. These refinancings maintenance outage.                                                          made available to BPA additional funds enabling BPA to advance The agency also paid $4.9 million in privilege taxes to the state of      the repayment of $550 million of BPA's repayment obligations to Washington    -  setting a record for the largest tax sum ever paid by the    the Department    of the Treasury. BPA estimates that the interest public power agency. The annual tax is levied on public power electricity    expense savings to the region associated with the refinancings are producers for the privilege of generating electricity in the state and is    approximately $144 million through fiscal year 2023.
directly tied to the amount of electricity generated. The 2014 generation record by Columbia Generating Station of nearly 9.5 million megawatt-hours significantly contributed to fiscal 2015's record-breaking privilege tax payment by Energy Northwest.                                                                            INTEREST EXPENSE SAVINGS TO THE REGION ASSOCIATED WITH BOND REFINANCINGS ARE APPROXI MATELY I$11,4 MILLION THROUGH IFISCAL YEAR 2023.
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Community Service As a major Washington state employer and member of the local Tni-Cities business community for nearly 60 years, Energy Northwest strongly believes in supporting the communities and associated non-profit agencies where its employees work and live.
From the CEO to the newest employee, Energy Northwest cares through direct, hands-on involvement. During fiscal year 2015, Energy Northwest employees contributed more than $100,000 in direct fundraising and countless hours to the community. The agency officially supports three major charities: Benton and Franklin Head Start, March of Dimes and United Way.
Benton and Franklin Head Start                              March of Dimes                                      United Way Since 1980 Energy Northwest employees              Team Energy Northwest raised more than            During 2015, employees contributed more have helped bring holiday season cheer to          $34,000 during 2015 for the March of Dimes,        than $75,000 to the United Way of Benton more than 11,000 children in low-income            exceeding its goal and demonstrating the            and Franklin Counties, The employees' families in local communities. Each year,        philanthropy and generosity of its employees.          contributions help provide hot meals to Energy Northwest employees commit to                Approximately 40 employees, along with          elderly neighbors, fund youth developmental adopting every child in the Benton and          their friends and family, participated in a 3.1    programs, provide disaster relief planning for Franklin Head Start program.                mile walk during the annual Tri-Cities March        local communities and build self-esteem for Babies event to support neonatal birth                      in at-risk youth.
centers and local families in need.
DURING FISCAL 2015 EMPLOYEES SPONSORED NEARLY 450 CHILDREN IN THE HEAD START PROGRAM.
SU*I(L111,11( EACELLENEE UE WNEL£N INNOVAl NANDVAL~t olumbia TiNG        STATIO N Columbia GeneratingStation is the Northwest's only commercial nuclear energy facility, generating 1,190 megawatts of electriecity, which is sold at-cost to the Bonneville Power Administration. Ninety-two Northwest utilities receive a percentageof its output.
Columbia is the third largest electricity generatorin Washington state.
Columbia Net Generation - MWh
In December, Columbia Generating Station marked its 30th year of          in 2012 (9.3 million MWhrs), which followed a generation record for a commercial operation. During that time, Columbia provided more              refueling outage year in 2013 (8.4 million MWhrs).
than 214 million megawatt-hours to the power grid. A boiling water              Columbia achieved another record, in May this time, for its longest reactor, Columbia saw its first fuel loaded into the reactor core Dec. 25,  continuous operational run      - 683 days  -  set on the day operators 1983. After a period to test systems and components, Columbia began          shut down the reactor for start of the station's biennial refueling and commercial operation, sending its first power to the Northwest grid          maintenance outage (see next page). The record also included an Dec. 13, 1984.                                                              industry rarity - a "breaker to breaker" run, meaning the plant operated Columbia also set its third consecutive calendar year generation          non-stop since reconnecting to the grid June 25, 2013, following its record. The plant sent nearly 9.5 million megawatt-hours of electricity      previous refueling outage. Columbia's previous online record  - 505 days to the grid, beating the previous calendar year generation record set        -  was set in April 2011.
    ,II 23th1 ENE3RGY NURTHWEST ANlNUA
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LXCELEN  OEiVRH INNOIAT  DNA*dVL Refueling
                          &MAINTENANCE OUTAGE 22 Columbia Generating Station began a 50-day refueling and maintenance outage May 9 that included several major projects and the loading of 248 new, higher-efficiency nuclear fuel assemblies into the reactor core. The agency temporarily hired an additional 1,500 skilled outage workers locally and from across the country7 to support maintenance projects throughout the plant.
Major projects included:
The feedwater flowmeter project which installed more accurate ultrasonic instruments      to increase the accuracy        of water flow measurement through the reactor core, allowing increased feedwater flow and subsequent higher megawatt output. The project resulted in an increase of Columbia's output capacity by 21 megawatts.
Installation of a new power range neutron monitoring system, replacing analog circuit controls with more reliable and redundant digital circuit controls. Installation of the new PRNM hardware allows for implementation of improvements in analytical methods. The benefits of this project to Columbia are significant, including efficient use of nuclear fuel, an increase in overall efficiency of reactor operations and increased equipment reliability.
Columbia installed three new 175-ton main power transformers. The former transformers were original plant equipment and approaching their end-of-service life. The new transformers increased overall plant reliability and will serve Columbia through its current operating life, scheduled for the end of 2043.
ZERO RECORDABLE INJURIES 2015~
ENRYNRTHWEiT A4NNUR[PORT
ENERGY SERVICES                              &
Development Nine Canyon Wind Project Nine Canyon Wind Project, located on the hilltops southeast of Kennewick, Wash., is one of the largest public-owned wind projects in the nation with 63 wind turbines--14 rated at 2.3 megawatts and 49 rated at 1.3 megawatts.
Each turbine has its own miniature weather station that monitors wind direction and speed. Motors rotate the turbines into the wind and sophisticated control systems ensure the blades turn at the optimal speed to maximize power generation. The turbines are self-starting and begin generating electricity when wind speed reaches eight miles per hour, with full power achieved at about 35 mph. If winds exceed 55 mph on a sustained basis, the turbines shut down automatically and restart when the winds fall below 45 mph.
Nine Canyon's public outreach program promoting renewable energy reached more than 300 members of the communitq during fiscal year 2015.
Packwood Lake Hydroelectric Project The 27.5-megawatt Packwood Lake Hydroelectric Project is located in the Gifford Pinchot National Forest in Lewis County, Wash., approximately 20 miles south of Mt. Rainier. The facility began commercial operation in 1964 as Energy Northwest's first electric power generation project.
Hydro is a carbon-free resource, and fish screens protect migrating fish populations. Water levels in Packwood Lake and Lake Creek are closely monitored to preclude other environmental impacts.
White Bluffs Solar Station White Bluffs Solar Station, a 242-panel demonstration facility, is located at the agency's Industrial Development Complex near Columbia Generating Station in Richland, Wash.
The collaborative    project is funded    by Energy    Northwest, the Bonneville Power Administration, the Bonneville Environmental Foundation      Operations & Maintenance and the Department of Energy.                                                      Operations & Maintenance Services renewed a contract with the city of Burbank, Calif. to operate and maintain the Tieton Hydroelectric Generation & Project Development                                              Project at Rimrock Lake in the Cascades.
During fiscal year 2015, Energy Northwest activated its Demand                Energy Northwest also continues to provide operations and Response Aggregated Control System and successfully launched a                maintenance services to the natural gas-fired Olympic View Generating demand response pilot project. DRACS is a communication and control            Station, owned by Mason County Public Utility District 3.
infrastructure used for demand-side management of power loads. A pilot project with BPA is currently under way with a demand response resource up to 35 megawatts of reliable, fast-reaction              demand response capacity.
Energy Northwest also launched a new, member-driven community solar initiative during the year. This aggregated public power effort may result in multiple community solar installations throughout Washington state.
                                                            ~*
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Applied Process Engineering Laboratory Energy  Northwest    manages    the  Applied  Process    Engineering Laboratory    as a  lease  facility for  laboratory-based    research    and development within a controlled operating environment. Approximately Environmental and Analytical Services Laboratory 90 percent of the leasable space was occupied during fiscal 2015, with                Energy Northwest's Environmental and Analytical Services Laboratory 10 percent remaining available for business start-ups or as specialized          provides chemical analysis and environmental monitoring expertise for testing labs for emerging technologies.                                          utility, municipal and residential customers. The laboratory continues to maintain accreditation for wastewater, drinking water, radiochemical Calibration Services Laboratory                                                  analyses and licensure as a clinical laboratory for drug screenings.
The Energy Northwest Standards Laboratory, located adjacent to                    Services provided to Columbia and outside clients include metals Columbia, is a multi-faceted applied physics laboratory            performing    quantification, general chemistry, microbiological testing, radiological calibrations in virtually every aspect of metrology, including torque,            monitoring,    lubricant  condition  monitoring,  material  verification, force, pressure, vacuum,      mass, dimensional,    electrical,  electronic,    commercial-grade dedication of materials, and aquatic and terrestrial temperature, humidity, flow, vibration, light and sound.                          monitoring.
ENSL is accredited to international Standard ANSI/ISO/IEC 17025 by                Laboratory staff is active in the community, providing classroom the American Association for Laboratory Accreditation. The laboratory            education to Delta High School students, serving as judges for local achieved re-accreditation during fiscal 2015, through January 2017.              science and technology competitions, and participating in the annual Major laboratory clientele include Columbia, Bechtel, Washington              Science    Technology    Engineering  and  Math    Conference. Staff also Closure Hanford, Washington        River Protection Solutions, CH2M Hill,        provides instruction to Delta students on analytical chemistry, laboratory Pacific Northwest National      Laboratory, AREVA, Columbia        Energy &      testing methods, careers in environmental science and the importance of Environmental, High-Line Engineering, Intermech, Energy Solutions and            clean energy.
Mid-Columbia Engineering.
The Energy Northwest laboratory is also involved with educational            Industrial Development Complex outreach in the Tni-Cities through participation in the annual Science                The industrial Development Complex is located just east of Columbia Technology Engineering and Math Conference and World Metrology                    and operated by Energy Northwest. A leasing business line successfully Day. Participation includes hands-on classroom instruction and hosting            leverages available outlying buildings by renting office and warehouse students at ENSL facilities for work-based learning experiences.                  space.
Laboratorystaff is involved with educationaloutreach in the Tri-Cities, includingpresentations to students, serving asjudges for local science and technology competitions, andparticipatingin the annual "4                Science Technology Engineering and Math Conference.
201BEf*EY NORTH*EST ANNUAL  R*PO
18        18Su.IstaJ.in'ing EXCELLENCE
                                    &DELIVERING INNOVATION AND VALUE
* S - 9 Finacia at        &Inorato 20T ENR  NOTWSTANALRPR
19                                                      SU.*_-aiI'*.I'*.*  EXCELLENCE
                                                                                    &DELIVERING INNOVATIDN ANDVALUE MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING Energy Northwest management is responsible for preparing the accompanying financial statements and for their integrity. They were prepared in accordance with Generally Accepted Accounting Principles (GAAP) (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 independent auditors. Management has made available to pricewaterhouseCoopers ((P 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 financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures.,
Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, PricewaterhouseCoopers LLP has considered the internal control structure inorder 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, 2015, internal control procedures are adequate.
M.E. Reddemann                              B. Ridge Chief Executive Officer                    Vice President for Corporate Services; Chief Financial and Risk Officer AUDIT, LEGAL AND FINANCE COMMITTEE CHAIR'S LETTER The executive board's Audit, Legal and Finance Committee (committee) is composed of 11 independent directors. Members of the committee are Chair Kathy Vaughn, Marc Daudon, Jack Janda, Jim Moss, Skip Orser, Will Purser, Dave Remington, Lori Sanders, Tim Sheldon, Linda Gott and Sid Morrison, ex-officlo. The committee held 9 meetings during the fiscal year ended June 30, 2015.
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 independent auditors the overall scope and specific plans for their respective audits, and reviewed Energy Northwest's financial statements and the adequacy of Energy Northwest's internal controls.
The committee met regularly with Energy Northwest's internal auditor and convened periodic meetings with the independent auditors to discuss the results of their audit, their evaluations 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 auditors.
Kathleen R.Vaughn
: Chair, Audit, Legal and Finance Committee 20l15ENERGY NORTHWESTANNUAL REPDRT
20                                                      SUStc:7iuB.iiiigEXCELLENCE    &DELIVERING  INNOVATIONANDVALUE L. . _*. . . .. . . . . . .  . . :. . .. . : . . .    .. . .  .. . . .. . . . . . . .. . ..... . . . . . .. . . . ...... .. . ... 2 . . . .: . . . . . . . . . .. . . .. L _
INDEPENDENT AUDITOR'S REPORT To the Executive Board of Energy Northwest:
We have audited the statements of net position and the related statements of revenues, expenses and changes in net position and of cash flows of each major fund of Energy Northwest (the "Company"), which consists of the Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.
1, Nuclear Project No. 3, the Business Development Fund, the Nine Canyon Wind Project, and the Internal Service Fund, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Company's basic financial statements.
Management's Responsibility for the Financial Statements Management isresponsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted inthe United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility Our responsibility is to express opinions on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund of the Company at June 30, 2015, and the respective changes in financial position and its cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter As discussed in Note 1 and 6 to the financial statements, the Company adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, effective July 1,2014. The financial statements of Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.1, the Business Development Fund, and the Nine Canyon Wind Project as of and for the year ended June 30, 2015 reflect the adoption of the provisions of GASB 68. Our opinions are not modified with respect to this matter.
Other Matter The accompanying management's discussion and analysis, the Schedule of the Company's Proportionate Share of Net Pension Liability and the Schedule of the Company's Contributions (Schedules of Required Supplementary Information) as listed in the table of contents of the Company's 2015 Annual Report are required by accounting principles generally accepted inthe United States of America to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Portland, Oregon September 24, 2015 2015 ENERGYNORTHWEST  ANNUAL  REPORT
2.1                                                      sustaningEXtELLENCE      &DELIVERINGINNOVATIONANDVALUE ENERGY NORTHWEST MANAGEMENT'S DISCUSSION AND ANALYSIS Energy Northwest is a municipal corporation and joint operating agency            The Statements of Revenues, Expenses, and Changes in Net Position of the state of Washington. Each Energy Northwest business unit is financed      provide financial information relating to all expenses, revenues and equity and accounted for separately from all other current or future business            that reflect the results of each business unit and its related activities over assets. The following discussion and analysis is organized by business unit.      the course of the fiscal year. The financial information provided aids in The management discussion and analysis of the financial performance and          benchmarking activities, conducting comparisons to evaluate progress, and activity is provided as an introduction and to aid in comparing the basic        determining whether the business unit has successfully recovered its costs.
financial statements for the fiscal year (FY) ended June 30, 2015, with the          The Statements of Cash Flows reflect cash receipts and disbursements and basic financial statements for the FY ended June 30, 2014.                        net changes resulting from operating, financing and investing activities. The Energy Northwest has adopted accounting policies and principles that          Statements of Cash Flows provide insight into what generates cash, where are in accordance with Generally Accepted Accounting Principles (GAAP) in        the cash comes from, and purpose of cash activity.
the United States of America. Energy Northwest's records are maintained as            The Notes to Financial Statements present disclosures that contribute prescribed by the Governmental Accounting Standards Board (GASB). (See            to the understanding of the material presented in the financial statements.
Note i to the Financial Statements.)                                              This includes, but is not limited to, Schedule of Outstanding Long-Term Debt Because each business unit is financed and accounted for separately, the      and Debt Service Requirements (See Note 4 to the Financial Statements),
following section on financial performance is discussed by business unit to aid  accounting policies, significant balances and activities, material risks, in analysis of assessing the financial position of each individual business unit. commitments and obligations, and subsequent events, if applicable.
For comparative purposes only, the table on the following page represents a          The basic financial statements of each business unit along with the notes memorandum total only for Energy Northwest, as a whole, for FY 2015 and          to the financial statements and management discussion and analysis should FY 2014.                                                                          be used to provide an overview of Energy Northwest's financial performance.
The financial statements for Energy Northwest include the Statements of      The following discussion provides comparative financial information for Net Position; Statements of Revenues, Expenses, and Changes in Net Position;      the years ended June 30, 2015 and 2014. The year of 2014 has not been and Statements of Cash Flows for each of the business units, and Notes to        restated to reflect changes in accounting principles per GASB Statement No.
Financial Statements.                                                            68; however, FY 2015 beginning balance has been restated. (See Note 1 The. Statements of Net Position present the financial position of each        to the Financial Statements.) Questions concerning any of the information business unit on an accrual basis. The Statements of Net Position report          provided in this report should be addressed to Energy Northwest at P0 Box financial information about construction work in progress, the amount of          968, Richland, WA, 99352.
resources and obligations, restricted accounts and due to/from balances for each business unit. (See Note 1 to the Financial Statements.)
2015 ENERG]Y NORTHIWEST ANNUAL REPORT
22                                                                ss ta*i*ningEXCELLENCE              &DELIVERIN9    INNOVATION AND  VALUE COMBINED FINANCIAL INFORMATION June 30, 2015 and 2014 (DoLLars in thousands) 24                              21:                                      Change Assets                                                                                                        :i Current Assets                                                :$                                  242,268 i$                                    233,276 i$                                    (8,992)
Restricted Assets                                                                                            ::
Special Funds                                                :172,851                                      i318,116:i                                                                      145,265 Debt Service Funds                                            :662,673:i                                                                          352,643:i                                  (310,030)
Net Plant                                                      :1,517,397                                    !1,562,376                                    i44,979 Nuclear Fuel                                                                                        999,007 i976,327                                        i(22.680)
Lung-Term Receivables                                          :                                                                                        59:!                                          59 Other Charges                                                  :3,078.698                                    !3,187,338:!                                                                    108,640 TOTAL  ASSETS                                                                                  6.672.894 i6,630,135                                                                          (42,759)
DEFERRED    OUTFLOWS OFRESOURCES*                              i20,048                                        !38,845                                        !18,797 TOTAL  ASSETS AND DEFERRED OUTFLOWS                          i$                                6,692.942 i$                                  6,668,980! $                                    (23,962)
Current Liabilities                                            :$                                  983,794i $                                    517,195 i$                                (466,599)
Restricted Liabilities                                                                                        ::
Special Funds                                                  :153,250:i                                                                        158,818:i                                        5,568 Debt Service Funds                                            :123.653                                      i119,479:i                                                                        (4,174)
Long-Term Debt                                                                                    5.420,783 !                                  5,731,753 :                                    310,970 Other Long-Term Liabitilies                                                                          11,254:i                                    105,843:i                                    94,589 Other Credits                                                  :6,041                                        i5,850:                                                                              1191)
Net Position                                                                                                  ::
Invested in capital assets, net of related debt              :(35,450):                                                                        (44,813):                                    (9,363)
Restricted, net                                              :38,005                                      !43,685                                        :                                      5,680 Unrestricted, net                                            :(15,478):                                                                        (14,301 ):                                      1,177 TOTAL    LIABILITIES  AND NETPOSITION                                                          6,685,852 i6,623,509                                                                        (62,343)
DEFERRED    INFLOWS    OFRESOURCES*                                                                  7,090 i45,471                                                                            38,381 TOTAL    LIABILITIES,  NETPOSITION AND DEFERRED INFLOWS i$                                      6,692.942 !$                                  6,668,980 i$                                  (23,962)
Operating Revenues                                              :                                  470,779 i$542,257                                          $                                71,478 Operating Expenses                                              :386,496                                      i421,6322                                                                          35,126 Net Operating Revenues                                                                              84,283 i120,635:i                                                                          36,352 Other Income and Expenses                                      :(84.238)!                                                                      (1 18,467)i                                    (34,229)
(DISTRIBUTION)    & CONTRIBUTION                                                                            -:-:
Beginning Net Assets*                                                                                (12,968)i                                    (17,597):                                      (4,629)
ENDING NETPOSITION                                              !$                                  (12,923)* $                                  (15S,429)* $                                  (2,506)
  *Energy Northwest's 2014 Statement of Net Position end Statements of Revenues and Expenses and Changes in Net Position were updated for the impacts of the required retroactive application of GASBStatement No. 6S "Items Previously Reported as Assets and Liabilities," which became effective for Energy Northwest in fiscal year 2015. See Note 1 forea summary of this change in accounting principle.
2915 ENERGY NORTHWEST  ANNUAL    REPORT
23 COLUMBIA GENERATING STATION Columbia Generating Station (Columbia) is wholly owned by Energy LPRM replacement, Critical Spares, Rad Monitors, ECCS Pump Flow, Main Northwest and its participants and operated by Energy Northwest. The plant      Transformer, Security Cameras, Radio Obsolescence, and Circuit/Panel is a 1,157-megawatt electric (MWe, Design Electric Rating, net) boiling water  Upgrade. These projects resulted in 74 percent of the CWIP activity. The nuclear power plant located on the Department of Energy's (DOE) Hanford        remaining 26 percent was made up of 151 separate projects.
Site north of Richland, Washington.                                                Nuclear fuel, net of accumulated amortization, decreased $22.7 million Columbia produced 8,142 gigawatt-hours (GWh) of electricity in FY 2015,    from FY 2014 to $976.3 million for FY 2015. During FY 2015 Columbia as compared to 9,781 GWh of electricity in FY 2014, which included economic    incurred $58.4 million in capitalized fuel/reload activity with a decrease in dispatch of 0 and 62 GWh respectively. The FY 2015 generation decrease of      fuel of $37.9 million due to amortization, a decrease of $18.0 million for 16.8 percent was due to a record generation run in FY 2014 coupled with        activity related to movement of TVA fuel and a decrease of $25.3 million for Columbia entering its planned 42 day refueling outage (R-22) on May 9, 2015    transfer of fuel monitoring equipment to utility plant in service.
and down powers. The 42 day planned outage extended an additional 8                Current assets decreased $20.7 million in FY 2015 to $197.7 million.
days and ended on June 27. The down powers took place in the first quarter      Changes were decreases to receivables of $8.3 million, decreases to cash of FY 2015. The extended outage and down powers resulted in budgeted            and investments of $15.2 million, clearing of due from other business units generation lower than budget by 280 GWh for the fiscal year.                    of $9.4 million and increases to materials and supplies and prepaid amounts Columbia's cost performance is measured by the cost of power indicator. of $12.2 million.
The cost of power for FY 2015 was 5.05 cents per kilowatt-hour (kWh) as compared with 3.70 cents per kWh in FY 2014. The industry cost of power            Special funds increased $146.8 million to $283.8 million in FY 2015 due to fluctuates year to year depending on various factors such as refueling          the FY 2015 bond activity and schedule of construction costs for these funds outages and other planned activities. The FY 201 5 cost of power increase of    in FY 2015.
36.5 percent was due to the planned outage and impacts from the extended            The debt service funds increased $83.3 million in FY 2015 to $182.4 R-22 activity and first quarter down power.                                    million. The increase is due to the restructuring and funding activities for the regional cooperative debt program associated with the 2015 bond activities.
Assets, Liabilities, and Net Position Analysis                                      Other charges increased $146.3 million in FY 2015 from $907.0 million The net increase to Utility Plant (plant) and Construction Work In Progress to $1,053.3 million. The increase was change in Costs in Excess of Billings (CWlP) from FY 2014 to FY 2015 (excluding nuclear fuel) was $52.9 million.      related to the net effect of payment of current maturities and refunding The changes to plant and CWIP were comprised of additions to plant of          activity.
$152.1 million with a decrease to CWIP of $10.9 million. Remaining change          Deferred outflows increased $15.2 million in FY 2015 from $18.2 million was the period effect of depreciation of $88.3 million.                        to $33.4 million. The major change was an increase of $12.3 million due to The FY 2015 CWtP balance of $58.2 million consisted of 14 major projects    the recognition of a deferred pension outflow in accordance with GASB No.
of at least $1.0 million: Cyber Security, Pipe Replacement, Scram Discharge    68. An increase of $2.9 million was associated with the 2015 bond activity.
Monitoring, Fukushima Impacts, Main Condenser, Feedwater Flowmeter,                Current liabilities increased $144.8 million in FY 2015 to $285.2 million.
24                                                      24 SUSI  lifll              aDELDIVrNG INNDVAIION ll(J EXCELLENCE                  ANDVALJ Components of the change were increases to current maturities of debt of          Revenue and Expenses Analysis
$82.4 million, addition of notes payable promissory note for refunding of              Columbia is a net-billed project. Energy Northwest recognizes revenues
$93.6 million, increase to taxes payable of $5.0 million due to fuel assemblies    equal to expenses for each period on net-billed projects. No net revenue or being moved into Washington State for R-22, decrease in generation tax of          loss isrecognized and no net position is accumulated.
$0.7 million due to R-22 impacts, increase of bearer bonds payable of $0.3            Operating expenses increased $34.7 million from FY 2014 costs of $363.2 million, decreases due to timing of year end obligations of $8.5 million, and      million to $397.9 million in FY 2015. The increases in costs were due to FY timing of due to participants that resulted in an decrease of $27.3 million.      2015 being a planned refueling year as compared to FY 2014 and were mostly Restricted liabilities increased $7.9 million in FY 2015 to $208.6 million. in the operations and maintenance areas amounting to $68.7 million. The The increase was due to accrued decommissioning of $6.9 million and interest      increase in operations and maintenance costs due to R-22 were offset by a related to bond activity of $1.0 million.                                          decrease in nuclear fuel costs of $25.5 million and a decrease of $8.2 million in Long-term debt (Bonds Payable) increased $119.7 million in FY 2015 from        fuel disposal fee. The decrease of $9.5 million in fuel expense was due to less
$3,455.7 million to $3,575.4 million due to the restructuring and funding          generation and R-22 impacts along with a decrease in costs of $15.1 million activities for the regional cooperative debt program associated with the 2015      due to the ISFSI settlement claim with the Department of Energy (See Note bond activities.                                                                  13 to the Financial Statements) along with decreases to fuel operating costs Other long-term liabilities increased $90.6 million in FY 2015 to $101.6      of $0.5 million for fuel casks and $0.4 million relating to fuel interest costs.
million. The increase was due to reorganization of pension liability in            Fuel disposal fees ceased in FY 2015 per notice from the DOE, resulting in the accordance with GASB No. 68, of approximately $88.6 million; and nuclear          $8.2 million decrease. (See Note 13 to the Financial Statements.) Decrease fuel cask activity, of approximately $2.0 million.                                in costs for administrative and general of $4.1 million were mostly driven Deferred inflows increased $38.3 million from $2.7 million in FY 2014 to      by FY 2014 having a $3.7 million charge with the adoption of GASB No. 65
$40.9 million in FY 2015. An increase of $39.3 million was recognized to          in FY 2014, recognition of $2.6 million of pension expense in accordance deferred pension inflow in accordance with GASB No. 68. A decrease to bond        with GASB No. 68 in FY 2015, and decreases in other costs of $2.2 million.
refunding inflows of $1.0 million was due to the restructuring and funding        Generation tax decreased $1.0 million due to lower generation, depreciation activities for the regional cooperative debt program associated with the 2015      increased $4.6 million which is reflective of the plant focus on reliability and bond activities.                                                                  decommissioning increased slightly at $0.3 million per established schedule.
Other Income and Expenses increased $35.4 million from FY 2014 to
                                                                                  $115.7 million net expenses in FY 2015. A major piece of the increase was the COLUMBIA GENERATING STATION Total Operating Costs (Dollars in thousandsi          spent fuel litigation settlement from the DOE of $23.6 million reported in FY 2014 as a gain on DOE settlement on the Statement of Revenues, Expenses, and Changes in Net Position. The FY 2015 amount of $15.1 million has been recorded as a reduction to fuel expense to represent the true cost of the fuel FY2015
          -                    I-        I-FY2012
          -                                                                      cask program. The cask costs were never an intended cost for the facility and only resulted from a failure to perform from the Department of Energy.
(See Note 13 for DOE settlement discussion.) The remaining increase of $11.8
          -          I-        I-        I-          II                          million was due to increased bond related expenses of $20.0 million, increase in investment income of $0.3 million, increases in miscellaneous non-utility FY2012                i                                                            leasing revenue of $4.0 million, and an increase of $3.9 million for gain on SWU sale related to the TVA fuel contract. (See Note 13 for Nuclear Fuels FY 2011                                                                            discussion).
I                                      Columbia's total operating revenue increased from $443.5 million in FY 2014 to $513.6 million in FY 201 5. The increase of $70.1 million was due to 0        100,000    200,000  300,000    400,000  500,000 the refueling year of the two year cycle for the refueling and maintenance 1  Operating Expenses        I      ther Income/Expenses          program and the related effect of the net billing agreement on total revenue.
2O15ENERB' NDRTHEiffT ANNUA REPORC
25                                                    25              ~i1* ( dCLN~
* UFLVRNJ iN    VA1ONAN reA PACKWOOD LAKE HYDROELECTRIC PROJECT                                                                THE PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Do 1ars in thousands)
The Packwood Lake Hydroelectric Project (Packwood) is wholly owned and operated by Energy Northwest. Packwood consists of a diversion structure at Packwood Lake and a powerhouse located near the town of Packwood, Washington. The water is carried from the lake to the powerhouse through FY 2015
                                                                                                              - i                          m          *2.141 a five-mile long buried tunnel and drops nearly 1,800 feet in elevation.          FY 2014                                                                2.150 Packwood produced 107.16 GWh of electricity in FY 2015 versus 115.04 GWh in FY 2014. The 6.8 percent decrease in generation can be attributed          FY 2013                      im                                        2.166 to less favorable water conditions compared to the previous year; FY 2015 was the 14th best generation year compared to FY 2014 which ranked 5th.          FY 2012                    -                                          1.872 Although FY 2015 was a low water year, generation results exceeded the budgeted generation amount of 84.64 GWh by 26.7 percent due to higher            FY 2011                                                                1.742 than average generation and a delay in new license requirements (See Note 1 to the financial statements) which will eventually lower the generating 0U0          1 00 2,0        250 capacity for Packwood.
iOperating Expenses Packwood's cost performance is measured by the cost of power indicator.
The cost of power for FY 2015 was $2.01 cents per kWh as compared to
$1.88 cents per kWh in FY 2014. The cost of power fluctuates year-to-year        is indefinitely extended for continued operations until a formal decision is depending on various factors such as outage, maintenance, generation, and        issued by FERC and a new operating license is granted. As of June 30, 2015, other operating costs. The FY 201 5 cost of power increase of 6.9 percent        Packwood continues to be relicensed under this extended agreement.
was a result of decreased generation as overall results of operations were relatively unchanged (.42%/).                                                    Revenue and Expenses Analysis The agreement with Packwood participants obligates them to pay Assets, Liabilities, and Net Position Analysis                                    annual costs and to receive excess revenues. (See Note 1 to the Financial Total assets increased $0.6 million from FY 2015, with the major driver      Statements.) Accordingly, Energy Northwest recognizes revenues equal to being an increase to cash of $0.3 million to cash and $0.3 million due from      expenses for each period. No net revenue or loss is recognized and no net other business units. The corresponding increase to total liabilities of $0.5    position isaccumulated.
million was the $0.3 million increase due to bearer bond recognition, an              Operating expenses remained consistent from the prior year.
increase of $0.3 million in net pension liability and increase of $0.1 million        Other Income and Expense remained unchanged from previous year to deferred pension inflow as a result of recognition of pension liability        resulting in a net gain of $4 thousand.
in accordance with GASB No. 68. Packwood has incurred $3.7 million in                Packwood participants are obligated to pay annual costs of the project relicensing costs through FY 2015 with no new costs incurred for FY 2015.        (including any applicable debt service), whether or not the project is operable.
These costs are shown as Other Charges on the Statement of Net Position.          The Packwood participants also share project revenue to the extent that the Packwood has been operating under a 50-year license issued by Federal            amounts exceed costs. These funds can be returned to the participants or Energy Regulatory Commission (FERC), which expired on February 28, 2010.          kept within the project. As of June 30, 201 5 there is $5.8 million recorded as Energy Northwest submitted the Final License Application (FLA) for renewal        deferred revenues in excess of costs that are being kept within the project.
of the operating license to FERC on February 22, 2008. On March 4, 2010,          Packwood participants are currently taking 100 percent of the project FERC issued a one-year extension to operate under the original license which      generation; there are no additional agreements for power sales.
26                                                      sustainingEXCELLENCE        &DELIVERING INNOVATION ANDVALUE NUCLEAR PROJECT NO. 1                                                              NUCLEAR PROJECT NO. 3 Energy Northwest wholly owns Nuclear Project No. 1, a 1,250-MWe                    Nuclear Project No. 3, a 1,240-MWe plant, was placed in extended plant, which was placed in extended construction delay status in 1982, when        construction delay status in 1983, when it was 75 percent complete. On it was 65 percent complete. On May 13, 1994, Energy Northwest's Board of            May 13, 1994, Energy Northwest's Board of Directors adopted a resolution Directors adopted a resolution terminating Nuclear Project No. 1. All funding      terminating Nuclear Project No. 3. Energy Northwest is no longer responsible requirements are net-billed obligations of Nuclear Project No. 1. Termination      for any site restoration costs as they were transferred with the assets to the expenses and debt service costs comprise the activity of Nuclear Project No. 1      Satsop Redevelopment Project. The dlebt service related activities remain the and are net-billed. (See Notes 5 and 12 to the Financial Statements.)              responsibility of Energy Northwest and are net-billed. (See Notes 5 and 12 to the Financial Statements.)
Assets, Liabilities, and Net Position Analysis Restricted cash decreased $281.6 million in FY 2015 to $80.2 million. The      Assets, Liabilities, and Net Position Analysis decrease was due to bond activities, investment activities and transactions            Long-term debt increased $9.6 million from $1,071.4 million in FY 2014 between other units.                                                                to $1,081.0 million in FY 2015, as a result of $47.8 million being transferred Long-term debt increased $124.8 million from $715.9 million in FY 2014          to current debt to be paid on July 1, 2015 along with a decrease in bond to $840.7 million in FY 2015 as a result of $53.7 million being transferred to      related amortization of $17.6 million; and the remaining changes were due current debt to be paid on July 1,2015 along with an increase in bond related      to the debt associated with the planned and approved regional cooperative amortization of $45.1 million; the remaining changes were due to the debt          debt program (2015 A and B). Current debt per the debt maturity schedule associated with the planned and approved regional cooperative debt program.        decreased $109.5 million from $157.3 million in FY 2014 to $47.8 million in (2015 A and B). Short term debt decreased $278.3 million per the debt maturity      FY 2015. The remaining changes in liabilities of $54.3 million were due to a schedule and current notes payable decreased $183.6 million as a result of the      decrease in notes payable related to bond financing of $52.6 million, increase regional cooperative debt program. There was a decrease to restricted liabilities  to bearer bond activity of $0.3 million and a decrease in accrued interest of $3.0 million, represented by decreases to interest payable of $3.1 million and  payable of $2.0 million.
slight increase inthe decommissioning estimate of $0.1 million.
Revenue and Expenses Analysis Revenue and Expenses Analysis                                                          Overall expenses decreased $6.0 million from FY 2014 related to bond Other Income and Expenses showed a net decrease to expenses of $6.6            activity decreases of $5.9 million (interest expense and amortization) and $0.1 million from $41.6 million in FY 2014 to $35.0 million in FY 2015. Investment      million decrease to liquidation (plant preservation and termination costs).
revenue for FY 2015 remained the same as previous year at $15 thousand; bond related expenses decreased $6.0 million; other expenses decreased $0.3 million, which included a restoration cost estimate decrease of $0.5 million as a result of the FY 2014 change in estimate in the accelerated restoration work plan, offset by an adjustment of $0.2 million to account for an Internal Service Fund allocation charge.
2015 ENERGYNORTHWEST ANNUAL REPORT
27                                                          S      I *sU
                                                                  -L  f.ifTy EXCELLENCE
                                                                                      &DELIVERINGINNOVATIONAND VALUE BUSINESS DEVELOPMENT FUND                                                            Revenue and Expenses Analysis Energy Northwest was created to enable Washington public power utilities              Operating Revenues in FY 2015 totaled $7.2 million as compared to FY and municipalities to build and operate generation projects. The Business            2014 revenues of $6.0 million, an increase of $1.2 million (20.0 percent). The Development Fund (BDF) was created by Executive Board Resolution No.                  increase in revenues was driven by two new activities: Demand Response 1006 inApril 1997, for the purpose of holding, administering, disbursing, and        Initiative (revenues of $0.8 million) and the Tieton Hydroelectric Project accounting for Energy Northwest costs and revenues generated from engaging            (revenues of $0.5 million). The Demand Response Initiative is a project to innew energy business opportunities.                                                  have readily available resources to reduce electricity demand on the Bonneville The BDF is managed as an enterprise fund. Four business lines have been          Power Administration (BPA) System. The Tieton Hydroelectric project isa facility created within the fund: General Services and Facilities, Generation, Professional    located in Southeastern Washington along the Tieton River. Various laboratory Services, and Business Unit Support. Each line may have one or more programs          services (Environmental and Calibration) revenue increased $0.4 million, lease that are managed as a unique business activity.                                      activity decreased $0.2 million due to occupancy utilization, and engineeringl technical services decreased $0.3 million. New projects related to expansion of Assets, Liabilities, and Net Position Analysis                                        nuclear options (Modular Nuclear and UAMPS Carbon Free Power) generated Total assets and deferred outflows increased $0.3 million from $10.4 million      $48 thousand, two other projects for solar expansion are continuing with less in FY 2014 to $10.3 million in FY 2015. There were small decreases to plant          than $10 thousand inrevenues.
of $0.1 million offset by increases to current assets of the same amount. The            Operating costs increased $0.7 million from $7.6 million in FY 14 to $8.3 major change in assets was $0.3 million due to the recognition of a deferred          in million in FY 2015. The increases in costs were due to the two new revenue pension outflow inaccordance with GASB No. 68. There was an overall increase          producing activities described above. These projects increased costs $1.5 to liabilities and net position of $0.3 million. Liabilities decreased $0.3 million  million, decreased business activity discussed above for engineeringltechnical from FY 2014 due to timing of year end outstanding items, with an increase            services accounted for $0.4 million resulting in a FY 2015 net operating cost to net pension liability of $2.7 million and increase to deferred inflows of $1 .2    increase of $1.1 million.
million to account for the net pension liability inaccordance with GASB No. 68.            Other Income and Expenses increased $0.2 million in FY 2015 to $1.4 There was an adjustment to beginning net position of $3.6 million due to the          million, with the change attributable to less indirect costs. There were no other retrospective application of GASB No. 68. The change in net position of $0.4          significant individual item variances.
million from operations in FY 2015 as compared to a decrease of $0.3 million in          The Business Development Fund receives contributions from the Intemnal FY 2014 reflects the control of costs, new lines of business and achievement of      Service Fund to cover cash needs during startup periods. Initial startup costs are better margin for business sectors.                                                  not expected to be paid back and are shown as contributions. As an operating business unit, requests can be made to fund incurred operating expenses. In FY 201 5 there were no contributions (transfers), which was also the case for FY 2014.
2015 ENERGYNORTHWEST ANNUAL  REPORT
28                                                      28 sLisIuifliflg          LN~Y NINE CANYON WIND PROJECT                                                              measures along with the $1.2 million in decreased treasury related expenses in The Nine Canyon Wind Project (Nine Canyon) is wholly owned and operated            FY 2015 (a result of the 2015 refinancing) helped to mitigate the overall impact by Energy Northwest. Nine Canyon is located in the Horse Heaven Hills area            of poor wind conditions and resultant loss of generation on the cost of power southwest of Kennewick, Washington. Electricity generated by Nine Canyon is            calculation.
purchased by Pacific Northwest Public Utility Districts (purchasers). Each of the purchasers of Phase I, Phase II,and Phase Illhave signed a power purchase              Assets, Liabilities, and Net Position Analysis agreement which are part of the 2nd Amended and Restated Nine Canyon                      Total assets decreased $4.0 million from $104.9 million in FY 2014 to Wind Project Power Purchase Agreement which now has an end date of 2030.              $100.9 million in FY 2015. The major driver for the change in assets was a Nine Canyon is connected to the BPA transmission grid via a substation and            decrease of $6.7 million in net plant due to accumulated depreciation. The transmission lines constructed by Benton County Public Utility District.              remaining changes consisted of increases to current cash and investments Phase I of Nine Canyon, which began commercial operation in September              of $0.9 million, decreases to special and debt service funds of $0.3 million, 2002, consists of 37 wind turbines, each with a maximum generating capacity            decrease of $0.2 million in account receivables, increase to unamortized debt of approximately 1.3 MW, for an aggregate generating capacity of 48.1 MW.              expense and deferred outflows of $2.4 million and an increase of $0.1 million Phase II of Nine Canyon, which was declared operational in December 2003,              to deferred pension outflow to recognize pension related asset associated with includes 12 wind turbines, each with a maximum generating capacity of 1.3              the implementation of GASB No. 68. There was an overall decrease to liabilities MW, for an aggregate generating capacity of approximately 15.6 MW. Phase              and net position of $4.0 million with a decrease to long term debt (including Illof Nine Canyon, which was declared operational in May 2008, includes 14            unamortized bond discountlpremium) of $5.8 million, increases to current debt wind turbines, each with a maximum generating capacity of 2.3 MW, for an              maturities of $0.1 million, decreases to payables and interest of $0.2 million, an aggregate generating capacity of 32.2 MW. The total Nine Canyon generating            increase of $0.8 million in net pension liability and an increase of $0.4 million capability is95.9 MW, enough energy for approximately 39,000 average homes.            to the deferred pension inflow to recognize pension liabilities associated with Nine Canyon produced 196.75 GWh of electricity in FY 2015 versus 239.39            the implementation of GASB No. 68.There was an adjustment to beginning net GWh in FY 2014. The decrease of 17.8 percent was a result of very poor wind            position of $1.0 million due to the retrospective application of GASB No. 68.The conditions resulting in the lowest generation since all three phases came on          change innet position of $1.9 million from operations in FY 2015 as compared line in 2009. There were two small outages where additional generation of 249          to an increase of $0.4 million in FY 2014 reflects the steady operations and MWh was not realized however FY 2015 would still have been at the lowest              treasury savings due to the 2015 refinancing.
levels since 2009. Capacity factor for FY 2015 was 24 percent as compared to              In previous years Energy Northwest has accrued, as income (contribution) 29.4 percent for FY 2014.                                                              from the Department of Energy, Renewable Energy Production Incentive (REPI)
Nine Canyon's cost performance is measured by the cost of power indicator.        payments that enable Nine Canyon to receive funds based on generation as The cost of power for FY 2015 was $8.31 cents per kwh as compared to $7.83            it applies to the REPI legislation. REPI was created to promote increases in cents per kWh in FY 2014. The cost of power fluctuates year to year depending          the generation and utilization of electricity from renewable energy sources on various factors such as wind totals and unplanned maintenance. The                  and to further the advances of renewable energy technologies. This program, increase of 6.1 percent in cost of power for FY 2015 was directly attributable        authorized under Section 1212 of the Energy Policy Act of 1992, provides to the extremely poor wind conditions. Operating expenses decreased slightly          financial incentive payments for electricity produced and sold by new qualifying from $13.6 million in FY 2014 to $13.3 million in FY 201 5.These cost control          renewable energy generation facilities. The payment stream from Nine Canyon 2)*1NR*Y  NRTHWEST ANNUAL  REPORT
29                                                      29SLSU    I(1i1U?
* OEVE HNGNNUV FXCELLENOL                TI N&N      0LU participants and the REPI receipts was projected to cover the total costs over the purchase agreement. Continued shortfalls in REPI funding for the Nine Canyon project led to a revised rate plan to incorporate the impact of this shortfall over the life of the project. The billing rates for the Nine Canyon participants increased 69 percent and 80 percent for Phase I and Phase I1 participants respectively in FY 2008 in order to cover total project costs, projected out to the 2030 proposed project end date. The increases for FY 2008 were a change from the previous plan where a 3 percent increase each year over the life of the project was projected. Going forward, the increase or decrease in rates will be based on cash requirements of debt repayment and the cost of operations.
Phase Ill started with an initial planning rate of $49.82 per MWh which increased at 3 percent per year for three years. In year six (FY 2013) the rate increased to a rate that is expected to be stabilized over the life of the project.
Possible adjustments may be necessary to future rates depending on operating costs and REPI funding, similar to Phase I and II.
Revenues and Expenses Analysis Operating revenues remained relatively steady from FY 2014 levels, increasing $0.1 million. The project received revenue from the billing of the purchasers at an average rate of $76.10 per MWh for FY 2015 as compared to
                                                                                      $76.33 per MWh for FY 2014 which is reflective of the implementation of the revised rate plan in FY 2008 to account for REPI funding shortfalls and costs OJECT      of operations. Operating costs decreased $0.3 million in FY 2015 from $13.6 NINE CANYON WIND PR lota[ Operating Costs (dottars rn thou_sands)            million in FY 2014 to $13.3 million in FY 2015. Decreased operating costs inFY 2015 were due to the FY 2014 recognition of current period costs for refinancing due to implementation of GASB No. 65. Other operating items remained steady 17.383    with no major fluctuations in individual operations or maintenance activities.
FY2015 Other income and expenses decreased $1.1 million from $5.2 million in net F'Y201A                                                                    18.750    expenses FY 2014 to $4.1 million in FY 2015. Decreased interest costs of $0.7 million and decreases inamortized bond expenses of $0.4 million accounted for FY2013                                                                    18.805    the change. Net gain or change in net position of $1.9 million for FY 2015 was
          -I                                                                          a direct result of the planned rate structure with projected treasury savings due to refunding and lower than budgeted operating costs.
FY2012    -I-                                                                  17.1~67 The original plan anticipated operating at a loss in the early years and 1.6 gradually increasing the rate charged to the purchasers to avoid a large rate FY2011
          -                                I-                                        increase after the REPI expires. The REPI incentive expires 10 years from the initial operation startup date for each phase. Reserves that were established 0          3,000      6,000      9,000      12,000    15,000 are used to facilitate this plan. The rate plan in FY 2008 was revised to account Operating Expenses                Other IncomfelExpense        *s  for the shortfall experienced in the REPI funding and to provide a new rate scenario out to the 2030 project end date. Energy Northwest did not receive REPI funding in FY 2015 and is not anticipating receiving any future REPI incentives. The results from FY 201 5 reflect the revised rate plan scenario and gradual increase in the return of total net position 2010 00R00 NORTIWEl*
ANNUA* R0P0


As stated Cc: NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector
30                                                      30SUIS~~iIliUJ      AXELEC A    YEAN A*E ~NOVAThO ANUVAL INTERNAL SERVICE FUND The Internal Service Fund (1SF) (formerly the General Fund) was established The net decrease in net position and liabilities is due to increases inaccounts in May 1957.The 1SF  provides services to the other funds.This fund accounts for    payable and payroll related liabilities of $4.2 million due to year-end allocation the central procurement of certain common goods and services for the business        of related expenses and an decrease of $1.5 million due to change in unpaid units on a cost reimbursement basis. (See Note 1 to Financial Statements.)          bearer bond estimates.
-9880 w/o C Sonoda -BPA/1 399 w/o WA Horin -Winston & Strawn w/o ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures
Assets, Liabilities, and Net Position Analysis                                      Revenues and Expenses Analysis Total assets increased $2.5 million from $39.4 million in FY 2014 to $41.9          Other income and expenses for FY 2015 increased to $107 thousand from million in FY 2015. There were increases to cash and investments of $2.2            FY 2014. There were increases in other business expenses of $80 thousand, million, receivables and prepaids of $0.6 million and increase in due to other      increases to depreciation of $23 thousand, along with slightly lower overhead business units of $0.9 million. Decreases to plant of $1.0 million accounted for    costs of $36 thousand.
the remainder of change in total assets.
205 ENERGYN3RTHWATANNUAL  RAP


4.6 7 8 9 12 14 15 18 19 19 20 21 30 31 33 34 36 54 A Message to our Stakeholders Executive Board Board of Directors Senior Leadership Sustainability Reporting Columbia Generating Station Refueling and Maintenance Outage 22 Energy Services & Development FINANCIAL DATA & IN FORMATION Management Report on Responsibility for Financial Reporting Audit, Legal and Finance Committee Chair's Letter Independent Auditor's Report Energy Northwest Management's Discussion and Analysis Current Debt Ratings Statement of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to Financial Statements Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT  
31_                                                                              Su*:tai.n..ing* "        - EXE;ELLENEE  &DELIVERING      ININOVATION  ANDVALUE STATEMENT OF NET POSITION                    = Clumia Packwood As of June 30, 2015 (DoLars inthousands)
Couba            Lake        i Nuclear                Nuclear      i Businesa              Nine Canyon                              Internal                                2015 Generating        Hydroelectric i        Projt              Pret          Dveomn                    Wind                                  Service                              Combined Stto        rjc        iNumber I*              Number 3* i          Fund                Project            Subtotal            Fund            Eliminations          Total ASSETS CURRENT ASSETS Cash                                      $      37,162      $      1,169 $                843; $              39!$          7,640 $                  543 $            47,396( $          7,347      $              -i$        54,743 Investments                                              -              498!              2,487              2,983                  -                9,315 i            15,283
* 27                    -!        15,310 Accounts and other receivables                    15,671                110 i1                    i                i            291                    175 i            16,248                469                    -i        16,717 Due from other business units                            -i              446 i                399                310 i            796                    188 i            2,139              1 1086              (3,225)                  -
Materials sod supplies                          142,962 1                  i                                      "                                                    1"42,962 i                                      -I        142,962 Prepayments and other                              1,930                  17i                    2                  2i                1                  190              2,142i              1,402                    -i          3,544 TOTAL CURRENT ASSETS                          "197,725              2,240!              3,7321            3,334i            8.728i              10,411"            226,170i            10.3311            (3,225)i        233.276 RESTRICTED    ASSETS INote 1)
Special funds                                                                                                                              .i, Cash                                              883-                                  3,444              5,114                159i                  825              10,425              1,834                    -          12,259 Investments                                  282 744i                                          i"                                                    754i          283498 i              22193                    i        305,691 Accounts and other                                                          ii16 receivables                                        166                    "-"                    I              --                                                        16                                                      166 Debt service funds                                                            iiiii Cash                                          182.436                                  76,793            73.9281                                    96.46            342 803 Iii                                              342,803 Investments                                          -                                        "                ii                                9.837 i              9.837                  3                    i          9,840 TOTAL    RESTRCTEDASSETS                        4*66,229                                  80,237            79 0421              159              21062i            646 729              24.030""                            670.759 NON CURRENT    ASSETS    UTILITY  PLANT  (Note 21 Inservice                            i      4,121,660            14,736i                        i"                          3,011              134'643 i          4'274'0501            46'814                    "      4,320,864 Not in service                        ii                                                29,415                    ""!-                                                  29'4151                    i"                          29,415 Construction work inprogress i                  58,203                    i                      i"                                                        !          58,203 i                    i.i                          58,203 Accumulated depreciation                    (2,695,114)            (12 9661!            (29,415)1                  -i___      (1,556)i            (67 748)i        (2,806,799)I          (39,307)1                    -      12,846,106)
Net Utility Plant                            1 1484,749 i              1,7701                    _                  {          1,455i              66 895]          1,554,869 i              7,507                    "i      1,562,376 Nuclear uel, net of                                        ,i                                                                            iiii accumulated depreciation              !        976,327                    -                    -                                    -  I                              762                                                    96,2 LONG    TERM  RECEIVABLES                                -.                -                    i-                  i                                                                            59                    i59 TOTAL    NONCURRENT ASSETS                  2,461,076                1,770 i                    -                "            1,455i              66,895i          2 531,196 i              7,566        '            -      2,538,762 OTHER  CHARG ES Cost inexcess of billigs**                    1053 2281                    -!          972,083i          1,158 2891                  i                      -        3.1836000i                                                3,183,600 Other                                                    "          3,7371                      "i                "~                - "                  11              3,738 !-i                                                3,738 TOTAL    OTHER  CHARGES                    1,I053,228              3,.7371          972,083          1,I158,289i                    "-                  1        3,187,338 i-i                                            3,187,338 TOTAL    ASSETS                              4,178,258i              7,747 I        1.056,052 I        1,240,665i            10,3421              98.369!        6.591,433i              41,927              (3,225)1      6.630.135 DEFERRED    OUTFLOWS OFRESOURCES
- unamortized loss ot bond                                                                                                                                                        I                    i refundin9g                                      21.102 i                    i              800 i..        1,643 i*                    I            2,400              25,945
* I        25,945 Deferred pension outflows                        12,333 i                43  1                36 i-!                              378 i                1101            12,9001                                                  12,900 TOTAL    DEFERRED    OUTFLOWS                                                                      !                                      ii                                                          i OFRESOURCES                                      33,4351                  43i                836!            1,643i              378i                2,5101            38,845!"                                                38,845 3 22
.DEFERRED OUTFLOWS                .: ',$..4,211,693,          $.:    7,790 = $ 1,056,888~ .$ 1,242,308:-$,,/10.720j $                            :100,879: $ -6,630 278 ,$: :41,927.* $                      ( ,    5) i $ ,6,668,980
  *Project recordiedonra liquidation basis Theaccompanying notes sie as integral part ofthese combised financial statements
  **oEergy Northwest's 2015 Statement ofNet Position   and Statements of tevenues    and fopenses  and Changes inNetPositiss weie antapdated      forthe application ofthe required rettoactine application of GASB  Statement No.6t TAccoanting and Financiai teparting far Pensions,"  whichbecame effectise for Energy    Northwest infiscalyear 2815. SeeNote 1for a summary ofthis change in accounting principle.
2815 ENERGY  NORTlIVWEST ANNUAL   REPORT


j XJ t]EXL DEL YERI, INNOVJrflN ANt VALUA A Message TO OUR STAKEHOLDERS We are proud to share Energy Northwest's accomplishments through our annual report.The agency continues to deliver carbon-free electricity to the Pacific Northwest.
32                                                                                    Su[(taining*                  EXCELLENCE  &DELIVERING      INNOVATION  AND VALUE STATEMENT OF NET POSITION                                        As ofJune 30, 2015 (DoUlars                      in thousands)
--U[]We attribute the success of Energy Northwest to our dedicated team of nearly 1,100 professionals.
Packwood                                                                                                                                                      -
Their focus on performance excellence ensured our energy generation projects and equipment continued to operate reliably and predictably throughout the fiscal year.During December 2014, the agency celebrated the 30th anniversary of commercial operation for Columbia Generating Station, the region's only nuclear energy facility and the state's third largest generating resource (behind Grand Coulee and Chief Joseph dams). With today's social focus on improving our global air quality, Columbia's carbon-free baseload generation is more vital than ever to the interests of regional ratepayers, the power plant annually prevents about 4.4 million metric tons of carbon dioxide from entering the atmosphere (3.6 million if natural gas is used as the sole source option).Performance On the morning of May 9, Columbia set a new record for its longest continuous operational run -683 days -when operators shut down the reactor for start of the station's biennial refueling and maintenance outage. Columbia achieved what's known as a "breaker to breaker" run, meaning the plant operated non-stop since reconnecting to the grid June 25, 2013, following its previous refueling outage.During its 683-day run, Columbia produced nearly 18 million megawatt-hours of electricity and operated at more than 98 percent capacity.
Columbia                Lake          I      Nuclear              Nuclear        I Business            Nine Canyon IInternal                                                            2015 (Generating          Hydroelectric            Project              Project        Development      j       Wind                              Service                                Combined Station              Project              Number 1'*            Number 3*            Fund                Project    I  Subtotal            Fund        IEliminations                Total LIABILITIES AND NET POSITIONI CURRENT      LIABILITIES Current maturities of                                      :
Columbia also broke its third consecutive calendar year generation record, sending nearly 9.5 million megawatt-hours of clean nuclear energy to the Northwest power grid.In May, we began a 50-day refueling and maintenance outage at Columbia that included installation of key modifications to further strengthen plant safety and gain greater efficiencies.
long-term debt                          !$      114,590:* $                      -$          53,750:i$            47,815:i$                      $S        7,130    5    223,285:i$                                          -:$      223,285 Current notes payable                            93,648                                      51,850              32,620                          ____-___              178,118:                                                -:    178,118 Accounts payable and accrued expenses                              57,210 :                552 i                  553::                345 :          1,319 ::                519 !        60,498:          35,218:i
Completion of these projects raised Columbia's capacity by approximately 28 megawatts-electric.
* 95,716 Due to participants                    :          18,655                  958
That equates to more than 200,000 megawatt-hours of additional generation per year. Employees completed all of the work during the outage safely, without a single Occupational Safety and Health Administration recordable or lost-time accident.Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I. ' 'I.
* 463 i                    -:                          - :        -:        20,076                                          -           20,076 Due to other business units            :          1,086:,                                                                                            - :        -:          1,086 :            2,139 :          (3,2251:
s L4t(lliflq EXCELLENCE
TOTAL    CURRENT LIABILITIES            *:      285,189 :              1,510 :            106,616 :              80,780 :          1,319 :              7,649 :      483,063:              37,357 :            (3,225):            517,195 LIABILITIES-PAYABLE      FROM RESTRICTED        ASSETS (NOTE1)                                              ____________                            ____________                      ______              ____________
& NG INNlOVatION ANU VALUEh Project set a new availability record -99.2 percent. We recognized our team of wind technicians for this historical achievement and their implementation of innovative preventative maintenance to minimize turbine unavailability.
Special funds                          :                                          :                                                            .                 .
On Feb. 9, 2015, we launched a demand response pilot project in partnership with the City of Richland, Cowlitz County Public Utility District, Pend Oreille County PUD and the Bonneville Power Administration.
Accounts payable                      ::                                        :
Demand-side resources have the potential to defer or displace the need for new generation in the region and make the most efficient use of existing generation
and accrued expenses                  :        140,706 i-                      :            16,716~      ____        _-   :              -:              1,396 i      158,818:    ______-:                            -:          158,818 Debt service funds:                                                                ::::::::
-resulting in overall cost savings for Northwest ratepayers.
Accrued interest payable                        67,846 :                    -. :            23,043 *:            26,113 :                -:              2,477 :      119,479 :                    -:                  -:          119,479 TOTAL    RESTRICTED                    :                                          :::                                                                              ::'
We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a solar program for their customers.
LIABILITIES                            :      208,552:                        .-           39,759:i              26,113:*                -:              3,873 :      278,297:            -          :                -:          278,297 LONG-TERM DEBT(NOTE          S)
Small Modular Reactors Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with work on the Carbon Free Power Project, a small modular reactor facility planned for construction in southeastern Idaho within the next 10 years.We are supporting early siting work and the startup of licensing and training programs.We believe small modular reactors will eventually play a role in future power generation here in Washington state and the Northwest.
Revenue bonds payable                  :      3,407.450 :                        .       840,675 :            1,081,005 :                -:            101,620 :    5,430,750 :                  -:                      :      5,430,750 Unamortized (discount)/                          167,965                          -           68,050 :              53,494 :-:                            1494 :        301,003                    -:                  -.          301,003 premium on bonds - net                  :                    ..
safety Our agency emphasizes safety in everyday work activities.
TOTAL    LONG-TERM DEBT                :    3,575,415 :                      -:          908,725:i          1,134,499 :                  -:          113,114:      5,731,753 :                    -:                  -:        5,731.753 OTHER    LONG-TERM LIABILITIES Pension liability.:,                              88,631 :                306:,                   260:,                   -.:,         2,716:1                768:          92,701 ,:                -,:                -. ,           92,701 Dry storage cask liability              ,:        12,749:i                        :-                    :-                                  -.                   -,:        12,749,:                  -,:                    ,"        12,749 Otber                                  :            229 :                    -:                    -                    -:            159 :                  -:            388 :                5:                        :            393 TOTAL OTHER LONG-TERM                  "                  ":
During fiscal 2015, Energy Northwest received the first place Northwest Public Power Association safety award for our strong industrial safety performance.
LIABILITIES                            :      101,609:!                  308:!                  260:                    -          2,875:                  788 :    105,838:*                  5                    -:          105,843 OTHER    CREDITS Advances from members                  :                -:            5,838 :                        :-                                  -:                  -:          5,838 :                  -:                  -:              5,838 and otbers **                          .                    :                    .                    .:                                                                                              :
We continue to strengthen our safety performance, while continuously reaching for the highest levels of excellence.'pl Sustainability This year we integrated sustainability reporting into our annual report.Building and maintaining trust with key stakeholders is important to all Energy Northwest employees.
Other                                  .                  .                    -  :                  -.-                                    -.                12:              12:                    :                -:                  12 TOTAL    OTHER CREDITS                  ":                              5,838:              :                            -:                -i                  12 :          5,850 :                  -:                  -:              5,850 TOTAL    LIABILITIES                    . 4,170,765 :              7,654:            1,055,360:            1,241,392 :            4,194 :            125,436 :    6.604,801 :            37,362 :            (3,225):          6,638,938 DEFERRED      INFLOWS OFRESOURCES Deferred inflows - unamortized :                                                  .                    .::
We believe sustainability reporting is another way to build awareness of Energy Northwvest's overall positive impact on our environment, including social and economic aspects.Our employees continue to volunteer their time and talents to support those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions.
gain on bond refunding                  ,:          1,620:                    -:              1,413:                  916:                -:                409:!          4,358:,                 -,:                    ,:          4,358 Deferred pension inflows**            :          39,308*:                136 :                  115:                    -:          1,205:      .         349 :        41,113 :                  -:                  -"            41,113 TOTAL    DEFERRED INFLOWS                        :          :
Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.
OFRESOURCES                            :        40,928:i                136 :                1,528:                  916 :          1,205.:                  758:!      45.471 :-:                            :                      45.471 NETPOSITION Invested in capital assets,           :                  :-                    :                  -:                    -:          1,455:!            (53,834):        (52,379):            7,566:                    -            (44,813) net of related debt                    :                                                                                    :
Respectfully, Sid Morrison Chair, Executive Board Mark Reddemann Chief Executive Officer SID MORRISON Chair Outside Dire tot Zillah, Wash.JACK JANDA Vice Chair inside Dire~cto SIhetiito, Wash.LORI SANDERS Secretary ineside Dire(1to1 Kesnnew c, Wash.DAVE REMINGTON Assistant Secretary ml bem tonial Appointee Spok~ane, Wash MARC DAUDON GubernatoriaI Appointee Seattle, Wash LINDA GOTT lns(ideP DiCeor Phelton, Wa sh.JAMES MOSS Gubhernatorial Appomi ei Edi ;ewoo Wa shI WILL PURSER sIC Ii Diretor Seqi Wan sh Executive BOARD SKiP ORSER Outside Dirretor Raleigh, N C TIM SHELDON Oumtside Director PoJtlatch, Wash.KATHY VAUGHN ns idS Diiretor tyinnwood, Wash
Restricted, net                        :                -:.                     :.                                         .             -:             19,655 i          19,655 i          24,030                    - :            43,685 Unrestricted, net                      :                -:                    -:                    -:                  -:          3,866 :              8,864:          12,730.         127,031).                     -:          (14,301)
~Ut1iIU1UJ X ~ NN VAf TERRY BREWER President Commissioner.
NET POSITION**                        "                -:                    -.                   -:                  -:          8,571 :            (25,315):        (19,994):            4,672:                    :            (15,429)
Grant County PUD 2 BARNEY BURKE BILL GORDON Vice President Sec'retary Commissioner, Commissioner, Jefferson County PUG Franklin County PUG ARIE CALLAGHAN DOUG AUBERTIN Ass istcant Secretary Commissioner, Commissioner, Ferry County PUG Grays Harbor County PUG 1 CARNAN BERGREN BILL GAINES Commissioner, Director of Utilities.
Prolect recorded us a liqoidation basis Theaccompanying notes are as Integralpart ef these combined financial statements
Clintan County PUG Tacoma Public Uttlinies LINDA GOTT LIZ GREEN DAN GUNKEL Commissioner, Commissioner, Commissioner, Mason County PUD 3 Skamania Counny PUG Klickitat County PUG UUItI AWMMONU 51ILVL" JAbK JANUA Energy Services Director, Commissioner, Commissioner, City of Richland Okanogan County PUG Mason County PUG 1 UIKL Power Supply and Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS CURT KNAPP PHIL LUSK JIN NALINOWSKI M.L NORTON Commissioner, Commissioner, Power Resources Manager, Commissioner.
**  nergy Neonbwesn's 2015 Statenment  ofNetPosition  and Statements ofRevenues and Expensesand Changes inlNetPosition            were enoupdated forthe application of the required retroactive application of GASB  Starement No.va'Ac counting and FinancialRteporting  for Pensions,"which became effective for EnergyNorthwest in fiscalyear 25t15.See Nate 1 for a summary ef this change in accounting principle.
General Manager, Wahikiakium County PUD PeniS Oreille County PUG City of Port Angeles Clark Public Utilities City of Centralia NED PIPER Commissioner, Cowlitz County PUG WILL PURSER Commissioner, Clallam County PUG JUUn KEUUf~j KUWI5U I 11AM LUKEI bANUEIb UII¶UUK~ l ~I1,NA: UEAANA I UIIUIMI'U11 h I'.I!  Commissioner, Commissioner, Commissioner, Commissioner, Commissioner, Commissioner, Asotno County PUG Kitttas County PUG Renton PUG Lewis County PUG Pacific County PUG 2 Snoohomisfi County PUG D.ee El I' I' susti iiiij A [5l ~ EicELC O[ VER NG AiI5U/! fh AsL VAL SE N IOR Leadership The senior leadership team manages dazj-to-daij oper ations, executes progjra is and establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essential hanids-on leadlersh ip to foster continual improvement and strengthen organizational core 'alites in the vorkforce.
2815 ENERGY      NORTHWEST    ANNUAL  REPORT
MARK REDDEMANN Chief Executive Officer BRAD SAWATZKE Chief Operating Officer& Chief Nuclear Officer GROVER HETTEL Vice President for Operations BOB DUTTON General Counsel& Chief Ethics Officer BRENT RIDGE Vice President for Corporate Services;Chief Financial
& Risk Officer ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services& Development SUISltlftJ A EL VELANG INNOVATEO NA Environmental The environmental dimension of sustainability concerns the organization's impact on living and non-living natural systems, including land, air, water and ecosystems.
Social The social dimension of susta inability concerns the impacts the organization has on the social systems it operates within.,i'Economic The economic dimension of sustainability concerns the organization's impacts on the economic conditions of its stakeholders and on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.
Environmental Stewardship Environmental Stewardship is the cornerstone of the Energy Northwest Environmental Management System and all employees consider the environment in the conduct of daily work activities.
Commitment to regulatory compliance and pollution prevention are key to continuation of Energy Northwest's EMS registration to the International Organization for Standardization 14001:2004, Each year Energy Northwest is subject to third-party oversight by NSF International Strategic Registrations, an accredited registrar, which ensures conformance with the rigorous requirements of the standard.
Following a successful external, independent maintenance audit, Energy Northwest maintained its EMS certification to the ISO 14001 Standard.During fiscal year 2015, Energy Northwest  achieved its environmental goals to reduce i5 waste generation and increase community outreach and electrical efficiency.
Energy Northwest reduced hazardous waste generation by more than 10 percent from fiscal 2014. Columbia Generating Station reduced mixed waste generation by more than 20 percent from 2013 (a refueling and maintenance outage year).Energy Northwest's solid waste recycling efforts bested fiscal year 2014 by more than 10 percent and the agency achieved more than 100 megawatt-hours of electrical efficiency gain.Additionally, Energy Northwest surpassed its goal of recycling 1,500 pounds of surplus refrigerants stored at Columbia.Energy Northwest recycled approximately 29 million pounds of metals, in association with site restoration activities at the Industrial Development Complex.For fiscal 2016, Energy Northwest h~as again established aggressive


EA ELLENCt O£ ELVEROC ANO OAL E environmental targets to reduce waste generation of all waste types, including hazardous, mixed and solid wastes, and increase energy efficiency gains.Energy/ Northwest installed and began operating at Columbia its Liquid Effluent Evaporation Facility, a lined pond which eliminates a significant volume of wastewater discharges to the ground.We empower our team to make an environmental impact at work and in our communities.
33            .                                                                  T                *t.fl7g--
Energy Northwest volunteers teamed with AREVA to celebrate Earth Day by holding a community clean-up project along the Yakima River.Economic Value in addition to generating massive amounts of power, Energy Northwest generates a huge cash flow for the economy.During fiscal year 2015, Energy Northwest added to its 1,100 workforce 1,500 temporary workers from the local area and across the country in support of Columbia Generating Station's refueling and maintenance outage.The agency also paid $4.9 million in privilege taxes to the state of Washington
                                                                                                    °        EXCELLENCE    &DELUVERING  INNOVATION  AND  VALUE STATEMENTS OF REVENUES, EXPENSES, AND CHANGES INNET POSITION As of June 30, 2015 (Do!.[ars in thousands)
-setting a record for the largest tax sum ever paid by the public power agency. The annual tax is levied on public power electricity producers for the privilege of generating electricity in the state and is directly tied to the amount of electricity generated.
Packwood Columbia                  Lake              Nuclear            Nuclear          Business        Nine Canyon                                Internal          2015 Generating          IHydroelectric          I Project            Project        Development I        Wind                                    Service        ICombined Station                Project            1 No.
The 2014 generation record by Columbia Generating Station of nearly 9.5 million megawatt-hours significantly contributed to fiscal 2015's record-breaking privilege tax payment by Energy Northwest.
Since 2001, Energy Northwest and the Bonneville Power Administration have worked together to refinance certain maturities of Net Billed Bonds. These refinancings are currently known as"Regional Cooperation Debt." In 2014 and 2015, Energy Northwest issued approximately
$461 million of bonds to refinance outstanding Net Billed Bonds that matured in 2014 and 2015. These refinancings made available to BPA additional funds enabling BPA to advance the repayment of $550 million
LONG-TERM LIABILITIES (Dollars in thousands)
LONG-TERM LIABILITIES (Dollars in thousands)
Balance 6/30/2014 Increase Decrease Balance 6/30/2015 Columbia Revenue hoods payable Unamortized (discount)Ipremium on bonds -net Current maturities of long-term debt 3,304,805
Balance 6/30/2014                                  Increase                      Decrease                  Balance 6/30/2015 Columbia Revenue hoods payable                                              3,304,805 !$                              659.635      S                  556,990 !$                        3,407,450 Unamortized (discount)Ipremium on bonds - net                          150,938                                  47,031!                        30,004i                            167,965 Current maturities of long-term debt                                    32,205i                              114,590                          32,205                            114,590 Other noncurrent liabilities                                            1,04i,55!61                                                                                                  297
!$150,938 32,205i 659.635 S 47,031!114,590 556,990 !$30,004i 32,205 3,407,450 167,965 114,590 Other noncurrent liabilities 1,04i,55!61 297$ 3.499,002 i$ 823,841 i$ 619,860 $3,0,3 Nuclear Project No.1 Revenue bonds payable !$ 715,905 !$ 327,360 !$ 202,590 i$ 840,675 Unamortized (discountl/premium on bonds -net " 22,8190 58,197 13,066 !68,O50 Current maturities of long-term debt .332,10O0 : 53,750 !332,100 : 53,750$ 1,070,924 i$ 439,307 !$ 547,756 i$ 962,475 Nuclear Project No.3 Revenue bonds payable !$ 1,071,400
                                                  $                3.499,002 i$                              823,841 i$                      619,860    $3,0,3 Nuclear Project No.1 Revenue bonds payable                          !$                      715,905 !$                              327,360 !$                      202,590 i$                          840,675 Unamortized (discountl/premium on bonds - net  "                        22,8190                                58,197                          13,066 !68,O50 Current maturities of long-term debt          .                      332,10O0 :                              53,750 !332,100                        :                            53,750
$ 184,890 !$ 175,285 $ 1,081,005 Unamortized ldiscount)lpremium on bonds -net :35,894 i30,226 i12,626 !53,494 Current maturities of long-term debt .157.300 : 47,815 :
                                                  $                1,070,924 i$


==Subject:==
==Subject:==
COLUMBIA GENERATING STATION, DOCKET NO. 50-397;2015 ANNUAL FINANCIAL REPORT  
COLUMBIA GENERATING STATION, DOCKET NO. 50-397; 2015 ANNUAL FINANCIAL REPORT


==Dear Sir or Madam:==
==Dear Sir or Madam:==
In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility.
 
An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.There are no commitments contained in this letter or the enclosure.
In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility. An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.
Should you have any questions, please call DM Wolfgramm at (509) 377-4792.Respectfully, ,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement
There are no commitments contained in this letter or the enclosure. Should you have any questions, please call DM Wolfgramm at (509) 377-4792.
Respectfully,
,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement


==Enclosures:==
==Enclosures:==
As stated Cc:    NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector - 9880 w/o C Sonoda - BPA/1 399 w/o WA Horin - Winston & Strawn w/o
ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures
: 4. A Message to our Stakeholders 6    Executive Board 7    Board of Directors 8    Senior Leadership 9    Sustainability Reporting 12  Columbia Generating Station 14  Refueling and Maintenance Outage 22 15  Energy Services & Development 18  FINANCIAL DATA & IN FORMATION 19  Management Report on Responsibility for Financial Reporting 19  Audit, Legal and Finance Committee Chair's Letter 20  Independent Auditor's Report 21  Energy Northwest Management's Discussion and Analysis 30  Current Debt Ratings 31  Statement of Net Position 33  Statements of Revenues, Expenses and Changes in Net Position 34  Statements of Cash Flows 36  Notes to Financial Statements 54  Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT
SS*.tlU~l      j XJ LENC*
t]EXL      &*DELYERI, INNOVJrflN ANtVALUA AMessage TO OUR STAKEHOLDERS We are proud to shareEnergy Northwest's accomplishments through our annual report.
The agency continues to deliver carbon-free
                                                                                                                  -  -  U electricity to the PacificNorthwest.                                                                                      []
We attribute the success of Energy                                                                              outage. Columbia achieved what's Northwest to our dedicated team                                                                                      known as a "breaker to breaker" of nearly 1,100 professionals. Their                                                                                run, meaning the plant operated focus on    performance    excellence                                                                              non-stop since reconnecting to the ensured    our    energy    generation                                                                              grid June 25, 2013, following its projects and equipment continued                                                                                    previous refueling outage.
to operate reliably and predictably                                                                                      During its 683-day run, Columbia throughout the fiscal year.                                                                                          produced        nearly    18    million During December 2014, the agency                                                                                megawatt-hours of electricity and celebrated the 30th anniversary of                                                                                  operated at more than 98 percent commercial operation for Columbia                                                                                    capacity. Columbia also broke its Generating Station, the region's only                                                                                third  consecutive    calendar  year nuclear energy facility and the state's                                                                              generation record, sending nearly third  largest  generating  resource                                                                              9.5 million megawatt-hours of clean (behind    Grand    Coulee and    Chief                                                                            nuclear energy to the Northwest Joseph dams). With today's social focus                                                                              power grid.
on improving our global air quality,                                                                                    In May, we        began a 50-day Columbia's      carbon-free    baseload                                                                              refueling and maintenance outage generation is more vital than ever to the interests of regional ratepayers,  at Columbia that included installation of key modifications to further the power plant annually prevents about 4.4 million metric tons of carbon    strengthen plant safety and gain greater efficiencies. Completion dioxide from entering the atmosphere (3.6 million if natural gas is used as  of these projects raised Columbia's capacity by approximately 28 the sole source option).                                                      megawatts-electric. That equates to more than 200,000 megawatt-Performance                                                                  hours of additional generation per year. Employees completed all of the On the morning of May 9, Columbia set a new record for its longest        work during the outage safely, without a single Occupational Safety and continuous operational run    -  683 days  -  when operators shut down      Health Administration recordable or lost-time accident.
the reactor for start of the station's biennial refueling and maintenance        Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I.      '    'I.


As stated Cc: NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector
s L4t(lliflq      EXCELLENCE
-9880 w/o C Sonoda -BPA/1 399 w/o WA Horin -Winston & Strawn w/o ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures
                                                                                    & ELVE* NGINNlOVatION ANU VALUEh Project set a new availability record - 99.2 percent. We recognized our team      safety of wind technicians for this historical achievement and their implementation          Our agency emphasizes safety in everyday work activities. During fiscal of innovative preventative maintenance to minimize turbine unavailability.        2015, Energy Northwest received the first place Northwest Public Power On Feb. 9, 2015, we launched a demand response pilot project in                Association safety award for our strong industrial safety performance. We partnership with the City of Richland, Cowlitz County Public Utility District,    continue to strengthen our safety performance, while continuously reaching Pend Oreille County PUD and the Bonneville Power Administration.                  for the highest levels of excellence.
Demand-side resources have the potential to defer or displace the need for
                                                                                                                                                    'pl new generation in the region and make the most efficient use of existing generation    - resulting in overall cost savings for Northwest ratepayers.
V**
We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a      Sustainability solar program for their customers.                                                    This year we integrated sustainability reporting into our annual report.
Building and maintaining trust with key stakeholders is important to all Small Modular Reactors                                                            Energy Northwest employees.
Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with                We believe sustainability reporting is another work on the Carbon Free Power Project, a small modular reactor facility            way to build awareness of Energy Northwvest's overall planned for construction in southeastern Idaho within the next 10 years.          positive impact on our environment, including social We are supporting early siting work and the startup of licensing and training      and economic aspects.
programs.
We believe small modular reactors will eventually play a role in future            Our employees continue to volunteer their time and talents to support power generation here in Washington state and the Northwest.                      those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.
As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions. Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.
Respectfully, Sid Morrison                    Mark Reddemann Chair, Executive Board          Chief Executive Officer


4.6 7 8 9 12 14 15 18 19 19 20 21 30 31 33 34 36 54 A Message to our Stakeholders Executive Board Board of Directors Senior Leadership Sustainability Reporting Columbia Generating Station Refueling and Maintenance Outage 22 Energy Services & Development FINANCIAL DATA & IN FORMATION Management Report on Responsibility for Financial Reporting Audit, Legal and Finance Committee Chair's Letter Independent Auditor's Report Energy Northwest Management's Discussion and Analysis Current Debt Ratings Statement of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to Financial Statements Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT
SID MORRISON            JACK JANDA        LORI SANDERS            DAVE REMINGTON Chair                  Vice Chair        Secretary                Assistant Secretary Outside Dire tot        inside Dire~cto  ineside Dire(1to1          ml bem tonial Appointee Zillah, Wash.          SIhetiito, Wash. Kesnnew c, Wash.        Spok~ane, Wash MARC DAUDON            LINDA GOTT        JAMES MOSS              WILL PURSER GubernatoriaI Appointee lns(idePDiCeor    Gubhernatorial Appomi ei  sIC IiDiretor Seattle, Wash            Phelton, Wa sh. Edi ;ewoo WashI          Seqi    Wansh Executive BOARD SKiP ORSER              TIM SHELDON      KATHY VAUGHN Outside Dirretor        Oumtside Director  ns idSDiiretor Raleigh, N C            PoJtlatch, Wash. tyinnwood, Wash


j XJ t]EXL DEL YERI, INNOVJrflN ANt VALUA A Message TO OUR STAKEHOLDERS We are proud to share Energy Northwest's accomplishments through our annual report.The agency continues to deliver carbon-free electricity to the Pacific Northwest.
                                                                          ~Ut1iIU1UJ X                                   ~     NNVAf TERRY BREWER                 BARNEY BURKE                     BILL GORDON                   ARIE CALLAGHAN                  DOUG AUBERTIN                    CARNAN BERGREN                BILL GAINES President                    Vice President                 Sec'retary                     Ass istcant Secretary           Commissioner,                     Commissioner,                 Director of Utilities.
--U[]We attribute the success of Energy Northwest to our dedicated team of nearly 1,100 professionals.
Commissioner.                Commissioner,                  Commissioner,                  Commissioner,                    Ferry County PUG                  Clintan County PUG             Tacoma Public Uttlinies Grant County PUD2            Jefferson County PUG            Franklin County PUG            Grays Harbor County PUG 1 LINDA GOTT Commissioner, LIZ GREEN Commissioner, DAN GUNKEL Commissioner, UUItI AWMMONU Energy Services Director, 51ILVL" UU*IUIN Commissioner, JAbK JANUA Commissioner, UIKL  ~JUNIL*
Their focus on performance excellence ensured our energy generation projects and equipment continued to operate reliably and predictably throughout the fiscal year.During December 2014, the agency celebrated the 30th anniversary of commercial operation for Columbia Generating Station, the region's only nuclear energy facility and the state's third largest generating resource (behind Grand Coulee and Chief Joseph dams). With today's social focus on improving our global air quality, Columbia's carbon-free baseload generation is more vital than ever to the interests of regional ratepayers, the power plant annually prevents about 4.4 million metric tons of carbon dioxide from entering the atmosphere (3.6 million if natural gas is used as the sole source option).Performance On the morning of May 9, Columbia set a new record for its longest continuous operational run -683 days -when operators shut down the reactor for start of the station's biennial refueling and maintenance outage. Columbia achieved what's known as a "breaker to breaker" run, meaning the plant operated non-stop since reconnecting to the grid June 25, 2013, following its previous refueling outage.During its 683-day run, Columbia produced nearly 18 million megawatt-hours of electricity and operated at more than 98 percent capacity.
Power Supply and Mason County PUD 3           Skamania Counny PUG             Klickitat County PUG           City of Richland                 Okanogan County PUG               Mason County PUG 1             Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS               CURT KNAPP                       PHIL LUSK                     JIN NALINOWSKI                   M.L NORTON                       NED PIPER                      WILL PURSER Commissioner,                 Commissioner,                   Power Resources Manager,       Commissioner.                   General Manager,                  Commissioner,                  Commissioner, Wahikiakium County PUD       PeniS Oreille County PUG         City of Port Angeles           Clark Public Utilities           City of Centralia                 Cowlitz County PUG             Clallam County PUG JUUn KEUUf~j Commissioner,
Columbia also broke its third consecutive calendar year generation record, sending nearly 9.5 million megawatt-hours of clean nuclear energy to the Northwest power grid.In May, we began a 50-day refueling and maintenance outage at Columbia that included installation of key modifications to further strengthen plant safety and gain greater efficiencies.
                                              *HAN KUWI5U I 11AM Commissioner, LUKEIbANUEIb Commissioner, UII¶UUK~l ~I1,NA:
Completion of these projects raised Columbia's capacity by approximately 28 megawatts-electric.
Commissioner, UEAANA I UIIUIMI'U11 Commissioner, h I'.I! VRUUI*III Commissioner, Asotno County PUG               Kitttas County PUG               Renton PUG                     Lewis County PUG                 Pacific County PUG 2           Snoohomisfi County PUG
That equates to more than 200,000 megawatt-hours of additional generation per year. Employees completed all of the work during the outage safely, without a single Occupational Safety and Health Administration recordable or lost-time accident.Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I. ' 'I.
                                                                  .ee D
s L4t(lliflq EXCELLENCE
El                   I'                       I'
& NG INNlOVatION ANU VALUEh Project set a new availability record -99.2 percent. We recognized our team of wind technicians for this historical achievement and their implementation of innovative preventative maintenance to minimize turbine unavailability.
On Feb. 9, 2015, we launched a demand response pilot project in partnership with the City of Richland, Cowlitz County Public Utility District, Pend Oreille County PUD and the Bonneville Power Administration.
Demand-side resources have the potential to defer or displace the need for new generation in the region and make the most efficient use of existing generation
-resulting in overall cost savings for Northwest ratepayers.
We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a solar program for their customers.
Small Modular Reactors Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with work on the Carbon Free Power Project, a small modular reactor facility planned for construction in southeastern Idaho within the next 10 years.We are supporting early siting work and the startup of licensing and training programs.We believe small modular reactors will eventually play a role in future power generation here in Washington state and the Northwest.
safety Our agency emphasizes safety in everyday work activities.
During fiscal 2015, Energy Northwest received the first place Northwest Public Power Association safety award for our strong industrial safety performance.
We continue to strengthen our safety performance, while continuously reaching for the highest levels of excellence.'pl Sustainability This year we integrated sustainability reporting into our annual report.Building and maintaining trust with key stakeholders is important to all Energy Northwest employees.
We believe sustainability reporting is another way to build awareness of Energy Northwvest's overall positive impact on our environment, including social and economic aspects.Our employees continue to volunteer their time and talents to support those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions.
Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.
Respectfully, Sid Morrison Chair, Executive Board Mark Reddemann Chief Executive Officer SID MORRISON Chair Outside Dire tot Zillah, Wash.JACK JANDA Vice Chair inside Dire~cto SIhetiito, Wash.LORI SANDERS Secretary ineside Dire(1to1 Kesnnew c, Wash.DAVE REMINGTON Assistant Secretary ml bem tonial Appointee Spok~ane, Wash MARC DAUDON GubernatoriaI Appointee Seattle, Wash LINDA GOTT lns(ideP DiCeor Phelton, Wa sh.JAMES MOSS Gubhernatorial Appomi ei Edi ;ewoo Wa shI WILL PURSER sIC Ii Diretor Seqi Wan sh Executive BOARD SKiP ORSER Outside Dirretor Raleigh, N C TIM SHELDON Oumtside Director PoJtlatch, Wash.KATHY VAUGHN ns idS Diiretor tyinnwood, Wash
~Ut1iIU1UJ X ~ NN VAf TERRY BREWER President Commissioner.
Grant County PUD 2 BARNEY BURKE BILL GORDON Vice President Sec'retary Commissioner, Commissioner, Jefferson County PUG Franklin County PUG ARIE CALLAGHAN DOUG AUBERTIN Ass istcant Secretary Commissioner, Commissioner, Ferry County PUG Grays Harbor County PUG 1 CARNAN BERGREN BILL GAINES Commissioner, Director of Utilities.
Clintan County PUG Tacoma Public Uttlinies LINDA GOTT LIZ GREEN DAN GUNKEL Commissioner, Commissioner, Commissioner, Mason County PUD 3 Skamania Counny PUG Klickitat County PUG UUItI AWMMONU 51ILVL" JAbK JANUA Energy Services Director, Commissioner, Commissioner, City of Richland Okanogan County PUG Mason County PUG 1 UIKL Power Supply and Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS CURT KNAPP PHIL LUSK JIN NALINOWSKI M.L NORTON Commissioner, Commissioner, Power Resources Manager, Commissioner.
General Manager, Wahikiakium County PUD PeniS Oreille County PUG City of Port Angeles Clark Public Utilities City of Centralia NED PIPER Commissioner, Cowlitz County PUG WILL PURSER Commissioner, Clallam County PUG JUUn KEUUf~j KUWI5U I 11AM LUKEI bANUEIb UII¶UUK~ l ~I1,NA: UEAANA I UIIUIMI'U11 h I'.I! Commissioner, Commissioner, Commissioner, Commissioner, Commissioner, Commissioner, Asotno County PUG Kitttas County PUG Renton PUG Lewis County PUG Pacific County PUG 2 Snoohomisfi County PUG D.ee El I' I' susti iiiij A [5l ~ EicELC O[ VER NG AiI5U/! fh AsL VAL SE N IOR Leadership The senior leadership team manages dazj-to-daij oper ations, executes progjra is and establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essential hanids-on leadlersh ip to foster continual improvement and strengthen organizational core 'alites in the vorkforce.
MARK REDDEMANN Chief Executive Officer BRAD SAWATZKE Chief Operating Officer& Chief Nuclear Officer GROVER HETTEL Vice President for Operations BOB DUTTON General Counsel& Chief Ethics Officer BRENT RIDGE Vice President for Corporate Services;Chief Financial
& Risk Officer ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services& Development SUISltlftJ A EL VELANG INNOVATEO NA Environmental The environmental dimension of sustainability concerns the organization's impact on living and non-living natural systems, including land, air, water and ecosystems.
Social The social dimension of susta inability concerns the impacts the organization has on the social systems it operates within.,i'Economic The economic dimension of sustainability concerns the organization's impacts on the economic conditions of its stakeholders and on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.
Environmental Stewardship Environmental Stewardship is the cornerstone of the Energy Northwest Environmental Management System and all employees consider the environment in the conduct of daily work activities.
Commitment to regulatory compliance and pollution prevention are key to continuation of Energy Northwest's EMS registration to the International Organization for Standardization 14001:2004, Each year Energy Northwest is subject to third-party oversight by NSF International Strategic Registrations, an accredited registrar, which ensures conformance with the rigorous requirements of the standard.
Following a successful external, independent maintenance audit, Energy Northwest maintained its EMS certification to the ISO 14001 Standard.During fiscal year 2015, Energy Northwest  achieved its environmental goals to reduce i5 waste generation and increase community outreach and electrical efficiency.
Energy Northwest reduced hazardous waste generation by more than 10 percent from fiscal 2014. Columbia Generating Station reduced mixed waste generation by more than 20 percent from 2013 (a refueling and maintenance outage year).Energy Northwest's solid waste recycling efforts bested fiscal year 2014 by more than 10 percent and the agency achieved more than 100 megawatt-hours of electrical efficiency gain.Additionally, Energy Northwest surpassed its goal of recycling 1,500 pounds of surplus refrigerants stored at Columbia.Energy Northwest recycled approximately 29 million pounds of metals, in association with site restoration activities at the Industrial Development Complex.For fiscal 2016, Energy Northwest h~as again established aggressive


EA ELLENCt O£ ELVEROC ANO OAL E environmental targets to reduce waste generation of all waste types, including hazardous, mixed and solid wastes, and increase energy efficiency gains.Energy/ Northwest installed and began operating at Columbia its Liquid Effluent Evaporation Facility, a lined pond which eliminates a significant volume of wastewater discharges to the ground.We empower our team to make an environmental impact at work and in our communities.
susti        iiiij ~  A EicELC
Energy Northwest volunteers teamed with AREVA to celebrate Earth Day by holding a community clean-up project along the Yakima River.Economic Value in addition to generating massive amounts of power, Energy Northwest generates a huge cash flow for the economy.During fiscal year 2015, Energy Northwest added to its 1,100 workforce 1,500 temporary workers from the local area and across the country in support of Columbia Generating Station's refueling and maintenance outage.The agency also paid $4.9 million in privilege taxes to the state of Washington
[5l  O[ VERNGAiI5U/!    fh AsLVAL SE NIOR Leadership The senior leadershipteam manages dazj-to-daij operations, executes progjrais and Jpro*ects, establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essentialhanids-on leadlership tofoster continual improvement and strengthen organizationalcore 'alites in the vorkforce.
-setting a record for the largest tax sum ever paid by the public power agency. The annual tax is levied on public power electricity producers for the privilege of generating electricity in the state and is directly tied to the amount of electricity generated.
MARK        REDDEMANN Chief Executive Officer BRAD SAWATZKE                                              GROVER          HETTEL                                            BOB General DUTTON  Counsel Chief Operating Officer                                    Vice President for Operations
The 2014 generation record by Columbia Generating Station of nearly 9.5 million megawatt-hours significantly contributed to fiscal 2015's record-breaking privilege tax payment by Energy Northwest.
& Chief Nuclear Officer                                                                                                        & Chief Ethics Officer BRENT        RIDGE                                                          ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services Vice President for Corporate  Services; Chief Financial & Risk Officer                                                                                                            & Development
Since 2001, Energy Northwest and the Bonneville Power Administration have worked together to refinance certain maturities of Net Billed Bonds. These refinancings are currently known as"Regional Cooperation Debt." In 2014 and 2015, Energy Northwest issued approximately
 
$461 million of bonds to refinance outstanding Net Billed Bonds that matured in 2014 and 2015. These refinancings made available to BPA additional funds enabling BPA to advance the repayment of $550 million
SUISltlftJ            A LLE*C ELVELANG    INNOVATEO LN* NA
                                                                                                                                            ,i' Environmental                                                      Social                                                  Economic The environmental dimension of                        The social dimension of susta inability                The economic dimension of sustainability sustainability concerns the organization's              concerns the impacts the organization has on                concerns the organization's impacts on the impact on living and non-living natural systems,                the social systems it operates within.                economic conditions of its stakeholders and including land, air, water and ecosystems.                                                                          on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.
Environmental Stewardship Environmental        Stewardship    is    the    cornerstone      of    the waste    generation    and  increase  community      outreach  and  electrical Energy      Northwest    Environmental    Management        System      and    all    efficiency. Energy Northwest reduced hazardous waste generation by more employees consider the environment in the conduct of daily work                        than 10 percent from fiscal 2014. Columbia Generating
LONG-TERM LIABILITIES (Dollars in thousands)
LONG-TERM LIABILITIES (Dollars in thousands)
Balance 6/30/2014 Increase Decrease Balance 6/30/2015 Columbia Revenue hoods payable Unamortized (discount)Ipremium on bonds -net Current maturities of long-term debt 3,304,805
Balance 6/30/2014                                  Increase                      Decrease                  Balance 6/30/2015 Columbia Revenue hoods payable                                              3,304,805 !$                              659.635      S                  556,990 !$                        3,407,450 Unamortized (discount)Ipremium on bonds - net                          150,938                                  47,031!                        30,004i                            167,965 Current maturities of long-term debt                                    32,205i                              114,590                          32,205                            114,590 Other noncurrent liabilities                                            1,04i,55!61                                                                                                  297
!$150,938 32,205i 659.635 S 47,031!114,590 556,990 !$30,004i 32,205 3,407,450 167,965 114,590 Other noncurrent liabilities 1,04i,55!61 297$ 3.499,002 i$ 823,841 i$ 619,860 $3,0,3 Nuclear Project No.1 Revenue bonds payable !$ 715,905 !$ 327,360 !$ 202,590 i$ 840,675 Unamortized (discountl/premium on bonds -net " 22,8190 58,197 13,066 !68,O50 Current maturities of long-term debt .332,10O0 : 53,750 !332,100 : 53,750$ 1,070,924 i$ 439,307 !$ 547,756 i$ 962,475 Nuclear Project No.3 Revenue bonds payable !$ 1,071,400
                                                  $                3.499,002 i$                              823,841 i$                      619,860    $3,0,3 Nuclear Project No.1 Revenue bonds payable                          !$                      715,905 !$                              327,360 !$                      202,590 i$                          840,675 Unamortized (discountl/premium on bonds - net  "                        22,8190                                58,197                          13,066 !68,O50 Current maturities of long-term debt          .                      332,10O0 :                              53,750 !332,100                        :                            53,750
$ 184,890 !$ 175,285 $ 1,081,005 Unamortized ldiscount)lpremium on bonds -net :35,894 i30,226 i12,626 !53,494 Current maturities of long-term debt .157.300 : 47,
                                                  $                1,070,

Latest revision as of 07:16, 19 March 2020

Transmittal of 2015 Annual Financial Report
ML16025A097
Person / Time
Site: Columbia Energy Northwest icon.png
Issue date: 01/19/2016
From: Gregoire D
Energy Northwest
To:
Document Control Desk, Office of Nuclear Reactor Regulation
References
GO2-16-017
Download: ML16025A097 (56)
v • d • e


Text

ENERGYBoxo 96,P2 QNORT WESTDonald NORTH WESTPh. w.Gregoire Richland, WA 99352-0968 509-377-8616 j F. 509-377-4317 dwgregoire@ energy-northwest.comn 10 CFR 50.71 (b)

January 19, 201.6 G02-16-017 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555-0001

Subject:

COLUMBIA GENERATING STATION, DOCKET NO. 50-397; 2015 ANNUAL FINANCIAL REPORT

Dear Sir or Madam:

In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility. An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.

There are no commitments contained in this letter or the enclosure. Should you have any questions, please call DM Wolfgramm at (509) 377-4792.

Respectfully,

,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement

Enclosures:

As stated Cc: NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector - 9880 w/o C Sonoda - BPA/1 399 w/o WA Horin - Winston & Strawn w/o

ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures

4. A Message to our Stakeholders 6 Executive Board 7 Board of Directors 8 Senior Leadership 9 Sustainability Reporting 12 Columbia Generating Station 14 Refueling and Maintenance Outage 22 15 Energy Services & Development 18 FINANCIAL DATA & IN FORMATION 19 Management Report on Responsibility for Financial Reporting 19 Audit, Legal and Finance Committee Chair's Letter 20 Independent Auditor's Report 21 Energy Northwest Management's Discussion and Analysis 30 Current Debt Ratings 31 Statement of Net Position 33 Statements of Revenues, Expenses and Changes in Net Position 34 Statements of Cash Flows 36 Notes to Financial Statements 54 Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT

SS*.tlU~l j XJ LENC*

t]EXL &*DELYERI, INNOVJrflN ANtVALUA AMessage TO OUR STAKEHOLDERS We are proud to shareEnergy Northwest's accomplishments through our annual report.

The agency continues to deliver carbon-free

- - U electricity to the PacificNorthwest. []

We attribute the success of Energy outage. Columbia achieved what's Northwest to our dedicated team known as a "breaker to breaker" of nearly 1,100 professionals. Their run, meaning the plant operated focus on performance excellence non-stop since reconnecting to the ensured our energy generation grid June 25, 2013, following its projects and equipment continued previous refueling outage.

to operate reliably and predictably During its 683-day run, Columbia throughout the fiscal year. produced nearly 18 million During December 2014, the agency megawatt-hours of electricity and celebrated the 30th anniversary of operated at more than 98 percent commercial operation for Columbia capacity. Columbia also broke its Generating Station, the region's only third consecutive calendar year nuclear energy facility and the state's generation record, sending nearly third largest generating resource 9.5 million megawatt-hours of clean (behind Grand Coulee and Chief nuclear energy to the Northwest Joseph dams). With today's social focus power grid.

on improving our global air quality, In May, we began a 50-day Columbia's carbon-free baseload refueling and maintenance outage generation is more vital than ever to the interests of regional ratepayers, at Columbia that included installation of key modifications to further the power plant annually prevents about 4.4 million metric tons of carbon strengthen plant safety and gain greater efficiencies. Completion dioxide from entering the atmosphere (3.6 million if natural gas is used as of these projects raised Columbia's capacity by approximately 28 the sole source option). megawatts-electric. That equates to more than 200,000 megawatt-Performance hours of additional generation per year. Employees completed all of the On the morning of May 9, Columbia set a new record for its longest work during the outage safely, without a single Occupational Safety and continuous operational run - 683 days - when operators shut down Health Administration recordable or lost-time accident.

the reactor for start of the station's biennial refueling and maintenance Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I. ' 'I.

s L4t(lliflq EXCELLENCE

& ELVE* NGINNlOVatION ANU VALUEh Project set a new availability record - 99.2 percent. We recognized our team safety of wind technicians for this historical achievement and their implementation Our agency emphasizes safety in everyday work activities. During fiscal of innovative preventative maintenance to minimize turbine unavailability. 2015, Energy Northwest received the first place Northwest Public Power On Feb. 9, 2015, we launched a demand response pilot project in Association safety award for our strong industrial safety performance. We partnership with the City of Richland, Cowlitz County Public Utility District, continue to strengthen our safety performance, while continuously reaching Pend Oreille County PUD and the Bonneville Power Administration. for the highest levels of excellence.

Demand-side resources have the potential to defer or displace the need for

'pl new generation in the region and make the most efficient use of existing generation - resulting in overall cost savings for Northwest ratepayers.

V**

We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a Sustainability solar program for their customers. This year we integrated sustainability reporting into our annual report.

Building and maintaining trust with key stakeholders is important to all Small Modular Reactors Energy Northwest employees.

Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with We believe sustainability reporting is another work on the Carbon Free Power Project, a small modular reactor facility way to build awareness of Energy Northwvest's overall planned for construction in southeastern Idaho within the next 10 years. positive impact on our environment, including social We are supporting early siting work and the startup of licensing and training and economic aspects.

programs.

We believe small modular reactors will eventually play a role in future Our employees continue to volunteer their time and talents to support power generation here in Washington state and the Northwest. those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.

As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions. Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.

Respectfully, Sid Morrison Mark Reddemann Chair, Executive Board Chief Executive Officer

SID MORRISON JACK JANDA LORI SANDERS DAVE REMINGTON Chair Vice Chair Secretary Assistant Secretary Outside Dire tot inside Dire~cto ineside Dire(1to1 ml bem tonial Appointee Zillah, Wash. SIhetiito, Wash. Kesnnew c, Wash. Spok~ane, Wash MARC DAUDON LINDA GOTT JAMES MOSS WILL PURSER GubernatoriaI Appointee lns(idePDiCeor Gubhernatorial Appomi ei sIC IiDiretor Seattle, Wash Phelton, Wa sh. Edi ;ewoo WashI Seqi Wansh Executive BOARD SKiP ORSER TIM SHELDON KATHY VAUGHN Outside Dirretor Oumtside Director ns idSDiiretor Raleigh, N C PoJtlatch, Wash. tyinnwood, Wash

~Ut1iIU1UJ X ~ NNVAf TERRY BREWER BARNEY BURKE BILL GORDON ARIE CALLAGHAN DOUG AUBERTIN CARNAN BERGREN BILL GAINES President Vice President Sec'retary Ass istcant Secretary Commissioner, Commissioner, Director of Utilities.

Commissioner. Commissioner, Commissioner, Commissioner, Ferry County PUG Clintan County PUG Tacoma Public Uttlinies Grant County PUD2 Jefferson County PUG Franklin County PUG Grays Harbor County PUG 1 LINDA GOTT Commissioner, LIZ GREEN Commissioner, DAN GUNKEL Commissioner, UUItI AWMMONU Energy Services Director, 51ILVL" UU*IUIN Commissioner, JAbK JANUA Commissioner, UIKL ~JUNIL*

Power Supply and Mason County PUD 3 Skamania Counny PUG Klickitat County PUG City of Richland Okanogan County PUG Mason County PUG 1 Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS CURT KNAPP PHIL LUSK JIN NALINOWSKI M.L NORTON NED PIPER WILL PURSER Commissioner, Commissioner, Power Resources Manager, Commissioner. General Manager, Commissioner, Commissioner, Wahikiakium County PUD PeniS Oreille County PUG City of Port Angeles Clark Public Utilities City of Centralia Cowlitz County PUG Clallam County PUG JUUn KEUUf~j Commissioner,

  • HAN KUWI5U I 11AM Commissioner, LUKEIbANUEIb Commissioner, UII¶UUK~l ~I1,NA:

Commissioner, UEAANA I UIIUIMI'U11 Commissioner, h I'.I! VRUUI*III Commissioner, Asotno County PUG Kitttas County PUG Renton PUG Lewis County PUG Pacific County PUG 2 Snoohomisfi County PUG

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susti iiiij ~ A EicELC

[5l O[ VERNGAiI5U/! fh AsLVAL SE NIOR Leadership The senior leadershipteam manages dazj-to-daij operations, executes progjrais and Jpro*ects, establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essentialhanids-on leadlership tofoster continual improvement and strengthen organizationalcore 'alites in the vorkforce.

MARK REDDEMANN Chief Executive Officer BRAD SAWATZKE GROVER HETTEL BOB General DUTTON Counsel Chief Operating Officer Vice President for Operations

& Chief Nuclear Officer & Chief Ethics Officer BRENT RIDGE ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services Vice President for Corporate Services; Chief Financial & Risk Officer & Development

SUISltlftJ A LLE*C ELVELANG INNOVATEO LN* NA

,i' Environmental Social Economic The environmental dimension of The social dimension of susta inability The economic dimension of sustainability sustainability concerns the organization's concerns the impacts the organization has on concerns the organization's impacts on the impact on living and non-living natural systems, the social systems it operates within. economic conditions of its stakeholders and including land, air, water and ecosystems. on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.

Environmental Stewardship Environmental Stewardship is the cornerstone of the waste generation and increase community outreach and electrical Energy Northwest Environmental Management System and all efficiency. Energy Northwest reduced hazardous waste generation by more employees consider the environment in the conduct of daily work than 10 percent from fiscal 2014. Columbia Generating Station reduced activities. Commitment to regulatory compliance and pollution mixed waste generation by more than 20 percent from 2013 (a refueling prevention are key to continuation of Energy Northwest's EMS and maintenance outage year).

registration to the International Organization for Standardization Energy Northwest's solid waste recycling efforts bested fiscal year 2014 14001:2004, Each year Energy Northwest is subject to third-party by more than 10 percent and the agency achieved more than 100 megawatt-oversight by NSF International Strategic Registrations, an accredited hours of electrical efficiency gain.

registrar, which ensures conformance with the rigorous requirements of Additionally, Energy Northwest surpassed its goal of recycling 1,500 the standard. Following a successful external, independent maintenance pounds of surplus refrigerants stored at Columbia.

audit, Energy Northwest maintained its EMS Energy Northwest recycled approximately 29 million pounds of certification to the ISO 14001 Standard. metals, in association with site restoration activities at the Industrial During fiscal year 2015, Energy Northwest achieved its environmental goals to reduce i5 Development Complex.

For fiscal 2016, Energy Northwest h~as again established aggressive

sus*[fItiinhi EAELLENCtO£ELVEROC INNOVA*IOli ANOOALE environmental targets to reduce waste generation of all waste types, including hazardous, mixed and solid wastes, and increase energy efficiency gains.

Energy/ Northwest installed and began operating at Columbia its Liquid Effluent Evaporation Facility, a lined pond which eliminates a significant volume of wastewater discharges to the ground.

We empower our team to make an environmental impact at work and in our communities.

Energy Northwest volunteers teamed with AREVA to celebrate Earth Day by holding a community clean-up project along the Yakima River.

Economic Value Since 2001, Energy Northwest and the Bonneville Power in addition to generating massive amounts of power, Administration have worked together to refinance certain maturities Energy Northwest generates a huge cash flow for the economy. of Net Billed Bonds. These refinancings are currently known as During fiscal year 2015, Energy Northwest added to its 1,100 "Regional Cooperation Debt." In 2014 and 2015, Energy Northwest workforce 1,500 temporary workers from the local area and across issued approximately $461 million of bonds to refinance outstanding the country in support of Columbia Generating Station's refueling and Net Billed Bonds that matured in 2014 and 2015. These refinancings maintenance outage. made available to BPA additional funds enabling BPA to advance The agency also paid $4.9 million in privilege taxes to the state of the repayment of $550 million of BPA's repayment obligations to Washington - setting a record for the largest tax sum ever paid by the the Department of the Treasury. BPA estimates that the interest public power agency. The annual tax is levied on public power electricity expense savings to the region associated with the refinancings are producers for the privilege of generating electricity in the state and is approximately $144 million through fiscal year 2023.

directly tied to the amount of electricity generated. The 2014 generation record by Columbia Generating Station of nearly 9.5 million megawatt-hours significantly contributed to fiscal 2015's record-breaking privilege tax payment by Energy Northwest. INTEREST EXPENSE SAVINGS TO THE REGION ASSOCIATED WITH BOND REFINANCINGS ARE APPROXI MATELY I$11,4 MILLION THROUGH IFISCAL YEAR 2023.

susUiuiii~j I~'~

Community Service As a major Washington state employer and member of the local Tni-Cities business community for nearly 60 years, Energy Northwest strongly believes in supporting the communities and associated non-profit agencies where its employees work and live.

From the CEO to the newest employee, Energy Northwest cares through direct, hands-on involvement. During fiscal year 2015, Energy Northwest employees contributed more than $100,000 in direct fundraising and countless hours to the community. The agency officially supports three major charities: Benton and Franklin Head Start, March of Dimes and United Way.

Benton and Franklin Head Start March of Dimes United Way Since 1980 Energy Northwest employees Team Energy Northwest raised more than During 2015, employees contributed more have helped bring holiday season cheer to $34,000 during 2015 for the March of Dimes, than $75,000 to the United Way of Benton more than 11,000 children in low-income exceeding its goal and demonstrating the and Franklin Counties, The employees' families in local communities. Each year, philanthropy and generosity of its employees. contributions help provide hot meals to Energy Northwest employees commit to Approximately 40 employees, along with elderly neighbors, fund youth developmental adopting every child in the Benton and their friends and family, participated in a 3.1 programs, provide disaster relief planning for Franklin Head Start program. mile walk during the annual Tri-Cities March local communities and build self-esteem for Babies event to support neonatal birth in at-risk youth.

centers and local families in need.

DURING FISCAL 2015 EMPLOYEES SPONSORED NEARLY 450 CHILDREN IN THE HEAD START PROGRAM.

SU*I(L111,11( EACELLENEE UE WNEL£N INNOVAl NANDVAL~t olumbia TiNG STATIO N Columbia GeneratingStation is the Northwest's only commercial nuclear energy facility, generating 1,190 megawatts of electriecity, which is sold at-cost to the Bonneville Power Administration. Ninety-two Northwest utilities receive a percentageof its output.

Columbia is the third largest electricity generatorin Washington state.

Columbia Net Generation - MWh

In December, Columbia Generating Station marked its 30th year of in 2012 (9.3 million MWhrs), which followed a generation record for a commercial operation. During that time, Columbia provided more refueling outage year in 2013 (8.4 million MWhrs).

than 214 million megawatt-hours to the power grid. A boiling water Columbia achieved another record, in May this time, for its longest reactor, Columbia saw its first fuel loaded into the reactor core Dec. 25, continuous operational run - 683 days - set on the day operators 1983. After a period to test systems and components, Columbia began shut down the reactor for start of the station's biennial refueling and commercial operation, sending its first power to the Northwest grid maintenance outage (see next page). The record also included an Dec. 13, 1984. industry rarity - a "breaker to breaker" run, meaning the plant operated Columbia also set its third consecutive calendar year generation non-stop since reconnecting to the grid June 25, 2013, following its record. The plant sent nearly 9.5 million megawatt-hours of electricity previous refueling outage. Columbia's previous online record - 505 days to the grid, beating the previous calendar year generation record set - was set in April 2011.

,II 23th1 ENE3RGY NURTHWEST ANlNUA

14 SUS~~I

( II"11 E*U~

LXCELEN OEiVRH INNOIAT DNA*dVL Refueling

&MAINTENANCE OUTAGE 22 Columbia Generating Station began a 50-day refueling and maintenance outage May 9 that included several major projects and the loading of 248 new, higher-efficiency nuclear fuel assemblies into the reactor core. The agency temporarily hired an additional 1,500 skilled outage workers locally and from across the country7 to support maintenance projects throughout the plant.

Major projects included:

The feedwater flowmeter project which installed more accurate ultrasonic instruments to increase the accuracy of water flow measurement through the reactor core, allowing increased feedwater flow and subsequent higher megawatt output. The project resulted in an increase of Columbia's output capacity by 21 megawatts.

Installation of a new power range neutron monitoring system, replacing analog circuit controls with more reliable and redundant digital circuit controls. Installation of the new PRNM hardware allows for implementation of improvements in analytical methods. The benefits of this project to Columbia are significant, including efficient use of nuclear fuel, an increase in overall efficiency of reactor operations and increased equipment reliability.

Columbia installed three new 175-ton main power transformers. The former transformers were original plant equipment and approaching their end-of-service life. The new transformers increased overall plant reliability and will serve Columbia through its current operating life, scheduled for the end of 2043.

ZERO RECORDABLE INJURIES 2015~

ENRYNRTHWEiT A4NNUR[PORT

ENERGY SERVICES &

Development Nine Canyon Wind Project Nine Canyon Wind Project, located on the hilltops southeast of Kennewick, Wash., is one of the largest public-owned wind projects in the nation with 63 wind turbines--14 rated at 2.3 megawatts and 49 rated at 1.3 megawatts.

Each turbine has its own miniature weather station that monitors wind direction and speed. Motors rotate the turbines into the wind and sophisticated control systems ensure the blades turn at the optimal speed to maximize power generation. The turbines are self-starting and begin generating electricity when wind speed reaches eight miles per hour, with full power achieved at about 35 mph. If winds exceed 55 mph on a sustained basis, the turbines shut down automatically and restart when the winds fall below 45 mph.

Nine Canyon's public outreach program promoting renewable energy reached more than 300 members of the communitq during fiscal year 2015.

Packwood Lake Hydroelectric Project The 27.5-megawatt Packwood Lake Hydroelectric Project is located in the Gifford Pinchot National Forest in Lewis County, Wash., approximately 20 miles south of Mt. Rainier. The facility began commercial operation in 1964 as Energy Northwest's first electric power generation project.

Hydro is a carbon-free resource, and fish screens protect migrating fish populations. Water levels in Packwood Lake and Lake Creek are closely monitored to preclude other environmental impacts.

White Bluffs Solar Station White Bluffs Solar Station, a 242-panel demonstration facility, is located at the agency's Industrial Development Complex near Columbia Generating Station in Richland, Wash.

The collaborative project is funded by Energy Northwest, the Bonneville Power Administration, the Bonneville Environmental Foundation Operations & Maintenance and the Department of Energy. Operations & Maintenance Services renewed a contract with the city of Burbank, Calif. to operate and maintain the Tieton Hydroelectric Generation & Project Development Project at Rimrock Lake in the Cascades.

During fiscal year 2015, Energy Northwest activated its Demand Energy Northwest also continues to provide operations and Response Aggregated Control System and successfully launched a maintenance services to the natural gas-fired Olympic View Generating demand response pilot project. DRACS is a communication and control Station, owned by Mason County Public Utility District 3.

infrastructure used for demand-side management of power loads. A pilot project with BPA is currently under way with a demand response resource up to 35 megawatts of reliable, fast-reaction demand response capacity.

Energy Northwest also launched a new, member-driven community solar initiative during the year. This aggregated public power effort may result in multiple community solar installations throughout Washington state.

~*

HHl !C *,IC I[ V OJC]b

Applied Process Engineering Laboratory Energy Northwest manages the Applied Process Engineering Laboratory as a lease facility for laboratory-based research and development within a controlled operating environment. Approximately Environmental and Analytical Services Laboratory 90 percent of the leasable space was occupied during fiscal 2015, with Energy Northwest's Environmental and Analytical Services Laboratory 10 percent remaining available for business start-ups or as specialized provides chemical analysis and environmental monitoring expertise for testing labs for emerging technologies. utility, municipal and residential customers. The laboratory continues to maintain accreditation for wastewater, drinking water, radiochemical Calibration Services Laboratory analyses and licensure as a clinical laboratory for drug screenings.

The Energy Northwest Standards Laboratory, located adjacent to Services provided to Columbia and outside clients include metals Columbia, is a multi-faceted applied physics laboratory performing quantification, general chemistry, microbiological testing, radiological calibrations in virtually every aspect of metrology, including torque, monitoring, lubricant condition monitoring, material verification, force, pressure, vacuum, mass, dimensional, electrical, electronic, commercial-grade dedication of materials, and aquatic and terrestrial temperature, humidity, flow, vibration, light and sound. monitoring.

ENSL is accredited to international Standard ANSI/ISO/IEC 17025 by Laboratory staff is active in the community, providing classroom the American Association for Laboratory Accreditation. The laboratory education to Delta High School students, serving as judges for local achieved re-accreditation during fiscal 2015, through January 2017. science and technology competitions, and participating in the annual Major laboratory clientele include Columbia, Bechtel, Washington Science Technology Engineering and Math Conference. Staff also Closure Hanford, Washington River Protection Solutions, CH2M Hill, provides instruction to Delta students on analytical chemistry, laboratory Pacific Northwest National Laboratory, AREVA, Columbia Energy & testing methods, careers in environmental science and the importance of Environmental, High-Line Engineering, Intermech, Energy Solutions and clean energy.

Mid-Columbia Engineering.

The Energy Northwest laboratory is also involved with educational Industrial Development Complex outreach in the Tni-Cities through participation in the annual Science The industrial Development Complex is located just east of Columbia Technology Engineering and Math Conference and World Metrology and operated by Energy Northwest. A leasing business line successfully Day. Participation includes hands-on classroom instruction and hosting leverages available outlying buildings by renting office and warehouse students at ENSL facilities for work-based learning experiences. space.

Laboratorystaff is involved with educationaloutreach in the Tri-Cities, includingpresentations to students, serving asjudges for local science and technology competitions, andparticipatingin the annual "4 Science Technology Engineering and Math Conference.

201BEf*EY NORTH*EST ANNUAL R*PO

18 18Su.IstaJ.in'ing EXCELLENCE

&DELIVERING INNOVATION AND VALUE

  • S - 9 Finacia at &Inorato 20T ENR NOTWSTANALRPR

19 SU.*_-aiI'*.I'*.* EXCELLENCE

&DELIVERING INNOVATIDN ANDVALUE MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING Energy Northwest management is responsible for preparing the accompanying financial statements and for their integrity. They were prepared in accordance with Generally Accepted Accounting Principles (GAAP) (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 independent auditors. Management has made available to pricewaterhouseCoopers ((P 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 financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures.,

Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, PricewaterhouseCoopers LLP has considered the internal control structure inorder 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, 2015, internal control procedures are adequate.

M.E. Reddemann B. Ridge Chief Executive Officer Vice President for Corporate Services; Chief Financial and Risk Officer AUDIT, LEGAL AND FINANCE COMMITTEE CHAIR'S LETTER The executive board's Audit, Legal and Finance Committee (committee) is composed of 11 independent directors. Members of the committee are Chair Kathy Vaughn, Marc Daudon, Jack Janda, Jim Moss, Skip Orser, Will Purser, Dave Remington, Lori Sanders, Tim Sheldon, Linda Gott and Sid Morrison, ex-officlo. The committee held 9 meetings during the fiscal year ended June 30, 2015.

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 independent auditors the overall scope and specific plans for their respective audits, and reviewed Energy Northwest's financial statements and the adequacy of Energy Northwest's internal controls.

The committee met regularly with Energy Northwest's internal auditor and convened periodic meetings with the independent auditors to discuss the results of their audit, their evaluations 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 auditors.

Kathleen R.Vaughn

Chair, Audit, Legal and Finance Committee 20l15ENERGY NORTHWESTANNUAL REPDRT

20 SUStc:7iuB.iiiigEXCELLENCE &DELIVERING INNOVATIONANDVALUE L. . _*. . . .. . . . . . . . . :. . .. . : . . . .. . . .. . . .. . . . . . . .. . ..... . . . . . .. . . . ...... .. . ... 2 . . . .: . . . . . . . . . .. . . .. L _

INDEPENDENT AUDITOR'S REPORT To the Executive Board of Energy Northwest:

We have audited the statements of net position and the related statements of revenues, expenses and changes in net position and of cash flows of each major fund of Energy Northwest (the "Company"), which consists of the Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.

1, Nuclear Project No. 3, the Business Development Fund, the Nine Canyon Wind Project, and the Internal Service Fund, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Company's basic financial statements.

Management's Responsibility for the Financial Statements Management isresponsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted inthe United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility Our responsibility is to express opinions on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund of the Company at June 30, 2015, and the respective changes in financial position and its cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter As discussed in Note 1 and 6 to the financial statements, the Company adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, effective July 1,2014. The financial statements of Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.1, the Business Development Fund, and the Nine Canyon Wind Project as of and for the year ended June 30, 2015 reflect the adoption of the provisions of GASB 68. Our opinions are not modified with respect to this matter.

Other Matter The accompanying management's discussion and analysis, the Schedule of the Company's Proportionate Share of Net Pension Liability and the Schedule of the Company's Contributions (Schedules of Required Supplementary Information) as listed in the table of contents of the Company's 2015 Annual Report are required by accounting principles generally accepted inthe United States of America to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Portland, Oregon September 24, 2015 2015 ENERGYNORTHWEST ANNUAL REPORT

2.1 sustaningEXtELLENCE &DELIVERINGINNOVATIONANDVALUE ENERGY NORTHWEST MANAGEMENT'S DISCUSSION AND ANALYSIS Energy Northwest is a municipal corporation and joint operating agency The Statements of Revenues, Expenses, and Changes in Net Position of the state of Washington. Each Energy Northwest business unit is financed provide financial information relating to all expenses, revenues and equity and accounted for separately from all other current or future business that reflect the results of each business unit and its related activities over assets. The following discussion and analysis is organized by business unit. the course of the fiscal year. The financial information provided aids in The management discussion and analysis of the financial performance and benchmarking activities, conducting comparisons to evaluate progress, and activity is provided as an introduction and to aid in comparing the basic determining whether the business unit has successfully recovered its costs.

financial statements for the fiscal year (FY) ended June 30, 2015, with the The Statements of Cash Flows reflect cash receipts and disbursements and basic financial statements for the FY ended June 30, 2014. net changes resulting from operating, financing and investing activities. The Energy Northwest has adopted accounting policies and principles that Statements of Cash Flows provide insight into what generates cash, where are in accordance with Generally Accepted Accounting Principles (GAAP) in the cash comes from, and purpose of cash activity.

the United States of America. Energy Northwest's records are maintained as The Notes to Financial Statements present disclosures that contribute prescribed by the Governmental Accounting Standards Board (GASB). (See to the understanding of the material presented in the financial statements.

Note i to the Financial Statements.) This includes, but is not limited to, Schedule of Outstanding Long-Term Debt Because each business unit is financed and accounted for separately, the and Debt Service Requirements (See Note 4 to the Financial Statements),

following section on financial performance is discussed by business unit to aid accounting policies, significant balances and activities, material risks, in analysis of assessing the financial position of each individual business unit. commitments and obligations, and subsequent events, if applicable.

For comparative purposes only, the table on the following page represents a The basic financial statements of each business unit along with the notes memorandum total only for Energy Northwest, as a whole, for FY 2015 and to the financial statements and management discussion and analysis should FY 2014. be used to provide an overview of Energy Northwest's financial performance.

The financial statements for Energy Northwest include the Statements of The following discussion provides comparative financial information for Net Position; Statements of Revenues, Expenses, and Changes in Net Position; the years ended June 30, 2015 and 2014. The year of 2014 has not been and Statements of Cash Flows for each of the business units, and Notes to restated to reflect changes in accounting principles per GASB Statement No.

Financial Statements. 68; however, FY 2015 beginning balance has been restated. (See Note 1 The. Statements of Net Position present the financial position of each to the Financial Statements.) Questions concerning any of the information business unit on an accrual basis. The Statements of Net Position report provided in this report should be addressed to Energy Northwest at P0 Box financial information about construction work in progress, the amount of 968, Richland, WA, 99352.

resources and obligations, restricted accounts and due to/from balances for each business unit. (See Note 1 to the Financial Statements.)

2015 ENERG]Y NORTHIWEST ANNUAL REPORT

22 ss ta*i*ningEXCELLENCE &DELIVERIN9 INNOVATION AND VALUE COMBINED FINANCIAL INFORMATION June 30, 2015 and 2014 (DoLLars in thousands) 24 21: Change Assets :i Current Assets  :$ 242,268 i$ 233,276 i$ (8,992)

Restricted Assets  ::

Special Funds :172,851 i318,116:i 145,265 Debt Service Funds :662,673:i 352,643:i (310,030)

Net Plant :1,517,397 !1,562,376 i44,979 Nuclear Fuel 999,007 i976,327 i(22.680)

Lung-Term Receivables  : 59:! 59 Other Charges :3,078.698 !3,187,338:! 108,640 TOTAL ASSETS 6.672.894 i6,630,135 (42,759)

DEFERRED OUTFLOWS OFRESOURCES* i20,048 !38,845 !18,797 TOTAL ASSETS AND DEFERRED OUTFLOWS i$ 6,692.942 i$ 6,668,980! $ (23,962)

Current Liabilities  :$ 983,794i $ 517,195 i$ (466,599)

Restricted Liabilities  ::

Special Funds :153,250:i 158,818:i 5,568 Debt Service Funds :123.653 i119,479:i (4,174)

Long-Term Debt 5.420,783 ! 5,731,753 : 310,970 Other Long-Term Liabitilies 11,254:i 105,843:i 94,589 Other Credits :6,041 i5,850: 1191)

Net Position  ::

Invested in capital assets, net of related debt  :(35,450): (44,813): (9,363)

Restricted, net :38,005 !43,685  : 5,680 Unrestricted, net  :(15,478): (14,301 ): 1,177 TOTAL LIABILITIES AND NETPOSITION 6,685,852 i6,623,509 (62,343)

DEFERRED INFLOWS OFRESOURCES* 7,090 i45,471 38,381 TOTAL LIABILITIES, NETPOSITION AND DEFERRED INFLOWS i$ 6,692.942 !$ 6,668,980 i$ (23,962)

Operating Revenues  : 470,779 i$542,257 $ 71,478 Operating Expenses :386,496 i421,6322 35,126 Net Operating Revenues 84,283 i120,635:i 36,352 Other Income and Expenses  :(84.238)! (1 18,467)i (34,229)

(DISTRIBUTION) & CONTRIBUTION -:-:

Beginning Net Assets* (12,968)i (17,597): (4,629)

ENDING NETPOSITION  !$ (12,923)* $ (15S,429)* $ (2,506)

  • Energy Northwest's 2014 Statement of Net Position end Statements of Revenues and Expenses and Changes in Net Position were updated for the impacts of the required retroactive application of GASBStatement No. 6S "Items Previously Reported as Assets and Liabilities," which became effective for Energy Northwest in fiscal year 2015. See Note 1 forea summary of this change in accounting principle.

2915 ENERGY NORTHWEST ANNUAL REPORT

23 COLUMBIA GENERATING STATION Columbia Generating Station (Columbia) is wholly owned by Energy LPRM replacement, Critical Spares, Rad Monitors, ECCS Pump Flow, Main Northwest and its participants and operated by Energy Northwest. The plant Transformer, Security Cameras, Radio Obsolescence, and Circuit/Panel is a 1,157-megawatt electric (MWe, Design Electric Rating, net) boiling water Upgrade. These projects resulted in 74 percent of the CWIP activity. The nuclear power plant located on the Department of Energy's (DOE) Hanford remaining 26 percent was made up of 151 separate projects.

Site north of Richland, Washington. Nuclear fuel, net of accumulated amortization, decreased $22.7 million Columbia produced 8,142 gigawatt-hours (GWh) of electricity in FY 2015, from FY 2014 to $976.3 million for FY 2015. During FY 2015 Columbia as compared to 9,781 GWh of electricity in FY 2014, which included economic incurred $58.4 million in capitalized fuel/reload activity with a decrease in dispatch of 0 and 62 GWh respectively. The FY 2015 generation decrease of fuel of $37.9 million due to amortization, a decrease of $18.0 million for 16.8 percent was due to a record generation run in FY 2014 coupled with activity related to movement of TVA fuel and a decrease of $25.3 million for Columbia entering its planned 42 day refueling outage (R-22) on May 9, 2015 transfer of fuel monitoring equipment to utility plant in service.

and down powers. The 42 day planned outage extended an additional 8 Current assets decreased $20.7 million in FY 2015 to $197.7 million.

days and ended on June 27. The down powers took place in the first quarter Changes were decreases to receivables of $8.3 million, decreases to cash of FY 2015. The extended outage and down powers resulted in budgeted and investments of $15.2 million, clearing of due from other business units generation lower than budget by 280 GWh for the fiscal year. of $9.4 million and increases to materials and supplies and prepaid amounts Columbia's cost performance is measured by the cost of power indicator. of $12.2 million.

The cost of power for FY 2015 was 5.05 cents per kilowatt-hour (kWh) as compared with 3.70 cents per kWh in FY 2014. The industry cost of power Special funds increased $146.8 million to $283.8 million in FY 2015 due to fluctuates year to year depending on various factors such as refueling the FY 2015 bond activity and schedule of construction costs for these funds outages and other planned activities. The FY 201 5 cost of power increase of in FY 2015.

36.5 percent was due to the planned outage and impacts from the extended The debt service funds increased $83.3 million in FY 2015 to $182.4 R-22 activity and first quarter down power. million. The increase is due to the restructuring and funding activities for the regional cooperative debt program associated with the 2015 bond activities.

Assets, Liabilities, and Net Position Analysis Other charges increased $146.3 million in FY 2015 from $907.0 million The net increase to Utility Plant (plant) and Construction Work In Progress to $1,053.3 million. The increase was change in Costs in Excess of Billings (CWlP) from FY 2014 to FY 2015 (excluding nuclear fuel) was $52.9 million. related to the net effect of payment of current maturities and refunding The changes to plant and CWIP were comprised of additions to plant of activity.

$152.1 million with a decrease to CWIP of $10.9 million. Remaining change Deferred outflows increased $15.2 million in FY 2015 from $18.2 million was the period effect of depreciation of $88.3 million. to $33.4 million. The major change was an increase of $12.3 million due to The FY 2015 CWtP balance of $58.2 million consisted of 14 major projects the recognition of a deferred pension outflow in accordance with GASB No.

of at least $1.0 million: Cyber Security, Pipe Replacement, Scram Discharge 68. An increase of $2.9 million was associated with the 2015 bond activity.

Monitoring, Fukushima Impacts, Main Condenser, Feedwater Flowmeter, Current liabilities increased $144.8 million in FY 2015 to $285.2 million.

24 24 SUSI lifll aDELDIVrNG INNDVAIION ll(J EXCELLENCE ANDVALJ Components of the change were increases to current maturities of debt of Revenue and Expenses Analysis

$82.4 million, addition of notes payable promissory note for refunding of Columbia is a net-billed project. Energy Northwest recognizes revenues

$93.6 million, increase to taxes payable of $5.0 million due to fuel assemblies equal to expenses for each period on net-billed projects. No net revenue or being moved into Washington State for R-22, decrease in generation tax of loss isrecognized and no net position is accumulated.

$0.7 million due to R-22 impacts, increase of bearer bonds payable of $0.3 Operating expenses increased $34.7 million from FY 2014 costs of $363.2 million, decreases due to timing of year end obligations of $8.5 million, and million to $397.9 million in FY 2015. The increases in costs were due to FY timing of due to participants that resulted in an decrease of $27.3 million. 2015 being a planned refueling year as compared to FY 2014 and were mostly Restricted liabilities increased $7.9 million in FY 2015 to $208.6 million. in the operations and maintenance areas amounting to $68.7 million. The The increase was due to accrued decommissioning of $6.9 million and interest increase in operations and maintenance costs due to R-22 were offset by a related to bond activity of $1.0 million. decrease in nuclear fuel costs of $25.5 million and a decrease of $8.2 million in Long-term debt (Bonds Payable) increased $119.7 million in FY 2015 from fuel disposal fee. The decrease of $9.5 million in fuel expense was due to less

$3,455.7 million to $3,575.4 million due to the restructuring and funding generation and R-22 impacts along with a decrease in costs of $15.1 million activities for the regional cooperative debt program associated with the 2015 due to the ISFSI settlement claim with the Department of Energy (See Note bond activities. 13 to the Financial Statements) along with decreases to fuel operating costs Other long-term liabilities increased $90.6 million in FY 2015 to $101.6 of $0.5 million for fuel casks and $0.4 million relating to fuel interest costs.

million. The increase was due to reorganization of pension liability in Fuel disposal fees ceased in FY 2015 per notice from the DOE, resulting in the accordance with GASB No. 68, of approximately $88.6 million; and nuclear $8.2 million decrease. (See Note 13 to the Financial Statements.) Decrease fuel cask activity, of approximately $2.0 million. in costs for administrative and general of $4.1 million were mostly driven Deferred inflows increased $38.3 million from $2.7 million in FY 2014 to by FY 2014 having a $3.7 million charge with the adoption of GASB No. 65

$40.9 million in FY 2015. An increase of $39.3 million was recognized to in FY 2014, recognition of $2.6 million of pension expense in accordance deferred pension inflow in accordance with GASB No. 68. A decrease to bond with GASB No. 68 in FY 2015, and decreases in other costs of $2.2 million.

refunding inflows of $1.0 million was due to the restructuring and funding Generation tax decreased $1.0 million due to lower generation, depreciation activities for the regional cooperative debt program associated with the 2015 increased $4.6 million which is reflective of the plant focus on reliability and bond activities. decommissioning increased slightly at $0.3 million per established schedule.

Other Income and Expenses increased $35.4 million from FY 2014 to

$115.7 million net expenses in FY 2015. A major piece of the increase was the COLUMBIA GENERATING STATION Total Operating Costs (Dollars in thousandsi spent fuel litigation settlement from the DOE of $23.6 million reported in FY 2014 as a gain on DOE settlement on the Statement of Revenues, Expenses, and Changes in Net Position. The FY 2015 amount of $15.1 million has been recorded as a reduction to fuel expense to represent the true cost of the fuel FY2015

- I- I-FY2012

- cask program. The cask costs were never an intended cost for the facility and only resulted from a failure to perform from the Department of Energy.

(See Note 13 for DOE settlement discussion.) The remaining increase of $11.8

- I- I- I- II million was due to increased bond related expenses of $20.0 million, increase in investment income of $0.3 million, increases in miscellaneous non-utility FY2012 i leasing revenue of $4.0 million, and an increase of $3.9 million for gain on SWU sale related to the TVA fuel contract. (See Note 13 for Nuclear Fuels FY 2011 discussion).

I Columbia's total operating revenue increased from $443.5 million in FY 2014 to $513.6 million in FY 201 5. The increase of $70.1 million was due to 0 100,000 200,000 300,000 400,000 500,000 the refueling year of the two year cycle for the refueling and maintenance 1 Operating Expenses I ther Income/Expenses program and the related effect of the net billing agreement on total revenue.

2O15ENERB' NDRTHEiffT ANNUA REPORC

25 25 ~i1* ( dCLN~

  • UFLVRNJ iN VA1ONAN reA PACKWOOD LAKE HYDROELECTRIC PROJECT THE PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Do 1ars in thousands)

The Packwood Lake Hydroelectric Project (Packwood) is wholly owned and operated by Energy Northwest. Packwood consists of a diversion structure at Packwood Lake and a powerhouse located near the town of Packwood, Washington. The water is carried from the lake to the powerhouse through FY 2015

- i m *2.141 a five-mile long buried tunnel and drops nearly 1,800 feet in elevation. FY 2014 2.150 Packwood produced 107.16 GWh of electricity in FY 2015 versus 115.04 GWh in FY 2014. The 6.8 percent decrease in generation can be attributed FY 2013 im 2.166 to less favorable water conditions compared to the previous year; FY 2015 was the 14th best generation year compared to FY 2014 which ranked 5th. FY 2012 - 1.872 Although FY 2015 was a low water year, generation results exceeded the budgeted generation amount of 84.64 GWh by 26.7 percent due to higher FY 2011 1.742 than average generation and a delay in new license requirements (See Note 1 to the financial statements) which will eventually lower the generating 0U0 1 00 2,0 250 capacity for Packwood.

iOperating Expenses Packwood's cost performance is measured by the cost of power indicator.

The cost of power for FY 2015 was $2.01 cents per kWh as compared to

$1.88 cents per kWh in FY 2014. The cost of power fluctuates year-to-year is indefinitely extended for continued operations until a formal decision is depending on various factors such as outage, maintenance, generation, and issued by FERC and a new operating license is granted. As of June 30, 2015, other operating costs. The FY 201 5 cost of power increase of 6.9 percent Packwood continues to be relicensed under this extended agreement.

was a result of decreased generation as overall results of operations were relatively unchanged (.42%/). Revenue and Expenses Analysis The agreement with Packwood participants obligates them to pay Assets, Liabilities, and Net Position Analysis annual costs and to receive excess revenues. (See Note 1 to the Financial Total assets increased $0.6 million from FY 2015, with the major driver Statements.) Accordingly, Energy Northwest recognizes revenues equal to being an increase to cash of $0.3 million to cash and $0.3 million due from expenses for each period. No net revenue or loss is recognized and no net other business units. The corresponding increase to total liabilities of $0.5 position isaccumulated.

million was the $0.3 million increase due to bearer bond recognition, an Operating expenses remained consistent from the prior year.

increase of $0.3 million in net pension liability and increase of $0.1 million Other Income and Expense remained unchanged from previous year to deferred pension inflow as a result of recognition of pension liability resulting in a net gain of $4 thousand.

in accordance with GASB No. 68. Packwood has incurred $3.7 million in Packwood participants are obligated to pay annual costs of the project relicensing costs through FY 2015 with no new costs incurred for FY 2015. (including any applicable debt service), whether or not the project is operable.

These costs are shown as Other Charges on the Statement of Net Position. The Packwood participants also share project revenue to the extent that the Packwood has been operating under a 50-year license issued by Federal amounts exceed costs. These funds can be returned to the participants or Energy Regulatory Commission (FERC), which expired on February 28, 2010. kept within the project. As of June 30, 201 5 there is $5.8 million recorded as Energy Northwest submitted the Final License Application (FLA) for renewal deferred revenues in excess of costs that are being kept within the project.

of the operating license to FERC on February 22, 2008. On March 4, 2010, Packwood participants are currently taking 100 percent of the project FERC issued a one-year extension to operate under the original license which generation; there are no additional agreements for power sales.

26 sustainingEXCELLENCE &DELIVERING INNOVATION ANDVALUE NUCLEAR PROJECT NO. 1 NUCLEAR PROJECT NO. 3 Energy Northwest wholly owns Nuclear Project No. 1, a 1,250-MWe Nuclear Project No. 3, a 1,240-MWe plant, was placed in extended plant, which was placed in extended construction delay status in 1982, when construction delay status in 1983, when it was 75 percent complete. On it was 65 percent complete. On May 13, 1994, Energy Northwest's Board of May 13, 1994, Energy Northwest's Board of Directors adopted a resolution Directors adopted a resolution terminating Nuclear Project No. 1. All funding terminating Nuclear Project No. 3. Energy Northwest is no longer responsible requirements are net-billed obligations of Nuclear Project No. 1. Termination for any site restoration costs as they were transferred with the assets to the expenses and debt service costs comprise the activity of Nuclear Project No. 1 Satsop Redevelopment Project. The dlebt service related activities remain the and are net-billed. (See Notes 5 and 12 to the Financial Statements.) responsibility of Energy Northwest and are net-billed. (See Notes 5 and 12 to the Financial Statements.)

Assets, Liabilities, and Net Position Analysis Restricted cash decreased $281.6 million in FY 2015 to $80.2 million. The Assets, Liabilities, and Net Position Analysis decrease was due to bond activities, investment activities and transactions Long-term debt increased $9.6 million from $1,071.4 million in FY 2014 between other units. to $1,081.0 million in FY 2015, as a result of $47.8 million being transferred Long-term debt increased $124.8 million from $715.9 million in FY 2014 to current debt to be paid on July 1, 2015 along with a decrease in bond to $840.7 million in FY 2015 as a result of $53.7 million being transferred to related amortization of $17.6 million; and the remaining changes were due current debt to be paid on July 1,2015 along with an increase in bond related to the debt associated with the planned and approved regional cooperative amortization of $45.1 million; the remaining changes were due to the debt debt program (2015 A and B). Current debt per the debt maturity schedule associated with the planned and approved regional cooperative debt program. decreased $109.5 million from $157.3 million in FY 2014 to $47.8 million in (2015 A and B). Short term debt decreased $278.3 million per the debt maturity FY 2015. The remaining changes in liabilities of $54.3 million were due to a schedule and current notes payable decreased $183.6 million as a result of the decrease in notes payable related to bond financing of $52.6 million, increase regional cooperative debt program. There was a decrease to restricted liabilities to bearer bond activity of $0.3 million and a decrease in accrued interest of $3.0 million, represented by decreases to interest payable of $3.1 million and payable of $2.0 million.

slight increase inthe decommissioning estimate of $0.1 million.

Revenue and Expenses Analysis Revenue and Expenses Analysis Overall expenses decreased $6.0 million from FY 2014 related to bond Other Income and Expenses showed a net decrease to expenses of $6.6 activity decreases of $5.9 million (interest expense and amortization) and $0.1 million from $41.6 million in FY 2014 to $35.0 million in FY 2015. Investment million decrease to liquidation (plant preservation and termination costs).

revenue for FY 2015 remained the same as previous year at $15 thousand; bond related expenses decreased $6.0 million; other expenses decreased $0.3 million, which included a restoration cost estimate decrease of $0.5 million as a result of the FY 2014 change in estimate in the accelerated restoration work plan, offset by an adjustment of $0.2 million to account for an Internal Service Fund allocation charge.

2015 ENERGYNORTHWEST ANNUAL REPORT

27 S I *sU

-L f.ifTy EXCELLENCE

&DELIVERINGINNOVATIONAND VALUE BUSINESS DEVELOPMENT FUND Revenue and Expenses Analysis Energy Northwest was created to enable Washington public power utilities Operating Revenues in FY 2015 totaled $7.2 million as compared to FY and municipalities to build and operate generation projects. The Business 2014 revenues of $6.0 million, an increase of $1.2 million (20.0 percent). The Development Fund (BDF) was created by Executive Board Resolution No. increase in revenues was driven by two new activities: Demand Response 1006 inApril 1997, for the purpose of holding, administering, disbursing, and Initiative (revenues of $0.8 million) and the Tieton Hydroelectric Project accounting for Energy Northwest costs and revenues generated from engaging (revenues of $0.5 million). The Demand Response Initiative is a project to innew energy business opportunities. have readily available resources to reduce electricity demand on the Bonneville The BDF is managed as an enterprise fund. Four business lines have been Power Administration (BPA) System. The Tieton Hydroelectric project isa facility created within the fund: General Services and Facilities, Generation, Professional located in Southeastern Washington along the Tieton River. Various laboratory Services, and Business Unit Support. Each line may have one or more programs services (Environmental and Calibration) revenue increased $0.4 million, lease that are managed as a unique business activity. activity decreased $0.2 million due to occupancy utilization, and engineeringl technical services decreased $0.3 million. New projects related to expansion of Assets, Liabilities, and Net Position Analysis nuclear options (Modular Nuclear and UAMPS Carbon Free Power) generated Total assets and deferred outflows increased $0.3 million from $10.4 million $48 thousand, two other projects for solar expansion are continuing with less in FY 2014 to $10.3 million in FY 2015. There were small decreases to plant than $10 thousand inrevenues.

of $0.1 million offset by increases to current assets of the same amount. The Operating costs increased $0.7 million from $7.6 million in FY 14 to $8.3 major change in assets was $0.3 million due to the recognition of a deferred in million in FY 2015. The increases in costs were due to the two new revenue pension outflow inaccordance with GASB No. 68. There was an overall increase producing activities described above. These projects increased costs $1.5 to liabilities and net position of $0.3 million. Liabilities decreased $0.3 million million, decreased business activity discussed above for engineeringltechnical from FY 2014 due to timing of year end outstanding items, with an increase services accounted for $0.4 million resulting in a FY 2015 net operating cost to net pension liability of $2.7 million and increase to deferred inflows of $1 .2 increase of $1.1 million.

million to account for the net pension liability inaccordance with GASB No. 68. Other Income and Expenses increased $0.2 million in FY 2015 to $1.4 There was an adjustment to beginning net position of $3.6 million due to the million, with the change attributable to less indirect costs. There were no other retrospective application of GASB No. 68. The change in net position of $0.4 significant individual item variances.

million from operations in FY 2015 as compared to a decrease of $0.3 million in The Business Development Fund receives contributions from the Intemnal FY 2014 reflects the control of costs, new lines of business and achievement of Service Fund to cover cash needs during startup periods. Initial startup costs are better margin for business sectors. not expected to be paid back and are shown as contributions. As an operating business unit, requests can be made to fund incurred operating expenses. In FY 201 5 there were no contributions (transfers), which was also the case for FY 2014.

2015 ENERGYNORTHWEST ANNUAL REPORT

28 28 sLisIuifliflg LN~Y NINE CANYON WIND PROJECT measures along with the $1.2 million in decreased treasury related expenses in The Nine Canyon Wind Project (Nine Canyon) is wholly owned and operated FY 2015 (a result of the 2015 refinancing) helped to mitigate the overall impact by Energy Northwest. Nine Canyon is located in the Horse Heaven Hills area of poor wind conditions and resultant loss of generation on the cost of power southwest of Kennewick, Washington. Electricity generated by Nine Canyon is calculation.

purchased by Pacific Northwest Public Utility Districts (purchasers). Each of the purchasers of Phase I, Phase II,and Phase Illhave signed a power purchase Assets, Liabilities, and Net Position Analysis agreement which are part of the 2nd Amended and Restated Nine Canyon Total assets decreased $4.0 million from $104.9 million in FY 2014 to Wind Project Power Purchase Agreement which now has an end date of 2030. $100.9 million in FY 2015. The major driver for the change in assets was a Nine Canyon is connected to the BPA transmission grid via a substation and decrease of $6.7 million in net plant due to accumulated depreciation. The transmission lines constructed by Benton County Public Utility District. remaining changes consisted of increases to current cash and investments Phase I of Nine Canyon, which began commercial operation in September of $0.9 million, decreases to special and debt service funds of $0.3 million, 2002, consists of 37 wind turbines, each with a maximum generating capacity decrease of $0.2 million in account receivables, increase to unamortized debt of approximately 1.3 MW, for an aggregate generating capacity of 48.1 MW. expense and deferred outflows of $2.4 million and an increase of $0.1 million Phase II of Nine Canyon, which was declared operational in December 2003, to deferred pension outflow to recognize pension related asset associated with includes 12 wind turbines, each with a maximum generating capacity of 1.3 the implementation of GASB No. 68. There was an overall decrease to liabilities MW, for an aggregate generating capacity of approximately 15.6 MW. Phase and net position of $4.0 million with a decrease to long term debt (including Illof Nine Canyon, which was declared operational in May 2008, includes 14 unamortized bond discountlpremium) of $5.8 million, increases to current debt wind turbines, each with a maximum generating capacity of 2.3 MW, for an maturities of $0.1 million, decreases to payables and interest of $0.2 million, an aggregate generating capacity of 32.2 MW. The total Nine Canyon generating increase of $0.8 million in net pension liability and an increase of $0.4 million capability is95.9 MW, enough energy for approximately 39,000 average homes. to the deferred pension inflow to recognize pension liabilities associated with Nine Canyon produced 196.75 GWh of electricity in FY 2015 versus 239.39 the implementation of GASB No. 68.There was an adjustment to beginning net GWh in FY 2014. The decrease of 17.8 percent was a result of very poor wind position of $1.0 million due to the retrospective application of GASB No. 68.The conditions resulting in the lowest generation since all three phases came on change innet position of $1.9 million from operations in FY 2015 as compared line in 2009. There were two small outages where additional generation of 249 to an increase of $0.4 million in FY 2014 reflects the steady operations and MWh was not realized however FY 2015 would still have been at the lowest treasury savings due to the 2015 refinancing.

levels since 2009. Capacity factor for FY 2015 was 24 percent as compared to In previous years Energy Northwest has accrued, as income (contribution) 29.4 percent for FY 2014. from the Department of Energy, Renewable Energy Production Incentive (REPI)

Nine Canyon's cost performance is measured by the cost of power indicator. payments that enable Nine Canyon to receive funds based on generation as The cost of power for FY 2015 was $8.31 cents per kwh as compared to $7.83 it applies to the REPI legislation. REPI was created to promote increases in cents per kWh in FY 2014. The cost of power fluctuates year to year depending the generation and utilization of electricity from renewable energy sources on various factors such as wind totals and unplanned maintenance. The and to further the advances of renewable energy technologies. This program, increase of 6.1 percent in cost of power for FY 2015 was directly attributable authorized under Section 1212 of the Energy Policy Act of 1992, provides to the extremely poor wind conditions. Operating expenses decreased slightly financial incentive payments for electricity produced and sold by new qualifying from $13.6 million in FY 2014 to $13.3 million in FY 201 5.These cost control renewable energy generation facilities. The payment stream from Nine Canyon 2)*1NR*Y NRTHWEST ANNUAL REPORT

29 29SLSU I(1i1U?

  • OEVE HNGNNUV FXCELLENOL TI N&N 0LU participants and the REPI receipts was projected to cover the total costs over the purchase agreement. Continued shortfalls in REPI funding for the Nine Canyon project led to a revised rate plan to incorporate the impact of this shortfall over the life of the project. The billing rates for the Nine Canyon participants increased 69 percent and 80 percent for Phase I and Phase I1 participants respectively in FY 2008 in order to cover total project costs, projected out to the 2030 proposed project end date. The increases for FY 2008 were a change from the previous plan where a 3 percent increase each year over the life of the project was projected. Going forward, the increase or decrease in rates will be based on cash requirements of debt repayment and the cost of operations.

Phase Ill started with an initial planning rate of $49.82 per MWh which increased at 3 percent per year for three years. In year six (FY 2013) the rate increased to a rate that is expected to be stabilized over the life of the project.

Possible adjustments may be necessary to future rates depending on operating costs and REPI funding, similar to Phase I and II.

Revenues and Expenses Analysis Operating revenues remained relatively steady from FY 2014 levels, increasing $0.1 million. The project received revenue from the billing of the purchasers at an average rate of $76.10 per MWh for FY 2015 as compared to

$76.33 per MWh for FY 2014 which is reflective of the implementation of the revised rate plan in FY 2008 to account for REPI funding shortfalls and costs OJECT of operations. Operating costs decreased $0.3 million in FY 2015 from $13.6 NINE CANYON WIND PR lota[ Operating Costs (dottars rn thou_sands) million in FY 2014 to $13.3 million in FY 2015. Decreased operating costs inFY 2015 were due to the FY 2014 recognition of current period costs for refinancing due to implementation of GASB No. 65. Other operating items remained steady 17.383 with no major fluctuations in individual operations or maintenance activities.

FY2015 Other income and expenses decreased $1.1 million from $5.2 million in net F'Y201A 18.750 expenses FY 2014 to $4.1 million in FY 2015. Decreased interest costs of $0.7 million and decreases inamortized bond expenses of $0.4 million accounted for FY2013 18.805 the change. Net gain or change in net position of $1.9 million for FY 2015 was

-I a direct result of the planned rate structure with projected treasury savings due to refunding and lower than budgeted operating costs.

FY2012 -I- 17.1~67 The original plan anticipated operating at a loss in the early years and 1.6 gradually increasing the rate charged to the purchasers to avoid a large rate FY2011

- I- increase after the REPI expires. The REPI incentive expires 10 years from the initial operation startup date for each phase. Reserves that were established 0 3,000 6,000 9,000 12,000 15,000 are used to facilitate this plan. The rate plan in FY 2008 was revised to account Operating Expenses Other IncomfelExpense *s for the shortfall experienced in the REPI funding and to provide a new rate scenario out to the 2030 project end date. Energy Northwest did not receive REPI funding in FY 2015 and is not anticipating receiving any future REPI incentives. The results from FY 201 5 reflect the revised rate plan scenario and gradual increase in the return of total net position 2010 00R00 NORTIWEl*

ANNUA* R0P0

30 30SUIS~~iIliUJ AXELEC A YEAN A*E ~NOVAThO ANUVAL INTERNAL SERVICE FUND The Internal Service Fund (1SF) (formerly the General Fund) was established The net decrease in net position and liabilities is due to increases inaccounts in May 1957.The 1SF provides services to the other funds.This fund accounts for payable and payroll related liabilities of $4.2 million due to year-end allocation the central procurement of certain common goods and services for the business of related expenses and an decrease of $1.5 million due to change in unpaid units on a cost reimbursement basis. (See Note 1 to Financial Statements.) bearer bond estimates.

Assets, Liabilities, and Net Position Analysis Revenues and Expenses Analysis Total assets increased $2.5 million from $39.4 million in FY 2014 to $41.9 Other income and expenses for FY 2015 increased to $107 thousand from million in FY 2015. There were increases to cash and investments of $2.2 FY 2014. There were increases in other business expenses of $80 thousand, million, receivables and prepaids of $0.6 million and increase in due to other increases to depreciation of $23 thousand, along with slightly lower overhead business units of $0.9 million. Decreases to plant of $1.0 million accounted for costs of $36 thousand.

the remainder of change in total assets.

205 ENERGYN3RTHWATANNUAL RAP

31_ Su*:tai.n..ing* " - EXE;ELLENEE &DELIVERING ININOVATION ANDVALUE STATEMENT OF NET POSITION = Clumia Packwood As of June 30, 2015 (DoLars inthousands)

Couba Lake i Nuclear Nuclear i Businesa Nine Canyon Internal 2015 Generating Hydroelectric i Projt Pret Dveomn Wind Service Combined Stto rjc iNumber I* Number 3* i Fund Project Subtotal Fund Eliminations Total ASSETS CURRENT ASSETS Cash $ 37,162 $ 1,169 $ 843; $ 39!$ 7,640 $ 543 $ 47,396( $ 7,347 $ -i$ 54,743 Investments - 498! 2,487 2,983 - 9,315 i 15,283

  • 27 -! 15,310 Accounts and other receivables 15,671 110 i1 i i 291 175 i 16,248 469 -i 16,717 Due from other business units -i 446 i 399 310 i 796 188 i 2,139 1 1086 (3,225) -

Materials sod supplies 142,962 1 i " 1"42,962 i -I 142,962 Prepayments and other 1,930 17i 2 2i 1 190 2,142i 1,402 -i 3,544 TOTAL CURRENT ASSETS "197,725 2,240! 3,7321 3,334i 8.728i 10,411" 226,170i 10.3311 (3,225)i 233.276 RESTRICTED ASSETS INote 1)

Special funds .i, Cash 883- 3,444 5,114 159i 825 10,425 1,834 - 12,259 Investments 282 744i i" 754i 283498 i 22193 i 305,691 Accounts and other ii16 receivables 166 "-" I -- 16 166 Debt service funds iiiii Cash 182.436 76,793 73.9281 96.46 342 803 Iii 342,803 Investments - " ii 9.837 i 9.837 3 i 9,840 TOTAL RESTRCTEDASSETS 4*66,229 80,237 79 0421 159 21062i 646 729 24.030"" 670.759 NON CURRENT ASSETS UTILITY PLANT (Note 21 Inservice i 4,121,660 14,736i i" 3,011 134'643 i 4'274'0501 46'814 " 4,320,864 Not in service ii 29,415 ""!- 29'4151 i" 29,415 Construction work inprogress i 58,203 i i"  ! 58,203 i i.i 58,203 Accumulated depreciation (2,695,114) (12 9661! (29,415)1 -i___ (1,556)i (67 748)i (2,806,799)I (39,307)1 - 12,846,106)

Net Utility Plant 1 1484,749 i 1,7701 _ { 1,455i 66 895] 1,554,869 i 7,507 "i 1,562,376 Nuclear uel, net of ,i iiii accumulated depreciation  ! 976,327 - - - I 762 96,2 LONG TERM RECEIVABLES -. - i- i 59 i59 TOTAL NONCURRENT ASSETS 2,461,076 1,770 i - " 1,455i 66,895i 2 531,196 i 7,566 ' - 2,538,762 OTHER CHARG ES Cost inexcess of billigs** 1053 2281 -! 972,083i 1,158 2891 i - 3.1836000i 3,183,600 Other " 3,7371 "i "~ - " 11 3,738 !-i 3,738 TOTAL OTHER CHARGES 1,I053,228 3,.7371 972,083 1,I158,289i "- 1 3,187,338 i-i 3,187,338 TOTAL ASSETS 4,178,258i 7,747 I 1.056,052 I 1,240,665i 10,3421 98.369! 6.591,433i 41,927 (3,225)1 6.630.135 DEFERRED OUTFLOWS OFRESOURCES

- unamortized loss ot bond I i refundin9g 21.102 i i 800 i.. 1,643 i* I 2,400 25,945

  • I 25,945 Deferred pension outflows 12,333 i 43 1 36 i-! 378 i 1101 12,9001 12,900 TOTAL DEFERRED OUTFLOWS  ! ii i OFRESOURCES 33,4351 43i 836! 1,643i 378i 2,5101 38,845!" 38,845 3 22

.DEFERRED OUTFLOWS .: ',$..4,211,693, $.: 7,790 = $ 1,056,888~ .$ 1,242,308:-$,,/10.720j $ :100,879: $ -6,630 278 ,$: :41,927.* $ ( , 5) i $ ,6,668,980

  • Project recordiedonra liquidation basis Theaccompanying notes sie as integral part ofthese combised financial statements
    • oEergy Northwest's 2015 Statement ofNet Position and Statements of tevenues and fopenses and Changes inNetPositiss weie antapdated forthe application ofthe required rettoactine application of GASB Statement No.6t TAccoanting and Financiai teparting far Pensions," whichbecame effectise for Energy Northwest infiscalyear 2815. SeeNote 1for a summary ofthis change in accounting principle.

2815 ENERGY NORTlIVWEST ANNUAL REPORT

32 Su[(taining* EXCELLENCE &DELIVERING INNOVATION AND VALUE STATEMENT OF NET POSITION As ofJune 30, 2015 (DoUlars in thousands)

Packwood -

Columbia Lake I Nuclear Nuclear I Business Nine Canyon IInternal 2015 (Generating Hydroelectric Project Project Development j Wind Service Combined Station Project Number 1'* Number 3* Fund Project I Subtotal Fund IEliminations Total LIABILITIES AND NET POSITIONI CURRENT LIABILITIES Current maturities of  :

long-term debt  !$ 114,590:* $ -$ 53,750:i$ 47,815:i$ $S 7,130 5 223,285:i$ -:$ 223,285 Current notes payable 93,648 51,850 32,620 ____-___ 178,118: -: 178,118 Accounts payable and accrued expenses 57,210 : 552 i 553:: 345 : 1,319 :: 519 ! 60,498: 35,218:i

  • 95,716 Due to participants  : 18,655 958
  • 463 i -: - : -: 20,076 - 20,076 Due to other business units  : 1,086:, - : -: 1,086 : 2,139 : (3,2251:

TOTAL CURRENT LIABILITIES *: 285,189 : 1,510 : 106,616 : 80,780 : 1,319 : 7,649 : 483,063: 37,357 : (3,225): 517,195 LIABILITIES-PAYABLE FROM RESTRICTED ASSETS (NOTE1) ____________ ____________ ______ ____________

Special funds  :  : . .

Accounts payable  ::  :

and accrued expenses  : 140,706 i-  : 16,716~ ____ _-  : -: 1,396 i 158,818: ______-: -: 158,818 Debt service funds:  ::::::::

Accrued interest payable 67,846 : -. : 23,043 *: 26,113 : -: 2,477 : 119,479 : -: -: 119,479 TOTAL RESTRICTED  :  :::  ::'

LIABILITIES  : 208,552: .- 39,759:i 26,113:* -: 3,873 : 278,297: -  : -: 278,297 LONG-TERM DEBT(NOTE S)

Revenue bonds payable  : 3,407.450 : . 840,675 : 1,081,005 : -: 101,620 : 5,430,750 : -:  : 5,430,750 Unamortized (discount)/ 167,965 - 68,050 : 53,494 :-: 1494 : 301,003 -: -. 301,003 premium on bonds - net  : ..

TOTAL LONG-TERM DEBT  : 3,575,415 : -: 908,725:i 1,134,499 : -: 113,114: 5,731,753 : -: -: 5,731.753 OTHER LONG-TERM LIABILITIES Pension liability.:, 88,631 : 306:, 260:, -.:, 2,716:1 768: 92,701 ,: -,: -. , 92,701 Dry storage cask liability ,: 12,749:i  :-  :- -. -,: 12,749,: -,: ," 12,749 Otber  : 229 : -: - -: 159 : -: 388 : 5:  : 393 TOTAL OTHER LONG-TERM " ":

LIABILITIES  : 101,609:! 308:! 260: - 2,875: 788 : 105,838:* 5 -: 105,843 OTHER CREDITS Advances from members  : -: 5,838 :  :- -: -: 5,838 : -: -: 5,838 and otbers ** .  : . .:  :

Other . . -  : -.- -. 12: 12:  : -: 12 TOTAL OTHER CREDITS ": 5,838:  : -: -i 12 : 5,850 : -: -: 5,850 TOTAL LIABILITIES . 4,170,765 : 7,654: 1,055,360: 1,241,392 : 4,194 : 125,436 : 6.604,801 : 37,362 : (3,225): 6,638,938 DEFERRED INFLOWS OFRESOURCES Deferred inflows - unamortized : . .::

gain on bond refunding ,: 1,620: -: 1,413: 916: -: 409:! 4,358:, -,: ,: 4,358 Deferred pension inflows**  : 39,308*: 136 : 115: -: 1,205: . 349 : 41,113 : -: -" 41,113 TOTAL DEFERRED INFLOWS  :  :

OFRESOURCES  : 40,928:i 136 : 1,528: 916 : 1,205.: 758:! 45.471 :-:  : 45.471 NETPOSITION Invested in capital assets,  :  :-  : -: -: 1,455:! (53,834): (52,379): 7,566: - (44,813) net of related debt  :  :

Restricted, net  : -:.  :. . -: 19,655 i 19,655 i 24,030 - : 43,685 Unrestricted, net  : -: -: -: -: 3,866 : 8,864: 12,730. 127,031). -: (14,301)

NET POSITION** " -: -. -: -: 8,571 : (25,315): (19,994): 4,672:  : (15,429)

Prolect recorded us a liqoidation basis Theaccompanying notes are as Integralpart ef these combined financial statements

    • nergy Neonbwesn's 2015 Statenment ofNetPosition and Statements ofRevenues and Expensesand Changes inlNetPosition were enoupdated forthe application of the required retroactive application of GASB Starement No.va'Ac counting and FinancialRteporting for Pensions,"which became effective for EnergyNorthwest in fiscalyear 25t15.See Nate 1 for a summary ef this change in accounting principle.

2815 ENERGY NORTHWEST ANNUAL REPORT

33 . T *t.fl7g--

° EXCELLENCE &DELUVERING INNOVATION AND VALUE STATEMENTS OF REVENUES, EXPENSES, AND CHANGES INNET POSITION As of June 30, 2015 (Do!.[ars in thousands)

Packwood Columbia Lake Nuclear Nuclear Business Nine Canyon Internal 2015 Generating IHydroelectric I Project Project Development I Wind Service ICombined Station Project 1 No.1

  • No.3
  • i Fund I Project Subtotal Fund i Total OPERATING REVENUES $ 513,6031 $ 2,1411 $ " $ " $ 7,228* $ 19,2851 $ 542,2571 $ " $ 542,257 OPERATING EXPENSES iiii Services to other business units, --

Nuclear fuel 27.433 ,--i--! 27,433 i i 27,433 Decommissioning 6,938 i ."-*-i 88 i 7,026 ii 7,026 Depreciation and amortization i 89,745 i 90 i-*- 261 6,7099 96,895 i-! 96,895 Operations and maintenance 244,915 1 1877 -i- 8,027 : 6,3341 261,153 1 " 261,153 Administrative &general 24.796 155i ]i 14i 24.965 24,965 Generation tax 4,085 23 ! i-  ! 42 i 4,150 ! " 4,150 Total operating expenses .: 397,912 2,145 -- 8,288 13,277 421,622 - 421,622 OPERATING INCOME (LOSS) i 115,691 (4) i i (1,060) 66008 i 120,635 " 120,635 OTHER INCOME &EXPENSE  ::;-

Other  ! 11,112. 1 35,017 i 41 910i 1 422i 5! 89467" 71 464* 89,360 Investment income, 412 i, 3 1iS 21 11 i 60 i 522 i7 522 Interest espense and debt amortization, nut of (127,215) -: (33,463) (41,599) i  : (4,171) i (206 448) !- (206,448) capitalized interest _________ _______________

Plant preservation and termination costs i--: (1,203) 1332)i i- (1,535)j " (1,535)

Depreciation and amortization  ! *-: (258) -"i" (258)j 1,386 ! (258)

Decommissioning _______- (108)1 ______ 18 (108 Services to other business units i- - i-.-i (72,964)

TOTAL OTHER INCOME &EXPENSE i (115,691) i 4 -! - 1,433 i (4,106)! (118,360)! (107) i (118,457) iNCOME (LOSS) i -: - -. " 373! 1,902 2,275 (107)i 2,168 GASB68 ADJUSTMENT as of 7/1/201 4** -:" "i- (3,623) (1,051) i (4,674) i i (4,674)

TOTAL NETPOSITION. BEGINNING OF YEAR -i "- "- " 8,571 i (26,166) i (17,595)1 4.672 1 (12,923)

TOTAL NETPO)SITION/ENrDOFYEAR! , I' -*i:  :;*$-'i:

.; ° I $-o i $- ..... - '* *.-$-; r " , $5,321:"I $(25,315)i .:.$(,19,9"94)I $.;!

i4,5'651 "$(i5,*429)

  • Project recorded ona liquidatios basis Theaccompanying notes are as integral part ofthese combined financial statemients
    • Energy Nsrthwest's 2015 Statement of NetPsoition asd Statements oftenenses and Expenses and Changes inNetPosition mere not updated forthseapplication of the required retroactive application of GASO Statement No.68 "Ac counting and Finaocialteporting for Pensions,"whichbecame effective forEnergy Northwest infiscalyear 2015. SeeNote 1for a summary ofthis change inaccounting principle, 2915 ENERO;Y NORTh WEST ANNUAL REPORT

34 sstaininTg EXCELLENCE &DELIVERING NNO VATiOna AND VALUE STATEMENT OF CASH FLOWS As of June 30, 2015 (Dollars inthousands)

Columbia !Packwood Lake Nuclear Business Nine Canyon Nuclear Internal 2015 Generating Hydroelectric Project Project Development Wind Service Combined Station Project No.1* No.3

  • Fund Project Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Operating revenlue receipts i$ 467 9081 $ 2,512 i$ -$ " $ 3,037 S 19'5051 $ "i$ 492,962 Cash payments for operating expenses i (287,592)i (2.139)i - . (2,869)i (6,454)1.-i (299,054)

DOECash settlement 23,5751 -i " i - 23,575 Cash received from TVAfuel activities 21'917 i"" -i "i" 21,917 Cash payments for services net of cash  !.!.

received from other units 3 43i348 Net cash provided by operating activities  ! 225,808 i 373 "i168  ! 13,051 3,483 242,883 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bond refundings 242,4241" 235,290 1 84,700 " 4131 562,827 Principal paid on revenue bond maturities i (32 205)i" (332 100)i (157'300)i (7 265)i - (528,870)

Payment for bond issuance and financing costs (3'871)i (2)i (1'209)i (727)i (1)i (440)i" (6,250)

Proceeds from notes payable 93 648 i i 51,848 32620 -" " 178,116 Payment for notes payable "" (235,443) (85,180)I i"i" (320,623)

Interest paid on bonds (138,890)i" (47,481) ~ (54,154)i" (5'107)i" (245,632)

Interest paid on notes "- (53) (19)i-- - (72)

Payment for capital items (117,124)i (99)i (259) -] (357)! (168)i (1,321) (119,328)

Nuclear fuel acquisitions (55 268)i -i "] "i "i " (55.268)

Payments received from BPAfor !i i terminated nuclear projects "i4~7,66 65S686 i" "" 113,4S2 Net cash provided/(used) by capital iiiii and related financing activities (11,286)] (101)! (281,641) (114,374)i (358)i (12,567)i (1321)1 (421,648)

CASH FLOWS FROM NON-CAPITAL FINANCE ACTIVITIES "

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities i (392,540)! (994)i (8717)I (26,364)i (5 540)* (36,208)I (37,734)i (508,097)

Sales of investment securities  ! 258 449 i 995 i 6 226 ! 25,484 i 10,975 27 639 i 40 880 i 370,648 Interest on investments 2081 41 19i 25i 11 831 171 501 Net cash providedl(used) by investing activities , (133,883)i 5 (2,472)! (855) 5,446 i (8,506)! 3,317 i (136,948)

NETINCREASE (DECREASE) IN CASH 80,6391 2771 (284,113)i (115,229), 5,256 (8,022)i ,7 (315,713)

CASH AT JUNE 30,2014 1 139,842:i 892 i 365,193 i~ 194,310i 2,543 i 19,036 ! 3,702i 725,518

.:CASHAT IUNE3O,.2015(HOTE B)': ' *. -.... * ,$: 220,4811 $ 1,1'}

691 $ . 8',i080~ i$ -*i. 79,081 1$ 7,799* $"

  • iiiO1'4$.* ,9,'18i'1$ i:409.805!
  • Projectrecorded onsaliquidation basis Threaccompanying notes areanrintegral part ofthese combined financial stutements 2015 ENERGY NORTIHWEST ANNUAL REPORT

35 sustainingEXCELLENCE &DELI VERNOH INNOVATION AND VALUE STATEMENT OF CASH FLOWS As of June 30, 2015 (DolLars in thousands)

SColumbia iPackwood Lake Nuclear Nuclear Business Nine Canyon Internal 2015 Generating iHydroelectric Project . Project Development Wind Service Combined Station  ! Project No.1* No.3* Fund Total Fund Project RECONCILIATION OF NETOPERATING REVENUES TONET CASH FLOWS PROVIDED BYOPERATING ACTIVITIES Net income/loss from operations $ 115,691 $ (4)l$ " S -i (1,059)1 $ 6,008 i J$ 120,636 Adjustments to reconcile net operating revenues to cash provided by operating activities:

Depreciation and amortization 132,321 90 - -i 261 6,799 1,386r 140,857 Decommissioning 6,9381!"[i- -! 88 "i7,026 Non-operating revenues -i(1) _- - (5)I (108), (114)

Other 12,885 (6)~ 133 4i9 4,1 Change in operating assets and liabilities: i i Deferred charges/costs in excess of billings (42,856)I 415S i" (42,441)

Accounts receivable 7,933 7i i(172)! 142 (531)I 7,379 Mate ria lsandsupplies (1,009) __ _ _"__ " _ -_ -_ " - (12,009)

Prepaid and other assets (195)i (1)i"- (1)i (6)1 (234)i (437)

Due from/to other business units 10'536 i (315)i (53)i (32)! (9,767)I 360 Due from/to participants iT (70)- (37)i (10-

  • 7)

Accounts payable (5'436)I 258i (114)i (37)) 12,638i 7,309

and nonoperating acti'vities':  :::  : ,*:L:' ?$* 22 8 $ , , ':373 $ $:".':  :  : 168: $ 301 3:483 !$' ,;242.*883 Non-cash activities Capitalized interest 3,767 " - 3,767-
  • Project recorded os a liquidation basis Theaccompanying notes are as lntegra[part afthese combined financial statements 2015 ENERGY NORTHWEST ANNUALREPORT

36 36Sus*tain*in EXCELLENCE

&DEUIVERING INNOVATION ANID VALUE NOTES TO FINANCIAL STATEMENTS NOTE 1 - Summary of Operations and Significant Accounting Policies Nuclear Project No. 1, a 1,250-MWe plant, was placed in extended Energy Northwest, a municipal corporation and joint operating agency of construction delay status in 1982, when it was 65 percent complete. Nuclear the state of Washington, was organized in 1957 to finance, acquire, construct Project No. 3, a 1,240-MWe plant, was placed in extended construction and operate facilities for the generation and transmission of electric power. delay status in 1983, when it was 75 percent complete. On May 13, 1994, Membership consists of 22 public utility districts and 5 municipalities. All Energy Northwest's Board of Directors adopted resolutions terminating members own and operate electric systems within the state of Washington. Nuclear Projects Nos. 1 and 3.All funding requirements remain as net-billed Energy Northwest is exempt from federal income tax and has no taxing obligations of Nuclear Projects Nos. 1 and 3. Energy Northwest is no longer authority. responsible for site restoration costs for Nuclear Project No. 3. (See Note 12)

Energy Northwest maintains seven business units. Each unit is financed The Business Development Fund was established in April 1997 to pursue and accounted for separately from all other current or future business units, and develop new energy related business opportunities. There are four and is accounted for as a major fund for governmental accounting purposes. main business lines associated with this business unit: General Services and All electrical energy produced by Energy Northwest's net-billed business Facilities, Generation, Professional Services, and Business Unit Support.

units is ultimately delivered to electrical distribution facilities owned and The Nine Canyon Wind Project (Nine Canyon) was established in January operated by Bonneville Power Administration (BPA) as part of the Federal 2001 for the purpose of exploring and establishing a wind energy project.

Columbia River Power System. BPA in turn distributes the electricity to Phase I of the project was completed in FY 2003 and Phase IIwas completed electric utility systems throughout the Northwest, including participants in in FY 2004. Phase I and II combined capacity is approximately 63.7 MWe.

Energy Northwest's business units, for ultimate distribution to consumers. Phase Ill was completed in FY 2008 adding an additional 14 wind turbines Participants in Energy Northwest's net-billed business units consist of public to Nine Canyon and adding an aggregate capacity of 32.2 MWe. The total utilities and rural electric cooperatives located in the western United States number of turbines at Nine Canyon is 63 and the total capacity is 95.9 MWe.

who have entered into net-billing agreements with Energy Northwest and The Internal Service Fund was established in May 1957. It is currently used BPA for participation in one or more of Energy Northwest's business units. to account for the central procurement of certain common goods and services BPA isobligated by law to establish rates for electric power which will recover for the business units on a cost reimbursement basis.

the cost of electric energy acquired from Energy Northwest and other sources,. Energy Northwest's fiscal year begins on July 1 and ends on June 30. In as well as BPA's other costs (see Note 5). preparing these financial statements, the company has evaluated events and Energy Northwest operates the Columbia Generating Station (Columbia), transactions for potential recognition or disclosure through September 24, a 1,1 57-MWe (Design Electric Rating, net) generating plant completed 2015, the date of audit opinion issuance date.

in 1984. Energy Northwest has obtained all permits and licenses required The following is a summary of the significant accounting policies:

to operate Columbia. Columbia was issued a standard 40-year operating license by the Nuclear Regulatory Commission (NRC) in 1983. On January A) Basis of Accounting and Presentation: The accounting policies of 19, 2010 Energy Northwest submitted an application to the NRC to renew Energy Northwest conform to Generally Accepted Accounting Principles the license for an additional 20 years, thus continuing operations to 2043. (GAAP) applicable to governmental units. The Governmental Accounting A renewal license was granted by the NRC on May 22, 2012 for continued Standards Board (GASB) is the accepted standard-setting body for operation of Columbia to December 31, 2043. establishing governmental accounting and financial reporting principles.

Energy Northwest also operates the Packwood Lake Hydroelectric Project Energy Northwest has applied all applicable GASB pronouncements and (Packwood), a 27.5-MWe generating plant completed in 1964. Packwood has applied Financial Accounting Standards Board (FASB) standards, has been operating under a 50-year license issued by the Federal Energy as other accounting literature, in those areas not directly prescribed Regulatory Commission (FERC), which expired on February 28, 2010. Energy by GASB and to the extent that they do not conflict with or contradict Northwest submitted the Final License Application (FLA) for renewal of the GASB pronouncements. The accounting and reporting policies of Energy operating license to FERC on February 22, 2008. On March 4, 2010, FERC Northwest are regulated by the Washington State Auditor's Office and issued a one-year extension, or until the issuance of a new license for the are based on the Uniform System of Accounts prescribed for public project or other disposition under the Federal Power Act, whichever comes utilities and licensees by FERC. Energy Northwest uses an accrual first. FERC is awaiting issuance of the National Oceanic and Atmospheric basis of accounting where revenues are recognized when earned and Administration's (NOAA) Biological Opinion, after which FERC will complete expenses are recognized when incurred. Revenues and expenses related the final license renewal documentation for Packwood. Costs incurred to to Energy Northwest's operations are considered to be operating date for relicensing are $3.7 million included in other charges. revenues and expenses; while revenues and expenses related to capital, The electric power produced by Packwood issold to 12 project participant financing and investingactivities are considered to be other income and utilities which pay the costs of Packwood. The Packwood participants are expenses. Separate funds and books of accounts are maintained for each obligated to pay annual costs of Packwood including debt service, whether business unit. Payment of the obligations of one business unit with funds or not Packwood is operable. The participants also share Packwood revenue of another business unit is prohibited, and would constitute violation of (See Note 5). bond resolution covenants (See Note 4).

2015 ENERGYNORTH ANNUAL WEST REPORT

37 SvL taTfl7 ig EXCELLENCE &DELIVERING INNOVATIONANDVALUE Energy Northwest maintains an Internal Service Fund for centralized GASB Statement No. 75, "Accounting and financial Reporting for control and accounting of certain capital assets such as data processing Posternployment Benefits Other than Pensions" primary objective is equipment, and for payment and accounting of internal services, payroll, to improve the accounting and financial reporting for employer's with benefits, administrative and general expenses, and certain contracted postemployment benefits other than pensions (other postemployment services on a cost reimbursement basis. Certain assets in the Internal or OPEB). GASB Statement No. 75 is effective for Energy Northwest in Service Fund are also owned by this Fund and operated for the benefit fiscal year 2018. The impact of GASB Statement No. 75 has not yet been of other projects. Depreciation relating to capital assets is charged to the determined by Energy Northwest management.

appropriate business units based upon assets held by each project. GASB Statement No. 76, "The Hierarchy of Generally Accepted Liabilities of the Internal Service Fund represent accrued payroll, Accounting Principles for State and Local Governments" primary vacation pay, employee benefits, such as pensions and other post- objective is to identify in the context of the current governmental retirement benefits, and common accounts payable which have been financial reporting environment the hierarchy of generally accepted charged directly or indirectly to business units and will be funded by accounting principles to improve financial reporting. GASB Statement the business units when paid. Net amounts owed to, or from, Energy No. 76 is effective for Energy Northwest in fiscal year 201 6. The impact Northwest business units are recorded as Current Liabilities-Due to of GASB Statement No. 76 has not yet been determined by Energy other business units, or as Current Assets-Due from other business units Northwest management.

on the Internal Service Fund Statement of Net Position. GASB Statement 77, "Tax Abatement Disclosures" primary objective The combined total column on the financial statements is for isto assist citizens, taxpayers, legislative and oversight bodies, municipal presentation only as each Energy Northwest business unit is financed bond analysts, and others to assess the current economic position of the and accounted for separately from all other current and future business entity. GASB Statement No.77 is effective in fiscal year 2017, but is not units. The FY 2015 Combined Total includes eliminations for transactions applicable to Energy Northwest.

between business units as required in GASB Statement No. 34, "'Basic Change in Accounting Principle In fiscal year 2015, Energy Financial Statements and Management's Discussion and Analysis for Northwest implemented GASB Statement No: 68 Accounting and State and Local Governments". Financial Reporting for Pensions and GASB Statement No. 71, "Pension GASB Statement No. 67, "Financial Reporting for Pension Plans - Transition for contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 25" and GASB Statement No. 69, - an amendment of GASB Statement No. 68". The primary objective "Government Combinations and Disposal of Government Operations" of GASB Statement No. 68 is to improve accounting and financial was effective at beginning of FY 2015, but has no impact for Energy reporting by state and local governments for pensions. GASB Statement Northwest. Implementation of the statement was not required. No. 68 establishes standards for measuring and recognizing liabilities, Issued but not Adopted Guidance GASB Statement No. 72, "Fair deferred outflows of resources, deferred inflows of resources (See Note Value Measurement and Application" primary objective is to address 1 for definition of deferred inflow / outflow of resources), and expense!

the reporting issues related to fair value measurements. This statement expenditures. For defined benefit pensions, this Statement identifies provides guidance for applying fair value to certain investments and the methods and assumptions that should be used to project benefit disclosures related to all fair value measurements. GASB Statement payments, discount projected benefit payments to their actuarial present No. 72 is effective for Energy Northwest in fiscal year 2016. The impact value, and attribute that present value to periods of employee service.

of GASB Statement No. 72 has not yet been determined by Energy In addition, prior to implementing GASB Statement No. 68, employers Northwest management. participating in a cost-sharing plan recognized annual pension expense GASB Statement No. 73, "Accounting and Financial Reporting essentially equal to their contractually required contribution to the plan.

for Pensions and Related Assets" that are not within the Scope of Upon the adoption of GASB Statement No. 68, employers participating in GASB Statement 68, and Amendments to Certain Provisions of GASB cost-sharing plans recognize their proportionate share of the collective Statements 67 and 68 primary objective is to improve the usefulness pension amounts for all benefits provided through the plan based on of information about pensions included in the general purpose external an allocation methodology. GASB Statement No. 71 amends GASB financial reports for making decisions and assessing accountability. GASB Statement No. 68 regarding the deferred outflows of resources for Statement No. 73 is effective in fiscal year 2017. The impact of GASB governments whose current year pension contributions are reported Statement No. 73 has not yet been determined by Energy Northwest subsequent to the measurement date. The collective financial impact management. resulting from the implementation of GASB Statements No. 68 and 71 GASB Statement No. 74, "Financial Reporting for Postemployment is the restatement of 2015 beginning balances by $123,656 million for Benefit Plans OtherThan Pension Plans" primary objective isto improve Energy Northwest's portion of the net pension liability incurred in prior the usefulness of information about postemployment benefits other years, which is then allocated across the business units. See financial than pensions (other postemployment benefits or OPEB) for OPEB Plans. statement Note 6 for further details on the impact to Energy Northwest.

GASB Statement No. 74 is effective in 2017, however does not apply to Energy Northwest as it only applies to OPEB plans.

2015 ENERGYNORTH WEST ANNUALREPORT

38 SUS *Yt*in n* EXCELLENCE

&DELIVERING INNgVATION AND VALUE Dollars in Thousands Columbia Packwood ! Nuclear Project No. 1: Business Development : Nine Canyon 7/1114 Balances as Previously Reported:

Cost in Excess of Billings  !$ 906,957 i$ - !$ 985,437 !$ - : $-

Advances from members and others  :-  : 5,817:i -: - -

Net Position  : -: -: -: 8,571 : (26,166)

GASB 68 Restatement Adjustment to Beginning Balances : 118,228 !408 i346 !3,623 !1,051 7/1/14 Restated Balances:  ::::

Cost in Excess of Billings :1,025,185 i-  : 985,783 i- -

Advances from members and others  : - : 5.409:i -: -.

Net Position  : -: -: -: 4,048 !(27,217)

B) Utility Plant and Depreciation: Utility plant is recorded at original and Environmental Obligations as issued by the FASB, which is considered cost which includes both direct costs of construction or acquisition and "other accounting literature" that does not conflict with or contradict indirect costs. GASB standards, according to GASB Statement No. 55, The Hierarchy of Property plant, and equipment are depreciated using the straight- Generally Accepted Accounting Principles for State and Local Governments line method aver the following estimated useful lives: (GAAP hierarchy). ASC 410 requires Energy Northwest to recognize the fair value of a liability associated with the retirement of a long-lived asset, Buildings and Improvements 20- 60 years such as: Columbia Generating Station, Nuclear Project No. 1, and Nine Generation Plant 40 years Canyon, inthe period in which it is incurred (see Note 10).

Transportation Equipment 6 -9 years General Plant and Equipment 3 - 15 years F) Decommissioning and Site Restoration: Energy Northwest established decommissioning and site restoration funds for Columbia Group rates are used for assets and, accordingly, no gain or loss and monies are being deposited each year in accordance with an is recorded on the disposition of an asset unless it represents a major established funding plan (see Note 11).

retirement. When operating plant assets are retired, their original cost together with removal costs, less salvage, is charged to accumulated G) Restricted Assets: In accordance with bond resolutions, related depreciation. agreements and laws, separate restricted accounts have been The utility plant and net position of Nuclear Projects Nos. 1 and 3 have established. These assets are restricted for specific uses including debt been reduced to their estimated net realizable values due to termination. service, construction, capital additions and fuel purchases, unplanned A write-down of Nuclear Projects Nos. 1 and 3 was recorded in FY 1995 operation and maintenance costs, termination, decommissioning, and included in Cost in Excess of Billings. Interest expense, termination operating reserves, financing, long-term disability, and workers' expenses and asset disposition costs for Nuclear Projects Nos. 1 and 3 have compensation claims. They are classified as current or non-current assets been charged to other income and expense (see Note 10). as appropriate.

C) Capitalized Interest: Energy Northwest analyzes the gross interest H) Cash and Investments: For purposes of the Statement of Cash Flows, expense relating to the cost of the bond sale, taking into account interest cash includes unrestricted and restricted cash balances and each earnings and draws for purchase or construction reimbursements for the business unit maintains its cash and investments* Short-term highly liquid purpose of analyzing impact to the recording of capitalized interest. investments are not considered to be cash equivalents; and are stated If estimated costs are more than inconsequential, an adjustment is at fair value with unrealized gains and losses reported in investment made to allocate capitalized interest to the appropriate plant account. income (see Note 3). Energy Northwest resolutions and investment Capitalized interest casts were $3.8 million for utility plant with no policies limit investment authority to obligations of the United States capitalized Interest for fuel. Treasury, Federal National Mortgage Association and Federal Home Loan Banks. Safe keeping agents, custodians, or trustees hold all investments D) Nuclear Fuel: Energy Northwest has various agreements for uranium for the benefit of the individual Energy Northwest business units.

concentrates, conversion, and enrichment to provide for short-term enriched uranium product and long-term enrichment services. All T) Accounts Receivable: The percentage of sales method is used to expenditures related to the initial purchase of nuclear fuel for Columbia, estimate uncollectible accounts. The reserve is then reviewed for including interest, were capitalized and carried at cost. adequacy against an aging schedule of accounts receivable. Accounts deemed uncollectible are transferred to the provision for uncollectible E) Asset Retirement Obligation (ARO's): In the absence of government- accounts on a yearly basis. Accounts receivable specific to each business specific guidance that directly addresses ARO's, Energy Northwest has unit are recorded in the residing business unit.

adopted Accounting Standards Codification (ASC) 410, Asset Retirement 2815 ENERGY NORTHWEST ANNUAL REPORT

39 Su,*tain'lin*g EXCELLENCE &DELIVERING INNOVATION AN'D VALUE J) Other Receivables: Other receivables include amounts related to the K) Materials and Supplies: Materials and supplies are valued at cost Internal Service Fund from miscellaneous outstanding receivables from using the weighted average cost method.

other business units which have not yet been collected. The amounts due to each business unit are reflected in Due To/From other business L) Leases: Consist of separate operating lease agreements. The total of units. Other receivables specific to each business unit are recorded inthe these leases by business unit and their respective amounts paid per year residing business unit. are listed inthe table below:

PROJECTS OPERATING LEASE COSTS (Dollars in thousands) 2015 : 2016 :2017  : 2018 2019: 2020+

Columbia . $ 634:i $ 634 i$ 634 !$ 634 !$ 634 !$ 14, 582 Nuclear Project No. 1 35i35 i 35 : 35 35 805 Nine Canyon 667:i 667 i667:i 667 667 15,341 NineCanyon Business Development Fund . 37 !37  : 37  : 37 : 37 : 851 Internal Service Fund :138 i138 i138 !138 . 138 i3,174 Packwood Lake Project . 100 !100 !100 !100 !100 2,300 Total . $ 1.611 $ 1,611 !$ 1,611 !$ 1,611 !$ 1,611 i$ 37,053 M) Long-Term Liabilities: Consist of obligations related to bonds payable and the associated premiums/discounts and gains/losses. Other noncurrent liabilities are pension liabilities recognized according to GASB Statement No. 68 (see Note 6), dry storage cask liabilities for Columbia Generating Station, and other immaterial liabilities. The table below summarizes activities for all long~term liabilities excluding pension liabilities.

LONG-TERM LIABILITIES (Dollars in thousands)

Balance 6/30/2014 Increase Decrease Balance 6/30/2015 Columbia Revenue hoods payable 3,304,805 !$ 659.635 S 556,990 !$ 3,407,450 Unamortized (discount)Ipremium on bonds - net 150,938 47,031! 30,004i 167,965 Current maturities of long-term debt 32,205i 114,590 32,205 114,590 Other noncurrent liabilities 1,04i,55!61 297

$ 3.499,002 i$ 823,841 i$ 619,860 $3,0,3 Nuclear Project No.1 Revenue bonds payable  !$ 715,905 !$ 327,360 !$ 202,590 i$ 840,675 Unamortized (discountl/premium on bonds - net " 22,8190 58,197 13,066 !68,O50 Current maturities of long-term debt . 332,10O0 : 53,750 !332,100  : 53,750

$ 1,070,924 i$ 439,307 !$ 547,756 i$ 962,475 Nuclear Project No.3 Revenue bonds payable  !$ 1,071,400 $ 184,890 !$ 175,285 $ 1,081,005 Unamortized ldiscount)lpremium on bonds - net :35,894 i30,226 i12,626 !53,494 Current maturities of long-term debt . 157.300  : 47,815 : 157,300 !47,815 4 ]

$ 1,264,594 i$ 262.931 i$ 345,211 !$ 1,182,314 Nine canyon Revenue bonds payable :112,120 i54,895 !65,395  !$101,620 Unamortized (discount)/premium on bonds - net :6,802 !7,671 !2,979 !11,494 Current maturities of long-term debt  : 725!,10 ,65 7,130

$1617i$ 69,696

  • 569*$ 120,244 2015 ENERGY NORTHWEST ANNUALREPORT

40 Sus~taininigEXCELLENCE &DELIVERtNG]NNOVATION AND VALUE N) Debt Premium, Discount and Expense: Original issue and reacquired Q) Compensated Absences: Employees earn leave in accordance with bond premiums, discounts and expenses relating to the bonds are length of service. Energy Northwest accrues the cost of personal leave in amortized over the terms of the respective bond issues using the bonds the year when earned. The liability for unpaid leave benefits and related outstanding method which approximates the effective interest method. payroll taxes was $21.4 million at June 30, 2015 and is recorded as a In accordance with GASB Statement No. 65, "Accounting and Financial current liability.

Reporting for Refundings of Debt Reported by Proprietary Activities",

gains and losses on debt refundings have been deferred and amortized R) Use of Estimates: The preparation of Energy Northwest financial as a component of interest expense over the shorter of the remaining life statements in conformity with GAAP requires management to make of the old or new debt. estimates and assumptions that directly affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities

0) Revenue Recognition: Energy Northwest accounts for expenses on at the date of the financial statements, and the reported amounts of an accrual basis, and recovers, through various agreements, actual cash revenue and expenses during the reporting period. Actual results could requirements for operations and debt service for Columbia, Packwood, differ from these estimates. Certain incurred expenses and revenues are Nuclear Project No. 1 and Nuclear Project No. 3. For these business allocated to the business units based on specific allocation methods that units, Energy Northwest recognizes revenues equal to expenses for each management considers to be reasonable.

period. Revenues of Nuclear Project No.1 and Nuclear Project No.3 are recorded under other income and expense, as these two business units S) Deferred Inflows and Outflows: Deferred outflows of resources are are terminated nuclear projects. No net revenue or loss is recognized, defined as the consumption of net assets by Energy Northwest that and no net position is accumulated. The difference between cumulative are applicable to a future reporting period, and are reported in the billings received and cumulative expenses is recorded as either billings statement of financial position in a separate section following assets.

in excess of costs (other credits) or as costs in excess of billings (other Deferred inflows of resources are defined as acquisitions of net assets charges), as appropriate. Such amounts will be settled during future by Energy Northwest that is applicable to a future reporting period, and operating periods (see Note 5). are reported in the statement of financial position in a separate section Energy Northwest accounts for revenues and expenses on an accrual following liabilities.

basis for the remaining business units.The difference between cumulative These amounts consist of losses and gains on bond refundings, revenues and cumulative expenses is recognized as net income or loss subsequent contributions, difference between projected and actual and included in Net Position for each period. investment income, and other GASB 68 related costs (see Note 6) as labeled on the Statement of Net Position.

P) Capital Contribution: Renewable Energy Performance Incentive (REPI) payments enable Nine Canyon to receive funds based on generation as it T) Other Charges and Credits for Resources: Other charges of $3.7 applies to the REPI bill. REPI was created as part of the Energy Policy Act of million relate to the Packwood relicensing effort. Other credits of $12 1992 to promote increases in the generation and utilization of electricity thousand for Nine Canyon consist of cost of issuance related to the bond from renewable energy sources and to further the advances of renewable refunding in FY 201 5.

energy technologies.

This program, authorized under section 1212 of the Energy Policy Act U) Short-Term Debt: The non-revolving loan facilities that were established of 1992, provides financial incentive payments for electricity produced for Project 1 and Project 3 in the amount of $235.4 million and $85.2 and sold by new qualifying renewable energy generation facilities. Nine million respectively, in fiscal year 2014 were subsequently paid in full Canyon did not record a receivable for FY 2014 REPI funding as no funds during fiscal year 201 5. Three new non-revolving credit facilities were are anticipated to be disbursed to Energy Northwest under this program. established infiscal year 2015: $70.0 million for Columbia to pay a portion The payment stream from Nine Canyon participants and the anticipated of debt service and operations and maintenance related costs of which REPI funding were projected to cover the total costs of the purchase $48.1 million remained outstanding as of June 30, 2015. An agreement agreement. Permanent shortfalls in REPI funding for the Nine Canyon for up to $130 million in total; $51.9 million for Project 1, $45.5 million project led to a revised rate plan to incorporate the impact of this shortfall for Columbia, and $32.6 million for Project 3 were drawn to fund debt over the life of the project. The current rate schedule for the Nine Canyon principal maturing on July 1, 2015. Additionally, a loan agreement was participants covers total estimated project costs occurring in FY 2015 and established for up to $117.2 million in total; $41.1 million for Project 1 estimated total cost recovery projections out to the 2030 proposed end and $76.1 million for Project 3 to fund monthly debt service sinking fund date. During FY 2015 there was no cost recovery obtained from REPI. requirements beginning in July 2015. No funds were drawn against the

$117.2 million agreement for Project 1 and Project 3 as of June 30, 2015.

Nine Canyon did not receive short-term financing during fiscal year 2015.

201EENERGY NORTH WEST ARNNUAL REPORT

41 sustainingEXCELLENCE &nELVERING lINNOVATION ANDVALVE SHORT-TERM LiABiLITIES :BlneOttnig: aac vial (Dollars in thousands) Baac.ustnig Blnc vial Balance 6130/2014 Increases Decreases: 6/30/2015 at 6/30/2015 Columbia Non-Revolving Loan $ -! $ 93,648~ S -* $ 93,648 i $ 21,842 Nuclear Project No.1 Non-Revolving Loan . 235,445 !51,850 !235,445 !51,850 !41,070 Nuclear Project No.3 Non-Revoleing Loan -85,180 i32,620 !85,180 32,620 76,145 Nine Canyon Short-term debt .-  :-:- -:

Packwood Short-term debt .- . -: - :-"

Business Development Short-term debt . - :-  :-  :- -

Total i$ 320,625! $ 178,118* $ 320,625~ S 178,118! $ 139,057 NOTE 2 - Utility Plant Utility plant activity for the year ended June 30, 2015 was as follows:

Balance 06/30/2014 iCapital Acquisitions iSale or Other Dispositionse Balance 0813012015 Columbia Generation  !$ 3,954,807 !$ 152,276! $ (191)! $ 4,106,892 Decommissioning :14,768:i - - -. 14,768 Construction Work-in-Progress  : 69,150 :225,054 (236,001)i 58,203 Accumulated Depreciation and (2,606,854)i (88,451):: 191 (2,695,114)

Decommissioning* **

Utility Plant, net*  :$ 1.431,871  :$ 288.879: $ (236,001): $ 1,484,749 Packwood Generation  !$ 14,635 i$ 113 5 (12)! $ 14,736 Construction Work-in-Progress  :-  : 114:i (114)i Accumulated Depreciation  :* (12.892):; (86);. 12 :i (12,966)

Utility Plant, net  :$ 1,743: $ 141  :$ (114): $ 1,769 Business Development Generation  !$ 2,898 !$ 113! $ -! $ 3,011 Construction Work-in-Progress  :- :113 (11 13)!

Accumulated Depreciation  : (I,335)i (221)i* - - (1,556)

Utility Plant, net  :$ 1,563: $ 5  :$ (113): $ 1,455 Nine Canyon _____________

Generation $ 133,657:i $ 157 !$ (32): 133,782 Decommissioning 661:i -: - 861 Construction Work-in-Progress. -: 157 (157)

Accumulated Depreciation and (60,960)! (6,820)! 32 !(67,748)

Decommissioning  ;

Utility Plant, net* $ 73,558 i$ (6,506): $ (157): $66,895 Internal Service Fund Generation  !$ 47,878 5 179 !$ (1,296) $ 46,761 Construction Work-in-Progress  :- - 232 i(1 79)! 53 Accumulated Depreciation  :(39,216): (1,387)i 1,296 i(39,307)

Utility Plant, net  :$ 8'6621 $ (976): $ (179): $7,507

  • Doessotincludte Noclear Fuel,net ofamortization

42 42 ~SU#StC lfiflTy EXFELLENCE &DELIVERING INNOVATION AND VALUE

- - -I NOTE 3 - Investments Interest rate risk: In accordance with its INVESTMENTS (Dolears inthousands)

Amortized cost i Unrealized Gains :: Unrealized Losses i Fair Value (1)(12) investment policy, Energy Northwest manages Columbia i$ 282,654 $ 163 $ (73) $ 282,744 its exposure to declines in fair values by Packwood :497 i1  : -. 498 limiting investments to those with maturities Nuclear Project No.1 :2,484 i3 - . 2,487 as designated in specific bond resolutions to Nuclear Project No. 3  : 2,979 : 4:  : 2,983 coincide with expected use of the funds.

Business Development Fund  :- -  :

Credit risk: Energy Northwest's investment Internal Service Fund  : 22,209 !14 -  : 22,223 policy restricts investments to debt securities Nine Canyon Wind  : 19,891 : 15: -  : 19,906 and obligations of the U.S. Treasury, U.S.

government agencies Federal National (1) Allinvestments are in U.S.Government backed securities including U.S.GovernmentAgencies and Treasury Bills.

121The majority of investments have maturities of lese than 1year. Approximately $98.88 million have a maturity beyond 1 year Mortgage Association and the Federal Home with the longest maturity being June 30, 2017 Loan Banks, certificates of deposit and other evidences of deposit at financial institutions qualified by the Washington Bonds). No 2001, 2003, or 2005 Nine Canyon bonds remained outstanding Public Deposit Protection Commission (PDPC), and general obligation debt as of June 30, 2015 under Resolution Nos. 1214, 1299, and 1376 respectively.

of state and local governments and public authorities recognized with one of During the year ended June 30, 2015, Energy Northwest issued, for Project the three highest credit ratings (AAA, AA+, AA, or equivalent). This investment 1 and Project 3, 2014-C fixed-rate bonds. The Series 201 5-A fixed-rate bonds policy is more restrictive than the state law. and 2015-B fixed-rate bonds for Project 1, Columbia, and Project 3 were Concentration of credit risk: Energy Northwest's investment policy also issued. The Project 1, Columbia, and Project 3 bonds were issued with a does not specifically address concentration of credit risk. An individual coupon interest rate ranging from 0.55 percent to 5.0 percent.

authorized security or obligation can receive up to 100 percent of the The 2014-C bonds for Project 1 and Project 3 are tax-exempt fixed-rate authorized investment amount; there are no individual concentration limits. bonds issued to repay an outstanding Note obligation originally issued to Custodial credit risk, deposits: For a deposit, this is the risk that in repay prior Project 1and Project 3 bonds. The Series 201 5-A bonds issued for the event of bank failure, Energy Northwest's deposits may not be returned Project 1, Columbia, and Project 3 are tax-exempt fixed-rate bonds. Series to it. Energy Northwest's demand deposit interest bearing accounts and 201 5-B bonds issued for Project 1, Columbia, and Project 3 are taxable fixed-certificates of deposits are covered up to $250,000 by Federal Depository rate bonds. These bonds were issue'd in majority to refund prior Project 1, Insurance (FDIC) while time and savings deposit non-interest bearing Columbia, and Project 3 bonds (See Note 1). These transactions resulted in accounts are covered up to an additional $250,000 by FDIC. All interest and a net loss for accounting purposes of $8.7 million. The 201 5-A, and 2015-B nan-interest bearing deposits are covered by collateral held in a multiple refunding bonds resulted in a combined economic gain of $26.0 million, $0.2 financial institution collateral pooi administered by the Washington state million and $1 .0 million for Columbia, Project 1 and Project 3, respectively.

Treasurer's Local Government Investment Pool (PDPC). Under state law, public During fiscal year 2015, Nine Canyon issued the 2015 Series bonds that depositories under the PDPC may be assessed on a prorated basis if the pool's refunded prior Nine Canyon bonds. The 2015 Series tax-exempt fixed-rate collateral is insufficient to cover a loss. All deposits are insured by collateral bonds were issued with a coupon interest rate ranging from 4.0 percent to held in the multiple financial institution collateral pool. State law requires 5.0 percent. This transaction resulted in a net loss for accounting purposes of deposits may only be madewith institutions that are approved by the PDPC. $2.54 million. The 2015 series refunding bonds resulted inan economic gain of $5.1 million.

NOTE 4 - Long-Term Debt The Bond Proceeds, Weighted Average Coupon Interest Rates, Net Each Energy Northwest business u~nit is financed separately. The Accounting Loss, and Total Defeased Bonds for Project 1 and Project 3 2014-resolutions of Energy Northwest authorizing issuance of revenue bonds for C; Project 1, Columbia, and Project 3 201 5-A and 201 5-B; and 2015 Series for each business unit provide that such bonds are payable from the revenues Nine Canyon are presented in the following tables:

of that business unit. All bonds issued under resolutions Nos. 769, 775 and 640 for Nuclear Projects Nos. 1,3 and Columbia, respectively, have the same BOND PROCEEDS (Dollars isthousands)_________________

priority of payment within the business unit (the "prior lien bonds"). No 2014C 2015A 201SB . 2015 Total prior lien bonds remain outstanding related to Columbia authorized under Project 1 $ 235,443 $ 137,67915$ 12,435 $ -$ 385,557 resolution No. 640. All bonds issued under resolutions Nos. 835, 838 and columbia . 377,491 329,175 - 706,666 1042 (the "electric revenue bonds") for Nuclear Projects Nos. 1, 3 and Project 3 85,176 96,395 33,545 - 215,116 Columbia, respectively, are subordinate to the prior lien bonds and have Nine Canyon -- 62,566 62,566 the same subordinated priority of payment within the business unit. Nine Total $ 320,619 $ 611,565 $ 375,155 $ 62,566 $ 1,369,905 Canyon's bonds were authorized by the following resolutions: Resolution No.

1214 (2001 Bonds), Resolution No. 1299 (2003 Bonds), Resolution No. 1376 (2005 Bonds), Resolution No.1482 (2006 Bonds), Resolution No. 1722 (2012 Bonds), Resolution No. 1789 (2014 Bonds), and Resolution No. 1824 (2015 2015 ENERGY NORTHWE-ST ANNUAL REPORT

43 S*,S*tainZlng EXCELLENCE &DELiVERiNG INNOVATION ANDVALUE WEIGHTED AVERAGE COUPON INTEREST RATE NET ACCOU NTIN G (GAl N)ILOS S (Dollars inthousands) _____

FOR REFUNDED BONDS 2014C 2015A 2015B 2015 Total 2014C 2015A 2015B 2015 Project1i - $ (273) 5 372 $ $ 99 Project 1 (A) 4.47% 5.00% Columbia - (114) 7,482 - 7.368 Columbia 4.90% 5.00% Project 3 - 70 1,171 - 1,241 Project 3 (A) 2.77% 5.00% Nine Canyon --- 2,543 2,543 Nine Canyon 4.82% Total $ - $ (317) $ 9,025 $ 2,543 $ 11,251 Total (A) 4.24% 5.00% 4.82%

TOTAL DEFEASED (Dollars in thousands) _______________

WEIGHTED AVERAGE COUPON INTEREST RATE 2014C 2015A 2015B 20151I Total FOR NEW BONDS Project1 (A) $ 137,680 $ 11,160 $ -$ 148,840 2014C 2015A 2015B 2015 Columbia - 169,325! 273,075 - 442,400 Project 1 5.00% 5.00% 0.97% Project 3 (A) 96,140, 31,330 - 127,470 Columbia 4.80% 2.83% Nine Canyon --- 58,265 58,265 Project 3 5.00% 4.92% 1.16% Total $ - $ 403,145 $ 315,565 $ 58,265'$ 776,975 Nine Canyon 4.65%

(A) The 201 4C Bonds were issued with the purpose of repaying $235.4 million and $85.2 million Total 5.00% 4.86% 2.62% 4.65%

of Project 1 and Project 3 Notes renpectively established in June 2014.

2015 REFUNDING RESULTS Outstanding principal on revenue and refunding bonds for the various business units as of June 30, 2015, and future debt service requirements for these bonds are presented in the following tables:

Columbia Project1 :

201 5-A (Tax-Exempt) Transaction Project 3 Nine Canyon 2015 Transaction S Nine Canyon Cash Flow Difference Cash Flow Difference Old debt service cash flown  : $ 184,502 !$ 137,680 $ 96,817 Old debt service cash flows $ 85,277 New debt service cash flown 265,370 i 192,176:i 119,074 New debt service cash flows  : 78,855 ENinterest contribution  : 388:! - :88 Net Cash Flow Savings (Dissavings)  :$ 6,422 Net Cash Flow Savings (Dissavings) i$ (81,256)i $ (54,496)! $ (22,345)

Economic Gain / Loss Economic Gain / Loes Present valse of old debt service cash flows  !$ 67,258 Present value of old debt service cash flows  !$ 176,820 i$ 137,165 $ 96,432 Present value of new debt service cash flows :62,155 Present value of new debt service cash flows :171,150 137,043 !96,055 Economic Gain (Loss)  : $ 5,103 ENinterest contribution  : 388:!- 88 Economic Gain (Lots) - $5,282 !$122 i$289 2015-B (Taxable) Transaction  : Columbia Project 1 : Project 3 Cash Flow Difference Old debt service cash flows i$ 380,389 5 12,555, $ 6,030 New debt service cash flows  : 347,834:! 12,693 !34,604 ENinterest contribution  : 4,741 : 194 !544 Net Cash Flow Savitgs (Dissavings)  !$ 27,814 !$ (332)! $ 882 Economic Gain / loss Present value of old debt service cash flows i$ 318,194 i$ 12,277 i$ 34,861 Present value of new debt service cash flows :292,738 i11,958 i33,570 ENinterest contribution :4,741  : 194 : 544 Economic Gain (Lost) i$ 20,715 !$ 125 $ 747 2801ENERGY NORTHWEST ANNUAL REPORT

44 sustainingEXCELLENCE &DELI VERINO 9NNOVATION ANDVALUE COLUMBIA REVENUE AND REFUNDING BONDS Nuclear Project No. 1 Refunding Revenue Bonds (Continued)'

(Dollars in thousands)

Serial or Term 2014C0 5.00 7-1-25-2027 :197,110 Series *Coupon Rate (%) Maturities Amount 2015A - 5.00 - 7-1-27/2028 :117,815 2003A ' 5.50

  • 2015 $ 35,100 20158 0.60-0.98  ! 7-1-16/2017 :12.435 2004A  : 5.25 7-1-2017 :20,375 2004C 5.25  : 7-1-16/2017 :5,510 Revenue bonds payable $ 894,425 2005A  : 5.00  : 7-1-2015 7,960 Estimated fair value at June 30, 2015 $ 985,183 2005C  : 4.74 7-1-2015 14,955 2006A  : 5.00 7-1-2020 :50,000 NUCLEAR PROJECT NO. 3 REFUNDING REVENUE BONDS 20060 5.80  : 7-1-2023 :3,425 (Dollars in thousands) 2007A  : 5.00  : 7-1-15/2018 *51,150 Serial or Term 20078 5.33  : 7-1-20/2021 :9.935 Series *Coupon Rate (%) Maturities Amount 19898 7.13  : 7-1-2016  !$ 76,145 20v8A 1993C - 5.75 - 7-1-15/2018 16,337 (A)
5.00-5.25 S 7-1-15/2018 51,.205 2008A 2004A 5.25  : 7-1-2016 :30,810
5.95 7 71-20/2021 12,025 20080 2005A  : 5.00  : 7-1-2015 10,415
5.00-5.25 7 71-21/2024  : 28,240 2008A 2006A  : 5.00  : 7-1-2016 :3,605
4.00-5.00 7 71-15/2018 73,695 2009A 2007A 4.50-5.00  : 7-1-15/2018 :55,755
6.80  : 7-1-2312024 9,780 20090 2007C  : 5.00  : 7-1-16/2018 29,380
4.25-5.00 7 71-20/2024 69,170 20108
3.75-4.25  ! 7-1-2012024  : 16,005 2010B  : 7-1-1612017  : 14,740
4.52-5.12 i 7-1-2012024 75,770 20080 5.00 20100 i 7-1-15/2018 92,210
5.61 -5.71  : 7-1-2312024 155,805 2009A 5.00-5.25 2010D  : 7-1-16/2018  : 279,980
4.00-5.00 i 7-1-15/2023 281,410 2010A 5.00 20118  : 7-1-2016 29,865
4.19-5.19  ! 7-1-19/2024 29,920 20108 5.00 2011B  : 7-1-2018 92,285
3.55 7-1-2019 4,600 2011A 4.00-5.00 2012A  : 7-1-2018 67,885
5.00  : 7-1-18/2021  : 441,240 2012A 5.00 2012A  ! 7-1-16/2017  : 30,330
4.00-5.00 i 7-1-25/2044  : 34,140 20128 3.00-5. 00 2012E 7-1-15/2016 55,945
1.06-4.14 i 7-1-15/2037 748,515 20120 1.2 6-1.74 20124A  : 7-1-2028 72,305
3.00-5.00 i 7-1-16/2040  : 517,720 20140 5.00 20140 i 7-1-17/2026 79,040
0.32-4.05  : 7-1-15/2030 90,520 2015A 3.00-5.00 2014A i 7-1-16/2018  : 33,545
4.00-5.00 S 7-1-21/2038  : 330,460 201 5B 0.60-1.38 2015A
0.55-3.84 7-1-16/2038  : 329,175 Compound interest bonds accretion 44,453 Revenue bonds payable $ 3,522,040 Revenue bonds payable $ 1,128,820 Estimated fair value at June 30, 2015 $ 3,850,705 Estimated fair value at June 30, 2015 $ 1,233,092 (A) Compound Interest Bonds NUCLEAR PROJECT NO. 1 REFUNDING REVENUE BONDS (Dollars in thousands) NINE CANYON WIND PROJECT REVENUE AND

- Serial or Term REFUNDING BONDS Series Coupon Rate (%) Maturities Amount (Dollars in thousands) 19898 7.13 " 7-1-2016  !$ 41,070 Serial or Term 2005A  : 5.00  : 2015 :8,925 Series Coupon Rate (%) Maturities Amount 2006A  : 5.00  : 7-1-15/2016 :42,910 2006 " 5.00  ; 7-1-15/20.16 $ 5,545 2007A 5.00 7-1-15/2017 :34,095 2012  : 3.00-5.00  ! 7-1-15/2023 :11,740

-20070 5.00  : 7-1-16/2017 :90,085 2014 4.00-5.00 i 7-1-15/2023 :36,570 2008A 5,00-5.25 ! 7-1-16/2017 :146,700 2015  : 4.00-5.00  ! 7-1-1712030 :54,895 20080 5.00 7-1-1612017 11,355 2009A 3.25-5.00 7-1 -2015 :1,670 $ 108.750 Revenue bonds payable 2010A 3.00-4.00 i 7-1-16/2017 :26,075 Estimated fair value at June 30, 2015 $ 120,423 2012A  : 5.00  : -- 15/2017 :111,800 2012B8 5.00  : 7-1-2017 :41,285 Total Bonds Payable -$ 5,654,035!

20120 1.26  : 7-1-2015 :11,095 Estimated fair value at June 30, 2015 $' 6,'189,403

45 Su.s*.]*taini EXCELLENCE

&DELIVERING INNOVATION AND VALUE DEBT SERVICE REQU IREM ENTS As of June 30, 2015 (Dollars in thousands)

COLUMBIA GENERATING STATION NUCLEAR PROJECT NO. 1 FISCAL YEAR*:! PRINCIPAL INTEREST iTOTAL FISCALYEAR* i PRINCIPAL i INTEREST iTOTAL 6130/2015 Balance:~** $ 114,590 i$ 67,846 i$ 182,436 6/30/2015 Balance:** : $ 53,750:i $ 23,043 i$ 76,793 2016 !81,410 i 142,495 i 223,905 2016 239,700 i42,336 i 282,036 2017:i 96,715 i 139,690:i 236,405 2017: 286,050:i 29.425: 315,475 2018:i 426,695 135,645 j 562,340 2018: -: 15,746:i 15,746 2019: 416,850:! 120,172 ! 537,022 2019:! -: 15,746 i 15,746 2020! 357,000 i 104,838i 461,.838 2020:! -: 15,746 !15,746 2021-2025:i 1,373,405 ! 304,073 i 1,677,478 2021-2025i 02,525: 78,731  : 141,256 2026-2030 i 175,360 i 146,558:! 321,918 2026-2028:i 252,400:i 24,975:! 277,375 2031-2035i 300,785 i76,140 i 376,925 2036-2040:i 168,310 i20,295 i 188,605 2041 -2044 10,920:i 1,162 i12,082

$ 3,522,040 $ 1,258,914 ::$ 4,780,954 $ 894,425 i$ 245,748 $ 1,140.173

  • Fiscal year for this report indicates the cash funding requirement year.
  • Fiscal year for this report indicates the cash funding requirement year.
    • Principal and Interest due July 1,2015. ** Principal and Interest due July 1, 2015.

NUCLEAR PROJECT NO. 3 NINE CANYON WIND PROJECT FISCAL YEAR* i PRINCIPAL:i INTEREST:! TOTAL FISCALYEAR* PRINCIPAL i INTEREST iTOTAL 6/30/2015 Balance:** $ 47,815 j $ 26,113 i$ 73,928 6/30/2015 Bulance:**  :$ 7,130:i $ 2,477:i $ 9,607 2016: 260,810: 50,430 i 311,240 2016:1 7,440  : 4,831  : 12,271 2017! 191,230 i38,410:i 229,640 2017:i 7,640 i 4,471 i12,111 2018:! 482,075  : 30,441 i 512,516 2018: 8,010 ! 4,105:i 12,115 2019:* -: 7,345 !7,345 2019: 8,425.: 3,705: 12,130 2020:i -: 7,345 i7,345 2020:i 8,835 i3,296 i12,131 2021-2025 !36,385  : 36,723 : '73,108 2021-2025:i 37,425 i9,784:i 47,209 2026-2028 i 110,505 i12,756:i 123,261 2026-2030  : 23,845 : 2,983 i26,828

$ 1,128,8201 $ 209,563 i$ 1,338,383 $ 108,750 i$ 35,652 $ 144,402

  • Fiscal year for this report indicates the cash funding requirement year.
  • Fiscal year for this report indicates the cash funding requirement year.
    • Principal and Interest due July 1, 2015. ** Principal and Interest due July 1,2015.

2815 ENERGY NORTH WESTANNUAL REPORT

46 sustaininFgEXCELLENCE &DELIVERING INNOVATION AND VALUE PERS members who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 and by either February NOTE 5 - Net Billing Security - Nuclear Projects Nos. 1 and 3 and Columbia 28, 2002 for state and higher education employees, or August 31,2002 for local The participants have purchased all of the capability of Nuclear Projects government employees, are Plan 2 members unless they exercised an option to Nos. 1 and 3 and Columbia. BPA has in turn acquired the entire capability transfer their membership to Plan 3. PERS members joining the system on or from the participants under contracts referred to as net-billing agreements. after March 1,2002 for state and higher education employees, or September 1, Under the net-billing agreements for each of the business units, participants 2002 for local government employees have the irrevocable option of choosing are obligated to pay Energy Northwest a pro-rata share of the total annual membership in either PERS Plan 2 or Plan 3. The option must be exercised costs of the respective projects, including debt service on bonds relating to within 90 days of employment. Employees who fail to choose within 90 days each business unit. BPA is then obligated to reduce amounts from participants default to Plan 3.

under BPA power sales agreements by the same amount. The net-billing PERS is comprised of and reported as three separate plans for accounting agreements provide that participants and BPA are obligated to make such purposes: Plan 1, Plan 2/3, and Plan 3. Plan 1 accounts for the defined payments whether or not the projects are completed, operable or operating benefits of Plan 1 members. Plan 2/3 accounts for the defined benefits of Plan and notwithstanding the suspension, interruption, interference, reduction or 2 members and the defined benefit portion of benefits for Plan 3 members.

curtailment of the projects' output. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 On May 13,1994, Energy Northwest's Board of Directors adopted resolutions members. Although members can only be a member of either Plan 2 or Plan terminating Nuclear Projects Nos. 1 and 3. The Nuclear Projects Nos. 1 and 3 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the project agreements and the net-billing agreements, except for certain sections same pension trust fund. All assets of this Plan 2/3 may legally be used to pay which relate only to billing processes and accrued liabilities and obligations the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, under the net-billing agreements, ended upon termination of the projects. as defined by the terms of the plan. Therefore, Plan 2/3 is considered to be a Energy Northwest previously entered into an agreement with BPA to provide single plan for accounting purposes. Pursuant to RCW 41.45.060, Washington for continuation of the present budget approval, billing and payment processes. State Department of Retirement Systems (DRS) will allocate a certain portion With respect to Nuclear Project No. 3,the ownership agreement among Energy of employer contributions from Plan 2/3 to Plan 1 in order to fund its unfunded Northwest and private companies was terminated in FY 1999. (See Note 12) actuarially accrued liability (UAAL).

Security - Packwood Lake Hydroelectric Project B. Benefits Provided Power produced by Packwood is provided to the 12 member utilities. The PERS provides retirement, disability and death benefits. Benefit provisions member utilities pay the annual costs, including any debt service, of Packwood are established by state statute and can only be modified by the state legislature.

and are obligated to pay these annual costs whether or not Packwood is PERS Plan 1 and Plan 2 retirement benefits are financed from a combination operational. The Packwood participants also share project revenue to the of investment earnings and employer and employee contributions. Employee extent that the amounts exceed project costs. contributions to the PERS Plan 1 and Plan 2 defined benefit plans accrue interest at a rate specified by the Director of DRS. Benefit increases are provided to NOTE 6 - Pension Plans benefit recipients each January. Increases are related to the funding ratio of For purposes of measuring the net pension liability, deferred outflows/ the plan. Members in plans that are at least 90% funded for two consecutive inflows of resources, and pension expense, information about the fiduciary years are given 2.5% increases. Members inplans that have not exceeded 90%

net position of the Washington State Public Employees Retirement System funded, or have fallen below 80%, are given 1% increases.

(PERS) and additions to/deductions from PERS' fiduciary net position have been The benefit provisions stated in the following paragraphs of this section determined on the same basis as they are reported by PERS. For this purpose, are current provisions and apply to active plan participants. Vested, terminated plan contributions are recognized as of employer payroll paid dates and benefit employees who are entitled to benefits but are not receiving them yet are bound payments and refunds are recognized when due and payable in accordance by the provisions in effect at the time they last terminated their public service.

with the benefit terms. Investments are reported at fair value.

PERS Plan 1 A. Plan Description Provides retirement, disability and death benefits. Retirement benefits PERS was established in 1947 and its retirement benefit provisions are are determined as two percent of the member's average final compensation contained in chapters 41.34 and 41.40 RCW. PERS is a cost-sharing multiple- (AFC) times the member's years of service. The AFC is the average of the employer retirement system comprised of three separate pension plans for member's 24 highest consecutive service months. Members are eligible for membership purposes. PERS Plan 1 and PERS Plan 2 are defined benefit plans, retirement from active status at any age with at least 30 years of service, and PERS Plan 3 isa defined benefit plan with a defined contribution component. at age 55 with at least 25 years of service, or at age 60 with at least five PERS members include elected officials; state employees; employees of the years of service.

Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher Members retiring from inactive status prior to the age of 65 may education employees not participating inhigher education retirement programs. receive actuarially reduced benefits. PERS Plan 1 retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other 2015 ENERGY NORTHWEST ANNUAL REPRRT

4-7 ,su.stainin" EXCELLENCE

&DELIVERINGINNOVATIONAND VALUE benefits include duty and non-duty disability payments, an optional cost C. Contributions of- living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS Plan 1 PERS Plan 1 Contributions provides retirement, disability and death benefits. Retirement benefits are The PERS Plan 1 member contribution rate is established by statute at determined as two percent of the member's average final compensation 6 percent. The employer contribution rate isdeveloped by the Office of the (AFC) times the member's years of service. The AFC is the average of the State Actuary and includes an administrative expense component that is member's 24 highest consecutive service months. Members are eligible for currently set at 0.1 8 percent.

retirement from active status at any age with at least 30 years of service, at The PERS Plan 1required contribution rates (expressed as a percentage age 55 with at least 25 years of service, or at age 60 with at least five years of covered payroll) at the close of Fiscal Year 2014 were as follows:

of service.

Members retiring from inactive status prior to the age of 65 may Actual Contribution Rates I Employer Employee receive actuarially reduced benefits. PERS Plan 1 retirement benefits Local governmental units 9.21% 6.00%

are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost of-living adjustment (COLA), and a one-time duty-related death benefit, if PERS Plan 2/3 Contributions found eligible by the Department of Labor and Industries. The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the PERS Plan 2/3 defined benefit portion of Plan 3. The Plan 2/3 employer rates include a PERS Plan 2/3 provides retirement, disability and death benefits. component to address the PERS Plan 1 unfunded actuarial accrued liability Retirement benefits are determined as two percent of the member's (UAAL) and an administrative expense that iscurrently set at 0.18 percent.

average final compensation (AFC) times the member's years of service for The Plan 2/3 contributions related to the Plan 1 UAAL are allocated by DRS Plan 2 and 1 percent of AFC for Plan 3. PERS Plan 2 members are vested and included within the Plan 1fiduciary net position amounts.

after the completion of five years of eligible service. The PERS Plan 2/3 required contribution rates (expressed as a The AFC is the monthly average of the member's 60 highest-paid percentage of covered payroll) at the close of Fiscal Year 2014 were as consecutive service months. There is no cap on years of service credit. follows:

Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 isconsidered an early Actual Contribution Employer Employee Plan 2 Employee Plan 3 retirement. PERS Plan 2/3 members who have at least 20 years of service Rates credit and are 55 years of age or older are eligible for early retirement with Local governmental 9.21% 4.92% 0%

units a reduced benefit. The benefit is reduced by a factor that varies according to age, for each year before age 65. PERS Plan 2/3 members who have 30 Both Energy Northwest and the employees made the required or more years of service credit and are at least 55 years old can retire under contributions during fiscal years 2015, 2014 and 2013. The Company's one of two provisions, if hired prior to May 2, 2013: required employer contributions for the years ending June 30 were as

  • With a benefit that is reduced by three percent for each year before follows (inthousands):

age 65; or

  • With a benefit that has a smaller (or no) reduction (depending on 2015 2014 2013 age) that imposes stricter return-to work rules PEnS Plan I $ 32 $ 43 $ 57 PERSPlan 1 UAAL 5,679 5,342 3,021 PERS Plan 2/3 members hired on or after May 1,2013 have the option PERSPlan 213 7,108 6,564 6,0320 to retire early by accepting a reduction of five percent for each year of Tota]l 12,819 $ 11,949 $ 9,098 retirement before age 65.This option isavailable only to those who are age 55 or older and have at least 30 years of service. PERS Plan 2/3 retirement D. Pension Costs benefits are also actuarially reduced to reflect the choice of a survivor benefit. PERS Plan 1 Plan 2/3 benefits include duty and nonduty disability payments, a At June 30, 2015, Energy Northwest reported a liability of $61,290,964 cost- of-living allowance (based on the Consumer Price Index), capped at for its proportionate share of the PERS Plan 1 net pension liability. The three percent annually and a one-time duty-related death benefit, iffound net pension liability was measured as of June 30, 2014, and the total eligible by the Department of Labor and Industries. pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to that date.

Energy Northwest's proportion of the net pension liability was based on the contributions received by PERS during the measurement period for employer payroll paid dates from July 1, 2013 through June 30, 2014, 2015 ENERGYNORTRIWEST-ANNUALREPORT

48 SU.St**t '*iffl7 EXCELLENCE

&DELIVERING lUNNOVATIONAND VALUE relative to the total employer contributions received from all of PERS' For the year ended June 30, 2015, Energy Northwest recognized participating employers as well as the statutorily required contributions pension expense of $5,035 thousand for its proportionate share of the required to fund the unfunded actuarial accrued liability. At June 30, 2013 PERS Plan 2/3 pension expense.

and June 30, 2014 Energy Northwest's respective proportionate share was At June 30, 2015, Energy Northwest reported its proportionate share 1.186848% and 1.216683%, increasing 0.029835%/ from June 30, 2013. of the PERS Plan 2/3 deferred outflows of resources and deferred inflows For the year ended June 30, 2015, Energy Northwest recognized of resources related to pensions from the following sources (inthousands):

pension expense of $5,043,331 for its proportionate share of PERS Plan 1 pension expense. Deferred Out- Deferred inflows At June 30, 2015, Energy Northwest reported its proportionate share flows Resources Resources of PERS Plan 1 deferred outflows of resources and deferred inflows of Differences between expected and actual $ -$-

economic experience resources from the following sources (inthousands):

changes inactuarial assumptions-Difference between projected and actual -33,294 Deferred Out- Deferred Inflows investment earnings flows Resources Resources Changes in proportion 61 96 Differences between expected and actual $ -$-

Contributions paid to PERSsusbsequent to 7,108 economic experience the measurement date Changes inactuarial assumptions Total $ 7,189 $ 33,390 Difference between projected and actual 7,664 investment earnings Changes inproportion-

$7,108 thousand reported as deferred outflows of resources related Contributions paid to PERSnubsequent to 5,711 to pensions resulting from Energy Northwest contributions to the PERS the meaturement date Plan 2/3 subsequent to the measurement date will be recognized as a Difference between actual and 59 reduction of the net pension liability in the year ending June 30, 2016.

proportionate employer contributions Other amounts reported as deferred outflows and inflows of resources Total $ 5,711 $ 7,723 related to the PERS Plan 2/3 will be recognized in pension expense as follows (inthousands):

$5,711 thousand reported as deferred outflows of resources related to pensions resulting from Energy Northwest contributions to PERS Plan 1 Year ended June 30: Pension Expense Amount subsequent to the measurement date will be recognized as a reduction of 2016 j$ (8,3281 1(8,328) the net pension liability inthe year ending June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to PERS Plan 1 pensions will be recognized in pension expense as follows (in 2017 2018 2019 1(8,328) (8,325) thousands):

E. Actuarial Assumptions Year ended June 30: Pension Expense Amount The total pension liability (TPL) for each of the plans was determined using 2016 $ (1,935) the most recent actuarial valuation completed in 2014 with a valuation date 2017 (1,935)* of June 30, 2013. The actuarial assumptions used in the valuation were based 2016 (1,935) on the results of Office of State Auditor's (USA) 2007-2012 Experience Study.

2019 (1,918) Additional assumptions for the subsequent events and law changes are current as of the 2013 actuarial valuation report. The TPL was calculated as PERS Plan 2/3 Pension Costs of the valuation date and rolled forward to the measurement date of June 30, At June 30, 2015, Energy Northwest reported a liability of $31,409 2014. Plan liabilities were rolled forward from June 30, 2013 to June 30, 2014, thousand for its proportionate share of the PERS Plan 2/3 net pension reflecting each plan's normal cost (using the entry-age cost method), assumed liability. The net pension liability was measured as of June 30, 2014, and interest and actual benefit payments.

the total pension liability used to calculate the net pension liability was The total pension liability in the June 30, 2014, actuarial valuation was determined by an actuarial valuation as of June 30, 2013 rolled forward to determined using the following actuarial assumptions:

the measurement date. Energy Northwest's proportion of the net pension

  • Inflation 3.00% per year liability was based on Energy Northwest contributions received by PERS
  • Active Member Payroll Growth 3.750h per year during the measurement period for employer payroll paid dates from July
  • Investment Rate of Return 7.50%

1,2013 through June 30, 2014, relative to the total employer contributions received from all of PERS' participating employers. At June 30, 2013 and Salary increases were based on a service-related table. Mortality rates for June 30, 2014 Energy Northwest's respective proportionate share was active members, retirees, survivors and disabilitants were based on RP-2000 1.551499% and 1.553883%, increasing 0.002384% from June 30, 2013. report's Combined Healthy Table and Combined Disabled Table. The Society 2815 ENERGY NORTHWEST ANNUAL REPORT

49 sus&taininRg EXCELLENCE &DELIVERING iNNOVATION AND VALUE of Actuaries published the document. OSA applied offsets to the base table Contributions from plan members and employers are assumed -to continue and recognized future improvements in mortality by projecting the mortality being made at contractually required rates (including PERS Plans 2 and 3.)Based rates using 100 percent Scale BB. Mortality rates are applied on a generational on those assumptions, the pension plans' fiduciary net position was projected basis, meaning, each member is assumed to receive additional mortality to be available to make all projected future benefit payments of current plan improvements in each future year throughout his or her lifetime. members. Therefore, the long-term expected rate of return of 7.50 percent was The long-term expected rate of return on pension plan investments was used to determine the total liability.

determined using a building block method. The Washington StatelInvestment Board (WSIB) used a best estimate of expected future rates of return (expected H. Pension Liability Sensitivity returns, net of pension plan investment expense, including inflation) to develop The following table (in thousands) presents Energy Northwest's each major asset class. Those expected returns make up one component of proportionate share of the net pension liability for all plans it participates in, WSIB's Capital Market Assumptions (CMAs). calculated using the discount rate of 7.50 percent as well as what the Energy The CMAs contain three pieces of information for each class of assets WSIB Northwest's proportionate share of the net pension liability would be if it currently invests in: were calculated using a discount rate 1 percentage point lower (6.50 percent)

  • Expected annual return or 1 percentage point higher (8.50 percent) than the current discount rate:
  • Standard deviation of the annual return
  • Correlations between the annual returns of each asset class 1% Decrease in 1% Increase in with every other asset class Discount Rate Discount Rate Discount Rate (6.5%) (7.5%) (8.5%)

Esergy Northwest's $ 75,547 $ 61,291 $ 49,053 WSIB uses the CMAs and their target asset allocation to simulate future proportionate share of the investment returns at various future times. PER5Plan 1 net pension liability/(asset):

The long-term expected rate of return of 7.50 percent approximately equals Energy Northwest's $ 131,016 $ 31,410 $ (44,671) the median of the simulated investment returns over a 50 year time horizon, proportionate share of the increased slightly to remove WSIB's implicit, small, short-term downward PE9S Plan 2/3 net pension adjustment due to assumed mean reversion. WSIB's implicit short-term liability/(asset):

adjustment, while small and appropriate over a 10 to 15 year period, becomes amplified over a 50 year period. The pension liability has been allocated to the business units based on the percentages listed inNote 1.The total pension liability for each unit as of June F. Estimated Rates of Return by Asset Class 30, 2015 is as follow (inthousands):

Best estimates of arithmetic real rates of return for each major class included in the pension plans' target asset allocation as of June 30, 2014, are Energy Northwest's Energy Northwest's summarized inthe following table: proportionate share proportionate share of of the PERS Plan 1 net the PERS Plan 2/3 net The inflation component used to create the table is 2.70 percent and pension liability: pension liability: Total represents WSIB's most recent long-term estimate of broad economic inflation. Columbia $ 56.600 $ 30,031 $ 88,631 Packwood 202 104 306

% Long-Term Expected Business Asset Class Real Rate of Return Arithmetic Development 1,796 920 2,716 FixedIncome .80% Nine canyon 521 267 788 Tangible Assets 4.10% Nuclear Project No. 1 172 88 260 Real Estate 5.30% Total $ 61,291 $ 31,410 $ 92,701 Global Equity 6.05%

Private Equity 9.05% H. Pension Plan Fiduciary Net Position Detailed information about each defined benefit pension plan's fiduciary G. Discount Rate net position is available in a separately-issued DRS 2014 CAFR. The DRS The discount rate used to measure the total pension liability was 7.50% CAFR may be obtained by writing to: Department of Retirement Systems, for PERS Plans 1 and 213. To determine that rate, an asset sufficiency test Communications Unit, P.O. Box 48380, Olympia WA 98504-8380; or it may be was completed to test whether each pension plan's fiduciary net position downloaded from the DRS website at www.drs.wa.gov.

was sufficient to make all projected future benefit payments of current plan Any information obtained from the DRS is the responsibility of the state members. Consistent with current law, the asset sufficiency test included an of Washington. PricewaterhouseCoopers LLP (PwC), independent auditors assumed 7.70% long-term discount rate to determine funding liabilities for for Energy Northwest, has not audited or examined any of the information calculating future contribution rate requirements. (All plans use 7.70 percent.) available from the DRS; accordingly, PwC does not express an opinion or any Consistent with the long-term expected rate of return, a 7.50 percent future other form of assurance with respect thereto.

investment rate of return on invested assets was assumed for the test.

2015 ENERGY NORTHWEST ANN*UAL REPORT

50 sustainin*rg EXLELLENCE &DELIVERING IHNDVATIONAND VALUE NOTE 7 - Deferred Compensation Plans Energy Northwest provides a 401(k) deferred compensation plan (401 (k) Nuclear Insurance plan), and a 457 deferred compensation plan. Both plans are defined Nuclear insurance includes liability coverage, property damage, contribution plans that were established to provide a means for investing decontamination and premature decommissioning coverage and accidental savings by employees for retirement purposes. All permanent, full-time outage and/or extra expense coverage. The liability coverage is governed by employees are eligible to enroll in the plans. Participants are immediately the Price-Anderson Act (Act), while the property damage, decontamination vested in their contributions and direct the investment of their contribution. and premature decommissioning coverage are defined by the Code of Each participant may elect to contribute pre-tax annual compensation, Federal Regulations. Energy Northwest continues to maintain all regulatory subject to current Internal Revenue Service limitations. required limits as defined by the NRC, Code of Federal Regulations and the For the 401(k) plan, Energy Northwest may elect to make an employer Act. The NRC requires Energy Northwest to certify nuclear insurance limits matching contribution for each of its employees who is a participant during on an annual basis. Energy Northwest intends to maintain insurance against the plan year. The amount of such an employer match shall be 50 percent of nuclear risks to the extent such insurance is available on reasonable terms the maximum salary deferral percentage. During FY 2015 Energy Northwest and in an amount and form consistent with customary practice. Energy contributed $3.5 million in employer matching funds while employees Northwest is self-insured to the extent that losses (i) are within the policy contributed $11.8 million. deductibles, (ii)are not covered per policy exclusions, terms and limitations, (iii) exceed the amount of insurance maintained, or (iv)are not covered due NOTE 8 - Other Employment Benefits - Post-Employment to lack of insurance availability. Such losses could have an effect on Energy Inaddition to the pension benefits available through PERS, Energy Northwest Northwest's results of operations and cash flows. All dollar figures noted offers post-employment life insurance benefits to retirees who are eligible to below are as of June 30, 2015.

receive pensions under PERS Plan 1, Plan 2, and Plan 3.There are 55 retirees American Nuclear Insurance (ANI) Coverage: The Act provides financial who remain participants in the insurance I3rogram. In 1994, Energy Northwest's protection for the public in the event of a significant nuclear generation Executive Board approved provisions which continued the life insurance plant incident. The Act sets the statutory limit of public liability for a benefit to retirees at 25 percent of the premium for employees who retire prior single nuclear incident at $13.36 billion. Energy Northwest addresses this to January 1, 1995, and charged the full 100 percent premium to employees requirement through a combination of private insurance and an industry-wide who retired after December 31, 1994. The life insurance benefit is equal to the retrospective payment program called Secondary Financial Protection (SFP).

employee's annual rate of salary at retirement for non-bargaining employees Energy Northwest has $375 million of liability insurance as the first layer of retiring prior to January 1,1995. The life insurance benefit has a maximum protection. If any US nuclear generation plant has a significant event which limit of $10,000 for retirees after December 31, 1994. The cost of coverage exceeds the plant's first layer of protection, every operating licensed reactor for retirees remained unchanged for FY 2015 and was $2.82 per $1,000 of in the US is subject to an assessment up to $127.3 million not including coverage. Employees who retired prior to January 1, 1995, contribute $.58 cents state insurance premium tax. Assessments are limited to $18.96 million per per $1,000 of coverage while Energy Northwest pays the remainder; retirees reactor, per year, per incident, excluding tax. The SFP is adjusted at least every after December 31, 1994, pay 100 percent of the cost coverage. Premiums are 5 years to account for inflation and any changes in the number of operating paid to the insurer on a current period basis. At the time each employee retired, plants. The 5FF and liability coverage are not subject to any deductibles.

Energy Northwest accrued an estimated liability for the actuarial value of the NEIL Coverage: The Code of Federal Regulations requires nuclear future premium. Energy Northwest revises the liability for the actuarial value generation plant license-holders to maintain at least $1.06 billion nuclear of estimated future premiums, net of retiree contributions. The total liability decontamination and property damage insurance and requires the proceeds recorded at June 30, 2015, was $0.4 million for these benefits. thereof to be used to place a plant in a safe and stable condition, to During FY 2015, pension costs for Energy Northwest employees and post- decontaminate it pursuant to a plan submitted to and approved by the NRC employment life insurance benefit costs for retirees were calculated and before the proceeds can be used for plant repair or restoration or to provide allocated to each business unit based on direct labor dollars. This allocation for premature decommissioning. Energy Northwest has aggregate coverage basis resulted in the following percentages by business unit for FY 2015 for in the amount of $2.75 billion which is subject to a $5 million deductible per this and other allocated costs; Columbia at 96 percent, Business Development accident.

at 3 percent, and Project 1,Nine Canyon, Packwood and Project 3 receiving the residual amount of 1percent. NOTE 10 - Asset Retirement Obligation (ARO)

Energy Northwest recognizes the fair value of a liability of an ARO NOTE 9 - Nuclear Licensing and Insurance for legal obligations related to the dismantlement and restoration costs associated with the retirement of tangible long-lived assets, such as nuclear Nuclear Licensing decommissioning and site restoration liabilities, in the period in which it Energy Northwest is a licensee of the Nuclear Regulatory Commission is incurred. Upon initial recognition of the AROs that are measurable, the

("NRC") and issubject to routine licensing and user fees. Additionally, Energy probability weighted future cash flows for the associated retirement costs Northwest may be subject to license modification, suspension, revocation, or are discounted using a credit-adjusted-risk-free rate, and are recognized as civil penalties inthe event regulatory or license requirements are violated. both a liability and as an increase in the capitalized carrying amount of the 2015 ENERG;Y NORTHWEST ANNUAL REPORT

51 ss ti ning**77*9 EXtELLENCE

&DELUVERING INNOVATION ANidVALUE related long-lived assets. Capitalized asset retirement costs are depreciated Asset Retirement Obligation (Dollars inthousands) over the life of the related asset with accretion of the ARO liability classified as an operating expense on the statement of revenues, expenses, and Columbia Generating Station Balance AtlJune 30,2014 i $ 131,443 changes in net position each period. Upon settlement of the liability, an entity Current year accretion expense . 6,824 either settles the obligation for its recorded amount or incurs a gain or loss ARO at June 30, 2015 $ 138,317 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 ISFSl decommissioning and site restoration; therefore, any gain or loss recognized BalanceAt June 30, 2014  !$ 2,265 upon settlement of the ARO results in an adjustment to either the billings in Current year accretion expense . 33 excess of costs (liability) or costs in excess of billings (asset), as appropriate, AROat June 30, 2015  :$ 2,298 as no net revenue or loss is recogrnized, and no net position is accumulated Nuclear Project No. 1 for the net-billed projects.

Balance At June 30, 2014 $ 16,608 Energy. Northwest has identified legal obligations to retire generating Current year accretion expense  : 108 plant assets at the following business units: Columbia, Nuclear Project No.

AROat June 30, 2015  : $ 16,716 1 and Nine Canyon. Decommissioning and site restoration requirements for Columbia and Nuclear Project No. 1 are governed by the NRC regulations Nine Canyon Wind Project and site certification agreements between Energy Northwest and the state of Balance At June 30, 2014 $ 1,341 Washington and regulations adopted by the Washington Energy Facility Site current year accretion expense . 55 Evaluation Council (EFSEC) and a lease agreement with the Department of ARO at June 30,2015 i$ 1,396 Energy ("DOE"). (See Notes 1 and 12)

As of June 30, 2015, Columbia has a capital decommissioning net asset NOTE 11 - Decommissioning and Site Restor'ation value of zero and an accumulated liability of $;138.3 million for the generating The NRC has issued rules to provide guidance to licensees of operating plant, and for the Independent Spent Fuel Storage Installation (ISFSI) a net nuclear plants on providing financial assurance for decommissioning plants asset value of $1.1 million and an accumulated liability of $2.3 million. at the end of each plant's operating life (See Note 10 for Columbia ARO). In The adjustment to ISFSI was associated with new NRC (Nuclear Regulatory September 1998, the NRC approved and published its "Final Rule on Financial Commission) spent fuel decommissioning requirements. Assurance Requirements for Decommissioning Power Reactors." As provided As of June 30, 2015, Nuclear Project No. 1 has a capital decommissioning in this rule, each power reactor licensee is required to report to the NRC the net asset value of zero and an accumulated liability of $16.7 million. status of its decommissioning funding for each reactor or share of a reactor Under the current agreement, Nine Canyon has the obligation to remove it owns. This reporting requirement began March 31, 1999, and reports are the generation facilities upon expiration of the lease agreement if requested required every two years thereafter. Energy Northwest submitted its most by the lessors. The Nine Canyon Wind Project recorded the related original recent report to the NRC in June 2014.

ARO in FY 2003 for Phase I and II. Phase Ill began commercial operation in Energy Northwest's estimatd of Columbia's decommissioning costs in FY FY 2008 and the original ARO was adjusted to reflect the change in scenario 2015 dollars is $470.1 million (Columbia - $465.4 million and ISFS1 - $4.7 for the retirement obligation, with current lease agreements reflecting million). This estimate, which is updated biannually with the last update a 2030 expiration date. As of June 30, 2015, Nine Canyon has a capital in fiscal year 2013, is based on the NRC minimum amount required to decommissioning net asset value of $0.5 million and an accumulated liability demonstrate reasonable financial assurance for a boiling water reactor with of $1.4 million. the power level of Columbia.

Packwood's obligation has not been calculated because the time frame Site restoration requirements for Columbia are governed by the site and extent of the obligation was considered under this statement as certification agreements between Energy Northwest and the state of indeterminate. AS a result, no reasonable estimate of the ARO obligation can Washington and by regulations adopted by the EFSEC. Energy Northwest be made. An ARO will be required to be recorded if circumstances change. submitted a site restoration plan for Columbia that was approved by the Management believes that these assets will be used in utility operations for EFSEC on June 12, 1995. Energy Northwest's current estimate of Columbia's the foreseeable future. site restoration costs is $113.6 million in constant dollars (based on the 2015 The following table describes the changes to Energy Northwest's ARO study) and is updated biannually along with the decommissioning estimate.

liabilities for the year ended June 30, 2015. The balance is included in the Both decommissioning and site restoration estimates (based on 2015 study) accounts payable and accrued expense balances for each unit. ISFSI is are used as the basis for establishing a funding plan that includes escalation included in Columbia's balance: and interest earnings until decommissioning activities occur. Payments to the decommissioning and site restoration funds have been made since January 1985. The fair value of cash and investment securities inthe decommissioning and site restoration funds as of June 30, 2015, totaled approximately $223.0 million and $36.9 million, respectively. The fair value of cash and investment securities inthe site restoration fund for Nuclear Project No. 1 is $31 .7 million.

2015 ENERGY NOR~THWEST ANNUAL REPORT

52 52ss*,-t-aining EXCELLENCE

&DELIVERING AND lUNNOVATION VALUE Since September 1996, these amounts have been held in an irrevocable trust or other techniques such that the sites pose minimal hazard to the public.

that recognizes asset retirement obligations according to the fair value of the EFSEC approved Energy Northwest's site restoration plan on June 12, 1995.

dismantlement and restoration costs of certain Energy Northwest assets. The In its approval, EFSEC recognized that there is uncertainty associated with trustee is a domestic U.S. bank that certifies the funds for use when needed to Energy Northwest's proposed plan. Accordingly, EFSEC's conditional approval retire the asset. The trusts are funded by BPA ratepayers and managed by SPA provides for additional reviews once the details of the plan are finalized. A in accordance with NRC requirements and site certification agreements; the new plan with additional details was submitted in FY 2003. This submittal balances in these external trust funds are not reflected on Energy Northwest's was used to calculate the ARO discussed in Note 10.

balance sheet.

Energy Northwest established a decommissioning and site restoration Business Development Fund Interest in Northwest Open plan for the ISF51 in 1997. Beginning in FY 2003, an annual contribution is Access Network made to the Energy Northwest Decommissioning Fund. These contributions The Business Development Fund is a member of the Northwest Open are held by Energy Northwest and not held in trust by BPA. The fair market Access Network (NoaNet). Members formed NoaNet pursuant to an Interlocal value of cash and investments as of June 30, 2015, is $1.4 million. These Cooperation Agreement for the development and efficient use by the contributions will occur through FY 2044; cash payments will begin for members and others of a communication network in conjunction with SPA.

decommissioning and site restoration in FY 2045. The Business Development Fund has a 7.38 percent interest in NoaNet with a potential mandate of an additional 25 percent step-up possible for a NOTE 12 - Commitments and Contingencies maximum 9.23 percent. NoaNet has $2.9 million in network revenue bonds and $5.7 million in note payables outstanding, based on their December 30, Nuclear Project No. 1 Termination 2014 audited financial statements. The members are obligated to pay the Since the Nuclear Project No.1 termination, Energy Northwest has been principal and interest on the bonds when due in the event and to the extent planning for the demolition of Nuclear Project No. 1 and restoration of the that NoaNet's Gross Revenue (after payment of costs of Maintenance and site, recognizing the fact that there is no market for the sale of the project Operation) is insufficient for this purpose. The maximum principal share in its entirety, and no viable alternative use has been found to-date. The final (based on step-up potential) that the Business Development Fund could level of demolition and restoration will be in accordance with agreements be required to pay is $.8 million. The Business Development Fund is not discussed below under "Nuclear Project No. 1 Site Restoration." obligated to reimburse losses of NoaNet unless an assessment is made to NoaNet's members based on a two-thirds vote of the membership. In FY 2015 Nuclear Project No. 3 Termination the Business Development Fund was not required to contribute to NoaNet.

In June 1994, the Nuclear Project No. 3 Owners Committee voted Financial statements for NoaNet may be obtained by writing to: Northwest unanimously to terminate the project. In 1995, a group from Grays Harbor Open Access Network, NoaNet Headquarters, 5802 Overlook Ave. NE,Tacoma, County, Washington, formed the Satsop Redevelopment Project (SRP). The WA 98422. Any information obtained from NoaNet is the responsibility of SRP introduced legislation with the state of Washington under Senate Bill NoaNet. PwC has not audited or examined any information available from No. 6427, which passed and was signed by the governor of the state of NoaNet; accordingly, PwC does not express an opinion or any other form of Washington on March 7, 1996. The legislation enables local governments assurance with respect thereto.

and Energy Northwest to negotiate an arrangement allowing such local governments to assume an interest in the site on which Nuclear Project Other Litigation and Commitments No. 3 exists for economic development by transferring ownership of all or a Energy Northwest v. SPX Heat Transfer Inc. (CV13-5151-SAB). Energy portion of the site to local government entities. This legislation also provides Northwest filed suit against SPX Heat Transfer Inc. (SPX) on December 24, for the local government entities to assume regulatory responsibilities for 2013 seeking the recovery of damages relating to SPX's breach of contract.

site restoration requirements and control of water rights. In February 1999, In February, 2009, SPX's predecessor in interest Yuba Heat Transfer LLC Energy Northwest entered into a transfer agreement with the SRP to transfer and Energy Northwest entered into a contract for the design, engineering, the real and personal property at the site of Nuclear Project No. 3. The SRP fabrication and delivery of the condenser modules and related components also agreed to assume regulatory responsibility for site restoration. Therefore, for Energy Northwest's Columbia Generating Station. In the lawsuit, Energy Energy Northwest is no longer responsible to the state of Washington and Northwest contends that SPX breached the contract (1) by failing to meet EFSEC for any site restoration costs. contract specifications for condenser backpressure and sub-cooling; (2) by failing to provide work that was free from defect in design and fabrication; Nuclear Project No. 1 Site Restoration and (3) by failing to meet the express warranties contained in the contract.

Site restoration requirements for Nuclear Project No. 1 are governed by No specific amount of damages has been demanded in the complaint.

site certification agreements between Energy Northwest and the state of SPX has responded to the lawsuit and has included a counterclaim for Washington and regulations adopted by EFSEC, and a lease agreement with damages. In its counterclaim, SPX seeks the balance of the contract amount, DOE. Energy Northwest submitted a site restoration plan for Nuclear Project which is $2,070,334 plus accumulated interest. Additionally, SPX seeks No. 1 to EFSEC on March 8, 1995, which complied with EFSEC requirements recovery of some or all of a portion of the incentive fee contained in the to remove the assets and restore the sites by demolition, burial, entombment, contract as determined by the formula in the contract with no specific amount 2015 ENERG*Y NORTHWEST ANNUAL REPORT

53 su 'staif-lng EXCELLENCE

&DELIVERINGINND*VATIDN AND VALUE demanded. Energy Northwest has denied that it owes SPX the contract was received June 14, 2015 for $21.8 million. The total gain reported balance or any amount of the performance incentive. for the sale was $3.9 million reported on the Statements of Revenues, On July 22, 2014, Energy Northwest made an offer of settlement to SPX Expenses, and Changes in Net Position under Other. The remaining sales in accordance with RCW 39.04.240, RCW 4.84.260 and the Federal Rules of under this agreement are scheduled to take place between September Civil Procedure, Rule 68. Inthe offer of settlement, Energy Northwest agreed 2015 and 2022.

to accept a judgment from SPX for all claims including but not limited to Energy Northwest has a contract with DOE that requires DOE to accept SPX's counterclaims, for $0.00. Should SPX decline this offer of settlement title and dispose of spent nuclear fuel. Although the courts have ruled that and Energy Northwest prevails at trial with a jury verdict greater than the DOE had the obligation to accept title to spent nuclear fuel by January 31, offer of settlement, in addition to the jury verdict SPX would be obligated to 1998, currently, there is no known date established when DOE will fulfill pay Energy Northwest its legal costs and attorneys' fees from the date of the this legal obligation and begin accepting spent nuclear fuel. On November offer of settlement. The parties have continued to engage inpretrial discovery. 19, 2013, the D.C. Circuit Court ordered the DOE to submit to Congress The case is set for a two week trial In July 2016. The outcome of this matter a proposal to reduce the current waste disposal fee to zero, unless and cannot be predicted at this time. until there is a viable disposal program. On January 3, 2014, the DOE filed Energy Northwest is involved in other various claims, legal actions and a petition for rehearing which was denied by the D.C. Circuit Court on contractual commitments and in certain claims and contracts arising in the March 18, 201 4. Also, on January 3, 2014, the DOE submitted a proposal to normal course of business. Although some suits, claims and commitments are Congress to reduce the current waste disposal fee to zero. On May 9, 2014, significant in amount, final disposition is not determinable. In the opinion of the DOE notified Energy Northwest that the waste disposal fee will remain management, the outcome of such litigation, claims or commitments will not in effect through May 15, 2014, after which time the fee will be set to have a material adverse effect on the financial positions of the business units zero. For the year ended June 30, 2014, Energy Northwest incurred expense or Energy Northwest as a whole. The future annual cost of the business units, of $8.16 million in waste disposal fees, recorded in fuel disposal within however, may either be increased or decreased as a result of the outcome of Columbia's Statement of Revenues, Expenses, and Changes in Net Position.

these matters. Until such time as a new fee structure is in effect, Energy Northwest will not accrue any further costs related to waste disposal fees. When the fuel NOTE 1.3 - Nuclear Fuels is placed in the reactor the fuel cost is amortized to operating expense on In May 201-2, Energy Northwest entered into agreements with three the basis of quantity of heat produced for generation of electric energy. The other parties for processing high assay uranium tails. The Program consists amount moved to spent fuel for cooling increased $66.0 million. Fees for of several agreements between the parties involved, entered into as a disposal of fuel in the reactor are expensed as part of the fuel cost.

joint effort between the Department of Energy (DOE), Tennessee Valley The current period operating expense for Columbia was $37.9 million Authority (TVA), United States Enrichment Corporation (USEC) and Energy for amortization of fuel used in the reactor. There were no DOE spent fuel Northwest to enrich approximately 9,082 metric tons (MTU) of Depleted disposal charges.

Uranium Hexafluoride (DUF6) with an average assay of 0.44 weight Energy Northwest has an Independent Spent Fuel Storage Installation percent U235 (wt%) that will yield approximately 482 MTU of enriched (ISFSI), which is a temporary dry cask storage facility to be used until DOE uranium product (EUP) with an average assay of 4.4 wt%/. completes its plan for a national repository. ISFS1 will store the spent fuel in DOE and Energy Northwest have entered into an agreement for the commercially available dry storage casks on a concrete pad at the Columbia transfer of the DUF6 to Energy Northwest. The agreement addresses site. Nine casks were issued from the cask inventory account in FY 2014 delivery and transfer of title of the DUF6, return of residual DUF6 after totaling $9.2 million. Spent fuel is transferred from the spent fuel pool to enrichment, storage of the EUP, and payment of DOE's costs. The costs the ISFS1 periodically to allow for future refueling. Current period costs were for the handling of the DUF6 and storage of the EUP are anticipated to be $1.8 million for dry cask storage costs which are recorded in nuclear fuel

$5 million or less. As of June 30, 2015, Energy Northwest had recorded expense. The next ISF5I loading campaign is scheduled for March of 2018 approximately $0.6 million in charges to the DOE for delivery of the DUF6, for a total of 9 casks.

storage and loading of the EUP, which is capitalized as cost of the fuel On August 28, 2014, Energy Northwest and the United States entered being purchased. into a Settlement Agreement ("Agreement") under Energy Northwest v.

Under the Depleted Uranium Enrichment Program (DUEP), Energy United States, No. 11-~447C (Fed. Cl. filed July 7, 2011). On March 11, 2014, Northwest purchased from USEC all of the Separative Work Units (SWU) the court awarded Energy Northwest summary judgment for costs incurred contained in the EUP. Upon finalization of the program, Energy Northwest to continue to operate and maintain its dry storage program. This favorable had purchased a total of 481.6 MTU of EUP from USEC at a cost of $687.2 decision ultimately led to the approval by the Executive Board of a settlement million, which is recorded in nuclear fuel, net of accumulated amortization, agreement with the Government in the amount of $23.6 million to dispose as of June 30, 2013. There have been no additional purchases since the of the second action. This amount was recorded in FY 2014, and received conclusion of the program in May of 2013. in FY 2015. In addition to settling the pending litigation, the Agreement Energy Northwest and TVA have entered into an agreement for the sale provided that Energy Northwest could be reimbursed by the government and purchase of a portion of the SWU and Feed Component of the EUP. for its allowable expenses, as defined in the Agreement, related to the U.S.

The sales under the agreement are expected to total approximately $731 Department of Energy's (DOE) continued failure to accept used nuclear fuel million. The first delivery to TVA was on May 15, 2015 and the payment under the Standard Contract Energy Northwest signed with DOE in 1983.

2015 ENERGY NORTh WEST ANNUAL REPORT

,54 SuStai.nin*g-- EXEELLENCE & DELIVERING INNOVATION ANDVALVE Under the Agreement, Energy Northwest is required to submit a claim Under the Agreement, Energy Northwest submitted its first claim to DOE for reimbursement to DOE annually for each year, July 1, 2012 through by the deadline. The first claim covers FY13-14 (a catch-up claim). EN December 31, 2016. The claim submission deadline is January 31 of the sought reimbursement of $16,016,574. DOE's final determination, which following calendar year. After submission, DOE has a set time to review was accepted by EN, was for payout of $15,143,888. Payout could be as and request additional information from Energy Northwest. At the end of early as October 2015. The $15.1 million expected to be received from DOE the review period, Energy Northwest can accept DOE's determination and was accrued as an offset against the fuel amortization where the related be paid the amount determined by DOE or Energy Northwest can reject the costs are reported.

determination and proceed to binding arbitration.

SCHEDULES OF REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE ENERGY NORTHWEST'S PROPORTIONATE SHARE OF NET PENSION LIABILITY (Dollars inthousands)

(Unaudited)

PERSi PERS 2/3 Measurement Date Ended June 30 2014 2013 2014 2013 Proportion of the net pension liability (anset) 1.22%: 1.19%/ 1.55% 1.55%

Proportionate share of the net pension liability (asset)  !$ 61,291  :$ 71,094 : $ 31,410 i$ 66,351 Covered-employee payroll . 439 i 772 i 144,158 !139,637 Proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll i 13961.50% i9209.07%  : 21.79% i47.52%

Plan fiduciary net position as a percentage of the total pension liability . 61.19% : 55.70% 93.29% : 84.60%

SCHEDULE OF ENERGY NORTHWEST'S CONTRIBUTIONS (Dollars inthousands)

(gnaudited)

PERS 1 Fiscal Year Ended June 30  : 2015 ! 2014 i 2013 1 2012~ . 2011 2010
  • 2009 i 2008 i 2007
  • 2006 Contractually Required contribution i$ 32 $ 43 i$ 57 i$ 70 !$ 88 $ 104 i$ 245 i$ 202 i$ 175 i$ 113 Contributions inRelation to the Contractually (32)i (43): (57)i (70): (88)i (104): (245): (202)! (175)! (113)

Required Contribution Subtotal  :::":

Contribution Deficiency (Excess) i $ - !$ -5 < -*$ -!$-$ -::$ -: -

Covered-Employee Payroll i$ 351 i$ 439i $ 772i $ 996* $ 1,610i $ 1,933 i$ 2,894i $ 3,297: $ 3,964i $ 4,785 Contributions as aPercentage of Covered 9.12% 9.79% i 7.38% ! 7.03% ! 5.47% ! 5.38% ! 8.47% ~ 6.13% ! 4.41% ! 2.36%

Employee Payroll .  : .

PERS 2/3 Fiscal year Ended June 30  : 2015 ! 2014 ! 2013 ! 2012 ! 2011 ! 2010 i 2009 ! 2008 i 2007 i 2006 Contractually Required Contribution  !$ 12,787 $ 11,906 i$ 9.041 i$ 8,760! $ 6,533 $ 6,225 $ 9,522i $ 6,016 $ 4,5051 $ 2,016 Contributions in Relation to the Cohitractually  : (12,787)! (11,906)! (9,041)! (8,760): (6,533)i (6,225)! (9,522)j (6,016)i (4,505)! (2,016)

Required Contribution . .  :

Contribution Deficiency (Excess) S -! $ -! $ - $  ! -$  :-$ -.-  ! $9 -9 $-!

Covered-Employee Payroll i$ 154,080! $ 144,158i $ 139,637! $ 134,777i $ 133,276i $ 123,367: $ 124.301  !$ 105,464! $ 104,971 !$ 97,117 Contributions us a Percentage of Covered 8.30% 8.26% i 6.47% i 6.50% 4.90% 5.05% i 7.66% 5.70% ! 4.29% i 2.08%

Employee Payroll .  : .  :

PERSPlan1UAAL* :5$ 5,679i $ 5,342* $ 3,021i $ -: -:$ -<5 -i $ -i $ -:5 ,$

Notes to Schedules Energy Northwest implemented GAS8 68 for the year ended June 30, 2015. There were no changes in actuarial assumptions between the valuation data of June 30, 2013 and the measurement date of June 30, 2014.

  • DRS allocates certain portion sf contributions from PERSPlan 213to PERSPlan 1 in order to fund its unfunded actuarially accrued liability (LUAAL).

2915 ENERGY NORTH WEST AdUAL REPORT

ENERGYBoxo 96,P2 QNORT WESTDonald NORTH WESTPh. w.Gregoire Richland, WA 99352-0968 509-377-8616 j F. 509-377-4317 dwgregoire@ energy-northwest.comn 10 CFR 50.71 (b)

January 19, 201.6 G02-16-017 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555-0001

Subject:

COLUMBIA GENERATING STATION, DOCKET NO. 50-397; 2015 ANNUAL FINANCIAL REPORT

Dear Sir or Madam:

In accordance with the requirements of 10 CFR 50.71(b), enclosed is a copy of the Energy Northwest 2015 Annual Report for the subject facility. An unbound copy of the report is also being provided to facilitate scanning and uploading of the information into the ADAMS Database.

There are no commitments contained in this letter or the enclosure. Should you have any questions, please call DM Wolfgramm at (509) 377-4792.

Respectfully,

,", DW Gregoire Manager, Regulatory Affairs and Performance Improvement

Enclosures:

As stated Cc: NRC RIV Regional Administrator w/o NRC NRR Project Manager w/o NRC Sr. Resident Inspector - 9880 w/o C Sonoda - BPA/1 399 w/o WA Horin - Winston & Strawn w/o

ENERGY NORTHWEST 2015 ANNUAL REPORT Enclosures

4. A Message to our Stakeholders 6 Executive Board 7 Board of Directors 8 Senior Leadership 9 Sustainability Reporting 12 Columbia Generating Station 14 Refueling and Maintenance Outage 22 15 Energy Services & Development 18 FINANCIAL DATA & IN FORMATION 19 Management Report on Responsibility for Financial Reporting 19 Audit, Legal and Finance Committee Chair's Letter 20 Independent Auditor's Report 21 Energy Northwest Management's Discussion and Analysis 30 Current Debt Ratings 31 Statement of Net Position 33 Statements of Revenues, Expenses and Changes in Net Position 34 Statements of Cash Flows 36 Notes to Financial Statements 54 Schedules of Required Supplementary information 21J15 ENEtRGY NORTHWEST ANNUAL REPORT

SS*.tlU~l j XJ LENC*

t]EXL &*DELYERI, INNOVJrflN ANtVALUA AMessage TO OUR STAKEHOLDERS We are proud to shareEnergy Northwest's accomplishments through our annual report.

The agency continues to deliver carbon-free

- - U electricity to the PacificNorthwest. []

We attribute the success of Energy outage. Columbia achieved what's Northwest to our dedicated team known as a "breaker to breaker" of nearly 1,100 professionals. Their run, meaning the plant operated focus on performance excellence non-stop since reconnecting to the ensured our energy generation grid June 25, 2013, following its projects and equipment continued previous refueling outage.

to operate reliably and predictably During its 683-day run, Columbia throughout the fiscal year. produced nearly 18 million During December 2014, the agency megawatt-hours of electricity and celebrated the 30th anniversary of operated at more than 98 percent commercial operation for Columbia capacity. Columbia also broke its Generating Station, the region's only third consecutive calendar year nuclear energy facility and the state's generation record, sending nearly third largest generating resource 9.5 million megawatt-hours of clean (behind Grand Coulee and Chief nuclear energy to the Northwest Joseph dams). With today's social focus power grid.

on improving our global air quality, In May, we began a 50-day Columbia's carbon-free baseload refueling and maintenance outage generation is more vital than ever to the interests of regional ratepayers, at Columbia that included installation of key modifications to further the power plant annually prevents about 4.4 million metric tons of carbon strengthen plant safety and gain greater efficiencies. Completion dioxide from entering the atmosphere (3.6 million if natural gas is used as of these projects raised Columbia's capacity by approximately 28 the sole source option). megawatts-electric. That equates to more than 200,000 megawatt-Performance hours of additional generation per year. Employees completed all of the On the morning of May 9, Columbia set a new record for its longest work during the outage safely, without a single Occupational Safety and continuous operational run - 683 days - when operators shut down Health Administration recordable or lost-time accident.

the reactor for start of the station's biennial refueling and maintenance Looking at our non-nuclear initiatives, in fiscal 2015, Nine Canyon Wind I. ' 'I.

s L4t(lliflq EXCELLENCE

& ELVE* NGINNlOVatION ANU VALUEh Project set a new availability record - 99.2 percent. We recognized our team safety of wind technicians for this historical achievement and their implementation Our agency emphasizes safety in everyday work activities. During fiscal of innovative preventative maintenance to minimize turbine unavailability. 2015, Energy Northwest received the first place Northwest Public Power On Feb. 9, 2015, we launched a demand response pilot project in Association safety award for our strong industrial safety performance. We partnership with the City of Richland, Cowlitz County Public Utility District, continue to strengthen our safety performance, while continuously reaching Pend Oreille County PUD and the Bonneville Power Administration. for the highest levels of excellence.

Demand-side resources have the potential to defer or displace the need for

'pl new generation in the region and make the most efficient use of existing generation - resulting in overall cost savings for Northwest ratepayers.

V**

We're also proud to have partnered with Benton PUD, Clark Public Utilities, Inland Power and Light Company, Mason County PUD 3 and Seattle City Light on a community solar guide for utilities interested in creating a Sustainability solar program for their customers. This year we integrated sustainability reporting into our annual report.

Building and maintaining trust with key stakeholders is important to all Small Modular Reactors Energy Northwest employees.

Energy Northwest, as part of a teaming agreement with NuScale Power and the Utah Associated Municipal Power Systems, is moving forward with We believe sustainability reporting is another work on the Carbon Free Power Project, a small modular reactor facility way to build awareness of Energy Northwvest's overall planned for construction in southeastern Idaho within the next 10 years. positive impact on our environment, including social We are supporting early siting work and the startup of licensing and training and economic aspects.

programs.

We believe small modular reactors will eventually play a role in future Our employees continue to volunteer their time and talents to support power generation here in Washington state and the Northwest. those in need in our communities through March of Dimes, Benton Franklin Head Start and United Way.

As a team, we're moving forward on all of our initiatives to reach our vision as the region's leader in power generation and energy solutions. Our sustained excellence in performance and focus on innovation provide public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions.

Respectfully, Sid Morrison Mark Reddemann Chair, Executive Board Chief Executive Officer

SID MORRISON JACK JANDA LORI SANDERS DAVE REMINGTON Chair Vice Chair Secretary Assistant Secretary Outside Dire tot inside Dire~cto ineside Dire(1to1 ml bem tonial Appointee Zillah, Wash. SIhetiito, Wash. Kesnnew c, Wash. Spok~ane, Wash MARC DAUDON LINDA GOTT JAMES MOSS WILL PURSER GubernatoriaI Appointee lns(idePDiCeor Gubhernatorial Appomi ei sIC IiDiretor Seattle, Wash Phelton, Wa sh. Edi ;ewoo WashI Seqi Wansh Executive BOARD SKiP ORSER TIM SHELDON KATHY VAUGHN Outside Dirretor Oumtside Director ns idSDiiretor Raleigh, N C PoJtlatch, Wash. tyinnwood, Wash

~Ut1iIU1UJ X ~ NNVAf TERRY BREWER BARNEY BURKE BILL GORDON ARIE CALLAGHAN DOUG AUBERTIN CARNAN BERGREN BILL GAINES President Vice President Sec'retary Ass istcant Secretary Commissioner, Commissioner, Director of Utilities.

Commissioner. Commissioner, Commissioner, Commissioner, Ferry County PUG Clintan County PUG Tacoma Public Uttlinies Grant County PUD2 Jefferson County PUG Franklin County PUG Grays Harbor County PUG 1 LINDA GOTT Commissioner, LIZ GREEN Commissioner, DAN GUNKEL Commissioner, UUItI AWMMONU Energy Services Director, 51ILVL" UU*IUIN Commissioner, JAbK JANUA Commissioner, UIKL ~JUNIL*

Power Supply and Mason County PUD 3 Skamania Counny PUG Klickitat County PUG City of Richland Okanogan County PUG Mason County PUG 1 Environmental Affairs Officer, Seattle City Lighit ROBERT JUNGERS CURT KNAPP PHIL LUSK JIN NALINOWSKI M.L NORTON NED PIPER WILL PURSER Commissioner, Commissioner, Power Resources Manager, Commissioner. General Manager, Commissioner, Commissioner, Wahikiakium County PUD PeniS Oreille County PUG City of Port Angeles Clark Public Utilities City of Centralia Cowlitz County PUG Clallam County PUG JUUn KEUUf~j Commissioner,

  • HAN KUWI5U I 11AM Commissioner, LUKEIbANUEIb Commissioner, UII¶UUK~l ~I1,NA:

Commissioner, UEAANA I UIIUIMI'U11 Commissioner, h I'.I! VRUUI*III Commissioner, Asotno County PUG Kitttas County PUG Renton PUG Lewis County PUG Pacific County PUG 2 Snoohomisfi County PUG

.ee D

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susti iiiij ~ A EicELC

[5l O[ VERNGAiI5U/! fh AsLVAL SE NIOR Leadership The senior leadershipteam manages dazj-to-daij operations, executes progjrais and Jpro*ects, establishes long-term strategies in direct support o~f the IEnergyl Northwest vision, and provides essentialhanids-on leadlership tofoster continual improvement and strengthen organizationalcore 'alites in the vorkforce.

MARK REDDEMANN Chief Executive Officer BRAD SAWATZKE GROVER HETTEL BOB General DUTTON Counsel Chief Operating Officer Vice President for Operations

& Chief Nuclear Officer & Chief Ethics Officer BRENT RIDGE ALEX JAVORIK Vice President for Engineering JIM GASTON General Manager for Energy Services Vice President for Corporate Services; Chief Financial & Risk Officer & Development

SUISltlftJ A LLE*C ELVELANG INNOVATEO LN* NA

,i' Environmental Social Economic The environmental dimension of The social dimension of susta inability The economic dimension of sustainability sustainability concerns the organization's concerns the impacts the organization has on concerns the organization's impacts on the impact on living and non-living natural systems, the social systems it operates within. economic conditions of its stakeholders and including land, air, water and ecosystems. on economic systems at local, national and global levels. It does not focus on the financial condition of the organization.

Environmental Stewardship Environmental Stewardship is the cornerstone of the waste generation and increase community outreach and electrical Energy Northwest Environmental Management System and all efficiency. Energy Northwest reduced hazardous waste generation by more employees consider the environment in the conduct of daily work than 10 percent from fiscal 2014. Columbia Generating Station reduced activities. Commitment to regulatory compliance and pollution mixed waste generation by more than 20 percent from 2013 (a refueling prevention are key to continuation of Energy Northwest's EMS and maintenance outage year).

registration to the International Organization for Standardization Energy Northwest's solid waste recycling efforts bested fiscal year 2014 14001:2004, Each year Energy Northwest is subject to third-party by more than 10 percent and the agency achieved more than 100 megawatt-oversight by NSF International Strategic Registrations, an accredited hours of electrical efficiency gain.

registrar, which ensures conformance with the rigorous requirements of Additionally, Energy Northwest surpassed its goal of recycling 1,500 the standard. Following a successful external, independent maintenance pounds of surplus refrigerants stored at Columbia.

audit, Energy Northwest maintained its EMS Energy Northwest recycled approximately 29 million pounds of certification to the ISO 14001 Standard. metals, in association with site restoration activities at the Industrial During fiscal year 2015, Energy Northwest achieved its environmental goals to reduce i5 Development Complex.

For fiscal 2016, Energy Northwest h~as again established aggressive

sus*[fItiinhi EAELLENCtO£ELVEROC INNOVA*IOli ANOOALE environmental targets to reduce waste generation of all waste types, including hazardous, mixed and solid wastes, and increase energy efficiency gains.

Energy/ Northwest installed and began operating at Columbia its Liquid Effluent Evaporation Facility, a lined pond which eliminates a significant volume of wastewater discharges to the ground.

We empower our team to make an environmental impact at work and in our communities.

Energy Northwest volunteers teamed with AREVA to celebrate Earth Day by holding a community clean-up project along the Yakima River.

Economic Value Since 2001, Energy Northwest and the Bonneville Power in addition to generating massive amounts of power, Administration have worked together to refinance certain maturities Energy Northwest generates a huge cash flow for the economy. of Net Billed Bonds. These refinancings are currently known as During fiscal year 2015, Energy Northwest added to its 1,100 "Regional Cooperation Debt." In 2014 and 2015, Energy Northwest workforce 1,500 temporary workers from the local area and across issued approximately $461 million of bonds to refinance outstanding the country in support of Columbia Generating Station's refueling and Net Billed Bonds that matured in 2014 and 2015. These refinancings maintenance outage. made available to BPA additional funds enabling BPA to advance The agency also paid $4.9 million in privilege taxes to the state of the repayment of $550 million of BPA's repayment obligations to Washington - setting a record for the largest tax sum ever paid by the the Department of the Treasury. BPA estimates that the interest public power agency. The annual tax is levied on public power electricity expense savings to the region associated with the refinancings are producers for the privilege of generating electricity in the state and is approximately $144 million through fiscal year 2023.

directly tied to the amount of electricity generated. The 2014 generation record by Columbia Generating Station of nearly 9.5 million megawatt-hours significantly contributed to fiscal 2015's record-breaking privilege tax payment by Energy Northwest. INTEREST EXPENSE SAVINGS TO THE REGION ASSOCIATED WITH BOND REFINANCINGS ARE APPROXI MATELY I$11,4 MILLION THROUGH IFISCAL YEAR 2023.

susUiuiii~j I~'~

Community Service As a major Washington state employer and member of the local Tni-Cities business community for nearly 60 years, Energy Northwest strongly believes in supporting the communities and associated non-profit agencies where its employees work and live.

From the CEO to the newest employee, Energy Northwest cares through direct, hands-on involvement. During fiscal year 2015, Energy Northwest employees contributed more than $100,000 in direct fundraising and countless hours to the community. The agency officially supports three major charities: Benton and Franklin Head Start, March of Dimes and United Way.

Benton and Franklin Head Start March of Dimes United Way Since 1980 Energy Northwest employees Team Energy Northwest raised more than During 2015, employees contributed more have helped bring holiday season cheer to $34,000 during 2015 for the March of Dimes, than $75,000 to the United Way of Benton more than 11,000 children in low-income exceeding its goal and demonstrating the and Franklin Counties, The employees' families in local communities. Each year, philanthropy and generosity of its employees. contributions help provide hot meals to Energy Northwest employees commit to Approximately 40 employees, along with elderly neighbors, fund youth developmental adopting every child in the Benton and their friends and family, participated in a 3.1 programs, provide disaster relief planning for Franklin Head Start program. mile walk during the annual Tri-Cities March local communities and build self-esteem for Babies event to support neonatal birth in at-risk youth.

centers and local families in need.

DURING FISCAL 2015 EMPLOYEES SPONSORED NEARLY 450 CHILDREN IN THE HEAD START PROGRAM.

SU*I(L111,11( EACELLENEE UE WNEL£N INNOVAl NANDVAL~t olumbia TiNG STATIO N Columbia GeneratingStation is the Northwest's only commercial nuclear energy facility, generating 1,190 megawatts of electriecity, which is sold at-cost to the Bonneville Power Administration. Ninety-two Northwest utilities receive a percentageof its output.

Columbia is the third largest electricity generatorin Washington state.

Columbia Net Generation - MWh

In December, Columbia Generating Station marked its 30th year of in 2012 (9.3 million MWhrs), which followed a generation record for a commercial operation. During that time, Columbia provided more refueling outage year in 2013 (8.4 million MWhrs).

than 214 million megawatt-hours to the power grid. A boiling water Columbia achieved another record, in May this time, for its longest reactor, Columbia saw its first fuel loaded into the reactor core Dec. 25, continuous operational run - 683 days - set on the day operators 1983. After a period to test systems and components, Columbia began shut down the reactor for start of the station's biennial refueling and commercial operation, sending its first power to the Northwest grid maintenance outage (see next page). The record also included an Dec. 13, 1984. industry rarity - a "breaker to breaker" run, meaning the plant operated Columbia also set its third consecutive calendar year generation non-stop since reconnecting to the grid June 25, 2013, following its record. The plant sent nearly 9.5 million megawatt-hours of electricity previous refueling outage. Columbia's previous online record - 505 days to the grid, beating the previous calendar year generation record set - was set in April 2011.

,II 23th1 ENE3RGY NURTHWEST ANlNUA

14 SUS~~I

( II"11 E*U~

LXCELEN OEiVRH INNOIAT DNA*dVL Refueling

&MAINTENANCE OUTAGE 22 Columbia Generating Station began a 50-day refueling and maintenance outage May 9 that included several major projects and the loading of 248 new, higher-efficiency nuclear fuel assemblies into the reactor core. The agency temporarily hired an additional 1,500 skilled outage workers locally and from across the country7 to support maintenance projects throughout the plant.

Major projects included:

The feedwater flowmeter project which installed more accurate ultrasonic instruments to increase the accuracy of water flow measurement through the reactor core, allowing increased feedwater flow and subsequent higher megawatt output. The project resulted in an increase of Columbia's output capacity by 21 megawatts.

Installation of a new power range neutron monitoring system, replacing analog circuit controls with more reliable and redundant digital circuit controls. Installation of the new PRNM hardware allows for implementation of improvements in analytical methods. The benefits of this project to Columbia are significant, including efficient use of nuclear fuel, an increase in overall efficiency of reactor operations and increased equipment reliability.

Columbia installed three new 175-ton main power transformers. The former transformers were original plant equipment and approaching their end-of-service life. The new transformers increased overall plant reliability and will serve Columbia through its current operating life, scheduled for the end of 2043.

ZERO RECORDABLE INJURIES 2015~

ENRYNRTHWEiT A4NNUR[PORT

ENERGY SERVICES &

Development Nine Canyon Wind Project Nine Canyon Wind Project, located on the hilltops southeast of Kennewick, Wash., is one of the largest public-owned wind projects in the nation with 63 wind turbines--14 rated at 2.3 megawatts and 49 rated at 1.3 megawatts.

Each turbine has its own miniature weather station that monitors wind direction and speed. Motors rotate the turbines into the wind and sophisticated control systems ensure the blades turn at the optimal speed to maximize power generation. The turbines are self-starting and begin generating electricity when wind speed reaches eight miles per hour, with full power achieved at about 35 mph. If winds exceed 55 mph on a sustained basis, the turbines shut down automatically and restart when the winds fall below 45 mph.

Nine Canyon's public outreach program promoting renewable energy reached more than 300 members of the communitq during fiscal year 2015.

Packwood Lake Hydroelectric Project The 27.5-megawatt Packwood Lake Hydroelectric Project is located in the Gifford Pinchot National Forest in Lewis County, Wash., approximately 20 miles south of Mt. Rainier. The facility began commercial operation in 1964 as Energy Northwest's first electric power generation project.

Hydro is a carbon-free resource, and fish screens protect migrating fish populations. Water levels in Packwood Lake and Lake Creek are closely monitored to preclude other environmental impacts.

White Bluffs Solar Station White Bluffs Solar Station, a 242-panel demonstration facility, is located at the agency's Industrial Development Complex near Columbia Generating Station in Richland, Wash.

The collaborative project is funded by Energy Northwest, the Bonneville Power Administration, the Bonneville Environmental Foundation Operations & Maintenance and the Department of Energy. Operations & Maintenance Services renewed a contract with the city of Burbank, Calif. to operate and maintain the Tieton Hydroelectric Generation & Project Development Project at Rimrock Lake in the Cascades.

During fiscal year 2015, Energy Northwest activated its Demand Energy Northwest also continues to provide operations and Response Aggregated Control System and successfully launched a maintenance services to the natural gas-fired Olympic View Generating demand response pilot project. DRACS is a communication and control Station, owned by Mason County Public Utility District 3.

infrastructure used for demand-side management of power loads. A pilot project with BPA is currently under way with a demand response resource up to 35 megawatts of reliable, fast-reaction demand response capacity.

Energy Northwest also launched a new, member-driven community solar initiative during the year. This aggregated public power effort may result in multiple community solar installations throughout Washington state.

~*

HHl !C *,IC I[ V OJC]b

Applied Process Engineering Laboratory Energy Northwest manages the Applied Process Engineering Laboratory as a lease facility for laboratory-based research and development within a controlled operating environment. Approximately Environmental and Analytical Services Laboratory 90 percent of the leasable space was occupied during fiscal 2015, with Energy Northwest's Environmental and Analytical Services Laboratory 10 percent remaining available for business start-ups or as specialized provides chemical analysis and environmental monitoring expertise for testing labs for emerging technologies. utility, municipal and residential customers. The laboratory continues to maintain accreditation for wastewater, drinking water, radiochemical Calibration Services Laboratory analyses and licensure as a clinical laboratory for drug screenings.

The Energy Northwest Standards Laboratory, located adjacent to Services provided to Columbia and outside clients include metals Columbia, is a multi-faceted applied physics laboratory performing quantification, general chemistry, microbiological testing, radiological calibrations in virtually every aspect of metrology, including torque, monitoring, lubricant condition monitoring, material verification, force, pressure, vacuum, mass, dimensional, electrical, electronic, commercial-grade dedication of materials, and aquatic and terrestrial temperature, humidity, flow, vibration, light and sound. monitoring.

ENSL is accredited to international Standard ANSI/ISO/IEC 17025 by Laboratory staff is active in the community, providing classroom the American Association for Laboratory Accreditation. The laboratory education to Delta High School students, serving as judges for local achieved re-accreditation during fiscal 2015, through January 2017. science and technology competitions, and participating in the annual Major laboratory clientele include Columbia, Bechtel, Washington Science Technology Engineering and Math Conference. Staff also Closure Hanford, Washington River Protection Solutions, CH2M Hill, provides instruction to Delta students on analytical chemistry, laboratory Pacific Northwest National Laboratory, AREVA, Columbia Energy & testing methods, careers in environmental science and the importance of Environmental, High-Line Engineering, Intermech, Energy Solutions and clean energy.

Mid-Columbia Engineering.

The Energy Northwest laboratory is also involved with educational Industrial Development Complex outreach in the Tni-Cities through participation in the annual Science The industrial Development Complex is located just east of Columbia Technology Engineering and Math Conference and World Metrology and operated by Energy Northwest. A leasing business line successfully Day. Participation includes hands-on classroom instruction and hosting leverages available outlying buildings by renting office and warehouse students at ENSL facilities for work-based learning experiences. space.

Laboratorystaff is involved with educationaloutreach in the Tri-Cities, includingpresentations to students, serving asjudges for local science and technology competitions, andparticipatingin the annual "4 Science Technology Engineering and Math Conference.

201BEf*EY NORTH*EST ANNUAL R*PO

18 18Su.IstaJ.in'ing EXCELLENCE

&DELIVERING INNOVATION AND VALUE

  • S - 9 Finacia at &Inorato 20T ENR NOTWSTANALRPR

19 SU.*_-aiI'*.I'*.* EXCELLENCE

&DELIVERING INNOVATIDN ANDVALUE MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING Energy Northwest management is responsible for preparing the accompanying financial statements and for their integrity. They were prepared in accordance with Generally Accepted Accounting Principles (GAAP) (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 independent auditors. Management has made available to pricewaterhouseCoopers ((P 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 financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures.,

Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, PricewaterhouseCoopers LLP has considered the internal control structure inorder 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, 2015, internal control procedures are adequate.

M.E. Reddemann B. Ridge Chief Executive Officer Vice President for Corporate Services; Chief Financial and Risk Officer AUDIT, LEGAL AND FINANCE COMMITTEE CHAIR'S LETTER The executive board's Audit, Legal and Finance Committee (committee) is composed of 11 independent directors. Members of the committee are Chair Kathy Vaughn, Marc Daudon, Jack Janda, Jim Moss, Skip Orser, Will Purser, Dave Remington, Lori Sanders, Tim Sheldon, Linda Gott and Sid Morrison, ex-officlo. The committee held 9 meetings during the fiscal year ended June 30, 2015.

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 independent auditors the overall scope and specific plans for their respective audits, and reviewed Energy Northwest's financial statements and the adequacy of Energy Northwest's internal controls.

The committee met regularly with Energy Northwest's internal auditor and convened periodic meetings with the independent auditors to discuss the results of their audit, their evaluations 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 auditors.

Kathleen R.Vaughn

Chair, Audit, Legal and Finance Committee 20l15ENERGY NORTHWESTANNUAL REPDRT

20 SUStc:7iuB.iiiigEXCELLENCE &DELIVERING INNOVATIONANDVALUE L. . _*. . . .. . . . . . . . . :. . .. . : . . . .. . . .. . . .. . . . . . . .. . ..... . . . . . .. . . . ...... .. . ... 2 . . . .: . . . . . . . . . .. . . .. L _

INDEPENDENT AUDITOR'S REPORT To the Executive Board of Energy Northwest:

We have audited the statements of net position and the related statements of revenues, expenses and changes in net position and of cash flows of each major fund of Energy Northwest (the "Company"), which consists of the Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.

1, Nuclear Project No. 3, the Business Development Fund, the Nine Canyon Wind Project, and the Internal Service Fund, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Company's basic financial statements.

Management's Responsibility for the Financial Statements Management isresponsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted inthe United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility Our responsibility is to express opinions on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund of the Company at June 30, 2015, and the respective changes in financial position and its cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter As discussed in Note 1 and 6 to the financial statements, the Company adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, effective July 1,2014. The financial statements of Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No.1, the Business Development Fund, and the Nine Canyon Wind Project as of and for the year ended June 30, 2015 reflect the adoption of the provisions of GASB 68. Our opinions are not modified with respect to this matter.

Other Matter The accompanying management's discussion and analysis, the Schedule of the Company's Proportionate Share of Net Pension Liability and the Schedule of the Company's Contributions (Schedules of Required Supplementary Information) as listed in the table of contents of the Company's 2015 Annual Report are required by accounting principles generally accepted inthe United States of America to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Portland, Oregon September 24, 2015 2015 ENERGYNORTHWEST ANNUAL REPORT

2.1 sustaningEXtELLENCE &DELIVERINGINNOVATIONANDVALUE ENERGY NORTHWEST MANAGEMENT'S DISCUSSION AND ANALYSIS Energy Northwest is a municipal corporation and joint operating agency The Statements of Revenues, Expenses, and Changes in Net Position of the state of Washington. Each Energy Northwest business unit is financed provide financial information relating to all expenses, revenues and equity and accounted for separately from all other current or future business that reflect the results of each business unit and its related activities over assets. The following discussion and analysis is organized by business unit. the course of the fiscal year. The financial information provided aids in The management discussion and analysis of the financial performance and benchmarking activities, conducting comparisons to evaluate progress, and activity is provided as an introduction and to aid in comparing the basic determining whether the business unit has successfully recovered its costs.

financial statements for the fiscal year (FY) ended June 30, 2015, with the The Statements of Cash Flows reflect cash receipts and disbursements and basic financial statements for the FY ended June 30, 2014. net changes resulting from operating, financing and investing activities. The Energy Northwest has adopted accounting policies and principles that Statements of Cash Flows provide insight into what generates cash, where are in accordance with Generally Accepted Accounting Principles (GAAP) in the cash comes from, and purpose of cash activity.

the United States of America. Energy Northwest's records are maintained as The Notes to Financial Statements present disclosures that contribute prescribed by the Governmental Accounting Standards Board (GASB). (See to the understanding of the material presented in the financial statements.

Note i to the Financial Statements.) This includes, but is not limited to, Schedule of Outstanding Long-Term Debt Because each business unit is financed and accounted for separately, the and Debt Service Requirements (See Note 4 to the Financial Statements),

following section on financial performance is discussed by business unit to aid accounting policies, significant balances and activities, material risks, in analysis of assessing the financial position of each individual business unit. commitments and obligations, and subsequent events, if applicable.

For comparative purposes only, the table on the following page represents a The basic financial statements of each business unit along with the notes memorandum total only for Energy Northwest, as a whole, for FY 2015 and to the financial statements and management discussion and analysis should FY 2014. be used to provide an overview of Energy Northwest's financial performance.

The financial statements for Energy Northwest include the Statements of The following discussion provides comparative financial information for Net Position; Statements of Revenues, Expenses, and Changes in Net Position; the years ended June 30, 2015 and 2014. The year of 2014 has not been and Statements of Cash Flows for each of the business units, and Notes to restated to reflect changes in accounting principles per GASB Statement No.

Financial Statements. 68; however, FY 2015 beginning balance has been restated. (See Note 1 The. Statements of Net Position present the financial position of each to the Financial Statements.) Questions concerning any of the information business unit on an accrual basis. The Statements of Net Position report provided in this report should be addressed to Energy Northwest at P0 Box financial information about construction work in progress, the amount of 968, Richland, WA, 99352.

resources and obligations, restricted accounts and due to/from balances for each business unit. (See Note 1 to the Financial Statements.)

2015 ENERG]Y NORTHIWEST ANNUAL REPORT

22 ss ta*i*ningEXCELLENCE &DELIVERIN9 INNOVATION AND VALUE COMBINED FINANCIAL INFORMATION June 30, 2015 and 2014 (DoLLars in thousands) 24 21: Change Assets :i Current Assets  :$ 242,268 i$ 233,276 i$ (8,992)

Restricted Assets  ::

Special Funds :172,851 i318,116:i 145,265 Debt Service Funds :662,673:i 352,643:i (310,030)

Net Plant :1,517,397 !1,562,376 i44,979 Nuclear Fuel 999,007 i976,327 i(22.680)

Lung-Term Receivables  : 59:! 59 Other Charges :3,078.698 !3,187,338:! 108,640 TOTAL ASSETS 6.672.894 i6,630,135 (42,759)

DEFERRED OUTFLOWS OFRESOURCES* i20,048 !38,845 !18,797 TOTAL ASSETS AND DEFERRED OUTFLOWS i$ 6,692.942 i$ 6,668,980! $ (23,962)

Current Liabilities  :$ 983,794i $ 517,195 i$ (466,599)

Restricted Liabilities  ::

Special Funds :153,250:i 158,818:i 5,568 Debt Service Funds :123.653 i119,479:i (4,174)

Long-Term Debt 5.420,783 ! 5,731,753 : 310,970 Other Long-Term Liabitilies 11,254:i 105,843:i 94,589 Other Credits :6,041 i5,850: 1191)

Net Position  ::

Invested in capital assets, net of related debt  :(35,450): (44,813): (9,363)

Restricted, net :38,005 !43,685  : 5,680 Unrestricted, net  :(15,478): (14,301 ): 1,177 TOTAL LIABILITIES AND NETPOSITION 6,685,852 i6,623,509 (62,343)

DEFERRED INFLOWS OFRESOURCES* 7,090 i45,471 38,381 TOTAL LIABILITIES, NETPOSITION AND DEFERRED INFLOWS i$ 6,692.942 !$ 6,668,980 i$ (23,962)

Operating Revenues  : 470,779 i$542,257 $ 71,478 Operating Expenses :386,496 i421,6322 35,126 Net Operating Revenues 84,283 i120,635:i 36,352 Other Income and Expenses  :(84.238)! (1 18,467)i (34,229)

(DISTRIBUTION) & CONTRIBUTION -:-:

Beginning Net Assets* (12,968)i (17,597): (4,629)

ENDING NETPOSITION  !$ (12,923)* $ (15S,429)* $ (2,506)

  • Energy Northwest's 2014 Statement of Net Position end Statements of Revenues and Expenses and Changes in Net Position were updated for the impacts of the required retroactive application of GASBStatement No. 6S "Items Previously Reported as Assets and Liabilities," which became effective for Energy Northwest in fiscal year 2015. See Note 1 forea summary of this change in accounting principle.

2915 ENERGY NORTHWEST ANNUAL REPORT

23 COLUMBIA GENERATING STATION Columbia Generating Station (Columbia) is wholly owned by Energy LPRM replacement, Critical Spares, Rad Monitors, ECCS Pump Flow, Main Northwest and its participants and operated by Energy Northwest. The plant Transformer, Security Cameras, Radio Obsolescence, and Circuit/Panel is a 1,157-megawatt electric (MWe, Design Electric Rating, net) boiling water Upgrade. These projects resulted in 74 percent of the CWIP activity. The nuclear power plant located on the Department of Energy's (DOE) Hanford remaining 26 percent was made up of 151 separate projects.

Site north of Richland, Washington. Nuclear fuel, net of accumulated amortization, decreased $22.7 million Columbia produced 8,142 gigawatt-hours (GWh) of electricity in FY 2015, from FY 2014 to $976.3 million for FY 2015. During FY 2015 Columbia as compared to 9,781 GWh of electricity in FY 2014, which included economic incurred $58.4 million in capitalized fuel/reload activity with a decrease in dispatch of 0 and 62 GWh respectively. The FY 2015 generation decrease of fuel of $37.9 million due to amortization, a decrease of $18.0 million for 16.8 percent was due to a record generation run in FY 2014 coupled with activity related to movement of TVA fuel and a decrease of $25.3 million for Columbia entering its planned 42 day refueling outage (R-22) on May 9, 2015 transfer of fuel monitoring equipment to utility plant in service.

and down powers. The 42 day planned outage extended an additional 8 Current assets decreased $20.7 million in FY 2015 to $197.7 million.

days and ended on June 27. The down powers took place in the first quarter Changes were decreases to receivables of $8.3 million, decreases to cash of FY 2015. The extended outage and down powers resulted in budgeted and investments of $15.2 million, clearing of due from other business units generation lower than budget by 280 GWh for the fiscal year. of $9.4 million and increases to materials and supplies and prepaid amounts Columbia's cost performance is measured by the cost of power indicator. of $12.2 million.

The cost of power for FY 2015 was 5.05 cents per kilowatt-hour (kWh) as compared with 3.70 cents per kWh in FY 2014. The industry cost of power Special funds increased $146.8 million to $283.8 million in FY 2015 due to fluctuates year to year depending on various factors such as refueling the FY 2015 bond activity and schedule of construction costs for these funds outages and other planned activities. The FY 201 5 cost of power increase of in FY 2015.

36.5 percent was due to the planned outage and impacts from the extended The debt service funds increased $83.3 million in FY 2015 to $182.4 R-22 activity and first quarter down power. million. The increase is due to the restructuring and funding activities for the regional cooperative debt program associated with the 2015 bond activities.

Assets, Liabilities, and Net Position Analysis Other charges increased $146.3 million in FY 2015 from $907.0 million The net increase to Utility Plant (plant) and Construction Work In Progress to $1,053.3 million. The increase was change in Costs in Excess of Billings (CWlP) from FY 2014 to FY 2015 (excluding nuclear fuel) was $52.9 million. related to the net effect of payment of current maturities and refunding The changes to plant and CWIP were comprised of additions to plant of activity.

$152.1 million with a decrease to CWIP of $10.9 million. Remaining change Deferred outflows increased $15.2 million in FY 2015 from $18.2 million was the period effect of depreciation of $88.3 million. to $33.4 million. The major change was an increase of $12.3 million due to The FY 2015 CWtP balance of $58.2 million consisted of 14 major projects the recognition of a deferred pension outflow in accordance with GASB No.

of at least $1.0 million: Cyber Security, Pipe Replacement, Scram Discharge 68. An increase of $2.9 million was associated with the 2015 bond activity.

Monitoring, Fukushima Impacts, Main Condenser, Feedwater Flowmeter, Current liabilities increased $144.8 million in FY 2015 to $285.2 million.

24 24 SUSI lifll aDELDIVrNG INNDVAIION ll(J EXCELLENCE ANDVALJ Components of the change were increases to current maturities of debt of Revenue and Expenses Analysis

$82.4 million, addition of notes payable promissory note for refunding of Columbia is a net-billed project. Energy Northwest recognizes revenues

$93.6 million, increase to taxes payable of $5.0 million due to fuel assemblies equal to expenses for each period on net-billed projects. No net revenue or being moved into Washington State for R-22, decrease in generation tax of loss isrecognized and no net position is accumulated.

$0.7 million due to R-22 impacts, increase of bearer bonds payable of $0.3 Operating expenses increased $34.7 million from FY 2014 costs of $363.2 million, decreases due to timing of year end obligations of $8.5 million, and million to $397.9 million in FY 2015. The increases in costs were due to FY timing of due to participants that resulted in an decrease of $27.3 million. 2015 being a planned refueling year as compared to FY 2014 and were mostly Restricted liabilities increased $7.9 million in FY 2015 to $208.6 million. in the operations and maintenance areas amounting to $68.7 million. The The increase was due to accrued decommissioning of $6.9 million and interest increase in operations and maintenance costs due to R-22 were offset by a related to bond activity of $1.0 million. decrease in nuclear fuel costs of $25.5 million and a decrease of $8.2 million in Long-term debt (Bonds Payable) increased $119.7 million in FY 2015 from fuel disposal fee. The decrease of $9.5 million in fuel expense was due to less

$3,455.7 million to $3,575.4 million due to the restructuring and funding generation and R-22 impacts along with a decrease in costs of $15.1 million activities for the regional cooperative debt program associated with the 2015 due to the ISFSI settlement claim with the Department of Energy (See Note bond activities. 13 to the Financial Statements) along with decreases to fuel operating costs Other long-term liabilities increased $90.6 million in FY 2015 to $101.6 of $0.5 million for fuel casks and $0.4 million relating to fuel interest costs.

million. The increase was due to reorganization of pension liability in Fuel disposal fees ceased in FY 2015 per notice from the DOE, resulting in the accordance with GASB No. 68, of approximately $88.6 million; and nuclear $8.2 million decrease. (See Note 13 to the Financial Statements.) Decrease fuel cask activity, of approximately $2.0 million. in costs for administrative and general of $4.1 million were mostly driven Deferred inflows increased $38.3 million from $2.7 million in FY 2014 to by FY 2014 having a $3.7 million charge with the adoption of GASB No. 65

$40.9 million in FY 2015. An increase of $39.3 million was recognized to in FY 2014, recognition of $2.6 million of pension expense in accordance deferred pension inflow in accordance with GASB No. 68. A decrease to bond with GASB No. 68 in FY 2015, and decreases in other costs of $2.2 million.

refunding inflows of $1.0 million was due to the restructuring and funding Generation tax decreased $1.0 million due to lower generation, depreciation activities for the regional cooperative debt program associated with the 2015 increased $4.6 million which is reflective of the plant focus on reliability and bond activities. decommissioning increased slightly at $0.3 million per established schedule.

Other Income and Expenses increased $35.4 million from FY 2014 to

$115.7 million net expenses in FY 2015. A major piece of the increase was the COLUMBIA GENERATING STATION Total Operating Costs (Dollars in thousandsi spent fuel litigation settlement from the DOE of $23.6 million reported in FY 2014 as a gain on DOE settlement on the Statement of Revenues, Expenses, and Changes in Net Position. The FY 2015 amount of $15.1 million has been recorded as a reduction to fuel expense to represent the true cost of the fuel FY2015

- I- I-FY2012

- cask program. The cask costs were never an intended cost for the facility and only resulted from a failure to perform from the Department of Energy.

(See Note 13 for DOE settlement discussion.) The remaining increase of $11.8

- I- I- I- II million was due to increased bond related expenses of $20.0 million, increase in investment income of $0.3 million, increases in miscellaneous non-utility FY2012 i leasing revenue of $4.0 million, and an increase of $3.9 million for gain on SWU sale related to the TVA fuel contract. (See Note 13 for Nuclear Fuels FY 2011 discussion).

I Columbia's total operating revenue increased from $443.5 million in FY 2014 to $513.6 million in FY 201 5. The increase of $70.1 million was due to 0 100,000 200,000 300,000 400,000 500,000 the refueling year of the two year cycle for the refueling and maintenance 1 Operating Expenses I ther Income/Expenses program and the related effect of the net billing agreement on total revenue.

2O15ENERB' NDRTHEiffT ANNUA REPORC

25 25 ~i1* ( dCLN~

  • UFLVRNJ iN VA1ONAN reA PACKWOOD LAKE HYDROELECTRIC PROJECT THE PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Do 1ars in thousands)

The Packwood Lake Hydroelectric Project (Packwood) is wholly owned and operated by Energy Northwest. Packwood consists of a diversion structure at Packwood Lake and a powerhouse located near the town of Packwood, Washington. The water is carried from the lake to the powerhouse through FY 2015

- i m *2.141 a five-mile long buried tunnel and drops nearly 1,800 feet in elevation. FY 2014 2.150 Packwood produced 107.16 GWh of electricity in FY 2015 versus 115.04 GWh in FY 2014. The 6.8 percent decrease in generation can be attributed FY 2013 im 2.166 to less favorable water conditions compared to the previous year; FY 2015 was the 14th best generation year compared to FY 2014 which ranked 5th. FY 2012 - 1.872 Although FY 2015 was a low water year, generation results exceeded the budgeted generation amount of 84.64 GWh by 26.7 percent due to higher FY 2011 1.742 than average generation and a delay in new license requirements (See Note 1 to the financial statements) which will eventually lower the generating 0U0 1 00 2,0 250 capacity for Packwood.

iOperating Expenses Packwood's cost performance is measured by the cost of power indicator.

The cost of power for FY 2015 was $2.01 cents per kWh as compared to

$1.88 cents per kWh in FY 2014. The cost of power fluctuates year-to-year is indefinitely extended for continued operations until a formal decision is depending on various factors such as outage, maintenance, generation, and issued by FERC and a new operating license is granted. As of June 30, 2015, other operating costs. The FY 201 5 cost of power increase of 6.9 percent Packwood continues to be relicensed under this extended agreement.

was a result of decreased generation as overall results of operations were relatively unchanged (.42%/). Revenue and Expenses Analysis The agreement with Packwood participants obligates them to pay Assets, Liabilities, and Net Position Analysis annual costs and to receive excess revenues. (See Note 1 to the Financial Total assets increased $0.6 million from FY 2015, with the major driver Statements.) Accordingly, Energy Northwest recognizes revenues equal to being an increase to cash of $0.3 million to cash and $0.3 million due from expenses for each period. No net revenue or loss is recognized and no net other business units. The corresponding increase to total liabilities of $0.5 position isaccumulated.

million was the $0.3 million increase due to bearer bond recognition, an Operating expenses remained consistent from the prior year.

increase of $0.3 million in net pension liability and increase of $0.1 million Other Income and Expense remained unchanged from previous year to deferred pension inflow as a result of recognition of pension liability resulting in a net gain of $4 thousand.

in accordance with GASB No. 68. Packwood has incurred $3.7 million in Packwood participants are obligated to pay annual costs of the project relicensing costs through FY 2015 with no new costs incurred for FY 2015. (including any applicable debt service), whether or not the project is operable.

These costs are shown as Other Charges on the Statement of Net Position. The Packwood participants also share project revenue to the extent that the Packwood has been operating under a 50-year license issued by Federal amounts exceed costs. These funds can be returned to the participants or Energy Regulatory Commission (FERC), which expired on February 28, 2010. kept within the project. As of June 30, 201 5 there is $5.8 million recorded as Energy Northwest submitted the Final License Application (FLA) for renewal deferred revenues in excess of costs that are being kept within the project.

of the operating license to FERC on February 22, 2008. On March 4, 2010, Packwood participants are currently taking 100 percent of the project FERC issued a one-year extension to operate under the original license which generation; there are no additional agreements for power sales.

26 sustainingEXCELLENCE &DELIVERING INNOVATION ANDVALUE NUCLEAR PROJECT NO. 1 NUCLEAR PROJECT NO. 3 Energy Northwest wholly owns Nuclear Project No. 1, a 1,250-MWe Nuclear Project No. 3, a 1,240-MWe plant, was placed in extended plant, which was placed in extended construction delay status in 1982, when construction delay status in 1983, when it was 75 percent complete. On it was 65 percent complete. On May 13, 1994, Energy Northwest's Board of May 13, 1994, Energy Northwest's Board of Directors adopted a resolution Directors adopted a resolution terminating Nuclear Project No. 1. All funding terminating Nuclear Project No. 3. Energy Northwest is no longer responsible requirements are net-billed obligations of Nuclear Project No. 1. Termination for any site restoration costs as they were transferred with the assets to the expenses and debt service costs comprise the activity of Nuclear Project No. 1 Satsop Redevelopment Project. The dlebt service related activities remain the and are net-billed. (See Notes 5 and 12 to the Financial Statements.) responsibility of Energy Northwest and are net-billed. (See Notes 5 and 12 to the Financial Statements.)

Assets, Liabilities, and Net Position Analysis Restricted cash decreased $281.6 million in FY 2015 to $80.2 million. The Assets, Liabilities, and Net Position Analysis decrease was due to bond activities, investment activities and transactions Long-term debt increased $9.6 million from $1,071.4 million in FY 2014 between other units. to $1,081.0 million in FY 2015, as a result of $47.8 million being transferred Long-term debt increased $124.8 million from $715.9 million in FY 2014 to current debt to be paid on July 1, 2015 along with a decrease in bond to $840.7 million in FY 2015 as a result of $53.7 million being transferred to related amortization of $17.6 million; and the remaining changes were due current debt to be paid on July 1,2015 along with an increase in bond related to the debt associated with the planned and approved regional cooperative amortization of $45.1 million; the remaining changes were due to the debt debt program (2015 A and B). Current debt per the debt maturity schedule associated with the planned and approved regional cooperative debt program. decreased $109.5 million from $157.3 million in FY 2014 to $47.8 million in (2015 A and B). Short term debt decreased $278.3 million per the debt maturity FY 2015. The remaining changes in liabilities of $54.3 million were due to a schedule and current notes payable decreased $183.6 million as a result of the decrease in notes payable related to bond financing of $52.6 million, increase regional cooperative debt program. There was a decrease to restricted liabilities to bearer bond activity of $0.3 million and a decrease in accrued interest of $3.0 million, represented by decreases to interest payable of $3.1 million and payable of $2.0 million.

slight increase inthe decommissioning estimate of $0.1 million.

Revenue and Expenses Analysis Revenue and Expenses Analysis Overall expenses decreased $6.0 million from FY 2014 related to bond Other Income and Expenses showed a net decrease to expenses of $6.6 activity decreases of $5.9 million (interest expense and amortization) and $0.1 million from $41.6 million in FY 2014 to $35.0 million in FY 2015. Investment million decrease to liquidation (plant preservation and termination costs).

revenue for FY 2015 remained the same as previous year at $15 thousand; bond related expenses decreased $6.0 million; other expenses decreased $0.3 million, which included a restoration cost estimate decrease of $0.5 million as a result of the FY 2014 change in estimate in the accelerated restoration work plan, offset by an adjustment of $0.2 million to account for an Internal Service Fund allocation charge.

2015 ENERGYNORTHWEST ANNUAL REPORT

27 S I *sU

-L f.ifTy EXCELLENCE

&DELIVERINGINNOVATIONAND VALUE BUSINESS DEVELOPMENT FUND Revenue and Expenses Analysis Energy Northwest was created to enable Washington public power utilities Operating Revenues in FY 2015 totaled $7.2 million as compared to FY and municipalities to build and operate generation projects. The Business 2014 revenues of $6.0 million, an increase of $1.2 million (20.0 percent). The Development Fund (BDF) was created by Executive Board Resolution No. increase in revenues was driven by two new activities: Demand Response 1006 inApril 1997, for the purpose of holding, administering, disbursing, and Initiative (revenues of $0.8 million) and the Tieton Hydroelectric Project accounting for Energy Northwest costs and revenues generated from engaging (revenues of $0.5 million). The Demand Response Initiative is a project to innew energy business opportunities. have readily available resources to reduce electricity demand on the Bonneville The BDF is managed as an enterprise fund. Four business lines have been Power Administration (BPA) System. The Tieton Hydroelectric project isa facility created within the fund: General Services and Facilities, Generation, Professional located in Southeastern Washington along the Tieton River. Various laboratory Services, and Business Unit Support. Each line may have one or more programs services (Environmental and Calibration) revenue increased $0.4 million, lease that are managed as a unique business activity. activity decreased $0.2 million due to occupancy utilization, and engineeringl technical services decreased $0.3 million. New projects related to expansion of Assets, Liabilities, and Net Position Analysis nuclear options (Modular Nuclear and UAMPS Carbon Free Power) generated Total assets and deferred outflows increased $0.3 million from $10.4 million $48 thousand, two other projects for solar expansion are continuing with less in FY 2014 to $10.3 million in FY 2015. There were small decreases to plant than $10 thousand inrevenues.

of $0.1 million offset by increases to current assets of the same amount. The Operating costs increased $0.7 million from $7.6 million in FY 14 to $8.3 major change in assets was $0.3 million due to the recognition of a deferred in million in FY 2015. The increases in costs were due to the two new revenue pension outflow inaccordance with GASB No. 68. There was an overall increase producing activities described above. These projects increased costs $1.5 to liabilities and net position of $0.3 million. Liabilities decreased $0.3 million million, decreased business activity discussed above for engineeringltechnical from FY 2014 due to timing of year end outstanding items, with an increase services accounted for $0.4 million resulting in a FY 2015 net operating cost to net pension liability of $2.7 million and increase to deferred inflows of $1 .2 increase of $1.1 million.

million to account for the net pension liability inaccordance with GASB No. 68. Other Income and Expenses increased $0.2 million in FY 2015 to $1.4 There was an adjustment to beginning net position of $3.6 million due to the million, with the change attributable to less indirect costs. There were no other retrospective application of GASB No. 68. The change in net position of $0.4 significant individual item variances.

million from operations in FY 2015 as compared to a decrease of $0.3 million in The Business Development Fund receives contributions from the Intemnal FY 2014 reflects the control of costs, new lines of business and achievement of Service Fund to cover cash needs during startup periods. Initial startup costs are better margin for business sectors. not expected to be paid back and are shown as contributions. As an operating business unit, requests can be made to fund incurred operating expenses. In FY 201 5 there were no contributions (transfers), which was also the case for FY 2014.

2015 ENERGYNORTHWEST ANNUAL REPORT

28 28 sLisIuifliflg LN~Y NINE CANYON WIND PROJECT measures along with the $1.2 million in decreased treasury related expenses in The Nine Canyon Wind Project (Nine Canyon) is wholly owned and operated FY 2015 (a result of the 2015 refinancing) helped to mitigate the overall impact by Energy Northwest. Nine Canyon is located in the Horse Heaven Hills area of poor wind conditions and resultant loss of generation on the cost of power southwest of Kennewick, Washington. Electricity generated by Nine Canyon is calculation.

purchased by Pacific Northwest Public Utility Districts (purchasers). Each of the purchasers of Phase I, Phase II,and Phase Illhave signed a power purchase Assets, Liabilities, and Net Position Analysis agreement which are part of the 2nd Amended and Restated Nine Canyon Total assets decreased $4.0 million from $104.9 million in FY 2014 to Wind Project Power Purchase Agreement which now has an end date of 2030. $100.9 million in FY 2015. The major driver for the change in assets was a Nine Canyon is connected to the BPA transmission grid via a substation and decrease of $6.7 million in net plant due to accumulated depreciation. The transmission lines constructed by Benton County Public Utility District. remaining changes consisted of increases to current cash and investments Phase I of Nine Canyon, which began commercial operation in September of $0.9 million, decreases to special and debt service funds of $0.3 million, 2002, consists of 37 wind turbines, each with a maximum generating capacity decrease of $0.2 million in account receivables, increase to unamortized debt of approximately 1.3 MW, for an aggregate generating capacity of 48.1 MW. expense and deferred outflows of $2.4 million and an increase of $0.1 million Phase II of Nine Canyon, which was declared operational in December 2003, to deferred pension outflow to recognize pension related asset associated with includes 12 wind turbines, each with a maximum generating capacity of 1.3 the implementation of GASB No. 68. There was an overall decrease to liabilities MW, for an aggregate generating capacity of approximately 15.6 MW. Phase and net position of $4.0 million with a decrease to long term debt (including Illof Nine Canyon, which was declared operational in May 2008, includes 14 unamortized bond discountlpremium) of $5.8 million, increases to current debt wind turbines, each with a maximum generating capacity of 2.3 MW, for an maturities of $0.1 million, decreases to payables and interest of $0.2 million, an aggregate generating capacity of 32.2 MW. The total Nine Canyon generating increase of $0.8 million in net pension liability and an increase of $0.4 million capability is95.9 MW, enough energy for approximately 39,000 average homes. to the deferred pension inflow to recognize pension liabilities associated with Nine Canyon produced 196.75 GWh of electricity in FY 2015 versus 239.39 the implementation of GASB No. 68.There was an adjustment to beginning net GWh in FY 2014. The decrease of 17.8 percent was a result of very poor wind position of $1.0 million due to the retrospective application of GASB No. 68.The conditions resulting in the lowest generation since all three phases came on change innet position of $1.9 million from operations in FY 2015 as compared line in 2009. There were two small outages where additional generation of 249 to an increase of $0.4 million in FY 2014 reflects the steady operations and MWh was not realized however FY 2015 would still have been at the lowest treasury savings due to the 2015 refinancing.

levels since 2009. Capacity factor for FY 2015 was 24 percent as compared to In previous years Energy Northwest has accrued, as income (contribution) 29.4 percent for FY 2014. from the Department of Energy, Renewable Energy Production Incentive (REPI)

Nine Canyon's cost performance is measured by the cost of power indicator. payments that enable Nine Canyon to receive funds based on generation as The cost of power for FY 2015 was $8.31 cents per kwh as compared to $7.83 it applies to the REPI legislation. REPI was created to promote increases in cents per kWh in FY 2014. The cost of power fluctuates year to year depending the generation and utilization of electricity from renewable energy sources on various factors such as wind totals and unplanned maintenance. The and to further the advances of renewable energy technologies. This program, increase of 6.1 percent in cost of power for FY 2015 was directly attributable authorized under Section 1212 of the Energy Policy Act of 1992, provides to the extremely poor wind conditions. Operating expenses decreased slightly financial incentive payments for electricity produced and sold by new qualifying from $13.6 million in FY 2014 to $13.3 million in FY 201 5.These cost control renewable energy generation facilities. The payment stream from Nine Canyon 2)*1NR*Y NRTHWEST ANNUAL REPORT

29 29SLSU I(1i1U?

  • OEVE HNGNNUV FXCELLENOL TI N&N 0LU participants and the REPI receipts was projected to cover the total costs over the purchase agreement. Continued shortfalls in REPI funding for the Nine Canyon project led to a revised rate plan to incorporate the impact of this shortfall over the life of the project. The billing rates for the Nine Canyon participants increased 69 percent and 80 percent for Phase I and Phase I1 participants respectively in FY 2008 in order to cover total project costs, projected out to the 2030 proposed project end date. The increases for FY 2008 were a change from the previous plan where a 3 percent increase each year over the life of the project was projected. Going forward, the increase or decrease in rates will be based on cash requirements of debt repayment and the cost of operations.

Phase Ill started with an initial planning rate of $49.82 per MWh which increased at 3 percent per year for three years. In year six (FY 2013) the rate increased to a rate that is expected to be stabilized over the life of the project.

Possible adjustments may be necessary to future rates depending on operating costs and REPI funding, similar to Phase I and II.

Revenues and Expenses Analysis Operating revenues remained relatively steady from FY 2014 levels, increasing $0.1 million. The project received revenue from the billing of the purchasers at an average rate of $76.10 per MWh for FY 2015 as compared to

$76.33 per MWh for FY 2014 which is reflective of the implementation of the revised rate plan in FY 2008 to account for REPI funding shortfalls and costs OJECT of operations. Operating costs decreased $0.3 million in FY 2015 from $13.6 NINE CANYON WIND PR lota[ Operating Costs (dottars rn thou_sands) million in FY 2014 to $13.3 million in FY 2015. Decreased operating costs inFY 2015 were due to the FY 2014 recognition of current period costs for refinancing due to implementation of GASB No. 65. Other operating items remained steady 17.383 with no major fluctuations in individual operations or maintenance activities.

FY2015 Other income and expenses decreased $1.1 million from $5.2 million in net F'Y201A 18.750 expenses FY 2014 to $4.1 million in FY 2015. Decreased interest costs of $0.7 million and decreases inamortized bond expenses of $0.4 million accounted for FY2013 18.805 the change. Net gain or change in net position of $1.9 million for FY 2015 was

-I a direct result of the planned rate structure with projected treasury savings due to refunding and lower than budgeted operating costs.

FY2012 -I- 17.1~67 The original plan anticipated operating at a loss in the early years and 1.6 gradually increasing the rate charged to the purchasers to avoid a large rate FY2011

- I- increase after the REPI expires. The REPI incentive expires 10 years from the initial operation startup date for each phase. Reserves that were established 0 3,000 6,000 9,000 12,000 15,000 are used to facilitate this plan. The rate plan in FY 2008 was revised to account Operating Expenses Other IncomfelExpense *s for the shortfall experienced in the REPI funding and to provide a new rate scenario out to the 2030 project end date. Energy Northwest did not receive REPI funding in FY 2015 and is not anticipating receiving any future REPI incentives. The results from FY 201 5 reflect the revised rate plan scenario and gradual increase in the return of total net position 2010 00R00 NORTIWEl*

ANNUA* R0P0

30 30SUIS~~iIliUJ AXELEC A YEAN A*E ~NOVAThO ANUVAL INTERNAL SERVICE FUND The Internal Service Fund (1SF) (formerly the General Fund) was established The net decrease in net position and liabilities is due to increases inaccounts in May 1957.The 1SF provides services to the other funds.This fund accounts for payable and payroll related liabilities of $4.2 million due to year-end allocation the central procurement of certain common goods and services for the business of related expenses and an decrease of $1.5 million due to change in unpaid units on a cost reimbursement basis. (See Note 1 to Financial Statements.) bearer bond estimates.

Assets, Liabilities, and Net Position Analysis Revenues and Expenses Analysis Total assets increased $2.5 million from $39.4 million in FY 2014 to $41.9 Other income and expenses for FY 2015 increased to $107 thousand from million in FY 2015. There were increases to cash and investments of $2.2 FY 2014. There were increases in other business expenses of $80 thousand, million, receivables and prepaids of $0.6 million and increase in due to other increases to depreciation of $23 thousand, along with slightly lower overhead business units of $0.9 million. Decreases to plant of $1.0 million accounted for costs of $36 thousand.

the remainder of change in total assets.

205 ENERGYN3RTHWATANNUAL RAP

31_ Su*:tai.n..ing* " - EXE;ELLENEE &DELIVERING ININOVATION ANDVALUE STATEMENT OF NET POSITION = Clumia Packwood As of June 30, 2015 (DoLars inthousands)

Couba Lake i Nuclear Nuclear i Businesa Nine Canyon Internal 2015 Generating Hydroelectric i Projt Pret Dveomn Wind Service Combined Stto rjc iNumber I* Number 3* i Fund Project Subtotal Fund Eliminations Total ASSETS CURRENT ASSETS Cash $ 37,162 $ 1,169 $ 843; $ 39!$ 7,640 $ 543 $ 47,396( $ 7,347 $ -i$ 54,743 Investments - 498! 2,487 2,983 - 9,315 i 15,283

  • 27 -! 15,310 Accounts and other receivables 15,671 110 i1 i i 291 175 i 16,248 469 -i 16,717 Due from other business units -i 446 i 399 310 i 796 188 i 2,139 1 1086 (3,225) -

Materials sod supplies 142,962 1 i " 1"42,962 i -I 142,962 Prepayments and other 1,930 17i 2 2i 1 190 2,142i 1,402 -i 3,544 TOTAL CURRENT ASSETS "197,725 2,240! 3,7321 3,334i 8.728i 10,411" 226,170i 10.3311 (3,225)i 233.276 RESTRICTED ASSETS INote 1)

Special funds .i, Cash 883- 3,444 5,114 159i 825 10,425 1,834 - 12,259 Investments 282 744i i" 754i 283498 i 22193 i 305,691 Accounts and other ii16 receivables 166 "-" I -- 16 166 Debt service funds iiiii Cash 182.436 76,793 73.9281 96.46 342 803 Iii 342,803 Investments - " ii 9.837 i 9.837 3 i 9,840 TOTAL RESTRCTEDASSETS 4*66,229 80,237 79 0421 159 21062i 646 729 24.030"" 670.759 NON CURRENT ASSETS UTILITY PLANT (Note 21 Inservice i 4,121,660 14,736i i" 3,011 134'643 i 4'274'0501 46'814 " 4,320,864 Not in service ii 29,415 ""!- 29'4151 i" 29,415 Construction work inprogress i 58,203 i i"  ! 58,203 i i.i 58,203 Accumulated depreciation (2,695,114) (12 9661! (29,415)1 -i___ (1,556)i (67 748)i (2,806,799)I (39,307)1 - 12,846,106)

Net Utility Plant 1 1484,749 i 1,7701 _ { 1,455i 66 895] 1,554,869 i 7,507 "i 1,562,376 Nuclear uel, net of ,i iiii accumulated depreciation  ! 976,327 - - - I 762 96,2 LONG TERM RECEIVABLES -. - i- i 59 i59 TOTAL NONCURRENT ASSETS 2,461,076 1,770 i - " 1,455i 66,895i 2 531,196 i 7,566 ' - 2,538,762 OTHER CHARG ES Cost inexcess of billigs** 1053 2281 -! 972,083i 1,158 2891 i - 3.1836000i 3,183,600 Other " 3,7371 "i "~ - " 11 3,738 !-i 3,738 TOTAL OTHER CHARGES 1,I053,228 3,.7371 972,083 1,I158,289i "- 1 3,187,338 i-i 3,187,338 TOTAL ASSETS 4,178,258i 7,747 I 1.056,052 I 1,240,665i 10,3421 98.369! 6.591,433i 41,927 (3,225)1 6.630.135 DEFERRED OUTFLOWS OFRESOURCES

- unamortized loss ot bond I i refundin9g 21.102 i i 800 i.. 1,643 i* I 2,400 25,945

  • I 25,945 Deferred pension outflows 12,333 i 43 1 36 i-! 378 i 1101 12,9001 12,900 TOTAL DEFERRED OUTFLOWS  ! ii i OFRESOURCES 33,4351 43i 836! 1,643i 378i 2,5101 38,845!" 38,845 3 22

.DEFERRED OUTFLOWS .: ',$..4,211,693, $.: 7,790 = $ 1,056,888~ .$ 1,242,308:-$,,/10.720j $ :100,879: $ -6,630 278 ,$: :41,927.* $ ( , 5) i $ ,6,668,980

  • Project recordiedonra liquidation basis Theaccompanying notes sie as integral part ofthese combised financial statements
    • oEergy Northwest's 2015 Statement ofNet Position and Statements of tevenues and fopenses and Changes inNetPositiss weie antapdated forthe application ofthe required rettoactine application of GASB Statement No.6t TAccoanting and Financiai teparting far Pensions," whichbecame effectise for Energy Northwest infiscalyear 2815. SeeNote 1for a summary ofthis change in accounting principle.

2815 ENERGY NORTlIVWEST ANNUAL REPORT

32 Su[(taining* EXCELLENCE &DELIVERING INNOVATION AND VALUE STATEMENT OF NET POSITION As ofJune 30, 2015 (DoUlars in thousands)

Packwood -

Columbia Lake I Nuclear Nuclear I Business Nine Canyon IInternal 2015 (Generating Hydroelectric Project Project Development j Wind Service Combined Station Project Number 1'* Number 3* Fund Project I Subtotal Fund IEliminations Total LIABILITIES AND NET POSITIONI CURRENT LIABILITIES Current maturities of  :

long-term debt  !$ 114,590:* $ -$ 53,750:i$ 47,815:i$ $S 7,130 5 223,285:i$ -:$ 223,285 Current notes payable 93,648 51,850 32,620 ____-___ 178,118: -: 178,118 Accounts payable and accrued expenses 57,210 : 552 i 553:: 345 : 1,319 :: 519 ! 60,498: 35,218:i

  • 95,716 Due to participants  : 18,655 958
  • 463 i -: - : -: 20,076 - 20,076 Due to other business units  : 1,086:, - : -: 1,086 : 2,139 : (3,2251:

TOTAL CURRENT LIABILITIES *: 285,189 : 1,510 : 106,616 : 80,780 : 1,319 : 7,649 : 483,063: 37,357 : (3,225): 517,195 LIABILITIES-PAYABLE FROM RESTRICTED ASSETS (NOTE1) ____________ ____________ ______ ____________

Special funds  :  : . .

Accounts payable  ::  :

and accrued expenses  : 140,706 i-  : 16,716~ ____ _-  : -: 1,396 i 158,818: ______-: -: 158,818 Debt service funds:  ::::::::

Accrued interest payable 67,846 : -. : 23,043 *: 26,113 : -: 2,477 : 119,479 : -: -: 119,479 TOTAL RESTRICTED  :  :::  ::'

LIABILITIES  : 208,552: .- 39,759:i 26,113:* -: 3,873 : 278,297: -  : -: 278,297 LONG-TERM DEBT(NOTE S)

Revenue bonds payable  : 3,407.450 : . 840,675 : 1,081,005 : -: 101,620 : 5,430,750 : -:  : 5,430,750 Unamortized (discount)/ 167,965 - 68,050 : 53,494 :-: 1494 : 301,003 -: -. 301,003 premium on bonds - net  : ..

TOTAL LONG-TERM DEBT  : 3,575,415 : -: 908,725:i 1,134,499 : -: 113,114: 5,731,753 : -: -: 5,731.753 OTHER LONG-TERM LIABILITIES Pension liability.:, 88,631 : 306:, 260:, -.:, 2,716:1 768: 92,701 ,: -,: -. , 92,701 Dry storage cask liability ,: 12,749:i  :-  :- -. -,: 12,749,: -,: ," 12,749 Otber  : 229 : -: - -: 159 : -: 388 : 5:  : 393 TOTAL OTHER LONG-TERM " ":

LIABILITIES  : 101,609:! 308:! 260: - 2,875: 788 : 105,838:* 5 -: 105,843 OTHER CREDITS Advances from members  : -: 5,838 :  :- -: -: 5,838 : -: -: 5,838 and otbers ** .  : . .:  :

Other . . -  : -.- -. 12: 12:  : -: 12 TOTAL OTHER CREDITS ": 5,838:  : -: -i 12 : 5,850 : -: -: 5,850 TOTAL LIABILITIES . 4,170,765 : 7,654: 1,055,360: 1,241,392 : 4,194 : 125,436 : 6.604,801 : 37,362 : (3,225): 6,638,938 DEFERRED INFLOWS OFRESOURCES Deferred inflows - unamortized : . .::

gain on bond refunding ,: 1,620: -: 1,413: 916: -: 409:! 4,358:, -,: ,: 4,358 Deferred pension inflows**  : 39,308*: 136 : 115: -: 1,205: . 349 : 41,113 : -: -" 41,113 TOTAL DEFERRED INFLOWS  :  :

OFRESOURCES  : 40,928:i 136 : 1,528: 916 : 1,205.: 758:! 45.471 :-:  : 45.471 NETPOSITION Invested in capital assets,  :  :-  : -: -: 1,455:! (53,834): (52,379): 7,566: - (44,813) net of related debt  :  :

Restricted, net  : -:.  :. . -: 19,655 i 19,655 i 24,030 - : 43,685 Unrestricted, net  : -: -: -: -: 3,866 : 8,864: 12,730. 127,031). -: (14,301)

NET POSITION** " -: -. -: -: 8,571 : (25,315): (19,994): 4,672:  : (15,429)

Prolect recorded us a liqoidation basis Theaccompanying notes are as Integralpart ef these combined financial statements

    • nergy Neonbwesn's 2015 Statenment ofNetPosition and Statements ofRevenues and Expensesand Changes inlNetPosition were enoupdated forthe application of the required retroactive application of GASB Starement No.va'Ac counting and FinancialRteporting for Pensions,"which became effective for EnergyNorthwest in fiscalyear 25t15.See Nate 1 for a summary ef this change in accounting principle.

2815 ENERGY NORTHWEST ANNUAL REPORT

33 . T *t.fl7g--

° EXCELLENCE &DELUVERING INNOVATION AND VALUE STATEMENTS OF REVENUES, EXPENSES, AND CHANGES INNET POSITION As of June 30, 2015 (Do!.[ars in thousands)

Packwood Columbia Lake Nuclear Nuclear Business Nine Canyon Internal 2015 Generating IHydroelectric I Project Project Development I Wind Service ICombined Station Project 1 No.1

  • No.3
  • i Fund I Project Subtotal Fund i Total OPERATING REVENUES $ 513,6031 $ 2,1411 $ " $ " $ 7,228* $ 19,2851 $ 542,2571 $ " $ 542,257 OPERATING EXPENSES iiii Services to other business units, --

Nuclear fuel 27.433 ,--i--! 27,433 i i 27,433 Decommissioning 6,938 i ."-*-i 88 i 7,026 ii 7,026 Depreciation and amortization i 89,745 i 90 i-*- 261 6,7099 96,895 i-! 96,895 Operations and maintenance 244,915 1 1877 -i- 8,027 : 6,3341 261,153 1 " 261,153 Administrative &general 24.796 155i ]i 14i 24.965 24,965 Generation tax 4,085 23 ! i-  ! 42 i 4,150 ! " 4,150 Total operating expenses .: 397,912 2,145 -- 8,288 13,277 421,622 - 421,622 OPERATING INCOME (LOSS) i 115,691 (4) i i (1,060) 66008 i 120,635 " 120,635 OTHER INCOME &EXPENSE  ::;-

Other  ! 11,112. 1 35,017 i 41 910i 1 422i 5! 89467" 71 464* 89,360 Investment income, 412 i, 3 1iS 21 11 i 60 i 522 i7 522 Interest espense and debt amortization, nut of (127,215) -: (33,463) (41,599) i  : (4,171) i (206 448) !- (206,448) capitalized interest _________ _______________

Plant preservation and termination costs i--: (1,203) 1332)i i- (1,535)j " (1,535)

Depreciation and amortization  ! *-: (258) -"i" (258)j 1,386 ! (258)

Decommissioning _______- (108)1 ______ 18 (108 Services to other business units i- - i-.-i (72,964)

TOTAL OTHER INCOME &EXPENSE i (115,691) i 4 -! - 1,433 i (4,106)! (118,360)! (107) i (118,457) iNCOME (LOSS) i -: - -. " 373! 1,902 2,275 (107)i 2,168 GASB68 ADJUSTMENT as of 7/1/201 4** -:" "i- (3,623) (1,051) i (4,674) i i (4,674)

TOTAL NETPOSITION. BEGINNING OF YEAR -i "- "- " 8,571 i (26,166) i (17,595)1 4.672 1 (12,923)

TOTAL NETPO)SITION/ENrDOFYEAR! , I' -*i:  :;*$-'i:

.; ° I $-o i $- ..... - '* *.-$-; r " , $5,321:"I $(25,315)i .:.$(,19,9"94)I $.;!

i4,5'651 "$(i5,*429)

  • Project recorded ona liquidatios basis Theaccompanying notes are as integral part ofthese combined financial statemients
    • Energy Nsrthwest's 2015 Statement of NetPsoition asd Statements oftenenses and Expenses and Changes inNetPosition mere not updated forthseapplication of the required retroactive application of GASO Statement No.68 "Ac counting and Finaocialteporting for Pensions,"whichbecame effective forEnergy Northwest infiscalyear 2015. SeeNote 1for a summary ofthis change inaccounting principle, 2915 ENERO;Y NORTh WEST ANNUAL REPORT

34 sstaininTg EXCELLENCE &DELIVERING NNO VATiOna AND VALUE STATEMENT OF CASH FLOWS As of June 30, 2015 (Dollars inthousands)

Columbia !Packwood Lake Nuclear Business Nine Canyon Nuclear Internal 2015 Generating Hydroelectric Project Project Development Wind Service Combined Station Project No.1* No.3

  • Fund Project Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Operating revenlue receipts i$ 467 9081 $ 2,512 i$ -$ " $ 3,037 S 19'5051 $ "i$ 492,962 Cash payments for operating expenses i (287,592)i (2.139)i - . (2,869)i (6,454)1.-i (299,054)

DOECash settlement 23,5751 -i " i - 23,575 Cash received from TVAfuel activities 21'917 i"" -i "i" 21,917 Cash payments for services net of cash  !.!.

received from other units 3 43i348 Net cash provided by operating activities  ! 225,808 i 373 "i168  ! 13,051 3,483 242,883 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bond refundings 242,4241" 235,290 1 84,700 " 4131 562,827 Principal paid on revenue bond maturities i (32 205)i" (332 100)i (157'300)i (7 265)i - (528,870)

Payment for bond issuance and financing costs (3'871)i (2)i (1'209)i (727)i (1)i (440)i" (6,250)

Proceeds from notes payable 93 648 i i 51,848 32620 -" " 178,116 Payment for notes payable "" (235,443) (85,180)I i"i" (320,623)

Interest paid on bonds (138,890)i" (47,481) ~ (54,154)i" (5'107)i" (245,632)

Interest paid on notes "- (53) (19)i-- - (72)

Payment for capital items (117,124)i (99)i (259) -] (357)! (168)i (1,321) (119,328)

Nuclear fuel acquisitions (55 268)i -i "] "i "i " (55.268)

Payments received from BPAfor !i i terminated nuclear projects "i4~7,66 65S686 i" "" 113,4S2 Net cash provided/(used) by capital iiiii and related financing activities (11,286)] (101)! (281,641) (114,374)i (358)i (12,567)i (1321)1 (421,648)

CASH FLOWS FROM NON-CAPITAL FINANCE ACTIVITIES "

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities i (392,540)! (994)i (8717)I (26,364)i (5 540)* (36,208)I (37,734)i (508,097)

Sales of investment securities  ! 258 449 i 995 i 6 226 ! 25,484 i 10,975 27 639 i 40 880 i 370,648 Interest on investments 2081 41 19i 25i 11 831 171 501 Net cash providedl(used) by investing activities , (133,883)i 5 (2,472)! (855) 5,446 i (8,506)! 3,317 i (136,948)

NETINCREASE (DECREASE) IN CASH 80,6391 2771 (284,113)i (115,229), 5,256 (8,022)i ,7 (315,713)

CASH AT JUNE 30,2014 1 139,842:i 892 i 365,193 i~ 194,310i 2,543 i 19,036 ! 3,702i 725,518

.:CASHAT IUNE3O,.2015(HOTE B)': ' *. -.... * ,$: 220,4811 $ 1,1'}

691 $ . 8',i080~ i$ -*i. 79,081 1$ 7,799* $"

  • iiiO1'4$.* ,9,'18i'1$ i:409.805!
  • Projectrecorded onsaliquidation basis Threaccompanying notes areanrintegral part ofthese combined financial stutements 2015 ENERGY NORTIHWEST ANNUAL REPORT

35 sustainingEXCELLENCE &DELI VERNOH INNOVATION AND VALUE STATEMENT OF CASH FLOWS As of June 30, 2015 (DolLars in thousands)

SColumbia iPackwood Lake Nuclear Nuclear Business Nine Canyon Internal 2015 Generating iHydroelectric Project . Project Development Wind Service Combined Station  ! Project No.1* No.3* Fund Total Fund Project RECONCILIATION OF NETOPERATING REVENUES TONET CASH FLOWS PROVIDED BYOPERATING ACTIVITIES Net income/loss from operations $ 115,691 $ (4)l$ " S -i (1,059)1 $ 6,008 i J$ 120,636 Adjustments to reconcile net operating revenues to cash provided by operating activities:

Depreciation and amortization 132,321 90 - -i 261 6,799 1,386r 140,857 Decommissioning 6,9381!"[i- -! 88 "i7,026 Non-operating revenues -i(1) _- - (5)I (108), (114)

Other 12,885 (6)~ 133 4i9 4,1 Change in operating assets and liabilities: i i Deferred charges/costs in excess of billings (42,856)I 415S i" (42,441)

Accounts receivable 7,933 7i i(172)! 142 (531)I 7,379 Mate ria lsandsupplies (1,009) __ _ _"__ " _ -_ -_ " - (12,009)

Prepaid and other assets (195)i (1)i"- (1)i (6)1 (234)i (437)

Due from/to other business units 10'536 i (315)i (53)i (32)! (9,767)I 360 Due from/to participants iT (70)- (37)i (10-

  • 7)

Accounts payable (5'436)I 258i (114)i (37)) 12,638i 7,309

and nonoperating acti'vities':  :::  : ,*:L:' ?$* 22 8 $ , , ':373 $ $:".':  :  : 168: $ 301 3:483 !$' ,;242.*883 Non-cash activities Capitalized interest 3,767 " - 3,767-
  • Project recorded os a liquidation basis Theaccompanying notes are as lntegra[part afthese combined financial statements 2015 ENERGY NORTHWEST ANNUALREPORT

36 36Sus*tain*in EXCELLENCE

&DEUIVERING INNOVATION ANID VALUE NOTES TO FINANCIAL STATEMENTS NOTE 1 - Summary of Operations and Significant Accounting Policies Nuclear Project No. 1, a 1,250-MWe plant, was placed in extended Energy Northwest, a municipal corporation and joint operating agency of construction delay status in 1982, when it was 65 percent complete. Nuclear the state of Washington, was organized in 1957 to finance, acquire, construct Project No. 3, a 1,240-MWe plant, was placed in extended construction and operate facilities for the generation and transmission of electric power. delay status in 1983, when it was 75 percent complete. On May 13, 1994, Membership consists of 22 public utility districts and 5 municipalities. All Energy Northwest's Board of Directors adopted resolutions terminating members own and operate electric systems within the state of Washington. Nuclear Projects Nos. 1 and 3.All funding requirements remain as net-billed Energy Northwest is exempt from federal income tax and has no taxing obligations of Nuclear Projects Nos. 1 and 3. Energy Northwest is no longer authority. responsible for site restoration costs for Nuclear Project No. 3. (See Note 12)

Energy Northwest maintains seven business units. Each unit is financed The Business Development Fund was established in April 1997 to pursue and accounted for separately from all other current or future business units, and develop new energy related business opportunities. There are four and is accounted for as a major fund for governmental accounting purposes. main business lines associated with this business unit: General Services and All electrical energy produced by Energy Northwest's net-billed business Facilities, Generation, Professional Services, and Business Unit Support.

units is ultimately delivered to electrical distribution facilities owned and The Nine Canyon Wind Project (Nine Canyon) was established in January operated by Bonneville Power Administration (BPA) as part of the Federal 2001 for the purpose of exploring and establishing a wind energy project.

Columbia River Power System. BPA in turn distributes the electricity to Phase I of the project was completed in FY 2003 and Phase IIwas completed electric utility systems throughout the Northwest, including participants in in FY 2004. Phase I and II combined capacity is approximately 63.7 MWe.

Energy Northwest's business units, for ultimate distribution to consumers. Phase Ill was completed in FY 2008 adding an additional 14 wind turbines Participants in Energy Northwest's net-billed business units consist of public to Nine Canyon and adding an aggregate capacity of 32.2 MWe. The total utilities and rural electric cooperatives located in the western United States number of turbines at Nine Canyon is 63 and the total capacity is 95.9 MWe.

who have entered into net-billing agreements with Energy Northwest and The Internal Service Fund was established in May 1957. It is currently used BPA for participation in one or more of Energy Northwest's business units. to account for the central procurement of certain common goods and services BPA isobligated by law to establish rates for electric power which will recover for the business units on a cost reimbursement basis.

the cost of electric energy acquired from Energy Northwest and other sources,. Energy Northwest's fiscal year begins on July 1 and ends on June 30. In as well as BPA's other costs (see Note 5). preparing these financial statements, the company has evaluated events and Energy Northwest operates the Columbia Generating Station (Columbia), transactions for potential recognition or disclosure through September 24, a 1,1 57-MWe (Design Electric Rating, net) generating plant completed 2015, the date of audit opinion issuance date.

in 1984. Energy Northwest has obtained all permits and licenses required The following is a summary of the significant accounting policies:

to operate Columbia. Columbia was issued a standard 40-year operating license by the Nuclear Regulatory Commission (NRC) in 1983. On January A) Basis of Accounting and Presentation: The accounting policies of 19, 2010 Energy Northwest submitted an application to the NRC to renew Energy Northwest conform to Generally Accepted Accounting Principles the license for an additional 20 years, thus continuing operations to 2043. (GAAP) applicable to governmental units. The Governmental Accounting A renewal license was granted by the NRC on May 22, 2012 for continued Standards Board (GASB) is the accepted standard-setting body for operation of Columbia to December 31, 2043. establishing governmental accounting and financial reporting principles.

Energy Northwest also operates the Packwood Lake Hydroelectric Project Energy Northwest has applied all applicable GASB pronouncements and (Packwood), a 27.5-MWe generating plant completed in 1964. Packwood has applied Financial Accounting Standards Board (FASB) standards, has been operating under a 50-year license issued by the Federal Energy as other accounting literature, in those areas not directly prescribed Regulatory Commission (FERC), which expired on February 28, 2010. Energy by GASB and to the extent that they do not conflict with or contradict Northwest submitted the Final License Application (FLA) for renewal of the GASB pronouncements. The accounting and reporting policies of Energy operating license to FERC on February 22, 2008. On March 4, 2010, FERC Northwest are regulated by the Washington State Auditor's Office and issued a one-year extension, or until the issuance of a new license for the are based on the Uniform System of Accounts prescribed for public project or other disposition under the Federal Power Act, whichever comes utilities and licensees by FERC. Energy Northwest uses an accrual first. FERC is awaiting issuance of the National Oceanic and Atmospheric basis of accounting where revenues are recognized when earned and Administration's (NOAA) Biological Opinion, after which FERC will complete expenses are recognized when incurred. Revenues and expenses related the final license renewal documentation for Packwood. Costs incurred to to Energy Northwest's operations are considered to be operating date for relicensing are $3.7 million included in other charges. revenues and expenses; while revenues and expenses related to capital, The electric power produced by Packwood issold to 12 project participant financing and investingactivities are considered to be other income and utilities which pay the costs of Packwood. The Packwood participants are expenses. Separate funds and books of accounts are maintained for each obligated to pay annual costs of Packwood including debt service, whether business unit. Payment of the obligations of one business unit with funds or not Packwood is operable. The participants also share Packwood revenue of another business unit is prohibited, and would constitute violation of (See Note 5). bond resolution covenants (See Note 4).

2015 ENERGYNORTH ANNUAL WEST REPORT

37 SvL taTfl7 ig EXCELLENCE &DELIVERING INNOVATIONANDVALUE Energy Northwest maintains an Internal Service Fund for centralized GASB Statement No. 75, "Accounting and financial Reporting for control and accounting of certain capital assets such as data processing Posternployment Benefits Other than Pensions" primary objective is equipment, and for payment and accounting of internal services, payroll, to improve the accounting and financial reporting for employer's with benefits, administrative and general expenses, and certain contracted postemployment benefits other than pensions (other postemployment services on a cost reimbursement basis. Certain assets in the Internal or OPEB). GASB Statement No. 75 is effective for Energy Northwest in Service Fund are also owned by this Fund and operated for the benefit fiscal year 2018. The impact of GASB Statement No. 75 has not yet been of other projects. Depreciation relating to capital assets is charged to the determined by Energy Northwest management.

appropriate business units based upon assets held by each project. GASB Statement No. 76, "The Hierarchy of Generally Accepted Liabilities of the Internal Service Fund represent accrued payroll, Accounting Principles for State and Local Governments" primary vacation pay, employee benefits, such as pensions and other post- objective is to identify in the context of the current governmental retirement benefits, and common accounts payable which have been financial reporting environment the hierarchy of generally accepted charged directly or indirectly to business units and will be funded by accounting principles to improve financial reporting. GASB Statement the business units when paid. Net amounts owed to, or from, Energy No. 76 is effective for Energy Northwest in fiscal year 201 6. The impact Northwest business units are recorded as Current Liabilities-Due to of GASB Statement No. 76 has not yet been determined by Energy other business units, or as Current Assets-Due from other business units Northwest management.

on the Internal Service Fund Statement of Net Position. GASB Statement 77, "Tax Abatement Disclosures" primary objective The combined total column on the financial statements is for isto assist citizens, taxpayers, legislative and oversight bodies, municipal presentation only as each Energy Northwest business unit is financed bond analysts, and others to assess the current economic position of the and accounted for separately from all other current and future business entity. GASB Statement No.77 is effective in fiscal year 2017, but is not units. The FY 2015 Combined Total includes eliminations for transactions applicable to Energy Northwest.

between business units as required in GASB Statement No. 34, "'Basic Change in Accounting Principle In fiscal year 2015, Energy Financial Statements and Management's Discussion and Analysis for Northwest implemented GASB Statement No: 68 Accounting and State and Local Governments". Financial Reporting for Pensions and GASB Statement No. 71, "Pension GASB Statement No. 67, "Financial Reporting for Pension Plans - Transition for contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 25" and GASB Statement No. 69, - an amendment of GASB Statement No. 68". The primary objective "Government Combinations and Disposal of Government Operations" of GASB Statement No. 68 is to improve accounting and financial was effective at beginning of FY 2015, but has no impact for Energy reporting by state and local governments for pensions. GASB Statement Northwest. Implementation of the statement was not required. No. 68 establishes standards for measuring and recognizing liabilities, Issued but not Adopted Guidance GASB Statement No. 72, "Fair deferred outflows of resources, deferred inflows of resources (See Note Value Measurement and Application" primary objective is to address 1 for definition of deferred inflow / outflow of resources), and expense!

the reporting issues related to fair value measurements. This statement expenditures. For defined benefit pensions, this Statement identifies provides guidance for applying fair value to certain investments and the methods and assumptions that should be used to project benefit disclosures related to all fair value measurements. GASB Statement payments, discount projected benefit payments to their actuarial present No. 72 is effective for Energy Northwest in fiscal year 2016. The impact value, and attribute that present value to periods of employee service.

of GASB Statement No. 72 has not yet been determined by Energy In addition, prior to implementing GASB Statement No. 68, employers Northwest management. participating in a cost-sharing plan recognized annual pension expense GASB Statement No. 73, "Accounting and Financial Reporting essentially equal to their contractually required contribution to the plan.

for Pensions and Related Assets" that are not within the Scope of Upon the adoption of GASB Statement No. 68, employers participating in GASB Statement 68, and Amendments to Certain Provisions of GASB cost-sharing plans recognize their proportionate share of the collective Statements 67 and 68 primary objective is to improve the usefulness pension amounts for all benefits provided through the plan based on of information about pensions included in the general purpose external an allocation methodology. GASB Statement No. 71 amends GASB financial reports for making decisions and assessing accountability. GASB Statement No. 68 regarding the deferred outflows of resources for Statement No. 73 is effective in fiscal year 2017. The impact of GASB governments whose current year pension contributions are reported Statement No. 73 has not yet been determined by Energy Northwest subsequent to the measurement date. The collective financial impact management. resulting from the implementation of GASB Statements No. 68 and 71 GASB Statement No. 74, "Financial Reporting for Postemployment is the restatement of 2015 beginning balances by $123,656 million for Benefit Plans OtherThan Pension Plans" primary objective isto improve Energy Northwest's portion of the net pension liability incurred in prior the usefulness of information about postemployment benefits other years, which is then allocated across the business units. See financial than pensions (other postemployment benefits or OPEB) for OPEB Plans. statement Note 6 for further details on the impact to Energy Northwest.

GASB Statement No. 74 is effective in 2017, however does not apply to Energy Northwest as it only applies to OPEB plans.

2015 ENERGYNORTH WEST ANNUALREPORT

38 SUS *Yt*in n* EXCELLENCE

&DELIVERING INNgVATION AND VALUE Dollars in Thousands Columbia Packwood ! Nuclear Project No. 1: Business Development : Nine Canyon 7/1114 Balances as Previously Reported:

Cost in Excess of Billings  !$ 906,957 i$ - !$ 985,437 !$ - : $-

Advances from members and others  :-  : 5,817:i -: - -

Net Position  : -: -: -: 8,571 : (26,166)

GASB 68 Restatement Adjustment to Beginning Balances : 118,228 !408 i346 !3,623 !1,051 7/1/14 Restated Balances:  ::::

Cost in Excess of Billings :1,025,185 i-  : 985,783 i- -

Advances from members and others  : - : 5.409:i -: -.

Net Position  : -: -: -: 4,048 !(27,217)

B) Utility Plant and Depreciation: Utility plant is recorded at original and Environmental Obligations as issued by the FASB, which is considered cost which includes both direct costs of construction or acquisition and "other accounting literature" that does not conflict with or contradict indirect costs. GASB standards, according to GASB Statement No. 55, The Hierarchy of Property plant, and equipment are depreciated using the straight- Generally Accepted Accounting Principles for State and Local Governments line method aver the following estimated useful lives: (GAAP hierarchy). ASC 410 requires Energy Northwest to recognize the fair value of a liability associated with the retirement of a long-lived asset, Buildings and Improvements 20- 60 years such as: Columbia Generating Station, Nuclear Project No. 1, and Nine Generation Plant 40 years Canyon, inthe period in which it is incurred (see Note 10).

Transportation Equipment 6 -9 years General Plant and Equipment 3 - 15 years F) Decommissioning and Site Restoration: Energy Northwest established decommissioning and site restoration funds for Columbia Group rates are used for assets and, accordingly, no gain or loss and monies are being deposited each year in accordance with an is recorded on the disposition of an asset unless it represents a major established funding plan (see Note 11).

retirement. When operating plant assets are retired, their original cost together with removal costs, less salvage, is charged to accumulated G) Restricted Assets: In accordance with bond resolutions, related depreciation. agreements and laws, separate restricted accounts have been The utility plant and net position of Nuclear Projects Nos. 1 and 3 have established. These assets are restricted for specific uses including debt been reduced to their estimated net realizable values due to termination. service, construction, capital additions and fuel purchases, unplanned A write-down of Nuclear Projects Nos. 1 and 3 was recorded in FY 1995 operation and maintenance costs, termination, decommissioning, and included in Cost in Excess of Billings. Interest expense, termination operating reserves, financing, long-term disability, and workers' expenses and asset disposition costs for Nuclear Projects Nos. 1 and 3 have compensation claims. They are classified as current or non-current assets been charged to other income and expense (see Note 10). as appropriate.

C) Capitalized Interest: Energy Northwest analyzes the gross interest H) Cash and Investments: For purposes of the Statement of Cash Flows, expense relating to the cost of the bond sale, taking into account interest cash includes unrestricted and restricted cash balances and each earnings and draws for purchase or construction reimbursements for the business unit maintains its cash and investments* Short-term highly liquid purpose of analyzing impact to the recording of capitalized interest. investments are not considered to be cash equivalents; and are stated If estimated costs are more than inconsequential, an adjustment is at fair value with unrealized gains and losses reported in investment made to allocate capitalized interest to the appropriate plant account. income (see Note 3). Energy Northwest resolutions and investment Capitalized interest casts were $3.8 million for utility plant with no policies limit investment authority to obligations of the United States capitalized Interest for fuel. Treasury, Federal National Mortgage Association and Federal Home Loan Banks. Safe keeping agents, custodians, or trustees hold all investments D) Nuclear Fuel: Energy Northwest has various agreements for uranium for the benefit of the individual Energy Northwest business units.

concentrates, conversion, and enrichment to provide for short-term enriched uranium product and long-term enrichment services. All T) Accounts Receivable: The percentage of sales method is used to expenditures related to the initial purchase of nuclear fuel for Columbia, estimate uncollectible accounts. The reserve is then reviewed for including interest, were capitalized and carried at cost. adequacy against an aging schedule of accounts receivable. Accounts deemed uncollectible are transferred to the provision for uncollectible E) Asset Retirement Obligation (ARO's): In the absence of government- accounts on a yearly basis. Accounts receivable specific to each business specific guidance that directly addresses ARO's, Energy Northwest has unit are recorded in the residing business unit.

adopted Accounting Standards Codification (ASC) 410, Asset Retirement 2815 ENERGY NORTHWEST ANNUAL REPORT

39 Su,*tain'lin*g EXCELLENCE &DELIVERING INNOVATION AN'D VALUE J) Other Receivables: Other receivables include amounts related to the K) Materials and Supplies: Materials and supplies are valued at cost Internal Service Fund from miscellaneous outstanding receivables from using the weighted average cost method.

other business units which have not yet been collected. The amounts due to each business unit are reflected in Due To/From other business L) Leases: Consist of separate operating lease agreements. The total of units. Other receivables specific to each business unit are recorded inthe these leases by business unit and their respective amounts paid per year residing business unit. are listed inthe table below:

PROJECTS OPERATING LEASE COSTS (Dollars in thousands) 2015 : 2016 :2017  : 2018 2019: 2020+

Columbia . $ 634:i $ 634 i$ 634 !$ 634 !$ 634 !$ 14, 582 Nuclear Project No. 1 35i35 i 35 : 35 35 805 Nine Canyon 667:i 667 i667:i 667 667 15,341 NineCanyon Business Development Fund . 37 !37  : 37  : 37 : 37 : 851 Internal Service Fund :138 i138 i138 !138 . 138 i3,174 Packwood Lake Project . 100 !100 !100 !100 !100 2,300 Total . $ 1.611 $ 1,611 !$ 1,611 !$ 1,611 !$ 1,611 i$ 37,053 M) Long-Term Liabilities: Consist of obligations related to bonds payable and the associated premiums/discounts and gains/losses. Other noncurrent liabilities are pension liabilities recognized according to GASB Statement No. 68 (see Note 6), dry storage cask liabilities for Columbia Generating Station, and other immaterial liabilities. The table below summarizes activities for all long~term liabilities excluding pension liabilities.

LONG-TERM LIABILITIES (Dollars in thousands)

Balance 6/30/2014 Increase Decrease Balance 6/30/2015 Columbia Revenue hoods payable 3,304,805 !$ 659.635 S 556,990 !$ 3,407,450 Unamortized (discount)Ipremium on bonds - net 150,938 47,031! 30,004i 167,965 Current maturities of long-term debt 32,205i 114,590 32,205 114,590 Other noncurrent liabilities 1,04i,55!61 297

$ 3.499,002 i$ 823,841 i$ 619,860 $3,0,3 Nuclear Project No.1 Revenue bonds payable  !$ 715,905 !$ 327,360 !$ 202,590 i$ 840,675 Unamortized (discountl/premium on bonds - net " 22,8190 58,197 13,066 !68,O50 Current maturities of long-term debt . 332,10O0 : 53,750 !332,100  : 53,750

$ 1,070,924 i$ 439,307 !$ 547,756 i$ 962,475 Nuclear Project No.3 Revenue bonds payable  !$ 1,071,400 $ 184,890 !$ 175,285 $ 1,081,005 Unamortized ldiscount)lpremium on bonds - net :35,894 i30,226 i12,626 !53,494 Current maturities of long-term debt . 157.300  : 47,815 : 157,300 !47,815 4 ]

$ 1,264,594 i$ 262.931 i$ 345,211 !$ 1,182,314 Nine canyon Revenue bonds payable :112,120 i54,895 !65,395  !$101,620 Unamortized (discount)/premium on bonds - net :6,802 !7,671 !2,979 !11,494 Current maturities of long-term debt  : 725!,10 ,65 7,130

$1617i$ 69,696

  • 569*$ 120,244 2015 ENERGY NORTHWEST ANNUALREPORT

40 Sus~taininigEXCELLENCE &DELIVERtNG]NNOVATION AND VALUE N) Debt Premium, Discount and Expense: Original issue and reacquired Q) Compensated Absences: Employees earn leave in accordance with bond premiums, discounts and expenses relating to the bonds are length of service. Energy Northwest accrues the cost of personal leave in amortized over the terms of the respective bond issues using the bonds the year when earned. The liability for unpaid leave benefits and related outstanding method which approximates the effective interest method. payroll taxes was $21.4 million at June 30, 2015 and is recorded as a In accordance with GASB Statement No. 65, "Accounting and Financial current liability.

Reporting for Refundings of Debt Reported by Proprietary Activities",

gains and losses on debt refundings have been deferred and amortized R) Use of Estimates: The preparation of Energy Northwest financial as a component of interest expense over the shorter of the remaining life statements in conformity with GAAP requires management to make of the old or new debt. estimates and assumptions that directly affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities

0) Revenue Recognition: Energy Northwest accounts for expenses on at the date of the financial statements, and the reported amounts of an accrual basis, and recovers, through various agreements, actual cash revenue and expenses during the reporting period. Actual results could requirements for operations and debt service for Columbia, Packwood, differ from these estimates. Certain incurred expenses and revenues are Nuclear Project No. 1 and Nuclear Project No. 3. For these business allocated to the business units based on specific allocation methods that units, Energy Northwest recognizes revenues equal to expenses for each management considers to be reasonable.

period. Revenues of Nuclear Project No.1 and Nuclear Project No.3 are recorded under other income and expense, as these two business units S) Deferred Inflows and Outflows: Deferred outflows of resources are are terminated nuclear projects. No net revenue or loss is recognized, defined as the consumption of net assets by Energy Northwest that and no net position is accumulated. The difference between cumulative are applicable to a future reporting period, and are reported in the billings received and cumulative expenses is recorded as either billings statement of financial position in a separate section following assets.

in excess of costs (other credits) or as costs in excess of billings (other Deferred inflows of resources are defined as acquisitions of net assets charges), as appropriate. Such amounts will be settled during future by Energy Northwest that is applicable to a future reporting period, and operating periods (see Note 5). are reported in the statement of financial position in a separate section Energy Northwest accounts for revenues and expenses on an accrual following liabilities.

basis for the remaining business units.The difference between cumulative These amounts consist of losses and gains on bond refundings, revenues and cumulative expenses is recognized as net income or loss subsequent contributions, difference between projected and actual and included in Net Position for each period. investment income, and other GASB 68 related costs (see Note 6) as labeled on the Statement of Net Position.

P) Capital Contribution: Renewable Energy Performance Incentive (REPI) payments enable Nine Canyon to receive funds based on generation as it T) Other Charges and Credits for Resources: Other charges of $3.7 applies to the REPI bill. REPI was created as part of the Energy Policy Act of million relate to the Packwood relicensing effort. Other credits of $12 1992 to promote increases in the generation and utilization of electricity thousand for Nine Canyon consist of cost of issuance related to the bond from renewable energy sources and to further the advances of renewable refunding in FY 201 5.

energy technologies.

This program, authorized under section 1212 of the Energy Policy Act U) Short-Term Debt: The non-revolving loan facilities that were established of 1992, provides financial incentive payments for electricity produced for Project 1 and Project 3 in the amount of $235.4 million and $85.2 and sold by new qualifying renewable energy generation facilities. Nine million respectively, in fiscal year 2014 were subsequently paid in full Canyon did not record a receivable for FY 2014 REPI funding as no funds during fiscal year 201 5. Three new non-revolving credit facilities were are anticipated to be disbursed to Energy Northwest under this program. established infiscal year 2015: $70.0 million for Columbia to pay a portion The payment stream from Nine Canyon participants and the anticipated of debt service and operations and maintenance related costs of which REPI funding were projected to cover the total costs of the purchase $48.1 million remained outstanding as of June 30, 2015. An agreement agreement. Permanent shortfalls in REPI funding for the Nine Canyon for up to $130 million in total; $51.9 million for Project 1, $45.5 million project led to a revised rate plan to incorporate the impact of this shortfall for Columbia, and $32.6 million for Project 3 were drawn to fund debt over the life of the project. The current rate schedule for the Nine Canyon principal maturing on July 1, 2015. Additionally, a loan agreement was participants covers total estimated project costs occurring in FY 2015 and established for up to $117.2 million in total; $41.1 million for Project 1 estimated total cost recovery projections out to the 2030 proposed end and $76.1 million for Project 3 to fund monthly debt service sinking fund date. During FY 2015 there was no cost recovery obtained from REPI. requirements beginning in July 2015. No funds were drawn against the

$117.2 million agreement for Project 1 and Project 3 as of June 30, 2015.

Nine Canyon did not receive short-term financing during fiscal year 2015.

201EENERGY NORTH WEST ARNNUAL REPORT

41 sustainingEXCELLENCE &nELVERING lINNOVATION ANDVALVE SHORT-TERM LiABiLITIES :BlneOttnig: aac vial (Dollars in thousands) Baac.ustnig Blnc vial Balance 6130/2014 Increases Decreases: 6/30/2015 at 6/30/2015 Columbia Non-Revolving Loan $ -! $ 93,648~ S -* $ 93,648 i $ 21,842 Nuclear Project No.1 Non-Revolving Loan . 235,445 !51,850 !235,445 !51,850 !41,070 Nuclear Project No.3 Non-Revoleing Loan -85,180 i32,620 !85,180 32,620 76,145 Nine Canyon Short-term debt .-  :-:- -:

Packwood Short-term debt .- . -: - :-"

Business Development Short-term debt . - :-  :-  :- -

Total i$ 320,625! $ 178,118* $ 320,625~ S 178,118! $ 139,057 NOTE 2 - Utility Plant Utility plant activity for the year ended June 30, 2015 was as follows:

Balance 06/30/2014 iCapital Acquisitions iSale or Other Dispositionse Balance 0813012015 Columbia Generation  !$ 3,954,807 !$ 152,276! $ (191)! $ 4,106,892 Decommissioning :14,768:i - - -. 14,768 Construction Work-in-Progress  : 69,150 :225,054 (236,001)i 58,203 Accumulated Depreciation and (2,606,854)i (88,451):: 191 (2,695,114)

Decommissioning* **

Utility Plant, net*  :$ 1.431,871  :$ 288.879: $ (236,001): $ 1,484,749 Packwood Generation  !$ 14,635 i$ 113 5 (12)! $ 14,736 Construction Work-in-Progress  :-  : 114:i (114)i Accumulated Depreciation  :* (12.892):; (86);. 12 :i (12,966)

Utility Plant, net  :$ 1,743: $ 141  :$ (114): $ 1,769 Business Development Generation  !$ 2,898 !$ 113! $ -! $ 3,011 Construction Work-in-Progress  :- :113 (11 13)!

Accumulated Depreciation  : (I,335)i (221)i* - - (1,556)

Utility Plant, net  :$ 1,563: $ 5  :$ (113): $ 1,455 Nine Canyon _____________

Generation $ 133,657:i $ 157 !$ (32): 133,782 Decommissioning 661:i -: - 861 Construction Work-in-Progress. -: 157 (157)

Accumulated Depreciation and (60,960)! (6,820)! 32 !(67,748)

Decommissioning  ;

Utility Plant, net* $ 73,558 i$ (6,506): $ (157): $66,895 Internal Service Fund Generation  !$ 47,878 5 179 !$ (1,296) $ 46,761 Construction Work-in-Progress  :- - 232 i(1 79)! 53 Accumulated Depreciation  :(39,216): (1,387)i 1,296 i(39,307)

Utility Plant, net  :$ 8'6621 $ (976): $ (179): $7,507

  • Doessotincludte Noclear Fuel,net ofamortization

42 42 ~SU#StC lfiflTy EXFELLENCE &DELIVERING INNOVATION AND VALUE

- - -I NOTE 3 - Investments Interest rate risk: In accordance with its INVESTMENTS (Dolears inthousands)

Amortized cost i Unrealized Gains :: Unrealized Losses i Fair Value (1)(12) investment policy, Energy Northwest manages Columbia i$ 282,654 $ 163 $ (73) $ 282,744 its exposure to declines in fair values by Packwood :497 i1  : -. 498 limiting investments to those with maturities Nuclear Project No.1 :2,484 i3 - . 2,487 as designated in specific bond resolutions to Nuclear Project No. 3  : 2,979 : 4:  : 2,983 coincide with expected use of the funds.

Business Development Fund  :- -  :

Credit risk: Energy Northwest's investment Internal Service Fund  : 22,209 !14 -  : 22,223 policy restricts investments to debt securities Nine Canyon Wind  : 19,891 : 15: -  : 19,906 and obligations of the U.S. Treasury, U.S.

government agencies Federal National (1) Allinvestments are in U.S.Government backed securities including U.S.GovernmentAgencies and Treasury Bills.

121The majority of investments have maturities of lese than 1year. Approximately $98.88 million have a maturity beyond 1 year Mortgage Association and the Federal Home with the longest maturity being June 30, 2017 Loan Banks, certificates of deposit and other evidences of deposit at financial institutions qualified by the Washington Bonds). No 2001, 2003, or 2005 Nine Canyon bonds remained outstanding Public Deposit Protection Commission (PDPC), and general obligation debt as of June 30, 2015 under Resolution Nos. 1214, 1299, and 1376 respectively.

of state and local governments and public authorities recognized with one of During the year ended June 30, 2015, Energy Northwest issued, for Project the three highest credit ratings (AAA, AA+, AA, or equivalent). This investment 1 and Project 3, 2014-C fixed-rate bonds. The Series 201 5-A fixed-rate bonds policy is more restrictive than the state law. and 2015-B fixed-rate bonds for Project 1, Columbia, and Project 3 were Concentration of credit risk: Energy Northwest's investment policy also issued. The Project 1, Columbia, and Project 3 bonds were issued with a does not specifically address concentration of credit risk. An individual coupon interest rate ranging from 0.55 percent to 5.0 percent.

authorized security or obligation can receive up to 100 percent of the The 2014-C bonds for Project 1 and Project 3 are tax-exempt fixed-rate authorized investment amount; there are no individual concentration limits. bonds issued to repay an outstanding Note obligation originally issued to Custodial credit risk, deposits: For a deposit, this is the risk that in repay prior Project 1and Project 3 bonds. The Series 201 5-A bonds issued for the event of bank failure, Energy Northwest's deposits may not be returned Project 1, Columbia, and Project 3 are tax-exempt fixed-rate bonds. Series to it. Energy Northwest's demand deposit interest bearing accounts and 201 5-B bonds issued for Project 1, Columbia, and Project 3 are taxable fixed-certificates of deposits are covered up to $250,000 by Federal Depository rate bonds. These bonds were issue'd in majority to refund prior Project 1, Insurance (FDIC) while time and savings deposit non-interest bearing Columbia, and Project 3 bonds (See Note 1). These transactions resulted in accounts are covered up to an additional $250,000 by FDIC. All interest and a net loss for accounting purposes of $8.7 million. The 201 5-A, and 2015-B nan-interest bearing deposits are covered by collateral held in a multiple refunding bonds resulted in a combined economic gain of $26.0 million, $0.2 financial institution collateral pooi administered by the Washington state million and $1 .0 million for Columbia, Project 1 and Project 3, respectively.

Treasurer's Local Government Investment Pool (PDPC). Under state law, public During fiscal year 2015, Nine Canyon issued the 2015 Series bonds that depositories under the PDPC may be assessed on a prorated basis if the pool's refunded prior Nine Canyon bonds. The 2015 Series tax-exempt fixed-rate collateral is insufficient to cover a loss. All deposits are insured by collateral bonds were issued with a coupon interest rate ranging from 4.0 percent to held in the multiple financial institution collateral pool. State law requires 5.0 percent. This transaction resulted in a net loss for accounting purposes of deposits may only be madewith institutions that are approved by the PDPC. $2.54 million. The 2015 series refunding bonds resulted inan economic gain of $5.1 million.

NOTE 4 - Long-Term Debt The Bond Proceeds, Weighted Average Coupon Interest Rates, Net Each Energy Northwest business u~nit is financed separately. The Accounting Loss, and Total Defeased Bonds for Project 1 and Project 3 2014-resolutions of Energy Northwest authorizing issuance of revenue bonds for C; Project 1, Columbia, and Project 3 201 5-A and 201 5-B; and 2015 Series for each business unit provide that such bonds are payable from the revenues Nine Canyon are presented in the following tables:

of that business unit. All bonds issued under resolutions Nos. 769, 775 and 640 for Nuclear Projects Nos. 1,3 and Columbia, respectively, have the same BOND PROCEEDS (Dollars isthousands)_________________

priority of payment within the business unit (the "prior lien bonds"). No 2014C 2015A 201SB . 2015 Total prior lien bonds remain outstanding related to Columbia authorized under Project 1 $ 235,443 $ 137,67915$ 12,435 $ -$ 385,557 resolution No. 640. All bonds issued under resolutions Nos. 835, 838 and columbia . 377,491 329,175 - 706,666 1042 (the "electric revenue bonds") for Nuclear Projects Nos. 1, 3 and Project 3 85,176 96,395 33,545 - 215,116 Columbia, respectively, are subordinate to the prior lien bonds and have Nine Canyon -- 62,566 62,566 the same subordinated priority of payment within the business unit. Nine Total $ 320,619 $ 611,565 $ 375,155 $ 62,566 $ 1,369,905 Canyon's bonds were authorized by the following resolutions: Resolution No.

1214 (2001 Bonds), Resolution No. 1299 (2003 Bonds), Resolution No. 1376 (2005 Bonds), Resolution No.1482 (2006 Bonds), Resolution No. 1722 (2012 Bonds), Resolution No. 1789 (2014 Bonds), and Resolution No. 1824 (2015 2015 ENERGY NORTHWE-ST ANNUAL REPORT

43 S*,S*tainZlng EXCELLENCE &DELiVERiNG INNOVATION ANDVALUE WEIGHTED AVERAGE COUPON INTEREST RATE NET ACCOU NTIN G (GAl N)ILOS S (Dollars inthousands) _____

FOR REFUNDED BONDS 2014C 2015A 2015B 2015 Total 2014C 2015A 2015B 2015 Project1i - $ (273) 5 372 $ $ 99 Project 1 (A) 4.47% 5.00% Columbia - (114) 7,482 - 7.368 Columbia 4.90% 5.00% Project 3 - 70 1,171 - 1,241 Project 3 (A) 2.77% 5.00% Nine Canyon --- 2,543 2,543 Nine Canyon 4.82% Total $ - $ (317) $ 9,025 $ 2,543 $ 11,251 Total (A) 4.24% 5.00% 4.82%

TOTAL DEFEASED (Dollars in thousands) _______________

WEIGHTED AVERAGE COUPON INTEREST RATE 2014C 2015A 2015B 20151I Total FOR NEW BONDS Project1 (A) $ 137,680 $ 11,160 $ -$ 148,840 2014C 2015A 2015B 2015 Columbia - 169,325! 273,075 - 442,400 Project 1 5.00% 5.00% 0.97% Project 3 (A) 96,140, 31,330 - 127,470 Columbia 4.80% 2.83% Nine Canyon --- 58,265 58,265 Project 3 5.00% 4.92% 1.16% Total $ - $ 403,145 $ 315,565 $ 58,265'$ 776,975 Nine Canyon 4.65%

(A) The 201 4C Bonds were issued with the purpose of repaying $235.4 million and $85.2 million Total 5.00% 4.86% 2.62% 4.65%

of Project 1 and Project 3 Notes renpectively established in June 2014.

2015 REFUNDING RESULTS Outstanding principal on revenue and refunding bonds for the various business units as of June 30, 2015, and future debt service requirements for these bonds are presented in the following tables:

Columbia Project1 :

201 5-A (Tax-Exempt) Transaction Project 3 Nine Canyon 2015 Transaction S Nine Canyon Cash Flow Difference Cash Flow Difference Old debt service cash flown  : $ 184,502 !$ 137,680 $ 96,817 Old debt service cash flows $ 85,277 New debt service cash flown 265,370 i 192,176:i 119,074 New debt service cash flows  : 78,855 ENinterest contribution  : 388:! - :88 Net Cash Flow Savings (Dissavings)  :$ 6,422 Net Cash Flow Savings (Dissavings) i$ (81,256)i $ (54,496)! $ (22,345)

Economic Gain / Loss Economic Gain / Loes Present valse of old debt service cash flows  !$ 67,258 Present value of old debt service cash flows  !$ 176,820 i$ 137,165 $ 96,432 Present value of new debt service cash flows :62,155 Present value of new debt service cash flows :171,150 137,043 !96,055 Economic Gain (Loss)  : $ 5,103 ENinterest contribution  : 388:!- 88 Economic Gain (Lots) - $5,282 !$122 i$289 2015-B (Taxable) Transaction  : Columbia Project 1 : Project 3 Cash Flow Difference Old debt service cash flows i$ 380,389 5 12,555, $ 6,030 New debt service cash flows  : 347,834:! 12,693 !34,604 ENinterest contribution  : 4,741 : 194 !544 Net Cash Flow Savitgs (Dissavings)  !$ 27,814 !$ (332)! $ 882 Economic Gain / loss Present value of old debt service cash flows i$ 318,194 i$ 12,277 i$ 34,861 Present value of new debt service cash flows :292,738 i11,958 i33,570 ENinterest contribution :4,741  : 194 : 544 Economic Gain (Lost) i$ 20,715 !$ 125 $ 747 2801ENERGY NORTHWEST ANNUAL REPORT

44 sustainingEXCELLENCE &DELI VERINO 9NNOVATION ANDVALUE COLUMBIA REVENUE AND REFUNDING BONDS Nuclear Project No. 1 Refunding Revenue Bonds (Continued)'

(Dollars in thousands)

Serial or Term 2014C0 5.00 7-1-25-2027 :197,110 Series *Coupon Rate (%) Maturities Amount 2015A - 5.00 - 7-1-27/2028 :117,815 2003A ' 5.50

  • 2015 $ 35,100 20158 0.60-0.98  ! 7-1-16/2017 :12.435 2004A  : 5.25 7-1-2017 :20,375 2004C 5.25  : 7-1-16/2017 :5,510 Revenue bonds payable $ 894,425 2005A  : 5.00  : 7-1-2015 7,960 Estimated fair value at June 30, 2015 $ 985,183 2005C  : 4.74 7-1-2015 14,955 2006A  : 5.00 7-1-2020 :50,000 NUCLEAR PROJECT NO. 3 REFUNDING REVENUE BONDS 20060 5.80  : 7-1-2023 :3,425 (Dollars in thousands) 2007A  : 5.00  : 7-1-15/2018 *51,150 Serial or Term 20078 5.33  : 7-1-20/2021 :9.935 Series *Coupon Rate (%) Maturities Amount 19898 7.13  : 7-1-2016  !$ 76,145 20v8A 1993C - 5.75 - 7-1-15/2018 16,337 (A)
5.00-5.25 S 7-1-15/2018 51,.205 2008A 2004A 5.25  : 7-1-2016 :30,810
5.95 7 71-20/2021 12,025 20080 2005A  : 5.00  : 7-1-2015 10,415
5.00-5.25 7 71-21/2024  : 28,240 2008A 2006A  : 5.00  : 7-1-2016 :3,605
4.00-5.00 7 71-15/2018 73,695 2009A 2007A 4.50-5.00  : 7-1-15/2018 :55,755
6.80  : 7-1-2312024 9,780 20090 2007C  : 5.00  : 7-1-16/2018 29,380
4.25-5.00 7 71-20/2024 69,170 20108
3.75-4.25  ! 7-1-2012024  : 16,005 2010B  : 7-1-1612017  : 14,740
4.52-5.12 i 7-1-2012024 75,770 20080 5.00 20100 i 7-1-15/2018 92,210
5.61 -5.71  : 7-1-2312024 155,805 2009A 5.00-5.25 2010D  : 7-1-16/2018  : 279,980
4.00-5.00 i 7-1-15/2023 281,410 2010A 5.00 20118  : 7-1-2016 29,865
4.19-5.19  ! 7-1-19/2024 29,920 20108 5.00 2011B  : 7-1-2018 92,285
3.55 7-1-2019 4,600 2011A 4.00-5.00 2012A  : 7-1-2018 67,885
5.00  : 7-1-18/2021  : 441,240 2012A 5.00 2012A  ! 7-1-16/2017  : 30,330
4.00-5.00 i 7-1-25/2044  : 34,140 20128 3.00-5. 00 2012E 7-1-15/2016 55,945
1.06-4.14 i 7-1-15/2037 748,515 20120 1.2 6-1.74 20124A  : 7-1-2028 72,305
3.00-5.00 i 7-1-16/2040  : 517,720 20140 5.00 20140 i 7-1-17/2026 79,040
0.32-4.05  : 7-1-15/2030 90,520 2015A 3.00-5.00 2014A i 7-1-16/2018  : 33,545
4.00-5.00 S 7-1-21/2038  : 330,460 201 5B 0.60-1.38 2015A
0.55-3.84 7-1-16/2038  : 329,175 Compound interest bonds accretion 44,453 Revenue bonds payable $ 3,522,040 Revenue bonds payable $ 1,128,820 Estimated fair value at June 30, 2015 $ 3,850,705 Estimated fair value at June 30, 2015 $ 1,233,092 (A) Compound Interest Bonds NUCLEAR PROJECT NO. 1 REFUNDING REVENUE BONDS (Dollars in thousands) NINE CANYON WIND PROJECT REVENUE AND

- Serial or Term REFUNDING BONDS Series Coupon Rate (%) Maturities Amount (Dollars in thousands) 19898 7.13 " 7-1-2016  !$ 41,070 Serial or Term 2005A  : 5.00  : 2015 :8,925 Series Coupon Rate (%) Maturities Amount 2006A  : 5.00  : 7-1-15/2016 :42,910 2006 " 5.00  ; 7-1-15/20.16 $ 5,545 2007A 5.00 7-1-15/2017 :34,095 2012  : 3.00-5.00  ! 7-1-15/2023 :11,740

-20070 5.00  : 7-1-16/2017 :90,085 2014 4.00-5.00 i 7-1-15/2023 :36,570 2008A 5,00-5.25 ! 7-1-16/2017 :146,700 2015  : 4.00-5.00  ! 7-1-1712030 :54,895 20080 5.00 7-1-1612017 11,355 2009A 3.25-5.00 7-1 -2015 :1,670 $ 108.750 Revenue bonds payable 2010A 3.00-4.00 i 7-1-16/2017 :26,075 Estimated fair value at June 30, 2015 $ 120,423 2012A  : 5.00  : -- 15/2017 :111,800 2012B8 5.00  : 7-1-2017 :41,285 Total Bonds Payable -$ 5,654,035!

20120 1.26  : 7-1-2015 :11,095 Estimated fair value at June 30, 2015 $' 6,'189,403

45 Su.s*.]*taini EXCELLENCE

&DELIVERING INNOVATION AND VALUE DEBT SERVICE REQU IREM ENTS As of June 30, 2015 (Dollars in thousands)

COLUMBIA GENERATING STATION NUCLEAR PROJECT NO. 1 FISCAL YEAR*:! PRINCIPAL INTEREST iTOTAL FISCALYEAR* i PRINCIPAL i INTEREST iTOTAL 6130/2015 Balance:~** $ 114,590 i$ 67,846 i$ 182,436 6/30/2015 Balance:** : $ 53,750:i $ 23,043 i$ 76,793 2016 !81,410 i 142,495 i 223,905 2016 239,700 i42,336 i 282,036 2017:i 96,715 i 139,690:i 236,405 2017: 286,050:i 29.425: 315,475 2018:i 426,695 135,645 j 562,340 2018: -: 15,746:i 15,746 2019: 416,850:! 120,172 ! 537,022 2019:! -: 15,746 i 15,746 2020! 357,000 i 104,838i 461,.838 2020:! -: 15,746 !15,746 2021-2025:i 1,373,405 ! 304,073 i 1,677,478 2021-2025i 02,525: 78,731  : 141,256 2026-2030 i 175,360 i 146,558:! 321,918 2026-2028:i 252,400:i 24,975:! 277,375 2031-2035i 300,785 i76,140 i 376,925 2036-2040:i 168,310 i20,295 i 188,605 2041 -2044 10,920:i 1,162 i12,082

$ 3,522,040 $ 1,258,914 ::$ 4,780,954 $ 894,425 i$ 245,748 $ 1,140.173

  • Fiscal year for this report indicates the cash funding requirement year.
  • Fiscal year for this report indicates the cash funding requirement year.
    • Principal and Interest due July 1,2015. ** Principal and Interest due July 1, 2015.

NUCLEAR PROJECT NO. 3 NINE CANYON WIND PROJECT FISCAL YEAR* i PRINCIPAL:i INTEREST:! TOTAL FISCALYEAR* PRINCIPAL i INTEREST iTOTAL 6/30/2015 Balance:** $ 47,815 j $ 26,113 i$ 73,928 6/30/2015 Bulance:**  :$ 7,130:i $ 2,477:i $ 9,607 2016: 260,810: 50,430 i 311,240 2016:1 7,440  : 4,831  : 12,271 2017! 191,230 i38,410:i 229,640 2017:i 7,640 i 4,471 i12,111 2018:! 482,075  : 30,441 i 512,516 2018: 8,010 ! 4,105:i 12,115 2019:* -: 7,345 !7,345 2019: 8,425.: 3,705: 12,130 2020:i -: 7,345 i7,345 2020:i 8,835 i3,296 i12,131 2021-2025 !36,385  : 36,723 : '73,108 2021-2025:i 37,425 i9,784:i 47,209 2026-2028 i 110,505 i12,756:i 123,261 2026-2030  : 23,845 : 2,983 i26,828

$ 1,128,8201 $ 209,563 i$ 1,338,383 $ 108,750 i$ 35,652 $ 144,402

  • Fiscal year for this report indicates the cash funding requirement year.
  • Fiscal year for this report indicates the cash funding requirement year.
    • Principal and Interest due July 1, 2015. ** Principal and Interest due July 1,2015.

2815 ENERGY NORTH WESTANNUAL REPORT

46 sustaininFgEXCELLENCE &DELIVERING INNOVATION AND VALUE PERS members who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 and by either February NOTE 5 - Net Billing Security - Nuclear Projects Nos. 1 and 3 and Columbia 28, 2002 for state and higher education employees, or August 31,2002 for local The participants have purchased all of the capability of Nuclear Projects government employees, are Plan 2 members unless they exercised an option to Nos. 1 and 3 and Columbia. BPA has in turn acquired the entire capability transfer their membership to Plan 3. PERS members joining the system on or from the participants under contracts referred to as net-billing agreements. after March 1,2002 for state and higher education employees, or September 1, Under the net-billing agreements for each of the business units, participants 2002 for local government employees have the irrevocable option of choosing are obligated to pay Energy Northwest a pro-rata share of the total annual membership in either PERS Plan 2 or Plan 3. The option must be exercised costs of the respective projects, including debt service on bonds relating to within 90 days of employment. Employees who fail to choose within 90 days each business unit. BPA is then obligated to reduce amounts from participants default to Plan 3.

under BPA power sales agreements by the same amount. The net-billing PERS is comprised of and reported as three separate plans for accounting agreements provide that participants and BPA are obligated to make such purposes: Plan 1, Plan 2/3, and Plan 3. Plan 1 accounts for the defined payments whether or not the projects are completed, operable or operating benefits of Plan 1 members. Plan 2/3 accounts for the defined benefits of Plan and notwithstanding the suspension, interruption, interference, reduction or 2 members and the defined benefit portion of benefits for Plan 3 members.

curtailment of the projects' output. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 On May 13,1994, Energy Northwest's Board of Directors adopted resolutions members. Although members can only be a member of either Plan 2 or Plan terminating Nuclear Projects Nos. 1 and 3. The Nuclear Projects Nos. 1 and 3 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the project agreements and the net-billing agreements, except for certain sections same pension trust fund. All assets of this Plan 2/3 may legally be used to pay which relate only to billing processes and accrued liabilities and obligations the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, under the net-billing agreements, ended upon termination of the projects. as defined by the terms of the plan. Therefore, Plan 2/3 is considered to be a Energy Northwest previously entered into an agreement with BPA to provide single plan for accounting purposes. Pursuant to RCW 41.45.060, Washington for continuation of the present budget approval, billing and payment processes. State Department of Retirement Systems (DRS) will allocate a certain portion With respect to Nuclear Project No. 3,the ownership agreement among Energy of employer contributions from Plan 2/3 to Plan 1 in order to fund its unfunded Northwest and private companies was terminated in FY 1999. (See Note 12) actuarially accrued liability (UAAL).

Security - Packwood Lake Hydroelectric Project B. Benefits Provided Power produced by Packwood is provided to the 12 member utilities. The PERS provides retirement, disability and death benefits. Benefit provisions member utilities pay the annual costs, including any debt service, of Packwood are established by state statute and can only be modified by the state legislature.

and are obligated to pay these annual costs whether or not Packwood is PERS Plan 1 and Plan 2 retirement benefits are financed from a combination operational. The Packwood participants also share project revenue to the of investment earnings and employer and employee contributions. Employee extent that the amounts exceed project costs. contributions to the PERS Plan 1 and Plan 2 defined benefit plans accrue interest at a rate specified by the Director of DRS. Benefit increases are provided to NOTE 6 - Pension Plans benefit recipients each January. Increases are related to the funding ratio of For purposes of measuring the net pension liability, deferred outflows/ the plan. Members in plans that are at least 90% funded for two consecutive inflows of resources, and pension expense, information about the fiduciary years are given 2.5% increases. Members inplans that have not exceeded 90%

net position of the Washington State Public Employees Retirement System funded, or have fallen below 80%, are given 1% increases.

(PERS) and additions to/deductions from PERS' fiduciary net position have been The benefit provisions stated in the following paragraphs of this section determined on the same basis as they are reported by PERS. For this purpose, are current provisions and apply to active plan participants. Vested, terminated plan contributions are recognized as of employer payroll paid dates and benefit employees who are entitled to benefits but are not receiving them yet are bound payments and refunds are recognized when due and payable in accordance by the provisions in effect at the time they last terminated their public service.

with the benefit terms. Investments are reported at fair value.

PERS Plan 1 A. Plan Description Provides retirement, disability and death benefits. Retirement benefits PERS was established in 1947 and its retirement benefit provisions are are determined as two percent of the member's average final compensation contained in chapters 41.34 and 41.40 RCW. PERS is a cost-sharing multiple- (AFC) times the member's years of service. The AFC is the average of the employer retirement system comprised of three separate pension plans for member's 24 highest consecutive service months. Members are eligible for membership purposes. PERS Plan 1 and PERS Plan 2 are defined benefit plans, retirement from active status at any age with at least 30 years of service, and PERS Plan 3 isa defined benefit plan with a defined contribution component. at age 55 with at least 25 years of service, or at age 60 with at least five PERS members include elected officials; state employees; employees of the years of service.

Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher Members retiring from inactive status prior to the age of 65 may education employees not participating inhigher education retirement programs. receive actuarially reduced benefits. PERS Plan 1 retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other 2015 ENERGY NORTHWEST ANNUAL REPRRT

4-7 ,su.stainin" EXCELLENCE

&DELIVERINGINNOVATIONAND VALUE benefits include duty and non-duty disability payments, an optional cost C. Contributions of- living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS Plan 1 PERS Plan 1 Contributions provides retirement, disability and death benefits. Retirement benefits are The PERS Plan 1 member contribution rate is established by statute at determined as two percent of the member's average final compensation 6 percent. The employer contribution rate isdeveloped by the Office of the (AFC) times the member's years of service. The AFC is the average of the State Actuary and includes an administrative expense component that is member's 24 highest consecutive service months. Members are eligible for currently set at 0.1 8 percent.

retirement from active status at any age with at least 30 years of service, at The PERS Plan 1required contribution rates (expressed as a percentage age 55 with at least 25 years of service, or at age 60 with at least five years of covered payroll) at the close of Fiscal Year 2014 were as follows:

of service.

Members retiring from inactive status prior to the age of 65 may Actual Contribution Rates I Employer Employee receive actuarially reduced benefits. PERS Plan 1 retirement benefits Local governmental units 9.21% 6.00%

are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost of-living adjustment (COLA), and a one-time duty-related death benefit, if PERS Plan 2/3 Contributions found eligible by the Department of Labor and Industries. The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the PERS Plan 2/3 defined benefit portion of Plan 3. The Plan 2/3 employer rates include a PERS Plan 2/3 provides retirement, disability and death benefits. component to address the PERS Plan 1 unfunded actuarial accrued liability Retirement benefits are determined as two percent of the member's (UAAL) and an administrative expense that iscurrently set at 0.18 percent.

average final compensation (AFC) times the member's years of service for The Plan 2/3 contributions related to the Plan 1 UAAL are allocated by DRS Plan 2 and 1 percent of AFC for Plan 3. PERS Plan 2 members are vested and included within the Plan 1fiduciary net position amounts.

after the completion of five years of eligible service. The PERS Plan 2/3 required contribution rates (expressed as a The AFC is the monthly average of the member's 60 highest-paid percentage of covered payroll) at the close of Fiscal Year 2014 were as consecutive service months. There is no cap on years of service credit. follows:

Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 isconsidered an early Actual Contribution Employer Employee Plan 2 Employee Plan 3 retirement. PERS Plan 2/3 members who have at least 20 years of service Rates credit and are 55 years of age or older are eligible for early retirement with Local governmental 9.21% 4.92% 0%

units a reduced benefit. The benefit is reduced by a factor that varies according to age, for each year before age 65. PERS Plan 2/3 members who have 30 Both Energy Northwest and the employees made the required or more years of service credit and are at least 55 years old can retire under contributions during fiscal years 2015, 2014 and 2013. The Company's one of two provisions, if hired prior to May 2, 2013: required employer contributions for the years ending June 30 were as

  • With a benefit that is reduced by three percent for each year before follows (inthousands):

age 65; or

  • With a benefit that has a smaller (or no) reduction (depending on 2015 2014 2013 age) that imposes stricter return-to work rules PEnS Plan I $ 32 $ 43 $ 57 PERSPlan 1 UAAL 5,679 5,342 3,021 PERS Plan 2/3 members hired on or after May 1,2013 have the option PERSPlan 213 7,108 6,564 6,0320 to retire early by accepting a reduction of five percent for each year of Tota]l 12,819 $ 11,949 $ 9,098 retirement before age 65.This option isavailable only to those who are age 55 or older and have at least 30 years of service. PERS Plan 2/3 retirement D. Pension Costs benefits are also actuarially reduced to reflect the choice of a survivor benefit. PERS Plan 1 Plan 2/3 benefits include duty and nonduty disability payments, a At June 30, 2015, Energy Northwest reported a liability of $61,290,964 cost- of-living allowance (based on the Consumer Price Index), capped at for its proportionate share of the PERS Plan 1 net pension liability. The three percent annually and a one-time duty-related death benefit, iffound net pension liability was measured as of June 30, 2014, and the total eligible by the Department of Labor and Industries. pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to that date.

Energy Northwest's proportion of the net pension liability was based on the contributions received by PERS during the measurement period for employer payroll paid dates from July 1, 2013 through June 30, 2014, 2015 ENERGYNORTRIWEST-ANNUALREPORT

48 SU.St**t '*iffl7 EXCELLENCE

&DELIVERING lUNNOVATIONAND VALUE relative to the total employer contributions received from all of PERS' For the year ended June 30, 2015, Energy Northwest recognized participating employers as well as the statutorily required contributions pension expense of $5,035 thousand for its proportionate share of the required to fund the unfunded actuarial accrued liability. At June 30, 2013 PERS Plan 2/3 pension expense.

and June 30, 2014 Energy Northwest's respective proportionate share was At June 30, 2015, Energy Northwest reported its proportionate share 1.186848% and 1.216683%, increasing 0.029835%/ from June 30, 2013. of the PERS Plan 2/3 deferred outflows of resources and deferred inflows For the year ended June 30, 2015, Energy Northwest recognized of resources related to pensions from the following sources (inthousands):

pension expense of $5,043,331 for its proportionate share of PERS Plan 1 pension expense. Deferred Out- Deferred inflows At June 30, 2015, Energy Northwest reported its proportionate share flows Resources Resources of PERS Plan 1 deferred outflows of resources and deferred inflows of Differences between expected and actual $ -$-

economic experience resources from the following sources (inthousands):

changes inactuarial assumptions-Difference between projected and actual -33,294 Deferred Out- Deferred Inflows investment earnings flows Resources Resources Changes in proportion 61 96 Differences between expected and actual $ -$-

Contributions paid to PERSsusbsequent to 7,108 economic experience the measurement date Changes inactuarial assumptions Total $ 7,189 $ 33,390 Difference between projected and actual 7,664 investment earnings Changes inproportion-

$7,108 thousand reported as deferred outflows of resources related Contributions paid to PERSnubsequent to 5,711 to pensions resulting from Energy Northwest contributions to the PERS the meaturement date Plan 2/3 subsequent to the measurement date will be recognized as a Difference between actual and 59 reduction of the net pension liability in the year ending June 30, 2016.

proportionate employer contributions Other amounts reported as deferred outflows and inflows of resources Total $ 5,711 $ 7,723 related to the PERS Plan 2/3 will be recognized in pension expense as follows (inthousands):

$5,711 thousand reported as deferred outflows of resources related to pensions resulting from Energy Northwest contributions to PERS Plan 1 Year ended June 30: Pension Expense Amount subsequent to the measurement date will be recognized as a reduction of 2016 j$ (8,3281 1(8,328) the net pension liability inthe year ending June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to PERS Plan 1 pensions will be recognized in pension expense as follows (in 2017 2018 2019 1(8,328) (8,325) thousands):

E. Actuarial Assumptions Year ended June 30: Pension Expense Amount The total pension liability (TPL) for each of the plans was determined using 2016 $ (1,935) the most recent actuarial valuation completed in 2014 with a valuation date 2017 (1,935)* of June 30, 2013. The actuarial assumptions used in the valuation were based 2016 (1,935) on the results of Office of State Auditor's (USA) 2007-2012 Experience Study.

2019 (1,918) Additional assumptions for the subsequent events and law changes are current as of the 2013 actuarial valuation report. The TPL was calculated as PERS Plan 2/3 Pension Costs of the valuation date and rolled forward to the measurement date of June 30, At June 30, 2015, Energy Northwest reported a liability of $31,409 2014. Plan liabilities were rolled forward from June 30, 2013 to June 30, 2014, thousand for its proportionate share of the PERS Plan 2/3 net pension reflecting each plan's normal cost (using the entry-age cost method), assumed liability. The net pension liability was measured as of June 30, 2014, and interest and actual benefit payments.

the total pension liability used to calculate the net pension liability was The total pension liability in the June 30, 2014, actuarial valuation was determined by an actuarial valuation as of June 30, 2013 rolled forward to determined using the following actuarial assumptions:

the measurement date. Energy Northwest's proportion of the net pension

  • Inflation 3.00% per year liability was based on Energy Northwest contributions received by PERS
  • Active Member Payroll Growth 3.750h per year during the measurement period for employer payroll paid dates from July
  • Investment Rate of Return 7.50%

1,2013 through June 30, 2014, relative to the total employer contributions received from all of PERS' participating employers. At June 30, 2013 and Salary increases were based on a service-related table. Mortality rates for June 30, 2014 Energy Northwest's respective proportionate share was active members, retirees, survivors and disabilitants were based on RP-2000 1.551499% and 1.553883%, increasing 0.002384% from June 30, 2013. report's Combined Healthy Table and Combined Disabled Table. The Society 2815 ENERGY NORTHWEST ANNUAL REPORT

49 sus&taininRg EXCELLENCE &DELIVERING iNNOVATION AND VALUE of Actuaries published the document. OSA applied offsets to the base table Contributions from plan members and employers are assumed -to continue and recognized future improvements in mortality by projecting the mortality being made at contractually required rates (including PERS Plans 2 and 3.)Based rates using 100 percent Scale BB. Mortality rates are applied on a generational on those assumptions, the pension plans' fiduciary net position was projected basis, meaning, each member is assumed to receive additional mortality to be available to make all projected future benefit payments of current plan improvements in each future year throughout his or her lifetime. members. Therefore, the long-term expected rate of return of 7.50 percent was The long-term expected rate of return on pension plan investments was used to determine the total liability.

determined using a building block method. The Washington StatelInvestment Board (WSIB) used a best estimate of expected future rates of return (expected H. Pension Liability Sensitivity returns, net of pension plan investment expense, including inflation) to develop The following table (in thousands) presents Energy Northwest's each major asset class. Those expected returns make up one component of proportionate share of the net pension liability for all plans it participates in, WSIB's Capital Market Assumptions (CMAs). calculated using the discount rate of 7.50 percent as well as what the Energy The CMAs contain three pieces of information for each class of assets WSIB Northwest's proportionate share of the net pension liability would be if it currently invests in: were calculated using a discount rate 1 percentage point lower (6.50 percent)

  • Expected annual return or 1 percentage point higher (8.50 percent) than the current discount rate:
  • Standard deviation of the annual return
  • Correlations between the annual returns of each asset class 1% Decrease in 1% Increase in with every other asset class Discount Rate Discount Rate Discount Rate (6.5%) (7.5%) (8.5%)

Esergy Northwest's $ 75,547 $ 61,291 $ 49,053 WSIB uses the CMAs and their target asset allocation to simulate future proportionate share of the investment returns at various future times. PER5Plan 1 net pension liability/(asset):

The long-term expected rate of return of 7.50 percent approximately equals Energy Northwest's $ 131,016 $ 31,410 $ (44,671) the median of the simulated investment returns over a 50 year time horizon, proportionate share of the increased slightly to remove WSIB's implicit, small, short-term downward PE9S Plan 2/3 net pension adjustment due to assumed mean reversion. WSIB's implicit short-term liability/(asset):

adjustment, while small and appropriate over a 10 to 15 year period, becomes amplified over a 50 year period. The pension liability has been allocated to the business units based on the percentages listed inNote 1.The total pension liability for each unit as of June F. Estimated Rates of Return by Asset Class 30, 2015 is as follow (inthousands):

Best estimates of arithmetic real rates of return for each major class included in the pension plans' target asset allocation as of June 30, 2014, are Energy Northwest's Energy Northwest's summarized inthe following table: proportionate share proportionate share of of the PERS Plan 1 net the PERS Plan 2/3 net The inflation component used to create the table is 2.70 percent and pension liability: pension liability: Total represents WSIB's most recent long-term estimate of broad economic inflation. Columbia $ 56.600 $ 30,031 $ 88,631 Packwood 202 104 306

% Long-Term Expected Business Asset Class Real Rate of Return Arithmetic Development 1,796 920 2,716 FixedIncome .80% Nine canyon 521 267 788 Tangible Assets 4.10% Nuclear Project No. 1 172 88 260 Real Estate 5.30% Total $ 61,291 $ 31,410 $ 92,701 Global Equity 6.05%

Private Equity 9.05% H. Pension Plan Fiduciary Net Position Detailed information about each defined benefit pension plan's fiduciary G. Discount Rate net position is available in a separately-issued DRS 2014 CAFR. The DRS The discount rate used to measure the total pension liability was 7.50% CAFR may be obtained by writing to: Department of Retirement Systems, for PERS Plans 1 and 213. To determine that rate, an asset sufficiency test Communications Unit, P.O. Box 48380, Olympia WA 98504-8380; or it may be was completed to test whether each pension plan's fiduciary net position downloaded from the DRS website at www.drs.wa.gov.

was sufficient to make all projected future benefit payments of current plan Any information obtained from the DRS is the responsibility of the state members. Consistent with current law, the asset sufficiency test included an of Washington. PricewaterhouseCoopers LLP (PwC), independent auditors assumed 7.70% long-term discount rate to determine funding liabilities for for Energy Northwest, has not audited or examined any of the information calculating future contribution rate requirements. (All plans use 7.70 percent.) available from the DRS; accordingly, PwC does not express an opinion or any Consistent with the long-term expected rate of return, a 7.50 percent future other form of assurance with respect thereto.

investment rate of return on invested assets was assumed for the test.

2015 ENERGY NORTHWEST ANN*UAL REPORT

50 sustainin*rg EXLELLENCE &DELIVERING IHNDVATIONAND VALUE NOTE 7 - Deferred Compensation Plans Energy Northwest provides a 401(k) deferred compensation plan (401 (k) Nuclear Insurance plan), and a 457 deferred compensation plan. Both plans are defined Nuclear insurance includes liability coverage, property damage, contribution plans that were established to provide a means for investing decontamination and premature decommissioning coverage and accidental savings by employees for retirement purposes. All permanent, full-time outage and/or extra expense coverage. The liability coverage is governed by employees are eligible to enroll in the plans. Participants are immediately the Price-Anderson Act (Act), while the property damage, decontamination vested in their contributions and direct the investment of their contribution. and premature decommissioning coverage are defined by the Code of Each participant may elect to contribute pre-tax annual compensation, Federal Regulations. Energy Northwest continues to maintain all regulatory subject to current Internal Revenue Service limitations. required limits as defined by the NRC, Code of Federal Regulations and the For the 401(k) plan, Energy Northwest may elect to make an employer Act. The NRC requires Energy Northwest to certify nuclear insurance limits matching contribution for each of its employees who is a participant during on an annual basis. Energy Northwest intends to maintain insurance against the plan year. The amount of such an employer match shall be 50 percent of nuclear risks to the extent such insurance is available on reasonable terms the maximum salary deferral percentage. During FY 2015 Energy Northwest and in an amount and form consistent with customary practice. Energy contributed $3.5 million in employer matching funds while employees Northwest is self-insured to the extent that losses (i) are within the policy contributed $11.8 million. deductibles, (ii)are not covered per policy exclusions, terms and limitations, (iii) exceed the amount of insurance maintained, or (iv)are not covered due NOTE 8 - Other Employment Benefits - Post-Employment to lack of insurance availability. Such losses could have an effect on Energy Inaddition to the pension benefits available through PERS, Energy Northwest Northwest's results of operations and cash flows. All dollar figures noted offers post-employment life insurance benefits to retirees who are eligible to below are as of June 30, 2015.

receive pensions under PERS Plan 1, Plan 2, and Plan 3.There are 55 retirees American Nuclear Insurance (ANI) Coverage: The Act provides financial who remain participants in the insurance I3rogram. In 1994, Energy Northwest's protection for the public in the event of a significant nuclear generation Executive Board approved provisions which continued the life insurance plant incident. The Act sets the statutory limit of public liability for a benefit to retirees at 25 percent of the premium for employees who retire prior single nuclear incident at $13.36 billion. Energy Northwest addresses this to January 1, 1995, and charged the full 100 percent premium to employees requirement through a combination of private insurance and an industry-wide who retired after December 31, 1994. The life insurance benefit is equal to the retrospective payment program called Secondary Financial Protection (SFP).

employee's annual rate of salary at retirement for non-bargaining employees Energy Northwest has $375 million of liability insurance as the first layer of retiring prior to January 1,1995. The life insurance benefit has a maximum protection. If any US nuclear generation plant has a significant event which limit of $10,000 for retirees after December 31, 1994. The cost of coverage exceeds the plant's first layer of protection, every operating licensed reactor for retirees remained unchanged for FY 2015 and was $2.82 per $1,000 of in the US is subject to an assessment up to $127.3 million not including coverage. Employees who retired prior to January 1, 1995, contribute $.58 cents state insurance premium tax. Assessments are limited to $18.96 million per per $1,000 of coverage while Energy Northwest pays the remainder; retirees reactor, per year, per incident, excluding tax. The SFP is adjusted at least every after December 31, 1994, pay 100 percent of the cost coverage. Premiums are 5 years to account for inflation and any changes in the number of operating paid to the insurer on a current period basis. At the time each employee retired, plants. The 5FF and liability coverage are not subject to any deductibles.

Energy Northwest accrued an estimated liability for the actuarial value of the NEIL Coverage: The Code of Federal Regulations requires nuclear future premium. Energy Northwest revises the liability for the actuarial value generation plant license-holders to maintain at least $1.06 billion nuclear of estimated future premiums, net of retiree contributions. The total liability decontamination and property damage insurance and requires the proceeds recorded at June 30, 2015, was $0.4 million for these benefits. thereof to be used to place a plant in a safe and stable condition, to During FY 2015, pension costs for Energy Northwest employees and post- decontaminate it pursuant to a plan submitted to and approved by the NRC employment life insurance benefit costs for retirees were calculated and before the proceeds can be used for plant repair or restoration or to provide allocated to each business unit based on direct labor dollars. This allocation for premature decommissioning. Energy Northwest has aggregate coverage basis resulted in the following percentages by business unit for FY 2015 for in the amount of $2.75 billion which is subject to a $5 million deductible per this and other allocated costs; Columbia at 96 percent, Business Development accident.

at 3 percent, and Project 1,Nine Canyon, Packwood and Project 3 receiving the residual amount of 1percent. NOTE 10 - Asset Retirement Obligation (ARO)

Energy Northwest recognizes the fair value of a liability of an ARO NOTE 9 - Nuclear Licensing and Insurance for legal obligations related to the dismantlement and restoration costs associated with the retirement of tangible long-lived assets, such as nuclear Nuclear Licensing decommissioning and site restoration liabilities, in the period in which it Energy Northwest is a licensee of the Nuclear Regulatory Commission is incurred. Upon initial recognition of the AROs that are measurable, the

("NRC") and issubject to routine licensing and user fees. Additionally, Energy probability weighted future cash flows for the associated retirement costs Northwest may be subject to license modification, suspension, revocation, or are discounted using a credit-adjusted-risk-free rate, and are recognized as civil penalties inthe event regulatory or license requirements are violated. both a liability and as an increase in the capitalized carrying amount of the 2015 ENERG;Y NORTHWEST ANNUAL REPORT

51 ss ti ning**77*9 EXtELLENCE

&DELUVERING INNOVATION ANidVALUE related long-lived assets. Capitalized asset retirement costs are depreciated Asset Retirement Obligation (Dollars inthousands) over the life of the related asset with accretion of the ARO liability classified as an operating expense on the statement of revenues, expenses, and Columbia Generating Station Balance AtlJune 30,2014 i $ 131,443 changes in net position each period. Upon settlement of the liability, an entity Current year accretion expense . 6,824 either settles the obligation for its recorded amount or incurs a gain or loss ARO at June 30, 2015 $ 138,317 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 ISFSl decommissioning and site restoration; therefore, any gain or loss recognized BalanceAt June 30, 2014  !$ 2,265 upon settlement of the ARO results in an adjustment to either the billings in Current year accretion expense . 33 excess of costs (liability) or costs in excess of billings (asset), as appropriate, AROat June 30, 2015  :$ 2,298 as no net revenue or loss is recogrnized, and no net position is accumulated Nuclear Project No. 1 for the net-billed projects.

Balance At June 30, 2014 $ 16,608 Energy. Northwest has identified legal obligations to retire generating Current year accretion expense  : 108 plant assets at the following business units: Columbia, Nuclear Project No.

AROat June 30, 2015  : $ 16,716 1 and Nine Canyon. Decommissioning and site restoration requirements for Columbia and Nuclear Project No. 1 are governed by the NRC regulations Nine Canyon Wind Project and site certification agreements between Energy Northwest and the state of Balance At June 30, 2014 $ 1,341 Washington and regulations adopted by the Washington Energy Facility Site current year accretion expense . 55 Evaluation Council (EFSEC) and a lease agreement with the Department of ARO at June 30,2015 i$ 1,396 Energy ("DOE"). (See Notes 1 and 12)

As of June 30, 2015, Columbia has a capital decommissioning net asset NOTE 11 - Decommissioning and Site Restor'ation value of zero and an accumulated liability of $;138.3 million for the generating The NRC has issued rules to provide guidance to licensees of operating plant, and for the Independent Spent Fuel Storage Installation (ISFSI) a net nuclear plants on providing financial assurance for decommissioning plants asset value of $1.1 million and an accumulated liability of $2.3 million. at the end of each plant's operating life (See Note 10 for Columbia ARO). In The adjustment to ISFSI was associated with new NRC (Nuclear Regulatory September 1998, the NRC approved and published its "Final Rule on Financial Commission) spent fuel decommissioning requirements. Assurance Requirements for Decommissioning Power Reactors." As provided As of June 30, 2015, Nuclear Project No. 1 has a capital decommissioning in this rule, each power reactor licensee is required to report to the NRC the net asset value of zero and an accumulated liability of $16.7 million. status of its decommissioning funding for each reactor or share of a reactor Under the current agreement, Nine Canyon has the obligation to remove it owns. This reporting requirement began March 31, 1999, and reports are the generation facilities upon expiration of the lease agreement if requested required every two years thereafter. Energy Northwest submitted its most by the lessors. The Nine Canyon Wind Project recorded the related original recent report to the NRC in June 2014.

ARO in FY 2003 for Phase I and II. Phase Ill began commercial operation in Energy Northwest's estimatd of Columbia's decommissioning costs in FY FY 2008 and the original ARO was adjusted to reflect the change in scenario 2015 dollars is $470.1 million (Columbia - $465.4 million and ISFS1 - $4.7 for the retirement obligation, with current lease agreements reflecting million). This estimate, which is updated biannually with the last update a 2030 expiration date. As of June 30, 2015, Nine Canyon has a capital in fiscal year 2013, is based on the NRC minimum amount required to decommissioning net asset value of $0.5 million and an accumulated liability demonstrate reasonable financial assurance for a boiling water reactor with of $1.4 million. the power level of Columbia.

Packwood's obligation has not been calculated because the time frame Site restoration requirements for Columbia are governed by the site and extent of the obligation was considered under this statement as certification agreements between Energy Northwest and the state of indeterminate. AS a result, no reasonable estimate of the ARO obligation can Washington and by regulations adopted by the EFSEC. Energy Northwest be made. An ARO will be required to be recorded if circumstances change. submitted a site restoration plan for Columbia that was approved by the Management believes that these assets will be used in utility operations for EFSEC on June 12, 1995. Energy Northwest's current estimate of Columbia's the foreseeable future. site restoration costs is $113.6 million in constant dollars (based on the 2015 The following table describes the changes to Energy Northwest's ARO study) and is updated biannually along with the decommissioning estimate.

liabilities for the year ended June 30, 2015. The balance is included in the Both decommissioning and site restoration estimates (based on 2015 study) accounts payable and accrued expense balances for each unit. ISFSI is are used as the basis for establishing a funding plan that includes escalation included in Columbia's balance: and interest earnings until decommissioning activities occur. Payments to the decommissioning and site restoration funds have been made since January 1985. The fair value of cash and investment securities inthe decommissioning and site restoration funds as of June 30, 2015, totaled approximately $223.0 million and $36.9 million, respectively. The fair value of cash and investment securities inthe site restoration fund for Nuclear Project No. 1 is $31 .7 million.

2015 ENERGY NOR~THWEST ANNUAL REPORT

52 52ss*,-t-aining EXCELLENCE

&DELIVERING AND lUNNOVATION VALUE Since September 1996, these amounts have been held in an irrevocable trust or other techniques such that the sites pose minimal hazard to the public.

that recognizes asset retirement obligations according to the fair value of the EFSEC approved Energy Northwest's site restoration plan on June 12, 1995.

dismantlement and restoration costs of certain Energy Northwest assets. The In its approval, EFSEC recognized that there is uncertainty associated with trustee is a domestic U.S. bank that certifies the funds for use when needed to Energy Northwest's proposed plan. Accordingly, EFSEC's conditional approval retire the asset. The trusts are funded by BPA ratepayers and managed by SPA provides for additional reviews once the details of the plan are finalized. A in accordance with NRC requirements and site certification agreements; the new plan with additional details was submitted in FY 2003. This submittal balances in these external trust funds are not reflected on Energy Northwest's was used to calculate the ARO discussed in Note 10.

balance sheet.

Energy Northwest established a decommissioning and site restoration Business Development Fund Interest in Northwest Open plan for the ISF51 in 1997. Beginning in FY 2003, an annual contribution is Access Network made to the Energy Northwest Decommissioning Fund. These contributions The Business Development Fund is a member of the Northwest Open are held by Energy Northwest and not held in trust by BPA. The fair market Access Network (NoaNet). Members formed NoaNet pursuant to an Interlocal value of cash and investments as of June 30, 2015, is $1.4 million. These Cooperation Agreement for the development and efficient use by the contributions will occur through FY 2044; cash payments will begin for members and others of a communication network in conjunction with SPA.

decommissioning and site restoration in FY 2045. The Business Development Fund has a 7.38 percent interest in NoaNet with a potential mandate of an additional 25 percent step-up possible for a NOTE 12 - Commitments and Contingencies maximum 9.23 percent. NoaNet has $2.9 million in network revenue bonds and $5.7 million in note payables outstanding, based on their December 30, Nuclear Project No. 1 Termination 2014 audited financial statements. The members are obligated to pay the Since the Nuclear Project No.1 termination, Energy Northwest has been principal and interest on the bonds when due in the event and to the extent planning for the demolition of Nuclear Project No. 1 and restoration of the that NoaNet's Gross Revenue (after payment of costs of Maintenance and site, recognizing the fact that there is no market for the sale of the project Operation) is insufficient for this purpose. The maximum principal share in its entirety, and no viable alternative use has been found to-date. The final (based on step-up potential) that the Business Development Fund could level of demolition and restoration will be in accordance with agreements be required to pay is $.8 million. The Business Development Fund is not discussed below under "Nuclear Project No. 1 Site Restoration." obligated to reimburse losses of NoaNet unless an assessment is made to NoaNet's members based on a two-thirds vote of the membership. In FY 2015 Nuclear Project No. 3 Termination the Business Development Fund was not required to contribute to NoaNet.

In June 1994, the Nuclear Project No. 3 Owners Committee voted Financial statements for NoaNet may be obtained by writing to: Northwest unanimously to terminate the project. In 1995, a group from Grays Harbor Open Access Network, NoaNet Headquarters, 5802 Overlook Ave. NE,Tacoma, County, Washington, formed the Satsop Redevelopment Project (SRP). The WA 98422. Any information obtained from NoaNet is the responsibility of SRP introduced legislation with the state of Washington under Senate Bill NoaNet. PwC has not audited or examined any information available from No. 6427, which passed and was signed by the governor of the state of NoaNet; accordingly, PwC does not express an opinion or any other form of Washington on March 7, 1996. The legislation enables local governments assurance with respect thereto.

and Energy Northwest to negotiate an arrangement allowing such local governments to assume an interest in the site on which Nuclear Project Other Litigation and Commitments No. 3 exists for economic development by transferring ownership of all or a Energy Northwest v. SPX Heat Transfer Inc. (CV13-5151-SAB). Energy portion of the site to local government entities. This legislation also provides Northwest filed suit against SPX Heat Transfer Inc. (SPX) on December 24, for the local government entities to assume regulatory responsibilities for 2013 seeking the recovery of damages relating to SPX's breach of contract.

site restoration requirements and control of water rights. In February 1999, In February, 2009, SPX's predecessor in interest Yuba Heat Transfer LLC Energy Northwest entered into a transfer agreement with the SRP to transfer and Energy Northwest entered into a contract for the design, engineering, the real and personal property at the site of Nuclear Project No. 3. The SRP fabrication and delivery of the condenser modules and related components also agreed to assume regulatory responsibility for site restoration. Therefore, for Energy Northwest's Columbia Generating Station. In the lawsuit, Energy Energy Northwest is no longer responsible to the state of Washington and Northwest contends that SPX breached the contract (1) by failing to meet EFSEC for any site restoration costs. contract specifications for condenser backpressure and sub-cooling; (2) by failing to provide work that was free from defect in design and fabrication; Nuclear Project No. 1 Site Restoration and (3) by failing to meet the express warranties contained in the contract.

Site restoration requirements for Nuclear Project No. 1 are governed by No specific amount of damages has been demanded in the complaint.

site certification agreements between Energy Northwest and the state of SPX has responded to the lawsuit and has included a counterclaim for Washington and regulations adopted by EFSEC, and a lease agreement with damages. In its counterclaim, SPX seeks the balance of the contract amount, DOE. Energy Northwest submitted a site restoration plan for Nuclear Project which is $2,070,334 plus accumulated interest. Additionally, SPX seeks No. 1 to EFSEC on March 8, 1995, which complied with EFSEC requirements recovery of some or all of a portion of the incentive fee contained in the to remove the assets and restore the sites by demolition, burial, entombment, contract as determined by the formula in the contract with no specific amount 2015 ENERG*Y NORTHWEST ANNUAL REPORT

53 su 'staif-lng EXCELLENCE

&DELIVERINGINND*VATIDN AND VALUE demanded. Energy Northwest has denied that it owes SPX the contract was received June 14, 2015 for $21.8 million. The total gain reported balance or any amount of the performance incentive. for the sale was $3.9 million reported on the Statements of Revenues, On July 22, 2014, Energy Northwest made an offer of settlement to SPX Expenses, and Changes in Net Position under Other. The remaining sales in accordance with RCW 39.04.240, RCW 4.84.260 and the Federal Rules of under this agreement are scheduled to take place between September Civil Procedure, Rule 68. Inthe offer of settlement, Energy Northwest agreed 2015 and 2022.

to accept a judgment from SPX for all claims including but not limited to Energy Northwest has a contract with DOE that requires DOE to accept SPX's counterclaims, for $0.00. Should SPX decline this offer of settlement title and dispose of spent nuclear fuel. Although the courts have ruled that and Energy Northwest prevails at trial with a jury verdict greater than the DOE had the obligation to accept title to spent nuclear fuel by January 31, offer of settlement, in addition to the jury verdict SPX would be obligated to 1998, currently, there is no known date established when DOE will fulfill pay Energy Northwest its legal costs and attorneys' fees from the date of the this legal obligation and begin accepting spent nuclear fuel. On November offer of settlement. The parties have continued to engage inpretrial discovery. 19, 2013, the D.C. Circuit Court ordered the DOE to submit to Congress The case is set for a two week trial In July 2016. The outcome of this matter a proposal to reduce the current waste disposal fee to zero, unless and cannot be predicted at this time. until there is a viable disposal program. On January 3, 2014, the DOE filed Energy Northwest is involved in other various claims, legal actions and a petition for rehearing which was denied by the D.C. Circuit Court on contractual commitments and in certain claims and contracts arising in the March 18, 201 4. Also, on January 3, 2014, the DOE submitted a proposal to normal course of business. Although some suits, claims and commitments are Congress to reduce the current waste disposal fee to zero. On May 9, 2014, significant in amount, final disposition is not determinable. In the opinion of the DOE notified Energy Northwest that the waste disposal fee will remain management, the outcome of such litigation, claims or commitments will not in effect through May 15, 2014, after which time the fee will be set to have a material adverse effect on the financial positions of the business units zero. For the year ended June 30, 2014, Energy Northwest incurred expense or Energy Northwest as a whole. The future annual cost of the business units, of $8.16 million in waste disposal fees, recorded in fuel disposal within however, may either be increased or decreased as a result of the outcome of Columbia's Statement of Revenues, Expenses, and Changes in Net Position.

these matters. Until such time as a new fee structure is in effect, Energy Northwest will not accrue any further costs related to waste disposal fees. When the fuel NOTE 1.3 - Nuclear Fuels is placed in the reactor the fuel cost is amortized to operating expense on In May 201-2, Energy Northwest entered into agreements with three the basis of quantity of heat produced for generation of electric energy. The other parties for processing high assay uranium tails. The Program consists amount moved to spent fuel for cooling increased $66.0 million. Fees for of several agreements between the parties involved, entered into as a disposal of fuel in the reactor are expensed as part of the fuel cost.

joint effort between the Department of Energy (DOE), Tennessee Valley The current period operating expense for Columbia was $37.9 million Authority (TVA), United States Enrichment Corporation (USEC) and Energy for amortization of fuel used in the reactor. There were no DOE spent fuel Northwest to enrich approximately 9,082 metric tons (MTU) of Depleted disposal charges.

Uranium Hexafluoride (DUF6) with an average assay of 0.44 weight Energy Northwest has an Independent Spent Fuel Storage Installation percent U235 (wt%) that will yield approximately 482 MTU of enriched (ISFSI), which is a temporary dry cask storage facility to be used until DOE uranium product (EUP) with an average assay of 4.4 wt%/. completes its plan for a national repository. ISFS1 will store the spent fuel in DOE and Energy Northwest have entered into an agreement for the commercially available dry storage casks on a concrete pad at the Columbia transfer of the DUF6 to Energy Northwest. The agreement addresses site. Nine casks were issued from the cask inventory account in FY 2014 delivery and transfer of title of the DUF6, return of residual DUF6 after totaling $9.2 million. Spent fuel is transferred from the spent fuel pool to enrichment, storage of the EUP, and payment of DOE's costs. The costs the ISFS1 periodically to allow for future refueling. Current period costs were for the handling of the DUF6 and storage of the EUP are anticipated to be $1.8 million for dry cask storage costs which are recorded in nuclear fuel

$5 million or less. As of June 30, 2015, Energy Northwest had recorded expense. The next ISF5I loading campaign is scheduled for March of 2018 approximately $0.6 million in charges to the DOE for delivery of the DUF6, for a total of 9 casks.

storage and loading of the EUP, which is capitalized as cost of the fuel On August 28, 2014, Energy Northwest and the United States entered being purchased. into a Settlement Agreement ("Agreement") under Energy Northwest v.

Under the Depleted Uranium Enrichment Program (DUEP), Energy United States, No. 11-~447C (Fed. Cl. filed July 7, 2011). On March 11, 2014, Northwest purchased from USEC all of the Separative Work Units (SWU) the court awarded Energy Northwest summary judgment for costs incurred contained in the EUP. Upon finalization of the program, Energy Northwest to continue to operate and maintain its dry storage program. This favorable had purchased a total of 481.6 MTU of EUP from USEC at a cost of $687.2 decision ultimately led to the approval by the Executive Board of a settlement million, which is recorded in nuclear fuel, net of accumulated amortization, agreement with the Government in the amount of $23.6 million to dispose as of June 30, 2013. There have been no additional purchases since the of the second action. This amount was recorded in FY 2014, and received conclusion of the program in May of 2013. in FY 2015. In addition to settling the pending litigation, the Agreement Energy Northwest and TVA have entered into an agreement for the sale provided that Energy Northwest could be reimbursed by the government and purchase of a portion of the SWU and Feed Component of the EUP. for its allowable expenses, as defined in the Agreement, related to the U.S.

The sales under the agreement are expected to total approximately $731 Department of Energy's (DOE) continued failure to accept used nuclear fuel million. The first delivery to TVA was on May 15, 2015 and the payment under the Standard Contract Energy Northwest signed with DOE in 1983.

2015 ENERGY NORTh WEST ANNUAL REPORT

,54 SuStai.nin*g-- EXEELLENCE & DELIVERING INNOVATION ANDVALVE Under the Agreement, Energy Northwest is required to submit a claim Under the Agreement, Energy Northwest submitted its first claim to DOE for reimbursement to DOE annually for each year, July 1, 2012 through by the deadline. The first claim covers FY13-14 (a catch-up claim). EN December 31, 2016. The claim submission deadline is January 31 of the sought reimbursement of $16,016,574. DOE's final determination, which following calendar year. After submission, DOE has a set time to review was accepted by EN, was for payout of $15,143,888. Payout could be as and request additional information from Energy Northwest. At the end of early as October 2015. The $15.1 million expected to be received from DOE the review period, Energy Northwest can accept DOE's determination and was accrued as an offset against the fuel amortization where the related be paid the amount determined by DOE or Energy Northwest can reject the costs are reported.

determination and proceed to binding arbitration.

SCHEDULES OF REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE ENERGY NORTHWEST'S PROPORTIONATE SHARE OF NET PENSION LIABILITY (Dollars inthousands)

(Unaudited)

PERSi PERS 2/3 Measurement Date Ended June 30 2014 2013 2014 2013 Proportion of the net pension liability (anset) 1.22%: 1.19%/ 1.55% 1.55%

Proportionate share of the net pension liability (asset)  !$ 61,291  :$ 71,094 : $ 31,410 i$ 66,351 Covered-employee payroll . 439 i 772 i 144,158 !139,637 Proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll i 13961.50% i9209.07%  : 21.79% i47.52%

Plan fiduciary net position as a percentage of the total pension liability . 61.19% : 55.70% 93.29% : 84.60%

SCHEDULE OF ENERGY NORTHWEST'S CONTRIBUTIONS (Dollars inthousands)

(gnaudited)

PERS 1 Fiscal Year Ended June 30  : 2015 ! 2014 i 2013 1 2012~ . 2011 2010
  • 2009 i 2008 i 2007
  • 2006 Contractually Required contribution i$ 32 $ 43 i$ 57 i$ 70 !$ 88 $ 104 i$ 245 i$ 202 i$ 175 i$ 113 Contributions inRelation to the Contractually (32)i (43): (57)i (70): (88)i (104): (245): (202)! (175)! (113)

Required Contribution Subtotal  :::":

Contribution Deficiency (Excess) i $ - !$ -5 < -*$ -!$-$ -::$ -: -

Covered-Employee Payroll i$ 351 i$ 439i $ 772i $ 996* $ 1,610i $ 1,933 i$ 2,894i $ 3,297: $ 3,964i $ 4,785 Contributions as aPercentage of Covered 9.12% 9.79% i 7.38% ! 7.03% ! 5.47% ! 5.38% ! 8.47% ~ 6.13% ! 4.41% ! 2.36%

Employee Payroll .  : .

PERS 2/3 Fiscal year Ended June 30  : 2015 ! 2014 ! 2013 ! 2012 ! 2011 ! 2010 i 2009 ! 2008 i 2007 i 2006 Contractually Required Contribution  !$ 12,787 $ 11,906 i$ 9.041 i$ 8,760! $ 6,533 $ 6,225 $ 9,522i $ 6,016 $ 4,5051 $ 2,016 Contributions in Relation to the Cohitractually  : (12,787)! (11,906)! (9,041)! (8,760): (6,533)i (6,225)! (9,522)j (6,016)i (4,505)! (2,016)

Required Contribution . .  :

Contribution Deficiency (Excess) S -! $ -! $ - $  ! -$  :-$ -.-  ! $9 -9 $-!

Covered-Employee Payroll i$ 154,080! $ 144,158i $ 139,637! $ 134,777i $ 133,276i $ 123,367: $ 124.301  !$ 105,464! $ 104,971 !$ 97,117 Contributions us a Percentage of Covered 8.30% 8.26% i 6.47% i 6.50% 4.90% 5.05% i 7.66% 5.70% ! 4.29% i 2.08%

Employee Payroll .  : .  :

PERSPlan1UAAL* :5$ 5,679i $ 5,342* $ 3,021i $ -: -:$ -<5 -i $ -i $ -:5 ,$

Notes to Schedules Energy Northwest implemented GAS8 68 for the year ended June 30, 2015. There were no changes in actuarial assumptions between the valuation data of June 30, 2013 and the measurement date of June 30, 2014.

  • DRS allocates certain portion sf contributions from PERSPlan 213to PERSPlan 1 in order to fund its unfunded actuarially accrued liability (LUAAL).

2915 ENERGY NORTH WEST AdUAL REPORT

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