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ENERGYNORTHWEST2016ANNUALREPORT Enciosure | ENERGYNORTHWEST2016ANNUALREPORT Enciosure | ||
ENERGY NORTHWEST | ENERGY NORTHWEST 2016 ANNUAL REPORT | ||
CONTENTS 3 A Message to our Stakeholders 19 Financial Data & Information 4 Executive Board 20 Management Report on Responsibility 5 Board of Directors for Financial Reporting 6 Senior Leadership 20 Audit, Legal and Finance Committee 7 Sustainability Reporting Chair's Letter 12 Columbia Generating Station 21 Independent Auditor's Report 14 Energy Services & Development 22 Energy Northwest Management's 18 Members and Projects Map Discussion and Analysis 29 Current Debt Ratings 30 Statement of Net Position 34 Statements of Revenues, Expenses and Changes in Net Position 35 Statements of Cash Flows 37 Notes to Financial Statements 55 Schedules of Required Supplementary Information | CONTENTS 3 A Message to our Stakeholders 19 Financial Data & Information 4 Executive Board 20 Management Report on Responsibility 5 Board of Directors for Financial Reporting 6 Senior Leadership 20 Audit, Legal and Finance Committee 7 Sustainability Reporting Chair's Letter 12 Columbia Generating Station 21 Independent Auditor's Report 14 Energy Services & Development 22 Energy Northwest Management's 18 Members and Projects Map Discussion and Analysis 29 Current Debt Ratings 30 Statement of Net Position 34 Statements of Revenues, Expenses and Changes in Net Position 35 Statements of Cash Flows 37 Notes to Financial Statements 55 Schedules of Required Supplementary Information | ||
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MARK REDDIEMANN Chief Executive Officer BRAD SAWATZKE BRENTRHJGE GROVER HETTIEL Chief Operating Officer; Vice President for Corporate Vice President for Operations Chief Nuclear Officer Services; Chief Financial Officer ALEX JAVORBK BOB DUTTON JIM GASTON Vice President for Engineering General Counsel; General Manager for Energy Chief Ethics Officer Services & Development 6 2016 Energy Northwest Annual Report | MARK REDDIEMANN Chief Executive Officer BRAD SAWATZKE BRENTRHJGE GROVER HETTIEL Chief Operating Officer; Vice President for Corporate Vice President for Operations Chief Nuclear Officer Services; Chief Financial Officer ALEX JAVORBK BOB DUTTON JIM GASTON Vice President for Engineering General Counsel; General Manager for Energy Chief Ethics Officer Services & Development 6 2016 Energy Northwest Annual Report | ||
SUSTAINABILITY REPORTING economic | SUSTAINABILITY REPORTING economic Sustainability reporting has evolved during the past decade and focuses on reporting to stakeholders the impact the organization has on environmental, social and economic factors as a result of its everyday activities. | ||
Sustainability reporting has evolved during the past decade and focuses on reporting to stakeholders the impact the organization has on environmental, social and economic factors as a result of its everyday activities. | |||
ECONOMIC VALUE Energy Northwest's generation resulted in a its electricity generation while producing virtually fiscal year 2016 privilege tax payment to the state of no greenhouse gas emissions. | ECONOMIC VALUE Energy Northwest's generation resulted in a its electricity generation while producing virtually fiscal year 2016 privilege tax payment to the state of no greenhouse gas emissions. | ||
Washington of more than $4.4 million. This annual tax is levied on public power electricity producers More Value Added: The 2012 extension of for the privilege of generating electricity in the state. Columbia's operating license through 2043 allowed Privilege tax payments are distributed to the state a similar extension of bonds and decommissioning school fund, state general fund and 39 separate fund contributions into a new 20-year license jurisdictions within a 35-mile radius of Columbia period . Combined with regional cooperation debt, Generating Station. Set by state statute, these low-cost nuclear fuel purchases, reduced operations payments benefit city and county governments, and maintenance budgets, and other cost-cutting and fire and library districts-directly enhancing the activities, the agency will contribute more than $2.2 quality of life throughout Washington state. billion (offset by a $160 million increase in Columbia's Since commencing operations in 1984, EN has capital financing and inventory) in regional savings pa id approximately $87 million in privilege taxes on between 2012 and 2023 . | Washington of more than $4.4 million. This annual tax is levied on public power electricity producers More Value Added: The 2012 extension of for the privilege of generating electricity in the state. Columbia's operating license through 2043 allowed Privilege tax payments are distributed to the state a similar extension of bonds and decommissioning school fund, state general fund and 39 separate fund contributions into a new 20-year license jurisdictions within a 35-mile radius of Columbia period . Combined with regional cooperation debt, Generating Station. Set by state statute, these low-cost nuclear fuel purchases, reduced operations payments benefit city and county governments, and maintenance budgets, and other cost-cutting and fire and library districts-directly enhancing the activities, the agency will contribute more than $2.2 quality of life throughout Washington state. billion (offset by a $160 million increase in Columbia's Since commencing operations in 1984, EN has capital financing and inventory) in regional savings pa id approximately $87 million in privilege taxes on between 2012 and 2023 . | ||
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$101 .2 million and an increase to CWIP of $17.8 million. Remaining change Current liabilities decreased $70.4 million in FY 2016 to $214.8 million. | $101 .2 million and an increase to CWIP of $17.8 million. Remaining change Current liabilities decreased $70.4 million in FY 2016 to $214.8 million. | ||
was the period effect of depreciation of $73.8 million. Components of the change were decreases to current maturities of debt The FY 2016 CWIP balance of $76.0 million consisted of 15 major of $110. 6 million, addition of notes payable promissory note for refunding COLUMBIA GENERATING STATION COLUMBIA GENERATING STATION Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 ; L 9.617 FY 2016 3.65 FY 2015 : J 8.142 FY 2015 5.05 FY2014 : | was the period effect of depreciation of $73.8 million. Components of the change were decreases to current maturities of debt The FY 2016 CWIP balance of $76.0 million consisted of 15 major of $110. 6 million, addition of notes payable promissory note for refunding COLUMBIA GENERATING STATION COLUMBIA GENERATING STATION Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 ; L 9.617 FY 2016 3.65 FY 2015 : J 8.142 FY 2015 5.05 FY2014 : | ||
J 9.781 FY 2014 3.70 | J 9.781 FY 2014 3.70 FY 2013 : J : | ||
8.479 FY 2013 4.51 FY 2012 : ] 6.984 4.73 0 2,000 4,000 6,000 8,000 10,000 0 2 3 4 5 6 24 2016 Energy Northwest Annual Report | |||
FY 2013 : J : | |||
8.479 FY 2013 4.51 | |||
FY 2012 : ] 6.984 4.73 0 2,000 4,000 6,000 8,000 10,000 0 2 3 4 5 6 24 2016 Energy Northwest Annual Report | |||
of $61.4 million, decrease to taxes payable of $5.2 million due to non- Deferred inflows decreased $21.9 million from $40.9 million in FY 2015 refueling year and not having the effect of fuel assemblies being moved into to $19.0 mil lion in FY 2016. A decrease of $21 .2 mi llion was recognized to Washington State, increase in generation tax of $0.9 million due to increased deferred pension inflow in accordance with GASB No. 68. A decrease to bond generation in the non refueling year. decrease in retention payable of $1.3 refunding inflows of $0.6 million was due to the restructuring and funding million due to closure of public work contracts, increases due to timing of year activities for the regional cooperation debt program associated with the .lOl b end obligations and due to other projects of $0.4 million, increase and timing bond activities. | of $61.4 million, decrease to taxes payable of $5.2 million due to non- Deferred inflows decreased $21.9 million from $40.9 million in FY 2015 refueling year and not having the effect of fuel assemblies being moved into to $19.0 mil lion in FY 2016. A decrease of $21 .2 mi llion was recognized to Washington State, increase in generation tax of $0.9 million due to increased deferred pension inflow in accordance with GASB No. 68. A decrease to bond generation in the non refueling year. decrease in retention payable of $1.3 refunding inflows of $0.6 million was due to the restructuring and funding million due to closure of public work contracts, increases due to timing of year activities for the regional cooperation debt program associated with the .lOl b end obligations and due to other projects of $0.4 million, increase and timing bond activities. | ||
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THE PACKWOOD LAKE HYDROELECTRIC PROJECT PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Dollars in thousands) | THE PACKWOOD LAKE HYDROELECTRIC PROJECT PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Dollars 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, FY 2016 ;, "''""""'II 2.333 Washington . The water is carried from the lake to the powerhouse through a five-mile long buried tunnel and drops nearly 1,800 feet in elevation. FY 2015 2.141 Packwood produced 98.89 GWh of electricity in FY 2016 versus 107 .16 l".i' GWh in FY 2015. The 7.7 percent decrease in generation can be attributed FY 2014 2.150 to continuing unfavorable water conditions over the past two years with FY | 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, FY 2016 ;, "''""""'II 2.333 Washington . The water is carried from the lake to the powerhouse through a five-mile long buried tunnel and drops nearly 1,800 feet in elevation. FY 2015 2.141 Packwood produced 98.89 GWh of electricity in FY 2016 versus 107 .16 l".i' GWh in FY 2015. The 7.7 percent decrease in generation can be attributed FY 2014 2.150 to continuing unfavorable water conditions over the past two years with FY 2016 delivering the 20th best generation year compared to FY 2015 which FY 2013 2.166 ranked 14th. There continues to be some relief in generation capacity due to the delay in new license requirements (See Note 1 to the Financial Statements) FY 2012 1.872 I | ||
2016 delivering the 20th best generation year compared to FY 2015 which FY 2013 2.166 ranked 14th. There continues to be some relief in generation capacity due to | |||
the delay in new license requirements (See Note 1 to the Financial Statements) FY 2012 1.872 I | |||
which will eventually lower the generating capacity for Packwood Packwood's cost performance is measured by the cost of power indicator. 1,000 1,500 2,000 2,500 0 500 The cost of power for FY 2016 was $2.35 cents per kWh as compared to | which will eventually lower the generating capacity for Packwood Packwood's cost performance is measured by the cost of power indicator. 1,000 1,500 2,000 2,500 0 500 The cost of power for FY 2016 was $2.35 cents per kWh as compared to | ||
- Operating Expenses - Other Income/Expenses | - Operating Expenses - Other Income/Expenses | ||
| Line 251: | Line 239: | ||
FY 2015. Capacity factor for FY 2016 was 29.87 percent as compared to 24.00 In previous years Energy Northwest has accrued, as income (contribution) percent for FY 201 5. from the Department of Energy, Renewable Energy Production Incentive (REPI) | FY 2015. Capacity factor for FY 2016 was 29.87 percent as compared to 24.00 In previous years Energy Northwest has accrued, as income (contribution) percent for FY 201 5. 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 2016 was $6.07 cents per kWh as compared to it applies to the REPI legislation. REPI was created to promote increases in | 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 2016 was $6.07 cents per kWh as compared to it applies to the REPI legislation. REPI was created to promote increases in | ||
$8.31 cents per kWh in FY 2015. The cost of power fluctuates year to year the generation and utilization of electricity from renewable energy sources depending on various factors such as wind totals and unplanned maintenance and to further the advances of renewable energy technologies. This program, and is distinctly different than revenue billed cost of power discussed below in authorized under Section 1212 of the Energy Policy Act of 1992, provides revenue and expense analysis. The decrease of 27.0 percent in cost of power for financial incentive payments for electricity produced and sold by new qualifying FY 2016 was directly attributable to more favorable wind conditions along with renewable energy generation facilities. The payment stream from Nine Canyon NINE CANYON WIND PROJECT NINE CANYON WIND PROJECT Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 l 244.62 FY 2016 ) 6.07 r u | $8.31 cents per kWh in FY 2015. The cost of power fluctuates year to year the generation and utilization of electricity from renewable energy sources depending on various factors such as wind totals and unplanned maintenance and to further the advances of renewable energy technologies. This program, and is distinctly different than revenue billed cost of power discussed below in authorized under Section 1212 of the Energy Policy Act of 1992, provides revenue and expense analysis. The decrease of 27.0 percent in cost of power for financial incentive payments for electricity produced and sold by new qualifying FY 2016 was directly attributable to more favorable wind conditions along with renewable energy generation facilities. The payment stream from Nine Canyon NINE CANYON WIND PROJECT NINE CANYON WIND PROJECT Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 l 244.62 FY 2016 ) 6.07 r u FY 2015 196.75 FY 2015 8.31 FY2014 r 239.39 FY 2014 r 7.83 FY 2013 ] 228.23 FY 2013 l 7.91 FY 2012 ~ 261 .63 FY 2012 L 6.69 0 50 100 150 200 250 300 0 2 3 4 5 6 7 8 9 29 | ||
FY 2015 196.75 FY 2015 8.31 | |||
FY2014 r 239.39 FY 2014 r 7.83 FY 2013 ] 228.23 FY 2013 l 7.91 | |||
FY 2012 ~ 261 .63 FY 2012 L 6.69 0 50 100 150 200 250 300 0 2 3 4 5 6 7 8 9 29 | |||
NINE CANYON WIND PROJECT participants and the REPI receipts was projected to cover the total costs over the Capacity Factor(%) | NINE CANYON WIND PROJECT participants and the REPI receipts was projected to cover the total costs over the Capacity Factor(%) | ||
purchase agreement. Continued shortfalls in REPI funding for the Nine Canyon | 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 FY 2016 J 29.87 increased 69 percent and 80 percent for Phase I and Phase II participants respectively in FY 2008 in order to cover total project costs, projected out to FY 2015 : | ||
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 FY 2016 J 29.87 increased 69 percent and 80 percent for Phase I and Phase II participants respectively in FY 2008 in order to cover total project costs, projected out to FY 2015 : | |||
I : | I : | ||
24.00 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 FY 2014 : : : ] : | |||
24.00 the 2030 proposed project end date. The increases for FY 2008 were a change | 29.40 the project was projected. Going forward, the increase or decrease in rates will : | ||
from the previous plan where a 3 percent increase each year over the life of FY 2014 : : : ] : | |||
29.40 | |||
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. FY 2013 : ) 28.00 Phase Ill started with an initial planning rate of $49.82 per MWh which : : : | be based on cash requirements of debt repayment and the cost of operations. FY 2013 : ) 28.00 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. | 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. | ||
FY 2012 : | FY 2012 : | ||
J : | J : | ||
32.00 Possible adjustments may be necessary to future rates depending on operating 20 22 24 26 28 30 32 34 costs and REPI funding, similar to Phase I and II. | 32.00 Possible adjustments may be necessary to future rates depending on operating 20 22 24 26 28 30 32 34 costs and REPI funding, similar to Phase I and II. | ||
Revenues and Expenses Analysis to $92.87 per MWh for FY 2015. Billings for FY 2015 were at the same levels Operating revenues remained relatively steady from FY 2015 levels, of FYI 6 but the average rate was impacted by less favorable generation in FY increasing $52 thousand. The project received $18.27 million from the billing of 2015. BPA scheduling charges remained relatively steady for both years at the purchasers at an average rate of $74. 70 per MWh for FY 2016 as compared $1.06 million. The stabilization of revenue is reflective of the implementation of the revised rate plan in FY 2014/2015 to account for costs of operations over the remaining life of the project, taking into account the REPI shortfalls in the early years of the project. Operating costs decreased $0.6 million in FY NINE CANYON WIND PROJECT Total Operating Costs (dollars in thousands) 2016 from $13.3 million in FY 2015 to $12. 7 million in FY 2016. Decreased operating costs in FY 2016 were due to lower turbine maintenance and major component rebuild/gear boxes of $0. 7 million offset by slightly higher labor and FY 2016 15.881 administrative non labor costs of $0.1 million. | Revenues and Expenses Analysis to $92.87 per MWh for FY 2015. Billings for FY 2015 were at the same levels Operating revenues remained relatively steady from FY 2015 levels, of FYI 6 but the average rate was impacted by less favorable generation in FY increasing $52 thousand. The project received $18.27 million from the billing of 2015. BPA scheduling charges remained relatively steady for both years at the purchasers at an average rate of $74. 70 per MWh for FY 2016 as compared $1.06 million. The stabilization of revenue is reflective of the implementation of the revised rate plan in FY 2014/2015 to account for costs of operations over the remaining life of the project, taking into account the REPI shortfalls in the early years of the project. Operating costs decreased $0.6 million in FY NINE CANYON WIND PROJECT Total Operating Costs (dollars in thousands) 2016 from $13.3 million in FY 2015 to $12. 7 million in FY 2016. Decreased operating costs in FY 2016 were due to lower turbine maintenance and major component rebuild/gear boxes of $0. 7 million offset by slightly higher labor and FY 2016 15.881 administrative non labor costs of $0.1 million. | ||
Latest revision as of 20:46, 4 February 2020
| ML17026A087 | |
| Person / Time | |
|---|---|
| Site: | Columbia  |
| Issue date: | 01/24/2017 |
| From: | Gregoire D Energy Northwest |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| G02-17-024 | |
| Download: ML17026A087 (58) | |
Text
Donald W. Gregoire ENERGY P.O. Box 968, PE20 Richland, WA 99352-0968 NORTHWEST Ph. 509-377-8616 IF. 509-377-4317 dwgregoire@energy-northwest.com 10 CFR 50.71(b)
January 24, 2017 G02-17-024 U.S. Nuclear Regulatory Commission ATIN: Document Control Desk Washington, D.C. 20555-0001
Subject:
COLUMBIA GENERATING STATION, DOCKET NO. 50*397; 2016 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 2016 Annual Report for the subject facility.
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, bvJ DW Gregoire Manager, Regulatory Affairs and Performance Improvement
Enclosure:
As stated Cc: NRC RIV Regional Administrator w/o NRC NRA Project Manager w/o NRC Sr. Resident Inspector - 988C w/o C Sonoda - BP A/1399 w/o WA Horin - Winston & Strawn w/o
ENERGYNORTHWEST2016ANNUALREPORT Enciosure
ENERGY NORTHWEST 2016 ANNUAL REPORT
CONTENTS 3 A Message to our Stakeholders 19 Financial Data & Information 4 Executive Board 20 Management Report on Responsibility 5 Board of Directors for Financial Reporting 6 Senior Leadership 20 Audit, Legal and Finance Committee 7 Sustainability Reporting Chair's Letter 12 Columbia Generating Station 21 Independent Auditor's Report 14 Energy Services & Development 22 Energy Northwest Management's 18 Members and Projects Map Discussion and Analysis 29 Current Debt Ratings 30 Statement of Net Position 34 Statements of Revenues, Expenses and Changes in Net Position 35 Statements of Cash Flows 37 Notes to Financial Statements 55 Schedules of Required Supplementary Information
A MESSAGE TO OUR STAKEHOLDERS We're proud to report Energy Northwest's 1,100 employee-led workforce produced a near-record output of electricity for the ratepayers of the Pacific Northwest during fiscal year 2016.
Columbia Generating Station sent 9,617,206 megawatt-hours ofnet generation to the grid, its second-highest fiscal year generation total ever. Columbia also set monthly generation records in December and January; and achieved its lowest dose in a fiscal year in more than 30 years of operation, a direct result of the efforts of employees working as a team. MARK REDDEMANN Packwood Lake Hydroelectric Project and Nine Canyon Wind Project SID MORRISON availability remained above generation goals for the fiscal year. Nine Canyon set a record availability for the fiscal year at 99.32 percent. The wind turbines also set availability records for August, October, February, March, April and June.
Based on generation achievements, EN paid more than $4.4 million in privilege taxes to the state of Washington. Those funds help educate our children and sustain our standard of living in the Pacific Northwest.
Columbia launched Delivering the Nuclear Promise, an initiative driven by chief nuclear officers throughout the industry aimed at maintaining operational focus while significantly increasing plant efficiency - and value - by 2020. Our agency-specific cost-effective operation plan aligns well with the nuclear promise goal to reduce the cost of power from U.S. plants during the next three to five years.
This fall, the Energy Northwest executive board approved corrective actions developed by agency leaders in response to a recent investigation into claims raised in anonymous letters to the board. Many of the actions have already been implemented. The independent investigation team concluded senior leadership has been transparent and Columbia is operated in a safe manner. The investigation also found that employees are nearly unanimous in stating their willingness to raise concerns to their direct supervisors, managers and senior leadership; are willing to raise concerns through the employee concerns and corrective action programs; and have positive assessments of their work en:vironment.
This year we added "Successful Outage" to Phase IV, Sustaining Excellence, of our Excellence in Performance program that we implemented at Energy Northwest more than five years ago. The team planning next May's refueling and maintenance outage has and continues to prepare to execute the work planned during the 40-day schedule to ensure we are predictable, and return Columbia on line within the allotted time frame.
Despite challenges affecting the entire power industry, it's been a productive, record-setting year at Energy Northwest. All of us at Energy Northwest look forward to next year when we celebrate 60 years of providing the region with safe, reliable, cost-effective, responsible power generation and energy solutions.
Respectfully, Sid Morrison Mark Reddemann Chair, Executive Board Chief Executive Officer 3
SID MORRISON JACK JANDA LORI SANDERS DAVE REMINGTON Chair Vice Chair Secretary Assistant Secretary Outside Director Inside Director Inside Director Gubernatorial Appointee Zillah, Wash. Shelton, Wash. Kennewick, Wash. Spokane, Wash.
MARC DAUDON LINDA GOTT JAMES MOSS WILL PURSER Gubernatorial Appointee Inside Director Gubernatorial Appointee Inside Director Seattle, Wash. Shelton, Wash. Edgewood, Wash. Sequim, Wash.
SKIP ORSER TIM SHELDON KATHY VAUGHN Outside Director Outside Director Inside Director Raleigh, N.C. Potlatch, Wash. Lynnwood, Wash.
EXECUTIVE BOARD The Energy Northwest executive board sets policies that govern the operations of the agency. It is made up of 11 members: five elected from the board of directors, three outside members appointed by the board of directors, and three outside members appointed by Washington's governor.
4 2016 Energy Northwest Annual Report
TERRY BREWER BARNEY BURKE BILL GORDON ARIE CALLAGHAN DOUG AUBERTIN CARNAN BERGREN President Vice President Secretary Assistant Secretary Commissioner, Commissioner, Commissioner;. Commissioner, Commissioner, Commissioner, Ferry County PUD Chelan County PUD Grant County PUD 2 *Jefferson County PUD Franklin County PUD Grays Harbor County PUD 1 CRAIG FULTON BILL GAINES LINDAGDTT LIZ GREEN DAN GUNKEL BOB HAMMOND Director of Public Works Director and CEO, Commissioner, Commissioner, Commissioner, Energy Services Director, and Utilities, Tacoma Public Utilities Mason County PUD 3 Skamania County PUD Klickitat County PUD City of Richland Energy City of Port Angeles Services STEVE HOUSTON JACK JANDA MIKE JONES ROBERT JUNGERS CURT KNAPP JIM MALINOWSKI Commissioner, Commissioner, Power Supply and Strategic Commissioner, Commissioner, Commissioner, Okanogan County PUD Mason County PUD 1 Planning Officer, Wahkiakum County PUO Pend Oreille County PUD Clark Public Utilities Seattle City Light M.L. NORTON NED PIPER WILL PURSER JUDY RIDGE SHAN ROWBOTHAM LORI SANDERS General Manager, Commissioner, Commissioner, Commissioner, Commissioner, Commissioner, Centralia City Light Cowlitz County PUD Clallam County PUD Asotin County PUD Kittitas County PUD Benton PUD The Energy Northwest board of directors comprises representatives from each of its Washington state member utilities. The board of directors has final authority on any decision CHUCK TENPAS DIANA THOMPSON KATHY VAUGHN to purchase, acquire, construct, terminate or Commissioner, Commissioner, Commissioner, Lewis County PUD Pacific County PUD 2 Snohomish County PUD decommission any plants and facilities of Energy Northwest. Board members represent utilities with strong .histories of serving the public power needs of BOARD OF DIRECTORS Washington ratepayers. Their experience helps guide the agency as a continuing and effective source of powerful energy solutions.
5
SENIOR LEADERSHIP The senior leadership team manages day-to-day operations, executes programs and projects, establishes long-term strategies in direct support of Energy Northwest's vision, and provides essential hands-on leadership to foster continual improvement and strengthen organizational core values in the workforce.
MARK REDDIEMANN Chief Executive Officer BRAD SAWATZKE BRENTRHJGE GROVER HETTIEL Chief Operating Officer; Vice President for Corporate Vice President for Operations Chief Nuclear Officer Services; Chief Financial Officer ALEX JAVORBK BOB DUTTON JIM GASTON Vice President for Engineering General Counsel; General Manager for Energy Chief Ethics Officer Services & Development 6 2016 Energy Northwest Annual Report
SUSTAINABILITY REPORTING economic Sustainability reporting has evolved during the past decade and focuses on reporting to stakeholders the impact the organization has on environmental, social and economic factors as a result of its everyday activities.
ECONOMIC VALUE Energy Northwest's generation resulted in a its electricity generation while producing virtually fiscal year 2016 privilege tax payment to the state of no greenhouse gas emissions.
Washington of more than $4.4 million. This annual tax is levied on public power electricity producers More Value Added: The 2012 extension of for the privilege of generating electricity in the state. Columbia's operating license through 2043 allowed Privilege tax payments are distributed to the state a similar extension of bonds and decommissioning school fund, state general fund and 39 separate fund contributions into a new 20-year license jurisdictions within a 35-mile radius of Columbia period . Combined with regional cooperation debt, Generating Station. Set by state statute, these low-cost nuclear fuel purchases, reduced operations payments benefit city and county governments, and maintenance budgets, and other cost-cutting and fire and library districts-directly enhancing the activities, the agency will contribute more than $2.2 quality of life throughout Washington state. billion (offset by a $160 million increase in Columbia's Since commencing operations in 1984, EN has capital financing and inventory) in regional savings pa id approximately $87 million in privilege taxes on between 2012 and 2023 .
7
Regional Cooperation Debt Long-Range Planning for Columbia In 2014, EN and the Bonneville Power Columbia's long-range plan forecasts and Administration began refinancing low- interest prioritizes resources required to maintain safe, municipal bond debt from Columbia and nuclear reliable, predictable and cost-effective operations.
projects 1and 3 to pay off Bonneville's higher-interest The 10-year operat ions, maintenance and capital federal debt. EN completed four transact ions, budget forecast is challenged and managed by leveraging regional debt carrying rates from 2.4 to cross-functional teams and senior leadership, 3.17 percent to pay off BPA's 7.15-percent-interest- and approved by the executive board. Steering rate federal debt. As of the end of fiscal year 2016, committees assigned to mission-critical projects extending EN's nuclear debt to pay off this higher- ensure schedule and budget success.
interest federal debt equals more than $650 million Through successful development and management in savings to ratepayers through 2032 . of the 10-year, long-range plan, Columbia has decreased cost of power and maintains flat capital Cost-Effective Operation cost at fiscal 2016 and 2017 levels.
This Phase IV focus area consists of the industry's Delivering the Nuclear Promise initiative and in collaboration with BPA, EN-throughvarious industry initi atives - is focused on reducing Columbia's cost of power in order to be regionally competitive while maintaining safe, reliable operation.
8 2016 Energy Northwest Annual Report
MANAGING ENVIRONMENTAL RISK The EMS guides the organization to systematically Energy Efficiency identify, manage, control and monitor environmental EN implemented a strategic initiative to improve impacts through use of the triple bottom -line energy efficiency. Projects include replacing concept, which incorporates values important to in efficient lights with light emitting diod e fixtures fiscal responsibility, environmental protection and and installing occupancy sensors in office buildings social responsibility. and warehouses . During fiscal2016, EN implemented To reduce risk, the EMS requires operational energy efficiency initiatives that will save more than controls on activities that could sign ificant ly 80 megawatt-hours of energy annually.
impact the environment. Several such controls are in place. For example, Columbia recently Continual Improvement implemented a stormwater pollution prevention EN is committed to generating energy in a clean plan to help reduce the impact stormwater may have and responsible manner, and remains committed to groundwater and surrounding surface waters. to continual improvement of its environmental This plan contains best-management practices to performance . All projects generate carbon-free prevent stormwater from becoming contaminated energy. Some operation and maintenance activities, with oil or other pollutants from runoff in parking however, generate low amounts of greenhouse lots and bui ldin g roofs. gas em issions. EN sets goals to improve agency Energy Northwest regularly reviews all its performance, and has a target to reduce greenhouse operation activities to identify impacts and minimize gas emissions. EN set a fiscal 2017 goal to reduce environmental impact. greenhouse gas emissions by 80 metric tons .
EN moves forward into fiscal 2017 with a goal to Environmental Objectives achieve and maintain environmental excellence by The corporate strategic plan contains initiatives fostering environmental stewardship at all facilities to improve environmental performance at all agency and operations.
facilities . EN leaders develop objectives and targets to reduce impacts from environmental aspects of operations, consistent w ith environmental strategic initiatives, which are incorporated at all levels of the organ ization.
Reduce Waste Through the pollution prevention program, Energy Northwest has set aggressive targets to reduce all types of waste including hazardous and mixed waste. The pollution prevention program prioritizes minimizing waste through job planning and product substitution with more environmentally friendly chem icals. When waste must be generated, disposal is only used if reuse and recycle options are unavailable.
Recycling is important in reducing waste and all facilities participate in the recycling program. During fiscal 2016, the agency recycled more than 209 tons of waste (plastic, aluminum, paper, cardboard and metal).
10 2016 Energy Northwest Annual Report
COMMUNITY SERVICE Benton and Franklin Head Start As a major Washington state employer Since 1980, employees have brought holiday cheer and member of the local Tri-Cities business to more than 11,000 local children in low-income community for nearly 60 years, Energy Northwest families . Each year, employees commit to adopting strongly believes in supporting local community every child in the Benton and Franklin Head Start organizations, and non -profit agencies. program by providing gifts for the holiday season .
The approximatelyl,100 employees who live in the During fiscal 2016 employees fulfilled the wishes greater Tri-Cities area play a major role in the health of 521 children . Additionally, employees dressed and welfare of the community. They contribute as Santa and elves to deliver those gifts to schools both their time as volunteers and provide financial participating in the Head Start program.
support. The agency supports three major charities:
Benton and Franklin Head Start, March of Dimes March of Dimes and the United Way. Employees - through individual Team EN exceeded its donation goal by raising initiative - are also involved in Specia l Olympics, more than $27,000 during 2016 for the March of the American Cancer Society, the Red Cross, Junior Dimes. Employees, along with friends and family, Achievement and Columbia Basin College's Math, participated in a 3.1 mile walk du ring the Tri-Cities Engineering & Science Achievement program, March for Babies event to support neonatal bi rth among other civic and community activities . centers and local families in need.
United Way United~ HealllP.d During fiscal 2016, employees contributed more than $87,000 to the United Way of Benton and Way~ Start ' Franklin Counties. Employee contributions help provide hot meals to elderly neighbors, provide disaster relief planning for the local community, and fund youth developmental (includ ing at-risk) programs.
~~,. -
-- *-~
. *'/O" ~
COLUMBIA GENERATING STATION Columbia Generating Station near Richland is the used in the Pacific Northwest. This power is sold third largest generator in Washington (behind Grand at-cost to BPA and 92 Northwest utilities receive a Coulee and Chief Joseph dams), and represents about percentage of its output.
12 percent of the Bonneville Power Administration's During fiscal year 2016, Columbia sent 9,617,206 firm energy and 9.5 percent of Bonneville's sustained megawatt-hours of net generation to the grid, its peak capacity. second-highest fiscal year generation total ever.
Columbia's 1,190 (1,157 nameplate) megawatt-electric output is enough energy to power a city the size of Seattle, about three percent of all electricity 12 2016 Energy Northwest Annual Report
ENERGY SERVICES & DEVELOPMENT NINE CANYON WIND PROJECT PACKWOOD LAKE HYDROELECTRIC During fiscal year 2016 Nine Canyon Wind Project PROJECT achieved a record 99 .32 percent adjusted availability The 27.5 megawatt Packwood Lake Hydroelectric rate. Situated along the hilltops southeast of Project achieved a 99.14 percent adjusted availability Kennewick, Nine Canyon is one of the largest rate during fiscal 2016. Located in the Gifford Pinc hot publicly-owned wind projects in the nation with National Forest in Lewis County, approxim ately 63 wind turbines; 14 rated at 2.3 megawatts and 49 20 miles south of Mt. Rainier, the facility is Energy rated at 1.3 megawatts. Northwest's first electric power generation project Each turbine is equipped with its own weather and began commercial operation in 1964.
station that monitors wind direction and speed. Hydro is a carbon-free resource, and fish screens Motors rotate the turbines into the wind and protect migrating fish populations. The water levels sophisticated control systems ensure blades turn in Packwood Lake are closely monitored to preclude at an optimal speed to maximize power generation . environmental impacts.
The turbines are self-starting and begin generating electricity when wind speed reaches eight miles per WHITE BLUFFS SOLAR STATION hour, with full power achieved at about 35 mph. White Bluffs Solar Station, a 242-panel If winds exceed 55 mph on a susta in ed basis, the demonstration facility, is located at the Industrial turbines shut down automatically and restart when Development Complex near Columbia Generating winds fall below 45 mph. Station .
The collaborative project was funded by Energy Northwest, the Bonneville Power Adm inistration, the Bonneville Environmental Foundation and the Department of Energy.
14 2016 Energy Northwest Annual Report
GENERATION & PROJECT DEVELOPMENT Aggregated Demand Response Pilot Project In 2016, EN successfully concluded a one-year, 35-megawatt, aggregated demand response pilot project in partnership with the Bonneville Power Administration, the City of Richland Energy Services, Cowlitz Public Utility District and Pend Oreille PUD.
The project demonstrated use of aggregated demand response as a viable and cost-effective resource for balancing the smart grid. The pilot was the first such public-power-led program in the Northwest.
Peak Load Management Alliance recognized the project as one of the nation's most creative demand response programs, initiatives and achievements of 2015 with their national Pacesetter Award for Innovation and Excellence. PILOT PROJECT The Northwest Power and Conservation Council's Demand response Seventh Northwest Power Plan identifies development of up partners included to 600 megawatts-electric of demand response resources as the Bonneville Power Administration, the City of a high priority and the least-cost means to maintain adequate Richland Energy Services, peak reserves.
Cowlitz County Public Utility District and Pend Oreille PUD.
Community Solar Since 2009, utilities in the state of Wash ington array and take advantage of econom ies of scale.
have been exploring, developing and implementing The serving utility takes responsibility for finding community solar projects in response to customer the right site, building and maintaining the array, interest in carbon-free sources of energy and financial and charging a prorated cost to customers based on incentives. Energy Northwest, in collaboration their level of participation.
with Mason County PUD 3, Benton PUD, Inland Community solar can meet the demand for Power and Light Company and Clark Public Utilities customer interest in solar while at the same time published a Community Solar Planning Guide to help allowing utilities to control the integration of solar Washington utilities develop solar projects that are to the grid. This is a win-win for both customers 75 kilowatts or less. and utilities. There is minimal, if any, cost to the Community solar is a way to have the benefits of utility and the entire project cost is prepaid by the rooftop solar without solar panels on a roof. Utility customer before construction.
customers purchase units in a centrally located solar 15
- eev11a EVITA powered The Electric Vehicle Infrastructure Transportation - -
- Alliance is leading the way to advocate for sustainab le electric transportation infrastructure in southeast Washington. This effort is sponsored by the Mid -
Columbia Energy Initiative, a collaborative industry effort coordinated through the Tri-City Development Council. Alliance members include Franklin and Benton PUDs, Benton Rural Electric Association, City of Richland Energy Services and with support from Energy Northwest.
The program involves deploying direct-current, fast-charging stations at participating businesses or organizations Increased usage of the EVs, which throughout the Mid-Columbia region . have zero tailpipe emissions, will reduce carbon emissions in the Compared to a normal home re-charge, transportation sector.
which can take eight to 20 hours2.314815e-4 days <br />0.00556 hours <br />3.306878e-5 weeks <br />7.61e-6 months <br /> to fully re-charge, the stations will re-charge an electric vehicle in about 30 minutes. If EVITA fulfills its prom ise, the program will open up a new gateway of Should this project continue forward, construction carbon-free travel across the state. is expected to begin next summer with commercial operation starting in late 2017.
Solar Development Energy Services & Development met several Operations and Maintenance milestones in the potential development of the Horn Energy Northwest supports public power in the Rapids Solar, Storage and Training Center, a first- areas of operations and maintenance of generating of-its-kind battery storage system and technician facilities and electric utility automation.
training facility. The project, located in north Richland, During fisca l 2016, operations and maintenance will comprise a four-megawatt direct-current solar services renewed a contract with the City of Burbank, generating array across 20 acres, a one-MW battery Ca lif., to operate and maintain the Tieton Hydroelectric storage system and a training faci lity for members of Project at Rim rock Lake in the Cascades.
the International Brotherhood of Electrical Workers. EN also provides operations and maintenance During 2016 EN began the BPA small generator services to Olympic View Generating Station, owned interconnect application process, and the Washington by Mason County PUD 3.
State Clean Energy Fund awarded a grant to assist with project Applied Process Engineering Laboratory development. EN manages the Applied Process Engineering Energy Northwest is Laboratory as a lease facili ty for laboratory-based in discussions with the research and development within a controlled City of Richland Energy operating environment. Approximately 90 percent Services on a long- of the lea sable space was occup ied during fiscal 2016, term agreement for the with 10 percent available for business start-ups or as city to purchase power specialized testing labs for emerging technologies.
generated from the APEL's advisory board represents the major facility. institutions that sponsor APEL and its mission; 16 2016 Energy Northwest Annual Report
including the Port of Benton, Department of Energy, AREVA, Columbia Energy & Environmental, High-Line Washington State University Tri-Cities, Pacific Engineering, lntermech, Energy Solutions and Mid-Northwest National Laboratory, City of Richland Columbia Engineering.
Energy Services, Tri-Cities Industrial Development Council and EN. APEL is self-funded through lease Environmental & Analytical Services Laboratory revenues . Energy Northwest's Environmental and Analytical Services Laboratory provides chemical analysis and Energy Northwest Standards Laboratory environmental monitoring expertise for utility, The Energy Northwest Standards Laboratory, municipal and residential customers. The laboratory located adjacent to Columbia Generating Station, is a continues to maintain accreditation for wastewater, multi-faceted applied physics laboratory performing drinking water and radiochemical analyses; and calibrations in virtually every aspect of metrology, licensure as a clinical laboratory for drug screenings .
including torque, force, pressure, vacuum, mass, Services provided to Columbia and outside dimensional, electrical, electronic, temperature, clients include metals quantification, general humidity, flow, vibration, light and sound. chemistry, microbiological testing, radiological ENSL is accredited to International Standard monitoring, lubricant condition monitoring, ANSl/ISO/IEC 17025 by the American Association material verification, commercial-grade dedication for Laboratory Accreditation. The laboratory is of materials, and aquatic and terrestrial monitoring.
accredited through January 2017.
Major laboratory clientele includes Columbia Industrial Development Complex Generating Station, Bechtel, Washington Closure The Industrial Development Complex is a leasing Hanford, Washington River Protection Solutions, business line for EN, primarily comprised of office CH2M Hill, Pacific Northwest National Laboratory, and warehouse space.
17
OUR MEMBERS & PROJECTS Asotin County Public Utility District 12 Grant County PUD 2 23 Seattle City Light 2 Benton PUD 13 Grays Harbor County PUD 1 24 Skamania County PUD 3 Chelan County PUD 14 Jefferson County PUD 25 Snohomish County PUD 4 Centralia City Light 15 Kittitas County PUD 26 Tacoma Public Utilities 5 City of Port Angeles 16 Klickitat County PUD 27 Wahkiakum County PUD 6 City of Richland Energy Services 17 Lewis County PUD 7 Clallam County PUD 18 Mason County PUD 1 Packwood Lake Hydroelectric Project 8 Clark Public Utilities 19 Mason County PUD 3 Columbia Generating Station 9 Cowlitz County PUD 1 20 Okanogan County PUD Nine Canyon Wind Project 10 Ferry County PUD 21 Pacific County PUD 2 White Bluffs Solar Station 11 Franklin County PUD 22 Pend Oreille County PUD 5 Tieton Hydroelectric Project 18 2016 Energy Northwest Annual Report
FINANCIAL DATA & INFORMATION 19
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 Baker Tilly Virchow Krause, LLP, Energy Northwest's independent auditors. Management has made available to Baker Tilly Virchow Krause, LLP all financial records and related data, and believes that all representations made t0 Baker Tilly Virchow Krause, 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, Baker Tilly Virchow Krause, LLP has considered the internal control structure in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered recommendations made by the internal auditor and Baker Tilly Virchow Krause, LLP concerning the control procedures and has taken appropriate action to respond to the recommendations. Management believes that, as of June 30, 2016, internal control procedures are adequate.
M.E. Reddemann B. Ridge Chief Executive Officer Vice President for Corporate Services; Chief Financial and Risk Officer AUDII 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, Linda Gott, Jack Janda, Jim Moss, Skip Orser, Will Purser, Dave Remington, Lori Sanders, Tim Sheldon, and Sid Morrison, ex-officio. The committee held 9 meetings during the fiscal year ended June 30, 2016.
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 fortheir 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 20 2016 Energy Northwest Annual Report
INDEPENDENT AUDITOR'S REPORT To the Executive Board of Energy Northwest:
Report on the Financial Statements We have audited the accompanying financial statements of Energy Northwest. as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Energy Northwest's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the 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.
Auditors' Responsibility Our responsibility is to express opinions on these 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 the auditors' 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, the auditor considers internal control relevant to the Energy Northwest's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Energy Northwest'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 financial position of Energy Northwest as of June 30, 2016, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matter Required Supplementary Information:
Accounting principles generally accepted in the United States of America require that the required supplementary information as listed in the table of contents be presented 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.
Other Information Our audit was conducted for the purpose of forming opinions on the basic financial statements as a whole. The other information as identified in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion or provide any assurance on it.
Madison, Wisconsin September 22, 2016 21
ENERGY NORTHWEST MANAGEMENTS DISCUSSION AND ANALYSIS Energy Northwest is a municipal corporation and joint operating agency resources and obligations, restricted accounts and due to/from balances for of the state of Washington. Each Energy Northwest business unit is financed each business unit. (See Note 1 to the Financial Statements.)
and accounted for separately from all other current or future business The Statements of Revenues, Expenses, and Changes in Net Position assets. The following discussion and analysis is organized by business unit. provide financial information relating to all expenses, revenues and equity The management discussion and analysis of the financial performance and that reflect the results of each business unit and its related activities over activity is provided as an introduction and to aid in comparing the basic the course of the fiscal year. The financial information provided aids in financial statements for the fiscal year (FY) ended June 30, 2016, with the benchmarking activities, conducting comparisons to evaluate progress, and basic financial statements for the FY ended June 30, 2015. determining whether the business unit has successfully recovered its costs.
Energy Northwest has adopted accounting policies and principles that The Statements of Cash Flows reflect cash receipts and disbursements and are in accordance with Generally Accepted Accounting Principles (GAAP) in net changes resulting from operating, financing and investing activities. The the United States of America . Energy Northwest's records are ma intained as Statements of Cash Flows provide insight into what generates cash, where prescribed by the Governmental Accounting Standards Board (GASB). (See the cash comes from, and purpose of cash activity.
Note 1 to the Financial Statements.) The Notes to Financial Statements present disclosures that contribute Because each business unit is financed and accounted for separately, the to the understanding of the material presented in the financial statements.
following section on financial performance is discussed by business unit to aid This includes, but is not limited to, Schedule of Outstanding Long-Term Debt in analysis of assessing the financial position of each individual business unit. and Debt Service Requirements (See Note 4 to the Financial Statements).
For comparative purposes only, the table on the following page represents a accounting policies, significant balances and activities, material risks, memorandum total only for Energy Northwest. as a whole, for FY 2016 and commitments and obligations, and subsequent events, if applicable.
FY 2015. The basic Financial Statements of each business unit along with the Notes The Financial Statements for Energy Northwest include the Statements of to the Financial Statements and Management Discussion and Analysis should Net Position; Statements of Revenues, Expenses, and Changes in Net Position; be used to provide an overview of Energy Northwest's financial performance.
and Statements of Cash Flows for each of the business units, and Notes to The following discussion provides comparative financial information for Financial Statements. the years ended June 30, 2016 and 2015. Questions concerning any of the The Statements of Net Position present the financial position of each information provided in this report should be addressed to Energy Northwest business unit on an accrual basis. The Statements of Net Position report at PO Box 968, Richland, WA, 99352.
financial information about construction work in progress, the amount of 22 2016 Energy Northwest Annual Report
COMBINED FINANCIAL INFORMATION June 30, 2016 and 2015 (Dollars in thousands) 2015 : 2016 : Change Assets Current Assets 233,276 : s 424,206 : s 190,930 Restricted Assets Special Funds 318,116 : 220,562 : (97,554)
Debt Service Funds 352,643 : 166,234 : (186,409)
Net Plant 1,562,376 : 1,600,045 : 37,669 Nuclear Fuel 976,327 : 893,486 : (82,841)
Long-Term Receivables 59 : 7: (52)
Other Charges 3,187,338 : 3,188,539 : 1,201 TOTAL ASSETS : $ 6,630, 135 : $ 6,493,079 : $ (137,056)
DEFERRED OUTFLOWS OF RESOURCES* :s 38,845 : s 44,002 : s 5,157 TOTAL ASSETS AND DEFERRED OUTFLOWS : $ 6,668,980 : $ 6,537,081 : $ (131,899)
Current liabilities 517,195 : s 323,919 : s (193,276)
Restricted liabilities Special Funds 158,818 : 178 : (158,640)
Debt Service Funds 119,479 : 127,030 : 7,551 Long-Term Debt 5,731 ,753 : 5,788,165 : 56,412 Other Long-Term liabitilies 105,843 : 281,448 : 175,605 Other Credits 5,850 : 5,911 : 61 Net Position Invested in capital assets, net of related debt (44,813): (41 ,342): 3,471 Restricted, net 43,685 : 42,825 : (860)
Unrestricted, net (14,301): (12,554) : 1,747 TOTAL LIABILITIES AND NET POSITION : $ 6,623,509 : $ 6,515,580 : $ (107,929)
DEFERRED INFLOWS OF RESOURCES* : $ 45,471 : s 21,501 : s (23,970)
TOTAL LIABILITIES, NET POSITION AND DEFERRED INFLOWS : $ 6,668,980 : $ 6,537,081 : $ (131,899)
Operating Revenues : $ 542,257 : s 463,033 : s (79,224)
Operating Expenses 421 ,622 : 351,837 : (69,785)
Net Operating Revenues 120,635 : 111 ,196 : (9,439)
Other Income and Expenses (118,467): (106,838): 11,629 Beginning Net Assets* (17,597): (15,429): 2,168 ENDING NET POSITION : $ (15,429): $ (11,071): $ 4,358
- Energy Northwest 2015 Statement of Net Position and Statements of Revenues and Expenses and Changes in Net Position were retroactively updated for the application of GASS Statement No. 68 "Accounting and Financial Reporting for Pensions."
23
COLUMBIA GENERATING STATION projects of at least $1.0 million: Fukushima Impacts, Cyber Security, Stack Columbia Generating Station (Columbia) is wholly owned by Energy Monitor Upgrade, Cobalt Reduction Program, Scram Discharge Volume Northwest and its participants and operated by Energy Northwest. The plant Instrumentation Modification, Independent Spent Fuel Storage Installation is a 1, 157-megawatt electric (MWe, Design Electric Rating, net) boiling water Pad Expansion, Control Rod Drive Repair/Refurbishment, Main Turbine Valve, nuclear power plant located on the Department of Energy's (DOE) Hanford Measurement Uncertainty Recapture, Operational Control Area Security Site north of Richland, Washington . Cameras, Direct Current Bucket Replacement, High Pressure Core Spray Columbia produced 9,61 7 gigawatt-hours (GWh) of electricity in FY 2016, Voltage Regulator, and Main Control Room Chillers. These projects resulted as compared to 8, 142 GWh of electricity in FY 2015, there were no instances in 79 percent of the CWIP activity. The remaining 21 percent was made up of of economic dispatch for either year. The FY 2016 generation increase of 18.1 80 separate projects.
percent was due to consistent and reliable operations slightly above budgeted Current assets increased $142.8 million in FY 2016 to $340.5 million.
estimates (.3% higher generation and second highest FY generation on Changes were increases to receivables of $144.4 million mostly due to an record), additional MWe gained as a result of the Leading Edge Flow Meter increase in the amount of BPA draw for participant net billing, decreases Project and valve work completed in the FY 201 5 refueling outage (R-22), to cash and investments of $13.8 million, and increases to materials and coupled with the FY 2015 reduced generation due to the 42 day R-22 outage supplies and prepaid amounts of $12.2 million.
in FY 2015 and first quarter FY 2015 down power. Special funds decreased $110.0 million to $173.8 million in FY 2016 due Columbia's cost performance is measured by the cost of power indicator. to the FY 2016 bond activity and schedule of construction costs for these The cost of power for FY 2016 was 3.65 cents per kilowatt-hour (kWh) as funds in FY 2016.
compared with 5.05 cents per kWh in FY 2015. The industry cost of power The debt service funds decreased $106.1 million in FY 2016 to $76.3 fluctuates year to year depending on various factors such as refueling million. The decrease is due to the restructuring and funding activities for the outages and other planned activities. The FY 2016 cost of power decrease regional cooperation debt program associated with the 2016 bond activities.
of 27.7 percent was due to the increased generation levels budgeted for and Other charges increased $64.4 million in FY 2016 from $1,053.3 million attained in FY 2016 along with the planned outage and impacts from the FY to $1, 11 7.7 million. The increase was Costs in Excess of Billings related to the 201 5 R-22 activity and FY 2015 first quarter down power on previous year net effect of payment of current maturities and refunding activity associated generation and costs. with the regional cooperation debt program.
Deferred outflows increased $6.5 million in FY 2016 from $33.4 million Assets, Liabilities, and Net Position Analysis to $39.9 million. The major change was an increase of $8.3 million due to The net increase to Utility Plant (plant) and Construction Work In Progress the recognition of a deferred pension outflow in accordance with GASB No.
(CWIP) from FY 2015 to FY 2016 (excluding nuclear fuel) was $45.2 million. 68 and a decrease of $1 .9 million to unamortized loss on refunding was The changes to plant and CWIP were comprised of additions to plant of associated with the 2016 bond activity.
$101 .2 million and an increase to CWIP of $17.8 million. Remaining change Current liabilities decreased $70.4 million in FY 2016 to $214.8 million.
was the period effect of depreciation of $73.8 million. Components of the change were decreases to current maturities of debt The FY 2016 CWIP balance of $76.0 million consisted of 15 major of $110. 6 million, addition of notes payable promissory note for refunding COLUMBIA GENERATING STATION COLUMBIA GENERATING STATION Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 ; L 9.617 FY 2016 3.65 FY 2015 : J 8.142 FY 2015 5.05 FY2014 :
J 9.781 FY 2014 3.70 FY 2013 : J :
8.479 FY 2013 4.51 FY 2012 : ] 6.984 4.73 0 2,000 4,000 6,000 8,000 10,000 0 2 3 4 5 6 24 2016 Energy Northwest Annual Report
of $61.4 million, decrease to taxes payable of $5.2 million due to non- Deferred inflows decreased $21.9 million from $40.9 million in FY 2015 refueling year and not having the effect of fuel assemblies being moved into to $19.0 mil lion in FY 2016. A decrease of $21 .2 mi llion was recognized to Washington State, increase in generation tax of $0.9 million due to increased deferred pension inflow in accordance with GASB No. 68. A decrease to bond generation in the non refueling year. decrease in retention payable of $1.3 refunding inflows of $0.6 million was due to the restructuring and funding million due to closure of public work contracts, increases due to timing of year activities for the regional cooperation debt program associated with the .lOl b end obligations and due to other projects of $0.4 million, increase and timing bond activities.
of due to participants that resulted in an decrease of $15.4 million.
Restricted liabilities increased $5.0 million in FY 2016 to $72.8 million. Revenue and Expenses Analysis The increase was due to interest related to bond activity of $5.0 million. Columbia is a net-billed project. Energy Northwest recognizes revenues Long-term debt (Bonds Payable) increased $24.6 million in FY 2016 from equal to expenses for each period on net-billed projects. No net revenue or
$3,575.4 million to $3,600.0 mill ion due to the restructuring and funding loss is recognized and no net position is accumulated.
activities for the regional cooperation debt program associated with the 2016 Operating expenses decreased $69.7 million from FY 2015 costs of $397.9 bond activities. million to $328.2 million in FY 2016. The decreases in costs were due to Other long-term liabilities increased $22. 7 million in FY 2016 to $264.8 FY 2016 being a non refueling year while FY 2015 was a planned refueling million. The increase was due to an increase in the pension liability in year and were generally in the operations and maintenance areas amounting accordance with GASB No. 68 of $28.0 million and an increase in the to $71.3 million. The decrease in operations and maintenance costs were decommissioning liability of $7.4 million to reflect the annual updated offset by increases in nuclear fuel costs of $11.0 million and $1 .2 million estimate of the obligation that was partially offset by the decrease in in generation tax; both increases due to increased generation in FY 2016.
deferred nuclear fuel cask activity of $12.7 million. Costs associated with Increases of $1 .1 million in admin istrative and generals costs were a result of cask activity are no longer being recorded as a long term liability as all costs pension expense requirements related to GASB No. 68; other administrative have been deemed to be reimbursable under the agreement with DOE and and genera l costs remained relatively steady from the previous year. Other reimbursements, per each approved subm ittal, will be offset against costs changes affecting operating expenses were a decrease to depreciation of incurred. (See Note 11 to the Financial Statements - Commitments and $12.1 million due to assets becoming fully depreciated during the year with Contingencies - Other Litigation and Commitments.) a slight increase of $0.5 million in decommissioning as part of the asset retirement obligation estimate. (See Note 9 to the Financial Statements -
Asset Retirement Obligation (ARO).)
Other Income and Expenses increased $10.6 million from FY 2015 to
$105.1 million net expenses in FY 2016. One component of the change was COLUMBIA GENERATING STATION the FY 2016 $ 4.5 million gain on spent fuel litigation settlement from the Total Operating Costs (Dollars in thousands) DOE. The previous year settlement amount of $15.1 million had been recorded as a reduction to fuel expense to represent the true cost of the fuel cask program . The cask costs were never an intended cost for the facility and only FY 2016 433.225 resulted from a failure to perform from the Department of Energy. (See Note 11 to the Financial Statements - Commitments and Contingencies - Other FY 2015 513.603 Litigation and Comm itments.) Fuel disposal is no longer being recognized as part of the DOE settlement for this reason; any future recoveries from the DOE FY 2014 443.484 will be recorded similar to the FY 2016 transaction. Another component of the change was a gain on the second scheduled separative work unit sale related FY 2013 539.779 to the Tennessee Valley Authority fuel contract (See Note 12 to the Financial Statements - Nuclear Fuel). The FY 2016 gain on SWU sale was $8.7 million, FY 2012 397.881 an increase of $4.8 million over the FY 2015 SWU sale gain. The remain ing changes of $1.3 million was due to decreased bond related expenses of $2.3 0 100,000 200,000 300,000 400,000 500,000 million, increase in investment income of $0.7 million, and a small decrease in miscellaneous non-utility leasing revenue of $0.3 million.
- Operating Expenses - Other Income/Expenses Columbia's total operating revenue decreased from $513.6 million in FY 2015 to $433.2 million in FY 2016. The decrease of $80.4 million was due to the off cycle year of the two year refueling and maintenance program and the related effect of the net bi ll ing agreement on total revenue. (See Note 5 to the Financial Statements - Net Billing.)
25
THE PACKWOOD LAKE HYDROELECTRIC PROJECT PACKWOOD LAKE HYDROELECTRIC PROJECT Total Operating Costs (Dollars 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, FY 2016 ;, """""'II 2.333 Washington . The water is carried from the lake to the powerhouse through a five-mile long buried tunnel and drops nearly 1,800 feet in elevation. FY 2015 2.141 Packwood produced 98.89 GWh of electricity in FY 2016 versus 107 .16 l".i' GWh in FY 2015. The 7.7 percent decrease in generation can be attributed FY 2014 2.150 to continuing unfavorable water conditions over the past two years with FY 2016 delivering the 20th best generation year compared to FY 2015 which FY 2013 2.166 ranked 14th. There continues to be some relief in generation capacity due to the delay in new license requirements (See Note 1 to the Financial Statements) FY 2012 1.872 I
which will eventually lower the generating capacity for Packwood Packwood's cost performance is measured by the cost of power indicator. 1,000 1,500 2,000 2,500 0 500 The cost of power for FY 2016 was $2.35 cents per kWh as compared to
- Operating Expenses - Other Income/Expenses
$2 .01 cents per kWh in FY 2015. The cost of power fluctuates year-to-year depending on various factors such as outage, maintenance, generation, and other operating costs. The FY 2016 cost of power increase of 16.9 percent on the Statement of Net Position. Packwood has been operating under a 50-was a result of decreased generation due to water conditions combined with year license issued by Federal Energy Regulatory Commission (FERC), which increased costs of $0.2 million for the Generator disassembly cleaning and expired on February 28, 2010. Energy Northwest submitted the Final License repair project completed in October. Application (FLA) for renewal of the operating license to FERC on February 22, 2008. On March 4, 2010, FERC issued a one-year extension to operate under Assets, Liabilities, and Net Position Analysis the original license which is indefinitely extended for continued operations Total assets and deferred outflows increased $181 thousand from FY until a formal decision is issued by FERC and a new operating license is 2015. The small increase was due to a $123 thousand increase to cash granted. As of June 30, 2016, Packwood continues to be relicensed under and investments and net utility plant increases of $39 thousand. Deferred this extended agreement.
pension outflows increased $21 thousand . There was an overall increase to liabilities, net position and deferred inflows of $0.2 million. The increase to Revenue and Expenses Analysis total liabilities of $243 thousand comprised an increase of $170 thousand in The agreement with Packwood participants obligates them to pay annual net pension liability, increases of $73 thousand to billings in excess of cost costs and to receive excess revenues. (See Note 1 to the Financial Statements.)
and $93 thousand to due to participants, and decreases of $93 thousand Accordingly, Energy Northwest recognizes revenues equal to expenses for each to accrued year end costs and $62 thousand to deferred pension inflow as period. No net revenue or loss is recognized and no net position is accumulated.
a result of recognition of pension liability in accordance with GASB No. 68. Operating expenses increased $0.2 million from $2.1 million in FY 2015 to $2.3 Packwood has incurred $3 .7 million in relicensing costs through FY 2016 with million in FY 2016 due to the generator disassembly cleaning repair project.
no new costs incurred for FY 2016. These costs are shown as Other Charges Other expense items remained relatively constant from the previous year.
THE PACKWOOD LAKE HYDROELECTRIC PROJECT THE PACKWOOD LAKE HYDROELECTRIC PROJECT Cost of Power - Cents/kWh Net Generation - GWhrs FY 2016 J 2.35 FY 2016 r 98.89 FY 2015 I 2.01 FY 2015 ] 107.1 6 FY 2014 L 1.88 FY 2014 J 115.04 FY 2013 J 2.07 FY 2013 J 103.70 FY 2012 J 1.58 FY 2012 l 119.43 0.0 0.5 1.0 1.5 2.0 2.50 0 20 40 60 80 100 120 26 2016 Energy Northwest Annual Report
Other Income and Expense remained relatively steady from previous year NUCLEAR PROJECT NO. 3 with an increase of $2 thousand from investment returns and a decrease of Nuclear Project No. 3, a 1,240-MWe plant, was placed in extended
$1 thousand gain on property disposed resulting in an overall net gain of $5 construction delay status in 1983, when it was 75 percent complete. On thousand for FY 2016 compared to $4 thousand for FY 2015. May 13, 1994, Energy Northwest's Board of Directors adopted a resolution l'ackwood part1c1pants are obligated to pay annual costs ot the project terminating Nuclear Project No. 3. Energy Northwest is no longer respon sible (including any applicable debt service), whether or not the project is operable. for any site restoration costs as they were transferred with the assets to the The Packwood participants also share project revenue to the extent that the Satsop Redevelopment Project. The debt service related activities remain the amounts exceed costs. These funds can be returned to the participants or responsibility of Energy Northwest and are net-billed. (See Notes 5 and 11 to kept within the project. As of June 30, 2016 there is $5.9 million recorded as the Financial Statements.)
deferred revenues in excess of costs that are being kept within the project.
Packwood participants are currently taking 100 percent of the project Assets, Liabilities, and Net Position Analysis generation; there are no additional agreements for power sales. Long-term debt decreased $38.9 million from $1,081 .0 million in FY 2015 to $1,042.1 million in FY 2016, as a result of $18.1 million being transferred to current debt to be paid on July 1, 2016 along with an increase related to NUCLEAR PROJECT NO. 1 additional premiums on new debt issued during the year of $41 .1 million; Energy Northwest wholly owns Nuclear Project No. 1, a 1,250-MWe and the remaining changes were due to the debt associated with the planned plant, which was placed in extended construction delay status in 1982, when and approved regional cooperative debt program. Current debt per the debt it was 65 percent complete. On May 13, 1994, Energy Northwest's Board of maturity schedule decreased $29.8 million from $47.8 million in FY 2015 to Directors adopted a resolution terminating Nuclear Project No. 1. All funding $18.0 million in FY 2016. The remaining changes in liabilities of $5.5 million requirements are net-billed obligations of Nuclear Project No. 1. Termination were due to a decrease in notes payable related to bond financing of $6.6 expenses and debt service costs comprise the activity of Nuclear Project No. 1 million, an increase in accrued interest payable of $1 .7 million and a decrease and are net-billed. (See Notes 5 and 11 to the Financial Statements.) to deferred Inflows of $0.6 million due to unamortized gain on bond refundings.
Assets, Liabilities, and Net Position Analysis Revenue and Expenses Analysis Total Assets and deferred outflows decreased $50.3 million from $1.057 Overall expenses and revenues decreased slightly in FY 2016 due to billion in FY 2015 to 1.007 billion in FY 2016. Restricted cash decreased $48.0 increased investment returns of $65 thousand and lower interest expense and million in FY 2016 to $32.2 million. Current assets increased $23.0 million amortization of $20 thousand. The slight drop in expenses combined with due to increased BPA draw on participant net billing, costs In excess of billing better investment returns lowered other income and expenses by $0.1 million decreased $24. 7 million and unamortized losses on bond refunding decreased in FY 2016 to $41.9 million.
$0.6 million.
Long-term debt increased $1.1 million from $840.7 million in FY 2015 to
$841 .8 million in FY 2016 as a result of $0.3 million being transferred to current debt to be paid on July 1, 2016 along with an increase related to additional premiums on new debt issued during the year of $37.5 million; the remaining changes were due to the debt associated with the planned and approved regional cooperative debt program. Short term debt decreased $53.4 million per the debt maturity schedule and current notes payable decreased $28.9 million as a result of the regional cooperative debt program. There was a decrease to restricted liabilities and other long term liabilities of $5.7 million, represented by a decrease to the decommissioning estimate of $7.0 million, an increase to interest payable of $1.0 million and an increase to the net pension liability of $0.3 million, in accordance with GASB No. 68 Revenue and Expenses Analysis Other Income and Expenses showed a net decrease to expenses of $7.4 million from $35.0 million in FY 2015 to $27.6 million in FY 2016. Main driver for the change in expenses was an adjustment to the site restoration plan resulting in a decrease to the decommissioning and amortization expense of $7.1 million.
The remaining change was a decrease to depreciation and amortization of $0.3 million and decreases to interest expense, amortization and plant preservation/
termination costs of $0.1 million.
27
BUSINESS DEVELOPMENT FUND Revenue and Expenses Analysis Energy Northwest was created to enable Washington public power utilities Operating Revenues in FY 2016 totaled $8.1 million as compared to FY and municipalities to build and operate generation projects. The Business 2015 revenues of $7.2 million, an increase of $0.9 million (12 .6 percent).
Development Fund (BDF) was created by Executive Board Resolution No. Several continuing and one new project were the drivers for the FY 2016 1006 in April 1997, for the purpose of holding, administering, disbursing, and increase. Support of the Enloe Dam Powerhouse is a new initiative that is accounting for Energy Northwest costs and revenues generated from engaging currently under an operations and maintenance agreement with Okanogan in new energy business opportunities. PUD. Activities associated with Enloe Dam in FY 2016 generated $0.1 million.
The BDF is managed as an enterprise fund. Four business lines have been Established projects continue to provide revenue to the Business Development created within the fund: Business Services, Facilities and Leasing, Generation, Fund; Environmental and Calibration services ($0.3 million increase). Demand Professional Services. A separate line of activity is used as general Business Response ($0.4 million increase), Utah Associated Municipal Power Systems Unit Support. Each line may have one or more programs that are managed as (UAM PS) Carbon Free Power ($0.1 million increase), and the Tieton Hydroelectric a unique business activity. Project ($0.3 million increase). Lease activity for the year showed a $0.1 million decrease in revenue. Overall operations for FY 2016 by business line resulted in Assets, Liabilities, and Net Position Analysis Business Services increase in revenue of $0.3 million, Facilities and Leasing with Total assets and deferred outflows increased $0.3 million from $10. 7 million a decrease of $0.1 million, Generation having an increase of $0.7 million and in FY 2015 to $11 .0 million in FY 2016. There were small increases to net Professional Services with an increase of $0.1 million. Overall Business Support utility plant of $0.1 million offset by decreases to current assets of the same showed a decrease of $0.1 million in allocable revenues for a total increase of amount. The major change in assets was $0.3 million due to the recognition $0.9 million for the Business Development Fund.
of a deferred pension outflow in accordance with GASB No. 68. There was an Operating costs increased $0.3 million from $8.3 million in FY 2015 to overall increase to liabilities, net position and deferred inflows of $0.3 million. $8.6 in million in FY 2016. Expenses for each Business Line remained relatively Current liabilities decreased $0.5 million from FY 2016 due to timing of year steady, with the modest increase driven by additional business support labor end outstanding items, with an increase to net pension liability of $0.7 million and compensation.
and decrease to deferred inflows of $0. 7 million to account for the net pension Other Income and Expenses decreased $0.2 million in FY 2016 to $1.2 liability in accordance with GASB No. 68. The change in net position of $0.8 million, with the change attributable to less indirect costs. There were no other million from operations in FY 2016 as compared to a $0.4 million in FY 2015 significant individual item variances.
reflects the improved margins resulting from the business sectors and overall The Business Development Fund receives contributions from the Internal control of costs. Service Fund to cover cash needs during startup periods. Initial startup costs are not expected to be paid back and are shown as contributions. As an operating business unit, requests can be made to fund incurred operating expenses. In FY 2016 there were no contributions (transfers), which was also the case for FY 2015.
28 2016 Energy Northwest Annual Report
NINE CANYON WIND PROJECT significantly lower operating costs (insurance, labor and major maintenance).
The Nine Canyon Wind Project (Nine Canyon) is wholly owned and operated Operating expenses decreased from $13.3 million in FY 2015 to $12.7 million in by Energy Northwest. Nine Canyon is located in the Horse Heaven Hills area FY 2016. These cost control measures along with the $0.9 million in decreased southwest of Kennewick, Washington. Electricity generated by Nine Canyon is treasury related expenses in FY 2016 (a result of the 2015 refinancing) helped purchased by t'aof1c Northwest Public Utility Districts (purchasers) . Each of the drive the second best historical cost of power on a fiscal year basis.
purchasers of Phase I, Phase II, and Phase Ill have signed a power purchase agreement which are part of the 2nd Amended and Restated Nine Canyon Assets, Liabilities, and Net Position Analysis Wind Project Power Purchase Agreement which now has an end date of Total assets and deferred outflows decreased $5.5 million from $100.9 2030. Nine Canyon is connected to the Bonneville Power Administration (BPA) million in FY 201 5 to $95.4 million in FY 2016. The major driver for the change transmission grid via a substation and transmission lines constructed by Benton in assets was a decrease of $6.6 million in net plant due to accumulated County Public Utility District. depreciation. The remaining changes consisted of increases to current cash Phase I of Nine Canyon, which began commercial operation in September and investments of $1.2 million, increases to special and debt service funds 2002, consists of 37 wind turbines, each with a maximum generating capacity of $0.3 million, decrease of $0.2 million in account receivables, a decrease to of approximately 1.3 MW, for an aggregate generating capacity of 48.1 MW. deferred outflows for unamortized debt expense of $0.3 million and an increase Phase II of Nine Canyon, which was declared operational in December 2003, to deferred pension outflows of $0.1 million. There was an overall decrease to includes 12 wind turbines, each with a maximum generating capacity of 1.3 liabilities, net position and deferred inflows of $5.5 million. Changes were a MW, for an aggregate generating capacity of approximately 15.6 MW. Phase decrease to long term debt (including unamortized bond discount/premium) of Ill of Nine Canyon, which was declared operational in May 2008, includes 14 $9.1 million, increases to current debt maturities of $0.3 million, increases to wind turbines, each with a maximum generating capacity of 2.3 MW, for an long term liabilities of $0.2 million for pension liability and decommissioning aggregate generating capacity of 32.2 MW. The total Nine Canyon generating estimates, decreases to deferred inflows of $0.3 million for pensions and $0.1 capability is 95.9 MW, enough energy for approximately 39,000 average homes. million for unamortized gain on bond refunding. The change in net position of Nine Canyon produced 244.62 GWh of electricity in FY 2016 versus 196. 75 $3.5 million from operations in FY 2016 as compared to an increase of $1.9 GWh in FY 2015. The increase of 24.3 percent was a result of the third highest million in FY 2015 reflects the steady operations and treasury savings due to year on record for generation in FY 2016 as compared to the ninth highest for the 2015 refinancing.
FY 2015. Capacity factor for FY 2016 was 29.87 percent as compared to 24.00 In previous years Energy Northwest has accrued, as income (contribution) percent for FY 201 5. 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 2016 was $6.07 cents per kWh as compared to it applies to the REPI legislation. REPI was created to promote increases in
$8.31 cents per kWh in FY 2015. The cost of power fluctuates year to year the generation and utilization of electricity from renewable energy sources depending on various factors such as wind totals and unplanned maintenance and to further the advances of renewable energy technologies. This program, and is distinctly different than revenue billed cost of power discussed below in authorized under Section 1212 of the Energy Policy Act of 1992, provides revenue and expense analysis. The decrease of 27.0 percent in cost of power for financial incentive payments for electricity produced and sold by new qualifying FY 2016 was directly attributable to more favorable wind conditions along with renewable energy generation facilities. The payment stream from Nine Canyon NINE CANYON WIND PROJECT NINE CANYON WIND PROJECT Net Generation - GWhrs Cost of Power - Cents/kWh FY 2016 l 244.62 FY 2016 ) 6.07 r u FY 2015 196.75 FY 2015 8.31 FY2014 r 239.39 FY 2014 r 7.83 FY 2013 ] 228.23 FY 2013 l 7.91 FY 2012 ~ 261 .63 FY 2012 L 6.69 0 50 100 150 200 250 300 0 2 3 4 5 6 7 8 9 29
NINE CANYON WIND PROJECT participants and the REPI receipts was projected to cover the total costs over the Capacity Factor(%)
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 FY 2016 J 29.87 increased 69 percent and 80 percent for Phase I and Phase II participants respectively in FY 2008 in order to cover total project costs, projected out to FY 2015 :
I :
24.00 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 FY 2014 : : : ] :
29.40 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. FY 2013 : ) 28.00 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.
FY 2012 :
J :
32.00 Possible adjustments may be necessary to future rates depending on operating 20 22 24 26 28 30 32 34 costs and REPI funding, similar to Phase I and II.
Revenues and Expenses Analysis to $92.87 per MWh for FY 2015. Billings for FY 2015 were at the same levels Operating revenues remained relatively steady from FY 2015 levels, of FYI 6 but the average rate was impacted by less favorable generation in FY increasing $52 thousand. The project received $18.27 million from the billing of 2015. BPA scheduling charges remained relatively steady for both years at the purchasers at an average rate of $74. 70 per MWh for FY 2016 as compared $1.06 million. The stabilization of revenue is reflective of the implementation of the revised rate plan in FY 2014/2015 to account for costs of operations over the remaining life of the project, taking into account the REPI shortfalls in the early years of the project. Operating costs decreased $0.6 million in FY NINE CANYON WIND PROJECT Total Operating Costs (dollars in thousands) 2016 from $13.3 million in FY 2015 to $12. 7 million in FY 2016. Decreased operating costs in FY 2016 were due to lower turbine maintenance and major component rebuild/gear boxes of $0. 7 million offset by slightly higher labor and FY 2016 15.881 administrative non labor costs of $0.1 million.
Other income and expenses decreased $0.9 million from $4.1 million in net FY2015 17.383 expenses FY 2015 to $3.2 million in FY 2016. Decreased interest costs of $0.8 million, decreases in amortized bond expenses of $0.4 million and increased interest revenue of $0.1 million accounted for the change. Net income or FY 2014 18.750 change in net position of $3.5 million for FY 2016 was a direct result of the planned rate structure with projected treasury savings due to refunding and FY 2013 18.805 lower than budgeted operating costs.
The original plan anticipated operating at a loss in the early years and FY 2012 17.467 gradually increasing the rate charged to the purchasers to avoid a large rate 12,000 15,000 increase after the REPI expires. The REPI incentive expires 10 years from the 0 3,000 6,000 9,000 initial operation startup date for each phase. Reserves that were established
- Operating Expenses - Other Income/Expenses are used to facilitate this plan. The rate plan in FY 2008 was revised to account 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 2016 and is not anticipating receiving any future REPI incentives. The results from FY 2016 reflect the revised rate plan scenario and gradual increase in the return of total net position 30 2016 Energy Northwest Annual Report
INTERNAL SERVICE FUND The Internal Service Fund (ISF) (formerly the General Fund) was established The net increase in net position and liabilities is due to increases in accounts in May 1957. The ISF provides services to the other funds. This fund accounts for payable and payroll related liabilities of $7.8 mill ion due to year-end allocation the central procurement of certain common goods and services for the business of related expenses and a decrease to due to other projects of $0.8 million.
units on a cost reimbursement basis. (See Note 1 to Financial Statements.)
Revenues and Expenses Analysis Assets, Liabilities, and Net Position Analysis Overall results of operations improved $251 thousand from a net loss of Total assets and deferred outflows increased $7.2 million from $41.9 million $107 thousand in FY 2015 to a net income of $144 thousand in FY 2016 due to in FY 2015 to $49.1 million in FY 2016. There were decreases to cash and relocating offices back to the Multi-Purpose Facility and gaining lease revenue investments of $3.0 million, a decrease of $0.4 million to accounts receivable from the previous location.
was offset by an increase of $0.4 million to prepaid expenses and there was increase in due to other business units of $11 .2 million. Decreases to net utility plant of $1 .0 million accounted for the remainder of change in total assets.
CURRENT DEBT RATINGS {Unaudited)
Nine Canyon Rating Energy Northwest (Long-Term) Net-Billed Rating Phase I & II Phase Ill Fitch, Inc. AA A- A-Moodys Investors Service, Inc. (Moodys) Aal A2 Standard and Poor's Ratings Services (S & P) AA- NR A 31
STATEMENT OF NET POSITION As of June 30, 2016 (Dollars in thousands)
Packwood Columbia Lake Nuclear Nuclear Business Nine Canyon : Internal 2016 Generating Hydroelectric : Project Project Development Wind . Service Combined Station Project
- Number 1* Number 3* Fund Project Subtotal Fund Eliminations Total ASSETS CURRENT ASSETS Cash !$ 23,366 i$ 1,790 j 3,105 i 3,063 i $ 2,135 i 7,030 f $ 40.489 i $ 4,558 f 45,047 Investments - ; -l 5,942 : 4,031 i 9,973 : 9,973 Accounts and other receivables 160,055 ! 23,112 : 26,000 : 198 : 209,925 : 210,038 Due from other business units 445 i 303 85 : -i 1,368 ; 12,279 f (13,647)'
Materials and supplies 155,221 155,221 i 155,221 Prepayments and other 1,860 . 16 : 55 ! 193 j 2,143 ! 1,784 i 3,927 TOTAL CURRENT ASSETS 340,502 2,361 : 26,768 i 29,369 i 8,667 ! 11,452 ! 419,119 18,734 : (13,647) 424,206 RESTRICTED ASSETS (NOTE 1)
Special funds Cash 10,543 7,847 i 13,334 : 31,902 i 8,992 : 40,894 Investments 163,124 ! - ; 1,562 i 164,686 : 14,864 ! 179,550 Accounts and other receivables 118 Debt service funds Cash 76,296 : 24,379 : 45,760 . 156,800 i 156,800 Investments 9.426 : 9.426 j 9,426 Accounts and other receivables -l 61 21 8 TOTAL RESTRICTED ASSETS 250,081 ! 32,226 : 59,094 ; 21,378 ! 362,938 i 23,858 . -1 386,796 NON CURRENT ASSETS UTILITY PLANT (NOTE 2)
In service 4,222,849 ; 14,866 . 3,347 f 134,868 ; 4,375,930 : 46,285 i 4.422,215 Not in service 29.415 - ! 29.415 ! 29.415 Construction work in progress 75,989 . - i 75,989 . 75,989 Accumulated depreciation (2,768,937)' (13,057): (29.415) -,i
{1,783li (74,579) {2,887,771 )
1 (39,803); -: (2,927,574)
Net Utility Plant 1,529,901 i 1,809 j 1,564 i 60,289 1,593,563 : 6,482 . 1,600,045 Nuclear fuel, net of accumulated depreciation 893,486 ; 893,486 1 893.486 LONG TERM RECEIVABLES - i TOTAL NONCURRENT ASSETS i 2,4 23,387 , 1,809 i 1,564 j 60,289 . 2,487,049 i 6,489 i 2,493,538 OTHER CHARGES Cost in excess of billings 1,117,661 947.335 ! 1,119,806 ; 3,184,802 ; 3,184,802 Other 3,737 i 3,737 3,737 TOTAL OTHER CHARGES 1,1 17,661 ! 3,737 . 947,335 i 1,119,806 : 3,188,539 ! 3, 188,539 TOTAL ASSETS 4, 131,631 : 7,907 ! 1,006,329 f 1,208,269 : 93, 119 f 6,457,645 : 49,081 i (13,647): 6,493,079 DEFERRED OUTFLOWS Of RESOURCES Deferred outflows
- unamortized loss on bond refunding 19,226 : 213 2,057 i 22,394 ~
l
.I 22,394 Deferred pension outflows 20,664 64 42 21,608 ; 21,608 TOTAL DEFERRED OUTFLOWS OF RESOURCES 39,890 255 898 ' 646 1 2,249 . 44,002 . 44,002 TOTAL ASSETS AND DEFERRED OUTFLOWS : $ 4, 171,521 $ 7,971 . $ 1,006,584 $ 1,209, 167 $ 11,036 ; $ 95,368 $ 6,501 ,647 $ 49,081 !$ (13,647) $ 6,537,08 1 Project recorded on a liquidation basis The accompanying notes are an integral part of these combined financial statements 32 2016 Energy Northwest Annual Report
STATEMENT OF NET POSITION As of June 30, 2016 (Dollars in thousands)
Packwood Columbia Lake Nuclear Nuclear Business Nine Canyon Internal 2016 Generating Hydroelectric Project Project Development Wind Service Combined Station Project Number 1* Number 3* Fund Project Subtotal Fund Eliminations Total LIABILITIES AND NET POSITION CURRENT LIABILITIES Current maturities of long-term debt :s 3,965 : s -:$ 315 :$ 18,055 : $ -:$ 7,440 :s 29,775 : $ - :$ -:$ 29,775 Current notes payable 155,000 : 23,000 : 26,000 : 204,000 : 204,000 Accounts payable and accrued expenses 40,304 : 459 : 486 : 322 : 810 : 501 : 42,882 : 42,980 : 85,862 Due to participants 3,231 : 1,051 : 4,282 : 4,282 Due to other business units 12,253 : -. 26 : 12,279 : 1,368 : (13,647):
TOTAL CURRENT LIABILITIES 214,753 : 1,510 : 23,801 : 44,377 : 810 : 7,967 : 293,218 : 44,348 : (13,647): 323,919 LIABILITIES-PAYABLE FROM RESTRICTED ASSETS (NOTE 1)
Special funds Other liabilities 159 : 159 : 19 : 178 Debt service funds Accrued interest payable 72,805 : 24,050 : 27,783 : 2,392 : 127,030 : 127,030 TOTAL RESTRICTED LIABILITIES 72,805 : 24,050 : 27,783 : 159 : 2,392 : 127,189 : 19 : 127,208 LONG -TERM DEBT (NOTE 5)
Revenue bonds payable 3,426,005 : 841,785 : 1,042,130 : 94,180 : 5,404,100 : 5,404,100 Unamortized (discount)/ 174,059 : 105,577 : 94,607 : -. 9,822 : 384,065 : -. -. 384,065 premium on bonds - net : :
TOTAL LONG-TERM DEBT 3,600,064 : 947,362 : 1, 136,737 : 104,002 : 5,788, 165 : 5,788, 165 OTHER LONG -TERM LIABILITIES Pension liability 116,616 : 476 : 513 : 3,453 : 964 : 122,022 : 122,022 Decommissioning liability 148,056 : 9,750 : 1,454 : 159,260 : 159,260 Other 161 : -. -. -* -. -. 161 : 5: -* 166 TOTAL OTHER LONG-TERM LIABILITIES 264,833 : 476 : 10,263 : 3,453 : 2,418 : 281,443 : 5: 281,448 OTHER CREDITS Advances from members 5,911 : 5,911 : -. 5,911 and others Other -.
TOTAL OTHER CREDITS 5,911 : 5,911 : 5,911 TOTAL LIABILITIES 4, 152,455 : 7,897 : 1,005,476 : 1,208,897 : 4,422 : 116,779 : 6,495,926 : 44,372 : (13,647): 6,526,651 DEFERRED INFLOWS OF RESOURCES Deferred inflows - unamortized gain on bond refunding 991 : 1,029 : 270 : 298 : 2,588 : 2,588 Deferred pension inflows 18,075 : 74 : 79 : -. 535 : 150 : 18,913 : -. 18,913 TOTAL DEFERRED INFLOWS OF RESOURCES 19,066 '. 74 : 1,108 : 270 : 535 : 448 : .21 ,501 : 21 ,501 NET POSITION Net investment in capital assets : 1,563 : (49,394): (47,831): 6,489 : (41,342)
Restricted 18,986 : 18,986 : 23,839 : 42,825 Unrestricted 4,516 : 8,549 : 13,065 : (25,619): -. (12,554)
NET POSITION -. 6,079 : (21,859): (15,780): 4,709 : (11,071)
TOTAL LIABILITIES, NET POSITION, AND DEFERRED INFLOWS : $ 4,171,521 : $ 7,971 : $ 1,006,584 $ 1,209, 167 $ 11,036 $ 95,368 $ 6,501,647 $ 49,081 $ (13,647~ $ 6,537,081 Project recorded on a liquidation basis The accompanying notes are an integral part of these combined financial statements 33
STATEMENTS OF REVENUES. EXPENSES. AND CHANGES IN NET POSITION As Of June 30, 2016 (Dollars in thousands)
Packwood Columbia Lake Nuclear Nuclear l Business l Nine Canyon Internal 2016 Generating l Hydro electric Project Project l Development : Wind Service Combined Station j Project No.1
- No.3 *
- Fund Project Subtotal Fund Total OPERATING REVENUES : $ 433,225 : $ 2,333 j $ 8,138 j $ 19,337 ! $ 463,033 l$ -! $ 463,033 OPERATING EXPENSES Services to other business units Nuclear fuel, net 38,393 j 38,393 j 38,393 Decommissioning 7,407 ! 7,498 ! 7,498 Depreciation and amortization 77,663 [ 98 j -: 84,807 j 84,807 Operations and maintenance 173,605 j 2,090 : 8,401 : 5,701 : 189.797 j 189.797 Administrative & general 25,861 ! 26,022 j 26,022 Generation tax 5,247 ! 5,320 ! 5,320 Total operating expenses 328,176 j 2,338 j 8,635 [ 12,688 j 351 ,837 [ 351,837 OPERATING INCOME (LOSS) 105,049 j (497)j 6,649 [ 11 1,19( 111,1 96 OTHER INCOME & EXPENSE Other 14,21 1 : 27,557 : 41 ,829 [ 1,218 j 1j 84,816 ! 84,960 Gai n on DOE settlement 4,532 j 4,532 : 4,532 Investment income 1,1 53 j 86 ~ 1,482 : 1,482 Interest expense and debt amortization, net of (124,945)1 (3 3 ,402)~ (41, 579): (3,358)~ (203,284)~ (203,284) capitalized interest Plant preservation and termination costs (336)[ (1,493)l (1,493)
Depreciation and amortization (1 )j (1)
Decommissioning 6,966 : 6,966 j 6,966 Services to other business units TOTAL OTHER INCOME & EXPENSE (105,049)[ 5[ 1,2 55 [ (3,193)[ (106,982)! 14( (106,838)
INCOME(LOSS) 3,456 : 4,214 : 4,358 TOTAL NET POS ITION, BEG INNIN G OF YEAR 5,3 21 : (25,315): (1 9,994)! 4,565 ! (15,429)
TOTAL NET POSITION, END OF YEAR -l $ 6,079 j $ (2 1,859)! $ (15,780)j $ 4,709 j $ (11 ,071)
Project recorded on a liquidation basis The accompanying notes are an integral part of these combined fi nancial statements 34 2016 Energy Northwest Annual Report
STATEMENT OF CASH FLOWS As of June 30, 2016 (Dollars in thousands)
Columbia , Packwood Lake Nuclear Nuclear Business Nine Canyon Internal 2016 Gcr:~ ~otlng Hydrc::!cc.::( Ornicv*+
- "' J'-'-~ Prcjed n a.101,..nmont
...... . '-'""t' " ..... *~ W!nd Se!'!!ce Ccmb!~ed Station Project No.1
- No.3
- Fund Project Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Operating revenue receipts 206,604 s 2,500 s $ 4,030 s 19,314 s s 232,448 Cash payments for operating expenses (224, 108) (2,207) -* (3,270) ' (5,653) (23 5,238)
DOE Cash settlement 15,144 -I 15,144 Cash received from TVA fuel activities 48,218 .,I
-i -1 I
48,218 Cash payments for services net of cash received from other units (3,050) (3,050)
Net cash provided by operating activities 45,858 293 760 13,661 (3,050) 57,522 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bond refundings 46,153 -I 53,126 33,908 ! - 1 -i 133,187 Principal paid on revenue bond maturities (114,590) ' (53,750) (47,815)' (7,130) (223,285)
Payment for bond issuance and financing costs (1,770) (4) (1,634) (1,493) . (43) (4,944)
Proceeds from notes payable 155,000 53,803 83,109 ; _, 291,912 I
Payment for notes payable (93,651) (82,653) (89,729)! _,I (266,033)
Interest paid on bonds (139,942) (44,580) (51 ,719); (4,893) (241,134)
Interest paid on notes (91) - ; (66) (41) ; (198)
Payment for capital items (122,020) (171) (1) (353) (240) (40) (122,825)
Nuclear fuel acquisitions (6,039)" (6,039)
Payments received from BPA for terminated nuclear projects 27,482 53.786 -! 81,268 Net cash provided/( used) by capital and related financing activities (276,950) (175) (48,273) (19,994) (353) (12,306) (40) (358,091)
CASH FLOWS FROM NON-CAPITAL FINANCE ACTIVITIES -,
CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities (4,223) (695) (13,634) (44,153)* (5,994) (4,807) (18,332) (91,838)
Sales of investment securities 123,351 1,187 16,114 47,135 9,635 25,664 . 223,086 Interest on investments 1,688 11 44 88 82 217 100 2,230 Net cash provided/(used) by investing activities 120,816 503 I 2,524 3,070 (5,912), 5,045 7,432 133,478 NET INCREASE (DECREASE) IN CASH (110,276) 621 (45,749) (16,924) (5, 505) 6,400 4,342 (167,091)
CASH AT JUNE 30, 2015 220,481 1,169 i 81,080 79,081 : 7.799 11,014 9,208 409,832 CASH AT JUNE 30, 2016 (NOTE H) $ 110,205 $ 1,790 $ 35,331 $ 62,157 $ 2,294 $ 17,414 $ 13,550 $ 242,741 Project recorded on a liquidation basis The accompanying notes are an integral part of these combined financial statements RECONCILIATION OF DIRECT CASH FLOW TO STATEMENT OF NET POSITION Cash unrestricted Is 23,366 $ 1.790 s 3, 105 I S 3,063 $ i 2,135 is 7,030 : $ 4,558 ' s 45,047 Cash restricted special funds js 10,543 is -s 7,847 s 13,334 ' s 159 i s 19 $ 8,992 $ 40,894 Cash restricted debt service funds s 76,296 s 24,379 $ 45,760 'S 10,365 s 156,800 Total Statement of Net Position cash s 110,205 1.790 s 35,331 s 62,157 2,294 s 17,414 13,550 242.741 35
STATEMENT OF CASH FLOWS As of June 30, 2016 (Dollars in thousands)
Columbia i Packwood Lake i Nuclear Nuclear Business Nine Canyon Internal 2016 i Generating . Hydroelectric i Project Project Development Wind Service Combined
- Station Project ' No.1
- No.3
- Fund Project Fund Total RECONCILIATION OF NET OPERATING REVENUES TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net income/loss from operations 105,049 ' $ -;$ (497) $ 6,649 ' $ -' s 111,196 Adjustments to reconcile net operating revenues to cash provided by operating activities:
Depreciation and amortization 116,649 234 i 6,812 ' 1,043 124,836 Decommissioning 7,412 91 7,503 Non--0perating revenues (1) 144 143 Other 20,136 41 1,219 ' 262 ' (45) 21,613 Change in operating assets and liabilities:
Deferred charges/costs in excess of billings (37,859) ' 175 ' (37,684)
Accounts receivable (146,023) ' (1 l)i (154) (239) . 327 (146,100)
Materials and supplies (12,259)! -J (12,259)
Prepaid and other assets 70 : .: (382) (368)
Due from/to other business units 9,588 : 88 511 108 : (11,964) (1,669)
Due from/to participants Accounts payable (16,905) ' (94) (499) (18) 7,827 (9,689)
Net cash provided by operating and nonoperating activit ies s 45,858 $ 293 $ $ $ 760 $ 13,661 $ (3,050) $ 57,522 Non-cash activities Capitalized interest 4,778 -i $ -;$ 4,778 !
Bond Refunding 158,807 292,375 is 285,783 ' $ _: 736,965
- Decommissioning Liability Adjustment iS 7,062 s 7,062 '
Project recorded on a liquidation basis The accompanying notes are an integral part of these combined financial sta tements 36 2016 Energy Northwest Annual Report
NOTES TO FINANCIAL STATEMENTS NOTE 1 - Summary of Operations and Significant obligated to pay annual costs of Packwood including debt service, whether Accounting Policies or not Packwood is operable. The participants also share Packwood revenue Energy Northwest, a municipal corporation and joint operating agency (See Note 5).
of the state of Washington, was organized in 1957 to finance, acquire, Nuclear Project No. 1, a 1,250-MWe plant, was placed in extended construct and operate facilities for the generation and transmission of construction delay status in 1982, when it was 65 percent complete. Nuclear electric power. Project No. 3, a 1,240-MWe plant, was placed in extended construction Membership consists of 22 public utility districts and 5 municipalities. All delay status in 1983, when it was 75 percent complete. On May 13, 1994, members own and operate electric systems within the state of Washington. Energy Northwest's Board of Directors adopted resolutions terminating Energy Northwest is exempt from federal income tax and has no taxing Nuclear Projects Nos. 1 and 3. All funding requirements remain as net-billed authority. obligations of Nuclear Projects Nos. 1 and 3. Energy Northwest is no longer Energy Northwest maintains seven business units. Each unit is financed responsible for site restoration costs for Nuclear Project No. 3. (See Note 10) and accounted for separately from all other current or future business units, The Business Development Fund was established in April 1997 to pursue and is accounted for as a majorfund for governmental accounting purposes. and develop new energy related business opportunities. There are four All electrical energy produced by Energy Northwest's net-billed business main business lines associated with this business unit General Services and units is ultimately delivered to electrical distribution facilities owned and Facilities, Generation, Professional Services, and Business Unit Support.
operated by Bonneville Power Administration (BPA) as part of the Federal The Nine Canyon Wind Project (Nine Canyon) was established in January Columbia River Power System. BPA in turn distributes the electricity to 2001 for the purpose of exploring and establishing a wind energy project.
electric utility systems throughout the Northwest, including participants in Phase I of the project was completed in FY 2003 and Phase II was completed Energy Northwest's business units, for ultimate distribution to consumers. in FY 2004. Phase I and II combined capacity is approximately 63.7 MWe.
Participants in Energy Northwest's net-billed business units consist of public Phase Ill was completed in FY 2008 adding an additional 14 wind turbines utilities and rural electric cooperatives located in the western United States to Nine Canyon and adding an aggregate capacity of 32.2 MWe. The total who have entered into net-billing agreements with Energy Northwest and number of turbines at Nine Canyon is 63 and the total capacity is 95.9 MWe.
BPA for participation in one or more of Energy Northwest's business units. The Internal Service Fund was established in May 1957. It is currently used BPA is obligated by law to establish rates for electric power which will to account for the central procurement of certain common goods and services recover the cost of electric energy acquired from Energy Northwest and for the business units on a cost reimbursement basis.
other sources, as well as BPA's other costs (See Note 5). Energy Northwest's fiscal year begins on July 1 and ends on June 30. In Energy Northwest operates the Columbia Generating Station (Columbia), preparing these financial statements, the company has evaluated events and a 1, 157-MWe (Design Electric Rating, net) generating plant completed in transactions for potential recognition or disclosure through September 22, 1984. Energy Northwest has obtained all permits and licenses required 2016, the date of audit opinion issuance date.
to operate Columbia. Columbia was issued a standard 40-year operating The following is a summary of the significant accounting policies:
license by the Nuclear Regulatory Commission (NRC) in 1983. On January 19, 2010 Energy Northwest submitted an application to the NRC to renew A) Basis of Accounting and Presentation: The accounting policies of the license for an additional 20 years, thus continuing operations to 2043. Energy Northwest conform to Generally Accepted Accounting Principles A renewal license was granted by the NRC on May 22, 2012 for continued (GAAP) applicable to governmental units. The Governmental Accounting operation of Columbia to December 31, 2043. Standards Board (GASB) is the accepted standard-setting body for Energy Northwest also operates the Packwood Lake Hydroelectric establishing governmental accounting and financial reporting principles Project (Packwood), a 27.5-MWe generating plant completed in 1964. this includes all GASB implementation guides, GASB technical Bulletins, Packwood has been operating under a 50-year license issued by the Federal and guidance from the American Institute of Certified Public Accountants Energy Regulatory Commission (FERC), which expired on February 28, (AICPA) that is cleared by GASB. Energy Northwest has applied all 2010. Energy Northwest submitted the Final License Application (FLA) for applicable GASB pronouncements and has applied Financial Accounting renewal of the operating license to FERC on February 22, 2008. On March Standards Board (FASB) standards, as other accounting literature, in those 4, 2010, FERC issued a one-year extension, or until the issuance of a new areas not directly prescribed by GASB and to the extent that they do not license for the project or other disposition under the Federal Power Act, conflict with or contradict GASB pronouncements. The accounting and whichever comes first. FERC is awaiting issuance of the National Oceanic reporting policies of Energy Northwest are regulated by the Washington and Atmospheric Administration's (NOAA) Biological Opinion, aher which State Auditor's Office and are based on the Uniform System of Accounts FERC will complete the final license renewal documentation for Packwood. prescribed for public utilities and licensees by FERC. Energy Northwest Costs incurred to date for relicensing are $3. 7 million included in other uses an accrual basis of accounting where revenues are recognized charges. when earned and expenses are recognized when incurred. Revenues The electric power produced by Packwood is sold to 12 project participant and expenses related to Energy Northwest's operations are considered utilities which pay the costs of Packwood. The Packwood participants are to be operating revenues and expenses; while revenues and expenses 37
related to capital, financing and investing activities are considered to of information about pensions included in the general purpose external be other income and expenses. Separate funds and books of accounts financial reports for making decisions and assessing accountability. GASB are maintained for each business unit. Payment of the obligations of Statement No. 73 is effective in fiscal year 2017. The impact of GASB one business unit with funds of another business unit is prohibited, and Statement No. 73 has not yet been determined by Energy Northwest would constitute violation of bond resolution covenants (See Note 4). management.
Energy Northwest maintains an Internal Service Fund for centralized GASB Statement No. 74, "Financial Reporting for Postemployment control and accounting of certain capital assets such as data processing Benefit Plans Other Than Pension Plans" primary objective is to improve equipment, and for payment and accounting of internal services, payroll, the usefulness of information about postemployment benefits other benefits, administrative and general expenses, and certain contracted than pensions (other postemployment benefits or OPEB) for OPEB Plans.
services on a cost reimbursement basis. Certain assets in the Internal GASB Statement No. 74 is effective in 2017, however does not apply to Service Fund are also owned by this Fund and operated for the benefit Energy Northwest as it only applies to OPEB plans.
of other projects. Depreciation relating to capital assets is charged to the GASB Statement No~ 75, "Accounting and financial Reporting for appropriate business units based upon assets held by each project. Postemployment Benefits Other than Pensions" primary objective is Liabilities of the Internal Service Fund represent accrued payroll, to improve the accounting and financial reporting for employer's with vacation pay, employee benefits, such as pensions and other post- postemployment benefits other than pensions (other postemployment retirement benefits, and common accounts payable which have been or OPEB). GASB Statement No. 75 is effective for Energy Northwest in charged directly or indirectly to business units and will be funded by fiscal year 2018. The impact of GASB Statement No. 75, however does the business units when paid. Net amounts owed to, or from, Energy not apply to Energy Northwest.
Northwest business units are recorded as Current Liabilities-Due to GASB Statement No. 77, "Tax Abatement Disclosures" primary other business units, or as Current Assets-Due from other business units objective is to assist citizens, taxpayers, legislative and oversight bodies, on the Internal Service Fund Statement of Net Position. municipal bond analysts, and others to assess the current economic The combined total column on the financial statements is for position of the entity. GASB Statement No.77 is effective in fiscal year presentation only as each Energy Northwest business unit is financed 2017, but is not applicable to Energy Northwest.
and accounted for separately from all other current and future business GASB Statement No. 78, "Pensions Provided through Certain units. The FY 2016 Combined Total includes eliminations for transactions Multiple Employer Defined Benefit Pension Plans" primary objective between business units as required in GASB Statement No. 34, "Basic is to address a practice issue regarding the scope and applicability of Financial Statements and Management's Discussion and Analysis for GASB 68, "Accounting and Financial Reporting for Pensions." This issue State and Local Governments". is associated with pensions provided through certain multiple-employer Issued and Adopted Guidance: defined benefit pension plans and to state or local governmental GASB Statement No. 72, "Fair Value Measurement and Application" employers whose employees are provided with such pensions. GASB primary objective is to address the reporting issues related to fair value Statement No. 78 is effective for fiscal year 2016, but is not applicable to measurements. This statement provides guidance for applying fair Energy Northwest.
value to certain investments and disclosures related to all fair value GASB Statement No. 80, "Blending Requirements for Certain measurements. GASB Statement No. 72 is effective for Energy Northwest Component Units-An Amendment of GASB Statement No. 14." objective in fiscal year 2016. Energy Northwest has implemented GASB Statement is to improve financial reporting by clarifying the financial statement No. 72 addressing the method we use to value our investments. (See presentation requirements for certain component units. GASB Statement Note 3) No. 80 is effective in fiscal year 2017, but is not applicable to Energy GASB Statement No. 76, "The Hierarchy of Generally Accepted Northwest.
Accounting Principles for State and Local Governments" primary GASB Statement No. 81, "Irrevocable Split-Interest Agreements" objective is to identify in the context of the current governmental objective is to improve accounting and financial reporting for irrevocable financial reporting environment the hierarchy of generally accepted split-interest agreements by providing recognition and measurement accounting principles to improve financial reporting. GASB Statement guidance for situations In which a government Is a beneficiary of the No. 76 is effective for Energy Northwest in fiscal year 2016. GASB agreement. This statement is applicable for fiscal year 2018, but is not Statement No. 76 has been implemented by Energy Northwest changing applicable to Energy Northwest.
the secondary category of guidance to GASB Implementation Guides, GASB Statement No. 82, "Pension Issues-Amendment of GASB GASB Technical Bulletins, and guidance from the AICPA that is cleared by No. 67, No. 68, and No. 73." objective is to address certain issues that GASB. FASB will now be utilized when GASB and the stated sources are have been raised with respect to GASB Statements No. 67, "Financial silent. Reporting for Pension Plans," GASB Statement No. 68, "Accounting Issued but not Adopted Guidance: and Financial Reporting for Pensions," and GASB Statement No. 73, GASB Statement No. 73, "Accounting and Financial Reporting "Accounting and Financial Reporting for Pensions and Related Assets for Pensions and Related Assets" that are not within the Scope of That Are Not within the Scope of GASB Statement 68, and Amendments GASB Statement 68, and Amendments to Certain Provisions of GASB to Certain Provisions of GASB Statements 67 and 68." Specifically, this Statements 67 and 68 primary objective is to improve the usefulness statement addresses issues regarding (1) The presentation of payroll-38 2016 Energy Northwest Annual Report
related measures in required supplementary information, (2) the selection with the retirement of a long-lived asset, such as: Columbia Generating of assumptions and the treatment of deviations from the guidance in an Station, Nuclear Project No. 1, and Nine Canyon, in the period in which it Actuarial Standard of Practice for financial reporting purposes, and (3) is incurred (See Note 9) . AROs are included in decommissioning liabilities the classification of payments made by employers to satisfy employee on the statement of net position.
(plan member) contribution requirements. GASB Statement No. 82 is effective in fiscal year 2018. The impact of GASB Statement No. 82 has F) Decommissioning and Site Restoration: Energy Northwest not yet been determined by Energy Northwest management. established decommissioning and site restoration funds for Columbia and monies are being deposited each year in accordance with an B) Utility Plant and Depreciation: Utility plant is recorded at original established funding plan (See Note 10).
cost which includes both direct costs of construction or acquisition and indirect costs. G) Restricted Assets: In accordance with bond resolutions, related Property, plant, and equipment are depreciated using the straight- agreements and laws, separate restricted accounts have been line method over the following estimated useful lives: established. These assets are restricted for specific uses including debt service, construction, capital additions and fuel purchases, unplanned Buildings and Improvements 20 - 60 years operation and maintenance costs, termination, decommissioning, Generation Plant 40 years operating reserves, financing, long-term disability, and workers' Transportation Equipment 6 - 10 years compensation claims. They are classified as current or non-current assets General Plant and Equipment 5 - 15 years as appropriate.
When both restricted and unrestricted resources are available for Group rates are used for assets and, accordingly, no gain or loss use, it is Energy Northwest's policy to use restricted resources first, then is recorded on the disposition of an asset unless it represents a major unrestricted resources as they are needed.
retirement. When operating plant assets are retired, their original cost together with removal costs, less salvage, is charged to accumulated H) Cash and Investments: For purposes of the Statement of Cash Flows, depreciation. cash includes unrestricted and restricted cash balances and each The utility plant and net position of Nuclear Projects Nos. 1 and business unit maintains its cash and investments. Short-term highly liquid 3 have been reduced to their estimated net realizable values due to investments are not considered to be cash equivalents; and are stated termination. A write-down of Nuclear Projects Nos. 1 and 3 was recorded at fair value with unrealized gains and losses reported in investment in FY 1995 and included in Cost in Excess of Billings. Interest expense, income (See Note 3) . Energy Northwest resolutions and investment termination expenses and asset disposition costs for Nuclear Projects policies limit investment authority to obligations of the United States Nos. 1 and 3 have been charged to other income and expense (See Note Treasury, Federal National Mortgage Association and Federal Home Loan 10). Banks. Safe keeping agents, custodians, or trustees hold all investments for the benefit of the individual Energy Northwest business units.
C) Capitalized Interest: Energy Northwest analyzes the gross interest expense relating to the cost of the bond sale, taking into account interest I) Accounts Receivable: The percentage of sales method is used to earnings and draws for purchase or construction reimbursements for the estimate uncollectible accounts. The reserve is then reviewed for purpose of analyzing impact to the recording of capitalized interest. adequacy against an aging schedule of accounts receivable. Accounts If estimated costs are more than inconsequential, an adjustment is deemed uncollectible are transferred to the provision for uncollectible made to allocate capitalized interest to the appropriate plant account. accounts on a yearly basis. Accounts receivable specific to each business Capitalized interest costs were $4.8 million for utility plant with no unit are recorded in the residing business unit.
capitalized Interest for fuel.
J) Other Receivables: Other receivables include amounts related to the D) Nuclear Fuel: Energy Northwest has various agreements for uranium Internal Service Fund from miscellaneous outstanding receivables from concentrates, conversion, and enrichment to provide for short-term other business units which have not yet been collected. The amounts enriched uranium product and long-term enrichment services. All due to each business unit are reflected in Due To/From other business expenditures related to the initial purchase of nuclear fuel for Columbia, units. Other receivables specific to each business unit are recorded in the including interest, were capitalized and carried at cost. residing business unit. No allowances were deemed necessary at the end of the fiscal year. Payments made by members in advance of expenses E) Asset Retirement Obl igation (ARO's): In the absence of government- incurred are included as advances from members in the Statement of Net specific guidance that directly addresses ARO's. Energy Northwest has Position.
elected to follow Accounting Standards Codification (ASC) 410, Asset Retirement and Environmental Obligations as issued by the FASB, which K) Materials and Supplies: Materials and supplies are valued at cost does not conflict with or contradict GASB standards. ASC 41 O allows using the weighted average cost method.
Energy Northwest to recognize the fair value of a liability associated 39
L) Leases: Consist of separate operating lease agreements. The total of these leases by business unit and their respective amounts paid per year are listed in the table below:
PROJECTS OPERATING LEASE COSTS (Dollars in thousands) 2017 : 2018 : 2019 : 2020 : 2021 2022-2026*
Columbia 614 : $ 614 : s 614 : s 614 : $ 614 : $ 3,070 Nuclear Project No. 1 35 : 35 : 35 : 35 : 35 : 175 Nine Canyon 710 : 710 : 710 : 710 : 710 : 3,550 Business Development Fund 37 : 37 : 37 : 37 : 37 : 185 Internal Service Fund 136 : 136 : 136 : 136 : 136 : 680 Total : $ 1,532 : $ 1,532 : $ 1,532 : $ 1,532 : $ 1,532 : $ 7,660
- The life of the assets is estimated to be through 2043, which is the year the nuclear plant is currently licensed.
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), and other immaterial liabilities. The table below summarizes activities for all long-term liabilities excluding pension and decommissioning liabilities.
LONG-TERM LIABILITIES (Dollars in thousands)
Balance 6/30/2015 ; Increase ; Decrease ; Balance 6/30/2016 Columbia Revenue bonds payable :s 3,407,450 : s 131,665 : $ 113,110 : $ 3,426,005 Unamortized (discount)/premium on bonds - net 167,965 : 27,157 : 21,063 : 174,059 Current maturities of long-term debt 114,590 : 3,965 : 114,590 : 3,965 Other noncurrent liabilities 12,978 : 12,817 : 161 3, 702, 983 : $ 162,787 : $ 261 ,580 : $ 3,604, 190 Nuclear Project No.1 Revenue bonds payable : $ 840,675 : $ 240,810 : $ 239,700 : s 841,785 Unamortized (discount)/premium on bonds - net 68,050 : 51,569 : 14,042 : 105,577 Current maturities of long-term debt 53,750 : 315 : 53,750 : 315
$ 962,475 : $ 292,694 : $ 307,492 : $ 947,677 Nuclear Project No.3 Revenue bonds payable :s 1,081 ,005 : s 230,630 : $ 269,505 : s 1,042,130 Unamortized (discount)/premium on bonds - net 53,494 : 55,172 : 14,059 : 94,607 Current maturities of long-term debt 47,815 : 18,055 : 47,815 : 18,055
$ 1, 182,314 : $ 303,857 : $ 331,379 : $ 1, 154,792 Nine Canyon Revenue bonds payable : $ 101,620 : $ -: $ 7,440 : $ 94,180 Unamortized (discount)/premium on bonds - net 11,494 : 1,672 : 9,822 Current maturities of long-term debt 7,130 : 7,440 : 7,130 : 7,440
$ 120,244 : $ 7,440 : $ 16,242 : $ 111,442
- Does not include Pension Liabilities and decommissioning liabilities; these items are in notes 6 and 9 respectively.
40 2016 Energy Northwest Annual Report
N) Debt Premium, Discount and Expense: Original issue and reacquired differ from these estimates. Certa in incurred expenses and revenues are bond premiums, discounts relating to the bonds are amortized over the allocated to the business units based on specific allocation methods that terms of the respective bond issues using the bonds outstanding method management considers to be reasonable.
which approximates the effective interest method. In accordance with GASB Statement No. 65, " Items Previously Reported as Assets and R) Deferred Inflows and Outflows: Deferred outflows of resources are Liabilities, gains and losses on debt refundings have been deferred and defined as the consumption of net assets by Energy Northwest that amortized as a component of interest expense over the shorter of the are applicable to a future reporting period, and are reported in the remaining life of the old or new debt. Expenses related to debt issuance statement of financial position in a separate section following assets.
are expensed as incurred. Deferred inflows of resources are defined as acquisitions of net assets by Energy Northwest that is applicable to a future reporting period, and
- 0) Revenue and Expenses: Energy Northwest accounts for expenses and are reported in the statement of financia l position in a separate section revenues on an accrual basis, and recovers, through various agreements, following liabilities.
actual cash requirements for operations and debt service for Columbia, These amounts consist of losses and gains on bond refundings, Packwood, Nuclear Project No. 1 and Nuclear Project No. 3. For these subsequent contributions, difference between projected and actual business units, Energy Northwest recognizes revenues equal to expenses investment income, and other GASB 68 related costs (See Note 6) as for each period. Revenues of Nuclear Project No.1 and Nuclear Project labeled on the Statement of Net Position.
No.3 are recorded under other income and expense, as these two business units are terminated nuclear projects. No net revenue or loss is S) Other Charges and Credits fo r Resources: Other charges of $3. 7 recognized, and no net position is accumulated. The difference between mill ion relate to the Packwood rel icensing effort.
cumulative billings received and cumulative expenses is recorded as either billings in excess of costs (other credits) or as costs in excess of T) Short-Term Debt: Multiple non-revolving loan facilities that were billi ngs (other charges), as appropriate. Such amounts wil l be settled establ ished for Project 1, Columbia, and Project 3 in fiscal year 2015 during future operating periods (See Note 5) . were subsequently paid in full during fiscal year 2016. Those facilities The difference between cumulative revenues and cumulative paid in full included separate facilities in the amount of $51.9 million and expenses for Packwood Hydroelectric, Nine Canyon and Business $30.8 million for Project 1; $45.5 million and $48.1 million for Columbia; Development is recognized as net income or loss and included in Net and $32.6 million and $57.1 million for Project 3. One new loan Position for each period. agreement was established in fiscal year 2016 for up to $300.0 million in Energy Northwest disti nguishes operating revenues and expenses total; $23.0 million for Project 1, $251 .0 mil lion for Columbia, and $26.0 from other income and expense items. Operating revenues and expenses million for Project 3 to fund interest expense for all three projects as generally result from the Net Billing agreements stated above or from well as operations and maintenance related expenses for Columbia . On services provided by EN's principle operations. Operating expenses June 30, 2016, $23.0 million, $155.0 million, and $26.0 million had been for Energy Northwest include the costs of operating the generation drawn for Project 1, Columbia, and Project 3 respectively. The short-term producing facility, related admin istrative fees, and depreciation on utility loan has a final maturity of June 30, 2017. Nine Canyon did not receive plant. All revenues and expenses not meeting this definition are reported short-term financing during fiscal year 2016. These balances are included as other income or expense. in current notes payable in the Statement of Net Position.
P) Compensated Absences: Employees earn leave in accordance with U) Pensions: For purposes of measuring the net pension liability (asset),
length of service. Energy Northwest accrues the cost of personal leave deferred outflows of resources and deferred Inflows of resources related in the year when earned. The liability for unpaid leave benefits and to pensions, and pension expense, Information about the fiduciary net related payroll taxes was $21 .8 million at the end of th is fiscal year and position of the Washington State Public Employees Retirement System is recorded as a current liability. (PERS) and additions to/deductions from PERS' fiduciary net position have been determined on the same basis as they are reported by PERS.
Q) Use of Estimates: The preparation of Energy Northwest financial For this purpose, benefit payments (including refunds of employee statements in conformity with GAAP requires management to make contributions) are recognized when due and payable in accordance with estimates and assumptions that directly affect the reported amounts the benefit terms, investments are reported at fair value.
of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could 41
SHORT-TERM LIABILITIES Balance Outstanding : Balance Available (Dollars in thousands)
Balance 6/30/2015 : Increases : Decreases : 6/30/2016 : at 6/3012016 Columbia Non-Revolving Loan :s 93,648 : s 155,000 : s 93,648 : s 155,000 : $ 96,000 Nuclear Project No.1 Non-Revolving Loan 51 ,850 : 53,803 : 82,653 : 23,000 :
Nuclear Project No.3 Non-Revolving Loan 32,620 : 83,109 : 89,729 : 26,000 :
Nine Canyon Short-term debt Packwood Short-term debt Business Development Short-term debt Total : $ 178,118 : $ 291,912 : $ 266,030 : $ 204,000 : $ 96,000 NOTE 2 - Utility Plant Utility plant activity for the year ended June 30, 2016 was as follows:
Balance 0613012015 ; Capital Acquisitions ; Sale or Other Dispositions ; Balance 0613012016 Columbia Generation : $ 4, 106,892 : $ 104,076 : $ (2,887): $ 4,208,081 Decommissioning 14,768: 14,768 Construction Work-in-Progress 58,203 : 560,716 : (542,929): 75,990 Accumulated Depreciation and (2,695, 114): (76,711) : 2,887 : (2,768,938)
Decommissioning :
Utility Plant, net* : $ 1,484, 749 : $ 588,081 : $ (542,929): $ 1,529,901 Packwood Generation :s 14,736 : $ 130 : s _: $ 14,866 Construction Work-in-Progress 363 : (363) :
Accumulated Depreciation (12,966): (91) : (13,057)
Utility Plant, net : $ 1,770 : $ 402 : $ (363) : $ 1,809 Business Development Generation : $ 3,011 : $ 336 : $ -: s 3,347 Construction Work-in-Progress 490 : (490) :
Accumulated Depreciation (1 ,556f (227)'. (1,783)
Utility Plant, net :$ 1,455 : $ 599 : $ (490): $ 1,564 Nine Canyon Generation : $ 133,782 : s 225 : s -: $ 134,007 Decommissioning 861 : 861 Construction Work-in-Progress 1,047 : (1,047):
Accumulated Depreciation and (67,748): (6,831): (74, 579)
Decommissioning Utility Plant, net* :$ 66,895 : $ (5,559): $ (1 ,047): $ 60,289 Internal Service Fund Generation :5 46,761 : s 71 : $ (547); $ 46,285 Construction Work-in-Progress 53 : 5,456 : (5,509):
Accumulated Depreciation (39,307) '. (1,043): 547 : (39,803)
Utility Plant net : $ 7,507 : $ 4,484 : $ (5,509): $ 6,482
- Does not include nuclear fuel, net of amortization 42 2016 Energy Northwest Annual Report
NOTE 3 - Investments Fair Market Value: Energy Northwest investments have been adjusted Interest rate risk: In accordance with its investment policy, Energy to reflect available market values as of June 30, 2016 obtained from available Northwest manages its exposure to declines in fair values by limiting financial industry valuation sources. Energy Northwest categorizes its fair investments to those with maturities as designated in specific bond value measurements within the fair value hierarchy established by GAAP. The resoiut1ons to coincide with expected use ot the tunds. hierarchy is based on the valuation inputs used to measure the fair value Credit risk: Energy Northwest's investment policy restricts investments to of the asset. Level 1 inputs are quoted prices in active markets for identical debt securities and obligations of the U.S. Treasury, U.S. government agencies assets; Level 2 inputs are significant other observable inputs; Level 3 inputs Federal National Mortgage Association and the Federal Home Loan Banks, are significant unobservable inputs. All EN fair market measurements are certificates of deposit and other evidences of deposit at financial institutions quoted at Level 2.
qualified by the Washington Public Deposit Protection Commission (PDPC),
and general obligation debt of state and local governments and public NOTE 4 - Long-Term Debt authorities recognized with one of the three highest credit ratings (AAA, Each Energy Northwest business unit is financed separately. The AA+, AA, or equivalent). This investment policy is more restrictive than the resolutions of Energy Northwest authorizing issuance of revenue bonds for state law. each business unit provide that such bonds are payable from the revenues Concentration of credit risk: Energy Northwest's investment policy of that business unit. All bonds issued under resolutions Nos. 769, 775 and has restrictions on concentration of credit risk. No limits of concentration 640 for Nuclear Projects Nos. 1, 3 and Columbia, respectively, have the same are set on U.S. Treasury related to securities or cash holdings. Excluding the priority of payment within the business unit (the "prior lien bonds"). No exceptions noted, no more than 50% of the entity's total Investment portfolio prior lien bonds remain outstanding related to Columbia authorized under will be invested in a single security type or with a single financial Institution. resolution No. 640. All bonds issued under resolutions Nos. 835, 838 and Custodial credit risk, deposits: For a deposit, this is the risk that in 1042 (the "electric revenue bonds") for Nuclear Projects Nos. 1, 3 and the event of bank failure, Energy Northwest's deposits may not be returned Columbia, respectively, are subordinate to the prior lien bonds and have to it. Energy Northwest's demand deposit interest bearing accounts and the same subordinated priority of payment within the business unit. Nine certificates of deposits are covered up to $250,000 by Federal Depository Canyon's bonds were authorized by the following resolutions: Resolution No.
Insurance (FDIC) while time and savings deposit non-interest bearing 1214 {2001 Bonds), Resolution No. 1299 (2003 Bonds), Resolution No. 1376 accounts are covered up to an additional $250,000 by FDIC. All interest and (2005 Bonds), Resolution No.1482 (2006 Bonds), Resolution No. 1722 (2012 non-interest bearing deposits are covered by collateral held in a multiple Bonds), Resolution No. 1789 (2014 Bonds), and Resolution No. 1824 (2015 financial institution collateral pool administered by the Washington state Bonds). No 2001, 2003, or 2005 Nine Canyon bonds remained outstanding Treasurer's Local Government Investment Pool (PDPC). Under state law, public as of June 30, 2016 under Resolution Nos. 1214, 1299, and 1376 respectively.
depositories under the PDPC may be assessed on a prorated basis if the pool's During the year ended June 30, 2016, Energy Northwest issued, for Project collateral is insufficient to cover a loss. All deposits are insured by collateral 1, Columbia, and Project 3, 2015-C fixed-rate bonds. The Series 2016-A fixed-held in the multiple financial institution collateral pool. State law requires rate bonds and 2016-B fixed-rate bonds for Project 1, Columbia, and Project deposits may only be made with institutions that are approved by the PDPC. 3 were also issued. The Project 1, Columbia, and Project 3 bonds were issued Custodial credit risk, investments: For an investment, custodial credit with a coupon interest rate ranging from 1.65 percent to 5.0 percent.
risk is the risk that, in the event of failure of the counterparty, EN will not The 2015-C bonds for Project 1, Columbia, and Project 3 are tax-exempt be able to recover the value of its investments or collateral securities in fixed-rate bonds issued to repay an outstanding Note obligation originally possession of an outside party. EN's investment policy addresses this risk. All issued to repay prior Project 1, Columbia, and Project 3 bonds. The Series securities owned by Energy Northwest are held by a third party custodian, 2016-A bonds issued for Project 1, Columbia, and Project 3 are tax-exempt acting as an agent for EN under the terms of a custody agreement. fixed-rate bonds. Series 2016-B bonds issued for Project 1, Columbia, and AVAILABLE-FOR-SALE INVESTMENTS (Dollars in thousands)
Amortized Cost : Unrealized Gains : Unrealized Losses : Fair Value (1) (2)
Columbia :s 162,995 : $ 146 : s (17) : s 163,124 Packwood Nuclear Project No. 1 June 30, Nuclear Project No. 3 Investment Type Rating : 2016 Business Development Fund 5,937 : 5: 5,942 Federal Home Loan Bank AA+ ; 25%
Internal Service Fund 14,857 : 1; 14,864 Federal National Mortgage AA+ ; 7%
Nine Canyon Wind 14,969 : 50 : 15,019 Assn.
U.S. Treasury AA+ ; 69%
(1) All investments are in U.S. Government backed securities including U.S. Government Agencies and Treasury Bills.
(2) The majority of investments have maturities of less than 1 year. Approximately $1 million have a maturity beyond 1 year with 100%
the longest maturity being December 8th, 2017.
43
Project 3 are taxable fixed-rate bonds. These bonds were issued in majority to 2015 REFUNDING RESULTS refund prior Project 1, Columbia, and Project 3 bonds. The 2016-A, and 2016- Outstanding principal on revenue and refunding bonds for the various B refunding bonds resulted in a combined economic loss of $0.8 million and business units as of June 30, 2016, and future debt service requirements for
$0.8 million for Project 1 and Columbia respectively while Project 3 realized these bonds are presented in the following tables:
an economic gain of $0.1 million.
Energy Northwest also defeased certain revenue bonds by placing the 2016 -A {Tax-Exempt) Transaction Columbia ; Project 1 : Project 3 net proceeds from the refunding bonds in irrevocable trusts to provide for Cash Flow Difference all required future debt service payments on the refunded bonds until the Old debt service cash flows :s 115,227 : s 239,385 : s 248,360 dates of redemption. Accordingly, the trust account assets and liabilities for New debt service cash flows 135,995 : 290,068 : 304, 103 the defeased bonds are not included in the financial statement. In FY 2016 Net Cash Flow Savings (Dissavings) :s (20,768); s (50,683); s (55.743) defeasements included $214 million, $216 million, and $512 million for Project Nos. 1 and 3, and Columbia respectively. Economic Gain I Loss The Weighted Average Coupon Interest Rates and Total Defeased Bonds Present value of old debt service cash :s 109,637 : s 238,240 : s 246.735 flows :
for Project 1, Columbia, and Project 3 2015-C; and Project 1, Columbia, and Present value of new debt service cash 110,073 : 238,991 : 246,352 Project 3 2016-A and 2016-B are presented in the following tables:
flows Economic Gain (Loss) : $ (436); $ (751); $ 383 WEIGHTED AVERAGE COUPON INTEREST RATE FOR REFUNDED BONDS 2016-8 (Taxable) Transaction Columbia : Project 1 : Project 3 2015C 2016A 20168 (A) N/A Cash Flow Difference Project 1 5.39%
Columbia (A) 4.05% 0.85%
Old debt service cash flows :s 3,655 : s -: s 4,045 New debt service cash flows 5,116 : 5,460 Project 3 (A) 5.17% 1.74%
Total (A) 5.06% 1.32%
Net Cash Flow Savings (Dissavings) : $ (1,461); s -: s (1,415)
Economic Gain I Loss Present value of old debt service cash : $ 3,638 : $ -: $ 4,026 WEIGHTED AVERAGE COUPON INTEREST RATE flows FOR NEW BONDS Present value of new debt service cash 3,968 : 4,308 flows 2015C 2016A 20168 Project 1 4.32% 5.00% 1.65%
Economic Gain (Loss) :s (330); s -: s (282)
Columbia 5.00% 5.00% 3.05%
Project 3 5.00% 5.00% 2.70%
Total 4.73% 5.00% 2.71%
TOTAL DEFEASED (Dollars in thousands) 2015C 2016A 20168 Total Project 1 (A) s 239,385 N/A s 239,385 Columbia (A) s 105,490 s 3,655 $ 109,145 Project 3 (A) s 247,405 s 4,045 s 251,450 Total (A) s 592,280 $ 7.700 s 599,980 (A) The 2015C Bonds were issued with the purpose of repaying $51.85 million, $45.53 million, and S32.62 million of Project 1, Columbia, and Project 3 Notes respectively, which were established in June 2015.
44 2016 Energy Northwest Annual Report
COLUMBIA REVENUE AND REFUNDING BONDS NUCLEAR PROJECT NO. 1 REFUNDING REVENUE BONDS (Dollars in thousands) (Dollars in thousands)
Coupon Rate Serial or Term Original Issue ; Amount Coupon Rate Serial or Term Original Issue ;
Series (%) Maturities Amount ; Outstanding Series (%) Maturities Amount : Amount LV\J'-tl-\ 5.25 /-i-20i8 422,350 : $ 20,375 2007A ~.uu /-1-LUl I 51,/30 : ~ 15,895 2004C 5.25 7-1-2018 26,620 : 2,825 2007C 5.00 7-1-2017 219,020 : 46.140 2006A 5.00 7-1-2020 434,210 : 50,000 2008A 5.00-5.25 7-1-2017 230,535 : 54,350 2006D 5.80 7-1-2023 3,425 : 3,425 2008D 5.00 7-1-2017 72,000 : 6,580 2007A 5.00 7-1-17/2018 77,575 : 20,105 2010A 3.00-4.00 7-1-2017 71,150 : 10,980 20078 5.33 7-1-20/2021 10,665 : 9,935 2012A 5.00 7-1-2017 155,390 : 98,700 2007D 5.00 7-1-2112024 35,080 : 24,235 20128 5.00 7-1-2017 41,285 : 41,285 2008A 5.00-5.25 7-1-16/2018 110,935 : 32,910 2014C 5.00 7-1-25/2027 197,110 : 197,110 20088 5.95 7-1-20/2021 14,850 : 12,025 2015A 5.00 7-1 -2712028 117,815 : 117,815 2008C 5.00-5.25 7-1-2112024 37 ,240 : 28,240 20158 0.60-0.98 7-1 -16/2017 12,435 : 12,435 2009A 4.00-5.00 7-1-16/2018 116,425 : 59,345 2015C 3.00-5.00 7-1-2025 44,005 : 44,005 20098 6.80 7-1-23/2024 18,515 : 9,780 2016A 5.00 7-1-25/2026 195,525 : 195,525 2009C 4.25-5.00 7-1-20/2024 69,170 : 41,235 20168 1.65 7-1-2019 1,280 : 1,280 20108 3.75-4.25 7-1-20/2024 16,005 : 16,005 2010C 4.52-5.12 7-1-20/2024 75,770 : 75,770 Revenue bonds payable 842,100 2010D 5.61-5.71 7-1-23/2024 155,805 : 155,805 Estimated fair value at June 30, 2016 993,528 (8) 2011A 4.00-5.00 7-1-16/2023 311,245 : 270,105 (8) The estimated fair value shown has been reported to meet the disclosure requirements of the 20118 4.19-5.19 7-1-19/2024 29,920 : 29,920 Accounting Standards Codification (ASC) 820 and does not purport to represent the amounts at 2011C 3.55 7-1-2019 4,600 : 4,600 which these obligations would be settled.
2012A 5.00 7-1-18/2021 441,240 : 441,240 2012D 4.00-5.00 7-1-25/2044 34,140 : 34,140 2012E 2.15-4.14 7-1-18/2037 748,515 : 723,030 NUCLEAR PROJECT NO. 3 REFUNDING REVENUE BONDS 2014A 3.00-5.00 7-1-17/2040 517,720 : 501,175 (Dollars in thousands) 20148 0.5-4.05 7-1-17/2030 90,520 : 72,445 Coupon Rate Serial or Term Original Issue ;
Series (%) Maturities Amount ; Amount 2015A 4.00-5.00 7-1-2112038 330,460 : 330,460 1993C 5.75 7-1-16/2018 522,853 : 12,151 (A) 20158 0.55-3.84 7-1-16/2038 329,175 : 329, 175 2007A 4.50-5.00 7-1-17/2018 84,465 : 17,430 2015C 5.00 7-1-30/2031 38,525 : 38,525 2007C 5.00 7-1-17/2018 61,085 : 20,025 2016A 5.00 7-1-18/2032 89,055 : 89,055 2008A 5.25 7-1-2018 13,790 : 13,790 20168 1.65-3.2 7-1-19/2028 4,085 : 4,085 2008D 5.00 7-1-2017 64,295 : 8,525 2009A 5.00-5.25 7-1-2018 116,055 : 91,365 Revenue bonds payable 3,429,970 2010A 5.00 7-1-17/2018 279,980 : 263,955 Estimated fair value at June 30, 2016 3,895,874 (8) 2011A 4.00-5.00 7-1-2018 92,285 : 92,285 (8) The estimated fair value shown has been reported to meet the disclosure requirements of the 2012A 5.00 7-1 -2018 67,885 : 67,885 Accounting Standards Codification (ASC) 820 and does not purport to represent the amounts at which these obligations would be settled. 20128 3.00-5.00 7-1-2017 30,330 : 22,995 2014C 5.00 7-1-2028 72 ,305 : 72,305 2015A 3.00-5.00 7-1-17/2026 79,040 : 79,040 20158 0.60-1.38 7-1-16/2018 33,545 : 33,545 2015C 5.00 7-1-2026 26,675 : 26,675 2016A 5.00 7-1-18/2027 198,535 : 198,535 20168 1.65-3.05 7-1-19/2027 5,420 : 5,420 Compound interest bonds accretion 34,259 Revenue bonds payable 1,060,185 Estimated fair value at June 30, 2016 1,214,398 (8)
(A) Compound Interest Bonds (B) The estimated fair value shown has been reported to meet the disclosure requirements of the Accounting Standards Codification (AS() 820 and does not purport to represent the amounts at which these obligations would be settled.
45
NINE CANYON WIND PROJECT REVENUE AND REFUNDING BONDS (Dollars in thousands}
Coupon Rate Serial or Term Original Issue :
Series (%} Maturities Amount : Amount 2006 5.00 7-1-2016 69.410 : s 2,840 2012 3.00-5.00 7-1-16/2023 13,750 : 10,640 2014 5.00 7-1-16/2023 36,750 : 33,245 2015 4.00-5.00 7-1-17/2030 54,895 : 54,895 (B} The estimated fair value shown has been reported to meet the disclosure requirements of the Accounting Standards Codification (AS(} 820 and does not purport to represent the amounts at Revenue bonds payable 101,620 which these obligations would be settled.
Estimated fair value at June 30, 2016 116,280 (B}
Total Bonds Payable 5.433,875 Estimated fair value at June 30, 2016 6,220,080 DEBT SERVICE REQUIREMENTS As of June 30, 2016 (Dollars in thousands}
COLUMBIA NUCLEAR PROJECT NO. 1 FISCAL YEAR* ; PRINCIPAL ; INTEREST ; TOTAL FISCAL YEAR * ; PRINCIPAL : INTEREST : TOTAL 6/30/2016 Balance:** : $ 3,965 : $ 72,805 : s 76,770 6/30/2016 Balance:** : $ 315 : $ 24,050 : $ 24,365 2017 : 96,715 : 144,627 : 241 ,342 201 7 : 286,050 : 41,122 : 327,172 2018 : 426,295 : 140,582 : 566,877 2018 : 27,444 : 27.444 2019 : 417,255 : 125,129 : 542,384 2019 : 1,280 : 27,444 : 28,724 2020 : 357,000 : 109,789 : 466,789 2020 : 27.423 : 27.423 2021 : 359,405 : 95,088 : 454.493 2021 : 27.423 : 27.423 2022-2026 : 1,032,085 : 269.489 : 1,301 ,574 2022-2026 : 367,705 : 125,592 : 493,297 2027-2031 : 363,505 : 154,360 : 517,865 2027-2028 : 186,750 : 12,354 : 199,104 2032-2036 : 241,695 : 61,740 : 303,435 2037-2041 : 123,505 : 12,639 : 136,144 2042-2044 : 8,545 : 724 : 9,269
$ 3,429,970 : $ 1,186,972 : $ 4,616,942 $ 842, 100 : $ 312,852 : $ 1,154,952
. 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, 2016. Principal and Interest due July 1, 2016.
NUCLEAR PROJECT NO. 3 NINE CANYON WIND PROJECT FISCAL YEAR* ; PRINCIPAL : INTEREST ; TOTAL FISCAL YEAR * : PRINCIPAL ; INTEREST ; TOTAL 6/30/2016 Balance:** ; $ 18,055 : s 27,783 : $ 45,838 6/30/2016 Balance:** ; $ 7.440 : $ 2.416 : s 9,856 201 ( 191,230 : 49.382 : 240,612 2017 : 7,640 : 4,471 : 12,111 2018 : 481,805 : 41.413 : 523,218 2018 : 8,010 : 4,105 : 12,115 2019 : 1,350 : 18,330 : 19,680 2019 : 8,425 : 3,705 : 12, 130 2020 : 18,308 : 18,308 2020 : 8,835 : 3,296 : 12,1 31 2021 : 18,308 : 18,308 2021 : 9,295 : 2,855 : 12,150 2022-2026 : 165,540 : 89,720 : 255,260 2022-2026 : 32,500 : 7,927 : 40,427 2027-2028 : 202,205 : 13,646 : 215,851 2027-2030 : 19,475 : 1,985 : 21 .460
$ 1,060,185 : $ 276,890 : $ 1,337,075 $ 101,620 : $ 30,760 : $ 132,380
- 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, 2016. Principal and Interest due July 1, 2016.
r NOTE 5 - Net Billing Security - Nuclear Projects Nos. 1 and 3 and Columbia transfer their membership to Plan 3. PERS members joining the system on or The participants have purchased all of the capability of Nuclear Projects after March 1, 2002 for state and higher education employees, or September 1, Nos. 1 and 3 and Columbia. BPA has in turn acquired the entire capability 2002 for local government employees have the irrevocable option of choosing from the participants under contracts referred to as net-billing agreements. membership in either PERS Plan 2 or Plan 3. The option must be exercised Under the net-billing agreements for each of the business units, participants within 90 days of employment. Employees who fail to choose within 90 days are obligated to pay Energy Northwest a pro-rata share of the total annual default to Plan 3.
costs of the respective projects, including debt service on bonds relating to PERS is comprised of and reported as three separate plans for accounting each business unit. BPA is then obligated to reduce amounts from participants purposes: Plan 1, Plan 2/3, and Plan 3. Plan 1 accounts for the defined under BPA power sales agreements by the same amount. The net-billing benefits of Plan 1 members. Plan 2/3 accounts for the defined benefits of Plan agreements provide that participants and BPA are obligated to make such 2 members and the defined benefit portion of benefits for Plan 3 members.
payments whether or not the projects are completed, operable or operating Plan 3 accounts for the defined contribution portion of benefits for Plan 3 and notwithstanding the suspension, interruption, interference, reduction or members. Although members can only be a member of either Plan 2 or Plan curtailment of the projects' output. 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the On May 13, 1994, Energy Northwest's Board of Directors adopted resolutions same pension trust fund. All assets of this Plan 2/3 may legally be used to pay terminating Nuclear Projects Nos. 1 and 3. The Nuclear Projects Nos. 1 and 3 the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, project agreements and the net-billing agreements, except for certain sections as defined by the terms of the plan. Therefore, Plan 2/3 is considered to be a which relate only to billing processes and accrued liabilities and obligations single plan for accounting purposes. Pursuant to RCW 41.45.060, Washington under the net-billing agreements, ended upon termination of the projects. State Department of Retirement Systems (DRS) will allocate a certain portion Energy Northwest previously entered into an agreement with BPA to provide of employer contributions from Plan 2/3 to Plan 1 in order to fund its unfunded for continuation of the present budget approval, billing and payment processes. actuarially accrued liability (UAAL).
With respect to Nuclear Project No. 3, the ownership agreement among Energy Northwest and private companies was terminated in FY 1999. (See Note 10) B. Benefits Provided PERS provides retirement, disability and death benefits. Benefit provisions Security - Packwood Lake Hydroelectric Project are established by state statute and can only be modified by the state legislature.
Power produced by Packwood is provided to the 12 member utilities. The PERS Plan 1 and Plan 2 retirement benefits are financed from a combination member utilities pay the annual costs, including any debt service, of Packwood of investment earnings and employer and employee contributions. Employee and are obligated to pay these annual costs whether or not Packwood is contributions to the PERS Plan 1 and Plan 2 defined benefit plans accrue interest operational. The Packwood participants also share project revenue to the at a rate specified by the Director of DRS. Benefit increases are provided to extent that the amounts exceed project costs. benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90% funded for two consecutive NOTE 6 - Pension Plans years are given 2.5% increases. Members in plans that have not exceeded 90%
For purposes of measuring the net pension liability, deferred outflows/ funded, or have fallen below 80%, are given 1% increases.
inflows of resources, and pension expense, information about the fiduciary The benefit provisions stated in the following paragraphs of this section net position of the Washington State Public Employees Retirement System are current provisions and apply to active plan participants. Vested, terminated (PERS) and additions to/deductions from PERS' fiduciary net position have been employees who are entitled to benefits but are not receiving them yet are bound determined on the same basis as they are reported by PERS. For this purpose, by the provisions in effect at the time they last terminated their public service.
plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance 1. PERS Plan 1 with the benefit terms. Investments are reported at fair value. Provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member's average final compensation (AFC)
A. Plan Description times the member's years of service. The AFC is the average of the member's 24 PERS was established in 1947 and its retirement benefit provisions are highest consecutive service months. Members are eligible for retirement from contained in chapters 41.34 and 41.40 RCW. PERS is a cost-sharing multiple- active status at any age with at least 30 years of service, at age 55 with at least employer retirement system comprised of three separate pension plans for 25 years of service, or at age 60 with at least five years of service.
membership purposes. PERS Plan 1 and PERS Plan 2 are defined benefit plans, Members retiring from inactive status prior to the age of 65 may receive and PERS Plan 3 is a defined benefit plan with a defined contribution component. actuarially reduced benefits. PERS Plan 1 retirement benefits are actuarially PERS members include elected officials; state employees; employees of the reduced to reflect the choice of a survivor benefit. Other benefits include duty Supreme, Appeals and Superior Courts; employees of the legislature; employees and non-duty disability payments, an optional cost of- living adjustment (COLA),
of district and municipal courts; employees of local governments; and higher and a one-time duty-related death benefit, if found eligible by the Department education employees not participating in higher education retirement programs. of Labor and Industries.
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 28, 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercised an option to 47
- 2. PERS Plan 2/3 The PERS Plan 2/3 required contribution rates (expressed as a percentage PERS Plan 2/3 provides retirement, disability and death benefits. Retirement of covered payroll) at the close of Fiscal Years 2015 and 2016 for local benefits are determined as two percent of the member's average final government units were as follows:
compensation (AFC) times the member's years of service for Plan 2 and 1 percent of AFC for Plan 3. PERS Plan 2 members are vested after the completion Actual Employer Employee Plan 2 Employee Plan 3
!Contribution Rates of five years of eligible service.
2015 9.21% 4.92% 0%
The AFC is the monthly average of the member's 60 highest-paid consecutive 2016 11.18% 6.12% 0%*
service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit.
Retirement before age 65 is considered an early retirement. PERS Plan 2/3 Both Energy Northwest and the employees made the required contributions members who have at least 20 years of service credit and are 55 years of age during fiscal years 2016, 2015, and 2014. The Company's required employer or older are eligible for early retirement with a reduced benefit. The benefit is contributions for the years ending June 30 were as follows (in thousands):
reduced by a factor that varies according to age, for each year before age 65.
PERS Plan 2/3 members who have 30 or more years of service credit and are at 2016 2015 2014 least 55 years old can retire under one of two provisions, if hired prior to May PERS Plan 1 $ 35 $ 32 $ 43 2, 2013: PERS Plan 1 UAAL 6,106 5,679 5,342
- With a benefit that is reduced by three percent for each year before age PERS Plan 2/3 8,200 7,108 6,564 65;or Total $ 14,341 $ 12,819 $ 11,949
- With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to work rules D. Pension Costs PERS Plan 2/3 members hired on or after May 1, 2013 have the option to 1. PERS Plan 1 retire early by accepting a reduction of five percent for each year of retirement At June 30, 2016, Energy Northwest reported a liability of $65,004 thousand before age 65. This option is available only to those who are age 55 or older for its proportionate share of the PERS Plan 1 net pension liability. The net and have at least 30 years of service. PERS Plan 2/3 retirement benefits are also pension liability was measured as of June 30, 2015, and the total pension actuarially reduced to reflect the choice of a survivor benefit. liability used to calculate the net pension liability was determined by an actuarial Plan 2/3 benefits include duty and nonduty disability payments, a cost- of- valuation as of June 30, 2014 rolled forward to that date. Energy Northwest's living allowance (based on the Consumer Price Index), capped at three percent proportion of the net pension liability was based on the contributions received annually and a one-time duty-related death benefit, if found eligible by the by PERS during the measurement period for employer payroll paid dates from Department of Labor and Industries. July 1, 2014 through June 30, 2015, relative to the total employer contributions received from all of PERS' participating employers as well as the statutorily C. Contributions required contributions required to fund the unfunded actuarial accrued liability.
At June 30, 2013, June 30, 2014 and June 30, 2015 Energy Northwest's
- 1. PERS Plan 1 Contributions respective proportionate share was 1.186848%, 1.216683% and 1.242700%.
The PERS Plan 1 member contribution rate is established by statute at For the year ended June 30, 2016, Energy Northwest recognized pension 6.00%. The employer contribution rate is developed by the Office of the expense of $5,377 thousand for its proportionate share of PERS Plan 1 pension State Actuary and includes an administrative expense component that is expense.
currently set at 0.18%. At June 30, 2016, Energy Northwest reported its proportionate share of The PERS Plan 1 required contribution rates (expressed as a percentage PERS Plan 1 deferred outflows of resources and deferred inflows of resources of covered payroll) at the close of Fiscal Years 2015 and 2016 for local from the following sources (in thousands):
government units were as follows:
Deferred Outflows Deferred Inflows Resources Resources Actual Contribution Rates Employer Employee Differences between expected and actual $ - $ 0 2015 9.21% 6.00%
economic experience 2016 11.18% 6.00%
Changes in actuarial assumptions - -
Net difference between projected and actual 3,556
- 2. PERS Plan 2/3 Contributions investment earnings The PERS Plan 2/3 employer and employee contribution rates are Changes in proportion and differences between developed by the Office of the State Actuary to fully fund Plan 2 and the contriputions and proportionate share of contributions defined benefit portion of Plan 3. The Plan 2/3 employer rates include a Contributions paid to PERS subsequent to the 6,140 -
component to address the PERS Plan 1 unfunded actuarial accrued liability measurement date (UAAL) and an administrative expense that is currently set at 0.18%. The Difference between actual and proportionate Plan 2/3 contributions related to the Plan 1 UAAL are allocated by DRS and employer contributions included within the Plan 1 fiduciary net position amounts. Total $ 6,140 $ 3,556 48 2016 Energy Northwest Annual Report
$6, 140 thousand reported as deferred outflows of resources related to as deferred outflows and inflows of resources related to the PERS Plan 2/3 will pensions resulting from Energy Northwest contributions to PERS Plan 1 be recognized in pension expense as follows (in thousands):
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2017. Other amounts Vear ended June 30: Pension Expense Amount reported as deferred outflows and inflows of resources related to PERS Plan 2017 s (3,743) 1 pensions will be recognized in pension expense as follows (in thousands): 2018 (3,743) 2019 (3,742)
Vear ended June 30: Pension Expense Amount 2020 3,369 2017 $ (1,378) 2021 2018 (1,378) Thereafter 2019 (1,379) Total $ (7,859) 2020 579 2021 - E. Actuarial Assumptions Thereafter - The total pension liability (TPL) for each of the plans was determined using Total (3,556) the most recent actuarial valuation completed in 2015 with a valuation date of June 30, 2014. The actuarial assumptions used in the valuation were based
- 2. PERS Plan 2/3 Pension Costs on the results of Office of State Auditor's (OSA) 2007-2012 Experience Study.
At June 30, 2016, Energy Northwest reported a liability of $57,018 thousand Additional assumptions for the subsequent events and law changes are for its proportionate share of the PERS Plan 2/3 net pension liability. The net current as of the 2014 actuarial valuation report. The TPL was calculated as pension liability was measured as of June 30, 2015, and the total pension of the valuation date and rolled forward to the measurement date of June 30, liability used to calculate the net pension liability was determined by an 2015. Plan liabilities were rolled forward from June 30, 2014 to June 30, 2015, actuarial valuation as of June 30, 2014 rolled forward to the measurement date. reflecting each plan's normal cost (using the entry-age cost method), assumed Energy Northwest's proportion of the net pension liability was based on Energy interest and actual benefit payments.
Northwest contributions received by PERS during the measurement period for The total pension liability in the June 30, 2014, actuarial valuation was employer payroll paid dates from July 1, 2014 through June 30, 2015, relative determined using the following actuarial assumptions:
to the total employer contributions received from all of PERS' participating employers. At June 30, 2013, June 30, 2014 and June 30, 2015 Energy Total Economic Inflation 3.00%
Northwest's respective proportionate share was 1.551499%, 1.553883% and Salary Increases 3.75%*
1.5957590%. Investment Rate of Return 7.50%
For the year ended June 30, 2016, Energy Northwest recognized pension
- In addition to the base 3.75% salary inflation assumption, salaries are also expected expense of $7,376 thousand for its proportionate share of the PERS Plan 2/3 to grow by promotions and longevity.
pension expense.
At June 30, 2016, Energy Northwest reported its proportionate share of the Mortality rates were based on the RP-2000 report's Combined Healthy PERS Plan 2/3 deferred outflows of resources and deferred inflows of resources Table and Combined Disabled Table, published by the Society of Actuaries. The related to pensions from the following sources (in thousands): OSA applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB.
Deferred Outflows Deferred lnfl ows Mortality rates are applied on a generational basis; meaning, each member Resources Resources is assumed to receive additional mortality improvements in each future year Differences between expected and actual $ 6,002 $ throughout his or her lifetime.
economic experience There were minor changes in methods and assumptions since the last Changes in actuarial assumptions 92 valuation.
Net difference between projected and actual - 15,280 investment earnings The OSA updated demographic assumptions, consistent with the changes Changes in proportion and differences between 77 from the 2007-2012 Experience Study Report, used when valuing the PERS 1 contriputions and proportionate share of and TERS 1 Basic Minimum COLA.
contributions The OSA corrected how valuation software calculates a member's entry Effect of change in the Employer's 1,404 proportionate share age under the entry age normal actuarial cost method. Previously, the funding Contributions paid to PERS subsequent to the 7,970 age was rounded, resulting in an entry age one year higher in some cases.
measurement date For purposes of calculating the Plan 2/3 Entry Age Normal Cost Total $ 15,468 $ 15,357 contribution rates, the OSA now uses the current blend of Plan 2 and Plan 3 salaries rather than using a long-term membership assumption of two-thirds
$7,970 thousand reported as deferred outflows of resources related to Plan 2 members and one-third Plan 3 members.
pensions resulting from Energy Northwest contributions to the PERS Plan 2/3 The OSA changed the way it applies salary limits, as described in the 2007-subsequent to the measurement date will be recognized as a reduction of the 2012 Experience Study Report.
net pension liability in the year ending June 30, 201 7. Other amounts reported 49
1% Decrease in 1% Increase in The long-term expected rate of return on the DRS pension plan investments Discount Rate Discount Rate Discount Rate of 7.50% was determined using a building-block-method. The Washington (6.5%) (7.5%) (8.5%)
State Investment Board (WSIB) used a best estimate of expected future rates Energy Northwest's $ 79,143 $ 65,005 $ 52,847 of return (expected returns, net of pension plan investment expense, including proportionate share of the PERS Plan 1 net pension inflation) to develop each major asset class. Those expected returns make liability/( asset):
up one component of WSIB's capital market assumptions. The WSIB uses the Energy Northwest's $ 166,722 $ 57,017 $ (26,979) capital market assumptions and their target asset allocation to simulate future proportionate share of the PERS Plan 2/3 net pension investment returns at various future times. The long-term expected rate of liability/(asset):
return of 7.50% approximately equals the median of the simulated investment returns over a 50-year time horizon.
The pension liability has been allocated to the business units based on the F. Estimated Rates of Return by Asset Class percentages listed in Note 1. The total pension liability for each unit as of June Best estimates of arithmetic real rates of return for each major class included 30, 2016 is as follow (in thousands):
in the pension plans' target asset allocation as of June 30, 2014, is summarized in the following table: Energy Northwest's Energy Northwest's proportionate share proportionate share of of the PERS Plan 1 net the PERS Plan 2/3 net
% Long-Term Expected Real pension liability: pension liability: Total Asset Class Target Allocation Rate of Return Arithmetic Columbia $ 62,125 $ 54,491 $ 116,616 Fixed Income 20% 1.70%
Packwood 254 222 476 Tangible Assets 5% 4.40%
Business Real Estate 15% 5.80% Development 1,838 1,615 3,453 Global Equity 37% 6.60% Nine Canyon 514 450 964 Private Equity 23% 9.60% Nuclear Project No. 1 273 240 513
- The inflation component used to create the table is 2.20% and represents WSIB's most Total $ 65,004 $ 57,018 $ 122,022 recent long-term estimate of broad economic inflation.
I. Pension Plan Fiduciary Net Position G. Discount Rate Detailed information about each defined benefit pension plan's fiduciary The discount rate used to measure the total pension liability was 7.50% net position is available in a separately-issued DRS 2014 CAFR. The DRS for PERS Plans 1 and 2/3. To determine that rate, an asset sufficiency test CAFR may be obtained by writing to: Department of Retirement Systems, was completed to test whether each pension plan's fiduciary net position Communications Unit, P.O. Box 48380, Olympia WA 98504-8380; or it may be was sufficient to make all projected future benefit payments of current plan downloaded from the DRS website at www.drs.wa.gov.
members. Consistent with current law, the asset sufficiency test included an assumed 7.70% long-term discount rate to determine funding liabilities for NOTE 7 - Deferred Compensation Plans calculating future contribution rate requirements. (All plans use 7. 70%.) Energy Northwest provides a 401 (k) deferred compensation plan (401 (k)
Consistent with the long-term expected rate of return, a 7.50% future plan), and a 457 deferred compensation plan. Both plans are defined investment rate of return on invested assets was assumed for the test. contribution plans that were established to provide a means for investing Contributions from plan members* and employers are assumed to continue savings by employees for retirement purposes. All permanent, full-time being made at contractually required rates (including PERS Plans 2 and 3.) employees are eligible to enroll in the plans. Participants are immediately Based on those assumptions, the pension plans' fiduciary net position vested in their contributions and direct the investment of their contribution.
was projected to be available to make all projected future benefit payments Each participant may elect to contribute pre-tax annual compensation, of current plan members. Therefore, the long-term expected rate of return of subject to current Internal Revenue Service limitations.
7.50% was used to determine the total liability. For the 401 (k) plan, Energy Northwest may elect to make an employer matching contribution for each of its employees who is a participant during H. Pension Liability Sensitivity the plan year. The amount of such an employer match shall be 50 percent of The following table (in thousands) presents Energy Northwest's the maximum salary deferral percentage. During FY 2016 Energy Northwest proportionate share of the net pension liability for all plans it participates contributed $3.3 million in employer matching funds while employees in, calculated using the discount rate of 7.50% as well as what the Energy contributed $11.1 million.
Northwest's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower (6.50%) or 1 percentage point higher (8.50%) than the current discount rate:
50 2016 Energy Northwest Annual Report
NOTE 8 - Nuclear Licensing and Insurance anticipated risks of losses are covered through a combination of self-insurance, commercial property and liability insurance, nuclear property and Nuclear Licensing liability insurance, professional services liability insurance, Directors & Officers Energy Northwest is a licensee of the Nuclear Regulatory Commission (including employment practices liability) insurance, and fiduciary insurance.
("NRC") and is subject to routine licensing and user fees. Additionally, Energy Claims for loss to the Agency are infrequent and have not exceeded the Northwest may be subject to license modification, suspension, revocation, or liability policy limits in the past three years.
civil penalties in the event regulatory or license requirements are violated.
NOTE 9 - Asset Retirement Obligation (ARO)
Nuclear Insurance Energy Northwest recognizes the fair value of a liability of an ARO Nuclear insurance includes liability coverage, property damage, for legal obligations related to the dismantlement and restoration costs decontamination and premature decommissioning coverage and accidental associated with the retirement of tangible long-lived assets, such as nuclear outage and/or extra expense coverage. The liability coverage is governed by decommissioning and site restoration liabilities, in the period in which it the Price-Anderson Act (Act), while the property damage, decontamination is incurred. Upon initial recognition of the AROs that are measurable, the and premature decommissioning coverage are defined by the Code of probability weighted future cash flows for the associated retirement costs Federal Regulations. Energy Northwest continues to maintain all regulatory are discounted using a credit-adjusted-risk-free rate, and are recognized as required limits as defined by the NRC, Code of Federal Regulations and the both a liability and as an increase in the capitalized carrying amount of the Act. The NRC requires Energy Northwest to certify nuclear insurance limits related long-lived assets. Capitalized asset retirement costs are depreciated on an annual basis. Energy Northwest intends to maintain insurance against over the life of the related asset with accretion of the ARO liability classified nuclear risks to the extent such insurance is available on reasonable terms as an operating expense on the statement of revenues, expenses, and and in an amount and form consistent with customary practice. Energy changes in net position each period. Upon settlement of the liability, an Northwest is self-insured to the extent that losses (i) are within the policy entity either settles the obligation for its recorded amount or incurs a gain deductibles, (ii) are not covered per policy exclusions, terms and limitations, or loss if the actual costs differ from the recorded amount. However, with (iii) exceed the amount of insurance maintained, or (iv) are not covered due regard to the net-billed projects, BPA is obligated to provide for the entire to lack of insurance availability. Such losses could have an effect on Energy cost of decommissioning and site restoration; therefore, any gain or loss Northwest's results of operations and cash flows. All dollar figures noted recognized upon settlement of the ARO results in an adjustment to either below are as of June 30, 2016. the billings in excess of costs (liability) or costs in excess of billings (asset),
American Nuclear Insurance (ANI) Coverage: The Act provides financial as appropriate, as no net revenue or loss is recognized, and no net position protection for the public in the event of a significant nuclear generation is accumulated for the net-billed projects.
plant incident. The Act sets the statutory limit of public liability for a Energy Northwest has identified legal obligations to retire generating single nuclear incident at $13.36 billion. Energy Northwest addresses this plant assets at the following business units: Columbia, Nuclear Project No.
requirement through a combination of private insurance and an industry-wide 1 and Nine Canyon. Decommissioning and site restoration requirements for retrospective payment program called Secondary Financial Protection (SFP). Columbia and Nuclear Project No. 1 are governed by the NRC regulations Energy Northwest has $375 million of liability insurance as the first layer of and site certification agreements between Energy Northwest and the state protection. If any US nuclear generation plant has a significant event which of Washington and regulations adopted by the Washington Energy Facility exceeds the plant's first layer of protection, every operating licensed reactor Site Evaluation Council (EFSEC) and a lease agreement with the Department in the US is subject to an assessment up to $127.3 million not including of Energy ("DOE"). (See Notes 1 & 1O) state insurance premium tax. Assessments are limited to $18.96 million per As of June 30, 2016, Columbia has a capital decommissioning net reactor, per year, per incident, excluding tax. The SFP is adjusted at least every asset value of zero and an accumulated liability of $145.6 million for the 5 years to account for inflation and any changes in the number of operating generating plant, and for the Independent Spent Fuel Storage Installation plants. The SFP and liability coverage are not subject to any deductibles. (ISFSI) a net asset value of $1.0 million and an accumulated liability of $2.4 NEIL Coverage: The Code of Federal Regulations requires nuclear million.
generation plant license-holders to maintain at least $1.06 billion nuclear As of June 30, 2016, Nuclear Project No. 1 has a capital decommissioning decontamination and property damage insurance and requires the proceeds net asset value of zero and an accumulated liability of $9.8 million. A thereof to be used to place a plant in a safe and stable condition, to downward revision in future restoration estimates reduced the ARO liability decontaminate it pursuant to a plan submitted to and approved by the NRC $7.1 million.
before the proceeds can be used for plant repair or restoration or to provide Under the current agreement, Nine Canyon has the obligation to remove for premature decommissioning. Energy Northwest has aggregate coverage the generation facilities upon expiration of the lease agreement if requested in the amount of $2.75 billion which is subject to a $5 million deductible per by the lessors. The Nine Canyon Wind Project recorded the related original accident. ARO in FY 2003 for Phase I and II. Phase Ill began commercial operation in The Agency anticipates exposure to a variety of risks of loss as a normal FY 2008 and the original ARO was adjusted to reflect the change in scenario part of conducting business (for example: torts; theft of, damage to, or for the retirement obligation, with current lease agreements reflecting destruction of assets; errors and omissions; workers compensation). These a 2030 expiration date. As of June 30, 2016, Nine Canyon has a capital 51
decommissioning net asset value of $0.5 million and an accumulated Site restoration requirements for Columbia are governed by the site liability of $1.5 million. certification agreements between Energy Northwest and the state of Packwood's obligation has not been calculated because the time frame Washington and by regulations adopted by the EFSEC. Energy Northwest and extent of the obligation was considered under this statement as submitted a site restoration plan for Columbia that was approved by the indeterminate. As a result, no reasonable estimate of the ARO obligation can EFSEC on June 12, 1995. Energy Northwest's current estimate of Columbia's be made. An ARO will be required to be recorded if circumstances change. site restoration costs is $102.7 million in constant dollars and is updated Management believes that these assets will be used in utility operations for biannually along with the decommissioning estimate. Both decommissioning the foreseeable future. and site restoration estimates are used as the basis for establishing a funding The following table describes the changes to Energy Northwest's ARO plan that includes escalation and interest earnings until decommissioning liabilities for the year ended June 30, 2016. The balance is included in the activities occur. Payments to the decommissioning and site restoration funds accounts payable and accrued expense balances for each unit. ISFSI is have been made since January 1985. The fair value of cash and investment included in Columbia's balance: securities in the decommissioning and site restoration funds as of June 30, 2016, totaled approximately $234.3 million and $38.4 million, respectively.
Asset Retirement Obligation (Dollars in thousands) The fair value of cash and investment securities in the site restoration fund for Nuclear Project No. 1 is $33.4 million. Since September 1996, these amounts Columbia have been held in an irrevocable trust that recognizes asset retirement Balance at Beginning of the Year :$ 138,317 obligations according to the fair value of the dismantlement and restoration Current year accretion expense 7,234 costs of certain Energy Northwest assets. The trustee is a domestic U.S. bank ARO Ending Balance :$ 145,551 that certifies the funds for use when needed to retire the asset. The trusts ISFSI are funded by BPA ratepayers and managed by BPA in accordance with NRC
- Balance at Beginning of the Year :$ 2,298 requirements and site certification agreements; the balances in these external Current year accretion expense 111 trust funds are not reflected on Energy Northwest's balance sheet.
ARO Ending Balance :$ 2,409 Energy Northwest established a decommissioning and site restoration plan for the ISFSI in 1997. Beginning in FY 2003, an annual contribution is Nuclear Project No. 1 made to the Energy Northwest Decommissioning Fund. These contributions Balance at Beginning of the Year :$ 16,716 are held by Energy Northwest and not held in trust by BPA. The fair market Current year accretion expense 96 value of cash and investments as of June 30, 2016, is $1.5 million. These Revision in future restoration estimates (7,062) contributions will occur through FY 2044; cash payments will begin for ARO Ending Balance :$ 9,750 decommissioning and site restoration in FY 2045.
Nine Canyon Wind Project Balance at Beginning of the Year 1,396 NOTE 11 - Commitments and Contingencies Current year accretion expense 58 ARO Ending Balance : $ 1,454 Nuclear Project No. 1 Termination Since the Nuclear Project No.1 termination, Energy Northwest has been planning for the demolition of Nuclear Project No. 1 and restoration of the NOTE 10 - Decommissioning and Site Restoration site, recognizing the fact that there is no market for the sale of the project The NRC has issued rules to provide guidance to licensees of operating in its entirety, and no viable alternative use has been found to-date. The final nuclear plants on providing financial assurance for decommissioning plants level of demolition and restoration will be in accordance with agreements at the end of each plant's operating life (See Note 9). In September 1998, discussed below under "Nuclear Project No. 1 Site Restoration."
the NRC approved and published its "Final Rule on Financial Assurance Requirements for Decommissioning Power Reactors." As provided in this rule, Nuclear Project No. 3 Termination each power reactor licensee is required to report to the NRC the status of In June 1994, the Nuclear Project No. 3 Owners Committee voted its decommissioning funding for each reactor or share of a reactor it owns. unanimously to terminate the project. In 1995, a group from Grays Harbor This reporting requirement began March 31, 1999, and reports are required County, Washington, formed the Satsop Redevelopment Project (SRP). The every two years thereafter. Energy Northwest submitted its most recent SRP introduced legislation with the state of Washington under Senate Bill report to the NRC for Columbia decommissioning in March 2015 and ISFSI No. 6427, which passed and was signed by the governor of the state of decommissioning in December 2015. Washington on March 7, 1996. The legislation enables local governments Energy Northwest's estimate of Columbia's decommissioning costs in FY and Energy Northwest to negotiate an arrangement allowing such local 2015 dollars is $467. 7 million (Columbia - $461.6 million and ISFSI - $6.1 governments to assume an interest in the site on which Nuclear Project million). This estimate, which is updated biannually with the last update in No. 3 exists for economic development by transferring ownership of all or a fiscal year 2015, is based on the NRC minimum amount (based on NRC 2013 portion of the site to local government entities. This legislation also provides study) required to demonstrate reasonable financial assurance for a boiling for the local government entities to assume regulatory responsibilities for water reactor with the power level of Columbia.
52 2016 Energy Northwest Annual Report
site restoration requirements and control of water rights. In February 1999, Other Litigation and Commitments Energy Northwest entered into a transfer agreement with the SRP to transfer Energy Northwest is a party to various claims and legal actions arising the real and personal property at the site of Nuclear Project No. 3. The SRP in the normal course of business. The following is a discussion of certain also agreed to assume regulatory responsibility for site restoration. Therefore, litigation and claims relating to the Net Billed Projects to which Energy Energy Northwest is no longer responsible to the state of Washington and Northwest is a party:
EFSEC for any site restoration costs. Energy Northwest contracted with Bechtel Power Corporation ("Bechtel")
for a hardened containment vent plant design change. Energy Northwest Nuclear Project No. 1 Site Restoration concluded Bechtel's contract. Bechtel submitted a contract claim to Energy Site restoration requirements for Nuclear Project No. 1 are governed by Northwest for an additional $6,262,057. Energy Northwest submitted a site certification agreements between Energy Northwest and the state of contract claim against Bechtel totaling $3,323,556. The parties reached final Washington and regulations adopted by EFSEC, and a lease agreement with settlement of the claim in May, 2016 whereby Energy Northwest agreed to DOE. Energy Northwest submitted a site restoration plan for Nuclear Project pay Bechtel the sum of $2,400,000 and dismissed its claims. The Executive No. 1 to EFSEC on March 8, 1995, which complied with EFSEC requirements Board approved the settlement in June, 2016.
to remove the assets and restore the sites by demolition, burial, entombment, Energy Northwest v. United States of America (DOE). On August 28, 2014, or other techniques such that the sites pose minimal hazard to the public. Energy Northwest and the United States entered into a Settlement Agreement EFSEC approved Energy Northwest's site restoration plan on June 12, 1995. ("Settlement Agreement") under Energy Northwest v. United States, No. 11-In its approval, EFSEC recognized that there is uncertainty associated with 447C (Fed. Cl. filed July 7, 2011 ). In addition to settling litigation for the Energy Northwest's proposed plan. Accordingly, EFSEC's conditional approval U.S. Department of Energy's ("DOE") continuing breach of contract for its provides for additional reviews once the details of the plan are finalized. A failure to dispose of spent nuclear fuel and high-level radioactive waste, the new plan with additional details was submitted in FY 2003. This submittal Settlement Agreement provided that Energy Northwest could be reimbursed was used to calculate the ARO discussed in Note 10. by the government for its allowable expenses, as defined in the Settlement Agreement, related to DOE's continued failure to accept used nuclear fuel Business Development Fund Interest in Northwest under the Standard Contract Energy Northwest signed with DOE in 1983. The Open Access Network Settlement Agreement also settled the litigation filed by Energy Northwest in The Business Development Fund is a member of the Northwest Open the U.S. Court of Federal Claims in July 2011 for damages incurred between Access Network (NoaNet). Members formed Noa Net pursuant to an lnterlocal September 1, 2006, and June 30, 2012 in the amount of $23.6 million. Energy Cooperation Agreement for the development and efficient use by the Northwest received $48. 7 million in 2011 under the first action that resulted members and others of a communication network in conjunction with BPA. in a Stipulation for Entry of Final Judgment in Favor of Plaintiff Energy The Business Development Fund has a 6.66 percent interest in NoaNet's Northwest which covered damages prior to September 1, 2006.
revenue bonds with a potential mandate of an additional 25 percent step-up Under the Settlement Agreement, Energy Northwest is required to submit possible for a maximum 6.83 percent on outstanding revenue bonds. Noa Net a claim for reimbursement to DOE annually for each year, July 1, 2012 has 2.8 million outstanding in revenue bonds, based on their December 30, through December 31, 2016. The claim submission deadline is January 31 of 2015 audited financial statements. The members are obligated to pay the the following calendar year. After submission, DOE has a set time to review principal and interest on the bonds when due in the event and to the extent and request additional information from Energy Northwest. At the end of that NoaNet's Gross Revenue (after payment of costs of Maintenance and the review period, Energy Northwest can accept DOE's determination and Operation) is insufficient for this purpose. The maximum principal share be paid the amount determined by DOE or Energy Northwest can reject the (based on step-up potential) that the Business Development Fund could determination and proceed to binding arbitration.
be required to pay is $.2 million. The Business Development Fund is not Under the Settlement Agreement, Energy Northwest submitted its first obligated to reimburse losses of NoaNet unless an assessment is made to claim to DOE by the deadline. The first claim covers Fiscal Years 2013 through Noa Net's members based on a two-thirds vote of the membership. In FY 2016 2014 (a catch-up claim). Energy Northwest was reimbursed $15, 143,888.14 the Business Development Fund was not required to contribute to NoaNet. in September 2015. In early 2016, Energy Northwest submitted its second Noa Net intends to pay off the revenue bonds by December 31, 2016 relieving claim for costs incurred from July 1, 2014 to June 30, 2015. DOE has agreed Energy Northwest of any potential financial obligation. Financial statements to pay and Energy Northwest has accepted the sum of $4,531,664 in full for NoaNet may be obtained by writing to: Northwest Open Access Network, satisfaction of the claim for costs incurred by Energy Northwest for the time NoaNet Headquarters, 5802 Overlook Ave. NE, Tacoma, WA 98422. Any period. Payment from the Judgment Fund is expected in fall 2016.
information obtained from NoaNet is the responsibility of NoaNet. Baker Energy Northwest v. SPX Heat Transfer Inc., (CV13-5151-SAB). Energy Tilly has not audited or examined any information available from NoaNet; Northwest filed suit against SPX Heat Transfer Inc. ("SPX") on December accordingly, Baker Tilly does not express an opinion or any other form of 24, 2013, seeking the recovery of damages relating to SPX's breach of assurance with respect thereto. contract and amended the lawsuit on March 18, 2014. In February 2009, SPX's predecessor in interest Yuba Heat Transfer LLC and Energy Northwest entered into a contract for the design, engineering, fabrication and delivery of the condenser modules and related components for Columbia. In the 53
lawsuit, Energy Northwest contends that SPX breached the contract (1) by contained in the EUP. Upon finalization of the program, Energy Northwest failing to meet contract specifications for condenser backpressure and sub- had purchased a total of 481.6 MTU of EUP from USEC at a cost of $687.2 cooling; (2) by failing to provide work that was free from defect in design million, which is recorded in nuclear fuel, net of accumulated amortization, and fabrication; and (3) by failing to meet the express warranties contained as of June 30, 2013. There have been no additional purchases since the in the contract. No specific amount of damages has been demanded in conclusion of the program in May of 2013.
the complaint. SPX responded to the lawsuit and included a counterclaim Energy Northwest and TVA have entered into an agreement for the sale for damages. In its counterclaim, SPX sought the balance of the contract and purchase of a portion of the SWU and Feed Component of the EUP. The amount, which is $2,070,334 plus accumulated interest. Additionally, SPX sales under the agreement are expected to total approximately $730 million.
demanded recovery of some or all of a portion of the incentive fee contained The second delivery to TVA was on August 8, 2015 and the payment was in the contract as determined by the formula in the contract with no specific received September 8, 2015 for $48.1 million. The total gain reported for the amount demanded. Energy Northwest denied that it owes SPX the contract sale was $8.5 million reported on the Statements of Revenues, Expenses, balance or any amount of the performance incentive. On July 22, 2014, and Changes in Net Position under Other. The remaining sales under this Energy Northwest made an offer of settlement to SPX in accordance with agreement are scheduled to take place between September 2016 and 2022.
RCW 39.04.240 and 4.84.260 and the Federal Rules of Civil Procedure, Rule Energy Northwest has a contract with DOE that requires DOE to accept
- 68. In the offer of settlement, Energy Northwest agreed to accept a judgment title and dispose of spent nuclear fuel. Although the courts have ruled that from SPX for all claims including but not limited to SPX's counterclaims, for DOE had the obligation to accept title to spent nuclear fuel by January 31,
$0.00. On July 31, 2014, SPX also made an offer of settlement in which it 1998, currently, there is no known date established when DOE will fulfill this agreed to resolve the case brought by Energy Northwest by paying Energy legal obligation and begin accepting spent nuclear fuel. On November 19, Northwest $0.00 dollars on all Energy Northwest claims, and would accept 2013, the D.C. Circuit Court ordered the DOE to submit to Congress a proposal the sum of $2,070,334 as complete and final payment on all SPX claims. Each to reduce the current waste disposal fee to zero, unless and until there is a of the parties has rejected the offers of settlement viable disposal program. On January 3, 2014, the DOE filed a petition for In November 2015 after extensive discovery and pre-trail motions by rehearing which was denied by the D.C. Circuit Court on March 18, 2014. Also, both parties, SPX and Energy Northwest negotiated a settlement agreement on January 3, 2014, the DOE submitted a proposal to Congress to reduce the that resolved the litigation. The settlement agreement was ratified by Energy current waste disposal fee to zero. On May 9, 2014, the DOE notified Energy Northwest's Executive Board in December 2015 and the court entered an Northwest that the waste disposal fee will remain in effect through May 15, order of dismissal on December 17, 2015. In the settlement agreement, SPX 2014, after which time the fee will be set to zero. Until such time as a new dismissed all of its counterclaims and agreed to provide to Energy Northwest fee structure is in effect, Energy Northwest will not accrue any further costs a credit for goods and services to be used by 2021. Energy Northwest agreed related to waste disposal fees. When the fuel is placed in the reactor the to dismiss its claims against SPX, and both parties agreed to pay their own fuel cost is amortized to operating expense on the basis of quantity of heat costs and attorney's fees. produced for generation of electric energy. The amount moved to spent fuel for cooling decreased $66.0 million. Fees for disposal of fuel in the reactor are NOTE 12 - Nuclear Fuels expensed as part of the fuel cost.
In May 2012, Energy Northwest entered into agreements with three The current period operating expense for Columbia was $48.8 million other parties for processing high assay uranium tails. The Program consists for amortization of fuel used in the reactor. There were no DOE spent fuel of several agreements between the parties involved, entered into as a joint disposal charges.
effort between the Department of Energy (DOE), Tennessee Valley Authority Energy Northwest has an Independent Spent Fuel Storage Installation (TVA), United States Enrichment Corporation (USEC) and Energy Northwest (ISFSI), which is a temporary dry cask storage facility to be used until DOE to enrich approximately 9,082 metric tons (MTU) of Depleted Uranium completes its plan for a national repository. ISFSI will store the spent fuel in Hexafluoride (DUF6) with an average assay of 0.44 weight percent U235 commercially available dry storage casks on a concrete pad at the Columbia (wt%) that will yield approximately 482 MTU of enriched uranium product site. There we(e no casks issued from inventory In fiscal year 2016. Spent fuel (EUP) with an average assay of 4.4 wt%. is transferred from the spent fuel pool to the ISFSI periodically to allow for DOE and Energy Northwest have entered into an agreement for the future refueling. The next ISFSI loading campaign is scheduled for March of transfer of the DUF6 to Energy Northwest. The agreement addresses delivery 2018 for a total of 9 casks.
and transfer of title of the DUF6, return of residual DUF6 after enrichment, storage of the EUP, and payment of DOE's costs. The costs for the handling of the DUF6 and storage of the EUP were anticipated to be $5 million or less.
As of December 31, 2015, Energy Northwest had removed all EUP stored with DOE to a commercial facility in New Mexico. Energy Northwest had recorded
$0.9 million in total charges to the DOE for delivery of the DUF6, storage and loading of the EUP, which is capitalized as cost of the fuel being purchased.
Under the Depleted Uranium Enrichment Program (DUEP), Energy Northwest purchased from USEC all of the Separative Work Units (SWU) 54 2016 Energy Northwest Annual Report
SCHEDULES OF REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE ENERGY.NORTHWEST'S PROPORTIONATE SHARE OF NET PENSION LIABILITY (Dollars in thousands)
(Unaudited)
PERS 1 PERS 2/3 Measurement Date Ended June 30 2015 : 2014: 2013 2015 : 2014: 2013 Proportion of the net pension liability (asset) 1.24% : 1.22% : 1.19% 1.60% : 1.55%: 1.55%
Proportionate share of the net pension liability (asset) :$ 65,005 : $ 61,291 : $ 71,094 57,017 : $ 31,410 : $ 66,351 Covered-employee payroll 310 : 439 : 772 128,944 : 144,158: 139,637 Proportionate share of the net pension liability (asset) 20969.35% : 13961.50% : 9209.07% 44.22% : 21.79% : 47.52%
as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total 59.10%: 61.19%: 55.70% 89.20% : 93.29% : 84.60%
pension liability SCHEDULE OF ENERGY NORTHWEST'S CONTRIBUTIONS (Dollars in thousands)
(Unaudited)
PERS 1 Fiscal year ended June 30 2016: 2015: 2014: 2013: 2012: 2011: 2010: 2009: 2008: 2007: 2006 Contractually required contribution $35: $32: $43: $57: $70: $88: $104: $245: $202: $175: $113 Contributions in relation to the (35): (32): (43): (57): (70): (88): (104): (245): (202): (175): (113) contractually required contribution subtotal Contribution deficiency (excess) : $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $
Covered-employee payroll : $ 310: $ 351 : $ 439: $ 772: $ 996: $ 1,610: $ 1,933: $ 2,894: $ 3,297: $ 3,964: $ 4,785 Contributions as a percentage of 11.29%: 9.12%: 9.79%: 7.38%: 7.03%: 5.47%: 5.38%: 8.47%: 6.13%: 4.41%: 2.36%
covered employee payroll PERS 2/3 Fiscal year ended June 30 2016: 2015: 2014: 2013: 2012: 2011 : 2010: 2009: 2008: 2007: 2006 Contractually required contribution :$ 14,306: $ 12,787: $ 11,906: $ 9,041 : $ 8,760 : $ 6,533: $ 6,225: $ 9,522 : $ 6,016: $ 4,505: $ 2,016 Contributions in relation to the con- (14,306): (12,787): (11,906): (9,041): (8,760): (6,533): (6,225): (9,522): (6,016): (4,505): (2,016) tractually required contribution Contribution deficiency (excess) : $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $ -: $
Covered-employee payroll : $ 128,944: $ 154,080: $ 144,158: $ 139,637: $ 134,777: $ 133,276: $ 123,367: $ 124,301 : $ 105,464: $ 104,971 : $ 97,117 Contributions as a percentage of 11.09%: 8.30%: 8.26%: 6.47%: 6.50%: 4.90%: 5.05%: 7.66%: 5.70%: 4.29%: 2.08%
covered employee payroll PERS Plan 1 UAAL * : $ 6,106: $ 5,679: $ 5,342: $ 3,021: $ -: $ -: $ -: $ -: $ -: $ -: $
Notes to Schedules Energy Northwest implemented GASS 68 for the year ended June 30, 2015. There were no changes in actuarial assumptions between the valuation date of June 30, 2013 and the measurement date of June 30, 2014. Additional assumptions for subsequent events and law changes are current as of the 2014 actuarial valuation report rolled forward to the current measurement date of June 30, 2015.
- DRS allocates certain portion of contributions from PERS Plan 2/3 to PERS Plan 1 in order to fund its unfunded actuarially accrued liability (UAAL).
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