ML20039C169

Annual Financial Rept for Fy Ending Jan 31,1981

ML20039C169
Person / Time
Site:	South Texas
Issue date:	03/19/1981
From:	SAN ANTONIO, TX
To:
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ML20039C167	List: ML20039C166 ML20039C168 ML20039C169 ML20039C170
References
NUDOCS 8112280534
Download: ML20039C169 (24)

Text

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San Antonio, Texas, i ' *

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the nation's 11th largest city, .

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is experiencing 1- 'n -

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unprecedented economic .

growth. We at City Public Service, the municipally owned l

![ natural gas and electric utility, are endeavoring l gg " '

to do our part by providing for the present-

! cc 1 and future energy needs of our community.

_ 1; ti j g; 'Our continuing challenge is to supply our 340,000 electric customers 4 and 260,000 gas customers with .

4>0 reliable utility service at the lowest possible cost.

9

This report will tell you how we are e ,

answering this challenge.

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9 Pow.r plants STP mcl r plant sit.

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Summary cf Applicatinn cf Revenue and Source of Funds for Improvements Gross revenue for 1980-81 _ _ _ _ - $ 444,030 00_0 1 Application of Revenue:

Purchase of gas, electricity and fuel $ 238,760,000 Other operating and general expenses _ - . - 38,909,000 Maintenance of the systems __ _ 18,142,000 For debt reluirements __ $ 84,457,000 Less interest charged to cor.siructicn __ _ 32,766,000 51,691,000 Benefits to the City of San Antonio _ _ 52,570,000 Balance from operations availabla for construction 43,958,000 Total - $ 444,03.0 1000 Amount spent for replacements, improvements and '

expansion of gas and electric systems __. $ 182,998,000 Amount provided for future construction 19,667,000 Total _ $ 202 665 1 1000 Funds obtained from:

~

Operations ._ $ 43,958,000 Contnbutions and advances in aid of constru,: tion 4,40:,000 Bcad Funds _ 154,166,000 Sale of property - 140,000 Total _

y - $ 2_02 &651000

$o~ /

Highlights of the Year e Assets increased by $176,733,000 to $ 1,621,984,000

• City equity increased $42,545,000 to _ - _ _ $ 585,946,000

• City payments were up $9,259.000 to _ __--__$ 52,570,000

• Gross revenues increased $76.680,000 to - - _ $ 444,030,000

• Maximum electric system load increased 243.000 KW to _ _ _ _ - - _ _ 1,950,000 e Distribution substations added 74.100 KVA to total _ - - _ _ 4,633,860 e 17.244 electric customers were added to total _ . _ . - _ _ _ _ 340,797

• 7,679 gas customers were added to total-. _ - - _ - - _ . _ _ _ _ _ - _ _ _ 263,902 e 91 miles of gas mains were added to total ____ _ _ _- _ _.-- _ _ -- _-- _ . - - - - _ 3,315 e Amount of gas (cubic feet) saved through use of coal for generation __.-___.._ ___ -- _ 47,485,870,000 e Total MWH generation increased 8.4% to total _ _ _ _ _ _ _ _ _ _ _ - - _ _ - - - - - _ 8,079.950

, a lhe cover coast. City Pubhc Service is one of four owner utilities constructing the Project to meet Silhouetted against the morning growing electrtCal energy needs sky, workmen erect one of the and to hold down the cost of towers :n the transmission hne producing electncity. For more linking San Antonio with the deta,!ed information on San South Texas Project nuclear Antonio's energy supply, please power plant on the Texas Gulf turn to page 8.

3 J

Tha Year in Rsvi;w in the first year of the new of San Antonio reached an all-deccde City Public Service time-high of $52.6 million, up Extensions to CPS. gas system (below left) ancj suppli;d record amounts of gas $9.3 million from FY 1979-80. planning sessions betWeen CPS CommerCI snd slectricity to a growing San in addition to helping set new representatlVes and builders (below right) are Antonio, contmued to fight for financial marks, the surnmer i fair rtil transportation rates for heat proved once again the tWo of the many visible signs of growth in San h:uling coal and moved ahead wisdom of converting much of  : Antonio. But just as obvious is the Changeless on plans to switch to less- our electrical generating g g cxpontive fuels - nuclear and capacity to coal, thus reducing P 8-lignita - for electrical heavy dependence on expensive scene (right) along San Antonio's famed g:neration. natural gas. our coal-fired Deely downtown Riverwalk, the Paseo del Rio.

And all the while, we were Power Plant became fully.

tbl3 to keep San Antonio's gas operational in .1978, and since .  ;

ed tiectric rates among the that time, it has supplied 60% of ,

lowest of the nation's 25 largest San Antonio's electricity while ', j

• cities. In a nationwide saving our customers more than 4

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• N comparison on January 1,1981, $160 million in fuel costs , i only one major city had a lower compared to the cost of natural l'i '

I" combined residential gas and gas. However, attempts by the

" '* 1 tiectric bill than San Antonio, railroads to boost the cost of JCRs t and th t city benefits from . coal-hauling have worked

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' in2xpansive hydroelectric power. against even additional savings.

! Tha availabilit/ of energy, a in October,1976, the ,ff h picastnt environment and Interstate Commerce Com- '1 ' '

reasornble cost of living are mission set the rate for '

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! major reasons why the Alamo . transporting coal from Gillette. '

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! City is enjoying unparalleled . Wyoming, to San Antonio in economic growth. New hotels, CPS-owned railroad cars at

• ') %o office buildings, apartment $10.93 per ten. The rate had c. ,

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complzxes and manufacturing increased to $21.95 by July 12 yi plents are springing up all over 1980, but a favorable decision f  ;  :

the arta. In fact, requests for by the U.S. Court of Appeals for h.. (j w

utility service from commercial- the District of Columbia Circuit t l industrial customers set an all-tima record high in 1980.

reduced the rate to $15.83 per-ton for the remainder of the -(L .,

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l Another record-setter was the fiscal year. In contrast, the cost [

! sumrnor of 1980, second hottest of coal at the mine has remained . -

l in the city's history. As a result, at approximately $7 per ton. h" g b Sin Antonians used more Burlington Northern and .,y ' p electrical energy than ever Southern Pacific railroads have ,VI bcfore. CPS responded by persisted in their attempts to genartting more than one billion seek rates which we consider kilowatt hours in July, the first unjustifiably high and which tims ws've surpassed the billion place an unwarranted burden on mark in a single month. on July our customers. Such high rates 1, the hourly peak usage rose to unfairly subsidize shipments of a new high of 1,950 megawatts, other commodities where the eclipsing the 1979 peak by railroads face truck snd barge 14.2%. competition. Another develop-The record use of electricity ment in our battle for fair fraight also helped establish new highs rates was the addition of tne in revsnues and expenses for Loeffler Amendment, suoported the fiscal year ended January by other local Congressional 31,1981. Gross revenues representatives, to the Staggers reached $444 million, a 20.9% Rail Act of 1980. This provision, increass over the preceding which permits the railroads to ye2r, while operating costs, charge rates which cover capital interest expense charged to costs but not to exceed 162% of operations and City benefits variable costs such as labor and ross 17% to $401.5 million. The maintenance, could save San cost of fuel for generation and Antonio ratepayers millions of gis for resale to our customers dollars, total @d $238.8 million and Using coal is one way CPS a counted for 80.7% of the plans to comply with the Fuel operating expenses for the year. Use Act of 1978, which requires interest costs also continued to utilities to discontinue burning rise to support greater system natural gas as a power plant fuel needs, particularly in relation to tha South Texas Project nuclear power plant. Benefits to the City continued 4

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Tha Year in Review after 1990. We are further filed in the early '70s by CPS ,

diversifying to less-expensive, and other customers seeking <

more-abundant fuels by $1.6 billion m damages because participating in the South Teus of CoastaVLoVaca's failure to L_ Project (STP) nuclear plant trm fulfill long-term natural gas under construction near Bay supply contracts. G,es and City. Texas, and by initiating vectric ratepayers received j approximately $8.2 million in studies for a lignite coal plant to

. be operationalin the early credits during the year. Benefits ~

! m 1990s. Specifics of our fuels from sales of Valero (successor

. diversification program are to LoVaca) and Coastal stock,

'"~* /. contained in the next section of proceeds from a gas search

)  !

this report. program and r*her benefits are

( ww g. [, The STP, since the start of construction in 1975, has expected over se next 20 years and will be credited to our He! ping consumers save energy and money is suff*r'd sche'* *?ppenes and customers as they are received.

cost overruns. under the current An interesting program was the goal of home energy surveys (left) eeneouie, gne pient.: te units agun in 19e0 wherein CPS and conducted by highly tralned CPS Consumer are due to be completed in ine - Southwe.t Research institute mid-1m at a e et t $2.72 began testing the commercial

,Information personnel. EfficienW in meetinE billion with CPS' share equal 'o feasibility of electric vehicles.

Customer needs is also a major goal of CPS' 28%. We beiieve inat the iower The performance of 10 battery.

cost of nuclear fuel and the powered cars, trucks and vans recently upgraded Computer system (above). excellent safety record of w"l be studied during a three-i nuclear power make continued year, Department of Energy test participation in the STP our best - ~ program. ,

current option for future During the summer months, electrical energy, we conducted public hearings To finance major capital on utility rates and regulatory

improvements, a construction standards as required by the 4 budget of $204.3 million has Public Utility Regulatory Policies been approved for FY 1981-82, Act of 1978 (PURPA). Based on Total CPS Customers with $138.9 million earmarked testimony presented, the Board for the STP. The operating of Trustees - CPS' governing y_

budget of $327 million includes body - made final expenditures of $168.8 miillon determinations on the PURPA for fuel and $93.9 million for standards and forwarded them

• ~ resale gas. A rate increase will to the U.S. Department of

, e M be needed during 1981 in order Enemy.

( F to provide the debt service in reviewing the results of FY .

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requirements to continue issuing rever a bonds and to keep up 198}81 and looking ahead, we find ourselves in good condition s

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with the effects of inflation.

In other highlights of FY 1980 to meet the ever-expending energy needs of cor beautiful

! ; 2m - 81, CPS agreed to supply 200 te and historic city. This positive

- 500 megawatts of electrical outlook is bolstered by the fact generating capacity to Houston , that we have dedicated, Lighting & Power (HL&P) from competent employees who have -

/ ' # 1982-87. To do so, we wl!! use a worked diligently to provide our l ,

number of serviceabla customers C: reiiable service.

1973 1975 1977 1979 1981 g g g ggg r tm

• • ' '"'i Ernsed Janua*y 3 s been operati recenth because ' Challeng69 one, but our Em nu newer, larger gas- and coal-fired oosition is strong, tha7ks to units are in operation. The sound planning and determined agreemerit provides for HL&P to effort. We will continue to work pay a capacity charge of $39.6 hard to merit the confidence of million over the life of the sale those we serve.

plus an energy charge for all - S ncerely, kilowatt hours taken. These ,

payments will help defray capstal costs which otherwise would be l(,

included in the rates our a customers pay. Glenn Biggs Our customers also began to Cha' man, Board of Trustees realize benefits from the (

CoastaVLoVaca settlement in the form of credits on utility bills. That settlement stemmed J.K. Sp ce from breach of contract lawsuits General Manager 7

4

The Energy Outink l As a result of prudant available as part of the While South Texas Project construction (ri pl:nning, City Public Service is CoastaVLoVaca sett'ement.

no longer dependent on a slagte Consulting firms were engaged Continues, CPS is also exploring othem source of fuel for generating to study this availability of water expanding energ forms. Planning 15 Under wah

$9ICPS began to convert ss b i slu in i to to (below right) on a lignite power plant, and almost two-thirds of its ' San Antonio. electric vehicles (below left) are being tested for, gensration to coal a move that CPS is also working to secure CornmerCla! feaSibi!Itya has saved consumers $160 a long-term supply of natural million in lower fuel costs on - gas for San Antonio. The current contract with Valero Dm. , .,

their electric bills. That was f '

Ph se 1 of CPS' successful fuels Energy Corporation expires on l diversification program.- ' April 1,1982, so CPS has been [ -

J Phase 2 is participation in the - advertising for potential . ,,

South Texas Project (STP) suppliers in national, state and ,

nuclear power plant under local publications as well as 3 construction and jointly owned making personal contacts within .

j by CPS, Houston Lighting & ' the gas-producing industry. CPS -- -

s Power (HL&P), Central Power & . . projects that up to 1.1 tril! ion Light End the City of Austin. It is ~ cubic feet of gas will be needed v

\ j located near the Texas coast in ' from 1982 to 2002 for direct use 3

> Matagorda County. San - .- by customers as wei! as for use - #, ~

Antonio's 28% share of the . in gas-fired electrical '

pl nt's output will supply generators.The projected figure #

700,000 kilowatts and satisfy is slightly more than one-half - *[

about 35% of the area's , , the amount CPS estimated it . '[

electrical requirements when .  : needed for a 20-year supply in . . -  % Ji' '

1 both units are on line later in the :1962, a further indication of the , . .

s ^y success of the utility's fuels i----

1980s. .

Construction at the STP is diversification program. Under - a-rtturning to near-normal levels ~ provisions of the settlement ..;

^

following a lengthy, thorough agreement between CPS and .

revi4w of the Project's quality CoastaVLoVaca, Valero must 5 assurtnce and quality control . continue to supply San _ c>- -

programs. The review began in . Anton!o's gas requirements l June,1980, following the beyond the contract expiration l Nuclear Regulatory Commis.- date, even though another l sion's (NRC) decision to impose contract has not been i a $100,000 fir.e against the concluded.-

project manager for allegedly Gas, coal, nuclear and ligni.te Fuels for Electric Generation failing to comply with certain will all play important roles in procedural standards. The San Antonio's energy future, probistns, many concerning while other developing energy . /)

docum:ntation and record - forms will receive CPS

• careful '

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procedures, will be resolved to scrutiny for possible inclusion in ' -

ths NRC's satisfaction. At the - . the energy mix if they prove to . ;; / Mfo"r time th@ fine was levied, the be economically and - -e ~/

Commission clearly stated that technologically feasible. I M ** N -

"no major discrepancies were All future energy plans and -

[ N h, , h N N found in construction already programs must give every .f compl1ted." consideration to conservation, g be's 52 n b ;W.9 P- :#4W M3cnwhile, the transmission which has been an integral part

- /k[h, [. EY%WIIY[

lins which will link the STP to of CPS planning. As the fiscal j . / i San Antonio was close to ' year came to a close, CPS beao nsw m w o m w w _ _ ,

compl4: tion at year's end. The received the President's Award ~

for Energy Efficiency, which was

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$25 million line runs northwtstward from the Project presented on the strength of p,g ,,

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for 158 miles and crosses 11 CPS' programs in energy , , ,

conservation, home energy 2 4 e s-countics en route to San

• • oa8 o' M'p**" HOWS l Antonio. surveying, energy safety and [ _ cn ro on Phase 3 of CPS

• fuels energy education. [25 com diversification program focuses on the proposed construction of i a lignite-fueled power plant to l be operational in the early i

1990s. CPS already owns 30 million tons of lignite in the BIst op, Texas. area northeast of San Antonio, and additional

! fignita reserves will become 8

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1980-81 Financial Review . ,

Recovsnes of higher fuel costs, above-average summer Revenues: The record $444 million in gross revenues for the fiscal i tzmperrtures, sustamed customer growth and increased yiets on year exceeded last year's total by $76.7 minion, or 20.9% Electric l investments contnbuted to n record $444 million in City Public operating revenues rose to $333.7 million, an increase of $59.1 l Service gross revenues for FY 1980-81. million, or 21.5% The increased revenues resulted from recoveries Construction expenditures remained at a high level principally due of $21.3 million in higher fuel costs, from record sales to customers to the South Texas Project (STP) nuclear power plant as CPS' and from a 5.4% rate increase which went into effect in November, I program to diversify its fuel mix and provide for the most 1979. Electric sales, other than power sales to another utility, cconomical method of electrical generation continued. To finance climbed 13.33 due to warmer weather. The addition of more than the STP and other construction activities CPS issued $160 million in 17,000 new electr4 customers also contributed to the sales increase.

AA-rtted revenue bonds during the fiscal year. Residential customers accounted for 41.6% of FY 1980-81's electric Customtrs cor tinued to benefit from CPS

• investments in two revenues.

coSfired generating units, which produced 58.3% of total electric Cas operating revenues of $91.3 million surpassed last year's total requirements for the year. By using coal instead of natural gas, CPS t>y $12.2 million, or 15.4%. The higher revenues resulted from the saved customers $51.8 million in fuel costs during FY 1980-81 as 7.4% gas rate increase which became effective in September,1979, will cs making available 47.5 million MCF of gas for other uses. and recoveries of the higher cost of gas which was up 384 per MCF. i Warmer weather and conservation caused a 1.6% decline in gas dd in the dawTf5 early light, a CPS lineman (left) h*,Ij,*,'ly",*n'"e',,'wnl[n"es'uIp"r **cIp'ah*o*m7n*v'es**n'*nts works On dlStfibutIOn lines in an area Of neW $19.1 million and increased $5.4 million, or 39.7% The higher yields

• • • i'*b du'i"8 th' Y' *cc unt for most of inis increase.

dev !oPment near downtown San Antonio. The Revenue oeductions: Total operating expenses, benefits to tne increasing demand for utility service WAS One Of City of San Antonio and interest chargeable to operations tota led SeVeral factors whlCh reSulted in record gross $401.5 rainion, an increase of $ss.3 minion, er 17.0%, over the preceding year, revenues for 198o-81. o,e,a,,n, ,,,enees, o,e,a,in, ex,en,e, ,o, ,ne ,e,iod we,e

$295.6 million, a $50.6 million increase, with gas, electricity and fuel accounting for 81.5% of the higher costs. Electric production fuel costs of $164.0 million rose $30.9 million because of 8.4% more generation and higher fuel costs, even though $7.9 million of the Coastal /LoVaca settlement proceeds was credited to these costs.

The cost of coal, which provided 58.3% of the electricity generated during the year, averaged $4.71 per ton more due to higher railroad rates for transporting coal. Natural gas used for the remaining generation cost 39% more than the prior year as the gas price rose and the volume of gas to supply the greater electric generation also .

ir. creased. Gas purchased for resale cost $74 8 million and increased 16.0% because of escalating prices, even flough the quantity purchased was approximately the same as the previous year. A

$266.000 credit from the Coastal /LoVaca settlement proceeds served to offset a small portion of the higher gas cost.

Other operating and maintena ce costs totaled $56.9 million, an -

increase of $9.4 milion, or 19.7% The higher costs reflected inflationary pressures on wages, supplies and services, greater maintenance requirements caused by weather conditions and greater numbers of customers to be served. Depreciation expense of

$30.1 million increased a modest 2.8% as a result of additional plant placed in service during the year.

Interest and debt expense totaled $55.9 million 26.2% higher this year as a result of issuing $160 million in new series bonds to finance capital improvement projects. A $75 million bond issue was sold at an interest rate of 9.38% sn March,1980, and an $85 ruillion bond issue in August received an 8.62% interest rate. Interest charged to construction increased $14.0 million over fY 1979-80 amounting to $32.8 million and indicating CPS

• greater invesment in the STP.

City Benette: City benefits and payments totaled $52.6 million, a

( $9.3 million. or 21.4%, increase from the prior year. Total benef ts paid to the City of San Antonio by CPS remain at It 3% of gross

( . revenues. Since the City acquired the utilit f ni 1942,it has received l $415.1 millbn in benefits, while the City equity in the utility has risen to $5* S.9 million.

Gross investment in utility plant and equipment at the end of the fiscal year, including $599.0 million in construction work in progress, stood at $1.6 billion, an increase of $177.3 million.

Construction costs for the year were $%3.0 v.

llion, with

! expenditures for the STP accounting W $128,3 million of the total

$131.2 million invested in efectric proo.du plant. Other expe9ditures included $252 milli 2 for electric distrioution facilities, l $15.3 million for electric transmissiort $6.6 million for gas system improvements and $3.7 million for g.aeral property additions.

11 A

Ba!anco Sheets Years ended January 31, ASSETS Notes 1981 1980 (in thousands)

UTILITY PLANT - At cost: 1 Electric $ 871,919 $ 846,877 Gas 138,475 129,759 General 17,496 16,979 Construction work in progress 7 599.026 455.958 Total 1,626,9'S 1,449,573 Less accumulated depreciation 263i 1 236.614 Utility plant - net 1.363.7,5 1.212.959 RESTRICTED CASH (Principally temporary cash investments and U.S. Government obligations -

at cost which approximates market): 3 Bond Construction Fund 5,888 Bond Reserve - Old Series Bonds 17,405 17,186 Bond Reserve - New Series Bonds 33,583 22,377 Improvements and Contingencies Fund 62.159 42.491 Totai restricted cash 119,035 82.054 EQUITY IN LOVACA SETTLEMENT TRUST 6 29,540 30.540 CURRENT ASSETS:

Cash, including temporary cash investments - at cost 11,597 35,105 Accounts receivable, less allowance for doubtful aceunts of $300,000 32,327 31,504 inventories - at average cost:

Materials and supplies 18,765 16,374 Fuel stock.. 43,059 31,639 Prepayments 972 1.725 Total current assets 106,720 116.347 DEFERRED DEBITS:

l Unamortized debt expense 1,342 1,159 Other 1.582 2.192 Total deferred debits 2.924 3.351 TOTAL _ $1621,984 $1.445.251 -

See notes to financialstatements.

i 12

_ . _ _ _ - _ . _ . ._- ._ _. ~ ~ . -

i Years ended January 31, LIABILITIES AND EQUITY Notes 1981 1980 (in inousands)

LONG-TERM DEBT - Revenue improvement Bonds: 3&4 Old Series $ 156,390 $ 163,630 New Series 751.100 603.675 Total long-term debt _ 907.490 767.305 EQUITY:

Appropriated retained earnings: 3 17,405 17,186 Bond Reserve - Old Series Bonds Bond Reserve - New Series Bonds 33,583 22,377 Improvements and Contingencies Fund 62.159 42.491 Total 113,147 82,054 Reinvested earnings 472.799 461.347 Total equity 585.9_4_6 543,401 CURRENT LIABILITIES:

Current maturities of long-term debt 4 19,015 16,340 Accounts payable and accrued liabilities 44,412 48,881 LoVaca settlement benefits payable to customers 6 745 7,910 Customer service deposits 3.208 2.806 Total current liabilities 67.380 75.937 DEFERRED CREDITS:

LoVaca settlement benefits 6 29,540 30,540 Customer advances for construction 4,483 3.412 Other 463 394 34.486 34,346 Total deferred credits CONTRIBUTIONS IN AfD OF CONSTRUCTION 26,682 2 ,262 COMMITMENTS AND CONTINGENCIES 7&8 TOTAL $1.621,984 $1.445.251 13 j

Statem:nts cf Earninga and AppIIcati:n cf Earnings Years ended January 31, Notes 1981 1980 (in thousands)

REVENUE: 1 Electric $333,656 $274,601 Gas 91,275 79.080 Interest 19,099 13.669 Gross revenue 444.030 367.350 EXPENSES: 1 Gas, electricity and fuel 238,760 197,505 Other operating and general 38,786 32,907 Maintenance _ 18,142 *4,663 Deprecioton 30,101 .9.274 Interest and debt expense _ __ 55,892 44,297 Allowanco for interest charged to cr.nstruction (32,766) (18,7841 Paymer*ts to the City of San Antorso: 5 in lieu of taxes 4,997 4,923 Refund of electric and gas ser, ices 9,713 8,384 Additional payments 37.860 30.003 Total expenses 401.485 343.172 EARNINGS BEFORE APPLICATION 42,545 24,178 Add:

Depreciation 30,101 29,274 Interest requirements on New Series Borids (payable from improvemc,nts and Contingencies Fund) 46.161 34.281 AVAILABLE FOR APPLICATION $118.807 $ 87,733 APPLICATION:

To operating funds for working capital 5 2,000 To pay long-term debt requirements -

Old Series Bonds:

Principal payments $ 6,940 6.655 Bond reserve 219 79 To reinvested earnings - Net gain on sale of assets 124 97 To improvements and Contingencies Fund:

Minimum requirement (12%% of gross revenue) 55,504 45,919 Balance of availabic evenue 56.020 32.983 APPLICATION $118.807 $ 87.733 1

See notes to financial statements.

l 14

Statem nts cf Chang o in Equity Years ended January 31, Notes 1981 1 80 (in thousands)

BOND RESERVE - OLD SERIES BONDS:

Balance, beginning of year $ 17,186 $ 17,107 Additions - from application of earnings 219 79 Balance, end of year $ 17,405 $ 17,186 BOND RESERVE - NEW SERIES BONDS:

Balance, beginning of year $ 22,377 $ 14.095 Additions - from improvements and Contingencies Fund:

Interest earned on bond reserve investments 2,696 1.519 Reserve requirements 8.510 6,763 ,

Total 11.206 8.282 Balance, end of year _$_33,58_3 .$ 22,377 IMPROVEMENTS AND CONTINGENCIES FUND:

Balance, beginning of year $ 42.491 $ 22.581 Additions - from application of earnings:

Minimum requirement (12%% of gross revenue) 55,504 45.919 Balance of available revenue 56.020 32.983 Total 111,524 78,902 Deductions:

New Series Bonds:

Interest earned and reserve requirements 11,206 8.282 Payment of bond interest 46,161 34,281 Payment of bond principal 10,200 7,675 Construction expenditures 24,289 8.754 91,858L 58.992 Total Balance, end of year _$_6_2159 $ 42,491 REINVESTED EARNINGS:

Balance, beginning of year $461,347 $465.440 Additions:

From improvements and Contingencies Fund -

For construction 24,289 8,754 From applications of earnings:

To operating funds for working capital 2,000 Old Series Bonds principal payments 6,940 6,655 From improvements and Contingencies Fund -

New Series Bonds principal payments 10,200 7,675 Net gain on sale of assets _ 124 97 Total 41,553 25.181 Deductions - Depreciation _. 30.101 29.274 Balance, end of year _$47_2.799 $461.347 Sea notes to financial statements.

15

Statem2nts of Chang 30 in Financial PritlEn Years ended January 31, Notes 1981 1980 (in thousands)

SOURCES OF FUNDS:

Earnings before application $ 42,545 $ 24,178 Add amount not affecting working capital - depreciation 30.101 29.274 Working capital provided from operations 72,646 53,452 Contributions in aid of and advances for construction 4,401 4,193 Sale of revenue improvement bonds 160,000 175,000 LoVaca settlement benefits 6 1,017 38,450 Other 1,677 1.231 Total 239.741 272.326 APPLICATIONS OF FUNDS:

Acquisition of utility plant 182,998 188,044 Retirement of bonda 17,140 14,330 increase in current maturities of long-term debt _ _ _ 2,675 3.110 increase in restricted cash 36,981 28,271 Equi:y in LoVaca settlement trust 30,540 LoVaca settlement benefits 1.017 7.910 Total 240,811 272.205 INCREASE (DECREASE) IN WORKING CAPITAL M0_70) $ 121 CHANGES IN WORKING CAPITAL COMPONENTS:

Increase (decrease) in current assets:

Cash $ (23,508) $ 15.808 Accounts receivable 823 4,727 inventories - 13,811 (12,810)

Prepayments (753) 1,068 Decrease (increase) in current liabilities:

Current maturities of long-term debt _ (2,675) (3,110)

Accounts payable and accrued liabilities 4,469 2,451 LoVaca settlement benefits payable to customers - 7,165 (7,910)

Customer service deposits _ (402) (103)

INCREASE (DECREASE) IN WORKING CAPITAL _. $ (1,070J $ 121 WORKING CAPITAL, BEGINNING OF YEAR $ 40,410 $ 40,289 INCREASE (DECREASE) IN WORKING CAPITAL (1.070) 121 WORKING CAPITAL, END OF YEAR $ 39 340 $ 40,410 See notes to financial statements.

16 L_

Notes to Financial Statem:nts - January 31,1981 and 1980

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES among others, the following provisions:

Basis of Accounting - City Public Service (CPS) uses the accrual 1) All of the assets of the gas and electric systems, together with method of CCcounting based upon the Uniform System of Accounts the net revenues of the systems, as defined, are pledged with the for G s rnd Electric Utilities issued by the National Association of Hans Trust and Savin;;s Bank of Chicago, Illinois, as Corporate Reguiltory Utility Commissioners. Trustee, to secure the payment of the "Old Series Bonds."

2) Gross revonues of the gas and electric systems shall be applied Revenue and Expenses - Revenue is recognized as billed on a to: (a) expenses of operating and maintaining the systems; (b) cycl 3 bisis. Rate schedcles include fuel adjustment clauses which debt service and reserve requirements on the "Old Series Bonds."

permit r:covery of fuel and gas costs in the month incurred CPS (c) payment of an "in lieu of tax" amount to the City of San charges to expense the cost of electric production fuel as it is Antonio; (d) an amount equal to 12% of gross revenues to the consum d cnd the cost of resale gas at the time of purchase. Improvements and Contingencies Fund. (e) additional benefits and payments to the City of San Antonio to bring total City Utility Plant is stated at the cost of construction, including costs of benefits and payments to 14% of gross revenue; (f) additional contricted se' vices. direct material and labor, indirect costs, payments to the improvements and Contingencies Fund unt.l including general engineenng labor and material overhead. and an such fund equais 20% of the value of f xed capital assets; and (g) tifowines for interest used dunng construction (AIUDC). CPS balance to a surplus fund.

computes AIUDC using rates representing the cost of borrowed funds on projects estimated to cost in excess of one million dollars 3) The following funds are established: (a) General Fund; (b)

Cnd cxpected to require more than one year to complete. Improvements and Contingencies Fund, (c) Bond Construction Retirim:nts of utility plant. together with removal cost less salvage, Fund (containing the proceeds of revenue bonds); (d) Pnncipal a*e chtrg d to accumulated depreciation. The maintenance of and Interest current requirements (containing the monthly property. and replacement and renewals of items determined to be payments of annual debt requirements); and (e) Bond Reserve less thin a unit of property, are charged to maintenance expense. Fund (containing an amount equal to the fiscal year's principal and interest requirements). These funds may be invested with CPS Computes deprec!ation pnnCipally using the straight-line authonzed depository banks or in U.S. Government secunties.

mithod over the estimated useful service lives of the assets as det rmined by periodic engineenng studres. Depreciation as a Beginning with the year ended January 31,1976. New denes perecntage of average depreciatie plant was 3 06% in 1981 and Electnc and Gas Systems Revenue improvement Bonds ("New 3 07% in 1980 Senes Bonds") were issued These bonds are junior and subordinate to the "Old Senes Bonds." The bond ordinances authorizing these Contnbutions in aid of construction are amortized over a period issues provide that no further bonds or obligations will be equal to the lives of the related assets. authorized or issued under the terms of the Trust Indenture for "Old Senes Bonds" and. at such time as the Trust indenture becomes

2. PENSION PLAN inoperative, the Trust Estate will revert to the City. While any of the "Old Senes Bonds" are outstanding, the "New Senes Bonds" are CPS has a contnbutory pension plan covenng substantially all payable solely from the net revenues of the systems (1) deposited employees. Under the Plan, insurance is purchased for each and available for deposit in the improvements and Contingencies pLrticipating employee in an amount calculated to yield cash value Fund and (2) payable to the City of San Antonio At such time as at ritirement sufficient to provide an annuity equal to prescribed the Trust Indenture covenng the "Old Senes Bonds" becomes benefits. To the extent benefits represent amounts attnbutable to inoperative, revenues will be appised as follows- (a) for maintenance wage increases received after an employee has reached age 55. CPS and operating expenses of the systems; (b) for payments of the assumes all of the incremental cost. The incremental costs for wage "New Senes Bonds;" (c) for the payment of any bonds infenor in incre ses after age 603 are paid directly to retirees by CPS. l'en to the "New Series Bonds" which mai be issued; (d) for an amount equal to 6% of the gross revenues of the systems to be

. In accordance with provisions of the Plan funded pension costs deposited in a Repair and Replacement Fund; (e) for cash payments and benefits to the City of San Antonio not to exceed 14% of the w rs $3.588.000 in 1981 and $2.828.000 in 1980 which includes

$532.000 in 1981 and $470.000 in 1980 paid directly to retired gross revenues of the systems; and (f) any remaining revenues to employees. To more systematically allocate total pension costs over the Repair and Replacement Fund. The funds created by the *New thJ cmployees' years of. active service CPS accrued an additional Senes Bonds" ordinance are similar to those set forth under the

$2.100.000 en 1981 to p: ovide for payments that will be required in "Old Senes Bonds" Trust Indenture.

futura ytars.

4. LONG-TERM DEBT An actuarial study is currently being conducted to determine requirem:nts necessary to bnng CPS' plan into general agreement A summary of long-term debt as as follows:

with the Employees' Retirement income Secunty Act and to insure tht.t it continues to be a qualified plan under the Internal Revenue we,ghied- Awerage Unpaid Code. Final interest Rate On . .Pnncipal -

Maturity Outstandin2 Bonds 1981 1980 In addition to pension benefits. CPS purchased certain life On thousands)

insurance and health benefits for retired employees. The costs of O

th:s3 benefits are recognized as paid and totaled $248.000 in 1981

-94 1984-1997 6 053 % $163.630 $170.570 and $206.000 in 1980.

New Senes.

3. LEVENUE BOND INDENTURE REQUIREMENTS 1975-1980 1998-2005 6 666 % 762.875 613.075 Total 6 592 % 925.505 783.645 Th3 Trust indenture executed by the City of San Antonio in Less current maturrties 19.015 16.340 conjunction with the issuance of the revenue bonds dated February Amounts due after one year

_5907 1 $767.305 4_90 '----

1,1951. through August 1,1974. "Old Series Bonds," contains.

17

Notes to Financial Statem:nts At J:nuary 31,1981,"New Senes Bonds" totaling $75.000,000 had The value nf these parts of the settlement has not been recorded in been authorized by the 14oard of Trustees of CPS but had not been CPS' financial statements because of the inherent uncertainty sold. These bonds were sold on March 5,1981 at an effective thereof. Since CPS has determined that it 93 pass through the interest rate of 9 956%. benefits of this settlement to its ratepayers, the settlement will have no substantial effect on the results of operations of CPS.

5. PAYMENTS TO THE CITY 7, PURCHASE AND CONSTRUCTION COMMITMENTS The Trust indenture provides for benefits and services totaling 14%

of CPS' gross revenues, as defined to be paid or provided to the CPS has commitments under an agreement with Houston Lighting &

City of San Antonio. Currently the total benefits and services to the Power Company, Central Power and Light Company, and the City of City of San Antono are less than 14% of gross revenue as a result Austin for joint construction of a nuclear power plant. CPS' share of of the voluntary action of the City in reducing such benefits due to the terraining cost of the plant is estimated to be approximately increased gas costs. The reduction of City benefits has been passed $348,000,000 for construction uver the next four-to-six years, on to gas consumers and, accordingly, there is no effect on financial exclusive of initial fuel requirements and interest during operations- construction. Add:tiona' facters that may cause construction costs to vary from the estimated amount include continuing inflation,

6. LOVACA SETTLEMENT changes in equipment delivery and construction schedules, and legislative changes. In addition to the above, other purchase and On December 31,1979, CPS settled claims against its natural gas construction commitments amounted to approximately $12.650,000 supplier, LoVaca Gathering Company and its parent, Coastal at January 31,1981. As of January 31,1981, CPS has no material Corporation. The settlement resulted in CPS owning about 17% of a lease commitments.

trust established for the benefit of CPS and other settling parties consisting primanly of equity secunties that are to be sold over a 8. CONTINGENCIES seven-year penod and a note in the principal amount of $8,000.000.

Bis d on the then current market tatues of the equity securities in Coal Freight Rate Olspute - Since the mid 1970s, CPS and the tha Trust, a 17% share of the Trust on or about December 31,1979 railroads which transport coal from Wyoming to San Antonio have had an approximate value of $30,540.000. The market value of CPS

• been engaged in continuous litigation regarding tha proper rate or share of the Trust as of January 31,1981 was about $40.100,000. tanff, which has been, and is the subject of vanous interstate Commerce Commission and court decisions. If the railroads prevail All monies received from the Trust are to be distnbuted to CPS' in the most recently initiated action CPS may have to pay certain electnc and gas customers. During the fiscal year ended January 31, additional freight charges. CPS' counsel in this matter is of the 1981, CPS received $1,017,000 as a result of the settlement. In 1981, opinion that CPS hss paid and is paying the proper current lawful distnbutions to electric and gas customers totaled $7,916,000, and charges. CPS has made no provision in the financial statements for

$266.000, respectively, which included a $7,910,000 cancellation in any additional costs that migh? result from adverse outcome.

1980 of disputed excess fuel costs.

Other - CPS is involved in various legal proceedings related to The settlement provided CPS with an option to obtain certain lignite alleged personal and property damages, condemnation a;; peals, and properties. It also required Coastal Corporation to undertake a 15- disenmination cases. In the opinion of management of CPS, such yrar gas search program and to provide gas obtained from the proceedings will not have a material effect on the financial position program at discounted rates to a natural gas supplier, the benefit of or results of operations of CPS.

which must be passed through to CPS and other settling parties.

9. SEGMENT INFORMATION Segment information is as follows:

1981 1980 (in thousands) (in thousands)

Electric Gas Total Electric Gas Total REVENUE _$ 333,656 $ 91,27.5 $ 424,931 $ 274.601 $ 79,080 $ 353,681 EXPENSES:

Operating and maintenance expenses _ 207,407 88,281 295,688 169,500 75.575 245,075 Depreciation 26.962 3,139 30.101 26,328 2,946 29.274 Total 234,369 91,420 325,789 195,828 78,521 274,349 EARNINGS (LOSS) BEFORE INTEREST AND DEBT EXPENSE, ALLOWANCE FOR INTEREST CHARGED TO CON-STRUCTION, AND PAYMENTS TO THE CITY OF SAN ANTONIO $ 99,287 $ (145) $ 99,142 $ 78,773 $ 559 $ 792 3_32 CAPITAL EXPENDITURES- _$ 173,261 $ 9,737 $ 182,998 $ 180,369 $ 7,675 $ 188,044 UTILITY ASSETS __ $ 880,290 $ 142,668 $ 1,022,958 $ 857,206 $ 132,087 $ 989,293 CONSTRUCTION WORK IN PROGRESS 596,322 2,704 599,026 453,609 2,349 455,958 TOTAL ASSETS _ _ _ _ _ _ $ _1,476412 $ 145,372_ $ _1,621,984 $ 1,310 1815 $ 134,436 $ 1,445,251 18

Audit:rs' Repsrt CPS Revenue Dollar I+ wwe n ceae r,om.

Haskins+ Sells t x. e-o-

t-'

Boa:d of Truste.es amens E xq -

C ty Pubhc Service -.

San Antonio, Texas:

We have examined the balance sheet of City Public Service as of January 31,1981 and the related statements of earoings and applications of earnings. changes in equity, and changes in financial posi >cn for the year then ended. Our examination was made in accorcance with generally accepted auditing standards and, accordingly, included such tests of the accounting recorcs and such other audit:ng procedures as we considered necessary in the circumstances. The financial statements of City Pubhc Service for ~ o,, ' ~

s. , y the year ended January 31,1980 were examined by other auditors ,, ,,,, ,p, whose report, dated February 29,1980. expressed en unquahfied opinion on those statements.

In our opinion, the financial statements for 1981 present fairly the Mow n was u a financial position of City Pubhc Sennce at January 31,1981 and the resc'ts of its operations and the changes in its financial position for the year then ended, in conformity with generally accepted . . eas g . sm ' ( . . su accounting principles applied on a basis corisistent with that of the O preceding year, k Fuel ams 8tmassa esa -

DM prH AL 144 San Antonio. Texas March 19,1981 l

'2'

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1961 '976 1971 F.scm vears EaSad Jarsary 31

• E mCNdes WerP5t Cha'73 t3 COes"uctOn CPS Utility Plant M Tc*a! Ut+ty Pant i 730 _ M Coestew.on Wors e Peogress twe Common Paat e Serwce M Gas Raet e Serv <e 1 a00 - RW E ectr < mant e Seewece 1 100 -

E b

3 80o _ -t 5

s00 _

200 -

1977 19'8 1979 1980 1961 F, scal ven s Erded January 31 19

Five-Year Financial Review Years ended January 31 1981 1980 1979 1978 1977 (dollars in thousands)

REVENUE AND APPLICATION Revenues:

Electric sales $ 333,656 $ 274.601 $ 257,676 $ 246.625 $ 221,325 Gas sales 91,275 79.080 78.306 67,788 65.210 Other income 19.099 13.669 7.275 5.275 4.130 Total revenues $ 444,030 $ 367.350 $ 343.257 $ 319.68_8 $ 290.665 Revenues applied:

Cost of operating systems:

Gas efectricity and fuel purchased $ 238,760 $ 197,505 $ 190.533 $ 179.801 $ 172.142 Other operating expenses 38,909 33.004 28,863 27,262 25.532 Maintenance 18.142 14.663 12.223 9.966 8.586 Total $ 295.811 $ 245.172 $ 231.619 $ _217.029 $ 206 260 Operating Fund $ $ 2.000 $ 3_000 $ 22.000 $ Debt requirements for Old Series Bonds:

Interest and debt expense $ 9,731 $ 10.016 $ 10,287 $ 10,553 $ 10.870 Principal requirements 6,940 6,655 6.390 6,120 5.860 Reserve requirements 220 79 517 151 56 Total $ 16.891 $ 16,750 $ 17.194 $ 16.824 $ 16.786 Payment and service to City:

Payment in lieu of taxes $ 4,997 $ 4.923 $ 4,901 $ 4,703 $ 4.663 Refunds for services 9,713 8.384 8.323 8.126 7.561 Construction of street lighting (74) 278 479 Additional payment 37.860 30.003 26.407 23.890 19.487 Total $ 52.570 $ 43 310 $ 39.557 $ 36.997 $ _

32.190 Debt requirements for New Series Bonds:

Interest expense $ 46,161 $ 34.281 $ 24,141 $ 16,429 $ 8.686 Principal requirements 10,200 7,675 4,925 2,700 1,625 Reserve requirements 11.205 8.282 6.571 4.746 2.422 Total $ 67.566 $ 50.238 $ 35.637 $ _ 23.875 $ 12.733 Allowance for funds used during construction (32.766) (18.784) (12.867) (13.511) (13.128)

Additions to plant:

Total expenditures for year $ 182,998 $ 188.044 $ 167.449 $ 151,582 $ 149.934 Less construction funds provided by sources other than revenues 158.708 179.290 153.007 137.996 126.651 Revenues used for additions to plant _._ $ 24,290 $ 8.754 $ 14,442 $ 13.586 $ 23,283 Addition to improvements and Contingencies Fund 19.668 19.910 14.675 2.888 12.541 Total $ 43.958 $ 28.664 $ 29.117 $ 16.474 $ 35.824 Total revenues applied $ 444.030 $ 367.350 $ 343.257 $ 319.688 $ 290.665 BALANCE SHEET DATA 1,626,916 $ 1,449,573 $ 1,265.233 $ 1.100,709 $ 954,207 Utility plant at cost $

Annual construction additions 182,998 188,044 167,375 151.860 150.413 Accumulated depreciation 263,152 236.614 209.127 182,599 163.811 Annuct depreciation allowance 30,101 29.274 27,503 20.889 17,477 Debt service coverage 1.75x 1.82x 2.11x 2.52x 2.86x 20

Hve-Year Operadon3 Review Years ended January 31, 1981 1980 1979 1978 1977 (dollars in thousands)

OPERATING REVENUES Electnc:

Residential $ 138,806 $ 106,968 $ 102,569 $ 97.535 $ 82.687 Commercial and industrial 140,458 116,674 108,724 107,066 98,911 Street lighting 5,316 4,952 3,922 4.676 4,309 Public authorities 39,361 32,065 32,622 33,040 31,494 Othe. utilities 8,101 12.396 7,597 3.118 2,864 Miscellaneous 1,614 1.546 2.242 1.190 1.060 Total electric $ 333,656 $ 274.601 $ 257,676 $ 246.625 $ 221,325 Gis:

R:sidential _$ 51,949 $ 44.364 $ 44,001 $ 36,634 $ 35,414 Commercial and industrial 32,716 28,835 28,422 26,212 25.020 Public authorities 6,021 5,357 5,433 4,561 4.377 Miscelianeous 589 524 450 381 399 Total gas S 91,275 $ 79,0e0 $ 78.306 $ 67.768 $ 65,210 SALES (000 OMITTED)

Electric - KWH:

R:sidential - 2,799,274 2,344,081 2.318,020 2,155,884 1,928,326 Commercial and industrial 3,467,354 3,154,478 3.059,621 2,919,511 2,748,937 Street lighting 77,888 77,045 75,783 74,631 73,154 Public authorities 1,087,129 983,025 1,050,897 1,025,464 983,538 Other utilities 196,529 438.693 335.000 105.999 96 684 Total 7,628,174 6.997.322 6,839,321 6,281,489 5.830,639 Gas - MCF:

R:sidential 14,404 14.355 15,598 13,249 14.691 Commercial and industrial 10,763 11,164 11,933 11.331 12,438 Public authorities 1.969 2.061 2.279 1.944 2.193 Total 27,136 27,580 29,810 26,524 29,322 PURCHASE FOR RESALE:

Electric (1,000) KWH Gis (1,000) MCF 27,732 27,714 30,441 27,399 30,641 ELECTRIC GENERATION -

(1,000) KWH 8,079,950 7,453,425 7,267,236 6,691,909 6.211,489 Electric Gen. Capacity, KW (Gas)* 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 Electric Gen. Capacity, KW (Coal)- 836,000 836,000 836,000 418,000 ELECTRIC PEAK DEMAND - KW 1,950,000 1,707,000 1,688,000 1,641,000 1.560,000 NUMBER OF CUSTOMERS:

Electric 340,797 323,553 307,638 291,796 280,418 Gas 263,902 256,223 249,292 241,310 234,910 RESIDENTIAL AVERAGES:

Electric:

Revenue per customer $ 475,16 $ 387.55 $ 390 33 $ 390.03 $ 341.02 KWH per customer . 9,582 8.493 8,822 8,621 7,953 Revenue per KWH 4.96c 4.56C 4.42C 4.52C 4.29C Gas:

Revenue per customer $ 216.41 $ 190.48 $ 194.55 $ 167.40 $ 165.72 MCF per customer 60 62 69 61 69 Revenue per MCF $ 3,61 $ 3.09 $ 2.82 $ 2,77 $ 2.41 Oil rating for the gas units is 2,198.000 KW for the five-year penod.

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jj 4 %- of San Antonio's l 7 i

! , ]c+m ,-strengths is an abundant energy supply. l

! Another strength is its people, who are  ;

! now working together under the banner of United San Antonio for the economic and social F >>~~' ~l advancement of the community. i l

We at City Public Service are proud to be actively involved l

Mortarstde Barsk

in USA because we foresee a prosperous future forLour city.

I We'd be happy to tell you about it. 1 Dial (512) 227-3211 and talk with LeRoy Eck, . .J our Director of Industrial Development, -*

j on why you should consider locating j;?'

in sunny San Antonio. It won't be a f 'g waste of your time, or energy. _gg ,

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City Public Service i

, P.O. Box 1771

• San Antonio, Texas 78296

(, , g; ,,. Tu j, (512) 227-3211 I

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