ML050050527
| ML050050527 | |
| Person / Time | |
|---|---|
| Site: | Columbia  |
| Issue date: | 12/22/2004 |
| From: | Energy Northwest |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| Download: ML050050527 (55) | |
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Strength in Numbers Energy Northwest is a joint operating agency, comprised of public power utilities that recognize there is strength in numbers. As a public power agency, Energy Northwest member utilities work together to develop generating resources that one or two utilities may not be able to accomplish alone. In addition, member utilities have access to a variety of professional services and the expertise of Energy Northwest staff.
Throughout the year, Energy Northwest met with a number of public power utilities in Washington to discuss how membership could help them achieve their goals. As the Fiscal Year closed, a former member, Snohomish County PUD, voted to rejoin the joint operating agency.
Energy Northwest's Board of Directors voted unanimously at its July meeting to accept Snohomish County PUD as its 19th member utility!
Generating Resources Packwood Lake Hydroelectric Project The Packwood Lake Hydroelectric Project produced 90,003 megawatt-hours of electricity in Fiscal Year 2004, Nine Canyon Wind Project down slightly from the previous year's total of 91,100 mega-The Nine Canyon Wind Project grew by almost a third watt-hours. Last winter's near-normal snow pack in the during Fiscal Year 2004. Crews completed construction on Packwood Lake basin provided reliable generation through-Phase II in December 2003, with the addition of 12 wind out the year.
turbines. Construction of the Phase Two turbines was In late August 2004, Energy Northwest hosted an "open completed one at a time, and the turbines began producing house" at the plant in celebration of its 40-year anniversary.
electricity between September and December 2003. All Packwood's annual maintenance outage began October twelve of the Phase II turbines entered commercial operation 6, 2004, and lasted four weeks, as scheduled. Outage work at noon on December 31, 2003. focused on electrical components such as verification of The new turbines join 37 that have been producing control room wiring and relay meter calibrations. Other work renewable energy since September 2002. Each of the was completed, such as replacement of outer generator expanded project's 49 turbines can produce up to 1.3 bearing, tailrace caulking, water stop gasket replacement and megawatts of electricity, resulting in a total generating turbine runner bucket repair.
capacity of 63.7 megawatts of power. Nine Canyon Wind The power sales agreement with Benton and Franklin Project is the largest public power wind project in the region. County PUDs for Packwood's output extended through The general contractor, Renewable Energy Systems September 2004. The terms of a new agreement, extending (RES), met the demanding construction schedule, in spite of power sales to the two utilities through September 2005, high winds during much of the fall. Benton County PUD built were approved by the Executive Board in September 2004.
the electrical substation on the site, along with the Relicensing work is proceeding using the new Federal transmission lines that tie the project to the existing Energy Regulatory Commission's (FERC) Integrated Licensing Bonneville Power Administration transmission system. Process, which is designed to expedite the process. Energy Reliable equipment and an effective preventive Northwest expects to file its Pre-Application Document, maintenance program kept the project's adjusted availability including schedules and a draft study plan, and Notice of factor at 99.0 percent for the year in spite of several Intent with FERC in November 2004.
challenges at the project. Benton County PUD, Clallum County PUD, Clark County Benton County PUD, Chelan County PUD, Douglas PUD, Ferry County PUD, Franklin County PUD, Kittitas County PUD, Grant County PUD, Grays Harbor County PUD, County PUD, Klickitat County PUD, Lewis County PUD, Lewis County PUD, Mason County PUD No. 3, Okanogan Mason County PUD No. 3, Skamania County PUD, County PUD, Cowlitz County PUD, and Columbia Generating Snohomish County PUD, and Wahkiakum County PUD Station collectively purchase the entire generating capability participate in the Packwood Lake Hydroelectric Project.
of the project.
6 www.energy-northwest~com
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White Bluffs Solar Station When it began operation in 2002, White Bluffs was the region's largest photovoltaic solar facility in the region, with a nameplate rating of 38.7 kilowatts DC. It is still the largest installation of its kind in the State of Washington.
Performance at White Bluffs has been extremely reliable.
The station has produced 91,302 kilowatt-hours of energy to-date. The highest monthly production was 6,387 kilowatt-hours. Over a 12-month period, average monthly production was 4,228 kilowatt-hours.
The Bonneville Power Administration (BPA) integrates White Bluffs' power into its system and Bonneville Columbia Generating Station Environmental Foundation markets the displaced air pollution during Fiscal Year 2004, including initial fuel loading, receipt and greenhouse gas emissions as "Green Tags." Buyers that of its operating license from the NRC, reaching the reactor's participate in utility green power programs purchase these initial "criticality" (the creation of power from nuclear fission),
tags. and Columbia's first connection to and transmission of power As a first-of-its-kind generating plant in the Northwest, on BPA's electrical grid. Columbia will mark several more of White Bluffs continues to generate interest within both the these milestones in the first six months of Fiscal Year 2005.
solar and academic communities. The University of Oregon monitors production and radiation data from solar stations Independent Spent Fuel Storage Installation (ISFSI) across the country, including White Bluffs. Columbia Generating Station's Reactor Maintenance group completed the second dry cask loading campaign on Columbia Generating Station April 25, 2004, when the tenth cask of the campaign was Columbia Generating Station completed its 16th refueling placed on the ISFSI pad. The pad now holds 1,020 spent fuel and maintenance outage just in time for the start of Fiscal assemblies.
Year 2004. That outage was followed by a brief forced The campaign finished in 70 days, or 7 days per cask, outage. Dissatisfied with that performance, the management instead of the planned 100 days; significantly better than the team developed a comprehensive, 18-month plan focused on 18 days per cask during the first campaign.
improving the station's performance. Significant savings were achieved by doubling the The Quest for Excellence was rolled out in November. number of casks originally scheduled for loading. In the midst The Quest is a detailed plan identifying specific work to be of the campaign, the Nuclear Regulatory Commission (NRC) done to improve the plant's overall operation. The Quest is performed an inspection that resulted in no issues or also an ongoing journey toward sustained operational concerns.
excellence. It requires Energy Northwest employees to Subsequent cask loadings are scheduled for Fiscal Years change how they view, plan, and complete work at Columbia. 2006 and 2008.
While the action plan runs only through refueling outage 17, scheduled for May 2005, the cultural change initiated by the Quest will be ongoing. Independent Spent Fuel Storaae Installation OSFSI) Cask Load Another key initiative is the Actively Committed to Everyone's Safety (ACES) program. ACES is an observation and coaching-based safety program administered by employees from throughout the organization. Observers watch people doing work, provide immediate feedback on potential industrial safety hazards, and offer coaching on improving safety practices.
Columbia ended the Fiscal Year on its 3 6 2nd day of continuous operation-very nearly the station's longest run.
The previous longest run of 368.98 days was surpassed on July 6, 2004, just into Fiscal Year 2005.
Since Columbia began operating in 1984, Energy Northwest has paid more than $44.79 million in privilege taxes on its electricity generating operations, while producing virtually no air pollution and without harming fish habitat.
The 2 0th anniversary of a number of significant milestones leading up to Columbia's commercial operation were marked
goals and measurements; force-on-force exercises; and the updating of security officer physical fitness criteria and medi-cal qualification criteria.
The enhancements will provide highly effective security for Columbia in the post-9/11 environment.
Debt Optimization Program Now in its fourth year, Energy Northwest continues to support the Debt Optimization Program on behalf of BPA and the ratepayers of the Pacific Northwest. In Fiscal Year 2004, refinancing bonds were sold, providing BPA with $291 million in revenue. To date, the program has deferred $1.024 billion.
The purpose of the program isto allow BPA some flexibil-Enhanced Security ity in its Federal borrowing authority.
In April 2003, the NRC issued several security enhance- This program alters the payment profile of existing debt, ment orders to all nuclear power plants in the U.S. The first improves BPA's overall debt profile, and provides for potential order required implementation of additional actions to protect debt interest savings for ratepayers of approximately $20 against sabotage by terrorists and other adversaries. The million, annually.
second order addressed security force personnel fitness-for-duty and work hours. The third order required the develop-ment and application of an enhanced training and qualification program for armed security personnel at power reactor facilities. Energy/Business Services Columbia Generating Station expects to be in full compliance with all the new orders by the NRC-mandated deadline of October 29, 2004. A special team was assigned WNP-1 and -4 Site Restoration and to oversee this project in December 2003. Following NRC Potential Re-use approval of the station's security enhancement plan in April Energy Northwest has signed a site restoration agree-2003, work began to complete necessary changes to ment for former Washington Nuclear Project (WNP) Nos. 1 programs, structures, facilities, equipment, and training. and 4. The agreement between BPA, the Washington State The NRC orders required a number of significant plant Energy Facilities Site Evaluation Council, the U.S. Department modifications and security program revisions. The latter of Energy, and Energy Northwest, calls for implementation of includes changes to procedures, plans, and training; imple- a restoration program to begin in 2023 that will be completed mentation of a new corrective action process for security- by 2026. As part of the agreement, BPA will fund the final related events; development of new security performance restoration through a trust fund established in 2003. This fund covers the currently estimated $45 million restoration costs if a re-use for the site cannot be identified.
Energy Northwest has begun near-term health, safety, and environmental protection work on WNP-4; WNP-1 work began in September 2004. This will eliminate current environ-mental issues, ensure a safe worksite for future projects, and lay the foundation for full site restoration. Scheduled comple-tion of this project is June 2005, at an estimated cost of $4.1 million.
An Ad Hoc Committee comprised of Energy Northwest Board members and staff has defined formal re-use criteria based on maximizing the value of the sites for the region's ratepayers, while meeting the essential security and emer-gency response requirements for the adjacent Columbia Generating Station. This plan is the foundation for the proto-col document listing specific screening criteria against which potential uses of the site will be measured. Re-use business cases meeting the screening criteria will be presented to all concerned parties for review and approval. Portions of the site identified for re-use will be exempted from restoration.
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Hanford Generating Project Restoration Completed As the Fiscal Year ended, so did an era. On June 29, 2004, Energy Northwest officials, community leaders, former employees, and the public commemorated the unique history and site restoration of the Hanford Generating Project (HGP).
Restoration activities began in 1999 and were completed, within budget, on May 19, 2004, when the final load of dirt covered the remaining turbine pedestal concrete structure.
The HGP site restoration is a testimony to the power of interagency cooperation. State and federal agencies, along with local Native American tribes, worked with Energy Northwest to achieve all the requirements in the Tri-Party Agreement for Hanford. Cooperation among the Washington State Department of Ecology, the U.S. Department of Energy (DOE), and Energy Northwest contributed greatly to the success of the project. Final cleanup, demolition, and restora- Northwest Open Access Network (NoaNet) tion were completed within budget and ahead of the DOE Energy Northwest is a founding member of NoaNet. The schedule. non-profit organization offers its customers an open access, fiber-optic network to bring high-speed broadband communi-Exploring New Generating Resources cations and services to rural areas of the Pacific Northwest.
Energy/Business Services staff continued researching In 2004, Energy Northwest continued its support of the promising new wind projects during Fiscal Year 2004. open access model by offering broadband services at the Working with Renewable Energy Systems (RES), the general Applied Process Engineering Laboratory (APEL) in Richland, contractor responsible for construction of both phases of the Washington, and to additional communities throughout the Nine Canyon Wind Project, Energy Northwest looked into state. Locally, Energy Northwest is working with utilities, city development of a site at Hopkins Ridge, near Pomeroy, governments, and industry to connect the Tri-Cities commu-Washington. At Fiscal Year end, expressions of interest in the nity into one virtual network.
power from Hopkins Ridge were approximately half the 100 megawatts considered necessary to make the project cost-effective.
The second potential wind project investigated during Fiscal Year 2004 is located in Reardan, Washington. The site may support up to 50 megawatts of wind power; however, studies were still ongoing at the close of the Fiscal Year. If determined to be feasible, the Reardan project would likely be ready to market in Fiscal Year 2006.
BioEnergy Solutions In Fiscal Year 2003, Energy Northwest, working with Franklin County PUD, initiated a pilot program to investigate biomass technology at a local dairy farm in Pasco, Washington. Preliminary results have shown the new technol-ogy is capable of increasing methane production from biomass materials, in this case waste from dairy cows.
Energy Northwest continues to assess the project's ability to continuously produce elevated quantities of methane over extended periods.
Energy Northwest's focus on investigating and develop-ing this technology is a testament to its commitment to iden-tifying and developing viable renewable energy resources for the ratepayers of the region.
filtration and exhaust systems.
A number of tenants are successfully expanding their operations: InnovaTek has leased manufacturing space for production of its BioGuardianTm microorganism air sampler; PNNL's electron beam welding system has moved into the APEL high bay and, in addition to supporting PNNL programs, will be marketed to other national laboratories and high tech-nology users; and PNNL's diesel automobile test stand and diesel engine test laboratory have also relocated to APEL's high bay.
Environmental Services Lab, APEL Calibration Services Laboratory The Calibration Services Laboratory continued to provide in-house services to Columbia Generating Station. The Laboratory has supported the station's Quest for Excellence Applied Process Engineering Laboratory and ACES programs, while providing excellent service and (APEL) minimal turnaround times in Fiscal Year 2004.
APEL offers a unique incubator environment for scientific, While Columbia continues to be a primary customer for engineering, and manufacturing enterprises. APEL plays an the Laboratory, demand for services outside of Energy important role in economic development across Washington Northwest continues to grow. New and repeat customers and the region. Continuing support from Energy Northwest continue to praise the lab's service quality and broad spec-and other founding contributors, including the Pacific trum of capabilities. In addition to large companies such as Northwest National Laboratory (PNNL), the Port of Benton, Bechtel, Pacific Northwest National Laboratory (PNNL), and the U.S. Department of Energy (DOE), Tri-City Industrial Washington Demilitarization Company, the Laboratory has Development Council, the City of Richland, and Washington added numerous small businesses to its growing list of State University Tri-Cities, has fueled the laboratory's note- customers.
worthy achievements over the last six years. The Calibration Laboratory recently completed five years APEL's tenant roster has expanded to include institu- of service to the Hanford site through the Fluor/Dynacorp tional, as well as individual entrepreneurs. Energy Northwest's contract and is negotiating an agreement that will extend Environmental Services Laboratory joined APEL in August services through October 2006. The agreement has been a 2003. successful model for Fluor, and is often referenced when 20To accommodate the growing needs of current and future contracting other work from the Hanford site to commercial tenants, APEL commissioned a major upgrade of the inlet air customers. The Laboratory's contract work with outside customers helps reduce overhead costs at Columbia Generating Station.
Environmental Services Laboratory Since 1992, Energy Northwest's Environmental Services Laboratory has provided a wide range of chemical analysis and environmental monitoring services to utility, municipal, commercial, nuclear, wind-power, small business, and resi-dential customers.
Services include ecological evaluations, environmental monitoring, National Pollution Discharge Elimination System (NPDES) permit testing, drinking water analyses, solid and hazardous waste site monitoring, lubrication oil condition testing, and technical consulting.
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Olympic View Power Plant In March 2004, Energy Northwest began providing O&M Operations & Maintenance services for the Olympic View Power Plant located in Shelton, Washington, and owned by Mason County PUD No. 3.
Services Energy Northwest developed a comprehensive maintenance program and conducts weekly maintenance work, as appropriate. Under Energy Northwest's oversight, the plant Grays Harbor Energy Facility has been at 100 percent readiness in keeping with the PUD's Energy Northwest continued to provide asset preserva- expectations.
tion support to Duke Energy North America (DENA) at the By Fiscal Year end, Energy Northwest O&M technicians Grays Harbor Energy Facility, near Satsop, Washington, had completed a number of high priority actions, including including site supervision and licensing support while the installation of new engine oil heaters that have improved project remains in construction suspension status. overall plant performance. Due to market conditions, the Site personnel continue to maintain equipment in a ready plant had been operated for only brief runs as of the end of condition should market conditions warrant a restart of the Fiscal Year.
construction.
Throughout Fiscal Year 2004, Energy Northwest Aggregated Utility Services supported DENA's efforts in exploring potential partnerships, Fulfilling Energy Northwest's primary objective of or a sale of the facility, by seeking expressions of interest providing value to members and public power utilities, the from Northwest public utilities. new aggregated services program will allow utilities to take With no clear resolution, DENA is working with EFSEC to advantage of economies of scale. Participants will benefit take all appropriate measures involved with site preservation from centralized services that reduce duplication of resources and extensions of construction permits. The first extension and activity; lower equipment and supply purchase costs; allows delay of construction restart through January 2006, and provide access to innovative technology, best practices, with the potential for one additional 18-month extension. and lessons learned without high investment costs.
Market research of our member and non-member utilities H.W. Hill Landfill Gas Power Plant over the last year identified 23 potential utility services. For Energy Northwest provides Operations & Maintenance Fiscal Year 2005, the list includes joint purchasing services; (O&M) services to Klickitat County PUD at its H.W. Hill Landfill substation design, construction, and maintenance; Gas Power Plant, located near Roosevelt, Washington. centralized technology services; spare sharing program; and Despite many challenges, including a significant "Green Tag" program services.
reduction in landfill gas production due to inclement weather Business case assessments will be prepared for each of and freezing last winter, the plant increased output every the potential services. This information will be shared with month of Fiscal Year 2004. Station personnel aggressively Energy Northwest members to determine their interest.
pursued ways to increase the fuel supply from the landfill.
They succeeded in adding approximately 100 KW of output capability, with a total increase of 1.2 aMW load for the year.
Energy Northwest and Klickitat County PUD O&M personnel conducted a planned maintenance outage in Looking Ahead October 2003 to replace the main gas header due to continuing leakage. Following that repair, the gas supply Energy Northwest looks to the future with an unwavering system has been virtually trouble free. Station and Energy commitment to serving the needs of our members, the public Northwest personnel completed all maintenance without power community, and the ratepayers of the Pacific vendor assistance. Northwest. The region will continue to face a number of chal-May 2004 saw the station's first extended full power run lenges in Fiscal Year 2005 and beyond, and the people of after achieving over 134 hours0.00155 days <br />0.0372 hours <br />2.215608e-4 weeks <br />5.0987e-5 months <br /> of full power production. Since Energy Northwest will be there...investigating new technolo-May, full load production days have become commonplace. gies for energy production, researching the needs of public Maintenance activities began returning to normal levels power to determine how best to service the ratepayers of the at the end of the Fiscal Year. In Fiscal Year 2005, Energy region.
Northwest's O&M personnel will continue their aggressive Energy Northwest looks forward to continuing the work approach to increasing station output, including researching the public power community asked it to do when the joint the installation of a gas cleanup and heat recovery system to operating agency was formed in 1957.
lower maintenance costs and further enhance plant Energy Northwest will remain steadfast in its commitment generation capability. to being responsible stewards of all the assets it operates in the public interest.
16 www.energy-northwest.com
OPERATING STATISTICS For the year ended June 30, 2004 (Dollars in Millions)
Columbia Generating Station Packwood Lake Project FY2004 FY2003 FY2004 FY2003 Net Generation (1) 9,520 7,738 90 91 Plant Availability (2) 99.4% 81.0% 9.2% 96.2%
Plant Capadty (3) 97.7% 78.5% 37.3% 34.7%
Cost of Power (cents/kWh)
Production Expenses (4) 1.33 2.01 1.34 0.73 Industry Basis (5) 2.19 3.01 Investment Performance FY2004 FY2003 CHANGE(%)
Income 4 16 - -75.0%
Average Balance 416 558 -25.4%
Rate of Return 1.05% 2.94% -64.3%
Bonds Outstanding FY2004 FY2003 CHANGE (%)
Nuclear Project No. 1 Fixed $1,667 $1,665 0.1%
Weighted Average 5.6% 5.6% 0.0%
Variable $310 $316 -2.2%
Average Rate 0.9% 1.1% -18.2%
Columbia Generating Station Fixed (6) $2,064 $1,987 0.1%
Weighted Average (7) 5.5% 5.5% 0.0%
Variable $96 $102 -5.9%
Average Rate 0.9% 1.2% -25.0%
Nuclear Project No. 3 Fixed (6) $1,471 $1.098 -9.7%
Weighted Average (7) 5.6% 5.6% 0.0%
Variable $464 $466 1.7%
Average Rate 1.0% . 1.2% -16.7%
Packwood Lake Project Fixed $3.8 S4.3 -11.6%
Weighted Average 3.7% 3.7% 0.0%
Nine Canyon Wind Project Fixed $92.4 $92.4 -2.6%
Weighted Average 5.4% 5.3% 1.9%
(1) Expressed in millions of KWh. Columbia's generation includes BPA economic dispatch credit of: FY2004-16; FY2003-122.
(2) Plant availability is defined as the ratio of the sum of source hours and reserve shut down hours to total period hours.
(3) Plant capacity factor isthe ratio of the actual energy production over a given period of rmeto the maximum energy production capability.
(4) Includes operating, maintenance, and fuel amortization costs per the EIA.412 report submitted to the Federal Energy Regulatory Commission (FERC).
(5) Indushy cost of power includes expenses associated with operations and maintenance, capital additions, fuel-related costs, and estimated costs associated with the economic generation credit.
(6) Excludes compound interest bonds accretion.
(7) Excludes compound interest bonds. 17 Annual Report
I..
Management Report on Responsibility for Financial Reporting The management of Energy Northwest is responsible for preparing the accompanying financial statements and for their integrity. The statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis, and include amounts that are based on management's best estimates and judgments.
The financial statements have been audited by PricewaterhouseCoopers LLP, Energy Northwest's independent accountants. Management has made available to PricewaterhouseCoopers LLP, all financial records and related data, and believes that all representations made to PricewaterhouseCoopers LLP, during its audit were valid and appropriate.
Management has established and maintains internal control procedures that provide reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use of disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures.
Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, PricewaterhouseCoopers LLP, has considered the internal control structure in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered recommendations made by the internal auditor and PricewaterhouseCoopers LLP, concerning the control procedures and has taken appropriate action to respond to the recommendations. Management believes that, as of June 30, 2004, internal control procedures are adequate.
J. V Parrish A.E Mouncer Chief Executive Officer Vice President, CorporateServices/General CounseI/CFO Audit, Legal and Finance Committee Chairman's Letter The Executive Board's Audit, Legal and Finance Committee is comprised of six independent directors. Members of the Committee are Larry Kenney, Chairman, Vera Claussen, Sid Morrison, Amy Solomon, Roger Sparks, and Ted Coates, Ex Officio.
The Committee held 12 meetings during the fiscal year ended June 30, 2004.
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 accountants, the overall scope and specific plans for their respective audits, and reviewed Energy Northwest's financial statements and the adequacy of Energy Northwest's internal controls.
The Committee met regularly with Energy Northwest's internal auditor and independent accountants to discuss the results of their examinations, 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 accountants.
Larry Kenney Chairman, Audit, Legal and Finance Committee 18 www.energy-northwest.com
Report of Independent Auditors To the Executive Board of Energy Northwest We have audited the accompanying balance sheet of Energy Northwest and the related individual balance sheets of Energy Northwest's business units and internal service fund as of June 30, 2004, and the related statements of operations and cash flows for the year then ended. Energy Northwest's business units include the Columbia Generating Station, Packwood Lake Hydroelectric Project, Nuclear Project No. 1, Nuclear Project No. 3, the Business Development Fund, Grays Harbor Energy Facility, and the Nine Canyon Wind Project. These basic financial statements are the responsibility of Energy Northwest's management. Our responsibility is to express an opinion on these basic financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Energy Northwest and Energy Northwest's business units and internal service fund as of June 30, 2004, and the results of their operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Management's Discussion and Analysis (MD&A) listed in the table of contents is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. The information in MD&A has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on it.
September 3, 2004
_ _ _ __ LI-P Portland, Oregon September 3, 2004 19 Annual Report
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, 1 equit r 5'.7fFtscale t 00nery yNwest'hdpe59 oxygen-and me'Businforatin Preinglelsl exense, reovenues stsher is rm'-.idje'ctio r provem pemsn addbierg
. videdGna'ids i nbenh naktin"gS £tWaattire rc hemisty Ijection Project thirasprojeteistingthefinal -
~reetthe reui ftah~ii6stiiem'end s reate franu1 00 i Yoear~00ior' total'cking SireeninFss5
-tt
-'<'biii~sbuover
.&oitn s to~oiissinfcn hevial theanoure atemn ipSogi s rfltteentiscloshesthetr of ihanFisdaIear,.the 6balancesan informto Sprojec aciiier~ d paccofmcostrubynection s cos of approxiedmaely$171002 ateting ThejHydrogen Hydrognten
.*. p.water t '
,po rsbT Lf es ucsa A - -**. -
- ubeqen tsif aplicble `ecduingda eoi fFsa Ya 05Poet 1-s dee - s' ;t_ t-:~~- ,-
2 OO.~
- "Cerutaiseiacig ndatei~ Noeers'0~ot 'F-,aaca throgh hen oisaYer20 weroements bugs~ati-"
nciaeslt in.eifiotsd ratedet, beneeseTyvrabeh0 ear205te irprojec~ts cost bbcfis lt d rovrents ai-i; Busiesias what.
T it was in uxwsed f ontees ratesn porTIhedojetie n manag'ing- o fti ,-$10l6,03~Ugae ecrt ytmCmue h
.'t-;{~-rh Unitshs fsucrrimitments tiomof~- : vernd-bintsionts-;and d .t '.'ghemiry xidizing species 00actr 0 orlain,2 the InjWtr~emsr~ection Project isben this riProedeuctci ipented 1-61 wil bte by Enaergy,.,~
laf' .'~Tesateet -'
of csfowiefetcsheceiptsad
- *' - Vb.A _- A..I-*A quarthetomitge ,Ytegauar Stress Coroion rakig t it-
.Notents tothefinancials'tatem
.rvemn-Tent equy thatj aoempminshedag iC." owma intothehi°,7, n
=the fnan ia sstat :.bas oncanMaZZ
`bf lis tliquidh ren stor a ilyto pt e ofm tglj
.4"'.
'..ntlainadtsigof the -Station--Upgraded Seuit'.13otwet aldrnc6Shee .. .....
-.-,;NcystearfCoputerl,-isftob complted ureingzheaecon6Lo ngiermfDebt nce d 15 00fr qu -2005of4f FiscalYear Thisnew computer replaces=9the 7,$00i 3 sl0t0o 0e 34 E0 n n x m4 0
-fh'dcurrent wich
,omput oftof :fYear. t the Fciscal 20h04"'i.an R inside the ro.-protedted
-iscaV.~ ar204;Projectacostds 'rrFs as i of theg ed dIsean mb annd ed bove, b-Ap'Generating ti , isFisizeaf isa aane -bi 2004,ne aedtin nai, ect-$2,04,3
-j
_$0,49,art
--$of Fisl ,Year2004 project
,the apt'ofe-coStisc
'sreaof`CGS weren$4 urd~eted proximately $4,9d3;00i._.'t:d
,022,000.
a$ 89 lForiscal 10 0 0 resa Y.ear-'2005 totaRl isial'aiiatero. project: , i ' wel e ote ebt wassto Eaoe foss'd support fri the finaial variousCGS Debt~a statements) 3co Optimization~nsctruction, Plan 3.4'
,prjoj Deb
.e Nt as
'alNuclear fuel, net`of k ted amortization decreased -
lacum yDiss $7 0 ,r by.$19,226,000o'foTih'$121;275 060 ai iear Oper,0teonspe: Aii isv'l Year.... i7..S'O r- $102049 000 NYar20 D F e00fro 3n0Fiscal $ GeneratnSiosanetbilledPoe CG S hed $ of uerfuewhichwas.EnergNorhst recognizes revenues . q to epensef 60by'current year amortization of2$33,380,000 0 nbed projectsNo
'on helchprio revenso losn 5-
-\'-:~,-~Th'e ~Restricted~A~ssets ,Sp'ecial:,Fu'ndst,,,inqcre ased-'<,-.are re~cognized and no equity is--accumulated.'The'fllwn 2e,003 to6 h.Year .
2004, Fiscalu Year 2003 ltd' Fihcatl ear s 9 foly^rNet from$3 19,0000 from $31;551,000 -icFes23alY 457000inFiscaiYeargei2004 tthcis result offinzatncintgtn-rCOperating'R f ar ain enies.eed s to;e me additionalmconstruction.pBrojects Pthotan maWn'rege6ts coiw 2,532,000 I439 frnFl 947 0o00 n204'ond WeYiar _e' 2 00 4 f.XFY
.iduring Fiscal Year2004as part of t Is e F03Fiscal uft*tind: Fid-calerst:d rm.
Deiaiigcretmtrn ecreased$3O100 bia,XGncdatnge-S~ctdne~r,,ato NUclei~eifeel;ependitures ~haveihdreased-$8'261 ,,S 00 ro,<
SeVice Fud S"'eb 62777,000 in Fiscal.Year66 200 to 19,7.76-,00 nFsa Y' i$71 1000in isa Year 2063 t 6$35,322,0006in Fiscal Year 5
<<r '66.ueA6'1ond Fund Reserve through'thd'eDebt 2oo4,beau'se increased generationi of 0free-ups t;-h ina-'i'ipoutagyeats
-O&ptimizationCrbrri heDebt
-. Otmization: Program ls'>,~The ir~grarii.366neeation'nddririd'Fis&cal Year -2004 rTesutdi .
'-'"" desied'to take'advanta f$3,199,000'jnFiscaYear0 hiianeghedr~nteirest debt :if the ,debt 4sis avilable `o'__'-" ',iompred'-with$12,237,000 ,iniFiscal..YearK2003>-,AlsoS~t'"
o onr 5.pt frb n't7e25 i cal".port'ratriyas -well
'calleid.)
'assisting Bonrasdnei iville6'k- Fuel .Disp~sal ,fees icesd$1:77.6,O060oi7 6 3 iisraior'~BPALt~frb~p ckrntcash flowst~Y
---Z--,~~_PoW-Aa b9~'~F&61-lYear 2003t t 9,'0`2_9,0`00 in'Fsiscal1 Y-6ar'2004; due t'h
~srefinancing .current matUring debtwfth- IoW6_'~ihtere'st ..d ebt,- 'rfces'e generation I Whiyears....aturejri.f~f~k&' Operations and Mainteaneexediueswre lower by.A.~. ' 4 K $6,591000 5ia-rs:5,%---1
--. LogTerm Rceiab e&dcr' sed `.,52300 O~roM ;~C--alne $974 '0Lfr6~n $159,312,000-in .Fiscal. Year.20 o-
'inFikalI e-r2063'tb.,$3,06'8,000.in Fiscat'I"y a7$129 57-0 41 saVe~Kb4Tereieii'a' 204pmaiydue-to a $3,300,000 rec assifia 'hto.C mt-!,;,!tainte-n'anc'e ou'itage .in-F~iscal'Ier20 cc~tdf'
-- Rece6ivable reaedto- .ica 7atid at-" urn'Asesices~d'~~fsti X2 r ete I-. 160,000nraf. in costs'not-.expended
.jromer in`FiscalYear"20."t
$13,800,000 Was-due tos'everfact' rs 000a
"-$ 16;992lb~O'i-i'$9,~6"'0 n, ~i'-- ~ fc~i-'the .need- f Storage.~hn~ji-t'i in 5.. ~--~t$106 ,685;000 'frinFis6~l ,Ye~r2Ob4,~u-tob~t6'~th'f~6ll6~6jA'.., 6,.,~'prating~throug1iout~Fisca ei2b inldn l~din c I-5 .
-1)tCasf,~had' available -for~sale '4securities ,Iincreased-,$'an':~d .transf ernng of spnt'fuel casiks tothefnew onisit'e" storage-.
V,~_3?_$2 ,646,000. in, Fiscal Yar'2004',dbe6 to a6We= large-r v prepa y~men o4,f tebstfleseo .fcI ddiitry'1menion i -abovb;;the NRC ~
rvmns~ whichK Incue '
g=;rXcurrT.the NtBligfrFsaYer .2005;.as compared toFfiscal Yer ;: -fri~i'idAted,;s'ecurityoi 2'20 '2), Reclassification, of ,Lo~n&'Te~rn*.RAe-ceivables '-to ~,~'.~,signifi6;~t ifcrease ,in .the' CGSi.Securitysa~utemr ~S "
' "ff'. .4'tdf .urthe 5
! 5,-.2004`.'
urn ' Receivables, as' mentIoe abv')Itefn ."006rtidns 'and Ma'intenac Wer b
- e~dtu~ frhe
~,-s--~'-. '-transfe'rs thatare -elminated in Cbombinatiohof'thezFinancialJ.impactd 'in Fiksal 'Y~aear 2004Y,;-a'ch rime-ahe5 Horeln
- .. Sttemnt _4 h.u. '&-3/4 .-::~Security Threat Level incrjea 'se.-Operations 'and Maintenne sts~in~ess~i fBiih:i~ &increased $168;497,000 ~---. staff 'were also:4faced '.;it'h'-se~6eral chalegs~uiI Fsa fromi ,,$325,818,000T.h --Fiscal '.Year.:2003 46$494,31 5,000 in'~ Year , 200441Yifl4IIdihf
.Fiscal 'ear ,2004.Y.,his is ,argeylu itho' shbt iri -past, ittt dow _CGS,~'whicwh WhenandQMitnnc6tf it'hesmen metiond
'.grmaove hed66lck64he o a Debt eed Qptimlztion'~'55~
or fnds o'-.'~.ituaion wihoengcd inte th Operations-
~,,~ *~a:,,pay off current matunities results incosts that exceed biflingS, -'_Wiuld have shut tepatdw ~-"1'Y." '~. '
~5,' ln~dditon te acdumulated decommissioning ~andsit$j'AdiiravendGealEpsewreoerb
-i~~rt~ accrued costs-arIo urnl billed to-BonnevilleL;_-. $52200fo62 0 0 nFs alYa 203t PwrAdministration (BPA~) ~BPA holds- and m~fanages altrust ~.$2~ 16900iFIsa Yea 2004, m:~ainly 'due' to~"t~he; foloig djoopffnig eomssoig ad-it S tems In Fiscal Year_2003; incentv pyetwere a direct rs th p(See- NoeBt te,-finan-cial for`6strtion .. A'
,tatefornCGS in Fiscal ~-Year 2004, the icentive payments 7:,
-'ecommissioning -anid Site TRestorationh) ':The- balances ~in' -- er cs t verhead, -which ;-resulted in a6 ,decrease0ofq,
~t6se h'Ž' ,external' tr-usttfunlds 5 are , ot reflectedd on .Energyi.;7,-'-$4 ;7-35, 000,B'en-efit c'o's~t's w'ere'$1242,000 less in Fiscal -Years e-enrgy northwestxc 7orn'*".7 .. 5;7A
-4 **t--;-S- 5-4-.;1/4 vA - ~;- -*~
< --. -,r_
2904,-a's comp'ared to Fiscal Year 2003 due to less ov'ertime-X^--"$412,000iin excessefunding that wassavailable to be returned nd temporary labor'in a non- ouita'geJer Regulatory t the Parti-cipansi October'200404'F 9 n~ca a sno C1'at int
- 20O3, -byna ,5700c fe' ncrdasrnhejt OprainsAa1nsis...
L-NucICr Reuojommi'issioni y and E-re an Electric'Power Reearch'§.-i -Th'e' ag'r- t obligatesehthemPr nstitute:'Decomrnissionin g'expenses Jhdr6ba`6d $i6, 88,000 to pay arna costsandLtheyreceive excess'revenues from:$26,505;0, inFiscal Yea;r20O3to$42;993,0OiriFiscal r recognizes revenues equal to ear 2004, pritaril'yedueto6acifi6ngteinen' th'e fidehfor expensesof reachjperiodNo orloss
-et-revenue i s" the .'to f ' ".F-'- -'-e"r -e ni- 6d-- id a .- i V-- -accumu fev v n-ue's accretion epense was accounted for in Fiscal Year - recogniz 2004.>In.'Fiscal.'Ydariz-2003,th 'ado6p'ti6n-of-;Statte'm'ent'i ofincreased bec use'of the tcotincreassdetailed below tandasN'.13tig' NFina.14iai3cAcountic perationsandMaintenancetalong with Administrativeandd bligationsAssociate'dwitthhRetientfLongLid eneral ture '-increasedP 353, 00,from ;$1086,000
":(SFAS i43)^resulted 'inn.irinitial increase in..expense Fisca er 2003'to $1,439000.iniFiscai 'Year 200 wasaccurited for as an increas 'C in Excest'6f wsdue tohe nni o rego eni effor hich totale ii.gs4. i- '.o-m-plianice,withtih Net-BilIing Agreement with'2- $322,000 for Fiscal Year 2004 The Federal En rgy egulaoI
'Ainste~ad 'of Cum'ulative"Effect-f Accou'nting' CangeCommnission (FERC)-issued-a 50 ye io'ptinglicense to FASt143'calls .forthe'Ass'et'Retire'mentObligationbt&o-bekPackwood -onMarch1 1,960 Thec.urrent icens e!will ex recorded atdeoreciated 'overthelife- of -the planh on' February.28 2010.
iamount wiprolbae bi&6-rac66 to. lN= dear Proje ct ,t25
- fotrthe accretion valeothe oblgatioi inc` asi- Nu-lea
_ r'o-' No.1;250 MWe'pi in -, .i20wsoibnuohaluei r e neiided constructioi delay status in 1982henit w
-if'~ qure-pe~'alclaias -~,adoptedby5 ,SFAS, ~143 ~and ~will:,:~ `percent complete. On May,13 ' 19 EeryN~twets'"
flo e-s- samern impact as ~mntd abv SeNoeGt ord of Directorsaaopted :areso intemntng Nuclear,'
U.:. he fin'anc'ial 'stateiments'for rthr e.x p'1--an -f --Project No. 1. IniFisbaIYe&ai'1999 :the assetsanlibite f"-
'~ ~th6ki~ri~e*anaretheneteffets~~ te "Hnfod GneraingProect ,were-confsolidatdit Ex6s~6change on ColumbiaDebt;(See Nttothe financial statements)Nuclear Project lNo. The.Hanford GeneratingProject site :-v F- ncome'wfl~oe 5 as by coed ntinuin rstr'ation .actiteswr o~mp et'ed o On2
-rates'of returriand :low'er. cash .balanices r-esulting in a decline" I fundiung requirements are net billed o
~
of $4873,bOO.from .$6 75t'01nFscal Yar2003 toi
- ,'roectNo1 'Energ orthwestwo on ular roect r_~bfi~.~.aeshfe
.-- Oet~66 piia b',eslirnA
-bt ion otzainig,--. -
7gi9,'41330,00;.f ne'webt'issuediFsclYear 2003'at a i"~-BlnceS' cth ess I-j n-- st s'.'.
- ..-5-2 p'ercetiriDterest e tratetofNset
- b'lthereduce ebt .O t""iation Program long ter isnca'Ye se 0uto$2,279e00.idb fe~t _Artiza-inoy,1iner'-
t^9akooula~
o r.--..-..........e 0-F Bondu fudnl[e6 anya-0 -to
,Un
$1 961r297,000 in sat er ;h '--D bt.O ti-Yeare-de'to uccte deth eart
-o ';t ,.c ' dihr
- Fncrefnd41i30 edWrh .dereaue Ia in~Fsae Yr'2 $300s-rt rf vsu'N'ce 'r. to take a rojecNoz3th, ng of lower interes rs -
produced 90.06 of675elec00ci
~'-,<-R f nding'nett dnaestmecreasernndecpensed-fll 335 000tsrrogjdJ:W
-- "X- ui PoetN :>'
locte o Pckoo sut Wahigtnaacwod - ' 6. ...- -(0---~~~-~-
eB iuea ad9.08Whoin0 Ya 00 -,'-.Yexeddcosrcto Fiscal n eay,0 statu in619830whn itwaF5"~
y~oeae.by.Eherg
-.- .. "y,"."N.<~pecethomleesntay 3 99-Eery orhst at PackW.Current Assetse havefincreased 000;'f'.'tPrjetNo3Enrgborhesoiwo oge rsonilee
':;- Pck~odA-T~re ike HyrelcriPoecti $57-fromj$22200 wned aind- 204ue atodhistoicvall-o
-- --.3. a-I-240 retrenet-bil aes ofM.--p-
-n-sitendresto rationcost a;s thed eetrnferdwihtee1~
in~9 Fiscal~ Yea 203tF2i7s0cnaicllar20 u t evneA ae eut Pakwoo ~ ""
accred tctvtisrean P--'iceTd
'asere et torrthetSatsop Redevelopmen Project aeneN orte ner'(Se
'v"*
idF) ile
,- -'.J *',-P-Soj-e ,,.'--, t,:No, Ervice negy 3 :orhiestsnoonerrspnuai~eo
-- r-'~-an t '-ie-etrtin~ot-dhe~w r enf
$227,00inFs~L~Ya-20 - ;d
Balance Sheet Analysis testing a. newiy developed bioreactor technology produced Under'the Debt Optimization Program, long-term debt by Soil Search.-This-resedrch'andc development effortmay.-
was increased $28,131,000. from $1,761,562,000 in Fiscal provide a quantum leap in methane production. from.'dairy, Year 2003 to $1,789,693,000 in Fiscal Year 2004, due to cow manure. In. Fiscal Near' 2004, approximately $591-,000:.'
principal payments and debt restructuring to take advantage was expended on developirig this project. Wind Mining efforts of lower interest rates. continued in Fiscal Year 2004,:.with approximately:$409,000 being expended. These'efforfts' are to; explore, site, ,and.-:'
Statement Of Operations Analysis demonstrate wind resources for potential new wind sites...
Investment Income decreased $2,719,000, from In Fiscal Year 2004, $370,000 was spent on sales and'.
$3,636,000 in Fiscal Year 2003 to $917,000 in Fiscal -Year marketing efforts and an additional $1,305,000 was spent, on -
2004, due to historically low rates of return.' - developing the organizational infrastructure to..support the growing business. '- . ' ':
^The BDF receives contributions.from the Internal Service Business Development Fund Fund to cover cash needs during this startup. period. -Initial'-'.
-The Business Development Fund (BDF) was created by start-up costs' are not expected to be paid: back and 're.
Executive Board Resolution -No. 1006 in April 1997,-for the shown as contributions.
- purpose of holding, administering, disbursing, and accounting for Energy Northwest costs- and revenues generated from*
engaging in new energy business opportunities. Grays Harboor Energy Facility.
'The BDF is managed as'an .enterprise fund. Three Becoming the6 operator of the Grays Harbor. Energy" business sectors have been created within the fund: General 'Facility was a component. in Energy Northwest's strategic-
- . Services, Generation, and Professional Services. Each sector plan. to eventually'own'and' operate combined cyc gas'.'.l may have, one or more programs that. are managed as a turbine power plants. This contract, was intended to be our-unique business activity. A fourth business: sector, Business first step toward' establishing a credible position 'in the Unit Support, has been created to capture costs associated Combustion:Turbine power generation market. It'was to'"
with developing programs. provide the basis for Energy'Northwest to become a major supplier of Operations & Maintenance services to other public Statement Of Operations Analysis utilities in the Northwest, and to become an owner ofg. gas';..--
Operating Revenues in Fiscal. Year. 2004 totaled turbine generating facilities,'as well. ' - '7:
$14,719,000 as compared to Fiscal Year 2003' revenues of :On January 15,.2001 .Energy Northwest entered into an:.
$11,163,000, an increase of $3,556,000. The Department of agreement to sell the Grays, Harbor Energy Facility site to the.
Energy (DOE) and Energy Northwest had an agreement for Duke Energy.North America (DENA) affiliate, Duke Energy
.'the completion of restoration and'cleanup of the'Hanford Grays Harbor, LLC (DEGH). The actual sale 'of the, land and.'
Generating' Project. Under. the agreement, the DOE would be assets at the site in Grays Harbor County 'near,.Elma;',
billed for 50 percent of the restoration and-cleanup efforts. Washington, has already been successfully concluded.,This '
The project was completed in Fiscal Year 2004, with Energy sale was. to leado tothe construction' by DEGH of-a-630-.
Northwest recognizing revenue of $3,792,000, an increase of megawatt combined cycle 2-on-1 'gas turbine power plant at'.,
$3,431,000 over Fiscal Year 2003. Other major business the site to be on-line by late 2003. Energy Northwest was to,;
program contributors to revenue growth were: operations and become the.operator of the Grays Harbor Energy Facility.: n.'
maintenance- services by $349,000 and environmental 'September 2002, due to market conditions, DENA placed the
-services by $322,000. project in "Construction"Suspension." In February 2004';,-
Total operating revenues increased 32 percent in Fiscal DENA-announced it has no intention of completing the facility Year 2004, however net. revenues for the Fiscal Year 2004. with its own funds. Energy. Northwest: and DENA'have~a
-showed $987,000' loss as compared to. approximately a contract for site'preservation services during this construction,',
$683,000 loss in Fiscal Year 2003. .. suspension time period. Per the agreement.-with DENA', 'if:'
Energy Northwest was created to enable. Washington construction is not restarted by August 31; 2004, such that:
public power utilities and municipalities' to build and operate the project. reaches: substantial completion 'eleven months
- generation projects. TWo of Energy Northwest's Research and later,- or if the project fails to achieve commercial operation by
-Investigation:bu'siness projects, BioErnergy Solutions and December 31, 2005, Energy Northwest may request'payment
-:.:Wind Mning, accounted for $1,000,000 in expenditures with 'of $5,000,000 and dissolution of the O&M. contract.'- DENA.,
no revenues.; BioEnergy Solutions is a business line of Energy has expressed interest regarding the sale of the site' for Northwest working with Soil Search,' LLC,' of Kennewick' completion by"'public power."' Energy Northwest will perform' Washington; that has developed a full-scale biomass power due dilligence.in exploring this opportunity. Revenues, for
' .test unit- at a dairy farm near Pasco, Washington. This unit is Fiscal Year' 2004'were recorded for reimbursable costs and.-
services provided to DENA.
24 .
www energy-northwest.com
- . I : - s I.
'.~,.1992 ,topromiote'incdreases intte'generation and'utilizatino t,-'----Statemenht Of Opderations Analyi:
N.
Noperating reeus ee$1;479 000 anid $407 '000~-'electriciy from reeal nergy. sourcesadtofrhrhe .
f;`',-orFiscal Yea'r.2003'and Fiscal Yer204vepctvayn>kdrces,'of renewVable ,energt6yhrI~gsTi rga,~-.,.
.~~, ~~ ,..~~~..-. ,-, a~uth rzdunder; section 11 fteEeg oiyAto '-
> b,: - ~ -. I 992 -`provides-;financialIIincentive payment o lcrct NineCafiyoh Windric rdod
--he'Nin'e Canyon WIin'd POroject i-s owned and -operated -by,?, ~generatio'n f-acilities. For .the ,~first 'timhe in;the history~o
'Eeg otwes.Th'r6etislcted inthe- Horse Heaven ".'~ ,p'rogram, 'congressional fundirng f" uliidwndporm th,.1'"
~ P blisb soueasa thnc§ts snh,i ng, WNElctictyf;wa the ot fully-funddZheNn ano in jct
- 'Cfho en'ewusic.
- .,c-i,;generated ,b ,.h ',P~ '~tis'-; f6idad~b ffa~cifjc Northwest h-vie as nand k eevd total6cost Pulc
- Utility. Di trct. ' e~ p li d 1EP bh iij -Th~dpayrnent~strem ..
prehs6.~dstddh REto' coeFh P,--4;!._:ntretinj pu'rch aing at east aportion-bf their electriit46m' &A~erhe purchas --a-gr'e'ement Penanent -,sho6rtfalls inTIRPIr--
fenp ower -sour6e~sEac hi'purch as er of Phase-.I' hs -sig 1 funding -will leaiddtAo'increase's in: th-e-billing o-f~the,.project.,-
~Ta22-yeair power purchase.areetW `E -Nrhe 't participants inorder t cover-total project cost -- &;-
h--rhaeFof 'Phase .Il'hs signe~da!203'ear;powerii.1..J- greetwith project purchase~r~s a-nti'cipatfe"s als 6,,-~,,-,prha-se'.l'gr'e'emntwith _'Eniergy. Nct) West34The,-project is ~.s-in ~Fiscai-.lYear ~-2005::i~th -,additionial cas6dh ~needs being pidy; cn6firndte'd onvle~PCAmns~aif fo xsigpoetreserved 4t funds 'The,-reserve funds 'were,~,.-.~-.
~ -. t~nissior~rid-;i I,`-~established siopart[6ipanht payments.would increase-at arae btriitd b h6 Bin'ton-County Rbi tlt'isrc~~?~o- -pecen pe j.yar over the lIife -,of eacbh .power- purcae by t re-n tt,"OoeatngCosts""r~e---'-p~ehd'ed forddebtevc 3,'VThsI6fthe project,..w ich began commercial oe on- .. ,,,
~< :;,JwS~pemfber 2002 confsists i7idtrie, ahwt *'and for-operationialiand mhain'ten'a-n'c-e ies -
~ ~xmr ~eaing,-.caacyofprxnteY 1. . ~
-.e,-*'- A meaats, of electricity,:jor~ a~tota wd i caP~c~df ~ 'FL1/2 Z~ T
,,~,Phase--,opofato-ntenDeleServece Fund. ?-,lF melyL h K~operationi
-wiri'd triewihaa December31 ',2003,~--Tjclu es ann-tdditiohal $i'24~'24.. ~,',-;The ',~Internail -Service Fn 1F (omryth eea tegrtncpcPfkV ud)-das e6stablished in May; 1957.sTe.IR roie
~approximately156 'megaWats:
--.- o6tta1'poet.eeaig-c~ evcst h te ud Ti cbnsfrte-eta ~
1-.
_capability is'approximate'ly 63.74'rngawatts'~wh "ch poue' rcrmnt of.,bertin,'~6ommpn`god-nservie'ote.
V.-e'n'otig'h :Energy.-capa'cityfor .'approxiffiatelj !'26,000 ~average bu esunits -on m cos reimuremn bss(eNote
.~2,Thduturbtnestoaer
- , inrxnt~. et ne~- ht 6
~ heigt treJ -Yarn203s47 00 nEFicalYeare 6rtrbine bla'desattached to a rotor ,and a niacelle thatl~ir%03t'473000i
`t~1O
'h&4'ouse's'a
~, 'g'enerat-o-r 'gea-r box and braking me Fs6IYa
-a s st,~~-'!i-:2004 ",-The decreasein Asse~ts is,c'omprised of a-net decreadse
-'.~.-~ ~ in UilityPlantf I$967,000 due to cburentyear depreciato c St"ee
,aa Arayi- I - - - ,a ' Mellas a crease'of $2 ,643,000'ij rtrfriTanfrh Lon~terr inth?6formof
'det brid wer' sod In'the~ 'that are due ttotheeInte~rnal Service"Funird, wihich aeemntd .
~'amount of $70,675 ,000 to ~financh'e P'haseI an!'d $21 ,720 000 .7~--.~in -theCombining of- the -Fihnancial.Statementsg.-,The decreaise ,
Ioth o hs rjc os~i~frbt hses 6 has of$ 4 0 nFn qiyadis compnised o vz'been complet danddeclared commeiircIally ~operational.22i-~s$2,551 0 euto nA aal oee hsi
-.- Principal payments.b'ega-niFiscal .Ye&r.2004 in'the-a~mou'nt opf offset by a~-.1~~6960,000 $5 in'crea-se in Interfund-rTrainsfers duet:-
t:,$2,060,000 'Thus; a reutn`.inLong iterm db e'ie'otrFnds .eliminaited. in he ombiniing; ofteA iacilM
{
.g~cbonds ,payablefrom FTiscal -_Year2003 of $92,395 '000 to~
'$035000'inFiscal Year 20 4" -.-
-Saeet swlla 28000icraei udEut Fund Equity refsulted from -a'tran6sfer-to the!,,,,
f~h~nraein
.. SaeetoOprto n-s A n'aly'sis- ' ~ -~-Year.;7~ 2003 Incentive Fe.- - - ->
Operati ng' ,Reven ues -i ncrease-. 1 849,00foi~~K ~ ~ 2.1is - --- ~~:~-
- 464,00:i&Fisca-Yar~b00:to
~ .-$5,313,000 iniFiscal~a ~SaeetO.p~aiisAilss '.-~ ~ . ,
tu004.2-.Thd';roject -r-e~ceived'ieenue, rom -thebligfth' -k er204wre:$69,000 i6ReeuefrFi6l ~veru
-- :project -purchasersat an :average rate of $34. 98prM hfr. $3 0 for iscal .,Year 203
~- -Fsa er2004 .Other contribjution o,`f j rd fil 1,-varlianc of$365 000 'is~th'e~s-uspe6nsion of the PP f6rman~&
bhiain conitributor to' this
$1,537,000 from th enwble'Energy Prio'dudcti'o n"Tnci'ntiVe,-- F~e 6"~'rd 4por~am by~,B BPA
.~ ~ 4
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I---
BALANCE SHEETS As of June 30, 2004 (Dollars in.Tho'usands)
COLUMBIA PACKWOOD NUCLEAR NULA BUSINESS GRAYS HARBOR NINE CANYON SUBTOTAL IN~TERAL: 2504 GENERATING LAKIE PROJECT PROJECT DEVELOPMENT, ENERGY *vND SERVICE .COMBINRED.
STATION PROJECT NO.1
- NO.3' FUND FACILITY PROJECT. FUND TOTAL ASSETS -' - . .r~- : -
UTI~LIY PLANT (NOTE B)
Inservice $ 3,482,467 S$ 12.991 $ - $ S 882 $ -$ 68,485 $ 3,564,825 S. 44,352 $ $3,609,177 Notin service - 25,253 *25,253 '25,253 Accinoulatedldeprecatiol (1,953,510) (12,417) (25,253) (246) - (4.6`15) ('1.996,0411) -- (30,606) (2.026,647) 1,528,957 574 -636 *- 63,870 1.594,037 - 13,746 1.607,783:.
Nuclear fuel,net of acoumulated amorlizahion 102,049 *- 102,049 - 102,049, ConshitScion worki inprogress 30,501I. -30,501 -.- 30,501 1,661,507. 574 -- 636- 63,870 1,726,587 13,746. 1,740,333;a RESTRICTED ASSETS (NOTE B)
- Special funds Cash 16,201 5,934 -. 3,344 2 25,482, - 1,942- 27,424 Available-for-sale lnvestiments -35.256.- 282 - 7,668 7,917 3,404 54.527 . 1,010 55,537 Accounts andotherreceivables 1,554 - 1,554 - 1554 Debtservice funds Cash 19,776 1 24.244 16,528 4,521 65,070 . 65,070-
- Available-for-sale investments 744 21.286 9,998
- 6,028 38,056 - 38,056' Duefirom other funds 1,874 - 1.874
- Other receivables -12 12
- 12--
73,107 1,028 59,144 37,787 - . 15,509 186,575 2,952 187.653,7 LONG-TERM
- RECEIVABLES (NOTE B) 3,068 3.068 3,068 CURRENT ASSETs, Cash 735 , . 283 63 31 .. . 1,113 1,556 2,669~
Available-far-nale investments 5,483 1,762. - 25.222 11,441 3,55 1,135 2,011 50,605 22,620 73,225" Accounts & otherreceivables 4,461 454 . 4,179 2..067 82 11.243
- 73 11,.316 DuefromParlidipants 21 .9 8 38~ 38 Duefromi otherbusiness unrts 7,393- -341 .113 409 8,256 6,170 Duefromotherfunds 16,604 5 I10.612 8,173 158 35,632 Materials andsupplies 71,481 225 71,706 71,706
- Prepaynsents andother 427 58 95 - 580'
- 243 823-Nuclearfuelheldforsate 1,095 1,095 1,095 Plant& equipment holdforsale 1,166 - 1,166 1,166 106,685 2,279 -42,907 19,685 5.714 1,361 2,803 -181,434 30,662 162.038':-
DEFERRED CHARGES, Costs inexcess of~bilings 494,315 - 1,856 1,944,067 1,758,787 . 4,199,025 4,199,025 Unamortized debtexpense 16,509. 2 . 15,657 12,524 -3,981 - 48,673 . 48,673 Other deferred charges - . . 4,643 - 4.844. - 4844 510,825 188 19974 17131- 8,824 4,252,542, . .- .-- 4,252,542,-
TOTALASSETS. $ 2,355,192 $ 5,739$ 2,061,775 $ 1,828,783 $ 6,350 $ -1,361 $ 91.006 $ 6,350,206 $ -. 47,360 $6,345,634~-
Procject recorded onaliquidation basin Seenoteu tofinancial statements
- 26 www~energy-northwest.com
3,10
} a,*
STATEMVENTS'OF OPERATIONS AND. FUND EQUITY For the Year ended June 30, 2004 (Dollars in Thouands)
COLUMBIA PACKWOOD NUCLEAR` NUCLEAR .BUSINESS GRAYS NINE. SUBTOTAL INTERNAL 2D84 GENERATING LAKE. PROJECT** PROJECT DEVELOPMENT HARBOR C)WYON'. SERVICE COMBINED STATION - PROJECT NO.1
- NO.3' FUND ENERGY INIiND FUND TOTALr FACILIlY PFIOJE-CT
- OPERATING REVENUES $ 437,415 $ 1,915 S., - $ - $ 14,719 $ 5,313. $ 459,362 $ 76,500 S 459,431:
- OPERATING EXPENSES Services tooth~er businessusfss 75,029 Nudlear fuel 35,322 35,322 35,322 Spentfueldisposal tee 9,029 9,029 9,029 Decomnmissiaoning 42,993
- 24 43.017 43.017 -
Depreciation asdamortization 79,932
- 333 127 *3,252 83,644 1,482. 83,644.,
Operations audmaintenance 129,572 2,037 132,859 132.859 1,25 Administrative &general 21,609 20 21,818 21.818..-
189 Generation tax 3,199 30 3,248 - . 3,248 Newbusisess Initiatives 15,649 II - 15,649 -15,649-Totaf sperating expenses 321,656 - . 1,791 - - 15,776 . . . 5,363 344.586 76,511 344,586~
NET OPERATING REVENUES (EXPENSES) l1D~f.f9 11I4 (1.u~i) (50) 114,776 (I11) .114,845 OTHER INCOME &EXPENSE Nun-operating revenues 113,861 88,732 407 203,000 203.000 investirent income 1,878 26 :1,261 917 19. 15 120 4,236 80 .4.236
- aidloss) nncunent bre~demption 4 4 . 4 Interes e'xpense and-discount amrnstizationr (119,604) . (154) (102,947)2 (86,801) (4,706) (314,212) . . (314.212.
Plantpreservation &
tersination costs (12,953) . (2,848)- *. (15,801)(1,0
- Depreciation andamortization (5) (2) (7)(7.
- Revaluation ofSiteRestaration 582 582 582-1,967 201 .51 . (339) - 1,880 0. 1,880.
NET RE VENUES (EXPENSES) *-**(987) 81 (4,636) (5,542) 69 (543
- Distribution &Con~tributions **-* (1,225) (573) 1,374 (424) -2.791 2.367
- Beginsirg FundEquity -*--2,776 1,848 (2.261) 2.363 4,121 *6,484 ENDING FUND EQUITY - , . -S-S 564 $ 1.356 $ (5,523) 5 (3.63) $ 6.981 5 .3,378 IPrujed recorded onaliquidationbasis
.I Seenotes tofinancial statements 28 1 www~energy-nortihwesti.corn
,,33325,z~:'a .!2 700 '(,o
- .STATEMENTS OF CASH FLOWS (Continued)
For the year ended June 30, 2004 (Dollars in Thousands)
COLUMBIA PACKWOOD NUCLEAR NUCLEAR BUSINESS GRAYSHARBOR NINECANYON INTERNAL 2004 .
GENERATING LAKE PROJECT
- PROJECT DEVELOPMENT ENERGY WIND SERVICE. COMBINED.
'. I ' STATION PROJECT . NO.1 NO.3' FUND FACILITY PROJECT FUND TOTAL RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Netoperatingrevenues $ 115,759 Q$ 124 $ - $ - $ .- (1.057) $ . - S .(50) $ 114,776 Adjustments to recncice netoperating revenues tocashprovided byoperating activities:
Costicash incurred inexcess of cash/cost (165.623) (332) (165,955)
Depreciation andamortization 113,598 333 32 3,223 117,186 Decommissioning 42,993 .54 43,047 Other 1,955 51 - 2 -006 Change inoperating assets andliabilities:
Accounts receivable 50 (80) (1,089) 231 (888).
Materials andsupplies (742) ' (226) (968)
Prepaid andotherassets 202 9 (44) 168 Duefromlto otherbusiness units, fundsandParticipants (17,823) 596 5,027 (103) ( 2,303)
. Accounts payable (9,930) 5 (220) (56) (0,201).,
Non-operating revenue receipts 95,457 36,234 887 132.578 Cashpayments for preservation.
termination expense (11,223) (2,909) (14,132)
Cashpayments forservces - ', (1,950) (516) (2,466)
Netcashprovided (used)by operating andother activities $ 80,439 $ 655 $ 84,234 $ 33,325 $ 2,700 $S (1,063) $ 3,074 $ (516) . 202,848 -
Project recorded onaliquidation basis Seenotes tofinancial statements 30 www.energy-northwest.com
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OUTSTANDING LONG-TERM DEBT (Continued)
As of June 30, 2004 (Dollars in Thousands)
PACKWOOD LAKE PROJECT REVENUE BONDS COUPON SERIAL SERIES . RATE. ORTERMMATURITIES AMOUNT 1962 3.625% 3-1-2012 $ 2741 2,741
.1965 3.75 3-1-2012 1,010 1,010 Revenue bonds payable $ 3,751 Estimated fair value at June 30, 2004 . S 3,948 (D)
NUCLEAR PROJECT NO. I REFUNDING REVENUE BONDS 9 r ' CC~l NLPLUKILK:
ZbtKLALUKI tKM
- SERIES COUPONRATE MATURITIES AMOUNT I- 1989B 7.125% 7-1-2016. $ 41,070 41,070
- 1990B 7.25 7-1-2009 3,590 3,590 1992A 6.10 7-1-2006 720 720 1993A 5.70-7.00 7-1-2008 34,895-34,895 1993B 5.15-7.00 7-1-2005/2009 34,650 34,650 1993C 5.00-5.20 7-1-2008 7,385 7,385 1996A 5.75-6.00 7-1-200512012 -324,815 324,815.
1996B 6.00 7-1-2005 765 765 1996C 5.10-600 7-1-2005/2016 83,395 5.50 7-1-2017 12,740 96,135 1997A 6.00 7-1-200612008. 20,400.
20,400 19978 5.00-5.125 7-1-200512017 -
- 243,445 243,445
- 1998A 5.00-5.75 7-1-200512017 . 85,020 85,020 2001A 4.125-5.50 7-1-2005/2013 . 77,160 77,160 (A)Includes amounts dueJuly 1, 2004:
. I)Exucudesamounts dueJutyl 2004whidch were paidasotJune30 2004 (C)Compound InlerestBonds (D)Theestimated lairvalueshown hasbeenreported to meetthedisctosurerequiremenetof Statementof FnancialAccountng Standards (SFAS)107anddoes rot purportb representheamounts atwhichtheseobligations wouldbe seltted (EA)Aurcion RateCertificates thatwi havea rateof 5.5 though 71112008 anda variable rate thereafter unit 711017 32: . m www.energy-northwest.com
I Exdudeusarnunts dueJuty1.d h' p 30 2004, tCompoundinterestBonds -- . ,. 7y fairvalue shownhas beenrepuled b meetthediscltsse requbements Theesutimated of Statement FAS)107anddoes riot to parpodt repsent theamountsatwtiet theseobligatons wouldbe settled
)Aucfon RateCedficates that wil havea rateO1S50thrmlgh712008 anda variableratethereafter
OUTSTANDING LONG-TERM DEBT (Continued)
As of June 30, 2004 (Dollars in Thousands)
NUCLEAR PROJECT NO.3 REFUNDING REVENUE BONDS SERIALORTERM SERIES COUPON RATE MATURITIES AMOUNT 1989A (C) 7-1-2005/2014 15,653 15,653 19898 (C)' 7-1-200512014 61,379, 7.125% 7-1-2016 76,145 137,524 1990B *(C) 7-1-200512010 19,335 19,335 1993B 5.40-7.00 7-1-2005/2009 53,990 53,990 1993C 5.00-7.50 7-1-200512008 73,480
'(C) 7-1-201312018 23,963 97,443 1996A 5.50-6.00 7-1-200512009 30,415 30,415 1997A 5.00-6.00 7-1-2005/2018 107,170 107,170 1998A 5.00 7-1-2005 11,150 5.125 7-1-2018 53,825 64,975 2001A 5.50 7-1-2010/2018. 151,380 151,380 2001 B 5.50 7-1-2018 20,675 (E) 20,675 2002B 6.00 7-1-2016 75,360 75,360 2003A 5.50 7-1-2011/2017 241,915 241,915 2003B 4.15 7-1-2009 21,575 21,575 2004A 5.25 7-1-2014/2016 83,835 83,835 20048 5.50 7-1-2013 1,515 1,515 1993-3A-3' .95% 21,325 21,325 1998-3A .96% 138,650 138,650 2001-B3-1 .98% 5,000 5,000
. 2003D .96% 201,065 201,065 2003E .97% 98,025 98,025 Compound interestbonds accretion 347,965.
Revenue bonds payable $ 1,934,790 (A)-
Estimated fairvalue at June30,2004 . $ 2,007,292 (D)
(A) Includes amounts due July 1, 2004 (A) Excudes anvunts dueJuly 1,2004,whichwere paidas ofJune30,2004 (C) Compound InterestBonds.
(D) Theestimated fairvalueshownhasbeenreportedtomeetthedisdosure requirements of Statement of Financrial Aconunting Standards (SFAS)107 doesnot purporttorepresent and theamountsatwhichtheseobligationswouldbe settled (E)AuctionRateCertificates thatwil havea rate of 5.00through7112003,711/2004 (renspectively),
5.50through71112010, anda variableratethereafter unti 711/2018 on theentire2001Bseries 34 wwwenergy-northwest.com
OUTSTANDING LUONGI'J TERM;iDEBTI'J (Contin'ued)00'riast-" 4 2A's of June,3020 ('Dolars Thousands)
-iin
!rNINE CANYON W-INDPROJECT REVENUE BONSO ~.. ..
S;riERIES-*; RATE : . ,,. MATURITIES ' 'AMOUNT.
,. 2001 A : - '40 o7/o204 2-i3' . j 50410
- 4 ~4'4 rfi . ' 1
- Yx
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. .... ....... L (8Edu ., VeIourra2003l 204 '
hirwrpadaofure0 r 'I 2001 -( 72.
()TEestimated v lue shart fair 3,204sbe eotdtome h icouerqirmrt fSaeis ofFl1dtconrgSadrs S 107,8 and inpu'igs fl (A) i deaiaOYftat I20OC n~t~er~fti e-, d-4 5O1ldee~ -- 4 " ,', . .', .:4 (E)Aucio e etRoatMCrtIalcstestht hav araFe of e~500 71/037 lthroughs 04(esetvl) 5 hogh7121 rSAte
§andavariabl thr 10a unt nde
'not purportto epries2001Bserits itwA#kab .t~'s'woId b . . .d 44r. 6...4-_ f - II.:
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an u
- 4. I . . - . ;"~ -
DEBT SERVICE REQUIREMENTS As of June 30, 2004 (Dollars in Thousands)
COLUMBIA GENERATING STATION FISCAL YEAR PRINCIPAL INTEREST TOTAL
- 6/30/2004
. Balance:' . $ - $ 21,651 21,651
-. - 2005 101,885 141,953 243,838
- 0 - 2006 94,046 125,966 220,012 2007 153,686 115,427 269,113
- 2008 143,305 100,543 243,848
- . 2009 134.726 94,496 229,222 2010-2014 799,525 295,146 '1,094,671 2015-2018 684,755 120,772 805,527 Adjustment
- 48,127 - (48,127)
A .__'A
$ 2,160,055 $ 967,827 S 3,127,882 Principal and Interest due July 1, 2004 Adjustment for Compound Interest Bonds accretion: Compound Interest Bonds are retlected at their face amount less discount on the balance sheet I, PACKWOOD LAKE PROJECT FISCAL YFAR . - PRir IPAL
... INTEREST TOTAL 6/30/2004 Balance: $s 197 $ *46 $ 243 2005
- 598 130 728 2006 624 108 , 732 2007 648
- 85 * .733 2008 673 63 736 2009 572 15 587 2010-2012 439 44 483 Adjustment
$ 3,751- $ 491 $ 4,242 Principal and Interest due July 1,2004 Adjustment for Compound Interest Bonds accretion; Compound Interest Bonds are reflected at their face amount
-less discount on the balance sheet
- . 36 I 36 -n-
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AC ANTIGUA,.
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Le, heir faoe ambunt t,
_v, JAMES J,
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'4
DEBT SERVICE REQUIREMENTS (Continued)
As of June 30, 2004 (Dollars in Thousands)
NINE CANYON WIND PROJECT FISCAL YEAR, PRINCIPAL INTEREST TOTAL 6/30/2004 Balance:- 2,060 $ 2,460 $ 4,520 2005 2,915 4,835 7,750 2006 3,040 4.720 7,760 2007 3,170 4,594 7,764 2008 3.315 4,457 7,772 2009 3,480 4,301 7,781
- 2010-2014 20,290 18,713 39,003 2015-2019 26,630 12,592 39,222 2020-2023 27.495 4,076 31,571 Adjustment I
$ 92,395 S 60,748 $ 153,143 Principal and Interest due July I, 2004
- Adjustment for Compound Interest Bonds accretion; Compound Interest Bonds are reflected at their face amount less discount on the balance sheet 38 www.energy-northwest.com
Notes Fnancial--including to debt service wehro o h rjc soeal
~ untilte outstanding .bonidsare ,p-aid :o'r -provisosaemd State merhs-~forabond
-. re~tirement, in acrdnewihth euieenso NOTE .%- GEL,,: as e Pa WepatWs lcdi
-4 KrA~Nrhei t~~bn eoio he Paricipanits slhhareProject evenue of-h uiia croainadjin ecn opet ula rjc No25 .3~ a 1240 MWe pian op-6i'g~c tt f Washingtoin, wa reated in ,?k was-placed airi,6n extne :contruidtion_ delay status: in 18
~1957 ~It.is-.empowe6red'to financep,.acquiiree;--ons-tii6'ructjan-d .,,~,when it Was- 75"percetc` ml O a1319,-Enrgy oprt aiiisfrt n~t orthWest s Board of Directors acdopted! -reso utiorns:
-:electric.power.:On Ju~ne 30, -2004,-Its-memnbershiop`dohdistbd~ emntn ula rjcsNs1ad 3 -t(See .'Note6 -~
f16 pubi utility~distncts ad 3cities, ~Richla~ind, Seattle' Nc'lear Lh .Prtjcits ;Nos .~'1 an erminationh) .In Fisca!,-Yeaer%7'-'-
Tacma llmembers ~ 99ohwastsadlibliisafth aford G ratiri,
' within the State of Washifigton.>Endigy, NorthWest is exernp .1,,Project ,were 'consolidated it ula PoetN: %he" fromfderal ncome ax ~Eergy Northwe'st ha~s' no&~axing ,~,~Haniford .Generating Project 'site etrto ciiiswr aut ' ~' cmpletd on ay 9`2004.-All fundling -requiremet
.4 ~~~~' .- etbilled -obligatioins ocf ~Nuclea;rPrJec o1Eeg usiness -or. h~4,, o 4.-e.zr f l:.~'EneigyNorthwest Busns nits' .,... . Northwest Whol onNulaProject No 1."-
EahEeryNrthwest-Businegss Unit ,is"~Ancd and -;'.'~Energy 4 ~,North-west -a'lso 'manages the ~Buslin-eis~s`;,
acoute or,-separately. from all, oher-currenor fuue Dvlpen udNn ayo idPoetand"Grays
"'BusinLs.units i:
.Harbor..En'eegyFacility',Project.'".-The -Business-eveb pmen fAleetiaenryproduced. by Energy Nrhes e Fund ~wais.esta'blished- in -A~~iI19 opru n eeo bileBsies Uis is'ultimnately ,,delivered"to.electrical -.new- nerg' Ite buins_ ppruntis h NieCno ditibution facilities-`owned and operated ,by~Bonnea~i~le .--?7-~Wind-Project'~v~s esta~blished inJ-a'n'u-ary -2001lfor the purpose'7,.,%~-,
PwrAministration (BPA) asparft of the Fedderl'.C61ur~bi'a .-',-o-f expiorin'g and establishing 'ideerypoet hs
'sr ;River Power,Systemn BPA inturndistribuites the~eiectribit9T'to~ oth rjecasometdi'FclYar20 Phase Io 4'.- P.
eetIc utit 'system-s throuhghout theNNoghwst,--:1c-dng - t * -
the -project cnsists' of tuirb!ie6'4whf~ichaertdat4 '
-Patcp'ants ~in ,Energy .'NorthWesgt's iiorprojPhasewl'as-declared 6usinesi. oeainlDcme ulimtedistrilbution to' smesiPricp nts~~e -- 120 P sIbfh~e-propectcnisofurnewhc
,Northwesf6t's n~f~t-billed ~B si-ness"U-it-s ~c'o'n'sist'o'f-p-u-blicly ar aed.at 15.611MW 1.h6 totlpoetgnraigcpblt v-oWned! utilities-and ~rural -electric~coo6peratives_ loae in the .i" aFxiratbly'64M .i -. P wetrnUitdStates -wh6--Yha'enteedJnto, net 'billinig TeGrays Harb~rEn&~y Facility PrJec a -tb~
agremets ort~es ithEnrgan BA fr prtiipaio 's--'in uly99' to collect advantces and con'tribution'sto'pay.th'e-in on'e ormr fEeg otws ~usiness:Units: 'BPA~is"'.~ c-'o-sts -of -i~nviestigating new'generating-'pro~jects~z icuing th&;'
[.-. obitd 7
-byw toetbihrtsfrelectric, power which fesibility -of a comnbustiontrbi-N e:near. Satso W~igo
.,..wilL rec6V'r~thd cost of electric'birya1i *from EnergyjTe rjet upoe a ame6nhded duiring Fiscal.ee20 j '~"_"Northwes'n~d other'sources as, well 'as: BPA's obther costsi. 4, 4 inclu6de te" operation -and -'maintenance' of a frd Ja .
(Se4 Not&)- .,4. ,Vn~- ' ~muto ubn lae ~teGasHabrst'o~e eiergy orthwest operates t4he CoubaGnrtn'yDk nryGrays, Harb- ULC)'-a~ndinlddh ptn pan3 --a:. We,% (Delsign lectic. Rating net) generadting -,.;to purchase up to!50,MW- of wer geneated ~yjthe qfcilt
. ~
~tpt comoleted~hnA984':n. g:dthetha btie al I Septerbiib `~062,;due ,to'ni'a-rk-"e~t ~conc tions"uk~en
-. prmt..-ie pl6e Ate..pojctn'.Constmctioh
,~:a:Nuc6leate NceregliriC
,olumiaeicludigtNothAimisin'NRC) ~operating license i.1,,Suspension."~-ln-. ebuay 04'4.NAa tha exires'Iin Decern er-2 23 .2>-~ eoua(DEA)'-has"n
. -- -7' intentin'ofWithlt i e4 fndrn6 R I~h__-e~ ls&opera8, hergy te6s `'thei'` Pac6k-Wo-d -La'k-e 'N ort hWest ',_and DEN A hadve -a con tract for! site preserv at i on
.,;:;-,~yrobelectric 'Project 4,(Packwoodd) a4:',27.5 MWe-g'e'ner'ati'n'g ',';:,-s'ervice-sdurin'gtti'sconstruction suspensi-on' timne period ,Pe
"'.~-.-plant'clompleted ~in:1964 Packwoal od oeaeuneafit ?hegrmntwhDEAfcnsuton isno rsttedb L44erlcnefromh the Federal Energy, Regulatory Commission Auut3120 suhtat tePoetrace usata
~:(FERC) that expie nFbur 8,-201 0.The electicpoer completion- eleven moinths later, -_orJifthe!Project fails to prouce byPacwooissol to12 tiltie whchpay the .Z-,~achieve commercial operatioin'by Decembe'r 31 2005Eeg osso-ackwood"~n~dn te_ debt' service-7on te Nrtws ma rqetdsouinfthcontract.,'
Hydroelectric revenue bonds; Thie Pacwoi6'TeItra evc Fn frel eea ud a 4.-Pa'rticip~ant~s are obligated to _pay annuial cot of tePoct sabihdnMy197Iiscrrently` used toacutfo 44 74.54.
the central procurement of certain common goods and contradict GASB pronouncements. Specifically, Statement'of-services for the Business Units on a cost' reimbursement Governmental Accounting Standard No. 7 "Advance basis. Refundings Resulting in 'Defeasance of' Debt" and No. 23 "Accounting and Financial Reporting for Refundings of Debt-Reported by Proprietary Activities" conflict with Statement' of Financial Accounting Standard (SFAS) No. 140 "Accountirng -
NOTE B1-
SUMMARY
OF SIGNIFICANT for Transfers and- Servicing of Financial. Assets'. and -
ACCOUNTING POLICIES' Extinguishments of Liabilities." As' such, the guidance under .
Statement of Governmental Accounting Standards No'. 7 and.
Basis of Accounting. -No. 23 is followed. Such guidance governs the accounting for .
Energy Northwest has adopted accounting policies and bond defeasances and refundings ', - - 'ta .e- ;
- principles that are in accordance with accounting principles The preparation of Energy Northwest financial statements -
generally accepted in the United States of America. Accounts - in conformity with accounting principles generally acdepted ':
are maintained in accordance with the uniform system of in the United States of America requires management to ;
accounts of the Federal Energy Regulatory Commission make'estimates and assumptions that directly affect'the ..
(FERC). Separate funds and books of account are maintainedX reported amounts of assets and liabilities and the disclosure v for each Business Unit. Payment of obligations of one of contingent assets and liabilities at the date of the financial
- Business Unit with funds of another Business Unit is 'statements and the reported' amounts of revenueand prohibited, and would constitute violation of bond resolution expenses during: the. reporting period. Actual results could covenants. differ from-'these estimates. Certain incurred expensesa d Energy Northwest maintains an Internal Service Fund for revenues are allocated to the Businesss Units basedo$on'-X centralized' control and accounting of certain fixed' assets specific allocation methods and management considers the,'
such as data processing equipment, and for payment'and- allocation methods to be reasonable.'
accounting. of internal -services,., payroll benefits,- Energy Northwest's fiscal year begins oniJuly 15'. and l administrative and general expenses, and certain contracted ends on June 30t. -
'services on a cost reimbursement basis. Certain assets in the7 Internal Service Fund are also owned by the Fund and Utility Plant .
operated for the benefit of other Projects. Depreciation Utility plant is 'stated at original cost. Plant in'service is relating to fixed assets is charged.to the appropriate Business depreciated by' the,'straight-line method, over the estirnated'.
Units based upon assets held by each Project. . useful lives of the various classes of plant, which range from.
Liabilities of the Internal Service Fund represent accrued five to 60 years.. -'
payroll, vacation pay, employee benefits, and common During.the normal construction phase of a- Project-, .l
'accounts payable,-which have been charged directly or Energy Northwest's policy is to capitalize all costs relating to '
indirectly to Business Units arid will be funded by the the Project, including interest exp'ense (riet. of interest,.
Business Units when paid. Net amounts owed to or receivable income), and related administrative and general expense.:
from. Energy Northwest Business Units are recorded under The utility plant and net assets of Nuclear Projects Nos..1 Current Liabilities - Due to other Business Units, or Current and 3 have been reduced to their estimated net reaIizable Assets - Due from other Business' Units on' the Internal values due to termination. A write-down of Nuclear Projects ..
- Service Fund balance sheet. Nos. 1 and 3-was recorded in Fiscal Year 1995 and is The Combined Total column on the financial statements included in Cost in Excess of Billings. Interest expense, is for presentation only as each Energy Northwest Business termination expenses, and asset disposition costs for Nuclear' Unit-is financed and accounted for' separately from all other Projects Nos.
- 1 and 3 have been charged to operation's. -
current and future Business Units. The Fiscal Year. 2004 Utility Plant activity for the year ended June 30, 2004, was as Combined Total'includes eliminations for transactions follows:-
between Business Units as required in Statement No. 34
'"Basic Financial Statements and Management's Discussion
-and Analysis for State and Local Governments" of the
'Governmental Accounting Standards Board (GASB).
Pursuant-to' GASB Statement No. 20 "Accounting and Financial-Reporting for Proprietary Funds and Other Governniental Entities That Use Proprietary Fund
.'--Accontir,"'Energy Northwest has elected to apply all Financial' Accounting Standards Board statements and interpretations, except for those that conflict with or
.40 www.energy-northwest.com 7 ~0 - :' ' ' /
, eiito -~-' ~ $ 3552 -. 9. .4 (1~,;
,4 66)f.~ .~~,-- ,-' 3,451-357. 7 ' ~-1 Decommission ~,,_f1;4110-CnsrutonWok n rgrss
.-,...'-.!. `,-:~-'31,110 138 ..
~Ii,--
-,, ;~,,I61'-'i';- - ,6'~ -. 1-1' 3O501-S
~~Acumuate DeprecaationI-."'
~Acum mo~ztin'-" iaed
--j;(,865,O96)
'.(986) f_ 7804.
(19
'~ W~ Ž I-.A
.,.,, 1,,.,,94310) - ,~;~~~;' ,~-,
,It -; ,,;- - 449,, _Y; '3/4~: *A~_ ! 4- , , _449 , -. s ~1.'-- !- .- "~ ~
( Z-,-Ge., eratI
.1..-'..Uilty~.__;~,~ PlnZ e
"'-.,~
Businss .-
,Z Develop
.. ~ ,m ent
~r-,
33~*.a. .....- $
... J,
... 4 ... ,..
574 a....~.'~ ,i*.
I.o,-.
),'-, ~.
I~<. L .. t UtilitP-an .0 ne ccumulted (14) 69,
~S ~ (32)I 2 ~"~5. - -;---;'-;--- `- `-
$~j~I6 --(246
~ " "`- ,~ ,'. . %,. '
..- ntena Sevc -$.a43V FundI~.;I'.I~ ~ ,'I." ,83 ~ ,.,
~G '. ..-
. y,:, ~ - ~ , i-,,t:.'{ a V:: .~ n ra.-
, '~~Yr '- '(29 14)'.-..'.:~ "(1 482)-~:_"~t.~-"r 4
,AccumulatedDepreciatio "' '-
$_,.;:;~z,~, (3 60)- .. .,. ~ __ -
Utility'lant net -- aI. 171 , -W$ -
~~ ~4(967a.Sa.,..-"_S 134
- .. " I.-..
<kiti -,. -~ 4;~--- ~ ~ ~~~~.4.i;-.-_ .-- ",1 .~-~ ,.-r,,,.-~,.I
,-x~',~ -~,. , - , '
1 I~
,' ;~-
~--, All-,,expenditures I,. '- related~' .~77 tote ,_,4 ucas ~iaand fnula 1 .a. .. -a a.Eeg felna orh eth s ava.ilable o pee drya storagIcask _-ojec to store Ithe I carriedfuel, spetciefe omercaly site -Z'Z;'. willon
.. ,a.. , .
[,--.for Columbia includingIinterest are Capitalized ~t the Columbia beia. .,
(9cos,,-,'--t Whe ~ ,.I th fu, 1~ placed , in ~';~the rectr , the'-fue .- cost is -`rnsferIe frm teSetFe oltoteIdpnetC*
Utifnultr fueltamotizatio (th amorbn fenrgyan intheful n tizousatin of) thcs of,; z. milo for nula fuel ,nd $17o~ millin, accrued liab~~ilitfo
-. fr lss ha si moth pe:-.r,. , ~,11, ,J a.... .. ,.. ., . . ,
FECgieins s$32"ilo s fJn3 20 o---..Re~:5-tr-lctedAS,-i~etS',~'~lI"- ', 0 - I- -- ~', Ia-a.. a... ... - '.~
I.EryNrtws olmba_... ha acotac vihtb earmn of
- a. - .;.2'7 I.- ' i-2--z- Z - agreements or stt lw .separate-restricted funds have been
-1 - _~t , A'V-; '~ . bond t;esolut~ Y _ion related,' -
.~ nicl r'u.e~:tI
-.- ...._...a.
frmfuue
-bligation
~.
~,
to acc"-
pn nuc;-Ilerfl
.e 14
~ -
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. 71
-ept~ titl " to ,--peht deb"tj I~oi t I"I 7S:-
~~' _ :tI~W 41-t Ln Term:,,-'%I siie Rec%
~.wables --`. t ..
revision
.. a.Tha
"!' .~
W" ~ `,- ,~ )-., -'r."-¶--. ,~4"-_ ~,-~.Annuai ~_ '- '- -, e- porhy-,_
. a.-' _SLz..,, jIND BEG_:'.-
a ., '
NNISG ',-,-~`
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.~
.. a.~
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Accounts and Other Receivables the 2003 study) are used as the basis for establishing a funding-'
Accounts and other receivables for the Internal Service plan that includes escalation and interest earnings 'until Fund include miscellaneous receivables outstanding from decommissioning activities occur. Payments to the' other Business Units that have not yet been collected. The decommissioning and site restoration funds have been made amounts due to each Business Unit are reflected in the due since January 1985. The fair value of cash and investment to/from other Business Units account. securities in the decommissioning and site restoration funds as of June 30, 2004, totaled approximately $83.9 million and $9.4 Asset Retirement Obligation million, respectively, and are included as a Deferred Charge on Energy Northwest adopted the Statement of Financial the Balance Sheet. Since September 1996, these amounts Accounting Standards No. 143, Accounting for Obligations have been held and managed by BPA in external trust funds in Associated with the Retirement of Long-Lived Assets (SFAS accordance with NRC requirements and site certification 143) on July 1, 2002. SFAS 143 requires an entity to recognize agreements.
the fair value of a liability for- an asset retirement obligation (ARO), such as nuclear decommissioning and site restoration Materials and Supplies liabilities, in the period in which it is incurred, rather than Materials and supplies are valued at- cost, using a using a cost-accumulation approach. (See Note G, weighted-average cost method.
Accounting Change: Accounting for Asset Retirement Obligations, for discussion regarding the impact of adopting Financing Expense, Bond Discount and Deferred Gain and SFAS 143.) Losses Financing expenses and bond discounts are amortized' Decommissioning and Site Restoration over the terms of the respective bond issues using the bonds Energy Northwest established decommissioning and site outstanding method.
restoration funds for Columbia and monies are being In accordance with the Statement of Governmental '
deposited each year in accordance with an established Accounting Standard No. 23, losses on debt refundings. have funding plan. been deferred and amortized as a-component of interest:
The NRC has issued rules to provide guidance to expense over the shorter of the remaining life of the old or new-licensees of operating nuclear plants on decommissioning debt. The balance sheet includes the original deferred amount the plants at-the end of each plant's operating life. In less recognized amortization expense and is included as a September 1998, the NRC approved and. published its "Final reduction to the new debt.
Rule on Financial Assurance Requirements for Decommissioning Power Reactors." As provided in this rule, Current Maturities of Revenue Bonds each power reactor licensee is required to report to the NRC Current maturities of revenue bonds payable from the status of its decommissioning funding for each reactor or restricted assets are reflected in Long-Term Debt for the' share of a reactor it owns. This reporting requirement began Packwood project. For all other projects, debt that matures in -
on March 31, 1999, and reports are required every two years, the next twelve months is reflected as current maturities of:
thereafter. Energy Northwest submitted its most recent report Long-Term Debt.
'to the NRC in March, 2003.
Energy Northwest's current estimate of Columbia's Accounts Payable and Accrued Expenses decommissioning costs is approximately $608 million (in Restricted Liabilities - Internal Service Fund accounts 2003 dollars). This estimate, which is updated bi-annually, is payable and accrued expenses include $0.4 million for'.
based on the NRC minimum amount required to demonstrate unclaimed bearer bonds. Columbia includes $90.7'million for reasonable financial assurance for a boiling water reactor with decommissioning and site restoration. Nuclear Project No.1' -
the power level of Columbia. includes .$26.2 million for decommissioning and'site Site restoration requirements for Columbia are governed restoration. The Nine. Canyon Wind Project includes $0.5 by the site'certification agreements between Energy million for decommissioning and site restoration.
Northwest and the State of Washington, and regulations Current Liabilities - Internal Service Fund accounts' --
adopted by the Washington Energy Facility Site Evaluation payable and accrued expenses include $0.7 million for payroll-' -
Council (EFSEC). Energy Northwest submitted a site and related benefits, $16 million for compensated absences, restoration plan for Columbia that was approved by EFSEC and $1.5 million for outstanding warrants. The Nine Canyon on June 12, 1995.: Energy Northwest's current estimate of Wind Project includes retainage related to construction in the Columbia's site restoration costs is approximately $65 million amount of $0.1 million.
.(based on a 2003 study) and is updated biannually with the decommissioning estimate. Fair Value of Financial Instruments Both decommissioning and site restoration estimates (in The fair value of financial instruments has been estimated 42 -
www.energy-northwest.com
.--- . ,- , ,.i. '. .
9 -u ng avalabe -. . mrke inorato and~: cetain ~~,asupin'
-_ ~.e,, to,;. cover the total costs over the purchase agreement-
-acurrent, market, exchnge:!1- ~ follwin mehdsn ,;,--4-~.- -" _N4 .--- ~'_0- ',
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~,~ -'"car`ryIingwal__ueis-'-,~~,I~~. '. . ~, L~-- .:~--I A-valal for sal~iir- -i..Lde-_-tments accounts'
-- I recevabl 'oter-co,.
n sist-_, ,
~ of-,~,~
K"~~cahacut :~, .-,- and other receivables7_1.11'-~,,-' , -acons aid r~iales,"b logtr ecials andcost ,nexes
, ~,of'. :- -.
'accrued,-"": exenesavace J~~" fo,.- I Mmbrsidthi - -,-Energ-billings Northwest invest exclusively.. ri,., .S other'-,non- curren libliisn du t/fomP~tiit ~-, '--ovrnmntseuriie
_-`-.,.~'"- ~ad aenie ,-. Energ Northwest's
-~ and other, Busiess fundsZ .. nit -'h-fair , ~, s"of inesmnt se ot ) n rvnu onspaalese.cocntaedwthPojc Participants and BPA, throbgh-~ theY-
~ : Iva1,~~_ accoun receivble ' an cost in exes filig-are 1
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- -,- .~ net billing agemet -Se NteE.on-TrmDet
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-- -- 4 ,.,. - I,,- P ,
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ba,,sis andi rbevr th~roug.hfvarfious agreemen6tasuactualcsh stable6 companies whichtEnergycorthwest considers`to-b I Forrthese Busines UntsEnrg Nortwes reonie o rei rs t e iied..Z H~-'o
~'revsidenuesbequaldto expnse fr ah erod N neit revenue-,~~, "--.-e--.---- -I-. ,-.,\
ls i rcgnzdsn noequityini ep is ccmuatd he-Taermenbrt sofCash Flowsfu dig~il. ad, '-1 i,cumu~ :~latv xpneiseode sethrbllnsinecs incb~ludes-ounethbrijct n retictebd cash baane of cost (li0"abiity)aoreastcost~siandexcssuof billings (atss'ret)' a~s Shor ter higlyliuiaivetments areenot considered cas appropriate- Such am utswl be settled,;~. dui ,futur, -.. ~',equivalent s ." ,._~--,I~'~_.~ ,-, ,- ~.~ ~~
I I- - -.. ", ;. ,~_ ~ ~~,II EnergyNothwest acounts fr revenue and expnses ---- ',,.,f~---:,'--1,4-' '-
diffeencecumuativ reeusand curriuative -, :--',,-*--*
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p y"--,- g yr Nortwes -- 1,_---- s eposts~ re- -
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~'REl,3,r;-nstainale tein Cnyn in 'i;je orhws resolutions 1~ and invsten pliie limi eaceiven fudsbaedongeertin s t ppiet theREP ,
bil E! a createdxashard.-t o'fthe Energy Policyh Ac6f
-,,---,- -7,investmentauthority to obligations~ of th UniedStaes r'.'FlNtinl otgg Association and'~,~;""-.,!-..,.; Federal,,.;--
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funding i amount of $15,million forFiscal Year - -- -"-- '->--
2004 TheII&ripaymnt riillstream andtRE! reeipt wer proecte ~W-< innca Arsdfb W ptni y*.-sujc nry,,--.
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-;_- Ii"i 6s-- -' Y--
AVAILABLE-FOR-SALE INVESTMENTS (Dollars inThousands)
Arnortied Cost Unrealized Gains Unrealized Losses Fair Value Columbia U.S. Government Agencies 40,747 0 (8) 40.739 Total 40,747 0 (8) - 40,739 Packwood U.S. Government Secunbes 2,789 0 2788 2(1)
Total 2,789 0 (1) 2,788 Nuclear Project No.-1 U.S. Government Agencies 54,178 0 * (2) 54,176 Total 54,178 0 (2) - 54,176
- Nuclear Project No. 3 U.S. Government Agencies 29,357 0 (1) 29,356 Total 29,357 0 (1) - 29,356 Business Development Fund U.S. Government Agencies 3,552 0 (i) 3,551P Total 3,552 0 (1) 3,551 CT Project
- U.S. Government Agencies 1,135 0 0 1,135 Total 1,135 0 - 0 - 1.135 Internal Service Fund U.S. GovemmentAgencies 23,638 0 (8) 23,630 Total - 23,638 0 (8) 23,630 Nine Canyon Wind U.S. Government Securities 758 0 (1) 757 .
-n ---
U.S. Government Agencies U0@bbd 0 . *
- Iupbf Total 11,446 0 ((3) 11,443
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NOTE D - RETIREMENT BENEFITS Department of Retirement Systems: based on' recommendations by the Office of the. State Actuary to,"-
Substantially all Energy Northwest full-time and qualifying continue to fully'fund the plan. All employers. are required to'-
part-time employees participate in one of the following contribute at the level established by state law. The methods statewide retirement systems administered by the Washington used to determine the contribution requirements are',
State Department of Retirement Systems,'under cost-sharing established under state statute in accordance with chapters-multiple-employer public employee defined benefit and 41.40 and 41.45 Revised Code of Washington.
defined contribution retirement plans. The Department of The required contribution rates for the defined benefit-Retirement Systems (DRS), a department within the primary plan expressed as a percentage of current year covered government of the State of Washington, issues a publicly payroll, as of June 30, 2004, were: -'
available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained I I PERS Plan 1 PERS Plan 2 - PERS Plan 3 by writing to: Department of Retirement Systems, IEmployer* 1.
I
'1.4% 1 I
1.4%
I
. 1.4%** I"I Administrative Services Division, P.O. Box 48380, Olympia, IEmployee I'% 6.00%. 1.18%1 -
- a WA 98504-8380. The following disclosures are made pursuant to GASB.Statement No. 27, "Accounting for *The employer rates include the employer administrative Pensions by State and Local Government Employers." expense fee currently set at 0.22%.
- Plan 3 defined benefits portion only.
Public Employee's Retirement System (PERS). ***Variable from 5.0% minimum to 15.0% maximum based on Plans 1, 2, and 3 Plan Description rate selected by PERS 3 member.
PERS is a cost-sharing multiple-employer defined benefit pension, plan. Membership in the plan includes: elected Both Energy Northwest and the employees made the officials; state employees;. employees of the Supreme, required contributions. Energy Northwest's required Appeals, and Superior courts (other than judges in a judicial contributions for the year ended June 30'were:
retirement system); employees of legislative committees; college and university employees not in national higher PERS Plan 1 PERS Plan2 . PERS Plan 3 education retirement programs; judges of district and municipal-courts; non-certificated employees of school 2004 $101,132 $905,073 $336,973 districts; and employees of local government, including 2003 $108,239 $1,077,106 - $95,821 Energy Northwest. The PERS system includes three plans.
Participants who joined the, system by September 30, 2002 $147,307 $1,238,861 NMA 1977, are Plan 1 members. Those joining thereafter are enrolled in Plan 2, unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002, for state and higher In addition to the pension benefits available through education employees, or September. 1, 2002, for local PERS, Energy Northwest offers post-employment life-.
government employees have the option of choosing insurance benefits to retirees who are eligible to receive membership in either PERS'Plan 2 or PERS' Plan 3. The pensions under PERS Plan 1,-Plan 2, and Plan 3. One option'must be exercised within 90 days of employment. hundred and one retirees have elected to participate in this Retirement benefits are financed from employee, and insurance. In 1994, Energy Northwest's Executive Board employer contributions and investment earnings. Retirement approved provisions' which continued the life insurance benefits in Plan 1 and Plan 2 are vested after completion of benefit to retirees at 25 percent of the premium for employees' -
five years of eligible service. PERS Plan 3 participants are who retire prior to January 1, 1995, and charged the full 100' vested immediately. percent premium to employees who retired after December.
31,1994. The life insurance benefit is equal to the employee's Funding Policy annual rate of salary at retirement for non-bargaining-Each biennium, the state Pension Funding Council employees retiring prior to January 1, 1995. The cost 'of adopts Plan 1 employer contribution rates, Plan 2 employer coverage for employees who retired after January 1, 1995, is and employee rates,- and Plan 3 employer contribution rates. $2.33 per $1,000 of coverage, with a maximum limit of Employee contribution rates for Plan 1.are established by $10,000. Employees who retired prior to January 1, 1995, statute at six percent and do not vary from year to' year. The contribute $.58 per $1,000 of coverage while Energy -
employer and employee contribution rates for Plan 2 and Northwest pays the remainder. Premiums are paid to the.
employer rate for Plan 3 are set by the director of the insurer on a current period basis.
46 www.energy-northwest.com - -. I
J4.
'-~~Atthe tme eah employee retire's lEnergy ~No-rthwest'-:,$606.4 m~illioofutanigbdshvgawehed z:,-amccrues a liability for-the ac2tuariial value o~f estmaedfuture :~;4average cou'pon- in-terest ratib 6 -'5.31',-percent The $606 ilpremriumns, -neto :fetiie~e.-contr-ibujtions ,~.The~to~talliaibility, m,--.~tillionpof pro-ceteds ~a-ss-o'cia-ted withtthe Senes2004-:A Bonds 7.
(~.-recorded' ait Jue3,20e~ ~:3~ iliofforf- tese -'wereallocated to NuMclear 'Project No ..-1 ($06.69miin)/
beneits .!, ~ '~~ 2 Col~umbia"'~($450.6 mfilioiin) ,~and '~Nucleare Project No73 DrnFiclea-~~2004, peso ot o ilo)~stascion-resule jn.ahe~gaiN'".-
-North-w'es-t"e'mpl'oyees' -raid--pdst-'e~m-plo'y-m-ent. life.-ins-urande . a,~ccounting' 'p'urposiet.6sof $09illion for Nuclear P~et1~
bnftcssfrrirees.Were~calculated andd allctd 116ddt-d'toa-h oech ntgairnof$ 1.2ilillionorua for Nucle-ar -Project 3 ad nt ai 2 Z'&o:f $3A mi~illion .for-Colutmbia. t&odigABtteet Bsns Unit based ondirect labor dollars ~~,"~"Tj,~,~-'.'- t--
allsuOch costs-were ,allocatedd ,, .No ,7 orxmtl.0or~tf in DeAfeasan-'R'eff
~.' o~C~urfibi~d'diing Fiscal Year 20 1/2- ~ -A- et' h mri~inot6~i n osso h VA~ii ~~ ~ 4..:w- .a rfudigs are. calculated ,based 'o .thL- shorter fbthe life' of-40(~ 47~Plan Deferre6d Compnsahtion 'Plan l-f'- - tnedtcmad he olddeb.;v-~ - -Y~'~
ompessied'oruucleraPojet -
-- slan)tkandPlna4th7-Def01rk)d i-,,No-f1`uler Pr"~ "N6 3 ~ndColumfbiarj the 'aggre'gate ~
"Ze-plans whtier&ebstablish'e'd to'projv-ide~a ~means-for ifi~esting ~-"-"~'w~eight6d ad~6~c-o-u~pon inte'r~st-iate 5of:5.5ercent.A'The'e-frpermanent,~04B~ ,'j7 J purpos
~z'4ul-tiffe emp 11V -oyeere '6li~ibIe 'to -enrioll 16 'the,;PlAnsh-,Ea'ch ,:~-.costs rela;tin~g -toth-is'suancib of theSeribs'2004A andSei
'anftcit ;mayhI e 2004 BrI Bohds',, i'W611ell .'cea
'limitations For,the 401(k) Plan', En"gy. Nort hwest mae s'5He0b ' ie6s 2 0b04B1. ;Bon d :P r ocee6d s! willIb e' is ed'5t fina nce ,a Ser percenit'.of the ~portiofi ~f ~lr'1d efbii~n' rra1 potooo h st of certainf capital imrprovements- Y -
,,amount -which- does-not exed5heren-t of the participan' . 0 'CZ<T ',113d6 h ise frCouba nth am~ffount of $26.6 mfllion ~are fxdrt od iha vrg
[AZC41k eliil Jnearningsb
~41 k)-Plan for'th ti- s yebar. Particip'ants ',of
-5
-:5percent TeS eis20
'direct th-nesmnbf ,tdir -rirbito"Pafticipants~are'>,,-~-coupon~rinterestfrat immdiaelyvested in6 their c6ontributioii-'plUs'a'ct'u'aI e'arinigs"-" "-;Bonds w'e'r'eis's~ued to ,finance a portioni of thecotofceti
~>teren~~Durng Fsca Yer 204 nergy., Northwest'l~' Tccpitaiiimpro~'em'erts -at Coimbia,:a'nd to pay costs'relating,,~
v-s~-~cntibued$18 iilio'i'eployer matchin fud>Y W'othe igsianc6e of the 'Series 2004CBd ;ss '
~<-'~-
-'" ~-pr-l "I iorJFis'c-61a Years ~--Energy-N6orthwest ~also -defesd'
- . -~--.. ~.: ~-'.
~-A.--~ ~ .chairevernui~bonds ~by plac6ngthe net,,proceesfo h '-
- .,'x?---.-..-. - ref Und-ingb-nd int ble-tnhI&rus*to Wpro'vid oat
-. ES D B *)-ER -,
,-..-'-,-.-, ,;~,rqie'fte~~se'rvic~e ~p'aym'ents onlthre'efunddb'd;c
. Each- Energy -.Nort we't'BusnesUnit is financed:1%-~ assetad lilffrh'dfa d -b6d6aerltnckided in
-- separately Tihe`~e6ili.; t~i~6'isof4 Enerdj Northwest a-tuthorizing the
~-~~ statementZs in acc&danide with GASBstatement W-Jissuance ofveue on Uit -provide'->~-.~ No -7 aind 23.'~:Includirng~tF1isdal-Year204dfamet; h5'Bsns U that-'such bonds'-are.'payable~from -th-e revebnues of Athait !-approximateiy'.$260.9.mil~liofin~$1 01 .8 ,filioiinhnd$213"--
si6§U'nit.All Un~,s~e udeRsIt -~:or:769 io~' mini Iiuuiui~ ufeieaseu uiuwere 'not c6a'Iieu or, had not i 1;75,anid r640 frNcerFrjct NsJf3anCouba.atJuine -30,72004;'fof-r Nucleadr Projects' No 1~,,.3 ad~ -
-- I on- s"~ustanding.-revenbod th under ..Resolutions§Nos '-835rL-838,, aridiO2te"Eetl ntsa fJn 3 0 4200-~and -fbutre 'debg evcs jCevenue ,'Bonds )ft'Nu'clear, ,.Projects'-.Nos ' ~ 1 ,~-3 a-cnd ,,--eoiements for th ese bodsre-presentted at the'end o h -
) fo . , , d - .7- equi Colum~bia 'respectively, .ar-s'ub'o'r'dnateio6r'the P~rior ,Lien ,;--FirinanialISection of this rteport. ,' ~I Bondsanid'have the same -,udbordinated[prirt of-paymhent ,,-;--' . .'
w~-ithin'the Bdifbg Uhi,--*.---N.- ?r'l-t-b--;--Sno-t~~:--. ened Durig ~ th yea 30~OO4~E~e~ Nothwet?&~rc. rojet Prticipants' have 7purchased all of the capablt
~-sud~ forNucler PrjcsI~,n ourbateSre .fNuclear.Projects NosA,1 3'and Columbia ,BPA' has ntr ~
204 00- ons &e BndSeie'00 CBnd X~acuie ~te entire. capab"ility fromn ,the' Participantude Seris204A~~ris'is'uedor~ulea-Proecf '~O~ 7~contracdts.referred to ~as net billing kagremnsUdrte4'-
'"' ' "7~d 4'6!tfi~biq.6f-&e fiied riatdebonds~f~~ili agreemenhts for ,each" of hth&BusinessUis F ,iwith a weighkE-d a-verage couo ineet rat of 53'prent. ii-ze',,Particpat aeoligated to pay.Eeg otwetaport Tie'Series'2004 A Bond Proceeds of .$6064 miillionrefunf~ded - h- e'sr of he total -annual csso h epciePoet
~ *- 9 'C'~'-' ~'-~ S-'~4, -'~ Anualepr
including debt service on bonds relating to each Business Nuclear Project No. 3 Termination Unit, BPA is then obligated to reduce amounts from In June 1994, the Nuclear ProjectNo. 3 Owners Participants; under BPA power sales agreements by the same Committee voted unanimously to terminate-the Project.
amount. The net-billing agreements provide that Participants During 1995, a group from Grays Harbor County, Washington, and BPA, are obligated to make, such payments wheth6r or formed the Satsop Redevelopment Project (SRP). The SRP not the Projects are completed, operable, or operating, and introduced legislation with the State of Washington under' notwithstanding the suspension, interruption, interference, Senate Bill No. 6427, which passednand was signed by the reduction, or curtailment of the Projects' output. Governor of the State of Washington on March 7, 1996. The On May-13, 1994, Energy Northwest's Board of Directors legislation enables local governments and Energy Northwest adopted resolutions terminating Nuclear Projects Nos. 1 and to negotiate an arrangement allowing such local governments'
- 3. The Nuclear Projects Nos. 1and 3 Project agreements and to assume an interest in the site on which Nuclear Project No.
the net-billing agreements, except for certain sections which 3 and Nuclear Project No. 5 exists for economic development' relate. only to billing processes and.- accrued liabilities and by transferring ownership of all or a portion of the 'site to local obligations under the net-billing agreements, ended upon government'entities. This legislation also' provides for the termination of the Projects. Energy Northwest entered into an local government entities to assume regulatory responsibilities" agreement with BPA to provide for continuation of the present for site restoration requirements and control of water rights.
budget'approval, billing, and, payment processes. .With In February 1999, Energy Northwest entered into a transfer' respect to Nuclear Project No. 3, the ownership agreement agreement with the SRP to transfer the- real- and personal:
among Energy Northwest and private companies was property at th6 site'of Nuclear Project No. 3; and Nuclear terminated in Fiscal Year 1999. The ownership of. all real and Project No. 5. The SRP also agreed to assume regulatory' personal property interests was transferred to Energy. responsibility for site restoration. Therefore, Energy Northwest Northwest. is no longer responsible to-the State of Washington and EFSEC for any site restoration costs.
Security - Packwood Lake Hydroelectric Project Energy Northwest, Benton County PUD, and Franklin Nuclear Projects Nos. 1 and 4 Site Restoration County PUD have signed Power. Sales agreements which Site restoration requirements for Nuclear Projects Nos. 1' became effective November 4, 2002, and run through and 4 are governed by site certification agreements between--
October 30, 2004. A subsequent one-yearlextension was Energy Northwest and-the State of Washington ,and, negotiated for the period beginning November, 1, 2004, regulations adopted by EFSEC, and a lease'agreemerit with' extending through October 30, 2005. Benton and .Franklin the DOE. Energy Northwest submitted a site restoration plan -
County PUDs agree to pay Energy Northwest in exchange for for Nuclear Projects Nos. 1 and 4 to EFSEC on March 8,'
the total output of electric capacity and energy delivered from 1995, which complied with'EFSEC requirements to remover'
- 'the Packwood Project. Packwood Participants are obligated the assets and restore the sites by demolition', burial,',
to. pay annual costs of the. Project including- debt service, entombment, or other techniques such that the sites pose' whether o, not the Project is operable, until the outstanding minimal hazard to the public. EFSEC approved Energy.-
bonds are paid or provisions are made for bond retirement, in Northwest's site restoration plan on June .12, 1995: In its accordance with the requirements of the bond resolution. The approval, EFSEC recognized that there is uncertainty Participants also share project revenue to the' extent that the associated with Energy Northwest's proposed plan..
amounts exceed costs. Accordingly, EFSEC's conditional approval provides for additional reviews once the details of the plan are finalized. A new plan with additional details was submitted in Fiscal Year.'
NOTE F - COMMITMENTS AND 2003. This submittal was used to calculate the ARO" CONTINGENCIES discussed in Note G of the financial statements.
Nuclear Project No. 1 Termination Business' Development Fund Interest in Northwest Open Since the Nuclear Project No.1 termination, Energy Access Network ' -
Northwest has been planning for the demolition of Nuclear The Business Development Fund is a member of the' Project No. 1 and restoration of the site,'recognizing the fact Northwest Open Access Network (NoaNet). Members formied that there isno market for the' sale of the Project in its entirety NoaNet pursuant to an Interlocal Cooperation Agreement for-and to-date, no viable alternative use has been found. The the development and efficient use of a communication-final level of demolition and restoration will be in accordance network in conjunction with BPA for use by the members and with agreements discussed later in Note F under "Nuclear others.
Projects Nos. 1and 4 Site Restoration."
48 www.energy-northwest.com
posbe~d for a Dmaximu opercen t 92 "A of Ju er30 '2O0'-~~,Z mo'iicesi odfic'aiiossuspninojeoctoeo ii
~-NoaNet has $26.0 -million inoutstanding boh~ heevenit of viltos
'lfejnAin nfvrous 'regulatory anid
(,:'.~zo~-bbigatEid t'opay the principaleand interest on the bonds when. d2icense rqieet
,~Y:' ddt;ierinteeetadoth exei~ oa~Nets~~G ros ~-Y.6PieAdro c urrenitly' provides, for -,nuclear,
-YRe~enue' (afer;pa-jh'ytm o cost:6tsi'of:,Mainten'n'ce-~and~ liblf lnuranbe' of over $1l0.7, billion per incidenit w"hich is
- peratn)sinuiief ti &Th'ema-iinaximu-.;4.'-. covbered by,a ~combiniation-bof commerciail nucle~a-ri-nsu~r-ance~,!.
.-'rncp-share ,(with',"tep -up) ~the -,Bbsih6ess Deve opmernt;-,w."idndandatory industry slinuace..Energy.Norfthwest hs'1ii"1 F .c'o'u 1d be6arequ ired to -pa6y is'$24 :-T !Bus1ne . ur thedi maximfium commercial inuaneaviabeo DeeometFnd`snt biatdorehimburseiao~sbsesof -'-300 million, which isthe first lye1o prtection 'Thesecn-
-NoaNet unle~ssan assessmrent risade'to NoaNet's mrfiebers,'-,l ?erfpoeto~spoided through a main'datory lndsr4 based ,on atwo-third ,vote ofthe -membl~ershipilnFica er.~Iself-insrri -lan whereinl ~eachlicensednuclearfaclt.',..
,-2004 .-',the ~Businiess Develop0m~ent :Funid~cohtibt1bitd :,$Q.3~~requir-ed to p'articipate-in the p'la'n '(cUrrbntlj~16'4.>-peart ic6ipat)...
i .ilion, .t.NaNet'based on_ aassmetbasesduto$06milnpr cdent,- subjett
_,-~er.-Ti".equit~.cnti' to '~,reducedA er , -- a mxumanasesetof10il peryear.;c-..
.yre'nd b16caus '6-NoaNeth~da&,ne-ative'net equity, p6giti6 ~---~.' "-Nul'Erpr . ara a donrination liabiliWl 1ilion- Future-eqiycotiuon ifinanynceire~uie .es met thrbuhacmitonf
.'~~rae h ame Until Naet, has'a positive equiy p'iio.~. ,-commercial nucleriniifbe.ocispieh6d nrgr,-:
Norhwet ad BAThttdaonofinsurance ~u~rchased' d~
~uiessDevelopmie nt "Fund-Ennch'ed'Urainium L&4e"s'- ~crety$.5bli h dedctible ~for this -co)veradge is~..
~~,~$5 0 mnUllion~pr '6ccurrence.,
-- ' ""," VI, C
rIn, Jnuary :2004 the ee prlet, u
'-.- nteedinto ~an encb uraniuim les -agreernenwt~t j7z
. 4-third partiesw hereby'brie'third party leases enrich~d'r~nA6h'z.m,'NOTEG" -A COUNTING C(,HANGE -'-.'~~
,.,~~tothe -Busineass Development- Fundl ad concurrently-'all6is~ ~'~ACCOUNTING, FOR "ASSET.'4'~.-;>j
~'h',usinier t't De66p~'ntFuhi,,tdieae&t i "RETIREMENT 4-,OBLIGATIONS!z,,----
raartyut,.T`Pe usiness'Dev ~o!;ity ,.-k-~'-4?, - ,
.,- FZ~un~d-ea'rns anet~ma~rginof 0.625 percent ~'e6'6r~rnu(throuight--<i';, 'Energy.,N~rt w'est 'adopted.S Lin,,0 700)'.onthenaket-Vlu6ofJhe esecer c`6 NoeBi:Summrn 4bf,~fSig-nificant AccountingPlce)'~
V',turanium..,-- In accora'rdanceWith'.,Ernerjing.l~ssue,'Ta~k"F6r~ce ,,~ .-ThisS~ftatment ,requires me~asured an eintity to~~ i firza:uthe-~
~-2ElT) N 9919,~'Rporing Reii~ Grss ~:iripFl . f aiafcbility fo~,an ARO, at estim'a'te6dfa'ir'"value for -'~ ' ,.
99-19,e-" e_'_F 4
-(EIF i
'! versus Net as .an A.,gent, ,;the lease rtevenues ,andaexp~fienses Jega~~l~ .. obligations relatdtote dsatement and restoato
~are.~sened on -a net 4basis in thestatemnent'of oeain'~'~ot soitdwt h eiee!o agbeln ie ~
(~'a§the Business Development Fund 'does6'not taketitle to ~the ', - assets; sucdh a~snuclear decommissioning anid site restoration~'~
'-"enhed uranium -does not-have netoyrisk *dis at n w.~hich .lti A~-pro Uo iiil -
~~2only ,for th nt agi FrFica ear-2004,the B sinesi;- recognition o~f: the -AR06s tha arbmasurab~leAthe prbilt' i Fun'd recorded ~n'et revenues of ,$0~ 1 million in-` ~w htead future-cas~h" flwJorth associated rtrmn
"'Developmenht revenuesonderathisagreement.," icutdusinglaicredit-adjusted-risk
-,f~-css free ae -re"
'4 .. a- ..~--. .'~jrecognized' ohalaiiyadas ia anjincreaseith
~"'OtherLitiainadCmitet "" ~crynmunht oftherelated long ive6_its<4.
ne th 'etiihibved.ln Vrious -. l a s lgl aptledastrbrmen ct ae ercatdovrth ohrnonrcul omsk. te.rlt ?.w~vth Eaccretion`:'bf-.'`th6'R, ibiiy~' 4-.
w.
4-actosd d*.6rtad~ iomtnrefits;and inctanc6i6 'o axens~e-.n"th 'taemnto
-- 6nt
iacts~iarising inrit".ia` bu '-of.' . - a o~gh ome uits,~'c airrs, and comnmitments'are sigrhificant,-'`?operationls-andfOn ~equity~'each:perjod. pon'seteetO dso itin's-no6t'det'ermin'able.' In~the~p~i1fnio i-~the' a1ett -ibltp ither;.setlsAe biion forit .-~~
o~c's! an
-manage..me-nt, 4hle'- o~utc6n-ome -suh--Iitirtin'-,bariisn' : re'!,,
amouatri ?6~oswftheatulcot suhe-,~h iaload"r ,- reodd'muto
,~3'com hritmen'6ns
,efecof
~illnot ha've' a-materia ades efctonth dier friihicromdamontH'owvr wtreadth& henie
-'4 4 Monsa14 ofi-jhe~I snes Wnt6E Projects -BPAis oblite t'ridf
-,~h~t'.'.ltbille inanci phos6iTe 4tuehanul otst.
- p. hle~-Th' fu- "lhhal~6s:.f-.the 'Bdfinsi~ .Uhits';--at.-cost of.decommiussicnn an itrs oran,'~Aherefoeay'"
~Z~F~;h~wever, may'~i ther 'Tncreaseadi odir"d ecreaised as'a"r' esu.lt o-f £>gain or-os eonzduo ete~t-'~&~ eut n-'~
oucieef"~--.""
thsemates .'~;;~. a~ just utin eriht t& either the billing~"in e6eis'of~coss(laity exdess of billings a~ `-)'Capropriate-snnt
~. '
-""-~
-I'- 4
~ (ocosts 4,.
NcerLcnigand`Insurance--- :- '--' ~'.~enue v or oss is recognhized and no eq~uity ,is acumuae ,
~ ~' Enery Nothwet isa liense ofth~e ,N-u'clea'~r -Regulatoryf~,-' for-the'net billed projects v- '"-"----
"-N 4 .F.. -'Annual Rep
-'S - r
Energy Northwest has identified legal obligations to retire made. An ARO will be' required to be: recorded if.-
generating plant assets at the following business units: circumstances change.- Management believes these assets Columbia Generating Station, Nuclear Project No. 1, and Nine will be used in utility operations for the foreseeable future.
Canyon Wind Project. Decommissioning and site restoration requirements for Columbia and Nuclear Project No. 1 are governed by the NRC regulations and site certification agreements between Energy Northwest and, the State of Washington, and regulations adopted by EFSEC and a lease agreement with the DOE. (See Notes B and F). Prior obligations recorded with regard to the decommissioning obligation of Columbia and Nuclear Project No. 1 were reversed as of the adoption date, with revised obligations being recorded in accordance with SFAS No. 143. As a result
-of-the net billing arrangement, the adoption of SFAS No. 143 for Columbia Generating Station and Nuclear Project No. 1 did not'result in a cumulative-effect adjustment on the statement of operations and fund equity, but resulted in costs in excess of billings. An adjustment was made in Fiscal Year 2004 adjusting the accretion rate from the original model and calculation. This adjustment increased the liability by $42.0 million for Columbia Generating Station. As of June 30, 2004, Columbia Generating Station has a net asset value of $20.7 million and an accumulated liability of $90.7 million. Nuclear Project No. 1 has an accumulated liability of $26.2 million.
Under the current agreement, the Nine Canyon Wind Project has the obligation to remove the generation facilities upon expiration of the lease agreement if requested by the lessors. The Nine Canyon Wind Project recorded the related ARO in Fiscal Year 2003. As of June 30, 2004, the Nine Canyon Wind Project has an accumulated liability of $0.5 million.
The following table describes the changes to Energy Northwest's ARO liabilities for the year ended June 30, 2004:
Millions of dollars Columbia Balance at 6/30/03 $47.7 Adjustment to cumulative accretion 38.5 Current year accretion expense 4$ 5 ARO at 6/30/04 $90.7 NuclearProjdct No. 1 Balance at 6/30/03 $25.9 Adjustment to cumulative accretion 0.7 Less: Restoration costs incurred (1.2)
Accretion Expense 1.3 Adjustment to estimated timing of cash flows ARO at 6/30/04 $26.2 Nine Canyon Wind Project Balance at 6/30/03 $ 0.47 Current year accretion expense 0.03
- ARO at 6/30/04 $ 0.50 Packwood's obligation has not been calculated because.
the timeframe and extent of the! obligation was considered under this statement as indeterminate, as a result, no reasonable estimate of the asset retirement obligation can be
- 50 www.energy-northwest.com
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