ML20126H495

Annual Financial Rept 1980

ML20126H495
Person / Time
Site:	Rancho Seco
Issue date:	04/10/1981
From:	Carr P, Walbridge W SACRAMENTO MUNICIPAL UTILITY DISTRICT
To:
Shared Package
ML20126H494	List: ML20126H492 ML20126H495
References
NUDOCS 8104140434
Download: ML20126H495 (25)

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Sacramento Municipal Utility District i SMUD Profile Electricity for people in a 750 square mile area surrounding California's capital city is provided by the Sacramento Municipal Utility District. During 19 80, SMUD's service area was expanded to in-clude an additional portion of southeastern Sacramento County which surrounds the Rancho Seco nuclear power plant. Five directors serving staggered terms of four years each are elected by the people SMUD serves. The General Manager is appointed by the Board u

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Gary llursh Ann L. Taykir E 1 6, -- -

. J Director, Ward i Director, Ward l e $1 ,7M,f' yy =ta (Elected Nov.1980,

' Named Vice Pres.

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pd3# A um ([%g - w- , '[;CQ. William O. Baird John T. Kehoe M M[Rh[$ M f -

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N S 3Valnut Grove William C. Walbridge

,, General Manager kJ Contents 2 Operations Review 12 Financial Section 22 Ten-Year Summary 24 SMUD Information

Sacramento Municipal Utdity District ,

Operations Review 2 Nature's hand smoothed a year with many Significant plant modifications and operating rough regulatory and economic edges as a blan- changes were required of all United States ket of white brought record hydroelectric output nuclear plant licensees following the March 28, at a time when it was needed most. 1979, accident at Three Mile Island. Additions This was 198 0; the turbulent beginning of an end modifications to Rancho Seco cost $20 mil-exciting decade where planning and innovation lionin19 60 Further modifications totaling will have greater importance than ever before m $97 million are scheduled for 1981 and 1982.

Modifica tions performe d in w80, combined 6,cru c inow Sets Record with routine s eruehng and maintenance, kept

} Rancho Seco cut of service from January 12 More energy was produced by the District's through May to. The plant was also stilled hydroelectric generators in 1980 than in any pre- 22 days for turbine bearing repair work later in vious year. A record 2.6 billion kilowatt-hour the year.

output eclipsed average water year production During19 80, a new long-term fund was estab-by more than 39 percent. lished for decommissioning Rancho Seco. This Record water years place special demands on fund will accumulate money over the remaining the people who maintain hydroelectric facilities. 25 years of the plant's life to pay for decommis-Careful planning and control are required to ob- sioning. A total of $3 7 million had been placed tain optimum use of these liquid assets. Good in this fund by year's end. Plant decommission-maintenance and closely followed schedules ing is currently estimated to cost $77 3 million.

kept the project's 65 0 megawatts of capacityin This figure will be reviewed and adjusted service during1980. periodically a Of course, a banner water year generates more than power. It also generates recreation. A Tomorrow's Energy network of reservoirs, dams, and powerhouses form the Crystal Basin recreation area in the Where energy is concerned, the future clearly Sierra Nevada,64miles east of Sacramento. belongs to the diversified with special emphasis Waterways and camping sites are enjoyed by on the renewable. Keeping this in mind, the Dis-Kw reak Demand tens of thousands of outdoor enthusiasts each tract moved ahead with plans for a geothermal (mdl*"O year a steam plant in Sonoma County, continued to A g search out new hydroelectric possibilities,

% shared in research to develop energy from geo-

[ Q Climbing the Regulatory Mountain g b ,' ] thermal hot water in Northern Nevada, and of-fered a unique proposal which could tap the sun

' j Superior hydroelect ric performance was espe-

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• j cially vitalin 19 0.8 Increased government regu- for power. A major commitment for purchase r s @ lation of nuclear power plants reduced the out- of nuclear fuel was also approved during 1980.

iji[ put of Rancho Seco to 4 4 billion kilowatt-hours. On February 19,198 0, an Application for Cer-

, g This wast.3 billion less than the 9:3-megawatt tification to construct a geothermal steam power o.8 4

j plant generated during the previous year. plant was submitted to the California Energy

] Just as Rancho Seco helped rneet demand for Commission. Final Commission approval of that

[ electricity during the drought of1977, when area application is scheduled for March 25,198 1.

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$ water supplies were at an historic low, hydro- Most of the major components for this geo-oa 9

. R s fic electric resources came to the aid of consumers thermal plant were ordered during 1980. The in 1980. This reaffirmed the importance of a original design assumed a gross plant capacity q ,

}p strong domestic energy mix. of55 megawatts; however, improvements to that design will upgrade the output to 72 megawatts.

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Maintenanceseason in the high country doesn't corne easy it comes cold, wet andfast. Don's peopleare making the most ofNature's liquid .

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assets. Once this hydro-yp[ , , ;;;

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gerly reassembled, it will serve the needs of 20,000 homes. Rencimble energy has the most demanding schedule of all. m

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Sacramento Municipal Utility District 5

Construction of this geothermal plant is sched- The sparsely populated deserts of Northern uled to begin during the second quarter of1981 Nevada may be a source of power if a utility task on a site in Sonoma County, surrounded by sev- force is successful. Geothermal hot water re-eral existing geothermal generating stations. sources are known to exist in this region. Devel-Steam supply for the plant will come from a opment of power plant systems capable of using geothermalleasehold in Sonoma and Lake this energy is the goal of the Nor%rn Nevada Counties. Geothermal Group (NORNEV). The District is Plans for expansion of the District's existing one of five utility members of this research hydroelectric project include a 400-kilowatt group. A 20-megawatt, semi-portable power mini-generator to be installed on a fish water re- plant could go into commercial operation in the lease valve at an existing dam at Slab Creek. The area as early as 19 8 2. A generation station in the District received the Federal Energy Regulatory 55-megawatt range is also under review by the Commission license in 198o and work is sched- utility task force.

uled to begin on this unit during 1981. Prelimi- A unique proposal calling for construction of nary work on a new 10-megawatt powerhouse, a too-megawatt photovoltaic power station was utilizing two existing reservoirs at Ice House submitted to the Department of Energy (DOE) and Union Valley, continued in 198 0. Advance by the District during19 8o. Development of this planning also continued on a project that would commercial size solar power plant, to be located divert water from the Rubicon River into Loon adjacent to Rancho Seco, awaits the approval Lake. The license applications for these two of DOE.

projects will be filed in 1981. These small hydro Uranium to power Rancho Seco in the late additions could net 40 million kilowatt-hours 1980s will be received next year as a result of per year. commitments made during 1980. Total expendi-Other potential hydroelectric developments tures for nuclear fuel will reach $30 7 million m outside the existing project area are also being pursued. Voters in the South Sutter Water Dis. Today's Service trict overwhelmingly approved a bond issue in November to construct a powerhouse at the Work on a 230,ooo-volt urnierground transmis-Nuclear Generation Camp Far West Dam. Although the project will sion line from Carmichael substation to Orange-(diuions of kilowatt-hours i" be owned by South Sutter Water District, SMUD vale subswion was tinished in June. With the gross output) has agreed to participate in the design cf this completion c,f this projm, the District tripled i

g seven megawatt plant, scheduled to go into the size ofits 23o, coo-volt underground trans-1 service in 198 3. Once it is complete Mhe District mimnn system.

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% _ willopera+e and purchase all power produced Although thousands of miles of cable and mil-5"5

{ f by the facility. lions of dollars in plant and equipment have f b g In 198 0, the District submitted a competing been planned and constructed since 1970, the number of system disturbances has been kept to 4 y application to the Federal Energy Regulatory k 3 Ccmmissian to take over the Rock Creek-Cresta a minimum and the length of the average cus-iso Ej hyarcelectric project when the Pacific Gas and tomer outage has been reduced. Several factors

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_M Elect ric (PGa nd E) Company's license d 198 2. The project, located on the north fork of expires in have contributed to this service record.

A voltage conversion program is upgrading

? R qd the Feather River, has a current capacity of the distribution system by replacing lower volt-t W t p 178 megawatts. The District proposes to uprate age lines with more efficient,12,ooo-volt con-4 ,d the plant's capacity to 202 megawatts if granted ductor. An apprenticeship program provides

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f O ; } thelicense, useful on-the-job training for field forces, and improved construction techniques continue to E

[ be implemented.

Sacramento MunicTal Utility District 6

l Membership in " Underground Service Alert" Trio of Factors is credited with reducing power interruptions resulting from accidental cable damage. Mild weather, conservation, and economic Through this program, undergrcund cable declinc combined to cause a reduction in locations are marked before excavators begin kilowatt-hour sales from 5 5 billion in1979 to 5 4 digging a billion in 1980. Cooler than normal summer days and warmer winter evenings were the najor fac-Employment tors contributing to a decline in usage u : wo percent. Reduced business activity was another The average number of equivalent full time em- factor holding down energy consumption. One ployees was 1,810 during 198 0. This was an in- visible sign of economic conditions was the crease of 103 over the previou ; year. Many of marked reduction in new construction. While these additional employees will be working in 14,703 new customers were added to the system concervation programs. A major contribution to in 1979, only 20,653 were added in 198 0.

the area's economy is made by the District's an- Sacramento's peak demand for power occurs nual payroll which exceeded $40 million. during hot summer days. In 1980, a peak of Following a four-day strike, the first in the 1,574 megawatts was recorded on July 31.This District's history, an agreement was reached in . compares to i,547 megawatts in 1979 a nd 1,578 January on a two-year wage and benefits pack- megawatts in 1978 m age for hourly rated employees represented by theinternational Brotherhwd of Electrical Conservation Workers (IBEW). Tins settlement included a _ _ . _ .

I While weather has alv.ays been a major force 10.25 percent wage increase effet tive Ja nuary 1, 198 0, and an agreement which resulted in an av- shaping energy use, conservation cow is clearly erage 113 percent incrase on January 1,1981. playing a part. Historical consumption patterns Similarly, the bargaining unit represented bv the amhanging to 'neet the challenge of the energy Organization of SMUD Employees (OSU crisis first posed in the early 1970s, negotiated a two-year agreement in J une. This To aid consu mers facing this s hallenge, many Hydroelectric Generation agreement also included a to.25 percent wage consei vation programs have been established to n matt-hours in ncrease effective July 1,19 8 0, with a second year ease the way for virtually every sector of the adjustment to be based on increases in the cost community. Expenditures during the yeat for of living. Improved employee health benefits activities and programs related to conservation h and other fringes were included for both em- were $2.2 million, or i.7 percent of total operat-jj ployee bargaining units e ing expenses.

2.2s <: To be effective, conservation mus t be readdy understood, and educating consumers is vital if they are to act decisively. With this in ynind, jg "g ,j educational programs on energy-related topics oso s

g for groups and individuals of all ages were pre-sented, and a mass media advertking campaign c

g y f h [J W l was employed. A "Residentid Conservation Service" plan was also being developed during 198 0in accordance with the requirements of the 0 75 G j q g National Energ,y Act.

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Sacrarnento Municipal Utility District 9

Saving energy throughout the year and the Federal Energy Regulatory Commission.

reducing the demand for power during heavy The District contended that the increases are not use periods are goals of ongoing conservation in accord with the rate modification formula in progra ms. its power purchase contract, and the United Air conditioning cycling devices have been in States filed a lawsuit to resolve this dispute. On use since 1977 when a group of300 homeowners June 25,1979, the United States District Court volunteered for a project designed to evaluate granted judgment in favor of the United States.

the effectiveness of available cycling equipment The District has taken an appeal from this and gauge customer attitudes toward its use. judgment to the United States Court of Appeals Based on that experimentation,it was deter- for the Ninth Circuit. Briefs have been filed by mined that electric demand is reduced by an av- both parties, but the Court has not yet set a date erage of one kilowatt per volunteer. Considering for hearing the argument. Pending conclusion of the vast number of homes using central air con- the lawsuit, the District is paying into escrow all ditioning systems, this cycling could contribute billings for Central Valley Project power in ex-l significantly to future reductions in peak de- cess of those based on the pre-May 25,1978 ,

mand. Cycling devices were installed on 6,000 rates.

homes at the end of198 0, and the experiment in November 1979, a group of electrical con-became an operating program for the first time, tractors filed a lawsuit charging the District with During 1980, a negotiable " Time-of-Day" attempting to monopolize the markets for elec-power rate was approved by the District's Board tric distribution systems and street and outdoor of Directors. Huge pumps used for drainage by lighting systems in the District's territory. The reclamation districts represent a substantial contractors have asked for injunctive relief and electric load, and this equipment is now oper- for damages of approximately $54 million. Both ated during off-peak hours. The signing of the parties are conducting discovery, and a date for District's negotiated rate resultsin a peak reduc- trial has not yet been set.

tion equal t01,000 residentialload cyclers a In October 1979, one of the District's employees filed a class action charging that the Legal Action District had discriminated against women and custorners at Year I na minorities in its employment practices. The (hundreds of thousands) During 1979, the District and the Pacific Gas and complaint sought injunctive relief and damages Electric Company (PGandE) agreed to submit to in an unspecified amount. That suit was settled arbitration the PGandE claim against the Dis- during 1980 for an amount that was con <iderably x trict resulting from plant outages at Rancho Seco less than litigation costs would have bun if the y

4  % in 1975 and 197 .6 Under the agreement, PGandE case had proceeded to trial.The settlement did

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3  % d abandoned a portion ofits claim so that the not constitute an admission by the District that

{ p) amount in dispute is now approximately $50 its employment practices had been improper a 4 million instead of approximately $70 million.

The arbitration hearing is scheduled to begin on Financial Firsts 2 , April 6,198 t

, [ The Western Area Power Administration During 1980, the District's total assets exceeded 0 $i billion for the first time. Capitalization at j"a g (WAPA), an agency which administers the f power marketing funcuons of the Central Valley year's end was $931 million, of which 45 3 per-p g  %}k y Project, put into eliect an interim rate increase of cent was customers' equity. Net revenue for the A approximately 95 percent effective May 23,197 8, year was $35 3 million. The revenue bond debt and an addition.d locrease of approximately coverage ratio for 198 0 was 2 5 times.

y ~ 4 a to percent effectn e November 1,1979. These 6s , s # nereases are subject to review and approval by M n 78 79 Ho

bacramento Municipal Utility District l

10 Another financial first was also set: the Dis- Extensive use of passive and active solar trict began issuing tax-exempt commercial systems and other conservation measures will paper under new authority of the California make this new facility a model of energy effi-Municipal Utility District Act. Up to $50 million s.iency in commercial construction. The facility may be issued in this manner. To date, $40 mil- will also improve the District's operating effi-lion has been issued to finance the purchase of ciency by reducing travel time for personnel and nuclear fuel. This paper is supported by a bank equipment serving the fast-growing northeast line of credit it carries the highest ratings of- area.

fered by Moody's investors Service, Inc., and Foothill Service Center is scheduled to open Standard & Poor's. during the second half of1981. A bulk power in December, the Board of Directors approved substation will share the site later in the a $322.8 million budget for 198 1. This budget decade e includes si31 million for new construction pro-jects, $io4 million for operating expenses, $50.1 Board Election million for debt service, and $3 6 7 million for nuclear fuel purchases. John Kehoe was elected to the SMUD Board of Electric rates increased an average of 18% on Directors in November nSo, representing Ward 2.

March 1. Even with this increase, the District His term on the SMUD' Board began January 5, continued to offer one of the nation's lowest 198 1, and expires in January 1985. His long career prices for power. Following the increase, resi- in public service includes a current appointment dential customers paid 2.81 cents per kilowatt- as Executive Vice President of the Sacramento hour. Their counterparts in San Francisco paid Metropolitan Chamber of Commerce.

4 47 cents, and in Los Angeles,6.81 cents. Resi- Ann Taylor was elected to the SMUD Board of dential power bills were running four times as Directors in November 1980, representing Ward 1.

much in New York. Her term on the SMUD Board began on Janu-This rate adjustment was preceded by a num- ary 5,19 81, and expires in January 198 5. Cur-ber of hearings on 12 Federal rate standards held rently, she serves as Board Vice President. While in response to passage of the National Energy pursuing a career as a professional horse-xwit sales tBittions) Act of 1978 . Reports from three citizens' com- woman, she has also maintained active involve-Excludes Sales of mittees, representing residential and business ment in numerous civic organizations a nd Surplus Pow er customers and environmentalinterests, were activities &

A members of the public. The committees were 45 b "

h] considered as were(comments funded by the District to meet requirements of 9 the Public Utility Regulatory Policy Act a aa-PAUL W. CARR President 4o ofind q

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Sacramento Municipal Utility District Balance Sheets 12 December 31,1980 and 1979 1980 1979 Assets Electric Utility Plant:

Plant in service, at original cost $ 8 3,252,657 9 C4o,320,o32 Less-Reserve for depreciation 183,973,944 162,547,313

$ 709,27 8,723 $677,772,739 Construction work in progress 77,492,68o 6o,860,839 Nuclear fuel, at cost less amortization 223,398,987 90,822,386

$ 900,169,380 $829,454,964 Reservefunds, consisting of cash and securities at cost which approximates vnarket:

For Revenue Bonds (Note 4) $ 27,570,228 $ 27,983,898 For nuclear plant decommissioning (Note 1) 3,733,725 -

$ 32,303,953 $ 27,983,898 Current Assets:

Cash and marketable securities, at cost which -

approximates market-General fund 5 28,566,364 $ 52,591,937 For payment of debt service 23,930,302 13,S77,949 Accrued interest receivable 2,647,297 2,429,975 Accounts receivable-net 20,352,095 9,977,269 Receivable from sale of surplus power 25,323,171 9,358,825 Materials and supplies, at average cost 28,500,643 13,157,849 Prepayments and special deposits 2,292,614 1,325,m2 Puachased power rate increase-Escrow deposit (Note 6) 20,o28,234 8,755,277

$ 209,540,619 $t 2 2,46 4,o83 Deferred Charges $ 8,293,919 6 5,2w,258

$2,o49,307,872 $974,103,203 The accompanying notes are an integral part of these t>alance snects.

p

Sacramento Municipal Utility District 13 1980 1979 Customers' Equity and Liabilities Capitalization:

Customers' equity employed in the business-Balance beginning of year $386,272,433 $358,794,438 Net revenue for the year 35,251,381 27,476,995 Total customers' equity $ 422,522,814 $386,272,433 Long-tenn debt (Note 2) 509,576,740 526,736,443

$ 931,099,554 $913,007,878 Current Liabilities:

Commercial paper (Note 3) $ 39,93 6,608 $ -

Accounts payable 27,492,278 25,748,734 Accrued salaries, wages and vacation pay 4,388,277 4,204,281 Long-term debt due within one year 27,226,453 16,484,774 Accrued interest payable 6,935,742 7,o33,639 Customers' deposits 3,234,806 2,619,141 Purchased power rate increase (Note 6) 22,292,669 11,797,243 Other 3,977,959 3,187,513

$ 124,474,592 $ 61,o95,325 Reservefor Decommissioning (Note 1) $ 3,733,725 $ -

Commitments and Contingencies (Note 7) - -

$1,049,307,872 $974,103,203 L________________._________________________.____________________________________

Sacramento Municipal Utility District l Statements of Net Revenue 14 l

l Years ended December 31,1980 and 1979 1980 1979 Opemting Revenues:

Residential $ 68,446,205 $ 6cf36,9m Commercial and industrial 59,5388,5 o 52,643,857 Sale of surplus power (Note 5) 50,o53,230 35,382,315 l Other 25 85,555 1,364,498

. _ _ _ . - j Total operating revenues $179,623,478 $150,227,570 Operating Expenses:

Operation-Purchased power (Note 6) $ 16,401,560 . $ 24,972,257 Nuclear fuel used for generation 29,601,s96 21,212,516 Production 29,767,590 10,73o,223 g 24,759,756- 20,528,354 f Other Maintenance 23,129,127 15,953,421 Provision for depreciation and decommissioning (Note 1) 27,453,759 22,694,566 Total operating expenses $232,212,978 $2o6,o91,327 Net operating revenue $ 4 6,3u,,590 $ 44,136,243 Other income:

Allowance for equity funds used during construction (Note 1) 3,555,268 2,o35,702-Interest income and other 8,958,282 6,241,335 Net revenue before interest expense $ 6x,024,o49 $ 52,423,28o  ;

Interest Expense:

Interest on debt 29,470,o89 .27,230,26 Allowance for borrowed funds used during construction-credit (Note 2) (3,697,424 (2,193,976) l Net revenue for the year $ 35,252,381 $ 27,476,995 The accompanying notes are an integral part of these statements.

j l

Sacramento Municipal Utility District Statements of Changes in Financial Position . 15 Years ended December 31,198o and 1979 1980 1979 Funds providedfrom:

Operations-Net revenue for the year S 35,252,381 $ 27,476,995 Add non-cash charges-Depreciation and decommissioning 27,453,759 22,694,566 Write-offs of generation projects 76,018 2,491,945 Add-Interest on debt 29,470,o88 27,130,261 Total available for revenue bond debt service $ 92,252,246 $ 79,793,767 Add-Nuclear fuel used for generation -29,602,296 21,212,516 Total available for total debt service $222,852,442 $101,006,283 Sale of electric revenue bonds $ - $ So,om,om Sale of commercial paper-net 39,936,608 .-

Decrease in working capital (excluding commercial paper) 25,366,223 -

Total funds provided , $267,255,273 $151,006,283 Funds usedfor:

Debt service-Revenue bonds $ 3 6,802,255 $ 34,o4o,486 Generalobligation bonds 8,324,393 8,912,377 Total debt service $ 45,226,648 $ 42,952,863 Additions to plant and nuclear fuel 226,222,972 103,707,o31 Increase in working capital - 642,963 Additions to reserve funds 3,320,o35 2,919,o15 Interest on commercial paper 552,229 -

Other 2,954,27o 784,391 Total funds used $267,255,273 $151,006,283 Nurnh r of times debt service is covered byfunds available:

Revenue bonds 2 52 2 34 Total debt 248 2 35 The accompanying notes are an integral part of thew statements.

i l______________ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ . _ _ _ _ _ _ ____ _ _ _ _ _ _ _ _ _ _ _

Sacramento Municipal IJtuity Distrkt Notes to Financial Statements 16 December y,19 8o and 1979 Non 1. Summary Organization and Exemption From income Taxes: Method of Accounting: The District's books and ofSignificant The Sacramento Municipal Utility District was accounts are based upon the Uniform System of Accounting Policies formed and operates under the State of California Accounts for Public Utilities and Licensees Municipal Utility District Act.The Act confers prescribed by the Federal Energy Regulatory upon the District the rights and powers to fix Commission, the same accounting system which rates and charges for commodities or services investor-owned electric utilities operating in Cali-furnished, to incur indebtedness and issue bonds fornia are required to follow.

i or other obligations and, under certain circum-stances, to levy and collect ad valorem property Depreciation, Amorti:ation,andDecommissioning taxes. The District's power to levy property taxes Methods: The District provides for depreciation is restricted by the California Constitution, Ar- on the historical cost of electric properties on a ticle XIII A, which places limits on the taxing straight-line basis at rates determined by engi-power of all California public agencies. The Dis- neering studies. The average annual depreciation trict is exempt from payment of Federal and State rates for District plant in 19 08 and 1979 were:

income taxes.

1980 1979 intangible plant . . .

306% 3.o6%

Generation-Hydro . . . . .

2 53 2 43 Nuclear (excluding decommissioning) . . . 3 44 33o Transmission . . . 2.86 2.62 Distribution ... . . .

2 94 30o General . . .. .. 5 04 5 47 Composite . . . .. . .. . 2 93 2.85 The costs of replacement property units are Decommissioning of the nuclear power plant charged to plant. Repair and maintenance costs has been estimated at $773 million in 1978 dol-are charged to expense, including such costs as- lars. This amount will be reviewed and adjusted sociated with refueling the Rancho Seco nuclear periodically to reflect the latest practices of plant plant. Rancho Seco was refueled in 19 8 0, but not decommissioning. The District established the in 1979 decommissioning fund on January 1,1980, to set The District amortizes the cost of nuclear fuel aside decommissioning costs over the remaining on a unit-of-production method, based on the 25 years of plant life.The $77 3 million has been original cost of nuclear fuel plus et timated costs escalated for inflation through 198o, and is used of disposal escalated for inflation to the antici- to establish the reserve for decommissioning pated time of disposal. and to make cash deposits into the fund. Fund management is under District control.

Sacramento Municipal Utility District Notes to Financial Statements teemiiouca> 47 Non 1. Surntnary Allomtncefor Funds Used During Construction: and 1979 amounted to $6,642,000 and $5,121,ow, ofSignificar,t The total allowance for funds used during con- respectively. Reflecting improved benefits of the Accounting Policies struction in 19 80 and 1979 amounted to approx- plan and actuarial studies, the District's rate of kontinued) imately 6.1% and 59%, respectively, of elig,ible covered payroll contributed to the plan in-nuclear fuel and plant under construction. creased from 15 31% to 1719% effective July 1, 1979, and to 17 51% effective July 1,198 0. The ketirement Plan: The District'n employees are State Retirement System has reported that the covered by a contributory retireme. .t plan ad- District's share of the actuarially determmed ministered by the State of California Retirement unfunded obligation as of June 30,198o, was l

System. The District's policy is to fund retire- approximately $62,000,000.

ment costs as accrued and contributions for1980 l

Nca 2. Long-Terrn Long-term debt outstanding at December 31,19 0 8 and 1979 was as follows:

Debt 1980 1979 General Obligation Bonds-Electric Bonds,2%,19 81 to 199o . ... .. . . $ 5,424,000 3 6,144,ow Building Bonds 4%-4% %,19 81 to 1992 ... ... . ... .. 5,765,000 6,100,000 SMUD Bonds, Series C 4% %,19 81 . .. . .. . .. ..... . 6,7m,wo 13,1 w ,o w Revenue Bonds-Upper American River Project Refunding Bonds 3%%3 % %,19 18 to 1991 ..... . .. .. 46,600,000 50,2 N,0N White Rock Project Bonds-Series A and B,3%%3 %%,19 81 te ,'oo4 33,805,wo 34,645,000

- Series C and D,6%%7%,198 1 to:nto .. .. 54,800,000 55,4N,000 Electric System Bonds 3%3 % %,19 81 to 198 3 . . . . . . . . 2,855,0N 4,No,No Electric Revenue Bonds Series A-H,4%47 %,19 81 to 2o19 . 370,600,000 373,5N,0N Total bonds ... . .. ... .. . $526,549,NO $542,989,000 Purchase Agreement,3 % %,1982 to 2000 . . . 2,347,932 1,392,705

$527,896,932 $544,381,7o5 Less-Bond discount, White Rock Project, Series C 2,103,739 1,160,486 Less-Amount due within one year .... .... 27,226,453 16,484,774

$509,576,740 $526,736,445

_._.--._.______.__.______m.___._____.mm , _ _ _ _ . , , , _ , , _ _ _ _ _ _ _ _ . _ _ _ , _ _ , , _ _ _ _ _ , _ _ _ _ _ _ _ _ , _ _ _ _ _ _ _ _ _ _ _ _ _ , _ _ , , _ , _ _

Sacramento Municipal Utility Distric.

Notes to Financial Statements icemiimmeo) 18

~

NOTE 3. Commercial The District is authorized to issue commercial 7 37% the approximate average commercial Paper paper not to exceed $50,000,000 with a term not paper outstanding was $33,o85,000 and the av-to exceed 270 days. erage term was 30 days.The effective interest The District first issued commercial paper on rates were computed on a daily basis weighted October 23,1980. As of December 31,198 o, there for the amount borrowed at each rate and in-was $39,937,000 of the District's commercial clude the dealer's and bank line-of-credit fees.

paper outstanding at an effective interest rate of A line of credit is maintained to support the 8.19% The maximum amount of commercial sale of commercial paper. The District compen-paper outstanding at any month-end during the sates the bank for the line of credit by fee year ended December 31,19 8o, was $39,937,000. payments. During 198o, the District utilized the During the period from October 23,198o, bank line of credit in the amount of $5,n,e through December 31,1980, the approximate ef- for seven days at an effective interest rate of fective interest rate for ccmmercial paper was 8 47 %

NO ; E 4. Reserve Reserve funds to revenue bonds at December 31,19 8o and 1979 were as folknvs:

Tundsfor Revenue Bonds 198o 1979 14ctric System Bonds . .. .... .. . $ s,000,000 $ i,000,000 Electric Revenue Bonds . . . . . . . . . . . . . . 20,267,920 20,5o1,565 White Rock Project Bonds . . . . . .. . . .. 929,986 929,986 AllParitj Bonds ... . .. ...... ......... 5,372,322 5,552,347

$27,570,228 $27,983,898 NOTE 5. Rancho Seco in April 1975, the Rancho ecco nuclear plant On June 30,1975, the operation of the plant Nuclear Plant began commercial operation, and the District's was halted because of a failure of the rotor discs surplus pc,wer billings to Pacific Gas and Electric in the low-pressure turbines. The turbine rotors Company (PGandE) since that time have been were replaced, and the plant went back into op-rendered in accordance with the terms of the eration in late February 1976. It was again taken 1970 Power Sale, Exchange and Integration con- out of servicein early April 1976 for replacement tract with PGandE. The contract provides that of the generator stator windings and was re-PGandE shall purchase the District's unused turned to service on October 10,1976 generating capacity, the energy generated by that capacity and also the surplus energy gener-ated by capacity used by the District. Under the contract, payments for capacity continue during periods of plant shutdown, although payments for energy do not.

Sacramento Municipal Utility District Notes to Financial Statements (cooiinueo) 19 NOTE 5. Rancho Seco In June 1976 , PGandE filed a claim against the In accordance with a Nuclear Regulatory Nuclear Plant District alleging that the matters referred to Commission Order, Rancho Seco was shut (amlinued) above indicate that the Rancho Seco plant did down from April 28,1979, until early July 1979 not become commercially operable in April 1975, On April 0,19 3 0,8 Pacific Gas and Electric Com-and that ehe rights and obligations of the parties - pany filed a claim against the District to recover continued to be controlled by an earlier con- a portion of the costs it incurred during the tract. The claim seeks recovery of approximately months of May through September 1979,in pur-

$50,mo,ooo alleged to be the difference between . chasing capacity from the Bonneville Power payments due under the two contracts, and also Administration. The claim is based upon a sought recovery of $20,000,000, plus additional provision of the District's 197o Power Sale, Ex-costs expected to occur after the filing of the change and Integration Contract with PGandE claim to replace capacity and energy which it which states that PGandE shall make capacity should have received from Rancho Seco. The available to the District in the event of outages at District and PGandE have executed an agree- no charge except to the extent that such outages ment whereby PGandE has agreed that any cause PGandE to incur additional costs to obtain award or judgment it receives based on its claim capacity from outside the Northern California will be subordinated to the rights of holders of area. PGandE contends that its Bonneville pur-documents evidencingindebtedness of the Dis- chases were made necessary by the Rancho Seco trict issued prior to the date of such award or outage. The PGandE claim'does not specify an judgment, and has further agreed that amounts, amount, but, based upon informal discussions including interest, collected or offset by reason with PGandE representatives, the District's of such award of judgment during any. month present understanding is that PGandE's posi-may not exceed six percent of the District's tion is that the claim will total approximately operating revenues from retail sales during the $4,000,000. The District disagrees with the preceding month. method by which PGandE has computed this On May 30,1979, PGandE and the District amount and believes, on the basis of the infor-signed an agreement submitting the claim to mation presently available to it, that mo t of an arbitration panel. Under the agreement, PGandE's purchases were caused by de t ys in PGandE has abandoned its claim for the completing PGandE's scheduled genereing fa-

$20,000,000 and additional expenses alleged in cilities and by PGandE's consequent failt.re to the claim to have been incurred in the purchase maintain the reserves contemplated by the 1970 of replacement capacity and energy.The hearing contract, rather than by the shutdown of Ran-before the arbitration panelis scheduled to cho Seco. The claim is now being informally dis-begin on April 6,1981. While the outcome of this cussed between the District and PGandE. At dispute cannet be predicted with certainty, the this time, the District is unable to predict in District believes that it has meritorious defenses what ma nner or in what amount it will ulti-and, in addition, that an indemnity provision in mately be settled.

the contract under which the District purchased the Rancho Seco turbine generator from the Westinghouse Electric Corporation obligates Westinghouse to pay any judgment which PGandE may obtain. The District also asserts rights of indemnity against Babcock & Wilcox Co. and Bechtel Power Corporation.

Sacramento Municipal Utility District Notes to Financial Statements eentinomo 20 Norr. 6. Purchased On May 25,1978, and November 1,1979, interim rate proceedings are not in accord with a rate Pourr Rate /ncrease rate increase's for power purchased from the modification formula in the contract under Central Valley Project (CVP) were placed into which the Distric t purchases CVP power. On

, effect by the U.S. Department of Energy.The June 23,1979, the United States District Court estimated annual billing increase to the District for the Eastern District of California granted under these interim rates is approximately a motion for summary judgment against the

$77 million. The proposed rates will not become District. On July 20,1979, the District filed a final until they are confirmed and approved by notice of appeal to the United States Court of the Federal Energy Regulatory Commission. Appeals for the Ninth Circuit. The District can-The District is presently paying into escrow that not at this time estimate how much,if any, of portion of each monthly bill representing the the amounts paid into escrow will be returned to increase over the rates in effect before May 25, it if it is successful in the lawsuit. Currently, the 1978 (at December 31,198o, the balance in es- entire billing increase is included in Purchased crow was $20,o28, coo), pending conclusion of a - Power Expense and as Purchased Power Rate In-lawsuit filed against the District by the United crease, a current liability. At December 31,1980, States to obtain.a judicial ruling on the District's the balance of the current liability is $21,293,000.

contention that the criteria being used in the NOTE 7. Commitmenis Estimated construction and nuclear fuel The District is a defendant in various actions and Contingencies expenditures in 19 1 8 are $13o,594,om and ' including a suit filed by 13 electrical contractors

$36,746,000, respectively. The total cost of alleging that the District's practice of construct-nuclear fuel under contracts for future reloads ing its own distribution facilities violates the (covering the period 1981 to1988)is estimated to antitrust laws. Management is unable to pre-dict what effect,if any, the ultimate outcome of '

be approximately $17 6,616,000.

these suits might have on future operations.

But, af ter evaluating this claim and discussing it with staff counsel and with the law firm retained to defend the District, managemen;is of the opinion that the effect on the accompanying fi-nancial statements will not be material.

s

Sacramento Municipal Utility District Auditors' Report n To the Board of Directors of Sacramento Municipal Utility District:

We have examined the balance sheets of Sacramento Municipal Utility District (a political subdivi-l sion of the State of California) as of December 32,198o and 1979, and the related statements of net revenue and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

As discussed further in Note 5 to the accompanying financial statements, Pacific Gas and Electric Company has filed two claims against the District resulting from unplanned shutdowns of the Rancho Seco Nuclear Plant. The first claim of approximately $50,000,000 seeks recovery of dif-ferences in payments between a contract in effect prior to commercial operation and the current contract. The second claim seeks recovery of costs incurred to purchase capacity from other sources and is in the amount of approximately $4,000,000. The District believes that its position on the larger claim will be upheld and that the amount of the second claim is greatly overstated, but the outcome of these claims cannot be determined at this time.

Also, as discussed further in Note 6, during 1978and 1979, the U.S. Department of Energy placed inta effect interim rate increases. The District has recorded the related billings of $22,293,000 as pur-chased power expense but is currently placing funds for payment in escrow. The District contends that the interim rate increases are not in accordance with its purchased power contract. The United States has filed a lawsuit against the District to obtain a judicial ruling on this matter. The District cannot determine at this time how much,if any, of the $20,o28,000 which is now in escrow will be refunded if it is successfulin this action.

In our opinion, subject to the effect of any adjustments that might have been required had the out-come of the matters discussed above been known, the financial statements referred to above present' fairly the financial position of Sacrar ento Municipal Utility District as of December 32,29 80 and 1979, and the results of its operations and the changes in its financial position for the years then ended,in conformity with generally accepted accounting principles applied on a consistent basis.

San Francisco. California ARTHUR ANDERsEN & CO.

January 30, n8 l

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Sacramento Mundripal Utdity District Ten-Year Summary 22 Operating Statistics 1980 197s Customern at Year-End 335,o91 324,4p KWH Sales (in thousands):

Sales to Customers-Residential 2,587,168 2,678,8of Commercial, Industrial, and Other - 2,76 4,7m 2,792,223 Total 5,352,868 5,471,031 Sale of Surplus Power 3,306,254 3,533,88f Total .

8,658,u2 9,004,91t Revenue (in thousands of dollars):

Sales to Customers-Residential $ 68,446 $ 60,837 Commercial, Industrial, and Other 62,224 54,cx#

Total . $ 229,570 $ 114,8 4y Sale of Surplus Power 50,053 35,3 8; Total $ 279,623 $ 150,225 Average KWH Sales per Reside %I Customer 8,776 9,44f Average Revenue per Residential KWH Sold 2.65e 2.27 Power Supply (KWH in thousands):

Hydroelectric Generation 2,595,983 1,673,322 Nuclear Generation 4,408,698 5,717,476 Purchases 2,899,292 1,890,28s System pea Demand-KW 2,573,967 68 1,54 ,7 f Equivalent Full-time Employees at Year-End 2,868 2,764 Financial Statistics (in thousands of dollars): j Total Operating Revenues $ 179,613 $ 150,12p Operating Expenses i Purchased Power $ 26,402 $ 14,97(

Operation, Maintenance, and Taxes 87,257 68,4q Depreciation and Decommissioning 27,454 22,694 Total operating expenses $ 231,113 $ 106,o9 Net operating revenue $ 4 8,520 $ 44,23G Otherincome 12,514 8,17f Net revenue before interest expense $ 62,024 $ 52,41j interest Expense 15,773 24,939 Net revenue for the year $ 35,252 $ 27,4cg Times Debt service Earned-Revenue Bonds 25 2.j Bonds Repaid ' $ 26,485 $ 16,o4j Electric Utility Plant 900,169 $ 829,45j Capitalization:

Long-Term Debt $ 509,577 $ 526,73j Customers' Equity $ 421,523 $386,271

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23 1978 1977 1976, 1975 1974 1973 1972 1971 309,735 296,541 282,621 273,259 264,159 254,64 6' 245,449 234,128 2,458,990 2,222,998 2,102,704 2a34g17 1,903,777 1,873,373 1,732,798 1,611,792 a,691,87 6 2,544,239 2,504,313 2,376,723 2,227,039 2,334,5o3 2,204,425 2,038,245 5,150,866 4,767,237 4,607,017 4,410,74o 4,130,836 4,207,876 3,937,223 3,650,o37 3,081,911 2,923,955 159,196 1,835,952 - - - -

8,a32,777 7,691,192 4,766,213 6,246,692 4,130,836 4,207,876 3,937,223 3,650,037 s

$ 53,955 6 44,497 $ 40,553 $ 35,188 $ 32,497 $ 29,686 $- 26,624 $ 23,302 49,710 43,257 41,405 35,497 32,43o 30,957 28,o48 24,373

$ 103,665 $ 8 ,67 54 $ 81,958 $ 70,685 $ 64,927 $ 60,643 $ 54,6 72 $ 47,675 31,558 33,57o 20,988 28,551 - - - -

$ 99,236 $ 60,643

$ 135,223 121,224 5 102,946 $ 64,927 $ 54,6 72 $ 47,675 -

9,091 8,597 8,491 8,5m 8,244 8,416 8,116 7,928 2.19e 2.oor 1 93e 1 73e 1 71e 15e 8 1 54e 145e 1,705,497 209,717 1,o38,936 2,023,803 8 6 2,54,47 1,853,co6 1,591,129 1,664,528 4,965,812 5,80,82 7 3 2,181,261 2,472,624 207,223 - - -

1,866,937 1,904,428 1,855,626 2,o16,288 1.603,556' 2,586,927 2,663 552 2,240,277 1,577,785 1,353,589 1,329,983 1,272,389 1,201,188 1,173,588 1,099,188 1,o20,389 1,687 1,559 1,442 1,447 1,375 1,3c2 1,242 1,166

$ 135,223 $ 121,224 $ 102,946 $ 99,236 $ 64,927 6o,643 $ 54,6 72 $ 47,675 1

3 11,740 $ 7,708 $ 7,643 $ 845o $ 8p59 $ 9,914 $ 10,600 $ ' 8,661 54,473 55,o32 66 7,37 3,88 83 16,811 14,504 13,153 21,435 'i 21,769 30,795 2s,552 18,227 8,olo 7,68 9 7,337 6,43 8

3 8,91 78 $ 83,607 $ 46 6,52 5 65,125 $ 32,88o $ 32,116 $ 31490 $ 26,579 3 47,242 $ 37,617 $ 88 3,34 $ 34,121 $ 32,o47 $ 28,527 $ 23,58 2 $ 21,(96 6,262 5,27o 5,254 8,986 29,976 23,377 15417 10,098 3 53,504 $ 42,887 $ 43,6 38 $ 43,107 $ 62,023 $ 51,904 $ 3 8,599 $ 31,194 23,920 24,568 24,946 25,226 25,76 2 22,524 18,658 13,105 1

3 29,5 84 $ 18,3 t 9 $ 18,692 $ 17,881 $ 36,261 $ 29,38 o $ 19,941 $ 18,o89 i 2.2 19 1.8 17 19 1.1 2.o 2.o l 3 15,566 $ 16,657 $ 25,648 $ 15,145 $ 11453 $ 6,607 $ 6,237 $ 5,88 9 l

$ 771,499 $ 739,185 $ 729,178 $ 722481 $ 705,812 $649,036 $ 571,896 $466,091 l l

3 493,205 $ 4 69,225 $ 4 4,827 8 $ 47 8,159 $ 494,165 $ Scy,61 7 $ 420,(93 $ 340,565

$ 35 8,794 $ 329,210 $ 310,892 $ 292,200 $ 274,319 $ 23 8,o59 $ 208,679 - $ 188,738 l l

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Sacramento Municipal Utility District SMUD Information 24 Board of Directors PAUL W. CARA, President

' DONALD C. MCCLAIN, Vice President WILLIAM O. BAiRD Rich ARD D. CASTRO GARY NURSH

)1-Officers and Executives Wu. C. WALBRIDcE, General Manager JOHN J. M ATT MoE, Assistant General Manager and Chief Engineer WM. S. BoSsENM AIER, Assistant General Manager and Controller WM. K. LATHAM, Assistant GeneralManager, Operations KENNETH J. MELLoR, Assistant General Manager and Treasurer Davro S. KAPLAN, General Ccunsel and Secretary Department Managers BETTv BotEs, Land WituAM J. CoNDoN, Data Processing JOHN D. DUNN, Transmission & Distribution Operations leo A. FAssLER, Distribution Planning GEoRcE F. FRASER, Distribution ConFtructi,sn j EARL M. GABRIELLI, Customer Services WrLLIAM j. HAMMoND, Services JOHN P. HitTz, Hydro Operations PHittIP R. HotLiCx, Conservarim DONALD W. HowToN, Consumer Relations CORDON B. MERRILL, Purchases & Stores JOHN H.MrCHELMoRE, Accounting -

DALLAS G. RAAsCH, Generation Engineering Joff N L. RAVERA, Engineering RONALD J. RoDRicUEz, Nuclear Operations i Bond Counsel ORRICK, HERR NctoN, & SUTctarrE, San Francisco Trustee and Paying BANS or AMERICA NATIONAL TRUST AND SAVINcs association, San Francisco l Agent i i Paying Agents CITIBANK, N.A., New York i HARRIS TRUST AND SAVINcs BANK, Chicago Engineers R.W. BECK AND ASSOCIATES, Sacramento Auditors ARmVR ANDERsEN & Co., San Francisco Financing Consultants LEHMAN BROTHERS KUHN LOEB INCORPORATED, New York Main Offices SAcRAuENTo MuNiC PAL UTILITY DISTRICT,62o1 S Street, Sacramento, California 95827 i

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