ML20108C751

Orlando Util Commission 1995 Annual Rept

ML20108C751
Person / Time
Site:	Crystal River
Issue date:	12/31/1995
From:	Haven R, Martinez M ORLANDO UTILITIES COMMISSION
To:
Shared Package
ML20108C682	List: 3F0496-13, Forwards Annual Financial Rept for 1995 & Annual Financial Repts for Ten Participating Owners of Crystal River 3 ML20108C685 ML20108C689 ML20108C699 ML20108C712 ML20108C734 ML20108C739 ML20108C751 ML20108C752
References
NUDOCS 9605070126
Download: ML20108C751 (48)

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9 % leason 'Qg JerToers Endd SgtJ 30 1995. 1994 (Deacon) 1985 . 2% we coassesso OPERATeoseS - HE%

Oposing tennus 340,120,505 326,111,994 4.5%

204,322,305 75 gn L lolol0pweling Expenses 245,637,380 S 240,020,131 2.3% 149,589,083 quW ' Internt and 0ther luene 28,106,918 -S 30,314,777 -7.3% 55,748,146 W% inlant and Other Expenses 82,306,148 L$ 82,373,929. 0.1% 44,711,214 M,d[D ', S' 35,736,221 34,160,492 4.6% .S 40,729,757 f L Het imeme : M Peyments to Oly'of Orlando : 32,191,708' S 29,279,647-9.9% 14,172,000 ? QQD,k ^ l@nnt(Not boek valm) : ' $ : 1,371,901,430.. S 1,281,397,997 7.1% 650,216,789 Md I81uity.... 444,418,389 5 420,598,635 ' 51% S 222,978,242 % ypf ' long-tum Debt J ' $ I,322,143,207 ' S. 1,332,670,811 -0.8% - S 846,266,905 a COj

Tolol Asets 4 :' 1,960,264,942 S L1,947645.069 0.9%

$ 1,151,136,237 y,

Debt Service Coverage:.

,%g 'Seniorlien y 3.67x. 3.47x 5.8% 212x T @ J1 t Juniw hen : 3.36x 3.36x 0.0% N/A 5f[ ' ' Combineddeb[. " gy Senior Send Ratings (1) -_ 1.95x 1.93x 1.0% 212x AAA,AA+,- AAA,AA+, N/A,N/A p- .e w Ael, AA Aal, AA Aal, AA fqd 7 ?: f t El.ECTIuc BUSNGESS UfflT - dy

Operating Revenues

$ ' 317,224,520 $ 301,893,904 5.1% 189,165,783 %};1$jt

Totolopereeing ExpEsas, 227,181,121 S 221,600,667 2.5%

140,017,424 Fwland Pwchosed Power? $: 105,580,590 100,268,749 - 5.3% 81,169,644 mmA poportmental0peations(2) 121,600,431 121,331,918 0.2% 58,847,780 W* ' TotalW(MWH) ' .5,245,775 5,042,552 4.0% 2,848,110 Q;$ 2 TetelRetailSelm(MWH). 3,892,662-3,762,086 3.5% 2,653,159 g Commutiel/ industrial 5 ales

2,544,657.

2.467,793 3.1% 1,663,862 f - g,. g.,,l,,,ml Sale - 1,344,005. 1,294,293 4.1% 999,297 W,_ Sales for Resoles (MWH) ' 1,353,113 1,260,466 - $1% 184,951 ~^ j Total _ Actin 5ervica - 126,937 123,809 2.5% 97,559 n eao

ResidentialL.

109,279 106,657 , 2.5% 84,444 k n9F, ' Commercial / Industrial 17,658 17,152 3.0% - 13,115 W ig-ym

Anrege AnnualRaidentialUse(KWH).

12,445: 13,546 -7.8% 11,380 M 1 Avwege Rmnw pw KWH. <7C" Raidentielseles 8.03 4 7.88 ' 1.9% 7.35 t )^ ' Hosting Degru Days l 481-520 1.5% 659 f @N L

Cooling Degree Doys

3,546 3,420 4.9%

3,427 Gross Peak Demand (MW) 863-810 6.5% 711 . ~ _,

c S~ 4' WATER BUSNGESS USNT -

X.Q . Opwetag Rmnues S ~ 23,495,985 24,278,090 3.2% 15,156,522 NNN ' ' Tesol0perenne Expenses 18,456,258 S. 18,419,464 - 0.2% 9,571,659 ' Qj7 (Sales (Milion GaRons)- 26,606,448 - 26,270,981. 1.3% 20,631,069 w ;;f ' ntal Active 5ervica 107,368 105,669 1.6% 83,292 i i'Wf Rosalenhol. - 88,830. 87;15. 1.2% 71,793 bi- - Commercial / Industrial i 10,455 10,361 0.9% 8,342 Imeshon. 8,083 7,513 7.6% 3,157 .g, 'N$ ( Average Amuel Resnienhol Usey (Gol.). "160,000 157,000 1.9% 157,000 1 AverageImnueper1000gaRons ResaienhalSales - 90.90 G 95.50 t -4.8% 79.30 t ,u e .Reiniel(indes) 51.3 571 11.1% 43.2 b-y r(+ ' Peak Pwnping (Milien Galons per Doy) i 149.5 1491 -0.1% 138.5 M_ N i (1) Bond Rating Agencies 1995 - Duff 8 Phelps, Inc., Fitch Invetors Sevice, Inc., Moody's Investors Sevice, and Standard 8 Poor's, rr,pect 1 (2) AR expenses less fwl and pwchosed poww. - i i ils information provided in this dwument is intended to nwet the as, inancialinformation disclosure requirements outlined in ~ ' Swwities and Exchony Comussen Rule 15c212(b)(5)(i)(A). - ,{ .._ _ a

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3 U ..\\.() QC Q D Q q .A ] i ~] "I ~ V._ ~~ __k d _L L Overallperformance in 1995 was excellent as the result of continued aggressive cost reduction and strong gains in electric sales and revenue. Net income rose, and the benefits to our community and stakeholders increased significantly. During the year, a leading bond rating agency reported that we are " clearly well positioned to compete." But we are facing a pe!!od of unparalleled change. To maintain our leadership position in both the electric and water supply industries, the Orlando Utilities Commission continues to launch bold new initiatives to meet this challenge. To be able to respond quickly and effectively to competition, we transformed our electric business unit into three separate business units. We entered into an unprecedented power partnership to supply power to another city, and became a player in the national wholesale power market. Traditional cost centers are becoming revenue producers. With the new 443 MW, coal-fired i generating unit under budget and on schedule to come on line in June 1996, we will have the intrastructure to maintain our competitive edge in both the retailand bulk sale markets. Thus, we are well positioned to keep retail electric rates stable and competitive. The prospect of growth is strong, too, as we expanded our electric service area significantly, encompassing the next hot spot for growth. To ensure that customers have a safe, reliable, and adequale supply of drinking water well into the future, we embarked on an i accelerated five-year, $178 million plan to completely upgrade and expand our water system and convert it to ozone treatment. In the process we willimprove the laste and quality of the water we deliver to customers, water we are proud to call H,0UC. Yet OUC's cater rates will remain among the lowest in the state. We are also forging new partnerships with our commercial customers, developing ways to offer them value-added products and services that go beyond the meter to help them improve their competitive position, toc. At the same time, we work one-on-one with our residentialcustomers, keeping service personal and convenient, ftequently inviting public participation at nelghborhood meetings. We also offer these customers a growing range of value-added services and products. While change abounds, core values remain the same. We remain strongly committed to protecting the environment, preserving resources, and serving the community. And we remain steadfastly committed to reliability. In no instance was this more evident than in the extraordinary performance of OUC employees when Hurricane Erin struck. The noted futurlst Leland Kaiser has said: "The future is not something we predict.. it is something we invent. " We are inventing oer future so we can continue to safeguard the interests of our stakeholders: our owners -the City of Orlando and its citizens, all of our customers, and our employees. [ A Mel R. Martinez Robert C. Haven, P.E. President General Manager and Orlando Utinties Commission Chief Executive Officer

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i l f Focusing on 9 _ew.evene Srces Through cost-cutting strategies such y acing an industry on the threshold of dramatic change, OUC has taken l g as combiningjobs and not filling new proactive steps to maintain its leadership position. In FY '95, we continued positions or those that become vacant major cost-contro/ initiatives that will enable 000 to provide the best possible through planned retirement, OUC has streamlined the workforce without service af the lowest possible rates. At the same time, we are moving aggressively impacting operations. to generate new revenue streams to further position ourselves for competition. Optimizing Plant Efficiency Reducing power plant maintenance ~ Restructuring For The Future complete within two years, most of it was costs has always been a priority at OUC. Sweeping, innovative changes in the accomplished during FY '95. Through ongoing predictive and reliability-Electric Business Unit (EBU) paved the centered maintenance programs, we service 'l l way to heightened efficiency and improved Holding The Line On Expenses equipment Afore problems occur, minimiz-i i accountability in OUC operations. To Employees' efTorts to keep a lid on ing the risk of costly unplanned outages. respond more effectively to the differing expenses resulted in a $4.6 million In addition, by maintaining a database to 1 competitive forces and new regulatory decrease in costs for FY '95. trend expected service life of critical environment that will exist in the future, In addition to the EBU restructuring, components, we can maintain equipment OUC restructured EBU into three separate OUC has been getting " leaner" by reducing on an as-needed basis, rather than at regular business units: Electric Distribution, operation and maintenance costs and intervals - which,in turn, allows us Electric Transmission, and Power holding theline on hiring, to improvejob scheduling and labor Resources. This restructuring is expected since 1993, our overall actual employee allocation. All this will enable OUC to to reduce staff by 6%, save more than head count has dropped from a record high move from two scheduled outages a year at $1.5 million annually andimprove of 1,099 to 1,028 at the end of FY 95. Stanton Energy Center Unit 1 (SEC 1) to accountability. It will be accomplished One-third of that decrease has occurred only one in 1996, an estimated cost savings without laying off employees. since July 1,1994. of 5.5 million. The culmination of a long-Performing short duration my w -._,.,.,_ _.- _- term cost cutting effort which is {

g maintenance activities during expected to have a positive effect b

a r.. ] mild weather periods has reduced i- '4 " p lf g j or eliminated the need for on future electric rates, the EBU I

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scheduled outages at the Indian restructuring willenable OUC to make decisions quickly, act River Plant. Overall, predictive = m on them faster and operate more [ j ( us tolower operating and mamtenance strategies helped like a private sector company. J Although fullimplementation of maintenance expenses at SEC the restructuring planis to be K_ and IRP by 22% in FY '95. mwma.a a. n wu, ~.

3 U. Improving EHiciency And Reliability OUC's operating flexibility also enables sales net benefits were up more than i New levels of employee and equipment us to provide power generation from $3 million (21%) from the previous fiscal performance at both SEC and IRP enabled multiple sources using multiple fuels. year, while bulk sales energy was up on!y both plants to operate with optimum At the same time, conservative generation 6%. Retail sales were also " hot," rising efficiency and reliability. One of the planning allows sufficient capacity to 3.2% to $263.7 million. cleanest, most reliable, coal-fired power capitalize on bulk power sales The heat wave ushered in a new era for plants in the nation, SEC 1 produced more opportunities. OUC and its Florida hiunicipal Power Pool megawatts than ever before in FY '95, as partners, as they began selling power to generation increased to 3.3 million hiWH. Power Sales Heat Up, Head North out-of-state utilities in Georgia, Alabama, Net heat rate remained on par with 1994. Record-breaking August heat helped to Tennessee, Kentucky, the Carolinas, The bottomline: a 13% reductionin make 1995 a record-breaking year for Mississippi, Virginia and even as far north operating costs per megawatt over the power sales. The heat wave - and profit as Ohio. Un August 15, OUC's retail previous four year average. Similarly, IRP margin it generated - drove bulk sales to demand hit, summer peak of 859 MW, achieved the highest level of operational their highest level ever: 518 million. Bulk just 4 megawa3s less than the all-time reliability in the last decade. 863 peak set in NMory '95. Operating "To stahmze eintric utility rates reliability at SEC and IRP was 100% Maintaining Flexibility for its cutomers, the city of st. cioug - during this high demand period. To respond to competitive challenges, requested proposals from power providers From August 14-21, OUC and the pool tomorrow's utilities must be flexible - in the state. we received proposals from sold a record 38,733 MWH of bulk power. a quality that has always characterized Tampa Electric Co., Florida Power corp., IWrer before had OUC and the poolsold OUC's approach to the energy N' * * """*8' # " " A"'I'"' so much bulk power in such a short time. Orlando Utilities Commission. Anor an marketplace. This drove the pool benefits for OUC to g Over the years, fuel mix and flexibility consulting firm, the Duc proposal $3.8 million for FY '95, up 51 million from have helped us control fuel expenses and be was determined to be the best overall last fiscal year. aggressive in fuel purchasing. In FY '95, submittat. we negotiated and signed an OUC provides load dispatching service the generation mix included 63% natural innovative 'all-requirements' agreement for the pool, which is comprised of OUC, gas and fuel oil,32% coal, and 5% nuclear. with OUC-and since January 1,1995, the City of Lakeland and the Florida That mix allows us to take advantage of-we have enjoyed exceptional service." Mum.. l Power Agency. cipa low prices and use the most cost-effective -J. Paul Wetief " 8888' 8 fuel to power our plants and keep costs St. Cloud Partnership Sets competitive. Precedent OUC GENERATION MIX FY '95 marked a milestone for OUC, as ..m -~7 mm,gmyq it began a precedent-setting power supply 5%Iludesr' partnership with the City of St. Cloud. g.g' ?fj This agreement administered by the e32% Cost Power Resources Business Unit is OUC's first full requirements power supply con-j tract. It is also unique because the city is .j paying a market-based rate for the service it yM receives. OUC's System Operations staff is q j currently dispatching St. Cloud's existing p wer resources, providingload dispatch-63% 08/Ges : -l uMJ ing services from the Pershing Operation __a O

1 i Control Center. Plans are in place to a year upon buildout of the area. extend a 69 KV transmission line to the The agreement also provides for adding city by 1998. St. Cloud will pay $17.3 approximately 200 acres in the Fairvilla million of the cost and own the portion section m northwest Orlando when the 1 of the line located in its service area. City annexes that area. i / q ~ TECO Boys into OUC Transmission Work Units Become Cost Centers In an agreement that promises strategic ~j Seeking creative ways to respond to j and economic benefits to OUC, Tampa competition, while offsetting expenses at i Electric Co. (TECO) has purchased a } the same time, OUC is turning cost centers n g-portion of OUC's Taft to Lakeland into revenue centers. Work units are being transmission line. In return, we will receive 1 challenged to operate like private-sector $5.5 million and a direct tie to the Reedy companies facing direct competition. ] Creek utility that provides power to In FY '95, our Fleet Division, a i Walt Disney World. TECO will also pay "As Orlando continues to compete both $2 million overhead expense, took initial i 25% of the operating and maintenance domestically and internationally for business-steps to provide maintenance services for f costs of the 230,000-volt line and convey a strong, unanciany sound and wen-posinoned a fee to customers outside of OUC. OUC to OUC an undivided interest in a new and the City of Orlando entered into a i cannot have growth without a utility that can j substation and 69 KV underground precedent setting reciprocal interlocal provide reliable electricity, quality water and transmission line it plans to build in competiuve rates, to attract industry and agreement to provide each other with ccet 1 Osceola County. The Commission has encourage residential development.- maintenance services. Finding OUC : ) also agreed to provide TECO with cous hompes,6e GNose _ g,,,,,g g,,, expansion rights of up to 25% of Afayor or Orlando Fleet to paint large trucks and provide OUC Commissioner the capability of the transmission other automotive preventive maintenance .[I work. The City is expected to be the source corridor, with OUC retaining the option

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j to share in the expansion. [ of thousands of dollars in revenue for the hm division. p l Territorial Agreement p$%- fp "i Significantly, the division has taken on y. i With Florida Power e/ N. 6 additional work, maximizing the use of i ,O,y ' iq i in FY '95, the Florida Public Service M existmg resources while saving jobs for i H Commission approved the 10-year a! 3, 3 employees. territorial agreement between OUC and N. i 3 l Florida Power Corp. The new agreement ./O w~~ j 3 expands our electric service area by y W1 m j approximately 20 square miles, including .} 4 prime developable property in what is b ~^ considered the next growth " hot spot" in Orange County. The agreement will gh 4 '" # #"#"E"##"8 ##'"'"""##' enables OUC to turn cost centers into ] remain in etfect until April 2005. .l ^ - revenue p oducers. the city at ottando '*8" ### ""' 82"#8" '8 #'#"' i As a result of this agreement, OUC its large trucks andprovide other j gained 287 customer accounts in the maintenance services. l Lake Nona vicinity, with an estimated j potential annual revenue of $30 million

h +, 4; --w. +. e m ',(; m .m n. .i i ig '. ~, l&efetingin$$ly s u rin e a u a tity .9 , +, ~ % "' f' " ]l %;f Ithough the utility industry is,

j in effect, planning for an w

3 m [' uncertain future, one thing is sure: We 9 must guarantee the reliability of our e s generation source 11 we are to compete Hi successfully. Keeping customers on-33 ,.g O J

1. l line, minimizing interruptions, restoring lE'-

l D y power promptly, and maintaining the y i p i r if 4', f H jji integrity of the power and water we g MM.A g Y.q 3 deliver-all these will be vital to ) success in a competitive environment. The Power To Lead in Reliability Understanding theimportance of reliability, OUC has spent decades designing a distribution system that would stand up under the most rigorous circum 3tances. Planning conservatively for growth, we have n made initial investments in high quality material and equipment that, over time, .J yield a high return in reliability and availability To make our system less vulnerable to service interruptions, OUC standardizes concrete poles instead of wood, installs static wire for lightning protection and uses underground cable in conduit, rather than direct burial. The fact that 42% of OUC's system is underground also irs contributes to high reliability. f0;' For allofIhese reasons, OUC' reliability s continues to leadthe state. In 1995, the average annual customer

f W W.b\\.J.. C J.LJ ) .( J-outage time was 47.69 minutes electricity fell from 52,500 to 16,000. By (not including Hurricane Erin)- an the end of the day, that number dropped to 7,500. Power was restored to all OUC improvement of over two minutes from { 1994. This repre.,ents roughly 100,000 c' customers in just three days (an average 7.69 hours of customer outage time). customer outage hours a year. 3., Generating unit performance at both j-The intensive restoration effort showed IRP and SEC 1 once again exceeded most [ OUC at its best: rapid assessment, swift national averages. IRP's three steam units action and total cooperation among all posted an equivalent availability of 91.85%, departments. Restorations were made compared to the national average of 83.07%. expeditiously with existing stalling levels The equivalent forced outage rate for these and with no injury to the public or OUC units was 314%, compared to the national personnel. average of 9.21%. Equivalent availability for IRP's four combustion turbines was 93.12%, Reliability A " Watermark," Too "As a business owner myself, i compared to the national average of 84.39%. understand the importance of reliability and A term usually applied to the electric Equivalent forced outage for the cts was the impact it has on day to-day operations. side of OUC's business, " reliability" is 13.85%, significantly lower than the national Having a power and water supply that you equally applicable to OUC's Water Business average of 62.11%. can count on - and a utility company that Unit. Despite alarming reports of water '""P '" " I Y'""" '8""8"Y SEC l's equivalent forced outage rate quality problems around the country, OUC make a difference on the bottom line." was 0.43%, compared to the national average customers have always found their drinking of 8.81%, while equivalent availability rate '-(j' I'y','; water to be safe and reliable, consistently was 86.30%, slightly higher than the national arrando utilities commission exceeding all standards set by the federal averageof 84.39%. government through the Safe Drinking Water Act. Swilt Response To Erin's Fury service in the wake of the storm. Erin's Following the tradition of " going above in the early morning hours of August 2, impact was greater than the total average and beyond" when it comes to water quality, 1995, Hurricane Erin roared through Central outage time experienced over the last four OUC took additional steps in FY '95 to Florida, creating a level of service interrup. years. make a good product even better. By tion that eclipsed both the Christmas freeze During the storm, OUC's customer initiating " Water Project 2000"- an aggres-of 1989 and the March 1993 " Storm of the service representatives tirelessly answered sive, comprehensive refurbishment of our Century." While no damage was done to any approximately 38,000 phone calls. At the water system and comersion to ozone treat-OUC generation or transmission facilities, same time,260-plus OUC employees worked ment - we are ensuring that our customers Erin's 90 mph winds knocked out power to diligently to restore power in the safest will have a very safe, reliable and adequate 37 main distribution feeders and 52,500 manner possible to the highest number of supply of water into the 21st century. (For OUC customers - although all told,63,000 customers. By 12 noon on the day of the details of Water Project 2000, see ' Building customers experienced some interruption in storm. the number of customers without The Infrastruaurchr The future," pg.10.) 1

Looking Ahead and [ ]" e a ~ r l or . d reparing for tomorrow, OUCis P taking steps today to b solid Infrastructure that will position us for quality in the uncertain competitive climate that lies ahead. Water Project 2000: Laying The Groundwork for Improved Quality ]-]y F r OUC's Water Business Unit, Water ~ I f tNlllljy gy;Wjh. Project 2000 is the story of the century. The vgggymT?rmm most significant water capital improvement .mpe wan nA e l7 y program in OUC history, this five-year, e 1f 'j accelerated $178 million expansion / ( ~ YC upgrade calls for modernizing, expanding \\ { and converting the system to a new ozone g* treatment process. Of the total projected S h-g; cost,36% would be for renewal and L i replacement; 33% for growth; and 31% for ozone conversion. p," '~7 Toimplement this program. OUC will I 1 f{ need to increase rates 10% a year for five \\ dq f years. Even with the increase, OUC water

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rates should remain among the state's ?; --T lowest. A significant portion of Water j j4 hd3 Project 2000 includes replacing outdated {' Atauc's wentgMe 3d and inefficient facilities. Five water plants y nl m'" ' Shoemaker att a will be closed, including three built by fsolutions for f: OUC: Primrose and Martin, both 39 years 2 e ti 1. i old; and Lake Highland, now 46 years old. l Also slated to close are two small plants built by private utilities and acquired by ~ ,/ E;sa e e 7 S ,,,4 - 'f' OUC through territorial expansion. e The Lake Highland Plant will be pp replaced by a new facility to be located in il Qu

Qg Jo vin g Forward yy 3 7 FT q. . q g g _. q. . q g .q c 1 1 1 m b b. J b J . 0.. ..J.bJ.. 0 2,_ the same area and served by the same wells. sampled it noted that "it tastes just like M h The Primrose Plant will be abandoned, and bottled water." its capacity replaced by expanding the exist-A, y i ing Conway Plant. A new southwest plant Infrastructure improvements if currently under construction will replace In 1995, OUC kicked off the flagship M capacity provided by the Martin and Dr. water plant for the next generation of h Phillips plants and will provide for growth. water treatment. Slated for completion f Water Project 2000 also includes a in 1997, the $25-million southwest water n galvanized, unlined water pipes. Construction on the project began in July %j program to replace up to 200 miles of old, plant is located near Universal Studios. r 1995. The next new water plant will be d ~ H 00C: Entering The "0-zone" located in the southeastern section of g 2 "As an educator, I know the importance y Our ozone-treated water, a product we OUC's service area. which encompasses 3])) of investing in the future - and I've atways are proud to call H30UC, is the result of 30 square miles near Lake Nona - as well r: major breakthroughs in research. After a as the area around Orlando International tomorrow. OUC has the same philosophy: c comprehensive, two-year st Jy and pilot Airport. to build a strong foundation that can support testing, ozone treatment was determined to fu'ure growth - and stand up against the be the safest and most cost-effective solution SEC 2: Ahead Of Schedule, rigorous challenges that the utility indus'ry to ensure long-term water quality. In Under Budget is going to facer j ? addition to providing better taste. using With 95% of the engineering and S6% of - CarolP. Wilson, Ph.D. ^4 ? ozone will enable OUC to reduce the the construction completed - and all second vice President H y Orlando utilities Commission amount of chlorine used in water treatment major milestones accomplished at the end by 75% and remove 100% of the hydrogen of FY '95 - the 443-MW, coal-fired h ki sulfide from the water. Hydrogen sulfide is Stanton Energy Center Unit ,7 a naturally occurring, harmless compound 2(SEC 2) forged ahead of ?- ^ that gives water an unpleasant taste and schedule and under budget, odor. Formed by passing an electrical moving toward commercial discharge through air or oxygen in a operation in June of 1996. j specially designed genera r, ozone is the SEC 2 remains as the only %~ E E- ] E strongest disinfectant used in the drinking construction project in the water supply industry. United States that has been 4, g. ] H 0UC has been pre-introduced and honored with the coveted L-1 2 ] " taste-tested" throughout OUC's service " Star Award," given by the area at trade shows and community events. US Occupational Health A From ground-breaking...to erection of structural steel.. The new product received an overwhelming and Safety Administration to hydrostatic test of the boiler... al/ milestones have been met or exceeded at SEC 2. s " thumbs-up"- in fact, most people who (OSHA). G

l with c u s to m e rs, c o m m u n i t y, and employees S J. . V .p .c (. .p.( e..p \\./..b . J. ... L/... . V (1 9 q q r r q- - e qq rn 0. . Y. d y commitment to outstanding A customer service has always 4 OUC's Naida Marquez educates residential customers about been top priority at DUC. But in FY '95, ~,..:.:. their electric bitts. we look that commitment to the "next

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~~ =" level" -- making s: <c operational '[ [_'~ G, '~) ~,* ;" ~ p=. g decisions to enhance relationships C L'._'"a.'.. 2 w andprovide more value-addedservice W= ~ ~ ' ~ ~ " " ' * ~ ~ op to our customers. Going Beyond The Meter OUC resources, personnel and technical cooking,in the case of restaurants. To streamline the customer semce effort expertise to improve energy efliciency and in FY '95 - by replacing old incandes-4 and eliminate overlapping functions, OUC help customers reduce costs. cent or fluorescent bulbs with energy combined New Development, Commercial saving, lower wattage lighting-the Services and Residential / Commercial Helping Commercial CommercialEfficient Lighting Program Conservation into a single Marketing (vstomers (Ut Energy Costs removed 1,181 kilowatts from the system, Division. By consolidating talents and From small businesses to large corpora-saving customers $1.8 million. Among the resources, the Marketing / Conservation tions,427 commercial customers took larger customers who helped make this merger places OUC in a better position to advantage of OUC's free commercial program a success: AT&T, Florida Hospital, be the utility of choice in a competitive energy surveys in 1995. Li conductirg Darden Restaurants and several elementary environment, proactively reaching out to these surveys, OUC energy experts use schools. customers, getting to know their individual infra-red and ultra-sound scanners among To streamline the customer service market needs and developing individualized other techniques to check electrical equip-and response process for our commercial solutions. ment, as well as the building itself, to locate customers, OUC created a new customer On the commercial / industrial front, areas of heat loss and heat gain. class for key accounts. Those accounts will OUC recognizes that energy consumption Recommendations are then made on be assigned their own OUC representative, constitutes a large percentage of customers' how toimprove efficiencies in water who will serve as one point of contact for operating costs. Therefore, we are gearing usage - as well as air conditioning / all utility needs. up to go "beyond the meter" - by offering heating, water heating, lighting - and even

Working One-On-One With ~ Residential Customers For its 145,000 residential customers, OUC continued to forge partnerships f *\\ ) the "old-fashioned way"- by talking y to customers one-on-one, conducting p neighborhood meetings, and inviting ~ ~ j-E! community participation. From informing - j ,f customers about upcoming projects in their j g" neighborhood.. to explaining utility bills.. to educating people about conservation, ~ OUC's grassroots community relations effort pro ed a forum to learn - and to be I b Public participation was also invited ? .6 3 during the siting process for proposed new '~- ~ water plants. Open houses and neighbor-r f N / hood meetings were held to explain the f need to get residents involved. The success of this project demonstrated the effective-ness of public participation. improving Energy Efhaency i One of the most widely used marketing tools for OUC's conservation programs is the residential energy survey which analyzes a customer's energy and water .,f use and suggests conservation programs to address areas of concern. With 3,049 participants in the program in FY 95, OUC M 'N repped last year's all-time high of 2,982. J fy, ; Sm yFit mest q" p In turn, this led to an increase in the ~ number of participants in residential , p * *; ~ conservation programs such as the Home Energy fix-Up program. Aimed at house-holds with family incomes of $20,000 or less, the prognm helps customers make energy efficiency improvements to their homes. OUC pays 85' of the costs; the remaining 15% Can be financed interest-Prov,d,ng value added serv,cs,s,ntegral to OUC s partnersh,ps free, on monthly electric bills. Continuing "d8"""''"5'8"5 8"C "'*'d ' 'd" ' 'r '"' '* 8' us,nq,ntra red technology to,de,,t,9y areas of energy loss and .s w its strong track record, this program provid-d,,,,,,,,,,,,n,,,,,,,nor,,,,,c,,,, i,,,,,,,,,, yss,,,, ed rebates to 295 customers in FY '95. t 13 l

l l Similarly, customers can fmance all work Brevard County to Orange and stretching done through the HomeInsulation and to Osceola in 1996. In FY '95 volunteers Security Lightingprograms for up to 24 and family members participated in 25 months without interest; payment is made different project 3, raising over $21,000 for on regular OUC bills. j the community and contributing more f Other popular conservation programs y than 8,000 hours. are IRatherwise and E/]icient Heat fump, Our volunteer program did not go which in FY '95 went from a maximum unrecognized. Only one year into the rebate of $300 to $750 for residential Community Crews volunteer program, electric customers who replace strip heating OUC was one of three corporations with a heat pump system. Approximately recogr.ized by the Center for Community 800 customers took part in these programs Invo'vement's Community Leadership last year. "This past year, the SEC 2 Community Awards. The older PROUD volunteer service council constructed a recreation park program continues to pay rewards to Responding To Customer Needs organizations where OUC employees The project, which was valued at more than { Responding to customer inquiries is no $70.000 included a multi-purpose field. small task at OUC. We receive more than a basketball courts and picnic pavilions for the To encourage volunteerism, OUC kicked half million calls annually - 528,999 in families and children in Pine Hills. The park otT a new rewards program for employees FY '95 to be exact. Response time during is one of many examples of auc's genuine participating in community service. The that period averaged juct 40 seconds. commitment to our community." OUC Bucks Employee Program recognizes While the number ofincoming calls employees who go "above and beyond" _ g,y g,3,,g,,,,, rose in FY '95, the number answered was first vice President both at work and in their volunteer activi-Orlando Utilities Commission slightlylower and the response time ties. OUC Bucks can be redeemed for slightly higher than the previous year - everything from TV sets to t-shirts. due largely to reduced staffmg levels. Coring For Our Community Both OUC and our employees make Technology helped to pick up the slack. At OUC," Caring for Our Community" financial and in-kind contributions to orga-t however, with OUC's automated Voice is more than just a slogan for our volunteer nizations performing important work in the Response System routing callers to request-program It's a corporate philosophy put community. Support for United Way was ed destinations, allowing representatives to into action by employees dedicated to up 4% in FY '95, totalling $109,579. In devote more time to customers. building better communities - from addition, United Arts, the Minority y Taking its conservation message > "on Ine road," OUC transformed one ofits electric mini-vans into a race car to help promote the use of alternative energy vehicles.

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~ ~ '..,f OUC'slatanya > " cy ' fd. ' 'Y f& ff' .? Woodson cares for [ her community by .a ln _,, . h :'. L ~~ volunteering to h? )?% rock a toddler al -, f.g' ' fi'r,g. ' flk,' [ a Orlando Day Nursery. ,[ ? L _ __ '.;~: g n. 3 31 .W' 4 '4; f f, .Q _ / [} p, f1 ] / NA Alliance and the Orlando Science Center ponent: our employees. We're committed As part of our commitmen to promote received nearly $400,000 from OUC. to providing them with comprehensive multi-cultural awareness in the workplace, OUC donors also gave a record 645 benefits, training programs and other OUC held a series of one-day diversity units of blood, enough to meet one day's incentives that will foster motivation and training seminars for approximately 800 requirement in Orlando. OUC was one of make them "proud to be OUC." employees. The series is a continuation of three organizations to receive a corporate Through our Incentive Compensation the program conducted for all supervisory award for its employee support of blood Program, employees pitched in to keep the staff last year. drives. lid on spending and hold costs down. As a Because technology has become OUC's community relations efTorts now result, business unit / department expenses important for nearly every employee, OUC encompass our Educational 0utreach dropped 54 6 million in FY '95, a 5.5% added several programs to facilitate the use Program, which was expanded in FY '95 decrease from the previous year. Modified of personal computers. to bring conservation, electrical and water as of October 1,1995, this program will be Employees can now get interest free safety messages to more than 14,000 known as the Achievement Recognition loans to buy new PCs and make students in 54 Orange County Public Award Program (ARAP). It is based solely payments via payroll deduction Schools. And in Brevard County, our on OUC's commitment to control costs in through a new Employee PC partnership with the Challenger 7 Elementary the face of increased competition. Purchase Plan. Schxlcontinues to strengthen. In addition, OUC implemented a To help employees share information, voluntary Flexible Spending Account OUClaunched the OUC Web, Fostering A Motivated Workforce (FSA) for dependent care and unreim-which is patterned after Internet's OUC realizes that keeping customers bursed medical expenses. The FSA ives Worldwide Web. 3 satisfied, cutting costs and improving panicipants a tax break because deductions productivity all hinge on one pivotal com-are taken out before taxes.

S u rp a s sin g S ta n da rds, Ta k in g the Lead u g q qn-aq -c ca ,c qn c -ce a c G 0 C) b...... .....0. V......... 0.... b j l l nvironmentalperformance at DUC continues to surpass all state and federal Proottive On Pollution Control standards established by the 1990 Clear Air Act and the Sale Drinking Taking a proactive stance on pollution control, OUC volunteered to be one of only Water Act. Continuous Emission Monitorin0 (CEM) data from SEC 1 and IRP 13 utilities in the country that are charter documented N0x emissions at 33% below the allowable limit; particulate emissions members of a U.S. Energy Department program (" Climate Challenge") to reduce at 70% below; and sulfur dioxide at 68% below. Ambient air monitoring continues to carbon dioxide and other gas emissions prove that these low emission levels have no measurable impact on air quality in associated with global warming. The program seeks to reduce emissions to 1990 Central Florida. levels. OUC's etTort will reduce emissions in FY '95, yearly site rainfall-which impacts SEC's zero discharge pond by more than 250,000 tons annually by converting from oil to natural gas, pursuing systems -totalled 49.53 inches,103.5% above normal. Despite this abnormally demand-side conservation programs, heavy rain, the existing plant wastewater treatment equipment controlled the planting trees, installing high efficiency transformers, selling fly ash as a cement ponds' systems within design levels. substitute, participating in EPA's Green Preventing or reducing pollution at the source is at the core of OUC's Lights program, using electric cars, pursumg new energy sources, convertmg to environmentalstrategy. This includes eliminating hazardous materials, restricting compressed naturalgas vehicles and their use or substituting them with " environmentally friendly" products. participating as a charter member of the EPA's Landfill Methane Outreach program. As part of our pollution prevention plan, OUC continues to conduct product reviews 4 8 of all purchased materials such as cleaners h! and solvents used at our facilities to a ~ d determine their impact on the environment. J Over time, the goal is to eliminate the more harmful chemicals. Process changes were also implemented to eradicate harmful chemicals from wastewater. For example, OUC is now substituting magnesium hydroxide for sodium hydroxide in the treatment of wastewater. At SEC 2, the second Brine Concentrator Crystallizer was installed to treat wastewater streams. A Deer roam freely in the natural habitat preserved at Stanton Energy Center. In FY '95,0UC also completed the

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Again taking the lead in environmental 4 M protection, OUC was part of a collaborative E4 c;3.$ 4';) s. f:3, h 4 process with regulatory agencies and ~ 'j% ggfg . gd environmental groups - to work towards {2 ~' j j ecosystem management in the Alafaya Trail ..N% .h *. 1 area of east Orange County. To avoid L 4 9 ) lp,,.t. bisecting a large contiguous habitat there, 7 , - y g 3 OUC agreed to relinquish a portion of its k f l' k 7 i combustion water storage area to allow for rerouting of Alafaya Trail to the west of 4( c."**6r the Stanton 2 facility. In other action, OUC has voluntarily monitored lake water as a courtesy to homeow ners on the Lake Highlands site, w here the chemical TCE has been detected. ~ ' OUC has found the lake water to be within all safe water drinking standards for TCE. Studies performed and reviewed by the state Department of Environmental Protection + show that OUC was not the source of the contamination. Also in FY '95, OUC began a "well building program" that includes routine air and water quality check ups for all OUC facilities. Air quality tests in the Administration Building this year came in well within acceptable limits. The Pershing facility experienced air quality problems Contoneously monitorme pqwer plant emissoons. OUC that were ultimately traced to defective con,,nues to surpass an state,ns reseral stan's,rns Carpet. n

l Through Strong Sales Performanced ..(. ..(..( . q .( .c . \\./. n fiscal year 1995, a strong sales performance atut continued control of operating expenses resulted in net income of $35.7 million, up 4.6% from 1994. Operating revenues were up $14.5 million or 4.5%, and operating expenses excluding fuel and depreciation were down $4.0 million or 4.0% c The heat wave during the summer caused retail and resale revenue to soar. The TOTAL OPERATING REVENUES EBU restructuring effort played a sig'lificant part in reducing operating expenses and will have an even greater impact in future years. s340 m 4..-===-----. A strong financial year allowed OUC to expense an additional ~ sa20 m $3.6 million of fixed costs. This move will allow for lower electric and water rates in the lature. $300 m As a result of strong retail sales and the net income gain, OUC 1991 1992 1993 1994 1995 transferred a total of $32.2 million to its owners - the City of Orlando and its citizens - 9.9% more than for the previous year. Of this totvl, $20.5 million is based on a five-year rolling avera0e of net income; the balance is revenue-based. Electric Business Units 7.7 cents per KWH. Commercial and indus-were lower than those of the surrounding Record heat fueled record sales for trial customers paid an average of 5.7 cents investor owned utilities in the residential OUC's Electric Business Unit. Bulk sales per KWH. and general service non demand classes, as led the way at $49 million, a 14 8% increase Compared to 12 peer utilitiesin well as in the large demand class. Rates for over the previous year. Retail sales followed Peninsular Florida, the average price of 1996 will remain the same. 4 suit, increasing 3.5% to $268.2 million. As a OUC power in FY '95 was 6th lowest for result, total electric operating revenues grew residential customers and 2nd lowest for Water Business Unit 5.1% to $317 million. large commercial customers - a rate class Water Business Unit sales increased Total active services increased to created for customers with 6,000 KW slightly in FY '95 to 26.6 billion gallons. 126,937, led by a 3% increase in the demand or greater. In the commercial Customer growth offset losses due to the commercial / industrial sector. demand category, OUC ranked in the lower weather and the ck&g or 9e Naval OUC's electric rates continued to be third. OUC's cost per KWH is the same as Training Center. Toui revenues were among the state's lowest. Residential it was in 1985. 523.5 million. customers using 1300 KWH monthly paid Comparing electric bills, OUC's prices Both resiuential and commeretal/ {

host Control Rm ns ~ssa S-C.J......; r n-Audited J Financial Statements industrial consumption rose slightly, OPERATING EXPENSES v,hile total active services were up 1.6% to 107,368- '.........--.e. $300 m OUC's water rates remained unchanged 2 y in FY '95 and are still ranked the lowest $200 m among 11 peer utilities in Peninsular salance Sheets A1 Florida. The typical Orlando customer's monthly bill was $8.93 for 10,000 gallons - the same as the previous year. H '95 W $5 W '95 W '95 Depreciation Fueland Other Total Despite the 10% annual increase in water and Purchased Operating Operating Statemests of Nerences. Amortization Power Expenses Expenses frpenses and Changes rates proposed for Water Project 2000, OUC customers' bills will still be lower in the year m Refamed farmnps A4 2000 than today's water rates for Orange OPERATING REVENUES County and otherlarge Florida metropolitan areas. $300 m '........-I. 9 Financial Managernent s2oo m {a-----.. f Success in 1995 is defined in part by w hat n,,,,,,f,,,,,,, stoo m was not done. OUC did not have to borrow Statements A -6 additional funds due to more stringent 88

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• 8 capital budgeting and funds remaining in construction accounts due to favorable Resale Retail rating construction costs for SEC 2. Funds needed Reporf A-17 for SEC 2 were obtained in 1993 when Fitch assigned a strong fitch Comyctitive interest costs were at historical lows.

Indicator of 2.28 on a scale of 1 to 5, with Interest income was $26.9 million and, I being least vulnerable to competition. although lower than last year. exceeded The rating reflects competitive rates, sound badgetary expectations by $10 million or service area, diverse generating resource 17.7% due to favorable interest rates and mix and solid financial position. lower capital project costs than planned. Standard & Poor's assigned OUC a Concerned about utilities' ability to ranking of 2 on a scale of 1 to 5, with I compete in the rapidly evolving electric being the strongest, in its Business Ibs!rion ~ utility industry, two credit rating agencies Assessment analysis. The BusinessIbsition l s established programs to evaluate competitive Assasment intensifies the analytical focus on position OUC was evaluated by both four key factors: management, operations, in 1995. competitive position and markets.

BilInc3 Sheets OrlInda Utilitica Csmmir:i:n September 30 ASSETS _ _,__ _ _ _I_995___ __ _ _ 1994 Utility plant - Note B in Service: Electric-- Notes H and K. $1,270.374.143 $1,227,144.464 Water 165.4 l 1,834 151.120.253 Common 89,696,949 8':,761,397 Allowances for depreciation and amortization (deduction).............. 1451.176.438) (408.320.666) 1,074,306,488 1.050,705,448 Construction work in progress. 297.594.942 230.692,550 1,371,901,430 1.281.397.998 Restricted Assets - Notes C and D Debt service and related accounts. 192.117.016 200.840,574 Construction and related accounts. 105,745.619 197,888.717 Renewal and replacement account. 33.885.487 32,952,219 Customer meter deposits......................... I4,254.934 13,409.246 346.003.056 445,090.756 Current Assets Cash and investments --Note D. 48.907,880 35,771.004 Customer accounts receivable, less allowance for doubtful accounts (1995 -- $928.401.1994 -- $667,376) 35,202.053 31.118.650 Accrued utility revenue 15.488,591 15,481,354 Fuel for generation inventory. 7.866.264 8.077,957 Materials and supplies inventory. 26.930.535 26,763,888 Accrued interest receivable. 3.628,035 1,169,881 Miscellaneous receivables and prepaid expenses....... 6.103.474 5.757.603 144.126.832 124.140,337 Other Assets Self-insurance account -- Note E. 6.053,049 5,861.680 investment fund. 25.024.050 24,962.030 Fuel stabilization account. I1,445,449 15.879,719 Rate stabilization account. 22.855,724 19,729.283 Unamortized debt issuance costs. 3.089.743 3,380,508 Minibond sinking funds--Note D 8,241.056 6.680.922 Deferred compensation plan investmer'.s --Note 1. 10.507,211 8.080,787 __ _ Dpferred_i,nterest expense _on bonds. . _ _ I I,017.34 2 __ 7.441_,050 _ 98.233.624 92,015,979 Total Assets $ 1.960.264.942 $ 1.942.645.070 See notes to the financial statements. A-2

l c l C: pit:lizati:n l l and Liabilities September 30 CAPITALIZATION 1995 1994 Equity Accumulated retained earnings: Reserved for debt service. $ 137,269.273 $ 146.172.770 keserved for renewal and replacement. 33.885.487 32,952.219 Unreserved ~ invested in or designated for plant and working capital. 183,156.869 157.697.216 354,311.629 336.822.205 Contributed capital--Note F 90.106.760 83.776.430 444.418.389 420,598.635 Long-Term Debt - Note G Bond and note principal. 1,472,944.016 1,490.845,080 Unamortized discount and deferred amount on refunding (150.800.809) (158.174.268) 1,322.143.207 1.332.670.812 Total Capitalization 1,766.561.596 1.753.269,447 LIABILITIES Current Liabilities-- payable from restricted assets Accrued interest payable on notes and bonds. 36.232,743 36.662.803 Current portion of long-term debt--Note G, 18.615.000 18.005.000 Ct*"omer meter deposits and interest thereon 14.254.934 13.409,246 69.102.677 68.077.049 Current Liabilities -- payable from current assets Accounts payable and accrued expenses. 39,911,625 40.072,444 Billings on behalf of state and local governments. 9.346.882 8,762,291 [ Accrued payments to the General Fund of the l City of Orlando -- Note i. 1,799.653 1,031.908 5 I.058.I60 49.866.643 Other Liabilities and Deferred Credits Fuel stabilization account. I1.445,449 15.879.719 Rate stabilization account. 22.855,724 19,729.283 Water and electric construt. deposits 27.971.788 26,248,136 Deferred materials and supplies. 702.337 1.494,006 Deferred compensation plan liability -- Note !. 10.507.211 8.080.787 73.542.509 71,431,931 Total Liabilities 193.703.346 189.375.623 Total Capitalization and Liabilities $1.960.264,942 $1.942.645.070 See notes to the financial statements. A-3

s St;t;ments cf Riv nur, Expenses cnd Changes in Retained Earnings Year Ended September 30 j 1995 1994 Operating Revenues $340.720,505 $326.171,994 Operating Expenses: Fuel for generation and purchased power. 105,580,690 100,268.749 Production. 34,570.882 35.498,186 Transmission and distribution 12,831.318 13,335,708 Depreciation and amortization. 43,076.026 38.770,i13 Customer services. 9.867,044 10.590,992 General and administrative. 21,907,522 24,285,172 State utilities gross receipts and property taxes. 6.154,190 6,111,664 Revenue based payment to the General Fund of the City of Orlando -- Note I i1,649,708 11.159.547 Total Operating Expenses 245.637,380 240,020,131 Operating income 95,083,125 86,151,863 Non-Operating income (Expense): Interest income. 26.849,565 29,395.158 Other income 1,257,353 919,619 Interest expense. (78.042,696) (73,754,548) Amortization of deferred amount on refundings and other expenses (9.411.126) (8.551,600) Net income 35.736.221 34,160.492 Accumulated retained earnings at beginning of yet r 336,822,205 318,656.962 Dividend payment to the General Fund of the City of Orlando -- Note l. (20.542,000) (18,120,000) Depreciation of contributed utility plant. 2,295,203 2,124,751 Accumulated Retained Earnings at End of Year $354,311.629 $336.822,205 See notes to the financial statements. A-4

I l l St:tement3 cf Crh Flows l l l Year Ended September 30 1995 1994 Cash Flows from Operating Activltles Operating income $ 95,083,125 $ 86,151,863 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization of plant charged to operations. 43.076.026 38,770.113 Depreciation and amortization charged to fuel costs. 2,859.899 2.394.236 Depreciation of vehicles and equipment charged to general and administrative costs. I,985.679 1,709.115 Changes in operating assets and liabilities: Decrease (increase) in receivables and accrued revenue. (4.898,51I) 5,487,275 Decrease (increase) in fuel j and materials and supplies inventories. 45,046 1,546.765 i (Decrease) increase in accounts payable and accruals. 3,342.544 (l,530,119) l (Decrease) increase in deposits payable t and deferred items. 1.837,671 1,607,746 ) (Decrease) increase in fuel and rate stabilization accounts. (1,307,829) (3,477,014) Net cash provided by operating activities 142,023.650 132.659.980 Cash Flows from Non-Capital Financing Activities Dividend payment to the General Fund of the City of Orlando. (19.431,000) (18.215,000) Net cash used in non-capital financing activities (19,431,000) (18,215.000) Cash Flows from Capital and Related Financing Activities Debt interest expense (81,380.356) (85,882,418) Principal payments on long-term debt. (17,291,064) (17,283,919) Debt issuances. 131.318.491 i Construction and acquisition of utility plant (140 819.129) (160.051,764) Proceeds relating to utility plant. 854,347 860.855 ) Contributed capital. 6.207,011 7,502.611 Payment to escrow. (120.440,000) Net cash used in capital and related financing activities (232.429,191) (243,976.144) l Cash Flows from Investing Activities i Net sales (purchases) of investments 105,577,883 62.353.073 Invertment income. 27.307.263 26,893,519 Net cash provided by (used in) Investing activities 132,885,146 89,246.592 j i l IDecrease) increase in Cash and Cash Equivalents 23,048,605 (40,284,572) Cash and Cash Equivalents at Beginning of Year 85,409.932 125.694,504 Cash and Cash Equivalents at End of Year $ 108.458.537 $ 85.409.932 See notes to the financial statements. I A-5 l l l

N t;c To Financi:1 St:tements l l September 30,1995 i NOTE A-

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES J The financial statements of the Orlando Utilities Commission (the Commission) are presented in conformity with generally accepted accounting principles as applicable to governments. The existing hierarchy provides that accounting guidance should first be sought in statements of the Governmental Accounting Standards Board (GASB), If the CASB has not issued a standard applicable to a situation, then pronouncements of the Financial Accounting Standards Board (FASB) are presumed to apply. Additionally, I the financial statements a; presented substantially in conformity with accounting principles and methods prescribed by the Federal Energy Regulatory Commission (FERC), except for the method of accounting for contributed capital described in the notes to the financial statements. ) The fcllowing is a summary of the more significant accounting policies: Reporting Entity: The Orlando Utihties Commission (the Commission) was created in 1923 by a Special Act of the Florida Legislature as a statutory commission of the State of Florida. The Commission consists of i five members, including the Mayor of the City of Orlando. Members, with the exception of the Mayor who is an ex-officio member of the Commission, serve without compensation and may serve no more than two consecutive four year terms. The process for new member selections begins when the Nominating Board of the City of Orlando, which for this purpose functions only as a screening committee, submits the names of three persons to the Commission for consideration. The Commission may nominate one of these persons or reject all three. The nominee is then subject to election or rejection by the Orlando City Council. Once elected Commission members cannot be removed for any reason by the City c uncil. The Commission meets the criteria of an "other stand-alone government" as defined in Statement 14 of the Governmental Accounting Standards Board The Financial Reporting Entity. No component units exist as defined in Statement 14. Measurement Focus and Basis of Accounting: The Commission operates the electric and water system I in a manner similar to private business; therefore, operations are accounted for as an enterprise fund where costs (expenses, including depreciation) of providing services to customers on a continuing basis are recovered through user charges. The Commission's financial statements are prepared on an accrual basis of accounting, with revenues being recognized when earned and expenses recognized when incurred. The Commission has elected to not apply FASB statements and interpretations issued after November 30,1989, as permitted by Statement No. 20 of the Governmental Ac;ounting Standards Board, Accounting and Financial Reporting for Proprietary Funds and other Governntental Entities tha' use Proprietary Fund Accounting. Budgets: Revenue and expense budgets are prepared on an annual basis in accordance with the Commission's bond indentures and submitted to the Commission for approval prior to October i of the fiscal year. Legal adoption of budgets is not required. Actual revenues and expenses are compared to the budgets on a line item basis within departments and an analysis of variances report is prepared and submitted to the Commission each month as required by bond indentures. Utility Plant: Utility plant is stated at historical cost which includes cost of contract work, labor, materials and allocated indirect charges for equipment, supervision and engineering and labor related costs. Donated assets are recorded at the cost provided by the developer which approximates fair market value at date of donation. The Commission charges the cost of repairs and minor replacements to maintenance expense. The cost of electric or water plant retired or otherwise disposed of, together with removal costs less salvage, is charged to accumulated depreciation at such time as property is removed ) from service. 1 1 A-6

NOTE A-

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES-Continued Depreciation: Utility plant is depreciated using the straight-line method for each of the various p' ant classifications at rates which will amortize the costs over the estimated economic useful lives of the assets. Depreciation of vehicles and other construction equipment is charged to departmental operating expenses. Amounts for all other assets are charged to depreciation expense The estimated useful lives of utility plant are as follows: Electric Plant; Generating Plant: Fossil ';0 - 40 years Nuclear 30 - 36 years Structures and improvements 30 - 50 years Equipment 6 2/3 - 50 years Water Plant: Water wells.. 25 - 50 years Structures and improvements 50 years Equipment 6 2/3 - 50 years Common Plar+ Structures and improvements 50 years Office equipment 3 - 141/3 years Vehicles and other construction equipment 4 - 30 years Cash and investments: Cash and investments are recorded at cost or amortized cost. except for Deferred Compensation Plan investments which are reported at market value. The Commission's investment policy, related Florida Statutes and applicable debt resolutions define investment parameters. The Commission is authorized to invest in the Surplus Funds investment Pool Trust Fund administered by the State Board of Administration of Florida, obligations of the United States Treasury and its various agencies, interest-bearing time certificates of deposit, repurchase agreements. reverse repurchase agreements, state and local govemment obligations, bankers' acceptances and prime commercial paper. Repurchase agreements are purchases of securities from authorized dealers or banking institutions, with a simultaneous agreement that the dealers or banking institutions will repurchase them in the future at the same price plus a contract rate of interest. The market value of the securities underlying repurchase agreements normally exceeds the cash received, providing a margin against a decline in market value of the securities Except for overnight repurchase agreements with the Commission's depository bank. securities underlying repurchase agreements are held in the Commissions accounts by a third party, if the dealers default on their o'oligations to repurchase these securities from the commission, the Commission would suffer an economic loss equal to the difference between the market value plus accrued interest of the underlying securities and the agreement obligation, including accrued interest. Futures Contracts: The Comraission uses natural gas futures contracts to offset the price fluctuations of anticipated future acquisitions of fossil fuel. Futures contracts, while utilized as a hedge to minimize market risk. are subject to price movements which may result in gains or losses differing from price fluctuations associated with purchases of natural gas. At September 30.1994 the Commission had a $503.125 margin deposit on open natural gas futures contracts with an original cost of $1,095,750 and a market value of $874.250 All outstanding contracts were liquidated during fiscal 1995. Statements of Cash Flows: For purposes of the Statements of Cash Flows. cash and cash equivalents include all cash accounts and investments (including restricted assets) with a maturity of three months or less when purchased. Customer Accounts Receivable: The Commission bills customers monthly on a cyclical basis and accrues revenues at the end of the fiscal year for electric ano nier consumed but not billed. See " Rates and Revenues" below. The customer accounts receivable balance of $35,202.053 and $31,118.650 at September 30.1995 and 1994 respectively, includes billings done on behalf of state and other local governments. The net liability of $9.346.882 and $8.762.291 at September 30.1995 and 1994 respectively. (billings on behalf of state and local governmer.ts 'ess expenses) represents the September billings of these governments. ) A-7

l 1 NOTE A-

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES--Continued r Fuel for Generation and Materials and Supplies inventory: Fuel oil, coal and materials and supplies inventories are stated at average cost. Nuclear fuel is included in electric utility plart and amortized to fuel [ expense as it is used. investment Fund: The Investment Fund consists of monies set aside for the retirement of outstanding debt and payment of construction costs. Unamortized Debt issuance Costs: Unamortized debt issuance costs represent issuance costs related to bond issuances which are amortized using the bonds outstanding method and recorded net of accumulated amortization. Deferred Interest Expense on Bonds: Deferred interest expense on bonds represents interest costs on Series 1993 and 1993B bonds which are in excess of interest costs that would have been incurred on short-terra debt. The Commission elected to defer this additional interest cost for rate-setting purposes until fiscal 1996 Deferred interest expense on bonds is to be amortized to interest expense over the life of the Series 1993 and 1993B bonds beginning in fiscal 1996, in accordance with the Commission's rate setting methodology Interest expense deferred during 1995 and 1994 amounted to approximately $3,576,292 and $7,441,050, respectively. Contributed Capital: Amounts received for construction of utility plant and utility plant contributed by developers are recorded as capital contributions. Depreciation applicable to contributed utility plant is included as an operating expense in determining net income and is subsequently charged against contributed capital from accumulated retained earnings. Interest Rate Swap Agreement: The differential to be paid or received on the interest swap agreement discussed in Note G is accrued as interest rates change and is recognized over the life of the agreement. Unamortized Discount and Deferred Amount on Refunding: Unamortized discount on outstanding bonds is amortized using the bonds outstanding method and is recorded net of accumulated amortization. Deferred amount on refunding represents deferred losses on bond refundings which are amortized over the r shorter of the lives of the refunded debt or refunding debt using the straight-line method and are recorded net of accumulated amortization. The Commission implemented Governmental Accounting Standards j Board Statement 23, Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities during fiscal year 1995, resulting in a reclassification on the balance sheets of the unamortized deferred amount on refunding amounting to $78.260,899 and $82,885,800 at September 30,1995 and 1994, respectively. Ti ere was no impact on operations or equity. Compensated Absences: The Commission records compensation for unused vacation and sick leave as an expense in the year in which the vacation and sick leave is earned in accordance with the Governmental Accounting Standards Board 16, Accounting for Compensated Absences. At September 30,1995 and 1994, annual vacation leave earned but not taken was $1.107,077 and $1,108,766, sick leave accumulated but not taken was $2.446.330 and $2,544,993, respectively. When operations and scheduling permit, compensatory time to offset overtime hours on an hour for hour basis may be granted through mutual agreement between the employees and their supervisors. A maximum of 40 hours compensatory time may be accrued and carried over from pay period to pay period. j Compensatory time is expensed in the period earned. At September 30,1995 and 1994, the liability was i $94,664 and $90,352. Rates and Revenues: Each year, the Commission's staff performs a rate adequacv study to determine the electric and water revenue requirements. Based on this study, current cost of service studies, and regulations of the Florida Public Service Commission regarding electric

• rate structure", the Commission's staff develops its electric and water rate schedules which are presented to the Commission at a public workshop and then presented for their approval at a public hearing.

The Commission staff makes its determination of revenue requirements using the rate base method and includes construction work in progress in the rate base. Therefore, in accordance with proper ratemakirg theory, the Commission does not use an allowance for funds used during construction (AFUDC) in determining revenue requirements. Since the Commission's level of revenue requirements and subsequent revenue is determined without regard to AFUDC, the Commission does not capitalize interest on i construction work in progress. ] a A-8

NOTE A-

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES--Continued Operating revenues are recorded based on actual billings to customers plus an estimate for accrued unbilled electric and water consumption at the end of each fiscal year. l The Commission has established a policy on recovery of fuel costs in accordance with guidelines from the Public Utilities Regulatory Policies Act of 1978 (PURPA). Under PURPA only fuel costs incurred are to be i recovered. The Commission estimates on an annual basis a fuel component charge to be applied during the l next fiscal year. The difference between the fuel costs actually charged to the customers and the fuel cost i actually incurred is applied to the fuel stabilization account. The Commission determines what portion of l the fuel stabilization account will be utilized to reduce rates annually during the rate-setting process. In addition to fuel, costs (revenues) which are to be recovered by (used to reduce) rates in periods other than when incurred trealized) are deferred until the periods in which the Commission recognizes them in utility rates. These items are included in the rate stabilization account. Specific approval is required by the Commission's governing board for all increases or decreases to this account. The balances in the fuel stabilization account and the rate stabilization account are funded by internally l restricted cash accounts and earn the same interest rate as the Commission's operating investment portfolio. Following is a summary of deferred costs (revenues) resulting from the Commission's policy on recovery of fuel costs and from actions by the Commission's governing board for rate-setting purposes: September 30 l 1995 1994 Deferred interest on bonds $ 11,017,342 $ 7,441,050 Fuel stabilization deferred credit (11,445,449) (15,879,719) Rate stabilization deferred credit (22,855.724) (19,729.283) l Deferred materials and supplies (762,337) (1,494.006) $ (24,046,168) $(29,661,958) 1 ( Reclassifications: Certain amounts in the 1994 statements have been reclassified to conform with the presentation adopted in 1995. 1 i NOTE B-UTILITY PLANT The following is a summary of utility plant at September 30,1995, by major classes: Electric Water Common Total Land S 20.091,210 $ 3,536,488 $ 1,730,508 25,358,206 Electric generating plant 785,177,008 785,177,008 Water wells 15,934,548 15,934,548 Structures and improvements 70.954,955 6.172,266 54,076,189 131,203,410 l Equipment 394,150,970 139,768,532 33,890.252 567,809,754 i 1,270,374,143 165,411,834 89,696,949 1,525.482.926 Allowances for depreciation and amortization (381,889,684) (40,944,051) (28,342,703) (451,176.438) Construction work in progress 281,537,987 10,624,384 5,432,571 297,594,942 Net utility plant $ 1,170,022,446 $ 135,092.167 $ 66,786.817 $ 1,371,901,430 i l A-9

NOTE B-UTILITY PLANT--Continued The following is a summary of utility plant at September 30,1994, by major classes: l Electric Water Common Total Land $ 18,661,583 861,992 $ 1,730,508 $ 21,254,083 Electric generating plant 765,212,616 765,212,616 Water wells 13,367,017 13.367,017 Structures and improvements 70,063,490 5,724,440 49,378.469 125,166,399 Equipment 373,206,775 131,166,804 29.652,420 534,025,999 l.227,144,464 151,120,253 80,761,397 1.459,026.114 Allowances for depreciation and amortization (345,227,263) (38,508,291) (24,585,112) (408,320.666) Construction work in progress 205,580,918 14,945,030 10,166,602 230,692,550 Net utility plant $1,087,498.119 $127,556,992 $66,342,887 $1,281,397,998 Participation Agreements: In 1980 the Commission entered into a Participation Agreement with Florida Power and Light Company (FPL) to purchase a 6.08951% (52 net megawatts) undivided ownership interest in St. Lucie Unit No. 2 nuclear powered electric generating facility constructed by FPL. This unit is presently rated at 853 net megawatts (MW) and commenced commercial operation in 1983. The Commission has also entered into a Reliability Exchange Agreement with FPL. The Reliability Exchange Agreement m:,elts in the Commission exchanging 50% of its share of the output from St. Lucie Unit No. 2 for a like amount from St. Lucie Unit No.1, a nuclear powered electric generating facility. FPL has operational control of both projects. The Commission funds nuclear decommissiot.ing costs for St. Lucie Unit No. 2 in accordance with the estimate included in Florida Public Service Commission's (FPSC) docket #870098-El. Costs in the amount of $862,81I in 1995 and $877,655 in 1994 were charged to depreciation expense. A trust fund has been established to provide certain financial assurances that funds will be available when needed for required decommissioning activities. Trust fund assets at September 30,1995 and 1994 were $5,733,346 and $4,870.535, respectively, and were recorded as a restricted asset (see Note C - Restricted Assets). Estimated l costs of decommissioning may be periodically adjusted in response to requirements of the FPSC and the l Nuclear Regulatory Commission (NRC). The Commission also has a Participation Agreement with the City of Lakeland, Florida dated April 4, 1978. Under the terms of this Agreement the Commission has a 40% (136 net MWI undivided ownership interest in a 340 net MW refuse and coal-fired steam generating unit (McIntosh Unit No. 3) owned by the City of Lakeland. The City of Lakeland has operational control of this project. Since 1975, the Commission has owned a 1.6015% (13 net MW) undivided ownership interest in Florida Power Corporation's 835 net MW nuclear powered electric generating plant designated Crystal River Unit No. 3. This ownership interest was acquired under the terms of a single Participation Agreement with Florida Power Corporation and ten Florida municipal utilities. Florida Power Corporation has operational control of this project. The Commission funds nuclear decommissioning costs for Crystal River Unit No. 3 in accordance with the estimate included in FPSC docket #870098-El. Costs in the amount of $346,318 in imand $337,068 in 1994 were charged to depreciation expense. A trust fund has been established to provi certain financ!al assurances that funds will be available when needed for required decommissioning activities. Trust fund assets at September 30,1995 and 1994 were $1,949,710 and $1,603,392, respectively, and recorded as a restricted asset (see Note C - Restricted Assetsh Estimated costs of decommissioning may be periodically i adjusted in response to requirements of the FPSC and NRC. in 1984 and 1985, the Commission entered into Participation Agreements with Florida Municipal Power Agency (FMPA) and the Kissimmee Utility Authority (KUA) to sell a portion of Stanton Energy Center Unit #1 (SEC ll excluding common and external facilities. SEC 1 is rated at 440 net MW. Under the terms of these agreements, FMPA has a 26 6265% undivided ownership interest and KUA has a 4 8193% undivided ownership interest. The Commission, which has retained a 68.5542% undivided ownership interest, has operational control of this project. A - 10

i i NOTE B-UTILITY PLANT--Continued In 1988, the Commission entered into Participation Agreements with FMPA and KUA to sell a portion of I. the Commission's indian River Plant Combustion Turbine Project for units A and B excluding common facilities, The Commission's Combustion Turbine Project for units A and B includes two 48 MW combustion turbines which can generate electricity utilizing natural gas or light diesel oil. Under the terms of these I agreements, FMPA has a 39% undivided ownership interest and KUA has a 12.2% undivided ownership interest. The Commission, which has retained a 48.8% undivided ownership interest, has operational control of this project. In 1990, the Commission entered into a Participation Agreement with FMPA to sell a portion of the Commission's Indian River Plant Combustion Turbine Project for Units C and D excluding common facilities. The Commission's Combustion Turbine Project for Units C and D includes two i 18 MW combustion turbines which can generate electricity utilizing natural gas and light diesel oil. Unit C was placed in commercial operation in August,1992, with Unit D placed in service in October 1992. Under the terms of this agreement, FMPA has a 21% undivided ownership interest. The Commission, which has (etained a 79% (93 net megawatts per unit) undivided ownership interest, has operational control of this project. In 1991, the Commission entered into a participation agreement with FMPA to sell a portion of Stanton Energy Center Unit #2 which is under construction. Under the terms of this agreement, FMPA has an undivided ownership interest of 28.4091%. The Commission, which has retained a 71.5909% undivided ownership interest, will have operational control of this project. The closing on this sale took place in June 1992. Following is a summary of the Commission's proportionate share of each jointly owned plant. SEC 1, McIntosh Unit No. 3, and the indian River Plant Combustion Turbine Projects include the cost of common and/or external facilities, the other plants do not, but the participants pay user charges to the operating entity. According to the participation agreements, each participant must provide its own financing and each participant's share of expenses for the operations of the plants are included in the corresponding operating expenses of its own income statement. Allowance for depreciation and amortization on utility plant in service is determined by each participant based on their depreciation methods and rates relating to their share of the plant. Plants as of September 30,1995 Stanton Stanton Energy Energy Indian River St. Lucie McIntosh Crystal River Center Center Combustion Unit No. 2 Unit No. 3 Unit No. 3 Unit No i Unit No. 2 Turbines Utility plant in service. $1 l l.074,935 $106 076,570 $15.637,424 $374.872.719 $ 15.513,501 $55,772.980 Allowance for depreciation & amortization. (46,621,718) (40,499.035) (11,977.059) (76.012.407) (354,467) i8.098.427) Construction work in progress. 263.647.584 Commission's net share $ 64.453.217 $ 65,577,541 $ 3.660.365 $298,860,312 $278.806.618 $47,674,553 l t-A-11

NOTE B-UTILITY PLANT--Continued Plants as of September 30,1994 Stanton Stanton Energy . Energy Indian River St. Lucie McIntosh Crystal River Center Center Combustion tinit No. 2 Unit No. 3 Unit No. 3 Unit No. I Unit No. 2 Turbines Utility plant in service. $107.841.263 $ 104.090.927 $17,586.209 $374.202.905 $55.830.439 Allowance for depreciation & amortization. -(41.532.699) (36.665.828) (10.719.279) (66.785.359) (6.110.007) Construction work in progress. 1,130.071 $ 191.268.800 5,934 Commission's net share $ 66.308.564 $ 67.425.049 $ 6.866.930 $308.547.617 $ 191.268.800 $49,726.366 The Commission presents its share of jointly owned assets in utility plant classifications shown above The Commission also presents its share of related operations in respective revenue and expense classifications on the Statements of Revenues Expenses and Changes in Retained Earnings. It has been determined that none of the participation agreements to which the Commission is a party meet the criteria of a joint venture as specified in Statement 14 of the Governmental Accounting Standards Board. The Commission lacks operational control over the St. Lucie Unit No. 2 McIntosh Unit No. 3 and Crystal River Unit No. 3 plants. SEC 1 and Indian River Combustion Turbine Projects are controlled by the Commission. Fiscal and budgetary control of SEC 1 and the Combustion Turbine Projects remains with the Commission. No separate governing authority exists for any of the participation plants. The Commission also has an agreement with Orange County, Florida to share operating costs of a waste water treatment facility at the SEC 1 site. The Commission operates the facility and charges Orange County an annual fee amounting to $ 646,044 and $626,100 during the years ended September 30,1995 and 1994, respectively. The annual fee is classified as a reduction to SEC 1 operating and maintenance expenses. During fiscal year 1995, the Commission authorized an additional $2,500,000 in amortization of its interest in the Crystal River Unit No. 3 nuclear generating plant, providing for a more competitive cost structure for rate-setting purposes. Also during fiscal year 1995, the Commission authorized $1,158.240 of water plant write-down due to planned abandonment included as other expenses on the Statements of Revenues, Expenser and Changes in Retained Earnings. A - 12

NOTE C-RESTRICTED ASSETS Certain assets are restricted by bond resolution; additionally, some assets have been classified as restricted in accordance with governmental accounting standards for enterprise funds and utility industry accounting practices. The Commission's restricted assets consist of the following accounts: September 30 1995 1994 Debt service and related accounts-Note G: Principal and interest accounts S 54,909,347 $ 55,286.182 Debt service reserve accounts 137,207,669 137,023,600 Capitalized interest 8,530,792 Total debt service and related accounts 192,117,016 200,840,574 Construction and related accounts: Nuclear generation facility decommissioning accounts 7,683,056 6,473.927 Bond construction accounts 98,062,563 191,414.790 Total construction and related accounts 105,745,619 197,888,717 Renewal and replacement account 33,885.487 32,952,219 Customer deposits and interest thereon 14,254,934 13,409,246 Total restricted assets $346,003,056 $445,090,756 The accounts consist of: Cash 9,411 197,732 Investments 341,482,007 437,383,425 Accrued interest receivable 4,511,638 7,509,599 $ 346,003,056 $445,090,756 NOTE D-CASH AND INVESTMENTS At September 30,1995 and 1994, the carrying amount of the Commission's cash was $3,007.033 and $901,200, respectively, and the bank balances were $2,650,442 and $554,529, respectively. The bank balances were covered by federal depository insurance or collateralized by a pool of U.S. Government securities held in trust by a third party bank in the name of the Commission's banking institution. The Commission invested funds throughout the year with the Local Government Surplus Funds investment Pool Trust Fund (the " Surplus Funds Investment Pool"), an investment pool administered by the State Board of Administration of Florida. Throughout the year and as of September 30,1995, the Surplus Funds Investments Pool contained certain floating rate notes which were indexed based on the prime rate and/or one and three month London Interbank Offered Rate rates. These investments, representing approximately 2% of the Surplus Funds investment Pool portfolio at September 30,1995, were purchased to add relative value to the portfolio. Funds held with the Surplus Funds Investment Pool at September 30, 1995, totaled $84.640. In the following schedule the Commission's investments are summarized and categorized to give an indication of the level of risk assumed by the Commission at September 30,1995 and 1994. Category I includes investments that are insured or registered or for which the securities are held by the Commission or its agent in the Commission's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the bank's trust department or agent in the Commission's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the bank's trust department or agent but not in the Commission's name. A - 13

~ _ _ NOTE D-CASH AND INVESTMENTS--Continued Deferred compensation plan benefit investments and the surplus Fund Investment Pool investments are not categorized because they are not evidenced by securities that exist in physical or book entry form. Category Carrying Market Investments 1 2 3 Amount Value September 30,1995: Repurchase agreements $121,477,749 $ 6.933.000 $128,410,749 $128.410,749 U.S. Government securities 239,965,615 239,965,615 245,860,558 Other U.S. and agency backed securities 68,838,897 68,838,897 68,774,473 State and local government securities 23,252,731 23,252,731 22,945,267 $453,534,992 $ 6.933,000 $460,467,992 $465.991,047 September 30,1994: Repurchase agreements $239,771,865 $10,311,000 $250,082,865 $250,082.865 U.S Government securities 221.136,604 221.136,604 211,963,248 Other U.S. and agency backed securities 50,527,221 50,527,221 50,246,219 State and local government securities 23,252,732 23,252,732 21,641,612 $534,688,422 $10,311,000 $544,999,422 $533,933,944 l These investments are held in the following accosnis: September 30 1995 1994 Restricted assets $346,003.056 $445,090,756 Cash and investments.., 48,907,880 35,771,004 i Accrued interest receivable 3.628.035 1,169,881 Self-insurance account 6.053,048 5,861,680 l investment fund 25,024.050 24,962,030 Fuel stabilization account 11,445,449 15.879,719 Rate stabilization account. 22,855,724 19,729,283 Minibond sinking funds 8.241,056 6,680,922 j 472,158.298 555,145,275 Less: Cash from restricted assets. (9,41I) (197,732) Accrued interest receivable from restricted assets (4,511,638) (7,509,5991 Cash from cash and investments (3.007,033) (901,200) Accrued interest receivable on current assets... (3.628.035) (1,169,881) Accrued interest receivable from investment fund (449,549) (367,441) State Board of Administration investment. (84,640) Total investments $460,467,992 $544,999,422 Cash and cash equivalents $108,458,537 $ 85.409,932 Investments 355,110,539 460,688,422 l Accrued interest 8.589,222 9,046,921 t $472,158,298 $555,I45,275 A - 14

NOTE E-SELF-INSURANCE The Commission's self-insurance program covers a portion of its workers' compensation, general liability and automobile liability exposures. A self-insurance cash and investments account was funded during fiscal 1992 and is used to pay claims as incurred, an estimated liability for claims outstanding has not been recorded since a case-by-case analysis of such claims indicates any amount payable to be immaterial. A summary of activity in the self-insurance cash and investments account for the years ended September 30 is as follows:. 1995 1994 Balance, beginning of year $ 5.861.680 $ 6,043,406 Interest income 337,189 256.979 Payments of claims (145.820) (438,705) Balance, end of year. $ 6 053 049 $ 5 861.680 Under the self-insurance program the Commission is liable for all claims up to certain maximum amounts. Claims in excess of the maximum amounts are covered by insurance. The maximum amounts at September 30 are as follows: 1995 1994 Workers' compensation. 250,000 $ 400,000 Generalliability. 1,000.000 500,000 Automobile liability. 1,000,000 500.000 The Commission's transmission and distribution system is not covered by insurance, since such coverage is generally not available. It is the opinion of general counsel that the Orlando Utilities Commission, as a statutory commission, may enjoy sovereign immunity in the same manner as a municipality, as allowed by Florida Court of Appeals rulings. Under said rulings, Florida Statutes limit liability for claims or judgements by one person to $100,000 or a total of $200.000 for the same incident or occurrence, greater liability can result only through an act of the Florida Legislature. Furthermore, any defense of sovereign immunity shall not be deemed to have been waived or the limits of liability increased as a result of obtaining or providing insurance in excess of statutory limitations. It is also the opinion of general counsel that the Commission, as a municipal utility, is statutorily immune from suit for malicious prosecution. NOTE F-CONTRIBUTED CAPITAL Changes in Contributed Capital are as follows: September 30 1995 1994 Source: Electric $ 5,473,970 $ 5,041.781 Water 3,151,563 3.568,888 Total additions 8,625,533 8.610,669 Depreciation (2,295,203) (2.124,751) Contributed Capital at the Beginning of the Year 83,776.430 77,290,512 Contributed Capital at the End of the Year $90,106,760 $83.776.430 A - 15

~, i NOTE G-LONG-TERM DEBT Long-term debt principal outstanding is as follows. l Issue l Date 1995 1994 SENIOR LIEN: Series 1992,2.40% to 6 00% due serially December 1993 to 2010 1992 $ 432,875,000 $ 450,555,000 Series 1993,4.75% to 5.00% due serially September 201I to 2013 and 5.125% and 5.00% 1993 in term form 2019 to 2023 139,020,000 139,020,000 571,895,000 589,575,000 IUNIOR LIEN: Series 1989D,5.00% to 6.75% due in term December form in years 2017,2020 and 2023 1989 253,945,000 253,945,000 Series 1991 A,5.50% due in term form in lanuary j year 2026 1991 115,380,000 115,380,000 Series 1992A,6 00% and 5.50% due in term August form in years 2020 and 2027 1992 74,520,000 74,520,000 Series 1993A 2.75% to 5.50% due serially June 1994 to 2010 and 5.50% and 5.25% in 1993 term form in years 2012,20l4,2023 87.625.000 87,950,000 Series 1993B,4.15% to 5,40% due serially August 1997 to 2009,5.25% in term form in year 1993 2023 and Select Auction Variable Rate Securities and Residual Interest Bonds, 5.60% and 5.664% due 2013 and 2017 139,240,000 139,240,000 Senes 1994A,3.25% to 5.00% due serially January 1996 to 2012 and 5.00% in term form in 1994 years 2014 and 2020 137,305,000 137,305,000 808,015,000 808,340,000 OTHER DEBT: Series 1990AA,7.10% Capital Appreciation Bonds, 'Minibonds", maturing March February 8,2000 1990 11.6'4,016 10,940,080 Series 1991 Variable Rate Demand December Bond Anticipation Notes, maturing 1991 December 1996 99,995,000 99,995,000 l11,649,016 l 10,935,080 Less current portion (18,615,000) (l8,005,000) S1,472,944,016 $ 1,490.845,080 A - 16

NOTE G-LONG-TERM DEBT--Continued Following is a schedule of annual principal and interest sinking fund requirements on the revenue bonds and notes outstanding at September 30,1995 Fiscal Year Ending Principal interest (1) Total !996- $ I9.935.000 $ 78.695.709 $ 98.630.709 1997 123.460.000 73,416,858 196,876.858 1998 24.245,000 72.281.350 96.526.350 1999 25.625.000 71.148.5 I I 96.773.511 2000 42.422.000 69.896.692 I I 2.318.692 2001-2005 156.510.000 326.835.112 483.345.112 2006-2010 205.730.000 277.589.231 483.319.231-2011-2015 240.635.000 214.253.983 454.888.983 2016-2020 316.985.000 137.835.325 454.820.325 2021-2025 286.830.000 47.256.763 334.086.763 2026-2027 34.700.000 2.270.I25 36.970.I25 S1.477.077.000 $ l.371,479.659 $2.848.556.659 (1) An estimated interest rate of. 4.50% for 1996 and 4 65% for 1997 was used to determine interest on the Series 1991 Variable Rate Demand Bond Anticipation Notes. (2) The above schedule of sinking fund requirements differs from maturities of long-term debt in that it excludes the current portion of long-term debt for which sinking fund requirements have been met as of September 30.1995, and includes $4,132.984 of future accretion on Capital Appreciation Bonds. Senior Lien Bonds: The senior lien bonds are payable and secured by a first lien upon and pledge of the net revenues derived by the Commission from the operation of the water and electric system and from certain investment income. The Commission has covenanted in the unior lien bond resolution to fix, establish and maintain rates and collect such fees, rentals or other charges for the services and facilities of the water and electric system, which shall be adequate at all times to pay in each fiscal year at least one hundred twenty-five percent (125%) of the annual debt service requirements for the bonds, and that the net revenues shall be sufficient to make all other payments required by the terms of the senior bond resolution. j The senior bond resolution establishes the Revenue Fund Account. Renewal and Replacement Fund Account and Sinking Fund Account, which is comprised of the Interest. Principal, investment. Bond Redemption. Debt Service Reserve and Demand Charge Component accounts. In accordance with the senior bond resolution, gross revenues denved from the operation of the water and electric system are to be deposited in the Revenue Fund and shall be applied only in the following manner: 1. Revenues are first to be used to pay the current operating expenses of the water and electric system and then all Sinking Fund and Renewal and Replacement Fund requirements. 2. The balance of any revenues remaining in the Revenue Fund shall. at the option of the Commission, be used til for any lawful purpose in connection with the water and electric system and (ii) to make any payments of funds to the City of Orlando; provided however, that none of the revenues is ever to be used for the purposes described in (i) and (ii) unless all payments required in (1) above, including any deficiencies for prior payments, have been made in full to the date of such use, and the Commission shall have fully complied with all covenants and agreements contained in the bond resolution-Junior Lien Bonds: The junior lien bonds are payable from, and secured by, a lien upon and a pledge of the net revenues derived by the Commission from the operation of the water and electric system and certain investment income subject to the prior lien thereon of the Commission's outstanding senior lien bonds. A - 17

l NOTE G-LONG-TERM DEBT--Continued The Commission has covenanted in the junior lien bond resolution to fix, establish and maintain such rates and collect such fees, rentals or other charges for the services and facilities as will always provide in each fiscal year, net revenues which will be adequate after the deduction of amounts required to be deposited from net revenues in each fiscal year to provide for the annual debt service requirement for senior lien bonds, to fund any debt service reserve requirement for such senior lien bonds and to make any required deposit to other funds and accounts established under documents evidencing or securing senior lien bonds at all times to pay in each fiscal year the sum of at least (i) one hundred percent (100%) of the annual debt service requirement for the bonds issued pursuant to the resolution and any pari passu additional bonds hereafter issued for the then current fiscal year and (ii) one hundred percent (100%) of the amount required to be deposited into the Demand Charge Component Account for the then current fiscal year, and that such net revenues will be sufficient to make all other payments required by the terms of the resolution and that such rates, fees, rentals or other charges shall not be reduced so as to be insufficient to provide adequate revenues for such purposes. The junior lien bond resolution establishes the Sinking Fund which includes the Interest Principal, Bond Redemption and Demand Charge Component Accounts. In accordance with the resolution gross revenues are to be applied in accordance with the senior lien bond resolution and then to be apphed to the lunior Lien Sinking Fund accounts. Other Debt: The Water and Electric Subordinated Revenue Bonds, Series 1990AA (Minibonds) are issued as fully registered capital appreciation bonds in the initial principal amount of $250 and integral multiples thereof, The Minibonds bear interest at 7.10% per annum compounded semi-annually, and are not subject to redemption prior to maturity. The Minibonds are payable solely from and secured by a lien upon the net revenues derived by the Commission from the operation of the water and electric system and of certain investment income, as provided in the Minibond Resolution. The lien of the Minibonds upon the net revenues is junior and subordinate to the prior lien thereon of the Commission's outstanding senior and junior lien debt obligations. The Variable Rate Demand Water and Electric Revenue Bond Anticipation Notes Series 1991 (Series 1991 Notes) are due December 10,1996 and were issued in the weekly pricing mode. The average yield for fiscal year 1995 was 3.72% The Series 1991 Notes are payable from and secured ratably by a lien on and pledge of (1) the proceeds of Bonds to be issued by the Commission to pay the principal of and accrued and unpaid interest on the Series 1991 Notes (other than proceeds of Bonds deposited in a reserve fund or funded interest accounts therefore or used to pay costs of issuance thereof), which lien and pledge are superior to all other liens thereon, (ii) the moneys on deposit in the Note Debt Service Reserve Account, which lien and pledge are superior to all other liens thereon and (iii) the moneys on deposit in the Construction Account, which lien and pledge are superior to all other liens thereon. In addition to the sources described in clauses (ii) and (iii) above, payment of interest on the Series 1991 Notes is payable from and secured by a lien on and pledge of Net Revenues. Defeased Bonds: During 1078 the Commission provided for the advance refunding of all of its $123,325,000 water and electric revenue bonds (Refunded Bonds) outstanding at April 1,1978 by the sale of $110,330,000 Water and Electric Revenue Refunding and Improvement Bonds, Series 1978 and $94,650,000 Special Obligation Bonds, Series 1978. The Refunding and Improvement Bonds were subsequently advance refunded in December 1985. From the proceeds of the sale of the two 1978 issues, monies were invested in United States obligations in an irrevocable Escrow Deposit Trust Fund. Such United Nes obligations mature at such time so as to provide sufficient funds for the payment of matuung principal and interest on the Refunded Bonds. All interest earned or accrued on the United States obligations has been pledged and will be used for the payment of the principal and interest on the Special Obligation Bonds, Series 1978. The Special Obligation Bonds, Series 1978 have a remaining principal balance of $8,245,000 and $10,815,000 at September 30,1995 and 1994, respectively. The Refunded Bonds are treated as extinguished debt for financial reporting purposes, were removed from the balance sheet and hase a remaming principal balance of $34,170.000 and $41,445,000 at September 30,1995 and 1994, respectively. A - 18

NOTE G-LONG-TERM DEBT--Continued in December 1985, the Commission provided for the advance refunding of all of its water and electric revenue bonds then outstanding in the aggregate principal amount of $577,730.000 (Refunded Bonds) by the sale of $565,040.000 Water and Electric Refunding Bonds, Series 1985 ($950 million authorized and validated and confirmed by the Supreme Court of Floridal Sale proceeds were invested in United States obligations in an irrevocable Escrow Deposit Trust Fund. Such United States obligations will mature at such time and in such amounts so as to provide sufficient funds for the payment of maturing principal and interest on the Refunded Bonds. The Refunded Bonds are treated as extinguished debt for financial reporting purposes, were removed from the balance sheet and have a remaining principal balance of $260,535.000 and $525,395,000 at September 30.1995 and 1994, respectively. In December 1992, the Commission provided for the advance refundmg of all of its senior lien water and electric revenue bonds then outstanding in the aggregate principal amount of $532,720.000 (Refunded Bonds) by the sale of $467.820.000 Water and Electric Revenue Refunding Bonds Series 1992 Sale proceeds were invested in United States obligations in an irrevocable Escrow Deposit Trust Fund. Such United States obligations will mature at such time and in such amounts so as to provide sufficient funds for the payment of maturing principal and interest on the Refunded Bonds The Refunded Beds are treated as extinguished debt for financial reporting purposes, were removed from the balance sheet and hive a remaining principal balance of $508.720.000 and $522.615,000 at September 30.1995 and 1994 taspectively. Present value savings of $51.659.344 or 11.34% of the Refunded Bonds resulted from the transacti.an in June 1993, the Commission issued the Water and Electric Subordinated Revenue Refunding Bonds Series 1993A (Series 1993A Bonds)in the amount of $87.950.000 to advance refund $75.000,000 of the Series 1989C Bonds (Refunded Bondsl. Sale proceeds were invested in United States obligations in an irrevocable Escrow Deposit Trust Fund. Such United States obligations will mature at such time and in such amounts so as to provide sufficient funds for the payment of maturing principal and interest on the Refunded Bonds. The Refunded Bonds are treated as extinguished debt for financial reporting purposes, were removed from the balance sheet and have a remaining principal balance of $75.000.000 at September 30,1995 and 1994 respectively. Present value savings of $4,778.284 or 6.37% of the Refunded Bonds resulted from the transaction. In lanuary 1994, the Commission provided for the refunding of $120.440,000 Water and Electric Subordinated Revenue Bonds, Series 1991 A due October 1,202C (Refunded Bonds) by the sale of $137,305,000 Water and Electric Subordir:ated Revenue Refunding Bonds. Series 1994A. Sale proceeds were invested in United States obligations in an irrevocable Escrow Deposit Trust Fund. Such United States obligations will mature at such time and in such amounts so as to provide sufficient funds for the payment of maturing principal and interest on the Refunded Bonds. The Refunded Bonds are treated as extinguished debt for financial reporting purposes, were removed from the balance sheet and have a remaining principal balance of $120.440,000 at September 30.1995 and 1994 respectively. Present value savings of $7.278.961 or 6 04% of the Refunded Bonds resulted from the transaction An economic loss of $14,417,757 is included in Unamortized Discount and Deferred Amount on Refunding and will be amortized over the life of the Series 1994A Bonds Related Debt Information: On May 18.1994 the Commission entered into a five year interest rate swap agreement on a notional amount of $25,000.000. Under the terms of the agreement the Commission will receive a fixed rate of 5.07% and pay a variable rate based on the Public Securities Association Index (PSA Index) until April I,1999. The Commission will be obligated to pay the variable rate if the counter party to the swap defaults or if the swap is terminated. A termination of the swap may also result in the Commission's making or receiving a termination payment. However, the Commission does not anticipate nonperformance by the counter party. The Commission has no material operating or capital leases. A - 19

) NOTE H-ELECTRIC SUPPLY AGREEMENTS Capacity Commitments: In 1985, the Commission entered into an agreement with the Florida Municipal Power Agency (FMPA) to provide FMPA with a total of 130MW of the Commission's 619MW of Units I,2, and 3 generating capacity of the Indian River plant on a take or pay basis. Payment to the Commission is based upon a demand charge plus 21.65% share of the cost of operation and maintenance of the oil / gas fired steam turbine units plus the fuel cost for any power used The contract's initial term began during 1986 and extends to 2001. FMPA has an option to extend the contract for a five-year ramp down. In 1989, the Commission entered into a capacity commitment contract with Kissimmee Utility Authority IKUA) to provide KUA 20MW of firm generating capacity and associated energy from the Commission's system for 15 years. The Commission also offered on an as available basis 50MW of supplemental capacity and associated energy. In 1989, the Commission entered into two capacity commitments with Reedy Creek Improvement District (RCID) to provide 15MW from the Commission's system generating capacity for 10 years plus a two-year ramp down, and to provide 6MW of reserve capacity from the Commission's system generating capacity for 11 years. In 1989, the Commission entered into a capacity commitment contract with FMPA to provide 20MW of generating capacity and associated energy from the Commission's undivided ownership interest in the Indian River Combustion Turbines or other generating resources for 15 years. 1 In 1992, the Commission entered into a contract with the City of St. Cloud Florida (STC), whereby the Commission will supply STC 5MW of generating capacity and associated energy from the Commission's ownership share of Stanton Energy Center Unit 2 (SEC 2) for a period of 10 years, beginning on the date of commercial operation of SEC 2. In 1993, the Commission entered into a Letter of Commitment with RCID to provide 30MW of unit specific firm service from Stanton Energy Center Unit I through 1998, with a two year ramp down, In 1994, the Commission entered into a contract with Seminole Electric Cooperative to provide 75MW of firm capacity from the Commission's Indian River Plant beginning lanuary 1,1996, and ending May 31,2004. The Commission will provide an additional 50MW of firm capacity beginning January 1,1997, and ending December 31,2000. In 1994, the Commission entered a 21-year Full Requirements contract with STC to supply the City with wholesale electricity beginning December 1994 through 2015. The Commission will act as St. Cloud s agent to direct the commitment and dispatch of the City's diesels, purchase power contracts, and manage the procurement of its fuel resources. In 1995, the Commission entered an agreement with Enron Power Marketing. Inc. for purchase and sale of capacity and energy beginning lune 1996 through May 31,2000. The Commission will provide to Enron 25 MW for January and February,10 MW for March, lune,luly, August September and December. The Commission also entered an agreement with the Florida Power Corporation for 20 n4W of Stanton 11 for July 1,1996 through December 31,1997. Florida Municipal Power Pool: In May 1988, an agreement was entered into between the Commission, the City of Lakeland Florida (LAK) and the FMPA's All-Requirements Project to cooperate in the interconnected operation of the respective electric supply systems, so as to obtain the fullest advantage of each systems' generating resources. In 1995, KUA was adoed as a member to the Florida Municipal Power Pool. A management committee consisting of a representative from each organization supervises the operation of this Pool. The Commission operates the dispatching service and administers the Pool. The operations of the Pool accounts for production cost savings which are allocated to each participant based on their individual pool participation. The term of the agreement is for one year, to be automatically renewed from year to year until terminated by the consent of all participants; however, any one participant may withdraw at any time upon one year's written notice. A - 20

I NOTE I-DEFERRED COMPENSATION PLAN The Commission offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Commission employees, permits employees to contribute 25% of their base salary, exclusive of total pension, dependent medical care and flexible spending plan contributions, up to $7,500 per year. The deferred compensation is not available to I employees until termination, retirement, death, or unforeseeable emergency. Assets and liabilities of the plan are recorded at market. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, are (until paid or made available to the employee or other beneficiary) solely the property of the Commission (without being restricted to the provisions of benefits under the plan), subject only to the claims of the Commission's general creditors. Participants' rights under the plan are equal to those of general creditors of the Commission in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the Commission's legal counsel that the Commission has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The Commission believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. NOTE J-PAYMENTS TO THE CITY OF ORLANDO AND ORANGE COUNTY Two types of payments are made to the General Fund of the City of Orlando pursuant to agreements between the Commission and the City of Orlando; a revenue based payment and an income based payment. The revenue based payment is calculated at six percent of gross retail electric and water billings to customers within the City. This payment is made pursuant to a policy established by the Commission and classiiled as an operating expense. The income-based dividend payment is calculated at 60% of a rolling five year average of net income. This payment is recorded as a reduction of retained earnings and is not considered an expense for rate making purposes. payments are made

• ange County based on one percent of gross retail electric billings within the County but outside the city limits of the City of Orlando. This payment, which was $635,390 and $604,744 for fiscal years ended September 30,1995 and 1994, respectively, is classified as an operating (general and administrative) expense. Payments are made pursuant to a policy established by the Commission.

NOTE K-COMMITMENTS AND CONTINGENT LIABILITIES 1. The Commission and the other participants in SEC 1 have entered into coal supply contracts which expire in 2000,2005 and 2006, with renewal options of two, two and five years, respectively. The contracts require minimum annual purchases as follows (in tons): 1996 1,885,000 1997 - 2000 1,960.000 2001 - 2005 1,480,000 2006 480,000 2. The Commission and the other participants in SEC 1 have also agreed to a contract that expires on December 31,2007 for rail delivery of the unit's coal purchases. 3. In September 1992, the Commission approved construction of a second coal fired generating unit. The unit is a 440 net MW unit that will supply 315 MW to the system. The Commission will pay an estimated $345,448.000 for its 71,59% ownership of the unit with an estimated completion date of lune 1996 At September 30.1995 the Commission contracts totaled $322.121,717, of which $52,251,266 is l still outstanding. A - 21

_m NOTE K-COMMITMENTS AND CONTINGENT LIABILITIES--Continued l 4. The Commission has a natural gas contract with a term that ends on March 31,1999. The contract j requires minimum annual purchases of 5,140.000 MMBTUs, 5. The Commission has also entered into contracts which expire in 2004 and 2014 with ten year renewal l options for delivery of all natural gas purchases. The contracts require minimum annual delivery as follows (in MMBTUs): i 1996 - 1997 12,742,352 ~ l998 - 2003 9,092.352 2004 7,751,276 2005 - 2014 6,686.200 NOTE L-PENSION PLAN The Commission has a single employer defined benefit pension plan covering all employees who regularly work 20 or more hours per week. Employees participate in the pbn immediately upon employment and receive a pension benefit equal to 2h % of the highest three ccmecutive years average base earnings times years of employment. A maximum of 30 years of service is credited. Benefits are vested after 5 years of i service. j The pension plan states that the Commission shall make such contributions to the retirement fund as shall be required under accepted actuarial principles to at least be sufficient to maintain the plan as a qualified employee defined benefit plan meeting the minimum funding standard requirements of the Internal Revenue Code with respect to its members, as shall be determined from time to time by the actuary. The Commission shall not have any right, title, or interest in the contributions made to the retirement fund under the plan, and no part of the retirement fund shall revert to the Commission, except that: a. Upon complete termination of the plan and the allocation and distribution of the retirerr.ent fund as provided herein, any funds remaining in the retirement fund because of an actuarial computation after the satisfaction of all fixed and contingent liabilities under the plan with respect to the Commission may revert to the Commission. b, if an excess contribution is made to the retirement fund by the Commission, then such contribution may be returned to the Commission within one year after the payment of the contribution. c. If the internal Revenue Service determines that the plan does not meet the requirements of Code section 401(a), the plan shall be null and void, and any contributions shall be returned to the Commission within one year following the determination that the plan does not meet such requirements, unless the Commission elects to make the changes to the plan necessary to receive a determination from the internal Revenue Service that the requirements of Code section 401(a) are met. During the year ended September 30,1994 and through December 31,1994. each participant contributed weekly to the Plan four percent of earnings until the completion of 20 years of service, two percent of earnings thereafter. Effective January 1,1995, participant contribution obligations were reviwd to require 4% of earnings until the later of age 62 or completion of 30 years of service, with no requirec tributions thereafter: the reduction for early retirement prior to age 62 was changed from 2% to 1% per year. Total payroll and covered payroll for the year ended September 30,1995, amounted to $43,577,202 and $40.621.824, respectively. Employer and employee contributions to the Plan for the year endea September 30.1995 amounted to $2,896.534 and $1,471,943, respectively, representing 7.1% and 3.6% of covered payroll. Payroll and contribution data for fiscal 1994 is included in three year trend information. The Commission's contributions for the years ended September 30,1995 and 1994 were made in accordance with actuarially determined contribution requirements to cover normal cost, utilizing the aggregate actuarial cost method. Significant actuarial assumptions used to compute actuarially determined contributions requirements are the same as those used to compute the pension benefit obligation, including a rate of return on the investment of present and future assets of 8.25% compounded annually and projected salary increases of 6% per year due. A - 22

l l NOTE L-PENSION PLAN--Continued l The pension benefit obligation is a standard measure or the present value of pension benefits, adjusted i for the effects of projected salary increases of 6% estimated to be payable in the future as a result of employee service to date, l Plan data as of October 1,1994 (latest actuarial valuation) as developed by consulting actuaries is as I follows: Projected benefit funded status: Vested. Retirees and beneficiaries currently receiving benefits, terminated & disabled employees not yet receiving benefits S 51,189,420 Current employees: Accumulated employee contributions 15,538,584 Employer-financed (vested) 28,480,746 Employer-financed (non-vested) 22,206,105 Total pension benefit obligation $117,414,855 Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. The following information is presented for the three most recent years available: Year Ended September 30 I I994 1993 199? l Net assets available for benefits $127,557,755 $125,478,328 $ 110,048,366 Pension benefit obligations (PBO) $ 117,414,855 $107,657,524 $ 99,191,953 Overfunded PBO $ 10,142,900 $ 17,820,804 $ 10,856.413 Net assets available for benefits as a percent of the PBO. 108.6% 116 6 % 110.9% Total payroll $ 43,361,111 $ 42,883,835 $ 42,143,467 Annuel covered payroll $ 40,645,961 $ 40,318,967 $ 38,566.337 Overfunded PBO as a percent of annual covered payroll 25.0% 44.2% 28.2% Actuarially determined employer contributions. $ 2,960,272 $ 3,226,220 $ 3,062,095 Employer contributions S 3,230,549 $ 3,452,277 $ 3,483,906 Employer contributions as j a percent of covered payroll 8.0% 86% 9.0% i l l l I i I r A - 23 i

t l NOTE M-PENSION PLAN SUPPLEMENTARY INFORMATION (UNAUDITED) This schedule presents required supplemental historical pension benefit information for the last ten l years currently available. This trend information provides information about progress made in l accumulating sufficient assets to pay benefits when due. 1 (6) (1) (4) Overfunded Net Overfunded Pension Assets (2) Pension (5) Obligation as Year Avallable Pension (3) Benefit Annual a Percentage Ended for Benefit Percentage Obligation Covered of Annual l September Benefits Obligation Funded (2HI) Payroll Covered Payroll 30 (Millions) (Millions) (11/(2) (Millions) (Millions) (4)/(5) 1994 $127.56 $117.41 108.64 % $10.14 $40.65 24.97% 1993 125.48 107.66 116 55 17.82 40.32 44.20 4 1992 110.05 99.19 I I 0.95 10.86 38.57 28.16 199l 101.44 91.14 111.30 10.30 36.97 27.86 1990 87.84 83.80 104.82 4.04 32.43 12.46 1989 85.68 71.64 119.60 14.04 30.43 46.14 1988 74.58 61.95 120.39 12.63 28.33 44.58 i 1987 A 70.74 60.72 116 50 10 02 28.04 35.73 l 1986 42.57 24.90 170.96 17.67 19.72 89.60 1985 33.79 24.36 138.71 9.43 18.23 51.73 i 1 (A) The pension benefit obligation was valued by the actuary as prescribed by the Governmental l Accounting Standards Board Statement 5 in 1987. This method differed from prior years in that l projected benefits were allocated on a level basis to employee's years of service. This resulted in a j l 39.2% increase. Contract amendments increased the pensian benefit obligation by 68.8% and net assets available for benefits by 44.3%. NOTE N-OTHER POSTEMPLOYMENT BENEFITS j in addition to the pension benefits described in Note L, the Commission has a policy to provide health care benefits and life insurance coverage to all employees who retire on or after attaining age 55 with at least 10 years of service or at any age after completing 25 years of service. Currently 311 retirees meet the eligibility requirements. Retirees may also elect to provide health care insurance for their qualifying dependents by paying 35 percent of the calculated premium. The Commission is a secondary provider for l those retirees and/or their dependents who are eligible for Medicare benefits. The Commission's health care plan is administered through an insurance company on a Minimum Payment Plan but operates as a self-insurance program with an additional purchased insurance policy to l cover those claims over $100.000. In this plan the insurance company administers the plan and processes l the claims according to insurance coverage with the Commission reimbursing the insurance company for its l payouts. Expenses are recorded by the Commission when paid to the insurance company. Total post i employment health care costs recognized by the Commission for the years ended September 30.1995 and 1994, were $1,301.862 and $1,042.689 respectively, post employment life insurance costs during the same periods were $56,745 and $28,798. Health care coverage is offered to employees who terminate before retirement and certain dependents who are no longer eligible for employee tiependent coverage in accordance with federal law (COBRAL At September 30,1995, there were 4 COBRA participants. All participants are responsible for 100 percent of their insurance premiums. i A - 24 l 1

NOTE O-REGULATION According to existing laws of the State of Florida. the five board members of the Orlando Utilities Commission act as the regulatory authority for the establishment of electric and water rates. The Florida Public Service Commission (FPSC) has authority to regulate the electric " rate structures" of municipal utilities in Florida. It is believed that " rate structures" are clearly distinguishable from the total amount of revenues which a particular utility may receive from rates, and that distinction has thus far been carefully made by the FPSC. Prior to implementation of any rate change, the Commission files the proposed tariff with the Florida Public Service Commission and has established the prerequisite of a Public Notice and the holding of a Public Hearing. Florida Public Service Commission: As noted above. the FPSC has jurisdiction to regulate electric " rate structures" of municipal utilities. In addition. the Florida Electric Power Plant Siting Act and the Transmission Line Siting Act have given the FPSC exclusive authority to approve the need for new power plants and transmission lines. The FPSC also exercises jurisdiction under the Florida Energy Efficiency and Conservation Act as related to electric use conservation programs and prescribes conformance to the Federal Energy Regulatory Commission's Uniform System of Accounts. The FPSC also approves territorial agreements and settles territorial dispu.es, Environmental and Other Regulations: Operations of the Commission are subject to environmental regulation by Federal. State and local authorities and to zoning regulations by local authorit;es. The Commission's interconnection agreements with investor owned utilities are subject to rev:ew and approval by the FERC. FERC also exercises jurisdiction over the Commission under the Public UtiP.ty Regulatory Policies Act of 1978 Federal and State standards and procedures that govern control of tic environment can change. These changes can arise from continuing legislative. regulatory, and judicial action respecting the standards and procedures. Therefore, there is no assurance that the electric and water plants m operation. under construction, or contemplated will always remain subject to the regulations currently in effect, or will always be in compliance with future regulations. An inability to comply with environmental standards or deadlines could result in reduced operating levels or complete shutdown of individual electric generating units or water plant facilities not in compliance Furthermore. compliance with environmental standards or deadlines may substantially increase capital and operating costs. A - 25

7 NOTE P-BUSINESS SEGMENTS The Commission operates in two business segments -- the generation, transmission and distribution of electricity and the production, treatment, and distribution of water. A summary of the segment information follows: Electric Water Total Year Ended September 30,1995: Operating revenues $317,224,520 $ 23,495,985 $340,720.505 Depreciation and amortization 39,109,313 3,966,713 43,076,026 Operating income. 90.043,399 5,039,726 95,083,125 Federal Emergency Management Assistance Grant 218,088 22,068 240,156 Net income 33,504.339 2,231,882 35,736,221 Dividend payment to the General Fund of the City of Orlando 17,460,700 3,081.300 20,542,000 Contributed capital additions 5,473,970 3,151,563 8,625.533 Utility plant additions 128,100,320 13,230,720 141,331,540 Utility plant deletions 636,045 1,158,239 1,794,284 Net working capital 90,211,164 2,857,509 93,068,673 Total assets 1,779,710.791 180,554,151 1,960,264.942 Long-term debt - net 1,263,311,560 58,831,647 1,322.143,207 Total equity (accumulated retained earnings and contributed plant). 324,340,348 120.078,041 444,418,389 Year Ended September 30,1994: Operating revenues $301,893,904 $ 24,278,090 S326,171,994 Depreciation and amortization 35,025,545 3,744,568 38,770,113 Operating income. 80.293,237 5,858.626 86,151,863 Net income 28,319,811 5,840,681 34,160,492 Dividend payment to the General Fund of the City of Orlando 15,220,800 2,899,200 18.120,000 Contributed capital additions 5,041,781 3,568.888 8.610,669 Utility plant additions 159,306,536 15,002.000 174,308,536 Utility plant deletions 4,124,282 144,072 4,268,354 Net working capital 73,640,042 633,652 74,273,694 Total assets 1,761,432,093 181,212,977 1,942,645,070 Long-term debt - net 1,273,947,205 58.723,607 1,332.670.812 Total equity (accumulated retained earnings and contributed plant). 302,822,738 117,775,897 420,598.635 A - 26

Deloitte& ToucheEPo Independent Auditor's Report Commissioners of the Orlando Utilities Commission We have audited the accompanying balance sheet of Orlando Utilities Commission (the " Commission"), as of September 30,1995, and the related statements of revenues, expenses and changes in retained earnings and of cash flows for the year then ended. These financial statements are the responsibility of the Commission's management. Our responsibility is to express an opinion on the financial statements based on our audit. The financial statements of the Commission for the year ended September 30.1994 were audited by other auditors whose report, dated November 23,1994, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 I and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Commission as of September 30,1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated November 22,1995 on our consideration of the Commission's internal control structure and a report dated November 22,1995 on its compliance with laws and regulations Orlando. Florida November 22.1995 DeloitteTouche A - 27 TM Intemational

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