2014 annual report by Turlock Irrigation District

2014 Annual Report

Overview 2014 Established in 1887, TID was the first publicly owned irrigation district in the state and one of only four in California today that also provides electric retail energy directly to homes, farms and businesses. Organized under the Wright Act, TID operates under the provisions of the California Water Code as a special district. TID is also a balancing authority and is governed by a five-member Board of Directors.

Irrigated Acres

Electric Service Territory

2014 Peak Demand

146,274

662 square miles 510MW

Miles of Distribution Line

Miles of Transmission Line

Number of Electric Accounts (year end)

2,217

389

100,989

Customers per Mile of Distribution Line

Customers per Mile of Transmission Line

Employees

219

455

Bond Ratings

Board of Directors

Standard & Poor’s A+ Fitch A+ Moody’s A2

Michael Frantz Division 1 Charles Fernandes Division 2 Joe Alamo (VP) Division 3 Rob Santos Division 4 Ron Macedo (President) Division 5

Service Area

DON PEDRO LAKE XY

Y X

MODESTO

Y X

TUOLUMNE RIVER Y X Y X

Y X

CERES

Y X Y X

Y X

TURLOCK LAKE

Y X

HUGHSON

Y X

Y X XY

KEYES

X Y X Y X

DENAIR TURLOCK

Y NT OU NTY SC U U O LA DC NIS RCE STA ME

N SA

DELHI BALLICO XY

RIV

N UI AQ JO

PATTERSON

HILMAR XY X

Y X

SANTA CLARA COUNTY

Y X

STANISLAUS COUNTY

R RIVE CED MER XY

H IG

HW AY 99

ELECTRICAL SERVICE AREA IRRIGATION SERVICE AREA

The year 2014 was challenging and promising at the same time. The challenges faced by Turlock Irrigation District were primarily water-related, and are the same challenges faced by nearly every other water agency in California during this unprecedented drought. Namely; how to mitigate drought impacts while living out our mission of providing water and power safely, reliably and at affordable rates. This drought is by far the worst in TID’s 127-year history and makes delivering water and power with a high level of service increasingly problematic. Nevertheless, within every challenge awaits an opportunity. The drought, while making operations more challenging, has galvanized our efforts to further efficiencies with the resources entrusted to us by our customers for more than a century. TID’s heritage has been made possible due to foresight and prudent planning, and that legacy is continuing in these trying times of water shortage and ever-growing regulatory threats. In 2014, TID implemented the following water projects: • The Sidegate Measurement Project, which includes both permanent and mobile metering systems allowing volumetric measuring and pricing of irrigation water. • The Lateral 8 Regulating Reservoir Project, involves refurbishing and improving the existing but nolonger-used wastewater treatment ponds into a 29-acre-foot regulating reservoir. This project, which can be expanded in size in the future, has the potential to save approximately 2,550 acre feet of water annually in water that would have otherwise spilled into the Merced River due to the nature of operating a gravity-delivery water system. • The Lateral 8 Total Channel Control Pilot Project will automate 11 canal drops over a span of eight miles. This automation will function to release the amount of water that is demanded downstream, thereby reducing the amount sent to the river unused. • The Automated Pump Project will allow the control of all pump sites from one location while improving efficiency and allowing improved tracking of water deliveries. • TID is developing its Water Master Plan, a comprehensive, forward-looking integrated master plan that will guide the District in future decisions. While there is no single solution to the water supply challenges facing TID, these projects and others being envisioned will augment supplies in an increasingly volatile water supply future. TID continues to own and operate an integrated and diverse electric generation, transmission and distribution system that serves more than 100,000 customer accounts within a 650-square-mile area. Over the last several years, TID has expanded and diversified its generation assets, developed a comprehensive conservation program - Home Energy Analysis, and embraced renewable generation. The year 2014 will be remembered not only as one with many challenges and difficult decisions, but also as one where TID resolved to make difficult decisions to benefit our customers. We’re confident that TID and the region will emerge from the drought, or any other water or power challenges that come our way, stronger and better able to serve our customers.

Casey Hashimoto, PE

Historical Operating Statistics (unaudited) 2014

2013

2012

2011

2010

Residential

72,909

72,366

72,033

71,829

71,559

Commercial

7,090

7,065

6,983

6,968

6,907

($ IN THOUSANDS)

AVERAGE CUSTOMERS AT END OF PERIOD:

Industrial

830

794

798

780

781

Other (1)

20,160

20,046

20,099

20,355

20,361

Total

100,989

100,271

99,913

99,932

99,608

Residential

725,523

716,316

713,915

693,659

675,876

Commercial

130,606

128,154

126,608

124,820

121,267

Industrial

749,864

747,745

738,693

729,239

724,489

Other (1)

399,761

393,316

377,315

346,822

339,379

2,005,754

1,985,531

1,956,531

1,894,540

1,861,011

69,199

68,235

66,846

49,137

54,399

1,388,342

1,641,616

1,542,545

1,942,107

1,877,222

3,463,295

3,695,382

3,565,922

3,885,784

3,792,632

Generated by district

2,257,182

2,214,620

2,305,959

2,369,260

2,541,574

Purchased

1,281,089

1,563,500

1,350,643

1,618,465

1,345,918

Subtotal

3,538,271

3,778,120

3,656,602

3,987,725

3,887,492

74,976

82,738

90,680

101,941

94,860

3,463,295

3,695,382

3,565,922

3,885,784

3,792,632

$114,169

$109,790

$106,946

$100,655

$99,806

Commercial

18,319

17,756

16,759

15,998

15,545

Industrial

87,318

85,711

80,006

75,891

74,618

Other (1)

52,226

50,453

45,117

41,571

47,922

3,093

(12,112)

425

(36,586)

(10,941)

MWh SALES:

Total Retail Interdepartmental meters Wholesale Power Total

SOURCES OF MWh:

System losses Total

ELECTRIC ENERGY REVENUES: (IN THOUSANDS) Residential

Power Supply Adjustment Recognized (Deferral)

275,125

251,598

249,253

197,529

226,950

Electric Service Charges

Total Retail Energy

497

488

358

408

385

Other Electric Revenue

212

Electric Energy Retail

275,699

252,162

249,692

198,011

227,547

Wholesale Power Total

SYSTEM PEAK DEMAND (MW)

64,341

73,460

49,115

69,334

80,039

$340,040

$325,622

$298,807

$267,345

$307,586

510

527

516

491

497

AVERAGE MWh SALES PER CUSTOMER FOR THE PERIOD Residential

9.951

9.899

9.911

9.657

9.445

Commercial

18.421

18.139

18.131

17.913

17.557

903.451

941.744

925.680

934.922

927.643

Residential

$157.36

$153.27

$149.80

$145.11

$147.67

Commercial

$140.26

$138.55

$132.37

$128.17

$128.19

Industrial

$116.45

$114.63

$108.31

$104.07

$102.99

$0.080

$0.070

Industrial

AVERAGE REVENUE PER MWh FOR THE PERIOD

AVERAGE COST OF POWER PER KWh FOR RETAIL LOAD(2)

(1) Includes agricultural and municipal water pumping, street lighting, and interdepartmental meters. (2) Includes depletion and depreciation on generation assets, excludes debt service. (3) Revised to reflect natural gas sales and depletion (4) Revised to reflect PG&E pipeline depreciation. (5) Added A2PP and A2PP pipeline depreciation

(3)

$0.073

(3)&(5)

$0.063

(3)

$0.085

(3)&(4)

Historical Results of Operations (unaudited) ($ IN THOUSANDS)

2014

2013

2012

2011

2010

OPERATING REVENUES: Electric energy - Retail

$275,699

$252,162

$249,692

$198,011

Electric energy - Wholesale

64,341

73,460

49,115

69,334

80,039

Wholesale Gas

17,061

12,391

5,121

13,941

11,049

Irrigation

7,758

8,438

7,606

7,445

7,382

Other

4,293

3,944

3,700

3,538

3,545

369,152

350,395

315,234

292,269

329,562

Total Operating Revenue

$227,547

OPERATING EXPENSES: Power Supply: Purchased Power

63,926

68,505

64,158

73,466

96,084

Generation and Fuel

121,951

107,391

94,948

92,539

118,518

Total Power Supply

185,877

175,896

159,106

166,005

214,602

Other Electric O&M

22,730

23,506

19,561

19,732

20,074

Irrigation O&M

11,828

12,623

11,943

11,161

10,582

Public Benefits

6,962

6,908

5,012

4,614

5,013

21,640

20,528

20,703

19,962

21,568

Administration and General Loss of disposal of utility plant

2,438

5,634

Depreciation and amortization

70,442

64,496

53,152

50,109

47,303

319,479

306,395

275,111

271,583

319,142

49,673

44,000

40,123

20,686

10,420

Total Operating Expenses

OPERATING INCOME OTHER INCOME (EXPENSE): Interest/Derivative (loss)gain

1,271

562

2,548

5,218

5,334

Miscellaneous

9,357

9,119

8,267

8,187

7,643

10,628

9,681

10,815

13,405

12,977

57,338

59,996

54,687

50,547

44,673

2,963

(6,315)

(3,749)

(16,456)

(21,276)

304,009

310,324

314,073

330,529

351,805

$306,972

$304,009

$310,324

$314,073

$330,529

2.35x

2.83x

2.42x

2.82x

3.16x

Total Other Income

INTEREST EXPENSE Long Term Debt

TRANSFER (TO) FROM DEFERRED REGULATORY CREDITS NET INCOME (LOSS) RETAINED EARNINGS: BEGINNING OF YEAR END OF YEAR

DEBT SERVICE COVERAGE REVENUE BONDS/COP'S

Management Team Casey Hashimoto

General Manager

Assistant General Managers Joseph Malaski Larry Gilbertson Tou Her Brian LaFollette

Financial Services & CFO Electrical Engineering & Operations Water Resources Power Supply

Advisors

Griffith & Masuda Orrick, Herrington & Sutcliffe LLP PricewaterhouseCoopers LLP Public Financial Management, Inc. SAIC Energy, Environment & Infrastructure, LLC

General Counsel Bond Counsel Independent Accountants Financial Advisor Consulting Engineers