The attached disc contains the Turlock Irrigation District's 2009 Financial Statements. This document is stored in the Adobe Acrobat (PDF) format. To view the document you will need to have the Adobe Acrobat ReaderÂŽ installed on your computer. The PDF files are also available through the TID website at www.tid.com or by calling the TID business office at 209.883.8300.
662 square-miles 99,453 Number of Electric Accounts at year end 307 square-miles Irrigation Service Area 145,559 Number of Acres Irrigated 460 Employees 45 Customers per mile of Distribution Line 290 Customers per mile of Transmission Line 2,193 Miles of Distribution Line Electric Service Area
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 an independent control area and is governed by a five member Board of Directors.
Looking back, you could say we have a history of making history. As of last year, TID is the leading electric utility in California supplying 28% of its energy from qualified renewable resources to our consumers. Of course, our goal is not to be first, but to be focused. And we are. We're focused on promoting sustainability and a healthy environment through our own efforts and by encouraging energy-wise action at the individual level, from homeowners to businesses. We believe in the profound ripple effect that's possible when you lead by example, when you make the effort to be the change you want to see. By advancing our acquisitions and pursuing ownership over contracts that expire, we will protect our consumers long-term through competitive rates and assets to show for our investment. While water and power are common commodities, our approach to providing them is, and always has been, anything but common. In 2009, TID leaned strategically into the future by putting new processes and technologies in place that build on our existing accomplishments and developments. For example, the beginning of our transition to Smart Meters will improve the way we gather and report power usage. Facility enhancements like the Almond 2 Power Plant and the Red Mountain Pump Storage projects will bring growth. Additions like our purchase of the Tuolumne Wind Project, or the solar panels we installed atop our parking structure to promote and illustrate the possibilities of alternative energy sources will hopefully serve as further catalysts for change within our customer community. True, these new initiatives were a major part of 2009's success but so was our strategic management of existing resources. As in years past, by closely monitoring drought conditions and conserving as necessary, we were able to supply water to our growers throughout the 2009 season. On a more individual level, it was a record year for key members of the TID team as well. TID Linemen roped first place in the Annual American Public Power Association Lineworkers Rodeo. Public utilities of all sizes participated and competitors were judged based on safe work practices, neatness, ability, equipment handling and timely event completion. A win for them is a win for our customers because their expertise is a reflection of our high standards and commitment to providing customers with reliable power. In closing, while harnessing the power of natural resources to provide our customers with reliable energy and water is certainly an effective course for change, harnessing the power of inspired and informed individuals is equally important. TID has invested itself through projects, incentive programs and more, to build lasting, more influential relationships with customers of all rate levels. The reason why is clear. In our view, when you empower people, you power the world.
In the tradition of TID's history of utilizing renewable energy and serving customers with safe, reliable and affordable energy, TID purchased a 62 turbine, 136.6 megawatt wind farm, located in Klickitat County, Washington. Construction of the project was completed in spring 2009, and commercial operation commenced May 28, 2009. It includes 20 wind turbines manufactured by REpower Systems AG, each with a rated capacity of
2.0 megawatts, and 42 wind turbines manufactured by Siemens Power Generation Inc., each with a rated capacity of 2.3 megawatts. These 62 turbines are all three-bladed, upwind, horizontal-axis wind turbines with rotor diameters ranging from 92 to 101 meters, set atop 80 meter towers.
The Tuolumne Wind Project, located near the town of Goldendale on the border of Washington and Oregon, is along a ridgeline property that overlooks the Columbia River. The project is an eligible renewable resource and is used to exceed the renewable portfolio standard (RPS) adopted by the TID board.
TID is taking its commitment to renewable energy practices and educating the community about alternative energy to new heights. TID is proud to report that it installed a 70 kilowatt AC array atop its newly renovated parking structure located at its administration building. The system is expected to generate a total of 132,460 kilowatt-hours a year, and includes a total of 378 Sanyo 210n series panels. The solar array uses high-efficiency photovoltaic (PV) modules to generate maximum energy output per square-foot. TID selected the parking structure for the system because the available space lined up well with its educational objectives, and the panels as well as the inverters are all visible and easily accessible. One of the system's most unique features is its transparency. Anyone can view real time electricity generation information on the TID website. The data shows what the system is currently generating, as well as the daily, weekly, monthly and annual output. This creates a working model that invites customers to see what they can expect from a system and how solar energy might be right for their needs. A solar array provides environmental benefits by eliminating certain greenhouse gas emissions. Using a calculator feature, the site shows how much carbon dioxide, nitrogen dioxide and sulfur dioxide is kept out of the atmosphere as a result of the solar generation.
On October 19, the TID local office in Ceres opened for business. Though the office building is new, TID still provides the same great services that it became known for during the past five years, plus some added conveniences. The new building, located near historic downtown Ceres, is 3,375 square-feet and features a spacious lobby where customers can pay their electric bills as well as obtain personal assistance and information regarding the many rebates and programs TID provides. To increase the functionality of the space, there is also a conference room for community presentations and events. Additionally, the office features a lighted pathway that leads to the connecting Ceres Drugstore where customers can pay other utility bills.
TID has a long-held belief in the wisdom and strategy of owning and operating generation facilities that allow TID greater flexibility in meeting electric needs. Staying true to this strategy, TID is in the process of engineering and constructing a state-of-the-art, natural-gas fired, simple-cycle peaking power generation facility directly adjacent to the existing Almond Power Plant located in Ceres. With the addition of the Almond 2 Power Plant (A2PP), TID will add 174 megawatts to its current generating output. The added output will assist TID in meeting its resource adequacy and reserve needs well into the future as additional load growth occurs. A2PP will increase the reliability of the electric grid by giving TID the ability to quickly switch from solar and wind generated electricity, which can vary significantly depending on weather conditions. Although the addition of renewable resources is vital to reducing dependence on fossil fuels, maintaining electric system reliability remains a core focus for TID.
Reaching your goals is good. Exceeding them is great. And in 2009, TID exceeded it’s conservation goal for the third consecutive year. This push toward improved energy efficiency and sustainability gained momentum in September 2007 when the TID Board of Directors adopted an aggressive 10year plan to promote energy conservation. The plan involved offering several residential, commercial, industrial and agricultural incentive and rebate programs that helped save TID customers money and reduce energy consumption. From standardized residential rebates for qualifying efficiency measures to fully customizable, complex industrial process upgrades, TID's commitment to saving energy and helping customers is paramount. The goal for 2009 was to conserve 12.6 million kilowatt-hours, and working with its customers TID achieved a savings of 13 million kilowatt-hours. Further, TID provides financial grade audits to customers of all rate classes: residential, commercial and industrial. On the home front or business, large or small, this personalized service enables TID representatives to give customers a big-picture view of how they use energy, how they can conserve energy, and the efficiency rebates for which they may qualify. The value of this service helps customers better manage their energy consumption, as well as provides TID opportunities to develop more personal, long-term relationships with its customers, keeping them engaged in sustainable practices.
As a retail electric utility, one of TID's most basic functions is to measure customer energy consumption and bill them for it. Within this traditional approach, the bill itself is the connection between the consumer and the utility. TID's new “SMART meter� project is changing that. SMART meters represent a strategic shift in the way TID gathers and disseminates electric consumption data. Historically, electric meters were read on site by trained staff each month. Today, using proven and reliable technology, that same function is done electronically. SMART meters will continue to help TID improve its service and, over time, will provide customers with the information and tools that give them a clearer picture of and better control over their energy use and bill. SMART meters are more than a step forward. They're a big leap forward on the path toward a "smart grid" and a smarter energy future. While some features are still a few years away from being fully implemented, when completed a smart grid will deliver electricity using digital technology to save energy, reduce costs and increase reliability.
It was anticipated that 2009 would be a dry water year, especially following consecutive drought conditions in 2007 and 2008. However, improved watershed conditions resulted in more water available for growers than originally forecasted in the beginning of the season. Also, TID’s 2008 conservation measures helped to compensate for dry spring conditions and left more water in the reservoir for the 2009 season. Originally, the TID Board established the allotment at 33 inches and capped water at 48 inches. In July, the allotment was increased to 48 inches and the cap was increased to 54 inches. The Board’s decision was based in part on the current runoff figures which exceeded the projections set in April when the original allotment was established. Although conditions improved, the state was still in a drought. To encourage water conservation and to reserve water in Don Pedro Reservoir for 2010, TID maintained a reduced allotment, placed a cap on available water and shortened the irrigation season.
Don Pedro Reservoir is central to both TID’s water and energy operations, and is licensed by the Federal Energy Regulatory Commission (FERC). The FERC license will expire and will need to be renewed in 2016. Because the re-licensing process can be a long, arduous and expensive process, in its role as majority owner and project operator of the reservoir and generation facilities, TID began working with other project partners to outline the work needed to ensure a smooth methodology for the multi-year re-licensing efforts that will focus on, in large part, in-stream flow releases and fisheries habitat below Don Pedro Reservoir.
Continuing its legacy of maximizing water resources to generate hydroelectric power, TID is in the initial process of investigating the feasibility and economics of a pumped storage reservoir project to generate a boost in electricity production during peak demand. The concept calls for a small reservoir to be built above Don Pedro Reservoir. This allows water to be pumped into the reservoir at night when demand for energy is low and the price for electricity is less expensive. The water would then be released back into Don Pedro Reservoir to generate power when the demand and price for electricity is high. The nature of the pumped storage project will increase the electric grid’s reliability with the ability to quickly replace solar and wind generated electricity that varies significantly with weather conditions.
Board of Directors Michael Frantz – Division 1 Charles Fernandes – Division 2 – Vice President Joe Alamo – Division 3 Rob Santos – Division 4 - President Ron Macedo – Division 5
Management Team Larry Weis – General Manager/CEO Jeff Barton – Assistant General Manger, Civil Engineering & Water Resources Randy Baysinger – Assistant General Manager, Power Supply Steve Boyd – Assistant General Manager, Consumer Services Keith Cargill – Assistant General Manager, Water Operations, Construction & Maintenance James Farrar – Assistant General Manager, Resource Management Planning & Rates Casey Hashimoto – Assistant General Manager, Electrical Engineering & Operations Joe Malaski – Assistant General Manager, Financial Services/CFO
Advisors Griffith & Masuda – General Counsel PricewaterhouseCoopers LLP – Independent Accountants Public Financial Management, Inc. – Financial Advisor R.W. Beck, Inc. – Consulting Engineers
Revenue Bond Ratings Moody's A1 Fitch A+ Standard & Poor's A+
For additional information, contact: Turlock Irrigation District Public Information P.O. Box 949, Turlock, CA 95381-0949 (209) 883-8530, www.tid.com
TURLOCK IRRIGATION DISTRICT
Consolidated Financial Statements December 31, 2009 and 2008
Consolidated Financial Statements December 31, 2009 and 2008
table of contents Topic
Page No.
Report of Independent Auditors
1
Management's Discussion and Analysis
2
Financial Statements
11
Notes to Financial Statements: Note 1. Organization and Description of Business
16
Note 2. Summary of Significant Accounting Policies
16
Note 3. Acquisition
26
Note 4. Utility Plant
28
Note 5. Participation in Joint Powers Agencies
29
Note 6. Cash, Cash Equivalents and Investments
33
Note 7. Long-term Debt
36
Note 8. Commercial Paper and Short-Term Borrowings
39
Note 9. Regulatory Deferrals
40
Note 10. Derivative Financial Instruments
41
Note 11. Pension Plan
45
Note 12. Other Post Employment Benefits
47
Note 13. Commitments
49
Note 14. Contingencies
50
Appendix Historical Operating Statistics (unaudited)
A1
Historical Results of Operations (unaudited)
A3
PricewaterhouseCoopers LLP 400 Capitol Mall, Suite 600 Sacramento CA 95814-4602 Telephone (916) 930 8100 Facsimile (916) 930 8450
REPORT OF INDEPENDENT AUDITORS To the Board of Directors of Turlock Irrigation District In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of revenues, expenses and changes in net assets and of cash flows present fairly, in all material respects, the financial position of Turlock Irrigation District and its blended component units ("TID�) at December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of TID's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The management's discussion and analysis included on pages 2 through 10, and the schedules of funding progress of benefit plans included in Notes 11 and 12 are not required parts of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
April 16, 2010
1
Management's Discussion & Analysis The following management's discussion and analysis of Turlock Irrigation District ("TID”) and its financial performance provides an overview of TID's financial activities for the years ended December 31, 2009 and 2008. This management's discussion and analysis should be read in conjunction with TID's financial statements and accompanying notes, which follow this section. Background TID is an irrigation district organized under the provisions of the Wright Act and has the powers provided therein. Organized in 1887, TID was the first of 65 irrigation districts to be formed in the State of California. The Board of Directors (the “Board”) governs TID. The five members of the Board are elected from geographic divisions of TID for staggered four-year terms. The Board appoints a general manager and certain other senior managers who are responsible for the operations of TID. Since 1923, TID has provided all the electric service within its 425 square-mile service area, which includes portions of Stanislaus, Merced and Tuolumne counties. TID's service area includes the cities of Turlock, Ceres, Hughson and a part of Modesto and the unincorporated communities of Ballico, Keyes, Denair, Hickman, Delhi and Hilmar. In December 2003, TID completed the acquisition of Pacific Gas and Electric's (PG&E) electric distribution facilities in a portion of the west side of Stanislaus County, including the City of Patterson, the community of Crows Landing and certain adjacent rural areas (collectively, the “Westside”). The Westside covers approximately 237 square miles and includes 10,154 electric customer accounts. To provide electric service within its service area, TID owns and operates an electric system, which includes generation, transmission and distribution facilities. Its generating facilities include hydroelectric, wind, gas-fired and other facilities. TID also purchases power and transmission service from other sources and participates in other utility arrangements.
TID also supplies water for irrigation use within 308 square miles of its service area, comprising approximately 5,800 parcels of land and 250 miles of gravity flow canals and laterals. TID's electric and irrigation systems are operated and accounted for as a single entity; hence, revenues from both systems are available to pay the obligations of TID. Rates and Charges TID's Board has full and independent authority to establish revenue levels and rate schedules for all electric service provided by TID. TID is not subject to retail rate regulation by any state or federal regulatory body, and is empowered to set retail rates effective at any time. TID has maintained rates for electric service that have been sufficient to provide for all operating and maintenance costs and expenses, debt service, repairs, replacements and renewals and to provide for base capital additions to the system. The Board fixes rates and charges of TID based on a cost of service methodology. Effective February 1, 2009, TID increased electric rates by an average of 15.00%. TID has a credit requirement for all new service connections, which requires new customers to verify their good credit standing with their former electric utility provider or to place a deposit with TID if an acceptable credit standing cannot be verified. Financial Reporting TID maintains its accounts in accordance with generally accepted accounting principles for proprietary funds as prescribed by the Governmental Accounting Standards Board (GASB), and where not in conflict with GASB pronouncements, accounting principles prescribed by the Financial Accounting Standards Board (FASB). TID is accounted for as an enterprise fund and is financed and operated in a manner similar to that of a private business enterprise. TID uses the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. TID's TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
2
Management's Discussion & Analysis accounting records generally follow the Uniform System of Accounts for public utilities and licensees prescribed by the Federal Energy Regulatory Commission (FERC), except as it relates to the accounting for contributions in aid of construction (CIAC).
separate legal entity from TID, it is blended into and reported as part of TID because of the extent of its operational and financial relationship with TID. Accordingly, all operations of the Authority are consolidated into TID's financial statements.
In accordance with the FASB accounting rules which govern regulatory accounting, the Board has taken various regulatory actions for ratemaking purposes that result in the deferral of revenue or expense recognition. At December 31, 2009 and 2008, TID had a regulatory asset of $24.4 million and $17.0 million, respectively. At December 31, 2009 and 2008, TID had total regulatory credits of $18.2 million and $19.8 million, respectively. The regulatory assets and credits will be recognized in the statement of revenues, expenses and changes in net assets when determined by the Board for ratemaking purposes.
The Tuolumne Wind Project Authority (“TWPA”) was formed in 2008 for the purpose of purchasing a wind farm in the State of Washington. On July 14, 2009, the TWPA completed the purchase of the membership interest in a 136.6 MW wind farm, consisting of 62-wind turbine generators located in Klickitat County, Washington. Although TWPA is a separate legal entity from TID, it is blended into and reported as part of TID because of the extent of its operational and financial relationship with TID. Accordingly, all operations of the TWPA are consolidated into TID's financial statements since the acquisition date of July 14, 2009.
Investment Policies and Procedures The Board reviews the investment policy on an annual basis. TID also has an Investment Committee, comprised of the Treasurer, Deputy Treasurer, General Manager and two members of the Board. This committee meets on an asneeded basis to review issues related to TID's investments. TID has contracted with Public Financial Management, Inc. (PFM), a leading investment manager of public entity funds, to invest TID's cash and investments. PFM only purchases investments on behalf of TID which are permitted by TID's investment policy. The Bank of New York Western Trust Company holds these investments in custody. Debt Management Program TID regularly reviews its debt structure, which includes the issuance of refunding bonds to achieve debt service savings. Component Units The Walnut Energy Center Authority (the “Authority”) was formed in 2003 for the purposes of developing and operating a 250 MW natural gas fueled generation facility located in TID's service territory. Although the Authority is a
Using this Financial Report This annual financial report consists of management's discussion and analysis and the financial statements, including notes to the financial statements. The annual financial report reflects the activities of TID primarily funded through the sale of energy, transmission, and distribution services to its retail and wholesale customers, as well as irrigation services. Balance Sheets, Statements of Revenues, Expenses and Changes in Net Assets, and Statements of Cash Flows The balance sheets include all of TID's assets and liabilities, using the accrual basis of accounting, as well as information about which assets can be utilized for general purposes, and which assets are restricted as a result of bond covenants and other commitments. The statements of revenues, expenses, and changes in net assets report all of the revenues and expenses during the time periods indicated. The statements of cash flows report the cash provided and used by operating activities, as well as cash payments for debt service and capital expenditures and cash proceeds from investments.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
3
Summary of Financial Position and Changes in Net Assets (dollars in thousands) as of and for the years ended December 31, 2009, 2008, and 2007
Assets Utility plant, net Cash and investments Other non-current assets Other current assets Liabilities and Net Assets Long-term debt Other non-current liabilities and deferred credits Other current liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Revenue, Expenses and Changes in Net Assets Operating revenues Operating expenses Operating income Nonoperating income (expense), net Increase (decrease) in net assets Net assets, beginning of year Net assets, end of year
2009
2008
2007
$ 1,200,225 183,908 32,158 50,131 $ 1,466,422
$ 782,936 134,382 21,918 55,762 $ 994,998
$ 743,515 145,082 15,523 46,281 $ 950,401
$ 743,205 35,980 335,432 1,114,617
$ 383,911 35,544 219,432 638,887
$ 394,726 41,250 170,545 606,521
254,332 15,066 82,407 351,805 $ 1,466,422
280,956 11,060 64,095 356,111 $ 994,998
264,787 10,432 68,661 343,880 $ 950,401
$ 314,120 (298,225) 15,895
$ 336,563 (324,014) 12,549
$ 306,768 (280,944) 25,824
(20,201)
(318)
(11,216)
(4,306)
12,231
14,608
356,111 $ 351,805
343,880 $ 356,111
329,272 $ 343,880
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
4
Management's Discussion & Analysis
as of and for the Year Ended December 31, 2009
ASSETS Utility Plant TID has invested approximately $1,200.2 million in utility plant assets, net of accumulated depreciation at December 31, 2009. TID transferred approximately $52.3 million of assets from construction in process to utility plant assets in 2009. Net utility plant makes up 82% of TID's assets at December 31, 2009, compared to 79% in the prior year. The following chart shows the breakdown of net utility plant by major plant category at December 31, 2009 generation, transmission, distribution, natural gas supply, pipeline, unamortized future power rights, irrigation and other:
Generation – 64% Transmission – 5% Distribution – 16% Unamortized Future Power Rights – 1% Irrigation – 4% Natural Gas Supply – 6% PG & E Pipleline – 1% Other – 3%
During 2009, TID capitalized $456.8 million of additions to utility plant. TID invested $389.2 million in the Tuolumne Wind project. TID also invested $33.1 million for the Almond power plant expansion, $16.1 million to add/upgrade certain transmission and distribution assets, $9.4 million for routine expansion which consists of transformers, T&D lines, meters, lights, and new services and $2.3 million in Irrigation improvements. Cash and Investments TID's cash and investments increased $49.5 million during 2009. This was primarily due to cash financing activities regarding the TWPA Bond issuance. Total proceeds from the issuance amounted to approximately $428.9 million of which a total of $391.5 was used to acquire the wind farm resulting in a net increase in cash and investments of approximately $37.4 million. Of the $37.4 million increase, $36.1 million of the amount makes up the TWPA bond reserve and TID has added $11.5 million for TWPA debt service due January 1, 2010 as of December 31, 2009. Other Non-current Assets Other non-current assets increased $10.3 million during 2009. This increase was primarily due to change in regulatory assets of $7.4 million and debt issue costs related to TWPA financing and short-term borrowings of $3.8 million offset by a net decrease in debt issue costs of $0.9 million related to the Authority B & C refinancing and normal amortization. TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
5
Management's Discussion & Analysis as of and for the Year Ended December 31, 2009
Other Current Assets
Other Non-current Liabilities and Deferred Credits
Other current assets decreased $5.6 million during 2009. This was primarily due to decrease in derivative financial instruments of $13.1 million and a decrease in interest receivable of $1.5 million offset by an increase in retail and wholesale receivables of $5.6 million, TWPA prepaid spare parts of $0.6 million, increase of gas inventories $2.4 million, and an increase in prepaid OPEB costs of $0.3 million.
LIABILITIES AND CHANGES IN NET ASSETS
Other non-current liabilities and deferred credits increased $0.5 million in 2009. The increase was due primarily to the recording of a asset retirement obligation due to the acquisition of the Tuolumne Wind Project in the amount of $2.7 million, an increase of $0.8 million in TID's share of the Transmission Agency of Northern California's obligation offset by decreases in deferred regulatory credits of $1.6 million and an increase in TID's PG&E Pipeline obligation of $1.4 million.
Long-term Debt
Other Current Liabilities
Long-term debt increased $359.3 million due to the issuance of the 2009 TWPA revenue bonds of $427.6 million, which is partially offset by scheduled principal payments.
Other current liabilities increased $116.0 million in 2009. This was primarily the result of $177.8 million issued in short-term financing offset by a decrease in Commercial Paper of $74.0 million. The short-term financings were issued to retire commercial paper and refinance WECA Bonds Series B & C. In addition, accounts payable is up $9.1 million due to capital projects and interest payable increased $12.8 million due to TWPA debt service. This was offset by a decrease in short-term financial derivatives of $10.1 million due to the change in derivative contract values held as of December 31, 2009 when compared to contract values as of December 31, 2008.
The following table shows TID's future debt service requirements from 2010 through 2014 at December 31, 2009 (dollars in thousands): $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0
2010
2011
2012
2013
Interest
2014
Principal
At December 31, 2009, TID's bond ratings are A1 from Moody's, A+ from Fitch and A+ from Standard and Poor's.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
6
Management's Discussion & Analysis as of and for the Year Ended December 31, 2009
CHANGES IN NET ASSETS Operating Revenues Operating revenues decreased $22.5 million from $336.6 million in 2008 to $314.1 million in 2009. Wholesale revenues decreased $45.4 million to $52.0 million from $97.4 in 2008 as a result of a decrease in average sales price and decrease in volume sold. Average sales price decreased approximately 50% from an average of $75/megawatt hour (MWh) in 2008 to $38/MWh in 2009 and volumes decreased by approximately 13% when compared to 2008. Wholesale gas revenues decreased $4.1 million due to decrease in gas prices of approximately 53%. Retail power revenues were up $26.5 million primarily due to an average rate increase of 15.0% effective February 1, 2009, which was slightly offset by a 1.6% decrease in consumption.
Net Investment Income
Operating Expenses
Other income is up $0.6 million in 2009 when compared to 2008. This increase is the result of a $1.7 million Federal subsidy from the issuance of Build America Bonds offset by a $0.9 million decrease in contribution in aid of construction.
Purchased power, generation and fuel expenses were $200.5 million in 2009 compared to $239.3 million in 2008. Walnut Energy Center Fuel cost decreased $22.3 million due to decreased volume and gas prices. Other electric expense and Administrative and General Expense are up due to increase in cost of employee benefits related to poor market conditions. Public Benefits expense was up $0.6 million in 2009 due to new solar programs. Depletion expense decreased $1.0 million due to decreased production and depreciation expense increased $8.0 million due primarily to the addition of TWPA.
Net investment income in 2009 was $10.0 million lower than in 2008, primarily as a result of the recognition in 2008 of $8.0 million in interest revenue that was released from the regulatory credits in connection with rate action authorized by TID Board of Directors. Derivative (Loss) Gain Net loss on derivatives increased $3.6 million, primarily as a result of contracts no longer meeting the definition of an effective hedge upon settlement. Other Income
Interest Expense Interest expense increased $7.0 million in 2009 as compared to 2008 primarily due to the addition of 2009 TWPA Revenue Bonds which had interest of $11.6 million. This increase was offset by a decrease in interest expense due to refinancing during the year and a decrease on variable rate debt resulting in a decrease in interest expense of approximately $4.6 million.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
7
Management's Discussion & Analysis as of and for the Year Ended December 31, 2008
ASSETS Utility Plant TID has invested approximately $782.9 million in utility plant assets and construction work in progress, net of accumulated depreciation at December 31, 2008. TID transferred approximately $51.0 million of assets from construction in process to utility plant assets in 2008. Net utility plant makes up 79% of TID's assets at December 31, 2008, compared to 78% in the prior year. The following chart shows the breakdown of net utility plant by major plant category at December 31, 2008 - generation, transmission, distribution, natural gas supply, pipeline, unamortized future power rights, irrigation and other:
During 2008, TID capitalized $72.9 million of additions to construction work in progress and utility plant. TID invested $4.8 million in gas field development activities. TID also invested $20.8 million for the Almond power plant LM6000, $5.9 million for a fuel cell plant, $10.3 million to add/upgrade certain transmission and distribution assets, $9.4 million for routine expansion which consists of transformers, transmission and distribution (T&D) lines, meters, lights, and new services and $5.8 million in irrigation improvements (including $2.5 million for the Domestic Water Infiltration project). Cash and Investments TID's cash and investments decreased $10.7 million during 2008. This was primarily due to cash used by capital and financing activities. Other Non-current Assets Other non-current assets increased $6.4 million during 2008. This increase was primarily due to change in regulatory assets of $7.8 million.
Generation – 46% Transmission – 7% Distribution – 23% Unamortized Future Power Rights – 2% Irrigation – 7% Natural Gas Supply – 10% PG & E Pipleline – 2% Other – 4%
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
8
Management's Discussion & Analysis as of and for the Year Ended December 31, 2008
Other Current Assets Other current assets increased $9.5 million during 2008. This was primarily due to an increase in the deferred loss related to hedged derivative financial instruments of $11.4 million as a result of adopting Governmental Accounting Standards Board Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, the prepayment of OPEB costs of $3.7 million, an increase in derivative financial instruments of $1.4 million offset by a decrease in wholesale energy receivables of $4.1 million, and a decrease in interest and other receivables of $3.2 million.
LIABILITIES AND CHANGES IN NET ASSETS Long-term Debt Long-term debt decreased $10.8 million in 2008 as a result of scheduled principal payments. The following table shows TID's future debt service requirements from 2009 through 2013 at December 31, 2008 (dollars in thousands):
At December 31, 2008, TID's bond ratings are A1 from Moody's, A+ from Fitch and A+ from Standard and Poor's. In 2004, TID purchased a financial guaranty insurance policy to insure the regularly scheduled payment of principal and interest on $201 million of 2004 Revenue Bond Series A, B and C. The 2004 Revenue Bonds Series B and C total $58.3 million and are variable rate bonds that bear interest based on weekly auction rates. In January 2008, the insurer's credit rating was downgraded and/or put on review for possible downgrade by several credit agencies. This resulted in increases in interest rates during a portion of 2008; however, by year end, rates declined to 3% and 4%. To minimize this interest rate exposure, TID is considering a number of alternatives if the markets continue to perform erratically. Under the terms of the bond indenture, the Series B and C Revenue Bonds cannot be put back to TID. There have been no failed auctions to date. Other Non-current Liabilities and Deferred Credits Other non-current liabilities and deferred credits decreased $5.7 million in 2008. The decrease was due primarily to a decrease in deferred regulatory credits of $7.4 million offset by an increase in TID's share of the Transmission Agency of Northern California's obligation of $1.8 million.
$35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
2009
2010
2011
2012
Interest
2013
Principal
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
9
Management's Discussion & Analysis as of and for the Year Ended December 31, 2008
Other Current Liabilities Other current liabilities increased $48.9 million in 2008. This was primarily the result of an increase in Commercial Paper of $34.6 million and an increase in derivative financial instruments of $12.0 million.
portfolio. Public Benefits expense was up $2.9 million in 2008 due to new solar programs. Depletion expense increased $4.2 million due to increased production and fully depleting abandoned wells, and depreciation increased $0.3 million.
CHANGES IN NET ASSETS
Net Investment Income
Operating Revenues
Net investment income in 2008 was $8.2 million higher than in 2007, primarily as a result of the recognition of $8.0 million in interest revenue that was released from the regulatory credits in connection with rate action authorized by TID Board of Directors in December 2008.
Operating revenues increased $29.8 million from $306.8 million in 2007 to $336.6 million in 2008. Retail power revenues were up $13.6 million primarily due to an increase in Power Supply Adjustment (PSA) revenue, and a 0.6% increase in consumption. Wholesale revenues increased $11.0 million to $97.4 from $86.4 million in 2007 as a result of an increase in average sales price of approximately 22% from an average of $61/megawatt hour (MWh) in 2007 to $75/MWh in 2008, slightly offset by a decrease in volumes sold of approximately 11.0%. Operating Expenses Purchased power, generation and fuel expenses were $239.3 million in 2008 compared to $205.5 million in 2007. Walnut Energy Center Fuel cost increased $31.0 million due to increased volume and gas prices. Other electric expense is up $0.7 million due to increased maintenance on overhead lines. Administrative and General expense is up $1.2 million related to enhancing TID's renewable energy
Other Income Other income is down $0.8 million in 2008 when compared to 2007. This decrease is the result of a $0.7 million decrease in contribution in aid of construction and a $0.1 million decrease in property tax revenue. Interest Expense Interest expense decreased $3.5 million in 2008 as compared to 2007. Interest expense on TID's variable rate debt was down $0.9 million in 2008 due to a decrease in interest rates. Capitalized interest was approximately $2.0 million compared to $0.8 million in 2007. Interest expense related to the Authority decreased by $1.3 million due to lower interest rates.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008
10
Financial Statements
Consolidated Balance Sheets December 31, 2009 and 2008
(dollars in thousands)
ASSETS Utility plant, net Investments and other long-term assets: Cash and cash equivalents restricted for long-term purposes Long-term investments, including restricted amounts Debt issuance costs and other assets Deferred regulatory asset Current assets: Cash and cash equivalents, including restricted amounts Short-term investments, including restricted amounts Retail accounts receivable, net Wholesale accounts receivable, net Accrued interest and other receivables Materials and supplies, net Prepaid expenses and other current assets Derivative financial instruments Total assets
2009
2008
$ 1,200,225
$ 782,936
44,925 58,741 7,800 24,358 135,824
15,950 54,328 4,968 16,950 92,196
63,798 16,444 18,440 9,675 4,754 3,151 11,736 2,375 130,373 $ 1,466,422
51,392 12,712 16,852 5,616 6,251 3,062 18,797 5,184 119,866 $ 994,998
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
11
Financial Statements
Consolidated Balance Sheets December 31, 2009 and 2008 (continued) (dollars in thousands)
Capitalization and Liabilities Capitalization: Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Long-term debt, net of current portion Total capitalization Liabilities and deferred credits: Deferred regulatory credits Derivative financial instruments, net of current portion Asset Retirement Obligation Lease obligation Affiliate obligation Current liabilities: Commercial paper notes and short term financing Current portion of long-term debt Power purchases payable Accounts payable and accrued expenses Accrued salaries, wages and related benefits Customer deposits and advances Accrued interest payable Current portion of lease obligation Derivative financial instruments Commitments and contingencies Total capitalization and liabilities
2009
2008
$ 254,332 15,066 82,407
$ 280,956 11,060 64,095
$ 351,805
356,111
730,725
372,696
1,082,530
728,807
18,184 173 2,628 9,158 5,837 35,980
19,760 142 10,576 5,066 35,544
258,111 12,480 15,743 21,875 6,833 7,161 20,011 1,669 4,029 347,912
154,069 11,215 15,185 12,797 6,790 7,123 7,246 1,394 14,828 230,647
$ 1,466,422
$ 994,998
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
12
Consolidated Statements of Revenues, Expenses and Changes in Net Assets For the years ended December 31, 2009 and 2008 (dollars in thousands)
Operating revenues: Electric: Retail Wholesale Irrigation Wholesale gas Other Operating expenses: Purchased power Generation and fuel Other electric Irrigation Public benefits Administration and general Depreciation and amortization Operating income Nonoperating revenues and expenses: Net investment income Other income, net Derivative (loss) gain Interest expense Increase (decrease) in net assets Net assets, beginning of year Net assets, end of year
2009
2008
$ 241,500 52,047 6,832 10,472 3,269 314,120
$ 214,955 97,385 6,570 14,592 3,061 336,563
71,352 129,202 19,801 11,257 6,611 20,576 39,426 298,225 15,895
95,460 143,792 17,259 10,239 6,041 18,819 32,404 324,014 12,549
3,660 6,446 (2,963) (27,344) (20,201)
13,660 5,808 602 (20,388) (318)
(4,306)
12,231
356,111
343,880
$351,805
$356,111
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
13
Consolidated Statements of Cash Flows For the years ended December 31, 2009 and 2008 (dollars in thousands) Cash flows from operating activities: Receipts from electric customers Receipts from wholesale power sales Receipts from irrigation customers Receipts from sales of gas Payments to vendors for purchased power Payments to employees and vendors for generation and fuel and other electric Payments to employees and vendors for irrigation Payments to employees and vendors for administration and general Other receipts and payments, net Net cash provided by operating activities Cash flows from capital and related financing activities: Acquisition and construction of capital assets Proceeds from contributions in aid of construction Proceeds from issuance of long-term debt Repayment of long-term debt Repayment of long-term lease obligation Borrowing under long-term lease obligation Repayment of commercial paper and short-term borrowings Proceeds from issuance of commercial paper and short-term borrowings Interest payments on long-term debt Interest payments on long-term lease obligation Build America Bond receipts Net cash provided by (used in) capital and related financing activities Cash flows from investing activities: Investment income Derivative (loss) gain Purchases of investments Sales of investments Net cash provided by (used in) investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Reconciliation of cash and equivalents to balance sheet: Cash and cash equivalents restricted for long-term purposes Cash and cash equivalents, including restricted amounts
2009
2008
$239,950 47,988 6,791 10,854 (78,022)
$214,920 101,487 6,529 14,974 (101,782)
(143,451) (14,166) (20,634) (3,040) 46,270
(164,562) (10,251) (22,189) 12,060 51,186
(445,866) 1,812 425,138 (69,515) (1,143) (134,389) 238,698 (13,344) (694) 1,702
(75,913) 2,728 (10,775) 2,068 (159) 34,808 (19,880) (654) -
2,399
(67,777)
4,003 (2,236) (94,743) 85,688 (7,288)
5,891 (105,165) 114,345 15,071
41,381 67,342 $108,723
(1,520) 68,862 $67,342
$44,925 63,798 $108,723
$15,950 51,392 $67,342
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
14
Consolidated Statements of Cash Flows For the years ended December 31, 2009 and 2008 (continued) (dollars in thousands) Adjustment to reconcile operating income to net cash provided by operations: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Change in fair value of derivative financial instruments Other income Other changes in operating assets and liabilities: Accounts receivable Materials and supplies Prepaid expenses and other current assets Regulatory assets and credits Power purchases payable Accounts payable and accrued expenses Accrued salaries, wages and related benefits Customer deposits and advances Affiliate obligation Net cash provided by operating activities
2009
2008
$15,895
$12,549
39,426 (8,685) 2,980
32,404 11,360 4,173
(4,493) (89) 7,092 (8,074) 558 808 43 38 771 $46,270
6,495 516 (15,785) (7,239) 2,372 3,266 (645) (100) 1,820 $51,186
$8,270 (726) 2,827 801 -
$2,995 602 8,000
Supplemental non-cash investing and financing activities: Accounts payable related to construction of capital assets Investment (loss)income from derivatives Asset Retirement Obligation Refunding loss Rate Stabilization transfer
The accompanying notes are an integral part of these financial statements.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
15
Notes to Consolidated Financial Statements December 31, 2009 and 2008
1. ORGANIZATION, DESCRIPTION OF BUSINESS AND LIQUIDITY The Turlock Irrigation District (“TID”) was organized under the Wright Act in 1887 and operates under the provisions of the California Water Code as a special district of the State of California. As a public power utility, TID is not subject to regulation or oversight by the California Public Utilities Commission (CPUC). TID provides electric power and irrigation water to its customers. TID's Board of Directors (the “Board”) determines its rates and charges for its commodities and services. TID levies ad valorem property taxes on property located in the counties of Stanislaus and Merced. TID may also incur indebtedness, including issuing bonds, and is exempt from payment of federal and state income taxes. The District has short-term debt obligations maturing in 2010 totaling $177,810, which exceeds existing working capital resources. TID's plans to sustain liquidity and refinance the debt are described in the last paragraph of Note 8. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Accounting TID maintains its accounts in accordance with generally accepted accounting principles for proprietary funds as prescribed by the Governmental Accounting Standards Board (GASB), and where not in
conflict with GASB pronouncements, accounting principles prescribed by the Financial Accounting Standards Board (FASB). TID is accounted for as an enterprise fund and is financed and operated in a manner similar to that of a private business enterprise. TID uses the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. TID's accounting records generally follow the Uniform System of accounts for public utilities and licensees prescribed by the Federal Energy Regulatory Commission (FERC), except as it relates to the accounting for contributions in aid of construction (CIAC). Component Units The Walnut Energy Center Authority (the “Authority”) owns and operates a 250 MW natural gas fueled generation facility, which commenced commercial operations on February 28, 2006. Although the Authority is a separate legal entity from TID, it is blended into and reported as part of TID because of the extent of its operational and financial relationship with TID. Accordingly, all operations of the Authority are consolidated into TID's financial statements. The Tuolumne Wind Project Authority (“TWPA”) was formed in 2008 for the purpose of purchasing a wind farm in the State of Washington. On July 14, 2009, the TWPA completed the purchase of the membership interest in a 136.6 MW wind farm, consisting of 62wind turbine generators located in Klickitat County,
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
16
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Washington (see Note 3). Although TWPA is a separate legal entity from TID, it is blended into and reported as part of TID because of the extent of its operational and financial relationship with TID. Accordingly, all operations of the TWPA are consolidated into TID's financial statements since its acquisition date of July 14, 2009. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. TID's more significant estimates include fair value estimates for investments and derivative financial instruments; allowance for doubtful accounts; estimated useful lives of utility plant; health insurance reserves; and workers' compensation reserves. Long-term and Short-term Debt Long-term debt is recorded at the principal amounts of the obligations adjusted for original issue discounts and premiums. The premiums and discounts on bonds issued are amortized over the terms of the bonds using the effective interest method as a component of interest expense.
Debt defeasance charges result from debt refunding transactions and comprise the difference between the reacquisition costs and the net outstanding debt balances including deferred costs of the defeased debt at the date of the defeasance transaction. Such charges are included as a component of long-term debt and amortized as a component of interest expense over the shorter of the life of the refunded debt or the new debt, using the effective interest method. Utility Plant Utility plant is recorded at cost. The cost of additions, renewals and betterments are capitalized; repairs and minor replacements are charged to operating expenses as incurred. Interest and related financing costs are capitalized as a component of major utility plant development projects. TID incurred gross interest cost of $29,460 and $22,374 for years ending December 31, 2009 and 2008, respectively, of which $2,116 and $1,986 were capitalized during 2009 and 2008, respectively. Depreciation is computed using the straight-line method over the estimated useful lives, which generally range from 20 to 40 years and 40 to 150 years for electric and irrigation related assets, respectively. The estimated useful lives of furniture, fixtures, equipment and other assets range from 5 to 25 years. Upon retirement, the cost of depreciable utility plant, plus removal costs, less salvage, is charged to accumulated depreciation.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
17
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Future power rights are costs incurred by TID in development of hydroelectric facilities owned by others who provide power to TID. Such costs are recorded as a component of utility plant and are being amortized on a straight-line basis over the 49-year periods to which these rights apply. Impairment of Long-Lived Assets TID accounts for potential impairments in accordance with GASB accounting rules which govern, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries under which TID
evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly and when full recovery through utility rates or other means is not considered probable. TID did not incur impairment losses in 2009 or 2008. Intangible Assets TID accounts for intangible assets in accordance with GASB account rules which govern Accounting and Financial Reporting for Intangible Assets, which provides guidance regarding how to identify, account for and report intangible assets. Intangible assets are defined as assets that lack physical substance, are nonfinancial in nature, and have an initial useful life extending beyond a single reporting period. Accounting and Financial Reporting for Intangible Assets provides that intangible assets be classified
as capital assets, except for items explicitly excluded from the scope of the standard. Included in utility plant are costs related to emission credits acquired that may be necessary to operate the gas fired facility which meet the definition of an intangible asset as defined. Such credits have an indeterminate life and are therefore, not amortized. At December 31, 2009 and 2008 TID had emission credits totaling $20,187. Investments in Gas Properties TID owns non-operating ownership interests in gas producing properties in Wyoming and Texas. TID uses the successful efforts method of accounting for its investments in gas producing properties. Costs to drill and complete wells that access economically recoverable reserves are capitalized as a component of utility plant on the balance sheet. Costs to drill wells that do not find economically recoverable reserves are expensed. The capitalized costs of producing gas properties, after considering estimated residual salvage values, are depleted by the unit-ofproduction method based on the estimated future production of proved reserves for the properties. Gas production from TID's share of these properties is sold to wholesale buyers as an economic hedge to offset the net cost of TID's gas supply. Sales of gas in 2009 and 2008 totaled $10,472 and $14,592, respectively. Depletion expense, which is included as a component of depreciation expense in the
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
18
Notes to Consolidated Financial Statements December 31, 2009 and 2008
accompanying statement of revenues, expenses and changes in net assets, totaled $6,089 and $7,091, respectively, in 2009 and 2008. Cash, Cash Equivalents and Investments Cash equivalents include all debt instruments with original maturity dates of three months or less from the date of purchase and all investments in the California Asset Management Program (CAMP) and the Local Agency Investment Fund (LAIF). The debt instruments are reported at amortized cost which approximates fair value and the CAMP and LAIF are reported at the value of their pool shares. CAMP is a joint powers authority (JPA) and public agency whose investments are limited to those permitted by the California Government Code. Investments in CAMP shares are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other governmental agency. LAIF has an equity interest in the State of California Pooled Money Investment Account (PMIA). PMIA funds are on deposit with the State's Centralized Treasury System and are managed in compliance with the California Government Code, according to a statement of investment policy which sets forth permitted investment vehicles, liquidity parameters and maximum maturity of investments. The PMIA cash and investments are recorded at amortized cost which approximates market. TID's deposits with CAMP and LAIF are generally available for withdrawal on demand.
All investments are carried at their fair market value, generally based on market prices quoted by dealers for those or similar investments. Investment income includes both realized gains and losses and unrealized changes in the fair market value of investments, unless deferred as a regulatory asset or credit. In accordance with provisions of the credit agreements relating to TID's long-term debt obligations, restricted funds held by trustees have been established to provide for certain debt service and project funding requirements. The restricted funds held by trustees are invested primarily in United States (U.S.) government securities and related instruments with maturities no later than the expected date of the use of such funds. Participation in Joint Power Authorities TID's ownership investments in JPAs, all representing less than 20% ownership interests except for the Authority and TWPA, are accounted for using the cost method. Debt Issuance Costs Costs incurred in connection with the issuance of debt obligations, principally underwriters' and legal fees, are deferred on the balance sheet as debt issuance costs and are amortized, as a component of interest expense, over the terms of the related obligations using the effective interest method.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
19
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Accounts Receivable and Allowance for Doubtful Accounts
$301 at both December 31, 2009 and 2008, respectively.
Accounts receivable arise from billings to customers for the sale of power and water, and certain improvements made to customers' properties. Accounts receivable also includes an estimate for unbilled retail and wholesale revenues related to power delivered between the last billing and the last day of the reporting period.
Long-term Lease Obligation
TID recognizes an estimate of uncollectible accounts for its retail and wholesale receivables based upon its historical experience with collections, current market conditions and specific identification of known losses. At December 31, 2009 and 2008, the allowance for doubtful accounts relating to retail electric receivables totaled $420 and $349, respectively. At both December 31, 2009 and 2008, the allowance on the wholesale receivables was $3,820 which relates to collectibility issues resulting from the uncertain California wholesale energy markets. TID records bad debt expense related to electric service and wholesale activities as administration and general in the statements of revenues, expenses and changes in net assets. In 2009 and 2008, bad debt expense relating to uncollectible accounts receivable was $561 and $492, respectively. Materials and Supplies Materials and supplies are used in TID's operations and are recorded at average cost, net of reserves for obsolete items. Reserves for obsolete items totaled
In connection with completing the Walnut Energy Center, TID entered into a long-term transmission arrangement with Pacific Gas and Electric (PG&E) which included PG&E constructing new, and reinforcing existing natural gas transmission facilities. The arrangement represents, in substance, a capital lease wherein TID (lessee) is obligated to repay all costs associated with the construction and reinforcement of the transmission facilities to PG&E through billings on transmission usage. As such, TID records its obligation to PG&E as a long-term lease obligation and the associated assets in utility plant in accordance with FASB accounting rules governing lease accounting. At inception, the contract required an up-front payment of $1,600 plus an irrevocable payment obligation which totals $13,800 on a net present value basis to be paid over a ten year period with the amounts due within one year classified as current. Contract provisions provides for periodic evaluation of TID's usage of natural gas which has resulted in additional amounts being paid to PG&E or received from PG&E in the first three years of the contract. The lease obligation is included in TID's balance sheet at December 31, 2009 and 2008 with a balance of $10,827 and $11,970, respectively, along with the related assets with a net book value of $9,543 and $11,091, respectively, in utility plant. Future lease
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
20
Notes to Consolidated Financial Statements December 31, 2009 and 2008
payments are approximately $1.5 million in each of the next seven years. Deferred Regulatory Asset and Credits TID's Board has the authority to establish the level of rates charged for all District services. As a regulated entity, TID's financial statements are prepared in accordance with FASB accounting rules governing regulatory accounting, which requires the effects of the rate making process be recorded in the financial statements. Accordingly, certain expenses and income, normally reflected in operations as incurred, are recognized when included in rates and recovered from or refunded to customers as set forth in rate actions taken by the Board. Compensated Absences TID accrues vacation leave, sick leave and other compensated absences earned as liabilities when the employees earn the benefits. At December 31, 2009 and 2008, the total estimated liability for vacation, sick, and other compensated absences was $4,100 and $4,070, respectively, and is included in accrued salaries, wages and related benefits in the accompanying balance sheet. Self-insurance Liability Substantially all of TID's assets are insured against possible losses from fire and other risks. TID carries insurance coverage to cover general liability claims in excess of $1,000 per occurrence up to $35,000 and worker's compensation claims in excess of $750 per
occurrence. Excess insurance for medical claims for the years ended December 31, 2009 and 2008 was $150 and $125, respectively, per employee and covered retiree. TID records liabilities for unpaid claims when they are probable of occurrence and the amount can be reasonably estimated. TID purchases its excess worker's compensation insurance from the California State Association of Counties (CSAC) Excess Insurance Authority. The risk of loss in excess of $750 per occurrence is transferred to the insurance pool. The accompanying financial statements include accrued expenses for general liability, workers' compensation and medical, dental and vision claims based on TID's best estimates of the ultimate cost of settling outstanding claims and claims incurred, but not reported. At December 31, 2009 and 2008, TID's estimated self-insurance liability for its worker's compensation claims totaled $4,200 and $3,450, respectively, and is reported as a component of accounts payable and accrued expenses in the consolidated balance sheets. At both December 31, 2009 and 2008, TID's estimated self-insurance liability for its medical claims totaled $780 and is reported as a component of accrued salaries, wages and related benefits in the consolidated balance sheets. Gas Price Swap and Option Agreements TID uses forward purchase agreements, swaps and option agreements to hedge the impact of market volatility on gas prices for its gas fueled power plants.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
21
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Expenses under the contracts, net of the payments received, are reported as a component of generation and fuel expense, in the period in which the underlying gas and power deliveries occur. Derivative Financial Instruments TID accounts for derivative instruments in accordance with GASB accounting rules, Accounting and Financial Reporting for Derivative Instruments, which establishes accounting and financial reporting standards for the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments (See Note 10). TID records derivative financial instruments, consisting of gas price swap agreements, option agreements, and gas and electricity purchase and sales agreements that are not treated as normal purchases and normal sales, at fair value on its balance sheets. Normal purchases and normal sales are contracts that are for the purchase or sale of a commodity, such as natural gas or electricity, to be used in the normal course of operations, provided that it is probable TID will take or make delivery of the commodity specified in the derivative instrument. Changes in the fair value of derivatives that do not meet the requirements of an effective hedge transaction are included in investment income. Changes in the fair value of derivatives which are effective hedges, are deferred on the balance sheet and included in prepaid expenses and other current assets and accounts payable for current derivative
contracts and in debt issue costs and other assets for non-current derivative contracts. The fair values of gas price swap and option agreements are based on forward prices from established indexes for the applicable regions, where available and forward prices obtained from a pricing service utilized by TID. The fair values of gas and electricity purchase and sales agreements are based on forward prices from both published indexes from applicable regions and discounted using established interest rate indexes, where applicable, and information obtained from a pricing service where a published index is not available. TID reports derivative financial instruments with remaining maturities of one year or less and the portion of long-term contracts with scheduled transactions over the next twelve months as current on the consolidated balance sheets. TID is exposed to risk of nonperformance if the counterparties default or if the agreements are terminated. TID monitors these risks and does not anticipate nonperformance. Net Assets TID classifies its net assets into three components – invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows: Invested in capital assets, net of related debt – This component of net assets consists of capital assets, net of accumulated depreciation reduced by the outstanding debt balances, net of unamortized debt
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
22
Notes to Consolidated Financial Statements December 31, 2009 and 2008
expenses and unspent debt proceeds. Restricted – This component consists of net assets with external constraints placed on their use. Constraints include those imposed by debt indentures, grants or laws and regulations of other governments, by law through constitutional provisions or enabling legislation. Unrestricted – This component of net assets consists of net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt”.
In 2008, the Board transferred $5,000 out of the capital improvements account to pre-fund TID's Other Post-Employment Benefits as described in Note 12. The designated funds included in unrestricted net assets were as follows at December 31:
2009 Rate Stabilization Capital Improvements
$ 34,076 7,791 $ 41,867
2008 $ 34,076 7,791 $ 41,867
Board Designated Net Assets Net assets include amounts that TID's Board designates as reserves for debt service, capital improvements and rate stabilization. The rate stabilization fund represents amounts reserved for the purpose of stabilizing electric utility rates in future periods. The Board determines the annual transfers into and out of these reserves. While the Board designates these funds as reserve funds, they are not restricted and the Board can utilize such funds for any purpose.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
23
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Purchased Power Expenses A portion of TID's power needs are provided by power purchase agreements. Expenses from such agreements, along with associated transmission costs paid to other utilities, are charged to purchased power expense in the period the power was received. Adjustments to prior billings are included in purchased power expense once the payments or adjustments can be reasonably estimated. Gains or losses on power purchase and sale transactions that are settled without physical delivery are recorded as net additions or reductions to purchased power expense. Additionally, any changes in the Power Supply Adjustment (see note 9) balance are recorded as additions or reductions to purchased power expense. For the years ended December 31, 2009 and 2008, the Power Supply Adjustment balance increased resulting in a reduction to purchased power expense of $7,408 and $7,828, respectively. CIAC and Grants TID receives CIAC for customer contributions relating to expansions to TID's distribution facilities. TID also receives grant proceeds from federal and state assisted programs for its river restoration programs and other programs. The contributions and grant proceeds are included in other income in the accompanying financial statements. When applicable, these programs may be subject to financial and compliance audits pursuant to regulatory requirements, although TID considers the
possibility of any material grant disallowances to be remote. Asset Retirement Obligations TID accounts for potential asset retirement obligations in accordance with FASB accounting rules which require the recognition and measurement of liabilities for legal obligations associated with the retirement of tangible long-lived assets. Under these rules, an obligation is recorded only when legally binding retirement obligations exist under enacted laws, statutes, written contracts or oral contracts, including obligations arising under the doctrine of promissory estoppel. Asset retirement obligations (AROs) are recognized at fair value as incurred and capitalized as a component of the cost of the related tangible longlived assets with a corresponding amount recorded as a liability. TID has identified potential retirement obligations related to certain generation, transmission and distribution facilities located on properties that do not have perpetual leases. TID's nonperpetual leased land rights generally are renewed continuously because TID intends to utilize these facilities indefinitely. Since the timing and extent of any potential asset retirements are unknown, the fair value of any obligations associated with these facilities cannot be reasonably estimated. Accordingly, no liability has been recorded at December 31, 2009 or 2008.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
24
Notes to Consolidated Financial Statements December 31, 2009 and 2008
In conjunction with the purchase of the Tuolumne Wind Project, TID recorded an ARO of $2,553 related to a decommissioning plan approved by Klickitat County. As the decommissioning plan represents a legal obligation to clean up the site at the retirement of the asset to comply with the approved contract with the Klickitat County, Washington, it meets the definition of an ARO. During the year ended December 31, 2009 TID recorded $73 of accretion expense. Recent Accounting Pronouncements In 2009, the GASB issued the Hierarchy of Generally Accepted Accounting Principles for State and Local Governments which established the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the Governmental Accounting Standards Board's (GASB) authoritative literature. The "GAAP hierarchy" consists of the sources of accounting principles used in the preparation of financial statements of state and local governmental entities that are presented in conformity with GAAP, and the framework for selecting those principles. TID adopted these principles for the year ended December 31, 2009, which had no material impact on the financial statements. In 2009, the GASB issued Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing to incorporate into the Governmental Accounting Standards Board's (GASB)
authoritative literature certain accounting and financial reporting guidance presented in the American Institute of Certified Public Accountants' Statements on Auditing Standards. This Statement addresses three issues not included in the authoritative literature that establishes accounting principles -- related party transactions, going concern considerations, and subsequent events. The presentation of principles used in the preparation of financial statements is more appropriately included in accounting and financial reporting standards rather than in the auditing literature. TID adopted this standard for the year ended December 31, 2009, which had no material impact on the financial statements. Subsequent events have been assessed through April 15, 2010. In June 2009, the FASB issued, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This Codification
became the source of authoritative U.S. generally accepted accounting principles recognized by the FASB. On the effective date of this Statement, the Codification superseded all then-existing non-SEC accounting and reporting Standards. TID adopted the codification for the year ended December 31, 2009 with no material impact on TID's financial statements. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation, with no effect on the consolidated increase or decrease in net
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
25
Notes to Consolidated Financial Statements December 31, 2009 and 2008
assets or capitalization. Such reclassifications primarily relate to the gross presentation of investment purchases and sales, which were previously presented on a net basis in the consolidated statement of cash flows. 3. ACQUISITION During 2008, TID and the Authority formed a JPA, the Tuolumne Wind Project Authority (TWPA) for the purpose of purchasing newly constructed wind farm assets in the State of Washington. In December 2008, the TWPA entered into an agreement to purchase the membership interest in Tuolumne Wind Project LLC which owns the 136.6 MW wind farm, consisting of 62-wind turbine generators located in Klickitat County, Washington. The acquisition was completed on July 14, 2009 (acquisition date) in conjunction with the funding of the TWPA 2009 Series A & B Revenue Bonds for a total purchase price of $383,516. The acquisition has been accounted for as an asset acquisition as the wind farm did not meet the definition of a business. The total capitalized costs of the asset recorded as of the acquisition date was $389,186 which includes the purchase price plus acquisition costs of $3,117 and an ARO asset of $2,553 (see Note 2). Upon completion of the acquisition, Tuolumne Wind LLC was dissolved and the wind farm was contributed to TWPA along with all relevant agreements. TWPA has no employees and all the output of TWPA is sold to TID through a Power Purchase Agreement.
Operations and Maintenance Agreement TWPA is being operated and maintained pursuant to an operating and maintenance agreement with the operator, which expires November 2018. After the initial term, the operating and maintenance agreement may be extended through successive one year periods. Total expense under the operations and maintenance agreement amounted to approximately $141 for the period from July 14, 2009 to December 31, 2009. Service Agreements There are two service agreements with each of the manufacturers of the 62 turbines. One service agreement is for 42 turbines and expires in May 2011. The other service agreement is for 20 turbines and expires in May 2014. Both service agreements are for standard operations and maintenance on the respective manufacturer's turbines over the life of the agreement. Total expense under the two service agreements amounted to approximately $1,143 for the period from July 14, 2009 to December 31, 2009. Interconnection and Transmission Service Agreements The TWPA has two interconnection and transmission agreements with local utilities in the Pacific Northwest. The interconnection agreements allow for the delivery of the wind energy output from TWPA to various delivery points in the Northwest. The agreements have an initial term of 10 years and 20
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
26
Notes to Consolidated Financial Statements December 31, 2009 and 2008
years, respectively, one of which also includes a 10 year renewal option. Total expense under the two interconnection service agreements amounted to approximately $833 for the period from July 14, 2009 to December 31, 2009. Land Leases The TWPA has leases with 9 land owners on which the turbines are located. The land owners are paid a fixed price per kilowatt based on the output of the respective turbines. Each agreement is for 20 years with two 10 year renewal options. Total expense for the period from June 14, 2009 to December 31, 2009 was $635. The annual lease expense under the remaining initial term of the land leases (based on average wind data for the last 10 years) is estimated as follows: Amount 2010 2011 2012 2013 2014 Thereafter
$
$
1,154 1,154 1,154 1,154 1,154 16,733 22,503
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
27
Notes to Consolidated Financial Statements December 31, 2009 and 2008
(dollars in thousands)
4. UTILITY PLANT The summarized activity of TID's utility plant during 2009 is presented below:
Nondepreciable utility plant Land Emission credits Construction in progress Total nondepreciable utility plant Depreciable utility plant Generation Distribution Transmission General Future power rights Irrigation Investment in gas properties Total depreciable utility plant Less: accumulated depreciation, amortization and depletion Depreciable utility plant, net Utility plant, net
Balance December 31, 2008
Balance December 31, 2009
Additions
Transfers
Disposals
$ 26,273 20,187 36,264 82,724
$ 175 70,184 70,359
$ (52,331) (52,331)
$ -
$ 26,448 20,187 54,117 100,752
388,100 259,964 93,428 62,961 26,465 52,615 90,909 974,442
386,405 386,405
17,825 18,190 1,281 9,156 16 2,955 2,908 52,331
(5) (1,017) (1,945) (2,967)
792,325 277,137 94,709 70,172 26,481 55,570 93,817 1,410,211
(274,230) 700,212 $ 782,936
(39,426) 346,979 $ 417,338
52,331 $ -
2,918 (49) $ (49)
(310,738) 1,099,473 $ 1,200,225
The summarized activity of TID's utility plant during 2008 is presented below:
Nondepreciable utility plant Land Emission credits Construction in progress Total nondepreciable utility plant Depreciable utility plant Generation Distribution Transmission General Future power rights Irrigation Investment in gas properties Total depreciable utility plant Less: accumulated depreciation, amortization and depletion Depreciable utility plant, net Utility plant, net
Balance December 31, 2007
Disposals
Balance December 31, 2008
Additions
Transfers
$ 25,386 5,732 34,499 65,617
$ 887 14,455 52,779 68,121
$ (51,014) (51,014)
$ -
$26,273 20,187 36,264 82,724
383,062 239,946 76,721 60,784 26,426 49,786 87,177 923,902
4,796 4,796
5,117 21,992 16,707 4,187 39 2,972 51,014
(79) (1,974) (2,010) (143) (1,064) (5,270)
388,100 259,964 93,428 62,961 26,465 52,615 90,909 974,442
(246,004) 677,898 $ 743,515
(32,404) (27,608) $ 40,513
51,014 $ -
4,178 (1,092) $ (1,092)
(274,230) 700,212 $782,936
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
28
Notes to Consolidated Financial Statements December 31, 2009 and 2008
5. PARTICIPATION IN JOINT POWERS AGENCIES Transmission Agency of Northern California TID is a member of the Transmission Agency of Northern California (TANC), a JPA consisting of fifteen municipal utilities. TANC is a participant, with a 79.3% share of the California-Oregon Transmission Project (COTP) and other facilities for electric power transmission. TANC develops, operates and manages these projects. The COTP provides electric transmission between the Pacific Northwest and California. TID's entitlement share of TANC's portion of the COTP and other facilities is 15.1% and 12.5% for the years ending December 31, 2009 and 2008, representing approximately 206 megawatts (MW) and 171, respectively, of transmission capacity. TID also has a 6.3% entitlement share of TANC's transmission under the South of Tesla transmission agreements, which provides TID with 22 MW and 19 MW for the years ending December 31, 2009 and 2008, respectively, of transmission during normal operating conditions between Tesla and Midway. Under the TANC agreements, TID is responsible for TANC's development, operating and debt service costs on a take-or-pay basis proportionate to its entitlement share. During 2009 and 2008, TID's total expenses in connection with its TANC agreements, included in purchased power expense, totaled $8,825 and $8,973, respectively. At December 31, 2009 and 2008, TID has an affiliate obligation payable to TANC of $5,837 and $5,066, respectively, relating to certain
non-cash expenses and other cumulative differences between expenses recognized for accounting purposes and cash payments made to the Agency. Northern California Power Agency TID is a member of the Northern California Power Agency (NCPA), a JPA consisting of seventeen member agencies. NCPA develops and operates projects for the generation and transmission of electric power. TID has a 6.3% entitlement share in the capacity and energy from NCPA Geothermal Plants l and 2 (the “Geothermal Project�). TID is responsible for development, operating and debt service costs on a take-or-pay basis in proportion to its entitlement share. TID's expenses relating to the Geothermal Project, included in purchased power expense, were $4,076 and $4,081 in 2009 and 2008, respectively. At December 31, 2009 and 2008, TID has prepaid expenses related to the Geothermal Project to NCPA of $1,480 and $1,247, respectively, which is included in prepaid expenses and other current assets on the balance sheets. The Geothermal Project continues to experience lower than expected steam production from the geothermal wells on its leasehold properties. Therefore, NCPA operates the facility at lower output levels than originally planned, which increases the cost of power per unit. Although the cost of power from the Geothermal Project is higher than that supplied from
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
29
Notes to Consolidated Financial Statements December 31, 2009 and 2008
other sources, TID is obligated to pay its contractual takeor-pay obligations under its agreement with NCPA until they are fully satisfied, regardless of resulting cost or availability of energy. Management plans to continue to include the Geothermal Project in its long-term resource plan and, as such, its related costs are fully recoverable in TID's rates.
$63,956 at December 31, 2009. Should other members of TANC or NCPA default on their obligations to these JPAs, TID would be required to make “step up� payments, up to 25% of its proportionate share, to cover a portion of the defaulted payments and would be entitled to the same proportion of additional power production or transmission.
As described in Note 12, TID purchases natural gas and pays related transmission costs to NCPA for delivery of natural gas to some of TID's natural gas fired power plants. Such natural gas purchases and transmission expenses amounted to $5,686 and $6,492 for the years ended December 31, 2009 and 2008, respectively, included in generation and fuel expenses on the consolidated statements of revenues, expenses and changes in net assets. Financial Summary of NCPA and TANC The combined summarized financial information of NCPA and TANC is as follows at December 31: 2009
2009
(unaudited)
(unaudited)
Total assets
$ 1,346,120
$ 1,335,413
Total liabilities Total net assets
$ 1,314,246 31,874 $ 1,346,120
$ 1,291,442 43,971 $ 1,335,413
$ 282
$ 30,456
Excess of revenues over expenses for the year
The long-term debt of TANC and NCPA is collateralized by a pledge and assignment of net revenues of each JPA, supported by the take-or-pay commitments of TID and other members. As such, TID is contingently obligated for its proportionate share of TANC's liabilities of $488,030 and NCPA's debt related to the Geothermal Project of
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
30
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Walnut Energy Center Authority TID and Merced Irrigation District formed the Authority for the principal purpose of owning and operating a 250 MW natural gas fueled generation facility that is blended into and reported as a component unit of TID. All operations of the Authority are consolidated into TID's financial statements. The Authority's financial information is summarized as follows: 2009
2008
$ 6,233 305,542
$ 3,523 289,218
Total assets
$ 311,775
$ 292,741
Current liabilities Long-term debt, net of current portion
$ 163,832 147,943
$ 86,144 206,597
Total liabilities
$ 311,775
$ 292,741
$ 109,632 100,728 8,904
$ 126,625 114,990 11,635
Nonoperating revenues and expenses, net
(8,904)
(11,635)
Changes in net assets
$
$
Summarized Balance Sheets Current assets Noncurrent assets
Summarized Statements of Revenues, Expenses and Changes in Net Assets Operating revenues Operating expenses Operating income
-
-
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
31
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Tuolumne Wind Project Authority As described in Note 3, TWPA was formed for the principal purpose of acquiring and operating wind farm assets. TWPA is blended into and reported as a component unit of TID. All operations of TWPA are consolidated into TID's financial statements. The TWPA's balance sheet as of December 31, 2009 and the results of their operations for the period from July 14, 2009 through December 31, 2009 are summarized as follows:
Summarized Balance Sheets Current assets Noncurrent assets Total assets Current liabilities Long-term debt, net of current portion Total liabilities
2009
$ 15,429 428,988 $ 444,417 $12,901 431,516 $ 444,417
Summarized Statements of Revenues, Expenses and Changes in Net Assets Operating revenues Operating expenses Operating income Nonoperating revenues and expenses, net Changes in net assets
$ 14,719 4,838 9,881 (9,881) $ -
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
32
Notes to Consolidated Financial Statements December 31, 2009 and 2008
6. CASH, CASH EQUIVALENTS AND INVESTMENTS TID's investment policies are governed by the California Government Codes and its Bond Indenture, which restricts TID's investment securities to obligations which are unconditionally guaranteed by the U.S. Government or its agencies or instrumentalities; direct and general obligations of the State of California (State) or any local agency within the State; bankers' acceptances; commercial paper; certificates of deposit; time certificates of deposit; repurchase agreements; medium-term corporate notes; shares of beneficial interest; mortgage pass-through securities; and deposits with the LAIF and CAMP. Investments in CAMP and LAIF are unregistered, pooled funds. TID's investment policy includes restrictions for investments relating to maximum amounts invested as a percentage of total portfolio and with a single issuer, maximum maturities, and minimum credit ratings. Credit Risk To mitigate the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment, TID limits investments to those rated, at a minimum, “A1� or equivalent for medium-term notes and "A" for commercial paper by a nationally recognized rating agency. The following schedules present the credit risk at December 31, 2009 and 2008. The credit ratings listed are from Standard and Poor's. NR means not rated and TSY refers to U.S. Treasury securities.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
33
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Credit Rating
2009
Cash and cash equivalents: Deposits California Asset Management Program U.S. Treasury bill Repurchase agreements Local Agency Investment Fund
NR AAA TSY NR NR
$42,733 7,775 13,290 63,798
$29,809 5,157 7,659 8,767 51,392
Short-term investments: Corporate notes Government sponsored enterprises U.S. Treasury bill U.S. Treasury Notes
A, A+ AAA TSY TSY
4,839 4,113 5,285 2,208 16,445
3,489 9,223 12,712
Cash and cash equivalents restricted for long-term purposes: Deposits California Asset Management Program Local Agency Investment Fund
NR AAA NR
44,925 44,925
11,815 4,135 15,950
31,346 14,555 12,839 58,740 $183,908
34,372 4,915 15,041 54,328 $134,382
$30,860 47,200 7,791 85,851
$29,710 47,200 7,791 84,701
62,196 33,670 2,191 98,057 $183,908
31,375 18,306 49,681 $134,382
Long-term investments: Government sponsored enterprises U.S. Treasury notes Corporate notes
AAA TSY AAA, AA, A+
2008
The schedule below presents restricted and unrestricted balances of cash, cash equivalents and investments as of December 31, 2009 and 2008: General operating funds: Operating accounts Funds designated for rate stabilization Funds designated for capital improvements Restricted funds: Reserve funds Debt service funds Letter of Credit Deposit
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
34
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Custodial Credit Risk This is the risk that in the event of the failure of a depository financial institution or counterparty to a transaction, TID's deposits may not be returned or TID will not be able to recover the value of its deposits, investments or collateral securities that are in the possession of another party. TID does not have a deposit policy for custodial credit risk. At December 31, 2009 and 2008, cash, cash equivalents and investments, excluding the LAIF and CAMP, totaling $176,134 and $109,665, respectively, are collateralized with securities held by the pledging bank's trust department in TID's name; of which $13,185 and $11,074, respectively, are also insured by the FDIC. Investments in the LAIF and CAMP at December 31, 2009 and 2008, of $7,775 and $24,717, respectively, were uninsured and uncollateralized. Under the Temporary Liquidity Program (TLGP) announced in October 2008, the FDIC has temporarily increased their standard coverage from $100 to $250 for deposits in interest bearing accounts until December 31, 2009. For noninterest bearing accounts there is unlimited insurance coverage until December 31, 2009 for institutions participating in the TLGP. Effective October 2009, the TLGP extended the date from December 31, 2009 to June 30, 2010. Also under the TLGP, the FDIC has agreed to guarantee new senior unsecured bank debt issued after April 1, 2009 and before October 31, 2009 and maturing on or before December 31, 2012. Under the TLGP, TID has a total of $3,398 and $3,294 in interest bearing and non-interest bearing accounts at December 31, 2009 and 2008, respectively $9,537 and $7,780 in investments at December 31, 2009 and 2008, respectively, which are guaranteed by the FDIC under the TLGP.
Concentration of Credit Risk This is the risk of loss attributed to the magnitude of an entity's investment in a single issuer. TID places no limit on the amounts invested in any one issuer for federal
agency securities, except for mortgage pass through securities, which may not exceed 20% of TID's portfolio. For disclosure purposes, investments issued or explicitly guaranteed by the U.S. government and investment in mutual funds and external investment pools are not required to be evaluated for concentration of credit risk. The following are the concentrations of risk representing 5% or greater in a single issuer in either year:
Investment type Federal Home Loan Bank* Federal National Mortgage Association* Federal Home Loan Mortgage Coporation* Federal Farm Credit Bank*
2009
2008
11% 5% 18% 1%
17% 13% 6% 6%
* Indicates a government sponsored enterprise
Interest Rate Risk Although TID has restrictions as to the maturities of some of the investments, it does not have a formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increases in interest rates. Of TID's total portfolio at December 31, 2009 and 2008, all of TID's cash and cash equivalents have maturities of 90 days or less. Investments maturing within one year are classified as current and the remaining investments mature between one to three years. In accordance with provisions of the credit agreements relating to certain of TID's long-term debt obligations, restricted funds are maintained at levels set forth in the agreements to provide for debt service reserve and project funding requirements. These funds are held by trustees and are invested in U.S. Government securities and related instruments with maturities no later than the expected date of the use of the funds.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
35
Notes to Consolidated Financial Statements December 31, 2009 and 2008 7. LONG-TERM DEBT Long-term debt consists of the following at December 31: 2009
2008
Revenue bonds, fixed interest rates of 4.0% to 6.3%, maturing through 2034
$244,820
$254,045
Revenue bonds, variable interest rates, maturing through 2034
5,650
64,840
427,575
-
26,785
26,785
33,600 738,430
34,700 380,370
(12,480) 7,867 (3,092) $730,725
(11,215) 7,106 (3,565) $372,696
TWPA revenue bonds, fixed interest rates of 3.0% to 6.9%, maturing through 2034 Certificates of participation, fixed interest rates of 4.5% to 5.0%, maturing through 2033 Certificates of participation, variable interest rates, maturing through 2031 Total long-term debt outstanding Less: Current portion Unamortized premiums and discounts, net Deferred losses on bond refundings, net Total long-term debt, net
Debt Issuance and Refunding In July 2009, TID issued 2009 Series A and B TWPA revenue bonds totaling $427,575, for the purpose of financing the acquisition of the Tuolumne Wind Project. The Series B bonds were sold as Build America Bonds under the American Recovery and Reinvestment Act passed in February 2009. The Build America Bonds were sold as a taxable issue and TID receives a federal subsidy of 35% of the interest paid on the bonds. For the year ended December 31, 2009 TID received $1,703 in a federal subsidy which is included in other income on the Statement of Revenues, Expenses, and Changes in Net Assets.
In May 2009, TID issued 2009 Series A revenue refunding bonds of $79,675, the proceeds of which were combined with $4,135 from a reserve fund, and used to refinance the Series 2004 Series B & C revenue bonds of $58,300 and pay down $25,650 of commercial paper. This refunding resulted in a deferred accounting loss of $831, which is being amortized over the life of the refunding issue. The 2009 Series A revenue refunding bonds are further described in Note 8. TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
36
Notes to Consolidated Financial Statements December 31, 2009 and 2008
The summarized activity of TID's long-term debt during 2009 and 2008 is presented below: December 31, 2008 Revenue bonds Certificates of participation Total Less: Unamortized premiums and (discounts), net Deferred losses on bond refundings, net Total long-term debt, net
Payments and December 31, Amounts amortization 2009 Due Within One Year
$ 318,885 61,485 380,370
$ 427,575 427,575
$ (68,415) (1,100) (69,515)
$ 678,045 60,385 738,430
7,106
1,350
(589)
7,867
(3,565) $ 383,911
$ 428,925
473 $ (69,631)
(3,092) $ 743,205
December 31, 2007 Revenue bonds Certificates of participation Total Less: Unamortized premiums and (discounts), net Deferred losses on bond refundings, net Total long-term debt, net
Additions
Additions
$ 11,380 1,100 $ 12,480
Payments and December 31, Amounts amortization 2008 Due Within One Year
$ 328,760 62,385 391,145
$ -
$ (9,875) (900) (10,775)
$ 318,885 61,485 380,370
7,673
-
(567)
7,106
(4,092) $ 394,726
$ -
527 $ (10,815)
(3,565) $ 383,911
$ 10,115 1,100 $ 11,215
Variable Rate Debt Most of TID's variable rate revenue bonds were refinanced with the issuance of the 2009 Series A revenue bonds in May 2009. TID's remaining variable rate bonds and certificates of participation bear interest at daily and weekly rates, which had an average effective rate on outstanding obligations of 0.19% at December 31, 2009. TID has two letters of credit totaling $42,977 with a bank, which expire in April 2011. These facilities provide liquidity support for TID's variable rate
revenue bonds and TID's variable rate Certificates of Participation (COPs). The credit rating of the bank is A+ (Standard & Poor's) as of December 31, 2009. Management is considering a number of financing alternatives related to its variable rate debt obligations and the related liquidity facility which expires in April 2011. If the District does not renew the letters of credit at acceptable rates, management plans to either refinance the debt with fixed rate securities or repay the obligations with available working capital or some combination thereof. TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
37
Notes to Consolidated Financial Statements December 31, 2009 and 2008
General The COPs and TID revenue bonds are collateralized by a pledge of, and a lien on, the revenues of the electric system after deducting maintenance and operation costs, as defined in the bond resolutions. The COPs are subordinate to the TID revenue bonds and commercial paper. TID's bond resolutions contain various covenants that include requirements to maintain minimum debt service coverage ratios, certain financial ratios, stipulated minimum funding of revenue bond reserves, and various other requirements. Certain of TID's bonds are enhanced by bond insurance provided by two different counterparties. The credit quality of these two bond insurers has declined subsequent to the origination of the policies. However, the impact on the District's current liquidity is mitigated because the bonds cannot be put to TID before their maturity dates. TID has a surety bond of $4,102 with a bank, in lieu of funding reserve fund requirements for certain
revenue bonds, as allowed by the bond resolution. The surety bond expires concurrent with the related revenue bonds. No amounts have been drawn on the surety bond to date. Variable rate bonds totaling $5,650 may be subject to redemption by TID at any interest date without a premium or discount. Fixed rate revenue bonds totaling $54,690 may be subject to redemption by TID without premium or discount beginning in 2010. Additionally, fixed rate revenue bonds totaling $23,705, $125,410, and $85,105 may be subject to redemption during 2013, 2014 and 2019, respectively, by TID without a premium or discount. Fixed rate revenue bonds totaling $151,605 may be subject to redemption by TID at any interest date with a make whole premium. COPs totaling $33,600 may be subject to redemption by TID at any interest date without a premium or discount. Additionally, COPs totaling $26,785 may be subject to redemption by TID during 2013 without a premium or discount.
TID's scheduled future annual principal maturities and estimated interest are as follows at December 31, 2009
2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2034
Principal
Estimated Interest
Total
$12,480 13,495 13,265 23,325 24,125 125,005 150,195 175,960 200,580 $738,430
$25,272 38,001 37,519 36,790 35,860 163,564 131,790 91,655 38,582 $599,033
$37,752 51,496 50,784 60,115 59,985 288,569 281,985 267,615 239,162 $1,337,463
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
38
Notes to Consolidated Financial Statements December 31, 2009 and 2008
TID used the interest rates in effect as of December 31, 2009, to estimate the future interest requirements for its variable rate debt, included in the table above. At December 31, 2009 and 2008, the estimated fair values of TID's long-term debt, calculated by determining the net present value using appropriate maturity dates of future debt service payments discounted at the bond buyer's revenue bond index rate, are as follows:
2009 Carrying Amount Fair Value
$ 743, 205 $ 809,551
2008 $ 383, 911 $ 404,322
annual fee for this service. There has not been a term advance under the letter of credit, which expires in September 2012. The counterparty to the letter of credit is a national bank whose credit rating is AA- Negative (Standard & Poor's). The consolidated activity of TID's commercial paper during 2009 and 2008 is presented below:
2009 Balance, beginning of year Additions Payments Balance, end of year
$154,069 60,259 (134,389) $79,939
2008 $119,420 34,808 (159) $154,069
Short-Term Borrowings 8. COMMERCIAL PAPER AND SHORT-TERM BORROWINGS Commercial Paper TID has two commercial paper programs, one established in December 2006 for various financing needs up to $100,000. The outstanding balance under this commercial paper program at December 31, 2009 and 2008 was $0 and $74,500, respectively. The effective interest rate for the notes outstanding at December 31, 2009 and 2008 was 0% and 0.61%, respectively. The average term for these notes at December 31, 2009 and 2008 was 0 and 5 days, respectively. Prior to December 2009, TID maintained a $108,876 letter of credit to support these notes and incurred an annual fee for this service. The letter of credit expired in December 2009 and was not renewed. The other commercial paper program is used to finance capital expenditures. At December 31, 2009 and 2008, the balance outstanding under TID's other commercial paper program was $79,939 and $79,569, respectively, of which $74,939 and $53,919 was taxable, respectively. The effective interest rate for the notes outstanding at December 31, 2009 and 2008 was 0.30% and 1.88%, respectively, and the average term was 84 and 13 days, respectively. A letter of credit of $87,200 supports the sale of these outstanding notes and TID incurs an
In May 2009 TID issued TID First Priority Subordinated Refunding Revenue Notes (TID Note) in the amount of $98,135. The proceeds of the TID Note were utilized to pay down the outstanding balance of the commercial paper programs. TID Note bears interest at 1.5% and has a stated maturity of June 8, 2010 and therefore has been classified as current on the balance sheet at December 31, 2009. Concurrent with the TID Note issue, TID issued the Authority Revenue Refunding Bonds (Authority Note) in the amount of $79,675. The proceeds from the Authority Note was used to refinance the 2004 Series B & C Revenue Bonds in the amount of $58,300 and pay down a portion of the outstanding commercial paper balance in the amount of $25,650. The refunding of the 2004 Series B& C resulted in a refunding loss of $831, which is being amortized over the life of the Authority Note. The Authority Note is a multi-mode instrument and has a due date of January 1, 2034, however the initial issue was sold in term mode bearing an interest rate of 1.5% with a mandatory redemption of June 8, 2010 and therefore has been classified as current on the balance at December 31, 2009. As of December 31, 2009, the fair value of the TID Note and Authority Note approximate their carrying value.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
39
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Short-Term Borrowings consists of the following at December 31, 2009: Note Description
Authority Note TID Note
Principal
Premium
$ 79,675 98,135 $ 177,810
$ 302 416
Refunding Loss
$ (356) -
Total Short Term Borrowings, Net $ 79,621 98,551 $ 178,172
Planned refinancing transaction
Power Supply Adjustment
At December 31, 2009, TID has principal outstanding on the TID Note and Authority Note totaling $177,810, which have a due date of June 8, 2010. TID is in the process of refinancing both the TID Note and Authority Note through a public offering of new debt securities prior to the stated due date of June 8, 2010. While there is no absolute assurance that TID will be successful in refinancing this debt, management expects such financing to occur as planned. Management believes the District's current credit ratings and history of ready access to public debt markets are indicative of their ability to successfully complete the debt offering by June 2010. Should market conditions deteriorate, the District may be required to accept interest rates that are higher than current prevailing rates.
TID's Rate Schedule PSA (Power Supply Adjustment) billing factor provides for an adjustment to the kilowatt-hour (KWh) portion of customer bills to reflect variations in the variable cost of power supply, which comprises purchased power, fuel used for generation of electric energy and gas field costs including related capital costs, reduced by revenue from wholesale sales of gas and energy to other entities. The PSA rate is reset semi-annually in June and December. The Board has limited reset amounts to ($0.005) to $0.01 per KWh. A balancing account is maintained in an amount by which the energy revenues collected from retail customers are less than (or more than) the actual cost of power supply. Deficiencies (or excesses) in the balancing account are adjusted by increasing (or decreasing) the PSA billing factor. On December 31, 2009 and 2008, the deficiency in the balancing account was $24,358 and $16,950, respectively.
9. REGULATORY DEFERRALS TID's Board has taken various regulatory actions that result in differences between recognition of revenues and expenses for rate-making purposes as reflected in these consolidated financial statements and as incurred. These actions result in regulatory assets and credits. Deferred Regulatory Assets Deferred regulatory assets consist of the following at December 31:
2009 Deferred power supply adjustment
$ 24,358
2008
Deferred Regulatory Credits Deferred regulatory credits consist of the following at December 31:
2009 Electric rate stabilization $13,124 4,342 Public benefit 718 Unrealized gain on investments $18,184
2008 $13,124 5,008 1,628 $19,760
$ 16,950 TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
40
Notes to Consolidated Financial Statements December 31, 2009 and 2008 Electric Rate Stabilization
Unrealized Gain on Investments
Historically, TID deferred interest earnings on net assets designated for electric rate stabilization. These amounts are recognized as increases in income in future periods based on a rate program approved by the Board of Directors which releases rate stabilization amounts under identified circumstances. During 2008, the Board directed the use of $8,000 from the Electric Rate Stabilization account to stabilize current electric utility rates, which is included in interest income in the consolidated statements of revenues, expenses and changes in net assets.
TID defers unrealized holding gains and losses on its investments until such investments mature or are sold which is consistent with TID's rate setting process.
Public Benefit TID's Board has specified a component of its rates, 2.85%, to be committed to public benefit expenditures. Public benefit expenditures consist of non-capital and capital expenditures for energy efficiency programs and renewable energy resources. Differences between amounts collected, as a component of rates and amounts expended for public benefit, are included in this regulatory account.
10. DERIVATIVE FINANCIAL INSTRUMENTS TID enters into contracts for the purchase of electricity to meet the expected needs of its retail customers and for the purchase, transportation and storage of natural gas to meet its generation needs. TID also enters into hedging transactions to reduce the price volatility of some of these agreements. Many of these contracts are considered derivative financial instruments under the provisions of GASB accounting rules, Accounting and Financial Reporting for Derivative Instruments. For those contracts, substantially all of the electricity contracts and most of the gas related contracts qualify as normal purchases or normal sales under because TID takes or makes delivery under the related contract, and as a result, the contracts are not required to be recorded at fair value. The fair values of TID's derivative instruments that are not considered normal purchase normal sale are as follows:
December 31, 2009 2008 Derivative financial instrument assets: Gas related contracts Electric related contracts Total derivative financial instruments Less current portion
$ 676 1,699 2,375 (2,375) $ -
$ 5,184 5,184 (5,184) $ -
Derivative financial instrument liabilities: Gas related contracts $ 2,655 Electric related contracts 1,547 4,202 Total derivative financial instruments (4,029) Less current portion $ 173
$ 14,970 14,970 (14,828 $ 142
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
41
Notes to Consolidated Financial Statements December 31, 2009 and 2008
The fair value balances and notional amounts of derivative instruments outstanding as of December 31, 2009 and 2008, classified by type, are as follows:
Investment Derivatives: Settled Ineffective Hedges Gas related contracts Electric related contracts Electric related contracts Gas related contracts Net investment derivatives gain(loss) Cash Flow Hedges Gas related contracts Gas related contracts Net deferred outflow
Classification
December 31, 2009 Fair Value
Notional
Nonoperating revenues and expense Nonoperating revenues and expense Nonoperating revenues and expense Nonoperating revenues and expense
$ 454 1,699 (1,546) (1,332) (725)
4,185-161,200 MMBtu 7,200-10,800 MWh 7,200-10,800 MWh 1,500-330,000 MMBtu
Deferred Inflow Deferred Outflow
221 (1,322) (1,101)
50,000-100,000 MMBtu 50,000-200,000 MMBtu
$ (1,826)
Total derivative contracts loss
Classification Investment Derivatives: Gas related contracts Gas related contracts Net Investment Income (loss)
Investment Revenue Investment Revenue
Cash Flow Hedges Gas related contracts Gas related contracts Net Deferred Inflow (Outflow)
Deferred Inflow Deferred Outflow
December 31, 2008 Fair Value $ 4,022 (3,420) $602 $ 1,162 (11,550) $ (10,388)
Notional
5,000-131,000 MMBtu 7,000-122,000 MMBtu
50,000-250,000 MMBtu 30,000-130,000 MMBtu
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
42
Notes to Consolidated Financial Statements December 31, 2009 and 2008
The investment derivatives are gas and electric contracts that do not meet the definition of effective hedges as defined in GASB accounting rules, Accounting and Financial Reporting for Derivative Instruments. Changes in the fair value of these contracts are recorded in the statement of revenues, expenses and changes in net assets. For the years ending December 31, 2009 and 2008, TID recorded a (loss) gain on derivative contracts that did not meet the definition of effective hedges resulting in $(2,961) and $602, respectively, and is included in the nonoperating revenues and expenses section on the Statement of Revenues, Expenses and Changes in Net Assets. Of the $(2,961) loss recorded for the year ended December 31, 2009, $(2,236) represents contracts that were originally classified as hedges but no longer met the definition of an effective hedge at the time of settlement. No such amount existed for the year ending December 31, 2008. The deferred gain related to hedged derivative financial instruments of $221 and $1,162 is included in accounts payable and accrued
Type
Classification
Notional Amount
expenses on the balance sheet at December 31, 2009 and 2008, respectively. The current deferred loss related to hedged derivative financial instruments of $1,149 and $11,408 is included as a component of prepaid expenses and other current assets on the balance sheet at December 31, 2009 and 2008, respectively and the remaining non-current deferred loss of $173 and $142 is included as a component of debt issuance costs and other assets on the balance sheet at December 31, 2009 and 2008, respectively. Objective and Terms of Hedging Derivative Instruments The following table displays the classification and terms of TID's derivative instruments outstanding at December 31, 2009 and 2008, along with the credit rating of the associated counterparty. All of the hedge contracts are designed to hedge against changes in cash flows due to market price fluctuations related to expected purchases of natural gas, and were initiated in 2008 and 2009. Maturity Date
Terms
December 31, Counterparty 2009 Value Credit Rating
Commodity forward contract (gas sales)
Investment Derivative (ineffective hedge)
4,432,000 MMBtu
0-12 months
Fixed Price & Basis
$(814)
Commodity forward contract (gas purchases)
Investment Derivative (ineffective hedge)
1,231,000 MMBtu
0-12 months
Fixed Price & Basis
(64)
A-
Commodity forward contract (electric purchases)
Investment Derivative (ineffective hedge)
219,000 MWh
0-12 months
Fixed Price
200
AA
Commodity forward contract (electric sales)
Investment Derivative (ineffective hedge)
274,225 Mwh
0-12 months
Fixed Price
(48)
AA
Commodity forward contract (gas purchases)
Effective Hedge
2,585,000 MMBtu
0-12 months
Fixed Price
(831)
AA, A, A-
Commodity forward contract (gas purchases)
Effective Hedge
827,000 MMBtu
12-24 months
Fixed Price
(172)
AA
Commodity collar (gas purchase)
Effective Hedge
300,000 MMBtu
0-12 months
Fixed Price
(116)
A
Commodity collar (gas sale)
Effective Hedge
300,000 MMBtu
0-12 months
Fixed Price
19
A
Total derivative contracts gain (loss)
AA, A, A-, BBB
$(1,826) TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
43
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Type
Classification
Notional Amount
Maturity Date
Terms
December 31, Counterparty 2008 Value Credit Rating
Commodity forward contract (gas sales)
Investment Derivative (ineffective hedge)
1,692,000 MMBtu
0-12 months
Fixed Price & Basis
Commodity forward contract (gas purchases)
Investment Derivative (ineffective hedge)
1,319,000 MMBtu
0-12 months
Fixed Price
Commodity forward contract (gas sales)
Effective Hedge
328,000 Mwh
0-12 months
Basis
Commodity forward contract (gas purchases)
Effective Hedge
5,960,000 Mwh
0-12 months
Fixed Price & Basis
Commodity forward contract (gas purchases)
Effective Hedge
184,000 MMBtu
12-24 months
Fixed Price
Total derivative contracts gain (loss)
$ 3,996
A-, BBB
(3,394)
A-
83
A
(10,329) (142)
AAA, AA-, A, A-, BBB AAA
$ (9,786)
Credit risk TID is exposed to credit risk on hedging derivative instruments that are in asset positions. To minimize its exposure to loss related to credit risk, TID's policy is to establish a credit limit for each counterparty with a maximum limit of $5,000 and no single counterparty can account for more than 15% of the total exposure to TID without approval from the Board. When a counterparty does not have a credit rating, a written guarantee is required from the counterparty's parent company which must have an acceptable credit rating. TID's agreements generally require netting whenever it has entered into more than one derivative instrument transaction with a counterparty. Under the terms of these agreements, should one party become insolvent or otherwise default on its obligations, close-out netting provisions permit the nondefaulting party to accelerate and terminate all outstanding transactions and net the transactions' fair values so that a single sum will be owed by, or owed to, the nondefaulting party. The aggregate fair value of hedging derivative instruments in a net asset position at December 31, 2009
totaled $70 and was with a single counterparty. Basis risk TID is exposed to basis risk on some of its commodity forward contracts because the expected commodity purchase being hedged will price based on a pricing point different than the pricing point at which the forward contract is expected to settle. The majority of these exposures relate to gas contracts that settle at NYMEX whereas the hedged gas purchase will be delivered at PG&E Citygate. At December 31, 2009, prices at those delivery points were $5.79 and $6.34, respectively. Termination risk TID or its counterparties may terminate a derivative instrument if the other party fails to perform under the terms of the contract. If at the time of termination, a hedging derivative instrument is in a liability position, TID would be liable to the counterparty for a payment equal to the liability, subject to netting arrangements. TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
44
Notes to Consolidated Financial Statements December 31, 2009 and 2008
11. PENSION PLAN TID has a single-employer group defined benefit pension plan (the “Retirement Plan�) which provides retirement benefits covering substantially all its employees who have completed one year of continuous service. Employees may retire after age 55 with benefits based on compensation and years of service to actual retirement date. The Retirement Plan also provides death benefits for those employees having reached age 55. TID, through the action of its Board may amend or establish Retirement Plan provisions. The Board has appointed third parties to carry out substantially all administrative responsibilities, including custody of the Retirement Plan assets and as a result, excludes the pension trust funds from these financial statements. The Retirement Plan is a governmental plan under section 414(d) of the Internal Revenue Code (IRC). Copies of the Retirement Plan's annual financial report may be obtained from TID's executive office at 333 East Canal Drive, Turlock, California 95381. The Retirement Plan's annual financial report is the responsibility of TID.
the January 1, 2009 and 2008 actuarial valuations were as follows: ? Investment rate of return applied to assets of 8.5% per year; ? Discount rate applied to the pension benefit obligation of 8.5% per year; ? Salary increases of 4.5% per year; and ? Cost of living adjustment of 3.5% per year. Realized and unrealized gains are phased in to the actuarial value of Retirement Plan assets over a three year period, and may be adjusted so that the actuarial value of Retirement Plan assets are not less than 80% or more than 120% of the fair market value of the Retirement Plan's assets as of the current valuation date. The unfunded actuarial accrued liability (UAAL) is being amortized as a portion of annual pension cost.
Funding Policy To participate in the Retirement Plan, employees who are not members of a bargaining unit are required to contribute 2.25% of their earnings and employees who are members of a bargaining unit are required to contribute 3.25% of their earnings. Under the Retirement Plan provisions established by the Board, the Retirement Plan is to be funded in amounts equal to the normal costs of the Retirement Plan plus an amortization of the past service liability. Contributions made by the employees vest immediately. Contributions made by TID are fully vested after five years of participation. Annual Pension Cost The annual required contributions for 2009 and 2008 were determined by actuarial valuations using the frozen entry age actuarial cost method. The actuarial assumptions utilized for TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
45
Notes to Consolidated Financial Statements December 31, 2009 and 2008
TID's annual pension cost and net pension obligation for 2009 and 2008, based on valuations as of January 1, 2009 and 2008, respectively, are as follows: 2009 2008 Annual required contribution Interest on net pension obligation Adjustment to annual required contribution Annual pension cost Contributions made Decrease in net pension obligation Net pension (prepaid balance) obligation, beginning of period Net pension prepaid balance end of period
$ 10,611 (54) 76 10,633
$ 6,331 (52) 73 6,352
10,633 -
6,371 (19)
(636) $ (636)
(617) $ (636)
Summarized Historical Trend Information - Three year trend information is presented below: Fiscal Period Ending
Annual Pension Cost (APC)
Percentage of APC Contributed
Net Pension Obligation (Asset)
12/31/09 12/31/08 12/31/07
$ 10,611 $6,352 $5,988
100% 100% 117%
$ (636) $ (636) $ (617)
The schedule of funding progress presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The schedule of funding progress is presented below and is required supplementary information:
Actuarial Valuation Date
Actuarial Value of Assets (a)
Actuarial Accrued Liability (AAL) Entry Age (b)
Unfunded AAL (UAAL) (b-a)
Funded Ratio (a/b)
Covered Payroll (c)
UAAL as a Percentage of Covered Payroll ([b-a]/c)
12/31/09 12/31/08 12/31/07
$ 126,070 $ 107,968 $ 128,028
$ 189,518 $ 164,590 $ 154,223
$ 63,448 $ 56,622 $ 26,195
66.5% 65.6% 83.0%
$33,878 $32,705 $30,327
187.3% 173.1% 86.4%
Deferred Compensation Plan In addition, TID offers its employees a deferred compensation plan (the “Deferred Plan�), which provides employees the option to defer part of their compensation until termination, retirement, death, or unforeseeable emergency. TID makes no contribution to the Deferred Plan. TID has the duty of reasonable care in the selection of investment alternatives, but
neither TID nor its directors or officers have any liability for losses under the Deferred Plan. TID holds all deferred compensation assets in the name of the Deferred Plan, and accordingly, the Deferred Plan assets and corresponding liability are not recorded in the accounts of TID. TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
46
Notes to Consolidated Financial Statements December 31, 2009 and 2008
12. OTHER POST EMPLOYMENT BENEFITS TID follows GASB accounting rules, Accounting and Financial Reporting by Employers for Post Employment Benefits other than Pensions (OPEB), which establishes standards of accounting
and financial reporting for OPEB expense and related OPEB liabilities or assets. OPEB arises from an exchange of salaries and benefits for employee services rendered. TID considers post employment healthcare benefits to be OPEB costs. TID provides post-retirement medical benefits in accordance with TID policy to qualified retirees and their spouses through TID's Employee Health Care Plan ( the “Health Plan�) until the retiree and participating spouse reach age 65. The Health Plan is a single-employer group, for which TID is the administrator and through the action of its Board may amend or establish Health Plan provisions. The qualification requirements for these benefits are the same as those under TID's Retirement Plan. The Board has appointed third parties to carry out certain administrative responsibilities. TID contributes the full cost of coverage for retirees; however, retirees contribute the estimated health care cost of dependents. However, at the time of retirement an employee may utilize the remaining balance of unused sick leave, at the rate defined in the employee's applicable employee contract for one month's medical coverage for an eligible dependent. Covered retirees are also responsible for personal deductibles and copayments. Currently, 140 retirees and surviving dependents are receiving post-employment health care benefits. Actuarial Methods and Assumptions Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new
estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the most recent actuarial valuation the entry age actuarial cost method was used. The actuarial assumptions included a 7.75 percent investment rate of return and an annual healthcare cost trend rate of 10 percent initially, reduced by decrements to an ultimate rate of 5 percent after ten years. Assets of the Health Plan, as of the latest actuarial report, were valued on a market value basis. Future gains and losses may be averaged over five years subject to a corridor. The UAAL is being amortized as a level percentage of projected payroll basis. The remaining amortization period in the latest actuary report, was twenty-eight years. Funding Policy In December 2008, TID joined the CALPERS Pre-funding OPEB Plan, which is an irrevocable multi-employer trust and plan consisting of an aggregation of single-employer plans, with pooled administrative and investment functions. At that time TID made an incremental contribution of $5,000 to the CALPERS Pre-funding OPEB Plan. During 2009 and 2008, TID's post-retirement health care benefit contributions were $2,086 and $6,242, respectively, net of premiums received from retirees for eligible dependents. Annual OPEB Cost and Net OPEB Obligation TID's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
47
Notes to Consolidated Financial Statements December 31, 2009 and 2008
actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. For the years ended December 31, 2009 and 2008, TID's annual OPEB expense of $1,788 and $1,647, respectively, was equal to the ARC. The following table shows the components of TID's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in TID's net OPEB obligation:
2009
2008
$1,788 1,788
$1,647 1,647
2,086 (298)
6,242 (4,595)
Net OPEB (prepaid) obligation, beginning of year (3,728) Net OPEB (prepaid) obligation, end of year $(4,026)
867 $(3,728)
Annual required contribution Annual OPEB cost Contributions made (Decrease) increase in net OPEB obligation
TID's annual OPEB cost, the percentage of annual OPEB cost contributed o the plan, and the net OPEB obligation for the years ended 2009 and 2008 is as follows:
Fiscal Period Ending
Annual OEPB Cost (AOC)
Percentage of AOC Contributed
Net OEPB Obligation (Asset)
12/31/09 12/31/08
$1,788 $1,647
117% 379%
$(4,026) $(3,728)
The schedule of funding progress presents trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The schedule of funding progress is presented below and is required supplementary information:
Actuarial Valuation Date
Actuarial Value of Assets (a)
Actuarial Accrued Liability (AAL) Entry Age (b)
1/1/09
$ 5,086
$ 19,869
Unfunded AAL (UAAL) (b-a) $ 14,783
Funded Ratio (a/b)
Covered Payroll (c)
25.6%
$ 35,009
UAAL as a Percentage of Covered Payroll ([b-a]/c) 42.2%
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
48
Notes to Consolidated Financial Statements December 31, 2009 and 2008 13. COMMITMENTS Power Exchange and Transmission Agreements In 2009, TID entered into power sales agreement with a counterparty where TID sells all of the output of the TWPA at day-ahead or hourly Mid-Columbia (MID-C) market prices. The counterparty sells at least the same amount of energy to TID at the California-Oregon Border (COB) at prices based on the COB indexes plus a service fee. TID is obligated to schedule and pay for transmission from TWPA to MID-C. TID has secured firm point to point transmission service for the majority of the MWh to be delivered from the Bonneville Power Administration. The agreement expires on December 31, 2013, but can be canceled by either party with six months notice. Total sales and purchases under the agreement were $7,106 and $11,900 in 2009, respectively. Power Purchase Agreements TID has two long-term power purchase agreements with other power producers to purchase capacity and associated energy to meet its load requirements, which expire through December 2024. Capacity and certain energy is purchased on a take-or-pay basis. Power purchased under these agreements totaled $18,382 and $20,298 in 2009 and 2008, respectively. City and County of San Francisco TID and the City and County of San Francisco (CCSF) have a power sales agreement which allocates a share of excess Hetch Hetchy Project capacity and energy to TID through 2015. TID purchased $4,143 and $4,368 of power in 2009 and 2008, respectively, under the CCSF agreement. Gas Purchase Agreements TID has two long-term natural gas supply agreements with two companies to meet the consumption need of its
natural gas fired power plants, which expire through January 2011. TID can purchase up to 27,000 million British Thermal Units (MMBtu) per day from NCPA (see note 5); the other contract is with another counterparty, which allows for the purchase of all required natural gas for the Walnut Energy Center not to exceed 55,000 MMBtu per day. Pricing for both contracts are indexed to certain natural gas indexes, or a mutually agreed upon price, as defined in the gas purchase agreements. Fuel purchased under both agreements totaled $37,721 and $68,730 in 2009 and 2008, respectively. Gas Transportation Capacity and Storage Agreements TID has nine long-term gas transportation capacity agreements and one long-term gas storage agreement with Canadian and U.S. companies to transport natural gas to TID's natural gas fired power plants from gas supply basins in Alberta, Canada. The gas transportation capacity agreements complement TID's gas purchase agreements, described above, but expire in years 2010 through 2033. Payments under these agreements totaled $3,757 and $3,514 in 2009 and 2008, respectively. The approximate future minimum obligations for the above described power purchase, gas supply, and gas transportation and storage contracts are as follows at December 31, 2009: Amount 2010 2011 2012 2013 2014 Thereafter
$24,130 24,159 24,668 23,071 22,405 153,424 $271,857 TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
49
Notes to Consolidated Financial Statements December 31, 2009 and 2008 14. CONTINGENCIES California Energy Market Refund Proceedings In July 2001, FERC issued an order establishing evidentiary hearings for the purpose of determining the amount of refunds, if any, due to customers of the California ISO and PX organized spot markets from market participants selling into those markets for the period October 2, 2000 through June 20, 2001 (the refund period). During this time period, TID was both a seller and a buyer in the markets. The Administrative Law Judge (ALJ) assigned to the proceedings, among other issues, addressed the calculation of refunds and identification of the amount currently owed to each supplier (with separate quantities due from each entity) by the California ISO, the investor owned utilities, and the State of California. In December 2002, the ALJ issued his Certification of Proposed Findings (the “Findings”) and found that TID owes $1,243 in refunds for these sales. In March 2003, FERC revised its ruling to include the impact of gas price mitigation to be applied to sales into the California ISO and PX market retroactively. In July 2004, the California ISO completed the calculation of revised Mitigated Market Clearing Prices (MMCPs) for the refund period using the methodology that had been developed by the administrative process at FERC, including mitigated gas pricing. TID's potential refund liability under the MMCPs increased to approximately $3,600. On September 6, 2005 the Ninth Circuit Court of Appeals issued its decision regarding FERC's authority regarding the imposing of refunds on non public utilities. The Court concluded that FERC does not have authority over non public authorities making sales in wholesale energy markets.
likely not require a cash payment; rather it would probably be fully offset against amounts owed by the California ISO to TID of $4,340. TID has recorded an allowance of $3,820 against the amount owed by the California ISO related to the uncertainty of the ultimate amount that it will collect. TID believes such allowance is sufficient to cover its refund obligation, if any, and accordingly, no liability has been recorded. California Parties vs. Government Entities Complaint for Damages for 2000 and 2001 Power Sales Following the 9th Circuit Court of Appeals ruling that FERC could not order refunds in the California Refund proceeding, TID and other publicly owned utilities were sued in U.S. District Court in March 2006, by PG&E, California Edison Company and California Electricity Oversight Board and by San Diego Gas & Electric (collectively the “California Parties”). In April 2007, the U.S. District Court dismissed the claims and the California Parties have appealed, which is still pending. Additionally, the California Parties filed a similar lawsuit in California Superior Court, which is currently in the discovery phase. The claims are for damages arising from sales of wholesale power and ancillary services from May 1, 2000 through June 20, 2001. No actual dollar damage amounts were cited in the complaints. The complaints state they are based upon the same facts as were included in the FERC and 9th Circuit Court cases. However, unlike the California Refund proceeding, the complaints extend the period in dispute back five months making the starting date May 1, 2000, instead of October 2, 2000. During the May 1, 2000 through October 1, 2000 period TID made no sales to the California ISO. Thus, the transactions in dispute in the California Parties'
In any event, TID does not expect to be liable for any refunds because TID's final refund liability, if any, would TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
50
Notes to Consolidated Financial Statements December 31, 2009 and 2008
Complaints are believed to be the same transactions in dispute in the California Refund proceeding before FERC. District management believes it is reasonably possible, but not probable, that TID will ultimately incur a liability in this matter due to the strength of its legal defenses and because these complaints are a result of the California parties' defeat in the 9th Circuit Court of Appeals and addresses the same issues raised in those proceedings. Consistent with the offsetting impacts of the receivables and potential liabilities described in the FERC-related proceeding described above, District management believes that any settlement would not involve cash outflows by TID. As such, no liability has been recorded. General Contingencies In the normal course of operations, TID is party to various claims, legal actions and complaints, including possible liability for environmental matters. Although the ultimate outcome of these matters is not presently determinable, TID's management believes the resolution of all such pending matters will not have a material adverse effect on TID's financial position or results of operations.
TURLOCK IRRIGATION DISTRICT Consolidated Financial Statements December 31, 2009 and 2008 (dollars in thousands)
51
Historical Operating Statistics 2005-2009 (unaudited)
2009
2008
2007
71,333 6,915 787 20,418 99,453
70,594 6,923 792 20,239 98,548
MWh SALES: Residential Commercial Industrial Other (1) Total Retail Wholesale Power Total
712,053 125,498 730,828 420,577 1,988,956 1,440,480 (6) 3,429,436
SOURCES OF Mwh: Generated by district Purchased Subtotal System losses Total ELECTRIC ENERGY REVENUES: (IN THOUSANDS) Residential Commercial Industrial Other (1) Total Retail Energy Electric Service Charges Other Electric Revenue Electric Energy Retail Wholesale Power Total
AVERAGE CUSTOMERS AT END OF PERIOD: Residential Commercial Industrial Other (1) Total
SYSTEM PEAK DEMAND (MW)
2006
2005
70,981 6,851 784 19,807 98,423
70,715 6,748 766 19,214 97,443
68,257 6,584 730 18,346 93,917
712,387 128,553 754,527 425,399 2,020,866 1,260,069 (6) 3,280,935
706,977 125,614 753,617 422,016 2,008,224 1,392,429 (6) 3,400,653
729,792 125,050 709,315 395,600 1,959,757 995,658 (6) 2,955,415
678,878 121,825 675,016 338,395 1,814,114 950,873 (6) 2,764,987
2,157,278 1,346,677 (6) 3,503,955 74,519 3,429,436
1,924,982 1,445,451 (6) 3,370,433 89,498 3,280,935
1,748,714 1,706,265 (6) 3,454,979 54,326 3,400,653
1,762,745 1,239,151 (6) 3,001,896 46,481 2,955,415
776,112 2,088,418 (6) 2,864,530 99,543 2,764,987
$102,662 15,893 74,812 47,632 240,999 322 179 241,500 52,047 (6) $293,547
$91,826 14,807 66,688 41,100 214,421 344 190 214,955 97,385 (6) $312,340
$86,561 13,587 62,058 38,534 200,740 373 270 201,383 86,408 (6) $287,791
$81,956 12,874 55,026 32,521 182,377 324 165 182,866 57,083 (6) $239,949
$70,659 11,630 44,643 26,535 153,467 284 164 153,915 58,296 (6) $212,211
493
520
516
534
476
AVERAGE MWh SALES PER CUSTOMER FOR THE PERIOD Residential Commercial Industrial
9.982 18.149 928.625
10.091 18.569 952.686
9.960 18.335 961.246
10.320 18.531 925.999
9.946 18.503 924.679
AVERAGE REVENUE PER MWh FOR THE PERIOD Residential Commercial Industrial
$144.18 $126.64 $102.37
$128.90 $115.18 $88.38
$122.44 $108.16 $82.35
$112.30 $102.95 $77.58
$104.08 $95.46 $66.14
$0.084
$0.077
$0.066
$0.055
$0.046
AVERAGE COST OF POWER PER KWh FOR RETAIL LOAD(2)
(1) Includes agricultural and municipal water pumping, street lighting, and interdepartmental meters. (2) Includes depreciation, excludes debt service. (3) Summary accounts are now counted by individual connections. (4) Includes the benefits of well above normal wholesale power margins. (5) District acquired Westside Service territory which included 5,778 accounts. (6) Includes adjustments for transaction "bookouts" which were not physically settled into the District's system.
A1
Historical Operating Statistics 2000-2004 (unaudited)
AVERAGE CUSTOMERS AT END OF PERIOD: Residential Commercial Industrial Other (1) Total
2004
2003
2002
2001
2000
65,218 6,419 687 17,307 89,631
62,813 6,094 718 15,646 85,271 (5)
56,480 5,508 613 14,944 77,545
55,505 5,416 592 11,888 (3) 73,401
54,535 5,311 613 6,183 66,642
MWh SALES: Residential Commercial Industrial Other (1) Total Retail Wholesale Power Total
661,266 119,746 651,200 327,811 1,760,023 356,686 (6) 2,116,709
602,930 109,644 584,283 306,511 1,603,368 354,687 (6) 1,958,055
551,132 98,991 544,995 298,345 1,493,463 553,520 2,046,983
544,930 99,240 522,229 284,873 1,451,272 1,002,446 2,453,718
539,341 96,612 534,329 281,206 1,451,488 667,564 2,119,052
SOURCES OF Mwh: Generated by district Purchased Subtotal System losses Total
425,110 1,799,808 (6) 2,224,918 108,209 2,116,709
337,430 1,682,451 (6) 2,019,881 61,826 1,958,055
419,211 1,744,398 2,163,609 116,626 2,046,983
643,359 1,875,316 2,518,675 64,957 2,453,718
797,851 1,424,687 2,222,538 103,486 2,119,052
ELECTRIC ENERGY REVENUES: (IN THOUSANDS) Residential Commercial Industrial Other (1) Total Retail Energy Electric Service Charges Other Electric Revenue Electric Energy Retail Wholesale Power Total
$65,231 11,081 40,100 24,152 140,564 295 (645) 140,214 24,081 (6) $164,295
$58,563 9,988 35,336 22,561 126,448 213 94 126,755 22,335 (6) $149,090
$48,547 8,909 30,744 21,303 109,503 127 118 109,748 21,232 $130,980
$47,680 8,979 29,773 20,447 106,879 74 170 107,123 201,108 $308,231
$46,676 9,156 31,017 20,253 107,102 92 100 107,294 82,893 $190,187
SYSTEM PEAK DEMAND (MW)
437
406
397
410
379
10.139 18.655 947.889
9.599 17.992 813.765
9.758 17.972 889.062
9.818 18.323 882.144
9.890 18.191 871.662
AVERAGE REVENUE PER MWh FOR THE PERIOD Residential Commercial Industrial
$98.65 $92.54 $61.58
$97.13 $91.09 $60.48
$88.09 $90.00 $56.41
$87.50 $90.48 $57.01
$86.54 $94.77 $58.05
AVERAGE COST OF POWER PER KWh FOR RETAIL LOAD(2)
$0.055
$0.048
$0.055
$0.047
$0.029 (4)
AVERAGE MWh SALES PER CUSTOMER FOR THE PERIOD Residential Commercial Industrial
(1) Includes agricultural and municipal water pumping, street lighting, and interdepartmental meters. (2) Includes depreciation, excludes debt service. (3) Summary accounts are now counted by individual connections. (4) Includes the benefits of well above normal wholesale power margins. (5) District acquired Westside Service territory which included 5,778 accounts. (6) Includes adjustments for transaction "bookouts" which were not physically settled into the District's system.
A2
Historical Results Of Operations 2005-2009 (unaudited)
2009
2008
$241,500 52,047 (2)
$214,955 97,385 (2)
2007
2006
2005
$182,866 57,083 (2)
$153,915 58,296 (2)
(IN THOUSANDS) OPERATING REVENUES: Electric energy - Retail Electric energy - Wholesale Small Hydropower Other Electric Irrigation Other Total Operating Revenue OPERATING EXPENSES: Power Supply: Purchased Power Generation and Fuel Total Power Supply Other Electric O&M Irrigation O&M Public Benefits Administration and General Depreciation and amortization Total Operating Expenses OPERATING INCOME (LOSS) OTHER INCOME (EXPENSE): Interest/Deriative (loss)gain Unrealized (Loss) Gain on Investments Miscellaneous Total Other Income INTEREST EXPENSE Long Term Debt NCPA Obligation TRANSFER (TO) FROM DEFERRED REGULATORY CREDITS
$201,383 86,408 (2)
6,832 13,741 314,120
6,570 17,653 336,563
6,571 12,406 306,768
6,168 11,803 257,920
6,105 4,911 223,227
71,352 (2) 129,202 200,554 19,801 11,257 6,611 20,576 39,426 298,225
95,460 (2) 143,792 239,252 17,259 10,239 6,041 18,819 32,404 324,014
93,293 (2) 112,255 205,548 16,541 10,240 3,111 17,650 27,854 280,944
65,177 (2) 89,172 (5) 154,349 15,416 10,482 3,429 18,357 23,126 225,159
120,184 (2) 14,164 134,348 12,593 8,302 3,133 14,915 15,936 189,227
15,895 697
12,549 14,262 (6)
25,824
32,761
34,000
6,044
5,761
3,409
6,446 7,143
5,808 20,070
6,634 12,678
6,402 12,163
6,571 9,980
27,344
20,388
23,894
20,955
10,902
-
-
-
-
-
(4,306)
12,231
14,608
23,969
33,078
356,111 $351,805
343,880 $356,111
329,272 $343,880
305,303 $329,272
272,225 $305,303
1.91x
2.38x
2.71x
LOSS FROM ADVANCE REFUNDING NET INCOME (LOSS) RETAINED EARNINGS: BEGINNING OF YEAR GASB 33 Accounting Principle END OF YEAR DEBT SERVICE COVERAGE REVENUE BONDS/COP'S
1.67x
2.13x (6)
(1) Revised 2002 to reflect Public Benefits. (2) Includes adjustments for transaction "bookouts" which were not physically settled into the District's system. (3) Revised 2003 to reflect changes in reporting format. (4) Rate Stabilization transfer of $7,240. (5) Walnut Energy Center went commercial 2/28/06. (6) Electric Rate Stabiliation transfer of $8,000
A3
Historical Results Of Operations 2000-2004 (unaudited)
2004
2003
2002
2001
2000
$140,214 24,081 (2)
$126,755 22,335 (2)
$109,748 21,232
$107,123 201,108
$110,209 82,893
5,603 3,449 173,347
5,191 343 (3) 154,624
5,392 103 136,475
5,172 16 313,419
5,192 34 198,328
103,074 (2) 11,847 114,921 14,459 8,032 2,855 15,208 14,360 169,835
89,108 (2) 8,064 97,172 10,823 8,490 2,102 14,191 13,121 145,899
72,766 22,174 (1) 94,940 10,301 (1) 8,369 1,677 (1) 12,469 12,316 140,072
215,010 44,686 259,696 10,099 7,159
98,170 18,905 117,075 9,191 7,032
11,820 12,252 301,026
15,081 11,635 160,014
3,512
8,725
(3,597)
12,393
38,314
2,901
5,292 (3)
7,423
10,164
5,955 8,856
6,117 (3) 11,409
4,094 11,517
3,506 13,670
7,190 1,726 2,679 11,595
10,644
11,642
11,615 171
(1,220)
(5,820)
(5,589)
(IN THOUSANDS) OPERATING REVENUES: Electric energy - Retail Electric energy - Wholesale Small Hydropower Other Electric Irrigation Other Total Operating Revenue OPERATING EXPENSES: Power Supply: Purchased Power Generation and Fuel Total Power Supply Other Electric O&M Irrigation O&M Public Benefits Administration and General Depreciation and amortization Total Operating Expenses OPERATING INCOME (LOSS) OTHER INCOME (EXPENSE): Interest/Deriative (loss)gain Unrealized (Loss) Gain on Investments Miscellaneous Total Other Income INTEREST EXPENSE Long Term Debt NCPA Obligation TRANSFER (TO) FROM DEFERRED REGULATORY CREDITS
9,194
-
9,920
- (3)
LOSS FROM ADVANCE REFUNDING NET INCOME (LOSS) RETAINED EARNINGS: BEGINNING OF YEAR GASB 33 Accounting Principle END OF YEAR DEBT SERVICE COVERAGE REVENUE BONDS/COP'S
3,174
10,214
(3,944)
8,601
32,534
269,051 $272,225
258,837 $269,051
262,781 $258,837
254,180 $262,781
168,758 52,888 $254,180
1.83x
1.36x
1.31x
2.74x
1.64x (4)
(1) Revised 2002 to reflect Public Benefits. (2) Includes adjustments for transaction "bookouts" which were not physically settled into the District's system. (3) Revised 2003 to reflect changes in reporting format. (4) Rate Stabilization transfer of $7,240. (5) Walnut Energy Center went commercial 2/28/06. (6) Electric Rate Stabiliation transfer of $8,000
A4