Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90Seattle City Light 2015 Annual Report 15 - 15 - THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 and 2014 power expenses of $65.9 million, which decreased $0.4 million, and Transmission which increased $4.6 million. Bonneville purchased power costs increased $5.5 million due to increased power rates effective October 2013 plus a higher block load shaping rate. Other long-term purchased power was higher by $5.7 million for the most part due to higher average wholesale power prices and volume, plus higher fair valuation of exchanged power. Short-term wholesale power purchases where lower mainly the result of lower volume. Furthermore, Transmission increased because of higher Bonneville transmission rates. Non-power operating expenses increased by $8.4 million to $200.4 million or 4.4% from $192.0 million in 2013. These expenses included Distribution expenses of $59.7 million, unchanged, Customer service of $37.6 million, which decreased $1.6 million, Conservation of $27.3 million, which increased $5.8 million, and Administrative and general, net, of $75.8 million which increased $4.1 million. Customer service expenses were higher due to increased temporary labor for low income outreach and meter reading, and customer contract expenses due to increased service connections, offset by lower bad debt expense. Conservation expenses increased because of higher amortization for commercial and residential programs, and higher customer renewable solar energy credits. Administrative and general, net, were higher because of general office salaries due to a lower vacancy rate along with higher professional service fees. Taxes at $80.0 million increased $0.7 million due to higher revenues and included the effect of $2.8 million of conservation incentive tax credits. Depreciation and amortization at $105.8 million increased by $3.5 million as a result of additional plant assets placed in service. NONOPERATING REVENUES AND (EXPENSES), CAPITAL CONTRIBUTIONS AND GRANTS 2015 Compared to 2014 Nonoperating revenues decreased by $1.8 million to $16.7 million in 2015. Major causes were lower market performance for the Department’s share of investments in the city cash pool and less sales of properties. There was an increase in FEMA grants and specifically related to a fire near one of the Department’s generating facilities. Nonoperating expenses were slightly lower by $1.4 million to $76.5 million. Higher interest on outstanding bonds were offset primarily by higher interest charged to construction projects as the focus on capital work continued during the year. Capital contributions and grants increased by $11.0 million to $39.4 million in 2015. Capital contributions were higher mostly due to energization of underground electrical infrastructure for Shoreline, a local suburban jurisdiction within the Department’s service territory; and to a lesser extent, for service connections for larger construction projects. 2014 Compared to 2013 Nonoperating revenues increased by $7.4 million to $18.5 million in 2014. The major contributor was a substantial gain in investment income of $7.1 million due to the favorable swing between years in unrealized fair value gains for the Department’s share of investments in the city cash pool.