Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 15 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 and 2015 - 15 - generation, and subject to weather dependency. Other power related variances were minimal and part of normal operations. Non-power operating expenses increased by $16.7 million to $241.3 million or 7.4% from $224.6 million in 2015. These expenses included Distribution expenses of $63.5 million, which decreased $1.6 million, Customer service of $42.6 million, which increased $4.3 million, Conservation of $30.2 million, which increased $1.1 million, and Administrative and general, net, of $105.0 million which increased $12.9 million. Customer service expenses were driven higher by bad debt expense for retail electric sales due to clean-up of accounts in arrears as part of the conversion process to the new retail billing system. Retro pay and COLA salary adjustments also contributed to the higher Customer service expenses. The 2016 GASB Statement No. 68 adjustment increased pension expenses by $9.2 million within Administrative and general, net. Other increases were for salaries and benefits due to retro pay and COLA salary adjustments; and injuries and damages expenses based on the most recent actuarial report; and other. These were offset by lower legal costs as an ongoing power related case from the 2001 energy crises was settled, compensated absences, and other. Taxes at $85.2 million increased by $4.1 million because of the higher revenues. Depreciation and amortization at $120.8 million increased by $8.8 million generally due to additional plant assets placed in service. 2015 Compared to 2014 Operating expenses totaled $772.0 million, an increase of $37.9 million or 5.2% from $734.1 million in 2014. Power-related operating expenses at $354.3 million were higher by $6.4 million or 1.8%. These expenses were comprised of Long-term purchased power - Bonneville and other of $219.8 million, which increased $6.2 million, Short-term wholesale power purchases of $15.0 million, which decreased $11.8 million, Other power expenses of $60.1 million, which increased $0.5 million, and Transmission of $53.5 million, which decreased $0.8 million. Short-term wholesale power purchases were affected by the earlier snow melt in the region and related consequences, and along with higher average purchase power prices led to increased short-term power purchases to manage load. The aftermath of a major wildfire near one of the Department’s generating facilities triggered 160.7 59.1 53.5 63.5 42.6 105.0 156.5 57.1 54.3 65.1 38.3 92.1 155.6 58.7 52.8 59.8 37.6 75.8 0.0 50.0 100.0 150.0 200.0 Bonneville long-term purchased power Long-term purchased power other Transmission and wheeling Distribution Customer service Administrative and general, net Selected Expenses 2016 2015 2014 ($ in millions)