Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 16 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 - 16 - additional short-term power purchases of $1.0 million. In general, lower average wholesale power prices and lower volume led to lower valuation of power exchange purchases within Other power expenses. Non-power operating expenses increased by $24.2 million to $224.6 million or 12.1% from $200.4 million in 2014. These expenses included Distribution expenses of $65.1 million, which increased $5.4 million, Customer service of $38.3 million, which increased $0.7 million, Conservation of $29.1 million, which increased $1.8 million, and Administrative and general, net, of $92.1 million which increased $16.3 million. Distribution expenses increased due to higher labor and benefits for system maintenance, tree trimming, outage maintenance, COLA accruals, and an increase in costs to repair damage billable to other parties. The implementation of GASB Statement No. 68 increased pension expenses by $7.5 million within Administrative and general, net. Other increases were for salaries and related benefits due to lower vacancies, COLA accruals, city general fund cost allocations, NERC administration, and other. These were offset by higher overhead applied to capital work generally due to higher labor charges and related higher overhead rates, plus a higher allocation of pension costs from GASB Statement No. 68. Taxes at $81.1 million increased incrementally $1.1 million due to higher revenues. Depreciation and amortization at $112.0 million increased by $6.2 million as a result of additional plant assets placed in service. NONOPERATING REVENUES AND (EXPENSES), CAPITAL CONTRIBUTIONS AND GRANTS 2016 Compared to 2015 Nonoperating revenues decreased by $2.1 million to $14.6 million in 2016. There was no FEMA non-capital grant revenue related to a fire near one of the Department’s generating facilities as occurred in 2015. Lower sales of property were offset by higher CREB bonds interest subsidies from the U.S. Treasury Department. Nonoperating expenses were slightly lower by $1.4 million to $75.1 million. Higher bond premium amortization and interest for construction projects were offset by an increase in bond refunding loss amortization and interest on higher average bonds outstanding throughout the year. Capital contributions and grants decreased by $1.0 million to $38.4 million in 2016, the net of higher service connections for larger construction projects during 2016 on the heels of a strong local economy; and no recurring energization of underground electrical infrastructure for a local suburban jurisdiction as transpired in 2015. 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.