Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 26 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 - 26 - 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City Light Department (the Department) is the public electric utility of The City of Seattle (the City). The Department is an enterprise fund of the City. The Department owns and operates certain generating, transmission, and distribution facilities and supplies electricity to approximately 448,000 residential, commercial, and public customers in the city of Seattle. The Department also supplies electrical energy to other City agencies at rates prescribed by City ordinances, and to certain neighboring communities under franchise agreements. The establishment of the Department’s rates is within the exclusive jurisdiction of the Seattle City Council. A requirement of Washington State law provides that rates must be fair, nondiscriminatory, and fixed to produce revenue adequate to pay for operation and maintenance expenses and to meet all debt service requirements payable from such revenue. The Department pays occupation taxes to the City based on total revenues. The Department’s revenues for services provided to other City departments were $20.1 million and $18.0 million in 2016 and 2015, respectively, and $2.4 million and $2.2 million for non-energy services, respectively. The Department receives certain services from other City departments and paid $86.6 million in 2016 and $64.8 million in 2015, for such services. Amounts paid include central cost allocations from the City for services received including treasury services, risk financing, purchasing, data processing systems, vehicle maintenance, personnel, payroll, legal, administrative, information technology and building rentals, including for the Department’s administrative offices. The Department’s receivables from other City departments totaled $5.1 million and $3.5 million at December 31, 2016, and 2015, respectively. The Department’s payables to other City departments totaled $11.1 million and $11.0 million at December 31, 2016, and 2015, respectively. The balances receivable and payable are the result of transactions incurred in the normal course of operations. Basis of Presentation and Accounting Standards—The financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America as applied to governmental units. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Department has applied and is current through 2016 with all applicable GASB pronouncements. Effective January 1, 2015, the Department adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. Statement Nos. 68 and 71 establish new accounting and financial reporting requirements for state and local governments related to pensions, including changes to the recognition of liabilities, expenses, deferred outflows of resources, and deferred inflows of resources. See Note 12 Seattle City Employees’ Retirement System for more information related to Statement Nos. 68 and 71. Effective January 1, 2016, the Department adopted GASB Statement No. 72, Fair Value Measurement and Application, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. Statement No 72 requires that investments should be measured at fair value, with the exception of certain