Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 68 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 - 68 - location as it operates in the western United States. These concentrations of counterparties and concentrations of geographic location may impact the Department’s overall exposure to credit risk, either positively or negatively, because the counterparties may be similarly affected by changes in conditions. Other Operational and Event Risk—There are other operational and event risks that can affect the supply of the commodity, and the Department’s operations. Due to the Department’s primary reliance on hydroelectric generation, the weather, including spring time snow melt, runoff, and rainfall, can significantly affect the Department’s operations. Other risks include regional planned and unplanned generation outages, transmission constraints or disruptions, environmental regulations that influence the availability of generation resources, and overall economic trends. 18. LONG-TERM PURCHASED POWER, EXCHANGES, AND TRANSMISSION Bonneville Power Administration—The Department purchases electric energy from the U.S. Department of Energy, Bonneville Power Administration (Bonneville) under the Block and Slice Power Sales Agreement, a 17-year contract, for the period October 1, 2011 through September 30, 2028. Block quantities, Slice percentage and Bonneville rates are expected to be recalculated periodically during the term of the contract. Rates will be developed and finalized every two years. Accordingly, certain estimates and assumptions were used in the calculations in the estimated future payments table below. The terms of the Slice product specify that the Department will receive a percentage of the actual output of the Federal Columbia River Power System (the System). The percentage is adjusted annually with a Slice Adjustment Ratio no greater than 1.0 times the 3.65663 initial slice percentage, no later than 15 days prior to the first day of each federal fiscal year, beginning with fiscal year 2012. The current Slice percentage is 3.62643%, the same as the previous fiscal year. The cost of Slice power is based on the Department’s same percentage of the expected costs of the System and is subject to true-up adjustments based on actual costs with specified exceptions. Bonneville’s Residential Exchange Program (REP) was established as a mechanism to distribute financial benefits of the Federal Columbia River Power System to residential customers of the region’s investor owned utilities (IOUs). In May 2007, the Ninth Circuit Court (the Court) rulings found the 2000 REP Settlement Agreements with IOUs inconsistent with the Northwest Power Act. To remedy this inconsistency, the court ruled that refunds be issued to non-IOUs through 2019. The Department received $5.7 million in both 2016 and 2015 in billing credits related to both the Block and Slice agreements as a result of the Court decision. Lucky Peak—In 1984, the Department entered into a purchase power agreement with four irrigation districts to acquire 100% of the net surplus output of a hydroelectric facility that began commercial operation in 1988 at the existing Army Corps of Engineers Lucky Peak Dam on the Boise River near Boise, Idaho. The irrigation districts are owners and license holders of the project, and the FERC license expires in 2030. The agreement, which expires in 2038, obligates the Department to pay all ownership and operating costs, including debt service, over the term of the contract, whether or not the plant is operating or operable. The Department provided and billed Lucky Peak $0.3 million for operational and administrative services in both 2016 and 2015. These amounts are recorded as offsets to purchased power expense. The Department paid $3.6 million and $3.4 million for energy from Lucky Peak in 2016 and 2015, respectively.