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SEATTLECITYLIGHTSEATTLECITYLIGHTANNUALREPORT2012LIGHTINGTHEWAFORWARD OwnedHydroTreatyRightsFromBritishColumbiaLong-TermHydroContractsinadditiontotheBPAcontractGCPHAistheGrandCouleeProjectHydroelectricAuthorityOtherLong-TermContractsENERGYRESOURCESSERVICEAREAENERGYRESOURCESSeattleCityLightservesapproximately403000customersintheCityoSeattleandeightadjacentjurisdictions.Thepubliclyownedutilityreliesonamixoresourcestoulfllitscustomersenergyneeds.ThecurrentresourceportolioincludesCityLight-ownedgenerationresourceslong-termcontractresourcessupplementedwithpowerexchangeagreementsnear-termpurchasesandsalesmadeinthewholesalepowermarketandconservation.LuckyPeakPriestRapidsBoundaryDamRossDamDiabloDamGorgeDamNewhalemSouthForkToltCedarFallsHighRossAgreementStatelineWindProjectBurlingtonBiomassColumbiaRidgeLandfllGasPotholesEastCanal66GCPHAR.D.SmithEltopiaBranchCanalGCPHASummerFallsGCPHAMainCanalGCPHACANADAIDAHOOREGONWASHINGTONShorelineSeattleUnincorporatedKingCountyBurienRentonTukwilaNormandyParkSeaTacLakeForestPark YOURSEATTLECITYLIGHTSeattleCityLightwascreatedbythecitizensoSeattlein1902whentheyapprovedbondstobuildahydroelectricpowerplantontheCedarRiver.Theplantdelivereditsfrstelectricitytocustomersin1905.AsamunicipallyownedpublicpowersystemSeattleCityLightisgovernedbyelectedSeattleofcialsandprimarilysupportedbycustomerrevenuesandsurpluspowersales.RecognizedasanationalleaderinenergyefciencyandenvironmentalstewardshipSeattleCityLightprovideslow-costreliableandenvironmentallyresponsibleelectricpower.NearlyhalocustomerselectricneedsaremetromhydropowerdamsownedandoperatedbyCityLightmostotheremainingpowerneedsaremetbyhydropowerpurchasedromtheBonnevillePowerAdministrationandinvestmentsinrenewableandconservationresources.SeattleCityLightisthe10thlargestpublicelectricutilityintheUnitedStatesonthebasisoretailenergysales.YOURSEATTLECITYLIGHTANNUALREPORT20121 SOURVISIONTosetthestandardtodeliverthebestcustomerserviceexperienceofanyutilityinthenation.OURMISSIONSeattleCityLightisdedicatedtoexceedingourcustomersexpectationsinproducinganddeliveringenvironmentallyresponsiblesafelow-costandreliablepower.OURVALUESExcellenceAccountabilityTrustandStewardshipYOURSEATTLECITYLIGHTANNUALREPORT2012S2 SEATTLCITYLIGHTLEANEARTESEATTLCITYLIGHTLEANEARTE Theyear2012wasastandoutorSeattleCityLight.Customerssupportedanambitioussix-yearstrategicplanthatocusesoncustomerserviceandreliabilityandmakesocusedinvestmentsinworkorcedevelopmentandorganizationalperormance.Approvedbythemayorandunanimouslyadoptedbythecitycouncilin2012the2013-2018SeattleCityLightStrategicPlanbeneftscustomersbymakinginvestmentsthatwillresultinbetterservicehigherlevelsoconservationandenvironmentalleadershipandmorepredictablerates.ApprovalandimplementationofthestrategicplanallowsustofocusonfourcriticalobjectivesImprovingcustomerexperienceandratepredictabilityIncreasingworkforceperformanceandsafetypracticesEnhancingorganizationalperformanceContinuingconservationandenvironmentalleadershipOurcustomer-ocusedworkin2012hasalreadypaido.J.D.PowerandAssociatesoundthatSeattleCityLighthasthehighestcustomersatisactionwithbusinesselectricserviceintheWesternU.S.amongmidsizeutilities.ImincrediblyproudothemenandwomenoSeattleCityLightwhoworkedsohardtoachievethisgoal.Iamalsogratefultothehundredsofcustomersofcialsstakeholdersandemployeeswhohelpedshapethestrategicplanoveratwo-yearperiod.Theplanisablueprintforcontinuingourcommitmenttocustomers.Itgivesdata-basedguidancetopolicymakersanditprescribesaseriesoinvestmentsefcienciesandactionsthatlayasolidfoundationforthenextsixyears.Itisourguideortheuture.The2012annualreportisanintegralpartotheimplementationprocessthereporttellsthestoryoourprogressanddemonstratesourcommitmenttotheplanandmostimportantourcustomers.Thestrategicplanshapesallothercustomerandinvestmentdecisionsgoingorward.Theannualreporthighlightshowtheplandoesjustthat.Thereismuchworktobedonebutwelooktotheuturewithconfdence.JorgeCarrascoGeneralManagerandChiefExecutiveOfcerSeattleCityLightFROMTHEGENERALMANAGERANDCHIEFEXECUTIVEOFFICERYOURSEATTLECITYLIGHTANNUALREPORT20124 OURSTRATEGY2013-2018SeattleCityLighthasemergedromtherecessionleanersmarterandbetterconnectedtoitscustomersandpolicymakers.Implementationofthe2013-2018strategicplanensuresthattheutilitycanefcientlyandeectivelymeettheneedsandexpectationsoSeattlescitizensandalloSeattleCityLightscustomers.WORKINGTOGETHERTOINVESTINTHEFUTUREThestrategicplanistheculminationoatwo-yeareortlaunchedbytheSeattleCityCouncilandmayorinMay2010withtheappointmentonineindividualstoaSeattleCityLightreviewpanel.Thiswasthemostextensiveplanningprocesseverundertakenbytheagency.Theutilitysexecutiveteamledtheeortwithextensiveinvolvementandinputromthereviewpanelcustomerscommunitymemberscityandbusinessleadersemployeesandotherkeystakeholders.TheSeattleCityCouncilunanimouslyadoptedthesix-yearplan.Theplanincludesrevenuerequirementsthatequalabouta4.7percentrateincreaseoreachothenextsixyears.AFRAMEWORKFORINFORMEDDECISIONSThestrategicplanisablueprintformakingdecisionsaboutthefuture.ItdescribeshowCityLightcanbestmeetandexceedcustomersexpectationsinproducinganddeliveringenvironmentallyresponsiblesaeaordableandreliablepowerformanyyearstocome.Itincludespoliciesthatenableadditionalefciencies.Italsomakesstrategicinvestmentstoimprovereliabilitystrengthentheworkorceandprovideopportunitiesoreconomicdevelopment.Strategicinvestmentsareorganizedaroundfourkeyobjectives1.Improvecustomerexperienceandratepredictability.2.Increaseworkforceperformanceandsafetypractices.3.Enhanceorganizationalperformance.4.Continueconservationandenvironmentalleadership.IMPLEMENTINGTHEPLANThestrategicplanisalreadyenablingSeattleCityLighttoprovideanddeliverenergyinamodernefcientandreliablewaywhileachievinglong-termcostsavings.The2012annualreporttellsthestoryohowSeattleCityLightispreparingtoimplementthestrategicplananddeliveringonitspromisetoprovidethebestcustomerserviceexperienceoanyutilityinthecountry.YOURSEATTLECITYLIGHTANNUALREPORT20125 IMPROVINGCUSTOMERSEXPERIENCEANDRATEPREDICTABILITYCityLightpridesitselonsatisfedcustomers.Meetingchangingcustomerneedsisdifcultwithoutcustomer-supportingsystemsaproblemacedbyCityLightpriortoimplementationofthestrategicplan.Inthepastthecustomerexperiencehasalsobeenimpactedbyuncertaintyaroundwholesalepowermarketrevenues.TodaythestrategicplanisaddressingthesechallengesandhelpingCityLightmeetthevarieddemandsotheutilitysresidentialcommercialinstitutionalandindustrialcustomers.YOURSEATTLECITYLIGHTANNUALREPORT2012KwanKimowneroWallingordDryCleanerstookadvantageoCityLightrebatestoimprovelightinginhisshopandsaveenergy.6 SEATTLCITYLIGHTEFFICIENRELIABLENNOVATIVSEATTLCITYLIGHTEFFICIENRELIABLENNOVATIVYOURSEATTLECITYLIGHTANNUALREPORT20127 SECURINGTHEFUTURECompletedworkonBoundaryDamrelicensingaftereightyearsofintenseactivity.Thenewlicensepreservescurrentoperationsatthedamforthenext42years.BoundaryDamisresponsibleforabout60percentoftheelectricityCityLightgeneratesonitsownandabout30percentoftheelectricitytheutilityscustomersuse.UPGRADINGSYSTEMSInstalledanewsecondfeederintheChinatown-InternationalDistrict.Thisbackupsystemhelpskeepthepoweronforarearesidentsandbusinesses.CoordinatedwithSeattleDepartmentofTransportationcrewstoremoveanoverheadfeederandconstructanewreplacementaspartoftheMercercorridorproject.Thecomplexprojectrequiredeightplannedoutagesthatimpactedmorethan100residentialand30commercialcustomersandinvolveddiggingtrenchesunderneaththeSouthLakeUnionstreetcarwhilethelinewasactive.Theworkwasdoneonbudgetandaheadofschedule.RelocatedpowerlinestomakewayforthenewAlaskanWayViaducttunnelwhilecoordinatingwithlocalresidentsbusinessesagenciesandcontractors.ENHANCINGRELIABILITYInjectedundergroundpowercableswithprotectivesiliconetoextendtheirlifeandsavetheutilitymillionsofdollarsinrepairs.Trimmedvegetationalongdistributionandtransmissionlinesminimizingoutages.ReplacedstreetlightswithLEDslight-emittingdiodessavingtheutilityenergyandmoneyextendingthelifeofstreetlightsandreducingmaintenancecosts.UsedLightDetectionandRangingLiDARtechnologytoinspectall230kVtransmissionlinesmeetingcompliancerequirementsandprovidingimportantassessmentdataforthetransmissionsystem.Testedandtreatedpolesreplacingsomeandgivinglife-extendingtreatmentstoothers.Assessed28substationtransformersandinstalledanewsubstationtransformerattheNorthSubstation.OpenedanewSystemControlCenterastate-of-the-artbackupfacilitydesignedtoimprovethereliabilityoftheelectricalsystemduringanemergency.CompletionofthefacilityputsCityLightaheadofscheduleonnewfederalrequirementsforredundantcontrolsystems.YOURSEATTLECITYLIGHTANNUALREPORT20128 IMPROVINGRATEPREDICTABILITYStrengthenedtheRateStabilizationAccountRSA.Establishedin2010torespondtoenergycostvolatilityandminimizeratespikesorservicecutsduetoundingshortallstheRSAstoodat128.3millionbytheendo2012.TheaccounthelpstoprotectratepayersagainstutureratefuctuationsandpositivelyimpactsCityLightsbondrating.HELPINGPEOPLERampedupeffortstoservecustomersonalimitedorxedincomethroughtherateassistanceprogram.PartneredwithSeattlePublicUtilitiesTheSeattleTimesandSnohomishCountyPublicUtilityDistrictNo.1tosupportTakeWinterbyStormapublic-privatecooperativeprogramthathelpspeoplegetbetterpreparedorwinterstormsandmoreseriousemergencies.SATISFYINGCUSTOMERSContinuedimplementationoftheoutagemanagementsystemincludingapilotprojectthattelephonespeopletogivetheminormationsuchastheestimatedrestorationtime.Engagedadditionalcustomersthroughsocialmediaadding11percentmoreTwitterollowersandincreasingFacebooklikesby37percent.CUSTOMER-FOCUSEDACHIEVEMENTS80Percentocallsansweredlivewithin60secondsbytheutilityscallcenter910CustomersassistedthroughProjectShare12800CustomersservedthroughtheUtilityDiscountProgram1273CustomershelpedbytheEmergencyLowIncomeAssistanceProgram1Averagenumberoannualnon-stormoutagespercustomerYOURSEATTLECITYLIGHTANNUALREPORT20129 HighestCustomerSatisfactionWithBusinessElectricServiceintheWesternU.S.AmongMidsizeUtilitiesSeattleCityLightrankedhighestinastudythatlookedatcustomerservicecommunicationsandcorporatecitizenshipamongotherfactors.YOURSEATTLECITYLIGHTANNUALREPORT2012SeattleCityLightreceivedthehighestnumericalscoreamongmidsizeutilitiesintheWestregionintheproprietaryJ.D.PowerandAssociates2013ElectricUtilityBusinessCustomerSatisfactionStudySM.Studybasedon25794totalonlineinterviewsrankingthe9largestprovidersintheWestAZCACOIDMTNMNVORUTWAWY.ProprietarystudyresultsarebasedonexperiencesandperceptionsofconsumerssurveyedApril-JuneandSeptember-December2012.Yourexperiencesmayvary.Visitjdpower.com.10 DENNYSUBSTATIONCityLightsfrstnewelectricalpowersubstationin30yearsDennySubstationwillservebusinessesandresidentsthroughoutCityLightsserviceterritoryandwillalleviatedistributioncongestion.LocatednearDennyWayandStewartStreetthesubstationwillservetheutureexpansionandgrowthoftheBelltown-SouthLakeUnionarea.Itwillprovidethehigherleveloreliabilityandelectricalloaddensityneededbymedicaltechnologymanuacturingandentrepreneurialindustries.CityLightiscommittedtodesigningasubstationthatwillftwiththeneighborhoodadvancecommunitygoalsandserveasamodelorenvironmentalsustainability.ThoughthemajorityothesitewillbeutilizedorsubstationoperationsCityLightisexploringopportunitiestoadvanceneighborhoodgoalsandpriorities.In2012CityLightcompletedphaseonecleanupofsoilandgroundwatercontaminationromoldleakingundergroundstoragetanks.Crewsalsotoredowntheoldbusgaragesandmaintenancebuildingsinstalledanewencegradedsuracesandinstallederosioncontrols.TheDraftEnvironmentalImpactStatementDEISisscheduledorcompletioninearly2014withthefnalEISduelaterintheyear.Substationconstructionisscheduledtobegininlate2014andthesubstationshouldbeenergizedinlate2016.RELIABILITYACHIEVEMENTS692Milesotreetrimming22850Feetooverheadlinesconvertedtoundergroundconduits13956LEDstreetlightsinstalled2000PolesreplacedYOURSEATTLECITYLIGHTANNUALREPORT2012AtemporarymuralnexttotheDennySubstationprojectwascreatedbyvolunteersandyoungartists.11 INCREASINGWORKFORCEPERFORMANCEANDSAFETYPRACTICESSeattleCityLights1812employeesarethekeytodeliveringenergysaelyreliablyandaffordably.InvestinginandretainingCityLightspeoplemeansmakingsuretheyresafehealthyandskilled.Itsgoodforbusinessgoodorcustomersandtherightthingtodo.SeattleCityLightsstrategicplanrecognizestheutilityacessignifcantbusinessrisksiworkorcechallengesarenotaddressed.HaloCityLightsemployeeswillbeeligibletoretireinthenextfveyearsanddespitesomesignifcantimprovementsinworkplacesaetytheemployeeinjuryrateremainsabovethenationalaverage.In2012CityLightbeganimplementationofstrategicinitiativesaimedatconrontingtheseworkorceperormanceandsaetychallenges.YOURSEATTLECITYLIGHTANNUALREPORT201212 SEATTLCITYLIGHTSAFHEALTHSKILLESEATTLCITYLIGHTSAFHEALTHSKILLEYOURSEATTLECITYLIGHTANNUALREPORT201213 INVESTINGINEMPLOYEESAFETYANDWELLNESSIMPROVINGWORKPLACEPERFORMANCEReducedtheinjuryratebyimprovinganddocumentingsaetystandardsandworkpracticesprovidingadditionalworkersaetytrainingandrewardingemployeesorsaework-behavior.Achievedhiringadvancementandretentiongoalsresultinginareducedjobvacancyrate.Advancedemployeedevelopmentthroughthetuitionreimbursementprogram.Launchedasix-daycrewchiefeldsupervisorleadership-trainingprogramatSouthandNorthServiceCenters.ReceivedapprovaltodesignandconstructatechnicaltrainingcenterthatwillconsolidatetrainingorCityLights800-plusskilledtradesworkers.Helpeddevelopandprovideworkplaceviolencepreventionawarenesstrainingtoapproximately100supervisorsandmorethan1000employees.Establishedanexecutivesafetycounciltoprovideobjectivesstrategicdirectionandcoordinationosaetyandhealthprogram.FinalizedagreementswithLocalUnions77and17toprovidefameresistantclothingoremployeeswhoareexposedtoarcasheselectricalexplosions.Establishedandimplementedpersonalprotectiveequipmentguidelines.Developedandpresentedadriversguidetonearly700employees.Createdandemployedapolicyonvehicleidling.In2012CityLightapprovedandfundedtheseprogramsbeginningin2013asafetyandhealthmanagementsystemadriversafetyprogramaeldergonomicsprogramasafework-behaviorrecognitionprogram17EMPLOYEEINJURYRATEDOWNDecreaseinTotalRecordableRateTRRfrom2011to2012YOURSEATTLECITYLIGHTANNUALREPORT201214 1221149TheTotalRecordableRateTRRindicateshowmanyemployeesper100employeeswereinjuredorsueredanillnessthatrequiredoverandbeyondfrstaidtreatmentwithinthespecifedyear.NewhiresNewskilledapprenticescablesplicerselectricianconstructorsandmeterelectriciansIMPROVINGSAFETYJobpromotionsInjuryRateProjectedSeattleCityLightisdesigningandconstructinga6.9millionTechnicalTrainingCentertoconsolidatethedeliveryoallapprenticeshipjourney-levelskillsenhancementsaetycommercialdriverlicenseandothertechnicaltrainingsorthe800-plusskilledtradesworkersthatbuildandmaintainCityLightselectricalinrastructure.The9000-square-ootone-storybuildingwillhouseclassroomstraininglaboratoriesandacomputerlab.Thecenterwillalsoincludeoutdoortraininginstallationssuchaspole-climbingyardsandundergroundtrainingvaultsandapavedareaorcommercialdriverandcranesaetytraining.20118.420127.020136.720145.420154.320163.420172.820182.2NEWSTATE-OF-THE-ARTTRAININGCENTERYOURSEATTLECITYLIGHTANNUALREPORT2012WORKFORCEACHIEVEMENTS15 ENHANCINGORGANIZATIONALPERFORMANCEThestrategicplantargets18millioninefciencysavingsayearby2015inCityLightsoperationscapitalspendingandbusinesspractices.Realizingtheseefcienciesrequiresinvestmentsinmanagementandinormationsystemson-goingperormancebenchmarkinginternalauditingmonitoringandreporting.YOURSEATTLECITYLIGHTANNUALREPORT201216 SEATTLCITYLIGHTINVESTMENTANAGEMENTPERFORMANCSEATTLCITYLIGHTINVESTMENTANAGEMENTPERFORMANCYOURSEATTLECITYLIGHTANNUALREPORT201217 COORDINATIONMONITORINGANDREPORTINGParticipatedinEvergreenQuake2012emergencymanagementexercisesaimedattestingtheresponseandrecoverycapabilityopublicandprivatesectorentitiesinWesternWashington.NegotiatedwiththeBonnevillePowerAdministrationandPugetSoundEnergytoreducetransmissioncongestionissuesalongthehigh-demandI-5power-transmissioncorridor.CoordinatedcerticationfromFERCforsecurityprogramsorBoundarySkagitandToltRiverhydroelectricprojects.Submittedthe2012IntegratedResourcePlanIRPoutliningstrategiesforthetypeamountandtimingonewresourceacquisitionstomeettheelectricalloadorthe20-yearperiodbetween2012and2031.Providedregionalandnationalleadershiponenergyandenvironmentalissues.ContinuedtheWesternWashingtonCopperThetTaskForceaprojectinitiatedbyCityLightin2010sharingtechniquesandtacticstodetercrime.PursuedopportunitiesforpolicyimprovementsandcostsavingssuchasexplorationoapotentialenergymarkettoolaimedataddressingthevariabilityothewindenergymarketandworkontheColumbiaRiverTreaty.ConductedpublicoutreachthroughtheCityLightwebsiteprintedmaterialsandpublicinteractionopportunitiestohelpcustomersunderstandrequirementsorelectricvehiclecharging.ENHANCINGBUSINESSMANAGEMENTANDINFORMATIONPRACTICESLaidthegroundworkforamobileworkforceprojectthatwillconnectmultiplesotwaresystemsautomateschedulinganddispatchoCityLightsfeldworkorceenablereal-timemonitoringoworkprogressandimproveemergencyandoutageresponses.BeganAdvancedMeteringInfrastructureAMItosupportemergingconsumertechnology.AdvancedacomprehensiveEnterpriseRiskManagementERMstructureaimedatimprovingoperationaleicienciesbyproactivelyidentiyingrisksandhelpingavoidorminimizeimpactsandcoststotheorganization.Initiatedphasetwoofaworkorderandassetmanagementsystem.Thisphasewasimplementedorthepowerproductionstationsacilitiesshopsrelayandcommunicationsgroups.SteppedupcybersecurityeffortsupdatingcriticalarchitecturecoordinatingwiththeCityoSeattlechieinormationsecurityofcerparticipatinginnationalsummitsandinvitingtheDepartmentofEnergytoconductacybersecurityreview.NEGOTIATINGFORFUTURESAVINGSSeattleCityLightpaysannuallanduseeesortheuseoederallandsatitsSkagitandBoundaryhydroelectricprojects.InFebruary2009theFederalEnergyRegulatoryCommissionFERCannouncedachangeineecalculationsthatwouldhaveincreasedCityLightcostsbymillionsodollarsayear.In2012CityLightinpartnershipwithacoalitionoutilitieswassuccessulinoverturningFERCsdecisionincourt.Anewmethodologyisbeingappliedandin2013CityLightwillpaynearly4millionlessthantheinitialassessment.YOURSEATTLECITYLIGHTANNUALREPORT201218 SUPPORTINGDIVERSEBUSINESSESSeattleCityLightspentmorethan11.4millionprocuringgoodsandservicesfromHistoricallyUnderutilizedBusinessesandWomenMinorityBusinessEnterprisesHUBWMBE.TheutilityalsopartneredwiththeNorthwestMinoritySupplierDevelopmentCounciltondHUBWMBEvendorstobidonCityLightcontracts.Thispartnershipwillcontinuein2013.2007200820092010201120127.238.8810.8810.1911.7511.44BUILDINGASMARTGRIDADVANCEDMETERINGINFRASTRUCTUREIn2006CityLightbeganexploringimplementationoadvancedmeteringwithpilotprograms.AdvanceMeteringInfrastructureAMIreferstotechnologysystemsthatallowortheremotereadingometers.Backthensystemswereone-wayandocusedonremotemeterreading.TodayAMIsystemsaretwo-wayhigh-speedandotenintegratedwithotheroperationalsystems.Theyalloworremotemeterreadingconnectionsdisconnectionsandloadcontrol.Customersbeneftthroughasterserviceandtheabilitytomanagetheirenergyuse.SeattleCityLightismakingprogressonAMIandworkingcloselywithcustomerstomakesuretheyunderstandtheullstoryohowAMIsupportsimprovementstobillingratesoutagemanagementpowerreliabilityandconservationwhileaddressingconcernsaboutprivacyaccuracyandsaety.YOURSEATTLECITYLIGHTANNUALREPORT2012REGIONALANDNATIONALENERGYENVIRONMENTALLEADERSHIPSeattleCityLightGeneralManagerandChieExecutiveOfcerJorgeCarrascoisarecognizedleaderregionallyandnationallyoncriticalenergyandenvironmentalissues.PastChairTheLargePublicPowerCouncilBoardoDirectorsAlliancetoSaveEnergyBoardoDirectorsElectricPowerResearchInstituteBoardoDirectorsNatureConservancyWashingtonChapterBoardoTrusteesSeattleCommunityCollegesPanelistTheAllianceCommissiononNationalEnergyEfciencyPolicyPanelistCityoSeattlesGreenRibbonCommissionLeaderU.S.DepartmentofEnergyMunicipalSolidStateStreetLightingConsortiumHUBWMBEEXPENDITURESmeasuredinmillionsColleenHallettletandherdaughterTanyaco-ownMobileElectricalDistributorsinnortheastSeattleanelectricalsupplierorresidentialcommercialandindustrialcustomers.Thewoman-ownedbusinesshassuccessullybidoncompetitivecontractswithSeattleCityLight.19 CONTINUINGCONSERVATIONANDENVIRONMENTALLEADERSHIPSeattleCityLightiscontinuingitsleadershiproleinenergyconservationsh-riendlyoperationoitshydroelectricprojectscarbon-neutraloperationsandotherenvironmentalcommitments.EnergyconservationhasbeenCityLightsrst-priorityresourceormeetingcustomerselectricityneeds.The2013-2018strategicplancallsoracombinationoconservationeciencyimprovementsfexibilityocurrentpowercontractsandmarketpurchasestobuildasustainableuture.YOURSEATTLECITYLIGHTANNUALREPORT201220 SEATTLCITYLIGHTCARBONEUTRAINCE200SEATTLCITYLIGHTCARBONEUTRAINCE200YOURSEATTLECITYLIGHTANNUALREPORT201221 LEADINGCONSERVATIONNearedcompletionofanambitiousFive-YearConservationPlanthatdoublesCityLightsannualenergyconservationeortswithagoaltosaveatotalo66annualmegawatts.Inaddition185millionworthoinvestmentsinenergyeciencyprogramswillsavecustomersmorethan310millioninresidentialbusinessbills.InstalledacommunitysolarprojectonBeaconHillandreceivedaninnovationawardromtheInterstateRenewableEnergyCouncil.EncouragedconservationthroughrebatesadirectinstallprogramorcompactfuorescentlightbulbsTwistSavelightingdiscountsandincentivesorcommercialenergyeciencyenhancements.ProvidednancialincentivestosmallbusinessesthroughtheSmartBusinessprogramhelpingbusinessesreplaceinecientlightingwithenergy-savingdevices.ReachedouttocustomersthroughCityLightsPowerulNeighborhoodsprogramtooerreecompactforescentlightbulbsenergy-savingshowerheadsandaucetaerators.Theprogramtargetscustomerswhomaynothavetakenadvantageoconservationprogramsincludingseniorcitizensnon-English-speakinghouseholdsandlow-incomecustomers.IncorporatedelectricvehiclesintoCityLightsfeetreachedouttothepublicaboutelectricvehicleuseandcontinuedtomonitorcustomeruseoelectricvehiclestounderstanduseandprepareoruturedemand.STEWARDINGRESOURCESOfferedtheHomewardBoundeldtripfortheeighthyearinarow.GuidedbyCityLightstaourthandthgradersromtheSeattlePublicSchoolswalktrailsandlearnaboutriversshmapsandcompasses.Purchasedninepropertiestotalingmorethan87acresintheSkagitandToltwatershedsaspartoftheEndangeredSpeciesActEarlyActionProgramwhichbuyslandtoprotectimportanthabitatorshandwildlie.Reachedouttostudentsingrades3-6tocontributetotheShrinkingBigootcalendaracontestorkidstolearnaboutreducingtheircarbonootprint.Received640acresofold-growthorestintheSkagitRiverwatershedorconservationpurposes.Beganplanningconstructionofadecantingandwaterpre-treatmentacilitythatwillallowtheSouthServiceCentertohandleandtreatwaterromundergroundvaultsalloverthecityandwasterompole-settingoperations.CompletedremediationofSlip4oneotheearlyactionareasorthelowerDuwamishWaterwaySuperundproject.YOURSEATTLECITYLIGHTANNUALREPORT2012HomewardBoundeldtripsgivestudentsanoutdoorexperience.22 ItprobablycomesasnosurprisethattheHutchoneoftheworldsmostinnovativecancerresearchcenterswouldalsobeonthecuttingedgewhenitcomestoenergyconservation.SophisticatedscienticequipmentinlaboratoriesatFredHutchinsonCancerResearchCenterrequires10timesmoreelectricitythanatypicaloceanditcomesatabigcost.Lastyearthecenterspentroughly2.8milliontoprovideelectricitytotheirlaboratoriesandocesthatsmorethan7000adayBecauseeverydollarsavedonelectricityisanotherdollarthatcanbeinvestedinlie-savingresearchprojectstheHutchhasapowerulincentivetoreduceenergyuse.TheHutchacilitiesandoperationsstarstpartneredwithSeattleCityLightyearsagooninitiativestosaveenergyandensuresteadyow.Energyconservationinitiativeshavenowbeenincorporatedinto49newprojectsand86retrotprojectsatatotalcosto8million.SeattleCityLightnotonlyprovidestechnologicalknow-howitalsooersnancialincentivestocustomersliketheHutch.Incentivestoreduceenergydemandareawin-win-win.TheysaveSeattleCityLightgenerationcoststheyaregoodortheenvironmentandtheymakecustomerinvestmentsviable.CityLightsincentiveprogramdecreasescostspeedsupourtimerameandhelpsmakeprojectspenciloutsaidScottRuschtheHutchsvicepresidentoacilitiesandoperations.CityLightandtheHutchalsoworkcloselytogetheronprogramstomonitorenergyuseandensureareliablefow.Scienticequipmentissensitiveandexpensivesopowersurgescancreatecostlyproblems.ItsimportantforustodelivertherightamountoenergyjustintimeandasHUTCHINNOVATIONSSAVEENERGYANDMONEYecientlyaspossibleRuschsaid.CityLighthasbeenanimportantpartnerinthiseort.Onlinemonitoringodetailedenergyconsumptionispossiblethroughtheplacementosmartmeterstherstgenerationothistypeometerthatusesatelephonedial-uptodownloaddataeachmorning.ThemetershavehelpedusidentiyandaddressanomaliesexplainsJamesWalkeraacilitiesengineerattheHutch.Adjustingourenergyuseoverholidaysisacriticalconservationandcostsavingsstrategy.OtherinnovationshaveincludedtakingadvantageoSeattlestemperateclimateandusingoutsideairorcoolingthedatacenterusingavariablevolumevariablepressuresystemtobetterrespondtocurrentconditionsandimplementingwater-savingprojectsthatalsosaveenergy.Theresultsaredramaticinconservationandindollarsandcents.Weresaving1.3millionayearinratesandreducingourelectricityconsumptionby21millionkWh.ItssubstantialbutwerereachinghigheritspartotheHutchculture.FredHutchsenergyconservationandenvironmentalleadershiphasbeenrecognizedwithalonglistoawardsincludinghonorsfromNAIOPacommercialrealestatedevelopmentassociationAssociatedGeneralContractorsLeadershipinEnergyandEnvironmentalDesignLEEDBusinessesforanEnvironmentallySustainableTomorrowBESTMayorsEnvironmentalLeadershipAwardanddozensoothers.AsFredHutchcontinuestogrowandinnovatesowillthesurroundingSouthLakeUnionneighborhood.CityLightinvestmentssuchastheDennySubstationwillimprovequalityandreliabilitysomethingveryimportanttothisworld-classresearchandinnovationhub.Weresaving1.3millionayearinratesandreducingourelectricityconsumptionby21millionkWh.ScottRuschVicePresidentoFacilitiesandOperationsFredHutchinsonCancerResearchCenterYOURSEATTLECITYLIGHTANNUALREPORT201223 1313016404Averagemegawattssavedfromcustomerconservationenoughtopower12739averagehouseholdsforayear11993191MAverageamountsavedbyresidentialcustomersparticipatinginrebateordirectinstallprogramsAverageamountsavedbysmallbusinessesparticipatinginrebateordirectinstallprogramsAverageamountsavedbylargebusinessesorindustriesparticipatinginrebateordirectinstallprogramsCustomersavingsovertimeastheresultofconservationmeasuresinstalledin2012ELECTRICVEHICLEPROGRAMHITSTHEROADCityLighthelpscustomersmakethemostoftheirelectricserviceincludingelectricvehicles.In2012CityLightselectricvehicleprogramreachedouttothepublicbyparticipatinginregionalandneighborhoodeventssuchastheSeattleAutoShowJeffersonParksgrandreopeningtheSeattleDepartmentofTransportationsSummerStreetsseriesandtheSeattleCentersNext50celebrations.InadditiontoconductinglocaloutreachCityLightparticipatesinseveralregionalandnationalelectrictransportationinitiativessuchastheCityofSeattleInter-DepartmentalTaskForceonElectricTransportationtheEPRIElectricTransportationAdvisoryCommitteeandtheRockyMountainInstitutesProjectGetReady.In2013CityLightwillcontinuetomonitorndingsofaDepartmentofEnergy-fundedelectricvehicleprogramthathelpsprovidefreeelectriccarchargingstationstocustomersinexchangeforconsenttoshareenergyconsumptioninformation.CityLighthasinstalledmoreelectricvehicleinfrastructurethanallbutoneotherutilityparticipatinginthisnationalprogram.YOURSEATTLECITYLIGHTANNUALREPORT2012ENVIRONMENTALACHIEVEMENTS24 COMMUNITYSOLARPROJECTWINSCOMMUNITYPRAISEANDNATIONALHONORThreenewpicnicshelterswithsolarpanelroofsarenowgeneratingpoweratSeattlesJeffersonParkonBeaconHillthankstofundingfromsomeCityLightcustomersandaDepartmentofEnergygrant.Customersparticipatinginthiscommunitysolarprojectreceiveannualenergycreditsontheirpowerbills.Forthosewhocannotaffordtoinstallsolarpanelsontheirownhomescommunitysolaroffersanaffordableoptiontogetinvolved.TheJeffersonParkprojectisestimatedtoproduce24000kilowatt-hoursofcleanrenewableelectricityeachyearenoughtorunthreehouseholds.TheprojecthasbeenstronglysupportedbyresidentsonBeaconHill.Italsoreceivednationalaccoladesearninga2012InnovationAwardfromtheInterstateRenewableEnergyCouncil.YOURSEATTLECITYLIGHTANNUALREPORT201225 SEATTLECITYLIGHTGIVESBACKThestrategicplanrefectsSeattleCityLightscommitmenttothecommunitymakingimportantinvestmentstodaytomeetcustomerneedsoftomorrow.Thiscommunitycommitmentisatthecoreofwhoweare.ItisactedoutonadailybasisandthroughouttheregionasCityLightspeoplereachoutandgiveback.YOURSEATTLECITYLIGHTANNUALREPORT2012CityLightsent14employeesandourtruckstohelpthepeopleofLongIslandrecoverfromHurricaneSandyinthefallof2012.26 SEATTLCITYLIGHTCARINCOMMITTEGENEROUSEATTLCITYLIGHTCARINCOMMITTEGENEROUSEATTLCITYLIGHTCARINCOMMITTEGENEROUYOURSEATTLECITYLIGHTANNUALREPORT201227 GREGCARLSONREBUILDINGLIVESONEVACATIONATATIMESince1992CityLightemployeeGregCarlsonhasusedhisvacationtimetohelppeopleinneed.Hexeshousesbuildssheltersdigswellsandotherskilledtasks.Withcivilconstructiondisasterrelieandincidentcommandskillsheiswidelysought-aterduringnaturaldisastersandotherunexpectedevents.Greghasvolunteeredin20dierentcountriesandtheUnitedStates.HehelpedwithGroundZerorecoveryafter911traveledtoMississippitohelpvictimsoHurricaneKatrinaandrecentlywenttoKentuckytorebuildandxhousingorvictimsodevastatingtornadoes.COMMUNITYCOMMITMENTSExpandedtheemployee-volunteerprogramlaunchedin2011withdozensoemployeesgettinginvolvedintheannualPugetSoundHeartWalktheSkagitCleanupRebuildingTogetherSeattletheDuwamishAliveEarthDayandothereventsatallutilitylocations.Sent14employeesandfourtruckstoassisttheLongIslandPowerAuthoritytorestorepowertohundredsothousandsopeopleaectedbyHurricaneSandy.ContinuedProjectShareaprogramthathelpspayelectricbillsorpeoplewhoneedtemporaryassistance.Assembledemergencypreparednesskitsforlow-incomechildreninCityLightsserviceterritorythroughtheKitsorKidsprogram.OrganizedfundraisersfordozensofnonprotsservingamiliesthatstruggledduringtheholidayseasonsuchasToysorTotslocaloodbanksNorthwestHarvestMiraclesFoodBankYWCAandothers.Helpedkidsfromlow-incomefamiliesgetreadyorschoolduringtheannualStutheBuscampaignsponsoredbyCommunitiesinSchools.Employeesdonatedafullbusloadobackpacksandschoolsupplies.Thebackpacksincludedasmallfashlightandtipsonpreparingoroutageemergencies.YOURSEATTLECITYLIGHTANNUALREPORT2012CityLightemployeesjoinedmorethan200othervolunteersaspartotheDuwamishAliveEarthDayeventsponsoredbyForterraaconservationnonprot.28 223000911150MoneyraisedthroughProjectShareNumberofpeopleservedbyProjectShareKitsforKidsassembledbyCityLightstaffIoffermysincerestgratitudetoyouandyourstaffforyoursteadfasteffortsinthewakeofHurricaneSandywhichwereinvaluabletoourworktohelpourresidentsandcommunitiesbegintorecoverandrebuild.NewYorkGovernorAndrewCuomoLENDINGAHELPINGHANDAlthoughtheeconomyisrecoveringtherearemanyinthecommunitywhoarestrugglingandneedhelppayingtheirutilitybills.SeattleCityLightpartnerswiththeCityofSeattlesHumanServicesDepartmenttoofferenergyandutilityassistanceprogramsthataddressthispressingneed.Programsareavailabletoaddressavarietyofcircumstancesfromthosewhoarestrugglingtomakeendsmeettothosefacingimmediatedisconnection.TherearealsotemporaryassistanceprogramssuchasProjectSharethatenableCityLightcustomerstosupportothersinthecommunitywhoarestrugglingtopayforelectricity.Customerscanrounduptheirutilitybillpaymentormakeanindividualdonationtosupportthosefacingservicedisconnections.Whilehelpisavailabletherearestillmanywhoqualifybutdonttakeadvantageoftheseprograms.Continuedoutreachisastrategicplaninitiative.YOURSEATTLECITYLIGHTANNUALREPORT2012COMMUNITYACHIEVEMENTSInanunprecedentedeffortCityLightcrewsandequipmentewtoLongIslandonamilitarytransportplanetoassistwithHurricaneSandyrecovery.29 Inthespringof2012itwaswithgreatpleasurethatIjoinedbusinessleaderstopubliclyendorseSeattleCityLightsstrategicplanaplanthatwillguidetheutilitysoperationsinvestmentsandcustomerrateswellintotheuture.InJuly2012theSeattleCityCouncilunanimouslyapprovedtheplan.Withthatkindobroadsupporttheutilitywillbuildonitslegacyoprovidinglow-costreliableenvironmentallyresponsibleelectricityanditwillremainamajorplayerinourlocaleconomy.Inadditioncustomerswillenjoyimprovedserviceandpredictablerates.IcongratulateSeattleCityLightonbringingthiscriticalplantofruitionandIlookorwardtoitsulfllment.MayorMikeMcGinnCityoSeattleFROMTHEMAYORLettorightTimBurgessTomRasmussenSallyBagshawNickLicataBruceA.HarrellJeanGoddenRichardConlinMikeOBrienandSallyJ.Clark.SEATTLECITYCOUNCILYOURSEATTLECITYLIGHTANNUALREPORT201230 LefttorightJeffBishopchiefnancialofcerJorgeCarrascogeneralmanagerandCEOPhilWestcustomerserviceandenergydeliveryofcerJimBaggscomplianceofcerDaVonnaJohnsonhumanresourcesofcerandSephirHamiltonchieosta.SEATTLECITYLIGHTEXECUTIVETEAMYOURSEATTLECITYLIGHTANNUALREPORT201231 YOURSEATTLECITYLIGHTANNUALREPORT201232 FINANCIALINFORMATIONANNUALREPORT201233 AUDITEDFINANCIALSTATEMENTSIndependentAuditorsReportManagementsDiscussionandAnalysisBalanceSheetsStatementsofRevenuesExpensesandChangesinNetPositionStatementsofCashFlowsNotestoFinancialStatementsRequiredSupplementaryInformationUnauditedOtherInformationUnauditedSUPPLEMENTALINFORMATIONHighlightsUnauditedFinancialSummaryUnauditedLong-TermDebtUnauditedCustomerStatisticsUnauditedPowerUnauditedChangesinOwnedTotalGeneratingInstalledCapabilityUnauditedSystemRequirementsUnauditedTaxesandContributionsbySeattleCityLighttotheCostofGovernmentUnauditedPublicPurposeExpendituresUnaudited36373850515253545556959697103104105106107108109109110111FINANCIALTABLEOFCONTENTSYOURSEATTLECITYLIGHTANNUALREPORT201234 -1-INDEPENDENTAUDITORSREPORTEnergyandEnvironmentCommitteeTheCityofSeattleCityLightDepartmentSeattleWashingtonReportontheFinancialStatementsWehaveauditedtheaccompanyingfinancialstatementsofTheCityofSeattleCityLightDepartmenttheDepartmentanenterprisefundofTheCityofSeattleWashingtonasofandfortheyearsendedDecember312012and2011andtherelatednotestothefinancialstatementsaslistedinthetableofcontents.ManagementsResponsibilityfortheFinancialStatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericathisincludesthedesignimplementationandmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatementwhetherduetofraudorerror.AuditorsResponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperformtheauditstoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditorsjudgmentincludingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatementswhetherduetofraudorerror.InmakingthoseriskassessmentstheauditorconsidersinternalcontrolrelevanttotheDepartmentspreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstancesbutnotforthepurposeofexpressinganopinionontheeffectivenessoftheDepartmentsinternalcontrol.Accordinglyweexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagementaswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.BakerTillyVirchowKrauseLLPTenTerraceCtPOBox7398MadisonWI53707-7398tel6082496622fax6082498532bakertilly.com35 EnergyandEnvironmentCommitteeTheCityofSeattleCityLightDepartmentOpinionInouropinionthefinancialstatementsreferredtoabovepresentfairlyinallmaterialrespectsthefinancialpositionoftheDepartmentasofDecember312012and2011andthechangesinitsfinancialpositionanditscashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.EmphasisofMattersAsdiscussedinNote1thefinancialstatementspresentonlytheDepartmentanddonotpurporttoanddonotpresentfairlythefinancialpositionofTheCityofSeattleWashingtonasofDecember312012and2011andthechangesinitsfinancialpositionanditscashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.Ouropinionisnotmodifiedwithrespecttothismatter.AsdiscussedintheNote1theDepartmentadoptedtheprovisionsofGASBStatementNo.63FinancialReportingofDeferredOutflowsofResourcesDeferredInflowsofResourcesandNetPositioneffectiveJanuary12012.Ouropinionisnotmodifiedwithrespecttothismatter.OtherMattersAccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequirethattheManagementsDiscussionandAnalysisandSchedulesofFundingProgressinformationaslistedinthetableofcontentsbepresentedtosupplementthefinancialstatements.SuchinformationalthoughnotapartofthefinancialstatementsisrequiredbytheGovernmentalAccountingStandardsBoardwhoconsidersittobeanessentialpartoffinancialreportingforplacingthefinancialstatementsinanappropriateoperationaleconomicorhistoricalcontext.WehaveappliedcertainlimitedprocedurestotherequiredsupplementaryinformationinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericawhichconsistedofinquiriesofmanagementaboutthemethodsofpreparingtheinformationandcomparingtheinformationforconsistencywithmanagementsresponsestoourinquiriesthefinancialstatementsandotherknowledgeweobtainedduringourauditofthefinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsufficientevidencetoexpressanopinionorprovideanyassurance.Ourauditwasconductedforthepurposeofformingopinionsonthefinancialstatements.TheDebtServiceCoverageInterestRequirementsandPrincipalRedemptiononLong-termDebtStatementofLong-termDebtPowerCostsandStatisticsHistoricalEnergyResourcesandCustomerStatisticsarepresentedforpurposesofadditionalanalysisandarenotarequiredpartofthefinancialstatements.Suchinformationhasnotbeensubjectedtotheauditingproceduresappliedintheauditofthefinancialstatementsandaccordinglywedonotexpressanopinionorprovideanyassuranceonit.MadisonWisconsinApril30201336YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011ThefollowingdiscussionandanalysisofthefinancialperformanceofTheCityofSeattleCityLightDepartmenttheDepartmentprovidesasummaryofthefinancialactivitiesfortheyearsendedDecember312012and2011.ThisdiscussionandanalysisshouldbereadincombinationwiththeDepartmentsfinancialstatementswhichimmediatelyfollowthissection.ORGANIZATIONTheDepartmentisthepublicelectricutilityofTheCityofSeattletheCity.AsanenterprisefundoftheCitytheDepartmentownsandoperatescertaingeneratingtransmissionanddistributionfacilitiesandsupplieselectricitytoapproximately403000customersinSeattleandcertainsurroundingcommunities.TheDepartmentalsosupplieselectricalenergytootherCityagenciesatratesprescribedbyCityordinances.OVERVIEWOFTHEFINANCIALSTATEMENTSTheDepartmentsaccountingrecordsaremaintainedinaccordancewithgenerallyacceptedaccountingprinciplesforproprietaryfundsasprescribedbytheGovernmentalAccountingStandardsBoardGASB.Effectivein2012theDepartmentimplementedGASBNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncements.ThisstatementessentiallyincorporatesintotheGASBsauthoritativeliteraturepronouncementsfromtheFinancialAccountingStandardsBoardFASBandAmericanInstituteofCertifiedPublicAccountantsAICPAissuedonorbeforeNovember301989.PleaseseeNote1intheaccompanyingfinancialstatementsforadditionalinformationonGASBNo.62.TheDepartmentsaccountingrecordsalsofollowtheUniformSystemofAccountsforPublicLicenseesprescribedbytheFederalEnergyRegulatoryCommissionFERC.ThisdiscussionandanalysisisintendedtoserveasanintroductiontotheDepartmentsbasicfinancialstatementswhicharecomprisedofthefinancialstatementsandthenotestothefinancialstatementsandincludethefollowingBalanceSheetsStatementsofRevenuesExpensesandChangesinNetPositionandStatementsofCashFlowsThebasicfinancialstatementsprovideanindicationoftheDepartmentsfinancialhealth.ThebalancesheetsincludealloftheDepartmentsassetsandliabilitiesusingtheaccrualbasisofaccountingaswellasanindicationaboutwhichassetscanbeutilizedforgeneralpurposesandwhichassetsarerestrictedasaresultofbondcovenantsandothercommitments.Thestatementsofrevenuesexpensesandchangesinnetpositionreportalloftherevenuesandexpensesduringthetimeperiodsindicated.Thestatementsofcashflowsreportthecashprovidedandusedbyoperatingactivitiesaswellasothercashsourcessuchasinvestmentincomeandcashpaymentsforbondprincipalandcapitaladditionsandbetterments.NotestotheFinancialStatementsThenotestothefinancialstatementsprovideadditionalinformationthatisessentialtoafullunderstandingofthedataprovidedinthefinancialstatements.37 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011CONDENSEDBALANCESHEETS201220112010aAssetsUtilityplantnet235219579622003096802073105948Restrictedassets275696717209187449140201173Currentassets323510486326816912234991204Otherassets289853334243159092221485452Totalassets324125633329794731332669783777LiabilitiesLong-termdebt176151107216405562531515834791Noncurrentliabilities747947645584636655034256Currentliabilities224606260205687761166474305Otherliabilities12793621813060207577815560Totalliabilities218884831420326924551815158912NetPositionNetinvestmentincapitalassets842603149732940158737531065RestrictedRatestabilizationaccount250000002500000025000000Specialdepositsandotherpurposes722837427670128122Totalrestricted257228372542767025128122Unrestrictednet18408203318841285091964978Totalnetposition1052408019946780678854624165Totalliabilitiesandnetposition324125633329794731332669783077December31aGASB51AccountingandFinancialReportingforIntangibleAssetswasimplementedin2010.ASSETSUtilityPlantNet2012Comparedto2011Utilityplantassetsnetofaccumulateddepreciationandamortizationincreased151.9millionto2352.2millionin2012.Utilityplantassetswerecomprisedofhydroelectricproductionplant714.7millionwhichincreased11.7milliontransmissionplant189.8millionwhichincreased26.3milliondistributionplant1967.0millionwhichincreased119.2milliongeneralplant310.4millionwhichdecreased5.1millionandintangibleassets411.5millionwhichincreased16.6million.Thenetincreaseinutilityplantassetswerepartiallyoffsetbya53.8millionincreaseinAccumulateddepreciationandamortization.38YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011The119.2millionincreaseindistributionplantisprimarilydueto36.0millionforundergroundconductors22.4millionforundergroundconduit12.6millionforoverheadconductors11.6millionforpoles11.3millionforundergroundandoverheadsystem9.9millionfortransformers8.7millionforstreetlightsand2.8millionformeters.OthercomponentsofUtilityplant-atoriginalcostincludeConstructionwork-in-progress132.4millionwhichincreased22.1millionAssetsheldforfutureuse65.6millionwhichincreased12.8millionnon-operatingproperty6.9millionwhichincreased0.3millionandLandandlandrights65.1millionwhichincreased2.0million.TheincreaseinAssetsheldforfutureuseincludedthereclassificationfromConstructionworkinprogressofcostsfortheGorgesecondtunnelprojectof6.5million.MoreinformationontheDepartmentscapitalassetscanbefoundinNote2UtilityPlantoftheaccompanyingfinancialstatements.2011Comparedto2010Utilityplantassetsnetofaccumulateddepreciationandamortizationincreased127.2millionto2200.3millionin2011.Utilityplantassetswerecomprisedofhydroelectricproductionplant703.0millionwhichincreased29.2milliontransmissionplant163.5millionwhichincreased5.2milliondistributionplant1847.9millionwhichincreased120.7milliongeneralplant315.5millionwhichincreased24.3millionandintangibleassets394.9millionwhichincreased39.9million.Theseincreaseswereoffsetbya73.0millionincreaseinAccumulateddepreciationandamortization.The120.7millionincreaseindistributionplantisprimarilydueto35.2millionforundergroundconductors24.0millionforundergroundconduit19.6millionforpoles10.6millionforoverheadconductors9.4millionforstreetlights9.1millionfortransformers7.3millionforundergroundandoverheadservices.OthercomponentsofUtilityplant-atoriginalcostincludeConstructionwork-in-progress110.3millionwhichdecreased36.7millionnon-operatingproperty6.6millionwhichincreased1.5millionAssetsheldforfutureuse52.8millionwhichincreased43.5millionandLandandlandrights63.1millionwhichdecreased27.4million.TheincreaseinAssetsheldforfutureuseandthedecreaseinLandandlandrightsbothincludedthereclassificationofcostsofthesiteforanewdowntownsubstationof39.6million.OtherincreasesinLandandlandrightswereforlandacquisitionsof12.2millionincluding11.0millionatSkagitaidedbyStateofWashingtongrantsandothercontributions.RestrictedAssets2012Comparedto2011Restrictedassetsincreasedby66.5millionto275.7millionconsistingprimarilyofrestrictedcash.During2012therewasanetoutflowofcashtotaling13.2millionfromtheRatestabilizationaccountRSAestablishedin2010byOrdinanceNo.123260seeNote3RateStabilizationAccountintheaccompanyingfinancialstatementsformoreinformationontheRSA.36.2millionwastransferredtooperatingcashfromtheRSAduringtheyeartosupplementlowerthanactualnetwholesalerevenues.InDecember2012operatingcashintheamountof22.0millionrepresentingcashinexcessoftheestimatedamountneededtoachievea1.85xdebtservicecoveragewastransferredtotheRSAinaccordancewithOrdinanceNo.124059.Thebalanceof1.0milliontransferredtotheRSAwasforinterestearnings.39 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011Constructionfundsincreasedby44.6millionto106.1millionduetoremainingbondproceedsfromthe2012bondissuethatwillbeusedtofundtheongoingcapitalimprovementprogram.Bondreserveaccountdepositsincreasedduringtheyearby32.7million20.0millionfromthesuretybondreplacementaccountandthebalanceof12.7millionfrom2012bondproceedsandrelatedinterestearnings.Theresidualincreaseof2.4millionforotherrestrictedaccountswasduetonormaloperations.2011Comparedto2010Restrictedassetsincreasedby69.0millionto209.2millionduring2011andgenerallyforadditionalfundingof62.2milliontotheRatestabilizationaccount.Operatingcashintheamountof21.0millionwastransferredatthebeginningoftheyeartotheRSAfor2011debtservicesavingsfromthe2011refundingbonds.InDecember2011operatingcashintheamountof40.5millionrepresentingcashinexcessoftheestimatedamountneededtoachievea1.85xdebtservicecoveragewasalsotransferredinaccordancewithOrdinanceNo.123757.Constructionfundswereupby4.5millionto61.5millionattheendof2011representingremainingproceedsfromthe2011bondissuesetasidetofundtheongoingcapitalimprovementprogram.In2011abondreserveaccountwasestablishedintheamountof1.5million.Theresidualincreaseintheamountof0.8millionisduetonormaloperations.CurrentAssets2012Comparedto2011Currentassetsdecreasedby3.3millionto323.5millionattheendoftheyear.Operatingcashdecreasedby9.1millionto156.3million.Operatingcashwashigherasaresultofthe3.2rateincreaseeffectiveatthebeginningoftheyearandoffsetbylowernetwholesaleenergysalesdebtservicepaymentstransferoffundstotheRSAtransferoffundsfromthesuretybondreplacementaccounttothebondreserveaccountandnormaloperations.Accountsreceivablenetincreasedby6.9millionto66.4million.Wholesalepowerreceivablesincreasedby5.4millionbecauseofhighersurplussalesinDecember2012comparedtoDecember2011.Othersundryreceivablesincreased4.2millionmostlytheresultofareductioninthesundrysalesallowanceforbaddebtcomparedto2011aswrite-offsweremadeforuncollectibleandpastduesundryaccountreceivables.Furthermoreretailelectricreceivablesdecreasedanet2.7millionduetowrite-offsofinactiveaccounts.Unbilledrevenuesandmaterialsandsuppliesinventorydecreasedby0.9millionand0.4millionrespectivelyoffsetbyanetincreaseinothercurrentassetsof0.1millionduetonormaloperations.Slightlylowerconsumptiontowardstheendoftheyearpartiallyoffsetbyhigherretailelectricratescontributedtothelowerunbilledrevenues.2011Comparedto2010Currentassetsincreasedby91.8millionto326.8millionattheendof2011.Operatingcashincreasedby108.5millionto165.4million.Higheroperatingcashwasreceivedasaresultofthe4.3rateincreaseeffectiveatthebeginningoftheyearandhigherconsumptionduetocolderweather.40YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011Highernetwholesaleenergysalesalsocontributedfavorablytooperatingcash.ThehighercashreceiptswereoffsetbythenettransferstotheRSAduringtheyear.InadditionlessoperatingcashwasexpendedforpowercontractsandbothFERCadministrativefeesandcapitalexpenditureswerelowerthanplanned.Operatingcashincludesa10.0millionsuretybondreplacementaccountestablishedin2011.Accountsreceivablenetdecreasedby22.3millionto59.5million.Retailelectricsalesreceivableswerelowerby5.0millioninpartduetoimprovedcollectionsoncurrentaccountsduringthelastquarter.Wholesalepowerreceivableswerelowerby5.4millionbecauseoflesssurpluspowersalesduringDecember2011.Inadditionthereserveforbaddebtsincreasedby9.5millionasaresultofachangeinthereservemethodologyreflectingamoreconservativevaluationofretailpowerandnon-powersundryaccountsinarrears.Apartialincreaseinthereservecanbeattributabletotheongoingdepressedlocaleconomy.Thenetremainingdecreaseof2.4millionwasduetonormaloperations.Unbilledrevenuesincreasedby2.1millionandmaterialsandsuppliesinventoryincreasedby4.6millionnecessarytomeetmaterialrequirementsfortheAlaskanWayViaductProjectbutwereoffsetbyanetdecreaseinthenormalcourseofoperationsof1.1million.OtherAssets2012Comparedto2011Otherassetsincreasedby46.7millionto289.9million.Conservationcostsnetincreasedby10.5million.TheDepartmentplacesahighpriorityonconservationinvestmentastheprimarymeanstomaintainthenecessarylong-termbalancebetweenelectricdemandandsupply.Environmentalcleanupcostsintheamountof23.5millionweredeferredandwerelargelyassociatedwiththeLowerDuwamishWaterwaySuperfundSite.Long-termreceivablesduefromthecitiesofShorelineandBurienincreasedby9.4millionforelectricalinfrastructureimprovementscompletedduringtheyearthatarebeingrepaidbythecitiesrespectiveelectricretailcustomersover25years.Thebalanceoftheincreasewasfora1.1millionnegotiatedlong-termnotereceivablefromSeattleHousingAuthorityforprioryearselectricalwork1.0millionfordebtrelatedcostsand1.2millionforanincreaseinestimatedenvironmentalremediationrecoveries.DetailsforOtherassetsnetareprovidedinNote11OtherAssetsoftheaccompanyingfinancialstatements.2011Comparedto2010In2010deferralofpaymentstotheProvinceofBritishColumbiaanddeferredrelicensingcostsfortheSkagitBoundaryandToltprojectswerereclassifiedtoplantinserviceasaresultofimplementingGASB51notedaboveinUtilityplantnet.Otherassetsincreasedby21.7millionto243.2million.Conservationcostsnetincreasedby12.1million.Thebalanceofthe9.6millionincreaseinotherassetsisalmostexclusivelyforthelong-termreceivableduefromtheCityofShorelineforelectricalinfrastructureimprovementscompletedduringtheyearandtoberepaidbyelectricretailcustomerswithintheCityofShorelineover25years.41 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011LIABILITIESLong-TermDebt2012Comparedto2011Long-termdebtincreasedanet120.9millionto1761.5millionin2012.InJuly2012theDepartmentissuedatotalof345.6millionofrevenueandrefundingrevenuebonds.293.3millionof2012Aseriestax-exemptpowerimprovementandrefundingrevenuebonds9.3millionof2012Bseriestaxablerefundingrevenuebondsand43.0millionof2012CseriestaxableNewCleanRenewableEnergybondswereissuedtofundtheongoingcapitalimprovementprogramandtoadvancerefundcertainhigherinterestbearingpriorlienrevenuebonds.Atotalof158.1millionpriorlienrevenuebondswereadvancerefunded.89.0millionofpriorlienbondswererepaidasscheduledduring2012.Theremainingvariancebalanceof22.4millionwasanetincreaseofbondpremiumbonddiscountandclassificationofbondsduewithinayear.Debttocapitalizationratiowas62.8attheendof2012adecreasefromthe64.0ratioof2011andcontinuingthefavorabletrendfromrecentyears.Bondratingsforthe2012bondsandotheroutstandingparitybondsretainedstrongratingsatAa2fromMoodysInvestorsServiceandAA-fromStandardandPoors.Netrevenuesavailabletopaydebtservicewereequalto1.81timesprincipalandinterestonallbondsfor2012withinthetargetlevelof1.8x.Note7Long-TermDebtoftheaccompanyingfinancialstatementsprovidesadditionalinformationontheDepartmentslong-termdebt.2011Comparedto2010Long-termdebtincreasedanet124.7millionto1640.5millionin2011.InFebruary2011theDepartmentissuedatotalof306.3millionofrevenueandrefundingrevenuebonds.296.1millionof2011Aseriestax-exemptpowerimprovementandrefundingrevenuebondsand10.0millionof2011BseriestaxableNewCleanRenewableEnergybondswereissuedtofundtheongoingcapitalimprovementprogramandtoadvancerefundcertainhigherinterestbearingpriorlienrevenuebonds.Atotalof101.3millionpriorlienrevenuebondswereadvancerefunded.61.7millionofpriorlienbondswererepaidasscheduledin2011.Theremainingvariancebalanceof18.6millionwasanetdecreaseofbondpremiumbonddiscountandclassificationofbondsduewithinayear.Debttocapitalizationratiowas64.0attheendof2011afavorabledecreasefromthe64.3ratioof2010.Bondratingsforthe2011bondsandotheroutstandingparitybondswerere-affirmedatAa2fromMoodysInvestorsServiceandAA-fromStandardandPoors.Netrevenuesavailabletopaydebtservicewereequalto1.84timesprincipalandinterestonallbondsfor2011wellwithinthetargetlevelof1.8x.42YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011EnvironmentalLiabilitiesEnvironmentalliabilitieswere58.3million32.1millionand35.3millionatDecember3120122011and2010respectively.EnvironmentalliabilitiesarerecordedinaccordancewithGASBStatementNo.49AccountingandFinancialReportingforPollutionRemediationObligations.TheliabilitiesareprimarilyattributabletotheestimatedcostofremediatingcontaminatedsedimentsinthelowerDuwamishWaterwayadesignatedfederalSuperfundsite.TheDepartmentisconsideredapotentiallyresponsiblepartyforcontaminationintheDuwamishRiverduetolandownershiporuseofpropertylocatedalongtheriver.Notincludedinenvironmentalliabilitiesisanestimateof8.0millionforremediationworkthatwillbecapitalizedasworkisperformedforlandpurchasedfromGreyhoundforaproposednewsubstation.MoreinformationonenvironmentalliabilitiesisfoundinNote14EnvironmentalLiabilitiesoftheaccompanyingfinancialstatements.OtherLiabilitiesOtherliabilitiestotaled127.9million130.6millionand77.8millionatDecember3120122011and2010respectively.Thesignificantactivityoccurringsince2010hasbeenprincipallytheresultofimplementingfundingandrelatedactivityoftheRSAinaccordancewithOrdinanceNos.123260and123757.FundingoftheRSAfromoperatingcashhasthecorrespondingeffectofdeferringoperatingrevenuesintheratestabilizationunearnedrevenueaccountandviceversa.In2012therewasanettransferof13.2millionfromtheratestabilizationunearnedrevenueaccounttooperatingrevenuestosupplementlowerthanactualnetwholesalerevenues.OperatingrevenuesdeferredfromRSAtransactionstotaled62.2millionin2011.SeeNote3RateStabilizationAccountintheaccompanyingfinancialstatementsformoreinformationontheRSA.43 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011RESULTSOFOPERATIONSCondensedRevenuesandExpenses201220112010Operatingrevenues800273311772157282733177387Nonoperatingrevenues12702783104990137876101Totalrevenues812976094782656295741053488Operatingexpenses661976080655390703671912496Nonoperatingexpenses771755367603721565149303Totalexpenses739151616731427918737061799Incomebeforecapitalcontributionsandgrants73824478512283773991689Capitalcontributions309936432908062521745947Capitalgrants809220118468114633584Totalcapitalcontributionsandgrants318028634092743626379531Changeinnetposition1056273419215581330371220YearEndedDecember31SUMMARY2012Comparedto2011Changeinnetpositionfor2012was105.6millionanincreaseof13.4millionor14.5from2011changeinnetpositionof92.2million.HigherretailpowersalesandRSAdeferredrevenuetransferred-inalongwithlowerBonnevillePowerAdministrationBPApurchasedpowercostsandlowercustomerserviceexpenseswerethemaindriverscontributingtothestrongchangeinnetposition.Thepositivedriverswereoffsetbylowernetwholesaleenergyrevenuespowerrelatedrevenuescapitalgrantsandhigherdepreciationandadministrativeandgeneralexpenses.2011Comparedto2010Changeinnetpositionfor2011was92.2millionanincreaseof61.8millionor203.3from2010changeinnetpositionof30.4million.Higherretailpowersalesandnetwholesaleenergyrevenuescontributedsignificantlytothestrongresults.Additionalpositivecomponentsofchangeinnetpositionwerelowerpowercostsalongwithhighercapitalcontributionsandcapitalgrants.ThesewereoffsetbyhigherdeferralofrevenuesfortheRSAnon-poweroperatingexpensesanddebtinterestexpense.44YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011REVENUES2012Comparedto2011Totaloperatingrevenueswere800.3millionanincreaseof28.1millionor3.6from2011.Retailpowerrevenuesat664.3millionincreased8.3millionWholesalepowerrevenuesat70.4milliondecreased32.3millionOtherpowerrevenuesat29.3milliondecreased25.3millionRSAdeferredrevenuesat13.2millionincreased75.4millionandOtheroperatingrevenuesat23.1millionincreased2.0million.Retailpowerrevenueswerehigherasaresultofthe3.2across-the-boardrateincreaseeffectiveJanuary12012.OperatingrevenueswereaugmentedbyTransfersfromtoratestabilizationaccountinaccordancewithOrdinanceNo.123260.Anet13.2millionofRSAdeferredrevenuewastransferred-intosupplementlowerthanactualnetwholesalerevenuescausingthefavorableswingof75.4millionfrom2011evenwith22.0milliontransferredtounearnedrevenueinDecember2012correspondingtotheoperatingcashtransferredtotheRSAinexcessoftheestimatedamountneededtoachievea1.85xdebtservicecoverageinaccordancewithOrdinanceNo.124059andbasedonthemostcurrentforecastofoperatingresultsavailable.TheDepartmentisrequiredtosetratesdesignedtoachievedebtservicecoverageof1.80x.Debtservicecoveragewas1.81xin2012.Netwholesaleenergyrevenueswere58.6millionadecreaseof32.7millionor35.8fromnetwholesaleenergyrevenuesof91.3millionin2011.OnanannualbasistheDepartmentexpectstobeanetsellerinthewholesaleenergymarket.During2012lowerenergysurplusavailableforsalealongwithlowerwholesalepowerpriceswereprimefactorsforthedeclineinnetwholesaleenergyrevenuescomparedto2011.OtherpowerrevenueswerelowerasaconsequenceoflowerBPAconservationaugmentationrevenuerealizedastheoldaugmentationprogramendedinSeptember2011andthenewaugmentationprogramisbeingrecognizedovera20yearperiod.Furthermorepowerexchangerevenuesdecreasedbecauseofthelowerwholesalepowerprices.2011Comparedto2010Operatingrevenuestotaled772.2millionanincreaseof39.0millionor5.3from2010.Retailpowerrevenuesat656.0millionincreased31.6millionWholesalepowerrevenuesat102.7millionincreased28.2millionOtherpowerrevenuesat54.6milliondecreased12.1millionRSAdeferredrevenuesat62.2milliondecreased7.9millionandOtheroperatingrevenuesat21.1milliondecreased0.8million.Retailpowerrevenueswerehigherasaresultofthe4.3rateincreaseeffectiveJanuary12011andhigherelectricityconsumptionduringthefirstsevenmonthsoftheyearduetocolderweather.The4.5temporaryratesurchargeimplementedinMay2010wasterminatedatthebeginningoftheyear.RevenueswerereducedbyTransfersfromtoratestabilizationaccountinaccordancewithOrdinanceNo.123260.40.5millionofoperatingrevenuetransferredtotheRSAweremadetocorrespondwiththetransferofoperatingcashinexcessoftheestimatedamountneededtoachievea1.85xdebtservicecoveragefor2011inaccordancewithOrdinanceNo.123757.Debtservicecoveragewas1.84xin2011.Netwholesaleenergyrevenueswere91.3millionfor2011anincreaseof41.3millionor82.6fromnetrevenuesof50.0millionin2010.ExtremelywethydroconditionsinthePacificNorthwestregionduring2011producedabundantsurpluspowerthatcontributedtohigherwholesaleenergysalesevenwithlowerwholesalepowerpricescomparedto2010.45 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011EXPENSES2012Comparedto2011Operatingexpensestotaled662.0millionanincreaseof6.6millionor1.0from655.4millionin2011.Power-relatedexpensesat313.3millionwerelowerby1.4millionor0.4.TheseexpensesconsistedofBPApurchasedpowerof149.3millionwhichdecreased5.8millionShort-termwholesalepowerpurchasesof11.8millionwhichincreased0.4millionpower-relatedwholesalepurchasesof7.8millionwhichdecreased1.2millionandotherpower-relatedexpensesincludingTransmissionandGenerationof144.4millionwhichincreased5.2million.ThenetdecreaseinBPApurchasedpowerwasduetolowerSlicepurchasesforthevariablecomponentofthepowercontractoffsetbyhigherBlockpurchasesandlowerSlicetrue-upcreditin2012.Short-termpowerpurchasesacomponentofnetwholesaleenergyrevenueswereslightlyhigher.Power-relatedexpenseswerehigherduepredominantlytohigherpowerpurchasesfromtheGrandCouleePowerHydroAuthorityGCPHApowercontractrenewalenergyfromtheStatelinewindpowercontractandhighergenerationrelatedexpenses.Non-poweroperatingexpensesat179.0millionincreasedincrementallyby0.7millionor0.4from178.3millionin2011.TheseexpensesincludedDistributionexpensesof60.9millionwhichincreased2.6millionCustomerserviceof31.3millionwhichdecreased11.9millionConservationof20.7millionwhichincreased1.6millionandAdministrativeandgeneralnetof66.1millionwhichincreased8.4million.Distributionexpenseswerehigherduetoincreasedeffortsdedicatedtoinspectionandreplacementofoverheadandundergrounddistributionlines.Customerserviceexpensedecreasedsignificantlyasaresultoflowerbaddebtexpensebecauseofloweroverallaccountsreceivableduringtheyearandnorecurrenceofasignificantbaddebtserviceadjustmentthatwastakenin2011.Administrativeandgeneralnetincreasedduetohighersalariesfromcostoflivingadjustmentspensioncontributionsbenefitsandexpendituresassociatedwithlegalclaimsandenvironmentalcosts.Taxesat74.9millionincreased1.3millionduetothehigherrevenuesandDepreciationandamortizationof94.8millionincreased6.0millioninlargeparttheresultofdistributionassetsplacedinservice.2011comparedto2010TotalOperatingexpenseswere655.4millionadecreaseof16.6millionor2.5from672.0millionin2010.Power-relatedexpensesat314.7millionwerelowerby37.5millionor10.6.TheseexpensesencompassedBPApurchasedpowerof155.1millionwhichdecreased8.2millionShort-termwholesalepowerpurchasesof11.4millionwhichdecreased13.1millionpower-relatedwholesalepurchasesof9.0millionwhichdecreased16.1millionandotherpower-relatedexpensesincludingTransmissionandGenerationof139.2millionwhichremainednearlyconstantto139.3millionin2010.BPApurchasedpowerdecreasedinlargepartasaresultofahigherBPASlicetrue-upcreditfrom2010forthevariablecomponentofthepowercontract.Short-termpowerpurchaseswerelowerasaconsequenceof46YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011theextremelywethydroconditionsexperiencedintheNorthwestin2011andtherebycontributingtothehighernetwholesaleenergyrevenues.Power-relatedwholesalepurchaseswerelowerduetolesspowerpurchasesfromthePriestRapidspowercontractandlowervaluationofexchangedpowerduetolowerpowermarketpricesin2011.Non-poweroperatingexpensesat178.3millionincreased15.3millionor9.4from163.0millionin2010.TheseexpensesconsistedofDistributionexpensesof58.3millionwhichincreased2.0millionCustomerserviceof43.2millionwhichincreased7.1millionConservationof19.1millionwhichincreased2.3millionandAdministrativeandgeneralnetof57.7millionwhichincreased3.9million.Distributionexpenseswerehigherasaresultofhighermaintenancecostsforpolestreetrimmingandstreetlights.Customerserviceexpenseincreasedpredominantlybecauseofhigherbaddebtexpenseforretailpowerandnon-powersundryaccountsreflectingthechangeinthereservemethodologyimplementedandpartiallyowingtotheslowlyrecoveringlocaleconomy.Administrativeandgeneralnetreflecttheeffectofhigherpensioncontributionsandbenefits.Taxesof73.6millionincreased3.2millionduetothehigherrevenuebaseandDepreciationandamortizationof88.8millionincreased2.4million.NONOPERATINGREVENUESEXPENSESCAPITALCONTRIBUTIONSANDGRANTS2012Comparedto2011Nonoperatingrevenuesincreased2.2millionto12.7millionin2012.NoncapitalgrantsforenvironmentalcleanupandfromFEMAforthe2012stormincreasedbyatotalof1.4million.Thebalanceoftheincreasewasforhigherinterestearningsandhigherfederalsubsidiesforthe2012and2011taxablebonds.Nonoperatingexpenseincreased1.1millionto77.2millionin2012mostlytheresultofhigherinterestexpenseincurredforthe2012and2011bonds.Capitalcontributionsandgrantsdecreasedby9.1millionto31.8millionin2012.Capitalcontributionswerehigherby1.9millionprincipallytheresultofadditionalundergroundelectricalinfrastructureimprovementsforthecitiesofShorelineandBurienoffsetbylowercapitalin-kindcontributionsfortheyearcomparedto2011.Capitalgrantsdecreasedby11.0millionto0.8millionin2012.Amajorcapitalgrantwasreceivedin2011fromthestateofWashingtonintheformofalandgrantforwildlifeconservationinthesurroundingareasoftheDepartmentsSkagitgeneratingfacilitieswithnocomparablegrantreceivedin2012.2011Comparedto2010Nonoperatingrevenuesincreased2.6millionto10.5millionin2011duelargelytohigherinterestearningsonhighercashandinvestmentbalancesduringtheyearandhigherfederalinterestsubsidiesforthe2010and2011bonds.Nonoperatingexpenseincreased10.9millionto76.0millionin2011duelargelytohigherinterestexpenseincurredforthe2011and2010bonds.Capitalcontributionsandgrantsincreasedby14.5millionto40.9millionin2011.Capitalcontributionsincreasedby7.4millionto29.1milliondueforcompletionofaphaseofsuburbanelectricalinfrastructure47 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011undergroundingfortheCityofShorelinealocaljurisdictionwithintheDepartmentsservicearea.Capitalgrantsincreasedby7.1millionto11.8millionin2011.Amajorcapitalgrantwasreceivedin2011fromthestateofWashingtonintheformofalandgrantforwildlifeconservationinthesurroundingareasoftheDepartmentsSkagitgeneratingfacilities.RISKMANAGEMENTTheDepartmentbeganimplementinganEnterprise-wideRiskManagementERMprocessin2008toestablishafullspectrumapproachtoriskmanagementthatlinksimportantdecisionmakingfunctionsthroughastandardizedprocessofidentifyingassessingmonitoringandmitigatingrisksacrossallBusinessUnitsandDivisionsoftheDepartment.ARiskOversightCouncilROCoverseeswholesalepowermarketingactivities.ItiscomprisedoftheChiefFinancialOfficerChairPowerSupplyEnvironmentalAffairsOfficerDirectorofRiskOversightDirectorofPowerOperationsandMarketingnon-votingmemberDirectorofPowerContractsResourceAcquisitionnon-votingmemberandManagerofPowerOperationsandMarketingnon-votingmember.TheROCguidesthecontinuousimprovementofenergyriskmanagementactivitiesandcapabilitiesapproveshedgingstrategieshedgingplansandapproveschangestorelevantoperatingprocedures.TheRiskOversightDivisionmanagesthemarketandcreditriskrelatedtoallwholesalemarketingactivitiesandcarriesoutthemiddleofficefunctionsoftheDepartmentwhichincludeconfirmationsriskcontrolsindependentreportingofmarketpositionscounterpartycreditriskensuringadherencetoWholesaleEnergyRiskManagementWERMpolicyandcounterpartysettlements.HydroRiskDuetotheDepartmentsprimaryrelianceonhydroelectricgenerationweathercansignificantlyaffectitsoperations.Hydroelectricgenerationdependsontheamountofsnow-packinthemountainsupstreamoftheDepartmentshydroelectricfacilitiesspringtimesnow-meltandrun-offandrainfall.Hydroelectricoperationsalsoareinfluencedbyfloodcontrolandenvironmentalmattersincludingprotectionoffish.Inlow-wateryearstheDepartmentsgenerationisreducedandtheuseofwholesalepurchasedpowermayincreaseinordertomeetload.NormallytheDepartmentexperienceselectricityusagepeaksinwinterhoweverextremeweatherconditionsaffectingeitherheatingorcoolingneedscouldcausetheDepartmentsseasonalfluctuationstobemorepronouncedandincreasecosts.Inadditioneconomictrendsincreaseordecreaseinbusinessactivityhousingsalesanddevelopmentofpropertiescanaffectdemandandchangeorincreasecosts.EnergyMarketRiskFortheDepartmentenergymarketriskistheriskofadversefluctuationsinthepriceofwholesaleelectricitywhichiscompoundedbyvolumetricchangesaffectingtheavailabilityofordemandforelectricity.Factorsthatcontributetoenergymarketriskincluderegionalplannedandunplannedgenerationplantoutagestransmissionconstraintsordisruptionsthenumberofactivecreditworthymarketparticipantswillingtotransactandenvironmentalregulationsthatinfluencetheavailabilityofgenerationresources.TheDepartmentsexposuretohydrovolumetricandenergymarketriskismanagedbytheROCandtheapprovedstrategiesareexecutedbythePowerOperationsandMarketingDivision.TheDepartmentengagesinmarkettransactionstomeetitsloadobligationsandtorealizeearningsfromsurplusenergyresources.48YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312012and2011WithasignificantportionoftheDepartmentsrevenueexpectedfromwholesaleenergymarketsalesgreatemphasisisplacedonthemanagementofrisksassociatedwiththisactivity.Policiesproceduresandprocessesdesignedtomanagecontrolandmonitortheserisksareinplace.Aformalfrontmiddleandbackofficestructureisinplacetoensurepropersegregationofduties.TheDepartmentmeasurestheriskinitsenergyportfoliousingaMonteCarlomodelthatincorporatesnotonlypriceriskbutalsothevolumetricriskassociatedwithitshydro-dominatedpowerportfolio.Scenarioanalysisisusedforstresstesting.CreditRiskCreditriskistheriskoflossthatwouldbeincurredasaresultofnonperformancebycounterpartiesoftheircontractualobligations.IfacounterpartyfailedtoperformonitscontractualobligationtodeliverelectricitythentheDepartmentmayfinditnecessarytoprocureelectricityatcurrentmarketpriceswhichmaybehigherthanthecontractprice.IfacounterpartyfailedtopayitsobligationinatimelymannerthiswouldhaveanimpactontheDepartmentsrevenueandcashflow.AswithmarketrisktheDepartmenthaspoliciesgoverningthemanagementofcreditrisk.Wholesalecounterpartiesareassignedunsecuredcreditlimitsbasedonpubliclyavailableandproprietaryfinancialinformation.Athird-partysproprietarycreditscoringmodelisusedtoclassifycounterpartiesintooneofseveralcategorieswithpermissiblerangesofunsecuredcreditlimits.Specificcounterpartycreditlimitsaresetwithinthisprescribedrangebasedonqualitativeandquantitativefactors.Creditlimitsarealsousedtomanagecounterpartyconcentrationrisk.TheDepartmenthasaconcentrationofcreditriskrelatedtogeographiclocationandcounterpartiesasittransactsinthewesternUnitedStates.ThisconcentrationofcounterpartiesandofgeographiclocationmayimpacttheDepartmentsoverallexposuretocreditriskeitherpositivelyornegativelybecausecounterpartiesmaybesimilarlyaffectedbychangesinconditions.Creditlimitsexposuresandcreditqualityareactivelymonitored.Despitesucheffortsdefaultsbycounterpartiesmayperiodicallyoccur.TheDepartmenttransactswithcounterpartiesonanuncollateralizedandcollateralizedbasis.Postedcollateralmaybeintheformofcashorlettersofcreditandmayrepresentprepaymentorcreditexposureassurance.49 BALANCESHEETS-ASSETSASOFDECEMBER312012AND201120122011ASSETSUTILITYPLANTAtoriginalcostPlant-in-serviceexcludingland35933967743424797765Lessaccumulateddepreciationandamortization15111691151457324303Totalplant-in-servicenet20822276591967473462Constructionwork-in-progress132370677110306410Nonoperatingpropertynetofaccumulateddepreciation68637256600315Assetsheldforfutureuse6561050452801688Landandlandrights6512323163127805Totalutilityplantnet23521957962200309680RESTRICTEDASSETSRatestabilizationaccount128271427141490367Municipallightandpowerbondreserveaccount341947261463621ConstructionCashandequityinpooledinvestments10606084261459971Specialdepositsandotherrestrictedassets71697224773490Totalrestrictedassets275696717209187449CURRENTASSETSCashandequityinpooledinvestments156304744165410811Accountsreceivableincludes1849577and2423509atfairvaluenetofallowanceof8055832and202252536556516358927851Interfundreceivable865272565061Unbilledrevenues7101523071882810Materialsandsuppliesataveragecost2908459429463064Prepaymentsinterestreceivableandothercurrentassets675483567315Totalcurrentassets323510486326816912OTHERASSETSConservationcostsnet201081012190543331EndangeredSpeciesActcostsnet24409332584751Otherassetsnet8633138950031010Totalotherassets289853334243159092TOTALASSETS32412563332979473133Seenotestofinancialstatements.THECITYOFSEATTLECITYLIGHTDEPARTMENT50YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTBALANCESHEETS-LIABILITIESANDNETPOSITIONASOFDECEMBER312012AND201120122011LIABILITIESLONG-TERMDEBTRevenuebonds17786000001680095000Plusbondpremium10481844477716810Lessbonddiscount101147106813Lesschargesonadvancerefunding2996622528298744Lessrevenuebondscurrentportion9184000088850000Totallong-termdebt17615110721640556253NONCURRENTLIABILITIESAccumulatedprovisionforinjuriesanddamages5354161935342486Compensatedabsences1505499414502018Othernoncurrentliabilities61981516001862Totalnoncurrentliabilities7479476455846366CURRENTLIABILITIESAccountspayableandothercurrentliabilities8727743170483287Interfundpayable77906648305236Accruedpayrollandrelatedtaxes62995455192384Compensatedabsences18822111684180Accruedinterest2951640931172674Long-termdebtcurrentportion9184000088850000Totalcurrentliabilities224606260205687761OTHERLIABILITIESUnearnedrevenue-ratestabilizationaccount103271427116490367Otherliabilitiesincludes284059and618319atfairvalue2466479114111708Totalotherliabilities127936218130602075TOTALLIABILITIES21888483142032692455NETPOSITIONNetinvestmentincapitalassets842603149732940158RestrictedRatestabilizationaccount2500000025000000Specialdepositsandotherpurposes722837427670Totalrestricted2572283725427670Unrestrictednet184082033188412850Totalnetposition1052408019946780678TOTALLIABILITIESANDNETPOSITION32412563332979473133Seenotestofinancialstatements.51 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFREVENUESEXPENSESANDCHANGESINNETPOSITIONFORTHEYEARSENDEDDECEMBER312012AND201120122011OPERATINGREVENUESRetailpowerrevenues664262521655983647Short-termwholesalepowerrevenues70402469102663126Otherpower-relatedrevenues2930481654696024Transfersfromtoratestabilizationaccount1321894062224740Otheroperatingrevenues2308456521039225Totaloperatingrevenues800273311772157282OPERATINGEXPENSESLong-termpurchasedpowerBonneville149317872155076576Long-termpurchasedpowerother5481463951776136Short-termwholesalepowerpurchases1176380711432510Otherpowerexpenses1808847319225428Generation3228883829297226Transmission4697925847877573Distribution6085488358311340Customerservice3129606443119817Conservation2076271019128013Administrativeandgeneral6611407057727448CityofSeattleoccupationtax4092846940008422Othertaxes3395656533604737Depreciationandamortization9481043388805477Totaloperatingexpenses661976081655390703OPERATINGINCOME138297230116766579NONOPERATINGREVENUESEXPENSESInvestmentincome52170444944390Interestexpense8156746979930331Amortizationofrefundingloss47090124911262Amortizationofbondpremium102066119950106Amortizationofbonddiscountandissuecosts11056661145728Noncapitalgrants28379111397506Gainonsaleofproperty182771303925Otherincomenet44650583853192Totalnonoperatingexpenses6447275265538202INCOMEBEFORECAPITALCONTRIBUTIONSANDGRANTS7382447851228377CAPITALCONTRIBUTIONSANDGRANTSCapitalcontributions3099364329080625Capitalgrants80922011846811Totalcapitalcontributionsandgrants3180286340927436CHANGEINNETPOSITION10562734192155813NETPOSITIONBeginningofyear946780678854624865Endofyear1052408019946780678Seenotestofinancialstatements.52YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFCASHFLOWSFORTHEYEARSENDEDDECEMBER312012AND201120122011OPERATINGACTIVITIESCashreceivedfromcustomersandcounterparties784513408822981708Interfundoperatingcashreceived23606792579921Cashpaidtosuppliersemployeesandcounterparties440743842437626369Interfundoperatingcashpaid2708698623016434Taxespaid7553027572280313Netcashprovidedbyoperatingactivities243512984292638513NONCAPITALFINANCINGACTIVITIESNoncapitalgrantsreceived29150721920814Bonnevillereceiptsforconservation74770279901373Paymenttovendorsonbehalfofcustomersforconservationaugmentation2413625227670574Netcashusedinnoncapitalfinancingactivities1374415315848387CAPITALANDRELATEDFINANCINGACTIVITIESProceedsfromlong-termdebtnetofpremium387564004323519102Paymenttotrusteefordefeasedbonds170492761104164947Bondissuecostspaid27154211451781Principalpaidonlong-termdebt8899500061650000Interestpaidonlong-termdebt8474798585038180Acquisitionandconstructionofcapitalassets239009454180142718Interfundpaymentsforacquisitionandconstructionofcapitalassets39426447591927Capitalcontributions3303403517683110Interfundreceiptsforcapitalcontributions2564861884498Capitalgrantsreceived4425581794462Interestreceivedforsuburbaninfrastructureimprovements12983851303045Proceedsonsaleofpropert140057315261Increaseinotherassets91693579270786Netcashusedincapitalandrelatedfinancingactivities176337097102810861INVESTINGACTIVITIESProceedsfrominvestments-234522250Purchasesofinvestments-195652481Interestreceivedoninvestmentsandoncashandequityinpooledinvestments39714673404558Netcashprovidedbyusedininvestingactivities397146742274327NETINCREASEDECREASEINCASHANDEQUITYINPOOLEDINVESTMENTS57403201216253592CASHANDEQUITYINPOOLEDINVESTMENTSBeginningofyear374598260158344668Endofyear432001461374598260Seenotestofinancialstatements.53 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFCASHFLOWS-RECONCILIATIONFORTHEYEARSENDEDDECEMBER312012AND201120122011RECONCILIATIONOFOPERATINGINCOMETONETCASHPROVIDEDBYOPERATINGACTIVITIESOperatingincome138297230116766579AdjustmentstoreconcileoperatingincometonetcashprovidedbyoperatingactivitiesNon-cashitemsincludedinoperatingincomeDepreciation9692006090725641Amortizationofotherliabilities1869264699529Amortizationofotherassets1795586217072752Baddebtexpense32844614090930Powerrevenues1807652636975695Powerexpenses1942588327820784Provisionforinjuriesanddamages14872353628883Othernon-cashitems70233344551864ChangeinAccountsreceivable71289427948012Unbilledrevenues8675802199919Materialsandsupplies18496823541787Prepaymentsinterestreceivableandotherreceivables20226151106840Otherassets271161986425741Provisionforinjuriesanddamagesandclaimspayable167118982471184Accountspayableandotherpayables107069475330741Ratestabilizationunearnedrevenue1321894062224740Totaladjustments105215754175871934Netcashprovidedbyoperatingactivities243512984292638513SUPPLEMENTALDISCLOSURESOFNONCASHACTIVITIESIn-kindcapitalcontributions5282609817614Amortizationofdebtrelatedcostsnet43919333893117Changeinvaluationofpowerexchangeassetsorliabilities334260180901Allowanceforfundsusedduringconstruction35243584279648Powerexchangerevenues39640097377735Powerexchangeexpenses42036817567765Powerrevenuenettedagainstpowerexpenses48119286329899Powerexpensenettedagainstpowerrevenues1006287013494166Seenotestofinancialstatements.54YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND20111.OPERATIONSANDSUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESTheCityLightDepartmenttheDepartmentisthepublicelectricutilityofTheCityofSeattletheCity.TheDepartmentisanenterprisefundoftheCity.TheDepartmentownsandoperatescertaingeneratingtransmissionanddistributionfacilitiesandsupplieselectricitytoapproximately403000customers.TheDepartmentsupplieselectricalenergytootherCityagenciesatratesprescribedbyCityordinancesandtocertainneighboringcommunitiesunderfranchiseagreements.TheestablishmentoftheDepartmentsratesiswithintheexclusivejurisdictionoftheSeattleCityCouncil.ArequirementofWashingtonStatelawprovidesthatratesmustbefairnondiscriminatoryandfixedtoproducerevenueadequatetopayforoperationandmaintenanceexpensesandtomeetalldebtservicerequirementspayablefromsuchrevenue.TheDepartmentpaysoccupationtaxestotheCitybasedontotalrevenues.TheDepartmentsrevenuesforservicesprovidedtootherCitydepartmentswere18.4millionand18.9millionforelectricalenergyand2.9millionand2.7millionfornon-energyservicesin2012and2011respectively.TheDepartmentreceivescertainservicesfromotherCitydepartmentsandpaid39.7millionin2012and41.8millionin2011forsuchservices.AmountspaidincludecentralcostallocationsfromtheCityforservicesreceivedincludingtreasuryservicesriskfinancingpurchasingdataprocessingsystemsvehiclemaintenancepersonnelpayrolllegaladministrativeandbuildingrentalsincludingfortheDepartmentsadministrativeoffices.TheDepartmentsreceivablesfromotherCitydepartmentstotaled0.9millionand0.6millionatDecember312012and2011respectively.TheDepartmentspayablestootherCitydepartmentstotaled7.8millionand8.3millionatDecember312012and2011respectively.Thebalancesreceivableandpayablearetheresultoftransactionsincurredinthenormalcourseofoperations.BasisofPresentationandAccountingStandardsThefinancialstatementsarepreparedusingtheeconomicresourcesmeasurementfocusandtheaccrualbasisofaccountinginconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaasappliedtogovernmentalunits.Revenuesarerecordedwhenearnedandexpensesarerecordedwhenaliabilityisincurredregardlessofthetimingofrelatedcashflows.TheGovernmentalAccountingStandardsBoardGASBistheacceptedstandard-settingbodyforestablishinggovernmentalaccountingandfinancialreportingprinciples.TheDepartmenthasappliedandiscurrentthrough2012withallapplicableGASBpronouncements.EffectiveJanuary12012theDepartmentadoptedStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.StatementNo.62incorporatesintotheGASBsauthoritativeliteraturecertainaccountingandreportingliteratureissuedbytheFinancialAccountingStandardsBoardFASBandAmericanInstituteofCertifiedPublicAccountantsAICPAonorbeforeNovember301989whichisnotinconflictwithorcontradictedbyGASBpronouncements.ThisliteratureincludesFASBStatementsandInterpretationsAccountingPrinciplesBoardOpinionsandAccountingResearchBulletinsoftheAICPACommittee.UponimplementationofStatementNo.62theDepartmentfollowsguidanceissuedbyGASBunlessaparticulartopicisnotaddressedbyGASB.Inthatcasethe55 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011DepartmentwouldfollowotheraccountingliteraturefromtheFASBthatisconsideredalowertierofGAAPthanstandardspromulgatedbytheGASB.ChangestodisclosuresrelatedtononmonetarytransactionswerenecessaryuponimplementationofStatementNo.62.SincetheStatementcoversnonmonetarytransactionstheDepartmentnolongerfollowsreportingrequirementsforsuchtransactionsunderFASBAccountingStandardsCodification820FairValueMeasurementsandDisclosures.TheDepartmentsnonmonetarytransactionsrelatetoexchangeenergydiscussedinmoredetailinNote10Long-TermPurchasedPowerExchangesandTransmission.NochangestotheaccountinginareasaffectedbyStatementNo.62werenecessary.ChangestothecitationsofaccountingliteratureareshownforregulatoryaccountinginNote3RateStabilizationAccountNote6Short-TermEnergyContractsandDerivativeInstrumentsNote11OtherAssetsandNote12OtherLiabilities.EffectiveJanuary12012theDepartmentadoptedStatementNo.63oftheGASBFinancialReportingofDeferredOutflowsofResourcesDeferredInflowsofResourcesandNetPosition.StatementNo.63providesreportingguidancerelatedtodeferredoutflowsofresourcesanddeferredinflowsofresourcesaswellasrenamingequityornetassetstonetposition.TheDepartmentsbalancesheetsstatementsofrevenuesexpensesandchangesinnetpositionandstatementsofcashflowshavebeenreviseduponimplementationofStatementNo.63.TheDepartmenthasnodeferredinflowsofresourcesordeferredoutflowsofresources.TheGASBhasapprovedGASBStatementNo.65ItemsPreviouslyReportedasAssetsandLiabilitiesStatementNo.66TechnicalCorrections2012anamendmentofGASBStatementsNo.10andNo.62StatementNo.67FinancialReportingforPensionPlansanamendmentofGASBStatementNo.25andStatementNo.68AccountingandFinancialreportingforPensionsanamendmentofGASBStatementNo.27.ThesestatementswillbeeffectivefortheDepartmentinfutureyearsandapplicationofthesestandardsmayrestateportionsofthesefinancialstatements.FairValueMeasurementsDescriptionsoftheDepartmentsaccountingpoliciesonfairvaluemeasurementsforitemsreportedonthebalancesheetsatDecember312012and2011areasnotedinthefollowingparagraphNote5AccountsReceivableandNote10Long-TermPurchasedPowerExchangesandTransmission.FairValueofFinancialInstrumentsTheDepartmentsfinancialinstrumentsarereportedonthebalancesheetsatDecember312012and2011asRestrictedassetsandCashandequityinpooledinvestmentsandinvestmentsaremeasuredatfairvalue.TheseinstrumentsconsistprimarilyoftheDepartmentsshareoftheCity-widepoolofinvestmentsanditsdedicatedinvestmentsseeNote4CashandEquityinPooledInvestmentsandInvestments.GainsandlossesonthesefinancialinstrumentsarereflectedinInvestmentincomeinthestatementsofrevenuesexpensesandchangesinnetposition.Long-termdebtatDecember312012and2011isdisclosedatfairvalueseeNote7Long-termDebt.NetPositionTheDepartmentclassifiesitsnetpositionintothreecomponentsasfollowsNetinvestmentincapitalassetsThiscomponentconsistsofcapitalassetsnetofaccumulateddepreciationandamortizationreducedbythenetoutstandingdebtbalancesrelatedtocapitalassetsnetofunamortizeddebtexpenses.56YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011RestrictedThiscomponentconsistsofnetpositionwithconstraintsplacedonuse.ConstraintsincludethoseimposedbycreditorssuchasthroughdebtcovenantsandexcludingamountsconsideredinnetcapitalabovegrantsorlawsandregulationsofothergovernmentsorbyenablinglegislationTheCityofSeattleCharterorbyordinanceslegislatedbytheSeattleCityCouncil.UnrestrictedThiscomponentconsistsofassetsandliabilitiesthatdonotmeetthedefinitionofNetinvestmentincapitalassetsorRestricted.RestrictedandUnrestrictedNetPositionTheDepartmentspolicyistouserestrictednetpositionforspecifiedpurposesandtouseunrestrictednetpositionforoperatingexpenses.TheDepartmentdoesnotcurrentlyincurexpensesforwhichbothrestrictedandunrestrictednetpositionisavailable.AssetsHeldforFutureUseTheseassetsincludepropertyacquiredbutneverusedbytheDepartmentinelectricalserviceandthereforeheldforfutureserviceunderadefinitiveplan.Alsoincludedispropertypreviouslyusedinservicebutretiredandheldpendingitsreuseinthefutureunderadefinitiveplan.AsofDecember312012and2011Assetsheldforfutureuseincludedthefollowingelectricalplantassetslandforfuturesubstationsductsandvaultstransmissionlinesandplansforadditionalhydraulicgeneratingcapacitytotaling65.6millionand52.8millionrespectively.MaterialsandSuppliesMaterialsandsuppliesaregenerallyusedforconstructionoperationandmaintenanceworknotforresale.Theyarevaluedutilizingtheaveragecostmethodandchargedtoconstructionorexpensewhenused.RevenueRecognitionServiceratesareauthorizedbyCityordinances.Billingsaremadetocustomersonamonthlyorbimonthlybasis.RevenuesforenergydeliveredtocustomersbetweenthelastbillingdateandtheendoftheyearareestimatedandreflectedintheaccompanyingfinancialstatementsasunbilledrevenuewithinRetailpowerrevenues.TheDepartmentscustomerbaseaccountedforelectricenergysalesatDecember312012and2011asfollows20122011Residential36.537.1Nonresidential63.562.9Total100.0100.0Revenuesearnedintheprocessofdeliveringenergytocustomerswholesaleenergytransactionsandrelatedactivitiesareconsideredoperatingrevenuesinthedeterminationofchangeinnetposition.InvestmentincomenonexchangetransactionsandotherrevenuesareconsideredNonoperatingrevenues.ExpenseRecognitionExpensesincurredintheprocessofdeliveringenergytocustomerswholesaleenergytransactionsandrelatedactivitiesareconsideredoperatingexpensesinthedeterminationofchangeinnetposition.DebtinterestexpensedebtrelatedamortizationandcertainotherexpensesareconsideredNonoperatingexpenses.57 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011AdministrativeandGeneralOverheadCostsAppliedCertainadministrativeandgeneraloverheadcostsareallocatedtoconstructionwork-in-progressmajordataprocessingsystemsdevelopmentprogrammaticconservationrelicensingmitigationprojectsandbillableoperationsandmaintenanceactivitiesbasedonratesestablishedbycoststudies.Pensionandbenefitcostsareallocatedtocapitalandoperationsandmaintenanceactivitiesbasedonapercentageoflabordollars.Theadministrativeandgeneraloverheadcostsappliedtotaled37.5millionand32.6millionin2012and2011respectively.Pensionandbenefitcostswere43.0millionand39.6millionin2012and2011respectively.Administrativeandgeneralexpensesnetoftotalappliedoverheadwere66.1millionand57.7millionin2012and2011respectively.InterestChargedtoConstructionInterestischargedforfundsusedduringconstructionofplantassetsandtononbillableconstructionwork-in-progress.InterestchargedrepresentstheestimatedcostsoffinancingconstructionprojectsandiscomputedusingtheDepartmentsweighted-averageinterestrateforallbondsoutstandingthemajorityofwhicharetaxexemptandisrevisedwhennewbondsareissuedandattheendoftheyear.Interestchargedtoconstructiontotaled3.5millionand4.3millionin2012and2011respectivelyandisreflectedasareductionofInterestexpenseinthestatementsofrevenuesexpensesandchangesinnetposition.NonexchangeTransactionsCapitalcontributionsandgrantsintheamountof34.6millionand42.3millionarereportedfor2012and2011respectivelyinthestatementsofrevenuesexpensesandchangesinnetpositionasnonoperatingrevenuesfromnonexchangetransactions.Capitalcontributionsandgrantsrevenuesarerecognizedbasedontheaccrualbasisofaccounting.In-kindcapitalcontributionsarerecognizedatestimatedfairvalueintheperiodwhenalleligibilityrequirementshavebeenmetasdescribedinGASBStatementNo.33AccountingandFinancialReportingforNonexchangeTransactions.Federalandstategrantrevenuesarerecognizedasearnedandaresubjecttocontractandothercomplianceaudits.CompensatedAbsencesRegularemployeesoftheDepartmentearnvacationtimeinaccordancewithlengthofservice.Amaximumof480hoursmaybeaccumulatedforthemosttenuredemployeesanduponterminationemployeesareentitledtocompensationforunusedvacation.Uponretirementemployeesreceivecompensationequivalentto25oftheiraccumulatedsickleave.Effective2006onlyemployeesrepresentedbyunionswhovotedinfavorofaHealthcareReimbursementArrangementHRAreceive35oftheirsickleavebalancetax-freethroughanHRAaccountforhealthcareexpensespostretirement.BecauseofthespecialtaxarrangementthesickleavebalancemayonlygointotheHRAaccountitmaynotbetakenasacashout.TheHRAprogramisadministeredbyanindependentthirdpartyadministratorMeritainHealth.HRAinvestmentsaremanagedbyHRAVEBATrust.TheDepartmentaccruesallcostsassociatedwithcompensatedabsencesincludingpayrolltaxes.UseofEstimatesThepreparationofthefinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectamountsreportedinthefinancialstatements.TheDepartmentusedsignificantestimatesindeterminingreportedallowancefordoubtfulaccountsUnbilledrevenuespowerexchangesaccumulatedprovisionforinjuriesanddamagesandworkerscompensationenvironmentalliabilitiesaccruedsickleaveotherpostemploymentbenefitsandothercontingencies.Actualresultsmaydifferfromthoseestimates.SignificantRiskandUncertaintyTheDepartmentissubjecttocertainbusinessrisksthatcouldhaveamaterialimpactonfutureoperationsandfinancialperformance.Theserisksincludefinancialmarket58YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011liquidityandeconomicuncertaintypricesonthewholesalemarketsforshort-termpowertransactionsinterestratesandotherinputsandtechniquesforfairvaluationwaterconditionsweatherclimatechangeandnaturaldisaster-relateddisruptionsterrorismcollectivebargaininglabordisputesfishandotherEndangeredSpeciesActESAissuesEnvironmentalProtectionAgencyEPAregulationscompliancewithcleanandrenewableenergylegislationfederalgovernmentregulationsorordersconcerningtheoperationsmaintenanceandorlicensingofhydroelectricfacilitiesothergovernmentalregulationsrestructuringoftheelectricalutilityindustryandthecostsofconstructingtransmissionfacilitiesthatmaybeincurredaspartofanorthwestregionaltransmissionsystemandrelatedeffectsofthissystemontransmissionrightstransmissionsalessurplusenergyandgovernance.ReclassificationsCertain2011accountbalanceshavebeenreclassifiedtoconformtothe2012presentation.2.UTILITYPLANTUtilityPlantUtilityplantisrecordedatoriginalcostwhichincludesbothdirectcostsofconstructionoracquisitionandindirectcostsincludinganallowanceforfundsusedduringconstruction.Thecapitalizationthresholdwas5000in2012and2011.Plantconstructedwithcapitalcontributionsorcontributionsin-aid-ofconstructionreceivedfromcustomersisincludedinUtilityplant.Capitalcontributionsandcapitalgrantstotaled31.8millionin2012and40.9millionin2011.Provisionfordepreciationandamortizationismadeusingthestraight-linemethodbaseduponestimatedeconomicliveswhichrangefrom4to57yearsofrelatedoperatingassets.TheDepartmentusesahalf-yearconventionmethodontheassumptionthatadditionsandreplacementsareplacedinserviceatmid-year.Thecompositedepreciationandamortizationratewasapproximately2.6in2012and2.6in2011.Whenoperatingplantassetsareretiredtheiroriginalcosttogetherwithretirementcostsandremovalcostslesssalvageischargedtoaccumulateddepreciationoramortizationifapplicable.Thecostofmaintenanceandrepairsischargedtoexpenseasincurredwhilethecostofreplacementsandbettermentsiscapitalized.TheDepartmentperiodicallyreviewslong-livedassetsforimpairmenttodeterminewhetheranyeventsorcircumstancesindicatethecarryingvalueoftheassetsmaynotberecoverableovertheireconomiclives.During2012aprojecttoaddanadditionalintaketunnelattheSkagitprojectwasplacedonholdtemporarily.AsofDecember312011assetsrelatedtotheintaketunnelprojectof5.5millionreportedonthebalancesheetasConstructionwork-in-progressweretemporarilyidle.AsofDecember312012thestatusoftheseassetswasunchangedandtheircostof6.5millionwasreportedonthebalancesheetasAssetsheldforfutureuse.Intangibleassetsarethosethatlackphysicalsubstancearenonfinancialinnatureandhaveusefullivesextendingbeyondasinglereportingperiod.TheDepartmentsintangibleassetsarereportedascapitalassetsunderUtilityPlant.TheDepartmentsintangibleassetsconsistofeasementspurchasedandinternallydevelopedsoftwaretransmissionrightscapitalizedrelicensingcostsforSkagitandBoundaryhydroelectricprojectsTolthydroelectricprojectmitigationcostsandcostscapitalizedundertheHighRossAgreement.59 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011Utilityplant-in-serviceatoriginalcostexcludinglandatDecember312012and2011wasHdroelectricProductionTransmissionDistributionGeneralIntangibleTotal2012OriinalcostBeinninbalance70297931516347378818478610633155121873949714123424797765Caitalacuisitions21669784271756841276585131450734916567166207578496Disositions9978179863797780250919570495-38214980Transfersandadjustments--764507--764507Totaloriginalcost71467092018978567519669525603104490414115385783593396774AccumulateddereciationandamortizationBeinninbalance355287670737973316771201371996115911515075741457324303Increaseinaccumulateddereciationandamortization134697494006226581654401341430912469555101525279Retirements1177314118976831626814419925908-49864876Retirementwork-in-progress293702175737162844886522-2184409Totalaccumulateddereciationandamortization357277980760816117206458811931865141639771291511169115Endingbalance35739294011370406412463066791172625272475614492082227659HdroelectricProductionTransmissionDistributionGeneralIntanibleTotal2011OriinalcostBeinninbalance67382435015826714317271007462912051053550228983205420242Caitalacuisitions3197795955532981187633492635877243551520226204898Disositions282299434665363303272051690157062713122291Transfersandadjustments--8327295-20323796294916Totaloriginalcost70297931516347378818478610633155121873949714123424797765AccumulateddereciationandamortizationBeinninbalance346095346711332096352445191855527211462656811384291476Increaseinaccumulateddereciationandamortization1400153634655775362650516324360884489996262877Retirements5304938830777128801742411313203139123458593Transfersandadustments----15716151571615Retirementwork-in-progress495726293221129287145823-1800158Totalaccumulateddereciationandamortization355287670737973316771201371996115911515075741457324303Endingbalance347691645896764571170740926115900596243463838196747346260YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND20113.RATESTABILIZATIONACCOUNTTheSeattleCityCouncilpassedordinancestoestablishsetparametersandprovideafundingmechanismforaRatestabilizationaccountRSA.TheRSAwasestablishedtoreducetheneedforrapidandsubstantialrateincreasessolelytocomplywiththeDepartmentsbondcovenants.InMarch2010theSeattleCityCounciladoptedResolutionNo.31187andOrdinanceNo.123260establishingrevisedfinancialpoliciesandadditionalparametersfortheRSAcreatedbyOrdinanceNo.121637in2004.InMay2010the25.0millionintheContingencyReserveAccountwastransferredtotheRateStabilizationAccountinaccordancewithOrdinanceNo.123260.TherevisedfinancialpoliciesincludethreemainelementsaadditionalparametersforthefundingoperationandexpenditureofamountswithintheRSAtogetherwiththecreationofautomaticratesurchargestoreplenishtheRSAbarate-settingguidelinetomaintaindebtservicecoverageof1.8xandcarequirementforrevenuefundingaportionoftheDepartmentscapitalprogramsothatonaverageitwillbe40fundedfromoperatingcash.OrdinanceNo.123260identifiedthesourcesofsignificantfundingoftheRSAandspecifiedthattheRSAistobeaccessedwhensurpluspowersalesdeviatefromplannedamounts.TheRSAwouldbedrawndowntosupplementrevenueswhensurpluspowersalesrevenuesarebelowtheforecastedamountandconverselydepositswouldbemadetotheRSAifthesurpluspowersalesrevenuesaregreaterthanforecasted.OrdinanceNo.123260establishedatargetsizefortheRSAofnolessthan100.0millionandnogreaterthan125.0millionandauthorizedtheimpositionofautomatictemporarysurchargesonelectricratesrangingbetween1.5and4.5whentheRSAbalancefallsbelowspecifiedlevelsRSABalanceActionRSAbelow90.0millionAutomatic1.5surchargeRSAbelow80.0millionAutomatic3.0surchargeRSAbelow70.0millionAutomatic4.5surchargeRSAbelow50.0millionCityCouncilmustinitiateratereviewanddetermineactionstoreplenishRSAto100.0millionwithin12monthsInNovember2012and2011theSeattleCityCounciladoptedOrdinanceNos.124059and123757respectivelyrequiringtheRSAtobefundedatalevelthatreducedthelikelihoodofratesurchargesforyears2013and2012.BothordinancesalsoprovidedforthetransfertotheRSAofoperatingcashinexcessoftheestimatedamountsneededtoachieve1.85xdebtservicecoverageforyears2012and2011.OrdinanceNo.123757requiredaratereviewwhenevertheRSAbalanceexceeded125.0millionalongwiththeimplementationofmeasurestoreducetheRSAbalanceto125.0millionwithinaperiodof12monthsorless.SubsequenttoOrdinanceNo.123757theSeattleCityCounciladoptedOrdinanceNo.124108inFebruary2013whichextendedthetimingoftheratereviewtoaneffectivedateofJanuary12014whenevertheRSAbalanceexceeds125.0million.OrdinanceNo.124108wasretroactivetoJanuary12013.In2012actualsurpluspowersalesrevenueswerelessthantheforecastedsurplussalesrevenuesandaccordinglyfundsof36.2millionwerewithdrawnfromtheRSAtosupplementrevenues.Interest61 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011incomeof1.0millionwasearnedontheRSA.Theestimatedexcessofoperatingcashtoachievethe1.85xdebtservicecoveragewas22.0millionandthisamountwastransferredtotheRSAfromoperatingcashinDecember2012.Thenet2012RSAcashtransferredtooperatingcashwas13.2million.In2011actualsurpluspowersalesrevenueapproximatedforecastedsurpluspowersalesrevenue.TotaloperatingcashtransferredtotheRSAwas62.2million.21.0millionwastransferredatthebeginningofJanuary2011representingestimated2011debtrefundingsavingsand40.5millionwastransferredinDecember2011representingtheestimatedexcessofoperatingcashtoachieve1.85xdebtservicecoverage.Interestincomeof0.8millionwasearnedontheRSA.The25.0milliontransferredfromtheContingencyReserveAccounttotheRateStabilizationAccountinMay2010exceedsthebalanceofunearnedrevenuerelatedtotheRateStabilizationAccountandisincludedinRestrictednetposition.TheRatestabilizationaccountatDecember312012and2011consistedofcashfromthefollowingsources20122011RatestabilizationaccountBeginningbalance14149036779265627RSAinterestincome980230824844Operatingrevenue1419917061399896Endingbalance128271427141490367RSAtransactionsarerecordedinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncements.TheregulatoryliabilityUnearnedrevenue-ratestabilizationaccountatDecember312012and2011consistedofthefollowing20122011Unearnedrevenue-ratestabilizationaccountBeginningbalance11649036754265627RSAinterestincome980230824844Operatingrevenue1419917061399896Endingbalance103271427116490367TransfersfromtoratestabilizationaccountinthestatementsofrevenuesexpensesandnetpositionatDecember312012and2011wereasfollows62YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND201120122011Transfersfromtoratestabilizationaccount13218940622247404.CASHANDEQUITYINPOOLEDINVESTMENTSANDINVESTMENTSCashandEquityinPooledInvestmentsCashresourcesoftheDepartmentarecombinedwithcashresourcesoftheCitytoformapoolofcashthatismanagedbytheCitysDepartmentofFinanceandAdministrativeServicesFAS.UndertheCitysinvestmentpolicyalltemporarycashsurplusesinthepoolareinvested.TheDepartmentsshareofthepoolisincludedonthebalancesheetsasCashandequityinpooledinvestmentsorasrestrictedassets.ThepooloperateslikeademanddepositaccountinthatalldepartmentsincludingtheDepartmentmaydepositcashatanytimeandcanalsowithdrawcashoutofthepooluptotheamountoftheDepartmentsfundbalancewithoutpriornoticeorpenalty.Accordinglythestatementsofcashflowsreconciletocashandequityinpooledinvestments.TheCityconsidersinvestmentsinfinancialinstrumentshavingamaturityof90daysorlessasacashequivalent.CustodialCreditRiskofDepositsCustodialriskistheriskthatintheeventofbankfailureforoneoftheCitysdepositoryinstitutionstheCitysdepositsmaynotbereturnedinatimelymannerorinthecaseofcollateralizedsecuritiestheCitymaynotbeabletorecoverthecollateralheldinthepossessionofanoutsideparty.AsofDecember312012and2011theCitydidnothavecustodialrisk.TheCitysdepositsarecoveredbyinsuranceprovidedbytheFederalDepositInsuranceCorporationFDICandtheNationalCreditUnionAssociationNCUAaswellasprotectionprovidedbytheWashingtonStatePublicDepositProtectionCommissionPDPCasestablishedintheRevisedCodeofWashingtonRCW39.58.ThePDPCmakesandenforcesregulationsandadministersaprogramtoensurepublicfundsdepositedinbanksandthriftsareprotectedifafinancialinstitutionbecomesinsolvent.ThePDPCapproveswhichbankscreditunionsandthriftscanholdstateandlocalgovernmentdepositsandmonitorscollateralpledgedtosecureuninsuredpublicdeposits.ThissecurespublictreasurersdepositswhentheyexceedtheamountinsuredbytheFDICorNCUAbyrequiringbankscreditunionsandthriftstopledgesecuritiesascollateral.AsofDecember312012and2011theCityheld95000initscashvault.AdditionalsmallamountsofcashwereheldindepartmentalrevolvingfundaccountswiththeCitysvariouscustodialbanksallofwhichfellwithintheNCUAandFDICs250000standardmaximumdepositinsuranceamount.AnyoftheCityscashnotheldinitsvaultoralocaldepositorywasheldintheCitysoperatingfundinvestmentpoolandatthecloseofeverybusinessdayanycashremainingintheoperatingfundissweptintoanovernightrepurchaseagreementthatmaturesthenextday.InvestmentsTheDepartmentscashresourcesmaybeinvestedbyFASseparatefromthecashandinvestmentspool.InvestmentsaremanagedinaccordancewiththeCitysinvestmentpolicywithlimitsandrestrictionsappliedattheCity-widelevelratherthantospecificinvestmentsoftheDepartment.TheCityisauthorizedtopurchaseU.S.TreasuryandgovernmentagencysecuritiescertificatesofdepositsandotherinvestmentdepositsissuedbyWashingtonStatedepositoriesthatqualifyundertheWashingtonStateDepositProtectionActasdefinedbyRCW39.58bankersacceptancespurchasedinthesecondarymarketcommercialpaperpurchasedinthesecondarymarketandhavingreceivedthehighestratingbyatleasttwonationallyrecognizedratingagenciesrepurchaseandreverserepurchase63 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011agreementswithprimarydealersthathaveexecutedmasterrepurchaseagreementspublicfundsinthelocalgovernmentinvestmentpoolLGIPintheStateTreasuryandothersecuritiesasauthorizedbylaw.TheCityofSeattlehasthefollowingpoliciesinmanagingitsinvestmentsTheCityseekstopreserveprincipalwhilemaximizingincomeandmaintainingliquiditytomeettheCitysneedforcash.InvestmentdecisionsshouldfurthertheCityssocialpoliciesestablishedbyordinanceorpolicyresolutionsoftheCityCouncil.ACitysocialpolicyshalltakeprecedenceoverfurtheringtheCitysfinancialobjectiveswhenexpresslyauthorizedbyCityCouncilresolutionexceptwhereotherwiseprovidedbylawortrustprinciples.Securitiespurchasedshallhaveamaximummaturityoffifteenyearsandtheaveragematurityofallsecuritiesshallbelessthanfiveyears.Alltransactionsareexecutedonadelivery-versus-paymentbasis.ThestandardofprudencetobeusedbyinvestmentpersonnelshallbethePrudentPersonRuleandwillbeappliedinthecontextofmanaginganoverallportfolio.Securitiesshallnotbepurchasedwithtradingorspeculationasthedominantcriterionfortheselectionofthesecurity.InvestmentsarerecordedatfairvaluebasedonquotedmarketpricesinaccordancewithStatementNo.31oftheGASB.Fairvalueistheamountatwhichafinancialinstrumentcouldbeexchangedinacurrenttransactionbetweenwillingpartiesotherthaninaforcedorliquidationsale.AsofDecember312012and2011theDepartmentsdedicatedinvestmentsandtheCityspoolandotherinvestmentswereasfollows64YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND20112012Weihted-DedicatedCitOtherAveraeInvestmentsofPooledCitDedicatedMaturittheDeartmentInvestmentsPoolTotalDasRepurchaseagreements-162390595-1623905954U.S.treasuriesandU.S.government-backedsecurities-67448440-67448440482U.S.governmentagenciessecurities-647689787-647689787535U.S.governmentagencymortgage-backedsecurities-156167102-1561671022162Commercialpaper-176955311-17695531140Municipalbonds-182163719-182163719549Total-1392814954-1392814954Portfolioweighted-averagematurity592FairValue2011Weihted-DedicatedCitOtherAveraeInvestmentsofPooledCitDedicatedMaturittheDeartmentInvestmentsPoolTotalDasRepurchaseagreements-66785435-667854353U.S.treasuriesandU.S.government-backedsecurities-37993718-37993718816U.S.governmentagenciessecurities-990427625-990427625975U.S.governmentagencymortgage-backedsecurities-701113-701113876Commercialpaper-77494938-7749493810Municipalbonds-105403511-105403511513Total-1278806340-1278806340Portfolioweighted-averagematurity823FairValueAsofDecember312012and2011theDepartmentsshareoftheCitypoolwasasfollows20122011CashandequityinpooledinvestmentsRestrictedassets275696717209187449Currentassets156304744165410811Total432001461374598260BalanceasapercentageofCitypool31.029.3InterestRateRiskInterestrateriskistheriskthatchangesininterestratesovertimewilladverselyaffectthefairvalueofaninvestment.TheCitysinvestmentpolicylimitsthematurityofindividual65 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011securitiestofifteenyearsandlimitstheweightedaveragematurityofthetotalinvestmentportfoliotonolongerthanfiveyearswhichmitigatesinterestraterisk.CreditRiskCreditriskistheriskthatanissuerorothercounterpartytoaninvestmentwillnotfulfillitsobligations.TheCitymitigatescreditriskinseveralwaysasdescribedbelow.BystatestatutesandtheCitysinvestmentpolicytheCitymaypurchasesecuritiesthatcarrythehighestcreditratingsissuedbyMoodysInvestorsServiceStandardPoorsandorFitchRatings.SecuritiespurchasedmusthavethefollowingratingsatthetimeofpurchaseSecuritiesbackedbyissuerswithlong-termcreditratingsofAaaAa1andAa2byMoodysInvestorsServiceAAAAAandAAbyStandardPoorsandAAAAAandAAbyFitchRatingsandsecuritiesbackedbyissuershavingshort-termratingsofMIG1VMIG1andP1byMoodysInvestorsServiceA1andA1byStandardPoorsandF1andF1byFitchRatings.TheCityinvestsinU.S.TreasurysecuritieswhichareconsideredfreeofcreditriskandinsecuritiesbackedbythefullfaithandcreditoftheU.S.governmentsuchasbondsissuedbytheDepartmentofHousingandUrbanDevelopmentHUD.TheCityalsoinvestsinsecuritiesissuedbyU.S.governmentsponsoredenterprisesincludingFederalNationalMortgageAssociationFederalHomeLoanBankFederalHomeLoanMortgageCorporationandFederalFarmCreditBank.MaterialcreditriskintheCitysinvestmentportfolioresidesinitsholdingsofcommercialpaperandmunicipalsecurities.InaccordancewithstatestatutesandtheCitysinternalinvestmentpolicytheCitymanagesthatcreditriskbypurchasingsecuritiesbackedbyissuershavinglong-termandshort-termcreditratingsasnotedabove.TheCityalsosubscribestoasset-backedcommercialpaperresearchfromMoodysInvestorsServiceandFitchRatingsconductsinternalduediligenceofcommercialpaperandmunicipalissuersandmaintainsanapprovedlistofcommercialpaperissuersbaseduponinternalandexternalcreditresearch.ConcentrationofCreditRiskConcentrationriskistheriskoflossattributedtothemagnitudeofinvestmentsinasingleissuer.InaccordancewiththeCitysinvestmentpolicyandstatestatutesthatwereineffectin2012and2011theCitymanagedconcentrationriskbylimitingitsinvestmentsinanyoneissuerasfollowsU.STreasurybillscertificatesnotesandbonds100oftheportfolio.U.SGovernmentagencysecurities100oftheportfolio.Certificatesofdeposit25oftheportfolioand10oftheportfolioperbank.Bankersacceptances25oftheportfolioand5oftheportfolioperbank.Commercialpaper25oftheportfolioand5oftheportfolioperissuer.Municipalbondsorwarrants15oftheportfolioand5oftheportfolioperissuer.Repurchaseagreements1Termandovernight-50oftheportfolioand2Termonly180days-25oftheportfolio.Allrepurchaseagreementswerelimitedto75ofRegulatoryCapitalRegulatedbySecuritiesandExchangeCommissionRule15C3-1perdealer.66YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011Reverserepurchaseagreements20oftheportfolioand75ofRegulatoryCapitalperdealer.Mortgagebackedsecurities15oftheportfolio.Localgovernmentinvestmentpool110oftheportfolio.AtDecember312012and2011theCitydidnothavethefollowinginvestmentscertificatesofdepositbankersacceptancesreverserepurchaseagreementsandlocalgovernmentinvestmentpool.TheCitysinvestmentsinsingleissuersincludingthosematuringlessthanoneyearfromdateofpurchaseandamountingto5ormoreofthetotalportfolioasofDecember312012and2011areshowninthefollowingtable.PercentofPercentofTotalTotalIssuerFairValueInvestmentsFairValueInvestmentsFederalHomeLoanMortgageCorporationFreddieMac2067922891539535837531FederalNationalMortgageAssociationFannieMae3014161692231774092625FederalHomeLoanBank2586332511919432135915FederalFarmCreditBank--837080787WellsFargo--667854355Total7668417095610579141738320122011TheDepartmenthadnodedicatedinvestmentsasofDecember312012and2011.CustodialCreditRiskInvestmentsThecustodialcreditriskforinvestmentsistheriskthatintheeventoffailureofthecounterpartytheCitywillnothaveaccesstoorbeabletorecoveritsinvestmentsorcollateralsecuritiesthatareinthepossessionofanoutsideparty.TheCitymitigatescustodialcreditriskforitsinvestmentsbyhavingitsinvestmentsecuritiesheldbytheCityscontractualcustodialagentBNYMellonandnotbythecounterpartyorthecounterpartystrustdepartmentoragent.AdditionallytheCitymitigatescustodialriskbysettlingitstradesdelivery-versus-paymentthroughtheCityscontractualcustodialagent.ByinvestmentpolicytheCitymaintainsalistofapprovedsecuritiesdealersfortransactingbusiness.ForrepurchaseagreementstheCitytransactsonlywithlargeprimarydealerswithinvestmentgradecreditratingsprovidedbyatleasttwoofthenationallyrecognizedstatisticalratingorganizationsNRSROs.TheCityalsoconductsitsownduediligenceastothefinancialwherewithalofitscounterparties.TheCitymitigatescounterpartycustodialriskfromrepurchaseagreementsbyusingathird-partycustodianfortri-partyrepurchaseagreements.TheCityconformswithindustrystandardrequiringexecutionofamasterrepurchaseagreementwitheachcounterpartypriortotransactingarepurchaseagreementexecutionofathird-partycustodialagreementbetweentheCitythebrokerandtheclearingbankbeforetransactingathird-partyrepurchaseagreementandover-collateralizingbyaminimumof105.ByinvestmentpolicytheunderlyingsecuritiestheCityiswillingtoacceptascollateralmust67 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011havethehighestcreditratingsofatleasttwoNRSROs.Throughout2012and2011thecollateralunderlyingtheCitysrepurchaseagreementsexcludedsecuritiesotherthanU.S.Treasuryagenciesandagencymortgage-backedpass-throughs.ForeignCurrencyRiskTheCityTreasurypooledinvestmentdonotincludesecuritiesdenominatedinforeigncurrencies.ReverseRepurchaseAgreementsRCW35.39.030andCityinvestmentpolicyallowtheinvestmentofCitymoniesinexcessofcurrentCityneedsinreverserepurchaseagreements.HoweveratthistimetheCitydoesnotengageitselfinthistypeofinvestmentstrategy.TheCityofSeattlesComprehensiveAnnualFinancialReportmaybeobtainedbywritingtoTheCityofSeattleDepartmentofFinanceandAdministrativeServicesP.O.Box94680SeattleWA98124-4689telephone206684-2489orobtainedon-lineathttpwww.seattle.govcafrs.5.ACCOUNTSRECEIVABLEAccountsreceivableatDecember312012and2011consistofRetailWholesaleOtherOeratinNonoeratinElectricPowerOperatinSubtotalSubtotalTotal2012Accountsreceivable39364780155762426245271611862931243470273620995Lessallowancefordoubtfulaccounts415000063160373066579438251120078055832352147801551308225146065324246812322695655651632011Accountsreceivable50930117101510686479489675606741159243079153104Lessallowancefordoubtfulaccounts13056500631603833833169534933271760202252533787361710087908264565650607181832067058927851Wholesalepowerreceivableincludes1.8millionatDecember312012and2.4millionatDecember312011forexchangeenergyatfairvalueunderlong-termcontractsseeNote10Long-termPurchasedPowerExchangesandTransmission.6.SHORT-TERMENERGYCONTRACTSANDDERIVATIVEINSTRUMENTSTheDepartmentengagesinanongoingprocessofresourceoptimizationwhichinvolvestheeconomicselectionfromavailableenergyresourcestoservetheDepartmentsloadobligationsandusingtheseresourcestocaptureavailableeconomicvalue.TheDepartmentmakesfrequentprojectionsofelectricloadsatvariouspointsintimebasedonamongotherthingsestimatesoffactorssuchascustomerusageandweatheraswellashistoricaldataandcontractterms.TheDepartmentalsomakesrecurringprojectionsofresourceavailabilityatthesepointsintimebasedonvariablessuchasestimatesofstreamflowsavailabilityofgeneratingunitshistoricandforwardmarketinformationcontracttermsandexperience.OnthebasisoftheseprojectionstheDepartmentpurchasesandsellswholesaleelectriccapacityandenergytomatchexpectedresourcestoexpectedelectricloadrequirementsandtorealizeearningsfromsurplusenergyresources.Thesetransactionscanbeupto24monthsforward.Underthese68YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011forwardcontractstheDepartmentcommitstopurchaseorsellaspecifiedamountofenergyataspecifiedtimeorduringaspecifiedtimeinthefuture.ExceptforlimitedintradayandinterdaytradingtotakeadvantageofownedhydrostoragetheDepartmentdoesnottakemarketpositionsinanticipationofgeneratingrevenue.EnergytransactionsinresponsetoforecastedseasonalresourceanddemandvariationsrequireapprovalbytheDepartmentsRiskOversightCouncil.ItistheDepartmentspolicytoapplythenormalpurchaseandnormalsalesexceptionofStatementNo.53oftheGASBAccountingandFinancialReportingforDerivativeInstrumentsasappropriate.Certainforwardpurchaseandsaleofelectricitycontractsmeetthedefinitionofaderivativeinstrumentbutareintendedtoresultinthepurchaseorsaleofelectricitydeliveredandusedinthenormalcourseofoperations.AccordinglytheDepartmentconsiderstheseforwardcontractsasnormalpurchasesandnormalsalesunderStatementNo.53.Thesetransactionsarenotrequiredtoberecordedatfairvalueinthefinancialstatements.TheaggregatecontractamountsfairvalueandunrealizedgainorlossoftheDepartmentscommodityderivativeinstrumentsqualifyingasnormalpurchasesandnormalsalesatDecember31followAggregateAggregateUnrealized2012ContractAmountFairValueGainLossSales28552733264340862118647Purchases86774288000978676450Total37230161344350641442197AggregateAggregateUnrealized2011ContractAmountFairValueGainLossSales1644420616861765417559Purchases60276015751763275838Total2247180722613528693397FairvaluemeasurementsatDecember312012and2011usedanincomevaluationtechniqueconsistingofKiodexForwardCurvesandPlattsM2MPowerCurvesrespectivelyandinterestratesfromHISGlobalInsightthatareusedtocalculatediscountrates.AllderivativeinstrumentsnotconsideredasnormalpurchasesandnormalsalesaretoberecordedwithinthefinancialstatementsusingderivativeaccountingaccordingtoStatementNo.53.In2010theSeattleCityCounciladoptedaresolutiongrantingtheDepartmentauthoritytoenterintocertainphysicalputandcalloptionsthatwouldnotbeconsiderednormalpurchasesandnormalsalesunderStatementNo.53.TheDepartmentdidnothaveanysuchactivityfor2012and2011.InadditiontheSeattleCityCouncilhasdeferredrecognitionoftheeffectsofreportingthefairvalueofderivativefinancialinstrumentsforrate-makingpurposesandtheDepartmentmaintainsregulatoryaccountstodefertheaccountingimpactoftheseaccountingadjustmentsinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncementsseeNotes11OtherAssetsand12OtherLiabilities.69 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011MarketRiskMarketriskisingeneraltheriskoffluctuationinthemarketpriceofthecommoditybeingtradedandisinfluencedprimarilybysupplyanddemand.Marketriskincludesthefluctuationinthemarketpriceofassociatedderivativecommodityinstruments.Marketriskmayalsobeinfluencedbythenumberofactivecreditworthymarketparticipantsandtotheextentthatnonperformancebymarketparticipantsoftheircontractualobligationsandcommitmentsaffectsthesupplyofordemandforthecommodity.BecausetheDepartmentisactiveinthewholesaleenergymarketitissubjecttomarketrisk.CreditRiskCreditriskrelatestothepotentiallossesthattheDepartmentwouldincurasaresultofnonperformancebycounterpartiesoftheircontractualobligationstodeliverenergyormakefinancialsettlements.Changesinmarketpricesmaydramaticallyalterthesizeofcreditriskwithcounterpartiesevenwhenconservativecreditlimitsareestablished.TheDepartmentseekstomitigatecreditriskbyenteringintobilateralcontractsthatspecifycredittermsandprotectionsagainstdefaultapplyingcreditlimitsanddurationcriteriatoexistingandprospectivecounterpartiesandactivelymonitoringcurrentcreditexposures.TheDepartmentalsoseeksassurancesofperformancethroughcollateralrequirementsintheformoflettersofcreditparentcompanyguaranteesorprepayment.TheDepartmenthasconcentrationsofsuppliersandcustomersintheelectricindustryincludingelectricutilitieselectricgeneratorsandtransmissionprovidersfinancialinstitutionsandenergymarketingandtradingcompanies.InadditiontheDepartmenthasconcentrationsofcreditriskrelatedtogeographiclocationasitoperatesinthewesternUnitedStates.TheseconcentrationsofcounterpartiesandconcentrationsofgeographiclocationmayimpacttheDepartmentsoverallexposuretocreditriskeitherpositivelyornegativelybecausethecounterpartiesmaybesimilarlyaffectedbychangesinconditions.OtherOperationalandEventRiskThereareotheroperationalandeventrisksthatcanaffectthesupplyofthecommodityandtheDepartmentsoperations.DuetotheDepartmentsprimaryrelianceonhydroelectricgenerationtheweatherincludingspringtimesnowmeltrunoffandrainfallcansignificantlyaffecttheDepartmentsoperations.Otherrisksincluderegionalplannedandunplannedgenerationoutagestransmissionconstraintsordisruptionsenvironmentalregulationsthatinfluencetheavailabilityofgenerationresourcesandoveralleconomictrends.70YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND20117.LONG-TERMDEBTAtDecember312012and2011theDepartmentslong-termdebtconsistedofthefollowingpriorlienorparitybondsLONG-TERMMaturityOriginalFixedRateYearIssuance20122011PriorLienBonds2012AMLPImprovementandRefundingRevenueBonds2.0005.0002041293280000293280000-2012BMLPRefundingRevenueBonds0.3500.700201493550009210000-2012CMLPCleanRenewableEnergyBonds3.4003.75020334300000043000000-2011AMLPImprovementandRefundingRevenueBonds1.0005.50020362963150002825800002933500002011BMLPCleanRenewableEnergyBonds5.7505.75020271000000010000000100000002010AMLPBuildAmericaBonds4.4475.57020401816250001816250001816250002010BMLPImprovementandRefundingRevenueBonds2.0005.00020265968700005520200005875200002010CMLPRecoveryZoneEconomicDevelopmentBonds5.5905.59020401327500013275000132750002008MLPRevenueandRefundingRevenueBonds4.0006.00020292573750002156400002291250002004MLPImprovementandRefundingRevenueBonds3.0005.25020292848550001735600002217050002003MLPImprovementandRefundingRevenueBonds4.0006.000202825185000044100001300450002002MLPRefundingRevenueBonds3.0004.500201487735000-13450000Totalpriorlienbonds232553500017786000001680095000TheDepartmenthadthefollowingactivityinlong-termdebtduring2012and2011BalanceatBalanceatCurrent2012123111AdditionsReductions123112PortionPriorLienBonds1680095000345635000247130000177860000091840000BalanceatBalanceatCurrent2011123110AdditionsReductions123111PortionPriorLienBonds1536775000306315000162995000168009500088850000PriorLienBondsInJuly2012theDepartmentissued345.6millionofMunicipalLightandPowerMLPImprovementandRefundingRevenueBonds2012Bonds.The2012Bondswerecomprisedof293.3million2012AseriestaxexemptMLPBonds9.4million2012BseriestaxableMLPBondsand43.0million2012CseriestaxableMLPCleanRenewableEnergyBonds.Thetaxexempt2012AseriesMLPBondscouponinterestratesrangefrom2.00to5.00andmatureseriallyfromJune12013toJune12036withtermBondsmaturingJune12041.Thetaxable2012BseriesBondscouponinterestratesrangefrom0.35to0.70andmatureseriallyfromDecember12012toDecember12014.The2012CtaxableseriesBondsinterestratesrangefrom3.40to3.75andmatureseriallyfromJune12028toJune12030withtermBondsmaturingJune12033.Thearbitrageyieldswere2.990.63and0.45forthe2012A2012Band2012CBondsrespectively.ArbitrageyieldwhenusedincomputingthepresentworthofallpaymentsofprincipalandinterestontheBondsinthemannerprescribedbytheInternalRevenueCodeproducesanamountequaltotheissuepriceoftheBonds.Proceedsfromthe2012Bondsarebeingusedtofinancecertaincapitalimprovementandconservationprogramstoadvancerefund158.1millionofthe20022003and2004seriesoutstandingpriorlienbondsandtomakeadeposittotheReserveFund.Thedebtserviceonthe2012Bondsrequiresacashflowoverthelifeofthebondsof547.8millionincluding202.2millionininterest.Thedifferencebetweenthecashflowsrequiredtoservicetheold71 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011andnewdebtandtocompletetherefundingtotaled23.3millionandtheaggregateeconomicgainonrefundingtotaled20.2millionatnetpresentvalue.Theaccountinglossonrefundingwas10.6million.The2012CseriesBondsprovidearefundabletaxcreditorfederalsubsidypaidtostateorlocalgovernmentalissuersbytheUnitedStatesInternalRevenueService.Theamountofthefederalsubsidyisequaltothelesseroftheamountofinterestpayablebasedonthecouponinterestrateor70.0oftheamountofinterestpayablebasedonthetaxcreditrateonthesaledatewithrespecttothe2012CseriesBonds.Thisfederalsubsidyultimatelyresultsinanetdecreasetodebtservicealthoughdebtservicepaymentsarepaidgross.Thefederalsubsidiesarerecordedasnonoperatingrevenuesonthestatementsofrevenuesexpensesandchangesinnetposition.InFebruary2011theDepartmentissued306.3millionofMunicipalLightandPowerMLPImprovementandRefundingRevenueBonds2011Bonds.The2011Bondswerecomprisedof296.3million2011AseriestaxexemptMLPBondsand10.0million2011BseriestaxabletermMLPCleanRenewableEnergyBonds.Thetaxexempt2011AseriesMLPBondscouponinterestratesrangefrom1.00to5.50andmatureseriallyfromAugust12011toFebruary12033withtermBondsmaturingFebruary12036.Thetaxable2011BseriesBondscouponinterestrateis5.75andmaturesFebruary12027.Thearbitrageyieldwas4.43and1.94forthe2011Aand2011BBondsrespectively.Proceedsfromthe2011Bondswereusedtofinancecertaincapitalimprovementandconservationprogramstoadvancerefund101.3millionoftheremaining2001seriesoutstandingpriorlienbondsandtomakeadeposittotheReserveFund.Thedebtserviceonthe2011Bondsrequiresacashflowoverthelifeofthebondsof515.0millionincluding208.7millionininterest.Thedifferencebetweenthecashflowsrequiredtoservicetheoldandnewdebtandtocompletetherefundingtotaled11.6millionandtheaggregateeconomicgainonrefundingtotaled9.8millionatnetpresentvalue.Theaccountinglossonrefundingwas0.4million.The2011BseriesBondsprovidearefundabletaxcreditorfederalsubsidypaidtostateorlocalgovernmentalissuersbytheUnitedStatesInternalRevenueService.Theamountofthefederalsubsidyisequaltothelesseroftheamountofinterestpayablebasedonthecouponinterestrateor70.0oftheamountofinterestpayablebasedonthetaxcreditrateonthesaledatewithrespecttothe2011BseriesBonds.PursuanttotherequirementsoftheBalancedBudgetandEmergencyDeficitControlActof1985asamendedcertainautomaticreductionswillbeeffectiveMarch12013forqualifiedbondsincludingtheDepartments2012CseriesBonds2011BseriesBonds2010AseriesBondsand2010CseriesBonds.Federalsubsidiesforthesebondswillbereducedby8.7throughtheendofthefederalfiscalyearSeptember302013orconveningU.S.Congressionalactionatwhichtimethesequestrationrateissubjecttochange.TheeffectfortheaccrualoffederalsubsidiesasofDecember312012isinconsequential.Theeffectduring2013isestimatedtobelowerplannedsubsidiesinJulyandAugustbyapproximately0.1millionand0.2millionrespectively.Theeffectonplannedsubsidiesforyearsafter2013iscurrentlyindeterminable.72YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011Debtservicerequirementsforpriorlienbondsexcludingfederalsubsidiesforthe20122011and2010bondsareasfollowsYearsEndinPrincialInterestDecember31RedemtionsReuirementsTotal20139184000086447498178287498201496645000821726231788176232015989150007734479417625979420169745500072409976169864976201798475000675035001659785002018202247623000026677037574300037520232027403350000150455070553805070202820321845550007694589726150089720332037151815000371570351889720352038204179320000662226385942263Total17786000009238290312702429031TheDepartmentisrequiredbyOrdinanceNo.123169thebondordinancetofundreservesforthe2012BondsandotherparitybondsintheMunicipallightandpowerbondreservefundReserveFundinanamountatanytimeequaltothelesserofathemaximumannualdebtserviceonallparitybondsthenoutstandingandbthemaximumamountpermittedbytheInternalRevenueCodeasareasonablyrequiredreserveorreplacementfundReserveRequirement.TheReserveRequirementuponissuanceofthe2012Bondswasanamountequalto111.2million125ofaverageannualdebtservice.Themaximumannualdebtserviceonpriorlienbondsis178.8millionduein2014andtheaverageannualdebtservicewas92.5millionatissuanceofthe2012Bonds.Uponissuanceofthe2012Bonds12.6millionofthe2012AseriesBondproceedsweredepositedintheReserveFundanaccountwithinthebooksoftheDepartment.TheReserveRequirementwasalsofundedbyanexistingsuretybondpurchasedin2005fromFinancialSecurityAssuranceInc.whichisnowknownasAssuredGuaranteeMunicipalCorporationintheamountof77.1million.FurtherfundingoftheReserveRequirementwas1.5millionfromthe2011Aseriesbondproceedsand20.0millionfromoperatingcashduring2012.ThesuretybondwillexpireonAugust12029.AsofDecember312012and2011AssuredGuaranteeMunicipalCorporationwasratedAa3andAA-byMoodysandStandardPoorsrespectively.ThebondordinancedoesnotrequirethattheReserveRequirementbefundedwithcashasubstitutesuretybondorletterofcreditiftheproviderofqualifiedinsuranceisdowngraded.UnderthebondordinanceasuretybondqualifiesasQualifiedInsuranceforpurposesofsatisfyingtheReserveRequirementiftheprovidersratingsareinoneofthetoptworatingcategoriesatthetimethepolicyisissuedeveniftheproviderofsuchsuretybondissubsequentlydowngraded.Aportionoftheproceedsfromthe2012revenuerefundingBondswereplacedinaseparateirrevocabletrustaccounttoprovideforallfuturedebtservicepaymentsoncertainpriorlienbondsadvancerefundedordefeased.NeithertheassetsofthetrustaccountnortheliabilitiesforthedefeasedbondsarereflectedintheDepartmentsfinancialstatements.Theoutstandingprincipalbalanceofallbondsdefeasedthrough2012was149.0millionasofDecember312012.Therewasnobalanceoutstandingforthebondsdefeasedin2011asofDecember312011.9.1millionofthe2002bondswererepaidfromthe2012irrevocabletrustaccountand311.7millionofthe2001bondsfromthe2011irrevocable73 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011trustaccountwerecalledandpaidinfullduring2011.Fundsheldinthe2012irrevocabletrustaccountonDecember312012aresufficienttoserviceandredeemtheremainingdefeasedbondsoutstanding.RevenuePledgedAllrevenuebondsarespeciallimitedobligationspayablefromandsecuredsolelybythegrossrevenuesoftheDepartmentlesschargesformaintenanceandoperationsandbymoneyinthedebtserviceaccountandReserveFund.Principalandinterestpaidfor2012and2011was173.7millionand146.7millionrespectively.Totalrevenueavailablefordebtserviceasdefinedforthesameperiodswas306.1millionand269.9millionrespectively.Annualinterestandprincipalpaymentsareexpectedtorequire58.2ofrevenuesavailablefordebtservicefor2012andrequired63.7in2011.FederalArbitrageRegulationsAllrevenuebondsaresubjecttofederalarbitrageregulationsandtheDepartmenthascompliedwiththeseregulations.Therewasnofederalarbitragerebateduein2012or2011.OtherTherewerenoliensonpropertyorrevenuepertainingtoparitybondsandallbondcovenantswereincompliancefortheDepartmentspriorlienbondsasofDecember312012and2011respectively.FairValueFairvaluesatDecember312012and2011wereprovidedbytheDepartmentsfinancialadvisorSeattleNorthwestSecurities.ThefairvaluefortheDepartmentsbondsareestimatedbasedonthequotedmarketpricesforthesameorsimilarissuesoronthecurrentratesofferedtotheDepartmentfordebtofthesameremainingmaturities.CarryingamountsnetofpremiumsanddiscountsandfairvaluesatDecember312012and2011wereasfollowsCarryinCarryinAmountFairValueAmountFairValueLong-termdebtPriorlienbonds1883317296203366650217577049971879816667Total188331729620336665021757704997187981666720122011AmortizationBondissuecostsincludingthesuretybonddiscountsandpremiumsareamortizedusingtheeffectiveinterestmethodoverthetermofthebonds.Theexcessofcostsincurredoverthecarryingvalueofbondsrefundedonearlyextinguishmentofdebtisamortizedasacomponentofinterestexpenseusingboththestraight-lineandeffectiveinterestmethodsoverthetermsoftheissuestowhichtheypertain.Deferredrefundingcostsamortizedtointerestexpensetotaled4.7millionin2012and4.9millionin2011.Deferredrefundingcostsintheamountof30.0millionand28.3millionareincludedasacomponentofLong-termdebtonthe2012and2011balancesheetsrespectively.74YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011NoncurrentLiabilitiesTheDepartmenthadthefollowingactivitiesduring2012and2011BalanceBalance2012at1112AdditionsReductionsat123112Accumulatedprovisionforinjuriesanddamages3534248618199133-53541619Compensatedabsences14502018552976-15054994Other6001862196289-6198151Total5584636618948398-74794764BalanceBalance2011at1111AdditionsReductionsat123111Accumulatedprovisionforinjuriesanddamages36500185-115769935342486Compensatedabsences13979516522502-14502018Other45545551447307-6001862Total550342561969809115769955846366AdditionalinformationabouttheprovisionforinjuriesanddamagescanbefoundinNote13ProvisionforInjuriesandDamagesandNote14EnvironmentalLiabilities.OtherincludesprimarilyaliabilityforOtherPostemploymentBenefitsseeNote9SeattleCityEmployeesRetirementSystemandOtherPostemploymentBenefits.8.ACCOUNTSPAYABLEAccountsPayableandOtherCurrentLiabilitiesThecompositionofaccountspayableandothercurrentliabilitiesatDecember312012and2011isasfollowsVoucherspayable3049353224597692Poweraccountspayable2627369224388442Taxespayable1019829710859154Claimspayable162936158350331Guaranteedepositandcontractretainer25195101053679Otheraccountspayable14987851233989Total87277431704832879.SEATTLECITYEMPLOYEESRETIREMENTSYSTEMANDOTHERPOSTEMPLOYMENTBENEFITSPensionBenefitsTheSeattleCityEmployeesRetirementSystemSCERSisasingle-employerdefinedbenefitpublicemployeeretirementsystemcoveringemployeesoftheCityandadministeredin75 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011accordancewithChapter41.28oftheRevisedCodeofWashingtonandChapter4.36oftheSeattleMunicipalCode.SCERSisapensiontrustfundoftheCity.AllemployeesoftheCityareeligibleformembershipinSCERSwiththeexceptionofuniformedpoliceandfirepersonnelwhoarecoveredunderaretirementsystemadministeredbytheStateofWashington.EmployeesoftheKingCountyDepartmentsofTransportationandPublicHealthwhoestablishedmembershipinSCERSwhentheseorganizationswereCitydepartmentswereallowedtocontinuetheirSCERSmembership.AsofDecember312012therewere5714retireesandbeneficiariesreceivingbenefitsand8465activemembersofSCERS.Inaddition1121vestedterminatedemployeeswereentitledtofuturebenefits.SCERSprovidesretirementdeathanddisabilitybenefits.Retirementbenefitsvestafter5yearsofcreditedservicewhiledeathanddisabilitybenefitsvestafter10yearsofcreditedservice.Retirementbenefitsarecalculatedas2multipliedbyyearsofcreditableservicemultipliedbyaveragesalarybasedonthehighest24consecutivemonthsexcludingovertime.Thebenefitisactuariallyreducedforearlyretirement.Additionalincreasesinthecost-of-livingadjustmentsareavailabletocurrentandfutureretiredmembersonlyifSCERSattainsatleasta100fundingratio.SCERSdoesnotprovideterminationbenefits.ThecontributionrequirementsofplanmembersandtheCityareestablishedandmaybeamendedbytheSeattleCityCouncil.InNovember2010theCityCounciladoptedCouncilBillNo.117018OrdinanceNo.123482amendingSeattleMunicipalCodeSection4.36.110toprovideforcontributionrateincreasesformembersoftheCitysRetirementSystem.InOctober2011theSCERSBoardofAdministrationadoptedacreditinterestpolicyforemployeecontributionsreceivedJanuary2012forwardbasedontheJanuary12011valuationreport.Thisresultedinthetotalrequiredcontributionratestodecreasefrom21.30to21.04.EffectiveJanuary2012theemployeecontributionrateofannualcoveredpayrollwasincreasedfrom9.03to10.03.Theemployercontributionratewasincreasedfrom9.03to11.01.Theincreaseincontributionrateswasnecessarytoacknowledgethefinancialandeconomicrecessionof20072008whichadverselyimpactedSCERSassets.AlsoplandemographicsshowedactivemembersinSCERSretirelaterinlifeandlivelongerplacingaheavierliabilityonSCERSassets.ChangestocontributionratesarenecessarytoensurecontinuedfinancialsupporttotheretiredemployeesoftheCity.TheCityisrequiredtocontributeatanactuariallydeterminedrateequaltoatleastthatofthememberscontributionrate.TheCityscontractswithalllaborunionsthatrepresentmembersofSCERSdescribehowcontributionrateswouldbechangedintheeventhighercontributionsareneededtoimprovethefinancialstatusoftheEmployeesRetirementFund.UnderthesecontractstheCityandemployeeswillshareanycontributionrateincreaseequallyuptoamaximumincreaseof2intheemployeecontribution.IfacontributionrateincreaseisneededtheCityintendstoapplythesameformulatonon-representedemployees.InNovember2011theSeattleCityCounciladoptedResolutionNo.31334affirmingtheCitysintenttofullyfunditsrequiredcontributionstoSCERS.BasedontheJanuary12012actuarialvaluationreporttheestimatedcontributionsrequiredtoamortizetheUnfundedActuarialAccruedLiabilityUAALover30yearsorlessis22.92.Effectivefor2013thistotalcontributionratewillbemetwithanemployeecontributionrateof10.03andinaccordancewithResolutionNo.31334theCityscontributionratewillincreaseto12.89.76YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011UndertheauthorityofthestateandCitySCERSoperatesasecuritieslendingprogramandthereweretransactionsduring2012and2011.In2012and2011SCERSdidnotincuralossasaresultofborrowerdefault.SCERSdidnothavenegativecreditexposureatDecember312012or2011.EmployercontributionsfortheCitywere62.5millionand50.3millionin2012and2011respectively.EmployercontributionsfortheDepartmentwere15.1millionand11.6millionin2012and2011respectively.ctuaraataValuationdateJanuary12012ActuarialcostmethodEntryageAmortizationmethodLevelpercentRemainingamortizationperiodDoesnotamortizeAmortizationperiodMaximumof30yearsAssetvaluationmethod5-YearSmoothingctuarassumptonsPriceinflation3.50Investmentrateofreturn7.75Projectedgeneralwageincreases4.00Postretirementbenefitincreases1.50Cost-of-livingyear-endbonusdividend0.00ThecontributionratescurrentlyineffectdonotamortizetheUAALoveraperiod30yearsorless.77 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011AnnualPensionCostandNetPensionObligationForFiscalYearEndingDecember312011BasedonJanuary12011Valuation201120101aTotalnormalcostrate15.1915.231bEmployeecontributionrate9.038.031cEmployernormalcostrate1a-1b6.167.202aTotalemployercontributionrate9.038.032bAmortizationpaymentrate2a-1c2.870.832cAmortizationperioddoesnotamortizedoesnotamortize2dGASB27amortizationrate6.959.803TotalannualrequiredcontributionARCrate1c2d13.1117.004Coveredemployeepayroll5570461025631978465aARC3x473028744957436345bInterestonnetpensionobligationNPO226046560346125cARCadjustment157865642144325dAnnualpensioncostAPC5a5b5c72346935939234546Employercontribution50301263452247877aChangeinNPO5d-622045672486986677bNPOatbeginningofyear29167296778659637cNPOatendofyear7a7b712162429167296IftheamortizationperioddeterminedbytheactualcontributionrateexceedsthemaximumamortizationperiodrequiredbyGASBStatementNo.27theARCisdeterminedusinganamortizationoftheUAALover30years.Coveredpayrollincludescompensationpaidtoallactiveemployeesonwhichcontributionsweremadeintheyearprecedingthevaluationdate.FiscalYearEndedDecember31In2011thetotalcontributionrateof18.06wasbelowtheARCof21.3computedasoftheJanuary12011actuarialvaluation.IfthetotalcontributionrateandARCweretoremainattheselevelstheUAALwouldnotfullyamortizeinlessthan30years.AsnotedearlierinOctober2011theSCERSBoardadoptedacreditinterestpolicythatresultedintotalrequiredcontributionratestodecreasefrom21.3to21.04whichwasmetin2012withanemployeecontributionrateof10.03andemployercontributionrateof11.01toensuretheUAALwouldfullyamortizeover30yearsorless.78YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011TheschedulesoffundingprogressinmillionsunauditedforSCERSareasfollowsUAALorActuarialExcessasaActuarialActuarialAccruedUnfundedPercentaeValuationValueofLiabilitiesAALFundinCoveredofCoveredDateAssetsAALaUAALbRatioPayrollcPayrollJanuar1ABB-AABCB-AC20101645.32653.81008.562.0580.9173.620112013.72709.0695.474.3563.2123.520121954.32859.3905.068.3557.0162.5aActuarialpresentvalueofbenefitslessactuarialpresentvalueoffuturenormalcostsbasedonentryageactuarialcostmethod.bActuarialaccruedliabilitieslessactuarialvalueofassetsfundingexcessifnegative.cCoveredpayrollincludescompensationpaidtoallactiveemployeesonwhichcontributionsweremadeintheyearprecedingthevaluationdate.SCERSissuesastand-alonefinancialreportthatmaybeobtainedbywritingtotheSeattleCityEmployeesRetirementSystem720ThirdAvenueSuite900SeattleWA98104bytelephoneat206386-1293orbyaccessingthewebsitehttpwww.seattle.govretirementannual_report.htm.OtherPostemploymentBenefitsOPEBHealthcareplansforactiveandretiredemployeesareadministeredbytheCityofSeattleassingle-employerdefinedbenefitpublicemployeehealthcareplans.EmployeesretiringundertheCitymaycontinuetheirhealthinsurancecoverageundertheCityshealthinsuranceplansforactiveemployees.Whenaretiredparticipantdiesthespouseremainsfullycovereduntilage65andcoveredbytheMedicaresupplementplanthereafter.EmployeesthatretirewithdisabilityretirementundertheCitymaycontinuetheirhealthcoveragethroughtheCitywithsamecoverageprovisionsasotherretirees.Eligibleretireesself-pay100percentofthepremiumbasedonblendedrateswhichwereestablishedbyincludingtheexperienceofretireeswiththeexperienceofactiveemployeesforunderwritingpurposes.TheCityprovidesanimplicitsubsidyofthepost-retirementhealthinsurancecostsandfundsthesubsidyonapay-as-you-gobasis.ThepostemploymentbenefitprovisionsareestablishedandmaybeamendedbyordinanceoftheSeattleCityCouncilandasprovidedinSeattleMunicipalCode4.50.020.TheCitysexpectedcontributionforemployer-paidbenefitswas2.4millionin2012and3.9millionin2011.TheDepartmentsportionoftheexpectedcontributionwas0.4millionin2012and0.5millionin2011.TheCityrecordedanexpenseandliabilityforOPEBof5.0millionin2012and7.2millionin2011.TheDepartmentrecordedanexpenseandliabilityforOPEBof0.2millionin2012and1.4millionin2011.Actuarialvaluationsinvolveestimatesofthevalueofreportedamountsandassumptionsabouttheprobabilityofeventsfarintothefuture.Actuariallydeterminedamountsaresubjecttocontinualrevisionasactualresultsarecomparedtopastexpectationsandnewestimatesaremadeaboutthefuture.Calculationsarebasedonthetypesofbenefitsprovidedunderthetermsofthesubstantiveplanatthetimeofeachvaluationandonthepatternofsharingofcostsbetweentheemployerandplanmembersto79 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011thatpoint.Theprojectionofbenefitsforfinancialreportingpurposesdoesnotexplicitlyincorporatethepotentialeffectsoflegalorcontractualfundinglimitationsonthepatternofcostsharingbetweentheemployerandplanmembersinthefuture.Actuarialcalculationsreflectalong-termperspective.Consistentwiththatperspectiveactuarialmethodsandassumptionsusedincludetechniquesthataredesignedtoreduceshort-termvolatilityinactuarialaccruedliabilitiesandtheactuarialvalueofassets.Basedonthelatestbiennialactuarialvaluationdatethesignificantmethodsandassumptionsareasfollows80YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011ctuaraataanassumptonsValuationdateJanuary12012ActuarialcostmethodEntryagenormalAmortizationmethodLeveldollarInitialamortizationperiod30yearsopenDiscountrate3.88HealthcarecosttrendratesmedicalAetnaplans9.0decreasingby0.5eachyearfor5yearstoanultimaterateof5.75.GroupHealthplans8.5decreasingby0.5eachyearfor8yearstoanultimaterateof5.0Participation40ofActiveEmployeeswhoretireparticipateMortalityGeneralServiceActivesandRetireesbasedonRP-2000TableandRP-2000CombinedHealthyrespectivelywithagessetbackthreeyearsformaleandfemaleactivessetbackoneyearformaleandfemalereitrees.RatesaregenerationalforbothmalesandfemalesusingProjectionScaleAA.Maritalstatus60ofmemberselectingcoveragemarriedorhavearegistereddomesticpartner.Malespousestwoyearsolderthantheirfemalespouses.MorbidityfactorsMorbidityraterangesforages50through64AetnaTraditionalAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof128.06forretireesand142.17forspouses.AetnaPreventiveAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof127.61forretireesand142.06forspouses.FortheAetnaplansbecausetheretireesspousespayalowerpremiumforhealthcarecoveragethanretireesthenetcosttotheCityforthespousecoverageisgreaterthanforaretireeofthesameageandgender.Themorbidityfactorswereadjustedtoreflectthisdiscrepancy.GroupHealthStandardandDeductiblePlansAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof147.08forretireesandspouses.OtherconsiderationsActiveemployeeswithcurrentspouseandordependentcoverageelectsameplanandcoverage.Afterretirementitisassumedthatchildrenwillhaveagedoffofcoverageandwillhave0liability.81 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011BasedontheactuarialvaluationdateofJanuary12012theCitysannualcostforfiscalyearsendedDecember312012and2011theamountofexpectedcontributiontotheplanandchangesinnetobligationareasfollows20122011Annualrequiredcontribution806400011286000InterestonnetOPEBobligation13400001212000Adjustmenttoannualrequiredcontribution19690001673000AnnualOPEBcostexpense743500010825000Expectedcontributionemployer-paidbenefits24410003889000IncreaseinnetOPEBobligation49940006936000NetOPEBobligation-beginningoftheyear3454800027612000NetOPEBobligation-endofyear3954200034548000TheschedulesoffundingprogressinmillionsunauditedareasfollowsctuaraAccruedUAALasaActuarialActuarialLiabilitiesUnfundedPercentaeValuationValueofAALAALFundinCoveredofCoveredDateAssetsEntrAeUAALRatioParollParollJanuar1ABB-AABCB-AC2010-93.593.5-869.110.82011a-99.499.4-866.211.52012-74.774.7-891.68.4aThe2011disclosureinformationisbasedonarollforwardoftheJanuary12010valuation.TheHealthCareSubfundoftheGeneralFundisreportedinTheCityofSeattlesComprehensiveAnnualFinancialReport.10.LONG-TERMPURCHASEDPOWEREXCHANGESANDTRANSMISSIONBonnevillePowerAdministrationTheDepartmentpurchaseselectricenergyfromtheU.S.DepartmentofEnergyBonnevillePowerAdministrationBonnevilleundertheBlockandSlicePowerSalesAgreementa17-yearcontractfortheperiodOctober12011throughSeptember302028.BlockquantitiesSlicepercentageandBonnevilleratesareexpectedtoberecalculatedperiodicallyduringthetermofthecontract.Rateswillbedevelopedandfinalizedeverytwoyears.Accordinglycertainestimatesandassumptionswereusedinthecalculationsintheestimatedfuturepaymentstablebelow.ThetermsoftheSliceproductspecifythattheDepartmentwillreceiveapercentageoftheactualoutputoftheFederalColumbiaRiverPowerSystemtheSystem.ThepercentageisadjustedannuallywithaSliceAdjustmentRationogreaterthan1.0timesthe3.65663initialslicepercentagenolaterthan15dayspriortothefirstdayofeachfederalfiscalyearbeginningwithfiscalyear2012.ThecurrentSlicepercentageis3.63323thesameasthepreviousfiscalyear.ThecostofSlicepowerisbasedonthe82YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011DepartmentssamepercentageoftheexpectedcostsoftheSystemandissubjecttotrue-upadjustmentsbasedonactualcostswithspecifiedexceptions.Theprevious10-yearcontracttopurchasebothBlockandSliceenergyfromBonnevilleexpiredSeptember302011.ThisagreementprovidedpowerequaltotheDepartmentsannualnetrequirementdefinedasthedifferencebetweenprojectedloadandfirmresourcesdeclaredtoservethatload.TheBlockproductprovidedfixedamountsofpowerpermonth.TheSlicepercentagewas4.6676duringthedurationofthecontract.BonnevillesResidentialExchangeProgramREPwasestablishedasamechanismtodistributefinancialbenefitsoftheFederalColumbiaRiverPowerSystemtoresidentialcustomersoftheregionsinvestorownedutilitiesIOUs.InMay2007theNinthCircuitCourttheCourtrulingsfoundthe2000REPSettlementAgreementswithIOUsinconsistentwiththeNorthwestPowerAct.TheDepartmentreceived5.7millionand5.9millionin2012and2011respectivelyinpaymentsandbillingcreditsrelatedtoboththeBlockandSliceagreementsasaresultoftheCourtdecision.LuckyPeakIn1984theDepartmententeredintoapurchasepoweragreementwithfourirrigationdistrictstoacquire100ofthenetsurplusoutputofahydroelectricfacilitythatbegancommercialoperationin1988attheexistingArmyCorpsofEngineersLuckyPeakDamontheBoiseRivernearBoiseIdaho.TheirrigationdistrictsareownersandlicenseholdersoftheprojectandtheFERClicenseexpiresin2030.Theagreementwhichexpiresin2038obligatestheDepartmenttopayallownershipandoperatingcostsincludingdebtserviceoverthetermofthecontractwhetherornottheplantisoperatingoroperable.TheDepartmentprovidedandbilledLuckyPeak0.5millionand0.3millionforservicesin2012and2011respectively.Theseamountsarerecordedasoffsetstopurchasedpowerexpense.TheDepartmentpaid3.4millionand3.2millionforenergyfromLuckyPeakin2012and2011respectively.TheDepartmentsreceivablesfromLuckyPeakwerelessthan0.1millionatDecember312012and2011respectively.TheDepartmentspayablestoLuckyPeakwere0.5millionand0.4millionatDecember312012and2011respectively.BritishColumbiaHighRossAgreementIn1984anagreementwasreachedbetweentheProvinceofBritishColumbiaandtheCityunderwhichBritishColumbiawillprovidetheDepartmentwithenergyequivalenttothatwhichwouldhaveresultedfromanadditiontotheheightofRossDam.Deliveryofthisenergybeganin1986andistobereceivedfor80years.InadditiontothedirectcostsofenergyundertheagreementtheDepartmentincurredcostsofapproximately8.0millioninprioryearsrelatedtotheproposedadditionandwasobligatedtohelpfundtheSkagitEnvironmentalEndowmentCommissionthroughfourannual1.0millionpayments.Theseothercostsareincludedinutilityplant-in-serviceasanintangibleassetasdefinedinStatementNo.51andarebeingamortizedtopurchasepowerexpenseover35yearsthrough2035seeNote2UtilityPlant.83 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011Energyreceivedandexpensesincurredundertheseandotherlong-termpurchasedpoweragreementsatDecember312012and2011areasfollows2012201120122011ExpenseExpenseAverageMegawattsBonnevilleBlock6921433961941315269.8247.6BonnevilleSlice8010353393135261371.6461.9Long-termpurchasepower-Bonneville149317872155076576641.4709.5LuckyPeakincludingroyalties7255082680956245.744.4BritishColumbia-HighRossAgreement134296431342269935.135.8GrantCountyPublicUtilityDistrict298133131265824.13.7GrandCouleeProjectHydroAuthority5360090444377929.127.1BonnevilleSouthForkToltbillingcredit33316933470373--BritishColumbia-BoundaryEncroachment--1.42.0Renewableenergy-StateLineWind242561592184368641.647.2Renewableenergy-Other445190050645658.69.7Exchangesandlossreturnsenergyatfairvalue5696294775474816.417.7Long-termpurchasedpowerbookedout5284167721911235.836.6Long-termpurchasedpower-other5481463951776136146.2151.0Total204132511206852712787.6860.5Paymentsundertheselong-termpowercontractstotaled210.1millionand215.4millionin2012and2011respectively.Paymentsundertransmissioncontractstotaled36.4millionand38.9millionin2012and2011respectively.RenewableEnergyPurchaseandorExchangesTheEnergyIndependenceActChapter19.285RevisedCodeofWashingtonrequiresallqualifyingutilitiesinWashingtonStatetomeetcertainannualtargetsofeligiblenewrenewableresourcesandorequivalentrenewableenergycreditsasapercentageoftotalenergydeliveredtoretailcustomers.Theannualtargetsareatleast3by2012atleast9by2016andatleast15by2020.TheDepartments2012resourceportfoliometthe3target.Long-termrenewablepurchaseorexchangeagreementswereexecutedwiththeSacramentoMunicipalUtilityDistrictin2007WasteManagementRenewableEnergyLLCin2009theexistingStatelineWindProjectcontractandtheKingCountyWastewaterTreatmentDivisionin2010.EnergyExchangeNorthernCaliforniaPowerAgencyNCPAandtheDepartmentexecutedalong-termCapacityandEnergyExchangeAgreementinMarch1993.TheDepartmentdeliversenergytoNCPAfromJunethroughOctober15.NCPAreturnsenergyunderconditionsspecifiedinthecontractata1.21ratioofexchangepowerfromNovemberthroughApril.Theagreementincludesfinancialsettlementandterminationoptions.InaletterNCPAdatedMay172011NCPAgavesevenyearsadvancewrittennoticetotheDepartmentterminatingtheagreementeffectivenolaterthanMay312018.FairValueofExchangeEnergyExchangeenergyreceivableandtherelatedregulatorygainsatDecember312012and2011werevaluedusingKiodexForwardCurvesandPlattsM2MPowerCurvesrespectivelyandDowJonesU.S.DailyElectricityPriceIndicesforsettleddeliveries.AnincomevaluationtechniquethatusesinterestrateforecastsfromHISGlobalInsightisusedtodiscount84YOURSEATTLECITYLIGHTANNUALREPORT2012 HECITYOFSEATTLECITYLIGHTDEPARTMENTOTESTOFINANCIALSTATEMENTSSOFANDFORTHEYEARSENDEDDECEMBER312012AND2011forpresentvaluebasedontheinterestrateforTreasuryconstantmaturitiesbond-equivalentyieldsbythefuturemonthofthetransactionsseeNote12OtherLiabilities.EstimatedFuturePaymentsUnderPurchasedPowerTransmissionandrelatedContractsTheDepartmentsestimatedpaymentsforpurchasedpowerandtransmissionRenewableEnergyCreditsRECsandothercontractsfortheperiodfrom2013through2065undiscountedareasfollowsYearsEndingEstimatedDecember31Pamentsa201326949143720142843057662015290228784201629381252920172970086122018-202215560776512023-2027b14728033462028-2032c2960299462033-2037964101932038-2042458731882043-2047407941352048-206550875081Total4993710668a2013to2019includesestimatedREPrecoveriesfromBonneville.bBonnevilletransmissioncontractexpiresJuly312025.cBonnevilleBlockandSlicecontractexpiresSept302028.dLuckyPeakcontractexpiresSept302038.1.OTHERASSETSSeattleCityCouncilpassedresolutionsauthorizingthedebtfinancingandorregulatorydeferralofcertaincostsinaccordancewithStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.ProgrammaticconservationcostsincurredbytheDepartmentandnotfundedbythirdpartiesandEndangeredSpeciesActcostsaredeferredinaccordancewithStatementNo.62andamortizedover20years.EndangeredSpeciesActcostsareamortizedovertheremaininglicenseperiodseeNote15CommitmentsandContingencies.Environmentalcostsdeferredwillbeexpensedastheyarerecoveredthroughfuturerates.OtherassetswhicharenotcoveredunderStatementNo.62consistofSuburbaninfrastructurelong-termreceivablesareundergroundelectricalinfrastructurecostsforsuburbanjurisdictionswhichwillberecoveredthroughratesfromcustomerswithintherespectivejurisdictionsforaperiodofapproximately25yearsasapprovedbytheSeattleCityCouncil.85 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011In2012additionalexpectedrecoverieswererecordedtothelong-terminterfundreceivablerelatedtoenvironmentalcostscoveredunderGASBStatementNo.49AccountingandFinancialReportingforPollutionRemediationObligationsseeNote14EnvironmentalLiabilitiesoriginallyrecordedin2011.PugetSoundEnergyinterconnectionandsubstationandUnamortizeddebtexpensearebeingamortizedtoexpenseover4to36years.Studiessurveysandinvestigationsaredeferreduntilsuchtimetheyresultinactiveprojectsorwhenitisdeterminednoassetswillresultatwhichtimetheyareexpensed.Long-termcustomerloansreceivableandtheremainingcomponentsofotherassetsarenotamortized.RegulatorydeferredchargesandotherassetsnetatDecember312012and2011consistedofthefollowing20122011RegulatorydeferredchargesConservationcostsnet201081012190543331EndangeredSpeciesActcostsnet24409332584751Environmentalcosts23482500-227004445193128082OtherdeferredchargesandassetsnetSuburbaninfrastructurelong-termreceivables4426934034849849Long-terminterfundreceivableforenvironmentalcosts38423632624879Long-termcustomernotesreceivable102789859915PugetSoundEnergyinterconnectionandsubstation794287893573Studiessurveysandinvestigations912842394496Unamortizeddebtexpense109078779931296Other109428212770026284888950031010TotalOtherAssets28985333424315909212.OTHERLIABILITIESSeattleCityCouncilpassedresolutionsauthorizingregulatorydeferralofcertaincreditsinaccordancewithStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.TheunearnedrevenuefortheRateStabilizationAccountfor2012and2011istheresultofdeferringretailelectricrevenuesandrelatedactivityseeNote3RateStabilizationAccount.PaymentsreceivedfromBonnevillefromanewcontractforqualifiedconservationaugmentationprogramsareamortizedtorevenuesover20yearseffectivein2012.Priorto2012paymentswereamortizedtorevenuesoverthelifeofthe10-yearBonnevillecontractthatexpiredSeptember302011therewerenoreceiptsfromBonnevillerelatedtoconservationaugmentationunderthenew17-yearcontractduring2011.86YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011RegulatorydeferralisappliedtoBonnevilleSlicecontracttrue-upcreditsintheyearinvoicedandrecognizedasrevenueinthefollowingyearseeNote10Long-TermPurchasedPowerExchangesandTransmission.SeattleCityCouncilaffirmedtheDepartmentspracticeofdeferringrecognitionoftheeffectsofreportingthefairvalueofexchangecontractsforratemakingpurposesandmaintainingregulatoryaccountstodefertheaccountingimpactoftheseaccountingadjustmentsinResolutionNo.30942adoptedJanuary162007seeNote10Long-TermPurchasedPowerExchangesandTransmission.Theremainingcomponentsofothercreditsareamortizedtorevenuesasearnedexceptdepositsthatarereturnedtocustomersandcertainotherunearnedrevenueswhichexpireatcontractcompletion.RegulatorycreditsandotherliabilitiesatDecember312012and2011consistedofthefollowingRegulatorycreditsUnearnedrevenueratestabilizationaccount103271427116490367Bonnevilleconservationaugmentation7290101-BonnevilleSlicetrue-upcredit16130181365866Exchangeenergyregulatorydeferredgain284059124805112458605117981038OtherliabilitiesUnearnedcapitalfees102924376650393Customerdepositssundrysales38523862962118Unearnedoperationsandmaintenancerevenues5024721086886Unearnedrevenuesother83031819216401547761312621037Total12793621813060207513.PROVISIONFORINJURIESANDDAMAGESTheDepartmentestablishesliabilitiesforclaimsbasedonestimatesoftheultimateprojectedcostofclaims.EnvironmentalrelatedexpensesarediscussedinNote14EnvironmentalLiabilities.Thelengthoftimeforwhichsuchcostsmustbeestimatedvariesdependingonthenatureoftheclaim.Actualclaimscostsdependonsuchfactorsasinflationchangesindoctrinesoflegalliabilitydamageawardsandspecificincrementalclaimadjustmentexpenses.ClaimsliabilitiesarerecomputedperiodicallyusingactuarialandstatisticaltechniquestoproducecurrentestimateswhichreflectrecentsettlementsclaimfrequencyindustryaveragesCity-widecostallocationsandeconomicandsocialfactors.For2012and2011liabilitiesforlawsuitsclaimsandworkerscompensationwerediscountedoveraperiodof16to19yearsattheCitysaverageannualrateofreturnoninvestmentswhichwas0.784and0.824respectively.Toaddresstheriskforcertainlossesarisingfrompersonalandpropertydamageclaimsbythirdpartiesandforjob-relatedillnessesandinjuriestoemployeestheDepartmentaspartoftheCityofSeattlehasbeenself-insuredformostofitsgeneralliabilityrisksforworkerscompensationandforemployees87 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011healthcarebenefits.AsofDecember312011theCityhadgeneralliabilityinsurancecoverageforlossesovera6.5millionself-insuredretentionperoccurrencewitha40.0millionlimitperoccurrenceandintheaggregate.TheDepartmenthadnosettledclaimsexceedingcoverageinthelastthreeyears.TheCityalsopurchasedanallriskcomprehensivepropertyinsurancepolicythatprovides500.0millioninlimitssubjecttovariousdeductiblelevelsdependingonthetypeofassetandvalueofthebuilding.Thisincludes100.0millioninearthquakeandfloodlimits.Hydroelectricandcertainotherutilityproducingandprocessingprojectsarenotcoveredbythepropertypolicy.TheCityalsopurchasedinsuranceforexcessworkerscompensationfiduciaryandcrimeliabilityinlandmarinetransportationvolunteersandanassortmentofcommercialgeneralliabilitymedicalaccidentaldeathanddismembermentandmiscellaneouspolicies.Bondsarepurchasedforpublicofficialspublicnotariespensionexposuresandspecificprojectsandactivitiesasnecessary.ThechangesintheprovisionforinjuriesanddamagesatDecember312012and2011areasfollows111Beginningunpaidclaimsliability1159674812079458Payments43821752264411Incurredclaims43166651781701Endingunpaidclaimsliability1153123811596748TheprovisionforinjuriesanddamagesincludedincurrentandnoncurrentliabilitiesatDecember312012and2011isasfollows20122011Noncurrentliabilities83871908114936Accountspayableandothercurrentliabilities31440483481812Totalliability115312381159674814.ENVIRONMENTALLIABILITIESEnvironmentalliabilitieswere58.3millionand32.1millionatDecember312012and2011respectively.ThefollowingisabriefdescriptionofthesignificantSuperfundsitesTheHarborIslandSuperfundSiteIn1983theU.S.EnvironmentalProtectionAgencyEPAdesignatedthissiteasafederalSuperfundsite.TheDepartmentandotherentitiesaresharingcostsofinvestigatingcontaminationintheEastWaterwayalongsideHarborIsland.TheDepartmentsinvolvementstemsfromitssaleoftransformerstoacompanyonHarborIsland.TheCityofSeattleisoneoffourpartieswhoareconductingaremedialinvestigationandfeasibilitystudythatwilldelineatecleanupactions.TheDepartmentsultimateliabilityisindeterminate.88YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011TheLowerDuwamishWaterwaySuperfundSiteIn2001theEPAdesignatedthissiteasafederalSuperfundsiteforcontaminatedsediments.TheDepartmentsinvolvementisattributabletoitslandownershiporuseofpropertyalongtheriver.TheCityofSeattleisoneoffourpartieswhosignedanAdministrativeOrderonConsentAOCwiththeEPAandWashingtonStateDepartmentofEcologytoconductaremedialinvestigationfeasibilitystudytoprepareasiteremedy.TheEPAapprovedthefeasibilitystudyinNovember2012.InFebruary2013theEPAissuedtheProposedPlanforcleanupoftheLowerDuwamishWaterwaySuperfundSiteindicatingEPAspreferredalternativecleanupwithanestimatedcostof305million.TheProposedPlanissubjecttopubliccomment.AtthistimethecostofcertainadditionalundefinedrequirementsbytheEPAisunknown.TheDepartmentsultimateliabilityisindeterminate.InNovember2012theEPAissuedgeneralnotificationletterstopartiesinformingthemoftheirpotentialliabilityfortheLowerDuwamishWaterwaycleanup.TheCityandotherthreepartieswhosignedtheAOCwiththeEPAhaveagreedtoinvitesomeofthosepartiestoparticipateinanalternativedisputeresolutionprocesstheallocationprocesstoresolvetheirrespectivesharesofpastandfuturecosts.Thedevelopmentoftheallocationprocessandtheselectionofanallocatorareongoing.TheDepartmenthasagreedtoadministertheallocatorscontract.Partiesparticipatingintheallocationprocesswillsharethecostoftheallocatorandtheprocess.NorthBoeingFieldGeorgetownSteamPlantTheCityKingCountyandBoeinghavesignedanAdministrativeOrderissuedbytheWashingtonStateDepartmentofEcologyEcologyrequiringthemtoinvestigateandpossiblyremovecontaminationinanareathatencompassesNorthBoeingFieldtheDepartmentsGeorgetownSteamPlantandtheKingCountyAirport.ThissitewasalsothesubjectofthelawsuitbroughtbytheCityagainstBoeing.Boeinghasagreedtopay67ofthecostsforEcologysimplementationoftheorder.Theorderrequirescompletionandthenimplementationofaremedialinvestigationfeasibilitystudyworkplan.BoeingandtheCitywilleachpay100ofcostsforremedialactionattheirownfacilities.TheDepartmenthasincludedinitsestimatedliabilitythoseportionsoftheenvironmentalremediationworkthatarecurrentlydeemedtobereasonablyestimable.CostestimatesweredevelopedusingtheexpectedcashflowtechniqueinaccordancewithStatementNo.49oftheGASB.Estimatedoutlayswerebasedoncurrentcostandnoadjustmentsweremadefordiscountingorinflation.Costscenariosweredevelopedthatdefinedaparticularsolutionforagivensite.Scenariosconsideredrelevantpotentialrequirementsandalternativesforremediationofasite.Costswerecalculatedonaweightedaveragethatwasbasedontheprobabilitiesofeachscenariobeingselectedandreflectedcost-sharingagreementsineffect.Inadditioncertainestimateswerederivedfromindependentengineersandconsultants.Theestimatesweremadewiththelatestinformationavailableasnewinformationbecomesavailableestimatesmayvarysignificantlyduetopriceincreasesorreductionstechnologyorapplicablelawsorregulations.TheDepartmentisaggressivelypursuingotherthirdpartiesthatmayhavecontributedtothecontaminationofsuperfundsitesforappropriatecostsharing.TheDepartmentsestimateforrealizedrecoverieswas3.8millionand2.6millionatDecember312012and2011respectivelyprimarilyrepresentinganinterfundreceivablefromSeattlePublicUtilitiesforrecoveryofremediationcostsincurredrelatedtothelowerDuwamishWaterwaysite.TheDepartmentsestimatefornotyetrealizedrecoveriesfromotherpartiesfortheirshareofremediationworkperformedthatpartiallyoffsettheDepartmentsestimatedenvironmentalliabilitieswere0.5millionand0.3millionatDecember312012and2011respectively.AsofDecember312012environmentalcostsof23.5millionwere89 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011deferredfortheinitialcleanupestimateoftheDepartmentsresponsibilityfortheLowerDuwamishWaterwaySuperfundSiteandthesecostswillberecoveredthroughfutureratesinaccordancewithGASBStatementNo.62.ThechangesintheprovisionforenvironmentalliabilitiesatDecember312012and2011areasfollows20122011Beginningenvironmentalliabilitynetofrecoveries3209607035346970Payments64532326746689Incurredenvironmentalliability326611603495789Endingenvironmentalliabilitynetofrecoveries5830399832096070TheprovisionforenvironmentalliabilitiesincludedincurrentandnoncurrentliabilitiesatDecember312012and2011isasfollowsNoncurrentliabilities4515443127227550Accountspayableandothercurrentliabilities131495674868520Endingliability583039983209607015.COMMITMENTSANDCONTINGENCIESOperatingLeasesWhiletheDepartmentownsseveralbuildingsincludingthoseattheSkagitandBoundaryhydroelectricprojectsservicecentersandtheSystemControlCentertheDepartmentleasessomeadministrativeofficespacefromtheCity.SuchleasepaymentstotheCityaremadethroughacentralcostallocationprocesssimilartoallotherpaymentsfortenancyofCityproperty.Thesepaymentsarenotincludedintheoperatingleasestablebelow.TheDepartmentalsoleasescertainofficeequipmentandsmallerfacilitiesforvariouspurposesthroughlong-termoperatingleaseagreements.Expensesunderallleasestotaled1.3millionand1.2millionin2012and2011respectively.MinimumpaymentsundertheoperatingleasesareYearEndingMinimumDecember31Payments20131147984201410393702015105104320169839902017847361Total506974890YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND20112013CapitalProgramThebudgetfortheDepartments2013programforcapitalimprovementconservationanddeferredoperationsandmaintenanceincludingrequiredexpendituresonassetsownedbyothersis237.5million.TheDepartmenthassubstantialcontractualcommitmentsrelatingthereto.Departmentoverheadcostsandotherallocationsassociatedwiththecapitalprogramarenotincludedinthebudgetamount.FederalEnergyRegulatoryCommissionFeesEstimatedFederallanduseandadministrativefeesrelatedtohydroelectriclicensestotal342.3millionthrough2055theseestimatesaresubjecttochange.TheestimatedportionoffeesattributedtotheSkagitandToltlicensesareexcludedafter2025atwhichtimetheircurrentFERClicensesexpire.TheestimatedportionofBoundaryfeesisincludedthrough2055theyearinwhichthenewlicenseissuedbyFERCexpires.ThenewBoundaryFERClicenseandrelatedissuesarediscussedbelow.NewBoundaryLicenseTheDepartmentsFERClicensefortheBoundaryProjectexpiredonSeptember302011andanewlicensewasissuedonMarch202013.Thetermsandconditionsofthenewlicensearecurrentlyunderevaluation.AspartoftheapplicationprocesstheDepartmentnegotiatedasettlementwithexternalpartiessuchasownersofotherhydroelectricprojectsIndiantribesconservationgroupsandothergovernmentagencies.ThesettlementsoughttopreservetheDepartmentsoperationalflexibilityatBoundaryDamwhileprovidingfornaturalresourceprotectionmitigationandenhancementmeasures.IfthelicenseFERCapprovedissignificantlydifferentthanthetermsofthesettlementtheDepartmentandorotherpartiestothesettlementmayrequestarehearingatFERC.UnderthosecircumstancesFERCwoulddeterminethescopeoftherehearingandcouldissueastayoftheentirelicenseorder.AnystayoftheentireorderwoulddelayimplementationoftheorderuntilsuchtimeasFERCconcludesitsproceedings.AlternativelyFERCcoulddeterminethatthescopeofanyrehearingrelatesonlytoissuesindisputeandcouldorderimplementationoftheremainingissuesinthelicenseorder.AsnotedabovethesettlementisunderevaluationbyallpartiesasaresultoftherecentlyissuedFERClicense.Totalapplicationprocesscostsrelatedtothenewlicenseareestimatedat48.9millionofwhich48.6millionhadbeenexpendedanddeferredasofDecember312012.Thenewlicensewillrequireadditionalmitigationeffortsforendangeredspeciesincludingwaterqualitystandards.Thecostprojectionsforsuchmitigationovertheexpected50-yearlifeofthelicenseincludedintheDepartmentslicenseapplicationwereestimatedtobe438.1millionadjustedto2012dollarsofwhich3.5millionwereexpendedthrough2012.Thenewlicensewasissuedwitha42-yearlife.Projectedmitigationcostestimatesaresubjecttorevisionasmoreinformationbecomesavailable.SkagitandSouthForkToltLicensingMitigationandComplianceIn1995theFERCissuedalicenseforoperationoftheSkagithydroelectricfacilitiesthroughApril302025.OnJuly201989theFERClicenseforoperationoftheSouthForkTolthydroelectricfacilitiesthroughJuly192029becameeffective.AsaconditionforbothoftheselicensestheDepartmenthastakenandwillcontinuetotakerequiredmitigatingandcompliancemeasures.TotalSkagitlicensemitigationcostsfromtheeffectivedateuntilexpirationofthefederaloperatinglicensewereestimatedatDecember312012tobe124.5millionofwhich105.9millionhadbeenexpended.TotalSouthForkToltlicensemitigationcostswereestimatedat1.7millionofwhich1.2millionwereexpendedthrough2012.InadditiontothecostslistedforSouthForkToltmitigationthelicenseandassociatedsettlementagreementsrequiredcertainotheractionsrelatedtowildlifestudiesand91 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011wetlandmitigationforwhichnosetdollaramountwaslisted.Requirementsfortheseactionshavebeenmetandnofurtherexpendituresneedtobeincurredfortheseitems.Capitalimprovementotherdeferredcostsandoperationsandmaintenancecostsareincludedintheestimatesrelatedtothesettlementagreementsforbothlicenses.Amountsestimatedareadjustedto2012dollars.Departmentlaborandotheroverheadcostsassociatedwiththeactivitiesrequiredbythesettlementagreementsforthelicensesarenotincludedintheestimates.HydroelectricprojectsmustsatisfytherequirementsoftheEndangeredSpeciesActESAandtheCleanWaterActinordertoobtainaFERClicense.ESAandrelatedissuesarediscussedbelow.EndangeredSpeciesSeveralfishspeciesthatinhabitwaterswherehydroelectricprojectsareownedbytheDepartmentorwheretheDepartmentpurchasespowerhavebeenlistedundertheESAasthreatenedorendangered.AlthoughthespecieswerelistedafterFERClicenseswereissuedforalloftheDepartmentshydroelectricprojectstheESAlistingsstillaffectoperationsoftheDepartmentsBoundarySkagitToltandCedarFallshydroelectricprojects.FederalRegulationsinresponsetothelistingofspeciesaffectflowintheentireColumbiaRiversystem.AsaresultoftheseregulationstheDepartmentspowergenerationatitsBoundaryProjectisreducedinthefallandwinterwhentheregionexperiencesitshighestsustainedenergydemand.TheBoundaryProjectsfirmcapabilityisalsoreduced.TheDepartmentwiththesupportofCityCouncilelectedtotakeaproactiveapproachtoaddressissuesidentifiedwithintheESA.TheDepartmentiscarryingoutanESAEarlyActionprogramincooperationwithagenciestribeslocalgovernmentsandwatershedgroupsforbulltroutChinooksalmonandsteelheadintheSouthForkToltandSkagitWatersheds.TheESAEarlyActionprogramisauthorizedbyCityCouncilbutisseparatefromanycurrentFERClicenserequirements.Theprogramincludeshabitatacquisitionmanagementandrestoration.TheESAEarlyActionhasbeensuccessfulinprotectinglistedspecies.TotalcostsfortheDepartmentsshareoftheEarlyActionprogramfrominceptionin1999throughDecember312012areestimatedtobe6.9millionand0.8millionhasbeenallocatedfortheprograminthe2013budget.ProjectImpactPaymentsEffectiveAugust2010theDepartmentreneweditscontractwithPendOreilleCountyandcommittedtopayatotalof19.0millionover10yearsendingin2019toPendOreilleCountyforimpactsoncountygovernmentsfromtheoperationsoftheDepartmentshydroelectricprojects.EffectiveFebruary2009theDepartmentreneweditscontractwithWhatcomCountycommittingtopayatotalof15.8millionover15yearsendingin2023.Thepaymentscompensatethecountiesandcertainschooldistrictsandtownslocatedinthesecountiesforlossofrevenuesandadditionalfinancialburdensassociatedwiththeprojects.TheBoundaryProjectlocatedonthePendOreilleRiveraffectsPendOreilleCountyandSkagitRiverhydroelectricprojectsaffectWhatcomCounty.Theimpactpaymentstotaled1.6millionand1.6milliontoPendOreilleCountyand1.0millionand0.9milliontoWhatcomCountyin2012and2011respectively.EnergyCrisisRefundLitigationTheCityisinvolvedinvariouslegalproceedingsrelatingtotheenormousspikesinenergypricesinCaliforniaandtherestoftheWestCoastin2000and2001.CaliforniaRefundCaseAppealsandRelatedLitigationIntheproceedingbeforetheFederalEnergyRegulatoryCommissionFERCvariouspublicandprivateCaliforniaentitiesthe92YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011CaliforniaPartiessoughtrefundsinmarketsthathadbeencreatedbytheStateofCalifornia.TheDepartmenthadsoldenergyinoneofthesemarkets.InFebruary2011theCityagreedtoasettlementwhichwasapprovedbythetrialcourtandFERC.UnderthesettlementtheDepartmentresolvedthismatterfor9.0millionnoneofwhichneededtobeimmediatelypaidbytheDepartment.AspartofthesettlementtheDepartmenthasassigneditsaccountsreceivablefromtheCaliforniaIndependentSystemsOperatortotheCaliforniaPartieswhichwasvaluedatapproximately1.4millionatthetimeofthesettlementagreement.Thebalanceofover7.6millioniscontingentupontheDepartmentrecoveringmoniesinthePacificNorthwestRefundCasediscussedbelow.TodatetheDepartmenthasreceived1.8millioninpaymentsinthePacificNorthwestRefundCasehalfofwhichhasbeenpaidtotheCaliforniapartiespursuanttothesettlement.PacificNorthwestRefundCaseandAppealIntheproceedingbeforeFERCvariousbuyersofenergyincludingtheCitysoughtrefundsonenergytransactionsinthePacificNorthwestbetweenMay2000andJune2001.TheDepartmentsclaimscurrentlyareinexcessof100.0million.In2003FERCdeclinedtograntrefundsonthegroundsthattherewasnoequitablewaytodoso.TheCityandotherpartiesappealedtotheNinthCircuit.InAugust2007theNinthCircuitheldthatFERChadabuseditsdiscretionindenyingallrefundreliefinthePacificNorthwestandremandedthecasetoFERCforfurtherproceedings.InDecember2007variousbuyersofenergyfiledpetitionsforrehearingintheNinthCircuit.OnApril92009theNinthCircuitdeniedthosepetitionsforrehearing.OnApril162009theNinthCircuitissuedthemandateremandingthecasetoFERC.OnSeptember42009thesellersfiledaPetitionforaWritofCertiorariintheUnitedStatesSupremeCourt.ThatpetitionwasdeniedonJanuary112010.OnremandFERChasorderedasettlementprocessandhasencouragedthepartiestoengageinsettlementdiscussions.TheDepartmenthasengagedinsettlementdiscussionswithvariousentitiesfromwhichitpurchasedpowerduring2000and2001.Thesediscussionshaveresultedinsettlementagreementswith12entitieswithacombinedsettlementamountof2.5million.Asdiscussedabovetodate1.8millionofthisamounthasbeenreceivedbytheDepartment.OtherContingenciesInadditiontothosenotedaboveinthenormalcourseofbusinesstheDepartmenthasvariousotherlegalclaimsandcontingentmattersoutstanding.TheDepartmentbelievesthatanyultimateliabilityarisingfromtheseactionswillnothaveamaterialadverseimpactontheDepartmentsfinancialpositionoperationsorcashflows.16.SUBSEQUENTEVENTSFairValueofPooledInvestmentsTheFederalOpenMarketCommitteeFOMCoftheFederalReserveBoardlastmetonMarch202013.TheFOMCleftitstargetrangeforFederalFundsunchangedat0to0.25andreneweditscommitmenttocontinueitspurchaseprogramof40.0billionpermonthofagencymortgage-backedsecuritiesand45.0billionpermonthoflonger-termU.S.Treasurysecurities.TheFederalReserveBoardhasstateditwillcontinueitspurchaseprogramuntiltheoutlookforthelabormarketimprovessubstantially.ThetargetrangefortheFederalReserveBoardFundsratehasnotchangedsinceitwasfirstestablishedDecember162008duringthefinancialcrisis.InterestratechangesremainsensitivetoeconomicriskfromEurope.FairvalueoftheCityspooledinvestmentsfluctuateswithchangesininterestrates.Itismostsensitivetochangesininterestratesbetweenthe2-to5-yearmaturitiesoftheyieldcurveforU.S.Treasurysecurities.TheCitytypicallyholdsitsinvestmentstomaturity.Interestrateshaverisenslightlyalongthe93 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312012AND2011yieldcurvesincetheendof2012.HoweverthenetchangeinthefairvalueoftheCitysPooledinvestmentsandthustheDepartmentsshareinthePooledinvestmentshasnotbeensignificantthroughtheendofthefirstquarter2013duetotheshort-termdurationoftheinvestmentsandhasalsobeenmitigatedbyinvestmentsbeingheldtomaturity.94YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTREQUIREDSUPPLEMENTARYINFORMATIONUNAUDITEDREQUIREDSUPPLEMENTARYINFORMATIONUNAUDITEDSchedulesofFundingProgressSCERS.ThescheduleoffundingprogressforSCERSispresentedbelowforthemostrecentactuarialvaluationandthetwoprecedingvaluationsforwhichtheDepartmenthasavailabledatadollaramountsinmillionsUAALorActuarialExcessasaActuarialActuarialAccruedUnfundedPercentaeValuationValueofLiabilitiesAALFundinCoveredofCoveredDateAssetsAALaUAALbRatioPayrollcPayrollJanuar1ABB-AABCB-AC20101645.32653.81008.562.0580.9173.620112013.72709.0695.474.3563.2123.520121954.32859.3905.068.3557.0162.5aActuarialpresentvalueofbenefitslessactuarialpresentvalueoffuturenormalcostsbasedonentryageactuarialcostmethod.bActuarialaccruedliabilitieslessactuarialvalueofassetsfundingexcessifnegative.cCoveredpayrollincludescompensationpaidtoallactiveemployeesonwhichcontributionsweremadeintheyearprecedingthevaluationdate.OPEB.Thescheduleoffundingprogressfortheotherpost-employmentbenefithealthcareplansispresentedbelowforthemostrecentactuarialvaluationandthetwoprecedingvaluationsforwhichtheDepartmenthasavailabledatadollaramountsinmillionsctuaraAccruedUAALasaActuarialActuarialLiabilitiesUnfundedPercentaeValuationValueofAALAALFundinCoveredofCoveredDateAssetsEntrAeUAALRatioParollParollJanuar1ABB-AABCB-AC2010-93.593.5-869.110.82011a-99.499.4-866.211.52012-74.774.7-891.68.4aThe2011disclosureinformationisbasedonarollforwardoftheJanuary12010valuation.95 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDOTHERINFORMATIONUNAUDITEDDEBTSERVICECOVERAGEFollowingisatablethatprovidesinformationfortheDepartmentsdebtservicecoverageforyears20122011and2010.Thetargetlevelfordebtservicecoveragewas1.8xonallbondsfor20122011and2010inaccordancewithcurrentfinancialpolicieswhichincludeaRatestabilizationaccountthatwillresultingreatercomplianceofactualdebtservicecoveragewiththepolicy-specifiedlevel.DebtServiceCoverage201220112010RevenuesTotaloperatingrevenues800273311772157282733177387AdjustmentsValuationofexchangepowerrevenues125310421695966633034404BPAconservationaugmentationrevenue186926143019456043110Investmentincomea439041155817083846132Proceedsgainonsaleofpropertyb17322042221280959Principalreceiptsfromsuburbaninfrastructurereceivables543068415429-OtherincomeexpensenetexcludingCIACg257555745160543477351Totalrevenues795237599751831074701504315ExpensesOperationandmaintenance492280614492972067515162963AdjustmentsFERClandusefeesadjustmentc-11298021909474Amortizationanddepreciationchargedtooperationsd215180822094330117388862Valuationofexchangepowerpurchases127707141714969633103126Non-cashwrite-offs1341237812578387247Baddebtexpensee-8179600-Netnon-cashclaims148723536288836823203Subtotal455163346448385973459369999TaxesexcludingCityTaxesf339350193358270931721855Totalexpenses489098365481968682491091854Revenueavailablefordebtservice306139234269862392210412461DebtserviceParityg169123664146688179118371944Totaldebtservice169123664146688179118371944Debtservicecoverageratio1.811.841.78December31aExcludesGASB31adjustmentsforfairmarketvalueinvestments.bMethodologychangeeffectivein2011tousesalesproceeds2010andprioryearsusedgainonsales.cNon-cashadjustmentdueto2011favorablecourtdecisionregardingFERCfees.Neteffectfor2010wasnon-cashreductionofexpenses.Neteffectfor2011wasanon-cashexpense.dExcludesamortizationofbondissuecosts.eOnetimeadjustmentduetomoreconservativemethodologychangeinallowanceforbaddebts.fCitytaxestakeajuniorlientodebtservice.gMethodologychangeeffectivein2012toreportdebtservicenetoffederalbondsubsidiesrevenueforfederaldebtsubsidiesalsoexcludedfromOtherincomeexpensenetexcludingCIAC.96YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDDEBTSERVICECOVERAGEALLBONDSYearEndinRevenueAvailableDebtServiceDebtServiceDecember31forDebtServiceRequirementsCoveragea20123061392341691236641.8120112698623921466881791.8420102104124611183719441.7820091996953311448642381.3820082786373921356780992.05a2009debtservicerequirementsexclude72.0millioninvariableratebondsrepaidinFebruary2009from2008bondproceeds.97 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDINTERESTREQUIREMENTSANDPRINCIPALREDEMPTIONONLONG-TERMDEBTYearEndinDecember31PrincipalInterestTotala2013918400008644749817828749820149664500082172623178817623201598915000773447941762597942016974550007240997516986497520179847500067503500165978500201898915000628242751617392752019955050005804087515354587520209475000053242775147992775202194125000486848991428098992022929350004397755113691255120239407500039250354133325354202496545000343570921309020922025826450002945186311209686320267834500025392666103737666202751740000220030957374309520285300500019358445723634452029458050001691587962720879203027600000149632394256323920312856500013575066421400662032295800001213326941713269203330625000106370094126200920343187000090711834094118320353330000074273164072731620363479000057096744049967420372123000043118542554185420382205000032515742530157420392290000021507112505071120402374500010074772475247720411062500021250010837500Total17786000009238290312702429031aMaximumdebtserviceof178817623isduein2014.SeeNote7Long-termdebt.98YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDSTATEMENTOFLONG-TERMDEBTAsofDecember312012AmountDueInterestAmountAmountWithinAccruedBondSeriesWhenDueRateIssuedOutstandinOneYearInterestSeres20032006-20135.000959750004410000441000036750eres-5.5575757555Seres20042019-20214.5005300500045555000854156Seres20042022-20235.0003162000026065000543021Seres20042024-20255.2501731500011180000244563eres-.575Seres20082010-20145.000652150002984000014500000373000Seres200820155.2501633500016335000214397Seres20082016-20185.0003666000036660000458250Series20082019-20205.2502058000020580000270113Series20082021-20225.5002136500021365000293769Series200820235.7501081000010810000155394Series20082024-20256.0002364000023640000354600Series20082026-20295.7505641000056410000810894Series2010A2011-20214.4474570000457000084678Series2010A20224.59772350007235000138580Series2010A20234.74774600007460000147553Series2010A20244.94776950007695000158613Series2010A20255.04779500007950000167182Series2010A20265.14782200008220000176285Series2010A20275.24785000008500000185831Series2010A2028-20305.4702737500027375000623922Series2010A2031-20405.5701026200001026200002381639Series2010B20133.000100000001000000010000000125000Series2010B20134.000318800003188000031880000531333Series2010B20143.0003190000319000039875Series2010B20145.0004054000040540000844583Series2010B20153.0001385000138500017313Series2010B20155.0004384000043840000913333Series2010B20164.0001000000010000000166667Series2010B20165.0003825500038255000796979Series2010B20174.0004405000440500073417Series2010B20175.0004626500046265000963854Series2010B20184.0005000000500000083333Series2010B20185.0003881500038815000808646Series2010B20194.0001500000150000025000Series2010B20195.0004265500042655000888646Series2010B20204.0002575000257500042917Series2010B20205.0004385000043850000913542Series2010B2021-20265.0001878650001878650003913854Series2010C2011-20405.5901327500013275000309197Series2011A2013-20275.00017703500017703500045550003688229Series2011A20285.25093800009380000205188Series2011A2029-20305.5002036000020360000466583Series2011A2031-20365.25075805000758050001658234Series2011B20275.7501000000010000000239583Series2012A20132.0003770000377000037700006283Series2012A20143.0004755000475500011888Series2012A2015-20275.000198120000198120000825500Series2012A20283.250124200001242000033638Series2012A2034-20364.000250900002509000083633Series2012A2037-20414.0004912500049125000163750Series2012B20130.5004430000443000044300001846Series2012B20140.700478000047800002788Series2012C20283.4004290000429000012155Series2012C20293.5007655000765500022327Series2012C20303.5007690000769000022429Series2012C2031-20333.750233650002336500073016Total19536850001778600000918400002951640999 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDPOWERCOSTSANDSTATISTICSYearendinDecember3120122011201020092008POWERCOSTSHydroelectricgenerationac4575856243286202355923944158775840724233Long-termpurchasedpowerb204132511206852712223590510202003062181689089Wholesalepowerpurchasesce1295458711560531274613153052501874712575Fairvaluationpowerpurchasesbe66152498896318221439852171984772379036Ownedtransmissiona1449776912419411110360941279049912114542Wheelingexpenses3648766738923691385388493810912140300976Otherpowerexpenses10282444102010891019735084386559289203Totalpowercosts330728789332139954368560497355173960431209654Lessshort-termwholesalepowersalesc704024691026631267453464488650460169048552Lessotherpower-relatedrevenues1677377437736358335397863665198360274847Lessfairvaluationotherpower-relatedb1253104216959666330344043013006182224825Netpowercosts231021504174780804227451663199741456119661430POWERSTATISTICSMWhHydroelectricgenerationc69470887546905550919158783826298724Long-termpurchasedpowerb72823357909886689422268412957241422Wholesalepowerpurchasesc2592354169686115502249953111158037Wholesalepowersalesc56250886053258333487229759903731710Otherd1180220978783753389599100642558Totalpoweravailable100164691012161198653761013989810323915Lessselfconsumedenerg3107232752307263366334478Lesssystemlosses518755488627463654412811580977Totalpowerdeliveredtoretailcustomers94666429600232937099696934249708460NetpowercostperMWhdelivered24.4018.2124.2720.6112.33aIncludingdepreciation.bLong-termpurchasedpowerfairvaluationpowerpurchasesandfairvaluationotherpower-relatedincludeenergyexchangedunderseasonalandotherexchangecontractsvaluedatmarketinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.cThelevelofgenerationandconsequentlytheamountofpowerpurchasedandsoldonthewholesalemarketcanfluctuatewidelyfromyeartoyeardependinguponwaterconditionsintheNorthwestregion.dOtherincludesseasonalexchangepowerdeliveredandmiscellaneouspowertransactions.eBookoutpurchasesareexcludedfromwholesalepowerpurchasesandarereportedonanetbasisinwholesalepowersales.100YOURSEATTLECITYLIGHTANNUALREPORT2012 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDHISTORICALENERGYRESOURCESinMWh20102009h2008Department-OwnedGenerationBoundaryProject38022514499134316135136098113838600SkagitHydroelectricProjectGorge10813491094529871686840294916818Diablo937646920969720244691542756342Ross939943870310647899621588658536CedarFallsNewhalem122615111959699487955788070SouthForkTolt6328450004540105076757439Subtotal69470887546905552513858935596315805EnergyPurchasesBonneville56339066214839524230154052155719007PriestRapidsa36381322851682513298923195GCPHAb255569237785240787259987259794HighRoss308365313817307390312878310257LuckyPeak401400388786285757323218310775StatelineWindProject365192413697348524352525432058ColumbiaRidgec4977950120509551398-SeasonalandOtherExchanged100782276656278885353444288772WholesaleMarketPurchasese2592354169686115502249953111158037Subtotal97437289624846847307480369658501895TotalDepartmentResources1669081617171751139982121393052414817700MinusOffsettingEnergySalesFirmEnergySalesandMarketingLossesf557279520394421627435693360750SeasonalandOtherExchanged491980476488376337378943401325WholesaleMarketSalesg56250886053258333487229759903731710TotalNetEnergyResources100164691012161198653761013989810323915aCityLightmadeanelectionfor2010and2011topurchasetheenergyinsteadofresellingatauction.bGrandCouleeProjectHydroelectricAuthority.cTheColumbiaRidgecontractcommencedDecember2009.dIncludesexchangecontractswiththeNorthernCaliforniaPowerAuthorityNCPASacramentoMunicipalUtilityDistrictSMUDandtheLuckyPeakProject.ePurchasestocompensateforlowwaterconditionsandtobalanceloadsandresources.fEnergyprovidedtoPublicUtilityDistrictofPendOreilleCountyundertheBoundaryProjectsFERClicenseandincludeincrementallossesduetoexpandedactivityinthewholesalemarket.gRunoffwas121ofhistoricalaveragein2012and133ofhistoricalaveragein2011.hCertain2009amountshavebeenrevisedfrompreliminarytoactual.20122011101 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDCUSTOMERSTATISTICSYearendedDecember3120122011201020092008AveragenumberofcustomersResidential362658360442359079355097348110Non-residential3995039909397793963439605Total402608400351398858394731387715Megawatt-hoursaResidential333098745343217101333073405333187365333219951Non-residential676367897666383131676297591676506059676488509Total10094666421009600232100937099610096934241009708460AverageannualrevenuepercustomeraResidential664679635569585Non-residential1060310306996286558695YearendedDecember3120122011201020092008AverageannualconsumptionpercustomerkWhsabResidential-Seattle85458925855989769250-Nationalna11279115001090011045Non-residential-Seattle159397159942158314164155163833-Nationalna126703125325121856128311Averagerateperkilowatt-hourcentsabResidential-Seattle7.777.617.426.346.32-National11.8811.7211.5411.5111.26Non-residential-Seattle6.656.446.295.275.31-National8.678.788.758.798.85aSourceofnationaldataDepartmentofEnergywww.eia.doe.govcneafelectricityepaepa_sum.htmlwww.eia.doe.govcneafelectricityepmepm_sum.html.2012Nationalaverageannualconsumptiondatanotavailable2012Nationalaverageratedataispreliminary2011Nationalaverageannualconsumptiondataadded2011Nationalaverageratedataupdated.bSeattleamountsincludeanallocationforthenetchangeinunbilledrevenue.NOTEThemostrecentcomprehensiveratechangewas4.4effectiveJanuary12013.AlsoeffectiveonJanuary12012wasarateincreaseof3.2.RatesaresetbytheSeattleCityCouncil.NoticeofpublichearingsonfuturerateactionsmaybeobtainedonrequesttoTheOfficeoftheCityClerk600-4thAveFloorThreeSeattleWA98104.AdditionalinformationaboutCouncilmeetingscanbefoundontheWebatwww.seattle.govcouncilcalendar.102YOURSEATTLECITYLIGHTANNUALREPORT2012 FinancialinmillionsTotaloperatingrevenuesTotaloperatingexpensesOperatingincomeInvestmentincomeInterestexpensenetCapitalcontributionsandgrantsNoncapitalgrantsOtherincomenetChangeinnetpositionDebtservicecoverageratioallbonds2012800.3662.0138.35.277.231.82.84.7105.61.81x2011772.2655.4116.84.976.040.91.44.292.21.84xChange3.61.018.46.11.622.2100.011.914.51.6EnergyTotalgenerationCityLight-ownedgenerationFirmenergyloadPeakloadhighestsinglehourlyuseAveragenumberofresidentialandnon-residentialcustomersAnnualaverageresidentialandnon-residentialenergyconsumptionincludesestimatedunbilledrevenueallocationLong-termPowerPurchasesCustomerServiceConservationShort-termWholesaleOtherPowerGenerationTransmissionAdministrativeGeneralDepreciationTaxesDistributionMWhMegawatthoursMWMegawattskWhKilowatthours20126947088MWh10016469MWh1797MWJanuary182012402608167942kWh20117546905MWh10121611MWh1739MWJanuary112011400351168867kWhChange7.91.03.30.60.5HIGHLIGHTSUnaudited2012OPERATINGREVENUES2012OPERATINGEXPENSESinmillions800.3inmillions662.0113114983029.832.347.060.952.166.1423.6Non-residentialShort-termWholesalePowerOtherResidential70.465.6240.75374.9204.194.85579810103 YearsendedDecember31BALANCESHEETSAAssetsUtilityplantnetBRestrictedassetsCurrentassetsCOtherassetsBTotalassetsLiabilitiesNetPositionLong-termdebtnetNoncurrentliabilitiesDCurrentliabilitiesCDOtherliabilitiesCENetpositionTotalliabilitiesnetpositionSTATEMENTSOFREVENUESANDEXPENSESAOperatingRevenuesResidentialNon-residentialUnbilledrevenue-netchangeTotalretailpowerrevenuesShort-termwholesalepowerrevenuesOtherpower-relatedrevenuesTransfersfromtoratestabilizationaccountEOtherrevenuesTotaloperatingrevenuesOperatingExpensesLong-termpurchasedpowerShort-termwholesalepowerpurchasesOtherpowerexpensesGenerationTransmissionDistributionCustomerserviceConservationAdministrativeandgeneralDTaxesDepreciationandamortizationTotaloperatingexpensesOperatingincomeNoncapitalgrantsOtherincomeexpensenetInvestmentincomeTotaloperatingandotherincomeInterestExpenseInterestexpenseAmortizationofdebtexpenseInterestchargedtoconstructionNetinterestexpenseCapitalContributionsandGrantsChangeinnetposition2012235219579627569671632351048628985333532412563331761511072747947642246062601279362181052408019324125633124306824542206185686758066426252070402469293048161321894023084565800273311204132511117638071808847332288838469792586085488331296064207627106611407074885034948104336619760801382972302837911464782952170441510000148509182643919333524357771755373180286310562734020112200309680209187449326816912243159092297947313316405562535584636620568776113060207594678067829794731332420918714113407462551030655983647102663126546960246222474021039225772157282206852712114325101922542829297226478775735831134043119817191280135772744873613159888054776553907031167665791397506415711749443901272655928420997938931164279648760372154092743692155813201020731059481402011732349912042214854522669783777151583479155034256166474305778155608546248652669783777223081698392064686923786962438425374534644665741905426562721949927733177387223590510244843953528825522521473461362805636972936136821167937105384179170380947863685856719124966126489129697212216513268986769140992745139044219887514471465149303263795313037122020091955519016316398501867799562026006712376539493129934932149677868174532295287263648242536452376539493202753993342342372144855451108508865046066782044-22584687723128041202003062245706433611287728621886470740845700544135661790169208307321719862274653806932846641557485897229316955079840402612978622967387294500024404243833222715522024341346234157998200818036429852670191382231310801919053922485698595144457424239142190181149971307365457900956472485698595202068446345251867563850547884163169048552142499672-179602658773926521816890895250089310387992127977551487902196069936033401909156535786614088561904156780552817306928421466998102307945205377595620115475857964300015200729332129266309438239926457131590654FINANCIALSUMMARYUnauditedAEffectiveJanuary12012theDepartmentadoptedStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.DescriptionsoftheDepartmentsaccountingpoliciesonfairvaluemeasurementsforitemsreportedonthebalancesheetatDecember312012and2011areinthenotestothefinancialstatementsasfollowsNote1OperationsandSummaryofSignificantAccountingPoliciesparagraphNote5AccountsReceivableandNote10Long-TermPurchasedPowerExchangesandTransmission.BEffectiveJanuary12010theDepartmentadoptedGASBStatementNo.51AccountingandFinancialReportingforIntangibleAssets.AsaresultcertainassetspreviouslyrecordedasOtherAssetsmetthecriteriaforintangibleassetsandhavebeenreclassifiedtoUtilityPlantalongwithrelatedaccumulatedamortization.Accordinglysuchcostsinthebalancesheetsfor2009and2008havebeenreclassifiedtoconformwiththe2010presentation.SeeNote2UtilityPlantonpage60oftheauditedfinancialstatements.CEffectiveJanuary12009theDepartmentimplementedGASBStatementNo.53AccountingandFinancialReportingforDerivativeInstruments.Accordinglyadjustmentstothe2008balancesheetwereasfollowscurrentassetsenergycontractsatfairvaluedecreased6.6millioncurrentliabilitiesenergycontractsatfairvaluedecreased0.2millionandotherliabilitiesdecreased6.4million.SeeNote6Short-TermEnergyContractsDerivativeInstrumentsonpage69oftheauditedfinancialstatements.DEffectiveJanuary12008theDepartmentimplementedGASBStatementNo.49AccountingandFinancialReportingforPollutionRemediationObligationstoaccountforenvironmentalliabilities.SeeNote14EnvironmentalLiabilitiesonpage89oftheauditedfinancialstatementsforfurtherdetails.EDuring2010aRateStabilizationAccountRSAwasfundedinaccordancewithOrdinanceNo.123260.TheRSAwasestablishedtoreducetheneedforrapidandsubstantialrateincreasessolelytocomplywiththeDepartmentsbondcovenants.SeeNote3RateStabilizationAccountonpage62oftheauditedfinancialstatements.NoteCertainother2011and2010accountbalanceshavebeenreclassifiedtoconformtothe2012presentation.104YOURSEATTLECITYLIGHTANNUALREPORT2012 LONG-TERMDEBTUnaudited20083500inmillionsLONGTERMDEBTANDTOTALASSETS3000250020001500100050002009201020112012timescoveredDEBTSERVICECOVERAGE2.252.051.381.781.841.812.001.751.501.2520082009201020112012Long-termdebtTotalassetsDebtservicecoverageAllbonds105 CUSTOMERSTATISTICSUnaudited20082009201020112012AVERAGEANNUALRESIDENTIALCONSUMPTION12inthousandsofkilowatthoursSeattle9630National20082009201020112012AVERAGERESIDENTIALRATES121086024SeattleNational20082009201020112012AVERAGEANNUALNONRESIDENTIALCONSUMPTION200150100500SeattleNational20082009201020112012AVERAGENONRESIDENTIALRATESincentsperkilowatthour1086024SeattleNationalNoteSourceofnationaldataDepartmentofEnergywww.eia.doe.govcneafelectricityepaepa_sum.htmlwww.eia.doe.govcneafelectricityepmepm_sum.html.2012nationalaverageannualconsumptiondatanotavailable2012nationalaverageratedataispreliminary2011nationalaverageannualconsumptiondataadded2011nationalaverageratedataupdated.2008KilowatthoursusedinbillionsNumberofcustomersinthousands20092010201120123.253.153.05364360356352348344340AveragecustomersKilowatthoursusedRESIDENTIALCONSUMPTION20082009201020112012KilowatthoursusedinbillionsNumberofcustomersinthousands6.556.506.456.406.356.306.254039AveragecustomersKilowatthoursusedNON-RESIDENTIALCONSUMPTIONincentsperkilowatthourinthousandsofkilowatthours106YOURSEATTLECITYLIGHTANNUALREPORT2012 POWERUnaudited2012SOURCESOFPOWER2012USESOFPOWERGENERATEDBoundarySkagitCedarFallsSouthForkToltTREATYPURCHASEDBPAOtherBCHydroSERVICESNonResidentialResidentialOTHERWholesaleotherSeattleCityLightoperationsandlossesinpercentmegawatthoursinpercentmegawatthours40.221.122.52.31.445.35.326.97.927.1107 CHANGESINOWNEDTOTALGENERATINGINSTALLEDCAPABILITYUnauditedTOTALGENERATIONANDLONG-TERMPURCHASEDPOWERCONTRACTSVS.FIRMENERGYLOADUnauditedSYSTEMREQUIREMENTSUnauditedYear1904-0919121914-21192119211924-291929193219321936-37195119511952-56195819611967196719721980198619871989-921990199319952000Year195019551960196519701975198019851990199519961997199819992000200120022003200420052006200720082009201020112012KilowattsPeakLoadE312000733000889000113800013830001429387177155018063412059566174865719506671816152192885417299331769440166184216896661645998179892617140801822342176780519008781858735184125517392381796728KilowattsAverageLoad15403038151751278763527580681384880596368610258981088077107269211101331111035112017811423821142383108206810875191087901108844811076541140466116477311753091157523112618411554351140308PlantCedarFallsHydroUnits1234LakeUnionHydroUnit10LakeUnionSteamUnits111213NewhalemHydroUnit20CedarFallsHydroUnit5GorgeHydroUnits212223CedarFallsHydroUnit6CedarFallsHydroUnits1234LakeUnionHydroUnit10DiabloHydroUnits31323536GeorgetownSteamUnits123GorgeHydroUnit24RossHydroUnits41424344DiabloPlantModernizationGorgeHydroHighDamGeorgetownPlantperformancetestgainBoundaryHydroUnits51525354CentraliaUnits12GeorgetownSteamUnits123BoundaryHydroUnits5556LakeUnionSteamUnits111213GorgeUnits212223newrunnersGorgeUnit24generatorrewindCentraliaTransmissionUpgradeSouthForkToltUnit81CentraliaUnits12KilowattsAddedA10400150040000200015000600001500010400150018240021000480004500002700067000200063980010240023000400000400003660032000500016800107400CCCCDCapabilityBTotalKilowatts104001190051900539006890012890014390013350013200031440033540038340083340086040092740092940015692001671600164860020486002008600204520020772002082200209900019916001600000014000000120000001000000080000006000000400000002000000200820072006200520042003Long-termpurchasedpowercontractsTotalgenerationFirmenergyload2009201020112012ACertainhistoricalcapabilitieswererevisedduetovalidationandtesting.BCapabilityisthemaximumcapabilityofgeneratorsandassociatedprimemoversexpressedinkilowattskW.CRetirementofunitsdecreaseintotalcapability.DTheDepartmentsownershipinterestoftheCentraliaSteamPlantwassoldinMay2000.EPeakLoadhighestsinglehourlyuse.megawatthours108YOURSEATTLECITYLIGHTANNUALREPORT2012 TAXESANDCONTRIBUTIONSBYSEATTLECITYLIGHTTOTHECOSTOFGOVERNMENTUnauditedTAXESANDCONTRIBUTIONSTOTHECOSTOFGOVERNMENTYearsendedDecember31TaxesCityofSeattleoccupationutilitytaxStatepublicutilityandbusinesstaxesSuburbancontractpaymentsandotherContractpaymentsforgovernmentservicesTotaltaxesasshowninstatementofrevenuesandexpensesTaxeslicenseschargedtoaccountsotherthantaxesOthercontributionstothecostofgovernmentATotalmiscellaneoustaxesTotaltaxesandcontributionsNoteElectricratesincludealltaxes.TheStatePublicUtilityTaxrateforretailelectricpowersaleswas3.8734.TheCityofSeattleOccupationUtilityTaxratewas6forin-stateretailelectricpowersales.AAfavorablecourtdecisioninearly2011ruledthat2009FERClandusefeeswereoverpaidby3million.Thisoverpaymentwasaccruedandappliedagainstthe2010costs.2012409284692555510052543273147138748850341375424110900187246544289953946220114000842225021917553405630487647361315913922057758984821511905951250642010386491742418217649969922552605703809471304569837174071676310587144052200933664082214100994164182303629062274653130396459278991223186368459328920083384244421474031394630126413806190415612956941683959819796539817006952008105inmillions90756045301502009201020112012CityofSeattleoccupationutilitytaxStatepublicutilityandbusinesstaxesOthertaxesandcontributionstogovernment109 PUBLICPURPOSEEXPENDITURESUnauditedANNUALENERGYSAVEDTHROUGHCONSERVATIONAProgrammaticconservationexpendituresaredeferredandamortizedovera20-yearperiodinaccordancewithCityCouncil-passedresolutionsandStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.Non-lowincomeprogrammaticconservationincludesexpendituresforprogrammeasurescustomerincentivesfieldstaffsalariesenergycodeenforcementanddirectprogramadministration.Low-incomeprogrammaticconservationincludesthesetypesofexpendituresfortheDepartmentsHomeWiseandLow-IncomeMultifamilyProgramsBNon-programmaticexpendituresincludeprogramplanningevaluationdataprocessingandgeneraladministration.Theseexpensesarenotassociatedwithmeasuredenergysavings.CLow-incomeassistanceincludesratediscountsandotherprogramsthatprovideassistancetolowincomecustomers.DNon-hydrorenewableresourcesincludepowergeneratedfromtheBurlingtonBiomassColumbiaRidgeBiogasandStatelineWindProjectwhicharefundedfromcurrentrevenues.KingCountyWestPointCogenPlantMetroCoGenerationgeneratedthetestpowerforMWhwithoutanychargefor2012.YearsendedDecember31CONSERVATIONProgrammaticconservationexpensesANon-lowincomeLowincomeNon-programmaticconservationexpensesBSubtotalOTHERPUBLICPURPOSEEXPENDITURESLow-incomeenergyassistanceCNon-hydrorenewableresourcesDSubtotalNETPUBLICPURPOSESPENDINGRevenuefromretailelectricsalesPERCENTPUBLICPURPOSESPENDINGTORETAILELECTRICSALESConservationonlyLow-incomeassistancenon-hydrorenewablesTotalAnnualenergysavingsmegawatthoursE201221908366179196661179782981831081454202870805936853479666717896642625214.55.510.0128288201124019842303489756175573267229687402892690825135648540683208366559594565.05.410.4126196201028745475179549339835863452455480887932390073131989524665140786241936425.55.110.6141581200922599797184692058281573027487466889632000513926694102569689765451108505.64.910.5102693200817536068173265653341952460291963106512357867429889325544922445478841634.55.510.097762140000160000120000100000800006000040000200000megawatthours20082009201020112012110YOURSEATTLECITYLIGHTANNUALREPORT2012 700FifthAvenueSuite3200POBox34023SeattleWA98124-4023www.seattle.govlight