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FromtheGeneralManagerandChiefExecutiveOfcerReectingonthelast10yearsatSeattleCityLightIcantbelievehowfasttimehasgonebyorhowfarwehavecometogether.Itstrulyanhonortoleadthisorganization.TodaySeattleCityLightisanorganizationthatisfocusedonitscustomers.In2013wedeliveredbetterservicemorevalueandaffordableprices.WeimprovedstreetlightingwithLEDsmadequickerrepairsexpandedtheresidentialrebateconservationprogramsandgavebacktothecommunitythroughvolunteerprojects.CustomersandindustryleadersarenoticingSeattleCityLightssteadyimprovementsincustomerservice.J.D.PowerandAssociatesrecognizedourcustomercommitmentwithtoprankingsfortheWesternU.S.regionrstforcustomersatisfactionamongbusinesscustomersandsecondamongresidentialcustomers.WerefollowingtheStrategicPlanthatwasadoptedbythemayorandSeattleCityCouncilin2012whichwillbeupdatedin2014.Forthersttimeintheutilityshistorywehaveaclearlyarticulatedtransparentlong-rangeplanthatwasdevelopedwithbroad-basedinvolvement.Weknowexactlywhatneedstobedoneandwereactingnowtofullltheplansgoals.SeattleCityLightisownedbythepeopleofSeattleandgovernedbytheirelectedofcials.Ourgoalsandvaluesaredifferentthanafor-protcorporation.Westrivetoprovideoutstandingservicetoallcustomerstokeeprateslowandpredictabletomaintainastronganddiverseworkforceandtobegoodstewardsoftheenvironment.WereectSeattlesvaluesbecomingtherstcarbon-neutralutilityinthecountryassistinglow-incomeresidentsandgivingbacktothecommunity.Iwanttogivecreditforouraccomplishmentstotheoutstandingwomenandmenwhoworkforthisorganization.Theyhaveembracedchangewithenthusiasmarethesourceofinnovativeideasandworkhardeverydaytodeliverelectricitytoourcustomers.Iammostproudoftheiraccomplishmentsinimprovingnancesandreducingrisk.CityLighthasdramaticallyimproveditsnancesthroughcontrollingcostspayingdowndebtpayingforcapitalprojectswithcashandbuildingreservesenhancingriskmanagementandpreparingforemergencies.Therearealotofinterestingfactsinthisreportinadditiontodetailednancialinformation.Ihopeyouenjoyreadingour2013AnnualReportandwelcomeyourfeedback.SincerelyJorgeCarrascoGeneralManagerandCEOSEATTLECITYLIGHT2013AnnualReport1 BurlingtonBiomassColumbiaRidgeLandllGasPotholesEastCanal66GCPHAR.D.SmithEltopiaBranchCanalGCPHASummerFallsGCPHAMainCanalGCPHAIDAHOOREGONWASHINGTONLuckyPeakPriestRapidsBoundaryDamRossDamDiabloDamGorgeDamNewhalemSouthForkToltCedarFallsHighRossAgreementStatelineWindProjectOwnedHydroTreatyRightsFromBritishColumbiaLong-TermHydroContractsinadditiontotheBPAcontractGCPHAistheGrandCouleeProjectHydroelectricAuthorityOtherLong-TermContractsENERGYRESOURCES1924CityLightdedicatesfirstdam1902Seattleresidentsapprove590000bondtodevelopahydroelectricfacilityontheCedarRiver1905SeattleCityLightestablished1911CitylightencouragesincreasedpowerconsumptionJ.D.RossbecomestheutilityssecondsuperintendentJ.D.RossFatherofCityLightSeattlevotersapprovebuyoutofprivatelyownedcompetitorsSeattleterritory19511967DedicationofBoundaryDamabletogenerate600000kWofelectricityPromotionofconsumerelectricityuse.SellingmoreelectricityallowsCityLighttochargelessperkWh1940s-60sPublicationofEnergy1990andlaunchofconservationprograms1977TheBoeingBust-60000layoffsanddouble-digitunemploymentresult19691970Energycrisesintheearlyandlate70sreshapetheeconomyandpoliciesusheringinaneweraofconservationandenergyefficiency1941WWIIenergyuseandtheU.S.workforcechangedramatically1973LaunchofKill-a-WattprogramtopromoteconservationSEATTLECITYLIGHT2013AnnualReport2 SEATTLECITYLIGHTShorelineSeattleUnincorporatedKingCountyBurienRentonTukwilaNormandyParkSeaTacLakeForestPark2013REAPINGTHEREWARDSDeliveringonStrategicPlanprioritiesLaunchofNationsGreenestbrandingInvestmentsinbusinesspracticesinfrastructuretechnologyandpeopleimproveserviceandincreaseefficiencySeattleCityLightservesmorethan408000customersintheCityofSeattleandeightadjacentjurisdictions.Thepubliclyownedutilityreliesonamixofresourcestofulllitscustomersenergyneeds.ThecurrentresourceportfolioincludesCityLight-ownedgenerationresourcesinvestmentsinconservationandlong-termcontractresourcessupplementedwithpower-exchangeagreementsnear-termpurchasesandsalesmadeinthewholesalepowermarket.ABRIGHTFUTURENumberoneincustomerserviceResponsivetocitizensofSeattleLeadingenvironmentalandconservationpracticesLowest-costmostreliableelectricityinurbanAmericaRatestabilityandbroadeningofpowersourcesthroughregionalpowercontracts1980s2012AdoptionoftheStrategicPlan1977Severedrought2006HanukkahEvestormmostdamagingstorminmorethan40years.Halfofcustomerslosepower2008CityLightadoptsnewpoliciesandshoresupfinancesAfive-yearconservationactionplansignificantlyincreasestheutilitysconservationinvestments2010CreationoftheCityLightReviewPanelanine-memberpanelrepresentingkeycustomergroupschargedwithdevelopingaStrategicPlanandreviewingratepoliciesRelicensingofSkagitRiverHydroelectricProjectandsigningofahistoricmitigationpackagetoimprovefisherieswildliferecreationculturalresourcesandvisualenvironment1990sWestCoastenergymanipulationandcrisisdotcombuststockmarketcollapseandrecorddrought20002001Averagepriceforamegawatthourofelectricityjumpsfrom10to40tomorethan86.CityLightpays737millionforwholesalepowermorethantheentireannualcityoperatingbudgetCityLightbecomesfirstgreenhouse-gasneutralutilityinthenation300millioninshort-termdebtpaidoff20052007StudiesofstormresponseresultinstepstowardsacomprehensiveoutagemanagementsystemSEATTLECITYLIGHT2013AnnualReport3 PROVIDINGOUTSTANDINGSERVICESeattleCityLightshighestpriorityismeetingourcustomersexpectationsAbout90percentofSeattleCityLightscustomersareresidential.Therestarecommercialaccounts.Energyconsumptionisnearlyreversedcommercialcustomersusealmosttwo-thirdsofourelectricitygeneration.Ourcustomersexpectcleanenergygreatserviceandaffordableratesandourgoalistoprovidethebestserviceandexperienceofanyutilityinthecountry.ThevastmajorityofCityLightselectricitycomesfromcleansources.About50percentofourelectricityisgeneratedbyCityLightsownhydroprojects.Another40percentofourpowercomesfromBonnevillePowerAdministrationBPAhydroprojects.LessthanonepercentofourelectricitycomesfromcoalandthatsduetoBPAsfuelmix.ByoffsettingemissionscreatedbyutilityoperationsCityLighthasachievedzero-netcarbonemissionseveryyearsince2005.Akeystrategytocustomerserviceisengagementviaone-on-onecontactsurveyscommunitymeetingsfairsandfestivalsmailedpublicationsonlinepublicationsandsocialmedia.ThroughFacebookTwitterandournewYouTubechannelwevebeenabletosharenearreal-timeupdatesandplentyofenergy-savingtipswiththousandsofcustomers.Wealsoregularlyengageour1800employeesmanyofwhomareonthefrontlineface-to-facewithcustomers.Someofourbestandmostinnovativeideascomefromoureldemployees.Weverespondedtocustomerandemployeeinputtocontinuallyimprovecustomerservice.OursystemismorereliabletodaythaneverbeforeWehavefeweroutagesandtheyreofshorterdurationCustomershaveaccesstonearreal-timeoutagemapsandrestorationinformationonlineoronasmartphoneAndmorethanninein10streetlightrepairsweremadewithin10daysofreporting.Customerinputhasalsohelpedusimproveourwebsitemakingiteasiertouseandmoreattractive.Theresalwaysroomforimprovementbutweknowweremovingintherightdirection.JustlastyearwewonrecognitionforoutstandingservicefromJ.D.PowerandAssociateswhichsurveyedbusinessandresidentialutilitycustomersthroughoutthecountry.SeattleCityLightsupervisorCecileBameranswersacustomersquestion.CityLightscustomersincludeamixofresidentialandcommercialusers.In2013SeattleCityLightservedmorethan408000customers.Ourcustomersarentjustnumberstheyrehomeownersandrenterspre-schoolsandcollegesbusinesseslargeandsmallfactoriesandofcebuildingshotelsandmotelsandmore.ForCityLighttakinggreatcareofourcustomersisastrategicpriority.SEATTLECITYLIGHT2013AnnualReport4 TreeTrimmingandNewPolesHelpKeeptheLightsonOnelow-techbuteffectivemethodforreducingstorm-relatedoutagesistrimmingtrees.In2007wetrimmedtreesalongjust170miles.Lastyearwetrimmedtreesalong601miles.OurworkhasbeenhonoredbytheNationalArborDayFoundationsTreeLineUSAprogramforbestpracticesandhasdecreasedtree-relatedoutagesduringstorms.Everypowerpolemaylookthesametoyoubuteachpoleisspecialtous.Wegiveeachoneitsownidentitynumberandwekeepalogofitsinspections.Wereinforceorreplaceupto2000poleseachyeartoreducetheriskofolderpolestopplinginastorm.In2013westartedaddingsteelstaystoreinforcesomepoles.Thisaddsyearsoflifetoeachpoleincreasesreliabilityandhelpssavemoney.TREETRIMMINGDistributionline-milescleared254HighestCustomerSatisfactionWithBusinessElectricServiceintheWesternU.S.AmongMidsizeUtilitiesSeattleCityLightrankedhighestinastudythatlookedatcustomerservicecommunicationsandcorporatecitizenshipamongotherfactors.Increaseintheamountofdistributionline-milesclearedinthelastsixyears.SEATTLECITYLIGHT2013AnnualReport5 WORKINGTOKEEPRATESLOWANDPREDICTABLESeattleCityLightscentralcustomerpromiseLowandpredictableratesareatopprioritytoSeattleCityLight.LowrateshelpkeepSeattleaffordableforresidentsandareessentialtoretainingandattractingbusinessesthatprovideemployment.SeattlehasthelowestelectricityratesamongthelargestU.S.citiesandweredeterminedtomaintainourplaceontop.TheStrategicPlanadoptedin2012bythemayorandcitycouncilaftermorethantwoyearsofworkbymanystakeholdersisourblueprintforkeepingrateslowandpredictable.Akeystrategyforkeepingrateslowandpredictableistoensurewehaveenoughpowerandsupportinginfrastructuretomeetdemand.In2013wemadesignicantstridesbysecuringanewlicenseforBoundaryDamthrough2055.ItwasahugeachievementBoundaryDamisourmostproductivefacility.Itisresponsibleforabout60percentoftheelectricityCityLightgeneratesandabout30percentoftheelectricityusedbytheutilityscustomers.Wealsomadeprogresstowardbuildinganewsubstationtheutilitysrstin30years.TheDennySubstationwillhelpmakeservicemorereliableandcost-effective.TheStrategicPlanalsoisguidinginitiativestomaketheutilitymoreefcient.In2013CityLightachieved10millioninnewsavingsexceedingourtargetby3million.Nowwereworkingonnewinitiativeswhichareprojectedtosave18millionperyearby2015.Efcienciesarepassedalongtocustomersthroughlowerrates.EnergyconservationhasbeenapartofSeattleCityLightsculturesincethe1970s.Weweretherstutilityinthecountrytoidentifyconservationasanenergyresource.Reducingtheneedforelectricitynotonlysavescustomersmoneyitsalsogoodfortheenvironment.KeepingRatesLowSeattleCityLightratesversusotherlargeU.S.citiesincentsperkilowatt-hour2013SourcesEdisonElectricInstitutesTypicalBillsandAverageRatesReportWinter2014ordirectlyfromeachutility.Dataisbasedontypicalbillsandaveragerates.SomeTexasutilitiesassignedTexasaveragerateEnergyInformationAdministrationduetoderegulation.SEATTLECITYLIGHT2013AnnualReport6 BoundaryDamBoundaryDamonthePendOreilleRiverinnortheastWashingtonisresponsibleforabout60percentoftheelectricityCityLightgeneratesandabout30percentoftheelectricityusedbytheutilityscustomers.SEATTLECITYLIGHT2013AnnualReport7 REFLECTINGSEATTLESVALUESSeattleCityLightcaresaboutthecommunityPeopledependonCityLighttoprovidetheelectricitythathelpskeeptheeconomymovinghomeswarmandstreetssafe.Weworkdayandnighttomakesureallareserved.Low-incomeAssistanceThecityofSeattlegotinthepowerbusinessbecauseelectricitycosttoomuch.Intheearly20thcenturycitizensandbusinesseswereunhappyabouthighratesandbadservice.Inthegenerationssinceweveworkedtokeepelectricityaffordableandtoprovideprogramstosupportthosewholiveonlowerincomes.Wealsoworktokeepelectricityaffordabletobusinessandindustrybecauselowerratesgiveourregionaneconomicadvantage.TheUtilityDiscountProgramfundedbySeattleCityLightandSeattlePublicUtilitiesisourkeyefforttohelplow-incomecustomers.Wehavehelpedmorethan14000householdstakeadvantageoftheprogramandbelievesubstantiallymorecouldqualify.Householdsearninglessthan70percentoftheannualmedianstateincomewouldqualify.Anextensiveoutreachprogramisgettingthewordoutandworkingtoovercomelanguageandculturalbarriers.Thesupportcanmakeahugedifferencetopeopleofferinguptoa60percentdiscountonutilitybillsplusafreehomeenergyvisit.RaceandSocialJusticeInitiativeSeattleCityLightisapartnerintheRaceandSocialJusticeInitiativeacitywideefforttoendinstitutionalizedracisminCitygovernment.Theinitiativealsostrivestocreateacommunitythatisenrichedbyitsdiversecultureswithfullparticipationbyallitsresidents.AsapartofthateffortCityLightiscommittedtoperformingoutreachandpublicengagementinamannerthatreectstheracialandculturaldiversityofSeattle.CityLighttranslatesnewsandcriticalinformationintoseverallanguagesincludingChineseVietnameseTagalogSpanishKoreanandSomali.HUBWMBEPurchasingConsultingPercentofTotalServingtheGreaterGoodIn2013theutilityachievedthehighestannualperformanceinitshistoryfordoingbusinesswithHistoricallyUnderutilizedBusinessesHUBandWomenMinorityBusinessEnterprisesWMBE.LastyeartheutilityexceededitsgoalwithHUBWMBEconsultingservicesandpurchasestotaling20863478oralmost17percentoftheutilitystotalexpenditures.TheNorthwestMountainMinoritySupplierDevelopmentCouncilgaveSeattleCityLightitsPublicAgencyoftheYearAwardfor2013inrecognitionoftheutilitysleadership.CityLightsJavierValdezleftHUBprogrammanagerstrategicadviserwontheChampionAward.TheSantosfamilyofSeattleisgratefulforhelpreceivedfromtheUtilityDiscountProgram.SEATTLECITYLIGHT2013AnnualReport8 CommunityInvolvementManyofSeattleCityLights1800employeesareactiveintheircommunitieseitherontheirownorthroughactivitiessponsoredbytheutility.CityLightemployeesgivegenerouslybothtimeandmoneytocommunity-basedorganizationsandthroughtheSeattleSharesprogram.Supportingcommunitieswhereweliveandworkanddonatingtolocalnationalandglobalorganizationsispartofourcultureofgiving.DuwamishAliveEarthDaySoumailaSawadogoisoneofmanyCityLightemployeesfriendsandfamilywhovolunteeredtohelprestoretheDuwamishRivershoreline.RebuildSeattleAteamofSeattleCityLightvolunteersandfamilymembersworkedtomakeadifferenceinthelifeofonecustomeraspartofRebuildTogetherSeattlesSpringRebuildingDay.Inonedayenergeticvolunteersinstalledanewstructuralsupportbeamreplacedaleakywaterheaterwithahigh-efciencyunitrepaintedtwointeriorroomsremoveddebrisfromthebasementrepairedandreplacedplumbinginthekitchenandbathroomandinstallednewappliances.Outsidethehometeamsremovedblackberrybushesandotherovergrownplantsmowedandtrimmedtheyardandrebuiltadeterioratingvegetablegarden.RebuildingTogetherSeattleiscommittedtobringingvolunteersandcommunitiestogethertohelplow-incomehomeownersliveinwarmthsafetyandindependence.ThatmissionisinlinewithSeattleCityLightsemployeevolunteerprogramwhichfocusesonassistancetolow-incomecustomersandenvironmentalstewardshipprojects.StufftheBusCityLightteamedupwithCouncilmemberMikeOBriensofceandourcustomerstohelpCommunitiesinSchoolsofSeattleintheannualStufftheBuscampaignwhichhelpskidsfromlow-incomefamiliesheadbacktoschoolwithneededsupplies.Donationshelplessentheburdenofthehighcostsofschoolsuppliesforfamiliesandteachers.OutsideofSeattleouremployeesraisemoneyforprogramssuchasBoundarysPendOreilleCountyPublicUtilityDistrictsNeighborsinNeedprogramandtheSkagitCountyWarmHomeFund.Tohelplow-incomekidsstarttheschoolyearrightCityLightemployeesdonatedhundredsofbackpacksandbagslledwithschoolsuppliesintheannualStufftheBuscampaign.SEATTLECITYLIGHT2013AnnualReport9 ENHANCINGSUSTAINABILITYANDPROTECTINGNATURALRESOURCESSeattleCityLightiscommittedtoconservationandenvironmentalstewardshipEnvironmentIn2013welaunchedacampaigncalledGreenPowertothePeopletohighlighttheprogressSeattleCityLighthasmadeasthenationsgreenestutility.ItsapointofprideforusandwebelievethepeopleofSeattle.HowgreenareweMorethan90percentofourelectricityisgeneratedfromhydroelectricfacilitieshelpingmakeSeattleCityLighttherstcarbon-freeutilityinthecountrywevebeensosince2005.Wedothisbyfullyoffsettingemissionscreatedbyday-to-dayoperationsandthroughthepowerpurchasedtosupplementourowncleanhydrogeneration.SeattleCityLights37-yearconservationprogramisthelongestrunninginthenation.SeattleCityLightexceededitsconservationgoalandmetitseligiblerenewableenergytargetestablishedbystatelawI-937requiringmajorutilitiesinWashingtonstatetopursuecost-effectiveconservationandtomeetthreepercentofitsretailloadwitheligiblerenewableenergyresources.Weoffercertiedlow-impacthydrooperatingdamstohelpshthriveevenifthatmeansweproducelesspower.TheutilityreceivedoverwhelmingsupportforCommunitySolarattheSeattleAquariumcontinuinganimportantinitiativeforsolar-energydevelopment.SEATTLECITYLIGHTPOWERMIXSolarinSeattleSolarisanincreasingpartofCityLightsenergyportfolio.ThisyearwelaunchedaCommunitySolarProjectattheSeattleAquariumthatwillgeneratemorethan46000kilowatt-hoursannuallyorenoughenergytopowerveSeattlehomesforoneyear.TheideabehindCommunitySolaristocreateutility-ownedsolarprojectsforcustomerswhowanttosupportandreceivethebenetsofsolarwithouthavingtoinstalltheirownsystem.Customerscontributenanciallytopayforthecommunityprojectsandreceiveannualcreditsontheirbill.Theaquariumprojectattractednearly200customerswithinsixweeksoftheoffering.OurrstCommunitySolarprojectbuiltin2012isatBeaconHillsJeffersonPark.Thesitenowgeneratesapproximately26000kilowatt-hoursofcleanrenewableelectricityeachyearwhilesupplyingparkvisitorswithmuchneededpicnicshelters.SEATTLECITYLIGHT2013AnnualReport10 NaturalResourcesSeattleCityLightrecognizesthatitsoperationsdrawuponnaturalresourcesthatarevitaltowildlifeandshandalsoaddtothequalityoflifeinthePacicNorthwest.Assuchweembraceourresponsibilitytobeagoodstewardoftheenvironment.CityLightputsthiscommitmenttoworkbyacquiringpropertytopreserveandrestorewildlifeandshhabitatmanagingitshydroelectricoperationstoprotectshanddevelopingrecreationalprojectsonbehalfofthepublic.CityLightprotectsatotalof13075acresofland.TheSkagitRiverHydroelectricProjectWildlifeMitigationProgramhasgrowntototal10300acresprovidingcriticalhabitatforawiderangeofanimalsandincludinghighqualityold-growthconiferforest.Inadditiontheutilitynowowns2775acresofkeyspawningandrearinghabitatforChinooksalmonsteelheadandbulltrout.OneofthemostimportantreasonsforSeattleCityLightssuccessasastewardoftheenvironmentandnaturalresourcesisourwillingnessandabilitytodeveloppartnershipswithotherstakeholders.Theutilityothergovernmentagenciestribesenvironmentalorganizationsandothersworktogethertoprotectandrestoreshandwildlifehabitats.CityLightistheleaderintheindustryinprotectingwildlife.DavidWeeksexecutivedirectoroftheWashingtonFieldOfceofTheNatureConservancyCityLighthasbeenputtingupnestingplatformsforospreystoreducetheriskofelectrocutingbirdstryingtonestonpolesandtowersandtoreducetheriskofpoweroutagesandres.SEATTLECITYLIGHT2013AnnualReport11 MANAGINGMONEYWISELYSeattleCityLightbelieveseverydollarmattersSeattleCityLightisownedbyratepayers.Everydollarsavedthroughefciencyorsmartmanagementbenetscustomers.Theproofofoursoundnancialmanagementisintheratings.In2013StandardPoorsRatingServicesupgradedSeattleCityLightscreditratingfromAA-toAAwithastableoutlookandMoodysafrmeditsAA2ratingwithastableoutlook.Ourcreditratinghasbeenupgradedseventimesoverthepast10years.NootherpubliclyownedelectricutilityinthePacicNorthwesthasahighercreditrating.HowdidweachievethehighcreditratingWeestablishedstrictcostcontrolspaiddowndebtreducingitbymorethanahalf-billiondollarsovera10-yearperiodpaidforahigherportionofcapitalprojectswithcashandbuildupreservesthroughtheRateStabilizationAccountthatmaybedrawnonwhenwholesalemarketpricesorawatershortagecauseanunexpecteddropinrevenue.Iftheaccountgetstoolowasurchargeisaddedtocustomerbillstoreplenishthefundandvisaversa.Thisshieldscustomersfromhugerateincreaseslikethoseseenin2000-2001.Costcontrolsarentjustaboutspendinglessmoney.Theyreaboutspendingmoneywisely.Ourstrategicplanhasidentiedefcienciesintheareasoftransmissionanddistributionenvironmentandconservationgenerationandpowerhumanresourcesandsafetycustomerserviceinfrastructureandnancialmanagement.In2013weachieved10millioninnewsavingsexceedingthestrategicplantargetby3million.Smartspendingandimprovedcreditratingswillsavetheutilityanditscustomersmillionsofdollarsintheyearsahead.AuditorsProvideaDoubleCheckThevarietyandcomplexityofrisksfacingSeattleCityLightisrapidlychangingdueinparttoemergingtechnologiesanincreaseinregulationsandthereorganizationofjobfunctions.ToaddresstheserisksandsethighstandardsoforganizationalgovernanceaccountabilityandtransparencyCityLightcreatedaninternalauditteamin2013.TheauditteamwillhelpensureKristiMauckSaraLienZenonOYoung-ChuJosephArchuletaSeattleCityLightsinternalauditteam.properinternalcontrolsaredesignedandoperatingeffectivelycompliancewithlawsandregulationssafeguardingofutilityassetsidenticationofopportunitiestostreamlineandimproveoperationspromotionofindustrybestpractices.SEATTLECITYLIGHT2013AnnualReport12 MAINTAININGASTRONGLOCALWORKFORCESeattleCityLightinveststopreparepeopleforrewardingcareersOneofthebigchallengesfacingutilitiesacrossthecountryisanagingworkforce.ManyofSeattleCityLightshighlyskilledemployeesarenearingretirementageandsomeofthesepositionsrequireyearsofpreparation.Theapprenticeshipforsomejobshydroelectricmaintenancemachinistforexampleisaprogramthatinvolves8000hoursofon-the-jobtrainingincludingmorethan700hoursofclassroominstruction.TomeettheworkforcechallengeSeattleCityLightisrecruitingandtrainingnewtechnicianselectriciansandmachinistswhilesupportingexistingprogramsforapprenticesinternsandrecentgraduates.Ourrecruitingisaimedathavingaworkforcethatreectsthediversityofthepopulationweserve.Andweremovingquicklytotransferasmuchknowledgeaspossibletothenextgenerationofworkersbeforethecurrentgenerationretires.SafetyCultureItisSeattleCityLightsresponsibilitytoprovideasafeworkenvironmentforouremployeesandthepublicandmaintainingcompliancewithfederalstateandlocalsafetyregulations.Wehaveaprograminplacetoreduceourinjuryrateby20percentperyearandbeinthetopquartilecomparedtootherpubliclyownedutilitiesby2018.StudentsGetHands-onLearningLastyearwesteppedupourpaidcollegeandhighschoolinternprogramaspartofourrecruitingprogram.Thirty-eightstudentsfromtheUniversityofWashingtonSeattlePacicUniversitySeattleUniversityandothercollegesanduniversitieswereawardedinternshipstoenhancetheireducationandtogivethemopportunitiestolearnmoreaboutcareeropportunitiesatSeattleCityLight.HelpingLeadersBeBetterLeadersSeattleCityLightisconstantlyreviewingcompensationretentionandtrainingprogramstoattractandkeeptop-performingemployeesateveryleveloftheorganization.Wearecreatingacultureinwhichemployeesareencouragedandrewardedforinnovativeideas.Forexamplesuggestionsfromrank-and-leemployeesledtothecreationofa2013leadershipprogram.Theprogramfeaturesa12-coursecurriculumcoveringcommunicationsleadershipdelegationbusinesswritingmanagingperformanceandothertopics.Morethan150supervisorsandcrewchiefshavealreadytakenthecourse.Everyonefromseniorleaderstosupervisorswilltakethiscourse.TrainingisaboutworkingsmarternotharderanditssomethingweembraceatSeattleCityLight.SEATTLECITYLIGHT2013AnnualReport13 LETTERFROMTHEMAYORMyvisionforthepeopleofSeattleisasafevibrantaffordableinterconnectedcityforall.TheseideasdovetailnicelywiththeinitiativesofSeattleCityLightsStrategicPlan.SomeexamplesTheutilityrecentlyinstalledLEDstreetlightsinourresidentialneighborhoodsandisbeginningtoconvertlightsonarterials.LEDsgiveahigherqualitylightthanconventionaltechnologyimprovingdriverbicyclistandpedestriansafetythroughbetterdepthofeldandperipheralvisionalongwithtruercolor.VibrantcertainlydescribesthePacicScienceCentersSonicBloomproject33-footsolar-poweredberglassowersthatplaymusicwhenpeoplewalkby.ItwasfundedbycustomercontributionstoCityLightsGreenUpprogramwhichsupportsrenewableenergy.SonicBloomisartandenergyrolledintooneamazingdisplay.CityLightofferscleanenvironmentallyresponsibleandaffordableelectricitywithsomeofthelowestcostpowerinthenation.Evensotheutilityunderstandsourmostvulnerablecitizensmayneedhelpwiththeirbills.OnewayCityLightassistsiswithautilitydiscountprogramthatcansaveeligiblecustomersupto60percentonutilitybills.Additionallytheutilityheavilypromotesconservationasameanstosavebothmoneyandenergy.FinallyCityLightemployeesconnectwithourcommunityinmeaningfulwaysincludingannualvolunteerandfundraisingeffortssuchastheannualHeartWalkandEarthDayprojects.CityLightisavaluedpartofourteampeoplewhoworkeverydaytoservethecitizensofSeattle.MayorEdMurrayCityofSeattleSEATTLECITYCOUNCILLefttorightSallyBagshawTomRasmussenMikeOBrienSallyJ.ClarkNickLicataKshamaSawantBruceA.HarrellJeanGoddenandTimBurgessSEATTLECITYLIGHT2013AnnualReport14 SEATTLECITYLIGHTEXECUTIVETEAMLefttorightSephirHamiltonchiefofstaffJeffBishopchiefnancialofcerJorgeCarrascogeneralmanagerandchiefexecutiveofcerMichaelJonespowersupplyandenvironmentalaffairsofcerJimBaggscomplianceofcerPhilWestcustomerserviceandenergydeliveryofcerandDaVonnaJohnsonhumanresourcesofcerSEATTLECITYLIGHT2013AnnualReport15 SEATTLECITYLIGHT2013AnnualReport16 FINANCIALINFORMATIONANNUALREPORT2013SEATTLECITYLIGHT2013AnnualReport17 FINANCIALTABLEOFCONTENTSAUDITEDFINANCIALSTATEMENTSIndependentAuditorsReport..............................................................................................................19-20ManagementsDiscussionandAnalysisUnaudited........................................................................21-33BalanceSheets.....................................................................................................................................34-35StatementsofRevenuesExpensesandChangesinNetPosition....................................................36StatementsofCashFlows....................................................................................................................37-38NotestoFinancialStatements.............................................................................................................39-80RequiredSupplementaryInformationUnaudited.............................................................................81OtherInformationUnaudited.............................................................................................................82-88SUPPLEMENTARYINFORMATIONHighlightsUnaudited..........................................................................................................................89FinancialSummaryUnaudited...........................................................................................................90Long-TermDebtUnaudited.................................................................................................................91CustomerStatisticsUnaudited..........................................................................................................92PowerUnaudited.................................................................................................................................93ChangesinOwnedTotalGeneratingInstalledCapabilityUnaudited..............................................94SystemRequirementsUnaudited......................................................................................................94TaxesandContributionsbySeattleCityLighttotheCostofGovernmentUnaudited...................95PublicPurposeExpendituresUnaudited...........................................................................................96SEATTLECITYLIGHT2013AnnualReport18 -1-INDEPENDENTAUDITORSREPORTTotheEnergyCommitteeTheCityofSeattleCityLightDepartmentSeattleWashingtonReportontheFinancialStatementsWehaveauditedtheaccompanyingfinancialstatementsofTheCityofSeattleCityLightDepartmenttheDepartmentanenterprisefundofTheCityofSeattleWashingtonasofandfortheyearsendedDecember312013and2012andtherelatednotestothefinancialstatementsaslistedinthetableofcontents.ManagementsResponsibilityfortheFinancialStatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericathisincludesthedesignimplementationandmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatementwhetherduetofraudorerror.AuditorsResponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperformtheauditstoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditorsjudgmentincludingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatementswhetherduetofraudorerror.InmakingthoseriskassessmentstheauditorconsidersinternalcontrolrelevanttotheDepartmentspreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstancesbutnotforthepurposeofexpressinganopinionontheeffectivenessoftheDepartmentsinternalcontrol.Accordinglyweexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagementaswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.OpinionInouropinionthefinancialstatementsreferredtoabovepresentfairlyinallmaterialrespectsthefinancialpositionoftheDepartmentasofDecember312013and2012andthechangesinitsfinancialpositionanditscashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.BakerTillyVirchowKrauseLLPTenTerraceCtPOBox7398MadisonWI53707-7398tel6082496622fax6082498532bakertilly.comSEATTLECITYLIGHT2013AnnualReport19 TotheEnergyCommitteeTheCityofSeattleCityLightDepartmentEmphasisofMattersAsdiscussedinNote1thefinancialstatementspresentonlytheDepartmentanddonotpurporttoanddonotpresentfairlythefinancialpositionofTheCityofSeattleWashingtonasofDecember312013and2012andthechangesinitsfinancialpositionanditscashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.Ouropinionisnotmodifiedwithrespecttothismatter.AsdiscussedinNote1theDepartmentadoptedtheprovisionsofGASBStatementNo.65ItemsPreviouslyReportedasAssetsandLiabilitieseffectiveJanuary12013.Theprioryearhasbeenrestatedforthischange.Ouropinionisnotmodifiedwithrespecttothismatter.OtherMattersRequiredSupplementaryInformationAccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequirethattheManagementsDiscussionandAnalysisandSchedulesofFundingProgressinformationaslistedinthetableofcontentsbepresentedtosupplementthefinancialstatements.SuchinformationalthoughnotapartofthefinancialstatementsisrequiredbytheGovernmentalAccountingStandardsBoardwhoconsidersittobeanessentialpartoffinancialreportingforplacingthefinancialstatementsinanappropriateoperationaleconomicorhistoricalcontext.WehaveappliedcertainlimitedprocedurestotherequiredsupplementaryinformationinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericawhichconsistedofinquiriesofmanagementaboutthemethodsofpreparingtheinformationandcomparingtheinformationforconsistencywithmanagementsresponsestoourinquiriesthefinancialstatementsandotherknowledgeweobtainedduringourauditofthefinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsufficientevidencetoexpressanopinionorprovideanyassurance.OtherInformationOurauditwasconductedforthepurposeofforminganopiniononthefinancialstatementsasawhole.TheDebtServiceCoverageInterestRequirementsandPrincipalRedemptiononLong-termDebtStatementofLong-termDebtPowerCostsandStatisticsHistoricalEnergyResourcesandCustomerStatisticswhicharetheresponsibilityofmanagementarepresentedforpurposesofadditionalanalysisandarenotarequiredpartofthefinancialstatements.Suchinformationhasnotbeensubjectedtotheauditingproceduresappliedintheauditofthefinancialstatementsandaccordinglywedonotexpressanopinionorprovideanyassuranceonit.MadisonWisconsinApril302014SEATTLECITYLIGHT2013AnnualReport20 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012ThefollowingdiscussionandanalysisofthefinancialperformanceofTheCityofSeattleCityLightDepartmenttheDepartmentprovidesasummaryofthefinancialactivitiesfortheyearsendedDecember312013and2012.ThisdiscussionandanalysisshouldbereadincombinationwiththeDepartmentsfinancialstatementswhichimmediatelyfollowthissection.ORGANIZATIONTheDepartmentisthepublicelectricutilityofTheCityofSeattletheCity.AsanenterprisefundoftheCitytheDepartmentownsandoperatescertaingeneratingtransmissionanddistributionfacilitiesandsupplieselectricitytoapproximately408000customersinSeattleandcertainsurroundingcommunities.TheDepartmentalsosupplieselectricalenergytootherCityagenciesatratesprescribedbyCityordinances.OVERVIEWOFTHEFINANCIALSTATEMENTSTheDepartmentsaccountingrecordsaremaintainedinaccordancewithgenerallyacceptedaccountingprinciplesforproprietaryfundsasprescribedbytheGovernmentalAccountingStandardsBoardGASB.Newaccountingstandardswereimplementedin2013and2012.Effectivein2013theDepartmentimplementedGASBStatementNo.65ItemsPreviouslyReportedasAssetsandLiabilities.Effectivein2012theDepartmentimplementedGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncements.PleaseseeNote1intheaccompanyingfinancialstatementsforadditionalinformationonGASBStatementsNos.65and62.TheDepartmentsaccountingrecordsalsofollowtheUniformSystemofAccountsforPublicLicenseesprescribedbytheFederalEnergyRegulatoryCommissionFERC.ThisdiscussionandanalysisisintendedtoserveasanintroductiontotheDepartmentsbasicfinancialstatementswhicharecomprisedofthefinancialstatementsandthenotestothefinancialstatementsandincludethefollowingBalanceSheetsStatementsofRevenuesExpensesandChangesinNetPositionandStatementsofCashFlowsThebasicfinancialstatementsprovideanindicationoftheDepartmentsfinancialhealth.ThebalancesheetsincludealloftheDepartmentsassetsdeferredoutflowsofresourcesliabilitiesdeferredinflowsofresourcesandnetpositionusingtheaccrualbasisofaccountingaswellasanindicationaboutwhichassetscanbeutilizedforgeneralpurposesandwhichassetsarerestrictedasaresultofbondcovenantsandothercommitments.Thestatementsofrevenuesexpensesandchangesinnetpositionreportalloftherevenuesandexpensesduringthetimeperiodsindicated.Thestatementsofcashflowsreportthecashprovidedandusedbyoperatingactivitiesaswellasothercashsourcessuchasinvestmentincomeandcashpaymentsforbondprincipalandcapitaladditionsandbetterments.NotestotheFinancialStatementsThenotestothefinancialstatementsprovideadditionalinformationthatisessentialtoafullunderstandingofthedataprovidedinthefinancialstatements.SEATTLECITYLIGHT2013AnnualReport21 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012CONDENSEDBALANCESHEETSinmillions20132012a2011AssetsUtilityplantnet2541.12352.22200.3Restrictedassets227.0275.7209.2Currentassets369.1323.5326.9Otherassets301.0278.9243.1Totalassets3438.23230.32979.5Totaldeferredoutflowsofresources26.030.0-Totalassetsanddeferredoutflowsofresources3464.23260.32979.5LiabilitiesLong-termdebt1870.31791.51640.6Noncurrentliabilities78.174.855.8Currentliabilities241.7224.6205.7Otherliabilities19.215.4130.6Totalliabilities2209.32106.32032.7Totaldeferredinflowsofresources100.7112.5-NetpositionNetinvestmentincapitalassets906.1832.8733.0RestrictedRatestabilizationaccount25.025.025.0Specialdepositsandotherpurposes0.40.70.4Totalrestricted24.625.725.4Unrestrictednet223.5183.0188.4Totalnetposition1154.21041.5946.8Totalliabilitiesdeferredinflowsandnetposition3464.23260.32979.5December31aGASBNo.65ItemsPreviouslyReportedasAssetsandLiabilitieswasimplementedeffectiveJanuary2013.Accordinglythe2012balancesheetwasrestatedtoconformtothe2013presentation.The2011balancesheetwasnotrestated.SeeNote1OperationsandSummaryofSignificantAccountingPolicies.Becausethe2011balancesheetwasnotrestatedcertaincomparisonsinthefollowingdiscussionbetween2012comparedto2011maynotbeasmeaningful.SEATTLECITYLIGHT2013AnnualReport22 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012ASSETSUtilityPlantNet2013Comparedto2012Utilityplantassetsnetofaccumulateddepreciationandamortizationincreased188.9millionto2541.1millionin2013.Utilityplantassetswerecomprisedofhydroelectricproductionplant761.2millionwhichincreased46.5milliontransmissionplant201.8millionwhichincreased12.0milliondistributionplant2086.5millionwhichincreased119.5milliongeneralplant305.2millionwhichdecreased5.2millionandintangibleassets440.6millionwhichincreased29.0million.Thenetincreaseinutilityplantassetswerepartiallyoffsetbya52.7millionincreaseinAccumulateddepreciationandamortization.The119.5millionincreaseindistributionplantisprimarilydueto62.1millionforundergroundsystem14.1millionforoverheadsystem13.2millionfortransformers11.5millionforpoles8.6millionforstreetlightsand6.3millionforsubstations.Inhydroelectricproductionanincreaseof36.6millionwasduetoimprovementstooneofthegenerationunitsattheBoundaryprojectfurtherimprovementstoadditionalunitsareongoingandexpectedtocontinuethrough2015.OthercomponentsofutilityplantincludeConstructionwork-in-progress164.1millionwhichincreased31.7millionAssetsheldforfutureuse68.7millionwhichincreased3.1millionNonoperatingproperty8.7millionwhichincreased1.8millionandLandandlandrights68.2millionwhichincreased3.1million.The31.7millionincreaseinConstructionwork-in-progressisprimarilydueto12.7millionforBoundarygeneration9.1millionforDennySubstationand7.1millionforAlaskanWayViaduct.The3.1millionincreaseinAssetsheldforfutureuseincludedtheadditionof11.3millionforpreparationofthefutureDennySubstationsite.Thisincreasewaspartiallyoffsetbythewrite-offofpreviouscostsfortheGorgesecondtunnelprojectandotherassetswhichtotaled9.0million.MoreinformationontheDepartmentscapitalassetscanbefoundinNote2UtilityPlantoftheaccompanyingfinancialstatements.2012Comparedto2011Utilityplantassetsnetofaccumulateddepreciationandamortizationincreased151.9millionto2352.2millionin2012.Utilityplantassetswerecomprisedofhydroelectricproductionplant714.7millionwhichincreased11.7milliontransmissionplant189.8millionwhichincreased26.3milliondistributionplant1967.0millionwhichincreased119.2milliongeneralplant310.4millionwhichdecreased5.1millionandintangibleassets411.5millionwhichincreased16.6million.Thenetincreaseinutilityplantassetswerepartiallyoffsetbya53.8millionincreaseinAccumulateddepreciationandamortization.The119.2millionincreaseindistributionplantisprimarilydueto36.0millionforundergroundconductors22.4millionforundergroundconduit12.6millionforoverheadconductors11.6millionforpoles11.3millionforundergroundandoverheadsystem9.9millionfortransformers8.7millionforstreetlightsand2.8millionformeters.OthercomponentsofutilityplantincludeConstructionwork-in-progress132.4millionwhichincreased22.1millionAssetsheldforfutureuse65.6millionwhichincreased12.8millionNonoperatingproperty6.9millionwhichincreased0.3millionandLandandlandrights65.1millionwhichincreased2.0SEATTLECITYLIGHT2013AnnualReport23 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012million.The22.1millionincreaseinConstructionwork-in-progressiscomprisedmainlyof23.5millionforBoundarygenerationand6.2millionforthesecondphaseoftheworkassetmanagementsystempartiallyoffsetbyareclassificationof6.5millionforGorgesecondtunnelprojecttoAssetsheldforfutureuseand3.9millionforMercercorridorreplacementplacedinservice.RestrictedAssets2013Comparedto2012Restrictedassetsconsistingprimarilyofrestrictedcashdecreasedby48.7millionto227.0million.In2013theRatestabilizationaccountRSAdecreasedbyanet18.3million.40.0millionwastransferredtooperatingcashfromtheRSAduringtheyeartosupplementlowerthanactualnetwholesalerevenues.InDecember2013operatingcashintheamountof21.0millionwastransferredtotheRSA.Thebalanceof0.7milliontransferredtotheRSAwasforinterestearnings.SeeNote3RateStabilizationAccountintheaccompanyingfinancialstatements.Constructionfundsdecreasedby47.5millionto58.5millionasbondproceedsfromthe2012and2013bondissueswereusedtofundtheongoingcapitalimprovementprogram.Theendingbalanceofconstructionfundswerefromthe2013bondissue.Bondreserveaccountdepositsincreasedduringtheyearby12.6million10.0millionfromoperatingcashandthebalanceof2.6millionfrom2013bondproceedsandinterestearnings.Theresidualincreaseof4.5millionforotherrestrictedaccountswasduetoanincreaseinthedebtserviceaccountof4.2millionand0.3millionother.2012Comparedto2011Restrictedassetsincreasedby66.5millionto275.7million.During2012therewasanetoutflowofcashtotaling13.2millionfromtheRSA.36.2millionwastransferredtooperatingcashfromtheRSAduringtheyeartosupplementlowerthanactualnetwholesalerevenues.InDecember2012operatingcashintheamountof22.0millionwastransferredtotheRSA.Thebalanceof1.0milliontransferredtotheRSAwasforinterestearnings.Constructionfundsincreasedby44.6millionto106.1millionduetoremainingbondproceedsfromthe2012bondissuethatwillbeusedtofundtheongoingcapitalimprovementprogram.Bondreserveaccountdepositsincreasedduringtheyearby32.7million20.0millionfromthesuretybondreplacementaccountandthebalanceof12.7millionfrom2012bondproceedsandrelatedinterestearnings.Theresidualincreaseof2.4millionwasforother.CurrentAssets2013Comparedto2012Currentassetsincreasedby45.6millionto369.1millionattheendof2013.Operatingcashincreasedby37.5millionto193.8million.Operatingcashwashigherinlargepartduetothe4.4rateincreaseeffectiveatthebeginningoftheyearandtheBonnevillePowerAdministrationBPA1.2pass-throughrateadjustmenteffectiveinOctoberandtransfersfromtheRSAoffsetbylowernetwholesaleenergysalesdebtservicepaymentsandtransfertothebondreserveaccount.SEATTLECITYLIGHT2013AnnualReport24 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012Accountsreceivablenetdecreasedby2.4millionto64.0million.Wholesalepowerreceivablesdecreasedby6.6millionasaresultoflowersurplussales.Decreasestotaling2.3millionwerealsoexperiencedinthereserveforuncollectibleaccountsasimprovedcollectioneffortscontinuedanddecreasesinothersundryreceivables.Thesewereoffsetbyhigherretailelectricbillingsof2.9milliondueinparttotheaforementionedrateincreasesandconstructionbillingsof3.6million.Unbilledrevenuesincreasedby7.8milliongenerallytheresultof2013rateincreases.Inventoryformaterialsandsuppliesincreasedby2.9millionandothercurrentassetsdecreasedby0.2million.2012Comparedto2011Currentassetsdecreasedby3.3millionto323.5millionattheendoftheyear.Operatingcashdecreasedby9.1millionto156.3million.Operatingcashwashigherasaresultofthe3.2rateincreaseeffectiveatthebeginningoftheyearandoffsetbylowernetwholesaleenergysalesdebtservicepaymentstransferoffundstotheRSAandtransferoffundsfromthesuretybondreplacementaccounttothebondreserveaccount.Accountsreceivablenetincreasedby6.9millionto66.4million.Wholesalepowerreceivablesincreasedby5.4millionbecauseofhighersurplussalesinDecember2012comparedtoDecember2011.Othersundryreceivablesincreased4.2millionmostlytheresultofareductioninthesundrysalesallowanceforbaddebtcomparedto2011aswrite-offsweremadeforuncollectibleandpastduesundryaccountreceivables.Furthermoreretailelectricreceivablesdecreasedanet2.7millionduetowrite-offsofinactiveaccounts.Unbilledrevenuesandmaterialsandsuppliesinventorydecreasedby0.9millionand0.4millionrespectivelyoffsetbyanetincreaseinothercurrentassetsof0.1million.OtherAssets2013Comparedto2012Otherassetsincreasedby22.1millionto301.0million.Conservationcostsnetincreasedby13.2million.Deferredenvironmentalcleanupcostsincreasedby8.2millionandwerelargelyassociatedwithcleanupoftheLowerDuwamishWaterwaySuperfundSite.Deferredenvironmentalcostsarebeingrecoveredthroughratesovera25yearperiod.OtherchargeswithinOtherassetsincreasednet0.7million.AdditionaldetailforOtherassetsisprovidedinNote6OtherAssetsoftheaccompanyingfinancialstatements.2012Comparedto20112011notrestatedforGASBNo.65Otherassetsincreasedby35.8millionto278.9million.Conservationcostsnetincreasedby10.6million.Environmentalcleanupcostsintheamountof23.5millionweredeferredandwerelargelyassociatedwiththeLowerDuwamishWaterwaySuperfundSite.Long-termreceivablesduefromthecitiesofShorelineandBurienincreasedby9.4millionforelectricalinfrastructureimprovementscompletedduringtheyearthatarebeingrepaidbythecitiesrespectiveelectricretailcustomersover25years.Therewasalsoanincreasefora1.1millionnegotiatedlong-termnotereceivablefromSeattleHousingAuthorityforprioryearselectricalwork1.0millionfordebtrelatedcostsand1.2millionforanincreaseinestimatedenvironmentalremediationrecoveries.Thenetresidualdecreaseof11.0millionisattributabletonotexpensingbondissuecostsin2011fortheeffectofGASBNo.65.Therefore2011isnon-comparativeto2012.SEATTLECITYLIGHT2013AnnualReport25 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012DeferredOutflowsofResourcesDeferredoutflowsofresourcesarespecificallyforChargesonadvancerefundingofcertainpriorlienbondsinrecentyears.In2013Chargesonadvancerefundingdecreasedby4.0millionforatotalof26.0million.Chargesonadvancerefundingincreased1.7millionto30.0millionin2012from2011.Netactivityistheresultofadditionsduetonewbondissuesanddecreasesduetoamortizationofcosts.LIABILITIESLong-TermDebt2013Comparedto2012Long-termdebtincreasedanet78.8millionto1870.3millionin2013.InJuly2013theDepartmentissuedatotalof190.8millionofrevenueandrefundingrevenuetax-exemptbondstofundtheongoingcapitalimprovementprogramandtoadvancerefundcertainhigherinterestbearingpriorlienrevenuebonds.Debttocapitalizationratiowas61.7attheendof2013adecreasefromthe62.8ratioof2012andcontinuingthefavorabletrendinrecentyears.Netrevenuesavailabletopaydebtservicewereequalto1.85timesprincipalandinterestonallbondsfor2013.Note8Long-TermDebtoftheaccompanyingfinancialstatementsprovidesadditionalinformationontheDepartmentslong-termdebt.2012Comparedto20112011notrestatedforGASBNo.65Long-termdebtincreasedanet122.5millionto1791.5millionin2012.InJuly2012theDepartmentissuedatotalof345.6millionofrevenueandrefundingrevenuebonds.Debttocapitalizationratiowas62.8attheendof2012adecreasefromthe64.0ratioof2011.Netrevenuesavailabletopaydebtservicewereequalto1.81timesprincipalandinterestonallbondsfor2012.EnvironmentalLiabilitiesandNoncurrentLiabilitiesTotalnon-currentenvironmentalliabilitieswere46.2million45.2millionand27.2millionatDecember3120132012and2011respectively.EnvironmentalliabilitiesarerecordedinaccordancewithGASBStatementNo.49AccountingandFinancialReportingforPollutionRemediationObligations.TheliabilitiesareprimarilyattributabletotheestimatedcostofremediatingcontaminatedsedimentsinthelowerDuwamishWaterwayadesignatedfederalSuperfundsite.TheDepartmentisconsideredapotentiallyresponsiblepartyforcontaminationintheDuwamishRiverduetolandownershiporuseofpropertylocatedalongtheriver.RiskManagementliabilitiesforclaimslawsuitsandindustrialinsurancetotaled8.6million8.4millionand8.1millionfor20132012and2011respectively.SEATTLECITYLIGHT2013AnnualReport26 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012ThebalanceofNoncurrentliabilitiesof23.2million21.3millionand20.5millionfor20132012and2011respectivelywereforcompensatedabsencesotherpost-employmentbenefitsandother.MoreinformationonenvironmentalliabilitiesisfoundinNote12EnvironmentalLiabilitiesandforotherNoncurrentliabilitiesprimarilyforriskmanagementliabilitiesinNote9ProvisionforInjuriesandDamagesoftheaccompanyingfinancialstatements.CurrentLiabilitiesCurrentliabilitiestotaled241.7million224.6millionand205.7millionatDecember3120132012and2011respectively.Currentliabilitiesareneartermtomeetongoingoperationsandencompassedalmost100.0millionincurrentportionoflong-termdebtforeachrespectiveyear.Othercomponentsofcurrentliabilitieswerevoucherspayablepoweraccountspayabletaxespayableinterfundpayablepayrollpayableandother.Ofthenetincreaseof17.1millionin2013from201210.5millionwastheresultofhigherdebtservicefromrecentbondissues.Ofthenetincreaseof18.9millionin2012from20118.2millionwasforenvironmentalliabilities5.9millionforpurchasedpowerand4.8millionother.OtherLiabilities2011notrestatedforGASBNo.65Otherliabilitiesincreasedby3.8millionto19.2millionin2013from2012.Themajorcomponentsofthiscategoryareforcustomerprepaymentsfromsundryaccountspre-paymentsreceivedinadvanceforserviceconnectionsorcontributionsin-aid-ofconstructionprojectsandother.In2013customerpaymentsforserviceconnectionsincreasedby3.4million.Asnotedearlier2011wasnotrestatedfortheeffectofGASBNo.65.DeferredInflowsofResources2011notrestatedforGASBNo.65Deferredinflowsofresourcestotaled100.7millionand112.5millionatDecember312013and2012respectively.Thesignificantactivityoccurringsince2010hasbeenprincipallytheresultofimplementingfundingandrelatedactivityoftheRSA.FundingoftheRSAfromoperatingcashhasthecorrespondingeffectofdeferringoperatingrevenuesintheratestabilizationunearnedrevenueaccountandviceversa.In2013and2012nettransfersof18.3millionand13.2millionweremadefromtheratestabilizationunearnedrevenueaccounttooperatingrevenuestosupplementlowerthanbudgetednetwholesalerevenuesrespectively.OperatingrevenuesdeferredfromRSAtransactionstotaled62.2millionin2011.EndingbalancesoftheRSAunearnedrevenueaccountwere85.0million103.3millionand116.5millionatDecember3120132012and2011respectively.SeeNote3RateStabilizationAccountintheaccompanyingfinancialstatementsformoreinformationontheRSA.Otherdeferredinflowsofresourcesincreasedby6.5millionto15.7millionin2013from2012.PaymentsreceivedundertheDepartmentsEnergyConservationAgreementwithBPAincreasedby3.1millionandBPAsSlicetrue-upcreditwashigherin2013by2.7millioncomparedto2012.Thebalanceof0.7millionincreasewastheresultofexchangeenergyregulatorygains.Asnotedearlier2011wasnotrestatedfortheeffectofGASBNo.65.SEATTLECITYLIGHT2013AnnualReport27 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012RESULTSOFOPERATIONSCondensedStatementsofRevenuesExpensesandChangesinNetPositioninmillions20132012a2011Operatingrevenues842.2800.3772.2Nonoperatingrevenues11.112.710.5Totalrevenues853.3813.0782.7Operatingexpenses711.0662.0655.4Nonoperatingexpenses79.378.876.0Totalexpenses790.3740.8731.4Incomebeforecapitalcontributionsandgrants63.072.251.3Capitalcontributions47.931.029.1Capitalgrants1.80.811.8Totalcapitalcontributionsandgrants49.731.840.9Changeinnetposition112.7104.092.2YearEndedDecember31aGASBNo.65ItemsPreviouslyReportedasAssetsandLiabilitieswasimplementedeffectiveJanuary2013.Accordinglythe2012StatementofRevenuesExpensesandChangesinNetPositionwasrestatedtoconformtothe2013presentation.The2011StatementofRevenuesExpensesandChangesinNetPositionwasnotrestated.SeeNote1OperationsandSummaryofSignificantAccountingPolicies.Becausethe2011StatementofRevenuesExpensesandChangesinNetPositionwasnotrestatedcertaincomparisonsinthefollowingdiscussionbetween2012comparedto2011maynotbeasmeaningful.SUMMARY2013Comparedto2012Changeinnetpositionfor2013was112.7millionanincreaseof8.7millionor8.4from2012restatedchangeinnetpositionof104.0million.HigherretailpowersalesRSAunearnedrevenuetransferred-inpowerrelatedrevenuesandcapitalcontributionsaddedtothepositivechangeinnetposition.Thesewerepartiallyoffsetbyhigherexpensesforgenerationcustomerserviceadministrativeandgeneraltaxesdepreciationinterestandlowerinvestmentearnings.ThenetimpactofadoptingGASBNo.65was1.6millionreductioninChangeinnetpositionfor2012.2012Comparedto20112011notrestatedforGASBNo.65Changeinnetpositionfor2012asrestatedwas104.0millionanincreaseof11.8millionor12.8from2011changeinnetpositionof92.2million.HigherretailpowersalesandRSAdeferredrevenuetransferred-inalongwithlowerBPApurchasedpowercostsandlowercustomerserviceexpenseswerethemaindriverscontributingtothestrongchangeinnetposition.ThepositivedriverswereoffsetbylowernetwholesaleSEATTLECITYLIGHT2013AnnualReport28 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012energyrevenuespowerrelatedrevenuescapitalgrantsandhigherdepreciationandadministrativeandgeneralexpenses.REVENUES2013Comparedto2012Totaloperatingrevenueswere842.2millionanincreaseof41.9millionor5.2from2012.Retailpowerrevenuesat697.7millionincreased33.4millionWholesalepowerrevenuesat63.0milliondecreased7.4millionOtherpowerrevenuesat40.4millionincreased11.1millionRSAdeferredrevenuesat18.3millionincreased5.1millionandOtheroperatingrevenuesat22.8milliondecreased0.3million.Retailpowerrevenueswerehigherasaresultofthe4.4across-the-boardrateincreaseeffectiveJanuary12013andthe1.2BPApass-throughrateadjustmenteffectiveinOctober2013.OperatingrevenuesweresupplementedbyTransfersfromtoratestabilizationaccountinaccordancewithOrdinanceNo.123260.Anet18.3millionofRSAunearnedrevenuewastransferred-intosupplementlowerthanbudgetnetwholesalerevenues.Thiswasinclusiveof21.0milliontransferredtounearnedrevenueinDecember2013correspondingtotheoperatingcashtransferredtotheRSAinexcessoftheestimatedamountneededtoachieveinexcessof1.80xdebtservicecoverageinaccordancewithOrdinanceNo.124426.TheDepartmentisrequiredtosetratesdesignedtoachievedebtservicecoverageof1.80x.Netwholesaleenergyrevenueswere43.2millionadecreaseof15.4millionor26.3fromnetwholesaleenergyrevenuesof58.6millionin2012.OnanannualbasistheDepartmentexpectstobeanetsellerinthewholesaleenergymarket.During2013lowersurplusenergyavailableforsaledespiteanincreaseinwholesalepowerpriceswasafactorinthecontinueddecliningtrendinrecentyearsoflowernetwholesaleenergyrevenues.Otherpowerrevenueswerehigherbyanet4.8millionfrom2012predominantlytheresultofhighervaluationofnetpowerexchangerevenuesbecauseofthehigherwholesalepowerprices.2012Comparedto2011Totaloperatingrevenueswere800.3millionanincreaseof28.1millionor3.6from2011.Retailpowerrevenuesat664.3millionincreased8.3millionWholesalepowerrevenuesat70.4milliondecreased32.3millionOtherpowerrevenuesat29.3milliondecreased25.3millionRSAdeferredrevenuesat13.2millionincreased75.4millionandOtheroperatingrevenuesat23.1millionincreased2.0million.Retailpowerrevenueswerehigherasaresultofthe3.2across-the-boardrateincreaseeffectiveJanuary12012.OperatingrevenueswereaugmentedbyTransfersfromtoratestabilizationaccountinaccordancewithOrdinanceNo.123260.Anet13.2millionofRSAdeferredrevenuewastransferred-intosupplementlowerthanbudgetnetwholesalerevenuescausingthefavorableswingof75.4millionfrom2011evenwith22.0milliontransferredtounearnedrevenueinDecember2012correspondingtotheoperatingcashtransferredtotheRSAinexcessoftheestimatedamountneededtoachievea1.85xdebtservicecoverageinaccordancewithOrdinanceNo.124059andbasedonthemostcurrentforecastofoperatingresultsavailable.Netwholesaleenergyrevenueswere58.6millionadecreaseof32.7millionor35.8fromnetwholesaleenergyrevenuesof91.3millionin2011.During2012lowerenergysurplusavailableforsalealongwithlowerwholesalepowerpriceswereprimefactorsforthedeclineinnetwholesaleenergyrevenuescomparedto2011.OtherpowerrevenueswerelowerasaconsequenceoflowerBPAconservationaugmentationrevenuerealizedastheoldaugmentationprogramendedinSeptember2011andthenewaugmentationprogramisbeingrecognizedovera20yearperiod.Furthermorepowerexchangerevenuesdecreasedbecauseofthelowerwholesalepowerprices.SEATTLECITYLIGHT2013AnnualReport29 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012EXPENSES2013Comparedto2012Operatingexpensestotaled711.0millionanincreaseof49.0millionor7.4from662.0millionin2012.Power-relatedexpensesat337.4millionwerehigherby24.1millionor7.7.TheseexpensesentailedBPApurchasedpowerof150.1millionwhichincreased0.8millionShort-termwholesalepowerpurchasesof19.8millionwhichincreased8.0millionpower-relatedwholesalepurchasesof14.1millionwhichincreased6.3millionandotherpower-relatedexpensesincludingTransmissionandGenerationof153.4millionwhichincreased9.0million.AlthoughMWhspurchasedforShort-termwholesalepowerpurchaseswerelowercomparedto2012thehigherwholesalepowerpricesduring2013addedtothehigherexpenses.Increasedtransactionsforpowerexchangesalongwiththehigherwholesalepowerpricesaccountedfortheincreasedpower-relatedwholesalepurchases.Thewrite-offforGorgesecondtunnelcostsof6.6millionplushigherFERCfeesof3.0millionoffsetbyoperationcostsencompassedthe9.0millionvarianceforotherpower-relatedexpenses.BPApurchasedpowerandtransmissionexpenseswerenotsignificantlydifferentfrom2012.Non-poweroperatingexpensesincreasedby13.0millionto192.0millionor7.3from179.0millionin2012.TheseexpensesincludedDistributionexpensesof59.5millionwhichdecreased1.3millionCustomerserviceof39.2millionwhichincreased7.9millionConservationof21.5millionwhichincreased0.8millionandAdministrativeandgeneralnetof71.7millionwhichincreased5.6million.Customerserviceexpensewashigherprimarilyduetohigherbillingandcollectionexpensesbillingsystemoperatingexpensesandbaddebtexpense.Thecomparativebaddebtexpensefor2012waslowerasaresultoflowerreceivablesinpartduetoimprovedcollections.AdministrativeandgeneralnetarehigherbecauseofhighersalariesforCOLAadjustmentsnewpositionsandhigherpensionandbenefitsexpenses.Taxesat79.3millionincreased4.4millionduetohigherrevenues.Depreciationandamortizationat102.3millionincreasedby7.5millionasaresultofadditionalplantassetsplacedinservice.2012Comparedto2011Operatingexpensestotaled662.0millionanincreaseof6.6millionor1.0from655.4millionin2011.Power-relatedexpensesat313.3millionwerelowerby1.4millionor0.4.TheseexpensesconsistedofBPApurchasedpowerof149.3millionwhichdecreased5.8millionShort-termwholesalepowerpurchasesof11.8millionwhichincreased0.4millionpower-relatedwholesalepurchasesof7.8millionwhichdecreased1.2millionandotherpower-relatedexpensesincludingTransmissionandGenerationof144.4millionwhichincreased5.2million.ThenetdecreaseinBPApurchasedpowerwasduetolowerSlicepurchasesforthevariablecomponentofthepowercontractoffsetbyhigherBlockpurchasesandlowerSlicetrue-upcreditin2012.Short-termpowerpurchasesacomponentofnetwholesaleenergyrevenueswereslightlyhigher.Power-relatedexpenseswerehigherduepredominantlytohigherpowerpurchasesfromtheGrandCouleePowerHydroAuthorityGCPHApowercontractrenewalenergyfromtheStatelinewindpowercontractandhighergenerationrelatedexpenses.SEATTLECITYLIGHT2013AnnualReport30 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012Non-poweroperatingexpensesat179.0millionincreasedincrementallyby0.7millionor0.4from178.3millionin2011.TheseexpensesincludedDistributionexpensesof60.9millionwhichincreased2.6millionCustomerserviceof31.3millionwhichdecreased11.9millionConservationof20.7millionwhichincreased1.6millionandAdministrativeandgeneralnetof66.1millionwhichincreased8.4million.Distributionexpenseswerehigherduetoincreasedeffortsdedicatedtoinspectionandmaintenanceofoverheadandundergrounddistributionlines.Customerserviceexpensedecreasedsignificantlyasaresultoflowerbaddebtexpensebecauseofloweroverallaccountsreceivableduringtheyearandnorecurrenceofasignificantbaddebtserviceadjustmentthatwastakenin2011.Administrativeandgeneralnetincreasedduetohigherpersonnelcostsandexpendituresassociatedwithlegalclaimsandenvironmentalcosts.Taxesat74.9millionincreased1.3millionduetothehigherrevenuesandDepreciationandamortizationof94.8millionincreased6.0millioninlargeparttheresultofdistributionassetsplacedinservice.NONOPERATINGREVENUESANDEXPENSESCAPITALCONTRIBUTIONSANDGRANTS2013Comparedto2012Nonoperatingrevenuesdecreasedby1.6millionto11.1millionin2013.Investmentincomewaslowerby4.4millionlargelyduetounrealizedlossesfortheDepartmentsshareoffairvalueadjustmentsfrominvestmentsinthecitycashpool.Thiswasoffsetbyhighersalesforseveralsurplusrealestatepropertiesof2.2millionand0.8millionofhighernoncapitalgrantsandotherrevenues.Nonoperatingexpensewasslightlylowerby0.5millionto79.3million.Higherinterestexpenseonpriorlienbondswasoffsetbylowercostsofissuanceamortizationofrefundinglossandhigherbondpremiumamortization.Capitalcontributionsandgrantsincreasedby17.9millionto49.7millionin2013.Capitalcontributionswerehigherby16.9primarilyduetohigherin-kindcontributionstotaling21.8millionincluding13.3millionofundergroundassetscontributedbytheSeattleDepartmentofTransportationfortheMercerEastcorridorprojectandotherconstructionprojects.Thesewereoffsetby8.9millionoflowerundergroundelectricalinfrastructureimprovementsforthecitiesofShorelineandBuriencomparedto2012.Capitalgrantsincreasedby1.0millionto1.8millionin2013mainlyforworkrelatedtotheSoundTransitNorthlinkprojectinprogress.2012Comparedto20112011notrestatedforGASBNo.65Nonoperatingrevenuesincreased2.2millionto12.7millionin2012.NoncapitalgrantsforenvironmentalcleanupandfromFEMAforthe2012stormincreasedbyatotalof1.4million.Thebalanceoftheincreasewasforhigherinterestearningsandhigherfederalsubsidiesforthe2012and2011taxablebonds.Nonoperatingexpenseincreased2.9millionto78.8millionin2012mostlytheresultofhigherinterestexpenseincurredforthe2012and2011bondsandforhigherbondissuecostsforthe2012bonds.2011bondissuecostswerenotrestatedfortheeffectofimplementingGASBNo.65.Capitalcontributionsandgrantsdecreasedby9.1millionto31.8millionin2012.Capitalcontributionswerehigherby1.9millionprincipallytheresultofadditionalundergroundelectricalinfrastructureSEATTLECITYLIGHT2013AnnualReport31 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012improvementsforthecitiesofShorelineandBurienoffsetbylowercapitalin-kindcontributionsfortheyearcomparedto2011.Capitalgrantsdecreasedby11.0millionto0.8millionin2012.Amajorcapitalgrantwasreceivedin2011fromthestateofWashingtonintheformofalandgrantforwildlifeconservationinthesurroundingareasoftheDepartmentsSkagitgeneratingfacilitieswithnocomparablegrantreceivedin2012.RISKMANAGEMENTTheDepartmentbeganimplementinganEnterprise-wideRiskManagementERMprocessin2008toestablishafullspectrumapproachtoriskmanagementthatlinksimportantdecisionmakingfunctionsthroughastandardizedprocessofidentifyingassessingmonitoringandmitigatingrisksacrossallBusinessUnitsandDivisionsoftheDepartment.RiskOversightCouncilROCoverseeswholesalepowermarketingactivities.ItiscomprisedoftheChiefFinancialOfficerChairPowerSupplyEnvironmentalAffairsOfficerDirectorofRiskOversightDirectorofPowerOperationsandMarketingnon-votingDirectorofPowerContractsResourceAcquisitionnon-votingandManagerofPowerOperationsandMarketingnon-voting.TheROCguidesthecontinuousimprovementofenergyriskmanagementactivitiesandcapabilitiesapproveshedgingstrategieshedgingplansandapproveschangestorelevantoperatingprocedures.TheRiskOversightDivisionmanagesthemarketandcreditriskrelatedtoallwholesalemarketingactivitiesandcarriesoutthemiddleofficefunctionsoftheDepartmentwhichincludesconfirmationsriskcontrolsindependentreportingofmarketpositionscounterpartycreditrisksettlementsandensuresadherencetoWholesaleEnergyRiskManagementWERMpolicyandprocedures.HydroRiskDuetotheDepartmentsprimaryrelianceonhydroelectricgenerationweathercansignificantlyaffectitsoperations.Hydroelectricgenerationdependsontheamountofsnow-packinthemountainsupstreamoftheDepartmentshydroelectricfacilitiesspringtimesnow-meltrun-offandrainfall.Hydroelectricoperationsarealsoinfluencedbyfloodcontrolandenvironmentalmattersincludingprotectionoffish.Inlow-wateryearstheDepartmentsgenerationisreducedandtheuseofwholesalepurchasedpowermayincreaseinordertomeetload.NormallytheDepartmentexperienceselectricityusagepeaksinwinterhoweverextremeweatherconditionsaffectingeitherheatingorcoolingneedscouldcausetheDepartmentsseasonalfluctuationstobemorepronouncedandincreasecosts.Inadditioneconomictrendsincreaseordecreaseinbusinessactivityhousingsalesanddevelopmentofpropertiescanaffectdemandandchangeorincreasecosts.EnergyMarketRiskFortheDepartmentenergymarketriskistheriskofadversefluctuationsinthepriceofwholesaleelectricitywhichiscompoundedbyvolumetricchangesaffectingtheavailabilityofordemandforelectricity.Factorsthatcontributetoenergymarketriskincluderegionalplannedandunplannedgenerationplantoutagestransmissionconstraintsordisruptionsthenumberofactivecreditworthymarketparticipantswillingtotransactandenvironmentalregulationsthatinfluencetheavailabilityofgenerationresources.TheDepartmentsexposuretohydrovolumetricandenergymarketriskismanagedbytheROCandtheapprovedstrategiesareexecutedbythePowerOperationsandMarketingDivision.TheDepartmentengagesinmarkettransactionstomeetitsloadobligationsandtorealizeearningsfromsurplusenergyresources.SEATTLECITYLIGHT2013AnnualReport32 THECITYOFSEATTLECITYLIGHTDEPARTMENTMANAGEMENTSDISCUSSIONANDANALYSISUNAUDITEDASOFANDFORTHEYEARSENDEDDECEMBER312013and2012WithasignificantportionoftheDepartmentsrevenueexpectedfromwholesaleenergymarketsalesgreatemphasisisplacedonthemanagementofrisksassociatedwiththisactivity.Policiesproceduresandprocessesdesignedtomanagecontrolandmonitortheserisksareinplace.Aformalfrontmiddleandbackofficestructureisinplacetoensurepropersegregationofduties.TheDepartmentmeasurestheriskinitsenergyportfoliousingamodelthatutilizeshistoricalsimulationmethodologyandincorporatesnotonlypriceriskbutalsothevolumetricriskassociatedwithitshydro-dominatedpowerportfolio.Scenarioanalysisisusedforstresstesting.CreditRiskCreditriskistheriskoflossthatwouldbeincurredasaresultofnonperformancebycounterpartiesoftheircontractualobligations.IfacounterpartyfailedtoperformonitscontractualobligationtodeliverelectricitythentheDepartmentmayfinditnecessarytoprocureelectricityatcurrentmarketpriceswhichmaybehigherthanthecontractprice.IfacounterpartyfailedtopayitsobligationinatimelymannerthiswouldhaveanimpactontheDepartmentsrevenueandcashflow.AswithmarketrisktheDepartmenthaspoliciesgoverningthemanagementofcreditrisk.Wholesalecounterpartiesareassignedcreditlimitsbasedonpubliclyavailableandproprietaryfinancialinformation.Alongwithratingsprovidedbynationalratingsagenciesaninternalcreditscoringmodelisusedtoclassifycounterpartiesintooneofseveralcategorieswithpermissiblerangesofcreditlimits.Specificcounterpartycreditlimitsaresetwithinthisprescribedrangebasedonqualitativeandquantitativefactors.Creditlimitsarealsousedtomanagecounterpartyconcentrationrisk.TheDepartmentisactivelyreducingconcentrationofcreditriskrelatedtogeographiclocationofcounterpartiesasitonlytransactsinthewesternenergymarkets.ThisgeographicconcentrationofcounterpartiesmayimpacttheDepartmentsoverallcreditexposurebecausecounterpartiesmaybeaffectedbysimilarconditions.Creditlimitsexposuresandcreditqualityareactivelymonitoredonadailybasis.DespitesucheffortsthereispotentialfordefaulthowevertheDepartmenthasnothadacounterpartydefaultinthelast10years.TheDepartmenttransactswithcounterpartiesonanuncollateralizedandcollateralizedbasis.Postedcollateralmaybeintheformofcashlettersofcreditorparentalguarantees.SEATTLECITYLIGHT2013AnnualReport33 THECITYOFSEATTLECITYLIGHTDEPARTMENTBALANCESHEETS-ASSETSANDDEFERREDOUTFLOWSOFRESOURCESASOFDECEMBER312013AND2012inmillions20132012ASSETSUTILITYPLANTAtoriginalcostPlant-in-serviceexcludingland3795.33593.4Lessaccumulateddepreciationandamortization1563.91511.2Totalplant-in-servicenet2231.42082.2Constructionwork-in-progress164.1132.4Nonoperatingpropertynetofaccumulateddepreciation8.76.9Assetsheldforfutureuse68.765.6Landandlandrights68.265.1Totalutilityplantnet2541.12352.2RESTRICTEDASSETSRatestabilizationaccount110.0128.3Municipallightandpowerbondreserveaccount46.834.2ConstructionCashandequityinpooledinvestments58.5106.0Debtserviceaccount4.2-Specialdepositsandotherrestrictedassets7.57.2Totalrestrictedassets227.0275.7CURRENTASSETSCashandequityinpooledinvestments193.8156.3Accountsreceivableincludes2.8and1.8atfairvaluenetofallowanceof9.4and8.163.265.5Interfundreceivable0.80.9Unbilledrevenues78.871.0Materialsandsuppliesataveragecost32.029.1Prepaymentsinterestreceivableandothercurrentassets0.50.7Totalcurrentassets369.1323.5OTHERASSETSConservationcostsnet214.3201.1EndangeredSpeciesActcostsnet2.32.4Environmentalcostsnet31.723.5Otherchargesandassetsnetrestated52.751.9Totalotherassets301.0278.9TOTALASSETS3438.23230.3DEFERREDOUTFLOWSOFRESOURCESChargesonadvancerefunding26.030.0TOTALASSETSANDDEFERREDOUTFLOWSOFRESOURCES3464.23260.3Seenotestofinancialstatements.SEATTLECITYLIGHT2013AnnualReport34 THECITYOFSEATTLECITYLIGHTDEPARTMENTBALANCESHEETS-LIABILITIESDEFERREDINFLOWSOFRESOURCESANDNETPOSITIONASOFDECEMBER312013AND2012inmillions20132012LIABILITIESLONG-TERMDEBTRevenuebonds1863.31778.6Plusbondpremium106.8104.8Lessbonddiscount0.10.1Lessrevenuebondscurrentportion99.791.8Totallong-termdebt1870.31791.5NONCURRENTLIABILITIESAccumulatedprovisionforinjuriesanddamages54.953.5Compensatedabsences15.515.1Othernoncurrentliabilities7.76.2Totalnoncurrentliabilities78.174.8CURRENTLIABILITIESAccountspayableandothercurrentliabilities90.787.3Interfundpayable9.77.8Accruedpayrollandrelatedtaxes7.56.3Compensatedabsences2.01.9Accruedinterest32.129.5Long-termdebtcurrentportion99.791.8Totalcurrentliabilities241.7224.6OTHERLIABILITIES19.215.4TOTALLIABILITIES2209.32106.3DEFERREDINFLOWSOFRESOURCESRatestabilizationunearnedrevenue85.0103.3Otherdeferredinflowsofresourcesincludes1.0and0.3atfairvalue15.79.2TOTALDEFERREDINFLOWSOFRESOURCES100.7112.5NETPOSITIONNetinvestmentincapitalassetsrestated906.1832.8RestrictedRatestabilizationaccount25.025.0Specialdepositsandotherpurposes0.40.7Totalrestricted24.625.7Unrestrictednetrestated223.5183.0Totalnetposition1154.21041.5TOTALLIABILITIESDEFERREDINFLOWSOFRESOURCESANDNETPOSITION3464.23260.3Seenotestofinancialstatements.SEATTLECITYLIGHT2013AnnualReport35 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFREVENUESEXPENSESANDCHANGESINNETPOSITIONFORTHEYEARSENDEDDECEMBER312013AND2012inmillions20132012OPERATINGREVENUESRetailpowerrevenues697.7664.3Short-termwholesalepowerrevenues63.070.4Otherpower-relatedrevenues40.429.3Transfersfromtoratestabilizationaccount18.313.2Otheroperatingrevenues22.823.1Totaloperatingrevenues842.2800.3OPERATINGEXPENSESLong-termpurchasedpowerBonneville150.1149.3Long-termpurchasedpowerother53.054.8Short-termwholesalepowerpurchases19.811.8Otherpowerexpenses26.418.1Generation40.032.3Transmission48.247.0Distribution59.560.8Customerservice39.231.3Conservation21.520.8Administrativeandgeneral71.766.1CityofSeattleoccupationtax42.840.9Othertaxes36.534.0Depreciationandamortization102.394.8Totaloperatingexpenses711.0662.0OPERATINGINCOME131.2138.3NONOPERATINGREVENUESANDEXPENSESOtherrevenuesandexpensesInvestmentincome0.85.2Noncapitalgrants3.22.8Gainonsaleofproperty2.20.2Otherincomenet4.94.5Totalotherrevenueandexpenses11.112.7InterestexpenseInterestexpense89.085.1Allowanceforfundsusedduringconstruction3.83.5Amortizationofrefundingloss4.24.7Amortizationofbondpremiumanddiscountrestated11.310.2Bondissuecostsrestated1.22.7Totalinterestexpense79.378.8Totalnonoperatingexpenses68.266.1INCOMEBEFORECAPITALCONTRIBUTIONSANDGRANTS63.072.2CAPITALCONTRIBUTIONSANDGRANTSCapitalcontributions47.931.0Capitalgrants1.80.8Totalcapitalcontributionsandgrants49.731.8CHANGEINNETPOSITION112.7104.0NETPOSITIONBeginningofyear1041.5946.8AdjustmentfortheimplementationofGASBStatementNo.65ItemsPreviouslyReportedasAssetsandLiabilities-9.3Beginningofyearrestated-937.5Endofyear1154.21041.5Seenotestofinancialstatements.SEATTLECITYLIGHT2013AnnualReport36 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFCASHFLOWSFORTHEYEARSENDEDDECEMBER312013AND2012inmillions20132012OPERATINGACTIVITIESCashreceivedfromcustomersandcounterparties811.6784.5Interfundoperatingcashreceived2.62.4Cashpaidtosuppliersemployeesandcounterparties478.9440.8Interfundoperatingcashpaid26.427.1Taxespaid79.275.5Netcashprovidedbyoperatingactivities229.7243.5NONCAPITALFINANCINGACTIVITIESNoncapitalgrantsreceived1.82.9Bonnevillereceiptsforconservation3.67.5Paymenttovendorsonbehalfofcustomersforconservation31.024.1Netcashusedinnoncapitalfinancingactivities25.613.7CAPITALANDRELATEDFINANCINGACTIVITIESProceedsfromlong-termdebtnetofpremium204.4387.6Paymenttotrusteefordefeasedbonds15.2170.5Bondissuecostspaid1.22.7Principalpaidonlong-termdebt91.889.0Interestpaidonlong-termdebt86.184.7Acquisitionandconstructionofcapitalassets257.2239.1Interfundpaymentsforacquisitionandconstructionofcapitalassets4.53.9Capitalcontributions30.633.0Interfundreceiptsforcapitalcontributions0.30.3Capitalgrantsreceived2.30.4Interestreceivedforsuburbaninfrastructureimprovements1.81.3Proceedsonsaleofpropert2.10.1IncreaseDecreaseinotherassets0.39.2Netcashusedincapitalandrelatedfinancingactivities214.2176.4INVESTINGACTIVITIESInterestreceivedpaidoninvestmentsandoncashandequityinpooledinvestments1.14.0Netcashprovidedbyusedininvestingactivities1.14.0NETINCREASEDECREASEINCASHANDEQUITYINPOOLEDINVESTMENTS11.257.4CASHANDEQUITYINPOOLEDINVESTMENTSBeginningofyear432.0374.6Endofyear420.8432.0Seenotestofinancialstatements.SEATTLECITYLIGHT2013AnnualReport37 THECITYOFSEATTLECITYLIGHTDEPARTMENTSTATEMENTSOFCASHFLOWS-RECONCILIATIONFORTHEYEARSENDEDDECEMBER312013AND2012inmillions20132012RECONCILIATIONOFOPERATINGINCOMETONETCASHPROVIDEDBYOPERATINGACTIVITIESOperatingincome131.2138.3AdjustmentstoreconcileoperatingincometonetcashprovidedbyoperatingactivitiesNon-cashitemsincludedinoperatingincomeDepreciation104.396.9Amortizationofotherliabilities0.40.2Amortizationofotherassets19.917.9Baddebtexpense5.10.3Powerrevenues27.018.1Powerexpenses26.719.4Provisionforinjuriesanddamages1.01.5Othernon-cashitems8.27.0ChangeinAccountsreceivable2.97.1Unbilledrevenues7.80.9Materialsandsupplies7.51.8Prepaymentsinterestreceivableandotherreceivables3.42.0Otherassets9.227.1Provisionforinjuriesanddamagesandclaimspayable0.416.7Accountspayableandotherpayables2.610.7Ratestabilizationunearnedrevenue18.313.2Totaladjustments98.5105.2Netcashprovidedbyoperatingactivities229.7243.5SUPPLEMENTALDISCLOSURESOFNONCASHACTIVITIESIn-kindcapitalcontributions22.30.5Amortizationofdebtrelatedcostsnetrestated7.15.5Changeinvaluationofpowerexchangeassetsorliabilities0.70.3Allowanceforfundsusedduringconstruction3.83.5Powerexchangerevenues5.24.0Powerexchangeexpenses5.04.2Powerrevenuenettedagainstpowerexpenses6.54.8Powerexpensenettedagainstpowerrevenues14.910.1Seenotestofinancialstatements.SEATTLECITYLIGHT2013AnnualReport38 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20121.OPERATIONSANDSUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESTheCityLightDepartmenttheDepartmentisthepublicelectricutilityofTheCityofSeattletheCity.TheDepartmentisanenterprisefundoftheCity.TheDepartmentownsandoperatescertaingeneratingtransmissionanddistributionfacilitiesandsupplieselectricitytoapproximately408000customers.TheDepartmentsupplieselectricalenergytootherCityagenciesatratesprescribedbyCityordinancesandtocertainneighboringcommunitiesunderfranchiseagreements.TheestablishmentoftheDepartmentsratesiswithintheexclusivejurisdictionoftheSeattleCityCouncil.ArequirementofWashingtonStatelawprovidesthatratesmustbefairnondiscriminatoryandfixedtoproducerevenueadequatetopayforoperationandmaintenanceexpensesandtomeetalldebtservicerequirementspayablefromsuchrevenue.TheDepartmentpaysoccupationtaxestotheCitybasedontotalrevenues.TheDepartmentsrevenuesforservicesprovidedtootherCitydepartmentswere18.3millionand18.4millionin2013and2012respectivelyand2.9millionfornon-energyservicesinboth2013and2012.TheDepartmentreceivescertainservicesfromotherCitydepartmentsandpaid44.9millionin2013and39.7millionin2012forsuchservices.AmountspaidincludecentralcostallocationsfromtheCityforservicesreceivedincludingtreasuryservicesriskfinancingpurchasingdataprocessingsystemsvehiclemaintenancepersonnelpayrolllegaladministrativeandbuildingrentalsincludingfortheDepartmentsadministrativeoffices.TheDepartmentsreceivablesfromotherCitydepartmentstotaled0.8millionand0.9millionatDecember312013and2012respectively.TheDepartmentspayablestootherCitydepartmentstotaled9.7millionand7.8millionatDecember312013and2012respectively.Thebalancesreceivableandpayablearetheresultoftransactionsincurredinthenormalcourseofoperations.BasisofPresentationandAccountingStandardsThefinancialstatementsarepreparedusingtheeconomicresourcesmeasurementfocusandtheaccrualbasisofaccountinginconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaasappliedtogovernmentalunits.Revenuesarerecordedwhenearnedandexpensesarerecordedwhenaliabilityisincurredregardlessofthetimingofrelatedcashflows.TheGovernmentalAccountingStandardsBoardGASBistheacceptedstandard-settingbodyforestablishinggovernmentalaccountingandfinancialreportingprinciples.TheDepartmenthasappliedandiscurrentthrough2013withallapplicableGASBpronouncements.EffectiveJanuary12013theDepartmentadoptedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.StatementNo.65establishesaccountingandfinancialreportingstandardsthatreclassifycertainitemsthatwerepreviouslyreportedasassetsandliabilitiesasdeferredoutflowsofresourcesordeferredinflowsofresourcesandrecognizeasexpensecertainitemsthatwerepreviouslyreportedasassets.TheDepartmentsbalancesheetsstatementsofrevenuesexpensesandchangesinnetpositionandstatementsofcashflowshavebeenreviseduponimplementationofStatementNo.65.Forcomparabilityprioryearbalanceshavebeenrestatedforpresentationwhereapplicabletoreflecttheeffectsoftheimplementationoftherevisedstandard.SEATTLECITYLIGHT2013AnnualReport39 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012UponimplementationofStatementNo.65Lossondebtrefundinghasbeenreclassifiedasadeferredoutflowofresourcesandisnolongerreportedasacontra-liabilitycomponentofLong-termdebt.UnearnedrevenueresultingfromtheRateStabilizationAccounthasbeenreclassifiedasadeferredinflowofresourcesfromotherliabilitiesandthreeregulatorycreditshavebeenreclassifiedasotherdeferredinflowsofresourcesfromotherliabilities.AdditionallydebtissuancecostswhichhadpreviouslybeenrecordedasacomponentofOtherassetsandamortizedoverthelifeofthebondsarenowexpensedasNonoperatingexpenseintheperiodincurred.TheeffectsoftheimplementationofStatementNo.65arediscussedinmoredetailinNote8Long-TermDebt.EffectiveJanuary12012theDepartmentadoptedStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.StatementNo.62incorporatesintotheGASBsauthoritativeliteraturecertainaccountingandreportingliteratureissuedbytheFinancialAccountingStandardsBoardFASBandAmericanInstituteofCertifiedPublicAccountantsAICPAonorbeforeNovember301989whichisnotinconflictwithorcontradictedbyGASBpronouncements.ThisliteratureincludesFASBStatementsandInterpretationsAccountingPrinciplesBoardOpinionsandAccountingResearchBulletinsoftheAICPACommittee.UponimplementationofStatementNo.62theDepartmentfollowsguidanceissuedbyGASBunlessaparticulartopicisnotaddressedbyGASB.InthatcasetheDepartmentwouldfollowotheraccountingliteraturefromtheFASBthatisconsideredalowertierofGAAPthanstandardspromulgatedbytheGASB.ChangestodisclosuresrelatedtononmonetarytransactionswerenecessaryuponimplementationofStatementNo.62.SincetheStatementcoversnonmonetarytransactionstheDepartmentnolongerfollowsreportingrequirementsforsuchtransactionsunderFASBAccountingStandardsCodification820FairValueMeasurementsandDisclosures.TheDepartmentsnonmonetarytransactionsrelatetoexchangeenergydiscussedinmoredetailinNote16Long-TermPurchasedPowerExchangesandTransmission.NochangestotheaccountinginareasaffectedbyStatementNo.62werenecessary.ChangestothecitationsofaccountingliteratureareshownforregulatoryaccountinginNote3RateStabilizationAccountNote6OtherAssetsNote13OtherLiabilitiesandNote15Short-TermEnergyContractsandDerivativeInstruments.EffectiveJanuary12012theDepartmentadoptedStatementNo.63oftheGASBFinancialReportingofDeferredOutflowsofResourcesDeferredInflowsofResourcesandNetPosition.StatementNo.63providesreportingguidancerelatedtodeferredoutflowsofresourcesanddeferredinflowsofresourcesaswellasrenamingequityornetassetstonetposition.TheDepartmentsbalancesheetsstatementsofrevenuesexpensesandchangesinnetpositionandstatementsofcashflowshavebeenreviseduponimplementationofStatementNo.63.TheGASBhasapprovedGASBStatementNo.68AccountingandFinancialReportingforPensionsanamendmentofGASBStatementNo.27StatementNo.69GovernmentCombinationsandDisposalsofGovernmentOperationsStatementNo.70AccountingandFinancialReportingforNonexchangeFinancialGuaranteesandStatementNo.71PensionTransitionforContributionsMadeSubsequenttotheMeasurementDateanamendmentofGASBStatementNo.68.ThesestatementswillbeeffectivefortheDepartmentinfutureyearsandapplicationofthesestandardsmayrestateportionsofthesefinancialstatements.FairValueMeasurementsDescriptionsoftheDepartmentsaccountingpoliciesonfairvaluemeasurementsforitemsreportedonthebalancesheetsatDecember312013and2012areasnotedinSEATTLECITYLIGHT2013AnnualReport40 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012thefollowingparagraphNote5AccountsReceivableandNote16Long-TermPurchasedPowerExchangesandTransmission.FairValueofFinancialInstrumentsTheDepartmentsfinancialinstrumentsarereportedonthebalancesheetsatDecember312013and2012asRestrictedassetsandCashandequityinpooledinvestmentsaremeasuredatfairvalue.TheseinstrumentsconsistprimarilyoftheDepartmentsshareoftheCity-widepoolofinvestmentsseeNote4CashandEquityinPooledInvestmentsandInvestments.GainsandlossesonthesefinancialinstrumentsarereflectedinInvestmentincomeinthestatementsofrevenuesexpensesandchangesinnetposition.Long-termdebtatDecember312013and2012isdisclosedatfairvalueseeNote8Long-TermDebt.NetPositionTheDepartmentclassifiesitsnetpositionintothreecomponentsasfollowsNetinvestmentincapitalassetsThiscomponentconsistsofcapitalassetsnetofaccumulateddepreciationandamortizationreducedbythenetoutstandingdebtbalancesrelatedtocapitalassetsnetofunamortizeddebtexpenses.RestrictedThiscomponentconsistsofnetpositionwithconstraintsplacedonuse.ConstraintsincludethoseimposedbycreditorssuchasthroughdebtcovenantsandexcludingamountsconsideredinnetcapitalabovegrantsorlawsandregulationsofothergovernmentsorbyenablinglegislationTheCityofSeattleCharterorbyordinanceslegislatedbytheSeattleCityCouncil.UnrestrictedThiscomponentconsistsofassetsandliabilitiesthatdonotmeetthedefinitionofNetinvestmentincapitalassetsorRestricted.RestrictedandUnrestrictedNetPositionTheDepartmentspolicyistouserestrictednetpositionforspecifiedpurposesandtouseunrestrictednetpositionforoperatingexpenses.TheDepartmentdoesnotcurrentlyincurexpensesforwhichbothrestrictedandunrestrictednetpositionisavailable.AssetsHeldforFutureUseTheseassetsincludepropertyacquiredbutneverusedbytheDepartmentinelectricalserviceandthereforeheldforfutureserviceunderadefinitiveplan.Alsoincludedispropertypreviouslyusedinservicebutretiredandheldpendingitsreuseinthefutureunderadefinitiveplan.AsofDecember312013and2012Assetsheldforfutureuseincludedthefollowingelectricalplantassetslandforfuturesubstationsductsandvaultstransmissionlinesandplansforadditionalhydraulicgeneratingcapacitytotaling68.7millionand65.6millionrespectively.MaterialsandSuppliesMaterialsandsuppliesaregenerallyusedforconstructionoperationandmaintenanceworknotforresale.Theyarevaluedutilizingtheaveragecostmethodandchargedtoconstructionorexpensewhenused.RevenueRecognitionServiceratesareauthorizedbyCityordinances.Billingsaremadetocustomersonamonthlyorbimonthlybasis.RevenuesforenergydeliveredtocustomersbetweenthelastbillingdateandtheendoftheyearareestimatedandreflectedintheaccompanyingfinancialstatementsasunbilledrevenuewithinRetailpowerrevenues.SEATTLECITYLIGHT2013AnnualReport41 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012TheDepartmentscustomerbaseaccountedforelectricenergysalesatDecember312013and2012asfollows20132012Residential37.336.5Nonresidential62.763.5Total100.0100.0Revenuesearnedintheprocessofdeliveringenergytocustomerswholesaleenergytransactionsandrelatedactivitiesareconsideredoperatingrevenuesinthedeterminationofchangeinnetposition.InvestmentincomenonexchangetransactionsandotherrevenuesareconsideredNonoperatingrevenues.ExpenseRecognitionExpensesincurredintheprocessofdeliveringenergytocustomerswholesaleenergytransactionsandrelatedactivitiesareconsideredoperatingexpensesinthedeterminationofnetincome.DebtinterestexpensedebtrelatedamortizationandcertainotherexpensesareconsideredNonoperatingexpenses.AdministrativeandGeneralOverheadCostsAppliedCertainadministrativeandgeneraloverheadcostsareallocatedtoconstructionwork-in-progressmajordataprocessingsystemsdevelopmentprogrammaticconservationrelicensingmitigationprojectsandbillableoperationsandmaintenanceactivitiesbasedonratesestablishedbycoststudies.Pensionandbenefitcostsareallocatedtocapitalandoperationsandmaintenanceactivitiesbasedonapercentageoflabordollars.Theadministrativeandgeneraloverheadcostsappliedtotaled42.2millionand37.5millionin2013and2012respectively.Pensionandbenefitcostswere50.1millionand43.0millionin2013and2012respectively.Administrativeandgeneralexpensesnetoftotalappliedoverheadwere71.7millionand66.1millionin2013and2012respectively.InterestChargedtoConstructionInterestischargedforfundsusedduringconstructionofplantassetsandtononbillableconstructionwork-in-progress.InterestchargedrepresentstheestimatedcostsoffinancingconstructionprojectsandiscomputedusingtheDepartmentsweighted-averageinterestrateforallbondsoutstandingthemajorityofwhicharetaxexemptandisrevisedwhennewbondsareissuedandattheendoftheyear.Interestchargedtoconstructiontotaled3.8millionand3.5millionin2013and2012respectivelyandisreflectedasareductionofInterestexpenseinthestatementsofrevenuesexpensesandchangesinnetposition.NonexchangeTransactionsCapitalcontributionsandgrantsintheamountof52.9millionand34.6millionarereportedfor2013and2012respectivelyinthestatementsofrevenuesexpensesandchangesinnetpositionasnonoperatingrevenuesfromnonexchangetransactions.Capitalcontributionsandgrantsrevenuesarerecognizedbasedontheaccrualbasisofaccounting.In-kindcapitalcontributionsarerecognizedatestimatedfairvalueintheperiodwhenalleligibilityrequirementshavebeenmetasdescribedinGASBStatementNo.33AccountingandFinancialReportingforNonexchangeTransactions.Federalandstategrantrevenuesarerecognizedasearnedandaresubjecttocontractandothercomplianceaudits.SEATTLECITYLIGHT2013AnnualReport42 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012CompensatedAbsencesRegularemployeesoftheDepartmentearnvacationtimeinaccordancewithlengthofservice.Amaximumof480hoursmaybeaccumulatedforthemosttenuredemployeesanduponterminationemployeesareentitledtocompensationforunusedvacation.Uponretirementemployeesreceivecompensationequivalentto25oftheiraccumulatedsickleave.Effective2006onlyemployeesrepresentedbyunionswhovotedinfavorofaHealthcareReimbursementArrangementHRAreceive35oftheirsickleavebalancetax-freethroughanHRAaccountforhealthcareexpensespostretirement.BecauseofthespecialtaxarrangementthesickleavebalancemayonlygointotheHRAaccountitmaynotbetakenasacashout.TheHRAprogramisadministeredbyanindependentthirdpartyadministratorMeritainHealth.HRAinvestmentsaremanagedbyHRAVEBATrust.TheDepartmentaccruesallcostsassociatedwithcompensatedabsencesincludingpayrolltaxes.UseofEstimatesThepreparationofthefinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectamountsreportedinthefinancialstatements.TheDepartmentusedsignificantestimatesindeterminingreportedallowancefordoubtfulaccountsUnbilledrevenuespowerexchangesaccumulatedprovisionforinjuriesanddamagesandworkerscompensationenvironmentalliabilitiesaccruedsickleaveotherpostemploymentbenefitsandothercontingencies.Actualresultsmaydifferfromthoseestimates.SignificantRiskandUncertaintyTheDepartmentissubjecttocertainbusinessrisksthatcouldhaveamaterialimpactonfutureoperationsandfinancialperformance.Theserisksincludefinancialmarketliquidityandeconomicuncertaintypricesonthewholesalemarketsforshort-termpowertransactionsinterestratesandotherinputsandtechniquesforfairvaluationwaterconditionsweatherclimatechangeandnaturaldisaster-relateddisruptionsterrorismcollectivebargaininglabordisputesfishandotherEndangeredSpeciesActESAissuesEnvironmentalProtectionAgencyEPAregulationscompliancewithcleanandrenewableenergylegislationfederalgovernmentregulationsorordersconcerningtheoperationsmaintenanceandorlicensingofhydroelectricfacilitiesothergovernmentalregulationsrestructuringoftheelectricalutilityindustryandthecostsofconstructingtransmissionfacilitiesthatmaybeincurredaspartofanorthwestregionaltransmissionsystemandrelatedeffectsofthissystemontransmissionrightstransmissionsalessurplusenergyandgovernance.ReclassificationsCertain2012accountbalanceshavebeenreclassifiedtoconformtothe2013presentation.2.UTILITYPLANTUtilityPlantUtilityplantisrecordedatoriginalcostwhichincludesbothdirectcostsofconstructionoracquisitionandindirectcostsincludinganallowanceforfundsusedduringconstruction.Thecapitalizationthresholdwas5000in2013and2012.Plantconstructedwithcapitalcontributionsorcontributionsin-aid-ofconstructionreceivedfromcustomersisincludedinUtilityplant.Capitalcontributionsandcapitalgrantstotaled49.7millionin2013and31.8millionin2012.TheDepartmentusesastraight-linecompositemethodofdepreciationandamortizationandthereforegroupsassetsintocompositegroupsforpurposesofdepreciation.Estimatedeconomiclivesrangefrom4to57years.TheDepartmentusesahalf-yearconventionmethodontheassumptionthatadditionsandreplacementsareplacedinserviceatmid-year.Depreciationandamortizationexpenseasapercentageofdepreciableutilityplant-in-servicewasapproximately2.7in2013and2.6in2012.Whenoperatingplantassetsareretiredtheiroriginalcosttogetherwithretirementcostsandremovalcostslesssalvageischargedtoaccumulateddepreciationoramortizationifapplicable.ThecostofSEATTLECITYLIGHT2013AnnualReport43 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012maintenanceandrepairsischargedtoexpenseasincurredwhilethecostofreplacementsandbettermentsiscapitalized.TheDepartmentperiodicallyreviewslong-livedassetsforimpairmenttodeterminewhetheranyeventsorcircumstancesindicatethecarryingvalueoftheassetsmaynotberecoverableovertheireconomiclives.AsofDecember312013assetsof2.5millionwereidentifiedastemporarilyimpairedduetoconstructionstoppageinorderthattheDepartmentcouldfocusonotherhigherpriorityprojects.Oftheprojectsthatweretemporarilyimpaired1.8millionisincludedinConstructionwork-in-progressand0.7millionisincludedinAssetsheldforfutureuse.During20136.6millionrelatedtotheintaketunnelprojectthathadbeenreportedinAssetsheldforfutureusewaswrittenoffasoperatingexpenseduetoanindefiniteplanofcompletion.Intangibleassetsarethosethatlackphysicalsubstancearenonfinancialinnatureandhaveusefullivesextendingbeyondasinglereportingperiod.TheDepartmentsintangibleassetsarereportedascapitalassetsunderUtilityPlant.TheDepartmentsintangibleassetsconsistofeasementspurchasedandinternallydevelopedsoftwaretransmissionrightscapitalizedrelicensingcostsforSkagitandBoundaryhydroelectricprojectsTolthydroelectricprojectmitigationcostsandcostscapitalizedundertheHighRossAgreement.SEATTLECITYLIGHT2013AnnualReport44 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012Utilityplant-in-serviceatoriginalcostexcludinglandatDecember312013and2012wasHydroelectricProductionTransmissionDistributionGeneralIntangibleTotal2013inmillionsOriginalcostBeginningbalance714.7189.91966.9310.4411.53593.4Capitalacquisitions59.513.3121.510.029.6233.9Dispositions13.01.311.215.20.541.2Transfersandadjustments--9.2--9.2Totaloriginalcost761.2201.92086.4305.2440.63795.3AccumulateddepreciationandamortizationBeginningbalance357.376.1720.6193.2164.01511.2Increaseinaccumulateddepreciationandamortization14.04.461.116.113.7109.3Retirements20.42.717.915.50.557.0Retirementwork-in-progress0.2-0.2--0.4Totalaccumulateddepreciationandamortization351.177.8764.0193.8177.21563.9Endingbalance410.1124.11322.4111.4263.42231.4HydroelectricProductionTransmissionDistributionGeneralIntangibleTotal2012inmillionsOriginalcostBeginningbalance703.0163.51847.8315.5395.03424.8Capitalacquisitions21.727.2127.714.516.5207.6Dispositions10.00.87.819.6-38.2Transfersandadjustments--0.8--0.8Totaloriginalcost714.7189.91966.9310.4411.53593.4AccumulateddepreciationandamortizationBeginningbalance355.373.8677.1199.6151.51457.3Increaseinaccumulateddepreciationandamortization13.54.058.213.412.5101.6Retirements11.81.916.319.9-49.9Retirementwork-in-progress0.30.21.60.1-2.2Totalaccumulateddepreciationandamortization357.376.1720.6193.2164.01511.2Endingbalance357.4113.81246.3117.2247.52082.2SEATTLECITYLIGHT2013AnnualReport45 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20123.RATESTABILIZATIONACCOUNTTheSeattleCityCouncilpassedordinancestoestablishsetparametersandprovideafundingmechanismforaRatestabilizationaccountRSA.TheRSAwasestablishedtoreducetheneedforrapidandsubstantialrateincreasessolelytocomplywiththeDepartmentsbondcovenants.InMarch2010theSeattleCityCounciladoptedResolutionNo.31187andOrdinanceNo.123260establishingrevisedfinancialpoliciesandadditionalparametersfortheRSAcreatedbyOrdinanceNo.121637in2004.InMay2010the25.0millionintheContingencyReserveAccountwastransferredtotheRateStabilizationAccountinaccordancewithOrdinanceNo.123260.TherevisedfinancialpoliciesincludethreemainelementsaadditionalparametersforthefundingoperationandexpenditureofamountswithintheRSAtogetherwiththecreationofautomaticratesurchargestoreplenishtheRSAbarate-settingguidelinetomaintaindebtservicecoverageof1.8xandcarequirementforrevenuefundingaportionoftheDepartmentscapitalprogramsothatonaverageitwillbe40.0fundedfromoperatingcash.OrdinanceNo.123260identifiedthesourcesofsignificantfundingoftheRSAandspecifiedthattheRSAistobeaccessedwhensurpluspowersalesdeviatefromplannedamounts.TheRSAwouldbedrawndowntosupplementrevenueswhensurpluspowersalesrevenuesarebelowtheforecastedamountandconverselydepositswouldbemadetotheRSAifthesurpluspowersalesrevenuesaregreaterthanforecasted.OrdinanceNo.123260establishedatargetsizefortheRSAofnolessthan100.0millionandnogreaterthan125.0millionandauthorizedtheimpositionofautomatictemporarysurchargesonelectricratesrangingbetween1.5and4.5whentheRSAbalanceiswithinthebelowspecifiedlevelsRSABalanceActionLessthanorequalto90.0millionbutgreaterthan80.0millionAutomatic1.5surchargeLessthanorequalto80.0millionbutgreaterthan70.0millionAutomatic3.0surchargeLessthanorequalto70.0millionbutgreaterthan50.0millionAutomatic4.5surchargeLessthanorequalto50.0millionCityCouncilmustinitiateratereviewanddetermineactionstoreplenishRSAto100.0millionwithin12monthsInFebruary2014andNovember2012theSeattleCityCounciladoptedOrdinanceNos.124426and124059respectivelyrequiringtheRSAtobefundedatalevelthatreducedordelayedthelikelihoodofratesurchargesforyears2014and2013.OrdinanceNo.124426wasretroactivetoDecember2013.BothordinancesalsoprovidedforthetransfertotheRSAofoperatingcashinexcessoftheestimatedamountsneededtoachieveinexcessof1.8xand1.85xdebtservicecoverageforyears2013and2012.OrdinanceNo.123757requiredaratereviewwhenevertheRSAbalanceexceeded125.0millionalongwiththeimplementationofmeasurestoreducetheRSAbalanceto125.0millionwithinaperiodof12monthsorless.SubsequenttoOrdinanceNo.123757theSeattleCityCounciladoptedOrdinanceNo.124108inFebruary2013whichextendedthetimingoftheratereviewtoaneffectivedateofJanuary12014whenevertheRSAbalanceexceeds125.0million.OrdinanceNo.124108wasretroactivetoJanuary12013.TheRSAbalancewasgreaterthan125.0millionatDecember312012SEATTLECITYLIGHT2013AnnualReport46 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012andwaslessthan125.0millionatDecember312013.Nosurchargeswereineffectduring2013and2012.In2013actualsurpluspowersalesrevenueswerelessthantheforecastedsurplussalesrevenuesandaccordinglyfundsof40.0millionwerewithdrawnfromtheRSAtosupplementrevenues.Interestincomeof0.7millionwasearnedontheRSA.Theestimatedexcessofoperatingcashtoachieveinexcessof1.80xdebtservicecoveragewas21.0millionandthisamountwastransferredtotheRSAfromoperatingcashinDecember2013.Net2013RSAcashtransferredtooperatingcashwas18.3million.In2012actualsurpluspowersalesrevenueswerelessthantheforecastedsurplussalesrevenuesandaccordinglyfundsof36.2millionwerewithdrawnfromtheRSAtosupplementrevenues.Interestincomeof1.0millionwasearnedontheRSA.Theestimatedexcessofoperatingcashtoachieve1.85xdebtservicecoveragewas22.0millionandthisamountwastransferredtotheRSAfromoperatingcashinDecember2012.Net2012RSAcashtransferredtooperatingcashwas13.2million.The25.0milliontransferredfromtheContingencyReserveAccounttotheRateStabilizationAccountinMay2010exceedsthebalanceofunearnedrevenuerelatedtotheRateStabilizationAccountandisincludedinRestrictednetposition.TheRatestabilizationaccountatDecember312013and2012consistedofcashfromthefollowingsourcesinmillions20132012RatestabilizationaccountBeginningbalance128.3141.5RSAinterestincome0.71.0Operatingrevenue19.014.2Endingbalance110.0128.3RSAtransactionsarerecordedinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncements.TheregulatorydeferredinflowofresourcesRatestabilizationunearnedrevenueaccountatDecember312013and2012consistedofthefollowinginmillions20132012Unearnedrevenue-ratestabilizationaccountBeginningbalance103.3116.5RSAinterestincome0.71.0Operatingrevenue19.014.2Endingbalance85.0103.3SEATTLECITYLIGHT2013AnnualReport47 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012TransfersfromtoratestabilizationaccountinthestatementsofrevenuesexpensesandnetpositionatDecember312013and2012wereasfollowsinmillions20132012Transfersfromtoratestabilizationaccount18.313.24.CASHANDEQUITYINPOOLEDINVESTMENTSANDINVESTMENTSCashandEquityinPooledInvestmentsCashresourcesoftheDepartmentarecombinedwithcashresourcesoftheCitytoformapoolofcashthatismanagedbytheCitysDepartmentofFinanceandAdministrativeServicesFAS.UndertheCitysinvestmentpolicyalltemporarycashsurplusesinthepoolareinvested.TheDepartmentsshareofthepoolisincludedonthebalancesheetsasCashandequityinpooledinvestmentsorasrestrictedassets.ThepooloperateslikeademanddepositaccountinthatalldepartmentsincludingtheDepartmentmaydepositcashatanytimeandcanalsowithdrawcashoutofthepooluptotheamountoftheDepartmentsfundbalancewithoutpriornoticeorpenalty.Accordinglythestatementsofcashflowsreconciletocashandequityinpooledinvestments.TheCityconsidersinvestmentsinfinancialinstrumentshavingamaturityof90daysorlessasacashequivalent.CustodialCreditRiskofDepositsCustodialriskistheriskthatintheeventofbankfailureforoneoftheCitysdepositoryinstitutionstheCitysdepositsmaynotbereturnedinatimelymannerorinthecaseofcollateralizedsecuritiestheCitymaynotbeabletorecoverthecollateralheldinthepossessionofanoutsideparty.AsofDecember312013and2012theCitydidnothavecustodialrisk.TheCitysdepositsarecoveredbyinsuranceprovidedbytheFederalDepositInsuranceCorporationFDICandtheNationalCreditUnionAssociationNCUAaswellasprotectionprovidedbytheWashingtonStatePublicDepositProtectionCommissionPDPCasestablishedintheRevisedCodeofWashingtonRCW39.58.ThePDPCmakesandenforcesregulationsandadministersaprogramtoensurepublicfundsdepositedinbanksandthriftsareprotectedifafinancialinstitutionbecomesinsolvent.ThePDPCapproveswhichbankscreditunionsandthriftscanholdstateandlocalgovernmentdepositsandmonitorscollateralpledgedtosecureuninsuredpublicdeposits.ThissecurespublictreasurersdepositswhentheyexceedtheamountinsuredbytheFDICorNCUAbyrequiringbankscreditunionsandthriftstopledgesecuritiesascollateral.AsofDecember312013and2012theCityheld95000initscashvault.AdditionalsmallamountsofcashwereheldindepartmentalrevolvingfundaccountswiththeCitysvariouscustodialbanksallofwhichfellwithintheNCUAandFDICs250000standardmaximumdepositinsuranceamount.AnyoftheCityscashnotheldinitsvaultoralocaldepositorywasheldintheCitysoperatingfundinvestmentpoolandatthecloseofeverybusinessdayanycashremainingintheoperatingfundissweptintoanovernightrepurchaseagreementthatmaturesthenextday.InvestmentsTheDepartmentscashresourcesmaybeinvestedbyFASseparatefromthecashandinvestmentspool.InvestmentsaremanagedinaccordancewiththeCitysinvestmentpolicywithlimitsandrestrictionsappliedattheCity-widelevelratherthantospecificinvestmentsoftheDepartment.TheCityisauthorizedtopurchaseU.S.TreasuryandgovernmentagencysecuritiescertificatesofdepositsandotherinvestmentdepositsissuedbyWashingtonStatedepositoriesthatqualifyundertheSEATTLECITYLIGHT2013AnnualReport48 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012WashingtonStateDepositProtectionActasdefinedbyRCW39.58bankersacceptancespurchasedinthesecondarymarketcommercialpaperpurchasedinthesecondarymarketandhavingreceivedthehighestratingbyatleasttwonationallyrecognizedratingagenciesrepurchaseandreverserepurchaseagreementswithprimarydealersthathaveexecutedmasterrepurchaseagreementspublicfundsinthelocalgovernmentinvestmentpoolLGIPintheStateTreasuryandothersecuritiesasauthorizedbylaw.TheCityofSeattlehasthefollowingpoliciesinmanagingitsinvestmentsTheCityseekstopreserveprincipalwhilemaximizingincomeandmaintainingliquiditytomeettheCitysneedforcash.InvestmentdecisionsshouldfurthertheCityssocialpoliciesestablishedbyordinanceorpolicyresolutionsoftheCityCouncil.ACitysocialpolicyshalltakeprecedenceoverfurtheringtheCitysfinancialobjectiveswhenexpresslyauthorizedbyCityCouncilresolutionexceptwhereotherwiseprovidedbylawortrustprinciples.Securitiespurchasedshallhaveamaximummaturityoffifteenyearsandtheaveragematurityofallsecuritiesshallbelessthanfiveyears.Alltransactionsareexecutedonadelivery-versus-paymentbasis.ThestandardofprudencetobeusedbyinvestmentpersonnelshallbethePrudentPersonRuleandwillbeappliedinthecontextofmanaginganoverallportfolio.Securitiesshallnotbepurchasedwithtradingorspeculationasthedominantcriterionfortheselectionofthesecurity.InvestmentsarerecordedatfairvaluebasedonquotedmarketpricesinaccordancewithStatementNo.31oftheGASB.Fairvalueistheamountatwhichafinancialinstrumentcouldbeexchangedinacurrenttransactionbetweenwillingpartiesotherthaninaforcedorliquidationsale.AsofDecember312013and2012theDepartmentsdedicatedinvestmentsandtheCityspoolandotherinvestmentswereasfollowsSEATTLECITYLIGHT2013AnnualReport49 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20122013Weihted-inmillionsDedicatedCitOtherAveraeInvestmentsofPooledCitDedicatedMaturittheDeartmentInvestmentsPoolTotalDasRepurchaseagreements-44.8-44.82U.S.treasuriesandU.S.government-backedsecurities-227.7-227.7902U.S.governmentagenciessecurities-666.8-666.8880U.S.governmentagencymortgage-backedsecurities-186.8-186.82077Commercialpaper-155.0-155.047Municipalbonds-156.8-156.8818Total-1437.9-1437.9Portfolioweighted-averagematurity915FairValue2012Weihted-inmillionsDedicatedCitOtherAveraeInvestmentsofPooledCitDedicatedMaturittheDeartmentInvestmentsPoolTotalDasRepurchaseagreements-162.4-162.44U.S.treasuriesandU.S.government-backedsecurities-67.4-67.4482U.S.governmentagenciessecurities-647.7-647.7535U.S.governmentagencymortgage-backedsecurities-156.2-156.22162Commercialpaper-177.0-177.040Municipalbonds-182.2-182.2549Total-1392.9-1392.9Portfolioweighted-averagematurity592FairValueAsofDecember312013and2012theDepartmentsshareoftheCitypoolwasasfollowsinmillions20132012CashandequityinpooledinvestmentsRestrictedassets227.0275.7Currentassets193.8156.3Total420.8432.0BalanceasapercentageofCitypool29.331.0FairValueofPooledInvestmentsFairvalueoftheCitysPooledinvestmentsfluctuateswithchangesininterestratesandtheunderlyingsizeofthePooledinvestmentportfolio.AsofMarch31SEATTLECITYLIGHT2013AnnualReport50 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20122014theinterestratesforU.S.Treasurysecuritieshaverisenslightlyinjustthe2-and3-yearpartoftheyieldcurverelativetoDecember312013.TomitigateinterestrateriskintheCitysPooledinvestmentportfoliotheCitytypicallyholdsitsinvestmentstomaturityandmanagesitsmaturitiestoensuresufficientmonthlycashflowtomeetitsliquidityrequirements.ThedecreasednetchangeinthefairvalueoftheCitysPooledinvestmentsduringthefirstquarterof2014andthustheDepartmentsshareinthePooledinvestmentswascommensuratewiththeoveralldeclineinthePooledinvestmentportfolioforCityliquidityrequirementsandlesssignificantduetochangesininterestrates.InterestRateRiskInterestrateriskistheriskthatchangesininterestratesovertimewilladverselyaffectthefairvalueofaninvestment.TheCitysinvestmentpolicylimitsthematurityofindividualsecuritiestofifteenyearsandlimitstheweightedaveragematurityofthetotalinvestmentportfoliotonolongerthanfiveyearswhichmitigatesinterestraterisk.CreditRiskCreditriskistheriskthatanissuerorothercounterpartytoaninvestmentwillnotfulfillitsobligations.TheCitymitigatescreditriskinseveralwaysasdescribedbelow.BystatestatutesandtheCitysinvestmentpolicytheCitymaypurchasesecuritiesthatcarrythehighestcreditratingsissuedbyMoodysInvestorsServiceStandardPoorsandorFitchRatings.SecuritiespurchasedmusthavethefollowingratingsatthetimeofpurchaseSecuritiesbackedbyissuerswithlong-termcreditratingsofAaaAa1andAa2byMoodysInvestorsServiceAAAAAandAAbyStandardPoorsandAAAAAandAAbyFitchRatingsandsecuritiesbackedbyissuershavingshort-termratingsofMIG1VMIG1andP1byMoodysInvestorsServiceA1andA1byStandardPoorsandF1andF1byFitchRatings.TheCityinvestsinU.S.TreasurysecuritieswhichareconsideredfreeofcreditriskandinsecuritiesbackedbythefullfaithandcreditoftheU.S.governmentsuchasbondsissuedbytheDepartmentofHousingandUrbanDevelopmentHUD.TheCityalsoinvestsinsecuritiesissuedbyU.S.governmentsponsoredenterprisesincludingFederalNationalMortgageAssociationFederalHomeLoanBankandFederalHomeLoanMortgageCorporation.MaterialcreditriskintheCitysinvestmentportfolioresidesinitsholdingsofcommercialpaperandmunicipalsecurities.InaccordancewithstatestatutesandtheCitysinternalinvestmentpolicytheCitymanagesthatcreditriskbypurchasingsecuritiesbackedbyissuershavinglong-termandshort-termcreditratingsasnotedabove.TheCityalsosubscribestoasset-backedcommercialpaperresearchfromMoodysInvestorsServiceandFitchRatingsconductsinternalduediligenceofcommercialpaperandmunicipalissuersandmaintainsanapprovedlistofcommercialpaperissuersbaseduponinternalandexternalcreditresearch.ConcentrationofCreditRiskConcentrationriskistheriskoflossattributedtothemagnitudeofinvestmentsinasingleissuer.InaccordancewiththeCitysinvestmentpolicyandstatestatutesthatwereineffectin2013and2012theCitymanagedconcentrationriskbylimitingitsinvestmentsinanyoneissuerasfollowsU.STreasurybillscertificatesnotesandbonds100oftheportfolio.U.SGovernmentagencysecurities100oftheportfolio.Certificatesofdeposit25oftheportfolioand10oftheportfolioperbank.SEATTLECITYLIGHT2013AnnualReport51 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012Bankersacceptances25oftheportfolioand5oftheportfolioperbank.Commercialpaper25oftheportfolioand5oftheportfolioperissuer.Municipalbondsorwarrants15oftheportfolioand5oftheportfolioperissuer.Repurchaseagreements1Termandovernight-50oftheportfolioand2Termonly180days-25oftheportfolio.Allrepurchaseagreementswerelimitedto75ofRegulatoryCapitalRegulatedbySecuritiesandExchangeCommissionRule15C3-1perdealer.Reverserepurchaseagreements20oftheportfolioand75ofRegulatoryCapitalperdealer.Mortgagebackedsecurities15oftheportfolio.Localgovernmentinvestmentpool110oftheportfolio.AtDecember312013and2012theCitydidnothavethefollowinginvestmentscertificatesofdepositbankersacceptancesreverserepurchaseagreementsandlocalgovernmentinvestmentpool.TheCitysinvestmentsinsingleissuersincludingthosematuringlessthanoneyearfromdateofpurchaseandamountingto5ormoreofthetotalportfolioasofDecember312013and2012areshowninthefollowingtable.inmillionsPercentofPercentofTotalTotalIssuerFairValueInvestmentsFairValueInvestmentsFederalHomeLoanMortgageCorporationFreddieMac329.423206.815FederalNationalMortgageAssociationFannieMae393.127301.422FederalHomeLoanBank86.56258.619Total809.056766.85620132012TheDepartmenthadnodedicatedinvestmentsasofDecember312013and2012.CustodialCreditRiskInvestmentsThecustodialcreditriskforinvestmentsistheriskthatintheeventoffailureofthecounterpartytheCitywillnothaveaccesstoorbeabletorecoveritsinvestmentsorcollateralsecuritiesthatareinthepossessionofanoutsideparty.TheCitymitigatescustodialcreditriskforitsinvestmentsbyhavingitsinvestmentsecuritiesheldbytheCityscontractualcustodialagentBNYMellonandnotbythecounterpartyorthecounterpartystrustdepartmentoragent.AdditionallytheCitymitigatescustodialriskbysettlingitstradesdelivery-versus-paymentthroughtheCityscontractualcustodialagent.ByinvestmentpolicytheCitymaintainsalistofapprovedsecuritiesdealersfortransactingbusiness.ForrepurchaseagreementstheCitytransactsonlywithlargeprimarydealerswithinvestmentgradecreditratingsprovidedbyatleasttwoofthenationallyrecognizedstatisticalratingorganizationsSEATTLECITYLIGHT2013AnnualReport52 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012NRSROs.TheCityalsoconductsitsownduediligenceastothefinancialwherewithalofitscounterparties.TheCitymitigatescounterpartycustodialriskfromrepurchaseagreementsbyusingathird-partycustodianfortri-partyrepurchaseagreements.TheCityconformswithindustrystandardrequiringexecutionofamasterrepurchaseagreementwitheachcounterpartypriortotransactingarepurchaseagreementexecutionofathird-partycustodialagreementbetweentheCitythebrokerandtheclearingbankbeforetransactingathird-partyrepurchaseagreementandover-collateralizingbyaminimumof105.ByinvestmentpolicytheunderlyingsecuritiestheCityiswillingtoacceptascollateralmusthavethehighestcreditratingsofatleasttwoNRSROs.Throughout2013and2012thecollateralunderlyingtheCitysrepurchaseagreementsexcludedsecuritiesotherthanU.S.Treasuryagenciesandagencymortgage-backedpass-throughs.ForeignCurrencyRiskTheCityTreasurypooledinvestmentdonotincludesecuritiesdenominatedinforeigncurrencies.ReverseRepurchaseAgreementsRCW35.39.030andCityinvestmentpolicyallowtheinvestmentofCitymoniesinexcessofcurrentCityneedsinreverserepurchaseagreements.HoweveratthistimetheCitydoesnotengageitselfinthistypeofinvestmentstrategy.TheCityofSeattlesComprehensiveAnnualFinancialReportmaybeobtainedbywritingtoTheCityofSeattleDepartmentofFinanceandAdministrativeServicesP.O.Box94680SeattleWA98124-4689telephone206684-2489orobtainedon-lineathttpwww.seattle.govcafrs.5.ACCOUNTSRECEIVABLEAccountsreceivableatDecember312013and2012consistofRetailWholesaleOtherOperatingNonoperatingElectricPowerOperatingSubtotalSubtotalTotal2013inmillionsAccountsreceivable42.48.910.261.511.172.6Lessallowancefordoubtfulaccounts3.5-5.99.4-9.438.98.94.352.111.163.22012inmillionsAccountsreceivable39.415.66.261.212.473.6Lessallowancefordoubtfulaccounts4.20.13.78.00.18.135.215.52.553.212.365.5Wholesalepowerreceivableincludes2.8millionatDecember312013and1.8millionatDecember312012forexchangeenergyatfairvalueunderlong-termcontractsseeNote16Long-TermPurchasedPowerExchangesandTransmission.SEATTLECITYLIGHT2013AnnualReport53 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20126.OTHERASSETSSeattleCityCouncilpassedresolutionsauthorizingdebtfinancingandreportingasregulatoryassetscertaincostsinaccordancewithStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.ProgrammaticconservationcostsincurredbytheDepartmentandnotfundedbythirdpartiesandEndangeredSpeciesActcostsarereportedasregulatoryassetsinaccordancewithStatementNo.62andamortizedover20years.EndangeredSpeciesActcostsareamortizedovertheremaininglicenseperiodseeNote17CommitmentsandContingencies.Environmentalcostsreportedasregulatoryassetsareamortizedover25yearsbeginningintheyearcostsarepaid.OtherassetswhicharenotcoveredunderStatementNo.62consistofSuburbaninfrastructurelong-termreceivablesareundergroundelectricalinfrastructurecostsforsuburbanjurisdictionswhicharerecoveredthroughratesfromcustomerswithintherespectivejurisdictionsforaperiodofapproximately25yearsasapprovedbytheSeattleCityCouncil.Long-terminterfundreceivableforexpectedrecoveriesrelatedtoenvironmentalcostscoveredunderGASBStatementNo.49AccountingandFinancialReportingforPollutionRemediationObligationsseeNote12EnvironmentalLiabilities.PugetSoundEnergyinterconnectionandsubstationcostsarebeingamortizedtoexpenseover25years.Studiessurveysandinvestigationsarereportedasregulatoryassetsuntilsuchtimetheyresultinactiveprojectsorwhenitisdeterminednoassetswillresultatwhichtimetheyareexpensed.Long-termcustomerloansreceivableandtheremainingcomponentsofotherassetsarenotamortized.RegulatoryassetsandotherassetsnetatDecember312013and2012consistedofthefollowingSEATTLECITYLIGHT2013AnnualReport54 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012inmillions20132012RegulatoryassetsConservationcostsnet214.3201.1EndangeredSpeciesActcostsnet2.32.4Environmentalcosts31.723.5248.3227.0OtherchargesandassetsnetSuburbaninfrastructurelong-termreceivables44.044.3Long-terminterfundreceivableforenvironmentalcosts3.13.8Long-termcustomernotesreceivable0.81.0PugetSoundEnergyinterconnectionandsubstation0.70.8Studiessurveysandinvestigations2.80.9Other1.31.152.751.9TotalOtherAssets301.0278.97.DEFERREDOUTFLOWSOFRESOURCESEffectiveJanuary12013theDepartmentadoptedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.UponimplementationofStatementNo.65ChargesonadvancerefundingwhichwerepreviouslyreportedasacomponentofLong-termdebtwerereclassifiedasDeferredoutflowsofresources.Prioryearbalanceshavebeenrestatedtoconformtothe2013presentation.SeeNote8Long-TermDebtformoreinformationrelatedtoadvancerefundingcosts.8.LONG-TERMDEBTEffectiveJanuary12013theDepartmentimplementedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.Theeffectofimplementationwastoadjustthe2012balancesheetbyreclassifyingChargesonadvancerefundingtoDeferredoutflowsofresourcesfromLong-termdebtandtoadjustnetpositionto1041.5millionfrom1052.4millionoradecreaseof10.9millionasaresultofbondissuecostschargedtoexpense.AccordinglyChangeinnetpositionfor2012wasadjusteddownwardby1.6millionto104.0million.AtDecember312013and2012theDepartmentslong-termdebtconsistedofthefollowingpriorlienorparitybondsSEATTLECITYLIGHT2013AnnualReport55 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012LONG-TERMnmonsMaturityOriginalFixedRateYearIssuance20132012PriorLienBonds2013MLPImprovementandRefundingRevenueBonds2.0005.0002043190.8190.8-2012AMLPImprovementandRefundingRevenueBonds2.0005.0002041293.3289.5293.32012BMLPRefundingRevenueBonds0.3500.70020149.34.89.22012CMLPCleanRenewableEnergyBonds3.4003.750203343.043.043.02011AMLPImprovementandRefundingRevenueBonds1.0005.5002036296.3278.0282.62011BMLPCleanRenewableEnergyBonds5.7505.750202710.010.010.02010AMLPBuildAmericaBonds4.4475.5702040181.6181.6181.62010BMLPImprovementandRefundingRevenueBonds2.0005.0002026596.9510.1552.02010CMLPRecoveryZoneEconomicDevelopmentBonds5.5905.590204013.313.313.32008MLPRevenueandRefundingRevenueBonds4.0006.0002029257.4201.1215.62004MLPImprovementandRefundingRevenueBonds3.0005.2502029284.9141.1173.62003MLPImprovementandRefundingRevenueBonds4.0006.0002028251.8-4.4Totalpriorlienbonds2428.61863.31778.6TheDepartmenthadthefollowingactivityinlong-termdebtduring2013and2012BalanceatBalanceatCurrent2013123112AdditionsReductions123113PortioninmillionsPriorLienBonds1778.6190.7106.01863.399.7BalanceatBalanceatCurrent2012123111AdditionsReductions123112PortioninmillionsPriorLienBonds1680.1345.6247.11778.691.8PriorLienBondsInJuly2013theDepartmentissued190.8millionoftaxexemptMunicipalLightandPowerMLPImprovementandRefundingRevenueBonds2013Bonds.Couponinterestratesrangefrom2.00to5.00andmatureseriallyfromJuly12014toJuly12033withtermBondsmaturingJuly12043.Thearbitrageyieldofthe2013Bondswas3.91.ArbitrageyieldwhenusedincomputingthepresentworthofallpaymentsofprincipalandinterestontheBondsinthemannerprescribedbytheInternalRevenueCodeproducesanamountequaltotheissuepriceoftheBonds.Proceedsfromthe2013Bondsarebeingusedtofinancecertaincapitalimprovementandconservationprogramstoadvancerefund14.2millionofthe2004seriesoutstandingpriorlienbondsandtomakeadeposittotheReserveFund.Thedebtserviceonthe2013Bondsrequiresacashflowoverthelifeofthebondsof352.2millionincluding161.4millionininterest.Thedifferencebetweenthecashflowsrequiredtoservicetheoldandnewdebtandtocompletetherefundingtotaled1.4millionandtheaggregateeconomicgainonrefundingtotaled0.7millionatnetpresentvalue.Theaccountinglossonrefundingwas0.8million.InJuly2012theDepartmentissued345.6millionofMunicipalLightandPowerMLPImprovementandRefundingRevenueBonds2012Bonds.The2012Bondswerecomprisedof293.3million2012AseriestaxexemptMLPBonds9.4million2012BseriestaxableMLPBondsand43.0million2012CseriestaxableMLPCleanRenewableEnergyBonds.Thetaxexempt2012AseriesMLPBondscouponinterestratesrangefrom2.00to5.00andmatureseriallyfromJune1SEATTLECITYLIGHT2013AnnualReport56 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20122013toJune12036withtermBondsmaturingJune12041.Thetaxable2012BseriesBondscouponinterestratesrangefrom0.35to0.70andmatureseriallyfromDecember12012toDecember12014.The2012CtaxableseriesBondsinterestratesrangefrom3.40to3.75andmatureseriallyfromJune12028toJune12030withtermBondsmaturingJune12033.Thearbitrageyieldswere2.990.63and0.45forthe2012A2012Band2012CBondsrespectively.Proceedsfromthe2012Bondswereusedtofinancecertaincapitalimprovementandconservationprogramstoadvancerefund158.1millionofthe20022003and2004seriesoutstandingpriorlienbondsandtomakeadeposittotheReserveFund.Thedebtserviceonthe2012Bondsrequiresacashflowoverthelifeofthebondsof547.8millionincluding202.2millionininterest.Thedifferencebetweenthecashflowsrequiredtoservicetheoldandnewdebtandtocompletetherefundingtotaled23.3millionandtheaggregateeconomicgainonrefundingtotaled20.2millionatnetpresentvalue.Theaccountinglossonrefundingwas10.6million.The2012CseriesBondsprovidearefundabletaxcreditorfederalsubsidypaidtostateorlocalgovernmentalissuersbytheUnitedStatesInternalRevenueService.Theamountofthefederalsubsidyisequaltothelesseroftheamountofinterestpayablebasedonthecouponinterestrateor70.0oftheamountofinterestpayablebasedonthetaxcreditrateonthesaledatewithrespecttothe2012CseriesBonds.Thisfederalsubsidyultimatelyresultsinanetdecreasetodebtservicealthoughdebtservicepaymentsarepaidgross.Thefederalsubsidiesarerecordedasnonoperatingrevenuesonthestatementsofrevenuesexpensesandchangesinnetposition.PursuanttotherequirementsoftheBalancedBudgetandEmergencyDeficitControlActof1985asamendedcertainautomaticreductionswereeffectiveMarch12013forqualifiedbondsincludingtheDepartments2012CseriesBonds2011BseriesBonds2010AseriesBondsand2010CseriesBonds.Federalsubsidiesforthesebondswerereducedby8.7throughtheendofthefederalfiscalyearSeptember302013atwhichtimetheautomaticreductionswerefurtherreducedto7.2.TheeffectfortheaccrualoffederalsubsidiesasofDecember312013wasinconsequential.Theeffectduring2014isestimatedtobelowerfederalsubsidiesbyapproximately0.4million.Theeffectthereafterforfederalsubsidiesisindeterminable.SEATTLECITYLIGHT2013AnnualReport57 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012Debtservicerequirementsforpriorlienbondsexcludingfederalsubsidiesforthe20122011and2010bondsareasfollowsYearsEndingPrincipalInterestDecember31RedemptionsRequirementsTotalinmillions201499.790.1189.82015101.885.5187.32016100.580.4180.92017101.675.3176.92018102.270.5172.720192023490.6278.9769.520242028386.2160.9547.120292033192.891.9284.720342038182.445.6228.020392043105.510.1115.6Total1863.3989.22852.5TheDepartmentisrequiredbyOrdinanceNo.124045thebondordinancetofundreservesforthe2013BondsandotherparitybondsintheMunicipallightandpowerbondreservefundReserveFundinanamountatanytimeequaltothelesserofathemaximumannualdebtserviceonallparitybondsthenoutstandingandbthemaximumamountpermittedbytheInternalRevenueCodeasareasonablyrequiredreserveorreplacementfundReserveRequirement.TheReserveRequirementuponissuanceofthe2013Bondswasanamountequalto113.7million125ofaverageannualdebtservice.Themaximumannualdebtserviceonpriorlienbondsis189.8millionduein2014andtheaverageannualdebtservicewas94.0millionatissuanceofthe2013Bonds.Uponissuanceofthe2013Bonds2.4millionofbondproceedsweredepositedintheReserveFundanaccountwithinthebooksoftheDepartment.TheReserveRequirementwasalsofundedbyanexistingsuretybondpurchasedin2005fromFinancialSecurityAssuranceInc.whichisnowknownasAssuredGuaranteeMunicipalCorporationintheamountof77.1million.FurtherfundingoftheReserveRequirementwas12.6millionfromthe2012Aseriesbondproceeds20.0millionfrom2012operatingcashand1.6millionfrombondproceedspriorto2012plusinterestearnings.InDecember201310.0millionfromoperatingcashwasaddedandalongwithinterestincomeresultedintheReserveFundbalanceof46.8millionattheendoftheyear.ThesuretybondwillexpireonAugust12029.AsofDecember312013AssuredGuaranteeMunicipalCorporationwasratedA2andAA-byMoodysandStandardPoorsrespectively.ThebondordinancedoesnotrequirethattheReserveRequirementbefundedwithcashasubstitutesuretybondorletterofcreditiftheproviderofqualifiedinsuranceisdowngraded.UnderthebondordinanceasuretybondqualifiesasQualifiedInsuranceforpurposesofsatisfyingtheReserveRequirementiftheprovidersratingsareinoneofthetoptworatingcategoriesatthetimethepolicyisissuedeveniftheproviderofsuchsuretybondissubsequentlydowngraded.Aportionoftheproceedsfromthe2013revenuerefundingBondswereplacedinaseparateirrevocabletrustaccounttoprovideforallfuturedebtservicepaymentsoncertainpriorlienbondsadvancerefundedordefeased.NeithertheassetsofthetrustaccountnortheliabilitiesforthedefeasedbondsarereflectedintheDepartmentsfinancialstatements.TheoutstandingprincipalbalanceofallbondsSEATTLECITYLIGHT2013AnnualReport58 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012defeasedthrough2013and2012was41.8millionand149.0millionasofDecember312013and2012respectively.27.6millionofthe2004bondsdefeasedin2012remainedoutstandingasofDecember312013.Also121.4millionofthe2003bondswererepaidfromthe2013irrevocabletrustaccountand9.1millionofthe2002bondswerecalledandpaidinfullfromthe2012irrevocabletrustaccountduring2012.Fundsheldinthe2013and2012irrevocabletrustaccountsatDecember312013and2012respectivelyweresufficienttoserviceandredeemdefeasedbondsoutstanding.BondRatingsThe2013and2012BondsalongwithotheroutstandingparitybondswereratedAa2andAAandAa2andAA-byMoodysInvestorsServiceInc.andStandardPoorsRatingServicesrespectively.RevenuePledgedRevenuebondsarespeciallimitedobligationspayablefromandsecuredsolelybythegrossrevenuesoftheDepartmentlesschargesformaintenanceandoperationsandbymoneyinthedebtserviceaccountandReserveFund.Principalandinterestpaidfor2013and2012was178.0millionand173.7millionrespectively.Totalrevenueavailablefordebtserviceasdefinedforthesameperiodswas319.6millionand306.1millionrespectively.Annualinterestandprincipalpaymentsareexpectedtorequire59.4ofrevenuesavailablefordebtservicefor2014andrequired58.2in2013.FederalArbitrageRegulationsRevenuebondsaresubjecttofederalarbitrageregulationsandtheDepartmenthascompliedwiththeseregulations.Therewasnofederalarbitragerebateduein2013or2012.OtherTherewerenoliensonpropertyorrevenuepertainingtoparitybondsandallbondcovenantswereincompliancefortheDepartmentspriorlienbondsasofDecember312013and2012respectively.FairValueFairvaluesatDecember312013and2012wereprovidedbytheDepartmentsfinancialadvisorSeattleNorthwestSecurities.ThefairvaluefortheDepartmentsbondsareestimatedbasedonthequotedmarketpricesforthesameorsimilarissuesoronthecurrentratesofferedtotheDepartmentfordebtofthesameremainingmaturities.CarryingamountsnetofpremiumsanddiscountsandfairvaluesatDecember312013and2012wereasfollowsinmillionsCarryingCarryingAmountFairValueAmountFairValueLong-termdebtPriorlienbonds1970.02012.61883.32033.7Total1970.02012.61883.32033.720132012AmortizationDiscountsandpremiumsareamortizedusingtheeffectiveinterestmethodoverthetermofthebonds.Theexcessofcostsincurredoverthecarryingvalueofbondsrefundedonearlyextinguishmentofdebtisamortizedasacomponentofinterestexpenseusingboththestraight-lineandeffectiveinterestmethodsoverthetermsoftheissuestowhichtheypertain.Chargesonadvancedrefundingamortizedtointerestexpensetotaled4.2millionin2013and4.7millionin2012.ChargesonadvancerefundinginSEATTLECITYLIGHT2013AnnualReport59 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012theamountof26.0millionand30.0millionareincludedasacomponentofDeferredOutflowsofResourcesonthe2013and2012balancesheetsrespectively.NoncurrentLiabilitiesTheDepartmenthadthefollowingactivitiesduring2013and2012BalanceBalance2013at1113AdditionsReductionsat123113inmillionsAccumulatedprovisionforinjuriesanddamages53.51.4-54.9Compensatedabsences15.10.4-15.5Other6.21.5-7.7Total74.83.3-78.1BalanceBalance2012at1112AdditionsReductionsat123112inmillionsAccumulatedprovisionforinjuriesanddamages35.318.2-53.5Compensatedabsences14.50.6-15.1Other6.00.2-6.2Total55.819.0-74.8AdditionalinformationabouttheprovisionforinjuriesanddamagescanbefoundinNote9ProvisionforInjuriesandDamagesandNote12EnvironmentalLiabilities.OtherincludesprimarilyaliabilityforOtherPostemploymentBenefitsseeNote11SeattleCityEmployeesRetirementSystemandOtherPostemploymentBenefits.9.PROVISIONFORINJURIESANDDAMAGESTheDepartmentestablishesliabilitiesforclaimsbasedonestimatesoftheultimateprojectedcostofclaims.EnvironmentalrelatedexpensesarediscussedinNote12EnvironmentalLiabilities.Thelengthoftimeforwhichsuchcostsmustbeestimatedvariesdependingonthenatureoftheclaim.Actualclaimscostsdependonsuchfactorsasinflationchangesindoctrinesoflegalliabilitydamageawardsandspecificincrementalclaimadjustmentexpenses.ClaimsliabilitiesarerecomputedperiodicallyusingactuarialandstatisticaltechniquestoproducecurrentestimateswhichreflectrecentsettlementsclaimfrequencyindustryaveragesCity-widecostallocationsandeconomicandsocialfactors.For2013and2012liabilitiesforlawsuitsclaimsandworkerscompensationwerediscountedoveraperiodof16to19yearsattheCitysaverageannualrateofreturnoninvestmentswhichwas0.675and0.784respectively.Toaddresstheriskforcertainlossesarisingfrompersonalandpropertydamageclaimsbythirdpartiesandforjob-relatedillnessesandinjuriestoemployeestheDepartmentaspartoftheCityofSeattlehasSEATTLECITYLIGHT2013AnnualReport60 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012beenself-insuredformostofitsgeneralliabilityrisksforworkerscompensationandforemployeeshealthcarebenefits.BeginningDecember312011theCityhadgeneralliabilityinsurancecoverageforlossesovera6.5millionself-insuredretentionperoccurrencewitha40.0millionlimitperoccurrenceandintheaggregate.TheDepartmenthadnosettledclaimsexceedingcoverageinthelastthreeyears.TheCityalsopurchasedanallriskcomprehensivepropertyinsurancepolicythatprovides500.0millioninlimitssubjecttovariousdeductiblelevelsdependingonthetypeofassetandvalueofthebuilding.Thisincludes100.0millioninearthquakeandfloodlimits.Hydroelectricandcertainotherutilityproducingandprocessingprojectsarenotcoveredbythepropertypolicy.TheCityalsopurchasedinsuranceforexcessworkerscompensationfiduciaryandcrimeliabilityinlandmarinetransportationvolunteersandanassortmentofcommercialgeneralliabilitymedicalaccidentaldeathanddismembermentandmiscellaneouspolicies.Bondsarepurchasedforpublicofficialspublicnotariespensionexposuresandspecificprojectsandactivitiesasnecessary.ThechangesintheprovisionforinjuriesanddamagesatDecember312013and2012areasfollowsinmillions20132012Beginningunpaidclaimsliability11.511.6Payments5.04.4Incurredclaims5.24.3Endingunpaidclaimsliability11.711.5TheprovisionforinjuriesanddamagesincludedincurrentandnoncurrentliabilitiesatDecember312013and2012isasfollowsinmillions20132012Noncurrentliabilities8.68.4Accountspayableandothercurrentliabilities3.13.1Totalliability11.711.5SEATTLECITYLIGHT2013AnnualReport61 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND201210.ACCOUNTSPAYABLEAccountsPayableandOtherCurrentLiabilitiesThecompositionofaccountspayableandothercurrentliabilitiesatDecember312013and2012isasfollowsinmillions20132012Voucherspayable33.030.5Poweraccountspayable23.826.3Taxespayable10.510.2Claimspayable17.116.3Guaranteedepositandcontractretainer3.52.5Otheraccountspayable2.81.5Total90.787.311.SEATTLECITYEMPLOYEESRETIREMENTSYSTEMANDOTHERPOSTEMPLOYMENTBENEFITSPensionBenefitsTheSeattleCityEmployeesRetirementSystemSCERSisasingle-employerdefinedbenefitpublicemployeeretirementsystemcoveringemployeesoftheCityandadministeredinaccordancewithChapter41.28oftheRevisedCodeofWashingtonandChapter4.36oftheSeattleMunicipalCode.SCERSisapensiontrustfundoftheCity.AllemployeesoftheCityareeligibleformembershipinSCERSwiththeexceptionofuniformedpoliceandfirepersonnelwhoarecoveredunderaretirementsystemadministeredbytheStateofWashington.EmployeesoftheKingCountyDepartmentsofTransportationandPublicHealthwhoestablishedmembershipinSCERSwhentheseorganizationswereCitydepartmentswereallowedtocontinuetheirSCERSmembership.AsofDecember312013therewere5880retireesandbeneficiariesreceivingbenefitsand8604activemembersofSCERS.Inaddition1170vestedterminatedemployeeswereentitledtofuturebenefits.SCERSprovidesretirementdeathanddisabilitybenefits.Retirementbenefitsvestafter5yearsofcreditedservicewhiledeathanddisabilitybenefitsvestafter10yearsofcreditedservice.Retirementbenefitsarecalculatedas2multipliedbyyearsofcreditableservicemultipliedbyaveragesalarybasedonthehighest24consecutivemonthsexcludingovertime.Thebenefitisactuariallyreducedforearlyretirement.Additionalincreasesinthecost-of-livingadjustmentsareavailabletocurrentandfutureretiredmembersonlyifSCERSattainsatleasta100fundingratio.SCERSdoesnotprovideterminationbenefits.ThecontributionrequirementsofplanmembersandtheCityareestablishedandmaybeamendedbytheSeattleCityCouncil.InNovember2010theCityCounciladoptedCouncilBillNo.117018OrdinanceNo.123482amendingSeattleMunicipalCodeSection4.36.110toprovideforcontributionrateincreasesformembersoftheCitysRetirementSystem.EffectiveJanuary2012theemployeecontributionrateofannualcoveredpayrollwasincreasedfrom9.03to10.03.Theemployercontributionratewasincreasedfrom9.03to11.01.Theincreaseincontributionrateswasnecessarytoacknowledgethefinancialandeconomicrecessionof20072008whichadverselyimpactedSCERSSEATTLECITYLIGHT2013AnnualReport62 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012assets.AlsoplandemographicsshowedactivemembersinSCERSretirelaterinlifeandlivelongerplacingaheavierliabilityonSCERSassets.ChangestocontributionratesarenecessarytoensurecontinuedfinancialsupporttotheretiredemployeesoftheCity.TheCityisrequiredtocontributeatanactuariallydeterminedrateequaltoatleastthatofthememberscontributionrate.TheCityscontractswithalllaborunionsthatrepresentmembersofSCERSdescribehowcontributionrateswouldbechangedintheeventhighercontributionsareneededtoimprovethefinancialstatusoftheEmployeesRetirementFund.UnderthesecontractstheCityandemployeeswillshareanycontributionrateincreaseequallyuptoamaximumincreaseof2intheemployeecontribution.IfacontributionrateincreaseisneededtheCityintendstoapplythesameformulatonon-representedemployees.InNovember2011theSeattleCityCounciladoptedResolutionNo.31334affirmingtheCitysintenttofullyfunditsrequiredcontributionstoSCERS.In2013thetotalcontributionratewasmetwithanemployeecontributionrateof10.03andinaccordancewithResolutionNo.31334theCityscontributionratewasincreasedfrom11.01to12.89.BasedontheJanuary12013actuarialvaluationreporttheestimatedcontributionsrequiredtoamortizetheUnfundedActuarialLiabilityUAALover30yearsorlessis24.34.Effectivefor2014thistotalcontributionratewillbemetwithanemployeecontributionrateof10.03andtheCityscontributionratewillincreaseto14.31.ThisreflectstheCityscommitmenttofundtheactuarialrequiredcontributionrate.InAugust2013theCityCounciladoptedResolutionNo.31474clarifyingtheCitysapproachtowardamortizingtheunfundedliabilityofSCERSandrequestingthattheSCERSBoardofAdministrationanditsactuarydelivertotheCityCouncilin2014ananalysisofotherpotentialassumptionandpolicychangesdesignedtofurtherstrengthentheretirementsystem.BeginningwiththeJanuary12013actuarialvaluationandthereaftertheamortizationfortheunfundedliabilityisspecifiedasaclosedfixedperiodof30years2013-2042.AssuchthisresolutionendstherollingamortizationpracticestartingwiththecurrentJanuary12013valuationandwillhaveseveralbenefitsincludingprovidingstrongerfundingtoSCERSreducingtherisksofunderfundingthesystemlimitingnegativeamortizationwheretheunfundedliabilitiescontinuetorisethoughmoreslowlythanassetspreservingintergenerationalequitybykeepingcostscloserintimetotheservicesprovidedandreducingtheCitystotalpensioncostsinthatdollarscontributedearlierhavemoretimetoearnaninvestmentreturnpriortobeingusedforbenefits.UndertheauthorityofthestateandCitySCERSoperatesasecuritieslendingprogramandthereweretransactionsduring2013and2012.In2013and2012SCERSdidnotincuralossasaresultofborrowerdefault.SCERSdidnothavenegativecreditexposureatDecember312013or2012.SEATTLECITYLIGHT2013AnnualReport63 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012EmployercontributionsfortheCitywere76.6million62.5millionand50.3millionin20132012and2011respectively.EmployercontributionsfortheDepartmentwere18.4million15.1millionand11.6millionin20132012and2011respectively.ActuarialDataValuationdateJanuary12013ActuarialcostmethodEntryageAmortizationmethodLevelpercentRemainingamortizationperiodDoesnotamortizeAmortizationperiodMaximumof30yearsAssetvaluationmethod5-YearSmoothingActuarialAssumptionsPriceinflation3.50Investmentrateofreturn7.75Projectedgeneralwageincreases4.00Postretirementbenefitincreases1.50Cost-of-livingyear-endbonusdividend0.00Thecontributionrateof22.92currentlyineffectasoftheJanuary12013valuationdoesnotamortizetheUAALoveraperiod30yearsorless.SEATTLECITYLIGHT2013AnnualReport64 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012AnnualPensionCostandNetPensionObligationForFiscalYearsEndingDecember312013andDecember312012BasedonJanuary12012andJanuary12011Valuationsinmillions201320121aTotalnormalcostrate14.9514.991bEmployeecontributionrate10.0310.031cEmployernormalcostrate1a-1b4.924.962aTotalemployercontributionrate12.8911.012bAmortizationpaymentrate2a-1c7.976.052cAmortizationperiod38years38years2dGASB27amortizationrate9.106.883TotalannualrequiredcontributionARCrate1c2d14.0211.844Coveredemployeepayroll567.85aARC3x467.25bInterestonnetpensionobligationNPO0.65cARCadjustment0.45dAnnualpensioncostAPC5a5b5c67.06Employercontribution62.57aChangeinNPO5d-64.57bNPOatbeginningofyear7.17cNPOatendofyear7a7b2.6IftheamortizationperioddeterminedbytheactualcontributionrateexceedsthemaximumamortizationperiodrequiredbyGASBStatementNo.27theARCisdeterminedusinganamortizationoftheUAALover30years.Coveredpayrollincludescompensationpaidtoallactiveemployeesonwhichcontributionsweremadeintheyearprecedingthevaluationdate.FiscalYearEndedDecember31BeginningwiththeJanuary12013actuarialvaluationreportGASBcalculationstakeintoaccountthelagbetweendeterminationoftheactuarialcontributionrate.ForexampletheJanuary12011actuarialvaluationcalculatesthecontributionratebeginningJanuary12012forfiscalyearendingDecember312012.ThischangewasmadeduetoSCERSnewfundingpolicyadoptedin2011tocontributetheactuariallydeterminedcontributionratepreviouslyafixedratewascontributed.SEATTLECITYLIGHT2013AnnualReport65 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012TheschedulesoffundingprogressinmillionsunauditedforSCERSareasfollowsUAALorActuarialExcessasaActuarialActuarialAccruedUnfundedPercentageValuationValueofLiabilitiesAALFundingCoveredofCoveredDateAssetsAALaUAALbRatioPayrollcPayrollJanuary1ABB-AABCB-AC20112013.72709.0695.474.3563.2123.520121954.32859.3905.068.3557.0162.520131920.13025.31105.263.5567.8194.6aActuarialpresentvalueofbenefitslessactuarialpresentvalueoffuturenormalcostsbasedonentryageactuarialcostmethod.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-paidbenefitswas2.4million2.4millionand3.9millionin20132012and2011.TheDepartmentsportionoftheexpectedcontributionwas0.4million0.4millionand0.5millionin20132012and2011.TheCityrecordedanexpenseandliabilityforOPEBof5.0millionin2013and5.0millionin2012.TheDepartmentrecordedanexpenseandliabilityforOPEBof1.5millionin2013and0.2millionin2012.Actuarialvaluationsinvolveestimatesofthevalueofreportedamountsandassumptionsabouttheprobabilityofeventsfarintothefuture.Actuariallydeterminedamountsaresubjecttocontinualrevisionasactualresultsarecomparedtopastexpectationsandnewestimatesaremadeaboutthefuture.CalculationsarebasedonthetypesofbenefitsprovidedunderthetermsofthesubstantiveplanattheSEATTLECITYLIGHT2013AnnualReport66 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012timeofeachvaluationandonthepatternofsharingofcostsbetweentheemployerandplanmemberstothatpoint.Theprojectionofbenefitsforfinancialreportingpurposesdoesnotexplicitlyincorporatethepotentialeffectsoflegalorcontractualfundinglimitationsonthepatternofcostsharingbetweentheemployerandplanmembersinthefuture.Actuarialcalculationsreflectalong-termperspective.Consistentwiththatperspectiveactuarialmethodsandassumptionsusedincludetechniquesthataredesignedtoreduceshort-termvolatilityinactuarialaccruedliabilitiesandtheactuarialvalueofassets.BasedonthelatestbiennialactuarialvaluationdatethesignificantmethodsandassumptionsareasfollowsSEATTLECITYLIGHT2013AnnualReport67 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012ctuaraataanassumptonsValuationdateJanuary12012ActuarialcostmethodEntryagenormalAmortizationmethodLeveldollarInitialamortizationperiod30yearsopenDiscountrate3.88HealthcarecosttrendratesmedicalAetnaplans9.0decreasingby0.5eachyearfor5yearstoanultimaterateof5.75.GroupHealthplans8.5decreasingby0.5eachyearfor8yearstoanultimaterateof5.0Participation40ofActiveEmployeeswhoretireparticipateMortalityGeneralServiceActivesandRetireesbasedonRP-2000TableandRP-2000CombinedHealthyrespectivelywithagessetbackthreeyearsformaleandfemaleactivessetbackoneyearformaleandfemalereitrees.RatesaregenerationalforbothmalesandfemalesusingProjectionScaleAA.Maritalstatus60ofmemberselectingcoveragemarriedorhavearegistereddomesticpartner.Malespousestwoyearsolderthantheirfemalespouses.MorbidityfactorsMorbidityraterangesforages50through64AetnaTraditionalAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof128.06forretireesand142.17forspouses.AetnaPreventiveAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof127.61forretireesand142.06forspouses.FortheAetnaplansbecausetheretireesspousespayalowerpremiumforhealthcarecoveragethanretireesthenetcosttotheCityforthespousecoverageisgreaterthanforaretireeofthesameageandgender.Themorbidityfactorswereadjustedtoreflectthisdiscrepancy.GroupHealthStandardandDeductiblePlansAveragemedicalclaimisbasedonanaveragelossratioclaimvs.premiumof147.08forretireesandspouses.OtherconsiderationsActiveemployeeswithcurrentspouseandordependentcoverageelectsameplanandcoverage.Afterretirementitisassumedthatchildrenwillhaveagedoffofcoverageandwillhave0liability.SEATTLECITYLIGHT2013AnnualReport68 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012BasedontheactuarialvaluationdateofJanuary12012theCitysannualcostforfiscalyearsendedDecember312013and2012theamountofexpectedcontributiontotheplanandchangesinnetobligationareasfollowsinmillions20132012Annualrequiredcontribution8.18.1InterestonnetOPEBobligation1.31.3Adjustmenttoannualrequiredcontribution2.02.0AnnualOPEBcostexpense7.47.4Expectedcontributionemployer-paidbenefits2.42.4IncreaseinnetOPEBobligation5.05.0NetOPEBobligation-beginningoftheyear39.534.5NetOPEBobligation-endofyear44.539.5TheschedulesoffundingprogressinmillionsunauditedareasfollowsActuarialAccruedUAALasaActuarialActuarialLiabilitiesUnfundedPercentageValuationValueofAALAALFundingCoveredofCoveredDateAssetsEntryAgeUAALRatioPayrollPayrollJanuary1ABB-AABCB-AC2010-93.593.5-869.110.82011a-99.499.4-866.211.52012-74.774.7-891.68.4aThe2011disclosureinformationisbasedonarollforwardoftheJanuary12010valuation.TheHealthCareSubfundoftheGeneralFundisreportedinTheCityofSeattlesComprehensiveAnnualFinancialReport.12.ENVIRONMENTALLIABILITIESEnvironmentalliabilitieswere60.2millionand58.3millionatDecember312013and2012respectively.ThefollowingisabriefdescriptionofthesignificantSuperfundsitesTheHarborIslandSuperfundSiteIn1983theU.S.EnvironmentalProtectionAgencyEPAdesignatedthissiteasafederalSuperfundsite.TheDepartmentandotherentitiesaresharingcostsofinvestigatingcontaminationintheEastWaterwayalongsideHarborIsland.TheDepartmentsinvolvementstemsfromitssaleoftransformerstoacompanyonHarborIsland.TheCityofSeattleisoneoffourpartieswhoareconductingaremedialinvestigationandfeasibilitystudythatwilldelineatecleanupactions.TheEPAapprovedtheremedialinvestigationreport.TheDepartmentsultimateliabilityisindeterminate.SEATTLECITYLIGHT2013AnnualReport69 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012TheLowerDuwamishWaterwaySuperfundSiteIn2001theEPAdesignatedthissiteasafederalSuperfundsiteforcontaminatedsediments.TheDepartmentsinvolvementisattributabletoitslandownershiporuseofpropertyalongtheriver.TheCityofSeattleisoneoffourpartieswhosignedanAdministrativeOrderonConsentAOCwiththeEPAandWashingtonStateDepartmentofEcologytoconductaremedialinvestigationfeasibilitystudytoprepareasiteremedy.TheEPAapprovedthefeasibilitystudyinNovember2012.InFebruary2013theEPAissuedtheProposedPlanforcleanupoftheLowerDuwamishWaterwaySuperfundSiteindicatingEPAspreferredalternativecleanupwithanestimatedcostof305million.TheProposedPlanissubjecttopubliccomment.AtthistimethecostofcertainadditionalundefinedrequirementsbytheEPAisunknown.TheDepartmentsultimateliabilityisindeterminate.InNovember2012theEPAissuedgeneralnotificationletterstopartiesinformingthemoftheirpotentialliabilityfortheLowerDuwamishWaterwaycleanup.TheCityandotherthreepartieswhosignedtheAOCwiththeEPAhaveagreedtoinvitesomeofthosepartiestoparticipateinanalternativedisputeresolutionprocesstheallocationprocesstoresolvetheirrespectivesharesofpastandfuturecosts.TheCityhasselectedanallocator.Thedevelopmentoftheallocationprocessagreementisongoing.TheDepartmenthasagreedtoadministertheallocatorscontract.Partiesparticipatingintheallocationprocesswillsharethecostoftheallocatorandtheprocess.NorthBoeingFieldGeorgetownSteamPlantTheCityKingCountyandBoeinghavesignedanAdministrativeOrderissuedbytheWashingtonStateDepartmentofEcologyEcologyrequiringthemtoinvestigateandpossiblyremovecontaminationinanareathatencompassesNorthBoeingFieldtheDepartmentsGeorgetownSteamPlantandtheKingCountyAirport.ThissitewasalsothesubjectofthelawsuitbroughtbytheCityagainstBoeing.Boeinghasagreedtopay67ofthecostsforEcologysimplementationoftheorder.Theorderrequirescompletionandthenimplementationofaremedialinvestigationfeasibilitystudyworkplan.ThefinalremedialinvestigationworkplanwasissuedinNovember2013.BoeingandtheCitywilleachpay100ofcostsforremedialactionattheirownfacilities.TheDepartmenthasincludedinitsestimatedliabilitythoseportionsoftheenvironmentalremediationworkthatarecurrentlydeemedtobereasonablyestimable.CostestimatesweredevelopedusingtheexpectedcashflowtechniqueinaccordancewithStatementNo.49oftheGASB.Estimatedoutlayswerebasedoncurrentcostandnoadjustmentsweremadefordiscountingorinflation.Costscenariosweredevelopedthatdefinedaparticularsolutionforagivensite.Scenariosconsideredrelevantpotentialrequirementsandalternativesforremediationofasite.Costswerecalculatedonaweightedaveragethatwasbasedontheprobabilitiesofeachscenariobeingselectedandreflectedcost-sharingagreementsineffect.Inadditioncertainestimateswerederivedfromindependentengineersandconsultants.Theestimatesweremadewiththelatestinformationavailableasnewinformationbecomesavailableestimatesmayvarysignificantlyduetopriceincreasesorreductionstechnologyorapplicablelawsorregulations.TheDepartmentisaggressivelypursuingotherthirdpartiesthatmayhavecontributedtothecontaminationofsuperfundsitesforappropriatecostsharing.TheDepartmentsestimateforrealizedrecoverieswas3.1millionand3.8millionatDecember312013and2012respectivelyprimarilyrepresentinganinterfundreceivablefromSeattlePublicUtilitiesforrecoveryofremediationcostsincurredrelatedtothelowerDuwamishWaterwaysite.TheDepartmentsestimatefornotyetrealizedrecoveriesfromotherpartiesfortheirshareofremediationworkperformedthatpartiallyoffsettheDepartmentsestimatedenvironmentalliabilitieswerezeroand0.5millionatDecember312013andSEATTLECITYLIGHT2013AnnualReport70 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND20122012respectively.AsofDecember312013and2012environmentalcostsof31.7millionand23.5millionweredeferredprimarilyforthecleanupestimateoftheDepartmentsresponsibilityfortheLowerDuwamishWaterwaySuperfundSiteandthesecostswillberecoveredthroughfutureratesinaccordancewithGASBStatementNo.62.ThechangesintheprovisionforenvironmentalliabilitiesatDecember312013and2012areasfollowsinmillions20132012Beginningenvironmentalliabilitynetofrecoveries58.332.1Payments6.36.5Incurredenvironmentalliability8.232.7Endingenvironmentalliabilitynetofrecoveries60.258.3TheprovisionforenvironmentalliabilitiesincludedincurrentandnoncurrentliabilitiesatDecember312013and2012isasfollowsinmillions20132012Noncurrentliabilities46.245.2Accountspayableandothercurrentliabilities14.013.1Endingliability60.258.313.OTHERLIABILITIESEffectiveJanuary12013theDepartmentadoptedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilitieswhichestablishesaccountingandfinancialreportingstandardsthatreclassifycertainregulatoryliabilitiespreviouslyreportedasOtherliabilitiesasDeferredinflowsofresources.ThereforecertainregulatoryliabilitieswerereclassifiedasDeferredinflowsofresources.ThebalancesreclassifiedcanbeseeninmoredetailinNote14DeferredInflowsofResources.Prioryearbalanceshavebeenrestatedtoconformtothe2013presentation.Otherliabilitiesincludeunearnedcapitalfeeswhichareamortizedtorevenuesasearneddepositsthatarereturnedtocustomersandcertainotherunearnedrevenueswhichexpireatcontractcompletion.OtherliabilitiesatDecember312013and2012consistedofthefollowingSEATTLECITYLIGHT2013AnnualReport71 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012inmillions20132012OtherliabilitiesUnearnedcapitalfees13.810.3Customerdepositssundrysales4.43.8Unearnedoperationsandmaintenancerevenues0.40.5Unearnedrevenuesother0.60.8Total19.215.414.DEFERREDINFLOWSOFRESOURCESSeattleCityCouncilpassedresolutionsauthorizingthereportingofcertaincreditsasregulatoryliabilitiesinaccordancewithStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.EffectiveJanuary12013theDepartmentadoptedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.UponimplementationofStatementNo.65theseregulatoryliabilitieswhichwerepreviouslyreportedasOtherliabilitieswerereclassifiedasDeferredinflowsofresources.Prioryearbalanceshavebeenrestatedtoconformtothe2013presentation.TheunearnedrevenuefortheRateStabilizationAccountfor2013and2012istheresultofspreadingretailelectricrevenuesandrelatedactivityovermultipleperiodstoreducetheneedforrapidandsubstantialrateincreasesseeNote3RateStabilizationAccount.PaymentsreceivedfromBonnevillesEnergyConservationAgreementareamortizedtorevenuesover20years.BonnevilleSlicecontracttrue-upcreditsarereportedasregulatoryliabilitiesintheyearinvoicedandrecognizedasrevenueinthefollowingyearseeNote16Long-TermPurchasedPowerExchangesandTransmission.SeattleCityCouncilaffirmedtheDepartmentspracticeofrecognizingtheeffectsofreportingthefairvalueofexchangecontractsinfutureperiodsforratemakingpurposesandmaintainingregulatoryaccountstospreadtheaccountingimpactoftheseaccountingadjustmentsinResolutionNo.30942adoptedJanuary162007seeNote16Long-TermPurchasedPowerExchangesandTransmission.DeferredinflowsofresourcesatDecember312013and2012consistedofthefollowinginmillions20132012AdjustedDeferredinflowsofresourcesUnearnedrevenueratestabilizationaccount85.0103.3Bonnevilleenerconservationareement10.47.3BonnevilleSlicetrue-ucredit4.31.6Exchangeenergyregulatorygain1.00.3Total100.7112.5SEATTLECITYLIGHT2013AnnualReport72 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND201215.SHORT-TERMENERGYCONTRACTSANDDERIVATIVEINSTRUMENTSTheDepartmentengagesinanongoingprocessofresourceoptimizationwhichinvolvestheeconomicselectionfromavailableenergyresourcestoservetheDepartmentsloadobligationsandusingtheseresourcestocaptureavailableeconomicvalue.TheDepartmentmakesfrequentprojectionsofelectricloadsatvariouspointsintimebasedonamongotherthingsestimatesoffactorssuchascustomerusageandweatheraswellashistoricaldataandcontractterms.TheDepartmentalsomakesrecurringprojectionsofresourceavailabilityatthesepointsintimebasedonvariablessuchasestimatesofstreamflowsavailabilityofgeneratingunitshistoricandforwardmarketinformationcontracttermsandexperience.OnthebasisoftheseprojectionstheDepartmentpurchasesandsellswholesaleelectriccapacityandenergytomatchexpectedresourcestoexpectedelectricloadrequirementsandtorealizeearningsfromsurplusenergyresources.Thesetransactionscanbeupto24monthsforward.UndertheseforwardcontractstheDepartmentcommitstopurchaseorsellaspecifiedamountofenergyataspecifiedtimeorduringaspecifiedtimeinthefuture.ExceptforlimitedintradayandinterdaytradingtotakeadvantageofownedhydrostoragetheDepartmentdoesnottakemarketpositionsinanticipationofgeneratingrevenue.EnergytransactionsinresponsetoforecastedseasonalresourceanddemandvariationsrequireapprovalbytheDepartmentsRiskOversightCouncil.ItistheDepartmentspolicytoapplythenormalpurchaseandnormalsalesexceptionofStatementNo.53oftheGASBAccountingandFinancialReportingforDerivativeInstrumentsasappropriate.Certainforwardpurchaseandsaleofelectricitycontractsmeetthedefinitionofaderivativeinstrumentbutareintendedtoresultinthepurchaseorsaleofelectricitydeliveredandusedinthenormalcourseofoperations.AccordinglytheDepartmentconsiderstheseforwardcontractsasnormalpurchasesandnormalsalesunderStatementNo.53.Thesetransactionsarenotrequiredtoberecordedatfairvalueinthefinancialstatements.TheaggregatecontractamountsfairvalueandunrealizedgainorlossoftheDepartmentscommodityderivativeinstrumentsqualifyingasnormalpurchasesandnormalsalesatDecember31followAggregateAggregateUnrealized2013ContractAmountFairValueGainLossinmillionsSales19.422.43.0Purchases1.51.70.2Total20.924.12.8AggregateAggregateUnrealized2012ContractAmountFairValueGainLossinmillionsSales28.526.42.1Purchases8.78.00.7Total37.234.41.4SEATTLECITYLIGHT2013AnnualReport73 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012FairvaluemeasurementsatDecember312013and2012usedanincomevaluationtechniqueconsistingofKiodexForwardCurvesandinterestratesfromHISGlobalInsightthatareusedtocalculatediscountrates.AllderivativeinstrumentsnotconsideredasnormalpurchasesandnormalsalesaretoberecordedwithinthefinancialstatementsusingderivativeaccountingaccordingtoStatementNo.53.In2010theSeattleCityCounciladoptedaresolutiongrantingtheDepartmentauthoritytoenterintocertainphysicalputandcalloptionsthatwouldnotbeconsiderednormalpurchasesandnormalsalesunderStatementNo.53.TheDepartmentdidnothaveanysuchactivityfor2013and2012.InadditiontheSeattleCityCouncilhasdeferredrecognitionoftheeffectsofreportingthefairvalueofderivativefinancialinstrumentsforrate-makingpurposesandtheDepartmentmaintainsregulatoryaccountstodefertheaccountingimpactoftheseaccountingadjustmentsinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBandAICPAPronouncementsseeNotes6OtherAssetsand14DeferredInflowsofResources.MarketRiskMarketriskisingeneraltheriskoffluctuationinthemarketpriceofthecommoditybeingtradedandisinfluencedprimarilybysupplyanddemand.Marketriskincludesthefluctuationinthemarketpriceofassociatedderivativecommodityinstruments.Marketriskmayalsobeinfluencedbythenumberofactivecreditworthymarketparticipantsandtotheextentthatnonperformancebymarketparticipantsoftheircontractualobligationsandcommitmentsaffectsthesupplyofordemandforthecommodity.BecausetheDepartmentisactiveinthewholesaleenergymarketitissubjecttomarketrisk.CreditRiskCreditriskrelatestothepotentiallossesthattheDepartmentwouldincurasaresultofnonperformancebycounterpartiesoftheircontractualobligationstodeliverenergyormakefinancialsettlements.Changesinmarketpricesmaydramaticallyalterthesizeofcreditriskwithcounterpartiesevenwhenconservativecreditlimitsareestablished.TheDepartmentseekstomitigatecreditriskbyenteringintobilateralcontractsthatspecifycredittermsandprotectionsagainstdefaultapplyingcreditlimitsanddurationcriteriatoexistingandprospectivecounterpartiesandactivelymonitoringcurrentcreditexposures.TheDepartmentalsoseeksassurancesofperformancethroughcollateralrequirementsintheformoflettersofcreditparentcompanyguaranteesorprepayment.TheDepartmenthasconcentrationsofsuppliersandcustomersintheelectricindustryincludingelectricutilitieselectricgeneratorsandtransmissionprovidersfinancialinstitutionsandenergymarketingandtradingcompanies.InadditiontheDepartmenthasconcentrationsofcreditriskrelatedtogeographiclocationasitoperatesinthewesternUnitedStates.TheseconcentrationsofcounterpartiesandconcentrationsofgeographiclocationmayimpacttheDepartmentsoverallexposuretocreditriskeitherpositivelyornegativelybecausethecounterpartiesmaybesimilarlyaffectedbychangesinconditions.OtherOperationalandEventRiskThereareotheroperationalandeventrisksthatcanaffectthesupplyofthecommodityandtheDepartmentsoperations.DuetotheDepartmentsprimaryrelianceonhydroelectricgenerationtheweatherincludingspringtimesnowmeltrunoffandrainfallcansignificantlyaffecttheDepartmentsoperations.Otherrisksincluderegionalplannedandunplannedgenerationoutagestransmissionconstraintsordisruptionsenvironmentalregulationsthatinfluencetheavailabilityofgenerationresourcesandoveralleconomictrends.SEATTLECITYLIGHT2013AnnualReport74 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND201216.LONG-TERMPURCHASEDPOWEREXCHANGESANDTRANSMISSIONBonnevillePowerAdministrationTheDepartmentpurchaseselectricenergyfromtheU.S.DepartmentofEnergyBonnevillePowerAdministrationBonnevilleundertheBlockandSlicePowerSalesAgreementa17-yearcontractfortheperiodOctober12011throughSeptember302028.BlockquantitiesSlicepercentageandBonnevilleratesareexpectedtoberecalculatedperiodicallyduringthetermofthecontract.Rateswillbedevelopedandfinalizedeverytwoyears.Accordinglycertainestimatesandassumptionswereusedinthecalculationsintheestimatedfuturepaymentstablebelow.ThetermsoftheSliceproductspecifythattheDepartmentwillreceiveapercentageoftheactualoutputoftheFederalColumbiaRiverPowerSystemtheSystem.ThepercentageisadjustedannuallywithaSliceAdjustmentRationogreaterthan1.0timesthe3.65663initialslicepercentagenolaterthan15dayspriortothefirstdayofeachfederalfiscalyearbeginningwithfiscalyear2012.ThecurrentSlicepercentageis3.62763andthepreviousfiscalyearwas3.63323.ThecostofSlicepowerisbasedontheDepartmentssamepercentageoftheexpectedcostsoftheSystemandissubjecttotrue-upadjustmentsbasedonactualcostswithspecifiedexceptions.BonnevillesResidentialExchangeProgramREPwasestablishedasamechanismtodistributefinancialbenefitsoftheFederalColumbiaRiverPowerSystemtoresidentialcustomersoftheregionsinvestorownedutilitiesIOUs.InMay2007theNinthCircuitCourttheCourtrulingsfoundthe2000REPSettlementAgreementswithIOUsinconsistentwiththeNorthwestPowerAct.TheDepartmentreceived5.7millioninboth2013and2012inbillingcreditsrelatedtoboththeBlockandSliceagreementsasaresultoftheCourtdecision.LuckyPeakIn1984theDepartmententeredintoapurchasepoweragreementwithfourirrigationdistrictstoacquire100ofthenetsurplusoutputofahydroelectricfacilitythatbegancommercialoperationin1988attheexistingArmyCorpsofEngineersLuckyPeakDamontheBoiseRivernearBoiseIdaho.TheirrigationdistrictsareownersandlicenseholdersoftheprojectandtheFERClicenseexpiresin2030.Theagreementwhichexpiresin2038obligatestheDepartmenttopayallownershipandoperatingcostsincludingdebtserviceoverthetermofthecontractwhetherornottheplantisoperatingoroperable.TheDepartmentprovidedandbilledLuckyPeak0.3millionand0.5millionforservicesin2013and2012respectively.Theseamountsarerecordedasoffsetstopurchasedpowerexpense.TheDepartmentpaid3.2millionand3.4millionforenergyfromLuckyPeakin2013and2012respectively.TheDepartmentsreceivablesfromLuckyPeakwerelessthan0.1millionatDecember312013and2012respectively.TheDepartmentspayablestoLuckyPeakwere0.4millionand0.5millionatDecember312013and2012respectively.BritishColumbiaHighRossAgreementIn1984anagreementwasreachedbetweentheProvinceofBritishColumbiaandtheCityunderwhichBritishColumbiawillprovidetheDepartmentwithenergyequivalenttothatwhichwouldhaveresultedfromanadditiontotheheightofRossDam.Deliveryofthisenergybeganin1986andistobereceivedfor80years.InadditiontothedirectcostsofenergyundertheagreementtheDepartmentincurredcostsofapproximately8.0millioninprioryearsrelatedtotheproposedadditionandwasobligatedtohelpfundtheSkagitEnvironmentalEndowmentCommissionthroughfourannual1.0millionpayments.Theseothercostsareincludedinutilityplant-SEATTLECITYLIGHT2013AnnualReport75 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012in-serviceasanintangibleassetandarebeingamortizedtopurchasepowerexpenseover35yearsthrough2035seeNote2UtilityPlant.Energyreceivedandexpensesincurredundertheseandotherlong-termpurchasedpoweragreementsatDecember312013and2012wereasfollows2013201220132012inmillionsExpenseExpenseAverageMegawattsBonnevilleBlock70.169.2270.0269.8BonnevilleSlice80.080.1309.9371.6Long-termpurchasepowerBonneville150.1149.3579.9641.4LuckyPeakincludingroyalties5.27.224.645.7BritishColumbia-HighRossAgreement13.413.435.735.1GrantCountyPublicUtilityDistrict3.03.03.84.1GrandCouleeProjectHydroAuthorit5.55.429.129.1BonnevilleSouthForkToltbillingcredit3.33.3--BritishColumbia-BoundaryEncroachment--1.21.4Renewableenergy-StateLineWind23.824.341.441.6Renewableenergy-other4.54.49.08.6Exchangesandlossreturnsenergyatfairvalue9.25.715.416.4Long-termpurchasedpowerbookedout8.35.331.835.8Long-termpurchasedpowerother53.054.8128.4146.2Total203.1204.1708.3787.6RenewableEnergyPurchaseandorExchangesTheEnergyIndependenceActChapter19.285RevisedCodeofWashingtonrequiresallqualifyingutilitiesinWashingtonStatetomeetcertainannualtargetsofeligiblenewrenewableresourcesandorequivalentrenewableenergycreditsasapercentageoftotalenergydeliveredtoretailcustomers.Theannualtargetsareatleast3by2012atleast9by2016andatleast15by2020.TheDepartments2013and2012resourceportfoliometthe3target.Long-termrenewablepurchaseorexchangeagreementswereexecutedwiththeSacramentoMunicipalUtilityDistrictin2007WasteManagementRenewableEnergyLLCin2009theexistingStatelineWindProjectcontractassignedtoJPMorganin2010andtheKingCountyWastewaterTreatmentDivisionin2010.EnergyExchangeNorthernCaliforniaPowerAgencyNCPAandtheDepartmentexecutedalong-termCapacityandEnergyExchangeAgreementinMarch1993.TheDepartmentdeliversenergytoNCPAfromJunethroughOctober15.NCPAreturnsenergyunderconditionsspecifiedinthecontractata1.21ratioofexchangepowerfromNovemberthroughApril.Theagreementincludesfinancialsettlementandterminationoptions.InaletterNCPAdatedMay172011NCPAgavesevenyearsadvancewrittennoticetotheDepartmentterminatingtheagreementeffectivenolaterthanMay312018.FairValueofExchangeEnergyExchangeenergyreceivableandtherelatedregulatorygainsatDecember312013and2012werevaluedusingKiodexForwardCurvesandDowJonesU.S.DailyElectricityPriceIndicesforsettleddeliveries.AnincomevaluationtechniquethatusesinterestrateforecastsfromHISGlobalInsightisusedtodiscountforpresentvaluebasedontheinterestrateforTreasuryconstantmaturitiesbond-equivalentyieldsbythefuturemonthofthetransactionsseeNote14DeferredInflowsofResources.SEATTLECITYLIGHT2013AnnualReport76 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012EstimatedFuturePaymentsUnderPurchasedPowerTransmissionandRelatedContractsTheDepartmentsestimatedpaymentsforpurchasedpowerandtransmissionRenewableEnergyCreditsRECsandothercontractsfortheperiodfrom2014through2065undiscountedareasfollowsYearsEndingEstimatedDecember31Paymentsainmillions2014279.62015289.42016303.92017308.72018327.52019-20231764.82024-2038bc1562.42029-2033115.92034-2038d90.62039-204332.22044-204837.42049-206538.9Total5151.3a2014to2019includesestimatedREPrecoveriesfromBonneville.bBonnevilletransmissioncontractexpiresJuly312025.cBonnevilleBlockandSlicecontractexpiresSeptember302028.dLuckyPeakcontractexpiresSeptember302038.17.COMMITMENTSANDCONTINGENCIESOperatingLeasesWhiletheDepartmentownsseveralbuildingsincludingthoseattheSkagitandBoundaryhydroelectricprojectsservicecentersandtheSystemControlCentertheDepartmentleasessomeadministrativeofficespacefromtheCity.SuchleasepaymentstotheCityaremadethroughacentralcostallocationprocesssimilartoallotherpaymentsfortenancyofCityproperty.Thesepaymentsarenotincludedintheoperatingleasestablebelow.TheDepartmentalsoleasescertainofficeequipmentandsmallerfacilitiesforvariouspurposesthroughlong-termoperatingleaseagreements.Expensesforalloperatingleasestotaled1.3millioninboth2013and2012.SEATTLECITYLIGHT2013AnnualReport77 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012MinimumpaymentsundertheoperatingleasesareYearEndingMinimumDecember31Paymentsinmillions20141.020151.120161.020170.920180.1Total4.12014CapitalProgramThebudgetfortheDepartments2014programforcapitalimprovementconservationanddeferredoperationsandmaintenanceincludingrequiredexpendituresonassetsownedbyothersis248.2million.TheDepartmenthassubstantialcontractualcommitmentsrelatingthereto.Departmentoverheadcostsandotherallocationsassociatedwiththecapitalprogramarenotincludedinthebudgetamount.FederalEnergyRegulatoryCommissionFeesEstimatedFederallanduseandadministrativefeesrelatedtohydroelectriclicensestotal271.1millionthrough2055theseestimatesaresubjecttochange.TheestimatedportionoffeesattributedtotheSkagitandToltlicensesareexcludedafter2025atwhichtimetheircurrentFERClicensesexpire.TheestimatedportionofBoundaryfeesisincludedthrough2055theyearinwhichthecurrentlicenseissuedbyFERCexpires.ThecurrentBoundaryFERClicenseandrelatedissuesarediscussedbelow.NewBoundaryLicenseTheDepartmentsFERClicensefortheBoundaryProjectexpiredonSeptember302011andanewlicensewasissuedonMarch202013with42yearlifeforthetotalcostof48.6million.Thetermsandconditionsofthenewlicensehavebeenevaluated.TheDepartmenthasmovedonfromlicenseevaluationtolicenseimplementationprocessthatimposesmitigationofendangeredspeciesincludingwaterqualitystandardsandconservationmanagement.AspartoftheapplicationprocesstheDepartmentnegotiatedasettlementwithexternalpartiessuchasownersofotherhydroelectricprojectsIndiantribesconservationgroupsandothergovernmentagencies.ThesettlementsoughttopreservetheDepartmentsoperationalflexibilityatBoundaryDamwhileprovidingfornaturalresourceprotectionmitigationandenhancementmeasures.Thecostprojectionsforsuchmitigationovertheexpected42-yearlifeofthelicenseincludedintheDepartmentslicenseapplicationwereestimatedtobe395.0millionadjustedto2013dollarsofwhich8.0millionwereexpendedthrough2013.Projectedmitigationcostestimatesaresubjecttorevisionasmoreinformationbecomesavailable.SkagitandSouthForkToltLicensingMitigationandComplianceIn1995theFERCissuedalicenseforoperationoftheSkagithydroelectricfacilitiesthroughApril302025.OnJuly201989theFERClicenseforoperationoftheSouthForkTolthydroelectricfacilitiesthroughJuly192029becameSEATTLECITYLIGHT2013AnnualReport78 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012effective.AsaconditionforbothoftheselicensestheDepartmenthastakenandwillcontinuetotakerequiredmitigatingandcompliancemeasures.TotalSkagitlicensemitigationcostsfromtheeffectivedateuntilexpirationofthefederaloperatinglicensewereestimatedatDecember312013tobe125.7millionofwhich107.8millionhadbeenexpended.TotalSouthForkToltlicensemitigationcostswereestimatedat1.8millionofwhich1.3millionwereexpendedthrough2013.InadditiontothecostslistedforSouthForkToltmitigationthelicenseandassociatedsettlementagreementsrequiredcertainotheractionsrelatedtowildlifestudiesandwetlandmitigationforwhichnosetdollaramountwaslisted.Requirementsfortheseactionshavebeenmetandnofurtherexpendituresneedtobeincurredfortheseitems.Capitalimprovementotherdeferredcostsandoperationsandmaintenancecostsareincludedintheestimatesrelatedtothesettlementagreementsforbothlicenses.Amountsestimatedareadjustedto2013dollars.Departmentlaborandotheroverheadcostsassociatedwiththeactivitiesrequiredbythesettlementagreementsforthelicensesarenotincludedintheestimates.HydroelectricprojectsmustsatisfytherequirementsoftheEndangeredSpeciesActESAandtheCleanWaterActinordertoobtainaFERClicense.ESAandrelatedissuesarediscussedbelow.EndangeredSpeciesSeveralfishspeciesthatinhabitwaterswherehydroelectricprojectsareownedbytheDepartmentorwheretheDepartmentpurchasespowerhavebeenlistedundertheESAasthreatenedorendangered.AlthoughthespecieswerelistedafterFERClicenseswereissuedforalloftheDepartmentshydroelectricprojectstheESAlistingsstillaffectoperationsoftheDepartmentsBoundarySkagitToltandCedarFallshydroelectricprojects.FederalRegulationsinresponsetothelistingofspeciesaffectflowintheentireColumbiaRiversystem.AsaresultoftheseregulationstheDepartmentspowergenerationatitsBoundaryProjectisreducedinthefallandwinterwhentheregionexperiencesitshighestsustainedenergydemand.TheBoundaryProjectsfirmcapabilityisalsoreduced.TheDepartmentwiththesupportofCityCouncilelectedtotakeaproactiveapproachtoaddressissuesidentifiedwithintheESA.TheDepartmentiscarryingoutanESAEarlyActionprogramincooperationwithagenciestribeslocalgovernmentsandwatershedgroupsforbulltroutChinooksalmonandsteelheadintheSouthForkToltandSkagitWatersheds.TheESAEarlyActionprogramisauthorizedbyCityCouncilbutisseparatefromanycurrentFERClicenserequirements.Theprogramincludeshabitatacquisitionmanagementandrestoration.TheESAEarlyActionhasbeensuccessfulinprotectinglistedspecies.TotalcostsfortheDepartmentsshareoftheEarlyActionprogramfrominceptionin1999throughDecember312013areestimatedtobe7.5millionand0.6millionhasbeenallocatedfortheprograminthe2014budget.ProjectImpactPaymentsEffectiveAugust2010theDepartmentreneweditscontractwithPendOreilleCountyandcommittedtopayatotalof19.0millionover10yearsendingin2019toPendOreilleCountyforimpactsoncountygovernmentsfromtheoperationsoftheDepartmentshydroelectricprojects.EffectiveFebruary2009theDepartmentreneweditscontractwithWhatcomCountycommittingtopayatotalof15.8millionover15yearsendingin2023.Thepaymentscompensatethecountiesandcertainschooldistrictsandtownslocatedinthesecountiesforlossofrevenuesandadditionalfinancialburdensassociatedwiththeprojects.TheBoundaryProjectlocatedonthePendOreilleRiveraffectsPendOreilleCountyandSkagitRiverhydroelectricprojectsaffectSEATTLECITYLIGHT2013AnnualReport79 THECITYOFSEATTLECITYLIGHTDEPARTMENTNOTESTOFINANCIALSTATEMENTSASOFANDFORTHEYEARSENDEDDECEMBER312013AND2012WhatcomCounty.Theimpactpaymentstotaled2.4millionand1.6milliontoPendOreilleCountyand1.0millionand1.0milliontoWhatcomCountyin2013and2012respectively.EnergyCrisisRefundLitigationTheDepartmentCityisinvolvedinvariouslegalproceedingsrelatingtotheenormouspricespikesinenergycostsinCaliforniaandtherestoftheWestCoastin2000and2001.CaliforniaRefundCaseAppealsandRelatedLitigationIntheproceedingbeforetheFederalEnergyRegulatoryCommissionFERCvariouspublicandprivateCaliforniaentitiestheCaliforniaPartiessoughtrefundsinmarketsthathadbeencreatedbytheStateofCalifornia.InFebruary2011theCityagreedtoasettlementwhichwaseventuallyapprovedbythetrialcourtandbyFERC.UnderthesettlementtheCityhasresolvedthismatterfor9.0millionnoneofwhichwasimmediatelypaidbytheDepartment.AspartofthesettlementtheCityhasassigneditsaccountsreceivablefromtheCaliforniaIndependentSystemsOperatortotheCaliforniaPartieswhichwasvaluedatapproximately1.4millionatthetimeofthesettlementagreement.Thebalanceofover7.6millioniscontingentupontheDepartmentrecoveringmoniesinthePacificNorthwestRefundCasediscussedbelow.TodatetheDepartmenthasreceived2.6millioninpaymentsinthePacificNorthwestRefundCasehalfofwhichhasbeenpaidtotheCaliforniapartiespursuanttothesettlement.PacificNorthwestRefundCaseInaproceedingbeforeFERCvariousbuyersofenergyincludingtheCitysoughtrefundsfromvarioussellersonenergysalesinthePacificNorthwestbetweenMay2000andJune2001.ThecasewastriedatFERCbetweenAugustandOctoberof2013.TwowitnessesprovidedtestimonyonbehalfoftheCityandwerecross-examinedbythesellers.FERChasreceivedthepartiesclosingbriefsandtheCityisawaitingthepreliminaryrulingfromthetrialjudge.PriortotheFERCtrialtheCitysettledrefundclaimswithtwelveentitieswithacombinedtotalsettlementamountof2.6million.DuringthemiddleoftheFERCtrialtheCityalsoreachedasettlementwithPowerexCorpfor2.0million.ThePowerexsettlementwassubsequentlyapprovedbyFERConMarch72014.BoundaryUnit55DelayClaimsTheDepartmententeredintoageneratorrebuildcontractwithToshibaInternationalCorporationforUnits55and56attheDepartmentsBoundaryHydroelectricProject.TherebuildcontractspecifiedaturnoverdateofMarch292013forUnit55.ToshibawasmateriallylateonanumberofmatterswhichtriggeredliquidateddamageclaimsunderthecontractwithToshiba.Theliquidateddamagesclauseallowsfor11.0thousandperdayandtheDepartmenthasmadeliquidateddamagesclaimsagainstToshibafortheperiodofMarch292013throughJuly172013.Theseclaimstotal1.2millionandarecurrentlybeingnegotiatedwithToshiba.Theultimaterecoveryamountisindeterminate.OtherContingenciesInadditiontothosenotedaboveinthenormalcourseofbusinesstheDepartmenthasvariousotherlegalclaimsandcontingentmattersoutstanding.TheDepartmentbelievesthatanyultimateliabilityarisingfromtheseactionswillnothaveamaterialadverseimpactontheDepartmentsfinancialpositionoperationsorcashflows.SEATTLECITYLIGHT2013AnnualReport80 THECITYOFSEATTLECITYLIGHTDEPARTMENTREQUIREDSUPPLEMENTARYINFORMATIONUNAUDITEDSCHEDULESOFFUNDINGPROGRESSSCERS.ThescheduleoffundingprogressforSCERSispresentedbelowforthemostrecentactuarialvaluationandthetwoprecedingvaluationsforwhichtheDepartmenthasavailabledatainmillionsUAALorActuarialExcessasaActuarialActuarialAccruedUnfundedPercentageValuationValueofLiabilitiesAALFundingCoveredofCoveredDateAssetsAALaUAALbRatioPayrollcPayrollJanuary1ABB-AABCB-AC20112013.72709.0695.474.3563.2123.520121954.32859.3905.068.3557.0162.520131920.13025.31105.263.5567.8194.6aActuarialpresentvalueofbenefitslessactuarialpresentvalueoffuturenormalcostsbasedonentryageactuarialcostmethod.bActuarialaccruedliabilitieslessactuarialvalueofassetsfundingexcessifnegative.cCoveredpayrollincludescompensationpaidtoallactiveemployeesonwhichcontributionsweremadeintheyearprecedingthevaluationdate.OPEB.Thescheduleoffundingprogressfortheotherpost-employmentbenefithealthcareplansispresentedbelowforthemostrecentactuarialvaluationandthetwoprecedingvaluationsforwhichtheDepartmenthasavailabledatainmillionsActuarialAccruedUAALasaActuarialActuarialLiabilitiesUnfundedPercentageValuationValueofAALAALFundingCoveredofCoveredDateAssetsEntryAgeUAALRatioPayrollPayrollJanuary1ABB-AABCB-AC2010-93.593.5-869.110.82011a-99.499.4-866.211.52012-74.774.7-891.68.4aThe2011disclosureinformationisbasedonarollforwardoftheJanuary12010valuation.SEATTLECITYLIGHT2013AnnualReport81 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDDEBTSERVICECOVERAGEFollowingisatablethatprovidesinformationfortheDepartmentsdebtservicecoverageforyears20132012and2011.Thetargetlevelfordebtservicecoveragewas1.8xonallbondsfor20132012and2011inaccordancewithcurrentfinancialpolicieswhichincludeaRatestabilizationaccountthatwillresultingreatercomplianceofactualdebtservicecoveragewiththepolicy-specifiedlevel.DebtServiceCoverageinmillions201320122011RevenuesTotaloperatingrevenues842.2800.3772.2AdjustmentsValuationofexchangepowerrevenues18.812.617.0BPAconservationaugmentationrevenue0.50.214.3Investmentincomea4.74.45.6Proceedsgainonsaleofproperty2.40.20.5Principalreceiptsfromsuburbaninfrastructurereceivables0.70.50.4OtherincomeexpensenetexcludingCIACe3.12.64.5Totalrevenues833.8795.2751.9ExpensesOperationandmaintenance529.4492.3493.0AdjustmentsFERClandusefeesadjustmentb--1.1Amortizationanddepreciationchargedtooperations22.321.520.9Valuationofexchangepowerpurchases18.612.817.2Non-cashwrite-offs9.81.30.8Baddebtexpensec--8.2Netnon-cashclaims1.01.53.6Subtotal477.7455.2448.4TaxesexcludingCityTaxesd36.533.933.6Totalexpenses514.2489.1482.0Revenueavailablefordebtservice319.6306.1269.9Totaldebtservicee172.8169.1146.7Debtservicecoverageratio1.851.811.84December31aExcludesGASB31adjustmentsforfairmarketvalueinvestments.bNon-cashadjustmentdueto2011favorablecourtdecisionregardingFERCfees.Neteffectfor2011wasanon-cashexpense.cOnetimeadjustmentduetomoreconservativemethodologychangeinallowanceforbaddebts.dCitytaxestakeajuniorlientodebtservice.eMethodologychangeeffectivein2012toreportdebtservicenetoffederalbondsubsidiesrevenueforfederaldebtsubsidiesalsoexcludedfromOtherincomeexpensenetexcludingCIAC.SEATTLECITYLIGHT2013AnnualReport82 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDDEBTSERVICECOVERAGEALLBONDSYearEndinRevenueAvailableDebtServiceDebtServiceDecember31forDebtServiceRequirementsCoverageainmillions2013319.6172.81.852012306.1169.11.812011269.9146.71.842010210.4118.41.782009199.7144.91.38a2009debtservicerequirementsexclude72.0millioninvariableratebondsrepaidinFebruary2009from2008bondproceeds.SEATTLECITYLIGHT2013AnnualReport83 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDINTERESTREQUIREMENTSANDPRINCIPALREDEMPTIONONLONG-TERMDEBTYearEndinDecember31PrincipalInterestTotalainmillions201499.790.1189.82015101.885.5187.32016100.580.4180.92017101.675.3176.92018102.270.5172.7201999.065.6164.6202098.460.6159.0202198.055.8153.8202297.050.9147.9202398.346.0144.32024101.040.9141.9202587.335.8123.1202683.231.5114.7202756.927.884.7202857.824.982.7202950.822.373.1203033.520.053.5203134.818.353.1203236.116.652.7203337.514.752.2203439.112.851.9203540.810.951.7203642.68.951.5203729.47.236.6203830.55.836.3203931.74.336.0204033.02.835.8204120.21.621.8204210.10.911.0204310.50.511.0Total1863.3989.22852.5aMaximumdebtserviceof189.8isduein2014.SeeNote8Long-termdebt.SEATTLECITYLIGHT2013AnnualReport84 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDSTATEMENTOFLONG-TERMDEBTAsofDecember312013inmillionsAmountDueInterestAmountAmountWithinAccruedBondSeriesWhenDueRateIssuedOutstandinOneYearInterestSeries20042012-20185.000105.658.216.11.2Series20042019-20214.50053.045.60.9Series20042022-20235.00031.626.10.5Series20042024-20255.25017.311.20.2Series20082010-20145.00065.215.315.30.2Series200820155.25016.316.30.2Series20082016-20185.00036.736.70.5Series20082019-20205.25020.620.60.3Series20082021-20225.50021.421.40.3Series200820235.75010.810.80.2Series20082024-20256.00023.623.60.4Series20082026-20295.75056.456.40.8Series2010A2011-20214.4474.64.60.1Series2010A20224.5977.27.20.1Series2010A20234.7477.57.50.1Series2010A20244.9477.77.70.2Series2010A20255.0478.08.00.2Series2010A20265.1478.28.20.2Series2010A20275.2478.58.50.2Series2010A2028-20305.47027.427.40.6Series2010A2031-20405.570102.6102.52.4Series2010B20143.0003.23.23.20.0Series2010B20145.00040.540.540.50.8Series2010B20153.0001.41.40.0Series2010B20155.00043.843.80.9Series2010B20164.00010.010.00.2Series2010B20165.00038.338.30.8Series2010B20174.0004.44.40.1Series2010B20175.00046.346.31.0Series2010B20184.0005.05.00.1Series2010B20185.00038.838.80.8Series2010B20194.0001.51.50.0Series2010B20195.00042.742.70.9Series2010B20204.0002.62.60.0Series2010B20205.00043.943.90.9Series2010B2021-20265.000187.8187.83.9Series2010C2011-20405.59013.313.30.3Series2011A2013-20275.000176.9172.412.03.6Series2011A20285.2509.49.40.2Series2011A2029-20305.50020.420.40.5Series2011A2031-20365.25075.875.81.7Series2011B20275.75010.010.00.2Series2012A20143.0004.84.84.80.0Series2012A2015-20275.000198.0198.00.8Series2012A20283.25012.412.40.0Series2012A2034-20364.00025.125.10.1Series2012A2037-20414.00049.149.10.2Series2012B20140.7004.84.84.80.0Series2012C20283.4004.34.30.0Series2012C20293.5007.77.70.0Series2012C20303.5007.77.70.0Series2012C2031-20333.75023.423.40.1Series201320142.0003.03.03.00.0Series201320154.0002.92.90.1Series20132016-20335.00097.497.42.3Series20132034-20354.00014.714.70.3Series20132036-20384.12524.424.40.5Series20132039-20434.50048.348.31.0Total1984.21863.399.732.1SEATTLECITYLIGHT2013AnnualReport85 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDPOWERCOSTSANDSTATISTICSYearendinDecember3120132012201120102009inmillionsPOWERCOSTSHydroelectricgenerationac54.045.743.335.641.6Long-termpurchasedpowerb203.1204.1206.9223.6202.0Wholesalepowerpurchasesce25.313.011.627.530.5Fairvaluationpowerpurchasesbe8.66.68.922.121.7Ownedtransmissiona15.114.512.411.012.8Wheelingexpenses37.436.538.938.538.1Otherpowerexpenses12.210.310.210.28.5Totalpowercosts355.7330.7332.2368.5355.2Lessshort-termwholesalepowersalesc63.070.4102.774.588.7Lessotherpower-relatedrevenues21.616.837.733.536.7Lessfairvaluationotherower-relatedb18.912.517.033.030.1Netpowercosts252.2231.0174.8227.5199.7POWERSTATISTICSMWhHydroelectricgenerationc61089086947088754690555091915878382Long-termpurchasedpowerb64829607232362785976668432676839867Wholesalepowerpurchasesc2072066259235416968611550224995311Wholesalepowersalesc38543525625088605325833348722975990Otherd8058101130247928663702434597672Totalpoweravailable100037721001646910121611986537610139898Lessselfconsumedenerg3091031072327523072633663Lesssystemlosses466462518755488627463654412811Totalpowerdeliveredtoretailcustomers95064009466642960023293709969693424NetpowercostperMWhdelivered26.5324.4018.2124.2720.61aIncludingdepreciation.bLong-termpurchasedpowerfairvaluationpowerpurchasesandfairvaluationotherpower-relatedincludeenergyexchanged.underseasonalandotherexchangecontractsvaluedatmarketinaccordancewithGASBStatementNo.62CodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.cThelevelofgenerationandconsequentlytheamountofpowerpurchasedandsoldonthewholesalemarketcanfluctuatewidelyfromyeartoyeardependinguponwaterconditionsintheNorthwestregion.dOtherincludesseasonalexchangepowerdeliveredandmiscellaneouspowertransactions.eBookoutpurchasesareexcludedfromwholesalepowerpurchasesandarereportedonanetbasisinwholesalepowersales.NoteCertainMWhamountsfor2009-2012havebeenrevisedtoconformtothe2013presentation.SEATTLECITYLIGHT2013AnnualReport86 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDHISTORICALENERGYRESOURCESinMWh20102009hDepartment-OwnedGenerationBoundaryProject34658903802251449913431613513609811SkagitHydroelectricProjectGorge95526510813491094529871686840294Diablo828200937646920969720244691542Ross726560939943870310647899621588CedarFallsNewhalem773971226151119596994879557SouthForkTolt5559663284500045401050767Subtotal61089086947088754690555251385893559EnergyPurchasesBonneville50799915633906621483952423015405215PriestRapidsa33205363813228516825132989GCPHAb254568255569237785240787259987HighRoss312350308365313817307390312878LuckyPeak215587401400388786285757323218StatelineWindProject363099365192413697348524352525ColumbiaRidgec515774977950120509551398SeasonalandOtherExchanged69940100782276656278885353444WholesaleMarketPurchasese2072066259235416968611550224995311Subtotal84523839743728962484684730748036965TotalDepartmentResources1456129116690816171717511399821213930524MinusOffsettingEnergySalesFirmEnergySalesandMarketingLossesf466303557279520394421627435693SeasonalandOtherExchanged236864491980476488376337378943WholesaleMarketSalesg38543525625088605325833348722975990TotalNetEnergyResources100037721001646910121611986537610139898aCityLightmadeanelectionfor2010topurchasetheenergyinsteadofresellingatauction.bGrandCouleeProjectHydroelectricAuthority.cTheColumbiaRidgecontractcommencedDecember2009.dIncludesexchangecontractswiththeNorthernCaliforniaPowerAuthorityNCPASacramentoMunicipalUtilityDistrictSMUDandtheLuckyPeakProject.ePurchasestocompensateforlowwaterconditionsandtobalanceloadsandresources.fEnergyprovidedtoPublicUtilityDistrictofPendOreilleCountyundertheBoundaryProjectsFERClicenseandincludeincrementallossesduetoexpandedactivityinthewholesalemarket.gRunoffwas121ofhistoricalaveragein2012and133ofhistoricalaveragein2011.hCertain2009amountshavebeenrevisedfrompreliminarytoactual.201320122011SEATTLECITYLIGHT2013AnnualReport87 THECITYOFSEATTLECITYLIGHTDEPARTMENTOTHERINFORMATIONUNAUDITEDCUSTOMERSTATISTICSYearendedDecember3120132012201120102009AveragenumberofcustomersResidential367837362658360442359079355097Non-residential4021839950399093977939634Total408055402608400351398858394731Megawatt-hoursaResidential333158629343098745343217101333073405333187365Non-residential676347771666367897666383131676297591676506059Total10095064001009466642100960023210093709961009693424verageannuarevenuepercustomeraResidential710664679635569Non-residential10820106031030699628655YearendedDecember3120132012201120102009AverageannualconsumptionpercustomerkWhsaResidential-Seattle85878545892585598976-Nationalna10837112791150010900Non-residential-Seattle157834159399159942158314164155-Nationalna125674126703125325121856Averagerateperkilowatt-hourcentsaResidential-Seattle8.277.777.617.426.34-Nationalna11.8811.7211.5411.51Non-residential-Seattle6.866.656.446.295.27-Nationalna8.678.788.758.79aSourceofnationaldataDepartmentofEnergywww.eia.doe.govcneafelectricityepaepa_sum.htmlwww.eia.doe.govcneafelectricityepmepm_sum.html.2013Nationalaverageannualconsumptionandaverageratedatanotavailable.2012NationalaverageannualconsumptionandNationalaverageratedataupdated.bSeattleamountsincludeanallocationforthenetchangeinunbilledrevenue.Effective2013allocationofnetchangeinunbilledrevenueexcludesretailcustomervoluntarypaymentsforconservationandsolarenergy.Prioryearspresentedwerenotrevised.NOTEThemostrecentcomprehensiveratechangewas5.6effectiveJanuary12014.Inadditionacomprehensiveratechangeof1.2waseffectiveOctober12013fortheBPApass-through.NoticeofpublichearingsonfuturerateactionsmaybeobtainedonrequesttoTheOfficeoftheCityClerk600-4thAveFloorThreeSeattleWA98104.AdditionalinformationaboutCouncilmeetingscanbefoundontheWebatwww.seattle.govcouncilcalendar.SEATTLECITYLIGHT2013AnnualReport88 FinancialinmillionsTotaloperatingrevenuesTotaloperatingexpensesOperatingincomeInvestmentincomeInterestexpensenetACapitalcontributionsandgrantsNoncapitalgrantsOtherincomenetChangeinnetpositionDebtservicecoverageratioallbonds2012800.3662.0138.35.278.831.82.84.7104.01.81x2013842.2711.0131.20.879.349.73.27.1112.71.85xChange5.27.45.184.60.656.314.351.18.42.2EnergyTotalgenerationCityLight-ownedgenerationFirmenergyloadFirmpeakloadhighestsinglehourlyuseAveragenumberofresidentialandnon-residentialcustomersAverageannualresidentialandnon-residentialenergyconsumptionincludesestimatedunbilledrevenueallocationMWhMegawatthoursMWMegawattskWhKilowatthours20136108908MWh10003772MWh1837MWDecember92013408055166421kWhChange12.10.12.21.40.9HIGHLIGHTSUnaudited20126947088MWh10016469MWh1797MWJanuary182012402608167942kWhAEffectiveJanuary12013CityLightadoptedGASBStatementNo.65.The2012amountwasrestatedtoconformtothe2013presentation.SeeNote1OperationsandSummaryofSignificantAccountingPoliciesoftheauditedfinancialstatementsfordetails.2013OPERATINGREVENUESinmillions842.271031435.6Non-residentialShort-termWholesalePowerOtherResidential63.081.5262.152Long-termPowerPurchasesCustomerServiceConservationShort-termWholesaleOtherPowerGenerationTransmissionAdministrativeGeneralDepreciationTaxesDistribution2013OPERATINGEXPENSESinmillions711.011291446.239.948.259.660.771.779.3203.1102.36678910SEATTLECITYLIGHT2013AnnualReport89 20122352.2275.7323.5278.930.03260.31791.574.8224.615.4112.51041.53260.3243.1422.10.9664.370.429.313.223.1800.3204.111.818.132.347.060.831.320.866.174.994.8662.0138.32.84.75.2151.085.12.83.578.831.8104.020132541.1227.0369.1301.026.03464.21870.378.1241.719.2100.71154.23464.2256.6433.37.8697.763.040.418.322.8842.2203.119.826.440.048.259.539.221.571.779.3102.3711.0131.23.27.10.8142.389.05.93.879.349.7112.720112200.3209.2326.8243.2-2979.51640.655.8205.7130.6-946.82979.5242.1411.32.6656.0102.754.762.221.0772.2206.911.419.229.347.958.343.119.157.773.688.8655.3116.81.44.24.9127.384.23.94.376.040.992.220102073.1140.2235.0221.5-2669.81515.955.0166.577.8-854.62669.8223.1392.19.2624.474.566.654.322.0733.2223.624.535.322.546.156.436.116.853.870.486.4671.961.33.02.22.769.274.54.25.165.226.430.420091955.531.6186.8202.6-2376.51299.349.7174.528.7-824.32376.5202.8342.3-545.188.666.8-22.6723.1202.024.636.128.647.157.035.716.973.262.380.7664.259.01.71.02.662.372.92.43.871.543.434.2FINANCIALSUMMARYUnauditedinmillionsYearsendedDecember31BALANCESHEETSABAssetsandDeferredOutflowsofResourcesUtilityplantnetCRestrictedassetsCurrentassetsOtherassetsCDeferredoutflowsofresourcesTotalassetsanddeferredoutflowsofresourcesLiabilitiesDeferredInflowsofResourcesNetPositionLong-termdebtnetNoncurrentliabilitiesCurrentliabilitiesOtherliabilitiesDDeferredinflowsofresourcesNetpositionTotalliabilitiesdeferredinflowsofresourcesnetpositionSTATEMENTSOFREVENUESANDEXPENSESABOperatingRevenuesResidentialNon-residentialUnbilledrevenue-netchangeTotalretailpowerrevenuesShort-termwholesalepowerrevenuesOtherpower-relatedrevenuesTransfersfromtoratestabilizationaccountDOtherrevenuesTotaloperatingrevenuesOperatingExpensesLong-termpurchasedpowerShort-termwholesalepowerpurchasesOtherpowerexpensesGenerationTransmissionDistributionCustomerserviceConservationAdministrativeandgeneralTaxesDepreciationandamortizationTotaloperatingexpensesOperatingincomeNoncapitalgrantsOtherincomeexpensenetInvestmentincomeTotaloperatingandotherincomeInterestExpenseInterestexpenseAmortizationofdebtexpenseInterestchargedtoconstructionNetinterestexpenseCapitalContributionsandGrantsChangeinnetpositionAEffectiveJanuary12013theDepartmentadoptedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.Accordinglycertainitemspreviouslyreportedasassetsandliabilitiesarereclassifiedasdeferredoutflowsofresourcesordeferredinflowsofresourcesandrecognizeasexpensecertainitemspreviouslyreportedasassets.The2012balanceshavebeenrestatedtoconformtothe2013presentation.Thebalancesfortheyearspriorto2012havenotbeenrestated.DescriptionsoftheDepartmentsaccountingpoliciesforitemsreportedonthebalancesheetatDecember312013and2012areinthenotestothefinancialstatementsasfollowsNote1OperationsandSummaryofSignificantAccountingPoliciesparagraphNote7DeferredOutflowsofResourcesandNote14DeferredInflowsofResources.B.EffectiveJanuary12012theDepartmentadoptedStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.NochangestotheaccountinginareasaffectedbyStatementNo.62werenecessary.DescriptionsoftheDepartmentsaccountingpoliciesonfairvaluemeasure-mentsforitemsreportedonthebalancesheetatDecember312013and2012areinthenotestothefinancialstatementsasfollowsNote1OperationsandSummaryofSignificantAccountingPoliciesparagraphNote5AccountsReceivableandNote16Long-TermPurchasedPowerExchangesandTransmission.CEffectiveJanuary12010theDepartmentadoptedGASBStatementNo.51AccountingandFinancialReportingforIntangibleAssets.AsaresultcertainassetspreviouslyrecordedasOtherAssetsmetthecriteriaforintangibleassetsandhavebeenreclassifiedtoUtilityPlantalongwithrelatedaccumulatedamortization.Accordinglysuchcostsinthebalancesheetsfor2009havebeenreclassifiedtoconformwiththe2010presentation.SeeNote2UtilityPlantonpage43oftheauditedfinancialstatements.DDuring2010aRateStabilizationAccountRSAwasfundedinaccordancewithOrdinanceNo.123260.TheRSAwasestablishedtoreducetheneedforrapidandsubstantialrateincreasessolelytocomplywiththeDepartmentsbondcovenants.SeeNote3RateStabilizationAccountonpage46oftheauditedfinancialstatements.NoteCertainother2012accountbalanceshavebeenreclassifiedtoconformtothe2013presentation.SEATTLECITYLIGHT2013AnnualReport90 LONG-TERMDEBTUnaudited3500inmillionsLONGTERMDEBTANDTOTALASSETS300025002000150010005000timescoveredDEBTSERVICECOVERAGE2009-20132.251.381.781.841.811.852.001.751.501.2520092010201120122013EffectiveJanuary12013theDepartmentimplementedStatementNo.65oftheGASBItemsPreviouslyReportedasAssetsandLiabilities.The2012BalanceSheetassetswererestatedtoconformtothe2013presentation.Prioryearswerenotrestated.SeeNote1OperationsandSummaryofSignificantAccountingPoliciesoftheauditedfinancialstatementsforfurtherdetails.Long-termdebtTotalassetsDebtservicecoverageAllbonds20092010201120132012SEATTLECITYLIGHT2013AnnualReport91 CUSTOMERSTATISTICSUnaudited2009201020112013AVERAGEANNUALRESIDENTIALCONSUMPTION12inthousandsofkilowatthoursSeattle9630National2009201020112013AVERAGERESIDENTIALRATES121086024SeattleNational2009201020112013AVERAGEANNUALNONRESIDENTIALCONSUMPTION200150100500SeattleNational2009201020112012AVERAGENONRESIDENTIALRATESincentsperkilowatthour1086024SeattleNational20122012201220122013KilowatthoursusedinbillionsNumberofcustomersinthousands200920102011201220133.253.203.103.153.05370365360355AveragecustomersKilowatthoursusedRESIDENTIALCONSUMPTION20092010201120122013KilowatthoursusedinbillionsNumberofcustomersinthousands6.506.406.30414039AveragecustomersKilowatthoursusedNON-RESIDENTIALCONSUMPTIONincentsperkilowatthourinthousandsofkilowatthoursSourceofnationaldataDepartmentofEnergywww.eia.doe.govcneafelectricityepaepa_sum.htmlwww.eia.doe.govcneafelectricityepmepm_sum.html.2013nationalaverageannualconsumptiondataandaverageratedatanotavailable2012nationalaverageannualconsumptionandnationalaverageratedataupdated.Effective2013averageannualconsumptionandaverageratesexcludeunbilledrevenueallocationofretailcustomervoluntarypaymentsforconservationandsolarenergy.Prioryearspresentedwerenotrevised.SEATTLECITYLIGHT2013AnnualReport92 POWERUnaudited2013SOURCESOFPOWER2013USESOFPOWERGENERATEDBoundarySkagitCedarFallsSouthForkToltTREATYPURCHASEDBPAOtherBCHydroSERVICESNonResidentialResidentialOTHERWholesaleOtherSeattleCityLightOperationsandLossesinpercentmegawatthoursinpercentmegawatthours40.820.225.22.61.050.85.918.17.527.9SEATTLECITYLIGHT2013AnnualReport93 CHANGESINOWNEDTOTALGENERATINGINSTALLEDCAPABILITYUnauditedTOTALGENERATIONANDLONG-TERMPURCHASEDPOWERCONTRACTSVS.FIRMENERGYLOADUnauditedSYSTEMREQUIREMENTSUnauditedYear1904-0919121914-21192119211924-291929193219321936-37195119511952-56195819611967196719721980198619871989-921990199319952000Year1950195519601965197019751980198519901995199619971998199920002001200220032004200520062007200820092010201120122013FirmPeakLoadE3120007330008890001138000138300014293871771550180634120595661748657195066718161521928854172993317694401661842168966616459981798926171408018223421767805190087818587351841255173923817967281837372FirmAverageLoad154030381517512787635275806813848805963686102589810880771072692111013311110351120178114238211423831082068108751910879011088448110765411404661164773117530911575231126184115543511403081141983PlantCedarFallsHydroUnits1234LakeUnionHydroUnit10LakeUnionSteamUnits111213NewhalemHydroUnit20CedarFallsHydroUnit5GorgeHydroUnits212223CedarFallsHydroUnit6CedarFallsHydroUnits1234LakeUnionHydroUnit10DiabloHydroUnits31323536GeorgetownSteamUnits123GorgeHydroUnit24RossHydroUnits41424344DiabloPlantModernizationGorgeHydroHighDamGeorgetownPlantperformancetestgainBoundaryHydroUnits51525354CentraliaUnits12GeorgetownSteamUnits123BoundaryHydroUnits5556LakeUnionSteamUnits111213GorgeUnits212223newrunnersGorgeUnit24generatorrewindCentraliaTransmissionUpgradeSouthForkToltUnit81CentraliaUnits12KilowattsAddedA1040015004000020001500060000150001040015001554002100048000450000270004600020006398001024002300040000040000460032000500016800107400CCCCDCapabilityBTotalKilowatts10400119005190053900689001289001439001335001320002874003084003564008064008334008794008814001521200162360016006002000600196060019652001997200200220020190001911600160000001400000012000000100000008000000600000040000000200000020082007200620052004Long-termpurchasedpowercontractsTotalgenerationFirmenergyload20092010201120122013ACertainhistoricalcapabilitieswererevisedduetovalidationandtesting.BCapabilityisthemaximumcapabilityofgeneratorsandassociatedprimemoversexpressedinkilowattskW.CRetirementofunitsdecreaseintotalcapability.DTheDepartmentsownershipinterestoftheCentraliaSteamPlantwassoldinMay2000.EFirmPeakLoadhighestsinglehourlyuse.megawatthoursinKilowattsSEATTLECITYLIGHT2013AnnualReport94 TAXESANDCONTRIBUTIONSBYSEATTLECITYLIGHTTOTHECOSTOFGOVERNMENTUnauditedTAXESANDCONTRIBUTIONSTOTHECOSTOFGOVERNMENTYearsendedDecember31TaxesCityofSeattleoccupationutilitytaxStatepublicutilityandbusinesstaxesSuburbancontractpaymentsandotherContractpaymentsforgovernmentservicesTotaltaxesasshowninstatementofrevenuesandexpensesTaxeslicenseschargedtoaccountsotherthantaxesOthercontributionstothecostofgovernmentATotalmiscellaneoustaxesTotaltaxesandcontributionsNoteElectricratesincludealltaxes.TheStatePublicUtilityTaxrateforretailelectricpowersaleswas3.8734.TheCityofSeattleOccupationUtilityTaxratewas6forin-stateretailelectricpowersales.AAfavorablecourtdecisioninearly2011ruledthat2009FERClandusefeeswereoverpaidby3million.Thisoverpaymentwasaccruedandappliedagainstthe2010costs.201240.925.65.33.174.913.710.924.699.5201342.827.25.34.079.315.313.628.9108.2201140.025.05.53.173.613.97.621.595.1201038.624.25.02.670.413.03.716.787.1200933.721.44.23.062.313.09.322.384.6105120inmillionsinmillions907560453015020092010201120122013CityofSeattleoccupationutilitytaxStatepublicutilityandbusinesstaxesOthertaxesandcontributionstogovernmentSEATTLECITYLIGHT2013AnnualReport95 PUBLICPURPOSEEXPENDITURESUnauditedANNUALENERGYSAVINGSTHROUGHCONSERVATIONAProgrammaticconservationexpendituresaredeferredandamortizedovera20-yearperiodinaccordancewithCityCouncil-passedresolutionsandStatementNo.62oftheGASBCodificationofAccountingandFinancialReportingGuidanceContainedinPre-November301989FASBAICPAPronouncements.Non-lowincomeprogrammaticconservationincludesexpendituresforprogrammeasurescustomerincentivesfieldstaffsalariesenergycodeenforcementanddirectprogramadministrationandexcludesexpendituresrelatedtosolarorotherrenewableprograms.Low-incomeprogrammaticconservationincludesthesetypesofexpendituresfortheDepartmentsHomeWiseandLow-IncomeMultifamilyPrograms.BNon-programmaticexpendituresincludeprogramplanningevaluationdataprocessingandgeneraladministration.Theseexpensesarenotassociatedwithmeasuredenergysavings.CEnergysavingsarefromcompletedprojectsinthatyearandincludethosefromNorthwestEnergyEfficiencyAllianceresidentialbehaviorprogramsandtheapplicableTransmissionDistributionbenefit.DLow-incomeenergyassistanceincludesratediscountsandotherprogramsthatprovideassistancetolowincomecustomers.ENon-hydrorenewableresourcesincludepowergeneratedfromtheBurlingtonBiomassColumbiaRidgeBiogasKingCountyWestPointBiogasCogenerationPlantandStatelineWindProjectwhicharefundedfromcurrentrevenues.YearsendedDecember312013CONSERVATIONProgrammaticconservationexpensesANon-lowincomeLowincomeNon-programmaticconservationexpensesBSubtotalAnnualenergysavingsmegawatthoursCOTHERPUBLICPURPOSEEXPENDITURESLow-incomeenergyassistanceDNon-hydrorenewableresourcesESubtotalNETPUBLICPURPOSESPENDINGRevenuefromretailelectricsalesPERCENTPUBLICPURPOSESPENDINGTORETAILELECTRICSALESConservationonlyLow-incomeassistancenon-hydrorenewablesTotal201221.91.86.129.81373748.228.736.966.7664.34.55.510.0201329.92.56.739.11381598.028.336.375.4694.75.65.210.8201124.03.15.632.71261968.726.935.668.3656.05.05.410.4201028.71.84.034.51415818.123.932.066.5624.25.55.110.6200922.61.95.830.31026936.720.026.757.0545.15.64.910.5inmillions140000160000120000100000800006000040000200000megawatthours20092010201120122013SEATTLECITYLIGHT2013AnnualReport96 OURVISIONTosetthestandardandtodeliverthebestcustomerserviceexperienceofanyutilityinthenation.OURMISSIONSeattleCityLightisdedicatedtoexceedingourcustomersexpectationsinproducinganddeliveringenvironmentallyresponsiblesafelow-costandreliablepower.OURVALUESExcellenceaccountabilitytrustandstewardship 700FifthAvenueSuite3200POBox34023SeattleWA98124-4023www.seattle.govlightPhotospage18top12and15byChristopherNelsonCertno.XXX-XXX-XXXX