Forwards 1998 annual financial repts for participants who ... · 08/06/99 Don-The copy ofexternal document 9907070350 we received for processing was missing page "2.3-72"from Vol

CATEGORYREGULAT Y INFORMATION DXSTRXBUTIO SYSTEM

(RIDS)'CCESSION

NBR:9909160126 DOC.DATE: 99/09/02 NOTARIZED: NO DOCKET ¹FACIL:STN-50-528 Palo Verde Nuclear Station, Unit 1, Arizona Publi 05000528

STN-50-.529 Palo Verde Nuclear Station, Unit 2, Arizona Publi 05000529STN-50-530 Palo Verde Nuclear Station, Unit 3, Arizorl'a Publi 05000530

AUTH.NAME AUTHOR AFFILIATIONKRAINIK,A.K. Arizona Public Service Co. (formerly Arizona Nuclear Power

RECIP.NAME RECIPIENT AFFILIATIONRecords Management Branch (Document Control D~es )

SUBJECT: Forwards 1998 annual financial repts for participants whoown PVNGS,including APS,Salt River Project,EPEC,SCE,PSNM, A ~ ASouthern California Public Power Authority S Los AngelesDept of Water &. Power,IAW 10CFR50.71(b). T

DZSTRZBUTZON CODE: M004D CORTES RECEZVED:LTR I ENCL { S1'ZE: ~ g ETITLE: 50.71 (b) Annual Financial Report

NOTES: STANDARX}IZED PLANTStandardized plant.Standardized plant.

80500052805000529 005000530

R

RECXPXENTXD CODE/NAME

FIELDS,M

INTERNAL: FXLE CENTER 01

EXTERNAL: NRC PDR

COPIESLTTR ENCL

1 1

1 1

1 1

RECIPIENTID CODE/NAME

NRR/DRIP/RGEB

COPIESLTTR ENCL

1 1

'E

N

NOTE TO ALL "RIDSN RECIPIENTS:PLEASE HELP US TO REDUCE WASTE. TO HAVE YOUR NAME OR ORGANIZATION REMOVED FROM DISTRIBUTION LISTSOR REDUCE THE NUMBER OF COPIES RECEIVED BY YOU OR YOUR ORGANIZATION, CONTACT THE DOCUMENT CONTROLDESK (DCD) ON EXTENSION 415-2083

TOTAL NUMBER OF COPIES REQUIRED: LTTR 4 ENCL 4

Palo Verde NuclearGenerating Station

Angela K. KralnlkDirector,Regulatory Affairs

Mail Station 7636Tel. 623493-5421 PO Box 52034Fax 623493-5442 Phoenix, Arizona 85072-2034

102-04340 —AKK/SAB/CJ J

September 2, 1999

U.S. Nuclear Regulatory CommissionATTN: Document Control DeskMail Station P1-37Washington, DC 20555-0001

Dear Sirs:

Subject: Palo Verde Nuclear Generating Station (PVNGS)Units 1, 2, and 3Docket Nos. STN 60-628/629/630Submittal of 1998 Annual Financial Reports

Pursuant to 10 CFR 50.71(b), enclosed please find copies of the 1998 AnnualFinancial Reports for the Participants who jointly own PVNGS. These Participantsare Arizona Public Service Company, Salt River Project, El Paso Electric Company,Southern California Edison Company, Public Service Company of New Mexico,Southern California Public Power Authority, and Los Angeles Department of Waterand Power. No commitments are being made to the NRC by this letter.

If you have any questions, please contact Scott A. Bauer at (602) 393-5978.

Sincerely,

AKK/SAB/CJ J

Enclosures

ec: E. W. Merschoff (all w/enclosure)N. KalyanamJ. H. Moorman

VV09XSO~aS, 99090m (

PDR ADQCK 05000528E " 'PDR

\

ENCLOSURE

PALO VERDE NUCLEAR GENERATING STATION

1998 ANNUALFINANCIALREPORTS

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The copy of external document 9907070350 we received forprocessing was missing page "2.3-72" from Vol 1 - Chapter2 and page "3B.9-S" from Vol 3 - Chapter 3 in enclosure9907070~~~% note to the data records title descriptionfield was added which reads:

Page 2.3-72 in Vol 1 - Chapter 2 and page 3B.9-8 in Vol 3-Chapter 3 of incoming submittal were not included.

Attached is a copy of the RIDS sheet and the forwardingletter so you can advise the person(s) who submitted thisdocument of the situation. The data record was not placedin a "hold" status and the microfilm address was left as ison the system.

Thanks

Dean

pvcEWA~ERHOUsgcGPER5 9

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'OUTHERN

CALII<'ORNIAPUBLIC POWER AUTHORITY

REPORT AND FINANCIALSTATEMENTSAND SUPPLEMENTAL

F<INANCIALINFORMATION

JUNE 30, 199S AND 1997

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PricewaterhouseCoo pers LLP400 South Hope StreetLos Angeles CA 90071-2889Telephone (213) 236 3000

REPORT OF INDEPENDENT ACCOUNTANTS

September 10, 1998

To the Board ofDirectors of theSouthern California Public Power Authority

In our opinion, the accompanying combined balance sheet and the related combinedstatements ofoperations and ofcash flows, present fairly, in all material respects, thefinancial position of the Southern California Public Power Authority (Authority) at June30, 1998 and 1997, and the results of its operations and its cash flows for the years thenended in conformity with generally accepted accounting principles. These financialstatements are the responsibility of the Authority's management; our responsibility is toexpress an opinion on these financial statements based on our audits. We conducted ouraudits of these statements in accordance with generally accepted auditing standards whichrequire that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free ofmaterial misstatement. An audit includes examining, ona test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for the opinion expressed above.

In our opinion, the accompanying separate balance sheets and the related separatestatements ofcash flows of the Authority's Palo Verde Project, Southern TransmissionSystem Project, Hoover Uprating Project, Mead-Phoenix Project, Mead-Adelanto Project,Multiple Project Fund and San Juan Project and the separate statements ofoperations ofthe Authority's Palo Verde Project, Southern Transmission System Project, HooverUprating Project, Mead-Phoenix Project, Mead-Adelanto Project and San Juan Project,present fairly, in all material respects, the financial position of each of the Projects at June30, 1998 and 1997, and their cash flows, and the results ofoperations of the Authority'sPalo Verde Project, Southern Transmission System Project, Hoover Uprating Project,Mead-Phoenix Project, Mead-Adelanto Project and San Juan Project for the years thenended in conformity with generally accepted accounting principles. These financialstatements are the responsibility of the Authority's management; our responsibility is toexpress an opinion on these financial statements based on our audits.

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PVCEWA~ERHOU5+CDPERS IIyThe Board ofDirectorsSeptember 10, 1998

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We conducted our audits of these statements in accordance with generally acceptedauditing standards which require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for,the opinionexpressed above.

As discussed in Note 10 to the financial statements, the Authority changed its method ofaccounting for investments retroactive to July 1, 1996.

As discussed in Note 9 to the financial statements, the 1997 financial statements have beenrestated to expense a loss on extinguishment ofdebt.

Our audits were conducted for the purpose of forming an opinion on the basic financialstatenients taken as a whole. The supplemental financial information, as listed on theacconipanying index, is presented for purposes ofadditional analysis and is not a requiredpart of the basic financial statements. This information is the responsibility of theAuthority's managen>ent. Such information has been subjected to the auditing proceduresapplied in the audits of the basic financial statements and, in our opinion, is fairly stated inall n>aterial respects in relation to the basic financial statements taken as a whole.

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ly SOUTIIERN CALIFORNIAPUBLIC POPOVER AUTIIORITY

COMBINEDBALANCESHEET(In thousands)

June 30 1998

Assets

PaloVerde

~Pro'ect

SouthernTransmission Hoover Mead-

Systcm Uprating Phoenix~Pro ect ~Pro'ect ~Pro'cct

Mead-Adelanto~Pro'cct

hlultiplcProjectFund

SanJuan

~Pro ect

Projects'tabilization

and OtherFunds Total

Utilityplant:ProductionTransmissionGeneral

$ 617,40414,153 $ 674,6062 655 18951

693,557

233 559

459,998

G34,212

I ~s.dc I ted d p elatle 3011748

325,464

Construction work in progress 10,016Nuclear fuel, at amortized cost 15 014

$ 51,2662 632

53,898

3 577

50,321

$ 170,896341

171,237

10 305

160,932

$ 183,125

7 890191,015

55 573135,442

6,578

$ 800,529910,921

32 469

1,743,919

611 762

I,I32 157

16,59415 014

Nct utilityplant 35tl 494 459 99R 50321 160932 142 020 I 163 765

Special funds:Funds at fair value (Note 2):

Decommissioning fundInvestmentsEscrow account

Advance to Intermountain Power AgencyAdvances I'or capacity and energy, netInterest receivableCash and cash equivalents

4

54,46077,30034,778

2,06585 792

254,395

97,51324,41311,550

54551 863

185,884

$ 4,906 19,394 57,884 $ 254,884

23,98479 718 2,138 9,367

2 690 2 676 7 9116 76

22,788 67,928 264,32731,659

21,952 $

41718,509

40,878

02 v

„54,46011,352 '545,185

59,19111,55023,984

266 15>595

7079 177491

19,597 887,456

Accounts rcceivablcMaterials and suppliesCosts recoverable from (in cxccss of)

future billings'to participantsUnamortized debt expenses, less

accumulated amortization of$ 124,609

2>018

7,196

128,380 191,221

173,413 260,261

20

(6,321)

2,410

3,084 9,090

5,017 17,280

8,850 25,155

(8,357) 6,6053,356

33,680

2,500

12,440

10,572

483,330

358,516

5 915 896 $ 1097364 S 2776S 3 911060 5 2R0385 S 255 970 S 229039 5 19 597 S2 916079

LhhilltlesI

Long-term debt $ 8G4,345 $ 1,050,209 $ 26,559 $ 86,727 $ 2G8,918 $ 244,145 $ 210,295 $ 2,751,198

Deferred credits

Current liabilitiEarnings to bc distributedLong.term debt due within one year 32,015Accrued interest 13,229*cc \s p >able 0 acctaad cape ses 6 307

109

21,97021,131

3 945

550395264

2,588745

7,8843 583

3,5G9

8,2566,5405,7426 462

3,678

$ 799 79961,07559,225

18 798 40 104

Total current liabilities 51 551 47 046 I 209 3 333 I I 467 8256 18 744 19 597 161 203

Commitments and contingcncics

5 915 896 3 I 097 364 S 27768 5 90 060 5 280 385 S 255 970 5 229 039 S 19 597 32 916079

The accompanying notes arc an integral part of these financial statements.

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SOUTHERN CALIFORNIAPUBLIC POPOVER AUTIIORITY

COMBINEDBALANCESIIEET(fn thousands)

June 30 1997 Restated -Notes 9 and 10

Assets

PaloVcrdc

~Pro'ect

'outhcmTransmission

System~Pro'ect

HooverUprating~Pro'cct

Mead-Phoenix~Pro'ect

Mead-Adclanto~pro'ect

MultipleprojectFund

SanJuan

~Pro'eet

projects'tabilization


Utilityplant:ProductionTransmissionGeneral

Less - Accumulated depreciation

Construction work in progressNuclear fuel, at amortized cost

$ 615,21414,1532 656

632,023

$ 674,60618 893

693,499

279 927 213 844

352,096 479,655

10,02613 514

$ 51,1892 627

53,816

2 202

51,614

$ 170,895335

171,230

5 828165,402

S 183,208

7 865

191,073

43 112

147,96 1

210

$ 798,422910,843

32 376

1,741,641

544 913

1,196,728

10,23613 514

Net utilityp!ant 375 636 479 655 51 614 165 402 148 171 I 220 478

Special funds:Funds at fair value (Note 2):

Decommissioning fundInvestmentsEscrow account

Advance to Intermountain Potvcr AgencyAdvances for capacity and energy, netInterest receivableCash and cash equivalents

43,943155,763 138,550

IS,48411,550

1,946 58327396 32442

$ 4,906 18,586

24,5266 690

2.503 2 7612,0574 229

9,28873

58,380 S 252,779

1347.503

710.463

37,431 $ 43442

43,943670,837

IS,484119550

24,52614,71187,370

229048 198609 31941 22.037 64666 262140 45.068 14.912 868421

Accounts receivableMaterials and suppliesCosts rccoverablc from (in excess ol)

I'uture billings to participantsUnamortized debt expenses, less

accumulated amortization of$ 118,334

2,8787,511

231,230 240,210

1$ 2 491 197 675

2,122 5,386

(6,477) 4,163 14,545

2.567 936826639

(7,345)3,494

33,709

2.805

3,041

11,005

517,380

421.545

5 I 078 794 Sl 116 149 S 28 031 5 89 304 S 276 638 5 254 795 5 233,247 5 14.912 S 3.041.870

LiahllitlesI

Long-term debt $ 9GS, I5 I $ 1,065,877 5 26,999 $ 86,570 5 268,456 $ 243,466 $ 216,496 S 2,873,015

Deferred credits

Current liabilities:Long-term debt due within one yearAccrued interestAccounts payable and accrued expenses

112

28,570 21,36022,G60 24,39412 413 4 406

5 IS402 2,588I IS 146

7,884298

3,073

8,256

3,185

6,275 56,7205,873 72,0574 603 5 14 912 36 893

Total current liabilities 63643 50160 1032 2734 8182 8256 16751 14912 165.670

Commitments and contingencies

5 102S794 Sl 116149 5 28031 S 89304 S 276638 5254795 5233247 5 14912 5 3041.870

gThc accompanying notes are an integral part of these financial statements.

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SOUTIIERN CALIFORNIAPUBLIC POPOVER AUTIIORITY

COMBINEDSTATEMENTOF OPERATIONS(fn thousands)

Year Fnded June 30 1998

PaloVerde

~Pm cct

SouthcmTransmission

System~Pro'ect


Mcad-Phocnix~Pro'cct

Mcad-Adclanto

~Pro ectSan Juan~Pro'ect

projectTotal


and OtherFunds

CombinedTotal

Operating revcnucs:Sales ofclcctric energySales of transmission servicesRcimburscmcnt to participantsOther revenues 65 M0

(6,787)

$ 125,706 $ 83,119 S 2,148$ 6,347 $ 18,623

$ 61,465 $ 272,43824,970(6,787)65 000

S 272,43824,970(6,787)

'65 000

Total operating revenues 190706 76332 21486347 111.623 61 465 355 621 355 621

l Operating expenses:Amortization ofnuclear fuelOther operationsMaintenance

preciationcommissioning

99044

21,1266,135

17,95511 593

9,2063,499

19,715

2,099 1,561

127

1,441

4,027281

4,477

304

38,7329,4363 113

9,04438,32348,77453,02414.706

99044

38,32348,77453,02414 706

Total operating cxpenscs

Operating income

Invcstmcnt income

Income before debt cxpcnsc

Debt expense

124,853 43,912 49 3,218 9,838 9,880

8 843 11 254 492 I 509 4 399 2 377

133,696 55,166 541 49727

75 879 75 217 697 5 581

14,237

16,972

12,257

12.228

65 853 32 420 2.099 3 129 8.785 51.585 163.871

191,750

28,874

220,624

186,574

S 799

163 871

191,750

29,673

799 221,423

186,574

Costs rccovcrablc (from) irt excess offuture billings to participants

Earnings to bc distributed

3 57 817 $~20 051 ~S156 S~RS4 $~2735 $ 29 5 34 050

S 799

Total Costs recoverable in excess offuture billings to participants and

Earnings to be distributed $ 34 849

The accompanying notes are an integral part of thcsc financial statements.

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SOUTHERN CALIFORNIAPUBLIC POPOVER AUTHORITY

COMBINED STATEMENTOF OPERATIONS(In thousands)

Year Ended June 30 1997 Restated - Notes 9 and 10

PaloVerde

~Pro'cct

SouthernTransmission Hoover

System Uprating~Pro ect ~Pro ect

Mead-Phoenix~Pro ect

Mead-Adelanto

~Pro ectSan Juan~Pro'ect Total

Reimbursement to participan

Total operating revenues

Operating revenues:Sales ofelectric energySales of transmission services

ts

$ 119,507$ 85,054~8000

$ 2,521$ 3,282 $ 8,194

$ 58,017 $ 180,04596,530

~8000"

119 507 77 054 2 521 3 282 8 194 58 017 268 575

Operating expenses:Amortization ofnuclear fuelOther operations

aintenanceepreciation

Decommissioning

7,75521,411

5,81818,37111 593

9,9974,460

19,717

2,082 50773

1,356

875207

4,573

25737,181

9,1393 113

7,75535,12947,73953,15614 706

Total operating expenses"

64 948 34 174 2 082 I 936 5 655 49 690 158 485

Operating income

Investment income

54,559 42,880

11 146 21 131

439 1,346 2,539 8,327 110,090

69 I 491 4 340 2 242 40419

Income before debt cxpensc

Debt expense

Costs recoverable from futurebillings to participants

65,705 64,011 50& 2,837 6,879 10,569 150,509

78 553 85 866 I 034 5 597 17 013 12 494 200 557

$~12 848 ~$ 21 855 ~$ 526 $~2760 $~10 134 ~$ 1 925 ~$ 50048

The accompanying notes are an integral part of these financial statements.

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SOUTHERN CALIFORNIAPUBLIC POPOVER AUTHORITYCOMBINEDSTATEMENTOF CASH FLOWS

(In thousands)

PaloVerde

~Pro cct

Southern

TransmissionSystem~Pro'cct

HooverUprating~Pro'ect

June 30 1998

Mead- Mcad-Phoenix Adelanto~Pro'cct ~Pro'ect

Cash flows from operating activities:Operating incomeAdjustmcnts to reconcile operating

income to nct cash providedby operating activities-

DeprcciationDecommissioningAdvances I'rcapacity and energy, netAmortization ofnuclear fuel

Changes in assets and liabilities:Accounts receivableMaterials and suppliesOther assetsAccounts payable and accrued

expensesDefcrrcd credits

19,71517,95511,593

4,4771,441

1,7009,044

860315

55

(962) (3,704)

(154) (20) (6)

(6,106) (461) 149~3 599 3,285

$ 124,853 $ 43,912 $ 49 $ 3,218 $ 9,838

MultipleprojectFund

San

Juan~Pro ect

$ 9,880

9,4363>113

(6,605)13930

1,859



$ 191,750

53,02414,706

1>700

9,044

(10,411)454(95)

(675)

Net cash provided by operatingactivities 158 569 63 009 I 878 4.296 13 890 17852 259.494

Cash flows from noncapitalflnancing activities:

Advances from participantsParticipant withdrawals

Nct cash provided by noncapitalfinancing activities

flows from capital and relatedancing activities:

Payments for constructionol'acilities

Payments of interest on long-term debtProcccds from sale ofbondsFloat forward contract proceedsPayment for dcfcasanceofrcvcnue bonds

Repayment ofprincipal on long. termdebt

Decommissioning fundPayment for bond issue costs

Net cash used for capital and

(13,450)(57,069)377,849

3>464

(60,815)93,802

(28,570)(10,517)

~5316(21,360)

I 130

(415,581) (97,485)

(515) (6,275)

(148) (6,398)(1,594) (4,905) (15,027) (5 16,512) (11,746)

$ 9,731 9,731~5932 ~5932

3.799 3 799

(19,996)(167,668)471,651

3>464

(513,066)

(56,720)(10,517)

~6446

related financing activities ~I49 190 ~86 98$ ~2109 ~5053 ~IS 027 ~l6 512 ~24 419 299 298

Cash flows from investing activities:Interest rcccivcd on investmcntsPurchases of investmcntsProceeds from sale/maturity of

8,723 11>386 '$345 1,473 4,318 18,620 2,042 539 47,446(177,665) (60,457) (10,725) (1,026) (8,560) (2,105) (34,511) (32,290) (327,339)

mvestmcnts

Nct cash provided by (used for)

217959 92471 10798 225 9056 50042 25468406019

mvestmg acuvities 49 017 43 400 418 672 4 814 16 515 17 573 ~6283 126126

Net increase (decrease) in cashand cash cquivalcnts

Cash and cash equivalents atbeginning ofyear

Cash and cash equivalents atd ofyear

58,396 19,421 187 (85) 3,677 3 11,006 (2,484) 90,121

27 396 32 442 2 503 2 761 4229 73 7.503 10463 87370

3 85792 5 51863 $ 2690 S 2.676 3 7906 S 76 S IL509 8 7.979 3 177491

Thc accompanying notes arc an integral part of these financial statements.

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SOUTHERN CALIFORNIAPUBLIC POPOVER AUTIIORITY

COMBINEDSTATEMENTOF CASH FLOKVS(In thousan s)

June 30 1997Southern

Palo TransmissionVerde System

~Pro'ect ~Pro'ect


Mead-Phoenix~Pro ect

Mead-Adehnto

~Pro'ect

MultipleprojectFund

projects'an

StabilizationJuan and Other

~Pro'ect Funds Total

Cash flows from operating activities:Operating incomeAdjustmcnts to reconcile operating

incoinc to nct cash providedby operating activitics-

DcprcciationDecommissioningAdvances for capacity and energy, netAmortization ofnuclear I'uelReimbursement to participants

Changes in assets and liabilities:Accounts receivableMaterials and suppliesOther assetsAccounts payable and accrued

expcnscs

1,356 4,57319,71718,37111,593

1,7107,755

8,000

(2,140)1,729

25

2>687 19 (372) (646)

26 6G

2 880 4 203 53 ~444 ~482

$ 54,559 $ 42,880 $ 439 $ 1,346 $ 2,539 $ 8,327

9,1393,113

94575

896

$ 110,090

53,15614,706

1,7107,7558,000

4931,804

117

4 514

Nct cash providedby operatingactivities

Cash flows from noncapitalifinancing activities:

Advances from participantsParticipant withdrawals

93 972 77 487 2 221 I 912 6 050 20 703 202 345

$ 16,835 16,835~2149 ~2149

Net cash provided by noncapitallinancing activities

l llows from capital and rclatcdncing activities:

ayments for construction offacilitics

Payments of interest on long-term debtProceeds from sale ofbondsTransfers from escrow account-Crossovcr series

Payment I'or defeasance/redemptionofrcvenuc bonds

Repayment ofprincipal on long. termdebt

Decommissioning fundPayment for bond issue costs

(10,325)(51,127)153,034

(74,876)199,739

(1,784)

(25,690)(10,469)~3558

(10,845) (1,085)

~2250

343,898

(157,015) (5G 1,565) (3,637)

(422)(4,924) (15,077) ($ 16,512)

(1,623)(12,002)

(6,035)

14 686 14 686

(12,370)(176,302)352,773

343,898

(722,217)

(43,655)(10,469)

~5.808Net cash used for capital and

related linancing activities ~105 150 ~105 899 ~6506 ~5346 ~15 077 16 512 19 660 274 150

Cash Ilows from investing activities:Interest rcccivcd on investmentsPurchases of investmentsProceeds from sale/maturity of

investments

10,989 17,741(111,714) (161,198)

140(10,663)

1,633 4,541(939) (9,276)

71420 113 987 15 314 3 953 13 4S7

18,475(2,030)

140

2,174 219(25,553) (6,767)

55,912(328,140)

22.293 2325 242919

Net cash provided by (used for)investing activities, ~29 305 ~29 470 4791 4 647 8 752 16 585 ~1086 ~4223 ~29 309

Net increase (dccreasc) in cashand cash equivalents (40,483) (57,882) 506 1,213 (275) 73 (43) 10,463 (86,428)

Cash and cash equivalents atbeginning ofyear 67 879 90 324 I 997 I 5411 4 504 7 546 173 798

Cash and cash equivalents atend ofyear S 27396 S 32442 5 2503 5 2761 5 4.229 5

4

73 5 7503 5 10463 5 87 370

The accompanying notes arc an integral part of these financial statements.

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Sg SOUTHERN CALIFORNIAPUBLIC POWER AUTHORITY

NOTES TO FINANCIALSTATEMENTS

NOTE 1 - ORGANIZATIONAND PURPOSE:

The members have the followingparticipation percentages in the Authority's interest in the projectsat June 30, 1998 and 1997:

SouthernPalo Transmission Hoover Mead- Mead- San

d ~S' i 'd1 1P~attici ants

Southern California Public Power Authority (Authority), a public entity organized under the laws ofthe State ofCalifornia, was formed by a Joint Powers Agreement dated as ofNovember 1, 1980pursuant to the Joint Exercise ofPowers Act of the State ofCalifornia. The Authority's participantmembership consists of ten Southern California cities and one public district of the State ofCalifornia. The Authority was formed for the purpose ofplanning, financing, developing, acquiring,constructing, operating and maintaining projects for the generation and transmission ofelectricenergy for sale to its participants. The Joint Powers Agreement has a term of fiftyyears.

City ofLos AngelesCity ofAnaheimCity ofRiverside

" Imperial Irrigation DistrictCity ofVernonCity ofAzusaCity ofBanningCity ofColtonCity ofBurbank

LCity ofGlendaleCity ofPasadena

6.54.91.01.01.044444.4

4.52.35.9

67.0% 59.5%17.6

5.4 10.2 .

51.0%

4.22.13.2

16.0

1.01.01.0

15.414.813.8

2.21.32.6

11.511.1 9.88.6

14.79.8

14.7

24.8% 35.7%42.6% 24.2 13.531.9 4.0 13.5

100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Mead-Phoenix participation reflects three ownership components (see below).

The members participate in the Projects'tabilization Fund by making deposits to the fund at theirdiscretion.

The members do not currently participate in the MultipleProject Fund as it was established toprovide funding for unspecified future projects.

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NOTE 1: (Continued)

Palo Verde Pro'ect

The Authority, pursuant to an assignment agreement dated as ofAugust 14, 1981 with the Salt RiverProject (Salt River), purchased a 5.91% interest in the Palo Verde Nuclear Generating Station(PVNGS), a 3,810 megawatt nuclear-fueled generating station near Phoenix, Arizona, and a 6.55%share of the right to use certain portions of the Arizona Nuclear Power Project Valley TransmissionSystem (collectively, the Palo Verde Project).

As ofJuly 1, 1981, ten participants had entered into power sales contracts with the Authority topurchase the Authority's share ofPVNGS capacity and energy. Units 1, 2 and 3 of the Palo VerdeProject began commercial operations in January 1986, September 1986, and January 1988,respectively.

Southern Transmission S stem Pro'ect

The Authority, pursuant to an agreement dated as ofMay 1, 1983 with the Intermountain PowerAgency (IPA), has made payments-in-aid ofconstruction to IPA to defray all the costs ofacquisitionand construction of the Southern Transmission System Project (STS), which provides for thetransmission ofenergy from the Intermountain Generating Station in Utah to Southern California.The Authority entered into an agreement also dated as ofMay 1, 1983 with six of its participantspursuant to which each member assigned its entitlement to capacity ofSTS to the Authority in returnfor the Authority's agreement to make payments-in-aid ofconstruction to IPA. STS commencedcommercial operations in July 1986. The Department ofWater and Power of the City ofLosAngeles (LADWP), a member of the Authority, serves as project manager and operating agent of theIntermountain Power Project (IPP).

Hoover U ratin Pro'ect

The Authority and six participants entered into an agreement dated as ofMarch 1, 1986, pursuant towhich each participant assigned its entitlement to capacity and associated firm energy to theAuthority in return for the Authority's agreement to make advance payments to the United StatesBureau ofReclamation (USBR) on behalf of such participants. The USBR has declared that theProject is substantially complete. The Authority has an 18.68% interest in the contingent capacity ofthe Hoover Uprating Project (HU). Allseventeen "uprated" generators of the HU have commencedcommercial operations.

Mead-Phoenix Pro'ect

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The Authority entered into an agreement dated as ofDecember 17, 1991 to acquire an interest in theMead-Phoenix Project (MP)," a transmission line extending between the Westwing substation inArizona and the Marketplace substation in Nevada. The agreement provides the Authoritywith an18.31% interest in the Westwing-Mead project component, a 17.76% interest in the Mead Substationproject component and a 22.41% interest in the Mead-Marketplace project component. The Authorityhas entered into transmission service contracts for the entire capability of its interest with nine

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members of the Authority on a "take or pay" basis. In addition, the Authority has administrativeresponsibility for accounting for the separate ownership interest in the project by Western AreaPower Administration (WAPA), which is providing separate funding ($73,758,000 and $73,011,000at June 30, 1998 and 1997, respectively) for its interest. Commercial operations ofMP commencedin April 1996. Funding was provided by a transfer offunds from the MultipleProject Fund (Note 4).

Mead-Adelanto Pro'ect

The Authority entered into an agreement dated as ofDecember 17, 1991 to acquire a 67.92% interestin the Mead-Adelanto Project (MA), a transmission line extending between the Adelanto substationin Southern California and the Marketplace substation in Nevada. The Authority has entered intotransmission service contracts for the entire capability of its interest with nine members of theAuthority on a "take or pay" basis. In addition, the Authority has administrative responsibility foraccounting for the separate ownership interest in the project by WAPA, which is providing separatefunding ($ 17,088,000 at June 30, 1998 and 1997) for its interest. Funding was provided by a transferof funds from the MultipleProject Fund (Note 4). Commercial operations commenced in April1996. LADWP serves as both construction manager and operations manager.

Multi le Pro'ect Fund

During fiscal year 1990, the Authority issued Multiple Project Revenue Bonds for net proceeds ofapproximately $ 600 million to provide funds to finance costs ofconstruction and acquisition ofownership interests or capacity rights in one or more then unspecified projects for the generation ortransmission ofelectric energy.

In August 1992, the Authority's Board ofDirectors approved a resolution authorizing the use ofcertain proceeds ofMultipleProject Revenue Bonds to finance the Authority's ownership interests inthe Mead-Phoenix and Mead-Adelanto projects. Transfers made from the Multiple Project Fund aresufficient to provide for the Authority's share of the estimated costs ofacquisition and constructionof these two projects, including reimbursement ofplanning, development and other related costs.

Effective July 1, 1993, the Authority purchased a 41.80% interest in Unit 3, a 488 megawatt unit andrelated common facilities, of the San Juan Generating Station (SJGS) from Century PowerCorporation. Unit 3 is one unit ofa four-unit coal-fired power generating station in New Mexico.The Authority allocated the $ 193 millionpurchase price to the estimated fair value of the utilityplant ($ 190 million) and to materials and supplies ($3 million). The purchase has been financedthrough the issuance ofapproximately $237 million (par value) ofSan Juan Project Revenue Bonds.The Authority has entered into power sales contracts for the entire capability of its interest with fivemembers of the Authority on a "take or pay" basis.

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NOTE 1: (Continued)

Pro'ects'tabilization Fund

In fiscal 1997 the Authority authorized the creation of a Projects'tabilization Fund. Dep'osits maybe made into the fund from budget under-runs, aAer authorization of individual participants, and bydirect contributions from the participants. Participants have discretion over the use oftheir depositsto pay costs and expenses ofAuthority-related projects. This fund is not a project-related fund,therefore, it is not governed by any project Indenture ofTrust.

NOTE 2 - SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES:

The financial statements of the Authority are presented in conformity with generally acceptedaccounting principles, and are substantially in conformity with accounting principles prescribed bythe Federal Energy Regulatory Commission and the California Public Utilities Commission. TheAuthority is not subject to regulation by either of these regulatory bodies.

The Authority complies with all applicable pronouncements of the Governmental AccountingStandards Board (GASB). In accordance with GASB Statement No. 20, "Accounting and FinancialReporting for Proprietary Funds and Other Governmental Entities That Use Proprietary FundAccounting," the Authority also complies with authoritative pronouncements applicable tonongovernmental entities (i.e., Financial Accounting Standards Board statements) which do notconflict with GASB pronouncements.

The financial statements represent the Authority's share in each jointly-owned project. TheAuthority's share ofdirect expenses ofjointly-owned projects are included in the correspondingoperating expense of the combined statement ofoperations. Each owner of the jointly-ownedprojects is required to provide its own financing.

~Utitit Plant

The Authority's share ofall expenditures, including general administrative and other overheadexpenses, payments-in-aid ofconstruction, interest net ofrelated investment income, deferred costamortization and the fair value of test power generated and delivered to the participants arecapitalized as utilityplant construction work in progress until a facilitycommences commercialoperation.

The Authority's share ofconstruction and betterment costs associated with PVNGS is included as

utilityplant. Depreciation expense is computed using the straight-line method based on theestimated service life ofthirty-fiveyears. Nuclear fuel is amortized and charged to expense on thebasis ofactual thermal energy produced relative to total thermal energy expected to be produced overthe life of the fuel. Under the provisions of the Nuclear Waste Policy Act of 1982, the Authority ischarged one millper kilowatt-hour, by the federal government, on its share ofelectricity produced byPVNGS, and such funds willeventually be utilized by the federal government to provide forPVNGS'uclear waste disposal. The Authority records this charge as a current year expense.

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The Authorit 's sharey ofconstruction and betterment costs associated with STS, MP, MAand SJGSare included as utilityplant. Depreciation expense is computed using the straight-line method basedon the estimated service lives, principally thirty-fiveyears for STS, MAand MP and twenty-oneyears for SJGS.

Advances for Ca acit and Ener

Advance payments to USBR for the uprating of the 17 generators at the Hoover Power Plant areincluded in advances for capacity and energy. These advances are being reduced by the principalportion of the credits on billings to the Authority for energy and capacity.

Nuclear Decommissionin

Decommissioning ofPVNGS is projected to commence subsequent to the year 2022. Based upon anupdated study performed by an independent engineering firm, the Authority's share of the estimateddecommissioning costs is $ 85.5 million in 1995 dollars ($390 million in 2022 dollars assuming a 6%estimated annual inflation rate). The Authority is providing for its share of the estimated futuredecommissioning costs over the remaining life of the nuclear power plant (25 to 27 years) throughannual charges to expense which amounted to $ 11.6 million in fiscal 1998 and 1997. Thedecommissioning liabilityis included as a component ofaccumulated depreciation and was $ 111.3millionand $99.7 million at June 30, 1998 and 1997, respectively.

i A Decommissioning Fund has been established and partially funded at $54.5 million atJune 30, 1998. The Decommissioning Fund earned interest income of$2,841,000 and $2,690,000during fiscal 1998 and 1997, respectively.

Demolition and Site Reclamation

Demolition and site reclamation ofSJGS, which involves restoring the site to a "green" conditionwhich existed prior to SJGS construction, is projected to commence subsequent to the year 2014.Based upon a study performed by an independent engineering firm, the Authority's share of theestimated demolition and site reclamation costs is $ 18.7 million in 1992 dollars ($65.3 million in2014 dollars assuming a 6% estimated annual inflation rate). The Authority is providing for its shareof the estimated future demolition costs over the remaining life of the power plant (17 years) throughannual charges to expense of$3.1 million. The demolition liabilityis included as a component ofaccumulated depreciation and totaled $ 15.6 and $ 12.5 million at June 30, 1998 and 1997,respectively.

As ofJune 30, 1998, the Authority has not billed participants for the cost ofdemolition nor has itestablished a demolition fund.

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NOTE 2: (Continued)

Unamortized Debt Ex enses

Unamortized debt issue costs, including the loss on refundings, are being amortized over the shorterof the terms of the respective issues or the remaining terms of the bonds refunded, and are reportednet ofaccumulated amortization. Total deferred loss on refundings, net ofaccumulatedamortization, was $297,224,000 and $394,575,000 at June 30, 1998 and 1997, respectively.

Investments

Investments include United States Government and governmental agency securities and repurchaseagreements which are collateralized by such securities. Additionally, the Mead-Phoenix Project, theMead-Adelanto Project and the MultipleProject Fund's investments are comprised ofan investmentagreement with a financial institution earning a guaranteed rate ofreturn. The SouthernTransmission System Project has debt service reserve funds associated with the 1991 and 1992Subordinate Refunding Series Bonds invested with a financial institution under a specific investmentagreement allowed under the Bond Indenture earning a guaranteed rate ofreturn.

)

Investments are carried at aggregate fair value and changes in unrealized gains and losses arerecorded in the statement ofoperations (Note 10). Investments are reduced to estimated netrealizable value when necessary for declines in value considered to be other than temporary. Gainsand losses realized on the sale of investments are generally determined using the specificidentification method. As discussed in Note 3, all of the investments are restricted as to their use.

Cash and Cash E uivalents

Cash and cash equivalents include cash and all investments with original maturities less than 90days.

Revenues

Revenues consist ofbillings to participants for the sales ofelectric energy and of transmissionservice in accordance with the participation agreements. Generally, revenues are fixed at a level torecover all operating and debt service costs over the commercial life of the property (see Note 6).

In March 1997, the Palo Verde Proje'ct participants approved a board resolution which instructs theAuthority to increase fiscal 1998 and future billings to Palo Verde participants so as to fullyamortizethe costs recoverable from future billings to participants balance of$231,230,000.at June 30; 1997

by June 30, 2003 and to prevent the further accumulation ofcosts recoverable from future billings toparticipants. In fiscal 1998, total billings to participants for this purpose were $65,000,000....-

/

DbE

Debt expense includes interest on debt and the amortization ofbond discounts, debt issuance

expense and loss on refunding costs.

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A rebate payable to the Internal Revenue Service MRS) results from the investment of the proceedsfrom the MultipleProject Revenue Bond offering in a taxable financial instrument that yields ahigher rate of interest income than the cost of the associated funds. The excess of interest incomeover costs is payable to the IRS within five years of the date of the bond offering and eachconsecutive five years thereaAer. The Authority made a payment of$ 3.8 millionat the end of theinitial rebate period during fiscal year 1995. The next rebate payment to the IRS, ifany, is due infiscal year 2000. As ofJune 30, 1998 and 1997, the Authority had no liabilityrelating to ArbitrageRebate.

Use ofEstimates

The preparation of financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts ofassetsand liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statementsand the reported amounts ofrevenues and expenses during the reporting period. Actual results coulddiffer from those estimates.

Reclassi fications

Certain reclassifications have been made in the fiscal year 1997 financial statements to conform tothe fiscal year 1998 presentation.

NOTE 3 - SPECIAL FUNDS:

The Bond Indentures for the six projects and the MultipleProject Fund require the following specialfunds to be established to account for the Authority's receipts and disbursements. The moneys andinvestments held in these fiinds are restricted in use to the purposes stipulated in the BondIndentures. A summary of these funds follows:

Fund Puruose

Construction To disburse funds for the acquisition and construction of theproject.

Debt Service

Revenue

Operating

To pay interest and principal related to the Revenue Bonds.

To initiallyreceive all revenues and disburse them to other funds.

To pay operating expenses.

Reserve and Contingency To pay capital improvements and make up deficiencies in otherfunds.

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NOTE 3: (Continued)

Fund

General Reserve

Advance Payments

Proceeds Account

Puruose

To make up any deficiencies in other funds.

To disburse funds for the cost ofacquisition ofcapacity.

To initiallyreceive the proceeds of the sale of the MultipleProjectRevenue Bonds.

Earnings Account To receive investment earnings on the MultipleProject RevenueBonds.

Revolving Fund

Decommissioning Fund

To pay the Authority's operating expenses.

To accumulate funds related to the future decommissioning ofPVNGS.

Issue Fund To initiallyreceive pledged revenues associated with theapplicable subordinated refunding series'ndenture ofTrust and

pay the related interest and principal.

i Escrow account - SubordinateRefunding

To initiallyreceive pledged revenues associated withSubordinate Refunding Indenture ofTrust and pay the relatedinterest and principal.

Acquisition Account To disburse funds for the acquisition and construction of theMead-Phoenix, Mead-Adelanto and San Juan projects.

Surplus Fund To make up any deficiencies in other funds of the Mead-Adelantoand Mead-Phoenix projects.

Costs of Issuance

Deposit Installment

To pay costs associated with the issuance ofbonds.

To accumulate funds related to the purchase ofbond obligations.

Deposit Installment Reserve To make up deficiencies in the Deposit Installment account.

Renewal and Replacement To pay costs associated with capital improvements.

Allof the funds listed above, except for the Revolving Fund, are held by the respective trustees.

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t Palo Verde Pro ect

The balances of the funds required by the Bond Indenture are as follows, in thousands:

June 301998

AmortizedCost

FairValue

1997Amortized

CostFair

ValueDebt Service Fund-

Debt Service AccountDebt Service Reserve Account

Revenue FundOperating FundReserve and Contingency FundDecommissioning Trust FundIssue FundEscrow Account —Subordinate Refunding1997 Deposit Installment1997 Deposit Installment ReserveRevolving Fund

$ 41,25739,183

928,91824,98355,23423,41438,395

6,1711,001

92

$ 40,94639,098

928,86024,92755,21923,30034,779

6,1641,001

92

$ 42,37767,317

1

25,81224,91144,39924,912

52

$ 41,69567,332

1

25,83024,98244,41824,738

52

~Contractual maturities

l Within one yearAAer one year through five yearsAfter five years through ten yearsAAer ten years

$258 657 $254 395 $229 781 $ 229 048

$ 110,083 $ 110,392110,181 108,505

8,068 ',16030 325 29 338

$258 657 $254 395

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The balances in the special funds required by the Bond Indenture are as follows, in thousands:

June 301998 1997

Amortized Fair Amortized FairCost Value Cost Value

Construction fund —InitialFacilities Account $Debt Service Fund-


Operating FundGeneral Reserve FundIssue FundEscrow Account - Subordinate Refunding

Crossover SeriesRevolving Fund

96111,3655,1912,580

129,504

23,67932

96111,3225,1912,580

129,820

24,42832

2,58721,339

6,54511,772

128,000

2,58721,379

6,54511,772

129,031

15,43915

15,48415

$ 246 $ 246

I Contractual maturities:Within one yearAAer one year through five yearsAfter five years through ten yearsAfter ten years

$ 173 312 $ 174 334 $ 185 943 $ 187 059

$ 57,136 $ 57,57658,368 59,091

6,686 6,54551 122 51 122

$ 173 312 $ 174 334

In addition, at June 30, 1998 and 1997, the Authority had non-interest bearing advances outstandingto IPA of$ 11,550,000.

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NOTE 3: (Continued)



June 301998

AmortizedCost

FairValue

1997Amortized

CostFair

Value

Operating-Working Capital FundDebt Service Fund-


General Reserve FundRevolving Fund

1,1683,1261,870

34

1,1683,1251,869

34

7533,1261,871

15

7533,0811,845

15

$ 1,479 $ 1,479 $ 1,724 $ 1,721

8 7677 $ 7675 5 7489 7 415

Contractual maturities:Within one yearAAer one year through five years

$ 2,704 $ 2,7704 973 4 905

5 7677 5 7675

In addition, at June 30, 1998 and 1997, the Authority had advances to USBR of$23,984,000 and$24,526,000, respectively.



June 30

1998Amortized

CostFair

Value

1997Amortized

CostFair

Value

iii

Acquisition AccountDebt Service Fund-


Issue FundRenewal and ReplacementOperating FundSurplus FundRevolving Fund

$ 13,594 $ 13,594 $ 12,830 $ 12,830

1,4096,1321,325

62254

48

1,4096,1321,325

62254

48

2,9046,132

79884

2,9046,132

7988

4

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$ 22 788 $ 22 788 $ 22 037 $ 22 037

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NOTE 3: (Continued)

Mead-Phoenix Pro'ect (Continued)June 30 1998

Amortized FairCost Value

Contractual maturities:.Within one year $ 22 788 $ 22 788



1998June 30

1997Amortized

CostFair

ValueAmortized

CostFair

Value

Acquisition AccountDebt Service Fund-


Issue FundRevenue FundOperating FundSurplus FundRevolving Fund

4,09116,8654,411

1

2434

10

4,09116,8654,411

1

2434

10

8,32216,865

'8

4

8,32216,865

88

$ 42,303 $ 42,303 $ 39,386 $ 39,387

$ 67 928 $ 67 928 $ 64 665 $ 64 666

Contractual maturities:Within one year $ 67 928 $ 67 928

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NOTE 3: (Continued)



June 301998

AmortizedCost

FairValue

1997Amortized

CostFair

Value

Proceeds AccountEarnings Account

$256,831 $256,8317 496 7 496

$256,903 $ 256,9035 237 5 237

Contractual maturities:AAer ten years

$264 327 $264 327 $262 140 $ 262 140

$264327 $264 327


June 301998 1997

Amortized Fair Amortized FairCost Value Cost Value

Operating FundOperating Reserve FundProject FundDebt Service Fund-


Reserve and ContingencyRevolving

8,802 8,83718,049 18,0497,857 7,857

24 24

9,08818,02615,455

10

9,08818,02615,452

10

$ 5,980 $ 5,993 $ 1,932 $ 1,9323 3 7 7

115 115 553 553

$ 40 830 $ 40 878 $ 45 071 $ 45 068

Contractual maturities:Within one yearAfter one year through five yearsAAer ten years

$ 17,080 $ 16,9715,740 5,862

18 010 18 045

$ 40 830 $ 40 878

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NOTE 3: (Continued)

Pro'ects'tabilization Fund and Other Funds

At June 30, 1998, the Projects'tabilization Fund investments had amortized cost and fair value of$ 19,451,000 and $ 19,424,000 respectively. Allcontractual maturities as ofJune 30, 1998 are withinone year. At June 30, 1997, the Projects'tabilization Fund investments had amortized cost and fairvalue of$ 14,896,000 and $ 14,871,000 respectively. Other Funds of the Authority include cash of$ 173,000 and $41,000 at June 30, 1998 and 1997, respectively.

Pro'ect Investment Sales

There were no proceeds from sales of investments during fiscal 1998 or 1997.

NOTE 4 - LONG-TERM DEBT:

Reference is made below to the Combined Schedule ofLong-term Debt at June 30, 1998 for detailsrelated to all of the Authority's outstanding bonds.

Palo Verde Pro'ect

To finance the purchase and construction of the Authority's share of the Palo Verde Project, theAuthority issued Power Project Revenue Bonds pursuant to the Authority's Indenture ofTrust datedas ofJuly 1, 1981 (Senior Indenture), as amended and supplemented. The Authority also has issuedand has outstanding Power Project Subordinate Refunding Series Bonds issued under an Indenture ofTrust dated as ofJanuary 1, 1993 (Subordinate Indenture). The Subordinate Refunding Bonds wereissued to advance refund certain bonds previously issued under the Senior Indenture.

The bond indentures provide that the Revenue Bonds and Subordinate Refunding Bonds shall bespecial, limited obligations of the Authority payable solely from and secured solely by (1) proceedsfrom the sale ofbonds, (2) all revenues, incomes, rents and receipts attributable to the Palo VerdeProject (see Note 6) and interest on all moneys or securities (other than in the Construction Fund)held pursuant to the Bond Indenture and (3) all funds established by the Bond Indenture.

AAer the purchase ofsecurities (consisting ofnon-callable direct obligations of, or unconditionallyguaranteed by, the United States ofAmerica) pursuant to a 1997 Series B Forward PurchaseAgreement ("Defeasance Obligations"), the principal of and interest on the PaloVerde 1997Subordinate Refunding Series B Bonds willbe payable solely from and secured by the DefeasanceObligations. The 1997 Series B Forward Purchase Agreement provides that Defeasance Obligationsmust be purchased monthly in specified amounts. The Authority expects that all of the DefeasanceObligations aggregating $290,568,000 willbe purchased'by July 1, 2004. It is expected that theSeries B Subordinate Bonds willbe defeased once all of the Defeasance Obligations have been

purchased pursuant to the 1997 Series B Forward Purchase Agreement.

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NOTE 4: (Continued)

Pursuant to a Forward Securities Purchase Contract, the collection ofadditional revenues by theAuthority under the Senior Indenture, together with other available moneys, willbe used to purchasenon-callable direct obligations of, or unconditionally guaranteed by the United States ofAmerica, todefease, on or about July 1, 2004, approximately $ 166,350,000 of the outstanding 1987 Series A and1989 Series A revenue bonds, maturing on July 1, 2011 through 2017.

At the option of the Authority, all outstanding Power Project Revenue Bonds and SubordinateRefunding Term Bonds are subject to redemption prior to maturity, except for the 1996 SubordinateRefunding Series A and portions of the 1989A, 1992A, 1992B and 1993A Series bonds which arenot redeemable.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2003 (1986 Series A Bonds and 1987 Series A Bonds), 2005 (1989 Series A Bonds), 2010(1993 Series ABonds), and 2008 (1996 Subordinate Refunding Series B). Scheduled principalmaturities for the Palo Verde Project during the five fiscal years following June 30, 1998 are$32,015,000 in 1999, $35,305,000 in 2000, $37,075,000 in 2001, $31,500,000 in 2002, and$40,250,000 in 2003. The average interest rate on outstanding debt during fiscal year 1998 and 1997was 5.0% and 5.8%, respectively.


> To finance payments-in-aid ofconstruction to IPA for construction of the STS, the Authority issuedTransmission Project Revenue Bonds pursuant to the Authority's Indenture ofTrust dated as ofMay 1, 1983 (Senior Indenture), as amended and supplemented. The Authority also has issued andhas outstanding Transmission Project Revenue Bonds 1991 and 1992 Subordinate Refunding Seriesissued under Indentures ofTrust dated as ofMarch 1, 1991 and June 1, 1992, respectively. The 1991and 1992 subordinated bonds were issued to advance refund certain bonds previously issued underthe Senior Indenture.

The bond indentures provide that the Revenue Bonds and the Subordinate Refunding Series Bondsshall be special, limited obligations of the Authoritypayable solely from and secured solely by (1)proceeds from the sale ofbonds, (2) all revenues, incomes, rents and receipts attributable to STS (seeNote 6) and interest on all moneys or securities (other than in the Construction Fund) held pursuantto the Bond Indenture and (3) all funds established by the Bond Indenture.

At the option of the Authority, all outstanding Transmission Project Revenue and Refunding Bondsare subject to redemption prior to maturity, except for the 1996 Subordinate Refunding Series Awhich is not redeemable.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2019 (for the 1996 Series B Bonds). Scheduled principal maturities for STS during the fivefiscal years following June 30, 1998 are $21,970,000 in 1999, $ 19,275,000 in 2000, $24,205,000 in2001, $ 19,210,000 in 2002, and $23,170,000 in 2003. The average interest rate on outstanding debtduring fiscal year 1998 and 1997 was 5.4% and 5.6%, respectively.

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NOTE 4: (Continued)


To finance advance payments to USBR for application to the costs of the Hoover Uprating Project,the Authority issued Hydroelectric Power Project Revenue Bonds pursuant to the Authority'sIndenture ofTrust dated as ofMarch 1, 1986 (Bond Indenture).

The Bond Indenture provides that the Revenue Bonds shall be special,.limited obligations of theAuthority payable solely from and secured solely by (1) the proceeds from the sale of the bonds, (2)all revenues from sales ofenergy to participants (see Note 6), (3) interest or other receipts derivedfrom any moneys or securities held pursuant to the Bond Indenture and (4) all funds established bythe Bond Indenture (except for the Interim Advance Payments Account in the Advance PaymentsFund).

At the option of the Authority, all outstanding Hydroelectric Power Project Revenue Bonds aresubject to redemption prior to maturity.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2007 for the 1991 Series A Bonds maturing on October 1, 2010 and fiscal year 2011 for the1991 Series A Bonds maturing on October 1, 2017. Scheduled principal maturities for the HooverUprating Project during the five fiscal years following June 30, 1998 are $550,000 in 1999, $580,000in 2000, $615,000 in 2001, $650,000 in 2002, and $ 1,145,000 in 2003. The average interest rate onoutstanding debt during fiscal year 1998 and 1997 was 5.8% and 5.7%, respectively.


To finance costs ofconstruction and acquisition ofownership interests or capacity rights in one ormore projects expected to be undertaken within five years after issuance, the Authority issuedMultipleProject Revenue Bonds pursuant to the Authority's Indenture ofTrust dated as ofAugust 1,

1989 (Bond Indenture), as amended and supplemented.

The Bond Indenture provides that the Revenue Bonds shall be special, limited obligations of theAuthoritypayable solely from, and secured solely by, (1) proceeds from the sale ofbonds, (2) withrespect to each authorized project, the revenues ofsuch authorized project, and (3) all fundsestablished by the Bond Indenture.

In October 1992, $ 103,640,000 and $285,010,000 of the MultipleProject Revenue Bonds weretransferred to the Mead-Phoenix Project and the Mead-Adelanto Project, respectively, to finance theestimated costs ofacquisition and construction of the projects.

A total of$ 153,500,000 of the outstanding MultipleProject Revenue Bonds are not subject toredemption prior to maturity. At the option of the Authority, the balance of the outstanding bondsare subject to redemption prior to maturity.

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NOTE 4: (Continued)

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2006 for the 1989 Series Bonds. The first scheduled principal maturities for the MultipleProject Revenue Bonds for fiscal years followingJune 30, 1998 are $5,400,000 in 2000, $5,800,000in 2001, $6,200,000 in 2002, and $6,600,000 in 2003. The average interest rate on outstanding debtduring fiscal year 1998 and 1997 was 6.7%.


To finance the Authority's ownership interest in the estimated cost of the project, $ 103,640,000 ofthe MultipleProject Revenue Bonds were transferred to the Mead-Phoenix Project in October 1992.In March 1994, the Authority issued and has outstanding $51,835,000 ofMead-Phoenix RevenueBonds under an Indenture ofTrust dated as ofJanuary 1, 1994 (Bond Indenture). The proceeds fromthe Revenue Bonds, together with drawdowns from the Debt Service Fund and Project AcquisitionFund, were used to advance refund $64,840,000 of the Multiple Project Revenue Bonds previouslytransferred to the Mead-Phoenix Project.

The Bond Indenture provides that the Revenue Bonds shall be special, limited obligations of theAuthority payable solely from, and secured solely by, (1) proceeds from the sale ofbonds, (2) allrevenues, incomes, rents and receipts attributable to Mead-Phoenix (see Note 6) and interest on allmoneys or securities and (3) all funds established by the Bond Indenture.

At the option of the Authority, all outstanding Mead-Phoenix Revenue Bonds are subject toredemption prior to maturity.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2018 for the 1994 Series Bonds. The first scheduled principal maturities for the Mead-PhoenixRevenue Bonds for fiscal years followingJune 30, 1998 are $2,160,000 in 2000, $2,320,000 in 2001,$2,480,000 in 2002 and $2,640,000 in 2003. The average interest rate on outstanding debt duringfiscal year 1998 and 1997 was 5.6%.


To finance the Authority's ownership interest in the estimated cost of the project, $285,010,000 ofthe MultipleProject Revenue Bonds were transferred to the Mead-Adelanto Project in October 1992.In March 1994, the Authority issued and has outstanding $ 173,955,000 ofMead-Adelanto RevenueBonds under an Indenture ofTrust dated as ofJanuary 1, 1994 (Bond Indenture). The proceeds ofthe Revenue Bonds, together with drawdowns from the Debt Service Fund and Project AcquisitionFund, were used to advance refund $ 178,310,000 of the MultipleProject Revenue Bonds previouslytransferred to the Mead-Adelanto Project.

)0I

The Bond Indenture provides that the Revenue Bonds shall be special, limited obligations of theAuthoritypayable solely from, and secured solely by, 1) proceeds from the sale ofbonds, (2) allrevenues, incomes, rents and receipts attributable to Mead-Adelanto (see Note 6) and interest on allmoneys or securities and (3) all funds established by the Bond Indenture.

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Oy NOTE 4: (Continued)

At the option of the Authority, all outstanding Mead-Adelanto Revenue Bonds are subject toredemption prior to maturity.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2018 for the 1994 Series Bonds. The first scheduled principal maturities for the Mead-AdelantoRevenue Bonds for fiscal years followingJune 30, 1998 are $5,940,000 in 2000, $6,380,000 in 2001,$6,820,000 in 2002, and $7,260,000 in 2003. The average interest rate on outstanding debt duringfiscal year 1998 and 1997 was 5.6%.

S

To finance the costs ofacquisition ofan ownership interest in Unit 3 of the SJGS, the Authorityissued San Juan Project Revenue Bonds pursuant to the Authority's Indenture ofTrust dated as ofJanuary 1, 1993 (Bond Indenture).

The Bond Indenture provides that the Revenue Bonds shall be special, limited obligations of theAuthoritypayable solely from, and secured solely by, (1) proceeds from the sale ofbonds, (2) allrevenues, incomes, rents and receipts attributable to San Juan (see Note 6) and interest on all moneys

,or securities and (3) all funds established by the Bond Indenture.

At the option of the Authority, all outstanding San Juan Project Revenue Bonds are subject toredemption prior to maturity.

The Bond Indenture requires mandatory sinking fund installments to be made beginning in fiscalyear 2012 for the 1993 Series A Bonds. The scheduled principal maturities for the San Juan ProjectRevenue Bonds during the five fiscal years followingJune 30, 1998 are $6,540,000 in 1999,$6,825,000 in 2000, $7,140,000 in 2001, $7,480,000 in 2002, and $7,845,000 in 2003. The averageinterest rate on outstanding debt during fiscal year 1998 and 1997 was 5.3%.

Refundin Bonds

In October 1997, the Authority issued $29,975,000 ofPalo Verde Revenue Bonds 1997 SubordinateRefunding Series A and $375,650,000 ofPalo Verde Revenue Bonds 1997 Subordinate RefundingSeries B to refund $28,690,000 and $422,845,000 ofpreviously issued bonds, respectively. Theserefundings were implemented to reduce interest costs, to free up debt service reserves and toaccelerate the repayment ofdebt. These refundings are expected to reduce total debt servicepayments in the future by $297,103,000. The transactions willnot result in any material net presentvalue savings.

Ig

In June 1998, the Authority issued $90,900,000 ofSouthern Transmission Project Revenue Bonds1998 Subordinate Refunding Series A to refund $96,520,000 of the Southern Transmission Project1988 Refunding Series ABonds. The refunding is expected to reduce total debt service paymentsover the next seven years by approximately $ 15,364,200 (the difference between the debt servicepayments on the old and new debt) and is expected to result in a net present value savings ofapproximately $7,548,000.

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NOTE 4: (Continued)

In July 1992, the Authority issued $475,000,000 ofSouthern Transmission Project Revenue Bondsto refund $385,385,000 ofpreviously issued bonds. Principal and interest with respect to the 1992bonds were allocated into four separate components. Each ofcomponents 1, 2 and 3 were secured

by, and payable from, investments in its escrow fund until scheduled crossover dates. Component 4proceeds of$ 14,100,000 were used to advance refund approximately $9,000,000 ofbonds in fiscalyear 1993. On the Component 1 Crossover date (January 1, 1994), Component 1 proceeds of$ 13,959,000 were used in fiscal 1994 to advance refund $ 13,455,000 ofpreviously issued bonds. Onthe Component 2 Crossover date (January 1, 1995), Component 2 proceeds of$5,519,000 were usedin fiscal 1995 to advance refund $5,335,000 ofpreviously issued bonds. On the Component 3

Crossover date (July 1, 1996), Component 3 proceeds of$321,069,000 were used in fiscal 1997 toadvance refund $313,050,000 ofpreviously issued bonds.

In September 1996, the Authority issued $42,245,000 ofSouthern Transmission Project RevenueBonds, 1996 Subordinate Refunding Series A and $ 121,065,000 ofSouthern Transmission ProjectRevenue Bonds, 1996 Subordinate Refunding Series B to refund $68,720,000 and $ 127,100,000 ofthe STS 1986 Refunding Series A and B, respectively. The refunding is expected to reduce totaldebt service payments over the next 26 years by approximately $ 125,382,000 (the differencebetween the debt service payments on the old and new debt) and is expected to result in a net presentvalue savings ofapproximately $32,526,000.

aIn January 1992, $70,680,000 ofPalo Verde Special Obligation Crossover Series Bonds were issued,the proceeds ofwhich were placed in an irrevocable trust to redeem $69,125,000 ofpreviouslyissued bonds. On July 1, 1996, trust assets held in escrow of$63,415,000 were used to advancerefund $62,000,000 ofpreviously issued bonds.

In August 1996, the Authority issued $ 89,570,000 ofPalo Verde 1996 Subordinate Refunding SeriesC bonds to refund $95,015,000 of 1986 Refunding Series B bonds. The refunding is expected toreduce total debt service payments over the next 20 years by approximately $24,713,000 (thedifference between the debt service payments on the old and new debt) and is expected to result in a

net present value savings ofapproximately $ 16,955,000.

In April 1996, the Authority issued $ 152,905,000 ofPalo Verde 1996 Subordinate Refunding SeriesABonds to refund $ 163,355,000 ofpreviously issued Palo Verde 1987 Refunding Series A Bondsand issued $58,870,000 ofPalo Verde 1996 Subordinate Refunding Series B Bonds to refund$ 18,555,000 and $40,315,000 ofpreviously issued Palo Verde 1986 Refunding Series B and 1987Refunding Series A Bonds, respectively. The refunding is expected to reduce total debt servicepayments over the next 13 years by approximately $50,967,000 (the difference between the debtservice payments on the old and new debt) and is expected to result in a net present value savings ofapproximately $29,537,000.

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NOTE 4: (Continued)

In March 1994, the Authority issued $51,835,000 ofMead-Phoenix Project Revenue Bonds and$ 173,955,000 ofMead-Adelanto Project Revenue Bonds to refund $243,150,000 ofpreviouslyissued MultipleProject Revenue Bonds which were transferred to the Mead-Phoenix and Mead-Adelanto projects during fiscal year 1993. The partial refunding of the original issue within fiveyears of its issuance triggered a recalculation of the arbitrage yield. The recalculation resulted in a

higher arbitrage yield which reduced the rebate liabilityof the Authority. At June 30, 1998,cumulative savings due to the rebate calculation amounted to $8,356,000. This amount wasallocated $2,228,000 and $6,128,000 to the Mead-Phoenix and Mead-Adelanto Projects,respectively, and is recorded as accounts receivable in the accompanying combined balance sheet.

At June 30, 1998, the aggregate amount ofdebt in all projects considered to be defeased andoutstanding was $970,635,000.

Interest Rate Swa

s

In fiscal year 1991, the Authority entered into an Interest Rate Swap agreement with a third party forthe purpose ofhedging against interest rate fluctuations arising from the issuance of the SouthernTransmission Project Revenue Bonds, 1991 Subordinate Refunding Series as variable rateobligations. The notional amount of the Swap Agreement is equal to the par value of the bond($290,500,000 and $291,000,000 at June 30, 1998 and 1997, respectively). The Swap Agreementprovides for the Authority to make payments to the third party on a fixed rate basis at 6.38%, and forthe third party to make reciprocal payments based on a variable rate basis (3.1% and 3.9% atJune 30, 1998 and 1997, respectively). The bonds mature in 2019.

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lg~Pro ect Series

DateofSale

EffectiveInterest Rate

COMBINEDSCHEDULE OF LONG-TERM DEBTATJUNE30 1998

(In thousands)

Maturity on~Jul I Total

Principal:Palo Vcrdc Project Revenue and Refunding Bonds 1986A

1987A1989A1992A1992B1992C1993A1996A1996B1996C1997A1997B

03/13/8602/11/8702/15/8901/01/9201/01/9201/01/9203/01/9302/13/9602/29/9608/22/9610/09/9710/09/97

8.2%6.9%7.2%6.0/o60%60%5.5%4.4%4.4%4.2%4.3%69%

1998 to 20061998 to 20171998 to 20151998 to 20101998 to 20061998 to 20101998 to 20171998 to 20171998 to 2017

'2016 to 20171998 to 2004

2017

4 6,20040,140

241,4655,145

52,7852,810

29,04572,81558,87089,57029,975

345 675

974 495

Southern Transmission System ProjectRevcnuc and Refunding Bonds 1988A

1991A1992Comp1,2,4

1992 Comp 3

1993A1996A1996B1998A

11/22/8804/17/9107/20/9207/20/9207/01/9309/12/9609/12/9606/04/98

7.2%6.4%61%6.1%5.4%4.9%4.3%4.6%

1998 to 20152019

1998 to 20211998 to 2021

1998 to 20231998 to 20062019 to 20231999 to 2011

57,565290,500

34,831413,189113,32039,250

121,06590 900

Hoover Uprating Project Revenue andRefunding Bonds 1991 08/01/91 6.2% 1998 to 2017

1 160 620

30 490

Multiple Project Revenue BondsMead-Phoenix ProjectMead-Adclanto ProjectMultiple Project

19891989

1989

01/04/9001/04/9001/04/90

7.1%7.1%7.1%

1999 to 2020 38,8001999 to 2020 106,7001999142020 259100

404,600

Mead-Phoenix Project Revenue Bonds

Mead-Adclanto Project Rcvenuc Bonds

San Juan Project Revenue Bonds

Total principal amount

Unamortized bond discount:Palo Verde ProjectSouthern Transmission System Projectlloover Uprating ProjectMead.Phoenix ProjectMead-Adclanto ProjectMultiple Project FundSan Juan Project

Total unamortized bond discount

Long-term debt due within onc year

Total long-term debt, net

1994A

1994A

1993

03/Ol/94

03/01/94

06/01/93

5.3%

5.3%

5.6%

2006 to 2015

2006 to 2015

1998 to 2020

51 835

173 955

225.065

3 021 060

(78,136)(88,441)

(3,381)(3,908)

'11,737)

(14,954)~8230

208 787

61 075

5 2 751 198

Note - bonds which have been refunded arc excluded from this schedule

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8?r2?F99 14:47 LADMP-FSA EXEC + 916I?23935442 NO. 763 PB1

TE 5 - DISCLOSURES FAIRVALUEOF FINANCIALINSTRUMENTS:

The followingmethods and assumptions were used to estimate the Mrvalue ofeach class offinancial instruments forwhich it is practicable to estimate that value:

a d cash e uivalents

The canying'value approximates fairvalue because ofthe short maturity ofthose instruments.

nvestmen econunissio d/Es w un - u te e ndin

The fair values ofinvestmcnts are estimated based on quoted market prices for the same or similarinvestments.

The fair value of the Authority's debt is estimated based on the quoted market prices for the same orsimilar issues or on the current average rates offered to the Authority for debt of approximately thesame remaining maturities, net of the effect ofa related interest rate swap agreement.

The fair values of the Authority's financial instruments are as follows (in thousands):

19 8

June 301997

AmortizedCost

FairValue

AmortizedCost

FairValue

Assets'ash

and cash cquivalcntsEscrow account - Subordinate RefundingDecommissioning fundInvestments

$ " 177,491 $ 177,491 $ 87,37062,074 59,191 15,43955,234 54,460 43,924

538,34& 545,185 670,711

$ 87)37015,48443,943

670,837

Liabilities;Debt 2,812,273 3,169,592 2,929,735 3,211,927

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NOTE 6 - POWER SALES ANDTRANSMISSION SERVICE CONTRACTS:

The Authority has power sales contracts with ten participants of the Palo Verde Project (see Note 1).Under the terms of the contracts, the participants are entitled to power output from the PVNGS and

are obligated to make payments on a "take or pay" basis for their proportionate share ofoperatingand maintenance expenses and debt service whether or not the Palo Verde Project or any part thereofhas been completed, is operating or is operable, or its service is suspended, interfered with, reducedor curtailed or terminated in whole or in part. The contracts expire in 2030 and, as long as anyPower Project Revenue Bonds are outstanding, cannot be terminated or amended in any mannerwhich willimpair or adversely affect the rights of the bondholders.

The Authority has transmission service contracts with six participants of the Southern TransmissionSystem Project (see Note 1). Under the terms of the contracts, the participants are entitled totransmission service utilizing the Southern Transmission System Project and are obligated to makepayments on a "take or pay" basis for their proportionate share ofoperating and maintenanceexpenses and debt service whether or not the Southern Transmission System Project or any partthereof has been completed, is operating or is operable, or its ser vice is suspended, interfered with,reduced or curtailed or terminated in whole or in part. The contracts expire in 2027 and, as long as

any Transmission Project Revenue Bonds are outstanding, cannot be terminated or amended in anymanner which willimpair or adversely affect the rights of the bondholders.

In March 1986, the Authority entered into power sales contracts with six participants of the HooverUprating Project (see Note 1). Under the terms of the contracts, the participants are entitled tocapacity and associated firm energy of the Hoover Uprating Project and are obligated to makepayments on a "take or pay" basis for their proportionate share ofoperating and maintenanceexpenses and debt service whether or not the Hoover Uprating Project or any part thereof has beencompleted, is operating or is operable, or its service is suspended, interfered with, reduced orcurtailed or terminated in whole or in part. The contracts expire in 2018, and as long as anyHydroelectric Power Project Revenue Bonds are outstanding, cannot be terminated or amended inany manner which will impair or adversely affect the rights of the bondholders.

In August 1992, the Authority entered into transmission service contracts with nine participants of,the Mead-Phoenix Project (see Note 1). Under the terms of the contracts, the participants are entitledto transmission service utilizing the Mead-Phoenix Project and are obligated to make payments on a"take or pay" basis for their proportionate share ofoperating and maintenance expenses and debtservice on the MultipleProject and Mead-Phoenix Revenue Bonds and other debt, whether or not theMead-Phoenix Project or any part thereof has been completed, is operating or is operable, or itsservice is suspended, interfered with, reduced or curtailed or terminated in whole or in part. Thecontracts expire in 2030 and, as long as any MultipleProject and Mead-Phoenix Revenue Bonds areoutstanding, cannot be terminated or amended in any manner which willimpair or adversely affectthe rights of the bondholders.

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NOTE 6: (Continued)

In August 1992, the Authority entered into transmission service contracts with nine participants ofthe Mead-Adelanto Project (see Note 1). Under the terms of the contracts, the participants areentitled to transmission service utilizing the Mead-Adelanto Project and are obligated to makepayments on a "take or pay" basis for their proportionate share ofoperating and maintenanceexpenses and debt service on the MultipleProject and Mead-Adelanto Revenue Bonds and otherdebt, whether or not the Mead-Adelanto Project or any part thereof has been completed, is operatingor is operable, or its service is suspended, interfered with, reduced or curtailed or terminated inwhole or in part. The contracts expire in 2030 and, as long as any Multiple Project and Mead-Adelanto Revenue Bonds are outstanding, cannot be terminated or amended in any manner whichwillimpair or adversely affect the rights of the bondholders.

In January 1993, the Authority entered into power sales contracts with five participants ofUnit 3 ofthe San Juan Project (see Note 1). Under the terms of the contracts, the participants are entitled totheir proportionate share of the power output of the San Juan Project and are obligated to makepayments on a "take or pay" basis for their proportionate share ofoperating and maintenanceexpenses and debt service on the San Juan Revenue Bonds, whether or not Unit 3 of the San JuanProject or any part thereof is operating or is operable, or its service is suspended, interfered with,reduced or curtailed or terminated in whole or in part. The contracts expire in 2030 and, as long as

any San Juan Revenue Bonds are outstanding, cannot be terminated or amended in any mannerwhich willimpair or adversely affect the rights of the bondholders.

NOTE 7 - COSTS RECOVERABLE FROM FUTURE BILLINGSTO PARTICIPANTS:

Billings to participants are designed to recover "costs" as defined by the power sales andtransmission service agreements. The billings are structured to systematically provide for debtservice requirements, operating funds and reserves in accordance with these agreements. Thoseexpenses, according to generally accepted accounting principles (GAAP), which are not included as"costs" are deferred to such periods when it is intended that they be recovered through billings forthe repayment ofprincipal on related debt.

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NOTE 7: (Continued)

Costs recoverable from future billings to participants are comprised of the following (in thousands):

BalanceJune 30,

1997

Fiscal1998

~Activi

BalanceJune 30,

1998GAAP items not included in billings to participants:

Depreciation ofplantAmortization ofbond discount, debt

issue costs, and loss on refundingsNuclear fuel amortizationDecommissioning expenseInterest expense

327,35719,54889,54540,668

49,345

6,702798

376,70219,54896,24741,466

$ 450,807 $ 53,022 $ 503,829

I

Bond requirements included in billings to participants:Operations and maintenance, net of investment incomeCosts ofacquisition ofcapacity - STSBillings to amortize costs recoverableReduction in debt service billings

due to transfer ofexcess fundsPrincipal repaymentsOther

(102,574)(18,350)

67,658(317,775)

~39 504

(7,057)

(65,000)

(1,042)(60,393)

~10 425

(109,631)(18,350)(65,000)

66,616(378,168)

~49 929

5 517 380 ~534 050 8 483 330

In March 1997, the Palo Verde Project participants approved a board resolution which instructs theAuthority to increase fiscal 1998 and future billings to Palo Verde participants so as to fullyamortizethe costs recoverable from future billings to participants balance of$231,230,000 at June 30, 1997

by June 30, 2003 and to prevent the further accumulation ofcosts recoverable from future billings toparticipants. In fiscal 1998, total billings to participants for this purpose were $65,000,000.

NOTE 8 - COMMITMENTSAND CONTINGENCIES:

}

, In September 1996, Assembly Bill1890 (Bill)was given final approval. The Bill,which providesfor broad deregulation of the power generation industry in California, requires the participation ofthe state's investor-owned utilities. Consumer-owned utilities can participate on a voluntary basisbut must hold public hearings as part of their decision making process. The Bill,which wassupported by the Authority, authorizes the collection of a transition charge for generation when a

consumer-owned utilityopens its service area to competition and participates in the independenttransmission system established by the legislation. The Billalso mandates the collection ofa publicbenefit charge from all electric utilitycustomers in the state. Although these funds (currentlyestimated at 2.5% ofgross revenues) must be spent on renewable resources, conservation, researchand development, or low income rate subsidies, the governing authority of each consumer-ownedutilitywillcontrol actual expenditures.

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The Price-Anderson Act (the "Act")requires that all utilities with nuclear generating facilities sharein payment for claims resulting from a nuclear incident. The Act limits liabilityfrom third-partyclaims to $ 8.9 billionper incident. Participants in the Palo Verde Nuclear Generating Stationcurrently insure potential claims and liabilitythrough commercial insurance with a $200 millionlimit; the remainder of the potential liabilityis covered by the industry-wide retrospectiveassessment program provided under the Act. This program limits assessments to $88.0 million foreach licensee for each nuclear incident occurring at any nuclear reactor in the United States;payments under the program are limited to $ 10 million, per incident, per year. Based on theAuthority's 5.91% interest in Palo Verde, the Authority would be responsible for a maximumassessment of$5.2 million, limited to payments of$591,000 per incident, per year.

The Authority is involved in various legal actions. In the opinion ofmanagement, the outcome ofsuch litigation or claims willnot have a material effect on the financial position of the Authority orthe respective separate projects.

NOTE 9 - RESTATEMENT OF PRIOR YEARS COMPARATIVEFINANCIALSTATEMENTS:


The Authority has restated prior year comparative financial statements for the Hoover UpratingProject to expense a loss on bonds tendered associated with the early redemption ofa portion of theHoover Uprating Project Refunding 1991 Series ABonds.

The effect of the restatement on Costs recoverable from future billings to participants in thestatement ofoperations for the year ended June 30, 1997 is as follows (in thousands):

Costs recoverable from future billings to participantsas previously reported

Adjustment for effect of restatementAdjustment for effect ofaccounting change (Note 10)


$ (484)29~71

Costs recoverable from future billings to participantsas adjusted ~526

Unamortized debt expenses, net and Costs recovered in excess of future billings to participants at.

July 1, 1996 have also been reduced by $520 to reflect the retroactive effect of the restatement onbeginning Unamortized debt expenses, net and Costs recovered in excess of future billings toparticipants.

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NOTE 9: (Continued)

>Combined Total

The effect of this restatement on the combined total ofcosts recoverable from future billings toparticipants in the statement ofoperations for the year ended June 30, 1997 is as follows (inthousands):

Combined TotalCosts recoverable from future billings to participants

as previously reportedAdjustment for effect ofrestatementAdjustment for effect ofaccounting change (Note 10)

8 (53,747)29

3 670

Costs recoverable from future billings to participantsas adjusted 50 048

Unamortized debt expenses, net and Costs recoverable from future billings to participants at July 1,1996 have also been reduced and increased, respectively, by $520 to reflect the retroactive effect ofthe restatement on beginning Unamortized debt expenses, net and Costs recoverable from futurebillings to participants.

l NOTE 10 —ACCOUNTINGCHANGE

On July 1, 1997, the Authority adopted Governmental Accounting Standards Board StatementNo. 31 (GAS 31) "Accounting and Financial Reporting for Certain Investments and for ExternalInvestment Pools." This statement requires that investments be adjusted to market value at the end ofeach accounting period. Unrealized market value gains and losses are charged to the statement ofoperations. Prior year financial statements have been restated to apply GAS 31 retroactively. Prior tothe adoption ofGAS 31, changes in unrealized gains and losses on available for sale investmentswere recorded separately in the balance sheet.

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NOTE 10: (Continued)

The effect of the accounting change on fiscal 1998 Costs recoverable (from) in excess of futurebillings and on fiscal 1997 Costs recoverable from future billings ("Costs Recoverable" ) as

previously reported in the statement ofoperations is as follows (in thousands):

Costs Recoverable and Earnings to be distributed:

L~OSS GainFor the year ended June 30,

1998 1997

Palo Verde ProjectSouthern Transmission System ProjectHoover Uprating ProjectMead-Phoenix ProjectMead-Adelanto ProjectSan Juan ProjectProjects'tabilization and Other Funds

$ 3,53094

(76)

(1)(52)

~88

$ 277(3,981)

71

(9)(27)

(1)

Combined Total 3 407 [$ 3 6~70

IThe begmnmg balances ofCosts recoverable from (in excess of) future billings at July 1, 1996 and1997 have been adjuste'd for the effect ofapplying retroactively the new method ofaccounting as

follows (in thousands):Southern Hoover Mead- Mcad-

Pa! o Verde Transmission Uprating Phoenix Adclanto San Juan Combined~Pro'ect Svstems ~Pro'ect ~Pro'cct ~Pro'cct ~Pro ect Total

~JI I 1996

Balance at beginning ofyear,as previously reported

Add cumulative effecton prior years ofapplyingretroactively the newmethod ofaccounting

Adjustmcnt for effec ofrestatement (Note 9)

Balance at beginning ofyear as adjusted

J~ul I 1997

Balance at beginning ofyear,as previously reported

Add cumulative effect on prioryears ofapplying retroactivelythe ncw method ofaccounting

Adjustment for effect ofrestatement(Note 9)

Balance at beginning ofyear as adjusted

S 217,926 S 215,490 (S 7,526) S 1,394 S 4,383 S 31,780 S 463,447

456 2,865

520

28 3,365

520

S 218 382 S 218 355 8~7003 5 I 403 $ 4 411 S 31 784 S 467.332

$ 230,497 S 241,326 $ (7,042) S 4,163 $ 14,544 $ 33,706 S 517,194

733 (1,116) 74

491

'(305)

491

5 231230 3 240210 5~6477 S 4163 5 14545 S 33709 S 517380

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SOUTHERN CALIFORNIAPUBLIC POWER AUTHORITY

SUPPLEMENTAL FINANCIALINFORMATION

INDEX

Palo Verde Pro'ect

Supplemental Schedule ofReceipts and Disbursements in Funds Required by the BondIndenture for the Year Ended June 30, 1998






l Supplemental Schedule ofReceipts and Disbursements in Funds Required by the BondIndenture for the Year Ended June 30, 1998

Mead-Adelanto Pro ect




~SJ P

Supplemental Schedule ofReceipts and Disbursements in Funds Required by the BondIndenture for the Year Ended June 30, 1998.

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SOUTHERN CALIFO PUBLIC POWER AUTHORITY

PALO VERDE PROJECf

DecommissioningIssue Trust EscrowFund Funds Account

SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTSIN FUNDS REQUIRED BYTHE BOND INDENTURE

FOR THE YEAR ENDED JUNE 30 1998

(In thousands)Debt Reserve &

Service Revcnuc Operating ContingencyFund Fund Fund Fund

DepositInstallment

Funds Total

Balance at June 30, 1997Additions:

Investment earningsDiscount on investment purchasesDistribution of investment earningsRevenue from power sales

Distribution ofrevenuesTransfers to escrow for refundingsTransfer from escrow for principal

and interest paymentsTransfer to issue fund for debt

service paymentOther

Total

5 108 048 5 5 25570 5 24.551 5 24735 5 43886 $ $ 5 226 790

3,4491,001

(4,595)

65,518(27,755)

44,091

103

10

8,838185,333

(195,512)

1,061

365

(1,627)

36,781

1,309284

(1,579)

435737

(961)

3,822 35,378(9,977)

2,363195

8,000 38,153

41

35

(76)

7,860

8,761

2,627

185,333

(37,732)

44,091

(20,752)~13 I 237 ~40460 944 9 36 176

20,752I 274 ~4542 562 46 364 10 558 38 153 7 860 202 626

Deductions:Construction expendituresOperating expendituresFuel costsBond issue costs

Payment ofprincipalInterest paidPremium and interest paid

on investmentsPayment ofprincipal and interest on

escrow bondsTotal

22,95522,543

109

44 091

89 698

22,90810,538

36

33 482

6,981245

5,31G

5,61534,575

4G 47

7 027 45 798

12

17

6,98123,15810,5385,316

.28,57057,118

250

44 091

176 022

Balance at June 30, 1998 S 79294 S 9 5 28264 S 20086 S 25301 S 54427 S 38153 S 7860 5253394

This schedule summarizes the receipts and disbursements in funds rcquircd under thc Bond Indenture and has been prcparcd from the trust statements. The balances in thc funds consist ofcash and investments at original cost. These balances do not include accrued intcrcst receivable of$ 1,307 and S1,471, and Decommissioning Fund accrued interest receivable of$758 and$475 at June 30, 1998 and 1997, respcctivcly, nor do they include total amortized nct investmcnt discounts of$3,199 and 1,045 at June 30, 1998 and 1997, respectively. Thcsc balances alsodo not include unrealized loss on investments in funds availablc for sale of$4,263 and $733 at June 30, 1998 and 1997, respectively.

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SOUTHERN TRANSMISSION SYSTEM PROJECT

SUPPLEMENTALSCHEDULE OF RECEIPTS ANDDISBURSEMENTSIN FUNDS REQUIRED BYTHE BOND INDENTURE


(in thousands)

RcvcnueFund

ConstructionFund-InitialFacilitiesAccount

DebtService

FundOperating

Fund

General

ReserveFund

IssueFund

EscrowFund Total

Ba!ance at June 30, 1997 S S 245 5 23 546 5 6 536 5 11 719 5 123947 5 14444 5 180437

Additions:Investment earningsDistribution of investment earningsRevenue from transmission sales

Distribution ofrevenueTransfer from escrow for principal

and interest paymentsTransfer to escrow fund required by

refunding bonds issuance

Other transfers

3268,915

76/03(85,444)

10

(255)1,542

(1,542)

8,258

100,667

(13,165)

397

(397)

2439

474 6,469(476) . (6,245)

74,947

I 0639 144 ~9344

73

13,165I 063

9,291

76/03

100,667

Total ~245 95760 11383 ~9146 74 108 14 301 186 161

Deductions:Operating expensesPayment ofprincipalInterest paidPayment for dcfeasancc ofrevenue bondsPayment ofprincipal and interest on escrow bondsPremium and interest paid on investment purchasesBond issue costs

6,548

100,667

12,712

21,36048,902

8752 138

7,262

65

12,712

21,36055,450

7,262100,667

9402 138

Total 107 215 12 712 73 275 7 327 200 529

Balance at June 30, 1998 5 - 5 - 5 12091 5 5207 5 2573 5 124780 5 21418 5 166069

This schedule summarizes the receipts and disbursements in funds required under thc Bond Indenture and has been prepared from thc trust statements. The balances in the funds consist ofcash andinvestmcnts at original cost. These balances do not include accrued interest receivable ofS545 and $583 at June 30, 1998 and 1997, respectively, nor do they include total amortized net invcstmcnt discountsofS6,698 and S4,923 at June 30, 1998 and 1997, respectively. These balances do not include unrealized (gain) loss on investmcnts in lands available for sale ofS1,022 and ($1,116) at June 30, 1998 and1997, respectively.

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HOOVER UPRATING PROJECT

SUPPLEMENTAL SCHEDULE OF RECEIPTS ANDDISBURSEMENTSIN FUNDS REQUIRED BYTHE BOND INDENTURE


(In thousands)

AdvancePayments

FundsOperating

FundRevenue

Fund

OperatingWorkingCapitalFund

DebtServiceAccount

DebtServiceReserveAccount

GeneralReserve

Fund Total

Balance at June 30, 1997 8 - 8 1172 S 560 S 750 5 3083 8 1845 S 7410

Additions:Investment earningsDiscount on investment purchasesDistribution of investment earningsRevenue from power sales

Distribution ofrevenuesMiscellaneous transfers

2716

(56)

159

411

2,264(2,264)

~418

28

(28)

31

(31)

2,105418

9689

(185)

5853

(111)

247158

2,264

Total 146 2 523 2 669

Deductions:Payment ofprincipalAdministrative expendituresInterest paid

Total

Balance at June 30, 1998

406

406

S - S 912 S S 560

515

1 564

2 079

8 1 194 5 3083

515406

1 564

2485

5 1845 8 7594

This schedule summarizes thc receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist ofcash and investmcnts at originalcost. These balances do not include accrued interest rcccivable of$79 and $ f7 at June 30, 1998 and 1997 respectively, nor do they include total amortized net investment discount of$73 at June 30, 1997. These balancesalso do not include unrealized loss on investments in funds availablc for sale of$2 and $74 at June 30, 1998 and 1997, respectively.

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MEAD-PHOENIXPROJECT

SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTSIN FUNDS REQUIRED BY THE BOND INDENTURE


(In thousands)

AcquisitionAccount

DebtServiceAccount

DebtServiceRcscrvcAccount

RevenueFund

IssueFund

OperatingFund

SurplusFund

Renewaland

ReplacementFund Total

Balance at Junc 30, 1997

Additions:Investment camingsTransfer of investmentsTransmission revenueTransfe'r of revenuesOther transfers

902 51

435435

(435)

2,044

5 12377 5 1490 5 5916 5 - 5 1380

47

5,640(5,789) 2,436

86

1,504

1,230 795,640

8 78 5 88 5 - 5 21 329

902 2 530 2 4113 I 233 ~84 80 7 144

Deductions:i .Construction cxpcndituresInterest paidPremium and interest paid

i on investment purchasesOperating cxpcnses

165

2,642 2,53419 184

5,176

41 048 1 048

Total


165 2 642 2 538 1 048 - 19 6 412

5 13114 5 1378 8 5916 S - S 1325 S 263 S 4 S 61 S 22061

I This schedule summarizes thc rcccipts and disburscmcnts in funds required under thc Bond Indenture and has been prepared from the trust statcmcnts.Thc balances in the funds consist ofcash and invcstmcnts at original cost. These balances do not include accrued intcrcst receivable of$718 and $690 at

June 30, 1998 and 1997, rcspectivcly, nor do they include total amortized net invcstmcnt discount of$ 9 and $ 18 at Junc 30, 1998 and 1997,rcspcctively.

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MEAD-ADELANTOPROJECT



(In thousands)

AcquisitionAccount

DebtServiceAccount


OperatingFund

IssueFund

RevenueFund

SurplusFund Total


t««1

Additions:Investmcnt earnings

istribution of investmentearningsransmission revenue

Distribution of revenuessi Other transfer

Total

2,835 168 1,196 117 18 2 4,340

1,196

6,073

(1,196)

1,28315,708

8,456 (15,812)86 ~86

15,708

2 835 7 437 I 287 8 573 ~84 20 048

8 37968 5 3856 3 16267. 8 28 8 4349 8 - 3 88 3 62556

) Deductions:Interest paidPremium and intcrcst paid on

investmcnt purchasesOperating expenses

7,264

1 062

8,505 15,769

6I 062

Total

l Balance at Junc 30, 1998

7 264 I 062 8 511

8 40803 8 4029 5 16267 5 253 8 4411 5

16 837

8 4 5 65767

LThis schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from thc trust statements.The balances in the funds consist ofcash and investmcnts at original cost. Thcsc balances do not include accrued intcrcst rcccivable ofS2,138 and$2,057 at Junc 30, 1998 and 1997, rcspcctivcly, nor do they include total amortized nct investment discount ofS23 and $ 53 at Junc 30, 1998 and 1997,rcspcctivcly. Thcsc balances do not include unrealized loss on invcstmcnts in funds available for sale of$ 1 at Junc 30, 1997.i

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SOUTHERN CALIFORNIAPUBLIC POWER AUTHORITY

MULTIPLEPROJECT FUND

SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTSINFUNDS REQUIRED BYTHE BOND INDENTURE

FOR THE YEARENDED JUNE 30 1998

gn thousands)

Balance at June 30, 1997

Additions:Investment earningsTransfer of investment

earnings to earnings accountTransfer to debt service account

ProceedsAccount

247 727

18,208

(18,208)

DebtServiceAccount

16 512

EarningsAccount

5 125

412

18,208~16 512

Total

252 852

18,620

Total 16 512 2 108 18 620

Deductions:Interest paid

Total

16 512

16 512

16 512

16 512

Balance at June 30, 1998 247 727 7 233 254 960

This schedule summarizes the receipts and disbursements in funds required under the BondIndenture and has been prepared from the trust statements. The balances in the funds consist of

'nvestmentsat original cost. These balances do not include accrued interest receivable of$9,367 and$9,288 at June 30, 1998 and 1997, respectively.t

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SAN JUAN PROJECT


FOR THE YEARENDED JUNE 30 1998

(In thousands)

RevenueFund

OperatingOperating Reserve

Fund FundProjectFund

DebtServiceAccount


Reserveand

~Contin enc Total

Balance at June 30, 1997 8 - $ 1939 $ 5 $ 552 $ 9012 $ 18025 $ 15 344 $ 44 877

Additions:Investment earningsDistribution of investment earningsDiscount on investment purchasesRevenue from power sales

Distribution ofrevenuesTransfer of investments for capital

purchases

501,930

3

55,278(57,261)

184

(226)56

36,851

6,017

35

(»)76

(320)244

17,741

1,043

(1,043)437 1,825

(324)303

55,2782,667

(6,017)

Total 42 882 18 17 741 2 ~3237 57 406

Deductions:Administrative expendituresInterest paidPremium and interest on

investment purchasesPrincipal payment

38,944 44711,747

46 275

12

4,330 43,72111,747

306 275

Total 38 944 454 18 026 12 4 337 61 773

Balance at June 30, 1998 8 - 5 5 877 $ 5 $ 116 $ 8 727 $ 18 015 $ 7 770 $ 40 510

This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in thefunds consist ofcash and investments at original cost. These balances do not include accrued interest receivable of$417 and $ 134 at June 30, 1998 and 1997, respectively, nordo they include total amortized net investment discount of$ 60 at June 30, 1997. These balances do not include unrealized gain on investments in funds available for sale of$49 and an unrealized loss of$3 at June 30, 1998 and 1997, respectively.

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Documents

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