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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

or

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission file number 000-50039

 

OLD DOMINION ELECTRIC COOPERATIVE

(Exact name of registrant as specified in its charter)

 

 

 

VIRGINIA

 

23-7048405

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S.  employer

identification no.)

 

4201 Dominion Boulevard, Glen Allen, Virginia

 

23060

(Address of principal executive offices)

 

(Zip code)

 

(804) 747-0592

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “larger accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Larger accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The Registrant is a membership corporation and has no authorized or outstanding equity securities.

 

 


GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:

 

Abbreviation or Acronym

 

Definition

 

 

 

ACES

 

Alliance for Cooperative Energy Services Power Marketing, LLC

 

 

 

Alstom

 

Alstom Power, Inc.

 

 

 

Bear Island

 

Bear Island Paper WB LLC

 

 

 

Clover

 

Clover Power Station

 

 

 

EPC

 

Engineering, procurement, and construction

 

 

 

FERC

 

Federal Energy Regulatory Commission

 

 

 

GAAP

 

Accounting principles generally accepted in the United States

 

 

 

Mitsubishi

 

Mitsubishi Hitachi Power Systems Americas, Inc.

 

 

 

MPSC

 

Maryland Public Service Commission

 

 

 

MW

 

Megawatt(s)

 

 

 

MWh

 

Megawatt hour(s)

 

 

 

North Anna

 

North Anna Nuclear Power Station

 

 

 

North Anna Unit 3

 

A potential additional nuclear-powered generating unit at North Anna

 

 

 

ODEC, We, Our, Us

 

Old Dominion Electric Cooperative

 

 

 

PJM

 

PJM Interconnection, LLC

 

 

 

REC

 

Rappahannock Electric Cooperative

 

 

 

RTO

 

Regional transmission organization

 

 

 

TEC

 

TEC Trading, Inc.

 

 

 

Virginia Power

 

Virginia Electric and Power Company

 

 

 

VSCC

 

Virginia State Corporation Commission

 

 

 

Wildcat Point

 

Wildcat Point Generation Facility

 

 

 

WOPC

 

White Oak Power Constructors

 

 

 

XBRL

 

Extensible Business Reporting Language

 

 

2


OLD DOMINION ELECTRIC COOPERATIVE

INDEX

 

 

 

Page

Number

 

 

 

PART I.  Financial Information

 

 

 

 

 

Item 1.  Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets – June 30, 2017 (unaudited) and December 31, 2016

 

4

 

 

 

Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital (unaudited) – Three and Six Months Ended June 30, 2017 and 2016

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, 2017 and 2016

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

Item 4.  Controls and Procedures

 

26

 

 

 

PART II.  Other Information

 

27

 

 

 

Item 1.  Legal Proceedings

 

27

 

 

 

Item 1A.  Risk Factors

 

27

 

 

 

Item 5.  Other Information

 

27

 

 

 

Item 6.  Exhibits

 

29

 

3


OLD DOMINION ELECTRIC COOPERATIVE

PART 1.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

(in thousands)

 

 

 

(unaudited)

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

 

Electric Plant:

 

 

 

 

 

 

 

 

Property, plant, and equipment

 

$

1,749,293

 

 

$

1,746,852

 

Less accumulated depreciation

 

 

(876,767

)

 

 

(855,068

)

Net Property, plant, and equipment

 

 

872,526

 

 

 

891,784

 

Nuclear fuel, at amortized cost

 

 

15,536

 

 

 

22,138

 

Construction work in progress

 

 

810,141

 

 

 

736,996

 

Net Electric Plant

 

 

1,698,203

 

 

 

1,650,918

 

Investments:

 

 

 

 

 

 

 

 

Nuclear decommissioning trust

 

 

170,554

 

 

 

159,155

 

Lease deposits

 

 

105,278

 

 

 

104,514

 

Unrestricted investments and other

 

 

7,117

 

 

 

6,599

 

Total Investments

 

 

282,949

 

 

 

270,268

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

1,147

 

 

 

2,946

 

Accounts receivable

 

 

11,022

 

 

 

6,563

 

Accounts receivable–members

 

 

73,688

 

 

 

85,116

 

Fuel, materials, and supplies

 

 

61,880

 

 

 

56,353

 

Prepayments and other

 

 

7,017

 

 

 

4,737

 

Total Current Assets

 

 

154,754

 

 

 

155,715

 

Deferred Charges:

 

 

 

 

 

 

 

 

Regulatory assets

 

 

46,019

 

 

 

49,682

 

Other

 

 

2,267

 

 

 

3,533

 

Total Deferred Charges

 

 

48,286

 

 

 

53,215

 

Total Assets

 

$

2,184,192

 

 

$

2,130,116

 

CAPITALIZATION AND LIABILITIES:

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

Patronage capital

 

$

408,872

 

 

$

402,857

 

Non-controlling interest

 

 

5,735

 

 

 

5,725

 

Total Patronage capital and Non-controlling interest

 

 

414,607

 

 

 

408,582

 

Long-term debt

 

 

990,257

 

 

 

990,083

 

Revolving credit facility

 

 

239,550

 

 

 

152,000

 

Total long-term debt and revolving credit facility

 

 

1,229,807

 

 

 

1,142,083

 

Total Capitalization

 

 

1,644,414

 

 

 

1,550,665

 

Current Liabilities:

 

 

 

 

 

 

 

 

Long-term debt due within one year

 

 

28,292

 

 

 

28,292

 

Accounts payable

 

 

102,114

 

 

 

131,581

 

Accounts payable–members

 

 

72,994

 

 

 

66,380

 

Accrued expenses

 

 

7,436

 

 

 

5,806

 

Deferred energy

 

 

13,786

 

 

 

40,029

 

Total Current Liabilities

 

 

224,622

 

 

 

272,088

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

122,539

 

 

 

120,083

 

Obligations under long-term lease

 

 

100,304

 

 

 

96,930

 

Regulatory liabilities

 

 

91,418

 

 

 

89,020

 

Other

 

 

895

 

 

 

1,330

 

Total Deferred Credits and Other Liabilities

 

 

315,156

 

 

 

307,363

 

Commitments and Contingencies

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

2,184,192

 

 

$

2,130,116

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


OLD DOMINION ELECTRIC COOPERATIVE

CONDENSED CONSOLIDATED STATEMENTS OF REVENUES,

EXPENSES, AND PATRONAGE CAPITAL (UNAUDITED)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

 

(in thousands)

 

Operating Revenues

 

$

156,907

 

 

$

199,149

 

 

$

346,686

 

 

$

455,608

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel

 

 

20,498

 

 

 

30,266

 

 

 

38,181

 

 

 

64,588

 

Purchased power

 

 

80,729

 

 

 

80,999

 

 

 

202,845

 

 

 

220,281

 

Transmission

 

 

23,979

 

 

 

30,772

 

 

 

47,721

 

 

 

62,360

 

Deferred energy

 

 

(4,705

)

 

 

8,869

 

 

 

(26,243

)

 

 

10,414

 

Operations and maintenance

 

 

12,099

 

 

 

12,618

 

 

 

24,572

 

 

 

25,177

 

Administrative and general

 

 

11,309

 

 

 

10,156

 

 

 

22,439

 

 

 

20,795

 

Depreciation and amortization

 

 

11,340

 

 

 

11,630

 

 

 

22,683

 

 

 

23,168

 

Amortization of regulatory asset/(liability), net

 

 

(850

)

 

 

646

 

 

 

(20

)

 

 

77

 

Accretion of asset retirement obligations

 

 

1,257

 

 

 

1,211

 

 

 

2,512

 

 

 

2,421

 

Taxes, other than income taxes

 

 

2,087

 

 

 

2,098

 

 

 

4,191

 

 

 

4,219

 

Total Operating Expenses

 

 

157,743

 

 

 

189,265

 

 

 

338,881

 

 

 

433,500

 

Operating Margin

 

 

(836

)

 

 

9,884

 

 

 

7,805

 

 

 

22,108

 

Other expense, net

 

 

(955

)

 

 

(905

)

 

 

(1,904

)

 

 

(1,949

)

Investment income

 

 

6,748

 

 

 

1,327

 

 

 

8,269

 

 

 

1,465

 

Interest income on North Anna Unit 3 cost recovery

 

 

4,427

 

 

 

 

 

 

4,427

 

 

 

 

Interest charges, net

 

 

(6,327

)

 

 

(7,341

)

 

 

(12,571

)

 

 

(15,706

)

Income taxes

 

 

(2

)

 

 

(2

)

 

 

(2

)

 

 

(3

)

Net Margin including Non-controlling interest

 

 

3,055

 

 

 

2,963

 

 

 

6,024

 

 

 

5,915

 

Non-controlling interest

 

 

(8

)

 

 

(8

)

 

 

(9

)

 

 

(7

)

Net Margin attributable to ODEC

 

 

3,047

 

 

 

2,955

 

 

 

6,015

 

 

 

5,908

 

Patronage Capital - Beginning of Period

 

 

405,825

 

 

 

393,929

 

 

 

402,857

 

 

 

390,976

 

Patronage Capital - End of Period

 

$

408,872

 

 

$

396,884

 

 

$

408,872

 

 

$

396,884

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


OLD DOMINION ELECTRIC COOPERATIVE

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

Six Months Ended June 30,

 

 

 

 

2017

 

 

2016

 

 

 

 

(in thousands)

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

Net Margin including Non-controlling interest

 

$

6,024

 

 

$

5,915

 

 

Adjustments to reconcile net margin to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

22,683

 

 

 

23,168

 

 

Other non-cash charges

 

 

9,625

 

 

 

9,216

 

 

Amortization of lease obligations

 

 

3,374

 

 

 

3,152

 

 

Interest on lease deposits

 

 

(1,511

)

 

 

(1,479

)

 

Change in current assets

 

 

(838

)

 

 

16,640

 

 

Change in deferred energy

 

 

(26,243

)

 

 

10,414

 

 

Change in current liabilities

 

 

(12,592

)

 

 

(49,221

)

 

Change in regulatory assets and liabilities

 

 

2,800

 

 

 

8,339

 

 

Change in deferred charges-other and deferred credits and other liabilities-other

 

 

1,301

 

 

 

104

 

 

Net Cash Provided by Operating Activities

 

 

4,623

 

 

 

26,248

 

 

Investing Activities:

 

 

 

 

 

 

 

 

 

Purchases of held to maturity securities

 

 

(2,523

)

 

 

 

 

Proceeds from sale of held to maturity securities

 

 

2,824

 

 

 

 

 

Increase in other investments

 

 

(8,193

)

 

 

(1,270

)

 

Electric plant additions

 

 

(86,080

)

 

 

(148,038

)

 

Net Cash Used for Investing Activities

 

 

(93,972

)

 

 

(149,308

)

 

Financing Activities:

 

 

 

 

 

 

 

 

 

Draws on revolving credit facility

 

 

303,250

 

 

 

92,100

 

 

Repayments on revolving credit facility

 

 

(215,700

)

 

 

(25,500

)

 

Net Cash Provided by Financing Activities

 

 

87,550

 

 

 

66,600

 

 

Net Change in Cash and Cash Equivalents

 

 

(1,799

)

 

 

(56,460

)

 

Cash and Cash Equivalents - Beginning of Period

 

 

2,946

 

 

 

58,383

 

 

Cash and Cash Equivalents - End of Period

 

$

1,147

 

 

$

1,923

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

6


OLD DOMINION ELECTRIC COOPERATIVE

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

1.

General

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include only normal recurring adjustments, necessary for a fair statement of our consolidated financial position as of June 30, 2017, our consolidated results of operations for the three and six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016.  The consolidated results of operations for the three and six months ended June 30, 2017, are not necessarily indicative of the results to be expected for the entire year.  These financial statements should be read in conjunction with the financial statements and notes thereto included in our 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The accompanying financial statements reflect the consolidated accounts of Old Dominion Electric Cooperative and TEC.  We are a not-for-profit wholesale power supply cooperative, incorporated under the laws of the Commonwealth of Virginia in 1948.  We have two classes of members.  Our Class A members are eleven customer-owned electric distribution cooperatives engaged in the retail sale of power to member customers located in Virginia, Delaware, and Maryland.  Our sole Class B member is TEC, a taxable corporation owned by our member distribution cooperatives.  Our board of directors is composed of two representatives from each of the member distribution cooperatives and one representative from TEC.  In accordance with Consolidation Accounting, TEC is considered a variable interest entity for which we are the primary beneficiary.  We have eliminated all intercompany balances and transactions in consolidation.  The assets and liabilities and non-controlling interest of TEC are recorded at carrying value and the consolidated assets were $5.7 million as of June 30, 2017 and December 31, 2016.  The income taxes reported on our Condensed Consolidated Statement of Revenues, Expenses, and Patronage Capital relate to the tax provision for TEC.  As TEC is wholly-owned by our Class A members, its equity is presented as a non-controlling interest in our consolidated financial statements.

Our rates are set periodically by a formula that was accepted for filing by FERC, but are not regulated by the respective public service commissions of the states in which our member distribution cooperatives operate.  See Note 5—Other—FERC Proceeding Related to Formula Rate below.

We comply with the Uniform System of Accounts as prescribed by FERC.  In conformity with GAAP, the accounting policies and practices applied by us in the determination of rates are also employed for financial reporting purposes.

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported therein.  Actual results could differ from those estimates.

We do not have any other comprehensive income for the periods presented.

 

 

 

2.

Fair Value Measurements

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3).  In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy.  The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy.  Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

7


The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016: 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

June 30,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(in thousands)

 

Nuclear decommissioning trust (1)

$

58,650

 

 

$

58,650

 

 

$

 

 

$

 

Nuclear decommissioning trust - net asset value (1)(2)

 

111,904

 

 

 

 

 

 

 

 

 

 

Unrestricted investments and other (3)

 

265

 

 

 

 

 

 

265

 

 

 

 

Derivatives - gas and power (4)

 

549

 

 

 

549

 

 

 

 

 

 

 

Total Financial Assets

$

171,368

 

 

$

59,199

 

 

$

265

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives - gas and power (4)

$

89

 

 

$

89

 

 

$

 

 

$

 

Total Financial Liabilities

$

89

 

 

$

89

 

 

$

 

 

$

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

December 31,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(in thousands)

 

Nuclear decommissioning trust (1)

$

48,142

 

 

$

48,142

 

 

$

 

 

$

 

Nuclear decommissioning trust - net asset value (1)(2)

 

111,013

 

 

 

 

 

 

 

 

 

 

Unrestricted investments and other (3)

 

247

 

 

 

 

 

 

247

 

 

 

 

Derivatives - gas and power (4)

 

6,968

 

 

 

4,874

 

 

 

2,094

 

 

 

 

Total Financial Assets

$

166,370

 

 

$

53,016

 

 

$

2,341

 

 

$

 

 

 

(1)

For additional information about our nuclear decommissioning trust see Note 4 below.

 

(2)

Nuclear decommissioning trust includes investments measured at net asset value per share (or its equivalent) as a practical expedient and these investments have not been categorized in the fair value hierarchy.  The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Condensed Consolidated Balance Sheet.

 

(3)

Unrestricted investments and other includes investments that are related to equity securities.

 

(4)

Derivatives - gas and power represent natural gas futures contracts.  Level 1 are indexed against NYMEX.  Level 2 are valued by ACES using observable market inputs for similar transactions.  For additional information about our derivative financial instruments, see Note 1 of the Notes to Consolidated Financial Statements in our 2016 Annual Report on Form 10-K.

We did not have any financial assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category.

 

 

 

 

3.

Derivatives and Hedging

We are exposed to market price risk by purchasing power to supply the power requirements of our member distribution cooperatives that are not met by our owned generation.  In addition, the purchase of fuel to operate our generating facilities also exposes us to market price risk.  To manage this exposure, we utilize derivative instruments.  See Note 1 of the Notes to Consolidated Financial Statements in our 2016 Annual Report on Form 10-K.

8


Changes in the fair value of our derivative instruments accounted for at fair value are recorded as a regulatory asset or regulatory liability.  The change in these accounts is included in the operating activities section of our Condensed Consolidated Statements of Cash Flows.

Excluding contracts accounted for as normal purchase/normal sale, we had the following outstanding derivative instruments:

 

 

 

 

 

As of

 

 

As of

 

 

 

 

 

June 30, 2017

 

 

December 31, 2016

 

Commodity

 

Unit of Measure

 

Quantity

 

 

Quantity

 

Natural Gas

 

MMBTU

 

 

16,970,000

 

 

 

14,250,000

 

 

 

The fair value of our derivative instruments, excluding contracts accounted for as normal purchase/normal sale, was as follows:

 

 

 

 

 

Fair Value

 

 

 

 

 

As of

June 30,

 

 

As of

December 31,

 

 

 

Balance Sheet Location

 

2017

 

 

2016

 

 

 

 

 

(in thousands)

 

Derivatives in an asset position:

 

 

 

 

 

 

 

 

 

 

Natural gas futures contracts

 

Deferred charges-other

 

$

549

 

 

$

6,968

 

Total derivatives in an asset position

 

 

 

$

549

 

 

$

6,968

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives in a liability position:

 

 

 

 

 

 

 

 

 

 

Natural gas futures contracts

 

Deferred credits and other liabilities-other

 

$

89

 

 

$

-

 

Total derivatives in a liability position

 

 

 

$

89

 

 

$

-

 

 

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital for the Three and Six Months Ended June 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of Gain

 

 

Amount of Gain

 

 

 

Amount of Gain

 

 

Location of

 

(Loss) Reclassified

 

 

(Loss) Reclassified

 

 

 

(Loss) Recognized

 

 

Gain (Loss)

 

from Regulatory

 

 

from Regulatory

 

 

 

in Regulatory

 

 

Reclassified

 

Asset/Liability

 

 

Asset/Liability

 

 

 

Asset/Liability for

 

 

from Regulatory

 

into Income for

 

 

into Income for

 

Derivatives Accounted for

 

Derivatives as of

 

 

Asset/Liability

 

the Three Months

 

 

the Six Months

 

Utilizing Regulatory Accounting

 

June 30,

 

 

into Income

 

Ended June 30,

 

 

Ended June 30,

 

 

 

2017

 

 

2016

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

 

 

 

(in thousands)

 

 

(in thousands)

 

Natural gas futures contracts

 

$

656

 

 

$

2,093

 

 

Fuel

 

$

(867

)

 

$

(1,475

)

 

$

(999

)

 

$

(2,498

)

Total

 

$

656

 

 

$

2,093

 

 

 

 

$

(867

)

 

$

(1,475

)

 

$

(999

)

 

$

(2,498

)

 

9


Our hedging activities expose us to credit-related risks.  We use hedging instruments, including forwards, futures, financial transmission rights, and options, to mitigate our power market price risks.  Because we rely substantially on the use of hedging instruments, we are exposed to the risk that counterparties will default in performance of their obligations to us.  Although we assess the creditworthiness of counterparties and other credit issues related to these hedging instruments, and we may require our counterparties to post collateral with us, defaults may still occur.  Defaults may take the form of failure to physically deliver purchased energy or failure to pay.  If a default occurs, we may be forced to enter into alternative contractual arrangements or purchase energy in the forward, short-term, or spot markets at then-current market prices that may exceed the prices previously agreed upon with the defaulting counterparty.

 

 

 

10


4.

Investments

Investments were as follows as of June 30, 2017 and December 31, 2016:

 

 

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

Carrying

 

Description

 

Designation

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

Value

 

 

 

 

 

(in thousands)

 

June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nuclear decommissioning trust (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

Available for sale

 

$

53,668

 

 

$

4,564

 

 

$

 

 

$

58,232

 

 

$

58,232

 

Equity securities

 

Available for sale

 

 

73,990

 

 

 

37,914

 

 

 

 

 

 

111,904

 

 

 

111,904

 

Cash and other

 

Available for sale

 

 

418

 

 

 

 

 

 

 

 

 

418

 

 

 

418

 

Total Nuclear Decommissioning Trust

 

 

 

$

128,076

 

 

$

42,478

 

 

$

 

 

$

170,554

 

 

$

170,554

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Deposits (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government obligations

 

Held to maturity

 

$

105,278

 

 

$

1,841

 

 

$

 

 

$

107,119

 

 

$

105,278

 

Total Lease Deposits

 

 

 

$

105,278

 

 

$

1,841

 

 

$

 

 

$

107,119

 

 

$

105,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrestricted investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government obligations

 

Held to maturity

 

$

2,340

 

 

$

 

 

$

(8

)

 

$

2,332

 

 

$

2,340

 

Debt securities

 

Held to maturity

 

 

2,342

 

 

 

1

 

 

 

 

 

 

2,343

 

 

 

2,342

 

Total Unrestricted Investments