HomeMy WebLinkAboutMemo - Mail Packet - 6/6/2017 - Memorandum From Tim Mccollough Re: Platte River Power Authority�S Annual ReportPowering Our
Sustainable FUTURE
Annual Report 2016
2 Annual Report 2016
Table of
Contents
Chairman and General Manager’s Letter
About Platte River
Vision, Mission, and Values
Our Communities
Board of Directors and Senior Management
Financial Results
Report of Management
Independent Auditor’s Report and Financial Statements
Resources and Planning
Water Policy
Rawhide Flats Solar
Platte River Completes Sale of Series JJ Bonds
Employee Engagement
Laporte Substation Expansion
Headquarters Campus Project
4
6
7
8
9
10
14
16
17
18
19
20
21
22
24
News
Annual Report 2016 3
From the
Chairman of
the Board and
General Manager
The future of Platte River looks bright as we
continue to build on a strong foundation of
operational, financial, and environmental
excellence. Sustaining our success will require
enhanced collaboration with the municipalities
we serve so that Platte River continues to be the
foundation upon which these communities can
build their energy and innovation future.
Since its inception, Platte River has provided
a reliable and low-cost supply of electricity
to its owners. In the past, a simple strategy
accomplished this result. Projecting municipal
load growth, Platte River constructed generation
facilities with capacity to meet future loads
and leveraged the output of these facilities in
the wholesale market until the municipal loads
developed. The future will require a wider range
of strategies. Opportunities and challenges
include diverse community values, reduced
surplus sales prices, substantial shifts in natural gas
availability and pricing, lower costs for renewable
resources, technological advancements, regulatory
uncertainty, and changes in western regional
markets.
Our 2016 successes reflect the expertise and
commitment of our dedicated employees. Platte
River leadership actively encourages employee
development and training. Employee engagement
is crucial in transforming our plans into reality. We
thank them for what they do every day.
Platte River has taken positive steps to address
challenges and leverage opportunities. During
the past decade we have diversified our resource
portfolio to include natural gas-fired combustion
turbines, wind deliveries from multiple sites,
and a new 30 MW solar facility. Coal generation
and federal hydropower purchases round out
the supply side of the current resource mix and
provide essential baseload capacity. As new
resources are added, we are also implementing a
strategy to reduce supply from coal generation at
the Craig Station. For 2016, carbon-free resources
provided over 30 percent of the average electrical
energy supply to the member municipalities. Our
new renewable energy supply (wind and solar) has
more than tripled since 2013.
Other highlights in the area of resource
management include approval of Platte River’s
first-ever comprehensive water policy, submission
of our 2016 Integrated Resource Plan, approval
of the Joint Dispatch Agreement by FERC, and
expansion of the Laporte Substation, which will
enhance resiliency of our transmission system.
Platte River’s financial position remained solid
in 2016. All strategic financial plan targets were
exceeded and net income came in at $18 million.
Jason Frisbie
Named New
General Manager
/CEO
scale and increased opportunities to bring more resources into
our system, particularly wind and solar.
As we look to the future, “sustainability” is the brass ring that
the electric industry is striving to grasp, but that term is often
left to the eye of the beholder. Speaking as the leadership of
Platte River, we consider the vital attributes of sustainability for
our organization to be:
Resilience – our infrastructure, our human capital and the
bonds we share with our owner municipalities must be capable
of absorbing unexpected events;
Viability – our business model and financial position must
continue to provide value to our owners;
Reliability – more than ever, electricity is an indispensable
component of our everyday lives, and we must strive to make
it available continuously.
These attributes demonstrate the soundness of the strategy
to diversify our resource portfolio. A diverse mix of resources
—both on the supply and demand side—answers a need
associated with each of the attributes.
Activities planned for 2017 support the sustainability of the
organization. A key aspect of maintaining a viable business
model for our organization is responsiveness to evolving needs
of each individual community—with an eye towards managing
system cost and risk. Work continues to evaluate customized
resource options for the owner municipalities, with focus
on modeling system level resource additions (particularly
increased renewable and integration sources). Board direction
and collaboration with the municipalities’ staff continue to
guide this important effort.
Platte River Power Authority remains a customer-focused,
sustainable and innovative energy provider for our owner
communities of Estes Park, Fort Collins, Longmont, and
Loveland. We are committed to powering our sustainable
future.
Our team is pleased to present Platte River’s 2016 Annual
Report.
Sincerely,
Jason Frisbie Tom Roiniotis
Platte River Power Authority’s
Board of Directors hired Jason
Frisbie on August 6, 2016 as Platte
River’s sixth General Manager. Mr.
Frisbie has been with Platte River
since 1982, serving in multiple
roles related to power production,
and was selected as Plant Manager
for Rawhide Energy Station in
1999. In 2003 he became Division
Manager of Power Production,
with responsibility for all
production and fuel management.
Jason was named COO in 2010,
overseeing all operations functions
at Platte River.
Annual Report 2016 5
About
Platte River
Platte River delivers safe, reliable,
environmentally responsible, and
competitively priced energy and services
to its owner municipalities of Estes Park,
Fort Collins, Longmont, and Loveland,
Colorado for their utility customers.
Employees (Dec. 31, 2016):
245
Headquarters:
Fort Collins, Colorado
Began Operations:
1973
Historical Peak Municipal Demand:
659 MW on June 21, 2016
Governance:
Platte River is governed by an eight-person
board of directors designed to bring
relevant expertise to the decision-making
process. The board includes two members
from each of the owner municipalities.
The mayor may serve or designate
some other member of the governing
board of their owner municipality to
serve in their place on Platte River’s
Board of Directors. Each of the other
four directors is appointed to a four-
year staggered term by the governing
body of the owner municipality being
represented by that director.
Transmission System:
Platte River has equipment in 26
substations, 258 miles of wholly owned
and operated high-voltage lines, and 511
miles of high-voltage lines jointly owned
with other utilities.
The Organization:
Platte River is a political subdivision of the
State of Colorado.
6 Annual Report 2016
Our
Mission
Values
Our
Vision
Provide safe, reliable,
environmentally responsible, and
competitively priced energy and
services.
Customer Service
What creates added value and improves
customer satisfaction?
Providing quality service at a competitive
price while being responsive to our
owners’ needs.
Safety
What is non-negotiable?
Working safely to protect the public, our
employees, and the assets we manage.
Operational Excellence
How do we provide reliable service while
managing costs and creating a rewarding
work environment?
By engaging employees to strive for
excellence and continuous improvement.
Respect
What leads us to optimal solutions for
even the most difficult challenges?
Encouraging constructive dialogue that
promotes a culture of inclusiveness,
recognizes our differences, and accepts
varying viewpoints.
Integrity
What is at the core of what we do?
Being ethical and holding ourselves
accountable to conduct business in
a fair, honest, open, compliant, and
environmentally responsible manner.
Innovation
How do we mitigate risk and create
opportunities?
By becoming an early adopter of
technologies proven to improve electric
efficiency, protect the environment, and
create a diversified energy supply portfolio.
Sustainability
How do we ensure long-term viability of
the organization and the communities we
serve?
By maintaining financial integrity,
minimizing our environmental impact,
and supporting responsible economic
development in our owner communities.
As a respected leader and responsible
energy partner, improve the quality
of life for the citizens served by our
owner communities.
Annual Report 2016 7
Our Communities
Platte River Power Authority is a Colorado political
subdivision established to provide wholesale
electric generation and transmission to the
municipal utilities of its owner communities –
Estes Park, Fort Collins, Longmont, and Loveland.
Town of Estes Park
Estimated population*: 6,257
Utility: Estes Park Light & Power,
established in 1945
City of Longmont
Estimated population*: 93,933
Utility: Longmont Power & Communications,
established in 1912
City of Fort Collins
Estimated population*: 161,000
Utility: Fort Collins Utilities,
established in 1938
City of Loveland
Estimated Population*: 74,427
Utility: Loveland Water and Power,
established in 1925
8 Annual Report 2016 * Population data from U.S. Census and municipal staff
Annual Report 2016 9
Board of Directors
Senior Management Team
Platte River is governed by an eight-person board of directors designed to bring relevant expertise to the
decision-making process. The board includes two members from each of the owner municipalities.
The mayor may serve or designate some other member of the governing board of their owner
municipality to serve in their place on Platte River’s Board of Directors. Each of the other four directors
is appointed to a four-year staggered term by the governing body of the owner municipality being
represented by that director.
Platte River operates under the direction of a general manager/CEO who serves at the pleasure of the
board of directors. The general manager/CEO is the principal executive officer with full responsibility
for planning, operations, and administrative affairs of Platte River. The senior management team also
includes a deputy general manager/chief financial officer, a chief operating officer, a chief administrative
services officer, a general counsel, a chief communications and marketing officer, and an executive
administrative assistant to the general manager/CEO. Platte River’s senior management has substantial
experience, with an average of 30 years of service in the utility industry.
Gerry Horak
Mayor Pro Tem
City of Fort Collins
Cecil Gutierrez
Mayor
City of Loveland
Dennis Coombs
Mayor
City of Longmont
Wade Troxell
Mayor
City of Fort Collins
Steve Adams
City Manager
City of Loveland
Reuben Bergsten
Vice Chairman
Director of Utilities
Town of Estes Park
Pete Hoelscher
Chief Communications &
Marketing Officer
Joseph Wilson
General Counsel
Jason Frisbie
General Manager /
Chief Executive Officer
Angela Walsh
Executive Assistant to
General Manager / Chief
Executive Officer
Karin Hollohan
Chief Administrative
Services Officer
David Smalley
Deputy General Manager /
Chief Financial Officer
Andy Butcher
Chief Operating Officer
Todd Jirsa
Mayor
Town of Estes Park
Tom Roiniotis
Chairman of the Board
10 Annual Report 2016
Financial Results
Platte River’s financial position remains stable. Favorable results were reported in 2016. Net income of
$18.0 million exceeded the budget and the strategic financial plan target. Revenues were lower primarily
due to unfavorable surplus sales market conditions. However, lower revenues were offset by below-
budget operating expenses and favorable financing expenses as a result of the 2016 debt financing.
Debt service coverage – the ratio of total net revenues to debt payments and a source of confidence for
holders of Platte River bonds – was 1.78 times, well above the 1.10 times required by bond covenants.
Financial Highlights
$ 199,433
184,741
(7,905)
$ 6,787
639
3,201
713
$ 1,334,404
$ 200,174
29 / 71
1.51x
Revenues / Expenses ��000�
Operating Revenues
Operating Expenses
Nonoperating Revenues (Expenses), Net
Income Before Contributions
Power Operations
Demand-Municipalities (MW)
Energy-Municipalities (GWh)
Energy-Others
Selected Other Data
Gross Utility Plant ($000)
Long-Term Debt, Net ($000)
Debt to Capitalization Ratio
Total Revenue Bond Coverage
�ear Ended December 31,
2016 2015 2014
$ 205,293
181,698
(5,630)
$ 17,965
659
3,216
722
$ 1,361,279
$ 250,838
33 / 67
1.78x
$ 199,867
174,985
(8,276)
$ 16,606
626
3,154
770
$ 1,304,828
$ 223,552
31 / 69
1.71x
Annual Report 2016 11
Energy Market Statistics
Combined Retail Sales for Four Municipalities1
Number of Customers �average monthly�
Residential
Commercial & Industrial
Other
Total
Energy Sales �MWh�
Residential
Commercial & Industrial
Other
Total
Revenue ��000�
Residential
Commercial & Industrial
Other
Total
Residential Averages �annual�
kWh per Customer
Revenue per kWh (cents)
Revenue per Customer
Wholesale Power Re�uirements
Peak Demand �kW�
Estes Park
Fort Collins
Longmont
Loveland
Sum of Municipalities' Peaks
Demand - PRPA Coincident
Energy �MWh�
Estes Park
Fort Collins
Longmont
Loveland
Sum of Municipalities' Energy
Sales to Others and Miscellaneous2
Energy�Total System
�ear Ended December 31,
2016 2015 2014
138,134
17,682
290
156,106
1,115,015
1,995,654
12,158
3,122,827
$ 110,313
150,157
502
$ 260,972
8,072
9.89
$ 798.59
25,482
306,659
179,325
163,228
674,694
12 Annual Report 2016
Energy Deliveries
Revenues, Expenses, and Income (In millions)
2014 2015 2016
To Municipalities To Others
Gigawatt�hours �GWh�
4500
4000
3500
3000
2500
2000
1500
1000
500
0
3,154 3,201
770
3,924
713
3,914
3,216
722
3,938
Operating Expenses
2014 2015 2016
�200
�150
�100
�50
�0
Net Nonoperating Expenses Operating Revenues
� Millions
$200 $199
$205
Financial Results (continued)
Annual Report 2016 13
News
14 Annual Report 2016
Resources and Planning
Platte River Power Authority employs an adaptive strategy to cost-effectively maintain reliability, manage
risks, and ensure regulatory compliance. During 2016, Platte River delivered its latest Integrated Resource
Plan, initiated collaborative efforts to help satisfy individual resource needs of the owner municipalities,
and began exploring potential participation in an existing Regional Transmission Organization. Platte River
continues to evaluate future plans with an eye toward resource diversification.
One of the most significant events of 2016
involved the decision to decommission Craig
Unit 1 by the end of 2025. This decision was
jointly made by the five owners of the Yampa
Project based on market conditions and
regulatory uncertainty. During 2016, Platte
River also participated in discussions with
several other regional utilities to consider
forming an organized wholesale power
market, which could materialize in the next
few years. Belonging to an organized market
will also bring future operational and planning
challenges for Platte River’s system, and these
changes are being contemplated in current
modeling efforts.
Annual Report 2016 15
Shown below is the Action Plan from the 2016 IRP, which helps shape
near-term resource decisions for Platte River.
Prepare for business structures, products, and programs preferred by our owner municipalities
• Work with owner municipalities to develop customized future supply portfolios
• Continue expansion of cost-effective energy efficiency programs
• Continue development and implementation of a demand response pilot
• Participate with owner municipalities in the evaluation of distributed technologies such as community
solar and combined heat-and-power applications
Continue to implement ways to maintain the high reliability of Platte River’s power system
• Look to secure affordable ways of balancing expected long-term growth in renewables generation
using services from the regional balancing authority or future organized markets
• Manage unit outage risk through mutual support agreements, use of peaking resources, or other
market opportunities for capacity
• Actively monitor regional markets to understand options for cost-effective reliability products
• Provide direction to influence the development of regional energy and ancillary services markets
Continue to diversify the portfolio to manage risk and limit CO2 emissions
• Exit ownership of Platte River’s share of Craig Unit 1
• Integrate 30 MW of new solar generation into the portfolio
• Evaluate the acquisition of additional renewables generation
16 Annual Report 2016
Water
Policy
In December 2016, Platte River’s board of directors
approved and adopted the first comprehensive
Platte River Water Policy, which will provide
direction to Platte River going forward in the
management of water resources and assets. The
board of directors and city staff members from Fort
Collins, Loveland, Longmont, and the town of Estes
Park all contributed to the document’s content and
completion. Water is critical to the reliable operation
of Rawhide Energy Station and may be necessary
for the reliable operation of future generation
resources. This policy will position Platte River to
pursue activities that will:
• Increase reliability of water deliveries
to meet contractual commitments and
operational needs
• Actively manage water as an asset
• Maintain adequate water supplies for all
existing and projected future operations
Annual Report 2016 17
Rawhide
Flats Solar
In October 2016, Platte River further diversified its energy
portfolio with the commissioning of a 30 MW solar generation
facility at Rawhide Energy Station. The new solar facility,
Rawhide Flats Solar, joins Platte River’s existing coal and natural
gas facilities at the site, and will generate an expected 65,000
MWh annually—enough to supply the equivalent energy
use of 8,000 average homes. Rawhide Flats Solar covers
approximately 185 acres with over 117,000 solar photovoltaic
panels mounted on a single-axis tracking system. The full
energy output of the project is purchased from a third party
under contract that runs through 2040.
Power For
8,000 Homes
185 Acres
117,000
Photovoltaic Panels
30 Megawatts
Platte River Completes
Sale of Series JJ Bonds
Platte River issued its Series JJ Bonds in April 2016
using $119 million of the proceeds to advance
refund a portion of the outstanding Series HH
Bonds. The true interest cost of the Series JJ
Bonds is 2.20 percent, and the net present value
savings for the refunded bonds is $13.7 million.
The remaining $60 million of the proceeds from
the Series JJ Bonds will be used to reimburse and
fund transmission and production capital projects.
These bond proceeds will enable Platte River to
initiate and complete projects that are essential in
ensuring the high level of service reliability owner
municipalities expect.
Platte River’s strong credit rating was a key to
obtaining a low interest rate for the Series JJ
Bonds. Prior to the sale, Standard and Poor’s
Global Ratings and Fitch Ratings rated the bonds
AA with a stable outlook. The agencies also
affirmed Platte River’s AA ratings on all outstanding
Power Revenue Bonds. Rationale behind the
ratings included strong historical and projected
debt service coverage, prudent risk management
procedures, the creditworthiness of Platte River’s
four owner municipalities, strength of the local
economy, and a continued commitment of the
board of directors to raise rates when necessary to
sustain strong financial performance. The closing
date of the transaction was April 26, 2016.
18 Annual Report 2016
Employee Engagement
Our most important resource is our employees.
They work hard to provide reliable power to our
owner municipalities 24 hours a day, 365 days a
year. By continuing to invest in our employees
we leverage diversity, grow internal talent,
develop innovative skills, and maintain high
standards. In 2016, Platte River:
Platte River strives to create a work environment
that encourages employees to be engaged, to
achieve outstanding performance, and identify
opportunities for continuous improvement. We
are committed to open, honest, and effective
communication as a way to keep employees well-
informed and positioned to meet the needs of the
organization and the communities we serve.
• Conducted company-wide
training events
• Provided leadership development
opportunities
• Conducted a variety of safety trainings
• Offered multiple employee health and
wellness events
• Encouraged and supported employee
participation in several community
events and volunteer opportunities
Community Involvement
Platte River believes it has a responsibility to
participate in efforts that enhance the well-
being of citizens in its communities. We
are proud of our employees who volunteer
and represent the organization. In 2016,
employees raised over $36,000 for United Way
of Larimer County. Employees also donated
to and participated in a variety of community
organizations including Boys & Girls Club of
Larimer County, Project Self-Sufficiency, Arbor
Day, Alexa’s Hugs, Loveland Passport to Water,
Bike-To-Work Day, and science fair judging at
local schools.
Image: Employee donated gifts
to Boys & Girls Club families
Annual Report 2016 19
Laporte Substation
Expansion
Before After
In 2016, Platte River completed a 230kV expansion and
autotransformer addition project at Laporte Substation,
located northwest of Fort Collins. Completion of this
substation expansion increased Platte River’s power
transmission capacity from Rawhide Energy Station by
41 percent. This increased power transmission capacity
helps Platte River to provide a more reliable and robust
power supply to our owner municipalities. Installation of
a second 230/115kV autotransformer helps Platte River to
minimize system exposure and risks during maintenance
operations or contingency situations. Several equipment
and protection upgrades were also completed during this
project to increase system reliability and more effectively
protect our assets. The oil containment plan for the existing
autotransformer was improved and existing oil circuit
breakers were replaced.
Projects like this one help Platte River achieve operational
excellence by designing, constructing, operating, and
maintaining safe, reliable, and environmentally-responsible
transmission assets.
20 Annual Report 2016
• Over 9,600 hours invested by
Platte River
• Total of 10 departments
involved
• Project took over 22 months
to complete
• Over 18 miles of control cable
installed
• Over 200 foundations
installed
New 230 115kV Autotransformer
Headquarters
Campus Project
Late 1970’s
Current
Artistic Rendering
Platte River’s headquarters, located in Fort Collins,
Colorado, was built in 1978. Since then, Platte River
has experienced significant growth in staffing and
the services provided to our owner municipalities,
which exceeds the capacity and functionality of
the existing facilities. As a result, the Headquarters
Campus Project was initiated. After performing a
detailed analysis of the existing site, facilities, and
discussing possible alternatives with a specific focus
on safety, efficiency, code compliance, useful life
span, and functional requirements, direction was
given to proceed towards a complete campus
redevelopment. In October 2016, visioning and
programming of the new Platte River Campus
began. The new campus facilities will provide a
modern up-to-date workplace with up-to-date
technology and energy efficiency, allow for future
growth, increase public interaction and education,
as well as honor Platte River’s history.
• Selected Belford Watkins Group and
Anderson Mason Dale as our design team
partner
• Completed the programming process and
began schematic design
In 2016, the Platte River
Headquarters Campus Project:
Platte River’s management is responsible for
the preparation, integrity, and objectivity of the
financial statements and related information
included in this Annual Report. The financial
statements have been prepared in conformity
with accounting principles generally accepted in
the United States of America and, where required,
reflect amounts based on the best estimates and
judgments of management.
Platte River maintains a strong internal control
structure designed to provide reasonable
assurance that transactions are executed in
accordance with management’s authorization, that
financial statements are prepared in conformity
with generally accepted accounting principles, and
that assets are safeguarded.
Platte River’s internal auditor evaluates internal
controls for adherence to policies and procedures
on an ongoing basis, and reports findings and
recommendations for possible improvements to
management. In addition, the independent auditors
consider elements of the internal control system
in determining the nature and scope of their audit
procedures in performing the annual audit of Platte
River’s financial statements.
The board of directors, whose members are not
employees of Platte River, periodically meet with
the independent auditors and management to
discuss the audit scope, audit results, and any
recommendations to improve the internal control
structure. The board of directors directly engages
the independent auditors.
22 Annual Report 2016
Report of Management
Jason Frisbie
General Manager / CEO
David Smalley
Deputy General Manager / CFO
Annual Report 2016 23
Independent
Auditor’s Report
Platte River Power Authority
Independent Auditor’s Report and Financial Statements
December 31, 2016 and 2015
24 Independent Auditor’s Report 2016
Platte River Power Authority
Financial Statements
Years Ended December 31, 2016 and 2015
Contents
I n d e p e n d e n t A u d i t o r ’ s R e p o r t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .................................26
Management’s Discussion and Analysis (Unaudited) ..................................................................28
Financial Statements
Statements of Net Position .............................................................................................................40
Statements of Revenues, Expenses and Changes in Net Position .................................................42
Statements of Cash Flows ..............................................................................................................43
Notes to Financial Statements ........................................................................................................45
Required Supplementary Information (Unaudited) .......................................................................76
Other Information (Unaudited) ......................................................................................................78
Independent Auditor’s Report 2016 25
Independent Auditor’s Report
Board of Directors
Platte River Power Authority
Fort Collins, Colorado
We have audited the accompanying financial statements of Platte River Power Authority (Platte River), as
of and for the years ended December 31, 2016 and 2015, and the related notes to the financial statements,
which collectively comprise Platte River’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Board of Directors
Platte River Power Authority
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Platte River as of December 31, 2016 and 2015, and the changes in its financial
position and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis and pension information as listed in the table of contents be presented to
supplement the basic financial statements. Such information, although not part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States
of America, which consisted of inquiries of management about the methods of preparing the information
and comparing the information for consistency with management’s responses to our inquiries, the basic
financial statements and other knowledge we obtained during our audits of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited procedures
do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audits were conducted for the purpose of forming an opinion on the basic financial statements as a
whole. The Other Information (Budgetary Comparison Schedule) listed in the table of contents is
presented for purposes of additional analysis and is not a required part of the basic financial statements.
Such information has not been subjected to the auditing procedures applied in the audit of the basic
financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Denver, Colorado
March 9, 2017
Independent Auditor’s Report 2016 27
Platte River Power Authority
Management’s Discussion and Analysis
(Unaudited)
December 31, 2016 and 2015
This discussion and analysis provides an overview of the financial performance of Platte River
Power Authority (Platte River) for the fiscal years ended December 31, 2016 and December 31,
2015. The information presented should be read in conjunction with the basic financial
statements and accompanying notes to the financial statements.
Platte River is a wholesale electricity generation and transmission provider that delivers safe,
reliable, environmentally responsible and competitively priced energy and services to its four
owner municipalities, Estes Park, Fort Collins, Longmont and Loveland.
Platte River’s power resources include generation from coal and natural gas units, allocations of
federal hydropower from Western Area Power Administration (WAPA), wind and solar
purchases, spot market purchases, and a forced outage exchange agreement.
Coal-fired generation includes Rawhide Unit 1 (280 MW), located 25 miles north of Fort
Collins, and 18 percent ownership in Craig Units 1 and 2 (154 MW combined), located in
northwest Colorado.
Gas-fired combustion turbines located at Rawhide Energy Station include five simple
cycle combustion turbines, which includes four GE 7EAs (65 MW each) and a GE 7FA
(128 MW). The combustion turbines are utilized to meet peak load demand, to provide
reserves during outages of the coal-fired units, and to make short-term surplus sales.
Hydropower is received under two long-term contracts with WAPA. Colorado River
Storage Project contract rate of delivery amounts are 106 MW in the summer and 136
MW in the winter. Actual capacity available varies by month. During the summer season,
available capacity ranges from 51 MW to 60 MW. In the winter season, available
capacity ranges from 72 MW to 85 MW. Loveland Area Projects capacity is 30 MW in
the summer and 32 MW in the winter.
Wind generation includes 78 MW provided under long-term power purchase agreements.
The agreements are for deliveries from Spring Canyon Wind Energy Center (60 MW) in
Colorado, Silver Sage Windpower Project (12 MW) and Medicine Bow Wind Project (6
MW), both in Wyoming.
Solar generation includes 30 MW provided under a long-term power purchase agreement
from the Rawhide Flats Solar facility located at Rawhide Energy Station. In addition,
Platte River purchases solar capacity of approximately 4 MW and 0.5 MW from Fort
Collins and Loveland, respectively.
28 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Spot market purchases provide energy to satisfy loads, replacement power during
outages, and reserve requirements.
Platte River has a forced outage exchange agreement with Tri-State Generation and
Transmission, Inc. (Tri-State), whereby in the event that either Rawhide Unit 1 or Tri-
State’s Craig Unit 3 is out of service the other utility will provide up to 100 MW of
generation on a short-term basis.
Platte River operates as a utility enterprise and follows the Uniform System of Accounts
prescribed by the Federal Energy Regulatory Commission (FERC). Platte River has implemented
all applicable Governmental Accounting Standards Board (GASB) pronouncements. The
accompanying financial statements are prepared on the accrual basis of accounting in conformity
with accounting principles generally accepted in the United States of America.
Financial Summary
Platte River reported income before contributions of $18.0 million in 2016; approximately $11.2
million higher than 2015. The year ended with an increase in operating revenues of $5.9 million,
a decrease in operating expenses of $3.0 million, and a decrease in nonoperating expenses, net,
of $2.3 million.
Condensed Financial Statements
The following condensed statements of net position and condensed statements of revenues,
expenses and changes in net position summarize Platte River’s financial position and changes in
financial position for 2016, 2015, and 2014.
Independent Auditor’s Report 2016 29
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Condensed Financial Statements (continued)
Condensed Statements of Net Position
December 31,
2016 2015 2014
(In thousands)
A s s e t s
Electric utility plant $ 579,134 $ 574,453 $ 571,240
Special funds and investments 122,411 79,967 95,085
Other current and noncurrent assets 98,587 83,949 91,763
Total assets 800,132 738,369 758,088
Deferred outflows of resources 24,150 6,174 1,908
Liabilities
Noncurrent liabilities 263,808 203,163 217,236
Current liabilities 38,836 41,098 39,072
Total liabilities 302,644 244,261 256,308
Deferred inflows of resources 5,201 1,619 8,780
Net position
Net investment in capital assets 369,729 366,412 339,567
Restricted 25,616 21,421 24,559
Unrestricted 121,092 110,830 130,782
Total net position $ 516,437 $ 498,663 $ 494,908
Net Position
Total net position at December 31, 2016 was $516.4 million, an increase of $17.7 million over
2015. Total net position at December 31, 2015 was $498.7 million, an increase of $3.8 million
over 2014. As a result of implementing GASB 68 in 2015, Platte River recognized the effect of a
change in accounting principle in the amount of a $2.9 million decrease to net position as of
January 1, 2015.
30 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Net Position (continued)
Electric utility plant increased $4.7 million during 2016, primarily the result of a $13.1 million
increase in construction work in progress, an $11.3 million increase in plant and equipment in
service, and a $2.5 million increase in land and land rights. Partially offsetting the overall
increase was an increase in accumulated depreciation of $22.2 million. In 2015, electric utility
plant increased $3.2 million, primarily the result of a $24.3 million increase in construction work
in progress and a $5.3 million increase in plant and equipment in service. Accumulated
depreciation also increased $26.4 million, which partially offset the overall increase.
Special funds and investments during 2016 increased $42.4 million from 2015. The increase in
funds is primarily due to the Series JJ Bond financing that occurred in 2016 to fund capital
expenditures.
In 2015 the funds decreased $15.1 million from 2014. The decrease is due to expenses associated
with the Rawhide Unit 1 and the Craig Unit 2 scheduled maintenance outages and continued
capital investments.
Current and other assets increased $14.6 million during 2016 due to increases in other long-
term assets, regulatory assets, cash and cash equivalents, materials and supplies, and fuel
inventory. The largest increase in other long-term assets is a result of recording estimated closure
costs of impoundments at the Rawhide Energy Station that will be expensed over future periods.
Regulatory assets increased from deferring additional pension expense that will also be
amortized over future periods. The increase in cash equivalents is primarily due to the Series JJ
Bond financing to fund capital expenses in 2016 and to reimburse capital expenses that occurred
in 2015. However, there were also more liquid funds in anticipation of large payments in early
2017. Materials and supplies increased mainly for stocking parts necessary for the new digital
control system installed in 2015. Craig Station fuel inventory levels have been higher than
normal as a result of lower generation due to scheduled and unplanned maintenance outages and
surplus sales market conditions. These increases were partially offset by decreases in other
temporary investments and accounts receivable. In 2015, current and other assets decreased $7.8
million primarily due to a decrease in cash and cash equivalents. Cash decreased as a result of
increased expenses related to the scheduled maintenance outages along with continued capital
investments. Regulatory assets and other long-term assets also decreased. These decreases were
partially offset by increases in fuel inventory, other temporary investments, accounts receivable,
material and supplies and prepayments. Fuel inventory was the largest increase. The inventory
balance at the Rawhide Energy Station was lower than normal at the beginning of 2015 but
inventory was built back to normal levels over the course of the year. Craig Station inventory
Independent Auditor’s Report 2016 31
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Net Position (continued)
levels were higher than normal as a result of lower generation due to scheduled and unplanned
maintenance outages and surplus sales market conditions.
Deferred outflows of resources increased $18.0 million in 2016. This amount includes 2016
pension contributions, differences between the pension plan’s expected and actual experience,
changes in actuarial assumptions, and differences in actual and expected earnings of the pension
investments that will be amortized over future periods. In addition, the Series JJ Bond financing
that occurred in 2016 refinanced a partial amount of Series HH Bonds resulting in an
unamortized deferred loss on debt refunding. In 2015, deferred outflows of resources increased
$4.3 million due to implementing GASB 68. This amount includes 2015 pension contributions
and differences in actual and expected earnings of the pension investments that will be amortized
over future periods. Partially offsetting this increase is the amortization of the deferred losses on
debt refunding.
Noncurrent liabilities increased $60.6 million in 2016 mainly due to increased long-term debt,
net pension liability, and other liabilities. The Series JJ Bonds were issued in 2016 increasing
long-term debt. The net pension liability increased as a result of below target market returns, and
plan assumption changes. Other liabilities increased as a result of recording the estimated future
closure costs for impoundments at the Rawhide Energy Station. These increases were partially
offset by principal retirements of debt and decreases in the capitalized lease obligation, and the
Trapper Mine Reclamation liability. The capitalized lease obligation was fulfilled as the final
debt payment associated with the Windy Gap Project was made in 2016. The Trapper Mine
Reclamation liability decreased as portions of the mine were reclaimed earlier than anticipated.
Noncurrent liabilities decreased $14.1 million in 2015. The decrease was mainly the result of the
principal retirements of debt and a decrease in the capitalized lease obligation. In 2015, the net
pension liability of $6.7 million was recorded as required by GASB 68. Additional details about
long-term debt can be found in Note 7 and the defined benefit pension liability in Note 11 to the
financial statements.
Current liabilities reflect a $2.3 million decrease in 2016 due to decreases in accounts payable
and the current portion of the capitalized lease obligation partially offset by increases in the
current portion of long-term debt, accrued interest, and other liabilities. As mentioned
previously, the capitalized lease obligation was relieved as the final debt payment associated
with the Windy Gap Project was completed. In 2015, current liabilities reflected a $2.0 million
increase due to increases in accounts payable and the current portion of the capitalized lease
obligation partially offset by decreases in the current portion of long-term debt, accrued interest,
32 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Net Position (continued)
and other liabilities. Accounts payable increased due to accrued but unpaid expenses for the
Rawhide Unit 1 scheduled maintenance outage that occurred at the end of 2015.
Deferred inflows of resources increased $3.6 million in 2016 due to recording the accrual for the
2018 scheduled maintenance outage expenses for Rawhide Unit 1. Pension deferrals reflect a
small decrease for the amortization of differences in the pension plan’s expected and actual
experience and assumption changes. Deferred inflows of resources decreased $7.2 million in
2015 due to reversing the accrual for the 2015 scheduled maintenance outage expenses for
Rawhide Unit 1. Additional pension deferrals to reflect differences in the pension plan’s
expected and actual experience and assumption changes were recorded as a result of
implementing GASB 68, which will be amortized over future periods.
*Information in this table regarding December 31, 2014 has not been restated for the prior year
implementation of GASB 68.
Condensed Statements of Revenues, Expenses and Changes in Net Position
Years Ended December 31,
2016 2015 2014*
(In thousands)
Operating revenues $ 205,293 $ 199,433 $ 199,867
Operating expenses 181,698 184,741 174,985
Operating income 23,595 14,692 24,882
Nonoperating expenses, net (5,630) (7,905) (8,276)
Income before contributions 17,965 6,787 16,606
Contributions of assets to
municipalities (191) (155) (155)
Change in net position 17,774 6,632 16,451
Beginning net position 498,663 492,031 478,457
Ending net position $ 516,437 $ 498,663 $ 494,908
Independent Auditor’s Report 2016 33
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Changes in Net Position
Net position increased $17.7 million in 2016, $13.9 million higher than 2015. There was an
increase in operating revenues and a decrease in both operating expenses and nonoperating
expenses, net. Net position increased $3.8 million in 2015, $12.6 million lower than 2014. An
increase in operating expenses and a decrease in operating revenues more than offset a decrease
in nonoperating expenses, net. The $2.9 million adjustment for a change in accounting principle
with the implementation of GASB 68 also impacted the change in net position.
Operating revenues in 2016 increased $5.9 million from 2015.
Municipal sales revenue increased $9.2 million over 2015 primarily as the result of a
4.5% increase in wholesale rates. Municipal energy deliveries increased 0.5% and billing
demand decreased 0.1% from 2015.
Surplus sales revenue (sales for resale and other) decreased $3.3 million in 2016
compared to 2015 resulting from lower short-term sales. Short-term sales decrease was a
result of a lower average selling price and less energy sold. The surplus market
conditions continued to be unfavorable this past year as a result of low natural gas prices,
mild weather, and additional renewable resources on the market. Wheeling revenues
increased 2.9% primarily as a result of an increase in customer loads.
Operating revenues in 2015 decreased $0.4 million from 2014.
Municipal sales revenue increased $6.2 million over 2014 as the result of a 2.5% increase
in wholesale rates and an increase in municipal energy deliveries of 1.5%. Billing
demand decreased 0.4% from 2014.
Surplus sales revenue (sales for resale and other) decreased $6.7 million in 2015
compared to 2014 resulting from lower contract and short-term sales. Contract sales
decreased $0.9 million as the contract ended mid-year 2015. Short-term sales decreased
$5.8 million with a lower average selling price and less energy sold. The surplus market
conditions were unfavorable this past year as a result of low natural gas prices and mild
weather. Wheeling revenues were relatively flat from 2014.
34 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Changes in Net Position (continued)
Operating expenses in 2016 decreased $3.0 million from 2015.
Purchased power costs for 2016 increased $0.7 million compared to 2015. Wind
purchased power increased $1.5 million as a result of favorable wind conditions. Solar
purchased power contracts began in the fall of 2016 increasing expense by $0.8 million.
The increase in costs was partially offset by market purchases and other purchased power
costs that were $1.3 million lower mainly due to the Rawhide Unit 1 and Craig Unit 2
scheduled maintenance outages in 2015. Purchased reserves also decreased $0.3 million
due to self-providing reserves.
Fuel expense decreased $0.1 million from 2015. Fuel for the Craig units was $1.9 million
below 2015 and Rawhide Unit 1 was $2.4 million above 2015. The Craig units’
generation was 14% less than 2015 primarily because the Craig units were held back due
to the unfavorable surplus sales market. Rawhide Unit 1’s generation was 15% higher
because of the 2015 planned outage. Natural gas for the combustion turbines decreased
$0.6 million as the units were required less due to more favorable market prices.
Operations and maintenance expenses were $5.4 million less than 2015. Rawhide Unit 1
had a six-week scheduled maintenance outage in 2015 resulting in the majority of the
decrease in 2016.
Administrative and general expenses increased $1.5 million over 2015 primarily due to
increased demand side management program funding, and personnel expenses.
Operating expenses in 2015 increased $9.8 million over 2014.
Purchased power costs for 2015 increased $5.6 million compared to 2014. Wind
purchased power contracts were in place for a full year in 2015 resulting in $4.8 million
more in expense. Market purchases were $5.6 million higher for the Rawhide Unit 1 and
Craig Unit 2 scheduled maintenance outages and to meet loads during peak periods but
were offset by the $5.0 million replacement power outage accrual. Purchased reserves
also increased $0.7 million due to reserves required for the additional wind on Platte
River’s system. The increase in costs was partially offset by $0.3 million received from
Tri-State under the forced outage exchange agreement and $0.2 million in other expenses.
Independent Auditor’s Report 2016 35
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Changes in Net Position (continued)
Fuel expense decreased $3.5 million from 2014. The majority of the decrease relates to
fuel for the Craig units and Rawhide Unit 1, $2.9 million and $1.5 million, respectively.
The Craig units’ generation was 11.7% less than 2014 as Craig Unit 2 had a six-week
scheduled maintenance outage. In addition, Craig units were held back due to the
unfavorable surplus sales market. Rawhide Unit 1’s generation was 10.8% less than 2014
mainly due to a six-week scheduled maintenance outage. Natural gas for the combustion
turbines increased $0.9 million to meet load requirements and sales.
Operations and maintenance expenses were $7.5 million more than 2014. Rawhide Unit 1
had a six-week scheduled maintenance outage creating the majority of the increase over
2014. The outage was one of the most extensive outages performed since 2005. Major
activities included a complete inspection of the turbine and generator, and extensive
inspections of the boiler, burners, and air heater system to address areas of concern
identified in the 2014 minor outage. Craig Unit 2 also performed a six-week scheduled
maintenance outage. This outage was necessary for the construction of the SCR project
that is scheduled to go commercial in the spring of 2017. The overall outage expenses
were offset by amounts previously accrued. The increase in 2015 is also partially due to
an increase of $2.3 million in wheeling expenses, which were required for the
transmission of the additional wind purchases.
Administrative and general expenses increased $1.5 million over 2014 mainly due to
increased personnel expenses, demand side management program funding, professional
services, and facilities planning and maintenance.
Depreciation expense decreased $1.4 million from 2014 as the original Rawhide Energy
Station and Craig Station assets reached the end of their depreciable lives.
Nonoperating expenses, net, decreased $2.3 million in 2016 compared to 2015. The Series JJ
Bond financing resulted in lower interest expense of $0.9 million, net of bond amortizations.
Further, $1.1 million of interest expense was capitalized for projects in progress. Also
contributing to lower net expenses was an increase in interest income of $0.3 million.
Nonoperating expenses, net, decreased $0.4 million in 2015 compared to 2014. The main
contributor is lower interest expense of $1.0 million. Other income decreased $0.5 million as
there was a one-time water lease of surplus effluent in 2014. Higher interest income of $0.1
million and a decrease in fair value of investments of $0.2 million were also recorded in 2015.
36 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Operating Revenues and Expenses
(In millions)
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Municipal Sales Surplus Sales and Other
2016
2015
2014
Operating Revenues
$0
$10
$20
$30
$40
$50
$60
$70
Purchased
Power
Fuel Operations &
Maintenance
Administrative
& General
Depreciation
2016
2015
2014
Operating Expenses
Independent Auditor’s Report 2016 37
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Debt Ratings
Standards & Poor’s (S&P) and Fitch Ratings assigned ratings of AA to Platte River’s Series JJ
Bonds issued in April 2016. The ratings on Platte River’s existing bonds remained unchanged.
B o n d I s s u e M o o d y ’ s S & P F i t c h
Power Revenue Bonds
S e r i e s G G A a 2 A A A A
S e r i e s H H A a 2 A A A A
S e r i e s I I A a 2 A A A A
S e r i e s J J N / A A A A A
Budgetary Highlights
Platte River’s Board of Directors approved the 2016 Annual Budget with total revenues of
$217.5 million, operating expenses of $169.9 million, debt service expenditures of $31.0 million
and capital additions of $47.7 million. The following budgetary highlights are presented on a
non-GAAP budgetary basis.
Total operating revenues of $205.3 million ended the year $10.5 million below budget.
Municipal sales of $185.2 million were $0.4 million below budget due to below-budget variance
in billing demand. Energy deliveries were just slightly below budget. Surplus sales and wheeling
totaled $20.1 million and were $10.1 million below budget, negatively impacted by a weak
surplus sales market. Low natural gas prices, mild weather, and additional renewable resources
on the market impacted the average sales price, which excluding combustion turbine sales was
18% below budget. As a result of the market, approximately 29% less energy was sold as the
Craig units were held back. Wheeling revenues were close to budget.
Operating expenses totaled $154.4 million and were $15.5 million below budget. Fuel expense
was the largest variance, $8.6 million below budget, primarily due to 19.2% lower generation
from the Craig units as a result of surplus sales market conditions and the extension of the
scheduled outage of Craig Unit 1. Rawhide Unit 1’s generation was also 4.3% below budget
mainly due to the screen maintenance outage. Lower coal prices than budget were experienced
for both Rawhide Unit 1 and the Craig units. Above-budget natural gas expense partially offsets
the below-budget coal expense. Natural gas expense was above budget due to operating the
combustion turbines to meet load requirements and surplus sales.
38 Independent Auditor’s Report 2016
Platte River Power Authority
Management’s Discussion and Analysis (continued)
(Unaudited)
December 31, 2016 and 2015
Budgetary Highlights (continued)
Production expenses ended the year $3.4 million below budget with lower-than-budgeted
operations and maintenance costs for the Rawhide Unit 1, Craig units, the combustion turbines,
and power operations. Water related expenses at the Rawhide Energy Station were less than
planned primarily due to the final debt payment associated with the Windy Gap Project made in
2016. Further, personnel expenses were lower due to vacant positions and other operations and
maintenance projects were canceled, delayed, or completed under budget. As mentioned
previously, Craig Unit 1 underwent a scheduled maintenance outage that was completed
successfully and under budget.
Administrative and general expenses were $1.5 million below budget mainly due to personnel
expenses from vacant positions, planning expenses, consulting services, and a delay in the
implementation of the demand response program.
Purchased power expenses were $1.0 million below budget. Energy was provided to Tri-State
under the forced outage assistance agreement creating a credit to purchased power. There were
also fewer reserve purchases mainly due to holding reserves on the generating units, taking
advantage of lower cost options by purchasing reserves from other sources, and lower loads.
These below-budget expenses were partially offset by above-budget supplemental purchases,
which were required due to the scheduled maintenance outages. Market purchases were also
made to take advantage of the favorable pricing. Lastly, favorable wind conditions resulted in
higher generation from purchased power contracts for wind energy.
Transmission expenses were below budget $0.9 million from lower personnel expenses, joint
facility expenses, substation projects, and wheeling expenses.
Debt service expenditures totaled $29.6 million, which were $1.4 million below budget due to
favorable results from the Series JJ Bond financing and capitalizing more interest expense than
budgeted. Capital additions of $38.4 million were $9.3 million below budget. This variance was
due to construction schedule changes, scope changes, contract delays, internal resource
constraints, canceled projects, and favorable pricing. Production additions, transmission
additions and general additions were below budget $6.9 million, $2.3 million and $0.1 million,
respectively. The majority of the variance will be carried over to the 2017 Annual Budget in
order to complete the projects. (See Budgetary Comparison Schedule presented as Other
Information as listed in the table of contents.)
Independent Auditor’s Report 2016 39
Platte River Power Authority
Statements of Net Position
December 31, 2016 and 2015
December 31,
2016 2015
Assets
Electric utility plant, at original cost (Notes 3 and 4):
Land and land rights $ 16,997 $ 14,515
Plant and equipment in service 1,287,246 1,275,987
Less: accumulated depreciation (782,145) (759,951)
Plant in service, net 522,098 530,551
Construction work in progress 57,036 43,902
Total electric utility plant 579,134 574,453
Special funds and investments (Note 5):
Restricted funds and investments 61,624 22,201
Dedicated funds and investments 60,787 57,766
Total special funds and investments 122,411 79,967
Current assets:
Cash and cash equivalents (Notes 3 and 5) 14,159 10,126
Other temporary investments (Note 5) 18,888 20,711
Accounts receivable—municipalities 15,410 14,503
Accounts receivable—other 6,457 7,501
Fuel inventory, at last-in, first-out cost 14,607 13,590
Materials and supplies inventory, at average cost 13,470 12,362
Prepayments and other assets 1,358 1,364
Total current assets 84,349 80,157
Noncurrent assets:
Regulatory assets (Note 9) 6,507 2,437
Other long-term assets 7,731 1,355
Total noncurrent assets 14,238 3,792
Total assets 800,132 738,369
Deferred Outflows of Resources
Deferred loss on debt refundings (Note 7) 9,916 1,033
Pension deferrals (Note 11) 14,234 5,141
Total deferred outflows of resources 24,150 6,174
See accompanying notes.
(In thousands)
40 Independent Auditor’s Report 2016
Platte River Power Authority
Statements of Net Position (continued)
December 31, 2016 and 2015
December 31,
2016 2015
Liabilities
Noncurrent liabilities (Notes 3 and 6):
Long-term debt, net (Note 7) $ 227,288 $ 183,559
Capitalized lease obligation (Note 8) – 3,229
Net pension liability (Note 11) 20,508 6,693
Other liabilities and credits 16,012 9,682
Total noncurrent liabilities 263,808 203,163
Current liabilities:
Current maturities of long-term debt (Note 7) 23,550 16,615
Current portion of capitalized lease obligation (Note 8) – 3,063
Accounts payable 13,037 19,297
Accrued interest 849 780
Accrued liabilities and other 1,400 1,343
Total current liabilities 38,836 41,098
Total liabilities 302,644 244,261
Deferred Inflows of Resources
Regulatory credits (Note 9) 4,729 1,006
Pension deferrals (Note 11) 472 613
Total deferred inflows of resources 5,201 1,619
Net Position
Net investment in capital assets (Note 10) 369,729 366,412
Restricted 25,616 21,421
Unrestricted 121,092 110,830
Total net position $ 516,437 $ 498,663
See accompanying notes.
(In thousands)
Independent Auditor’s Report 2016 41
Platte River Power Authority
Statements of Revenues, Expenses, and Changes in Net Position
December 31, 2016 and 2015
2016 2015
Operating revenues (Note 3):
Sales to municipalities $ 185,214 $ 175,998
Sales for resale and other 20,079 23,435
Total operating revenues 205,293 199,433
Operating expenses:
Purchased power 33,270 32,548
Fuel 46,361 46,446
Operations and maintenance 57,481 62,854
Administrative and general 17,366 15,906
Depreciation 27,220 26,987
Total operating expenses 181,698 184,741
Operating income 23,595 14,692
Nonoperating revenues (expenses) (Notes 5 and 7) :
Interest income 1,084 745
Other income 846 900
Interest expense (8,523) (9,438)
Allowance for funds used during construction 1,137 –
Net decrease in fair value of investments (Note 5) (174) (112)
Total nonoperating revenues (expenses) (5,630) (7,905)
Income before contributions 17,965 6,787
Contributions of assets to municipalities (Note 13) (191) (155)
Change in net position 17,774 6,632
Net position at beginning of year 498,663 492,031
Net position at end of year $ 516,437 $ 498,663
See accompanying notes.
Years Ended December 31,
(In thousands)
42 Independent Auditor’s Report 2016
Platte River Power Authority
Statements of Cash Flows
December 31, 2016 and 2015
2016 2015
Cash flows from operating activities
Receipts from customers $ 205,190 $ 199,008
Payments for operating goods and services (132,698) (136,175)
Payments for employee services (32,985) (32,472)
Net cash provided by operating activities 39,507 30,361
Cash flows from capital and related financing activities
Additions to electric utility plant (27,313) (27,747)
Payments from accounts payable incurred for electric utility
plant additions (2,608) (962)
Deposits into escrow for bond defeasance (119,164) –
Proceeds from issuance of long-term debt 179,170 –
Principal payments on long-term debt (16,615) (21,980)
Interest payments on long-term debt (9,996) (9,874)
Net cash provided by (used in) capital
and related financing activities 3,474 (60,563)
Cash flows from investing activities
Purchases and sales of temporary and restricted investments, net (40,786) 14,505
Interest and other income, including realized gains and losses 1,838 1,589
Net cash (used in) provided by investing activities (38,948) 16,094
Increase (decrease) in cash and cash equivalents 4,033 (14,108)
Balance at beginning of year in cash and cash equivalents 10,126 24,234
Balance at end of year in cash and cash equivalents $ 14,159 $ 10,126
See accompanying notes.
(In thousands)
Years Ended December 31,
Independent Auditor’s Report 2016 43
Platte River Power Authority
Statements of Cash Flows (continued)
December 31, 2016 and 2015
2016 2015
Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 23,595 $ 14,692
Adjustments to reconcile operating income to net cash provided
by operating activities:
Depreciation 27,220 26,987
Changes in assets and liabilities which provided (used) cash:
Accounts receivable 138 (514)
Fuel and materials and supplies inventories (2,126) (6,062)
Prepayments and other assets (10,507) 582
Deferred outflows of resources (9,094) (1,236)
Accounts payable (7,295) 5,965
Net pension liability 13,815 (89)
Other liabilities 179 (2,803)
Deferred inflows of resources 3,582 (7,161)
Net cash provided by operating activities $ 39,507 $ 30,361
Noncash capital and related financing activities
Additions of electric utility plant through incurrence of accounts
payable $ 3,643 $ 2,608
Amortization of bond premiums and deferred loss on refundings (1,696) (522)
Amortization of regulatory asset (debt issuance costs) 153 173
See accompanying notes.
Years Ended December 31,
(In thousands)
44 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements
December 31, 2016 and 2015
1. Organization
Platte River Power Authority (Platte River) was organized in accordance with Colorado law as a
separate governmental entity by the four municipalities of Estes Park, Fort Collins, Longmont,
and Loveland. Platte River contracted to supply the wholesale electric power and energy
requirements of each of these municipalities (except for energy produced by each municipality’s
hydro facilities in service at September 1974). These contracts currently extend through
December 31, 2050. Each of the four member municipalities has a residual interest in Platte
River’s assets and liabilities upon dissolution, which is proportional to the total revenue received
from each municipality since Platte River was organized, less any contributions of assets
previously distributed. Based upon electric revenues billed from inception through December 31,
2016, these residual interests are approximately as follows:
R e s i d u a l
I n t e r e s t
City of Fort Collins 48%
City of Longmont 26%
City of Loveland 21%
Town of Estes Park 5%
1 0 0 %
Under Colorado law and the municipal contracts, Platte River’s Board of Directors has the
exclusive authority to establish the electric rates to be charged to the member municipalities.
Platte River must follow specified statutory procedures, including public notice and holding a
hearing to receive public comments, before adopting an annual budget and implementing any
changes in the electric rates.
2. Operations
Rawhide Energy Station
The Rawhide Energy Station consists of Rawhide Unit 1, a 280-megawatt (net) coal-fired
generating facility, a cooling pond, coal-handling facilities, related transmission facilities, five
simple-cycle gas-fired combustion turbines and a 30-megawatt solar facility. Natural gas Units A
through D have a summer peaking capacity of 65 megawatts each and Unit F has a summer
peaking capacity of 128 megawatts. The Rawhide Energy Station facilities, except for the solar
facility, are wholly owned and operated by Platte River.
Independent Auditor’s Report 2016 45
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
2. Operations (continued)
Yampa Project
Platte River owns 18%, or 154 megawatts, of Craig Units 1 and 2 of the Yampa Project as a
tenant-in-common with four other electric utilities. The current Yampa Project Participation
Agreement took effect on April 15, 1992. The Yampa Project consists of 855 megawatts of coal-
fired generation and associated transmission plant facilities located near the town of Craig in
northwestern Colorado. Platte River’s share of the plant investment is included in plant in
service, net, in the accompanying statements of net position. Platte River’s share of operating
expenses of the Yampa Project is included in operating expenses in the accompanying statements
of revenues, expenses and changes in net position. Separate financial statements for the Yampa
Project are not available. In addition, Platte River and all but one of the other Yampa Project
participants own Trapper Mining, Inc., which owns and operates the adjacent coal mine that
supplies the majority of Craig Units 1 and 2 fuel needs.
3. Summary of Significant Accounting Policies
Reporting Entity
For financial reporting purposes, Platte River meets the criteria of an “other stand-alone
government” and has no component units as defined in Governmental Accounting Standards
Board (GASB) Statements No. 14, as amended, and 39, The Financial Reporting Entity and
Determining Whether Certain Organizations Are Component Units—an amendment of GASB
Statement No. 14. As a municipal utility and a separate governmental entity, Platte River is
exempt from taxes on its property and income.
46 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Basis of Accounting
Platte River accounts for its financial operations as a “proprietary fund” and the accompanying
financial statements have been prepared using the accrual method of accounting in conformity
with accounting principles generally accepted in the United States of America. Platte River’s
accounts are maintained in accordance with the Uniform System of Accounts as prescribed by
the Federal Energy Regulatory Commission.
As a Board-regulated entity, Platte River is subject to the provisions of GASB Statement No. 62,
Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30,
1989 FASB and AICPA Pronouncements, Regulated Operations, paragraphs 476–500, which
requires the effects of the rate-making process to be recorded in the financial statements.
Accordingly, certain expenses and revenues normally reflected in the statements of revenues,
expenses and changes in net position as incurred are recognized when they are included in Platte
River’s wholesale rates. Platte River has recorded various regulatory assets and credits to reflect
the rate-making process (Note 9).
Budgetary Process
A formal budgetary process is required by Colorado State Local Government Law and is utilized
as a management control tool. A proposed annual budget must be submitted to Platte River’s
Board of Directors by October 15 of each year. Following public hearings, the budget is
considered for adoption by the Board of Directors on or before December 31. Since Platte River
operates as an enterprise, it is not subject to Colorado’s Taxpayers’ Bill of Rights (TABOR)
provisions.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America as prescribed by GASB requires management to make
estimates and assumptions that affect the reported amounts of assets, deferred outflows of
resources, liabilities and deferred inflows of resources and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates.
Independent Auditor’s Report 2016 47
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Electric Utility Plant and Depreciation
Electric utility plant is stated at the historical cost of construction. Construction costs include
labor, materials, contracted services, and the allocation of indirect charges for engineering,
supervision, transportation, and administrative expenses. The cost of additions to utility plant and
replacement property units is capitalized. Repairs, maintenance, and minor replacement costs are
charged to expense when incurred. When construction is debt-financed, an allowance for
borrowed funds used during construction is included in the project cost.
Depreciation is recorded using the straight-line method over the estimated useful lives of the
various classes of plant in service, which range from five to fifty years. Depreciation expense
was approximately 2.1% of depreciable property for the years 2016 and 2015. The original cost
of property replaced or retired, and removal costs less salvage, are charged to accumulated
depreciation.
Cash and Cash Equivalents
For purposes of the statements of cash flows, Platte River considers all cash on deposit with
financial institutions and highly liquid investments with an original maturity of less than three
months, excluding special funds and investments, as cash and cash equivalents.
Closure and Postclosure Care Costs of Disposal Facility
Platte River accrues a liability of estimated future closure and postclosure care costs for its
Rawhide Energy Station ash disposal facility. The liability is determined by multiplying the
estimated closure and postclosure care costs in current dollars by the percentage of the disposal
facility’s total estimated capacity used through the end of the year.
Closure Costs for Impoundments
Platte River is obligated under state laws and regulations to remove wastes from impoundments
at the Rawhide Energy Station and confirm that any environmental impact has been addressed
prior to closing them. During 2016, the State of Colorado notified Platte River of the need to
report a liability for such removal and closure costs.
48 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Closure Costs for Impoundments (continued)
At December 31, 2016, Platte River accrued a liability of $7,557,000 for the estimated clean
closure costs of these impoundments. A corresponding amount was recognized in other long-
term assets. Beginning in 2017, Platte River will amortize these costs over 30 years, the
estimated remaining useful life of the facility. Platte River is in compliance with the financial
assurances required by the state.
Long-term Debt
The difference between the reacquisition price and the net carrying amount of refunded debt
(deferred amount on refundings) in an advance refunding transaction is deferred and amortized
as a component of interest expense using the bonds outstanding method over the shorter of the
remaining life of the defeased debt or the life of the new debt. The deferred amount is reported as
a deferred outflow of resources.
Energy Risk Management
Platte River has established a formal energy risk management program to manage its exposure to
risks associated with wholesale energy and natural gas market price fluctuations. Under Board of
Directors’ approved policies, Platte River may use various physical and financial instruments,
such as physical forward contracts, futures, swaps, and option agreements. These transactions are
hedges and any expense, gain or loss that is realized on these transactions is recorded as
purchased power or fuel expense in the accompanying statements of revenues, expenses and
changes in net position.
There were no natural gas swap contracts entered into during 2016 and no swap contracts were
outstanding at December 31, 2016 and 2015. During 2015, Platte River entered into natural gas
swap contracts to fix prices for the purpose of hedging against natural gas price fluctuations. The
contracts were based on the Colorado Interstate Gas Co. (CIG) index published in Gas Daily.
Swap contracts for 40,000 mmBtu at an average fixed price of $2.96 per mmBtu expired in July
and August 2015. As a result of these hedging contracts, there was an increase in fuel expense of
$15,000 for the year ended December 31, 2015. No cash was paid or received by Platte River
when the contracts were initiated. Platte River is the fixed price payer. The natural gas swap
contracts are considered normal purchase contracts because Platte River takes delivery of the
natural gas. Thus, the contracts are not included in the scope of GASB Statement No. 53,
Accounting and Financial Reporting for Derivative Instruments
Independent Auditor’s Report 2016 49
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Operating Revenues and Expenses
Operating revenues and expenses consist of those revenues and costs directly related to the
generation, purchase, and transmission of electricity. Operating revenues are billed and recorded
at the end of each month for all electricity delivered. Revenues and expenses related to financing,
investing, and other activities are considered to be nonoperating.
Defined Benefit Pension Plan
The Platte River Power Authority Defined Benefit Plan (the Plan) is a single-employer defined
benefit pension plan. For purposes of measuring the net pension liability, deferred outflows of
resources and deferred inflows of resources related to pensions, and pension expense,
information about the fiduciary net position of the Plan and additions to/deductions from the
Plan’s fiduciary net position have been determined on the same basis as they are reported by the
Plan. For this purpose, benefit payments are recognized when due and payable in accordance
with the benefit terms. Investments are reported at fair value.
Deferred Outflows of Resources
Deferred outflows consist of unamortized deferred losses on refunding of debt and pension-
related deferrals.
Deferred Inflows of Resources
Deferred inflows consist of the estimated incremental expenses of scheduled major maintenance
outages and pension-related deferrals.
Use of Restricted and Unrestricted Resources
The use of restricted and unrestricted resources will be based on the intended purposes as
indicated in the bond resolutions.
50 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
Platte River implemented GASB Statement No. 72, Fair Value Measurement and Application, in
2016. Because Platte River was already reporting investments at fair value, the primary effect of
the implementation was additional note disclosures.
In 2015, Platte River implemented GASB Statement No. 68, Accounting and Financial
Reporting for Pensions, an amendment of GASB Statement No. 27 and GASB Statement No. 71,
Pension Transition for Contributions Made Subsequent to the Measurement Date—an
amendment of GASB Statement No. 68. In implementing GASB 68 and 71, Platte River
recognized the effect of a change in accounting principle in the amount of $6,782,000 for the net
pension liability and $3,905,000 to deferred outflows of resources for the 2014 pension
contribution made subsequent to the measurement date for a net adjustment to net position of
$2,877,000 as of January 1, 2015. There was no impact to deferred inflows of resources for prior
years.
4. Electric Utility Plant
Electric utility plant asset activity for the year ended December 31, 2016, was as follows:
December 31
2015
Increases
Decreases
December 31
2016
(In thousands)
N o n d e p r e c i a b l e a s s e t s :
Land and land rights $ 14,515 $ 2,482 $ – $ 16,997
Construction work
in progress 43,902 38,404 (25,270) 57,036
5 8 , 4 1 7 4 0 , 8 8 6 ( 2 5 , 2 7 0 ) 74,033
D e p r e c i a b l e a s s e t s :
Production plant 893,311 12,448 (9,928) 895,831
Transmission plant 345,506 9,014 (607) 353,913
General plant 37,170 1,924 (1,592) 37,502
1 , 2 7 5 , 9 8 7 2 3 , 3 8 6 ( 1 2 , 1 2 7 ) 1,287,246
L e s s a c c u m u l a t e d
depreciation (759,951) (27,220) 5,026 (782,145)
Total electric utility plant $ 574,453 $ 37,052 $ (32,371) $ 579,134
Independent Auditor’s Report 2016 51
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
4. Electric Utility Plant (continued)
Electric utility plant asset activity for the year ended December 31, 2015, was as follows:
December 31
2014
Increases
Decreases
December 31
2015
(In thousands)
N o n d e p r e c i a b l e a s s e t s :
Land and land rights $ 14,515 $ – $ – $ 14,515
Construction work
in progress 19,603 33,219 (8,920) 43,902
3 4 , 1 1 8 3 3 , 2 1 9 ( 8 , 9 2 0 ) 5 8 , 4 1 7
D e p r e c i a b l e a s s e t s :
Production plant 891,344 4,240 (2,273) 893,311
Transmission plant 343,649 3,019 (1,162) 345,506
General plant 35,717 2,032 (579) 37,170
1 , 2 7 0 , 7 1 0 9 , 2 9 1 ( 4 , 0 1 4 ) 1 , 2 7 5 , 9 8 7
L e s s a c c u m u l a t e d
depreciation (733,588) (26,987) 624 (759,951)
Total electric utility plant $ 571,240 $ 15,523 $ (12,310) $ 574,453
5. Cash and Investments
Investment of Platte River’s funds is administered in accordance with Colorado law and Platte
River’s General Power Bond Resolution, Fiscal Resolution and Investment Policy. Accordingly,
Platte River may only invest in obligations of the United States government and its agencies and
other investments permitted under Colorado law. Platte River records its investments at their
estimated fair market values. The unrealized holding gains and losses on these investments are
included in net increase (decrease) in fair value of investments in the statements of revenues,
expenses and changes in net position.
The fair value of investments is presented on the statements of net position as special funds and
investments, cash and cash equivalents, and other temporary investments. Special funds and
investments are either internally dedicated by Board Resolution (dedicated funds and
investments) or restricted as to use by Platte River’s General Power Bond Resolution (restricted
funds and investments). The fair value of investments, exclusive of accrued interest of $233,000
and $140,000 as of December 31, 2016 and 2015, respectively, are shown in the following
tables.
52 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
5. Cash and Investments (continued)
As of December 31, 2016, Platte River had the following cash and investments and related
maturities:
Investment Maturities (in years)
Cash and
Investment Type
Fair
Value
Less
Than 1
1 - 2
2 - 3
3 - 4 4 - 5
(In thousands)
U.S. Treasuries $ 39,858 $ 24,002 $ 10,901 $ 4,955 $ – $ –
U.S. Agencies:
F F C B 1 6 , 0 6 3 9 , 0 4 4 1 , 9 8 2 5 , 0 3 7 – –
F H L B 1 2 , 5 6 9 5 , 1 0 9 4 , 4 8 6 2 , 9 7 4 – –
F H L M C 1 , 9 8 8 – 1 , 9 8 8 – – –
F N M A 9 , 4 5 5 – – 9 , 4 5 5 – –
Total securities 79,933 38,155 19,357 22,421 – –
Certificates of deposit 8,133 8,133 – – – –
Cash and money market funds 3,822 3,822 – – – –
L o c a l g o v e r n m e n t i n v e s t m e n t
p o o l s 6 3 , 3 3 7 6 3 , 3 3 7 – – – –
Total cash and investments $155,225 $113,447 $ 19,357 $ 22,421 $ – $ –
Statement of net position presentation of cash, cash equivalents and investments is as follows as
of December 31, 2016:
F a i r
Value
Accrued
Interest
Total
(In thousands)
Restricted funds and investments $ 61,569 $ 55 $ 61,624
Dedicated funds and investments 60,658 129 60,787
Cash and cash equivalents 14,158 1 14,159
Other temporary investments 18,840 48 18,888
Total cash and investments $ 155,225 $ 233 $ 155,458
Independent Auditor’s Report 2016 53
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
5. Cash and Investments (continued)
As of December 31, 2015, Platte River had the following cash and investments and related
maturities:
Investment Maturities (in years)
Cash and
Investment Type
Fair
Value
Less
Than 1
1 - 2
2 - 3
3 - 4 4 - 5
(In thousands)
U.S. Treasuries $ 48,955 $ 21,004 $ 23,936 $ 4,015 $ – $ –
U.S. Agencies:
F F C B 1 1 , 0 0 7 – 9 , 0 2 0 1 , 9 8 7 – –
F H L B 1 5 , 0 1 2 3 , 8 6 4 5 , 0 9 6 6 , 0 5 2 – –
F H L M C 1 1 , 0 9 8 1 1 , 0 9 8 – – – –
F N M A 3 , 0 0 0 3 , 0 0 0 – – – –
Total securities 89,072 38,966 38,052 12,054 – –
Certificates of deposit 11,099 3,012 8,087 – – –
Cash and money market funds 9,873 9,873 – – – –
L o c a l g o v e r n m e n t i n v e s t m e n t
p o o l s 6 2 0 6 2 0 – – – –
Total cash and investments $110,664 $ 52,471 $ 46,139 $ 12,054 $ – $ –
Statement of net position presentation of cash, cash equivalents and investments is as follows as
of December 31, 2015:
Fair
Value
Accrued
Interest
Total
(In thousands)
Restricted funds and investments $ 22,190 $ 11 $ 22,201
Dedicated funds and investments 57,665 101 57,766
Cash and cash equivalents 10,126 – 10,126
Other temporary investments 20,683 28 20,711
Total cash and investments $ 110,664 $ 140 $ 110,804
54 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
5. Cash and Investments (continued)
Interest Rate Risk
As a means of limiting its exposure to fair value losses arising from rising interest rates, Platte
River’s investment policy and Colorado state statutes limit the investment portfolio to maturities
of five years or less. Platte River uses a laddered approach to investing funds based on projected
cash flows. The assumed maturity date for callable securities is based on market conditions as of
December 31, 2016. If the price of the security is at or above its call price, the security is
assumed to be redeemed on its next call date.
Credit Risk
Platte River’s investment policy allows investments in local government investment pools and
money market funds. As of December 31, 2016, Platte River maintained investments in funds
managed by the local government investment pool Colorado Local Government Liquid Asset
Trust (COLOTRUST), and the Colorado Statewide Investment Program (CSIP). Both of these
funds are rated AAAm by Standard and Poor’s Ratings Services (S&P). Platte River’s
investments in Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB), Federal
Home Loan Mortgage Corporation (FHLMC), and Federal National Mortgage Association
(FNMA) were rated Aaa by Moody’s Investors Service and AA+ by S&P.
Concentration of Credit Risk
Platte River’s investment policy states that assets held in Platte River’s funds shall be diversified
to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a
specific issuer or a specific class of securities. As of December 31, 2016, more than 5% of Platte
River’s investments were concentrated in FFCB, FHLB and FNMA. These investments are 10%,
8% and 6%, respectively, of Platte River’s total investments (including outside investment pools
and certificates of deposit).
Independent Auditor’s Report 2016 55
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
5. Cash and Investments (continued)
Fair Value
Platte River categorizes its fair value measurements within the fair value hierarchy established
by generally accepted accounting principles. The hierarchy is based on the valuation inputs used
to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for
identical assets; Level 2 inputs are prices determined using observable inputs other than Level 1
prices such as quoted prices for similar assets, quoted prices in markets that are not active, or
other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets; Level 3 inputs are significant unobservable inputs.
Platte River has the following recurring fair value measurements as of December 31, 2016:
U.S Treasury securities of $39,858,000 are valued using quoted market prices (Level 1
inputs)
U.S. Agency securities of $40,075,000 and Local Government Investment Pools of
$63,337,000 are valued using Level 2 inputs
Platte River had the following recurring fair value measurements as of December 31, 2015:
U.S. Treasury securities of $48,955,000 are valued using quoted market prices (Level 1
inputs)
U.S. Agency securities of $40,117,000 and Local Government Investment Pools of
$620,000 are valued using Level 2 inputs
56 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
6. Noncurrent Liabilities
Noncurrent liability activity for the year ended December 31, 2016 was as follows:
December 31
2015
Additions
Reductions
December 31
2016
Due within
one year
(In thousands)
Long-term debt, net $ 200,174 $ 179,170 $ (128,506) $ 250,838 $ 23,550
Capitalized lease obligation 6,292 – (6,292) – –
Net pension liability 6,693 13,815 – 20,508 –
Reclamation liability 4,253 – (1,162) 3,091 –
Disposal facility closure costs 192 3 – 195 –
Impoundments closure costs – 7,557 – 7,557 –
Compensated absences 4,442 514 (462) 4,494 353
Lease advances 823 – (83) 740 83
Yampa employee obligation 360 11 – 371 –
Total noncurrent liabilities $ 223,229 $ 201,070 $ (136,505) $ 287,794 $ 23,986
Noncurrent liability activity for the year ended December 31, 2015 was as follows:
December 31
2014
Additions
Reductions
December 31
2015
Due within
one year
(In thousands)
Long-term debt, net $ 223,552 $ – $ (23,378) $ 200,174 $ 16,615
Capitalized lease obligation 9,067 – (2,775) 6,292 3,063
Net pension liability – 6,693 – 6,693 –
Reclamation liability 4,250 3 – 4,253 –
Disposal facility closure costs 190 2 – 192 –
Compensated absences 3,997 802 (357) 4,442 305
Lease advances 906 – (83) 823 83
Yampa employee obligation 353 7 – 360 –
Total noncurrent liabilities $ 242,315 $ 7,507 $ (26,593) $ 223,229 $ 20,066
Independent Auditor’s Report 2016 57
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
7. Long-term Debt
Long-term debt outstanding as of December 31, 2016 and 2015 consists of the following:
D e c e m b e r 3 1
I n t e r e s t R a t e 2 0 1 6 2 0 1 5
(In thousands)
P o w e r R e v e n u e B o n d s —
S e r i e s G G :
S e r i a l B o n d s —
Maturing 6/1/2018 4.50%–5.00% $ 30,520 $ 41,560
S e r i e s H H :
S e r i a l B o n d s —
Maturing 6/1/2019 3.00%–5.00% 8,185 113,725
S e r i e s I I :
S e r i a l B o n d s —
Maturing 6/1/2037 4.00%–5.00% 31,955 37,430
S e r i e s J J :
S e r i a l B o n d s —
Maturing 6/1/2036 3.50%–5.00% 147,230 –
217,890 192,715
Unamortized bond premium 32,948 7,459
Total revenue bonds outstanding 250,838 200,174
Less: due within one year (23,550) (16,615)
Total long-term debt, net $ 227,288 $ 183,559
___________
Fixed rate bond premium costs are amortized over the terms of the related bond issues.
Interest expense for the years ended December 31, 2016 and 2015 is comprised of the following:
2 0 1 6 2 0 1 5
(In thousands)
Interest $ 10,066 $ 9,787
Amortization of bond related costs (1,543) (349)
Total interest expense $ 8,523 $ 9,438
58 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
7. Long-term Debt (continued)
Calendar year totals for monthly bond service funding requirements per bond resolution for all
bonds outstanding, which may differ from actual semi-annual debt service requirements by year,
are shown in the table below:
Year ending December 31 Principal Interest Total
(In thousands)
Deposits in 2016 for 2017 payment $ 13,738 $ 904 $ 14,642
2 0 1 7 1 8 , 3 1 8 9 , 5 8 2 2 7 , 9 0 0
2 0 1 8 1 2 , 1 0 4 8 , 7 2 9 2 0 , 8 3 3
2 0 1 9 1 0 , 3 2 1 8 , 1 2 9 1 8 , 4 5 0
2 0 2 0 1 0 , 6 0 4 7 , 6 2 0 1 8 , 2 2 4
2 0 2 1 1 1 , 1 3 0 7 , 0 9 6 1 8 , 2 2 6
2 0 2 2 – 2 0 2 6 6 4 , 3 5 2 2 6 , 7 5 1 9 1 , 1 0 3
2 0 2 7 – 2 0 3 1 4 6 , 7 6 3 1 2 , 3 7 5 5 9 , 1 3 8
2 0 3 2 – 2 0 3 6 2 9 , 2 3 7 4 , 6 9 7 3 3 , 9 3 4
2 0 3 7 1 , 3 2 3 6 6 1 , 3 8 9
$ 2 1 7 , 8 9 0 $ 8 5 , 9 4 9 $ 3 0 3 , 8 3 9
In April 2016, Platte River issued $147,230,000 Series JJ Power Revenue Bonds at a true interest
cost of 2.2%. The bonds were sold at a $31,940,000 premium, providing total bond proceeds of
$179,170,000. Proceeds of $60,208,000 will be used to fund capital projects and pay issuance
costs and $118,962,000 will be used to advance refund a portion of the outstanding Series HH
Bonds. The refunding resulted in an economic gain (net present value savings) of $13,652,000.
The proceeds from the Series JJ Bonds along with the proceeds and available cash from prior
year’s refunded bonds have been placed in an irrevocable trust to provide for all future debt
service payments on the refunded bonds. Accordingly, the trust account assets and the liability
for the defeased bonds are not included in Platte River’s financial statements. As of December
31, 2016, $105,440,000 of the defeased Series HH Bonds and $16,975,000 of the defeased Series
I Bonds remains outstanding.
Independent Auditor’s Report 2016 59
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
7. Long-term Debt (continued)
Bond Service Coverage
Power revenue bonds are secured by a pledge of the revenues of Platte River after deducting
operating expenses, as defined in the General Power Bond Resolution. The power revenue bonds
issued by Platte River may be subject to early call provisions. Principal and interest payments are
met from net revenues earned from wholesale electric rates charged to the municipalities and
others, and from interest earnings.
Under the General Power Bond Resolution, Platte River is required to charge wholesale electric
energy rates to the municipalities that are reasonably expected to yield net revenues for the
forthcoming 12-month period that are at least equal to 1.10 times total power bond service
requirements. Under the General Power Bond Resolution, Platte River has established a Rate
Stabilization Reserve Account. Deposits to this account are a reduction to current net revenues
for purposes of computing bond service coverage. Future withdrawals will increase net revenues
for purposes of computing bond service coverage and could assist Platte River, at such time, in
meeting its wholesale rate covenant. The balances in the Rate Stabilization Reserve Account at
December 31, 2016 and 2015 were $20,166,000 and $20,216,000, respectively, excluding
accrued interest. The Rate Stabilization Reserve Account is included in dedicated funds and
investments in the statements of net position.
60 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
7. Long-term Debt (continued)
The following table is a calculation of the power revenue bond coverage ratios for the years
ended December 31, 2016 and 2015:
2 0 1 6 2 0 1 5
(In thousands)
N e t r e v e n u e s :
Operating revenues $ 205,293 $ 199,433
Operating expenses, excluding depreciation 154,478 157,754
Net operating revenues 50,815 41,679
Plus interest and other income(1) 1,921 1,672
Net revenues before rate stabilization 52,736 43,351
Rate stabilization:
Deposits – –
Withdrawals – –
Total net revenues $ 52,736 $ 43,351
Bond service:
Power revenue bonds $ 30,726 $ 28,637
Allowance for funds used during construction (1,137) –
Net revenue bond service $ 29,589 $ 28,637
Power revenue bond coverage ratio 1.78 1.51
___________
(1) Excludes unrealized holding gains and losses on investments.
Independent Auditor’s Report 2016 61
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
7. Long-term Debt (continued)
Arbitrage Rebate
Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after
August 31, 1986, is subject to arbitrage rebate requirements. Interest income on bond proceeds
that exceeds the cost of borrowing is payable to the federal government on every fifth
anniversary of each bond issue. No arbitrage liability was outstanding as of December 31, 2016
and 2015.
Deferred Outflows of Resources Related to Debt
As of December 31, 2016 and 2015, deferred outflows related to debt consisted of the
unamortized deferred loss on debt refundings of $9,916,000 and $1,033,000, respectively.
8. Capitalized Lease Obligation
Under an agreement with the Municipal Subdistrict of the Northern Colorado Water
Conservancy District, Platte River is entitled to an allocation of one-third of the available water
from the Windy Gap Project, a water diversion facility completed May 1, 1985. Under the
agreement, Platte River is obligated to pay each year one-third of the debt service and
approximately one-third of the actual operating and maintenance costs of the Windy Gap Project.
These payments, which totaled $4,918,000 and $4,605,000 in 2016 and 2015, respectively, have
been included in operations and maintenance expenses in the accompanying statements of
revenues, expenses and changes in net position, as allowed under GASB 62, paragraphs 476–
500.
In April 2016, the Municipal Subdistrict defeased all outstanding maturities of the Series H
Water Revenue Bonds with Subdistrict project reserve funds. As a result of the defeasance, Platte
River wrote off its remaining share of the principal amounts of the defeased bonds in the amount
of $3,229,000. As of December 31, 2016, the capitalized lease of $41,590,000 for Platte River’s
water allotment has been fully amortized.
62 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
9. Regulatory Assets and Deferred Inflows of Resources Related to Regulatory Credits
Additional Pension Expense
Platte River funds its defined benefit pension plan (Note 11) based on cost estimates developed
on an actuarial basis. In addition to the base contribution, Platte River has an additional funding
charge if the market value of the assets is less than 100% of the actuarial present value of
accumulated plan benefits. Effective January 1, 2010, the Board of Directors approved a policy
under GASB 62, paragraphs 476–500, that provides for the expense recognition of any additional
pension funding charge to be spread over a ten-year period. Each subsequent year’s additional
funding charge, if any, will be added to the regulatory prepaid asset and amortized over an
additional ten-year period. There was no additional pension funding charge for 2016 and 2015.
The regulatory prepaid asset for additional pension expense was $1,542,000 and $1,985,000 as
of December 31, 2016 and 2015, respectively. The current portion of these amounts, $443,000 as
of December 31, 2016 and 2015, is included as a component of prepayments and other assets in
the statements of net position.
Debt Issuance Costs
Under GASB 65, debt issuance costs are required to be expensed in the period incurred rather
than amortized over the life of the related debt. In order to provide recovery for debt issuance
costs through rates, the Board of Directors approved the use of GASB 62, paragraphs 476–500,
to recognize debt issuance costs as a regulatory asset and to amortize these costs over the life of
the associated debt. Unamortized debt issuance costs included in regulatory assets were $828,000
and $895,000 as of December 31, 2016 and 2015, respectively.
Accrued Maintenance Outage Costs
As allowed under GASB 62, paragraphs 476–500, an accrual for the estimated incremental
expenses of future scheduled major maintenance outages is recorded each year. Prior to the
major maintenance outage at Rawhide Unit 1 in the fall of 2015, a portion of the estimated
maintenance expenses was accrued. After the 2015 outage was completed, a portion of the
estimated maintenance and replacement power costs for the next major maintenance outage,
planned for the fall of 2018, was accrued. During 2016, the accrual estimate was expanded to
include 100% of the total estimated outage costs. As of December 31, 2016 and 2015,
$4,089,000 and $295,000, respectively, was accrued as a deferred inflow of resources for the
2018 scheduled maintenance outage planned for Rawhide Unit 1.
Independent Auditor’s Report 2016 63
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
9. Regulatory Assets and Deferred Inflows of Resources Related to Regulatory Credits
(continued)
Pension Contribution Expense Recognition
Effective for the year ending December 31, 2015, Platte River’s Board of Directors approved
recording pension contributions as pension expense under GASB 62, paragraphs 476–500, since
the pension contribution amount is known at the time of budget preparation and rate setting. Any
difference between pension contribution and pension expense, as calculated by the actuary under
GASB 68, will be amortized over a ten-year period beginning the following year. The
amortization amount will be included in pension expense along with the pension contribution for
each year calculated. At December 31, 2016, a regulatory asset of $4,580,000 was recorded as a
result of the difference between the 2016 contribution amount of $2,912,000 and pension
expense of $7,492,000 as calculated under GASB 68. The regulatory credit for unamortized
pension expense was $640,000 and $711,000, respectively, as of December 31, 2016 and 2015
and was accrued as a deferred inflow of resources.
10. Net Investment in Capital Assets
Net investment in capital assets is comprised of the following as of December 31, 2016 and
2015:
2 0 1 6 2 0 1 5
(In thousands)
Electric utility plant
Unspent Series JJ bond proceeds
Deferred loss on debt refundings
Long-term debt, net
Capitalized lease obligation
Accounts payable incurred for capital assets
$ 579,134
35,160
9,916
(250,838)
–
(3,643)
$ 574,453
–
1,033
(200,174)
(6,292)
(2,608)
$ 369,729 $ 366,412
64 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan
Plan Description
The Platte River Power Authority Defined Benefit Plan (the Plan) is a single-employer, defined
benefit pension plan administered by Platte River with managerial responsibilities for investment
decisions residing with the Plan’s Retirement Committee. The Plan provides retirement and
disability benefits, annual cost-of-living adjustments, and death benefits to Plan participants and
beneficiaries. All regular Platte River employees hired prior to September 1, 2010 are covered by
the Plan. The Plan is closed to new employees hired on or after that date. Benefit provisions of
the Plan are determined and authorized by the Board of Directors of Platte River. Platte River
issues a publicly available financial report for the Plan that can be obtained at www.prpa.org.
Benefits Provided
The Plan provides for 100% vesting after five years of service to all eligible employees.
Retirement benefits are based upon years of service rendered and the final average compensation
earned by the participant in accordance with the Plan’s provisions. The Plan provides for normal
retirement at age 65. Participants who are at least age 55 and have 10 years or more of credited
service may choose early retirement with a reduced benefit. A special early retirement benefit is
available at age 62, with unreduced benefits, if certain years of service and age requirements are
met as defined by the Plan document.
Benefits paid by the Plan are adjusted annually by the change in the consumer price index,
subject to a maximum increase of 6% for employees who retired prior to December 6, 1991.
Those employees who retired on or after December 6, 1991, receive two-thirds of the change in
the consumer price index, up to a maximum of 4.0%.
At December 31, 2015, the measurement date, the participants in the Plan are:
N u m b e r o f
P a r t i c i p a n t s
Retirees and beneficiaries currently receiving benefits 128
Terminated vested employees not yet receiving benefits 53
A c t i v e p l a n p a r t i c i p a n t s 1 5 5
T o t a l p a r t i c i p a n t s 3 3 6
Independent Auditor’s Report 2016 65
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
Contributions
All contributions to the Plan are authorized by the Board of Directors and made by Platte River.
The Plan’s funding policy is intended to fund current service costs as they accrue, plus an
additional funding charge if the market value of the assets is less than 100% of the actuarial
present value of accumulated plan benefits. Platte River’s contributions to the Plan for the years
ended December 31, 2016 and 2015 of $2,912,000 and $3,302,000, respectively, equaled the
actuarially determined requirements.
Net Pension Liability
The net pension liability of $20,508,000 reported as of December 31, 2016 was measured as of
December 31, 2015, and the net pension liability of $6,693,000 reported as of December 31,
2015 was measured as of December 31, 2014. The total pension liability used to calculate the net
pension liability at the December 31, 2015 and 2014 measurement dates was determined by
actuarial valuations as of January 1, 2016 and 2015, respectively.
The actuarial valuations for the December 31, 2015 and December 31, 2014 measurement dates
used the following actuarial assumptions.
2015 2014
S a l a r y i n c r e a s e s 3 . 0 % 3 . 0 % i n 2 0 1 5 ,
4 . 5 % i n 2 0 1 6 +
Investment rate of return 7.5% 8.0%
C o s t o f l i v i n g 1 . 5 % 2 . 0 %
Mortality rates for the measurement period ended December 31, 2015 were based on the RP-
2014 table for males and females combined with the MP-2014 projection scale. For the
measurement period ended December 31, 2014, mortality rates were based on the RP-2000
mortality table for males and females without projection and without collar or amount
adjustments.
66 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
The long-term expected rate of return on Plan investments was based on a building-block method
in which best-estimate ranges of expected future real rates of return (expected returns, net of
pension plan investment expense and inflation) are developed for each major asset class. These
ranges are combined to produce the long-term expected rate of return by weighting the expected
future real rates of return by the target asset allocation percentage and by adding expected
inflation. The estimates for each major asset class that is included in the Plan’s target asset
allocation as of December 31, 2015 are summarized in the following table:
L o n g - t e r m
T a r g e t E x p e c t e d R e a l
Asset Class Allocation Rate of Return
D o m e s t i c e q u i t i e s – L a r g e c a p 1 8 . 0 0 % 7 . 5 0 %
Domestic equities – Mid/small cap 7.00% 8.00%
I n t e r n a t i o n a l e q u i t i e s 1 0 . 0 0 % 8 . 7 5 %
E m e r g i n g m a r k e t e q u i t i e s 4 . 0 0 % 1 0 . 5 0 %
C o r e f i x e d i n c o m e 8 . 0 0 % 2 . 2 5 %
H i g h y i e l d 3 . 0 0 % 3 . 7 5 %
F l o a t i n g r a t e c o r p o r a t e l o a n s 9 . 0 0 % 5 . 2 5 %
C o m m o d i t i e s 6 . 0 0 % 5 . 2 5 %
R e a l e s t a t e 1 5 . 0 0 % 7 . 7 5 %
L i q u i d l o w c o r r e l a t e d h e d g e 1 5 . 0 0 % 6 . 5 0 %
M a s t e r l i m i t e d p a r t n e r s h i p s 5 . 0 0 % 7 . 2 5 %
The discount rate used to measure the total pension liability was 7.5% and 8.0% for the years
ended December 31, 2015 and 2014, respectively. To determine the projection of cash flows, the
following assumptions were made: employer contributions are made throughout the year and, on
average, at mid-year; benefit payments are assumed to be made uniformly throughout the year
and, on average, at mid-year; annuity payments are payable monthly at the beginning of the
month and lump sum payments are payable on the date of decrement. Based on those
assumptions, the Plan’s fiduciary net position was projected to be available to make all projected
future benefit payments of current Plan members. Therefore, the long-term expected rate of
return on Plan investments was applied to all periods of projected benefit payments to determine
the total pension liability.
Independent Auditor’s Report 2016 67
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
Changes in the net pension liability for the year ended December 31, 2016, were as follows:
Total Pension
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability
(a) – (b)
(In thousands)
Balances at December 31, 2015 $ 98,124 $ 91,431 $ 6,693
C h a n g e s f o r t h e y e a r :
S e r v i c e c o s t 1 , 8 3 9 – 1 , 8 3 9
I n t e r e s t 7 , 6 6 5 – 7 , 6 6 5
Changes of benefit terms 2,397 – 2,397
Differences between expected
and actual experience 931 – 931
Employer contributions – 3,302 (3,302)
N e t i n v e s t m e n t i n c o m e – ( 6 2 4 ) 6 2 4
B e n e f i t p a y m e n t s ( 4 , 6 3 2 ) ( 4 , 6 3 2 ) –
Changes of assumptions 3,661 – 3,661
N e t c h a n g e s 1 1 , 8 6 1 ( 1 , 9 5 4 ) 1 3 , 8 1 5
Balances at December 31, 2016 $ 109,985 $ 89,477 $ 20,508
The changes of assumptions were due to updating the mortality table from the RP-2000 to the
RP-2014 table combined with the modified MP-2014 projection scale, reducing the cost of living
assumption from 2.0% to 1.5%, reducing the Plan stated interest rate assumption from 8.0% to
7.5%, and reducing the salary increase assumption from 4.5% to 3.0%.
68 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
Changes in the net pension liability for the year ended December 31, 2015, were as follows:
Total Pension
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability
(a) – (b)
(In thousands)
Balances at December 31, 2014 $ 93,937 $ 87,155 $ 6,782
C h a n g e s f o r t h e y e a r :
S e r v i c e c o s t 1 , 8 8 5 – 1 , 8 8 5
I n t e r e s t 7 , 3 4 3 – 7 , 3 4 3
Differences between expected
and actual experience (180) – (180)
Employer contributions – 3,905 (3,905)
N e t i n v e s t m e n t i n c o m e – 4 , 6 5 8 ( 4 , 6 5 8 )
B e n e f i t p a y m e n t s ( 4 , 2 8 7 ) ( 4 , 2 8 7 ) –
Change of assumptions (574) – (574)
N e t c h a n g e s 4 , 1 8 7 4 , 2 7 6 ( 8 9 )
Balances at December 31, 2015 $ 98,124 $ 91,431 $ 6,693
The change of assumptions was due to a revision of the salary increase assumption from 4.5% to
3.0% due to employer experience.
Independent Auditor’s Report 2016 69
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
The net pension liability (asset) of Platte River at December 31, 2016 and 2015, calculated using
the current discount rate, as well as what the net pension liability would be if it were calculated
using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the
current rate:
2 0 1 6 2 0 1 5
Discount
Rate
Net Pension
Liability
Discount
Rate
Net Pension
Liability
(Dollars in thousands)
1% Decrease 6.5% $ 31,083 7.0% $ 15,650
Current discount rate 7.5% 20,508 8.0% 6,693
1% Increase 8.5% 11,413 9.0% (1,099)
Pension Expense
The Board of Directors approved policies under GASB 62, paragraphs 476–500, that allow Platte
River to recognize pension expense when recovered through rates rather than recording the
amount calculated under GASB 68. For the year ended December 31, 2016, Platte River
recognized pension expense of $3,284,000. Pension expense for 2016 consists of the $2,912,000
employer contribution plus $443,000 amortization of the additional funding charge and
($71,000) amortization of the difference between the 2015 contribution and pension expense as
calculated by GASB 68. For the year ended December 31, 2015, Platte River recognized pension
expense of $3,745,000. Pension expense for 2015 consists of the $3,302,000 employer
contribution plus $443,000 amortization of the additional pension funding charge. Additional
details about regulatory accounting for pension expense can be found in Note 9.
70 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At December 31, 2016, Platte River reported deferred outflows of resources and deferred inflows
of resources related to pensions from the following sources:
D e f e r r e d O u t f l o w s D e f e r r e d I n f l o w s
o f R e s o u r c e s o f R e s o u r c e s
(In thousands)
Differences between expected and actual
e x p e r i e n c e $ 7 3 7 $ 1 1 2
C h a n g e s o f a s s u m p t i o n s 2 , 8 9 8 3 6 0
Net difference between projected and actual
earnings on pension plan investments 7,687 –
C o n t r i b u t i o n s s u b s e q u e n t t o t h e
m e a s u r e m e n t d a t e 2 , 9 1 2 –
T o t a l $ 1 4 , 2 3 4 $ 4 7 2
At December 31, 2015, Platte River reported deferred outflows of resources and deferred inflows
of resources related to pensions from the following sources:
D e f e r r e d O u t f l o w s D e f e r r e d I n f l o w s
o f R e s o u r c e s o f R e s o u r c e s
(In thousands)
Differences between expected and actual
e x p e r i e n c e $ – $ 1 4 6
C h a n g e s o f a s s u m p t i o n s – 4 6 7
Net difference between projected and actual
earnings on pension plan investments 1,839 –
C o n t r i b u t i o n s s u b s e q u e n t t o t h e
m e a s u r e m e n t d a t e 3 , 3 0 2 –
T o t a l $ 5 , 1 4 1 $ 6 1 3
Independent Auditor’s Report 2016 71
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
11. Defined Benefit Pension Plan (continued)
Contributions of $2,912,000 made subsequent to the measurement date and reported as deferred
outflows of resources, as of December 31, 2016, will be recognized as a reduction of the net
pension liability in the year ended December 31, 2017. The $3,302,000 reported as deferred
outflows of resources resulting from contributions subsequent to the measurement date, as of
December 31, 2015, was recognized as a reduction of the net pension liability in the year ended
December 31, 2016. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions as of December 31, 2016 will be recognized in pension
expense as follows:
Year ending December 31
(In thousands)
2 0 1 7 2 , 8 5 3
2 0 1 8 2 , 8 5 2
2 0 1 9 2 , 8 5 2
2 0 2 0 2 , 2 9 3
12. Defined Contribution Pension Plan
Effective September 1, 2010, the Board of Directors established the Platte River Power
Authority Defined Contribution Plan (in accordance with the Internal Revenue Code Section
401(a)) for all regular employees hired on or after that date. As of December 31, 2016, there
were 102 plan participants. The plan’s assets are held in an external trust account. The General
Manager of Platte River is the Plan Administrator and benefit provisions and contribution
requirements are authorized and may be amended by the Board of Directors.
Platte River contributed the required contribution of 5% of earnings for plan participants with
fewer than five years of service and 7% for those with five or more years of service. Platte River
will also contribute to the 401(a) an amount equal to 50% of the participant’s contributions to a
separate 457(b) plan, taking into account only such participant contributions up to 6% of the
participant’s earnings. For the years ended December 31, 2016 and 2015, contributions to the
401(a) plan by Platte River, which were recognized as expenses, were $662,000 and $459,000,
respectively. The employer contributions to the 401(a) plan vest 100% after three years. The
plan’s records are kept on the accrual basis.
72 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
13. Contribution of Fiber Optic Network to Municipalities
During 1998, Platte River constructed a fiber optic network between and around the four
municipalities to which it provides electric service. The surplus capacity in the network built
around the City of Longmont was contributed to the City of Longmont in 1998 and was recorded
as a return of capital. Platte River retained ownership of the remaining fiber optic network, and
in 1999, began leasing surplus portions of the dark fiber for the benefit of each of the remaining
three municipalities to independent telecommunication service providers. The contributions of
the fiber assets to the municipalities of $191,000 and $155,000 for the years ended December 31,
2016 and 2015, respectively, is considered a return of capital on the original asset. As of
December 31, 2016 and 2015, lease advances of $740,000 and $823,000, respectively, have been
recorded as a liability in the statements of net position. The municipalities’ portion of the lease
payments received is flowed through to the municipalities, net of Platte River’s costs.
14. Insurance Programs
Platte River has purchased insurance policies to cover the risk of loss related to various general
liability and property loss exposures. The amount of insurance settlements has not exceeded
insurance coverage in the past three years. Platte River also provides a self-insured medical and
dental plan to its employees. Medical stop-loss insurance has been purchased, which covers
losses in excess of $175,000 per person per incident. A liability was recorded for estimated
medical and dental claims that have been incurred but not reported of $446,000 at December 31,
2016 and $499,000 at December 31, 2015. A third party administrator is used to account for the
health insurance claims and provides the estimated medical claims liability based on prior claims
payment experience. The medical claims liability is included as a component of accounts payable
in the statements of net position.
Changes in the balance of the medical claims liability during 2016 and 2015 were as follows:
2 0 1 6 2 0 1 5
(In thousands)
Medical claims liability, beginning of year $ 499 $ 505
Current year claims and changes in estimates 3,155 2,934
Claim payments (3,208) (2,940)
Medical claims liability, end of year $ 446 $ 499
Independent Auditor’s Report 2016 73
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
15. Commitments
Platte River has two long-term purchase power contracts with the Western Area Power
Administration. The contract with the Colorado River Storage Project continues through
September 30, 2024. In March 2015, the Loveland Area Projects contract was extended through
June 30, 2054. The federal hydroelectric power received in 2016 provided approximately 19% of
the resources needed by Platte River to serve the loads of the four owner municipal systems. The
contract rates and the amount of energy available are subject to change. During 2016, Platte
River purchased $17,928,000 under these contracts.
Platte River and three of the other four participants in the Yampa Project own Trapper Mine, the
primary source of coal for the Yampa Project. The contract provides for delivery of specified
amounts of coal to each Yampa owner through 2020. Supplemental coal will be supplied through
the year 2017 under a contract with ColoWyo Coal Company. These contracts are subject to
price adjustments. During 2016, coal purchases totaled $12,607,000 from Trapper Mine and
$5,044,000 from ColoWyo Coal Company.
The Rawhide Energy Station’s coal purchase and transportation agreements are under multiple-
year contracts. Base prices for these contracts are subject to future price adjustments. During
2016, Platte River paid $28,518,000 for coal delivered under these agreements.
Platte River has committed to purchase Renewable Energy Certificates (RECs) for the years
2017 through 2024 with future payments of $4,300,000. During 2016, Platte River purchased
$550,000 under these REC agreements.
In addition, Platte River has entered into agreements to purchase renewable wind energy output
of 12 megawatts from Silver Sage Windpower Project through 2027, 60 megawatts from Spring
Canyon Expansion Wind Energy Center through 2039, and approximately 6 megawatts from
Medicine Bow Wind Project through 2033. During 2016, Platte River purchased $9,925,000
under these renewable wind energy agreements.
In October 2016, a 30 megawatt solar photovoltaic power plant, located at the Rawhide Energy
Station, began commercial operation. Platte River executed an agreement with Bison Solar LLC,
the owner of the facility, to purchase all the output through 2041. During 2016, Platte River
purchased $604,000 under this agreement.
74 Independent Auditor’s Report 2016
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2016 and 2015
15. Commitments (continued)
Platte River and the other Yampa Project participants, in order to comply with recent
environmental regulations, have agreed to upgrade the NOx emissions control equipment at
Craig Unit 2 beginning in 2012. Platte River’s share of the capital costs of these upgrades,
expected to be completed in 2017, is estimated to be approximately $32,921,000 of which
$26,107,000 has been expended through December 31, 2016.
16. Risks and Contingencies
The owners of the Craig Station power plant, acting through Tri-State as operating agent,
reached an agreement with the Colorado Department of Public Health and Environment, U.S.
Environmental Protection Agency, WildEarth Guardians and the National Parks Conservation
Association to revise the Colorado Visibility and Regional Haze State Implementation Plan.
Under this agreement, Craig Station Unit 1 will have more stringent limits on annual emissions
beginning in 2020 and will be retired by December 31, 2025. As of December 31, 2016 the
decommissioning and closure costs have not been determined
In the ordinary course of business, Platte River may be impacted by various legal matters and is
subject to legislative, administrative, and regulatory requirements relative to environmental
issues. Although the outcomes of such matters are not possible to predict, management is aware
of no pending legal matters or environmental regulations for which the outcome is likely to have
a material adverse effect upon Platte River’s operations, financial position or changes in financial
position in the near term.
Platte River obtains the majority of its power from coal generating facilities. Changes in
environmental regulations could affect the cost of generation for these facilities or could require
significant capital expenditures. The impacts of the recently issued Clean Power Plan are being
analyzed by Platte River in order to prepare for potential CO2 related expenses. Such costs could
materially affect the rates Platte River charges its customers.
Independent Auditor’s Report 2016 75
Platte River Power Authority
Required Supplementary Information
Schedule of Changes in Net Pension Liability and Related Ratios – GASB 68
Last 3 Calendar Years
2 0 1 6 2 0 1 5 2 0 1 4
(In thousands)
Total pension liability
S e r v i c e c o s t $ 1 , 8 3 9 $ 1 , 8 8 5 $ 1 , 9 4 9
I n t e r e s t 7 , 6 6 5 7 , 3 4 3 7 , 0 0 5
C h a n g e s o f b e n e f i t t e r m s 2 , 3 9 7 – ( 1 3 5 )
Differences between expected and actual experience 931 (180) 86
C h a n g e s o f a s s u m p t i o n s 3 , 6 6 1 ( 5 7 4 ) ( 7 2 6 )
B e n e f i t p a y m e n t s ( 4 , 6 3 2 ) ( 4 , 2 8 7 ) ( 3 , 8 8 6 )
N e t c h a n g e i n t o t a l p e n s i o n l i a b i l i t y 1 1 , 8 6 1 4 , 1 8 7 4 , 2 9 3
T o t a l p e n s i o n l i a b i l i t y — b e g i n n i n g 9 8 , 1 2 4 9 3 , 9 3 7 8 9 , 6 4 4
Total pension liability—ending (a) $ 109,985 $ 98,124 $ 93,937
Plan fiduciary net position
C o n t r i b u t i o n s – e m p l o y e r $ 3 , 3 0 2 $ 3 , 9 0 5 $ 4 , 5 4 4
N e t i n v e s t m e n t i n c o m e ( 6 2 4 ) 4 , 6 5 8 1 2 , 0 1 1
B e n e f i t p a y m e n t s ( 4 , 6 3 2 ) ( 4 , 2 8 7 ) ( 3 , 8 8 6 )
Net change in plan fidu c i a r y p o s i t i o n ( 1 , 9 5 4 ) 4 , 2 7 6 1 2 , 6 6 9
Plan fiduciary net position—beginning 91,431 87,155 74,486
Plan fiduciary net position—ending (b) $ 89,477 $ 91,431 $ 87,155
Net pension liability—ending (a) – (b) $ 20,508 $ 6,693 $ 6,782
Plan fiduciary net position as a percentage of the total
pension liability
81.35% 93.18% 92.78%
Estimated covered employee payroll $ 17,305 $ 17,951 $ 18,614
N e t p e n s i o n l i a b i l i t y a s a p e r c e n t a g e o f e s t i m a t e d
c o v e r e d e m p l o y e e p a y r o l l 1 1 8 . 5 1 % 3 7 . 2 9 % 3 6 . 4 3 %
Note to Schedule
Historical information is not available for the years 2007 through 2013; additional years will be
displayed as they become available until 10 years of historical data are presented.
76 Independent Auditor’s Report 2016
Platte River Power Authority
Required Supplementary Information
Schedule of Employer Contributions – GASB 68
Last 10 Calendar Years
2 0 1 6 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 2 0 0 8 2 0 0 7
(In thousands)
Actuarially determined contribution $ 2,912 $ 3,302 $ 3,905 $ 4,544 $ 3,561 $ 4,390 $ 7,736 $ 2,867 $ 2,673 $ 2,737
Contribution in relation to the
actuarially determined contribution 2,912 3,302 3,905 4,544 3,561 4,390 7,736 2,866 2,673 2,737
Contribution deficiency (excess) $ – $ – $ – $ – $ – $ – $ – $ 1 $ – $ –
Estimated covered employee payroll $ 16,874 $ 17,305 $ 17,951 $ 18,614 $ 18,766 $ 18,728 $ 17,714 $ 18,521 $ 16,320 $ 15,290
Contributions as a percentage of
estimated covered employee payroll 17.26% 19.08% 21.75% 24.41% 18.98% 23.44% 43.67% 15.47% 16.38% 17.90%
Notes to Schedule
Valuation date:
Actuarially determined contribution rates are calculated as of January 1, two years prior to the end of the calendar year in which contributions are reported.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Frozen initial liability, entry age normal
Amortization method 5-year, level dollar, open period
Asset valuation method 4-year smoothed market
Salary increases 3.2%, average
Cost of living adjustments For participants in pay status prior to 1/1/92 – 3.00%, for all other participants – 2.00%
Investment rate of return 7.5% for 2016; 8.0% for 2015 – 2007
Independent Auditor’s Report 2016 77
Platte River Power Authority
Other Information
Budgetary Comparison Schedule
(Unaudited)
Year Ended December 31, 2016
B u d get Actual Variance
(In thousands)
Revenues
Operating r e v e n u e s :
Municip a l s a l e s $ 1 8 5 , 5 9 8 $ 185,214 $ (384)
Short-term surp l u s s a l e s 3 0 , 2 0 0 20,079 (10,121)
Total operating r e v e n u e s 2 1 5 , 7 9 8 205,293 (10,505)
Nonoperating revenues:
Interest income(1) 1,027 1,075 48
O t h e r i n c o m e 6 5 4 846 192
Total nonoperating r e v e n u e s 1 , 6 8 1 1,921 240
T o t a l r e v e n u e s $ 2 1 7 , 4 7 9 $ 207,214 $ (10,265)
Expenditures
Operating expenses(2):
Purchased power $ 3 4 , 2 6 3 $ 33,270 $ 993
Fuel exp e n s e 5 4 , 9 8 7 46,361 8,626
Production exp e n s e s 4 8 , 0 1 8 44,632 3,386
Transmission exp e n s e s 1 3 , 7 3 6 12,798 938
Administrative and g e n e r a l 1 8 , 9 1 0 17,366 1,544
Total operating exp e n s e s 1 6 9 , 9 1 4 154,427 15,487
Debt service expenditures(3):
Interest exp e n s e 1 0 , 5 3 4 10,066 468
Princip a l 2 0 , 7 1 9 20,660 59
Allowance for funds used during construction (263) (1,137) 874
Total debt service expenditures 30,990 29,589 1,401
Capital additions:
Production 2 6 , 8 1 3 19,963 6,850
T r a n s m i s s i o n 1 5 , 3 3 0 13,031 2,299
G e n e r a l 5 , 5 1 2 5,390 122
Total cap i t a l a d d i t i o n s 4 7 , 6 5 5 38,384 9,271
Total exp e n d i t u r e s $ 2 4 8 , 5 5 9 $ 222,400 $ 26,159
Revenues less expenditures $ (31,080) $ (15,186) $ 15,894
__________
(1) Interest income excludes unrealized investment holding gains and losses.
(2) Operating expenses do not include depreciation and other nonappropriated expenses.
(3) Debt service expenditures represent monthly principal and interest funding.
78 Independent Auditor’s Report 2016
658,587
131,275
1,541,509
812,037
731,650
3,216,471
878,615
4,095,086
136,088
18,097
292
154,477
1,093,146
1,988,855
12,572
3,094,573
$ 106,191
144,720
519
$ 251,430
8,033
9.71
$ 780.31
25,799
292,093
170,209
160,904
649,005
639,092
129,634
1,516,550
801,097
753,920
3,201,201
864,955
4,066,156
134,242
17,617
290
152,149
1,089,763
1,962,804
12,302
3,064,887
$ 103,299
139,100
505
$ 242,904
8,118
9.48
$ 769.50
28,092
281,610
169,109
157,857
636,668
625,517
129,380
1,474,916
795,248
754,733
3,154,277
879,949
4,034,226
1 Compiled from preliminary sales and other reports of the municipalities supplied with electric energy by Platte River.
2 Includes energy imbalance and exchange agreement settlements.
General Manager,
Longmont Power & Communications
City of Longmont
Our AA rating was confirmed and we issued $147
million in Series JJ Bonds to fund production
and transmission capital projects and to refund
a portion of outstanding debt. The refunding
provided net present value savings of $13.7 million.
We continue engaging our teams in continuous
improvement for work planning and budgeting
by better aligning scope, schedules, and available
resources.
Platte River is among a group of seven regional
utilities exploring potential participation with an
existing regional transmission organization (RTO).
Participation in a regional market may provide
operational efficiencies through economies of
4 Annual Report 2016