Before the Public Utilities Commission of the State of California

BEFORE THE PUBLIC UTILITIES COMMISSION FILED 03/30/18 OF THE 04:59 PM STATE OF CALIFORNIA A1803018

Application of Trans Bay Cable LLC (U934-E) for an Exemption from the Reporting Application No. ______Requirements of Certain General Orders

APPLICATION OF TRANS BAY CABLE LLC FOR AN EXEMPTION FROM THE REPORTING REQUIREMENTS OF CERTAIN GENERAL ORDERS

Lenneal Gardner Sean O’Reilly Corporate Counsel for Chief Operating Officer for Trans Bay Cable LLC Trans Bay Cable LLC One Letterman Dr., Bldg. C, 5th Fl. One Letterman Dr., Bldg. C, 5th Fl. San Francisco, CA 94129 San Francisco, CA 94129 Phone: (415) 291-2300 Phone: (415) 291-2300 Facsimile: (415) 651-9500 Facsimile: (415) 651-9500 Email: [email protected] Email: [email protected]

March 30, 2018

1 / 21

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Trans Bay Cable LLC (U934-E) for an Exemption from the Reporting Application No. ______Requirements of Certain General Orders.

APPLICATION OF TRANS BAY CABLE LLC FOR AN EXEMPTION FROM THE REPORTING REQUIREMENTS OF CERTAIN GENERAL ORDERS

In accordance with Article 2 of the California Public Utilities Commission’s

(“Commission”) Rules of Practice and Procedure (“Rules”), Trans Bay Cable LLC (“TBC” or the

“Applicant”) respectfully requests that the Commission issue TBC an exemption from the

reporting requirements of General Orders (“GOs”) 65-A, 77-M and 104-A.

TBC is a transmission-only utility (a) whose rates, and terms and conditions of service are

subject to the exclusive jurisdiction of the Federal Energy Regulatory Commission (“FERC”), and

(b) that has no retail California customers nor any Commission-established rates.

TBC requests that the Commission issue an Order which exempts TBC from the

requirements of GOs77-M and provides that TBC may satisfy the requirements of GO 65-A and

104-A by providing comparable FERC reports (Form 1 and Form 3Q). These requested

exemptions will be referred to herein collectively as the “General Order Exemptions.”

2 / 21 The basic reason for the request is straightforward: given TBC’s FERC jurisdictional status

(including and particularly FERC jurisdiction over TBC’s rates), its small size and that it has no

retail customers, application of GOs 65-A, 77-M and 104-A does not serve the purpose of (i)

helping the Commission to regulate utility rates, (ii) fulfilling Commission responsibilities in

consumer protections or market monitoring, (iii) needlessly consumes the Commission’s time and

resources, and (iv) increases TBC’s burden of complying with regulatory requirements.

In a 2013 decision in connection with a financing for TBC, the Commission observed that:

“TBC Cable LLC (TBC) is an energy transmission company under the jurisdiction of this Commission and the Federal Energy Regulatory Commission (FERC) that operates in the San Francisco Bay Area. TBC operates as a public utility in the Commission’s jurisdiction and is subject to Commission authority. TBC is also a FERC-regulated utility and its rates are subject to FERC’s exclusive jurisdiction.”1

Thus this Commission has recognized that although TBC has been held to be a public

utility subject to the Commission’s jurisdiction, its rates, and terms and conditions of service are subject to the exclusive jurisdiction of FERC and that such exclusive FERC jurisdiction is the

basis for exempting TBC from Commission rules and requirements that would be duplicative or

relate to matters solely within the FERC’s jurisdiction.2 The Commission went on to note that the

reasonableness of the terms of financing “is normally subject to review in the appropriate

proceeding at FERC. Therefore, we will not make a finding in this decision of the reasonableness

of the projected capital ratios for ratemaking purposes or the appropriate cost of capital. We do not make a finding in this decision on the reasonableness of TBC proposed construction program, which is reviewed in the appropriate FERC proceeding.”3 The Commission has also

previously accepted TBC’s FERC jurisdictional status as sufficient grounds to issue an exemption

1 Decision 14-01-008. 2 Id., page 1. 3 Decision 14-01-008, page 5 and 6.

3 / 21 from the requirements of Public Utilities Code §§ 816 through 830 and a partial exemption from

Public Utilities Code §851 (“2. Trans Bay Cable’s rates are set by FERC, not by this Commission.

3. Trans Bay Cable’s transactions must be approved by FERC.”)4 Relatedly, the Commission has

previously granted exemptions to other applicants “based on the fact that either the Commission

was preempted from setting rates or chose to no longer regulate the rates of the utility being

exempted”.5 Given the Commission’s observations in Decisions 14-01-008 and 16-09-003 ,

relevant case law, and the facts applicable to TBC, TBC’s compliance with the reporting

requirements of GO 65A, 77M, and 104-A does not advance the Commission’s purpose of

procuring information useful in setting utility rates. Indeed, compliance with the requirements is

an inefficient use of Commission resources since TBC’s rates are regulated by FERC and FERC

proceedings are the appropriate arena to assess the justness and reasonableness of TBC’s rates.

I. BACKGROUND

TBC is the owner and operator of a fifty-three mile, approximately 400 megawatt High

Voltage Direct Current transmission line and associated facilities (the “Project”), which provides

direct electric transmission between the Pacific Gas and Electric Company’s (“PG&E”)

Pittsburg Substation located at a site adjacent to the City of Pittsburg, California, in Contra Costa

County, and PG&E’s Potrero Substation within the City and County of San Francisco. The

Project’s commissioning enabled the retirement of the only “in city” generation at Potrero and

thus eliminated the environmental impact of that generation, and also increased overall system

reliability by relieving grid congestion.

Although TBC is subject to this Commission jurisdiction’s, TBC has, since its inception,

been a FERC-regulated transmission-only company, and FERC has exclusive jurisdiction over

4 Decision 16-09-003, page 8 and 9. 5 Decision 12-11-017, page 20.

4 / 21 TBC’s rates and terms and conditions of service.6 In addition, the Project is under the operational

control of the California Independent System Operator Corporation (“CAISO”), which recovers

its transmission service rates through its own FERC-approved tariff. TBC has no retail California

customers, and TBC recovers its entire revenue requirement pursuant to its FERC-jurisdictional

Transmission Owner Tariff (“TO Tariff”). These FERC-established rates are paid through the

Transmission Access Charge that the CAISO charges to scheduling coordinators that utilize the

transmission system which is under FERC’s jurisdiction.

TBC’s TO Tariff and transmission revenue requirement have been reviewed and

approved by FERC in three rate cases7 in which all interested parties, including the

Commission8, had an opportunity to participate. Trans Bay Cable LLC, 161 FERC ¶ 61,134

(2017); Trans Bay Cable LLC, 149 FERC ¶ 61,081 (2014); Trans Bay Cable LLC, 137 FERC

¶ 61,258 (2011). Future changes in TBC’s rates and terms and conditions are, likewise, subject

to FERC’s exclusive jurisdiction, pursuant to Federal Power Act (“FPA”)9 Section 20510

(changes proposed by TBC) and FPA Section 20611 (changes proposed by FERC, the

Commission or others). These FERC rate cases include an opportunity for FERC to review

TBC’s cost of service and for all parties to challenge the reasonableness and prudence of all aspects of TBC’s revenue requirement. Rate cases before the FERC are the appropriate forum for review and assessment of elements of TBC’s rate as the Commission has previously recognized12.

6Trans Bay Cable LLC, 112 FERC ¶ 61,095 (2005) and Trans Bay Cable LLC, 129 FERC ¶ 61,225 (2009) 7 FERC Docket Nos. ER10-116, ER13-2412 and ER16-2632. 8 Trans Bay notes that the Commission, through its legal department, has been an active participant in each of Trans Bay’s FERC rate cases. 9 16 USC §§ 791a et seq. 10 16 USC § 824d. 11 16 USC § 824e. 12 Decision 14-01-008, page 5 and 6.

5 / 21 In April 2011, Representatives from TBC met with Commission staff members to

describe the Trans Bay Cable Project, its relationship with the CAISO, and its Commission and

FERC jurisdiction. TBC explained that since all of its facilities were under the operational

control of the CAISO and that TBC is subject to FERC regulatory authority, it was unclear

which Commission reporting and compliance requirements applied to TBC. TBC made it clear

that it had every intention to comply with all appropriately applicable Commission reporting and

compliance requirements. With respect to GOs 65-A and 104-A, TBC highlighted that it was

required to file similar annual and quarterly reporting with the FERC and offered to provide

those filings to the Commission staff. Since the April 2011 meeting, TBC, proceeding on staff’s

guidance, has regularly filed its FERC Form No. 1 and Form No. 3Q with the Commission

without fail, but has not filed Form 77-M or its predecessor form. Questions have recently been

raised regarding information filing requirements that TBC had believed were addressed by staff’s

prior guidance and TBC now seeks to formalize the advice previously provided permitting

exemption from such information filing requirements. Given this history, TBC requests that the

Commission formally exempt TBC from complying with the reporting requirements of GO 77-

M, GOs 65-A and 104-A provided that TBC continue its practice of transmitting a copy of its

FERC Form No. 3Q and Form No. 1 on a quarterly and annual basis, respectively.

II. COMPLIANCE WITH GENERAL ORDERS 64-A, 77-M AND 104-A DO NOT ADVANCE COMMISSION UTILITY RATE SETTING OBJECTIVES

The Commission has clear authority to exempt a public utility from complying with the

reporting requirements of GOs designed to advance the Commissions objective in setting utility

rates where no relevant purpose served, and has done so on a number of occasions.13

13 See, e.g., Decision 88-09-066 (Exemption from General Order 123-G), Decision 89-11-010 (Exemption from General Order 123-G), Decision 96-07-052 (Exemption from General Order 77-K), Decision 98-02-014 (Exemption

6 / 21 In Southern Pacific Transportation, D96-07-052, the Commission noted that it

“recognizes a clear and direct relationship between the expenses claimed by a utility regulated by the Commission and the rates which are allowed to be charged for the provision of utility

services.”14 Based on this assessment, the Commission exempted Class I railroads because, although they are California utilities, the Commission “no longer has jurisdiction over the setting and enforcement of intrastate rail rates”15 In AirTouch Cellular, D98-02-014, when the

Commission authority to regulate the rates of cellular phone companies was federally preempted, the Commission stated “GO 77-K and 104-A were originally adopted by the Commission for the purpose of requiring utilities to provide the Commission with information useful in setting utilities’ rates… Given our lack of authority to regulate AirTouch’s rates, we see no point in requiring AirTouch to comply with general orders whose primary purpose is to help us regulate rates. Accordingly, we shall grant AirTouch’s request for an exemption from GOs 77-K and

104A.”16

In Decision 98-09-024, where the Commission on its own Motion ordered the exemption

of all cellular providers from GOs 77-K and 104-A, the Commission again remarked that “GOs

77-K and 104-A were adopted by the Commission for the purpose of providing information in

setting the rates of public utilities.”17 GO 65-A requires the filing of financial information similar

to that of GO 104-A, so similar logic applies regarding the nexus between such reporting and the

setting of utility rates. Accordingly, if the Commission is not setting rates for TBC, the

information normally useful to setting rates is not “useful” to the Commission or necessary to be

from General Orders 77-K and 104-A), Decision 98-09-024 (Exemption from General Orders 77-K and 104-A), and Decision 00-12-0430 (Exemption from General Orders 65-A and 77-K). 14 Decision 96-07-052 at pg. 3. 15 Ibid at pg. 5. 16 Decision 98-09-024 at pg. 4. 17 Decision 98-09-024 at pg. 6.

7 / 21 provided. As the cases in footnote 13 above demonstrate, the Commission has historically

granted exemptions to complying with the reporting requirements of GOs 65-A, 77-M (and its

predecessors) and 104-A where the Commission could not exercise regulatory authority of the

utility’ rates. In Decisions 96-07-052 and 98-09-024, the Commission exempted entire classes of

utilities from GOs 77-K, and 104-A (in Decision 98-090024 only) when the Commission no

longer exercises authority over rates.

In the instant case, TBC’s rates are regulated and set by FERC, and the Commission has

never exercised regulatory authority over TBC’s rates, nor may it exercise jurisdiction, over

TBC’s rates. Moreover TBC’s sole utility asset, its direct current transmission line, is under the operational control of the CAISO, whose rates are also regulated and set by FERC. As noted above, this Commission has previously recognized that FERC exercises authority over TBC’s rates. Therefore, TBC’s compliance with the reporting requirements of the GOs discussed herein, do not serve the intended purpose of the regulations.

As discussed above, Commission precedent has been to exempt entities from information filing requirements that provide information useful in setting rates where the Commission does not have jurisdiction to set rates or has chosen not to do so. Decision 12-11-017 is consistent with that principle. In that decision, the Commission denied the request of an exemption of

Uniform Regulatory Framework incumbent local exchange carriers (“ILECs”) from GO 77-M.

The basis of the Commission’s decision was that that compliance with GO 77-M was a tool to assist the Commission in its continuing duty to ensure that rates remain just and reasonable. The

Commission based its decision on a number of factors that might affect whether rates are just and reasonable, including (i) the ability to resolve questions regarding salary comparability and

8 / 21 cross-subsidization18, (ii) GO 77-M as a tool to assess the relation of competition to just and

reasonable rates since there no longer existed a basic rate cap for residential service19, and (iii)

GO 77-M as a useful tool in monitoring cross-subsidization of other services20. None of those

factors are present or relevant in the instant case as discussed herein.

The justification for the Commission’s decision was the need to fulfill its duty to ensure

that retail/customer services rates remained just and reasonable.21 However, TBCs rates are

cost of service rates regulated by FERC and it is FERC’s duty to assess whether TBC rates are

just and reasonable. TBC rates are subject to all the requirements of the Federal Power Act.

Moreover, 16 U.S. Code §824d of the FPA requires, in no uncertain terms, that “[a]ll rates and

charges made, demanded, or received by any public utility for or in connection with the

transmission or sale of electric energy subject to the jurisdiction of the Commission, …shall be

just and reasonable...”(Emphasis Added)22 TBC’s rates are the subject of Section 205 rate case

proceedings which traditionally have included numerous intervenors including the CAISO, the

California Department of Water Resources (CDWR), San Francisco Public Utilities

Commission, FERC Trial Staff, and this Commission. In these proceedings, the entirety of

TBC’s cost of service is examined based on a standard of just and reasonableness through

settlement discovery and potential trial.

Since it is the FERC that has exclusive rate setting authority of TBC’s rates and to

determine whether TBC’s rates are just and reasonable, TBC’s compliance with the requirements

of G0 77-M is both unnecessarily duplicative and inefficient. Given TBC’s FERC jurisdictional

18 Pg. 9 19 Pg. 10 20 Page 12-13 21 See Decision D12-11-017, Findings of Facts 3 through 7 22 U.S. Code §824d(a).

9 / 21 status, the proper forums for determining whether TBC’s rates are just and reasonableness are

FPA Section 205 and 206 proceedings. Furthermore, TBC notes that the Commission’s staff has

been an active participant in all three of TBC’s Section 205 rate cases, and no settlement of

TBC’s rates has occurred without the acceptance of the applicable Section 205 Settlement

Agreement by this Commission. No other factors cited by the Commission to support its decision in D12-11-017 are present or relevant in the instant case. TBC has no retail customers. TBC maintains one underwater transmission line which is a part of the CAISO transmission network which is only a small portion of the facilities under the operational control of the CAISO, and an even smaller fraction of California’s total transmission system. However viewed, TBC is not a dominant participant in the transmission market. Similarly, TBC represents only a de minimis fraction of electric transmission costs in California. TBC provides no other service and, as such, is neither a provider of residential or consumer services nor a participant in a competitive market.

Likewise, TBC is not a provider/carrier of last resort and does not make use of any publically funded subsidies. In sum, TBC’s business (i) is effectively regulated for the just and reasonableness of its rate through the appropriate FERC proceedings and (ii) provides no consumer or retail level services which would warrant increased level of scrutiny by the

Commission. TBC does not participate in any competitive markets or make use of any publically funded subsidies. As such, based on the above analysis, TBC’s compliance with GO 77-M advances no Commission objective or duty that is not already adequately and more proper addressed in the appropriate FERC proceeding. Requiring TBC to Comply with the Reporting

Requirements of GOs 65-A, 77-M and 104-A Serves No Useful Purpose, Increases Costs and

Needlessly Consumes Commission Resources. Therefore, TBC requests that the Commission issue an Order which exempts TBC from the requirements of GO 77-M and provides that TBC

10 / 21 may satisfy the requirements of GO 65-A and 104-A by providing comparable FERC reports

(Form 1 and Form 3Q).

III. PROCEDURAL AND STATUTORY REQUIREMENTS

Pursuant to Article 2 of the Commission Rules of Practice, the Applicant provides the following information concerning this application.

(1) Statutory Authority

TBC makes this Application pursuant to applicable prior decisions, orders, and resolutions of the Commission and the Commission’s Rules of Practice and Procedure.

(2) Applicant’s Legal Name, Location of Principal Place of Business

Applicant’s exact legal name is Trans Bay Cable LLC with the location of its principal place of business at One Letterman Drive, C5-100, San Francisco, California 94129.

Applicant is a Delaware limited liability company and is a public utility authorized to do business in the State of California.

(3) Correspondence

Applicant requests that all correspondence or communications in connection with this

Application and notices, orders and other papers be addressed and served on the following persons:

Sean O’Reilly Jay Elwell

Chief Operating Officer Treasurer Trans Bay Cable LLC Trans Bay Cable LLC One Letterman Dr. Bldg. C, 5th Fl. One Letterman Dr. Bldg. C, 5th Fl. San Francisco, CA 94129 San Francisco, CA 94129 Phone: (415) 291-2300 Phone: (415) 291-2300 Facsimile: (415) 651-9500 Facsimile: (415) 651-9500 Email: [email protected] Email: [email protected]

11 / 21 With copies to:

Lenneal Gardner

Corporate Counsel Trans Bay Cable LLC One Letterman Dr. Bldg. C, 5th Fl. San Francisco, CA 94129 Phone: (415) 291-2300 Facsimile: (415) 651-9500 Email: [email protected]

(4) Articles of Organization

A copy of TBC’s Certificate of Formation in the State of Delaware and Application for

Registration filed with the Secretary of State of California on February 26, 2005 was previously

filed with the Commission on October 29, 2013 in connection with A.13-10-018, and are

incorporated herein by reference.

(5) Proposed Category of Proceeding

TBC proposes that the Commission categorize this Application as a ratesetting

proceeding. Although rates are not at issue in this proceeding, the definitions of “adjudicatory"

or “quasi-legislatives” proceedings set forth in Rules 1.3(a) and 1.3(d) clearly do not apply to

this Application. Rule 7.1(e)(2) specifies that when a proceeding does not fit clearly into any

other category, it should be conducted under the rules for ratesetting proceeding, and Rule 1.3(e) defines ratesetting proceedings to include “[o]ther proceedings” that do not fit clearly into any other category.

(6) No Need for Hearing and Procedural Schedule

TBC believes that no hearing will be necessary for this proceeding, and respectfully requests that the Commission find that no hearing is necessary in connection with this

Application. There are no factual disputes requiring resolution, and all relevant facts are

12 / 21 presented in this Application.23 The only issue to be considered is whether the Commission should grant the requested exemption to the reporting requirements of GOs 65-A, 77-M, and

104-A. TBC has explained to the Commission why the Commission should grant the General

Order Exemptions pursuant to precedent and how TBC’s business and related facts are distinguishable from others. Applicant is unaware of any specific objections any party might raise to any of these issues. As a result, Applicant respectfully requests that the Commission proceed ex parte in this Application because public interest does not require a hearing on the exemptions sought. TBC believes that it is in the best interests of all concerned for the

Commission to proceed expeditiously with this matter since it is effectively just formal approval of a compliance plan that TBC and Commission staff agreed upon which has been operating without incident for the last six years.

In compliance with Commission Rule 2.1(c), TBC provides the following proposed schedule for the Commission’s consideration:

30 days After Application Filed Protests Due

60 days After Application Filed Commission Decision

(7) Description of Property

A general description of Applicant’s property and its field of operation, the original cost of its property and equipment, by class, and the cost thereof to Applicant and the depreciation and amortization reserves applicable to such property and equipment, by class, are contained in

TBC’s FERC Form 1 reports, which have been submitted to the Commission. Since the inception of TBC, all of its activities have been solely associated with the development, construction, and

23 See, e.g., D.08-07-011. 12

13 / 21 operation of a 400 MW HVDC transmission line that connects a converter station in the City of

Pittsburg to a similar converter station in the City and County of San Francisco (i.e., the Project).

Utility plant consists of assets related to the Project and those assets include direct costs and indirect costs that were incurred during the construction phase. Indirect costs capitalized as utility plant consist of real property lease expenditures, intangible assets, property tax expenditures, asset retirement obligations, other overhead costs, and allowance for funds used during construction. Utility plant also includes easements, permits, interconnection rights, and other costs. A statement of account in reference to the aforementioned is attached to this

Application as Attachment A.

(8) Financial Statement

Financial Statements in accordance with Rule 2.3, including TBC’s latest available balance sheet as of September 30, 2017 and its income statement for nine months ending

September 30, 2017 are attached hereto as Attachment B.

(9) Service

This Application is being served on the parties identified in the attached Certificate of

Service.

IV. ATTACHMENTS

Attachments A and B, described below, are a part of and incorporated into this

Application:

(1) Attachment A: A copy of TBC’s statement of account of the original cost and depreciation reserve attributable to its property and equipment.

(2) Attachment B: A copy of TBC’s most recent filed balance sheet and income statement.

14 / 21 V. REQUESTED AUTHORIZATIONS

WHEREFORE, Applicant respectfully requests that the Commission, sixty (60) days from the filing of this Application, issue an Order herein, which:

(1) Exempts TBC from the requirements of 77-M, and,

(2) Provides for TBC to continue the provision of its FERC Form No.1 and Form 3Q in lieu of complying with the reporting requirements of GOs 65- A and 104-A.

Executed in San Francisco, California, this 30th day of March, 2018.

Respectfully submitted,

TRANS BAY CABLE LLC

/s/ Sean O’Reilly Sean O’Reilly Chief Operating Officer

/s/ Lenneal K. Gardner Lenneal K. Gardner Corporate Counsel

One Letterman Dr., C-5 Suite 100 San Francisco, CA 94129 Phone: (415) 291-2300 Facsimile: (415) 651-9500

15 / 21 VERIFICATION

I, Sean O’Reilly, am the Chief Operating Officer for Trans Bay Cable LLC, the

Applicant in the foregoing Application. I have read said Application and know the contents

thereof. I certify the same is true of my own knowledge, except as to the matters which are

therein stated upon information or belief, and that as to those matters, I believe them to be true.

I certify under penalty of perjury that the forgoing is true and correct.

Executed in San Francisco, California, on March 30, 2018.

/s/ Sean O’Reilly Sean O’Reilly Chief Operating Officer TRANS BAY CABLE LLC One Letterman Dr., Bldg. C, 5th Fl. San Francisco, CA 94129

16 / 21 ATTACHMENT A

17 / 21 UTILITY PLANT DETAILS

Utility Plant Class September 30, 2017 December 31, 2016 Underground Conductors $ 182,436,027 $ 182,436,027 Station Equipment 208,908,910 209,056,089 Land Improvements 63,020,239 63,020,239 Structure 75,809,622 72,663,085 Permits & Intangible Plant 31,521,812 31,521,812 Underground Conduit 15,240,444 15,240,444 Asset Retirement Obligation 5,532,047 5,532,047 General Plant 5,410,317 3,559,374 Total Utility Plant 587,879,418 583,029,117

Accumulated Depreciation & Amortization (104,762,685) (87,971,128) CWIP 1,811,697 4,857,314

Utility Plant, Net $ 484,928,430 $ 499,915,303

ACCUMULATED DEPRECIATION & AMORITZATION DETAILS

Utility Plant Class September 30, 2017 December 31, 2016 Underground Conductors $ 36,734,993 $ 32,026,151 Station Equipment 28,550,327 22,196,495 Land Improvements 12,913,441 11,293,112 Structure 12,825,660 10,861,301 Permits & Intangible Plant 6,387,933 5,574,931 Underground Conduit 3,083,771 2,690,626 Asset Retirement Obligation 1,086,004 942,729 General Plant 3,180,556 2,385,783 Total Accumulated Depreciation & Amortization $ 104,762,685 $ 87,971,128

18 / 21 ATTACHMENT B

19 / 21 COMPARATIVE BALANCE SHEET

September 30, 2017 December 31, 2016 UTILITY PLANT Utility Plant (101-106, 114) $ 587,879,418 $ 583,029,117 Construction Work in Progress (107) 1,811,697 4,857,314 TOTAL Utility Plant 589,691,115 587,886,431 (Less) Accum. Prov. for Depr. Amort. Depl. (108, 110, 111, 115) 104,762,685 87,971,128 Net Utility Plant 484,928,430 499,915,303

OTHER PROPERTY AND INVESTMENTS Other Special Funds (128) 2,161,827 2,161,827 TOTAL Other Property and Investments 2,161,827 2,161,827 CURRENT AND ACCRUED ASSETS Cash (131) 1,786,939 11,660,926 Special Deposits (132-134) 1,094,948 1,097,176 Customer Accounts Receivable (142) 11,790,314 11,568,509 Other Accounts Receivable (143) 10,676 13,610 Accounts Receivable from Assoc. Companies (146) 107,612 2,137 Plant Materials and Operating Supplies (154) 227 13,212,458 13,284,419 Prepayments (165) 558,164 468,238 1,852,376 5,288,458 Miscellaneous Current and Accrued Assets (174) 1,153,868 1,153,868 Total Current and Accrued Assets 31,009,191 44,069,103

DEFERRED DEBITS Unamortized Debt Expenses (181) 3,153,103 1,833,784 Extraordinary Property Losses (182.1) 1,533,949 1,533,949 Other Regulatory Assets (182.3) 58,091,210 56,508,840 Accumulated Deferred Income Taxes (190) 234 23,382,173 23,382,173 Total Deferred Debits 86,160,435 83,258,746

TOTAL ASSETS $ 604,259,883 $ 629,404,979

PROPRIETARY CAPITAL Other Paid-In Capital (208-211) 253 $ (39,104,726) $ 29,589,108 Retained Earnings (215, 215.1, 216) 118-119 273,641,435 239,832,442 Total Proprietary Capital 234,536,709 269,421,550

LONG-TERM DEBT Advances from Associated Companies (223) 256-257 - 171,009,033 Other Long-Term Debt (224) 256-257 189,750,944 16,517,787 Total Long-Term Debt 189,750,944 187,526,820

OTHER NONCURRENT LIABILITIES Accumulated Provision for Pensions and Benefits (228.3) 8,102 3,867 Long-Term Portion of Derivative Instrument Liabilities 25,397,799 25,959,644 Asset Retirement Obligations (230) 8,204,449 7,938,038 Total Other Noncurrent Liabilities 33,610,350 33,901,549

CURRENT AND ACCRUED LIABILITIES Notes Payable (231) 8,109,600 - Accounts Payable (232) 224,363 12,020 Notes Payable to Associated Companies (233) - 8,525,359 Accounts Payable to Associated Companies (234) - 7,982 Taxes Accrued (236) 262-263 23,252,598 9,571,598 Interest Accrued (237) 144,318 87,983 Miscellaneous Current and Accrued Liabilities (242) 6,152,662 11,836,070 Derivative Instrument Liabilities (244) 28,988,852 29,697,880 (Less) Long-Term Portion of Derivative Instrument Liabilities 25,397,799 25,959,644 Total Current and Accrued Liabilities 41,474,594 33,779,248

DEFERRED CREDITS Other Deferred Credits (253) 269 2,008,217 1,896,743 Accum. Deferred Income Taxes-Other Property (282) 79,209,751 79,209,751 Accum. Deferred Income Taxes-Other (283) 23,669,318 23,669,318 Total Deferred Credits 104,887,286 104,775,812

TOTAL LIABILITIES AND STOCKHOLDER EQUITY $ 604,259,883 $ 629,404,979

20 / 21 STATEMENT OF INCOME

September 30, 2017 December 31, 2016 UTILITY OPERATING INCOME Operating Revenues (400) $ 107,801,190 $ 131,134,000

OPERATING EXPENSES Operation Expenses (401) 18,021,402 24,449,702 Maintenance Expenses (402) 1,353,050 1,116,892 Depreciation Expense (403) 15,782,710 14,615,562 Depreciation Expense for Asset Retirement Costs (403.1) 143,274 213,742 Amort. & Depl. of Utility Plant (404-405) 865,573 814,920 Regulatory Debits (407.3) 688,170 1,658,934 (Less) Regulatory Credits (407.4) (543,477) - Taxes Other Than Income Taxes (408.1) 5,588,345 7,348,073 Income Taxes - Federal (409.1) 18,208,354 6,276,394 Other (409.1) - State Income Taxes 5,056,835 3,309,751 Provision for Deferred Income Taxes (410.1) - 19,037,151 (Less) Provision for Deferred Income Taxes-Cr. (411.1) - 777,395 Accretion Expense (411.10) 266,412 432,494 TOTAL Utility Operating Expenses 65,430,648 78,496,220

Net Util Operating Income $ 42,370,542 $ 52,637,780

OTHER INCOME Interest and Dividend Income (419) 372 839 Allowance for Other Funds Used During Construction (419.1) 32,038 831,143 Miscellaneous Nonoperating Income (421) 709,028 2,564,363 Gain on Disposition of Property (421.1) - - TOTAL Other Income 741,438 3,396,345

OTHER INCOME DEDUCTIONS Donations (426.1) 1,400 5,300 Other Deductions (426.5) - - TOTAL Other Income Deductions 1,400 5,300

TAXES APPLICABLE TO OTHER INCOME AND DEDUCTIONS Income Taxes-Federal (409.2) - (1,562) Income Taxes-Other (409.2) - (394) Provision for Deferred Inc. Taxes (410.2) - 1,044,875 TOTAL Taxes on Other Income and Deductions - 1,042,919

Net Other Income and Deductions $ 740,038 $ 2,348,126

INTEREST CHARGES Interest on Long-Term Debt (427) 1,407,224 55,391 Amort. of Debt Disc. and Expense (428) 486,648 920,301 Interest on Debt to Assoc. Companies (430) 6,378,026 13,233,493 Other Interest Expense (431) 1,038,312 79,085 (Less) Allowance for Borrowed Funds Used During Construction-Cr. (432) 8,623 248,103 Net Interest Charges 9,301,587 14,040,167

Net Income $ 33,808,993 $ 40,945,739